AEY, Inc.
Docket: ASBCA 56470, ASBCA 56471, ASBCA 56472
Decision date: 2018-06-22

ARMED SERVICES BOARD OF CONTRACT APPEALS 
Appeals of -- ) 
) 
AEY, Inc. ) 
) 
UnderContractNos. W91GY0-07-M-0815 ) 
W91GY0-07-M-0670 ) 
W91GY0-08-M-0010 ) · 
W91GY0-08-C-0005 ) 
W91GY0-08-M-0040 ) 
APPEARANCES FOR THE APPELLANT: 
APPEARANCES FOR THE GOVERNMENT: 
ASBCA Nos. 56470, 56471, 56472 
56473, 56591 
Jeff H. Eckland, Esq. 
Jared M. Reams, Esq. 
Eckland & Blando LLP 
Minneapolis, MN 
Raymond M. Saunders, Esq. 
Army Chief Trial Attorney 
MAJ Jason W. Allen, JA 
Trial Attorney 
OPINION BY ADMINISTRATIVE JUDGE O'SULLIVAN 
AEY, Inc. (AEY) appeals from contracting officers' final decisions terminating a 
total of five contracts for cause, either partially or in full. The contracts were awarded by 
the Joint Contracting Command-Iraq (JCCI) in 2007 for arms and accessories for the 
Multi-National Security Transition Command in Iraq (MNSTC-I), ultimately destined for 
the use of the Security Forces of Iraq. We have jurisdiction under the Contract Disputes 
Act of 1978 (CDA), 41 U.S.<;. §§ 7101-7109. In large part, we sustain the appeals. 
FINDINGS OF FACT 
1. In chronological order of award, the five contracts at issue are: (1) Contract 
No. W91GY0-07-M-0670 (M-0670), awarded 29 July 2007 for a total amount of 
$4,645,785.84 (R4, tab l); (2) Contract No. W91GY0-07-M-0815 (M-0815), awarded 
27 September 2007 for a total amount of $2,874,500.00 (R4, tab 3); (3) Contract 
No. W91GY0-08-M-0010 (M-0010), awarded 4 December 2007 for a total amount of 
$1,180,144.44 (R4, tab 24); (4) Contract No. W91GY0-08-C-0005 (C-0005), awarded 
8 December 2007 for a total amount of $12,331,700.00 (R4, tab 5); and (5) Contract 
No. W91GY0-08-M-0040 (M-0040), awarded 17 December 2007 for a total amount of 
$1,192,915.60 (R4, tab 8). 

2. Delivery for each contract line item number (CLIN) under these contracts was due 
no later than a specified number of days (usually 45 or 60) following AEY's receipt of the 
end user certificate (EUC) 1 for the item from JCCI (R4, tab 3 at 7, tab 5 at 2, tab 8 at 7, 
tab 24 at 5). The contracts required AEY to request an EUC from JCCI for each line item 
within three days of "receipt of order," which AEY interpreted to mean its supplier's receipt 
of AEY's order for the item, since the submitted EUC request had to identify the supplier 
(tr. 1/70-71).2 The intended end users were the Security Forces of Iraq, under the Ministry 
of the Interior, the Ministry of Foreign Affairs, or the Ministry of Defense. Officials from 
one of these organizations would typically sign the EUC before delivering it back to JCCI 
for delivery to AEY. (Tr. 1/62-63) Delivery dates for each contract could and did vary by 
CLIN, depending on when AEY received an acceptable EUC for each item. 
3. Each of the five contracts contained the Federal Acquisition Regulation (FAR) 
52.232-4, CONTRACT TERMS AND CONDITIONS - COMMERCIAL ITEMS clause. Contracts 
M-0670, M-0815, M-0040, and M-0010 contained the FEB 2007 version of the clause. 
Contract C-0005 contained the FEB 2005 version of the clause. The following provisions 
of the clause are relevant to these appeals, and text appearing only in the FEB 2007 
version is bracketed: 
(a) Inspection/ Acceptance. The Contractor shall only 
tender for acceptance those items that conform to the 
requirements of this contract. The Government reserves the 
right to inspect or test any supplies or services that have been 
tendered for acceptance. The Government may require repair 
or replacement of nonconforming supplies ... at no increase in 
contract price. [If repair/replacement. .. will not correct the 
defects or is not possible, the Government may seek an 
equitable price reduction or adequate consideration for 
acceptance of nonconforming supplies or services.] The 
Government must exercise its postacceptance [sic] rights 
( 1) within a reasonable time after the defect was discovered or 
should have been discovered; and (2) before any substantial 
change occurs in the condition of the item, unless the change 
is due to the defect in the item. 
1 The EUC was essential to the process of obtaining an export license from the country in 
which the supplier of the arms or ammunition was located (tr. 1/60-61, 64). 
Because it was such an important document, AE Y's practice was to include a draft 
of the EUC along with each submitted request to ensure the accmacy of the EUC 
(tr. 1/61). 
2 The government does not dispute this interpretation. 
2 

(t) Excusable delays. The Contractor shall be liable 
for default unless nonperformance is caused by an occurrence 
beyond the reasonable control of the Contractor and without 
its fault or negligence such as, acts of God or the public 
enemy, acts of the Government in either its sovereign or 
contractual capacity, fires, floods, epidemics, quarantine 
restrictions, strikes, unusually severe weather, and delays of 
common carriers. The Contractor shall notify the Contracting 
Officer in writing as soon as it is reasonably possible after the 
commencement of any excusable delay, setting forth the full 
particulars in connection therewith, shall remedy such 
occurrence with all reasonable dispatch, and shall promptly 
give written notice to the Contracting Officer of the cessation 
of such occun-ence. 
(m) Termination for cause. The Government may 
terminate this contract, or any part hereof, for cause in the 
event of any default by the Contractor, or if the Contractor 
fails to comply with any contract terms and conditions, or 
fails to provide the Government, upon request, with adequate 
assurances of future performance. In the event of termination 
for cause, the Government shall not be liable to the 
Contractor for any amount for supplies or services not 
accepted, and the Contractor shall be liable to the 
Government for any and all rights and remedies provided by 
law. If it is determined that the Government improperly 
terminated this contract for default, such termination shall be 
deemed a termination for convenience. 
Contract Delivery Dates· 
4. Contract M-0670 required delivery 45 days after receipt of EUC (R4, tab 1 
at 6). It contained the following line items with country, date of receipt of EUC, and 
original contract delivery date indicated: 
CLIN 000 I-universal laser bore sight system (20), complete with 4 adaptors, 
carrying pouch, batteries and instructions. EUC for U.S. received 6 September 
2007 (R4, tab 27), making delivery due 22 October 2007. 
CLIN 0002-Remington 870 Express 12 gauge shotgun (106), with three 
magazines. EUC for U.S. received 6 September 2007, making delivery 
due 22 October 2007. 
3 

·CLIN 0003-Sniper Rifle, 7.62 x 5mm (48), to include 3 magazines, backup 
(adjustable) sights, bayonet mount. EUC for U.S. received 6 September 
2007, making delivery due 22 October 2007. 
CLIN 0004AA-AK-47 w/fixed stock (50-50 fixed/folding stock acceptable) 
(30,000), to include sling, 4 magazines, and cleaning kit. A corrected EUC for 
Montenegro for 16,000 AK-47s was received 15 October 2007 (R4, tab 46; 
tr. 1/161), making delivery due 29 November 2007. The EUC for the remainder 
of the AK-47s (14,000), sourced from Croatia, had to be re-done due to a missing 
import certificate, and the corrected EUC was not received until 3 April 2008 (R4, 
tab 108), making delivery due 19 May 2008. 
CLIN 0004AB-AK-47s (100)-later terminated for convenience. 
CLIN 0005-Tool kit, small arms repair (1). The record does not clearly establish 
when the U.S. EUC was issued. 
CLIN 0006AA-DShK 12.7 x 107mm machine gun (287), to include 3 magazines 
and tripod. EUC for the Czech Republic was received on 28 February 2008 (R4, 
tab 99 at 2), making delivery due 14 April 2008. 
CLIN 0006AB-DShK (2)-later terminated for convenience. 
CLIN 0007AA-Machine gun light RPK 7.62 x 39mm (404), to include bipod 
and 3 magazines. A corrected EUC for Montenegro was received 15 October 
2007 (R4, tab 46), making delivery due 29 November 2007. 
CLIN 0007 AB-Machine gun light RPK ( 114 ). EUC for Montenegro was 
received 6 September 2007 (R4, tabs 30, 33), making delivery due 22 October 
2007. 
CLIN 0008AA-Shipping costs in the amount of $69,000.00. 
CLIN 0008AB-Shipping costs in the amount of $656,985.00.(31 
(R4, tab 1 at 2-3) 
5. Contract M-0815 had only one CLIN, for 25,000,000 rounds of 7.62 x 39mm 
ball ammunition (new surplus) for the AK-47s (R4, tab 3 at 2; tr. 1/54). Delivery was 
3 CLIN 0008AA appears to be for shipping costs for weapons intended for the use of the 
Iraq MOI at Abu Ghraib, while CLIN 0008AB appears to be for shipping costs for 
weapons intended for the use of the Iraq MOD (R4, tab 149, AEY invoice for the 
29 January 2008 delivery). 
4 

due 45 days after receipt of EUC (R4, tab 3 at 7). An EUC for the Czech Republic was 
requested by AEY on 2 October 2007, but a correct EUC was not received until 
11 November 2007, making delivery due 27 December 2007 (R4, tabs 4, 52). 
6. Contract M-0010 had multiple CLINs with delivery due 60 days after receipt of 
EUC (R4, tab 24 at 2, 5): 
CLIN 0001-60mm mortar base plate w/ tripod (48); EUC for Serbia received 
7 February 2008 (R4, tab 86), making delivery due on 7 April 2008. 
CLIN 0003-AK-47 w/fixed stock including sling, 4 magazines, cleaning kit, and 
blank firing attachment (3932). EUC for Serbia received 7 Februaty 2008, 
making delivery due 7 April 2008. 
CLIN 0004-DShK machine gun M-38/46, cartridge 12.7 x 107mm, caliber 12.7, 
rate of fire 600 rounds/min., feed system: belt 50 rounds (54). EUC for Czech 
Republic received on 7 February 2008 (R4, tab 84), making delivery due 7 April 
2008. 
CLIN 0005-Plotting board, indirect fire, M 19 to include case ( 48). EUC for 
Serbia received 7 February 2008, making delivery due 7 April 2008. 
CLIN 0006-Sight unit M64 series (48). EUC for Serbia received 7 February 
2008, making delivery due 7 April 2008. 
CLIN 0007-Modernized small arms repair kit (224). EUC for the U.S. received 
28 February 2008 (R4, tab 99), making delivery due 28 April 2008. 
CLIN 0008-Sniper rifle to include scope, sight, and three magazines (60). EUC 
for the U.S. received 28 February 2008, making delivery due 28 April 
2008. 
CLIN 0009-Spotter scope (60). EUC for the U.S. received 28 February 2008, 
making delivery due 28 April 2008. 
CLIN 0010-Machine gun light RPK 7.62 x 39mm (496). EUC for Serbia 
received 7 February 2008, making delivery due 7 April 2008. 
CLIN 0012-Shipping charges of$214,390.00. 
AEY received the EUCs for CLIN 0004 (Czech Republic) and CLINs 0001, 0003, 0005, 
0006, and 0010 (Serbia) on 7 February 2008 (R4, tabs 84, 153), making delivery of those 
items due on 7 April 2008. AEY received the EUC for CLINs 0007, 0008, and 0009 
(U.S.) on 28 February 2008 (R4, tab 99 at 2), making delivery due 28 April 2008. 
5 

7. Contract C-0005 had only one CLIN, for 39 million rounds of 5.56 x 45mm 
M855 full metal jacket ball ammunition, with delivery due 60 days after receipt of EUC 
(R4, tab 5 at 1-2). In November of 2007, before the contract was officially awarded but 
after AEY had been informed that it was the apparent successful bidder, AEY was 
approached by !vfr. Mark Morales of Allied Defense Group, a U.S. firm, about the 
possibility of sourcing the ammunition with Alliant Techsystems (ATK) (tr. 1/115-16). 
Prior to this, AEY had intended to source the ammunition with a supplier in Serbia but 
was also considering a supplier in the United Arab Emirates (UAE) (tr. 1/119-20). 
Efraim Diveroli, AEY's president, testified that these suppliers would have a lower price 
but the ammunition would be shipped by air, whereas the American ammunition, being 
of higher quality, might be more expensive and shipping by sea, while it would be less 
expensive than air, would be slower and would not meet the contract's requirement to 
deliver within 60 days of receipt of EUC. (Tr. 1/ 116-17) Mr. Diveroli spoke with the 
JCCI contracting officer (CO), TSgt David Goff, prior to award of the contract, to inform 
him of the opportunity to source from ATK vs. the other suppliers and the fact that it 
would mean an extended delivery schedule (tr. 1/117). 
8. CO Goff gave the assent to source from ATK after checking with the customer, 
MNSTC-I/J4 (tr. 1/119). As a result, AEY entered into a subcontract with MECAR, 
USA, an affiliate of Allied Defense Group, for the A TK ammunition on 7 December 
2007, one day before Contract C-0005 was officially awarded (R4, tab 147). The 
subcontract contained estimated delivery dates: 3 million rounds on 28 February 2008, 
7 million rounds on 1 April 2008, 7 million rounds on 30 April 2008, 7 million rounds on 
31 May 2008, 7 million rounds on 30 June 2008, and 8 million rounds on 31 July 2008 
(id). AEY received the EUC for the U.S. on 7 February 2008 (R4, tab 154), making 
delivery due on 7 April 2008 per the contract. AEY had already applied for and received 
a U.S. export license for the ammunition on 1 February 2008 (tr. 1/123). 
9. Contract M-0040 contained multiple CLINs and required delivery 60 days 
from receipt of EUC (R4, tab 8 at 2, 7): 
CLIN 0002-AK-47 w/folding stock, 4 magazines, cleaning kit (43) 
CLIN 0006-Launcher: Grenade M203Al (32) 
CLIN 0007-Machine gun 5.56mm: M249 (39) 
CLIN 0008-Machine gun caliber .50: Browning M2, HB flexible W/E (6) 
CLIN 0009-Machine gun grenade 40mm MK 19 Mod III ( 4) 
CLIN 0010-Machine gun 7.62mm M240B (19) 
CLIN 0011-Machine gun 5.56mm MK46 Shorty Saw (4) 
6 

CLIN 0012-Machine gun 7.62mm MK48 Shorty (8) 
CLIN 0013-Tripod mount machine gun .50 caliber ( 6) 
CLIN 0014-Tripod mount machine gun M240B (16) 
CLIN 0015-Tripod mount machine gun MK19 (4) 
CLIN 0016-vehicle mount machine gun .50 caliber (6) 
CLIN 0017-vehicle mount machine gun MK 19 ( 4) 
CLIN 0020-Burris Spotting Sniper Scope 20-60 x 80mm Landmark Spotting 
Scope (12) 
CLIN 0021-Shotgun 12-gauge Remington 870 MCS (5) 
CLIN 0022-Submachine gun 9mm MP5 (25) 
CLIN 0026-Suppressor submachine gun MP5 (25) 
CLIN 0027-Tactical light carbine 5.56mm M4Al (980) 
CLINs 0002, 0008, and 0013 were to be acquired from Serbia and AEY received that 
EUC on 7 February 2008 (R4, tabs 151-52), making delivery due 7 April 2008. 
CLIN 0022 was to be acquired from Pakistan and that EUC was received on 21 February 
2008 (R4, tab 182), making delivery due 21 April 2008. The remainder of the items were 
to be acquired from the U.S. and this EUC was received on 21 February 2008 (R4, 
tabs 92, 182; tr. 1/205-06), making delivery due 21 April 2008. 
AEY's Progress toward Delivery 
Contract M-0670 (ASBCA No. 56591) 
10. For CLINs 0001, 0002, and 0003 (universal laser bore sight systems, 
12-gauge shotguns, and sniper rifles from the U.S.), the contract delivery date was 
22 October 2007 (finding 4).4 However, the U.S. export license originally issued on 
30 October 2007 incorrectly identified the Iraq MOI as the end user, and a corrected 
export license identifying the end user as MNSTC-I was not issued until 27 March 2008 
(tr. 1/165; R4, tabs 355, 363, 428). All the U.S. items were delivered to Lufthansa on 
4 As noted in finding 4, the date of receipt of an EUC for CLIN 0005 (small arms repair 
kit) is not apparent from the record. However, knowing this date is not necessary 
to our decision since this item was delivered and accepted. 
7 

15 April 2008 and arrived in Baghdad on 22 April 2008 (tr. 2/213-14). The government 
executed DD250s confirming delivery on 28 April 2008, and officially accepted the 
items on 2 June 2008 (R4, tabs 115, 278 at 1-2). With the exception of the universal 
laser bore sights, delivered quantities in full satisfaction of contract CLIN quantities were 
accepted.5 
11. On 29 January 2008, a partial AEY shipment arrived at Baghdad and was 
transported thereafter to the Abu Ghraib Warehouse (AGW). This shipment consisted of 
4,105 AK-47s6 under CLIN 0004AA, 404 RPK light machine guns under CLIN 0007 AA, 
and 114 RPK light machine guns under CLIN 0007AB. (Tr. 1/185-86; R4, tabs 78, 89, 149) 
12. By Repo1t of Discrepancy (ROD) issued to AEY on 16 February 2008, the 
government informed AEY that its 29 January 2008 shipment to AGW was missing 
accessories under CLIN 0004AA as follows: 1,089 cleaning kits, 107 blank firing 
adaptors, 174 pouches, and 160 slings (R4, tab 90). In addition, one rifle appeared to be 
damaged and several appeared to be used rather than new (id.). The ROD further noted 
that 13 of the RP Ks delivered under CLIN s 0007 AA and 0007 AB had folding rather than 
fixed stocks and all RPKs had come with 30 round magazines, not the specified 40 round 
magazines (id.). Finally, it was noted that "most" of the crates "just look like a wooden 
box not wooden crate to store weapons and accessories" and that "[t]hese crates had no 
inside wooden partitions to separate the weapons from the accessories ... and to keep them 
in row[ s] so it will be easy to be counted" (id.). 
13. AEY agreed to repackage the improperly packaged AK-47s and to supply the 
missing accessories ( tr. 2/22-25; R4, tab 94 ). On 19 February 2008, CO Goff sent an 
email to quality assurance personnel at AGW summarizing the agreement reached with 
AEY to fix problems with the shipment (R4, tab 93). He asked the AGW personnel to 
sort the shipments into four categories: (1) weapons that arrived in good condition with 
acceptable packing and accessories-these should be accepted; (2) weapons with 
"questionable packing" should be sorted into two subcategories: weapons in good 
condition ( should be accepted if it is just the bracing that is deficient); and weapons with 
significant cosmetic damage or that will require work to be functional ( these should be 
5 It appears that only 19 of the 20 universal laser bore sights were accepted, but the 
record is unclear as to the reason (R4, tab 278 at 2). 
6 The delivered quantity included 100 AK-4 7s originally ordered under CLIN 0004AB 
that were applied to CLIN 0004AA after the government terminated CLIN 
0004AB for convenience. The remainder of the AK-47 shipment was the amount 
approved (4,005) under the Montenegro export license issued 25 December 2007. 
(R4, tab 385) The record does not reflect when or if Montenegro ever issued an 
export license for the remainder of the 16,000 AK-47s that were to be sourced 
from that country. 
8 

set aside); (3) crates that were shipped without any bracing at all should be set aside; 7 and 
( 4) crates that have acceptable weapons but are missing accessories can be accepted if the 
missing items can be filled in from an otherwise unacceptable crate (id.). The record 
does not contain any indication of whether this sorting process was actually carried out or 
its results. However, AEY proceeded to order the accessories that had been reported to 
be missing and these were shipped to Baghdad from Montenegro on 9 April 2008 (R4, 
tab 113 at 3 ), delivered to AGW, and inspected and passed by quality assurance on 
5 May 2008 (R4, tab 93 at 4; tr. 2/202). 
14. AEY reported to CO Goff on 30 March 2008 that it had arranged with another 
company, SkyLink Arabia (SkyLink), to pick up the crates that needed to be repacked 
and perform the repacking "within the next 14 days" (R4, tab 103 at 1). On 26 April 
2008, SkyLink reported to AEY that the crates they had been given were "all fixed up" 
and ready to be delivered back to AGW, specifically noting that they "were informed by 
Abu Ghraib that there were only 130 crates that needed attention" (R4, tab 113 at 1 ). Per 
an AGW "Data Collection Sheet," the 1,300 re-crated AK-47s (10 weapons per crate) 
were inspected and accepted on 5 May 2008 (R4, tab 93 at 4). 
15. For the RPKs under CLINs 0007AA and 0007AB, the government ultimately 
(nearly six months after delivery) agreed to accept them despite the noted discrepancies 
in return for the consideration of a reduced price of $239.98 per weapon (R4, tabs 138, 
325 at 2; tr. 3/47). 
16. The only CLINs on Contract M-0670 that were not ultimately delivered and 
accepted were the remainder of CLIN 0004AA (25,895 AK-47s) and CLIN 0006AA 
(287 DShK machine guns). 
Contract M-0815 (ASBCA No. 56470) 
17. The only CLIN on Contract M-0515 was CLIN 0001 for 25 million rounds of 
ball ammunition for the AK-47s. Although the contract delivery date was 27 December 2007 
based on receipt of the EUC (finding 5), the Czech Republic did not issue an export license 
until 21 January 2008. In anticipation of receipt of the export license, AEY began 
arrangements to ship the ammunition in early January and requested pricing for air transport 
to Baghdad Airport (BGW) from Pardubice Airport (PED) in the Czech Republic (tr. 1/96; 
R4, tab 388). Following issuance of the export license, AEY entered into an aircraft charter 
contract for multiple routes, including PED-BGW, with Galaxy Air dated 26 January 2008 
(tr. 1/100-01; R4, tab 398 at 4th page, tab 404). AEY reported to CO Goff on 28 January 2008 
that they expected to begin shipments, thirteen flights in all, by the middle of February 2008 
(tr. 1/102; R4, tab 77). 
7 Whether the contract actually required the weapons and accessories to be shipped in 
crates with interior partitions is not at all clear (R4, tab 1 ). 
9 

18. Shipping arms by air requires permission from each country over which the 
aircraft will fly (known as overflight permits), as well as landing permits from each 
airport at which the aircraft will land (tr. 1/103, 2/128). While obtaining the necessary 
permits was, in the first instance, the responsibility of the carrier, it was not unusual in 
AEY's business for the carrier to request assistance from AEY in facilitating the permits, 
as Galaxy Air did on 29 January 2008 with respect to permits for Turkey, Romania, and 
Hungary (R4, tabs 405, 408). Turkey was a particularly difficult country from which to 
obtain a permit (tr. 1/103). Preparations for the first shipments continued in early 
February, with AEY reporting to CO Goff on 10 February 2008 that the first shipment 
would arrive on 27 February 2008 and that there would be 13 consecutive flights, 1 per 
day (R4, tab 88 at 2). The flight plan called for operations to begin on 26 February with 
a positioning flight into PED and continue thereafter through 15 March 2008 (tr. 1/107; 
R4, tab 415 at 8th page). 
19. Although all needed permits had been secured, Galaxy Air was not able to 
commence flights on 26 February 2008 as planned due to a fuel shortage in Baghdad, 
which AEY reported to CO Goff (tr. 1/109; R4, tab 97). The unavailability of fuel in 
Baghdad meant that an aircraft landing at BGW would not thereafter be able to refuel to 
take off. AEY further informed the CO that the goods were in a warehouse at PED and 
were ready to ship, and that it was seeking other carriers who might have devised a 
work-around for the fuel shortage (R4, tab 97). During the month of March, AEY 
contacted numerous carriers, including JLM Aviation, which offered AE Y estimated 
delivery dates in April of 2008 (R4, tab 430). As of the end of March, AEY was still 
searching for a solution to the fuel shortage, and kept CO Goff apprised of the situation 
(R4, tabs 102-03 ). 
Contract M-0010 {ASBCA No. 56471) 
20. The Serbian export license for CLINs 0001 (48 60mm mortar base plate with 
tripod), 0003 (3,932 AK-47s), 0005 (48 plotting boards), 0006 (48 M64 series sight 
units), and 0010 ( 496 RPK machine guns), all of which were to be delivered by 7 April 
2008, was delayed ( as were other Serbian export licenses during this period). AEY 
believed the delays were due to political tensions with the U.S. over the issue of 
independence for Kosovo (tr. 1/189). The shipment had been inspected by AEY to 
ensure it met standards and thereby avoid the problems experienced under Contract 
M-0670 with the AK-47s, and AEY reported to CO Goff on 9 February 2008 that there 
were no problems with the AK-47s in this shipment (R4, tab 155; tr. 1/191-94). 
21. The Czech Republic export license for CLIN 0004 (54 DShK machine guns) 
was also delayed. In a status report dated 11 April 2008, AEY anticipated receipt of both 
the Czech and Serbian licenses "in the next 21 days'' or by 2 May 2008. (R4, tab 109) 
22. For the U.S. items due 28 April 2008, CLINs 0007, 0008, and 0009 (224 
small arms repair kits, 60 sniper rifles, 60 spotter scopes), AEY had applied for an export 
10 
,.., 

license in advance of receipt of the EUC and received the export license for CLINs 0007 
and 0009 on 4 February 2008 and for CLIN 0008 on 24 February 2008 (R4, tab 333 
at 12th and 19th page). These goods were consolidated for shipment via air on 21 April 
2008 with U.S. items under Contract M-0040 (R4, tabs 103, 109). 
Contract C-0005 (ASBCA No. 56473) 
23. On 21 December 2007 AEY, in its regular weekly status report to JCCI, 
communicated to CO Goff that it expected to have firm delivery dates soon for Contract 
C-0005 (R4, tab 67 at 2). In February 2008, MECAR informed AEY that the first 
delivery date would slip by roughly a month and proposed to consolidate the shipments 
into three, as follows: 
13 million rounds, 25 March to 5 April 2008 
13 million rounds, 25 May to 5 June 2008 
13 million rounds, 25 July to 5 August 2008 
(R4, tab 187 at l; tr. 1/210) Later in February 2008, MECAR again pushed back the date 
of the first shipment to 14 April 2008 (R4, tab 190). On a regular basis, CO Goff was 
kept advised of the expected shipping dates for the ammunition (tr. 1/212; R4, tabs 194, 
218). On 30 March 2008, AEY notified CO Goff in its weekly progress report that the 
first 13 million rounds of ammunition had been manufactured and were being packaged 
and prepared to be loaded for ocean shipment and that the second 13 million rounds were 
in production (R4, tab 103; tr. 2/69-70). 
Contract No. M-0040 (ASBCA No. 564 72) 
24. CLINs 0002 (43 AK-47s), 0008 (6 Browning machine guns), and 0013 
( 6 tripod mounts), were due on 7 April 2008, but as of the end of March 2008 AEY and 
its supplier were still waiting for Serbia to issue an export license, which they believed 
was being intentionally delayed by the Serbian government due to political tensions with 
the U.S. over Kosovo. (Tr. 2/55) CLIN 0022 (25 9mm submachine guns) was due on 
21 April 2008, and the Pakistan export license was also delayed, purportedly due to a 
transition of the Pakistani government (tr. 2/56). At the end of March 2008, AEY 
believed it would be able to ship from both countries by mid-April 2008 (R4, tab 103). 
25. The remainder of the CLINs were sourced in the U.S. and were due 21 April 
2008. AEY received the necessary U.S. export licenses on 31 January 2008 for the 
accessories and 7 February 2008 for the small arms (R4, tabs 356, 359). AEY decided to 
consolidate shipment of these items with the small arms being sourced from the U.S. 
under Contract M-0010 and informed the government in its 12 April 2008 status report 
that it would ship both on 21 April 2008 (R4, tab 109). 
11 

AEY is Suspended from Future Government Contracts and CO Goff is Redeployed 
26. On 25 March 2008 the Anny suspended AEY from future government 
contracts due to issues with ammunition supplied under a contract not involved in these 
appeals (tr. 2/58-62). The action received press attention in the form of a New York 
Times article, which caused problems with some of AEY's suppliers, and which in 
Mr. Diveroli's view caused a change in the government's attitude toward AEY (tr. 2/69, 
2/82-83). 
27. On 31 March 2008, CO Goff was redeployed and his supervisor, 
L TC Jonathan McColumn, took over as CO on the five AEY contracts that are the 
subject of this appeal.8 Mr. Erwin Fernandez, an acquisition analyst employed by CACI 
International, Inc., was assigned to assist L TC McColumn in administering the contracts. 
(Tr. 2/66) 
28. On 29 March 2008, CO _Goff requested a status update on all five contracts for 
the benefit of his successor (R4, tab 233). AEY acknowledged the request and reminded 
CO Goff in an email dated 29 March 2008 that fuel unavailability in Baghdad was 
delaying several large shipments and requested any ideas he might have for dealing with 
the problem (R4, tab 234). On 30 March 2008, CO Goff sent an email stating that the 
ammunition under Contract M-0815 was urgently needed by the end users, that the 
contract was late, and that AEY needed to provide a delivery date. CO Goff further 
added that due to AEY' s "current situation," AEY needed to ensure that the ammunition 
was in "a usable condition." (R4, tab 235) AEY responded in its 30 March 2008 status 
update on the five contracts (on which Mr. Fernandez was copied) that the ammunition 
had been prepared for shipment and was stored in a warehouse at PED, that none of the 
carriers they had talked to could fly without fuel availability at Baghdad, but they had 
heard that the shortage might abate soon and would fly as soon as they could. AEY 
further assured CO Goff of the quality of the ammunition and reminded him that they had 
previously supplied it under an earlier contract with no issues. (R4, tab 236) 
29. On 31 March 2008 Mr. Fernandez replied, thanking AEY for the prompt 
response and inquiring if there was any way that AEY could ship just a portion of the 
ammunition "NOW." AEY responded on 1 April 2008 confirming that the ammunition 
had been sitting in a PED warehouse since 26 February 20089 due to the unavailability of 
fuel in Baghdad and asking whether it would be possible to have its cargo aircraft land on 
the military side of the airport (BGW) because if AEY could obtain the necessary 
permissions the entire delivery could be completed within 30 days from the first flight 
(R4, tab 104). Mr. Fernandez responded that he would see what he could do about the 
8 At the time of the hearing in these appeals, L TC McColumn had attained the rank of 
Brigadier General. This decision will refer to him as L TC McColumn. 
9 AEY had been paying for airport storage of this shipment since the beginning of the 
Baghdad fuel shortage on 26 February 2008 (tr. 2/68). 
12 

fuel issue since the ammunition was needed ASAP (R4, tab 239). However, AEY never 
received a response to its request (tr. 2/65). 
30. On 2 April 2008 Mr. Diveroli of AEY sent an email to Mr. Fernandez and 
L TC McColumn requesting a call to discuss several contract matters, including the fuel 
shortage (R4, tab 253; tr. 2/66). The call was scheduled for the next day, 3 April 2008 
(R4, tab 254). During the call, in which Mr. Diveroli participated on behalf of AEY and 
LTC McColumn and Mr. Fernandez participated on behalf of the government, 
L TC McColumn emphasized the importance of AEY making progress sufficient to instill 
some confidence in him and his superiors that deliveries were imminent (tr. 2/96, 
Diveroli). The discussion covered all five contracts 10 and was memorialized by 
Mr. Fernandez in a memorandum to file dated 4 April 2008: 
On 3 Apr 08, a conference call was conducted with AEY and 
the following was discussed: 
-Deliveries of all contracts 
-Lt Col McColumn wants ktr to provide immediate plan to 
show the government confidence that a delivery will be made 
very soon. The plan will consist of the following information: 
I. When he will deliver, 2. Ifktr cannot deliver by the mod 
delivery schedule, when would be the next delivery date, 
3. [sic] 
-Ktr asked if contracts will be terminated if current delivery 
schedule is not met-KO made no promises as to whether 
contracts would be terminated or not if current delivery 
schedule is not met. 
-Made Ktr aware to show the government some sign of 
delivery by 15 Apr 08. If no sign of delivery is made at this 
point, KO will determine course of action whether to 
terminate or not. 
-Ktr asked if government accept possible novation to the 
contracts-KO responded that it will be looked upon but if it 
causes more delays to the deliveries, it might not be pursued. 
Ktr tried to talk about the company's legal battle with the 
government-KO responded that he would not discuss any 
AEY's legal issues with government. 
1° Contracts M-0670, M-0040, M-0815, M-0010, and C-0005. The memorandum 
mistakenly references Contract M-0861 (another AEY contract) instead of 
Contract M-0040 (R4, tab 13). 
13 

(R4, tab 13) 
-If ktr continue to make excuses and prolong delivery, KO 
considered sending a show-cause notice. 
31. Mr. Diveroli testified that he was not sure where the 15 April 2008 date came 
from, but possibly from the fact that he had told LTC McColumn during the call that 
certain deliveries were imminent. He did not understand from the call that AEY would be 
terminated if it failed to "show some sign of delivery" by 15 April, and L TC McColumn 
had told him to expect a show cause notice. Mr. Diveroli explained to L TC McColumn 
the complicated process of delivering arms in a war zone, including the need for export 
licenses and overflight and landing permits to be issued, a process that was to a significant 
extent out of AEY's control. What he heard in response from L TC McColumn was that 
AEY needed to show him some kind of delivery, that something was happening, because 
he had people he reported to. (Tr. 2/99-101) 
32. L TC McColumn agreed that in the 3 April 2008 meeting he requested "some 
sign of delivery by April 15th_" He termed it a ·'benevolence to say, give me some 
indicator, something needs to show up .. .I need to see a sign. The J4, which was the 
requiring activity, needed to see a sign that supplies were going to increase with 
consistency in delivery.'' (Tr. 4/4 7) 
AEY's Efforts to Make "Some Sign of Delivery" by 15 April 2008 
Contract M-0815 
33. On 4 April 2008, AEY reported to Mr. Fernandez in its regular weekly status 
report that it had contracted with a carrier (JLM Aviation) ·'who claims to have solved 
the fuel issue" and it "should" be able to begin shipping on 11 April 2008. AEY added 
that all overflight and landing permits had been applied for and shipments would start 
once the approvals were in place. (R4, tab 261; tr. 2/114) On 8 April 2008, AEY's 
carrier reported to it that three of seven overflight permits had been received and the rest 
were expected that afternoon or the next day (R4, tab 441). 
34. AEY contacted the Director of Operations at PED, Vit Malek, to enclose an 
air operations certificate for the aircraft and inquire whether they could begin operations 
on 14 April 2008. Mr. Malek replied on 8 April 2008 that operations could commence 
on 14 April, however, "Military close airport 21-25 APR 08 and 19-23 MAY 08.'' (R4, 
tab 442 at 1, 3) On 10 April 2008 AEY followed up with its carrier seeking the 
overflight permit application for Turkey and "request application" for the Regional Air 
Movement Coordination center in Iraq, emphasizing "WE NEED THIS NOW!!!!!!!!" 
(R4, tab 444). After receiving documents from JLM, Mr. Diveroli followed up on 
Friday, 11 April 2008, and sought assurances the carrier would be set to fly on Monday, 
14 

14 April 2008 (R4, tab 444 at 4; tr. 2/121-22) He was assured that the aircraft would be 
at PED on Sunday, 13 April 2008 (R4, tab 444 at 5). 
35. Early on the morning of Saturday, 12 April 2008, AEY received word that the 
Saudi Arabian overflight permit and the PED (LKPD) landing permit were still in 
process and that the duty officer at PED had advised the flight must be delayed tµitil 
Monday when the approving body resumed office (R4, tab 450 at 1, 3; tr. 2/127-28). 
Later on Saturday, the Saudi overflight permit was approved, leaving only the PED 
landing permit outstanding (R4, tab 454 at 3; tr. 2/129-30). On Sunday, 13 April 2008, 
Mr. Diveroli emailed the carrier asking if the airplane had taken off for PED yet, and on 
Monday, 14 April 2008, AEY wired $110,000 in payment for the first flight to Liberty 
Air, the broker for JLM Aviation (R4, tabs 457, 274). Also on Monday, Mr. Diveroli 
emailed the AEY team with the flight schedules from PED to BGW and instructed them 
to closely coordinate on the series of flights that week (R4, tab 458; tr. 2/134-35). 
36. However, while AEY was waiting for the landing permit, the Turkey 
overflight permit expired (tr. 2/136-38; R4, tab 458). The record is less than clear about 
when the overflight permit expired and when AEY received the landing permit, although 
it appears that the overflight permit had expired by Monday, 14 April 2008 (R4, tab 458; 
tr. 2/157-60). It is also unclear if or when the Turkey overflight permit was renewed. 
However, as of 14 April 2008, AEY had reason to believe it would be able to commence 
flights on the 17th and 18th of April. (R4, tab 459; tr. 2/138-39) 
37. Shortly thereafter, AEY learned that that PED would close on Friday, 
18 April 2008 for military operations, three days earlier than the dates originally given to 
AEY. Because the early closure did not allow AEY to schedule flights on the 17th and 
18th of April, AEY sought special permission from the PED Director of Operations to 
schedule flights over the weekend ( 19 and 20 April 2008). However, even with the offer 
of special fees, this request was refused. (Tr. 2/146-47; R4, tab 365) On 15 April 2008, 
AEY reported the situation to Mr. Fernandez (R4, tab 276). AEY attached 
correspondence from JLM Aviation to confirm that the only reason for further delay at 
this point was the airport closure, and also attached a copy of the wire transfer to show 
that the first flight had already been paid for (id., R4, tab 249). Both AEY and JLM 
assured the government that flights would resume on 28 April 2008 at a rate of one per 
business day, 12 flights in all (id.). 
Contract M-0010 
38. As noted earlier, AEY was awaiting the issuance of delayed export licenses 
from both Serbia and the Czech Republic for CLINs 0001, 0003, 0004, 0005, 0006, and 
00 IO ( findings 20, 21 ). Mr. Diveroli testified that AEY had "zero direct control" over the 
length of time it would take for an export license to issue, other than speaking to its 
suppliers and urging them to "push'' their government, which AEY frequently did 
(tr. 1/64). The remainder of the CLINs were U.S. items due on 28 April 2008 that had 
15 

been consolidated with items for Contract M-0040 and were to ship from the U.S. on 
21 April 2008 per AEY's 30 March 2008 status report (R4, tab 103). 
Contract C-0005 
39. AEY had notified the government in its status report dated 30 March 2008 that 
the first 13 million rounds of ammunition were palletized and being prepared for ocean 
shipment and the second 13 million rounds were in production (finding 19). On 1 April 
2008, Marc Morales of Allied Defense Group (AEY's supplier on this contract) emailed 
Mr. Fernandez directly, expressing concern about the effect of AEY's suspension and/or 
contract stop-work orders (see finding 26) on Allied (R4, tab 24 7). Mr. Morales inquired 
whether the Army would consider assigning the contract to Allied if AEY agreed (id.). In 
closing, he stated that Allied planned to deliver the rounds to AEY as follows: 13 million 
rounds by 14 April 2008, 13 million rounds by 3 1 May 2008, and 13 million rounds by 
31 July 2008 (id.). 
40. On 4 April 2008, AEY wrote to Mr. Fernandez, informing him that the first 
13 million rounds of ammunition were ready for shipment and that AE Y planned either 
to novate the contract to Allied or to ship via air (rather than sea) in the next few days 
(R4, tab 261). Mr. Diveroli testified that the decision to change shipping method (with 
air being considerably faster but also significantly more expensive) was made after it 
became apparent to him that L TC McColumn did not intend to honor AEY's prior 
agreement with CO Goff trading the higher quality U.S.-made ammunition in return for 
an extended delivery schedule (tr. 2/170). 
41. AEY' s corporate counsel, Marko Cerenko, followed up on the potential 
novation of AEY's contract to Allied in an email to LTC McColumn dated 8 April 2008 
(R4, tab 268). Mr. Cerenko informed LTC McColumn that Mr. Fernandez did not think 
a novation of Contract C-0005 was possible, and asked either for a contact in JCCI's 
legal office, or LTC McColumn's own views on the matter, reiterating that input from the 
government on whether it would allow novation was needed "fairly quickly." AEY's 
contract with MECAR and a sample novation agreement were attached. (Id.) Not having 
heard back from LTC McColumn, AEY's Mr. Cerenko sent him another email on 
10 April 2008, reiterating that both parties were ready to move forward with the novation 
but needed to hear from him in order to do so, and had not heard from him despite 
"numerous" attempts to contact him (R4, tab 271 at 1). 
42. On 8 April 2008, ATK contacted MECAR to say that the Army's recent 
decision to suspend AEY from future contracting had caused ATK to reevaluate the 
terms of the agreement, and that A TK had concluded that advance payment prior to 
shipping was required to protect it from undue financial risk. An invoice for the first 
shipment of 13 million rounds was attached. (R4, tab 271 at 3) AEY sent payment to 
MECAR for this invoice in the amount of $3,845,800 on 18 April 2008 (R4, tab 466 at 2; 
tr. 2/184). 
16 

43. Concurrently, AEY arranged for air shipment for the initial 13 million rounds. 
By 11 April 2008 it had lined up a 747 to fly the first leg from the U.S. to Kuwait (R4, 
tabs 109, 448; tr. 2/172) and by 12 April 2008 had arranged for ferry flights from Kuwait 
to Baghdad (R4, tab 451; tr. 2/182-83). On Friday, 18 April 2008, AEY provided 
Mr. Fernandez with a notice of assignment of claims required by ATK before it would 
release the cargo for shipment and requested that it be promptly processed, so that AEY 
could start shipping the ammunition on Friday, 24 April 2008 (tr. 3/5; R4, tab 286).11 
Contract M-0040 
44. In early April 2008, AEY was still awaiting the Serbian and Pakistan export 
licenses needed to ship CLINs 0002, 0008, 0013 and 0022. AEY's supplier in Pakistan 
informed AEY on 5 April 2008 that it expected the export license for CLIN 0022 to issue 
in a week (R4, tab 438 at 2; tr. 1/207-08), an estimate later pushed back to 2 May 2008 
(R4, tab 284 at 4; tr. 3/102-04). AEY also expected its Serbian export license to issue by 
2 May 2008 (R4, tab 109; tr. 3/95). The U.S. goods (CLINs 0006, 0007, 0009-0012, 
0014-0021, 0026 and 0027) had been consolidated for shipment on 21 April 2008 with 
U.S. items under Contract M-0010, as reported in AEY's status report dated 12 April 
2008 (R4, tab 109; tr. 3/96). 
The First Four Contract Terminations 
45. On Monday, 17 April 2008, L TC McColumn terminated Contracts M-0815, 
M-0010, M-0040, and C-0005 for cause (R4, tab 18). Contract M-0670 was not included 
in this action. The reason given for termination was AEY's failure to deliver the contract 
items by 15 April 2008 (id.). The 17 April 2008 notice was followed by a final decision 
dated 24 April 2008 setting forth the rationale for LTC McColumn's decision to 
terminate the contracts (R4, tab 20). 
46. The final decision stated the following with respect to the four terminated 
contracts: 
Contract M-0815 
The contractual period of performance for delivery was 
27 December 2007. For months, AEY repeatedly failed to 
meet its own promises to deliver. In an email to the 
Government dated 30 March 2008, Mr. Diveroli claimed that 
shipment was delayed because there was "no fuel in Baghdad 
11 Mr. Diveroli testified that with the assignment of claims, ATK would need only half 
the payment up front in cash, but he was of the mind that the assignment would 
not be processed quickly enough by the government, so he had decided to expedite 
matters by providing full payment (tr. 3/7-8). 
17 

now for cargo aircrafts." However, commercial cargo 
airlines know that fuel is generally not available in Baghdad 
for commercial flights and therefore arrange to load aircraft 
appropriately to be able to return to an airport that sells fuel. 
Aircraft either reduce capacity for each aircraft and increase 
aircraft total numbers, or schedule a stop at an intermediate 
refueling airport enroute. On 3 April 2008, the Government 
informed Mr. Diveroli in a telephone conversation that the 
Government would require at least partial delivery no later 
than 15 Apr 08. In his follow-up email dated April 5, 2008, 
Mr. Diveroli established a revised schedule that committed to 
"begin to ship this cargo next Friday 4/11/08." At some point 
after the 11th of April, Mr. Diveroli contacted Col Mark 
Morrison of the requiring activity directly and told him that 
the shipment would start on 15 April 2008. In an email to the 
Contracting Officer dated 16 Apr 2008, Mr. Diveroli stated 
that the fuel and traffic problems were solved, but that 
"suddenly and unexpectedly" an airport in the Czech 
Republic closed "the rest of this week and all of next week" 
and would prevent AEY from having your "first flights ready 
for departure: until the 28th of April. However, the unsigned 
letter from a Mr. Radek Klima, Pardubice Airport Handling 
Department, attached to Mr. Diveroli's email contradicted 
Mr. Diveroli's claims. Mr. Klima's letter stated that 
"according to military scheduled airport maintenance 
programme [sic],'' the airport would be closed from Monday, 
21 April 2008 until 25 April 2008, 1500 hours. Even if this 
unsigned letter is taken at face value, the closure did not 
begin until 21 April. The 21 April date is well after the 
11th of April promised by Mr. Diveroli. Further, these dates 
did not include the "'rest of this week ( week of 16th) as 
Mr. Diveroli stated; and apparently the closure was part of a 
scheduled maintenance program, not a sudden and 
unexpected closure, indicating a negligent failure to plan. 
When shipment of cargo failed to occur according the revised 
schedule committed to by Mr. Diveroli, the undersigned 
terminated the contract for cause on 17 April 2008. The 
Contract [sic] Officer determined that AEY' s professed 
reasons for delay were not supported by the facts, lacked 
credibility, and did not constitute excusable delays. 
18 

Contract M-0010 
The contractual Period of Performance for this contract was 
10 April 2008. On 3 April 2008, the Government informed 
Mr. Diveroli in a telephone conversation that the Government 
would require at least partial delivery no later than 15 Apr 08. 
In his follow-up email dated April 5, 2008, Mr. Diveroli 
stated "MOO 10-Export license for DshK [sic] and mortar 
items should be received in the next 25 days and charter from 
Serbia flight will follow immediately. Balance of items shall 
originate from CONUS and will be shipped by air cargo 
along with the ;v10040 shipment.'' In emails dated 14 and 
15 April 2008, Mr. Diveroli indicated that an unexpectedly 
closed airport in the Czech republic and delays in export 
licenses were delaying delivery. This contradicted 
Mr. Diveroli's previous email that stated a "Serbia" flight 
would execute delivery and that the "balance of items shall 
originate from CONUS.'' When shipment of cargo failed to 
occur according to the revised schedule of 15 April 2008, the 
undersigned terminated the contract for cause on 1 7 April 
2008. The Contract [sic] Officer determined that AEY's 
professed reasons for delay were not supported by the facts, 
lacked credibility, and did not constitute excusable delays. 
Contract M-0040 
The contractual Period of Performance for this contract was 
10 April 2008. On 3 April 2008, the Government informed 
Mr. Diveroli in a telephone conversation that the Government 
would require at least partial delivery no later than 15 Apr 08. 
In his follow-up email dated April 5, 2008, Mr. Diveroli 
stated, "M0040. All weapons and accessories are ready to 
ship and export license has been received. We are in the 
process of consolidating all cargo at a licensed warehouse in 
Miami and we shall ship everything in one shipment by the 
15th of April." When shipment of cargo failed to occur 
according to the contractual period of performance and the 
assurances of Mr. Diveroli, the undersigned terminated the 
contract for cause on 17 April 2008. 
Contract C-0005 
The contractual Period of Performance for this contract was 
15 April 2008, and no extensions were authorized by the 
19 

Government. On 1 April 2008, Mr. Marc Morales of Allied 
Defense Group (AEY's supplier of the 5.56mm rounds) sent 
the contracting specialist (Erwin Fernandez) an unsolicited 
email stating his concerns about AEY's financial stability. 
Mr. Morales also stated, "Please be aware that the Allied 
Defense Group is delivering as scheduled according to our 
contract with AEY, Inc. We received a contract after the fact 
and were not made aware of the delivery schedule promised 
by AEY. As a matter of fact we have accelerated the original 
delivery schedule promised to AEY as we were told that you 
needed the ammunition sooner than originally anticipated.'' 
Further, "As a side note, per our contract with AEY. we are 
planning to deliver to AEY (ex-works) the 39,000,000 rounds 
per the schedule below: 13M by April 14th, 13M by 
May 3151-maybe earlier, 13 M by July 3151-probably the 
week before." This email from the vendor caused the 
Government serious concern, as it contradicted the 
information coming from AEY. In sum, AEY's after-the-fact 
contract with its vendor never met the delivery requirements; 
and AEY's assurances about the mode and status of delivery 
were wrong at best, and very possibly intentionally 
misleading. In his email sent April 5, 2008, to AEY s counsel, 
Mr. l\tlarko Cerenko, and to :Mr. Diveroli, the contracting 
specialist (Erwin Fernandez) informed AEY that "the 
Government will require strict compliance with the 
contractual delivery date." When shipment of cargo failed to 
occur according to the contractual period of performance, the 
undersigned terminated the contract for cause on 1 7 April 
2008. The Contract [sic] Officer determined that AEY's 
professed reasons for delay were not supported by the facts, 
lacked credibility, and did not constitute excusable delays. 
(R4, tab 20 at 1-3) The final decision contains a number of factual errors which were 
brought out during LTC McColumn's testimony but we do not need to address them for 
purposes of this decision. 
4 7. L TC McColumn' s final decision asserts that "commercial cargo airlines know 
that fuel is generally not available in Baghdad for commercial flights and therefore 
arrange to load aircraft appropriately to be able to return to an airport that sells fuel.'' 
This assertion appears to have its basis in information that the government received from 
SkyLink via a series of emails in early April 2008. The emails began with AEY asking 
SkyLink on 2 April 2008 for assistance in acquiring fuel so as to be able to begin 
deliveries on Contract M-0815 (R4, tab 14 at 10). SkyLink responded, "at this time there 
is no fuel for cargo aircraft due to low fuel levels'' (id at 6). AEY forwarded this 
20 

response to Mr. Fernandez and requested assistance in acquiring fuel from the military 
side of the airport, noting that AEY could deliver up to 1,977,000 rounds of ammunition 
with 20 metric tons of fuel (id). Mr. Fernandez forwarded this information on to 
LTJG Page of MNSTC-I, who forwarded it to COL Morrison (id at 4). COL Morrison 
then contacted a Mr. Jack Holly in what appears to be the government fuel contracting 
office, asking: 
I am trying to get ground truth on a fuel issue at BIAP. AEY 
is scheduled to deliver 25M rounds of 7.62x54 ammo-13 
flights by A/C IL-76. AEY states that the reason they cannot 
deliver is the lack of fuel available on the commercial side of 
BIAP. Skylink (see email trail below) states there is a 
shortage. Does this track with what you know and if so do 
you have a timeline when they may get fuel so we can 
coordinate this delivery of ammo? 
(R4, tab 14 at 4) Mr. Holly responded on 3 April 2008, in relevant part: 
Skylink is the DFC subcontractor for fuels for DOD agencies 
as a priority. Commercial refueling is not allowed by the 
DFC contract. All commercial air cargo vendors has [sic] 
known this and as such have had to load aircraft appropriately 
to be able to return to an airport that holds fuel. Reduced 
capacity for each aircraft and increased Aircraft total numbers 
has been the ongoing method of compliance. I think that 
AEY may be using this to save money or to delay by not 
increasing aircraft numbers or having the Aircraft divert to an 
intermediate refueling airport enroute. 
(Id at 3) The next day, SkyLink emailed Mr. Holly, stating: 
Just to clarify on this we have been either at limited or no 
issue fuel on cargo flights on and off for the past 3 months 
and most operators are able to get around this with return fuel 
loads and certainly there has never been an instance that we 
are aware of an inability to deliver cargo. 
We are receiving quantity fuel now and hope to start cargo 
issues within the next 2 days and we are also working on a 
longer term strategic plan utilizing fuel from Baji refinery 
which I will brief you on fully on my return as this is close 
hold at the minute. 
21 

(R4, tab 14 at 2) Mr. Holly forwarded SkyLink's email on to COL Morrison (id.). 
COL Morrison forwarded this email on 5 April 2008 to the contracting office (JCCI) and 
L TC McColumn, stating: 
FYI ... more info ref the fuel issue and AEY ... as far as I am 
concerned I expect AEY to deliver as per the contract...was 
told 15 April??? Can you confirm the date please? Also if 
they don't deliver on time I want to CXL and then contract 
with someone else ... there is way to [sic] much bad baggage 
with AEY. I can not get strung along on promises of 
deliveries, or excuse after excuse on why the[y] can not 
deliver. This 25M rounds [of] 7.62 ammo is critical 
especially with the ongoing Basrah operation ... need your 
assist to help us out. 
To this, L TC McColumn replied, "We are on the same sheet sir." (R4, tab 14 at 1-2) 
The Saga Continues: Contract M-0670 
48. LTC McColumn did not terminate Contract M-0670 on 17 April 2008. At 
trial he testified he did not remember the reason, but speculated it may have been because 
the government had not decided what to do about the partial delivery of AK-47s under 
that contract (tr. 4/60).12 All of the line items called for under Contract M-0670 were 
ultimately delivered by AEY and accepted by the government, with the exception of 
( 1) one universal laser bore sight out of the 20 called for by CLIN 0001; (2) the 
remaining AK-47s under CLIN 0004AA (1,300 repackaged rifles were accepted); and 
(3) the DShK machine guns under CLIN 0006AA. (Findings 10-16) 
49. At some time prior to 6 May 2008, SSgt Margarita Matson succeeded 
LTC McColumn as CO for Contract M-0670. In an email dated 6 May 2008, she sought 
verification from the customer (MNSTC-I/J4) that the remaining AK-47s on contract 
M-0670 were no longer needed (R4, tab 367). First Lieutenant Kirsten Bethancourt replied: 
"Yes, you are correct-we do not need the remaining AK-4 7s on the 0670 contract" (id). 
On 12 May 2008, CO Matson directed AEY not to ship the remaining items on Contract 
M-0670, including the AK-4 7s, and to "cease all work immediately," adding that the 
government intended to terminate the remainder of the contract (R4, tab 119). 
50. On 31 May 2008, L TC McColumn emailed COL Cain at AGW, authorizing 
him to accept the M-0670 shipments, "including the AK-4 7s" (R4, tab 278 at 5). In 
12 L TC McColumn drafted a memorandum for record on 24 April 2008 containing a 
rationale for terminating all CLINs in Contract M-0670 except for CLIN 0004AA, 
under which the partial delivery of AK-47s took place (R4, tab 111). 
22 

response, Marsha Havemann at AGW asked whether "'the AK-47s that have NOT been 
reworked by AEY are to be included as Accepted" (id at 3). CO Matson responded: 
You have been cleared to accept the shipment but the ball is 
in your court to confirm the acceptability of the items. I 
would suggest not accepting the AK-47s that have not been 
reworked by Skylink. Once acceptance on these items has 
occurred, the contractor is no longer held liable for those 
items. 
(Id) Ms. Havemann responded that she agreed and that she would contact AEY "to 
determine when they want the rest to be reworked" (id at 2). On 2 June 2008 she 
emailed AEY to inform them that only 1,300 AK-47s had been accepted and that 2805 
still needed to be "reworked'' (id at 1-2). 
51. AEY was surprised by this because COL Cain had told Mr. Diveroli that only 
1,300 rifles needed to be repackaged, and SkyLink had also been told by authorities at 
AGW that "there were only 130 crates that needed attention" (finding 14; tr. 3/27-28). 
Mr. Diveroli' s view was that the rifles met the contract specifications without needing to 
be repackaged (tr. 3/35). Nevertheless, AEY approached SkyLink to ascertain its 
availability to repackage the remaining 2,805 rifles and entered into another service 
agreement on 16 June 2008 that expired 30 June 2008 (R4, tab 320). On 18 June 2008, 
Mr. Diveroli contacted SkyLink inquiring about the schedule for picking up the remaining 
rifles from AGW and was informed that Sky Link was waiting to hear back from COL 
Cain at AGW on a date they could come and pick up the rifles (tr. 3/37; R4, tab 321). 
52. At some point, AEY heard from COL Cain that the weapons could be made 
available by 5 July 2008, and AEY informed CO Matson of this (R4, tab 126 at 1). 
However, on 1 July 2008, SkyLink informed COL Cain that it could no longer support 
the project due to the press of other work (R4, tab 324). At this point, AEY contacted 
CO Matson to ascertain whether she would be willing to accept the rifles "as is" in return 
for a discount of $20 per rifle that would lower the price per rifle to $79.98 (tr. 3/4 7; R4, 
tab 131). CO Matson rejected this offer and proposed terminating the remainder of the 
contract, including the 2,805 delivered rifles, for convenience at no cost to the 
government (R4, tab 132). 
53. Although Ms. Havemann, the government quality assurance specialist at 
AGW, ultimately elected not to accept the remaining 2,805 rifles, there is no evidence 
that there was anything wrong with them. Her inquiry as to whether they should be 
accepted did not indicate anything other than they had not been "reworked" as had the 
1,300 rifles repackaged by SkyLink (finding 50). CO Matson's response suggesting that 
they should not be accepted without being "reworked" by SkyLink, merely assumes that 
such "reworking," which consisted of repackaging, was needed (id.). 
23 

54. The original report of discrepancy issued after the shipment was delivered on 
29 January 2008 did not specify how many AK-47 crates were missing interior partitions, 
although it seemed to say that "most" of them did (finding 12). But when SkyLink went 
to AGW to pick up the crates that needed to be repackaged, it was told by AGW personnel 
that only 130 crates (1,300 rifles) needed attention (finding 14). CO Matson stated, in 
rejecting AEY's offer of a $20 discount per rifle, that the government could not accept 
"items that are not ready for use,'' but no factual basis for this characterization appears in 
the record. To the contrary, Mr. Diveroli testified, supported by photographs of the rifles, 
that the weapons were in good condition. (Tr. 2/23, 26; R4, tab 341) We find the record 
to be devoid of any evidence that the remaining 2,805 AK-4 7 s were nonconforming or 
needed to be repackaged; indeed, the weight of the evidence is to the contrary. 
55. AEY informed CO Matson on 7 July 2008 that it could not accept her 
proposal for a no-cost termination for convenience of Contract M-0670, because it would 
cause a significant financial loss for the company (R4, tab 325 at 2). Instead, it informed 
the CO that it had found another company able to complete the repackaging work within 
5-10 days of picking up the weapons (id). At this point, it was only two days after 
COL Cain had indicated the weapons would be made available. However, the next day 
CO Matson instructed AEY to stop all work on the AK-47s, stating that AEY was ·'given 
more than enough time to have [the rifles] reworked and we will not give you anymore 
time" (R4, tab 134). She also delivered an ultimatum: 
(Id.) 
You can either accept our proposal from 7 July 08 and take a 
no cost termination for convenience or we can terminate the 
remainder of the contract that has not been accepted to 
include the RPKs for cause. 
56. Mr. Diveroli testified that this was, in his view, most unfair because he 
believed that there \Vas no reason that the weapons could not have been accepted once he 
supplied the missing accessories (tr. 3/54). He never saw a contract requirement to pack 
the weapons a certain way (id). He had delivered weapons in 2005 that were not 
necessarily packed 10 weapons to a crate with partitions, but had been accepted by the 
same office (tr. 3/48). The AK-47s were not a "high margin item" and he had already 
spent $35,000 with SkyLink for work on 1,300 rifles that in his view added nothing to the 
performance or operational value of the weapons, just to make the government happy 
(tr. 3/53-55). Moreover, AEY had already paid its supplier for the 25,895 AK-47s that 
were yet to be delivered but were awaiting export licenses, meaning losses in the millions 
of dollars (tr. 3/55). 
57. The very next day, 9 July 2008, AEY asked that CO Matson reconsider her 
stated intention to terminate Contract M-0670 for cause, pointing out that the Army had 
failed to make the AK-47s available for pick-up until 5 July 2008 (R4, tab 135). On 
24 

19 July 2008, CO Matson issued a final decision terminating the contract with respect to 
unacceptable and/or undelivered CLINs, excluding the RPKs and all other accepted items 
(R4, tab 329). CO Matson's final decision stated, in relevant part: 
A Report of Discrepancy (ROD) was issued stating all of the 
AK47s delivered were not properly stored and missing parts. 
You were afforded the opportunity to correct the situation. 
You made an agreement with SkyLink Arabia to rework 118 
boxes (1,300) weapons on 19 March 08. Once reworked and 
reinspected by government personnel, those weapons were 
accepted. Another opportunity was afforded to correct the 
remaining weapons with the understanding that your failure 
to do so may result in a termination. You made an agreement 
with SkyLink Arabia to rework the remaining 2,805 AK47s 
on 16 June 08. SkyLink Arabia notified the U.S. Government 
on 1 July 08 of agreement cancellation stating that they were 
unable to support your efforts. 
You were given ample opportunities to correct the 
deficiencies stated in the ROD regarding the AK47s. The 
plan of action provided by your company to remedy the 
situation was unsuccessful and the weapons remain 
unacceptable. 
To date, CLINs 0001 (partial), 0004AA (partial), 0006AA, 
0008AA (Shipping) and 0008AB (partial shipping) have not 
been delivered. The above referenced CLIN[ s] to include the 
unacceptable AK4 7s in CLIN 0004AA will be terminated for 
cause for your failure to deliver in accordance with the terms 
and conditions set forth in the contract and your inability to 
provide reasonable assurance of delivery in the near future. 
(Id. )13 CO Matson never issued a cure notice calling for AEY to submit assurances of 
future performance. 
58. On 15 July 2008, AEY timely appealed to the Board LTC McColumn's final 
decision terminating Contracts M-0815, M-0010, M-0040, and C-0005 for cause in full 
or in part. The appeals were docketed on 16 July 2008 as, respectively, ASBCA 
Nos. 56470, 56471, 56472, and 56473. On 15 October 2008, AEY timely appealed to the 
Board CO Matson's final decision partially terminating Contract M-0670 for cause. 
This appeal was docketed on 16 October 2008 as ASBCA No. 56591. The appeals were 
13 The termination of CLIN 0001 as to one laser bore sight that either was not delivered 
or was found unacceptable is not contested by AEY. 
25 

voluntarily dismissed without prejudice in 2008 and were reinstated in 2010. In 2012, 
the appeals were consolidated for hearing and decision. After a somewhat lengthy 
procedural history, a hearing was held, commencing 30 November 2015. The 
government elected to present its case on the written record under Board Rule 11 and 
only appellant called witnesses to testify at the hearing. 
DISCUSSION 
As a preliminary matter, AEY contends that the military grade arms and 
accessories being procured under the five contracts do not qualify as commercial items 
and that, as a result, the Contract Terms and Conditions-Commercial Items clause, 
FAR 52.212-4, was the wrong clause to be included in the contracts. Rather, AEY 
argues that FAR 52.249-8, DEFAULT (FIXED-PRICE SUPPLY AND SERVICE), must be 
incorporated into the contracts pursuant to the holding of G.L. Christian & Associates v. 
United States, 312 F.2d 418 (Ct. Cl. 1963). (App. br. at 41-47) The government 
vigorously disagrees (gov't reply at 3-5). We find it unnecessary to decide this issue in 
order to dispose of the appeals. 
A termination for default is a drastic sanction that should be imposed only for good 
grounds and on solid evidence. JD. Hedin Comtntct;on Co. v. United States, 408 F.2d 
424, 431 (Ct. Cl. 1969). The government bears the burden of proving that the termination 
was justified. Lisbon Contractors, Inc. v. United States, 828 F.2d 759, 765 (Fed. Cir. 
1987). If the government establishes a prima facie case of the contractor's default, then the 
contractor bears the burden to show that its default was excusable or was caused by the 
government's material breach. Military Aircraft Parts, ASBCA No. 59978, 15-1 BCA 
136,101 atl 76,256. These principles apply equally in the case of a termination for cause 
under FAR 52.212-4(m). Genome-Communicatiom, ASBCA Nos. 57267, 57285, 
11-1 BCA 134,699 at 170,844. 
Under FAR 52.212-4(m), the government may terminate a contract for cause "in the 
event of any default by the Contractor, or if the Contractor fails to comply with any 
contract terms and conditions, or fails to provide the Government, upon request, with 
adequate assurances of future performance." LTC McColumn terminated Contracts 
M-0815, M-0010, M-0040, and C-0005 based on AEY's failure to deliver by the contract 
due date (finding 46). CO Matson terminated CLINs 0001 (as to one of 20 laser bore 
sights), 0004AA (all but the 1,300 delivered and accepted AK-47s), 0006AA (287 DShKs), 
0008AA and 0008AB (shipping) of Contract M-0670 due to "failure to deliver within the 
terms and conditions of the contract and to provide adequate assurance of delivery" (R4, 
tab 138). 
Severability 
In deciding the particulars of whether AEY failed to deliver by the contract due 
date, we must decide what the contract due dates were for each CLIN under each of the 
26 

five contracts. In this respect we have determined, following the lead of our decision in 
Bulova Technologies Ordnance Systems LLC, ASBCA No. 57406, 14-1BCA135,521 
at 174,098-99, that the three contracts containing multiple deliverables were severable. 
Severability simply means that the entire contract cannot be terminated for default for 
failure to deliver one or more line items by the due date. Per Bulova, the factors to be 
considered in this analysis include whether the items are capable of being performed 
separately, and whether the parties' conduct suggests that the requirements are '·separate 
in character." Id at 174,099. As in Bulova, the contracts in these appeals procured 
weapons for distinct end users, the Iraq Ministry of Defense (military), the Iraq Ministry 
of Foreign Affairs, and the Iraq Ministry of Interior (police) (finding 2). The weapons to 
be procured were distinct, with no interdependence, and were manufactured or stockpiled 
by different entities in different countries (findings 4, 6, 9). Each item carried its own 
pricing and contract due date based on the receipt of an acceptable EUC directed to the 
country from which it was sourced (id; R4, tabs 1, 8, 24 ). The parties' conduct during 
performance was consistent with the contract structure. 
Contract Due Dates 
Having found the contracts with multiple CLINs to be severable, our next task is 
to determine the contract due dates. The original contract due dates are set out in 
findings 4-9 above. One of the issues presented in these appeals is whether the original 
contract due dates were revised in the 3 April 2008 conference call with 
LTC McColumn. The record contains conflicting evidence on whether 15 April 2008 
was a revised delivery date for all or part of the items to be delivered under the five 
contracts, or merely a date by which AEY needed to show ''some sign of delivery.'' On 
the one hand, Mr. Fernandez's memorandum to file of the 3 April 2008 telephone call 
stated, "Made Ktr aware to show the government some sign of delivery by 15 Apr 08.'' 
(Finding 30) This is consistent with Mr. Diveroli's recollection of the conversation. On 
the other hand, LTC McColumn's final decision states variously that 15 April 2008 was a 
date by which "'at least partial delivery" was required (for Contracts M-0815, M-0010. 
and M-0040) or was the revised contractual due date or "period of performance'' 
(Contract C-0005) (finding 46).14 
In a memorandum to file dated 13 May 2008, in which L TC McColumn 
documents his rationale for terminating Contracts M-0815, M-0010, M-0040, and 
C-0005 for cause, he states that in the 3 April 2008 conference call he told AEY that at 
least partial delivery would be required by 15 April 2008 (R4, tab 21 ). L TC McColumn 
14 The final decision also states that AEY established a revised schedule under 
Contract M-0815 through an email from Mr. Diveroli reporting that AEY 
''should be able to begin shipping" on 11 April 2008. The Board views the 
cited document (R4, tab 261) as a hopeful status report and not a "revised 
schedule (See also tr. 2/112-13) 
27 

stated in a 5 April 2008 internal email to his superior, COL Mark Morrison, 
MNSTC-VJ4, his belief that he had set a revised deliveiy date of 15 April 2008, at least 
on Contract M-0815: 
Roger sir, 15 April is the date. I am "intimately" engaged 
with AEY to ensure they understand the need for on-time 
deliveiy IAW the "renegotiated'' deliveiy schedule. I have 
informed them of the actions I will have to take should they 
fail to deliver. 
(R4, tab 14 at 1) However, there is nothing in the record indicating that this version of 
events was ever communicated to AEY, in the 3 April 2008 conference call or at any 
time prior to the terminations, much less that there was agreement on a "renegotiated" 
deliveiy date. 15 Indeed, L TC McColumn testified at the hearing in this case that in the 
3 April 2008 telephone conversation with AEY he did not set a revised deliveiy date for 
any of AEY's contracts but asked for "some sign of deliveiy'' by 15 April 2008 (tr. 4/47). 
Thus, while L TC McColumn may have believed at the time that his "benevolence" in 
requiring "some sign of deliveiy" by 15 April 2008 was equivalent to setting a revised 
deliveiy date of 15 April 2008 or requiring partial deliveries on the contract by that date, 
we find that the government did not establish a revised schedule or new deliveiy dates for 
any of the five contracts. 
Termination of CLINs that Were Not Yet Due 
There is no dispute that LTC McColumn, on 17 April 2008, terminated CLINs 
that were not yet due under Contracts M-0010 and M-0040. Under Contract M-0010, 
CLINs 0007, 0008, and 0009 (small arms repair kit, 60 sniper rifles, and 60 spotter 
scopes from the U.S.) were due on 28 April 2008. Under Contract M-0040, various 
items under CLINs 0006-7, 0009-12, 0014-21, and 0026-27 (all from the U.S.) were due 
on 21 April 2008, and CLIN 0022 (submachine guns from Pakistan) was also due on 
21 April 2008. 
AEY contends, and the government concedes, that in the absence of a cure notice 
for failure to make progress, the government's termination of CLINs that were not yet 
due under the contracts was improper (gov't br. at 25). The Board agrees. The 
termination for cause of the above-enumerated CLINs under Contracts M-0010 and 
M-0040 is hereby converted to a termination for convenience. 
15 L TC McColumn actually did not speak to AEY from the time of the 3 April conference 
call until 17 April 2008 when he issued the terminations (tr. 3/159). 
28 

Did the Government Waive Original Contract Due Dates for Any of the Deliverables? 
The original contract due date on Contract C-0005 was 7 April 2008 (finding 8). 
AEY contends that CO Goff agreed to a "final delivery schedule" on Contract C-0005 
consisting of three installments of ammunition to be shipped from the U.S. on 14 April 
2008, 31 May 2008, and 31 July 2008 (app. br. at 51). In the alternative, AEY argues 
that CO Goff expressly waived the original contract delivery date by acquiescing in an 
installment schedule that extended far beyond the contractual due date of 7 April 2008, 
and by requesting the latest updated delivery schedule prior to his departure for the 
purpose of modifying the contract (app. br. at 68-69). The government denies that 
waiver occurred and asserts that, at most, CO Goff agreed to an installment contract and 
there is no evidence that he agreed to modify the first delivery date of 7 April 2008, 
which AEY missed (gov't br. at 21 ). 
AEY also contends that the government waived the original delivery date of 
27 December 2007 on Contract M-0815 by allowing AEY to continue performance for 
several months to its detriment before terminating, without ever establishing a new 
delivery date (app. br. at 66, 69-70). The government concedes that the original delivery 
date was probably waived (gov't br. at 18), but argues that LTC McColumn 
re-established a delivery date of 15 April 2008 to which AEY acquiesced following the 
3 April conference call (gov't br. at 18-19). 
AEY has the burden to prove the affirmative defense of waiver of the contract 
delivery schedule. To prove waiver, a contractor must show (1) failure to terminate 
within a reasonable time after default under circumstances indicating forbearance; and 
(2) reliance by the contractor on the failure to terminate and continued performance 
under the contract, with the government's knowledge and implied or express consent. 
DayDanyon Corporation, ASBCA No. 57681, 15-1BCA136,073 at 176,152 (citing 
De Vito v. United States, 413 F.2d 1147, 1153-54 (Ct. Cl. 1969)). In Tectron Corp., 
ASBCA No. 12901 et al., 73-1BCA19786, we elaborated on these elements: 
After failure of delivery without excusable cause, the 
Government must make an election of remedies; i.e., to 
terminate the contract for default or to waive the delivery date 
and require continued performance. The time within which 
this election is made must be reasonable and often it is 
difficult to determine whether the Government is forbearing a 
termination for default to assess the situation or whether it is 
forbearing to continue the contract. The determination 
usually rests on whether the Government's acts are non­
affirmative in nature, indicating forbearance of termination, 
or affirmative, indicating an election and waiver of the 
delivery schedule .... 
29 

/d.at45,719. 
As the Board has held in previous cases, waiver of the 
delivery schedule by acts or conduct of Government 
representatives ordinarily requires at least two basic elements, 
( 1) conduct on the part of the Government which is 
reasonably believed by the delinquent contractor to constitute 
encouragement to proceed with performance of the contract 
after the delivery date has passed, and (2) incurrence of 
performance costs by the delinquent contractor in reliance 
thereon. 
Bearing these principles in mind, we first examine Contract C-0005. Mr .. Diveroli 
testified, without contradiction, that prior to contract award he was approached by 
Mark Morales of Allied Defense Group and asked if he would consider sourcing the 
ammunition with Allied's affiliate ATK. He then broached the possibility to CO Goff, 
explaining that A TK would have to manufacture the ammunition and that it would be 
shipped by sea from the U.S., and that therefore the entire 39 million rounds would take 
longer to deliver than ammunition already stockpiled in Europe that could be delivered 
by air. He further testified that CO Goff, after checking with the customer, gave him the 
green light to order the ammunition from the U.S. In reliance on CO Goffs assent, AEY 
placed the order with ME CAR on 7 December 2007, one day prior to award of Contract 
C-0005. The delivery dates 16 in the order to MECAR were: 3 million rounds on 
28 February 2008, 7 million rounds on 1 April 2008, 7 million rounds on 30 April 2008, 
7 million rounds on 31 May 2008, 7 million rounds on 30 June 2008, and 8 million 
rounds on 31 July 2008. (Findings 7-8) 
Late in December 2007, AEY reported to CO Goff that it hoped to have firm 
delivery dates "soon" (finding 23 ). In February 2008, MECAR informed AEY that the 
contract dates would slip by roughly a month and proposed to deliver 13 million rounds 
during the period 25 March to 5 April 2008, 13 million rounds 25 May to 5 June 2008, 
and 13 million rounds 25 July to 5 August 2008. Later in February MECAR pushed back 
the expected first delivery date to 14 April 2008, a week past the contract delivery date of 
7 April 2008. (Id) AEY updated CO Goff on the expected shipping dates for the 
ammunition on a regular basis, and on 30 March 2008 notified CO Goff that the first 
13 million rounds were being packaged and prepared for ocean shipment (id). It is 
apparent that CO Goff was aware through this process that the delivery date of 7 April 
2008 contained in the express terms of the contract would not be met, not even for the 
frrst installment of 13 million rounds. Indeed, while CO Goff indicated he would try to 
modify the contract to reflect the new delivery dates before he was reassigned at the end 
16 The Board infers that these dates signified date of delivery to AEY in the U.S., not 
delivery to the customer in Baghdad. The contemplated shipment by sea would 
add additional time before final delivery to the customer. 
30 

of March, he failed to do so and the record does not reflect that before his departure he 
ever received firm dates that the ammunition would be delivered in Baghdad. Thus, we 
do not find that there was agreement on a revised delivery schedule. We do find that the 
government, through CO Goff, affirmatively waived the original contract delivery date. 
But what of the government's argument that the original waiver consisted, at most, 
of agreement to an installment contract with the first delivery due no later than the 
contract's express due date of 7 April 2008? As originally contemplated, the first 
installment would have been delivered to AEY for ocean shipment in February of 2008, 
so it is possible that CO Goff originally expected to receive the first shipment by 7 April 
2008. However, the expected delivery date for the first installment was pushed back by 
MECAR in February to the end of March/beginning of April, and then to 14 April 2008. 
CO Goff was kept informed of these changes by AEY, and the government took no 
action that would indicate that it thought it had a firm delivery date no later than 7 April 
2008. To the contrary, before his departure at the end of March 2008, CO Goff merely 
asked AEY to provide an update on the expected shipping schedule, and was at that time 
informed that the first 13 million rounds were being packaged for ocean shipment. Thus, 
we find that even if the government thought it was agreeing originally to an installment 
contract (and there is nothing in the record that affirmatively indicates such an 
understanding),. its knowledge and acquiescence in February and March 2008 to a first 
delivery after the 7 April 2008 due date in the contract sealed its waiver of that contract 
due date, even for the first installment. 
Our conclusion that the contract delivery date was waived is not affected by the 
fact that the successor CO, L TC McColumn, did not recognize that a waiver had 
occurred. L TC McColumn was asked during his testimony if he agreed that the 
government is required to establish a new, reasonable delivery date if it waives the 
original contract delivery date. His answer was that "[t]he reasonable date was the date 
of delivery [in the contract]" and that "[a]nything after the performance period of the 
contract was truly benevolence." (Tr. 4/39-40) L TC McColumn also expressed the view 
that perhaps the CO had not terminated AEY's contracts when it should have based on 
the passing of contract delivery dates without deliveries, but that the contract delivery 
dates were unchanged (tr. 4/95). But once a waiver has occurred, it is not undone by a 
successor CO's failure to realize it has occurred. Rather, the government must establish a 
new, reasonable delivery date by written notice to the contractor. De Vito, 413 F.2d at 
1154. LTC McColumn did not establish new, reasonable delivery dates for any of the 
contracts. 
The Board further finds that AEY relied on the government's waiver to its 
detriment. In reliance on the government's assent to the more expensive U.S. 
ammunition and slower shipment by sea, AEY lost the opportunity to buy less expensive 
ammunition that met the contract specifications--and most likely could have been 
delivered by air by the original due date-from European suppliers. (Finding 7) 
Moreover, as part of its effort to show L TC McColumn "some sign of delivery" by 
31 

15 April 2008, AEY arranged for more expensive air shipment instead of shipment by 
sea, and paid MECAR the amount of $3,845,800 on 18 April 2008 to release the first 
shipment of 13 million rounds of ammunition from the United States. (Findings 42-43) 
Because the original delivery date was waived, the government's 17 April 2008 
termination of Contract C-0005 for cause was improper, and it is hereby converted to a 
termination for convenience. 
We now turn to Contract M-0815. Delivery of ammunition under this contract 
was due 27 December 2007 (finding 5). An export license from the Czech Republic was 
not issued until well after this date, on 21 January 2008. Following issuance of the 
license, AEY entered into an aircraft charter with Galaxy Air and reported to CO Goff 
that AEY planned to commence shipping by mid-February. (Finding 17) It took AEY 
some time to line up the necessary permits, and on 10 February 2008 AEY reported to 
CO Goff that operations would commence on 26 February and continue into mid-March 
(finding 18). The fuel shortage in Baghdad then prevented flights from commencing as 
scheduled. AE Y contacted numerous carriers but none had a solution to the problem 
until April at the earliest. CO Goff was kept apprised of AEY's efforts in the face of the 
fuel shortage. (Finding 19) 
Notably, no effort was made by the government during this period to enforce the 
original contract due date, and it was apparently not until 30 March 2008 that the 
government communicated to AEY that the ammunition was urgently needed 
(finding 28). Despite the urgent need, and the government's awareness that the cargo 
was waiting in a warehouse at PED ready to be shipped if a solution to the fuel issue 
could be found, the government also failed to respond to AEY' s request for assistance 
with respect to the fuel issue, including its request for permission to land on the military 
side of the airport to refuel after deliveries. (Finding 29) 
The email exchange recounted in finding 4 7 corroborates the fact of a fuel 
shortage in Baghdad, and also demonstrates that, by 5 April 2008, the government had 
reason to believe that AEY could have begun deliveries during the fuel shortage, 
although at greater expense due to the reduced cargo loads and/or the need to refuel at 
intermediate airports. 
However, we need not decide if the fuel shortage excused AEY's delays in 
delivery despite the possible availability of a more expensive workaround because we 
find that the original contract due date of 27 December 2007 was waived by the 
government well prior to the end of March 2008, and the government did not establish a 
new date for delivery. AEY relied on the government's waiver. It had already paid for 
the ammunition and was paying rent each month on the airport warehouse at which the 
ammunition was stored, in addition to continuing to seek out carriers and assist them with 
overflight and landing permits, through the date of termination ( 17 April 2008). 
(Findings 33-35, 28, n.9) AEY also paid its carrier, JLM, $110,000 on 14 April 2008 for 
32 

a series of deliveries that were to begin with a positioning flight into PED on 14 April 
2008 (finding 35). 
The termination for cause of Contract M-0815 was therefore improper and is 
converted to a termination for convenience. 
AEY further contends that delivety dates on the remaining three contracts were 
waived by the government. As for Contract M-0040, the contract due dates were 7 April 
2008 for CLINs 0002, 0008, and 0013 (AK-47s and machine guns to be acquired from 
Serbia); 21 April 2008 for CLIN 0022 (submachine guns to be acquired from Pakistan); 
and 21 April for all other CLINs (to be acquired from the United States). 17 AEY 
contends that the government waived the 7 April 2008 due date because on 7 April 2008 
AEY paid a supplier the balance due for spotter scopes sourced in the U.S. (App. br. 
at 67) However, the 7 April 2008 due date was for items from Serbia, and we have been 
pointed to no conduct on the part of the government that we consider to be sufficient to 
show a waiver of that due date. We conclude that AEY has not met its burden of proof to 
show that the government waived the 7 April 2008 due date on Contract M-0040 for 
CLIN s 0002, 0008, and 0013. 
As for Contract M-0010, the contract delivety date was 7 April 2008 for CLINs 
0001, 0003, 0005, 0006, and 0010, to be acquired from Serbia, and for CLIN 0004, to be 
acquired from the Czech Republic. For all other CLINs under the contract, to be 
acquired from the U.S., the due date was 28 April 2008.18 AEY's argument for waiver of 
the 7 April 2008 due date is again based on its payment for the U.S. spotter scopes 
(app. br. at 67). However, as with Contract M-0040, we find that AEY has not met its 
burden of proof to show waiver of the 7 April 2008 due date. 
As for Contract M-0670, the government ultimately accepted all line items under 
this contract other than (1) the AK-47s, CLIN 0004AA, and (2) the DShK machine guns, 
CLIN 0006AA. The original contract delivety date for the 16,000 AK-47s coming from 
Montenegro was 29 November 2007 (finding 4 ). Of these, 4,105 were delivered to the 
government on 29 Januaiy 2008, following Montenegro's issuance of a partial export 
license on 25 December 2007 (finding 11). From the date of the partial shipment in 
Januaty through May of 2008, although LTC McColumn wanted "some sign of delivety" 
on at least one contract by 15 April, we see no evidence that the government expressed 
any concern regarding the AK-47s that had not yet shipped. The government's lack of 
concern may be due to the fact that as of 6 May 2008, and possibly before, the end user 
no longer had a need for the AK-47s. On 12 May 2008, the government directed AEY 
17 We have already found the 17 April 2008 termination for cause to be improper as to 
the items due thereafter on 21 April 2008. 
18 We have previously found that the 1 7 April 2008 termination for cause was improper 
as to the items due thereafter on 28 April 2008. 
33 

not to ship the remaining AK-47s and to "cease all work immediately," adding that the 
government intended to terminate the remainder of the contract (finding 49). 19 
We consider the fact that the government took no action to issue a show cause 
notice or to terminate with respect to the remaining 11,895 Montenegro AK-47s after 
AEY delivered 4,105 of them in January 2008 (two months after the contract due date). 
Indeed, on 5 May 2008 the government accepted an April shipment of missing parts and 
accessories for the AK-47s that were delivered in January 2008 (R4, tab 93 at 4, tab 315; 
tr. 2/202). Other shipments under M-0670 were also accepted in April 2008 (finding 10). 
We also consider LTC McColumn's decision not to terminate CLIN 0004AA or any 
other CLIN of Contract M-0670 in April 2008 and his 31 May 2008 authorization to 
AGW to accept the AK-47s and all the April deliveries under Contract M-0670 (R4, 
tab 278 at 5). We further think it relevant that CO Matson, on 12 May 2008, issued a 
stop-work order, directed that the remaining AK-47s not be delivered, and shortly 
thereafter proposed that the remaining quantities of AK-47s be terminated for 
convenience at no cost to the government. This affirmative conduct, and the period of 
time over which it occurred, are not consistent with forbearance for the purpose of 
assessing whether a termination for cause is justified. Rather, the government's conduct 
is consistent with an election to waive the contract delivery date. Therefore, we find that 
AEY has established the first element of waiver with respect to the remaining 11,895 
AK-4 7s from Montenegro due under CLIN 0004AA of Contract M-0670. 
The second element of waiver that AEY must show by a preponderance of the 
evidence is detrimental reliance on the government's conduct. We think this element is 
established by the extra effort and expense that AEY expended to repackage the initial 
quantity of 1,300 rifles and AEY's attempts to arrange for the repackaging of the rest of 
the delivered rifles after the government's belated decision to require them to be 
repackaged. These latter efforts continued until CO Matson refused to permit AEY to do 
the rest of the re-packaging with a company other than SkyLink and issued a stop-work 
order on 8 July 2008 (fmding 55). 
Thus, we fmd that the government waived the original contract delivery date for 
the remaining 11,895 AK-47s from Montenegro due under CLIN 0004AA of Contract 
M-0670. We note that even if it had not, AEY's failure to deliver might have been 
excusable, since it apparently was still awaiting a Montenegro export license for the 
remaining quantity at the time CO Matson issued a stop-work/do not ship order on 
12 May 2008 (findings 48, 11 n.5), and thereafter was prevented from performing by the 
government's stop-work order. 
19 The 14,000 AK-47s coming from Croatia were not due until 19 May 2008 (fmding 4), 
a week after the direction not to ship and to stop work, so we do not consider 
them here. 
34 

The 287 DShK machine guns sourced from the Czech Republic under 
CLIN 0006AA of Contract M-0670 were due on 14 April 2008 (finding 4). Given the 
relatively short period of time (less than a month) between the due date and CO Matson's 
stop-work order on 12 May 2008, the evidence is insufficient to support a finding of waiver. 
Has AEY Proven Excusable Delay for Any of the Contract CL!Ns? 
On Contract M-0670, the express due date for CLIN 0006AA for 287 DShK 
machine guns from the Czech Republic was 14 April 2008. It is undisputed that the 
DShKs were not delivered by 14 April 2008. Therefore, the government has established 
a prima facie case of default with respect to CLIN 0006AA of Contract M-0670. \Ve 
consider whether AEY has met its burden of proving excusable delay. The record 
contains Mr. Diveroli's testimony that, as of 24 April 2008, AEY was still awaiting an 
export license from the Czech Republic for the DShKs (tr. 2/216). The government 
contends that a country's delay in issuing an export license cannot constitute excusable 
delay but is merely ·"prevailing conditions in the international arms business" as to which 
AEY assumed the risk under its contracts (gov't reply at 7). We do not agree. The FAR 
clause provides that a contractor is not liable for default if its nonperformance is ·"caused 
by an occurrence beyond the reasonable control of' and without the fault or negligence of 
the contractor (finding 3). The government does not argue that the issuance or 
non-issuance of an export license was within AEY's reasonable control, other than to 
posit that perhaps it should have chosen to do business with suppliers in a country with 
more predictable timelines. Tellingly, the government has pointed to no evidence that 
any of the delays in issuing export licenses in these appeals resulted from any fault or 
negligence of AEY or that the arms and ammunition in question were available from 
countries with "more· predictable timelines.'' Thus, on the record before us, we hold that 
AEY' s non-delivery on the subject contracts due to the lack of a necessary export license 
constitutes excusable delay for as long as the situation is shown to persist. 
Nor do we agree with the government that the contracts placed the risk on AEY of 
a sovereign nation's delay in issuing an export license. The contract clause cited by the 
government to support this proposition states: 
Contractor shall process all necessary licenses, 
approvals, and/ or certificates required from the U.S. or 
another Nation as it may be applicable to ensure world arms 
sales ability and to perform the work/deliveries. 
The plain meaning of this clause, which appears in four of the contracts and not in 
Contract M-0815, is that the contractor shall be diligent in expediting those matters that 
are within its control. A clause placing the risk on the contractor of acts solely within the 
control of a foreign nation would clearly (or should clearly) say so. We doubt that the 
government would find many takers or reasonable prices if it clearly placed on the 
contractor the risk of an event completely beyond its control. 
35 

The government issued the stop-work/do not ship order under Contract M-0670 
on 12 May 2008 (finding 49). However, AEY has not pointed to any evidence that 
AEY was still awaiting the export license beyond 24 April 2008. The burden to prove 
excusable delays is on the appellant. In this instance, it has not been met. Thus, we 
uphold the government's termination for cause of CLIN 0006AA of Contract M-0670. 
On Contract M-0010, the express due date for CLINs 0001, 0003, 0005, 0006, and 
0010 (various arms from Serbia) was 7 April 2008. The due date for CLIN 0004, DShK 
machine guns from the Czech Republic, was also 7 April 2008. AEY has not met its 
burden to demonstrate waiver of these due dates by the government. It is undisputed that 
the various items under these CLINs were not delivered by 7 April 2008. Therefore, the 
government has established a prima facie case of default with respect to the 
above-enumerated CLINs of Contract M-0010. 
However, AEY has established that its non-delivery of these six CLINs was caused 
by the fact that it had not received export licenses from either Serbia or the 
Czech Republic for the items, and there is no evidence in the record that the delay was due 
to any fault or negligence of AEY. It reported to the government on 12 April 2008 that it 
was still awaiting both the Czech and Serbian licenses and anticipated receiving them by 
2 May 2008 (finding 21). Nevertheless, LTC McColumn terminated these six CLINs for 
cause on 17 April 2008 (finding 46). The termination for cause was improper because the 
delay was excusable. It is hereby converted into a termination for convenience. 
Remaining Contract M-0670 CLIN s 
CO Matson on 19 July 2008 also terminated 2,805 AK-47s delivered by AEY 
under CLIN 0004AA of Contract M-0670 and the undelivered 14,000 AK-47s from 
Croatia that were not due until 19 May 2008, seven days after CO Matson issued the 
stop-work/do not ship order. 
As to the 2,805 delivered AK-47s, the government has not met its burden to prove 
a prima facie case of default. The record contains the following evidence, summarized 
here: the 4,105 AK-47s for which AEY had received a Montenegro export license were 
delivered to AGW on 29 January 2008 (finding 11). The discrepancy report issued on 
16 February 2008 noted that "most" of the crates "just look like a wooden box not 
wooden crate'' and the "crates had no inside wooden partitions to separate the weapons 
from the accessories" and keep them in rows to make it easy to count (finding 12). 
CO Goff specifically asked that the warehouse personnel undertake an inventory to 
assess whether ( 1) the weapons were in good condition with "deficient" bracing, in which 
case they should be accepted; or (2) weapons were damaged, or crates were shipped 
without any bracing at all, in which case they should be "set aside." No such inventory 
appears in the record. (Finding 13) AEY arranged with SkyLink to pick up from the 
warehouse the crates that required repackaging, and when SkyLink did so, it was 
36 

informed by government personnel that only 130 crates needed attention (finding 14). 
These 130 crates were repackaged, delivered back to the warehouse, and accepted (id). 
After L TC McColumn, on 31 May 2008, authorized COL Cain at AGW to accept 
the M-0670 shipments, "including the AK-47s,'' Ms. Havemann at AGW inquired 
whether the authorization included the AK-47s that had not been re-packaged. 
CO Matson suggested that AGW not accept the AK-47s that had not been "reworked,'' 
because "[ o ]nee acceptance on these items has occurred, the contractor is no longer held 
liable.'' (Finding 50) Neither Ms. Havemann's inquiry nor CO Matson's response 
provided any evidence that the 2,805 rifles that had not been re-packaged were in any 
way nonconforming. Because only 130 crates of rifles were tendered to SkyLink as 
requiring work, and we have been presented with no evidence that the remaining 2,805 
AK-47s were not in acceptable condition, we find the government's rejection of those 
rifles and CO Matson' s subsequent termination for cause to be unsupported and 
improper. We hereby convert the termination for cause to a termination for convenience. 
Finally, we hold that CO Matson's termination for cause of the 14,000 AK-47s to 
be sourced from Croatia under Contract M-0670 was improper. These items were not 
due under the contract until 19 May 2008. CO Matson issued a stop-work/do not ship 
order for the remaining items under this contract on 12 May 2008. Thus, AEY's delivery 
of the rifles from Croatia was prevented by an act of the government in its contractual 
capacity, making its failure to deliver excusable under FAR 52.212-4(£). 
We have carefully considered all the arguments made by the parties. To the extent 
they are not mentioned herein, it is because they were not relevant to our disposition of 
the appeals or were not persuasive. 
CONCLUSION 
The termination for cause of CLIN 0006AA (287 DShK machine guns) and partial 
termination of CLIN 0001 (one laser bore sight) of Contract M-0670 are upheld. In all 
other respects, the appeals are sustained, and the terminations for cause are converted to 
terminations for convenience. The matter is returned to the parties to negotiate a 
termination settlement. 
Dated: 22 June 2018 
(Signatures continued) 
37 
L YNDT.O'SlJLLIV AN 
Administrative Judge 
Armed Services Board 
of Contract Appeals 

I concur 
RICHARD SHACKLEFORD 
Administrative Judge 
Acting Chairman 
Armed Services Board 
of Contract Appeals 
I concur 
J. REID PROUTY 
Administrative Judge 
Vice Chairman 
Armed Services Board 
of Contract Appeals 
I certify that the foregoing is a true copy of the Opinion and Decision of the 
Armed Services Board of Contract Appeals in ASBCA Nos. 56470, 56471, 56472, 
56473, 56591, Appeals of AEY, Inc., rendered in conformance with the Board's Charter. 
Dated: 
38 
JEFFREY D. GARDIN 
Recorder, Armed Services 
Board of Contract Appeals