Environmental Safety Consultants, Inc. ( 2014 )

ARMED SERVICES BOARD OF CONTRACT APPEALS
Appeal of -- )
)
Environmental Safety Consultants, Inc. ) ASBCA No. 58343)
Under Contract No. N62470-95-B-2399 )
APPEARANCE FOR THE APPELLANT: Mr. Peter C. Nwogu
President
APPEARANCES FOR THE GOVERNMENT: Ronald J. Borro, Esq.
Navy Chief Trial Attorney
Ellen M. Evans, Esq.
Senior Trial Attorney
OPINION BY ADMINISTRATIVE JUDGE FREEMAN ON APPELLANT'S
MOTION FOR PARTIAL SUMMARY JUDGMENT
Environmental Safety Consultants, Inc. (ESCI) moves for partial summary
judgment on its appeal of the contracting officer's deemed denial of its termination for
convenience settlement claim under the captioned contract. ESCI contends that there
is no genuine issue of material fact that it is entitled to immediate payment of
(i) $68,230.50 for "work that was completed and accepted at contract price," and
(ii) $199,950.00 for "settled constructive changes, extensive delays and overheads"
(mot. at 1-2). The government opposes on the grounds that there is no legal authority
under the termination for convenience clause for recovery of "selected prices in the
last invoice and the last modification issued before the termination" (opp'n at 1). We
agree with the government and deny the motion.
STATEMENT OF FACTS (SOF) FOR PURPOSES OF THE MOTION
1. This appeal arises out of our decision converting the government's
termination of the captioned contract (hereinafter "Contract 2399") for default to a
termination for the government's convenience. Environmental Safety Consultants,
Inc., ASBCA No. 51722, 11-2 BCA i! 34,848. 1 We have also addressed, more
recently, a jurisdictional issue with respect to the total amount ofESCI's termination
settlement claim. Environmental Safety Consultants, Inc., ASBCA No. 58343, slip op.
(25 July 2014). Familiarity with these decisions is assumed.
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All Rule 4 citations refer to the Rule 4 filed in ASBCA No. 51722.
2. Pursuant to paragraph (c) of the FAR 52.249-10, DEFAULT (FIXED-PRICE
CONSTRUCTION) (APR 1984) clause of the contract, and as a result of our decision
sustaining the appeal from the default termination, "the rights and obligations of the
parties will be the same as ifthe termination had been issued for the convenience of
the Government" (R4, tab 1 at 69).
3. The FAR 52.249-2, TERMINATION FOR CONVENIENCE OF THE GOVERNMENT
(FIXED-PRICE) (APR 1984)-ALTERNATE I clause in Contract 2399 states in pertinent
part:
(d) After termination, the Contractor shall submit a
final termination settlement proposal to the Contracting
Officer in the form and with the certification prescribed by
the Contracting Officer ....
(e) Subject to paragraph (d) above, the Contractor
and the Contracting Officer may agree upon the whole or
any part of the amount to be paid because of the
termination .... However, the agreed amount, whether
under this paragraph (e) or paragraph (t) below, exclusive
of costs shown in subparagraph (t)(3) below, may not
exceed the total contract price as reduced by ( 1) the
amount of payments previously made and (2) the contract
price of work not terminated ....
(t) If the Contractor and Contracting Officer fail to
agree on the amount to be paid the Contractor because of
the termination of work, the Contracting Officer shall pay
the Contractor the amounts determined as follows, but
without duplication of any amounts agreed upon under
paragraph (e) above:
( 1) For work performed before the effective date of
termination, the total (without duplication of any items) of-
(i) The cost of this work;
(ii) The cost of settling and paying termination
settlement proposals under terminated subcontracts that are
properly chargeable to the terminated portion of the
contract, if not included in subdivision ( i) above; and
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(iii) A sum, as profit on (i) above, determined by
the Contracting Officer under 49.202 of the Federal
Acquisition Regulation, in effect on the date of this
contract, to be fair and reasonable; however, if it appears
that the Contractor would have sustained a loss on the
entire contract had it been completed, the Contracting
Officer shall allow no profit under this subdivision (iii) and
shall reduce the settlement to reflect the indicated rate of
loss.
4. On 5 July 2012, ESCI submitted its termination settlement proposal to the
contracting officer for a "net proposed settlement" of$1,183,366.59. On
14 September 2012, it submitted that proposal to the contracting officer as a certified
claim under the Contract Disputes Act of 1978 (CDA), 41 U.S.C. §§ 7101-7109 (app.
supp. R4, vol. I, tab 3 at 1-4, tab 5 at 1-2). The contracting officer refused to either
negotiate a settlement or issue a final decision on the termination settlement claim
(answer ii 8). On 29 September 2012, ESCI appealed the deemed denial of the claim.
The appeal was docketed as ASBCA No. 58343.
5. ESCI's motion for partial summary judgment on its termination settlement
claim has two parts. First, it claims that:
[T]here are no genuine issues of material fact as to whether
appellant is entitled to payment of the amount of $68,230.50.
This amount represents the compensation for completed,
verified and accepted work at contract price before
government's termination on June 12, 1998. This amount
for payment is presented in Table 1.0 - Compensation for
completed, verified and accepted by the Government on
June 24, 1997 ....
(Mot. at 1)
6. Table 1 is a listing of the progress payment estimates in Invoice No. 7 for
some, but not all, of the items of work, required to perform Bid Item OOOlA (mot. at
20-23; R4, tab 14 at 3-16). 2 Bid Item OOOlA was a $358,754 lump sum fixed-price
2
Invoice No. 7 for a total progress payment of $138,506.50 was returned to ESCI
unpaid by the contracting officer in June 1997 on the ground that it contained
an "invalid" certification. ESCI did not thereafter submit a timely CDA claim
for payment of the invoice. See Environmental Safety Consultants, Inc.,
ASBCA No. 58847, 14-1BCAii35,510, and ASBCA No. 54615, 07-1 BCA
ii 33,483 at 165,984.
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item for ''the entire work, complete in accordance with the drawings and
specifications, but excluding work described in Bid Items OOOlB, OOOlC, OOOlD,
OOOlE and OOOlF." As of the date the contract was terminated (12 June 1998), Bid
Item OOOlA had not been completed. The work items in Table 1 ofESCI's motion
were part of the Bid Item OOOlA work, but none of those items were separately priced
in the contract Schedule. (R4, tab 1 at 16, 29-30)
7. The progress payment estimates for the work items in Invoice No. 7 and in
Table 1 ofESCI's motion are not based on the actual incurred costs of performing the
work item. They are based on portions of the Bid Item price assigned to the work item
by the contractor after award of the contract pursuant to paragraph (b) of the
FAR 52.232-5, PAYMENTS UNDER FIXED-PRICE CONSTRUCTION CONTRACTS
(APR 1989) clause of the contract. (R4, tab 1 at 68, 70) Paragraph (b) states in
pertinent part:
The Government shall make progress payments monthly as
the work proceeds, or at more frequent intervals as
determined by the Contracting Officer, on estimates of
work accomplished .... The Contractor shall furnish a
breakdown of the total contract price showing the amount
included therein for each principal category of the work,
which shall substantiate the payment amount requested in
order to provide a basis for determining progress
payments.
(R4, tab 1 at 70)
8. Progress payments under paragraph (b) are not final payments accepting the
work for which they are paid. The FAR 52.232-27, PROMPT PAYMENT FOR
CONSTRUCTION CONTRACTS (MAR 1994) clause of Contract 2399 makes a clear
distinction in this regard between progress payments and final payments as follows:
Notwithstanding any other payment terms in this
contract, the Government will make invoice payments and
contract financing payments under the terms and
conditions specified in this clause ....
(a) Invoice Payments. (1) For purposes of this
clause, there are several types of invoice payments which
may occur under this contract, as follows:
(i) Progress payments, if provided for elsewhere in
this contract, based on Contracting Officer approval of the
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estimated amount and value of work or services performed,
including payments for reaching milestones in any project:
(ii) Final payments based on completion and
acceptance of all work and presentation of release of all
claims against the Government arising by virtue of the
contract, and payments for partial deliveries that have been
accepted by the Government (e.g., each separate building,
public work, or other division of the contract for which the
price is stated separately in the contract) ....
(R4, tab 1 at 79)
9. The second part of ESCI' s motion for partial summary judgment is a claim
that: "Appellant is entitled to payment of $199,301, arising from the settlement
agreement of equitable adjustment through contract modification of June 23/24, 1997
presented in Table 2" (mot. at 2). The contract modification to which ESCI refers is
bilateral Modification No. P00006, signed by Peter Nwogu on 23 June 1997 for ESCI
and by the contracting officer on 24 June 1997 for the government. Modification
No. P00006 provided for various additions and deletions to the specified work. The
additional work items included among others:
j. Subcontract all remaining work, including supervision,
quality control, and punchlist items.
k. Provide additional overhead costs incurred due to
subcontracting.
n. Provide extended overhead for the Government delays
under this contract.
(R4, tab 2 at 11-12)
10. Modification No. P00006 concluded with a summary of the agreed price
adjustment and contract completion date for the additions and deletions of work and a
general release as follows:
2. TOTAL AMOUNT OF ADDITIONAL WORK $199,301.00
TOTAL AMOUNT OF CREDITS $199, 192.00
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The total contract price is increased by $109 .00 from
$561,764.25 to $561,873.25.
The contract completion date is extended by 308 calendar
days from August 26, 1996, to June 30, 1997.
The foregoing is agreed to as constituting full and
equitable adjustment and compensation (both time and
money) attributable to the facts of [sic] circumstances
giving rise to the change directed hereby, including, but
not limited to, any changes, differing site conditions,
suspensions, delays, rescheduling, accelerations, impact, or
other causes as may be associated therewith.
(R4, tab 2 at 12)
DECISION
ESCI' s termination settlement claim, including the two items in its motion for
partial summary judgment, is based on its prices for the terminated work and not its
incurred cost. As such, it is a claim for breach of contract damages (a disappointed
expectancy in not receiving the full contract price). But there has been no breach. The
parties agreed in Contract 2399 that if the contract was terminated for default and if f
the contractor was subsequently determined not to have been in default, "the rights and
obligations of the parties will be the same as ifthe termination had been issued for the
convenience of the Government" (see SOF ~ 2).
It is not disputed that Bid Item OOOlA was not completed when the contract was
terminated and accordingly the lump sum fixed-price for that item was not due (see
SOF ~ 6). It is not disputed that the individual work items in Bid Item OOOlA, agreed
to by the parties for purposes of progress payments, were not separately priced items
in the contract Schedule, and were accordingly part of the terminated work (id.). In
these circumstances, and since the parties did not conclude a termination settlement
amount agreement (see SOF ~ 4), paragraph (t)(l) of the Termination for Convenience
clause of the contract provided for the contracting officer to determine the settlement
amount on the basis of the cost of the terminated work up to the time it was terminated
and a reasonable profit on that cost. The clause did not provide for determination of a
settlement amount on the basis of a portion of the contract price of the terminated
work derived from the progress payment estimates (see SOF ~ 3). Accordingly, we
find no basis for including ESCI's claim for $68,230.50 of progress payment estimates
in Table 1 as actual incurred costs in the termination settlement determination.
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We also find no basis in the Termination for Convenience clause for including
the agreed increased price of $199,301 in Modification No. P00006 for changes and
delays in the work, as an incurred cost of the terminated work. The agreed price in
bilateral Modification No. P00006 of $199,301 for government-responsible changes
and delays in the work was offset in the same modification by an agreed amount of
$199, 192 for price credits due the government for deleted items of work. The net
increase in price agreed by the parties in Modification No. P00006 was $109 (see SOF
ir 10). However, the increased price of $109 is no proof by itself of the amount of any
cost incurred by ESCI.
The motion for partial summary judgment is denied.
Dated: 13 August 2014
MONROE E. FREEMAN, JR.
Administrative Judge
Armed Services Board
of Contract Appeals
I concur I concur
~#
Administrative Judge Administrative Judge
Acting Chairman Vice Chairman
Armed Services Board Armed Services Board
of Contract Appeals of Contract Appeals
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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. 58343, Appeal of
Environmental Safety Consultants, Inc., rendered in conformance with the Board's
Charter.
Dated:
JEFFREY D. GARDIN
Recorder, Armed Services
Board of Contract Appeals
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