Government Contracts Monitor

The Cardinal Change - A Dramatic But Important Remedy

October 17, 2018

All experienced government contractors know that it is often impossible to predict (and therefore to price), the wide range of risks involved in performing federal government contracts. When a dramatic change occurs, it can sometimes be compensable as a cardinal change - a change that occurs when a contractor is directed to perform additional work beyond the scope of the contract. Case in point: Planate Management Group, LLC v. United States, No. 17-1968C, presently pending before the Court of Federal Claims (COFC), where a contractor providing support services in Afghanistan is litigating its claim for increased costs due to a sudden, unexpected and costly shift in the required security triggered by a new military force-protection security directive.

In Planate, the contractor was faced with deteriorating security conditions in Afghanistan which triggered a new military force-protection security directive. In order to perform in accordance with the directive, the contractor had to purchase weapons for its on-site personnel. The contractor submitted a claim for the costs of the weapons, the government denied the claim, and the contractor filed suit at the COFC, claiming a compensable “cardinal change” to its contract requirements.

Let’s back up a bit. This all started when Planate was awarded a firm fixed-price Army contract to perform support services at sites throughout Afghanistan. Under this contract, Planate had to embed individuals within a U.S. Air Force squadron. When certain attacks took place that triggered a need for enhanced security, the Army amended Planate’s contract to authorize Planate personnel to be armed. However, the modification only committed the military to provide weapons to Planate’s personnel if available. If no weapons were available, Planate was on its own - it would have to provide the weapons itself. Shortly after issuing this amendment, the Contracting Officer (CO) expressed a willingness to negotiate a further modification that would reimburse Planate for its costs to arm its personnel, but only if the CO could obtain approval from a higher authority.

Subsequently, a force-protection directive was issued that required Planate’s personnel to have what is called a “guardian angel” at all times on Air Force bases and installations in Afghanistan. “Guardian angels” were required to be in “weapon status” and “remain alert and capable of immediate response to hostile threat[s]” at all times. Accordingly, Planate purchased a weapon for each of its in-theater personnel and then submitted a Request for Equitable Adjustment for the additional, unexpected costs incurred as a result of the need to provide for the self-defense of its employees.

According to Planate, its costs were not foreseeable prior to contract award. Indeed, weapons were not authorized under the solicitation or the original contract - that is, the costs Planate incurred to arm its personnel were outside the Statement of Work. Because the security risks were not accurately reflected in the solicitation, security costs were not reflected in Planate’s offered prices. In other words, had Planate known about the security risks, it would have included security costs in its proposal/offer. In short, according to Planate, the changed security situation amounted to a cardinal change.

We do not know if Planate’s cardinal change claim will succeed on the merits. But we do know that Planate’s case will test (and perhaps broaden) the criteria for what constitutes a cardinal change.

Attorneys

Lindsay Simmons