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multiyear contracts, was not fully funded at its inception, and
that the Government retained the right to cancel unfunded
portions of Contract 2034 in certain circumstances. We find
petitioner’s interpretation to be correct and consistent with the
analysis of the above-quoted cases holding that the Government’s
ability to cancel a multiyear contract is not discretionary, but
is limited to situations in which Congress fails to appropriate
funds for the goods ordered under the contract, or the Government
no longer has a need for the goods ordered under the contract.
Contract 2034 obligated the Air Force to fund each program
year under the contract as long as Congress continued to
appropriate funds and the Air Force continued to need the F-16's
ordered under Contract 2034. If, for example, costs of
petitioner’s performance dramatically declined during the term of
Contract 2034, the Air Force was not entitled to cancel Contract
2034 or require petitioner to produce the remaining F-16's at a
lower price.
The Air Force’s ability to cancel prior to full funding of
all 4 fiscal years was sufficiently limited as a matter of
Government contracting law so as to deplete the substance of
respondent's claim that the funding of each successive fiscal
year was merely an increase in order quantity. The Air Force did
not have unqualified or unlimited legal power to cancel, and the
480 aircraft procured were interdependently priced.
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