Lulus Ostrich Ranch
Docket: ASBCA 59252, ASBCA 59450, ASBCA 59598
Decision date: 2019-02-06

ARMED SERVICES BOARD OF CONTRACT APPEALS 
Appeals of -- ) 
) 
Lulus Ostrich Ranch ) 
) 
) 
Under Contract Nos. 48695391, 48695490 ) 
48695290,48695390) 
APPEARANCE FOR THE APPELLANT: 
APPEARANCES FOR THE GOVERNMENT: 
ASBCA Nos. 59252, 59450, 59598 
59814,59815 
Mr. William R. Hayward 
Owner 
Daniel K. Poling, Esq. 
DLA Chief Trial Attorney 
Robin Walters, Esq. 
Michael P. Thiefels, Esq. 
Trial Attorneys 
DLA Disposition Services 
Battle Creek, MI 
OPINION BY ADMINISTRATIVE WDGE MCILMAIL 
FINDINGS OF FACT 
In January 2014, appellant, after submitting a sealed bid in response to an 
Invitation For Bid (IFB), contracted to buy and remove four different types of metallic 
and non-metallic scrap from government locations in Afghanistan (R4, tabs 1-2, 8). 
The government awarded the contract only after appellant protested the government's 
earlier, initial decision not to award a contract to appellant out of concern that appellant 
could not perform at its bid prices (R4, tabs 5, 7). The contract states "Refer to IFB for 
complete item description" (R4, tab 8 at block 10), and for each type of scrap, the IFB 
includes a "SALES CONTRACT/BIDDING" provision that states: 
This contract is a sales contract. The bidder will be 
purchasing scrap property from the United States 
Government. At no time will there be. a payment by the 
USG to the bidder for services within this contract. The 
property removed by the bidder will be scrap property and 
in poor condition. The bidder will be required to remove 
all property in this item description regardless of condition. 
There will be absolutely no changes, modifications, 

adjustments, or negotiations concerning bid price after 
mvard 
(R4, tab 1 at 6-9 (emphasis added)) 
After the award of the contract appellant told the government that it had made a 
bid mistake, then went ahead and removed scrap, despite the contracting officer warning 
that "[t]he bid price will not be adjusted in any way to reflect other bidders [sic] prices''; 
appellant hasn't paid the government anything for any of that scrap (see R4, tabs 10-12; 
tr. 1/219, 2/139-42; app. br. at 15). In August 2014, the contracting officer terminated 
the contract for default, for non-payment (according to the government) of $1,303,218 
(R4, tab 21 ). 
DECISION 
ASBCA No. 59252: Price Reformation 
Appellant requests reformation of its contract prices, saying that after it was awarded 
the contract it discovered that it had made an arithmetical mistake in its bid that made the 
prices it offered to pay for the government's scrap too high (see app. br. at 10). The 
government opposes, relying upon the IFB provisions that state there will be "absolutely no 
changes, modification, adjustments, or negotiations concerning bid price after award" (gov't 
br. at 2,113, 16) (emphasis added). Appellant counters (app. reply br. at 1) with Federal 
Acquisition Regulation (FAR) 14.407-4, "Mistakes after award," which, under certain 
circumstances, authorizes the government to rescind or reform a contract if "a contractor's 
discovery and request for correction of a mistake in bid is not made until after the award." 
Appellant points to no authority in which FAR 14.407-4 trumped an "absolutely no 
changes" provision in an IFB and required reformation of a contract price. Based upon the 
"absolutely no changes" provisions, appellant's post-award request for reformation of its 
contract prices is rejected. The appeal is denied. 
ASBCA No. 59./.50: Request to Stay Payments 
Appellant requests that it be allowed not to have to pay the government for the 
scrap it removed until after ASBCA No. 59252 is adjudicated (July 25, 2014, letter). 
With the denial of ASBCA No. 59252, that request is moot, and the appeal is denied. 
ASBCA No. 59598: Contract Termination 
Appellant challenges the termination of its contract for default (app. br. at 13). 
The government says the termination is justified because appellant never paid anything 
for the scrap it removed from government locations (gov't br. at 21 ). Appellant is 
2 

silent on whether its non-payment is a default (see app. br. at 13). In not paying for 
scrap it removed, appellant defaulted, justifying the termination. 
Now it's up to appellant to demonstrate that the default is excused. See Joseph 
Sottolano, ASBCA Nos. 59081, 60043, 16-1BCAi136,315 at 177,065-67. Appellant 
provides no good reason for failing to pay anything for the scrap it removed. Even 
given the parties' dispute over .price, that dispute did not prevent appellant from paying 
at least the amount it believed it owed under what it believes the contract prices should 
be. The appeal is denied. 
ASBCA Nos. 59814 & 59815: Bad Faith Contract Administration 
Appellant seeks $1,252,543 for allegedly fraudulent contract administration; in 
other words, bad faith (app. br. at 10-12; Feb. 23, 2015 compls.; app. reply br. at 8-9). 
See Dan's Janitorial Service, Inc., ASBCA No. 27837, 85-1 BCA i-117,924 at 89,749. 
However, appellant points to no clear and convincing evidence that the government 
administered the contract with the specific intent to injure appellant. See Puget Sound 
Environmental Corp., ASBCA No. 58828, 16-1 BCA i136,435 at 177,597 (citing Road 
and Highway Builders, LLC v. United States, 702 F.3d 1365, 1368 (Fed. Cir. 2012); 
referencing Am-Pro Protective Agency v. United States, 281 F.3d 1234, 1240 (Fed. Cir. 
2002); and reciting test for proving bad faith). The appeals are denied. 
CONCLUSION 
The appeals are denied. Accordingly, appellant's recent request that its 
"debt...be moved back to DFAS - Defense Finance and Accounting until [the Board] 
has made a decision" is denied as moot. 
Dated: February 6, 2019 
(Signatures continued) 
3 
Administrative Judge 
Armed Services Board 
of Contract Appeals 

I concur in result (see separate opinion) 
J. REID PROUTY 
Administrative Judge 
Vice Chairman 
Armed Services Board 
of Contract Appeals 
4 
I concur in result (see separate opinion) 
RICHARD SHACKLEFORD 
Administrative Judge 
Acting Chairman 
Armed Services Board 
of Contract Appeals 

OPINION BY ruDGE PROUTY AND ruDGE SHACKLEFORD 
CONCURRING IN RESULT 
We concur in the result in these appeals, because we agree with the ultimate 
outcome but not in the brief analysis which leads to that outcome with respect to the 
issues of contract reformation and bad faith contract administration. Thus, the legal 
analysis that follows constitutes the precedential decision of the Board on those subjects. 
With respect to Judge Mcllmail' s denial of appellant's request for contract 
reformation, his opinion provides that appellant is not entitled to reformation because: 
Appellant points to no authority in which the FAR 14.407-4 
trumped an "absolutely no changes" provision in an IFB 
and required reformation of a contract price. Based upon 
the "absolutely no changes" provisions, appellant's 
post-award request for reformation of its contract prices is 
rejected. 
Yet, he does precisely what he accuses appellant of doing - he points to no 
authority in which an "absolutely no changes" provision trumps FAR 14.407. In our 
view, it does not and cannot. 
The sale of federal personal property is governed by Part 102-38 of the Federal 
Management Regulation (FMR). FMR § 102-38.260 instructs that the administrative 
procedures for handling mistakes in bids are contained in FAR 14.407. That section of 
the FAR sets forth the procedures for processing mistakes in bids both discovered 
before and after award, and since Lulus alleges it discovered a mistake after award 
FAR 14.407-4 applies. That section of the FAR states in part: 
If a contractor's discovery and request for 
correction of a mistake in bid is not made until after the 
award, it shall be processed under the procedures of 
Subpart 33.2 [Disputes and Appeals] and the following: 
(a) When a mistake in a contractor's bid is not 
discovered until after award, the mistake may be corrected 
by contract modification if correcting the mistake would be 
favorable to the Government without changing the 
essential requirements of the specifications. 
(b) In addition to ... paragraph (a) above ... agencies 
are authorized to make a determination --
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( 1) To rescind a contract; 
(2) To reform a contract (i) to delete the items 
involved in the mistake; or (ii) to increase the price if the 
contract price, as corrected, does not exceed that of the 
next lowest acceptable bid under the original invitation for 
bids; or 
(3) That no change shall be made in the contract as 
awarded, if the evidence does not warrant a determination 
under subparagraphs ( 1) or (2) above. 
In addition to the regulatory requirement, the right to assert a mistake in bid is 
based upon pure contract law. In Wender Presses, Inc. v. United States, 343 F.2d 961 
(Ct. Cl. 1965), a mistake in bid after award case involving the sale of surplus government 
property, the plaintiff sought rescission of the portion of the contract upon which a 
mistake in bid was alleged and recovery of its bid deposit. There the Court stated: 
It is plain that plaintiff may recover only if 
defendant's responsible officials knew or should have 
known of the mistake at the time the bid was accepted. 
Since plaintiff did not directly apprise defendant of 
the mistake prior to the acceptance of plaintiffs bid ... so that 
there is no showing of any actual knowledge, the only 
question is whether defendant's officials should have 
known of the mistake. Included in this problem is the 
question of whether, even though they could not have 
known with certainty from the bid data that a mistake had 
been made, there nevertheless was enough to have 
reasonably cast upon defendant's officials the duty to make 
inquiry, which inquiry would have led to the requisite 
knowledge. For although an award normally results in a 
binding contract fixing the parties' rights and obligations so 
that "Ordinarily no relief will be granted to a party to an 
executory contract in the case of a unilateral mistake," 
Saligman v. United States, 56 F. Supp. 505, 507 (E.D. Pa., 
1944 ), nevertheless an acceptance of a bid containing a 
palpable, inadvertent, error cannot result in an enforceable 
contract. An "offeree will not be permitted to snap up an 
offer that is too good to be true; no agreement based on such 
6 

an off er can then be enforced by the acceptor." 1 Williston, 
Contracts (3d ed. 1957) § 94. [Citations omitted] 
343 F.2d at 962-63. 
Perforce, a so-called "absolutely no changes" provision in a contract cannot 
permit a contracting officer to accept a bid, knowing it was in error, since in that 
circumstance no enforceable contract could come into existence and such an agreement 
would be unenforceable. Thus, the proper way to initially analyze this case is to 
determine if the contracting officer knew or should have known a mistake was made at 
the time of the award. As the Wender Court pointed out, the test as to whether the 
contracting officer knew or should have known of the mistake is one of reasonableness, 
"i.e., whether under the facts and circumstances of 'the particular case there were any 
factors which reasonably should have raised the presumption of error in the mind of the 
contracting officer."' Wender, 343 F .2d at 963. 
We have reviewed the parties' briefing on this issue, including facts and analyses 
and find that based upon this record, appellant has not demonstrated that the contracting 
officer either knew or should have known that a mistake was made in its bid. More 
particularly, we are persuaded by the arguments made by the government in its brief 
(gov't br. 6-7) as follows: 
The [CO] did not know the Appellant had made a 
mistake in its bid price, nor did he have reason to know. 
The bid sheet submitted by the Appellant contained no 
obvious errors, no errant marks, no improper payment or 
weight classification. Instead it demonstrated four line 
item prices clearly marked in pounds with the prices 
expressed in dollars as required by the IFB. There was no 
evidence on the face of the bid that suggested a clerical or 
mathematical error. In determining whether the 
contracting officer should have known of the mistake, a 
"reasonable person standard is used." The Kato Corp., 
ASBCA No. 47601, 1997 ASBCA LEXIS 127, 97-2, BCA 
,r 29,130 at 144,932. 
In this case [Lulu's] price was not so far off from 
other bidders as to suggest anything other than different 
judgments about the cost of doing business in Afghanistan 
or the revenues to be derived from scrap sales in 
Afghanistan, especially since the Appellant's plan 
appeared to rely on exports. Appellant's bid was lower 
than those of several other bidders. [Lulu's] bid was only 
7 

slightly higher than the next highest bidder and there was a 
group of 3 bidders with prices within 20% of the 
Appellant's. 
For these reasons, we conclude that under the particular circumstances of this 
case, there were no factors which reasonably should have raised the presumption of 
error in the mind of the contracting officer. Thus we concur in the result reached by 
Judge Mcllmail regarding Lulu's contract reformation claim, though not his analysis. 
We similarly diverge from Judge Mclmail's analysis regarding the set of issues 
that he characterizes as "Bad Faith Contract Administration" or ·'fraudulent contract 
administration," though we come to the same ultimate conclusion. These issues 
include allegations in Lulu's brief of "alleged contract interference, improper billing, 
improper contract termination, issuing more contracts than there was available scrap 
metal, and awarding contracts with the intention of 'giv[ing] only minimum amount of 
scrap material' [and allegations that] the government lied to appellant's subcontractor 
and [that on occasion, the government] delivered only dirt.'' Although we agree with 
Judge Mcllmail's general determination that these bases for Lulus' appeal should be 
denied, we also believe that, for the most part, he applied the incorrect standard to 
obtain this result. 
In large part, these allegations fit within the category of breaches of the duty of 
good faith and fair dealing. This doctrine is based upon the notion that every contract 
"imposes upon each party a duty of good faith and fair dealing in its performance and 
enforcement." Metcalf Constr. Co. v. United States, 742 F.3d 984, 990 (Fed. Cir. 2014) 
(quoting RESTATEMENT (SECOND) OF CONTRACTS§ 205 (1981)); see also Kelly-Ryan, 
Inc., ASBCA No. 57168, 18-1 BCA ~ 36,944 at 180,030; Relyant, LLC, ASBCA 
No. 59809, 18-1 BCA ~ 37,085 at 180,539. Pursuant to this implicit duty, each party's 
obligations "include the duty not to interfere with the other party's performance and not 
to act so as to destroy the reasonable expectations of the other party regarding the fruits 
of the contract." Metcalf, 742 F.3d at 991 (quoting Centex Corp. v. United States, 395 
F.3d 1283, 1304 (Fed. Cir. 2005)). The government need not, however, act in bad faith 
or with intent to injure the contractor to be found liable for a breach of the duty. To be 
sure, the Federal Circuit's opinion in Precision Pine & Timber, Inc. v. United States, 
596 F.3d 817, 831 (Fed. Cir. 2010), seemed to imply such a requirement, but the 
Federal Circuit's subsequent opinion in Metcalf made clear that there was no such 
intent to injure necessary. See 742 F.3d at 992-93 (rejecting requirement to 
"specifically target" contractor). 
Thus, we part ways with Judge Mcllmail's opinion on the law applied to this issue. 
Judge Mcllmail' s opinion requires that Lulus' point to "clear and convincing evidence 
that the government administered the contract with the specific intent to injure appellant," 
and cites the appeal of Puget Sound Environmental Corp., ASBCA No. 58828, 16-1 BCA 
8 

~ 36,435 at 177,597. This would be inconsistent with the binding law of Metcalf and is 
not supported by our ruling in the cited case of Puget Sound. The issue before us in the 
cited portion of Puget Sound was a challenge to the government's failure to exercise 
options, which is generally not reviewable unless the government acts in bad faith. Puget 
Sound, 16-1 BCA ~ 36,435 at 177,596. Similar requirements are applied in challenges to 
the government's decision to terminate contracts for convenience. Id. If there were an 
allegation here that the government wrong fully terminated Lulus' contracts for 
convenience, the Puget Sound formulation might be proper, but the terminations here 
were for default, and the portion of Judge Mcllmail's opinion that we join already 
dispatches this argument. Thus, the remaining issues before us here are of contract 
administration and are not subject to Puget Sound's "specific intent to injure" standard, 
but are instead governed by Metcalf. 
Applying the proper standard, we still reach the same result, primarily for lack 
of record evidence supporting Lulus' allegations. Judge Mcllmail directed the parties 
to reference all factual support for their arguments in their briefs (see tr. 2/168-69); 
Lulus did not do so. Nevertheless, we performed a review of the Rule 4 documents 
and the transcript of the hearing, and, on these subject areas, the only evidence 
presented was about delays or problems in allowing Lulus' subcontractor onto the 
military bases in Afghanistan (e.g., tr. 1/65-66, 211-12), and that the government 
allegedly provided "dirt" as opposed to scrap metal, as expected (tr. 1/215, 229). This 
evidence was all based on hearsay, and allegations of the government's bad motives 
were admittedly speculation (tr. 2/39). 
The government, by contrast, presented evidence that access to bases in 
Afghanistan was properly limited for security reasons (tr. 2/88-90). The government 
also presented evidence that the scrap provided to all contractors, in accordance with 
the contract, was not limited to metal, but also included many other things like canvas, 
glass, wood, PVC pipe, and shredded electronic scrap (tr. 2/78-79). We read this as 
consistent with the "dirt" of which Lulus complained. The contracting officer also 
explained that there were multiple scrap metal contract awards made because 
oftentimes, during the course of contract performance, contractors drop out and there 
is a need to "surge" for the work (tr. 2/83). 
Thus, Lulus presented weak to nonexistent evidence to support its allegations of 
a violation of the duty of good faith and fair dealing. The government presented 
evidence that its actions were reasonable undertakings in the war zone in which the 
contract was performed and where Lulus knew it would be operating. Lulus has not 
met its burden of proof that government action "interfere[d] with [its] performance" or 
acted "so as to destroy [Lulus'] reasonable expectations ... regarding thefmits of the 
9 

contract." Metcalf, 742 F.3d at 991. Accordingly, we agree with Judge Mcllmail's 
decision to deny this portion of the appeals. 
Dated: February 6, 2019 
RICHARD SHACKLEFORD 
Administrative Judge 
Acting Chairman 
Armed Services Board 
of Contract Appeals 
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 Nos. 59252, 59450, 59598, 59814, 59815, 
Appeals ofLulus Ostrich Ranch, rendered in conformance with the Board's Charter. 
Dated: 
10 
JEFFREY D. GARDIN 
Recorder, Armed Services 
Board of Contract Appeals