Dcx, Inc. v. William J. Perry, Secretary of Defense
79 F.3d 132 (1996)
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Rule of Law:
A government contractor's failure to perform is not excusable as an 'act of the Government' if the contractor's own fault or negligence, such as failing to properly manage a subcontractor or create contingency plans, contributed to the delay.
Facts:
- On April 1, 1988, the Defense Logistics Agency awarded a contract to DCX for light sets.
- The contract required DCX to submit a First Article Test Report by June 30, 1988.
- Because it lacked the necessary facilities, DCX subcontracted the required testing to Ball Brothers Aerospace Systems.
- DCX did not secure the subcontract with Ball until May 11, 1988, and the subcontract contained no firm commitment for a completion date.
- Ball did not begin testing until June 17, nearly a month later than planned.
- On June 17, DCX notified the government that the test report would be late, blaming the delay on Ball having to prioritize other government contracts under the Defense Priorities and Allocations System (DPAS).
- DCX failed to deliver the test report by the original June 30 deadline.
- After the government granted an extension, DCX again failed to deliver the report by the new July 12 deadline.
Procedural Posture:
- The Defense Logistics Agency's contracting officer terminated DCX's contract for default after DCX failed to deliver a required test report.
- DCX appealed the termination to the Armed Services Board of Contract Appeals (ASBCA), arguing the delay was excusable.
- The ASBCA upheld the termination for default, finding the delay was the fault of DCX and its subcontractor.
- DCX, as appellant, appealed the Board's decision to the U.S. Court of Appeals for the Federal Circuit.
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Issue:
Is a government contractor's failure to perform on a contract excusable when the delay is allegedly caused by the government's priority allocation system, but the contractor did not take reasonable steps to ensure timely performance by its subcontractor?
Opinions:
Majority - Bryson, Circuit Judge
No. A contractor's failure to perform is not excusable where its own negligence contributed to the delay. To claim an excusable delay due to an 'act of the Government,' the contractor bears the burden of proving that its failure to perform was beyond its control and without its fault or negligence. Here, DCX failed to prove that the Defense Priorities and Allocations System (DPAS) legally required its subcontractor, Ball, to postpone the tests. More importantly, DCX's own negligence contributed to the delay; it waited six weeks to hire a subcontractor, failed to secure a firm completion date, and had no backup arrangements. Furthermore, the court found that the termination contracting officer did not act arbitrarily or capriciously, as he considered the pertinent regulatory factors before termination. The regulation listing those factors (48 C.F.R. § 49.402-3(f)) is a discretionary guide for the officer and does not confer enforceable rights upon a defaulting contractor.
Analysis:
This decision reinforces that government contractors are responsible for managing their subcontractors and mitigating foreseeable risks. It clarifies that a contractor cannot simply blame a government priority system for a delay without proving the system legally compelled the delay and that the contractor itself was not negligent in its planning and execution. The ruling also solidifies the significant discretion afforded to contracting officers in termination decisions, establishing that their failure to meticulously follow internal procedural guidelines does not automatically invalidate a termination for default. This precedent strengthens the government's position in holding contractors accountable for performance failures.
