Court Opinion

ID: 2806233
Source: CourtListenerOpinion
Date Created: 2015-06-08 17:00:08.704685+00
Date Added: 2024-06-11T11:29:59.072088
License: Public Domain

ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of--                                    )
                                               )
Raytheon Company                               )      ASBCA No. 58212
                                               )
Under Contract No. F08635-03-C-0002            )

APPEARANCES FOR THE APPELLANT:                        Karen L. Manos, Esq.
                                                      John W.F. Chesley, Esq.
                                                      Sarah B. Gleich, Esq.
                                                       Gibson, Dunn & Crutcher LLP
                                                       Washington, DC

APPEARANCES FOR THE GOVERNMENT:                       E. Michael Chiaparas, Esq.
                                                       DCMA Chief Trial Attorney
                                                      Stephen R. Dooley, Esq.
                                                      Alexander M. Healy, Esq.
                                                       Trial Attorneys
                                                       Defense Contract Management Agency
                                                       Boston, MA

        OPINION BY ADMINISTRATIVE JUDGE DICKINSON
  ON APPELLANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT
                         ANDTHE
GOVERNMENT'S CROSS-MOTION FOR PARTIAL SUMMARY JUDGMENT

        At issue in this appeal is the allowability of certain airfare expenses incurred
by appellant Raytheon Company (Raytheon) in 2005. Raytheon asks us to find that
it is entitled to partial summary judgment on four issues related to the government's
determination that certain 2005 airfare expenses incurred by Raytheon are
unallowable. The government has cross-moved for partial summary judgment with
respect to one issue, opposes summary judgment on two issues and does not oppose
summary judgment on the fourth issue. The four issues have been fully briefed by
the parties and oral argument on the parties' cross-motions on the first issue has
been heard.

        Incorporated in Raytheon's Motion for Partial Summary Judgment, was a
Statement of Undisputed Material Facts. With its opposition and cross-motion for
partial summary judgment, the government submitted a Statement of Further
Undisputed Material Facts and a Statement of Genuine Issues of Material Fact in
which the government responded to each fact asserted by Raytheon and either
agreed the fact was undisputed or asserted that it was disputed, followed by
citations to the record on the motions in support of its assertions. As the
government statement of facts contains both Raytheon's statements of fact and the
government's responses, we cite to the parties' statements of facts in the
government's submission for ease of reference as UF (undisputed fact) or DF
(disputed fact). Citations to the parties' arguments are to their respective motions
and later filings on the motions.

     STATEMENT OF FACTS (SOF) FOR PURPOSES OF THE MOTIONS

       1. In 1985 Congress expressed the procurement policy that certain
enumerated costs incurred in performance of defense contracts are not allowable,
specifically and pertinent to the matters now at issue:

              Costs for travel by commercial aircraft which exceed
              the amount of the standard commercial fare.

10 U.S.C. § 2324(e)(l)(J). Congress did not define the phrase "standard
commercial fare." Congress further required that the procurement policy be
implemented by allowability provisions in the Federal Acquisition Regulation
(FAR). 10 U.S.C. § 2324(f).

        2. FAR 31.205-46, Travel Costs, contains the allowability provisions for
travel costs and FAR 3 l .205-46(b ), in particular, provides:

             Airfare costs in excess of the lowest customary
             standard, coach, or equivalent airfare offered during
             normal business hours are unallowable except when
             such accommodations require circuitous routing, require
             travel during unreasonable hours, excessively prolong
             travel, result in increased cost that would offset
             transportation savings, are not reasonably adequate for
             the physical or medical needs of the traveler, or are not
             reasonably available to meet mission requirements.
             However, in order for airfare costs in excess of the
             above standard airfare to be allowable, the applicable
             condition(s) set forth above must be documented and
             justified.

From 1986 to 2010, the FAR provision addressing the allowability of airfare costs
did not define the phrase "lowest customary standard, coach, or equivalent airfare."
Effective 11January2010, FAR 31.205-46(b) was amended by replacing "lowest
customary standard, coach, or equivalent airfare offered" with "lowest priced airfare

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available to the contractor"; the balance of FAR 3 l .205-46(b) remained unchanged.
(UF ~~ 24, 88)

       3. Contract No. F08635-03-C-0002, awarded to Raytheon on 21 May 2003
(R4, tab 3), is identified as a representative contract containing FAR 52.216-7,
ALLOWABLE COST AND PAYMENT (DEC 2002) (R4, tabs 3, 8), which incorporates
by reference the allowability provisions of FAR Part 31.2 in effect on the date of the
contract.

       4. The Defense Contract Audit Agency (DCAA) issued an audit report
addressing several topics including Raytheon's incurred airfare costs for 2005 on
24 August 2009 (UF ~~ 91, 95, 102; DF ~ 98 (the fact of the audit report is
undisputed)). DCAA recommended to DCMA that certain of Raytheon's airfare
costs be determined to be unallowable.

       5. Almost three years later, on 25 May 2012, DCMA corporate
administrative contracting officer Dowd issued a contracting officer's final decision
in which the government asserted a claim against Raytheon for unallowable airfare
incurred in 2005, plus associated penalties and interest (R4, tab 8). After quoting
the pertinent portion of FAR 3 l .205-46(b) (SOF ~ 2), the contracting officer divided
the costs determined to be unallowable into four categories. The first two
categories, which are the subject of the present motions, were:

                     In the first category, based upon the review of the
             selected sample items, it was found that Raytheon did
             not always use the negotiated corporate discounts with
             airlines. There were a number of flights on which the
             traveler was on coach and that fare was incurred and
             charged by Raytheon, instead of the negotiated
             discounted airfare amount. When there was a discount
             airfare available and not used for those flights, the
             difference between the discount fare and coach fare is
             unallowable under FAR 31.205-46(b ), 31.201-5 and
             3 l.201-2(d). The difference between the discount and
             coach fares is also unallowable under FAR 31.201-3,
             Determining Reasonableness. Fares charged in excess
             of those available to Raytheon through its negotiated
             corporate discounts are unreasonable. They exceed that
             which would be incurred by a prudent person in the
             conduct of competitive business.

                    In the second category, based upon the review of
             the selected sample items, Raytheon did not remove as

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              unallowable additional amounts when premium airfares,
              for first class or business class seats, were not justified
              by the FAR travel cost principle. For the airfare costs
              which did not meet the requirements of the cost
              principle cited above, the unallowable cost is the
              difference between the premium airfare incurred and the
              standard coach fare based upon FAR 31.205-46(b ).
              Raytheon incurred and included in its claimed costs
              airfare in excess of standard coach costs without
              meeting the requirements of the exception in
              FAR 31.205-46(b ). Since the exception in
              FAR 31.205-46(b) is not applicable, the claimed costs
              are unallowable.

(R4, tab 8 at 2)

       6. Raytheon timely appealed the contracting officer's final decision by letter
dated 6 July 2012 (R4, tab 11).

                                     DECISION

        In its motion for partial summary judgment, Raytheon asks us to find that it
is entitled to judgment in its favor as a matter of law on the following four issues:

              1. The publicly available coach fare is the appropriate
                 baseline for calculating unallowable airfare costs
                 under the pre-2010 version of FAR 31.205-46;

              2. There is no evidence that Raytheon failed to apply all
                 applicable airfare discounts to which it was entitled;

              3. DCMA improperly relied upon a misstatement of
                 Raytheon policy in disallowing airfare costs that
                 complied with FAR 31.205-46; and

              4. Raytheon's airfare costs for commercial business are
                 allocable to the Department of Defense contracts
                 included in the allocation base disclosed and
                 consistently applied in accordance with Raytheon's
                 CAS Disclosure Statements.

(App. mot. at 1, 81)

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A. Issue 1

        Issue 1 of Raytheon's motion for partial summary judgment states an issue of
contract interpretation. The government has submitted a cross-motion for summary
judgment on this issue. Both parties seek interpretation of the same phrase in
FAR 3 l .205-46(b ): "lowest customary standard, coach, or equivalent airfare
offered" (SOF ~ 2). Raytheon argues that the drafters of the phrase intended it to
mean the coach fare available to the general public and the government argues that
the drafters intended the same phrase to mean the discounted coach fares negotiated
by each individual contractor (Raytheon, in this particular case). Both parties assert
that there are no facts in dispute with respect to Issue 1 and each party argues that
its interpretation of the language at issue is the only reasonable interpretation, that
there is therefore no ambiguity and that it is entitled to summary judgment on this
particular issue. Both parties have included numerous citations to conflicting
extrinsic evidence in support of their opposing interpretations of FAR 31.205-46(b).
(App. mot. at 62-75; gov't mot. at 8-9, 11-47; DF ~~ 31-48, 77, 79-82, 84-85, 89,
104-06; app. reply/opp'n at 1-27; gov't reply at 1-30)

        Summary judgment is appropriate where there are no genuine issues of
material fact and the moving party is entitled to judgment as a matter of law.
Mingus Constructors, Inc. v. United States, 812 F.2d 1387, 1390 (Fed. Cir. 1987).
A material fact is one that may affect the outcome of the decision. Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986). The moving party bears the
burden of establishing the absence of any genuine issue of material fact and all
significant doubt over factual issues must be resolved in favor of the party opposing
the summary judgment. Mingus Constructors, 812 F.2d at 1390-91.

        On an issue of contract interpretation, summary judgment may only be
granted where there is no ambiguity in the contract terms at issue which would
require our reliance upon extrinsic evidence to resolve the matter. An ambiguity
exists where there are two or more reasonable interpretations of the contract
language at issue. Classic Site Solutions, Inc., ASBCA Nos. 58376, 58573, 14-1
BCA ~ 35,647 at 174,551; Teg-Paradigm Environmental, Inc. v. United States,
465 F.3d 1329, 1338 (Fed. Cir. 2006). "The question of interpretation oflanguage
and conduct-the question of what is the meaning that should be given by a court to
the words of a contract, is a question of fact, not a question of law." Beta Systems,
Inc. v. United States, 838 F.2d 1179, 1183 (Fed. Cir. 1988) (quoting 3 ARTHUR
LINTON CORBIN, CORBIN ON CONTRACTS § 554 at 219 (1960)); 11 RICHARD A.
LORD, WILLISTON ON CONTRACTS§ 30:7 (4th ed. 2012) ("When a written contract is
ambiguous, its meaning is a question of fact.").

      In order to determine whether the language at issue is ambiguous, i.e.
capable of two or more reasonable interpretations, we must determine the

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reasonableness of each party's interpretation of that language. It is well established
that a determination of reasonableness presents a question of fact. BAE Systems San
Francisco Ship Repair, ASBCA No. 58809, 14-1 BCA ii 35,642 at 174,534; Scott
Timber Co. v. United States, 333 F.3d 1358, 1369 (Fed. Cir. 2003); General
Dynamics Corp. v. United States, 410 F .2d 404, 409 (Ct. Cl. 1969). As we are
presented with a question of fact as to the reasonableness of each party's
interpretation, there can be no determination on a motion for partial summary
judgment of ambiguity and no determination as to whether extrinsic evidence may
be examined in resolving the meaning of the disputed language of
FAR 3 l .205-46(b).

       Raytheon also argues that the government's interpretation asserted in the
final decision, and in its cross-motion now before us, is different from its
contemporaneous interpretation in 2005 when the airfare costs at issue were
incurred (app. mot. at 62-67). The government argues that its interpretation of
FAR 31.205-46(b) has never changed (gov't mot. at 34-41; DF iii! 131-32). We
have declined to grant summary judgment where the contract provisions at issue are
"subject to allegedly conflicting contemporaneous interpretations by a party."
Skanska US Building, Inc., ASBCA No. 56339, 10-1 BCA ii 34,392 at 169,833.

      For the foregoing reasons, both Raytheon's motion and the government's
cross-motion for partial summary judgment as to Issue 1 are denied.

B. Issues 2 and 3

       The government initially states in its opposition that it does not oppose
Raytheon's motion with regard to one aspect of Issue 2 but in a footnote on the
same page states that it opposes certain other aspects of Issue 2 and the government
has provided evidence of facts in dispute that Raytheon availed itself of all
appropriate discounts (gov't mot. at 9; DF iii! 12-15, 19-21, 23, 26-28; gov't reply at
32 n.22). We find there are material facts in dispute for Issue 2.

       In Issue 3, Raytheon requests partial summary judgment on the issue of
DCMA's alleged improper reliance on a misstatement of Raytheon's travel policy
(app. mot. at 77-79; app. reply/opp'n at 27-28). The government opposes
Raytheon's motion (gov't mot. at 9; gov't reply at 30-32). The fact of DCMA's
reliance, improper or not, is in dispute, as are other facts necessary to a
determination of whether Raytheon's costs incurred for certain "multi-leg" flights
were unallowable (DF iii! 96-98, 118-22).

       Issues 2-3 are, therefore, inappropriate for summary judgment and
appellant's motion as to those issues is denied.

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     C. Issue 4

            The government does not oppose Raytheon's motion for summary judgment
     with respect to Issue 4 (gov't mot. at 1, 8-9). We need not address it further and
     grant summary judgment to appellant on Issue 4.

                                               CONCLUSION

             We have carefully considered the various additional arguments of both
     parties not formally addressed above and find them unpersuasive or inapplicable to
     the matters before us in the present motion. We deny Raytheon's motio,n for partial
     summary judgment as to Issues 1-3 and grant the motion as to Issue 4. We deny the
     government's cross-motion for partial summary judgment as to Issue 1.

           Dated: 27 May 2015

                                                          /(1   .     (·   ~
                                                          CZ>W_A-~') ,,· ~~/~
                                                           DIANA ~· DICKINSON
                                                           Administrative Judge
                                                           Armed Services Board
                                                           of Contract Appeals

     I concur                                              I concur

         7
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~/         ~/           ,, "'C_____.;:__ y
     MARK N. STEMPfER                                      RICHARD SHACKLEFORD
     Administrative Judge                                  Administrative Judge
     Acting Chairman                                       Vice Chairman
     Armed Services Board                                  Armed Services Board
     of Contract Appeals                                   of Contract Appeals

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      I certify that the foregoing is a true copy of the Opinion and Decision of the
Armed Services Board of Contract Appeals in ASBCA No. 58212, Appeal of
Raytheon Company, rendered in conformance with the Board's Charter.

       Dated:

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

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