## ..

- . ARMED SERVICES BOARD OF CONTRACT APPEALS

. Appeals of

-- . ) ) North American Landscaping, Construction ) ·

and Dredge, Co., Inc. ) ) Under Contract No. W912WJ-14-C-0004 )

-APPEARANCE FOR THE APPELLANT:

APPEARANCES FOR THE GOVERNMENT: ASBCA Nos. 60235, 60236 60237,60238

Joseph L. Katz, Esq.

Huddles Jones Sorteberg & Dachille, P.C. Columbia, MD
Michael P. Goodman, Esq.

Engineer ChiefTrial Attorney Theresa A. Negron, Esq

..

Engineer Trial Attorney U.S. Army Engineer District,

New England
OPINION BYADMINISTRATIVE JUDGE CLARKE
North American Landscaping, Construction and Dredge, Co., Inc. (NALCO) contracted with the U.S. Army Corps ofEngineers (COE) for maintenance dredging ofthe ScarboroughRiver, Scarborough, Maine. NALCO claims the unpaid contract balance of $960,482.48 (ASBCA No

..60235); unabsorbed overhead in the amount.of$108,868 (ASBCA No. 60236); differing site conditions in the amount of$507,914.19 (ASBCA

. No. 60237); anda time extension of94 days (ASBCA No. 60238). We decide entitlement only. We havejurisdictionpursuantto the ContractDisputes Act of 1978 (CDA), 41 U.S.C. §§ 710r-7109. The appeal is sustained in part and denied in part.
FINDINGS OF .FACT


### The Solicitation
1. Sealed bid Solicitation No. W912WJ-13-B-0012, issued on 23 August 2013, invited bids for maintenance dredging ofan eight-foot channel, a six-foot channel, and a six-foot anchorage on the Scarborough River, Scarborough, Maine (tr. 2/222; R4, tab 4b); Due to environmental restrictions dredging was only permitted from 1November 2013 through 31 March 2014 (R4, tab 4b at 33, ,i l.2(b)). Dredging was to commence within

·30 days ofthe Notice to Proceed (NTP) unless that fell within the "no dredge season" of

1April 2013 through 31 October 2013 (id.).2. The solicitation contained five-contract line item numbers (CLINs). CLIN_000l was a lump sum for Mobilization and Demobilization. CLINs 0002 through 0004 were for dredging inthe three channels for stated estimated quantities at a unitprice for each cubic yard ofdredged material. CLIN 0005 was an option item for DerelictMooring Removal and Disposal. Bidders were instructed to bid all items and that all the workwouldbe awarded to one bidder. (R4, tab 4b at 4) There were no instructions concerning what costs were to be included in which CLINs.
3. The solicitation included Federal Acquisition Regulation (FAR) 52.249-10, DEFAULT (FIXED-PRICE CONSTRUCTION) (APR 1984) (R4, tab 4b at 25), and Defense FAR Supplement (DFARS) 252.236-7004, PAYMENT FORMOBILIZATION AND DEMOBILIZATION (DEC 1991) (tr. 2/223; R4, tab 4b at 36, 

## ,r 1.9). This clause, in full text in the solicitation, reads: (a) The Government will pay all costs for the mobilization and demobilization ofall ofthe Contractor's plant and equipment atthe contract lump sumprice for this item. (1) Sixtypercent ofthe lump sumpriceupon completion ofthe contractor's mobilization at the work site. (2) Theremaining 40 percentupon completion of demobilization. (b) The Contracting Officermayrequire the Contractor to furnish cost datatojustifythis portion ofthebid ifthe Contracting Officerbelieves thatthepercentages in paragraphs a(l) and (2) ofthis clause do notbear a reasonable relation to the cost ofthe workinthis contract. (1) Failure tojustify suchprice to the satisfaction of the Contracting Officer will result inpayment, as determ,ined bythe Contracting Officer, of- (i) Actual mobilization costs at completion of mobilization; (ii) Actual demobilization costs at completion of demobilization; and 

### (iii).The remainder ofthis item inthe final paymentunderthis contract.

2

### (2) TheContracting Officer's det~rmination ofthe actual costs in paragraph b(l) ofthis clause is not subjectto appeal. (R4, tab 4b at 36,**~** 

### 1.9) Ms. Jessica Kidd was the contracting officer (CO) for NALCO's contract (tr. 2/220-21). CO Kidd testifiedthatparagraph (b) allows the COE to pay "actual costs at the time ofmobilization and demobilization and then make full payment for that line item at the end ofthe contract" (tr. 2/224).
4. The construction specifications for theproject included section 35 20 23, "HYDRAULIC DREDGING" (R4, .tab 4d at 160}. Part_

### 3, "EXECUTION,"paragraph 3.6.2, Deposition inDisposal Sites, required thatthe dredged material beplaced "at ' Western Beach atthe Prouts Neck Country Club [PNCC] as shown onthe contract

drawings." "[D]redged material shall betransportedto Western Beachby locatingthe pipeline on [PNCC] property at Ferry Rock and then along the beach face above the Mean High Water elevation to the discharge area." (R4, tab 4d at 166, 171) The western beach disposal area was shown onDrawing G-101. Ferry Rock was at the northern·end ofwestern beach and dredged material was to be placed north to south from Ferry Rock along the Western Beach. (R4, tab 4c, drawings G-101, -104) There is no indication on the disposal area drawing that a stone revetment1

### was to be built at the northern end ofthe westernbeach disposal area by PNCC 

### (id.; tr. 2/103, 3/99). The 8-foot deep channel was to be completed first, "prior to the start ofdredging ofall other areas" (R4, tab 4d at 62,**~** 

### 1.1).
5. Specification section 35 20 23, Hydraulic Dredging, part 3, Execution, provides other details relating to dredging (R4, tab 4d at 160). Paragraph 3.4.3, AdjacentProperty and Structures, required the contractor to "conductthe dredging operation suchthat it does notundermine, weaken or otherwise impair existing structures located in ornear the areas to be dredged" 

### (id. at 168). Paragraph 3.5.7, Safety ofStructures and Utilities, likewise requires protection of"piers, bulkheads, revetments, and other structures and utilities lying on, under or adjacent to the site of the work" 

### (id. at 170). The specification also requires construction oftemporary seawardberms to "containthe maximum amount ofdredged material as possible on

·the beach disposal area" 

### (id.,~ 3.6.l(d)), and the use ofa "baffle atthe pipe discharge

to prevent erosion ofthe existing beach" 

### (id.,~ 3.6.4(b)).


### Site Visit
6. ·The COEheld a site visit on4 September 2013. In addition to three COE representatives, representatives from Southwind Construction, the Town of· Scarborough's harbormaster, and the president and general manager ofProuts Neck

1

### See finding 77, 

### infra, for an explanation ofwhat a revetment is.

3

### Country Club attend€d. NALCO did not attend: (R4, tab Sa) There are no minutes or any other record ofwhat was discussed during the site visit.
Two Bidders Responded
7. Bids were publicly opened on 23 September 2013. When the bids were opened they were recorded on an abstract ofoffers. (Tr. 2/225; R4, tab 8) The two. offerors were NALCO and Village Dock (VD). The Independent Government Estimate (IGE) and bids were: IGE -IGE NALCO NALCO VD VD CLIN· Unit Estimated Unit Estimated Unit Estimated Description Price Amount Price Amount Price Amount Mobilization and LS 701,770 LS 1,457,044 LS 1,500,000 Demobilization

·Dredging 8' 19.34 771,666 2.50 99,750 14.30 570,570

channel First 39,900 CD Over 39,900CD 19.~4 427,414 1.40 30,940 14.30 316,030 Dredging 6' 24.49 198,3(:,9 2.50 20,250 14.30 115,830 channel Fjrst ' 

### 8,100 CD Over 8, 100 CD 24.49 210,614" 1.40 12,040 14.30 122,980 Dredging 6' 13.51 347,207 2.50 64,250 14.30 367,510 anchorage First

. 25,700 CD Over 25,700 13.51 133,749 1.40 13,860 14.30 141,570 Derelict Mooring 5,020 25,100 346 1,730 1,000 5,000 Total $2,815,889 $1,699,864 $3,139,490 (R4, tab 8) According to the CO's final decision, NALCO's bid was "extremely low and required bid verification" (R4, tab 2 at 2, 

## ,r 1 ). CO Kidd asked NALCO to verify its bid (tr. 2/226). NALCO verified its bid by letter dated 26 September 2013 (tr. 2/228;. R4, tab 11). After NALCO's bid verification, CO Kidd asked for a revised IGE (tr. 2/227). CO Kidd explained that because NALCO's bid was lower than the IGE, the COEengineers reviewed NALCQ's bid and, talked to NALCO to understand how it planned to perform and as a result revised the IGE (tr. 

### 2/226-27). The IGE was revised on 27 September 2013 to reduce CLIN 0001 Mobilization and Demobilization to

4$341,630.00, reduce the unitprices for CLINs 0002 to 0004 for a total of$1,963,6942 (R4, tab 67a at 4).
8. NALCO's bid included a printed form entitled "PLANTAND EQUIPJ\IBNT LIST" filled outbythe bidders (R4, tab 6 at 6). NALCO listed a GraceHydraulic (Ellicott) dredge with 12-inch discharge rated at 144,000 cubic yards per month and a 20

...foot Honda 225 tugboat 

### (id. at 6-7). · 

### The Protest

, 9. On26 September 2013, Village Dockfiled apre-award agency protest contending thatNALCO's bidwas "grosslytinbalanced"3 (tr. 2/231; R4, tab 12). In an undated "Report ofthe Contracting Officer" responding to the protest, CO Kidd presented a detailed factual analysis/legal analysis and stated the following: Therefore, even ifNALCO's price for mobilization is enhanced and its apparent lowbid is mathematically unbalanced, because the IFB's estimated quantities are reasonably accurate representations ofthe agency's anticipated actual dredging needs, NALCO's bidis not materially unbalanced as there is no reasonable basis for viewingthe bid as representing otherthanthe lowest cost to the government. · Althoughthe line items ofthe NALCO bid couldbe considered as unbalanced, the riskto the Government is marginal. The dredging industry regularly generates bids that are unbalanced, and common riskmitigation techniques are inplace to limitrisktothe Government including the use ofperformancebonds.and payment of mobilization at costwithremaining funds inthe mobilization/demobilization line itempaid atproject completion.

2 The revised IGE included the c~rtification "The undersigned certifies this GovernmentEstimate (IGE) was prepared independently and priorto any knowledge ofprime contractorpricing" (R4, tab 67a at 3). The copy in the

· record is unsigned, but the certification is clearly wrong. 3 "Unbalanced," inthis context means thatthe prices quoted for the

· mobilization/demobilization CLIN was proportionally too high, while the prices

quoted for the actual dredging were too low.

5(R4, tab 17 at 8-9, citations omitted)-Inherreportrespondingto the protest, CO Kidd statedthatthe IGE was "adjusted" and itwas determined thatNALCO'sprice for mobilization was not "unreasonably overstated" 

### (id. at 8). CO Kiddrecommended that Village Dock'sprotestbe dismissed.
The COE Wants a BiggerDredge
10. By letter dated 18 October 2013 to NALCO, Ms. Winston-Vincuilla, chief, COE Contract Division, inforrried NALCO that its Ellicott 370 dredge proposed for the Scarborough Project "is not adequate for open-water dredging inrough northeast waters" and invited-NALCO to submitanew dredge otherwise NALCO's bidwould berejected (tr. 2/233-34; R4, tab 13). Mr. Kim is president ofNALCO (tr. 1/37). He basedhis bid onusing the Ellicott 3·70 Dragon dredge NALCO owned and believed thatNALCO could successfully meetthe dredging requirement of40,000 cubic yards permonth withthe 370 (tr. 1/41, 51-52, 76-77; R4, tab 4b at 33). On 22 October 2013 NALCO responded to the 18 October 2013 letter stating thatthey were confident their Ellicott 370 dredge could do thejob, but offeredto use an Ellicott 670 dredge (tr. 2/234; R4, tab 14 at 2). The CEO ofEllicottDredges providing the dredge extendedNALCO credit for the rental amount. Itwas a four-month minimum at $70,000 permonthplus a $70,000 security deposit or $350,000. (Tr. 1/61-62) Mr. Kim intended to pay for the dredge rental whenthe COEpaidNALCO for mobilization (tr. 1/62). NALCO rented the bigger 670 dredge4 and purchased larger diameter pipe all for about four to five hundredthousand dollars (tr. 1/51-52). NALCO requested an additional $328,624 for the new dredge, but stated ifthat was notpossible NALCO wouldbe able to complete the project atthe original stated bid price 

### (id.). By letter dated 31 October 2013 the COE accepted the Ellicott 670 dredge but denied NALCO's request for an increase 

### iri its bidprice due to the additional expense ofthe larger dredge (R4, tab 15 at 2). By letter dated 1November 2013, NALCO confirmedthat it wouldperform the contractwiththe larger dredge without an increase in its bidprice (R4, tab 1.6): CO Kidd testified thatbefore award the COE found thatNALCO'sEllicott 370 dredge didnotmeetthe requirements ofthe contract and gave NALCO the opportunity to withdraw their bid (tr. 2/255). She testifieq. "Sowe did riot require themto use the 670. We hadthe right, and we did refuse to allow themto use [the] 370." (Id.)

4 On cross-examinatjon Mr. Kim testified that NALCO hadpurchased the 670 dredge in June 2014 for $1,250,000 (tr. 1/155) butthis is contrary to his other testimony and documents inthe record. We conclude NALCO rentedthe 670

· dredge.

6

### COEDenies the Protest
11. On 22 November 2013, Ms. McAndrew, assistant chiefcounsel/division counsel adopted CO Kidd's recommendation and denied Village Dock'sprotest (tr. 2/231; R4, tab 19).


### COEAwards Contract to NALCO & 

### Exercises DFARS252.236-7004(b)
12. Afterthe protestwas denied, the COE awarded ContractNo. W912WJ-14-C-0004 to NALCO on 2 December2013 in the amount of$1,698,1345 (R4, tab 20). The COE did not increase NALCO's bidprice for the larger 670 dredge. The contract included FAR 52.236-2, DIFFERING SITE CONDITIONS (APR 1984). (R4, tab 20 at 10) The contract included DFARS 252.236-7004, PAYMENT FORMOBILIZATION AND DEMOBILIZATION (DEC 1991), included in full text above (R4, tab 20 at 21, tab 21). In the award letter CO Kidd imposed DFARS 252.236-7004(b) and stat~d-that NALCO was required to furnish cost data tojustifythe mobilization and demobilization bidprice and that failure to justifythe price to her satisfaction "will result inpayment ofactual mobilization costs at completion ofmobilization; actual demobilization costs at completion ofdemobilization; and the remainder ofthis item inthe finai paymentunder this contract" (R4, tab 21 at 2). 6 The contract delivery date was 31 March 2014 the last day before the no-dredging period · (R4, tab 20 at 8).


### ProutsNeck Country Club (PNCC) to BuildNew Stone Revetment
13. 

### Mr. Walsh is a COEprojectmariager for NALCO's contract (tr. 3/45, 47). He testified thatthe COE didnot find outthatPNCC was building a stone revetment in the disposal area ofthe site until 3 December 2013,7 one day after awardto NALCO

5

-We do notknow why this amount is slightly less thatthe bid amount of$1,699,864 (finding 7). 6 According to a 27 January 2014 Memorandum for Recordby

### Mr. Stearns, CO Kidd's decision to invokeparagraph (b) was based on a 21 October 2013 memo from· 

### Mr. Acone, chiefofengineering/planning division, finding that NALCO's bid was unbalanced (R4, tab 127 at 140,, 1). 7 While we accept

### Mr. Walsh's testimony there is a potentially conflicting email from: PNCC to 

### Mr. Walsh sent on 3 December2013. The email reads inpart, "As you are aware, we are attempting to tie ourwall reconstruction along the golf course fairly close to your dredging work." (R4, tab 104 at 71) Referringto the email, 

### Mr. Walsh denied he knew abouttherevetmentbefore contract award (tr. 3/52). 

### Mr. Walsh also attended a 4 September 2013 site visitwhere the president and general manager ofPNCC and Southwind Construction were presentbutthere is no record ofwhatwas discussed (R4, tab 5a). We do not know whatrole Southwindplayed inthe process.

7

### (tr. 3/52; 65-66; R4, tab 104). He testified he was "nothappy thatProuts Neck Country Club did not share that information" sooner (tr. 3/52). He testified that a "changed site condition like that is problematic after you've awarded" a contract 

### (id.). There was also apre.:existing rock wall at the location where the revetment was built that is shown in a 2010 picture (tr. 3/53-54, 63-64; R4, tab 66 at 1). This prea.existing rockwall was covered with sand and notvisible in 2013 (tr. 3/64-65). Thepre-existingrock wall is shown in pictures 2 and 3 and the partially completed new revetment is shown in picture 3 (tr. 3/54; R4, tab 66 at 1-3).
NALCO 's Mobilization Costs


### 14. By letter dated 5 December 2013, NALCO submitted itsjustification for its bid mobilization costs with supporting documents (R4, tab 22 at 2). The cost of renting the Ellicott 670 Dredge was $70,000/Monthwith a 4-month minimum and

. security deposit of$70,000 for a total of$350,000 was included 

### (id.; tr. 1/62, 2/196). The mobilization costs were as follows: Transportation Costs: $ 54,469.00 Crane: $ 12,200.00 Dredge: $280,000.00 Pipe: $167,726.00 Housing: $ 15,000.00 Survey: $162,500.00 Bond/Insurance: $100,000.00 Miscellaneous/EmergencyFunds: $ 82,331.00 Total: $874,226.00 (R4, tab 22 at 2) The $874,226.00 was 60% ofNALCO's bid for mobilization as authorized by DFARS 252.236-7004(a) 

### (id.). The survey estimate was from a local survey company in the Scarborough area 

### (id. at 3-4).
15. A preconstructioh confer.ence was held. on 10 December 2013 between NALCO and the COE (R4, tab 23). The COEprepared a standard conference outline and also minutes ofthe meeting

.. Inthe Description ofWork, NALCO was told to

. complete the dredging ofthe 8-foot deep channel before starting other areas. 

### (Id. at 7) Inthe sectionDisposal ofDredgedMaterials, the COE directed that dredged material be placed at the westernbeach and the PNCC as shown onthe drawings 

### (id. at 25). The minutes did notindicate any discussion ofa stone revetment beingbuilt by PNCC in the disposal area (id 

### at 34-35). Dredging was to be completed by 31 March 2014 because environment~! restrictions limited dredging from 1November 2013 through 31 March 2014 

### (id. at 11).

8-Notice to Proceed (NTP)
16. The NTP was emailed to NALCO on 12 December 2013 (app. supp. R4, tab 109 at 83). The email was dis_tributed within the New England District ofthe COE 

### (id. at 82-83). ·Mr. O'Donnell, COE,. one ofthe email recipients, wrote, "Letthe

. babysitting begin! What's the over/under on the dredge's first sinking?" (Id. at 82)

Mr. Walsh responded, "Ifthey sink, does that create a lot ofwork for .the PM? Not really interested in that." COE administrative contracting office (ACO) Morocco (tr. 2/239) responded, "Lot ofpaperwork for the Resident." 

### Mr. Stearns responded,

."All-I know is I'm not going to bethe rep from USACE to be on the dredge once

inclement weather hits." (App. supp. R4, tab 109 at-82) The record contains a copy of the NTP signed by Mr. Kim but unsigned by CO Kidd (R4, tab 25).
NALCO Expresses Concern over the RevetmeY}t
17. On 17 December 2013 a Coordination Meeting was held between NALCO, COE and PNCC. In attendance were, among others, 

### Mr. Kim, Mr. Walsh, COE project engineer, 

### Mr. Stearns, COEproject manager, andMs. Jackson, PNCC manager (app. supp. R4, tab 301). Minutes ofthe meeting indicate that 

### Mr. Walsh directed NALCO to continue work regardless ofthe revetment (sea wall):
Concerns were brought up with the.sea wall that was. planned for construction along Western Beach. Mike Walsh stated-that NALCO should continue to work as is, and not see any p:r;oblems with this and that USACE would resolve this issue.
DeborahJackson stated that the work-could nothalt. due to the high demand ofthe project. Prout's Neck Country Club was anticipating for the sea wall to be completed before March. (Id. at 795) Mr. Kim recalls stating during·the meeting that the revetment was not identified in the contract (tr. 1/150-51). There was no indication on the drawings that a revetment was going to be built on the disposal area (tr. 1/47-48, 52-53). 

### Mr. Kim recalls after that comment he was told the COE had other business with the country club and that he could leave the meeting which he did (tr. 1/151-52). He was not given any information on the details on the revetment (tr. 1/165).
18. By email dated 13 January 2014 to NALCO, CO Kidd acknowledged receipt ofNALCO's 5 December 2013 letter about mobilization costs. In it CO Kidd stated that the matter ofmobilization costs was discussed during the pre-construction

9conference and thatNALCO hadto submit actual costs oncemobilizationwas complete. (R4, tab 26 at 2)
19. Also on 13 January 2014, 

### Mr. Stearns sent an email to NALCO, copy furnished to CO Kidd and ACO Morocco, concerning, among otherthings, PNCC's "revetmentreconstruction work at an areawithinNALCO's disposal operation." PNCC asked thatNALCO stockpile sand 50 feet away from the location ofthe revetmentwork. (App. supp. R4, tab 120)
20. On 14 January 2014 NALCO's new dredge was deliveredto the site (app. supp. R4, tab 122). By emails dated 9 and 15 January 2014 from PNCC (Woods Hole Group) to 

### Mr. Walsh, PNCC statedthatthe revetmentworkwouid interfere with the COE's dredging in its vicinity ofthe revetment and requested thatthe dredging contractor "stockpile the dredge sand" (app. supp. R4, tab 123 at 129-30). 

### Mr. Walsh testifiedthathe was concerned aboutwork onthe revetment interfering with NALCO's dredging operations (tr. 3/66-67). On 16 January 2014 Mr. Stearns forwarded the PNCC emails toACO Morocco andwrote:
This was what Woods Hole Group sentto Mike Wal~h in regards to their revetment work inthe same areawhere NALCO needs to dispose sand. Itwould make no sense for NALCO to agree to suchterms butregardless, I guess I can still askthemto play nice. (App. supp. R4, tab 123; tr. If58) 

### Mr. Kim recalled telling

### Mr. Stearns that they cannotbe building a revetment inthe disposal areawhenNALCO was dredging and asked ifthe revetment couldbe built after the dredging was complete. According to 

### Mr. Kim, 

### Mr. Stearns saidthe COE didn't care ifNALCO finished its work, they were justfollowing procedures. (Tr. 1/59)


### COERefuses to PayNALCO 's Mobilization Costs in its Bid
21. On 22 January 2014 NALCO submitted an invoice for $874,226.40 which

, was 60% ofNALCO's total mobilization costs of$1,457,044.00 inNALCO's bid as

authorized byparagraph (a) (ex. A-12). CO Kiddtestified that she did notbelieve the 60% ofCLIN 0001 "bore a reasonable relation to the cost ofthe work inthe contract, holistical1y" because the "line items were not balanced" and CLIN 0001 included costs that should have been CLINs 0002-0004 for dredged material quantities (tr. 2/298-300). She said "you can't even fuel a dredge for this work at the cost [$2.50] ofthe line item for the quantities" (tr. 2/299). She understood thatthe dredged quantity price of$2.50 wouldnot compensateNALCO for the costs ofthe dredge, pipe, survey etc. andthat NALCO hadplaced those costs inthe CLIN 0001 Mobilization/Demobilization costs

10(tr. 2/299-300). ShetestifiedthatNALCO's mobilization cost was not out-of-line with the otherbid but was a little bitmore than the government estimate (tr. 2/300).
22. In a 22 January 2014 email to ACO Morocco, Mr. Steams stated that NALCO had all oftheir "plant and material onsite" and were preparing to start dredging (app. supp. R4, tab 125 at 133). Mr. Steams also-wrote:
The President ofNALCO, Sung Man Kim, kept mentioning thatNALCO is short on cash at the moment and they needed to bepaid for mobilization. I told him in a separate e-mail today thatNALCO needs to provide backup documentation tojustifytheir mobilization andthat 1) USACE could notprovide advance payments since it's notpart ofthe contract and 2) thatI highly doubted USACEwouldpay for procurement costs ofa new dredge. 

### (Id.) Also on 22 January 2014, Mr. Dolan, COE, sent an email to ACO Morocco, copy to CO Kidd and Mr. Walsh, stating:
We had discussions about closely monitoring the

· contractor's performance andbeing quickwith the letters

to documentnon-performance. Obviously we will work · with the contractor and hope he can perform, butif [he] can'twe are going to aggressively administer the contract to protectthe Governrnent[']s rights underthe contract. At this point, the company seems very willing to workwith us...time will tell. · (App. supp. R4, tab 126 at 135)
23. By email dated 27 January 2014 to ACO Morocco and CO Kidd, 

### Mr. Steams wrote:
. Ijust got offthephone with Sung Man Kim ofNALCO

and hewas not in a happy moodregarding our initial stance ofwhatwe feel are allowable costs for mobilization (See attached memo). He statedthat ifwe gave him any less than the requested 60% ofNALCO's

- mobilization/demobilizationbiditem (Totals $874,226.40), wewouldputNALCO in a positionwhere they could not perform/work and would go bankrupt. Even atthe request of$874,226.40, he stated NALCOwould still be in a bad

11

### position since, as you can tell from my memo, all his costs are tied into the purchase ofnew materials and equipment.
The attached memo gives good reasoning as to why we feel only $1OOk in mobilization is currentlyjustifiablebut ifany [of] my positions are erroneous, I am willing to recant on them. Ofcourse, the final determination comes from the Contracting Officer so ultimately whatever is agreed to, I'llbe happy to pay it. (App. supp. R4, tab 127 at 138) The attached memo by Mr. Steams, also dated 27 January 2014, stated that CO Kidd decided to allow only actual mobilization and transportation costs because NALCO's bid was unbalanced (id. at 140). Mr. Steams disallowed all equipment costs (dredge, pipe, fusion machine, tractor, etc.) to arrive at a payment of$101,102.70 (id. at 142).
NALCONotifies COE of Severe Cash Flow Problems JeopardizingPerformance
24. On 28 January 2014 NALCO wrote a seven-page mobilizationjustification memorandum expressing "major concerns" (R4, tab 27). NALCO informed the COE that it was being "severelypenalized" bythe COE'sposition notto pay NALCO's bid mobilization costs and thatthe result wouldbethatNALCO wouldhave difficulty performing with the resultantnegative_ cash flow (id. at 3, 5-8). NALCO stated "no contractor canbereasonably expectedto finish with a highprobability ofsuccess and low risk on aproject ofthis magnitude with negative cash flow" 

### (id. at 6); In all,

.NALCO presented multiple supporting arguments:

-- 1. NALCO's bid was notmaterially unbalanced.
2. The fact that CLIN 0001 was 86% oftotalprice was due to aggressive biddingstrategy thatbenefited the government. 3. NALCO's cash flow is being severely restricted as a result ofproviding the COE a significant discou~t.
4. NALCO'sproposed mobilization costs arereasonably related to the absolute costofthe work.
5. Withholding mobilization costs provides multiple disincentives to performance. ·

12

### 6. NALCO cannotbe reasonable expectedto complete the contract with such a high magnitude ofnegative cash flow. (Id. at 2-6) NALCO requested a meeting on 29 January 2014 to discuss the memorandum and mobilization payment dispute, On 18 January 2014 NALCO's request and memorandum was distributed within the COE. ·

### Mr. Dolan, COE, commented by 28 January 2014 email, "Yikes

...I know it is late inthe day, butthat made no sense to me. I will reread later, but sevenpages ofblablabla

...it is not my fault because I didn'trealize what I was doing when I signed the contract is not a legal

. defense" (app. supp. R4,.tab 130 at 171). CO Kidd recalled meeting withNALCO to

discuss these payment issues (tr. 2/246).
25. Inresponse to NALCO's continuedrequests for more payments, CO Kidd sentNALCO a letter dated 30 January 2014 explaining her decision to exercise · paragraph (b) ofDFARS 252236-7004 (tr. 2/247; R4, tab 28). CO Kidd would only allow the following mobilization costs:

• Crane $18,375.00 • TruckingEquipment $9,968.00 • Trucking Dredge $16,060.00
• PipeFloat Shipping $900.00 • Office Trailer $828.70 • Real Estate Rental $3,975.00
• Bond $50,996.00 (Id. at 2) Thetotal amount approved was $101,102.70. This was the same breakdown of allowed mobilization costs in 

### Mr. Steam's 27 January 2014 memo (app. supp. R4, tab 127 at 142f 

## Mr. Kimtestified thatNALCO expected to be paid approximately $800,000 for mobilization costs butwas onlypaid about $100,000. This adversely impactedNALCO's ability to perform. (Tr. 1/68-69) CO Kidd statedthatthe remaining costs for mobilization 

### inN.ALCO's bid "are not costs that maybe attributed to mobilization" (R4, tab 28 at 2). · She denied costs for thepipe, pipe float, fusion machine, Kubota RTV 900, work preparation (fuel/utilities) an~ the dredge as ''not inherently associated with mobilization" (id. at 2-3; tr. 2/203). CO Kidd testified that including the cost ofthe equipment, i.e., dredge, pipe etc., inthe mobilization costs did not make any sense to her(tr. 2/305). She believes that as a result she came up withthe language "notinherently associated with mobilization" (tr. 2/304-05, 307). In the 30 January 2014 letter to NALCO, CO Kidd acknowledgedNALCO's cash flow concerns: Your letter dated 28 January 2014 also presented your concerns about your company's cash flow, basedupon my decisionto require youtojustifythe contract lump sum

13price for mobilization. 

### It is notthepractice ofthe U.S. Army Corps ofEngineers to counsel contractors ontheir cash flow concerns orprovide financing to contractors who experience cash flow problems. Resources thatprovide financing are available to the general public andto small businesses. Your decisionto pursue ornotpursue these resources is your business decision. · (R4, tab 28 at 3) CO Kidd stated thatNALCO was currently in default and threatened

.termination for default 

### (id. at 3-4). CO Kidd also warned NALCO aboutthe "serious

consequences" of"unsatisfactory contractorperformance ratings" onpotential future business NALCO might seek 

### (id. at 4).,
26. CO Kiddrecognized she had discretion to exercise paragraph (b) of DFARS 252.236-7004 ornot (tr. 3/38). She agreed thatNALCO would bepaid all of the bid CLIN 0001 mobilization and demobilization costs that she initially disallowed at the end ofthe contractwhen final paymentwas_made (tr. 3/40-41). CO Kidd testifiedthat she had concerns about NALCO's ability to perform when sheput off payment ofthe majority ofthe CLIN 0001 costs to the end ofthe contract even though she knew thatNALCO needed the dredge andpipeto performthe contract (tr. 3/41). However, she exercisedher discretion to follow paragraph (b) to limitrisk to the government (tr. 3/41-42). She testified that iftheypaidfor the dredge up front "there was no reason for the contractorto continue performance once they hadthe money because there is no money onthe line items [for dredgedmaterial]" (tr. 3/42). She did , what she did knowing thatthe $2.50 CY dredged material rate was not enough to put fuel in the dredge much less reimburse NALCO for the dredge, pipe and other equipment needed to perform (tr. 2/299, 3/43-44). During the hearing the Judge asked CO Kiddwhen NALCO would get money to perform:

(Tr. 3/44) Q. So when was he going to gethis money to perform?


### A. Well, he's, would, he would be financing.· But his, theway thathe structured-his bidputhim in that position

-- Q. Only because you exercised your discretionto do B ratherthan

### A. That's whatputhim inthe position.


### A. I would argue thatthere was already a risk, and that's why we did B instead of

### A.

1427. The COE authorized payment of$101,102.70 for CLIN 0001 Mobilization Costs (R4, tab 29). CO Kiddtold NALCO to resubmit the invoice for $101,102.70 which was the amount she was willing to pay for mobilization costs (tr. 2/201; R4, tab 29). Since the COE would notpay forthe mobilization costs as bidby NALCO, it did nothave the money to pay for the survey. That is why, according to Mr. Paul Kim,. NALCO's vice president, NALCO did not have survey support for the contract. (Tr. 2/198)


### NALCO Starts Dredging.
28. The revetmentwas completed by 7 February 2014 

### (tr. 3/52-53). NALCO started dredging on 10 February 2014 (R4, tab 72 at 47). Mr. Kimtestifiedthat the revetmentwas a "bigproblem" becausethe dredging material couldundermine the wall and cause itto collapse. NALCO hadto protectthe revetment and could only work at lowtide inthe vicinity ofthe revetment. (Tr. 1/47-50, 52-53; R4, tab 4c at 3, 7) Itwasn'tuntil t~e end ofMarch thatNALCO passedthe revetmentportion ofthe disposal area (tr. 1/50). Mr. Paul Kim is the vicepresident ofNALCO andwas the dredge operator (tr. 2/195). Mr, Paul Kim testified there were a "large degree ofstop and starts ofthe dredge" on this project. NALCO had a "watcher" on the beachwho was in constant communicationwith the dredge. When there was too much water getting close to the revetment (wall) they would stop the dredge. (Tr. 2/195) Stopping a dredge is not a simple matter because the operator must first clean outthe discharge pipe 

### (tr. 2/195-96).
29. On 18 February 2014 ACO Morocco sent a letterto NALCO stating that after one week ofworkNALCO's production/dredgingrate was only about 100 CY. Since only 41-dredge days remaineduntil the cut-offdate of31 March 2014, ACO Morocco requestedthatNALCO submit a productionplan indicating how it. · would completethe project. (R4, tab 30) NALCO responded by letter also on 18 February 2014 statingthatweatherpreventedmore dredging during the first week and that itwould implement 24 hourwork days to remedy the issue (R4, tab 31). ACO Morocco responded on20 February 2014 acknowledging the badweather during the first week ofdredging and askingNALCO to "elaborate onNALCO's original responses from the letter dated 18-FEB-2014." ACOMorocco threatened to issue a cure notice "unless we see immediate corrective action." (R4, tab 32) Mr. Kim "responded verbally' statingthat he did nothave time to respond to letters due to the needto oversee dredging operations (R4, tab 34).
30. NALCO submitted another invoice on 23 February 2014 for $22,188.82 for additional mobilization costs which the COE agreedto pay (tr. 2/202; R4, tab 33).

15_31. Mr. Walshrecalls thathe received a 24 February 2014 email from Ms. Jackson, PNCC, complainingthatNALCO's discharge was causing exc_essive erosion on the beachin front ofthe revetment. A picture was includedwiththe email. (Tr. 3/54; R4, tab 66 at4) Mr. Walshtestified thattherewas "noprotection required ·-ofa-coastalrevetment, exceptprotect itagainstnegligentoperation, orthe discharge

end ofthepipe" (tr. ~/75).

_ 

### NALCO 's FinancialHardship

--- -- 32. B_ecause-the COEwouldrtot pay for the dredge andpipe as mobilization costs, Mr. Kim couldnotpayNALCO's bills and he was getting communications from collection companies. Mr. Kim decided to get a loan using his personalhouse and equipment as collateral. (Tr. 1/65-66) Mr. Kim also borrowed $100,000 from members ofhis churchto make payroll (tr. 1/68-69). Mr. Kim eventually losthis house, equipment and his business to creditors (tr. 1/65-66).


### COEIssues Cure Notice
33. On28 February 2014 CO Kidd issued a cure notice due to "low dredging production." CO Kiddrequested a writtenplan onhowNALCO wquld cure the problem and suggested a termiriation for defaultmightbe issued ifthe situation was not cured. (R4, tab 34)
34. Mr. O'Connorwas a project engineer onthis projectworking with ACO Morocco (tr. 3/77-78). He took over from Mr. Steams who leftinFebruary 2014 (tr. 3/78-79). When Mr. O'Connorfirst arrived Mr. Kim explainedhis cash flow problems and Mr. O'Connor felt something shouldbe done to payNALCO more for performance (tr. 3/101-02). In a 3 March 2014 email to ACO Morocco, subjectMob Payment for NALCO, Mr. O'Connorwrites:
Current scenario is the contractor completes 59% ofthe workbutwepayhim for only 15% ofthe contract amount until we settle the situationwithhis totally unbalance[d] bid?
This does not seem fair to the contractor. (App. supp. R4, tab 144 at 232) Mr. O'Connor's 6 March 2014 email to Mr. Walsh

· suggestedthatNALCO shouldbepaid about $200,000 for performance 

### (id. at 231).

Mr. Walshresponded, "I am.in favor ofgivingto NALCO whatever compensationyou believe they are due. The soonerthe better consideringtheir cash-flowproblems." 

### ~)

-

16·35. By letter dated 4 March 2014 to CO Kidd, NALCO reiterated its argument that it shouldbepaid its bid mobilizationprice because it had beenpaid only $123,291.52 ofthe $874,226.40 it claimed (R4, tab 35). NALCO explained its positio_n thatthe dredge and pipe are properly part ofmobilization costs. NALCO stated: Moreover, the Corps' refusal to payNALCO for its mobilization expenses is presently seriously hindering NALCO's ability to implement a 24 hourwork day in orderto recovertheproject schedule. NALCO shall notbe

. responsible for delays to theproject scheduling caused by

the referenced adverse weather as exacerbated bythe Corps' position onthe mobilizationpaymentissue. 

### (Id. at3-4) CO Kiddtestified about this letter and statedthat the cost ofthe dredge, pipe, etc., was not a mobilization costbecause itwas "notrelated to getting equipment to the site" (tr. 2/254). She testified thatthe cost for these items shouldbeput in the price ofthe dredge quantity line item (tr. 2/254-55). CO Kiddreplied to NALCO's · 4 March 2014 letter on 7 March 2014 statingthatNALCO had not submitted its plan

to cure the deficiencies and suggestedthe contractwould be terminated for default (R4, tab 36). NALCO responded on 9 March 2014 requesting a meeting and assuring the COEthat it was committedto completingthe contract (R4, tab 38). A series of correspondence ensued culminatingwith a 17 March 2014 COE letter informing NALCO that itwould riot be allowed toperform beyond 31 March 2014 and stating that ifperformance was not completedby that date a termination for default maybe issued (R4, tabs 39-41). In a 24 March 2014 letter to NALCO, CO Kiddreiterated the COE'spositionthat itwouldnot consider any "interimpaymentrequests from NALCO" andthat workmaynotproceedpast 31 March 2014 (R4, tab 43). 

### Protecting the Revetment
36. Contract specification section 35 20 23, Hydraulic Dredging, paragraph 3.5.7, Safety ofStructures and Utilities, requiredNALCO to protectPNCC's new revetment (R4, tab 4d at 170). Mr. Kimtestifiedthat as of7 March 2014 NALCO continuedto protect the revetment from damage but as a result ofthe revetment NALCO had a very small work area that slowed down the dredging (tr. 1/79-80; app. supp. R4, tab 145). The needtoprotectthe wall inthe discharge area caused NALCO to stop pumping "[e]very day, every day, because ifit's hightide we stopped" to prevent "diggingunderneath" the wall (tr. 1/100, 102). Mr. Kimtestified, "Ifthere were no wall, we would have been ableto fly through the work" becausethey co:uldjustpump sand onthe beach (tr. 1/80).

17

### wrote, 37. In 

### an 11 March 2014 email to Mr. O'Connor and CO Kidd, ACO Morocco
Jessica--please remember that the contractor is working odd hours and atthe mercy ofthe'tides while·we have somebody 8 hours/day. The contractor has a lot ofstop and start due to,waiting for the tide, putting outpipe, then dredging ifthe tides allow. Itwas very inefficient. (App. supp. R4, tab 152 at 259)
COEDrafts TerminationforDefault


### 38. In 

### a 12 March 2014 email to ACO Morocco, CO Kiddwrote, "I'm drafting the T4D lettertoday for Counsel's review, and I'd like to send your completed report downwith my letter, hopefully tomorrow? Atthis point, we're still on track for T4D Friday." (App. supp. R4, tab 154 at 282) Also on 12 March 2014 Ms. Cameron, COE, emailed CO Kidd a drafttermination for default letter (app. supp. R4, tab 155).
PNCCNeedsAccess to the Revetment


### 39. By email dated 14 March 2014 to NALCO, Mr. O'Connor statedthat PNCC needed to place sand over the revetment and would need an 18-foot access in front ofthe revetmentto allow the equipmentto get in to place the sand (tr. 3/86-87; R4, tab 47 at 7-8; app. supp. R4, tab 158 at 290-92). The worktookthree days, 21 to 23 March 2_014 which caused NALCO to stop pumping (tr. 1/106-07, 3/73-74).. Mr. Walsh testified that this was "absolutely'; a change (tr. 3/74).
NALCONotified COE of Possible REA


### 40. By letter dated 25 March 2014 to CO Kidd, Mr. Kim notified her that the

. revetment inthe disposal area was interfering withNALCO's dredging and constituted a differing site condition (R4, tab 44). He explained thatprotection ofthe revetment requiredNALCO to maintain a second sand dike to direct flow ofdredging discharge away from the revetment. Mr. Kim informed CO Kidd thatNALCO "might make a request for an Equitable Adjustment." (Id.) 

### Mr. Kim sentthe letter because the COE wanted to close the project on 31 March 2014 (tr. 1/90). Hebelieved that CO Kidd would give NALCO an extension so they could finish thejob (tr. 1/91). CO Kidd did not give NALCO a time extension (id.).

1841. By letter dated 25 March 2014 to COKidd, NALCO stated:

- \

- Theprotection ofthe adjacent stone and sand bagwalls constructed during the performance ofour contractbythe --Prout's.Neck Country-Club, is a site condition thatwas not

identified inthe contract documents whichhas and continues to impactNALCO's time to perform its contract and its cost. NALCO believes this is a differing site condition within the parameters ofthe contract.
The protection ofthe Country Club's structures requires NALCO to maintain a second sand dike to direct the flow ofdredging discharge away from the structures which could neither be anticipated nor included in NALCO's bid. NALCO feels anEquitable Adjustment and a time extension isjust and warranted as a result ofthe changed condition. (R4, tab 44) CO Kidd agreedthatthe revetmentbuiltby the country club was not specified inthe contract (tr. 3/7). Shetestified, "clearlythe revetmentwas not in the contract specifications, thatthe impact ofitwas minimal" or "extremely minimal" (tr. 3/10, 12-13). CO Kidd testified thatitwas NALCO's "incompetence" and "mismanagement ofthe disposal''_that causedproblems, notthe presence ofthe revetment (tr. 3/16-17).


### NALCODemobilizes
42. Mr. K-im testified thatby the end-ofMarch 2014 NALCO hadmoved beyondthe revetment inthe disposal area (tr. 1/50). Mr. Kim asked CO Kidd for a two-week extension based onthe delay causedby the revetment. NALCOwas not given an extension and, on 31 March 2014, was told to remove the dredge and pipe immediately orthey wouldbeterminated for default. NALCO removed all ofthe equipment intwo days. (Tr. 1/50-51, 94) NALCO was notpaid for its mobilization and demobilization and other costs (tr. 1/95).
43. 

### In a 4 April 2014 internal COE email, Mr. O'Connor stated:
VerbalDirections to NALCO onthe beach: · There were ongoing directions to protectthe golf course's newly constructed stone wall from hydraulic pumping discharge. LastFriday 3-28-2014 toldthem in an on-site conversationto wrap up the dredging and concentrate on

19grading the beach. Followedup with a couple-ofphone calls on Sat and Sun (3/29 & 3/30)[.] (App. supp. R4, tab 189)
44. In another 4 April 2014 internal COE email, ACO Morocco statedthat NALCO hadremoved all equipment and material from the beach (app. supp. R4, tab 191 at 389). Inresponse, Mr. Walsh wrote, "I amnot surprised. Ifnothing else NALCO has puttheirbest foot forward and approached this projectwith integrity and a good faith effortto meettheir obligations underthis contract." 

### (Id.) In a 7 April 2014 email Mr. O'Connor stated, "The unofficial COE survey shows NALCO['s] workwas

_ very good considering they hadno survey work" (app. supp. R4, tab 192 at 392).
45. By email dated 9 April 2014 to CO Kidd and other COEpersonnel, Mr. Walshprovided a copy ofthe COE dredging survey(app. supp. R4, tab 201). The survey found that NALCO had dredged 16,078 cubic yards-ofrequired and over-depth material from the 8-foot entrance channel thatwas compensable under CLIN 0002AA. It found that NALCO removed an additional 8,704 cubic yards that was either outside the channel or over depth that was not compensable. 

### (Id. at 445) Mr. Walsh explained:



### (Id.) So they removed a total of24,702 cubic yards from the river, butwe would only pay for 16,078 ofthat volume. This is why we insist inthe contractthat the contractor have survey support.· Otherwise they are dredging blind and can waste time and their own money dredgin_g material wewill notpay for.

46. By email dated 23 April 2014 from Mr. O'Connorto CO Kidd and other COEpersonnel, Mr. O'Connorreportedthe results ofhis review ofNALCO' recent pay request for $929,623 (app. supp. R4, tab 204). He discussed "a lot ofproblems" withthe pay request, but concludedthata final settlement mightbe $740,000 to $790,000 

### (id.). CO Kidd responded onthe same day stating thathis analysis was "spot on," but cautioned Mr. O'Connorto explain in writing whyNALCO's request.was rejected 

### (id.). 8 ·

8 There was no testimony aboutthis email during the hearing.

20

### Photographs.
47. Datedphotographs showthe conditions in January, February and March 2014. PhotoNo. 3, 28 January 2014, showthe partially-completedrevetment and "sandbags" (R4, tab 66 at 3). PhotoNo. 4, 24 February 2014, shows dredging discharge and the lack ofprotection ofthe revetment and the relatively small.discharge area between the revetment and the water 

### (id. at 4). PhotoNos. 6 and 7, 6 March 2014, showthe dredging discharge, protection ofthe revetment, and, small discharge area 

### (id. at 6-7). Photo No. 8, 15 March 2014, is an aerial photo showing the dredge and pipe ending at the revetment 

### (id. at 8). Photo No. 9, 16 March 2014, shows dredging discharge in front ofthe protected revetment 

### (id. at 9). 

### ·DailyReports
48. Therecord includes NALCO's daily quality control reports from 27 December 2013 through 1April 2014 (R4, tab 72) and COE's daily quality assurance reports from 21 January 2014 through 15 April 2014 (R4, tab 73). There was no testimony on these reports atthe hearwg. However, NALCO's reports are typewritten and identify delay causedby the revetment. The COE's reports are handwritten and not as detailed. NALCO reviewed its andthe COE's daily reports. There were 156 hours ofdelays causedbythe revetment documented in NALCO's reports (app. proposed findings offact

## ,r 163).9 There were numerous days ofweather delays documented on NALCO's daily reports. 10 The COE's daily reports were not as clear but did not contradictthe entries inNALCO's daily reports 

### (id. 

## ,r,r 164-65). 

### Preparations for SettlementNegotiations
49. Mr. Kim hired a local attorney, Mr. Giffune, to assist in settlement negotiations with CO Kidd (tr. 1/97). On4 April 2014 Mr. Giffurie sent CO Kidd a letter with a spreadsheetattached documenting on a daily basis impacts to the work causedby having to protectthe revetment and weather issues (R4, tab 47). Mr. Kim recalled that Mr. Giffune reported that CO Kiddwould not considerpaying for the dredge rental, the newpipe and differing site condition (tr. 1/98). CO Kiddrecalled a. phone conversation withMr. Giffune where they discussed the possibility of settlement as an alternative to termination for default (tr. 2/264-65).
50. Also on4 April 2014 CO Kiddwrote NALCO to remind itthatthe performance period ended on 31 March 2014 andthatNALCO mustremove its equipment and materials from the area: She informedNALCO that ifshe decides to

9 Weverified the accuracy ofNALCO's tally by looking atthe entries on the reports. 10 NALCO alleged 53 days ofweather delay butwe were only able to verify 27 days ofcritical delay (R4, tab 64 at 4-5; app. proposed findings offact 

## ,r 209).

21terminate the contract for default, NALCO wouldberesponsible for excess re-procurement costs. (R.4, tab 48) CO Kidd recalled discussions withNALCO's attorney over a no-_cost settlement and that she was looking for a settlementproposal (tr: 2/266-67).
51. By email dated_25 April 2014 to Mr. Kim, CO Kidd stated:
To clarify Mr. O'Connor's statement, labor and equipment costs for dredging are not currently payable. The terms of your contract allow for payment ofa firm fixedprice for the unit cost ofdredged materials. We are only considering costs for your mobilization and demobilization line items because we invokedDF ARS 252.236-7004 whenwe awarded this contract, which allows us to pay actual costs.
Because you did not completeperformance underthe contract, we will need to determine howto conclude our business arrangement. Atthattime, the Government may consider all ofthe costs you incurredunderthe contract, including those related to labor and equipment for dredging. These costs cannotbe considerednow, however. (App. supp. R4, tab 209 at 483)
52.- By email dated 1 May 2014 to various COE employees, CO Kiddwrote: Yesterday Terry and I spoke-to the attorney and surety for NALCO.
-We spoke aboutNALCO's "pre-claim" statements and 

### I lettheir lawyerknowthat 

### I didn't find any claims to have

. merit.

... -We discussed the path forward for the contract. We've discussed these before, butto remind youthe three options

. before us are: 1. T4D

- Suretytenders payment for paymentbond. 2. T4D

- Suretytakes over. 3. No-cost settlement as T4D alternative. 

### I stressedthe benefits ofthis to NALCO's attorney, and heplans to presentthis optionto his client. It is myhopethatwe can

22 (go down this path, butthat depends onNALCO's willingness. (App. supp. R4, tab 214) CO Kidd again told Mr. Kim's lawyer that she would not consider the dredge rental, pipepurchase, etc. or differing site condition (tr. 1/119,

- - 172, 174).
53. By email dated 7 May 2014 to various COE employees, CO Kidd wrote: Terry and I met again today withNALCO's·counsel and surety. NALCO has agreed to pursue a no-cost settlement with us, which was our desiredpath forward. Please remember ~at, until the settlement is negotiated and finalized, NALCO couldback out andwe would still need to issue a T4D. Also please remember that money obligated onthe contractremains obligateduntil it is deobligated, and any remaining funds won'tbe deobligated until after we settle. (App. supp. R4, tab 218) Mr.-Kim testified that atthe time, hehadno choice butto agree to what CO Kidd offered (tr. 1/118).
54. Bilateral ModificationNo. POOOOl, dated 7 May 2014 was issuedto exercise "optional task 5 DerelictMooring Removal and Disposal (5) times" for a total of$1,730.00 (R4, tab 49)

.

. 55. On 9 May 2014 Mr. O'Connor sent an email_to ACO Morocco suggesting that a settlement cost would be around $616,000 (app. supp. R4, tab 220 at 509). Also on 9 May 2014 ACO Morocco sent an email to CO Kidd informing her ofMr. O'Connor's settlement estimate of"inthe $600,000 range" (app. supp. R4, tab 221).
56. On 12 May 2014 NALCO submitted invoice No. 3 for $60,742.86 for mobilization and demobilization costs and $40,195 for dredgedmaterial for a total of $100,937.86 (tr. 2/207; ex. A~2). ~Mr. Kim sent an email to the COE inquiring about the payment ofinvoice No. 3 thathadnot been received (app. supp. R4, tab 225). Mr. Kimtestified that the $60,742.86 in invoice No. 3 for-demobilization costs was neverpaid (tr. 1/126, 2/207-08). The $40,195 may have beenpaidto the bonding company (tr. 2/206).
57. On 3 June 2014 Mr. O'Connor emailedMr. Walsh stating thatNALCO was still notpaidthe majority oftheir money for work completed (app. supp. R4, tab 227). By letter dated 5 June 2014 to NALCO, CO Kidd acknowledgedthat ModificationNo. P00002 authorizedthatNALCO'spaymentrequest for $41,925 be

23paid to its surety, National American Insurance Co. CO Kidd also reminded NALCO that she was waiting for a settlementproposal. (R4, tab 50)

. 58. On 16 June 2014 NALCO's attorney submitted a settlementproposal inthe

-amount of$1,023,898 that included costs,-for the-dredge, pipe, miscellaneous

equipment, payroll, overhead, demobilization, and differing site conditions (R4, tabs 53, 77). The proposal included the following:
To date, NALCO has beenpaid a total of$165,216. By comparison, its expenses onthis project are estimated at well in excess of$1,000,000. I cannot stress to you enoughhow severely this loss has impactedmy client, its principals and employees. As you considerthis proposal, beplease [sic] mindful thatNALCO is a small, family-owned business andthat its survival may well depend on the resolution ofthis project.

- (R4, tab 53 at 2) NALCO offeredto settle the matter for $700,000 

### (id. at 5).
59. On 24 July 2014 a prenegotiation objective memorandum (POM) was signed by Mr, O'Connor, ACO Morocco and CO Kidd (R4, tab 76). The POM included an IGE of$348,508.18 as the amount owedtoNALCO 

### (id. at3). Within the POMwas an acknowledgementthat"[t]here were difficulties in completing work in the area ofSection A-A on sheet C-104 as called for in the contract. The combination oftheprivately owned structure [revetment] and narrow beachmadeperforming contract work mo_re difficult." 

### (Id. at 8)
-The 1August2014Meeting & ModificationNo. P00003
60. Negotiations were held.betweenNALCO and the COE on 1August 2014 (tr. 2/269). CO Kiddtestified, "Ithinkthatthey [NALCO] knew thatthe alternative to comingto a negotiated agreementwas to-be terminated for default" and "the whole purpose ofthe negotiations was to come to a settlement so that; to avoid the situation where we wouldhave to negotiate for default" (tr. 3/19). CO Kidd explained that she and "herteam" believed termination for default wasjustified, "Therevetment hadvery little to do withthe failure; itwas the mismanagement and incompetence, not only in the disposal, but also in the dredging itself' (tr. 3/20).
61. Mr. Kimrecalled attending the 1 August 2014 meeting with CO Kidd. She offered $350,000. Mr. Kim and his lawyer leftthe meeting and wentto a separate room. Mr. Kim toldhis lawyerhe could not accept $350,000. The lawyerwentback to the meeting and returned to Mr. Kimwith an offer of$375,000. CO Kidd told his · lawyer that $375,000 was take it or leave it and ifNALCO did nottake it she would

24

### terminatethecontractfordefault. (Tr.1/129, 131.a.33, 169,175) Mr.Kimunderstood that ifthe contractwas-terminated for default he would get no money and the bond company would auction offhis personal house, property andNALCO's equipment (tr. 1/133). Mr. Kim decidedto call a Small Business Administration (SBA) ombudsman. He talked to the ombudsman and told herhe had a dilemma, either take $375,000 or face termination for default. (Tr. 1/133) According to Mr. Kim, the ombudsman told him thatthe COE was trying to force NALCO into bankruptcy and that ifhe didn'ttake the money offered he would lose his house. She suggested that he sign and could go.to court and that ajudge mighthelp him. (Tr. 1/134) Mr. Kim went back into the meeting with CO Kidd and signed the offer (tr. 1/134-37). Hetestified it was a "take it or leave it" situation (tr. 1/i76). CO Kidd sent Mr. Kim an email after the meeting instructing him how to request an "interimpayment" of$374,000 with the final $1,000 at final payment and release ofclaims (app. supp. R4, tab 237).


### NALCO ComplainsAbout COE's Settlement Terms
62. By email dated 5 August 2014 to "chysler@maine.rr.com,11 " 

### Mr. O'Connor stated "Settled on a price and NALCO will notbe hitwith a termination" (app. supp. R4, tab 238). By email dated 6 August 2014 to the COE inspector general (IG), NALCO asked for help. The email read inpart: Eventually talks came to a No Cost Settlement which occurred last Friday (8/1/2014) and we felt almost forced to accept as we had various vendorsthatwe neededto pay. Ofthe agreed upon settlementprice ($375,000), there was $0 allocated to the_dredge, $0 from the pipes, and $0 from the differing site condition which we believe was unfair.

·· Also, payroll as well as equipment costs incurred during

the dredging periodwere disallowed as well. They said they wouldbe unable tojustify any sort ofpayment for the dredge and pipe ifthey were audited in the future. From our understanding, the contracting officerbeli,eved thatthe differing site condition had no bearing ontheproject and rejectedthem completely. (App. supp. R4, tab 240 at

### J-2; tr. 1/140-41) The 

### IG responded on 

### 7 August 2014 stating thatthe 

### IG could nothelp andreferred NALCO to the disputes clause (app. supp. R4, tab 241). NALCO respondedthe same day stating inpart, "Wewere just looking to receive a fair amount and we showed our costs which exceeded $1,000,000 onthe projectbut requested $700,000 to have an amicable split butthey completely blew offa few ofour costs saying itwas notpayable" (id.). By email

11 

### The identity ofthe person at this email address is not in the record.

25dated 8 August 2014, NALCO sentthe same 6 August 2014 textto Mr. Hazlett, COE

- director ofcontracting (app. supp. R4, tab 242; tr. 1/141). Mr. Hazlett responded on 11 August 2014 stating thathis staffwould look into the action and getbackwith NALCO (app. supp. R4, tab 243; tr. 1/141-42). ModificationNo.· P00003
63. A few days afterthe 1 August 2014 meeting, Mr. Kim received draft ModificationNo. P00003 inthe mail incorporating the $375,000 settlement and deobligating the remaining $1,159,647.48. Hereceived an email·asking him to sign and return to CO Kidd. (Tr. 1/140) Mr. Kim signedModification No. P00003 on 11 August 2014 and CO Kidd signed it on 12 August 2014 (R4, tab 54). He recalls there was a release, buthe was so angry hejust signed it to getthe money (tr. 1/136-40). Mr. Kim testified that he signed the rpodification under protest and did not agree with its content (tr. 1/143). CO Kidd knewthatMr. Kim was nothappy withthe settlement agreement and had told her that he felt forced to ehter into the settlement agreement (tr. 3/24-25).
64. Modification No. P00003 hadrelease language intwo places:
SUMMARY OF CHANGES
The Contractorunderstands and agrees that final payment of$375,000 will constitute compensation in full onbehalf ofthe Contractor, its subcontractors and suppliers for all costs and markups directly or indirectly attributable to workperformedunderthe Contract, including any modifications or changes attributable hereto. The

- ·Contractor will,·by-receipt of-saidpayment for itself, its successors and assigns, remise, release and for[e]ver discharge the United States, its officers, agents, and employees ofand from all liabilities, obligations, and claims whatsoever arising under or byvirtue ofsaid contract.

RELEASE

- CONTRACTORTO GOVERNMENT: This contracthavingbeen completed and finally accepted, the United States, its Officers and Agents are hereby released from all claims and demands whatsoever arising under or by virtue ofsaid contract. (R4, tab 54 at 3, 5)



### 26- 65. 

### -In a 13 August-2014 email to NALCO, 

### Mr. Kim's accountant recommended against a review ofNALCO's finances atthattime because the review would have to include the statement, "The Company is not a going concern" (ex. A-3).
66. On 13 August 2014 CO Kidd sent an internal email updating the recipients onthe "Scarborough settlement." The email read inpart:
Also on Monday, NALCO sent an e-mail to 

### Mr. Hazlett, the Director ofContracting for USACE. 

### In the email, NALCO made many ofthe same allegations they've made before, including differing site conditions, lack of payment, etc. They also saidthey felt "forced" into a settlement becausethey hadto paytheir subs. (App. supp. R4, tab 245 at 587; tr. 1/144-45)


### Mr. HazlettResponds to NALCO
67. On 15 Augus_t 2014 Mr. Hazlettresponded to Mr. Kim's 

### 8 August 2014 email with the following:
The Corps ofEngineers shares your disappointmentthat the time-sensitive dredging work couldnotbe completed underthe terms and conditions ofthe contract. However, having reviewed carefully the salient facts, it appears that ourNewEngland Districtnot only acted in good faith at

· every step in awarding and administering this contract, but

also took extra measures to limit financial damage to your company while acting withinthe bounds ofthe law and the best interests ofthe government. 

### I am informedthat a mutually acceptableresolutionwas achieved by both parties onAugust 1, 2014 at theNewEngland District. At that meeting, NALCO agreedto accept a total of$375,000 as fair compensationto resolve any and all claims against the United States under this contract. All othervalue on the contract was to be de-obligated viabilateral modification. The contracting officer advises that in consultation with your attorney who was present, you chose to acceptthese terms. Accordingly, 

### I see no basis for recommendingthatthe contracting officerreconsider the settlement agreement. Please address further concerns

27

### you may haveregarding this contractto- the responsible contracting officer. (App. supp. R4, tab 249 at 601)

- 68. CO Kidd testified that Modification No. P00003 authorized NALCO to be paid $374,000 with the final $1,000 to be paid at final payment (tr. 2/279-80). NALCO was paid $374,000 on 26 August 2014 (tr. 1/137, 146; app. supp. R4, tab 250). The COE withheld $1,000. The $1,000 was paid about a year later in the summer of2015 afterNALCOfiled its certified claim. (Tr. 1/146-47) · 69. On 1 October 2014, 

### Mr. Kim wrote Secretary ofDefense Chuck Hagel asking him to "straighten outthe situation" (tr. 1/137; app. supp. R4, tab 255 at 619). By letter dated 28 October 2014 to 

### Mr. Kim, 

### Mr. Hazlett, responding onbehalfof Secretary ofDefense Hagel, recounted many ofthe facts ofinteractions between NALCO and the NewEngland District COE and included:

- Becausethe Corps elected to invoke DFARS clause 252.236-7004 and to pay·actual mobilization costs, itwas necessary for you to establish actual mobilization costs. You statethatyou had costs associated with mobilization thatthe Corps did not agree to pay. DFARS clause 252.236-7004(b)(2) states thatthe Contracting Officer's determination ofthe actual costs is not subjectto appeal. Regulation does not define mobilization costs, but industry standards exist. 

### In determining allowable mobilization costs, the Contracting Officer relied upon the input ofthe --Construction Division oftheNewEngland District. The

District's Administrative Contracting Officer worked very closely withyou to identify any potential allowable costs that could be associated with mobilization. Atyourrequest, you alsometwith the Contracting Officer, Administrative Contracting Officer, and.ChiefofConstruction to discuss allowable mobilization costs. The goal ofthe Corps inthis matter was toprovideyou with the resources necessary to complete theproject while limiting riskto the government. You werepaid for those mobilization costs thatwere allowable and substantiated with documentation. Ultimately, the Contracting Officer's informed decision regarding whichmobilization costs were allowable is final in accordance with DFARS clause 252.236-7004(b)(2).

28

### I share your disappointmentthatthe project was not

- completed in a timely manner. The Corps is committed to

partnering with our small business community to meet our mission requirements. However, after review, it appears that ourNewEngland District acted in good faith in awarding and administrating this contract and also took extra measures to limit financial damage to your company

_

while acting within the bounds ofthe law andthe best interests ofthe government. Accordingly, there is no basis for reconsideration ofthe settlement agreement.

- - 

### (App. supp. R4, tab 265 at 663-65) CO Kidd drafted this letterto NALCO signed by Mr. Hazlett on 28 October 2014 (tr. 3/36; app. supp. R4, tabs 259-60).
70. On 18 November 2014, Mr. Kim met with-Mr. Hazlett and Ms. Fontana, associate director, COE Sinall Business Programs (app. supp. R4, tab 269). Mr. Hazlett told him his assistant would call to help him submit a certified claim (tr. 1/138-39).
The Cashman Memo


### 71. Mr. Cashman is the director ofcontracting for the COE New York District (tr. 2/5-6). Mr. Hazlett askedMr. Cashman ifhe would be part ofa team thatwould review the Scarborough dredging project (tr. 2/7). By email dated 8 December 2014 to Ms. Lee, COE attorney, Mr. Cashman wrote, "Lorraine

- talking to the NAE KO

- she saidthe settlement agreement:~vas in lieu ofa termination for default" (ex. A-5). Also on 8 December 2014, Mr. Cashman sent a memorandum to Mr. Hazlettpresenting a detailed analysis ofthe NALCO dispute with the COE (app. supp. R4, tab 271). Mr. Cashman concluded with Recommendations that included the following:
Due to the facts, that it appears from the contractor's understanding ofmodification P00003, there-was not a meeting ofthe minds regarding this to be a final settlement-thisreview teamrecommendsthatboth parties discuss this matter further. NAE shouldreview any new REA. Ifthe contractor canjustifythatthey are entitled to additional compensation in addition to the agreed upon $375K, the Contracting Officer shouldwork out a final bilateral modification with a release ofclaims for this contract. 

### (Id. at 690) Nothing happened as a result ofthis recommendation.

29

### ·COE SmallBusiness OffieeAgrees withNALC0-
72. On 16 December 2014, Ms. Fontana, sent an email to various COE personnel including CO Kidd and COL Stoddard, Mr. Hazlett's Deputy (app. supp. R4, tab 277 at 718-19). Ms. Fontana wrote·that the COE had treated NALCO improperly. She concludedthat DF ARS clause 252.236-7004 Mobilization and Demobilization was "misappli~d" and the COE's refusal to pay NALCO the full amount ofCLIN 0001 was unreasonable. She found the COE's denial ofNALCO's request for equitable adjustment for "significant differing site conditions" was unreasonable. She also asserted that ModificationNo. P00003 was notvalid due to the COE's "improper actions." She concludedthe email with, "Itis CESB's professional opinion and advisementthatNALCO, is entitled to fair and reasonable treatment to include full payment (CLIN 0001 value $1.46M) for services already provided under CLIN 0001, mobilization/demobilization, as well as compensation for differing site

.conditions, at a minimum

.." She also statedthat ifthe matter was notresolved "our office will proceedto advise NALCO to pursue the Claims process." 

### (Id. at 719)
73. In a 22 December 2014 email to COL Stoddard, NALCO wrote the following:
Just for clarification, ofthe agreed upon settlementprice ($375,000), there was $0 allocated to the dredge, $0 for the pipes, and $0 for the differing site conditions (extra work) whichwe believe was unfair buttheyjustwould not consider any ofthose costs at all. There was also $0 ofthe costs incurred during the dredging period due to them excluding all costs duringthatworkperiod. Als.o, we believe we should have received $1,498,969.00 from the firm-fixed-price contractbased onthe amountthatwas dredged buthad only received $538,486.52.
The 

### only reasonwe accepted this settlement was due to various government-agencies recommending thatwe do so in order toprevent bankruptcy as explained in the November 18[,] 2014 meeting withMr. Hazlett and Ms. Fontana. We had spoken withthe Congressman's office as well as the National Ombudsman which is where we had received the advice due to the financial damage we had received from the project. Also, we were told that we could receive additional compensation afterwards. (App. supp. R4, tab 280 at 725)

30

### FinalPayment·
74. By letter dated 23 January 2015 to NALCO, CO Kidd acknowledged that $1,000 remained unpaid and asked NALCO to fill out a form to "assistus in the closeout effort" (app. supp. R4, tab 297 at 788). CO Kidd recalled thatthe $1,000 was paid unilaterally because NALCO would not submit a final paymentrequest (tr. 2/280; R4, tab 62).



### · Certified Claim
75. NALCO submitted a certified claim in the amount of$2,165,093.11 on 14 January 2015 (R4, tab 57). ·By letter dated 5 February 2015 to NALCO, the COE stated that the certification inNALCO's claim was not in accordance withthe FAR's certification requirement (R4, tab 60). On 19 February 2015 NALCO submitted a properly certified claim (R4, tab 61): On 30 April 2015, NALCO submitted a supplemental certified claim for a 94-day time extension andrescission/repudiation of th:e settlement agreement (R4, tab 2 at 19).
76. On2 July 2015 CO Kidd issued a final decision denying NALCO's claim (R4, tab 2 at 24). NALCO appealedthe final decision to the Armed Services Board of Contract Appeals (ASBCA) and on 28 September 2015 the appeals were docketed as ASBCANos. 60235 ContractBalance, 60236 Unabsorbed Overhead, 60237 Differing Site Condition, and 60238 Time Extension (R4, tab 1). 

### Expertfestimony & Reports
Mr. Carlos Pena
77. 

### Mr. Carlos Penais advil engineer with experience in dredging and waterfront engineering and works for CLE Engineering in Marion, Massachusetts (tr. 2/88). The Board accepted 

### Mr. Pena·as NALCO's expert in dredge construction and performance (tr. 2/92-93). 

### Mr. Penawrote an expert report wherein he listed the.

· documents he reviewed and offered someopinions(ex. A-8). He learned that the golf

course built a stone revetmentwhich is a slanted seawall thatprotects the landward side from erosion (tr. 2/95-96). The COE drawings for the original Scarborough project did not showthe stone revetment constructedby the golfcourse (tr. 2/108-09, 3/99-100; R4, tab 4c, drawing C-104, section A-A). Drawings for the country club revetment, dated 24June 2013, show a "probedwall 2011" andth~ newrevetment seaward ofthe probed wall. Drawing note 1 states that an existing stone wall was constructed in the 1930's. The old wall influenced the location ofthe newrevetment. 

### Mr. Penatestified that the existence ofthe new stone revetment required NALCO to· protect it from "scouring" that would undermine the revetment and cause it to collapse.

31

### (Tr. 2/133-37) 

### Ifthe ')et" ofthe slurry were to hit the sandbelow the revetment it cou-ld erode the sand and the revetment would "fall apart" (tr. 3/204-05). The contract required NALCO to start pumping the dredged material on the country club's property where the newrevetmentwas built (tr. 2/138-42; R4, tab 4c at 3, sheet G-101, tab 4d at 171).

--- - -- -- --- - 78; 

### Mr. Penareviewed NALCO's records and found that it was less than 30% efficient and spent most ofits time trying to protectthe revetment (tr. 2/150). Once NALCO could move beyond the revetment it could "normalize operations and achieve a higher productionrate" (tr. 2/15l).
79. 

### Mr. Pena discussed various pictures taken in February and March 2014 that showed the revetment and dredging discharge operations. Thepictures show the access road NALCO provided to the country club and the protection berms used to protect the revetment. (Tr. 2/145-49; ex. A-11)
Mr. RogerBullock
80. 

### Mr. Roger Bullock is deputy chiefofoperations and chiefofnavigation, COE, Wilmington District ofNorth Carolina (tr. 3/111). 

### Mr. Bullockwas accepted by the Board as an expert in dredging (tr. 3/120, 125). 

### Mr. Bullock wrote an expert report dated 7 April 2017 (R4, tab 78).
81. 

### In his expertreport 

### Mr. Bullock first reviewed the abstract ofbids. He statedthat "NALCO's bidpresented warning signs as it was significantly lowerthan the independent government estimate (IGE). The contractor calculated excessive mobilization and minimarunit costs, particularly when comparedto the IGE unit cost." (R4, tab 78 at4) NALCO's

### CLIN 0002A unit costwas $2.50 comparedto the IGE of $19.34 

### (id., R4, tab 8). 

### Mr. Bullock couldnot see howNALCO could operate theequipment andpersonnel at such a low price 

### (id.).

-82. 

### Mr~ Bullock reviewed the contract documents and opined that the COE's concern over NALCO's dredge was appropriate:


### It is my opinion that US.ACE presented an appropriate level ofconcern withrespect to NALCO's bid and gave NALCO a prudent opportunity to improve its approach or withdraw due to clear indications thatthe contractor proposed inadequate equipment and showed inattentiveness to the level ofeffort required for success. (R4, tab 78 at 5)

3283. 

### Mr. Bullock commented onNALCO'sperformance. He stated "NALCO did notachieve the production capability ofthe Ellicott 670 because NALCO did not alter its manning approachto account for the largerplant [dredge]." (R4, tab 78 at 6; · tr. 3/145-48) Concerningplacement ofthe dredged material, the pipeline route was along the mea:n highwaterline andthe'dischargepoint depends on whatthe site looks like (tr. 3/150).
84. 

### Mr. Bullock commented on the stonerevetment. He stated, "The revetment was a knownphysical presence before and after bidding, which couldhave been notedbythe Contractorhad it conducted a site visit." 12 He acknowledged that the revetment was not on theplans and drawings. (R4, tab 78 at 8; tr. 3/152) 

### Mr. Bullock did notbelieve that the revetment should impactNALCO's production (tr. 3/153). He opined thatNALCO's problems with the revetment were the result of, "inattention to detail and housekeeping ofthe beach with constant contouring ofthe material as the projectprogressed, again indicated insufficient supervisory, workforce, technical knowledge, and/or management ofthe contractrequirements" 

### (id.).
DECISION 

### PreliminaryMatter
We wantto make it clearthat, although we referto CO Kidd often in this decision, we do not intend to single her out. Her decisions were made collectively withthe support ofother COEpersonnel, "herteam" (finding 60), as discussed herein. Responsibility for CO Kidd's actions and decisions are shared by all COE personnel involved.


### Pre-AwardInterference
We understand that the government's pre-award actions·cannotviolate the implied duty ofgood faith and fair dealing because the implied duty does not arise before the contract-is awarded. 

### Tug Hill Construction, Inc., ASBCANo. 57825, 14-1 BCA

## ,r 35,777 at 175,025 (Although every contract imposes upon eachparty a duty ofgood faith and fair dealing in its performance and its enforcement, that duty does not deal with good faith in the fonnation ofa contract.). We discuss the COE's pre-award actions because they are relevant to the COE's breach ofthe implied duty of good faith and fair dealing after award.
Bids were publicly opened on 23 September 2013 (finding 7). Three days later, on 26 September 2013, Village Dock, the only otherbidder, filed a pre-award agency

12 This statement is clearly incorrect. He may have confused the "probedwall" with the new revetment.

33protest contending thatNALCO's bid was "grossly unbalanced" (finding 9). It is obvious from the Abstract ofBids thatNALCO's bid was in fact "grossly unbalanced," but it·offered a really cheap price that appealed to the COE (finding 7). While the protestwas pending the COE reviewedNALCO's bid. NALCO proposedto use an Ellicott 370 Dragon dredge that it owned (finding 10). On 1'8 October 2013 the COE informed NALCO that its 370 dredge was not acceptable and thatNALCO had a choice to make, it could withdraw its bid orpropose a larger dredge otherwise its bid would be rejected 

### (id.). NALCO agreed to offer a larger dredge, the Ellicott 670, buthad to rent it for the additional cost of$70,000 per monthwith a four-month minimum plus $70,000 security deposit. NALCO asked for an additional $328,624 to compensate it for the larger dredge. However, NALCO stated ifit was notpossibleto increase its bid it would agree to complete the project at the original bid price. On-1 November 2013, NALCO confirmed that it would not withdraw its bid and woulduse a larger dredge, the Ellicott 670, at the original bid price. (Id.) The COE did not increase NALCO's bidprice as NALCO requested (findings 10, 12). The COE also recalculated its IGE based onNALCO's bid in ordertojustify award to NALCO in violation ofthe certificationprinted on the IGE form (finding.7).
Inresponding to Village Dock'sprotest, CO Kidd concluded that NALCO's bid was mathematically unbalancedbutnot materially unbalanced because ''there is no reasonable basis for viewing the bid as representing otherthanthe lowest cost to the government" (finding 9). CO Kidd argued there was no riskto the government because the COE couldpay for "mobilization at costwith remaining funds inthe mobilization/demobilization line itempaid atproject completion" 

### (id.). Village Dock's protest was denied on 22 November 2013 (finding 11). The COE awarded ContractNo. W912WJ-14-C-0004 tb NALCO on 2 December 2013 at the prices in NALCO's bid (finding 12). Inthe award letter CO Kidd imposedDFARS 252.236-7004(b) and statedthat NALCO was required to furnish actual cost data to justifypayments for mobilization and demobilization 

### (id.).
CO Kidd testifiedthatthe COEhad a rightto refuse to accept NALCO's use of its 370 dredge or have its bidrejected (finding 10). Contrary to the COE's belief, it had no rightto allow NALCO to amend its bid and offer a larger dredge in the middle ofa sealedbid competition. FAR 14.404-2(e), Rejection ofIndividual Bids, does not allow the government torequest bid changes that go to the substance ofthe bid or prejudice otherbidders. 13 Inthis case the COE did both: it changed the substance of NALCO's bid and itprejudiced Village Dock. The.COE hadthree alternatives after bid opening, 

### (1) rejectNALCO's bid as non-responsive because ofthe 370 dredge and

13 FAR 14.404-2(e) reads in part, "Alowbidder may berequestedto delete objectionable conditions from a bidprovidedthe conditions do not go to the substance, as distinguished from the form, ofthe bid, or work an injustice on other bidders."

34

### award to Village Dock, (2) award to NALCO based on its original bid that proposed

· the 370 dredge, or~(3) cancelthe solicitation. OfGourse ifthe COE awarded the

contract to Village Dock, it would haveto pay substantially more. (Finding 7) 

### It is clear to us that the COE violated FAR to get the low price offered by NALCO, but with the larger more expensive dredge at no additional cost. It

### was unfair and prejudicial to require NALCO 

### to absorb the additional $350K for the larger dredge. It 

### is also clear from CO Kidd's analysis ofthe protest that a significantjustification for denyingthe·protest was her plan to impose DFARS 252.236-7004(b) to limit mobilization "to cost" and defer payment ofthe remainder ofthe CLIN 0001 amount to the end ofthe contract. (Finding 9) The COE gave no thought to the effect ofthis plan on NALCO's cash flow. Therefore, before award, the COE improperly recalculated the IGEto support award to NALCO, improperly manipulated NALCO's bid tojustify award atthe lowest price, in so doing unfairly increased NALCO's cost ofperformance by requiring-a larger dredge, and simultaneously planned to act to deprive NALCO ofthe cash flow it needed to perform the contract. Invoking DFARS252.236-7004(b) was an Abuse of Discretion
No one in the COE gave any critical thought to the language in DFARS 252.236-7004(b) that set forth the criteria that must be satisfied before CO Kidd had the right to impose paragraph (b) on NALCO. If

### they had, it should have become apparent that the language is ambiguous. This in tum requires a multi-step.legal analysis to sort out the interpretation to be applied. That analysis is what we do in this decision.
Contract interpretation under the Contract Disputes Act (CDA) is a question of law. States Roofing Corp. v. Winter, 587 F.3d 1364, 1368 (Fed. Cir. 2009). 14 

### DFARS 252.236-7004, Payment for Mobilization and Demobilization, provides initially: (a) The Government will pay all costs for the mobilization and demobilization ofall ofthe Contractor's-plant and equipment at the contract lump sum price for this item. (1) 

### Sixty percent ofthe lump surrt price upon completion ofthe contractor's-mobilization at the work site.

14 

### Appellant offered a contract interpretation analysis, in its reply brief, but it focused on the words "actual mobilization costs" rather than the prerequisite requirement needed tojustify imposing paragraph (b) (app. reply br. at 5-7).

35

### (2) The remaining 40 percent upon completion of demebili-zation~

- 

### (Finding 3) The lump sum price in this case is NALCO's CLIN 0001 price of $1,457,044 (finding 7). Under paragraph (a) NALCO would-be entitled to be paid 60% of$1,457,044 or $874,226.00, (a)(l), for mobilization and 40% or $582,817.60, (a)(2), for demobilization ofits "plant and equipment." There is no definition of "mobilization" in the contract. We interpret the factthat "plant" is listed separately from "equipment" to mean that "plant" is something different than equipment. There is no-definition of"plant" in the contract. It 

### is clear from NALCO's bid that it interpreted "mobilization" ofits "plant and equipment" to allow for reimbursement for its equipment costs (dredge, pipe, etc.) which was required for performance. (Findings 7, _14} It 

### is equally clear that CO Kidd interpreted "mobilization" of"plant and equipment" to be limited to transportation and other non-performance related costs (findings 23, 25). CO Kidd believed that recoupment ofthe equipment/performance · costs should be in CLINs 0002 to 0004 unit prices for cubic yards ofdredged material (finding 21). However, there is nothing in the solicitation informing bidders ofthis interpretation. It

### is equally-clear CO Kidd knew that NALCO put its equipment/performance costs in CLIN 0001 15 

### because, she testified that CLINs 0002 to 0004 at $2.50 per CY was not enough to put fuel in the dredge (finding 26). She

- therefore knew that invoking DFARS 252.236-7004(b) would deprive NALCO ofthe

funds it needed to perform. · DFARS 252.236-7004(b) gives the CO the discretion to impose an alternative method ofpayment for mobilization: (b) The Contracting Officer may require the Contractor to furnish cost data tojustify this portion ofthe bid ifthe Contracting Officerbelieves that the percentages in paragraphs (a)(l) and (2) ofthis clause do not bear a reasonable relation to the cost ofthe work in this contract. (1) Failure·tojustify such price to the satisfaction of the Contracting Officer will result in payment, as determined by the Contracting Officer, of- (i) 

### Actual.mobilization costs at completion of mobilization; (ii) 

### Actual demobilization costs at completion of demobilization; and

15 

### Village Dock did the same thing because its CLIN 0001 price was $1.5M (finding 7).

36(iii) 

### The remainder ofthis item in the final payment under this contract. (2) The Contracting Gfficer's determination ofthe actual costs in paragraph (b)( 1) ofthis clause is not

·subject to appeal. (Finding 3) The use ofthe word "may" in the first sentence "presupposes" discretion. Smart Way Transport Services, 

### ASBCA No. 60315, 16-1BCA136,569 at 178,110. This grant ofdiscretion is limited by paragraph (b) and does not preclude the possibility that exercising paragraph (b) could be an abuse ofdiscretion. 16


### We considered abuse ofdiscretion recently in Raytheon 

### Co., ASBCA No. 57743 etal.. 

### 17-1 BCA 136,724:
In determining whether a CO's decision is arbitrary or capricious or an abuse ofdiscretion we consider (I) 

### whether there is evidence ofsubjective bad faith on the part ofthe CO; (2) whether the CO had a reasonable, contract-related basis for the decision; (3) the amount of discretion given to the CO; and (4) whether there was a proven violation ofa statute or regulation. There is no need for each ofthe four factors to be present in order to establish arbitrary and capricious action by the CO. For example, proofofthe fourth factor might be enough to show that the co·s conduct was arbitrary and capricious. However, the regulatory violation must have been· prejudicial.
The Board's scope ofreview ofalleged arbitrary and capricious action is narrow and we are notto substitute ourjudgment for that ofthe agency. However, the agency must have examined the relevant data and be able to articulate a satisfactory explanation for its action, including a rational connection between the facts and the action.
Id. 

### at 178,845 (citations omitted).

16 

### The immunity from appeal in subparagraph (b)(2) applies only to the CO's determination ofactual cost ofmobilization/demobilization in subparagraph (b)(I), 

### not the decision to impose paragraph (b).

37We consider these four elements. There is no evidence of"subjective bad faith," element (1). Viewed in a vaGuum. CO-Kidd's decision to impose (b) to defend against the protest seems reasonable, element (2). The amount ofCO Kidd's discretion, element (3), is limited by the test stated in (b). The optional method of payment in paragraph (b) may be imposed only if"the Contracting Officer believes that the percentages in paragraphs (a)(l) and (2) ofthis clause do not bear a reasonable relation to the cost ofthe work in this contract." The comparison required by (b) is to the "cost ofthe work in this contract." It does not say the actual cost oftransportation ofplant and equipment as CO Kjdd interpreted the language. So the central question in int6rpretingthis language is "what work"? It is apparent from NALCO's bid that it interpreted the "cost ofthe work in this contract" to mean the total cost ofthe contract. NALCO said as much in its 28 January 2014 Mobilization Justification Memorandum, "NALCO's proposed mobilization costs are reasonably related to the absolute cost of the work" (R4, tab 24 at 4), but the COE failed to appreciate the point. CO Kidd interpreted "work" to mean only the actual cost transportation costs, bond costs, etc. but not the cost ofequipment needed to perform the work (finding 25). Language is legally ambiguous ifit is susceptible to two reasonable interpretations. 

### MA. Mortenson Co., ASBCA No. 50383, 00-2 BCA, 30,936 at 152,705 ("It is a settled legal principle that a contract or its terms are considered ambiguous only when susceptible to two different reasonable interpretations, each ofwhich is consistent with the contract language.") (citations omitted). We thinkthe mostreasonable interpretation of"the cost ofthe work in this contract" is the total cost ofwork in the · contract or the total price ofCLINs 0001 to 0004 or $1,698,134 17 (finding 12). As-stated above, "the percentages in paragraphs (a)(l) and (2)" are $874,226.40 and $582,817.60 respectively or $1,457,044.00. Applying the amounts as required by the language means that to exercise paragraph (b) CO Kidd must find that $1,457,044 does not bear a "reasonable relation" to the total price of$·1,698, 134. The clause provides no help in understanding what "reasonable relation" means. We see no reason why $1,457,044 does not bear a "reasonable relation" to $1,698,134 and, ifcorrect, CO Kidd would not have had the discretion to invoke (b). However, we must also look at CO Kidd's interpretation to see ifit is also reasonable. In determining reasonableness it is only necessary that the interpretation be in the "zone ofreasonableness." 

### States Roofing, 587 F.3d at 1369 ("A contractor's reasonable interpretation need not be the best interpretation. 

### It need only be within the zone ofreasonableness/'). Therefore, we look closely at CO Kidd's interpretation ofparagraph (b). CO Kidd testified that she did not believe the 6_0% of CLIN 0001 or $874,226.40 "bore a reasonable relation to the cost ofthe work in the contract, holistically" because the "line items were not balanced" 18 and CLIN 0001

17 We are not sure why the contract award amount was slightly different that the $1,699,864 shown on the abstract ofbids (finding 7). 18 When it benefited the COE to defend the unbalanced bid, it did so in response to the protest (finding 9) to capture NALCO's low price. However, after award the

38included costs that should have been in CLINs 0002 to 0004 for dredged material. (Finding 21) We do not know what she meant by "holistically." We do not know what the unbalanced bid has to do with this test. The contract did not inform bidders they could only recover equipment/performance costs in CLINs 0002 to 0004. CO Kidd clarified her reasoning stating that the equipment costs·in CLIN 0001 "are not costs that may be attributed to mobilization" and "not inherently associated with mobilization." (Finding 25) Therefore, CO Kidd's interpreted "work"to be limited to the actual costs of moving equipment to the work site and other non-performance related costs, i.e., not

· costs for the dredge, pipe, etc. Her test was therefore, that $874,226.40 did not bear a

reasonable relationship to the actual cost oftransportation and other non-performance related costs which she valued at $101,102.70. We find that this interpretation, although not the best in our opinion, is within the "zone ofreasonableness." Having two reasonable interpretations, the language "do not bear a reasonable relation to the cost of

. - the work in this contract" is ambiguous as a matter oflaw.
The next step in the interpretation analysis is to use parole/extrinsic evidence to clear up the ambiguity. 

### Teg-Paradigm Environmental, Inc. v. United States, 465 ·F.3d-l329 ar-1338.:39 (Fed.·Cir:·2006) (Although the parol evidence rule bars the use of extrinsic evidence to supplement or modify a written agreement, the rule does not bar the use ofextrinsic evidence to interpret the terms ofa contract when the plain and ordinary meaning is not clear' from the contract itself.). There is no extrinsic evidence in

. the record to assist us in ascertaining what the drafters ofthe criteria in paragraph (b) had in mind. The next step is to consider the ambiguity and duty to inquire. Ifan ambiguity is patent a duty to inquire arises. 

### NVT Technologies v. UnitedStates, 370 F.3d 1153 at 1162 (Fed. Cir. 2004) (Ifthe ambiguity is patent, it triggers a duty to inquire. A patent ambiguity is one th.at is "obvious, gross, [or] glaring, so that plaintiff contractor had a duty to inquire about it at the start."). The ambiguity in this case is the ·-1anguage ofDFARS 252.236-7004(b), one ofmany clauses incorporated into the

·contract. We find that this ambiguity was not patent and NALCO was not obligated to inquire. This leads us to the final ·step. The government wrote DFARS 252.236-7004(b) and we interpret paragraph (b) against the government under 

### contraproferentem:
Ifthe ambiguity is not patent, butlatent, we construe it against the drafter under the rule of

### contraproferentem. Metric Constructors, Inc. v. NASA, 169 F.3d 747, 751 (Fed. Cir.-1999). Forthe rule to apply, however, the nondrafting party must prove that it relied on its interpretation during bidding. 

### Fruin-Calnan Corp. v. UnitedStates, 912 F.2d 1426, 1430 (Fed. Cir. 1990).

COE uses the unbalanced bid asjustification to refuse to pay NALCO its CLIN 0001 mobilization price (finding 23).

39

### Weis Builders, Inc., ASBCA No. 56306, 10-1 BCA, 34,369 at 169,722. It is clear from NALCO's bid that it relied upon its interpretation ofCLIN 0001 "mobilization" ofits "plant and equipment" to allow for partial reimbursement for its equipment (dredge, pipe, etc.) needed to perform the contract (findings 7, 14). This is the interpretation-we will enforce. We will not enforce CO Kidd's interpretation that CLIN 0001 only allows for transportation costs and not equipment costs based on 

### contraproferentem. Therefore, CO Kidd's decision violated element (3) in that her discretion was limited and element (4) in that she violated a regulation, which is OFARS 252.236-7004(b).
There are other independent facts supporting our conclusion that CO Kidd abused her discretion ininvoking paragraph (b). Before award in defending the protest she recognized NALCO's bidwas unbalanced and decided to implement (b) knowing NALCO's performance costs were in CLIN 0001. (Finding 9) She testified "you can't even fuel a dredge for this work at the cost [$2.50] ofthe line item for the quantities" 19 (finding 21). This testimony proves that CO Kidd knew that NALCO could not possibly pay for its costs ofperformance through the per cubic yard prices in CLINs 0002 to 0004: -She knew that NALCO had frontloaded its equipment/performance costs in· CLIN 0001. (Findings 23, 25) Nowhere in the solicitation are the bidders warned that only actual transportation and related costs would be paid for in CLIN 0001 and that bidders must recover all other costs needed to perform the contract in CLINs 0002 to 0004 unit prices for each cubic yard ofdredged material. The total amount approved by CO Kidd for mobilization was $101,102.70 reserving $773,123.70 for payment only when performance was complete. (Finding 25) CO Kidd knew NALCO needed this money to perform. She also knew that the COE's insistence that NALCO offer a larger dredge at no additional cost would increase NALCO's cost ofperformance thereby adversely affecting cash flow. She furtherjustifiedher decision by testifying that ifthe COE paid for the-dredge and other equipment up front "there was no reason for the contractor to continue performance once they had the money because there is no money on the line items [for dredged material]." (Finding 26) It is astonishing to us that the COE would enter into this contract assuming that NALCO would not perform ifit were -paid 60% ofits CLIN 0001 bid mobilization price as authorized by paragraph (a). In response to NALCO's plea for payment (finding 24), CO Kidd wrote, "It is not t~e practice ofthe U.S. Army Corps ofEngineers to counsel contractors on their cash flow concerns orprovide financing to contractors who experience cash flow problems" (finding 25). This shows a degree ofcallousness unexpected from the government since the government caused NALCO's cash flow crisis. When asked by the trialjudge how NALCO was supposed to pay for performance, CO Kidd testified that NALCO would have to get private financing and that the way NALCO structured its bid caused the cash flow problem (finding 26). Again this is proofthat the CO Kidd understood that

19 The COE's dredging expert, Mr. Bullock, agreed that NALCO could not operate its equipment at a per cubic yard price on $2.50 (finding 81). ·
40NA~CO front-loaded its performance costs in CLIN 0001. Thejudge suggested it was ·CO Kidd's decision to exercise paragraph (b) that caused NALCO's cash flow problem (id.). CO Kidd responded that there was already risk (id.). While these facts arguably do not support a finding of"subjective bad faith," they provide further support for our . finding ofabuse ofdiscretion be-cause CO Kidd knew that invoking paragraph (b) would cause NALCO severe cash flow problems. In fact, CO Kid4 knew all ofthis before award in defending the protest but was focused on capturing NALCO's low bid and protecting the COE rather than focusing on successful performance. (Findings 7, 9) Arguably, CO Kidd should have taken this knowledge and decided notto award to NALCO because its bid violated her-interpretation ofthe clause.
For the reasons discussed above we find that CO Kidd abused her discretion when she invoked DFARS 252.236-7004(b).


### The COE Breached the ImpliedDuty of GoodFaith & 

### Fair Dealing/Non-Interference

- ··Previouslywe dealtwith·the-implied'duty-ofgood-faith and fair·dealing in 

### Raytheon Missile Systems Co., ASBCANo. 57594, 13 BCA

## ,r 35,264. We followed the Federal Circuit's guidance in 

### Precision Pine & 

### Timber, Inc. v. UnitedStates, 596 F.3d 817 (Fed. Cir. 2010), that required a determination that the government's action: (1) was "specifically targeted" at the contractor, and (2) "reappropriated" a benefit guaranteed by the contract to the contractor. 

### Raytheon, 13 BCA

## ,r 35,264 at 173,116. The Federal Circuit clarified 

### Precision Pine in 

### MetcalfConstruction Co. v. United States, 742 F.3d 984 (Fed. Cir. 2014). The Court began with the general principle:

· "Every contract imposes upeneach party a duty of good faith and fair dealing in ·its performance and enforcement." Restatement (Second) ofContracts§ 205 (1981) ("Restatement"), quoted in 

### Alabama v. North Carolina, )60 U.S. :BO, 130 S. Ct. 2295, 2312, 176 L. Ed. 2d 1070 (2010). Failure to fulfill that duty constitutes a

· breach ofcontract, as does failure to fulfill a duty

"imposed by a promise stated in the agreement." Restatement§ 235. We have long applied those principles to contracts with the federal government. 

### E.g., Precision Pine & 

### Timber, Inc. v. UnitedStates, 596 F.3d 817, 828 (Fed. Cir. 2010); 

### Malone v. United States, 849 F.2d 1441, 1445-46 (Fed. Cir. 1988). 

### Metcalf, 742 F.3d at 990. The Courtthen explained that the lower court's decision misread 

### Precision Pine:

41The trial court's decision in this case rests on an unduly narrow view ofthe duty ofgood faith and fair dealing. Relying almost entirely on Precision Pine, it held that "a breach ofthe duty ofgood-faith and fair dealingclaim againstthe Government can only be established by a showing that it ·'specifically designed to reappropriate the benefits [that] the other party expected to obtain from the transaction, thereby abrogating the government's obligations under_the contract."

The trial court misread Precision Pine, which does not impose a specific-targeting requirement applicable across the board or in this case. The cited portion of Precision Pine does not purport to define the scope of good..;faith"and'"fair-dealing claims-foral-lcases;-let alone alter earlier standards.
Id. at 992-93. Accordingly, we no longer needto find "specific targeting" or "reappropriation" ofbenefits to establish a breach ofthe implied duty ofgood faith and fair dealing. The Federal Circuit directs us to follow "the familiar broader standards reflected in the passages from Centex [Corp. v. United States, 395 F.3d 1283 (Fed. Cir. 2005)]; and Malone [v. United States, 849 F.2d 1441 (Fed. Cir. 1988)]." Metcalf, 742 F.3d at 994. Centex provides, "The covenant ofgood faith and fair dealing

...imposes obligations on both contracting partiesthat include the duty notto interfere with the other party's performance and not to act so as to destroy the reasonable expectations ofthe otherparty regarding the fruits ofthe contract." Centex, 395 F.3d at 1304

.. We follow Centex and Malone.
In applying this guidance, we cannot ignore the COE's disturbing attitude toward NALCO as seen in the record. Beforeaward there was the improper direction to use a bigger dredge at noadditional cost or have its bid rejected (finding 10). This increased NALCO's equipment costs and reduced the cash flow available to pay for such things as labor, gas, survey support-, overhead and profit. When the NTP was issued on 12 December 2013, Messrs. O'Donnell, Walsh, Morocco and Steamsjoked that NALCO needed "babysitting" and that the dredge· might sink20 (finding 16). On 27 January 2014 Mr. Kim told Mr. Steams that ifhe didn't get the 60% ofhis mobilization_bid price NALCO could not perform and would go bankrupt to no avail (finding 23). On 28 January 2014, Mr. Kim submitted a seven-page memorandumto

· 20 Innocuous standing alone but not underthe circumstances ofthis appeal.

42the COE arguing that NALCO should be paid for its mobilization costs as bid (-finding 24); The memorandum was dismissed by th€COE as evidenced by Mr. Dolan's 28 January 2014 internal email mocking NALCO's 28 January 2014 memorandum (id.). This memorandum contained a number ofcompletely valid arguments that iftaken -serinusly may have avoid-ed-the-destruction ofNALCO and this litigation (id.). Then there is CO Kidd's beliefthat NALCO would not perform if she paid the 60% ofits CLIN 0001 price which was clearly authorized in DFARS 252.236-7004(a) (finding 26). When Mr. Kim informed Mr. Steams that the revetment in the disposal area was a problem, Mr. Kim recalled Mr. Steams saying the COE didn't care ifNALCO finished, they werejust following procedures21 (finding 20). CO Kidd attributed NALCO's problems with the revetment to its -"incompetence" an-d "mismanagement ofthe disposal" (finding 41), when the revetment clearly was a change that encroached on NALCO's disposal area and interfered in its dredging (findings 36, 41). Mr. Walsh testified on the revetment that a "changed site condition like that is problematic after you've awarded" a contract (finding 13). There is also the way Mr. Kim was coerced into signing Modification No. P00003 to avoid CO Kidd's threat to terminate for default ifhe did not accept her

- take-it:-or-leave;;;it offerof-$-3-95,000;22·a threat-she had-no-rightto make because

NALCO was not in default 

### (see decision below). CO Kidd wrote the 28 October 2014 Hazlett letter to Mr. Kim stating in part:
The goal ofthe Corps in this matter was to provide you with the resources necessary to complete the project while limiting risk to the government.

...

. -.;-'The Corps is committed to partnering with our small business community to meet our mission requirements. However, after review, it appears that our New England District acted in good faith in awarding and administrating this contract and also took extra measures to-limit financial damage to your company while acting within the bounds of the law and the best interests ofthe government.

- (Finding 69) -Nothing could be further fromthe truth. CO-Kidd drafted this letter

(id.). The COE certainly did notpartner with NALCO or attempt in any way to provide NALCO "resources necessary to complete the project" or "limit financial damage." As a result ofthe COE's actions, Mr. Kim lost his home, equipment and

21 Mr. Kim's testimony is unrebutted in the record and we find it credible. 22 This amount is much less that estimates from other COE personnel that valued the settlement at $600,000 or $700,000 (findings 46, 55).

43business. (Finding 32) Even with all the harm that the COE caused NALCO, it performed well (findings 44-45). -When presented with evidence ofthe validity of NALCO's claims, COE senior management failed to act to remedy the problems (finding 71). These examples are not merely anecdotal. At every point where an important decision had to he made, the COE chose to protect itselfrather thart act to successfully complete the contract or redress NALCO's legitimate claims.
To be fair, there were a few in the COE who seemed to sense the predicament NALCO faced. 

### Mr. Walsh testified the revetment was a changed site condition (finding 13). In March 2014 Mr. Walsh understood that asking NALCO to provide for access for PNCC to place sand over the revetment was an unreasonable imposition on NALCO and a change to the contract (finding 39). 

### Mr. O'Connor's 6 March 2014 email to Mr. Walsh suggested that NALCO should be paid about $200,000 for performance. Also in March 2014 

### Mr. Walsh wrote that NALCO should be paid something "the sooner the better considering their cash-flow problems." (Finding 34) In March 2014 Mr. O'Connor recognized that paying NALCO 15% ofthe contract amount for 59% ofthe work until settlement was unfair (finding 34). He also wrote, "Tneunnfficial EOEsurvey shows·NAI::eO[-'s] work was very good consideri~g they had no [could not afford] survey work" (finding 44). In April 2014 email Mr. Walsh wrote that NALCO "approached this project with integrity and a good faith effort to meet their obligations under this contract" (id.). In April 2014 Mr. O'Connor suggested settlement in the $740,000 to $790,000 range (finding 46). In May 2014 ACO Morocco informed CO Kidd that Mr. O'Connor's settlement estimate was in the $600,000 range (finding 55). In June 2014 Mr. O'Connor emailed Mr. Walsh stating that NALCO had still notbeen paid for the majority ofthe work performed · (finding 57). Unfortunately these voices ofreason fell on deafears. In December 2014, Mr. Cashman's memorandum to Mr. Hazlettrecognized weaknesses in the COE's position and recommendedreopening the negotiations, nothing happened (finding 71). Also in December 2014 Ms. Fontana recognized that NALCO was entitled to reliefbut her·arguments were not acted upon (finding 72).
The COE breached the implied duty ofgood faith and fair dealing/noninterference generally based on its treattnerit ofNALCO discussed above. We held above that invoking DFARS 252.236-7004(b) was an abuse ofdiscretion. This in tum interfered with NALCO by limiting the CLIN 0001 payment to $101,102.70 rather than $874,226.40 improperly denying NALCO $-773,123.70 it needed to perform the contract (finding 23). The interference was exacerbated by the COE's improperpre-award insistence that NALCO offer a larger more expensive dredge at the same bid price (finding 10). The drastic reduction in cash flow destroyed NALCO's reasonable expectations regarding the "fruits ofthe contract" i.e., being able to perform and be paid for completion ofthe contract. 

### Centex, 395 F.3d at 1304. This constitutes a breach of the implied covenant ofgood faith, fair dealing and non-interference.

. '

44

### The RockRevetment is a Constructive Change
The solicitation/contract required NALCO to place dredged material on the western beach starting from Ferry Rockto the north then south along the beach adjacent to the PNCCahd beyond (findings-4, 15). The solicitation/contract drawings ofthe disposal area did not show the new rock revetment or otherwise disclose that PNCC planned to construct a rock revetment at the northern end ofthe disposal area where NALCO was to start disposing ofdredged material (finding 17).
-The day after the contract was awarded, the COE learned that PNCC was going to construct a rock revetment along the western beach disposal area adjacent to and seaward ofPNCC's property (finding 13). Minutes from a 17 December 2013

. coordination meeting indicate that the revetment was discussed. Mr. Kim expressed concern over the revetment but was told by Mr. Walsh to continue work "as is" and that the COE would "resolve this problem" (finding 17). No resolution ofthe "problem" by the COE was forthcoming.

- Mr: Kim asked iftherevetment could be postponed until after NALCO had· completed dredging (finding 20). The revetment was not postponed and was completed by 7 February 2014,justbefore NALCO started dredging (finding 28). Mr. Kim and his son Mr. Paul Kim, the dredge operator, testified about the adverse effect the revetment had on dredging. The revetment encroached on the beach making it narrower reducing NALCO's work area. To avoid undermining the revetment and causing it to collapse,23 NALCO had to work at low tide which caused a ''large degree ofstop and starts ofthe dredge." (Finding 28) This testimony is corroborated by ACO Morocco's 11 March 2014 email, written when NALCO was still working at the revetment, stating thatNALCO "has a lot ofstop and start-due to waiting for the tide, putting-outpipe~ then dredging ifthe tides allow. It was very inefficient." (Finding 37) The Kims' testimony is also corroborated by photographs taken in March 2014 (finding 47). The Kims' testimony is also corroborated by the daily quality control reports (finding 48). Mr. Kim testified that NALCO could "fly through the work" ifthe revetment had not been there24 (finding 3

### 6). The COE, however, attributed NALCO'-s problems to its "incompetence" and"mismanagement ofthe disposal" not the revetment (finding 41). The COE's position is not supported by the record. We find Mr. Kim's and Mr. Paul Kim's testimony, corroborated by contemporaneous documents and photographs, is credible and we find that the

23 NALCO's dredging expert, Mr. Pena, agreed that the presence ofthe revetment forced NALCO to protect it from "scouring" by the "jet" ofthe slurry (finding 77). 24 

### Mr. Pena agreed that once NALCO progressed past the revetment, it could resume normal operations with greater efficiency (finding 78).

45

### revetment significantly interfered with NALCO's ability to make progress in its dredging work. Having held that the revetment interfered with NALCO's ability to perform, we ·consider ifthis·was a constructive change: 25


### A constructive change occurs ,vhere a coi:itractor perfonns work beyond the contract requirements without a formal order under the Changes provision ofthe contract, due either to an informal order from, or through the fault of: the government. Ifthe CO or other authorized person, without issuing a fonnal change order, requires the contractor to perform work or to utilize materials which the contractor regards as being beyond the requirements ofthe pertinent contract specifications or drawings, the contractor may elect to treat the CO's directive as a constructive change order and prosecute a claim for an equitable adjustment.
Lamb Engineering & Construction Co., 

### ASBCA No. 53304 et al., 

### 06-1BCA133,178 at 164,417 (citations omitted).
The first time the revetment was discussed with NALCO was at the 17 December 2013 coordination meeting when Mr. Walsh, COE project engineer, told 

## Mr. Kim to "continue to work as is, and [he did] not see any problems with this [the revetment] and that USACE would resolve this issue." Mr. Stearns, COE project manager, was present at the meeting. (Finding 17) Mr. Walsh and Mr. Stearns were not contracting officers, however, as project engineer and project manager we find that based on their positions they had implied actual authority to direct NALCO's work. Cate!, Inc., 

### ASBCA No. 54627, 05-1 BCA 132,966 at 163,298 ("Under appropriate circumstances. an implied-in-fact contract may arise where a government representative without express contracting authority has implied actual authority to bind the government. Such authority must be-'an integral part ofthe duties assigned to the Government employee who created the obligation."').
Ifwe were to find that Mr. Walsh's and Mr. Stearn's direction to NALCO was somehow unauthorized, we would find ratification.

-ACO Morocco knew about the

25 

### FAR 52.236-2, Differing Site Conditions, identifies two types ofconditions

..First, subsurface or latent physical conditions which differ materially from those indicated in the contract. Second, unknown physical conditions at the site ofan unusual nature which differ materially from those ordinarily encountered. We do not view the revetment as a differing site condition because it did not exist before contract award.

46revetment on 16 January 2014 (finding 20). On 22 January 2014, CO Kidd was informed ofNALCO's problems (finding 22). They had actual knowledge that NALCO would have to deal with the previously undisclosed revetment located in the disposal area and that Mr. Walsh and Mr. Steams were monitoring NALCO's work. We find CO Kidd and ACO Morocco-adopted the actions -ofMr. Walsh and Mr. Steams and therefore ratified their actions both at the 17 December 2013 meeting and thereafter. Cate!, 05-1 BCA

## ,r 32,966 at 163,298 (A government representative · with contract authority, who has actual or constructive knowledge ofthe material facts with respect to an unauthorized contract action by a government representative, may ratify the aGtion so as to bind the government provided the authorized representative expressly orby implication adopts the unauthorized coritract action.); Winter v. Cath-dr/BaltiJoint Venture, 497 F.3d 1339, 1347 (Fed. Cir. 2007) (Ratification requires knowledge ofmaterial facts involving the unauthorized act and approval of the activity by one with authority.). The additional work caused by the revetment was not work required under the contract. We find that NALCO did not volunteer to deal with the significant added difficulties caused by the revetment and that the COE directed NALCO to protect the revetment without additional compensation. The revetment was a constmctive change-to NAt-CO:s contract: NALCO was and is entitled to an equitable adjustment for increased costs and time to perform caused by the revetment. Lamb Engineering, 06-1 BCA 

### ,i 33,178 at 164,417. ,The Modification No. P00003 Release is Unenforceable
We have found that the CO Kidd's decision to invoke DFARS 252.236-7004(b) was an abuse ofdiscretion. This breach deprived NALCO ofcash flow needed to perform the contract. Consequently, we found that the COE breached the implied duty ofgood faith, fair dealing and non-interference. Therefore, NALCO's failure to perform due to financial difficulties is excusable. Cantril! Development Corp., ASBCA No. 30160 et al., 89-2 BCA

## ,r 21,635 at 108,850 ("IfCDC's financial incapacity was Government caused the resulting inability to perform would be due to a cause not within the contractor's control or due to its fault or negligence and thus would be excused."). We then found that the construction ofthe rock revetment by PNCC was a constructive change that entitled NALCO to an equitable adjustment to both cost and time to perform. For these reasons NALCO's failure tci complete by 31 March 201426 was excusable and NALCO was not in default. CO Kidd had no right to terminate for default and therefore no right to threaten to terminate for default. Such threats can be coercive. Milton Beatty v. UnitedStates, 168 F. Supp. 204, 207 (A party is always entitled to say that ifhis offer is not accepted, he will avail himselfof his legal rights; 

### it is only the threat ofa wrongful or unlawful act that may constitute

26 NALCO asked CO Kidd for a time extension because itbelieved having passed the revetment, it could finish the contract (findings 40-41). An extension was not granted.

47duress. Such a threat will amount to duress only ifit is sufficient to overpower the will ofthe other party and prev:ent the free exercise ofhis will.); B&H Construction Co., ASBCA Nos. 24558, 24587, 80-2 BCA ,i 14,568 at 71,840 (citations omitted):

- The coercion ofwhich appellant complains-in each instance was the threat by the contracting officer to terminate the contract for default. We must therefore determine whether the contracting officer would have been justified in terminating the respective contracts for default at the_time ofmakinKthe threats, since it is not coercion, or duress. for a party to do or threat~n to do_ what it has a legal right to do

.... In the ~atters before us, the propriety ofthe Government's threats to terminate for default hinges upon whether the delays arose from unforeseeable causes beyond the control and without the fault and negligence of

- --appellant and·its subcontractors-andsuppliers at any tier.
We now consider ifCO Kidd's threats to terminate NALCO for default amount to duress. In Freedom NY, Inc., ASBCA No. 43965, 04-2 BCA

### 'ii 32,775, we considered duress:
To render a contract unenforceable for duress, the party "must establish that (1) it involuntarily accepted [the other party's] terms, (2) circumstances pennitted no other alternative, and (3) such circumstances were the result of [the other party's] coercive acts." Rumsfeldv. Freedom NY, Inc., 329 F.3d at 1329, quotingDureiko v. United States, 209 F.3d 1345, 1358 (Fed. Cir. 2000). ·'[C]oercion requires a showing that the government's action was wrongful-i.e. that-it was (I) illegal, (2) a breach ofan express provision ofthe contract without a good faith beliefthat the action was pennissible under the contract, or (3) a breach ofthe implied covenant ofgood faith _and fair dealing." Id. at 1330.
Id. at 162,066. We follow this guidance.
We look at the events leading up to the 1 August 2014 negotiations and 

### Mr. Kim's signing Modification No. P00003 on 12 August 2014. On 23 April 2014 

### Mr. O'Connor suggested to CO Kidd that a settlement with NALCO "might be

48$740,000 to $790,000." CO Kidd responded saying his analysis was "spot on." (Finding 46)
CO Kidd suggested negotiation ofa settlement as an alternative to termination for default (finding 49). -On 1 May 2014, CO Kidd wrote NALCO presenting three "options" (previously discussed): (1) T4D

- Surety tenders payment for payment bond, (2) T4D

- Surety takes over, or (3) No-cost settlement27 as a T4D alternative (finding 52). CO Kidd also took the position that the COE would not include equipment costs, i.e., dredge, pipe, etc. or costs arising from the "differing site conditi.on" (revetment) in the settlement (finding 49). · On 30 April 2014 CO Kidd discussed settlement with NALCO's attorney. CO Kiddreiterated her position that she would not consider costs for the dredge, pipe and differing site condition. On 7 May 2014 CO Kidd met with NALCO's attorney and agreed to pursue settlement. Mr. Kim testified that at the time he felt he had no choice but to agree to what CO Kidd offered. (Findings 52-53)
Before meeting with CO Kidd, NALCO submitted a settlement proposal in the amount of$1,023,898 that included costs for the dredge, pipe, miscellaneous equipment, payroll, overhead, demobilization, and differing site conditions (finding 58). The parties met on 1 August 2014 to discuss settlement. The COE

. initially offered $350,000 and raised it to $375,000 when NALCO would not accept

the-first offer. CO Kidd told NALCO's lawyer that $375,000 was take it or leave it and ifNALCO did not take it she would terminate the contract for default. (Finding 61) Mr. Kim understood that ifthe contract was terminated for default he would get no money and the bonding company would auction offhis property such as his personal house and NALCO's equipment. Mr. Kim decided to call an SBA

~- - ombudsman.·Mr. Kim testified that the ombudsman told him the COE was trying to force NALCO into bankruptcy and that ifhe didn't take the money offered he would lose-his house. She suggested that he could go to court and that ajudge might help him. Mr. Kim wentback into the meeting with CO Kidd and signed the offer. (Finding.61) He testified it was a "take it or leave it" situation. CO Kidd knew that Mr. Kim was not happy with the settlement. Mr. Kim told her he felt forced into the agreement. (Findings 61, 63) The 1August 2014 agreement was formally implemented in Modification No. P00003 submitted to NALCO after the meeting. Before Mr. Kim signed Modification No. P00003, he complained to the COE IG and Mr. Hazlett, COE director ofcontracting, stating that the $375,000 was unfair because it did not include anything for the dredge, pipe and differing site conditions. (Finding 62) On 12 August 2014·Mr. Kim signed Modification No. P00003

27 This is a misnomer because Modification No. P00003 included a payment (finding 63)

49implementing the settlement, however, the COE held back $1,00028 (finding 63). On 26 August 2014 NALCO was pa-id $374,000 (finding 68). 

### Mr. Kim testified that he signed under protest and did not agree with the content ofthe modification but signed to get the money (finding 61). Based on this record we find that NALCO involuntarily accepted the COE's terms. We also find that because NALCO was effectively out of business-(finding 6-5), and Mr. Kim's personal house, and NALCO's equipment was about to be sold to pay creditors (findings 32, 61 ), Mr. Kim had no other alternative but to accept the COE's terms. Finally we must consider ifthe COE's actions were coercive, i.e. (1) illegal, (2) a breach ofan express provision ofthe contract without a good faith beliefthat the action was permissible under the contract, or (3) a breach ofthe implied covenant of good faith and fair dealing. 

### Freedom, 04-2 BCA ,i 32,775 at 162,066. We start with illegal act; we do not consider CO Kidd's actions to be illegal.
The default clause in NALCO's contract is FAR 52.249-10, Default (Fixed-Price Construction) (finding 3). It provides that a contractor's right to proceed "shall not be terminated"-ifthe-"delay in completingthe work arises from unforeseeable causes beyond the control and without the fault or negligence ofthe Contractor." We found that CO Kidd had no right to threaten NALCO with termination for default-a violation ofthe Disputes clause. So the question becomes did CO Kidd have a "good faith belief that the action was permissible under the contract"? CO Kidd explained that she and "her team" believed termination for default wasjustified, "The revetment had very little to do with the failure; it was the mismanagement and incompetence, not only in the disposal, but also in the dredging itself." (Finding 60) We do not accept this as a good faith position. CO Kidd ignored the fact that the revetment reduced the space on the beach NALCO had to work. NALCO had to work at low tide to avoid damaging the

-- -revetment (Finding 28) Mr. O'Connor's 11 March 2014 email, written at the time NALCO was working near the revetment, informing CO Kidd that NALCO was experiencing "a lot ofstop and start due to waiting for the tide" andwas very inefficient, contradicts CO Kidd's position (finding 37). The record is replete with evidence that NALCO's failure to perfonn was excusable. We find CO Kidd violated an express provision ofthe contract, the Default clause, without a good faith beliefthat the action was permissible under the contract,
We found that the COE improperly invoked DFARS 252.236-7004(b) depriving NALCO ofsignificant cash flow thereby breaching the implied covenant ofgood faith and fair dealing. We found that CO Kidd did not have the right to threaten NAJ_,CO with termination for default. Therefore, we find that CO Kidd's take it or leave it price

28 Because we find coercion we need not consider the issue ofconsideration for the modification and release.

50of$375,000 and threat to terminate NALCO for default ifMr. Kim did not agree to that price was another breach ofthe implied covenant. Having found two ofthe three indicia ofcoercion, we find that NALCO was coerced into signing Modification No. P00003 and its release is unenforceable.
CONCLUSION
ASBCA No. 60235-Contract Balance and Recession, Repudiation of Settlement Agreement for Duress. We found that the COE coerced Mr. Kim into signing the deal embodied in Modification No. P00003 and therefore the modification and its releases are unenforceable. Additionally, we found that under these circumstances the implementation ofDF ARS 252.236-7004(b) was a violation ofthe implied covenant ofgood faith and fair dealing. ASBCA No. 60235 is sustained, however, the exact amount NALCO is entitled to is left to quantum to be detennined in accordance with this decision and the terms ofthe contract.
ASBCA No. 60236-Unabsorbed Overhead. The only factual suppo1i for this claim is proposed finding 302. That finding dtes to Mr. Kim's testimony that identified some continuing expenses and ends with, "NALCO remains in standby mode pending resolution ofthis claim." We disagree. The project has been completed and there is no prospect that NALCO will be called upon to continue dredging on the project. ASBCA No. 60236 is denied.
ASBCA No. 60237-Differing Site Conditions. There are two alleged differing site conditions inNALCO's claim; first is the material NALCO was dredging. No evidence was presented on the differing dredge material claim; NALCO failed to meet its burden ofproof. Additionally, NALCO withdrev.r the dredged material part ofits claim (appellant's proposed conclusions oflaw, at 7 n. l). 'I'hat portion ofASBCA No. 60237 is denied. 'fhe second alleged differing site condition is the revetment. \Ve found that building the revetment after contract award interfered with NALCO's dredging work and was 

### a constructive change. The PNCC revetment portion ofASBCA No. 60237 is sustained, however, the amount NALCO is entitled to is left to quantum.
ASBCA No. 60238----Time Extension. We found that the COE breached the implied duty ofgood faith and fair dealing by improperly imposing DFARS 252.236-7004(b) that deprived NALCO ofmobilization funding needed to perform the contract. \Ve found that the revetment was a constructive change entitling NALCO to both compensation and a time extension. However, in its briefNALCO concedes that its request for a time extension is "moot in light the reprocurement work." We sustain ASBCANo. 60238, but there is no independent quantum aspect to this claim.

51Forthe reasons stated above, the appeal is sustained in part and remanded to the parties to determine quantum. CDA interest shanbe paid from 19 February 2015.
Dated: 9 August 2018

I concur in result (see separate opinion)

J~ Administrative Judge Vice Chairman Armed Services Board ofContract Appeals

52 CRAIG S. CLARKE

. 

### Administr:ive Judge Armed Services Board ofContract Appeals

I concur in result (andjoin Judge Prouty's opinion)



### RICHARD SHACKLEFORD Administrative Judge Acting Chairman Armed Services Board ofContract Appeals

### OPINION BY JUDGE PROUTY CONCURRING IN RESULT
We concur in the result, but not in some ofthe reasoning followed by Judge Clarke. In particular, we agree with Judge Clarke's findings that the presence of the revetment at the disposal location constituted a constructive change to the contract for which the government is liable for proven damages and which would preclude any termination for default ofNALCO on the grounds ofits failure to complete the ·contract on time. We also agree with Judge Clarke's findings that the release executed by NALCO was made under economic duress and is thus void (we do so, however, without agreeing that there was necessarily a breach ofthe duty ofgood faith and fair dealing). The consequence ofthese findings is that NALCO is entitled to termination for convenience damages: the whole ofCLIN 0001 (mobilization and demobilization); the work done on the other CLINs; and the extra costs incurred_ through the constructive change. This is the entirety ofwhat Judge Clarke aw~rds.
We part company with Judge Clarke on two matters that need not be reached to obtain his result, namely, the finding that the CO actionably abused her discretion by

-- -- exercising therightto deferpaying·certain-mobilization-costs, and the finding ofthe breach ofthe duty ofgood faith and fair dealing. Withrespect to the contract clause that the CO utilized to avoid early payment ofNALCO's mobilization costs, Defense Federal Acquisition Regulation Supplement (DFARS) 252.236-7004(b) (the DFARS clause), two things prevent us fromjoining Judge Clarke's opinion: first, the terms of this contract provision insulate it from review; second, it is not so clear to us that the CO applied the provision improperly.
The DFARS clause, set forth in Judge Clarke's opinion, above, provides, in section (b), that the CO: [M]ay require the Contractor to furnish cost data tojustify [the mobilization/demobilization] portion ofthe bid ifthe [CO] believes that the percentages in paragraphs (a)(l) and (2) ofthis clause do not b~ar a reasonable relation to the cost ofthe work in this contract. Subsection (b)(l) ofthe DFARS provision allows the CO to pay only "actual" mobilization and demobilization costs, as determined by the CO, ifthe contractor "[f]ail[s] tojustify such price to the satisfaction of' the CO. Next, subsection (b)(2) of the DFARS clause provides that "[t]he Contracting Officer's determination ofthe actual costs in subparagraph (b)(1) 

### ofthis clause is not subject to appeal." Judge Clarke has determined that the CO here abused her discretion by invoking section (b) ofthe DFARS clause (he does not c·ontend a violation ofsubsection (b)(1)). · 

### But section (b) is only about requiring the contractor to furnish cost data in the

53

### circumstances where the CO "beiieves" that the mobilization and demobilization CLINs did not bear a "reasonable relation" to the contract's costs. The CO's requiring the provisio~ ofcost data by NALCO is not how NALCO was (or alleged it was) harmed. NALCO was hurt by the CO's decision, pursuant to subsection (b)(l), to only pay "actual" mobilization costs. That determination-actually, the determination of what the actual mobilization costs should be, which is effectively the same thing in these circumstances-is insulated from review by subsection (b)(2) ofthe DFARS clause, thus we should not decide it and should end our inquiry. We note that subsection (b)(l)(iii) ofthe clause provides that any money agreed to be paid for the mobilization/demobilization CLIN that was not paid at the time ofmobilization or demobilization will be paid at the time ofthe final payment on the contract. In other words, the CO's unappealable discretion here is not about whether to pay NALCO the amount set forth under the mobilization/demobilization CLIN, but about exactly when to pay the full amount.
Were we to, nevertheless, find that we could review the CO's exercise of discretion under the DFARS clause, we would not conclude that it was unreasonable. Judge Clarke's-basis for determining this exercise to-be-unreasonable is his view that the CO's beliefthat the mobilization/demobilization amounts in the CLIN "did not bear a reasonable relation to the cost ofthe work in this contract" was simply wrong. To that end, he essentially found that any amount ofmobilization/demobilization costs that was less than the total contract price would bear a "reasonable relation" to the cost ofwork in the contract. We find this to be an untenable interpretation ofthe DFARS clause's terms.
It 

### is well established that to interpret a contract, the Board should read it 

### "as a whole and interpreted to harmonize and give reasonable meaning.to all its parts," if possible, leaving no words "useless, inexplicable, inoperative, insignificant, void, meaningless, or superfluous." Precision Dynamics, Inc., ASBCANo. 50519, 05-2 BCA 133,071 at 163,922; see also Hunkin Conkey Constr. Co: 

### v. United States, 461 F.2d 1270 (Ct. Cl. 1972) (rejecting contract interpretation that would render another clause in the contract meaningless). If

### "reasonable relation" meant that the cost ofthe CLIN were simply less than or equal to the cost ofthe entire contract, as Judge Clarke appears to imply, it would render the entire DFARS clause meaningless, because, as a matter of mathematics, in the absence ofnegative payments, all CLINs are less than or equal to_ the entirety ofthe contractprice. Thus, as a matter ofcontract interpretation, the phrase must mean more than Judge Clarke is allowing. The most reasonable interpretation we can read into it is that, in the CO'sjudgment, the mobilization/demobilization costs not be too disproportionately large a part ofthe contract's costs. The DFARS clause does not explain what exactly constitutes an overly large proportion ofmobilization/demobilization costs, but leaves it to the discretion ofthe CO, which is consistent with the general scheme implemented by the DFARS clause:

54

### nominally, the mobilization/demobilization CLIN is paid 60-40 at the completion of mobilization and the completion ofdemobilization; but ifthe CO believes that the numbers are too disproportionate; she may ask for more backup on actual costs; 29 

### after she receives that backup and analyzes it, she may decide what to pay prior to contract completion. Thus, though the.term is somewhat vague, it is not impermissibly so in this context, and certainly cannot be read to forbid what the CO did. Judge Clarke also argues that "other independent facts" support his conclusion that the CO abused her discretion by invoking the DFARS clause. Generally, we understand iudge-clarke's concerns to be that the CO knew that limiting up-front payments to NALCO through the DFARS clause would have serious cash flow implications upon the company, and that the solicitation would not have given NALCO any reason to expect that only a portion ofthe costs would be paid up-front. Judge Clarke concedes, however, that these facts do not prove subjective bad faith on the part ofthe CO.
In the absence ofsubjective bad faith and inasmuch as it was consistent with the contract, we do not find that these extra reasons make the CO's actions into an abuse of discretion as we define the term in 

### Raytheon Co., ASBCA No. 57743 

### et al., 17-1 BCA 

### ,i 36,724 at 178,845, which was cited by Judge Clarke. To be sure, we are not happy with the way the Corps acted on this issue: it was irresponsible, to say the least, ofthe Corps to make this contract award knowing full well how imbalanced the CLINs were, but NALCO also chose to make an unbalanced bid and to agree to the more expensive dredger. The DFARS clause was not a secret, and did putNALCO on notice that it might not receive the entirety ofits mobilization/demobilization costs at the beginning of performance. Moreover, the relatively short time frame for performance here (five months) was such that it was not impossible for NALCO to perform without a government pre-payment (and, indeed, NALCO did so). Similarly, like Judge Clarke, we find the government's general behavior throughout the award and performance ofthe contract to be abhorrent. Nevertheless, for reasons having nothingto do with the good faith ofthe government, we find it inappropriate to apply the implicit doctrine ofgood faith and fair dealing as Judge Clarke does.

29 

### The Federal Acquisition Regulation (FAR) has, on other occasions, permitted a CO's suspicions to trigger a requirement that a contractor provide more substantiation for certain costs. For example, in FAR 31.201-3, all that is necessary to impose upon a contractor the burden ofproofofdemonstrating a particular cost to be reasonable is the CO's "challenge" ofthat cost after "an initial review ofthe facts." FAR 3l.201-3(a). Like the DFARS clause we have discussed above, this FARprovision does not go into detail about what is sufficient for the CO to bring such a challenge.

55Primarily, we decline to apply the doctrine because it requires more than the government act badly; it does not apply when the contract otherwise addresses the action complained of, and, like any breach, it must lead to damages. See Relyant, LLC, ASBCA No. 59809, 2018 WL 3387700 (good faith and fair dealing does not expand duties beyond those explicitly set forth incontract, but addresses · circumstances not specifically set forth by the contract). Judge Clarke finds a breach ofthe duty by the government "generally based on its treatment ofNALCO discussed above." But general bad treatment, obnoxious though it may be (and it truly is here), is not enough for a cause·ofaction

- it must lead to some tangible damage. Judge Clarke does allege that the CO's exercise ofthe DFARS clause is one instance ofa particular action that breached the duty ofgood faith and fair dealing. We have addressed this above, however: by the contract's terms, it is effectively not reviewable; moreover, the CO appears to have acted within her broad discretion in delaying payment ofthe CLIN.
We underscore thatwejoin Judge Clarke's general condemnation ofthe means , by which the government administered this contract. And we find that the government breached the contract through the constructive change-and that the release it secured

---from

### -NA:t:co-wairobtatrre-d-tnr-ough·duress~-·Had-the-government acted reasonably

throughout, and treated NALCO fairly, it is highly likely that it could have obtained a properly enforceable release that would have far better served both its purposes and NALCO's than the results ofthis litigation will. Thus, though the government is technically absolved ofone cause ofaction, it is no victory and the results are the same. .In all other respects, we concur with Judge Clarke's opinion.
Dated: 9 August2018

I concur

RICHARD SHACKLEFORD Administrative Judge Acting Chairman Armed Services Board ofContract Appeals

56 

# @:://

J. REID PROUTY Administrative Judge Vice Chairman 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. 60235, 60236, 60237, 60238, Appeals ofNorth American Landscaping, Construction and Dredge, Co., Inc., rendered in conformance with the Board's Charter.
Dated:-

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