ARMED SERVICES BOARD OF CONTRACT APPEALS 

Appeal of--

SupplyCore, Inc. 

Under Contract No. W52PIJ-09-C-0006 

APPEARANCES FOR THE APPELLANT: 

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APPEARANCES FOR THE GOVERNMENT: 

ASBCA No. 58676 

William E. Hughes III, Esq. 

Emily A. Constantine, Esq. 

Whyte Hirschboeck Dudek S.C. 

Milwaukee, WI 

Raymond M. Saunders, Esq. 

Army Chief Trial Attorney 

CPT Harry M. Parent III, JA 

Trial Attorney 

OPINION BY ADMINISTRATIVE JUDGE WILSON 

ON THE GOVERNMENT'S AMENDED MOTION FOR SUMMARY JUDGMENT 

The government declined to exercise the fourth option of the captioned contract for 

warehousing services in Kuwait. Appellant, SupplyCore, Inc. (SupplyCore ), maintains that it 

was required under Kuwaiti labor law to provide its employees 90-days notice of termination, 

and seeks an additional $145,634.80 representing pay to its employees for 39 days because the 

government did not notify it that the government would not exercise the fourth option until 

51 days prior to the expiration of the contract. We have jurisdiction pursuant to the Contract 

Disputes Act of 1978, 41 U.S.C. §§ 7101-7109. The government moves for summary 

judgment. SupplyCore opposes the motion. For the reasons stated below, the motion is 

granted. 

STATEMENT OF FACTS FOR THE PURPOSES OF THE MOTION 

1. On 24 November 2008, the United States Army Contracting Command Rock 

Island Contracting Center (hereinafter referred to as Army or government) awarded 

Contract No. W52PIJ-09-C-0006 to SupplyCore. Under the contract, SupplyCore was to 

provide warehouse services at the Interceptor Body Armor Warehouse at Camp Ali Al 

Salem, Kuwait. The contract was awarded as a firm fixed-price commercial items contract 

and incorporated FAR 52.212-4, CONTRACT TERMS AND CONDITIONS - COMMERCIAL 

ITEMS (OCT 2008). (R4, tab 2 at 1, 3, 10) 

2. The contract was awarded for a one-year base period and contained four 

one-year options. The contract included FAR 52.217-9, OPTION TO EXTEND THE TERM 

OF THE CONTRACT (MAR 2000), which stated, in pertinent part: 
(a) The Government may extend the term of this 

contract by written notice to the Contractor within 30 days; 

provided that the Government gives the Contractor a 

preliminary written notice of its intent to extend at least 

60 days before the contract expires. The preliminary notice 

does not commit the Government to an extension. 

(R4, tab 2 at 3, 14) 

3. The contract also incorporated DFARS 252.222-7002, COMPLIANCE WITH 

LOCAL LABOR LAWS (OVERSEAS) (JUN 1997), which provided: 

(a) The Contractor shall comply with all-

( 1) Local laws, regulations, and labor union 

agreements governing work hours; and 

(2) Labor regulations including collective bargaining 

agreements, workers' compensation, working conditions, 

fringe benefits, and labor standards or labor contract matters. 

(b) The Contractor indemnifies and holds harmless the 

United States Government from all claims arising out of the 

requirements of this clause. This indemnity includes the 

Contractor's obligation to handle and settle, without cost to 

the United States Government, any claims or litigation 

concerning allegations that the Contractor or the United 

States Government, or both, have not fully complied with 

local labor laws or regulations relating to the performance of 

work required by this contract. 

(c) Notwithstanding paragraph (b) of this clause, 

consistent with paragraphs 3 l.205-15(a) and 31.205-47(d) of 

the Federal Acquisition Regulation, the Contractor will be 

reimbursed for the costs of all fines, penalties, and reasonable 

litigation expenses incurred as a result of compliance with 

specific contract terms and conditions or written instructions 

from the Contracting Officer. 

(R4, tab 2 at 10) 

4. The government exercised the first three options, extending the term of the 

contract through 23 November 2012 (R4, tabs 8, 10, 13). 

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5. SupplyCore alleges that, at the time the contract was executed, Kuwaiti labor 

law required an employer to provide 15 days advanced notice of termination to its 

employees (compl. ~ 4). On 21February2010, Kuwait enacted "The Law of Labor in the 

Private Sector," No. 6of2010. Article 44 of that law provided, in pertinent part: 

In the event where the term of the work contract is not 

specified, both parties shall have the right to terminate the 

same by means of a notice to the other party as follows: 

a- Three months prior to the termination of the contract 

for workers earning a monthly remuneration. 

b- One month prior to the termination of the contract 

for other workers. In the event where the party 

wishing to terminate the contract does not abide by 

the period of notice, he shall be obliged to pay the 

other party a compensation for the notification 

period equal to the remuneration of the worker for 

the same period. 

(Gov't am. mot., ex. 2 at KFLD-48) 

6. In a 10 September 2012 email to SupplyCore, an Army contract specialist 

stated, "hopefully we will get the funding and approval for OY4 [option year 4] with 

plenty of time to get it exercised without last minute jumping" (app. opp'n, ex. 8). 

7. The record includes a 19 September 2012 email from the same contract 

specialist to an Army captain discussing the contract with SupplyCore. That email stated, 

in pertinent part: 

The contract allows the Government to extend the term of the 

contract by written notice to the Contractor within 30 days; 

provided that the Government gives the Contractor a 

preliminary written notice of its intent to extend at least 

60 days before the contract expires. This preliminary notice 

does not commit the Government to an extension. 

Basically what this means is that we need to provide 

[SupplyCore] with a letter of intent to exercise the option 

prior to 24 Sep 12 if we plan to exercise the option within 

30 days. I'm sure [SupplyCore] would still accept the option 

if it was within 30 days but they may have additional costs 

associated. Lack of receipt of a 60 day notice is 

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SupplyCore's authorization to begin demobilizing on 

24 Oct 12. They are still responsible for the final month of 

service but they can begin terminating housing leases, vehicle 

leases, notifying employees that their contract will be ending, 

etc. Once they do this then the Government would be 

responsible for any related charges should we wish to 

exercise the option within that 30 day window. 

(App. opp'n, ex. 2) 

8. By letter dated 25 September 2012, the government notified SupplyCore of its 

intent to exercise the fourth option period from 24 November 2012 to 23 November 

2013. The notice further stated: "This preliminary notice does not commit the 

Government to an extension. If the Government exercises the option, a fully executed 

modification will be provided to you prior to the contract[']s expiration date of 

23 November 2012." (R4, tab 16 at 2) 

9. On 27 September 2012, a General Officer Steering Committee (GOSC) met to 

discuss, inter alia, whether to extend SupplyCore's contract (app. opp'n, Jameson dep. 

at 17-18). The decision made at that meeting was memorialized in a 1 October 2012 

memorandum, which stated in pertinent part: 

2. The contract GOSC was presented a decision brief 

regarding the IBA warehouse at the Ali As [sic] Salem LSA 

in Kuwait on 27 September 2012 in order to determine the 

future of the current requirement. 

5. Based on current use, which is less than 1500 customers 

per month, the elimination of R&R leave for units with a 

270 day boots on ground (BOG), and an uncertainty 

regarding throughput at the gateway over the next 12 months, 

the members of the GOSC concurred on the decision to not 

renew the option year and operate the warehouse with 

Soldiers. 

(R4, tab 17 at 3) 

10. By email on 4 October 2012, the government provided SupplyCore a copy of 

a 3 October 2012 letter from the contracting officer notifying SupplyCore that the 

government would not be exercising the contract's fourth option (R4, tab 18). 

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11. Following receipt of the contracting officer's letter stating that the fourth 

option would not be exercised, SupplyCore provided notice of termination to its Kuwaiti 

employees on 9 October 2012 (compl. ~ 15). 

12. SupplyCore submitted a 15 November 2012 "Equitable Adjustment Request" 

seeking payment of $145,634.80 on the basis that Kuwaiti labor law required 90 days 

notice of termination to employees and that the difference between the government's 

3 October 2012 notice of its intent not to exercise the fourth option "and the notice 

required by Kuwait law (90 days) subject[ed] SupplyCore to 39 days of renumeration 

[sic] (also know[n] in this case severance) pay" (R4, tab 19 at 1, 7, 8). The contracting 

officer denied SupplyCore's request by letter dated 14 January 2013 (R4, tab 20). 

13. SupplyCore submitted an 11 April 2013 certified claim to the contracting 

officer seeking $145,634.80 representing an "additional 39 days of compensation to the 

terminated employees" due to "the Government's failure to provide adequate notice of 

termination of the Contract." In its claim, SupplyCore asserted that following the change 

in Kuwaiti law regarding notice of termination to employees, "compliance with Kuwaiti 

law was rendered impossible unless the Government provided SupplyCore at least 

90 days[] advanced notice of its intent to not exercise its option for an extension of the 

Contract." SupplyCore alleged that it refrained from providing notice of termination to its 

workers in reliance on the government's communications indicating that it intended to 

exercise the fourth option. SupplyCore therefore maintained that the government was 

"responsible for lack of 90 days notice to [SupplyCore's] workers." (R4, tab 21 at 6) 

14. The contracting officer denied SupplyCore's claim by final decision dated 

28 May 2013 (R4, tab 23). 

15. SupplyCore timely appealed by notice of appeal dated 31May2013, which 

the Board docketed as ASBCA No. 58676. SupplyCore filed a complaint on 6 August 

2013 asserting four grounds for relief: Count I-breach of contract for non-compliance 

with DFARS 252.222-7002(c), Compliance with Local Labor Laws (Overseas), which 

provides for contract reimbursement of costs for compliance with local labor laws; Count 

II-breach of contract for failing to disclose superior knowledge; Count III-constructive 

change to the contract; and Count IV-breach of implied-in-fact contract of good faith and 

fair dealing (comp I. at 4-6). 

16. In lieu of filing an answer, on 21August2013 the government filed a motion 

for summary judgment. By order dated 9 December 2014, the Board deferred ruling on 

the motion to allow the parties to engage in discovery. 

17. Following the conclusion of discovery, on 28 September 2015 the government 

filed an amended motion for summary judgment contending, inter alia: (1) appellant is 

not entitled to additional compensation under DF ARS 252.222-7002( c ); (2) appellant is 

not entitled to additional compensation based on a failure to disclose superior knowledge; 

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(3) there was no constructive change to the contract; and (4) the Army did not breach its 

implied duty of good faith and fair dealing (gov't br., passim). SupplyCore responded in 

opposition on 29 October 2015, contending that there are material facts in dispute 

regarding whether the government breached its implied duty of good faith and fair 

dealing by failing to inform appellant that it had determined that it no longer needed the 

contract (app. opp'n at 11). The opposition did not address the other three government 

contentions. 

DECISION 

Summary judgment is properly granted only where the moving party has met its 

burden of proving the absence of any genuine issue of material fact and that it is entitled 

to judgment as a matter oflaw. Mingus Constructors, Inc. v. United States, 812 F.2d 

1387, 1390 (Fed. Cir. 1987). A material fact is one which may affect the outcome of the 

decision. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). All significant 

doubt over factual issues must be resolved in favor of the non-moving party. Mingus at 

1390 (citing United States v. Diebold, Inc., 369 U.S. 654 (1962)); SRI International v. 

Matsushita Electric Corp., 775 F.2d 1107, 1116 (Fed. Cir. 1985). 

The government seeks summary judgment on all four theories of recovery raised in 

SupplyCore's complaint. In its opposition, SupplyCore does not address the government's 

arguments regarding DF ARS 252.222-7002( c ), the superior knowledge doctrine, or 

constructive changes (SOF ~ 17). Accordingly, we consider SupplyCore to have abandoned 

these issues. See States Roofing Corp., ASBCA No. 54860 et al., 10-1BCA~34,356 at 

169,664 (failure to address release of claims contention in its post-hearing brief equated to 

abandonment of the issue); Beyley Constr. Grp. Corp., ASBCA No. 55692, 08-2 BCA 

~ 33,999 at 168,135 (brief failed to address any issues raised previously for which appellant 

claimed entitlement, thus the claim for performance cost deemed abandoned). Accordingly, 

we grant the government summary judgment on Count I (Breach of Contract-DP ARS 

§ 252.222-7002(c)), Count II (Breach of Contract-Doctrine of Superior Knowledge), and 

Count III (Constructive Change). 

In Count IV of its complaint, SupplyCore argues that the government breached its 

duty of good faith and fair dealing. Implied in every contract is a duty of good faith and 

fair dealing in its performance and enforcement. Lakeshore Eng 'g Servs., Inc. v. United 

States, 748 F.3d 1341, 1349 (Fed. Cir. 2014); Metcalf Constr. Co. v. United States, 742 

F.3d 984, 990 (Fed. Cir. 2014). The duty of good faith and fair dealing applies to the 

government as it does to private parties. Centex Corp. v. United States, 395 F.3d 1283, 

1304 (Fed. Cir. 2005). A showing of bad faith is not required to demonstrate a breach of 

the duty. SIA Constr., Inc., ASBCA No. 57693, 14-1 BCA ~ 35,762 at 174,986. The duty 

of good faith and fair dealing requires a party to refrain from interfering with the other 

party's performance and from acting to destroy the reasonable expectations of the other 

party regarding the fruits of the contract. Bell/Heery v. United States, 739 F.3d 1324, 

1334-35 (Fed. Cir. 2014); Centex, 395 F.3d at 1304. What the duty entails is "keyed to the 

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obligations and opportunities established in the contract," Lakeshore, 748 F.3d at 1349, and 

depends on what the contract promises or disclaims, Bell/Heery, 739 F.3d at 1335. See 

also Metcalf, 742 F.3d at 991-92 (explaining the need to consider the contract's allocation 

of risks and benefits in considering a claim of breach of the duty of good faith and fair 

dealing). The implied duty of good faith and fair dealing cannot create duties inconsistent 

with the express provisions of the contract. Bell/Heery, 739 F.3d at 1335. 

SupplyCore does not contend that the government was required to exercise the 

fourth option period or that the failure to exercise the option was arbitrary, capricious, an 

abuse of discretion, or done in bad faith. Rather, this contention turns on notice. 

SupplyCore argues that the government "breached its implied duty of good faith and fair 

dealing by failing to inform SupplyCore that it had determined that it no longer needed 

the Contract, despite having knowledge that its failure to timely provide that information 

to SupplyCore would result in significant costs to SupplyCore" (app. opp'n at 11). 

Appellant maintains that "not only did the Government fail to notify SupplyCore that it 

had decided it no longer needed the Contract, it actually informed SupplyCore that it 

intended to exercise the option to extend the Contract" (id. at 12). SupplyCore asserts 

that the government was "aware that SupplyCore could not begin the demobilization 

process-including laying off its Kuwaiti workforce-until at least 60 days[] prior to 

termination of the Contract" (id.). SupplyCore suggests that the "unfairness of the 

Government's actions" is underscored because the contract was a "fixed-price contract 

for which SupplyCore bore the risk of expense" (id. at 13). 

SupplyCore's opposition to the government's amended motion is, at best, 

confusing. The most liberal reading of SupplyCore's argument is that the government 

breached the duty of good faith and fair dealing by failing to provide SupplyCore any 

notice that the fourth option would not be exercised. The problem with the argument so 

framed is that the government did provide notice to SupplyCore that it would not be 

exercising the fourth option (SOF ~ 10), and SupplyCore does not dispute that it 

"received notice that the final option year would not be renewed on October 4, 2012" 

(app. opp'n at 5). We decline to read SupplyCore's opposition in such a self-defeating 

manner. We instead interpret SupplyCore's opposition as arguing, consistent with its 

11April2013 certified claim, that the implied duty of good faith and fair dealing required 

the government to provide earlier notice that the fourth option would not be exercised. 

Nonetheless, we reject SupplyCore's argument. 

The presence of an option in a contract does not create a legal obligation upon the 

government to exercise the option. Mid-Eastern Industries, Inc., ASBCA No. 53015, 

01-2 BCA il 31,471at155,383; Def Sys. Co., ASBCA No. 50918, 00-2 BCA ~ 30,991 at 

153,006. The exercise of an option is generally within the broad discretion of the 

government. IMS Engineers-Architects, P.C., ASBCA No. 53471, 06-1BCAil33,231 at 

164,674, recon. denied, 07-1BCAil33,467, aff'd, IMS Engineers-Architects, P.C. v. 

Geren, 274 F. App'x 898 (Fed. Cir. 2008); Plum Run, Inc., ASBCA No. 46091 et al., 

97-2 BCA il 29,193 at 145,230. The option clause in SupplyCore's contract stated that 

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the gov~rnment "may extend the term of this contract" (SOF ~ 2), providing the 

government such broad discretion here. See Northeast Air Group, Inc., ASBCA 

No. 46350, 95-2 BCA ~ 27,679 at 138,004-05. In light of the government's broad 

discretion in determining whether to exercise an option and the lack of an obligation to 

do so, SupplyCore could only have reasonably assumed that the contract would expire on 

23 November 2012. Nor could SupplyCore have reasonably relied on the government's 

communications indicating that it would exercise the fourth option. While the contract 

conditioned the exercise of an option upon providing preliminary written notice of the 

government's intent to extend at least 60 days prior to the expiration of the contract, the 

option clause specifically stated that such notice would not commit the government to 

actually extend the term of the contract (SOF ~ 2). Because the government had not yet 

exercised the fourth option, any expectation SupplyCore may have had that the contract 

would continue beyond the 23 November 2012 expiration date was patently 

unreasonable. 

SupplyCore seeks to shift responsibility onto the government, contending that the 

government knew that its failure to provide timely notice that the fourth option would not 

be exercised ''would result in significant costs to SupplyCore" (app. opp'n at 11). 

SupplyCore cites the contract specialist's 19 September 2012 email for the proposition 

that under the contract, "SupplyCore was not authorized to begin the demobilization 

process, including laying off its workers, until 60 days[] prior to termination of the 

Contract term" (app·. opp'n at 9). For the purposes of summary judgment, we accept 

SupplyCore's characterization of the 19 September 2012 email. That email alone, 

however, is insufficient to establish that SupplyCore was prohibited from providing 

timely notice of termination to its employees. SupplyCore cites no provision of the 

contract that precluded SupplyCore from giving the required notice to its employees 

under Kuwaiti law until the government notified it that the contract would not be 

extended. DF ARS 252.222-7002(b ), on the other hand, placed the risk of compliance 

with Kuwaiti law squarely on SupplyCore. Furthermore, because the contract was firm 

fixed-price, SupplyCore also bore the risk that the cost of such compliance would 

increase. Lakeshore, 7 48 F .3d at 134 7 ("The essence of a firm fixed-price contract is that 

the contractor, not the government, assumes the risk of unexpected costs."); Raytheon 

Missile Sys. Co., ASBCA No. 57594, 13 BCA ~ 35,264 at 173, 117 ("[T]he risk allocated 

to contractors by fixed-price-contracts of unexpected increases in the costs of material 

and labor is very broad indeed."). The contract specialist's 19 September 2012 email, 

therefore, does not raise a material factual issue that would bar summary judgment. 

Based upon the foregoing, the government did not breach its duty of good faith 

and fair dealing. 

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CONCLUSION 

The government's amended motion for summary judgment is granted. The appeal 

is denied. 

Dated: 17 February 2016 

oc:wfLSON 

Administrative Judge 

Armed Services Board 

of Contract Appeals 

I concur I concur 

~~~Rl~CKLEFORD Administrative Judge 

Acting Chairman 

Armed Services Board 

of Contract Appeals 

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. 58676, Appeal of SupplyCore, Inc., 

rendered in conformance with the Board's Charter. 

Dated: 

9 

JEFFREY D. GARDIN 

Recorder, Armed Services 

Board of Contract Appeals