2Connect W.L.L.

ARMED SERVICES BOARD OF CONTRACT APPEALS
Appeal of -- )
)
2Connect W.L.L. ) ASBCA No. 59233
)
Under Contract No. 2CON W 000276 )
APPEARANCES FOR THE APPELLANT: Shelly L. Ewald, Esq.
Scott P. Fitzsimmons, Esq.
Watt, Tieder, Hoffar & Fitzgerald, L.L.P.
McLean, VA
APPEARANCES FOR THE GOVERNMENT: Robert Gorman, Esq.
DISA Chief Trial Attorney
James W. Debose, Esq.
Christine Elizabeth Purvis, Esq.
Trial Attorneys
Defense Information Systems Agency
Fort Meade, MD
OPINION BY ADMINISTRATIVE JUDGE WILSON
This appeal originates from a cancellation of a delivery order issued by the Defense
Information Systems Agency (DISA or government) to 2Connect W.L.L. (2Connect or
appellant) for a telecommunications circuit. The parties could not agree on the costs
allegedly incurred as a result of the cancellation. The cancellation stemmed from a
successful protest by another offeror to the Government Accountability Office (GAO).
Appellant contends that it is entitled to be reimbursed for its reasonably incurred costs for
securing a telecommunications circuit necessary for performance of the contract. The
government counters that, pursuant to the relevant Defense Federal Acquisition Regulation
Supplement (DF ARS) clause, the claimed cost of the telecommunications circuit is not an
"actual nonrecoverable cost" that was reasonably incurred. The Board conducted a
two-day hearing on entitlement and quantum.
FINDINGS OF FACT
The Basic Agreement
1. On 9 December 2010, 2Connect and the government entered into a Basic
Agreement (BA) for the acquisition of commercial telecommunication services. Under
this agreement, appellant could compete with other agreement holders to fulfill DISA's
telecommunications requirements. The agreement contained general terms and conditions
that would be incorporated into subsequent orders for communication services that would
include other appropriate standard provisions. The BA included FAR 52.212-4,
CONTRACT TERMS AND CONDITIONS - COMMERCIAL ITEMS (JUN 201 OJ and deleted
paragraph (I), Termination for the government's convenience, and replaced it with DFARS
252.239-7007, CANCELLATION OR TERMINATION OF ORDERS (NOV 2005), which reads as
follows:
(a) If the Government cancels any of the services
ordered under this agreement/contract, before the services are
made available to the Government, or terminates any of these
services after they are made available to the Government, the
Government shall reimburse the Contractor for the actual
non-recoverable costs the Contractor has reasonably incurred in
providing facilities and equipment for which the Contractor has
no foreseeable reuse.
(b) The amount of the Government's liability upon
cancellation or termination of any of the services ordered under
this agreement/contract will be determined under applicable
tariffs governing cancellation and termination charges which -
( 1) Are filed by the Contractor with a governmental
regulatory body, as defined in the Rates, Charges, and Services
clause of this agreement/contract;
(2) Are in effect on the date of termination; and
(3) Provide specific cancellation or termination charges
for the facilities and equipment involved or show how to
determine the charges.
(c) The amount of the Government's liability upon
cancellation or termination of any of the services ordered under
this agreement/contract, which are not subject to a
governmental regulatory body, will be determined under a
mutually agreed schedule in the communication services
authorization (CSA) or other contractual document.
(d) If no applicable tariffs are in effect on the date of
cancellation or termination or set forth in the applicable CSA
or other contractual document, the Government's liability will
be determined under the following settlement procedures -
( 1) The Contractor agrees to provide the Contracting
Officer, in such reasonable detail as the Contracting Officer
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may require, inventory schedules covering all items of property
or facilities in the Contractor's possession, the cost of which is
included in the Basic Cancellation or Termination Liability for
which the Contractor has no foreseeable reuse.
(2) The Contractor shall use its best efforts to sell
property or facilities when the Contractor has no foreseeable
reuse or when the Government has not exercised its option to
take title under the Title to Telecommunications Facilities and
Equipment clause of this agreement/contract. The Contractor
shall apply any proceeds of the sale to reduce any payments by
the Government to the Contractor under a cancellation or
termination settlement.
(3) The Contractor shall record actual non-recoverable
costs under established accounting procedures prescribed by
the cognizant governmental regulatory authority or, if no such
procedures have been prescribed, under generally accepted
accounting procedures applicable to the provision of
telecommunication services for public use.
(4) The actual nonrecoverable costs are the installed
costs of the facilities and equipment, less cost of reusable
materials, and less net salvage value. Installed costs shall
include the actual cost of equipment and materials specifically
provided or used, plus the actual cost of installing (including
engineering, labor, supervision, transportation, rights-of-way,
and any other items which are chargeable to the capital
accounts of the Contractor) less any costs the Government may
have directly reimbursed the Contractor under the Special
Construction and Equipment Charges clause of this
agreement/contract. Deduct from the Contractor's installed
cost, the net salvage value (salvage value less cost of removal).
In determining net salvage value, give consideration to
foreseeable reuse of the facilities and equipment by the
Contractor. Make allowance for the cost of dismantling,
removal, reconditioning, and disposal of the facilities and
equipment when necessary either to the sale of facilities or
their reuse by the Contractor in another location.
(5) The Basic Cancellation Liability is defined as the
actual nonrecoverable cost which the Government shall
reimburse the Contractor at the time services are cancelled.
The Basic Termination Liability is defined as the
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nonrecoverable cost amortized in equal monthly increments
throughout the liability period. Upon termination of services,
the Government shall reimburse the Contractor for the
nonrecoverable cost less such costs amortized to the date
services are terminated. Establish the liability period as
mutually agreed to but not to exceed ten years.
(6) When the Basic Cancellation or Termination
Liability established by the CSA or other contractual document
is based on estimated costs, the Contractor agrees to settle on
the basis of actual cost at the time of termination or
cancellation.
(7) The Contractor agrees that, if after settlement but
within the termination liability period of the services, should
the Contractor make reuse of equipment or facilities which
were treated as nonreusable or non-salvageable in the
settlement, the Contractor shall reimburse the Government for
the value of the equipment or facilities.
(8) The Contractor agrees to exclude -
(i) Any costs which are not included in determining
cancellation and termination charges under the Contractor's
standard practices or procedures; and
(ii) Charges not ordinarily made by the Contractor for
similar facilities or equipment, furnished under similar
circumstances.
(e) The Government may, under such terms and
conditions as it may prescribe, make partial payments and
payments on the account against costs incurred by the
Contractor in connection with the canceled or terminated
portion of this agreement/contract. The Government may make
these payments if in the opinion of the Contracting Officer the
total of the payments is within the amount the Contractor is
entitled. If the total of the payments is in excess of the amount
finally agreed or determined to be due under this clause, the
Contractor shall pay the excess to the Government upon
demand.
(f) Failure to agree shall be a dispute concerning a
question of fact within the meaning of the Disputes clause.
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The BA also incorporated by reference the following clauses which state in pertinent part:
DFARS 252.239-7008, REUSE ARRANGEMENTS (DEC 1991)
(a) When feasible, the Contractor shall reuse canceled
or terminated facilities or equipment to minimize charges to the
Government.
(c) When there is another requirement or foreseeable
reuse in place of canceled or terminated facilities or equipment,
no charge shall apply and the Basic Cancellation or
Termination Liability shall be appropriately reduced. When
feasible, the Contractor shall promptly reuse discontinued
channels or facilities for which the Government is obligated to
pay a minimum service charge.
DFARS 252.239-7005, RA TES, CHARGES, AND SERVICES
(DEVIATION) (Nov 2005)
(f) Subject to the Cancellation or Termination of Orders
clause, of this agreement/contract, the Government may stop
the use of any service or facilities furnished under this
agreement/contract at any time. The Government shall pay the
Contractor all charges for services and facilities adjusted to the
effective date of discontinuance.
(R4, tab 1 at 3, 29; tr. 2/69)
Solicitation and Order/CSA Award
2. On 1 April 2012, DISA issued Solicitation No. TSR RE12MAR125241 for a
"high speed Synchronous Digital Hierarchy (SDH)/Synchronous Transport Module STM-4
AU 4 service" between a service delivery point at Camp Lemonier, Djibouti and Manama,
Bahrain. Or, more plainly put, the government sought to lease a telecommunications
circuit between the DISA Naval Support Activity in Bahrain and Camp Lemonier in
Djibouti. The solicitation was limited to offerors with a current BA in place. The
solicitation also contained the following provisions:
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10. Physical Plant and Infrastructure: ... The
Telecommunications Provider [TP] shall provide
documentation on the path layout and on furnished and full
documentation of installed equipment, to include interface
diagrams and system configurations ....
A. Information showing the route that the circuit
primary path or that an intended pro[j]ect path traverses.
Specific information that must be provided includes:
( 1) International border crossings
(2) Demarc points between any vendors used to provide
the service.
(5) Facilities (Central Office) locations
(6) Origin and destination of the STM-4 AU-4 (622MB)
structured AU4 commercial leased SDH trunk (originating and
terminating facilities)[.]
14. Standard Provision - Four Quote Preparation (July 2009)
Vendor/ [TP's] quote shall respond to each paragraph of this
inquiry.... Vendor/TP shall agree to satisfy all technical aspects
of inquiry .... Vendor's/TP's quote shall contain the
applicable ... charges for service ... from subcontractors or other
vendors/TPs.... Charges not included in quote shall not be
added to subsequent invoices, and U.S. Government shall not
be obligated to pay charges that are not specified in quote and
authorized in resultant order or circuit demand ....
15. Standard Provision -Nine Standard Procedure (July 2009)
One or more end points of this circuit terminate in
non-NATO countries and/or NATO countries that do not have
a national long lines agency (NALLA) and/or a NALLA
accredited TP. Therefore, quotes from telecommunication
Providers (TPS) possessing authorization to provide
telecommunications service from appropriate national
authorities will be considered. Quotes shall identify portions of
service that will be provided using TP's own facilities as well
as those that will be provided by subcontractor TPs, and shall
identify all subcontractor TPs. Additionally, quotes shall
provide evidence TP and all subcontractor TPs possess
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required national authority authorizations for countries where
this circuit terminates ....
22. Standard Provision Thirty [30] - Contract
Period-Indefinite Term-Inquiry (July 2010)
Contract for this telecommunications service shall be an
indefinite term contract with an estimated contract period of
60 months. However, this contract period is not guaranteed.
Minimum service period shall be l_month(s). Accordingly,
after meeting minimum service period, U.S. Government may
discontinue service, at no additional cost to U.S. Government.
U.S. Government will provide vendor/telecommunications
provider (TP) 30 days notice prior to discontinuing service.
In the event U.S. Government is unable to obtain quotes that
meet this minimum service period, U.S. Government may
consider quotes with a minimum service period greater than
l month(s).
(R4, tab 2 at 2, 5-7, 10)
3. Offerors were informed that their price proposals would be evaluated on the
basis of total price offered for the estimated contract period of 60 months (five years)
(R4, tab 2 at 51). On 1May2012, 2Connect submitted its proposal to the government.
The record reflects that 2Connect proposed a monthly rate of $235,000 for the first year
with a Non-Recurring Charge (NRC)/setup fee of $75,000. (R4, tab 7; tr. 1/53) The
proposal also included the physical system approach to meet the requirement as well as the
infrastructure diagram and proposed circuit architecture description (R4, tab 7 at 74-76).
4. After appellant provided clarifications as to the proposed circuit which would
avoid certain countries and cities along the route, and provided a detailed design/path
layout (R4, tab 8 at 106-08), DISA awarded the CSA to another company. Appellant
inquired as to the "reasoning employed" by the government in awarding the order to the
other company (R4, tab 9). After a review of the calculations, DISA determined that
appellant offered a lower price than the proposed awardee (R4, tab 12 at 131 ).
On 29 September 2012, DISA cancelled the award (id.) and awarded the CSA
(2CON W 000276) to 2Connect and incorporated its rates for service (R4, tab 10 at 126).
The "SERVICE DATE'', or commencement of services, was to occur on 30 November
2012 or "SOONER IF POSSIBLE" (id. at 115).
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5. On 14 October 2012, 2Connect entered into an Irrevocable Right of Use (IRU) 1
agreement with GCCIX W.L.L. (GCCIX) for a segment of the circuit through the United
Arab Emirates (UAE) and Saudi Arabia to connect with Fujairah, UAE. The agreement
was for a 15-year period commencing 19 November 2012 with a lump sum payment of
Bahraini Dinar (BHD) 816,480 for the circuit and BHD40,824 due annually for
maintenance charges. 2 (R4, tab 27) An IRU is purchasing and owning capacity on a cable
system for a number of years, usually 10-15 years, or the useful "life of the cable system."
It differs from a lease in that the cost for an IRU is paid upfront and a lease is "taking the
capacity on twelve month periods." (Tr. 1142-44)
Cancellation and Settlement
6. By letter dated 25 October 2012, prior to commencement of services under the
contract, the contracting officer (CO) issued a Stop Work Order due to a post-award
protest filed with GAO challenging the award to 2Connect (tr. 21141). The order read as
follows:
You are hereby instructed to neither continue performance nor
issuance of orders for materials or services under this contract.
You are directed to pass this Stop Work Order to all
subcontractors for the subject contract with instruction to stop
performance immediately. No additional costs shall be
incurred regarding this contract.
(R4, tab 11) We find that services were never commenced under the contract.
7. On 28 January 2013, GAO sustained the protest, recommending that the agency
reevaluate 2Connect's offer with regard to the response time and maximum repair time
requirements stated in the solicitation (R4, tab 12). By letter dated 3 April 2013, the
government, after reevaluation of 2Connect's offer, determined that it was unclear whether
the offer was compliant and cancelled CSA 2CON W 000276 in accordance with clause
252.239-7007, Cancellation or Termination of Orders, under the BA (R4, tab 13).
8. On 17 April 2013, 2Connect acknowledged and countersigned the notice of
cancellation via email and added:
1
It is also referred to as an Indefeasible Right to Use in the telecommunications industry
(see tr. 11430). Ansari v. Qwest Communications Corp., 414 F .3d 1214 (1 oth Cir.
2005).
2
The record reflects a fixed exchange rate of 1 BHD to 2.65 USD (tr. 1/73-74).
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For the purposes of reimbursement by the Government of costs
incurred by 2Connect prior t9 the cancellation of this award, I
would like to inform you that 2Connect incurred
Non-recoverable costs of purchasing IRU bandwidth from
GCCIX for STM4 bandwidth from GCCIX Silaa to Fujairah
Cable Landing Station in anticipation of performance. Our
claim for these costs is in the amount of BD857,304 (USD
$2,274,015). I understand these costs to be recoverable under
the FAR Section 31.205-42 ....
Can you please advise what type of documentation you require
for the settlement proposal?
(R4, tab 14) The government responded to appellant's acknowledgement, by email dated
24 April 2013, advising that while FAR 31.205-42 generally discussed the allowability of
certain termination costs, DF ARS 252.239-7007 specifically governs this cancellation and
should be relied upon when submitting its settlement request (R4, tab 15 at 142).
9. The record shows that appellant was able to cancel the other part of the circuit
that was leased, however it was unable to cancel the portion of the circuit secured via IRU
from GCCIX (app. supp. R4, tab UU; tr. 2/24). With regard to any further use of the IRU,
appellant testified as follows:
Now, an IRU is from point A to point B. All of my
customers, so it's going from Sila[a] to Fujairah. All of
2Connect's customer base, our entire customer base, requires
circuits to Europe and North America. We have no customers
that require circuits to Africa or Asia. So I had no internal use
for this IRU .
... But because it wasn't terminating the UAE because it
was leaving the UAE, I couldn't even use it for my own
customers that might want connectivity to the UAE ....
So I can't find any use for that circuit, there's no end
customer, no corporate customer can use it; and unfortunately
Sila[a], the only two carriers that are based in Sila[a] are
GCCIX and Etisalat. So I can't even sell it to another carrier
because they can't reach Sila[a], they're not in Sila[a]. So I'm
hamstrung. That capacity sits there to this day unused.
Appellant also testified that it attempted to offer the circuit to other companies at the yearly
Capacity Middle East telecommunications conference, to no avail. (Tr. 1/102-04) The
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government offered no credible evidence to the contrary. 3 Moreover, both appellant and
government witnesses testified that the capacity represented by the GCCIX IRU was
offered to the government for its use, but the government chose not to avail itself of the
offer (tr. 1/100-12, 2/75). Accordingly, we find that the IRU had no foreseeable reuse.
10. By letter dated 6 May 2013, appellant submitted its settlement proposal in the
amount of $2,274,015. Appellant believed that the costs associated with purchasing the
IRU were recoverable under the applicable DFARS clause because of the following:
( 1) DISA canceled the services ordered under the agreement/contract; (2) the cancellation
occurred before the IRU was made available to the government, but after 2Connect
purchased it; (3) the actual nonrecoverable costs were reasonably incurred, the purpose
was to provide facilities and equipment to meet the contract requirements, and the IRU has
no foreseeable reuse; (4) 2Connect has made its best efforts to re-sell the IRU, but has been
successful; and (5) 2Connect recorded actual nonrecoverable costs under established
accounting procedures. Appellant also provided backup documentation to show that it had
paid the requested amount to GCCIX for the IRU. (R4, tab 16 at 149)
11. The contracting officer, Mr. Todd Zeitler, testified that a telecommunications
circuit of the sort sought by DISA in this procurement was commonly provided by way of
leases, because "generally .. .in the overseas markets the providers don't own all the fibre
paths (tr. 2/102). "They have to go to-and especially when you're talking about multiple
countries, which this one did, you know, traverse. So, they'd have to go to other, you
know, companies to get part of that circuit." (Id.) Nevertheless, on 25 June 2013, the
government declined to reimburse appellant as follows:
As stated above, cancellation of this order is governed by
DF ARS 252.239-7007. This clause entitles a Contractor only
to settlement costs for actual property or facilities that are in
the Contractor's possession at the time of cancellation.
Because the 15 year IRU lease does not constitute actual
property or facilities that were in 2Connect's possession at the
time of cancellation, your settlement proposal in the amount of
$2,274,015.00 for an IRU to lease STM4 bandwidth from
GCCIX covering 15 year period will not be reimbursed by the
Government.
(R4, tab 17 at 163)
3
The government argues in its brief that appellant failed to demonstrate that there was no
foreseeable reuse for the IRU based on supposition and mere disagreement with the
testimony provided at the hearing (gov't reply at 24-25). It offered no evidence to
rebut appellant's sworn testimony.
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12. By letter dated 2 July 2013, appellant requested that the government reconsider
its determination regarding the allowability of the IRU costs incurred in furtherance of
contract performance prior to the 25 October 2012 stop work order (R4, tab 18 at 168).
The government responded, by letter dated 12 July 2013, reiterating its position that the
IRU lease did not constitute actual property or facilities under DF ARS 252.239-7007 and
added that the 15-year period was not reasonably incurred (R4, tab 19 at 174).
13. The record reflects that the parties continued to negotiate up until November of
2013, whereupon appellant filed a certified claim dated 25 November 2013 (R4, tab 22).
14. At the hearing, appellant testified that, during the solicitation phase of the
procurement, it anticipated that the 15-year IRU would be more cost effective than a yearly
lease by the third year of the contract (tr. 1/125). Appellant contacted Etisalat directly to
determine the reasonableness of the IRU with GCCIX (tr. 1/68-81). It received a quote for
bandwidth in excess of the contractually required specification (STM-16 vs. STM-4) in
order to make a comparison without tipping off Etisalat that it was requesting information
on the same specification that GCCIX fulfilled to appellant (tr. 1/71). Appellant received a
quote of $5,163,750 for an IRU for the STM-16 (app. supp. R4, tab F). When making the
comparison, appellant proffered:
[STM-1, STM-4, STM-16 and STM-64] are moving up four
times the speed, so you go from 155 megabit to 622 megabit to
2.5 gigabit to 10 gigabit. So you're moving up a step of four
each time. However pricing doesn't follow that same linear
scale; pricing will only move up, whilst the speed will move up
four times, pricing will move up about 2.4 times.
So I know if I'm paying a dollar for an STM-1 and I want it to
be an STM-4, I'm going to pay about 2.4 dollars. So you see
how the speed will move up four times, but the price will
generally go up about 2.4 times. It's a very good rule of thumb
that I've found since I've been in the region for the last eleven
years; it seems to be a very, very accurate way of determining
what other speed costs will be if you know one of the costs.
(Tr. 1/72-73) Ifwe compare the cost of the STM-16 IRU quoted by Etisalat ($5,163,750)
to the price of the STM-4 IRU obtained from GCCIX ($2,165,672), we see that the price of
the GCCIX IRU times 2.4 ($5,192,813) is in line with the Etisalat quotation of$5,163,750.
We therefore find that the cost of the IRU secured by appellant was reasonable. 4
15. By letter dated 23 January 2014, the CO denied the claim in its entirety
(R4, tab 23 ).
4
Appellant' s testimony concerning the pricing factor of 2.4 was credible and undisputed.
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16. On 31March2014, appellant filed a timely notice of appeal with the Board,
which was docketed as ASBCA No. 59233 (R4, tabs 24, 25).
DECISION
Appellant contends that it is entitled to the costs of its IRU, as the relevant clause,
DFARS 252.239.7007, Cancellation Termination of Orders, allows for recovery because
the government's narrow interpretation of "property or facilities" is "wholly tenuous and
unsupported." Further, appellant argues that the 15-year IRU was reasonably acquired
because the cost savings over a 5-year period were greater under the IRU than under a
5-year lease. (App. br. at 12-17)
The government counters that the disputed costs are not recoverable under the clear
terms of the contract. It is unreasonable, the government contends, for DISA to underwrite
appellant's business decision to secure a 15-year "lease" when the solicitation
unambiguously advised vendors that the government could discontinue service at any time
at no cost. Thus, the government concludes that allowing recovery of the 15-year IRU
costs would contradict the plain language of the contract; result in an inequitable windfall
for appellant, and would have a significant adverse impact on existing and future DoD
contracts within the telecommunications service industry. (Gov't reply at 11)
Generally, whether termed a cancellation or a termination for convenience, the
overall purpose of a termination for convenience settlement is to fairly compensate the
contractor and to make the contractor whole for the costs incurred in connection with the
terminated work. Nicon, Inc. v. United States, 331 F.3d 878, 885 (Fed. Cir. 2003). "A
contractor is not supposed to suffer as the result of a termination for convenience of the
Government, nor to underwrite the Government's decision to terminate." Jacobs Eng'g
Group, Inc. v. United States, 434 F.3d 1378, 1381 (Fed. Cir. 2006) (quoting Kasler Elec.
Co., DOT CAB No. 1425, 84-2 BCA ~ 17,374 at 86,566).
Entitlement
Standard Provision 30 ofthe CSA
The applicable regulation regarding telecommunication services found at DF ARS
239.7410(a)(l) defines cancellation as "stopping a requirement after placing an order but
before service starts"; while Subsection (a)(2) reads "Termination is stopping a
requirement after placing an order and after service starts." The clause at DF ARS
252.239-7007, paragraph (a), is consistent with these definitions. Finally, Subsection (b)
of the regulation informs the reader to "[ d]etermine cancellation or termination charges
under the provisions of the applicable tariff or agreement/contract." Standard Provision 30
solely relates to terminations of orders/CSAs after service has commenced. Both parties
reference the government's action as a termination or cancellation interchangeably.
However, as stated supra, there is a distinction between the two - commencement of the
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contracted services. Since services did not commence, the government cannot avail itself
of the no-cost termination provision found at Standard Provision 30 (finding 6).
Accordingly, the sole issue before us involves interpretation of DFARS 252.239-7007 and
how it applies to the cancellation that occurred in this case.
DFARS 252.239-7007
The clause at subsection (a) provides:
If the Government cancels any of the services ordered under
this agreement/contract, before the services are made available
to the Government. .. the Government shall reimburse the
Contractor for the actual nonrecoverable costs the Contractor
has reasonably incurred in providing facilities and equipment
for which the Contractor has no foreseeable reuse.
Further, subsection (d)(4) reads:
The actual nonrecoverable costs are "the installed costs of the
facilities and equipment, less cost of reusable materials, and
less net salvage value. Installed costs shall include the actual
cost of equipment and materials specifically provided or used,
plus the actual cost of installing (including engineering, labor,
supervision, transportation, rights-of-way, and any other items
which are chargeable to the capital accounts of the Contractor).
The government interprets this language to conclude that appellant's claimed costs do not
meet the definition of an actual nonrecoverable cost. Specifically, the government would
limit the recovery to costs for equipment or materials that were specifically provided or
used and installed to support the particular requirement. Thus, the government concludes
that appellant's costs for the use of existing or previously installed telecommunications
facilities do not constitute an actual nonrecoverable cost under the clause (gov't br. at
17-18). Wedisagree.
The government's interpretation selectively reads out the Subsection (a) provision
that the government shall reimburse the contractor for the actual nonrecoverable costs the
contractor has reasonably incurred in providing facilities and equipment for which the
contractor has no foreseeable reuse. Nowhere in that language does the clause limit
recovery to newly constructed facilities. We cannot conclude that the clause is
inapplicable to leased facilities and equipment or the same secured by IRU especially when
the government expected the circuit would be provided by way of leased facilities.
(Finding 11) Here, appellant submitted its infrastructure plan in accordance with the
physical plant and infrastructure provision of the solicitation, including installed equipment
(finding 3) and has demonstrated that it mitigated the cost impact that resulted from the
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cancellation (finding 8). Thus, we conclude that the equipment costs were reasonably
incurred, as the purpose was to provide facilities and equipment to meet the contract
requirements (finding 14). Since we found that the IRU has no foreseeable reuse
(finding 9), the government's arguments must fail.
With regard to the government's contention that allowing recovery would result in
an "inequitable windfall" for appellant, the government looks past the Reuse Arrangement
Clause from the BA that if DISA has another requirement for this area, it can use the IRU
at no charge (finding 1). Appellant has proven that there is limited or no commercial use
for the IRU (bandwidth and location). Both appellant and government witnesses testified
that the capacity represented by the GCCIX IRU was offered to the government for its use,
but the government chose not to avail itself of the offer (finding 9). Accordingly, the
government's contention misses the mark.
Quantum
Based on the documentation submitted and testimony at the hearing, appellant has
proved that it incurred $2,274,015.00 in nonrecoverable costs resulting from the
cancellation of the contract.
CONCLUSION
The appeal is sustained in the amount as specified above, with CDA interest from
25 November 2013.
Dated: 2 June 2017
OWEN C. WILSON
Administrative Judge
Acting Vice Chairman
Armed Services Board
of Contract Appeals
(Signatures continued)
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I concur I concur
LYNI5T.O'SULLIVAN RICHARD SHACKLEFORD
Administrative Judge Administrative Judge
Armed Services Board Acting Chairman
of Contract Appeals Armed Services Board
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. 59233, Appeal of 2Connect W.L.L.,
rendered in conformance with the Board's Charter.
Dated:
JEFFREY D. GARDIN
Recorder, Armed Services
Board of Contract Appeals
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