The Navy leased three boats from Assessment and Training Solutions Consulting Corporation (ATSCC) for training purposes. The lease extended 18 months and required the contractor to provide routine preventative maintenance. Any repairs from damages that were the Government's fault would be paid for separately. At lease end, the Navy returned the boats in damaged condition. ATSCC tallied the damages and submitted a claim for about $58 thousand.
The Navy failed to issue a final decision on the claim for more than a year so ATSCC appealed to the ASBCA (Armed Services Board of Contract Appeals) based on a "deemed denial".
ATSCC argued that the nature of the damage was sufficient to prove negligence on the part of the Navy. However, the Board ruled that the record does not clearly show that the Navy operated the vessels negligently. That would normally resolve the appeal in favor of the Navy. However, ATSCC pointed to "common law bailment" and argued that it may rely on a presumption to meet its burden of proof. The Navy countered that since negligence is specifically addressed in the PWS (Performance Work Statement), common law bailment principles are inapplicable to ATSCC's claim.
The Board ruled that ATSCC was correct.
When the Government rents property from a contractor, a bailment for the mutual benefit of the parties is created. The law of bailment imposes upon the bailee (the Navy in this case) the duty to protect the property by exercising ordinary care and to return the property in substantially the same condition, ordinary wear and tear excepted. When the Government receives the property in good condition and returns it in a damaged condition, a presumption arises that the cause of the damage to the property was the Government's failure to exercise ordinary care or its negligence.
Overcoming the presumption requires a preponderance of the evidence. The Navy filed to overcome the presumption that the damages were caused by its negligence by a preponderance of the evidence. The Board stated: "The evidenced in the record, when fairly considered, produces the stronger impression, and has the greater weight, and even though not free of doubt, is more persuasive as to its truth when weighed against evidence in opposition thereto."
The Board ruled in favor of ATSCC. You can read the entire Board decision here.