851 F.2d 334 (Fed. Cir. 1988), 87-1607, Glopak Corp. v. United States

Docket Nº:87-1607.
Citation:851 F.2d 334
Party Name:Rep.Serv.2d 1402 GLOPAK CORPORATION, Plaintiff-Appellant, v. The UNITED STATES, Defendant-Appellee.
Case Date:June 21, 1988
Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit

Page 334

851 F.2d 334 (Fed. Cir. 1988)

Rep.Serv.2d 1402

GLOPAK CORPORATION, Plaintiff-Appellant,


The UNITED STATES, Defendant-Appellee.

No. 87-1607.

United States Court of Appeals, Federal Circuit

June 21, 1988

Page 335

James J. McCullough, Fried, Frank, Harris, Shriver & Jacobson, Washington, D.C., argued for plaintiff-appellant. With him on the brief was Carl Peckinpaugh.

Sharon Y. Eubanks, Commercial Litigation Branch, Dept. of Justice, Washington, D.C., argued for defendant-appellee. With her on the brief were Richard K. Willard, Asst. Atty. Gen. and David M. Cohen, Director.

Before MARKEY, Chief Judge, FRIEDMAN, Circuit Judge, and SKELTON, Senior Circuit Judge.

FRIEDMAN, Circuit Judge.

This is an appeal from a judgment of the United States Claims Court that awarded to the government the amount by which the government had reduced the contract price pursuant to an economic price adjustment clause, and denied the appellant's claim for the additional raw material costs it allegedly incurred in performing the contract. Glopak Corp. v. United States, 12 Cl.Ct. 96 (1987). We affirm.


In May 1982, the government awarded the appellant Glopak Corporation (Glopak) a contract to manufacture and supply the government with polyethylene plastic bags at a fixed price of approximately $6,456,000. The contract had been set aside for economically and socially disadvantaged small businesses, pursuant to section

Page 336

2(a) of the Small Business Act of 1953, as amended, 15 U.S.C. Sec. 637(a) (1982). As frequently is the case with such arrangements, the prime contract was between the Small Business Administration (SBA), which administers the section 2(a) program, and the General Services Administration (GSA), which was the ultimate purchaser of the bags. The Small Business Administration in turn entered into a subcontract with Glopak, which agreed to supply the bags.

The contract, as had the solicitation for bids, contained an economic price adjustment clause (adjustment clause) which provided for increase or decrease in the contract price in the event of changes in the price of certain commodities used in manufacturing bags. With respect to the issue before us, the adjustment clause made the price changes dependent upon changes in the Producer's Price Index (PPI or Price Index) for polyethylene resin, a product which constituted approximately 75 percent of the raw material in the plastic bag. The Price Index is prepared by the United States Department of Labor. A similar clause had been used in a prior procurement of polyethylene plastic bags in which Glopak was involved. Glopak was, therefore, familiar with both the adjustment clause and the Price Index.

The adjustment clause provided that prices under the contract were "subject to price adjustment, upward or downward," in accordance with a specified formula on the basis of changes in the Price Index. The adjustment clause stated that the contractor was required to make a written request for a price increase, and that

[i]n the event of a decrease, the Government has the right to unilaterally adjust the contract price(s).

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(f) The aggregate of the increase in any contract unit price made under this clause shall not exceed 30 percent of the original unit price. There is no percentage limitation of the amount of decrease made under this clause.

During the negotiation of the contract, Glopak attempted to eliminate the adjustment clause or to tie the price adjustment to Glopak's own cost of raw material rather than to the price of the material in the Price Index. "According to Glopak, this request was based upon its previous experience with GSA contracts involving such a clause, leading it to conclude...

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