ARMED SERVICES BOARD OF CONTRACT APPEALS 
 
Appeals of -- ) 
 ) 
Supreme Foodservice GmbH ) ASBCA Nos. 57884, 58666, 59636
 )         59811, 61361 
 ) 
Under Contract No. SPM300-05-D-3130 ) 
 
APPEARANCES FOR THE APPELLANT: Philip J. Davis, Esq. 
Rand L. Allen, Esq. 
John R. Prairie, Esq. 
Tara L. Ward, Esq. 
Nina S. Samuels, Esq. 
J. Ryan Frazee, Esq. 
  Wiley Rein 
  Washington, DC 
 
APPEARANCES FOR THE GOVERNMENT: Daniel K. Poling, Esq. 
  DLA Chief Trial Attorney 
 Steven Cruz Herrera, Esq. 
J. Maxwell Carrion, Esq. 
Kari L. Scheck, Esq. 
   Trial Attorneys 
  DLA Troop Support 
  Philadelphia, PA 
 
OPINION BY ADMINISTRATIVE JUDGE O’CONNELL 
 
 Appellant, Supreme Foodservice GmbH (Supreme), appeals decisions by a 
contracting officer from the Defense Logistics Agency (DLA).  In ASBCA Nos. 57884 
and 61361, DLA established final rates for payments made to Supreme for delivery of 
foodstuffs in Afghanistan under the above-captioned contract (the contract) and 
demanded the return of payments amounting to $1.1 billion made under provisional 
rates.  In ASBCA Nos. 58666 and 59636, Supreme contends that it is entitled to 
payment based on the original rates and seeks about $2.4 billion.  Finally, in ASBCA 
No. 59811, DLA requests that the Board declare the contract void ab initio due to 
Supreme’s guilty plea for major fraud and for a variety of other allegedly fraudulent or 
dishonest actions and seeks the return of all the money it paid Supreme on the contract, 
more than $8 billion. 
 
 The Board conducted a hearing from January 15 to February 14, 2019, at which 
it received into evidence more than 3,000 Rule 4 tabs or exhibits, and heard testimony 

 
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from 14 witnesses.  Both liability and quantum are before us.  We sustain ASBCA 
Nos. 57884 and 61361 in part and remand to the parties for calculations based on this 
decision, deny ASBCA Nos. 58666 and 59636 with respect to Supreme’s interest 
claim, otherwise we hold that they are moot, and deny ASBCA No. 59811.   
 
FINDINGS OF FACT  
 
 1.  These appeals arise from a commercial item contract to furnish and deliver 
food in Afghanistan (R4, tabs 1, 5).  DLA refers to this type of contract as “subsistence 
prime vendor,” or SPV.  SPV contracts use commercial infrastructure to support the 
food needs of military customers using electronic ordering.  (Tr. 6/57)   
 
Notable Events Prior to Award  
 
2.  On May 6, 2002, a DLA employee researching the feasibility of SPV for 
Afghanistan spoke with Stephen Orenstein, Supreme’s Managing Director and part 
owner (tr. 11/154, 12/59; R4 tab 376 at 1),1 to discuss Supreme’s capabilities.  The 
DLA employee summarized the conversation in an email and sent it to, among others, 
MAJ Joseph H. Alvarez, who forwarded it to Gary Shifton (R4, tab 376 at 1-2). 
   
3.  In 2002, Mr. Shifton was Integrated Supply Team Chief at Defense Supply 
Center Philadelphia2; he supervised the two contracting officers discussed in this 
opinion, Maryann DiMeo and Lourdes Valentin (tr. 6/54, 56).  MAJ Alvarez was a 
1984 graduate of the United States Military Academy at West Point (R4, tab 136).  He 
was Chief of the Food Service Business Unit for the European Region and had been a 
contracting officer (CO) since about 1996 (R4, tab 376 at 1; tr. 13/10, 79).   
 
4.  After the May 2002 interview of Mr. Orenstein, DLA considered whether 
and how to implement SPV in Afghanistan, including a sole source award to Supreme, 
as documented in a series of emails MAJ Alvarez sent or received (tr. 6/64; R4, 
tabs 128-29, 131-32, 385, 403).   
    
5.  By the latter part of 2003, pressure grew to award an Afghanistan contract 
(tr. 6/89, 91).  In October 2003, Department of Defense (DoD) officials visited 
Supreme’s Kabul facility and took photos that MAJ Alvarez forwarded to Mr. Shifton.  
One of the attendees of the site visit was LTC Fred Lyons, who worked in 
MAJ Alvarez’s office.  (R4, tab 129 at 1-2, tab 387; tr. 6/79-83)   
 
                                              
1 Rule 4 citations are to the page number of the .pdf file. 
2 Defense Supply Center Philadelphia later became Defense Logistics Agency Troop 
 Support (e.g., R4, tab 111).  We will refer to both as “DLA.”.   

 
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6.  The site visit drew unfavorable attention from DLA headquarters, which, 
among other things, had concerns about whether security protocols had been followed 
(tr. 6/84).  In a sharply worded December 1, 2003 email on which MAJ Alvarez was 
copied, a DLA headquarters official ordered all visits to Supreme to cease (R4, 
tab 387).  We find that this was an email that people likely would have remembered. 
 
7.  Just nine days later, MAJ Alvarez sent an email to Mr. Ralph Lohmann, 
Command Ethics Counselor, concerning his post-government employment plans, that 
stated in part: 
 
Ralph - Per our previous conversation, I wish to pursue 
post-government employment opportunities with Supreme 
Food Services in Moerfelden, Germany. At this time, my 
Business Unit has no dealings with Supreme Food Services 
or have we since I have been here. 
 
(R4, tab 391)  At the hearing, Mr. Alvarez testified both that he did not remember 
writing the email (tr. 13/17) and that it was accurate because “no dealings with 
Supreme” actually meant no “contractual dealings” with Supreme (tr. 13/109-10).  We 
find this testimony to be self-serving and not credible. 
 
8.  On December 15, 2003, Mr. Lohmann informed MAJ Alvarez “there is no 
barrier to your entering into discussions with [Supreme] concerning possible 
employment after your retirement from the Army” (R4, tab 391). 
 
 9.  Subsequent to the Lohmann emails, MAJ Alvarez continued to work with 
Mr. Shifton on the development of a prime vendor platform concept for Afghanistan 
(tr. 6/95).  As late as February 24, 2004, MAJ Alvarez received an email concerning 
the development of that platform (R4, tab 133 at 1). 
 
 10.  On March 5, 2004, Supreme hired Mr. Alvarez, who then informed DLA 
(R4, tab 696; app. supp. R4, tabs 851, 851A, 856).  
 
 11.  Despite nearly two years of effort, at the time MAJ Alvarez gave his notice 
DLA had made only limited progress in developing a solicitation.  On March 17, 2004, 
Mr. Shifton conducted a meeting of DLA officials seeking assistance in “attempting to 
define requirements” for a prime vendor solicitation.  MAJ Alvarez does not appear to 
have attended.  (R4, tab 416 at 11) 
 
12.  MAJ Alvarez left DLA and began transitioning from the Army to 
retirement on April 13, 2004, but did not formally retire until July 31, 2004 (R4, 
tabs 136, 407).  He went on Supreme’s payroll and began receiving compensation in 
late April 2004 (app. supp. R4 tab 1384; tr. 11/114).   

 
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 13.  By the end of his service, MAJ Alvarez had become disgruntled with the 
Army.  On May 21, 2004, he wrote to a DLA official: 
 
Glad to be out of the “green machine” – it drained my 
creativity and what intelligence that I had remaining in 
undamaged brain cells.  I am finally trying to add value 
and be a productive citizen. 
 
(R4, tab 278 at 2) 
 
14.  After MAJ Alvarez had left DLA, he still had access to his DLA email and 
used it to forward internal DLA documents to Supreme.  On April 22, 2004, 
MAJ Alvarez received an email from another DoD official that he forwarded to 
jalvarez@supreme-foodservice.com (R4, tab 698).  Attached to the email were reports 
showing what DLA’s customers in Afghanistan were ordering, including the quantities 
(tr. 6/110-11).  DLA did not share such information with contractors (tr. 6/110). 
 
 15.  On May 7, 2004, MAJ Alvarez forwarded from his DLA email to his 
Supreme email “Week 17 Reports” from Bahrain Maritime & Mercantile International 
(BMMI) DLA’s prime vendor for Bahrain and Kandahar Air Base in Afghanistan (R4, 
tab 701; tr. 6/113).  The reports included detailed information about what food items 
the base had ordered, the amounts billed by BMMI, and the entire catalog of items 
(and prices) that BMMI had in stock (tr. 6/113-17). 
 
 16.  As a prime vendor, BMMI was a competitor to Supreme (tr. 6/117).  DLA 
would not share such reports with a competitor of BMMI and if Supreme had asked 
DLA would have refused (tr. 6/118-19).  In the subsequent price evaluation for the 
SPV contract, DLA ranked Supreme as first on price, ahead of BMMI which was third 
(R4, tab 452 at 7, 26). 
 
17.  Mr. Alvarez testified that he could not remember forwarding these 
documents to his Supreme email address (tr. 13/56-62).  He also contended that these 
documents would not have been helpful in preparing Supreme’s proposal (id.).  We 
find this testimony to be self-serving and not credible. 
 
18.  During his testimony, Mr. Orenstein also disputed the usefulness of the 
documents Mr. Alvarez forwarded to his Supreme email (tr. 11/126-39).  For example, 
Mr. Orenstein acknowledged that it contained BMMI’s pricing but he contended, 
among other things, that because they did not break down the price into the various 
components, it would not have been useful (tr. 11/136-38). 
 

 
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19.  Because Mr. Alvarez had left DLA by the time he forwarded these 
documents to his Supreme address, we find that the most likely reason was to use in 
connection with Supreme’s proposal for the upcoming SPV contract, or perhaps other 
contracts. 
 
20.  DLA issued the solicitation for the SPV contract on September 3, 2004 
(R4, tab 1 at 2).  On November 16, 2004, Supreme submitted separate technical and 
price proposals (R4, tabs 644, 646).  The technical proposal stated that Mr.  Alvarez 
would be “General Manager of the Subsistence Prime Vendor Afghanistan program” 
(R4, tab 644 at 57).  The price proposal listed Mr. Alvarez as one of Supreme’s 
authorized negotiators (R4, tab 646 at 17).  Both the technical and price proposal were 
signed:  
 
Joseph H. Alvarez 
Major, United States Army (Ret.) 
Director, U.S. DOD Division  
 
(R4, tab 644 at 2, tab 646 at 2) 
 
 21.  DLA used separate teams to evaluate the technical and price proposals but 
no one on either team (or anyone else at DLA) questioned Mr. Alvarez’s participation 
(tr. 6/207-09).  DLA did not take issue with Mr. Alvarez’s involvement until 2015 
(finding 221).  DLA and Supreme by that point were involved in a titanic legal 
struggle involving billions of dollars and more than 40 appeals.   
 
The SPV Contract 
 
 22.  Upon award on June 3, 2005, the contract provided for a base period of 
18 months, followed by two 12-month options, and an 18-month option.  The 
estimated dollar value if DLA exercised all options was about $726 million with a 
maximum value of about $14 billion.  (R4, tab 5 at 1, 3)  Among other things, 
Supreme agreed to obtain non-perishable foods in the United States that would be 
shipped by the Defense Transportation System (DTS), as well as perishable foods 
obtained in countries closer to Afghanistan (tr. 1/14-15, 62; R4, tab 1 at 11, 14, 122).   
 
23.  The contract initially required Supreme to deliver the food by truck to four 
large bases:  Bagram, Kabul, Salerno, and Kandahar (R4, tab 1 at 71).  The “Host 
Nation” had the responsibility for moving the food to Forward Operating Bases 
(FOBs) (id. at 72).  The contract required successful completion of 97% of the orders 
(a 97% “fill rate”) (id. at 73).  Until acceptance of the delivery, Supreme bore all risk 
of loss of the cargo and vehicles, as well as the personal injury or death of its workers 
(R4, tab 5 at 6; tr. 1/30-31; R4, tab 3 at 13-14). 
 

 
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 24.  DLA paid Supreme based on a “Unit Price” that was the sum of two 
components:  a “Delivered Price” and a “Distribution Fee.”  The former was the 
invoice price for the supplier to deliver the food to Supreme’s facility, plus 
transportation costs if DTS could not be utilized.  The Distribution Fee contained all 
other costs, including general and administrative expenses, overhead, profit, 
packaging, and the cost of transport from Supreme’s Afghanistan facility to the four 
bases.  The Distribution Fee varied by product.  (R4, tab 5 at 2-3; tr. 1/16-20; app. 
supp. R4, tab 78 at 9-10)   
 
 25.  The contract contained various clauses, including FAR 52.212-4, 
CONTRACT TERMS AND CONDITIONS – COMMERCIAL ITEMS (OCT 2003); 
DFARS 252.243-7002, REQUESTS FOR EQUITABLE ADJUSTMENT (MAR 
1998); and FAR 243-4, CHANGES (AUG 1987) (R4, tab 1 at 251, 262-63).  
 
 26.  Because there is a dispute as to whether Supreme has proven that it made 
truck deliveries involving millions of dollars in fees, we highlight the following 
contract provisions concerning signatures.  The “Inspection and Acceptance” clause 
provided: 
 
The authorized receiving official at each delivery point is 
responsible for inspecting and accepting products as they 
are delivered. The invoice/delivery ticket shall not be 
signed prior to the inspection of each product, unless 
agreed upon by the receiving activity (customer).  All 
overages/shortages/returns are to be noted on the 
invoice/delivery ticket by the receiving official and truck 
driver.  A signature on the invoice/delivery ticket denotes 
acceptance of the product. 
 
(R4, tab 1 at 64) (emphasis added)  
 
 27.  The “Deliveries and Performance” clause of the contract provided: 
 
The Prime Vendor must maintain records and provide a 
signed copy of the delivery invoice per U.S. Government 
instructions. 
 
(R4, tab 1 at 67) (emphasis added)  
 
DLA Adds FOB Deliveries to the Contract 
 
 28.  The parties agreed that Supreme would delay the start of its performance as 
the prime vendor until December 2005 so that it would have time to ramp up while the 

 
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incumbent contractors phased down their inventories (app. supp. R4, tab 79; tr. 1/60-61).  
Supreme worked as a subcontractor to one of those contractors, PWC Logistics (PWC), 
during this interim period (tr. 1/68). 
 
 29.  The contract provided that DLA could add “land-based” delivery sites and 
would pay only the agreed upon Distribution Fees (R4, tab 1 at 71).  DLA could also 
require air transportation, for which DLA would reimburse the cost (id. at 19).  If ice 
or heavy duty cardboard boxes (tri-walls) were required for air shipment of 
perishables, DLA would not pay any additional fee (id. at 20).   
 
 30.  In 2005, delivery sites increased due to a deteriorating security situation 
and an increasing number of FOBs (R4, tab 1387 at 1).  Shortly after contract 
execution, DLA decided to abandon host nation delivery to the FOBs and assign this 
responsibility to Supreme (R4, tab 745 at 3; tr. 1/67, 10/129-30).  DLA had realized 
that dependence on host nation truckers to deliver food to American troops “was never 
a great concept . . .” (tr. 6/125-26).  The problem, according to Mr. Shifton, was that 
these contractors were “at best inconsistent and by inconsistent, they might not decide 
to work . . . .  They don’t have the right type of assets.  They don’t have the proper 
refrigerated vehicle or even a clean vehicle” (id.). 
 
31.  While the contract appeared to allow DLA to assign land-based FOB 
deliveries to Supreme and pay only the applicable Distribution Fee (finding 29), 
Supreme convinced the contracting officer that the increase in work and the degree of 
difficulty in delivering to the FOBs made it unreasonable to expect Supreme to deliver 
to these sites without additional compensation (R4, tab 1387 at 2).   
 
DLA Modifies the Contract 
 
32.  On August 26, 2005, the contracting officer issued a verbal change order 
directing Supreme to begin FOB deliveries (R4, tab 7 at 2).  Initially, Supreme 
supported 12 FOBs but the parties knew that more would be added (tr. 1/193-95).  The 
parties did not agree on anything other than that Supreme would begin making the 
deliveries.  All other aspects of the deal were left to negotiation. 
 
 33.  The parties began negotiating payment for delivery to the FOBs, which 
came to be known as Premium Outbound Transportation (POT), and which would be a 
separate charge from the Distribution Fees (tr. 1/203, 224).  On October 14, 2005, 
Mr. Alvarez emailed CO DiMeo a quote that included a price of $0.49 per pound for 
truck delivery to Mazar-i-Sharif.  Mr. Alvarez proposed start dates in November 2005 
while Supreme would still be working as a subcontractor to PWC.  (R4, tab 486 at 5-6; 
tr. 1/87-88)  The contracting officer requested more detail on Supreme’s costs on 
November 2, 2005 (R4, tab 486 at 3-4).  Michael Epp, Supreme’s Director, 

 
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Commercial Division, understood that the negotiation would be based on Supreme’s 
costs and began preparing a response (tr. 5/8, 71-72). 
 
34.  As Supreme directors, both Messrs. Epp and Alvarez reported directly to 
Mr. Orenstein (tr. 5/11, 10/27).  Although Messrs. Epp and Alvarez were the primary 
Supreme officials communicating with DLA, Mr. Orenstein and his partner, Michael 
Gans, were closely involved in the development of the rates and held final approval 
authority (tr. 5/74, 104, 10/128-29). 
  
 35.  In a November 12, 2005, internal email, Mr. Epp wrote to Mr. Alvarez, 
with a copy to Mr. Orenstein, concerning the proposed rates.  With respect to the truck 
rate of $0.49/pound net weight for Mazar-i-Sharif, Mr. Epp stated that additional sites 
could be added at this rate.  He listed Supreme’s costs, including a risk surcharge of 
25%, as $0.14 “per lb net weight.”  (R4, tab 492 at 1) 
  
36.  Mr. Epp suggested Supreme propose a rate of $2.60 per pound net weight 
for transport by an AN-26 (fixed wing) airplane (tr. 5/75).  He calculated Supreme’s 
cost based on a $2,200 rate per block hour (which includes aircraft, crew, 
maintenance, and insurance (id.)), 2.5 hours average flight time (defined as the time 
from engine on to engine off (tr. 5/76)), and 7,500 gross load at $0.75 per pound 
(tr. 5/76-77).  For reasons that are not clear, he calculated that this would result in a 
markup of 90% and allow for a $64,000 gross margin per week with one AN-26 (R4, 
tab 492 at 1). 
 
37.  Mr. Epp also suggested a rotary wing (helicopter) rate of $8.27 per pound.  
He estimated Supreme’s cost at $2.60 per pound, based on a rate of $3,500 per block 
hour, two hours average flight time, and 3,000 pounds gross load and which, according 
to his calculations, would result in a markup of 76% and a gross margin of $356,000 
per week.  (R4, tab 492 at 1) 
 
38.  On November 23, 2005, Supreme made an offer to DLA, this time through 
PWC, for whom it was still working as a subcontractor (app. supp. R4, tab 12 at 2; 
tr. 10/154-55).  Supreme proposed higher aviation prices than those suggested by 
Mr. Epp internally:  $2.73 per pound for fixed wing deliveries with a minimum weight 
of 5,000 pounds, $8.68 for helicopter deliveries with a minimum weight of 2,000 
pounds, as well as $0.49 for truck (app. supp. R4, tab 12 at 3-4).  Supreme built the 
proposal based on what it knew at the time, along with projections and assumptions 
(tr. 10/159).  At this time, Supreme had been making truck deliveries in Afghanistan 
on other contracts since February of 2002, although only two or three of the locations 
were outside of Kabul (tr. 10/156-57).  Supreme had made its first air delivery in 
November 2005, shortly before this proposal (tr. 10/157, 160).  
  

 
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Supreme’s Costs vs. Its Negotiating Position 
 
39.  On December 16, 2005, Mr. Epp wrote to Messrs. Orenstein and Alvarez, 
reporting actual data for December 12-15, 2005.  He reported that the actual cost for 
the AN-26 had been slightly higher than projected at $0.78 per pound instead of $0.75, 
while the Mi-8 helicopter had been lower at $2.22 instead of $2.60.  The average flight 
time for the AN-26 was 2.1 hours and 2.5 hours for the Mi-8.  (R4, tab 496 at 1-2) 
 
40.  On December 25, 2005, Mr. Alvarez provided DLA a more detailed 
breakdown of Supreme’s fixed wing and helicopter proposal (app. supp. R4, tab 16; 
R4, tab 201; tr. 10/162-63).  He stated that the proposal was based on the assumption 
that the AN-26 would fly 40 hours per month and the Mi-8 60 hours per month.  Using 
these assumptions, he stated that the proposed $2.73 per net pound for the AN-26 
resulted in an “actual cost” of $2.43, and, for the Mi-8 helicopter, the proposed rate of 
$8.68 per net pound was based on an “actual cost” of $7.68 per pound.  Mr. Alvarez 
also stated that the prices did not include risk of loss.  Mr. Alvarez stated that the 
average flight time for the AN-26 was 3.5 hours and 3.2 hours for the Mi-8.  (App. 
supp. R4, tab 16 at 1-2)    
 
41.  Mr. Epp testified that the information in Mr. Alvarez’s December 25, 2005, 
offer was “completely false” (tr. 5/87).  In fact, the costs represented by Mr. Alvarez 
were more than triple the actual costs he had received from Mr. Epp just nine days 
earlier (R4, tab 496 at 1-2).  Supreme had manipulated the data by, among other 
things, inflating the flight times for the AN-26 from 2.1 hours in the internal email on 
December 16 to 3.5 hours in the email to the contracting officer (tr. 5/81-87).  
Mr.  Epp explained that Supreme did this because “[t]here was a final price we wanted 
to achieve per pound.  And this was just to make it fit. . .” (tr. 5/82).   
 
 42.  Mr. Epp knew that “no one in [DLA] would have accepted a markup of 
70-80 percent as being fair and reasonable . . . .  So, we needed to submit against our 
knowledge false information in order to make them believe that this is reasonable.”  
(Tr. 5/87) 
 
43.  Mr. Orenstein testified that the December 25 offer contained “projections” 
and “assumptions” and that DLA should have known it did not contain actual costs 
because it used so many round numbers (tr. 10/163-66).  While the proposal included 
round numbers and it is true Supreme had only preliminary data at that point, we found 
the testimony of Mr. Epp to be more credible than Mr. Orenstein.  The internal 
Supreme emails cannot be reconciled with the communications to the contracting 
officer.  Even if one were to give Supreme the benefit of the doubt at this early stage, 
actual cost data would build in the following months but it did not result in 
corresponding reductions in Supreme’s proposal.  In any event, whether labeled as a 

 
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projection or not, it contained misleading and untruthful statements about profit 
margins, mission lengths, and other bases of costs.   
 
 44.  CO DiMeo met with Messrs. Alvarez and Epp on February 15, 2006 to 
discuss the proposed rates and asked them for copies of all leases or contracts for 
“planes, pilots, housing[,] etc.” to help her determine Supreme’s actual costs (R4, 
tab 899).  During the POT negotiations, she “repeatedly ask[ed] them for the same 
information.  And although they never expressed unwillingness to provide it to me, 
they just didn’t provide it to me.  I’m constantly expressing a need for cost data, and 
they’re saying okay.  But, then, it wouldn’t arrive.”  (Tr. 1/112)  
 
45.  Mr. Epp continued to work on building a more detailed cost submission.  
On February 25, 2006, Mr. Epp sent Mr. Alvarez and Mr. Orenstein an email with a 
spreadsheet providing “more details for each cost element” of the POT costs 
Mr. Alvarez had proposed in the December 25, 2005 proposal (R4, tab 901).  Mr. Epp 
testified credibly that the spreadsheet was an effort to create a document that would 
provide DLA some data to support the proposed costs without disclosing enough for 
DLA to realize that Supreme had inflated the flight times.  Thus, Mr. Epp testified: 
 
. . . I could use the fuel consumption . . . but I could not 
provide the whole set of data to DSCP because it would 
show that the average mission was not, let’s say, 
three-and-a-half hours; it was only like 2.1 hours. 
 
(Tr. 5/94-95)   
   
 46.  Mr. Epp also warned in his February 25, 2006 email that Supreme’s 
proposed trucking rate was not supportable: 
 
With regards of the trucking cost it appears difficult to 
justify the price of 0.49 USD per lb with cost. I tried my 
best to allocate as high as possible, but frankly, don’t feel 
comfortable . . . . 
 
(R4, tab 901) 
 
 47.  Mr. Orenstein questioned some of the proposed costs on March 3, 2006 and 
returned a modified spreadsheet to Mr. Epp, apparently in the belief that it was not 
sufficiently favorable to Supreme (R4, tab 905; tr. 5/105-06, 121-22).  Mr. Epp 
modified some of the numbers and sent it to CO DiMeo by email on March 15, 2006 
(copying Messrs. Alvarez and Orenstein).  The March 15 email and the attached 
spreadsheet repeatedly used the terms cost breakdown, cost overview, cost elements, 
and cost per hour and did not state that the numbers were mere estimates or 

 
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projections.  (R4, tab 911 at 1, 4-9)  The rates proposed by Supreme remained the 
same ($8.68 for rotary, $2.73 for fixed wing and $0.49 for truck) (id. at 4-8).  
 
48.  In the March 15, 2006 submission, Mr. Epp had taken numbers from the 
earlier spreadsheets that were “already inflated” and made them more so (tr. 5/124).  
For example, the spreadsheets list various costs for the AN-26 including fuel, crew, 
airport, and overhead costs.  In the February spreadsheet Mr. Epp had listed a subtotal 
for these elements of $32,300 per month.  (R4, tab 901 at 2)  In the March spreadsheet 
provided to CO DiMeo, he had inflated these same costs to $54,000 (R4, tab 911 at 4).  
Mr. Epp arrived at this amount by, among other things, alleging that the air crew 
would need six furnished rooms when he knew that the pilot stayed in one room and 
the remaining crew in another (id. at 5; tr. 5/122).     
 
49.  Also striking is the risk surcharge and profit in each spreadsheet.  In the 
internal February 25, 2006 spreadsheet, Mr. Epp suggested that Supreme represent to 
DLA that its “risk surcharge and profit” was 20% for the AN-26, 28% for the Mi-8, 
and 30% for the trucks (R4, tab 901 at 2, 4, 6).  In the March spreadsheet provided to 
Ms. DiMeo he reduced these numbers to:  12.97% for the AN-26; 16% for the Mi-8; 
and 11% for truck (R4, tab 911 at 1, 4, 6, 8).   
 
50.  By the time of the March 15, 2006 submission to CO DiMeo, Supreme had 
performed hundreds of flights so that it had data to cross-check any estimated and 
projected numbers (tr. 6/33).  
 
51.  Supreme emphasizes all of the risks that it faced in accepting the POT 
mission at fixed rates.  The Board acknowledges that Supreme faced risks, including 
that fuel prices would rise, currencies would fluctuate, and that the security situation in 
Afghanistan would deteriorate.  But that does not change our fact finding with respect 
to the accuracy or truthfulness of the representations Supreme made to DLA.   
 
The Pressure to Reach an Agreement Increases on Both Parties 
 
 52.  In a May 3, 2006 email to Mr. Epp, with copies to Messrs. Alvarez and 
Orenstein, CO DiMeo asked to see Supreme’s actual flight hours per month for each 
aircraft type and actual pounds delivered.  She also requested that Supreme certify that 
its “submitted costs are accurate and submitted in good faith.”  (R4, tab 926 at 1-2)   
 
53.  Mr. Epp is a German citizen not trained in U.S. law, but he had “a good 
idea of what it means” to certify costs (tr. 5/136).  He discussed it with Mr. Alvarez, 
the former contracting officer, who explained “that you have to write down that this is 
all true and in good faith and, also, that there is a legal consequence of that . . .” (id.).   
 

 
12 
54.  Mr. Epp was reluctant to certify because he knew that Supreme had not 
submitted its true costs.  However, he felt “enormous pressure” because Supreme had 
been providing POT for months without payment.  He discussed it with 
Messrs. Orenstein and Alvarez, both of whom balked at certifying the costs because 
they were American citizens and “they also knew that it’s not true.  The person who 
signs it is lying.”  (Tr. 5/137-38)   
 
55.  Mr. Epp agreed to certify the costs, using the Contract Disputes Act 
(CDA), 41 U.S.C. § 7101-7109 claim certification language in 41 U.S.C. § 7103(b)(1) 
and FAR 33.207.  He placed the language at the end of an unsigned email to the 
contracting officer on May 10, 2006 (with copies to Messrs. Alvarez and Orenstein) 
(R4, tab 926 at 1).  As summarized by Mr. Epp, “we needed to appoint someone who 
is lying, and that was me” (tr. 5/138).   
 
56.  Neither party treated the communication as an actual claim made under the 
CDA.  We find, based on the Mr. Epp testimony and the language of the subsequent 
written modification, that Supreme understood that it was submitting a request for 
equitable adjustment (REA).  We also find that, despite the lack of an actual signature, 
the “certification” had the desired effect because CO DiMeo relied on it (tr. 1/115) and 
“believed that they were giving me real costs” (tr. 2/157).  
 
57.  To his credit, Mr. Orenstein testified that he remembered discussing the 
certification with Messrs. Epp and Alvarez and that Mr. Alvarez explained the 
certification to them (tr. 10/257-58).  However, he also testified that he thought the 
only thing Mr. Epp was certifying was the pounds delivered (tr. 10/258).  That is 
clearly not what the certification states and the Board finds that no reasonable business 
person would have drawn such a conclusion.  The Board finds credible Mr. Epp’s 
testimony that Mr. Alvarez explained claim certifications to them.  Further, the Board 
finds the testimony of Mr. Alvarez, who stated that he did not remember speaking with 
Messrs. Epp and Orenstein about the certification,3 to be incredible.       
 
 58.  On May 14, 2006, Supreme reduced its proposed rates to $8.35/rotary, 
$2.65/fixed wing, and $0.48 truck, still on a net weight basis.  These rates included 
purported profits of 12% on rotary, 10% on fixed wing, and 9% on trucks.  (R4, 
tab 926 at 7-9, tab 928; app. supp R4, tab 29A at 1; app. supp. R4, tab 1058F at 9)  In 
                                              
3 Mr. Alvarez testified as such on direct (tr. 13/67-69).  DLA’s counsel asked him 
about it in on cross-examination but it quickly bogged down when Mr. Alvarez 
acted baffled by the term “request for equitable adjustment” (tr. 13/153-56).  
Given that Mr. Alvarez spent about 15 years as a contracting officer or as a 
senior contracting official with Supreme (see tr. 13/74, 79), the Board found 
this to be a particularly unconvincing performance.  

 
13 
reality, as of June 2006, Supreme was earning 70-80% profit on aviation POT, and 
even more than that on trucking (tr. 5/146). 
 
 59.  On July 12, 2006, Mr. Epp represented to CO DiMeo that Supreme’s POT 
costs including tri-walls had exceeded $33.5 million.  He pressed her for a resolution, 
citing the deteriorating state of Supreme’s financial condition.  He once again 
submitted an unsigned certification with the updated proposal.  (R4, tab 1417 at 1; 
tr. 5/147-48)  CO DiMeo felt that he was trying to “blackmail” her (tr. 1/123). 
 
 60.  On July 26, 2006, Mr. Orenstein ratcheted up the pressure on DLA, stating 
in an email to CO DiMeo and Mr. Shifton that Supreme would begin reducing 
payments to suppliers (R4, tab 1418).  In an August 1, 2006 email to Mr. Shifton, he 
offered to send a team of people to DLA “with all documents so that they can be 
audited at your earliest convenience” (app. supp. R4, tab 34 at 1). 
 
 61.  By this point, the number of FOB sites to which Supreme delivered had 
grown to 68 (R4, tab 7 at 2).  Supreme’s threat to withhold payments to its 
subcontractors had the desired effect.  DLA officials envisioned a scenario where the 
suppliers cut off Supreme and (one might infer) that they would be personally 
responsible for the disappearance of quality food to American forces (see tr. 1/127-29).  
DLA blinked.  As CO DiMeo testified, the message from her entire chain of command 
was “basically ‘DiMeo, fix this, get them paid, get them the money they need.’”  
(Tr. 1/128)   
 
Modification Nos. P00010 and P00012 
 
62.  On August 2, 2006, the parties executed bilateral Modification No. P00010, 
which, “subject to final verification,” definitized pricing for deliveries from December 
2005 to June 2006 (R4, tab 7 at 1-2).  The modification stated that the rates proposed 
by Supreme ($0.48/ground, $2.65/fixed wing, and $8.35/ rotary) were acceptable for 
purposes of “this equitable adjustment until verification is completed” (id. at 2-3).  It 
further provided “[t]his modification begins the process for good faith reimbursement 
of the proposed $33.5 million equitable adjustment which Supreme has requested” for 
the December 2005 to June 2006 period (id. at 3).  Later modifications referred to the 
Modification No. P00010 rates as the “tentative agreed rates” (R4, tabs 9, 14).   
 
63.  While Modification No. P00010 contained more specifics than the oral 
modification the previous year, it failed to specify a profit rate to which Supreme 
would be entitled, or whether Supreme could charge a minimum weight for deliveries.  
At the hearing, CO DiMeo explained the gaps in the modification by stating that in her 
view it was “an interim agreement in response to . . . blackmail” (tr. 2/79).   
 

 
14 
64.  The modification also did not state whether Supreme would bill DLA based 
on gross weights, which is important for aviation purposes, or net weights, which 
removes, for example, packing materials.  The Board finds, however, that there is no 
dispute on this issue.  Supreme agrees that the truck deliveries under the original 
contract were based on net weights and that Supreme proposed POT fees using net 
weights.  (Tr. 18/181-84; app. br. at 62)  Supreme contends that the deal was for it to 
bill DLA using the net weight but that it would also receive a guaranteed minimum 
weight (app. br. at 62). 
 
65.  At approximately this time, DLA asked the Defense Contract Audit 
Agency (DCAA) to conduct an audit of Supreme’s proposed POT costs.  DCAA 
advised Supreme on September 23, 2006, that “[f]or us to be able to issue an opinion 
on the reasonableness of your proposal, we must be able to verify actual costs” (R4, 
tab 967 at 10).   
 
66.  Supreme did not express any objection to DCAA verification of actual 
costs and on October 10, 2006, the parties entered into bilateral Modification 
No. P00012.  The modification provided that Supreme would be reimbursed at 75% of 
the Modification No. P00010 rates until “the DCAA audit” had been completed, at 
which time additional adjustments could be made4.  (R4, tab 9)   
 
67.  Mr. Alvarez executed Modification No. P00012 for Supreme (R4, tab 9).  
The Board finds that, as a former DLA contracting officer, Mr. Alvarez would have 
known, at least in general terms, what an audit entailed.  Even Mr. Epp, who had no 
previous exposure to U.S. government contracts, understood that DCAA would 
examine Supreme’s actual costs (tr. 5/154-55, 206).   
 
68.  During the first years of contract performance, Supreme never objected to 
undergoing a DCAA audit (tr. 1/144).  In fact, during the course of the contract 
Supreme participated in eight DCAA audits, six of which pertained to issues other than 
POT (tr. 2/192-93).  
 
 69.  Mr. Orenstein testified that he believed DCAA would only verify and 
validate Supreme’s cost model, which was built on some actual costs, along with 
predictions, assumptions, and estimates.  When asked by his attorney if he understood 
that DCAA would be auditing Supreme’s actual incurred costs and that Supreme 
would only be able to recover its “allowable costs,” Mr. Orenstein replied “absolutely 
                                              
4 In November 2007, bilateral Modification No. P00043 added a second rotary rate of 
$8.05 if the government provided fuel.  In August 2010, bilateral Modification 
No. P00076 changed the reimbursement rates to $4.05/3.75 per pound for rotary 
wing; $1.41/pound for fixed wing and $0.30/pound for truck deliveries.  (R4, 
tabs 14, 19)    

 
15 
not.”  (Tr. 10/209-10)  The Board finds this testimony dubious, at best.  As the head of 
a company performing a multi-billion contract, Mr. Orenstein knew, or should have 
taken the time to learn, what DCAA does when it conducts an audit, particularly 
before he offered to bring all the documents to DLA to be audited (finding 60). 
 
 70.  The Board further finds that, even if DCAA had conducted an 
unconventional audit, it would not have been helpful to Supreme.  If DCAA had 
reviewed Supreme’s internal estimates and assumptions discussed above, it would 
have discovered the disparity between the internal numbers and those Supreme 
provided to DLA. 
 
 71.  On October 20, 2006, CO DiMeo reported to Supreme that DCAA had 
returned Supreme’s proposal as inadequate for audit (R4, tab 976 at 10).  This 
prompted an email from Mr. Epp to Mr. Alvarez in which he expressed doubt about 
what Supreme could prove.  He stated:  “[i]t turns out that we should retroactively 
justify the rates by showing them our real cost in all details which we can’t or if we try 
to do won’t match with the rates.”  (R4, tab 976 at 1) 
 
 72.  In an email to Mr. Alvarez on January 25, 2007, Mr. Epp stated that he had 
analyzed the road transportation costs to FOBs for the December 2005 to October 
2006 time period, and had determined that revenue was far beyond costs.  Among 
other things, he calculated that the average cost per trip was $1,051 but average 
revenue was $7,087.  He also observed that the number of trips for which Supreme had 
charged DLA was higher than the number of trips for which Supreme had invoices.  
(R4, tab 547 at 2)    
 
 73.  After a DCAA auditor requested a meeting with Supreme, Mr. Epp emailed 
updated figures to Mr. Alvarez on February 1, 2007, that highlighted the difference 
between Supreme’s “real cost so far” and what it had charged DLA (tr. 5/162).  He 
stated that road revenue through October 2006 had been $25.7 million but that 
Supreme’s direct costs had been only $3.8 million.  He also stated that there were 
1,523 road trips for which Supreme had invoiced DLA for which he could not find 
documentation, which meant that $7.3 million might need to be reimbursed to DLA on 
just this discrete issue.  (R4, tab 552 at 1-2)  Indeed, Mr. Epp understood that Supreme 
had charged DLA $7.3 million for deliveries to FOBs that it had not made (tr. 5/164). 
 
74.  For air transport, Mr. Epp stated that revenue was $24.5 million and direct 
costs were $8.5 million.  Referring to the difference between costs and revenue as the 
“gap,” Mr. Epp stated that he expected the total gap for 2006 to be about $40 million.  
(R4, tab 552 at 2)   
 

 
16 
Mr. Epp and CO DiMeo Depart/CO Valentin Arrives 
 
75.  Mr. Orenstein terminated Mr. Epp’s employment with Supreme on 
March 7, 2007.  The reason for the termination is disputed, but Mr. Epp testified that 
he believed it was because he sent emails to various Supreme employees raising 
concerns about the amounts Supreme was charging DLA for POT, which caused 
Mr. Orenstein to become “very angry” with him.  (Tr. 5/165-67)   
 
76.  But Mr. Epp did not go away quietly.  He had been keeping a secret archive 
of more than 50,000 documents on a home computer that he backed up “every second 
day” (tr. 6/49-50).  He eventually turned these documents over to the Defense 
Criminal Investigation Service and the Department of Justice (DOJ) and came to the 
United States voluntarily for 12 days of interviews by government investigators 
(tr. 6/44-45; app. supp. R4 tabs 1130, 1130E at 2, 1191, 1191A, 1423).5  We will 
describe the ensuing criminal and False Claims Act litigation below. 
 
 77.  CO DiMeo ceased working on the contract in November 2007 (tr. 1/166).  
Lourdes Valentin became the contract specialist in December 2007.  She received her 
warrant and became CO in March 2008.  (Tr. 2/182-83)   
 
 78.  While, as noted, Modification No. P00010 did not specify whether DLA 
would pay Supreme for minimum billable weights, CO DiMeo had agreed to pay 
minimum weights, including 2,000 pounds for helicopters (R4, tab 112 at 22-23).  
Supreme calculated a net weight of the delivery and then if the net weight was below 
the minimum, it charged DLA the higher number (ex. A-18). 
  
79.  The actual weight of some deliveries was below the minimum during this 
time but DLA did not know whether it was due to the small size of the orders or 
whether the helicopter/airplane/truck was reaching its volumetric capacity before it 
reached the minimum weight (R4, tab 1387 at 4, 16).  
  
 80.  During the first years of the contract, Supreme’s inefficiency appears to 
have resulted in the inefficient use of its aircraft and thus increased the aviation costs.  
Mr. Charles Szar, who became Supreme’s Aviation Operations Controller in 
May 2008 (tr. 14/9), testified that when he started, Supreme employees were treating 
the SPV contract as if Supreme were being paid per hour rather than per pound.  He 
testified that “the guys when I first got there were high fiving each other for exceeding, 
you know, 100 flights [per day.]  [T]hat wasn’t doing us any good because we weren’t 
                                              
5 DLA has objected to app. supp. R4, tab 1423 as protected by the attorney-client and 
work product privileges.  We need not resolve the objection because we cite it 
for the limited purpose of establishing that the Epp debriefings had occurred by 
June 2010. 

 
17 
getting paid on a per-hour basis . . . .”  (Tr. 14/30-31)  He testified that he eventually 
instituted reforms that emphasized moving as much weight as possible per flight 
(tr. 14/31-37).    
 
81.  In August 2008, CO Valentin decided that DLA would pay only for actual 
weights (R4, tab 1387 at 4, 16).  This would be the first of several steps she took to 
extricate DLA from what she clearly came to view as a bad deal.   
 
The Audits 
 
 82.  DCAA issued a report on December 19, 2008, stating that the 
documentation submitted by Supreme was not adequate to support its proposal (R4, 
tab 30 at 1-2).  Among other things, DCAA recommended that Supreme refund most 
of the Distribution Fees it had been paid for the FOBs (id. at 2, 11-13).  CO Valentin 
was not satisfied with the thoroughness of the report (tr. 2/208).  The auditors who 
performed this audit did not testify at the hearing and most of the testimony concerned 
the second audit discussed below.   
 
 83.  At a meeting with DLA in October 2009, Supreme for the first time took 
the position that POT rates should not be established by an audit of its costs but rather 
a price analysis using benchmark data from other contracts as well as consideration of 
the risk of performing POT (app. supp. R4, tab 63 at 1-2; tr. 2/233-35). 
 
84.  After Supreme submitted a revised proposal on October 15, 2010 (R4, 
tabs 52-55), DCAA performed a second audit.  DCAA followed FAR Part 31, 
CONTRACT COST PRINCIPLES AND PROCEDURES, per its usual practice when 
auditing both fixed price and cost reimbursement contracts (tr. 7/109, 17/75).  By the 
time of the second audit, Supreme was delivering to 239 FOB sites (R4, tab 102 at 13). 
 
85.  DCAA issued its second audit report on August 29, 2011, covering the 
period from November 2005 through August 2010, which consisted of more than 
$702 million in claimed costs (tr. 7/120-21; R4, tab 102 at 4).  The second audit was 
much more thorough than the first, examining almost 10 times the number of 
transactions (tr. 17/77).   
 
 86.  A brief history of Supreme at this juncture will provide some context.  
Supreme was established by Mr. Orenstein’s father, who served in the U.S. Navy 
during World War II.  He eventually settled in Germany before he opened Supreme.  
Mr. Stephen Orenstein began working at the company in 1985 at which point the 
business seems to have been of a fairly modest scale.6  (Tr. 10/14-15)  As recently as 
                                              
6 In case any part of this opinion causes the reader to wonder about Mr. Orenstein’s 
command of English, we observe that he attended high school and college in 

 
18 
1996, the company employed only six workers (tr. 10/17).  The business then began to 
grow but in 2004 it still had only 300 employees (tr. 10/17-20, 25).  After Supreme 
was awarded the SPV contract in 2005, it grew to 10,000 direct employees plus 
another 20,000 closely managed security personnel and truck drivers (tr. 10/25).  The 
results of the second DCAA audit suggest that Supreme’s capacity to maintain orderly 
records did not keep pace with the rapid growth of the business.       
 
 87.  Mr. Mark Davis was the DCAA co-lead auditor (tr. 7/87-88).  He has been 
an auditor at DCAA since 2005 and is currently a resident auditor at a major defense 
contractor (tr. 7/90-93).  When asked during direct examination if Supreme’s records 
were “in accordance with any sort of general business standard of accounting?” he 
replied “absolutely not” (tr. 7/113).  He went on to describe problems that were 
“unprecedented” in his experience for a company of this size (tr. 7/114-17, 127-28, 
145-47, 151, 154, 173-76). 
 
 88.  The problems with Supreme’s records cannot be attributed to a lack of 
resources.  In 2007, Supreme acquired Microsoft Dynamics, a sophisticated accounting 
program that gave Supreme the capability of recording expenses directly into its general 
ledger, which is what most companies do (tr. 7/114-15).  Supreme, instead, would post 
a single lump sum amount in the accounting ledger and record the individual expenses 
in Microsoft Excel workbooks.  The employees who recorded the data did so 
inconsistently and without controls to ensure accuracy, resulting in significant 
differences between the workbooks and the accounting system.  (Tr. 7/114-119)   
 
89.  To Mr. Davis, this demonstrated that, “they were not performing any kind of 
control to ensure that the . . . accounting ledger was actually based off of these recorded 
expenses in their Excel documents” (tr. 7/115-16, 118-19).  He concluded that, when 
combined with other problems DCAA discovered, it demonstrated “at every level that 
Supreme lacked proper accounting controls to ensure amounts were accurately 
recorded, accurately tracked, and that they were properly supported” (tr. 7/118). 
 
 90.  The major parts of Supreme’s proposal DCAA audited were:  
 
Rotary wing lease costs $266,386,561 
Truck costs    $166,840,769 
Fixed wing lease costs    $74,648,395 
Rotary fuel      $37,871,149 
Fixed wing fuel     $30,044,715 
Allocated overhead     $23,384,051   
 
                                              
the United States (tr. 10/14).  During his three days of testimony, he spoke 
nearly flawless English with a slight German accent. 

 
19 
DCAA did not audit other overhead and parking fees totaling $100,163,286.  (R4, 
tab 102 at 23, 27; tr. 7/121-22)  
 
 A. DCAA’s Rotary and Fixed Wing Findings  
 
91.  While DCAA spent over 3,400 hours on the audit, it could not audit every 
delivery (tr. 7/122).  There were more than 37,000 rotary wing trips alone during the 
audit period (tr. 7/140; R4, tab 102 at 33).  Thus, DCAA selected samples of each 
mode, including 145 rotary wing and 145 fixed wing flights, the results of which it 
then projected to the full number of deliveries (R4, tab 102 at 33, 49; tr. 7/141-43).   
 
1. Rotary and Fixed Wing Lease Costs 
 
92.  Supreme calculated its costs based on lease and fuel costs.  It calculated the 
lease cost by multiplying the block hours (engine on to engine off) by the lease rate 
with its vendor.  It calculated the fuel cost by multiplying the fuel burned by the rate 
charged by Supreme Fuels, a related division.  (R4, tab 102 at 35-36, 51-52) 
 
93.  Supreme did not keep any copies of the flight plans it filed with Afghan 
authorities (tr. 7/235; 9/79).  As explained by DCAA, Supreme calculated its costs 
using its own internal flight records from November 2005 to August 2010 (tr. 7/174-76; 
R4, tab 102 at 38, 42-43, 51).   
 
94.  DCAA was able to confirm that Supreme had paid the invoices for the 
290 rotary and fixed wing flights it examined (R4, tab 102 at 37, 53).  However, as 
Mr. Davis explained at the hearing, payment was not by itself conclusive proof that the 
costs were appropriate because it did not prove that the payment was in the correct 
amount and was made for a flight on the SPV contract.  Nor did it guard against 
employee misconduct, for example, an employee who makes a deal with the 
subcontractor to include unauthorized charges in the invoice.  He explained, “[y]ou 
need the contract to see what you should have paid them.  You need the invoice to see 
what services were performed.  You need the flight record to see if the flight was 
actually made.”  (Tr. 7/203; tr. 8/10, 73) 
 
95.  DCAA first sought to compare the lease rates in the subcontracts with the 
invoices and Supreme’s proposal to DLA.  But Supreme could not produce the 
subcontract for nearly half (68) of the rotary flights.  In addition, for 24 flights in the 
sample, DCAA found discrepancies between the subcontract rate, the invoice, and/or 
the amount sought from DLA.  (R4, tab 102 at 40-41)   
 
96.  Second, DCAA compared the lease hours in Supreme’s proposal with the 
hours recorded by the pilots in the flight records.  DCAA learned that in 2010 Supreme 
had terminated its rotary wing subcontractor for overstating flight hours.  DCAA asked 

 
20 
Supreme for documents quantifying the overstatement, but Supreme alleged that it had 
none.  DCAA also asked Supreme for documentation as to how it monitored and 
supervised pilots so that they did not overstate hours, but Supreme stated that it had 
none.  (Tr. 7/179-81; R4, tab 102 at 42) 
 
97.  Another issue identified by DCAA concerned the pilots’ use of standards 
for the flight time and fuel burn recorded, which were preprinted on some of the flight 
records (tr. 7/157-59; R4, tab 643 at working paper I-06b).  DCAA noticed that the 
recorded flight times and fuel burns were the same or very similar to the standards in 
one-third or more of the flights (R4, tab 102 at 42, 47).  For example, on flights from 
Bastion to Delaram on August 13 and 17, 2010, the Supreme helicopter carried a load 
of 2,932 pounds on one day and 4,279 on the other, but the flight record represented 
that each flight had burned exactly 750 liters of fuel and had taken exactly 1.43 hours 
(tr. 7/165; R4, tab 642 at working paper 09a-2).7  As Mr. Davis testified, this leads to 
the following questions:  “did they really make the trip, did they truly monitor it[?]” 
(tr. 7/166).   
 
98.  DCAA asked Supreme for information as to how it developed, 
implemented and monitored use of the standards to ensure that the flight times and fuel 
quantities were reasonable, but Supreme said it had none (R4, tab 102 at 42).  Supreme 
also told DCAA that it had subsequently eliminated the preprinted standards “because 
it could encourage a lazy pilot to incorrectly record their hours” (id.).  
 
99.  Due to concerns over the accuracy of Supreme’s records, DCAA requested 
a technical analysis of flight times and fuel burns (R4, tab 102 at 42).  Three subject 
matter experts, two of whom were pilots or former pilots in the Air Force, and a DLA 
contract price/cost analyst issued a report opining that Supreme had overstated rotary 
flight times by 12.64% and fixed wing by 38.96% (R4, tab 101 at 2).  They also 
concluded that Supreme’s claimed fuel quantities were reasonable if matched to the 
correct flight time (id.).   
 
100.  Only one of the three report authors testified at the hearing.  Mr. Donald Anderson 
(who had performed the fixed wing analysis for the technical report) testified for DLA as “an 
expert in military and commercial transportation logistics in the CENTCOM area of 
responsibility.”  (Tr. 9/28-29)  
 
101.  Complicating matters somewhat, on cross-examination Mr. Anderson 
admitted that at his deposition in 2014 he had “disavowed” his 2011 technical analysis, 
albeit not his overall conclusions (tr. 9/139).  He explained that he had disavowed the 
                                              
7 The path in tab 642 to the cited documents is:  tab 642 → working paper 09a-2 → 
click on email entitled “RE:  Accepted Block Hours and Accepted Fuel Usage” 
→ open the first two .pdf attachments.   

 
21 
analysis because it was based upon Supreme’s flight records which he had since found 
to be unreliable and he stuck by his overall conclusion that the flight times were 
overstated (tr. 9/139, 217-18).   
 
102.  Based on the 2011 technical analysis, DCAA decreased flight times that 
the technical analysis had found to be overstated.  For flights in the sample that the 
technical analysts did not review, DCAA decremented the flights by 18 minutes for 
rotary flights and almost 84 minutes for fixed wing, which were the average number of 
minutes for each mode questioned in that analysis.  (R4, tab 102 at 42-43, 57-58)  
 
103.  As a result of the various issues that it had identified, DCAA questioned 
$203,280,182 in fixed wing and rotary lease costs (R4, tab 102 at 27). 
 
2. Rotary and Fixed Wing Fuel Costs 
 
104.  DCAA attempted to verify the cost of fuel Supreme had obtained from its 
related division, Supreme Fuels.  However, Supreme failed to provide DCAA 
sufficient access to its records for DCAA to confirm the price per liter.  As described 
by Mr. Davis, over a four-month period Supreme alternately refused to provide 
information and then changed course and agreed to provide it, only to renege.  (R4, 
tab 102 at 45-46; tr. 7/145-51)  At a couple of points, Supreme furnished DCAA some 
information.  In the first instance, the Excel workbooks provided did not reconcile to 
Supreme’s accounting records in Microsoft Dynamics, an unusual result for a 
company using advanced accounting software (tr. 7/147-48; R4, tab 102 at 45).   
 
105.  In the second instance, the data did not reconcile to the portions of 
Supreme’s financial statements it made available without manual adjustments in the 
millions of dollars.  DCAA asked Supreme for its complete financial statements 
(balance sheet and notes to the statement) but it refused (R4, tab 102 at 45-46; 
tr.  7/149).  Mr. Davis found this denial of access to be unusual, but as he observed, 
such access would have revealed fuel quantity data and “[w]e would have been able to 
likely determine how many flights they had actually made or how much fuel was 
actually burned and used.  There was something that they simply didn’t want us to see 
there.”  (Tr. 7/150)   
 
106.  DCAA issued two formal “denial of access to records” letters, the only 
times Mr. Davis had issued such letters in his 14 years with DCAA (tr. 7/90, 151; R4, 
tab 102 at 46).  DCAA questioned the fuel sales data for the 2005 – 2009 time period 
in its entirety, or $67,915,864 (R4, tab 102 at 27).  Because Supreme combined fuel 
and lease costs in 2010, DCAA could not identify fuel costs for that year and, 
therefore, could not identify questioned costs for that year (id. at 32, 35, 48, 51, 60).  
 

 
22 
107.  In its brief, Supreme contends that FAR 31.205-26(e), Material Costs, 
permits the transfer of fuel between divisions of a corporation at price, and that it had 
done so (app. br. at 49-50).  Mark Davis agreed in his testimony that this is permissible 
if it is the accepted practice in the organization to do so, but when DCAA asked for 
evidence of the practice, Supreme failed to provide sufficient documentation.  Moreover, 
he testified credibly that even if Supreme had provided the information, DCAA still 
would have tested the data by, among other things, examining vendor invoices, which 
Supreme had not provided. (Tr. 8/45-47; tr. 17/87; R4, tab 102 at 45-46)   
 
108.  On a separate but related issue, Supreme had included vehicle and 
generator fuel totaling $17,951,585 in the allocated overhead costs audited by DCAA 
(R4, tab 102 at 74; see finding 90).  DCAA questioned this amount in its entirety based 
on Supreme’s denial of access to the fuel records (R4, tab 102 at 79).  
 
 B.  DCAA’s Truck Findings 
 
 109.  As with the rotary and fixed wing aircraft, DCAA initially selected for audit 
145 out of the more than 50,000 truck trips.  Because the sample found a number of high 
dollar value items, DCAA performed the audit on 145 randomly selected trips, plus 145 
high dollar value trips.  (Tr. 8/100-01, 103; R4, tab 102 at 64)  Mr. Russell Chiles was 
the auditor primarily responsible for the truck costs (tr. 8/83-84). 
 
 110.  DCAA found problems that were similar to those found during the rotary 
and fixed wing audit.  Supreme subcontracted the truck deliveries in their entirety, or 
nearly so (tr. 8/92).  Yet, it could not produce any subcontracts or invoices from the 
subcontractors for 2005, 2006, or 2007 (tr. 8/92-93, 97; app. supp. R4, tab 511).   
 
111.  As described above, the SPV contract required Supreme to obtain a signed 
invoice or delivery ticket when it made a delivery and produce it on DLA’s request 
(findings 26-27; see, e.g., app. supp. R4, tab 439).  Supreme submitted as proof of 
delivery to DCAA what it referred to as a signed “manifest.”  But it was unable to 
produce a signed manifest for 78 of the 290 transactions audited.  (R4, tab 102 at 70, 
73; tr. 8/95; tr. 15/110)  DCAA found other instances where Supreme charged DLA 
for a 40-foot truck but had actually used a cheaper 20-footer (R4, tab 102 at 68). 
 
 112.  Based on the results of its audit of the samples, DCAA questioned 
$77,537,970 of the truck costs for the 2005 – 2010 period (R4, tab 102 at 23).  The 
vast majority of these costs related to two items.  First, the lack of a truck manifest 
represented more than 40% of the questioned road costs in both the randomly selected 
and high dollar samples (id. at 67, 71).   
 
113.  Second, DCAA applied a decrement of 20.17% based upon an alleged 
failure by Supreme to conduct a price analysis of subcontractors (R4, tab 102 at 68, 

 
23 
73).  The subcontractor selected by Supreme had been the third low bidder.  Supreme 
represented to DCAA that it had not selected the low bidder because it did not have 
enough trucks for work it was already performing for Supreme and because it had not 
performed well.  Supreme also represented that it did not select the second low bidder 
because that company was working on a Supreme contract with the United Kingdom 
and Supreme did not want to risk giving it too much work.  (R4, tab 102 at 68)   
 
114.  DCAA did not accept Supreme’s explanation and calculated the 20.17% 
decrement based on the difference between the selected subcontractor and the lowest 
priced subcontractor (R4, tab 102 at 68).   
 
C. Second Audit Summary 
 
115.  DCAA examined $602,583,118 in claimed costs.  It questioned 
$375,697,758.  (R4, tab 102 at 19) 
 
Maximum Rates Based on the Costs Supreme Submitted to DCAA 
 
 116.  DCAA’s report identifies the actual pounds claimed by Supreme at that 
time (R4, tab 102 at 19).  The pounds and costs submitted by Supreme to DCAA can 
be used to calculate maximum potential rates if the pounds are accepted and none of 
the costs questioned by DCAA are removed from the calculation.  The numbers are 
striking because, even if none of the costs submitted to DCAA were questioned, 
Supreme still falls far short of supporting the Modification No P00010 rates: 
 
 PROPOSED 
COSTS 
POUNDS MAX. RATE 
(Costs ÷ Weight) 
(w/o profit) 
ORIGINAL RATES 
(Modification No. P00010) 
Rotary $325,185,434 88,748,398 $3.66 
($3.36 w/ fuel) 
$8.35 
Fixed 
Wing 
 
$125,846,398 95,219,631 $1.32 $2.65 
Truck $251,714,574 788,351,559 $0.32 $0.48 
 
(R4, tab 102 at 19; finding 62)  Thus, Supreme would receive a profit of more than 
100% for rotary and fixed wing if it were paid using the Modification No. P00010 
rates (as well as a road profit of 50%).   
 
 117.  If the contracting officer had removed all of the costs questioned by 
DCAA, the final rotary and fixed wing rates would, of course, have been much less 
than the above theoretical maximums.  But she made significant adjustments to 
DCAA’s findings.    

 
24 
 
The Contracting Officer Unilaterally Sets Final POT Rates 
 
118.  As of September 30, 2011, DLA had paid Supreme $1,383,807,545 in 
POT charges and more than $5.5 billion for the entire contract.  On December 9, 2011, 
CO Valentin issued a contracting officer’s final decision (COFD I) finalizing POT 
rates in accordance with the analysis set forth in a price negotiation memorandum 
(PNM).  (R4, tabs 111, 1233)   
 
119.  After receiving the 2011 audit report, CO Valentin worked with her 
colleagues at DLA for over three months to finalize the rates (tr. 3/44-45; R4, 
tab 1233).  Their analysis is documented, in part, in the PNM and also in other 
documents collected in Rule 4, tab 1233, including a 69-page Revised Addendum to 
the Pre-Negotiation Briefing Memorandum (RAPNBM).  CO Valentin accepted 
DCAA’s conclusions with respect to flight hours and worked out a method to 
compensate Supreme for some of the claimed fuel costs.  She departed from DCAA 
substantially on the number of proven flights.  (R4, tab 1233 at RAPNBM)   
 
Aviation Hours 
 
 120.  CO Valentin incorporated the reductions in flight times from the technical 
analysis and audit without change (tr. 3/35; 4/57-58).  The Board finds that the record 
strongly supports her decision. 
 
 121.  DLA’s expert, Donald Anderson, testified credibly concerning the poor 
quality of Supreme’s flight records, calling it “the worst data I’ve ever worked with in 
the logistics community” (tr. 9/32).  Supreme’s records were replete with instances 
where it failed to enter flight dates, or created confusion by switching back and forth 
from mm/dd/yyyy to dd/mm/yyyy formats; contained unpredictable changes in the 
method of recording flight times so that, for example, a 90-minute flight could be 
recorded as 1:30 or 1.50 and that sometimes one method was used but the context 
indicated that the other had been intended; lacked work order numbers (making it 
difficult to confirm whether the routes were accurate); had large discrepancies between 
various measures of time, for example, between tach time (engine on to engine off) 
and total time; and failed to indicate whether flights were one way or round trip 
(tr. 9/34-45; R4, tab 626 at 65-67; tab 1298 at 45-47).  He explained that “it’s nearly 
impossible to do any large-scale analysis on a data set that’s not even close to 
homogeneous” (tr. 9/45). 
 
122.  As part of his 2018 supplemental report, Mr. Anderson prepared an 
analysis of Supreme flights for the AN-26 airplane from Kabul to Farah in 2009.  
Mr. Anderson used SkyVector, a software application used worldwide to create flight 
plans.  He first generated a flight plan for a C-130H on that route and received a 

 
25 
projected flight time of 1.45 hours.  He then cross-checked it with actual C-130H flights 
on this route from 2005 - 2007 and found that the SkyVector prediction was within 
.01 hours of the actual flight time.  He thus concluded that SkyVector would produce 
accurate flight times on this route, and could reasonably be used for an AN-26.  (R4, 
tab 1298 at 13-14; tr. 9/73-78) 
 
123.  When Mr. Anderson input the AN-26 in SkyVector it calculated an 
expected round-trip flight time of four hours, six minutes.  This contrasted sharply 
with Supreme’s records for 71 AN-26 flights on the Kabul-Farah route in 2009.  He 
found that Supreme’s average recorded round trip flight time was five hours, forty 
minutes.  (R4, tab 1298 at 12-15; tr. 9/73-78)  Thus, Mr. Anderson concluded that 
Supreme (or its subcontractor) had inflated the flight times on this route by 38.2%.  
This is only slightly lower than the 38.96% Mr. Anderson calculated in the 2011 
technical analysis used by DCAA (finding 99).   
  
 124.  Because Mr. Anderson’s analysis of AN-26 flights on the Kabul-Farah 
route in 2009 was limited in scope, the Board must consider it in light of the record as 
a whole.  In addition to Mr. Anderson’s analysis of 2009 AN-26 flights, the Board 
found the following evidence to be of great weight with respect to flight times:  
1) Michael Epp’s credible testimony that Supreme exaggerated flight times to inflate 
its costs (finding 45); 2) DCAA’s discovery that Supreme terminated its rotary wing 
subcontractor in 2010 for overstating flight hours but failed to keep any documentation 
on the overstatement (finding 96); 3) DCAA’s finding that Supreme used prerecorded 
flight times and fuel burns that resulted in improbable similarities among various 
flights (finding 97); 4) DCAA’s finding that Supreme failed to keep records and 
properly record costs8 (which was similar to Mr. Anderson’s findings) (findings 88, 
95-96, 98, 111); 5) the Board’s findings concerning the lack of credibility of 
Mr. Alvarez and Mr. Orenstein (findings 7, 17, 43, 57); 6) Supreme’s refusal to turn 
over records to DCAA (finding 106) and its refusal to undergo an audit for POT for 
the period after August 2011 (discussed below); and 7) Supreme’s demonstrated track 
record of dishonesty on this contract (discussed below).   
 
125.  The Board finds that Supreme did not submit adequate proof of its actual 
flight times to persuade us that the flight hours were accurate.  Further, the Board finds 
that Mr. Anderson’s calculations of a 38% fixed wing flight time inflation are the best 
evidence of Supreme’s actual fixed wing flight times.  We also find that the 
calculation in the 2011 technical report by an Air Force pilot with over 2,000 rotary 
wing flight hours (R4, tab 101 at 2) of a 12.64% overstatement for rotary wing flight 
times is the best evidence in the record for these flight hours. 
                                              
8 The testimony of Mr. Szar, Supreme’s Aviation Operations Controller, concerning 
Supreme’s recordkeeping at least through 2008 was generally consistent with 
that of DCAA (tr. 14/9-10, 72-73, 84-86, 90-95, 101, 103).   

 
26 
 
126.  Accordingly, we find that the contracting officer acted reasonably by 
incorporating the reduced flight times from the DCAA audit report.   
 
Aviation Flights 
 
 127.  Although the second DCAA audit was very thorough, by questioning 
more than half of both the rotary and fixed wing lease costs, it presented the 
contracting officer a dilemma.  Supreme had performed well, filling almost all of the 
orders placed (although filling orders does not by itself prove how many flights it 
made) (finding 148).  If Supreme failed or refused to continue with POT due to 
inadequate payments, there was no other contractor prepared to take over immediately, 
which would have meant “mission failure” and placing American forces on 
operational rations (tr. 3/128-30; R4, tab 602 at 3-5).  The contracting officer, 
therefore, had compelling reasons to make sure that Supreme was adequately 
compensated. 
 
128.  On many of the rotary trips, DLA concluded that the trip had taken place, 
but the lack of a subcontract had caused DCAA to question the costs.  For such trips, 
CO Valentin calculated rates by locating other SPV contract flights by the same 
helicopter make and model for which Supreme had a subcontract.  She then used those 
subcontracts to calculate the average rates Supreme paid for that model.  She 
determined that the average rates for flights with a subcontract were slightly lower 
than for those without (about 1% for some models, 5% for others); she then applied the 
average rates to the rotary flights with missing agreements.  (R4, tab 1233 at PNM 
at 11-12, “RE Revised Rotary Wing Lease and Fuel Costs for negotiating objective 
(2).msg,” at attachment “I-06 Testing of Rotary Sample - Revised for DLA 
Negotiations (No 3).xlsx” at Column F)   
 
129.  The end result was that CO Valentin credited Supreme with about 55% of 
the rotary lease costs questioned by DCAA, or about $87 million (R4, tab 1233 
at PNM at 13).  The Board finds that CO Valentin’s pragmatic approach was 
reasonable based on the information that she had and that Supreme has not proven that 
the Board should make an additional upward adjustment. 
 
130.  CO Valentin and her team performed a similar analysis of fixed wing 
flights, which led her to restore $5,949,911 of the fixed wing costs.  She calculated 
costs using the same method she used on rotary flights, by averaging rates for similar 
aircraft for which Supreme produced the subcontract and applying them to the flights 
without agreements.  (R4, tab 1233, at PNM at 13-14, “RE Revised Rotary Wing 
Lease and Fuel Costs for negotiating objective.msg,” at “I-05 Testing of Fixed Wing 
Aviation Sample - Adjusted 12-09-11.xlsx” at the “Fixed Wing Aviation Testing” tab, 
at Column CY).  We find that this was reasonable under the circumstances. 

 
27 
 
Aviation Lease Decrement 
 
131.  CO Valentin decremented both the rotary and fixed wing rates “to protect 
the government from significantly overpaying” because Supreme had not performed a 
price analysis of the aviation subcontractors.  She calculated a 3.36% decrement based 
on an average of the four low rotary wing bidders Supreme received in December 
2010 (after the time period covered by the audit).  This decreased Supreme’s rotary 
lease costs by $6,852,984.  (R4, tab 1233 at PNM at 12-13)  CO Valentin also used the 
exact same 3.36% decrement for fixed wing costs, which resulted in a further 
$1,167,205 deducted from Supreme’s costs (id. at 14). 
  
132.  In her testimony, CO Valentin did not attempt to justify the decrement 
with a merits-based analysis.  Rather, she testified that she took the rotary decrement 
essentially as a bargaining chip to use with DCAA to obtain its agreement to the 
upward adjustments she made elsewhere (tr. 4/67-68).  (Presumably, CO Valentin took 
the fixed wing decrement for the same reason).  But in the audit report, DCAA opined 
that the 2010 rotary bids could not be used to decrement Supreme’s costs for the audit 
period because there was insufficient data to adjust for:  1) availability and type of 
aircraft; 2) inflation; and 3) other factors such as danger levels (R4, tab 102 at 41).   
 
133.  Mr. Szar, Supreme’s Aviation Operations Controller, testified credibly 
that in the early years of the contract there were not many vendors willing to transport 
cargo by helicopter or airplane in Afghanistan and that Supreme was forced to hire 
those willing and available, even if it was under less than optimal terms (tr. 14/34-35).  
Mr. Szar, a former Air Force pilot who had retired after a crash in Afghanistan 
(tr. 14/8) testified credibly about the enormous difficulties posed by flying conditions 
in Afghanistan (tr. 14/14-15, 24-25).   
 
134.  CO DiMeo had the opportunity to compare Supreme’s rates to those 
charged by other contractors before signing Modification No. P00010.  While the 
record is clear that the parties agreed that Supreme’s costs would be audited, the extent 
of the audit and whether it would embrace standards of cost reasonableness is a matter 
of dispute.  In any event, to the extent it is Supreme’s burden to prove that the rates 
were reasonable, the Board holds that it has done so.  The record does not justify a 
decrement of 3.36% for either rotary or fixed wing aircraft lease rates. 
 
Aviation Fuel Costs 
 
135.  While DCAA had questioned all of Supreme’s fuel costs based on its 
refusal to produce its records, the contracting officer recognized that Supreme had, of 
course, burned fuel and sought to compensate Supreme despite its refusal.  The 
starting point of her analysis was a conclusion in the 2011 technical report that 

 
28 
Supreme’s claimed fixed and rotary wing fuel consumption appeared reasonable, if 
based on the reduced flight times calculated in the report.  (R4, tab 1386 at 37, 41) 
 
136.  Seeking other sources to determine reasonable rates, her team reviewed 
DLA Energy contracts for fuel in the same time period, many of which happened to be 
with Supreme Fuels (the division from which appellant obtained its fuel).  They found 
that DLA Energy was paying about 23% less than Supreme’s proposed cost for rotary 
fuel and about 17% less for fixed wing.  (R4, tab 1386 at 39, 42)  The contracting 
officer applied these lower average prices to Supreme’s reported 2005 – 2009 fuel 
usage, thus compensating it for about 80% of the claimed fuel (R4, tab 1233 at PNM 
at 15-16; finding 106). 
 
137.  Supreme did not present any evidence to the Board demonstrating that the 
amount it paid for fuel was higher than that awarded by the contracting officer.  
Supreme contends that, in light of its refusal to provide fuel records to DCAA, DCAA 
should have responded by performing an analysis of the fuel market in Afghanistan 
(app. br. at 49-50).  The Board disagrees, because that is not what an audit is.  
Supreme also disagrees with the method the contracting officer used to provide partial 
compensation (app. br. at 53), but Supreme provides no alternative other than payment 
of all of the costs that it refused to prove, which is hardly a convincing position.   
 
138.  We find CO Valentin’s method of compensating Supreme for its fuel 
costs to be reasonable under the circumstances.   
 
DLA’s Adjustments to Supreme’s Overhead Costs 
 
 A. Unexamined Overhead 
 
 139.  Although DCAA examined a portion of the overhead, there was a 
substantial amount that it did not.  DCAA did not examine and, therefore, did not 
question $94,570,254 in allocated overhead, $4,803,277 in central overhead, and 
$789,757 in parking costs, a total of $100,163,286 after a rounding correction (R4, 
tab 102 at 27).  DCAA did not audit the allocated overheads because it would have 
taken months of additional work due to Supreme’s failure to record individual 
expenses in Microsoft Dynamics.  This would have forced DCAA to obtain the 
underlying documents from Supreme, which had difficulty locating original 
documents and had a history of providing incorrect or incomplete documents.  DCAA 
concluded that because it had audited more than 85% of the proposal and questioned 
more than 50% of the costs audited, there would be no additional benefit to expending 
months of further effort.  (Tr. 7/122-23; R4, tab 102 at 15, 21)    
 
140.  CO Valentin believed that if DCAA had audited the more than 
$100 million in costs it likely would have found significant unallowable costs based on 

 
29 
the audit results for the costs DCAA did examine (R4, tab 1386 at 49).  She decided to 
decrement Supreme’s costs, and considered 5%, 10%, and 15% of the $100,163,286 
ultimately settling on 10% (R4, tab 1386 at 49-50, 54; tab 1233 at PNM at 15-16).   
 
 B. Audited Overhead 
 
 141.  DCAA audited $23,385,459 in allocated overhead.  Of this amount, 
$14,971,913 was for generator fuel and $2,979,672 was for vehicle fuel.  (R4, tab 102 
at 74)  As described above, DCAA questioned these costs because Supreme refused to 
produce its cost information (finding 108).  Although it is reasonable to assume that, 
like aviation fuel, Supreme incurred generator and vehicle fuel costs, Supreme has not 
produced sufficient evidence to establish those costs.  The bulk of the remaining 
audited overhead relates to warehouses used on several contracts for which Supreme 
refused to produce documentation showing how it allocated costs to the SPV contract 
(R4, tab 102 at 74, 77-78), and legal costs, which Supreme withdrew in part and 
otherwise failed to show that they were allocable to the SPV contract (id. at 80-82). 
 
 142.  In her final decision, CO Valentin concluded that it was likely that 
Supreme had incurred some overhead costs.  She decided to pay Supreme $1,884,501 
(about 8%) of the $23,385,459 in overhead costs audited by DCAA (R4, tab 1386 
at 45-46; R4, tab 1233 at PNM at 15-16).  
 
Aviation Conclusion  
 
 143.  As a result of the various adjustments, CO Valentin concluded that 
Supreme had rotary wing costs of $242,652,800 and fixed wing costs of $74,933,450 
(R4, tab 1233 at PNM at 15-16, 19). 
 
Truck Costs 
 
 144.  Compared to her adjustments to DCAA’s rotary and fixed wing costs, 
CO Valentin made a smaller upward adjustment to Supreme’s direct truck costs.  Of the 
$77,537,970 questioned by DCAA, CO Valentin adjusted this upward by 4%, adding 
$3,101,519 back to Supreme’s direct costs (R4, tab 1386 at 48; R4, tab 1233 at “PNM 
for POT – Revised Negotiation Objectives – 9 Dec 2011-200pm - .xlsx,” at “Upward 
Adjustment” tab).  The PNM and her contracting officer’s final decision otherwise 
subtracted from Supreme’s costs the two major areas of disagreement:  missing truck 
manifests and the 20.17% decrement for lack of a price analysis, as well as some 
smaller items. 
 
 145.  With respect to trips missing a manifest, we agree with the government 
that without the contractually-required signature of a DoD receiving official 
(findings 26-27), Supreme cannot prove that the delivery actually took place.  We 

 
30 
acknowledge Supreme’s contention that it had internal documents showing that the 
deliveries occurred but we agree with DCAA that internal documents created by 
Supreme or its subcontractor are not a sufficient substitute for the documents required 
by the contract (tr. 8/125-32, 173-74), in light of Supreme’s fraud guilty plea 
(findings 203-213) and Mr. Epp’s discovery of more than 1,500 truck trips in just the 
first year that did not occur (finding 73).  We find that CO Valentin demonstrated in 
her analysis of aviation costs that she was open-minded about accepting alternate 
documentation; we find that she acted reasonably in refusing to do so when Supreme 
failed to produce signed acceptance documents required by the contract. 
 
 146.  The 20.17% decrement for lack of a price analysis to costs that Supreme 
had otherwise proven is more problematic.  As described above, at the time of award, 
the contract provided that “host nation” contractors would deliver the cargo to the 
FOBs.  DLA almost immediately abandoned the concept, in large part because it had 
found the contractors to be so unreliable.  (Finding 30)    
 
147.  While the parties agreed to an audit of Supreme’s POT costs, as noted 
above, there is a dispute over whether the costs would be subject to cost-reasonableness 
analysis, especially when it comes to choice of subcontractors.  In any event, we 
conclude that the trucking subcontractor choices were reasonable.  First, we note that 
DLA would have been familiar with the truck market based on its original plan for host 
nation transportation, and could have awarded the work to another firm if there were 
acceptable contractors with lower prices.  We also take into account that when the 
parties executed Modification Nos. P00010 and P00012, DLA declined to relax the 97% 
fill rate, even though the mission had grown more complex.   
 
148.  Two more facts demonstrate the reasonableness of Supreme’s 
subcontracting decisions on trucks.  First, the trucking subcontractors selected by 
Supreme did an exceptional job of making deliveries to remote, dangerous places.  
According to CO DiMeo, “[t]hey had fabulous fill rates” (tr. 1/182), and she 
nominated Supreme for DLA’s New Contractor award and granted it a performance 
bonus (tr. 1/182; R4, tab 141 at 12).  Second, truck delivery to the FOBs proved to be 
exceedingly dangerous.  The trucks were involved in more than 900 security incidents, 
resulting in the deaths of over 300 workers and 51 hostages taken (tr. 10/94; app. supp. 
R4, tab 1378 at 103-07).  Given all these facts, it would be fair to say that Supreme’s 
decision to not award the trucking subcontracts to the lowest bidder was amply 
justified, to say the least.   
 
149.  DLA has not directed us to any provision in the contract that required 
Supreme to prepare a detailed analysis of its subcontractor selection.  When asked 
about such a requirement on cross-examination, Co Valentin cited a contract provision 
that required Supreme to treat DLA as its “best customer” (tr. 4/19).  But that clause 
pertains to customer service.  It required Supreme to treat DLA in a manner similar to 

 
31 
its other major customers and to provide a dedicated customer service representative, 
but it did not impose any procedural requirements for evaluating subcontractor bids.  
(R4, tab 1 at 32)  CO Valentin also testified that Modification Nos. P00010 and 
P00012 required a price analysis (tr. 4/19) but there is no such requirement in these 
modifications. 
 
150.  We also find that Supreme has offered plausible explanations for not 
selecting either of the lower bidders.  Supreme’s explanation for not selecting the low 
bidder – that it had not performed well on other contracts (finding 113) – was 
consistent with DLA’s reason for abandoning host nation trucking.  The record also 
shows that during winter, this bidder was only willing to deliver with larger trucks in 
the east and sometimes to the south (app. supp. R4, tab 451 (“HEB 4” tab)).  Thus, we 
do not consider this a valid comparison to bidders with full availability.    
 
151.  Accordingly, the Board finds that Supreme has demonstrated that the 
factual basis for DLA’s truck decrement is not supported by the record.   
 
Profit on POT Rates   
 
 152.  As described above, Modification No. P00010 did not set a profit rate for 
POT deliveries (finding 63).  Using the weighted guidelines method in the Department 
of Defense Federal Acquisition Regulation Supplement (DFARS) 215.404-71, 
CO Valentin established profit rates of 6.5% for rotary and fixed wing and 6% for 
truck (R4, tab 1233 at PNM at 15-16; tab 1386 at 52-53).  To obtain these figures, 
CO Valentin first evaluated the performance risk factor in the guidelines (which 
considers the technical uncertainties of performance and management cost control) and 
assigned Supreme above normal percentages of 6% for rotary and fixed wing and 
5.5% for truck (compared to the normal value of 5%) (id.; DFARS 215.404-71-2 
(2005)).  She then added 0.5% to each for the contract type risk factor to arrive at the 
final percentages (R4, tab 1386 at 53).  
 
Final POT Rates 
 
153.  Based on her analysis of Supreme’s costs and an appropriate profit rate, 
CO Valentin established the following rates to be applied retroactively and 
prospectively: 
 
Rotary wing    $2.91 
   Rotary wing w/ fuel provided $2.61 
   Fixed wing    $0.84 
   Truck     $0.20 
 

 
32 
Using these rates, CO Valentin contended that DLA had overpaid Supreme and 
demanded that Supreme return $567,267,940 to DLA (R4, tab 111 at 3). 
 
 154.  Supreme contends that the contracting officer should have used prices 
paid on other contracts to establish POT rates.  Because we hold below that the 
contracting officer acted within her discretion in relying on cost data, we have not 
made detailed findings concerning prices on other contracts in Afghanistan, even 
though there was a good deal of testimony and evidence on this topic at the hearing.  
Suffice to say that, after hearing several witnesses and reviewing the expert reports, 
the Board credits the testimony of Mr. Donald Anderson, who examined a number of 
other contracts in Afghanistan but found them to be too dissimilar to the SPV contract 
for purposes of making a valid comparison between prices on those contracts and POT 
rates (tr. 9/29-31, 59-63, 65-69, 99, 116, 17/16-30).  Both contracting officers also 
examined other contracts but could not find similar contracts for purposes of 
comparison (tr. 1/149-51, 2/218-20, 2/235-37, 3/50-54; R4, tab 1233 at PMN at 4).  
The Board found the testimony of Mr. Anderson and the contracting officers to be 
credible. 
 
Distribution Fee Credit 
 
155.  In COFD I, CO Valentin also demanded $177,383,579, or 95% of the 
Distribution Fees for FOB deliveries through September 2011 (R4, tab 111 at 4, 
tab 1233 at PNM at 27).  Despite this conclusion, DLA kept paying the Distribution Fees 
in full until the end of the contract and, as discussed below, CO Valentin issued a 
subsequent final decision increasing this portion of DLA’s claim to more than 
$500 million.  Accordingly, it is important to understand exactly what the Distribution 
Fee was and how DLA calculated its claim. 
 
A. The Relationship Between Distribution and POT Fees 
 
156.  The Distribution Fee was supposed to contain every dollar of Supreme’s 
compensation except for some transportation costs not relevant to this dispute and the 
actual purchase price of the food item (finding 24).  During her testimony, CO DiMeo 
explained the Distribution Fee (also referred to as the distribution price) as follows: 
 
The distribution price . . . compensated [the contractor] for 
all of the services they provided, estimating the quantities 
of food they would need to ship, purchasing the food, 
transporting it in Afghanistan, any other services as well as 
their profit. 
 
. . . .  
 

 
33 
. . . So, again, if they needed a team of people to do 
demand planning, purchasing, handling the food within the 
warehouse, rotating inventory, disposing of inventory, any 
service that they needed to perform as well as their profit 
was to be addressed in that distribution fee. 
 
(Tr. 1/19) (emphasis added)   
 
157.  During the POT negotiations, in a November 2005 email to Supreme, 
CO DiMeo explained her mindset with respect to adding POT fees:  
 
My starting assumption is that we have distr. fees already 
in the Supreme contract to address over road deliveries for 
each of these categories of items . . . .  The gap lies in 
applying the extra cost of air or ground support to move 
these items on from Kabul, or any extra charge to 
destinations other than Kabul, Salerno, Bagram and 
Kandahar. 
 
(R4, tab 486 at 3)  In other words, the Distribution Fees in the contract compensated 
Supreme for deliveries by truck to the four listed bases.  CO Valentin understood that 
air delivery would be more expensive and was receptive to the argument that truck 
delivery to some FOBs would be more expensive than the original four bases.  But the 
parties executed Modification Nos. P00010 and P00012 without coming to an 
agreement on the amount of the “gap” between what Supreme was receiving in the 
Distribution Fees and the additional costs of delivering to FOBs. 
 
 B. The Audits 
 
 158.  In the 2008 DCAA audit report, the auditor stated that he considered the 
Distribution Fees to be applicable to the original four sites only and that all of the 
Distributions Fees paid for FOB deliveries (minus 10.7% profit) should be refunded to 
DLA (R4, tab 30 at 11).  This auditor did not testify at the hearing and as illustrated 
below, the Distribution Fees in some cases were significantly higher than the POT 
fees.  Elimination of the Distribution Fee would mean that on some deliveries Supreme 
would be doing more work but receive a lower payment.  Because no contractor would 
have agreed to this, the Board has some doubt as to how well this auditor understood 
the contract.  Nevertheless, the auditor does appear to have recognized correctly that 
there likely was a duplication in payment.    
 
159.  In January 2010, DLA conducted an analysis of distribution and storage 
fees for other prime vendors in the Middle East and concluded that Supreme should 
return 55.6% of the Distribution Fees (R4, tab 35 at 1-2).  

 
34 
 
 160.  In an August 31, 2010 letter to Supreme requesting a revised proposal, the 
contracting officer asked Supreme to break down its costs and profit for Distribution 
Fees for the original four sites so that DCAA could determine the amount of any cost 
duplication (R4, tab 48 at 5).   
 
 161.  Supreme submitted the revised proposal but, in its 2011 audit report, 
DCAA determined that Supreme failed to submit the requested information on its 
Distribution Fees (R4, tab 102 at 12-13).  DCAA found that, during the POT 
negotiation in 2005-06, “no consideration was given for the fact that certain costs,” 
such as “warehouse space . . . personnel and associated costs like life support, 
equipment, and vehicles” would have been included in the Distribution Fees for the 
original four sites and thus paid for in those Distribution Fees (R4, tab 102 at 13).  
DCAA stated that because Supreme failed to identify the cost and profit contained in 
the original Distribution Fees “we are unable to determine the significance of 
duplicated costs included in the calculation of the proposed FOB rates” (id.).   
 
 162.  As Mr. Davis explained at the hearing, the proposal Supreme submitted 
for the second audit was a total cost proposal that included both POT expenses and 
non-POT expenses (tr. 7/226).  DCAA found that Supreme accumulated all costs as 
contract costs without segregating them between original sites and FOBs and that, with 
the exception of central overhead (less than one-percent of the amount claimed), 
Supreme did not develop final indirect expense rates for allocation of costs to its 
contracts, but rather recorded all costs as direct contract costs.  Supreme developed a 
method of allocating costs between the FOBs and the original four sites based on 
average weights delivered, but it made no adjustment for costs recovered in the 
Distribution Fees.  (R4, tab 102 at 13) 
 
163.  The Board also finds that Supreme did not fully cooperate in DLA’s 
efforts to identify the extent of the overpayment.  For example, in an October 14, 2011 
letter to CO Valentin, Mr. Schuster contended that “[w]hile the costs audited by 
DCAA may include some modest costs that would have been incurred absent the 
contractual changes that require negotiation of POT rates, our POT proposals have 
never been based on our costs, so there has been no reason for us to identify the 
amount of that potential duplication.”  (App. supp. R4, tab 1299 at 3) (emphasis 
added)    
 

 
35 
C.  The Problem With the COFD I Methodology 
 
164.  The second highest Distribution Fee under the original contract for items 
paid on a per pound basis was $1.20 for certain kinds of meat9 (app. supp. R4, tab 78 
at 9).  Under the original contract Supreme would be paid $1.20/lb. if it delivered a 
truckload of meat from its Kabul warehouse to one of the four original sites.   
 
165.  Now assume a POT truck delivery from Supreme’s Kabul warehouse to a 
distant FOB, perhaps the FOB in Herat in western Afghanistan.  Under the 
Modification No. P00010 rates, Supreme would be paid a total of $1.68/lb. for this 
item ($1.20 plus the $0.48 POT truck fee).  COFD I effectively reduced this to $0.26.10  
In the Board’s view, this is not a defensible position.  Certainly, Supreme would have 
been entitled to at least the original $1.20; a reduction to $0.26 effectively gives DLA 
a windfall.     
 
166.  Focusing on the second highest Distribution Fee may exaggerate the 
unfairness of DLA’s position.  However, we observe that for Distribution Fees as low 
as $0.25/lb. (e.g., raw ground beef), a 95% reduction in the fee, plus a $0.20 POT fee, 
would result in less compensation than under the original contract.   
 
167.  CO Valentin recognized the challenge she faced in identifying the 
overpayment because she did not have “a thorough audit” of the Distribution Fees (R4, 
tab 1233 at PNM at 19).  She stated three times in the PNM that she found it 
“impossible” to calculate the appropriate reduction to the Distribution Fees (id. at 5, 
19, 24).      
 
168.  CO Valentin testified that she cushioned the blow to Supreme by 
including in her calculation some conservative estimates that worked in Supreme’s 
favor (tr. 3/79-81).  In COFD I, CO Valentin calculated DLA’s demand based on 
estimates that FOB deliveries were 25% of total deliveries and that Distribution Fees 
were 25% of the Unit Price (R4, tab 111 at 4).   
 
169.  On direct examination CO Valentin asserted that FOBs had really been 
35% of the total deliveries and that Distribution Fees had really been 40% of the Unit 
price and that by undercounting both numbers she had reduced the amount Supreme 
owed (tr. 3/79-80; see R4, tab 111 at 4).  On cross-examination, when Supreme’s 
attorney highlighted the amount of the reductions, she changed the number of FOB 
deliveries again, asserting that as many as 75% of the deliveries had been to FOBs 
(tr. 3/221-25).  And her supervisor, Mr. Shifton, gave an even more baffling rendition 
                                              
9 The highest per pound Distribution Fee was $3.80 and applied to lobster, scallops 
and cooked seafood.   
10 ($1.20 – 95%) plus the final truck rate of $0.20. 

 
36 
of the analysis, contending that DLA only reduced the $1.20 Distribution Fee to $1.13 
(tr. 17/142-43).   
 
170.  After hearing this testimony, the Board concludes that DLA’s numbers, 
however well-intentioned, are just guesses.  There is nothing in the record that would 
demonstrate whether FOB deliveries were 25%, 35%, or 75% of the total deliveries, 
nor is there anything that would indicate whether Distribution Fees are 25% or 40% of 
the Unit Price – facts that makes it much harder, if not impossible, to calculate the 
amount of any overpayment. 
   
171.  Supreme’s internal documents provide no clear answer, but there are 
enough internal emails and communications with DLA to demonstrate that Supreme 
knew that there was an overlap.  But its employees had significantly different 
assessments of the overlap.  In documents that vary in clarity, Supreme employees 
floated reductions to the Distribution Fees of 5.59%, 15.6% or 19%, as well as 
$0.05/pound, and a flat $49 million, or $88 – 102 million (app. supp. R4, tab 63 at 3, 
tab 64A at 4, tab 64B, tab 1200 at 4, tab 1299 at 10; R4, tab 267).  
 
172.  On December 20, 2010, bilateral Modification No. P00092 extended the 
contract (including exercised options) by two years (R4, tab 22).  One might think that 
if the contracting officer believed that the Distribution Fees were a waste of money she 
would have adjusted the Distribution Fees downward to eliminate any overpayment, or 
at least have held them steady.  She did not.  Instead, DLA agreed to sizable increases 
to the fees that, according to Supreme averaged 33% (id. at 10-14), an action that the 
Board finds inconsistent with a belief that Supreme was being overpaid.     
 
D. Trying to Understand DLA’s Distribution Fee Claim 
    
173.  Ultimately, the Board finds DLA’s case to be rather vague on the overlap 
between Distribution Fees and POT.  In its post-hearing brief, DLA does not focus on 
the easy to grasp duplication in transportation costs first raised by CO DiMeo.  Rather, 
it directs our attention to Supreme’s inclusion of costs for the original four sites in its 
POT submission.  But it does not identify the nature of the duplication or quantify it 
(DLA br. at PFF 224-227 and pp. 183-87).  It alludes in a footnote to the inclusion of 
some flights to one of the original four sites in Supreme’s POT proposal (id. at p. 70, 
n.40).  But under the original contract, Supreme was entitled to payment if it made 
deliveries by air (finding 29).   
 
174.  The expenses included in Supreme’s $702 million proposal consist mostly 
of aviation lease and fuel costs, and trucking costs that total $576 million.  The Board 
believes that by any objective measurement DCAA reviewed them thoroughly, 
questioning improper costs (R4, tab 102 at 23).  Almost all of the remaining costs were 
in overhead.  In its 2011 report, DCAA expressed concern over “warehouse space . . . 

 
37 
personnel and associated costs like life support, equipment, and vehicles,” that may 
have been included in the original distribution fees (R4, tab 102 at 13).  DCAA 
addressed this at least in part by questioning all of the costs for warehouse space and 
vehicle and generator fuel (R4, tab 102 at 74).  The contracting officer restored only 
eight percent of these costs in COFD I (finding 142).  
 
175.  To be sure, DCAA did not audit about $100 million in overhead and 
parking fees and there could be duplicate costs lurking in that amount.  But the 
contracting officer had the opportunity to assess these costs in COFD I and determined 
that a 10% decrement was in order (finding 140).  While DLA requests in its 
post-hearing briefs that the Board issue a decision more favorable to DLA than 
COFD I, it has not contended that the 10% overhead decrement should be increased.  
 
176.  Moreover, we observe that the unaudited $100 million in overhead and 
parking fees is far less than the $177 million Distribution Fee credit claimed in 
COFD I.  While this may be partly due to the additional period of time covered by 
COFD I, it leaves the Board perplexed as to where DLA believes a $177 million 
duplication in payment could have occurred.  It convinces the Board that while there is 
a germ of truth to DLA’s assertions, its claim is massively overstated.   
 
177.  The Board’s conclusion is that on this record we cannot identify the 
overlap between POT and Distribution Fees, nor can we approximate it. 
 
Helmand Regional Distribution Center (HRDC)  
 
 178.  In COFD I, CO Valentin also demanded a refund of $12,257,068 in POT 
fees paid for deliveries within one day’s drive of the HRDC, a regional distribution 
center constructed by Supreme in Helmand Province (R4, tab 111 at 5).  Supreme 
began making deliveries from the HRDC in December 2009 (R4, tab 111 at 4).  The 
government, through United States Transportation Command carriers, delivered cargo 
to this new warehouse and from there Supreme delivered it to the FOBs.  While these 
carriers were already delivering to Supreme in Kabul, CO Valentin testified that they 
received a premium to deliver to the HRDC.  CO Valentin became concerned that 
DLA was “potentially double-paying” if it paid both this premium and a POT fee to 
Supreme.  She concluded that, because some of the added FOBs were close to the 
HRDC and a similar threat level to the original four locations, Supreme should not be 
paid POT fees for these sites.  (Tr. 2/215-18; R4, tab 111 at 4-5)   
 
179.  During the POT negotiations, CO DiMeo had prioritized simplicity to the 
point of initially requesting a single rate that applied to all three modes of transport 
(tr. 1/103) before acceding to a single rate for each mode.  While Modification 
No. P00010 stated that the number of FOB sites was subject to change (R4, tab 7 at 2), 
it contained no provision adjusting rates up or down based on distance or degree of 

 
38 
difficulty.  Evidence produced by Supreme at the hearing demonstrated that a number 
of the FOBs added in the first years of performance were in the Kabul area (app. 
ex. A-1), relatively close to Supreme’s Kabul warehouse, but DLA never contended 
that these sites were ineligible for POT fees.    
 
180.  According to Mr. Orenstein, Supreme spent about $55 million 
constructing the portion of the facility that serviced the SPV contract (tr. 10/228-29).  
He testified that DLA saved money on the deliveries from the HRDC because 
previously it had been paying Supreme aviation POT rates to transport the cargo to the 
area (tr. 10/240-41). 
 
181.  Mr. Orenstein also testified that, in relation to Camp Leatherneck, the 
HRDC was “very close in terms of miles and very far away in terms of delivery” 
(tr. 10/236).  The security situation was such that a convoy with armed security would 
leave the HRDC, travel 1,000 to 3,000 feet and enter a “soak yard” for 24 hours until 
any improvised explosive device detonated.  Combined with security procedures at the 
gate, the actual delivery, and the return to the HRDC in another security convoy, a 
delivery one mile away required two days of effort.  (Tr. 10/235-37)  DLA did not 
attempt to controvert this testimony.  
 
Minimum Weights    
 
 182.  As described above, although Modification No. P00010 was silent on this 
issue, DLA paid Supreme minimum weights until CO Valentin ended the practice in 
2008 (finding 81).  In COFD I, CO Valentin confirmed her decision not to pay 
minimum weights (R4, tab 111 at 3).   
 
183.  Supreme timely appealed the contracting officer’s decision (COFD I) on 
December 14, 2011; the Board docketed it as ASBCA No. 57884. 
 
184.  The parties agree that DLA thereafter began withholding money from 
Supreme’s monthly payments.  While they disagree on the precise amount withheld, it 
is between $540.4 and $540.8 million (compare DLA br. at PFF 470, Supreme br. 
at PFF 233). 
 
Supreme’s Claims (ASBCA Nos. 58666 and 59636) 
 
 185.  On February 25, 2013, Supreme submitted a certified claim to the 
contracting officer that was, as Supreme described it, the “reverse image” of the 
government’s December 9, 2011 claim (R4, tabs 113, 115).  While Supreme made a 
variety of factual and legal contentions in the claim, the crux of it was that it was 
entitled to the Modification No. P00010 rates (and the Modification No. P00043 rate 
for rotary wing with fuel provided by the government) (R4, tab 113 at 46).  Supreme 

 
39 
contended that from the start of performance through December 12, 2012, it was due 
an additional $1,802,335,141.38 (id.).   
 
 186.  On April 25, 2012, DLA wrote to Supreme, proposing an audit for the 
period from August 2010 to December 2012 – the period after the most recent audit (R4, 
tab 114 at 1).  Supreme declined, citing the pending ASBCA appeal (R4, tab 115 at 1). 
 
 187.  CO Valentin denied the claim in a May 10, 2013 final decision based on 
her inability to review the claim without an audit (R4, tab 116).  On May 15, 2013, 
Supreme filed a timely appeal that the Board docketed as ASBCA No. 58666. 
 
 188.  On May 28, 2014, Supreme submitted a second claim seeking $598,769,101 
based on compensation at the Modification Nos. P00010 and P00043 rates from 
December 13, 2012 to the conclusion of contract performance on December 12, 2013 
(R4, tab 375 at 1). 
 
 189.  The contracting officer did not issue a final decision and Supreme filed an 
appeal based on a deemed denial on October 20, 2014, that the Board docketed as 
ASBCA No. 59636. 
 
 190.  At the hearing, Supreme did not submit any evidence to support its costs 
other than what it presented to DCAA in 2010.  Among other things, this means that it 
has not presented any evidence to either DLA or the Board of its costs for the period 
from September 2010 to December 2013, nor any evidence of its fuel costs for the 
entire contract.  (Compare, gov’t br. at 176-77 with Supreme reply at 23) 
 
The Second DLA Claim for Overpayment (ASBCA No. 61361) 
 
 191.  On October 2, 2017, CO Valentin issued a second decision for the time 
period October 1, 2011 to December 10, 2013 (R4, tab 650).  In this decision, she 
demanded that Supreme repay DLA an additional $358,120,738.  This amount mostly 
consisted of a demand for refund of Distribution Fees (based on the same rationale and 
formula as her previous final decision) for the period from October 1, 2011, to 
December 10, 2013, in the amount of $345,941,775.33 (id. at 2).  The decision also 
demanded $12,178,962.41 for overpayment of POT rates in October 2011, which was 
the last month before DLA began paying the rates in COFD I (id. at 1-2). 
 
 192.  Supreme timely appealed that decision to the Board on October 3, 2017.   
 

 
40 
Criminal and False Claims Act Litigation 
 
A. JAFCO Guilty Plea 
 
 193.  Supreme represented in its proposal that its primary supplier for local 
market ready items (fruits, vegetables, dairy, and bakery items) would be Barrakat 
Vegetables & Fruits Co.  Supreme stated that, to the extent purchased elsewhere, all 
local market ready products would be consolidated at Barrakat’s facility in Dubai and 
prepared for airlift to Afghanistan in containers or tri-walls.  (Tr. 1/40-42; R4, tab 645 
at 158, 389, tab 1387 at 2)  The contract required Supreme to obtain approval of any 
place of performance not identified in its proposal (R4, tab 1 at 111).   
 
194.  On September 19, 2005, after a request by Mr. Alvarez, the contracting 
officer issued Modification No. P00003, approving Jamal Ahli Foods Co. LLC 
(JAFCO) and Barakat’s facility as places of performance.  The modification stated that 
JAFCO would be an additional place of performance for local market ready support.  
(R4, tab 797 at 1-2) 
 
 195.  On September 20, 2007, Michael Schuster, Supreme’s Director Logistics 
Division, wrote to CO DiMeo.  While most of his letter concerned convoy security, on 
the second page he stated that Supreme had hired an auditing firm with experience in 
government contracts that had advised Supreme to “inform the government that a 
relationship exists between Supreme and U.A.E. based company Jamal Ahli Foods Co. 
LLC[].”  (R4, tab 558)  The JAFCO portion of the letter “didn’t raise an eyebrow” 
with CO DiMeo who was focused on convoy security (tr. 1/175). 
 
 196.  On March 3, 2009, Paul Rigby, who described himself as a “disgruntled 
former [Supreme] employee,” wrote to CO Valentin and other DLA officials to 
recount a conversation he had had with another former employee concerning JAFCO.  
He stated that he had been informed that Supreme was the owner of JAFCO with a 
“UAE sponsor.”  He stated that JAFCO would obtain products from Barakat, 
consolidate it, and add 35% to the purchase price, which increased Supreme’s margin 
to “60ish percent.”  Further, he stated that JAFCO employees were instructed not to 
disclose any information except about hygiene and packing issues.  (R4, tab 568) 
 
 197.  During a conference call with DLA on March 10, 2009, Supreme stated 
that it was part owner of JAFCO (R4, tab 572).  During another teleconference the 
following day, Supreme stated that it owned 49% of JAFCO and that a local sponsor 
held 51% of the company in trust for Supreme due to UAE restrictions of foreign 
companies and that JAFCO was “in reality” a subsidiary of Supreme (R4, tab 573 
at 2).  DLA concluded that the JAFCO markup to the Delivered Price was improper 
(R4, tab 573 at 1-2; tr. 6/154-57).   
 

 
41 
198.  On March 13, 2009, DLA referred the matter to the Defense Criminal 
Investigation Service (app. supp. R4, tab 1391 at 10-11).  By letter dated March 16, 
2009, CO Valentin informed Supreme that it should not include a JAFCO markup in 
the Delivered Price (tr. 4/145; app. supp. R4, tab 1132). 
 
 199.  Despite the pendency of a fraud investigation, CO Valentin signed 
unilateral Modification No. P00056 on June 2, 2009, exercising the final option on the 
contract for the period June 8, 2009 to December 12, 2010 (R4, tab 16).   
 
 200.  With the contract set to expire in December 2010, the parties entered into 
bilateral Modification No. P00092, effective December 20, 2010, which extended the 
contract for an additional two years, or until December 12, 2012 (including a base and 
two six-month options) (R4, tab 22).  
 
 201.  Modification No. P00092 contained a new premium distribution fee of 
$4.46 per pound for inbound airlift based on three elements that had been separate 
items under the contract:  JAFCO, triwalls, and inbound air (R4, tab 22 at 15; 
tr. 4/191) (Inbound air in this sense refers to delivery by air into Afghanistan 
(tr. 1/212)).  Supreme had proposed this price and had provided a breakdown of the 
costs to DLA (tr. 4/190-93; app. supp. R4, tabs 1239, 1243, 1243A, 1243C).  
Supreme’s breakdown indicated that the $4.46 included $0.09 for JAFCO (app. supp. 
R4, tab 1243A).   
 
 202.  During his testimony, Mr. Orenstein endeavored to paint JAFCO as a 
legitimate enterprise with a valid purpose (see tr. 11/37-51).  Because CO Valentin 
agreed to pay Supreme for JAFCO costs in Modification No. P00092 more than 1.5 
years after learning of Supreme’s ownership, it would be reasonable to conclude that 
JAFCO performed at least some legitimate activities.  The more relevant question is 
whether JAFCO was also engaged in criminal activity.  
  
 203.  On September 22, 2014, Supreme agreed to plead guilty to an information 
filed in the District Court for the Eastern District of Pennsylvania charging it with 
major fraud against the United States, 18 U.S.C. § 1031, conspiracy to commit major 
fraud against the United States, 18 U.S.C. § 371, and wire fraud, 18 U.S.C. § 1343 
(R4, tab 633).  The plea agreement incorporated a statement of facts that included a 
section entitled “The Scheme to Defraud by Using JAFCO to Increase the Delivered 
Price for Local Market Ready (LMR) Items” (id. at 15). 
 

 
42 
204.  Supreme agreed in the statement of facts that it11 effectively owned and 
controlled JAFCO during contract performance and knowingly concealed it from DLA 
and took steps to make it appear that JAFCO was unrelated to Supreme.  Supreme 
agreed that it used JAFCO to make profits over and above the profits made from the 
Distribution Fees in the Contract by fraudulently increasing the Delivered Price for 
LMR goods sold to the United States.  (R4, tab 633 at 15) 
 
205.  Supreme agreed that it had used JAFCO to markup LMR goods it 
purchased, which increased the Delivered Price to DLA.  Supreme agreed that it 
included the JAFCO markup even when JAFCO employees had not provided any 
services and that it did not inform DLA of the JAFCO markup and the attendant profit.  
Supreme agreed that it deliberately tried to prevent DLA from learning of the JAFCO 
markup, including by omitting the markup when Supreme believed DLA knew the true 
price suppliers charged.  (R4, tab 633 at 15-16) 
 
B. Bottled Water Guilty Plea 
 
 206.  In the desert environment of Afghanistan, water was a critical commodity 
for U.S. Forces.  CO DiMeo described it as a “very emotional issue” that led U.S. 
Central Command to require DLA to maintain a large reserve supply.  (Tr. 1/175)  
Both DLA and Supreme wanted to obtain water from multiple sources (tr. 1/176, 
11/54-55).   
 
207.  The online catalog of Supreme products from which DoD customers 
ordered included bottled water (app. supp. R4, tab 938A at 10).  A contractor could list 
only one price in the catalog (tr. 1/176), which was problematic due to Supreme’s 
procurement from multiple suppliers.  From 2005 until at least April 2007, Supreme 
charged DLA a Delivered Price of $6.45 per case of water.  (Tr. 1/177)   
 
 208.  Sometime in the summer of 2007, Mr. Alvarez “casually” mentioned to 
CO DiMeo that Supreme was paying its suppliers various prices for the water.  
Mr. Alvarez represented to her that $6.45 was the average price that Supreme paid.  
(Tr. 1/177-78)  On August 30, 2007, the parties signed bilateral Modification 
No. P00022 providing that Supreme could bill DLA for water based on average prices 
paid by Supreme during the previous two weeks (R4, tab 557 at 1-2).  Based on 
Mr. Alvarez’s representation that $6.45 was the average price, the Board finds that this 
did not place DLA on notice in 2007 that Supreme had committed fraud. 
 
                                              
11 The stipulation refers to “Supreme Foodservice, AG,” which was appellant’s name 
at award.  In 2009, Supreme changed “AG” to “GmbH,” as reflected in bilateral 
Modification No. P00067 (app. supp. R4, tab 134). 

 
43 
 209.  Supreme was not paying an average of $6.45 per case of water.  In fact, 
according to Mr. Epp, water was the single most profitable item on the contract 
because Supreme in some cases was paying less than $2 per case.  Because Supreme 
was selling millions of cases, the profits were “huge.”  The $6.45 price included 
Supreme’s transportation costs, which it charged DLA even when the government 
transported the water.  (Tr. 5/200-03) 
 
 210.  Mr. Epp’s testimony is consistent with a section of the guilty plea 
agreement entitled “The Scheme to Defraud by Overcharging for Bottled Water” (R4, 
tab 633 at 16).  The agreement states that Supreme:  
 
[C]onspired to, and knowingly devised and intended to 
devise a scheme to defraud the United States and to obtain 
money and property of the United States, by material and 
knowingly false and fraudulent pretenses, representations, 
and promises in connection with the SPV Contract, in 
violation of 18 U.S.C. §§ 371, 1031 and 1343. 
 
(Id.)   
 
 211.  To carry out this scheme, Supreme “used an artificially high price for the 
transportation of water, and used JAFCO as a middleman to fraudulently increase the 
Delivered Price that Supreme” charged DLA from December 2005 until April 2007.  
Supreme charged DLA $6.45 per case but the prices it paid its suppliers ranged from 
$1.64 to $5.03 per case.  (R4, tab 633 at 16) 
 
212.  The final paragraph of the section on the bottled water fraud states that as 
a result of the “schemes described above,” Supreme received profits of approximately 
$48 million to which it was not entitled (R4, tab 633 at 16).  It is not clear if this is 
referring to both JAFCO and bottled water, or just the latter.  DLA seems to 
understand it as including both, calling the $48 million figure “extremely low.”  DLA 
then implies that Supreme misled the Department of Justice and the district court as to 
the extent of its illegal gains.  (Gov’t br. at 130, n.82)       
 
 C. Resolution of the Criminal Case  
 
213.  Michael Epp, Joseph Alvarez, and Stephen Orenstein all escaped 
prosecution.  Supreme and a related company paid $250 million consisting of:  a 
forfeiture of $10 million; fines totaling $192 million, and $48 million in restitution 
(R4, tab 248 at 3, 7, tab 633 at 2-4).  In addition, Supreme agreed to pay DLA a water 
reconciliation or true-up of $38,362,198.71 for the period from March 2007 to 
December 2013 (R4, tab 633 at 4).  
 

 
44 
D. The False Claims Act Case Filed By Epp 
 
 214.  On March 16, 2010, Mr. Epp, as relator, filed a lawsuit against Supreme, 
JAFCO, Mr. Orenstein and others under the False Claims Act, 31 U.S.C. § 3729, et seq.12  
DLA received a copy of the complaint that same day (app. supp. R4, tab 1194).  The 
United States later intervened in the action to effect a settlement agreement (R4, tab 247 
at 1-2). 
 
 215.  In his amended qui tam complaint (R4, tab 617), Mr. Epp made a variety of 
allegations, including:  1) that Supreme negotiated “discounts” from suppliers ranging 
from four to nine percent that it did not disclose to DLA and which were actually illegal 
kickbacks (id. at 10-15); 2) Supreme used JAFCO to unlawfully mark up local market 
ready items (id. at 15-25); 3) Supreme inflated bottled water prices (id. at 25-32); and 4) 
Supreme misrepresented POT and other transportation costs (id. at 32-49). 
 
 216.  The United States intervened with respect to the first three of these 
allegations but declined with respect to inflated POT costs (R4, tab 247 at 2; United 
States of America ex rel. Michael Epp v. Supreme Foodservice AG, et al., E. D. Penn. 
No. 10-cv-1134, Dkt. 24).  On December 6, 2014, the parties entered into a settlement 
agreement in which Supreme was not required to admit liability, nor was the United 
States required to admit that its claims were not well founded (R4, tab 247 at 2-3). 
 
 217.  In return for dismissal of the lawsuit, Supreme agreed to pay the 
government $101 million and to pay Mr. Epp $300,000 and his attorney $1,150,000.  
The government agreed to pay Mr. Epp an additional $16,160,000.  (R4, tab 247 
at 3-4)  Thus, Mr. Epp, who by his own testimony was deeply involved in a staggering 
fraud against the United States Treasury, was rewarded with nearly $16.5 million.  
 
Contract Completion 
 
 218.  Long after DLA knew about Supreme’s fraud, the parties seem to have 
been able to maintain a good working relationship, presumably because Supreme was 
effective at delivering food under challenging conditions.  On June 22, 2012, after 
DoD and DOJ had had more than three years to investigate the fraud allegations, DLA 
issued a bridge contract extending performance of the SPV contract through 
December 12, 2013.  Among other things, the bridge contract provided for a 4.5% 
increase to the COFD I POT rates.  (R4, tab 194 at 1-3) 
 
                                              
12 The False Claims Act permits private individuals to initiate lawsuits on behalf of the 
government.  31 U.S.C. § 3730(b).  These are known as qui tam suits, and the 
individual bringing the suit is known as the relator. 

 
45 
 219.  In 2011-2012, DLA conducted a procurement for a follow-on contract, 
which attracted proposals from Supreme, Anham FZCO, and four other offerors.  
Supreme Foodservice GmbH v. United States, 112 Fed. Cl. 402, 407 (Fed. Cl. 2013).  
DLA conducted a technical evaluation that, among other things, considered past 
performance.  Id.  Following a bid protest filed by Supreme at the Government 
Accountability Office (GAO), DLA conducted a partial reevaluation of the technical 
factors that it completed in December 2012.  Id. at 408-409.  After that reevaluation, 
DLA gave Supreme an overall technical rating of “outstanding,” the highest possible 
rating.  Id. at 410.  However, despite Supreme’s technical rating, DLA determined that 
Anham’s proposal was a better value based on its lower price.  Id.  The Court of 
Federal Claims upheld DLA’s award.  Id. at 437-38. 
 
 220.  It is undisputed that Supreme delivered billions of dollars of food that was 
consumed by American troops (e.g., R4, tab 1233 at PNM at 27 (stating that DLA had 
paid Supreme almost $3 billion for product delivered through Sept. 30, 2011); 
(finding 237 (reflecting deliveries of more than three billion pounds through December 
2013)). 
 
 221.  On January 22, 2015, more than a year after Supreme completed 
performance, CO Valentin issued another final decision, asserting entitlement to all 
money paid to Supreme on the contract, or about $8.8 billion (R4, tab 123; DLA br. 
at 145, n.91).  CO Valentin asserted five bases for the decision:  1) Supreme’s 
misrepresentation of the actual costs of providing POT (id. at 2-4); 2) Supreme’s guilty 
plea to major fraud (id. at 4-5); 3) Supreme’s “systematic overcharging for POT” (id. 
at 5-6); 4) Supreme’s misrepresentation of market basket prices in its proposal and 
then its increase of them sharply after award (id. at 6-7); and 5) Mr. Alvarez’s 
participation in the contract as both an employee of DLA and then at Supreme was a 
conflict of interest (id. at 7-8). 
 
 222.  Supreme filed a timely appeal of this new decision on January 30, 2015, 
that the Board docketed as ASBCA No. 59811. 
 
223.  CO Valentin addressed the 2015 final decision only briefly during her 
three days of testimony at the hearing. 
 
Final Weights 
 
 224.  Each party has submitted to the Board one or more spreadsheets that 
contains its tabulation of POT weights.  With well over 100,000 total FOB deliveries 
(see findings 91 and 109), the numbers in the spreadsheets are virtually impossible for 
the Board to verify independently.   
 

 
46 
 225.  Because the parties’ actual weights13 are fairly close (at least with respect 
to fixed and rotary wing), the Board requested that the parties confer and attempt to 
stipulate the weights based on a comparison of their numbers and the elimination of 
typographical errors or other problems, but the parties failed to reach agreement (DLA 
ltr. to Bd. dtd. January 10, 2020; Supreme ltr. to Bd. dtd. January 15, 2020).   
 
 226.  Supreme has provided its weights for the entire project in exhibit A-18.  
While Supreme’s exhibit has the advantage of being comprehensive, it comes with the 
baggage of fraud convictions and our findings concerning the quality of its 
recordkeeping. 
 
 227.  DLA’s weights are contained in exhibits G-2 and G-3.  Only G-2 was 
discussed by a DLA witness (tr. 3/76) or in DLA’s post-hearing brief (gov’t br. 
at 148).  This spreadsheet contains weights only from December 2005 to September 
2011.  Exhibit G-3 contains weights from December 2005 to June 14, 2013.  Thus, 
neither DLA spreadsheet contains the weight delivered during the final six months of 
performance. 
 
 228.  In its January 10, 2020 letter to the Board, DLA proposes weights for the 
entire contract term.  It appears that in the negotiations with Supreme, DLA reviewed 
its records and made some corrections to exhibit G-3 and it added weights for the final 
six months of the contract (Supreme ltr. to Bd. dtd. January 15, 2020 at attachment 
pp. 20-21 of 25).  The source of the latter information is not clear.  DLA did not file its 
reworked G-3 with the Board, presumably because the Board closed the record at the 
conclusion of the hearing per its normal practice (tr. 17/187).   
 
 229.  The Board finds that neither party has provided the Board with weight 
evidence that is clearly correct.  While in an ordinary case this might be ruinous for the 
party with the burden of proof, this is not an ordinary case.  As we discuss below, the 
intertwined nature of the POT rate claims forces each party to act like both a plaintiff 
and a defendant.  Under these circumstances, a decision by the Board that the weight 
evidence is too imprecise for us to make findings of fact would effectively be the same 
thing as declaring DLA the winner because it has already recovered more than 
$540 million from Supreme. 
 
 230.  There are two determinations that the Board must make.  First, we must 
decide the weights for the period covered by the second DCAA audit.  The proven 
costs during this period for each mode of transportation must be divided by the pounds 
for that mode during this period, resulting in final rates.  Second, the weights for the 
                                              
13 The parties provided the Board with both actual (or net) weights and billable 
weights.  The latter numbers are higher because they include minimum billable 
weights.  We will focus on actual weights. 

 
47 
entire contract must be determined so that they can be multiplied by the final rates to 
determine the total amounts due Supreme. 
 
 231.  We start with each party’s pounds for aviation deliveries during the audit 
period (December 2005 to August 2010). 
 
  Fixed Wing      
  Supreme  95,198,825 lbs. 
  DLA  93,692,369 
 
  Rotary Wing 
 
  Supreme 64,811,476 
  DLA  64,658,989  
 
  Rotary Wing – GFM 
 
  Supreme 23,937,468 
  DLA  24,686,986 
 
(DLA ltr. to Bd. dtd. January 10, 2020; Supreme ltr. to Bd. dtd. January 15, 2020)  As 
can be seen, the parties are less than one percent apart on each rotary calculation, and 
less than two percent on fixed wing. 
 
 232.  The truck pounds for the audit period are: 
 
  Truck 
  Supreme 797,302,909 
  DLA   784,418,215 
 
(DLA ltr. to Bd. dtd. January 10, 2020; Supreme ltr. to Bd. dtd. January 15, 2020)  The 
gap between the parties is less than two percent.  The truck difference is largely due to 
DLA’s refusal to include truck deliveries from the HRDC in its calculation (DLA ltr. 
to Bd. dtd. January 10, 2020 at 4). 
 
 233.  As can be seen, in three of the four categories, Supreme’s pounds are 
slightly higher than DLA.  This actually presents a disadvantage to Supreme in one 
respect because increasing the weight lowers the final rate.14  A lower final rate costs 
Supreme some money when it is used for all pounds after the audit period.  For this 
                                              
14 For example, if final costs were $1 million and the weight was 500,000, the final 
rate is $2 ($1 million ÷ 500,000).  If the weight is increased to 600,000, the 
final rate drops to $1.67. 

 
48 
reason and because Supreme’s pounds are within 0-2% of the DLA numbers, we 
believe that there are sufficient indicia of reliability for the Board to rely on Supreme’s 
numbers, especially since we lack comprehensive records from DLA. 
 
 234.  Accordingly, the Board will use Supreme’s pounds for calculating final 
rates in the decision below. 
 
 235.  With respect to total weights, Supreme and DLA are less than 2% apart on 
fixed wing deliveries and less than 1% on the rotary wing deliveries.  The Board 
accepts Supreme’s numbers of 175,543,224 fixed wing pounds, 135,279,720 for rotary 
wing, and 63,974,718 for rotary wing with government-provided fuel.  (Supreme ltr. to 
Bd. dtd. January 15, 2020) 
 
 236.  With respect to truck deliveries, the parties are on a percentage basis 
much farther apart with DLA at 2,354,589,234 lbs. and Supreme at 2,772,211,907 
(DLA ltr. to Bd. dtd. January 10, 2020; Supreme ltr. to Bd. dtd. January 15, 2020).  
However, we believe that the difference is again largely due to DLA’s refusal to 
include deliveries from the HRDC in its number, a decision with which we disagree 
(DLA ltr. to Bd. dtd. January 10, 2020 at 4).  The Board accepts Supreme’s number. 
 
 237.  Because Supreme is entitled to an additional 4.5% during the final year of 
the contract (finding 218), we break down the weights into two periods:  1) from the 
start of POT in December 2005 to December 14, 2012; and 2) December 15, 2012 to 
December 14, 2013.  The truck pounds through December 14, 2012 are 2,392,143,150.  
The truck pounds for the final year are 380,068,757.  The fixed wing pounds for the 
first seven years are 157,066,864 and 18,476,360 for the last year.  Rotary wing 
pounds for the first seven years are 127,690,988 and 7,588,732 for the final year.  The 
rotary wing with GFM pounds are 58,638,241 for the first seven years and 5,336,476 
for rotary with GFM for the final year.  (Supreme ltr. to Bd. dtd. January 15, 2020 at 9) 
 
DECISION 
 
I. The POT Claims (ASBCA Nos. 57884, 58666, 59636, 61361) 
 
 While there are four appeals pending, two stem from COFDs in which the 
contracting officer demanded repayment (ASBCA Nos. 57884, 61361) and two arise 
from Supreme claims (ASBCA Nos. 58666, 59636).  Complicating matters somewhat, 
each party contends that the other is the real claimant and has the burden of proof 
(gov’t br. at 175; app. br. at 6, 25, 63).   
 
In the Board’s view, the most significant appeal is ASBCA No. 57884 because 
in COFD I the contracting officer established the key issues by:  setting final POT 
rates and reducing the Distribution Fees for FOBs; designating certain FOBs as 

 
49 
ineligible for POT fees; and demanding the return of amounts already paid.  
Importantly, all of the evidence supporting Supreme’s POT rates came from this 
period.  
 
Due to the Board’s de novo review, the Board can award more or less than the 
contracting officer in her final decision.  Grumman Aerospace Corp., ASBCA 
No. 48006, 06-1 BCA ¶ 33,216 at 164,622.  Thus, the Board’s review of the actions 
taken in COFD I will resolve most of the pending issues.  In its brief, Supreme states 
that it filed ASBCA Nos. 58666 and 59636 only as a protective measure in light of the 
Federal Circuit’s decision in M. Maropakis Carpentry, Inc. v. United States, 609 F.3d 
1323 (Fed. Cir. 2010) but it now contends that the Board need not address these 
appeals separately (app. br. at 64 n.16).  We conclude that, with the exception of 
entitlement to CDA interest, Supreme’s appeals are essentially redundant and the 
Board will focus on ASBCA No. 57884.     
 
 A.  The Burden of Proof 
 
 This fact pattern does not fit neatly into the government claim “box,” nor the 
contractor claim box.  As set forth in Modification Nos. P00010, P00012, P00043, and 
P00076, the parties agreed on tentative rates and agreed that DLA would reimburse 
Supreme using lower interim rates until DCAA completed its audit.  The dispute boils 
down to DLA’s contention that the interim rates were too high and resulted in 
overpayment versus Supreme’s contention that it has been underpaid and that the 
COFD I rates are too low.  While both parties want to adjust the rates, they both 
cannot simultaneously have the initial burden of coming forward with evidence, that 
is, the burden of production.  We look for an answer in general contract law, the 
congressional purpose in enacting the CDA, and the language in the SPV contract at 
award and in Modification Nos. P00010 and P00012 to determine which party had the 
burden of production in the first instance.   
 
We start with the basic proposition that the “‘party incurring the relevant costs 
is in the best position to adduce and establish such proof.’”  S. Nuclear Operating Co. 
v. United States, 637 F.3d 1297, 1304 (Fed. Cir. 2011) (quoting 11 Arthur L. Corbin & 
Joseph M. Perillo, Corbin on Contracts § 57.10 n.15 (rev. ed. 2005)).  The purpose of 
the CDA is to encourage resolution of disputes at the contracting officer level to save 
the parties the expense of litigation.  Maropakis, 609 F.3d at 1331.  A contracting 
officer’s review is facilitated by presentation of actual cost data.  
   
Once the contracting officer issued the verbal change order on August 26, 2005, 
Supreme was on notice that it needed to track its costs.  As the Federal Circuit has 
explained, the issuance of even a change order request “should signal to the prudent 
contractor that it must maintain records detailing any additional work . . . .”  Dawco 
Constr., Inc. v. United States, 930 F.2d 872, 881 (Fed. Cir. 1991), overruled on other 

 
50 
grounds by Reflectone, Inc. v. Dalton, 60 F.3d 1572 (Fed. Cir. 1995) (emphasis in 
original).  The use of actual costs “is preferred because it . . . ensur[es] that the final 
amount of the equitable adjustment will be just that—equitable —and not a windfall for 
either the government or the contractor.”  Id. at 882.  
 
The history of the negotiations demonstrates that Supreme understood that, in 
seeking POT, it was submitting an REA (findings 56, 62).  The SPV contract’s REA 
clause (findings 25; DFARS 252.243-7002), governed this process.  It provided that an 
REA request “shall include only costs for performing the change” and not “any costs 
that already have been reimbursed or that have been separately claimed.”  
FAR 252.243-7002(a).  The clause required certification of the REA because it 
exceeded the simplified acquisition threshold, or $100,000, per FAR 2.101 (2005).  
DFARS 252.243-7002(b).  Mr. Epp submitted multiple certifications, albeit using the 
more detailed CDA claim certification language (findings 55, 59).   
 
The REA clause granted the contracting officers broad discretion to insist on 
seeing Supreme’s actual costs.  The clause required Supreme to make “full disclosure 
of all relevant facts . . . including actual cost data . . . .”  FAR 252.243-7002(c) 
(emphasis added).  The clause thus required Supreme to be forthcoming.  By logical 
extension, it also prohibited Messrs. Epp and Alvarez from lying to the contracting 
officer, providing her misleading information, promising evidence that never appeared, 
or manufacturing a false crisis that jeopardized the food supply to American forces in a 
warzone (findings 34-61).   
 
 Even if the REA clause left any doubt as to the type of information the 
contracting officer could demand, such doubt is dispelled by Modification 
Nos. P00010 and P00012.  In these modifications, the parties agreed to verification of 
the preliminary rates and that there would be an audit that would examine actual costs 
– an audit that Mr. Orenstein professed to be eager to get started (findings 60, 65, 66).  
Reading the REA clause in conjunction with the modifications, Supreme agreed it 
would make “full disclosure of all relevant facts” to DCAA and produce “actual cost 
data.”  Pursuant to Modification Nos. P00010 and P00012, DCAA would verify 
whether Supreme’s books and records supported its representations of its costs and 
profit. 
 
 Supreme’s contention that the audit was intended to verify its assumptions and 
expectations is not consistent with general contract law, the REA clause, or 
Modification Nos. P00010 or P00012.  Supreme asks the Board to accept that there was 
a big misunderstanding about how its REA would be evaluated.  This would require us 
to accept several notions that border on the absurd, including:  1) Joseph Alvarez, 
despite working as a DLA contracting officer for eight years, did not know what a 
DCAA audit is and did not bother to find out; 2) that, despite being Supreme’s general 
manager for the SPV contract (finding 20), Mr. Alvarez failed to grasp the requirements 

 
51 
of the REA clause; 3) that Mr. Alvarez has no memory of key events such as his refusal 
to sign the REA after participating in a series of emails discussing how to inflate costs 
(findings 34-54); 4) that a reasonably prudent contractor performing a multi-billion 
dollar contract would not ascertain what it was getting into before it agreed to an audit; 
5) that Supreme was surprised when DCAA verified its actual costs, even though 
DCAA informed Supreme it would do precisely that before Supreme signed 
Modification No. P00012 (finding 65); and 6) when Stephen Orenstein read the CDA 
claim certification, he thought Mr. Epp was certifying only the pounds delivered 
(finding 69).  We decline Supreme’s invitation to accept these notions.   
 
 B. DLA’s Use of Cost Analysis 
 
 As we have found (finding 70), even if the government had agreed to an 
unusual audit where DCAA focused on Supreme’s assumptions and expectations 
rather than its actual costs, it would not have ended well for Supreme.  One can only 
imagine the displeasure of the auditors and contracting officer if they had read the 
internal Supreme documents identifying the true costs and profit margins and 
compared them to Supreme’s representations to DLA.  Whether DCAA had used 
traditional or non-traditional audit techniques, Supreme’s representations would not 
have survived the light of day.    
 
 Supreme’s reliance on our decisions in United Launch Services, LLC, ASBCA 
Nos. 56850, 57542, 57661, 16-1 BCA ¶ 36,483 (ULS II) and United Launch Services, 
LLC, ASBCA Nos. 56850, 57542, 57661, 14-1 BCA ¶ 35,511 is misplaced.  While 
that appeal involved a commercial items contract, the opinions in those appeals do not 
state that the contract contained the DFARS REA clause.  Nor did the parties agree to 
verification of the contractor’s costs through an audit, which makes it very different 
from these appeals.  The Board found that the contract did not define “equitable 
adjustment” and the meaning in the context of that contract was unclear.  ULS II, 16-1 
BCA at 177,765.  The Board found that the appellant had proven that the parties had 
negotiated equitable adjustments based on market conditions and not merely costs.  Id.  
The Board held that once the government made the change at issue, the commercial 
value of the services became a reasonable factor in determining the amount of the 
change.  Id. 
 
In these appeals, the Board does not believe that the term equitable adjustment 
is unclear.  For the reasons stated above, the REA clause and Modification 
Nos. P00010 and P00012 clearly set forth what Supreme was required to show for the 
tentative POT rates to become final.     
 

 
52 
 C.  Audit Standards 
 
 Supreme also contends that DCAA acted improperly when it applied 
FAR Part 31 standards to the audit.  As we have found, this is simply how DCAA 
conducts an audit (finding 84), something Mr. Alvarez knew or should have learned 
before signing Modification No. P00012.   
 
In its briefs, Supreme tries to make the case that it has been treated badly by 
overzealous auditors, but that is not the reality.  The Board agrees with Mr. Davis who 
testified that most of the areas in dispute involved sound business practices (tr. 7/111; 
finding 87) rather than compliance with what Supreme seems to view as obscure 
regulations.  Supreme’s problems were caused by its failures to record data in its 
accounting system and retain copies of basic records, including subcontracts and 
signed manifests, its refusal to produce fuel-related documents to DCAA, and its 
refusal to undergo an audit for the last three years of performance (findings 95-98, 
104-07, 186).  And the core problem was that many of Supreme’s numbers were 
unverifiable because they were simply the product of Mr. Epp’s fertile imagination.  
We reject Supreme’s complaints about DCAA. 
 
D.  Supreme has the Burden of Production 
 
Supreme had the burden of producing evidence of its costs to DLA and DCAA.  
That obligation carried through to proceedings before the Board, but Supreme did not 
furnish the Board with new evidence that would fill in the holes in its submission to 
DCAA and DLA.  Rather, Supreme has attempted to minimize its criminal conduct, 
complained about the difficulty of maintaining records, and urged the Board to accept 
internal documents that purport to substantiate its costs.  In essence, Supreme wants 
the Board to let it off the hook for failing to track its costs on a multi-billion dollar 
contract.  That would not be consistent with the law or the contract.  Nor would it be 
wise or just given the demonstrated fraud, the peculiar accounting practices, and the 
evidence of overstated flight times.  We hold Supreme to its proof.      
 
Supreme cites the Board’s lengthy decision in Kearfott Guidance & Navigation 
Corp., ASBCA No. 49271 et al., 04-2 BCA ¶ 32,757, which, like the present matter, 
involved a government demand for repayment after DCAA issued an audit report, in 
support of its contention that DLA has the burden of proof.  However, Kearfott was a 
more straightforward overpayment case than these appeals, which stem from 
Supreme’s failure to prove the underlying costs in an REA, an element that does not 
seem to have been at issue in Kearfott.      
 
We recognize that requirements imposed by the CDA, the FAR, and precedent 
sometimes complicate the basic plaintiff-defendant paradigm in which the plaintiff 
carries the burden of proof.  See Cost Issues:  Who Has the Burden of Proof?, 

 
53 
17 No. 10 Nash & Cibinic Rep. ¶ 54 (Oct., 2003); Government Claim or Contractor 
Claim:  Jockeying for Position, 7 No. 4 Nash & Cibinic Rep. ¶ 19 (Apr. 1993).  Thus, 
in some appeals the Board has recognized the government as the claimant but the 
contractor as the party with the burden of proof.  E.g., Kellogg Brown & Root Services, 
Inc., ASBCA No. 58081, 17-1 BCA ¶ 36,595 at 178,234, 178,240.  The Board views 
these appeals as comparable, because even though Supreme had the burden of 
production to support the costs in its REA, we still view the government as the primary 
claimant, as we discuss below.   
  
E.  DLA’s Affirmative Defenses 
 
 The hybrid nature of these claims leads to a second problem beyond 
determining which party has the initial burden of production:  to what extent can DLA 
assert affirmative defenses to defeat Supreme’s claims?   
 
1.  Which Party is the Claimant? 
 
In Supreme Foodservice GmbH, ASBCA No. 57884, et al., 16-1 BCA ¶ 36,387, 
the Board considered Supreme’s motions to dismiss or for summary judgment on 
DLA’s affirmative defenses.  The Board granted Supreme summary judgment on 
DLA’s affirmative defense that certain conduct related to JAFCO had been released in 
the False Claims Act settlement, but we otherwise denied Supreme’s motions on the 
affirmative defenses.  Id. at 177,400.  After development of a full record, we now 
consider an issue not addressed by the Board in that decision:  whether DLA can assert 
affirmative defenses when COFD I appears on its face to be a government claim?    
 
 DLA raises two broad categories of affirmative defenses:  first material breach 
and fraud in the inducement.  The former encompasses the guilty pleas arising from 
the JAFCO and bottled water fraud, and what DLA describes as false POT costs and 
profit rates, Supreme’s failure to cooperate in the DCAA audit, “systematic 
overcharging” on food items, failure to pass on rebates and discounts to DLA, failure 
to disclose violations of law, and conflict of interest violations based on Mr. Alvarez’s 
prior work at DLA (DLA answer to third amended compl. at pp. 71-85).  DLA’s fraud 
in the inducement theory includes JAFCO and false POT rates, as well as false market 
basket pricing (id. at pp. 85-88).  DLA also pled assumption of risk and failure to 
mitigate as affirmative defenses (id. at pp. 88-89) but it appears to have abandoned 
them. 
  
 Although not stated clearly in DLA’s briefs, DLA’s approach to the appeals is 
what could be described as “heads we win, tails you lose.”  It contends that it should 
prevail on the merits of the POT rates established by COFD I but, even if it loses, it 
can use its affirmative defenses to prevent Supreme from gaining an upward 
adjustment to the COFD I rates (gov’t reply br. at 40-41).  If DLA is correct, it would 

 
54 
appear that the contracting officer could have reduced POT rates to zero and 
demanded the return of the more than $1.7 billion in POT fees it paid Supreme, and 
Supreme would not be able to challenge it.  Or, to draw the argument out further, the 
contracting officer could have reduced the contract price from $8.8 billion to zero and 
Supreme would have no legal recourse.   
 
 Although the facts and procedural posture of these appeals are unusual, in 2017 
the Board issued a decision involving comparable facts.  Kellogg Brown & Root 
Services, Inc., ASBCA No. 56358, et al., 17-1 BCA ¶ 36,779 (KBR I) (aff’d Sec’y of 
Army v. Kellogg Brown & Root Services, Inc., 779 Fed. App’x. 716 (Fed. Cir. 2019) 
(KBR II)).  In those appeals, the Army paid KBR, a food service contractor in Iraq, 
$44 million for private security on its truck deliveries.  KBR II, 779 Fed. App’x. 
at 717-18.  The Army later decided that it should not have paid and made a series of 
withholdings to recoup the money.  Id.  KBR responded by submitting certified claims 
for each of the withheld payments, which KBR appealed to the Board based on 
deemed denials.  Id.  Although KBR sought the payment of money, the Board held, 
and the Federal Circuit agreed, that the facts presented a government claim.  KBR I, 
17-1 BCA at 179,247; KBR II, 779 Fed. App’x. at 721.  The Board further held that 
KBR’s submission of its own claims on the same subject served to start the running of 
CDA interest.15  KBR I, 17-1 BCA at 179,247; KBR II, 779 Fed. App’x. at 722. 
 
 A claimant cannot use an affirmative defense to avoid the consequences of its 
claim failing on the merits.  Engility, LLC, ASBCA No. 61281, 19-1 BCA ¶ 37,430 
at 181,923.  In other words, an affirmative defense is just that, a defense, not an 
offensive weapon.   
 
 We now consider what Supreme requests that the Board do with respect to the 
rates.  Because we have concluded that the contracting officer acted properly in 
establishing rates based on Supreme’s costs rather than on other contracts, we focus on 
the rates calculated by Supreme’s expert, Mr. Jeffrey DuVal, who calculated rates 
based on the costs Supreme submitted to DCAA.  Mr. DuVal has submitted a variety 
of calculations, including Supreme’s costs submitted to DCAA plus 16% profit and 
plus 35% profit (ex. A-5 at 7).  As discussed below, the Board believes that 
                                              
15 Further support for considering the present matter to be a government claim can be 
found in appeals where the government paid the contractor billing rates for 
indirect costs and later established final indirect rates.  When the government 
concludes that the billing rates were too high and demands repayment, the 
Board has treated such demands as government claims.  Quimba Software, Inc., 
ASBCA No. 59197, 19-1 BCA ¶ 37,350; DRS Global Enterprise Solutions, 
Inc., ASBCA No. 61368, 18-1 BCA ¶ 37,131; Pratt & Whitney Rocketdyne, 
Inc., ASBCA No. 58307, 13 BCA ¶ 35,259.  
 

 
55 
Mr. DuVal’s most realistic calculation is the 16% profit scenario.  But it suffices to say 
for the moment that even if none of the costs submitted to DCAA were questioned and 
35% profit then were added to those costs, the rates would be less than the 
Modification No. P00010 rates.  In other words, Supreme is not seeking an upward 
adjustment from Modification No. P00010’s “tentative agreed rates” (finding 62) 
based on Mr. DuVal’s analysis.  Moreover, based on actual costs, it lacks a 
non-frivolous argument that the Modification No. P00010 rates (or higher amounts) 
should be the final rates.  
  
  2.  Supreme’s Interest Claim 
 
 Because the Board agrees with many of the adjustments that the contracting 
officer made to Supreme’s rates, our determination that the facts primarily present a 
DLA claim might end the need for the Board to consider DLA’s affirmative defenses 
but for one consideration:  DLA has already withheld about $540 million from 
Supreme to recoup the overpayments (finding 184).  As detailed below, the Board 
makes relatively minor adjustments to the rotary and fixed wing rates, holds that 
Supreme is entitled to be paid POT fees for deliveries from the HRDC, and remands 
for an adjustment of the truck rates.  Due to the size of the DLA withholding, the 
Board believes that there is a significant possibility that DLA will have to return some 
money to Supreme.  If so, Supreme will be potentially entitled to CDA interest on the 
amounts withheld.  This interest, then, would fit into the “box” of being a contractor 
claim and, as such, would be subject to DLA’s affirmative defenses.  Because the lead 
appeal is now more than eight years old and there are about 40 other Supreme appeals 
that may be affected by this decision, we will address DLA’s affirmative defenses.  
We start with DLA’s contention that Supreme committed the first material breach due 
to the JAFCO and bottled water guilty pleas.   
 
  a. The Guilty Plea 
 
 “Prior material breach is a federal common law defense asserted when a party 
breaches a contract after another party has already breached the same contract.”  Laguna 
Construction Co., Inc. v. Carter, 828 F.3d 1364, 1369 (Fed. Cir. 2016) (citing 
Christopher Village, L.P. v. United States, 360 F.3d 1319, 1334 (Fed. Cir. 2004)).  The 
doctrine “can bar a contractor’s breach claim against the government, even if the 
government’s later-occurring breach happened without knowledge of the first breach.”  
Id.  The Federal Circuit has explained that “[a]pplication of the prior material breach rule 
in CDA proceedings at the Board comports with the Supreme Court’s instruction that the 
government must be able to ‘rid itself’ of contracts that are ‘tainted’ by fraud . . . .”  Id. 
at 1371 (citing United States v. Acme Process Equip. Co., 385 U.S. 138, 146 (1966); 
United States v. Miss. Valley Generating Co., 364 U.S. 520, 563 (1961)). 
 

 
56 
 But what happens if, like here, the government continues with the contract for 
years after it has been put on notice of the breach?  In some cases, the Federal Circuit 
has held that, when faced with a material breach, the non-breaching party has the 
choice to continue to perform under the contract or to cease to perform.  Conduct 
indicating an intention to continue the contract, in effect, waives the right to assert that 
the breach discharged an obligation to perform.  Barron Bancshares, Inc. v. United 
States, 366 F.3d 1360, 1383 (Fed. Cir. 2004).   
 
The breaching party bears the burden of proving such a waiver.  Westfed 
Holdings, Inc. v. United States, 407 F.3d 1352, 1360 (Fed. Cir. 2005).  A waiver may 
be express or implied.  An “[i]mplied waiver may be inferred by conduct or actions 
that mislead the breaching party into reasonably believing that the rights to a claim 
arising from the breach were waived.”  Id. at 1360-61; Long Island Savings Bank, FSB 
v. United States, 503 F.3d 1234, 1252 (Fed. Cir. 2007).    
 
The Board finds that by June 2010 DLA had ample evidence of Supreme’s 
extensive fraud.  The record indicates that after Mr. Rigby’s revelations concerning 
JAFCO in March 2009, Supreme admitted that it owned JAFCO and DLA referred the 
matter later that month for a criminal investigation (findings 196-98).  By June of 
2010, Mr. Epp had filed his qui tam complaint, his attorney had made his treasure 
trove of documents available to the government, and he had sat through exhaustive 
interviews with the government (findings 76, 214).  While DLA may not have known 
every detail of Supreme’s conduct by June 2010, it was well-aware of major 
components of it. 
 
b. DLA Did Not Waive Its Defense 
 
Despite DLA’s knowledge of at least some aspects of the fraud in 2009-10, we 
hold that DLA did not waive its defense for three reasons.  First, Laguna involved 
comparable facts in that the government in that appeal learned of a kickback scheme in 
January 2008 on a contract where the physical work was not done until sometime in 
2010.  Laguna, 828 F.3d at 1372.  The government obtained its first guilty plea by a 
Laguna project manager in October 2010.  Laguna Construction Co., Inc., ASBCA 
No. 58324, 14-1 BCA ¶ 35,748 at 174,945.  The parties continued with final 
accounting and auditing functions in the years that followed.  The government did not 
raise its first material breach defense to Laguna’s claim at the Board until after a final 
guilty plea by a Laguna senior executive in July 2013.  Laguna, 828 F.3d at 1367.   
 
The Federal Circuit held that it was reasonable for the government to wait to 
invoke the first material breach defense until after the senior executive’s July 2013 
guilty plea.  The court of appeals held that the government did not have a “known 
right” until after this guilty plea.  Laguna, 828 F.3d at 1372.  Because the government 
in that appeal had some notice of criminal conduct as early as 2008 and obtained a 

 
57 
guilty plea in 2010, Laguna means that the government may wait until the criminal 
process has concluded before asserting its first material breach defense.  
 
In these appeals, more than five years passed between the Rigby allegations 
concerning JAFCO fraud in March of 2009 and the 2014 guilty plea (finding 196, 
203).  The Board does not find it surprising that a complicated white-collar case 
involving a lot of paper, hundreds of millions of dollars, and a defendant with the 
means to mount a vigorous defense did not conclude until after the physical work on 
the contract had been completed.  We will discuss below the reasons DLA allowed 
Supreme to continue performing until December 2013, but we hold that Laguna 
supports DLA’s position. 
  
Second, we hold that DLA did not expressly waive its right to assert first 
material breach, nor did it impliedly waive it.  Rather, the evidence shows that the 
government carefully worked through the allegations.  As an immediate measure less 
than two weeks after receiving Mr. Rigby’s allegations, CO Valentin directed Supreme 
to stop including JAFCO costs in the Delivered Price, to provide a written explanation 
for the “discrepancies,” and to propose a remedy (finding 198; R4, tab 575).  The 
record indicates that Supreme hired outside counsel and thereafter mounted a robust 
but ultimately unsuccessful campaign to convince DLA and DOJ that the JAFCO 
charges were appropriate (R4, tabs 577, 619; app. supp. R4, tabs 1166, 1402A).  It was 
reasonable for DLA to take into account that Supreme sharply contested the fraud 
allegations before terminating the contract or taking other actions against Supreme.   
 
A key document with respect to DLA’s preservation of its rights is bilateral 
Modification No. P00092, signed in December 2010, which extended the contract for 
two years (finding 172).  DLA viewed the modification as an effort “to stop the 
bleeding immediately” (app. supp. R4, tab 1533) and it contained several provisions 
that served to protect the government’s interests: 
 
• Supreme agreed to disclose the price Supreme or its affiliates including 
JAFCO paid for the delivery of products; 
 
• Supreme agreed to accept service of process for civil and/or criminal actions 
initiated by the government and agreed to provide a registered/authorized 
agent to accept service; 
 
• Supreme agreed to waive defenses based on personal jurisdiction; 
 
• Supreme agreed to cooperate in any investigation relating to the contract, 
with cooperation defined as making officials available for interviews, 
production of records, “and other assistance requested by the Government”; 
 

 
58 
• Supreme agreed to submit its monthly reports with a statement signed by a 
senior official stating that all information in the report was true and 
accurate; and  
 
• When submitting catalog price changes, Supreme agreed to submit a 
statement from a senior official stating that to the best of the official’s 
knowledge and belief all pricing information in the change was true and 
accurate. 
 
(Finding 172; R4, tab 22 at 3-4)  The Board does not see anything in Modification 
No. P00092 that impliedly waived DLA’s rights.  Rather, the Board concludes that a 
reasonable contractor would have known that the government was preserving its 
rights. 
 
 Third, in Northern Helex Co. v. United States, 455 F.2d 546 (Ct. Cl. 1972) the 
Court of Claims discussed another exception to the waiver rule: where it is 
commercially reasonable to continue to perform.  The Court held that the 
non-breaching contractor did not waive its right to claim breach where continued 
performance was the only practicable choice based on the unique characteristics of its 
business.  Id. at 553-54. 
 
 The Board concludes that continuing with Supreme was DLA’s only practicable 
choice.  As we have found, in 2010, the contracting officer concluded that there was 
no other contractor at that time prepared to replace Supreme (finding 127).  When 
evidence of Supreme’s fraud accumulated in 2009-2010, DLA had to weigh it against 
the fact that it would take months to get a replacement contractor and that contractor 
might be less effective than Supreme.  If DLA had terminated Supreme, in the months 
that followed American troops would have gone from baked goods and fresh fruits and 
vegetables to operational rations.  DLA’s actions were reasonable under the 
circumstances.    
 
 While this may answer the question as to why DLA did not replace Supreme in 
2009-10, one might ask why DLA did not replace Supreme until after its contract 
expired in December 2013.  The answer is that DLA tried but Supreme did not go 
away quietly.  DLA issued a solicitation for the follow-on contract in April 2011 but 
Supreme successfully mired DLA in bid protests at the Government Accountability 
Office (GAO) and the Court of Federal Claims for more than two years.  Supreme 
Foodservice GmbH v. United States, 112 Fed. Cl. 402 (2013); Supreme Foodservice 
GmbH v. United States, 109 Fed. Cl. 369 (2013); Supreme Foodservice GmbH, 
B-405400.6, 2013 WL 1324949 (Comp. Gen. Mar. 27, 2013); Supreme Foodservice 
GmbH, B-405400.3, 2012 WL 5244576 (Comp. Gen. Oct. 11, 2012); Supreme 
Foodservice GmbH, B-405400.1, 2011 WL 5387717 (Comp. Gen. Oct. 31, 2011).  
Without dissecting all these decisions, it is safe to say that the bid protests forced DLA 

 
59 
to stick with Supreme far longer than it wanted.16  See, e.g., Supreme Foodservice, 
112 Fed. Cl. at 408.  Thus, we can hardly fault DLA for continuing with Supreme from 
2011-2013 when Supreme’s own bid protests forced DLA to do so.        
 
  c. The Bridge Contract 
 
 In one last twist, Supreme contends that the Board should treat the extensions 
from 2010-2012 and 2012-2013 as separate contracts to which the guilty plea 
affirmative defenses do not apply.  This is clearly not the case for the extension from 
2010 to 2012, which the parties implemented through a bilateral modification to the 
existing contract, despite later references to the extension as a bridge contract 
(finding 218; Supreme Foodservice GmbH, ASBCA No. 57884 et al., 16-1 BCA 
¶ 36,387 at 177,378).   
 
With respect to the final extension (finding 218), it is correct that DLA viewed 
it as a bridge contract.  Supreme Foodservice, 109 Fed. Cl. at 380.  As the name 
implies, bridge contracts bridge the gap between an expiring contract and a successor 
contract, often to maintain services because a GAO bid protest has triggered an 
automatic stay.  Innovation Development Enterprises of America, Inc. v. United States, 
600 Fed. App’x 743, 744 (Fed. Cir. 2015); SVD Stars II, LLC v. United States, 138 
Fed. Cl. 483, 486-87 (2018).   
 
The bridge contract addressed POT rates, providing for a 4.5% increase to the 
COFD I rates (finding 218).  The parties agreed that the payment of the increased rates 
was without prejudice to ASBCA No. 57884, and both parties reserved all of their 
legal rights and remedies regarding POT.  (R4, tab 194 at 2-3)  The bridge contract 
was otherwise very similar to the SPV contract.  It had the same parties, required 
Supreme to continue performing the same work, used the same contract number, 
incorporated by reference all terms and conditions and modifications of the SPV 
contract, continued the same numbering sequence for modifications, and provided that 
unresolved claims and REAs were not affected by the bridge contract (id. at 2; app. 
supp. R4, tabs 170-92).  
 
Supreme cites Afghanistan Trade Transportation Co., Ltd., ASBCA No. 59782, 
15-1 BCA ¶ 36,077, in support of its contention that DLA’s affirmative defenses 
arising under the SPV contract do not apply to the bridge contract.  That appeal 
involved a blanket purchase agreement (BPA) pursuant to which the Army issued 
multiple orders.  Id. at 176,163.  The Board held that the BPA itself was not a contract 
but that the orders were.  Id. at 176,166.  Because all of the orders were essentially 
                                              
16 Indeed, the fact that these bid protests lasted for so long and could not be dismissed 
out of hand illustrates the challenges that DLA would have faced had it 
attempted to terminate the contract for breach prior to the guilty pleas. 

 
60 
standalone contracts, the Board held that affirmative defenses relating to fraud on 
contracts entered into in 2008 did not affect contracts entered into in 2009.  Id.   
 
Afghanistan Trade does not govern the facts here.  The relationship of the 
individual task orders in that appeal does not speak to these facts.  The SPV and bridge 
contracts were inextricably intertwined for POT purposes and the parties have treated 
them as such.  In theory, it might be possible to treat the bridge contract as a separate 
contract, but that is not what Supreme has done, except in its efforts to avoid the 
government’s defenses.  To put a finer point on it, if the bridge contract were treated as 
a separate contract, Supreme would need to prove its costs during that contractual 
period, but it has not done so.  It would not be consistent (or fair) to allow Supreme to 
treat the contracts as separate for purposes of defeating DLA’s affirmative defenses 
but one and the same for purposes of proving its costs.   
 
d. Material Breach Conclusion 
 
The Board holds that Supreme committed the first material breach and has lost 
its right to CDA interest. 
 
    F.   POT Profit Rates 
 
Supreme contends that the rates established by the contracting officer are too 
low.  It requests, in decreasing order of preference, that the Board establish the 
following rates as final: 1) the Modification No. P00010 rates (app. br. at 68); 2) rates 
based upon an analysis of other government contracts by its expert, Jimmy Jackson 
(id. at 73); and 3) rates based on the costs Supreme submitted to DLA, “plus a fair and 
reasonable profit” (id. at 83) as calculated by its expert, Mr. Jeffrey Duval (ex. A-5).   
 
 Modification No. P00010 failed to specify a profit rate (finding 63).  The 
modification is not ambiguous; it simply failed to address a rather important issue.  We 
look to the Restatement for a tool to remedy the omission and then assess the parties’ 
proposed methodologies.  
 
RESTATEMENT (SECOND) OF CONTRACTS § 204, Supplying an Omitted 
Essential Term (1981), provides: 
 
When the parties to a bargain sufficiently defined to be a 
contract have not agreed with respect to a term which is 
essential to a determination of their rights and duties, a 
term which is reasonable in the circumstances is supplied 
by the court. 
 

 
61 
 Restatement § 204 cmt. b, How omission occurs, identifies a number of reasons 
why parties to a contract may fail to agree on an essential term, including one that 
accurately describes the situation here:  “because discussion of it might be unpleasant 
or might produce delay or impasse.”  Modification No P00010 fixed the immediate 
problem of getting Supreme paid for the work it had been doing for more than seven 
months, relieving the “enormous pressure” on Michael Epp and CO DiMeo, but at the 
expense of not ironing out important details (findings 54, 61, 63).    
 
Restatement § 204 cmt. d, Supplying a term, provides that in some cases the 
tribunal may engage in a “literal or purposive reading of the contract” to determine 
what the parties would have agreed to if the issue had been brought to their attention.  
However, where, like in these appeals, the parties were aware of the issue but simply 
failed to agree, the Restatement provides that the tribunal “should supply a term which 
comports with community standards of fairness and policy . . . .”    
 
The Board does not believe that Supreme’s first choice, the Modification 
No. P00010 rates, are in line with any community standard of fairness and public 
policy given the false statements that Supreme made to DLA in the negotiations and 
the gross disparity between those rates and Supreme’s costs.  Supreme’s second 
choice, that the Board apply the rates calculated by Mr. Jackson in his report using a 
price analysis, in some respects is worse because he calculates a fixed wing rate of 
$3.26 per pound, which is even higher than Modification No. P00010 and would give 
Supreme a profit rate of nearly 150%, even if none of the costs questioned by DCAA 
were removed (app. br. at 73-82 (citing ex. A-6 at ¶¶ 139, 143, 148-50); finding 116). 
 
Because we have held that the contracting officer acted within her discretion in 
basing the rates on Supreme’s costs, Supreme’s third method, which is cost based, is 
better than its first two.  Based on Mr. DuVal’s report, Supreme first requests its costs 
submitted to DCAA plus “at least 35% profit to fairly compensate Supreme for the 
increased operational and economic risk it took on in performing the POT mission . . . .”  
Second, Supreme requests a rate of 16%, which it views as “the floor.”  (App. br. at 87)   
   
As described above, the contracting officer applied the DFARS weighted 
guidelines to establish profit rates of 6.5% for rotary and fixed wing and 6% for truck 
(finding 152).  The Board has long recognized the use of weighted guidelines as an 
appropriate method of arriving at a reasonable profit to which a contractor is entitled.  
Doyle Constr. Co., ASBCA No. 44883, 94-2 BCA ¶ 26,832 at 133,463 (citing Norair 
Engineering Corp., ASBCA No. 10856, 67-2 BCA ¶ 6,619).  Accordingly, the 
weighted guidelines approach used by the contracting officer is firmly established in 
the law, and, based on its consideration of the factors described below, is consistent 
with community standards of fairness and policy.    
 

 
62 
 Of Supreme’s proposed rates, only the 16% profit rate is based on the weighted 
guidelines or remotely within the realm of what the Board would consider as 
reasonable given all of the circumstances.  Among other things, 35% would be three to 
four times the profit rates Supreme represented to CO DiMeo during the negotiations 
(finding 58) and more than double the maximum rate the contracting officer could 
award using the weighted guidelines.  Supreme could have informed DLA during the 
negotiations that it had to make a 35% profit if it was to perform POT, but given 
CO DiMeo’s resistance to profit rates in the low double digits, we are confident that 
Supreme would never have been given the POT work if it insisted on 35%.   
 
We will compare how Mr. Duval and the contracting officer reached their profit 
figures, along with the “normal” percentages listed in the guidelines, to determine why 
they reached such different conclusions.  DFARS 215.404-71-1 to 215.404-71-5 
(2005); ex. A-5 at 76. 
 
FACTOR NORMAL % COFD I % DuVAL % 
Performance Risk 5 6 (aviation) 
5.5 (truck) 
7 
Contract Type Risk Various  0.5 6 
Facilities Capital 
Employed 
N/A 0 0 
Cost Efficiency None 0 3 
TOTAL  6.5 (aviation) 
6 (truck) 
16 
 
 As can be seen, the differences starting with the highest are:  contract type risk; 
cost efficiency; and performance risk. 
 
 Contract type risk:  DFARS 215.404-71-3, Contract Type Risk and Working 
Capital Adjustment, contains a list of profit ranges for various types of contracts.  
DFARS 215.404-71-3(c).  Mr. DuVal used “firm-fixed-price, no financing” which has 
a normal value of 5% and a designated range of 4-6%.  Mr. DuVal correctly observes 
that DFARS 215.404-71-3(d) provides for evaluation of criteria such as length of 
contract, adequacy of cost data for projections, and economic environment.  
Mr. DuVal states in a footnote to his report with minimal elaboration that his 
evaluation of these factors led him to assign the maximum 6% value (ex. A-5 at 76).   
 
 The Board concludes that another provision in the regulation is of paramount 
importance here.  In the evaluation criteria paragraph, the regulation provides: 
 
Mandatory.  The contracting officer shall assess the extent 
to which costs have been incurred prior to the 
definitization of the contract action . . . .  When costs have 

 
63 
been incurred prior to definitization, generally regard the 
contract type risk to be in the low end of the designated 
range.  If a substantial portion of the costs have been 
incurred prior to definitization, the contracting officer 
may assign a value as low as zero percent, regardless of 
contract type.  
     
DFARS 215.404-71-3(d)(2) (emphasis added) 
 
 DLA paid Supreme a total of $1,767,473,638 in POT fees (app. PFF at ¶ 127; 
gov’t br. at 221).  CO Valentin crafted COFD I based on the period from the beginning 
of POT in late 2005 through September 30, 2011, during which DLA paid Supreme 
$1,383,807,545 in POT fees (finding 118).  Thus, at the time of definitization, 
Supreme had received 78.3% of its total payment for POT costs.  By any 
measurement, this would mean that “a substantial portion of the costs [were] incurred 
prior to definitization . . .” allowing her to assign a contract type risk value as low as 
zero percent.  In selecting 0.5%, CO Valentin complied with the regulation and acted 
within her discretion.  By contrast, we see no reasoned explanation for why Mr. DuVal 
selected the maximum 6% for contract type risk. 
 
Cost Efficiency:  Mr. DuVal credits Supreme with 3% of the maximum 4% 
increase in profit allowed under DFARS 215.414-71-5, Cost Efficiency Factor.  
Mr. DuVal does not explain his analysis in depth, but in a footnote to an exhibit to his 
second report, he cites Supreme’s construction of the HRDC as a cost saving for DLA.  
(Ex. A-5 at 76 n.6)   
 
 This “factor provides an incentive for contractors to reduce costs.”  
DFARS 215.414-71-5(a).  If the contractor demonstrates “cost reduction efforts that 
benefit the pending contract,” the contracting officer may increase profit by up to 
4 percent.  Id. 
 
The Board finds that, even if we accept for the sake of argument that Supreme 
implemented some discrete cost reductions, Supreme has not proven overall cost 
savings.  As evidenced by the guilty pleas, Supreme massively inflated costs on this 
contract.  The Board finds it rather brazen for a contractor which has pled guilty to 
defrauding the government by millions (including on POT deliveries) and which made 
untruthful representations to DLA about its POT costs, would contend that it is entitled 
to a higher profit rate because of its supposed cost efficiency.     
 
The Board holds that Supreme has not shown that the contracting officer erred 
when she refused to increase Supreme’s profit rate for cost efficiency.   
 

 
64 
Performance Risk:  There is less distance between the parties on this factor with 
the contracting officer at 6% for aviation and 5.5% for trucks (finding 152), while 
Mr. DuVal is at 7% (the maximum for this factor absent a technology incentive not 
applicable here).  The regulation provides for a designated range of 3% to 7% with a 
normal value of 5%.  DFARS 215.404-71-2(c).  Thus, both parties are above the 
normal value.  The factor considers “Technical - the technical uncertainties of 
performance” and “Management/cost control—the degree of management effort 
necessary—(i) To ensure that contr act requirements are met; and (ii) To reduce and 
control costs.”  DFARS 215.404-71-2(a).  
 
The regulation requires the contracting officer to assign a weight to the 
technical and management/cost control sub-factors.  DFARS 215.404-71-2(b).  
CO Valentin assigned a weight of 50% to each sub-factor, or a maximum of 3.5% each 
(R4, tab 1386 at 52-53), which Supreme has not challenged. 
   
The Board does not believe that a maximum 3.5% for management/cost control is 
warranted because Supreme’s management defrauded the government (finding 203-12).  
Among other things, the regulation provides that a value significantly below normal for 
this sub-factor may be in order if reviews by the agency “disclose unsatisfactory 
management and internal control systems . . . .”  DFARS 215.404-71-2(e)(3)(ii)(A).  We 
find that the criminal and False Claims Act cases disclosed unsatisfactory management 
and the DCAA audit and the Donald Anderson review uncovered inadequate internal 
controls (findings 89, 121, 203-12).   
 
Significantly below normal for this sub-factor would mean significantly below 
2.5% (one-half the normal 5% value for performance risk), which in the Board’s view 
would mean something less than 2%.  Anything below 2.5% for the management/cost 
control sub-factor would result in a performance risk value lower than that assigned by 
the contracting officer for rotary and fixed wing, and anything below 2% would have 
the same result for trucks, even if one assumes the maximum value of 3.5% for the 
technical sub-factor.   
 
The Board holds that Supreme has not shown that the contracting officer erred 
when she assigned a value for the performance risk factor of 5.5% for road and 6% for 
rotary and fixed wing.   
 
Overall Profit:  The Board rejects Supreme’s 16% and 35% profit calculations 
as unreasonable.  By contrast, the Board holds that the contracting officer established 
profit rates based on a reasoned analysis that was consistent with the law and 
community standards of fairness and policy. 
 
Finally, we observe that if one were looking for a middle ground between the 
contracting officer’s final rates and Supreme’s 16% profit rate, one might ask about 

 
65 
the last rates Supreme proposed to DLA before the parties entered Modification 
No. P00010, namely, 9% truck, 10% fixed wing, and 12% rotary (finding 58).  The 
answer is that there is no evidence that either party considered these rates binding (see, 
e.g., tr. 2/157, 18/160).  Neither party has asked the Board to establish these rates as 
final, and we decline to award relief neither party has requested.    
 
G. Helmand Regional Distribution Center (HRDC) 
 
As described above, the original contract required Supreme to make deliveries 
from its Kabul facility to four locations ranging in distance from the Marine Base in 
Kabul to Kandahar, about 300 miles away.  DLA compensated Supreme for its 
transportation costs in the Distribution Fees.  (Finding 24) 
 
There are probably many ways the parties could have priced POT fees.  One 
obvious possibility is that FOBs near Kabul would not have warranted any additional 
payment because there was no additional work compared to the original contract, 
while distant FOBs would have merited a substantial POT fee.  But when CO DiMeo 
negotiated the fees for DLA, she wanted simplicity to such an extent that she initially 
demanded one fee that would apply to rotary, fixed wing, and trucks (finding 179; 
tr. 1/103).  However, she ultimately agreed to one rate for each mode of transportation 
that made no distinctions based on distance or the degree of difficulty in accessing the 
FOBs (finding 62).   
 
Maps of the FOB sites added during the contract indicate that in 2005-06 DLA 
added a number of FOBs a relatively short distance from Kabul (finding 179).  DLA 
has never challenged the application of POT fees to these FOBs.  One might ask why 
these FOBs merited an additional POT fee but the other side of this issue is that for the 
same $0.48 per pound truck fee, Supreme had to deliver throughout Afghanistan.  
Regardless of whether Supreme or DLA got the best of this deal, that is what they 
agreed to in Modification No. P00010. 
 
COFD I clearly indicates that CO Valentin believed that paying POT fees on 
short truck trips was a bad deal for DLA: 
 
The [sites] listed below are those that are within one day of 
the HRDC and that have comparable distance and/or threat 
level as the original four destinations. There is no 
reasonable basis for additional cost for delivery to these 
sites beyond the Normal DF due to their proximity to the 
Supreme warehouse location. 
 
(R4, tab 111 at 4; finding 178) (emphasis added)  Because the exact same thing could 
be said for FOBs in the Kabul area, the Board believes this was a belated recognition 

 
66 
by DLA that Modification No. P00010 had some unpalatable aspects.  But the 
government cannot walk away from its obligations just because it made a bad deal.17  
The Board holds that Supreme is entitled to be paid for HRDC deliveries.   
 
Unlike the hybrid POT rate claims, the HRDC issue is a textbook government 
claim for which it bears the burden of proof.  The Board finds that DLA failed to prove 
its damages.  While CO Valentin testified that DLA was “potentially double-paying” 
for HRDC deliveries (finding 178), this bare assertion does not convince the Board 
that DLA double paid, any more than Mr. Orenstein’s testimony that DLA actually 
saved money, by itself, proves that DLA saved money.  Moreover, DLA’s failure to 
address Mr. Orenstein’s plausible assertion that security requirements resulted in 
deliveries close to the HRDC taking two days (finding 181), casts considerable doubt 
on the central tenet of DLA’s HRDC claim.   
 
H.  Minimum Weight 
 
Supreme continues to insist that it should be paid based on minimum weights 
(app. br. at 62; finding 78).  While the original contracting officer agreed to pay 
Supreme for minimum weights in the interim period, the Board has not seen any 
evidence that DLA agreed to include such a provision in the final rates.  The Board 
views the payment of minimum weights in the interim as a way to protect Supreme in 
case the preliminary rates proved to be inadequate if, for example, it had to make 
numerous small deliveries on helicopters.  Notwithstanding this protection, one can 
assume that the contracting officer did not intend for Supreme to run up its costs by 
sending out underutilized aircraft, but that appears to be what happened (finding 80).  
 
 The Board believes that the minimum weight issue receded once CO Valentin 
decided to calculate POT based on Supreme’s costs.  The final POT rate is Supreme’s 
costs divided by pounds.  If, for example, every fixed wing delivery below 5,000 
pounds were increased to 5,000 it would increase the number of pounds for which 
Supreme would be paid, but the final rate would be lower because Supreme’s costs 
would be divided by a higher number. 18   
 
                                              
17 The Board also observes that lower cost FOBs like those around Kabul or the 
HRDC would have lowered Supreme’s average cost and therefore would have 
resulted in a lower truck POT rate.  Thus, to the extent that there is a problem, it 
is at least partially self-correcting. 
18 A simple example: two 2,500 pound deliveries result in $10,000 in costs.  If the 
contractor were paid based on actual weight it receives $2 per pound ($10,000 ÷ 
(2,500 + 2,500)).  If it were paid using 5,000 pound minimums it would receive 
$1 per pound ($10,000 ÷ (5,000 + 5,000)).  With either method Supreme is paid 
$10,000.   

 
67 
 Accordingly, the Board concludes that minimum weights are not applicable to 
final POT rates calculated using actual costs. 
  
I. Distribution Fee Credit 
 
 In DLA’s view, the issue with respect to the Distribution Fee Credit “is not 
whether Supreme owes a credit, but how much credit is due” (gov’t br. at 186).  DLA 
acknowledges that the contracting officer calculated the Distribution Fee credit “in a 
less than ideal manner” (id.), but requests that the Board employ the jury verdict 
method to award damages.  However, it does not retreat to a more defensible number, 
but rather requests that the Board award the full $177,383,579 demanded in COFD I.  
With respect ASBCA No. 61361, in which the contracting officer demanded a further 
Distribution Fee reimbursement of $345,941,775.33, DLA states that it has discovered 
an error in its calculation and requests that the Board remand for the contracting 
officer to conduct a new quantum calculation (id. at 187, n.109).  
 
 The general rule is that the party seeking damages must prove them with 
“reasonable certainty.”  Precision Pine & Timber, Inc. v. United States, 596 F.3d 817, 
833 (Fed. Cir. 2010).  A claimant is not required to prove damages with absolute 
exactness, but its number must be more than a guess.  Id.   
 
This rule places DLA in an awkward position.  Because the most commonly 
litigated claims are contractor claims, government attorneys learn about reasonable 
certainty soon after taking the oath of office.  Thus, it is bit curious to see DLA 
prosecuting a claim of this size when the contracting officer has stated several times 
that it is “impossible” to calculate damages (finding 167).   
 
 The jury verdict approach is disfavored and may only be used when more exact 
methods cannot be applied.  Dawco, 930 F.2d at 880.  “In order to adopt the jury 
verdict method, ‘[the Board] must first determine three things:  (1) that clear proof of 
injury exists; (2) that there is no more reliable method for computing damages; and 
(3) that the evidence is sufficient for the Board to make a fair and reasonable 
approximation of the damages.’”  Grumman Aerospace Corp. v. Wynne, 497 F.3d 
1350, 1358 (Fed. Cir. 2007) (quoting Dawco, 930 F.2d at 880).  The Board holds that 
DLA has met the first prong of the test but not the second or third. 
 
 The Board has declined to award damages due to a failure of proof even when 
we found it “highly likely” that the contractor incurred costs because the contractor’s 
failure to produce evidence was not the result of a “justifiable inability” to produce 
such evidence but rather a lack of effort.  American Boys Construction Co., ASBCA 
No. 60515, 17-1 BCA ¶ 36,856 at 179,590.  The Board explained that “[w]e simply 
may not award a figure based upon speculation.”  Id.   
 

 
68 
 While we find it likely that there was some overlap between Distribution Fees 
and POT, DLA has given us very little to work with.  DLA’s 225-page opening brief 
covers many topics in almost a mind-numbing level of detail, but it devotes less than 
four pages of argument to Distribution Fees, a third of which cites precedent barring 
contractors from double charging the government, a point no one disputes.  Moreover, 
DLA does not address the discrete issue which we are most troubled about:  the 
original Distribution Fees must have contained the cost of transporting the cargo by 
truck to the original four bases, but DLA seems to have made a litigation decision not 
to pursue a claim for transportation costs.  Any temptation we have to formulate a jury 
verdict based on duplicate transportation costs is alleviated by DLA’s indifference to 
this matter.19 
 
 DLA largely relies on the 2008 audit, but as we have found, the conclusions of 
that audit with respect to Distribution Fees are, at best, dubious and DLA did not call 
the auditor as a witness (finding 158).  That audit was overcome by the events of 
Supreme’s 2010 proposal and the 2011 audit.  The second audit was much more 
thorough than the first (finding 85).  The Board found the auditors who testified to be 
credible and professional and it is therefore telling that they were unable to find any 
substantial duplication between Distribution Fees and POT (finding 161).  If there 
were over $177 million in duplicate costs in Supreme’s proposal, we believe these 
auditors would have found it.  We will go so far as to say that it is simply impossible 
from a mathematical perspective for there to be lurking in the audited $702 million an 
amount anywhere near the damages sought by DLA (findings 174-77).   
  
 A final option would be for the Board to craft an award based on the low end of 
Supreme’s internal estimates, or about 5% of the Distribution Fees to FOBs 
(finding 171).  But that just leads us to the dead end of:  5% of what number?  DLA 
does not know how much it paid for Distribution Fees for FOB deliveries and we 
cannot calculate 5% of an unknown amount (findings 169-70).  
 
 DLA’s claim with respect to Distribution Fees is denied for lack of proof of 
damages.  While DLA probably overpaid Supreme, it is not the Board’s role to relieve 
parties of the consequences of their litigation decisions.     
                                              
19 The Board acknowledges DLA’s contention that Supreme’s failure to produce cost 
information to DCAA is to blame for DLA’s inability to calculate the 
Distribution Fee credit (gov’t br. at 185-87).  However, DLA built much of its 
case on Supreme’s poor recordkeeping, so it is not clear whether Supreme has 
this information (see, e.g., findings 95, 98, 111, 121).  To the extent Supreme 
has such documents but failed to produce them to DCAA, we do not understand 
why DLA did not use the discovery process to compel production.  The Board 
also notes that DLA did not pursue alternatives such as expert testimony 
calculating the value of the overlap. 

 
69 
 
 J. Final Rotary Rates 
 
 The Board has accepted the contracting officer’s adjustments to the rotary wing 
rates with the exception of the 3.36% decrement based on the proposals Supreme 
obtained in 2010 (finding 134).  We revise the contracting officer’s accepted costs of 
$242,652,800 (finding 143) by adding the $6,852,984 amount of the decrement 
(finding 131).  This equals $249,505,784.  The price per pound is calculated by 
dividing this number by the combined rotary wing and rotary wing GFM actual 
pounds (finding 231) totaling 88,748,944: 
 
249,505,784 ÷ 88,748,944 = $2.81136622876324 
  
We add profit of 6.5% on this amount: 
 
 $2.81136622876324 + 6.5% = 2.994105033632851 
 
 Accordingly, we increase the COFD I rotary rate from $2.91 to $2.99.  We 
increase the rotary wing with GFM rate from $2.61 to $2.69.  Supreme is entitled to an 
additional 4.5% for the final year only (finding 218).  For the final year it is entitled to 
be paid $3.12 for rotary and $2.82 for rotary with GFM. 
 
 Based on our findings with respect to final weights (findings 235-37), Supreme 
is entitled to the following payments for rotary wing: 
 
 Dec. 2005 to Dec. 14, 2012:   $2.99 x 127,690,988 = $381,796,054.12 
 Dec. 15, 2012 to Dec. 14, 2013 $3.12 x 7,588,732 =     $23,676,843.84 
 
Gross rotary quantum is $405,472,897.96. 
 
 Supreme is entitled to the following payments for rotary wing with fuel 
provided as GFM: 
 
 Dec. 2005 to Dec. 14, 2012:   $2.69 x 58,638,241 = $157,736,868.29  
 Dec. 15, 2012 to Dec. 14, 2013 $2.82 x 5,336,476 =   $15,048,862.32 
 
Gross rotary with GFM quantum is $172,785,730.61. 
 
 DLA paid Supreme a total of $1,767,473,638 for POT (gov’t br. at 221; app. 
PFF ¶ 127).  However, the Board is not aware of any analysis that breaks down this 
number into time periods and modes of transportation and we cannot determine if 
Supreme has been over or under paid for rotary wing.  Accordingly, the Board 
remands to the parties for a calculation as to the net amount due a party after taking 

 
70 
into account DLA payments to Supreme and the subsequent DLA withholding of over 
$540 million from Supreme. 
 
 We now address a separate DLA request.  In its post-hearing brief, DLA asks 
the Board to establish a rate using only the amounts not questioned by DCAA in the 
second audit, and that we not include the upward adjustments made by the contracting 
officer (gov’t br. at 222-23).  It is true that we review COs’ decisions de novo and the 
government is not compelled to limit its arguments to the CO’s.  See Wilner v. United 
States, 24 F.3d 1397, 1401 (Fed.  Cir. 1994).  Nevertheless, we decline this request 
because the CO’s upward adjustments in COFD I were the result of a careful process 
where CO Valentin and her team made a good faith effort to ascertain Supreme’s 
actual costs (e.g., findings 128-29, 135-36).  DLA did not explain in its brief why all 
of this work should be abandoned, but it obviously leads to the question of whether the 
contracting officer made a mistake when she restored some of the costs questioned by 
DCAA.  During closing argument, the Board asked DLA counsel if the contracting 
officer erred by giving Supreme credit for the flights DCAA had questioned, the 
largest change she made.  Counsel answered rather succinctly:  “the contracting officer 
was not wrong.”  (Tr. 18/87-88)   
 
DLA has not made a reasoned argument as to why we should reject the 
contracting officer’s upward adjustments.  Rather, its change of heart is based on what 
seems to be exasperation with Supreme.  With the exception of the 3.36% decrement, 
the Board concludes that the analysis in COFD I and the price negotiation 
memorandum (finding 118) is the most reasonable and most convincing analysis that 
has been presented with respect to rotary and fixed wing flights. 
 
K. Fixed Wing Rates 
 
The Board has accepted the contracting officer’s adjustments to the fixed wing 
rates with the exception of the 3.36% decrement based on the proposals Supreme 
obtained in 2010 (finding 134).  We revise the contracting officer’s accepted costs of 
$74,933,450 (finding 143) by adding back the $1,167,205 decrement, which results in 
$76,100,655 during the audit period. 
 
$76,100,655 ÷ 95,198,825 actual pounds = $0.799386494528688 
 
$0.799386494528688 + 6.5% profit = $0.851346616673052 
 
As a result, we increase the COFD I rate of $0.84 for fixed wing to $0.85, plus 
4.5% for the final year only.  For the final year Supreme is entitled to be paid $0.89. 
 

 
71 
Supreme is entitled to the following payments for fixed wing: 
 
Dec. 2005 to Dec. 14, 2012: $0.85 x 157,066,864 = $133,506,834.40   
Dec. 15, 2012 to Dec. 14, 2013 $0.89 x 18,476,360   = $16,443,960.40 
 
Gross fixed wing quantum is $149,950,794.80.  The Board remands to the 
parties for a calculation as to the net amount due a party after taking into account DLA 
payments to Supreme and the subsequent DLA withholding of over $540 million from 
Supreme. 
 
L. Truck Rates  
 
The Board is unable to calculate a final truck rate because the contracting 
officer largely adopted a DCAA calculation that was a product of its EZ Quant 
application and which cannot be recreated by the Board.  As described above, the 
Board accepts the actions taken by the contracting officer and DCAA with the 
exception of the 20.17% decrement related to the bids Supreme obtained in 2007 
(findings 146-51).  The Board remands to the parties for a recalculation consistent with 
this decision. 
 
II. DLA’s Void Ab Initio Claim (ASBCA No. 59811) 
 
DLA contends that the contract is void ab initio and seeks repayment of all 
$8.8 billion it paid Supreme during the SPV contract.  As a fallback, it seeks 
repayment of the $1.7 billion in POT fees it paid Supreme.  DLA’s pursuit of this 
claim has been a bit uneven.  Among other things, it failed to question CO Valentin 
about it during a lengthy direct examination at the hearing and has failed to respond in 
its reply brief to important arguments made by Supreme in its opening brief.  
 
Supreme contends that there are fatal jurisdictional problems with the 
government’s claim.  First, DLA is effectively seeking damages based on a fraud 
counterclaim, but it cites no precedent in which we have awarded such damages.  DLA 
seems to view a declaration that the contract is void ab initio as a way to circumvent 
this jurisdictional hurdle, which leads us to Supreme’s second contention.  If we were 
to declare the contract void ab initio, then, we would lose jurisdiction to consider the 
appeal, since there would have been no CDA contract in being (which has been the 
result of previous matters involving such a finding before the Board, see ABS 
Development Corp., ASBCA No. 17-1 BCA ¶ 36,842).  In such circumstances, DLA 
does not explain how the Board would, nevertheless, retain jurisdiction to order 
Supreme to pay DLA either $8.8 or $1.7 billion.  (App. br. 106-07, 123-25)  DLA cites 
no precedent in which we have done so.  Moreover, DLA does not address a rather 
important consequence if we held the contract to be void ab initio: we would be unable 

 
72 
to address the government’s contract claims.  DLA failed to respond to Supreme’s 
arguments in its reply brief.  
 
 In addition to the jurisdictional hurdles discussed above, we have other reasons 
to reject DLA’s void ab initio claim.  In Kellogg Brown & Root Svs., Inc. v. United 
States, 728 F. 3d 1348 (Fed. Cir. 2013) (KBR), the Federal Circuit rejected what was, 
perhaps, a more compelling case to find a contract void ab initio.  In that case, the 
government had a less ambitious agenda: it sought merely to void a subcontract.  Yet, 
it had proof that appears to be more straightforward than anything DLA has presented.  
Specifically, the government demonstrated that the subcontractor in that case paid 
bribes and kickbacks to KBR officials who worked to override the company’s initial 
decision to award the work to a different subcontractor.  The Federal Circuit 
nevertheless rejected the government’s claim, accepting a finding by the Court of 
Federal Claims that KBR most likely would have awarded the subcontract without the 
intervention of its corrupted officials.  The court of appeals held, therefore, that the 
government failed to prove a causal link between the illegality and the contract 
provision.  KBR, 728 F.3d at 1371-72 (citing Godley v. United States, 5 F.3d 1473, 
1476 (Fed. Cir. 1993)).20     
 
 DLA relies on Godley and a case cited in that opinion, United States v. 
Mississippi Valley Generating Co., 364 U.S. 520 (1961), but as the Federal Circuit 
explained in Godley, both of these cases involved agency officials involved in the 
award who had been bribed or had a conflict of interest.  Godley, 5 F.3d at 1475-76.  
No such facts are present in this appeal.21  
 
 DLA contends that if CO DiMeo had known that Supreme was inflating prices 
in the Modification No. P00010 negotiations, she would not have signed the 
modification.  This is a fair point:  CO DeMeo would not likely have signed the 
modification as written had she known it was inflated.  But, by the same token, if the 
                                              
20 DLA contends that the Federal Circuit erred in KBR (see gov’t br. at 190, n.110).  
Needless to say, we will follow our reviewing court’s decisions. 
21 In its brief, DLA makes three void ab initio arguments:  1) Supreme fraudulently 
induced Modification No. P00010 by making false statements about costs; 2) it 
fraudulently induced this modification by concealing JAFCO; and 3) it 
fraudulently induced DLA to enter the contract by manipulating market basket 
prices (gov. br. at 188-99).  DLA also contended that Supreme committed the 
first material breach due to Mr. Alvarez’s conflict of interest (an issue we did 
not reach above because we agreed with DLA that Supreme committed the first 
material breach due to the criminal convictions) (gov. br. at 215-21).  But in the 
section of its brief where it lays out its void ab initio arguments (gov. br. 
at 188-99) DLA does not mention Mr. Alvarez or contend that his conflict of 
interest made the contract void ab initio.    

 
73 
contracting officer in KBR had known about the bribes and kickbacks, surely he would 
have taken action.  The lesson of KBR is that not every fraudulent or corrupt action 
gives rise to a void contract, even when there is bribery.   
 
DLA has used a lot of time in these appeals contending that it should not be 
held to have waived its right to claim first material breach because Supreme was the 
only option for POT delivery (e.g., gov. reply at 46 (“Supreme’s brief is mistaken that 
‘numerous viable alternatives existed.’ App. Br., at 101.  There were none. In fact, 
Supreme even agreed and signed Modification 92 that explicitly stated that Supreme is 
the ‘only’ source available that ‘will satisfy agency requirements.’”))  At the time of 
Modification No. P00010 execution in 2006, after DLA’s abandonment of host nation 
trucking, there is little reason for us to believe that DLA had a good alternative to 
Supreme.  CO DiMeo was clearly not satisfied with the cost information Supreme 
provided during the negotiations and Supreme’s failure to provide the information 
delayed execution of the modification.  In other words, Supreme obtained POT in spite 
of its deception, not because of it, a situation roughly analogous to KBR, where the 
Court of Federal Claims found that KBR would have made the subcontract award 
without the bribery.  KBR, 728 F.3d at 1371-72.  The absence of a corrupt action that 
caused CO DiMeo to sign Modification No. P00010 (or the original contract) clearly 
distinguishes these facts from cases where the contract award was tainted by bribery.22  
 
 The inescapable conclusion from KBR and Godley is that DLA is attempting to 
shoehorn this case into a very narrow rule.  This does not let Supreme off the hook and 
the government’s use of other fraud statutes resulted in about $390 million in fines, 
forfeitures, restitution, attorney fees, and a False Claims Act settlement.  The 
government’s exhaustion of its traditional remedies and DLA’s desire to have a third 
bite at the apple have led it to rely on cases that are inapposite. 
 
 Finally, we conclude by stating that DLA’s request for an additional $8.8 or 
$1.7 billion does not square with any traditional measure of damages.  While it is 
undisputed that Supreme committed fraud, it is also undisputed that Supreme delivered 
more than three billion pounds of quality food that has been consumed by U.S. forces.  
Supreme successfully delivered that food in some of the most dangerous places on 
earth.  We see no basis for awarding DLA any relief beyond that which we have 
awarded in this opinion or that which it obtained in the district court. 
 
                                              
22 Another distinguishing fact is that Modification No. P00010 left its prices 
contingent upon verification, which certainly diminishes (though not entirely) 
the effects of the misrepresentation. 
 

 
74 
CONCLUSION 
 
 The Board sustains ASBCA Nos. 57884 and 61361 in part and denies them in 
part.  The Board denies ASBCA Nos. 58666 and 59636 with respect to Supreme’s 
claim for interest, otherwise they are moot.  The Board denies ASBCA No. 59811. 
 
 Dated:  May 27, 2020 
 
 
 
MICHAEL N. O’CONNELL 
Administrative Judge 
Armed Services Board 
of Contract Appeals 
 
I concur 
 
 
 
 I concur 
 
RICHARD SHACKLEFORD 
Administrative Judge 
Acting Chairman 
Armed Services Board 
of Contract Appeals 
 J. REID PROUTY 
Administrative Judge 
Vice Chairman 
Armed Services Board 
of Contract Appeals 
 
 I certify that the foregoing is a true copy of the Opinion and Decision of the 
Armed Services Board of Contract Appeals in ASBCA Nos. 57884, 61361, 58666, 
59636 and 59811, Appeals of Supreme Foodservice GmbH, rendered in conformance 
with the Board’s Charter. 
 
 Dated:  May 28, 2020 
 
       
  
PAULLA K. GATES-LEWIS 
Recorder, Armed Services 
Board of Contract Appeals