Boeing Co. v. United States: Appeals Court Revives Cost Dispute Claims

The Boeing Company filed a lawsuit against the United States in the U.S. Court of Federal Claims, seeking a declaratory judgment and equitable adjustment under a fixed-price contract with the U.S. Air Force. The contract involved the production and retrofit of KC-46A aerial refueling tankers. Boeing claimed that the Air Force imposed changes without issuing formal contract modifications and that the government improperly shifted costs to Boeing for certain design and testing requirements.

The contract was awarded under a fixed-price incentive framework and included technical specifications for the aircraft. Boeing alleged that during performance, the Air Force introduced significant changes affecting wiring, cybersecurity compliance, and electromagnetic pulse (EMP) shielding. Boeing claimed these changes imposed new obligations beyond the original contract scope and sought compensation for the increased costs.

The Air Force denied that it made unilateral changes, contending that the requirements were already contemplated in the original contract or necessary to meet performance standards. Boeing submitted multiple requests for equitable adjustment, which the contracting officer denied.

Court of Federal Claims denied Boeing’s claims

The Court of Federal Claims ruled in favor of the government, holding that the disputed requirements fell within the scope of the contract. It found that Boeing assumed the risk for integration and compliance under the fixed-price agreement. The court emphasized that Boeing had agreed to meet military specifications and should have anticipated the technical challenges.

The court also found that Boeing’s claims lacked support in the contract’s language and that the Air Force did not improperly shift responsibilities. It concluded that the Air Force’s conduct did not constitute constructive changes requiring compensation.

Federal Circuit reversed in part and remanded

Boeing appealed, and the U.S. Court of Appeals for the Federal Circuit reversed the lower court’s decision in part. The appellate court found that the Court of Federal Claims erred in treating the entire contract as encompassing all disputed performance requirements without analyzing individual provisions.

The Federal Circuit emphasized that fixed-price contracts still require adherence to defined obligations and that unilateral demands outside those terms may constitute changes. It held that Boeing plausibly alleged that the EMP shielding requirement and cybersecurity implementation went beyond the original contract scope. The court found the lower court failed to assess whether specific requirements were new or materially different from those agreed upon.

The appellate court remanded for further factual development on whether Boeing was entitled to equitable adjustments for particular contract changes. It instructed the lower court to evaluate each disputed requirement individually to determine if a constructive change occurred.

Final outcome

The Federal Circuit reversed the dismissal of Boeing’s contract adjustment claims and remanded the case for further proceedings to assess whether the Air Force’s actions imposed changes beyond the fixed-price contract terms.

Help with contract scope disputes and government modifications

If your company is facing disputes over government contract modifications or fixed-price obligations, Whitcomb, Selinsky PC handles federal contract litigation, scope of work disagreements, and equitable adjustment claims. Reach out to schedule a consultation and learn how our team can assist with your case.