Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca13-14-05033/USCOURTS-ca13-14-05033-0/pdf.json

Parties Involved:
SUFI Network Services, Inc.
Cross-Appellant
United States
Appellant

Document Text:

United States Court of Appeals 

for the Federal Circuit ______________________ 

SUFI NETWORK SERVICES, INC.,

Plaintiff-Cross-Appellant

v.

UNITED STATES,

Defendant-Appellant

______________________ 

2014-5032, 2014-5033

______________________ 

Appeals from the United States Court of Federal 

Claims in No. 1:11-cv-00453-TCW, Judge Thomas C. 

Wheeler. 

______________________ 

Decided: April 24, 2015 

______________________ 

BRIAN TULLY MCLAUGHLIN, Crowell & Moring, LLP, 

Washington, DC, argued for plaintiff-cross-appellant. 

Also represented by FREDERICK W. CLAYBROOK, JR. 

DOUGLAS T. HOFFMAN, Commercial Litigation Branch, 

Civil Division, United States Department of Justice, 

Washington, DC, argued for defendant-appellant. Also 

represented by STUART F. DELERY, ROBERT E. KIRSCHMAN,

JR., STEVEN J. GILLINGHAM. 

______________________ 

Before LOURIE, REYNA, and TARANTO, Circuit Judges.

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2 SUFI NETWORK SERVICES, INC. v. US

REYNA, Circuit Judge.

The Air Force Nonappropriated Funds Purchasing Office (“Air Force”) materially breached a contract with 

SUFI Network Services, Inc. (“SUFI”). SUFI submitted

claims to the Air Force contracting officer and appealed 

denied claims to the Armed Services Board of Contract 

Appeals (“Board”). SUFI succeeded on several of its claims 

and subsequently submitted a claim for attorney fees to 

the contracting officer. The contracting officer did not 

respond to SUFI’s attorney fees claim for more than six 

months. As a result, SUFI bypassed the Board and sued

in the Court of Federal Claims. The trial court awarded

attorney fees with interest but denied SUFI’s request for 

overhead and lost profit. The government challenges the 

trial court’s award on the basis that the trial court lacked 

jurisdiction. SUFI cross-appeals for overhead and lost 

profit. For the reasons that follow, we affirm in part, 

vacate in part, and remand.

BACKGROUND

In 1996, SUFI contracted with the Air Force to install 

and operate telephone systems in lodging facilities on Air 

Force bases in Germany.1 SUFI furnished the necessary 

supplies, including cabling, wiring, telephone equipment, 

and other materials, at no cost to the Air Force. In exchange, the Air Force agreed that guests would make long 

distance calls exclusively through SUFI’s network.

Shortly after the parties entered into the contract, the 

Air Force broke its promise of exclusivity. Dispute first 

arose when the Air Force refused to disable free communal phones that guests were using to avoid SUFI’s long1 SUFI Network Servs., Inc. v. United States, 755 

F.3d 1305, 1309–11 (Fed. Cir. 2014) (“SUFI I”) contains a 

full description of the facts giving rise to this dispute. We 

include only facts necessary for this opinion.

 

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SUFI NETWORK SERVICES, INC. v. US 3

distance charges. The dispute intensified when the Air 

Force ordered SUFI to allow guests to access SUFI’s 

network by using calling cards from competing long 

distance service providers. SUFI initiated administrative 

proceedings at the Board, alleging that the Air Force 

materially breached the contract.

In 2004, the Board found that the Air Force was in 

material breach and that SUFI was entitled to cancel the 

contract. SUFI cancelled the contract, and the parties 

entered into a Partial Settlement Agreement in 2005. The 

parties agreed that the Air Force would pay SUFI $1.2 

million for its network and $1.075 million for good will. 

The parties also agreed that SUFI reserved the right to 

pursue additional monetary claims arising from the Air 

Force’s material breach. Should SUFI succeed on additional claims, the Air Force agreed to pay SUFI interest

from the date the Air Force received the claim, or the date 

SUFI “actually incurred” damages, whichever date is 

earlier. J.A. 1980. Thereafter, SUFI submitted claims to 

the contracting officer pursuant to the contract’s disputes 

clause.

The disputes clause requires that the contracting officer decide “any dispute or claim concerning [the] contract.” Id. at 748. The contracting officer must resolve the 

dispute or claim and “state his decision in writing.” Id. 

Once the contracting officer’s decision is received, any 

appeal to the Board must be made within 90 days. Id. If 

no appeal is made, the contracting officer’s decision is 

final. Id.

SUFI submitted 28 claims, totaling over $131 million. 

SUFI Network Servs., Inc., ASBCA No. 55306, 09–1 BCA 

¶ 34,018 at 168,217 (Nov. 21, 2008). The contracting 

officer failed to issue a decision for more than six months, 

and SUFI appealed to the Board. Id. The Board docketed 

SUFI’s appeal as a “deemed denial,” id., but before it

decided SUFI’s claims, the contracting officer issued a 

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4 SUFI NETWORK SERVICES, INC. v. US

final decision denying all of SUFI’s claims except one. Id. 

at 168,219 ¶ 9. Thereafter, the Board found in SUFI’s 

favor on 22 of the 28 claims.2

SUFI requested that the Board award expenses incurred in connection with preparing and submitting the 

claims to the contracting officer. The Board awarded 

SUFI certain claim preparation and non-legal consultant 

expenses. Id. at 168,289–91. SUFI’s brief to the Board 

also discussed attorney fees incurred in connection with 

its successful claim preparation efforts. Id. at 168,289. At 

the time, however, SUFI was unable to identify a specific 

amount of attorney fees because SUFI and its attorneys 

had agreed to a contingency fee arrangement sometime in 

2004. As a result, the Board declined to decide whether 

SUFI was entitled to attorney fees. Id.

On December 29, 2010, SUFI submitted to the contracting officer a formal claim for attorney fees and requested a decision within 60 days. More than six months 

passed without a decision by the contracting officer. On 

July 7, 2011, after numerous inquiries from SUFI about 

the status of the claim, Air Force counsel informed SUFI 

that SUFI could consider its claim “deemed denied.” 

The next day, SUFI sued the Air Force in the trial 

court, seeking attorney fees and expenses incurred as part 

of its successful claim preparation efforts, along with 

interest on those fees and expenses. The government 

moved to dismiss, arguing that because SUFI did not 

appeal to the Board, SUFI failed to exhaust the contractual remedy required by the disputes clause. The trial 

court denied the motion, concluding that SUFI was ex2 SUFI sought review of the amount awarded by the 

Board in the trial court. Although SUFI prevailed before 

the trial court, we recently vacated much of that decision. 

See SUFI I, 755 F.3d at 1323–24.

 

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SUFI NETWORK SERVICES, INC. v. US 5

cused from performance under the disputes clause because the contracting officer’s delay rendered the contractual remedy inadequate and unavailable and constituted 

material breach of the disputes clause. SUFI Network 

Servs., Inc. v. United States, 102 Fed. Cl. 656, 661–62 

(2012) (“SUFI CFC I”). The trial court then granted 

summary judgment in SUFI’s favor on the issue of liability for attorney fees and expenses. SUFI Network Servs., 

Inc. v. United States, 105 Fed. Cl. 184, 192–195 (2012) 

(“SUFI CFC II”). The case proceeded to trial on the question of fees and liability for interest.

After trial, the court determined the proper amount of 

damages and interest. First, the trial court determined 

that SUFI’s attorney fee calculations were reasonable and 

awarded $697,702.50 in fees and $25,486.81 in expenses. 

SUFI Network Servs., Inc. v. United States, 113 Fed. Cl. 

140, 147–48 (2013) (“SUFI CFC III”). Second, the trial 

court held that under the Partial Settlement Agreement, 

SUFI was entitled to interest on attorney fees and expenses starting from the date SUFI’s attorneys began the 

claim preparation work. Id. at 148. The court determined 

that SUFI was not entitled to overhead and lost profit 

incurred in connection with its claim preparation efforts. 

Id. at 149. The government appealed, and SUFI crossappealed. We have jurisdiction under 28 U.S.C. 

§ 1295(a)(3). 

DISCUSSION

We review the trial court’s legal conclusions de novo 

and its factual findings for clear error. Ind. Mich. Power 

Co. v. United States, 422 F.3d 1369, 1373 (Fed. Cir. 2005). 

Contract interpretation and interpretation of a settlement 

agreement are questions of law that we review de novo. 

Augustine Med., Inc. v. Progressive Dynamics, Inc., 194 

F.3d 1367, 1370 (Fed. Cir. 1999). 

An initial question concerns the trial court’s jurisdiction, given that SUFI bypassed the Board and brought 

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6 SUFI NETWORK SERVICES, INC. v. US

suit directly in the trial court. This question depends in 

part on whether this dispute is governed by the Contract 

Disputes Act (CDA). The parties agree that it is not. 

Accordingly, this case falls within the trial court’s Tucker 

Act jurisdiction. See Slattery v. United States, 635 F.3d 

1298, 1321 (Fed. Cir. 2011) (en banc) (“[T]he jurisdictional 

foundation of the Tucker Act is not limited by the appropriation status of the agency’s funds or the source of funds 

by which any judgment may be paid.”). We apply the 

common law to this dispute, and not the CDA. 

I. Exhaustion

The trial court excused SUFI from exhausting the 

contractual remedy under the disputes clause based on 

two theories. SUFI CFC I, 102 Fed. Cl. at 661–62. First, 

the contracting officer’s failure to issue a final decision 

within a reasonable time rendered the contractual remedy 

inadequate and unavailable. Id. Second, the contracting 

officer materially breached the disputes clause, which 

excused SUFI from further performance under the clause. 

Id. at 662.

According to the government, the trial court incorrectly presumed that SUFI lacked adequate recourse absent a 

final decision by the contracting officer. The government 

contends SUFI could have appealed directly to the Board 

under Board rules promulgated as part of the Federal 

Acquisition Regulation (FAR) System.3 The government 

highlights that SUFI had already used this recourse when 

it appealed to the Board without first receiving the contracting officer’s decision on SUFI’s original breach 

claims.

SUFI responds that precedent supports the trial 

court’s conclusion. SUFI argues that our predecessor 

3 Federal Acquisition Regulations are codified in Title 48 of the Code of Federal Regulations. 

 

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SUFI NETWORK SERVICES, INC. v. US 7

court has held that a contracting officer’s delay or refusal 

to render a timely decision excuses a party from exhausting its contractual remedy. See, e.g., N.Y. Shipbuilding 

Corp. v. United States, 385 F.2d 427, 435 (Ct. Cl. 1967); 

Oliver-Finnie Co. v. United States, 279 F.2d 498, 503 (Ct. 

Cl. 1960); Se. Oil Fla., Inc. v. United States, 115 F. Supp. 

198, 201 (Ct. Cl. 1953). SUFI also argues this Court’s 

precedent is consistent with our predecessor’s. See, e.g., 

New Valley Corp. v. United States, 119 F.3d 1576, 1581–

82 (Fed. Cir. 1997) (finding contractor exhausted disputes 

clause by attempting, unsuccessfully, to obtain a timely 

decision from a contracting officer). 

We affirm the trial court and hold that the contracting 

officer’s delay rendered the contractual remedy inadequate and unavailable.4 A contractual remedy is a government contractor’s exclusive remedy unless there is 

“some clear evidence that the appeal procedure is inadequate or unavailable.” United States v. Joseph A. Holpuch 

Co., 328 U.S. 234, 240 (1946). If a contractor ignores a 

contractual remedy altogether, the contractor’s failure to 

exhaust the remedy will not be excused. United States v. 

Anthony Grace & Sons, Inc., 384 U.S. 424, 427 (1966); 

Joseph A. Holpuch, 328 U.S. at 239; United States v. 

Blair, 321 U.S. 730, 735 (1944). When a contracting 

officer “so clearly reveals an unwillingness to act,” however, a contractual remedy may become inadequate or 

unavailable. Anthony Grace & Sons, 384 U.S. at 430. 

In this case, the contracting officer’s unwillingness to 

render a decision for more than six months denied SUFI 

access to the Board, rendering SUFI’s contractual remedy 

4 The parties agree that the disputes clause survived the government’s original material breach. See

Appellant’s Br. 9 (arguing that SUFI was required to 

comply with disputes clause); Cross-Appellant’s Br. 13 

(arguing that disputes clause applies to breaches). 

 

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8 SUFI NETWORK SERVICES, INC. v. US

inadequate and unavailable. This was affirmed by Air 

Force counsel’s advice that SUFI could consider the 

attorney fees claim deemed denied. By its terms, the 

disputes clause does not provide a way in which SUFI can 

reach the Board without first obtaining a decision from

the contracting officer. See J.A. 748. SUFI may appeal to 

the Board only after receipt of the contracting officer’s 

“decision in writing.” Id. The contracting officer’s failure

to issue a written decision prevented SUFI from obtaining 

a Board decision, hence, the contracting officer prevented 

SUFI from accessing the courts. See N.Y. Shipbuilding, 

385 F.2d at 437 (“No proper initial decision has been 

rendered administratively, there is nothing from which to 

appeal, and there is nothing for the appeal board to 

consider.”).

The fact that the government eventually informed 

SUFI that it could deem its claim denied does not change 

our analysis, even if we were to determine that the government’s deemed denial constituted a written decision by 

the contracting officer. By the time the government sent 

SUFI the deemed denial notice, the contractual remedy 

had been rendered inadequate and unavailable, giving 

SUFI the option to sue in the trial court. The trial court 

did not err in deciding that the contracting officer’s delay

rendered the contractual remedy inadequate and unavailable. Nor does the Board’s discretionary authority under 

48 C.F.R. Ch. 2 App. A to review an appeal where the 

contracting officer fails to issue a decision in “a reasonable 

time” relieve the government of its independent obligation 

to timely respond to SUFI’s claim. 

II. Attorney Fees

SUFI’s contract incorporates by reference two of the 

FAR’s standard changes clauses: a supplies changes 

clause and a services changes clause. If the contract is for 

supplies, the contracting officer may make an equitable 

adjustment for changes in “[d]rawings, designs, or specifiCase: 14-5033 Document: 3-2 Page: 8 Filed: 04/24/2015
SUFI NETWORK SERVICES, INC. v. US 9

cations,” methods of “shipment or packing,” and “[p]lace of 

delivery.” FAR § 52.243–1. If the contract is for services 

and if “no supplies are to be furnished,” a contracting 

officer may make an equitable adjustment for changes in 

the “[d]escription of services to be performed,” the “[t]ime 

of performance,” and the “[p]lace of performance.” FAR 

§ 52.243–1 Alternate I. 

The trial court concluded that SUFI’s attorney fees, 

incurred in negotiating its breach claims with the contracting officer, are recoverable under the contract’s 

changes clause and are allowed by the FAR as contract 

administration costs. SUFI CFC II, 105 Fed. Cl. at 192–

95 (citing Bill Strong Enters., Inc. v. Shannon, 49 F.3d 

1541, 1549–50 (Fed. Cir. 1995)). Recognizing that the 

FAR does not apply to nonappropriated funds contracts, 

see FAR §§ 1.104, 2.101, the trial court grounded its 

conclusion in common law, finding that SUFI’s attorney 

fees are recoverable as a foreseeable consequence of the 

government’s breach. SUFI CFC II, 105 Fed. Cl. at 195. 

The government interprets the trial court’s holding as 

awarding attorney fees only under the changes clause.

According to the government, attorney fees are not recoverable under the changes clause because neither the 

supplies changes clause nor the services changes clause

would permit the contracting officer to make an equitable 

adjustment to account for attorney fees incurred as part of 

SUFI’s claim preparation efforts. The government, however, fails to address whether attorney fees are recoverable under the common law. 

SUFI argues that attorney fees are recoverable under 

the services changes clause because the government’s 

breach triggered SUFI’s negotiations with the contracting 

officer. SUFI contends those negotiations qualify as a 

change in “services to be performed” under the services

changes clause. Alternatively, SUFI argues that attorney 

fees were foreseeable under the common law because the 

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10 SUFI NETWORK SERVICES, INC. v. US

disputes clause required SUFI to resolve breach claims by 

negotiating with the contracting officer.

We affirm the trial court’s ruling that SUFI is entitled 

to attorney fees under common law. Under common law, 

damages for breach of contract are awarded to place the 

wronged party in the position it would have been in had 

the contract been fully performed. Mass. Bay Transp. 

Auth. v. United States, 129 F.3d 1226, 1232 (Fed. Cir. 

1997) (“MTBA”). The government does not dispute that 

pre-litigation attorney fees under a claim-preparation 

provision like the one here can be compensable under 

common law principles. 

The government argues that the trial court’s award 

should be vacated because the trial court erred in mixing 

two distinct theories of recovery, the changes clause and 

the FAR, and common law. We disagree. Although the 

trial court addressed the changes clause, it clarified that 

the attorney fees award was based on common law. See

SUFI CFC III, 113 Fed. Cl. at 145 (explaining that attorney fees were a “direct and foreseeable result” of the 

government’s breach). The government failed to attack 

the trial court’s award of attorney fees on the basis of 

common law. Thus, we affirm the trial court’s award of 

attorney fees.

III. Interest 

The trial court also awarded interest on attorney fees 

from the date SUFI’s attorneys undertook the claim 

preparation work. Id. at 148. Under the Partial Settlement Agreement, the Air Force agreed to pay SUFI interest on any amount recovered by a judgment “from the 

earlier of (i) the date of receipt of the claim, or (ii) the date 

damages are actually incurred, until payment.” J.A. 1980.

The trial court determined that fees are incurred “either 

when they are paid or when there is an ‘express or implied agreement that the fee award will be paid over to 

the legal representative.’” SUFI CFC III, 113 F. Cl. at 148

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SUFI NETWORK SERVICES, INC. v. US 11

(internal quotation mark omitted) (quoting United Partition Sys., Inc. v. United States, 95 Fed. Cl. 42, 53 (2010) 

(quoting Phillips v. Gen. Servs. Admin., 924 F.2d 1577, 

1583 (Fed. Cir. 1991) (per curiam))). 

The government argues that SUFI’s contingency fee 

arrangement means that attorney fees were not “actually 

incurred” on the date the attorneys did the work because 

there was no obligation to pay the attorneys on that date. 

Thus, the government contends that the earliest date of 

interest accrual would be December 29, 2010, the date 

SUFI submitted its claim for fees and expenses to the 

contracting officer. The government also argues that the 

cases relied on by the trial court are limited to attorney 

fees under the Equal Access to Justice Act (EAJA). We 

cannot rely, the government insists, on interpretation of 

statutory language that is unrelated to the Partial Settlement Agreement.

SUFI counters that SUFI incurred an obligation to 

pay attorney fees at the moment the attorneys worked on 

SUFI’s matter. SUFI also relies, as the trial court did, on 

cases interpreting the word “incurred” in the EAJA and 

other fee shifting statutes.

We agree with the government that SUFI did not “actually incur” attorney fees on the date SUFI’s attorneys 

did the work. Contract interpretation starts with the 

language of the contract. Coast Fed. Bank, FSB v. United 

States, 323 F.3d 1035, 1038 (Fed. Cir. 2003). Terms must 

be given their plain meaning if the language of the contract is clear and unambiguous. Id. The word “incur” 

means to suffer “a liability or expense.” See Black’s Law 

Dictionary 771 (7th ed. 1999). Because the contract was 

between SUFI and the Air Force, SUFI, and not SUFI’s 

attorneys, must have “actually incurred” attorney fees on 

the date SUFI’s attorneys did the work. SUFI admits that 

it received no legal bills after the contingency fee arrangement was put into place. SUFI’s attorneys could not 

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12 SUFI NETWORK SERVICES, INC. v. US

have demanded payment from SUFI on the dates the 

work was done because the contingency, i.e., recovery 

from the government, had not yet occurred. Thus, SUFI 

suffered no liability or cost when SUFI’s attorneys did the 

work.

The case law relied on by the trial court is not persuasive. Those cases involve only whether attorney fees can 

be incurred under the EAJA, not when they are incurred. 

See United Partition Sys., Inc. v. United States, 95 Fed. 

Cl. 42, 53 (2010); Phillips v. Gen. Servs. Admin., 924 F.2d 

1577, 1583 (Fed. Cir. 1991) (per curiam).

SUFI argues that the attorney fees award is not based 

on fees actually incurred after the contingency. Rather, 

the award is based on a lodestar calculation involving

hours worked, making the date those hours were worked 

relevant. We disagree. The lodestar analysis only determines the amount of attorney fees sought. Had SUFI lost 

its case, no attorney fees would have been owed to the 

attorneys, even though the attorneys performed the work. 

In either case, it cannot be said that SUFI bore the financial cost of interest as it was never deprived of the use of 

monies paid to the lawyers; there were no such payments. 

See, e.g., LMI-La Metalli Industriale, S.p.A. v. United 

States, 912 F.2d 455, 460–61 (Fed. Cir. 1990) (“The time 

value of money is not an arbitrary fiction, but must correspond to a dollar figure reasonably calculated to account 

for such value during the gap period between delivery 

and payment.”). We therefore vacate the trial court’s 

award of interest and remand with instructions that the 

trial court calculate interest consistent with this opinion. 

IV. Standard Rates 

The trial court calculated attorney fees based on

SUFI’s attorneys’ standard rates that were in place when 

SUFI’s attorneys did the claim preparation work. SUFI 

CFC III, 113 Fed. Cl. at 145–47. The trial court concluded 

that SUFI’s attorneys’ standard rates were reasonable on 

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SUFI NETWORK SERVICES, INC. v. US 13

the basis of (i) testimony as to rates typically charged by 

SUFI’s attorneys during the relevant time period, (ii) an 

expert report that compared SUFI’s attorneys’ rates to 

rates charged by a leading law firm during the same time 

period, (iii) and evidence of market conditions that existed 

at the time. Id. at 147. 

The government argues that the trial court should 

have based its fee award on the rates SUFI actually paid 

its attorneys before the contingency arrangement was in 

place, and not the standard rates. The government reasons that SUFI did not produce at trial its other fee 

agreement that was in place prior to the contingency fee 

agreement. As a result, the government argues that SUFI 

did not meet its burden of proving that the standard rates 

were reasonable. SUFI responds that the evidence supports the trial court’s conclusion because the government 

failed to challenge the standard rate evidence at trial or 

on appeal.

We find no clear error in the trial court’s award of fees 

based on SUFI’s attorneys’ standard rates. The trial court 

calculated SUFI’s attorney fees award using the lodestar 

method, which involves multiplying the number of hours 

by an hourly rate. See, e.g., Perdue v. Kenny A. ex rel. 

Winn, 559 U.S. 542, 546 (2010). Both the number of hours 

and the hourly rate must be reasonable, and a party 

seeking a fee award has the burden of proving reasonableness. Blum v. Stenson, 465 U.S. 886, 897 (1984). An 

hourly rate is reasonable if it is “in line with those prevailing in the community for similar services by lawyers 

of reasonably comparable skill, experience and reputation.” Id. at 896 n.11. The trial court heard evidence 

suggesting that SUFI’s attorneys’ standard rates were 

reasonable and in line with those prevailing in the community.

The government cites no authority that a party cannot prove the reasonableness of its standard rates when 

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14 SUFI NETWORK SERVICES, INC. v. US

there is evidence the party paid a different rate at an 

earlier, unrelated time. In addition, the government 

introduced testimony suggesting that the prior rates were 

similar to the standard rates used by the trial court to 

calculate the attorney fees award. We affirm the trial 

court’s attorney fees calculation.

V. SUFI’s Cross-Appeal

The trial court denied SUFI’s request for overhead 

costs and lost profits it incurred pursuing its claim for 

attorney fees on the grounds that the FAR provides that 

the government “will not pay excessive pass-through 

charges,” FAR § 52.215-23(b), which are generally defined 

as a contractor’s “indirect costs or profit” resulting from 

work performed by a subcontractor with “negligible value” 

added by the contractor, id. § 52.215-23(a). SUFI CFC III, 

113 Fed. Cl. at 148–49. The trial court determined that 

SUFI added negligible value to the claim preparation 

work done by SUFI’s attorneys, hence, SUFI’s overhead 

and profit constituted excessive pass-through charges. 

SUFI CFC III, 113 Fed. Cl. at 149. 

SUFI argues that the trial court erred in applying the 

FAR because the FAR does not apply. SUFI contends that 

under applicable common law, overhead and lost profit 

are recoverable. The government responds that SUFI’s 

overhead costs and lost profits are unreasonable damages

and thus unrecoverable under common law for the same 

reason that excessive pass-through charges are not allowed under the FAR. 

We agree with SUFI that the trial court erred in applying the FAR. The FAR does not apply to SUFI’s nonappropriated funds contract. See FAR §§ 1.104, 2.101. 

Under applicable common law, damages for breach of 

contract should place the wronged party in as good a 

position as it would have been had the breaching party 

fully performed. MTBA, 129 F.3d at 1232–33. If a party 

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SUFI NETWORK SERVICES, INC. v. US 15

shows that work was done solely because of a breach, that 

party is entitled to prove the cost of that work, including 

“both direct and indirect costs.” Energy Nw. v. United 

States, 641 F.3d 1300, 1309 (Fed. Cir. 2011).

Contrary to the government’s contention, the common 

law and the FAR are not synonymous in this instance. 

The common law, unlike the FAR, does not require the 

party seeking overhead and profit to prove that it added 

more than negligible value to the work. See Energy Nw., 

641 F.3d at 1309. Nor would the parties have contemplated that FAR § 52.215-23 would limit overhead and profit 

recovery. The parties entered the contract in 1996. Legislation prohibiting excessive pass-through charges was not 

passed until 2007. John Warner National Defense Authorization Act for Fiscal Year 2007, Pub. L. No. 109-364, 

§ 852(b) (codified at 10 U.S.C. § 2324 note). The final 

version of FAR § 53.215-23 did not issue until December 

2010. See 75 Fed. Reg. 77,745 (Dec. 13, 2010). Thus, we 

vacate the trial court’s denial of overhead and profit and 

remand with instructions that the trial court apply law

consistent with this opinion. 

CONCLUSION

For these reasons, we affirm-in-part, vacate-in-part, 

and remand.

AFFIRMED IN PART, VACATED IN PART, and 

REMANDED

COSTS

No costs.

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