Some of you may recall a recent post in which a drywall contractor was awarded loss of future profits against a union. As explained below, not all contractors are so fortunate to recover loss of future profits. In a recent matter before the Armed Services Board of Contract Appeals, a contractor claimed that it was forced to take out loans so that it could pay its subcontractors because the government delayed final payment. But, the contractor had a few holes in his claim.
The contractor claimed it was forced to take out loans to pay his subcontractors. But, the government pointed out that the loans were taken out before the contractor submitted its final invoice to the government. Claim denied.
The board also refused to award interest because of the “no interest” rule that states that interest cannot be recovered unless there is an express waiver of sovereign immunity. Not surprisingly, the contract did not contain an express waiver. Claim denied, again.
Finally, the contractor sought loss of reputation damages because he had been forced to spend 10 days in jail for failing to pay his subcontractors. The problem with the contractor’s claim was that he could not prove that the government’s late payment caused his damage. The problem, once again, was timing. The criminal charges and failure to pay both pre-dated the date the contractor submitted its invoice to the government.
While this is an extreme case, it certainly demonstrates the difficulty that a contractor may experience in pursuing loss of future profits. Not only must lost profits be proven with specificity, a contractor’s delay in submitting the final invoices will never serve as a basis for damages, even if the government further delays final payment.