GRANTED AS TO ENTITLEMENT: January 26, 2012 
CBCA 2404 
SHARP ELECTRONICS CORPORATION, 
Appellant, 
v. 
GENERAL SERVICES ADMINISTRATION, 
Respondent. 
Andrew K. Wible, Andrew J. Mohr, and C. Kelly Kroll of Cohen Mohr LLP, 
Washington, DC, counsel for Appellant. 
Michael J. Noble, Office of General Counsel, General Services Administration, 
Washington, DC, counsel for Respondent. 
Before Board Judges SOMERS , BORWICK , and VERGILIO . 
VERGILIO , Board Judge. 
On April 26, 2011, the Board received a notice of appeal from Sharp Electronics 
Corporation (contractor) concerning its Federal Supply Schedule agreement, GS-25F-0037M, 
with the General Services Administration (GSA or agency). The Department of the Navy 
entered into a contract under the agreement by placing a delivery order (N00700-03-F-0188) 
for various items on a lease to ownership plan (LTOP) basis, with pricing calculated based 
upon a forty-eight month lease. The initial order covered one fiscal year; the contract 
specifies payments the Navy must make should it not continue the lease for the full term. 
The Navy ended the lease after the first fiscal year, but did not make payments pursuant to 
the agreement; rather, it unilaterally deemed the contract illusory and illegal, denying 
reimbursement of any cancellation charges. By agreement of the parties, the record is 
complete on the question of entitlement; quantum awaits a completed record for resolution. 

 
           
            
             
              
               
            
              
               
                 
              
               
               
           
  
            
          
           
              
            
             
             
               
         
           
             
  
         
              
               
           
             
          
       
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Initially, a Navy contracting officer denied the contractor’s claim to be paid 
$102,254.45 in accordance with the terms of the contract. Thereafter, the contractor 
submitted to a GSA contracting officer a claim regarding the interpretation of the contract 
and payment required thereunder. The GSA contracting officer denied the claim. The Board 
concludes that it has jurisdiction over this dispute and that the contract is neither illusory nor 
illegal. The Navy mischaracterizes the lease as a forbidden multi-year agreement. The 
agreement is effective for one fiscal year with pricing specified both for renewal and non-
renewal. Although the Navy may have set aside inadequate funds at the time of contracting, 
the record does not show a lack of appropriations. The seeming errors of the Navy do not 
permit it to unilaterally rewrite the contract by fabricating a price contrary to the express 
intent of the parties at the time of award. The contract dictates the cancellation charges 
should the Navy not renew the contract. The contractor is entitled to recover pursuant to 
those provisions. Accordingly, the Board grants the appeal as to entitlement. 
Findings of Fact 
1. With an effective date of September 18, 2001, the contractor was placed on 
GSA’s multiple award Federal Supply Schedule for commercial items (contract GS-25-F­
0037M), offering various plans for an agency to obtain copier/printers, supplies, and 
maintenance services. Exhibit 1 at 1.5, 2 (all exhibits are in the appeal file). 
2. With an effective date of October 1, 2001, the agreement was modified to 
include LTOP provisions. Exhibits 4, 6. These provisions specify that the “Government 
must lease the copier equipment placed under the LTOP Plans, uninterrupted for the full 
term. Early termination will incur cancellation charges, see Paragraph 10.” Exhibit 6 at 3 
(¶ 3). Paragraph seven addresses renewal under funding constraints: 
The Government cannot obligate funds beyond September 30th of each year. 
The initial term shall be from date of award and continue until expiration of 
the fiscal year. 
Except as specifically provided herein, the Government shall renew each 
Purchase Order at the conclusion of the initial term, and at the end of any 
renewal term thereof, for a period of one year or until the end of the LTOP 
Term, whichever is sooner, for all the LTOP Equipment, by giving written 
notice of renewal to the Contractor as soon as practicable, but not more than 
thirty (30) days after the date the Government receives formal notification 
from its funding source of its approved budget. 

 
                    
       
          
         
         
          
           
              
          
           
         
           
         
         
        
             
          
            
           
          
          
          
                  
             
             
       
        
          
             
     
3 CBCA 2404 
Exhibit 6 at 4. Further, payment is to be made in full within thirty days after the date of an 
invoice. Exhibit 6 at 3 (¶ 6). 
3. Paragraph ten (Cancellation Terms) of the LTOP provisions states in pertinent 
part: 
For equipment Ordered and Installed under the subject GSA Contract: 
Notification of cancellation must be received, in writing, by Contractor’s 
Operations Manager thirty (30) calendar days prior to the designated removal 
date. 
The Government (or its authorized agents) may not terminate an LTOP under 
this contract in order to avoid its buyout obligations or to obtain the same or 
similar equipment at more favorable terms. Should early termination be 
required, the cancellation charge shall be equal to the net present value of the 
monthly payments remaining through the completion of the relevant LTOP 
term, discounted to present value at the same interest rate charged upon 
execution of the original LTOP order. All cancellation charges must be paid 
to Contractor at the remittance address specified on Contractor’s invoices. 
Termination for Convenience of the Government: Equipment ordered 
under the LTOP plan is intended to provide for a firm commitment by the 
Government to continue the plan and remit all monthly payments through 
completion of the committed term. It is understood that for various reasons, 
the Government may exercise cancellation of the LTOP prior to completion of 
the committed term under the Termination for Convenience clause of the 
Contract. Should the Government exercise early cancellation of an LTOP 
under this clause, the cancellation charge shall be calculated as described 
above. 
Exhibit 6 at 5 (¶ 10). The clause also specifies that there will be no cancellation charge if 
cancellation is due to non-appropriation of funds, with the proviso that the Government will 
not replace the canceled model for the same organizational entity in the succeeding fiscal 
year. Exhibit 6 at 4 (¶ 10). 
4. The agreement includes the Contract Terms and Conditions--Commercial Items 
(May 1999) clause, 48 CFR 52.212-4 (2000), which includes the following: 
Disputes. This contract is subject to the Contract Disputes Act of 1978, as 
amended (41 U.S.C. 601-613).  Failure of the parties to this contract to reach 

 
          
              
          
          
           
        
            
             
             
              
           
      
            
    
           
               
             
   
            
             
                
            
          
            
           
              
           
         
       
          
             
            
               
4 CBCA 2404 
agreement on any request for equitable adjustment, claim, appeal or action 
arising under or relating to this contract shall be a dispute to be resolved in 
accordance with the clause at FAR 52.233-1, Disputes, which is incorporated 
herein by reference. The Contractor shall proceed diligently with performance 
of this contract, pending final resolution of any dispute arising under the 
contract. 
Exhibit 1 at 79 (¶ d), 80 (¶ l). 
5. On September 30, 2002, the Navy placed a delivery order, thereby creating a 
contract under the GSA agreement. The Navy obtained items (copiers) under the LTOP 
provisions priced for forty-eight months. The order indicates the initial funding and pricing 
for twelve months, October 1, 2002, through September 30, 2003 (fiscal year 2003). The 
contract incorporates the provisions of the contractor’s agreement with GSA, including those 
quoted above. Exhibit 8 at 1-13. 
6. The Navy utilized annually appropriated funds for the contract. Exhibit 8 at 
14. The Navy allocated annual funds to cover only its obligations if it renewed the lease; it 
did not allocate funds to cover potential cancellation charges under paragraph ten (Finding 
3). The record does not demonstrate that the Navy lacked appropriated funds to cover its 
obligations under the contract; rather, the Navy opted not to allocate sufficient funds to 
satisfy its contractual obligations. 
7. After having provided timely notice to the contractor, the Navy did not renew 
the lease; the lease ended without renewal after twelve months of the forty-eight month 
pricing period. The lack of renewal was not due to the non-appropriation of funds. The 
Navy replaced the contractor’s copiers with those of another contractor. Exhibit 11 
(contractor’s claim, exhibits 8, 9); Complaint (¶ 18); Answer (¶ 18). 
8. The contractor submitted a certified claim dated September 30, 2003, to a Navy 
contracting officer, seeking to recover $102,254.45 (said to reflect the cancellation charges 
pursuant to the contract) plus interest. By letter dated November 17, 2003, the Navy 
contracting officer denied the claim, concluding that the contractor’s interpretation of the 
contract rendered it illegal and that reformation was not an available option. Exhibits 9, 11 
(contractor’s claim, exhibit 7 at 5 (¶ 9)). 
9. The contractor’s appeal to the Armed Services Board of Contract Appeals 
(ASBCA) resulted in a dismissal without prejudice to the proper disposition of the claim 
required by regulation. The board concluded that the Federal Acquisition Regulation (FAR) 
Disputes provisions in effect at the time of award and at the time the contracting officer 

 
             
  
        
           
              
              
              
   
              
 
           
             
             
            
       
             
             
              
              
              
      
            
              
   
              
           
                
          
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denied the claim, 48 CFR 8.405-7 (2002, 2004), required the Navy contracting officer to 
refer the unresolved dispute to a scheduling (i.e., GSA) contracting officer for disposition. 
Sharp Electronics Corp. , ASBCA 54475, 04-2 BCA ¶ 32,704. 
10. Seeking to recover $102,254.45 as the amount due under paragraph ten for 
non-renewal, plus interest under the Prompt Payment Act, 31 U.S.C. § 3902 (2006), and the 
Contract Disputes Act, now at 41 U.S.C.A. § 7109 (West 2011), the contractor submitted a 
claim dated October 3, 2006, to a GSA contracting officer. Following an agreed upon 
extension of time, a GSA contracting officer denied the claim by decision dated January 28, 
2011. Exhibit 13. 
11. The contractor filed its notice of appeal with this Board on April 26, 2011. 
Exhibit 14. 
Discussion 
Jurisdiction 
As the ASBCA concluded, under regulation the Navy contracting officer had limited 
authority. When a dispute remained after the Navy contracting officer denied the claim, 
proper authority to resolve the dispute rested with the GSA contracting officer. The 
contractor timely submitted the claim to the GSA contracting officer, and timely appealed 
to this Board when that claim was denied. 
Statute gives the ASBCA jurisdiction to decide any appeal from a decision of a 
contracting officer of the Department of Defense (including the Navy) relative to a contract 
made by that department or agency and gives this Board jurisdiction to decide any appeal 
from a decision of a contracting officer of GSA (among various agencies) relative to a 
contract made by that agency. 41 U.S.C.A. § 7105. Regulations place the contracting-level 
authority to resolve this dispute with the GSA contracting officer, thereby assuring that the 
Federal Supply Schedule agreement is consistently interpreted. As such, this Board views 
the agreement as a GSA contract for purposes of dispute resolution. The Board has 
jurisdiction over the dispute. 
Merits 
The contractor and Navy entered into a contract for one fiscal year. Pricing was 
contingent upon renewal, but the contract expressly provides for payments should renewal 
not occur. For the second fiscal year, the Navy did not renew the contract; however, the 
Navy’s need for similar equipment continued while appropriations were available for 

 
             
        
              
                
             
              
                
              
               
             
               
        
               
               
       
              
                
  
              
             
           
   
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6 CBCA 2404 
renewal. Therefore, the Navy became obligated to pay cancellation charges pursuant to the 
provision in paragraph ten of the contract, Finding 3. 
The reliance by the Government on Leiter v. United States , 271 U.S. 204 (1926), is 
misplaced. In addressing the binding nature of a lease beyond the initial year, the Court notes 
the requirement for both appropriations and an affirmative act by the Government to continue 
a lease. This contract covers a single fiscal year, and notes the requirements for 
appropriations and an affirmative act by the Navy; it complies with the dictates of the Court. 
The contract does not obligate the Navy to renew the lease; rather, it imposes cancellation 
charges upon the Navy for failure to renew in various circumstances. In this case, the 
contractor seeks payment under the contract for the initial fiscal year. Annual appropriations 
were available to fund the contract, even if the Navy failed to allocate sufficient funds to 
cover its obligations. Leiter does not invalidate the Navy’s obligations.  Rather, it suggests 
that the Navy must fulfill its contractual obligations: “A lease to the Government for a term 
of years when entered into under an appropriation available for but one fiscal year, is binding 
on the Government only for that year.” 271 U.S. at 207.  Because appropriated funds were 
available, Finding 6, the contract does not violate provisions of the Anti-Deficiency Act. 31 
U.S.C. § 1341 (2006). The Navy is bound to compensate the contractor pursuant to the terms 
of the contract. 
The contract contains an explicit allocation of risks for the precise situation that arose. 
The contractor is entitled to recover cancellation charges under the plain language of the 
contract. 
Decision 
Accordingly, the Board GRANTS the appeal on the question of entitlement; quantum 
awaits a completed record. 
JOSEPH A. VERGILIO 
Board Judge 
We concur: 
JERI K. SOMERS ANTHONY S. BORWICK 
Board Judge Board Judge