J.L. Malone & Associates, Inc. v. United States

The Veterans Administration (VA) (defendant) issued an invitation for bids to replace the outdated fire-alarm system at a VA hospital. The bid specification stated that the new fire-alarm system must be integrated into the existing Johnson Controls JC-80 computer system that operated the hospital’s heating, ventilation, and air-conditioning system (HVAC). The specifications included an or-equal clause, which stated that contractors could either use the same brand-name equipment as listed in the bid specifications or different equipment of equal quality and function. J.L. Malone & Associates, Inc. (JLM) (plaintiff) submitted the lowest-price bid and was awarded the contract. Prior to commencing work, JLM was required to deliver submittals to the VA describing how it would complete the work. In one submittal, JLM proposed replacing the existing JC-80 computer system with a superior Honeywell system and installing Honeywell fire-alarm equipment. Honeywell fire-alarm equipment was superior to, and cheaper than, Johnson Controls equipment. JLM claimed that the JC-80 system was too obsolete to control both the HVAC and the new Honeywell fire-alarm system. The VA rejected JLM’s proposal as noncompliant with contract specifications, stating that integrating the new fire-alarm system into the existing JC-80 building computer system was an essential part of the contract. JLM ultimately completed the contract work using Johnson Controls fire-alarm equipment. JLM submitted an equitable-adjustment claim to the VA’s contracting officer (CO) seeking reimbursement for the increased costs it incurred by using Johnson Controls products instead of Honeywell products. The CO denied JLM’s claim. JLM appealed to the Veterans Administration Board of Contract Appeals (Board), which affirmed. The Board held that JLM’s submittal to replace the JC-80 computer system was properly rejected because (1) it represented a major change to the contract; and (2) allowing post-award major changes was anticompetitive. JLM appealed to the Federal Circuit, arguing that the or-equal clause applied to the JC-80 system.