ARMED SERVICES BOARD OF CONTRACTAPPEALS Appeals of

-- Sonoran Technology and Professional

Services, LLC Under ContractNo. FA3002-14-D-0005 APPEARANCES FORTHE APPELLANT: ) ) ) ) ) )

APPEARANCES FORTHE GOVERNMENT: ASBCA Nos. 61040, 61101

Brett W. Johnson, Esq. Colin P. Ahler, Esq. Sarah E. Delaney, Esq.

Snell & Wilmer L.L.P. Phoenix, AZ Jeffrey P. Hildebrant, Esq.

AirForce Deputy ChiefTrial Attorney Phillip E. Reiman, Esq. Lt Col Nathaniel H. Sears, USAF

Trial Attorneys OPINION BYADMINISTRATIVE JUDGE NEWSOM These appeals concern a claim for an equitable adjustment resulting from the government's incorporation ofa wage determination into the contract. Appellant, Sonoran Technology and Professional Services, LLC (Sonoran), alleges that the wage determination increased Sonoran's state gross receipts tax liability, and argues that the contract requires the government to adjust the contract price to compensate Sonoran for this tax increase. Bothparties have elected to resolve these appeals on the written record without a hearing under Board Rule 11. In addition, because appellant is a small business concern and the amount in controversy is less than $150,000, Sonoran elected to proceed underthe Board's expeditedprocedures in Rule 12.2. 1
Forthe reasons explainedbelow, we deny the appeals.

1 Pursuantto Board Rule 12.2(d), a decision under Rule 12.2 shall have no value as precedent, and in the absence offraud, shall be final and conclusive and may not be appealed or set aside.SUMMARYFINDINGS OF FACT
1. On 24 April 2014, the AirForce awarded ContractNo. FA3002-14-D-0005 to Sonoran. The contract called for Sonoranto provide training and related services to F-16 air crews operating out ofLuke AirForce Base (AFB), located in Arizona, and out ofHolloman AFB, located in New Mexico. The contract services were to be performed under firm-fixed-price contract line item numbers (CLINs), although the contract included a few cost-reimbursement CLINs to pay for travel and supplies. The base contract included one 11-monthperiod ofperformance followed by 4 option years. (R4, tab 2 at 2-42) The quantities were indefinite (id. at 62). Thetotal estimated contract value at the time ofaward was $5,942,640.10 (id. at 1).
2. The solicitation that led to this contract award attached a Service Contract Act wage determination (SCA WD) and a Collective BargainingAgreement (CBA). Section L.3.3.2.4 requiredthat offerors provide a statement acknowledging, among otherthings, that "thepricesproposed for labor coveredby the SCA WD and CBA were formulated using the minimum wage and benefitrates specified in the document as required for covered contractorpersonnel"; and that "thewage and benefitrates specified in the SCA WD and CBA are not escalatedbeyondthe basicperiod of performance." (Supp. R4, tab 26 at 95, tab 27, questions 95, 100, 109)
3. The contract incorporated, among otherFederal Acquisition Regulation (FAR) clauses: FAR52.222-41, SERVICE CONTRACT ACT OF 1965 (Nov2007); FAR 52.222-43, FAIR LABOR STANDARDS ACT AND SERVICE CONTRACT ACT- PRICE ADJUSTMENT (MULTIPLE YEAR AND OPTION CONTRACTS) (SEP 2009);FAR52.229-3,FEDERAL, STATE, AND LOCAL TAXES (FEB 2013); andFAR52.243-1, CHANGES-FIXED-PRICE (AUG 1987),ALTERNATE I (APR 1984)(R4,tab 2 at 58-59).
4. Ofthese clauses, three areparticularly relevant to this dispute. First, FAR 52.222-41, SERVICE CONTRACT ACT OF 1965 (Nov2007),provides in relevantpart: (c) 

### Compensation. (1) Each service employee employed in the performance ofthis contract by the Contractor or any subcontractor shall be paid not less than the minimum monetary wages and shall be furnished fringe benefits in accordance withthe wages and fringe benefits determined by the Secretary ofLabor, or authorized representative, as specified in any wage determination attached to this contract. 5. Second, FAR52.222-43,FAIR LABOR STANDARDS ACT AND SERVICE CONTRACT ACT- PRICE ADJUSTMENT (MULTIPLE YEAR AND OPTION CONTRACTS) (SEP 2009) (SCA Price Adjustment Clause),provides in relevant part:



### 2(a) This clause applies to both contracts subjectto areaprevailing wage determinations and contracts subject to collective bargaining agreements.

(c) Thewage determination, issued underthe Service ContractAct of 1965, as amended, (41 U.S.C. 351, etseq.), by theAdministrator, Wage and HourDivision, Employment Standards Administration, U.S. Department ofLabor, current onthe anniversary date ofa multiple year contract orthe beginning ofeach renewal option period, shall apply to this contract..

.. (d) The contractprice, contract unitprice labor rates, or fixed hourly laborrates will be adjusted to reflect the Contractor's actual increase or decrease in applicable wages and fringe benefits to the extent that the increase is made to comply with orthe decrease is voluntarily made by the Contractor as a result of: (I) TheDepartment ofLaborwage determination applicable onthe anniversary date ofthe multiple year contract, or at the beginning ofthe renewal option period

....

(e) Any adjustment will be limited to increases or decreases in wages and fringe benefits as described in paragraph (d) ofthis clause, and the accompanying increases ordecreases in social security and unemploymenttaxes and workers'compensation insurance, but shall not otherwise include any amount for general and administrative costs, overhead, orprofit.
6. Third, the contract incorporated the Changes clause at FAR52.243-1, CHANGES

- FIXED-PRICE (AUG 1987),ALTERNATE I (APR 1984). This clause provides in relevant part: (a) The Contracting Officermay at any time, by written order, and withoutnotice to the sureties, ifany,

3make changes within the general scope ofthis contract in any one or more ofthe following: (1) Drawings, designs, or specifications when the supplies to be furnished are to be specially manufactured for the Government in accordance with the drawings, designs, or specifications. (2) Method ofshipment orpacking. (3) Place ofdelivery. (b) Ifany such change causes an increase or decrease in the cost of, orthe time required for, performance ofany part ofthe work underthis contract, whether ornot changed by the order, the Contracting Officer shall make an equitable adjustment in the contractprice, the delivery schedule, orboth, and shall modify the contract.

AlternateI (APR 1984). Ifthe requirement is for services, otherthan architect-engineer orotherprofessional services, and no supplies are to be furnished, substitute the following paragraph (a) for paragraph (a) ofthe basic clause: (a) The Contracting Officer may at any time, by written order, and without notice to the sureties, ifany, make changes within the general scope ofthis contract in any one or more ofthe following: (1) Description ofservices to be performed. (2) Time ofperformance (i.e., hours ofthe day, days ofthe week, etc.). (3) Place ofperformance ofthe services. 7. On 18 March 2015, Sonoran entered into a CBAwith the International Association ofMachinists and Aerospace Workers, AFL-CIO, and two local lodges

4(collectively IAM)2 (id. at 39). This CBA took effect on 1May2015 (id. at 38). The CBA established pay and benefits for certain labor categories that were higherthan the previous wage determination and CBA (id. at 29). 8. On 23 April 2015, the Department ofLabor issued Wage Determination No. CBA-2015-7628. Referring to the CBA between Sonoran and the JAM, the wage determination stated that "employees employedby the contractor(s) in performing services covered by the [CBA] are to be paidwage rates and fringe benefits set forth in the current [CBA]." (R4, tab 4 at 4) Through Modification No. P00003 dated 1May 2015, the Air Force exercised the first optionperiod and incorporated this wage determination for the first option period (id. at 1). Thus the new wage determination applied to the contract's option years. The modification directed the contractto submit "arequest for equitable adjustment under FAR 52.222-43 FLSA and SCAprice adjustment" (id.). 9. The state ofNewMexico levies a tax on "any person engaging in business in New Mexico." This so-called "gross receipts tax" is calculated as a percentage of gross receipts. State law characterizes it as an excise tax. N.M. STAT. ANN.§ 7-9-4 (1978). (App. supp. R4, tab 23) 10. Gina Saldivar, who was previously Sonoran's chieffinancial officer, now provides financial services as a consultant to Sonoran (app. supp. R4, tab 22,**~** 2). She states that after Sonoran began performing the contract and the CBA and wage determination went into effect, Sonoran's revenues increased, and its NewMexico gross receipts tax liability increased proportionally (id.**~** 9). She asserts that Sonoran's liability for NewMexico gross receipts taxes nearly doubled**(id.~** 10). New Mexico subsequently increased the tax rate twice, further increasing Sonoran's tax liability (id.**~** 11). Although Sonoran anticipated thatthese taxes would likely increase, the amounts ofincrease "could not be calculated at the time ofContract offer or award" (id.**~** 13). 11. Sonoran submitted a request for equitable adjustment (REA) on 3 June 2015, in which it sought a price adjustment to compensate it for added costs incurred as a result ofthe CBA and wage determination (R4, tab 5). Sonoran initially requested three categories ofcosts: (1) compensation for the increase in direct labor costs for its non-exempt employees; (2) compensation for the increase in indirect labor costs for its exempt employees; and (3) compensation for the "financial effects ofthe NewMexico Gross Receipts Tax" (id. at 1 ). 12. On 18 September 2015, the government issued contractModification No. P00006 incorporating the CBA into the contract (R4, tab 8).

2 The government asserts that this CBA was signed on 29 May 2014 (gov'tbr. at 3), but this assertion is incorrect. The CBAplainly states that it was signed on 18 March 2015 (R4, tab 3 at 39). 513. On 25 September 2015, the government issued contract Modification No. P00007, increasing the contract price to compensate for Sonoran's higher direct labor costs (R4, tab 9). The modification did not include amounts for the increase in Sonoran's state gross receipts tax liability, nor amounts for indirect labor costs. In a subsequent letter dated 11 May 2016, the contracting officer explained that she concluded that the contract does not entitle Sonoran to compensation for these costs (R4, tab 10). 14. On 28 October 2016, Sonoran submitted a second, revised document, characterized as an REA. Sonoran dropped the request for indirect laborcosts, but pursued a price adjustment for the gross receipts tax expense. It sought $66,579.49 for Option Years 1 and 2, arguing that this adjustment is required underthe contract Changes clause. (R4, tab 11) This document did not include a request for a final decision, but did include the following certification signed by the Sonoran contracts administrator:
I certify that the claim is made in good faith; thatthe supporting data are accurate and complete to the best of my knowledge and belief; that the amount requested accurately reflects the contract adjustment for which the Contractorbelieves the Government is liable; and that I am authorized to certify the claim on the behalfofthe Contractor. (R 4, tab 13 at 1) 15. The contracting officer issued a written decision denyingthe 28 October2016 REA on 4 January 2017. The decision does not contain standard language explaining the contractor's appeal rights. (R4, tab 17) The record does not reveal when the written decision was received by Sonoran. 16. Sonoran filed an appeal with this Board on 3 February 2017, characterizing the 28 October 2016 REA as a "Claim," and the contracting officer's 4 January 2017 as a denial ofthat claim (R4, tab 15). The appeal was docketed as ASBCANo. 61040. 17. In response to the Board's concerns aboutjurisdiction, Sonoran submittedto the contracting officera claim dated 15 March 2017. Itattached the 28 October 2016 REA (in which Sonoran requested an adjustment for its gross receipts tax expense), and requested a final decision on a price adjustment in the same amount as before, $66,579.49. (Supp. R4, tab 28) The contracting officer issued a final decision denying that claim on 22 March 2017 (supp. R4, tab 29). This letter contained a description ofSonoran's appeal rights (id. at 3). 18. The next day, on 23 March 2017, Sonoran filed an appeal from the 22 March 2017 final decision. This appeal was docketed as ASBCANo. 61101 and consolidated with ASBCA No. 61040. 6DECISION These appeals present the issue ofwhether a new wage determination incorporated into the contract triggered an obligation for the government to adjust the contractprice so as to reimburse Sonoran for an increase in its state gross receipts taxes. Both appeals concern the same claim.3
Sonoran argues that two different contract clauses require the government to adjust the contractprice so as to compensate it for these taxes: FAR52.222-43, FAIR LABOR STANDARDS ACT AND SERVICE CONTRACTACT

- PRICE ADJUSTMENT (MULTIPLE YEAR AND OPTION CONTRACTS) (SEP 2009)to which werefer as the SCA Price Adjustment clause, and the Changes clause, which in this contract was FAR52.243-1, CHANGES

- FIXED-PRICE (AUG 1987), ALTERNATE I (APR 1984).
Forthereasons explained below, we hold that neither clause entitles Sonoran to recover its gross receipts tax expense. Recovery Underthe SCA Price Adjustment Clause The SCA Price Adjustment clause and otherrelated clauses implement the Service ContractAct, 41 U.S.C. § 35l(a) (SCA). The SCAwas designed to protectwages and fringe benefits ofserviceworkers employed on U.S. Government contracts. Itdirects the Department ofLabor (DOL) to issue special minimum wage orders applicableto fixed-price services contracts, called "wage determinations." Through contract clauses, contractors are forbidden from paying less than the wages and fringe benefits contained in a wage determination. See 41 U.S.C. § 35l(a)(l), (b). In this way, the SCA prevents contractors from underbidding competitors by cutting wages orfringe benefits to its service workers and thereby winning government contracts. See LearSieglerServices, Inc. v. Rumsfeld, 457 F.2d 1262, 1266 (Fed. Cir. 2006); Government Contracting Resources, Inc., ASBCANo. 59162, 15-1BCAi!35,916 at 175,575. An SCAwage determination may be basedupon a DOL determination of locally-prevailing wages and benefits, or it may bebased upon wages and benefits in a collective bargaining agreement. 41 U.S.C. 

### § 351(a)(2); 29 C.F.R. 

### § 4.50 (2017) (explaining types ofwage determinations). In these appeals, the wage determination was based upon a CBA negotiated between Sonoran and the IAM (finding 8).

3 We havejurisdiction overthe appeal docketed as ASBCA No. 61101 because it is a timely appeal from a final decision denying Sonoran's claim. The issues in both appeals are identical, so it is unnecessary to resolve the Board's jurisdictionto entertain ASBCA No. 61040. 7If, after contract award, a newDOL wage determination may increase (or decrease) contractorcosts, subsection (d) ofthe SCA Price Adjustment clause requires the government to adjust the contractprice. The adjustment is supposed to coverthe "actual increase ordecrease in applicable wages and fringe benefits to the extent that the increase is made to comply with

...[t]he Department ofLabor wage determination applicable onthe anniversary date ofthe multiple year contract, or at the beginning of the renewal option period." FAR 52.222-43(d)(l). Subsection (e) defines the requiredprice adjustment. It states: Any adjustment will be limited to increases or decreases in wages and fringe benefits as described in paragraph (d) ofthis clause, and the accompanying increases or decreases in social security and unemployment taxes and workers' compensation insurance, but shall not otherwise include any amount for general and administrative costs, overhead, orprofit.
FAR 52.222-43(e). Thus, a price adjustment must include "increases or decreases in wages and fringe benefits" plus "the accompanying increases ordecreases in social security and unemploymenttaxes andworkers' compensation insurance." Butthe price adjustment shall not include "any amount for general and administrative costs, overhead, orprofit." Id. State gross receipts taxes are not expressly listed in this clause. They are not listed amongthe expenses for which a price adjustment mustbe made, nor are they listed among the exclusions from a price adjustment. Accordingly, the Board's task is to divine whether or not the clause was intended to require a price adjustment for a contractor's increase in state gross receipts tax. We hold thatunderthe circumstances ofthis appeal, the SCA Price Adjustment clause does not entitle Sonoran to a price adjustment that covers the contractor's increase in state gross receipts taxes. The Board so held inAllStar/SABPacific, JV., ASBCA No. 50856, 98-2 BCAii 29,958, aff'don recons., 99-1BCAii30,214, which is directly onpoint. InAllStar, the contractor soughtrecovery for its increased state excise tax as part ofa price adjustment for a new SCA wage determination. 98-2 BCAii 29,958 at 148,234. The Board heldthatthe Price Adjustment clause did not entitle the contractorto a price adjustment for state excise tax expense, explaining: The clauses couldnotbemore clear. Theyprovidethat any contractprice adjustment for changes in mandated wagerates shall be limited to the changes in the wages, fringe benefits and accompanying changes in social security, unemploymenttaxes,

8Id. and workmen's compensation insurance and shall not include any additional amounts for G&A, overhead orprofit on these costs.l4l

This analysis applies with equal force to the present appeals. Like the contractor in

### AllStar, Sonoran seeks to recover state excise tax expense as part ofa wage determination price adjustment. The SCA Price Adjustment clause is specific about what costs may be included in a price adjustment: wage and fringe benefit costs, plus accompanying social security, unemployment taxes, and workmen's compensation insurance costs. Itmentions some taxes-social security and unemployment taxes-but not others. It specifies that these recoverable costs may not be burdened with overhead, G&A, orprofit. The principle ofconstruction, 

### expressio unius est exclusio alterius, instructs that where one or more objects in a class are specifically named, we construe the contract to exclude an object ofthat class that is not named. ITT

### Defense Communications Division, ASBCANo. 44791, 98-1 BCAif 29,590 at 146,703-04 (citing 3 

### Corbin on Contracts§ 552 (1960); 17A C.J.S. 

### Contracts§ 312). Accordingly, state excise taxes are not to be part ofan SCA price adjustment. Sonoran makes several arguments in support ofits claim. First, citing

### Lear Siegler, 457 F.3d at 1269 and 

### Gov't ContractingResources, 15-1BCAif35,916 

### (GCR), Sonoran argues that the SCA PriceAdjustment clause is "triggeredby changes in a contractor's cost ofcompliance." Sonoran argues that gross receipts taxes are part ofits cost ofcomplying with the wage determination and CBA, therefore increases in such taxes must be part ofany price adjustment. (App. br. at 5-7; app. resp. at 5)

4 The Board in

### AllStar considered different Price Adjustment clauses than that in the present contract, but the differences do not change the analysis. InAll

### Star, the contract included the May 1989 version ofFAR 52.222-43, in contrastto the September 2009 version in the present contract. Bothversions contain identical language in paragraph (e) defining the scope ofthe price adjustment. 

### Compare FAR 52.222-43(e) (SEP 2009) 

### with FAR 52.222-43(e) (AUG 1989). The contract inAll

### Star also included a Navy Marine Corps supplemental clause whichprovided in relevantpartthat "[a]ny such adjustments will be limited to increases or decreases in wages or fringe benefits as described above, and the concomitant increases or decreases in social security and unemployment taxes and workmen's compensation insurance, but shall not otherwise include any amount for general and administrative costs, overhead, orprofits." NMCARS 5252.222-9303, PRICE ADJUSTMENTS IN THE OPTION YEARS FOR CHANGES IN WAGE DETERMINATIONS, (ALTERNATE II) (AUG 1991). 98-2 BCAif29,958 at 148,234. The

### AllStar Boardheld this clause to have the same effect as FAR 52.222-43(e), and there is no reason currently to depart from that holding. 9In both LearSiegler and GCR, however, the contractor sought adjustments for increases in fringe benefits costs, not state taxes. In LearSiegler, the contractor sought health plan cost increases, which was a fringe benefit under the CBA in that case. 457 F.3d at 1265. In GCR, the contractor sought severance pay costs, also a fringe benefit under the CBA in that case. 15-1 BCAif 35,916 at 175,574. The SCA Price Adjustment clause expressly requires a price adjustmentto cover fringe benefit costs. Both cases considered costs that are expressly recoverable underthe SCA Price Adjustment clause, and neither considered whether state excise taxes are part ofthe costs for which an SCAprice adjustment should be made. Accordingly, those cases do not compel a different holding than the Board reached inAllStar. Sonoran next argues that the "totality" ofthe clause reflects an intent "to provide an adjustment for any increase (or decrease) in taxes that accompanies an increase (or decrease) in wages and fringe benefits." Gross receipts taxes, it says, are the "type ofcosts that should be covered." (App. br. at 7) Otherwise, the purpose of the clause would be negated (app. resp. at 6). This argument is unpersuasive. The clause's purpose is expressed in its text. We find no text evincing an intention to allow a price adjustment for generalized "type" ofcosts, nor for "any increase

...in taxes." TheAllStar Boardrejected this argument, notingthat "[t]hewage rate adjustment clauses do not provide for the general allowability ofexcise taxes, or for taxes similar in nature to the taxes listed. Only social security and unemployment taxes are specifically listed as reimbursable." 99-1BCAif30,214 at 149,480 (emphasis added). Finally, Sonoran argues that it could not have priced the increase in its gross receipts taxes, because it did not know how muchthey would increase. Itasserts that the solicitation required itto use labor rates in the previous CBA and did not allow contractors to "price contingencies into proposal when related to labor costs" (app. br. at 7-8; app. resp. at 2-4). Sonoran overstates the solicitation'spricingrequirement. Itrestricted escalation of"wage andbenefit" rates, but did notprohibitpricing other contingencies. Moreover, the risk ofa state tax increase in a fixed-price contract is generally born by the contractor. FAR52.229-3, FEDERAL, STATE, AND LOCAL TAXES (FEB 2013) (finding 3). Recovery Underthe Changes Clause Sonoran argues that the Changes clause, FAR 52.243-1, requires the government to pay an equitable adjustment for the costs incurred bythe contractor-to include gross receipts tax expense-as a result ofthe incorporation ofa new wage determination into the contract. Sonoran cites Geronimo Service Co., ASBCA Nos. 14686, 14687, 70-2 BCAif 8540 (1970), and LockheedSupportSys., Inc. v. UnitedStates, 36 Fed. Cl. 424, 429 (1996), for the propositionthat a revised wage 10determination can constitute a change compensable under the Changes clause. (App. br. at 9; app. resp. at 6-9) In opposition, the government argues that the wage determination did not change the contract work so itis not compensable underthe Changes clause (gov'tresp. at 3-4). Sonoran's arguments are unavailing. The Changes clause does not explain how to compute an equitable adjustment (finding 6). The SCA Price Adjustment clause does so, for labor rate adjustments required by an SCA wage determinations. Thus, even ifthe Changes clause entitled a contractor to an equitable adjustment for a revised wage determination, the calculation ofthat adjustment would be governed by the SCA Price Adjustment clause. Were it otherwise, the clauses would be largely redundant, and portions would be superfluous. Both clauses would governprice adjustments triggered by a new wage determination, but each clause would entitle the contractorto different recoveries. That makes no sense. A contract must be construed as a whole and in a mannerthat gives meaning to all ofits provisions and makes sense. Bell/Heery, 

### JV. v. United States, 739 F.3d 1324, 1331 (Fed. Cir. 2014); Hol-Gar Mfg. Corp. v. UnitedStates, 351F.2d972, 979 (Ct. Cl. 1965). The cases citedby Sonoran are not to the contrary. The contract in Geronimo Service, 70-2 BCA

### if 8540, did not include the SCA Price Adjustment clause. In LockheedSupportSys., 36 Fed. Cl. at 429, the SCA Price Adjustment clause did not govern the adjustment sought by the contractor. Thus, unlike in the present appeals the SCA Price Adjustment clause was inapplicable to those appeals. CONCLUSION Forthe foregoing reasons, the appeals are denied. Dated: 3 July 2017

11 Administrative Judge Armed Services Board ofContractAppealsI certify that the foregoing is a true copy ofthe Opinion and Decision ofthe Armed Services Board ofContract Appeals in ASBCA Nos. 61040, 61101, Appeals of Sonoran Technology and Professional Services, LLC, rendered in conformance with the Board's Charter. Dated:

12 JEFFREYD. GARDIN Recorder, Armed Services Board ofContract Appeals