Vhc Inc. (Formerly Known as Varo Inc.) v. F. Whitten Peters, Acting Secretary of the Air Force
179 F.3d 1363 | Court of Appeals for the Federal Circuit | 1999
What This Case Means for Subcontractors
VHC Inc. had a contract with the Air Force to supply power sources. When the Air Force terminated part of the contract for convenience, VHC asked to be paid for labor efficiency gains (learning costs) it had achieved on the remaining work. The Air Force and the lower court said no because VHC's pricing wasn't level across contract options. The Federal Circuit reversed, ruling that a contractor can recover unamortized labor learning costs if it can prove it actually became more efficient during performance, regardless of pricing structure.
Key Takeaways
- •Document your actual labor efficiency improvements during contract performance—learning curve data is your evidence for recovery claims after termination.
- •Don't accept a blanket denial of learning cost recovery just because your pricing wasn't uniform across contract phases; you have the right to prove actual costs incurred.
- •When partially terminated for convenience, measure your equitable adjustment claim on what you actually spent and achieved by termination date, not what you expected to spend.
An equitable adjustment depends on actual costs incurred, measured at termination, not expected costs.
Frequently Asked Question
Can I recover labor learning costs if my contract gets partially terminated for convenience?
Yes, if you can prove you actually became more efficient during performance. Courts will look at your real costs and productivity gains at the time of termination, not your original pricing structure. Document your labor efficiency improvements throughout the contract to support your claim.
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