ARMED SERVICES BOARD OF CONTRACTAPPEALS Appeal of-- Puget Sound Environmental Corp.

Under ContractNo. N00406-10-D-1001

APPEARANCE FORTHE APPELLANT: ) ) ) ) )

APPEARANCES FORTHE GOVERNMENT: ASBCA No. 58828

Mr. Carlos Moreno

President

Ronald J. Borro, Esq.

Navy ChiefTrial Attorney Stephanie Cates-Harman, Esq.

Assistant Director Stephen L. Bacon, Esq.

Trial Attorney

OPINION BYADMINISTRATIVE JUDGE O'CONNELL ON THE PARTIES' CROSS-MOTIONS FOR SUMMARY JUDGMENT

This matter is before the Board onthe parties' cross-motions for summary judgment. Forthe reasons set forth herein, we deny appellant's motion for summary judgmentand grant the government's cross-motion.

STATEMENT OF FACTS FORPURPOSES OF THE MOTIONS

The following facts are undisputed unless stated otherwise.

Introduction

This appeal arises from a certified claim that appellant, Puget Sound Environmental Corp. (PSE), submitted on two Navy contracts, Contract No. N00406-10-D-1001 (contract 1001) and ContractNo. N00406-08-D-8113 (contract 8113). The claim contained two discrete issues and the Board assigned two appeal numbers. InPugetSound Environmental Corp., ASBCANos. 58827, 58828,**14-1BCA~35,585** (PSE !), we dismissed ASBCANo. 58827, in which PSE sought about $2.16 million due to the government's alleged misclassification ofprevailingwage rates onthe two contracts (R4, tab 31 at 794, 799). In ASBCANo. 58828, PSE seeksjustunder $3.3 million due to the government's termination for convenience ofTask OrderNo. 9 on contract 1001 (id. at 794-99). While we dismissed the claim relating to contract 8113 in PSEI, a briefhistory ofboth contracts is necessary to understand the issues currently before us.Contract 8113

Contract 8113 was a labor hour, indefinite-delivery, indefinite-quantity, service contract effective 30 April 2008 (R4, tab 2 at 43-44). The performance work statement provided that PSE wouldprovide "qualifiedpersonnel to accomplish General Labor (includes Labor, Firewatch, Lead Work & Tank Watch) aboard vessels or at naval shore facilities under the cognizance of' Puget Sound Naval Shipyard and Intermediate Maintenance Facility (R4, tab 2 at 50). As we recounted in PSEI, the contract contained various clauses that required PSE to comply with the Service ContractAct (SCA), 41 U.S.C. §§ 6701-6707, and incorporated a Department ofLabor (DOL) wage determination. PSEI,**14-1BCA~35,585** at 174,368.

After a DOL investigation, PSE, through its president, Carlos Moreno, signed
a "BackWage Compliance And PaymentAgreement" with DOL dated 8 September2009 (R4, tab 55). In this agreement, PSE agreed to pay backwages in the amount of$382,178 to 220 employees by 25 September 2009. PSE did notpay the amounts due and on 7 January 2010 entered into anotherbackwage and compliance agreement with DOL (R4, tab 57). For
reasons that are not clear, this agreement statedthatPSE owed 214 employees $372,103.32. The amounts at issue primarily involved unpaid health and welfare benefits (R4, tabs 50, 54, 85). PSE concedes that it did notpay all ofthe amounts due underthe January 2010 agreement1 (app. resp. at 5,**~** 14). According to PSE, it paid44 ofthe employees but still
owes $314,863.27 (R4, tab 85 at 2, tab 89 at 4).

The January 2010 agreementprovided for an initial payment of$100,000, which PSE by its own admission did not make, followed by monthly payments of$24,681.24 starting 7 March 2010, and ending on 7 January 2011 (R4, tab 57). Accordingly, the January 2010 agreementprovided for payment in full long before DOL launched a second investigation of PSE and long before the contracting officerterminated Task OrderNo. 9 on contract 1001 for convenience, as detailed in the undisputed facts below.

Contract 1001

The government awarded contract 1001 to PSE on 13 October 2009, or five weeks after PSE signed the initial back wage compliance and payment agreement with DOL (R4, tab 11). Itis undisputed thatthe Navy knew about the backwage issues on contract 8113 butthe contracting officerdeterminedto award contract 1001 to PSE based upon the

1 In its response brief, PSE seems to dispute that it entered into the September2009 agreement with DOL (app. resp. at 2,**~** 5). PSE does not explain its position even though Mr. Moreno's signature appears on both the September and January agreements. This is not material because PSE concedes that it entered into the January 2010 agreement and that it failed to pay the full amount due (id. at 2,**~** 5, at 5,**~** 14).

2apparent resolution ofthe issues on 8113 (gov't Statement ofUndisputed Material Facts (SUMF) 

### iii! 13-14 (citing R4, tabs 47-54); app. resp. at 2, 

### iii! 13-14). Like contract 8113, contract 1001 was a time-and-material, indefinite-delivery, indefinite-quantity, service contract (R4, tab 11 at 315). Also like the earlier contract, the performance work statement for contract 1001 providedthat PSE would perform general labor, tank/void watch, firewatch, and lead handler support services aboard active duty and reserve fleet, nuclear and non-nuclearpowered U.S. Naval vessels homeported in the Puget Sound Washington State
area ofresponsibility (id. at 317). The initial period ofperformance was 13 October 2009 through 12 October 2010 at a not-to-exceed amount of$8,233,897.50 (R4, tab 11 at 313-15). By Modification No. P00003, the contracting officer exercised option 1 (also referred to as "Lottwo"), extending contract 1001 to 12 October 2011 and increasing the not-to-exceed amount to $16,485,150.50 (R4, tab 1l(c) at 430). During those two years, the Navy issued task orders in the not to exceed amount of$4,795,543.17 (R4, tabs 12-27).

To exercise an option, the governmenthad to provide a preliminary notice to the contractor 60 days before the end ofthe contract and had to exercise the option within 10 days ofcontract expiration (R4, tab 11 at 363 (FAR 52.217-9)). The contract contained a total offour option years (Lots two to five) (R4, tab 11 at 315).

The SecondDOLInvestigation

Contract 1001 incorporated various Federal Acquisition Regulation (FAR) clauses that are significantto this dispute, including FAR 52.222-41, SERVICE CONTRACTACT OF 1965 

### (Nov2007) (R4, tab 11at360); and FAR 52.222-42, STATEMENTOF EQUIVALENT RATES FORFEDERAL HIRES (MAy 1989). This latter clause provided:
[T]his clause identifies the classes ofservice employees expectedto be employedunderthe contract and states the wages and fringe benefits payable to each ifthey were employedby the contracting agency subject to the provisions of5 U.S.C. 5341or5332.

THIS STATEMENT IS FORINFORMATION ONLY: IT IS NOTA WAGEDETERMINATION Employee Class Monetary Wage-Fringe Benefits

Laborer#23470 $18.78 Per Hour for WG 03 (R4, tab 11 at 364) The contract also incorporated DOL Wage Determination 05-2559, Rev. 11 (id. at 393). This wage determination included hourly rates for occupation code 23470, laborer, at $13.77 

### + $3.35 in fringe benefits, and, significantly, based on the events that followed, a rate of$16.24 

### + $3.35 for occupation code 23580, maintenance trades

3helper (id. at 397, 399), and a rate of$29.26 

### + $3.35 for occupation code 30090, environmental technician (id. at 398).

Sometime in the summer of2011, DOL started a new investigation ofPSE. DOL conducted a "compliancereview" at PSE's office on 8August 2011 and interviewed PSE employees at thejob site the following day. (App. mot. at 2, encls. II, Ill; gov't SUMF 

### if 32). On 1 September 2011 DOL wrote tothe contracting officer, Gary Whitehead, asserting that its "investigationrevealed that [PSE] failed to pay the prevailing wage rates, holidays, and health and welfare as required underthe SCA" in the estimated amount of $1,270,195. DOL requested that the Navy withhold contractpayments in this amount from PSE. (R4, tab 28 at 1) On 12 September 2011, Mr. Moreno signed an "AuthorizationFor Transfer And Disbursement OfContract Funds," in which PSE authorized the Navy to transferto "DOL funds due to [PSE] on ContractN00406-10-D-1101 [sic]. The amount
so transferred is to be disbursed to employees due backwages found due on the contract I entered into with" the Navy. (R4, tab 80 at 3) Ultimately, DOL alleged that PSE owed its employees a combined total of $1,409,409.98 on contracts 8113 and 1001 (R4, tab 88, ex. 12 at 10). This amount consisted of$679,251.98 due to the classification ofworkers as laborers when, in DOL's view, they should have been classified as maintenance trades helpers or environmental technicians (id. at 5-6, 

### iii! 21-22). DOL calculatedthat PSE owed a further $60,188.92 in prevailing wage holiday backpaybecause it failed to pay the vast majority ofits workers the minimum often paid holidays (id. at 6, 

### iii! 23-24). DOL calculated that PSE failed to pay its employees contractually required vacationpay amounting to $36,525.83 (id. at 6-7, 

### iii! 25-27). Finally, DOL concluded that PSE owed a further $633,109.25 in health and welfare fringe benefits. Among otherthings, DOL alleged that PSE hadprovided health insurance cards to its employees; after they sought medical care, they were left with costly medical bills whenthey learned that the insurance cards were not valid. (Id. at 7-9, 

### iii! 27-37)

On 12 May 2014, an administrative lawjudge at DOL's Office ofAdministrative Law Judges issued a "Decision and Order Granting Summary Decision" in which he held that DOL had been correct to assess $1,409,409.98 in back wages and that PSE should be debarred from federal contracting for three years2 (R4, tab 90 at 1). On 6 July 2014, PSE filed an appeal with DOL'sAdministrative Review Board (ARB) (R4, tab 91). In a 4 May 2016 final decision and order, the ARB affirmed the administrative lawjudge's decision. Administrator, Wage & Hour Div., Dep 't of Laborv. PugetSoundEnvironmental, ARB Case No. 14-068, 2016 WL 3135580 (R4, tab 102). In a supplemental brieffiled after the ARB issued its decision, PSE states that it intends to challenge this ruling in federal court (PSE suppl. br. at 2).

2 The respondents in this action were PSE, Mr. Moreno, and More Support Services, a company that shared management with PSE (R4, tab 90 at 6-7).

4In this appeal, there is no dispute that PSE paid wages at a rate lower than those advocated by DOL, nor is there any dispute overthe contract language that identified laborer as the expected service class for the contractwork. But we will not address the misclassification ofworkers in this opinion because we dismissed that issue in PSEI. However, we agree with DOL's ARB that PSE's misclassification ofworkers is irrelevant to PSE's other violations ofthe Service ContractAct, namely by failing to (1) pay employees for legal holidays; (2) pay employees for vacation time; and (3) provide health and welfare benefits (R4, tab 102 at 13, n.50). PSE has not filed a meaningful response to the Navy's allegations concerning these three issues and we conclude that they are undisputed. Further, it is also undisputed that PSE failed to pay the amounts to which it agreed in the back wage agreement for contract 8113.

Termination of Task OrderNo. 9

Task OrderNo. 9 included a total funded amount of$258,092.45 (R4, tab 20(a) at 618-19). As of8 September2011, the Navy hadpaid $238,231.32 for services underthe task order, meaning that $19,861.13 remained available (R4, tab 97, 

### ii 15). Task Order No. 9 was the only pendingtask order at that time (id. 

### ii 14). Contracting officer Whitehead emailed PSE on 8 September2011 stating that the "Government no longerhas a need for the firewatch/laborer services providedundertask order" No. 9, and that it would be terminated for the convenience ofthe government effective 4:00 p.m. the next day (R4, tab 29). Contract 1001 incorporated FAR 52.212-4, CONTRACTTERMS AND CONDITIONS-COMMERCIAL ITEMS, ALT I(OCT 2008), which provided at 52.212-4(1) that "[t]he Governmentreserves the right to terminate this contract, or any parthereof, for its sole convenience" (R4, tab 11 at 356). On 15 September 2011, the parties signed a bilateral modification terminating Task OrderNo. 9 for the convenience of the government3 (R4, tab 20(d) at 625, 627).

The government did not issue any further task orders on Lottwo, which expired five weeks aftertermination ofTask OrderNo. 9. The government did not exercise the options for Lots three to five. On 3 October 2011 the Navy awarded a bridge contract for the same services to another contractorbut did not issue a task order on that contractuntil 3 1January 2012 (R4, tab 96 at 12, tab 100).

PSE's Certified Claim

On 17 May 2013, PSE submitted a claim certified underthe Contract Disputes Act, 41 U.S.C. §§ 7101-7109 (R4, tab 31at794). With respect to the current appeal, PSE contended that it lost potential revenue of$82,425,752.50 ($16,485,150.50 peryear) over

3 In this modification, the parties mistakenly cited FAR 52.249-4 instead ofFAR 52.212-4 (R4, tab 20(d) at 625).


### 5five years ifthegovernmenthad exercised all ofthe options. It sought four percent ofthat amount, $3,297,030.10, in damages. (Id. at 799) The contracting officer did not issue a final decision and PSE filed a notice ofappeal from the deemed denial ofits claim at the Board on 9 August 2013 (id. at 793).

DECISION

I. SummaryJudgmentStandards Summaryjudgment is appropriate whenthere is no genuine issue ofmaterial fact and the movingparty is entitled tojudgment as a matter oflaw. Anderson v. LibertyLobby, Inc., 477 U.S. 242, 247-48 (1986). When considering a motion for summaryjudgment, the Board's function is not to weigh the evidence and determine the truth ofthe matterbut to determine whetherthere is a genuine issue for trial. Id. at 249. Conclusory statements and
mere denials are not sufficientto ward offsummaryjudgment. Mingus Constructors, Inc. v. UnitedStates, 812 F.2d 1387, 1390-91 (Fed. Cir. 1987). The fact that bothparties have moved for summaryjudgmentdoes not mean that the Board must grantjudgment as a matter oflawfor one side orthe other. Rather, the Boardmust evaluate eachparty's motion
on its own merits, taking care in each instance to draw all reasonable inferences againstthe party whose motion is under consideration. Id. at 1391 (citations omitted).
II. Analysis of PSE's Claim

InPSEI, we determined that, although PSEhad styled its claim "Improper Contract Termination," the implicitbasis for the claim was a bad faith termination. PSEI, 14-1 BCA 

### if 35,585 at 174,370. Before weproceed any further, we must take a closer look at what PSE is actually seeking here. As we found, PSE is seeking four percent ofa total contract value ofmore than $82,425,752.50 over five years, which is the sum of$16,485,150.50 in all five years ofthe contract. However, whenthe contracting officer exercisedthe first option, this increasedthe not-to-exceed amount ofthe contractto a total for the first two years of$16,485,150.50 (R4, tab 1l(c) at 430), the precise amountperyear upon which PSE bases its claim. The contract stated that the estimated number oflaborhours peryear would remain constant over five years at 319,000, plus 500 overtime hours (R4, tab 11 at 372), meaning that there is no indicationthatthe level ofeffort might increase significantly in the final three option years. Thus, it is not clearhowthe contractvalue could have approached the $82.4 million upon which PSEpremises its claim.
Moreover, the not-to-exceed amounts in the base and first option year are one thing, the actual value ofissued task orders is another. The Navy issued only $4,795,543.17 in task orders during that time period. Thus, as best we can determine, the only way PSE's claim could work from a mathematical perspective is iftheNavy had awarded task orders totaling more than $77 million in the last five weeks ofoption year one and the final three option years. But there is no evidence that the government's requirements would have risen



### 6to that level. Based on the estimates in the contract and the experience ofthe first two years, the not-to-exceed amount for the final three option years, ifexercised, would likely have totaled about $25 million. Finally, we also note that applying PSE's method ofmultiplying lost contract
revenue by four percent indicates that its claim with respect to the only aspect ofcontract 1001 that the contracting officer actually terminated, Task OrderNo. 9, is nearly 

### de minimis. As we found, at the time oftermination, only $19,861.13 remained on this task order. Fourpercent ofthis number is $794.45.



### III. BoardReview of a Failure to Exercise Options

Our analysis demonstrates thatthis appeal is primarily about the government's failure to exercise options ratherthan the termination ofTask OrderNo. 9. In an option contract, the government has bargained for the right to exercise ornot exercise the option at its discretion and a contractor cannot compel the governmentto exercise the option. 

### GovernmentSystemsAdvisors, Inc. v. UnitedStates, 847 F.2d 811, 813 (Fed. Cir. 1988). The Boardhas recognized a limited exception to this rule ifthe contractor can prove bad faith, an abuse ofdiscretion orthat the contracting officer acted in an arbitrary or capricious
manner. 

### IMSEngineers-Architects, P.C., ASBCANo. 53471, 06-1BCA,-r33,231 at 164,674, 

### recon. denied, 07-1BCA,-r33,467, 

### aff'd, IMSEngineers-Architects, P.C. v. Geren, 274 F. App'x 898 (Fed. Cir. 2008). Similarly, the government has the right toterminate at will underthetermination for convenience clause and, absentbad faith or a clear abuse of discretion, the contracting officer's decision is final. 

### John Reiner & 

### Co. v. UnitedStates, 325 F.2d438, 442 (Ct. Cl. 1963).

Itis well establishedthat government officials are presumedto act in good faith. 

### RoadandHighway Builders, LLCv. UnitedStates, 702 F.3d 1365, 1368 (Fed. Cir. 2012). To prove that a government official acted in bad faith, a contractor "must show a 'specific intent to injure'" by clear and convincing evidence. 

### Id. at 1369 (quoting

### Am-ProProtective Agencyv. UnitedStates, 281 F.3d 1234, 1240 (Fed. Cir. 2002)). "Dueto this heavy burden ofproof, contractors have rarely succeeded in demonstrating the Government'sbad faith." 

### Krygoski Construction Co. v. UnitedStates, 94 F.3d 1537, 1541 (Fed. Cir. 1996). In deciding the cross-motions for summaryjudgment, we must determine whether a reasonable fact finder could find by clear and convincing evidence that the contracting officer acted in bad faith. 

### Am-Pro, 281 F.3d at 1241.



### IV Analysis of PSE's Casefor BadFaith

PSEhas filed three briefs (plus a supplemental briefafter the ARB issued its decision). Itfiled the opening brief; the governmentthen filed a response and cross-motion, to which PSE filed a response. Afterthe Navy notifiedthe Boardon 7 March 2016 that it did not intend to file a reply brief, PSE determined that this required further action on

7its part and on 31 March 2016 it filed another document entitled "Motion for Summary Judgment" (app. 2nd mot.) which is effectively a second response to the Navy's cross-motion. Although the Navy has objected to PSE filing a third brief, we will consider it to ensure that we fully understand PSE's contentions.

A. PSE Contends that the Contracting OfficerRushed to Judgment

PSE's central contention is that "within a matter of30 days, from August 8, 2011 to September 9, 2011, both Ms. Leung [the DOL investigator] and Mr. Whitehead rushed to judgmenttoward taking severe action against Mr. Moreno" (app. 2nd mot. at 4). As we found above, DOL alleged as early as 1 September 2011 that PSE owedbackwages ofmore than $1.27 million. PSE notes that this was only a preliminary determination and contends that DOL, in essence, lacked adequate documentation to make an accurate determination. Butthe undisputed evidence shows thatthe preliminary determination of$1.27 million was within about 10 percent ofDOL's final calculation of justover $1.4 million.

The flaw in PSE's argument is its focus on the timing ofDOL's actions rather than the accuracy ofits conclusions. In other words, PSE has notprovided us with any evidence that DOL is wrong (andthatthe contracting officer's reliance on DOL is actionable). For· example, with respect to the allegation that PSE failed topay health and welfare benefits, if DOL was wrong and PSE hadpaid for these benefits, it would have been relatively simple to establish this. But, PSE has failed to provide any such evidence.

In its briefs, PSE contends thatthe contracting officer could not take any action before conclusion ofthe administrative proceedings at DOL but fails to cite any precedent 

### (see, e.g., app. resp. at 10). The Service Contract Act clause, FAR 52.222-41(k), does not impose any such requirement. Rather, this provision specifically provides that "any failure to comply withthe requirements ofthis clause may be grounds for termination of the right to proceed with the contractwork" without limitingthis right tothe point in time after administrative review at DOL. Becausethe contracting officermust make decisions in real time and cannot afford to wait for the conclusion ofadministrative proceedings that may take years, the issue is whetherthe contracting officerhad a reasonable basis for his decision at the time. 

### See Copelandv. Veneman, 350 F.3d 1230 (Fed. Cir. 2003) (even though DOL concluded years later that withholdings were excessive, contracting officer acted reasonably in withholding contractpayments for Davis-BaconAct violations based onthe informationthathe had at the time). This analysis is particularly appropriate here because PSE's claim is based largely on the contracting officerexercising options;
as we found, the contracting officer had to make a decision onthe Lottwo option by 13 August 2011.

PSE spends a lot ofenergy focusing onthe minutes ofa meeting attended by the contracting officer on 12 August 2011, the day before the option had to be exercised (R4, tab 68). PSE contends thatthese minutes demonstrate the contracting officer'sbad



### 8faith (e.g., app. 2nd mot. at 2-3). Even viewed in the light most favorable to PSE, the meeting minutes do not help PSE. As we have found, by the time ofthis meeting PSE had long since defaulted on the backwage agreement for contract 8113. The minutes state, under the heading "Dept ofLabor Investigations" that there has been "No real improvement since last contract," that there were "Approx $IMback wages" and that "Employees' health coverage requests are being refused," all ofwhich are consistent with our findings ofundisputed facts. Facedwiththe recurring issue ofPSE's failure to pay its employees, andwiththe clockticking down on the option deadline, it was reasonable for the contracting officerto decline the option. There is simply no evidence that even hints at a specific intent to injure PSE, let alone proving such an intent by clear and convincing evidence. Sach Sinha andAssoc., Inc., ASBCA No. 47594, 00-1BCAif30,735 at 151,867.

B. PSE's Other Contentions

PSE also contends that "[t]houghthe government's action was not a termination for default [TFD] it most certainly did have the effects ofa TFD. In short, FISC/Navy exercised its powerto terminate PSE's contractby circumventing the procurementprocess." (App. mot. at 7) Itis not clearwhatthis means. The termination ofTask Order No. 9 for convenience did have a similar effect as a termination for default in the sense that it ended the task order. Although the governmenthas raised what couldperhaps be grounds for a termination for default, it had a separate contractual right to terminate the contract for convenience. The governmenthas the right to terminate at will underthis clause and, absent bad faith or a clear abuse ofdiscretion, the contracting officer's decision is final. John Reiner & Co., 325 F.2d at 442.

PSE raises two otherrelated contentions. In the 8 September2011 email that the contracting officer sent to PSE informing it ofthe termination ofTask OrderNo. 9 for convenience, the contracting officer stated that the governmentno longerhad a need for the services. However, earlierthat same day, in an internal Navy email, the contracting officer stated that he was concerned about awarding another task orderto PSE because of the likelihood that PSE would "commitFraud against their employees" (R4, tab 78), which, in PSE'sview, demonstrates the contracting officer's bad faith. PSE also notes thatthe government has defended this action based on Service ContractAct violations and otherbreaches, which is inconsistent with the contracting officer's statementto PSE in September 2011 that the governmentno longer needed the services.

While the contracting officer's 8 September 2011 email notifying PSE ofthe termination was probably less than candid given the Navy's concerns aboutworkerpay and other issues, it is also undisputed that the contracting officer did not execute atask order with another contractor for nearly four months after the PSE termination for convenience (see R4, tab 100) and it was, therefore, literally true that the Navy had no immediate need of those services from a contractor. Moreover, while the contracting officer's use ofthe word "fraud" in PSE'sview demonstrates thatthe contracting officerhad an animus for PSE, the

9

### undisputed facts show otherwise. First, PSE defaulted on a back pay agreement with respect to contract 8113 that arose primarily from a failure to pay health and welfare benefits, meaning that the workers on that contracthave notbeenpaid in full. Second, on contract 1001, DOL alleged that PSE, among otherthings, not only again failed to pay health and welfare benefits, it specifically led workers to believe that they had health insurance, which resulted in them obtaining medical services only to find that they would be responsible for the bills. Whether fraud was the best word choice is not the issue before us; the undisputed facts show that the contracting officerhad a good faith basis for concluding that PSE failed to pay its employees in accordance with the contracts and that it had deceived those employees by leading them to believethat they had health insurance when, in fact, they did not.
C. PSE's Recitation of"Facts" Showing BadFaith

PSE's third brief, while largely repetitive ofits earlierbriefs, appears to contain the most refined distillation ofits case. PSE sets forth in this brieffive "facts" that, in its view, demonstrates the contracting officer's bad faith:

a. Prior to meeting with the DOL investigators on about 10 August 2011, the contracting officer's representative told PSE employees that the purpose ofthe meeting
was "contractreview" (app. 2nd mot., ex. 8);
b. Priorto conductingthese interviews, the government did not notify Mr. 

### Moreno (app. 2nd mot. at 3-4);

c. In a declaration dated 15 October 2015 the contracting officer lied when he testified thatthe investigator assigned to review PSE's confidential facility clearance application stated that he stopped Mr. 

### Moreno'spersonal security clearance investigation in February 2011 and thathe did not intend to issue a clearance to Mr. Moreno (R4, tab 97, 

### if 7);
d. In an 8 September 2011 email to otherNavy officials, the contracting officer slandered Mr. 

### Moreno when he expressed concern that PSE would commit fraud against its employees ifissued any more task orders (app. 2nd mot. at 3); and

e. Mr. 

### Whitehead misled his agency when he statedthat a DOL investigator visiting the office was "looking for fiduciary violations, by PSE, dealing with mishandling ofinsurance and retirement funds collected from employees, instead ofthe real reason" for the investigator's visit (app. 2nd mot. at 4).

Even viewed in the light most favorable to PSE, we do not see how any ofthese "facts" demonstrate a specific intent to injure. With respect to (a) and (b), compliance with the Service ContractAct was part ofthe contract. Monitoring PSE's compliance

10with that Act, particularly in light ofthe admitted violations on contract 8113, was entirely appropriate. Nor do we agree that the contracting officer's representative misled the employees by describing the purpose ofthe meetings as "contractreview." PSE also has not identified any statute, regulation, or contractprovision that required the contracting officerto notify 

### Mr. Moreno before DOL met with the employees.

In (c), PSE makes the serious allegation that the contracting officer lied in a declaration submittedto the Board when testifying about one ofthe Navy's alternate grounds for the termination. In the testimony at issue, the contracting officerrelates a conversation between him and an unnamed investigator in May 2011. PSE does not allege that it was present during the conversation, nor does it present testimony from anyone who was present. PSE does not present any direct evidence that the testimony is untruthful and it does not, in any event, have anything to do withthe SCA issues.

We addressed point (d) and the contracting officer's use ofthe word "fraud" above. Finally, with respect topoint (e), PSE does not explain why this statement was false or demonstrated a specific intent to injure PSE, nor does PSE state what the "real reason" was for the DOL investigator's visit in early October2011.

D. Final Analysis

Based on all ofthe foregoing, we conclude that PSE cannot demonstrate by clear and convincing evidence that the contracting officerhad a specific intent to injure PSE. In this regard we observe that PSE's central contention

- that the contracting officer rushed tojudgmentwhen he terminated Task OrderNo. 9 and declined to exercise the second option-wouldnot prove a specific intent to injure even ifwe accepted the notion that he acted too quickly, which we do not. Assuming for the sake ofargument that the contracting officer was too quick to believe DOL's allegations, this would merely prove that he made the wrong decision when DOL accused PSE ofanother SCAviolationjustbefore the deadline to exercise the option; it falls well short ofdemonstrating a specific intent to injure. The contracting officer did not fabricate the SCA violations, nor is there any evidence thatheplotted or schemedwith DOL to use the labor issues as apretextto terminate PSE's performance or decline the options. At best for PSE, the contracting officer's decisions to decline the option and terminate Task OrderNo. 9 are decisions that could be second guessed ifwe were reviewing those actions 

### de novo, which we are not. The governmentbargained for the right not to exercise the options and the right to terminate at its convenience. Nothing that PSEhas presented to the Boardpersuades us that the government should be prevented from exercising its contract rights. 4

4 Because ofourruling, we have not addressed the Navy's other arguments in support of the contracting officer's actions.

11CONCLUSION

Forthe foregoing reasons, we deny PSE's motion for summaryjudgment and grant the government's cross-motion. ASBCANo. 58828 is denied.

Dated: 12 July 2016

I concur

# ~~~ Administrative Judge Acting Chairman Armed Services Board ofContractAppeals MICHAEL N. O'CONNELL Administrative Judge Armed Services Board ofContract Appeals

I concur

RICHARD SHACKLEFORD Administrative Judge Vice Chairman Armed Services Board ofContractAppeals

I certify thatthe foregoing is a true copy ofthe Opinion and Decision ofthe Armed Services Board ofContract Appeals in ASBCA No. 58828, Appeal ofPuget Sound Environmental Corp., rendered in conformance with the Board's Charter. Dated:

12 JEFFREYD. GARDIN Recorder, Armed Services Board ofContractAppeals