Hoel-Steffen Construction Co. v. United States

This government contract case presents two issues for resolution. First, whether a contracting officer’s (CO) refusal to substitute subcontractors is arbitrary and capricious. Second, whether a contract provision which relieves the government of liability for a CO’s refusal to substitute subcontractors can preclude recovery where the CO’s refusal to substitute is plainly wrong. We hold that, in the instant case, the CO’s refusal to substitute was, in fact, arbitrary and capricious, or so grossly erroneous as to imply bad faith. We further hold that the exculpatory clause does not preclude…