ARMED SERVICES BOARD OF CONTRACT APPEALS
Appeal of

--
Electric Boat Corporation

Under Contract No. N00024-03-C-2101

APPEARANCES FORTHE APPELLANT: ) ) ) ) )

APPEARANCES FORTHE GOVERNMENT: ASBCA No. 58672

Stephen J. McBrady, Esq. Skye Mathieson, Esq. Michelle D. Coleman, Esq.

Crowell & Moring LLP Washington, DC
Craig D. Jensen, Esq.

Navy ChiefTrial Attorney Russell A. Shultis, Esq. David B. Stinson, Esq. David M. Marquez, Esq. Alana M. Sitterly, Esq.

Trial Attorneys

OPINION BYADMINISTRATIVE JUDGE D'ALESSANDRIS ON THE GOVERNMENT'S MOTION FOR SUMMARYJUDGMENT REGARDING ENTITLEMENT
Pending before the Board is the motion for summaryjudgmentregarding entitlementfiled byrespondent, the Department ofthe Navy (government orNavy). The Navy seeks entry ofsummaryjudgmentholding that appellant, Electric Boat Corporation (Electric Boat orEB), and its subcontractor Huntington Ingalls, Inc. (HII), cannot establish economic injury directly causedby a change in federal law, and requests dismissal ofthe appeal.

On December 10, 2018, we granted, in part, the Navy's earlier-filed motion for summaryjudgment, dismissing Electric Boat's claim for its own costs based upon the statute oflimitations, butdenying the motion withregard to the costs ofits subcontractor HII. 

### ElectricBoat Corporation, ASBCANo. 58672, slip op. (December 10, 2018). Thus, despite the fact that the vast majority ofthe parties' briefing pertains to Electric Boat's costs, only HII's costs are at issue in this opinion. Forthe reasons statedbelow, we deny the Navy's motion.STATEMENTOFFACTS FORPURPOSES OF THE MOTION

This appeal pertains to ContractNo. N00024-03-C-2101 (the contract) for the construction ofsix Block II Virginia Class submarines (R4, tab 52). Familiarity with
ourprior opinion is assumed, and only facts relevant to the currentmotion are included here. The contractwas primarily firm-fixed-price, butwith some cost-reimbursement line items. Construction ofeach submarine was a fixed-price line item with cost sharing ofcosts above orbelow the target cost. (R4, tab 52 at 280-96) The contract included Clause H-9, NAVSEA 5252.233-9103, DOCUMENTATION OF REQUESTS FOR EQUITABLE ADJUSTMENT (AT)-ALTERNATE I (APR 1999), which stated:
(a) Forthe purposes ofthis requirement, the term "change" includes not only a change that is made pursuantto a written order designated as a "change order" but also (i) an engineering change proposed by the Government orthe Contractorpursuantto the "Other Change Proposals" or otherrequirements ofthis contract and (ii) any act or omissionto act on the part ofthe Governmentinrespect of which a request is made for equitable adjustment underthe "CHANGES" clause or any other article orrequirement of this contract.
(b) Wheneverthe Contractorrequests orproposes an equitable adjustment of$100,000 ormore pervessel in respect ofa change made pursuantto a written order designated as a "change order" or in respect ofa proposed engineering change and whenever the Contractorrequests
an equitable adjustment in any amount in respect ofany other act or omission to act on the part ofthe Government, the proposal supporting such request shall include the following information for each individual item or element ofthe request:

(3) Description ofwork which is substituted or added bythe change. A list ofidentifiable components and equipment (notbulk materials or items) involved, should be included. Separate descriptions are to be furnished for design work and production work;

2(4) Description ofinterference and inefficiencies in performing the change;

(c) Each proposal submitted in accordance with this requirement shall include a copy ofthe Contractor's ship's laborbudget at the cost level in effect as ofthe date the eventbegan, the cost incurred at the cost level as ofthe
same date, and the proposed effect ofthe change at the cost class level.
(d) It is recognized that individual claims for equitable adjustment may not include all ofthe factors listed in subparagraphs (b) (1) through (b) (8) above, or that the Contractor may notreasonably be able to furnish complete information on all ofthe factors listed in subparagraph (b) (1) through (b) (8) above. Accordingly, the Contractoris only required to set forth in its request for equitable adjustment information with respect to those factors which are relevant to the individual request for equitable adjustment, or in the level ofdetail which is reasonably available to the Contractor.
(e) In addition to any informationrequired under paragraph (b) above, each proposal submitted in support of
a claim for equitable adjustment, under any requirement of this contract, in an amount which requires certified cost or pricing data, shall contain such cost or pricing data as the Contracting Officer shall require with respect to each individual claim item, and shall be in sufficient detail to permitthe Contracting Officerto cross-reference the claimed increased costs, or delay in delivery, orboth, as appropriate, with the information submitted pursuantto subparagraphs (b) (1) through (b) (8) hereof.
(R4, tab 52 at428-30) The contract does not contain FAR 52.243-6, CHANGE ORDER ACCOUNTING, permitting the contracting officerto require a contractor to maintain separate accounts "ofall incurred segregable, direct costs (less allocable credits) of work, both changed and not changed, allocable to the change."

As described in more detail in ourprevious opinion, the Occupational Health and Safety Administration (OSHA) promulgated a new regulation, referred to as Subpart P,

### Fire Protection in Shipyard Employment (29 C.F.R. 

### § 1915.501 etseq.), that became effective on December 14, 2004 (Fire Protection in Shipyard Employment, Final Rule, 69 Fed. Reg. 55,667-708, OSHA (Sept. 15, 2004)). Electric Boat contends that compliance with Subpart P, which modified the regulations requiring a fire watch during "hotwork," increased its cost ofperformance by an amount sufficient to qualify for an adjustment, pursuant to Clause H-30 ofthe contract, to the firm-fixed-price contract line item for construction ofthe submarines.

Relevant to this motion, on January 30, 2006, HII submitted its Estimate of Cost Summary to Electric Boat, setting forth its "[a]dditional costs associated with complying with the increased requirements invoked by OSHA 29 C.F.R. 1915 SUBPART P" totaling $27,524,878 (gov'tmot., ex. 17). HII's claimed amount was based on an estimate of392,520 additional labor hours (id.).



### HII's estimated cost impact was developed by determining which ofits departments had a high percentage offire watch qualified personnel (gov'tmot.,
ex. 101 at 3172-73). HII used its Labor Resources Plan from 2005 as a baseline for labor to complete the submarines. HII then estimated, on a department-by-department basis, the percentage offire watch work performed before the effective date of Subpart P and an estimate ofthe percentage increase in fire watch performed after the effective date ofSubpart P, with the exception ofone department that estimated a set number offire watch hours per week for grinding, rather than welding, activity. (Id. 

### at 3174, 3204)

Mr. James Myers, HII's executive in charge ofcost and financing issues provided deposition testimony to the effect that it would be impractical to separately account for OSHA Subpart P costs. Mr. 

### Myers testified that even ifit were possible to create a cost code for "fire watch" that would only include the direct labor of"an individual to stand guard with a fire extinguisher" this would not measure the "ancillary efforts associated with fire watch" and that measuring these costs would be "nearly impossible" and that such "discrete cost intelligence would have been marginal, very subjective at best." (App. opp'n, ex. 26 at 79, 87-88, 90-91) EB's expert in cost estimating, Mr. James P. O'Hare, provided his opinion that HII's estimating methodology for the Subpart P regulation was based on information from supervisors familiar with HII's practices before and after Subpart P and that this was "consistentwith the practices ofother shipyards for pricing REAs and changes" and that HII's estimate "provides a sound basis for adjudicating" the claim pertaining to HII's costs (app. opp'n, ex. 42 at 12-13).

The Navy prepared a Technical Advisory Report (TAR), dated September 9, 2009, regarding HII's portion ofthe claim. The TAR recommended compensating HII for an increase of 13,548 direct labor hours (less than 5o/o ofHII's claimed amount) as a result ofSubpart P (app. opp'n, ex. 64 at 15295-300). In addition, Navy witnesses

4testified at deposition that the OSHA Subpart P regulations caused an impact on EB and HII* 

### (see, e.g., app. opp'n, ex. 19, Hill Dep. at 99 ("OSHArequired some additional fire watch in the area of

- say itwas nothing else, grinding, there would have to be some additional man-hours, but I don'tthink anywhere near what they proposed."), 

### see also ex. 56, Nixon Dep. at 66-67 (some impact), ex. 57, Brucker Dep. at 32, 35, 37, 105, 118 (some magnitude), ex. 58, Lussier Dep. at 93-94 (imposed
some new requirements and credit given in analysis), ex. 59, Malone Dep. at 84 (estimate 30% ofproposed impact)).

On December 19, 2012, EB filed a certified claim pursuant to the Contract Disputes Act, including both EB's and HII's claimed costs (R4, tab 71). The Navy denied the claim on February 27, 2013 (R4, tab 76), and this appeal followed.

DECISION

We will grant summaryjudgment only ifthere is no genuine issue as to any material fact, and the moving party is entitled tojudgment as a matter oflaw. 

### Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A material fact is one that may affect the outcome ofthe decision. 

### Anderson v. LibertyLobby, Inc., 477 U.S. 242, 248-49 (1986). The moving party bears the burden ofestablishing the absence ofany genuine issue ofmaterial fact, and all significant doubt over factual issues must be resolved in favor ofthe party opposing summaryjudgment. 

### Mingus Constntctors, Inc. v. United States, 812 F.2d 1387, 1390-91 (Fed. Cir. 1987). Once the moving partyhas met its burden ofestablishing the absence ofdisputed material facts, then the non-moving party must set forth specific facts, not conclusory statements orbare assertions, to defeat the motion. 

### Pure Gold, Inc. v. Syntex (U.S.A.), Inc., 739 F.2d 624, 626-27 (Fed. Cir. 1984).

The Navy asserts that it is entitled to entry ofsummaryjudgmentin its favor because HII hadthe ability to separately track its fire watch activities butfailed to do
so and thus HII fails to establish causation and does notprovide a reliable basis for calculating damages (gov't mot. at 121). Electric Boat opposes the motion, asserting that material factual disputes regarding the ability ofHII to separately track its costs, and disputes regarding causation and damages prevent entry ofsummaryjudgment (app. resp. at 20-26). We agree that material factual disputes prevent entry of summaryjudgment.

The Navy first argues that EB has not established causation for HII's claimed costs. According to the Navy, the absence ofactual cost data to support HII's claimed

*

### It is not always clear from the deposition transcript excerpts whether the deponents
are referring to EB, HII, orboth in their statements.

5costs transforms the claim to a total cost claim orjuryverdict award, and these theories require heightened proofofcausation (gov't mot. at 101). According to the Navy, the fact that EB and HII did notmaintain records sufficientto directly measure the increased costs means that EB and HII must be asserting a total cost claim or be requesting ajuryverdict award (gov'treply at 4). However, HII's costs are notin the form ofa total cost claim orrequest for ajuryverdict. HII is relying upon estimates by employees with personal knowledge ofthe events at issue (gov'tmot., ex. 101 at 3172-74). This is an estimate ofactual costs, and is not a total cost claim orrequest for ajuryverdict. A total costmethod claim "seeks to recover the difference between the actual cost experienced and cost anticipated in the bid.'' See, e.g., Crown Laundry & Dry Cleaners, Inc., ASBCANo. 31900, 86-3 BCA

## ,r 19,112 at 96,610. A "jury verdict" award is an award ofdamages where the amount ofrecovery can only be approximated due to ajustified inability to substantiate the amount ofinjury by direct and specific proof. See, e.g., Service Engineering Co., ASBCA No. 40274, 93-1 BCA 

## ,r 25,520 at 127,111 (quotingJoseph Pickard's Sons Co. v. UnitedStates, 532 F.2d 739, 742 (Ct. Cl. 1976)). Thus, HII is asserting an actual cost claim, with the increased cost ofperformance measured by estimating the increase in fire watch work performed afterthe implementation ofSubpart P, rather thanby direct measurement (gov't mot., ex. 101 at 3172-74, 3204). To be sure, HII will needto demonstrate the accuracy ofits calculations at a hearing onthe merits; however, as discussed below, at the summaryjudgment stage, HII has demonstrated the existence ofa material factual dispute.

While the Navy asserts that EB has not established causation (gov't mot. at 102), EB has asserted facts sufficient to raise a factual issue. In fact, the Navy's
own TAR concludedthat HII had incurred increased laborhours due to the Subpart P regulation (app. opp'n, ex. 64). The Navy argues that its preliminary conclusions are notbinding because the Board conducts a de nova review (gov'treply at 6 n.6). While the Navy's analysis is notbinding onthe Board, it is evidence that EB may cite to demonstrate the existence ofa material factual dispute. Moreover, numerous Navy employees testified attheir depositions that there was some impactto EB and HII as a result ofthe regulation, even though they believed the claimto be inflated (app. opp'n,
exs. 19, 57-59). The Navy's citation to cases such as Southeastern Sen,ices, Inc., ASBCA No. 21278, 78-2 BCA

## ,r 13,239, for the proposition that appellant must establish causation before recovering under thejury verdict method ignores the fact that Southeastern Sen,ices was an opinion on the merits. The appellant in Southeastern Services was permittedto present evidence ofcausation and damages and the Board found that evidence lacking. However, the opinion does not stand for the proposition that an appellant cannothave an opportunityto present its evidence.

The Court ofFederal Claims' holding inRavens Group, Inc. v. UnitedStates, 112 Fed. Cl. 39 (2013), did dismiss a claim on summaryjudgment (gov'tmot. at 104); however, in that case the court found that the plaintiffhad not demonstrated clear

6

### proofofinjury. Ravens Group, 112 Fed. Cl. at 54-55. Although notbinding on us in any event, the Ravens Group opinion actually supports denial ofthe government's motion. The plaintiffs contract provided for an adjustment to the contract ifthe plaintiffincurred costs over $15,000 permonth responding to service calls, and based costs on laborhours. The plaintiffintroduced evidence ofan increase in the number of service calls, but did not present evidence ofan increase in the number oflabor hours because it had not recorded labor hours. The court granted summaryjudgment on the issue, holding that the plaintiffhad not established injury. Id Notably, the court rejected the government's contention that the plaintiffcould only establish injury through actual labor hours, holding that it "mightbe able to establish injury by demonstrating that the number ofmonthly labor hours spent on service calls-as calculatedby R.

### S. Means or other commercially available estimating systems and based upon the daily work sheets-required compensation." Id at 55 n.16. Similarly, here HII has estimated its increased cost ofperformance comparedto a base period before the implementation ofSubpart P. The increase in estimated labor hours, combined with the Navy's TAR and the deposition testimony ofNavy witnesses that there was an impact on the contractors is sufficientto create a factual issue that the regulatory change caused a change in HII's performance and that there was an increase in the cost ofperformance. Thus, we find that EB has established a material factual issue regarding causation preventing the entry ofsummaryjudgment.

The Navy additionally argues thatEB cannot use estimates to support its claim unless the contractor was unable to collect actual data due to circumstances beyond its control (gov't mot. at 112 (citing OrloskyInc. v. UnitedStates, 68 Fed. Cl. 296 (2005))). According to the Navy, "the Boardrequires contractors to show that it would not be feasible to support a claim with actual cost data" (gov'tmot. at 112). Additionally, the Navy cites to contract Clause H-9 which requires EB to document its requested adjustment with a "level ofdetail which is reasonably available to the Contractor" (gov'tmot. at 113 (citing R4, tab 52 at 430, Clause H-9(d))). Here, EB presented deposition testimony and an expertreport asserting that it was not feasible for it to use actual cost data (app. opp'n, ex. 26 at 79, 87-88, 90-91, ex. 42 at 12-13). Moreover, the contract did not contain FAR 52.243-6 that would have required EB to maintain such data. Again, we find that material factual issues prevent the entry of summaryjudgmentin favor ofthe Navy.

7CONCLUSION

For the reasons stated above, the Navy's motion for summaryjudgmentis denied.

Dated: January 28, 2019

I concur

RICHARD SHACKLEFORD Administrative Judge Acting Chairman Armed Services Board ofContract Appeals DAVID D'ALESSANDRIS Administrative Judge Armed Services Board ofContract Appeals

I concur

J. REID PROUTY Administrative Judge Vice Chairman Armed Services Board ofContract Appeals

I certify thatthe foregoing is a true copy ofthe Opinion and Decision ofthe Armed Services Board ofContract Appeals in ASBCA No. 58672, Appeal ofElectric Boat Corporation, rendered in conformance with the Board's Charter.

Dated:

8 JEFFREY D. GARDIN Recorder, Armed Services Board ofContract Appeals