In Rumsfeld v. Freedom NY, Inc., 329 F.3d 1320 (2003), the government contractor was finally able to procure some relief after a 17 year struggle to rectify the shameful, bad faith tactics of the Defense Logistics Agency. The government's ACO, Marvin Lieberman, breached the contract by refusing to release authorized progress payments. By withholding these progress payments, the government literally brought Freedom NY to the brink of bankruptcy.
The ASBCA found that the ACO breached the contract each time he withheld or delayed a progress payment to Freedom. The ACO attempted to withhold progress payments so that Freedom would agree to contract modifications releasing the government from all legal causes of action by Freedom. The ASBCA held that withholding progress payments for the sole reason of forcing Freedom to agree to contract modifications is considered duress and invalidates the modifications.
[...] Wade, Under Secretary of Defense, corrected this DLA procurement discrimination by signing a Determination and Finding & on 7 February 1984 ordering DLA to award a contract to FII with a reasonable price differential. This award allowed FII to settle their Federal lawsuit against DLA. The contract awarded to FII represented the contractor's only business, a fact known to the government. The government agreed to make progress payments in the amount of 95% of incurred costs. All costs were treated as direct. [...]
[...] Another reason government duress is rarely found is that to render a contract unenforceable for duress, the party “must establish that it involuntarily accepted the other party's terms, circumstances permitted no alternative, and such circumstances were the result of the other party's coercive acts.” Dureiko v. U.S F.3d (Fed.Cir.2000). In Freedom, the government does not dispute that its withholding of progress payments caused the contractor to agree to Modification 29. The sole question was whether the government's actions were coercive. [...]
[...] In fact, Freedom is the main case to determine what government duress entails and if it may be used as grounds for contract elimination. There are several reasons to explain why Freedom is one of the only contractors allowed to use government duress as a defense. The most obvious reason is that the government wants to think that it always acts in a good faith manner and would never pressure a company like Freedom. If government duress is even used scarcely as a defense for contractors against the government, the government will seem like it is not acting in a good-faith, ethical manner in its contract dealings. [...]
[...] In Freedom, the government was not allowed to bind Freedom to Modification 29 due to duress as to progress payments. The government tried to use the parol evidence rule to bind Freedom to Modification 25. Parol Evidence is defined as: Rule of substantive law which states that once an agreement is reduced to writing and both parties have acknowledged this writing as the final expression of their agreement, then parol (oral) evidence of any prior or present understanding of the parties as to the terms of the agreement is inadmissible if it alters or contradicts the meaning of the written document. [...]
[...] Freedom rightfully claims that this sort of government loophole was utilized when the government tried to weasel out of the MRE contract. Since, the Small Business Act forced the government to award a contract to Freedom, the government felt it could pressure and manipulate Freedom into entirely unreasonable contract modifications. The government assumed that Freedom could not claim government duress because Freedom always had the opportunity to refuse the modifications and back out of the contract. The government assumed that Freedom would accept a deal to walk away from the contract with a termination for convenience by the government. [...]
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