Technical Assistance International v. U.S. (cb 480) US Ct of App, Fed. Circ.

, 1998 Facts US ( General Services Administration, GSA) entered a Requirements K w/ TAI () to m aintain and repair its White Sands vehicle fleet, after it integrated the fleet into its system. o K was to last for 1 yr, giving two one-yr options to renew at US discreti on. US estimated that during that first year, it would replace at least 30% of the v ehicles in the White Sands fleet during consolidation, and the rest would be mai ntained by TAI. US ultimately replaced more than twice as many vehicles as it projected, taking away that much work from TAI. o Reason for accelerated replacement was b/c of surpluses of vehicles at o ther locations. Procedural Posture TAI sues US for breach of K in Fed. Claims Ct (TC). TC found for TAI, saying that the seller/contractor that enters into a requireme nts K only assumes the risk of a change in requirements caused by fluctuations i n user/consumer demand. o TAI did not assume the risk that US would increase replacement rate b/c other fleets developed a surplus. US appeals. Issue(s) id US breach its Requirements K w/TAI by effecting a constructive change in the K by reducing its requirements b/c its other fleets developed a surplus = makin g a decision that affected the factors that formed the basis of the Ks requiremen t estimates? Essentially, was the act of the US an act of bad faith? Holding No. US did not breach the Requirements K b/c it acted in good faith. Requirement s Ks leave the buyer (US) the freedom to operate its business according to its b usiness judgment when its needs are uncertain or unpredictable this is the whole point of a Requirements K! Rule and Sub-Rules Limitation on the buyers freedom to vary its requirements in a Requirements K is a duty to act in good faith. Good faith means that it has a valid business reason for varying its requirement s o NOT b/c of dissatisfaction w/ the K. ----- ***NOTE: UCC also says buyer of goods cannot demand a quantity unreasonably dispr oportionate to any stated estimates. o Ct in this case says that this is basically an obligation to act in good faith, and the UCC isnt binding on govt contracts anyway. o But it isnt really clear how much more of an imposition this would put on a seller over the imposition of the requirement to act in good faith. How much does one read into the contract/situation to determine whether somethin g is unreasonably disproportionate? ------

Reason for the Rule o Requirements Ks purpose is to allow a buyer the flexibility to respond t o its fluctuating business needs. Reasoning TAI didnt even allege that the US altered its requirements in bad faith (i.e., b/ c it didnt like its obligations under the K). o It was b/c of a valid business decision, even if it was something over w hich they had control. While not explicit, the court appears to reason: o This contradicts Feld (supra), which didnt allow a buyer to make changes to/ breach a K b/c it isnt the most economical/fair. The difference between this case and Feld is that the US never hired another con tractor while the bread bakery sold their crumbs to another country isposition US Ct of App rules in favor of US, saying US did not breach its K w/ TAI.