Recovering Due to Government-Supplied Negligent Estimates

December 31, 2025 Sareesh Rawat, Esq.

The government may provide performance workload estimates during the solicitation phase to assist offerors in preparing their bids or proposals. If due care is not exercised in preparing these estimates and the contractor relies on them, the government may be liable for breach of contract. Due care requires the government to base its estimates on all relevant information reasonably available at the time. If the government fails to base its estimate on the latest available data or is otherwise negligent in preparing it, the contractor may recover any resulting damages. To prevail in such a claim, the contractor must show that it is more likely true than not true that the government’s estimate, on which it relied to prepare its offer, was inadequately or negligently prepared. In a typical case, the contractor must prove that the government’s negligent estimate misled it into submitting an unfairly low bid. The contractor may also need to demonstrate that the government had exclusive control over the information used in developing the estimate, which was unavailable to the contractor from other sources.

In Agility Defense & Government Services, Inc. v. United States, 847 F.3d 1345 (2017), the United States Court of Appeals for the Federal Circuit held that the government was in breach of contract because it negligently estimated its requirements and the contractor relied on the government’s estimates. The Defense Logistics Agency (DLA) awarded the underlying contract for the disposal of surplus military property at Defense Reutilization and Marketing Offices (DRMOs) upon the military’s departure from an area of operations. While the DLA usually handled the requirement internally, it became aware of planned troop movements, which were expected to cause a surge in workload that it was not equipped to handle without contracting out the requirement. During the solicitation phase, DLA issued several amendments relating to anticipated workload and costs. Under one such amendment, DLA provided offerors with a website that showed historical workload, including the number of military property items received for processing and the amount of scrap processed for each DRMO. In a later amendment, the DLA provided offerors with a workload chart that projected a stable workload for the first two years of the contract, followed by a progressive decline of 75%, 50%, and 30% in the option years three to five, respectively. The government also provided the contractor a workload baseline for each DRMO which utilized the same historical data.

Relying on the government’s estimates, the contractor submitted a successful proposal to operate six DRMOs at a fixed price of roughly $45 million per year for the five-year contract, which was much lower than the other two offers of approximately $68 million and $71 million, respectively. Upon commencing work on the six DRMO sites, the contractor realized that it had inherited a significant backlog of line items on five of the six sites, totaling 30 weeks of additional work for one of the sites, as compared to the government-furnished baseline data. In other words, the actual workload was significantly higher than the government’s estimates. A little over two years after the commencement of performance, the contract was terminated for the government’s convenience. Following the termination, the contractor submitted two claims for increased costs totaling roughly $ 4.6 million. In response, the contracting officer (CO) partially approved one of the claims for $ 236,363.93 but denied the remaining amount. The contractor filed suit at the Court of Federal Claims (COFC), which found that the contractor had experienced workloads much higher than the baseline data during the base year of performance at five of the six DRMO sites. Specifically, the COFC found that the contractor’s workload on the five sites ranged from 156.5% to 358.4% higher than the government-furnished baseline data. These findings notwithstanding, the COFC found that DLA was not liable for providing negligent or misleading estimates because it had furnished reasonably available historical data from which the contractor could extrapolate the government’s future needs. The contractor appealed to the Federal Circuit.

The Federal Circuit began its analysis by determining that the workload chart provided by the DLA during the solicitation phase was itself an estimate of projected requirements because it was intended to assist offerors in preparing their proposals. Next, the Federal Circuit determined that the COFC had clearly erred in holding that the DLA had furnished a realistic estimate just because it had provided the contractor with historical workload data. The Federal Circuit explained that providing historical data does not automatically guarantee that the government’s estimates are realistic. While it is true that estimates may be obtained from previous requirements, if the government is in possession of more current information different from historical requirements, it has the obligation to develop more accurate estimates based on the most current information available to it. In this case, the most current information differed from the government’s historical requirements because the DLA was aware of planned troop movements that would cause a surge in workload. In fact, this anticipated surge was one of the primary reasons the DLA had decided to award the underlying contract. Under these circumstances, it was insufficient for the DLA to merely furnish historical workload data as an estimate because it was not the most current information available to it. Finally, it was clear from the contractor’s proposal that it had relied on the government’s outdated workload estimates in preparing its pricing. Consequently, the Federal Circuit reversed the COFC’s denial of the negligent estimate claim and remanded the case for the calculation of an equitable adjustment.

When providing estimates regarding its requirements, the government is obligated to act in good faith and exercise due care. If the government supplies inaccurate or unrealistic workload estimates to offerors, it may subsequently be held liable for any resulting damages. That said, the government is under no obligation to fully guarantee its estimates or perfectly forecast its workload requirements. Any government estimate must withstand logical scrutiny and be based upon all relevant information that is reasonably available to the government at the time the estimate is prepared. The government may use historical requirements to develop its workload estimates, but solely relying on such an approach is not inherently reasonable in every scenario. If more current information, different from the historical requirements, is available, the government must use that information to develop its estimates. If the government fails to do so, it may be held liable, as demonstrated in the case above. To obtain recovery in such cases, the contractor must prove the inadequacy of the estimates by a preponderance of the evidence. Additionally, the contractor should have relied on the government’s negligent estimates in preparing its offer and should be able to demonstrate that the pertinent information underlying those estimates was exclusively available to the government.

This Federal Contract Claims Insight is provided as a general summary of the applicable law in the practice area and does not constitute legal advice. Contractors wishing to learn more are encouraged to consult the TILLIT LAW PLLC Client Portal or Contact Us to determine how the law would apply in a specific situation.

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Converting a Request for Equitable Adjustment into a CDA Claim

October 21, 2024 Sareesh Rawat, Esq.

While the Contract Disputes Act provides no definition of a claim, the Federal Acquisition Regulation (FAR) § 2.101 defines a claim as a written demand or assertion by one of the contracting parties seeking, as a matter of right, the payment of a sum certain arising under or relating to the contract. The FAR further provides that a routine request for payment that is not in dispute when submitted is not a claim. However, such submissions may be converted to a claim by written notice to the contracting officer as provided in FAR § 33.206(a) if it is disputed as to the liability or amount or is not acted upon in a reasonable time. Finally, the FAR requires claims over $100,000 to be certified. To assess whether a submission is a CDA claim rather than a request for equitable adjustment (REA), contractors may typically look to three objective criteria:

The submission meets the definition of a “claim”
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Despite these objective criteria, it may not always be clear when an REA is converted into a “claim,” the denial or deemed denial of which can be appealed to a Board of Contract Appeals or the Court of Federal Claims (COFC). On August 29, 2024, the Armed Services Board of Contract Appeals (ASBCA) in ASBCA No. 63197 issued a decision on a government’s motion to dismiss for the contractor’s failure to convert an REA into a CDA claim. The underlying contract for medical coding services was issued by the Army in January 2018 using the government-provided browser-based Application Virtualization Hosting Environment (AVHE) for the United States Medical Command. Almost two years later, on November 18, 2019, the contractor submitted a “Request for Price Modification” seeking various cost adjustments. The pertinent portion of the request sought costs for lost production due to the government-imposed downtime for the AVHE system. In February 2021, the contractor provided supporting material to validate downtime costs in response to a government request for additional information. In July 2021, the contractor submitted a revised request for price modification labeled “Request for Equitable Adjustment,” seeking payment for downtime costs in the amount of $615,199 categorized as an unexpected loss.

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The apportionment of risk of increased performance costs in a government contract depends primarily on the type of contract and its included clauses. If a specifically included contract clause assigns the financial risk of an event on either the government or the contractor, that clause usually dictates which party bears the increased costs of performance due to the occurrence of that event. However, even if the contract does not specifically contemplate the occurrence of a particular event, dispute adjudicative forums may look to relevant clauses included in the contract to determine which party must bear the increased costs. A good indicator of whether an included clause apportions the risk of increased performance costs on the government is if the clause points to the contract’s changes clause. In ASBCA No. 62712, a decision issued on October 2, 2024, the Armed Services Board of Contract Appeals (ASBCA) held the government liable for increased costs associated with COVID-19-related quarantine of contractor employees due to a specifically included contract clause dictating the health and safety requirements under the contract. Notably, the relevant clause also pointed to the clause at Federal Acquisition Regulation (FAR) 52.243-4 “Changes,” which was incorporated in the contract by reference.

Recovery Under the Doctrine of Superior Knowledge

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When entering federal contracts, the government acts in a proprietary capacity and owes contractors certain express and implied obligations. One such implied obligation is to disclose to the contractor facts and information vital to performance under the contract. Under what is also known as the “doctrine of superior knowledge,” the government may be held liable for breach of contract if it fails to disclose vital information impacting performance costs or duration. Notably, the doctrine of superior knowledge only applies to critical information withheld before the formation of the contract, with a related but distinct implied duty of good faith and fair dealing attaching post-contract formation. Contractors may prove that the government was in breach of contract under the superior knowledge doctrine by producing evidence that they: (1) undertook performance without vital knowledge of a fact that affects performance costs or duration, (2) the government was aware that the contractor did not have knowledge of the information and had no reason to obtain it, (3) any contract specification supplied by the government misled the contractor or did not put it on notice to inquire, and (4) the government failed to provide the relevant information. Thus, when the government violates this implied duty to disclose vital information in its possession pre-contract formation, contractors may assert a breach of contract action by demonstrating that their claim meets these four criteria.

Claims for Increased Cost of Performance in Fixed Price Contracts

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Firm-fixed-price contracts place maximum risk and full responsibility upon the contractor for all costs and resulting profit or loss incurred in performing a government contract. Fixed price contracts provide for a price that is not subject to any adjustment based on the contractor’s cost experience. Meanwhile, fixed-price contracts with economic price adjustments provide for upward or downward revisions of the stated contract price upon the occurrence of specified contingencies. There are three general types of price adjustments. First, price adjustments based on established prices provide for increases or decreases from an agreed-upon level in published prices of specific items. Second, adjustments based on actual costs of labor or materials contemplate increases or decreases in the specified costs of labor or materials actually experienced by the contractor during contract performance. Finally, adjustments based on labor or material cost indexes provide for increases or decreases in labor or material cost standards or indexes identified explicitly in the contract. In fixed-price contracts that do not provide for economic price adjustments, the contractor assumes the risk of unexpected costs not attributable to the government.

Recovering Due to Government-Supplied Negligent Estimates

TILLIT LAW Federal Contract Claims Insights