ASM represented a joint venture (“JV”) comprised of an SBA 8(a)/service-disabled, veteran-owned small business (“SDVOSB”) headquartered in Maryland and an Alaskan Native Corporation (“ANC”) who teamed to build a new Department of Veterans Affairs (“VA”) mental health center in Menlo Park, California. The JV and the VA became involved in a dispute over whether the contract price agreed upon in a very short time period and under unusual circumstances with VA was based, in large part, on JV reliance on acts, omissions and knowing misstatements by VA contracting personnel to JV personnel during the contracting process through the final sole-source contract negotiations and award. We were able to develop information in discovery that established that VA purposely withheld information and pricing knowledge it had that confirmed that VA knew the price of the project should have been at least 20%and probably higher than they represented to the JV was the fair price. Further, statements by the VA led the JV to believe that if the project exceeded the awarded amount, the price could and would be fairly adjusted based on a specially drafted economic price adjustment (“EPA”) clause included in the final version of the contract, and/or under the standard government contracts Changes Clause. These affirmative (but false) representations resulted in the contract being awarded for about $7.4 million less than the actual value and final cost to construct, causing the JV severe financial difficulties during and after construction. Nevertheless, the JV successfully and timely finished the project (at a financial loss) so that war veterans in that area would not be impacted.
ASM, which was retained after the project was completed, filed suit at the Civilian Board of Contract Appeals seeking recovery of the incurred losses. After document discovery and several depositions, we notified the VA of the JV’s intent to file a motion for summary relief based on the VA’s procurement regulations violations. VA agreed to settle the case for $5.972 million – approximately 80% of the claimed amount – and without the need for trial or even a mediation.