Fidelity and Deposit Company of Maryland

ARMED SERVICES BOARD OF CONTRACT APPEALS
Appeal of - )
)
Fidelity and Deposit Company of Maryland ) ASBCA No. 63052)
Under Contract No. W912ER-11-D-0010-0006 )
APPEARANCES FOR THE APPELLANT: Robert C. Niesley, Esq.
Rebecca S. Glos, Esq.
Watt, Tieder, Hoffar & Fitzgerald, L.L.P
Irvine, CA
APPEARANCES FOR THE GOVERNMENT: Michael P. Goodman, Esq.
Engineer Chief Trial Attorney
Rebecca L. Bockmann, Esq.
Michael E. Taccino, Esq.
Engineer Trial Attorneys
U.S. Army Engineer District, Middle East
Winchester, VA
OPINION BY ADMINISTRATIVE JUDGE MCILMAIL
ON THE GOVERNMENT’S MOTION TO DISMISS
The government moves to dismiss the appeal for lack of jurisdiction, saying that
appellant, Fidelity and Deposit Company of Maryland (F&D), has no standing to bring
the appeal because F&D was not in privity with the government when F&D’s claim
accrued (see gov’t mot. at 1).
STATEMENT OF FACTS FOR PURPOSES OF THE MOTION
In 2013, the government contracted with ECC CENTCOM (ECC) for ECC to
design and construct housing quarters for the United States Navy in Bahrain (R4, tab 5
at 1, 288). On December 29, 2015, the government unilaterally issued Modification
No. 16 to the contract, to change the sewer system called for by the contract “from a
gravity-flow sewer system to a lift station” (R4, tab 7 at 1-2). On April 19, 2016, the
government terminated ECC’s contract for default (R4, tab 17). On July 19, 2016, the
government and F&D, as surety to ECC’s contract, entered into an agreement for F&D to
take over that contract (R4, tab 6 at 11). The takeover agreement provides:
For purposes of completion of the Contract, except as may
otherwise be provided in this Agreement, Surety is entitled to
all rights, title, and interest of Principal in and to the Contract
in all respects as if Surety were the original party to the
Contract. Further, except as to the extent provided in this
Agreement, the Government shall have all rights, obligations,
and responsibilities under the Contract with respect to the
Surety, to the same extent and effect as if Surety had executed
the Contract initially instead of the Principal, as if the
Principal’s rights pursuant to the Contract terms had not been
terminated.
(R4, tab 6 ¶ 1)
On March 25, 2021, F&D presented to the contracting officer a certified claim for
$177,621.82 “for the modification in the gravity-flow sewer system to a lift station,”
which F&D described as “a unilateral modification, and, therefore, a change in scope
under [Federal Acquisition Regulation] 52.243-4, Changes” (R4, tab 2 at 1 (emphasis
added)). Referring to the completion contractor (Vertex) as well as subcontractors hired
by the completion contractor, F&D explained that:
On December 29, 2015, [the government] issued a Contract
Modification #16, Change C00J0, titled “Revise Gravity Feed
to Sewage Lift Station” (“MOD #16”). MOD #16 provided
for $245,595 in order to modify the lift station in the gravity-
flow sewer system . . . . The $245,595 price for the Work
under MOD #16 was unilaterally set by [the government],
without prior input or bid estimate from Vertex or the original
contractor, ECC. [The government] did not provide any
information as to how it arrived at the MOD #16 amount. In
order to comply with the requirements of MOD # 16, Vertex
issued Change Order # 19 (“CO #19”) in the amount of
$240,294 to Kooheji Contractors, W.L.L. (“Kooheji”) for
construction of the lift station. Vertex then subcontracted with
Al Doy Contracting & Excavations (“Al Doy”) for all
necessary sheet piling and dewatering work related to the lift
station. . . . Al Doy’s sheet piling rental and dewatering costs
were higher by $16,059 than originally estimated in Al Doy’s
subcontract for these items. In response to the additional
rental and dewatering costs, Vertex issued Change Order # 1
(“CO #I”) to Al Doy for these additional costs. . . .
. . . . The final cost to modify the lift station in the gravity-
flow sewer system was $423,216.82. The unilaterally issued
[Modification No. 16] priced the work at $245,595.
Therefore, F&D spent an additional $177,621.82 to finish the
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work under [Modification No. 16]. . . . As a result of the
Work on the lift station, F&D sustained cost impacts in the
amount of $177,621.82 for which it seeks to recover in this
Claim.
(Id. at 2)
DECISION
It is the responsibility of F&D, as appellant, to establish the Board’s jurisdiction.
Hellenic Air Force, ASBCA No. 60802, 17-1 BCA ¶ 36,821 at 179,457. Standing to
bring an appeal before the Board is founded upon privity of contract with the
government. See Peerless Ins. Co., ASBCA No. 28887, 88-2 BCA ¶ 20,730 at 104,738.
Moreover, the scope of the Board’s jurisdiction is determined by the contents of the
claims submitted to the contracting officer; thus the claim, and not the complaint,
determines the scope of our jurisdiction. IBM Corp., ASBCA No. 60332, 18-1 BCA
¶ 37,002 at 180,190.
Even taking into account F&D’s references in its March 25, 2021 submission to
the contracting officer to the completion contractor and the completion contractor’s
subcontractors, in that submission, F&D presented only the claim that, because the
government issued Modification No. 16 unilaterally, the government owed F&D the
$177,621.82 difference between the cost of performing the Modification No. 16 work and
the amount specified by Modification No. 16. However, the government issued
Modification No. 16 on December 29, 2015, and F&D did not contract with the
government until July 18, 2016, when F&D, as surety, entered into the takeover
agreement subsequent to the termination of ECC’s contract. Because F&D was not yet in
privity with the government when Modification No. 16 was issued, F&D has no standing
(absent some exception carved out for sureties) to assert the claim that Modification
No. 16 was a contract change, and the Board does not possess jurisdiction to entertain
that claim. See United Pac. Ins. Co., ASBCA No. 52419, 01-1 BCA ¶ 31,296 at 154,507.
F&D points to the takeover agreement (resp. at 14-18), which provides:
For purposes of completion of the Contract, except as may
otherwise be provided in this Agreement, Surety is entitled to
all rights, title, and interest of Principal in and to the Contract
in all respects as if Surety were the original party to the
Contract. Further, except as to the extent provided in this
Agreement, the Government shall have all rights, obligations,
and responsibilities under the Contract with respect to the
Surety, to the same extent and effect as if Surety had executed
the Contract initially instead of the Principal, as if the
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Principal’s rights pursuant to the Contract terms had not
been terminated.
(R4, tab 6 ¶ 1 (emphasis added)) However, without participation of the original
contractor, a takeover agreement cannot assign the original contractor’s claims so as to
provide to a surety, with respect to those claims, standing under the Contract Disputes
Act. United Pac. Ins., 01-1 BCA ¶ 31,296 at 154,509. ECC, the original contractor here,
is not a party to the takeover agreement; thus, the takeover agreement cannot assign to
F&D what would be ECC’s claim that Modification No. 16 is a contract change.
For these reasons, the government’s motion to dismiss is granted, and the appeal is
dismissed for lack of jurisdiction. We find it unnecessary to address the parties’ other
arguments.
CONCLUSION
The government’s motion to dismiss is granted, and the appeal is dismissed for
lack of jurisdiction.
Dated: May 24, 2022
TIMOTHY P. MCILMAIL
Administrative Judge
Armed Services Board
of Contract Appeals
I concur I concur
RICHARD SHACKLEFORD OWEN C. WILSON
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. 63052, Appeal of Fidelity and
Deposit Company of Maryland, rendered in conformance with the Board’s Charter.
Dated: May 25, 2022
PAULLA K. GATES-LEWIS
Recorder, Armed Services
Board of Contract Appeals
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