Court Reviews Contractor’s Claims Under HUD IDIQ Real Estate Contracts

Sage Acquisitions LLC appealed a ruling from the Civilian Board of Contract Appeals that rejected its claims against the Department of Housing and Urban Development (HUD) over three indefinite-delivery, indefinite-quantity (IDIQ) contracts and a subsequent bridge contract for real estate asset management services. Sage alleged entitlement to termination costs, equitable adjustments, and damages stemming from scope reductions and contract mischaracterizations.

HUD awarded Sage three REO Contracts in 2015 for Denver, Philadelphia, and Atlanta. These IDIQ contracts guaranteed a $1 million minimum for each region and were part of HUD’s Real Estate Owned (REO) program to manage foreclosed properties. Sage contended that although labeled as IDIQ, the contracts functioned as requirements contracts and that HUD failed to provide the expected work volume. Sage also challenged HUD’s increased use of REO alternatives, which diverted inventory and impacted Sage’s performance expectations.

In 2016, following bid protests, the Court of Federal Claims enjoined performance of the contracts at the end of the first option period. HUD then issued six-month task orders and later awarded a bridge contract to Sage to continue work. In 2018, HUD terminated the REO Contracts for convenience. Sage subsequently submitted certified claims seeking compensation for termination costs and scope reductions, arguing that HUD’s diversion of work breached contractual obligations.

Board and Federal Circuit upheld IDIQ classification and denied damages

The Board concluded that the REO Contracts were valid IDIQ contracts. It found that HUD satisfied its obligations by meeting the guaranteed minimums and had not committed to ordering beyond that amount. The Board rejected Sage’s argument that certain provisions created exclusivity, emphasizing that the contracts contained clear IDIQ terms and allowed HUD to reduce geographic scope or use other contractors.

The Board also found no breach of the bridge contract. It held that HUD had assigned all REO properties during the contract term and had no obligation to include inventory from alternative disposition programs. Sage’s claim under the superior knowledge doctrine also failed because the Board determined Sage was aware of HUD’s evolving policy favoring cost-saving alternatives.

The U.S. Court of Appeals for the Federal Circuit affirmed the Board’s ruling. It agreed that the REO Contracts were properly classified as IDIQ and that HUD discharged its contractual obligations by fulfilling the minimum guarantee. The court also affirmed that Sage had no entitlement to damages or equitable adjustments under the bridge contract.

Final outcome

The Federal Circuit upheld the denial of Sage’s claims, finding that HUD’s use of alternative programs and adherence to IDIQ contract terms did not constitute breach or entitle Sage to additional compensation.

Help with IDIQ contracts and government contract disputes

If your company is navigating a federal contract dispute involving IDIQ agreements, performance metrics, or scope reduction, Whitcomb, Selinsky PC handles contractor claims, termination issues, and bid protest appeals. Reach out to schedule a consultation and learn how our team can assist with your case.