Court Opinion

ID: 3007058
Source: CourtListenerOpinion
Date Created: 2015-10-05 18:00:08.91922+00
Date Added: 2024-06-11T12:11:38.864956
License: Public Domain

ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of --                                     )
                                                 )
Automotive Management Services FZE               )   ASBCA No. 58352
                                                 )
Under Contract No. W52P1J-11-C-0014              )

APPEARANCE FOR THE APPELLANT:                        James W. Kim, Esq.
                                                      McDermott Will & Emery
                                                      Washington, DC

APPEARANCES FOR THE GOVERNMENT:                      Raymond M. Saunders, Esq.
                                                      Army Chief Trial Attorney
                                                     CPT Harry M. Parent III, JA
                                                      Trial Attorney

    OPINION BY ADMINISTRATIVE JUDGE MELNICK ON THE PARTIES'
             CROSS-MOTIONS FOR SUMMARY JUDGMENT

        This is a case about payment. Automotive Management Services FZE (AMS)
entered into a contract with the government to provide vehicle and maintenance
support to the Afghanistan National Security Force. It seeks payment for the cost of
transporting vehicle parts within Afghanistan, which were costs the government
previously approved for the first ten months of performance. The government
contends that transportation of the parts within the country was a cost falling under the
firm-fixed-price provisions of the contract and not separately reimbursable. It says its
prior payment of those costs was a mistake. The parties have submitted their second
set of cross-motions for summary judgment. Appellant's motion is granted and the
government's motion is denied.

      STATEMENT OF FACTS (SOF) FOR PURPOSES OF THE MOTIONS

       The following facts are not in dispute:

        1. On 30 December 2010, the United States Army's Rock Island Contracting
Center awarded Contract No. W52P1J-11-C-0014 to AMS. The contract stated that
AMS was to support the Afghanistan National Security Force (ANSF) in accordance
with a Performance Work Statement (PWS) dated 10 September 2010. (R4, tab 1 at 1-2)
The contract was firm-fixed price except for two line items (id. at 2). Significantly,
contract line item number (CLIN) 0005AA, Spare Parts, was cost reimbursable (id.
at 11).
      2. The PWS explained in detail that the contract provided for vehicle and
equipment support to the ANSF Ministry of Defense (MOD) and Ministry oflnterior
(MOI). The MOD fleet included the Afghanistan National Army (ANA) and was
supported at 9 locations. The MOI fleet included the Afghanistan National Police
(ANP) and was supported at 21 maintenance locations, as well as one Central
Maintenance and Supply facility. (R4, tab 2 at 3)

       3. The PWS included separate requirements for MOD/ANA and MOI/ANP
fleet maintenance (R4, tab 2 at 10, 18). Relevant here are the MOI/ANP
requirements. 1 In pertinent part they provided:

               3.23 OBJECTIVE-THREE (3). MOI/ANP FLEET
                  MAINTENANCE. The contractor shall be responsible
                  for providing all the management, expertise, personnel,
                  equipment, tools, vehicles, fuel (life support/contractor
                  transportation), security, and life support to perform the
                  requirement. The contractor shall provide equipment
                  maintenance and supply chain management for the
                  MOl/ANP fleet.. ..

               3 .23 .1 Tasks associated include the following:

               3.23.1.8 Manage a repair parts warehouse to include
                        distribution of repair parts.

              3.43 SUPPLY CHAIN MANAGEMENT. Contractor
                  shall provide a commercially available supply chain
                  management system that interfaces with the supported
                  maintenance management system and allows for
                  monthly reconciliation. These systems must be fully
                  transferable to the Afghanistan Government without
                  proprietary restrictions or financial obligations. The
                  contractor shall manage a supply warehouse [and]
                  operate class IX parts procurement and requisitioning
                  program. The supply chain management program
                  shall include a viable distribution program for repair

1
    AMS contended at oral argument that it was not awarded the MOD/ANA portion of
       the contract (tr. 1153). It is not necessary to resolve that question here.

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                    parts to each maintenance site.... All costs of
                    providing the warehouse facility as well as the
                    management and personnel portion of this requirement
                    shall be a firm-fixed price effort. The contractor shall
                    invoice the government for the costs of parts on a
                    monthly basis, as outlined in the PWS.

             3.45 PARTS PROCUREMENT. The contractor shall not
                   add any costs, additional fees, mark ups, company
                   derived inflation costs, or any other factor that changes
                   the item's actual retail cost. For price comparison
                   purposes, and if there is a dispute between the USG
                   and contractor, the ACO shall determine if a source is
                   appropriate. The requirement for premium freight
                   costs for mission essential equipment must be
                   validated in advance by the COR. The contractor shall
                   seek fair and reasonable prices.... The contractor shall
                   consider freight and/or delivery fees when evaluating
                   prices. When requesting quotes, the contractor should
                   select suppliers who provide quality products at fair
                   and reasonable prices and consistently deliver items on
                   time.

(R4, tab 2 at 18, 23-24) (Italics added)

       4. On or about 20 April 2011, the parties executed Modification (Mod.)
No. P00002 to incorporate a revised PWS dated 11 March 2011 (R4, tab 4 at 2, tab 5).
The relevant parts of the revised PWS were virtually identical to the original (tr. 1113-14)
except the revised version did not contain the language of section 3 .23 .1. 8, which had
required AMS to provide management of a warehouse and distribution of parts. 2

       5. For roughly ten months after contract award, AMS submitted invoices for
the cost of shipping repair parts within the country, which were approved by the
government (Schuin decl. ii 5; R4, tabs 7, 10, 18 at 2-3; app. mot. at 5, ii 6).

      6. Mod. No. P00007, dated 18 August 2011, added a 28 July 2011 Guide for
Government Approval & Oversight of Contractor Purchasing & Invoicing (Purchasing
Guide) (R4, tab 6; Jt. Stips. ii 19). The government did not explain the need for the
Purchasing Guide (Schuin decl. ii 3). This draft guide described the specific acts to be

2
    This decision cites the provisions of the original PWS.

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performed to process payment requests by AMS. A revised version of the Purchasing
Guide, dated 28 September 2011, was incorporated into the contract through Mod.
No. P00008 on 24 October 2011 (R4, tab 8; Jt. Stips. ~ 19). With respect to the
procurement of parts, the revised Purchasing Guide stated as follows:

               (v) Per the PWS, only the cost of parts or costs directly
               related to the repair and maintenance of the equipment that
               is in addition to work already included in the contractor's
               firm fixed price cost, shall be purchased against the spare
               parts CLIN in the contract. An example of this type of cost
               would be sending a part out for rebuild to a local shop due
               to this type of capability not being required at the EMS
               shop and rebuild of part is more beneficial to the
               Government than purchasing a new part. Delivery and
               shipping costs are considered a cost associated to the part
               purchase. No overhead or profit can be added to the parts
               purchase. All other costs associated to parts procurement
               must be included in the cost of the contractor's firm fixed
               price for supply chain management.

(R4, tab 8 at 19) (Italics added)

       7. By email dated 30 November 2011, AMS submitted to the government
completed forms for approval of transportation costs that it designated T007, T008,
and T009. All of the forms were dated 29 November 2011 and referred to
transportation services obtained around that date. (R4, tabs 9-10) On 10 December
2011, the ACO disapproved those costs, stating:

               The USG is reimbursing the freight charges for the parts
               that are coming into the [sic] Afghanistan. However, once
               the parts are in Afghanistan, the distribution of the parts in
               the country is under the supply chain management (FFP).
               According to the PWS 3.5.3 "the supply chain
               management program shall include a viable distribution
               program for repair parts to each maintenance site .... "

               My understanding is that the USG has approved the
               transportation fees in the past. However, that will be
               adjusted accordingly with the future invoices.

(R4, tab 10)

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       8. By email dated 13 December 2011, AMS objected to the government's
position, contending that "all costs for transportation were covered in the cost
reimbursable CLIN for spare parts (0005)" (R4, tab 11). On 5 March 2012, the
Defense Contract Audit Agency issued a "NOTICE OF CONTRACT COSTS
SUSPENDED AND/OR DISAPPROVED," disapproving a total of $572, 100.56 that
was previously billed to the government from April 2011 through October 2011 for
transportation, crane rental, and container movement costs. The Notice claimed these
costs were a component of supply chain management under the PWS, which was
firm-fixed price and not cost reimbursable. (R4, tab 15 at 15-16)

       9. On 11April2012, AMS submitted a certified claim seeking reimbursement
of the disallowed invoices in the amount of$572,100, and reserving the right to amend
the amount sought given that contract performance was continuing (R4, tab 15 at 2).
On 12 July 2012, the CO issued a final decision denying AMS' claim (R4, tab 18 at 2).
The contracting officer acknowledged that transportation costs had previously been
approved, but explained:

              Since the beginning of the contract in-country
              transportation costs related to spare parts were not
              disapproved because select samplings taken by the
              Government never caught the fact that in-country
              transportation costs were being billed to the Government
              until recently. The in-country transportation costs would
              have been caught during the final audit and the
              Government would have been able to take corrective
              action for the costs associated at that time.

(Id.)

        10. This timely appeal followed.

                                PRIOR PROCEEDING

        The Board previously denied cross-motions for summary judgment by the
parties, concluding it required additional evidence. Auto. Mgmt. Servs., ASBCA
No. 58352, 14-1 BCA ~ 35,646. After that decision, the parties communicated that
they continued to believe that no material facts were in dispute and that they intended
to file a second set of cross-motions for summary judgment addressing the Board's
prior concerns. These motions followed.

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                                       DECISION

       Summary judgment should be granted if it has been shown that there are no
genuine issues of 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 non-movant seeking to defeat
summary judgment by suggesting conflicting facts "must set forth specific facts
showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 248 (1986) (quoting First National Bank ofArizona v. Cities Service Co.,
391 U.S. 253, 288-89 (1968)).

        Both parties contend again that there are no material facts in dispute and that
each is entitled to summary judgment as a matter oflaw. AMS argues that
section 3.45 of the PWS, which stated that "[t]he contractor shall consider freight
and/or delivery fees when evaluating prices," in conjunction with the Purchasing
Guide, entitled it to payment of transportation related charges by making shipment of
parts within the country subject to CLIN 0005's cost-reimbursement provision. It
suggests its interpretation is bolstered by the fact that the government paid charges for
transportation within Afghanistan for the first ten months of contract performance. It
also says that any ambiguity should be construed in its favor. The government
maintains that section 3.45 only applied to the transportation of parts and shipment to
AMS' warehouse in Afghanistan, not their distribution within the country to
maintenance sites. Instead, shipping costs within Afghanistan were incorporated
within section 3.43 's firm-fixed-price management requirement. It also suggests that
its prior approval of transportation costs is irrelevant and would have been corrected
after a final audit and corrected.

        Determining the meaning of a contract starts with its language. TEG-Paradigm
Environmental Inc. v. United States, 465 F.3d 1329, 1338 (Fed. Cir. 2006). "When the
contract's language is unambiguous it must be given its 'plain and ordinary' meaning
and the court may not look to extrinsic evidence to interpret its provisions." Id.
at 1338. "Construction of the language of the contract to determine whether there is an
ambiguity is [also] a question oflaw." Gardiner, Kamya & Assocs., P.C. v. Jackson,
467 F.3d 1348, 1353 (Fed. Cir. 2006). Extrinsic evidence cannot be used to create
an ambiguity where none otherwise exists. McAbee Constr., Inc. v. United States, 97
F.3d 1431, 1435 (Fed. Cir. 1996). Contract terms are ambiguous when read as a whole
if they are susceptible to more than one reasonable interpretation. Id. at 1434-35.
Accordingly, the task here is to decide whether this contract unambiguously permitted
AMS to recover payment for the cost of transporting parts within the country, whether
it unambiguously included that cost as part of AMS' fixed-price services, or whether it
is subject to more than one reasonable interpretation.

      Consistent with CLIN 0005AA, which made spare part costs reimbursable
(SOF ~ 1), section 3.43 of the PWS instructed AMS to "invoice the government for the

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costs of parts on a monthly basis, as outlined in the PWS" (SOF ~ 3). Section 3.45
then directly addressed parts procurement. Though it generally barred AMS from
adding fees and mark ups to the prices it passed on to the government, it required
AMS to "consider freight and/or delivery fees when evaluating prices," indicating,
without limitation to destination, that shipping costs would be reimbursable. (Id.)
Similarly, the Purchasing Guide, added in its final form in late October 2011, specified
that "[d]elivery and shipping costs" were to be "considered a cost associated to the part
purchase," again with no restrictions upon the shipping costs that could be included
(SOF ~ 6). Thus, by the time AMS obtained the November 2011 transportation
services addressed by payment approval requests T007, T008, and T009, the plain
language of section 3 .45 and the Purchasing Guide authorized reimbursement of AMS'
shipping costs, with no exceptions for shipments to maintenance sites in Afghanistan.

        The government concedes that section 3.45 dictated that AMS' shipping costs
to its Afghanistan warehouse were reimbursable. Nevertheless, it claims the contract
excluded reimbursement for shipping costs within Afghanistan to the maintenance
sites. The government relies upon the original PWS's section 3.23.1.8. That section
required AMS to "[ m]anage a repair parts warehouse to include distribution of repair
parts" (SOF ~ 3). Whatever that requirement may have meant, it was deleted by the
20 April 2011 revised PWS and did not apply to AMS' November 2011 payment
requests (SOF ~ 4).

        The government also contends that section 3.45's heading, "PARTS
PROCUREMENT," governs here. It suggests the word "procurement" defined the
scope of the reimbursement owed. It argues AMS' procurement was complete once
parts were received in its warehouse. A contract's section headings cannot limit the
plain language of its text. They "are of use only when they shed light on some
ambiguous word or phrase." Brotherhood of R.R. Trainmen v. Baltimore & Ohio R. Co.,
331 U.S. 519, 528-29 (1947); Glenn v. Am. United Life Ins. Co., No. 7:12-CV-03691,
2014 WL 3895429, at *9 n.5 (N.D. Ala. Aug. 8, 2014), aff'd, 604 F. App'x 893
(11th Cir. 2015). Section 3.45's requirement that AMS "consider freight and/or delivery
fees when evaluating prices" contained no ambiguity, and did not limit the freight or
delivery fees merely to those incurred shipping to the warehouse. Nor did the
Purchasing Guide's declaration that "[d]elivery and shipping costs" were to be
"considered a cost associated to the parts purchase" contain any ambiguity.
Accordingly, section 3.45's reference to "procurement" in its title did not limit the plain
language of its text.

        Finally, the government relies heavily upon section 3.43, maintaining that its
requirement for a "supply chain management program [that] shall include a viable
distribution program for repair parts to each maintenance site," could only mean that
AMS was to distribute repair parts. The government says the next sentence's mandate
that "[a]ll costs of providing the warehouse facility as well as the management and

                                            7
personnel portion of this requirement shall be a firm-fixed price," dictated the cost of
shipping to the maintenance sites fell under the contract's firm-fixed-price line item.
(SOF ~ 3)

        Section 3.43 did not address shipping costs. Section 3.43 sought a
"commercially available supply chain management system" that was "fully
transferable to the Afghanistan Government" (SOF ~ 3). "Management," in relevant
part is "the act or art of managing," or "the conducting or supervising of something (as
a business)." WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY 1372 (1986).
Section 3 .43 therefore sought a commercially available and transferable system for
supervising the parts supply chain. The parties agree that the management system was
a computer software package (tr. 1115-18, 43-44). In addition to requiring AMS to
manage a warehouse and operate a parts procurement program, the requirement that
"[t]he supply chain management program shall include a viable distribution program
for repair parts to each maintenance site," provided a further description of the
supervisory actions sought from the software program (SOF ~ 3). Accordingly, it was
not the actual cost of shipping parts to each maintenance site that section 3 .43 included
within the firm-fixed-price effort, it was the cost of providing a commercially
available and transferable supply chain management system (computer program) that,
among other things, supervised the distribution of repair parts.

       In summary, section 3.43 required a supply chain management program that,
among other things, supervised the distribution of repair parts. Section 3.45 governed
cost-reimbursable parts procurement and expressly required AMS to "consider freight
and/or delivery fees when evaluating prices," without restrictions. The Purchasing
Guide clearly stated "[d]elivery and shipping costs" were to be "considered a cost
associated to the part purchase," with no exclusion for shipments to the maintenance
sites. Considering these provisions together, the plain language of the contract entitled
AMS to reimbursement for its costs of shipping parts within Afghanistan, which is
exactly what the government approved for the first ten months of contract performance
(SOF ~ 5). Given the contract's terms, the government lacked any grounds to end that
practice.

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                                    CONCLUSION

       Appellant's motion for summary judgment is granted and the government's
 motion is denied. The appeal with respect to entitlement is sustained. The appeal is
 remanded to the parties to negotiate quantum consistent with this decision.

       Dated: 21 September 2015

                                               ~!/Ud
                                                 MARK A. MELNICK
                                                 Administrative Judge
                                                 Armed Services Board
                                                 of Contract Appeals

 I concur

~#---
. MARK N. STEMPLER                               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. 58352, Appeal of
Automotive Management Services FZE, rendered in conformance with the Board's
Charter.

       Dated:

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

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