General Builders Supply Co., Inc. v. United States

General Builders Supply Company, Inc. (GBS) (plaintiff), and GBS’s subcontractor, Hupp Corporation (Hupp), entered into a fixed-price contract with the General Services Administration (government) (defendant) to supply approximately 7,900 refrigerators for use in Germany. Pursuant to the contract, Hupp built pre-production refrigerator models for the government’s inspection. The government rejected Hupp’s pre-production models three times and then terminated GBS’s contract for default, stating that GBS failed to fulfill contract specifications. GBS filed a petition with the General Services Administration Board of Contract Appeals (Board), arguing that (1) the government had improperly terminated GBS’s contract; and (2) GBS was entitled to recover costs and entitled to an equitable adjustment for the anticipated profits that GBS and Hupp would have earned from the contract. The government rejected GBS’s claim for anticipated profits but agreed GBS was entitled to recover costs. The Board held that (a) because GBS’s contract had been improperly terminated for default, GBS was entitled to recover as if GBS’s contract had been terminated for the government’s convenience; and (b) GBS’s equitable adjustment could not include anticipated profits because the default clause in GBS’s contract did not allow recovery of anticipated profits. GBS appealed.