As experienced government contractors know, the rights and remedies available to prime contractors and subcontractors vary markedly. Prime contractors have a direct contractual relationship with the U.S. Government—referred to as “privity” of contract—and therefore may bring claims directly against the government under the Contract Disputes Act (CDA). Subcontractors are typically only able to pursue claims against the prime contractor or against the government on a “pass through” basis.

In a notable case released at the end of last year, the U.S. Court of Appeals for the Federal Circuit applied these principles to a dispute involving a tenant at the Milan Army Ammunition Plant in Milan, Tenn. The Milan facility was a government-owned, contractor-operated (GOCO) facility run by American Ordinance LLC, which had contracts with the Army Joint Munitions Command to operate the plant. The contracts allowed the plant to be put to “commercial use” through “tenant use agreements” with third parties.

One tenant, Wolf Creek Railroad LLC, had a 25-year tenant use agreement with American Ordinance to operate a commercial railroad at the site. The Army did not deal directly with Wolf Creek, although it did receive a copy of the agreement and insisted that American Ordinance reserve the right to cancel if the plant was closed. Of course, that is what happened. In 2019, the Army announced that it was closing the plant and that American Ordinance needed to terminate its tenant use agreements.

In 2023, Wolf Creek filed suit against the Army in the U.S. Court of Federal Claims (COFC) under the CDA, alleging breach of the tenant use agreement, including the “duty of good faith and fair dealing” that is implied in all government contracts. In 2024, COFC dismissed the suit for lack of subject matter jurisdiction and failure to state a claim.

Wolf Creek appealed to the U.S. Court of Appeals for the Federal Circuit, which affirmed COFC’s ruling. Under the Tucker Act, for the COFC to have jurisdiction, there must be an “express or implied contract with the United States.” 28 U.S.C. § 1491(a)(1). The Federal Circuit found that this contract did not exist.

Wolf Creek claimed that the FAR flow downs in its tenant use agreement—which the Army had directed American Ordinance to include—created a contractual relationship with the Army. The Federal Circuit rejected this argument, finding that “[t]hose provisions . . . do not soundly imply the creation of a new contractual relationship between the Army and Wolf Creek . . . or otherwise provide a mechanism for the subcontractor/tenant to sue the Army.”

The Federal Circuit also rejected the argument that American Ordinance was acting as an “agent” for the Army and thus had the authority to waive the Army’s sovereign immunity. This is a fairly high bar, which subcontractors/tenants will not be able to meet unless there is a clear showing that the prime contractor was acting as a “purchasing agent” for the government, the contractual relationship with the government was established through clear contractual consent, and the contract stated that the government would be directly liable to the contractor for the contract price.

Those facts didn’t exist in this case. Instead, Wolf Creek was paying American Ordinance to use the plant to generate revenue for itself. While the Army did receive some benefits from this relationship, this was not the same as American Ordinance purchasing directly from Wolf Creek for the Army’s benefit.

Wolf Creek Railroad is a good reminder for subcontractors: even if the government is indirectly exercising a great deal of control over your actions, you are unlikely to be in privity with the government absent express terms. This will limit a subcontractor’s rights and potential remedies if things go sideways.

The citation for the Federal Circuit’s non-precedential decision is Wolf Creek R.R. LLC v. United States, No. 2024-1873, 2025 WL 3276822 (Fed. Cir. Nov. 25, 2025).