W.G. Yates & Sons Construction Co., Inc. v. Caldera

The Department of the Army (defendant) issued a solicitation for bids to construct an aircraft hangar. The solicitation included the design, manufacture, and installation of hangar doors meeting specific government design requirements. The solicitation also included a qualification requirement that the contractor producing the hangar doors must have previously designed, manufactured, and installed at least 10 substantially similar hangar doors that had been in satisfactory operation for at least five years. The contract was awarded to W.G. Yates & Sons Construction Co., Inc. (Yates) (plaintiff). Yates subcontracted with Industrial Door Co. (IDC) to supply the hangar doors. However, the government rejected IDC for failing to meet the qualification requirements. Yates ultimately entered into a new subcontract with a different, government-approved hangar door supplier to complete the contract work. The new subcontract cost Yates approximately $160,000 more than Yates’s original subcontract with IDC. Yates and IDC entered into a Liquidation and Consolidated Claim Agreement (LCCA) stating that Yates would be liable to IDC if Yates recovered from the government for IDC’s damages. Yates brought a pass-through claim against the government for IDC’s damages before the Armed Services Board of Contract Appeals (Board), arguing that the Army improperly rejected IDC. The Army countered, claiming Yates did not have standing to bring the pass-through claim because Yates was not liable for IDC’s damages. The Board held that Yates had standing but that the Army properly rejected IDC for failing to meet the qualification requirements. Yates appealed.