Court Opinion

ID: 4418872
Source: CourtListenerOpinion
Date Created: 2019-07-22 18:00:05.024336+00
Date Added: 2024-06-11T13:42:08.045450
License: Public Domain

ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeals of --                                    )
                                                 )
DCX-CHOL Enterprises, Inc.                       )   ASBCA Nos. 61636, 61637
                                                 )
Under Contract Nos. N00104-10-C-FA09             )
                    NOO 104-06-C-F A6 7          )

APPEARANCE FOR THE APPELLANT:                        James S. DelSordo, Esq.
                                                      Argus Legal, PLLC
                                                      Manassas, VA

APPEARANCES FOR THE GOVERNMENT:                      Craig D. Jensen, Esq.
                                                      Navy Chief Trial Attorney
                                                     Matthew S. Hawkins, Esq.
                                                      Trial Attorney

                  OPINION BY ADMINISTRATIVE JUDGE SWEET

        These appeals challenge the government's default termination of two contracts
to deliver sonar system subcomponents due to the failure of appellant DCX-CHOL
Enterprises, Inc. (DCX-CHOL) to comply with the deadline for delivering first article
testing samples. DCX-CHOL argues that three defenses-namely, the government's
delays, constructive changes to the contracts, and waiver of strict compliance with the
schedule-excuse that failure. The government moves to strike the delay and
constructive change defenses, arguing that DCX-CHOL failed to present a delay or
constructive change claim to the contracting officer (CO). The government also
moves for summary judgment on the waiver defense.

        Because DCX-CHOL did not present government delay and constructive
change claims-as required by binding precedent-we do not possess jurisdiction over
the delay and constructive change defenses. However, DCX-CHOL has raised a
genuine issue of material fact suggesting that the government waived strict compliance
with the sample delivery deadline. Therefore, we grant the government's motion to
strike, and deny its summary judgment motion.

     STATEMENT OF FACTS (SOF) FOR PURPOSES OF THESE MOTIONS

I.    Factual Background

      1. On August 2, 2006, the government and DCX-CHOL executed Contract
No. N00104-06-C-FA67 (FA67 Contract) for Hull Penetrator Assemblies (R4, tab 1
at 1-2). On November 5, 2009, the government and DCX-CHOL executed Contract
No. N00104-10-C-FA09 (FA09 Contract) for Electric Lead Assemblies (R4, tab 7
at 67-68). The Hull Penetrator Assemblies and Electric Lead Assemblies are
components of Trident class submarine sonar systems (gov't mot., ex. 1, Palm decl. f3).

       2. The FA09 Contract and the FA67 Contract (collectively, contracts)
incorporated by reference Federal Acquisition Regulation (FAR) 52.249-8 DEFAULT
(FIXED-PRICE SUPPLY AND SERVICE) (APR 1984), which allowed the government to
terminate the contracts ifDCX-CHOL failed to perform within the time specified in
the contract (R4, tab 1 at 16; tab 7 at 81).

        3. The contracts required first article testing (FAT) and approval (R4, tab 1
at 3; tab 7 at 69). The contracts, as modified, incorporated FAR 52.209-4 FIRST
ARTICLE APPROVAL-GOVERNMENT TESTING (SEP 1989), which required DCX-CHOL
to deliver FAT samples within 180 days (R4, tab 2 at 44; tab 8 at 124).

       4. In a declaration, Tom Shafer-DCX-CHOL's Vice President and General
Manager-declares that "[f]rom the award of the Contract in 2006 the Government
repeatedly waived and ignored the Contract's schedule as awarded" (app. opp'n, ex. 1,
Shafer decl. 15). Mr. Shafer also declares that "[g]iven the Government's practice of
repeatedly waiving [the] delivery schedules over the 12-year life of the Contract,
DCX-CHOL reasonably assumed that time was not of the essence" (id. 14). Finally,
Mr. Shafer declares that he anticipates that, if deposed, government personnel would
admit that they waived the delivery schedule over the life of the contracts (id. 17).

        5. After several other modifications, the parties entered into bilateral
modifications of the FA09 Contract and the FA67 Contract on March 23, 2018, and
April 18, 2018, respectively (Modifications). The modifications extended the FAT
sample delivery deadline to April 30, 2018 (Deadline), at no cost to either party. (R4,
tab 5 at 53-54; tab 10 at 147-48) The modifications indicated that "[n]o equitable
adjustments are authorized." The modifications did not state that the government would
revive any waived strict schedule compliance requirements for the deadline. (Id.)

       6. On April 21, 2018, DCX-CHOL notified the government that it had failed
the F A09 Contract FAT (gov't mot., ex. 2, Kurek decl. 1 4, exs. A-B). DCX-CHOL
did not successfully deliver a F A09 Contract FAT sample or test report by the deadline
(Palm decl. 1 14).

       7. On April 30, 2018, DCX-CHOL contacted the government to schedule the
FA67 Contract FAT. DCX-CHOL sought a FA67 Contract FAT test date after the
deadline. (Palm decl. 1123-24; Kurek decl. 118-9, ex. C)

        8. On May 11, 2018, the government terminated the contracts for default (R4,
tabs 6, 11).

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II.    Procedural History

      9. We find that based on the record DCX-CHOL did not present any claims to
the CO.

        10. On May 29, 2018, DCX-CHOL filed notices of appeal challenging the
validity of the government's default terminations of the FA09 Contract and the FA67
Contract, which we docketed as ASBCA Nos. 61636 and 61637, respectively.

          11. On July 2, 2018, DCX-CHOL filed complaints in ASBCA Nos. 61636 and
61637, which are substantially similar (collectively, compls.). The complaints
allege that the default terminations were improper because three defenses excused
DCX-CHOL's failure to comply with the Deadline (compls. at 3-4 ,r,r 13-17). First,
the complaints allege that government-caused delays in the manufacturing process
impacted performance (id. ,r,r 5, 13). Second, the complaints allege that the
government constructively changed the contracts when it imposed new criteria
(id. ,r,r 6, 14 ). Third, the complaints allege that the government waived the strict
schedule compliance requirements (id. ,r,r 9, 14).

       12. There has not been any discovery yet.

                                       DECISION

I.     Motion to Strike

       We do not possess jurisdiction over DCX-CHOL's delay and constructive
change defenses. A jurisdictional prerequisite for filing an appeal with the
Board under the Contract Disputes Act is that a contractor present a claim to the CO.
M Maropakis Carpentry, Inc. v. United States, 609 F.3d 1323, 1327 (Fed. Cir. 2010).
A default termination is not subject to the CO presentment requirement because it is a
government claim. Securiforce Int'! Am., LLC v. United States, 879 F.3d 1354, 1363
(Fed. Cir. 2018). Moreover, a contractor need not present a claim to the CO in order
to assert a common-law affirmative defense to a default termination-such as fraud or
prior material breach. (Id. at 1362-63) However, "to the extent the affirmative
defense seeks a change in the terms of the contract-for example, an extension of time
or an equitable adjustment-it must be presented to the CO," (id. at 1363). Thus,
"while all possible defenses need not be submitted to a contracting officer for a final
decision, a contractor contesting ... a default termination due to excusable delay must
submit a claim for a time extension before appealing to the Board." ECC Centcom
Constructors, LLC, ASBCA No. 60647, 18-1 BCA ,r 37,133 at 180,713.

       Here, DCX-CHOL did not present to the CO claims regarding the delay and
constructive change defenses that it seeks to raise in these appeals (SOF ,r,r 9, 11).
That failure to present delay and constructive change claims to the CO prevents us

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I

    from exercising jurisdiction over the delay and constructive change defenses because
    those defenses seek a change to the terms of the contracts. Securiforce, 879 F.3d
    at 1363; ECC Centcom, 18-1 BCA ,i 37,133 at 180,713. As a result, the government's
    motion to strike the delay and constructive change defenses is granted. 1

    II.      Summary Judgment Motion

             A.     Standard of Review

           Summary judgment is appropriate only if there is no genuine issue as to any
    material fact, and the moving party is entitled to judgment as a matter of law. Celotex
    Corp. v. Catrett, 4 77 U.S. 317, 322-23 (1986). 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). There is a "genuine" dispute as to such a fact "if the evidence is such that a
    reasonable [fact-finder] could return a verdict for the nonmoving party." (Id. at 242)

             B.     DCX-CHOL Has Raised a Genuine Issue of Material Fact
                    Regarding Whether the Government Waived the Strict Schedule
                    Compliance Requirements

            The government is not entitled to judgment as a matter of law because
    DCX-CHOL has raised a genuine issue of material fact regarding whether the
    government waived the strict schedule compliance requirements. When the
    government has administered a contract in such a way as to give a reasonably
    intelligent and alert opposite party the impression that the government has waived a
    contract requirement, the government cannot suddenly revive the requirement to the
    prejudice of a contractor that has changed its position in reliance upon the supposed
    waiver. Gresham & Co. v. United States, 470 F.2d 542, 555 (Ct. Cl. 1972). Here,
    Mr. Shafer declares that, from award, the government repeatedly waived the strict
    schedule compliance requirements, and that DCX-CHOL relied upon that waiver when
    it missed the deadline (SOF ,i 4 ). That raises a genuine issue of material fact as to
    whether the government administered the contracts in such a way as to give a
    reasonably intelligent and alert opposite party the impression that the government
    waived the strict schedule compliance requirements, and whether the sudden revival of
    that requirement prejudiced DCX-CHOL.

           The government first argues that DCX-CHOL cannot establish waiver because
    the government promptly terminated the contracts after DCX-CHOL missed the
    deadline (gov't mot. at 13-14 (citing De Vito v. United States, 413 F.2d 1147, 1154
    (Ct. Cl. 1969)). While the waiver defense frequently involves showing that the

    1
        As the government concedes, we possess jurisdiction over DCX-CHOL's waiver
             defense because that is a common-law affirmative defense (gov't reply br. at 5).
                                                 4
government failed to promptly terminate a delinquent contractor, it also may involve
showing that the government permitted the contractor to deviate from contract
requirements. John Cibinic, Jr., James F. Nagle, and Ralph C. Nash, Jr.,
ADMINISTRATION OF GOVERNMENT CONTRACTS, 69 (5th ed. 2016) (citing Gresham,
470 F.2d at 555). Here, DCX-CHOL raises the latter type of waiver defense by
focusing upon the government's alleged history of failing to enforce the strict schedule
compliance requirements, instead of upon any failure to promptly terminate after
DCX-CHOL missed the deadline (SOF ,i,i 4, 11 ). Therefore, even though the
government promptly terminated the contracts after DCX-CHOL missed the deadline,
the evidence that the government failed to promptly terminate the contracts earlier,
when DCX-CHOL failed to comply with the strict schedule compliance requirements,
raises a genuine issue of material fact as to whether the government waived the strict
schedule compliance requirements. 2

        The government also argues that the Shafer Declaration is too vague to raise a
genuine issue of material fact (gov't reply br. at 8). While the Shafer Declaration
could have contained more detail, it is sufficient to raise a genuine issue of material
fact at this early stage of the appeals-when there has not been any discovery yet
(SOF ,i 12). That is particularly true because Mr. Shafer has identified additional
discovery that he anticipates may raise a genuine issue of material fact-namely the
expected deposition testimony from government personnel admitting that they waived
the strict schedule compliance requirements (SOF ,i 4 ); see also FED. R. CIV. P. 56( d).

        The government finally argues that the modifications "erased [DCX-CHOL 's]
ability to raise a pre-existing causes of delay" defense (gov't reply br. at 10 (quoting
Bulova Tech. Ordnance Sys., LLC, ASBCA No. 57406, 14-1 BCA ,i 35,521 at 174,097)).
However, unlike in Bulova, the surviving defense here is not a pre-existing delay defense,
but rather a waiver defense (SOF ,i 11 ). While the modifications erased the pre-existing
delay defense by prohibiting an equitable adjustment, they did not erase the waiver
defense because they did not notify DCX-CHOL that the government would revive the
strict schedule compliance requirements for the deadline (SOF ,i 5).

        In sum, DCX-CHOL has raised a genuine issue of material fact regarding
whether the government waived the strict schedule compliance requirements. As a
result, we deny the government's summary judgment motion.

2
    For the same reason, we deny the government's motion to limit discovery to the
          period between the deadline and the termination.
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                                   CONCLUSION

       For the reasons discussed above, we grant the government's motion to strike the
delay and constructive change defenses. We deny the government's summary
judgment motion.

       Dated: July 11, 2019

                                                 JAMES R. SWEET
                                                 Administrative Judge
                                                 Armed Services Board
                                                 of Contract Appeals

I concur                                        I concur

                                                OWEN C. WILSON
                                                Administrative Judge
                                                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. 61636, 61637, Appeals of
DCX-CHOL Enterprises, Inc., rendered in conformance with the Board's Charter.

      Dated:

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

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