1) Is the Government liable to pay for new equipment or fair market value of the items? These items were between 5 and 10 years old.
2) Is the Government liable to pay the leasing costs from Nov 2014 to May 2015?
While this is an excellent set of questions and an even better case study for current and future contingencies; the truth is that it is not one we can answer fully here at the Ask-a-Professor program.
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Our best advice, to start with, is to read all of FAR 33.2 and then DFARS 233.2; then to contact the cognizant contract JAG/Lawyer for operations in Afghanistan. This would be your SOCOM contract legal advice, CENTCOM or better yet the Army Contracting Command close-out/draw down cell. They handled many, many claims from Iraq and Afghanistan and should have the requisite expertise as well as applicable board and case-law citations to help you with the Contracting Officer’s Final Decision. The clock is running [60 days per the Contracts Disputes Statute and FAR 33.211(c)].
Our thoughts based on experience with formal claims, disputes and board decisions.
1) It would be fair market value for the equipment, subject to the condition they were in when first provided under the contract, minus any improvements the government may have made and then minus a reasonable depreciation and the current fair market value for similar condition equipment and it’s expected shelf/usable life. It should also be determined if we may have already paid more than fair-market value for how much money was paid during the PoP. In other words, did we already pay more in leasing costs than it would have cost to purchase the equipment in the first place? This was not uncommon under many contracts.
2) Potentially the government may have to pay some of the leasing costs, repeat “some”.
This case will really rely on the terms and conditions of the contract, all of the facts and circumstances including any actions the contractor might have taken to help mitigate the situation or to make it worse. There is also the question of how hard the USG and the contractor attempted to retrieve the equipment from the ANA and any recourse the USG has against the ANA for “taking control” of the equipment. This is, again, why we highly suggest you get your legal staff involved.