Agility Public Warehousing Co. KSCP v. Mattis

United States Court of Appeals
for the Federal Circuit
______________________
AGILITY PUBLIC WAREHOUSING COMPANY
KSCP, FKA PUBLIC WAREHOUSING COMPANY
K.S.C.,
Appellant
v.
JAMES N. MATTIS, SECRETARY OF DEFENSE,
Appellee
______________________
2016-1265
______________________
Appeal from the Armed Services Board of Contract
Appeals in No. 56022, Administrative Judge Peter D.
Ting.
______________________
Decided: April 4, 2017
______________________
JOHN PATRICK ELWOOD, Vinson & Elkins LLP, Wash-
ington, DC, argued for appellant. Also represented by
BRYAN BUNTING, MICHAEL CHARNESS, ADRIANNE LISBETH
GOINS, JOSHUA STEPHEN JOHNSON, RALPH MAYRELL.
PETER ANTHONY GWYNNE, Commercial Litigation
Branch, Civil Division, United States Department of
Justice, argued for appellee. Also represented by
BENJAMIN C. MIZER, ROBERT E. KIRSCHMAN, JR., CLAUDIA
BURKE; DANIEL KARL POLING, Office of General Counsel,
2 AGILITY PUBLIC WAREHOUSING v. MATTIS
Defense Logistics Agency, United States Department of
Defense, Fort Belvoir, VA.
______________________
Before LOURIE, O’MALLEY, and TARANTO, Circuit Judges.
O’MALLEY, Circuit Judge.
Agility Public Warehousing Co. KSCP (“Agility”) ap-
peals from a decision of the Armed Services Board of
Contract Appeals (“the Board”) finding that the govern-
ment did not breach the terms of a supply contract with
Agility. See Pub. Warehousing Co., ASBCA No. 56022,
15-1 BCA ¶ 36,062. In its decision, the Board stated that
it “need not decide whether the government constructively
changed contract performance or whether it breached its
implied duty of cooperation” because “whether the gov-
ernment breached the contract comes down to contract
interpretation.” Id. at 176110. The Board then interpret-
ed the modifications to the contract and found that the
government had not breached the contract. Id. at
176110–13. We agree with the Board that the govern-
ment did not breach the express terms of the contract or a
later agreement to consider exceptions, but find that the
Board erred when it concluded that it “need not decide”
Agility’s implied duty and constructive change claims.
We therefore affirm-in-part, vacate-in-part, and remand
for further proceedings consistent with this opinion.
I. BACKGROUND
In May 2002, the Defense Supply Center Philadelphia
(“DSCP”), a sub-agency of the Defense Logistics Agency,
issued a solicitation for an Indefinite-Delivery/Indefinite-
Quantity commercial item type contract to provide food
and non-food products to customers, including the mili-
tary, in three overseas zones. Id. at 176092. On May 30,
2003, DSCP awarded a contract to Agility under which
Agility agreed to supply “Full Line Food and Non-Food
Distribution” to authorized personnel in Kuwait and
AGILITY PUBLIC WAREHOUSING v. MATTIS 3
Qatar. Id. at 176092–93. The contract allowed the con-
tracting officer to extend the contract up to four times in
one-year increments. Id. at 176093.
The contract’s pricing structure called for a “Unit
Price” that would be made up of a “Delivered Price” and a
“Distribution Price” (i.e., Unit Price = Delivered Price +
Distribution Price). Id. This case deals with the Distri-
bution Price component of the pricing structure. Id. The
original contract defined “Distribution Price” as “a firm
fixed price, offered as a dollar amount, which represents
all elements of the unit price, other than the delivered
price.” Id. The Distribution Price consists of various
costs, including administrative expenses, overhead, profit,
packaging costs, transportation costs from a vendor’s
distribution facility to the final delivery point, and any
other projected expenses associated with the distribution
function. Id.The parties modified the contract numerous times af-
ter signing it in 2003 and before signing a new Prime
Vendor Contract in 2006. For the purposes of this appeal,
we provide a brief summary of the modifications and
contract extensions relevant to our decision before dis-
cussing the Board’s decision.
A. Modification 1
In June 2003, the parties agreed to Modification 1
(“Mod. 1”). Id. Mod. 1 expanded the contract’s service
area to the Iraq deployment zone and established re-
quirements and procedures for making deliveries in Iraq.
See id. According to Mod. 1, the supply trucks going into
Iraq would “travel as part of a U.S. military escorted
convoy” in order to reach their various destinations. Id.Paragraph 4 of Mod. 1 provided, inter alia, “[t]rucks will
return to [Agility] upon completion of unloading, and
trucks will not be used at the sites for storage purposes.”
Id.4 AGILITY PUBLIC WAREHOUSING v. MATTIS
B. Modification 2
In July 2003, the parties signed Modification 2 (“Mod.
2”), which set the pricing structure for deliveries to Iraq.
Id. at 176093–94. Mod. 2 set the price for refrigerated
trucks, or “reefers,” at $2,050 per truck for a three day
round trip minimum, with an additional charge of $645
per truck per day for trips lasting longer than three days.
Id. at 176094. For non-refrigerated, or “dry” trucks, Mod.
2 set the price at $1,600 per truck for a three day trip,
with an additional charge of $475 per day for trips lasting
longer than three days. Id. Mod. 2 also provided that the
number of days for which the government would pay fees
for each trip would be calculated based on the “time of
reporting of loading until truck(s) return(s) to [Agility]
distribution facility in Kuwait.” Id. Under Mod. 2, the
government did not have a limit on the maximum fees
payable to Agility if trucks remained in Iraq for long
periods of time. Id.Mod. 2 also included a provision stating that all other
contract terms and conditions not changed by Mod. 2
would remain the same. J.A. 2017. Mod. 2 did not have
an integration clause.
C. Modification 19
Agility’s supply trucks delivered food in Iraq using a
“hub and spoke system.” Pub. Warehousing Co., 15-1
BCA ¶ 36,062, 176094. In this system, trucks travelled
under military escort from Kuwait to major hubs in Iraq.
Id. Some supply trucks then travelled from the major
hubs to smaller spoke sites, such as forward operating
bases. Id. When the supply trucks arrived at their desti-
nation, they unloaded the food at either a dining facility
(“DFAC”), which hub sites typically utilized, or a mobile
kitchen trailer (“MKT”), which spoke sites typically uti-
lized. Id. Supply trucks that traveled to spoke sites
would return to the nearest hub site after unloading food
at the spoke sites. Id. Unloaded supply trucks at the hub
AGILITY PUBLIC WAREHOUSING v. MATTIS 5
sites waited for a military convoy to return back to Ku-
wait. Id.Within this delivery process, a variety of conditions
created delays that kept the supply trucks from immedi-
ately returning to Kuwait. Id. at 176094–96. The chief
cause for “major delays” was the lack of cold-storage
equipment at some delivery locations. Id. The MKTs
generally lacked cold-storage equipment, which meant
that the soldiers at forward operating bases without
refrigeration had no place to store items needing refriger-
ation (e.g., milk, fruits, and vegetables). Id. Without
anywhere else to store the items needing refrigeration,
the soldiers at these forward operating bases often kept
the refrigerated trucks onsite to store food. Id.To improve the transit time of the supply trucks, the
military requested that Agility place transport liaison
officers (“TLOs”) at the hubs. Id. at 176096. Agility
submitted a plan called “Operation Prime Mover,” which
involved deploying TLOs at five hubs to facilitate the
mission “by strengthening the [Agility] transport and
distribution network throughout Iraq.” Id. On May 10,
2004, the government unilaterally issued Modification 19
(“Mod. 19”) to implement a modified version of Agility’s
proposed Operation Prime Mover plan. Id. Under Mod.
19, Agility would deploy up to 25 TLOs to 8 hub sites in
Iraq. Id. The TLOs coordinated the logistics and provid-
ed a point of contact in order to improve truck fleet and
shipment visibility and improve the round trip transit
time of trucks. Id.D. Modification 27
1. Conditions Leading to Modification 27
From May 17–19, 2004, Agility, DSCP, the military,
and other entities held a Subsistence Prime Vendor
Summit in Kuwait to “come together and work as a
team . . . to help out [Agility] . . . [to] manage[] their
6 AGILITY PUBLIC WAREHOUSING v. MATTIS
distribution assets.” Id. at 176096–97. Agility’s principle
message at the Summit was “we need help . . . [in] getting
our assets back.” Id. at 176097.
As shown in a presentation at the Summit, DSCP da-
ta revealed that, from November 2003 to March 2004—a
time period in which Mod. 2 was in effect—the average
turnaround time for supply trucks was 15 days, which
was greater than the 7-day turnaround time expected by
the parties when they signed the contract. Id. at 176097.
Some trips, however, greatly exceeded the average and
resulted in large costs for the government under Mod. 2’s
fee structure. See id. at 176098. For example, other
DSCP data showed one refrigerated truck departed Agili-
ty’s facility on January 5, 2004, and did not return until
June 6, 2004; under Mod. 2’s fee structure, the govern-
ment paid $99,445 for this 154-day trip. Id. Other exam-
ples resulted in the government paying $82,030; $65,905;
and $63,325 for similarly-situated trucks that were held
in Iraq for long periods of time. Id.Another DSCP presentation at the Summit noted the
government’s average monthly detention costs, which
were forecasted to increase. Id. As a potential alterna-
tive, the presentation analyzed the purchase of “adequate
refrigeration storage,” which potentially would reduce the
government’s costs and Agility’s turnaround times. Id.As a result of the Summit, Lieutenant General Thomas
Metz at the Multi-National Corps-Iraq Headquarters in
Baghdad drafted a policy memorandum that set out
procedures for returning Agility’s trucks with less than 48
hours of delays. Id. The record is unclear, however,
whether the policy memorandum was ever signed or
issued. Id. The army also failed to deliver the necessary
storage units in a timely manner, so “the procedures set
out in the policy memorandum were not always followed.”
Id.AGILITY PUBLIC WAREHOUSING v. MATTIS 7
In August 2004, the parties began having discussions
regarding an adjustment to the uncapped fees of Mod. 2.
Linda Ford, a contracting officer representing the gov-
ernment in its negotiations and contacts with Agility,
expressed concern about the amount of money being spent
for the refrigerated trucks that were being kept in Iraq.
Id. at 176098. According to Ford’s testimony, the parties,
when signing Mod. 2, had not anticipated that truck trips
would take such a long time, resulting in the government
effectively paying for the entire cost of the truck in one
trip. Id.To address the government’s concerns, as well as its
own regarding the length of time its trucks were kept out
of service at certain MKTs, C.T. Switzer, Agility’s General
Manager and representative in communications with the
government, proposed a change to Mod. 19’s TLO program
to improve logistics for getting trucks returned to Agility’s
base of operations in Kuwait. Id. The proposal called for
sending Squad Leaders to travel with the convoys and
coordinate with the TLOs, who stayed at the hubs. Id. To
implement this change, Agility proposed a blanket in-
crease of 58% to the distribution fee to add TLOs and
Squad Leaders to the fee structure. Id. Ford sent back a
draft modification that authorized the additional TLO
numbers but, in return, proposed a cap on the number of
days the government would pay transportation fees. Id.Discussions between Ford and Switzer continued in
regards to the cap on transportation fees. Switzer ex-
pressed reservations about the cap being “unqualified,”
potentially causing large losses to Agility from govern-
ment-caused delays. Id. at 176099. He asked if Agility
could “submit exceptions to the 29 day rule if the situa-
tion is unavoidable despite our best efforts to prevent it.”
Id.Ford replied the next day with a revised draft modifi-
cation. The revised modification did not remove the 29-
8 AGILITY PUBLIC WAREHOUSING v. MATTIS
day cap. Id. Ford also did not include any reference to
exceptions in the revised draft modification, but her email
to Switzer stated, “exceptions to the 29 day rule will only
be considered in the form of a claim.” Id. Ford’s email
then asked Switzer to “sign and return the attached mod
or advise if additional changes are required.” Id. Switzer
did not suggest any other changes and instead signed the
modification on September 19, 2004. Id.
2. Terms of Modification 27
The terms of Modification 27 (“Mod. 27”) increased the
maximum number of TLOs from 25 to 94 and set a mini-
mum number of TLOs at 81. Id. at 176099–100. Mod. 27
then stated that it “restructure[d] the transportation fees
for the Iraq Deployment Zone to better fit the current
deployment zone structure.” Id. at 176100. The new fee
structure included a minimum number of days—4, 5, or
10 days round trip for transports to southern, central, and
northern Iraq, respectively—and a minimum cost for
trips—$2,695–6,565 for refrigerated trucks and $2,075–
$4,925 for dry trucks. Id. Additional days beyond the
minimum trip length would continue to result in fees of
$645 per day for refrigerated trucks and $475 per day for
dry trucks; these were the same daily costs as those used
in Mod. 2. Id. Mod. 27 then stated, “[t]he maximum
number of allowable trip days is 29. The Government will
not pay transportation fees beyond this established max-
imum. The maximum number of days shall apply to all
[Agility] trucks that depart from Kuwait to Iraq on or
after September 16, 2004.” Id. It clarified that the fees
for additional days beyond the established minimum
would only apply if the delay was caused by the govern-
ment, “i.e. Hub, DFAC or MKT not having the capability
to off load and return the truck.” Id.Mod. 27 also included a provision, similar to the pro-
visions in previous modifications, stating that, except as
AGILITY PUBLIC WAREHOUSING v. MATTIS 9
provided by the terms of Mod. 27, all other contract terms
and conditions would remain the same. Id. at 176099.
E. Modification 36
On December 3, 2004, DSCP advised Agility that it
planned to issue a contract modification to extend the
contract for six months. Id. at 176103. Switzer’s re-
sponse expressed a willingness to accept the contract
extension, but he stated he could not “take lightly the
effects of Mod 27’s limitation on the transport charges.”
Id. Switzer recognized Agility’s ability to submit claims
for trips exceeding the 29-day cap but acknowledged that
there was “no guarantee of being paid or if paid, what
delays will be involved.” Id.On January 13, 2005, Ford emailed Agility to ask if it
would accept a modification to extend the contract for an
additional 8 months. Id. Switzer replied that he had no
problem with extending the contract, but he requested
that the government rescind the 29-day cap. Id. On
January 13, 2005, Ford rejected Switzer’s request to
rescind Mod. 27’s 29-day cap. Id. at 176103–04. Ford
noted, however, that the government would be open to
Agility submitting an alternative proposal based on actual
cost and historical truck time frames. Id.Even though the government refused to rescind Mod.
27’s 29-day cap, Agility agreed to Modification 36 (“Mod.
36”), a bridge contract extension, in February 2005. See
id. at 176104. The extension covered a ten-month period
from February to December 2005. Id. The terms of the
contract, including all modifications in effect at that time,
were incorporated into the bridge contract extension of
Mod. 36. Id.F. Agility Files Claims for Exceptions
Based on Ford’s statement to Switzer that the gov-
ernment would consider exceptions to the 29-day cap in
the form of a claim, Agility began submitting claims for
10 AGILITY PUBLIC WAREHOUSING v. MATTIS
payment to cover the trucks that were in Iraq longer than
29 days. Id. Agility’s claims were not formal claims
under the Contract Disputes Act but, rather, submissions
to Ford based on her email that she would consider excep-
tions in the form of a “claim.” Id. at 176104 n.8.
On February 24, 2005, Agility sent its first claim to
Ford for the additional transportation fees that Agility
hoped to recover for the trucks that stayed in Iraq beyond
29 days. Id. The claim was in the amount of $2,951,335,
and Agility asserted that it covered the period from Sep-
tember 16, 2004, to December 31, 2004. Id. The contract-
ing officer representative who received the claim was
confused by the submission and requested assistance from
Ford prior to paying it. Id. Ford explained to the repre-
sentative that Agility had “no written contractual right to
payment” but that Agility was submitting claims to the
office based on her instruction to do so. Id. Ford told the
representative that the claims were submitted for “review
and decision.” Id. As to this particular claim, Ford told
the representative that she was not in favor of paying it
because the government had already paid $8.7 million for
those trucks and that she wanted more cost verification
data before she would consider paying another $2.9
million. Id. During her testimony before the Board, Ford
explained that she wanted to see the cost verification data
to determine whether Agility was losing money or could
show that the cap was “unreasonable, or unfair, or inequi-
table”; under those situations, she stated that she would
have considered paying the additional fee requested. Id.at 176104–05.
On March 8, 2005, Agility emailed Ford to inform her
that Agility would begin invoicing trucks as soon as they
passed the 29 days in Iraq and that they would later send
an additional claim for the time over 29 days. Id. at
176105. Ford rejected this proposal in an email sent on
March 9, 2005. Id. She stated that DSCP would not
accept invoices for trucks that had not returned because it
AGILITY PUBLIC WAREHOUSING v. MATTIS 11
was not “part of the normal invoicing procedure.” Id.Agility responded on March 28, 2005, by stating that the
additional costs were justified because “the customer IS
holding our trucks as storage. This is in direct violation of
the terms of [Mod. 1], paragraph 4, which states, ‘Trucks
will return to [Agility] upon completion of unloading, and
trucks will not be used at the sites for storage purposes.’”
Id.On May 25, 2005, Agility submitted a second claim.
Id. This claim amounted to $4,161,020 and covered all
Agility trucks out more than 29 days during January and
February 2005. Id. Agility later submitted a third claim
on October 26, 2005, for $1,138,370 to cover the truck
trips over 29 days in March 2005. Id. at 176106.
On August 7, 2005, Agility contacted Ford to ask what
information it needed to submit for the claims so that it
could avoid sending “mountains of paperwork.” Id. at
176105–06. Ford told Agility, “[s]end me the mountains
of paperwork.” Id. at 176106. Ford explained that all
claims had to be fully supportable. Id. She also stated
that she needed “actual cost data” to determine whether
Agility’s costs had actually exceeded the amount already
paid for the deliveries (e.g., whether the costs from the
467 trucks involved in the original claim submission for
$2.9 million had actually exceeded the $8.7 million al-
ready paid to Agility). Id.Ford informed Agility on November 17, 2005, that the
government intended to deny the submitted claims “for
inadequate support.” Id. She explained that the final
decision would come no later than December 9, 2005, and
that Agility could submit additional documentation before
that date if it desired. Id.On December 18, 2005, Agility informed DSCP that it
would be pursuing a Request for Equitable Adjustment
for the $13.1 million related to trucks being held in Iraq
by the government for longer than 29 days. Id. On
12 AGILITY PUBLIC WAREHOUSING v. MATTIS
December 20, 2005, Agility submitted a Request. Id. at
176107. The government initially did not respond. Id.On December 21, 2006, Agility submitted a certified claim
seeking payment of $12,490,060 based on its previously-
submitted Request. Id. On April 9, 2007, Ford denied
Agility’s claim because: (1) Mod. 27 imposed a 29-day cap;
(2) Agility had failed to offer evidence to show that the
amount already paid was unfair, unreasonable, or inequi-
table; and (3) the amount already paid was fair, reasona-
ble, equitable, and in line with the intent of Mod. 27. Id.
at 176108. Agility appealed the denial of the claim. Id. at
176108–09.
G. The Board’s Decision
After holding a ten-day hearing, the Board denied
Agility’s appeal in August 2015. The Board noted that it
did not have any testimony from Switzer to explain why
he signed Mod. 27 when he understood the 29-day cap to
be unqualified. 1 Id. at 176101. Based on testimony from
Ford, however, the Board determined that the selection of
29 days as a cap, which was double the 15-day average
truck return time, suggested that both parties intended to
shift the risks from the open-ended nature of Mod. 2 to
the shared-risk structure of Mod. 27. Id. at 176101–02.
The Board found that Ford “offered to leave the door open
for claims in the event the 29-day cap caused [Agility]
such economic hardship to the point where its ability to
continue performance under the contract was threatened.”
Id. at 176102.
1 Switzer did not testify during the appeal to the
Board. Id. at 176101 n.5. The Board therefore looked to
the email communications between Ford and Switzer,
along with the testimony from Ford—who was “extensive-
ly cross-examined by [Agility] counsel”—to determine the
meaning of Mod. 27. Id. at 176101.
AGILITY PUBLIC WAREHOUSING v. MATTIS 13
In its decision, the Board found that Switzer’s email
exchanges with Ford showed Switzer “understood the
consequences of establishing a cap on the transportation
fee structure.” Id. at 176099. The Board also found that
“Switzer understood before he signed Mod. 27, that the
29-day cap CO Ford established was unqualified or with-
out exception as to the causes of delay.” Id. As to the
government’s informal agreement to consider exceptions
in the form of a claim, the Board found that Switzer
“understood that CO Ford’s willingness to consider grant-
ing a claim was a matter of discretion given the right
circumstances and not a matter of contract right.” Id. at
176103.
Because Switzer did not testify, the Board determined
that there was no rebuttal to Ford’s statement, “made
during the course of performance,” that the parties “were
in agreement that a transport limitation rule was abso-
lutely necessary.” Id. at 176103–04. The Board also
found that Ford’s statements to Agility “support a finding
that, as far as CO Ford was concerned, ‘exceptions to the
29 rule’ would only be considered if it put [Agility] in an
economic hardship situation.” Id. at 176104.
In addressing Agility’s arguments, the Board deter-
mined that it “need not decide whether the government
constructively changed contract performance or whether
it breached its implied duty of cooperation. At its core,
whether the government breached the contract comes
down to contract interpretation.” Id. at 176110.
The Board held that the storage prohibition in Mod. 1,
Paragraph 4, was modified by the combination of Para-
graphs 2 and 3 in Mod. 27. Id. The Board noted that
Mod. 27, Paragraph 2.e, set forth a maximum of 29 days,
whereas Mod. 27, Paragraph 3, stated that “additional
days beyond the established minimum fees are only
applicable if the delay is customer caused.” Id. (internal
quotation marks omitted). The Board then explained that
14 AGILITY PUBLIC WAREHOUSING v. MATTIS
Paragraph 3 defined customer-caused delay to mean
“Hub, DFAC or MKT not having the capability to off load
and return the truck.” Id. The Board determined that
Mod. 27, Paragraphs 2 and 3, when read together, modi-
fied Mod. 1, Paragraph 4, because the facts of the case
made clear that “the lack of capacity to off load and return
trucks were [sic] quintessentially storage-related issues.”
Id. The Board also concluded that this result was neces-
sary because it could not harmonize Mod. 1, Paragraph 4,
with Mod. 27, Paragraphs 2 and 3, under Agility’s view of
the contract as requiring that all trucks be returned upon
unloading without being used as storage. Id. According
to the Board, Agility’s argument would leave Paragraphs
2 and 3 of Mod. 27 “useless and inexplicable.” Id.The Board also determined that, in signing Mod. 27,
Agility agreed to be bound by its 29-day cap. Id. at
176111. By agreeing to consider exceptions to the 29-day
cap, Ford did not abandon the cap altogether. Id. Accord-
ing to the Board, this holding was supported by its find-
ings that Switzer understood before signing Mod. 27 that
the 29-day cap was “unqualified” such that Agility was
accepting all risks associated with delays beyond 29 days.
Id. The Board also held that this understanding of the
contract is further supported by the rule of contract
interpretation that if “one party to a contract knows the
meaning that the other intended to convey by his words,
then he is bound by that meaning.” Id. at 176111 (collect-
ing cases). Because the facts showed that Agility knew
about Ford’s understanding of the contract and Switzer
did not provide any testimony to the contrary, the Board
determined that Agility was bound by Ford’s understand-
ing of the contract. Id. at 176111–12. The Board also
determined that the government’s conduct supported the
Board’s interpretation of the contract. Id. at 176112–13.
AGILITY PUBLIC WAREHOUSING v. MATTIS 15
II. DISCUSSION
Agility appeals the Board’s conclusions regarding its
claims that the government (1) breached the express
terms of the contract, (2) breached its promise to consider
exceptions to Mod. 27’s 29-day cap on fees, (3) breached
its implied duty of good faith and fair dealing, and (4)
constructively changed the contract. It does not directly
challenge any of the Board’s factual findings. Agility
instead argues that the Board misinterpreted the con-
tract, its relevant modifications, and the agreement to
consider exceptions.
A. Express Breach of Contract Claim
The Board’s interpretation of a government contract is
a question of law, reviewed de novo. Forman v. United
States, 329 F.3d 837, 841 (Fed. Cir. 2003); Interstate Gen.
Gov’t Contractors, Inc. v. Stone, 980 F.2d 1433, 1434 (Fed.
Cir. 1992). The interpretation of a contract begins with
the language of the written agreement. NVT Techs., Inc.
v. United States, 370 F.3d 1153, 1159 (Fed. Cir. 2004); see
also Barron Bancshares, Inc. v. United States, 366 F.3d
1360, 1375 (Fed. Cir. 2004) (“When construing a contract,
a court first examines the plain meaning of its express
terms.”). We consider the contract as a whole and inter-
pret it to harmonize and give meaning to all of its parts.
Id. “[I]n view of the Board’s considerable experience and
expertise in interpreting government contracts, its inter-
pretation is given careful consideration.” Interstate Gen.
Gov’t Contractors, 980 F.2d at 1434.
Agility argues that the government expressly
breached the contract by using its trucks for storage
purposes. Agility invokes Mod. 1, Paragraph 4, which
states that Agility’s trucks “will not be used at the sites
for storage purposes.” Pub. Warehousing Co., 15-1 BCA
¶ 36,062, 176093. According to Agility, this clause was
not altered by Mod. 27 and therefore creates an actionable
breach of the contract because the government did use
16 AGILITY PUBLIC WAREHOUSING v. MATTIS
trucks as storage on multiple occasions. Agility contends
that Mod. 27 did not affect Mod. 1, Paragraph 4, because
Mod. 27 dealt only with “transportation fees” and there-
fore only affected non-storage delays. Agility asserts this
reading would allow Paragraph 4 and Mod. 27 to exist
simultaneously, which would give full meaning to all
terms in the contract. See Gould, Inc. v. United States,
935 F.2d 1271, 1274 (Fed. Cir. 1991).
The plain language of the modification belies Agility’s
argument. Paragraph 2.e. of Mod. 27 explicitly states,
“[t]he maximum number of allowable trip days is 29. The
Government will not pay transportation fees beyond this
established maximum.” Pub. Warehousing Co., 15-1 BCA
¶ 36,062, 176100. Paragraph 3 then states that the
government would only pay fees for days beyond the
established minimums (i.e., more than 4, 5, or 10 days,
depending on the part of Iraq serviced) if “the delay is
customer caused; i.e. Hub, DFAC or MKT not having the
capability to off load and return the truck.” Id. The
Board found these two provisions, acting together, evi-
dence an agreement between the parties that the govern-
ment only would pay transportation fees subject to a 29-
day cap. The number of days for which the government
would pay fees, moreover, would accrue only if the gov-
ernment caused the delay, such as when a location could
not offload and return a truck because of a lack of cold
storage at that location. Because the language of Mod.
27, Paragraphs 2 and 3, included storage delays within
the meaning of government-caused delays for transporta-
tion fees and then set a 29-day cap on the payment of
transportation fees, the language of Mod. 27 abrogated
any remaining significance of Mod. 1, Paragraph 4.
Because we determine that the language of Mod. 27 is
not ambiguous, we need not resort to extrinsic evidence to
analyze the meaning of the contract. See Schism v. Unit-
ed States, 316 F.3d 1259, 1278 (Fed. Cir. 2002) (explain-
ing that the parol evidence rule bars a party from
AGILITY PUBLIC WAREHOUSING v. MATTIS 17
interpreting a contract with extrinsic evidence that con-
flicts with the language of the contract); see also McAbee
Constr. v. United States, 97 F.3d 1431, 1434 (Fed. Cir.
1996) (explaining that partially integrated contracts only
allow for the introduction of extrinsic evidence to supple-
ment a contract with additional terms consistent with the
plain language of the contract); Restatement (Second) of
Contracts §§ 215–16. Even if we were to consider extrin-
sic evidence regarding the meaning of Mod. 27, however,
the evidence and the Board’s unchallenged factual find-
ings further support the Board’s reading of the contract.
For example, despite the Mod. 1, Paragraph 4, re-
quirement that the government not use the trucks for
storage, some sites that lacked adequate storage capacity
regularly kept supply trucks onsite to use them for storing
food. Pub. Warehousing Co., 15-1 BCA ¶ 36,062, 176095–
96. The average truck turnaround time for reefer trucks
during the time period of Mod. 2 was between 13-24 days,
but some trucks that the government used for storage
stayed in Iraq for much longer, with at least two exceed-
ing the 100-day mark. See id. at 176098. Under the
transportation fee pricing structure of Mod. 2, the gov-
ernment paid for all delays caused by the use of the
trucks for storage. See id. Some of the individual trips
resulted in total payments of $99,445; $82,030; $65,905;
and $63,325. Id.Ford testified that the government never envisioned
paying the costs it did under Mod. 2 and became unhappy
with those costs. Id. at 176098. Ford believed a change
was necessary to the fee structure because the govern-
ment was “in the business of paying for deliveries” not “in
the business of paying for a truck.” Id. Ford therefore
sought another modification to the contract that would
share the risk between the parties of longer trips; this
effort resulted in Mod. 27 and its 29-day cap on transpor-
tation fees. See id. at 176098–100. Ford also testified
that the 29-day cap was necessary to pay for Agility’s
18 AGILITY PUBLIC WAREHOUSING v. MATTIS
expansion of the TLO program, which resulted in Mod.
27, Paragraph 1, increasing the maximum number of TLO
team members from 25 to 94. Id. at 176098.
During negotiations between the parties prior to the
signing of Mod. 27, Switzer emailed Ford to express “real
reservations about the maximum cap being unqualified.”
Id. at 176099. Despite these reservations, the parties
signed Mod. 27 with the 29-day cap in place. Id. at
176099–100. After the parties signed Mod. 27, Switzer
sent an email to Ford and others expressing concern that
there was “the makings of a problem with the new
Transport Mod that limits our billing for only 29 days.”
Id. at 176102. The Board found that Switzer’s “acknowl-
edgment that Mod. 27 limited [Agility’s] billing ‘for only
29 days,’ and that Mod. 27 ‘ha[d] the makings of a prob-
lem’ reflected his understanding at the time that Mod. 27
provided no relief just because trucks did not return in 29
days.” Id. Later emails from Switzer regarding the
government’s desire to extend the contract include state-
ments that Agility (1) could not “take lightly the effects of
Mod 27’s limitation on the transport charges,” and (2)
requested “the 29 day transport limitation rule for Iraq be
rescinded.” Id. at 176103.
As shown by the extrinsic evidence, the government
paid for trip days caused by storage delays under the fee
structure of Mod. 2. The parties then replaced this fee
structure with Mod. 27, which included the 29-day cap on
fees. The government and Agility understood Mod. 27
imposed a 29-day cap that was “unqualified” in applying
to all government-caused delays, including storage delays.
The evidence therefore shows that the parties’ actions
under Mod. 2 and Mod. 27 amended the requirement in
Mod. 1, Paragraph 4, that the government not use the
trucks for storage purposes. Although Agility under-
standably might have wished to escape from Mod. 27 and
the 29-day cap’s application to storage delays upon expe-
riencing its impact, “[a] contractor must stand by the
AGILITY PUBLIC WAREHOUSING v. MATTIS 19
words of his contract.” Upton v. Tribilcock, 91 U.S. 45, 50
(1875).
The plain language and extrinsic evidence support the
Board’s interpretation that the terms of Mod. 27 replaced
any remaining vitality that Mod. 1, Paragraph 4, had at
the time of Mod. 27’s signing. Mod. 27’s imposition of a
29-day cap on all transportation fees resulted in the
parties sharing the risk of travel times rather than hav-
ing the government shoulder the burden alone. Because
the government did not breach the contract by failing to
pay for days beyond the 29-day cap, even when delays
beyond the 29-day cap were caused by use of the trucks
for storage, we affirm the Board’s decision as to Agility’s
express breach of contract claim.
B. Claims for Exceptions to Mod. 27
Although Agility agreed to the 29-day cap in Mod. 27,
it claims that it did so with the understanding that it
could submit exceptions to the cap if the government
caused delays beyond the 29-day cap. But neither Agility
nor the government ever added or insisted on language in
Mod. 27 regarding exceptions to the 29-day cap. Instead,
Agility bases this argument entirely on a few lines in an
email exchange.
In a series of emails, Switzer expressed concerns
about the 29-day cap and stated that Agility “would prefer
to have the ability to submit exceptions to the 29 day rule
if the situation is unavoidable despite our best efforts to
prevent it.” J.A. 3041. Ford’s reply email does not show a
direct agreement with Switzer’s request; instead, Ford
cites a discussion with Switzer from earlier that day and
states, “exceptions to the 29 day rule will only be consid-
ered in the form of a claim.” J.A. 3040. Ford then re-
quested, “[p]lease sign and return the attached mod or
advise if additional changes are required.” Id.20 AGILITY PUBLIC WAREHOUSING v. MATTIS
According to Agility, this email chain amounts to an
agreement by the government to make exceptions to the
29-day cap as long as Agility provided documentation to
show that the government caused the delay beyond the 29
days. The plain terms of the email, however, indicate
that the government merely agreed to consider any excep-
tions to the 29-day cap. The government did not agree to
Agility’s offered terms; it counteroffered, and Agility
accepted the counteroffer when it returned a signed copy
of Mod. 27 without additional changes. See Restatement
(Second) of Contracts § 59 (Am. Law Inst. 1981). The
agreement to consider exceptions is not inconsistent with
the clear intent of the 29-day cap to share the risk of
delays; indeed, it would be entirely inconsistent for Ford
to agree in a single line in an email to grant every excep-
tion submitted by Agility for delays caused by the gov-
ernment after she insisted on the 29-day cap for fees and
rejected Agility’s attempts to lift the cap.
Mod. 27, moreover, specifically states that “[t]he ‘ad-
ditional days beyond the established minimum’ fees are
only applicable if the delay is customer caused.” Pub.
Warehousing Co., 15-1 BCA ¶ 36,062, 176100 (emphasis
added). Agility argues that the government would have to
pay for any government-caused delays beyond the 29-day
cap, but the government, under Mod. 27, already had to
cause the delays for Agility to receive any fees beyond
those laid out for minimum trips. Agility’s reading of the
email agreement would eviscerate the 29-day cap and
ignore the government’s purpose in implementing the cap.
Agility agreed to the 29-day cap for fees, and it cannot
escape that clause now by having the exception swallow
the rule.
The Board’s uncontested factual findings further sup-
port this result. The Board found that Ford considered
the 29-day cap, which was “about twice the average 15-
day truck return time experienced at the time” to be
“more than generous.” Id. at 176101–02. The Board also
AGILITY PUBLIC WAREHOUSING v. MATTIS 21
found that Ford “offered to leave the door open for claims
in the event the 29-day cap caused [Agility] such economic
hardship to the point where its ability to continue perfor-
mance under the contract was threatened.” Id. at 176102.
The Board further found that “Mod. 27 provided no relief
just because trucks did not return in 29 days,” id., and
“Switzer understood that CO Ford’s willingness to consid-
er granting a claim was a matter of discretion given the
right circumstances and not a matter of contract right,”
id. at 176103. Switzer’s own email even recognized that
Agility had “no guarantee of being paid” when submitting
a claim. Id.Given these uncontested factual findings and the
plain meaning of Ford’s email, the government only
agreed to consider claims submitted by Agility for excep-
tions to the 29-day cap. As discussed by the Board, the
government accepted the claims filed by Agility, consid-
ered the claims, and then denied the claims for failing to
meet the requirements under which the government
would grant an exception. See id. at 176105–06, 176112–
13. Finding no error in the Board’s judgment on this
issue, we affirm the Board’s denial of Agility’s claims
relating to exceptions to the 29-day cap. But Ford’s
recognition that some relief beyond the 29-day cap might
be appropriate is not irrelevant. As discussed below, it
relates to the parties’ obligations to carry out their own
contractual duties in good faith.
C. Implied Duty Claim
An implied duty of good faith and fair dealing exists
in government contracts and applies to the government
just as it does to private parties. Centex Corp. v. United
States, 395 F.3d 1283, 1304 (Fed. Cir. 2005). The duty to
cooperate is an aspect of the implied duty of good faith
and fair dealing. Precision Pine & Timber, Inc. v. United
States, 596 F.3d 817, 820 n.1 (Fed. Cir. 2010).
22 AGILITY PUBLIC WAREHOUSING v. MATTIS
The Board’s decision contains no reasoning specific to
the implied duty claim. Instead, the Board stated that it
“need not decide whether the government . . . breached its
implied duty of cooperation. At its core, whether the
government breached the contract comes down to contract
interpretation.” Pub. Warehousing Co., 15-1 BCA
¶ 36,062, 176110. Agility argues that the Board erred in
treating the implied duty claim as being subsumed within
an analysis of the express terms of the contract. Accord-
ing to Agility, the Board’s failure to address the implied
duty claim leaves fact-intensive questions unanswered,
such as whether the government had an implied duty to
cooperate in returning Agility’s trucks or failed to cooper-
ate by not diligently obtaining storage. Agility also as-
serts that the proper damages measure for a potential
breach of an implied duty by the government should not
be tied solely to the contract’s specified transportation fee.
The government attempts to save the Board’s failure
to address the merits of the implied duty claim by arguing
that the Board’s existing analysis suffices. The govern-
ment argues that it acted in conformance with the re-
quirements of the contract because Mod. 27 covered any
delay, including those caused by a lack of storage facili-
ties, in excess of 29 days.
It is true that a party to a contract cannot use an im-
plied duty of good faith and fair dealing to “expand [an-
other] party’s contractual duties beyond those in the
express contract or create duties inconsistent with the
contract’s provisions.” Metcalf Constr. Co. v. United
States, 742 F.3d 984, 991 (Fed. Cir. 2014). But a “breach
of the implied duty of good faith and fair dealing does not
require a violation of an express provision in the contract.”
Id. at 994. A party might breach this implied duty by
interfering with another party’s performance or acting in
such a way as to destroy the reasonable expectations of
the other party regarding the benefits provided by the
contract. Centex, 395 F.3d at 1304; see also Restatement
AGILITY PUBLIC WAREHOUSING v. MATTIS 23
(Second) of Contracts § 205 cmt. d (identifying possible
breaches of the implied duty of good faith and fair dealing
as including “evasion of the spirit of the bargain, lack of
diligence and slacking off, willful rendering of imperfect
performance, abuse of a power to specify terms, and
interference with or failure to cooperate in the other
party’s performance”).
As addressed above, the government abided by the
express terms of the contract under Mod. 27. But the
government may have breached its implied duty of good
faith and fair dealing by, inter alia, interfering with
Agility’s ability to perform its duties under the contract by
unnecessarily delaying the return of Agility’s trucks and
not increasing its on-site food storage capabilities. See
Centex, 395 F.3d at 1304; Restatement (Second) of Con-
tracts § 205 cmt. d. In other words, if the government
simultaneously imposed a cap and engaged in conduct
that made it impossible for Agility to perform within that
cap, the government may have breached its implied duties
to Agility. Indeed, Ford’s acknowledgment that circum-
stances might warrant payments above and beyond the
29-day cap appears to be a tacit recognition of this possi-
bility. And the parties’ discussions at the Summit leading
up to Mod. 27 reflected both the government’s cost con-
cerns and Agility’s need for the government’s assistance
in assuring the timely return of its trucks. The Board
therefore erred in concluding that it “need not decide” this
issue based on its interpretation of the terms of the con-
tract.
Because the Board erred by failing to analyze the im-
plied duty claim, we vacate the Board’s decision as to that
claim. We provide no opinion as to the merits of Agility’s
claim; the Board shall consider in the first instance
whether Agility has proven that the government breached
its implied duty of good faith and fair dealing. If appro-
priate, the Board also can consider in the first instance
whether Agility has provided evidence to support a dam-
24 AGILITY PUBLIC WAREHOUSING v. MATTIS
ages theory separate from the contract’s specified trans-
portation fee.
D. Constructive Change Claim
The government constructively changes a contract to
which it is a party when “a contractor performs work
beyond the contract requirements without a formal order,
either by an informal order or due to the fault of the
Government.” Int’l Data Prods. Corp. v. United States,
492 F.3d 1317, 1325 (Fed. Cir. 2007). To demonstrate
that the government has constructively changed the
terms of a contract, “a plaintiff must show (1) that it
performed work beyond the contract requirements, and
(2) that the additional work was ordered, expressly or
impliedly, by the government.” Bell/Heery v. United
States, 739 F.3d 1324, 1335 (Fed. Cir. 2014).
The Board’s treatment of the constructive change
claim suffers from the same shortcomings as its treatment
of the implied duty claim: the Board similarly concluded
that it “need not address” the constructive change claim
based on its interpretation of the contract. Pub. Ware-
housing Co., 15-1 BCA ¶ 36,062, 176110. The government
argues that the Board’s analysis as to Mod. 27 shows that
the government did not constructively change the con-
tract. But Agility contends that the government construc-
tively changed the contract by increasing, rather than
decreasing, those instances where Agility’s trucks were
forced to stay on site to provide storage for the MKTs.
The Board never addressed this contention, concluding,
again, that “whether the government breached the con-
tract comes down to contract interpretation.” Id. (empha-
sis added). A change of a contract by the government,
however, may or may not constitute a breach of contract,
depending on the circumstances. This is so even when
there is no express breach of the contract terms. See
Bell/Heery, 739 F.3d at 1335 (distinguishing between
constructive changes and cardinal changes by noting that,
AGILITY PUBLIC WAREHOUSING v. MATTIS 25
among other things, a cardinal change “amounts to an
actual breach of contract”). The Board, by its own admis-
sion, did not address the constructive change claim.
The government again tries to save the Board’s failure
to address the constructive change claim by arguing that
the Board’s analysis regarding the interpretation of the
contract applies with equal force to the constructive
change claim. But, “on the basis of the Board’s opinion in
this case, we cannot determine whether it properly reject-
ed” the constructive change claim because it failed to
provide any analysis of the claim. Charles G. Williams
Constr., Inc. v. White, 271 F.3d 1055, 1060 (Fed. Cir.
2001) (vacating an Armed Services Board of Contract
Appeals decision because the opinion failed to address an
issue adequately); see also Heyl & Patterson, Inc. v.
O’Keefe, 986 F.2d 480, 484 (Fed. Cir. 1993) (quoting Motor
Vehicle Mfrs. Ass’n of the United States v. State Farm
Mutual Auto. Ins. Co., 463 U.S. 29, 50 (1983)) (determin-
ing that the court “would be without authority to affirm”
on a basis not addressed by the Board because the Board’s
decisions must be upheld, if at all, on the basis articulated
by the Board), overruled on other grounds by Reflectone,
Inc. v. Dalton, 60 F.3d 1572 (Fed. Cir. 1995).
Because the Board did not address Agility’s construc-
tive change claim, we vacate the Board’s decision as to
that claim without expressing any opinion as to its merits.
On remand, the Board should consider in the first in-
stance whether the government constructively changed
the contract.
III. CONCLUSION
For the foregoing reasons, the decision of the Board is
affirmed in part, vacated in part, and remanded for
further proceedings.
AFFIRMED IN PART, VACATED IN PART, AND
REMANDED
26 AGILITY PUBLIC WAREHOUSING v. MATTIS
COSTS
No costs.