M.L. Energia, Inc.
Docket: ASBCA 55947
Decision date: 2012-07-24

ARMED SERVICES BOARD OF CONTRACT APPEALS 
Appeal of--
M. L. Energia, Inc. 
Under Contract No. NASI 0-98025 
APPEARANCE FOR THE APPELLANT: 
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APPEARANCES FOR THE GOVERNMENT: 
ASBCA No. 55947 
Dr. Moshe Lavid 
President 
Vincent A. Salgado, Esq. 
NASA Chief Trial Attorney 
Dawn L. Oliver, Esq. 
Assistant Chief Counsel 
Kennedy Space Center, FL 
OPINION BY ADMINISTRATIVE JUDGE SHACKLEFORD 
This is an appeal from a final decision denying a certified claim for $I53,6I5 
under a NASA-issued Small Business Innovation Research (SBIR) contract for 
photo-chemical remediation of sites contaminated with hazardous solvents. The 
contracting officer (CO) had previously issued 
a unilateral modification reducing the 
contract price by the amount of the claim under the Inspection clause of the contract. A 
three-day hearing was held in Trenton, New Jersey where appellant appeared prose. The 
record consists of the transcript of that hearing (tr.), a government Rule 4 file (R4) and 
supplements from appellant. Appellant's documents are numbered 500 and above, those 
below that number were submitted by the government. In addition we have initial and 
reply briefs from both parties. Only entitlement is before us for decision (tr. l/I5). 
FINDINGS OF FACT 
I. Congress created the SBIR program to assist small-business concerns in 
obtaining and performing research and devdopment work (tr. 3/44-45). The program 
requires federal agencies to reserve some research and development funds for small 
businesses, and has three phases (tr. 1/37-40; see I5 U.S.C. § 638(e)(4)). During Phase I, 
a concept is developed and proven (tr. I/43, 2/47-48). Phase II takes the concept 
developed in Phase I and, doing the necessary experiments, brings it to a point at which 
an apparatus is built and demonstrated (2/48-49, I90). Phase III involves the commercial 
application of the results of Phase II, with funding provided by either non-federal sources 
of capital or non-SBIR federal funding (tr. 1/44, 64; I5 U.S.C. § 638(e)(4)(C)). 

2. M. L. Energia, Inc. (Energia) is located in Princeton, New Jersey (R4, tab 3 at 1 
of9). Energia performed Phase I of a National Aeronautics and Space Administration 
(NASA) SBIR contract which established that photo-chemical remediation (PCR) had the 
potential to clean up sites contaminated by hazardous solvents (tr. 2/16, 28). 
Dr. Moshe Lavid is Energia's president and principal investigator (tr. 2/6, 7). He holds 
mechanical engineering degrees from Technion-Israel Institute of Technology (B.Sc. and 
M.Sc.) and from the State University of New York at Stony Brook (Ph.D.) (R4, tab 122 at 
47). His wife, Nira Lavid, is vice president of finance and administration and majority 
owner of the company (R4, tab 122 at first page, attach. B; tr. 115). 
3. On 18 March 1998, NASA entered into Contract No. NAS10-98025 with 
Energia to perform Phase II of an SBIR contract for photo-chemical remediation of sites 
contaminated with hazardous solvents. The contract was awarded and administered by 
NASA's John F. Kennedy Space Center in Florida (KSC). (Tr. 1/69; R4, tab 3) 
4. Dr. Jacqueline Quinn was the Contracting Officer's Technical Representative 
(COTR) for both Phase I and Phase II of the Energia contracts (tr. 2/141, 143). Dr. Quinn 
earned a B.S. degree in Civil Engineering from the Georgia Institute of Technology, an 
M.S. degree and a Ph.D. in Environmental Engineering both from the University of 
Central Florida (tr. 2/141-42). 
5. Article B-1 of the contract, Description of Supplies or Services, provided as 
follows: 
The Contractor shall furnish all personnel, facilities, 
equipment, material, supplies, and services ... and otherwise do 
all things necessary to, or incident to, performing the SBIR 
96-1 Phase II Research Project entitled ... "Photo-Chemical 
Remediation of Sites Contaminated with Hazardous 
Solvents." 
(R4, tab 3 at 2) 
6. Article C-1, Statement of Work, provided: 
The Contractor shall, under this contract identified as Phase II 
SBIR, continue to conduct the principle research effort 
initiated under a Phase I NASA contract for the development 
ofthe "Photo-Chemical Remediation of Sites Contaminated 
with Hazardous Solvents." The Contractor's Phase II SBIR 
2 

Proposal Number 96-1-II is incorporated into this contract by 
reference. 
(R4, tab 3 at 2) 
7. Pursuant to Article B-2, the "total firm fixed price" of the contract was 
$597,960. Article B-3, Deliverables, called for delivery of two items to KSC. Item 1 
called for seven Progress Reports and Item 2 called fot a Final Report. The content 
required in those progress reports was set forth in Article C-2, and these quarterly reports 
were to be delivered ten days following the last day of each quarter. The content required 
in the final report was set forth in Article C-3 in part as follows: 
a. The Contractor shall submit a Final Report not later than 
the last day of the period of performance defined in Article 
F -1. The report shall be in narrative form documenting and 
summarizing the results of the entire contract work. The 
Final Report shall include a single-page project summary as 
the first page, identifying the purpose of the research, a brief 
description of the research carried out and the research 
findings or results. The potential applications of the project 
results in Phase III both for NASA purposes a~d for 
commercial purposes shall also be included. The project 
summary is to be submitted without restriction for NASA 
publication. The balance of the report should indicate in 
detail the project objectives, work carried out, results 
obtained, and assessment of technical-feasibility. Rights to 
this data shall be in accordance with clause 52.227-20, Rights 
in Data-SBIR Program (Mar 1994). 
(R4, tab 3 at 3) 
8. The period of performance was required to begin on 18 March 1998 and was to 
be completed within 24 months thereafter, with the technical work completed within 23 
months and the final report due 30 days thereafter (R4, tab 3 at 3). Thus, technical wor~ 
was scheduled for completion on or before 18 February 2000 and the final report was due 
30 days thereafter or by 19 March 2000. 
9. While the firm fixed-price of the contract was $597,960, at time of award, 
pursuant to Article H -1, LIMITATION OF FUNDS (FIXED-PRICE CONTRACT) (MAR 1989), 
$175,000 was allotted to the contract deemed to be adequate through 30 September 1998 
and the contract contemplated that "from time to time additional funds [would] be 
allocated to the contract" until the total price was allotted (R4, tab 3 at 4). 
3 

10. Article H-6, Special Provision, states: 
If it is determined by the Government at any time during the 
period of performance of this contract that the progress of the 
research and/or development is not adequate to anticipate 
successful completion, the contractor agrees to enter into 
good faith negotiations with the Contracting Officer for the 
purpose of restructuring the contract by mutual agreement to 
reflect accomplishrilents to date, an alternate deliverable 
product, and a revised contract value. 
(R4, tab 3 at 6) 
11. The contract incorporated FAR 52.232-2, PAYMENTS UNDER FIXED-PRICE 
RESEARCH AND DEVELOPMENT CONTRACTS (APR 1984), which states in part: 
The Government shall pay the Contractor, upon 
submission of proper invoices or vouchers, the prices 
stipulated in this contract for work delivered or rendered and 
accepted, less any deductions provided in this contract. 
(R4, tab 3 at 7) 
12. The clause prescribed at FAR 52.232-16, PROGRESS PAYMENTS (JUL 1991)­
ALTERNATE I (AUG 1987), as modified, provided for a 100% progress payment rate based 
upon costs incurred, but an 80% rate for undefinitized contract actions. The clause 
further provided: 
(c) Reduction or suspension. The Contracting Officer 
may reduce or suspend progress payments, increase the rate of 
liquidation, or take a combination of these actions, after 
finding on substantial evidence any of the following 
conditions: 
(1) The Contractor failed to comply with any material 
requirement of this contract .... 
4 

(R4, tab 3) 
(2) Performance of this contract is endangered by the 
Contractor's (i) failure to make progress or (ii) unsatisfactory 
financial condition. 
13. The contract incorporated by reference the clause prescribed at FAR 52.246-7, 
INSPECTION OF RESEARCH AND DEVELOPMENT-FIXED-PRICE (AUG 1996) (Inspection 
clause), which provided in part as follows: 
(b) The Government ~as the right to inspect and test all 
work called for by the contract, to the extent practicable at all 
places and times, including the period of performance, and in 
any event before acceptance .... 
(d) The Government shall accept or reject the work as 
promptly as practicable after delivery, unless otherwise 
specified in the contract.. .. Work is nonconforming when it is 
defective in material or workmanship or is otherwise not in 
conformity with contract requirements. 
(e) The Government has the right to reject 
nonconforming work. If the Contractor fails or is unable to 
correct or to replace nonconforming work within the delivery 
schedule (or such later time as the Contracting Officer may 
authorize), the Contracting Officer may accept the work and 
make an equitable price reduction. Failure to agree on a price 
reduction shall be a dispute. 
(R4, tab 3 at 8) 
14. The Phase II proposal which was incorporated into the contract computed the 
total cost ofthe contract at $700,000 including fee and after deducting $100,000 which 
reflected the 
amount ofEnergia's cost-sharing, resulted in a request of$600,000 from 
NASA, which is slightly more than the 
amount awarded by the contract. The place of 
performance in the proposal was listed as Energia's laboratory in Plainsboro, New Jersey 
for months 1 to 18 and 22 to 24. For months 18 to 21, the place of performance was 
listed as NASA-KSC, FL. (R4, tab 122) 
5 

15. The direct costs included in the proposal were direct labor ($189,598), 
purchased equipment ($100,000), subcontracts ($62,000), other direct costs ($6,500) and 
travel ($8,799). The "Other Direct Costs" 
included $3,000 for crating and trucking the 
prototype unit roundtrip from Princeton, NJ to KSC, FL. The travel costs were for three 
visits to KSC by two persons, the first lasting two days for a survey of sites; the second 
for eight days and the third for 20 days. The 
cost proposal also included indirect costs of 
$293,877 and a 5.9%·fee amounting to $39,226 .. (R4, tab 122) 
16. The proposal reviewed the Phase I results and stated: 
Based on the encouraging findings described in details 
in Phase I Final Report .. .it is recommended to pursue PCR 
technology into a comprehensive Phase II effort, culminating 
in a field demonstration at a selected site in NASAIKSC, 
Florida. 
(R4, tab 122 at 5) 
17. The proposal included thre.e possible sites at KSC and the proposal listed each 
in order of preference for the field demonstration- (1) Convertor Compressor Facility, 
(2) Hydrocarbon Bum Facility and (3) Wilson Comers (R4, tab 122 at 36-37). These 
three sites, along with the chemical contamination and contour concentration gradient of 
each were given to Dr. Lavid by Dr. Quinn in the context of providing technical guidance 
in the preparation of the Phase II proposal (tr. 21147). From the NASA perspective, the 
purpose of the technology was to clean up sites contaminated with solvents used 
throughout the 1960s and 1970s to clean rocket parts from the Apollo space program, 
including trichloroethylene (TCE) and dichloroethylene (DCE) which degrade to 
binochloride and then to ethylene. These contaminants were in the groundwater 
throughout KSC. (Tr. 2/147-51) 
18. The stated objective of Phase II was "to design, construct and demonstrate in a 
field operation a pilot-scale prototype for environmentally safe destruction of volatile 
organic. halocarbons (VOHs) extracted from groundwater by air sparging/SVE operation 
in conjunction with Energia's Photo-Chemical Remediation (PCR) technology" (R4, tab 
122 at 6). The work plan for accomplishing the objective was 
divided into six tasks. 
Task No. 1 was to perform a comprehensive bench-scale study of treatment of chlorinated 
VOCs by Energia's PCR technology so as to "obtain all the operating conditions needed 
for the design of the pilot sector demonstration prototype for the specific application (i.e., 
air-sparging/SVE) at a selected site in NASA!KSC, FL" (id. at 7). 
19. Task No.2 was described as a scaling up of bench-scale results, first from 
bench-scale to pre-prototype unit and then, after fine-tuning and upgrading, to a pilot 
6 

scale prototype. Based upon the technical and cost data obtained during the performance 
of Task No.2, a design specification package would be prepared for use in Task No.3 for 
the design of the pilot-scale prototype. (R4, tab 122 at 21-22, 27) 
20. Task No. 3 is the design of the pilot scale prototype with it ultimately 
becoming a "self-contained, fabricated and tested pilot-scale prototype unit ready for 
installation at a demonstration site selected jointly by ENERGIA, its industrial partner 
and NASA" (R4, tab 122 at 27). 
21. Task No.4 is the installation and testing of the air sparging/soil venting 
extraction system (ASP/SVE) aboard one of the three possible sites at NASA's KSC in 
Florida (R4, tab 122 at 30-37). Task No. 5 is a field demonstration at the selected site 
(id. at 37-38) and Task No.6 is to examine the data in order to evaluate the technology 
(id. at 39-40). 
22. Based upon our review of the proposal we find as fact that the contractor 
intended to utilize property within NASA's KSC in Florida to conduct installation of the 
prototype and testing of the system and its cost proposal included costs for shipping and 
for travel from New Jersey to Florida to accomplish same. In addition, the proposal 
provided that Energia would contribute $100,000 of its own money to cover the estimated 
cost of the equipment necessary to build the pilot-scale prototype. (R4, tab 122 at 29-30, 
80-81; tr. 2/27-34) 
23. The proposal included a "Phase II Milestone (GANTT) Chart" which depicted 
the schedule for each task and the personnel requirement, expressed in person-months 
(p-m), for that task. While there was some overlap of steps, the schedule showed as 
follows: 
Task #1 Months 1-9 (15 p-m) 
Task #2 Months 7-12 (9 p-m) 
Task #3 Months11-18 (18 p-m) 
Task #4 Months 18-19 (1 p-m) 
Task #5 Months 19-21 (6 p-m) 
Task #6 Months 22-24 ( 4 p-m) 
(R4, tab 122 at 41-42) Based upon this schedule and the fact that the period of 
performance was to commence on 18 March 1998, Task #3 was scheduled for completion 
around 18 September 1999. 
24. On 6 May 1998, the CO unilaterally issued contract Modification No. 1 which 
increased the funding for the contract by $25,000, from $175,000 to $200,000 (R4, tab 4). 
7 

The CO testified that this was not an increase in the value of the contract, merely an 
increase of funding (tr. 3/55). 
25. By cover letter dated 20 June 1998, Energia submitted its first quarterly 
progress report. While the 
report itself was detailed, the cover letter summarized the 
work accomplished during the first quarter and, with respect to the future, stated: 
(R4, tab 5) 
During the upcoming quarter we have to find out what sites( s) 
is( are) designated for demonstration. Knowledge of the 
specific pollutants and their concentrations at the selected site 
will enable us to fine-tune the experimental conditions before 
moving on to the more expensive stage of desi~ing and 
assembling the prototype reactor. 
I believe that a joint technical meeting (Princeton, NJ or KSC, 
FL) is advisable prior to undertaking the fine-tuned 
experiments. 
26. The second quarterly 
report submitted on 28 September 1998 covered the 
period from 18 June 1998 to 17 September 1998. The report cover letter pointed to the 
experimental and computer modeling tasks completed during the quarter and the report 
detailed those results. In addition the cover letter stated: 
(R4, tab 6) 
[D]uring the upcoming quarter we have to find out what 
site(s) is( are) designated for demonstration. Knowledge of 
the specific pollutants and their concentrations at the selected 
site(s) will enable us to fine-tune the experimental conditions 
before moving on to the more expensive stage of designing 
and assembling the prototype reactor. 
A joint technical meeting (Princeton, NJ or KSC, FL) is 
imperative prior to undertaking the final stage of bench-scale 
experiments. 
27. Unilateral Modification No.2 dated 14 November 1998 added $300,000 in 
incremental funding bringing the total funding to $500,000 (R4, tab 4). 
8 

28. The third quarterly progress report covering the period 18 September 1998 
through 17 December 1998 was submitted on 28 December 1998. The cover letter 
transmitting the report again reminded NASA through Dr. Quinn of the importance of a 
joint technical meeting as follows: 
(R4, tab 7) 
At this juncture, a joint technical meeting (at Princeton, NJ or 
KSC, FL) is imperative prior to undertaking the final stage of 
bench-scale experiments. The main objective of the requested 
meeting is to find out what site(s) is( are) designated for 
demonstration. Knowledge of the specific pollutants and their 
concentrations at the selected site(s) will enable us to 
fine-tune the experimental conditions before moving on to the 
more expensive stage of designing and assembling the 
prototype reactor. 
29. The fourth quarterly progress report was submitted on 19 April 1999 and for 
the fourth time Energia included language in its cover letter emphasizing the importance 
of a joint meeting to discuss sites designated for testing (R4, tab 8). However, included in 
the body of this report was more positive language suggesting that the parties had agreed 
to a meeting, as follows: 
(!d. at 20) 
During the upcoming quarter, a technical meeting will 
be held between the technical staff ofNASA/KSC and 
Energia. The main agenda will be to discuss and select the 
site(s) for field demonstration, obtain specific data (i.e., 
contaminants and their concentrations) at these sites and file 
necessary requests for demonstration permits. 
30. By email dated 4 August 1999, Dr. Quinn wrote to Dr. Lavid as follows: 
I was under the impression that we were going to get 
something from you in the form of a work plan for 
implementation of your system at the Wiltec Facility. I would 
like to present it at the August Partnering team. Would that 
be possible? If so, please respond immediately. I am 
assuming you already have a field design done by this time [] 
9 

(R4, tab 31)1 
according to the statement of work in your contract[.] I would 
just assign you a well to use at the site that is in a hot spot. 
31. Dr. Lavid replied, stating: 
(R4, tab 31) 
[I]fthe Wiltec Facility is the selected site for demonstration, 
[we] would like to request a survey of its contaminants and/or 
any environmental study conducted at NASA/KSC. This is 
essential for the final design of the prototype. We need it 
ASAP (before the bench-scale apparatus is dismantled), 
because we may find contaminants for which we do not have 
any bench-scale data. 
32. On 10 September 1999, Dr. Quinn asked again, via email, ifDr. Lavid was 
still planning on doing the field demo, and remarked she had not heard from him on this 
in a while. She inquired as to whether they needed to do some contract adjustments. He 
responded on14 September 1999, that "[w]e are currently working on the quarterly 
report" and she would get it by the end of September. He said at that time he would 
"make recommendations regarding future work (including field demo) and any required 
contract modifications." Heals~ indicated he would be attending a conference in Cocoa 
Beach, Florida, 18-22 October 1999 and would like to meet with her to discuss site 
selection at that time. (R4, tab 31) However, a month later he informed her he would not 
be attending the Florida conference and would therefore mail the quarterly reports, but 
there was no mention of a field demonstration (R4, tab 32). 
33. On 20 October 1999, Energia forwarded a progress report covering the fifth 
and sixth quarters of work performed from 18 March to 17 September 1999. In addition 
to reporting on research efforts during that period, Energia advised as to its plans for the 
upcoming seventh and eighth quarters, including design of a modular photo-reactor and 
stated in its cover letter as follows: 
In addition, during this period, we will jointly (with KSC 
personnel) select a suitable remediation site and survey its 
particular contaminants (type and concentration). This task 
1 We observe that the Wiltec Facility was not one of the named areas in the proposal 
(finding 17), although it could possibly be an alternate name for one of them. It 
was not discussed at the hearing. 
10 

(R4, tab 9) 
(selection of a site) has to be completed before actual 
construction commences. 
34. As of 17 September 1999, the report stated that bench-scale experiments had 
been completed and that during the next periods of performance, the seventh and eighth 
quarters, Energia would use the bench-scale results to design a pilot-scale photo-reactor 
(R4, tab 9 at 19). The pilot-scale design was the planned Task No.3, which was 
scheduled to have been complete by the date of the report, but apparently had not yet 
begun. 
3 5. Each of the reports covering the first six quarters ( 18 months) of contract 
performance referred to the need for jointly selecting a suitable remediation site. 
36. Dr. Quinn testified that she had several conversations with Dr. Lavid 
regarding potential sites at KSC and Energia needed to be further along in the 
. development process before she could get approval for an implementation site. She 
explained Energia needed to complete Task No.3, the design and expected performance 
of the system, before she could approach the regulators to get approval for a site 
demonstration. The regulators at KSC, she said, as in any regulatory community, would 
not allow a system to be tested on site without a plan of operation indicating how the 
apparatus would get to the test site, the instrumentation to be used, the length of the test, 
monitoring issues, and health and safety plans. The concern was if something goes 
"awry" during the demonstration, the contaminated site is not made worse. Energia had 
not provided such 
a plan. The sites at KSC eventually became unavailable because 
appellant failed to adhere to the timeline which would have made a test at the center 
possible. (Tr. 2/155-57, 188) 
37. On27 December 1999 Dr. Quinn asked Dr. Lavid to contact her as soon as 
possible "to discuss a change in your original scope." Further she said: 
" Your contract called for a field demonstration, which you are 
. not going to do, so we need to make some adjustments. 
(R4, tab 33) 
38. Dr. Quinn testified that the foregoing 27 December 1999 email was sent in 
response to the indication that there would not be a demonstration at KSC because the 
sites in the proposal became unavailable, not that there would be no field demonstration 
at all (tr. 2/229-30, 349). 
11 

39. Dr. Lavid argued at'trial that the 27 December 1999 email from Dr. Quinn 
relieved Energia of the requirement for a field demonstration (tr. 11113-14). However, 
several times subsequent to the date of that email, Dr. Lavid referred to performing a field 
demonstration (R4, tabs.1 0, 11, 34; tr. 2/69-71 ). In fact, discussions about possible sites 
at KSC continued beyond December 1999 (R4, tab 501). We find that Dr. Quinn's email 
did not change the contract requirement for a demonstration in the field, nor did Dr. Lavid 
take it as such. 
40. On 18 January 2000, the CO issued Unilateral Modification No.3, changing 
the funding from $500,000 to $597,960. By its terms, this modification fully funded the 
contract and was to "cover the work to be performed through the end of the contract 
period." (R4, tab 4) 
41. On 8 February 2000, Dr. Lavid requested a "one (1) year No-Cost Time 
Extension (until March 31, 2001)," because additional time was needed "to finalize the 
design, obtain bids for the construction of the pilot-scale system, install the system and 
perform a demonstration at Kennedy Space Center (R4, tab 34). Dr. Lavid testified he 
had to build a new bench-scale apparatus because the first one that he had used for Phase 
I was inadequate, and he had to change the process he was using because the original one 
he had proposed was not as promising as he had hoped. He testified that at that time he 
believed he would be able to complete the remaining tasks on the contract within the next 
year. (Tr. 2/56-59) 
42. The CO, Lisa Morales, received 
the request for a one-year extension and, on 
24 February 2000, asked Dr. Quinn if she wanted the extension to be granted and if so, to 
provide a justification. In reply on 25 February 2000, Dr. Quinn advised the CO to grant 
the extension and stated: 
(R4, tab 37) 
The extension is required because the contractor has fallen 
behind with his designs and he has not performed the 
fieldwork portion of the contract. I have no problem with 
extending the grant to complete the work originally called for 
in the SOW. MLEnergia has not billed us for any of the work 
not completed to date. 
43. Thus, bilateral Modification No.4 was entered into on 21 March 2000 "to 
extend the Period of Performance from March 18, 2000 to March 18, 2001, at no cost to 
the Government" (R4, tab 4). 
12 

44. The seventh and eighth quarterly reports were submitted by letter dated 
24 March 2000. The report indicated that, among the work Dr. Lavid intended to 
accomplish in the coming quarters, was to schedule 
a meeting to select a demonstration 
site at KSC and to identify the contaminants and their respective concentrations. (R4, tab 
10 at 1) 
45. The ninth and tenth quarterly progress reports were submitted 25 September 
2000 covering work between 18 March 2000 and 17 September 2000 (R4, tab 11 ). Under 
"Tasks Completed," the report 
states "Purchase ofUV lamps (expected delivery time of 
UV lamps is 12 weeks)," and then enumerates various tasks as "Future Work," which are 
described as being "planned and underway" with expectation that "these tasks will be 
completed by 12/3112000." Another category described as future work, but without 
details or a deadline, includes "Selection of a demonstration site" and "Demonstration." 
(/d. at 17, 18) 
46. By 11 October 2000, Dr. Quinn was concerned that Energia had not submitted 
any details about the field demonstration, and in an email to the CO said: 
(R4, tab 43)2 
Need to meet with you shortly concerning cutting off the 
SBIR Phase II grant to ML Energia. I'm sure they will raise a 
stink. They have not sent down any documents indicating a 
planned field demonstration. I feel like they are stringing us 
along. So, we should get together and figure out how to end 
the process·now. This would be in NASA's best interest. 
I spoke today with Sam Simpkins. He is aware of my 
intentions. If you and I figure out how to stop the 
grant...(figuratively speeking [sic]), then Sam would like to 
know in advance of our actions. 
2 Sam Simpkins was an investigator with the NASA Office of the Inspector General who 
had some responsibility for a then-ongoing criminal investigation of Energia and 
its principals regarding SBIR contracts (R4, tabs 40, 41). 
13 

47. On 31 October 2000, Dr. Lavid asked about his request for a progress payment· 
in the amount of$143,855, which he had 
submitted on 25 September 2000 (R4, tabs 11, 
45). Energia repeated its request on 2 November 2000 (R4, tab 46). The CO responded 
to Energia by email dated 3 November 2000 to Nira Lavid: 
(R4, tab 47) 
Per my conversation this date with Mr. Moshe Lavid, we are 
waiting for the COTR, Ms. Jackie Quinn, to complete her 
review of the effort performed to date and receipt of the 
schedule for your planned field demonstration of the 
prototype. 
Your progress payment #3 in the amount of$143,855 has 
been received and is being held pending approval by 
Ms[.] Jackie Quinn upon her verification of satisfactory 
progress on the above effort. 
48. That same day, Dr. Lavid sent an email to Dr. Quinn, stating: 
Let me assure you that we are on track. The pilot-scale 
prototype will be ready by the end of the year, as outlined in 
the last progress report. You will be invited to see it and/or 
we will email you photos. Not only that. we are on schedule, 
we have reserved adequate money in the budget for the 
completion of the prototype as well as for the demonstration. 
Dr. Quinn forwarded that Energia email to the CO still on 3 November 2000, who 
replied: 
Jackie, in light of all the discussions so far, let me know if 
you want to email approval for payment of their progress 
payment #3 in the amount of$143,855. I can make payment 
on it (which will leave about $150K left to pay) and then start 
the letter of concern that we originally planned to send. This 
will alert them that we are still concerned about their 
progress. 
(R4, tab 48 at 2) 
14 

49. Dr. Quinn replied that same day, agreeing with the CO plan with the 
additional requirement that a "field demonstration design package ... be sent to the 
regulators." Moreover, she stated: 
Moshe knows this .... as we have discussed it in detail before. I 
need a design package which includes sparge wells, system 
design operations, and intended site location. It will take him 
until the end of the year to get this done if he starts right now. 
Maybe hold back $1 0-15k until he gets this to me. What do 
you think? 
(R4, tab 48 at 1-2) 
50. The CO proposed paying the entire amount recognizing that it would leave a 
final payment large "enough to make an impact," and that she would send Energia a letter 
restating Dr. Quinn's requirements. So, still on 3 November 2000, Dr Quinn advised the 
CO of what she needed by the end of the calendar year and approved release of the third 
billing for payment. (R4, tab 48) 
51. Thus, by letter of 6 November 2000, the CO advised Energia that the progress 
payment was in process and that in order to remain on schedule and with the allotted 
funding, he would have to provide the following information to the COTR no 
later than 
the end of that calendar year: 
An implementation package which includes a system design 
layout at the POL site; a sparge well design; a system 
operation plan including health 
and safety plan; and a . 
complete package signed and sealed by a 
registered Florida 
PE. 
In addition she explained that Dr. Quinn would schedule a time slot with the regulators at 
the January 2001 partnering meeting; that Dr. Lavid should be at that meeting to present 
the design; and that certain other specified information needed to be provided with 
respect to the project progress. (R4, tab 49) 
52. Energia received progress payment #3 during the second week of November 
2000 (R4, tab 51) and responded to the CO request of 6 November 2000 by email on 
12 December 2000 (R4, tab 52). In that email Dr. Lavid said the pilot-scale prototype 
was near completion-all he was missing were the UV lamps and suprasil sleeves ordered 
from Germany, which should have been delivered by Thanksgiving, but had been 
delayed. He had been promised they would arrive by Christmas or January, he said, and 
was proceeding as though they would arrive in January. "Please recall that these are new 
15 

lamps, fabricated to our specifications (50% longer than the bench-scale lamps)." He 
brought up the subject of testing the reactor in New Jersey instead of Florida. A group in 
the Civil and Environmental Engineering Department at Rutgers University was assisting 
Energia with construction of the reactor prototype and there were aquifers on campus 
contaminated with relevant contaminants. He listed the advantages in performing the 
demonstration at Rutgers, as opposed to KSC, which included savings in transportation, 
trucking, and travel costs. (R4, tab 52 at 2) 
53. By email dated 13 December 2000, Dr. Quinn let the CO know Dr. Lavid was 
suggesting a test at a contaminated site in New Jersey. According to her, from a technical 
standpoint,·it did not matter where the demonstration was, but it did from a contracting 
standpoint. The change of venue for the test, and the concomitant savings that would 
follow, should also result in some "return to the contract" she said. (R4, tab 52) The CO 
responded that she had spoken to Dr. Lavid and he "indicated that he was willing to 
negotiate any savings he might incur by holding the demo in NJ vice KSC." He could not 
confirm a New Jersey demonstration at that point, he had told her, because he had not 
received final approval from Rutgers. She informed him if he did need to demonstrate at 
KSC, he was to advise Dr. Quinn immediately, and if the demonstration was to take place 
in New Jersey, he was to provide her with "a proposed cost savings due to the reduction 
in the third visit to KSC and the· savings in personnel, transportation, and general support" 
listed in his original proposal. (!d. at 1) 
54. Dr. Quinn testified she agreed to a demonstration at Rutgers University in 
New Jersey as opposed to the Kennedy Space Center because appellant was behind on the 
contract, a New Jersey demonstration would obviate his need to travel to Florida for 
pre-demonstration planning and then to transport the reactor to Florida, and the technical 
data from a New Jersey site could be translated down to sites they were dealing with at 
NASA, although because the groundwater table is so much higher in New Jersey than in 
Florida, it would not be as useful (tr. 21191-93; R4,. tab 52). -
55. By letter dated 14 December 2000, Dr. Lavid submitted the status report 
synopsized in his 12 December 2000 email. He included a formal letter from 
Dr. Kenneth Lee, Assistant Professor, Department of Civil and Environmental 
Engineering, Rutgers University to Energia, and said it "documents their intent to 
collaborate with Energia on an on-site demonstration."· He again said "a local 
demonstration has many advantages over a remote one." (R4, tab 53 at 1) In the letter of 
intent, Dr. Lee explained, "The Busch Campus of Rutgers has PCE contamination in a 
fractured-rock aquifer" which would be used to demonstrate the technology. He also 
stated, "In addition, we will have a backup demonstration of this technology using 
contaminated water (TCE or PCE) from a laboratory-scale aquifer." (!d. at 3) Attached 
to Energia's letter from Dr. Lee was a progress report by Dr. Lee documenting 
collaboration already accomplished. In his report, Dr. Lee included an estimated 
16 

schedule, referencing the delay in the Heraeus lamps, their likely arrival in January 2001, 
and stated: 
Once these lamps arrive, the complete installation of the 
reactor should only take about a week or two. Therefore, we 
expect to begin testing and evaluating the reactor sometime in 
the middle ofFebruary 2001. A field demonstration ofthis 
technology is proposed soon after the testing and evaluation 
stage. The PCE contaminated site on the Rutgers University 
Busch Campus is an ideal setting for such a demonstration .... 
(!d. at 5) Dr. Lavid confirmed that at this point in time, the intent was to do a field 
demonstration as required by the contract (tr. 2/80-83). 
56. By email dated 7 February 2001, Dr. Lavid informed Dr. Quinn that the 
needed lamps had arrived from Germany and he had begun assembling various parts of 
the reactor. He anticipated completion by 18 February 2001, and invited her to visit 
anytime after that. By email dated 14 February 2001, she asked: 
(R4, tab 55) 
What is the status of the demonstration plan and deployment? 
You are way behind here, Moshe. Have you had discussions 
with NJ EPA equivalent for field-scale deployment/demo? 
57. Dr. Lavid answered, by email dated 21 February 2001: 
According to 
Ken Lee (Rutgers U), there may 
be no need for 
approval from NJ DEP for a demonstration on campus. We 
still hope to be able to perform the demonstration 
by the end 
of Feb, assuming no last minute surprises. If any 
unforeseeable delay will develop, I'll keep you posted. At 
that time, we may need to request a 6 month no-cost time 
extension. 
She responded to him on the same day: 
I would not rely on Ken Lee to let you know what regulations 
the State follows.... Anytime you have the potential for 
concentrations of air emissions containing TCE to be 
released, you have to let the regulators know. Do not be 
confused on this. Call them yourselfl The regulators "own" 
17 

(R4, tab 55) 
the air in NJ, not Rutgers University. The State Regulatory 
Agency .can fine you if you don't get approval up front. 
58. By email dated 2 March 2001, Dr. Lavid asked Dr. Quinn for a six-month, 
no-cost time extension, pushing contrapt completion to 30 September 2001.3 He stated 
the extension would "allow us to perform the demonstration, analyze the results, assess 
performance and document everything in a Final Report." (R4, tab 56) 
59. Dr. Quinn forwarded the extension request to the CO, asking what she should 
do (R4, tab 57). Dr. Quinn testified she had recommended against granting another 
extension. In her opinion, given appellant's history on the contract, and the time taken to 
perform the initial steps in the process, she had concerns about whether he could get the 
equipment into the field and do the demonstration. He had just received his lamps and 
· was only then beginning the required equipment shakedown. Her recommendation to the 
CO was to "cut our losses." (Tr. 2/222, 225) 
60. Dr. Lavid renewed his request for an extension by email dated 9 March 2001 
to the COTR (R4, tab 64). By email dated the same day, the CO inquired of Karin Huth if 
there was agency precedent for terminating an SBIRPhase II contract (R4, tab 65). 
Ms. Huth was the director of SBIR programs at NASA but did not supervise the CO or 
the COTR (tr. 1/107-08). The CO, in her email to Ms. Huth, explained the 
contract had 
already been extended a year at no cost but the contractor had not completed the work. 
She also explained the contractor had received $444,345 of the total $597,960 contract 
amount (R4, tab 65). 
61. Ms. Huth responded that the CO "should probably start the termination 
process." She said that while they usually tried to give companies "every possible 
opportunity to succeed, it sounds like they have had more than enough time." She 
directed the CO to FAR Part 49, and said: 
You may ultimately decide to negotiate something with the 
company to bring the contract to a close short of doing a 
termination - if they can somehow write a report or something 
to summarize what they've done so far and your COTR is 
willing to accept it, you could maybe decrease the value & the 
deliverables under the contract and just call it quits at the 
point they are at now. We have done something similar where 
3 In fact this was a request for a bit more than six months as six months would have 
extended the contract only to 18 September 200 1. 
18 

(R4, tab 65) 
a company could not complete a project but we did not want 
to saddle them with a default & force them to repay all the 
money they'd already gotten. But that could only really be 
done if you can argue that the Government has gotten 
something of value from the work that we've already paid for. 
62. By email dated 12 March 2001, the CO relayed Ms. Ruth's information to the 
COTR and asked if Dr. Quinn would be willing to accept a summary/final report for the 
current value of the contract. Dr. Quinn responded she could take a final report 
explaining the results to date. (R4, tab 66) 
63. On 13 March 2001, Dr. Lavid emailed the CO directly requesting the 
six-month extension (R4, tab 67). · 
64. The CO replied by email dated 14 March 2001, denying the request. She 
informed him she discussed a possible further extension with "Dr. Jacqueline Quinn, 
Mr. Joel Shealy (local SBIR Program Manager), and Ms Karin Ruth (Hqs SBIRProgram 
Director)," and attached a letter which "explain[ed] the government's position and 
decision not to extend the contract." (R4, tab 70) In the attached letter, she requested 
Energia submit a final report explaining the results of research efforts to date. She 
explained the first extension, of an additional year, had been to· allow Dr. Lavid to 
complete work under the contract, but that had not occurred. Thus, she said: 
(R4, tab 70) 
[I]t has been determined to be in the best interest of the 
Government not to proceed with another extension. The 
Government proposes a no-cost contract closeout agreement 
for delivery of the final report for monies already paid. The 
contract will be valued at the current total payments of 
$444,345. This action will be in lieu ofthe FAR 52249-9 
Default Termination. 
65. At the hearing, Dr. Lavid pointed to the valuation of the contract at $444,345 
on the proposed close-out date as the key to his case. In September 2000, at the time of 
the third progress payment-six months earlier-the contract was valued at that amount. 
Therefore, he testified, the government was valuing the work performed for six months 
since that time at zero. (Tr. 1/131-32) 
19 

66. In an email to the COTR dated 14 March 2001, Dr. Lavid expressed surprise 
and disappointment at the denial of his request and attached a letter. He stated, "I hope 
that after reviewing the [letter], you will be able to justify our request for another short 
extension at no extra cost (or risk) to the government." In the letter, he asked for 
reconsideration of the government's denial of the extension and, among other things, 
explains: 
(R4, tab 71) 
There will be no savings to the government by the decision 
not to grant the requested extension. Energia has already 
invested in this project more than its contracted value 
($597 ,960). The total amount of invoices as of 9/30/00 is 
$467,732. Energia has not yet submitted an invoice for the 
period 10/1100 to 3/18/01. We intended to wait with the final 
invoice until after completion of the contract. 
67. Dr. Quinn forwarded Dr. Lavid's email and attached letter to the CO with the 
comment, "Apparently he intends to bill for the remainder of the contract." She told the 
CO she had not contacted Energia and wanted the CO on the telephone when she did so. 
(R4, tab 71) 
68. By letter dated 16 March 2001, Dr. Lee wrote to the COTR on appellant's 
behalf asking that the request for another extension be granted. He stated: 
I would like to let you know that none of the delay is 
Dr. Lavid's fault. He has motivated, energized, supported, 
and done his best to keep all of us on schedule. Dr. Lavid 
should not be penalized or blamed for the delay. In 
retrospect, I may share some of the blame for being too 
optimistic and somewhat over zealous in my scheduling. 
The letter goes on to describe the technical accomplishments during the last year, 
explained reasons for the delay and then continued: 
We are very enthusiastic about the upcoming demonstration. 
We strongly believe in the potential of this technology. We 
have invested a considerable amount of academic resources 
. into this project. These include also time, energy and money. 
We have come a long way in developing the reactor and it 
would be an unfortunate loss of technology advancement not 
20 

(R4, tab 72) 
to bring the exhaustive effort by Energia and our staff to 
fruition. 
69. After discussion, it was decided to give Energia every opportunity to complete 
the contract (tr. 2/222-23). NASA agreed to continue the contract, but with 
"stringent 
protocols about reporting" to assure that they were making progress and there would not 
be a second delay (tr. 21166-67). By letter dated 16 March 2001, the CO informed. 
Dr. Lavid that there would be a six-month, no-cost extension 
on the contract, subject to 
the following requirements: 
(R4, tab 73) 
1. Your final invoice request will not be submitted until the 
completion and submittal of the final report at the end of the 
contract extension, September 30, 2001. 
2. You will submit a monthly proposed schedule for the 
six-month extension no later than March 23, 2001 indicating 
dates and milestones. Submit your work plan to the COTR by 
April 2, 2001 for the field-scale deployment effort. 
3. You will submit a monthly progress-to-date summary 
report to the COTR to show your progress on the completion 
of this effort. This report will summarize work completed, 
milestones achieved and remaining work to be completed. 
4. This office will proceed with a Termination for Default 
against M.L. Energia if at any time during the six-month 
extension period it is determined that the new completion date 
will not be met. 
70. Bilateral Modification No.5 was signed by both parties on 18 March 2001, 
and stated: "[t]he purpose ofthis modification is to extend the period of performance of 
this contract from March 18, 2001 to September 30, 2001 at no cost to the Government. 
Monthly reports must be provided during this extension period." (R4, tab 4) We find th.at 
except for the extended period of performance and the requirement to submit monthly, as 
opposed to quarterly, reports, there were no other changes to the contract. 
71. On 23 March 2001, Dr. Lavid submitted a one-page_ "Proposed Schedule and 
Work Plan" which included five categories of tasks purportedly to be completed during 
21 

the extended period of performance. Task No.5 entitled "Demonstration" was to be 
completed by 31 August 2001 and Task No. 6 "Performance evaluation; Final Report" 
was to be completed by 30 September 2001. (R4, tab 127) 
72. While there was contentious testimony from Drs. Lavid and Quinn over the 
scope of work during the extended period, with Dr. Lavid contending he had the option of 
performing a demonstration in the field or in the laboratory (tr. 1/194, 2/117), and 
Dr. Quinn contending a field demonstration was required, unchanged by Modification 
No.5 (tr. 2/171, 175, 3/22), we find as fact that Modification No.5 did not change the 
scope of work, nor did the one page revised schedule modify the basic contract 
requirements included in the work plan incorporated therein. 
73. The first monthly report mandated by Modification No. 5 was submitted by 
email on 6 May 2001 and stated: 
(R4, tab 12) 
[W]e have discussed/reviewed 
our planned demonstration 
experiments (using contaminated PCE groundwater from the 
Rutgers site) with Rutgers Environmental Health and Safety . 
. We do meet university compliance and will be able to proceed 
with the demonstration experiments using the reactor. It is 
worth noting that PCE has not been tested on the bench-scale 
reactor. It is a new challenge. 
74. Upon receipt of the report the COTR askedEnergia if it had invited 
New Jersey's EPA to see the test and Dr. Lavid responded that he had not invited them as 
guests but that "Prof. Ken Lee obtained all the necessary approvals for a demonstration at 
Rutgers" (R4, tab 82). 
75. The second monthly report for May 2001 was submitted on 7 June 2001. In 
response on 18 June 2001, Dr. Quinn remarked in reply that it looked like things were 
going well and asked as follows: 
Do you have a test plan written for the full-scale 
demonstration? I would be interested in reviewing that. The 
previous documents reviewed the testing procedure in general 
terms but are not considered a "test plan." The test plan 
would include duplicate and blank 
sampling procedures to 
show accurate QA/QC initiatives, etc. 
(R4, tabs 13, 83) 
22 

76. Dr. Lavid responded on 21 June 2001 that Professor Lee was out of town but 
upon his return they would address the testing plan. Dr. Quinn responded immediately 
with the question, "[ d]oes this mean you have not written a test plan at this time?'' (R4, 
tab 84 at 1) By email dated 3 July 2001, Dr. Lavid informed the COTRthe test plan 
would be attached to the third monthly progress report and that it had "experienced a few 
iterations between Rutgers and Energia" (R4, tab 87). 
77. The third monthly report for the period ending 30 June 2001 was submitted by 
email dated 8 July 2001. A first draft of a test plan was attached and was expected to be 
revised as testing proceeded. (R4, tabs 14, 88). The COTR expressed concern that the 
test plan was extremely weak. Dr. Lavid agreed the test plan was incomplete and 
explained it was only a first draft which would be revised as they gained experience with 
operation of the new unit. (R4, tab 90) 
78. A one-page report entid"ed "Fourth Monthly Report (ending July 31, 2001)" 
was submitted 
by email dated 7 August 2001 (R4, tabs 15, 91). The "Fifth Monthly 
Report (ending Aug. 3 1, 200 1 )" was. submitted by email dated 7 September 200 1 and 
stated that "[ d]uring the upcoming last month, we will attempt to optimize the operating 
conditions and will document the pilot-scale work in a final report" (R4, tabs 16, 92). 
79. A document titled "Final Report SBIR Phase II," was sent to Dr. Quinn by 
Professor Lee by email dated 2 October 2001 (R4, tabs 17, 93). By email dated 
19 October 2001, the CO asked Dr. Quinn to prepare a list of deficiencies or differences 
between what was required by the contract and what was delivered to NASA (tr. 2/308; 
R4, tab 97). Dr. Quinn responded by email dated 26 October 2001 (R4, tab 98). She read 
the monthly reports and the final report, and reviewed the tasks in the original statement 
of work. Using her technical background, she identified what tasks from the original 
statement of work had been completed and what had not. (Tr. 21179-80) At the hearing, 
she further elaborated on her cpnclusions as to each task (tr. 2/178-87) and each is 
discussed 
below along with the testimony of Dr. Lavid as to his view ofEnergi~'s 
accomplishments with respect to each task. 
Task 1 -Bench-Scale Study of Reductive Photo-thermal Treatment Processes 
80. Dr. Quinn noted there was scant information on the bench-scale tests. She 
thought 
it unusuaLthat Dr. Lavid referenced previous reports, but did not go into the data 
produced earlier, and she testified that usually a final rep.ort is extremely comprehensive, 
including all the data gathered from the entire project in order to use the data as "a 
stepping stone for further funding, for further technology transfer and 
commercialization." (Tr. 2/181; R4, tab 98) 
23 

81. Dr. Lavid testified that he completed Task 1 but that instead ofthe planned 
nine months, it took him two years to complete this task. His explanation follows: 
I think the reason was that. .. the process that we started, which 
was redacted for the chemical process, was not very 
promising. And in doing the lab experiments we find out that 
ifyou do a combination of reductive and oxidative, in other 
words, you don't do it only in a reductive atmosphere, you get 
better results. 
(Tr. 2/55-57) We find that Task 1 was partially completed. 
Task 2- Scaling-Up of Bench-Scale Results 
82. Dr. Quinn opined that Energia referenced the fourth quarterly report and 
lightly glossed over the scaling calculations performed. Again, she thought it unusual for 
a contractor to choose to not put all the information from a quarterly report into the final 
report. (R4, tab 98) Dr. Lavid said he completed Task 2 and explained the process of 
scaling-up (tr. 2/39-40, 59). We find that Task 2 was partially completed. 
Task 3 -Design, Construction and Shakedown of a Pilo~-Scale Prototype 
83. Dr. Quinn was dissatisfied with the documentation for this task as well 
(tr. 2/182; R4, tab 98). It did not include sampling methods, protocols or statistical 
reproducibility. It did not include design drawings or a discussion of the construction 
efforts. No design details were included in the final report. (R4, tab 98) Dr. Lavid 
testified it was performed (tr. 2/41-43). We find this task was only partially performed. 
Task 4 -Air Sparging/Soil Venting Extraction System 
84. This task included the design, installation and operation of a portable air 
sparge and vapor recovery system for a period of one to three months during which 
Energia's pilot-scale prototype would be field demonstrated (R4, tab 122 at 31). 
Dr. Quinn explained this task as merging two technologies. Photo-chemical remediation 
only addresses a contaminant in the air phase-the gaseous phase. The idea was to use a 
common technique, called air sparging with soil vapor extraction, to cause a phase change 
in the contaminants. Contaminants have a lower vapor pressure than water, and if air is 
bubbled through the _contaminants, it will cause an equilibrium shift, transferring the 
COJ:?.taminants out of the water, into the bubbles and to the surface. As the contaminants 
rise, they can then be collected into a gas phase and be forced into Energia' s treatment 
technology. (Tr. 2/162-63) To be effective, it needs to be performed "in the ground, in 
the subsurface, in conjunction with a well, and a sparging system." It never was. 
24 

(Tr. 2/163-64) Dr. Lavid admits he did not complete Task 4, the design and installation 
of an ASP /SVE system because one cannot do sparging if there is no site on which to 
perform it (tr. 2/43-44, 83). We find Task 4 was not performed. 
Task 5- Field Demonstration 
85. With respect to Task 5, the COTR testified she was expecting "the system run 
as a pilot-scale prototype at a contaminated site" (tr. 2/164). This was not done as 
evidenced in the documentation submitted by appellant indicating the 
reactor Energia 
built never left the laboratory. The reports submitted by appellant did not identify a 
location where the contaminated water was tested and only stated the starting 
contaminations. (Tr. 2/165) In her report, regarding Task 5, she wrote: 
· (R4, tab 98) 
Not performed. All testing was done in a laboratory at 
Rutgers University with water that must 
have been spiked 
with the contaminant. There is no detail included in the final 
report about the site where they may have collected 
groundwater and ported it to the lab for use in their system. 
This is far from being a Field Demonstration. The system 
was never tested on an "existing cleanup site[.}'"' 
86. She testified that the information garnered in a laboratory is not as meaningful 
as that developed through a demonstration in the field where ''you are dealing with a 
non-controlled environment, the ability to get the contaminant from the liquid phase, to 
vapor phase, and running it through your system, is much more challenging" 
(tr; 21171-72). Without a demonstration in the field, she said, "[y]ou can't come up with 
reasonable technology, performance parameters, nor cost[s] that would help your 
technology to go into [the] commercial phase" (tr. 2/173). Dr. Lavid testified he 
completed Task 5, the demonstration, but did it in a laboratory, not in the field (tr. 2/47, 
86). We find the contract required a field demonstration and it was not performed. 
Task 6- Technology Evaluation 
87. Task 6 as proposed was to be a careful review of all the data gathered in the 
field demonstrations, a comprehensive performance evaluation of that data, and a detailed 
cost analysis based upon field data gathered from the actual demonstration tests (R4, tab 
25 

122 at 39-40). Dr. Quinn found that the final report did not include any type of cost 
analysis (tr. 2/165-66) and in her evaluation of the final report stated: 
The results the contractor got in the lab are summarized in 
bullet form in the last paragraph. These do not elaborate on 
the technolog[y's] capabilities no[r] detail the potential for 
future deployments. In the final report, the contractor is 
missing data in Tables I and III. There is no data supporting 
how the tests were performed, where the contaminated water 
came from and how they were able to achieve such drastic 
changes in concentration from a single groundwater source. 
This is highly unlikely and in my opinion the contractor may 
have just gotten some groundwater or potable water and 
spiked it with PCE, which is why there is no discussion of this 
in the final report. There is no discussion why certain 
temperatures were selected. No discussion on how the -
contamination was fed from a water steam, transformed into a 
gas stream for treatment in the system. There are citations 
within the document that cannot be found in the References 
Section, perhaps because the contractor doesn't want anyone 
to verify the citation. There is no QA/QC program or 
elaboration in the document. No discussion of the type of 
analytical equipment used for analyses, and what analytical 
techniques were used on the samples collect[ ed]. 
In general, the final report is less than poor in representation 
and significant improvements and additional work would be 
required to even consider this work as representing . 
completion of the tasks described in the original work plan. 
(R4, tab 98 at 1-2) 
88. In Dr. Quinn's opinion, the data provided in Energia's final report was not 
statistically defensible. The -report did not document the performance of enough 
repetition and with enough accuracy and precision which would have provided the 
scientific community with "enough comfort in the data to accept it for further evaluation." 
(Tr. 21186) When asked ifKennedy Space Center got anything ofvalue from appellant's 
contract, Dr. Quinn answered, "[n]o" (tr. 21173). When pressed by Dr. Lavid to provide 
an adjective to describe the overall work on the contract, Dr. Quinn responded, 
"[p]roblematic" (tr. 2/345-46). 
26 

. 89. Dr. Lavid testified that he completed Task 6, the Technology Evaluation 
(tr. 2/47). However, he admitted the report did not contain all the information he had 
anticipated when he wrote the proposal, nor did he complete all the subtasks he had 
proposed. Specifically, he did not compare his work to other technologies and he did not 
perform the cost analysis as both were promised in the proposal. (Tr. 2/96-98) We find 
Task 6 was partially performed in that a report was submitted but the report did not 
include all required information and was of no use to NASA. Thus, we find task 6 was 
not acceptably performed. 
90. In late 2001, Christopher Canary, the CO, in an undated letter to appellant, 
detailed the result ofNASA's review of the final report and informed Energia of his 
decision that "the work that was to be performed under this contract fails to meet the 
requirements of the SBIR contract." Three of the six tasks required by the contract were 
not performed: Task 4, Design and Installation of Air-Sparging/SVE system; Task 5, 
Field Demonstration; and Task 6, Technology Evaluation. Additionally, he advised that 
Tasks I, 2, and 3 were "deficient in content." (R4, tab 99) 
91. The CO explained the work "not adequately performed constitute[ d] 
approximately 30% ofthe contract" and that, "[a]t minimum, $184,220 ofthe contract 
was not completed." Energia was directed to undertake no additional work under the 
contract or incur further costs. (R4, tab 99) The CO further stated: 
(!d.) 
M. L. Energia was given ample opportunity to perform the 
contract, especially taking into account the 12-month, and 
subsequent 6-month extensions granted. Thus, in accordance 
with the provisions of [FAR] 52.246-7, Inspection of 
Research and Development-Fixed[- ]Price, the government is 
hereby accepting the. final report as written, but is making an 
equitable price reduction to the contract from $597,960 to 
$444,345, to reflect the deficiencies noted herein. Therefore, 
please sign and return three copies of the attached 
modification, reducing the price of the contract by $153,615, 
the obligated balance on the contract. This amount is the 
adjustment for the work not adequately performed. We feel 
this adjustment is equitable under the circumstances. 
27 

92. While assigning a 30% value to the work not done resulted in an overpayment 
of$30,605, 4 the CO determined that there was no way the government would get that 
money back from appellant and they ')ust cut the losses at the dollar figure we had 
already paid, and did not ask for a return on the overpayment" (tr. 2/319). 
93. Dr. Lavid, by letter dated 17 January 2002, expressed his disagreement with 
what he called the "Xmas letter" because it had no date and arrived just before Christmas. 
He stated there was no basis for the issuance of the proposed modification, there were no 
deficiencies, and asked every effort be made "to promptly expedite the long overdue final 
payment." (R4, tab 100) 
94. By letter dated 6 February 2002, the CO informed appellant that NASA's 
position as explained in the December letter had not changed and the modification was 
"in the best interest of each party." Enclosed with the letter were a copy of the 
FAR 52.233-1, DISPUTES clause, the contract, and another copy ofModification No.6. 
Dr. Lavid was again asked to sign the modification. (R4, tab 101) 
95. The CO received correspondence from Energia expressing disagreement with 
the government's 
assessment, but appellant never disputed that specific tasks had not 
been completed. Because Dr. Lavid had not signed the proposed modification, the CO 
withdrew the bilateral modification and 
issued unilateral Modification No.6. In 
accordance with the provisions of the Inspection clause, he made an equitable price 
reduction of$153,615 to the contract, reflecting the value of"work not adequately 
performed." (R4, tabs 4, 99; tr. 3/57-59, 142) Appellant was again directed to not 
perform any additional work on the contract and also to contact the COTR to arrange 
delivery of the pilot-scale prototype constructed during performance of the contract (R4, 
tab 102). 
96. By certified mail dated 28 June 2002, Dr. Lavid again stated there was no 
basis for the modification and again requested payment of$153,615 (R4~ tab 104). 
97. The contract was closed out 4 September 2002 (R4, tabs 107, 108). 
98. Almost four years later, by letter dated 30 June 2006, Dr. Lavid requested that 
NASA reconsider denial of the payment of$153,615. He maintained the contract was 
satisfactorily completed "as per the mutually agreed upon revised work plan of March 
200 1" and that NASA's denial was based on the original proposal. 
According to 
Dr. Lavid, the revised work plan superseded the original one and therefore, NASA's 
4 Contract amount less 30% of contract amount equals adjusted value of contract: 
($597,960-$184,220=$413,740). Amount paid less adjusted value of contract 
equals overpayment: ($444,345-$413,740=$30,605). 
28 

December 2001 letter, because it was premised on the original work plan, was "irrelevant 
and moot." (R4, tab 109) (Emphasis in original) 
99. A further "inconsistency," according to Dr. Lavid, was NASA's valuation of 
the contract in Modification No.6, at $444,345. This was the same value NASA had 
assigned the contract in the CO's communication to him on 14 March 2001. (See finding 
64) This was before the revised work plan was agreed on and work continued for seven 
months after that date. Therefore, he argued, if the contract was valued at $444,345 on 
14 March 2001 and work continued for seven months thereafter, appellant was entitled to 
payment for the work which continued past 14 March 2001. (R4, tab 1 09) 
100. By email dated 24 August 2006, the CO informed Dr. Lavid that the contract 
had been reviewed, "everything was proper and in order," was closed, and would not be 
reopened (R4, tab 112). · 
101. By letter dated 18 October 2006, Dr. Lavid submitted a certified claim for 
$153,615 based on the 30 June 2006letter (R4, tab 126). 
102. The 
CO responded with a final decision dated 20 February 2007 which was 
amended by letter dated 14 March 2007 substituting a new paragraph explaining the 
process of appealing a final decision (R4, tabs 1, 2). 
103. Appellant appealed the CO's final decision to the Armed Services Board of 
Contract Appeals by letter dated 18 May 2007 (R4, tab 120). 
DECISION 
NASA determined that the research work for which it contracted was deficient in 
several respects and thus decided to take an equitable 
price reduction in the contract price 
consisting of all the funds that had not yet been paid, $153,615. While four years later, 
Energia filed a certified claim for that amount, the underlying claim is a government 
claim for an equitable price reduction under the Inspection clause. The government has 
the burden of proof with respect to this claim. WM Grace, Inc., ASBCA No. 23076, 
80-1 BCA ~ 14,256. At the outset, based upon our findings the government has met its 
burden of proving entitlement to deductions. Tasks 1, 2 and 3 were only partially 
performed and tasks 4, 5 and 6 were not performed at all. 
In its claim and in this appeal, Energia contends that it is entitled to the remainder 
of unpaid contract funds. The primary contention seems to be that since the last payment 
was made in late November 2000 for work performed through 30 September 2000, and 
since work continued for another year until 30 September 2001, Energia is entitled to 
additional 
payments for work performed between 1 October 2000 and 30 September 2001 
29 

(app. br. 3-4). This argument is without merit as appellant misconstrues the nature of the 
contract into which it entered. The contract was a firm fixed-price contract, not a cost 
reimbursement contract. While progress payments were made based upon the incurrence 
of costs, this did not convert the firm fixed-price contract into some sort of cost 
reimbursement contract. The Progress Payments clause allowed reduction or suspension 
of progress payments when the contractor fails to comply with a material requirement of 
the contract or where performance of the contract is endangered by the contractor's 
failure to make progress, both of which existed in this appeal. (Finding 12) Further, the 
Inspection clause allowed the government to make an equitable price reduction where, as 
here, there is a finding of nonconforming work (finding 13). Therefore, appellant has 
failed to demonstrate entitlement on the basis of incurrence of costs subsequent to receipt 
of its last progress payment. 
Next, appellant argues that Modification No. 5 superseded the original work plan 
such that the requirement for a field demonstration set forth in the original work plan was 
not included in what it terms the revised work plan resulting from Modification No.5 .. 
We found as fact that neither Modification No.5 nor Dr. Quinn's 27 December 1999 
email superseded or modified the original work plan and the field demonstration was 
required by the contract and it was unchanged by the modification. (See findings 39, 70, 
72) Therefore, the argument that the contract was modified to delete the field 
demonstration fails. Additionally, the argument that Modification No.5 changed the 
requirement from a field to a pilot-scale demonstration is totally unsupported by the 
record. 
Appellant next contends that after NASA learned that there was an ongoing 
investigation concerning Energia and its SBIR contracts, NASA began to exhibit bad 
faith and a biased attitude toward Energia and gives 14 examples of what it terms bad 
faith in its brief(app. br. 5-6). 
The issue of bad faith was not raised in the claim or in the complaint. It was only 
raised at trial and in appellant's brief. The government contends that this issue is not 
properly before the Board and, in any event, Energia has not met its burden of proving 
bad faith. 
Under the Contract Disputes Act, the Board has jurisdiction over claims a 
contractor has first submitted to the CO for decision. 41 U.S.C. §§ 7101-7109. However, 
we lack jurisdiction 
over claims raised for the first time on appeal. Dawkins General 
Contractors & Supply, Inc., ASBCA No. 48535, 03-2 BCA ~ 32,305. The test is whether 
the claim in question "arose from a common or related set of operative facts." Placeway 
Construction Corp. v. United States, 920 F.2d 903, 908 (Fed. Cir. 1990). 
30 

Moreover, the "burden of proving bad faith by the Government is a very onerous 
one and, to constitute bad faith ... there must be some specific intent to injure the other 
party .or actions motivated alone by malice." Plum Run, Inc., ASBCA No. 46091 et al. 
97-2 BCA ~ 29,193 at 145,230, citing Kalvar Corp. v. United States, 543 F.2d 1298 (Ct. 
Cl. 1976), cert. denied 434 U.S. 830 (1977). 
There is simply no credible proof of bad faith or bias towards appellant in this 
record. The reduction in contract price was based entirely upon an evaluation of the 
extent to which the work required in the contract was actually performed and we have 
found such performance deficient. Moreover, we have examined the 14 examples of bias 
cited in the brief and, to the extent they might be considered to overlap with the claim, 
find nothing factual in those examples that points to anything approaching bad faith or 
bias towards appellant. 
In sum, the government has established that, after three and one half years, 
appellant failed to fully perform the research and reporting required by the contract. The 
appeal is therefore denied. 
Dated: 24 July 2012 
I concur 
~~ 
Administrative Judge 
Acting Chairman 
Armed Services Board 
of Contract Appeals 
31 
RICHARD SHACKLEFORD 
Administrative Judge 
Armed ServicesBoard 
of Contract Appeals 
I concur 
EUNICE W. THOMAS 
Administrative Judge 
Vice Chairman 
Armed Services Board 
of Contract Appeals 

I certify that the foregoing is a true copy of the Opinion arid Decision of the Armed 
Services Board of Contract Appeals in ASBCA No. 55947, Appeal ofM. L. Energia, Inc., 
rendered in conformance with the Board's Charter. 
Dated: 
32 
CATHERINEA. STANTON 
Recorder, Armed Services 
Board of Contract Appeals