ARMED SERVICES BOARD OF CONTRACT APPEALS 

Appeal of-- ) 

) 

Missouri Department of Social Services ) 

) 

Under Contract No. W911S7-09-D-0029 ) 

APPEARANCE FOR THE APPELLANT: 

APPEARANCES FOR THE GOVERNMENT: 

ASBCA No. 59191 

Keith L. Baker, Esq. 

Baker, Cronogue, Tolle & Werfel, LLP 

McLean, VA 

Raymond M. Saunders, Esq. 

Army Chief Trial Attorney 

MAJ Travis P. Sommer, JA 

CPT Harry M. Parent III, JA 

Trial Attorneys 

OPINION BY ADMINISTRATIVE JUDGE MCILMAIL 

INTRODUCTION 

On 6 July 2016, we severed this appeal, for purposes of decision, from ASBCA 

No. 58944, with which it was consolidated for hearing, and stayed that appeal pending a 

decision in this one. Only the issue of entitlement is before the Board (tr. 1/7). Appellant 

seeks an equitable adjustment of contract prices, or, in the alternative, a "termination 

settlement," following the government's partial termination for convenience of a 

requirements contract. 1 

1 Although the conclusion of appellant's 3 June 2015 post-hearing briefing states that 

it is entitled to termination costs and an adjustment of contract prices, its 

briefing elsewhere indicates that it seeks those forms of relief only in the 

alternative (app. br. at 1, 15, 26). In addition, on 5 July 2016, appellant sent a 

letter to the Board, referring at page 3 to its "alternative claim for a termination 

settlement." We find that appellant seeks termination costs and an adjustment 

of contract prices only in the alternative, consistent with the approach in its 

claim to the contracting officer (R4, tab 76 at 5). 
FINDINGS OF FACT 

1. On 25 September 2009, the Mission and Installation Contracting Command-Fort 

Leonard Wood (government) awarded the contract referenced above to appellant, 

Missouri Department of Social Services, for the provision of food service operations at 

18 dining facilities at Fort Leonard Wood, Missouri (R4, tab 1at1).2 The contract was for 

a base year, with three option years, for services at 18 facilities, designated in the contract 

as DFACs 630, 653, 657, 735, 739, 754, 820, 821, 836, 930, 1010, 1011, 1740, 2105, 

3223, 1268, 1231, and 5073 (id. at 3-11, 13, 23, 33). On 25 September 2009, the 

government issued Delivery Order No. 1, for services during the base year; that is, 

26 September 2009 through 31 August 2010 (R4, tab 5). The government subsequently 

issued contract modifications that exercised the three option years; that is, through 

31 August 2013 (R4, tabs 17, 26, 66). Appellant contracted with EDP Services, Inc. 

(EDP), pursuant to the Randolph-Sheppard Act, to submit a proposal for the contract and 

to perform the food services required under the contract (tr. 1/77-78). 

2. In developing its proposed pricing for the contract, EDP relied on Technical 

Exhibits (TE-2s) supplied by the government for each dining facility (DFAC). The 

TE-2s specified for each DFAC information such as the operating schedule, serving 

hours, seating capacity, number of diners to be served per meal, and other relevant 

information that EDP relied on in coming up with a price (tr. 1142-43; app. supp. R4, 

tab 5 at 19-22 (representative example)). Based on that information, EDP built estimates 

of total costs per contract year to provide the required services at all 18 DF A Cs. Each of 

these total cost estimates contained both variable and fixed costs and profit at a rate of 

3 percent. For instance, EDP estimated, for Option Year 2, total cost and profit of 

$30,457,068.71.3 (App. supp. R4, tab 3 at 6). Variable costs within this amount 

consisted primarily of "production labor" (cooks, attendants, cashiers, etc.) that could be 

expected to vary in direct proportion to the volume of business in a DFAC (tr. 1/32-34; 

app. supp. R4, tab 3 at 5-6). Fixed costs included the salaries of the overall project 

manager, building managers, maintenance workers, and van operators; costs of the job 

site office at Fort Leonard Wood; and costs associated with the home office, which were 

unlikely to vary with volume of business (tr. 1134-36; app. supp. R4, tab 3 at 5-6). 

3. The total number of "production hours" estimated by EDP for each year of the 

contract, including Option Year 2, for all 18 DFACs was 1,279,423 (tr. 1137; app. supp. 

R4, tab 3 at 5). To price the services to be provided at each DF AC, EDP calculated a 

"retail rate" by taking the total estimated cost and profit for the year (minus direct costs 

that do not bear overhead or profit) and dividing it by the total number of estimated 

2 Although the contract lists the name of the contractor as "Social Services Missouri 

Dept" (R4, tab I at I), we understand that to be a reference to appellant. 

3 This figure does not include additional direct costs that do not bear overhead or profit. 

2 
production hours for the year. For Option Year 2, this arithmetic resulted in a "retail 

rate" of 23.8053 ($30,457,068.71 + 1,279,423 = 23.8053) (tr. 1137-39). EDP then 

multiplied the retail rate for the contract year times the number of production hours per 

day for each DFAC to come up with a daily unit price for each DFAC (tr. 1/38). For 

instance, for DFAC 630 in Option Year 2, the daily unit price was $6,046.55 for 

weekdays and $5,260.97 for weekend days (app. supp. R4, tab 2 at 7). The daily price 

was invoiced by EDP for each day of operation for each DF AC. 

4. On 4 August 2011, the government issued Modification No. P00005, 

exercising Option Year 2 (R4, tab 26 at 1 ). On 6 October 2011, the government issued 

a partial contract termination for convenience, which removed six DFACs (735, 821, 

1010, 1268, 1231, and 5073) from the contract (R4, tab 38). 

5. The contract includes FAR 52.216-21, REQUIREMENTS (OCT 1995)-ALTERNATE I 

(APR 1984), providing at paragraph (c) that "the Government shall order from the 

Contractor all of that activity's requirements for supplies and services specified in the 

Schedule that are required to be purchased by the Government activity or activities specified 

in the Schedule that exceed the quantities that the activity may itself furnish within its own 

capabilities" (R4, tab 1 at 136-37). The contract also incorporates by reference 

FAR 52.249-2, TERMINATION FOR CONVENIENCE OF THE GOVERNMENT (FIXED-PRICE) 

(MAY 2004 ), which provides, at paragraph (g), that: 

If the Contractor and the Contracting Officer fail to 

agree on the whole amount to be paid because of the 

termination of work, the Contracting Officer shall pay the 

Contractor the amounts determined by the Contracting 

Officer as follows, but without duplication of any amounts 

agreed on under paragraph (t) of this clause: 

( 1) The contract price for completed supplies or 

services accepted by the Government (or sold or 

acquired under subparagraph (b)(9) of this clause) not 

previously paid for, adjusted for any saving of freight 

and other charges. 

(2) The total of-

(i) The costs incurred in the performance of the 

work terminated, including initial costs and 

preparatory expense allocable thereto, but 

excluding any costs attributable to supplies or 

3 
services paid or to be paid under subparagraph 

(g)( I) of this clause; 

(ii) The cost of settling and paying termination 

settlement proposals under terminated 

subcontracts that are properly chargeable to the 

terminated portion of the contract if not 

included in subdivision (g)(2)(i) of this clause; 

and 

(iii) A sum, as profit on subdivision (g)(2)(i) of 

this clause, determined by the Contracting 

Officer under 49.202 of the Federal Acquisition 

Regulation, in effect on the date of this contract, 

to be fair and reasonable; however, if it appears 

that the Contractor would have sustained a loss 

on the entire contract had it been completed, the 

Contracting Officer shall allow no profit under 

this subdivision (iii) and shall reduce the 

settlement to reflect the indicated rate of loss. 

(3) The reasonable costs of settlement of the work 

terminated, including-

(i) Accounting, legal, clerical, and other expenses 

reasonably necessary for the preparation of 

termination settlement proposals and supporting data; 

(ii) The termination and settlement of subcontracts 

(excluding the amounts of such settlements); and 

(iii) Storage, transportation, and other costs incurred, 

reasonably necessary for the preservation, protection, 

or disposition of the termination inventory. 

Paragraph (1) of FAR 52.249-2 further provides that "[if] the termination is partial, the 

Contractor may file a proposal with the Contracting Officer for an equitable adjustment 

of the price(s) of the continued portion of the contract." (Id. at 133) 

6. On 24 June 2013, following unsuccessful attempts to negotiate a price increase 

for the remaining contract work, appellant submitted a certified claim for the increased 

4 
costs of performing the remaining contract work (R4, tab 76).4 The contracting officer, in 

a final decision dated 5 December 2013 (misdated 5 December 2012) denied appellant's 

claim and stated, inter alia: 

The remainder of the proposal addresses 

adjustments to contractual costs after the date of the 

termination notice. These issues should properly be 

addressed in a request for equitable adjustment separate 

and independent of the termination settlement proposal in 

accordance with FAR Part 49.208. 

This determination does not preclude filing a 

request for equitable adjustment for the continued portion 

of the contract. Any request for equitable adjustment shall 

be in the format prescribed in FAR 49.208(a) which may 

be found in FAR Part 15.408 Table 15-2. 

(R4, tab 79 at 1-2) At trial, the contracting officer testified that he had reviewed the 

request for equitable adjustment contained in appellant's 24 June 2013 claim but had 

made no determination regarding it (tr. 2/32). He stated that although FAR 49.208 does 

not require that a request for equitable adjustment be deferred until after agreement is 

reached on termination costs, it was his right to insist that it be deferred so as to ensure 

that there was no duplication of costs between an equitable adjustment and a 

termination settlement (tr. 2/32-34). 

7. Appellant timely appealed from the final decision on 28 February 2014. 

8. The record in this appeal contains evidence that the reduction in production 

hours caused by the termination of six facilities increased appellant's cost of 

performing the remaining work. Its original pricing proposal estimated 1,279,423 

production hours for all 18 facilities per year, but after the elimination of six facilities 

the revised estimate of total production hours per year was 980,682 (tr. 1146; app. 

supp. R4, tab 54 at 17). This would indicate that without an upward revision to the 

"retail rate" for Option Years 2 and 3, appellant would not recover all of its fixed 

costs. This is because when contract pricing is calculated using the same arithmetic 

4 Although entitled "Revised Partial Termination Settlement Proposal," the 

submission requests a contracting officer's final decision and includes the 

certification required by the Contract Disputes Act for claims in excess of 

$100,000 (R4, tab 76 at 7-8). 

5 
as used in the original pricing proposal; the fixed costs have not changed but the 

number of production hours has gone down, increasing the price per hour. The record 

indicates that the retail rate would have to increase from 23.8053 to 25.2242 for 

Option Year 2 and from 24.6301to26.4137 for Option Year 3 in order for appellant 

to recover its fixed costs to the extent provided for in its original proposal (tr. 1/46-48; 

app. supp. R4, tab 3 at 5-8, tab 54 at 17-19). In addition, appellant's expert testified, 

using a different methodology, that appellant had approximately $717,000 of 

unrecovered fixed costs in Option Year 2 and $805,054 of unrecovered fixed costs in 

Option Year 3 (tr. 11130-33; app. supp. R4, tab 53 at 7).5 

DECISION 

As indicated by the inclusion of the requirements clause, which provides that 

"the Government shall order from the Contractor all of that activity's requirements for 

supplies and services specified in the Schedule that exceed the quantities that the 

activity may itself furnish within its own capabilities," the contract is of the 

requirements type, meaning that the government promised not to purchase the contract 

subject matter from other sources. See Modern Systems Technology Corp. v. United 

States, 979 F.2d 200, 205 (Fed. Cir. 1992). Appellant claims entitlement to an 

equitable adjustment of the prices of the continued portion of the contract (app. hr. at 

13 ). Pursuant to FAR 52.249-2(1), where the government terminates a portion of a 

requirements contract with the type of termination clause at issue here, the contractor 

is entitled to an equitable adjustment of the prices of the continued portion of the 

contract for any increased cost of the remaining or unchanged work incurred as a result 

of the discontinuance of the terminated work. See Wackenhut Services, Inc., ASBCA 

No. 55691, 08-1BCA~33,831at167,436. In Wackenhut, the government contracted 

for base operating support services to be provided at two facilities. The Board found 

the contractor entitled to an increase in contract prices after the government terminated 

the work at one of the facilities, because the terminated facility provided a substantial 

part of the allocation base for the contractor's indirect facility management and 

administration cost pool, increasing the indirect cost of continuing to perform the work 

at the remaining facility. Id. 

Similarly, here, the record is sufficient to establish that the partial termination 

increased the cost of the remaining work, demonstrating entitlement to an equitable 

adjustment in contract prices for that work. See Wackenhut, 08-1 BCA ~ 33,831 at 

167,436. Appellant showed that its original proposal priced the contract to recover its 

fixed costs through a retail base rate based on 1,279,423 production hours annually, 

5 Because we are to decide entitlement only in this appeal, we make no finding 

regarding quantum. The evidence cited is relevant to whether appellant has 

shown any damage resulting from the government's partial termination. 

6 
and that the reduced production hours following the removal of six facilities left it with 

unrecovered fixed costs in the absence of an increase in that rate (findings 2, 3, 8). 

Appellant is entitled to an equitable adjustment of the prices of the portion of the 

contract continued after 6 October 2011. The amount of the adjustment to which 

appellant is entitled is not currently before us. 

The government does not address FAR 52.249-2(1) or dispute appellant's 

evidence of harm. Rather, it says that just because the government's requirements did 

not meet its estimated requirements does not mean that appellant is entitled to an 

equitable adjustment, and that there are no allegations that the government acted in bad 

faith or prepared a negligent estimate (gov't br. at 23). But that misses the point. 

Appellant and the government entered into a different contract than existed after 

6 October 2011-one that included 50% more dining facilities and 298,741 more 

production hours than did the contract after partial termination. Presumably, addressing 

such a change in the parties' expectations is the purpose of FAR 52.249-2(1). Indeed, 

we have indicated elsewhere that a partial termination of a requirements contract that 

includes language similar to FAR 52.249-2(1) alone entitles the contractor to an 

equitable adjustment of the prices of the continued portion of the contract. See Viktoria 

Transport GmbH & Co., KG, ASBCA No. 30371, 88-3 BCA ~ 20,921 at 105,738 

(applying DAR 7-103.21(OCT1974) in the context of diversion of requirements to 

another contractor); R.G. Robbins, Co., ASBCA No. 26521, 82-1BCA~15,643 

at 77,270 (quoting DAR 7-103.21(i) (OCT 1974), with language substantially identical 

to FAR 52.249-2(1)). 

The contracting officer in his final decision declined to decide appellant's 

equitable adjustment claim on the basis that FAR 49 .208 requires a "separate and 

independent" request for equitable adjustment after termination costs have been settled 

(finding 6). At trial he conceded that the FAR did not require a "separate and 

independent" request for equitable adjustment. Moreover, the government does not 

advance that argument; accordingly, we consider it abandoned. In any event, 

appellant's claim to entitlement to a "termination settlement" under FAR 52.249-2(g) 

is in the alternative to its claim to an adjustment of contract prices (app. br. at 15). In 

view of our decision finding appellant entitled to an adjustment of contract prices 

under FAR 52.249-2(1), appellant's alternative claim to relief under FAR 52.249-2(g) 

is moot, and we need not address it further. 

7 
CONCLUSION 

For the foregoing reasons, the appeal is sustained as to entitlement, and is 

remanded to the parties for the prompt negotiation of quantum. 

Dated: 15 November 2016 

I concur 

~~Af:/, 

Administrative 

MARK N. STEMPLER 

Judge 

~ Acting Chairman 

Armed Services Board 

of Contract Appeals 

I concur 

8 

~~ Administrative Judge 

Armed Services Board 

of Contract Appeals 

I concur 

ificHARDSHACKLEFORD 

Administrative Judge 

Vice Chairman 

Armed Services Board 

of Contract Appeals 
I certify that the foregoing is a true copy of the Opinion and Decision of the 

Armed Services Board of Contract Appeals in ASBCA No. 59191, Appeal of Missouri 

Department of Social Services, rendered in conformance with the Board's Charter. 

Dated: 

9 

JEFFREY D. GARDIN 

Recorder, Armed Services 

Board of Contract Appeals