Contaminated Vaccine Did Not Excuse Supplier's Default

A board of contract appeals' decision upholding the default termination of a contract to supply flu vaccine was affirmed by the Court of Appeals for the Federal Circuit because Food and Drug Administration approval of the vaccine was not a condition precedent to the contractor's delivery obligation, and the manufacturer's production failure did not excuse the contractor's failure to supply vaccine. The contractor was unable to make timely delivery of vaccine after the manufacturer discovered certain lots were contaminated by bacteria and the FDA banned import and distribution of its vaccine. On appeal to the Federal Circuit, the contractor renewed its contention it did not default under the terms of the contract because its obligation to perform was conditioned on the FDA's approval of the vaccine.

However, the FDA withheld approval because the manufacturer had produced contaminated vaccine and, by agreeing to act as a wholesaler to the government, the contractor was responsible for its supplier's failure. The board correctly concluded the FDA's decision to withhold approval of the vaccine was simply a consequence of the contractor's failure to provide acceptable vaccine (06-2 BCA ¶33,401). The Federal Circuit also agreed the default was not excused by FAR 52.212-4(f), which excuses nonperformance caused by events outside a contractor's reasonable control. The manufacturer was a subcontractor, and FAR 52.212-4(f) had to be read in light of the common law rule that contractors are liable for production failure by subcontractors. The manufacturer's failure to deliver acceptable vaccine, therefore, could not be excused as being beyond the manufacturer's reasonable control. (General Injectables & Vaccines, Inc. v. Gates, CA-FC, 52 CCF ¶78,905)

(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. )