In a recent decision, NOAA Maryland, LLC v. General Services Administration, the Civilian Board of Contract Appeals (“CBCA”) looked to “extrinsic” evidence outside the contract to interpret whether the government was required to pay real estate taxes.  This case provides a reminder to contractors that while the CBCA is reluctant to look beyond the four corners of a contract and prudent contractors should make their contract terms explicit, the CBCA will look beyond the contract if it is necessary to determine the objective intent of the parties.  NOAA Maryland appealed the denial of its claim under a lease with the General Services Administration (“GSA”).  The contractor moved for summary relief arguing certain charges were reimbursable under its lease with GSA as “real estate taxes.”  The Parties’ both agreed on the facts of the case, but asserted different interpretations of the contract.

In 2005, GSA executed a lease with NOAA Maryland.  As an element of the lease, the Government agreed to pay real estate taxes according to the lease’s Tax Adjustment Clause.  During the course of the lease, the contractor sought reimbursement for certain charges under the Tax Adjustment Clause. Following the contracting officer’s denial of two certified claims relating to disputed charges and the Tax Adjustment Clause, NOAA Maryland filed an appeal with the CBCA.

In order to resolve the dispute, the CBCA was forced to turn to its rules of contract interpretation.  The CBCA looked to (1) parties’ course of dealing; (2) contemporaneous intent of parties; and (3) whether the contract was “ambiguous.”

Contract Interpretation Using Extrinsic Evidence

The general rule is that the Board may not look to extrinsic evidence when interpreting the provisions of a contract absent an ambiguity in the contract.  However, extrinsic evidence may be used for the limited purpose of clarifying the parties’ objective intent when entering into the contract.  In this appeal, the Board used the following extrinsic evidence to determine the parties’ objective intent:

1. Parties’ Course of Dealing

Here, the Board found NOAA Maryland failed to show that GSA paid the specific charges at issue in the past, thus failing to establish that the Parties’ course of dealing mandated the charges be paid.

2. Contemporaneous Intent of Parties

This aspect refers to an examination of the Parties’ expectations and intent at the time the lease was entered into.  However, the contractor failed to show evidence that the disputed charges were a substitute or successor for the tax scheme at the time the lease was executed.  Because of this, the Board was unable to determine whether GSA’s payment of the disputed charges would uphold the Parties’ original bargain under the lease.

3. Contract’s Tax Clause “Carve-Out” Provision

The contractor’s final argument was that the carve-provision of the tax clause is ambiguous; as such, it should be entitled to recover damages for the disputed charges.  The Board rejected this argument by first finding that the clause is not ambiguous, but second, even if it was, the contractor must show it relied on its asserted interpretation of the ambiguous provision in submitting its bid, and NOAA Maryland failed to prove this here.

Conclusion

Ultimately, NOAA Maryland’s motion was denied after the CBCA found it failed to show the disputed charges were real estate taxes GSA agreed to pay in the lease.  This decision provides a strong example of contract interpretation principles that every contractor should know and understand when bidding a contract.

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At times, a prime contractor can effectively be the middle man between the government and a subcontractor. The FAR directs that the prime contractor should always provide value to the overall procurement; however, many prime contractors require the assistance of subcontractors to fulfill this contract requirement. The recent CBCA case VSE Corporation v. Department of Justice spotlights that, even in fixed-price contracting, the prime contractor may or may not have bid with locked in subcontract rates.  If the government accepts the prime contractor’s offer and the subcontractor raises their rates, the prime contractor is liable for the additional costs, not the government.  In VSE, this led to fireworks for the prime contractor, literally.

VSE provided storage services to the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) to store seized property. The initial contract was a cost-reimbursement contract for which VSE was paid on a per pound basis.  ATF stored seized fireworks with VSE at a facility owned by VSE’s subcontractor Heritage Disposal & Storage and Heritage charged VSE $0.10 per pound to store the fireworks. Subsequently, the government asked VSE to reconfigure the fireworks for safety reasons. Despite VSE’s contract with Heritage, Heritage increased its storage billing rate from $0.10 per pound to $0.195 per pound based on the reconfiguration.

The government then issued a new solicitation for nationwide seized property to include fireworks. Rather than a cost-reimbursement contract, this contract was fixed-price. VSE submitted a bid where it identified the fireworks and proposed a base year price of $1.95 per square foot. However, this price would not be sufficient to cover the expenses for the fireworks storage as Heritage had been charging VSE approximately $170,000 per month to store the fireworks while the government had only been paying VSE approximately $77,000 per month for storage.   Continue Reading Boom: Fireworks between Subcontractor, Prime Contractor, and Government (Literally)

The Armed Services Board of Contract Appeals (the “Board”) recently issued another reminder in [Redacted], ASBCA No. 61065, that government contractors need to specifically reserve their rights to Contract Disputes Act claims in modifications and releases for final payment. While its name doesn’t quite rival the best of those associated with civil forfeiture cases (for example, United States of America v. An Article Consisting of 50,000 Cardboard Boxes More or Less, Each Containing One Pair of Clacker Balls), [Redacted] does serve as a useful reminder to keep an eye out for any waiver language in payment requests, modifications, or (as here) an invoice for final payment.  Continue Reading Contractor Waives its Right to Pursue Claim Through its Invoice for Final Payment

It is a common principle of contract interpretation that a court will not set aside the clear intent of the parties particularly when it comes to assignments or releases of claims. However, the unique legislative history of the Contract Disputes Act (“CDA”) grants the agency boards of contract appeals the power to set aside an assignment of a claim, if that assignment would waive the contractor’s right to appeal a Contracting Officer’s decision to the boards. A recent Armed Services Board of Contract Appeals (ASBCA) decision highlights this power, which is of great importance to contractors because they keep their right to file affirmative monetary contractor claims against the government and appeal government claims, such as a termination for default.

In Ikhana, LLC, the Armed Services Board of Contract Appeals held that an assignment of all claims to a surety in an indemnity agreement for a performance and payment bond in the event of a default did not prevent the contractor from bringing claims and an appeal of that default to the Board.  ASBCA No. 60462.  Ikhana entered into a contract with the Army Corps of Engineers to provide secured access lanes and remote screening facilities at the Pentagon.  In October 2015, Ikhana filed four claims with the Contracting Officer.  In December 2015, the Contracting Officer terminated the contract for default.  On February 25, 2016, Ikhana appealed the termination for default as well as its four affirmative claims.  The government then made a claim against Ikhana’s performance bond. Continue Reading Assignment of Claims to a Surety Cannot Waive A Contractor’s CDA Appeal Rights

In Appeal of American West Construction, LLC, the Armed Services Board of Contract Appeals considered whether the U.S. Army Corps of Engineers (Government) lost its right to claim a credit under the Changes Clause by waiving its right to insist on compliance with the contract specifications prior to insisting on such compensation.  Finding the Government was fully aware of the Contractor’s use of a less expensive construction method than in the specifications, the Board found the right to claim there was a change to the contract was “dead” and no credit was owed for the work not performed.

American West was awarded a MATOC contract for design-build construction services.  In August 2015, the Government awarded Delivery Order 02 (DO2) under the MATOC contract for construction of bridges over irrigation canals in El Paso, Texas.  The DO2 specifications provided that the work would be performed by first building two temporary bridges over the canals so the Contractor could access the site.  The Contractor, however, sought access to the construction site via a levee owned by the local water district.  However, because negotiations with the water district over access to the levee were pending and the Contractor could not be sure that access would be granted, the Contractor proceeded under the assumption the temporary bridges would still be necessary. Continue Reading You Don’t Always Get What You Pay For: Government Waives a Credit for Work Not Performed

 

In Industrial Maintenance Services, CBCA 5618, the Civilian Board of Contract Appeals (CBCA) found a contractor was entitled to additional payment where the Agency paid certain direct costs associated with a change in the critical path of performance, but failed to include the costs of impacted, unchanged work in the modification.

Contractor Industrial Maintenance Services appealed the denial of its claim by the Department of Veterans Affairs (Agency) for direct costs and markups associated with changes and additions to its scope of work for renovation of a medical center.  The parties executed a bilateral modification, which increased the contract price and provided that the adjustment included “all costs direct and indirect, associated with the work and the time agreed to herein, including, but not limited to…the changes’ impact on unchanged work.”  Despite the language of the modification, the Agency’s representative stated the parties would address the “impact to the schedule” at a later date.  The Contractor similarly noted on the modification that it “reserved the right to be compensated for additional days if needed once the schedule is revised to incorporate this change.” Continue Reading Compensation for Changed Work Not Enough to Fully Compensate for Unchanged Work According to CBCA

The Armed Services Board of Contract Appeals (ASBCA) recently issued its Fiscal Year 2017 annual report, as well as its annual report on Alternate Dispute Resolution (ADR). The reports offer statistics that highlight the high success rate for contractors based on the contractor winning outright or receiving some recovery, a doubling of ASBCA Rule 12 accelerated and expedited appeals, a very high number of appeals resolved through ADR, and a reduction in the ASBCA’s backlog of appeals.  All in all, great news for contractors. Continue Reading ASBCA Reports High Appeal Success Rate for FY 2017; Accelerated and Expedited Appeals Double

Most government contractors are well-aware that the road to preserving and pursuing a claim against the government is one where opportunities for contractors to waive or otherwise lose their right to assert valid claims abound. In a decision where form has once again prevailed over substance, the Armed Services Board of Contract Appeals (“the Board”) recently determined in Appeal of NileCo General Contacting LLC that a typewritten signature block in a company director’s email was not a sufficient signature to certify the contractor’s claim under the Contract Disputes Act (“CDA”).

In December 2011 the U.S. Army Corps of Engineers (”USACE”) awarded NileCo General Contracting LLC (“NileCo”) a contract to construct a dining facility and other structures at Manas International Airport in Kyrgyzstan. Two years later, the government suspended work, and directed NileCo to demobilize and quit the site. By July 2016, the government was still withholding payments. NileCo sent the contracting officer a $2,079,137.25 claim. The emailed claim included certification language required by the CDA, but the sender—the contractor’s director, Anwar Ahmed—included only his typewritten name and not an “electronic or digital signature.”

The government’s contracting officer acknowledged receiving NileCo’s email, advised that he needed additional time to prepare his final decision, and stated that the final decision would “be issued by November 20, 2016.” Soon thereafter, the government terminated NileCo’s contract for convenience. Having received no final decision by Nov. 20, 2016, NileCo filed its notice of appeal with the Board. The government sought to dismiss NileCo’s appeal because it contended that NileCo’s email did not constitute a valid claim under the CDA as it did not provide the required certification. Continue Reading Form Matters: Contractor Loses $2M Claim Because Emailed Certification Was Not “Electronically or Digitally” Signed

A recent case makes clear the importance of focusing on the fundamentals, such as knowing the rules on who the government is required to pay on a government contract.  In The Hanover Insurance v. United States, the U.S. Court of Federal Claims recently found that a surety’s letter to the Government adequately notified it of the contractor’s default of bond agreement, triggering the surety’s equitable subrogation right to payments issued by the Government.

In that case, the surety, Hanover Insurance Company (Hanover), overcame a summary judgment motion filed by the Government, concerning a Veterans Administration (VA) contract awarded to B&J Multi-Service Corporation (“B&J”) for facilities maintenance at a VA facility in West Haven, Connecticut.  The Government paid termination for convenience (“T/C”) costs to B&J to which Hanover as surety claimed it was entitled.

The Government asserted that Hanover, as surety to B&J, had not given proper notice of B&J’s default, thereby precluding any Government obligation to pay Hanover directly.  The Government argued proper notice was not given because Hanover did not invoke the precise words “the principal is in default” prior to the VA’s payment to B&J.  As evident from the court’s opinion, the Government was aware that Hanover was making payments to B&J’s subcontractors.  Hanover put the Government on notice that the funds for termination for convenience should not be paid directly to B&J, because Hanover was asserting a subrogation right to the T/C funds.  However, the Government ignored the surety and paid the termination for convenience funds directly to B&J. Continue Reading Termination for Convenience: Government Pays the Wrong Party, No Magic Words Needed to Trigger Surety’s Right of Equitable Subrogation

With every new administration, there is both great uncertainty and opportunity in federal government contracting. To help you navigate the rough seas of doing business with the federal government in this new administration, we have assembled nationally recognized practitioners who will cover topics relevant to government contractors large and small, novice and seasoned. Session topics include:
– Ten Things Every Contractor Needs to Know When Doing Business with the Federal Government
James F. Nagle | Oles Morrison Rinker & Baker LLP | Seattle, WA
 
– Writing a Winning Technical Proposal – From the Contracting Officer’s Perspective
Mona Carlson, Mary Jo Juarez | PTAC Kitsap Economic Dvlpmnt. Alliance – Navy Contracting Officer (retired) | Kitsap, WA
 
– Keys to Winning Bid Protests and Defending Contract Awards
Adam K. Lasky | Oles Morrison Rinker & Baker LLP | Seattle, WA
 
– Navigating the Complex Rules Governing Data Rights
Jonathan M. Baker | Crowell & Moring LLP | Washington D.C.
 
– Overlooked Risks of Being a Lower-Tier Government Contractor
Alan C. Rither | Pacific Northwest National Laboratory | Richland, WA
 
– Mistakes to Avoid in the Claims and Litigation Process
Donald G. Featherstun | Seyfarth Shaw LLP | San Francisco, CA
 
– Adapting to Buy American and Domestic Preference Rules in the Trump Administration
Howard W. Roth | Oles Morrison Rinker & Baker LLP | Seattle, WA
 
– Understanding & Managing the Risk of Suspension & Debarment
Dominique L. Casimir | Arnold & Porter Kaye Scholler LLP | Washington D.C.

Thursday, November 16th 

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