ARMED SERVICES BOARD OF CONTRACT APPEALS

OPINION BY ADMINISTRATIVE JUDGE SWEET 

This appeal involves a delivery order for repair work on the USS WHIDBEY 

ISLAND. The delivery order included a Liability and Insurance Clause, under which 

the government assumed the risk of damage to the vessel, material, and equipment

unless, that damage was due to the defective workmanship of the appellant Marine 

Hydraulics International, LLC (Marine). While performing testing, Marine left a 

wood-wedge in a gearcase. When the government turned the engine, pre-acceptance, 

to allow for other work, the gears shredded the wood-wedge into wood-debris. The 

government required Marine to remove the wood-debris, and refused to cover the costs 

of that work. Marine filed a claim, which the contracting officer denied. 

On appeal of that claim, Marine argues that the government’s refusal to pay the 

costs of removing the wood-debris violated the Liability and Insurance Clause, and 

constituted a constructive change. Marine moves for summary judgment on the 

Liability and Insurance Clause basis of the claim. The government cross-moves for 

summary judgment on both bases of the claim. We grant the government’s motion for 

summary judgment—and deny Marine’s motion—because there is no genuine issue of 

material fact but that the costs of removing the wood-debris were due to Marine’s 

defective workmanship of leaving the wood-wedge in the gearcase. 

Appeal of - )

)

Marine Hydraulics International, LLC ) ASBCA No. 62817

)

Under Contract No. N00024-16-D-4412 )

APPEARANCE FOR THE APPELLANT: James A. Kelley, Esq.

 James A. Kelley & Associates

 Washington, DC

APPEARANCES FOR THE GOVERNMENT: Craig D. Jensen, Esq.

 Navy Chief Trial Attorney

Devin A. Wolak, Esq.

 Navy Trial Attorney 

Kiley A. Holshey, Esq. 

Bradley S. Garner, Esq.

 Navy Trial Attorneys 

 Norfolk, VA
2 

STATEMENT OF FACTS (SOF) FOR PURPOSES OF THE MOTION 

1. On February 17, 2016, the United States Navy’s Mid-Atlantic Regional 

Maintenance Center (government) awarded Marine Contract No. N00024-16-D-4412 

(Contract), an indefinite delivery, indefinite quantity contract to perform complex ship 

repairs on amphibious vessels at Norfolk, Virginia (R4, tab 4 at 155-242). The 

Contract contained three relevant clauses. First, it included a Defense Federal 

Acquisition Regulation 252.217-7012 Clause, LIABILITY AND INSURANCE 

(AUG 2003). Under the Liability and Insurance Clause, the “Government assumes the 

risks of loss of and damage to” the vessel, material, and equipment (id. at 239). 

However, the Liability and Insurance Clause contained an exception to that 

government assumption of risk where the damage was “due to . . . [d]efective 

workmanship performed by the Contractor . . .” (the Exception) (id.). Second, the 

Contract stated that:

If, prior to delivery, the Government finds any material or 

workmanship is defective or not in accordance with the job 

order, in addition to its rights under the Guarantees clause 

of the Master Agreement, the Government may reject the 

defective or nonconforming material or workmanship and 

require the Contractor to correct or replace it at the 

Contractor’s expense. 

(Id. at 236). Finally, the Contract incorporated by reference Federal Acquisition 

Regulation 52.243-1, CHANGES—FIXED PRICE (AUG 1987), which required the 

contracting officer to provide an equitable adjustment for any changes to the Contract 

(R4, tab 4 at 221; 48 C.F.R. § 52.243-1). 

2. On June 15, 2017, the government issued Delivery Order N50054-17-F-L000 

(Delivery Order) to Marine for repairs on the USS WHIDBEY ISLAND (R4, tab 8 

at 4,822-65). The Delivery Order stated that Marine would perform repair work 

pursuant to Work Item 233-11-012, Number 1A Main Propulsion Diesel Engine 

Camshaft Bearing Inspect (id. at 4,841; R4, tab 6 at 317). Among other things, Work 

Item 233-11-012 required Marine to clean, inspect, and measure each camshaft thrust 

and flex drive gear (ASOUMF ¶ 13; GRASOUMF ¶ 13; R4, tab 6 at 599).1

 In order to 

conduct that inspection, Marine had to take “backlash measurements and readings” 

(ASOUMF ¶ 14; GRASOUMF ¶ 14). 

1

 “ASOUMF” refers to the appellant’s statement of undisputed material fact. 

“GRASOUMF” refers to the government’s response to the ASOUMF. 

“GSOUMF” refers to the government’s statement of undisputed material fact. 
3

3. Between October 2017 and April 2019, Marine undertook repairs to the 

Number 1A Main Propulsion Diesel Engine (ASOUMF ¶ 12; GRASOUMF ¶ 12).

4. On May 11, 2019, Marine successfully took the backlash readings for the 

camshaft and flex drive inspection. Government representatives were present during 

the readings. (ASOUMF ¶¶ 15-16; GRASOUMF ¶¶ 15-16) During the readings, 

Marine placed a wood-wedge covered with orange tape between the gear-casing and 

the 105-tooth gear. That wedge pushed and held the 105-tooth gear in place so that

Marine could move the 36-tooth gear and take readings. This was an industrystandard, government-accepted method of taking the readings. (ASOUMF ¶ 14; 

GRASOUMF ¶ 14; GSOUMF Ex. A (Hillman Decl.) ¶ 6)

5. After the testing, Marine closed the gearcase (ASOUMF ¶ 17; GRASOUMF ¶ 

17). All government personnel had left before Marine closed the gearcase (GSOUMF 

Ex. A (Hillman Decl.) ¶ 5). Marine failed to remove the wood-wedge before closing 

the gearcase (ASOUMF ¶ 17; GRASOUMF ¶ 17, GSOUMF Ex. A (Hillman Decl.) ¶

6; id. ex. B (Ceglio Depo.) 84-85; R4, tab 25 at 5,273).

6. During subsequent repair work, the United States Navy Ship’s Force—which 

was responsible for operating the USS WHIDBEY ISLAND—rotated the engine

(ASOUMF ¶¶ 18-20, 29; GRASOUMF ¶¶ 18-20, 29; GSOUMF Ex. A (Hillman 

Decl.) ¶ 8).

7. Daniel Hillman—the government’s Fleet Diesel Engine Inspector— declares 

that to turn the engine, an operator merely pushes a button on an electric motor and 

that the operator would not notice resistance from the wood-wedge. Further, 

Mr. Hillman testified that the mechanical advantage of the gear train was enormous,

given that the engine was 28 feet long, 12 feet wide, 9 feet tall, and weighed over 

200,000 pounds (GSOUMF Ex. A (Hillman Decl.) ¶¶ 8, 10). According to Edmund 

Brisson—Marine’s Diesel Division Manager—an operator turning the engine would 

have noticed resistance from the wood-wedge (app. mot. Ex. 9 (Brisson Decl.) ¶¶ 1, 6; 

app. reply Ex. 1 (Brisson Decl.) ¶ 5).

8. Mr. Hillman also declares that the Ship’s Force may turn the engine without 

limit (GSOUMF Ex. A (Hillman Decl.) ¶ 11). Mr. Brisson declares that the Ship’s 

Force was not authorized to turn the engine without a backlash measurement (app. 

mot. Ex. 9 (Brisson Decl.) at ¶ 7).

9. After turning the engine, the government determined it could not locate a copy 

of the backlash readings. Thus, the government decided to retake the backlash reading

itself. (ASOUMF ¶ 22; GRASOUMF ¶ 22; GSOUMF Ex. A (Hillman Decl.) ¶ 9) 

When the government opened the gearcase to retake the backlash reading, it observed 

wood-debris and orange tape in the gearbox (ASOUMF ¶ 24; GRASOUMF ¶ 24). 
4 

Mr. Hillman declares that “[b]ased upon where the debris was found, the wedge that 

[Marine] left in the [gear] must have come loose and passed through the gear train 

between the 105 tooth gear and the idler” (GSOUMF Ex. A (Hillman Decl.) ¶ 6). 

There is no contradictory evidence. 

10. The government directed Marine to perform a complete lube oil flush of the 

engine, remove the contamination from the gear-train by mechanically cleaning the 

gear-train and gearcase, and replace the lube oil filters and oil. Marine performed the 

work. The government did not compensate Marine for that work. (ASOUMF ¶¶ 27, 

31-32; GRASOUMF ¶¶ 27, 31-32; R4, tab 23 at 5,267) 

11. On November 25, 2020, Marine submitted a certified claim (ASOUMF ¶ 2; 

GRASOUMF ¶ 2). 

12. On January 15, 2021, the contracting officer issued a final decision denying 

the claim (ASOUMF ¶ 3; GRASOUMF ¶ 3). 

13. This appeal followed. 

DECISION 

The government is entitled to judgment as a matter of law on Marine’s claims 

based upon the Liability and Insurance Clause and a purported constructive change. 

I. Summary Judgment Standard 

 We will grant summary judgment only if there is no genuine issue as to any 

material fact, and the moving party is entitled to judgment as a matter of law. Celotex 

Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). All significant doubt over factual 

issues must be resolved in favor of the party opposing summary judgment. Mingus 

Constructors, Inc. v. United States, 812 F.2d 1387, 1390-91 (Fed. Cir. 1987). In 

deciding summary judgment motions, we do not resolve controversies, weigh 

evidence, or make credibility determinations. Anderson v. Liberty Lobby, Inc., 

477 U.S. 242, 255 (1986). Moreover, we draw all reasonable inferences in favor of the 

non-movant. Id. A genuine issue of material fact arises when the non-movant 

presents sufficient evidence upon which a reasonable fact-finder, drawing the requisite 

inferences and applying the applicable evidentiary standard, could decide the issue in 

favor of the non-movant. C Sanchez & Son, Inc. v. United States, 6 F.3d 1539, 1541 

(Fed. Cir. 1993). 
5 

II. Liability and Insurance Clause 

 There is no genuine issue of material fact suggesting that the government 

breached the Liability and Insurance Clause. The elements of a breach of contract 

claim are: (1) a valid contract between the parties; (2) an obligation or duty on the part 

of the government arising out of the contract; (3) a breach of that duty; and (4) 

damages caused by the breach. Lockheed Martin Integrated Sys., Inc., ASBCA 

Nos. 59508, 59509, 17-1 BCA ¶ 36,597 at 178,284. Our analysis of the obligations 

and duties of the parties requires us to interpret the contract. In interpreting a contract, 

“clear and unambiguous [contract provisions] must be given their plain and ordinary 

meaning[.]” Coast Fed. Bank, FSB v. United States, 323 F.3d 1035, 1040 (Fed. Cir. 

2003) (en banc). “An ambiguity exists when a contract is susceptible to more than one 

reasonable interpretation.” E.L. Hamm & Assoc., Inc. v. England, 379 F.3d 1334, 

1342 (Fed. Cir. 2004).2

 “[T]he language of a contract must be given that meaning that 

would be derived from the contract by a reasonably intelligent person acquainted with 

the contemporaneous circumstances.” Hol-Gar Mfg. Corp. v. United States, 351 F.2d 

972, 975 (Ct. Cl. 1965). 

 The Liability and Insurance Clause—which Marine claims the government 

breached (app. reply at 2)—stated that the “Government assumes the risks of loss of 

and damage to” the vessel, materials, or equipment, except for loss and damage “due 

to . . . [d]efective workmanship performed by the Contractor” (SOF ¶ 1). The term 

“due to” in insurance clauses such as the one at issue here means the cause-in-fact and 

proximate cause. Winter v. Bath Iron Works Corp., 503 F.3d 1346, 1351 (Fed. Cir. 

2007), on remand ASBCA No. 54544, 08-2 BCA ¶ 33,936 at 167,935, recon. denied

09-1 BCA ¶ 34,085. Cause-in-fact, or actual cause, means that an act or omission is 

the but for cause of a result. Proximate cause means a sufficiently close connection 

between the act or omission and the result to impose legal responsibility for the result. 

Carter v. McDonough, 46 F.4th 1356, 1356-61 (Fed. Cir. 2022); Ollis v. Shulkin, 857 

F.3d 1338, 1343-44 (Fed. Cir. 2017). 

 Here, there is no genuine issue of material fact but that the wood-debris 

damage3

 to the vessel, materials, or equipment was due to Marine’s defective 

2

 Because the claims in this appeal ultimately are government claims that Marine’s 

performance was deficient, it is the government’s burden of proof on each 

claim. Mitchell Enters., ASBCA No. 53202 et al., 06-1 BCA ¶ 33,277 

at 164,962. 

3

 In the alternative, the government argues that it did not breach the Liability and 

Insurance Clause because that clause only applies to loss or damage and there is 

no genuine issue of material fact suggesting that there was loss or damage since 

the cleaning does not count as such (gov’t mot. 5-6). Though we are skeptical 

of this argument, and it appears to us that there is likely a genuine issue of 
6

workmanship because it is undisputable that Marine’s failure to remove the woodwedge was the cause-in-fact and proximate cause of the wood-debris damage. There 

is no genuine issue of material fact but that, but for Marine’s failure to remove the 

wood-wedge from the gearcase, the gears would not have shredded the wood-wedge

into the wood-debris that damaged the vessel, materials, or equipment. Moreover,

given the close causal connection between Marine leaving the wood-wedge in the 

gearcase and the gears shredding the wood-wedge to the damaging wood-debris, there 

is no genuine issue of material fact but that there was a sufficiently close connection to 

impose legal responsibility for the wood-debris damage on Marine. (SOF ¶¶ 5-6, 9); 

see also Lake Union Drydock Co., DOTCAB No. 73-39, 75-1 BCA ¶ 11,134 (DOT 

BCA) (holding that a contractor’s leaving a rag in an engine turbine caused damage to 

the turbine, entitling the government to charge the contractor for the costs incurred

repairing that damage).

Marine argues that the government caused the wood-debris damage for three 

reasons. First, Marine argues that government personnel observing the initial backlash 

measurement did not discover that Marine failed to remove the wood-wedge from the 

gearcase (app. mot. at 12). However, Marine has failed to raise a genuine issue of 

material fact suggesting that the government observers were present when Marine 

closed the gearcase (SOF ¶ 5). In any event, “[w]here the contract places on the 

contractor the burden of compliance, the presence or absence of a Government 

inspector does not shift responsibility for the sufficiency of the work from the 

appellant to the government.” CBRE Heery, Inc., ASBCA No. 62420, 21-1 BCA ¶ 

37,927 at 184,200 (quoting Panhandle Grading & Paving, Inc., ASBCA No. 38539, 

90-1 BCA ¶ 22,561 at 113,225).

4

 Here, it was Marine’s responsibility to carry out the 

testing in a workmanlike manner (SOF ¶¶ 1-2). Therefore, even if the government 

material fact as to whether at least some of the work directed by the 

government—such as replacing the lube oil filters and oil -- constituted 

repairing damage to the vessel, materials, or equipment, we do not decide it

today.

4 Marine relies upon Lake Union, 75-1 BCA ¶ 11,134 (DOT BCA) to argue that the 

government is responsible for pre-acceptance damage caused by a contractor’s 

defective workmanship if the government failed to detect that defective

workmanship (app. reply at 4). However, Lake Union merely held that the 

government detected a contractor’s defective workmanship. 75-1 BCA ¶ 

11,134. It did not hold that a failure to detect a contractor’s defective 

workmanship shifts responsibility for pre-acceptance damage caused by that 

defect to the government. Id. Even if it had, Lake Union Drydock, being from 

a different Board of Contract Appeals, is not binding upon this Board, and we 

would have to decline to follow it to the extent it was inconsistent with CBRE 

Heery and Panhandle Grading & Paving. 
7

observers had witnessed Marine leaving the wood-wedge in the gearcase, that would 

not shift responsibility to the government for Marine’s failure to remove the woodwedge.

Second, Marine argues that the government caused the wood-debris damage 

because it failed to take backlash measurements—which would have revealed the 

wood-wedge—before turning the engine (app. mot. at 12-13). However, there is no 

dispute that it was Marine’s responsibility to take the backlash measurement, and 

Marine had taken backlash measurements before the government turned the engine 

(indeed, it was Marine’s performance of this backlash measurement, in which it left 

the wood-wedge in the gearcase, that led to the damage in the first place) (SOF ¶¶ 2, 4, 

6). In any event, “[i]nspections are for the benefit of [the government], not the 

contractor, and the failure of [the government] to provide for an inspection does not 

relieve the contractor of its responsibilities under the contract.” Penguin Indus., Inc. v. 

United States, 530 F.2d 934, 936-37 (Ct. Cl. 1976). As a result, the government’s 

failure to take a backlash measurement before turning the engine did not relieve 

Marine of its responsibility to perform the backlash measurement in a workmanlike 

manner.

Finally, Marine argues that the government caused the wood-debris damage

because the wood-wedge would not have been shredded if the government had stopped 

turning the engine upon encountering resistance (app. mot. at 12-13). Even assuming 

without deciding that Mr. Brisson’s declaration raises a genuine issue of material fact 

as to whether the government could have avoided the wood-debris damage if it had 

stopped the engine turning once it encountered resistance, that would not raise a 

genuine issue of material fact suggesting that the Exception did not apply. Where a 

contractor’s defective workmanship is a proximate cause of damage to a vessel, 

materials, or equipment, that damage is due to the defective workmanship—and thus 

exceptions to insurance clauses like the Exception apply—even if another cause 

contributed to the damage, at least when the other cause is not intervening and 

independent of the defective workmanship. Bath Iron Works, 09-1 BCA ¶ 34,085 

at 168,521 (holding that damage was due to defective workmanship—and thus fell 

within an insurance clause exception—when the contractor improperly flushed piping, 

even though the high levels of chlorides, sediment, and microbes in the water 

contributed to the damage, because the high levels of chlorides, sediment, and 

microbes in the water were not an intervening and independent cause).5

 Here, there is 

5 Because we conclude that the failure to stop the engine was not an independent 

cause, we decline to reach the issue left open by Bath Iron Works of whether 

the damage is due to defective workmanship where defective workmanship is a 

proximate cause and there is an intervening and independent converging cause. 

09-1 BCA ¶ 34,085 at 168,521; see also Burlington N., Inc., ASBCA 
8 

no genuine issue of material fact suggesting that the government’s failure to stop 

turning the engine caused the wood-wedge shredding, independent of Marine’s 

defective workmanship of leaving the wood-wedge in the gear case. On the contrary, 

just as the exposure of the pipes to water with the high levels of chlorides, sediment, 

and microbes in Bath Iron Works depended upon the contractor improperly flushed 

piping, 09-1 BCA ¶ 34,085 at 168,521, the government’s failure to stop turning the 

engine shredding the wood-wedge depended upon Marine’s defective workmanship of 

leaving the wood-wedge in the gearcase in the first place (SOF ¶¶ 5-7). Because the 

government’s failure to stop turning the engine was not a cause of the wood-wedge 

shredding damage independent of the defective workmanship, the wood-wedge 

damage was due to the defective workmanship, regardless of whether the 

government’s failure to stop turning the engine also caused the damage. 

III. Constructive Change 

There is no genuine issue of material fact suggesting that the government 

constructively changed the contract either. There is a constructive change when: (1) 

an official compels a contractor to perform work not required under the terms of the 

contract; (2) the official directing the change had contractual authority to alter the 

contractor’s duties unilaterally; (3) the official enlarged the contractor’s performance 

requirements; and (4) the added work was not volunteered, but resulted from the 

official’s direction. Alfair Dev. Co., ASBCA Nos. 53119, 53120, 05-2 BCA ¶ 32,990 

at 163,515. 

 Here, there is no genuine issue of material fact suggesting that an official 

compelled Marine to perform work not required under the terms of the contract or 

enlarged Marine’s performance requirements. The Contract stated that: 

If, prior to delivery, the Government finds any material or 

workmanship is defective or not in accordance with the job 

order, in addition to its rights under the Guarantees clause 

of the Master Agreement, the Government may reject the 

defective or nonconforming material or workmanship and 

require the Contractor to correct or replace it at the 

Contractor’s expense. 

(SOF ¶ 1). As discussed in greater detail above, there is no genuine issue of material 

fact but that Marine’s workmanship was defective because it is undisputed that Marine 

left the wood-wedge in the gearcase (SOF ¶ 5). Therefore, there is no genuine issue of 

No. 19262, 75-2 BCA ¶ 11,526 (recognizing that there may be multiple 

proximate causes of a result). 
9 

material fact but that the Contract permitted the government to require Marine to 

correct the defect by removing the wood-debris at Marine’s expense pre-delivery. 

CONCLUSION 

For the foregoing reasons, we grant the government’s motion for summary 

judgment and deny Marine’s motion for summary judgment. This appeal is denied. 

 Dated: April 16, 2024 

JAMES R. SWEET

Administrative Judge 

Armed Services Board 

of Contract Appeals

I concur

JOHN J. THRASHER

Administrative Judge 

Chairman 

Armed Services Board 

of Contract Appeals

I concur

J. REID PROUTY

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. 62817, Appeal of Marine 

Hydraulics International, LLC, rendered in conformance with the Board’s Charter. 

 Dated: April 16, 2024 

PAULLA K. GATES-LEWIS

Recorder, Armed Services 

Board of Contract Appeals