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Government Breached Timber Sale Contracts

The government was liable for breach of timber sale contracts, according to the Court of Federal Claims, because it did not sufficiently disclose risks associated with pending environmental litigation, and it unreasonably and unduly delayed lifting suspensions of work. The government awarded the contracts while it was a defendant in a lawsuit that challenged the sufficiency of wildlife surveys in timber sale areas. The federal district court ultimately found the government did not perform the required surveys and enjoined operations at the work sites. After suspending the contracts to comply with the court order, the government entered into a stipulation agreement with the environmental plaintiffs, conducted the necessary surveys, and then lifted the suspensions. The timber contractor subsequently filed suit in the CFC, where it established breach of contract on two alternative and independent grounds.
Risks Not Disclosed

First, given the circumstances of the suspensions and the degree of the parties' respective knowledge, it was unreasonable for the government to award the contracts without informing the contractor of the specific risks arising from the environmental litigation. At the time of award, the government was aware of its weak position in the litigation and the environmental plaintiffs were targeting the sale areas. It also knew a decision from the district court was forthcoming. By contrast, the contractor did not know its timber sales were at issue in the litigation "and thus could not anticipate, or judge the likelihood of, an injunction against the pending timber sales." A contracting officer's "generic" announcement at the bid opening and in advance oral bidding, that the sale was currently under litigation and award may be delayed, did not put the contractor on notice its contracts were directly affected by the environmental litigation. The government was in breach of its duty to cooperate, which was inferred from its knowledge of certain risks, its failure to pass along this knowledge to the contractor, and the contractor's resulting deprivation of a "substantial measure of the fruits of the contract." The contractor bid "with the reasonable expectation ... its operations would proceed in due course," and the government was liable for a "shortfall in the raw materials [that] flow[ed] into the [contractor's] mills" of approximately five to six million board feet of timber.
Suspension Delays

Second, the government unreasonably extended the suspensions. Each contract was suspended for a period of approximately three to four years. However, the government unnecessarily delayed the suspensions by not completing survey work in a timely fashion. Other environmental litigation impacting two of the timber areas did not justify the length of the suspension, because in that case, there was no court order, which was a condition to the government's exercise of the contracts' suspension clause. The government also unreasonably enlarged the scope of one of the suspensions to cover an entire timber sale area, where it could have allowed operations to commence over part of the area. Finally, there was no merit to the government's contention the contractor suffered no damages, which were to be determined in a separate trial. (Scott Timber, Inc. v. U.S., FedCl, 53 CCF 79,077)



(The news featured above is a selection from the news covered in the Government Contracts Report Letter, which is published weekly and distributed to subscribers of the Government Contracts Reporter. )


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