Court Opinion

ID: 4104504
Source: CourtListenerOpinion
Date Created: 2016-12-05 19:00:11.198454+00
Date Added: 2024-06-11T08:53:31.315083
License: Public Domain

ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of --                                   )
                                               )
███████████████████████              )      ASBCA No. 60315
                                               )
Under Contract No. HTC711-14-D-R033            )

APPEARANCE FOR THE APPELLANT:                         ██████████████████
                                                       President

APPEARANCES FOR THE GOVERNMENT:                       Jeffery P. Hildebrant, Esq.
                                                       Air Force Deputy Chief Trial Attorney
                                                      Lt Col Mark E. Allen, USAF
                                                      Jason R. Smith, Esq.
                                                       Trial Attorneys

           OPINION BY ADMINISTRATIVE JUDGE D' ALESSANDRIS
        ON THE GOVERNMENT'S MOTION FOR SUMMARY JUDGMENT

       The United States Transportation Command (government) awarded ████████
█████████████████ (███) a commercial trucking services contract in Afghanistan.
SWT argues that the government breached the contract by failing to provide a fair
opportunity to compete, improperly terminating the contract, and by breaching the
implied duty of good faith and fair dealing. Pending before the Board is the
government's motion for summary judgment, asserting that there are no disputed
material facts and that ███ fails to establish any contractual violation. We grant the
government's motion and deny the appeal.

        STATEMENT OF FACTS (SOF) FOR PURPOSES OF THE MOTION

       1. On 9 January 2014, the United States Transportation Command awarded
Contract No. HTC711-14-D-R033 to ███ for commercial trucking services in
Afghanistan (R4, tab 14). ███'s contract was one of 23 awarded under the National
Afghan Trucking Program (NAT II) (R4, tab 34 at 1). The NAT II was a
firm-fixed-price, multiple-award, indefinite-delivery, indefinite-quantity (ID IQ)
contract (R4, tab 14 ). The contract had an original base period of 24 January 2014
to 15 December 2014 with two one-year options and one six-month option (id. at 5-7).

      2. The contract contained Federal Acquisition Regulation (FAR) clause 52.216-22,
INDEFINITE QUANTITY (OCT 1995), which provided, in relevant part:

               (a) This is an indefinite-quantity contract for the supplies or
               services specified, and effective for the period stated, in the
              Schedule. The quantities of supplies and services specified in
              the Schedule are estimates only and are not purchased by this
              contract.

              (b) Delivery or performance shall be made only as authorized
              by orders issued in accordance with the Ordering clause. The
              Contractor shall furnish to the Government, when and if
              ordered, the supplies or services specified in the Schedule up
              to and including the quantity designated in the Schedule as
              the "maximum." The Government shall order at least the
              quantity of supplies or services designated in the Schedule as
              the "minimum."

(R4, tab 14 at 12)

       3. The contract also contained FAR clause 52.217-9, OPTION TO EXTEND THE
TERM OF THE CONTRACT (MAR 2000), which provided, in relevant part, that the
government "may extend the term of this contract by written notice to the Contractor"
(R4, tab 14 at 12).

       4. The contract's Performance Work Statement stated that the government
"will normally provide the contractor's [Program Manager] at least 96 hours notice of a
mission requirement; however, the contractor shall be able to respond within 48 hours
for urgent requirements" (R4, tab 14 at 80). The Performance Work Statement also
required the contractor to attend a post-award conference; have contractor employees
enrolled in the Synchronized Pre-Deployment and Operational Tracker (SPOT) and
have a SPOT-generated Letter of Authorization (LOA) for its employees prior to
employment; to work on holidays; and to maintain Defense Base Act (DBA) insurance
(R4, tab 14 at 64-65, 67).

        5. By task order dated 17 January 2014, the contracting officer paid the
contractually guaranteed minimum of 129,500 afghani (AFN) to ███ (R4, tab 16).
The government had previously provided ███ the opportunity to invoice for the
guaranteed minimum order (R4, tab 39 at 3). The contracting officer also issued contract
Modification No. POOOOl to the contract, dated 17 January 2014, which notified ███
that the NAT II award decision was being protested to the Government Accountability
Office (GAO) and that "[t]he contractor is hereby notified to suspend performance until
further notice. Only the Contracting Officer is authorized to allow performance to
resume under this contract." (R4, tab 15 at 1)

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        6. By memorandum dated 30 April 2014, the contracting officer notified ███
that it had been reaffirmed as an awardee under the NAT II contract and that the
government expected "to complete a modification of your contract removing the
Stop Work Order following the debriefing period" (R4, tab 21 at 3).

       7. By memorandum dated 14 May 2014, the contracting officer notified all
NAT II contractors that three unsuccessful offerors of the NAT II contract had filed
protests with the GAO and that performance would continue "to be suspended pending
disposition of the protests" (R4, tab 22 at 1).

       8. ███ asserts that the government became aware that requirements for
trucking services in Afghanistan were being sharply reduced and were projected to
continue to decline in the NAT II option years around 22 August 2014 (app. resp. at 3).
On 8 September 2014, a kick-off meeting took place for the NAT II contract (comp I. at 2).

        9. By memorandum dated 11 September 2014, the contracting officer notified
███ that the stop work order was being lifted on the NAT II contract and directed ███
"to start preparing for performance in accordance with the terms and conditions of
HTC711-14-D-R033." The contracting officer also noted that the official notice to
proceed would be issued around 16 October 2014 along with a formal modification.
(R4, tab 23)

       10. By letter dated 25 September 2014, the government informed ███ that the
contract base period would only have a period of performance of two months ( 16 October
2014 through 15 December 2014) and that only around seven NAT II contractors would
have their contracts' option years exercised. The contracting officer offered ███ the
opportunity to execute an immediate no-cost termination of its contract. (R4, tab 24)

       11. By email dated 26 September 2014, the contracting officer notified NAT II
contractors that the modification to lift the stop work order had not been issued and that
the stop work order was still in effect (R4, tab 25).

         12. By memorandum dated 7 October 2014, the contracting officer notified
███ that the government would not exercise the first option period on the contract
(R4, tab 27). By a ten-page memorandum signed 22 November 2014, the contracting
officer outlined determinations and findings in support of the NAT II contractors who
had their option years exercised (R4, tab 34 ). The determination noted that the military
was downsizing, reducing the need for commercial trucking services, that there was a
similar decline in contracting personnel to administer the contracts, and that the contracts
required high fixed costs for a 24-hour operations center and DBA insurance (id.). The
determination concluded that awarding all options would "expose the contractors to
unnecessary start-up costs with no real expectation of recovering their initial outlay"
(id. at 3). The determination further reasoned that these financial risks could affect the
viability of the contractors and become a force protection issue (id.).

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       13. The contracting officer issued no competitive task orders under the NAT II
contracts during the base period (R4, tab 43 at 1).

      14. By email dated 8 July 2015, ███ submitted a certified claim demanding
payment for expenses allegedly incurred during the performance of the contract in the
amount of $5,547,248.98 (R4, tab 44).

       15. By memorandum dated 25 August 2015, the contracting officer issued a final
decision denying ███'s certified claim (R4, tab 47). ███ timely appealed to this Board
on 7 November 2015.

                                        DECISION

        ███ argues that the government "performed a breach of contract for failure to
provide fair opportunity to compete and be considered for orders, improper termination,
failure to perform in good faith, bad faith issuance of the minimum order guarantee and
improper use of the Option to Extend Services" (compl. at 3). The government argues
that there are no disputed material facts and that it is entitled to judgment as a matter of
law because it paid the guaranteed minimum required by the contract and its actions were
consistent with the terms of the contract.

        We will grant summary judgment 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, 477 U.S. 317, 322 (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). 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 summary judgment. Mingus Constructors, Inc.
v. United States, 812 F.2d 1387, 1390-91 (Fed. Cir. 1987). Once the moving party has
met its burden of establishing the absence of disputed material facts, then the non-moving
party must set forth specific facts, not conclusory statements or bare assertions, to
defeat the motion. Pure Gold, Inc. v. Syntex (U.S.A.), Inc., 739 F.2d 624, 626-27
(Fed. Cir. 1984). The government has met its burden of establishing the absence of
disputed material facts.

I.     Failure to Provide a Fair Opportunity to Compete For Task Orders

        We start with ███'s first argument that the government "breach[ed] [a] contract
for failure to provide fair opportunity to compete and be considered for orders." This
argument fails because there were no competitive task orders issued under the NAT II
contract during the base period (SOF ii 13). ███ was given the opportunity to invoice
for the contract minimum order guarantee during the base period (SOF ii 5), satisfying the
government's contractual obligation under the IDIQ contract. RJO Enterprises, Inc.,
ASBCA No. 50981, 03-1 BCA ii 32,137 at 158,908 (because it was an IDIQ contract the

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government "was obligated to purchase no more than the contractual minimum
quantity").

II.    Improper Termination

       ███ next alleges that the government improperly terminated the contract. Since
there was no actual termination of the contract, S WT appears to be alleging a de facto
termination through the government's suspension of work and failure to exercise the
contract's first option. This argument fails as well because the suspension of work and
termination for convenience clauses provide no relief when no work was ordered under
an IDIQ contract and the contractor has been paid the minimum contract value. See
Beneco Enterprises, Inc., ASBCA No. 46405, 96-2 BCA ,-i 28,531 at 142,468 (concurring
majority). In Beneco, the appellant, like ███ here, sought costs allegedly incurred
during a suspension of work due to a post-award bid protest. The Board denied the
appeal because no work was ordered under the IDIQ contract so no performance was
suspended. The Board noted that appellant's only relief was through the Minimum
Contract Value clause. Id.

III.   Good Faith and Fair Dealing and Bad Faith

        ███ next alleges that the government breached the implied duty of good faith
and fair dealing. Implied in every contract is a duty of good faith and fair dealing in
its performance and enforcement. Lakeshore Eng 'g Servs., Inc. v. United States,
748 F.3d 1341, 1349 (Fed. Cir. 2014); Metcalf Constr. Co. v. United States,
742 F.3d 984, 990 (Fed. Cir. 2014). It is well settled that the covenant of good faith and
fair dealing "imposes obligations on both contracting parties that 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." Centex Corp. v.
United States, 395 F.3d 1283, 1304 (Fed. Cir. 2005). "What is promised or disclaimed
in a contract helps define what constitutes 'lack of diligence and interference with or
failure to cooperate in the other party's performance."' Metcalf Constr., 742 F.3d at 991
(quoting Malone v. United States, 849 F.2d 1441, 1445 (Fed. Cir. 1988)). "[T]he nature
of that bargain is central to keeping the duty focused on 'honoring the reasonable
expectations created by the autonomous expressions of the contracting parties."' Id.
(quoting Tymshare, Inc. v. Covell, 727 F.2d 1145, 1152 (D.C. Cir. 1984)). The
implied duty of good faith and fair dealing cannot create duties inconsistent with the
express provisions of the contract. Bell/Heery v. United States, 739 F.3d 1324, 1335
(Fed. Cir. 2014).

        ███ initially alleges that the government breached the implied duty of good
faith and fair dealing by failing to exercise the contract's first option. However, the
government has broad discretion when exercising options. In Plum Run, Inc.,
ASBCA No. 46091 et al., 97-2 BCA ,-i 29,193 at 145,230, we held that the government
possesses discretion in exercising options and that a contractor can only prevail by

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establishing bad faith, abuse of discretion, or arbitrary or capricious action. The
contract's Option to Extend the Term of the Contract clause itself presupposes discretion,
employing the word "may" (SOF ii 3). ███'s citation to Community Consulting
International, ASBCA No. 53489, 02-2 BCA ii 31,940 (compl. at 5), is factually
distinguishable because that case involved allegations that the appellant was not fairly
considered for task orders. Here, no competitive task orders were issued during the base
period (SOF ii 13).

        Moreover, the government justified its decision not to exercise the first option
year to some but not all NAT II contractors in a ten-page determinations and findings
memorandum (SOF ii 12). The determination noted that the military was downsizing,
reducing the need for commercial trucking services, that there was a similar decline in
contracting personnel to administer the contracts, and that the contracts required high
fixed costs for a 24-hour operations center and DBA insurance (id.). The determination
concluded that awarding all options would "expose the contractors to unnecessary
start-up costs with no real expectation of recovering their initial outlay" (id.). The
determination further reasoned that these financial risks could affect the viability of the
contractors and become a force protection issue (id.). Thus the failure to award option
years to ███ was not done in bad faith nor was it an abuse of discretion or arbitrary or
capricious. Therefore, the government provided S WT "fair opportunity" to compete and
be considered for orders. In light of the government's discretion in determining whether
to exercise an option and the lack of an obligation to do so, ███ could only have
reasonably assumed that the contract would be for the base period. ███ alleges that the
government failed to properly follow the evaluation criteria for exercising option years.
This is not a reasonable belief. ███ does not point to any clause in the contract which a
reasonable person could interpret to mean the government restricted its discretion to
exercise options. Thus, ███ has not shown that there was a breach of the implied duty
of good faith and fair dealing when the government declined to exercise the contract's
option.

       ███ next asserts that the government required it to do specific tasks such as
attending a post-award conference, working on a holiday, and incurring expenses for
DBA insurance, SPOT authorization and SPOT-generated LOAs. ███ also states that
the contracting officer encouraged ███ to "remain in a state of ready with trucks and
personnel in anticipation of starting performance" despite knowing that mission needs
would be significantly reduced (app. resp. at 3). However, the terms of the contract
require the contractor to perform these tasks (SOF ii 4). ███ does not explain how the
government's actions constitute a breach of the implied duty of good faith and fair
dealing, given that the actions it complains of are provided for in the contract. As such,
there was no breach of the implied duty of good faith and fair dealing.

       Since the nature of the bargain is central to honoring the reasonable expectations of
the parties, we next turn to the bargain itself. ███ was awarded one of the contracts
under the NAT II program. The NAT II program was a firm-fixed-price, multiple-award,

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IDIQ (SOF ii 1). The government paid ███ the contract minimum order guarantee
(SOF ii 5). The government had discretion under the contract as to whether to exercise the
contract's option (SOF ii 3). Thus, the government honored the reasonable expectations of
the parties and did not breach the implied duty of good faith and fair dealing.

        Finally, ███ also alleges that the government acted in bad faith.* It is well
established that government officials are presumed to act in good faith. Road and
Highway Builders, LLC v. United States, 702 F.3d 1365, 1368 (Fed. Cir. 2012). To prove
that a government official acted in bad faith, a contractor "must show a 'specific intent to
injure"' by clear and convincing evidence. Id. at 1369 (quoting Am-Pro Protective
Agency, Inc. v. United States, 281F.3d1234, 1240 (Fed. Cir. 2002)). In deciding a
motion for summary judgment, we must determine whether a reasonable fact finder could
find by clear and convincing evidence that the government acted in bad faith. Am-Pro,
281 F.3d at 1239-41. ███ has not alleged any facts to show that the government had a
"specific intent" to injure ███ in any of its allegations. Moreover, even if the
allegations were sufficient to demonstrate an intent to injure, they are just allegations and
are not supported by citation to any evidence pursuant to Board Rule 7(c). Thus, a
reasonable fact finder could not find by clear and convincing evidence that the
government acted in bad faith.

       We have considered appellant's remaining arguments and find they have no merit.
The government's motion for summary judgment is granted. Accordingly, the appeal is
denied.

       Dated: 21November2016

                                                   DAVID D' ALESSANDRIS
                                                   Administrative Judge
                                                   Armed Services Board
                                                   of Contract Appeals
(Signatures continued)

* It is unclear whether or not appellant is alleging bad faith or a breach of good faith and
       fair dealing. We will read appellant's assertion as alleging both, using the same
       arguments.
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 I concur                                     I concur

~~ffet(--                                     ~
                                              RICHARD SHACKLEFORD
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 No. 60315, Appeal of █████████
██████████████████, rendered in conformance with the Board's Charter.

      Dated:

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

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