Court Opinion

ID: 3151443
Source: CourtListenerOpinion
Date Created: 2015-11-02 22:00:12.43073+00
Date Added: 2024-06-11T15:13:44.350591
License: Public Domain

ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of--                                     )
                                                )
Pros Cleaners                                   )      ASBCA No. 59797
                                                )
Under Contract No. FA3300-13-P-0033             )

APPEARANCE FOR THE APPELLANT:                          Mr. Bruce Webber
                                                        President/CEO

APPEARANCES FOR THE GOVERNMENT:                        Lt Col Matthew J. Mulbarger, USAF
                                                        Air Force Chief Trial Attorney
                                                       William M. Lackermann, Jr., Esq.
                                                       Alexis J. Bernstein, Esq.
                                                        Trial Attorneys

                  OPINION BY ADMINISTRATIVE JUDGE WILSON

        This appeal involves the claim of Pros Cleaners (appellant or Pros) arising out
of the Air Force's (government's) termination for convenience of its commercial items
contract for laundry services at the Air Force Reserve Officer Training Corps
(AFROTC) training site located at Camp Shelby, Mississippi. Appellant has elected to
proceed under the Small Claims (Expedited) Procedure pursuant to Rule 12 .2 1. The
parties waived an oral hearing to have the appeal decided on the record under Rule 11.
The record consists of the government's Rule 4 file (tabs 1-32), as supplemented
(tabs 33-135), and appellant's exhibits (1-3). Both parties have submitted briefs.
Entitlement and quantum are before the Board.

                                   FINDINGS OF FACT

         1. The government entered into Contract No. FA3300-13-P-0033, which was
set aside specifically for a small business, with appellant on 6 May 2013 for laundry_
services for the AFROTC at Camp Shelby, Mississippi. The contract specifically
required appellant to provide laundry services under two contract line item numbers
(CLINs): cadet uniforms and undergarments (CLIN 0001); and comforters (CLIN
0002), on a firm-fixed-price (FFP) basis of $0.70 per pound. The contract did not
contain any prices for hourly wages or salaries for employees, or any methodologies

1
    The Contract Disputes Act, implemented by Board Rule 12.2, provides that this
         decision shall have no value as precedent, and in the absence of fraud shall be
         final and conclusive and may not be appealed or set aside.
for determining overhead or profit. The total for all services under the contract (based
upon estimated quantities) was $57,190.00. (R4, tab 1)

     2. The contract also incorporated FAR 52.212-4, CONTRACT TERMS AND
CONDITIONS - COMMERCIAL ITEMS (FEB 2012) which reads in pertinent part:

                     (i) Payment ....

                   (2) Prompt Payment. The Government will make
             payment in accordance with the Prompt Payment Act
             (31 U.S.C. 3903) and prompt payment regulations at
             5 CFRpart 1315.

                     (4) Discount. In connection with any discount
              offered for early payment, time shall be computed from the
              date of the invoice ....

                    (1) Termination/or the Government's convenience.
             The Government reserves the right to terminate this
             contract, or any part hereof, for its sole convenience. In
             the event of such termination, the Contractor shall
             immediately stop all work .... 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. The
             Contractor shall not be required to comply with the cost
             accounting standards or contract cost principles for this
             purpose. This paragraph does not give the Government
             any right to audit the Contractor's records. The Contractor
             shall not be paid for any work performed or costs incurred
             which reasonably could have been avoided.

Moreover, the Prompt Payment regulations found at 5 C.F.R. § 1315.4(g) reads in
pertinent part:

             (g) Determining the payment due date.

                                           2
                     (1) Except as provided in paragraphs (g)(2) through
                     ( 5) of this section, the payment is due either:

                     (i) On the date(s) specified in the contract;

                     (ii) In accordance with discount terms when
                     discounts are offered and taken (see §1315.7);

                     (iii) In accordance with Accelerated Payment
                     Methods (see §1315.5); or

                     (iv) 30 days after the start of the payment period as
                     specified in paragraph (f) of this section, if not
                     specified in the contract, if discounts are not taken,
                     and if accelerated payment methods are not used.

       3. Appellant commenced performance on 29 May 2013 (R4, tab 2). On
27 June 2013 appellant notified the government that "due to the delay in processing
invoices, we will charge interest at 5% per day on late payments" (R4, tab 5). By
email dated 1 July 2013, appellant notified the government that it had not received any
payment for services rendered under the contract as of date. Appellant stated further:

              [W]e are completely out of funds to provide laundry
              services at [C]amp [S]helby, so as of today because we
              have know [sic] other option, we will have to discontinue
              services at [C]amp [S]helby. Once payments are received
              we will restart the program immediately.

(R4, tab 6)

        4. By letter dated 3 July 2013, the government terminated the contract for
convenience and requested that appellant submit its settlement proposal within 30 days
(R4, tab 8). Appellant submitted its proposal requesting $30,015.18, which included
the following items: processing laundry cost: $9,000.00; fuel cost: $3,600.00;
employee salary: $8,800.00 monthly; transportation cost: $500.00 monthly; vendors
cost: $4,000.00; and late charges: $4,115.18. The record reflects that appellant also
included several hand-prepared invoices and employee pay slips, including an
allegedly un-invoiced laundry ticket dated 29 June 2013 for 53 bags oflaundry
weighing 478 pounds, which, at the contract price of $0.70 per pound, translates into
$334.60. (R4, tab 11 at 1, 2) The contracting officer (CO) inquired within to
determine the validity of the 29 June 2013 laundry ticket, however the research
indicated that 28 June 2013 was the last date that appellant invoiced for services (R4,

                                            3
tab 28 at 6). Thus, we find that the 29 June 2013 laundry ticket was not invoiced prior
to the termination. We further find that the record does not contain any evidence that
appellant performed laundry services on or after 29 June 2013.

       5. Further, the government conducted its own analysis of the contract payment
history which demonstrated that appellant submitted several invoices that were either
paid in full as submitted (invoice numbers 80003, 80004, 80005, 80006); paid within
15 days and a discount was taken by the government (invoice numbers 80001 and
80001A- dated 25 June 13); voided (invoice number 80002); or rejected (80001A-
dated 17 June 13, and invoices 80007 through 80011). Four invoices were paid more
than 15 days after submittal: invoice numbers 80003 ($5,125.40 -21 days); 80004
($614.60 - 18 days); 80005 ($889.70- 16 days); and 80006 ($1,392.30- 24 days).
Thus, according to the government's analysis, appellant had been paid $14,593.99.
(R4, tab 12) Further, the government avers that appellant had been paid in full and
there were no outstanding weight tickets or invoices (gov't hr., ex. 1, Knott decl.).

       6. The parties continued to negotiate and exchange information, with no
resolution by June of 2014. By email dated 16 June 2014, appellant notified the
government that it had sent its original settlement offer nearly one year prior with no
resolution, and thus would be filing an appeal with the Board (R4, tab 32).

       7. By email dated 17 June 2014, appellant filed an appeal with the Board,
which was docketed as ASBCA No. 59369. The parties subsequently moved to
dismiss this appeal averring that "the current claim contains no termination costs
allowable under FAR 12.403." The parties further agreed that "[s]hould Appellant
identify allowable termination costs at a future date, the Government will consider a
new Termination Settlement Proposal in accordance with FAR 52.212-4(1)." (Bd.
corr. ASBCA No. 59369 ltr. dtd. 15 September 2015) Accordingly, on 17 September
2014, the Board dismissed the appeal.

        8. Appellant submitted a revised settlement proposal dated 13 September 2014
in the amount of $13,050.00 (app. resp., ex. 1). The record reflects that this amount
represented the hours spent negotiating the termination for convenience settlement
proposal by CEO Webber and Manager Leroy Jackson, Jr. (supp. R4, tabs 38-39). The
government offered to settle the matter based on the "charges that are demonstrate
[sic] based on e-mail traffic between [Pros Cleaners] and representatives from [the
government], directly resulted from the termination." The government added further
"You requested a Contracting Officer's Final Decision so you can file with ASBCA.
A formal Contracting Officer['s] Final Decision will be forthcoming as soon as
[possible] and not later than COB Friday, 14 November 2014." (Supp. R4, tab 39 at 1)

     9. In spite of appellant's request for a contracting officer's final decision
(COFD), the parties continued to negotiate the revised settlement proposal throughout

                                            4
the months of November and December of2014 with no resolution (supp. R4,
tabs 46-4 7). By email dated I December 2014 appellant again revised its proposal to
$11,136.00. The government responded, advising appellant that a COFD would be
forthcoming and could anticipate a response not later than 12 December 2014. On
20 January 2015, appellant again inquired about a decision on its proposal. The
government responded that the decision required legal review prior to issuance and
advised that a decision would be issued before 30 January 2015. (Supp. R4, tab 48)
The record does not contain the COFD, thus the Board is unable to ascertain whether
the government issued a COFD on the claim.

      10. By email dated 20 January 2015, appellant filed a notice of appeal with the
Board from the deemed denial of the claim, which was docketed as ASBCA
No. 59797.

       11. Both parties submitted briefs and replies. However, appellant submitted an
exhibit which purports to be a draft settlement agreement between the parties dated
4 June 2015 wherein the government agreed to settle the instant appeal for $11,607.00
(app. br., ex. 3 at 2). The government offered no objection to the inclusion of the
aforementioned document into the record.

                                       DECISION

       The overall purpose of a termination for convenience settlement is to fairly
compensate the contractor and to make the contractor whole for the costs incurred in
connection with the terminated work. SWR, Inc., ASBCA No. 56708, 15-1 BCA
~ 35,832 at 175,223 (citing Nicon, Inc. v. United States, 331 F.3d 878, 885 (Fed. Cir.
2003)). With regard to what a contractor may recover, the termination for
convenience clause from the contract at issue in this appeal reads: "plus reasonable
charges the Contractor can demonstrate to the satisfaction of the Government using its
standard record keeping system, have resulted from the termination." This part,
referred to as the "second prong" of the commercial items termination for convenience
clause is germane to the dispute in this appeal. See SWR, 15-1BCA~35,832 at
175,223.

        Here, the claim before the CO for consideration did not include any costs for
un-invoiced work prior to the 3 July 2013 termination; nor does it include any costs for
paying off suppliers after the effective date of the termination. The claim presently
before the Board is for appellant's salary for post-termination time spent negotiating
the settlement (finding 4).

      In its briefing to the Board, the government spends the majority of its time
addressing the earlier settlement proposal (i.e., the first proposal was filed under

                                            5
ASBCA No. 59369 that was jointly dismissed) and never addresses the
post-termination costs claimed under appellant's revised settlement proposal.

      The decision in this appeal comes down to the interpretation of what is
allowable for a contractor to recover under the second prong of the commercial items
termination for convenience clause, which relates to "reasonable charges the
Contractor can demonstrate" directly "resulted from the termination" (finding 2).
Based upon this record, the Board determines that appellant incurred unavoidable
reasonable post-termination costs in attempting to settle the matter in the amount of
$11,607.00.

                                       CONCLUSION
       The appeal is sustained.

       Dated: 20 October 2015

                                                  OWEN C. WILSON
                                                  Administrative Judge
                                                  Armed Services Board
                                                  of Contract Appeals

      I certify that the foregoing is a true copy of the Opinion and Decision of the
Armed Services Board of Contract Appeals in ASBCA No. 59797, Appeal of Pros
Cleaners, rendered in conformance with the Board's Charter.

       Dated:

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

                                           6