ARMED SERVICES BOARD OF CONTRACTAPPEALS Appeal of-- EJB Facilities Services Under ContractNo. N44255-05-D-5l03 APPEARANCES FORTHE APPELLANT: ) ) ) ) )

APPEARANCES FORTHE GOVERNMENT: ASBCA No. 57112

Kenneth B. Weckstein, Esq. Shlomo D. Katz, Esq. Aiden J. Delgado, Esq.

BrownRudnick LLP Washington, DC Ronald J. Borro, Esq.

Navy ChiefTrial Attorney Matthew S. Hawkins, Esq. Robyn L. Hamady, Esq.

Trial Attorneys OPINION BYADMINISTRATIVE JUDGE CLARKE EJB Facilities Services (appellant orEJB) appeals from the deemed denial ofa claim for an additional $1,904,062.50 over and above the $2,480,044.24 allowed by the Navy in unilateral Modification No. A00028. We considerboth entitlement and quantum. The Board issued an Orderon ProofofCosts (POC). EJB submitted its Statement ofCosts (SOC) and aftervarious adjustments now seeks an additional $1,826,801.25. We havejurisdictionpursuantto the Contract Disputes Act of 1978 (CDA), 41 U.S.C. §§ 7101-7109. We deny the appeal. FINDINGS OF FACT 1. Contract No. N44255-05-D-5103 (5103) was awardedto EJB 1on 1August 2005 (supp. R4, tab 5). The contract amount was $405,270,351.64 and required EJB to performbase operation support services at various Navy facilities in the Western Puget Sound area ofWashington State (supp. R4, tab 7 at 6732-35). The contract includedvarious "annexes"to be performed which covered all aspects ofthe required support services (supp. R4, tab 7).

1EJB is ajointventure consisting ofEMCOR, J&J Maintenance and BMAR Associates.2. The period ofperformance provided for aphase-in period, base year (1 February 2006 to 30 September 2006), four option years and three award options ending on 30 September 2013 (supp. R4, tab 13 at 9028-35). 2 3. Annex 1502000 (1502)- Facility Investment, required EJB to maintain the Central Monitoring System (CMS)/Direct Digital Control Systems (DDC) (CMS/DDC or simply CMS)3 (supp. R4, tab 7 at 6854, 

### ii 3.3.3), inspect and testthe CMS/DDC (supp. R4, tab 7 at 6865, 

### ii 3.4.4), and operate, monitor and respond to the CMS (supp. R4, tab 7 at 6867, 

### ii 3.5.1). CMS operators were required to be capable of operating the CMS/DDC hardware/software and knowledgeable ofHVAC systems monitored by the CMS/DDC system (supp. R4, tab 7 at 6854). MAXIMODatabase 4. Annex 0200000, 

### ii 2.6.4, Government's ComputerizedMaintenance Management Systems (CMMS) requires in part: "The Contractor shall maintain records stored in the Government's CMMS current and accurate

....CMMS currently in use is MAXIMO" (supp. R4, tab 7 at 6751). EJB uses MAXIMO as its computerized maintenance management system (tr. 31169, 4/213-14). MAXIMO is a system to manage repair and maintenance offacilities and utilities (tr. 11115). MAXIMO allows one to search by employee number and get a "general idea" ofwhat an individual was doing on aparticular day (tr. 1/125-26). 5. Scott Graudin is Director ofSystems Development for EJB. He maintains softwareprograms and the MAXIMO system. (Tr. 4/213-14) Mr. Graudin explained thatMAXIMO keeps track ofwork orders, material costs, subcontractorcosts, purchase orders, invoices,jobplans, type ofhours worked, equipment inventory and preventive maintenance (tr. 4/253-55). 6. Mr. Graudin testified that a work orderwill be assigned based on the problem described by the customerreporting the problem and the customer may not know what the actual problem is. This can cause the work orderto be assigned an incorrect code. (Tr. 4/264-67) JDEdwardsDatabase (JDE) 7. JDE is the financial accounting system used by EJB (tr. 2/9, 3/170). The amount actually paidto a worker is recorded in JDE (tr. 2112, 3/170). JDE does not

2 This schedule was put in place by Mod. P00005 after a delay due to apost-award protest (supp. R4, tab 13 at 9030; gov'tbr. at 23). 3 CMS was changed to Control System (CS) and then to Industrial Control System (ICS)

- the terms are interchangeable (tr. 1/89, 143-44).
2contain detailed information about what a workerwas doing during the time for which he was paid (tr. 2/12). CMS 8. The CMS is described in Mod. P00037, dated 20 September2007, (supp. R4, tab 25 at 11240) as follows: The [CMS] at SUBASE, Bangor is a computerized system used by operationpersonnel to monitor and control a multitude ofsystems throughoutthe base includingthe HV AC system, water system, electrical distribution system, sewage collection system andparking lot lighting. (Supp. R4, tab 25 at 11259) Witnesses described the CMS monitoringwork as a ''watch stand[er]" 4 situation where operators would monitorthe CMS and when a problem arose they would contactthe appropriate peopleto resolve the problem (tr. 3/14, 145, 221, 5/16). EJB assigned CMS personnel to othertasks as needed, a practicereferred to as "cross[-]utilization" (tr. 2/153, 192, 3112-14, 4/63, 172-74). For example, a DDCtechnician monitoring CMS could also be used to go out and make repairs (tr. 11102-03). DDCtechnicians and otherCMS personnel would also perform service calls (tr. 5/49). 9. InApril 2009 EJB established a separate "Crew 5100" for CMS including four CMS Operators, three CMS Technicians, three DDC Technicians and one DDC SystemAdministrator (supp. R4, tab 46, dep. ex. 110). Bullets & Service Calls 10. Work may also be ordered using "bullets." A bullet is a work order request for work not otherwise identified in the contractbutrequiring the same trade expertise. (Tr. 1/133-35; supp. R4, tab 7 at 6847, 

### ,-r 2.1.1.) 11. Work may also be coveredby "service calls." Service calls relate to work necessary to return a facility, structure, orpiece ofequipmentto serviceable condition having a direct costto the contractor ofno more than $5000 that is separately paid for by the Navy.

4 The transcript incorrectly says "watch standard" (tr. 3/14, 145).

3Point Checks 12. The contract required EJB to: [I]nspect andtesttwenty-five (25) percent ofsensing points and associated equipment (lines, etc.) annually (such that all points are covered in 4 years) to determine condition, operating capability, and verify electronically that the monitoring system represents the actual field readings. (Supp. R4, tab 7 at 6865,

### ii 3.4.4) These "pointchecks" are performed by CMS and DDC technicians to verify that whatthey are seeing on their screens is accurate (tr. 5/82). Bilateral Mod. A00008, 30 June 2008, changed the annual requirement to performpoint checks to 100% (supp. R4, tab 26 at 11437, 11731-32). 13. EJB did not complete 100% ofthe required point checks in fiscal year (FY) 09 (tr. 5199; supp. R4, tab 40 at 12785). As a result ofthe uncompletedpoint checks in FY09, the Navy deducted $90,703.64 from EJB's contract (supp. R4, tab 40 at 12986). EJB completed all point checks in all years ofthe contract after FY09 (tr. 4173). Proposed Change (PC) 09-009 14. On 6 November 2008, the Navy sentEJB Proposed Change (PC) 09-009 and requested a proposal (supp. R4, tab 14 at 9986). PC 09-009 changedthe way EJB was requiredto run the CMS. Among othernewrequirements, CMS operators and technicians wererequired to be "dedicated"to the CMS, could no longerbe "cross-utilized," and had additional training requirements. A new dedicated "Control System InformationTechnologyManager" position was created toperform informationtechnology duties. (Supp. R4, tab 14 at 9986-96) 15. Eric Lynch is the Navy industrial control system program manager (tr. 3/4-5). His role is to reduce the Navy's energy consumption (tr. 316). He was the utilities manager for public works, Kitsap Naval Base from the early 2000'sthrough December 2011 (tr. 3/8). Mr. Lynch was the author ofthe "page changes" in PC 09-009 (tr. 3/11). Mr. Lynchtestified thatpriorto PC 09-009, EJB was allowed to cross-utilizepeople operatingthe control system. They would answer service desk calls, and perform field technician duties. (Tr. 3/12-14) PC 09-009 changedthat and created dedicated full time positions for IT manager, CS operators, and service desk personnel (tr. 3/14-15). There were also trainingrequirements (tr. 3/38-40, 86) and changes to hardware and software and the replacement cycle (tr. 3/15). He described

4 

# , I ·.

.PC 09-009 as a "paradigm shift from the way business had been done for almost 30 years" (tr. 3/32). 16. Mr. Lynch prepared the independent government estimate (IGE) of $2,480,044.2 for PC 09-009 (tr. 3/19). He took the positions required by PC 09-009 and calculated the hours and applied wage rates to getthe laborpart ofthe IGE (tr. 3/21-23). 17. Rebecca Potter is a contract specialist for EJB (tr, 11187). When Ms. Potterreceived PC 09-009 she formed a team to assist in estimating costs associated with the change (tr. 11196). The team included Diane Greenfield-Lambert, HR, Steve Aarestad, IT manager, Dennis Dunlap, CS manager, and Larry Fuller, contracts manager (tr. 11196-97). Ms. Potter negotiated PC 09-009 with Keith Goodsell and Mr. Lynch from the Navy (tr. 11200). Business Clearance Memorandum (BCM) 18. The Navy's BCM documents the negotiation processbetween the Navy and EJB (supp. R4, tab 19 at 10461-75). Between 23 January 2009 and 10 July 2009, EJB submitted five proposals (id. at 10469-72). 19. The Navy's !GE/negotiation objective was $191,211.00 for FY 09 and $572,208.31 peryear for FY 10

- FY 13 for a total of$2,480,044.24 (supp. R4, tab 19 at 10472). TheBCM indicates that "[o]nly a limited cost analysis was performed as sufficient cost and pricing data was notprovidedby EJB and the proposal Rev 2, Rev 3, Rev 4, and Rev 5 were plagued with errors" (id. at 10468). The Navy "conductedprice analys[is] on EJB's original and revised proposals" (id. at 10469). 20. The BCM indicates that atthe end ofnegotiations the government's estimated hours were 43,614.5 andEJB's were 43,627.6. The government's dollar estimatewas $2,480,044.24 and EJB's was $3,535,871.04. (Supp. R4, tab 19 at 10472) Mr. Lynch was asked to explain whythe government's and EJB's estimated hours were close butthe dollars estimates were 43% apart. Mr. Lynch testified that EJB's spreadsheets contained many mathematical errors and inappropriate mark-ups for tools and vehicles that the CS operators do not use. (Tr. 3/148-51) He testified thatthey had a lot ofmeetings with EJB where they would discuss the errors in EJB's spreadsheets, EJB would submit new proposals with different errors and they never got together on the dollars (tr. 3/156-57). 21. The Navy concluded that it could not determine thatEJB'sRev 5 proposal was "fairandreasonable due to numerous errors, double charging, unsubstantiated

5costs, etc." (supp. R4, tab 19 at 10472). The BCM suggests "issuing a definitized unilateral change order for theproposed change" 

### (id. at 10474). 

### Mod. A00028 22. By letter 24 July 2009 the Navy issued unilateral Mod. A00028 in the fixed-price amount of$2,480,044.24 (supp. R4, tab 17 at 10137, 10139). The detailed changes in Mod. A00028 are extensive; the following is a summary ofthe changes with the major impacts 

### (id. at 10139-40, 10145-47, 10150-55):

• Purchase software. • IThardware to bereplaced every three years instead ofevery four years. • Thirty work shifts including 6 Level III operators. • Full time system administrator who performs no other function. • Full time Control System IT manager. • Control System Technicians shall perform no other functions than those associated withthe Control System. • Create Control System Operators, level I, II andIII, each level having a greater degree oftraining and responsibility.5 • Replace 37 meters. 23. Ms. Potter explainedthatwhen EJB received Mod. A00028, they developed a spreadsheetthat compared it with EJB'sproposal. Mod. A00028 did not account for shift differential for service desk and CS operators and laborrates were belowthose in EJB's CBA. (Tr. 1/207-08; app. supp. R4, tab 37) Forexample, EJB proposed $29.476perhour for a service desk operator (day shift) and the Navy used a rate of$23.39 perhour. Ms. Potterdid notknow where the Navy gottheir laborrate. (Tr. 1/213-14; app. supp. R4, tab 37 at 1 of 13) 24. Mr. Dennis Dunlap is utilities manager for EJB (tr. 5/11). He explained thattheNavy'srequirement in PC 09-009 for a dedicated CS crew ended EJB's ability to cross-utilize members ofICS Crew 5100. As a result they needed two more CS Technicians for ICS and more peopleto man the service desk and do point checks. (Tr. 

### 5130-35)

5 Mod. A00028 createdthree levels ofCS Operators, Levels I, II and III. A level III Operatormustbe certified bythe North American Electrical Reliability Corporation. (Tr. 1/86-87) These were brandnewpositions with different requirements from theprevious contractrequirements (tr. 11181). 6 These were estimates ofthe rate increase in the CBAthat would haveto be negotiated with the union as a result ofMod. A00028 (tr. 11211, 2/201-02, 206).

625. 

### Mr. Sergeson testified thatthe duties ofa DDC technician changed after Mod. A00028. Before the modification, a DDC technician could repair any equipment, after, the DDC technician could only work on CS equipment. Afterthe modification, ifa DDC technician found a problem with HV AC equipment, another technician had to be called to do the repair. This means it was more expensive to complete repairs. (Tr. 11103-05) Before Mod. A00028 the replacement cycle for IT equipment was four years; Mod. A00028 changedthatto three years (tr. 11113-14). 26. AfterMod. A00028 the ICS crew (Crew 5100) increased to six CS operators, two control systems technicians, five DDC technicians, one lead DDC technician, one work scheduler and one IT manager (tr. 1191). EJB 's Certified Claim & Appeal 27. By letter dated 2 September 2009, EJB submitted a request for equitable adjustment (REA) seeking an additional $1,904,062.53 above the $2,480,044.24 allowed in Mod. A00028 (supp. R4, tab 21at11208-20). The Navy acknowledged EJB'sREA (supp. R4, tab 24 at 11236-37). EJB submitted a certified claim to the Navy on 20 November 2009 for $1,904,062.50 (supp. R4, tab 23 at 11230-35). The Navy did not issue a contracting officer's final decision on EJB's certified claim (answer

### i! 6). On 16 February 2010, EJB filed an appeal with the Board based on a deemed denial. The appeal was docketed as ASBCANo. 57112 on 17 February 2010. EJB ClaimActivitiesFrom November 2009 to May 2011 28. Mr. Parker is an EMCORemployee and also general manager ofEJB (tr. 3/166). In "early 2010, maybe late 2009" Mr. Parkerpulled together a team "to start building whatwe needed as the supporting documentation for the claim" (tr. 3/180). Theteam consisted ofLarry Fuller, Dennis Dunlap, Scott Graudin, RebeccaPotter, andpossibly Pete Thomas (tr. 3/179). Mr. Parker assembled the team because "weknewwe'dhave to drive into ourbusiness records and talk to our subject matter experts to pull datatogether to kick offthe calculations and identify the impact ofMod 28" (tr. 3/180). 29. On 5April 2010, Mr. Parker sent an email to Dennis Graham, Larry Fuller, Scott Graudin, Mel Petrie and Dennis Dunlap asking them to: [F]igure howbestto track and account for all costs/expenses associated with the CS mod work [because] [t]here is a very good possibility

...we will have to document and show all these costs in order for us to receive any compensation from the Govt for the work performedunderthe unilateral mod.

7(Supp. R4, tab 46 at 14593) Mr. Graudin responded on 6 April 2010 stating that they shouldtrack old versus new equipmentrequired by the modification, that general ledgers (GL) were currently in place for "PM, Service Calls and Bullets,"that they should create new work orders for drawing up new maintenanceprocedures, and they should create a new GL for training. Lastly he stated that "[t]hetimekeeping system is capable oftracking wages for particularpeople and work orders sowe shouldbe good withrespect towages." (Supp. R4, tab 46 at 14592-93) 30. In a 7 April 2010 email to Mr. Parker, Mr. Dunlap states, "[w]e need direction on what we are going to provide to Eric for free and what we want to claim. This will dictate what we need to track." (Supp. R4, tab 46 at 14347) Mr. Parker responded, "[w]hatwe needto sort out is what is undertheunilateral scope and what is part ofthe older mod" (id.). Mr. Parker instructed his team "to look at costbefore versus cost after so we could identify the true impacts ofMod 28" (tr. 3/180). 31. Ms. PottertestifiedthatEJB created new GL account numbers and work orders to track costs associatedwithMod. A00028 (tr. 2/150). 32. In April and May 2010, EJB beganthe process ofaccounting for the additional costs caused byMod. A00028 (supp. R4, tab 46 at 14347, 14351-78, 14590-93, 14598, tab 40 at 12871-74, 12889, 12891-927; tr. 3/179-80, 4/30-33, 36-37). 33. In a 30July 2010 email from Mr. Larry Fuller, EJB contracts manager, to Ms. Potter, Mr. Fullerwrote: One wayto look at this is, ifwe were operating at a loss before 09-009 we would, theoretically, have to adjust for that in orderto get an adjustment that keeps us in the same place financially. (Supp. R4, tab 46 at 14595) Order on Proof of Costs (POC) 34. On 19 May 2011, the Board issued an Orderon POC. The orderrequired EJB to submit a Statement ofCosts (SOC) in schedule format and required the Navy to provide a formal responsetothe SOC. The POC warned, "[t]he lack ofresponse to any cost item orcomponentthereofclaimed by appellant shall be deemed an admission."

7Many ofthe documents listed were not explained through testimony at the hearing and may or may not be taken in context.
8

### EJB'sSOC 35. On 5 July 2011, Mike Leonard, EMCOR, emailedMr. Fuller, EMCOR, concerningthe POC: [T]he cost files need narrative explanation. [W]e are running out oftime. I told [B]ob awhile backthat this musttake priority. Too much at stake. [W]e have a good case. [L]abor is 85% ofourclaim and JDE/Maximo files are solid backup. [L]aboralone gives us a claim for considerable money. [N]eedto make the case ofnew labor vs already paid for labor. [P]urchasing/ODCs ofcourse important and we do have auditable files ofactual costs. [S]ite overhead

..forget that...with no deal on site overhead we can'tclaim. (Supp. R4, tab 40 at 12972) 36. On 6 July 2011, Mr. Fuller forwarded Mr. Leonard's email to Mr. Parker stating in part: Please see Mike's comments below. We will have to puttogether a narrative. Portrayingthis as some sort of "failure" fails to recognize the reality ofthis. We asked for a forensic accountant to do this. We got a promise instead that EMCORwould deliverthe goods as the court is only interested in "provable" costs (i.e. from an accounting system, vice Maximo). We have most ofthat. We have ALWAYS had the information from Maximo. That is not the issue. Whythis is so difficulttounderstand is a mystery to me. (Supp. R4, tab 40 at 12971)8

8 Mr. Parkerwas not asked about this document during the hearing and neither Mr. FullernorMr. Leonard was called as a witness.

937. Ms. Potterprepared EJB's initial SOC (tr. 2/5-6). Ms. Potter and Mr. Smith worked on the analysis (supp. R4, tab 40 at 14524). They used estimates to account for inaccuracies caused by cross-utilization: CMS Operators performed system monitoring and alarm notification 95% oftheir labor hours and 5% service desk functions. CMS Technicians workrepresents 70% for CMS operations and 30% other services excluding CMS. DDC Technicians laborhours represent 10% for CMS and 90% for all other service work. OneWork Schedulerwas assigned to crew 5040 and was utilized for scheduling CMS maintenance requirements representing 30% oflabor hours for a Work Scheduler. (Supp. R4, tab 46 at 14530, 14545) By email dated 25 May 2012, Ms. Potter sent Mr. Parker a spreadsheet analysis ofFY 08 CS costs priorto Mod. A00028 (supp. R4, tab 46 at 14524-27). Although the spreadsheetpresenting the results ofthe analysis indicatedthatthere was a total netprofit of$236,837.61, the actual numbers established that it was a loss for FY 08 (total costs $947,785.12 less prior funding $710,947.51) (id. at 14527). Mr. Parkerrecognized that it was a loss and notified Ms. Potter on 29 May 2012, "[y]ou show a net profitbut in reality it is a net loss!" (id. at 14528). Ms. Potter agreed it showed a loss at the hearing (tr. 2/159-60, 179-80).9 She also testified that they used estimates because there was no way of accurately tracking costs: [The spreadsheet] shows these arejustestimates because wehad no way ofaccurately looking at ourcosts because we weren'ttracking them and this was like a guestimate of someone who was in the crew at the time, Tim Smith, he said, aboutthis amount oftime was spent doing this and this, and this is withthe crew ofthe makeup, but it wasn't a dedicated crew. (Tr. 2/176) With respect to profit, Mr. Parkertestified: Q What is EJB's actual profitrate overthe years that you're aware of? A I don'tknow exactly, but it's in the three percentrange.

9 She also testified that there were various versions and some showed aprofit and some showed a loss (tr. 2/158-59).
10

### Q Overwhat portion ofthe contract does EJB measure theirprofitability? A We only measure it one way. And that is overthe full contract in aggregate. (Tr. 3/174) 38. Ms. Potter testified that she tried to do a before and after Mod. A00028 comparison, but since the crews were not dedicated to the tasks before as they were after, it was notpossible to identify the before costs (tr. 2/7-8, 13, 153, 159). She testified that they were able to track the costs afterMod. A00028 using the JDE accounting system and the MAXIMO work management systems (tr. 2/8-9). 39. Mr. 

### Parker explained that EJB tried to supportthe claim based on a before and after analysis, but was not able to do so because they "couldn't drill into the data afterthe fact to determine what were the actual costs before Mod 28" (tr. 3/181). He recalled seeing some before and after data developed by Ms. Potter, butthe data was not reliable (tr. 3/182). 40. Mr. Parker made the decision to stop attempts at conducting a "before versus after" analysis after "spending months tryingto look at how to do it" (tr. 4/29-30). The SOCs submittedby EJB do not attemptto compare the costs of performing CS work before and after Mod. A00028 (tr. 2/7). EJB's SOC adopts the approach ofincluding all ofits actual costs for CS work and deducts payments made by the Navy (tr. 2/55-57, 68). 41. EJB revised its SOC several times to replace projections with actual costs and correct errors (tr. 2/16-17). The first SOC was submitted on 11 July 2011 and indicatedthat Mod. A00028 resulted in "NetAdditional Costs of$4,147,627.14" (gov'tbr., attach. 13;jointex. 1). The Navy responded on 26 August 2011 presenting various challenges to EJB's SOC (gov'tbr., attach. 14;jointex. 2). EJB submitted a revised SOC in October 2011 reducing the Net Additional Costs to $4,114,312.71 (gov'tbr., attach. 15;jointex. 3). EJB submitted anotherrevised SOC in December 2011 increasingthe NetAdditional Costs to $5,111,618.12 (gov'tbr., attach. 16;joint ex. 4). The Navy responded on 6 January 2012 again providing various challenges to EJB'sDecember 2011 SOC (gov'tbr., attach. 17;joint ex. 5). EJB submitted a revised SOC in May 2012 reducing the Net Additional Costs to $4,627,613.93 (fiov't br., attach. 18;jointex. 6). In July 2012, Ms. Potterprovided her draft SOC 0 

### and

10 

### The acronym "POC" is used by the Navy attorneys and various witnesses in the transcripts instead ofSOC.
11supporting datato Mr. James Williams, EMCOR (tr. 2/144-45). While Ms. Potter remained involved with the SOC, she testified thatMr. Williams becamethe primary author ofthe August SOC (tr. 2/145, 147-48). EJB submitted a revised SOC on 9 August 2012 with a "TOTAL CLAIM AMOUNT" of$2,841,405.64 (app. supp. R4, tab 30; gov'tbr., attach. 19). The Navy responded to the August SOC on 2 November 2012 with various challenges (app. supp. R4, tab 31; gov'tbr., attach. 20). EJB replied on 10 December 2012 accepting some and disputing some ofthe Navy's challenges (supp. R4, tab 46 at 14424-43). As a result, EJB reduced its claim to $2,028,532.50 (tr. 2130, 37, 70). The Navy's ExpertReport 42. The Board accepted Eric Schaeb as the Navy's expert in damages specializing in "calculating cost impacts and claim damages" (tr. 6129, 33). OriginalExpertReport

- Total CostMethod 43. Before commencing his substantive analysis, Mr. Schaeb trackedthe claim history and providedthe following comment: EJB's Claim quantification suffers from conceptual, organizational, and formulaic errors. Throughoutthe various evolutions, EJB has not sufficiently and accurately explained its claim calculation, described what certain aspects ofits calculationrepresent, orprovidedproper support for all ofits claimed amounts. Itis apparent that EJB has failed to take a critical look at its available datato identify and/orunderstandthe nature and amount ofany impact causedby Mod. 28. (Supp. R4, tab 48 at 13096) In the substantive section ofthe expert report, Mr. Schaeb comments on EJB's total cost claim approach. 11 Mr. Schaeb testified that he did not feel EJB'stotal cost approach was "reliable" because EJB had the ability to perform a "before and after" analysis. (Id. at 13097-100) He testified that Mr. Graudin and Mr. Dunlap and theirteam were conducting such an analysis but did not complete it. He testifiedthat he was able to conduct a before and after analysis using EJB data (tr. 7/28-29). 44. Mr. Schaeb first calculated a "correction"to EJB'stotal cost claim. Mr. Schaeb identified errors thatremained in EJB's claim: "understatement of amounts paidby NA VFAC; application ofinconsistent and erroneous logic regarding

11 We disregard Mr. Schaeb's comments amounting to legal conclusions.

12

### the allocation ofnon-productive time, overhead and indirect costs; inclusion of claimed costs that are unrelated to Mod. 28 and Control Systems; inclusion of unsupported site overhead rates; and use ofaggressive assumptions regarding B&O Tax rates" (supp. R4, tab 48 at 13101). Mr. Schaeb concluded:

(Id.) 

### Due to the voluminous nature ofthese errors, detailed descriptions ofspecific adjustments or corrections to EJB's Claim are provided in Appendix A. As detailed in Appendix A, the adjusted amount ofEJB's Claim using its Total Cost method is $530,618. See Exhibit 6. This adjusted amount is partially corrected and other corrections and adjustments are still needed. This adjusted amount still uses the Total Cost method and suffers from all ofits weaknesses. This calculation is merely an estimate ofthe overrun experienced on CS work afterMod. 28, and does nothingto attribute the overrun toMod. 28.

OriginalExpertReport

- Modified Total Cost Method 

### 45. Next Mr. Schaeb endeavors to "convert" EJB's total cost claim to a modifiedtotal cost claim (supp. R4, tab 48 at 13101-03). One ofMr. Schaeb's main points was that EJB's actual CS staffingpriorto Mod. A00028 was:

• 1DDC SystemAdministrator (CS Administrator) • 4 CM Operators • 3 CMtechnicians • 3 DDC Technicians (Supp. R4, tab 48 at 13102) Mr. Schaeb concluded from the data that EJB's Crew 5100 included the eleven personnel listed above, but that EJB's prior funding credit did not include "at least"the 4 CM operators and they were "unaccounted for in EJB's bid": The estimated cost ofthese 4 CM Operatorpositions is approximately $333,000 per year or $1,359,645 overthe claim period. See Exhibit 8.

13Reducing EJB's corrected Total Cost method by this amount results in a negative claim value -$829,027. See Exhibit 9. (Id. at 13102-03) 

### Mr. Schaeb performed what he called a "partial modified total cost" analysis and concludedthat as a result ofMod. A00028, EJB experienced a loss of about $800,000 (tr. 7 /20-21; supp. R4, tab 48 at 13144). Mr. Schaeb testified that his loss amount was consistent with Ms. Potter's analysis when she looked at FY 08 and found a loss of$300,000 per year (tr. 7 /21). He characterized his analysis as "partial modifiedtotal cost" because he did not try to account for other costs that were EJB's responsibility such as inefficiencies or "extravagance costs" (tr. 7/23-24). 

### OriginalExpertReport

- "Before andAfter"Method 46. The last analysis in the expert report is a before versus after analysis. 

### Mr. Schaeb calculated an average weekly labor cost for "before" costs using a "stabilized"period sixmonths before Mod. A00028 (supp. R4, tab 48 at 13104). The "after"Mod. A00028 costs were extracted from JDE and MAXIMO data bases. The report concludes, "[t]he comparison ofEJB's labor costs before and after Mod. 28 shows that EJB did not actually suffer any financial harm above the compensation provided in Mod. 28" (id. at 13105). Mr. Schaebtestified that he could adjust his before and after calculation based on 

### Mr. Smith's estimate, i.e., reduce his number of hours for CM operatorby 5%, etc. (tr. 7/102). EJB's Response to the ExpertReport 47. In December 2012, in response to the expertreport, EJB provided a new total claim number of$2,028,532.57 (app. supp. R4, tab 33; gov'tbr., attach. 21; app. br. at 78-79). 

### Mr. Parkertestified that "many" ofthe challenges in the government's expertreport were valid and they made corrections (tr. 31185). That reducedthe claim to $2,028,532.57 (tr. 3/186). 48. EJB chose 

### Mr. Parker as the primary witness explaining EJB's response to 

### Mr. Schaeb's expertreport. 

### Mr. Parker is an EMCORemployee and also general manager ofEJB. (Tr. 3/166) He is the seniorrepresentative ofEJB (tr. 3/168). 

### Mr. Parkertestified that, following the receipt ofMr. Schaeb'sreport, EJB "studied 

### Mr. Schaeb'sreport and looked for areas where he found that we made an error or could have improved. And wetook those aboard and examined those and where we felt appropriate we made adjustments based on that." (Tr. 3/186) The team that reviewed Mr. Schaeb'sreport included, at least, Messrs. Parker, Fuller, Smith, Dunlap, Aarestad and Ms. Potter (tr. 3/187-88).

1449. Mr. Parkerproduced AEX-1 12 at the hearing. EJB reviewed Mr. Schaeb's expertreport and presentedtheresults ofthat review in AEX-1 (AEX-1, tab 1; tr. 41187, 193). 13 Mr. Parkertestified that "many" ofthe challenges in the government's expertreport were valid and they made corrections (tr. 31185). EJB reduced the claim value to $1,826,801.25 by replacing projected costs with actual costs and correcting additional errors discovered by Mr. Schaeb (tr. 3/183-84, 186, 195). In its post-hearingbriefEJB acknowledges another error and reduces its claim to $1,824,113 (app. br. at 88). 50. Mr. Schaeb's expert report includes Exhibits Al through A35.2A, each of whichrepresents a challengeto a claim component (supp. R4, tab 48 at 13279-385). AEX-1 addresses the majority ofthese exhibits and the Schaeb proposed adjustments in them. Mr. Parkertestified aboutAEX-1. Mr. Parker did not agree with the exact number in exhibit A3, "ReplaceFY12 Proj with Actual Data," however, he agreed with the concept ofreplacing projections with actual costs and EJB "re-ran the numbers" and "came up with a final numberthat was similarto this but not exactly the same"-Navy's $151,748 and EJB's $149,603.40-EJB'snumber is in the $1,826,801.25 (tr. 3/195; AEX-1, tab 1). Mr. Parker agreed with Mr. Schaeb's Exhibit A4, 14 "Addition ofCS IT Manager for FY12" (+$66,642) 15 (tr. 3/195-96). Mr. Parker does not agree with Mr. Schaeb's Exhibit A5, 16 "Removal ofNon-CS Labor Costs" (-$285,746) (supp. R4, tab 44 at 13289) stating thatthe work actually was CS work (tr. 31197-98). 17 EJB looked at many ofthe cost codes "withthe biggest values associated withthem" and found thatthe majority ofthe workwas related to ICS. 18 Mr. Parkerwas asked about Mr. Schaeb'sreport, Exhibit A5, "Removal ofNon-CS LaborCosts by Source," ExhibitA5.2 Cost Code 0200290, EJB Internal Work Orders (supp. R4, tab 44 at 13290, 13292). Mr. Parker explainedthat the name was misleading andthat he had Mr. Smith, his subject matter expert, look at the details and concluded that there was "productive work" in the overhead Cost Codes that was directly related to ICS (tr. 4/138-40).

12 AEX-1 is located in Volume I ofMr. Schaeb's Witness Notebook. 13 Bothparties, especially the Navy, delve into the details ofhow the parties got to their final position reflected primarily in AEX-1. We do not replicate that analysis in this decision. The dispute is now defined by AEX-1 and what occurred thereafter and that is what we deal with. 14 The transcript incorrectly refers to this as "Exhibit 85" (tr. 3/197). 15 This is shown as a negative number in ExhibitA4 but negative numbers are additions andpositive numbers are reductions in EJB's claim according to the Schaeb report (supp. R4, tab 44 at 13279). 16 The transcript incorrectly refers to this as "Exhibit 84" (tr. 3/195). 17 This testimony was hearsay because Mr. Parkerrelied on his "subject matter experts" for this testimony (tr. 3/198). 18 Mr. Parker agreedthat some ofthe work orders were notrelated to ICS (tr. 4/111).
1551. Mr. Parker does not agree with Mr. Schaeb's Exhibit A6, "Removal of Non-Productive CostAllocated to Bullets and Service Calls" (-$268,752) (supp. R4, tab 44 at 13295) because he believes that these costs were included in the credit given to the Navy in EJB's SOC (tr. 3/198-99). Mr. Parker explained EJB disagreed with Mr. Schaeb because "we'dalready made that adjustment in our statement ofcost when we credited the Navy back for bullets and service calls under less prior funding" (tr. 4/143). Thepriorfunding hourly rate credited backto the Navy was fully loaded and included non-productive time (tr. 4/143-44). Mr. Parker does not agree with Mr. Schaeb'sExhibitA7, "Removal ofNon-Productive Costs Allocated to Non-CS Costs" (-$55,242) (supp. R4, tab 44 at 13299) becausethese costs were related to CS work (tr. 3/199). Mr. Parkerexplained that EJB disagreed with Mr. Schaeb because, "thetrouble we had there with the Schaeb report goes back to what we saw in Exhibit 5, where we believe the Schaeb report was not correct in its analysis ofthe work that is categorized as non-CS work" (tr. 4/144). Mr. Parker explained, "[s]o ifyou came through that same analysis into A7, you'll see thatthe title here is removal of non-productive cost allocation, non-CS cost. Well iftheCS cost analysis was wrong, then obviously this analysis will be wrong as well." (Tr. 41144-45) 52. Mr. Parker agreed with Mr. Schaeb's Exhibit A8, "Correction ofFY13 Projection Error for CS Operators OT" (-$229,406) 19 (tr. 3/199-200; supp. R4, tab 44 at 13303). Mr. Parker did not agree with Mr. Schaeb's Exhibit A9, "Replacement of FY13 Projections" (-$416,132) (supp. R4, tab 44 at 13305-06) because data from Exhibit A5 was in Exhibit A9 and Mr. Schaeb was wrong to remove holiday overtime for DDTTechs and CS Techs becausethey are sometimes called in on holidays (tr. 3/201-03). EJB wentthrough Sheet A9.l and concluded that Mr. Schaeb did not fully understand "how we do the business and what the CBArequirements he'spicked outto require us to do in terms ofpay, labor and overtime" (tr. 4/116-19; supp. R4, tab 44 at 13306). Mr. Parkertestified that AEX-1, A9 "hadvarious mistakes, or assumptions, orwrong conclusions in it" so EJB decided to use its projections (tr. 4/120). Mr. Parker agreed with Mr. Schaeb'sExhibitAl2,20 "Claimed Hardware Purchased ViaBullets" (-$25,924) (tr. 3/204-05; supp. R4, tab 44 at 13320). Mr. Parker agreed with Mr. Schaeb's Exhibit Al3, "Hardware

- FY12 Actuals in Place ofFY12 Projections" (-$21,275) (tr. 3/205; supp. R4, tab 44 at 13325). Mr. Parker agreed with Mr. Schaeb's Exhibit Al4, "Software Purchased Via Bullets" (-$13,817) (tr. 3/205-06; supp. R4, tab 44 at 13327). Mr. Parker agreed with Mr. Schaeb's Exhibit Al5, "ReplacingFY12 Software Projections with Actual Purchases" (-$38,390) (tr. 3/206-07; supp. R4, tab 44 at 13332). Mr. Parker agreed

19 EJB removed this amount in their December 2012 response to the Navy's challenges (supp. R4, tab 44 at 13303). 20 ExhibitAIO was left blank and AlI was a summary ofnon-labor adjustments (supp. R4, tab 44 at 13317-18).
16

### with Mr. 

### Schaeb's ExhibitAl6, "Software Maintenance (ATS Automation) Claim Adjustments" (-$77,972) (tr. 3/207;21 

### supp. R4, tab 44 at 13333). Mr. Parker agreed with Mr. 

### Schaeb's ExhibitAl7, "Software Maintenance (Control Contractors) Purchased Via Service Calls, Bullets, etc." (-$26,213)22 

### (tr. 3/208-09; supp. R4, tab 44 at 13339). 53. Mr. 

### Parker did not agree with Mr. Schaeb's Exhibit Al8, "Adjustments for Wave Cable-Account 360-519429" (-$5,947) (supp. R4, tab 44 at 13341) because the "portal was required and still is required to operate the ICS system" (tr. 3/209-10). Mr. 

### Parker agreed with Mr. 

### Schaeb's Exhibit Al9, "Adjustments for Wave Cable

- ForAccounts OtherThan 360-519429, Unrelated to CS" (-$13,824) (tr. 3/209, 211; supp. R4, tab 44 at 13344). Mr. 

### Aarestad testified about AEX-1, A18, SW Maintenance (Wave Cable) -Acct360-519429, and Al9, SW Maintenance (Wave Cable)- OtherNon-CS Internet. There was a mistake in the original claim. EJB's claim included costs for four wave cables, but only one was related to the CS effort. The otherwave cable costs should not have been included. (Tr. 5/145-46) Mr. 

### Aarestad explained how he arrived at the numbers on Al8 and Al9. He used actuals for the CS wave cable and a projection through 30 September 2013. The adjustment for Al9 was included in Al8. (Tr. 5/146-47) He agreed thatthere were still pre-modification A00028 costs that should have been excluded (tr. 5/153). 54. Mr. 

### Parker agreed with Mr. Schaeb's Exhibit A23,23 

### "ProjectedLabor Included as Training Costs" (-$17,404) (tr. 3/213; supp. R4, tab 44 at 13353). Mr. 

### Parker agreed with Mr. 

### Schaeb's Exhibit A24, "Fuel Costs Claimed in Supply Annex Claim and Fuel Costs Included Twice in Mod. 28 Claim" (-$2, 171) (tr. 3/213; supp. R4, tab 44 at 13355).24 

### 55. Mr. Parkerwas asked about Exhibit A25, "Correction to Fuel Projections," where Mr. 

### Schaeb recommended a reduction of$30,296. EJB's response was "disagree with Schaeb, corrected formula error/re-ran analysis" and increased its

21 

### EJB's number was "alittle bit less" (tr. 3/207). 22 

### EJB identified another errorthat resulted in an upward adjustment for Control Contractors ofapproximately $100,000 (tr. 3/208). 23 Mr. 

### Parker did not testify about Exhibits A20, "Outside Services (Sound Energy) Purchased Via Service Calls" (-$21,393) (supp. R4, tab 44 at 13347), A21, "Training Costs Purchased Via Bullets" (-$15,286) (supp. R4, tab 44 at 13349) or A22, "Training FormulaError

- Double Counting" (-$8,394) (supp. R4, tab 44 at 13351). 24 Mr. 

### Parker did not testify about Exhibits A25, "Correction to Fuel Projections" (-$30,296) (supp. R4, tab 44 at 13358), A26, "Fuel Allocated to Bullets and Service Calls" (-$5,355) (supp. R4, tab 44 at 13360), or A27, "Inclusion of Office Supplies in Tools & 

### Equipment" (-$763) (supp. R4, tab 44 at 13363).
17deduction from $1,918.94 to $9,168.65. Mr. Parkertestifiedthat "Mr. Schaeb correctly identified an error in ourprogram" but whenthey corrected the errorand re-ran the program they calculated $9, 168.65 (tr. 4/150-51; AEX-1, tab 1 ). Mr. Parker was asked about Exhibit A26, Fuel Allocation to Bullets and Service Calls, and why EJB stated thatthe correction for A26 was included in the $9,168.65. He testified, "I can'texplain that to you" (tr. 4/156). Mr. Parkerwas asked about Exhibit A32, "Funding for Post-Mod 28 Point Check Modifications," where Mr. Schaeb recommended a reduction of$237,040 (supp. R4, tab 44 at 13368; AEX-1, tab 1). EJB increased its reduction from $69,579.07 to $80,110.13 (AEX-1, tab 1). Mr. Parker explainedthatthey looked at each modification listed in Mr. Schaeb's report and when they looked at Mod. PC 10-036, A0005l, DDC technician, they disagreed that the ICS crew would do $152,000 worth ofthe work (tr. 41158-59). 56. Mr. Parker did nottestify about the following exhibits (EJB's position on AEX-1 is in parenthesis): A20 (agrees), A21 (agrees), A22 (agrees), A26 (disagrees), A27 (disagrees), A31 (agrees), A33 (disagrees), A34 (agrees) and A35 (agrees for FY12, disagrees for FY13) (AEX-1, tab 1). 57. Mr. Parkertestified about Mr. Schaeb's expertreport. Concerning Exhibit 7, Staffing Level Priorto Mod. A00028: Weekly Hours Recorded to JD Edwards, Mr. Parkertestifiedthat looking atthe weekly JD Edwards data you could nottell ifa person was working onthe control system ornotbecause JD Edwards shows labor costs notwhere the employee actually was working (tr. 31191-92). Mr. ParkertestifiedthatMr. Schaeb's assumption that 11 people worked full time on ICS was incorrect because before Mod. A00028 EJB would cross-utilize its employees in multiple annexes (tr. 4/172-74). 58. AEX-1 includes four adjustments made by EJB thatwere not in the expert report. Mr. Parker explainedthatthey found thatthey had not includedpayments to ACCO, a subcontractor supporting ICS, andthey added $36,099.87 "adjusted for ACCO" in "EJB adjustments" number 3 nearthe bottom ofAEX-1 (AEX-1, tab l; tr. 4/167-68). EJB adjustment number4 likewise added $102,939.47 to the claim based onpayments they had to make to CCI, another subcontractor supporting ICS (tr. 4/169). The Navy's Response to EJB'sAEX-1 59. The hearingwas continuedbefore the government's expert, Mr. Schaeb, testified. The hearingwas reconvened overtwo months later on 31 July 2013 to take Mr. Schaeb'stestimony. In the interim, Mr. Schaeb revised two ofhis calculations, total cost and "Before versus After," in his expertreportbased on whathe heard during the trial, i.e., adding in some workhe had considered non-CS work (gov'tbr. at 112,

18114). These changes are included in blue pages added to the expertreport during the recess (tr. 6/112; supp. R4, tab 48 at 13261.001-33, tab 44, app'xA at 13262-85). 60. Mr. Schaeb explainedthe relationship between MAXIMO and JD Edwards databases: Butwe can see that ifyou want to know the fully-burdened costs, you need to use the JD Edwards data, but ifyou really wantto get some detail into what somebody's doing, you would use the MAXIMO data. (Tr. 6/64) Mr. Schaeb stated that EJB's proofofcosts used only the JD Edwards data thatprovided fully burdened labor costs, but lacks details ofwhatthe actual work was that is in MAXIMO (tr. 6/64). Mr. Schaeb testified that he was able to search MAXIMO data, both before and after Mod. A00028, and that the data fields were the same (tr. 6/67). ' 61. Mr. Schaeb testified that EJB's data was "the most detailed I've ever seen" (tr. 6/71). He testified that EJB couldperform a "before and after" Mod. A00028 analysis with the MAXIMO and JD Edwards data (tr. 6/75). A before and after analysis is a type of"measured mile" analysis where the cost before and after the impact are measured and the difference is attributed to the impact (tr. 6/76). Mr. Schaebtestified that EJB, Mr. Graudin, Mr. Dunlap and Ms. Potter, worked on a before and after analysis (tr. 6/109-11). EJB's pre-August 2012 statement ofcosts included an attempt at a before and after analysis. However, in its August 2012 statement ofcosts EJB employedthe "classic total cost method." (Tr. 61111-12) Revised Total Costs ExpertAnalysis 62. Mr. Schaeb performed a corrected total cost analysis that is documented in his expertreport: As detailed in Appendix A, the adjusted amount ofEJB's Claim using its Total Cost method is $530,618. See Exhibit 6. This adjusted amount is partially corrected and other corrections and adjustments are still needed. This adjusted amount still uses the Total Costmethod and suffers from all ofits weaknesses. This calculation is merely an estimate ofthe overrun experienced on CS work after Mod. 28, and does nothing to attribute the overrun to Mod. 28. (Supp. R4, tab 48 at 13101) Mr. Schaeb explained whathe did:

19

### Q Turningthen backto Exhibit 6, at GO 13140, the figure that's presented on that page, $530,618, is described as the adjusted EJB claim amount. Canyou explain, please, whatyou mean bythat

- - using that description? A Well, at the time the report was issued, this would be EJB's claim using its total cost method, once the errors identified in Appendix [A] were corrected. So this is not necessarily my opinion ofthe cost impact ofMod 28. This isjust showing, [h]ere's what a correct total cost method would look like. Thenumberwouldbe

- - at the time was [$]530,618. We now - - ifwe look at GX-172, that's revised slightly upward. Ifwe look atthe Schaeb adjustmentrevised number, that number would now be $562,493.



### Q So does thatrepresent an amount that is

- - afterthe adjustments tothe total cost method, is that an amount that is due to EJB? A Not in my opinion, no, because again, this is not the measure ofthe cost impact ofMod 28. This isjust what the overrun is when using a total cost method. (Tr. 6/181-82) 63. Mr. Schaeb developed GX-17225 to summarize the current state ofhis disagreementwith EJB'stotal cost claim (GX-172, tab 9; tr. 6/119). Page 7 of GX-172 lists the "bulk ofthe disagreement" (tr. 6/127). Mr. Schaeb explained each of the entries on GX-172, page 7:

• A5rev. Removal ofOverhead and OtherProductive Work. After adding back in CS work, the majority ofthe adjustment relates to Mr. Blankenship (tr. 6/129). EJB took out $64,497 for Mr. Blankenship (tr. 6/131; GX-172, tab 9 at 7). Mr. Schaeb identified $104,000 before mark-ups to remove for Mr. Blankenship (tr. 6/131; supp. R4, tab 48 at 13294.002). Mr. Parker and Ms. Potter agreed that costs for Mr. Blankenship shouldberemoved (tr. 2/39,

25 GX entries are all located in Volume I ofMr. Schaeb's Witness Notebook.
20

### 139-40, 4/113-14). EJB removed Mr. 

### Blankenship on 21March2011 (tr. 6/136, 138). Mr. 

### Schaeb was able to use MAXIMO labor data to identify that Mr. Blankenship did no more CS work after 24 November 2010 (tr. 6/135-38, 140-41; GX-16lb, tab 8 at 5). The initial Schaeb amount of $285,746 is reducedto $222,019 (GX-172, tab 9 at 7). The difference between the adjusted Schaeb amount ($222,019) and EJB's amount ($64,497) is $157,522 (id.).



### • A6 Allocation ofNon-Productive [Time] to Bullets & 

### Service Calls. EJB removed the actual cost ofperforming bullets and service calls but failed to allocate some burden ofnon-productive time (holiday and vacation) to that revenue (tr. 6/142-46). The reduction is $268,752 (GX-172, tab 9 at 7). EJB did not agree with any ofthis amount. Mr. Parkertestified thathe believed that this credit was already included "in our unit rates which we gave the Navy credit for in our Statement ofCosts under the Less Prior Funding line for various in-service calls" (tr. 3/199). Mr. Schaeb explained, using EJB's electronic data, thatEJB did not use "full[y] loaded" rates and that Mr. 

### Parker was mistaken (tr. 6/142-46).

• A7rev. Allocation ofNon-Productive [Time] to Overhead and Other. This is the same concept as A6 above, EJB failed to allocate non-productive time to overhead and other (tr. 6/150-51). Mr. Parker testified that Mr. Schaeb excluded CMS work. The initial Schaeb amount of$55,242 is reduced to $42,749 to account for excluded CMS work (GX-172, tab 9 at 7). EJB does not agree with any ofthis revised amount.

• A9rev. Replacement ofFY 13 Proj with FY 12 Actuals. EJB's FY 13 projections did notreflect the actual staffing or work on holidays in FY 12. Therefore, Mr. 

### Schaeb believed that FY 12 actuals were a more accurate predictor ofFY 13 costs (tr. 6/153-55). The initial Schaeb amount of$416,132 is reduced to $392,269 (GX-172, tab 9 at 7). EJB does not agree with any of this revised amount.

• A27 Inclusion ofOffice Supplies in Tools & 

### Equipment. Mr. Schaeb determined from looking at invoices that the same two ladders were included twice in EJB's claim (tr. 6/158). The reduction is $763 (GX-172, tab 9 at 7).

• A32 Funding for Post-Mod. A00028 Point CheckModifications. This is a credit adjustment where Mr. 

### Schaeb and EJB do not agree on the amount (tr. 6/159). Both agree that the modification adding point checks after Mod. A00028 have to come out ofthe claim amounts (tr. 6/159). Mr. Schaeb took the dollar amounts directly offofthe modifications that include all mark-ups. EJB did not include mark-ups in its amount and there were other
21formula errors. (Tr. 6/163-64) Additionally, EJB was taking a credit for a previous $90,703.64 withholding for non-performance that Mr. Schaeb thought was inappropriate (tr. 6/166). The reduction is $237,040 minus EJB's final adjustment of$80,110 or $156,930 (GX-172, tab 9 at 7).

• GX-152 PriorFunding Mods. -Priced at FY 09 Rates to Account for Wage Adj. EJB added a $413,676 credit for PC 08-100 by re-pricing at FY 09 rates to account for rate increases (tr. 61170). Mr. Schaeb thinks that is reasonable (id.). HoweverEJB failed to add a similar credit for other modifications, PC 07-093, PC 08-068 and PC 08-100 (id.). Mr. Schaeb repriced these modifications at FY09 rates to account for the rate increases (tr. 6/171). The Schaeb revised amount is $52,691 (GX-172, tab 9 at 7).

• GX-152 CCI Adj basedupon PC 08-068/contract.26 Mr. Schaeb disagrees with EJB's $102,939 addition to the claim because EJB'sproofofcosts already contains costs for FY 12 and FY 13 for CCI and there is no support for additional costs (GX-172, tab 9 at 7; tr. 6/176) Modified Total CostExpertAnalysis 64. Mr. Schaeb performed a modified total cost analysis. 27 He determined that the actual CS staffing six months before Mod. A00028 was:

• 1DDC SystemAdministrator (CS Administrator) • 4 CM Operators • 3 CMTechnicians • 3 DDC Technicians (Supp. R4, tab 48 at 13102) Mr. Schaeb found that EJB had not included the 4 CM Operators in its prior funding credit in its claim: As apparent from the above details and the table below, EJB's Claim [for] prior funding credit failed to consider at least 4 CM Operators that were used by EJB toperform CS work and were unaccounted for in EJB's bid. The estimated cost ofthese 4 CM Operatorpositions is

26 EJB added four "adjustments" at the bottom ofAEX-1 that Mr. Schaeb had not seen until the trial. He does not disagree with the first three but takes issue with the fourth relating to PC 08-068 (tr. 6/173-74) 27 This calculationwas not revised as a result ofthe hearing.

22approximately $333,000peryear or $1,359,645 over the claim period. See Exhibit 8. (Supp. R4, tab 48 at 13102) However, during the hearing, Mr. Schaeb looked at EJB's initial bid and found thatthere were five central monitor operators included in EJB's bid (tr. 7 /8). Mr. Schaebtestified thathe understood these CM Operators were not performing CM workbased on Ms. Potter's and Mr. Parker's testimony (id.).28 Mr. Schaeb characterizedthe situation as a "bidbust" or mistake in bid (tr. 6/190-91). Mr. Schaeb reduced the corrected total cost claim amount of$530,61829by the cost of the omitted CM Operators, $1,359,645 and concludedthatthe modified total cost claim value was a negative $829,02730 (supp. R4, tab 48 at 13102-03). RevisedBefore andAfterExpertAnalysis 65. Mr. Schaeb performed abefore and after analysis and reports the results in his expert report (tr. 6/77; supp. R4, tab 48 at 13105). Mr. Schaeb provided a lengthy detailed explanation ofhis before and after analysis to include adjustments for bullets and cross-utilization (tr. 6/76-109). Mr. Schaeb adjusted his before and after analysis based on the testimony he heard during the first phase ofthe hearing (tr. 6/112). The revisions are reflected in the blue pages ofthe final version ofthe report (tr. 6/112; supp. R4, tab 48 at 13261.001-033). The revisions resulted in a larger negative number because the before costs were higherthan the after costs (tr. 61112-13). He found that the actual cost oflabor31 afterMod. A00028, $1,640,395, was fully compensatedby Mod. A00028's $1,723,502 (tr. 6/109; supp. R4, tab 48 at 13261.001). RevisedPoint Checks

- Expertanalysis 66. Appendix B ofMr. Schaeb's expert report is an analysis relating to point checks. Again, blue pages in Appendix B indicate the same adjustments made in Appendix A in the calculations based on hearingtestimony. (Tr. 6/114) Mr. Schaeb testifiedhe preferredto remove point checks from the calculationbecause they "kind ofcloud[] the issue and the comparison ofthe periods"but since EJB included point checks, Mr. Schaeb included them in an alternative before and after analysis

28 The trialjudgequestionedthe witness's recollection ofMs. Potter'stestimony, however, Mr. Katz stipulated thatthe characterization ofMs. Potter'stestimony was accurate (tr. 7/13). The testimony is that certain utility "CMS operators" were actually boiler operators (tr. 2/163-65). 29 The $530,618 was revised upwards to $562,493 when Mr. Schaeb revised his total cost claim correction (tr. 6/181-82; finding 62). 30 This wouldbe -$797,152 using the revised figure of$562,493. 31 Laborwas the biggest cost associated with CS monitoring claim (tr. 6/84).
23(tr. 61114-15). The revised analysis resulted in a larger negativevaluebecause the costs incurredbefore Mod. A00028 were higherthan after (tr. 6/115-16). DECISION Contentions of the Parties EJB first attempted to calculate its claim directly using the "before and after" method. Itnow argues that it is unable to perform a "before and after" analysis to determine the cost impact ofMod. A00028 because, due to its practice of cross-utilization ofits workers and other inaccuracies, its accounting systems (MAXIMO and JDE) cannot accurately identify what "before"work was actually being performed. Therefore, EJB argues that it is left with the modified total cost method as the only way ofquantifying the cost impact ofMod. A00028. EJB argues that it uses the modified total cost approach because (1) there is no evidence of inefficiencies in its performancethat were its responsibility, and (2) the Navy previously deducted an amount for EJB's failure to completepoint checks in FY 09. (App. br. at 95) EJB argues that it satisfies each ofthe four elements required for utilization ofthe modified total cost method (app. br. at 96-102). EJB claims $1,826,801.25. TheNavy's expert, Mr. Schaeb, challenges the importance of"cross-utilization" and argues that EJB's accounting data bases, MAXIMO and JDE, are capable of accurately supporting a "before and after" analysis. The Navy argues thatEJB does not satisfy any ofthe four elements required for utilization ofthe total cost method. (Gov'tbr. at 151-70) Mr. Schaeb's expert report presents three calculations: (1) a correctedtotal cost claim; (2) a modified total cost claim; and (3) a "before and after" analysis. Forthe reasons stated in the report, Mr. Schaeb concludes that EJB was adequately compensated for the additional work caused by Mod. A00028 by the modification's unilateral price of$2,480,044.24. PreliminaryMatters As stated in contentions ofthe parties above, EJB characterizes its quantification analysis as a "modifiedtotal cost method." We disagree. EJB calculated its total cost for CMS work andtook no deductions otherthan Navy payments (findings 40, 43)-this is a classic total costmethod. We decline EJB's invitation to the Board to make needed adjustments to its total cost claim through use ofajuryverdict. EJB argues that since theNavy did not challenge its use ofthe so-called modified total cost method in its reply to EJB's SOC, theNavy admittedthat the method is appropriate (app. br. at 95-96). This argument is based on the standard

24language in the Board's Order on POC that reads, "[t]he lack ofresponse to any cost item orcomponent thereofclaimed by appellant shall be deemed an admission" (finding 34). EJB relies on Safeco Insurance Co. of America, ASBCA No. 52107, 03-2 BCA

### ii 32,341, where the Board stated that the government's failure to object to the use ofthe total cost method in its response to appellant's SOC "would seemingly qualify as an admission that the method was appropriate." Id. at 160,022. However, as the Navy correctly points out, in Safeco the contracting officerhad agreed to the total cost method and the Board's language is bothdicta and equivocal (gov'tbr. at 158-60). Itis also apparentto us thatthe total cost method is not a "cost item or componentthereof'butrather a methodology ofquantification and, therefore, not withinthe scope ofthe "deemed an admission" provision ofthe Board's order. Cross-Utilization The "before and after" analysis was complicatedbyEJB's cross-utilization of CMS workers. Cross-utilization is the terminology used by EJB to describe using its CMS workers to do work that is notpart oftheirprimary CMSjob. An example of cross-utilization would be when CMS personnel would be usedtoperform work other than CMS monitoring such as going out to the facilities to check and possibly repair equipment, answerphone calls from customers andperform service calls (findings 8, 15, 24). According to EJB's witnesses, the problem caused by cross-utilization was that EJB's work accounting system, MAXIMO, was not able to accurately track what work individual workers were actually performing (findings 6, 38, 39). Ms. Pottertestified that after Mod. A00028 she could use MAXIMO and JDE datato accurately account for "after" costs (finding 38). Mr. Parkerprovided similar testimony (finding 39). Ms. Potter'sFY08 "before" cost analysis used estimates to account for inaccuracies in the MAXIMO data causedby cross-utilization ofthe CMS crew. They estimated:

• CMS Operators

- 95% CMS work 

### I 5% service desk work • CMS Technicians

- 70% CMS work 130% other service work • DDC Technicians- 10% CMS work 190% other service work • Work Scheduler- 30% CMS work/70% other scheduling work (Id.) On 25 May 2012, in furtherance ofthe "before and after" analysis, Ms. Potter and Mr. Smith32 providedMr. Parkerwith a "before" CMS cost analysis for FY08 (finding 37). Usingthe estimates, MAXIMO data and JDE data, Ms. Potter's FY 08 "before" calculation resulted in a loss of$236,837.61 for the CMS crew (finding 37).

32 Mr. Smith worked on the CMS crew during FY08 (finding 37).
25We agree with EJB that cross-utilization ofCMS workers contributed to inaccuracies in MAXIMO data and made it impossible to account for work with absolute precision. However, absolute precision is not necessary. We conclude that the estimate ofcross-utilizationpercentages prepared by a member ofthe CMS team, Mr. Smith, is a reasonable**wa~** to adjust MAXIMO and JDE data to mitigate cross-utilization inaccuracies. 3
In his expertreport, Mr. Schaeb presented a "before and after" analysis using MAXIMO and JDE data (findings 46, 65). Mr. Schaeb testified that he could adjust his before and after calculationbased on Mr. Smith's estimates, i.e., reduce his number ofhours for CM operatorby 5%, etc. (finding 46). Fromthe FY 08 "before" analysis by Ms. Potter and Mr. Smith and the "before and after" analysis by Mr. Schaeb, we concludethat a "before and after" analysis is possible using MAXIMO and JDE data adjusted through the use ofestimates, such as the one developed by Mr. Smith, to mitigate the affect ofcross-utilization. SOC

- Total CostMethod Mr. Parker made the decision to stop attemptingthe "before and after" analysis and switch to the total cost method for the SOC (findings 39, 40). Hetestifiedthat he made the decision becausethey could not figure out howto do a before and after analysis34 (id.). He gave no explanation on why the cross-utilization estimate created by Ms. Potter and Mr. Smith could not be used to mitigate the effect of cross-utilization. Over a period ofa year EJB submitted five versions ofits SOC (finding 41). EJB's SOC claimranged from a high of$5,ll 1,618.12 to the August 2012 amount of $2,841,405.64 (id.). This amount was reduced to $2,028,532.57 in December2012 in response to the Navy's expertreport (finding 47). Onthe first day ofthe hearing, EJB reduced its SOC amountto $1,826,801.25 (finding 49). Generally, the revisions were to substitute actual costs for estimates and correct errors uncovered bythe Navy's expert Mr. Schaeb (findings 41, 43, 49). We conclude that EJB experienced difficulty

33 Although Ms. Pottertestified that cross-utilization caused inaccuracies, which we agree with, there was notestimony to the effect that an estimate was not a reasonable way to adjustthe datato correct for cross-utilization inaccuracies. Mr. Parker testifiedthatthe "data" was not reliable, but he did not address the reasonableness ofusing an estimate to mitigate theproblem. (Finding 39) 34 We note that Mr. Parker made the decision afterMs. Potter's FY08 "before" calculation using the estimate resulted in a $236,837.61 loss (finding 37) but neitherparty presented evidence on this coincidence.
26with its in-house effort to develop its SOC as illustrated by the number ofproblems identified by the Navy expert that were accepted by EJB and the fluctuations in the claim amount up to, during, and afterthe hearing.35 

### It is therefore difficult for us to have confidence in EJB's SOC. Mistake in Bid Getting right to one ofour major concerns - EJB did not adequately address Mr. Schaeb's conclusion that there was a mistake in EJB's original bid for CMS work in contract 5103. Mr. Schaeb's report finds that EJB's actual CMS staffing level was eleven (11) personnel, four (4) ofwhich were CM operators, but that the original bid did not include the 4 CMoperators. (Finding 64) Mr. Schaeb calculatedthat the mistake in bid cost EJB $1,359,645 (id.). When Mr. Schaeb deducted this amount from his corrected total cost claim, the claim changed to a negative number (id.). EJB fails to adequately rebut the evidence ofmistake in bid. In its post-hearing reply brief, EJB responds: Mr. Schaeb's faulty logic also ignores the fact that EJB was consistentlyprofitable. Tr. 3: 173: 12-17. Thus, regardless ofwhat labor categories Mr. Schaeb finds in the fixed-price bid, EJB was getting the work done at less than its cost. That is not and cannot be disputed. The Navy argues that EJB's bid bust is "proven"by the fact that EJB'sprofit has been around 3 % ratherthan EJB's target profit of5%. Navy Briefat 156. As noted, the Navy ignores the fact that it has failed to pay EJB all that it is due, thus reducing EJB'sprofit. (App. reply br. at 26) Ratherthan taking the position that Mr. Schaeb was wrong about the missing four CM operators in the bid, EJB equivocates, "[t]hus, regardless of what labor categories Mr. Schaeb finds in the fixed-price bid, EJB was getting the work done at less than its cost" (id.). EJB then supports its rebuttal with testimony about the contract as a whole. The testimony aboutthe 5% and 3%profitrates was the total contractprofit, not the CMS profit (finding 37). We conclude that EJB's failure to confrontthe mistake in bid evidence directly results in an argument that is illogical. We focus on whetherthere was a loss due to a mistake in bid in the CMS area ofthe contractbecause itrelates directly to the reasonableness ofEJB's bid for the CMS workthat is directly affected by Mod. A00028

- aprerequisiteto use ofthe total cost method. EJB did not rebut

35 The record reflects thatEJB had similarproblems with its spreadsheets supporting the price ofMod. A00028 (findings 20, 21).
27Mr. Schaeb's conclusion thatthere was a mistake in the CMS portion ofits bid by reference to a general profit in the contract as a whole. We concludethat on this record, there is substantial evidence thatthere was a mistake in EJB'sbid in the CMS work. EJB has not accounted for this mistake in its claim quantification. Discussion There is an imbalance in the quality ofthe evidence in this case. EJB chose Mr. Parkerto explain its total cost method claim. While we considerMr. Parkerto be a credible witness, he is a high level manager and essentiallypresentedthe results of his team's efforts

- his "subject matter experts." (Finding 28) Hetherefore lacked personal knowledge ofthe details behindhis testimony. 

### It was Mr. Williams who was the principle author ofEJB'sAugust SOC, the "final" SOC before the hearing (finding 41), butEJB did not call Mr. Williams as a witness. By contrast, the government's expert, Mr. Schaeb, exhibited detailed personal knowledge ofthe calculations he developed using EJB's MAXIMO and JDE databases. His expertreport is supported by extensive data from EJB's databases and he appeared to understand EJB's data much betterthan did EJB's witnesses. EJB presented nothing ofthe same detail and qualityto rebutthe Navy's expertreport. There is also the matter ofEJB's failure to adequately address the mistake in bid directly. As we stated above, EJB'sresponse to Mr. Schaeb'stestimony that there was a mistake in the CMS portion ofEJB'sbid was to argue that the contract as a whole made a profit. We found this argument illogical. EJB did not state ifits bid omittedthe four CMS operators or not

- somethingwe consider well within EJB's capability. Accordingly, we concludedthatthere was a mistake in bidthat EJB has not accounted for. As wehave concluded, to use the total costmethod, the contractor's bid musthave beenreasonable. Our decision is also influenced by the fact that up to the hearing and afterEJB continuedtoreduce its claimto account for mistakes in its SOC.36 While we find it commendablethatEJB acknowledges and corrects errors, we find it troublingthat after a year since the first SOC was submitted, EJB could not get its SOC right. The RecordDoesNotSupport Use of the Total CostMethod Theparties understand and agree on the criteria for application ofthe total cost method ofquantifying a claim (gov'tbr. at 145; app. br. at 96). The criteria are:

36 We recognize that some reductions were due to substituting actual costs for estimates and do not considerthose reductions related to mistakes.
28"'Underthe total cost method, the measure ofdamages is the difference between the actual cost ofthe contract and the contractor's bid." Raytheon Co. v. White, 305 F.3d 1354, 1365 (Fed. Cir. 2002). The total cost method of recovery is not favored and will not be used if. as here, there is another, more reliable method available by which to establish the contractor's damages. 

### Id. In any event, before a contractor can obtain the benefit ofthe total cost method, it must prove: (1) the impracticability ofproving its actual losses directly; (2) the reasonableness ofits bid; (3) the reasonableness ofits actual costs; and (4) lack of responsibility for the added costs. Propellex Corp. v. Brownlee, 342 F.3d 1335, 1339 (Fed. Cir. 2003). [Emphasis added] Hi-Shear Technology Corp. v. UnitedStates, 356 F.3d 1372, 1383 (Fed. Cir. 2004). In this appeal EJB applies the total cost methodto one particular aspect ofits contract

- the control system work. We consider the first two elements tojustifythe use ofthetotal cost method. First, we examinethe impracticability ofproving its actual losses directly. We previously concluded that MAXIMO and JDE data bases were capable oftracking work and costs both before and after Mod. A00028. EJB's main reason why it cannot use this capability to track

..before'' is that cross-utilization introduces inaccuracies into MAXIMO data. We previously concluded that this problem may be overcome by the use ofan estimate ofthe extent ofcross-utilization such as the one made by Mr. Smith. Our analysis ofGX-172 leads us to conclude that for A5rev. (Mr. Blankenship), A6 (allocation ofnon-productive costs), A7rev. (allocation ofnon-productive costs), A27 (duplication ofladdercosts), A32 (deduction ofpoint check modifications), GX-152 (prior funding mods), and GX-152 (CCI costs) the Navy's expert report raised doubts in our minds overthe accuracy ofEJB'stotal cost SOC. We therefore conclude that the before and after analysis utilizing an estimate ofcross-utilization is a more reliable and more direct method ofproving costs. EJB has not proven the first element. Next we considerthe reasonableness ofEJB's bid as it relates to the CMS work. We have concluded that EJB failed to adequately rebut Mr. Schaeb's conclusion that EJB's CMS bid omitted four CMS operators

- a mistake in bid. Failure to account for a mistake in bid prevents proofofreasonableness ofthe bid. GrummanAerospace Corp., ASBCA No. 48006,**06-1BCA~33,216** at 164,620. EJB has failed to prove that its bid in the CMS area was reasonable.

29Having failed to carry its burden ofproofas to the first two elements ofproof required tojustifyuse ofthe total cost method. we conclude that EJB may not rely on the total cost method to prove its claim. CONCLUSION Forthe reasons stated above, we deny EJB's appeal. Dated: 22 January 2015

I concur

# ~~ AdministrativeJudge Acting Chairman Armed Services Board ofContractAppeals CRAIG S. LARKE Administr tive Judge Armed Services Board ofContract Appeals

I concur

RICHARD SHACKLEFORD Administrative Judge Vice Chairman Armed Services Board ofContractAppeals I certify that the foregoing is a true copy ofthe Opinion and Decision ofthe Armed Services Board ofContractAppeals in ASBCANo. 57112, Appeal ofEJB Facilities Services, rendered in conformance with the Board's Charter. Dated:

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