Transportation v. Eagle Peak Rock & Paving, Inc. ( 2023 )

Case: 21-1837 Document: 57 Page: 1 Filed: 06/06/2023
United States Court of Appeals
for the Federal Circuit
______________________
DEPARTMENT OF TRANSPORTATION,
Appellant
v.
EAGLE PEAK ROCK & PAVING, INC.,
Appellee
______________________
2021-1837
______________________
Appeal from the Civilian Board of Contract Appeals in
No. 5692, Administrative Judge Beverly M. Russell, Ad-
ministrative Judge Marian Elizabeth Sullivan, Adminis-
trative Judge Harold C. Kullberg.
______________________
Decided: June 6, 2023
______________________
ASHLEY AKERS, Commercial Litigation Branch, Civil
Division, United States Department of Justice, Washing-
ton, DC, argued for appellant. Also represented by BRIAN
M. BOYNTON, PATRICIA M. MCCARTHY; RAYANN L.
SPEAKMAN, Federal Highway Administration, United
States Department of Transportation, Vancouver, WA.
DAVID WONDERLICK, Varela, Lee, Metz & Guarino,
LLP, Tysons Corner, VA, argued for appellee. Also repre-
sented by BENNETT J. LEE, STEPHEN LOUIS PESSAGNO, JR.,
San Francisco, CA.
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2 TRANSPORTATION v. EAGLE PEAK ROCK & PAVING, INC.
______________________
Before NEWMAN, SCHALL, and TARANTO, Circuit Judges.
Opinion for the court filed by Circuit Judge TARANTO.
Dissenting opinion filed by Circuit Judge NEWMAN.
TARANTO, Circuit Judge.
In May 2016, the Department of Transportation’s Fed-
eral Highway Administration (FHWA) entered into a con-
tract with Eagle Peak Rock & Paving, Inc., under which
Eagle Peak would do specified construction work in Yellow-
stone National Park, with the work to be completed by Oc-
tober 5, 2018. The contract required Eagle Peak to submit
to FHWA a schedule detailing how it would complete the
project on time. But by late January 2017, FHWA (acting
through either its contracting officer or project engineer)
had rejected all eight formal schedule submissions by Ea-
gle Peak as not complying with the contract’s require-
ments, and in early February 2017, the contracting officer
terminated the contract for default, concluding that Eagle
Peak was insufficiently likely to complete the project on
time.
Eagle Peak challenged the termination for default un-
der the Contract Disputes Act of 1978 (CDA), Pub. L. No.
95-563, 92 Stat. 2383, codified as amended at 41 U.S.C.
§§ 7101–7109, choosing to proceed before the Civilian
Board of Contract Appeals under 41 U.S.C. §§ 7104(a) and
7105(b). The Board ruled that the termination for default
was improper and converted the termination to one for the
convenience of the government. It relied heavily, though
not exclusively, on its view of deficiencies in the contracting
officer’s reasoning, rather than on de novo findings about
what the record developed in the Board proceeding showed
about whether the standard for a termination for default
was met. Eagle Peak Rock & Paving, Inc. v. Department of
Transportation, CBCA 5692, 21-1 BCA ¶ 37752, 2020 WL
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TRANSPORTATION v. EAGLE PEAK ROCK & PAVING, INC. 3
7409948 (Dec. 7, 2020). We now vacate the Board’s judg-
ment and remand for the Board to adjudicate the case de
novo on the record before it.
I
A
FHWA awarded a contract—valued at roughly $35 mil-
lion—to Eagle Peak in May 2016, the work to consist of im-
proving roads, parking areas, trails, and overlooks in
Yellowstone National Park. Eagle Peak, CBCA 5692, at 1–
2 (page numbers taken from version of opinion at J.A. 1–
17); J.A. 768–69. Eagle Peak was to complete the project
by October 5, 2018, with construction work to occur during
three construction seasons. Eagle Peak, CBCA 5692, at 2;
J.A. 771–72. The contract included one of the standard ter-
mination-for-default provisions of the Federal Acquisition
Regulations (FAR), namely, FAR 52.249-10, 48 C.F.R.
§ 52.249-10. Eagle Peak, CBCA 5692, at 3; J.A. 770 (stipu-
lation). Subsection (a) says that “[i]f the Contractor refuses
or fails to prosecute the work or any separable part, with
the diligence that will insure its completion within the time
specified in this contract including any extension, or fails
to complete the work within this time,” then “the Govern-
ment may, by written notice to the Contractor, terminate
the right to proceed with the work (or the separable part of
the work) that has been delayed.” Eagle Peak, CBCA 5692,
at 3 (quoting FAR 52.249-10(a)).
On May 24, 2016, FHWA issued a notice to Eagle Peak
that it could proceed with performance the next day. J.A.
772. Within 20 days of receiving the notice to proceed, Ea-
gle Peak was to provide an initial construction schedule
that would set a “baseline” for the project and would incor-
porate various restrictions imposed by the contract, e.g.,
halting construction during the winter and not engaging in
certain activities during bird-migration season. J.A. 71–
83; J.A. 744; J.A. 757; J.A. 771–72. But Eagle Peak did not
submit a schedule by the deadline. J.A. 86.
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4 TRANSPORTATION v. EAGLE PEAK ROCK & PAVING, INC.
On June 25, 2016, FHWA notified Eagle Peak that the
required schedule was past due and warned that the con-
tracting officer might withhold progress payments. Id. Ea-
gle Peak followed up by submitting several “draft”
schedules throughout June and July, but FHWA’s project
engineer rejected each as noncompliant and explained the
bases for the rejections. J.A. 97–101; J.A. 104–07; J.A.
410–12. In early August, FHWA began withholding pro-
gress payments. J.A. 108. Eagle Peak then submitted
three “formal” schedules in August, but the project engi-
neer again rejected each as noncompliant and identified
and explained the errors, e.g., working during the winter
shutdown and ignoring the restrictions associated with
bird migration. Eagle Peak, CBCA 5692, at 4; see also J.A.
109–15; J.A. 210–12; J.A. 246–50; J.A. 406–07; J.A. 412–
13.
On October 3, 2016, the contracting officer issued a
“cure” notice to Eagle Peak. Eagle Peak, CBCA 5692, at 4;
J.A. 464. In it, she noted that she was contemplating ter-
minating the contract for default due to Eagle Peak’s fail-
ure to submit a contract-compliant schedule, and—echoing
the language of the contract-incorporated FAR 52.249-
10(a)—she explained that the four-month delay raised
“great concern that Eagle Peak is not prosecuting the work
with sufficient diligence to ensure completion with[]in the
time specified in the contract.” J.A. 464; see Eagle Peak,
CBCA 5692, at 4. Eagle Peak directed its scheduling sub-
contractor “to get this schedule cured asap,” J.A. 465–67,
and responded to the officer’s letter on October 6, stating
that it was working with its expert to submit a compliant
schedule and that timely completion was not endangered,
J.A. 469–70.
Between October 13, 2016, and January 25, 2017, Ea-
gle Peak submitted five more schedules, each of which the
contracting officer rejected. Eagle Peak, CBCA 5692, at 4–
9; J.A. 772. The officer ultimately terminated the contract
for default on February 1, 2017, citing her lack of
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TRANSPORTATION v. EAGLE PEAK ROCK & PAVING, INC. 5
confidence in Eagle Peak’s ability to create a schedule or to
complete the project by the deadline. Eagle Peak, CBCA
5692, at 9; J.A. 714–15; J.A. 773.
B
Eagle Peak appealed the termination for default to the
Board under 41 U.S.C. §§ 7104(a) and 7105(b). Eagle Peak,
CBCA 5692, at 1–2. The Board first made several findings
of fact—including findings about the contract between
FHWA and Eagle Peak, Eagle Peak’s various schedule sub-
missions after receiving the October 2016 cure notice, and
the contracting officer’s termination for default. Id. at 2–
11. On the last of those matters, the Board found an error
in the officer’s calculation of the percentage of work com-
pleted by Eagle Peak at the time of the termination, and it
noted her inability to recall whether she had reviewed cer-
tain documents, such as Eagle Peak’s narrative reports ac-
companying its schedules. Id. at 10–11.
In its analysis after setting forth those findings, the
Board first explained that, even though Eagle Peak initi-
ated the appeal, “[a] termination for default is a govern-
ment claim, and the Government bears the burden of proof
that its action was justified,” id. at 11 (internal quotation
marks omitted), citing authorities back to Lisbon Contrac-
tors, Inc. v. United States, 828 F.2d 759, 764–65 (Fed. Cir.
1987) (same). The Board then stated what it believed the
government had to justify—based on the FAR 52.249-10(a)
language concerning a contractor’s failure to prosecute the
contract work “with the diligence that will insure its com-
pletion” by the due date. Eagle Peak, CBCA 5692, at 3. The
Board said that the government must justify the determi-
nation that “there was no reasonable likelihood of Eagle
Peak’s timely performance by October 5, 2018,” id. at 11,
and (seemingly meaning the same thing) that the govern-
ment “must show that it was reasonable for the contracting
officer to determine there was ‘no reasonable likelihood’ of
timely completion,” id. at 12 (citation omitted). See Lisbon,
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6 TRANSPORTATION v. EAGLE PEAK ROCK & PAVING, INC.
828 F.2d at 765 (in case involving materially identical ter-
mination-for-default contract provision, stating: “we con-
strue the contract . . . to require a reasonable belief on the
part of the contracting officer that there was no reasonable
likelihood that the [contractor] could perform the entire
contract effort within the time remaining for contract per-
formance” (bracketed alteration in original) (internal quo-
tation marks omitted)).
The Board proceeded to apply that standard in a dis-
cussion that focused heavily, though not entirely, on what
the contracting officer said and considered in determining
that timely completion was in sufficient doubt, rather than
on what the record developed before the Board showed
about whether timely completion was in sufficient doubt.
Notably, the Board found neither that the contracting of-
ficer failed to make a determination about Eagle Peak’s
performance (to date and to be expected) nor that the of-
ficer’s statements about performance were a pretext for a
decision actually made on non-performance grounds. See
Darwin Construction Co. v. United States, 811 F.2d 593,
596 (Fed. Cir. 1987) (holding that the Board was required
to set aside a termination for default, on facts similar to
precedent in which “the contractor’s status of technical de-
fault served only ‘as a useful pretext for taking the action
found necessary on other grounds unrelated to the plain-
tiff’s performance or to the propriety of the extension of
time,’” i.e., where the government “‘used the termination
article as a “device” and never made a “judgment as to the
merits of the case”’” (quoting Schlesinger v. United States,
390 F.2d 702, 709 (Ct. Cl. 1968))). The Board thus accepted
that the contracting officer’s decision was performance-
based and not pretextual, though it did not make express
findings to that effect. Despite that acceptance, the Board
devoted much of its discussion to finding faults in the con-
tracting officer’s reasoning.
The Board stated that the contracting officer “failed to
consider” (or did “not give[] due consideration” to) a number
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TRANSPORTATION v. EAGLE PEAK ROCK & PAVING, INC. 7
of factors, such as “the urgency” of the government’s need
for the contractor’s services or the contractor’s “resource ca-
pability,” set out in a FAR regulation, 48 C.F.R. § 49.402-
3, concerning terminations for default. Eagle Peak, CBCA
5692, at 12–14. The Board also criticized “the contracting
officer’s exclusion of [Eagle Peak’s] mobilization efforts
from her assessment of work completed in the first season.”
Id. at 14. The Board further stated that “the contracting
officer’s decision based so substantially upon Eagle Peak’s
[Critical Path Method] schedules is not sufficient to sup-
port the termination.” Id. at 15. The Board stressed that
“[t]he Government is given discretion to terminate a con-
tract for default, and that discretion must be exercised in a
reasonable and fair manner.” Id. at 16. Interspersed with
the foregoing statements about deficiencies in the contract-
ing officer’s reasoning are Board findings, on some of the
just-mentioned points and others, that address what the
evidence presented in the Board proceeding showed. Id. at
14–17. But although the “reasonable and fair” language
can (and must, as we will explain) be applied to assess the
termination de novo on the record evidence, the Board, in
applying that language, seems to have focused heavily on
the contracting officer’s reasoning, in contrast to making
its own findings based on the evidence. Indeed, at the end
of its opinion, the Board said that it “need not resolve the
issue of whether Eagle Peak . . . was making sufficient pro-
gress on the contract such that timely contract completion
was not endangered.” Id. at 17.
The Board issued its decision on December 7, 2020, and
the government filed a notice of appeal on April 6, 2021,
within the 120 days permitted by 41 U.S.C. § 7107(a)(1)(B).
We have jurisdiction under 28 U.S.C. § 1295(a)(10).
II
Under the Contract Disputes Act, “we review legal con-
clusions of the [Board] without deference” and “accept the
[Board’s] findings of fact unless they are: (1) fraudulent; (2)
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8 TRANSPORTATION v. EAGLE PEAK ROCK & PAVING, INC.
arbitrary or capricious; (3) so grossly erroneous as to nec-
essarily imply bad faith; or (4) not supported by substantial
evidence.” Ryste & Ricas, Inc. v. Harvey, 477 F.3d 1337,
1340 (Fed. Cir. 2007) (citations omitted); see 41 U.S.C.
§ 7107(b). Those standards govern our review of the
Board’s decision. What the government challenges is the
Board’s approach to judging the dispute about the underly-
ing termination for default. We agree that the Board com-
mitted legal errors in extensively focusing on the
contracting officer’s reasoning instead of simply judging de
novo, on the evidence developed in the Board proceeding,
the claim before it (termination for default). For that rea-
son, and others we set out, we vacate the Board’s decision
and remand the case.
A
Whenever a contracting officer makes a decision sub-
ject to the Contract Disputes Act, “[s]pecific findings of fact
are not required,” and “[i]f made, specific findings of fact
are not binding in any subsequent proceeding.” 41 U.S.C.
§ 7103(e). The statute expressly provides that if a contrac-
tor challenges that decision in the Court of Federal Claims
(Claims Court), the action “shall proceed de novo” under
the court’s rules. Id. § 7104(b)(4). And we have explained
that the same is true when the challenge is brought to the
Board: The case must proceed de novo, based on the evi-
dentiary record before the Board and not the officer’s rea-
soning or findings of fact. See Wilner v. United States, 24
F.3d 1397, 1401–02 (Fed. Cir. 1994) (en banc) (“The plain
language of the CDA and our decision in Assurance also
make it clear that, in court litigation, a contractor is not
entitled to the benefit of any presumption arising from the
contracting officer’s decision. De novo review precludes re-
liance upon the presumed correctness of the decision.
Thus, once an action is brought following a contracting of-
ficer’s decision, the parties start in court or before the
[B]oard with a clean slate.” (citation omitted)); Assurance
Co. v. United States, 813 F.2d 1202, 1206 (Fed. Cir. 1987).
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TRANSPORTATION v. EAGLE PEAK ROCK & PAVING, INC. 9
That is so, in particular, with respect to a termination for
default. McDonnell Douglas Corp. v. United States, 323
F.3d 1006, 1018 n.3 (Fed. Cir. 2003) (McDonnell Douglas
XII) (“[I]t is well-settled that the [tribunal] . . . reviews the
decision to terminate a contractor for default de novo.”).
When a contracting officer terminates a contract for de-
fault, and the contractor appeals that termination decision,
“the government . . . bear[s] the burden of proof with re-
spect to the issue of whether termination for default was
justified.” Lisbon, 828 F.2d at 765. In failure-to-make-pro-
gress cases, the government must establish that “the con-
tracting officer’s decision to terminate . . . was reasonable
given the events that occurred before the termination deci-
sion was made.” Empire Energy Management Systems, Inc.
v. Roche, 362 F.3d 1343, 1357–58 (Fed. Cir. 2004); see id.
at 1358 (affirming the Board’s finding that the contracting
officer “had a reasonable basis for default termination” (ci-
tation omitted)); Danzig v. AEC Corp., 224 F.3d 1333, 1336
(Fed. Cir. 2000) (noting that “the government [must] show
that it was reasonable for the [governmental deci-
sionmaker] to conclude that [the contractor] would be una-
ble to complete the project by what the Board found to be
the proper completion date”). If the government makes
this showing, the contractor then bears the “burden of
proving that its nonperformance was excusable.” DCX, Inc.
v. Perry, 79 F.3d 132, 134 (Fed. Cir. 1996); see also McDon-
nell Douglas Corp. v. United States, 567 F.3d 1340, 1353
(Fed. Cir. 2009) (noting that burden shifts to contractor to
rebut government’s untimeliness showing or to establish
“that there was excusable delay”), vacated and remanded
on other grounds by General Dynamics Corp. v. United
States, 563 U.S. 478 (2011).
Importantly, the “reasonable basis” language of the
substantive standard does not put the focus on the con-
tracting officer’s own reasoning. The CDA’s de novo stand-
ard—rooted partly in the statute’s command that “[s]pecific
findings of fact are not required” to be made by the
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10 TRANSPORTATION v. EAGLE PEAK ROCK & PAVING, INC.
contracting officer, and “[i]f made, specific findings of fact
are not binding in any subsequent proceeding,” 41 U.S.C.
§ 7103(e)—requires a determination by the Board on the
evidentiary record developed in the proceeding. One aspect
of that requirement is that the statute “demands an objec-
tive inquiry, not an evaluation of the contracting officer’s
subjective beliefs,” when ascertaining whether the govern-
ment has met its burden. Empire Energy, 362 F.3d at 1357.
More broadly, “once an action is brought following a con-
tracting officer’s decision, the parties start in court or be-
fore the [B]oard with a clean slate,” Wilner, 24 F.3d at 1402,
although the government may well present testimony by
the contracting officer, among other evidence, about the
facts bearing on the issue before the tribunal, id. at 1403.
On the often-central issue of whether it was reasonable
to view timely completion as not reasonably likely, see Em-
pire Energy, 362 F.3d at 1357–58; Lisbon, 828 F.2d at 765,
the tribunal must focus on “tangible, direct evidence re-
flecting the impairment of timely completion,” McDonnell
Douglas XII, 323 F.3d at 1016. In particular, the Board
must “decide the actual performance that the contract re-
quires and the amount of time remaining for performance”
and “may also consider” factors such as “the contracting of-
ficer’s testimony and contemporaneous documents[,] . . . a
comparison of the percentage of work completed and the
amount of time remaining under the contract, the contrac-
tor’s failure to meet progress milestones, problems with
subcontractors and suppliers, the contractor’s financial sit-
uation, . . . a contractor’s performance history, and other
pertinent circumstances.” Id. at 1016–17 (citations omit-
ted). This is a de novo adjudication: If the adjudicatory tri-
bunal finds, based on all the evidence before it, that the
standard for termination under the contract’s default
clause is met, it is to uphold that decision whether or not
the contracting officer stated the basis for that finding. As
we explained in Empire Energy, clarifying some language
in McDonnell Douglas XII, 323 F.3d at 1017:
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TRANSPORTATION v. EAGLE PEAK ROCK & PAVING, INC. 11
Our decisions have consistently approved default
terminations where the contracting officer’s
ground for termination was not sustainable if there
was another existing ground for a default termina-
tion, regardless of whether that ground was known
to the contracting officer at the time of the termi-
nation. Thus, the subjective knowledge of the con-
tracting officer herself is irrelevant, and the
government is not required to establish that the
contracting officer conducted the analysis neces-
sary to sustain a default under the alternative the-
ory.
362 F.3d at 1357 (citations omitted); see also Kelso v. Kirk
Brothers Mechanical Contractors, Inc., 16 F.3d 1173, 1175
(Fed. Cir. 1994) (“This court sustains a default termination
if justified by circumstances at the time of termination, re-
gardless of whether the Government originally removed
the contractor for another reason.” (citation omitted)).
In addition to the issues of failure to meet contractual
obligations and endangerment of timely completion (in the
sense explained in Lisbon), the standard termination-for-
default clause at issue here presents what can be consid-
ered a threshold issue—whether the contracting officer ac-
tually terminated the contract for default on the basis of a
perceived performance problem. Specifically, the termina-
tion-for-default decision must be performance-based and
not pretextual, under the Schlesinger and Darwin Con-
struction decisions quoted above. See supra p. 6; see also
McDonnell Douglas Corp. v. United States, 182 F.3d 1319,
1329 (Fed. Cir. 1999) (McDonnell Douglas X) (“[T]he gov-
ernment may not use default as a pretext for terminating
a contract for reasons unrelated to performance; instead,
there must be a nexus between the government’s decision
to terminate for default and the contractor’s perfor-
mance.”). That limited nexus requirement is implicit in the
standard termination-for-default contract clause.
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12 TRANSPORTATION v. EAGLE PEAK ROCK & PAVING, INC.
We have sometimes used broader language about
whether the contracting officer’s decision was “arbitrary
and capricious” or an “abuse of discretion.” See, e.g., DCX,
79 F.3d at 135; Darwin, 811 F.2d at 597–98. But Eagle
Peak agreed at oral argument that this court (unlike the
Board or the Claims Court) has not overturned a contract-
ing officer’s decision based on this threshold nexus require-
ment in the absence of a showing that the contracting
officer’s decision was pretextual and unrelated to contract
performance. See Oral Arg. at 29:07–30:22. And there is a
simple reason the nexus requirement is not properly un-
derstood to suggest the broader inquiry ordinarily implicit
in the “arbitrary and capricious” and “abuse of discretion”
language we have sometimes used. Such a standard does
not comport with the above-stated law calling for a de novo
adjudication on a newly developed record that may include
newly asserted bases for the contracting officer’s decision.
Contrary to that law, “arbitrary and capricious” review or-
dinarily calls for examination of whether a decision was not
just “reasonable” but also “reasonably explained” by the
agency, Federal Communications Commission v. Prome-
theus Radio Project, 141 S. Ct. 1150, 1158 (2021), thus fo-
cusing on the agency’s own reasoning, with the added
constraint that fact finding by the tribunal is not a proper
substitute for what the reviewed agency itself determined,
see Securities & Exchange Commission v. Chenery Corp.,
332 U.S. 194, 196–97 (1947). Likewise, the “abuse of dis-
cretion” standard is generally contrasted with a “de novo”
standard, the latter being the one that governs under the
CDA. See McLane Co. v. Equal Employment Opportunity
Commission, 581 U.S. 72, 79–85 (2017); Highmark Inc. v.
Allcare Health Management System, Inc., 572 U.S. 559,
563–64 (2014); Cooter & Gell v. Hartmarx Corp., 496 U.S.
384, 399–405 (1990).
Accordingly, as long as “the termination for default was
predicated on contract-related issues,” i.e., “the govern-
ment’s default termination was not pretextual or unrelated
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TRANSPORTATION v. EAGLE PEAK ROCK & PAVING, INC. 13
to Contractors’ alleged inability to fulfill their obligations
under the contract,” McDonnell Douglas X, 182 F.3d at
1321, 1326, the reasoning of the contracting officer at the
time of termination is not the subject of the CDA adjudica-
tion, which must proceed on the evidence and arguments
made in the adjudicatory proceeding, not through arbi-
trary-and-capricious or abuse-of-discretion review. Of
course, the substantive contract standard, in its endanger-
ment-of-timely-completion component, doubly considers
what is “reasonable”—whether it was “reasonable” to find
that there was no “reasonable likelihood” of timely comple-
tion. Empire Energy, 362 F.3d at 1357–58; Lisbon, 828
F.2d at 765. But the CDA tribunal must apply that sub-
stantive contract requirement de novo, not through one of
the deferential standards of review.
B
The Board, in its opinion on review here, did not clearly
separate its de novo analysis of the record evidence, see,
e.g., Eagle Peak, CBCA 5692, at 2 (discussing required per-
formance and project completion date); id. at 10–16 (evalu-
ating Eagle Peak’s expert’s testimony, Eagle Peak’s
narrative reports accompanying its schedule submissions,
and the percentage of work completed relative to the per-
centage of time used up), from its more extensive threshold
analysis of the officer’s reasoning, see, e.g., id. at 12 (“abuse
of discretion” (citation omitted)); id. at 12–13 (discussing
“failure to consider . . . critical information”); id. at 14 (not-
ing that “substantial information . . . was not given due
consideration”); id. (noting “inaccurate assessment of work
completed by Eagle Peak prior to termination” (capitaliza-
tion removed)); id. at 16 (“[D]iscretion must be exercised in
a reasonable and fair manner . . . .”); id. at 17 (“The Boards
of Contract Appeals have authority to set aside termina-
tions for default where they find that the contracting officer
has not acted fairly and reasonably, i.e., where the con-
tracting officer’s action was arbitrary and cap[r]icious.”
(cleaned up) (citation omitted)). Given the Board’s mixing
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14 TRANSPORTATION v. EAGLE PEAK ROCK & PAVING, INC.
of the two analyses, we do not have an adequate basis for
deeming parts of the opinion that seem to make de novo
findings sufficient to uphold the Board’s decision. Indeed,
the Board expressly declined to determine whether timely
performance was endangered by Eagle Peak’s inability to
submit a compliant schedule. See id. at 17 (“[B]ecause we
find that the termination was improper, we need not re-
solve the issue of whether Eagle Peak . . . was making suf-
ficient progress on the contract such that timely contract
completion was not endangered.”).
The Board’s threshold analysis, moreover, was errone-
ous in going beyond the issues of pretext and a performance
basis. See, e.g., id. at 12–14 (discussing “failure to consider
one or more of the factors” found in FAR 49.402-3 (citation
omitted)). 1 And even on the limited pretext/performance-
basis issue, the Board did not make a finding in Eagle
Peak’s favor or, in fact, any express finding at all. Without
suggesting that the evidence would support a finding in Ea-
gle Peak’s favor, we note that this is an issue for remand,
along with whether the facts support a reasonable view
1 The Board’s analysis also was contrary to our hold-
ing that the “failure to consider one or more of the . . . fac-
tors” found in FAR 49.402-3 “does not require that a default
termination be converted into a termination for the conven-
ience of the government,” as “the regulation does not confer
rights on a defaulting contractor,” so consideration of those
factors is not a “prerequisite[] to a valid termination.”
DCX, 79 F.3d at 135. At most, the factors “may aid a Board
of Contract Appeals or a court in determining whether a
contracting officer has abused his discretion in terminating
a contract for default.” Id. As explained above, that
threshold inquiry is properly limited to whether the termi-
nation decision was pretextual and unrelated to perfor-
mance.
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TRANSPORTATION v. EAGLE PEAK ROCK & PAVING, INC. 15
that timely completion was not “insure[d],” FAR 52.249-
10(a), as Lisbon interpreted that requirement.
In sum, the Board’s evaluation of the contracting of-
ficer’s reasoning exceeded the limited scope of the thresh-
old inquiry recognized by this court. The Board also failed
to separate that threshold analysis from its de novo evalu-
ation of the record evidence bearing on whether termina-
tion for default was justified. Because of these errors, we
vacate and remand for re-adjudication on the existing rec-
ord.
III
For the foregoing reasons, we vacate the Board’s deci-
sion and remand the case for proceedings consistent with
this opinion.
The parties shall bear their own costs.
VACATED AND REMANDED
Case: 21-1837 Document: 57 Page: 16 Filed: 06/06/2023
United States Court of Appeals
for the Federal Circuit
______________________
DEPARTMENT OF TRANSPORTATION,
Appellant
v.
EAGLE PEAK ROCK & PAVING, INC.,
Appellee
______________________
2021-1837
______________________
Appeal from the Civilian Board of Contract Appeals in
No. 5692, Administrative Judge Beverly M. Russell, Ad-
ministrative Judge Marian Elizabeth Sullivan, Adminis-
trative Judge Harold C. Kullberg.
______________________
NEWMAN, Circuit Judge, dissenting.
The Civilian Board of Contract Appeals (CBCA or
“Board”) determined that the United States Department of
Transportation, Federal Highway Administration (FHWA
or “agency”) improperly terminated a contract with Eagle
Peak Rock & Paving, Inc. on the ground of default. The
asserted default was based on the contracting officer’s find-
ing that Eagle Peak made inadequate progress during the
first year of this three-year contract. The Board converted
Case: 21-1837 Document: 57 Page: 17 Filed: 06/06/2023
2 TRANSPORTATION v. EAGLE PEAK ROCK & PAVING, INC.
the termination for default into a termination for conven-
ience of the government under 48 C.F.R. § 52.212-4(l). 1
The Board’s decision was reached after an evidentiary
hearing with witnesses for both sides and briefing, argu-
ment, and explanation. The Board’s decision is supported
by substantial evidence and is in accordance with law.
Nonetheless, the panel majority declines to complete our
appellate review, and returns the case to the Board for re-
determination of the same issue on the same record – to the
delay, burden, and cost of both sides. I respectfully dissent.
DISCUSSION
The issue on appeal is whether the Board appropriately
held that this contract should be subject to termination for
convenience, or whether the contracting officer’s termina-
tion for default should be reinstated.
The contract relates to various structural and highway
construction projects in Yellowstone National Park and
was to be performed over three years. After one year the
FHWA contracting officer terminated the contract for de-
fault, holding that Eagle Peak had not made sufficient pro-
gress. On Eagle Peak’s appeal to the Board, the Board
converted the termination into a termination for conven-
ience, citing the many errors in the FHWA’s project speci-
fications, the ensuing delays, the steps taken in correction,
and the failure of the contracting officer to consider these
aspects.
At the Board’s hearing, witnesses for both sides agreed
that the Contract Documents contained errors of major im-
pact on performance of the contract. FHWA Project Engi-
neer, Kyle Stone, stated that he had “never seen this many
1 Eagle Peak Rock & Paving, Inc. v. Dep’t of Transp.,
CBCA 5692, 21-1 BCA ¶ 37752, 2020 WL 7409948 (Dec. 7,
2020) (“Board Op.”).
Case: 21-1837 Document: 57 Page: 18 Filed: 06/06/2023
TRANSPORTATION v. EAGLE PEAK ROCK & PAVING, INC. 3
issues with the physical data on a Yellowstone contract.”
Appx1022 (email from FHWA Project Engineer Kyle Stone
to FHWA Construction Operations Engineer Howe Crock-
ett).
The contracting officer testified that she terminated
the contract for default without consideration of Eagle
Peak’s proposed schedule to correct FHWA’s errors or of
Eagle Peak’s proposed activities to meet the original com-
pletion date. See Eagle Peak Br. 5 (“Eagle Peak’s January
25, 2017 Recovery Schedule reflected Eagle Peak’s plan to
accelerate the remaining two seasons of work to overcome
excusable delays for which the FHWA was responsible and
complete the Project work (including the Mainline [me-
chanically stabilized earth] wall) by October 5, 2018.”).
Throughout the Board hearing, the contracting officer
testified that she did not consider the effect of the FHWA’s
specification errors on performance of the contract, did not
respond to Eagle Peak’s request for corrected Contract Doc-
uments, and did not consider Eagle Peak’s proposed sched-
ules for meeting the three-year completion date. With full
explanation of its reasoning, the Board determined the con-
tract issue. That determination is now before us on the
government’s request for appellate review. On an unchal-
lenged record and undisputed facts, it behooves this court
to conduct that review, not to require the Board to do it
again.
I
The contract is for a construction project for portions of
the Grand Loop Road within Yellowstone National Park,
including parking areas, trails, and overlooks, for four pri-
mary sites. Details are presented in Contract Documents
provided by the FHWA, and performance is scheduled over
three seasons.
During the first season it became apparent that the
Contract Documents contained major errors, which were
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4 TRANSPORTATION v. EAGLE PEAK ROCK & PAVING, INC.
the subject of testimony by both sides at the CBCA hearing.
In brief summary:
1. The Mainline mechanically stabilized
earth wall
This portion of the Mainline wall extends approxi-
mately 1,400 feet along Grand Loop Road. The Eagle Peak
work on this segment was scheduled for completion in the
first construction season. However, an error in the Con-
tract Documents affected the schedule.
The Contract Documents state that the ground where
the Mainline earth wall would be built did not contain soft
soils or underground water. Appx0973–76 (the Boring Log
from the Contract Documents); Appx1545–48 (Testimony
of Tony Cruse, Eagle Peak president and engineer). How-
ever, when Eagle Peak began digging at the site, it found
an unstable subgrade of soft soils, and underground water
with a high water table up to subgrade level.
FHWA witnesses testified that these conditions re-
quired additional work and made construction more com-
plex and more time-consuming than the Contract
Documents contemplated. See Appx1022–23 (FHWA Pro-
ject Engineer Kyle Stone describing problems with the pro-
ject design, acknowledging they have created a lot of extra
work, and requesting verifications of several elements of
the design).
2. Inspiration Point elevation error
Eagle Peak started work at Inspiration Point during
the first year and discovered that the existing ground was
2–3 feet lower than the elevations in the FHWA Contract
Documents. This admitted error “prevented Eagle Peak
from implementing its planned work sequence and im-
pacted the work at virtually every portion of Inspiration
Point.” Eagle Peak Br. 6.
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TRANSPORTATION v. EAGLE PEAK ROCK & PAVING, INC. 5
Eagle Peak proceeded with work on this site and re-
quested corrected designs. Full corrected designs were
never provided, although the record shows that the FHWA
acknowledged that the delay could “impact [the] critical
path” of the work. Eagle Peak Br. 6–7 (quoting an email
from FHWA Project Engineer Kyle Stone to Contracting
Officer Elizabeth Firestone). These facts were undisputed
at the Board hearing.
3. Brink of the Upper Falls instability
The record recites “[a]t least three sources of FHWA-
caused delays” at the Upper Falls site at the east edge of
the Yellowstone River. Eagle Peak Br. 7. The Contract
Documents provided for work at the Brink of the Upper
Falls Historic Wall, but instability of the site prevented use
of the heavy equipment, including the placement of a 90-
ton crane on the wall.
“The FHWA acknowledged both the need for a redesign
to address the wall’s instability, and that the ‘[p]ending
[c]ontract [m]odification’ for this changed work ‘[m]ay im-
pact [the] critical path.’” Eagle Peak Br. 7 (citations to rec-
ord omitted). Eagle Peak states, and the FHWA agrees,
that “the FHWA never issued a redesign before termina-
tion.” Eagle Peak Br. 7; see Appx1590–92 (contracting of-
ficer’s testimony agreeing that “the ball was in the
[FHWA’s] court” and stating the unanswered questions
“left things up in the air”).
In addition, the FHWA delayed commencement of work
on the Upper Falls Historic Wall for at least 26 days, such
that this work could not be included in the first construc-
tion season. None of this evidence was disputed.
4. Uncle Tom’s Point micropiles
The Uncle Tom’s Point site is at the west edge of the
Yellowstone River. The FHWA design specified insuffi-
cient linear feet of micropile materials to allow them to
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6 TRANSPORTATION v. EAGLE PEAK ROCK & PAVING, INC.
reach and be driven into the bedrock. Eagle Peak recites
that “[a]lthough the FHWA’s Project Engineer, Mr. Kyle
Stone, notified CO Firestone that he was ‘very aware of’ the
design error and ‘would like to issue a [Contract Modifica-
tion],’ the FHWA never issued a revised design or Contract
Modification before terminating Eagle Peak’s Contract.”
Eagle Peak Br. 8.
5. Additional design errors and omissions
The record refers to additional errors and omissions
that were not corrected by the FHWA before the contract-
ing officer terminated the contract for default. FHWA’s
Senior Engineer, Jason Hahn, testified “that there is [sic]
likely numerous errors in elevations in many of the over-
look designs.” Appx1310. The FHWA stated at the Board
hearing that there were at least nine pending contract
modifications, none of which had issued. Appx1206–07,
Appx1211, Appx1226 (various emails from FHWA Project
Engineer Kyle Stone to Contracting Officer Elizabeth Fire-
stone).
II
On a contractor’s appeal from termination for default,
“the government . . . bear[s] the burden of proof with re-
spect to the issue of whether termination for default was
justified.” Lisbon Contractors, Inc. v. United States, 828
F.2d 759, 765 (Fed. Cir. 1987). When the asserted termi-
nation ground is the contractor’s failure to make adequate
or scheduled progress, the government bears the burden of
establishing that “the contracting officer’s decision to ter-
minate . . . was reasonable given the events that occurred
before the termination decision was made.” Empire Energy
Mgmt. Sys., Inc. v. Roche, 362 F.3d 1343, 1357–58 (Fed.
Cir. 2004). And even if this standard is met, the contractor
may prevail if it meets the “burden of proving that its non-
performance was excusable.” DCX, Inc. v. Perry, 79 F.3d
132, 134 (Fed. Cir. 1996) (stating the burden shifts to the
Case: 21-1837 Document: 57 Page: 22 Filed: 06/06/2023
TRANSPORTATION v. EAGLE PEAK ROCK & PAVING, INC. 7
contractor to show that any delay was excusable). Within
this framework, the Board sustains a contract termination
for default only when there was “a reasonable belief on the
part of the contracting officer that there was ‘no reasonable
likelihood that the [contractor] could perform the entire
contract effort within the time remaining for contract per-
formance.’” Lisbon Contractors, 828 F.2d at 765 (quoting In
re RFI Shield-Rooms, ASBCA Nos. 17374, 17991, 77-2 BCA
(CCH) ¶ 12,714, 61,735 (Aug. 11, 1997)).
A
Contract Disputes Act Appeals
As stated in Wilner v. United States, 24 F.3d 1397 (Fed.
Cir. 1994) (en banc), when an action is brought under the
Contract Disputes Act following a contracting officer’s de-
cision, the parties start in the Board with a clean slate. Id.
at 1402; see Assurance Co. v. United States, 813 F.2d 1202,
1206 (Fed. Cir. 1987).
Instead of correcting the design errors and processing
appropriate contract modifications, the contracting officer
terminated the contract for default, asserting lack of pro-
gress during the first year. However, the Board recognized
the error in this theory, for it was undisputed that the de-
sign errors and absence of correction of those errors af-
fected progress during the first year. And it was not
disputed that the FHWA was the sole source of those er-
rors. The reduction in scheduled progress during the first
contract year was not the fault of Eagle Peak, but of the
agency.
The panel majority states that on review of “whether a
contracting officer has abused his discretion in terminating
a contract for default,” the “threshold inquiry is properly
limited to whether the [contracting officer’s] termination
decision was pretextual and unrelated to performance.”
Maj. Op. at 14 n.1 (quotation marks and citation omitted).
On the general standard of administrative review, the
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8 TRANSPORTATION v. EAGLE PEAK ROCK & PAVING, INC.
Board’s decision is reviewed to determine whether substan-
tial evidence supports the Board’s findings of fact, and
whether the Board’s conclusion is in accordance with law.
Although the panel majority spots the flaws in the gov-
ernment’s arguments in support of termination for default,
the panel majority declines to resolve the merits, instead
asking the Board to repeat its prior evaluation. There are
no disputed facts, and the case warrants finality.
1. The FAR factors
The Board held that the FHWA had not met its burden
of showing that termination for default was reasonable.
The Board considered the regulatory factors of FAR 49.402-
3(f), especially subparts (f)(4) and (f)(7), and found:
With two full seasons remaining on the contract,
the contracting officer here failed to consider “the
urgency of the need for the . . . services [described
in the contract] and the period of time” that an-
other contractor would have required to complete
the remaining work on the contract compared with
the date by which Eagle Peak could have completed
performance under the contract.
Board Op. at 8 (quoting FAR 49.402-3(f)(4)) (ellipsis, brack-
ets, and underline in original). The Board found “that
FHWA’s failure to consider this critical information, par-
ticularly with so much time remaining on the contract, [is]
a factor weighing against a determination that the agency’s
termination was reasonable.” Id.The Board cited FAR 49.402-3(f)(7) and precedent of
the Board and this court, and held that “[a] careful exami-
nation here should have included consideration of both
parts of Eagle Peak’s schedule submissions – the CPM
[critical path method] schedule and the narrative describ-
ing the company’s resource capabilities.” Id.Case: 21-1837 Document: 57 Page: 24 Filed: 06/06/2023
TRANSPORTATION v. EAGLE PEAK ROCK & PAVING, INC. 9
The Board stated: “Significantly here, Eagle Peak’s ev-
idence showing that the company had adequate resources
to timely complete the project remained undisputed.” Id.Whatever evidence the panel majority suggests the Board
should consider on remand was already before the Board
and was integrated into the Board’s decision.
2. The work completed assessment
The contracting officer estimated 9–10% of the work
was completed in 2016. Id. The FHWA’s expert Steven
Weathers assessed 17.1% work completed. Id. at 9. Eagle
Peak’s expert Jason Nolting estimated 26.5% work com-
pleted when weather and design impacts were considered.
Id.
The Board concluded that Eagle Peak’s progress was
not “so deficient as to support a termination for default
based on a calculation of work completed.” Id. The Board
discussed Eagle Peak’s critical path schedules and narra-
tives, and found that Eagle Peak “was ready, willing, and
capable of performing the project work in the two remain-
ing seasons of the contract.” Id. at 10. The Board con-
cluded:
Unlike the cases cited by FHWA which demon-
strated that default was clearly warranted, we can-
not find the facts in this appeal reflect “impairment
of timely completion” of the Yellowstone project,
particularly with two full construction seasons re-
maining under the contract, justifying the drastic
sanction of default termination.
Id.
Eagle Peak argues that even if it were reasonable for
the contracting officer to believe there was no expectation
of timely completion, any delay in Eagle Peak’s first year
of progress was excusable because of the myriad flaws and
errors in the FHWA’s Contract Documents, and failure of
Case: 21-1837 Document: 57 Page: 25 Filed: 06/06/2023
10 TRANSPORTATION v. EAGLE PEAK ROCK & PAVING, INC.
the FWHA to correct these flaws and errors. It is relevant
that Eagle Peak’s submission of the 2017 Recovery Sched-
ule “reflected significant acceleration efforts to overcome
FHWA-caused excusable delays and timely complete the
remaining work, including work resequencing and the pro-
vision of substantial additional resources, such as three ad-
ditional superintendents, two Canyon Rim crews, two
Mainline crews, and both night and day crews.” Eagle Peak
Br. 14. Eagle Peak’s Narrative Report with this infor-
mation, accompanied by witness testimony and full brief-
ing, was before the Board.
B
Review of the Board’s findings
The panel majority observes that the Board’s factual
findings must be accepted “unless they are: (1) fraudulent;
(2) arbitrary or capricious; (3) so grossly erroneous as to
necessarily imply bad faith; or (4) not supported by sub-
stantial evidence.” Maj. Op. at 7–8 (quoting Ryste & Ricas,
Inc. v. Harvey, 477 F.3d 1337, 1340 (Fed. Cir. 2007) (cita-
tions omitted)); see also Rockies Express Pipeline, LLC v.
Salazar, 730 F.3d 1330, 1335 (Fed. Cir. 2013) (stating fac-
tual findings of the Board are only overturned “if they are
arbitrary, capricious, or unsupported by substantial evi-
dence”); Tip Top Constr., Inc. v. Donahoe, 695 F.3d 1276,
1281 (Fed. Cir. 2012) (factual findings of the Postal Service
Board of Contract Appeals are final unless they are “fraud-
ulent, arbitrary, or capricious,” “so grossly erroneous as to
imply bad faith,” or “not supported by substantial evi-
dence”).
The Board made explicit findings of fact pertinent to
the conclusion that it was unreasonable for the contracting
officer to have found no reasonable likelihood of timely pro-
ject completion. The Board found that “Eagle Peak’s assur-
ances [to the contracting officer of sufficient resources]
were supported by detailed information,” Board Op. at 8,
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TRANSPORTATION v. EAGLE PEAK ROCK & PAVING, INC. 11
and that this adequacy of resources for timely completion
was “undisputed,” id. The record before us has exposed no
reversible error. These findings, along with those regard-
ing the assessment of work completed, discussed supra,
support the Board’s conclusion that it was unreasonable to
find no reasonable likelihood of timely completion, and the
Board’s opinion explains where it found substantial evi-
dence in the record.
The panel majority states that “the Board expressly de-
clined to determine whether timely performance was en-
dangered by Eagle Peak’s inability to submit a compliant
schedule.” Maj. Op. at 14. However, the Board explicitly
found that Eagle Peak “was ready, willing, and capable of
performing the project work in the two remaining seasons
of the contract.” Board Op. at 10; see also Discount Co. v.
United States, 213 Ct. Cl. 567, 576 (1977) (finding that ter-
mination for failure to file a work schedule was wrongfully
focused on a “technicality,” unless the underlying “function
of the work schedule,” i.e., “to show that the contractor was
ready, willing and able to make progress,” was sufficiently
in doubt as to make the government “justifiably insecure
about the contract’s timely completion”).
The panel majority’s ruling that the Board erred “in go-
ing beyond the issues of pretext and a performance basis,”
Maj. Op. at 14, is contrary to the principles of review under
the Contract Disputes Act. And the majority’s emphasis on
“the limited scope of the threshold inquiry recognized by
this court,” Maj. Op. at 15, takes the words of precedent
beyond the context in which they arose.
The panel majority, while acknowledging this court’s
obligation to conduct de novo review of legal conclusions on
appeal, Maj. Op. at 7, nonetheless declines to perform de
novo review.
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12 TRANSPORTATION v. EAGLE PEAK ROCK & PAVING, INC.
C
De Novo Review
Precedent for government contracts reinforces that
“[t]ermination is the most drastic of remedies.” In re Pipe
Tech, Inc., ENGBCA No. 5959, 94-2 B.C.A. (CCH) ¶ 26,649
(Dec. 20, 1993). The government bears the burden of prov-
ing the propriety of the termination by a preponderance of
the evidence. Lisbon Contractors, 828 F.2d at 765. Here,
termination was imposed after one year of a three-year con-
tract, despite significant performance during that year, in
the face of significant obstacles arising from government
errors.
Also, the government cannot “satisfy its burden by
merely showing that the contractor was behind schedule.”
Id. The contracting officer’s termination decision must “be
based on tangible, direct evidence reflecting the impair-
ment of timely completion.” McDonnell Douglas Corp. v.
United States, 323 F.3d 1006, 1016 (Fed. Cir. 2003). The
Board correctly held, applying precedent, that the agency
must show “that there was no reasonable likelihood of Ea-
gle Peak’s timely performance by October 5, 2018.” Board
Op. at 7.
The government argues that “[b]ecause Eagle Peak
made no allegation before the board that the default termi-
nation was anything other than performance-related, the
board should never have reviewed the termination for
abuse of discretion.” Gov’t Reply Br. 6. The government is
correct that the proper application of law cannot be waived.
Id. at 7 (citing Aposhian v. Wilkinson, 989 F.3d 890, 897
n.4 (10th Cir. 2021) (en banc) (Tymkovich, C.J., dissenting)
(“[P]arties typically cannot waive the proper standard of
review.”)); see also Worth v. Tyer, 276 F.3d 249, 262 n.4 (7th
Cir. 2001) (“[T]he court, not the parties, must determine
the standard of review, and therefore, it cannot be
waived.”). “When an issue or claim is properly before the
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TRANSPORTATION v. EAGLE PEAK ROCK & PAVING, INC. 13
court, the court is not limited to the particular legal theo-
ries advanced by the parties, but rather retains the inde-
pendent power to identify and apply the proper
construction of governing law.” Kamen v. Kemper Fin.
Servs., Inc., 500 U.S. 90, 99 (1991).
CONCLUSION
There is no need to repeat this administrative proceed-
ing, for the record is complete, both sides have been fully
and fairly heard, and the Board has explained the reasons
for its determination. The matter is now before us for ap-
pellate review, including de novo review of certain issues.
Refusing to adjudge the matter now delays justice, which
is contrary to the principles “generally applicable to good
judicial administration.” Radio Station WOW v. Johnson,
326 U.S. 120, 124 (1945); see also Cobbledick v. United
States, 309 U.S. 323, 325 (1940) (“To be effective, judicial
administration must not be leaden-footed.”). From the ma-
jority’s decision to vacate the Board’s decision and remand
for repetition of the Board’s analysis, I respectfully dissent.