Court Opinion

ID: 6325691
Source: CourtListenerOpinion
Date Created: 2022-03-22 19:00:13.345492+00
Date Added: 2024-06-11T09:22:04.992707
License: Public Domain

ARMED SERVICES BOARD OF CONTRACT APPEALS
 Appeal of -                                    )
                                                )
 Sauer Incorporated                             )   ASBCA No. 62395
                                                )
 Under Contract No. W91278-07-D-0030            )

 APPEARANCE FOR THE APPELLANT:                      Gina P. Grimsley, Esq.
                                                     Counsel

 APPEARANCES FOR THE GOVERNMENT:                    Michael P. Goodman, Esq.
                                                     Engineer Chief Trial Attorney
                                                    Laura J. Arnett, Esq.
                                                     Engineer Trial Attorney
                                                     U.S. Army Engineer District, Savannah

               OPINION BY ADMINISTRATIVE JUDGE STINSON ON
               GOVERNMENT’S MOTION FOR RECONSIDERATION

       The government requests reconsideration of our April 16, 2021, decision denying
the government’s motion for summary judgment and granting, in part, the cross-motion
for summary judgment filed by appellant Sauer Inc. (Sauer). Sauer, Inc., ASBCA
No. 62395, 21-1 BCA ¶ 37,845. Sauer appealed the denial of its claim challenging the
government's assessment of liquidated damages, based upon appellant’s substantial
completion of the Task Order. We granted appellant’s motion, in part, based upon
appellant’s completion of Phases I and II of the Task Order. Appellant’s motion was
denied, in part, due to material issues of fact regarding substantial completion of Phase III
of the Task Order, as well as issues regarding proper apportionment of the liquidated
damages rate. Familiarity with that decision is presumed. For the reasons stated below,
the government’s motion for reconsideration is denied.

                                      DISCUSSION

        “Motions for reconsideration do not afford litigants the opportunity to take a
‘second bite at the apple’ or to advance arguments that properly should have been
presented in an earlier proceeding.” Dixon v. Shinseki, 741 F.3d 1367, 1378 (Fed. Cir.
2014). “But if we made mistakes in our findings of fact or conclusions of law, or by
failing to consider an appropriate matter, reconsideration may be appropriate.” Supreme
Foodservice GMBH, ASBCA No. 57884 et al., 20-1 BCA ¶ 37,716 at 183,090 (citation
omitted).
         I. The Government’s Contentions

         The government alleges four errors in our decision:

                I. The Board mistakenly concluded that it possesses
                jurisdiction to consider the reasonableness and enforceability
                of the liquidated damages (LD) rate incorporated into the
                contract.

                II. The Board failed to appreciate that Sauer waived any
                argument as to the reasonableness and enforceability of the
                LD rate incorporated into the contract.

                III. The Board erred when it concluded, as a matter of law,
                that the LD rate is unenforceable.

                IV. The Board erred in re-writing the contract to adopt
                phased LDs when the parties never agreed to any such
                provision.

(Gov’t mot. at 2)

         II. Reasonableness and Enforceability of the Liquidated Damages Rate

        The government’s first assignment of error is based upon the suggestion that we
made a determination regarding the “reasonableness and enforceability” of the specific
liquidated damages rate incorporated in the task order. 1 The government’s argument is
based upon a false premise. Our decision did not address, let alone determine, whether
the actual liquidated damages rate imposed by the task order was reasonable, nor did we
decide whether we had jurisdiction to determine the reasonableness of the rate. Our
decision held, in the first instance, that the government had failed to meet its burden of
proof to establish the propriety of imposing liquidated damages under the circumstances
of this appeal, based upon Board precedent holding that assessment of the full amount of

1
    In its reply brief filed in support of its motion for summary judgment, the government
           argued that “Sauer’s certified claim dated 6 September 2019 does not raise the
           issue of the reasonableness of the liquidated damages rate,” and “does not question
           the rate, how it was calculated, or whether it was reasonable in light of the phased
           nature of the project” (gov’t reply at 7). The government argued also that
           appellant’s “claim does not assert any facts regarding the rate which would put the
           government on notice that the reasonableness of the rate or how it was calculated
           was in dispute,” and that “Sauer’s claim challenging the liquidated damages rate
           presents a materially different factual and legal theory of relief.” Id.
                                                2
daily liquidated damages after substantial completion of the first two phases of a contract
is unenforceable as a penalty. Sauer, 21-1 BCA ¶ 37,845 at 183,757 (citing Dick Pacific
Constr. Co., ASBCA No. 57675 et al., 16-1 BCA ¶ 36,196 at 176,641).

        The government’s argument on reconsideration ignores the statement in our
opinion which provided “[o]ur decision on the parties’ cross-motions for summary
judgment turns not on the reasonableness of the liquidated damages rate as established by
the government pre-award (nor are we able to decide that factual dispute on summary
judgment), but, rather, on the government’s failure to apportion its liquidated damages at
the time it assessed those damages.” Sauer, 21-1 BCA ¶ 37,845 at 183,759-60. As to the
issue of whether the Board had jurisdiction to consider appellant’s challenge to the
reasonableness or enforceability of the actual, daily rate established by the parties in the
task order, our decision recognized, as noted by the government, “that appellant’s
complaint does not address the reasonableness of the government’s liquidated damages
rate.” Id. at 183,760. We noted also that “Board Rule 6(d) provides for amendment of
pleadings ‘upon conditions fair to both parties,’” and that, “[g]iven our decision here,
appellant must decide what additional steps, if any, are necessary to properly tee up its
affirmative defense for resolution in this appeal.” Id. Our suggestion that appellant
consider what steps, if any, were necessary to properly assert its affirmative defense, was
stated in the context of the government’s jurisdictional challenge to appellant’s
arguments regarding assessment of liquidated damages, which the government argued
were not properly before us.

        Subsequent to the issuance of our decision, appellant filed a separate motion
seeking leave to file several affirmative defenses, including one challenging the
reasonableness of the government’s set daily rate. We address in a separate opinion the
issues raised by appellant in its motion for leave filed pursuant to Board Rule 6(b), as
well as the government’s response in opposition to that motion, including whether we
have jurisdiction to consider appellant’s challenge to the reasonableness of the specific
rate set forth in the task order.

      III. Appellant’s Alleged Waiver of the Reasonableness and Enforceability of the
Liquidated Damages Rate

       The government argues that appellant did not challenge enforceability of
liquidated damages until the filing of its cross-motion for summary judgment (gov’t mot.
at 2). The government is mistaken. In its claim submitted to the contracting officer,
appellant challenged the enforceability of liquidated damages, arguing that, because
appellant had substantially completed the project, assessment of liquidated damages was
improper. Sauer, 21-1 BCA ¶ 37,845 at 183,752. In briefing on the parties’ cross-
motions for summary judgment, appellant established, and the government did not
dispute, that prior to the government’s decision to impose liquidated damages, appellant
had completed Phases I and II of the three-phase project, and that, according to the

                                             3
contractor’s calculations, Phase I alone accounted for 98 percent of the project work. 2
Based upon these and other undisputed facts, we granted partial summary judgment to
appellant, finding “that the government has failed to reference sufficient evidence
demonstrating that a reasonable fact finder could decide in favor of the government on
the issue of substantial completion of Phases I and II.” Id. at 183,756.

        The government argues that appellant waived its right to challenge the
reasonableness of the actual rate by failing to lodge a protest prior to award, stating “[i]f
Sauer thought that the liquidated damages rate was unenforceable or unreasonable, it
should have raised it prior to contract award” (gov’t mot. at 8). In addition to
respondent’s jurisdictional argument that appellant’s challenge to the enforceability or
reasonableness of the liquidated damages rate is a new claim, in its motion for
reconsideration, the government suggests that appellant waived that defense because it
was not asserted in its complaint (id. at 6-7). The government states, “should the Board
find, as it did in its April 16, 2021 decision, that Sauer’s challenge to the enforceability
and reasonableness of the liquidated damages rate is an affirmative defense that is
permissible without submission of a claim to the contracting officer, Sauer has waived
the assertion of that defense” (id. at 6). As discussed above, although our decision
recognized the reasonableness of the liquidated damages rate as a potential affirmative
defense, our decision did not decide whether we had jurisdiction to determine the
reasonableness of the specific liquidated damages rate set forth in the task order.

        Respondent cites our decision in Trade West Construction, Inc., ASBCA
No. 61068, 20-1 BCA ¶ 37,713 at 183,080, for the proposition that “[a] party may waive
an affirmative defense by failing to assert it,” and complains that our decision in Trade
West “did not ‘tee up its affirmative defense for resolution in th[e] appeal,’ as it did for
Sauer” (gov’t mot. at 6-7). Respondent’s reliance upon that decision is misplaced as the
facts in that appeal present a quite different scenario than those presented here. Trade
West concerned a contractor claim for additional costs based upon an alleged change to
the contract requiring more work. At the Board, the government sought denial of the
claim based upon several grounds, including appellant’s alleged lack of notice pursuant

2
    Statement of Fact (SOF) ¶ 22 provides “that 98.7 percent of the total construction-
         related costs were placed in Phase I, construction of the new headquarters
         building.” Sauer, 21-1 BCA ¶ 37,845 at 183,752 (citing app. Statement of
         Undisputed Material Facts No. 3; R4, tabs 3.03, 3.07; app. mot. at ex. 1).
         SOF ¶ 22 also stated that “[a]lthough the government ‘denies’ this allegation, it
         does not state why appellant's determination is incorrect. Rather, the government
         ‘notes that the costs associated with the respective schedule activities were
         assigned by Sauer in its schedule, not determined by the government’” Sauer, 21-1
         BCA ¶ 37,845 at 183,752 (citing gov’t resp. to app. Statement of undisputed
         Material Facts No. 3).
                                              4
to the Changes clause - an issue that has no application to a government claim for
liquidated damages. Trade West, 20-1 BCA ¶ 37,713 at 183,080. 3

       We rejected the government’s argument, detailing the many ways that the
government was on notice of the contractor’s changed-condition claim, despite the
contractor submitting no formal notice to the government. Id. We found also that the
government failed to offer any record evidence that it was prejudiced by the passage of
time, and “[e]ven assuming appellant failed to provide the requisite Changes clause
notice, the government waived any objection it may have had to appellant’s claim based
upon that lack of notice,” because the contracting officer failed to raise the issue of lack
of notice in the final decision as a basis for denying the claim, and the government failed
to plead lack of notice as an affirmative defense. Id. The government’s failure to address
notice in its final decision or in its answer was additional evidence that the government
was on notice of the claim, despite the lack of any formal notice required by the Changes
clause. Id. That simply is not the situation here.

        As stated above, we will address in a separate decision whether we have
jurisdiction to consider the affirmative defense as to the reasonableness of the rate
established by the task order.

      IV. Our Decision Properly Held that Assessment of Liquidated Damages was
Improper Based Upon Completion of Phases I and II of the Task Order

       The government argues that we committed error when we “concluded, as a matter
of law, that the LD rate is unenforceable” (gov’t mot. at 2). According to the
government, we erred in our “reading Dick Pacific as establishing a rule of law rather
than resting its conclusion upon a factual finding,” and that while we “concluded that the
LD rate assessed in Dick Pacific was unenforceable in that case, the Board [in Dick
Pacific] specifically rested that conclusion upon the factual finding that the ‘daily rate
bears no reasonable relation to the probable loss that would be incurred by the
government after substantial completion of the first two contract items’” (id. at 10).

      Our decision in Dick Pacific both recognized, and applied, a rule of law based
upon factual findings, specifically that the daily liquidated damages rate set forth in the

3
    Respondent also suggests that “the situation is more problematic” because “this
        liquidated damages rate has been apparent to Sauer since January 12, 2011, when
        the Request for Proposals was issued, prior to contract award” (gov’t mot. at 7).
        Other than note the passage of time, respondent does not allege, let alone establish,
        how the passage of time has prejudiced the government. Moreover, appellant here
        was not put on notice that the government was going to assess liquidated damages
        (where the contractor already had completed two phases of the Contract), until
        project work was mostly complete.
                                               5
contract should be apportioned based upon substantial completion of certain portions of
the project, as indicated by their warranty dates. Dick Pacific, 16-1 BCA ¶ 36,196
at 176,640. Our decision in this appeal applied that same rule of law to undisputed
factual findings regarding completion of phases I and II of the task order. Specifically,
we held that “[t]he government’s assessment of the full amount of daily liquidated
damages after substantial completion and acceptance of the first two phases is
unenforceable.” Sauer, 21-1 BCA ¶ 37,845 at 183,758. To be clear, the rule of law
espoused in Dick Pacific applies equally to this appeal because, in both this appeal and in
Dick Pacific, the “‘daily rate bears no reasonable relation to the probable loss that would
be incurred by the government after’ substantial completion of the first two contract
items.” Sauer, 21-1 BCA ¶ 37,845 at 183,757 (quoting Dick Pacific, 16-1 BCA ¶ 36,196
at 176,641). 4

        The government argues also, that “[s]imply put, Sauer’s claim for remission of
liquidated damages was based solely on a disagreement with USACE about when
substantial completion occurred, not the unreasonableness or unenforceability of the rate
itself” (gov’t mot. at 5). The government then concludes “[t]hus appropriately, the
Contracting Officer’s Final Decision (COFD) was limited to the allegations set forth in
Sauer’s claim, concluded that the government is entitlement [sic] to the liquidated
damages assessed, and discussed when each phase of the three-phase project had been
completed” (id.). As noted in our decision, however, the contracting officer’s final
decision failed completely to address the issue of substantial completion as raised by
appellant in its claim. Indeed, we found that “[t]he contracting officer did not address
appellant’s argument that assessment of liquidated damages after substantial completion
of the Project was inappropriate. Rather, the contracting officer assessed liquidated
damages ‘[i]n accordance with FAR 52.211-12’ based upon appellant’s ‘failure to
complete the work within the contract duration’ (R4, tab 2.02 at 7).” Sauer, 21-1 BCA
¶ 37,845 at 183,752 (SOF ¶ 25).

        Respondent argues also that “contrary to the analysis required by the Federal
Circuit, the Board did not analyze how the liquidated damage figure was arrived at, nor
did it analyze whether the liquidated damages were reasonable at the time that the
contract was awarded” (gov’t mot. at 11 (citing K-Con Bldg. Sys., Inc. v. United States,
778 F.3d 1000, 1008)). The government’s argument puts the cart before the horse, as our
decision here did not turn on the reasonableness the liquidated damages rate, nor did we
decide whether we had jurisdiction to consider that issue. Indeed, the government admits
as much, stating that “based upon the limited factual findings reached at this stage, the
Board could not have done so, as the question of whether an LD amount bears a
reasonable relationship to the foreseeable actual damages suffered by delayed completion
of the project is a question of fact, which the Board has not yet reached” (gov’t mot.
at 11-12).

4
    See also our discussion of Dick Pacific set forth in section V of this decision.
                                                6
        Notwithstanding its position that rate reasonableness was not, and could not be
decided at this state of the litigation (a position with which we agree), the government’s
motion submits additional documentary information in an attempt to establish the
reasonableness of the liquidated damages rate set forth in the contract, arguing that “[t]he
reasonableness of the liquidated damages [rate] is evaluated at the time of contract
formation” (gov’t mot. at 12). As we already have held, however, “[o]ur decision on the
parties’ cross-motions for summary judgment turns not on the reasonableness of the
liquidated damages rate as established by the government pre-award (nor are we able to
decide that factual dispute on summary judgment), but, rather, on the government’s
failure to apportion its liquidated damages at the time it assessed those damages.” Sauer,
21-1 BCA ¶ 37,845 at 183,759-60.

        The government argues, that “without reaching a determination as to when the
project was substantially completed, in the next section of the decision the Board held
that the amount of liquidated damages assessed per day for this project must necessarily
be reduced” (gov’t mot. at 8-9). The government misreads our decision. Although, it
accurately quotes a portion of our decision, stating “as to the issue of substantial
completion of the Project vis-a-vis Phase III, we are constrained at this point in the
litigation from making a determination whether it occurred on December 20, 2013, or
at some point prior to that date,” (id. at 8), there we were addressing only the issue of
Phase III substantial completion. 5 Earlier in our decision, we had held, as admitted by
the government, that Phases I and II were complete (indeed, not just substantially
complete). Sauer, 21-1 BCA ¶ 37,845 at 183,757-58. The factual issue we were unable
to reach concerned Phase III of the task order, which, according to appellant’s
calculations, comprised less than two percent of appellant’s construction-related costs.
Sauer, 21- 1 BCA ¶ 37,845 at 183,752 (see SOF ¶ 23).

       As to the government’s argument that the contract is not substantially complete
because the government has not received all the benefits for which it contracted, those
“benefits” relate solely to work performed in Phase III. The government is free to argue
those benefits as they pertain to Phase III and the issue of substantial completion of that
phase. The government argues also, “[b]ecause the Board cannot assess whether the
parking lot is necessary for the government to achieve substantial completion, it is
impossible, at this stage of the proceedings, for the Board to conclude that the LD rate
assessed was unenforceable” (gov’t mot. at 9). The government is incorrect. The
liquidated damages rate is unenforceable as to Phases I and II. It may very well be
enforceable as to Phase III, with an apportioned amount of the task order’s specified rate
properly assessed in the event Phase III was not substantially complete. Our decision

5
    Concerning Phase III, we held that factual issues remained regarding the extent of work
        left to be completed, such that we were unable to make a determination of
        substantial completion vis-a-vis that phase. Sauer, 21-1 BCA ¶ 37,845 at 183,757.
                                              7
contains no determination as to what portion of the liquidated damages may properly be
enforced. A determination as to substantial completion of Phase III first must be made.

        V. Our Decision Did Not Rewrite Contract Terms

        The government argues that our decision improperly rewrote terms of the contract
(id. at 13-15). According to the government, our decision “recognized that the contract
did not set a different liquidated damages rate for each phase of the contract, (Decision
at 15), yet holds that the government ‘should have’ done so, and ultimately, rules as if the
government did have phased liquidated damages” (id. at 14). As support, the government
cites George Hyman Const. Co. v. United States, 832 F.2d 574, 581 (Fed. Cir. 1987), for
the proposition that courts lack authority to re-write contracts and insert words into a
contract to which the parties never agreed (gov’t mot. at 14-15). The government
misreads our decision, as we did not rewrite any terms of the contract. Rather we held
that “[t]he government’s assessment of the full amount of daily liquidated damages after
substantial completion and acceptance of the first two phases is unenforceable.” Sauer,
21-1 BCA ¶ 37,845 at 183,758.

        The origin of appellant’s critique arises out of an argument set forth in its motion
for summary judgment, wherein the government cited American Int’l Contractors, Inc.,
ASBCA Nos. 60948, 61166, 18-1 BCA ¶37,061, “as an example of when the government
did not include separate liquidated damages rates for each phase of a contract, even
though the FAR provides a contracting officer ‘the authority to revise the liquidated
damages clause to provide for different rates for separate parts of the work’ (gov’t reply
at 15).” Sauer, 21-1 BCA ¶ 37,845 at 183,758. In responding to the government’s
argument, we found that the government’s reliance upon American Int’l Contractors as
support for its not including separate liquidated damages for each project phase was
“misplaced, as the Board there did not reach the issue of whether the contracting officer
should have exercised the authority set forth in FAR 11.503(b) and should have included
different liquidated damages rates for each contract phase.” Id. 6

       However, in distinguishing American Int’l Contractors from the current appeal,
we did not thereby rewrite the liquidated damages clause to conform with the
requirements of FAR 11.503(b). Rather, we stated that “the plain wording of that
provision suggests that when the government issued RFP Revision No. 02 to provide for
phased construction with corresponding completion dates, the government should have
revised paragraph (a) of FAR 52.211-12 ‘to state the amount of liquidated damages for

6
    FAR 11.503(b) provides “[i]f the contract specifies more than one completion date for
       separate parts or stages of the work, revise paragraph (a) of the clause
       [FAR 52.211–12, LIQUIDATED DAMAGES—CONSTRUCTION] to state the
       amount of liquidated damages for delay of each separate part or stage of the
       work.” 48 C.F.R. §11.503(b).
                                             8
delay of each separate part or stage of the work,’” and “[t]he fact that the government did
not follow FAR 11.503(b) here is yet an additional argument in favor of a finding that
apportionment of the liquidated damages rate is appropriate in this appeal.” Id.

        Our decision that apportionment of the liquidated damages is appropriate in this
appeal was based, not on American Int’l Contractors or the instructions set forth in
FAR 11.503(b), but rather upon our precedent in Dick Pacific, and the well-established
principle set forth in that decision which instructs “that liquidated damages may not be
assessed past substantial completion.” Dick Pacific, 16-1 BCA ¶ 36,196 at 176,640
(citing Ellis Environmental Group, LLC, ASBCA No. 55375, 08-2 BCA ¶ 33,918
at 167,847). Indeed, our decision in Dick Pacific did not involve any change to the actual
rate amount set forth in the contract at time of award. Rather, in that decision we found
that apportionment of the rate was appropriate based upon substantial completion of two
of the three project phases, noting that “[a]ll of the information needed to apportion the
liquidated damages was available during the formation process,” specifically the
percentage of the contract price as it pertained to each phase. Dick Pacific, 16-1 BCA ¶
36,196 at 176,640. Accordingly, in Dick Pacific, we instructed that “[i]n the quantum
proceeding the parties may apply these [percentage] rates using the substantial
completion dates.” Id. at 176,641. We held that “[t]he $2,298 daily rate bears no
reasonable relation to the probable loss that would be incurred by the government after
the Rev B Infield and Strat Ramp are substantially complete,” and that “allowing the
daily rate of $2,298 to run after the Rev B Infield and Strat Ramp are substantially
complete results in a penalty.” Id. We held also that “assessing the full amount of daily
liquidated damages after substantial completion of the Rev B Infield and Strat Ramp is
unenforceable.” Id. 7

         Our holding in Dick Pacific applies equally to this appeal. The project here
likewise was divided into three phases, yet the task order specified only one liquidated
damages rate. In our decision, we noted that “[a]lthough the issue of substantial
completion is a question of fact, the record establishes beyond cavil that at the very least
appellant substantially completed Phases I and II, given that the government admits
Phases I and II were complete.” Sauer, 21-1 BCA ¶ 37,845 at 183,757-58. We noted
also it was undisputed that appellant completed the first two phases prior to the task
order’s deadline for completion of the project, with only Phase III remaining. Sauer,
21- 1 BCA ¶ 37,845 at 183,751. Here, as in Dick Pacific, the daily rate specified in the
task order “bears no reasonable relation to the probable loss that would be incurred by the
government after” Phases I and II “are substantially complete,” and “allowing the daily
rate . . . to run after” Phases I and II “are substantially complete results in a penalty.”

7
    Dick Pacific involved extension of existing airfield and pavement, and construction of a
         clear water rinse facility (CWRF), with the project divided into three construction
         phases - an Infield Ramp Rev B (Rev B Infield), an Airlift/Strat Ramp Expansion
         (Strat Ramp), and the CWRF. 16-1 BCA ¶ 36,196 at 176,603-06.
                                              9
Dick Pacific, 16-1 BCA ¶ 36,196 at 176,641. As with our decision in Dick Pacific, our
decision here was based upon unrefuted facts establishing that the vast portion of the
phased task order work already had been completed.

       The government challenges our holding, suggesting that completion of the parking
lots somehow justifies imposition of the entire amount of liquidated damages because
“the Project was not substantially complete without a parking lot” (gov’t mot. at 9). The
actual amount of liquidated damages properly assessed waits to be determined. The
government still has the ability to argue the importance of the parking lots going forward
in determining the proper amount of liquidated damages. However, as we already have
held, “[t]he government’s assessment of the full amount of daily liquidated damages after
substantial completion and acceptance of the first two phases is unenforceable.” Sauer,
21-1 BCA ¶ 37,845 at 183,758.

                                     CONCLUSION

      For the reasons stated above, the government’s motion for reconsideration is
denied.

      Dated: March 2, 2022

                                                  DAVID B. STINSON
                                                  Administrative Judge
                                                  Armed Services Board
                                                  of Contract Appeals

 I concur                                          I concur

 RICHARD SHACKLEFORD                               OWEN C. WILSON
 Administrative Judge                              Administrative Judge
 Acting Chairman                                   Vice Chairman
 Armed Services Board                              Armed Services Board
 of Contract Appeals                               of Contract Appeals

                                           10
      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. 62395, Appeal of Sauer
Incorporated, rendered in conformance with the Board’s Charter.

      Dated: March 3, 2022

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

                                           11