Environmental Chemical Corporation ( 2015 )

ARMED SERVICES BOARD OF CONTRACT APPEALS
Appeal of -- )
)
Environmental Chemical Corporation ) ASBCA No. 58871
)
Under Contract No. FA8903-06-D-8511 )
APPEARANCES FOR THE APPELLANT: R. Dale Holmes, Esq.
Amy M. Kirby, Esq.
Justin J. Williams, Esq.
Cohen Seglias Pallas
Greenhall & Furman PC
Philadelphia, PA
Kevin J. Kelly, Esq.
Corporate Counsel
APPEARANCES FOR THE GOVERNMENT: Lt Col Matthew J. Mulbarger, USAF
Air Force Chief Trial Attorney
Anna F. Kurtz, Esq.
Capt Christopher M. Kovach, USAF
Trial Attorneys
OPINION BY ADMINISTRATIVE JUDGE MCILMAIL ON APPELLANT'S
MOTION TO AMEND COMPLAINT
INTRODUCTION
Appellant moves to amend its complaint to add two counts: one alleging
unabsorbed overhead resulting from delay to the contract work, and one alleging
breaches of the implied duty of good faith and fair dealing. We grant the motion in
part, and deny the motion in part.
STATEMENT OF FACTS FOR PURPOSES OF THE MOTION
In April 2006, Air Force Materiel Command (Air Force) awarded Contract
No. F8903-06-D-8511, an indefinite delivery, indefinite quantity Heavy Engineering
and Repair (HERC) contract, to Environmental Chemical Corporation (ECC) (R4,
tab 9 at 1-2). On 2 September 2011, the Air Force awarded Task Order 81 to the
contract to ECC, for the design and construction of buildings and parking lots at
Kandahar Air Field (KAF), in Afghanistan, for the fixed price of $22,974,828 (R4,
tab 21at1-2). Task Order 81 required the construction of several buildings on KAF
by 2 September 2012 (id. at 3). On 23 August 2012, the Air Force unilaterally issued
Modification No. 3 to Task Order 81, combining some of the buildings, reducing the
size of other buildings, and making other changes to the work (R4, tab 24 at 1, 39-40).
Modification No. 3 also increased the contract price by $1,526,345, and extended the
construction completion date by 129 days, to 9 January 2013 (id. at 2-3).
On 24 January 2013, ECC presented to the contracting officer a claim for
$4,363,296, for subcontractor costs associated with Modification No. 3, and for costs
incurred during a 174-day period of alleged delay that ECC asserted was caused by the
late issuance of Modification No. 3 from 2 March 2012 through 24 August 2012 (R4,
tab 81 at 1-2, 13). 1 The claim references "substantial Govt.-initiated changes to the
project design which were introduced soon after award of the Task Order on
September 2, 2011" (id. at 1). The claim also references specific "design delays,"
including ( 1) a proposal during a 19 September 2011 "initial design charrette" to
combine several buildings into one complex; 2 (2) the issuance by the Air Force on
21September2011 of a new statement of requirements (SOR) for Task Order 81; (3) a
delay through 31 October 2011 of the submittal of the 3 5% design due to the new
SOR; (4) the approval by the Air Force of the 35% design on 4 November 2011;
(5) the issuance by the Air Force of further revisions to the SOR on 19 January 2012,
and 23 February 2012; and (6) the issuance of Modification No. 3 and a notice to
proceed (NTP) with that modification in August 2012 (id. at 11-13). On 8 March
2013, ECC resubmitted its claim, reducing the claim amount to $4,274,135, and
certifying that amount (R4, tab 84 at 3-4). On 28 March 2013, ECC submitted the
claim for a third time, increasing the claim amount to $4,282,762 (R4, tab 89 at 8-9).
On 25 April 2013, ECC certified the 28 March 2013 claim amount (R4, tab 92 at 6).
From 2 April 2013 through 16 October 2013, two Air Force program managers
provided the contracting officer a series of advice memoranda regarding the claim (R4,
tabs 90, 96, 99, 100); the final memorandum recommended that an award to ECC of
303 days (the 129 days awarded in Modification No. 3 plus the 174 days identified in
the claim) was appropriate (R4, tab 100 at 6). On 11 September 2013, ECC filed this
appeal from the deemed denial of its claim. On 15 October 2013, ECC filed its
complaint, requesting $4,282,762 and a time extension of 181 days. On 6 November
2013, the contracting officer issued a final decision awarding to ECC the $1,526,345
amount set forth in Modification No. 3 (R4, tab 101 at 1, 9).
On 8 June 2015, ECC filed a document, styled "Amended Complaint," which
added two counts: (1) a request for breach damages for alleged violations of the
1
The claim letter erroneously refers to Modification No. 3 as "Modification No. 2"
(R4, tab 81 at 1).
2
A "charrette" is a type of meeting. NEW OXFORD AMERICAN DICTIONARY 293
(3d ed. 2010).
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implied duty of good faith and fair dealing (Count 11), and (2) a request for "Eichleay"
damages for allegedly unabsorbed overhead during the period 19 September 2011
through 10 May 2012 (Count III). On 17 June 2015, the Air Force filed its opposition
to amendment of the complaint, pointing out that ECC had not requested leave to
amend, and contending that ( 1) amendment would prejudice the Air Force because
discovery was scheduled to close on 27 June 2015, and because a hearing was
scheduled to commence on 13 July 2015; and (2) the claims that were the subject of
the amendment had not been presented to the contracting officer. The Air Force
requested that if the motion were granted the hearing be postponed to allow it to
conduct further discovery. On 24 June 2015, the Board rejected the motion because
ECC had not requested leave to amend its complaint.
On 26 June 2015, ECC requested leave to amend its complaint to add Counts II
and III. The Air Force opposed the motion on 6 July 2015. On 9 July 2015, the Board
deferred indefinitely a decision upon the motion. 3 During the period 13-17 July 2015,
the Board conducted five days of hearing upon the issue of entitlement, including the
taking of evidence on Counts II and III of the proposed amended complaint. At the
conclusion of the fifth and final scheduled day of the entitlement hearing, the Air
Force asserted that the prejudice to it if the motion to amend were granted would be
erased if it were allowed to conduct further discovery upon, and have an opportunity to
present further evidence upon, Counts II and III. ECC consented that the Air Force be
able to conduct further discovery. The Board adjourned the hearing pending a
decision regarding further proceedings. On 20 July 2015, the Board issued an order
that the record would remain open pending, at the earliest, a decision upon appellant's
motion to amend, but that no further evidence would be presented to the Board until
further notice.
DECISION
Jurisdiction to entertain the proposed amendments to the complaint
We have jurisdiction to entertain the appeal pursuant to the Contract Disputes
Act, 41 U.S.C. §§ 7101-7109. The Board may permit a party to amend its pleading
upon conditions fair to both parties. Board Rule 6(d) (revised 21 July 2014).
However, the Board will deny a request to amend a complaint to add to the appeal
what is tantamount to a new claim; that is, a claim that is based upon operative facts
not already presented in the claim that is the subject of the appeal. GSC Construction,
Inc., ASBCA No. 59046, 15-1BCA~35,882 at 175,429. That is because the Board
does not possess jurisdiction, within a given appeal, to entertain a claim that is new to
the appeal. Id. at 175,430.
3
Board Rule 7(b) (2014) authorizes the Board to defer ruling on motions as
appropriate.
3
However, rigid adherence to the exact language or structure of the original
claim is not required. Scott Timber Co. v. United States, 333 F.3d 1358, 1365 (Fed.
Cir. 2003). The Board possesses jurisdiction to entertain claims that arise from the
same operative facts as those presented to the contracting officer, claim essentially the
same relief, and merely assert differing legal theories for that recovery. Id. New or
modified allegations in an amended complaint that do not change the operative facts of
the claim to the contracting officer, or change the essential nature of those facts, do not
constitute a new claim. See Lockheed Martin Aircraft Center, ASBCA No. 55164,
07-1BCA~33,472 at 165,934.
Count II: Breach of the implied duty ofgood faith and fair dealing
Count II of the proposed amended complaint seeks unquantified breach
damages for the following alleged breaches of the implied duty of good faith and fair
dealing by the Air Force: (1) failure to issue a timely revised SOR, (2) issuance of
multiple, revised SOR over a period of months, (3) refusal to issue a "full" NTP to
allow construction to proceed until 356 days into contract performance, and
(4) "refusal to issue a modification for [ECC's] delay costs when those costs had been
found to be due, and instead signing an arbitrary Final Decision denying those costs"
(am. compl. `` 79-80). The claim to the contracting officer includes references to
some of the events that Count II alleges. For example, the claim references the wait
for a revised SOR, the receipt of more than one revised SOR, and the issuance-nearly
a year after the award of the Task Order 81 and more than 11 months after the initial
design charrette--of a notice to proceed with Modification No. 3. Accordingly, we find
that the claim to the contracting officer presents the operative facts from which arise
items (1), (2), and (3) of paragraph 79 of Count II of the proposed amended complaint,
providing the Board's jurisdiction to entertain those elements of Count II.
However, the Board does not possess jurisdiction to entertain ECC's claim that
the Air Force breached the implied duty of good faith and fair dealing by signing an
"arbitrary" final decision subsequent to refusing to issue a modification for certain
delay costs. From the proposed amended complaint, we understand that claim to rest
upon allegations that the contracting officer signed a final decision awarding to ECC
only the same $1,526,345 and 129 delay days set forth in Modification No. 3, despite
the advice of Air Force program managers that that ECC was entitled to more delay
days (am. compl. `` 73-78). However, the claim to the contracting officer does not set
forth those facts, which is not surprising because ECC prepared the final version of its
claim on 28 March 2013, before the program managers provided their advice, and
before the contracting officer signed his final decision. Consequently, the Board does
not possess jurisdiction to entertain ECC's Count II claim that the Air Force breached
the implied duty of good faith and fair dealing by "refus[ing] to issue a modification
for [ECC' s] delay costs when those costs had been found to be due, and instead
signing an [allegedly] arbitrary Final Decision denying those costs" (am. compl. ~ 79).
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Count III: Eichleay damages
The Board possesses jurisdiction to entertain ECC's Eichleay claim. Count III
of the proposed amended complaint seeks $446,060.16 in Eichleay damages to recover
for allegedly unabsorbed home office overhead during what ECC alleges was a
government-created indefinite suspension of work that began on 19 September 2011
and ended on 10 May 2012 (am. compl. `` 81-88). ECC alleges that "[o]ther than
mobilization to the project site, and limited work on the 35% design, [the Air Force's]
actions during the September 19, 2011 Design Charrette, and contract administration
decisions thereafter, placed [ECC] in a near total indefinite suspension of work on the
project, until [the Air Force] issued a partial NTP on May 10, 2012," and that
"[b]ecause of the indefinite suspension of work during the Design Charrette, [ECC]
was greatly limited, after mobilization, in work and contract earnings that were
available, until [the Air Force] issued the partial NTP at [ECC's] request on May 10[,]
2012" (am. compl. `` 82-83).
In our view, the Eichleay claim arises from the same set of operative facts that
were presented in the claim submissions to the contracting officer, adds some new or
modified allegations that do not change those facts or their essential nature, claims
essentially the same relief, and merely asserts a differing legal theory for that recovery.
Therefore, the Eichleay claim is not new to the appeal. The Eichleay claim is
essentially consistent with the account presented to the contracting officer that ECC
was entitled to recover the cost of delays that began with a proposal on 19 September
2011 to change the statement of requirements, and ended in August 2012 with the Air
Force issuing a notice to proceed with Modification No. 3. Although the claim to the
contracting officer seeks costs for only one period of specific delay-from 2 March
2012 through 24 August 2012-the allegations in the proposed amended complaint that
ECC was in a near-total suspension with limited earnings can be reasonably inferred
from ECC's account in the claim presented to the contracting officer that before the
issuance of the notice to proceed with Modification No. 3, ECC performed only
35% design work. The allegation in Count III that the Air Force issued a partial NTP
on 10 May 2012, although new, merely limits the Eichleay claim to a portion of the
19 September 2011through24 August 2012 timeline presented to the contracting
officer. Indeed, 69 days of the 19 September 2011through10 May 2012 Eichleay
period alleged in the amended complaint overlap with the 2 March 2012 through
24 August 2012 "schedule impact" period that the claim to the contracting officer calls
out expressly. That is, the two periods have 2 March 2012 through 10 May 2012 in
common. Finally, Count III requests essentially the same relief requested in the claim
to the contracting officer: costs that ECC contends it incurred as a result of what it
characterizes as the Air Force's delay of the project.
Trepte Construction Co., ASBCA No. 38555, 90-1BCA~22,595, upon which
the Air Force relies, is meaningfully distinct from these circumstances. In Trepte, the
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Board struck from an amended complaint a constructive acceleration claim, finding
that the claim had not been presented in the delay claim submitted to the contracting
officer. Id. at 113,385-86. The Board rejected the contractor's contention that the
constructive acceleration claim was not new, explaining that the basic operative facts
necessary to establish such a claim (including an express or implied government order
to overcome excusable delay or to complete performance by a date earlier than that by
which the contractor was entitled to perform) "are substantially different than those by
which entitlement to delay costs can be ascertained." Id. at 113,386. Here, too, ECC
presented a delay claim to the contracting officer; however, unabsorbed overhead
resulting from suspension of work by the government, such as that sought in Count III,
is a form of delay damages. See Ricway, Inc., ASBCA No. 29983, 86-2 BCA ii 18,841
at 94,955. Moreover, we have found that the claim presented to the contracting officer
sets forth the facts from which the allegations in Count III that Air Force delays placed
ECC in a near-total, indefinite suspension of work can be reasonably inferred.
Prejudice
In consideration of the evidence taken during the five days of entitlement
hearing, the Air Force has advised that the prejudice that it contends it would suffer
from the amendment of the complaint to add Counts II and III would be erased if it
were allowed to conduct some limited discovery upon those counts. In view of the
Board's jurisdictional ruling, the Air Force may conduct such discovery and present
additional evidence upon entitlement regarding items (1), (2), and (3) of paragraph 79
(from Count II), as well as upon Count III.
CONCLUSION
For these reasons, the motion to amend the complaint is granted in part, and
denied in part. The motion is denied with respect to the claim in Count II of the
proposed amended complaint that the Air Force breached the implied duty of good
faith and fair dealing by "refusal to issue a modification for [ECC's] delay costs when
those costs had been found to be due, and instead signing an arbitrary Final Decision
denying those costs" (am. compl. iii! 73-78, item (4) ofiJ 79). 4 The motion is
otherwise granted. The Air Force may conduct additional discovery, and present
additional evidence regarding entitlement, upon the new claims, consistent with this
4
We express no opinion on whether such a claim without the jurisdictional issue
involved here is a claim within the meaning of the Contract Disputes Act.
6
op1mon. The evidentiary record upon entitlement regarding those items remains open.
The Board will address a schedule for further proceedings in a separate order.
Dated: 14 September 2015
Administrati e Judge
Armed Services Board
of Contract Appeals
I concur I concur
``
Administrative Judge
Rl~KLEFORD
Administrative Judge
Acting Chairman Vice Chairman
Armed Services Board Armed Services Board
of Contract Appeals of Contract Appeals
I certify that the foregoing is a true copy of the Opinion and Decision of the
Armed Services Board of Contract Appeals in ASBCA No. 58871, Appeal of
Environmental Chemical Corporation, rendered in conformance with the Board's
Charter.
Dated:
JEFFREY D. GARDIN
Recorder, Armed Services
Board of Contract Appeals
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