IDP won an 8(a) contract to provide computers to the Air Force and when it was purchased by a non-8(a) firm the government had to terminate the 8(a) contract.  The termination letter stated the termination would not “affect the rights and liabilities of the parties…concerning defects, guarantees or warranties related to any article furnished…under the contract.” With the Air Force purchasing $35 million worth of equipment from IDP it continued to demand warranty and upgrade services with IDP attempting to negotiate an additional contract to cover its costs.  A lower court ruled against IDP’s claim for termination costs but ruled the termination ended IDP’s obligation to provide warranty and upgrade services because the company was required to cease performance. A higher court reversed the lower court’s decision about IDP’s continuing obligation while upholding the decision refusing termination costs. The Court stated the termination letter “closely tracks” FAR 49.603-1(b)(7) that provides similar obligations to honor the liabilities related to warranties after a termination. The Court agreed with the Air Force that by terms of the contract, the agency already paid for the costs of the contested services since they were incorporated into the price of the equipment and hence was not entitled to additional termination costs (Int’l Data Prods. Corp. v US 2007 WL 1827842).

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