Court Opinion

ID: 4096303
Source: CourtListenerOpinion
Date Created: 2016-11-08 14:00:11.373245+00
Date Added: 2024-06-11T14:20:07.205313
License: Public Domain

ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of --                                 )
                                             )
Seven Seas Shipchandlers LLC                 )      ASBCA No. 60602
                                             )
Under Contract Nos. W91B4L-09-P-0318         )
                    W91B4L-09-P-0518         )
                    W91B4L-09-P-0436         )
                    W91B4L-09-P-0465         )
                    W91B4L-09-P-0585         )

APPEARANCE FOR THE APPELLANT:                       Joseph E. Schmitz, Esq.
                                                     Schmitz & Socarras LLP
                                                     McLean, VA

APPEARANCES FOR THE GOVERNMENT:                     Raymond M. Saunders, Esq.
                                                     Army Chief Trial Attorney
                                                    LTC Jose A. Cora, JA
                                                     Trial Attorney

                OPINION BY ADMINISTRATIVE JUDGE NEWSOM

        Appellant, Seven Seas Shipchandlers, LLC (Seven Seas), appeals from the deemed
denial of its claim for Prompt Payment Act (PPA) interest on five contracts. Because of a
dispute that ripened into a claim under the Contract Dispute Act, 41 U.S.C. §§ 7101-7109
(CDA), Seven Seas did not receive payment on these contracts until more than five years
after it submitted invoices. That dispute was resolved by this Board in Seven Seas
Shipchandlers, LLC, ASBCA No. 57875 et al., 15-1 BCA ~ 35,908 (Seven Seas/).

       Seven Seas elected use of the Board's expedited procedures under Rule 12.2. 1
Both parties filed motions for judgment on the record pursuant to Rule 11. 2 We deny
the appeal.

1
    A decision under Board Rule 12.2 shall have no value as precedent, and in the
        absence of fraud, shall be final and conclusive and may not be appealed.
2
    The government filed a motion for summary judgment on 7 September 2016, then
        converted it to a Motion for Judgment on the Administrative Record under
        Board Rule 11 (Bd. corr., gov't mot. dtd. 26 Sept. 2016). By Board order dated
        13 September 2016 the appellant's 8 September 2016 Legal Memorandum
        Addressing the Merits of the Appeal was deemed a motion for judgment on the
        administrative record under Board Rule 11.
                          SUMMARY FINDINGS OF FACT

       The predicate for the present appeal is the Board's decision in Seven Seas I.
Familiarity with that decision is presumed, although we highlight certain aspects of
that decision that are relevant to this appeal.

       1. Seven Seas I concerned five firm-fixed-price supply contracts that the
Kandahar Regional Contracting Center awarded to appellant in 2009: Contract
Nos. W91B4L-09-P-0318 (Contract 318); W91B4L-09-P-0436 (Contract 436);
W91B4L-09-P-0465 (Contract 465); W91B4L-09-0518 (Contract 518); and                         r'.
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                                                                                                .
W91B4L-09-P-0585 (Contract 585). The contracts called for appellant to provide
supplies to Kandahar Air Field in Afghanistan. Seven Seas I at 175,527 (findings 1-3, 6).

        2. Seven Seas delivered the supplies required by all five contracts and was
entitled to payment on the contracts. Seven Seas I at 175,529 (finding 28). Seven Seas
submitted invoices for payment between 1 and 9 June 2009 (R4, tab 12 at 120-24).
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       3. The government payment office disbursed to an individual named                    t
Muhammad Qahir (Mr. Qahir) some $240,549.90 in Afghan cash which was intended
as payment to Seven Seas. Seven Seas I at 175,529-30 (findings 35, 37). On prior
occasions, the government had disbursed cash to Mr. Qahir in payment to Seven Seas,
without incident. Id. at 175,528 (finding 18). However, on this occasion, Mr. Qahir
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disappeared with Seven Seas' money and was not seen again. Id. at 175,530 (finding 39).

       4. Seven Seas reported its money stolen. Seven Seas I at 175,530 (findings 40,
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42)). Asserting that it never received payment, Seven Seas submitted certified claims
seeking contract payments from the government. The contracting officer denied the
claims. Id. at 175,530 (finding 46).

       5. During the ensuing appeals before this Board, the government disputed
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Seven Seas' claims on the ground that Seven Seas had already been paid. It argued           ~

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that Seven Seas failed to object on prior occasions when the government disbursed
cash to Mr. Qahir that was intended for Seven Seas, therefore Mr. Qahir had apparent
authority to accept payment for Seven Seas. Seven Seas I at 175,531-32.
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        6. By decision dated 4 March 2015, the Board sustained the appeals, holding
that the government failed to prove that it had paid Seven Seas and that appellant was
entitled to $240,579.90 plus applicable interest. Seven Seas I at 175,531.

       7. Inferring from the foregoing findings, we find that the reason for the
government's delay in payment from July 2009 to the date of the Board's decision was
the dispute between the parties over whether Seven Seas had already been paid.
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        8. On 3 April 2015, Seven Seas submitted a new claim to the contracting
officer seeking payment of PPA interest on the $240,579.90 principal balance (PPA
Claim) (R4, tab 7).

        9. In its PPA claim, appellant asserted entitlement to PPA interest from "30 days
after a proper invoice" was received until 8 September 2011, the date that the Board
found that the government received appellant's CDA claims (R4, tab 7 at 85-86).

        10. On 26 December 2015, more than nine months after the Board's 4 March
2015 decision, the government transmitted payment to Seven Seas in the amount of
$261,262.25 which included $240,579.90 in contract payments plus $20,682.35 in CDA
interest measured from 8 September 2011 to the date of payment (R4, tab 14 at 1).

        11. After receiving the government's payment, appellant revised its calculation
of PPA interest upwards to charge PPA interest upon the CDA interest already paid,
and to extend the period that PPA interest accrues, beyond the date the invoices were
paid in December 2015, to some future date (R4, tab 14 at 3; compl. ilil 13-23). It now
claims at least $38,328.07 in PPA interest (compl. at 5).

       12. The contracting officer did not issue a final decision on the PPA claim (R4,
tab 17 at 139). Appellant filed this appeal on 25 May 2016 (R4, tab 17).

                                      DECISION

       The PPA entitles vendors to interest on unpaid or delayed contract payments in
certain circumstances. It provides that the head of an agency acquiring property or
service from a business concern, who does not pay the concern for each complete
delivered item of property or service by the required payment date, shall pay an
interest penalty to the concern on the amount of the payment due, in accordance with
regulations prescribed by the Secretary of the Treasury. 31 U.S.C. § 3902(a).
The PPA also provides an important exception, however, stating that no PPA interest is
due ifthe nonpayment was "because of a dispute between the head of an agency and a
business concern over the amount ofpayment or compliance with the contract." 3

3   Regulations implementing the PPA repeat and reinforce this limitation. Office of
        Management and Budget regulations state that "[i]nterest penalties are not
        required ...[w]hen payment is delayed because of a dispute between a Federal
        agency and a vendor over the amount of the payment or other issues concerning
        compliance with the terms of a contract." 5 C.F .R. § 1315 .10 (emphasis
        added). The Federal Acquisition Regulation (FAR) further provides that "The
        payment office will not pay interest penalties ifpayment delays are due to
        disagreement between the Government and contractor concerning - (i) The
        payment amount; (ii) Contract compliance; or (iii) Amounts temporarily
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31U.S.C.§3907(c) (emphasis added). The Act also prohibits PPA interest from
accruing either after a CDA claim has been submitted, or for more than one year.
31 U.S.C. § 3907(b )(1 )(B).

       Here, Seven Seas seeks to charge PPA interest from June 2009, when the
government received the invoices, beyond the date that the government paid the
invoices to some date in the future (finding 11). The reason for the government's
delay in payment was the parties' dispute over whether Seven Seas had already been
paid (finding 7). This appeal thus turns on whether the prior appeals involved "a
dispute between the head of an agency and a business concern over the amount of
payment" within the meaning of the PPA. 31 U.S.C. § 3907(c).

        We have no trouble holding that in the circumstances presented here, the matter
falls squarely within the PPA exception in section 3907(c) as a dispute "over the amount
of payment." The dispute centered on which party bore the risk of the theft of the money:
the government, because it paid the wrong person, or Seven Seas, because it failed to
notify the government of its concerns about Mr. Qahir. The amount of payment was at
the heart of the parties' disagreement. From the government's perspective, the dispute
concerned whether it should pay double for the same goods. From Seven Seas'
perspective, the dispute concerned whether it would be paid at all. This dispute thus very
much concerned the amount of payment, and falls within the PP A interest penalty
exception. Our precedent generally supports the view that the PPA does not require an
interest penalty in similar circumstances. See generally Vistas Construction of Illinois,
Inc., ASBCA No. 58479 et al., 16-1BCAiJ36,236 (citing authorities). Moreover, Seven
Seas could not continue to accrue PPA interest for the lengthy duration that it claims
(finding 11 ), because the PPA limits penalty interest either to the date the CDA claim was
filed or for one year. 5 C.F.R. § 390l(b)(l).

       Seven Seas argues that the issue in the prior dispute was "that the government
never paid Seven Seas the undisputed amount that was indisputably due" (app. br. dtd.
26 Sept. 2016 at 6 (app. br.). That argument ignores the fact that the government did
pay in June 2009. Its payment evidently did not reach Seven Seas. The dispute arose
because the government objected to paying double that amount, while Seven Seas
objected to receiving zero.

       Seven Seas next cites United States v. Heth, 7 U.S. (3 Cranch 399) (1806); and
Mesa Air Group, Inc. v. Department of Transportation, 87 F.3d 498 (D.C. Cir. 1996),
arguing that the PPA is ambiguous and should be construed against the government.
(app. br. at 7). Both cases are inapposite. Heth considered whether a statute should be
applied retroactively, which is not at issue here. 7 U.S. at 402. Mesa Air considered

       withheld or retained in accordance with the terms of the contract."
       FAR 32.907(d)(l) (emphasis added).
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whether certain transportation subsidy agreements were contracts or regulations.
87 F.3d at 500. It is irrelevant to this dispute.

       Finally, Seven Seas argues that the government acted in bad faith by taking
eight months to process the payment after the Board's decision and failing to pay PPA
interest (app. br. at 12). It is not bad faith for the government to refuse to pay PPA
interest when none is due. To the extent that the government took time to process the
payment, appellant was compensated with additional CDA interest (finding 10).

       In summary, we hold that Seven Seas is not entitled to PPA interest. We
expressly do not address the government's remaining arguments: that 5 C.F.R.
§ 1315.10(b)(2) bars PPA interest on Contract 585 and that appellant waived any
entitlement to PP A interest.

                                   CONCLUSION

      The appeal is denied.

      Dated: 25 October 2016

                                                 Administrative Judge
                                                 Armed Services Board
                                                 of Contract Appeals
                                                                                         !
      I certify that the foregoing is a true copy of the Opinion and Decision of the
Armed Services Board of Contract Appeals in ASBCA No. 60602, Appeal of Seven
Seas Shipchandlers, LLC, rendered in conformance with the Board's Charter.

      Dated:

                                                 JEFFREY D. GARDIN
                                                 Recorder, Armed Services
                                                 Board of Contract Appeals

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