U.S. Coating Specialties & Supplies, LLC
Docket: ASBCA 58245
Decision date: 2020-09-28

ARMED SERVICES BOARD OF CONTRACT APPEALS 
 
Appeal of - )  
 )  
U.S. Coating Specialties & Supplies, LLC ) ASBCA No.  58245 
 )   
Under Contract No. W912EE-10-C-0019 )  
    
APPEARANCE FOR THE APPELLANT: Louis H. Watson Jr., Esq. 
    Watson & Norris, PLLC 
    Jackson, MS 
 
APPEARANCES FOR THE GOVERNMENT: Michael P. Goodman, Esq. 
    Engineer Chief Trial Attorney 
 Steven H. Finch, Esq. 
John M. Breland, Esq. 
    Engineer Trial Attorneys 
    U.S. Army Engineer District, Vicksburg 
 
OPINION BY ADMINISTR ATIVE JUDGE WOODROW  
 
 This appeal arises from the termination for default of a contract to construct a 
building to house a large unclassified supercomputer at the Army’s Engineering Research 
and Design Center (ERDC).  On April 9, 2015, the Board issued a decision denying the 
government’s amended motion to dismiss or, in the alternative, for summary judgment.  
U.S. Coating Specialties & Supplies, LLC, ASBCA No. 58245, 15-1 BCA ¶ 35,957 (U.S. 
Coating I).  On January 21, 2016, the government filed a renewed motion for summary 
judgment, contending that the parol evidence rule barred evidence of an alleged prior oral 
agreement between appellant and the Assistant U.S. Attorney (AUSA) during appellant’s 
Chapter 11 bankruptcy proceedings, and alternatively, that the AUSA lacked actual 
authority to enter into the alleged agreement.  On April 6, 2017, the Board issued a 
decision denying the government’s motion.  U.S. Coating Specialties & Supplies, LLC, 
ASBCA No. 58245, 17-1 BCA ¶ 36,710 (U.S. Coating II).   
 
 In U.S. Coating II, we held that the record was insufficient to determine whether 
the April 25, 2012 bankruptcy agreement was a fully integrated agreement and that 
genuine issues of material fact existed regarding whether there was a separate oral 
agreement with the government to terminate the contract for convenience.  17-1 BCA 
¶ 36,710 at 178,760.  We further held the AUSA possessed the necessary authority to 
bind the government when the parties entered into the April 25, 2012 bankruptcy 
settlement agreement.  Id. at 178,761. 
 

2 
 Subsequently, the parties agreed to the submission of the appeal on the record 
without a hearing pursuant to Board Rule 11.  Based on the briefs and evidence 
submitted, we conclude that appellant has not met its burden of demonstrating that the 
parties entered into a separate oral agreement to terminate the contract for convenience.  
We further conclude that the contracting officer (CO) reasonably exercised her discretion 
when she terminated the contract for default.  Accordingly, we deny the appeal. 
 
FINDINGS OF FACT  
 
 I.  The Contract 
 
 1.  On June 21, 2010, the U.S. Army Corps of Engineers (Corps) awarded Contract 
No. W912EE-10-C-0019 (contract) to appellant, U.S. Coating Specialties & Supplies, LLC 
(U.S. Coating) in the amount of $11,383,000 for the construction of a U.S. Army Engineer 
Research and Development Center Information Technology Laboratory office building and 
computer facility in Vicksburg, Mississippi (ERDC Project) (R4, tab 3 at 5-61). 
 
 2.  The contract included the standard Federal Acquisition Regulation (FAR) default 
clause, 52.249-10, DEFAULT (FIXED-PRICE CONSTRUCTION) (APR 1984), which 
provided, in pertinent part: 
 
(a)  If the Contractor refuses or fails to prosecute the work or 
any separable part, with the diligence that will insure its 
completion within the time specified in this contract including 
any extension, or fails to complete the work within this time, 
the Government may, by written notice to the Contractor, 
terminate the right to proceed with the work (or the separable 
part of the work) that has been delayed. . . .    
. . . .  
 
(c)  If, after termination of the Contractor’s right to proceed, it 
is determined that the Contractor was not in default, or that 
the delay was excusable, the rights and obligations of the 
parties will be the same as if the termination had been issued 
for the convenience of the Government.    
 
(Id. at 132-34) 
 
 3.  U.S. Coating’s principal subcontractor was Mid-State Construction Company, 
Inc. (Mid-State) (gov’t br., ex. A at 2).   
                                              
1 Citations to the Rule 4 file are to the consecutively-numbered pages unless otherwise 
indicated. 

3 
 
 4.  Because U.S. Coating lacked the requisite bonding capacity for the project, 
Mid-State agreed to serve as a major subcontractor for the Project and to indemnify the 
bonds of U.S. Coating and Earl Washington, U.S. Coating’s President and CEO.  
Mid-State Construction Company, Inc. provided the bonding for U.S. Coating’s bid and 
contract on the ERDC Project.  (Gov’t br., ex. A at 2) 
 
 5.  On November 19, 2010, U.S. Coating entered into a subcontract agreement with 
Mid-State to perform the work on the ERDC Project.  Pursuant to the terms of an escrow 
agreement between U.S. Coating and Mid-State, U.S. Coating was to deposit all of the 
project payments it received from the government into an escrow account.  (Id. at 3) 
 
 6.  Mid-State performed work on the ERDC Project pursuant to the terms of the 
subcontract agreement with U.S. Coating (id. at 3).  U.S. Coating paid Mid-State up until 
March 2011, but did not pay Mid-State for the April, May, and June 2011 subcontract 
billings, despite having been paid by the government for the work Mid-State performed 
(id. at 4).   
 
 7.  On June 7, 2011, Mid-State provided notice to U.S. Coating that it would exercise 
its rights pursuant to the subcontract agreement within seven days unless the defaults were 
cured.  U.S. Coating did not cure the default, and on June 14, 2011, Mid-State terminated 
the subcontract agreement and stopped work on the Project.  (Id. at 5)  
 
 8.  In a letter to U.S. Coating, dated August 17, 2011, the CO, Jeri H. McGuffie 
(CO McGuffie), described a host of performance problems, including:  a 90-day delay in 
schedule, including multiple critical path items; the failure to maintain the site following 
rain events; the failure timely to provide the structural steel erection plan; the failure to 
reach firm agreements with various subcontractors; changing management personnel 
without notice; the failure to ensure adequate materials and equipment are onsite; and 
multiple failures to promptly pay subcontractors.  (Gov’t reply br., ex. E) 
 
 9.  On November 22, 2011, Mid-State won a $1.2 million arbitration award against 
U.S. Coating determining that U.S. Coating failed to tender payments to Mid-State (gov’t 
br., ex. A at 11).  The arbitrator found that U.S. Coating had materially breached the 
contract for failure to pay Mid-State, stating U.S. Coating had “offered no valid explanation 
as to why [Mid-State]” was not paid (id. at 7). 
 
 II.  Bankruptcy Proceedings 
 
 10.  On January 13, 2012, during performance of the contract, U.S. Coating sought 
bankruptcy protection, filing a Chapter 11 voluntary petition in the United States 
Bankruptcy Court for the Southern District of Mississippi (Bankruptcy Court) (R4, tab 4). 
 

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 11.  On February 24, 2012, Travelers Casualty and Surety Company of America 
(Travelers), U.S. Coating’s surety for the contract, filed a motion (“Dkt. #38”) in the 
Bankruptcy Court, seeking relief from the automatic stay imposed by U.S. Coating’s 
bankruptcy filing to enforce its rights under a General Agreement of Indemnity between 
Travelers and U.S. Coating (R4, tab 5).  Travelers also filed another motion (“Dkt. #39”) on 
the same date to compel rejection of the contract, or alternatively, to compel U.S. Coating to 
assume or reject the contract pursuant to 11 U.S.C. § 365 (gov’t supp. R4, tab 1).2   
 
 12.  On March 13, 2012, Mid-State, U.S. Coating’s subcontractor, filed a response 
and limited objection to Travelers’ motion for relief from the automatic stay (“Dkt. #52”) 
(R4, tab 7).  Mid-State also filed a response and limited objection to Travelers’ motion to 
compel on the same date (“Dkt. #53”) (gov’t supp. R4, tab 3). 
 
 13.  On March 13, 2012, the AUSA for the Southern District of Mississippi, 
David N. Usry (AUSA Usry), on behalf of the U.S. Attorney, filed responses to Travelers’ 
February 24 motions for the United States and the agency.  In its response and limited 
joinder in Travelers’ motion for relief from the automatic stay (“Dkt. #51”), the United 
States moved to lift the automatic stay to pursue termination proceedings pursuant to 
FAR Part 49 and allow the Corps to complete the construction (R4, tab 6 at 7).  The United 
States pled that the CO “was proscribed from . . . determin[ing] whether [U.S. Coating] was 
defaulted or is likely to default on the Contract for failure to make progress . . . ” (id. at 6 
¶ 26).  The United States also supported Travelers’ motion to compel rejection of the 
contract, or alternatively, to compel U.S. Coating to assume or reject the contract (gov’t 
supp. R4, tab 2). 
 
 14.  The Bankruptcy Court issued an order on March 30, 2012, directing U.S. 
Coating, the debtor, to file a motion to assume or reject the contract by April 13, 2012 and 
setting a trial on any such motion for April 26, 2012 (gov’t supp. R4, tab 4). 
 
 15.  In April 2, 2012, correspondence with the Corps, U.S. Coating stated that it had 
arranged for a new subcontractor, MTNT, to take over the contract after Mid-State 
Construction walked off the job.  Mr. Washington requested a meeting with the government 
to discuss a reorganization of the contract such that MTNT would become the prime 
contractor, but CO McGuffie refused to meet.  (Gov’t br., ex. D)  
 
 16.  On April 4, 2012, CO McGuffie responded and explained why she refused to 
meet.  She said that, despite her numerous requests, U.S. Coating had not provided her with 
sufficient information about the exact contractual relationship it intended.  She explained 
that FAR 49.402-4, Procedures in lieu of Termination for Default, allows a contractor to 
“continue performance of the contract by means of a subcontract or other business 
                                              
2 See U.S. Coating I, 15-1 BCA ¶ 35,957 at 175,706 for a discussion of the terms 
“assumption” and “rejection” of contracts under bankruptcy law.  

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arrangement with an acceptable third party, provided the rights of the Government are 
adequately preserved.”  FAR 49.402-4(b).  According to CO McGuffie, U.S. Coating 
provided her no assurances that its current bonding company consented to the assignment of 
the contract to MTNT and that, without such assurances, the government’s rights would not 
be adequately protected.  (Gov’t br., ex. D) 
 
 17.  After obtaining leave from the Bankruptcy Court to file its motion, U.S. Coating 
moved to assume the contract on April 17, 2012 (R4, tab 9).  The United States filed a 
response to the motion on April 20, 2012, demanding proof of U.S. Coating’s ability to 
assume the contract at the April 26, 2012 trial.  The response was filed by AUSA Usry.  
(R4, tab 12) 
 
  A.  The April 24, 2012 Teleconference 
 
 18.  On April 24, 2012, prior to the scheduled April 26, 2012 hearing, U.S. 
Coating, Travelers, the United States, and Mid-State participated in a telephone call to 
discuss a potential settlement of Traveler’s motion for relief from the automatic stay.  
The participants in the call included AUSA Usry, Earl Washington, President and CEO 
of U.S. Coating, Herbert J. Irvin, counsel for U.S. Coating in the bankruptcy action, 
Mark Herbert, counsel for Travelers, Ms. Velma Day, an employee of U.S. Coating, and 
Mr. Alden Brooks, an employee of U.S. Coating.  (R4, tab 15 ¶ 20). 
 
 19.  With respect to the April 24, 2012 teleconference, Mr. Washington’s affidavit 
stated, in pertinent part: 
 
With respect to my main concern, the nature of the 
termination that could be entered by the Corps, there was 
difficulty hearing everything due to speaker phone breakup 
on both ends of the call, but I understood David Usry to say 
that the Corps would have no issue with a termination for 
reasons other than default, but that the Corps could not take 
any action until the Automatic Stay was lifted. 
 
(App. supp. R4, tab 1 at 7, ¶ 37 (Washington aff., dated Oct. 31, 2018)) 
 
 20.  Ms. Day’s affidavit stated that telephone discussions between U.S. Coating’s 
counsel, Herb Irvin, and AUSA Usry took place on April 24, 2012, and there were 
discussions about the automatic stay being lifted to allow discussions about a termination 
for convenience (app. supp. R4, tab 4 (Day aff., dated Jan. 7, 2014)).   
 
 21.  Mr. Brooks’ affidavit stated that he received a telephone call on April 24, 
2012, to attend a meeting to discuss a resolution that would allow for a termination of the 
contract for convenience.  Mr. Brooks stated that U.S. Coating’s counsel and AUSA Usry 

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exchanged messages and it was his understanding that all parties agreed to terminate the 
contract for convenience.  (App. supp. R4, tab 3 (Brooks aff., dated Oct. 31, 2018)) 
 
 22.  U.S. Coating’s counsel, Mr. Irvin, stated “that either everyone on our end of the 
conference call . . . must have misunderstood what David Usry said, or the Corps was not 
acting in good faith during the negotiations” (app. supp. R4, tab 2 at 6-7, ¶ 35 (Irvin aff., 
dated Oct. 31, 2018)).  Mr. Irvin does not explicitly claim that an agreement with the 
government was reached during the phone call.  Instead, he avers that:  
 
[W]e understood [AUSA] David Usry to stay that the Corps 
would have no issue with a termination for reasons other than 
default, but that the Corps could not take any action until the 
Automatic Stay was lifted.   
 
(App. supp. R4, tab 2 at 5, ¶ 29 (Irvin aff., dated Oct. 31, 2018))   
 
 23.  Prior to the phone call, the only explicit discussion of a termination for other 
than default was between counsel for U.S. Coating and counsel for the surety, Travelers 
(app. supp. R4, tab 1 at 4, ¶¶ 19-20 (Washington aff., dated Oct. 31, 2018); R4, tab 15 
at 1-2, ¶¶ 7-8). 
 
  B.  The Bankruptcy Settlement 
 
 24.  On April 25, 2012, the parties advised the Bankruptcy Court that they reached 
a settlement on pending issues set for trial and submitted a proposed order for the 
Bankruptcy Court’s approval (R4, tab 20 at 453).   
 
 25.  Based on the parties’ communicated settlement and proposed order, the 
Bankruptcy Court judge issued an order on April 25, 2012 (Agreed Order), stating in 
pertinent part:  
 
 The Court, being fully advised in the premises and 
having considered the settlement of the foregoing pleadings as 
reflected below, finds that cause exists pursuant to 11 U.S.C. 
§ 362(d)(1) to grant Travelers and the Corps relief from the 
automatic stay and finds that the Motion to Assume should be 
denied and that the contract (“Contract”) between the Debtor 
and the Corps . . . should be deemed rejected. 
 
 IT IS, THEREFORE, ORDERED that the Contract is 
hereby rejected as a matter of law. 
                                              
3 Citation is to the original pagination. 

7 
 
 IT IS FURTHER ORDERED that the automatic stay is 
hereby terminated in favor of the Corps and Travelers with 
respect to the Contract and General Agreement of Indemnity 
(“GAI”). 
 
 IT IS FURTHER ORDERED that this Order does not 
adjudicate or waive any respective rights and/or defenses of 
Travelers, the Corps, or Mid State with respect to the 
Contract, the Bonded Project, the GAI, or the performance 
and payment bonds issued by Travelers on the project. 
 
 IT IS FURTHER ORDERED that, because the 
Automatic Stay Motion was sufficient to afford reasonable 
notice of the material provisions of the agreement between 
the parties and opportunity for hearing, the provisions of Fed. 
R. Bankr. P. 4001(d)(1)-(3) do not apply and the agreement is 
approved without further notice. 
 
 ORDERED that the Stay of execution of Fed. R. 
Bankr. P. 4001(a)(3) is hereby waived.  SO ORDERED. 
 
(R4, tab 13 at 2-3)  The order was “AGREED TO AND APPROVED AS TO FORM” by 
AUSA Usry, U.S. Coating’s bankruptcy counsel, and representatives for Travelers, and 
Mid-State (id. at 3-4).     
 
 III.  Termination for Default and Bankruptcy Hearing 
 
 26.  Following the issuance of the Bankruptcy Court’s April 25, 2012 order, 
CO McGuffie terminated the contract for default on the same date, asserting that U.S. 
Coating’s consent to rejection of the contract constituted an anticipatory repudiation of 
the contract (R4, tab 2). 
 
 27.  On April 30, 2012, U.S. Coating formally filed a motion in the Bankruptcy 
Court to vacate the April 25, 2012 order.  In its motion, U.S. Coating asserted that its 
consent to the settlement was based on representations made by AUSA Usry that the 
Corps would terminate the contract for “reasons other than default” (R4, tab 15 at 4 ¶ 32).  
The United States, Travelers, and Mid-State filed responses to U.S. Coating’s motion to 
vacate the April 25, 2012 order (R4, tabs 16-18). 
 
 28.  The CO’s Memorandum for the Record, dated May 7, 2012, provides support 
for the termination for default based upon U.S. Coating’s failure to make reasonable 
progress on critical path items.  In particular, CO McGuffie noted that U.S. Coating’s 

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schedule updates from December 2011 through April 2012 showed little or no progress on 
critical path items.  During that time frame, U.S. Coating reported negative float that 
increased from 69 days to 185 days.  Although CO McGuffie sought an explanation for 
the delay, U.S. Coating did not respond to her multiple letters.  Moreover, U.S. Coating 
admitted that it would not complete performance by the June 30, 2012 completion date.  
Finally, U.S. Coating provided CO McGuffie with no indication that it had a viable plan to 
halt slippage and regain the lost time.  (Gov’t br., ex. B)   
 
 29.  On May 17, 2012, the Bankruptcy Court held a hearing on U.S. Coating’s 
motion to vacate.  Ruling from the bench, the Bankruptcy Court denied U.S. Coating’s 
motion, holding that U.S. Coating’s contentions were insufficient to set aside the April 25 
order.  The Bankruptcy Court did not address the propriety of the Corps’ termination of 
the contract for default.  (R4, tab 20)  The Bankruptcy Court subsequently issued a written 
Final Judgment based on the reasons articulated at the hearing (R4, tab 19). 
 
 IV.  Proceedings before the Board 
 
 30.  On July 20, 2012, U.S. Coating timely appealed from the CO’s April 25, 2012 
final decision, terminating the contract for default. 
 
 31.  The Corps filed a motion to dismiss or, in the alternative, for summary 
judgment in this appeal, which was later amended, that was the subject of our April 9, 
2015 decision in U.S. Coating I.  15-1 BCA ¶ 35,957 at 175,705, ¶¶ 14-16.  In its decision, 
the Board struck U.S. Coating’s affirmative claims in its amended complaint and denied 
the remainder of the Corps’ motion.  Id. at 175,707-08.    
 
 32.  On January 21, 2016, the Corps filed a renewed motion for summary judgment 
in this appeal.  In its renewed motion for summary judgment, the Corps advanced two new 
theories to bar U.S. Coating’s introduction of an alleged prior oral agreement to terminate 
the contract for convenience for the purposes of contesting the propriety of the default 
termination.  First, it contended that U.S. Coating’s allegation of a prior agreement is 
barred by the parol evidence rule.  Second, it contended that, even if the allegation is 
assumed true, AUSA Usry, whose representations U.S. Coating relies upon, lacked the 
requisite actual authority to bind the government to such an agreement. 
 
 33.  In support of its renewed motion, the Corps submitted the affidavits of 
CO McGuffie and AUSA Usry.  CO McGuffie’s affidavit stated in pertinent part: 
 
2.  I was the Government Procuring Contracting Officer who 
awarded and administered the contract (number W912EE-10-
C-0019) that is the subject of this appeal. 
 

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3.  My authority as the duly authorized Contracting Officer 
under the subject Contract was never delegated to or usurped 
by the Assistant United States Attorney who represented the 
Corps in the bankruptcy proceeding that involved U.S. 
Coating and implicated contract number W912EE-10-C-0019. 
 
4.  Because of the Contractor’s actions endangering 
performance on the contract, I had clear justification for 
termination for default.  Due to the significant financial and 
contractual ramifications a termination for convenience 
would have presented to the Corps and our customer, I never 
would have agreed to terminate the contract for convenience.  
The Assistant United State[s] Attorney had no authority 
granted to him on the subject contract.  Had the Assistant 
United State[s] Attorney advised or recommended a 
termination for convenience, which he did not, I would not 
have entertained such a recommendation. 
 
(U.S Coating II, gov’t reply, ex. L (McGuffie aff., dated May 10, 2016))   
 
 34.  AUSA Usry’s affidavit stated in pertinent part: 
 
2.  I represented the United States Army Corps of Engineers 
(“the Corps”) in the Chapter 11 bankruptcy proceedings that 
involved the Corps’ contract, number W912EE-10-B-0011, 
with U.S. Coating Specialties & Supplies, LLC (“U.S. 
Coating”), the debtor . . . . 
 
3.  I had conversations with U.S. Coatings’ counsel in the 
bankruptcy proceedings, Herb Irvin, and representatives of 
the debtor on multiple occasions during the course of the 
bankruptcy proceedings. 
 
4.  During my discussions and negotiations in the bankruptcy 
proceedings with debtor’s counsel and debtor’s 
representatives, I never promised anyone that the Corps 
would terminate the contract for convenience if U.S. Coating 
rejected the contract in bankruptcy. 
 
5.  During my discussions and negotiations in the bankruptcy 
proceedings with debtor’s counsel and debtor’s 
representatives, I never did state or otherwise imply that I had 

10 
any authority whatsoever to bind the Corps to terminate the 
contract for convenience. 
 
(U.S Coating II, gov’t reply, ex. M (Usry aff., dated May 9, 2016))   
 
 35.  In its opposition to the Corps’ renewed motion for summary judgment, U.S. 
Coating relied on three affidavits of its employees - President and CEO, Mr. Earl J. Washington; 
Ms. Velma Day; and Mr. Alden Brooks - originally submitted in the earlier U.S. Coating I 
proceedings.  Mr. Washington’s affidavit stated in pertinent part: 
 
3.  I never consented to a termination by default.  I agreed to 
lift the automatic stay on the condition that U.S. Coating 
would be terminated only by convenience.  I held this 
discussion with Travelers’ legal counsel, the Respondent’s 
legal counsel, and U.S. Coating’s legal counsel, Herb Irvin, 
on April 24, 2012.  
 
(U.S Coating I, app. opp’n, ex. A (Washington aff., dated Jan. 13, 2013)) 
 
 36.  On April 6, 2017, we denied the government’s renewed motion for summary 
judgment.  We held that the record was insufficient to determine whether the April 25, 
2012 bankruptcy agreement was a fully integrated agreement, and that genuine issues of 
material fact existed regarding whether there was a separate oral agreement with the 
government to terminate the contract for convenience.  U.S. Coating II, 17-1 BCA 
¶ 36,710 at 178,760.  We further held the AUSA possessed the necessary authority to 
bind the government when the parties entered into the April 25, 2012 bankruptcy 
settlement agreement.  Id. at 178,761.  We concluded that the Corps was not entitled to 
judgment as a matter of law on the factual record and that U.S. Coating should have an 
opportunity to fully develop the facts surrounding the parties’ negotiations prior to the 
Bankruptcy Court settlement.  Id. 
 
 37.  On October 26, 2018, the parties agreed to the submission of the appeal on the 
record without a hearing pursuant to Board Rule 11 (Br. corr. ltr. dtd. November 6, 2018).  
On October 31, 2018, we issued a scheduling order for the submission of Rule 11 briefs 
and permitting appellant to take additional discovery.   
 
 38.  Appellant submitted in support of its Rule 11 brief the depositions of 
CO McGuffie and David Townsend, a Quality Assurance Technician with the Corps, the 
three affidavits of its employees that it previously had submitted, and an affidavit from its 
counsel in the bankruptcy matter, Herbert J. Irvin (app. supp. R4, tabs 1-7). 
 
 39.  The Corps submitted in support of its Rule 11 brief a variety of exhibits, 
including correspondence between appellant and the CO, a decision in the arbitration 

11 
between U.S. Coating and its principal subcontractor, Mid State Construction Company, 
Inc., and CO McGuffie’s Memorandum for the Record in support of the termination for 
default (gov’t br., exs. A-K). 
 
 40.  On February 11, 2019, the parties completed briefing pursuant to Board Rule 11. 
 
DECISION  
 
 The threshold issue is whether appellant has demonstrated that a separate oral 
agreement existed requiring the government to terminate the contract for convenience.  If 
we conclude that a separate agreement existed, then we must decide whether the CO 
violated that agreement when she terminated the contract for default.  Alternatively, if 
appellant cannot demonstrate that a separate agreement existed, we must determine 
whether the CO’s default termination was justified. 
 
 For the reasons set forth below, we conclude that appellant has not met its burden 
of demonstrating that the parties had entered into a separate oral agreement to terminate 
the contract for convenience.  We further conclude that the CO reasonably exercised her 
discretion when she terminated the contract for default.  Accordingly, we deny the appeal. 
 
 I.  Standard of Review 
 
 Board Rule 11 permits parties “to waive a hearing and to submit [their] case upon 
the record.”  The standards of review and burdens of proof of a motion for summary 
judgment and a decision on the merits under Board Rule 11 vary substantially.  DG21, 
LLC, ASBCA No. 57980, 15-1 BCA ¶ 36,016 at 175,909 n.1.  Unlike a motion for 
summary judgment, which must be adjudicated on the basis of a set of undisputed facts, 
pursuant to Board Rule 11, the Board “may make findings of fact on disputed facts.” 
Grumman Aerospace Corp., ASBCA No. 35185, 92-3 BCA ¶ 25,059 at 124,886 n.13. 
 
 The legal standards for a default termination are well established.  Under the 
default clause, in this appeal FAR 52.249-10, DEFAULT (FIXED-PRICE 
CONSTRUCTION) (APR 1984), the government may terminate a contract for default 
when the contractor, without excuse, fails diligently to prosecute the work or fails to 
complete the work within the time prescribed by the contract.  The government bears the 
burden to prove that its termination was justified.  Lisbon Contractors, Inc. v. United 
States, 828 F.2d 759, 765 (Fed. Cir. 1987); New Era Contract Sales, Inc., ASBCA 
No. 56661 et al., 11-1 BCA ¶ 34,738 at 171,022.  If the government establishes a prima 
facie case justifying the termination, the burden shifts to the contractor to prove the 
default was excusable.  ADT Constr. Grp., Inc., ASBCA No. 55358, 13 BCA ¶ 35,307 
at 173,312 (citing Empire Energy Management Systems, Inc., ASBCA No. 46741, 03-1 
BCA ¶ 32,079 at 158,553). 
 

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 II.  Whether the Parties Had a Separate Oral Agreement that the Corps Would  
       Terminate the Contract for Convenience 
 
 In U.S. Coating II, we held that the parol evidence rule did not prevent U.S. 
Coating from introducing evidence that a separate oral agreement existed apart from the 
Bankruptcy Court’s April 25, 2012 Agreed Order.  17-1 BCA ¶ 36,710 at 178,760.  We 
subsequently allowed U.S. Coating to take additional discovery to support its allegation 
of a separate agreement (Docket No. 115). 
 
 The parties agree that there is no written agreement that the Corps would terminate 
the contract for convenience.  Therefore, U.S. Coating must establish the existence of an 
implied-in-fact contract.  “An implied-in-fact contract has all the requirements of an 
express contract except that the evidence of the meeting of the minds differs.”  Safeco 
Ins. Co. of Am., 17-1 BCA ¶ 36,819 at 179,450 (citing Hanlin v. United States, 316 F.3d 
1325, 1328 (Fed. Cir. 2003)).  In order to establish an implied-in-fact contract, U.S. 
Coating must satisfy the following elements:  (1) mutuality of intent; (2) consideration; 
(3) lack of ambiguity in offer and acceptance; and (4) the existence of a government 
representative whose conduct is relied upon who had actual authority to bind the 
government in a contract.  Safeco, 17-1 BCA ¶ 36,819 at 179,450 (quoting Todd Pacific 
Shipyards Corp., ASBCA No. 55126, 08-2 BCA ¶ 33,891 at 167,755). 
 
 U.S. Coating offers sworn testimony of four individuals, as well as deposition 
testimony from CO McGuffie, to support the existence of a separate agreement to 
terminate the contract for convenience (finding 39).  U.S. Coating contends that it 
reached an agreement during an oral teleconference that took place on April 24, 2012, 
two days before the scheduled hearing (finding 19).  The participants in the call included 
AUSA Usry, Herbert J. Irvin, counsel for U.S. Coating in the bankruptcy action, and 
Mark Herbert, counsel for Travelers (finding 18).  The government, in turn, relies on the 
sworn statement and deposition testimony of CO McGuffie and the sworn statement of 
AUSA Usry to support its contention that no separate agreement existed (finding 39).   
 
  A.  No Evidence of Mutuality of Intent 
 
 The first element of an implied-in-fact contract is mutuality of intent.  Walsh 
Constr. Co. of Ill., ASBCA No. 52952, 02-2 BCA ¶ 32,024 at 158,279, aff’d, 80 F. App’x 
679 (Fed. Cir. 2003).  To show mutuality of intent, appellant must demonstrate, by 
objective evidence, the existence of an offer and reciprocal acceptance.  Guardian Safety 
& Supply LLC, ASBCA No. 61932, 19-1 BCA ¶ 37,333 at 181,561 (citing Anderson v. 
United States, 344 F.3d 1343, 1353 (Fed. Cir. 2003)).  Once an offer is made, 
“acceptance of the offer must be manifested by conduct that indicates assent to the 
proposed bargain.”  Guardian Safety, 19-1 BCA ¶ 37,333 at 181,561 (quoting Russell 
Corp. v. United States, 537 F.2d 474, 482 (Ct. Cl. 1976)). 
 

13 
 Prior to the phone call, the only explicit discussion of a termination for other than 
default was between counsel for U.S. Coating and counsel for the surety, Travelers 
(finding 23) (app. br. at 22-23).  Travelers was not a party to the contract between the 
United States and U.S. Coating and, therefore, had no authority to enter into an 
agreement concerning the termination of the contract. See Guardian Safety, 19-1 BCA 
¶ 37,333 at 181,561 (citing Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380, 384 (1947) 
(holding contractor assumes risk of ascertaining authority of agents who purport to act for 
the government)).  Therefore, discussions between counsel for Travelers and U.S. 
Coating do not establish mutual intent. 
 
 U.S. Coating’s counsel, Herb Irvin, does not explicitly claim that an agreement 
with the government was reached during the phone call.  Instead, he avers that:  
 
[W]e understood [AUSA] David Usry to say that the Corps 
would have no issue with a termination for reasons other than 
default, but that the Corps could not take any action until the 
Automatic Stay was lifted.   
 
(Finding 22)  Even if we accept Mr. Irvin’s assertion that AUSA Usry stated that he 
“would have no issue with a termination for reasons other than default,” this is well short 
of an agreement. 
 
 The statements of U.S. Coating’s employee, Mr. Brooks, also fail to establish the 
existence of mutual intent.  His statements indicate his subjective understanding that the 
government would agree to a termination for convenience:  
 
I believed that that there would be good-faith steps taken by 
Mr. Usry and the Corps to satisfactorily resolve the contract 
in the best manner possible. 
 
(App. supp. R4, tab 3 at 2, ¶ 9 (Brooks aff., dated Oct 31, 2018)) 
 
 Moreover, Mr. Washington’s statements fail to establish mutual intent.  He states 
in his affidavit that he “understood David Usry to say that the Corps would have no issue 
with a termination for reasons other than default, but that the Corps could not take any 
action until the Automatic Stay was lifted.”  (Finding 19)  This understanding, assuming 
it is entirely factual, falls short of establishing mutual intent.   
 
 From the government’s perspective, AUSA Usry’s sworn statement indicates that 
he did not believe that he possessed the authority to agree to a termination for 
convenience and that a decision on termination would need to occur after the bankruptcy 
stay was lifted (finding 34).  Even if AUSA Usry was mistaken about whether he 
possessed authority to enter into an agreement to terminate the contract, his subjective 

14 
belief at the time would have made it impossible for him to possess the requisite intent to 
reach a binding agreement.  Therefore, it was not possible for him to have a meeting of 
the minds with counsel for U.S. Coating.  See Man & Machine, Inc., ASBCA No. 61608, 
19-1 BCA ¶ 37,401 at 181,812 (mutual intent cannot be inferred when government 
official does not hold himself out as possessing authority to bind government). 
 
 Taken together, these statements fall well short of mutual intent.  A contractor’s 
subjective understanding that the government would agree is not sufficient to establish a 
meeting of the minds.  See Engineering Solutions & Products, LLC, ASBCA No. 58633, 
17-1 BCA ¶ 36,822 at 179,466 (holding that contractor’s unilateral “understanding” is 
not sufficient to establish a mutuality of intent).   
 
  B.  Existence of Offer and Acceptance is Ambiguous 
 
 Moreover, the record is ambiguous – at best – concerning the existence of an offer 
and acceptance.  To satisfy its burden, U.S. Coating must show, by objective evidence, 
the existence of an offer and reciprocal acceptance.  Anderson, 344 F.3d at 1353; Yonir 
Technologies Inc., ASBCA No. 56736, 10-1 BCA ¶ 34,417 at 169,897.  In this situation, 
the precatory statements of U.S. Coating’s representatives are not sufficient to 
demonstrate the existence of an agreement to terminate the contract for convenience. 
 
 The sworn statements of the individuals representing U.S. Coating are consistent 
in stating that U.S. Coating wanted a termination for convenience.  As we previously 
observed, it is hard to imagine why U.S. Coating would agree to settle the bankruptcy 
litigation in exchange for a termination for default.  U.S. Coating II, 17-1 BCA ¶ 36,710 
at 178,760.  Indeed, U.S. Coating’s president, Earl Washington, stated in his affidavit that 
his agreement to the bankruptcy order was based on his understanding that such an order 
was necessary to proceed with negotiations with the Corps to allow the addition of the 
subcontractor to assist U.S. Coating in completing the contract.  U.S. Coating I, 15-1 
BCA ¶ 35,957 at 175,705 (citing R4, tab 20 at 23-30).   
 
 However, the subjective beliefs of U.S. Coating’s representatives are not sufficient 
to establish the existence of an offer and acceptance.  The subjective unexpressed intent 
of one of the parties is irrelevant to contract interpretation.  Altanmia Commercial 
Marketing Co., ASBCA No. 55393, 09-1 BCA ¶ 34,095 at 168,585 (citing Andersen 
Consulting v. United States, 959 F.2d 929, 934 (Fed. Cir. 1992)).  It will not bind the 
other party, especially when the latter reasonably believes otherwise.  See Firestone Tire 
& Rubber Co. v. United States, 444 F.2d 547, 551 (Ct. Cl. 1971). 
 
 Finally, AUSA Usry unequivocally states in his sworn statement that he did not 
agree to a termination for convenience and that a decision on termination would need to 
occur after the bankruptcy stay was lifted.  Specifically, Mr. Usry averred that he “never 
promised anyone that the Corps would terminate the contract for convenience if U.S. 

15 
Coating rejected the contract in bankruptcy.”  (Finding 34)  We find Mr. Usry’s statement 
to be credible and consistent with the other evidence. 
 
 In summary, U.S. Coating has failed to demonstrate the existence of an 
implied-in-fact contract to terminate the contract for convenience. 
 
 III.  Whether the CO Abused her Discretion by Terminating the Contract for Default 
 
 In the absence of an agreement between the parties that the contract would be 
terminated for convenience, the remaining issue is whether the contracting officer abused 
her discretion by terminating the contract for default. 
 
 In U.S. Coating I, we held that rejection in bankruptcy is not, by itself, tantamount 
to anticipatory repudiation.  15-1 BCA ¶ 35,957 at 175,707 (citations omitted) (holding 
that rejection and termination are distinct concepts).  We further held that U.S. Coating 
consented to the bankruptcy order rejecting the contract and thus communicated to the 
Corps that it was freeing itself from the obligation to perform under the contract.  Id.  We 
held open the possibility that if appellant could prove the existence of an agreement to 
terminate the contract for convenience, it may be able to demonstrate that the CO 
improperly exercised her discretion when terminating the contract for default.  Id. 
at 175,708; see The Ryan Co., ASBCA No. 48151, 00-2 BCA ¶ 31,094 at 153,543, recon. 
denied, 01-1 BCA ¶ 31,151 (holding that “the default clause does not require the 
Government to terminate on a finding of a bare default but merely gives the agency the 
discretion to do so.”).  However, as we discussed above, we conclude that U.S. Coating 
has not demonstrated the existence of an agreement to terminate the contract for 
convenience. 
 
  A.  Government Has Demonstrated Prima Facie Grounds for Default 
        Termination 
 
 The only remaining question, therefore, is whether the rejection of the contract in 
bankruptcy, coupled with non-performance, was a reasonable basis for termination.  The 
government bears the burden of proof with respect to whether the default termination was 
justified.  Lisbon, 828 F.2d at 765.  The default provision “require[s] reasonable belief on 
the part of the contracting officer that there was no reasonable likelihood that the 
contractor could perform the entire contract effort within the time remaining for contract 
performance.”  McDonnell Douglas Corp. v. United States, 323 F.3d 1006, 1016 (quoting 
Lisbon, 828 F.2d at 765). 
 
 U.S. Coating’s decision to reject the contract in bankruptcy, considered alone, is 
sufficient to establish prima facie grounds for default termination.  The bankruptcy  
  

16 
statute states that the rejection in bankruptcy of a contract is a breach of that contract:  
 
Except as provided in subsections (h)(2) and (i)(2) of this 
section, the rejection of an executory contract or unexpired 
lease of the debtor constitutes a breach of such contract or 
lease 
 
11 U.S.C. § 365(g) (2005). 
 
 As we previously explained, rejection of a contract in bankruptcy “frees the estate 
from the obligation to perform under the contract.”  U.S. Coating I, 15-1 BCA ¶ 35,957 
at 175,707 (quoting Lewis Bros. Bakeries Inc. & Chi. Baking Co. v. Interstate Brands 
Corp., 751 F.3d 955, 961 (8th Cir. 2014)).  Moreover, in Thomas & Sons Building 
Contractors, Inc., we concluded that a contractor’s rejection of a contract in bankruptcy 
was sufficient to justify the government’s termination for default.  ASBCA No. 53395, 
05-2 BCA ¶ 33,083 at 163,989-90. 
 
 However, as we held in U.S. Coating I, the default clause does not require the CO 
to terminate upon a finding of bare default, but gives the CO discretion to do so.  Indeed, 
the CO’s exercise of that discretion must be fair and reasonable and not arbitrary and 
capricious.  U.S. Coating I, 15-1 BCA ¶ 35,957 at 175,708 (citations omitted). 
 
 We conclude that the CO reasonably exercised her discretion in terminating the 
contract for default.  The CO’s memorandum for the record, dated May 7, 2012, provides 
support for her termination decision based upon U.S. Coating’s failure to make 
reasonable progress on critical path items.  In particular, CO McGuffie noted that U.S. 
Coating’s schedule updates from December 2011 through April 2012 showed little or no 
progress on critical path items.  During that time frame, U.S. Coating reported negative 
float that increased from 69 days to 185 days.  Although CO McGuffie sought an 
explanation for the delay, U.S. Coating did not respond to her multiple letters.  Moreover, 
U.S. Coating admitted that it would not complete performance by the June 30, 2012 
completion date.  Finally, U.S. Coating provided CO McGuffie with no indication that it 
had a viable plan to halt slippage and regain the lost time.  (Finding 28)  In her affidavit, 
CO McGuffie reiterated her position regarding default, averring that “[b]ecause of the 
Contractor’s actions endangering performance on the contract, I had clear justification for 
termination for default.”  (Finding 33) 
 
 U.S. Coating offers no specific facts to refute the CO’s assertions.  The CO’s 
memorandum for the record offers a contemporaneous account of the facts that supported 
her decision and is consistent with her subsequent sworn statement in her affidavit.  As 
stated in Board Rule 11, “Submission of a case without hearing does not relieve the 
parties from the necessity of proving the facts supporting their allegations or defenses.”  

17 
We conclude that the government has demonstrated a prima facie basis for the 
termination for default.   
 
  B.  U.S. Coating Has Not Demonstrated That Default Was Excusable 
 
 Having concluded that the government has demonstrated a prima facie basis for 
the default termination, the burden shifts to the contractor to demonstrate that its default 
was excusable.  Truckla Services, Inc., ASBCA Nos. 57564, 57752, 17-1 BCA ¶ 36,638 
at 178,445 (citing ADT Constr. Grp., 13 BCA ¶ 35,307 at 173,312).  Here, U.S. Coating 
contends that the default was excusable because it resulted from the non-foreseeable 
circumstance of its primary subcontractor, Mid-State Construction, walking off the job 
and bringing a dispute against U.S. Coating that subsequently required U.S. Coating to 
file bankruptcy protection under Chapter 11 (app. br. at 1, 17-19). 
 
 U.S. Coating asserts, without evidence, that “Mid-State Construction walked off 
the job and brought a dispute against U.S. Coating in an effort to undermine U.S. Coating 
and to take over the contract U.S. Coating had in place with the Corps” (app. br. at 17).  
The government, in turn, presents uncontroverted evidence that Mid-State walked off the 
job because U.S. Coating had not paid Mid-State for its work on the project.  The Corps 
points to the November 22, 2011, arbitration award against U.S. Coating, in which the 
arbitrator found that U.S. Coating had materially breached the contract between it and 
Mid-State for failure to pay Mid-State, stating that U.S. Coating had “offered no valid 
explanation as to why [Mid-State]” was not paid (finding 9). 
 
 U.S. Coating has offered no new facts to refute these assertions, nor do we see any 
reason to disturb the arbitrator’s findings.  Further, U.S. Coating has offered no evidence 
that Mid-State’s decision to walk off the job was due to an unforeseeable event.  Instead, 
the evidence demonstrates that it walked off the job because it was not being paid 
(finding 9).  See Bichler Co., ASBCA No. 30680, 89-1 BCA ¶ 21,320 at 107,511 
(upholding termination for default against prime contractor based on subcontractor’s 
delay).  Appellant’s failure to pay Mid-State was the cause of job disruption and 
Mid-State provided notice to U.S. Coating that Mid-State would stop working on the 
contract unless it was paid (gov’t br., ex. A at 5). 
 
 U.S. Coating further contends that termination for default was not justified, 
because the Corps materially breached the contract when the CO repeatedly refused to 
meet with Mr. Washington to resolve issues regarding the replacement subcontractor 
(app. br. at 19-21).  According to U.S. Coating, it arranged for a new subcontractor, 
MTNT, to take over the contract after Mid-State Construction walked off the job 
(finding 15).  U.S. Coating wrote to the CO to arrange a meeting to discuss continuing 
the contract using MTNT, but the CO refused to meet (finding 15).  U.S. Coating 
contends, without evidence, that the CO “did not want U.S. Coating to continue and 
complete the contract” (app. br. at 19). 

18 
 
 In her April 4, 2012 letter, CO McGuffie explained why she refused to meet.  She 
said that, despite her numerous requests, U.S. Coating had not provided her with 
sufficient information about the exact contractual relationship it intended.  She explained 
that FAR 49.402-4, Procedures in lieu of Termination for Default, allows a contractor to 
“continue performance of the contract by means of a subcontract or other business 
arrangement with an acceptable third party, provided the rights of the Government are 
adequately preserved.”  FAR 49.402-4(b).  According to CO McGuffie, U.S. Coating 
provided her no assurances that its current bonding company consented to the assignment 
of the contract to MTNT and that, without such assurances, the government’s rights 
would not be adequately protected.  (Finding 16) 
 
 We conclude that the CO was justified in her reluctance to meet with U.S. Coating 
without first receiving adequate assurances that U.S. Coating’s bonding company 
supported MTNT’s assumption of the contract.  We further conclude that U.S. Coating 
has not carried its burden of proving that the default was excusable. 
 
  C.  U.S. Coating Has Not Demonstrated That Corps Acted in Bad Faith 
 
 U.S. Coating contends that  the Corps acted in bad faith when it terminated the 
contract for default the day after the Agreed Order was filed.  U.S. Coating presents its 
bad faith argument as an exception to the parol evidence rule to persuade us to allow 
consideration of the parties’ April 24, 2012 phone conversation during which the parties 
allegedly agreed that the contract would be terminated for convenience (app. br. at 16-17).  
Because we previously held that the parol evidence rule did not prevent U.S. Coating from 
introducing evidence regarding a separate oral agreement, there is no need for us to decide 
whether the government acted in bad faith in order to consider the April 24, 2012 phone 
conversation.  U.S. Coating II, 17-1 BCA ¶ 36,710 at 178,760.   
 
 U.S. Coating additionally argues that the CO, Ms. McGuffie, acted in bad faith 
when she “completely ignored the agreement reached between Earl Washington and the 
AUSA” (app. reply. br. at 2).  
 
 Government officials are presumed to act in good faith.  Puget Sound 
Environmental Corp., ASBCA No. 58828, 16-1 BCA ¶ 36,435 at 177,597 (citing Road 
and Highway Builders, LLC v. United States, 702 F.3d 1365, 1368 (Fed. Cir. 2012)).  To 
prove that a government official acted in bad faith, a contractor “must show a ‘specific 
intent to injure”’ by clear and convincing evidence.  Road and Highway Builders, 702 
F.3d at 1369 (quoting Am-Pro Protective Agency, Inc. v. United States, 281 F.3d 1234, 
1240 (Fed. Cir. 2002)). 
 
 Here, U.S. Coating has offered no specific evidence to overcome the presumption 
that government officials acted in good faith.  Other than Mr. Washington’s sworn 

19 
statement expressing his surprise that the Corps terminated the contract for default the 
day after the Agreed Order was signed (finding 27), U.S. Coating offers no testimony, 
correspondence, or other evidence that any government official intended to deceive U.S. 
Coating or otherwise negotiated in bad faith.   
 
 In his sworn statement, U.S. Coating’s counsel, Mr. Irvin, stated “that either 
everyone on our end of the conference call . . . must have misunderstood what David 
Usry said, or the Corps was not acting in good faith during the negotiations” (finding 23).  
Although Mr. Irvin implies that the Corps was not acting in good faith, this statement is a 
conclusory allegation and offers no evidence of specific intent.  Sia Construction, Inc., 
ASBCA No. 57693, 14-1 BCA ¶ 35,762 at 174,987 (appellant “must do more than 
merely allude to bad faith by contracting officials” to overcome the presumption). 
 
 Moreover, as we previously discussed, U.S. Coating’s own affidavits fall short of 
stating that the Corps specifically agreed to terminate the contract for convenience.  In 
the absence of an agreement, we cannot conclude that the CO acted in bad faith when she 
terminated the contract for default. 
 
 IV.  Whether the Doctrine of Res Judicata Precludes Appellant from Re-Litigating 
        Issues Decided by the Bankruptcy Court 
 
 The government contends that the doctrine of res judicata bars consideration of 
whether the government induced appellant to reject the contract before the Bankruptcy 
Court.  According to the government, the Bankruptcy Court previously considered this 
issue in its May 17, 2012 hearing and appellant is barred from raising it again before the 
Board (gov’t br. at 22).   
 
 The government did not raise this argument in its January 21, 2016 renewed 
motion for summary judgment.  There, the government argued that the April 25, 2012 
Agreed Order was an integrated agreement and that the parole evidence rule barred the 
Board from considering whether a separate contrary agreement existed.  We held that the 
parol evidence rule did not prevent U.S. Coating from introducing evidence that a 
separate oral agreement existed apart from the Bankruptcy Court’s Agreed Order.  U.S. 
Coating II, 17-1 BCA ¶ 36,710 at 178,760. 
 
 In light of our conclusion that the parties did not have an implied-in-fact contract 
to terminate the contract for convenience, we need not consider whether res judicata bars 
U.S. Coating from re-litigating whether the government induced U.S. Coating to reject 
the contract before the Bankruptcy Court.   
 
  

20 
CONCLUSION  
 
 For these reasons, we deny the appeal. 
 
 Dated:  September 28, 2020 
 
  
 
KENNETH D. WOODROW 
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 
 
 
 
I certify that the foregoing is a true copy of the Order of Dismissal of the Armed 
Services Board of Contract Appeals in ASBCA No. 58245, Appeal of U.S. Coating 
Specialties & Supplies, LLC, rendered in conformance with the Board’s Charter. 
 
 Dated:  September 29, 2020 
 
 
 
 
 
 
 
 
 
PAULLA K. GATES-LEWIS 
Recorder, Armed Services 
Board of Contract Appeals