Court Opinion

ID: 4385178
Source: CourtListenerOpinion
Date Created: 2019-04-08 20:00:05.985409+00
Date Added: 2024-06-11T14:50:19.046939
License: Public Domain

ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of --                                  )
                                              )
General Dynamics - National Steel             )      ASBCA No. 61524
 and Shipbuilding Company                     )
                                              )
Under Contract No. N00024- l 7-C-4426         )

APPEARANCE FOR THE APPELLANT:                        William M. Pannier. Esq.
                                                      Pannier Law, PC
                                                      Thousand Oaks, CA

APPEARANCES FOR THE GOVERNMENT:                      Craig D. Jensen, Esq.
                                                      Navy Chief Trial Attorney
                                                     Brian S. Smith, Esq.
                                                      Senior Trial Attorney

               OPINION BY ADMINISTRATIVE JUDGE SWEET
           ON THE PARTIES' MOTIONS FOR SUMMARY JUDGMENT

       This appeal involves a contract for appellant General Dynamics - National Steel
and Shipbuilding Company (NASSCO) to provide Drydocking Phased Maintenance
Availability repairs and alterations onboard USS Makin Island (LHD 08). The
contract was a fixed-price contract for NASSCO to accomplish defined work items.
However, it also provided for growth work-work that the government might assign in
addition to the defined work, which NASSCO committed to perform at a fixed-labor
rate and material-burden percentage. The issue in this appeal is whether certain
disputed clauses that required reservations of labor and material were for growth work.

        NASSCO moves for summary judgment, arguing that the disputed clauses
unambiguously were pre-priced reservations that capped the defined work, such that it
is entitled to an equitable adjustment for any work in excess of the reservations' labor
mandays and material costs. The government cross-moves for summary judgment,
arguing that the disputed clauses unambiguously were reservations for growth work
above and beyond the defined work, such that NASSCO must perform all of the
defined work for the fixed price, even if it exceeds the reservations' labor mandays
and material costs. We deny both motions because we find that the language of the
disputed clauses is ambiguous-and therefore that it is necessary to resort to extrinsic
evidence, which raises a genuine issue of material fact.
        STA TEMENT OF FACTS (SOF) FOR PURPOSES OF THE MOTIONS

        1. On June 6, 2017, the United States Naval Sea Systems Command
(government) awarded Contract No. N00024-l 7-C-4426 (4426 contract) to NASSCO
(R4, tab 1 at 1338). The 4426 contract required NASSCO to:

               [P]repare for and accomplish repair and alterations during
               the DryDocking Phased Maintenance Availability (DPMA)
               onboard USS MAKIN ISLAND (LHD 08) as specified in
               the statement of work provided herein and in accordance
               with standard items, work item specification package SSP
               TPPC-LHD8-SWRMC17-CNOl drawings, test procedures,
               and other detailed data as included in Attachments J-1 and
               J-2. See Notes A and C.

(R4, tab 1 at 1339; app. supp. R4, tab 1 at 1-5)

       2. The 4426 contract generally was a fixed-price contract (R4, tab 1 at 2-11,
14). However, NASSCO also committed in Notes A and C to provide reservations of
labor and material at a fixed rate for "growth" work. Growth work was tasks that the
government might assign in the future in addition to the defined work. (Id.
at 1357-59)

        3. The 4426 contract contained numerous Work Items (R4, tab 1 at 187-1568),
which were individual sets of work requirements to accomplish a specific alteration or
repair. Joint Fleet Maintenance Manual (JFMM), VII-4E-6, § Il(A), available
at https://www.navsea.navy.mil/Portals/ 103/Documents/SSRAC/4E/FY20/ l 0%2026%20FY
20%20Apendex%204E%20JFMM%2001OCT2018.pdf?ver=2018 10-26-103 93 8-110.
In particular, Work Items 311-21-001, 311-22-001, 311-23-002, 311-24-011, 311-25-001,
and 311-26-003 (Work Items 21 through 26) addressed Ship Service Diesel Generators
(SSDGs) Numbers 1 through 6, D level, respectively (R4, tab 1 at 1418-1568).

       4. Paragraph 3 of each Work Item contained the requirements (R4, tab 1
at 1418-1568); see also JFMM, § VII(B )( 4 ). The first several subparagraphs of
paragraph 3 (Defined Work Clauses) 1 required NASSCO to accomplish specifically
enumerated tasks (defined work) (R4, tab 1 at 1418-1568). Then, paragraph 3
contained a subparagraph mandating a reservation of labor mandays and material costs
(Reservation Clauses). In particular, subparagraphs 3.5 of Work Items 21, 23, and 26,
and subparagraph 3 .4 of Work Item 22 (Disputed Reservation Clauses) stated,

1
    The Defined Work Clauses were subparagraphs 3 .1 through 3 .3 of Work Items 22,
        24, and 25; and subparagraphs 3.1 through 3.4 of Work Items 21, 23, and 26
        (R4, tab 1 at 1418-1568).

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"[p ]rovide 60 mandays of labor and 16,000 dollars of material to accomplish this
Work Item, as designated by the SUPERVISOR." (Id. at 1419, 1431, 1451, 1558)
Subparagraph 3.4 of Work Items 24 and 25 (Undisputed Reservation Clauses) stated,
"[p]rovide 100 man days of labor and 50,000 dollars of material to accomplish
additional work not already covered by this Work Item, as designated by the
SUPERVISOR" (id. at 1463, 1510).

       5. Other reservation clauses in other Work Items (Other Reservation Clauses)
created a growth reservation of mandays and material to correct deficiencies identified
during inspections and tests (R4, tab 1 at 469-70, 504-05, 942, 1175, 1218-19).

       6. On September 11, 2017, NASSCO submitted a request for an equitable
adjustment (REA), claiming that it was entitled to an equitable adjustment for any
work on Work Items 21 through 23 and 26 (Disputed Work Items) requiring more than
60 labor mandays or $16,000 of materials (app. supp. R4, tab 3 at 71-126).

       7. The government rejected NASSCO's REA on October 3, 2017 (R4, tab 3
at 1661).

       8. On December 1, 2017, NASSCO filed a certified claim (R4, tab 2).

       9. Based upon a deemed denial of that claim, this appeal followed.

                                      DECISION

I.     The Standard for Summary Judgment

        We grant summary judgment if a moving party has shown that there are no
genuine issues of material fact, and it is entitled to judgment as a matter of law.
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). In deciding summary judgment
motions, we do not resolve controversies, weigh evidence, or make credibility
determinations. Anderson v. Liberty Lobby, Inc., 477 U.S. 242,255 (1986).
Moreover, we draw all reasonable inferences in favor of the non-movant. Id.
Summary judgment based upon an issue of contract interpretation may not be granted
if there is an ambiguity requiring that we resort to extrinsic evidence over which there
is a genuine dispute. Classic Site Solutions, Inc., ASBCA Nos. 58376, 58573, 14-1
BCA ,r 35,647 at 174,551.

II.    Neither Party is Entitled to Summary Judgment Because the Language of
       the Disputed Reservation Clauses is Ambiguous and we Must Resort to
       Contested Extrinsic Evidence

       Neither party is entitled to judgment as a matter of law because the language of
the Disputed Reservation Clauses is ambiguous, and therefore we must resort to
extrinsic evidence, which raises genuine issues of material fact. "[C]lear and

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unambiguous [contract provisions] must be given their plain and ordinary meaning, and
we may not resort to extrinsic evidence to interpret them." Coast Fed. Bank, FSB v.
United States, 323 F.3d 1035, 1040 (Fed. Cir. 2003) (en bane) (citations and internal
quotation marks omitted). ·'An ambiguity exists when a contract is susceptible to more
than one reasonable interpretation." E.L. Hamm & Assoc., Inc. v. England, 379 F.3d
1334, 1341 (Fed. Cir. 2004). ·'To show an ambiguity it is not enough that the parties
differ in their respective interpretations of a contract term. Rather, both interpretations
must fall within a 'zone of reasonableness."' NVT Tech., Inc. v. United States, 370 F.3d
1153, 1159 (Fed. Cir. 2004) (quoting Metric Constructors, Inc. v. NASA, 169 F.3d 747,
751 (Fed. Cir. 1989). As we have held:

               Determining whether. .. differing interpretations are
               reasonable begins with an examination of the plain
               language of the contract, construing the contract so as to
               effectuate its spirit and purpose giving reasonable meaning
               to all parts of the contract. In order to fall within the zone
               of reasonableness, a party's interpretation must be
               logically consistent with the contract and the parties'
               objectively ascertainable intentions.

ECCI-C Metag, JV, ASBCA No. 59031, 15-1BCA136,145 at 176,418 (citations and
quotations omitted). "[T]he language of a contract must be given that meaning that
would be derived from the contract by a reasonably intelligent person acquainted with
the contemporaneous circumstances." Hof-Gar Mfg. Corp. v. United States, 351 F.2d
972, 975 (Ct. Cl. 1965).

       If a contract is ambiguous, we may resort to extrinsic evidence to determine the
parties' intent. Beta Sys., Inc. v. United States, 838 F.2d 1179, 1183 (Fed. Cir. 1988).
Such evidence typically consists of evidence regarding discussions and concurrent
actions, the prior course of dealing between the parties, or custom and trade usage.
John Cibinic, Jr., James F. Nagle & Ralph C. Nash, ADMINISTRATION OF
GOVERNMENT CONTRACTS, 177 (5th ed. 2016).

       Here, NASSCO interprets the Disputed Reservation Clauses as being pre-priced
reservations that capped the Defined Work in each Work Item (app. mot. at 1, 6, 10;
app. reply br. at 2-3). 2 The government interprets the Disputed Reservations Clauses
as being growth reservations (pools), which NASSCO may have to provide in addition

2   The term "pre-priced reservation" does not appear in the 4426 contract (R4, tab 1).
         Rather, NASSCO derives that term from JFMM, vol. VII, app'x B, B-3 (app.
         reply br. at 3 ). While NASSCO does not define that term, we understand
         NASSCO to mean a reservation that caps the defined work (app. mot. at 1, 6.
         1O; app. reply br. at 3 ).

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to the defined work (gov't mot. at 2). Because both parties' interpretations of the
Disputed Reservation Clauses fall within the zone of reasonableness, the language of
the Disputed Reservation Clauses is ambiguous.

        The Disputed Reservation Clauses state, "[p]rovide 60 mandays of labor and
16,000 dollars of material to accomplish this Work Item, as designated by the
SUPERVISOR" (SOF ,i 4). That language does not spell out the relationship between
the Disputed Reservation Clauses and the Defined Work Clauses by specifying
whether the reservations are in addition to, or cap, the defined work. For example, the
Disputed Reservation Clauses clearly would be growth reservations if they stated,
··[p]rovide an additional 60 mandays of labor and 16,000 dollars of material to
accomplish this Work Item.'' Conversely, the Disputed Reservation Clauses clearly
would not have been growth reservations if they had stated, ·'[p]rovide 60 mandays of
labor and 16,000 dollars of material to accomplish the work in sub-sections 3. I
through 3. 4 [or 3. 3]." However, because the language of the Disputed Reservation
Clauses does not specify the relationship with the Defined Work Clauses, it is
ambiguous.

        Nor does the "to accomplish this Work Item" language provide such specificity.
The "to accomplish this Work Item" language does not indicate that the reservations
are to accomplish the defined work. Rather, it merely states that the purpose of the
reservations is to accomplish the particular Work Items. It does not indicate whether
the reservations are all that NASSCO has to provide to accomplish the Work Items, or
whether the reservations are in addition to the defined work that NASSCO has to
provide to accomplish the Work Items.

        Moreover, the comparison with the Undisputed Reservation Clauses and Other
Reservation Clauses only serves to highlight the ambiguity in the Disputed
Reservation Clauses (app. mot. at 13-14). On the one hand, the use of different
language by the Undisputed Reservation Clauses ("additional work not already
covered by this Work Item'') and the Disputed Reservation Clauses ("this Work Item")
suggests that the two sets of clauses are different types of reservations (SOF ,i 4 ). On
the other hand, the similarity in the structure of the Undisputed Work Items, the
Disputed Work Items, and the Other Work Items-namely that several subparagraphs
first require defined work, and then a separate subparagraph creates a reservation-
suggests that all the reservations serve the similar purpose of providing for growth
work (SOF ,i,i 4-5). Thus, comparing the Disputed Reservation Clauses to other
clauses does not resolve the ambiguity in the language of the Disputed Reservation
Clauses.

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        As a result, we must resort to extrinsic evidence to determine the parties' intent. 3
Beta Sys., 838 F.2d at 1183. NASSCO argues that its price workbook and
contemporaneous government statements show that the Disputed Reservation Clauses
capped the defined work (app. br. at 14-27). However, that raises genuine issues of
material fact, which we cannot resolve in deciding these cross-motions. See Classic Site
Solutions, 14-1BCA135,647 at 174,551 (citing Dixie Construction Co., ASBCA
No. 56880 10-1 BCA 1 34,422 at 169,918 ("Legal questions of contract interpretation are
amenable to summary resolution, unless there is an ambiguity that requires the weighing
of extrinsic evidence"). There also are other genuine issues of material fact, such as
those regarding whether a reasonably intelligent contractor in NASSCO's position would
have understood the Disputed Reservation Clauses to be pre-priced or growth
reservations in light of the defined work's specificity, the size of the reservations relative
to the scope of the defined work, and the "as designated by the SUPERVISOR" language.

                                     CONCLUSION

       For the reasons discussed above, the parties' motions for summary judgment
are denied.

         Dated: March 25, 2019

                                                    JAMES R. SWEET
                                                    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

3
    Because we must resolve the factual issue of whether extrinsic evidence
        demonstrates the parties' intent before determining whether any ambiguity is
        latent or patent, we do not address the parties' arguments about whether any
        ambiguity is patent or latent.

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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. 61524. Appeal of General
Dynamics - National Steel and Shipbuilding Company. rendered in conformance with
the Board's Charter.

      Dated:

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

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