Zalzar FZE
Docket: ASBCA 59545, ASBCA 59546, ASBCA 59616
Decision date: 2020-05-06

ARMED SERVICES BOARD OF CONTRACT APPEALS 
 
Appeals of -- ) 
 ) 
Zalzar FZE ) ASBCA Nos. 59545, 59546, 59616  
 )         60053, 60054 
Under Contract  ) 
  No. SDZ-OEF/OIF-06-011-08-006-08027 )      
 
APPEARANCES FOR THE APPELLANT: Gianna Puccinelli, Esq. 
 Kristin N. Tahler, Esq. 
 Anisha Queen, Esq. 
 Kevin Carroll, Esq. 
  Quinn Emanuel Urquhart  
     & Sullivan, LLP   
  Washington, DC 
 
APPEARANCES FOR THE GOVERNMENT: Scott N. Flesch, Esq. 
  Army Chief Trial Attorney 
LTC Robert B. Nelson, JA  
   Trial Attorney 
          
OPINION BY ADMINISTRATIVE JUDGE O’CONNELL 
 
 These appeals arise out of a contract to provide temporary workers for the 
operation of Army and Air Force Exchange Service (AAFES) facilities in the Middle 
East.  Appellant, Zalzar FZE (Zalzar), seeks a total of $6,092,845 in five appeals.  The 
largest is ASBCA No. 60054, in which it seeks $4,203,312 arising from an alleged 
change in the logistical support it received from the government.  Zalzar also seeks 
$1,284,930 due to AAFES’ alleged unfair administration and bad faith termination of 
the contract (ASBCA No. 59616); $246,852 for price rate increases for reasons 
including the poaching of its workers and more stringent medical screenings and 
background checks (ASBCA No. 60053); and, in two related appeals, $351,540 due to 
higher prices for military air transport (ASBCA No. 59545) and $6,211 for commercial 
air travel (ASBCA No. 59546).   
 
The Board conducted a three-day hearing at which both parties presented fact 
and expert witnesses.  Liability and quantum are before us, although as will be seen, 
we will remand a portion of the quantum to the parties for further calculation.  
 

 
2 
FINDINGS OF FACT 
 
 1.  AAFES awarded Zalzar the above-referenced contract on April 2, 2008 (R4, 
tab 1 at KFLD-000001-ZALZAR LLC (hereinafter “R4, tab 1 at 1”)).  The contract 
provided for a five-year performance period (R4, tab 1 at 5).  The award was not 
exclusive (id.) with AAFES awarding 27 other contracts (tr. 2/99).  Zalzar was an 
incumbent, having performed a predecessor contract since 2002 (tr. 1/51-52). 
   
2.  The contract contained hourly rates Zalzar would be paid for five categories 
of temporary workers (manpower associates or “MPAs”) in Afghanistan, Kyrgyzstan, 
the United Arab Emirates (UAE), Qatar, Kuwait, and Iraq.  The contract divided the 
workers into local nationals (“LNs” or residents of the host country) and third country 
nationals (“TCNs” or workers from outside that country or the United States).  For 
example, in Afghanistan the contract included category one (laborer/stocker) rates of 
$4.73 per hour for LNs and $7.68 per hour for TCNs, and category five (e.g., store 
manager) rates of $11.08/$14.15.  (R4, tab 1 at 6, 23-31, 34-37) 
 
 Logistics Fee Claim (ASBCA No. 600541) 
 
 3.  Zalzar’s largest claim involves the provision of logistics (medical and food) 
by the government to Zalzar workers.  To understand how the claim arose, we must 
wade through some confusing provisions in the solicitation and contract.    
 
The Solicitation 
 
4.  The solicitation, in Exhibit D, Wage and Fee Schedule, paragraph 5, 
Logistics Support (Clause D5), directed the offerors to provide an hourly rate if they 
were to provide logistic support to their workers.  It stated that “[c]urrently logistic 
support is being provided [by the military] to TCN’s in Afghanistan and Iraq.  If this 
changes in the future the amount you have proposed will be added to the cost per 
employee to be paid for services rendered to AAFES.”  (App. supp. R4, tab 80 at 
ZAL-R4-2665 (app. supp. R4, tab 80 at 2665)).  The bid form for Afghanistan TCN’s 
provided in relevant part: 
 
       PRICE PER POSITION 
EMPLOYEE CATEGORY   OFFERED TO AAFES 
 
Category 1, Third Country National $_____________/hour 
Category 2, Third Country National $_____________/hour 
                                              
1 The Board docketed the logistics fee claim as ASBCA No. 60054 and the price 
increase claim as ASBCA No. 60053.  The parties have switched these numbers 
in their briefs. 

 
3 
 
Category 3, Third Country National $_____________/hour 
 
Category 4, Third Country National $_____________/hour 
 
Category 5, Third Country National $_____________/hour 
 
Additional cost factor 
 
Logistic Support 
(food, housing and medical) $_____________/hour 
 
(App. supp. R4, tab 80 at 2667)  The bid forms for Iraq TCNs and Afghanistan LNs 
were similar (id. at 2666-675). 
 
5.  As Zalzar states in its brief, one reading of Clause D5 would be that if there is 
any change in logistical support, then Zalzar would be entitled to the predetermined 
logistics fee rate and would not have to prove its actual costs (app. br. at 31).  
Unfortunately for Zalzar, the signed contract did not contain Clause D5 (R4, tab 1 at 22).  
The record does not explain why it was omitted from the signed contract or when the 
change was communicated to Zalzar.  (This contracting officer died during performance 
and did not testify (tr. 2/95)).     
   
 The Contract  
 
6.  Both the solicitation and contract identified 22 cost factors for which Zalzar 
was responsible and thus had to take into account when it formulated its hourly rates.  
These factors included “medical care to include first aid, immunizations, etc.” and 
“employee medical insurance” (R4, tab 1 at 21; app. supp. R4, tab 80 at 2664).  Before 
he signed the contract, the contracting officer asked Zalzar to confirm that its proposed 
rates took into account all 22 cost elements.  Zalzar responded that it “certainly 
includes our responsibility for all costs listed in Exhibit D” (R4, tab 37).  The contract 
further demonstrated that Zalzar understood its responsibility for employee medical 
costs because it incorporated a spreadsheet breaking down Zalzar’s hourly rates for 
category two workers and included amounts for medical insurance2 as well as medical 
care in Kyrgyzstan where Zalzar was based (R4, tab 1 at 32).   
                                              
2 In its reply brief, Zalzar appears to contend that it did not obtain medical insurance, 
only employer liability insurance (app. reply at 17-18 (citing app. supp. R4, 
tab 2 at 23)); see 46 C.J.S. Insurance § 1421 (Feb 2020) (discussing relationship 
between workers compensation and employers’ liability insurance).  The 
contract required medical insurance, which was separate and in addition to its 
requirement for workers compensation/employer liability insurance and/or 

 
4 
 
7.  As proposed by Zalzar and incorporated in the contract, the logistics fee 
rates were: 
 
  Afghanistan LNs:  $1/hour 
  Afghanistan TCNs:  $2/hour 
  Iraq TCNs:   $3/hour 
 
(R4, tab 1 at 23-24, 31)3 
 
 8.  The solicitation contained a second clause discussing logistics fees.  
Exhibit C, Special Provisions, paragraph 7 (Clause C7), provided that for locations 
where TCNs were not allowed to leave the installation, the military may provide 
logistical support including “employee housing, meals, emergency medical care, and 
use of morale/welfare/recreation facilities.”  But such logistical support was “subject to 
change” and the decision whether to provide logistical support and “the extent of such 
support rests with [the] overseas commander concerned and not with AAFES.”  
AAFES directed offerors to consider the current level of logistical support and, if the 
support changed, the contractor could request a price revision.  (App. supp. R4, tab 80 
at 2660)  Unlike Clause D5, Clause C7 was incorporated in the signed contract (R4, 
tab 1 at 17).   
 
 9.  Exhibit D to both the solicitation and the contract specified that a request for 
a price revision “must provide sufficient factual information and data to substantiate 
the proposed revision, including clear and definite identification of existing cost 
factors which could not be identified at time of entering into contract or renewal.”  
(R4, tab 1 at 22; app. supp. R4, tab 80 at 2665)   
 
10.  In sum, the solicitation contained inconsistent messages concerning how 
additional payments for logistical fees would be obtained.  One clause (D5) simply 
provided that if there was a change, then the contractor would be entitled to the agreed 
upon logistics fee rate.  Another set of clauses (C7 and the price revision clause) 
required the contractor to submit a written request for a price revision, which required 
it not only to “substantiate” the change with facts and data but also to demonstrate that 
                                              
Defense Base Act insurance (R4, tab 1 at 15, 21, 40).  Thus, to the extent that 
Zalzar failed to obtain medical insurance for its employees, it was in breach of 
the contract. 
3 This may be confusing to the reader, given that we previously noted in Finding of 
Fact 5 that Clause D5, involving logistics fees, was not in the contract.  Finding 
of Fact 8 addresses a different logistics fee provision and we will provide an 
explanation for the incorporation into the contract of the fees discussed here 
later in this opinion. 

 
5 
the costs could not be identified prior to contract.  As we have stated, only the latter 
clauses made it into the signed contract. 
 
11.  Execution of the contract without Clause D5 is not quite the end of the 
story, however on December 14, 2009, bilateral contract amendment no. 6 added 
positions for associates at roving retail activities (rodeo) in Iraq (R4, tab 7).  The 
amendment specifically incorporated new pages 6A and 7A to Exhibit D, the Wage 
and Fee Schedule.  While the two new pages largely contained provisions specific to 
rodeo workers, it also included what we have been referring to as Clause D5.  There 
was no explanation for the addition of this clause and, notably, it contained the same 
misspelling of “Offeres” as the solicitation.  (Id. at 3; app. supp. R4, tab 80 at 2665)  
This leads us to suspect that, rather than an intentional act, the contracting officer was 
cutting and pasting without proofreading.4    
   
Zalzar’s Claim 
 
12.  The crux of Zalzar’s claim is that until the fall of 2008, the U.S. military 
provided free health care and meals to Zalzar’s workers but after that required payment 
(app. br. at 35).  Zalzar supports the claim primarily with testimony from its chief 
executive officer, Leila Seiitbeck, and Phyllis Taylor (tr. 1/57, 74, 77-78, 107; app. ex. 1 
at 55-57).  AAFES denies that the military provided free meals or medical care (gov’t br. 
at 30-32).   
 
13.  Ms. Taylor was an AAFES contracting officer’s representative (COR) on 
the MPA contracts from 2005 until November 2011, retiring in December 2011 (app. 
ex. 1 at 16-17).  Ordinarily, we would give her testimony considerable weight but she 
accepted a position with Zalzar in July 2013 to work on this contract (id. at 29).  This 
resulted in an investigation for a conflict of interest by AAFES’s regional general 
counsel, which caused her to incur legal fees and resulted in her departure from Zalzar 
after only three months (R4, tab 153 at 31-33 (“AAFES threw a stink about me 
working for them”); app. supp. R4, tab 118). 
 
14.  During performance, Zalzar did not object to the alleged discontinuance of 
free food and medical care, nor did it seek payment of the logistics fees until after 
AAFES terminated the contract in 2014.  If AAFES had paid Zalzar the contractual 
logistics fees it would have increased the Afghanistan rates by as much as 26% and 
the Iraq rates by as much as 30% (R4, tab 1 at 24, 31).  When AAFES’ counsel asked 
Zalzar’s chief executive officer at the hearing why Zalzar never requested payment of 
                                              
4 Pages 6A and 7A (governing Iraq rodeo associates) are also included in R4, tab 6, 
which contains bilateral amendment no. 5, adding a warehouse foreman 
position in the UAE.  The most plausible explanation for this is a filing error.    

 
6 
the logistics fees until after the termination notice, she testified that they were “very 
busy” (tr. 2/36).   
 
15.  The record demonstrates that the military provided some medical services 
to the MPAs but the weight of the evidence indicates that it always expected to be 
reimbursed.  First, in November 2008, the contracting officer emailed all contractors to 
“remind” them that the military would provide “resuscitative care and stabilization 
requiring emergency hospitalization at military treatment facilities when wound, loss 
of limb or eyesight occurs” and that hospitalization would be limited to emergency 
stabilization and short term treatment with an emphasis on returning the patient to his 
country of origin.  The contracting officer further stated that the contractors were 
financially responsible for the medical treatment.  (R4, tab 40)  Neither Zalzar, nor any 
other contractor appears to have contended that this email changed anything.  
 
16.  On March 31, 2010, the contracting officer issued a memorandum to all 
MPA contractors once again describing the emergency and short-term medical 
treatment available to contractors and the responsibility of contractors for the cost of 
treatment.  He added that care was dependent on availability and at the discretion of 
the military commander.  (R4, tab 45)  Once again, Zalzar did not object.      
 
17.  On November 10, 2010, the contracting officer issued unilateral 
amendment no. 10 to the contract (R4, tab 11).  The amendment added a new clause to 
the contract: FITNESS FOR DUTY AND MEDICAL/DENTAL CARE LIMITATIONS (JCC-I/A 
CLAUSE 952.225-0003) (JAN 2010) (id. at 4-5).  The amendment was generally 
consistent with the November 2008 and March 2010 communications but went into 
greater detail.  It specifically added statements that routine, primary, and dental care 
were not available, nor were pharmaceutical services available for routine or known 
issues and specified daily rates for in and outpatient visits.  As justification, the clause 
cited, among other things, Department of Defense Instruction (DoDI) 3020.41.  It once 
again stated that contractors were responsible for the costs of medical services.  (Id.)  
Zalzar did not object or notify AAFES that it considered this a change. 
 
18.  DoDI 3020.41, CONTRACTOR PERSONNEL AUTHORIZED TO ACCOMPANY 
THE U.S. ARMED FORCES, had been in effect since October 2005 and remained so 
during the time the contract was awarded and performed.  It authorized emergency 
medical treatment for contractors but, among other things, barred primary medical or 
dental care, or pharmaceutical support unless specifically authorized under a contract 
and a letter of authorization.  Moreover, it specifically provided that the costs of any 
treatment would be reimbursable to the government by the employee, his employer, or 
health insurer.  DoDI 3020.41 at ¶ 6.3.8.  Thus, free medical care for contractors was 
contrary to policy at the time of award. 
 

 
7 
19.  On March 19, 2013, the parties entered into bilateral amendment no. 13 
extending the period of performance from April 1, 2013 to December 31, 2015 at the 
same rates (R4, tab 14).  Before signing the amendment, Zalzar did not request an 
increase to the hourly rates, nor did it seek payment of the logistics fees either 
retroactively or prospectively (id.; tr. 1/70 (Q. What discussions did you have with [the 
CO] about this amendment? A. None)). 
 
20.  On May 23, 2014, contracting officer, Michelle Blake (CO Blake) notified 
Zalzar that she was terminating the contract upon 30 days’ notice per the contract’s 
termination clause (R4, tab 22).  
 
21.  It is not entirely clear when Zalzar first raised payment for logistics fees.  
The record contains an email from a Zalzar official to the contracting officer on 
May 30, 2014 (seven days after the termination notice), attaching a certified claim for 
logistics fees totaling $3,297,509.96 (app. supp. R4, tab 16).  Zalzar subsequently 
began adding the logistics fees to its invoices (tr. 2/46, 119). 
 
22.  On September 8, 2014, Zalzar appealed the deemed denial of its claim, and 
the Board docketed it as ASBCA No. 59547.  In its answer to the complaint, the 
government contended that it had not received the claim (answer at 2-3). 
 
23.  Zalzar submitted a new certified claim for logistics fees on April 9, 2015, now 
seeking $4,764,253.50 (R4, tab 33).  On June 8, 2015, the contracting officer denied the 
claim with the exception of $129,424.82 for logistical support in the UAE (R4, tab 35).  
Zalzar filed a timely appeal that the Board docketed as ASBCA No. 60054. 
 
 24.  At the hearing Zalzar sought a total of $4,203,312 for logistics fees.  This 
amount included:  $3,366,361 for Afghanistan TCNs: $190,759 for Afghanistan LNs; 
$558,582 for Iraq TCNs; and $87,611 for UAE TCNs (app. ex. 3, Binder 15 at 11) 
(hereinafter “app. ex. 3, B1 at 11”).  The two larger amounts (Afghanistan and Iraq 
TCNs) solely involve medical care, while the smaller claims are combined medical and 
food (tr. 1/76-79 (Seiitbek discussing app. demonstrative ex. no. 1)).  Zalzar’s claim is 
not based on actual costs of providing medical care or food to its workers.  Rather, it 
has simply multiplied the hourly rates for logistics fees by the hours worked.  (R4, 
tab 33 at 11, n.13) 
 
DECISION 
 
We deny ASBCA No. 60054 and dismiss ASBCA No. 59547 as moot.  To 
begin, despite the testimony of Ms. Seiitbeck and Ms. Taylor, we do not believe that 
                                              
5 Appellant’s exhibit 3 is the expert report by Chelsea R. Taylor of the Kenrich Group, 
LLC.  This report and supporting materials are formatted into two binders. 

 
8 
the military ever provided free medical care to Zalzar’s workers.  There is too much 
evidence indicating that medical services had always been limited in scope and subject 
to reimbursement.  This evidence includes the existence of DoDI 3020.41 at the time 
of award, the contracting officer’s reminders of the limited and reimbursable nature of 
medical services in 2008 and 2010, Zalzar’s failure to object to the alleged changes, 
and the bilateral extension of the contract without Zalzar demanding payment of 
logistics fees.  Further, it would have been nonsensical for AAFES to require Zalzar to 
include medical insurance and care in the hourly rates paid by AAFES if the military 
were providing free care.  There is insufficient evidence for us to conclude that the 
military ever changed the alleged free meal policy.  
 
We construe a contract “to effectuate its spirit and purpose giving reasonable 
meaning to all parts of the contract.”  Hercules, Inc. v. United States, 292 F.3d 1378, 
1381 (Fed. Cir. 2002), citing Gould, Inc. v. United States, 935 F.2d 1271, 1274 (Fed. 
Cir. 1991).  The relationship between the parties is governed by the contract, not 
solicitation provisions that the contract failed to incorporate.  Northrop Grumman Info. 
Tech., Inc. v. United States, 535 F.3d 1339, 1344 (Fed. Cir. 2008); KD1 Dev., Inc. v. 
Johnson, 495 Fed. App’x 84, 88 (Fed. Cir. 2012).   
 
As we have found, the executed contract provided that the contractor could 
request a price revision if the logistics services changed; to obtain the price revision it 
had to provide “sufficient factual information and data to substantiate the proposed 
revision” and to identify “cost factors” that could not be identified before entering into 
the contract (finding 9).  We believe that the terms “factual information and data,” 
“substantiate,” and “cost factors” communicate that the contractor would be entitled to 
recover only to the extent that it could demonstrate that a change that occurred and that 
the amount would be based on the actual cost of the change.  This would be consistent 
with the government’s usual approach to changes.  Dawco Const., Inc. v. United 
States, 930 F.2d 872, 882 (Fed. Cir. 1991) (The use of actual costs “is preferred 
because it... ensur[es] that the final amount of the equitable adjustment will be just 
that—equitable —and not a windfall for either the government or the contractor ”). 
 
By contrast, the approach advocated by Zalzar cannot be reconciled with the 
price revision clause.  According to Zalzar, “if the military’s provision of logistical 
support in these countries changed in any way after the award, Zalzar’s compensation 
for the attendant costs would be based not on Zalzar’s actual costs for these services, 
but rather by adding the hourly rates Zalzar bid for logistical support to Zalzar’s 
standard hourly labor rates.”  (App. br. at 31 (emphasis in original))  Under this theory, 
if the military ended the alleged free lunches and imposed a $5 fee, this would be a 
wonderful development for Zalzar:  each $5 lunch in Iraq would entitle it to payment 
of $24 ($3/hr. logistics fee x 8 hours per shift).  The contractual requirement that 
Zalzar substantiate the price revision with facts and data and to identify cost factors 

 
9 
that could not be identified prior to award makes no sense if such a simplistic 
mechanism were intended.  
 
Zalzar would have a stronger argument if the contract had included Clause D5, 
which required offerors to bid an hourly rate for logistics and represented that if 
“logistic support . . . changes in the future the amount you have proposed will be 
added to the cost per employee” (finding 4).  The omission of Clause D5 should have 
set off alarm bells at Zalzar, but apparently it did not.  But even if Clause D5 had 
remained in the contract, the best case scenario for Zalzar is a contract that had a 
glaring inconsistency between that clause and the price revision clause.  Such an 
obvious problem would have required Zalzar to seek clarification prior to signing the 
contract.6  Comtrol, Inc. v. United States, 294 F.3d 1357, 1365 (Fed. Cir. 2002).   
 
This leaves us with the question as to why the original contracting officer (who 
died prior to the hearing) omitted Clause D5 from the contract but included logistics 
fee rates that seem to correspond to the instructions in that clause.  When CO Blake 
reviewed Zalzar’s claim, she interpreted the logistics fee rates to be a ceiling 
(tr. 2/118).  In other words, she concluded that they were the total value of logistics for 
each category of worker and were, therefore, the maximum amount AAFES would 
have to pay if the military eliminated logistics7 (id.).  This would have been a useful 
tool to AAFES when it evaluated bids because it established AAFES’ upside price 
risk.  This approach in our view is the only way to harmonize the requirements of 
Clause C5 and the price revision clause with the logistics fee rates.  We conclude that 
this is the correct interpretation of the contract.   
 
Even if we acknowledge that the bidding process may have created some 
confusion and consider extrinsic evidence, Zalzar fares no better.  One of the tools at 
our disposal is to consider the conduct of the parties before the dispute, which can be 
illuminating and may be given great weight.  Metropolitan Area Transit, Inc. v. 
Nicholson, 463 F.3d 1256, 1260 (Fed. Cir. 2006); Blinderman Constr. Co. v. United 
States, 695 F.2d 552, 558 (Fed. Cir. 1982).  Zalzar’s failure to object to any of the 
communications from the contracting officer describing the limited and reimbursable 
nature of government-provided health care services or to ever request payment of the 
                                              
6 The mysterious reappearance of RFP D5 20 months after award in a contract 
amendment does not change the result (finding 11).  As we have found, the 
most likely explanation for this was carelessness on the part of the contracting 
officer.  Zalzar should have sought clarification if it was confused by the 
reintroduction of the clause. 
7 Whether $2/hr for Afghan TCNs and $3/hr for Iraq TCNs corresponds to the actual 
costs of food, housing, and emergency medical cannot be determined on this 
record.  However, we observe that it comes in a context where the category 
one workers were paid as little as $2.00 per hour (R4, tab 1 at 32).  

 
10 
logistics fees at any time prior to termination is persuasive evidence that the parties 
understood the contract in the manner advocated by the government.  Id.  It is also 
entirely consistent with DoDI 3020.41, which barred the military from providing free 
health care. 
 
ASBCA No. 60054 is denied. 
 
Unfair Administration and Bad Faith Termination Claim (ASBCA No. 59616)  
 
FINDINGS OF FACT 
 
 Additional Relevant Contract Provisions  
 
25.  The contract gave AAFES a great deal of flexibility over its work force.  It 
provided that AAFES had the authority to add or delete MPA positions, and to increase 
or decrease the number of workers.  It provided that if a worker became ill, quit, or was 
found to be unacceptable by AAFES, the contractor could not replace the worker unless 
directed in writing by the COR.  In addition, when AAFES negotiated with a contractor 
to fill a position, AAFES reserved the right to have the position filled by another 
contractor if the proposed candidates were not acceptable.  (R4, tab 1 at 16-17) 
 
 26.  By contrast, the contract had no provision that allocated contractors any 
number of MPA positions, nor did it provide that a contractor “owned” a position once 
it filled that position.  While the MPA contractors entered into contracts with their 
workers (e.g., app. supp. R4, tab 112), there was no provision in the contract providing 
that, upon signing a contract, the contractor “owned” the rights to that worker.  Nor 
was there any provision that required AAFES to bar an employee who switched 
companies from working at an AAFES site.  
  
27.  The contract did not have a standard termination for convenience clause.  
Rather, it allowed either party to terminate the contract without cause upon 30 days’ 
notice in writing (R4, tab 1 at 9).  It also provided that “all business risk remains with 
the contractor” including “lost income” from “operational changes or contract 
termination” (R4, tab 1 at 5). 
 
28.  The contract provided that the hourly rates would remain fixed for the term 
of the contract unless the parties agreed to a price adjustment (R4, tab 1 at 22) and that 
Zalzar was responsible for “all salaries” and “yearly raises” of the workers (id. at 15). 
 
Employee Poaching 
 
 29.  Zalzar contends that “[b]eginning in 2012, other MPA contractors began 
soliciting Zalzar’s workers by approaching the workers directly during their shifts, 

 
11 
offering them more money, and encouraging them to switch companies” (app. br. 
at 22).  The record indicates that the actual wages Zalzar paid to its workers were as 
low as $2.00 per hour (R4, tab 1 at 32).     
 
30.  The hiring or “poaching” of workers by other companies appears to have 
been an issue raised by contractors throughout the performance period.  For example, 
on January 14, 2009, the initial contracting officer wrote to the MPA contractors to 
inform them that he had been “flooded with letters” complaining about poaching.  
While not crystal clear, the crux of his message was that workers could not switch 
companies without following procedures; his email cited provisions of the contract 
that required contractors to follow installation regulations and to obtain proper badges 
or credentials for its workers.  He cautioned them that workers could not switch 
companies until they had been properly badged for the new company.  He also stated 
that AAFES had no obligation to hold positions open for either the contractors or the 
workers.  (App. supp. R4, tab 90 at 2748-49)    
 
 31.  Similarly, on May 23, 2013, CO Blake wrote to the MPA contractors to 
advise them that they “do not have the right to literally transfer employees from their 
contract to another MPA company or vice versa” (app. supp. R4, tab 37) (emphasis in 
original).  She reminded the contractors that AAFES needed to know who employed the 
workers in its facilities and that “there is a lot of administrative paperwork tied to your 
employees within the military systems.”  She also stated that contractors could not grow 
their businesses at the expense of safety and security.  (App. supp. R4, tab 37)   
 
 32.  The record also indicates that human trafficking was an issue in 
Afghanistan.  The Army was concerned that if procedures requiring new employees to 
report to a deployment center before arriving in country were not followed, human 
traffickers would bring workers into the theater with the goal of obtaining employment 
from an MPA contractor.  (App. supp. R4, tab 36) 
 
 33.  Despite complaints by Zalzar, the contracting officer refused to intervene in 
poaching disputes if the employee followed procedures in switching companies (app. 
supp. R4, tab 45 at 0328). 
 
 Termination 
 
 34.  After she became contracting officer in 2013, one of Ms. Blake’s first 
actions was to allow 13 of the 28 MPA contracts to expire.  She extended 15 contracts, 
including Zalzar’s.  (Tr. 2/99; R4, tab 14) 
 
 35.  On March 14, 2013, CO Blake wrote to Zalzar, requesting it sign the 
contract extension.  Although Zalzar was one of the surviving contractors, she left no 
doubt that more reductions were coming due to the drawdown of American forces in 

 
12 
the region, advising Zalzar:  “[p]lease understand that as our presence in these 
contingency areas continues to shrink, so will our needs for contractor employees” and 
that AAFES would continue “to phase out our contractor employees.”  (App. supp. R4, 
tab 71) 
 
 36.  In April 2013, CO Blake offered Zalzar the opportunity to obtain additional 
work by referring it to an opportunity with the Navy Exchange (NEXCOM) in Dubai 
and offering to amend the contract to add the “sister exchange” clause so that 
NEXCOM could order using this contract (R4, tab 75 at 1005-06).  On May 23, 2013, 
the parties executed a bilateral amendment to the contract adding the sister exchange 
clause (R4, tab 15).    
 
 37.  During her testimony, Zalzar’s CEO, Ms. Seiitbeck, seemed to question 
whether a drawdown occurred, referring to it as “a legend” (tr. 2/62-63).  But as 
CO Blake convincingly testified, “[t]he number of MPA contracts in contingency 
decreased because the military decreased.  And any time the military decreases, we 
decrease . . . . we’re only as large as what is needed to support the military” (tr. 2/129). 
 
 38.  In December 2013, CO Blake received instructions from AAFES 
headquarters to reduce manpower costs.  She formed a committee that included 
representatives from her office, general managers, area managers, the military 
commander, and the finance and accounting office.  (Tr. 2/129-33)  The committee 
first looked at coverage, meaning which contractors could cover all of the countries, 
and then at the cost per hour of the contractor (tr. 2/134).  CO Blake also had to take 
into account that forces in Kuwait would not be reduced and two contractors servicing 
that country would have to be retained (tr. 2/135-36).  Further, she determined that the 
contractor Asia Logistics Company (Asia Logistics) was one of the only contractors 
that could serve all countries and was an economical option for retention (tr. 2/136). 
 
 39.  CO Blake received input from the committee members as to which 
contractors should be retained.  With respect to Zalzar, she took into account a price 
increase request submitted by Zalzar and the administrative time required by its 
contract (R4, tab 111).  While there was some differences of opinion among the 
committee members as to which contractors should be retained, no one advocated for 
Zalzar (R4, tabs 111-18).  As a result of the process, CO Blake determined that she 
would terminate nine of the remaining contractors, including Zalzar (tr. 2/136; R4, 
tabs 22, 120-27).  As described above, CO Blake issued the termination notice to 
Zalzar on May 23, 2014, terminating the contract effective June 30, 2014 (R4, tab 22). 
 
 40.  Zalzar was responsible for the costs of transporting the workers out of the 
country at termination, the costs of which were included in the 22 costs itemized in the 
contract (R4, tab 1 at 21).  Thus, if Zalzar did not have to pay these costs, Zalzar 
would benefit financially. 

 
13 
 
 41.  While AAFES reduced the number of MPA contracts, it still needed 
workers because its stores did not immediately close and it wanted to be able to keep 
the best workers even if their employer had been terminated (R4, tab 116).  As a result, 
in June 2014, AAFES discussed with Zalzar releasing certain associates from their 
contracts.  (R4, tab 137)  This not only benefited AAFES, but it also offered a 
potential benefit to Zalzar by saving its return air fare for which it had already been 
compensated through the hourly rates (as discussed further below in the military air 
appeal).  Thus, we do not consider this evidence of bad faith on the part of AAFES, 
notwithstanding Zalzar’s contentions to the contrary.    
 
 42.  On July 8, 2014, Zalzar submitted a certified claim seeking $471,084.54 for 
the alleged improper administration and bad faith termination of the contract (R4, 
tab 28).  The contracting officer denied the claim on September 29, 2014 (app. supp. R4, 
tab 70).  Zalzar filed a timely appeal that the Board docketed as ASBCA No. 59616.  
 
 43.  Zalzar contends that “AAFES’s termination of Zalzar was primarily motivated 
by improper favoritism of Asia Logistics and disdain for Zalzar” (app. br. at 3).    
 
44.  The record shows that, while Asia Logistics was one of the six surviving 
contractors, it was not spared from the drawdown.  In November 2013, Asia Logistics 
had 179 TCNs in Afghanistan (app. supp. R4, tab 35).  By May 31, 2014 (the month of 
the Zalzar termination), this number had fallen to 147 and by December 31, 2014, Asia 
Logistics had only 107 TCNs (R4, tabs 140, 147).  (Asia Logistics had no LNs during 
this period).  
 
45.  At the hearing, Zalzar increased the claim to $1,284,930 including 
$985,307 in lost profits due to the alleged poaching of its workers.  The remainder 
involves damages related to the termination:  $244,091 in lost profits from July 1, 2014 
to December 31, 2015 (the contract expiration date before termination); $48,915 in 
non-refundable costs for leasing office space and apartments; and $6,617 in losses on 
new workers it hired but who were unable to start work due to the termination.  (App. 
ex. 3, B1 at 14-18, add. at 2-3). 
 
46.  The calculation of $985,307 in lost profits due to worker poaching is what 
might be loosely called a total cost claim.  Zalzar’s expert did not verify that the 
workers Zalzar included in the lost profits calculation had left due to poaching.  She 
testified that she understood that they had left “primarily” for this reason.  Thus, she 
did not remove from the calculation any worker who simply left exchange employment 
(such as at the end of his contract), nor any employees who were terminated by Zalzar.  
Nor did she account for the overall decrease in workers due to the drawdown.  
(Tr. 1/165-67)  Thus, the calculation is overstated by an unknown amount. 
 

 
14 
DECISION 
 
Zalzar’s claim for $985,307 related to the poaching of its workers by other 
contractors is not well received by the Board.  We find it unsurprising that workers 
making as little as $2.00 per hour in a war zone were receptive to offers of better pay 
from other companies.  Zalzar had no basis to expect AAFES to help maintain such a 
status quo and the contract had alerted Zalzar that compensation raises would be its 
responsibility (finding 28).  It would have been unconscionable for AAFES to 
cooperate with Zalzar’s efforts to claim permanent ownership of these workers and 
restrict them to the wages Zalzar chose to pay.   
 
Zalzar’s claim is based in part on a misunderstanding of the communications 
from the contracting officers in which they tried to maintain some order over the 
movement of workers among contractors.  To the extent AAFES regulated the flow of 
workers, it arose from its goals of maintaining security by ensuring that the workers 
were properly vetted, badged, and tracked, and preventing human trafficking, rather 
than a desire to help contractors cap wages at a low level (findings 30-32). 
 
Zalzar’s claim is also based on a misreading of the contract.  As we have found, 
the contract gave AAFES a great deal of flexibility in increasing or decreasing the 
number of workers and positions, hardly a surprising feature for temporary workers in 
a war zone.  The contract did not parcel out slots to contractors and if, for example, a 
worker quit, the contractor could only replace the worker if AAFES requested it do so, 
and, even if AAFES requested a replacement, AAFES retained the right to select a 
better candidate from another contractor.  (Finding 25)  AAFES did not assume any 
responsibility under the contract to protect Zalzar from competitors who bid rates high 
enough to offer better wages.  
 
Zalzar cites deposition testimony from former COR Phyllis Taylor who testified 
that a “position belonged to that MPA manpower agency” (app. ex. 1 at 134).  But 
there is no basis in the contract for this.  While there may have been an informal 
practice to give contractors the first chance to replace one of their workers who had 
departed, this does not compel the conclusion that the position “belonged” to that 
contractor. 
 
We have scoured Zalzar’s briefs in vain for some explanation of the contract 
terms violated by AAFES.  It instead falls back on the implied duty of good faith and 
fair dealing.  But AAFES’ actions were consistent with the express terms of the 
contract, and were not unfaithful to an agreed common purpose or the justified 
expectations of either party.  Metcalf Constr. Co. v. United States, 742 F.3d 984, 991 
(Fed. Cir. 2014).  As the Federal Circuit has held, the implied duty of good faith 
cannot overcome a fixed price contract’s allocation to the contractor of the risk that 
prices may rise.  Lakeshore Eng’g Servs, Inc. v. United States, 748 F.3d 1341, 1349 

 
15 
(Fed. Cir. 2014); see United States v. Beuttas, 324 U.S. 768, 772-73 (1945) 
(government did not breach the implied duty not to hinder the foundation contractor or 
to increase costs of performance when it let for bids a subsequent contract on the same 
project with higher wages that resulted in a strike by the plaintiff’s workers until it 
agreed to pay the higher wages).        
 
Zalzar’s claim is, however, contrary to the government’s justified expectations 
in entering a fixed price contract.  The government reasonably expected that Zalzar 
was competent to judge labor rates in the market and its bid was a representation that it 
could perform for the fixed rates over the five-year term of the contract.  Zalzar is 
essentially contending that the government could only receive the benefit of the fixed 
rates if it conspired with contractors to artificially deflate wages by restricting free 
movement of workers.  This is not consistent with the allocation of risk in a fixed price 
contract. 
 
Finally, even if Zalzar had proven entitlement, the amount is inflated by a 
significant amount (finding 46).  Accordingly, we hold that it has not proven damages 
to a reasonable degree of certainty.  Precision Pine & Timber, Inc. v. United States, 
596 F.3d 817, 833 (Fed. Cir. 2010). 
 
As for the bad faith termination claim, Zalzar faces two enormous hurdles:  the 
language of the contract and the cold math imposed by the drawdown.  In the contract, 
AAFES bargained for maximum flexibility in increasing or decreasing the workforce 
while assigning maximum risk to the MPA contractors.  By signing the contract, 
Zalzar accepted all business risk, including lost income, of operational changes and 
termination (finding 27).  By 2013, Zalzar had been performing for more than a decade 
(finding 1) and it must have realized that the war could not go on forever.  
Nevertheless, Zalzar is unhappy because the risk it freely accepted – the drawdown of 
forces and termination – finally came to pass.  
 
Contracts with a Federal Acquisition Regulation (FAR) termination for 
convenience clause allow the government to terminate contracts for convenience without 
being held liable for breach and required to pay the contractor lost profits on the 
termination.  A narrow exception to this rule is if the contractor can show that the 
government acted in bad faith, a heavy burden contractors have rarely been successful in 
meeting.  Nexagen Networks, Inc., ASBCA No. 60641, 19-1 BCA ¶ 37,258 at 181,328 
(citing Krygoski Constr. Co. v. United States, 94 F.3d 1537, 1541 (Fed. Cir. 1996)). 
 
As described above, the clause in this contract was not a termination for 
convenience clause but was broader in the sense that it gave both parties the right to 
terminate without cause.  The Board has stated that the right to terminate in this clause 
is “unfettered” and the motive of the terminating party is “immaterial.”  Christine 
Turner, ASBCA No. 26900, 84-1 BCA ¶ 17,138 at 85,381.  We have nevertheless 

 
16 
considered whether the AAFES contracting officer acted in bad faith in terminating the 
contract similar to a termination for convenience.  Id.; Jarke Corp., ASBCA No. 43509, 
93-2 BCA ¶ 25,866 at 128,696. 
 
Zalzar has not met its heavy burden of proving bad faith.  Despite suggestions 
to the contrary by its CEO, the drawdown was real and it forced the contracting officer 
to sharply reduce the number of contractors (findings 35, 38).  We understand that 
Zalzar is unhappy with the result, but it was 1 of 22 contractors that either were not 
extended or were terminated by CO Blake (findings 34, 39).  The record demonstrates 
that CO Blake went through a rational process of gathering input from various DoD 
stakeholders in determining which contractors to retain.  Unlike other contractors, 
there was no compelling reason to retain Zalzar.  (Findings 38-39) 
 
In addition, the CO’s extension of the Zalzar contract in 2013 and her offer of 
work with NEXCOM are affirmative evidence of good faith (findings 34, 36).  The 
evidence is wholly insufficient to conclude that AAFES officials were engaged in a 
conspiracy to take work from Zalzar and funnel it to Asia Logistics. 
 
Zalzar has made a variety of other allegations concerning the contracting 
officer’s alleged bad faith that are not directly tied to a damages calculation but are 
intended to show an overarching pattern of bad faith.  We have considered them but 
find that they do not prove bad faith on the part of the contracting officer.  For 
example, Zalzar alleges that CO Blake failed to take action when workers complained 
about working conditions (app. br. at 56-57).  But she testified convincingly that she 
was not the first line of contact for such a complaint and she put Zalzar in touch with 
the appropriate COR (tr. 2/125).  In addition, while Zalzar has nothing to say in its 
briefs about the NEXCOM opportunity in Dubai, it complains that CO Blake did not 
properly assist it in pursuing opportunities in Egypt and Jordan (app. br. at 55-56).  
The limited documentation in the record (app. supp. R4, tabs 41-42) does not support a 
finding of bad faith. 
 
ASBCA No. 59616 is denied.  
 
Price Increase Claim (ASBCA No. 60053) 
 
 47.  This appeal arises from a certified claim Zalzar submitted on May 1, 2015 
seeking increases to its hourly rates totaling $602,359.49 (R4, tab 34).  The contracting 
officer denied the claim on July 1, 2015 (R4, tab 36).  Zalzar filed a timely appeal on 
July 2, 2015 that the Board docketed as ASBCA No. 60053.8 
                                              
8 Similar to the logistics fee claim, Zalzar may have submitted an earlier claim to the 
contracting officer (app. supp. R4, tab 25) that it appealed based on a deemed 
denial  and the Board docketed as ASBCA No. 59548.  AAFES contended in its 

 
17 
 
 48.  At the hearing, Zalzar reduced the claim to $246,852.  As re-calculated by 
its expert, Zalzar seeks increases in the hourly rates for Afghanistan and UAE workers 
from September 16, 2013 to June 30, 2014 (R4, tab 34 at 1; app. ex. 3, B2 at ex. 4.1).  
Zalzar requested various rate increases including the following category one changes:  
Afghanistan LNs from $4.73 to $9.01; Afghanistan TCNs from $7.68 to $8.58; and 
UAE TCNs from $10.10 to $13.87 (R4, tab 1 at 23-24, 26; app. ex. 3, B1 at 20, 23, 26). 
 
 49.  As discussed below, the claim is based largely on events that happened before 
the contract extension, meaning that Zalzar knew about the costs before it agreed to an 
extension at the same rates.  Zalzar’s expert addresses this curiosity in her report by 
stating that “Zalzar alleges that the Contracting Officer did not allow Zalzar to propose 
updated hourly labor rates as a part of its contract extension” (app. ex. 3, B1 at 19).   
 
 50.  The Board has reviewed the record but has found nothing that indicates that 
the contracting officer prevented or discouraged Zalzar from requesting a rate increase 
before the contract extension. 
 
 51.  The largest component of the claim stems from wage increases that Zalzar 
contends it incurred “[b]eginning in 2012” to stave off poaching attempts by its 
competitors (app. br. at 22; tr. 1/107; see app. ex. 3, B2 at tab 4B (spreadsheets 
itemizing claim)).  As calculated by AAFES’ expert, when items such as pension that 
are based on a percentage of wages are taken into account, the wage increase makes up 
65-70% of the claim amount (tr. 3/57). 
   
52.  Somewhat confusingly, the wage increase is not based on the difference 
between Zalzar’s bid and the actual wages it paid its workers but rather on what its 
competitors, primarily Asia Logistics, paid their workers.  Ms. Seiitbek used her 
knowledge of the industry in specifying the claim rates.  (App. ex. 3 at 20-21)  It is 
unclear why Ms. Seiitbek would have a better grasp of Asia Logistics’ wages than 
Zalzar wages.   
   
53.  We have not found a direct explanation for the methodology, but we 
surmise that it relates to the unavailability of Zalzar’s financial documents, a 
circumstance that Ms. Seiitbek has variously blamed on Zalzar’s accountants and the 
“Kyrgyz KGB” (tr. 2/80-81).  During discovery, the government attempted to obtain 
documents from Zalzar that would demonstrate the amounts paid to its employees, but 
Zalzar failed to provide responsive documents (tr. 3/150-51; R4, tab 148 at 24-27).  
The Board finds that Zalzar has not proven its increased costs related to poaching.   
 
                                              
answer that it had not received it (answer at 4), which led to the May 1, 2015 
claim.  We deny ASBCA No. 59548 as moot. 

 
18 
54.  As for the remaining elements of this claim, we would characterize the 
information provided by Zalzar during the hearing and in its briefs as modest and the 
government’s defense as close to nonexistent.  The items that Zalzar discusses in its 
brief are:  new medical screening requirements; expenses that arose after workers were 
no longer able to collect their pay at a military “cash cage”; and changed background 
check requirements (app. br. at 77-79). 
 
New Medical Screenings 
 
55.  On July 25, 2010, COR Taylor forwarded to contractors a memorandum 
she described as containing “the new medical requirements for badging on military 
installations” (app. supp. R4, tab 97 at 2767).  The memorandum applied to 
Afghanistan LNs (id. at 2769).  Despite her reference to “new medical requirements” it 
is not clear from the memorandum if the requirements changed or if it was the method 
of screening that changed due to the expiration of a vendor contract.  However, a later 
email from COR Taylor to contractors in October 2010 suggests that there were new 
screening and/or immunization requirements (app. supp. R4, tab 99 at 2776). 
 
56.  Zalzar’s expert calculates a claim amount of $.20/hour for Afghanistan LNs 
based on two screenings per year at $250 each (app. ex. 3 at 21).  However, the 
memorandum forwarded by COR Taylor (app. supp. R4, tab 97 at 2769) required one 
screening before issuance of a base access badge and then annual screenings 
thereafter.  Moreover, in her analysis of the Afghanistan TCNs, the expert observed 
that while Zalzar was claiming for two medical screenings per year, the requirement 
was for only one screening.  Thus, she reduced the claim amount from $0.26/hour to 
the actual cost for one screening of $0.07/hour.  She did not address the discrepancy in 
the claimed number of screenings.  (App. ex. 3, B1 at 24)    
 
57.  Zalzar also seeks $0.08/hour for medical care of UAE employees back in 
Kyrgyzstan (app. ex. 3 at 26).  However, this does not appear to be related to increased 
screening or immunization requirements but rather a decision by Zalzar that medical 
care was cheaper in Kyrgyzstan than the UAE (tr. 2/87-88).  The contract placed 
responsibility for medical care and medical insurance on Zalzar (R4, tab 1 at 21). 
 
Cash Cage 
 
58.  This part of the claim stems from two emails in February 2010.  On 
February 12, Ms. Seiitbek wrote to Western Union, or more specifically to 
wu-governmentsanctions@intl.westernunion.com.  The email is lengthy but started 
with a description of Zalzar’s contract with AAFES in what appears to be an attempt to 
establish that it was a legitimate business.  In the second paragraph, she stated that 
most Western Union offices in Bishek, Kyrgyzstan, had prohibited money transfers to 
Afghanistan and that this was a problem for her company and its workers because 

 
19 
“banking services are not well developed or not easily available” in Afghanistan and 
that most transactions are done in cash.  (App. supp. R4, tab 92 at 2755)   
 
59.  The third paragraph of the email grew more specific and turned to a 
somewhat different problem than a blanket prohibition on transfers.  Ms. Seiitbek 
stated that Zalzar’s cashier had been blacklisted by Western Union because “he was 
making too many payments.”  She asserted that Zalzar was “not involved in any 
suspicious activity” and requested that his name be removed from the blacklist.  (Id.)  
 
60.  Finally, Ms. Seiitbek stated that there were “other money transfer systems we 
may use that provide services similar to yours” but stated that Zalzar preferred to use 
Western Union because each AAFES facility has a Western Union office (id. at 2756). 
 
61.  Ms. Seiitbek copied on the email, among others, COR Taylor.  Ms. Taylor 
responded two days later with something of a non sequitur, stating, in total, “Leia, I 
told you last year to get bank accounts for your workers, the military is going to no 
cash, they have issued so [sic] you might as well get the bank accounts.”  (Id. at 2754)  
 
62.  The contract provided that the contracting officer “[i]s the person who can 
contractually commit AAFES.  All contract changes and notices of major contract 
violations (default) must come from the contracting officer.”  (R4, tab 1 at 6)   
 
63.  At the hearing, Ms. Seiitbek testified that after receiving COR Taylor’s 
email, Zalzar set up bank accounts for its workers at a cost of $35 per person 
(tr. 1/105-06).  However, in her report, Zalzar’s expert stated that the claim was based 
on a fee of $35 per person per month for bank transfers, which amounted to an increase 
of $0.17/hour (app. ex. 3, B1 at 21, 25, 27).  The expert included the $0.17 charge for 
UAE workers (id. at 27) but there is no evidence that Western Union barred money 
transfers to the UAE.  
 
64.  In its brief, Zalzar also cites testimony from COR Taylor, who did not 
address the Western Union issue but she stated that there was “a lack of funds 
generated with the military” and there was not enough money in the cash cage to pay 
MPA workers (app. ex. 1 at 110-11).  Piecing this together, we infer that the cash cage 
was instrumental in converting the Western Union transfers into cash, or at least that is 
what Ms. Taylor believed.  
 
65.  The Board finds that Zalzar’s explanations for the claim (Western Union’s 
refusal to transfer money to Afghanistan and the lack of funds in the cash cage) are 
inconsistent and the most plausible is the one presented at length in Ms. Seiitbek’s 
February 12, 2010 email, namely the Western Union explanation.  However, based on 
COR Taylor’s statement that “the military is going to no cash,” it appears that this 

 
20 
might have become a problem if Western Union had not blocked the transfers to 
Afghanistan.    
 
66.  The contract did not mention Western Union or place any obligations on 
AAFES to facilitate Zalzar’s payment to its employees.  The costs for which Zalzar 
was responsible under the contract included administrative costs (R4, tab 1 at 21).   
 
Enhanced Background Checks 
 
67.  Contract exhibit D, Wage and Fee Schedule, included employee 
background checks in the 22 items for which Zalzar was responsible (R4, tab 1 at 21).  
Similarly, contract exhibit C, Special Provisions, provided “Contractor will provide (at 
their expense) fully qualified employees that have received security screening . . . .  In 
accordance with Paragraph 1, Employee Costs, of Exhibit D, Wage and Fee Schedule, 
it will be the contractor’s responsibility to provide this at no additional charge to 
AAFES.”  (Id. at 16)  The contract did not describe in detail the nature of the 
background checks at the time of award. 
 
68.  On February 10, 2011, COR Taylor wrote to MPA contractors stating:  
 
Ladies and Gentlemen, 
I need to bring some new regulations to your attention 
about the documents presented by your associates for 
badging purposes. 
Background Checks 
Background Checks must now be country wide back 
ground checks and must be able to be verified through the 
internet. 
 
(App. supp. R4, tab 103 (emphasis in original)) 
 
 69.  When asked by Zalzar’s counsel whether this email imposed new 
background check requirements, Ms. Taylor testified: “I wouldn’t say it was a new 
requirement, but it was a requirement to make sure that the background checks were 
not forged” (app. ex. 1 at 112). 
 
 70.  Ms. Seiitbek testified that Zalzar had to “upgrade the background checks to 
inspire more comfort on the base” and that it had to do them “through a notary office 
with an English translation.  And, that severely increased the expenses of the 
documentation.”  (Tr. 1/106-07) 
 
 71.  Zalzar did not provide a quantification of the allegedly increased costs of 
background checks during the hearing or in its briefs.  The Board has plumbed the 

 
21 
depths of both volumes of Zalzar’s expert report and has found spreadsheets calculating 
that background checks for Afghanistan and UAE TCNs increased from $0.01/hour as 
bid to $0.08/hour (app. ex. 3, B2 at exs. 4.7 to 4.16, tab 4B at Afghanistan TCN and 
UAE TCN spreadsheets). 
 
DECISION 
 
 The Board denies the wage increase portion of this claim for the same reasons 
as in No. 59616 above.  This was a fixed priced contract and, if it did not bid prices 
high enough to retain workers, that was Zalzar’s problem, not AAFES’s.  Certainly, it 
should not have agreed to an extension of the contract if it viewed its fixed prices as 
inadequate. 
 
In the June 10, 2014, claim letter that preceded the filing of ASBCA No. 59548, 
Zalzar stated: 
 
Salaries for [Afghanistan] local nationals (LN) have gone 
up since 2008.  The local population is demanding higher 
and higher salaries as the years go by.  Zalzar FZE needs to 
be able to pay a fair and competitive salary to its’ local 
national workers.  In almost every case we are currently 
paying a higher hourly rate to our workers then [sic] what 
we are charging to AAFES.   
 
(App. supp. R4, tab 25 at 0203)  This letter indicates that Zalzar simply miscalculated 
what it would have to pay workers, a risk that it faced on a fixed price contract.  But 
whether poaching or the changing expectations of Afghan workers was the root cause 
of the higher wages is irrelevant.  As the Federal Circuit has stated, “[t]he essence of a 
firm fixed-price contract is that the contractor, not the government, assumes the risk of 
unexpected costs.”  Lakeshore, 748 F.3d at 1347. 
 
 Zalzar’s claim with respect to the cash cage is denied.  The government did not 
bear the risk of a change in practice by Western Union in its Kyrgyzstan offices.  
COR Taylor had no authority to order Zalzar to open bank accounts for its workers 
and her reference to bank accounts did not make any sense in response to an email 
about Western Union’s prohibition on money transfers.  The contract did not require 
AAFES to take any action to facilitate Zalzar’s payments to its workers, such as 
making a cash cage available. 
 
 Finally, Zalzar has made a plausible showing of increased costs for medical 
screenings and background checks, especially in light of the lack of a defense from the 
government.  We find that Zalzar has demonstrated that it is entitled to an additional 
$0.07/hour for medical screenings for its Afghanistan LNs and TCNs.  It is entitled to 

 
22 
an additional $0.07/hour for increased background check requirements for Afghanistan 
and UAE TCNs.  Both amounts are due for the entire claim period, that is, from 
September 16, 2013 to June 30, 2014.  We remand to the parties for calculation of the 
precise amount owed. 
 
Military Air (ASBCA No. 59545) and Commercial Air (ASBCA No. 59546) 
 
 72.  One of the expenses for which Zalzar was responsible under contract 
exhibit D was transportation, including transportation from the installation upon 
termination, and vacation/home leave transportation (R4, tab 1 at 21). 
 
 73.  As discussed above, Clause C7 directed contractors to take into account 
various factors when they formulated their cost proposals.  The clause highlighted the 
availability of military air: 
 
The contractor should consider the services currently 
provided when submitting their cost proposals to AAFES. . 
. .  The contractor employee, if authorized, may use 
Military Air flights, however, the contractor shall be 
responsible for reimbursing the military (through AAFES) 
for these costs.  The contractor will be responsible for all 
other costs associated with the employee.  This includes 
but is not limited to the cost of transportation to and from 
the installation. 
 
(R4, tab 1 at 17) (emphasis omitted) 
 
 74.  There is no dispute that for most of the contract Zalzar was able to take 
advantage of military air between Manas Air Base in Kyrgyzstan and Afghanistan.  
But on February 19, 2014, AAFES notified all contractors that they would no longer 
be able to use military air at Manas as of February 28, 2014 (R4, tab 16). 
 
 75.  On April 7, 2014, Zalzar submitted a certified claim seeking $6,216.45 for 
the cost of transporting eight workers on commercial air after the February 28, 2014 
closure of Manas.  It alleged that military air through Manas had been the sole 
transportation method it had used between Kyrgyzstan and Afghanistan during the 
contract.  Zalzar calculated the claim by taking the $8,048.45 price of the commercial 
flights and subtracting from it the $1,832 price it alleged was the military airfare in 
2008.  Zalzar also requested $190 for shipping individual body armor and a helmet.  
(R4, tab 20 at 3, 6-7)  
 
 76.  On May 30, 2014, Zalzar submitted a certified claim seeking $330,208 for 
increases in the cost of military air from May 2009 through March 2014.  According to 

 
23 
the documents submitted with the claim, in 2008 the military air price of flights from 
Manas to Bagram was $165; from Manas to Kandahar it was $245.  Zalzar alleged that 
after 2008 the average flight cost increased by 181.41% (R4, tab 23 at 1, 3, 5). 
 
 77.  The contracting officer denied the commercial air claim on June 10, 2014 but 
the decision was not transmitted in full to Zalzar until the following day (R4, tab 26 at 1, 
29).  The contracting officer denied the military air claim on July 31, 2014 (R4, tab 31).   
 
 78.  Zalzar filed a timely appeal of both claims on September 9, 2014. 
 
 79.  At the hearing, Zalzar increased the military air claim to $351,540 based on 
the analysis of its expert, and reduced the commercial air claim by $5 to $6,211 (app. 
ex. 3 at 7). 
 
 80.  Zalzar’s expert increased the military air claim by correcting some 
calculation errors in a spreadsheet.  She also included a decrease of $492 due to 
inadequate documentation on the flight route of Kandahar to Pasab to Manas.  (App. 
ex. 3 at 30)  AAFES’s expert found a greater decrease for this route and recalculated 
the claim value as $343,988 (R4, tab 148 at 10). 
 
 81.  In its 2008 bid, Zalzar included $0.39/hour for transportation costs (app. 
supp. R4, tab 79; R4, tab 150 at 2).  AAFES’ expert determined that Zalzar spent a 
total of $651,584 in military airfare.  AAFES’ expert multiplied the hours invoiced by 
Zalzar, as accumulated and submitted with the logistics fee claim, by the $0.39 bid 
cost, finding that Zalzar recovered $567,370 from AAFES for the flight costs.  (R4, 
tab 148 at 6-7, tab 150 at 2)  Thus, Zalzar lost $84,214 on military air.  
 
DECISION 
 
 The Board holds that Zalzar has established entitlement.  AAFES bases its 
defense upon the fixed price nature of the contract and clauses that required it to pay 
for transportation as a component of its hourly rates, as well as the clause placing 
business risk on Zalzar (findings 27, 72).  Neither the fixed price nature of the contract 
nor Zalzar’s responsibility for transportation precludes a cost increase.  A general 
clause that places business risk upon Zalzar does not overcome the more specific 
Clause C7 which directed contractors to base their bids on the relatively low military 
air prices that were available in 2008 (finding 73).  Hometown Fin., Inc. v. United 
States, 409 F.3d 1360, 1369 (Fed. Cir. 2005) (citing Hol-Gar Mfg. v. United States, 
351 F.2d 972, 980 (Ct. Cl. 1965) (“where an agreement contains general and specific 
provisions which are in any respect inconsistent or conflicting, the provision directed 
to a particular matter controls over the provision which is general in its terms”). 
 

 
24 
 AAFES cites Weatherford Group, Inc., ASBCA No. 59315, et al., 15-1 BCA 
¶ 36,143, which bears some similarity to these appeals because it also involved a 
military air claim for flights to Afghanistan.  But the issue in that appeal was whether 
the contractor was entitled to free air fare, a dispute entirely dependent on the specific 
language of the contract and a contention that Zalzar has not made in these appeals.  
Weatherford Group is inapposite.    
 
 A somewhat more difficult question is the proper measure of damages.  Other 
than some relatively small corrections by its expert, AAFES does not challenge the 
basic fact that military air rates increased by about 181% over the course of the 
contract.  As described above, AAFES’ expert contends that Zalzar would receive a 
windfall if the Board awarded the amount sought by Zalzar because its actual losses 
were only $84,214 based on an analysis of its wage rates (finding 81).  Interestingly, 
however, AAFES does not pursue this defense in its post-hearing brief. 
 
The Board concludes that the proper measure of recovery is the $343,988 
increase from the anticipated cost at bid (finding 80).  In other words, we believe that 
the proper approach under these facts is to award damages based on Zalzar’s 
expectation interest or the interest in having the benefit of its bargain by being put in 
“as good a position as he would have been in had the contract been performed.”  
Bluebonnet Sav. Bank, F.S.B. v. United States, 266 F.3d 1348, 1355 (Fed. Cir. 2001) 
(quoting RESTATEMENT (SECOND) OF CONTRACTS, § 344 cmt. a (1981).  The damage 
that Zalzar would suffer if it bid based on 2008 rates as directed by AAFES but the 
military then sharply increased those rates was entirely predictable and ascertainable.  
Because AAFES cannot have its cake (2008 rates) and eat it too (disclaiming 
responsibility for increases in those rates) we award Zalzar its damages. 
 
For the same reasons, we award Zalzar its commercial air claim of $6,211, the 
costs for which have not been challenged by AAFES.  The increased costs of 
commercial flights to Afghanistan were entirely predictable and ascertainable if Zalzar 
bid the contract based on the 2008 rates but the military air service was thereafter 
terminated. 
 

 
25 
CONCLUSION 
 
 We deny ASBCA No. 60054 and ASBCA No 59616.  ASBCA No. 60053 is 
sustained in part.  ASBCA No. 59545 and ASBCA No. 59546 are sustained. 
 
Dated:  May 6, 2020 
 
MICHAEL N. O’CONNELL 
Administrative Judge 
Armed Services Board 
of Contract Appeals 
 
         I concur 
 
 
 
 
ALEXANDER YOUNGER 
Administrative Judge 
Armed Services Board 
of Contract Appeals 
 
I concur 
 
 
 
 I concur 
 
 
 
RICHARD SHACKLEFORD 
Administrative Judge 
Acting Chairman 
Armed Services Board 
of Contract Appeals 
 J. REID PROUTY 
Administrative Judge 
Vice Chairman 
Armed Services Board 
of Contract Appeals 
 
 
  


 
26 
 
 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. 59545, 59546, 59616, 
60053, 60054, Appeals of Zalzar FZE, rendered in conformance with the Board’s 
Charter. 
 
 Dated:  May 12, 2020 
 
 
       
  
PAULLA K. GATES-LEWIS 
Recorder, Armed Services 
Board of Contract Appeals