ARMED SERVICES BOARD OF CONTRACT APPEALS Appeal of

-- ) ) Seven Seas Shipchandlers LLC ) ) Under Contract Nos. W91B4L-09-P-0318 ) W91B4L-09-P-0518 ) W91B4L-09-P-0436 ) W91B4L-09-P-0465 ) W91B4L-09-P-0585 ) APPEARANCE FORTHE APPELLANT:

APPEARANCES FORTHE GOVERNMENT: ASBCA No. 60602

Joseph E. Schmitz, Esq.

Schmitz & Socarras LLP McLean, VA Raymond M. Saunders, Esq.

Army ChiefTrial Attorney LTC Jose A. Cora, JA

Trial Attorney OPINION BYADMINISTRATIVEJUDGE NEWSOM Appellant, Seven Seas Shipchandlers, LLC (Seven Seas), appeals from the deemed denial ofits claim for Prompt Payment Act (PPA) interest on five contracts. Because ofa dispute thatripened into a claim underthe Contract Dispute Act, 41 U.S.C. §§ 7101-7109 (CDA), Seven Seas did not receive payment on these contracts until more than five years after it submitted invoices. That dispute was resolved by this Board in 

### Seven Seas Shipchandlers, LLC, ASBCA No. 57875 

### etal., 15-1 BCA**~** 35,908 

### (Seven Seas/).
Seven Seas elected use ofthe Board's expeditedprocedures under Rule 12.2. 1 Both parties filed motions forjudgment on the record pursuantto Rule 11.2 We deny the appeal.

1 A decision underBoard Rule 12.2 shall have no value as precedent, and in the absence offraud, shall be final and conclusive and may not be appealed. 2 The government filed a motion for summaryjudgmenton 7 September 2016, then converted it to a Motion for Judgment on the Administrative Record under BoardRule 11 (Bd. corr., gov'tmot. dtd. 26 Sept. 2016). ByBoard order dated 13 September 2016 the appellant's 8 September2016 Legal Memorandum Addressing the Merits ofthe Appeal was deemed a motion forjudgmenton the administrative record under Board Rule 11.SUMMARYFINDINGS OF FACT The predicate for the present appeal is the Board's decision in Seven Seas I. Familiarity withthat decision is presumed, although we highlight certain aspects of that decision that are relevant to this appeal.
1. Seven Seas I concerned five firm-fixed-price supply contracts that the Kandahar Regional Contracting Center awarded to appellant in 2009: Contract Nos. W91B4L-09-P-0318 (Contract 318); W91B4L-09-P-0436 (Contract436); W91B4L-09-P-0465 (Contract465); W91B4L-09-0518 (Contract 518); and W91B4L-09-P-0585 (Contract 585). The contracts called for appellantto provide supplies to Kandahar AirField in Afghanistan. Seven Seas I at 175,527 (findings 1-3, 6). 2. Seven Seas delivered the supplies required by all five contracts and was entitledto payment on the contracts. Seven SeasI at 175,529 (finding 28). Seven Seas submitted invoices for payment between 1and 9 June 2009 (R4, tab 12 at 120-24). 3. The government payment office disbursed to an individual named Muhammad Qahir (Mr. Qahir) some $240,549.90 in Afghan cash which was intended as paymentto Seven Seas. Seven Seas I at 175,529-30 (findings 35, 37). Onprior occasions, the governmenthad disbursed cash to Mr. Qahir in paymentto Seven Seas, without incident. Id. at 175,528 (finding 18). However, onthis occasion, Mr. Qahir disappeared with Seven Seas' money and was not seen again. Id. at 175,530 (finding 39). 4. Seven Seas reported its money stolen. Seven Seas I at 175,530 (findings 40, 42)). Assertingthat it neverreceived payment, Seven Seas submitted certified claims seeking contract payments from the government. The contracting officer denied the claims. Id. at 175,530 (finding46). 5. During the ensuing appeals before this Board, the government disputed Seven Seas' claims on the ground that Seven Seas had already been paid. Itargued that Seven Seas failed to object on prior occasions whenthe government disbursed cash to Mr. Qahirthat was intended for Seven Seas, therefore Mr. Qahirhad apparent authority to accept payment for Seven Seas. Seven Seas I at 175,531-32.
6. By decision dated 4 March 2015, the Board sustained the appeals, holding that the government failed to prove that it had paid Seven Seas and that appellant was entitled to $240,579.90 plus applicable interest. Seven Seas I at 175,531.
7. Inferring from the foregoing findings, we find that the reason for the government's delay in payment from July 2009 to the date ofthe Board's decision was the dispute between the parties overwhether Seven Seas had already been paid.

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# l8. On 3 April 2015, Seven Seas submitted a new claim to the contracting officer seeking payment ofPPA interest on the $240,579.90 principal balance (PPA Claim) (R4, tab 7).
9. In its PPA claim, appellant asserted entitlementto PPA interest from "30 days after a proper invoice" was received until 8 September2011, the date that the Board found that the government received appellant's CDA claims (R4, tab 7 at 85-86).
10. On 26 December 2015, more than nine months after the Board's 4 March 2015 decision, the government transmitted payment to Seven Seas in the amount of $261,262.25 which included $240,579.90 in contract payments plus $20,682.35 in CDA interest measured from 8 September 2011 to the date ofpayment (R4, tab 14 at 1 ). 11. Afterreceivingthe government's payment, appellant revised its calculation ofPP A interestupwards to charge PPA interest upon the CDA interest already paid, and to extend the period that PPA interest accrues, beyond the date the invoices were paid in December2015, to some future date (R4, tab 14 at 3; compl. 

### ilil 13-23). Itnow claims at least $38,328.07 in PPA interest (compl. at 5). 12. The contracting officer did not issue a final decision on the PPA claim (R4, tab 17 at 139). Appellant filed this appeal on 25 May 2016 (R4, tab 17). DECISION The PP A entitles vendors to interest on unpaid or delayed contractpayments in certain circumstances. It provides that the head ofan agency acquiring property or service from abusiness concern, who does not pay the concern for each complete delivered item ofproperty or service by the required payment date, shall pay an interestpenaltyto the concern on the amount ofthe payment due, in accordance with regulations prescribedby the Secretary ofthe Treasury. 31 U.S.C. § 3902(a). The PPA also provides an important exception, however, stating that no PPA interest is due ifthenonpayment was "because of a dispute between the headof an agency anda business concern over the amount of paymentorcompliance with the contract."3

3Regulations implementingthe PPA repeat and reinforce this limitation. Office of Management and Budgetregulations state that "[i]nterestpenalties are not 

### required

...[w]henpayment is delayedbecause of a dispute between a Federal agencyanda vendor over the amountof thepaymentor other issues concerning compliance with the terms ofa contract." 5 C.F.R. § 1315.10 (emphasis added). The Federal Acquisition Regulation (FAR) further provides that "The payment office willnotpay interestpenalties 

### if paymentdelays are due to disagreement between the Governmentandcontractor concerning

- (i) The paymentamount; (ii) Contract compliance; or (iii) Amounts temporarily 331U.S.C.§3907(c)(emphasis added). The Act also prohibits PPA interest from accruing either after a CDA claim has been submitted, or for more than one year. 31 U.S.C. §3907(b)(1)(B). Here, Seven Seas seeks to charge PPA interest from June 2009, when the government received the invoices, beyond the date that the governmentpaid the invoices to some date in the future (finding 11). The reason for the government's delay in paymentwas the parties' dispute overwhether Seven Seas had already been paid (finding 7). This appeal thus turns on whether the prior appeals involved "a dispute between the head ofan agency and a business concern overthe amount of payment" within the meaning ofthe PPA. 31 U.S.C. § 3907(c).
We have no trouble holding that in the circumstancespresented here, the matter falls squarely within the PPA exception in section 3907(c) as a dispute "overthe amount ofpayment." The dispute centered on which party bore the risk ofthe theft ofthe money: the government, because it paid the wrong person, or Seven Seas, because it failed to notify the government ofits concerns about Mr. Qahir. The amount ofpayment was at the heart ofthe parties' disagreement. From the government's perspective, the dispute concernedwhether it should pay double for the same goods. From Seven Seas' perspective, the dispute concerned whether it would be paid at all. This dispute thus very much concernedthe amount ofpayment, and falls within the PPA interest penalty exception. Ourprecedent generally supports the view that the PPA does not require an interestpenalty in similar circumstances. See generally Vistas Construction of Illinois, Inc., ASBCA No. 58479 etal., 16-1BCAiJ36,236 (citing authorities). Moreover, Seven Seas could not continue to accrue PPA interest for the lengthy duration that it claims (finding 11), because the PPA limits penalty interest eitherto the date the CDA claim was filed or for one year. 5 C.F.R. § 390l(b)(l). Seven Seas argues thatthe issue in the prior dispute was "thatthe government neverpaid Seven Seas the undisputedamount that was indisputably due" (app. br. dtd. 26 Sept. 2016 at 6 (app. br.). That argument ignores the fact that the government did pay in June 2009. Its payment evidently did not reach Seven Seas. The dispute arose because the government objectedtopaying double that amount, while Seven Seas objectedto receiving zero. Seven Seas next cites UnitedStates v. Heth, 7 U.S. (3 Cranch 399) (1806); and MesaAir Group, Inc. v. Department of Transportation, 87 F.3d 498 (D.C. Cir. 1996), arguing that the PPA is ambiguous and should be construed against the government. (app. br. at 7). Both cases are inapposite. Heth consideredwhether a statute should be applied retroactively, which is not at issue here. 7 U.S. at 402. MesaAir considered

withheld orretained in accordance with the terms ofthe contract." FAR 32.907(d)(l) (emphasis added). 4whether certain transportation subsidy agreements were contracts orregulations. 87 F.3d at 500. Itis irrelevantto this dispute. Finally, Seven Seas argues that the government acted in bad faith by taking eight months to process the payment after the Board's decision and failing to pay PPA interest (app. br. at 12). Itis not bad faith for the government to refuse to pay PPA interest when none is due. To the extentthatthe government tooktime to process the payment, appellant was compensated with additional CDA interest (finding 10).
In summary, we hold that Seven Seas is not entitled to PPA interest. We expressly do not address the government's remaining arguments: that 5 C.F.R. § 1315.10(b)(2) bars PPA interest on Contract 585 and that appellant waived any entitlement to PPA interest.

The appeal is denied.
Dated: 25 October 2016 CONCLUSION

Administrative Judge Armed Services Board ofContractAppeals

I certify that the foregoing is a true copy ofthe Opinion and Decision ofthe Armed Services Board ofContract Appeals in ASBCA No. 60602, Appeal ofSeven Seas Shipchandlers, LLC, rendered in conformance with the Board's Charter.
Dated:



### 5 JEFFREY D. GARDIN Recorder, Armed Services Board ofContract Appeals 

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