Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca13-14-01326/USCOURTS-ca13-14-01326-0/pdf.json

Parties Involved:
Department of Veterans Affairs
Appellee
Reliable Contracting Group, LLC
Appellant

Document Text:

United States Court of Appeals 

for the Federal Circuit ______________________ 

RELIABLE CONTRACTING GROUP, LLC,

Appellant

v.

DEPARTMENT OF VETERANS AFFAIRS,

Appellee

______________________ 

2014-1326

______________________ 

Appeal from the Civilian Board of Contract Appeals in 

No. 3048, Administrative Judge Anthony S. Borwick, 

Administrative Judge Patricia J. Sheridan, Administrative Judge Stephen M. Daniels.

______________________ 

Decided: March 6, 2015 

______________________ 

REGINALD ASHTON WILLIAMSON, Kilpatrick Townsend 

& Stockton LLP, Atlanta, GA, argued for appellant. Also 

represented by WILLIAM E. DORRIS; THURSTON 

HOLDERNESS WEBB, Winston-Salem, NC. 

WILLIAM JAMES GRIMALDI, Commercial Litigation 

Branch, Civil Division, United States Department of 

Justice, Washington, DC, argued for appellee. Also 

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2 RELIABLE CONTRACTING GROUP v. DVA

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

JR., KIRK T. MANHARDT. 

______________________ 

Before NEWMAN, CLEVENGER, and DYK, Circuit Judges.

Opinion for the court filed by Circuit Judge DYK. Dissenting opinion filed by Circuit Judge NEWMAN. 

DYK, Circuit Judge. 

Reliable Contracting Group, LLC (“Reliable”) appeals 

from a decision by the Civilian Board of Contract Appeals 

(“Board”). The Board denied Reliable’s claim for an 

equitable adjustment of a Department of Veterans Affairs 

(“VA”) contract which required the installation of three 

backup generators for a VA medical center. Reliable 

contends that the VA improperly rejected the generators 

on the ground that they were not “new” as required by the 

contract. Because we hold that the Board erred in its 

interpretation of the contract, we vacate the Board’s 

decision and remand for further proceedings. 

BACKGROUND

On February 10, 2003, the VA awarded a contract to

Echo Construction Company (“Echo”) for the design and 

construction of electrical improvements at a VA medical 

center. On March 31, 2003, Echo, the VA, and Reliable 

entered into a novation agreement, effectively replacing 

Echo with Reliable. 

The contract required that three backup generators be 

installed. Section 1.47 of the contract, entitled 

“MATERIAL AND WORKMANSHIP,” required that “[a]ll 

equipment, material, and articles incorporated into the 

work covered by this contract shall be new and of the 

most suitable grade for the purpose intended, unless 

otherwise specifically provided in this contract.” J.A. 79. 

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RELIABLE CONTRACTING GROUP v. DVA 3

That section did not define “new.” Separately, § 1.79

incorporated Federal Acquisition Regulation (“FAR”)

52.211-5 by reference. FAR 52.211-5 contained a separate 

requirement that supplies called for by the contract be 

“new, reconditioned, or remanufactured,” and it defined 

“new” to require that the supplies be “composed of previously unused components.” See 48 C.F.R. § 52.211-5.

Reliable sub-contracted the procurement of the electrical generators to Fisk Electric Company (“Fisk”), which

in turn contracted with DTE Energy Technologies, Inc. 

(“DTE”) to provide the generators. On June 26 and 27 of 

2004, DTE delivered two Cummins Power Generation 

(“Cummins”) generators to the construction site. Upon 

delivery, the VA’s senior resident engineer, Leonard 

Romano, inspected the two generators and determined 

that they were, in his view, not “new.” He wrote to Reliable, stating:

I am concerned that [the two generators that were 

delivered] are not “new” as required by [§ 1.47(a)]. 

They show a lot of wear and tear including field 

burns to enlarge mounting holes. Are they new 

and will you certify them as such? I cannot pay 

you for these as planned in this month’s payment 

without that certification.

J.A. 2.

This letter initiated a flurry of letters between Romano, Reliable, Fisk, and DTE, with Fisk and Reliable 

initially expressing agreement that the generators did not 

meet the contract specification. For example, on June 28, 

Fisk wrote to DTE, stating: “[m]y foreman noted that the 

units were in ‘BAD CONDITION’ and proceeded to install 

the units.” J.A. 102. Similarly, on June 29, Reliable 

wrote to Fisk, stating: “[a]s we discussed with you, the 

equipment on site is clearly unacceptable by anyone’s 

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4 RELIABLE CONTRACTING GROUP v. DVA

standards . . . .” J.A. 109. On that same day, Reliable 

wrote to Romano, stating:

Representatives of Fisk have assured us that they 

were as surprised as anyone at the condition of 

the equipment delivered to the site. We have been 

working closely with Fisk personnel to investigate 

the matter and per our conversation have directed 

them to remove the nonconforming generators 

from the project site.

J.A. 303. Both Fisk and Reliable personnel continued to 

investigate the matter, and Romano continued to assert 

his belief that the generators were not conforming. 

After investigation, Reliable and Fisk came to the 

conclusion that the generators, which were manufactured 

in 2000, had been previously purchased by others but 

never used. Reliable presented this information to Romano on July 9, but Romano nonetheless rejected the generators, asserting that “[p]revious ownership makes them 

used.” J.A. 6. Subsequently, Fisk obtained different 

generators, which were accepted by the VA and installed. 

On April 3, 2007, Reliable submitted a claim to the 

VA, alleging that the VA had violated the contract and 

seeking roughly $1,100,000 for additional costs incurred 

as a result of the VA’s rejection of the three original 

generators. The VA failed to timely respond, so Reliable 

appealed to the Board. On November 27, 2013, the Board 

denied Reliable’s claim, finding that the generators were 

not “new” because they were not capable of being factory 

tested. Reliable appealed to this court.

We have jurisdiction pursuant to 41 U.S.C. 

§ 7107(a)(1)(A).

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RELIABLE CONTRACTING GROUP v. DVA 5

DISCUSSION

We review questions of law, including interpretations 

of contracts, de novo. Rockies Express Pipeline LLC v. 

Salazar, 730 F.3d 1330, 1335–36 (Fed. Cir. 2013). We 

review factual questions for substantial evidence. Id. at 

1335.

The parties’ dispute centers around the contract’s 

requirement that the generators be “new.” The Board 

held, and the VA presently argues, that “new” requires 

that each generator be “capable of being tested at the 

factory.” J.A. 8. This definition comes from the language 

of § 1.79, which incorporates FAR 52.211-5’s requirement

that the generators’ supplies “meet contract requirements” to be considered “new,” 48 C.F.R. § 52.211-5, and 

§ 16208, which requires that the generators be capable of 

factory testing.1 Because the generators left the factory 

in 2000, the Board reasoned, they were incapable of being 

factory tested in 2004 and therefore not “new.” On the 

1 Section 16208.1.3(E) provides, in relevant part:

Factory Test: The government shall have the option of witnessing the following tests at the factory. . . . 

1. Load Test: Shall include six hours of continuous operation; four hours while the set is delivering 100 percent of the specified KW and two 

hours while delivering 110 percent of the specified KW. . . . 

2. Quick Start Test: Record time required for the 

engine generator set to develop specified voltage, frequency and KW load from a standstill 

condition.

J.A. 301–02.

 

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6 RELIABLE CONTRACTING GROUP v. DVA

other hand, Reliable argues that the contract is clear on 

its face because § 1.79 provides an express definition of 

“new”: “new” means comprised of unused parts. According to Reliable, because the generators had never been 

used, they were “new” even though previously owned and 

damaged by improper storage. We reject both interpretations.

We reject the VA’s and the Board’s interpretation for 

two reasons. First, the VA never contemporaneously

argued that the generators were non-conforming because 

they were incapable of being factory tested. Generally, 

evidence of contemporaneous beliefs about the contract is 

particularly probative of the meaning of a contract. See 

Blinderman Constr. Co. v. United States, 695 F.2d 552, 

558 (Fed. Cir. 1982) (“It is a familiar principle of contract 

law that the parties’ contemporaneous construction of an 

agreement, before it has become the subject of a dispute, 

is entitled to great weight in its interpretation.”); Max 

Drill, Inc. v. United States, 427 F.2d 1233, 1240 (Ct. Cl. 

1970) (en banc) (per curiam) (expressly adopting Commissioner Stone’s view that “[t]he interpretation of a contract 

by the parties to it before the contract becomes the subject 

of controversy is deemed by the courts to be of great, if not 

controlling[,] weight”). Second, the contract required that 

the generators be capable of a “factory test” but did not 

expressly require testing be done at the factory at the 

time the generators were manufactured, nor did it require 

that testing be done at the factory if the government did 

not request it. Here, the Board found that that the generators were subsequently tested by Cummins factorycertified technicians, and the VA declined to observe the 

testing. There is no showing the generators were incapable of being tested at the factory if actual testing at the 

factory had been requested by the government—which it 

had not in fact requested. 

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RELIABLE CONTRACTING GROUP v. DVA 7

On the other hand, we reject Reliable’s interpretation 

because it is incomplete. While we agree that generators 

that had been used would not comply with the contract,2

we think that the mere fact that the generators were not 

used does not make them “new.” Reliable, aided by the 

July 8, 2013, affidavit of Fisk’s Executive Vice President 

James Muhl, argues that the generators were “new” 

because they were not used, and in the industry, “generators are not ‘used’ until the generators are commissioned[, 

at which point] the manufacturer pushes out the new 

equipment warranty and the unit is put into ‘service.’” 

J.A. 234. While Muhl’s affidavit speaks to the industry 

definition of “used,” he does not provide an industry 

definition of “new,”3 and dictionaries do not define “new” 

as simply being the opposite of “used.”4 Reliable relies on 

§ 1.79, which incorporated FAR 52.211-5 and defines

“new” to mean “composed of previously unused components.” 48 C.F.R. § 52.211-5(a). But, by its own terms, 

that definition is expressly limited to FAR 52.211-5 itself.5 

2 There is no contention here that the generators 

were used. The run times demonstrated only that the 

generators had been tested. 

3 Muhl’s statement that, “[i]f the unit has not be[en] 

‘used’, then the unit is ‘new,’” was his conclusion with 

respect to these “particular generator[s],” not a general 

statement about industry practice. See J.A. 234.

4 If anything, the opposite of “new” tends to be

“old,” not “used.” See, e.g., Random House Webster’s 

Unabridged Dictionary 1293 (2d ed. 1999) (“New, fresh, 

novel describe something that is not old.”); see also Webster’s Third New International Dictionary 1522 (2002).

5 FAR 52.211-5, incorporated by reference into 

§ 1.79, provides in relevant part:

 

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8 RELIABLE CONTRACTING GROUP v. DVA

As noted above, there are two separate “new” requirements, one found in § 1.47 and one found in § 1.79. 

Section 1.79’s “new” requirement focuses on the quality of 

the components in the generator—the components must 

be unused. Section 1.47 sets forth a different requirement. Under § 1.47, the generator itself must be “new.” 

And, in that section, “new” is undefined. Reading the 

contract in this manner—that § 1.47 and § 1.79 set forth 

separate and distinct “new” requirements—is reinforced 

by the rule of construction disfavoring surplusage and 

redundancy. See Mass. Bay Transp. Auth. v. United 

States, 129 F.3d 1226, 1231 (Fed. Cir. 1997) (“It is a 

fundamental rule of contract interpretation that the 

provisions are viewed in the way that gives meaning to all 

parts of the contract, and that avoids conflict, redundancy, and surplusage among the contract provisions.”). 

Reliable’s interpretation is incomplete because the “new” 

requirement under § 1.47 focuses on the generator as a 

whole, not the component parts. While the parties agree 

that “new” requires no prior use, there is no justification 

for treating a generator as new solely because it has not 

been used.

 Because “new,” as used in § 1.47, is not defined by the 

contract and there is no single plain meaning of the word

(a) Definitions. As used in this clause— 

New means composed of previously unused components, whether manufactured from virgin material, 

recovered material in the form of raw material, or materials and by-products generated from, and reused 

within, an original manufacturing process . . . . 

. . . 

48 C.F.R. § 52.211-5 (emphasis added).

 

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RELIABLE CONTRACTING GROUP v. DVA 9

“new,” it is ambiguous. It is therefore appropriate to look 

both to the dictionary definitions of “new” and to industry 

definitions, standards, and practices. See C.A. Acquisition 

Newco, LLC v. DHL Express (USA), Inc., 696 F.3d 109, 

113–14 (Fed. Cir. 2012) (noting that the trial court 

“should also consider any relevant industry practices” 

when resolving ambiguous terms in a contract and looking to dictionary definitions to resolve ambiguities); Hunt 

Constr. Grp. v. United States, 281 F.3d 1369, 1373 (Fed. 

Cir. 2002) (industry meaning can be used as an interpretative aid in understanding terms in a contract); see also 

Nat’l Union Fire Ins. Co. v. Lumbermens Mut. Cas. Co., 

385 F.3d 47, 55 (1st Cir. 2004) (vacating a district court 

decision interpreting a contract and remanding for further consideration in light of industry practices). 

One possible meaning is the one initially put forth by 

Romano but subsequently dropped, i.e., that “new” means 

not previously owned by another. This definition was 

disputed by Muhl’s affidavit. In it, he described that, “[i]n 

the electrical contracting and construction business, 

simply being owned and kept in storage by an intermediary does not make a generator ‘used’ . . . .” J.A. 238. The 

record evidence shows that generators are notuncommonly sold through various intermediaries, and, as 

here, are still entitled to a manufacturer’s warranty. In 

such circumstances, an interpretation that “new” requires 

that the generators not be previously owned is incorrect. 

Indeed, the VA no longer argues that this is the meaning 

of “new” in this context. 

 “New” could require that the generators be recently 

manufactured. This has some support in the dictionaries. 

See Black’s Law Dictionary 1204 (10th ed. 2014) (“recently 

come into being <the new car was shipped from the factory this morning>”); Webster’s Third New International 

Dictionary 1522 (2002) (“having existed or having been 

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10 RELIABLE CONTRACTING GROUP v. DVA

made but a short time; having originated or occurred 

lately”). We do not think that this is what the parties 

intended when they required that the generators be 

“new.” Neither party argues for this meaning, and no 

evidence was put forth with respect to the average life 

expectancy of a backup generator, the speed at which 

generator technology is improving, or the like. Recent 

manufacture is not a requirement. 

 “New” could require a fresh condition. Dictionary 

definitions support this interpretation. See Webster’s 

Third New International Dictionary 1522 (2002) (defining 

“new” to mean: “usu[ally] of superior quality;”

“[f]reshness;” “[f]resh in this connection applies to what is 

new and still retaining a first liveliness, energy, virginal 

quality, and so on”). We think this definition is appropriate for purposes of § 1.47. There is no testimony as to

how, in the industry, a generator can be “new” if it has 

been severely damaged. It defies logic to conclude that 

the parties intended to treat seriously damaged generators as “new.” 

In interpreting “new” to require the generators be 

“fresh,” we do not mean that the generators were required 

to be entirely free of cosmetic defects. It is entirely foreseeable that slight, superficial damage might occur during 

shipment or storage, and there is no evidence put forth by 

either party that the contract intended to define “new” to 

exclude damage such as paint scratches or light and 

easily fixable rusting. See, e.g., Groban v. S.S. Pegu, 331 

F. Supp. 883, 887, 890–91 (S.D.N.Y. 1971) (explaining 

that tractors exposed to heavy tropical rains during 

shipment, which resulted in surface damage to the tractors, were still “new”). In our view, “new” requires that 

the generators must not be used and also must be free of 

significant damage, i.e., damage that is not cosmetic.

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RELIABLE CONTRACTING GROUP v. DVA 11

The record evidence before us is conflicting with respect to the extent of the damage, and there was no 

express finding by the Board on the issue.

While, as noted above, there are unequivocal admissions by Reliable that the generators were significantly 

damaged and not in conformity with the contract, these 

statements are not binding judicial admissions. Although 

this circuit has had limited opportunities to address the 

doctrine, it is clear from other circuits that judicial admissions, which “have the effect of withdrawing a fact from 

issue and dispensing wholly with the need for proof of the 

fact,” are limited to formal admissions made in, for example, a complaint, answer, or pretrial order. See Am. Title 

Ins. Co. v. Lacelaw Corp., 861 F.2d 224, 226 (9th Cir. 

1988) (quoting Dery v. Gen. Motors Corp. (In re Fordson 

Eng’g Corp.), 25 B.R. 506, 509 (Bankr. E.D. Mich. 1982)). 

Although not formal judicial admissions and therefore 

not binding, contemporaneous admissions by Reliable are 

nonetheless probative evidence that the generators did 

not comply with the contract. See 3M Co. v. Mohan, 482 

F. App’x 574, 579 (Fed. Cir. 2012) (citing a party’s apologies to customers for causing confusion as support for the 

factual finding that the party did cause confusion); Sutton 

v. Calhoun, 593 F.2d 127, 128 (10th Cir. 1979) (affirming 

the trial court’s submission to the jury of the question of 

how much probative weight should be assigned to an 

admission of mistake by a doctor in a case alleging negligence on the part of the doctor); Becton v. Starbucks 

Corp., No. 2:05-CV-1143, 2007 WL 2688128, at *3 (S.D. 

Ohio Sept. 6, 2007) (admitting a contemporaneous statement by a Starbucks manager apologizing for an improperly secured lid because it was probative of whether the 

lid was properly secured). It is also significant that 

Reliable was unwilling at the time of delivery to certify 

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12 RELIABLE CONTRACTING GROUP v. DVA

that the generators were “new” or to characterize them as 

new. 

On the other hand, Muhl, in his July 9, 2013, affidavit, concluded that the damage to the generators was 

entirely cosmetic. He asserted that the damage to the 

generators was superficial, consisting of rust, scraped 

paint, disconnected hoses, and dust, dirt, and grime. 

According to him, the damage was easily remedied with a 

“buff and puff” and did not affect the quality of the generators. 

There was thus conflicting evidence as to the extent of 

the damage. There were admissions that the damage to

the generators was substantial, but the affidavit from 

Muhl asserts it was not. In light of the conflicting evidence and lack of fact-finding by the Board on this issue, 

we remand for the Board to determine whether the damage to the generators during the four-year period between

the original manufacture and the date of delivery to the 

VA site was significant enough to render the generators 

not “new.” 

Because our interpretation of “new” includes an analysis of the extent of the damage and whether it can be 

fully and easily cured, there is no need to address Reliable’s economic waste theory, as that doctrine substantially 

overlaps with whether the generators at issue are “new” 

under the contract. See Granite Constr. Co. v. United 

States, 962 F.2d 998, 1007–08 (Fed. Cir. 1992) (explaining 

that rejecting performance of a contract in which the 

performance is entirely adequate for the purpose of the 

project is economic waste). 

VACATED AND REMANDED

COSTS

Costs to neither party.

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United States Court of Appeals 

for the Federal Circuit ______________________ 

RELIABLE CONTRACTING GROUP, LLC,

Appellant

v.

DEPARTMENT OF VETERANS AFFAIRS,

Appellee

______________________ 

2014-1326

______________________ 

Appeal from the Civilian Board of Contract Appeals in 

No. 3048, Administrative Judge Anthony S. Borwick, 

Administrative Judge Patricia J. Sheridan, Administrative Judge Stephen M. Daniels.

______________________ 

NEWMAN, Circuit Judge, dissenting.

The Department of Veterans Affairs (“VA”) and Reliable Contracting Group (“Reliable”) entered into a contract 

for construction of a veterans’ medical center in Miami, 

Florida. The contract included the provision and installation of three new backup electrical generators. 

The prime contractor Reliable, through a subcontractor and supplier, provided previously owned, rusted, 

grime-encrusted, four-year-old generators with mounting 

holes and field burns. The VA on-site engineer observed 

their condition and objected to their installation. Reliable

agreed, and wrote that the generators were “nonconforming” and “clearly unacceptable by anyone’s standards,” 

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2 RELIABLE CONTRACTING GROUP v. DVA

and chastised the subcontractor. The subcontractor 

described the generators as in “bad condition” and chastised the supplier.

Reliable refused to certify the generators as “new” and 

the VA refused to accept them. Reliable instructed the

subcontractor to remove the generators and provide

“conforming equipment.” The claim here is $1.1 million

for the cost of providing the replacement generators. The

contracting officer, affirmed by the Civilian Board of 

Contract Appeals, denied the claim, stating that the 

generators were not new and that no additional compensation was warranted. 

My colleagues on this panel now fault the VA for rejecting the generators without ascertaining whether they 

might be cleaned up and refurbished. On this reasoning, 

my colleagues remand to the Board with instructions to 

determine whether the damage to the generators during 

the four-year period in which they were improperly stored 

was “significant enough” to render the generators not 

new. Maj. op. at 12. 

I respectfully dissent.

DISCUSSION

The Board’s findings of fact are final unless they are

“fraudulent, or arbitrary, or capricious, or so grossly 

erroneous as to necessarily imply bad faith, or if such 

decision is not supported by substantial evidence.” 41 

U.S.C. § 609(b) (1982).

No error has been shown in the Board’s determination 

that the generators were not new and that an adjustment 

was not warranted. The Board noted Reliable’s statements that the generators were “nonconforming” and 

“clearly unacceptable by anyone’s standards.” The contract is explicit as to the requirement for new generators. 

Section 1.47 of the contract states: 

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RELIABLE CONTRACTING GROUP v. DVA 3

(a) all equipment, material, and articles incorporated into the work covered by this contract 

shall be new and of the utmost suitable grade 

for the purpose intended, unless otherwise 

specifically provided in this contract.

The Board observed that neither Reliable nor its subcontractor characterized the generators as new, and that 

both refused to so certify.

My colleagues on this panel hold that “new” includes 

previously owned generators if they are in “fresh condition,” unused, and free of “significant damage.” Maj. op. 

at 10. Whatever may be the applicability of such a standard to other facts, these generators showed more than 

“slight, superficial damage.” Id. The absence of “freshness” of these begrimed, four-year-old, “inadequately 

stored,” previously owned generators was not plausibly 

disputed. No error in fact or law has been shown in the 

Board’s determination that these generators were not 

new, on any reasonable standard of newness.

Indeed, the panel majority refers to the “unequivocal 

admissions by Reliable that the generators were significantly damaged and not in conformity with the contract.” 

Id. at 11. However, the majority relieves the contractor of 

these admissions because they were not “binding judicial 

admissions” in formal court documents, but were made 

only in contemporaneous written records. Id. No basis 

has been shown for excluding this evidence. 

The panel majority further errs in ruling that the correct interpretation of “new” in government contracts or 

under the FAR includes previously owned and damaged 

equipment if the damage “can be fully and easily cured.” 

Id. at 12. Old and damaged equipment does not become 

new if the damage can be cured. There was no obligation, 

in law or equity, for the VA to determine whether these 

admittedly “nonconforming” generators could be cleaned 

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4 RELIABLE CONTRACTING GROUP v. DVA

up and refurbished. The additional costs of contract 

compliance are not the obligation of the agency.

The Board’s denial of the requested adjustment is correct, and is well supported in fact and law. There is no 

reasonable basis for further proceedings on this claim. 

From my colleagues’ contrary ruling, I respectfully dissent.

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