Court Opinion

ID: 9472710
Source: CourtListenerOpinion
Date Created: 2023-08-05 04:08:05.756365+00
Date Added: 2024-06-11T17:43:05.193078
License: Public Domain

NIES, Circuit Judge,
dissenting.
I disagree that “it is irrelevant whether ... AID caused Resources’ default.” As the majority recognizes in its discussion of the facts, delays in the purchase and installation of communication equipment prevented Resources from performing the evaluation specified in the contract. The ASBCA found in this regard that:
The delays were due to the increasing complexity and uncertainty of the final design of the hardware and equipment, design configuration changes required by the Government of Peru, uncertainties regarding potential applications, delays in negotiations with the hardware and equipment supplier because of the design configuration changes, and delays in identifying villages that delayed the collection of baseline data____ Respondent admitted that none of these delays in the entire project were the fault of appellant, but rather they resulted from the complicated nature of an experimental program and many factors which were not anticipated by AID and the Peruvian Government at the inception of the project. [Emphasis added.]
The ASBCA also found that at least part of the delay was caused by the government’s failure to award the actual subcontract for the procurement of the necessary hardware and equipment until approximately ten months after the award of the contract under appeal. Resources, frustrated by the delay and facing severe cash flow problems resulting from the accrual of overhead costs, was forced to undertake the task of coordinating the procurement of the necessary hardware itself in an effort to prevent total collapse of the project. Despite these efforts, which were not required by the contract, Resources’ financial situation continued to worsen, resulting in its inability to pay FSU in a timely manner.
AID’s inaction during this time period was not “irrelevant”, but rather was the direct cause of Resources’ “default”. The evidence also indicates that AID was quick to take advantage of the situation in an effort to rid itself of Resources as the “middleman”, so that it could contract directly with FSU. Following a series of meetings between AID and FSU concerning Resources’ payment problems under the subcontract, AID’s contracting officer wrote the General Counsel of FSU, stating in part:
As I explained to Dr. Johnson during his recent visit, if FSU terminates it’s [sic] relationship with HRM I may look at the option of terminating that portion of the HRM contract and obtaining the services *650via a direct contract. However, any action on my part beyond encouraging HRM to rectify the matter, is dependent upon action taken by FSU.
Three days later, in response to this “encouragement”, FSU terminated its contract with Resources. AID then proceeded to terminate its contract with Resources, and subsequently, awarded the contract for evaluation services directly to FSU.
Because AID’s action (or more correctly, inaction) lead directly to a situation in which Resources was unable to keep current with its payments to FSU, and because AID took advantage of that situation by terminating the contract with Resources so that it could contract directly with FSU, I would hold that AID had not met its burden of showing that the termination was proper, and would affirm the decision of the ASBCA.
I also agree with the ASBCA’s interpretation of the contract on overhead rates. The rates set forth in Article VIII of the contract represent only the negotiated provisional rates for the initial period pending establishment of final overhead rates. As the ASBCA noted, General Provision 10, “NEGOTIATED OVERHEAD RATES” provides for the negotiation of final overhead rates based on the contractor’s actual (rather than estimated) cost experience during the fiscal year.
Evidence in the record indicates that Resources’ difficulties in making payments to FSU were largely attributable to the un-reimbursed indirect costs being incurred as a result of delays in the project. The contracting officer terminated the contract believing it to be “grossly unfair” for Resources to delay payments to FSU in anticipation of reimbursement of these indirect costs. The contracting officer assumed that since these costs exceeded the contract indirect cost “ceiling”, they were not in any event reimbursable. Under my view that the ceiling only applied to the provisional rates, the contracting officer’s reasoning provided no justification for terminating the. contract.
For the above reasons, I would affirm the decision of the ASBCA in all respects.