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The United States v. Amdahl Corporation

Court of Appeals for the Federal Circuit
786 F.2d 387, 33 Cont. Cas. Fed. 74,266, 1986 U.S. App. LEXIS 20026 (1986)
ELI5:

Rule of Law:

Under the Competition in Contracting Act, 40 U.S.C. § 759(h)(6)(B), a government contract later found to be illegal is presumed valid as to all goods or services that were delivered to and accepted by the government before the contracting agency's procurement authority was revoked. This statutory presumption prevents a protest board from ordering the return of such goods or the recovery of payments made for them.


Facts:

  • The Department of Treasury received a delegation of procurement authority (DPA) from the General Services Administration (GSA) to acquire a used IBM mainframe computer on a sole-source basis.
  • On December 31, 1984, Treasury entered into a sales agreement with the Federal Home Loan Mortgage Corporation (Freddie Mac) for the computer, making an initial payment of $1.2 million of the $4.189 million total price.
  • The agreement stipulated that upon execution, Treasury 'shall have acquired' the equipment, and required Treasury to accept and move the equipment no later than March 31, 1985.
  • As Treasury did not have a facility ready for the computer, the equipment was initially stored at Freddie Mac's facilities.
  • Freddie Mac timely provided a required IBM certificate of maintainability, certifying the equipment was in proper working order.
  • On March 29, 1985, Treasury paid approximately $60,000 to have the computer moved to a different storage space that Treasury leased from Freddie Mac.
  • For a brief period in January 1985, Freddie Mac continued to use the computer and compensated Treasury for this use.

Procedural Posture:

  • Amdahl Corporation filed a bid protest with the General Services Administration Board of Contract Appeals (GSBCA) challenging the Department of Treasury's sole-source contract with Freddie Mac.
  • The GSBCA granted the protest, found the contract violated statute and regulation, and revoked Treasury's delegated procurement authority (DPA).
  • Treasury filed a motion for clarification, arguing that under 40 U.S.C. § 759(h)(6)(B), the contract was valid for the computer because it had been 'delivered and accepted' before the DPA revocation.
  • The GSBCA issued a supplemental decision holding that the statute was inapplicable and declaring the contract void ab initio.
  • The Department of Treasury, as appellant, appealed the GSBCA's remedial decision to the U.S. Court of Appeals for the Federal Circuit, with Amdahl Corporation as the appellee.

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Issue:

Does 40 U.S.C. § 759(h)(6)(B), which presumes a contract is valid for goods delivered and accepted before a procurement authority is revoked, prevent the General Services Administration Board of Contract Appeals from declaring the contract void ab initio and ordering the return of such goods, even when the contract was awarded in violation of statute and regulation?


Opinions:

Majority - Nies, Circuit Judge

Yes. 40 U.S.C. § 759(h)(6)(B) prevents a protest board from invalidating the portion of a contract concerning goods that have already been delivered and accepted. First, the court found as a matter of law that the computer equipment had been delivered and accepted by Treasury prior to the revocation of its DPA. The acts of the parties—including Treasury taking constructive possession, paying for its movement and storage, and receiving a certificate of maintainability—unequivocally demonstrated acceptance. Second, the court interpreted § 759(h)(6)(B) as a statutory limitation on the board's remedial authority, acting as a 'statute of at least partial repose.' This provision preserves the precedent of protecting contractors who have already performed under a contract that is later rescinded. It prevents the board from forcing the government to 'undo all that has occurred.' Therefore, while the illegal contract was terminated prospectively, precluding Treasury from making the final payment, the transaction concerning the delivered and accepted computer was presumed valid and could not be unwound.



Analysis:

This decision clarifies the scope of remedial power held by bid protest boards under the Competition in Contracting Act (CICA). It establishes that § 759(h)(6)(B) provides significant protection to contractors by preventing the complete rescission of a contract for goods that have already been delivered and accepted, even if the procurement was illegal. The ruling aligns the statutory remedy with the common law principle of treating certain illegal contracts as voidable rather than void ab initio to protect innocent parties who have performed in good faith. This precedent limits the ability of protest boards to unwind completed performance and solidifies the remedy as a prospective termination of the contract, leaving the contractor entitled to compensation for the benefits conferred.

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