DODS, Inc.
Docket: ASBCA 59510
Decision date: 2015-03-12

ARMED SERVICES BOARD OF CONTRACT APPEALS 
Appeal of -- ) 
) 
DODS, Inc. ) 
) 
Under Contract No. SPM4A 7-09-M-8426 ) 
APPEARANCE FOR THE APPELLANT: 
APPEARANCES FOR THE GOVERNMENT: 
ASBCA No. 59510 
Mr. David Storey 
President 
E. Michael Chiaparas, Esq. 
DCMA Chief Trial Attorney 
Douglas R. Jacobson, Esq. 
Trial Attorney 
Defense Contract Management Agency 
Bloomington, MN 
OPINION BY ADMINISTRATIVE JUDGE MCILMAIL 
PURSUANT TO BOARD RULE 12.3 
INTRODUCTION 
Appellant, DODS, Inc. (DODS), seeks $18,470.53 in termination settlement 
costs, appealing from the deemed denial of its I May 2014 certified claim for that sum 
certain. DODS has elected to proceed pursuant to Board Rule 12.3, and the parties 
have elected to proceed without a hearing, pursuant to Board Rule 11. We sustain the 
appeal in part and award $2,792.55, plus interest. 
SUMMARY FINDINGS OF FACTS 
In July 2009, DODS and the Defense Supply Center, Richmond, Virginia 
(government), entered into Contract No. SPM4A 7-09-M-B426 for DODS to supply 
"aircraft formers,'' including a first article for testing, for a total contract award of 
$6,400 (R4, tab I at L 4 ). The first article was priced at $1,800 (id. at 9), and each of 
the four aircraft formers that the contract contemplated DODS would deliver 
subsequent to first article testing was priced at $ L 150 (id. at 8). DODS never 
submitted a first article for approval (see app. supp. R4, tab A 184 ). 
On 13 June 2011, the government terminated the contract for default (R4, tab 2 
at 16). On 11 June 2012, we converted the termination for default to a termination for 

convenience ofthe government. DODS, Inc., ASBCA 57667, 12-2 BCA ~ 35,078 
at 172,281. On 18 December 2012, we denied the government's motion to reconsider 
our decision to convert the termination. DODS, Inc., ASBCA 57667, 13 BCA 
~ 35,203 at 172, 716. 
On 11 March 2013, DODS submitted to the contracting officer a termination 
settlement proposal (Standard Form 1435) requesting $18,470.53 (R4, tab 8). After 
over a year of correspondence including regarding whether DODS had provided the 
government sufficient information to support that request 
(R4, tabs 9, 11-17), on 
1 May 2014, DODS submitted to the contracting officer a certified claim for 
$18,470.53 (R4, tab 18; gov't br. at 16, ~ 56), the same amount set forth in the 
11 March 2013 settlement proposal. Although the contracting officer never issued a 
decision on the 1 May 2014 claim, the parties agree that they are at an impasse (Bd. 
corr. file, 8 October 2014 memorandum of telephonic conference). We find that by 
1 May 2014, when DODS submitted its certified claim to the contracting officer, the 
parties had reached an impasse, establishing the Board's jurisdiction to entertain this 
appeal. Cf Central Environmental, Inc., ASBCA No. 51086, 98-2 BCA ~ 29,912 
at 148,080 (impasse including where 14 months had passed since appellant submitted 
settlement proposal, and where appellant had requested contracting officer's final 
decision 4 months after submitting proposal). 
The contract includes Federal Acquisition Regulation (FAR) clause 52.249-1, 
TERMINATION FOR CONVENIENCE OF THE GOVERNMENT (FIXED-PRICE) (SHORT FORM) 
(APR 1984) (R4, tab 1 at 15), which provides: 
The Contracting Officer, by written notice, may 
terminate this contract, in whole or in part, when it is in the 
Government's interest. If this contract is terminated, the 
rights, duties, and obligations of the parties, including 
compensation to the Contractor, shall be in accordance 
with 
Part 49 of the Federal Acquisition Regulation in effect 
on the date of this contract. 
DECISION 
DODS bears the burden to prove by a preponderance of the evidence that it is 
entitled to a greater termination settlement amount than that determined by the 
contracting officer. See General Dynamics Land Systems, Inc., ASBCA No. 52283, 
02-1 BCA ~ 31,659 at 156,411. Here, having not issued any decision, the contracting 
officer did not determine a settlement amount; therefore, DODS bears the burden of 
proving entitlement to any amount. A convenience termination converts a fixed-price 
2 

contract into a cost-reimbursement contract, entitling the contractor to recover its 
allowable costs in accordance with the standards of reasonableness, allocability, and 
regulatory cost principles, as applicable, plus profit. Id. Pursuant to FAR 49.207, 
Limitation on settlements, "[t]he total amount payable to the contractor for a 
settlement, before deducting disposal or other credits and exclusive of settlement costs, 
must not exceed the contract price less payments otherwise made or to be made under 
the contract." 
Claimed Termination/or Convenience Settlement Costs 
DODS seeks the following (R4, tab 8 at 41 ): 
Metals: 
Work-in-Progress: 
Other Costs: 
General & Administrative Expenses (G&A) 
Profit: 
Settlement Expenses: 
Subtotal: 
Less Disposal and Other Credits 
Total: 
Metals and "Other Costs" 
$880.00 
$2,679.25 
$154.64 
$9,147.27 
$1,905.98 
$3,791.39 
$18,558.53 
($88.00) 
$18,470.53 
DODS seeks $880 
for four sheets of metal ($220 per sheet) paid for by TTF, 
L.L.C. (TTF), (minus a 10%, $88.00 credit), as well as $154.64 in "Other Costs"; 
namely, the cost of delivery of those sheets to TTF by FedEx (R4, tab 8 at 41-50, 128). 
We have found that "there is no practical distinction between TTF and DODS." DODS, 
13 BCA ~ 3 5 ,203 at 172, 711. We further find that one of the sheets "was consumed in 
the manufacturing process of the First Article" (app. supp. R4, tab A210), leaving 
three sheets of residual equipment with a value of $660. The government invokes the 
limitation in FAR 3 l.205-42(a), "Common items," that "[t]he costs of items reasonably 
usable on the contractor's other work shall not be allowable unless the contractor 
submits evidence that the items could not be retained at cost without sustaining a loss." 
The burden is on a contractor to demonstrate that it could not retain the residual 
equipment at cost for use on other work without sustaining a loss. FAR 31.205-42(a), 
Termination costs; see Essex Electro Engineers, Inc., DOT CAB Nos. 1025, 1119, 
81-1 BCA ~ 14,838 at 73,250 (citing former FPR 1-15.205-42(a) which was essentially 
identical to FAR 3 l.205-42(a)), ajf'd on recon., 81-1BCA~15,109, ajf'd, 702 F.2d 998 
(Fed. Cir. 1983). DODS makes no such showing. We award only the $220 cost of the 
3 

sheet that was consumed related to first article testing, as well as the $154.64 FedEx 
delivery cost. 1 
Work-in-Progress 
DODS seeks $2,679.25 for "Work-in-Progress," consisting of direct labor costs 
(R4, tab 8 at 41-42). The government does not dispute that those costs were incurred 
performing work on the contract, but contends that they are not reasonable, including 
because DODS did not even produce the first article, which was priced only at $1,800. 
Indeed, the government invokes FAR 49 .207, Limitation on settlements, which provides 
that "[t]he total amount payable to the contractor for a settlement, before deducting 
disposal or other credits and exclusive of settlement costs, must not exceed the contract 
price less payments otherwise made or to be made under the contract." However, $1,800 
was not the price of the contract (the contract price was $6,400) but the price of one of 
the contract's line items; namely, first article testing (R4, tab 1 at 1, 9). See Concord 
Electric Co., ASBCA No. 31012, 85-3 BCA ~ 18,484 at 92,844-45. 
Nevertheless, we agree that $2,679.25 in direct labor costs, given the 
circumstances, is not reasonable. In its settlement proposal to the contracting officer 
(Standard Form 1435), DODS proposed a 15% profit (R4, tab 8 at 41, line 11); from 
that we infer that DODS contemplated earning 15% profit on the $6,400 contract 
($960), leaving $5,440 for costs ($6,400 minus $960). In its settlement proposal, 
DODS also proposed 257% G&A (R4, tab 8 at 42); from that we infer that DODS also 
expected that it would incur $2.57 in indirect costs for each $1.00 in direct costs, or 
1 Although neither party addresses it, the contract includes FAR 52.209-4, FIRST 
ARTICLE APPROVAL - GOVERNMENT TESTING (SEP 1989) (R4, tab 1 at 13 ), 
which provides, at paragraph (h): 
Before first article approval, the acquisition of materials or 
components for, or the commencement of production of, 
the balance of the contract quantity is at the sole risk of the 
Contractor. Before first article approval, the costs thereof 
shall not be allocable to this contract for ( 1) progress 
payments, or (2) termination settlements ifthe contract is 
terminated for the convenience of the Government. 
The record does not establish whether any of the residual three sheets of metal 
was for production, or whether any exception to FAR clause 52.209-4(h) 
applies. See Switlik Parachute Co., ASBCA No. 18024, 75-2 BCA ~ 11,434 
at 4,438-40. For these reasons, we do not rely upon that clause. 
4 

approximately $3,920 in indirect costs and approximately $1,520 in direct costs for the 
entire contract work; otherwise it would not have expected to earn 15% profit. 
Because 
DODS spent $1,034.64 procuring metal for the work ($880.00 in material 
plus $154.64 for its delivery), that leaves approximately $485 ($1,520 minus $1,035) 
for direct labor costs. The contract work 
consisted of a first article and four aircraft 
forms; DODS produced none of those yet spent $2,679.25 - approximately 552% 
more ($2,679.25 divided by $485.00) than it must have contemplated spending on the 
entire contract work - on direct labor costs. Without any evidence in the record 
regarding what economies of scale DODS might have achieved had it passed first 
article testing, we find, using a jury verdict approach, that awarding $300 in direct 
labor costs is reasonable given the circumstances. 
G&A 
DODS seeks $9,147.27 in G&A expenses, consisting of 257% of the sum of $880 
in materials and $2,679.25 in direct labor costs (R4, tab 8 at 41-42). There being no 
evidence in the record demonstrating the calculation of that particular rate, but having 
found that there is no practical difference between DODS and TTF, 13 BCA ~ 35,203 
at 172,711, we adopt the comparable, 227.19% G&A rate computed for TTF's CY 2011 
by the Defense Contract Audit Agency in Audit Report No. 01241-2012Wl 7100001, 
which appears in the record (app. supp. R4, tabs A369, A384).2 Applying that rate to the 
materials and direct labor costs that we award, the result is an award of $1, 181.39 in 
G&A expenses ($220 plus $300 equals $520 times 2.2719). 
Profit 
DODS seeks $1,905.98 in profit; that is, 15% of the sum of materials, direct 
labor costs, and G&A (R4, tab 8 at 41-42). The government contends that no profit is 
allowable, pursuant to FAR 49.203(a), Adjustment for loss, which provides for the 
disallowance of profit "if it appears that the contractor would have incurred a loss had 
the entire contract been completed." It does so appear. According to DODS's figures, 
it spent $9,506.93, much more than the $6,400.00 contract price, without having 
produced anything. Consequently, DODS is not entitled to profit. 
2 Because we have found that "there is no practical distinction between TTF and 
DODS." DODS, 13 BCA ~ 35,203 at 172,711, we include the audit report in 
the Rule 4 file over the government's objection. 
5 

Settlement Expenses 
DODS seeks $3,791.39 in "Settlement Expenses," consisting of $936.52 that 
the government does not dispute (gov't br. at 28), and $2,854.87 in expenses spent 
litigating ASBCA No. 57667 (R4, tab 8 at 43). The latter are not allowable, pursuant 
to FAR 3 l.205-47(f)(l), Costs related to legal and other proceedings, because they 
were incurred in connection with "[d]efense against Federal Government claims or 
appeals or the prosecution of claims or appeals against the Federal Government." We 
find that DODS is entitled to the $936.52 that the government does not dispute. 
Termination/or Convenience Settlement Costs as Found by the Board 
For the above reasons, we award DODS the following: 
Metals: 
Work-in-progress: 
Other costs: 
G&A 
Settlement expenses: 
Total: 
CONCLUSION 
$220.00 
$300.00 
$154.64 
$1,181.39 
$936.52 
$2,792.55 3 
The appeal is sustained in part and DODS is awarded $2,792.55, plus interest 
pursuant to the Contract Disputes Act, 41 U.S.C. § 7109, from Monday, 5 May 2014, 
the putative date that the contracting officer received DODS's 1 May 2014 claim, until 
the date of payment. 
Dated: 12 March 2015 
(Signature continued) 
Administr · tive Judge 
Armed Services Board 
of Contract Appeals 
3 Because we do not allow the cost of the residual metal, we do not apply the 
10% materials credit that DODS included in its claim (R4, tab 8 
at 41, 43, 128). 
6 

I concur 
RICHARD SHACKLEFORD 
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 No. 59510, Appeal of DODS, 
Inc., rendered in conformance with the Board's Charter. 
Dated: 
7 
JEFFREY D. GARDIN 
Recorder, Armed Services 
Board of Contract Appeals