## Facts

- Cascade Pacific International (CPI) entered a one-year fixed-price requirements contract with the General Services Administration (GSA) to supply builders’ hardware, including spring hinges.
- The hinges were required to meet Federal Specification FF-H-116E, including plating/finish requirements, specified metal thickness, and button tips.
- The contract incorporated standard inspection requirements and default provisions and required inspection/testing submissions before delivery.
- CPI delivered hinges that did not conform to specification requirements; the government rejected the items and terminated the contract for default.
- After termination, GSA obtained replacement hinges from another supplier at higher prices and sought to recover the price difference from CPI as excess reprocurement costs.
- Before the GSA Board of Contract Appeals (Board), CPI challenged the default termination and the government’s damages claim.
- The Board upheld the default termination, denied excess reprocurement costs for lack of proof (the reprocurement contract was not introduced into evidence), but awarded breach-of-contract damages equal to the government’s increased cost to obtain substitute goods.
- CPI appealed to the Federal Circuit.

## Issues

1. Whether substantial evidence supported the Board’s decision upholding GSA’s termination for default.
2. Whether the Board could award the government breach-of-contract damages based on CPI’s default even though the government failed to prove excess reprocurement costs under the traditional reprocurement-cost framework.
3. Whether awarding breach-of-contract damages in an amount equal to the claimed excess reprocurement costs denied CPI due process because of inadequate notice of the damages theory.

## Decision

- The Federal Circuit affirmed the Board.
- Substantial evidence supported the finding that CPI failed to deliver conforming hinges and that default termination was proper under the contract clauses.
- The government was entitled to damages for breach of contract measured by the added cost of obtaining substitute performance, even though the formal proof necessary for an award of “excess reprocurement costs” was not satisfied.
- CPI had adequate notice and opportunity to contest the government’s claimed increased costs; the Board’s use of a breach-damages characterization did not violate due process.

## Legal Principles

- A default termination will be sustained on appellate review when the Board’s findings of material nonconformance and failure to cure are supported by substantial evidence.
- Failure to meet the evidentiary prerequisites for an award of excess reprocurement costs does not bar recovery of ordinary contract damages for breach measured by the government’s increased cost of obtaining substitute goods, if causation and amount are proven on the record.
- A tribunal may award damages under a legal theory consistent with the litigated facts and requested relief, even if the claim was framed under a different label, when the opposing party had fair notice and an opportunity to be heard on liability and amount.

## Conclusion

The Federal Circuit upheld GSA’s default termination for delivery of nonconforming goods and sustained an award of breach-of-contract damages equal to the government’s added cost of substitute performance, rejecting challenges based on proof formalities for reprocurement costs and on due process notice.


Cascade Pac. Int’l v. United States, 773 F.2d 287 (Fed. Cir. 1985)