Mil-Spec Contractors, Inc. v. United States

Mil-Spec Contractors, Inc. (Mil-Spec) (plaintiff) entered into a contract with the federal government (defendant) to insulate buildings on Norton Air Force Base. The contract price was approximately $580,000, and the government had an additional $6,000 to $7,000 contingency fund available. The contract work took 87 calendar days longer than expected. After completing the contracted work, Mil-Spec submitted a claim to the government for approximately $70,000 in additional costs. The government offered just over $6,300 from the contingency fund. Negotiations continued unsuccessfully until three days before the contingency fund would expire, after which Mil-Spec’s only recourse would be to seek additional compensation in court. Mil-Spec reached an oral agreement with Barker, a government negotiator, accepting the offered $6,300. Barker was authorized to negotiate on behalf of the government but did not have authority to enter into contracts on behalf of the government. Barker forwarded the negotiated terms to Hooppaw, the government’s contracting officer, who did have authority to bind the government to contracts. Hooppaw prepared a written contract modification agreement, signed it, and sent it to Mil-Spec. Mil-Spec refused to sign the modification agreement and stated it was rejecting the government’s settlement offer. Regardless, the government paid the $6,300 to the Internal Revenue Service (IRS) to cover a previously filed federal tax lien against Mil-Spec. Mil-Spec appealed the contracting officer’s rejection of its additional compensation request to the Armed Services Board of Contract Appeals (the board). The board held that Mil-Spec’s oral agreement with Barker constituted a valid contract and affirmed the denial of Mil-Spec’s claim. Mil-Spec appealed to the United States Court of Appeals for the Federal Circuit.