ARMED SERVICES BOARD OF CONTRACT APPEALS 
 
Appeal of -- ) 
 ) 
Aero Tech Services Associates, Inc. ) ASBCA No. 61682 
 ) 
Under Contract No. FA8106-17-D-0009 ) 
 
APPEARANCE FOR THE APPELLANT: Deborah Appel, Esq. 
   Law Office of Deborah Appel 
   Bronx, NY  
 
APPEARANCES FOR THE GOVERNMENT: Jeffrey P. Hildebrandt, Esq. 
   Air Force Deputy Chief Trial Attorney 
Isabelle P. Cutting, Esq. 
Capt Jacquelyn C. Fiorello, USAF 
  Trial Attorneys 
 
OPINION BY ADMINISTRATIVE JUDGE THRASHER 
 
Aero Tech Services Associates, Inc. (ATSA) seeks reimbursement for labor costs 
incurred under Contract No. FA8106-l7-D-0009 (“0009 Contract”) in logistical 
support of two E-9A aircraft at Tyndall Air Force Base, Florida.  ATSA’s claim is 
that the fixed hourly labor rate to repair or replace aircraft parts, which applies to 
“subcontractors” under “Over & Above” (O & A) contract line item numbers (CLIN) 
X007AA, does not apply to “vendors”.  Rather, ATSA’s position is that any labor hourly 
charges are part of the “material cost” for which ATSA is entitled to full reimbursement 
under CLIN 007AC.  We deny the appeal. 
 
FINDINGS OF FACT 
 
Background 
 
1.  The 82nd Aerial Targets Squadron at Tyndall Air Force Base, Florida 
employs two E-9A aircraft whose primary mission is to act as a surveillance 
platform to ensure the Gulf of Mexico waters are clear of civilian boaters and 
aircraft during live missile launches and other hazardous military activities within 
the test range (R4, tab 6 at 53-54).  These aircraft are maintained by contractor -
provided logistics.  Relevant to this appeal, the contractor-provided logistics 
support for these aircrafts, which includes over and above (O & A) tasks, 
engineering services including development, test and FAA certification of modifications, 
and installation of modifications and depot maintenance support (id. at 53).  “O & A 
Charges are Government directed tasks within [the] scope of the contract but not 

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specifically forecasted such as; [sic] bird strikes, lightning strikes, FOD [(foreign 
object damage)], dropped or damaged components,” and other government 
directed actions (R4, tab 6 at 14).  ATSA currently provides this support under the 
0009 contract. 
 
2.  This dispute arises out of a specific O & A situation when the appellant 
cannot repair or replace an item in-house and must remove the item and send it to 
an outside contractor for repair or replacement.  Upon return of the item to 
appellant, the outside contractor will invoice appellant either charging a fixed la bor 
rate or a total price encompassing both labor and material with no visibility or 
breakout of the amount or time or labor involved (tr. 22-23).  Appellant refers to the 
outside contractor in these situations as a “vendor”, not a subcontractor, insisting 
that a “vendor” is distinguishable from a subcontractor and vendor charges are 
reimbursable as part of “material costs” under CLIN X007AC (app br. at 2).  The 
end result being, appellant would be fully reimbursed for all labor costs.  
 
3.  In contrast, the government argues there is no separate “vendor” category 
under the contract because the term vendor is defined within the definition of 
subcontractor (gov’t br. at 8).  Therefore in these situations, the contract’s hourly 
rate, whether disclosed or not, is capped by CLIN X007 at the hourly labor rate in 
the contract (id. at 6).  Likewise, the government argues that material costs 
proposed by the contractor may not include labor costs ( id. at 7).   
 
Comparison between the Previous Contract and the 0009  Contract Follow-on 
Solicitation  
 
4.  ATSA performed these logistics services for six years under the 
previous contract, Contract No. FA8106-11-C-0004 (0004 contract) (R4, tab 1).  
On August 4, 2016, the Air Force issued a request for proposals (RFP) for a 
follow-on contract under Solicitation No. FA8106-16-R-0008 (R4, tab 6 at 1).  
Relevant here, the government substantially changed the acquisition strategy 
related to the O & A pricing, converting the 0004 contract prime and 
subcontract O & A CLINs from cost to fixed price CLINs.  Major Toyama, the 
lead contracting officer on the source selection, testified  that the O & A 0004 
contract prime and subcontractor costs for CLIN 0007 was converted into a firm 
fixed price CLIN in the 0009 contract based upon historical data from the previous 
six year contract.  (Tr. 59-60) 
 
5.  By way of comparison, the 0004 contract included an O & A 
subcontracting mark-up rate.  This fixed subcontract pass-through mark-up factor 
represented the administrative costs of obtaining the subcontract effort, including 
all indirect costs plus fee associated with obtaining the subcontract effort.  The fixed 
subcontract pass-through mark-up factor was then added to the price paid by the 

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contractor to the outside contractor to determine a fixed price amount for the 
subcontract effort.  (R4, tab 1 at 12)  The net effect of this clause was to fully 
reimburse the contractor for subcontractor services:  the amount charged to the 
contractor for the subcontract service, plus an administrative fee ( fixed subcontract 
pass-through mark-up factor) for obtaining the subcontractor effort.  In contrast, the 
follow-on contract solicitation established a single fixed O & A labor rate, 
proposed by the offerors that applied to the prime contractor and all subcontractors, 
eliminating the subcontracting mark-up rate found in the 0004 contract (R4, tab 6  
at 15, 140-41).  This effectively converted what had been a cost reimbursable  
clause for the complete cost paid the subcontractor for its services to a fixed price 
clause based upon the proposed fixed labor rates. 
 
6.  The follow-on solicitation required all proposed pricing to be submitted in 
a Pricing Matrix that would be incorporated into the contract (R4, tab 57 at 12).  The 
10 different O & A labor rates found in the 0004 contract were reduced to only 
two:  a single labor rate for work hours and a single O  & A labor rate for 
overtime (R4, tab 1 at 198, tab 6 at 140). 
 
7.  Additionally, the follow-on solicitation flagged the change in pricing 
strategy warning the offerors of the additional cost risk from subcontractors and 
vendors [emphasis added] in out years, stating: 
 
Offerors are strongly advised to seriously note risk for 
firm fixed pricing in contract out-years.  Such risk is 
considered contractor risk and not risk to the Government.   
Proposed pricing shall be sufficient to cover such 
contractor risk of future unknowns, such as subcontractor 
rate increases in contract out-years, as well as material cost 
increases in out-years or potential changes in teaming with 
specific subcontractors/vendors.  This also includes 
unanticipated changes in subcontractors’ or vendors’ 
[emphasis added] pricing in the out-years.  For example, 
as out-year performance periods are reached over time, 
subcontractor pricing (on which these originally proposed 
fixed wrap rates are based) could change.  As a result, 
future subcontractor pricing may not correspond with the 
original proposed FFP rates.  Revision of proposed firm 
fixed pricing will not be accepted by the Government to 
cover any additional costs in the future out-years.  Offerors 
shall be held to their originally proposed pricing, i.e., FFP 
rates for all CLINs.   
 
(R4, tab 57 at 17) (emphasis added) 

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ATSA’s Follow-on Contract Proposal 
 
8.  ATSA submitted its final proposal revision on May 8, 2017 (R4, tab 5 at 1).  
Mr. Christopher Bloomer, Vice President of Operations for ATSA testified he 
helped prepare the proposal on this contract and has been working on the contract 
since September 2017 (tr. 23).  He also testified he read the language in CLIN 0007 
of the solicitation that states all rates apply to prime contrac tors and all 
subcontractors but noted the proposal did not include subcontractors performing 
work on this contract because of the distinction the industry makes between 
subcontractors and vendors (tr. 25-28). 
 
9.  ATSA’s proposal reflects the distinction ATSA makes between 
“subcontractors” and “vendors”.  Both the technical volume and pricing volume 
of ATSA’s proposal state that 100% of all work will be done by ATSA i.e., not 
subcontractors, but then provided a list of twelve key “vendors” (R4, tab 5 at 2, 
77).  For example, section 2 of the pricing volume is entitled SUBCONTRACTOR 
AND VENDOR PRICING” (id. at 78).  That section explains why ATSA decided not to 
use, what they consider, subcontractors on this contract but clearly states when it is 
required to go out to a vendor for completion of a specific task it will enter into a 
subcontract relationship to accomplish the work, stating, “Each of the key vendors 
identified will be subcontracted to support the identified tasks as required.” (R4, tab 5  
at 100-01) 
 
10.  The government awarded the 0009 contract to ATSA on May 31, 2017 (R4, 
tab 6 at 1).  Shortly thereafter, ATSA entered into a contract agreement with Pratt  
& Whitney (P & W), effective September 1, 2017.  The contract agreement refers 
to the contract relationship between the parties as a “SUBCONTRACT 
AGREEMENT” (R4 tab 53 at 5).  Accordingly, we find that P & W was a 
subcontractor to ATSA under its contract with the government.  
 
Relevant 0009 Contract Provisions 
 
11.  Three of the contract’s O & A provisions are relevant to this appeal: 
 
 CLIN X007-OVER AND ABOVE WORK PROCEDURES  
 
(a)  Over and Above Labor Rates (Fixed Hourly):  The price 
negotiated by the PCO/ACO shall be based on “hands on” 
labor hours multiplied by the contract fixed hourly rate.  The 
number of “hands on” labor hours required shall be 
negotiated between the contractor and the PCO/ACO.  
“Hands on” labor hours to be used in negotiated fixed hourly 
rate items are restricted to those defined below.  The fixed 

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hourly rate includes charges for:  “hands on” labor cost; any 
labor cost not included in the definition of “hands on” labor 
for which the contractor accounts as direct labor; burdens; 
general and administrative expenses; and other allowable 
costs and profit.  The fixed hourly rate does not include direct 
parts and materials. 
 
For the purposes of negotiating prices for the fixed hourly 
rate items, the “hands on” labor hours to which the fixed 
hourly rate is applied, are limited to only that labor performed 
by personnel actually engaged in the direct performance of 
work required.  “Hands on” labor shall not include any labor 
performed by support of supervisory type personnel, such as, 
but not limited to:  timekeepers, payroll clerks, purchasing, 
material handling, quality control, storing and issuing 
personnel.  Quality control personnel are considered as those 
personnel who apply standards to finished work/products to 
determine that finish production work is serviceable in all 
respects. 
 
(b)  Material Handling Rate Items:  The price negotiated by 
the PCO/ACO shall be based on material proposed multiplied 
by the contract fixed material handling rate.  The material 
required shall be negotiated between the contractor and the 
PCO/ACO.  “Materials” are those parts or materials 
purchased, supplied, manufactured, or fabricated by the 
Contractor for the sole purpose of incorporating them into or 
making them a part of the end products or components 
thereof covered by this contract.  The Material Handling Rate 
includes charges for:  burdens; general and administrative 
expenses; and other allowable costs and profit. 
 
. . . 
 
The anticipated or negotiated hours, when multiplied by the 
fixed hourly rate plus any material costs multiplied by the 
material handling rate, constitute the firm fixed price for the 
over and above work. 
 
(R4, tab 6 at 12-14) (emphasis added) 
  

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12.  CLIN X007AA, OVER AND ABOVE-LABOR RATE. 
 
OVER AND ABOVE - FIXED HOURLY RATE FIRM 
FIXED PRICE AS DIRECTED BY THE ACO/PCO.  ***ALL 
RATES APPLY TO PRIME CONTRACTOR AND ALL 
SUBCONTRACTORS*** 
 
. . . 
 
This SubCLIN uses the fixed hourly rates in Attachment 2, 
Pricing Matrix.  These rates shall be used in negotiating a price 
when direct labor is involved for Over and Above 
requirements.  Overtime hours will be used only at the direction 
of the ACO/PCO. 
 
(Id. at 14-15) 
 
13.  CLIN X007AC, OVER AND ABOVE-PARTS AND MATERIALS 
AND MATERIAL HANDLING. 
 
FIRM FIXED PRICE AS DIRECTED BY THE ACO/PCO.  
The work called for under this item shall be accomplished 
when and as directed by the PCO/ACO in accordance with 
DFARS 252.217-7028 and the Over and Above Work 
Procedures stated in CLIN X007.  The work under this sub-
CLIN includes parts and materials for repairs beyond fair 
wear and tear (BFWT) including replacement of GFE support 
equipment and those parts using the material handling rate in 
Attachment 2, Pricing Matrix.  The material handling rate 
shall represent the administrative costs of obtaining parts and 
materials for Over and Above requirements not included in 
the flying hour rate.  The Material Handling Rate shall 
include all indirect costs plus fee associated with obtaining 
materials for the prime and all subcontractors.  The Material 
Handling Rate shall be added to the negotiated material price 
to determine a fixed price amount for the materials.  All costs 
included within the fixed hourly rates, or fixed price CLINs 
elsewhere in this contract must be excluded from calculations 
used by the Contractor to arrive at its Material Handling Rate. 
 
. . . 
 

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DEFINITION OF MATERIALS: “Materials” are those parts 
or materials purchased, supplied, manufactured, or 
fabricated by the Contractor for the sole purpose of 
incorporating them into or making them a part of the end 
products or components thereof covered by this contract.   
 
(Id. at 16) (emphasis added) 
 
14.  On December 15, 2017, ATSA submitted Work Request No. 17- 015 
seeking contracting officer (CO) approval for work valued at an estimated $4,409.68.  
ATSA sought a Mobile Repair Team from P & W to come to Tyndall Air Force Base 
to evaluate the severity of magnesium corrosion in the intake air inlet case in one of 
its engines.  The evaluation was required to determine the depth of repair necessary 
to allow the engine to remain in service.  (R4, tab 9 at 1, 3)  The use of P & W for 
this work was founded on the subcontract agreement between ATSA and P&W 
entered into shortly after the 0009 contract award, effective September 1, 2017 (R4, 
tab 53 at 5).  ATSA recommended that the work be charged under CLIN X007AC,  
O & A Parts, Materials, and Material Handling.  (R4, tab 9 at 3) 
 
15.  On December 20, 2017, the Defense Contract Management Agency 
(DCMA) requested that ATSA break down its costs in greater detail, explaining that the 
government would only pay for O & A labor at $55.12 an hour (R4, tab 9 at 24-25).  
ATSA resubmitted its revised Work Request No. 17- 015 on February 15, 2018 (R4,  
tab 9 at 8-9).  Of the total $4,409.68 proposed, ATSA anticipated that la bor would cost 
$2,938.50 (id. at 8).  On May 14, 2018, the CO approved the work request (R4, tab 9  
at 17).  On May 15, 2018, ATSA submitted an invoice seeking $2,938.50 in labor costs 
(R4, tab 9 at 29).  DCMA agreed to pay no more than $1,543.36 because ATSA had not 
used the $55.12 O & A labor rate in attachment 2 of the contract.  Negotiations between 
the parties reached an impasse on May 21, 2018.  (R4, tab 9 at 27) 
 
16.  On May 30, 2018, ATSA filed a claim with the CO for the $1,395.14 
difference between the $2,938.5 requested and the $1,543.36 rec eived (R4, tab 22 
at 1).  The stated basis for the claim was described as: 
 
The amount claims (sic) and items at issue arise out of 
CLINS X007XX- Over and Above.  CLIN X007AA is 
“Over & Above- Labor Rate” which specifically states that 
it applies to the prime contractor and all subcontractors.  
CLIN X007AC applies to “Over & Above - Material and 
Material Handling”. 
 
. . . 

 8 
 
It is ATSA’s position that any labor hour charge 
(whether shown as a separate charge or incorporated into 
the bill as a flat charge) is part of the “material cost” for 
which ATSA is entitled to full reimbursement for under 
CLIN 007AC.  It seems that the government’s position 
is that this vendor labor rate is capped at the $55.12 
hourly rate. 
 
. . . 
 
ATSA was the prior contractor on the previous contract 
(FA8 l 06-11-C- 0004) and performed the same repair 
and maintenance for six (6) years.  The standard process 
for those years was that any outside vendor costs 
(including labor) under the Over and Above CLIN was 
reimbursed at the full rate by the government with the 
appropriate negotiated burdens.  In this contract [the] 
government is trying to hold ATSA to the $55.12 hour 
rate for any labor charged by those outside vendors 
regardless of . . . how much the vendor charges for its 
labor. 
 
. . . 
 
A subcontractor is a company with which there is a 
contractual relationship to perform work under the contract 
that is negotiated in advance, that sets rates, terms and 
conditions.  If a prime can’t negotiate a contract then it is 
free to go to another subcontractor that is offering the same 
services and attempt to enter into a subcontract with them.   
A vendor is a supplier of parts/labor that is based on an “as 
needed” relationship and that does not rise to the level of a 
subcontractor as a vendor is free to offer its services to any 
company that requires same.  This was the definition that 
applied to the prior contract that ATSA performed on for 
six years.  There was nothing in the solicitation (that 
resulted in this contract) that indicated that the government 
was taking a different position from the prior contract.  
 
(Id. at 1-3)  On June 18, 2018, the CO denied ATSA’s claim (R4, tab 27 at 1).  
ATSA appealed the decision to the Board on July 2, 2018, which was docketed as 
ASBCA No. 61682. 

 9 
 
DECISION 
 
This appeal turns upon our interpretation of three of the contract’s O & A 
provisions - CLIN X007-OVER AND ABOVE WORK PROCEDURES, CLIN 
X007AA, OVER AND ABOVE-LABOR RATE, and CLIN X007AC, OVER AND 
ABOVE-PARTS AND MATERIALS AND MATERIAL HANDLING.   (Findings 
11-13)  The government argues that the plain language of the contract, CLIN X007, 
unambiguously establishes that appellant must propose labor charges at any 
subcontractor tier for O & A work under the contract’s fixed hourly labor rates and 
the contract defines the term “vendor” in the definition of subcontractor.  (Gov’t br. 
at 6)  In contrast, appellant’s position is that “[t]his disagreement sets up a classic 
case of a latent ambiguity in which there is a reasonable interpretation by both 
parties as to the meaning of a term.”  (App. br. at 3)  Appellant summarized the 
parties’ disagreement as: 
 
Here, the Government believes by inserting the word 
“subcontractor” under CLIN X007AA it gave the contractor 
sufficient notice that the labor rate would apply to all vendors as 
well.  ATSA, based on  its reading and prior conduct and 
performance between the parties and industry standards, had 
no inkling that the term “subcontractor” would encompass 
their vendors. 
 
(Id. at 4) 
 
Our threshold issue is whether the plain language of the contract “supports 
only one reading or supports more than one reading and is ambiguous .”  James G. 
Davis Construction Corporation, ASBCA Nos. 58000, 58002, 15-1 BCA ¶ 35,818 
at 175,154 (citing NVT Technologies, Inc. v. United States, 370 F.3d 1153, 1159 
(Fed. Cir. 2004)).  The mere fact that the parties differ in their respective 
interpretations of the contract language is not enough, both interpretations must fall 
within a “‘zone of reasonableness.’”  Metric-Constructors, Inc. v. NASA, 169 F.3d 
747, 751 (Fed. Cir. 1999) (citations omitted).  Such a determination begins with 
the plain language of the contract to discern the objective intent of the parties.  
James G. Davis 15-1 BCA ¶ 35,818 at 175,154 (citations omitted). 
 
We agree with the government’s position that the plain language of the 
contract, as applied to this dispute, is unambiguous.  It is our understanding that the 
dispute before us only involves charges for an outside contractor to evaluate the 
severity of magnesium corrosion in the intake air inlet case in one of its engines  to 
determine the depth of repairs necessary to allow the engine to remain in service, 
i.e. only services not parts.  (Finding 14)  Consequently, a reading of the plain 

 10 
language of the contract does not support appellant’s argument that the services 
provided by P & W in this dispute would be reimbursed under the O & A material 
clauses, CLIN X007(b) and CLIN X007AC, because the services at issue do not 
meet the definition of “material costs” in those clauses.  (See findings 11, 13)  The 
reimbursement would only involve the fixed–price O &A Labor Rate  
CLIN X007AA.  (Finding 12)  Even assuming this were a situation where 
materials/parts were involved and replaced, a plain reading of the two clauses is 
clear that the only reimbursable costs are, “[t]he anticipated or negotiated hours, when 
multiplied by the fixed hourly rate plus any material costs multiplied by the material 
handling rate . . . .” (finding 11). 
 
May We Consider Extrinsic Evidence of Trade Practice and Industry Standards? 
 
When the language of a contract is unambiguous, it must be given its “plain and 
ordinary” meaning and the Board may not look to extrinsic evidence to interpret its 
provisions.  McAbee Constr., Inc. v. United States, 97 F.3d 1431, 1435  
(Fed. Cir. 1996) (citation omitted).  However, even when a contract is unambiguous, we 
have found it appropriate to turn to one form of extrinsic evidence—evidence of trade 
practice and custom.  DynCorp International LLC, ASBCA No. 59244, 17-1 BCA ¶ 
36,653 at 178,494 (citing TEG-Paradigm Environmental, Inc. v. United States, 465 F.3d 
1329, 1338 (Fed. Cir. 2006)).  Such extrinsic evidence may be considered to confirm 
that the parties intended the term to have its plain and ordinary meaning.  (Id.)  
 
Extrinsic Evidence 
 
Appellant argues that under prior practice on the 0004 contract “vendors” is 
an industry term related to the O & A requirements and that ATSA’s position is that 
“vendors” in these situations are not a “subcontractor” subject to a subcontract 
agreement holding them to the negotiated rates in the 0009 contract O  & A CLINs 
XX007 and X007AA.  (App. br. at 3)  Our findings establish that the contract 
language of both the 0004 and 0009 contracts do not include the word “vendor”.  
However, both parties use these terms within the follow-on solicitation and ATSA’s 
proposal in response.  This indicates this term is recognized and used within this 
industry as appellant asserts.  (Findings 7-9) 
 
That being said, logically reimbursement under the contract CLINs at issue 
only apply to work for which the contractor, ATSA, has either performed in house, 
or more likely as in this appeal, contracted for with an outside contractor, a 
“vendor”.  The evidence also establishes that when ATSA actually contracts with 
the vendor, ATSA considers the vendor to become a “subcontractor” (finding 10).  
Although ATSA’s proposal on the current contract clearly recognizes a distinction 
between the two terms, the proposal states, “[E]ach of the key vendors identified 

 11 
will be subcontracted to support the identified tasks as required.”  (Finding 9)  This 
reality is further reinforced by the facts of the specific dispute before us.  ATSA 
entered into a subcontract agreement with P&W shortly after award of the 0009 
contract.  So, under the specific facts of this dispute, the work was given to a 
contractor that was never a “vendor” under appellant’s definition but instead was in 
fact a subcontractor (finding 10).  Consequently, the extrinsic evidence of trade 
practice confirms our unambiguous interpretation of the contract language. * 
 
In summary, after consideration of all the evidence, we hold that appellant is 
bound by the fixed labor rate it bid for CLIN X007AA and the materials and materials 
handling CLIN X007AC is inapplicable.  The extrinsic evidence confirms this 
interpretation.  We have considered trade practice evidence but we conclude that trade 
practice does not support appellant’s position. 
  
                                              
* ATSA’s primary argument is that the contract language is ambiguous and a 
consideration of the extrinsic evidence supports ATSA’s reading of the contract 
language that trade practice in this business recognizes a distinction between the 
terms “subcontractor” and vendor”.  This, ATSA argues, creates a latent ambiguity 
triggering the application of the principle of contra proferentum, construing the 
contract language against the drafter, in this case the government (app. br. at 9).  
Since our examination of the extrinsic evidence of trade practice supports a 
finding that the contract language is unambiguous, we need not address ATSA’s 
contra proferentum argument. 

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CONCLUSION 
 
For the forgoing reasons, this appeal is denied. 
 
 Dated:  March 30, 2020 
 
 
 
JOHN J. THRASHER 
Administrative Judge 
Chairman 
Armed Services Board 
of Contract Appeals 
 
 
I concur 
 
 
 
 I concur 
 
 
 
RICHARD SHACKLEFORD 
Administrative Judge 
Vice Chairman 
Armed Services Board 
of Contract Appeals 
 OWEN C. WILSON 
Administrative Judge 
Vice Chairman 
Armed Services Board 
of Contract Appeals 
 
  


 13 
 
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. 61682, Appeal of Aero Tech 
Services Associates, Inc., rendered in conformance with the Board’s Charter. 
 
 Dated:  March 30, 2020 
 
 
        
PAULLA K. GATES-LEWIS 
Recorder, Armed Services 
Board of Contract Appeals