Honeywell International, Inc.
Docket: ASBCA 57779
Decision date: 2013-08-07

ARMED SERVICES BOARD OF CONTRACT APPEALS 
Appeal of--
Honeywell International, Inc. 
Under Contract No. W911Sl-08-F-0131 
APPEARANCES FOR THE APPELLANT: 
) 
) 
) 
) 
) 
APPEARANCES FOR THE GOVERNMENT: 
ASBCA No. 57779 
Terry L. Albertson, Esq. 
Alexina G. Jackson, Esq. 
Crowell & Moring LLP 
Washington, DC 
Col Jennifer L. Martin, USAF 
Air Force Chief Trial Attorney 
Marvin Kent Gibbs, Esq. 
Trial Attorney 
OPINION BY ADMINISTRATIVE JUDGE MELNICK ON THE GOVERNMENT'S 
MOTION FOR PARTIAL DISMISSAL AND THE PARTIES' CROSS-MOTIONS FOR 
PARTIAL SUMMARY JUDGMENT 
Appellant Honeywell International, Inc. (Honeywell) entered into a delivery order 
with the United States Army to install various energy savings measures in facilities at 
Fort Dix, New Jersey. After the Army transferred administration of the contract to the 
United States Air Force, Honeywell pursued a claim for breach, claiming the government 
had failed to inspect and accept a solar array installed under the agreement, and failed to 
make payments. The government issued a final decision asserting that the provisions for 
the solar array were voidable. This appeal followed. 
The government moves to partially dismiss the appeal for lack of jurisdiction, or 
for failure to state a claim, seeking a ruling that the solar array provisions are invalid. 
Honeywell cross-moves for partial summary judgment, arguing that they are valid. We 
conclude that the Board has jurisdiction over the appeal, and grant partial summary 
judgment for the government, finding certain terms of the delivery order invalid. 
BACKGROUND AND STATEMENT OF FACTS (SOP) 
FOR PURPOSES OF THE MOTION 
Honeywell's Mid-Atlantic Region Energy Savings Performance Contract 
1. Section 8287 of Title 42 ofthe United States Code authorizes federal agencies 
to enter into Energy Savings Performance Contracts (ESPCs ). Under these agreements, 

contractors incur the costs of providing various energy conservation measures (ECMs) to 
agencies in exchange for receiving a share of the energy savings the agencies experience. 
42 U.S.C. § 8287(a)(l). 
2. On 25 February 1999, the Department ofEnergy (DOE) awarded Contract 
No. DE-AM01-99EE73683 to Honeywell (ex. B-1, tab 10) (the Super ESPC). 1 This 
Super ESPC is an indefinite-delivery/indefinite-quantity contract through which federal 
agencies can issue delivery orders to Honeywell for services and equipment to reduce 
energy and water consumption in facilities in six Mid-Atlantic states, including New 
Jersey (id. at 2, 4, 6). The delivery orders may include a variety of energy savings 
measures, including the installation of renewable energy systems, such as solar arrays 
(id. at 7). 
New Jersey Solar Renewable Energy Certificates 
3. New Jersey has adopted renewable energy portfolio standards. N.J. STAT. 
ANN.§ 48:3-87(d). The statute mandates that a percentage of the electricity sold by New 
Jersey's power utilities be from renewable energy sources (id.). The utilities are to 
satisfy these requirements by acquiring either Renewable Energy Certificates (RECs) or 
Solar Renewable Energy Certificates (SRECs). N.J. STAT. ANN.§ 14:8-2.8. An REC is a 
certificate issued by the state representing the environmental benefits or attributes of one 
megawatt-hour of electricity from a facility that produces renewable energy. N.J. STAT. 
ANN.§§ 14:8-2.2,48:3-51; In re Ownership of Renewable Energy Certificates, 913 A.2d 
825, 827 (N.J. Super. Ct. App. Div. 2007). An SREC is a certificate representing one 
megawatt-hour of solar energy produced from a facility connected to New Jersey's 
electricity distribution system. N.J. STAT. ANN.§§ 14:8-2.2, 48:3-51. Qualified 
generating facilities are issued RECs or SRECs upon their production of electricity. 
N.J. STAT. ANN.§§ 14:8-2.4, 14:8-2.9. 
4. Rather than generate the clean electricity necessary to meet New Jersey's 
renewable energy portfolio standards themselves, New Jersey utilities may acquire RECs 
and SRECs from the marketplace. Ownership of Renewable Energy Certificates, 
913 A.2d at 827-29. New Jersey's creation and recognition ofRECs and SRECs 
essentially permits any qualified generators of renewable electricity to sever the clean 
energy attributes and benefits of their electricity for separate sale. New Jersey's 
1 On 6 February 2013, Honeywell provided a 12-tab file containing the Super ESPC and 
its modifications, after the Board requested those materials from the government. 
The Board designates the entire file as Exhibit B-1. Modification No. (Mod. No.) 
M003 to the contract changed the number to DE-AM36-99EE73683 (ex. B-1, tab 
11; tr. 1167 -69). 
2 

establishment of the renewable energy portfolio standards for its utilities creates a market 
for those sales by positioning the utilities as potential buyers ofRECs and SRECs. 
Honeywell's Fort Dix Delivery Order 
5. On 9 July 2008, the Department of the Army awarded Delivery Order (DO) 
W911 S 1-08-F -0131 to Honeywell under the Super ESPC for ECM services at Fort Dix, 
New Jersey (compl. ~ 17, answer~ 17a; R4, tab 1). Consistent with the terms ofthe 
Super ESPC, the government was to fund its payments for the services from utility 
savings generated by the installed ECMs (R4, tab 1 at 80-112). The services to be 
provided included the installation of a solar array for the production of renewable 
electricity (R4, tab 1 at 21). After Mod. No. POOOOI was executed on 18 September 
2008, the DO assumed for the purpose of calculating savings "that the renewable energy 
credits produced by the [solar] system [would] have value for at least five years at a value 
of$0.3825/kwh." It characterized these credits as "Savings." (R4, tab 4 at 1, 82) The 
parties agreed that the government's energy savings resulting from the solar array 
included the value of the electricity it produced plus the value of the SRECs (R4, tab 4 at 
82-83, tab 33; gov't mot. at 2; app. resp. at 6). Based on the DO's assumptions, 
Honeywell guaranteed certain annual savings from the ECMs that included the value of 
SRECs, and the DO scheduled annual payments to Honeywell based upon those savings 
(R4, tab 4 at 6, 83, 109). As modified, the DO also "granted Honeywell transfer rights to 
manage the SREC transaction (including associated environmental benefits) for 10% of 
achieved SREC value" (R4, tab 4 at 4). We refer to the initial set ofECMs under the DO, 
including its solar array facility, as Phase I. 
6. In a letter to Honeywell dated 23 March 2009, the contracting officer addressed 
the SRECs generated by the solar array. The contracting officer requested Honeywell to 
"facilitate the sale of these certificates," permitting Honeywell to "manage and market" 
them. Honeywell was to forward the proceeds of its SREC sales to the government, 
minus a ten percent management fee. (R4, tab 35 at 2) 
7. Mod. No. P00004 ofthe DO, effective 29 May 2009, added additional solar 
arrays to the project. It contemplated expected savings from SRECs valued at 
$0.405/kWh for the first five years, and $0.2025/kWh for years six through ten. 
(R4, tab 16) We refer to it as Phase II. 
8. Both the contracting officer who awarded the DO, and the one who signed the 
modifications, possessed unlimited contracting warrants. After consulting counsel, both 
contracting officers believed that they had authority to authorize the sale of SRECs. 
However, neither now believes they had or were granted specific authorization to sell 
personal property. (R4, tab 1 at 1, tab 4 at 1, 3; gov't mot., Edler decl., Edgar decl.) 
3 

9. All Phase I work, including the solar array, was completed and accepted by the 
government sometime between 8 June and 25 September 2009, and payments have been 
made toward it. In April of 2010, the Phase II solar array was supplied by Honeywell as 
designed, completed on time, and installed as required. However, the government has 
not connected it to the base electrical grid, tested it, or accepted it. (Compl. ~~ 30-37, 
answer~~ 30-37) 
10. On 1 October 2009, the Army transferred administrative authority for the DO 
to the Department of the Air Force after Fort Dix became a joint base with McGuire Air 
Force Base (R4, tab 18; compl. ~ 5, answer~ 5b). 
11. On 22 March 20 11, Honeywell submitted a certified claim to the Air Force 
contracting officer, contending the government had breached the DO by refusing to 
inspect and accept the Phase II work, failing to pay interest owed for late payments, and 
failing to pay an invoice for $2,741,963.06 (R4, tab 50). In a 21 June 2011 final decision, 
the Air Force contracting officer declared the DO ''voidable as related to the solar arrays 
because of a failure of consideration; the payment stream required by the task order 
violates federal property disposition and miscellaneous receipt statutes." Therefore, the 
contracting 
officer purported to cancel "the voidable portions of the task order." The 
contracting officer offered to lease to Honeywell the facilities and land upon which the 
arrays were located and to purchase from Honeywell the power generated by the arrays. 
She also sought to revise the DO's payment schedule to reflect the exclusion of the arrays 
from its scope, and to pay any outstanding amounts due that would be in accordance with 
that modified schedule. (R4, tab 53) 
12. Honeywell filed this appeal on 16 September 2011. Its complaint seeks a 
ruling that it is entitled to payments for its Phase I and II work, and that its Phase II work 
must be accepted by the government. Alternatively, it seeks a ruling that Honeywell is 
entitled to compensation for the value of the benefits it has provided to the government. 
13. The government moves to partially dismiss the appeal on the ground that the 
portions of the DO providing for solar arrays are void ab initio, and therefore no contract 
exists to support our jurisdiction. Alternatively, it seeks partial dismissal for failure to 
state a claim upon which relief may be granted, or partial summary judgment, for the 
same reasons. Honeywell cross-moves for partial summary judgment, seeking a ruling 
that the DO is valid and enforceable. 
4 

DECISION 
I. Jurisdiction 
We need not dwell long over our jurisdiction. The claim and complaint are 
premised upon allegations that the DO imposes valid contractual obligations upon the 
parties. A claimant need only make a non-frivolous assertion as to the existence of a 
contract to trigger our jurisdiction. Whether a contract was legally formed and breached 
goes to the merits. Engage Learning, Inc. v. Salazar, 660 F.3d 1346, 1353-55 (Fed. Cir. 
2011); Tele-Consultants, Inc., ASBCA No. 58129, 13 BCA ~ 35,234. Also, the 
government does not deny that a contract was formed. It simply asserts that the portions 
of the DO relating to solar arrays are invalid. Thus, even under the government's theory, 
we must determine the extent ofthe enforceability of an existing contract. Finally, we 
also note that DOs issued by Department of Defense components under a DOE Super 
ESPC are discrete contracts. Disputes over the terms of such DOs are within our 
jurisdiction. AmerescoSolutions, Inc., ASBCA Nos. 56824, 56867, 11-1 BCA ~ 34,705. 
Accordingly, the Board has jurisdiction 
over this appeal. 
II. Summary Judgment 
The government's alternative motion to partially dismiss for failure to state a 
claim relies upon materials outside the pleadings and therefore we treat it as a motion for 
partial summary judgment that we consider with Honeywell's cross-motion for partial 
summary judgment. FED. R. CIV. P. 56( d). Summary judgment is appropriate when there 
is no genuine issue of material fact and a movant is entitled to judgment as a matter of 
law. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Both parties agree that the 
DO's validity is ripe for ruling through summary judgment. 
The government observes that the DO's guaranteed savings upon which 
Honeywell's payments are premised include the sale of the SRECs generated by the solar 
arrays. However, according to the government, SRECs are government-owned personal 
property. The government has provided declarations by the Army contracting officers 
who executed the DO stating they were not granted authority to sell personal property 
(SOF ~ 8). The government also contends that, even if the contracting officers were 
authorized to sell personal property, the DO's terms are inconsistent with governing 
regulations. Separately, the government argues that the proceeds of the sale of personal 
property must be deposited in the Treasury. Thus, the DO's provisions for the solar 
arrays are invalid. 
Honeywell's cross-motion for partial summary judgment argues that the ESPC 
statute and contractual scheme authorizes the inclusion of SREC sales toward the savings 
realized from a solar facility acquired under an ESPC, and can be added to the payments 
made to the contractor. Honeywell claims the contracting officers were authorized to 
5 

commit the government to such an arrangement. Honeywell also contends that such sales 
are exempt from any requirement to deposit the proceeds in the Treasury. 
A contract with the government must be executed by an agent with actual 
authority to bind the government. Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380 
(1947); Trauma Service Group v. United States, 104 F.3d 1321, 1325 (Fed. Cir. 1997). 
A contracting party bears the risk of accurately ascertaining the limits of a government 
agent's contractual authority even when the agent is unaware of those limitations himself. 
Merrill, 332 U.S. at 383-84; City ofEl Centro v. United States, 922 F.2d 816, 820 
(Fed. Cir. 1990). Additionally, the government is not bound to contractual terms that are 
inconsistent with law. Johnson Mgmt. Group CFC, Inc. v. Martinez, 308 F.3d 1245, 
1255-57 (Fed. Cir. 2002); Alabama Rural Fire Ins. Co. v. United States, 572 F.2d 727, 
736 (Ct. Cl. 1978). The burden is on Honeywell to prove the relevant provisions ofthe 
DO providing for the solar arrays are authorized and lawful. Harbert/Lummus Agrifuels 
Projects v. United States, 142 F.3d 1429, 1432 (Fed. Cir. 1998). 
The DO procures supplies and services for the government, including the 
installation of solar arrays. However, its terms are different from the typical fixed-price 
procurement contract. Consistent with the 
ESPC statutory scheme, the DO bases 
Honeywell's payments upon the savings Honeywell guaranteed, including in those 
savings the value of the SRECs the facility is expected to generate, and grants Honeywell 
authority to sell the SRECs to generate those funds. (SOF ~~ 5-7) Thus, the parties agree 
that the DO commits the government to finance part of Honeywell's payments for the 
solar array from the proceeds of Honeywell's sale of the SRECs (gov't mot. at 5 ("the 
sale of SRECs was the primary consideration for performance"); app. resp. at 9 ("the 
ESPC DO authorizes Honeywell to finance the DO in part by selling the SRECs 
generated by the solar arrays")). It is this arrangement that the government claims is 
invalid. We must decide whether the ESPC statute permits the inclusion of SREC sales 
among the energy savings generated by an ESPC, and upon which contract payments are 
calculated. We also must determine whether the contracting officers were authorized 
to 
commit the government to permit Honeywell to sell the government's SRECs and include 
. those proceeds in Honeywell's payments. 
A. The ESPC Statute's Definition of Energy Savings 
In support of the DO's validity, Honeywell stresses that the ESPC statute 
authorizes the agency's procurement of energy savings measures "in exchange for a share 
of any energy savings directly resulting from implementation of such measures during the 
term of the contract" (app. resp. at 11 (quoting 42 U.S.C. § 8287(a)(l)). It notes that the 
Super ESPC requires Honeywell to identify financial incentives offered by the state, 
apply for them, and incorporate them into the project (app. resp. at 13 (citing Section 
C.12 of Mod. No. M006 of the Super ESPC, ex. B-1, tab 12 at 12)). It contends that 
SRECs are just such financial incentives offered by New Jersey relating to the generation 
6 

of renewable energy, and therefore constitute energy savings. Honeywell also argues that 
there are no limits on the sources of the energy savings recognized by an ESPC. In the 
absence of a prohibition on the use of SREC sales, they should be permitted to fund a 
contractor's ESPC performance. (App. resp. at 11-14) 
The ESPC statute defines what constitutes cognizable "energy savings." Section 
8287c(2) of Title 42 defines the term to mean: 
(A) a reduction in the cost of energy, water, or 
wastewater treatment, from a base cost established through a 
methodology set forth in the contract, used in an existing 
federally owned building or buildings or other federally 
owned facility as a result of-
(i) the lease or purchase of operating equipment, 
improvements, altered operation and maintenance, or 
technical services; 
(ii) the increased efficient use of existing energy 
sources by cogeneration or heat recovery, excluding 
any cogeneration process for other than a federally 
owned building or buildings or other federally owned 
facilities; or 
(iii) the increased efficient use of existing water 
sources in either interior or exterior applications; 
(B) the increased efficient use of an existing energy 
source by cogeneration or heat recovery; 
(C) if otherwise authorized by Federal or State law 
(including regulations), the sale or transfer of electrical or 
thermal energy generated on-site from renewable energy 
sources or cogeneration, but in excess of Federal needs, to 
utilities or non-Federal energy users; and 
(D) the increased efficient use of existing water 
sources in interior or exterior applications. 
In short, under section 8287c(2)(A), (B), and (D), "energy savings" are reductions in the 
cost of energy, water, or wastewater treatment from a base cost, or increased efficient use 
of existing energy or water sources, resulting from a contractor's performance. Under 
7 

section 8287c(2)(C), energy savings can also include the sale of excess electricity from a 
renewable energy source if otherwise authorized by law. 
Considering first section 8287c(2)(A), (B), and (D), Honeywell has not shown that 
SREC sales fall within any of these definitions. SRECs simply reflect the clean, 
renewable aspect of electricity produced by a solar facility. Although the electricity 
produced by a solar array reduces the amount of energy the agency must purchase, 
lowering its costs, the certificates themselves (the SRECs) provide nothing that reduces 
those costs any further. Honeywell suggests that SREC sales meet the requirements of 
section 8287c(2)(A) because they provide "benefits derived from [measures] installed 
under an ESPC that result in avoided expenditures from appropriated energy and O&M 
funds" (app. reply at 
6-9). However, the statute's definitions focus upon whether the 
measure reduces energy costs, not whether it generates revenue that could be used to pay 
those costs in lieu of appropriated funds. SRECs do not reduce the agency's energy 
costs. Nor do SRECs increase the efficiency of existing energy or water sources. 
Accordingly, SREC sales do not meet the test of section 8287c(2)(A), (B), or (D). 
The closest candidate for Honeywell's purposes among the ESPC statute's 
definitions of"energy savings" might be section 8287c(2)(C). That section recognizes 
that, when "otherwise authorized by Federal or State law (including regulations)," energy 
savings include "the sale or transfer of electrical or thermal energy generated on-site from 
renewable energy sources ... but in excess of Federal needs, to utilities or non-Federal 
energy users." Added in 2007, this provision expands the definition of energy savings 
beyond reductions in cost to include the sale of excess electricity generated by solar 
facilities when it is otherwise authorized by law. Energy Independence and Security Act 
of2007, Pub. L. No. 110-140, § 515, 121 Stat. 1492, 1659. This provision is not 
included in the Super ESPC's definition of energy savings (SOF ~ 2). However, even if 
we conclude it should have been, it would not assist Honeywell. SRECs are not electrical 
energy. They are marketable certificates, representing the clean, renewable nature of a 
solar facility's electrical production that has been severed from the electricity for the very 
purpose of being sold separately (SOF ~~ 3-4 ). Thus, they do not meet the test of section 
8287 c(2)( C). 2 
B. Chevron Deference 
Honeywell argues that DOE interprets the ESPC statute to recognize SREC sales 
as valid energy savings, and contends the Board must defer to that interpretation. In 
2 The addition of section 8287c(2)(C) is another reason that the sales revenues from a 
solar facility's production, like SREC sales, do not constitute reduced energy costs 
under section 8287c(2)(A). Such a reading would render section 8287c(2)(C) 
superfluous. See Sprietsma v. Mercury Marine, 537 U.S. 51, 63 (2002). 
8 

support, Honeywell cites excerpts from what seems to be another Super ESPC that is not 
applicable here. (App. resp. at 14 (citing ex. 5 at 19)) That document appears to require 
the contractor to consider the benefits ofREC sales from renewable energy projects and 
to prepare "documentation ... to effectively address .. .implementing and leveraging the 
REC sales revenue financial benefits for the project." This expectation is repeated in 
another document relied upon by Honeywell, entitled "ENERGY SAVINGS 
PERFORMANCE CONTRACT (ESPC) INDEFINITE DELIVERY INDEFINITE 
QUANTITY (IDIQ) FREQUENTLY ASKED QUESTIONS (F AQS)," which Honeywell 
represents is from DOE's Federal Energy Management Program (FEMP) (app. resp. at 
14-15 (citing ex. 7 at 4)). Honeywell also quotes from the part ofFEMP's website that 
describes the incentive programs offered by New Jersey. There, DOE opines that 
"[t]ederal facilities can sell SRECs from their New Jersey solar installation[s]. .. thereby 
augmenting the financing" (app. resp. at 14 (citing ex. 6)). 
Honeywell's deference argument is derived from the doctrine articulated in 
Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). 
Under Chevron, when Congress has left ambiguity in a statute, it will "be resolved, first 
and foremost, by the agency." City of Arlington, Texas v. FCC, No. 11-1545, slip op. at 
5 (U.S. May 20, 2013) (quoting Smiley v. Citibank (South Dakota), N.A., 517 U.S. 735, 
740-41 (1996)). However, substantial deference to agency statutory interpretations may 
only be given under Chevron when Congress has delegated the agency rulemaking 
authority meant to carry the force of law, and the agency interpretation is an exercise of 
that authority. Gonzales v. Oregon, 546 U.S. 243, 255-56 (2006) (quoting United States 
v. Mead Corp., 533 U.S. 218, 226-27 (2001)); see also Long v. Soc. Sec. Admin., 
635 F.3d 526, 534 (Fed. Cir. 2011). Otherwise, agency interpretations are simply entitled 
to respect to the extent they are persuasive. Gonzales, 546 U.S. at 256 (citing Skidmore 
v. Swift & Co., 323 U.S. 134, 140 (1944)); see also Stephenson v. Office ofPers. Mgmt., 
705 F.3d 1323, 1330-31 (Fed. Cir. 2013). 
If the ESPC statute lacked a definition of the term "energy savings," then Chevron 
deference to an agency interpretation might be appropriate. See Abrams v. Soc. Sec. 
Admin., 703 F.3d 538, 543 (Fed. Cir. 2012) (applying Chevron deference to an agency 
construction of a statute lacking a definition of the relevant term). However, Honeywell 
does not identify a relevant ambiguity in the ESPC statute's definition of the term, and 
when the intent of Congress is clear, that is the end of the matter. City of Arlington, slip 
op. at 4; PSC VSMPO-Avisma Corp. v. United States, 688 F.3d 751, 763-64 (Fed. Cir. 
2012). 
Indeed, none of the DOE statements relied upon by Honeywell suggest that they 
are the product of an exercise ofrulemaking meant to interpret the ESPC statute's 
definition of energy savings. See New England Tank Indus. of N.H, Inc. v. United States, 
861 F.2d 685, 694 (Fed. Cir. 1988) (noting that not every piece of paper issued by an 
agency is a mandatory regulation). The purported Super ESPC contract language 
9 

Honeywell relies upon requires those contractors subject to it to consider whether REC 
sales can benefit a project in some way. It does not say that they could constitute energy 
savings under an ESPC contract. That is also the case for the FEMP frequently asked 
questions. The additional FEMP website language stating that New Jersey SRECs can be 
sold does not indicate that it is intended to apply to ESPCs. There is no basis for giving 
these materials any deference under Chevron. Nor is there any reason to find that these 
vague, superficial statements persuasively show that SREC sales are includable as energy 
savings under ESPCs, given that they do not purport to engage in any legal analysis to 
that effect. 3 
C. Property Disposal Regulations 
Even if SREC sales could otherwise constitute energy savings for purposes of an 
ESPC contract, the Army 
contracting officers could not lawfully commit to their sale to 
finance payments to Honeywell. We agree with the government's suggestion, not 
challenged by Honeywell, that SRECs are personal property, given their exclusive nature 
and transferability. See Members of the Peanut Quota Holders Ass 'n, Inc. v. United 
States, 421 F.3d 1323, 1330-34 (Fed. Cir. 2005). New Jersey case law is consistent with 
that conclusion, characterizing SRECs as commodities subject to ownership. Ownership 
of Renewable Energy Certificates, 913 A.2d at 827. 
General Services Administration (GSA) property disposal regulations contained at 
41 C.P.R. Parts 102-35 through 102-42 generally govern the disposition of personal 
property under the custody and control of executive agencies in the United States. 
41 C.P.R. § 102-35.5 (2008). These regulations ensure the government does not sell 
excess property without first determining if it can use the property elsewhere. 
41 C.P.R.§§ 102-35.15, 102-36.45(a), 102-36.65,102-36.210. Undertheprocess 
established by these rules, when an agency determines that personal property is not 
needed, the agency "declares the property excess and reports it to GSA for possible 
transfer to eligible recipients," including other agencies. 41 C.P.R. § 102-36.35(a). If 
GSA determines that the property has no uses, it becomes surplus property and available 
for donation. 41 C.P.R. § 102-36.35(b). Only if it is not selected for donation under 
established procedures does it become eligible for competitive sales under specific 
procedures. 41 C.P.R. §§ 102-36.35(c), 102-38.5-.370. Additionally, only a designated 
Sales Center may sell the government's personal property, and only a duly authorized 
agency official may execute the sale award documents and bind the government to a sale. 
41 C.F.R. § 102-38.40. Generally, all personal property sales are subject to these rules. 
41 C.F.R. § 102-38.20. 
3 DOE has engaged in formal rulemaking regarding ESPC contracts. However, those 
regulations predate the current version of section 8287c(2) and contain a definition 
of"energy cost savings" even more narrow than the statute. See 10 C.P.R. 
§ 436.31 (2013). 
10 

Honeywell suggests the relevant provision of the property disposal regulations is 
41 C.F.R. § 102-35.30(d), which says that "Government-owned personal property may 
only be used as authorized by [the] agency." Honeywell argues that the DO's inclusion 
of SREC sales as energy savings was authorized by the Army. Because the Army 
considered the SRECs' purpose was that they be sold to finance payments to Honeywell, 
they were neither excess nor surplus property and therefore exempt from the 
requirements of the property disposal regulations. Honeywell also contends that, because 
the Army contracting officers possessed unlimited warrants, and were advised that they 
could commit to the DO's SREC terms, they were authorized to do so. (App. resp. at 6-7, 
15-19; app. reply br. at 13-14) 
The question is not how SRECs could be used, but whether they could be sold as 
contemplated by the DO. The very next 
sentence of section 102-35.30(d), after the one 
relied upon by Honeywell, states that "[t]itle to Government-owned personal property 
cannot be transferred to a non-Federal entity unless through official procedures 
specifically authorized by law." Although the DO does not purport to directly sell 
SRECs to Honeywell, it would permit Honeywell to sell them in the marketplace to 
generate revenues to be paid to Honeywell. Thus, the DO would obligate the government 
to sell its SRECs and allow Honeywell to do it. Regardless of whether the Army 
contracting officers were authorized to sell personal property themselves, Honeywell has 
not presented any evidence showing that the contracting officers could authorize 
Honeywell to sell the government's personal property for the government. Moreover, the 
arrangement disregards the procedures dictated by the property disposal regulations for 
the disposition of virtually all personal property held by the government. Contrary to 
Honeywell's contention, the property disposal regulations do not simply restrict the sale 
of excess or surplus personal property, they apply to nearly all personal property, and 
only permit its sale after it has been declared excess and surplus. 41 C.F.R. § 102-36.35. 
Honeywell cites no support for the suggestion that an agency can circumvent those 
requirements by simply declaring that a piece of property's purpose is that it be sold. 
Honeywell also maintains that the SRECs are government-furnished property 
provided to Honeywell for its performance of the contract, and therefore governed by the 
provisions ofFAR Part 45 (app. reply br. at 14-15). It argues that, after receiving the 
SRECs from the government, it would "consume" them under the DO, which it says is an 
action exempted from the requirements of the property disposal regulations by FAR 
45.503. 
FAR Part 45 applies to property being furnished "for performance of a contract." 
FAR 45.101 (defining Government-furnished property). The DO does not provide the 
SRECs to Honeywell for contract performance. Contrary to Honeywell's contention, it 
would not be "consuming" the SRECs to perform the DO. It would be selling them for 
use by others. Nothing in FAR 45.503 exempts such transactions from the control of the 
11 

property disposal regulations. Indeed, even ifF AR Part 45 applied here in some way, it 
provides that the government "retains title to Government-furnished property until 
properly disposed of, as authorized by law or regulation." FAR 45.401. Honeywell has 
not shown that the DO would lawfully dispose of the SRECs. 
D. Invalid Contract Terms 
Finally, Honeywell claims that, even if the DO's SREC terms are inconsistent with 
applicable law, they are still valid because the Army contracting officers did not 
knowingly violate the law (app. resp. at 23-24). Honeywell contends that only contract 
terms that are plain or palpable violations of the law are invalid, and if contracting 
officials were unaware that particular terms were invalid then that invalidity cannot be 
plain or palpable. Honeywell cites John Reiner & Co. v. United States, 325 F.2d 438 
(Ct. Cl. 1963), and subsequent precedent relying upon it, in support of its position. See 
Trilon Educational Corp. v. United States, 578 F.2d 1356 (Ct. Cl. 1978); EROS Div. of 
Resource Recycling Int'l, Inc., ASBCA Nos. 48355,48773, 99-1 BCA ~ 30,207. 
In Reiner, the former General Accounting Office (GAO) sustained an unsuccessful 
bidder's protest of a contract award as improper. Accordingly, the government cancelled 
the contract, prompting the awardee to sue for breach. The government defended on the 
ground that the contract was void and therefore not subject to a breach claim. The court 
concluded that it was not bound by GAO's ruling, and held that "[i]n testing the 
enforceability of an award ... where a problem of the validity of the invitation or the 
responsiveness of the accepted bid arises ... the court should ordinarily impose the binding 
stamp of nullity only when the illegality is plain." Reiner, 325 F.2d at 440. In Trilon, the 
government also cancelled an award after concluding that the contractor was 
nonresponsible, and denied liability for costs on the basis that the award was improper 
and illegal. Citing Reiner, the court held that when an award does not egregiously 
deviate from applicable statutes and regulations, the bidder may recover because the 
contract was "not palpably illegal to the bidder's eyes." Trilon, 578 F.2d at 1359-60. 
Similarly, in EROS, this Board found that violation of pre-award procedural requirements 
were not sufficiently plain to render the contract illegal. EROS, 99-1 BCA ~ 30,207 at 
149,461. 
This 
appeal does not involve an irregular contract award. Here, the contract 
contains operative terms that are illegal and unauthorized. This contrasts with EROS, 
where the Board expressly found that the contract's "terms and conditions did not violate 
or exceed any statutory or regulatory limits." !d. Honeywell does not cite any precedent 
holding that illegal contract terms can be enforced as long as the 
parties agreeing to them 
believed the contracting officer possessed authority to commit to them and that they were 
lawful. Indeed, the contention is inconsistent with the entrenched principle that 
contractors assume the risk that the agency may enter a contract, regardless of what the 
contracting officer believed, and that we must strike down illegal contract terms. United 
12 

States v. Amdahl Corp., 786 F.2d 387, 392-93 (Fed. Cir. 1986). Unlike Reiner, this 
situation is governed by precedent such as Yosemite Park and Curry Co. v. United States, 
582 F.2d 552 (Ct. Cl. 1978), where the court found that operative payment terms 
permitting recovery of federal income taxes, and a 12.5 percent operating fee, were 
illegal regardless of the parties' genuine belief to the contrary. See also Johnson Mgmt. 
Grp., 308 F.3d at 1255-57 (invalidating a liquidation provision inconsistent with the 
FAR, despite detrimental reliance by the contractor); Urban Data Sys., Inc. v. United 
States, 699 F.2d 1147 (Fed. Cir. 1983) (invalidating illegal price terms); McDonnell 
Douglas Corp. v. United States, 670 F.2d 156, 159 (Ct. Cl. 1982) (invalidating a patent 
rights exemption clause inconsistent with mandatory regulations); W Pa. Horological 
Inst., Inc. v. United States, 146 Ct. Cl. 540 (1959) (invalidating illegal price terms). 
We conclude that the provisions of the DO including the sales value of SRECs 
among the government's energy savings, and the associated payment calculations 
premised upon those sales, are invalid. We also find invalid the DO's provision 
permitting Honeywell to sell the SRECs. 4 Honeywell has argued that such a finding does 
not bar its recovery, claiming that it is still entitled to payment under the doctrine of 
reformation. We recognize that a finding that these portions of the DO are invalid may 
not bar recovery. See Barrett Refining Corp. v. United States, 242 F.3d 1055 
(Fed. Cir. 2001) (recognizing that quantum valebant relief is awardable to compensate for 
goods delivered under a contract with an invalid price escalation clause); Amdahl, 
786 F.2d at 395; Urban Data Sys., 699 F.2d at 1154-55; Yosemite Park, 582 F.2d at 
560-61. Consideration of any such entitlement must await further proceedings. 
CONCLUSION 
The government's motion to partially dismiss for lack of jurisdiction is denied. 
The government's motion for partial summary judgment is granted to the extent 
consistent with this opinion. Honeywell's motion for partial summary judgment is 
denied. 
Dated: 7 August 2013 
aJU~ 
MARK A. MELNICK 
Administrative Judge 
Armed Services Board 
of Contract Appeals 
(Signatures continued) 
4 Given this conclusion, we do not consider the government's additional argument that 
that the proceeds of SREC sales must be deposited in the Treasury. 
13 

Administrative Judge 
Acting Chairman 
Armed Services Board 
of Contract Appeals 
Administrative Judge 
Acting 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. 57779, Appeal of Honeywell 
International, Inc., rendered in conformance with the Board's Charter. 
Dated: 
14 
JEFFREY D. GARDIN 
Recorder, Armed Services 
Board of Contract Appeals