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Contract Disputes Act (CDA) litigation.


The Appeal of Uranium

Last year's Year in Review reported that in Florida Power & Light Co. v. United States, (1) the Court of Federal Claims (COFC) found that the transfer of enriched uranium from the Department of Energy (DOE) to private utility companies was not subject to the Contract Disputes Act (CDA) (2) as a purchase or sale of property, but was subject to the Tucker Act (3) as a provision of services by the DOE. (4) This distinction is important because, as the last Year in Review reported, the CDA, "unlike the Tucker Act, allows for interest on a claim calculated from the date on which the claim was filed with the contracting officer until the date of judgment." (5) On appeal, the U.S. Court of Appeals for the Federal Circuit (CAFC) upheld the COFC's determination that the CDA did not apply to the uranium transfer. (6) Specifically, the CAFC held:
 In light of the pricing mechanism, the transaction is best
 characterized as a service provided by the government (the
 provision of a set amount of enrichment service for a particular
 price) rather than as a purchase or sale of personal property (the
 provision of a set amount of enriched uranium for a particular
 price). (7)

CAFC Reversal--District Court Stay Tolled the Statutory Time Period for Filing COFC Appeal

A contractor must file its appeal of a contracting officer's final decision with the COFC or the ASBCA before the statutory deadline expires or risk dismissal for lack of jurisdiction. (8) One recent case, however, demonstrates that there are exceptions to the rule. As last year's Year in Review reported, in International Air Response v. United States, (9) the COFC granted a government motion to dismiss because the contractor did not file its appeal until nineteen months after the final decision. (10) The contractor argued that an Arizona district court stay tolled the deadline. (11) The COFC held that "nothing in the All Writs Act gave the district court power to derogate from the jurisdiction of the Court of Federal Claims, or otherwise to affect the CDA's limitations provisions." (12)

The CAFC held, however, that tolling the one-year appeal period was appropriate because the government contracting activity did not appeal the district court's stay order. (13) Specifically, the CAFC determined that the "government was barred by the doctrine of res judicata from relitigating the issue of the Arizona district court's authority under the All Writs Act to issue the stay order." (14) Accordingly, the CAFC determined that the government was foreclosed from its collateral attack on the stay order, but ultimately did not decide whether the district court originally had authority to issue the stay order. (15)

Well-Nigh Irrefragable Proof Equals Clear and Convincing Proof

In Am-Pro Protective Agency, Inc. v. United States, (16) the CAFC affirmed a COFC dismissal for untimeliness where the contractor, Am-Pro, waited six years to file its appeal. Am-Pro alleged that the contracting officer had threatened to cancel the contract, refuse to exercise subsequent options, and prevent other contract awards if Am-Pro appealed her final decision. (17) The CAFC held that Am-Pro failed to overcome the strong presumption that the contracting officer acted in good faith in denying the claim. (18) While noting that the CAFC and its predecessors had "used the 'well-nigh irrefragable' language to describe the quality of evidence required to overcome the good faith presumption," the court also noted that prior decisions had also used the phrase "clear evidence." (19) From the three generally recognizable standards of proof courts most commonly used, (20) the CAFC held that the "clear and convincing" standard most closely approximated the somewhat archaic "well-nigh irrefragable" standard of proof language. Using the clear and convincing proof standard, the CAFC found that Am-Pro failed to rebut the presumption of good faith, primarily because Am-Pro waited six years after the alleged threats to make any complaint of wrongdoing. (21)

Late Is Late, Especially with Return Receipt evidence

In Policy Analysis Co. v. United States, (22) the contracting officer mailed a certified letter dated 27 April 1999, terminating a purchase order for default, and received a return receipt dated 30 April 1999. The contractor, Policy Analysis Co. (PAC), used the services of a commercial mail drop named Press Building Mailbox Company to receive the termination notice. More than one year later, on 2 May 2000, PAC appealed its termination to the COFC. (23) PAC alleged that it had never received the termination notice sent by certified mail, but rather learned of the termination through an employee of the contracting activity, and subsequently received a facsimile copy of the 27 April termination notice on 10 May 1999. (24) The COFC, however, held that the commercial mail drop acted as PAC's agent to receive mail, and that the return receipt evidenced receipt of the termination notification on 30 April 1999. Accordingly, PAC was late in filing its appeal. (25)

The GSBCA Examines a Postmark

After failing to get an adequate declaration from the pro se appellant in Betty Hamlin v. General Services Administration, (26) the General Services Board of Contract Appeals (GSBCA) examined the postmark on the notice of appeal to determine when it was mailed. The GSBCA received the appeal notice on 29 April 2002, which was beyond the ninety-day time period to file an appeal after receipt of the contracting officer's final decision 18 January 2002. (27) Because the postmark's date was not clear, the GSBCA enlarged the postmark and modified the shading to conclude that the appellant had mailed its notice on 17 April 2002. Accordingly, the GSBCA determined that the appellant had filed the notice within ninety days. (28)

It Still Takes Two to Reconsider

Last year's Year in Review discussed Propulsion Controls Engineering, (29) where the ASBCA refused to extend the ninety-day deadline for filing an appeal when the contractor alleged that the contracting officer's reconsideration extended the deadline. (30) The ASBCA found no evidence of reconsideration by the contracting officer. The contracting officer merely declined to rescind her original decision after the contractor's attorney presented additional issues and requested rescission of the contracting officer's decision. (31) In Damson Builders Inc., (32) the ASBCA continued to apply a strict standard to allegations of contracting officer reconsideration. Damson Builders submitted a letter on 25 March 1999, stating that it did not accept the contracting officer's 9 March 1999 final decision and asked that the letter serve as "our notice of claim dispute." (33) Damson Builders did not send the letter to the contracting officer, however, but to another government employee.

Over a year later, on 5 October 2000, Damson Builders notified the contracting officer that it had not sent its 25 March 1999 letter to the ASBCA, in the belief that its earlier submission would suffice. Damson Builders also requested that the contracting officer review the 9 March 1999 final decision. On 16 November 2000, the contracting officer notified Damson Builders that he would not review the final decision because Damson Builders had not presented any additional information for reconsideration. (34) On appeal, the ASBCA granted the government's motion to dismiss because the contracting officer's "actions could not have been reasonably construed to mean that the contracting officer had reconsidered his final decision." (35)

Last year's Year in Review warned that "a contracting officer may take actions that can be construed as reconsidering a claim which could inadvertently extend the filing deadline." (36) In DK & R Co., (37) a contracting officer fell into this trap when she concluded her final decision with the following: "If you wish to further discuss this issue, I can be reached at [her telephone number]." (38) She also subsequently arranged a meeting between the appellant and the acquisition executive. (39) Based on this activity and her concluding remarks in the final decision, the ASBCA concluded that the "appellant reasonably and objectively could have concluded that the [contracting officer] was reconsidering her decision and thus it was not final." (40)

Is the Contractor Premature with Its Appeal or Has There Been a Deemed Denial?

As some contractors discover that they may be at risk for dismissal of their appeals for filing late, other contractors risk dismissal for appealing prematurely, before the contracting officer issues a final decision. In Fru-Con Construction Corp., (41) the ASBCA allowed a protestor to continue with its appeal after the contracting officer notified the parties that she would issue her final decision within thirteen months. (42) The board held that the appeal was not premature because such an unreasonably long period of time was a constructive denial of the protestor's claim. (43)

"Do You Choose Curtain Number One or Two? The Government Wins Either Way!" The ASBCA Treats a Motion to Dismiss for Lack of Subject Matter Jurisdiction as a Motion for Summary Judgment and Dismisses a Vietnam-Era Appeal.

On 23 August 2002, the ASBCA issued a summary judgment, dismissing the appeal in Thai Hai, (44) ending a thirty-five-year contract dispute saga. On 22 February 2001, Mr. Thai Hai submitted a claim for over $2 million for "back rent, rent due under the lease, the value of the warehouse property, allegedly destroyed due to the Army's negligence; and accrued interest" for warehouse property in Vietnam that the appellant had allegedly leased to the Army during the Vietnam War. (45) Before the ASBCA, the government filed a motion to dismiss Mr. Hai's appeal for lack of subject-matter jurisdiction because no contracting officer had ever signed the alleged lease document. (46) Because the parties presented and disputed facts that were outside the scope of the initial pleadings, the board determined that a summary judgment would be more appropriate. Accordingly, the ASBCA found that there was never any mutuality of intent to lease the property from the appellant in his individual capacity because the dealings with Mr. Hai had been in his capacity as an agent for the alleged owner. The board also found no evidence of an unambiguous offer and acceptance because the Army believed that the South Vietnamese government had control over the property and allowed the Army to occupy it rent-free. (47)

Remedies and Defenses

Don't Save Affirmative Defenses for a Rainy Day!

The ASBCA dealt the Air Force a hard blow in Phoenix Management, Inc. (48) when it barred the Air Force from asserting an affirmative defense in its brief without having first raised that defense in its answer. Phoenix Management, Inc. (PMI) provided airfield management services at Randolph Air Force Base, Texas, under a firm fixed-price contract awarded on 25 February 1997. During the option period for fiscal years (FY) 2000 and 2001, PMI was subject to a revised wage determination through the incorporation of a collective bargaining agreement (CBA). (49) The contracting officer had originally non-concurred with the inclusion of two management positions within the CBA, but the revised wage determination had not addressed this concern. (50) In a letter dated 20 October 1999, PMI submitted a request for equitable adjustment for the increased costs associated with the revised wage determination. The contracting officer denied the request as it related to the two management positions, however, because he "considered these positions as exempt salaried personnel." (51)

On 7 June 2001, the parties executed a bilateral modification that provided for the wage adjustment and a release for the revised wage determination for FY 2001, but not for FY 2000. (52) After a final agency decision denying the remainder of PMI's claim and subsequent appeal to ASBCA, the Air Force's brief eventually argued that PMI released any remaining FY 2001 claims for the wage determination through the modification. Unfortunately for the Air Force, the board granted PMI's motion to strike the defense because "'any affirmative defenses available' must be pled in the answer." (53) Accordingly, the ASBCA "disregard[ed] the release in modification P00015 in evaluating entitlement for FY 2001" (54) and found that PMI was entitled to full recovery of the FY 2001 costs for complying with the wage determination. (55)

There Is Some Rotten Lumber in Panama--or Maybe Not

In 1997, the U.S. Army awarded Delta Construction International, Inc. (Delta) an indefinite-delivery, indefinite-quantity contract for replacing rotten lumber at various U.S. facilities in Panama, with a guaranteed minimum of $200,000 for the nine-month base and the two option years. (56) The contract also required Delta "to possess sufficient capability to accomplish a daily rate of work in monetary value of a minimum of $3000 when single of multiple delivery orders have been issued and accepted." (57) In January 1999, Delta submitted a claim for $125,965.46, which represented the difference between the amount of work ordered during the base and first option periods and the guaranteed $200,000 minimum. The contracting officer denied the claim but acknowledged that the government had failed to order the guaranteed minimum and provided an $11,216 adjustment. (58) The contracting officer explained his reasoning in his final decision:
 [T]he Government did not order the guarantee
 minimum, nevertheless, the contractor is
 not entitled to be put in a better position than
 it would have been if it had performed and
 had to bear the expense of full performance
 It is my decision that the contractor is entitled
 to recover a reasonable profit which it would
 have earned had he performed, based on the
 guarantee minimum, the overhead costs
 incurred on the guarantee minimum, and any
 reasonable, allocable, and allowable cost
 incurred based on the guarantee minimum. (59)

Upon appeal to the ASBCA, the board held that "Delta is entitled to recover the difference between $200,000 and the $86,323.07 in orders performed, or $113,676.93." (60) Relying on Maxima Corp. v. United States, (61) the board found that Delta's contract required it to maintain a minimum capability in return for the minimum guaranteed amount. (62) The CAFC, however, vacated and remanded the case to the ASBCA because the board used "an impermissible basis for calculating damages." (63) The CAFC specifically held that the board's impermissible damages calculation would have
 put the contractor in a more favorable position
 than it would have been in if the government
 had performed rather than breached its
 contractual commitment. The proper basis
 for damages in this case is the loss the contractor
 suffered as a result of the government's
 breach, not the total amount it would
 have received without the breach. (64)

The CAFC also distinguished its Maxima (65) decision by noting that the issue on appeal only involved whether the government could retroactively terminate a contract for convenience. The CAFC acknowledged that the contractor in Maxima would retain the difference between the guaranteed minimum and the amount the government actually ordered because the court did not address this basis of payment issue, but addressed the improper retroactive termination for convenience method of recapturing the erroneous payment. (66) Major Kuhn.

(1.) 49 Fed. Cl. 656 (2001).

(2.) 41 U.S.C. [subsection] 601-613 (2000). The CDA applies to contracts entered into by an executive agency for:

(1) the procurement of property, other than real property in being;

(2) the procurement of services;

(3) the procurement of construction, alteration, repair or maintenance of real property; or,

(4) the disposal of personal property.

Id. [section] 602(a).

(3.) 28 U.S.C. [section] 1491 (2000).

(4.) Major John J. Siemietkowski, et al., Contract and Fiscal Law Developments of 2001--The Year in Review, ARMY LAW., Jan./Feb. 2002, at 71 [hereinafter 2001 Year in Review].

(5.) Id. (citing 41 U.S.C. [section] 611).

(6.) Florida Power & Light Co. v. United States, 2002 U.S. App. LEXIS 20858 (Fed. Cir. Oct. 4, 2002).

(7.) Id. at *23.

(8.) The deadline for an appeal to the COFC is twelve months. 41 U.S.C. [section] 609(a) (2000). The deadline for an appeal to the ASBCA (or any Board of Contract Appeals) is ninety days. 41 U.S.C. [section] 606.

(9.) 49 Fed. Cl. 509 (2001).

(10.) 2001 Year in Review, supra note 4, at 73.

(11.) Int'l Air Response, 49 Fed. Cl. at 511.

(12.) Id. at 512. The All Writs Act is codified at 28 U.S.C. [section] 1651 (2000).

(13.) Int'l Air Response v. United States, 302 F.3d 1363 (Fed. Cir. 2002).

(14). Id. at 1368.

(15.) Id.

(16.) 281 F.3d 1234 (Fed. Cir. 2002).

(17). Id. at 1237.

(18.) Id. at 1238-39.

(19.) Id. at 1239 (citing Librach v. United States, 147 Ct. Cl. 605 (1959); George v. United States, 166 Ct. Cl. 527, 531 (1964)).

(20.) "Courts generally recognize three standards of proof: 'preponderance of the evidence,' 'clear and convincing,' and 'beyond a reasonable doubt.'" Id. (citing Price v. Symsek, 988 F.2d 1187, 1191 (Fed. Cir. 1993)).

(21.) Id. at 1242.

(22.) 50 Fed. Cl. 626 (2001).

(23.) Id. at 627.

(24.) Id. at 628.

(25.) Id. at 631.

(26.) GSBCA No. 15,856, 02-2 BCA [paragraph] 31,934.

(27.) Id at 157,761.

(28.) Id at 157,762. The GSBCA rules allow the date for filing a notice of appeal to occur on the earlier of its receipt at the board or on the date that is mailed. 48 C.F.R. [section] 6101.1(b)(5)(i) (2002).

(29.) ASBCA No. 53,307, 01-2 BCA [paragraph] 31,494.

(30.) See 2001 Year in Review, supra note 4, at 73.

(31.) Propulsion Controls Eng'g, 01-2 BCA [paragraph] 31,494, at 155,508.

(32.) ASBCA No. 53,172, 01-2 BCA [paragraph] 31,618.

(33.) Id. at 156,214.

(34.) Id.

(35.) Id. at 156,215.

(36.) See 2001 Year in Review, supra note 4, at 73-74.

(37.) ASBCA No. 53,451, 02-1 BCA [paragraph] 31,769.

(38.) Id. at 156,902.

(39.) Id.

(40.) Id. at 156,903.

(41.) ASBCA No. 53,544, 02-1 BCA [paragraph] 31,729.

(42.) Id. at 156,757. Under the CDA, there is a three-step analysis before a contractor may pursue an appeal of a deemed denial of its claim:
 A contracting officer shall, within sixty days of receipt of a
 submitted certified claim over $100,000 ... issue a decision;
 or ... notify the contractor of the time within which a decision
 will be issued.... The decision of a contracting officer on
 submitted claims shall be issued within a reasonable time, in
 accordance with regulations promulgated by the agency, taking into
 account such factors as the size and complexity of the claim and
 the adequacy of the information in support of the claim provided by
 the contractor.... Any failure by the contracting officer to issue
 a decision on a contract claim within the period required will be
 deemed to be a decision by the contracting officer denying the

41 U.S.C. [subsection] 605(c) (2000).

(43.) Fru-Con Constr., 02-1 BCA [paragraph] 31,729, at 156,757; see also Midwest Props., LLC, Nos. 15,822, 15,844, 2002 GSBCA LEXIS 160 (Aug. 1, 2002). The GSBCA held that Midwest Properties, LLC was immediately entitled to appeal the contracting officer's letter even though it did not meet the final decision requirements. The board found that the letter was "in essence" a final decision because the letter unequivocally provided the contracting officer's position without any suggestion that he was not open to negotiations. Id.

(44.) ASBCA No. 53,375, 02-2 BCA [paragraph] 31,971.

(45.) Id. at 157,919.

(46.) Id. at 157,920.

(47.) Id. "Although the Federal Rules of Civil Procedure do not apply to the Board as an administrative tribunal, [the Board] can look to them for guidance, particularly in areas our rules do not specifically address." Id. at 157,920 (citing Dennis Anderson Constr. Corp., ASBCA Nos. 48,780, 49,261, 96-1 BCA [paragraph] 28,076, at 140,188). The board looked to Federal Rule of Civil Procedure 12(b) to determine that it should treat the government's motion as a motion for summary judgment when "matters outside the pleadings are presented and not excluded by the tribunal." Id.

(48.) ASBCA No. 53,409, 02-1 BCA [paragraph] 31,704.

(49.) Id. at 156,587.

(50.) Id. at 156,587-88.

(51.) Id. at 157,588.

(52.) Id.

(53.) Id. at 156,589.

(54.) Id.

(55.) Id. at 156,591.

(56.) White v. Delta Constr. Int'l, Inc., 285 F.3d 1040 (Fed. Cir. 2002).

(57.) Id. at 1042 (citing to the contract requirements).

(58.) Id.

(59.) Id.

(60.) Delta Constr. Int'l, Inc., ASBCA No. 52,162, 01-1 BCA [paragraph] 31,195. The ASBCA similarly held that the contractor was entitled to the difference between the guaranteed minimum and the amount actually ordered in a Navy IDIQ contract. MId.-Eastern Indus. Inc., ASBCA No. 53,016, 02-1 BCA [paragraph] 31,657.

(61.) 847 F. 2d 1549 (Fed. Cir. 1988).

(62.) See Delta Constr. Int'l, 01-1 BCA [paragraph] 31,195, at 154,028.

(63.) Delta Constr. Int'l, 285 F.3d at 1040.

(64.) Id.

(65.) Maxima Corp., 847 F.2d at 1549.

(66.) Delta Constr. Int'l, 285 F.3d at 1044.
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Publication:Army Lawyer
Date:Jan 1, 2003
Previous Article:Terminations for convenience. (Contract Performance).
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