ARMED SERVICES BOARD OF CONTRACT APPEALS 
Appeal of--
DG21, LLC 
Under Contract No. N62742-06-D-4501 
APPEARANCES FOR THE APPELLANT: 
) 
) 
) 
) 
) 
APPEARANCES FOR THE GOVERNMENT: 
ASBCA No. 57980 
John C. Dulske, Esq. 
Joan Kelley Fowler Gluys, Esq. 
Bryan L. Kost, Esq. 
The Law Offices of Dulske & Gluys, P.C. 
San Antonio, TX 
Ronald J. Borro, Esq. 
Navy Chief Trial Attorney 
Russell A. Shultis, Esq. 
Senior Trial Attorney 
OPINION BY ADMINISTRATIVE JUDGE THRASHER 
DG21, LLC (DG21) contracted to provide the Navy with Base 
Operating 
Support services at Navy Support Facility/Diego Garcia 
(NSF/DG), British Indian 
Ocean Territory. Because NSF/DG is such a remote location, the government was 
effectively DG21 's sole source for obtaining fuel to perform the contract. The contract 
provided DG21 could purchase fuel from the government and reimburse the 
government for the fuel at the prevailing DoD rate at time of purchase. The prevailing 
DoD rate for fuel substantially increased during contract performance and DG21 now 
seeks an equitable adjustment for increased cost of purchasing the fuel. We have 
jurisdiction of the appeal under the Contract Disputes Act of 1978 (CDA), 41 U.S.C. 
§ § 7101-7109. The parties have elected to submit the appeal on the record pursuant to 
Board Rule 11. 1 We deny the appeal. 
1 Although the parties have elected to submit this appeal on the record pursuant to 
Board Rule 11, the government's post-hearing brief asserts our standard of 
review is that of a motion for summary judgment i.e., that there is no genuine 
issue of material fact and the government is entitled to a judgment as a matter 
oflaw (gov't br. at 1, 11). Likewise, appellant's response to the government's 
motion states that the government has failed to show it is entitled to judgment 
as a matter oflaw (app. resp. at 2). The standards of review and burdens of 
proof of a motion for summary judgment and a decision on the merits under 
Board Rule 11 vary substantially. We decide this appeal on the merits pursuant 
to Board Rule 11. 

FINDINGS OF FACTS 
Solicitation 
1. The Department of the Navy, Naval Facilities Engineering Command, 
NA VF AC Pacific Acquisition Department (government) issued a solicitation on 
2 September 2005 for Base Operating Support (BOS) services at NSF/DG. The 
government's acquisition strategy was to award a fixed-price/indefinite quantity 
contract through the use of a competitive best value source selection. (R4, tab 2) 
2. NSF /DG is located on a remote island in the Indian Ocean (R4, tab 21 
at GOVF0007224 (7224)).2 Access to NSF/DG is restricted to military personnel of 
the United States and the United Kingdom who are on business or are assigned there, 
contractors to the United States or United Kingdom, and other personnel of the 
governments of the United States and United Kingdom who have authorized business 
on the island. Given its remote location, there is no commercial or civilian 
infrastructure on NSF /DG. Pertinent to this appeal, the government is the only source 
of fuel on the island. (Id. at 7215) 
Government vs. Contractor-Provided Fuel Requirements 
3. The solicitation included a Performance Work Statement (PWS) organized 
into 18 annexes (R4, tab 21 at 7205). Annex 2 discussed how fuel would be 
furnished under the contract, distinguishing between government-provided (free) and 
contractor-provided (at contractor's expense). Spec Item 2.4.5, Government Furnished 
Fuel, provided: 
.J 
The Government will provide fuel required by the 
Contractor in the performance of the contract, except for 
Contractor-Furnished Fuel specified in Spec Item 2.5.1.1. 
The Government will make available fuel for items listed in 
Spec Item 2.5.1.1 on a cost reimbursable basis at the 
prevailing DoD rate at the time of purchase. This is to 
ensure the fuel conservation program achieves its full 
impact throughout the life of the contract. The Government 
will not provide fuel storage facilities and will not be liable 
for damages due to use of fuel purchased from the 
Government. 
2 Citations of the Rule 4 are to the Bates-stamped numbers. 
2 

The Contractor will implement a fuel conservation plan to 
reduce fuel consumption by 10% each year over the life of 
the contract with the Base Year as the baseline. 
(R4, tab 21 at 7240) The contractor-furnished fuel was to be used to fuel the 
contractor's base support vehicles and equipment (BSVE) used to perform the 
contract. Spec Item 2.5.1.1, Contractor-Furnished Fuel, provided: 
The contractor will provide fuel for all Contractor-operated 
BSVE. 
The Contractor may purchase fuel from the Government 
on a cost reimbursable basis. The Contractor shall 
reimburse the Government at the prevailing DoD rate at 
the time of purchase. See Spec Item 2.4.5. 
(Id. at 7244) The offerors were provided historical data from the incumbent's total 
fuel consumption and the June 2005 fuel rates for diesel and mogas3 to prepare their 
proposals (id.). DG21 does not allege the information provided was inaccurate or 
incomplete. 
Fuel Conservation Program 
4. The solicitation emphasized the requirement for a fuel conservation 
program. Annex 17 of the contract required the contractor to: 
[E]stablish a fuel conservation program for this annex for 
all vehicles and equipment used in this contract 
(Government and Contractor) ensuring a 10% reduction is 
achieved per year for the life of the contract. The fuel 
conservation program shall be approved by the ACO or 
COR prior to contract start-up. NA VFAC P-300 provides 
guidance and using Industry Best Practice to develop an 
effective fuel conservation program. Any deviation from 
the fuel conservation program will be submitted in writing 
to the ACO or COR for approval. 
(R4, tab 21 at 10927) 
3 The term "mogas" refers to gasoline or petrol to distinguish it from other types of 
fuels such as diesel or aviation fuel. 
3 

DG21 'Initial Proposal 
5. DG21 submitted its initial proposal on 4 January 2006 (R4, tab 6 at 167). 
The proposal addressed fuel costs as one category ofDG21 's Other Direct Costs 
(ODC) (id. at 188). Pertinent to this appeal, DG21 identified contractor-furnished fuel 
as an important cost driver in the ODC area and, accordingly, conducted a detailed 
analysis of the fuel consumption and cost information. DG2 l's proposal provided the 
government with the conclusions from its analysis, stating: 
Contractor-furnished fuel is defined in Annex 2 Management and 
Administration, RFP Paragraph 2.5.1.1 Contractor-Furnished Fuel. 
We understand from Paragraph 2.5.1.1 that we are required to 
provide fuel for all Contractor-operated 
BSVE only and may 
purchase fuel from the Government. All other fuel is 
Government-furnished as defined by Annex 2, Management and 
Administration, RFP paragraph 2.4.5 Government Furnished Fuel. 
We determined our cost for fuel first by considering the 
table provided by Annex 2, RFP Paragraph 2.5 .1.1 
Contractor-Furnished Fuel showing the total consumption 
by the BOS contractor for transportation (BSVE ONLY). 
We evaluated the quantities reported in the table and 
determined they were overstated, that the BSVE operating 
miles and hours do not support that level of consumption. 
We then made independent calculations of the gallons of 
fuel required to support our BSVE operations defined by 
Annex 1 
7 by reviewing the NSF-Owned-Government 
Operated-Government Replaced-Contractor Maintained 
BSVE and the Tenant-Owned-Tenant Operated-Tenant 
Replaced-Contractor Maintained BSVE lists in the RFP 
(Attachments J-1700000-10 and J-1700000-12) .... 
To calculate the price per gallon, we did use the 
information provided in RFP Section 2.5.1.1. DG21 used 
the weighted average of the June 2005 DoD rate for diesel 
of $1. 73; and the June 2005 DoD rate for mogas of $1. 79 
to calculate the cost of fuel. If these rates for Juel vary by 
plus or minus 10% we will request an equitable adjustment 
to address the unanticipated reduction or increase in cost. 
4 

Escalation: 
There is no escalation on Other Direct Costs over the life 
of the contract, unless noted above for specific items. 
(R4, tab 6 at 189-91) 
6. DG21 's technical proposal also addressed the fuel conservation program 
stressing its importance, stating: "[ s ]ince the Navy is faced with an annual energy budget 
that exceeds two billion dollars and with decreases in operating funds, DG21 realizes that 
we must use all available means to reduce energy costs and increase efficiency" (R4, tab 6, 
Disk 2, 20130315, 57980 DG21Rule4 Index (tab 6, Disk 2) at 852). 
Discussions 
7. The government responded to DG21 's initial proposal on 8 February 2006 
(R4, tab 6, Disk 2 at 2324). During this first round of discussions the government 
questioned some ofDG21 's estimating methodology for fuel consumption and costs. 
Pertinent to this appeal, government question number 15 considered the issue of 
escalation and stated: 
The price proposal states in various places that no 
escalation was applied in any year of the contract however, 
no further explanations are provided. Please confirm and 
explain DG21 's pricing intentions. Please explain the 
basis/rationale for not considering cost growth over the 
10-year contract term. Provide an explanation for each 
significant element of direct cost, e.g. labor, material, ODC 
etc. Additionally, address and confirm DG21 's intentions 
relative to the pricing of the IDIQ rates which do not 
include any provision for escalation. Please review and 
clarify/adjust as appropriate. 
(R4, tab 6, Disk 2 at 2320-21) In addition, 
government question number 17 referenced 
"Contractor Furnished Fuel, Narrative REA Assumptions" that referenced possible 
equitable adjustments for increases in fuel prices, stating: 
The 
historical fuel consumption and rates (RFP Section 
2.5.1.1) have been provided for informational purposes 
only. As this is a firm fixed price contract, DG21 assumes 
5 

the full risk of consumption and/or rate changes. Please 
price your proposal accordingly. Please review and 
correct/adjust as appropriate. 
(R4, tab 6, Disk 2 at 2321) 
8. DG21 responded to government question number 15 concerning DG21 's 
estimating methodology stating, in pertinent part: 
OTHER DIRECT COSTS: 
Several different categories of costs are included in Other 
Direct Costs. Although some items may, in fact, increase 
in cost over the life of the contract, other categories may 
decrease. DG21 believes that we can control cost growth 
in overall Other Direct Cost amounts included in price by 
prudent management of each category of cost. 
(R4, tab 7, Disk 2 at 2335-36) DG21 responded to government question number 17, 
addressing the escalation provision by stating: 
DG21 agrees to change the narrative. Fuel prices fluctuate 
dramatically from year-to-year. Fuel is priced in with 
Other Direct Costs and DG2 l will manage to total ODCs 
rather than this one category. Further, DG2 l believes that 
fuel costs overall should decrease through the Energy 
Efficiency Program. Therefore, DG2 l does not feel that 
fuel costs need to be escalated, therefore, we have not 
changed our price in this area. 
(R4, tab 7, Disk 2 at 2337) 
DG21 's Revised and Final Proposal 
9. DG21 submitted a revised proposal on 8 March 2006. The pertinent ODC 
fuel section of the revised proposal was identical to the initial proposal with two 
exceptions: (1) The proposal no longer included the "If these rates for fuel vary by 
plus or minus 10% we will request an equitable adjustment to address the 
unanticipated reduction or increase in cost" language; (2) The escalation section was 
changed, stating: 
6 

Escalation: 
There is no escalation on Other Direct Costs over the life 
of the contract, unless noted above for specific items. 
DG2 l expects that, although some costs may increase, 
others will either stay flat or decrease. 
(R4, tab 7, Disk 2 at 2367) No fuel costs were noted as subject to escalation (id. 
at 2365-67). DG21 's final price proposal, dated 28 April 2006, was identical to the 
revised proposal (R4, tab 8, Disk 2 at 3185-87). 
Contract Award 
10. Contract No. N62742-06-D-4501 was awarded to DG21on6 July 2006. 
The base contract term was for a period of twelve (12) months, beginning 1 August 
2006, with four (4) 12-month option periods and a potential fifth additional 12-month 
option period.4 (R4, tab 9) Section A.4 defined the documents incorporated into the 
contract document. It stated: 
This contract document incorporates revisions made by 
solicitation Amendments 0001 through 0011, and the 
following: 
a. The DG21, LLC Technical Proposal (Volumes II and 
III), as submitted in the final proposal revision, 28 April 
2006, is incorporated. 
b. The DG21, LLC Subcontracting Plan submitted as part 
of the final proposal revision, 28 April 2006, is accepted 
and incorporated as Attachment No. JL-2. 
c. Award Fee I Award Option Plan, approved 26 June 
2006, is incorporated as Attachment No. JE-1. 
d. The Pre-Proposal Conference Minutes is incorporated as 
Attachment JL-7. 
e. The Questions and Answers provided by solicitation 
Amendments are included herein and are identified as 
follows: 
4 All option periods were exercised extending contract until 31 July 2012 (R4, tab 23 
at 14330-31). 
7 

ATTACHMENT NUMBER TITLE 
JL-8 to JL-14 Questions & Answers 
f. Section H, add Clause H.12, SPS Consolidated Server 
Time Zone, which is incorporated by Full Text.. .. 
(R4, tab 9, Disk 1 at 4821) 
11. The award-fee/award-option plan, incorporated as Attachment JE-1 to the 
contract, established that a portion ofDG21 's award fee would be based on 
implementation of the fuel conservation program. The award-fee/award-option for the 
fuel savings initiative was 10% of the maximum award-fee pool and would be 
evaluated during each rating period. (R4, tab 9, Disk 1 at 4998-5003) 
12. The contract defined government furnished property as "property in the 
possession of, or directly acquired by, the Government and subsequently made 
available to the Contractor for use in the performance of work related to this contract" 
(R4, tab 21, Disk 1 at 7333). Contractor-furnished property was defined as 
"[ m ]aterials, supplies, and equipment provided or acquired by the Contractor and in 
the possession of the Contractor, to which the title remains with the Contractor" 
(id. at 7331). 
13. The contract incorporated by reference Federal Acquisition Regulation 
(FAR) 52.233-1, DISPUTES (JUL 2002)-ALTERNATE I (DEC 1991) (R4, tab 9, Disk 2 at 
4953). The contract also incorporated by reference two Changes clauses. The first 
was FAR 52.243-1, CHANGES - FIXED-PRICE (AUG 1987)-ALTERNATE II (APR 1984 ), 
which states in pertinent part: 
(a) The Contracting Officer may at any time, by 
written order, and without notice to the sureties, if any, 
make changes within the general scope of this contract in 
any one or more of the following: 
( 1) Description of services to be performed. 
(2) Time of performance (i.e., hours of the day, 
days of the week, etc.). 
(3) Place of performance of the services. 
( 4) Drawings, designs, or specifications when the 
supplies to be furnished are to be specially manufactured 
8 

for the Government, in accordance with the drawings, 
designs, or specifications. 
(5) Method of shipment or packing of supplies. 
(6) Place of delivery. 
(b) If any such change causes an increase or 
decrease in the cost of, or the time required for, 
performance of any part of the work under this contract, 
whether or not changed by the order, the Contracting 
Officer shall make an equitable adjustment in the contract 
price, the delivery schedule, or both, and shall modify the 
contract. 
(R4, tab 9, Disk 1at4953) The second was FAR 52.243-4, CHANGES (AUG 1987), 
which states in pertinent part: 
(a) The Contracting Officer may, at any time, 
without notice to the sureties, if any, by written order 
designated or indicated to be a change order, make changes 
in the work within the general scope of the contract, 
including changes-
(3) In the Government-furnished facilities, 
equipment, materials, services, or site; or 
(b) Any other written or oral order (which, as used 
in this paragraph (b ), includes direction, instruction, 
interpretation, or determination) from the Contracting 
Officer that causes a change shall be treated as a change 
order under this clause; provided, that the Contractor gives 
the Contracting Officer written notice stating (I) the date, 
circumstances, and source of the order and (2) that the 
Contractor regards the order as a change order. 
9 

( d) If any change under this clause causes an 
increase or decrease in the Contractor's cost of, or the time 
required for, the performance of any part of the work under 
this contract, whether or not changed by any such order, 
the Contracting Officer shall make an equitable adjustment 
and modify the contract in writing. 
(Id.) Per the contract, FAR 52.243-4 only applied to construction projects (id. 
at 4955).5 
14. After contract performance began, DG21 raised concerns about fuel 
forecasting. Following an executive partnering meeting, by letter dated 15 February 
2007, DG21 proposed adjustments to the contract 
costs in certain areas, particularly 
fuel. (R4, tab 11 at 5357) DG21 described the situation as follows: 
Introduction-During the procurement phase of this 
solicitation, DG21 had grave concerns on how to 
forecast/predict fuel costs over the potential ten year 
contract period. DG21 tried in vain to be allowed to limit 
the risk to plus or minus 10% of the then current rates .... 
Bid Assumptions-DG21 was not able to "take exception" 
to this bid item during the procurement phase because of 
the potential high risk of having our total bid "thrown out." 
We also considered this a "protestable" issue and one that 
needed to be addressed if awarded the contract or not. 
DG21 takes this position due to the unpredictability of oil 
prices, not only over the last six-eight months, but over the 
last six-eight years .... 
Billed Fuel Usage-The average fuel consumption per the 
RFP was 266,370 gallons of diesel at $1.73/gallon and 
156,986 gallons of gasoline at $1. 79/gallon and the current 
usage charges are $2.29 and $2.37/gallon respectively that 
represents about a 32% increase at beginning of [sic] 
contract. It also appears that DG21 is required to pay "in 
advance" for fuel which means we are subsidizing the 
Government prior to actual usage. 
5 FAR 52.243-4, CHANGES (AUG 1987) is designated within the list of clauses by an 
asterisk which denotes Applicable to Construction Projects (R4, tab 9, Disk 1 at 
4953, 4955). 
10 

Monetary Shortfall- ... DG2 l did not/could not "predict" 
the fuel costs for the ten year period, so considered the 
RFP rates as being "as good a guess as any" and used a 
composite rate of $1.75/gallon. This shortfall now projects 
a deficit of about $139,775/year, based on current billing 
rates. It is inconceivable and unfair to assume that DG2 l 
be required to sustain such a deficit given the impossible 
forecasting of the world's oil production, usage, pricing 
and how it relates to the DoD Fuel Reserve pricing 
model/forecasting. 
Proposed Resolution -
(Id. at 5505-06) 
1. Cap the maximum rate charged to DG2 l at the RFP 
rates of$1.73/gal and $1.79/gallon, plus or minus 
10%. 
2. If "advance payment" is being required, 
discontinue and 
bill based on actual usage at [sic] end 
of each period. 
15. The contracting officer (CO) responded to DG21 's proposal by letter dated 
15 August 2007. The letter stated, in pertinent part: 
The Government's understanding ofDG21 's position is 
that DG2 l requests to cap the maximum rate charged to 
DG21 at the rates of $1.73/gallon for diesel and 
$1.79/gallon for gasoline, plus or minus 10%. However, 
DG2 l acknowledges that the contract does not contain an 
economic price adjustment clause, and that increases in 
fuel costs are borne by the contractor. 
In accordance with Annex 0200000 Spec Items 2.4.5 and 
2.5.1.1, the Government's position is that DG21 may 
purchase fuel from the Government on a cost reimbursable 
basis at the prevailing DoD rate at the time of purchase. 
Effective April I, 2007, the prevailing rate as set annually 
by the Office of the Under Secretary of Defense is 
$2.13/gallon for diesel and $2.21/gallon for gasoline. 
DG21 used the same rate provided in the informational 
note in Annex 0200000 Spec. Item 2.5.1.1 (June 2005 rates 
11 

provided "for informational purposes only": $1.73/gallon 
diesel; $1.79/gallon mogas) and did not escalate the rate 
for outyears. 
During source selection discussions, the Government 
informed DG21 that the historical fuel consumption and 
rates provided in the RFP, Annex 0200000 Section 2.5.1.1 
were provided for informational purposes only, and that 
due to the contract being firm fixed price, DG21 assumes 
the full risk of consumption and/or rate changes. DG21 
was asked to price its proposal accordingly and 
review/correct/adjust as appropriate. 
In its response, DG21 indicated the following ... 
"Fuel prices fluctuate dramatically from year-to-year. 
Fuel is priced in with Other Direct Costs and DG2 J will 
manage to total ODCs rather than this one category. 
Further, DG21 believes that fuel costs overall should 
decrease through the Energy Efficiency Program. 
Therefore, DG21 does not feel thatfuel costs need to be 
escalated; therefore, we have not changed our price in this 
area. " 
Additionally, per DG2 l's final revised price proposal, page 
1-18 - 120, DG21 evaluated the quantities reported in the 
table of Spec. Item 2.5.1.1 and stated the following: 
"We evaluated the quantities reported in the table and 
determined they were overstated, that the BSVE operating 
miles and hours do not support that level of consumption. 
We then made independent calculations of the gallons of 
fuel required to support our BSVE operations. " 
DG21 's position is if "advance payment" is being required, 
discontinue and bill based on actual usage at the end of 
each period. 
The Government does not require DG21 to make advance 
payments for fuel consumption. Payment is made by 
DG21 after actual usage is determined based on what is 
12 

reported in the Fuel Accounting System (FAS). The Base 
Financial Office (BFO) confirmed DG21 is billed for their 
monthly fuel consumption after actual usage. 
(R4, tab 12 at 5524) 
16. On 12 December 2008, DG21 submitted another letter to the CO describing 
"Potential REA" issues. The letter stated, in pertinent part: 
Due to many factors over 
the last 24 months, DG21 has 
experienced losses which seriously impact the financial 
stability of the company. As will be [outlined] below, 
many of these issues are financial in nature and are directly 
or indirectly associated in one way or another with the high 
rise in fuel and items associated with these costs. These 
issues deal with the immediate request for funds and action 
from the Government.. .. 
Fuel Issues and Concerns 
The dramatic volatility in the cost of fuel over the last 
24 months is a phenomenon not seen since the late 1970s, 
over 30 years ago .... Currently, the reimbursable rate is 
$4.06 a gallon for diesel and $4.19 a gallon for mogas. 
This equates to approximately a 139% increase in diesel 
and mogas over a 24 month period. DG21 understands 
that fuel costs will fluctuate from year to year, and had 
determined during the proposal stage from historical data 
over the last 10 years, that the yearly increase in fuel cost 
could be absorbed by fuel management and rationing. 
Using historical data to develop proposed fuel costs (with 
or without additional escalation), is the standard for cost 
estimating. If DG2 l had proposed an escalation factor of 
70% per year in the price submission, the proposal 
evaluation team 
and/or DCAA would have questioned such 
an increase because there would have been no factual data 
in which to base such an increase .... 
13 

FAR Part 50.103-2(a)(l) states a contracting authority can 
approve a contract adjustment, 
"When an actual or threatened loss under a defense 
contract, however caused, will impair the productive 
ability of a contractor whose continued performance 
on any defense contract or whose continued operation 
as a source of supply is found to be essential to the 
national defense, the contract may be amended without 
consideration, but only to the extent necessary to avoid 
such impairment to the contractor's productive ability." 
DG2 l feels that no or protracted action by the Government 
on the following issues will cause DG2 l to become 
financially unsustainable. The total potential REA 
adjustment when summated equates to $4,995,072.23 .. ., 
and if allowed to continue would push DG2 l to an 
untenable position and be unable to perform the mission. 
Each issue will be highlighted and discussed in detail 
throughout this paper and associated attachments. 
I. Diesel and MoGas Rate Increases 
As stated above, diesel and mogas rates have increase[ d] approx 
139% over the last 24 months. Roughly, this equates to over a 
70% increase per annum. In a competitively procured 
solicitation, which has implications of price being a determining 
factor, no company would have anticipated or incorporated into 
the bid this magnitude of increase. We believe the most a 
company would have realistically escalated fuel rates by would 
be in the order of 6.9% a year, based on fuel prices for the past 
10 years.... Clearly, this dramatic increase in fuel prices was 
not envisaged by industry, the Government, or any other 
appropriate/relevant financial indicator. 
Since the beginning of the Contract, DG2 l has experienced 
over $560K in losses through October 2008, due to 
increased fuel costs .... 
During the proposal stage of this project, DG2 l felt that the 
6.9% increase could be off set by the 10% reduction in usage 
through the Energy [Conservation] Plan. However, with the 
14 

actual price of fuel at $2.21/gallon at the commencement of 
the contract, DG21 was already incurring a loss at this 
incredible rate. The rate increase for just the first year was 
over 26%, far out side the normal parameters for the last past 
10 years which was just 6.9% per year. 
DG21 can in no way sustain these increases, which have 
not only affected fuel, but every part of the cost structure 
supporting the mission. With these levels of volatility and 
in particular [these] dramatic increases in fuel, the model 
used to price Diego Garcia becomes obsolete even with 
taking into account the 10% usage deduction, and shows 
no real hope of making DG21 financially sound through 
traditional techniques, except for the Government to assist 
in this incredibly volatile time. 
(R4, tab 12 at 5528-30) The letter did not include a certification. 
17. The parties met on 12 January 2009. Following the meeting, DG21 submitted 
a letter, dated 6 March 2009, addressing "revised and 
updated 'Escalation REA Issues."' 
(R4, tab 13 at 5548) The letter reiterated many of the same arguments of the 
12 December 2008 letter and discussed the continued fluctuation of gas prices. DG21 
also stated that "[t]he total 
potential REA adjustment when summated equates to 
$2,810,953 through Option 2, or $47,464,294 over the life of the contract if all options 
are exercised." The letter did not include a certification. (R4, tab 13 at 5549-50) 
18. The CO treated DG21 's revised letter as a request for equitable adjustment 
(REA). By letter dated 11 September 2009, with the subject "REQUEST FOR 
EQUITABLE ADJUSTMENT FOR ESCALATION OF FUEL AND OTHER 
ASSOCIATED COSTS," the CO stated: 
The Government reviewed and considered DG21 's 
concerns regarding the escalation of fuel and other 
associated costs as presented in [DG21 letter dated 
6 March 2009]. ... 
Your request does not comply with the submission 
requirements of FAR Part 50.103 and must be denied. 
DG21 's letter referred to FAR Part 50 - Extraordinary 
Contractual Actions], specifically FAR Part 
50.103-2(a)(l), as the contract authority that would allow 
15 

the Government to approve a contract adjustment without 
consideration. However, FAR Part 50.101-2(a)(2) states 
"this authority conferred by [Public Law (PL) 85-804 
Extraordinary Contractual Relief], PL 85-804, may not be 
relied upon when other adequate legal authority exists 
within the agency." Based on your submission, we are 
unable to determine which avenue DG21 is electing to 
pursue this matter. 
In conclusion, based on the information provided in your 
letter of 6 March 2009, the Government is not able to 
provide a contract adjustment under the authority in FAR 
Part 50 - Extraordinary Contractual Actions]. 
(R4, tab 15 at 5587) 
19. By emails dated 8 July 2011, DG21 submitted a formal claim stating, 
"Please accept this e-mail and the following three additional e-mails as our submittal 
of our fuel claim." The four emails contained numerous attachments, making up the 
legal rationale, price narrative and other supporting evidence of DG21 's claim. (R4, 
tab 17 at 5598-5626) The claim letter's subject line read "REQUEST FOR 
CONTRACTING OFFICER'S FINAL DECISION." The claim letter stated: 
DG21, LLC (DG21) submitted at least one requests [sic] for 
relief from double-digit inflation on fuel rates as reflected in a 
Request for Equitable Adjustment (REA) dated 6 March 
2009 .... The request was rejected ... ; however, in the 
Government's reply to the former request, it appeared the 
rejection was due to conflicting information in the REA as to 
the clause or law that DG21 was submitting the request under. 
Therefore, DG21, LLC is submitting this claim requesting 
[a] Contracting Officer's Final Decision relative to fuel 
rate escalation for the Firm Fixed Price portion of the 
contract beyond normal escalation that a prudent contractor 
could foresee as described in Attachment 3 .... 
(R4, tab 17 at 5603) Attachment 3 provided DG21 's reasoning for its fuel rate claim. 
It provided, in pertinent part: 
Since the start of the DG BOS Contract N62742-06-D-4501, 
starting on 1 October 2006, fuel prices charged by the 
Government have been quite volatile. As a result, DG21, 
16 

LLC ... experienced significant cost increases from the fuel 
prices proposed to what has been charged to DG21 by the 
Navy on a per gallon basis. Further, at the start of the 
contract, Fuel was billed to DG2 l by the Base Financial 
Office, apparently in advance of actual usage and later 
reconciled. In March 2007, the billing methodology of the 
Government changed and DG2 l began receiving billings 
from DF AS-Columbus. [61 
In DG21 's Final Proposal Revision, Volume 1, Price 
Proposal, Price Narrative dated April 28, 2006 ... DG2 l 
used the data provided in Annex 0200000, spec Item 
2. 5 .1.1 reflecting usage history and the rates provided as 
information by the Government for diesel and mogas ... to 
arrive at a weighted average rate per gallon of $1.75. A 
fuel cost was proposed based on 258,231 gallons per year 
at $1.75 per gallon, or $451,904 per year for BSVE fuel 
only. This fuel was intended to be for the Firm Fixed 
Price portion of the contract only. 
Since the start of the contract, fuel prices charged to DG2 l 
by the Government have far exceeded the $1. 7 5 per gallon 
proposed, with the exception of two time periods covering 
February 2009 through August 2009. 
Since the Government determines these rates and invoices 
DG2 l for the fuel, DG2 l believes this constitutes a change 
under the Changes clause of the contract, FAR 52.243-1 
Changes-Fixed Price (Aug 1987) -Alternate II (Apr 
1984), and FAR 52.243-4 Changes, which indicates that 
the Contracting Officer may make changes in the work 
within the general scope of the contract, including 
changes-- .... " (3) In the Government-furnished property or 
service .... ". Such significant rate increases by the 
Government constitute a change in Government furnished 
property or service. 
6 Amendment No. A00007 changed the paying office (R4, tab 22 at 11435). 
17 

The Government has never officially included via Contract 
Modification revised rates for invoicing by the 
Government to DG21 into the contract. Therefore, really, 
DG21 has been overpaying for fuel since inception of the 
contract as there has never been a formal contract 
modification indicating increases in fuel rates. 
DG21 respectfully requests the Government's 
consideration of the impact of increased rates on actual 
fuel usage for the Firm Fixed Price portion of Contract 
N62742-06-D-4501... in the amount of $1,171,475.88 for 
the period August 2006 through February 2011 .... 
We look forward to a favorable decision in this regard. 
(R4, tab 17 at 5608-12) The claim included a CDA claim certification signed by 
Mr. Dave Larsen, Member, DG21, LLC (R4, tab 17 at 5605). 
20. The contracting officer's final decision (COFD), dated 8 November 2011, 
was furnished to DG2 l via email on 8 November 2011 (R4, tab 18 at 5627). The CO 
denied DG21 's claim in its entirety stating: 
The Government's position is that DG21 is not entitled to 
additional compensation for the fuel rate increase and this 
does not constitute a change under the changes clause FAR 
52.243-1. The Government did not make a change to the 
requirements of the contract and the fuel rates were 
included for informational purposes only.... Additionally, 
if DG21 believed that an increase in the fuel rate 
constituted a change, it was required to assert a right to an 
adjustment pursuant to the changes clause, FAR 52.243-1, 
within 30 days. DG2 l has waited several years to assert 
this right. 
(R4, tab 18 at 5628-29) 
21. DG21 appealed the COFD to the Board by letter dated 4 February 2012 
(R4, tab 19). 
18 

DECISION 
Preliminary Matters - Appellant's Evidentiary Objections 
Appellant objects to several documents in the record, contending these 
documents should be excluded from the evidentiary record (removed from the Rule 4 
file) and, thus, our consideration in this decision. Consequently, these documents have 
been constructively removed from the Rule 4 File pursuant to Board Rule 4( d) (21 July 
2014 Revision). In response, the government moves to have these documents entered 
into evidence (gov't resp. at 1-4). The documents in question generally fall into two 
categories: (1) pre-award source selection documentation, proposal submittals and 
discussions (exchange of questions and answers about appellant's proposal) 
(documents 1-8 below); and (2) post-award concerns raised by appellant about the 
increase in fuel prices (documents 9-13 below). Specifically, appellant objects to the 
following documents in the record: 
1. R4, Tab 6, GOVF0000189-191. DG21 Initial Proposal 
Volume I Price - Attachment - Vol I DG_Narrative_Att 1-0; 
2. R4, Tab 6, (Disk 2, 20130315, 57980 DG2 l Rule 4 
Index at GOVF0000214 ). The entire Excel Spreadsheet, 
including Tab "ODCs Sum," Line Q, Pol (Fuel). DG21 
Initial Proposal Volume I Price - Attachment - Vol I 
DG_ODC_vl; 
3. R4, Tab 6, GOVF0002320-2321. Initial Round of 
Discussion Questions Attachment B -Price; 
4. R4, Tab 7, GOVF0002337. DG21 Revised Proposal 
Volume I Price - Attachment -Vol I Attachment (B); 
5. R4, Tab 7, (Disk 2, 20130315, 57980 DG21 Rule 4 
Index at GOVF0002383). The entire Excel Spreadsheet, 
including Tab "ODC Sum," Line Q, Pol (Fuel). DG21 
Revised Proposal Volume I Price - Attachment -Vol I 
DG_ODC_vl; 
6. R4, Tab 7, GOVF0002365-2367. DG21 Revised 
Proposal Volume I Price - Attachment -Vol I 
DG_Narrative_Att I-0_030806; 
7. R4, Tab 8, GOVF0003185-3 l 87. DG2 l Final Proposal 
Volume I PriceVol I DG_Narrative_Att I-0_04282006; 
19 

8. R4, Tab 8, (Disk 2, 20130315, 57980 DG21Rule4 
Index at GOVF0003203). The entire Excel Spreadsheet, 
including, Tab "ODCs Sum," Line Q, Pol (Fuel). DG21 
Final Proposal Volume I Price Vol I DG _ ODC _vi; 
9. R4, Tab 11, GOVF0005505-5506. DG21 Proposal on 
Issues Reported at Executive Partnering Meeting on 
January 18, 2007 - Electricity II.A. I 
- Fuel Cost Forecast; 
10. R4, Tab 12, GOVF0005528-5529. DG21 Submittal 
Other Potential REA Issues - Cover Letter; 
11. R4, Tab 14, GOVF0005574. DG21 Confirming 
Receipt of Their Submittal on March 6, 2009; 
12. R4, Tab 14, GOVF0005579. DG21 Having Problems 
Sending One Large File; and 
13. R4, Tab 15, GOVF0005587. DG21 POC Letter Final 
dated November 9, 2009. 
Appellant asserts the risk of increase in fuel rates was allocated to the 
government by the unambiguous terms of the contract Changes clause, FAR 52.243-4. 
Since all these documents are extrinsic evidence offered by the government to vary, 
contradict, or add terms to an unambiguous contract, these documents must be 
excluded pursuant to the parol evidence rule. (App. objection at 3-4) In addition, 
appellant contends that Federal Rules of Evidence 402 states that irrelevant evidence is 
not admissible. Therefore, extrinsic evidence offered to contradict the clear meaning 
of FAR 52.243 4 is irrelevant as a matter oflaw under the parol evidence rule and 
inadmissible as an evidentiary matter under FED. R. Evm. 402 (app. reply at 6-7). 
In response, the government asserts these documents are pertinent and relevant 
as they concern the seminal issue in this appeal and thus meet the test for relevance in 
Rule 401. Furthermore, the government asserts that the 
parol evidence rule "is a 
doctrine of contract construction, not evidence," and does not require the exclusion of 
any documents from the record. (Gov't resp. at 1-4) The government notes that the 
Board can determine whether the parol evidence rule applies after reviewing all the 
evidence in light of the legal arguments being made by the parties (id. at 4). 
Additionally, the government challenges appellant's assertions that all the documents 
are extrinsic evidence, asserting that appellant's final price proposal (documents 7 and 
8 above) were incorporated into the contract upon the government's acceptance of 
appellant's final proposal (id. at 1-2). 
20 

The parol evidence rule prohibits consideration of extrinsic evidence that 
pre-dates a written agreement "to add to or otherwise modify the terms of a written 
agreement in instances where agreement has been adopted by the parties as an 
expression of their final understanding." Teg-Paradigm Environmental, Inc. v. United 
States, 465 F.3d 1329, 1338-39 (Fed. Cir. 2006) (quoting 
Barron Bancshares v. United 
States, 366 F.3d 1360, 1375 (Fed. Cir. 2004)). We agree with the government that the 
parol evidence rule does not exclude these documents from the evidentiary record. 
Contrary to appellant's arguments, as has often been stated, the parol evidence rule is 
not a rule of evidence but of substantive law. Nor is it a rule of contract interpretation; 
instead, it defines the parameters of the contract language to be interpreted by 
establishing the four comers of the parties' agreement. See RESTATEMENT (SECOND) 
oF CONTRACTS§ 213 cmt. a (1981). Therefore, we conclude the parol evidence rule 
can only be applied within the context of the particular issues and facts in question. 
Likewise, we agree with the government that these documents are relevant. 
Although we are not bound by the FED. R. Evm. we use them as a guide (Board Rule 
IO(c)). We conclude these documents meet the test for relevance in FED. R. Evm. 401. 
Consequently, we overrule appellant's objection; the documents in question are 
entered into the record. We will address the application of the parol evidence rule and 
applicable rules of contract interpretation in relation to these documents, as 
appropriate, as we consider the contentions of the parties. 
Decision on the Merits 
Appellant asserts three basic contentions: (1) the changes clause, by its terms, 
shifted the risk of fluctuations in fuel rates to the government; consequently, any fuel 
rate increase charged by the government constituted a change under the contract 
Changes clause (FAR 52.243-4) (app. br. at 12-15); (2) in the alternative, ifthere was 
no order from the CO that appellant should be charged the new fuel rates, any fuel rate 
charge above the bid rate would constitute a constructive change (app. br. at 15-16); 
and, (3) the government's failure to reimburse appellant for the fuel cost increases 
constituted a breach of the government's duty of good faith and fair dealing because it 
deprived it of the benefits of the fuel conservation program (app. br. at 17-25). Each 
argument will be addressed in tum. 
The Changes Clause Allocated the Risk of Fuel Rate Increases to the Government 
Although fuel price increases due to market fluctuations are generally not 
recoverable under a fixed-price contract, appellant contends the facts of this case fall 
within an exception enunciated in our decision in Raytheon Missile Systems 
Co., ASBCA No. 57594, 13 BCA ~ 35,264 at 173,117, that the parties may expressly 
21 

reallocate the risk of an increase in fuel costs back to the government (app. br. 
at 12-13; app. resp. at 6). Appellant contends the contract allocated the risk of fuel 
rate increases to the government as evidenced by the express language of the Changes 
clause, FAR 52.243-4, which appellant asserts requires an equitable adjustment when 
there is a change in government-furnished materials or services that result in increased 
costs to the contractor (app. br. 12-15; app. resp. at 6-12). Further, appellant asserts 
that it did not elect to purchase fuel from the government; rather, the government was 
the only viable source of fuel. Accordingly, not withstanding any proforma labels in 
the contract, fuel for contractor-operated BSVE was, in fact, government-furnished 
fuel. (App. resp. at 10) Therefore, with each government invoice issued to appellant 
that reflected a fuel rate increase beyond the bid rate, the government changed 
government-furnished materials within the meaning of FAR 52.243-4. Consequently, 
appellant is entitled to an equitable adjustment representing the increased cost of 
performance resulting from the government's change. (App. br. at 14-15) 
We reject appellant's contention. Even if the fuel at issue was 
government-furnished material within the meaning of FAR 52.243-4, fluctuations in 
the "prevailing DoD rate" would not constitute a change under the Changes clause. 
The plain language of the contract provided that appellant could purchase fuel at the 
"prevailing DoD rate"; the contract language clearly anticipates there will be market 
fluctuations in the fuel rates and appellant will reimburse 
the government at those rates 
if it purchases fuel (finding 3). Therefore, this process was clearly conte'mplated by 
the parties and is not a change to the contract. Reading the contract language as a 
whole, we conclude the Changes clause did not expressly allocate the risk of fuel price 
increases to the government as appellant contends. 
Likewise, we find no evidence that the parties expressly reallocated the risk of 
an increase in fuel costs back to the government, as appellant contends, based upon our 
decision in Raytheon, 13 BCA ~ 35,264. Appellant's reliance upon our decision in 
Raytheon in this regard is misplaced; there was no express allocation of risk to the 
government in Raytheon. As here, the contractor in Raytheon could only obtain fuel 
from the government, the government controlled the fuel price, the contractor was 
require to provide the fuel at its expense and there was no fuel cost escalation clause in 
the contract. During the source selection, the government disclosed the components of 
the government fuel pricing structure, some of which were not market related. The 
evidence established the contractor understood these pricing factors and assumed the 
risk of their escalation during performance. However, the contractor in Raytheon 
established that some of the government fuel price increases during performance were 
based upon factors that were not disclosed to the contractor during source selection 
and, thus, were risks that the contractor did not assume. As a result, we found that the 
government breached its implied duty of cooperation and noninterference by 
increasing the fuel price based upon factors that were not disclosed during the bidding 
process. Raytheon, 13 BCA ,-r 35,264 at 173,117-19. Therefore, the facts of this 
22 

appeal are distinguishable from those in Raytheon; unlike the contractor in Raytheon, 
appellant does not contend, nor does it present any evidence, that the government 
failed to disclose information related to how the rates were computed during the 
bidding process. 
Finally, the government contends that appellant's proffered interpretation of the 
contract violates the principle that a contract should be interpreted in a manner that 
gives meaning to all of its provisions, makes sense, and avoids whimsical and absurd 
results citing Hughes Communications Galaxy, Inc. v. United States, 998 F.2d 953, 
958 (Fed. Cir. 1993); ITT Defense Communications Division, ASBCA No. 44791, 
98-1 BCA ii 29,590 at 146,703 (gov't resp. at 16). The government's logic is that: 
DG21 's proposed interpretation of the contract undermines 
one of the goals of the contract-to conserve fuel. In the 
solicitation, the Navy stated that the contractor was 
required to purchase contractor-furnished fuel at the 
prevailing DoD rate "to ensure the fuel conservation 
program achieves its full impact throughout the life of the 
contract." (Spec. Item 2.4.5, R4, Volume 2, Tab 21, 
GOVF0007240). DG2l's main incentive to establish an 
effective fuel conservation program arises from the fact 
that, under the contract, DG2 l paid for the fuel it used. If, 
as DG21 suggests, the Government were required to pay 
even part of that cost, the primary incentive for a fuel 
conservation program would be eliminated. 
(Gov't resp. at 16) We agree with the government; appellant's interpretation would 
lead to an absurd result and, therefore, we reject it. 
In summary, we conclude the plain language of the contract allocated the risk of 
fuel price increases to appellant and such fuel price increases were not a change to the 
contract under the Changes clause. 
Constructive Change 
Appellant also contends, in the alternative, that the only contract price for fuel 
was the rate provided in the solicitation. Since that rate was never officially changed 
(by an executed change order or modification from the CO), every time the 
government charged appellant the higher rates it was constructively changing the 
contract. (App. resp. at 15-16) Appellant's logic is that since the CO is the only 
authority under the contract to order changes or modifications to the contract, and the 
CO never approved or ordered 
a change to the contract incorporating the increases in 
fuel rates, appellant should have only paid the rates reflected in the solicitation. 
23 

Accordingly, the government should reimburse appellant for the amounts associated 
with the increases in fuel rates. (Id.) 
For appellant to demonstrate a constructive change, it must show ( 1) that it 
performed work beyond the contract requirements, and (2) that the additional work 
was ordered, expressly or impliedly, by the government. Bell/Heery v. United States, 
739 F.3d 1324, 1335 (Fed. Cir. 2014). Appellant has failed to do so. The plain 
language of the contract contemplates the fuel rates would fluctuate during contract 
performance, that the solicitation rate was not a fixed contract rate, and appellant 
would be invoiced at the "prevailing DoD rate at the time of purchase" (finding 3). 
We conclude the government's actions invoicing appellant for reimbursement at 
higher fuel rates was within the scope of the contract and, therefore, appellant has 
failed to demonstrate a constructive change. 
The Implied Covenant of Good Faith and Fair Dealing 
Appellant also contends that the government breached the implied covenant of 
good faith and fair dealing by re-appropriating a bargained for benefit derived from the 
express terms of the contract. Appellant's logic is that: the goal of the fuel 
conservation program was to, "have a win-win situation for both the government and 
contractor where cost savings is [sic] achieved" ( app. hr. at 21 ); the Changes clause of 
the contract allocated the risk of fuel price increases to the government; the "win" or 
benefit for appellant under the program was an equitable adjustment for any fuel cost 
increases; therefore, when the government reallocated the risk of fuel cost increases to 
appellant it unilaterally removed a material benefit under the contract violating a 
covenant of good faith and fair dealing (app. hr. at 17-24). We reject that contention. 
The implied covenant of good faith and fair dealing is limited by the original 
bargain: it prevents a party's acts or omissions that, though not expressly proscribed 
by the contract, are inconsistent with the contract's purpose and deprive the other party 
of the contemplated value. Metcalf Construction Co. v. United States, 742 F.3d 984, 
991 (Fed. Cir. 2014). Contrary to appellant's contention, we fail to find any evidence 
in the express terms of the contract of any expectation that the risk of fuel increases 
was shifted to the government in relation to the fuel conservation plan. Therefore, we 
conclude the express language of the contract establishes that the original bargain 
between the parties was that appellant would assume the risk of fuel price increases. 
Contrary to appellant's contention, we have already rejected appellant's 
argument that the Changes clause, FAR 52.243-4, reallocates the risk of future fuel 
price increases to the government. In addition, the express language of the contract 
indicates the purpose of requiring appellant to reimburse for fuel costs was to achieve 
a successful fuel conservation program, stating in pertinent part, "[T]he Government 
will make available fuel for items listed in Spec Item 2.5.1.1 on a cost reimbursable 
24 

basis at the prevailing DoD rate at the time of purchase. This is to ensure the fuel 
conservation program achieves its full impact throughout the life of the contract." 
(Finding 3) Thus, we conclude the contract squarely places the risk for the cost of fuel 
increases on appellant, not the government, and the purpose of doing so was to 
incentivize appellant to conserve fuel consumption. 
In summary, appellant has failed to present any evidence to support its contention 
that the government's actions in charging it for increases in fuel prices deprived 
appellant of its rights to retain any implied benefits under the contract. Thus, we 
conclude the government did not breach any implied covenant of good faith and fair 
dealing. 
CONCLUSION 
For the reasons stated, the appeal is denied. 7 
Dated: 3 March 2015 
I concur 
~~E~ 
Administrative Judge 
Acting Chairman 
Armed Services Board 
of Contract Appeals 
dministrative Judge 
Armed Services Board 
of Contract Appeals 
I concur 
~CKlEFORD 
Administrative Judge 
Vice Chairman 
Armed Services Board 
of Contract Appeals 
7 Our decisions on appellant's arguments were based upon a reading of the plain 
language of the contract, not requiring our consideration of extrinsic evidence. 
Consequently, we need not address the application of the parol evidence rule. 
25 

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. 57980, Appeal of DG21, 
LLC, rendered in conformance with the Board's Charter. 
Dated: 
26 
JEFFREYD. GARDIN 
Recorder, Armed Services 
Board of Contract Appeals