ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of -- )

)

Aero Tech Services Associates, Inc. ) ASBCA No. 61682

)

Under Contract No. FA8106-17-D-0009 )

APPEARANCE FOR THE APPELLANT: Deborah Appel, Esq.

 Law Office of Deborah Appel

 Bronx, NY 

APPEARANCES FOR THE GOVERNMENT: Jeffrey P. Hildebrandt, Esq.

 Air Force Deputy Chief Trial Attorney

Isabelle P. Cutting, Esq.

Capt Jacquelyn C. Fiorello, USAF

 Trial Attorneys

OPINION BY ADMINISTRATIVE JUDGE THRASHER

Aero Tech Services Associates, Inc. (ATSA) seeks reimbursement for labor costs 

incurred under Contract No. FA8106-l7-D-0009 (“0009 Contract”) in logistical

support of two E-9A aircraft at Tyndall Air Force Base, Florida. ATSA’s claim is

that the fixed hourly labor rate to repair or replace aircraft parts, which applies to 

“subcontractors” under “Over & Above” (O & A) contract line item numbers (CLIN)

X007AA, does not apply to “vendors”. Rather, ATSA’s position is that any labor hourly 

charges are part of the “material cost” for which ATSA is entitled to full reimbursement

under CLIN 007AC. We deny the appeal.

FINDINGS OF FACT

Background

1. The 82nd Aerial Targets Squadron at Tyndall Air Force Base, Florida 

employs two E-9A aircraft whose primary mission is to act as a surveillance 

platform to ensure the Gulf of Mexico waters are clear of civilian boaters and 

aircraft during live missile launches and other hazardous military activities within 

the test range (R4, tab 6 at 53-54). These aircraft are maintained by contractorprovided logistics. Relevant to this appeal, the contractor-provided logistics 

support for these aircrafts, which includes over and above (O & A) tasks, 

engineering services including development, test and FAA certification of modifications,

and installation of modifications and depot maintenance support (id. at 53). “O & A 

Charges are Government directed tasks within [the] scope of the contract but not 
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specifically forecasted such as; [sic] bird strikes, lightning strikes, FOD [(foreign 

object damage)], dropped or damaged components,” and other government 

directed actions (R4, tab 6 at 14). ATSA currently provides this support under the 

0009 contract.

2. This dispute arises out of a specific O & A situation when the appellant 

cannot repair or replace an item in-house and must remove the item and send it to 

an outside contractor for repair or replacement. Upon return of the item to 

appellant, the outside contractor will invoice appellant either charging a fixed labor 

rate or a total price encompassing both labor and material with no visibility or 

breakout of the amount or time or labor involved (tr. 22-23). Appellant refers to the 

outside contractor in these situations as a “vendor”, not a subcontractor, insisting

that a “vendor” is distinguishable from a subcontractor and vendor charges are 

reimbursable as part of “material costs” under CLIN X007AC (app br. at 2). The 

end result being, appellant would be fully reimbursed for all labor costs.

3. In contrast, the government argues there is no separate “vendor” category 

under the contract because the term vendor is defined within the definition of 

subcontractor (gov’t br. at 8). Therefore in these situations, the contract’s hourly 

rate, whether disclosed or not, is capped by CLIN X007 at the hourly labor rate in 

the contract (id. at 6). Likewise, the government argues that material costs 

proposed by the contractor may not include labor costs (id. at 7). 

Comparison between the Previous Contract and the 0009 Contract Follow-on

Solicitation 

4. ATSA performed these logistics services for six years under the 

previous contract, Contract No. FA8106-11-C-0004 (0004 contract) (R4, tab 1). 

On August 4, 2016, the Air Force issued a request for proposals (RFP) for a 

follow-on contract under Solicitation No. FA8106-16-R-0008 (R4, tab 6 at 1). 

Relevant here, the government substantially changed the acquisition strategy 

related to the O & A pricing, converting the 0004 contract prime and 

subcontract O & A CLINs from cost to fixed price CLINs. Major Toyama, the 

lead contracting officer on the source selection, testified that the O & A 0004 

contract prime and subcontractor costs for CLIN 0007 was converted into a firm 

fixed price CLIN in the 0009 contract based upon historical data from the previous 

six year contract. (Tr. 59-60)

5. By way of comparison, the 0004 contract included an O & A 

subcontracting mark-up rate. This fixed subcontract pass-through mark-up factor 

represented the administrative costs of obtaining the subcontract effort, including 

all indirect costs plus fee associated with obtaining the subcontract effort. The fixed 

subcontract pass-through mark-up factor was then added to the price paid by the 
3

contractor to the outside contractor to determine a fixed price amount for the 

subcontract effort. (R4, tab 1 at 12) The net effect of this clause was to fully 

reimburse the contractor for subcontractor services: the amount charged to the 

contractor for the subcontract service, plus an administrative fee (fixed subcontract 

pass-through mark-up factor) for obtaining the subcontractor effort. In contrast, the 

follow-on contract solicitation established a single fixed O & A labor rate, 

proposed by the offerors that applied to the prime contractor and all subcontractors, 

eliminating the subcontracting mark-up rate found in the 0004 contract (R4, tab 6 

at 15, 140-41). This effectively converted what had been a cost reimbursable

clause for the complete cost paid the subcontractor for its services to a fixed price 

clause based upon the proposed fixed labor rates.

6. The follow-on solicitation required all proposed pricing to be submitted in

a Pricing Matrix that would be incorporated into the contract (R4, tab 57 at 12). The 

10 different O & A labor rates found in the 0004 contract were reduced to only 

two: a single labor rate for work hours and a single O & A labor rate for 

overtime (R4, tab 1 at 198, tab 6 at 140).

7. Additionally, the follow-on solicitation flagged the change in pricing 

strategy warning the offerors of the additional cost risk from subcontractors and 

vendors [emphasis added] in out years, stating:

Offerors are strongly advised to seriously note risk for 

firm fixed pricing in contract out-years. Such risk is 

considered contractor risk and not risk to the Government.

Proposed pricing shall be sufficient to cover such 

contractor risk of future unknowns, such as subcontractor 

rate increases in contract out-years, as well as material cost 

increases in out-years or potential changes in teaming with 

specific subcontractors/vendors. This also includes 

unanticipated changes in subcontractors’ or vendors’

[emphasis added] pricing in the out-years. For example, 

as out-year performance periods are reached over time, 

subcontractor pricing (on which these originally proposed 

fixed wrap rates are based) could change. As a result, 

future subcontractor pricing may not correspond with the 

original proposed FFP rates. Revision of proposed firm 

fixed pricing will not be accepted by the Government to 

cover any additional costs in the future out-years. Offerors 

shall be held to their originally proposed pricing, i.e., FFP 

rates for all CLINs. 

(R4, tab 57 at 17) (emphasis added)
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ATSA’s Follow-on Contract Proposal

8. ATSA submitted its final proposal revision on May 8, 2017 (R4, tab 5 at 1). 

Mr. Christopher Bloomer, Vice President of Operations for ATSA testified he 

helped prepare the proposal on this contract and has been working on the contract 

since September 2017 (tr. 23). He also testified he read the language in CLIN 0007 

of the solicitation that states all rates apply to prime contractors and all 

subcontractors but noted the proposal did not include subcontractors performing 

work on this contract because of the distinction the industry makes between 

subcontractors and vendors (tr. 25-28).

9. ATSA’s proposal reflects the distinction ATSA makes between 

“subcontractors” and “vendors”. Both the technical volume and pricing volume 

of ATSA’s proposal state that 100% of all work will be done by ATSA i.e., not 

subcontractors, but then provided a list of twelve key “vendors” (R4, tab 5 at 2, 

77). For example, section 2 of the pricing volume is entitled SUBCONTRACTOR 

AND VENDOR PRICING” (id. at 78). That section explains why ATSA decided not to 

use, what they consider, subcontractors on this contract but clearly states when it is 

required to go out to a vendor for completion of a specific task it will enter into a 

subcontract relationship to accomplish the work, stating, “Each of the key vendors 

identified will be subcontracted to support the identified tasks as required.” (R4, tab 5 

at 100-01)

10. The government awarded the 0009 contract to ATSA on May 31, 2017 (R4, 

tab 6 at 1). Shortly thereafter, ATSA entered into a contract agreement with Pratt 

& Whitney (P & W), effective September 1, 2017. The contract agreement refers 

to the contract relationship between the parties as a “SUBCONTRACT 

AGREEMENT” (R4 tab 53 at 5). Accordingly, we find that P & W was a 

subcontractor to ATSA under its contract with the government.

Relevant 0009 Contract Provisions

11. Three of the contract’s O & A provisions are relevant to this appeal:

CLIN X007-OVER AND ABOVE WORK PROCEDURES

(a) Over and Above Labor Rates (Fixed Hourly): The price 

negotiated by the PCO/ACO shall be based on “hands on” 

labor hours multiplied by the contract fixed hourly rate. The 

number of “hands on” labor hours required shall be 

negotiated between the contractor and the PCO/ACO. 

“Hands on” labor hours to be used in negotiated fixed hourly 

rate items are restricted to those defined below. The fixed 
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hourly rate includes charges for: “hands on” labor cost; any 

labor cost not included in the definition of “hands on” labor 

for which the contractor accounts as direct labor; burdens; 

general and administrative expenses; and other allowable 

costs and profit. The fixed hourly rate does not include direct 

parts and materials.

For the purposes of negotiating prices for the fixed hourly 

rate items, the “hands on” labor hours to which the fixed 

hourly rate is applied, are limited to only that labor performed 

by personnel actually engaged in the direct performance of 

work required. “Hands on” labor shall not include any labor 

performed by support of supervisory type personnel, such as, 

but not limited to: timekeepers, payroll clerks, purchasing, 

material handling, quality control, storing and issuing 

personnel. Quality control personnel are considered as those 

personnel who apply standards to finished work/products to 

determine that finish production work is serviceable in all 

respects.

(b) Material Handling Rate Items: The price negotiated by 

the PCO/ACO shall be based on material proposed multiplied 

by the contract fixed material handling rate. The material 

required shall be negotiated between the contractor and the 

PCO/ACO. “Materials” are those parts or materials 

purchased, supplied, manufactured, or fabricated by the 

Contractor for the sole purpose of incorporating them into or 

making them a part of the end products or components 

thereof covered by this contract. The Material Handling Rate 

includes charges for: burdens; general and administrative 

expenses; and other allowable costs and profit.

. . .

The anticipated or negotiated hours, when multiplied by the 

fixed hourly rate plus any material costs multiplied by the 

material handling rate, constitute the firm fixed price for the 

over and above work.

(R4, tab 6 at 12-14) (emphasis added)
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12. CLIN X007AA, OVER AND ABOVE-LABOR RATE.

OVER AND ABOVE - FIXED HOURLY RATE FIRM 

FIXED PRICE AS DIRECTED BY THE ACO/PCO. ***ALL 

RATES APPLY TO PRIME CONTRACTOR AND ALL 

SUBCONTRACTORS***

. . .

This SubCLIN uses the fixed hourly rates in Attachment 2, 

Pricing Matrix. These rates shall be used in negotiating a price 

when direct labor is involved for Over and Above 

requirements. Overtime hours will be used only at the direction 

of the ACO/PCO.

(Id. at 14-15)

13. CLIN X007AC, OVER AND ABOVE-PARTS AND MATERIALS 

AND MATERIAL HANDLING.

FIRM FIXED PRICE AS DIRECTED BY THE ACO/PCO. 

The work called for under this item shall be accomplished 

when and as directed by the PCO/ACO in accordance with 

DFARS 252.217-7028 and the Over and Above Work 

Procedures stated in CLIN X007. The work under this subCLIN includes parts and materials for repairs beyond fair 

wear and tear (BFWT) including replacement of GFE support 

equipment and those parts using the material handling rate in 

Attachment 2, Pricing Matrix. The material handling rate 

shall represent the administrative costs of obtaining parts and 

materials for Over and Above requirements not included in 

the flying hour rate. The Material Handling Rate shall 

include all indirect costs plus fee associated with obtaining 

materials for the prime and all subcontractors. The Material 

Handling Rate shall be added to the negotiated material price 

to determine a fixed price amount for the materials. All costs 

included within the fixed hourly rates, or fixed price CLINs 

elsewhere in this contract must be excluded from calculations 

used by the Contractor to arrive at its Material Handling Rate.

. . .
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DEFINITION OF MATERIALS: “Materials” are those parts 

or materials purchased, supplied, manufactured, or 

fabricated by the Contractor for the sole purpose of 

incorporating them into or making them a part of the end 

products or components thereof covered by this contract.

(Id. at 16) (emphasis added)

14. On December 15, 2017, ATSA submitted Work Request No. 17-015 

seeking contracting officer (CO) approval for work valued at an estimated $4,409.68. 

ATSA sought a Mobile Repair Team from P & W to come to Tyndall Air Force Base 

to evaluate the severity of magnesium corrosion in the intake air inlet case in one of 

its engines. The evaluation was required to determine the depth of repair necessary 

to allow the engine to remain in service. (R4, tab 9 at 1, 3) The use of P & W for 

this work was founded on the subcontract agreement between ATSA and P&W 

entered into shortly after the 0009 contract award, effective September 1, 2017 (R4,

tab 53 at 5). ATSA recommended that the work be charged under CLIN X007AC, 

O & A Parts, Materials, and Material Handling. (R4, tab 9 at 3)

15. On December 20, 2017, the Defense Contract Management Agency 

(DCMA) requested that ATSA break down its costs in greater detail, explaining that the 

government would only pay for O & A labor at $55.12 an hour (R4, tab 9 at 24-25). 

ATSA resubmitted its revised Work Request No. 17-015 on February 15, 2018 (R4, 

tab 9 at 8-9). Of the total $4,409.68 proposed, ATSA anticipated that labor would cost 

$2,938.50 (id. at 8). On May 14, 2018, the CO approved the work request (R4, tab 9 

at 17). On May 15, 2018, ATSA submitted an invoice seeking $2,938.50 in labor costs 

(R4, tab 9 at 29). DCMA agreed to pay no more than $1,543.36 because ATSA had not 

used the $55.12 O & A labor rate in attachment 2 of the contract. Negotiations between 

the parties reached an impasse on May 21, 2018. (R4, tab 9 at 27)

16. On May 30, 2018, ATSA filed a claim with the CO for the $1,395.14 

difference between the $2,938.5 requested and the $1,543.36 received (R4, tab 22 

at 1). The stated basis for the claim was described as:

The amount claims (sic) and items at issue arise out of 

CLINS X007XX- Over and Above. CLIN X007AA is 

“Over & Above- Labor Rate” which specifically states that 

it applies to the prime contractor and all subcontractors.

CLIN X007AC applies to “Over & Above - Material and 

Material Handling”.

. . .
8

It is ATSA’s position that any labor hour charge

(whether shown as a separate charge or incorporated into

the bill as a flat charge) is part of the “material cost” for 

which ATSA is entitled to full reimbursement for under 

CLIN 007AC. It seems that the government’s position

is that this vendor labor rate is capped at the $55.12 

hourly rate.

. . .

ATSA was the prior contractor on the previous contract 

(FA8 l 06-11-C- 0004) and performed the same repair

and maintenance for six (6) years. The standard process

for those years was that any outside vendor costs

(including labor) under the Over and Above CLIN was 

reimbursed at the full rate by the government with the 

appropriate negotiated burdens. In this contract [the] 

government is trying to hold ATSA to the $55.12 hour 

rate for any labor charged by those outside vendors

regardless of . . . how much the vendor charges for its

labor.

. . .

A subcontractor is a company with which there is a 

contractual relationship to perform work under the contract 

that is negotiated in advance, that sets rates, terms and 

conditions. If a prime can’t negotiate a contract then it is 

free to go to another subcontractor that is offering the same 

services and attempt to enter into a subcontract with them.

A vendor is a supplier of parts/labor that is based on an “as 

needed” relationship and that does not rise to the level of a 

subcontractor as a vendor is free to offer its services to any 

company that requires same. This was the definition that 

applied to the prior contract that ATSA performed on for 

six years. There was nothing in the solicitation (that 

resulted in this contract) that indicated that the government 

was taking a different position from the prior contract.

(Id. at 1-3) On June 18, 2018, the CO denied ATSA’s claim (R4, tab 27 at 1). 

ATSA appealed the decision to the Board on July 2, 2018, which was docketed as 

ASBCA No. 61682.
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DECISION

This appeal turns upon our interpretation of three of the contract’s O & A 

provisions - CLIN X007-OVER AND ABOVE WORK PROCEDURES, CLIN 

X007AA, OVER AND ABOVE-LABOR RATE, and CLIN X007AC, OVER AND 

ABOVE-PARTS AND MATERIALS AND MATERIAL HANDLING. (Findings

11-13) The government argues that the plain language of the contract, CLIN X007, 

unambiguously establishes that appellant must propose labor charges at any 

subcontractor tier for O & A work under the contract’s fixed hourly labor rates and 

the contract defines the term “vendor” in the definition of subcontractor. (Gov’t br. 

at 6) In contrast, appellant’s position is that “[t]his disagreement sets up a classic 

case of a latent ambiguity in which there is a reasonable interpretation by both 

parties as to the meaning of a term.” (App. br. at 3) Appellant summarized the 

parties’ disagreement as:

Here, the Government believes by inserting the word 

“subcontractor” under CLIN X007AA it gave the contractor

sufficient notice that thelaborrate would applytoall vendors as

well. ATSA,based on its reading and prior conduct and 

performance between the parties and industry standards, had 

no inkling that the term “subcontractor” would encompass 

theirvendors.

(Id. at 4)

Our threshold issue is whether the plain language of the contract “supports 

only one reading or supports more than one reading and is ambiguous.” James G. 

Davis Construction Corporation, ASBCA Nos. 58000, 58002, 15-1 BCA ¶ 35,818 

at 175,154 (citing NVT Technologies, Inc. v. United States, 370 F.3d 1153, 1159 

(Fed. Cir. 2004)). The mere fact that the parties differ in their respective 

interpretations of the contract language is not enough, both interpretations must fall 

within a “‘zone of reasonableness.’” Metric-Constructors, Inc. v. NASA, 169 F.3d 

747, 751 (Fed. Cir. 1999) (citations omitted). Such a determination begins with 

the plain language of the contract to discern the objective intent of the parties. 

James G. Davis 15-1 BCA ¶ 35,818 at 175,154 (citations omitted).

We agree with the government’s position that the plain language of the 

contract, as applied to this dispute, is unambiguous. It is our understanding that the 

dispute before us only involves charges for an outside contractor to evaluate the 

severity of magnesium corrosion in the intake air inlet case in one of its engines to 

determine the depth of repairs necessary to allow the engine to remain in service, 

i.e. only services not parts. (Finding 14) Consequently, a reading of the plain 
10

language of the contract does not support appellant’s argument that the services 

provided by P & W in this dispute would be reimbursed under the O & A material 

clauses, CLIN X007(b) and CLIN X007AC, because the services at issue do not 

meet the definition of “material costs” in those clauses. (See findings 11, 13) The 

reimbursement would only involve the fixed–price O &A Labor Rate

CLIN X007AA. (Finding 12) Even assuming this were a situation where 

materials/parts were involved and replaced, a plain reading of the two clauses is 

clear that the only reimbursable costs are, “[t]he anticipated or negotiated hours, when 

multiplied by the fixed hourly rate plus any material costs multiplied by the material 

handling rate . . . .” (finding 11).

May We Consider Extrinsic Evidence of Trade Practice and Industry Standards?

When the language of a contract is unambiguous, it must be given its “plain and 

ordinary” meaning and the Board may not look to extrinsic evidence to interpret its 

provisions. McAbee Constr., Inc. v. United States, 97 F.3d 1431, 1435 

(Fed. Cir. 1996) (citation omitted). However, even when a contract is unambiguous, we 

have found it appropriate to turn to one form of extrinsic evidence—evidence of trade 

practice and custom. DynCorp International LLC, ASBCA No. 59244, 17-1 BCA ¶ 

36,653 at 178,494 (citing TEG-Paradigm Environmental, Inc. v. United States, 465 F.3d 

1329, 1338 (Fed. Cir. 2006)). Such extrinsic evidence may be considered to confirm 

that the parties intended the term to have its plain and ordinary meaning. (Id.)

Extrinsic Evidence

Appellant argues that under prior practice on the 0004 contract “vendors” is 

an industry term related to the O & A requirements and that ATSA’s position is that 

“vendors” in these situations are not a “subcontractor” subject to a subcontract 

agreement holding them to the negotiated rates in the 0009 contract O & A CLINs 

XX007 and X007AA. (App. br. at 3) Our findings establish that the contract 

language of both the 0004 and 0009 contracts do not include the word “vendor”. 

However, both parties use these terms within the follow-on solicitation and ATSA’s 

proposal in response. This indicates this term is recognized and used within this 

industry as appellant asserts. (Findings 7-9)

That being said, logically reimbursement under the contract CLINs at issue

only apply to work for which the contractor, ATSA, has either performed in house, 

or more likely as in this appeal, contracted for with an outside contractor, a 

“vendor”. The evidence also establishes that when ATSA actually contracts with 

the vendor, ATSA considers the vendor to become a “subcontractor” (finding 10). 

Although ATSA’s proposal on the current contract clearly recognizes a distinction 

between the two terms, the proposal states, “[E]ach of the key vendors identified 
11

will be subcontracted to support the identified tasks as required.” (Finding 9) This 

reality is further reinforced by the facts of the specific dispute before us. ATSA 

entered into a subcontract agreement with P&W shortly after award of the 0009 

contract. So, under the specific facts of this dispute, the work was given to a 

contractor that was never a “vendor” under appellant’s definition but instead was in 

fact a subcontractor (finding 10). Consequently, the extrinsic evidence of trade 

practice confirms our unambiguous interpretation of the contract language.*

In summary, after consideration of all the evidence, we hold that appellant is 

bound by the fixed labor rate it bid for CLIN X007AA and the materials and materials 

handling CLIN X007AC is inapplicable. The extrinsic evidence confirms this 

interpretation. We have considered trade practice evidence but we conclude that trade 

practice does not support appellant’s position.

 * ATSA’s primary argument is that the contract language is ambiguous and a 

consideration of the extrinsic evidence supports ATSA’s reading of the contract 

language that trade practice in this business recognizes a distinction between the 

terms “subcontractor” and vendor”. This, ATSA argues, creates a latent ambiguity 

triggering the application of the principle of contra proferentum, construing the 

contract language against the drafter, in this case the government (app. br. at 9). 

Since our examination of the extrinsic evidence of trade practice supports a 

finding that the contract language is unambiguous, we need not address ATSA’s 

contra proferentum argument.
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CONCLUSION

For the forgoing reasons, this appeal is denied.

Dated: March 30, 2020

JOHN J. THRASHER

Administrative Judge

Chairman

Armed Services Board

of Contract Appeals

I concur I concur

RICHARD SHACKLEFORD

Administrative Judge

Vice Chairman

Armed Services Board

of Contract Appeals

OWEN C. WILSON

Administrative Judge

Vice Chairman

Armed Services Board

of Contract Appeals
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I certify that the foregoing is a true copy of the Opinion and Decision of the 

Armed Services Board of Contract Appeals in ASBCA No. 61682, Appeal of Aero Tech 

Services Associates, Inc., rendered in conformance with the Board’s Charter.

Dated: March 30, 2020

PAULLA K. GATES-LEWIS

Recorder, Armed Services

Board of Contract Appeals