CONTRACT DIPUTE: GOVERNMENT FURNISHED PROPERTY

On September 10, 1986, AAA was awarded a negotiated service contract F34601-86-C-XXX9

by the United States Air Force ("Government" or "Air Force") to provide for the storage,

maintenance, and processing of technical order ("TO") historical and negative files. AAA was

required, upon completion of the contract, to "prepare for shipment, deliver f.o.b. origin, or

dispose of the Government property as may be directed or authorized by the Contracting

Officer."

Contract line item number ("CLIN") 0017 also required AAA to develop a computerized

negative storage record keeping system and to provide a modem connection. The object of the

system was to replace an existing manual card locator file. The contract required that the

resulting system software be compatible with an Air Force "Z-248" computer running "MS

DOS," "Word Star Professional Word processing Software," and "DBase III (Data Base

Management Software)." It was AAA's responsibility to ensure that the software "will

interface with Air Force capabilities" so that the Air Force "can easily maintain [the system] at

the conclusion of the contract."

Following contract award, AAA subcontracted with Mr. Steve Nimmo of SuperSoft, Inc., to

write the system software. Rather than use DBase III, as apparently required under the contract,

Mr. Nimmo suggested to AAA that he be allowed to use Data Flex as the database management

program. AAA approved this substitution and accordingly purchased a "single use" license.

This license, however, did not give AAA the right to copy or give Data Flex to a third party.

The Air Force's technical personnel assented to this substitution. Even though AAA knew that

such personnel were without authorization to amend the contract, AAA did not seek approval

from the contracting officer ("CO").

On March 23, 1987, AAA submitted a "DD-250 (Material Inspection and Receiving Report")

invoicing the Air Force for the full bid price of $28,350 for CLIN 0017. The program software

was not submitted with the invoice. The Air Force paid the invoice in full. The DD-250 was

signed by an authorized government representative, but neither the "PQA" box nor the

"ACCEPTANCE" box on that form was checked. At that time, neither the Air Force nor AAA

had tested the software on a Air Force Z-248 computer.

AAA was not awarded the follow-on contract. Instead, the contract went to Hebco, Inc. AAA

was instructed to deliver all government furnished property ("GFP") to Hebco at a price to be

negotiated. In response to these instructions, AAA prepared a fixed price bid to box, pack, and

label negative, history, and reproducible files. Subsequently, in an apparent sudden change of

mind, the CO informed AAA that the contract already required AAA to furnish the GFP so no

additional compensation would be given for these services. AAA refused to comply. After

reaching an impasse on the responsibility to move the GFP, the CO informed AAA that

government personnel would visit AAA's site to pack and move the GFP. Air Force personnel

packed and moved the GFP from AAA's facility on December 19, 1989.

On February 21, 1990, the CO requested that AAA turn over the computerized record keeping

system software designed under CLIN 0017. AAA complied with this request. The Air Force

acknowledged receipt of a telephone modem, seventeen disks containing the software and

corresponding data on February 27, 1990. When the Air Force attempted to run the software on

their AF Z-248, however, they were unable to do so. Accordingly, the CO informed AAA that

the software was not compatible with the AF Z-248 as required by the contract. AAA was then

asked to identify the equipment used to develop the software. It was in response to this inquiry

that AAA first informed the Air Force that AAA had used Data Flex instead of DBase III. All

subsequent efforts to run the system software failed. The CO ultimately returned the disks to

AAA and demanded a full refund of the money paid for the software. On March 6, 1992,

effective February 4, 1992, the Air Force awarded Hebco a contract to develop replacement

software complying with CLIN 0017.

On May 18, 1992, the CO issued a "final decision" stating that AAA was liable for the cost of

repurchasing software conforming to CLIN 0017. The CO's final decision also indicated that the

Air Force intended to hold AAA liable for the costs of packing and moving the GFP. The total

sought by the Air Force was $121,809.50. AAA appealed the CO's final decision to the Board.

Questions:

1. What mistakes were made by the Contractor? By the Government?

2. How could this issue have been avoided?

3. Who do you believe the Board decided with, and why?