ARMED SERVICES BOARD OF CONTRACTAPPEALS Appeal of-- ) ) Nexagen Networks, Inc. ) ) Under Contract No. Wl5P7T-13-D-E077 )
APPEARANCE FOR THE APPELLANT:

APPEARANCES FORTHE GOVERNMENT: ASBCA No. 60641

David A. Rose, Esq.

Rose ConsultingLLC Valdosta, GA Raymond M. Saunders, Esq.

Army ChiefTrial Attorney MAJ Stephen P. Smith, JA

Trial Attorney
OPINION BYADMINISTRATIVE JUDGE O'CONNELL ON THE GOVERNMENT'S MOTION FORPARTIAL SUMMARYJUDGMENT Appellant, Nexagen Networks, Inc. (Nexagen) has appealed the contracting officer's (CO's) denial ofits certified claim. The Armyhas moved for partial summaryjudgmenton a portion ofthe claim in which Nexagen seeks $37,597,526.94 in "compensatory consequential damages." We grantthe motion in part. STATEMENT OF FACTS FORPURPOSES OF THEMOTION
The following facts are undisputed.
On May 31, 2013, the Army awardedNexagen Contract No. Wl5P7T-13-D-E077 (the contract) a multiple award indefinite-delivery/indefinite-quantity contractto provide software and systems engineering services (app. resp. at 3; R4, tab 1). The contract contains various clauses, including Federal Acquisition Regulation (FAR) 52.249-6, TERMINATION (COST-REIMBURSEMENT) (MAY 2004), ALTERNATE IV (SEP 1996) (R4, tab 1at 133).
On February 13, 2015, the Army awardedNexagen task order KXOl for "Data Strategy Service and Software Support" (the task order). Thetask orderhad a one-year base period with a one-year option. (App. resp. at 4; R4, tab 2)With respect to its value, the task orderprovided:
BASE PERIOD Estimated Labor Cost Fixed Fee Estimated Travel & ODC Total
OPTION PERIOD Estimated Labor Cost Fixed Fee Estimated Travel & ODC Total
Grand Total (App. resp. at 5; R4, tab 2 at 2) $ 18,170,944.36 $ 908,547.22 $ 3,881,775.40 $22,961,266.98

$ 18,534,362.29 $ 926,718.11 $ 3,887,296.90 $ 23,348,377.30 $ 46,309,644.28

During the less than three-month periodthatNexagen performedthe task order, the Army sent Nexagen deficiency notices and a cure notice (app. resp. at 6-7; R4, tabs 5, 8-9). On May 4, 2015, the CO notified Nexagen that he was terminating the task order for default due to Nexagen's failure to perform (app. resp. at 7; R4, tab 13). The CO quickly changed course, however, and on May 15, 2018, notified Nexagen that he was changing the termination to a "no-costtermination for convenience" (app. resp. at 7; R4, tabs 14-15).
On December 22, 2015, Nexagen submitted a certified claim to the CO. 

### It sought $37,597,526.94 for "Compensatory Consequential Damages: Breach ofimplied covenant ofgood faith and fair dealing," and $2,646,853 for "Compensatory Expectation Damages: Breach ofcontractbased upon wrongful termination." (App. resp. at 8-9; R4, tab 20 at 9) Forease ofreference, we will referto the former as the "consequential damages claim" and the latter as the "expectation damages claim." Nexagen's certified claim is 304 pages long. Pages 1-9 consist ofa cover, table ofcontents, narrative, and certification (R4, tab 20). Pages 10-304 consist ofvarious spreadsheets and other documents that purport to documentthe $2.6 million in expectation damages. The biggest single component ofthe expectation damages claim is the fixed fee (or lost profits) of$1,835,265.33 for the base and option years ofthe contract (id. at 11). 1

1$908,547.22 (base year)+ $926,718.11 (option year)= $1,835,265.33. 2By contrast, there is nothing in the claim that itemizes the $37.6 million consequential damages claim.2 The claim does allege, however, that Nexagen suffered:

• Partnership cancellation by CACI due to Loss ofConfidencewith Nexagen on an $SOM acquisition on which CACI is the incumbent

• Emboldened industry concerns about Nexagen ability to effectively perform and partner as a result ofthe government's actions

• Potential for biased TOR submission evaluations by ACC acquisition and legal team on future solicitations

• Loss of$35M+ in revenue and Technical Expertiserelated to Predictive Analytics, Cloud Computing and Messaging Technologies

• $48M in gross revenue Good Will Lost Due to Breach ofContract

• $1OM in OH, G&A and Profit (R4, tab 20 at 8)
The CO issued a final decision denying the claim on May 6, 2016 (app. resp. at 10; R4, tab 22). With respect to the fixed fee Nexagen sought in the expectation damages claim, the CO denied it for the option year because "there is no entitlementto unexercised options." Forthe base year fee of$908,547.22, she granted aprorated $151,424.54 to reflect Nexagen's actual performance period, and denied the remainder. (R4, tab 22 at 2) As for the consequential damages claim, the CO stated "Nexagen's claim for damages for breach ofcontract in the amount of$37,597,526.94 are denied in full as they are unsupported and not provided for under FAR49

### .3" (id.). Nexagen has submitted as exhibit 3to its response to the government's motion a spreadsheetthat for the first time itemizes its consequential damages claim:

2 Nexagen disputes the Army's assertion thatthe claim failed to itemize the consequential damages claim. Its only basis for the denial is that the CO did not seek clarification. (App. resp. at 9) We find that Nexagen has failed to properly address the government's assertion offact and we consider 

### it undisputed for purposes ofthe motion. FED. R. CIV. P. 56(e)(2). 3Nexagen Pro Forma for Termination of SSESR-2031 Description 

### I I Year I 

### I I Year 2 

### I I Year 3 

### I I Year4 

### I I Year 5 

### I ITotal Remarks Count II Breach ofContract (SSESR-2031 DS4 Award) Lost Fee $ 908,547 $ 926,718 $ 1,835,265 Two years of Lost G&A $ 1,886,284 $ 1,924,009 $ 3,810,293 Lost •Gross Lost OH $ 873,120 $ 890,582 $ 1,763,702 Profit (16%) on the DS4 Contract. Subtotal 

### I $ 7,409,260 Count I Breach ofimplied Covenant of200d faith dealin2 Loss on $5,451,283.32 $5,560,308.66 $ 11,011,592 Sixtimes Fee Corporate for each year Market Value Subtotal 

### I $11,011,592 Count I Breach ofimplied Covenant ofgood faith dealing "No Bid" $1,874,444 $1,874,444 $1,874,444 $1,874,444 $ 7,497,776 16% of Technology Revenue Opportunities Generating Gross Profit Contracts that we can not bid on without the talent pool we had hired to perform DS4. These areas include opportunities in: Predictive Analytics, Cloud Computing and Messaging; Calculation based on those opportunities no bid and ourhistorical bid to win ratio of25°/o ofall opportunities bid. Subtotal 

## IS 7,497,776 Also Count II: Recompete ofDS4 Lost Fee $ 945,252 $ 964,158 $ 983,441 $ 2,892,851 DS4: Year 3. LostG&A $ 1,962,489 $2,001,739 $ 2,041,774 $ 6,006,002 4 and 5 Gross Profits (16%) Lost OH $ 908,393 $ 926,561 $ 945,092 $ 2,780,047 withPWIN of 60% Subtotal 

### I $ 11,678,899 TOTAL 

### I S37,597,527
Exhibit 3 clarifies that the consequential damages claim is based on lostprofits, loss ofcorporate market value (calculatedby multiplying by sixthe lostprofits onthe base and option years), along with general and administrative costs (G&A), and overhead. Exhibit 3 indicates thatNexagen seeks its fixed fee for not only the base and option years but also for three additional years for which it contends it would have been the awardee after a recompetition. Forthe five years, Nexagen seeks a total of $19,088,159 in lost profits, G&A, and overhead. Ontop ofthis it seeks $11,011,592

4for the alleged loss ofcorporate market value, and nearly $7.5 million in lost profits on other contracts due to its loss ofthe "talentpool" it hired toperform this contract. Exhibit 3 illustrates that the damage calculations for the two claims overlap. As stated above, the major component ofthe expectation damages claim is the $1,835,265 in lost profits for the base and option year. Nexagen also included these in the consequential damages claim. (Compare app. resp., ex. 3, andR4, tab 20 at 11)
DECISION Jurisdiction
Afterreviewing Nexagen's claim, the Boardraised the issue ofourjurisdiction to consider the consequential damages claim because, while the claim has an abundance ofdetail for the much smaller expectation damages claim, it makes only relatively vague assertions with respect to consequential damages. We haveheld, for example, that ifa claim is so lacking in specificity that the CO would "haveto be omniscient to decipher appellant's intent," we do not possessjurisdiction. Sermor, Inc., ASBCA No. 46755, 95-1 BCAi127,500 at 137,043. We requested that the parties address the issueintheir briefs.
FAR 2.101 provides that a "claim" is: "awritten demand orwritten assertion by one ofthe contracting parties seeking, as a matter ofright, the payment ofmoney in a sum certain, the adjustment or interpretation ofcontract terms, or otherreliefarising under orrelating to the contract." The Court ofAppeals for the Federal Circuit has held that the claim mustprovide the CO adequate notice ofthe basis and amount ofthe claim. Contract CleaningMaintenance, Inc. v. UnitedStates, 811 F.2d 586, 592 (Fed. Cir. 1987). Shortly after our decision in Sermor, the Court ofAppeals clarified the minimal amount ofinformation required in H.L. Smith, Inc. v. Dalton, 49 F.3d 1563 (Fed. Cir. 1995). In H.L. Smith, the contractor submitted nine letters requesting equitable adjustments that did not explain how it calculated the amounts due, and did not submit any documentation, even after repeated requests from the CO asking for a more detailed explanation so that he could evaluate the claim. (Id. at 1564). The Board dismissed the appeals, finding that the "claim letters consist merely ofbroad allegations ofGovernment caused delay and disruption without linking a specific assertion ofdelay or disruption to the actual dollar amounts requested." H.L. Smith, Inc., ASBCANo. 45111 etal., 94-2 BCAi126,723 at 132,933. The Board held that it lackedjurisdictionbecausethe contractor failed to present enough information to the CO for him to meaningfully evaluate the claims. Id. The Federal Circuitreversed, holding that neitherthe Contract Disputes Act nor the FARrequired the contractorto account for each cost component ofthe claim. 5H.L. Smith, 49 F.3d at 1565. The Court held that, while our decision accurately described the claim letters, providing the CO adequate notice ofthe basis and amount does not require the contractorto submit a detailed breakdown ofcosts or financial documentation. Id. at 1564-65. Thus, the Courtheld that allegations ofgovernment delay, along with a sum certain, are sufficient forjurisdiction, even ifthere is no explanation as to how the delay resulted in the damages orhow the damages were calculated. In applying this standard, we have thus characterizedthe amount of information required to provide adequate notice ofthe basis and amount ofthe claim as "quite low.'· L-3 Communications IntegratedSystems, L.P., ASBCA Nos. 60713, 60716, 17-1BCAi136,865 at 179,626.
In its supplemental brief, Nexagen implicitly acknowledges that it did not provide the CO all ofthe information contained in Exhibit 3. But it states that after submission of the claim, "the Contracting Officer should have been on notice that the claim of $37,597,526.94 reflected the loss ofvalue, loss ofgoodwill, loss ofprofit, overhead and G&A resulting from the termination." (App. supp. br. at 5)
We agree with Nexagen that it submitted enough information, if justbarely so, to pass the lowjurisdictional bar. Without doubt, administrative review ofthe claim would have been difficult unless the CO were omniscient ortelepathic. Otherwise, there is no way for her to have known, for example, that Nexagen seeks an $11 million reduction in corporate value equal to the base and option year fees multiplied by six. But the claim does cite a "loss of$35M+ in revenue...relatedto PredictiveAnalytics, [and] Cloud Computing" and "$48Min gross revenue Good Will Lost," conveying by virtue ofnumbers largerthan the value ofthe task orderthatNexagen must be basing the claim on the loss ofother contracts. Further, the reference in the claimto losing a partnership on an $80 million contract, and "emboldened industry concerns" about its ability to effectively perform and partner, and the loss of"Technical Expertise," at least suggest the notion ofa company that has been weakened and is less valuable due to the government's alleged actions. Further the claim specifically cites the loss of$10 million in overhead, G&A and lost profit. Thus, we agree with Nexagen that the CO would have been on notice that the $37+ million claimed reflectedthe loss ofvalue, loss ofgoodwill, loss ofprofit, overhead and G&A resulting from the termination, even ifshe had no idea how Nexagen calculated its alleged losses. Accordingly, we conclude that we possessjurisdictionto considerthe consequential damages claim and now considerwhetherNexagen is entitled as a matter oflaw to recover the types ofdamages it seeks. SummaryJudgment Standardof Review Summaryjudgment is appropriate when there is no genuine issue ofmaterial fact and the movingparty is entitled tojudgment as a matter oflaw. Anderson v. Liberty 6Lobby, Inc., 477 U.S. 242, 247-48 (1986). When considering a motion for summary judgment, the Board must determine whether there is a genuine issue for trial. Id. at 249.
Claimsfor LostProfits after a Termination/or Convenience
Because so much ofNexagen's consequential damages claim is based on lost profits after a convenience termination, we begin with the termination for convenience clause. FAR 52.249-6 provides in relevant partthat: (a) The Government may terminate performance ofwork underthis contract in whole or, from time to time, in part, if

- (I) The Contracting Officer determines that a termination is in the Government's interest..

.. Such clauses allow the government to terminate a contract and avoid the payment ofcommon law damages such as anticipatory profits for which it could be liable ifit terminated a contract lacking such a clause. SWR, Inc., ASBCANo. 56708, 15-1 BCA ,i 35,832 at 175,222. The Court ofClaims explained that "[t]his exclusion from reliefofunearned profits [in a termination for convenience] is a settled policy which has long been accepted and enforced." William Green Constr. Co. v. United States, 477 F.2d 930,936 (Ct. Cl. 1973).
The CO's election to terminate for the government's convenience is conclusive unless the contractor can show a clear abuse ofdiscretion orthat the government acted in bad faith. T&MDistributors, Inc. v. UnitedStates, 185 F.3d 1279, 1283 (Fed. Cir. 1999). A termination tainted by bad faith or abuse ofdiscretion opens the door to breach damages such as anticipatory profits. Krygoski Constr. Co. v. UnitedStates, 94 F.3d 1537, 1541 (Fed. Cir. 1996). To provebad faith, there must be clear and convincing (or "well-nigh irrefragable") evidence ofsome specific intent to harm the contractor. Am-ProProtectiveAgency, Inc. v. UnitedStates, 281 F.3d 1234, 1239-40 (Fed. Cir. 2002). Due to the heavy burden ofproof, contractors have rarely been successful in demonstrating the government's bad faith. Krygoski, 94 F.3d at 1541. But, ifNexagen meets this elevated standard, it may be entitled to lost profits on the base year ofthe contract. (We address the option year at the end ofthis opinion.)

7AnticipatoryProfits on other Contracts andLoss of Business Value
Even ifa contractor succeeds in showing bad faith, it is not entitled to consequential damages3

, such as lostprofits on other contracts. William Green Constr, 477 F.2d at 936. Such damages, whether in a termination for convenience or in the event ofsome other kind ofbreach, are not recoverable because the award of future contracts is too remote and speculative. The Court ofClaims explained that: "if [ the damages] are such as would have beenrealized by the party from other independent and collateral undertakings, although entered into in consequence and on the faith ofthe principal contract, then they are too uncertain and remote to be taken into consideration as a part ofthe damages occasioned by the breach ofthe contract in suit." Ramseyv. UnitedStates, 121 Ct. Cl. 426, 435 (1951) (quotingMyerle v. United States, 33 Ct. Cl. 1, 26 (1897) (quoting Fox v. Harding, 61 Mass. 516, 522 (1851)). The Court ofClaims and the Federal Circuithave followed this rule in numerous cases. Rumsfeldv. FreedomNY, Inc., 329 F.3d 1320, 1333 (Fed. Cir. 2003) (after default termination convertedto one for convenience, denying.as too remote and uncertain profits and overhead on contracts appellant contended it would have been awarded but for the government's breach); Olin Jones Sand Co. v. UnitedStates, 225 Ct. Cl. 741, 744 (1980) ("The speculative alleged loss offuture contracts and work in this case comes within the losses ofoutside business, outside contracts, and general company worth referred to in [William Green Constr.].... [T]here is no assurance that plaintiffwould have received any additional contracts orwork."); William Green Constr., 477 F.2d at 936 ("even in a common-law suitthere would be no recovery for general loss ofbusiness, the claimed loss ofthe entire Green net worth, and losses on the non-federal work-such damages are all deemed too remote and consequential"); Ramsey, 121 Ct. Cl. at 433-35 (denying costs ofbankruptcyreorganization and profits lost on corporation's overall business activities).
In this appeal, Nexagen seeks $11,011,592 in lost corporate value, $7,497,776 in lost business opportunities in predictive analytics and other fields, and $11,678,899 for what it refers to as "gross profits" on the successorcontract to the one at issue (app. resp., ex. 3). Raj Parikh, Nexagen's ChiefOperating Officer, states in a declaration that Nexagen has a historical success rate of25% when it bids on contracts and that Nexagen would have been bidding on the successor contract as the incumbent (app. resp., ex. 12). Even ifwe accept these assertions, the claim remains speculative. The contract at issue did not entitle appellant to these contracts and there is no assurance that it would have received any additional contracts, e.g., Olin Jones, 225 Ct. Cl. at 744, and, to the extent that it received them, there is no assurance that it would have made aprofit.

3 Consequential damages are "[l]osses that do not flow directly and immediately from an injurious act but that result indirectly from the act." BLACK'SLAW DICTIONARY (10th ed. 2014). 8Thus, we grant the government summaryjudgmentwith respect to Nexagen's claims for $11,011,592 in lost corporate value, $7,497,776 in lost business opportunities in predictive analytics and other fields, and $11,678,899 in lost profits, G&A and overhead on the successor contract. The Option Year
This opinion does not address the portion ofNexagen's claim in which it seeks lost profits, G&A, and overhead totaling more than $3.7 million on the option year ofthe task order (app. resp., ex. 3). In an option contract, the government has bargained for the right to exercise or not exercise the option at its discretion and a contractor cannot compel the government to exercise the option. GovernmentSystemsAdvisors, Inc. v. UnitedStates, 847 F.2d 811, 813 (Fed. Cir. 1988). The Board has recognized a limited exception to this rule ifthe contractor can prove bad faith, an abuse ofdiscretion orthat the CO acted in an arbitrary or capricious manner. IMSEngineers-Architects, P.C., ASBCA No. 53471, 06-1 BCA

### ,J 33,231 at 164,674, recon. denied, 07-1 BCA

### ,J 33,467, ajf'd, IMSEngineers-Architects, P.C. v. Geren, 274 F. App'x 898 (Fed. Cir. 2008).
At the time oftermination in this appeal, roughly seven months remained before the government had to issue a preliminary notice ifit wished to exercise the option (see R4, tab I at 140, tab 2 at 2). Theparties have not addressed in their briefs whether we should treat the exercise ofan option so far in the future as similarto a future contract and thus barred as too remote and speculative by William Green Construction and the other cases cited above, orwhether a finding ofbad faith in the base year termination for convenience could somehow extend to the option year as well. We decline to rule on this issue sua sponte. CONCLUSION
We grant the government's motion for partial summaryjudgment as set forth in this opinion.
Dated: January 29, 2019

(Signatures continued)

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# o·~ MICHAEL N. O'CONNELL Administrative Judge Armed Services Board ofContract AppealsI concur

Administrative Judge Acting Chairman Armed Services Board ofContractAppeals 

### I concur

J. REii5PROUTY Administrative Judge 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. 60641, Appeal ofNexagen Networks, Inc., rendered in conformancewith the Board's Charter.
Dated:

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



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