DCX-CHOL Enterprises, Inc.
Docket: ASBCA 58742
Decision date: 2016-10-11

ARMED SERVICES BOARD OF CONTRACT APPEALS 
Appeal of --
DCX-CHOL Enterprises, Inc. 
Under Contract 
No. N00104-05-C-FA80 
APPEARANCE FOR THE APPELLANT: 
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APPEARANCES FOR THE GOVERNMENT: 
ASBCA No. 58742 
James S. DelSordo, Esq. 
Argus Legal, LLC 
Manassas, VA 
Ronald J. Borro, Esq. 
Navy Chief Trial Attorney 
Abram D. Burnett, III, Esq. 
Assistant Counsel 
NA VSUP Weapon Systems Support 
Mechanicsburg, PA 
OPINION BY ADMINISTRATIVE JUDGE HARTMAN 
ON APPELLANT'S MOTION FOR SUMMARY JUDGMENT 
Appellant seeks conversion of the termination of its contract for default to a 
termination for the convenience of the government. Appellant asserts that it is entitled 
to summary judgment because the Department of the Navy (Navy) waived the delivery 
schedule for its contract when it failed to deliver and continued to perform the contract 
in reliance on that waiver with the Navy's knowledge, thereby precluding termination 
of its contract for default absent establishment of a new delivery schedule. The Navy 
asserts that appellant has not established either of the elements necessary for a waiver 
and that there are questions of material fact precluding grant of appellant's motion for 
summary judgment. 
STATEMENT OF FACTS FOR PURPOSES OF THE MOTION 
In September of 2005, the Navy awarded Contract No. N00104-05-C-FA80, for 
submarine "stuffing tubes" (also referred to as "hull penetrators") to appellant, 
DCX-CHOL Enterprises, Inc. (DCX) (R4, tab 4). Stuffing tubes are classified as 
"Level I/SUB SAFE" materials because the use of incorrect or defective material could 
create a high probability of failure resulting in serious personnel injury, loss of life, 
loss of vital shipboard systems, or loss of the ship itself (see R4, tab 2 at 57). By 
bilateral contract Modification No. P00020 dated 18 October 2012, the parties agreed 
to extend the remaining contract delivery date to 15 February 2013 (R4, tab 56). 

By email dated 24 January 2013, Lea Demirovic, a Navy contract specialist 
located in Mechanicsburg, Pennsylvania, asked DCX for its delivery schedule for the 
remainder of the units under the contract (R4, tab 60 at 2). Four days later, by email 
dated 28 January 2013, Tom Shafer of DCX responded that "I am working on this and 
will get back to you later today" (id.). On 12 February 2013, Ms. Demirovic 
responded to Mr. Shafer that "I 
haven't received anything from you yet" and "[p]lease 
let me know what's the status" (id.). Two days later, on Thursday, 14 February 2013, 
one day before the specified delivery date, Mr. Shafer replied to Ms. Demirovic as 
follows: 
I apologize for not getting back to you but I was trying to 
get delivery answers. We are still missing components 
from our supplier for the Plasma Coating process. I have 
been told these parts should be at our facility next week. If 
the parts do come in and are acceptable, I am looking at an 
additional 4 weeks for in-house processing. I would 
estimate the delivery the week of March 25, 2013. I will 
keep you informed of our progress next week. 
(Id. at 1) On Tuesday, 19 February 2013, the day after the President's Day holiday, 
Ms. Demirovic advised Mr. Shafer by email that "[y ]our contract is currently 
delinquent" and "[i]n order to consider your extended delivery date of 03/25/13, 
we would need consideration." After Ms. Demirovic did not receive a response to 
her 19 February 2013 email within 2 days, she sent a 21 February 2013 email to both 
Mr. Shafer and Cory Gamberg of DCX stating again "subject contract is currently 
delinquent," "[y]our attention to this matter is greatly appreciated," and "[p]lease 
respond at your earliest convenience." (Id., tab 63 at 2) 
Ms. Demirovic received no response from DCX to her 21 February 2013 email 
during 
the following 12 days. The Navy's contracting officer (CO), Richard Fry, then 
sent DCX a "show cause" letter dated 5 March 2013 stating: 
Since you have failed to perform Contract 
No. NOO 104-05-C-F A80 within the time required by its 
terms, the Government is considering terminating the 
contract under the provisions for default of this contract. 
Pending a final decision in this matter, it will be necessary 
to determine whether your failure to perform arose from 
causes beyond your control and without fault or negligence 
on your part. 
Accordingly, you are given the opportunity to present, in 
writing, any 
facts bearing on the question ... within 10 days 
after receipt of this notice. Your failure to present any 
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(R4, tab 61) 
excuses within this time may be considered as an 
admission that none exist. Your attention is invited to the 
respective rights of the Contractor and the Government and 
the liabilities that may be invoked if a decision is made to 
terminate for default. 
Any assistance given to you on this contract or any 
acceptance by the Government of delinquent goods or 
services will be solely for the purposes of mitigating 
damages, and it is not the intention of the Government 
to condone any delinquency or to waive any rights the 
Government has under the contract. [Emphasis added] 
By letter dated 14 March 2013, Michael Jamison, vice president ofDCX, 
responded to the CO's show cause letter as follows: 
The delay on contract NOO 104-05-C-F A80 is due to delays 
that occurred during the outside processing of the hull 
penetrator bodies. There were two groups of parts that 
where [sic] sent out for the outside processing. 
Group 1 
Parts were sent out for Gold plating of contacts.... On 
January 29, 2013 the approved parts were then sent to 
another vendor to have the 
non-conductive coating 
applied.... These parts were received at [DCX] on 
February 27, 2013. 
Group 2 
These parts [were] a group of assemblies that [were] returned 
for repair due to a debonding issue that occurred on an 
earlier shipment of assemblies. During the rework 
process of these returned parts ... , it was determined the 
non-conductive coating was being removed during the 
rework. These assemblies [were] sent back to the original 
vendor for removal of the non-conductive coating and the 
re-application of the non-conductive coating. The last batch 
of these parts were signed off by the government inspector 
on February 21, 2013. 
To complete the manufacturing process on both Group 1 
and Group 2, the ... processes include wiring of the body, 
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(R4, tab 62) 
rubber molding, electrical testing, hydro-static testing and 
special packaging including the "Level- I" contract data 
requirements. 
[DCX] will ready for shipment no later than May 8, 2013. 
The Level 1 inspection will be notified 2 weeks prior to the 
ship date to make arrangements for travel. 
After reviewing the response from DCX, Ms. Demirovic prepared a 10-page 
memorandum dated 11 April 2013 for Jodene R. Watkins, deputy director of the 
Critical Requirements Contracting Department, proposing the DCX contract be 
terminated for "default." Ms. Demirovic stated in her memorandum: 
The contractor ha[ s] continuously failed to meet the 
scheduled delivery dates of the First Article Test Report 
("FAT report") and material. Originally, DCX failed to 
submit its FAT report and to get it approved before 
09/18/06 and consequently missed delivery dates on 
09/18/06 and on 10117/06. On 11/14/06, a bilateral 
modification with consideration, P00008, was issued to 
extend FAT report delivery date to 11130/06 and to extend 
incremental deliveries of the material with a final delivery 
date on 06115/07. 
On 12/01/06, the PCO sent a show cause notice to DCX 
because DCX failed 
to submit the report on time. As a 
new Level 1 supplier, DCX was given another opportunity 
and a bilateral modification with consideration, P00009 
extended the FAT report delivery date to 3/1/07 and final 
material delivery date was extended to 12/11/07. 
On 03/10/07, the FAT test report was disapproved and 
DCX requested to extend the FAT report delivery date. 
On 04/16/07, a bilateral modification with consideration, 
POOO 10 was issued to extend FAT report delivery date to 
4120107. Material delivery dates were not extended. On 
5/22/07 the FAT report was disapproved for a second time. 
On 06/04/07, the PCO sent a show cause notice to DCX 
and DCX responded with a Request for Waiver ("RFW"). 
The RFW was approved and the FAT report was 
resubmitted. DCX missed delivery dates on 06/14/07, 
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06/28/07, 07/16/07, 08/03/07, 09110107, 10/05/07, 
10/22/07, [and] 12/ 11 /07 per the latest revised delivery 
schedule listed in Mod P00009. 
In Aug 2009 the FAT report was approved and in Oct 
2009, DCX started to ship units but the shipped units were 
rejected due to pin defects and de-bonding issues; PQDRs 
were issued .... 
On 10/18/12, a bilateral modification, P00020 was issued 
and the material delivery date was extended to 0211512013 
for the remaining units .... 
... On 4/08/13, Code 8322 QA reported that at least 71 more 
units [supplied by DCX] may be rejected by the fleet (USS 
Topeka) due to de-bonding issues. Based on the 
information presented above and their rejection rate of 
approximately 45%, there is no reasonable expectation that 
DCX Chol will adhere to their proposed schedule [showing 
shipping by 8 May 2013]. 
I have determined that if this contract were terminated, the 
supplies would be available from other sources ... based on 
the fact this this is a fully competitive item and there are 
five other known sources that are capable of supplying this 
item. Since the effective date of this contract, seven ... 
contracts were awarded to other vendors. Six contracts 
have successfully delivered the material and one contract is 
currently in production of this item .... 
. . .I have considered the urgency of this item and the period 
of time required to obtain the item from other sources as 
compared to the time delivery could be obtained from the 
delinquent contractor. Based on the contractor's past 
performance on this contract, there is no confidence that 
the contractor will meet future deliveries or supply 
material that is acceptable. 
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I have concluded that this termination for default will have 
no effect on [the] Government's acquisition program and 
the contractor's capability as a supplier under other 
contracts. 
The contract and applicable regulations have been 
reviewed. Specific contractor failure and excuses for the 
failure have been considered. I recommend that, with the 
concurrence of legal counsel, this contract be terminated 
for default. 
(R4, tab 63) Ms. Watkins reviewed the memorandum and signed off on it on 
16 April 2013 (id. at 3). By Modification No. P00021 dated 17 April 20013, 
Navy CO Susan McArdle terminated Contract No. N00104-05-C-FA80 for default 
(R4, tab 64). 
DECISION 
In its summary judgment motion, DCX contends the Navy waived the delivery 
schedule for its contract after DCX failed to deliver on 15 February 2013, as required 
by Modification No. P00020, and it continued to perform the contract with the Navy's 
knowledge relying on that waiver. The Navy opposes the summary judgment motion 
on the grounds that DCX has not established any of the elements necessary for us to 
conclude that there was a waiver and that there are genuine issues of disputed material 
fact precluding a grant of summary judgment. 
In De Vito v. United States, 413 F.2d 1147, 1153 (Ct. Cl. 1969), the United 
States Court of Claims held that, where the government elects to permit a delinquent 
contractor to continue performance past the due date, it surrenders its contractual right 
to terminate the contract for default if the contractor has not abandoned performance 
and a reasonable time has expired for the government to furnish a termination notice. 
The Court stated that there are two elements necessary to find a governmental election 
to waive default -- ( 1) failure to terminate within a reasonable time after the default 
under circumstances indicating forbearance, and (2) reliance by the contractor on the 
failure to terminate and continued performance of the contract by the contractor with 
the government's knowledge and implied or express consent. De Vito, 413 F .2d 
at 1154. 
While DCX asserts that both elements necessary to establish waiver by the 
Navy are present here, based on the limited record before us, i.e., the Rule 4 file and 
several documents appended to the parties' briefs, we conclude that DCX has failed to 
show either of the elements necessary to conclude that there has been a waiver by the 
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Navy. DCX asserts in its motion that the "circumstance" indicating "forebearance" 
by the Navy is the contract specialist's 19 February 2013 email responding to a 
14 February 2013 email (app. mot. at 3-4). DCX's 14 February email, which was sent 
one day before the 15 February delivery date and in response to repeated emails from 
the contract specialist inquiring about delivery, stated if "the parts do come in" and 
they were "acceptable," DCX was "looking at an additional 4 weeks for [its] in-house 
processing" with estimated "delivery the week of March 25, 2013." The 19 February 
email sent by the Navy contract specialist in response stated simply "[y ]our contract is 
currently delinquent" and, for the Navy "to consider your extended delivery date of 
03/25113, [the Navy] would need consideration." There is nothing in the record before 
us showing that DCX ever proposed providing any consideration for an extension of 
the delivery date past 15 February 2013 or that the parties engaged in any discussion 
of extending the delivery date based on the furnishing of consideration by DCX. In 
sum, an email stating that a contract was delinquent and an offer of consideration was 
necessary for the Navy to agree to any further delay in date of delivery, by itself, 
cannot constitute "forebearance" when there is no evidence an offer of consideration 
was ever made by DCX. E.g., Switlik Parachute Co. v. United States, 573 F.2d 1228, 
1233 & n.7 (Ct. Cl. 1978). 
Moreover, the record reflects no other circumstances indicating forebearance by 
the Navy with respect to delivery after 15 February 2013. When the Navy's CO issued 
his 5 March 2013 show cause letter to DCX, he expressly notified DCX it had failed to 
perform Contract No. NOO 104-05-C-F A80 within the time required by its terms, the 
Navy was considering terminating the contract for default, DCX was being given the 
opportunity to present excuses for delivery failure, and, in soliciting possible excuses 
for delivery failure, it was 
"not the intention of the [Navy] to condone any delinquency 
[by DCX] or to waive any rights the [Navy] has under the contract." After the Navy 
considered DCX's response to the show cause order, including all excuses for failure 
to deliver, the contract specialist recommended default termination and the Navy's CO 
terminated the contract for default. Accordingly, we see no evidence of 
"circumstances indicating forbearance" by the Navy. 
DCX contends it also has shown the second element necessary to establish 
waiver under De Vito because, at time of contract termination, the "required supplies 
were manufactured and ready for delivery to the [Navy]" (app. mot. at 3, 5). The only 
evidence DCX cites for the proposition that the supplies were manufactured and ready 
for delivery is the contract specialist's memorandum recommending the DCX contract 
be terminated for default (id.; R4, tab 63). The memorandum, however, simply notes 
DCX stated in its 14 March 2013 response to the show cause order that "material will 
be shipped" by 8 May 2013. The memorandum concludes, based on DCX's repeated 
prior failures to deliver over a seven-year period, the Navy lacks confidence that DCX 
"will meet [its proposed] future deliveries or supply material that is acceptable." Such 
a statement by the contract specialist does not establish that the Navy knew DCX was 
continuing to perform the contract or that the supplies to be delivered were "ready for 
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delivery" on date of termination. Moreover, DCX did not expressly state in its reply to 
the CO show cause order whether or not, at that point in time, it was continuing to 
"complete the [remaining] manufacturing process[ es] on both Group 1 and Group 2" 
parts. We, therefore, see no evidentiary basis to conclude that there was continued 
performance of the contract by DCX "with the government's knowledge" and consent. 
Switlik, 573 F.2d at 1233-34. 
The standards set forth in FED. R. CJV. P. 56 guide us in resolving a 
summary judgment motion. J W Creech, Inc., ASBCA Nos. 45317, 45454, 94-1 BCA 
~ 26,459 at 131,661; Allied Repair Service, Inc., ASBCA No. 26619, 82-1 BCA ~ 15,785 
at 78,162-63; Board Rule 7(c)(2). We will grant a summary judgment motion only 
if pleadings, depositions, interrogatory answers, and admissions on file, together with any 
affidavits or other evidence, show that there is no genuine issue as to any material fact, 
and that the moving party is entitled to judgment as a matter of law. DCX, the party here 
seeking summary judgment, has the burden of demonstrating both of these elements. 
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Mingus Constructors, Inc. v. United 
States, 812 F.2d 1387, 1390 (Fed. Cir. 1987); Afghanistan Trade Transportation Co., 
ASBCA No. 59782, 15-1 BCA ~ 36,077 at 176, 166. DCX has failed to show it is entitled 
to judgment as a matter of law and carry its burden with respect to grant of summary 
judgment. 
CONCLUSION 
Appellant's motion for summary judgment is denied. 
Dated: 11 October 2016 
MARK N. STEMPLER / 
Administrative Judge 
Acting Chairman 
Armed Services Board 
of Contract Appeals 
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TERRENCES.HARTMAN 
Administrative Judge 
Armed Services Board 
of Contract Appeals 
RICHARD SHACKLEFORD 
Administrative Judge 
Vice Chairman 
Armed Services Board 
of Contract Appeals 

I certify that the foregoing is a true copy of the Opinion and Decision of 
the Armed Services Board of Contract Appeals in ASBCA No. 58742, Appeal of 
DCX-CHOL Enterprises, Inc., rendered in conformance with the Board's Charter. 
Dated: 
9 
JEFFREY D. GARDIN 
Recorder, Armed Services 
Board of Contract Appeals