ARMED SERVICES BOARD OF CONTRACT APPEALS 
 
 
OPINION BY ADMINISTRATIVE JUDGE WOODROW  
 
This appeal concerns a cost-plus-fixed-fee, level-of-effort task order issued 
to Peraton, Inc. (Peraton or appellant) for technical systems engineering support 
services for the Navy’s Fleet Systems Engineering Team (FSET).  The Navy issued 
the FSET I task order under the Seaport Enhanced (Seaport-e) Multiple Award 
Contract vehicle, an indefinite delivery, indefinite quantity (IDIQ) contracting 
mechanism designed to streamline service acquisition for the Navy. 
 
This appeal is being conducted pursuant to the Board’s Rule 11 procedures, 
which permit the parties to waive a hearing and submit the matter for decision on the 
written record.  Pursuant to Rule 11, the Board decides the weight to be given any 
evidence and may make findings of fact on disputed facts.  Board Rule 11(d).  This 
proceeding determines only Peraton’s entitlement to the claimed costs, not the specific 
amounts. 
 
This appeal involves identical legal issues as the appeals of Vectrus Systems 
Corporation (Vectrus) in ASBCA Nos. 62685 and 62949, involving a successor 
contract, known as the FSET II contract.  Peraton and Vectrus share the same counsel 
and the Vectrus appeal was briefed on the same schedule pursuant to Board Rule 11. 
 
The central dispute is whether Peraton is entitled to its full fixed fee based on 
the Navy’s initial estimated hours, despite the Navy’s actual requirements being 
substantially lower.  Peraton contends its fixed fee represents the agreed-upon profit, 
Appeal of - )  
 )  
Peraton, Inc. ) ASBCA No. 62853 
 )  
Under Contract No. N00178-05-D-4395 )  
   
APPEARANCES FOR THE APPELLANT: Kevin P. Mullen, Esq. 
Caitlin A. Crujido, Esq. 
    Morrison & Foerster LLP 
    Washington, DC 
 
APPEARANCES FOR THE GOVERNMENT: Allison M. McDade, Esq. 
    Navy Chief Trial Attorney 
  Devin A. Wolak, Esq. 
  Trial Attorney 

2 
while the Navy maintains it is obligated to pay only for actual costs plus a fee 
proportionate to the work performed. 
 
 We conclude that Peraton has been paid its fee in accordance with the express 
terms of the contract and that it is not entitled to any additional fee.  For the reasons 
stated below, we deny the appeal. 
 
FINDINGS OF FACT  
 
I. The FSET I Contract 
 
1.  On May 31, 2005, the Navy awarded Contract No. N00178-05-D-4395 
to ITT Industries, Inc., Systems Division (R4, tab 107 at GOV7508).  ITT Industries 
is a corporate predecessor to the appellant, Peraton, Inc.  This contract is known as the 
“FSET I contract.”  The FSET I contract is part of the multiple award Seaport 
Enhanced (Seaport-e) contract vehicle designed to streamline acquisition for the Navy, 
United States Marine Corps, and other Navy activities (id. at 7515). 
 
2.  The FSET I contract is an indefinite-delivery, indefinite quantity contract 
with a minimum government obligation of $2,501 (id. at 7509, 7513, 7515).  It 
contemplates the issuance of multiple task orders requiring the provision of “qualified 
personnel, materials, facilities, equipment, test instrumentation, data collection and 
analysis hardware and software, and other services that will support the Navy in the 
execution of their missions” in 22 specified fields of expertise (id. at 7515-19). 
 
3.  The terms and conditions set forth in the FSET I contract apply to all task 
orders issued pursuant to the contract (id. at 7524).  The contract incorporates Federal 
Acquisition Regulation (FAR) 52.216-18, ORDERING (OCT 1995), which states that 
“[i]n the event of a conflict between a delivery order or task order and this contract, 
the contract shall control” (id. at 7553). 
 
4.  The FSET I contract permits the award of cost-plus fixed-fee IDIQ orders 
(id. at 7525).  A “cost-plus fixed-fee” contract is a cost reimbursement contract that 
provides for payment to the contractor of a negotiated fee that is fixed at the inception 
of the contract.  The fixed fee does not vary with actual cost, but may be adjusted as a 
result of changes in the work to be performed under the contract.  FAR 16.306(a). 
 
5.  FAR 16.306(d) describes two types of cost-plus-fixed-fee contracts:  
completion and term.  Completion contracts define a specific deliverable and budget, 
allowing for increased effort without increased fee if the project goes over budget.  
The FSET-II task order is “term” form contract, meaning that the contract defines a 
level of effort over a specific time, with payment upon satisfactory completion of that 
period.  FAR 16.306(d). 

3 
6.  The FSET I contract provides for the issuance of “term” task orders, which it 
describes as follows: 
 
The term form [of task order] describes the scope of work 
in general terms and obligates the contractor to devote a 
specified level of effort for a stated period of time.  Under 
this form [of task order], if the performance is considered 
satisfactory by the Government, the fixed fee is payable 
at the expiration of the agreed-upon period and upon 
contractor certification that the level of effort specified in 
the order has been expended in performing the contract 
work. 
 
(R4, tab 107 at 7525) 
 
7.  The FSET I contract includes clause SEA 5252.216-9122, LEVEL OF 
EFFORT (DEC 2000).  Subsection (a) of the clause states: 
 
(a) The Contractor agrees to provide the total level of 
effort specified in the next sentence in performance of the 
work described in Sections B and C of this contract.  The 
total level of effort for the performance of this contract 
shall be (to be completed for each order) total man-hours 
of direct labor, including subcontractor direct labor for 
those subcontractors specifically identified in the 
Contractor’s proposal as having hours included in the 
proposed level of effort. 
 
(Id. at 7526) (emphasis in original)  Pursuant to this clause, the contractor agrees to 
dedicate a specific number of hours (level of effort or LOE) to the project (as detailed 
in Sections B & C of the contract, which describe what work needs to be done).  This 
includes hours worked by any subcontractors the contractor uses.  This number will be 
filled in when each specific order is placed. 
 
8.  Subsection (e) of clause SEA 5252.216-9122 addresses when the contractor 
accelerates the work.  It provides that, if the contractor foresees exhausting the 
allocated hours (level of effort or LOE) before the contract end date, it must notify the 
Task Order Contracting Officer in writing, proposing an acceleration plan at 
no additional cost or fee, along with a proposal for continued work through the 
contract term.  If the contracting officer (CO) approves the proposal, then it becomes a 
binding agreement via contract modification.  Id. at 7527 
 

4 
9.  Subsection (f) of SEA 5252.216-9122 addresses when the government 
accelerates the work.  It provides that the CO can order the contractor to speed up the 
work and use all the budgeted hours before the contract’s end date.  This order will 
specify how much faster the work needs to go and the new, shorter deadline.  The 
contractor has five days to acknowledge the order.  Id. at 7527. 
 
10.  Subsection (g) addresses when the actual hours are less than the budgeted 
hours.  Under subsection (g) of SEA 5252.216-9122, if the contractor does not use all of 
the budgeted hours, the CO can either reduce the contractor’s profit proportionally to the 
unused hours or make the contractor keep working until all the hours are used up, without 
paying any extra fee.  “If the total level of effort specified in paragraph (a) above is not 
provided by the Contractor during the period of this contract, the Task Order Contracting 
Officer, at its sole discretion, shall either (i) reduce the fee of this contract” pursuant to 
the following formula: 
 
Fee Reduction = Fee (Required LOE – Expended LOE) 
     Required LOE 
 
Subsection (g) further states the CO alternatively may “require the contractor to 
continue to perform the work until the total number of man-hours of direct labor 
specified in paragraph (a) above shall have been expended, at no increase in the fee of 
this contract.”  (R4, tab 107 at 7527) 
 
11.  The FSET I contract requires the contractor to perform detailed accounting 
work and wrap-up “[w]ithin 45 days after completion of the work under each 
separately identified period of performance hereunder . . . . [including a calculation of] 
the appropriate fee reduction in accordance with this clause.”  Id. at 7528. 
 
12.  The FSET I contract incorporates FAR 52.232-32 Performance Based 
Payments, which provides in pertinent part: 
 
(2) If at any time the amount of payments under this 
contract exceeds any limitation in this contract, the 
Contractor shall repay to the Government the excess.  
Unless otherwise determined by the Contracting Officer, 
such excess shall be credited as a reduction in the 
unliquidated performance-based payment balance(s), after 
adjustment of invoice payments and balances for any 
retroactive price adjustments. 
 
Id. at 7555. 
 

5 
13.  The FSET I contract specifies that responses to task order solicitations must 
include, at a minimum (and among other things) “a detailed cost per hour and the 
applicable fixed fee per hour of all resources required to accomplish the task as set 
forth in the TO” (id. at 7534). 
 
14.  The FSET I contract imposes an 8 percent cap on any fee applied to task 
orders (id. at 7541 (“Maximum Pass Through Rates”)). 
 
II. The Solicitation and Appellant’s Proposal 
 
15.  On March 20, 2013, the Space and Naval Warfare Systems Command
1 
(SPAWAR) issued Solicitation No. N00024-13-R-3069 under the FSET I contract, 
seeking competitive offers to provide technical systems engineering support (R4, tab 1 
at 1-2). 
 
16.  The solicitation described a cost-plus-fixed-fee, level-of-effort task order 
with a one-year base and two one-year options, plus two possible award term years for 
exceptional performance (id. at 3-4, 17).  The Navy provided estimated direct labor 
hours for each year, requiring offerors to calculate their fixed fee and resulting hourly 
rate based on those hours (id. at 4-5).  This hourly rate, derived by dividing the total 
proposed fixed fee by the total estimated labor hours, would be used for billing and 
payment.  Id. 
 
17.  Section L-2 of the solicitation states that the actual hours may differ from 
the estimated labor hours: 
 
This estimate provides the number of hours the contractor 
will be required to perform during contract performance; 
however, actual contract performance may vary from this 
estimate.  Accordingly, the Government cannot guarantee 
the contractor will perform the estimated hours shown for 
either the individual labor categories or the total estimated 
hours. 
 
Id. at 58. 
 
 
1 On June 3, 2019, SPAWAR was changed to Naval Information Warfare Systems 
Command, or NAVWAR for short to align its identity with the mission of 
“supporting naval warfare from seabed to space.”  
https://www.public.navy.mil/navwar/Atlantic/Documents/AboutUs/191212_NI
WCAtlantic_CommandOverview.pdf 

6 
18.  The Performance Work Statement is attached to Section J of the solicitation 
(R4, tab 200 at A_000001).  The Performance Work Statement repeatedly advises 
offerors that the Navy’s actual requirements under the Task Order will be determined 
and filled on an “emergent” basis and as requested by various authorized government 
personnel (id. at A_000003-10).  The Performance Work Statement requires the 
contractor to provide a variety of specified technical services at the direction of the 
government official or employee authorized to give direction under the FSET I task 
order (R4, tab 4 at A000003-9). 
 
19.  The solicitation included a deadline for offerors to submit questions and 
Peraton did not submit any questions (R4, tab 1 at 64, tab 268, Maureen DiGiacomo 
dep. tr. at 60-61).  Vectrus did not submit any questions because it was concerned that 
doing so would put it at a competitive disadvantage (DiGiacomo dep. tr. at 60-61). 
 
20.  Peraton’s May 30, 2013 proposal followed the solicitation’s pricing 
methodology (R4, tab 105.2 at 7499).  Peraton calculated its total estimated labor 
costs, including subcontractor costs, for each potential contract year (id.).  It then 
applied a 6% fee to its own labor costs and a 3% fee to subcontractor labor costs, 
summing these amounts to determine its total proposed lump-sum fixed fee per year 
(id.).  Peraton then divided this lump-sum total fixed fee by the Navy’s total estimated 
labor hours to arrive at an hourly rate for billing (id.). 
 
III. The FSET I Task Order 
 
21.  On September 16, 2013, the Navy awarded Peraton the FSET I task order 
(R4, tab 34 at 395). 
 
22.  Section B-3 of the Task Order, entitled “Fee Determination and Payment 
(Level of Effort),” sets forth the estimated hours for each contract period and describes 
how the fixed fee will be paid (id. at 398). 
 
23.  Subsection (a) of Section B-3, entitled “Total Estimated Hours,” states that 
the estimated hours presented in the subsection (d) table are “estimate[s].”  The Navy 
estimated between 333,880 and 351,760 hours for each performance period.  Id. 
at 398-99 
 
24.  The Navy built its estimate of the hours per performance period based on a 
number of factors, including planned strike group deployments and historical needs.  
The estimate was intended to be a ceiling or maximum number of hours per 
performance period.  (R4, tab 249, Paul Guerra dep. tr. at 18-20) 
 

7 
25.  Subsection (c) of Section B-3 addresses what happens when the CO 
decides to adjust the task order amount or the amount of estimated total hours.  It 
provides: 
 
If the contracting officer determines, for any reason, to 
adjust the task order amount or the estimated total hours 
set forth above, such adjustments shall be made by task 
order modification.  Any additional hours will be fee 
bearing, and the additional negotiated fee will be divided 
by the additional estimated hours to determine a new fee 
(applicable to the additional hours only).  If the fee for 
these additional hours is different from that of the original 
estimated hours, these hours shall be kept separate from 
the original estimated total hours. 
 
The estimated cost of the task order may be increased by 
written modification, if required, due to cost overruns.  
This increase in cost is not fee bearing and no additional 
hours will be added. 
 
(R4, tab 34 at 398) (emphasis added) 
 
26.  Section B-3(d), entitled “Payment of Fee,” explains how the fixed fee will 
be paid to the contractor.  It incorporates into the task order appellant’s proposed fixed 
fee and fee per direct labor hour for each year by Contract Line Item Number (CLIN) 
in a table as follows: 
 
TABLE CLIN Fixed Fee Hours Fee Per 
Direct Labor 
Hour 
Base Period 4001 $1,094,224.41 333,880 $3.2773 
Option Period I 7101 $1,125,151.70 346,580 $3.2464 
Option Period II 7201 $1,134,513.85 349,360 $3.2474 
Award Term I 7301 $1,137,321.30 350,560 $3.2443 
Award Term II 7401 $1,141,395.14 351,760 $3.2448 
 
It further states that the government will pay the contractor based on the hourly rate, 
subject to a 15% hold-back: 
 
The Government shall pay fixed fee to the contractor on 
each direct labor hour performed by the contractor or 
subcontractor, at the rate of [SEE TABLE] per labor hour 
invoiced by the contractor subject to the contract’s “Fixed 

8 
Fee” clause, provided that the total of all such payments 
shall not exceed eight-five percent (85%) of the fixed fee 
specified under the task order.  Any balance of fixed fee 
shall be paid to the contractor, or any overpayment of fixed 
fee shall be repaid by the contractor, at the time of final 
payment. 
 
Nothing herein shall be construed to alter or waive any of 
the rights or obligations of either party pursuant to the 
FAR 52.232-20 “Limitation of Cost” or FAR 52.232-22 
“Limitation of Funds” clauses, either of which is 
incorporated herein by reference. 
 
Section B-3(d) further provides that: 
 
The fee shall be paid to the prime contractor at the per hour 
rate specified in this paragraph regardless of whether the 
contractor or subcontractor is performing the work. 
 
The Government reserves the right to transfer unused 
ceiling from one period to another as needed. 
 
(R4, tab 34 at 398-99) 
 
IV. Performance Under the FSET-II Task Order 
 
27.  The Navy regularly collected information on potential jobs under the 
FSET I task order, primarily from SPAWAR and other eligible groups.  Customer 
needs, influenced by budgets and mission requirements, drove demand (Guerra dep. 
tr. at 11-13, 18-19; R4, tab 250, Luis Lopez dep. tr. at 9-12, 32-35).  The Navy would 
then request a rough order of magnitude (ROM) pricing and level of effort estimates 
from Peraton for the customer to review.  Approved jobs were added to the 
contractor’s workload.  (Guerra dep. tr. at 12; Lopez dep. tr. at 10-11) 
 
28.  In each performance period of the FSET 1 task order, the Navy’s actual 
requirements were lower than the estimates that had been provided in the solicitation 
and the FSET 1 task order itself (R4, tab 105.2 at 7503). 
 
29.  Beginning in May 2017, without informing the Navy, Peraton began 
preparing its ROM estimates by re-calculating its fee rate per direct labor hour using 
the level of effort it had determined to be appropriate under that year’s ROM process 
(R4, tab 254 at 1).  This resulted in a higher hourly rate for profit than set forth in the 
contract:  $4.11 instead of $3.2448 (id. at 3). 

9 
30.  The Navy remained unaware of Peraton’s unilateral fee adjustment until 
July 25, 2017, when Vectrus requested a meeting to discuss correcting the fee (id. 
at 1).  During an August 14, 2017, meeting, the Navy learned about Peraton’s position 
on the proposed adjustment and the fact that Peraton had been unilaterally adjusting 
its fee on recent ROM estimates (id. at 1-2). 
 
31.  On August 15, 2017, the Navy instructed Peraton to correct its ROM 
estimates to reflect the contractually stated hourly rate for profit (id. at 2).  Peraton 
then submitted additional ROMs on August 16, 2017, using its adjusted hourly rate for 
profit, but the Navy rejected them and reiterated its instruction (id.).  On August 17, 
2017, Peraton requested permission again to use its adjusted hourly rate for profit, but 
the Navy denied the request and again directed Peraton to resubmit using the 
contractually stated hourly rate for profit (id. at 2-3).  Finally, on August 18, 2017, 
Peraton complied with the Navy’s direction (id. at 3).  The Navy met with Peraton 
later that day to reinforce the requirement to use the contractually stated hourly rate for 
profit (id.). 
 
32.  The Navy paid actual fixed fees for each performance period that were 
approximately two-thirds of the original lump-sum fixed fee. 
 
Year Original Lump-Sum Fee Fixed Fee Paid 
Base Year $1,094,224 $829,815 
Option Year 1 $1,125,152 $767,995 
Option Year 2 $1,134,514 $779,642 
Award Term 1 $1.137,321 $750,798 
Award Term 2 $1,141,395 $719,838 
Extension $570,698 $271,312 
 
(R4, tab 105.2 at 7504) 
 
V. The Claim and Subsequent Appeal 
 
33.  On September 30, 2020, Peraton submitted a pass-through certified claim 
from Vectrus dated September 28, 2020 (R4, tabs 105.1, 105.2).  The claim sought 
$2,083,904, which represents the difference between the annual full fixed fee for each 
period of performance under the FSET I task order ($6,203,304), less that portion of 
the full fixed fee actually paid by the Navy pursuant to Section B-3(d) of the task order 
($4,119,400) (R4, tab 105.2 at 7498-505).  According to the claim, the base year 
performance period began on September 16, 2013, and ended on September 15, 2014.  
The final extension period began on September 16, 2018 and ended on March 15, 2019 
(id. at 7498). 
 

10 
34.  The CO denied the claim in a final decision dated February 10, 2021 (R4, 
tab 106).  On March 17, 2021, appellant filed a timely notice of appeal to the Board. 
 
DECISION 
 
I. Legal Standard 
 
This proceeding determines only Peraton’s entitlement to the claimed costs, 
not the specific amounts.  Pursuant to Board Rule 11(a), the parties have waived a 
hearing and submitted the matter for decision on the record.  While this expedites the 
process, Peraton retains the burden of proof.  The Board will weigh the evidence and 
make findings of fact, including on disputed facts.  See Board Rule 11(a), (d); U.S. 
Coating Specialties & Supplies, LLC, ASBCA No. 58245, 20-1 BCA ¶ 37,702 
at 183,031 (quoting Grumman Aerospace Corp., ASBCA No. 35185, 92-3 BCA 
¶ 25,059 at 124,886 n.13). 
 
II. Contract Interpretation 
 
 The fundamental question we must address is whether the Navy’s refusal 
to renegotiate the fixed fee constitutes a breach of contract when the Navy ordered 
only two-thirds of its estimated hours under the FSET-I task order. 
 
A.  The Contract Contains No Requirement to Renegotiate The Fixed Fee if 
 Actual Hours Fall Short of Estimated Hours 
 
Contract interpretation begins and ends with the contract language.  TEG-
Paradigm Env’t, Inc. v. United States, 465 F.3d 1329, 1338 (Fed. Cir. 2006)).  The 
contract should be read as a whole, harmonizing all parts and avoiding interpretations 
that render any part meaningless.  Precision Dynamics, Inc., ASBCA No. 50519, 05-2 
BCA ¶ 33,071 at 163,922; Hercules, Inc. v. United States, 292 F.3d 1378, 1381 (Fed. 
Cir. 2002).  A provision susceptible to multiple reasonable interpretations is 
ambiguous.  TEG-Paradigm, 465 F.3d at 1338.  
 
Peraton relies exclusively on Section B-3(c) of the FSET-II task order to 
support its argument that the contract imposes a mandatory duty to modify the contract 
if the actual hours are less than the estimated hours for a given performance period 
(app. br. at 11-12).  The first sentence of Section B-3(c) states:  “If the contracting 
officer determines, for any reason, to adjust the task order amount or the estimated 
total hours set forth above, such adjustments shall be made by task order modification” 
(finding 25) (emphasis added).  Peraton contends that the phrase “for any reason” 
creates a mandatory duty to modify the contract if the hours are less than estimated 
(app. br. at 12). 

11 
The plain language of Section B-3(c) states that a contract modification shall 
occur only “[i]f the contracting officer determines” that a modification is necessary.  
This gives the CO complete discretion to determine whether to modify the contract.  
The following phrase “for any reason” clarifies the breadth of that discretion.  Under 
appellant’s interpretation of Section B-3(c), the CO would be required to modify the 
contract – a position at odds with the provision’s plain language and with the CO’s 
discretion. 
 
When read in its entirety, Section B-3(c) addresses only what happens when the 
number of hours increases.  It explains that if more work is needed beyond the original 
estimate, a new fee will be calculated for these extra hours, and if that fee is different 
from the original fee, the extra hours will be tracked separately.  The total cost of the 
task order can be increased if costs go over budget, but this increase will not include 
any additional fee or hours.  (Finding 25) 
 
Section B-3(c) says nothing about what happens if the actual hours worked are 
less than the estimated hours.  There is no mention of a fee reduction or any other 
adjustment if fewer hours are needed.  Peraton acknowledges this fact, but insists that 
Section B-3(c) “contains no indication that the requirement for a modification does not 
also apply to a decrease in direct labor hours as well” (app. br. at 12).  However, the 
issue of decreased hours is addressed squarely in clause SEA 5252.216-9122(g) as we 
discuss next. 
 
B.  Section B-3(c) Must Be Harmonized With The Rest of the Contract 
 
 Section B-3(c) must be interpreted within the context of the entire contract.  LAI 
Servs., Inc. v. Gates, 573 F.3d 1306, 1314 (Fed. Cir. 2009), (quoting Hercules, Inc. v. 
United States, 292 F.3d 1378, 1381 (Fed. Cir. 2002) (contracts must be interpreted 
“‘to effectuate its spirit and purpose giving reasonable meaning to all parts of the 
contract’”). 
 
Peraton’s interpretation of Section B-3(c) ignores other provisions of the 
contract.  Specifically, Section B-3(c) addresses when the CO determines that the 
Navy’s needs are greater than the initial estimate for the period.  When the Navy’s 
actual needs are less than initially estimated, clause SEA 5252.216-9122(g) requires 
the CO to either reduce the fixed fee proportionally to the unused level of effort (LOE) 
or extend the contract term until the full LOE is used (finding 10).  The FSET I task 
order’s payment mechanism automatically implements the first option, paying a 
proportional fee for each direct labor hour invoiced (finding 26). 
 
Peraton argues that the “level of effort” clause is inapplicable, because it 
applies only when the contractor fails to provide the LOE, not the government (app. 
reply br. at 8).  We disagree.  Subsection (g) of SEA 5252.216-9122 states that fee 

12 
reduction applies “[i]f the total level of effort specified in paragraph (a) above is not 
provided by the Contractor during the period of this contract.”  Subsection (g) does not 
address causation and does not distinguish between whether the contractor or the 
government caused the level of effort to fall below the estimate.  While Peraton 
focuses on “by the Contractor,” the key phrase is “is not provided.”  The clause 
is broad enough to cover any situation where the total estimated level of effort is not 
ultimately performed, irrespective of whether the contractor was unable to perform or 
the government simply did not order the full amount of work. 
 
Thus, Peraton incorrectly interprets Section B-3(c) by ignoring clause 
SEA 5252.216-9122(g), which mandates a proportional fee reduction when the Navy’s 
actual needs are less than initially estimated, regardless of whether the contractor or 
the government caused the reduced level of effort. 
 
C.  Our Interpretation is Consistent With Cost-Plus Contracting Principles 
 
Our interpretation of Section B-3(c) is consistent with the overall structure and 
intent of a cost-plus contract.  These types of contracts are designed to shift the risk of 
cost fluctuations to the government, guaranteeing the contractor reimbursement for 
allowable costs.  See Fluor Enters., Inc. v. U.S., 64 Fed. Cl. 461, 463 (2005) (noting 
that in cost-plus fixed-fee contracts the government reimburses the contractor’s costs, 
shielding them from unexpected cost increases).  Peraton’s argument that it is entitled 
to profit based on initial estimates, even when significantly less work is required, 
would shift the risk back to the government, contradicting the fundamental purpose of 
a cost-plus contract.  Moreover, the automatic fee adjustment mechanism tied to actual 
labor hours invoiced already exists within the contract, further weakening the need for 
modification based on B-3(c). 
 
Our position is consistent with the Court of Federal Claims in Amtec Corp. v. 
United States, 69 Fed. Cl. 79 (2005), aff’d, 239 Fed. Appx. 585 (Fed. Cir. 2007).  In 
Amtec, the contractor argued it was entitled to the maximum fixed fee for unused labor 
hours in the option period of a cost-plus-fixed-fee contracts once the government 
exercised any portion of the option.  The court sided with the government, holding that 
the contract language clearly tied the fixed fee to the incremental labor hours actually 
exercised, not the maximum potential hours.  Amtec, 69 Fed. Cl. at 87. 
 
For these reasons, Peraton’s interpretation of Section B-3(c) as mandating 
renegotiation is unsustainable when considering the contract in its entirety. 
 
III. The Navy’s Estimated Level of Effort is Not a Guaranteed Minimum 
 
The estimated level of effort for each performance period set forth in Section B-
3(d) of the FSET-I task order is an estimate, not a guaranteed minimum (finding 26).  

13 
The solicitation was explicit on this point, stating that “actual contract performance 
may vary from this estimate” and that the “government cannot guarantee the contractor 
will perform the estimated hours shown for either the individual labor categories or the 
total estimated hours” (finding 17).  This also is consistent with the task order’s 
performance work statement, which explains that the Navy’s actual requirements 
under the task order will be determined and filled on an “emergent” basis and as 
requested by various authorized government personnel (finding 18). 
 
Estimates are not guarantees.  “Estimated contract requirements do not 
represent a guarantee or warranty and, normally, significant variances between 
estimated requirements and actual orders will not result in liability on the part of the 
government.”  Vectrus Sys. Corp., ASBCA No. 63444, 25-1 BCA ¶ 38,802 at 188,726 
(citing Hi-Shear Tech. Corp. v. United States, 53 Fed. Cl. 420 at 428-29 (2002), aff’d, 
356 F.3d 1372 (Fed. Cir. 2004)).  Moreover, there is no evidence that the Navy duped 
the contractor into unfairly low bid prices.  See, e.g., Rumsfeld v. Applied Cos., 
325 F.3d 1328, 1335 (Fed. Cir. 2003) (addressing whether the government’s incorrect 
estimates duped the contractor into unfairly low bid prices); noting “[w]here a 
contractor can show by preponderant evidence that estimates were ‘inadequately or 
negligently prepared, not in good faith, or grossly or unreasonably inadequate at the 
time the estimate was made[,]’ the government could be liable for appropriate 
damages resulting.”  (Quoting Clearwater Forest Indus., Inc. v. United States, 227 Ct. 
Cl. 386, 650 F.2d 233, 240 (1981); Am. Gen. Trading & Contracting, WLL, ASBCA 
No. 56758, 12-1 BCA ¶ 34,905 at 171,635. 
 
In practice, the Navy collected information on potential jobs from SPAWAR 
and other eligible groups and then approached Peraton for a “rough order of 
magnitude” for the job.  Once the customer reviewed the price and timeframe 
estimates, the Navy would add approved jobs to Peraton’s workload (finding 27).  This 
provided the Navy with the necessary flexibility in ordering work under the task order 
(gov’t resp. br. at 12).  As Mr. Paul Guerra, the Navy’s Assistant Program Manager 
testified, the Navy built its estimate of labor hours per performance period based on a 
number of factors, including planned deployments of Naval strike groups and the 
Navy’s historical needs.  He explained that the estimate was intended to be a ceiling or 
maximum number of hours per performance period (finding 24). 
 
In short, the solicitation clearly stated that the level of effort was an estimate, 
not a guarantee, eliminating any basis for Peraton to claim entitlement to a minimum 
level of work. 
 
IV. The Lump Sum Fixed Fee is a Maximum, Not a Guarantee 
 
By the same token, the fixed fee amount represents the maximum fee that 
Peraton could earn if the Navy used all of its estimated hours.  Because the contract 

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expressly stated that the fee would be paid on a per hour basis – the rate determined by 
dividing the total lump sum fee by the estimated hours – Peraton was aware that it 
would receive the full lump sum only if the Navy used all of its estimated hours. 
 
This payment mechanism ensured that Peraton would receive a profit on each 
hour worked.  It also conveniently provided a way to reduce the total fee proportional 
to the actual hours worked, consistent with SEA 5252.216-9122(g), which requires the 
CO either to reduce the fixed fee proportionally to the unused level of effort (LOE) or 
extend the contract term until the full LOE is used (finding 10). 
 
Peraton certainly understood the ramifications of the contract’s payment 
mechanism.  When it became clear that the Navy’s needs were significantly less than 
estimated, Peraton realized that it would not receive the total lump sum fee for the 
contract.  Beginning in 2017, without informing the Navy, it attempted to make up for 
this fact by preparing its rough order of magnitude estimates using a higher hourly rate 
for profit than set forth in the contract (finding 29).  By seeking to charge a higher 
hourly rate for profit than set forth in the contract, Peraton improperly attempted 
to make up some of the difference between its total lump sum fixed fee and the lesser 
amount it would receive based upon the contract’s payment formula (id.). 
 
Finally, FAR 16.306(d)(2) explains that in a cost-plus fixed-fee term form 
contract, the fixed fee is only fully recoverable if the contractor states “that the level 
of effort specified in the contract has been expended in performing the contract work.”  
48 C.F.R. § 16.306(d)(2).  Thus, the contractor cannot recover the total fixed fee 
unless it has completely performed the level of effort stated in the contract.   
 
Therefore, Peraton’s argument that it is entitled to the full lump sum fee, 
despite not performing the estimated level of effort, directly contradicts the express 
terms of the contract and applicable regulations. 
 
V. Whether Navy Has an Obligation to Revise its Estimated Hours if Actual Needs 
 Fall Short 
 
Peraton next argues that the negligent-estimate breach theory, supported by the 
Interior Board of Contract Appeals’ decision in Sanford Cohen & Assocs., IBCA 
No. 4239, 04-2 BCA ¶ 32,738, applies here because the Navy’s grossly overstated 
estimates denied Peraton its expected profit.  Peraton maintains that when the 
government grossly overestimates its needs, the basis of the contract pricing is 
undermined at the contractor’s expense.  (App. br. at 15)  According to Peraton, it is 
entitled to a renegotiation of the fees it received on the basis of what it would have 
earned had the Navy’s estimates more accurately reflected the known level of effort 
(id. at 15-16). 
 

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The Navy argues that the negligent-estimate breach theory is not applicable to 
cost reimbursement contracts, particularly when the contractor is not in a loss position.  
Instead, this theory is intended to address unrecovered costs in fixed-price contracts 
due to faulty estimates.  The Navy challenges Peraton’s reliance on Sanford Cohen, 
contending that the case is an outlier and has not been relied upon for a similar 
decision.  (Gov’t br. at 13-14; gov’t resp. br. at 7-8)   
 
We agree with the Navy.  The Federal Circuit has applied the negligent-
estimate breach theory only in situations involving fixed-price requirements contracts.  
See Agility Def. & Gov’t Servs. v. United States, 847 F.3d 1345, 1350-51 (Fed. Cir. 
2017) (applying the negligent-estimate breach theory to a fixed-price requirements 
contract).  The risk of underutilization in a fixed-price contract falls squarely on the 
contractor, justifying the need for an equitable adjustment when the government’s 
estimates are significantly off.  See Medart, Inc. v. Austin, 967 F.2d 579, 581 (Fed. Cir. 
1992) (“the risks associated with variance between actual purchases and estimated 
quantities are allocated to the contractor”).  This risk dynamic does not exist in a cost-
plus contract, which reimburses the contractor’s costs incurred plus a fixed fee.  See 
FAR 16.306(a). 
 
Our precedent has applied the negligent estimate breach theory only to 
requirements contracts, where the government must provide realistic estimates of its 
needs and can be held liable for damages if those estimates are negligently prepared.  
We have found no ASBCA appeal where this theory has been applied to indefinite-
quantity contracts or cost-reimbursement contracts.  To the contrary, our precedent 
holds that the government will not be held liable for a negligent estimate in an 
indefinite-quantity contract.  ABC Data Entry Sys., Inc., ASBCA No. 59865, 16-1 
BCA ¶ 36,557 at 178,049; Crown Laundry & Dry Cleaners, Inc., ASBCA No. 39982, 
90-3 BCA ¶ 22,993 at 115,481, aff’d, 935 F.2d 281 (Fed. Cir. 1991) (table). 
 
Finally, Sanford Cohen is not binding authority on the Board and we have 
found no examples of the Board following its precedent.  The Interior Board of 
Contract Appeals was abolished in 2007, with its functions transferred to the new 
Civilian Board of Contract Appeals (CBCA).  The ASBCA and CBCA operate 
independently, and decisions from one board are not binding on the other.  Nauset 
Constr. Corp., ASBCA No. 61673, et al., 22-1 BCA ¶38,052 at 184,769.  Each board 
has its own jurisdiction and authority to decide contract disputes within its purview, 
and their decisions are subject to review only by the appropriate appellate courts.  See 
28 U.S.C. § 1295.  The ASBCA operates under the Contract Disputes Act (CDA) and 
its own charter, which mandates that it decides matters independently.  CDA, 
41 U.S.C. § 7105. 
 

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Consequently, Peraton’s reliance on the negligent-estimate breach theory, 
which is inapplicable to cost-plus contracts and unsupported by binding precedent, 
provides no basis for relief. 
 
VI. Whether Peraton’s Claim With Respect to the First Performance Period is 
Timely 
 
 Lastly, the government contends that Peraton’s claim with respect to the base 
period of the contract is untimely, because it was submitted more than six years 
following the end of the performance period (gov’t resp. br. at 15).  Pursuant to the 
Contract Disputes Act, a contractor must submit its claim within six years of the 
accrual of that claim.  41 U.S.C. § 7103(a)(4)(A).  Here, Peraton’s claim states that the 
first period of performance under the FSET I task order ended on September 15, 2014 
(finding 33).  Peraton submitted its claim on September 30, 2020, more than six years 
later (id.). 
 
 Peraton disputes the government’s argument, contending that its claim did not 
accrue until final closeout of the FSET I task order’s final period of performance, 
reasoning that the Navy had the opportunity to adjust the level of effort in subsequent 
performance periods (app. reply br. at 11).  It relies on 48 C.F.R. § 33.201, which 
defines “accrual of claim” as “the date when all events, that fix the alleged liability of 
either the Government or the contractor and permit assertion of the claim, were known 
or should have been known.”  48 C.F.R. § 33.201. 
 
 Based upon our ruling denying the merits of Peraton’s claim, we have no need 
to reach the further question of whether Peraton’s claim with respect to the base period 
the contract is untimely. 
 
CONCLUSION 
 
The appeal is denied. 
 
 Dated:  July 10, 2025 
 
 
 
 
 
 
 
 
(Signatures continued) 
 
 
 
KENNETH D. WOODROW 
Administrative Judge 
Armed Services Board 
of Contract Appeals 

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I concur 
 
 
 
OWEN C. WILSON 
Administrative Judge 
Acting Chairman 
Armed Services Board 
of Contract Appeals 
 I concur 
 
 
 
 MICHAEL N. O’CONNELL 
Administrative Judge 
Vice Chairman 
Armed Services Board 
of Contract Appeals 
 
 I certify that the foregoing is a true copy of the Opinion and Decision of the 
Armed Services Board of Contract Appeals in ASBCA No. 62853,
 Appeal of Peraton, 
Inc., rendered in conformance with the Board’s Charter. 
 
 Dated:   
 
 
 
 
 
 
 
 
 
PAULLA K. GATES-LEWIS 
Recorder, Armed Services 
Board of Contract Appeals 


 
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