Court Opinion

ID: 2734513
Source: CourtListenerOpinion
Date Created: 2014-09-19 01:26:11.719267+00
Date Added: 2024-06-11T12:31:07.735462
License: Public Domain

ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of --                                 )
                                             )
Automotive Management Services               )          ASBCA No. 58352
                                             )
Under Contract No. W52PIJ-l l-C-0014         )

APPEARANCE FOR THE APPELLANT:                           James W. Kim, Esq.
                                                         McDermott Will & Emery LLP
                                                         Washington, DC

APPEARANCES FOR THE GOVERNMENT:                         Raymond M. Saunders, Esq.
                                                         Army Chief Trial Attorney
                                                        MAJ Nancy J. Lewis, JA
                                                         Trial Attorney

               OPINION BY ADMINISTRATIVE JUDGE DELMAN ON
                  CROSS-MOTIONS FOR SUMMARY JUDGMENT

        This appeal arises under a contract to Automotive Management Services (AMS or
appellant) for the repair and maintenance of vehicles in Afghanistan. The parties have
filed cross-motions for summary judgment, each contending it is entitled to judgment as a
matter of law based upon its interpretation of the contract. According to appellant, it is
entitled to reimbursement for the costs incurred to deliver Class IX spare parts from its
central warehouse in Kabul to the contractually prescribed work sites in Afghanistan
under contract line item number (CLIN) 0005AA, Spare Parts. According to the
government, appellant is not entitled to separate reimbursement for these costs, since they
are included in a firm fixed-price (FFP) effort under the provision for "supply chain
management" in the Performance Work Statement (PWS) of the contract. We have
jurisdiction under the Contract Disputes Act (CDA), 41 U.S.C. §§ 7101-7109.

        STATEMENT OF FACTS (SOF) FOR PURPOSES OF THE MOTIONS

      1. On or about 26 November 2010, the U.S. Army Rock Island contracting center
(Army or government) issued a draft solicitation for a project to provide, inter alia,
maintenance and support to the vehicle fleet of the Ministry of Interior/Afghanistan
National Police (MOI/ANP) at various maintenance locations in Afghanistan, through the
Afghanistan Technical Equipment Maintenance Program (A-TEMP) (R4, tab 1). 1

1
    The draft solicitation also included vehicle support for the Ministry of
        Defense/Afghanistan National Army (MOD/ANA). The contract before us was
        awarded to support the MOl/ANP only.
2. Insofar as pertinent, the draft PWS dated 26 February 2010 stated as follows:

      3.25 OBJECTIVE-THREE (3). MOI/ANP FLEET
         MAINTENANCE. The contractor will be responsible for
         providing all the management, expertise, personnel,
         equipment, tools, vehicles, fuel, security, and life support
         to perform the requirement. The contractor shall provide
         equipment maintenance and supply chain management for
         the MOI/ANP fleet. ... The supported fleet density by
         equipment type is defined in ANNEX 2. Required level
         of maintenance and locations of sites are defined in
         ANNEX3.

      3 .25 .1 Tasks associated include the following:

      3.25.1.8 Manage a repair parts warehouse to include
         distribution of repair parts.

      3.44 SUPPLY CHAIN MANAGEMENT. Contractor shall
         provide a commercially available supply chain
         management system.... The contractor shall manage a
         supply warehouse; operate class IX parts procurement and
         requisitioning program. The supply chain management
         program shall include a viable distribution program for
         repair parts to each maintenance site.... All costs of
         providing the warehouse facility as well as the
         management and personnel portion of this requirement
         shall be a firm-fixed price effort....

      3.46 PARTS PROCUREMENT. The contractor shall not
         add any costs, additional fees, mark ups, company derived
         inflation costs, or any other factor that changes the item's
         actual retail cost. For price comparison purposes, and if
         there is a dispute between the USG and contractor, the
         ACO shall determine if a source is appropriate. The
         requirement for premium freight costs for mission

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                 essential equipment must be validated in advance by the
                 COR. The contractor shall seek fair and reasonable
                 prices .... The contractor shall consider freight and/or
                 delivery fees when evaluating prices. When requesting
                 quotes, the contractor should select suppliers who provide
                 quality products at fair and reasonable prices and
                 consistently deliver items on time.

(Supp. R4, tab 1 at 14, 18, 19) (Emphasis added)

       3. After the draft PWS was issued, the government issued "A-TEMP INDUSTRY
QUESTIONS AND ANSWERS 05 MAY 2010" (Q&As) that provided government
responses to questions of potential offerors (R4, tab 15 at 17). One Q&A stated the
following:

              78. QUESTION: In section 3.2.2 [sic] of the PWS it states a
              direct pass through on parts, which appears to be in conflict
              with section 3.44 of the PWS. Is shipping approval required
              for mission essential parts? Are the parts/shipping CLINs
              FFP orT&M?

              ANSWER: Premium shipping cost must be approved.
              Established ASL will be transferred as part of GFE.
              Parts/shipping are [sic) non fee bearing cost reimbursable.

(Id. at 30) (Emphasis added) Neither the question nor the answer explained the term
"parts/shipping." Per the Declaration of the Procuring Contracting Officer who provided
the answer: "The Government was uncertain what the question was referring to."
However, it was her understanding that the question sought clarification concerning the
"the shipping costs to the contractor." (Govt. mot., ex. 1, if 6). Per the Declaration of
appellant's contract compliance officer, he relied on this Q&A and other solicitation
materials to price its offer such that the shipping of parts within Afghanistan were to be
paid on a cost-reimbursable basis (app. mot., ex. 1, iii! 3, 4, 5).

       4. On or about 15 July 2010, the government published the solicitation with a
revised PWS. This PWS was again revised prior to award (R4, tab 2). While there
appear to be some changes in pagination and section numbers amongst these various
versions of the PWS, the parties have not brought to our attention any material
differences between them with respect to the key PWS provisions above. (But we do
note a post-award change to the PWS that may have significance (SOF if 9, infra)).

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       5. AMS submitted a proposal in response to the solicitation. AMS's proposal
stated as follows:

              1.4.2.13 Parts Procurement (PWS 3.45, 3.47)

              The CMSF-SCM office in Kabul will utilize our reliable
              international procurement channels in the Middle East,
              United States, Europe and Asia. This will enable us to obtain
              competitive prices for quality products with on-time delivery.

              Upon arrival at the CMSF-SCM receiving area, all Class IX
              parts will be checked against the packing list and invoice.
              Parts are then sorted by location/site code[.] [D]uring this
              receiving process parts quality and suitability will be checked
              before being transferred to the designated RMC delivery line.

(Govt. mot., ex. 2 at 63) The proposal also stated:

              1.4.2 MOI/ANP Fleet Maintenance (PWS 3.23)

              We will provide all management, expertise, personnel,
              equipment, tools, vehicles, fuel, security and life support for a
              total of 22 ANP contract facilities ....

              Further to this, we will provide the management for a supply
              warehouse including procurement, storing, distribution and
              accountability for all spare parts used for the ANP equipment
              fleet.

(Id. at 48)

      6. AMS was awarded the contract on or about 30 December 2010 (R4, tab 1).
The contract was for a base period of one year with four yearly options. Per Section
A - Supplemental Information, paragraph 7, appellant was allowed 90 days to mobilize
and begin full performance. (Id.)

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      7. The contract contained CLIN OOOIAA, Central Maintenance & Supply Facility,
an FFP line item that provided as follows:

             CENTRAL MAINTENANCE & SUPPLY FACILITY (CMSF)
             IS A WARDED AT THE RANGE OF 18,000 - 18,999
             DENSITY OF VEHICLES IN THE AMOUNT OF
             $584,595.00 PER MONTH FOR A PERIOD OF 12 MONTHS
             FOR ONE LOCATION ....

(R4, tab 1at6of81) Appellant's CMSF was located in Kabul, Afghanistan.

       8. CLIN 0005AA, Spare Parts, was a cost-reimbursable line item and provided as
follows:

             THIS COST REIMBURSABLE CLIN IS FOR SPARE
             PARTS IN THE AMOUNT OF $2,750,000.00 PER MONTH
             FOR A PERIOD OF 12 MONTHS ....

(R4,tab 1at11 of81)

       9. On or about 20 April 2011, the contract was modified by Modification (Mod.)
No. P00002 to incorporate a revised PWS dated 11 March 2011 (R4, tabs 4-5). Insofar as
pertinent, we note that this revised PWS did not contain the language of PWS 3.25.1.8
above (SOF ~ 2), which language was also contained in the PWS as awarded at PWS
3.23.1.8. The record is unclear as to the purpose behind this post-award change in the
PWS.

        10. By Mod. No. P00008 dated 24 October 2011, the government issued a
"GUIDE FOR GOVERNMENT APPROVAL & OVERSIGHT OF CONTRACTOR
PURCHASING & INVOICING" dated 28 September 2011 (Purchasing Guide) (R4,
tab 8). The record is also unclear as to the purpose behind issuing this Purchasing Guide,
and why it was issued roughly 10 months after contract award. With respect to the
procurement of parts, the Purchasing Guide stated as follows:

             (v) Per the PWS, only the cost of parts or costs directly
                 related to the repair and maintenance of the equipment
                 that is in addition to work already included in the
                 contractor's firm fixed price cost, shall be purchased
                 against the spare parts CLIN in the contract. An example
                 of this type of cost would be sending a part out for rebuild
                 to a local shop due to this type of capability not being
                 required at the EMS shop and rebuild of part is more
                 beneficial to the Government than purchasing a new part.

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                  Delivery and shipping costs are considered a cost
                  associated to the part purchase. No overhead or profit
                  can be added to the parts purchase. All other costs
                  associated to parts procurement must be included in the
                  cost of the contractor's firm fixed price for supply chain
                  management ....

(R4, tab 8 at 19) (Emphasis added) The Purchasing Guide did not define "Delivery and
shipping costs."

        11. During the course of performance, AMS completed a Parts Approval Form (PAF)
to the government for review and approval of its proposed procurement of the subject spare
parts. From contract inception, this form included all transportation costs for these parts,
including in-country transport costs. Sometime during 2011, the government requested that
in-country transportation costs be segregated from actual parts costs and documented on a
Parts Approval Form - Transport Costs (R4, tab 14), where these costs were in excess of
$3,000.00. (Stip. at 3)

        12. It appears that the government approved all in-country transportation costs for
these spare parts for some unstated period of time during the base year of the contract.
(See PAF No. 92, dated 7 September 2011, and attachments, for container movement
from Kabul to Kandahar signed by the contracting officer representative on 18 September
2011 and by the administrative contracting officer (ACO) on 21 September 2011) (R4,
tab 7 at 1).

       13. By email to appellant dated 10 December 2011, towards the end of the
contract base year, the ACO advised that the government was disapproving transportation
costs under forms T007, T008 and T009, stating as follows:

               The USG is reimbursing the freight charges for the parts that
               are coming into the [sic] Afghanistan. However, once the
               parts are in Afghanistan, the distribution of the parts in the
               country is under the supply chain management (FFP).
               According to the PWS 3.5.3 "the supply chain management
               program shall include a viable distribution program for repair
               parts to each maintenance site .... "

               My understanding is that the USG has approved the
               transportation fees in the past. However, that will be adjusted
               accordingly with the future invoices.

(R4, tab 10)

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        14. By email to the government dated 13 December 2011, appellant objected to
this disapproval, stating that "all costs for transportation were covered in the cost
reimbursable CLIN for spare parts (0005)" (R4, tab 11). Appellant submitted a more
detailed response to the government by email dated 10 January 2012, enclosing a letter to
the government dated 10 January "2011" (sic) (R4, tab 13 at 3).

        15. On 5 March 2012, the Defense Contract Audit Agency issued a "NOTICE OF
CONTRACT COSTS SUSPENDED AND/OR DISAPPROVED," disapproving a total of
$572, 100.56 that was previously billed to the government from April 2011 through
October 2011 for in-country transportation, crane rental, and container movement costs
for the moving of repair parts within Afghanistan to the maintenance sites. This Notice
stated these costs were included in supply chain management under the PWS which was
FFP, and hence were not cost-reimbursable under CLIN 0005, Spare Parts. (R4, tab 15 at
15-16)

       16. On 11 April 2012, AMS submitted a certified claim pursuant to the CDA
requesting that the contracting officer (CO) issue a final decision relating to the
reimbursement of these costs (R4, tab 15 at 2). The claim requested reimbursement of
the disallowed invoices in the amount of $572, 100.56, and AMS reserved the right to
amend the amount requested since the performance under the contract was ongoing (id.).

       17. On 12 July 2012, the CO issued a final decision denying AMS's claim
(R4, tab 18 at 2). This appeal followed.

                                       DECISION

        The issue before us on summary judgment is whether appellant's costs to
deliver/distribute repair parts from its central warehouse in Kabul to the regional and
satellite work sites in Afghanistan are separately reimbursable under the cost-reimbursable
CLIN 0005AA, Spare Parts. According to appellant, we should interpret the contract
such that these costs, per the Purchasing Guide, are "Delivery and shipping" costs and
are "associated to the part purchase" (SOF ,-r 10), and hence are reimbursable under
CLIN 0005AA. According to the government, we should interpret the contract to the effect
that these costs are part of the FFP supply chain management system under the PWS.

        We believe the record is insufficiently developed to determine the reasonableness
of the parties' interpretations and whether the contract was clear or ambiguous in this
respect. L-3 Services, Inc., Unidyne Div., ASBCA Nos. 56304, 56335, 09-2 BCA
,-r34,156.

      The evidentiary record is unclear regarding the purpose behind the issuance of the
Purchasing Guide under Mod. No. P00008 in October 2011 and why it was issued
roughly 10 months after award. The record also does not adequately address the extent to

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which the government approved these now - disputed costs during the base year of the
contract; whether or not said approvals were knowing and intentional, and if so, whether
the parties shared, by their contemporaneous actions, a common understanding of what
the contract required. The record also does not address whether the issuance of the
revised PWS under Mod. No. P00002, and the Purchasing Guide under Mod. No. P00008
confirmed, or otherwise caused a change to the parties' understanding. We expect that a
better developed record will address these issues, which will aid us to ascertain the
appropriate contract interpretation.

                                        CONCLUSION

     We conclude that on the present record neither party has shown entitlement to
summary judgment as a matter of law. The parties' cross-motions are denied. 2

         Dated: 26 June 2014

                                               CJ      (\?),,
                                                      -~-------A·
                                                           DELMAN
                                                    Administrative Judge
                                                    Armed Services Board
                                                                                -

                                                    of Contract Appeals

I concur                                            I concur

~~
Administrative Judge
                                                     447\
                                                    RI~KLEFORD
                                                    Administrative Judge
Acting Chairman                                     Vice Chairman
Armed Services Board                                Armed Services Board
of Contract Appeals                                 of Contract Appeals

2
    The parties' cross-motions also seek various evidentiary rulings, seeking to exclude, for
         purposes of contract interpretation, the draft PWS, the Q&A, appellant's
         transportation invoices to the government and the Declarations of witnesses
         attached to the motions, on the basis that they are all extrinsic/parol evidence and
         should not be considered when the contract is "clear." Given our disposition of
         the motions, we need not address these evidentiary issues at this time.

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     I certify that the foregoing is a true copy of the Opinion and Decision of the
Armed Services Board of Contract Appeals in ASBCA No. 58352, Appeal of Automotive
Management Services, rendered in conformance with the Board's Charter.

      Dated:

                                             JEFFREYD. GARDIN
                                             Recorder, Armed Services
                                             Board of Contract Appeals

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