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Parties Involved:
DG21, LLC
Appellant
Raymond E. Mabus
Appellee

Document Text:

United States Court of Appeals 

for the Federal Circuit ______________________ 

DG21, LLC,

Appellant

v.

RAYMOND E. MABUS, 

SECRETARY OF THE NAVY,

Appellee

______________________ 

2015-1830

______________________ 

Appeal from the Armed Services Board of Contract 

Appeals in No. 57980, Administrative Judge John J. 

Thrasher.

______________________ 

Decided: May 6, 2016

______________________ 

JOHN C. DULSKE, Law Offices of Dulske & Gluys, P.C., 

San Antonio, TX, argued for appellant. Also represented 

by JOAN KELLEY FOWLER GLUYS. 

DOMENIQUE GRACE KIRCHNER, Commercial Litigation 

Branch, Civil Division, United States Department of 

Justice, Washington, DC, argued for appellee. Also represented by BENJAMIN C. MIZER, ROBERT E. KIRSCHMAN, JR., 

MARTIN F. HOCKEY, JR.; RUSSELL SHULTIS, Office of Litigation, United States Navy, Washington, DC.

______________________ 

Case: 15-1830 Document: 32-2 Page: 1 Filed: 05/06/2016
2 DG21, LLC v. MABUS

Before PROST, Chief Judge, NEWMAN and LOURIE, Circuit 

Judges.

LOURIE, Circuit Judge. 

DG21, LLC (“DG21”) appeals from the decision of the 

Armed Services Board of Contract Appeals (the “Board”) 

denying an appeal from the final decision of the contracting officer (“CO”) denying DG21 an equitable adjustment 

to account for escalated fuel costs under a government 

contract. See DG21, LLC, ASBCA No. 57980, 15-1 BCA 

¶ 36016 (Mar. 3, 2015); see also Joint App. (“J.A.”) 1–26. 

For the following reasons, we affirm. 

BACKGROUND 

The Department of the Navy (“the Navy”) maintains a 

support facility at Diego Garcia, a small atoll in the 

Indian Ocean. J.A. 36–37. The atoll occupies approximately 10.5 square miles in area, and is located approximately 1,800 miles east of the coast of Africa and 1,200 

miles south of the southern tip of India. J.A. 36. Access to 

Diego Garcia is restricted to military personnel, authorized government personnel, and contractors of the United 

States or United Kingdom, and there is no commercial or 

civilian infrastructure. J.A. 38. 

In September 2005, the Navy issued a solicitation for 

bids on a firm fixed-price contract to provide base operating support services at Diego Garcia. J.A. 39. The services to be performed by the contractor varied widely, 

from information technology services to refuse collection 

and recycling. J.A. 39. In addition to providing the 

services themselves, the contractor was required to implement a fuel conservation initiative, with a goal of 

cumulatively reducing fuel use by 10% per year of the 

contract. J.A. 48–49. Success in the fuel conservation 

initiative was responsible for 10% of the contractor’s 

award-fee pool each year. J.A. 50. 

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DG21, LLC v. MABUS 3

The solicitation identified two categories of fuel used 

under the contract. J.A. 115, 116. The first category, 

“government-furnished fuel,” was provided by the Navy to 

the contractor without any payment required, and could 

be used for most of the services in the contract. J.A. 115. 

The second category, which applied to all contractor base 

support vehicles and equipment (“BSVE”) and labelled as 

“contractor-furnished fuel,” was in fact also provided by 

the Navy. Rather than being provided without payment, 

however, the solicitation required the contractor to reimburse the Navy for that fuel “at the prevailing DoD [Department of Defense] rate at the time of purchase.” J.A. 

116. The solicitation indicated that the reimbursement 

program was “to ensure that the fuel conservation program achieves its full impact throughout the life of the 

contract.” J.A. 115. The solicitation also provided historical fuel prices and usage rates for contractors to use in 

crafting their bids. J.A. 116.

The solicitation incorporated by reference several 

provisions of the Federal Acquisition Regulations (“FAR”). 

J.A. 136. One incorporated provision provides that: 

(a) The Contracting Officer may, at any time . . . 

by written order designated or indicated to be a 

change order, make changes in the work within 

the general scope of the contract, including changes– 

. . . 

(3) In the Government-furnished facilities, 

equipment, materials, services, or site[.]

. . . 

(b) Any other written or oral order . . . from the 

Contracting Officer that causes a change shall be 

treated as a change order under this clause; provided, that the Contractor gives the Contracting 

Officer written notice stating (1) the date, circumCase: 15-1830 Document: 32-2 Page: 3 Filed: 05/06/2016
4 DG21, LLC v. MABUS

stances, and source of the order and (2) that the 

Contractor regards the order as a change order.

. . . 

(d) If any change under this clause causes an increase or decrease in the Contractor’s cost of . . . 

performance of any part of the work under this 

contract, whether or not changed by any such order, the Contracting Officer shall make an equitable adjustment and modify the contract in writing. 

48 C.F.R. § 52.243-4 (1987).

DG21 submitted a bid on the solicitation, and performed calculations to determine how much contractorfurnished fuel it expected to consume. J.A. 57–58. It 

arrived at “a significantly lower number of gallons than 

the total gallons” reflected in the solicitation, and so its 

fuel estimate was significantly less than the Navy’s. J.A. 

58. DG21 also indicated that if fuel rates varied from 

historical rates by 10% or more, it would request an 

equitable adjustment, but that it would not escalate the 

amount of costs over the life of the contract. J.A. 232. 

The Navy responded that “[t]he historical fuel consumption and rates” were “provided for informational 

purposes only.” J.A. 234. The Navy also clarified that as 

the solicitation was firm fixed-price, “DG21 assumes the 

full risk of consumption and/or rate changes. Please price 

your proposal accordingly. Please review and correct/adjust as appropriate.” J.A. 234. The Navy also 

questioned DG21’s decision not to include an escalation 

clause, and accordingly requested clarification and confirmation of DG21’s intentions regarding its rates. J.A. 

233–34. DG21 did not change its estimate of fuel costs, 

reasoning that although fuel prices “fluctuate dramatically from year-to-year . . . [it] believes that fuel costs overall 

should decrease through the Energy Efficiency Program.” 

J.A. 235. Accordingly, DG21 took the position that fuel 

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DG21, LLC v. MABUS 5

costs did not need to be escalated and therefore did not 

change its pricing. J.A. 235. DG21 also removed the 

provision from its proposal indicating that it would seek 

an equitable adjustment if fuel prices changed more than 

10%. See J.A. 236–38. DG21’s final proposal was accepted, and DG21 was awarded the fixed-price contract on 

July 6, 2006. J.A. 239, 241. The total estimated price for 

the contract was $455,292,490. J.A. 241.

During the course of the contract, fuel prices—and 

thus the prevailing DoD rate for fuel—rose dramatically, 

reaching a maximum of more than double the historical 

rate indicated in the solicitation. See J.A. 106–07. At one 

point, DG21 sought to cap the price for fuel at a 10% 

change from historical rates, despite having removed that 

language from its final proposal. J.A. 287–88. The Navy

did not accept that request, and DG21 dutifully reimbursed the Navy for all “contractor-provided” fuel that it 

consumed. J.A. 122–23. 

On July 8, 2011, DG21 requested an equitable adjustment to account for the unexpected increase in fuel 

costs. J.A. 100–02. DG21 calculated the weighted average of prices before contract performance began as $1.75 

per gallon, and calculated the requested adjustment by 

subtracting the amount it would have paid at $1.75 per 

gallon from the amount actually paid. J.A. 106–07. DG21 

reasoned that because the government determined the 

prevailing DoD rate and invoiced DG21 for fuel, the

change in fuel price was a “change” to the contract under 

FAR § 52.243-4. Accordingly, DG21 requested an equitable increase of $1,171,475.90. J.A. 100–02. 

The CO denied DG21’s request. The CO stated that 

the historical rates had been provided for informational 

purposes only and that the price fluctuations were not 

changes to the contract under FAR § 52.243-4. J.A. 131–

32. DG21 appealed the CO’s denial to the Board.

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6 DG21, LLC v. MABUS

After exhaustively reviewing the record, the Board 

denied DG21’s appeal. The Board reasoned that even if 

FAR § 52.243-4 applied to the contractor-furnished fuel, 

fluctuations in the prevailing DoD rate of fuel would not 

constitute a change under the changes clause. J.A. 22. 

The Board found that the contract language anticipated 

fluctuations in the market, and that the FAR did not 

reallocate the risk of changes to the Navy. J.A. 22–23. 

Moreover, the Board found that DG21’s proposed interpretation would undermine the purpose of the contract—

to conserve fuel. J.A. 23. The Board reasoned that if 

DG21 did not bear the risk of market fluctuations, it 

would have little incentive to conserve fuel or establish a 

fuel conservation program. J.A. 23. Finally, the Board 

also rejected DG21’s argument that the Navy constructively changed the contract by charging more than the 

fuel price listed in the solicitation because the plain 

language of the contract contemplated market fluctuations in the fuel price. J.A. 24. 

DG21 timely appealed. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(10). 

DISCUSSION

We review the Board’s conclusions of law, including 

its interpretation of a contract, de novo. Gen. Dynamics 

Corp. v. Panetta, 714 F.3d 1375, 1378 (Fed. Cir. 2013). 

Still, we give the Board’s determination “careful consideration due to the [B]oard’s considerable experience in 

construing government contracts.” Wickham Contracting 

Co. v. Fischer, 12 F.3d 1574, 1577 (Fed. Cir. 1994). We 

will affirm the Board’s factual determinations if they are 

“based on ‘such relevant evidence as a reasonable mind 

might accept as adequate to support a conclusion.’” Gen. 

Dynamics Corp., 714 F.3d at 1378 (quoting E.L. Hamm & 

Assocs. v. England, 379 F.3d 1334, 1338 (Fed. Cir. 2004)). 

DG21’s principal argument is that the Board erred 

when it determined that FAR § 52.243-4 did not allocate 

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DG21, LLC v. MABUS 7

the risk of market fluctuations in fuel prices to the Navy. 

DG21 does not contend that the contract is ambiguous, 

and specifically admits that “the plain and unambiguous 

meaning of DG21’s contract—which includes any properly 

incorporated terms—controls the dispute concerning the 

risk allocation associated with increases in the prevailing 

DoD rate for government-furnished materials.” Appellant’s Br. 12. The Navy responds that the contract allocates the risk of fuel price fluctuations to DG21, that a 

change in the price of fuel was not a “change” within the 

meaning of the FAR, and that DG21’s interpretation 

undercuts the goal of the fuel conservation program. 

Appellee’s Br. 16–33. 

We agree with the Navy that the Board did not err in 

denying the request for an equitable adjustment for 

increased fuel costs. The contract specifically states that 

DG21 would purchase fuel “at the prevailing DoD rate at 

the time of purchase.” J.A. 116. DG21 was only charged 

that prevailing DoD rate for fuel, and does not contend 

otherwise. DG21 also does not allege that DoD inflated 

the prevailing rate in an effort to force DG21 to pay for 

programs not covered by the contract. See Raytheon 

Missile Sys., Co., ASBCA No. 57594, 13-1 BCA ¶ 35,264. 

Because the contract indicates that DG21 would be 

charged the prevailing DoD rate, and DG21 was only 

charged the prevailing DoD rate, there was no change to 

the contract that would trigger FAR § 52.243-4.

DG21’s arguments do not convince us otherwise. The 

contract uses the phrase “prevailing DoD rate at the time 

of purchase” to describe the price that DG21 would pay 

for fuel, rather than stating a specific price that DG21 

would pay. J.A. 116. By referencing the “prevailing DoD 

rate at the time of purchase,” rather than a specific price, 

the contract conveyed that the price for fuel could vary as 

the prevailing DoD rate varied; the contract conveys that 

the price will vary depending on the “time of purchase.” 

J.A. 115–16. Accordingly, a variable fuel price was a 

Case: 15-1830 Document: 32-2 Page: 7 Filed: 05/06/2016
8 DG21, LLC v. MABUS

specific part of the contract. Indeed, the lack of a specific 

price that DG21 would be charged for fuel reveals a 

problem with the manner in which DG21 calculated the 

equitable adjustment that it seeks. Because the contract 

does not indicate a specific dollar amount that DG21 will 

be charged per gallon, DG21 instead grounds its requested adjustment in a price cap that it proposed based on 

historical data that the Navy provided “[f]or informational 

purposes only,” J.A. 116, but did not ever agree to, see J.A. 

287–88. If we were to hold the Navy to prices that it 

provided to prospective bidders for merely informational 

purposes, the Navy would have little incentive to include 

such prices in future solicitations. 

Consistent with the general rule that “[t]he essence of 

a firm fixed-price contract is that the contractor, not the 

government, assumes the risk of unexpected costs,” 

Lakeshore Eng’g Servs., Inc. v. United States, 748 F.3d 

1341, 1347 (Fed. Cir. 2014), the “prevailing DoD rate” 

provision also allocates the risk of fluctuating fuel prices 

to DG21. If DG21 wanted to protect itself from rising fuel 

prices, it could have bargained for such protections. See 

id. at 1348. Instead, during the bid process, DG21 told 

the Navy that the Navy had overestimated the cost of fuel 

under the contract; the Navy responded that fuel prices 

fluctuated and that DG21 was “assum[ing] the full risk of 

consumption and/or rate changes,” J.A. 234; and DG21 

elected not to adjust its cost projections upward, J.A. 58, 

234–35. DG21 itself recognized that “[f]uel prices fluctuate dramatically from year-to-year,” J.A. 235, but did not 

include an escalation provision in its bid, and removed

from its final bid the provision indicating that it would 

seek an equitable adjustment if fuel prices varied more 

than 10%. See J.A. 235–38. Having failed to protect itself 

during contract negotiation, despite specifically recognizing the volatility of fuel prices, DG21 “cannot now rewrite 

the clauses to provide it protections the government did 

not agree to.” Lakeshore Eng’g, 748 F.3d at 1348. AccordCase: 15-1830 Document: 32-2 Page: 8 Filed: 05/06/2016
DG21, LLC v. MABUS 9

ingly, the increase in fuel prices was not a change to the 

contract triggering FAR § 52.243-4; the contract allocated 

to DG21 the risk of rising fuel prices. 

CONCLUSION

We have considered the remaining arguments, but 

find them unpersuasive. For the foregoing reasons, the 

decision of the Board is affirmed.

AFFIRMED

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