ARMED SERVICES BOARD OF CONTRACTAPPEALS Appeal of

-- ) ) BAE Systems Southeast Shipyards Mayport LLC ) ) Under ContractNo. N00024-1O-C-4406 )

APPEARANCES FORTHE APPELLANT:

APPEARANCES FORTHE GOVERNMENT: ASBCA No. 59876

RobertE. Korroch, Esq. William A. Wozniak, Esq.

Williams Mullen Norfolk, VA
Ronald J. Borro, Esq.

Navy ChiefTrial Attorney Anthony K. Hicks, Esq.

Trial Attorney

OPINION BY ADMINISTRATIVE JUDGE WOODROW ON APPELLANT'S MOTIONS FOR SUMMARY JUDGMENT AND FOR STAY
INTRODUCTION

This appeal involves a dispute overthe calculation ofan award and incentive fee under a cost-plus award fee contract for maintenance and repair ofCG 4 7 and DDG 51 class ships at the Naval Station Mayport, in Jacksonville, Florida.

On 10 April 2016, appellant, BAE Systems Southeast Shipyards MayportLLC (BAE or appellant), filed a motion for summaryjudgment, contending that it is entitledto the full award and incentive fee determined duringthe sixth evaluation periodunder ContractNo. N00024-1O-C-4406. Appellant asserts that it is entitled to an award and incentive fee payment of$1,895,525.70 based on its compositerating of84.6 percent for the sixth evaluation period. Appellant contends thatthe government improperly reduced that amount in Phase II ofthe evaluation periodwhen the government concludedthat appellant did not achieve the 40 percentrate for small business subcontractor utilization that the contractrequired for payment ofthe fee without deduction. On 22 July 2016, appellant filed a motion to stay pending its motion for summaryjudgment.
The government opposes appellant's motion for summaryjudgment, arguing that there are genuine issues ofmaterial fact regarding the method ofcalculating the small business utilizationpercentage and regarding the specific costs appellant included in its calculation ofthe percentage. The government did not file a cross-motion for summary 

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### judgment, but instead set forth its own competing statement ofundisputed facts within its opposition brief. The government further opposes appellant's motion for stay.
We deny appellant's summaryjudgmentmotion as to the interpretation ofthe contractprovision setting forth the small business utilization percentage and because genuine issues ofmaterial fact remain regarding the correct figures to be included in the calculation. We deny appellant's motion for a stay as moot.
STATEMENT OF FACTS (SOF) FORPURPOSES OF THE MOTIONS
1. The Department ofthe Navy, Southeast Regional Maintenance Center, Jacksonville, Florida (government), awarded ContractNo. N00024-10-C-4406 to BAE on 13 September2010 (R4, tab 10). 

### The contract is a cost-plus-award-fee contract for maintenance and repair ofCG 47 

### and DDG 51 class ships (id. 

### at 51).

2. The contractprovides for the payment ofan award fee and an incentive fee. The purpose ofthe award fee is to encourage and reward superiorperformance in the management and technical areas ofthe contract. The purpose ofthe incentive fee is to encourage and reward cost control and completion ofwork on or before negotiated milestone completion dates. (R4, tab 10 at 34, 41) The contractprovides thatthe award and incentive fees are evaluated in two distinct phases for each fee evaluation period (id. 

### at 34).
3. In Phase I, award and incentive fees are determined (R4, tab 10 at 34), while in Phase II, the total award and incentive fee calculated in Phase I is adjusted based on the contractor's performance in subcontracting to small businesses (id. 

### at 44-46). The contract states that the contractormust subcontract at least 40 percent ofthe direct costs ofthe contract to small business concerns during each fee evaluation period (id. 

### at 51, 128-29).
4. The contract sets forth a formula by which the small business subcontracting percentage is calculated which is as follows:

Forthe purposes ofthis contract, the small business subcontractingrequirement is thatthe Prime Contractor subcontract to small businesses, either directly or indirectly,
overthe course ofall scheduled availabilities and inter-availability work completed within an overall Fee Evaluation Period to the extent that subcontracting averages forty percent (40%) ofdirect costs related to production work for CLINs associated with scheduled availabilities and inter-availability work (i.e. Continuous Maintenance and Emergent Maintenance) completed within the evaluation

2period, minus the cost ofany directed subcontracts and execution planning efforts, not including indirect cost. (R4, tab 10 at 45) The contractprovides that the 40 percent small business subcontracting requirement may be met at any subcontracting tier (id. at 128). Ifthe contractor meets the 40 percent small business subcontracting requirement, the contractor receives 100 percent ofthe award and incentive fee determined in Phase I. Ifthe contractor does not meet the 40 percentrequirement, the contractorreceives an adjusted percentage ofthe award and incentive fee determined in Phase I. (Id. at 46) The contract provides a table listing the percentage ofPhase I award and incentive fee to be decremented based on the contractor's small business subcontractingpercentage (id.).
5. When the solicitation was issued, Earl Industries, and the offeror, asked the government whether services performedby Atlantic Marine Florida, LLC (AMF) 1could be excluded from the small business subcontractingrequirement, on the grounds that AMF owned the only certified dry-docking facility at the Jacksonville shipyard (R4, tab 2, attach. 1at 2; gov't opp'n, ex. 2). The government responded in Amendment No. 0001 to the solicitation, which states '"the reason for the amendment is to: (1) change the date for proposal submission, (2) add and update clauses, and (3) answer offeror questions." Question and answer 4 in AmendmentNo. 0001 states, in relevantpart: Question 4

...Given that Atlantic Marine Florida (AMF), a large business, possesses the only certified dry-docking facility in the port capable ofdry-docking these vessels, does the government considerthe dry-docking services to be provided by AMF to be a directed subcontractor and, therefore, excluded from the small business subcontracting requirement?

Answer4: Atlantic Marine Florida is not considered a directed subcontractor. However, offerors will be allowed to exclude the use ofthe AMF dry-docking facility from the 40% small business subcontracting requirement. (R4, tab 2, attach. 1at 2)

6. Award Fee Evaluation Period (AFEP) No. 6 considered appellant's performance during the period from 1February 2013 through 31 July 2013 for all availabilities and from 1April 2013 through 30 September 2013, for Inter-Availability Planning and Administration (R4, tab 20). On 29 October 2013, appellant submitted data

1 Later named BAE Systems Shipyard Jacksonville (BAE SSYJ).

3for AFEP 6 reflecting a small business utilization rate of40.32 percent (app. mot., ex. 2; app. supp. R4, tab 11 at 1). On 30 October 2013, the government advised appellant of
errors in appellant's calculation (R4, tab 16 at 6; app. supp. R4, tab 11 at 2). Appellant admitted that its submission contained errors relating to the double-counting ofcertain costs (app. mot. ii 31).

7. On 30 October 2013, appellant submitted arevised calculation. Appellant made two significant changes in its revised calculations, both relating to the costs associated with work on the USS 

### SanJacinto Gob number 7333045). First, it corrected double-counting errors in its original submissionby reducing the small business cost from $2,317,580 to $1,184,726 (app. mot., exs. 2, 3). The $1,132,854 reduction was for costs associated with workthat appellant subcontractedto AMF (gov'tmot., ex. 9). Second, appellant reduced the direct contract cost from $3,906,131 to $503,151. The difference of$3,402,980 also was for work appellant subcontracted to AMF. (App. supp. R4, tab 11 at 2).
8. In calculating the small business utilization for the USS 

### SanJacintojob, appellant excluded the $1,132,854 from the contract cost (the denominator in the formula) but left that amount in the small business cost (the numerator in the formula) (gov'tmot., ex. 9). This adjustment resulted in a small business utilizationpercentage of 235.46 percent for the USS 

### San Jacintojob (id.). Afterthese adjustments, appellant calculated its composite small business utilization percentage for all ofthejobs included in AFEP 6 to be 44.68 percent (app. mot., ex. 3; R4, tab 17 at 1). In contrast, the government calculated appellant's composite small business utilization percentage to be 25.96 percent (R4, tab 25, encl. 2).

9. On 14 August 2014, the government issued Modification No. AOO 162. The modification resulted in a reduction ofappellant's total award and incentive fee in the amount of$1,061,494. (R4, tab 26) On 18 November 2014, appellant submitted a certified claim for $1,061,494 (R4, tab 29). On 18 December2014, the contracting officer issued a final decision (COFD) denying the claim (R4, tab 30). This timely appeal followed on 10 March 2015.
DECISION Summaryjudgment shall be granted ifthe movant shows there is no genuine dispute as to any material fact and the movant is entitledtojudgment as a matter oflaw. 

### AvantAssessment, LLC, ASBCA No. 58867, 15-1BCAii36,067 at 176,129 (citing FED. R. CIV. P. 56(a)). To counter a motion for summaryjudgment, more than mere assertions
are necessary. Conclusory assertions do not raise a genuine issue offact. The nonmovant must submit, by affidavit or otherwise, specific evidence that could be offered at

4trial. Failing to do so may result in the motion being granted. Thorington Electrical and Construction Co., ASBCA No. 56895, 10-2 BCA**~** 34,558 at 170,418.

Contract interpretation begins with the plain language ofthe contract's provisions. LAIServices, Inc. v. Gates, 573 F.3d 1306, 1314 (Fed. Cir. 2009). Contract language is clear and unambiguous when there is only one reasonable interpretation consistentwith the plain meaning. Id.

We repeat the formula by which the small business subcontracting percentage is calculated:

For the purposes ofthis contract, the small business subcontractingrequirement is that the Prime Contractor subcontract to small businesses, either directly or indirectly,
over the course ofall scheduled availabilities and inter-availability work completed within an overall Fee Evaluation Period to the extent that subcontracting averages forty percent (40%) ofdirect costs relatedtoproduction work for CLINs associated with scheduled availabilities and inter-availability work (i.e. Continuous Maintenance and Emergent Maintenance) completed within the evaluation period, minus the cost ofany directed subcontracts and execution planning efforts, not including indirect costs.
The contract further states the "forty percent (40%) subcontractingrequirement may be met at any subcontracting tier." (SOF**~** 4)
While this provision is densely worded, it does contain the necessary elements to determine the numerator and denominator ofthe small business utilization percentage. The formula may be paraphrased as follows:

Numerator = total dollars subcontracted to small businesses (including direct and indirect costs at all subcontracting tiers)

Denominator = direct costs ofall production work (including total dollars subcontracted to small business) minus the cost ofany directed subcontracts and executionplanning efforts

Because the numerator is a part ofthe denominator, the denominator necessarily includes all ofthe costs for the relevant contract line item numbers (CLINs), includingthe total dollars subcontracted to small businesses. In otherwords, the small business subcontracting costs are necessarily a subset ofthe total costs (i.e., the numerator is a subset ofthe denominator).

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# •We tumnow to the question ofwhether appellant may exclude from the calculation the costs associated with the use ofthe AMF dry-docking facility. This question turns on whetherthe government's answerto Question 4 in Amendment No. 0001 to the solicitation is incorporated into the contract as a matter oflaw. We conclude that it is.
Solicitation AmendmentNo. 0001 states: "thereason for the amendment is to: (1) change the date for the proposal submission, (2) add and update clauses, and (3) answer offerors questions." The government's answerto Question 4 stated that: "offerors will be allowedto exclude the use ofthe AMF dry-docking facility from the 40% small business subcontractingrequirement." (SOF 

### if 5) Appellant contends that Question 4 was made part ofthe solicitation by AmendmentNo. 0001, and that the solicitation was, in tum, incorporated into the contract by operation oflaw (app. mot. at 10-11). Appellant relies onFAR 15.204-1, which sets forth a list ofthe componentparts that mustbe included in the contractwhen following the uniform contract format. Appellant also contends that it relied on AmendmentNo. 0001 when preparing its Small Business Subcontracting Plan and that the plan is incorporated into the contractby operation ofFAR 52.219-9, Alt. II (app. mot. at 11).

In response, the government contends that the solicitation is not part ofthe contract. According to the government, FAR 15.204-1 describes the componentparts of the uniform contract format, but does not expressly provide for the incorporation ofthose parts into the final contract (gov't opp'n. at 17-18). The government also argues that, although appellant's Small Business Subcontracting Plan is incorporated into the contract, the Plan does not contain any specific reference to the exclusion ofthe use of the AMF dry-docking facility from the small business subcontracting requirement (gov't opp'n. at 19).

FAR 15.204-1, Uniform Contract Format, sets forth a "uniform contract format" that facilitates preparation ofsolicitations and contracts. Pursuantto FAR 15.204-1, contradting officers "shall prepare solicitations and resulting contracts using the uniform contract format." FAR 15.204-l(a). Accordingly, the following items all become part ofa contract: (1) the schedule (including the solicitation and contract forms, supplies or services and price/costs statement ofwork, specifications, special requirements); (2) the contract clauses; and (3) the list ofdocuments, exhibits and other attachments. FAR 15.204-1(b).
The contract in this appeal follows the uniform contract format and specifically includes the solicitation in Section A ofPart I ofthe Schedule (R4, tab 10 at 1 ). Although FAR 15.204-1 does not state expressly that amendments to the solicitation are incorporated into the contract by reference, it is reasonable to conclude that amendments to the solicitation are included along with the solicitation. Moreover, the contract states

6that the contractor shall perform the contract in accordance with its proposal submitted in response to Solicitation No. N00024-09-R-4412, providing further evidence that the solicitation is incorporated into the contract (R4, tab 10 at 87).

This appeal is not like Enterprise Information Services, Inc. v. Dep 't of Homeland Security, CBCANo. 4671,**15-1BCA~36,010,** in which the Civilian Board ofContract Appeals (CBCA) concluded that an information technology support contract expressly incorporated only selectportions ofthe solicitation and did not include questions and
answers set forth in the solicitation. Id. at 175,884. Here, in contrast, the contract expressly includes the entire solicitation in Part A ofthe contract (R4, tab 10 at 1 ). Moreover, CBCA's conclusion was dicta, because it held thatthe result would be the
same even considering the solicitation and its amendments to be within the contract. Id.

We conclude that it was reasonable for appellantto considerthe solicitation

- as amended

- would bepart ofthe contract andthat the governmentwould follow its answer concerning the calculation ofthe 40percent small business subcontractingrequirement.

The government also challenges whethertwo statements from appellant's proposed Small Business SubcontractingPlan (R4, tab 19-2 at 1, 2) thatreferenced AmendmentNo. 0001 are incorporated into the contract (gov'topp'n at 18). Appellant contends thatthese statements demonstrate its reliance on Amendment No. 0001 (app. mot. at 11). We do not reach this issue, however, because we have determinedthat AmendmentNo. 0001 to the solicitation is a part ofthe contract as a matter oflaw.

The government further argues that there is a genuine issue ofmaterial fact regarding the interpretation ofan email from the contracting officer, Jose Marin, concerning whetherthe government consented to appellant's interpretation ofthe contract when it approved appellant's calculation ofthe small business utilization factor for AFEP 5 (gov't opp'n at 24-25). This dispute concerns the interpretation ofMr. Marin's email, notthe fact that the email was sent, the facts surrounding the email, orthe content ofthe email. Moreover, the interpretation ofMr. Marin's email concerns a prior evaluation period to the period at issue in this case. While extrinsic evidence ofthe parties' contemporaneous contract interpretation may be relevant in some circumstances, it is not necessary to consider in this case, because the plain language ofthe contract is unambiguous. CoastFederalBank, FSB v. UnitedStates, 323 F.3d 1035, 1040 (Fed. Cir. 2003); Certified Construction Company of Kentucky, LLC, ASBCA No. 58782, 15-1 BCA**~** 36,068 at 176,133.

In this case, the formula for calculatingthe small business utilization percentage must be considered together with the statements in solicitation AmendmentNo. 0001. Indeed, it is a core principle ofcontract interpretation that contract terms are interpreted and read as a whole, giving reasonable meaning to all ofthe contract'sparts, and without leaving "'aportion ofthe contract useless, inexplicable, void, or superfluous." NVT

7Technologies, Inc. v. UnitedStates, 370 F.3d 1153, 1159 (Fed. Cir. 2004); Columbia State Bank(formerlyAppealof Castle-Rose, Inc.), ASBCANo. 59531, 16-1 BCA**~** 36,399 at 177,454. Therefore, we conclude that the costs paid to AMF for the use of the dry-dock facility may be excluded from the small business calculation. Finally, we agree with the governmentthat the language ofAmendmentNo. 0001 is permissive (gov't opp'n at 20-21). The words "allowed to exclude" logically imply that the contractor may choose whetherto include or exclude the costs associated with the
use ofthe dry-dock facility from the small business utilization calculation.

THE SMALL BUSINESS UTILIZATION CALCULATION FORAFEP 6

In its briefand in its answer to the complaint, the government makes two challenges to appellant's calculation ofthe small business utilization percentage. First, the government contends that appellant shouldhave subtractedthe AMF costs from both the numerator and denominator ofthe fraction (gov't opp'n at 21). Similarly, in its answer, the government argues that, ifappellant is permittedto subtractthe AMF costs from the contract cost in the denominator, it also must exclude from the numeratorthe corresponding costs ofsecond-tier smallbusiness subcontractors who performed work for AMF**(answer~** 41). The government also makes this argument in the COFD, where it states that the subcontracting dollars in the numeratormusthave a "direct correlation and be attributed to the 'direct costs relatedto production work"' as containedwithin the denominator (R4, tab 30 at 5).

We agree. There is support for this notion in the government's answerto Question 4, which states that "offerors will be allowed to exclude the use ofthe AMF dry-docking facility from the 40% small business subcontracting requirement." Excluding the AMF costs from the "requirement" implies that the costs shouldbe excluded from the entire calculation, notjust from the denominator ofthe fraction. While it is true that the contractprovides that the "forty percent (40%) subcontractingrequirement may be met at any subcontracting tier" (R4, tab 10 at 128), it also is true that for a percentageto be accurate, both the numerator and denominator must include the same categories ofcosts. In apercentage, the numeratoris a subset orportion of the denominator, meaning that it (numerator) represents a part ofa whole. The numeratorrepresents how many parts ofthe whole are being considered, while the denominatorrepresents the total number ofparts withinthe whole. It also means that the numerator cannotbe greaterthanthe denominator. See "Percentage," MerriamWebster.com, n.d. Web 20 December 2016 (defining "percentage" as a part ofawhole expressed in hundredths).

In this situation, ifappellant elects to exclude the costs associated with the use of the AMF dry-dock facility, it must exclude them from the whole, including costs associated with second-tier small business subcontractors who performed work for AMF.

8In other words, the costs for the use ofthe AMF dry-dock facility mustbe excluded from boththe numerator and the denominator ofthe small business utilization fraction. 2 Appellant's calculations forjobno. 7333045 (for work on the USS SanJacinto) result in
a small business utilization percentage of235 percent (SOF 'if 8), a result which defies logic. A basic tenet ofcontract interpretation is that "[w]e must interpret the contract in a mannerthat gives meaningto all ofits provisions and makes sense." Shell Oil Co. v. UnitedStates, 751F.3d1282, 1293 (Fed. Cir. 2014); ITTDefense Communications Division, ASBCA No. 44791, 98-1BCA'if29,590 at 146,703 (contract should be construedto avoid absurd results).
Second, the government contends that appellant subtracted the wrong amount of the AMF costs. Accordingto the government, appellant shouldhave subtracted only the amount pertainingto the "use of[the AMF] dry-dock facility," notthe entire amount of the AMF subcontract (gov't opp'n at 21). However, the government does not supply a different amount or question any ofthe particular invoices relied on by the appellant as support for its figure (app. supp. R4, tab 6 (AFEP 6 Spreadsheet)). Moreover, in the COFD, the government states that it is notrequiring appellantto separate outthe costs associated with the "use ofthe dry-dock facility," at least with respect to evaluation period six (R4, tab 30 at 1 ). The government makes no attemptto explainthis apparent contradictionbetweenthe government's briefand the COFD.

While the Rule 4 file contains a spreadsheet with cost data for evaluationperiod six (R4, tab 37 (AFEP 6 Spreadsheet)), we are unable to ascertain the precise amount paid to AMF for the use ofthe AMF dry-dock facility that is pertinenttothe small business calculation. Although it appears that appellant excluded $1,132,853 in costs paid to AMF from the denominator while failing to excludethe same amount from the numerator ofthe small business utilization fraction, we are unable to determine whether this amount is correct. In addition, on the record before us, we are unable to ascertain the effect ofincluding the dry-dock costs paid to AMF in the equation, ifappellantwere to electto do so. Therefore, because we cannot determine from the record before us the specific costs to include in the calculation ofsmall business utilizationpercentage, and because appellantpossesses the discretion whetherto include the AMF dry-dock costs in its calculation, summaryjudgmentis precluded.

2 In the alternative, ifappellant believes that including the costs paid to AMF for the use ofthe dry-dock facility wouldresult in a more favorable small business percentage, it may do so by including all ofthe AMF direct costs in the denominator and the costs ofthe second-tier small business subcontractors who performed work for AMF in the numerator.

9CONCLUSION

We hold that the contractprovision setting forth the calculation ofthe small business utilization percentage is unambiguous and that, ifthe contractor elects to exclude the costs associated with the use ofthe AMF dry-docking facility, those costs must be excluded from both the numerator and denominator ofthe small business utilization percentage. Accordingly, we grant summaryjudgment, in part, as to the interpretation ofthe contract and direct the parties to present evidence, either orally or in writing, as to the appropriate figures to input into the small business percentage formula. Finally, we deny appellant's motion for stay as moot.
Dated: 13 July 2017

I concur

RICHARD SHACKLEFORD Administrative Judge Acting Chairman Armed Services Board ofContractAppeals Administrative Judge Armed Services Board ofContract Appeals

I concur



### 0 Administrative Judge Acting Vice Chairman Armed Services Board ofContract Appeals

I certify that the foregoing is a true copy ofthe Opinion and Decision ofthe Armed Services Board ofContract Appeals in ASBCA No. 59876, Appeal ofBAE Systems Southeast Shipyards Mayport LLC, rendered in conformance with the Board's Charter.
Dated:

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

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