Court Opinion

ID: 4637061
Source: CourtListenerOpinion
Date Created: 2020-11-25 00:00:09.503612+00
Date Added: 2024-06-11T07:58:38.079598
License: Public Domain

ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeals of --                                )
                                             )
MPG West, LLC                                )      ASBCA Nos. 61100, 61560, 61570
                                             )
Under Contract No. HDEC09-15-D-0002          )

APPEARANCES FOR THE APPELLANT:                      J. Travis Pittman, Esq.
                                                    Yuki Haraguchi, Esq.
                                                     Holmes Pittman and Haraguchi, LLP
                                                     Greensboro, MD

APPEARANCES FOR THE GOVERNMENT:                     Brian M. Lucero, Esq.
                                                     Deputy General Counsel
                                                    Nikki R. Musick Esq.
                                                     Trial Attorney
                                                     Defense Commissary Agency
                                                     Fort Lee, VA

                OPINION BY ADMINISTRATIVE JUDGE WOODROW

        This appeal concerns a requirements contract with the Defense Commissary
Agency (DeCA) to supply fresh fruits and vegetables (FF&V) to U.S. Military
commissaries (i.e., grocery stores) in Japan and South Korea. The contract specified
“free on board” (FOB) destination delivery, so that the price of all imported products
was to include “any costs associated with the transportation and customs clearance of
[the] imported products.” During the solicitation, DeCA acknowledged that the prices
for FF&V would increase, because DeCA no longer would subsidize the cost of
transporting FF&V from the United States. DeCA also communicated to all offerors
that the winning contractor would need to source as much FF&V as possible from the
local market, which would include locally available imported items.

        After serving as a subcontractor to the incumbent contractor, MPG West, LLC
(MPG West) won the contract in May 2015. After the start of the contract was delayed
by a series of bid protests lodged by the incumbent contractor, MPG West began
performance in November 2015. However, MPG West struggled from the outset,
suffering financial losses relating to importing produce, including border inspections
resulting in condemnation and disposal of unacceptable products, short notice airlifts to
replace condemned produce, confusion regarding paperwork to clear customs, and failed
sanitary audits for local storage and processing warehouses.
       March 2016, MPG West submitted a request for equitable adjustment in the
amount of $3.3 million, which it subsequently converted to a certified claim in the
amount of $5,076,339.52. In May 2016, MPG West informed the government that it
must receive an interim payment within seven days or it would have to phase down
performance. On May 12, 2016, the government made a $2 million partial payment of
the claim to MPG West. However, in June 2016, the government issued a cure notice to
MPG West for failing to meet the contract requirements regarding fill rates and timely
submission of market-basket surveys. Eventually, in July 2016, two subcontractors
(EKK Investments and Interharvest Japan) effectively took over all of the cost and
performance of the contract.

       MPG West amended its claim to include additional costs associated with alleged
losses incurred from October 2015 through February 2016, bringing its total claim
amount to $10,952,546. In its claim, MPG West contended that DeCA negligently
estimated the amount of goods it would need in the solicitation, failed to cooperate with
the inspection process for imported goods, forced MPG West to sell its produce at prices
below MPG West’s costs of importation, and prevented MPG West from selling produce
it imported. On January 3, 2017, the government issued a contracting officer’s final
decision (COFD) denying MPG West’s claim, except for the $2 million it previously
had paid to MPG West.

       On March 21, 2017, MPG West appealed the COFD to the Board. In
January 2018, the government moved to dismiss the portion of appellant’s complaint
relating to losses associated with the supply of bagged salads. MPG West then filed two
new claims, one for bagged salad costs on a theory of constructive change, and one for
the same costs based on the government’s termination of the requirement. The
contracting officer (CO) dismissed these claims as untimely on the grounds that they
were filed after appellant had novated the contract and waived its rights to pursue future
claims.

      Appellant appealed the denial of its third and fourth supplemental claims to the
Board and we consolidated them with this appeal. We deferred a ruling on the
government’s jurisdictional arguments regarding the portion of the appeals pertaining to
bagged salad costs. On May 15-18, 2018, the Board held a three-day hearing.

        We hold that we possess jurisdiction to entertain Count Three of MPG West’s
complaint, which seeks to recover $5,089,321 in costs associated with the bagged salad
delivery requirement. On the merits, however, we conclude that MPG West has failed to
carry its burden of proving either that the government breached the terms of the contract,
or that the government constructively changed the contract. Because we conclude that
MPG West is not entitled to recovery, we do not reach the issue of quantum.

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                                 FINDINGS OF FACT

       1. The Defense Commissary Agency (DeCA or government) is an agency of the
United States Department of Defense (DoD) whose mission “is to provide an efficient
and effective worldwide system of commissaries for the resale of groceries and related
household items at reduced prices to members of the uniformed services, retired
members, dependents of such members, and other authorized patrons, to enhance their
quality of life and to support military readiness, recruitment, and retention.” DoD
Directive 5105.55(3), March 12, 2008.

I. The Solicitation

      2. On February 3, 2014, DeCA released Solicitation No. HDEC09-14-R-0002 to
provide fresh fruits and vegetables (FF&V) to commissaries in South Korea, Japan, and
Guam (app. supp. R4, tab 897).

       3. The Solicitation required FOB destination delivery (app. supp. R4, tab 897).

      4. The Solicitation was amended six times which included published questions
and answers (app. supp. R4, tabs 898-903).

       5. On February 24, 2014, the government amended the Solicitation to include the
following:

              The contractor(s) shall be fully responsible to supply and if
              necessary import the required produce items. Therefore,
              companies submitting offers under subject solicitation must
              be able to comply with all host country laws and regulations
              for the import of agricultural products from all over the
              world. Any costs associated with the transportation and
              customs clearance of imported products must be included
              into the offered F.O.B. destination price. Items not available
              under Host National Law (Embargo) shall be identified to
              the Contracting Officer so that equal substitution can be
              considered or a determination can be made to product
              assortment.

(App. supp. R4, tab 898 at 7)

       6. In response to questions regarding price, the government confirmed that
offerors must provide a minimum savings of 15 percent as compared to local market
prices (app. supp. R4, tab 900 at 7; answer ¶ 40).

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       7. The government confirmed in response to questions that it “allows contractors
to adjust prices on a weekly basis. The prices have to be fair and reasonable and shall
achieve the 15% patron savings.” (App. supp. R4, tab 900 at 8; answer ¶ 46)

       8. In responding to questions regarding sanitarily approved sources for produce,
the government stated that processed produce items shall be obtained from approved
sources in accordance with the regulations from the U.S. Army Public Health Command,
the government agency responsible for approved sources with the DoD, and the U.S.
Army Veterinarian Command, which assists with requests for sanitary inspections of
companies seeking to become an approved source (app. supp. R4, tab 900 at 5; answer
¶ 32).

       9. MPG West already was performing as a subcontractor on the prior contract for
the incumbent for the past six or seven years (tr. 1/52, 55). MPG West’s role in the
incumbent contract included training personnel at the store level, contracting with
trucking firms, and securing warehouses (tr. 1/55-57).

       10. DeCA communicated to all offerors that the winning contractor would need
to “locally source as much FF&V as possible from the local market, which would
include locally available imported items” (app. supp. R4, tab 898 at 2).

       11. DeCA was aware that the prices for FF&V would increase, because DeCA
would no longer subsidize the cost of transporting FF&V from the United States (app.
supp. R4, tab 898 at 2).

       12. The solicitation included weekly estimated quantities by pound for each item
on the High Volume Core Items (HVCI) list for each contract line item number (CLIN),
based on the previous three years of consumption data under the incumbent contract
(app. supp. R4, tab 897 at 83, 173).

         13. MPG West submitted an offer and took no exception to the terms of the
solicitation (tr. 1/151).

      14. In its offer, MPG West identified Fresh Express as its preferred partner to
provide bagged salads (tr. 1/152).

      15. In its offer, MPG West proposed that it could achieve a Patron Savings
Discount of 34 percent for Korea and 30 percent for Japan (tr. 1/107).

        16. MPG West’s proposal did not address or request any start-up or lead time
(tr. 2/80).

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II. The Contract

      17. On May 22, 2015, the government awarded requirements Contract
No. HDEC09-l 5-D-0002 (the contract) to MPG West, with a performance period
beginning on July 1, 2015 (R4, tab 1).

       18. The contract contained two CLINs specifying delivery to commissary stores
located in South Korea (CLIN 0001) and Japan (CLIN 0002) (R4, tab 1).

         19. The contract incorporated Solicitation No. HDEC09-14-R-0002 (R4, tab 1
at 2).

       20. The estimated value of the base period of performance, a twenty-four month
period, was $55 million (R4, tab 1).

       21. The contract incorporated Federal Acquisition Regulation (FAR) 52.212-4,
CONTRACT TERMS AND CONDITIONS COMMERCIAL ITEMS which read in
pertinent part:

                      (c) Changes. Changes in the terms and conditions of
                      this contract may be made only by written agreement
                      of the parties.

                      ....

                      (l) The government reserves the right to terminate
                      this contract, or any part hereof, for its sole
                      convenience. . . Subject to the terms of this contract,
                      the Contractor shall be paid a percentage of the
                      contract price reflecting the percentage of the work
                      performed prior to the notice of termination, plus
                      reasonable charges the Contractor can demonstrate to
                      the satisfaction of the government using its standard
                      record keeping system, have resulted from the
                      termination.

(R4, tab 1 at 22)

Additionally, the contract contained an addendum to this clause which read: “SCOPE
This contract is the primary source for fresh fruits and vegetables (FF&V) for
commissary stores in the Pacific Area” (R4, tab 1 at 7). The contract also contained:
FAR 52.216-19, ORDER LIMITATIONS, which set forth the minimum and maximum
ordering limitations that the contractor is not obliged to furnish under the contract; and

                                             5
FAR 52.216-21, REQUIREMENTS, which pronounced that the quantities specified in
the schedule are “estimates only” and if the government’s requirements “do not result in
orders in the quantities described as ‘estimated’ or ‘maximum’ in the schedule, that fact
shall not constitute the basis for an equitable price adjustment.” (R4, tab 1 at 25-26)

          22. The “Statement of Requirements” section of the aforementioned addendum
stated:

                [DeCA] will contract with one or more sources to provide
                [FF&V] to various DeCA commissary stores in South Korea
                and Japan. . . The contractor shall supply a full line of
                quality [FF&V] available world-wide that is better than or
                equal to U.S. Standards for Produce Grade #1 (Attachment
                12) and Bagged Salads from companies listed in the
                Worldwide Directory of Sanitarily Approved Sources for
                Armed Forces Procurement (Attachment 12).

(R4, tab 1 at 7)

      23. Attachment 11 to the contract specified that bagged salads should be sourced
from Fresh Express (R4, tab 1 at 60).

      24. The CO, Ms. Petra Pulze, testified that “Fresh Express was put in there
because MPG West said they would deliver Fresh Express salads” (tr. 2/70).

      25. The contract required FOB destination delivery to the DeCA commissaries in
South Korea and Japan (R4, tab 1 at 7).

      26. The contract provided that MPG West “shall be fully responsible to supply
and import the required produce items if necessary.” The contract required MPG West
to “comply with all host country laws and regulations for the import of agricultural
products from all over the world.” (R4, tab 1 at 7) Under the contract, MPG West was:

                [R]esponsible for providing all necessary licenses, permits,
                supervision, facilities, equipment, order processing,
                distribution, inventory management, and personnel at the
                contractor’s own facilities/distribution center to receive,
                store, handle, sort, and deliver all required FF&V items to
                the various commissary locations that are serviced under
                [the] contract.

(R4, tab 1 at 8)

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      27. Any costs associated with the transportation and customs clearance of
imported products were to be included in the FOB destination price (R4, tab 1 at 7).

       28. The contract required MPG West to identify to the CO any items not
available under Host Nation Law (Embargo) so that equal or equivalent substitutions
could be considered or a determination could be made regarding product assortment (R4,
tab 1 at 7-8).

       29. The contract required MPG West to provide DeCA with all necessary
support, order processing, electronic price updates, reporting, purchasing, distribution,
and merchandising materials, and personnel necessary for the successful performance
under the contract (R4, tab 1 at 8).

      30. Upon execution of the contract, DeCA and the Appellant were to establish a
catalog of items that shall be available all of the time, as well as those items subject to
seasonal change (R4, tab 1 at 8).

       31. The contract specified a fill rate requirement minimum of 98 percent,
calculated based on the number of cases that are ordered but not delivered (R4, tab l
at 16). Items not delivered due to market conditions beyond MPG West’s control would
not impact the fill rate (R4, tab 1 at 16). Likewise, unavailable items would not be
included in the weekly catalog, and therefore would not impact the fill rate (tr. 2/67-68).

       32. The contract provided payment terms of NET- 10 days (R4, tab 1 at 17).

       33. Prices were to be updated on a weekly basis via txt file and order guide into
the DeCA Produce Pricing System (R4, tab 1 at 9). MPG West was to post the price,
item and weight changes in its web-based ordering system by Thursday of each week in
order to ensure correct pricing for the following Monday orders (R4, tab 1 at 9-10).
Prices were to be fixed price and inclusive of all costs, overhead and profit (R4, tab 1
at 10). The contract required MPG West to mark all new items, price changes, different
case weights or sizes and reflect the case price in the local currency as well as in US
Dollars (R4, tab 1 at 9). The contract required that: “[t]he Government will monitor all
other prices provided on the weekly price lists for being fair and reasonable considering
the market conditions at the time” (R4, tab 1 at 10).

       34. The contract contained a “Patron Savings Requirement” applicable to
35 items of produce listed at Attachment 4 called “High Volume Core Items” (HVCI).
The contract defined the Patron Savings Requirement as a price savings to the
commissary patron when compared to the prices of like items from comparable private
sector retail stores within the local commuting area of a commissary store in the host
country. Under the Patron Savings Requirement, MPG West warranted that prices for

                                             7
the listed HVCI would provide a minimum percentage of savings when compared to the
prices in comparable private-sector retail stores. (R4, tab 1 at 10)

       35. As MPG West proposed in its offer, the contract required a 34 percent patron
savings discount for South Korea during the base period (R4, tab 1 at 3; tr. 1/112).
Similarly, the contract required a 30 percent patron savings discount for Japan during the
base period (R4, tab 1 at 3; tr. 1/112).

       36. The contract required the government to notify MPG West of fluctuations in
patron volume that might impact sales (R4, tab 1 at 13, ¶ 12(a)).

      37. The solicitation under which MPG West submitted its offer provided that
DeCA “will contract with one or more sources to provide [FF&V] to various DeCA
Commissary stores in South Korea, and Japan,” and “[t]his contract is the primary
source of [FF&V]” (R4, tab 897 at 26).

      38. The contract contained DFARS 252.229-7000, INVOICES EXCLUSIVE OF
 TAXES OR DUTIES (Jun 1997), and 252.229-7001, TAX RELIEF - BASIC
 (Sep 2014) (R4, tab 1 at 28), and provided that the Appellant would be exempt from
 paying the Republic of Korea Value Added Taxes and Japanese Consumption Tax.
 (R4, tab 1 at 18).

    39. The contract contained the following paragraph titled NOTICE OF
CONTRACTOR RESPONSIBILITY TO HOST NATION:

              This is a Requirement Type Contract with a Contractor. As
              such, the Contractor is not an employee of the U.S.
              Government and it is solely the Contractor’s responsibility to
              determine his/her reporting and payment responsibilities
              under Host Nation tax and labor laws. Status as a member of
              the U.S. Forces under the USFK and/or Japanese SOFA does
              not in itself relieve the Contractor of responsibilities under
              Host Nation laws. Contractor should consult appropriate
              authorities and advisors on these matters. Department of
              Defense military and civilian personnel will not provide
              advice in these matters. Contractor shall hold harmless the
              U.S. Government for any liability that may arise from the
              Contractor’s noncompliance with Host Nation laws.

(R4, tab 1 at 19, ¶ 27)

       40. The Technical Data Sheet, Attachment 10 to the contract, stated that the
contractor:

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              [S]hall comply with all applicable host nation laws, Status of
              Forces Agreement (SOFA) between the Host Nations and the
              United States of America, import, phytosanitary inspection,
              custom clearance procedures, and all applicable laws,
              executive orders, rules and regulations applicable to its
              performance under this contract.

(R4, tab 1 at 57)

II. The Startup Period

       41. MPG West began preparing for contract performance immediately upon
receiving the contract award on May 22, 2015, including hiring personnel, contracting
with local trucking companies, and taking steps to secure cold storage facilities in Japan
and Korea (tr. 1/61-69, 152).

       42. The original start date for contract performance, July 1, 2015, was delayed
due to bid protest litigation (tr. 1/62).

       43. One of the primary logistical issues was securing cold storage facilities in
Korea and Japan so that the Contractor could have the produce available in-country to
meet the 24-hour order requirement (tr. 1/62-63).

      44. The contractor required three main cold storage facilities to perform the
 contract, one each in Korea, Japan, and Okinawa (tr. 1/62, 70, 89).

        45. In order for the Contractor to use a cold storage facility to provide FF&V
to the government, the facility must be audited and approved as safe and sanitary
(tr. 1/80-82, 3/154-55).

      46. From July to November 2015, MPG West continued communicating with
DeCA representatives and warehouse inspectors in Korea and Japan to coordinate
warehouse inspections (gov’t supp. R4, tabs 1-7).

        47. In Korea, MPG West leased a cold storage facility from the Korean
government in Anseong, Korea, and it was approved for use prior to the Contract start
date (tr. 1/89).

      48. In Okinawa, Japan, the Contractor arranged for a new cold storage facility to
be constructed, which was approved for use on or about the Contract start date (tr. 1/90,
148).

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        49. In mainland Japan, the Contractor leased a cold storage facility in Yokohama
(tr. 1/80).

        50. The CO testified that she inquired with MPG West about the timeline to
start the contract, and issued the Notice to Proceed based upon input from MPG West
(tr. 2/34).

       51. On September 14, 2015, the government issued a notice to proceed with a
contract start date of November 1, 2015 (R4, tab 3). MPG West signed the notice
proceed on the same day (R4, tab 3; tr. 1/70).

      52. The CO testified that she assured MPG West that DeCA would bear MPG
West’s startup costs if DeCA lost the bid protest (tr. 2/36).

      53. MPG West submitted an estimate to the CO stating that its cost to start the
contract on November 1, 2015 would be “a little more than a million dollars” (tr. 2/36).

      54. In September 2015, MPG West began construction of a warehouse in
Okinawa to be used for this contract, at a cost of approximately of $2 million
(compl. ¶ 59; tr. 1/90).

       55. On September 25, 2015, the unsuccessful offeror who challenged the award
at the U.S. Government Accountability Office (GAO) filed a pre-filing notice of protest
at the United States Court of Federal Claims (R4, tab 5).

       56. In October 2015, MPG West began shipments of produce in anticipation of a
contract start date of November 1, 2015 (tr. 1/156).

       57. Bill Penny, MPG West’s President, testified that MPG West encountered
difficulties with government officials in Japan that would not work without a firm start
date, specifically with respect to inspections required for the importation of produce into
Japan (tr. 1/70-74, 142-45).

       58. On October 29, 2015, the Court of Federal Claims denied the protest (R4,
tab 43b).

        59. MPG West received final confirmation that it would begin the contract
performance on October 29, 2015, three days before the start date of November 1, 2015
(tr. 1/72-74).

      60. An existing warehouse facility located in Yokohama, Japan, which MPG
West planned to use, failed several sanitary inspections in early October 2015

                                            10
(compl. ¶ 60). As a consequence, MPG West was forced to dispose of produce that was
left rotting in containers in the harbor (tr. 1/89).

      61. MPG West also planned to use a newly-constructed warehouse in
Okinawa, Japan. The new warehouse did not pass sanitary inspection until November 4,
2015 (compl. ¶ 58).

         62. MPG West did not request additional start-up time prior to the start of
contract performance on November 1, 2015, nor did MPG West bring any problems to
the attention of the CO (tr. 2/81-82).

        63. Contract performance began on November 1, 2015.

IV Contract Performance

       A. The Role of the 106 Vets

       64. The 106 Medical Detachment and Veterinary Service Support (106 Vets)
unit, located in Seoul, South Korea, is the command and control unit for all the food
inspectors and all the commissaries in the Republic of Korea (tr. 3/157, 191).

       65. The Veterinary Command unit of the Public Health Command District-Japan
(Vet Command) located in Camp Zama, Japan, performs the equivalent functions in
Japan and Okinawa (tr. 3/157).

       66. The 106 Vets are responsible for food safety inspections, including
inspections of incoming produce that is to be delivered to commissaries, facility
inspections, and commercial sanitary audits of companies that provide products to the
U.S. military, to ensure that their products meet U.S. standards (tr. 3/193-94).

        67. The 106 Vets are required to inspect all inbound food that is going to military
installations (tr. 4/24-26).

        68. The 106 Vet inspectors work alongside inspectors from the Korean Ministry of
Agriculture’s Quality Inspection Agency (QIA) when produce is imported into Korea
(tr. 3/146, 158-59; 4/15). These joint inspections are governed by a Memorandum of
Agreement between the United States and Korea, executed by the Joint SOFA Committee
(gov’t supp. R4, tab 1 at 4004206; tr. 4/36-37).

      69. The U.S. government does not have unilateral authority over this import
process. Id.

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      70. The 106 Vets are responsible for maintaining a list of approved sources based
on U.S. practices and standards and to inspect cold storage facilities for use in storing
produce that will be sold to the U.S. government (tr. 3/159-60).

       71. Locally-sourced FF&V must be purchased from facilities approved by the
106 Vets. The DeCA contracting office must initiate the process for the 106 Vets to
audit the local facility. (Tr. 3/160-161)

       B. Initial Contract Performance

       72. MPG West began shipping products to the Pacific in early October under
direction to proceed from DeCA (tr. 1/71-72).

      73. Initially, MPG West expressed optimism about its performance (gov’t supp.
R4, tabs 29, 31).

       74. In January 2016, the Appellant sent several representatives to meet with
DeCA leadership at DeCA headquarters in Fort Lee, VA to address concerns regarding
price, quality, and shipping information (tr. 1/179-181, 2/263, 3/43). During the
January 2016 meeting, MPG West assured DeCA senior representatives that it had a
plan to reduce prices and improve quality by providing a full offering of locally-sourced
FF&V (tr. 1/182-185, 2/259-260, 3/43-44).

       75. MPG West confirmed its local sourcing plan in subsequent email
communications to DeCA representatives (gov’t supp. R4, tab 45; tr. 2/263). In the
email communications, MPG West stated that it could source 90 percent of a list of
100 items locally in Korea using a staggered start that would begin in three weeks (gov’t
supp. R4, tab 45; tr. 2/263).

      76. MPG West never implemented the local sourcing plan (tr. 2/260, 264;
3/44-45). Instead, MPG West continued to source most of its produce from the United
States and Mexico (tr. 3/44).

      77. MPG West sourced produce in the United States and Mexico through its
“broker” and sister company, Parma Fruit, also owned by Mr. Penny (tr. 1/ 219-220).
MPG West paid brokerage fees to Parma Fruit for items sourced in the United States and
Mexico (tr. 1/219-220).

       78. By sourcing produce from the United States and Mexico, MPG West
incurred the additional cost of transporting the produce to Korea and Japan (tr. 3/44).

       C. Status of Forces Agreement (SOFA)

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      79. The United States has a SOFA with Japan and Korea, which sets certain terms
and procedures for produce brought into Japan or Korea for consumption by U.S.
Military personnel (R4, tab 1 at 19).

       80. Both Korea and Japan maintain lists of produce items that are embargoed from
entry, but are allowed under the SOFA agreement if the produce is intended for use by the
U.S. Military (tr. 3/197-98, 2/124-25).

        81. The contract did not require MPG West to import produce under the SOFA
(tr. 2/72; app. supp. R4, tab 898 at 2). The contract gave the contractor the discretion
whether to import produce items pursuant to SOFA (tr. 2/124-28).

      82. In an effort to avoid paying import duties, and to secure a way to import
embargoed items, MPG West elected to import some items under a modified SOFA
process (tr. 1/117, 2/127-28).

      83. Under the terms of SOFA, items imported pursuant to SOFA could not be
resold locally (tr. 1/117, 254-56).

       84. The import inspection process in Korea added additional time to the import
process, introduced additional breaks in the refrigeration cold chain, and required
additional in-country transportation; this had the effect of hurting the quality of the
produce and raising prices by introducing more costs (tr. 1/118-120, 3/223-24).
       85. On October 28, 2015, DeCA wrote a letter to South Korean customs
explaining that MPG West was permitted to import embargoed items for sale in the
commissaries (gov’t supp. R4, tab 27). The CO testified that MPG West’s importation
difficulties into South Korea ended after she sent the letter (tr. 2/127-32).

       D. Prices for FF&V under the Contract

       86. During performance, produce items were priced extremely high, including:
$2.69 for a single cucumber (tr. 2/225); $8.99/lb. for eggplant (tr. 3/98); $10/lb. for
strawberries (tr. 3/31); $7.17/pkg for yellow corn (tr. 3/33); $7.07 for green beans
(tr. 3/34); $6.99 for iceberg lettuce (tr. 3/38); and $11.19/lb. for rhubarb (tr. 3/114).

       87. Dr. Joseph Jeu, the former Director of DeCA (retired), recalled seeing reports
about extremely high prices and testified that “people are very price conscious of some
items and we should know that we should never get that kind of pricing, so it is – I was
extremely disappointed with [the Appellant]” (tr. 3/38).

     88. There was widespread concern about high prices for FF&V at the
commissaries throughout Korea, Japan, and Guam (tr. 4/41).

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        89. At times, MPG West airlifted product to the Pacific at a very high price that
it otherwise would have shipped by sea. This was exacerbated by the need to ensure that
the stores had enough quantity to cover the high demand during the Thanksgiving
holiday. (R4, tab 12 at 90; tr. 2/196)

        90. MPG West elected not to alter its profit margins on individual items, as is
common in the grocery business, instead charging the same profit on each item
(tr. 1/245-46).

       E. Weekly Price Review Process

       91. The government would monitor prices provided on the weekly price lists for
being fair and reasonable considering the market conditions at the time (R4, tab 1 at 10).

       92. The DeCA produce category manager had the authority to make a
determination of fair and reasonable price (tr. 3/135). The DeCA produce category
manager and her team reviewed proposed prices weekly before the prices were fixed and
published to the stores (tr. 3/102, 107). The DeCA produce category manager during the
relevant time was Bridget Bennet (tr. 3/62).

      93. DeCA personnel working at the store level did not have authority to make a
determination of fair and reasonable price (tr. 3/135-136).

       94. In its weekly price reviews, DeCA utilized a comprehensive analysis to
determine whether the proposed prices were fair and reasonable; considerations cited by
the produce category manager included trend analysis, suggested retail cost over
$5.00 per unit, week-to-week price increases over 20 percent, and promotional status of
an item (tr. 3/120-27).

       95. For items on the weekly price list that appeared to be priced unreasonably
high, DeCA requested explanatory information (tr. 3/119-120).

      96. If an item was finally determined to be unreasonably priced, Ms. Bennet
and/or a member of her team requested the item be removed from the ordering guide or
offered at a lower price (tr. 3/86, 91).

        97. DeCA and MPG West negotiated the final fixed price of items on a
weekly basis (tr. 1/98-99; 3/108-109). MPG West provided the government with a
weekly catalog of items, with the prices established based on its costs and overhead
(tr. 1/90-91).

       98. DeCA held a weekly conference call with MPG West to review the pricing of
the items listed on MPG West’s weekly catalog (tr. 1/98-99, 3/99-100).

                                            14
       99. The weekly conference call was held in advance of when MPG West would
need to purchase and ship the items (tr. 3/100).

      100. During these calls, DeCA would ask MPG West to offer certain products at
lower prices (tr. 1/97-99, 177-179).

       101. During the weekly meetings, DeCA sometimes asked appellant to remove
products, including products on the HVCI list and bagged salad, from the commissary
catalogs due to the price (tr. 1/177-179; app. supp. R4, tab 57 at 96; R4, tabs 851,
867-868).

       102. DeCA recommended that its employees monitor prices and, if the prices
were too high, remove the high-priced items from the catalog (tr. 3/93; app. supp. R4,
tabs 849, 868).

       103. In determining whether the price of a particular item was reasonable, DeCA
considered whether the price of a particular item was higher than $5.00 and whether the
price of a particular item was greater than 20 percent higher than the previous week
(tr. 3/100).

      104. If DeCA determined that a price for a certain item was “unreasonable,” it
would direct MPG West either to reduce the price or remove the item from the weekly
catalog (tr. 3/91, 98).

      105. DeCA made the majority of its pricing directions orally during the weekly
conference calls, and sometimes reduced them to writing via email (tr. 1/100).

       106. Bridget Bennett, the DeCA Produce Category Manager, testified that DeCA
typically would question ten or so items out of a catalog of 400 offerings. On a weekly
basis, DeCA approved the vast majority of the items submitted by MPG West
(tr. 3/111).

      107. DeCA did not independently analyze the contractor’s profit or overhead
when performing the weekly price analysis meetings (tr. 3/102-03).

       108. Throughout the course of performance, DeCA was concerned about
mitigating the complaints of its patrons with regard to the prices at the commissaries
(R4, tab 44b at 4006-09).

        109. DeCA monitored social media sites including Twitter and Facebook for
patron complaints, and considered those complaints when directing MPG West to reduce
its prices or remove items from the catalog (tr. 3/104).

                                            15
       110. In some situations, MPG West acknowledged and corrected pricing errors
or explained that the local growing season was ending (app. supp. R4, tabs 855, 858).

      111. In other situations, however, MPG West tersely responded that the price
was the “new retail price” or due to a “FOB increase” (app. supp. R4, tabs 852, 855).

       F. The Bagged Salad Requirement

        112. The contract required MPG West to supply bagged salad products from a
list of approved sources (R4, tab 1 at 7).

       113. The list of approved sources was set forth on Attachment 12, which
provides a web link to a list of approved sources (R4, tab 1 at 61). The contract
contained an Attachment 11, which listed Fresh Express as the sole source of bagged
salads (R4, tab 1 at 60). Attachment 11 was not a part of the solicitation (tr. 2/70). The
solicitation requested offerors to identify the brand name of their salad supplier, and
MPG West identified Fresh Express as its supplier (tr. 2/60, 69-71).

       114. MPG West shipped Fresh Express bagged salads via the same airfreight and
stored them in the same cold storage facilities as all the other perishable products under
the contract (app. supp. R4, tab 231).

      115. During the course of performance, MPG West told DeCA that it was having
trouble with the bagged salad requirement and requested assistance because it was
losing so much money on these products (R4, tab 12 at 88-89; tr. 2/55-59).

      116. Bagged salads were not listed as HVCI and were not subject to the patron
savings requirement (tr. 2/110).

      117. MPG West approached DeCA and asked if DeCA could take over the
bagged salad program (tr. 2/55-56).

       118. DeCA Director Joseph Jeu testified that DeCA agreed to remove bagged
salads from the contracts and reinstate second destination transportation for bagged
salads to the Pacific (tr. 3/51).

      119. On July 12, 2017, DeCA issued bilateral Contract Modification No. P00003
removing the bagged salad requirement from the Contract without further compensation
under the Changes clause of the contract (FAR 52.212-4(c)) (app. supp. R4, tab 49).
There was no mention of the termination for convenience provision of the contract.

                                           16
      120. In total, MPG West asserts that it spent $5,089,321.56 more on providing
the bagged salad products than it was paid by DeCA (app. supp. R4, tabs 799-800).

V. The Inspector General Reports

      A. The Guam Report

       121. On February 28, 2017, the Department of Defense Inspector General (IG)
issued Report No. DODIG-2017-060 titled “Defense Commissary Agency Purchases of
Fresh Produce in Guam” (Guam report) (app. supp. R4, tab 48).

      122. The Guam report presented findings regarding the “current local purchase
process contract for fresh produce in Guam” (app. supp. R4, tab 48 at i).

       123. Anthony Peters, an IG employee, testified at the hearing (tr. 4/52-101). He
served as the program manager that oversaw the audit for the Guam report (tr. 4/58, 60).

     124. Mr. Peters testified that the Guam report provided a recommendation that
“was specific to only Guam” and did not evaluate any information or data generated in
South Korea or Japan (tr. 4/74, 100).

      125. Mr. Peters testified that the results of the Guam report could not be
extrapolated to other countries (tr. 4/100).

      B. The Oversight Report

     126. On February 22, 2018, the IG published Report No. DoDIG-2018-078 titled
“Defense Commissary Agency Oversight of Fresh Produce Contracts in Japan and
South Korea” (oversight report) (app. supp. R4, tab 979).

      127. The oversight report was based on an audit conducted from March through
December 2017, and relied upon a sample of data from November 2, 2015 to May 23,
2017 (app. supp. R4, tab 979 at 20-21).

        128. Mr. Peters conducted the audit for the oversight report (tr. 4/60). He
testified that the audit for the oversight report “included more than just an MPG West
contract” (tr. 4/79). The audit included multiple contractors, including MPG West, EKK
Investments, and Interharvest (tr. 4/80).

        129. The oversight report published findings relating to DeCA’s internal policies
and procedures for conducting market basket surveys, produce inspection worksheet
credit calculations, and fill rate calculations (app. supp. R4, tab 979 at i).

                                           17
      130. The oversight report contains an Agency response which states that DeCA
reviewed produce inspection worksheets from November 2015 to February 2016, and
determined that the net impact of calculation errors was $1,545, or only 0.015 percent
of the $9.9 million payments reviewed (app. supp. R4, tab 979 at iii).

      131. The IG performed its own fill rate calculations based on data generated
during MPG West’s performance of the contract in November 2015 and January 2016
(app. supp. R4, tab 979 at 12).

       132. The IG fill rate calculations for MPG West were 66 percent (vice 72 percent
calculated by DeCA) and 78 percent (vice 69 percent calculated by DeCA) (app. supp.
R4, tab 979 at 12).

       133. The IG fill rate calculations resulted in fill rate percentages that were still
well below the contract requirement of 98 percent (tr. 4/98).

        134. Petra Pulze, the CO, testified that the fill rate is calculated based on items
ordered by the commissaries versus items actually received (tr. 2/67). As a result, items
that are unavailable on the market would not lower the fill rate, because unavailable
items should not appear in the ordering catalog (tr. 2/67-68).

      135. The CO testified that MPG West “very seldom” met the required
contractual fill rate of 98 percent (tr. 2/68).

       C. The Market Research Report

      136. On February 12, 2018, the IG published Report No. DODIG-2018-072 titled
“Defense Commissary Agency’s Purchases of Fresh Produce for Japan and South
Korea” (market research report) (app. supp. R4, tab 978).

    137. The IG conducted its audit of DeCA’s market research from March 2017 to
December 2017 (app. supp. R4, tab 978 at 16).

      138. The market research report concluded that prices in South Korea and Japan
increased because DeCA’s market research was inadequate (app. supp. R4, tab 978 at ii).

       139. DeCA disagreed with the report’s finding regarding market research (app.
supp. R4, tab 978 at 28).

       140. Robert Shonewolf, the project manager for the market research report,
testified at the hearing (tr. 4/128-152).

                                             18
       141. He testified that his audit team “[wasn’t] looking at the [MPG West] contract
per se. We were just looking at the prices prior to [the contract] and what they were at the
time we were looking at the audit. We didn’t dig into the contract.” (Tr. 4/146)

       142. He further testified that the audit did not study the impact of the contract on
MPG West, did not evaluate DeCA’s conduct of weekly price reviews, and did not
evaluate the startup process nor MPG West’s delivery of bagged salads (tr. 4/147-48).
Moreover, the audit did not segregate data between MPG West and other contractors
that were also performing contracts in South Korea and Japan (tr. 4/148).

VI. Request for Equitable Adjustment and Subsequent Claims

      143. On March 6, 2016, MPG West submitted a Request for Equitable
Adjustment (REA) to the contract in the amount of $3.3 million (R4, tab 7).

        144. On March 7, 2016, at MPG West’s request, DeCA began paying MPG
West’s invoices on a daily basis, as opposed to the normal weekly payment cycle (R4,
tab 9).

       145. On March 9, 2016, DeCA requested that MPG West answer several
questions and provide documentation supporting its REA (R4, tab 10).

        146. On March 10, 2016, during a teleconference, MPG West requested an
immediate advance payment of $2.8 million on its claim. In the teleconference, MPG
West described anticipated shipment delays, inspection problems, extended timeline to
clear facilities for storage, low produce fill rates, and MPG West’s financial problems
associated with paying vendors and securing adequate credit. This discussion was
memorialized in an email. (R4, tab 11)

        147. On March 22, 2016, MPG West withdrew its request for equitable adjustment
and submitted a certified claim requesting payment for $5,076,339.52 (R4, tab 13). The
claim narrative refers to the bagged salad requirement as causing increased transportation
costs and loss of produce during the import process. The claim attributes the difficulties
to DeCA’s failure to facilitate immediate customs clearance of embargoed items, leading
to the loss of perishable product, such as “many green/lettuce items including . . . bagged
salads.” The claim itemizes losses attributable to produce lost as perishable allegedly due,
in part, to “intra-government disputes concerning inspections of produce and warehouse
inspections/licensing.” (R4, tab 13 at 4) It further references the specific dollar amounts
sought in that claim as including costs paid to Fresh Express, the vendor associated with
the bagged salad requirement (R4, tab 13b at 115-18), as well costs associated with the
disposal of specific salad items (R4, tab 13a at 100).

                                            19
        148. On March 28, 2017, the government requested supporting documentation
for the claim (R4, tab 14).

      149. On April 26, 2016, MPG West provided DeCA with claim documents and
backup data (R4, tabs 17-18).

      150. On May 4, 2016, the government requested that MPG West provide
information in a different format, and included a suggested format for presentation of the
supporting documentation (R4, tabs 22, 22a).

      151. That same day, MPG West stated that it must receive an interim payment
within seven days or it would have to phase down performance (R4, tab 23).

        152. On May 9, 2016, MPG West told the government that it needed $1.7 million
in the “next few days” in order to avert a phase down in performance (R4, tab 26 at 2).

       153. On May 11, 2016, MPG West requested that the government consider
issuing a loan to it secured by collateral (R4, tab 28).

       154. On May 12, 2016, the government made a $2 million partial payment of the
claim to MPG West, based on the guarantee that MPG West would submit
documentation that would allow the government to validate the payment and any
additional payments that may be due (R4, tab 30).

     155. MPG West paid the $2 million in full on May 17-18, 2016 to its
subcontractor, Interharvest, in order to keep the contract afloat (R4, tab 43i at 3757).

        156. On June 8, 2016, the government issued a cure notice to MPG West for
failing to meet the contract requirements regarding fill rates and timely submission of
market-basket surveys (R4, tab 32).

       157. In July 2016, two subcontractors (EKK Investments and Interharvest Japan)
effectively took over all of the cost and performance of the contract (tr. 2/245).

       158. DeCA coordinated with MPG West to set up an escrow account to receive
and distribute government contract payments directly to the subcontractors (gov’t supp.
R4, tab 36).

     159. On October 6, 2016, MPG West submitted its first supplemental claim to
the Government and revised the claim amount to $11,459,279 (R4, tab 39).

        160. On November 13, 2016, MPG West submitted a second supplemental claim
to the government with a revised claim amount of $10,952,546 (R4, tab 43). The

                                            20
revised claim amount of $10,952,546 set forth in the second supplemental claim was
comprised of the following figures:

 $6,380,837          Cash Reserves Spent on Increased Costs
 $625,000            Payment to Interharvest from Sale of Personal Residence
 $2,922,620          Current Vendor Arrearages
 $324,089            Fresh Express Judgment
 $700,000            Unrealized Profit

(R4, tab 43 at 17)

        161. The $6,380,837 “Cash Reserves Spent on Increased Costs” was calculated
as the total expenses MPG West incurred from October 2015 - February 2016, minus the
amounts paid on the contract (R4, tab 43 at 13).

       162. The CO testified that she had not seen anything that broke out the bagged
salad costs separately from all other produce when reviewing the claim (tr. 2/99). She
further testified that she had not been provided the documents now labeled as App.
Supp. Rule 4, Tabs 799 and 800, which consist of bagged salad costs only, when she
reviewed the claim (tr. 2/99-100).

      163. On January 3, 2017, the government issued a COFD to appellant wherein
the CO provided her analysis for each element of the claim (R4, tab 47).

       164. The COFD stated:

                    I have previously determined that MPG was entitled to
              increased compensation because of the compressed start-up
              period and difficulties MPG encountered in getting its
              product through the inspection process in the countries. In
              the interest of good faith and fair dealing, on May 13, 2016,
              DeCA paid MPG a sum of $2,000,000.00 even though such
              costs were not fully definitized, as explained in our May 12,
              2016 letter.

(R4, tab 47 at 4)

       165. The COFD determined that no other costs were supported by the appellant
(R4, tab 47 at 4).

      166. During the hearing, when the Contracting Officer was questioned whether,
when she issued her final decision, she included in her considerations a payment of or

                                           21
request for payment of $5,089,321.56 for bagged salad costs, she testified: “No. Not at
all.” (Tr. 2/105)

VII. Novation of the Contract and Litigation before the Board

       167. On February 24, 2017, the appellant novated the Korea portion of the
contract, CLIN 001, to EKK Investments (app. supp. R4, tab 989). As part of the novation
agreement between MPG West. EEK Investments, and the government for CLIN 001,
MPG West waived any future claims not already filed with the government (app. supp.
R4, tab 989 at 2).

       168. On April 14, 2017, MPG West filed its complaint under ASBCA No. 61100
alleging three counts: Count One – Constructive Contract Changes; Count Two –
Breach of Contract; and Count Three – Constructive Change/Termination for
Convenience. Counts Two and Three were presented as alternative theories of recovery.

       169. On April 19, 2017, the removal of the requirement to deliver bagged salads
to Japan became effective (compl. ¶ 138; gov’t answer ¶ 137).

       170. On September 12, 2017, MPG West novated the Japan portion of the
contract, CLIN 002, to Interharvest Japan Co., Ltd. (app. supp. R4, tab 990). As part of
the novation agreement for CLIN 002, appellant further waived any future claims not
already filed with the government (app. supp. R4, tab 990 at 2).

      171. On January 10, 2018, the government filed a Partial Motion to Dismiss for
Lack of Jurisdiction pertaining to the third count of appellant’s appeal seeking
$5,089,321.56 as compensation for bagged salad costs (gov’t mot., dtd. Jan. 1, 2018).

       172. The next day, January 11, 2018, appellant filed what the Board deems a
protective claim with DeCA referred to as a “third supplement” to its claim seeking
$5,089,321.56 as compensation due to constructive changes while delivering bagged salads.
The supplemental/protective claim did not increase the originally claimed amount, however
it was submitted to “further explain the bagged salad portion of MPG West’s existing
claim” as well as include conclusions from the IG report.

       173. On January 24, 2018, appellant filed another protective claim with DeCA
referred to as a “fourth supplement” to its claim seeking $5,089,321.56 as compensation
due to constructive changes while delivering bagged salads alleging that the removal of
the bagged salad requirement under Modification No. P00003 equated to a termination
for convenience (gov’t supp. R4, tab 40).

      174. On March 12, 2018, the government issued a COFD denying appellant’s third
supplemental claim on the basis that it was untimely (gov’t. supp. R4, tab 41). On March

                                           22
27, 2018, the government issued a COFD denying appellant’s fourth supplemental claim
on the basis that it was untimely (gov’t supp. R4, tab 42). The CO testified that the third
and fourth supplemental claims were untimely because appellant already had novated the
contract (tr. 2/105).

      175. Appellant appealed the denial of its third and fourth supplemental claims to
the Board.

      176. The Board assigned the new protective appeals ASBCA Nos. 61560 and
61570 respectively. Upon motion by appellant that the new appeals involved
alternative legal theories for recovery of the amount claimed in ASBCA No. 61100, and
over the government’s objection, the Board consolidated them with ASBCA No. 61100
(Board Order dtd. April 4, 2018).

       177. Additionally, the Board deferred a ruling on the Government’s jurisdictional
arguments regarding the portion of the protective appeals pertaining to bagged salad
costs of $5,089,321.56 (Board Order dtd. April 4, 2018).

     178. On March 22, 2018, the Appellant amended its complaint to remove
$683,797.60 in claimed costs, along with sixteen exhibits, that were admitted during
depositions to have been incurred on a different contract (amend. compl. dtd. Mar. 22,
2018).

      179. The amended complaint changed the total amount claimed from
$9,474,359.71 to $9,489,385.10, thereby increasing the total claim amount. (amend.
compl. at 2).

       180. The Board held a three-day hearing for theses appeals on May 15-18, 2018.

                                       DECISION

I. Whether the Board Possesses Jurisdiction to Entertain Count Three of ASBCA
Nos. 61100, 61560, and 61570

       DeCA contends that the Board lacks jurisdiction to entertain Count Three of
MPG West’s complaint, which seeks to recover $5,089,321 in costs associated with the
bagged salad delivery requirement (gov’t br. at 32-34; compl. at 37-38). According to
DeCA, the third count MPG West’s complaint is not a proper claim, because the events
that gave rise to MPG West’s claim occurred after the CO issued her final decision
denying MPG West’s initial claims (gov’t br. at 33). The CO testified that she did not
consider MPG West’s request for payment of $5,089,321 when she issued her final
decision (findings 162, 166) and, as a result, she did not receive adequate notice of the

                                            23
basis and amount of the claim. See Fahim Noori Constr. Co., ASBCA No. 60659, 16-1
BCA ¶ 36,492 at 177,833.

       After the government moved to dismiss Count Three, MPG West filed two new
claims with the CO, one for bagged salad costs on a theory of constructive change, and
one for the same costs based on the government’s termination of the requirement
(findings 172-173). The CO denied these claims as untimely on the grounds that they
were filed after appellant had novated the contract (finding 174). According to the
DeCA, the novation agreement included a waiver of its rights to pursue future claims
(gov’t br. at 34).

       Because MPG West filed protective appeals relating to each of its new claims for
bagged salad costs (findings 172-173), we need not decide whether we possess
jurisdiction over Count Three, because we now have appeals from COFDs for claims
presented to the CO, thereby establishing jurisdiction. 41 U.S.C.A. § 7104. Because we
are denying the appeals in their entirety, there is no need to address whether the merits
of these appeals may affect quantum and the running of interest. Consequently, we
possess jurisdiction to entertain Count Three of MPG West’s amended complaint.

II. Whether DeCA Breached its Duties under the Terms of the Requirements Contract

        In support of its claim of entitlement, MPG West contends that the contract is a
requirements contract and that DeCA has a duty to exercise good faith and reasonable
care in estimating both the amount of goods it would need in the solicitation, and in
determining its requirements during the course of performance (app. br. at 29).
According to MPG West, DeCA breached these duties both by demanding that MPG
West offer lower prices on FF&V, and by preventing MPG West from selling products
that it had purchased and shipped to Japan and Korea at its own expense (app. br. at 26).

       A. Whether DeCA’s Quantity Estimates Were Negligently Prepared

        The government is not required to be clairvoyant when it issues an estimate for
bidding purposes, but a contractor can recover if it shows that the estimate was
inadequately or negligently prepared, not in good faith, or grossly or unreasonably
inadequate at the time the estimate was made. Burnham Associates, Inc., ASBCA
No. 60780, 18-1 BCA ¶ 36,934 at 179,942 (citing Clearwater Forest Industries, Inc. v.
United States, 650 F.2d 386, 395 (Ct. Cl. 1981)). Thus, to the extent that a government
estimate is inadequately or negligently prepared, its inclusion without correction in a
solicitation or contract constitutes a misrepresentation that, whether deliberate or not,
amounts to a breach of contract. Rumsfeld v. Applied Companies, Inc., 325 F.3d 1328,
1335 (Fed. Cir. 2003) (citing Womack v. United States, 389 F.2d 793, 800 (Ct. Cl.
1968)). Even if the government’s estimate is not drastically inaccurate, if it was
prepared negligently or in bad faith the government is liable for breach. American

                                            24
General Trading & Contracting, WLL, ASBCA No. 56758, 12-1 BCA ¶ 34,905
at 171,635. The critical measure for determining whether an estimate was negligently
prepared is whether the estimate is based upon all relevant information that is reasonably
available to the government at the time of award. Burnham, 18-1 BCA ¶ 36,934
at 179,943 (citing Womack, 389 F.2d at 801).

       In this appeal, MPG West contends that the contract was flawed from its
inception, because of the “incompatibility of the import obligations, the pricing
requirements including all costs such as freight, and the government’s attempt to keep
patron prices as low as possible.” (App. br. at 32) MPG West points to the DOD
Inspector General’s report as evidence that DeCA was aware of these flaws, but
nonetheless refused to acknowledge that the flaws caused MPG West to incur substantial
damages (app. br. at 14-16).

        The solicitation included weekly estimated quantities by pound for each item on
the HVCI list for each CLIN, based on the previous three years of consumption data
under the incumbent contract (finding 12). MPG West contends that the weekly
estimates were flawed, because they did not account for all of the items on the HVCI list
that are subject to embargo in Japan and Korea and failed to include estimates for
non-HVCI items or for the bagged salad products (app. br. at 31). MPG West neglects
to explain, however, how these estimates contributed to the problems MPG West
encountered during performance.

       MPG West’s allegations concerning DeCA’s estimates of HVCI are a red herring.
Items that are unavailable on the market would not lower the fill rates, because they
would not appear in the ordering catalog. Indeed, the contract required appellant to
supply an item subject to the market basket survey only “if it’s available.” (Finding 22)
Therefore, any errors in estimating the local availability of HVCI would not impact
MPG West’s ability to satisfy the 98 percent fill rate requirement.

       MPG West also blames DeCA for failing to “understand the amount of produce
that would need to be imported to meet DeCA’s requirements” (app. br. at 32). It faults
DeCA for failing to “understand the difficulty of importing produce into Japan and
Korea, the effect of customs clearance on the quality of produce, and the impact all of
this would have on patron prices” (id.).

       In our view, MPG West’s quarrel is not with DeCA’s weekly estimated
quantities, but with the fact that MPG West was unable to obtain local sources of
produce and was forced to import significant quantities of produce to fill DeCA’s
requirements. The record demonstrates that MPG West failed to timely implement a
local sourcing plan. As a result, MPG West sourced most of its produce from overseas
(finding 76). For imported produce, MPG West paid brokerage fees to its sister

                                           25
company, Parma Fruit (also owned by Mr. Penny) (finding 77), and it incurred extra
costs of transporting the produce to Korea and Japan (finding 78).

       MPG West has not provided specific evidence that DeCA was negligent in
estimating weekly produce quantities. Instead, appellant seeks to rely upon the COFC’s
bid protest findings and the DOD IG’s reports as evidence that DeCA was negligent in
preparing quantity estimates (gov’t br. at 52). As we discuss more fully below, in
Section II.B., we do not consider the DOD IG’s reports to be dispositive. Indeed,
appellant admits that the COFC held that DeCA’s market research was adequate and
complied with FAR 10.001(a)(3)(1) (app. br. at 34).

      B. Whether the IG Reports are Persuasive Evidence of Breach

       As we concluded at the hearing, each of the IG reports are admissible into
evidence (tr. 3/49-50) pursuant to the public records exception to the hearsay rule. Fed.
R. Evid. 803(8); Tab Constr., ASBCA No. 48324, 95-2 BCA ¶ 27,788 at 138,593
(allowing admission of Air Force memoranda pursuant to official record exception to the
hearsay rule).

      MPG West asserts that the IG’s findings establish the following facts:
          • That DeCA failed to perform adequate market research into the local
            availability of FF&V (app. reply at 4).
          • DeCA failed to consider the difficulty of transporting produce into Korea
            and Japan, and its impact on produce prices and quality when awarding the
            contract (app. reply at 1, 5).

       According to MPG West, these facts support its claim that DeCA breached its
duties under the requirements contract, as well as its duty to cooperate in contract
performance (app. reply br. at 5). MPG West asks that we take judicial notice of the
reports and accord them significant weight (app. reply br. at 1, 4).

       In response, DeCA contends that the IG reports did not analyze the issues raised
in MPG West’s claim. It further responds that the IG reports are not legally binding as
party admissions. For a variety of reasons, we do not find the IG reports dispositive of
MPG West’s claims of breach.

       First, the Guam report, dated February 28, 2017, was specific only to Guam and
did not address South Korea or Japan (finding 122). According to the Program Manager
who oversaw the report, its findings cannot be extrapolated to other countries
(finding 125).

      Second, with respect to the oversight report, dated February 22, 2018, it involved
an audit that included data from all three contractors and did not differentiate between
                                           26
data from MPG West’s performance of the contract (finding 127). The only portions of
the oversight report potentially relevant to MPG West’s claim are the report’s findings
regarding DeCA’s calculation of fill rates and credits for produce inspection worksheets
(finding 129).

        Accepting as true the report’s findings that DeCA incorrectly calculated fill rates,
the corrected calculations do not change DeCA’s overall conclusion that MPG West
routinely failed to meet the 98 percent fill rate requirement. As the CO testified, MPG
West “very seldom” met the fill rate requirement (finding 135). This is true even when
considering that items unavailable on the local market were not counted against the fill
rate, because the fill rate was based on orders versus receipts (finding 134).

       The market research report, dated February 12, 2018, addressed DeCA’s market
research (finding 136). The report did not segregate data generated during MPG West’s
performance from data generated after other contractors took over in July 2016
(finding 137). The report also did not address DeCA’s weekly price reviews, nor its
delivery of bagged salads (finding 142).

        Relying on the market research report, MPG West contends that “DeCA failed to
consider the fact that in South Korea and Japan, the contractor would only have one
customer – DeCA – whereas the contractors in Europe and Guam had other avenues for
sales” (app. br. at 14; app. supp. R4, tab 978 at 12). Accepting this conclusion as true,
we do not consider it dispositive. The contract was not a SOFA contract and placed no
restrictions on MPG West’s ability to sell to other customers (finding 81). To the extent
that MPG West imported produce under SOFA to avoid import duties, it did so on its
own volition and knowingly accepted the concomitant restrictions on the resale of
imported produce (finding 82).

       Next, MPG West contends that DeCA failed to account for the “difficulty of
transporting produce into Japan and South Korea and its impact on produce prices when
awarding the contract” (app. br. at 15; app. supp. R4, tab 978 at 13). As we discuss in
much greater detail below in Section IV, the contract placed the sole responsibility for
importation on MPG West. Although there were problems initially with the importation
process and confusion surrounding the SOFA process, the problems largely were
alleviated when the CO wrote to Korean officials and explained that MPG West was
permitted to import produce under SOFA (finding 85).

       Moreover, assuming that the IG report correctly concluded that DeCA failed to
understand the custom clearance process and the adverse effect it would have on
produce prices, we fail to see how DeCA’s “understanding” is tantamount to a breach of
the contract. Even if we accept that DeCA’s procurement strategy was flawed, MPG
West responded to the proposal and agreed to the terms of the contract as proposed.

                                             27
       C. Whether DeCA Breached the Terms of the Requirements Contract during
          Performance

        MPG West argues that DeCA breached the contract during performance in three
ways. First, MPG West argues that DeCA based its weekly produce orders on political
concerns about how patrons perceived prices, rather than on the commissaries’ actual
requirements (app. br. 37-38). Second, MPG West argues that DeCA implemented new
pricing factors that were not included in the contract (app. br. at 39-41). Finally, MPG
West contends that DeCA failed to provide effective contract oversight and training to
government employees involved in the ordering and produce importation process (app.
br. at 36-37).

       The Federal Circuit has recognized that in a requirements contract, the limit on
the government’s freedom to determine its requirements is its duty to act in good faith.
See Technical Assistance Intern., Inc. v. United States, 150 F.3d 1369 (1998) (discussing
balance between ordering flexibility and duty to act in good faith). In that case, good
faith meant that “[the] buyer . . . has a valid business reason for varying its requirements
other than dissatisfaction with the contract.” Id. at 1372.

      DeCA does not dispute that the contract was a requirements contract, but
contends that the contract provided considerable flexibility in ordering. In particular,
DeCA points out that the contract gave the government the flexibility to order produce
from other providers, as long as the contract with MPG West was the “primary source.”
(Gov’t br. at 48).

       The contract contained FAR 52.216-21, REQUIREMENTS, and FAR 52.216-19,
ORDERING LIMITATIONS. Together, these clauses provide that DeCA must meet the
minimum ordering limitations set forth in the contract, but otherwise is not obligated to
order the estimated quantities. FAR 52.16-21(a) provides that the failure to order
estimated quantities set forth in the contract “shall not constitute the basis for an
equitable adjustment.” FAR 52.16-19(a), in turn, provides that orders must satisfy the
minimum ordering limitations set forth in the contract. (Finding 21)

       These clauses must be read in conjunction with the statement of requirements. As
FAR 52.216-21(c) allows, the parties may agree to a more specific statement of
requirements allowing the government to purchase from other sources.

              Except as this contract otherwise provides, the Government
              shall order from the Contractor all the supplies or services
              specified in the Schedule that are required to be purchased
              by the Government activity or activities specified in the
              Schedule.

                                            28
FAR 52.216-21(c) (emphasis added). Here, the contract’s statement of requirements
provided that DeCA “will contract with one or more sources to provide [produce] to
various DeCA Commissary stores in South Korea, and Japan,” and “[t]his contract is the
primary source of [produce]” (finding 21). Thus, the contract gives DeCA limited
freedom to order FF&V from other sources provided that MPG West remains the
primary source.

       Against this contractual backdrop, we turn to whether DeCA breached its
contractual obligations when conducting its weekly review of MPG West’s produce
catalog. In particular, we must determine whether the government’s request to remove
an item from the catalog or request that MPG offer an item at a lower price violated the
terms of the contract.

       As discussed more fully below, we conclude that DeCA conducted the weekly
pricing review in a manner that was reasonable and consistent with the contract terms
(see Section III.B.3). DeCA developed and applied reasonable and consistent criteria to
evaluate weekly prices based on the past history of prices for particular items
(finding 103). DeCA approved the vast majority of the items submitted by MPG West
on a weekly basis (finding 106). For those items that it questioned, DeCA identified
why it was questioning the price and gave MPG West an opportunity to explain the price
(findings 103-104).

        We are convinced that MPG West’s financial losses resulted predominantly from
factors within its control, rather than from government conduct. The record
demonstrates that MPG West failed to timely implement a local sourcing plan. As a
result, MPG West sourced most of its produce from overseas (finding 76). For imported
produce, MPG West paid brokerage fees to its sister company, Parma Fruit (also owned
by Mr. Penny) (finding 77), and it incurred extra costs of transporting the produce to
Korea and Japan (finding 78). Finally, the record contains no evidence that the
government interfered with MPG West’s performance of the contract.

       A contractor cannot prevail on a breach claim when it underestimated the
difficulty of the anticipated contract work. RDA Constr. Corp. v. United States, 132
Fed. Cl. 732, 775 (2017). Indeed, it is well settled that “the risk of increased
performance costs in a firm-fixed-price contract, absent a clause stating otherwise, are
on the contractor.” Edinburgh International, ASBCA No. 58864, 16-1 BCA ¶ 36,227
at 176,744 (quoting Chevron U.S.A., Inc., ASBCA No. 32323, 90-1 BCA ¶ 22,602
at 113,426); see also United States v. Spearin, 248 U.S. 132, 136 (1918) (“Where one
agrees to do, for a fixed sum, a thing possible to be performed, he will not be excused or
become entitled to additional compensation, because unforeseen difficulties are
encountered.”). In this appeal, MPG West accepted the risk of increased performance
costs when it elected to import the majority of the produce necessary to fulfill the
contract’s requirements.

                                            29
III. Whether DeCA Constructively Changed the Terms of the Contract

        As an alternative to its claim of breach, MPG West contends that DeCA
constructively changed the terms of the contract in three fundamental ways: (1) by
failing to provide adequate time for the startup of the contract; (2) by pressuring MPG
West to reduce its prices and preventing it from recouping its actual costs; and (3) by
failing to cooperate with MPG West in complying with host nation laws concerning the
import of fresh produce (app. br. at 43-47).

       In order to prevail on a theory of constructive change, MPG West must
demonstrate that: (1) the CO or her delegate compelled performance of work beyond the
contact terms; (2) the change was directed by someone with contractual authority
unilaterally to alter the contractor’s duties; (3) the contractor’s performance
requirements were enlarged; and (4) the added work was not volunteered. Innoventor,
Inc., ASBCA No. 59903, 17-1 BCA ¶ 36,798 at 179,355. Appellant bears the burden of
proving the elements of a change. Die-Matic Tool Co., ASBCA No. 31185, 89-1 BCA
¶ 21,342 at 107,603, aff’d, 889 F.2d 1100 (Fed. Cir. 1989) (table).

      A. Whether Constructive Change Doctrine Applies to a Commercial
         Items Contract

        As a threshold argument, the government contends that the constructive change
doctrine does not apply to this commercial items contract (gov’t br. at 37). Because the
contract contains FAR 52.212-4 (c), which provides that changes only may be made by
written agreement of the parties, the government had no unilateral authority to order
work beyond the contract terms (id.). Thus, according to the government, the second
element of the doctrine of constructive change – contractual authority to unilaterally
alter the contractor’s duties – cannot be satisfied here (id. at 37).

        MPG West has not cited a decision of this Board applying the constructive
change doctrine to a commercial items contract, nor have we directly addressed the
issue. Tkacz Engineering, LLC, ASBCA No. 60358, 18-1 BCA ¶ 36,940 at 179,962
(citing Hawaii CyberSpace, ASBCA No. 54065, 04-2 BCA ¶ 32,744 at 161,946 n.1
(declining to decide whether the constructive change doctrine applies to commercial
items contract); but cf. Agility Pub. Warehousing Co. KSCP v. Mattis, 852 F.3d 1370,
1385-86 (remanding to the Board initial consideration of a constructive change claim
made with respect to a Commercial Items contract).

       In this appeal, regardless of whether we analyze MPG West’s arguments through
the lens of constructive change or breach, our primary focus is on whether the work
MPG West performed was within the scope of the contract, and whether it performed
that work voluntarily.

                                           30
       B. Whether DeCA Constructively Changed the Terms of the Contract

        The starting point for our analysis of constructive change is the language of the
contract. “In order to decide whether a constructive change has occurred, we examine
the pertinent contract language . . . to interpret the contract requirements.” Lamb Eng’g
& Constr. Co., ASBCA No. 53304 et al., 06-1 BCA ¶ 33,178 at 164,417. Where the
provisions of a contract are “clear and unambiguous, they must be given their plain and
ordinary meaning, and we may not resort to extrinsic evidence to interpret them.” Coast
Fed. Bank, FSB v. United States, 323 F.3d 1035, 1040 (Fed. Cir. 2003) (en banc)
(citations omitted).

       1. Whether the Lack of Time Provided for Startup Constituted a Constructive
          Change

        Appellant contends that DeCA did not give it enough time to prepare for
performance and to establish local sources of produce to supply the commissaries (app.
br. at 48-52). Due to bid protests by the incumbent contractor, MPG West did not
receive final confirmation that it had the contract until three days before the start date
(finding 59). According to MPG West, the government’s direction to proceed without
enough time to secure local sources, in-country personnel, and necessary logistics was a
compensable change to the method and manner of performance (app. br. at 52).

       In response, the government admits that the time for startup was compressed due
to bid protests by the incumbent contractor (gov’t br. at 38). Indeed, in the COFD, the
government compensated MPG West in the amount of $2 million for the compressed
start-up period and the difficulties MPG West encountered in getting its product through
the inspection process (finding 154). However, despite the delay from the bid protests,
the government maintains that MPG West’s contemporaneous communications reveal
no concerns about financial losses during startup (gov’t br. at 39-40).

        The contract did not include a transition period for the startup of the contract. In
the absence of a transition period, the contractor is expected to perform on the date
identified upon contract award. CWT Alexander Travel, Ltd. v. United States, 78 Fed.
Cl. 486, 495 (2007). In the absence of a contract term establishing a specific start date
or period for transition, we will not imply a term. Id.; see also Metric Constructors, Inc.
v. National Aeronautics and Space Admin., 169 F.3d 747, 752 (Fed. Cir. 1999) (holding
that contracting party cannot invoke trade practice and custom to create an ambiguity
where a contract was not reasonably susceptible of differing interpretations at the time of
contracting).

       The timeline reveals uncertainty regarding whether MPG West would have the
contract until three days before the November 1, 2015 start date (finding 59). However,

                                            31
MPG West admits that it began preparations for the contract as early as May 22, 2015,
when it was awarded the contract (app. br. at 48; finding 41). MPG West hired
personnel, contracted with local trucking companies, and took steps to secure cold
storage in Korea and Japan (app. br. at 48). Moreover, DeCA issued a notice to proceed
on September 11 and followed it up with further direction on September 22 to prepare
for a November 1, 2015 start date. Despite an intervening bid protest at the Court of
Federal Claims which was not resolved until October 29, 2015, MPG West continued its
efforts to secure personnel and logistics subcontractors for the new start date (app. br.
at 49).

      Although MPG West asserts that it encountered difficulties with subcontractors
and government officials in Korea and Japan because of the uncertainty surrounding the
second bid protest, DeCA stated that it would pay for losses associated with shipping
produce from overseas to be ready for the November 1, 2015 start date (finding 52).

        While it is true that the contract did not require MPG West to locally procure
FF&V, MPG West knew from time of the solicitation that it would need to “locally
source as much FF&V as possible from the local market, which would include locally
available imported items” (finding 10). From the beginning, MPG West was on notice
that locally sourcing produce was crucial to successfully performing the contract.
Indeed, former Director Jeu expressed disappointment that MPG West was slow to go to
local sourcing (app. br. at 51).

       According to MPG West, it takes 3-4 months to establish a source for local
produce. Citing an email written by Mr. Dieter, DeCA’s Deputy Director of Acquisition
Management, MPG West claims that the uncertainty about the start date did not give it
sufficient time to establish local sources of produce (app. br. at 115). According to
MPG West’s owner, Mr. Penny, local companies would not agree to contracts without a
firm start date. However, his hearing testimony specifically addresses difficulties with
Plant Quarantine Japan regarding the importation of produce into Japan – not difficulties
with securing local growers or other local sources of produce (finding 57).

        Instead, MPG West offers only an unsupported allegation that it did not have
enough time to establish contracts with local growers, and vague statements about local
growers not growing in excess of their contracts and the expense of procuring local
produce that is not grown on contract (app. br. at 115). MPG West provides no detail in
the record about the efforts it undertook to establish contracts with local growers, nor
does it explain how the government prevented it from doing so.

        Instead, the contemporaneous record demonstrates that MPG West was confident
in its ability to perform at the outset of the contract. Even after performance began,
MPG West expressed optimism about its performance. (Finding 73) Moreover, MPG
West already was performing on the prior contract for the incumbent for the past six or

                                           32
seven years. MPG West’s role in the incumbent contract included training personnel at
the store level, truckers, and warehouses. (Finding 9) Given MPG West’s prominent
role in the previous contract, we cannot conclude that the delay in startup caused it harm
beyond the $2 million in compensation the CO already paid.

       2. Whether the Requirement for FOB Delivery was a Constructive Change

       Appellant contends that DeCA constructively changed the contract when it
refused to accept produce for the fixed prices MPG West proposed (app. br. at 44).
According to appellant, DeCA relied on pricing metrics that were not included in the
contract to request that MPG West lower its prices on certain items or remove those
items from the weekly catalog (app. br. at 45).

       As we stated in our discussion of the weekly pricing meetings, DeCA possessed
discretion under the contract to review produce prices on a weekly basis and to reject
items offered at unreasonable prices (findings 91-92, 98, 103-105). We concluded that
DeCA did not abuse its discretion in doing so, and that it was appropriate for DeCA to
rely on its own metrics to determine whether produce prices were “reasonable.” (See
discussion at ¶ III.B.3, below). These conclusions leave no room for the argument that
DeCA’s price review was a constructive change of the contract.

       Moreover, as the government observes, the FOB contract term is an express term
of the contract, and the obligation to comply with it cannot be a constructive change
(gov’t br. at 40). While it is true that the FOB term was a change from the prior
contract, there is no dispute that it was included in the final contract (findings 25, 27).
Indeed, the term was the subject of published vendor questions and bid protests
challenging its feasibility, so MPG West should have been fully aware of the
requirement (finding 5).

       3. Whether the Weekly Pricing Meetings Constituted Constructive Change

       The weekly price review was one of two pricing mechanisms set forth in the
contract. The first pricing mechanism identified 35 items as HVCI to be included in
monthly Market Basket Surveys, which were required to meet a “Patron Savings
Requirement.” (Finding 34) The Patron Savings Requirement established a minimum
discount based on a comparison of the price of commissary items to “like” items in
comparable retail grocery stores (finding 34). The parties do not dispute that MPG West
met the patron savings requirement and agree that the market survey is not an issue in
this appeal (gov’t br. at 44).

       The second pricing mechanism was the weekly review. The contract required that:
“[t]he Government will monitor all other prices provided on the weekly price lists for
being fair and reasonable considering the market conditions at the time.” (Finding 33)

                                            33
        MPG West argues that DeCA consistently pressured MPG West to keep its prices
down, thereby preventing it from charging prices sufficient to cover its costs (app. br.
at 44-47). In particular, MPG West asserts that DeCA pressured MPG West at weekly
meetings to lower prices or remove high-priced items from its catalog, relying on
“pricing metrics that are not included anywhere in the contract.” (App. br. at 45;
tr. 1/100; app. supp. R4, tabs 851-863). According to MPG West, DeCA continually
directed it to charge patrons artificially low prices or not sell its produce at all, even
when DeCA knew that MPG West already had purchased and shipped the products to its
warehouses in Japan and Korea (app. br. at 47). MPG West cites a long list of emails as
evidence that DeCA placed constant downward pricing pressure on MPG West, without
consideration of MPG West’s actual prices (app. br. at 46).

       In response, the government contends that it approved the vast majority of the
items proffered by appellant on a weekly basis, and that its employees expended
“extraordinary effort . . . and cooperation that went beyond what is reasonably expected”
in working with MPG West (gov’t br. at 52). According to the government, the weekly
price reviews “conformed to the express contract terms regarding price monitoring and
ordering, and were conducted in a fair manner.” (Gov’t br. at 44)

        We have reviewed the dozens of emails cited by MPG West as evidence of
downward pricing pressure and conclude that DeCA conducted its price reviews in a fair
and reasonable manner consistent with the express terms of the contract. Bridget
Bennett, the DeCA Produce Category Manager and her team developed criteria for
gauging the reasonableness of prices. These criteria included trend analysis, suggested
retail cost over $5.00 per unit, week-to-week price increases over 20 percent, and the
promotional status of an item (finding 103). While it is true that these specific criteria
are not set forth in the contract, they are a logical and consistent means of determining
the reasonableness of prices on an ongoing basis. By developing and applying a
consistent set of criteria, rather than taking an arbitrary and ad hoc approach, DeCA
acted in a reasonable manner. See, e.g., Advanced Data Concepts, Inc. v. United States,
216 F.3d 1054, 1058 (Fed. Cir. 2000) (sustaining agency action “evincing rational
reasoning and consideration of relevant factors”).

        Moreover, for each specific item it questioned, DeCA identified why it was
questioning the price and gave MPG West an opportunity to explain the price
(findings 103-104). In some situations, MPG West acknowledged and corrected pricing
errors or explained that the local growing season was ending (finding 110). In other
situations, however, MPG West tersely responded that the price was the “new retail
price” or due to a “FOB increase.” (Finding 111) Finally, as Ms. Bennett testified,
DeCA approved the vast majority of the items submitted by MPG West on a weekly
basis (finding 106).

                                           34
IV. Breach of Duty to Cooperate with Performance

        Appellant contends that DeCA breached its duty to cooperate with performance
by failing to ensure that government SOFA representatives and veterinarian inspectors
adequately were prepared for the new contract model (app. br. at 53-55). According to
MPG West, this created prolonged confusion over the import process under the contract
(app. br. at 111). MPG West further contends that DeCA failed to inform its
commissary personnel about the new contract, particularly that the new contract would
result in higher prices for produce due to the elimination of the freight subsidy (app.
reply br. at 41).

       MPG West cites various financial losses relating to importing produce, including
border inspections resulting in condemnation and disposal of unacceptable products;
short notice airlifts to replace condemned produce; confusion regarding paperwork to
clear customs; and failed sanitary audits for local storage and processing warehouses
(app. br. at 127). In particular, MPG West contends that DeCA interfered with the
inspection process for imported goods by failing to inform SOFA representatives of the
new procedures under the new contract (app. br. at 111).

        Every contract imposes upon each party “a duty of good faith and fair dealing in
its performance and enforcement.” Metcalf Const. Co. v. United States, 742 F.3d 984,
990 (Fed. Cir. 2014) (citations omitted). Pursuant to this implicit duty, each party’s
obligations “include the duty not to interfere with the other party’s performance and not
to act so as to destroy the reasonable expectations of the other party regarding the fruits
of the contract.” Id. at 991 (quoting Centex Corp. v. United States, 395 F.3d 1283, 1304
(Fed. Cir. 2005)).

        However, MPG West cannot rely on the implied duty of good faith and fair
dealing to change the terms of its contractual requirements. The Federal Circuit held
that a party to a contract cannot use an implied duty of good faith and fair dealing to
“expand [another] party’s contractual duties beyond those in the express contract or
create duties inconsistent with the contract’s provisions.” Precision Pine & Timber, Inc.
v. United States, 596 F.3d 817, 831 (Fed. Cir. 2010) (citations omitted). Put another
way, contractors with the government “cannot rely on the implied covenant of good faith
and fair dealing to change the text of their contractual obligations.” Century Exploration
New Orleans, LLC v. United States, 745 F.3d 1168, 1179 (Fed. Cir. 2014).

        Turning to this appeal, we must determine the extent to which the implied duty of
cooperation requires DeCA to coordinate with other government agencies and assist
MPG West with the importation process. See Relyant, LLC, ASBCA No. 59809, 18-1
BCA ¶ 37,085 at 180,539 (analysis of good faith doctrine should examine “duties that
fall within the broad outlines set forth by the express terms of the contract”). Our
analysis starts with the contract language concerning importation.

                                            35
        The contract expressly placed all responsibility for import on MPG West. As set
forth in the Addendum to FAR 52.212-4, “[t]he contractor(s) shall be fully responsible
to supply and import the required produce items if necessary.” (Finding 26) Under the
contract, MPG West expressly was:

                [R]esponsible for providing all necessary licenses, permits,
                supervision, facilities, equipment, order processing,
                distribution, inventory management, and personnel at the
                contractor’s own facilities/distribution center to receive,
                store, handle, sort, and deliver all required FF&V items to
                the various commissary locations that are serviced under
                [the] contract.

(Finding 26)

          With respect to compliance with host nation laws, paragraph 27 of the contract
stated:

                This is a Requirement Type Contract with a Contractor. As
                such, the Contractor is not an employee of the U.S.
                Government and it is solely the Contractor’s responsibility
                to determine his/her reporting and payment responsibilities
                under Host Nation tax and labor laws.

(Finding 39 (emphasis added))

       With respect to DeCA’s role in the importation process, paragraph 27 of the
contract further provided that:

                [The contractor’s] [s]tatus as a member of the U.S. Forces
                under the USFK and/or Japanese SOFA does not in itself
                relieve the Contractor of responsibilities under Host Nation
                laws. Contractor should consult appropriate authorities and
                advisors on these matters. Department of Defense military
                and civilian personnel will not provide advice in these
                matters. Contractor shall hold harmless the U.S.
                Government for any liability that may arise from the
                Contractor’s noncompliance with Host Nation laws.

(Finding 39 (emphasis added))

                                              36
       Taken together, these contractual provisions place the sole responsibility for the
importation process on MPG West. Crucially, the contract gives MPG West the
discretion whether to import produce – stating that “[t]he contractor(s) shall be fully
responsible to supply and import the required produce items if necessary.” (Finding 26)
(emphasis added) Indeed, as the solicitation stated, DeCA stated from the outset that the
contractor would need to “locally source as much FF&V as possible from the local
market, which would include locally available imported items” (finding 10).

       We are convinced that MPG West’s financial losses resulted predominantly from
factors within its control, rather than from government conduct. The record demonstrates
that MPG West failed to timely implement a local sourcing plan. As a result, MPG West
sourced most of its produce from overseas (finding 76). For imported produce, MPG West
paid brokerage fees to its sister company, Parma Fruit (also owned by Mr. Penny)
(finding 77), and it incurred extra costs of transporting the produce to Korea and Japan
(finding 78).

       In an effort to avoid paying import duties, and to secure a way to import embargoed
items, MPG West elected to import some items under a modified SOFA process
(finding 82). However, under the terms of SOFA, items imported in that manner could
not be resold locally (finding 83). Finally, MPG West elected not to alter its profit
margins on individual items, as is common in the grocery business, instead charging the
same profit on each item (finding 90).

        With respect to DeCA’s failure to coordinate with SOFA representatives, the
contract expressly states that it is not subject to SOFA (finding 79). MPG West
unilaterally chose to import items under the SOFA agreement (finding 82); therefore
DeCA had no duty to coordinate with SOFA representatives, other than to assist when
MPG West requested and to avoid hindering MPG West. Moreover, the CO explained
at the hearing that DeCA wrote a letter to South Korean customs explaining that MPG
West was permitted to import embargoed items for sale in the commissaries, and states
that importation difficulties ended after the letter (finding 85).

       As discussed above, the weekly pricing review was reasonable and consistent
with contract terms (see section II.B.3). We further held that MPG West had sufficient
time during the startup period to prepare for performance (see section III.B.1). Finally,
the record contains no evidence that the government interfered with MPG West’s
performance of the contract. RDA Const. Corp. v. United States, 132 Fed. Cl. 732
(2017).

V. Defective Specifications in Bagged Salad Requirement/Termination for Convenience

       MPG West argues that the bagged salad requirement was defective, because when
it supplied bagged salads from Fresh Express at a price that was inclusive of all costs of

                                            37
transportation, customs clearance, and overhead, the price paid by patrons was greater
than what DeCA would accept (app. br. at 76). MPG West further contends that the
government admitted that the requirement was defective in the February 2017 IG report
(app. br. at 120). MPG West also asserts that DeCA’s decision to remove the
requirement is an admission that the requirement was flawed and that “a termination for
convenience finding makes sense...” (app. br. at 76-77). MPG West claims that it spent
$5,089,321.56 more on providing bagged salads than DeCA paid for them (app. br.
at 121).

       In response, the government contends that it agreed – at MPG West’s request – to
remove the bagged salad requirement from the contract, because MPG West was unable
to make a profit offering bagged salads (gov’t br. at 54; finding 118). It further contends
that bagged salad requirement was not defective, because bagged salads were not
included in the pool of products listed as HCVI that were used to calculate the Patron
Savings Requirement (id.).

       Finally, the government asserts that the contract contained a patent ambiguity
requiring appellant to sole source bagged salads from Fresh Express (gov’t br. at 56).
According to the government, MPG West had a duty to inquire about the ambiguity and,
because it did not, its interpretation of the contract should be precluded from
consideration (gov’t br. at 57). See Travelers Cas. and Sur. of America v. United States,
74 Fed. Cl. 75, 88 (2006) (quoting Beacon Constr. Co. of Mass v. United States, 314
F.2d 501, 504 (Ct. Cl. 1963)) (patent ambiguity is “an obvious omission, inconsistency,
or discrepancy of significance”).

        A defective specification is a breach of the government’s implied warranty that
satisfactory contract performance will result from adherence to the specification. Essex
Electro Eng’rs, Inc. v. Danzig, 224 F.3d 1283, 1289 (Fed. Cir. 2000). To recover on this
basis, MPG West must show that there was a defect, that it reasonably relied on the
defect, and that the defect was latent. E.L. Hamm & Assocs., Inc. v. England, 379 F.3d
1334, 1339 (Fed. Cir. 2004); Robins Maint., Inc. v. United States, 265 F.3d 1254, 1257
(Fed. Cir. 2001). Specifically, the government’s issuance of a misleading solicitation
itself can be the basis for a price adjustment under a defective specification claim.
BECO Constr. Co., Inc., ASBCA No. 57483, 11-2 BCA ¶ 34,817 at 171,338; F.J. Stokes
Corp., ASBCA No. 6532, 1963 BCA ¶ 3944 at 19,542.

        MPG West has not identified any specific aspect of the bagged salad requirement
that was defective. Rather, MPG West’s contention boils down to its assertion that it
was unable to perform the requirement without losing money. This contention – even if
true – is not sufficient to demonstrate that the requirement was defective. See United
States v. Spearin, 248 U.S. 132, 136 (1918) (“Where one agrees to do, for a fixed sum, a
thing possible to be performed, he will not be excused or become entitled to additional
compensation, because unforeseen difficulties are encountered.”).

                                            38
       As we discussed above in Section II.B., we do not find the IG report dispositive
as an admission that the bagged salad requirement was flawed. The Guam report
analyzed data from Guam and did not address matters relating to Korea or Japan
(finding 122). Accordingly, its findings cannot be construed as an admission concerning
the delivery of bagged salads in Korea or Japan (finding 125).

       Moreover, MPG West has failed to demonstrate that it relied on the allegedly
defective requirement, because when it became apparent that it could not profitably
perform, the government agreed to modify the contract to remove the bagged salad
requirement (finding 118). This decision cannot be construed as an admission that the
requirement was defective. This was done bilaterally under the Changes clause of the
contract, not under the Termination clause (finding 119). Accordingly, MPG West
cannot avail itself of the termination clause and its arguments to the contrary must fail.

        Finally, to the extent that MPG West contends that the bagged salad requirement
was flawed because it was restricted to using Fresh Express as its sole source, MPG
West cannot reasonably contend that it was misled by this requirement. Indeed, the
contract included Fresh Express as the source of bagged salads because MPG West
identified Fresh Express as its supplier (finding 112). See Comtrol, Inc. v. United States,
294 F.3d 1357, 1364 (Fed. Cir. 2002) (citing Robins Maint., 265 F.3d at 1257) (no
recovery unless contractor actually was misled by erroneous statements in the
specifications).

VI. Whether to take Judicial Notice COFC Bid Protest Proceedings

        MPG West asks us to take judicial notice of certain factual findings that were
litigated in the bid protest litigation in the United States Court of Federal Claims
(COFC) (app. br. at 58). According to MPG West, DeCA now takes positions on these
issues that are contrary to the positions it took in the bid protest litigation. MPG West
does not insist that DeCA be estopped from taking contrary positions. Rather it “simply
asks that this Board take notice of the facts and issues raised in previous litigation over
this same contract, and not permit the Government to prevail on arguments that are
plainly contradicted to what has gone before.” (App. br. at 65) DeCA offers no
response to this argument, other than to defend its positions in this appeal on the merits.

       Appellant would have us infer conclusions from these uncontested facts. For
example, appellant asks the Board to preclude the government from contending that
additional costs incurred by appellant under the contract were the result of poor
management (app. br. at 59). However, the COFC’s factual holdings do not support this
inference. DeCA’s pre-award evaluation of MPG’s business references and past
performance has no bearing on its actual contract performance. Moreover, appellant
admits that COFC held that DeCA’s market research was adequate and complied with

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FAR 10.001(a)(3)(1) (app. br. at 34). Therefore, we decline to give preclusive effect to
the positions DeCA took in the COFC bid protest litigation.

                                     CONCLUSION

       We conclude that MPG West has failed to carry its burden of proving either that
the government breached the terms of the contract, or that the government constructively
changed the contract. Because we conclude that MPG West is not entitled to recovery,
we do not reach the issue of quantum. Accordingly, the appeals are denied.

       Dated: November 9, 2020

                                                  KENNETH D. WOODROW
                                                  Administrative Judge
                                                  Armed Services Board
                                                  of Contract Appeals

 I concur                                         I concur

 RICHARD SHACKLEFORD                              OWEN WILSON
 Administrative Judge                             Administrative Judge
 Acting Chairman                                  Vice Chairman
 Armed Services Board                             Armed Services Board
 of Contract Appeals                              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 Nos. 61100, 61560, 61570,
Appeals of MPG West, LLC, rendered in conformance with the Board’s Charter.

       Dated: November 9, 2020

                                                  PAULLA K. GATES-LEWIS
                                                  Recorder, Armed Services
                                                  Board of Contract Appeals

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