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Does the Christian Doctrine Apply to Commercial-Item Contracts? The Federal Circuit Misses the Mark in K-Con, Inc. v. Secretary of the Army

In K-Con, Inc. v. Secretary of the Army, No. 2017-2254, the Federal Circuit applied the Christian doctrine to read FAR clause 52.228-15, requiring the contractor to provide performance and payment bonds, into a construction contract—even though the Army designated the procurement as commercial-item pursuant to FAR Part 12 and omitted that clause.  In doing so, the Federal Circuit left two key issues unresolved: whether construction can be procured as a commercial item, and how the Christian doctrine applies to a commercial-item contract, where countervailing procurement policies may undermine the argument for incorporating certain clauses that would otherwise be read in.  How did the Federal Circuit avoid these key issues? By letting the Justice Department flip-flop the Army’s positions regarding commerciality, and by sidestepping the findings from the underlying ASBCA opinion that the Christian doctrine applies to commercial-item contracts.  The upshot is more questions than answers.

The case involved two contracts at Camp Edwards, Massachusetts, for the procurement of prefabricated shelters—a laundry facility and a communications equipment shelter.  The Army issued the solicitations as commercial-item procurements using Standard Form 1449. The solicitations and the contracts did not include any requirement for performance or payment bonds. After awarding the commercial-item contracts to K-Con, the Army told K-Con that it must obtain performance and payment bonds as required by the Miller Act, 40 U.S.C. §§ 3131-3134, and FAR 52.228-15.  K-Con replied that it had not anticipated obtaining bonding, since the solicitation and contract did not include any such requirements and, in any event, it could not obtain the bonds immediately.  Rather than terminating the contract for convenience, the Army decided to wait for K-Con to try to acquire the bonds.  Two years later, K-Con did so, and the government issued notices to proceed and modified the contracts to include the bonding requirements. K-Con asked the Army to pay the costs of the bonds and the costs incurred for increased material and labor due to the two-year delay.  The Contracting Officer agreed to pay the bond costs but not the delay costs.

Co-Authors: Robert Nichols, Rick Claybrook, Jason Lynch, Andrew Victor.

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