Court Opinion

ID: 4305517
Source: CourtListenerOpinion
Date Created: 2018-08-20 21:00:04.308339+00
Date Added: 2024-06-11T14:36:56.428193
License: Public Domain

.

           - . ARMED SERVICES BOARD OF CONTRACT APPEALS .

Appeals of --                            ) .

                                         )
North American Landscaping, Construction ) ·         ASBCA Nos. 60235, 60236
 and Dredge, Co., Inc.                   )                      60237,60238
                                         )
Under Contract No. W912WJ-14-C-0004      )

- APPEARANCE FOR THE APPELLANT:                      Joseph L. Katz, Esq.
                                                      Huddles Jones Sorteberg & Dachille, P.C.
                                                      Columbia, MD

APPEARANCES FOR THE GOVERNMENT:                      Michael P. Goodman, Esq.
                                                      Engineer Chief Trial Attorney
                                                     Theresa A. Negron, Esq ..
                                                      Engineer Trial Attorney
                                                      U.S. Army Engineer District,
                                                       New England

                   OPINION BY ADMINISTRATIVE JUDGE CLARKE

       North American Landscaping, Construction and Dredge, Co., Inc. (NALCO)
contracted with the U.S. Army Corps of Engineers (COE) for maintenance dredging of the
Scarborough River, Scarborough, Maine. NALCO claims the unpaid contract balance of
$960,482.48 (ASBCA No .. 60235); unabsorbed overhead in the amount.of $108,868
(ASBCA No. 60236); differing site conditions in the amount of $507,914.19 (ASBCA .
No. 60237); and a time extension of 94 days (ASBCA No. 60238). We decide entitlement
only. We have jurisdiction pursuant to the Contract Disputes Act of 1978 (CDA),
41 U.S.C. §§ 710r-7109. The appeal is sustained in part and denied in part.

                                   FINDINGS OF .FACT

The Solicitation

       1. Sealed bid Solicitation No. W912WJ-13-B-0012, issued on 23 August 2013,
  invited bids for maintenance dredging of an eight-foot channel, a six-foot channel, and a
  six-foot anchorage on the Scarborough River, Scarborough, Maine (tr. 2/222; R4, tab 4b);
  Due to environmental restrictions dredging was only permitted from 1 November 2013
 through 31 March 2014 (R4, tab 4b at 33, ,i l.2(b)). Dredging was to commence within
· 30 days of the Notice to Proceed (NTP) unless that fell within the "no dredge season" of
  1 April 2013 through 31 October 2013 (id.).
        2. The solicitation contained five-contract line item numbers (CLINs).
CLIN_ 000 l was a lump sum for Mobilization and Demobilization. CLINs 0002
through 0004 were for dredging in the three channels for stated estimated quantities at
a unit price for each cubic yard of dredged material. CLIN 0005 was an option item
for Derelict Mooring Removal and Disposal. Bidders were instructed to bid all items
and that all the work would be awarded to one bidder. (R4, tab 4b at 4) There were no
instructions concerning what costs were to be included in which CLINs.

        3. The solicitation included Federal Acquisition Regulation (FAR) 52.249-10,
DEFAULT (FIXED-PRICE CONSTRUCTION) (APR 1984) (R4, tab 4b at 25), and Defense
FAR Supplement (DF ARS) 252.236-7004, PAYMENT FOR MOBILIZATION AND
DEMOBILIZATION (DEC 1991) (tr. 2/223; R4, tab 4b at 36, ,r 1.9). This clause, in full
text in the solicitation, reads:

             (a) The Government will pay all costs for the mobilization
             and demobilization of all of the Contractor's plant and
             equipment at the contract lump sum price for this item.

                  (1) Sixty percent of the lump sum price upon
                  completion of the contractor's mobilization at the
                  work site.

                  (2) The remaining 40 percent upon completion of
                  demobilization.

             (b) The Contracting Officer may require the Contractor to
             furnish cost data to justify this portion of the bid if the
             Contracting Officer believes that the percentages in
             paragraphs a(l) and (2) of this clause do not bear a
             reasonable relation to the cost of the work in this contract.

                  (1) Failure to justify such price to the satisfaction of
                  the Contracting Officer will result in payment, as
                  determ,ined by the Contracting Officer, of-

                      (i) Actual mobilization costs at completion of
                      mobilization;

                      (ii) Actual demobilization costs at completion of
                      demobilization; and

                      (iii). The remainder of this item in the final
                      payment under this contract.

                                            2
                 (2) The Contracting Officer's det~rmination of the actual
                 costs in paragraph b(l) of this clause is not subject to
                 appeal.

 (R4, tab 4b at 36, ~ 1.9) Ms. Jessica Kidd was the contracting officer (CO) for
 NALCO's contract (tr. 2/220-21). CO Kidd testified that paragraph (b) allows the
 COE to pay "actual costs at the time of mobilization and demobilization and then
 make full payment for that line item at the end of the contract" (tr. 2/224).

          4. The construction specifications for the project included section 35 20 23,
  "HYDRAULIC DREDGING" (R4, .tab 4d at 160}. Part_ 3, "EXECUTION," paragraph
  3.6.2, Deposition in Disposal Sites, required that the dredged material be placed "at
' Western Beach at the Prouts Neck Country Club [PNCC] as shown on the contract
  drawings." "[D]redged material shall be transported to Western Beach by locating the
  pipeline on [PNCC] property at Ferry Rock and then along the beach face above the
  Mean High Water elevation to the discharge area." (R4, tab 4d at 166, 171) The
  western beach disposal area was shown on Drawing G-101. Ferry Rock was at the
  northern·end of western beach and dredged material was to be placed north to south
  from Ferry Rock along the Western Beach. (R4, tab 4c, drawings G-101, -104) There
  is no indication on the disposal area drawing that a stone revetment 1 was to be built at
  the northern end of the western beach disposal area by PNCC (id.; tr. 2/103, 3/99).
  The 8-foot deep channel was to be completed first, "prior to the start of dredging of all
  other areas" (R4, tab 4d at 62, ~ 1.1 ).

         5. Specification section 35 20 23, Hydraulic Dredging, part 3, Execution,
  provides other details relating to dredging (R4, tab 4d at 160). Paragraph 3.4.3,
  Adjacent Property and Structures, required the contractor to "conduct the dredging
  operation such that it does not undermine, weaken or otherwise impair existing
  structures located in or near the areas to be dredged" (id. at 168). Paragraph 3.5.7,
  Safety of Structures and Utilities, likewise requires protection of "piers, bulkheads,
  revetments, and other structures and utilities lying on, under or adjacent to the site of
  the work" (id. at 170). The specification also requires construction of temporary
  seaward berms to "contain the maximum amount of dredged material as possible on
· the beach disposal area" (id.,~ 3.6.l(d)), and the use of a "baffle at the pipe discharge
  to prevent erosion of the existing beach" (id.,~ 3.6.4(b)).

 Site Visit

        6. · The COE held a site visit on 4 September 2013. In addition to three COE
 representatives, representatives from Southwind Construction, the Town of·
 Scarborough's harbormaster, and the president and general manager of Prouts Neck

 1 See   finding 77, infra, for an explanation of what a revetment is.

                                               3
Country Club attend€d. NALCO did not attend: (R4, tab Sa) There are no minutes or
any other record of what was discussed during the site visit.

Two Bidders Responded

       7. Bids were publicly opened on 23 September 2013. When the bids were
opened they were recorded on an abstract of offers. (Tr. 2/225; R4, tab 8) The two.
offerors were NALCO and Village Dock (VD). The Independent Government
Estimate (IGE) and bids were:

                      IGE -IGE              NALCO      NALCO        VD      VD
  CLIN·               Unit Estimated        Unit       Estimated    Unit    Estimated
  Description         Price Amount          Price      Amount       Price   Amount
  Mobilization and    LS       701,770      LS          1,457,044   LS        1,500,000
  Demobilization
· Dredging 8'         19.34     771,666         2.50       99,750 14.30        570,570
  channel First
  39,900 CD
  Over 39,900CD       19.~4     427,414         1.40       30,940 14.30        316,030
  Dredging 6'         24.49     198,3(:,9       2.50       20,250 14.30        115,830
  channel Fjrst                                             '
  8,100 CD
  Over 8, 100 CD      24.49     210,614"        1.40       12,040 14.30        122,980
  Dredging 6'         13.51     347,207         2.50       64,250 14.30        367,510
  anchorage First .
  25,700 CD
  Over 25,700         13.51      133,749        1.40       13,860 14.30        141,570
  Derelict Mooring    5,020       25,100        346         1,730 1,000          5,000
  Total                       $2,815,889               $1,699,864           $3,139,490

(R4, tab 8) According to the CO's final decision, NALCO's bid was "extremely low
and required bid verification" (R4, tab 2 at 2, ,r 1). CO Kidd asked NALCO to verify its
bid (tr. 2/226). NALCO verified its bid by letter dated 26 September 2013 (tr. 2/228;.
R4, tab 11). After NALCO's bid verification, CO Kidd asked for a revised IGE (tr.
2/227). CO Kidd explained that because NALCO's bid was lower than the IGE, the
COE engineers reviewed NALCQ's bid and, talked to NALCO to understand how it
planned to perform and as a result revised the IGE (tr. 2/226-27). The IGE was revised
on 27 September 2013 to reduce CLIN 0001 Mobilization and Demobilization to

                                            4
$341,630.00, reduce the unit prices for CLINs 0002 to 0004 for a total of $1,963,694 2
(R4, tab 67a at 4).

           8. NALCO's bid included a printed form entitled "PLANT AND EQUIPJ\IBNT
LIST" filled out by the bidders (R4, tab 6 at 6). NALCO listed a Grace Hydraulic
(Ellicott) dredge with 12-inch discharge rated at 144,000 cubic yards per month and a
20 . . foot Honda 225 tugboat (id. at 6-7).  ·

The Protest

    , 9. On 26 September 2013, Village Dockfiled a pre-award agency protest
contending that NALCO's bid was "grossly tinbalanced" 3 (tr. 2/231; R4, tab 12). In an
undated "Report of the Contracting Officer" responding to the protest, CO Kidd
presented a detailed factual analysis/legal analysis and stated the following:

              Therefore, even ifNALCO's price for mobilization is
              enhanced and its apparent low bid is mathematically
              unbalanced, because the IFB 's estimated quantities are
              reasonably accurate representations of the agency's
              anticipated actual dredging needs, NALCO's bid is not
              materially unbalanced as there is no reasonable basis for
              viewing the bid as representing other than the lowest cost
              to the government.         ·

              Although the line items of the NALCO bid could be
              considered as unbalanced, the risk to the Government is
              marginal. The dredging industry regularly generates bids
              that are unbalanced, and common risk mitigation
              techniques are in place to limit risk to the Government
              including the use of performance bonds. and payment of
              mobilization at cost with remaining funds in the
              mobilization/demobilization line item paid at project
              completion.

2
  The revised IGE included the c~rtification "The undersigned certifies this
       Government Estimate (IGE) was prepared independently and prior to any
       knowledge of prime contractor pricing" (R4, tab 67a at 3). The copy in the
     · record is unsigned, but the certification is clearly wrong.
3 "Unbalanced," in this context means that the prices quoted for the

     · mobilization/demobilization CLIN was proportionally too high, while the prices
       quoted for the actual dredging were too low.

                                           5
(R4, tab 17 at 8-9, citations omitted)-In her report responding to the protest, CO Kidd
stated that the IGE was "adjusted" and it was determined that NALCO's price for
mobilization was not "unreasonably overstated" (id. at 8). CO Kidd recommended
that Village Dock's protest be dismissed.

The COE Wants a Bigger Dredge

        10. By letter dated 18 October 2013 to NALCO, Ms. Winston-Vincuilla,
chief, COE Contract Division, inforrried NALCO that its Ellicott 370 dredge proposed
for the Scarborough Project "is not adequate for open-water dredging in rough
northeast waters" and invited-NALCO to submita new dredge otherwise NALCO's
bid would be rejected (tr. 2/233-34; R4, tab 13). Mr. Kim is president of NALCO
(tr. 1/37). He based his bid on using the Ellicott 3·70 Dragon dredge NALCO owned
and believed that NALCO could successfully meet the dredging requirement of 40,000
cubic yards per month with the 370 (tr. 1/41, 51-52, 76-77; R4, tab 4b at 33).
On 22 October 2013 NALCO responded to the 18 October 2013 letter stating that they
were confident their Ellicott 370 dredge could do the job, but offered to use an Ellicott
670 dredge (tr. 2/234; R4, tab 14 at 2). The CEO of Ellicott Dredges providing the
dredge extended NALCO credit for the rental amount. It was a four-month minimum
at $70,000 per month plus a $70,000 security deposit or $350,000. (Tr. 1/61-62)
Mr. Kim intended to pay for the dredge rental when the COE paid NALCO for
mobilization (tr. 1/62). NALCO rented the bigger 670 dredge4 and purchased larger
diameter pipe all for about four to five hundred thousand dollars (tr. 1/51-52).
NALCO requested an additional $328,624 for the new dredge, but stated if that was
not possible NALCO would be able to complete the project at the original stated bid
price (id.). By letter dated 31 October 2013 the COE accepted the Ellicott 670 dredge
but denied NALCO's request for an increase iri its bid price due to the additional
expense of the larger dredge (R4, tab 15 at 2). By letter dated 1 November 2013,
NALCO confirmed that it would perform the contract with the larger dredge without
an increase in its bid price (R4, tab 1.6): CO Kidd testified that before award the COE
found that NALCO's Ellicott 370 dredge did not meet the requirements of the contract
and gave NALCO the opportunity to withdraw their bid (tr. 2/255). She testifieq.
"So we did riot require them to use the 670. We had the right, and we did refuse to
allow them to use [the] 370." (Id.)

4
    On cross-examinatjon Mr. Kim testified that NALCO had purchased the 670 dredge
         in June 2014 for $1,250,000 (tr. 1/155) but this is contrary to his other
         testimony and documents in the record. We conclude NALCO rented the 670
       · dredge.

                                            6
COE Denies the Protest

        11. On 22 November 2013, Ms. McAndrew, assistant chief counsel/division
counsel adopted CO Kidd's recommendation and denied Village Dock's protest
(tr. 2/231; R4, tab 19).

COE Awards Contract to NALCO & Exercises DFARS 252.236-7004(b)

        12. After the protest was denied, the COE awarded Contract No. W912WJ-14-C-0004
to NALCO on 2 December 2013 in the amount of $1,698,134 5 (R4, tab 20). The COE did
not increase NALCO's bid price for the larger 670 dredge. The contract included
FAR 52.236-2, DIFFERING SITE CONDITIONS (APR 1984). (R4, tab 20 at 10) The contract
included DFARS 252.236-7004, PAYMENT FOR MOBILIZATION AND DEMOBILIZATION
(DEC 1991), included in full text above (R4, tab 20 at 21, tab 21). In the award letter
CO Kidd imposed DF ARS 252.236-7004(b) and stat~d-that NALCO was required to
furnish cost data to justify the mobilization and demobilization bid price and that failure to
justify the price to her satisfaction "will result in payment of actual mobilization costs at
completion of mobilization; actual demobilization costs at completion of demobilization;
and the remainder of this item in the finai payment under this contract" (R4, tab 21 at 2). 6
The contract delivery date was 31 March 2014 the last day before the no-dredging period ·
(R4, tab 20 at 8).

Prouts Neck Country Club (PNCC) to Build New Stone Revetment

       13. Mr. Walsh is a COE project mariager for NALCO's contract (tr. 3/45, 47).
He testified that the COE did not find out that PNCC was building a stone revetment in
the disposal area of the site until 3 December 2013, 7 one day after award to NALCO

5- Wedo not know why this amount is slightly less that the bid amount of $1,699,864
      (finding 7).
6
  According to a 27 January 2014 Memorandum for Record by Mr. Stearns, CO Kidd's
      decision to invoke paragraph (b) was based on a 21 October 2013 memo from·
      Mr. Acone, chief of engineering/planning division, finding that NALCO's bid
      was unbalanced (R4, tab 127 at 140,, 1).
7
  While we accept Mr. Walsh's testimony there is a potentially conflicting email from:
      PNCC to Mr. Walsh sent on 3 December 2013. The email reads in part, "As
      you are aware, we are attempting to tie our wall reconstruction along the golf
      course fairly close to your dredging work." (R4, tab 104 at 71) Referring to the
      email, Mr. Walsh denied he knew about the revetment before contract award
      (tr. 3/52). Mr. Walsh also attended a 4 September 2013 site visit where the
      president and general manager of PNCC and Southwind Construction were
      present but there is no record of what was discussed (R4, tab 5a). We do not
      know what role Southwind played in the process.

                                           7
(tr. 3/52; 65-66; R4, tab 104). He testified he was "not happy that Prouts Neck Country
Club did not share that information" sooner (tr. 3/52). He testified that a "changed site
condition like that is problematic after you've awarded" a contract (id.). There was also
a pre.:existing rock wall at the location where the revetment was built that is shown in a
2010 picture (tr. 3/53-54, 63-64; R4, tab 66 at 1). This prea.existing rock wall was
covered with sand and not visible in 2013 (tr. 3/64-65). The pre-existing rock wall is
shown in pictures 2 and 3 and the partially completed new revetment is shown in
picture 3 (tr. 3/54; R4, tab 66 at 1-3).

NALCO 's Mobilization Costs

       14. By letter dated 5 December 2013, NALCO submitted its justification for its
bid mobilization costs with supporting documents (R4, tab 22 at 2). The cost of
renting the Ellicott 670 Dredge was $70,000/Month with a 4-month minimum and .
security deposit of $70,000 for a total of $350,000 was included (id.; tr. 1/62, 2/196).
The mobilization costs were as follows:

       Transportation Costs:              $ 54,469.00
       Crane:                             $ 12,200.00
       Dredge:                            $280,000.00
       Pipe:                              $167,726.00
       Housing:                           $ 15,000.00
       Survey:                            $162,500.00
       Bond/Insurance:                    $100,000.00
       Miscellaneous/Emergency Funds:     $ 82,331.00
                               Total:     $874,226.00

(R4, tab 22 at 2) The $874,226.00 was 60% ofNALCO's bid for mobilization as
authorized by DFARS 252.236-7004(a) (id.). The survey estimate was from a local
survey company in the Scarborough area (id. at 3-4).

        15. A preconstructioh confer.ence was held. on 10 December 2013 between
NALCO and the COE (R4, tab 23). The COE prepared a standard conference outline
and also minutes of the meeting .. In the Description of Work, NALCO was told to .
complete the dredging of the 8-foot deep channel before starting other areas. (Id. at 7)
In the section Disposal of Dredged Materials, the COE directed that dredged material
be placed at the western beach and the PNCC as shown on the drawings (id. at 25).
The minutes did not indicate any discussion of a stone revetment being built by PNCC
in the disposal area (id at 34-35). Dredging was to be completed by 31 March 2014
because environment~! restrictions limited dredging from 1 November 2013 through
31 March 2014 (id. at 11).

                                           8
-Notice to Proceed (NTP)

            16. The NTP was emailed to NALCO on 12 December 2013 (app. supp. R4,
   tab 109 at 83). The email was dis_tributed within the New England District of the COE
   (id. at 82-83). · Mr. O'Donnell, COE,. one of the email recipients, wrote, "Let the
. babysitting begin! What's the over/under on the dredge's first sinking?" (Id. at 82)
   Mr. Walsh responded, "If they sink, does that create a lot of work for .the PM? Not
   really interested in that." COE administrative contracting office (ACO) Morocco
   (tr. 2/239) responded, "Lot of paperwork for the Resident." Mr. Stearns responded,
 . "All-I know is I'm not going to bethe rep from USACE to be on the dredge once
   inclement weather hits." (App. supp. R4, tab 109 at-82) The record contains a copy of
   the NTP signed by Mr. Kim but unsigned by CO Kidd (R4, tab 25).

 NALCO Expresses Concern over the RevetmeY}t

        17. On 17 December 2013 a Coordination Meeting was held between NALCO,
 COE and PNCC. In attendance were, among others, Mr. Kim, Mr. Walsh, COE
 project engineer, Mr. Stearns, COE project manager, and Ms. Jackson, PNCC manager
 (app. supp. R4, tab 301). Minutes of the meeting indicate that Mr. Walsh directed
 NALCO to continue work regardless of the revetment (sea wall):

               Concerns were brought up with the.sea wall that was.
               planned for construction along Western Beach.
               Mike Walsh stated-that NALCO should continue to work
               as is, and not see any p:r;oblems with this and that USACE
               would resolve this issue.

               Deborah Jackson stated that the work-could not halt. due to
               the high demand of the project. Prout's Neck Country
               Club was anticipating for the sea wall to be completed
               before March.

 (Id. at 795) Mr. Kim recalls stating during· the meeting that the revetment was not
 identified in the contract (tr. 1/150-51 ). There was no indication on the drawings that
 a revetment was going to be built on the disposal area (tr. 1/47-48, 52-53). Mr. Kim
 recalls after that comment he was told the COE had other business with the country
 club and that he could leave the meeting which he did (tr. 1/151-52). He was not
 given any information on the details on the revetment (tr. 1/165).

         18. By email dated 13 January 2014 to NALCO, CO Kidd acknowledged
 receipt ofNALCO's 5 December 2013 letter about mobilization costs. In it CO Kidd
 stated that the matter of mobilization costs was discussed during the pre-construction

                                             9
 conference and that NALCO had to submit actual costs once mobilization was
 complete. (R4, tab 26 at 2)

        19. Also on 13 January 2014, Mr. Stearns sent an email to NALCO, copy
 furnished to CO Kidd and ACO Morocco, concerning, among other things, PNCC's
 "revetment reconstruction work at an area within NALCO's disposal operation."
 PNCC asked that NALCO stockpile sand 50 feet away from the location of the
 revetment work. (App. supp. R4, tab 120)

         20. On 14 January 2014 NALCO's new dredge was delivered to the site
 (app. supp. R4, tab 122). By emails dated 9 and 15 January 2014 from PNCC (Woods
 Hole Group) to Mr. Walsh, PNCC stated that the revetment work wouid interfere with
 the COE's dredging in its vicinity of the revetment and requested that the dredging
 contractor "stockpile the dredge sand" (app. supp. R4, tab 123 at 129-30). Mr. Walsh
 testified that he was concerned about work on the revetment interfering with
 NALCO's dredging operations (tr. 3/66-67). On 16 January 2014 Mr. Stearns
 forwarded the PNCC emails to ACO Morocco and wrote:

               This was what Woods Hole Group sent to Mike Wal~h in
               regards to their revetment work inthe same area where
               NALCO needs to dispose sand. It would make no sense
               for NALCO to agree to such terms but regardless, I guess I
               can still ask them to play nice.

 (App. supp. R4, tab 123; tr. If58) Mr. Kim recalled telling Mr. Stearns that they
 cannot be building a revetment in the disposal area when NALCO was dredging and
 asked if the revetment could be built after the dredging was complete. According to
 Mr. Kim, Mr. Stearns said the COE didn't care if NALCO finished its work, they were
 just following procedures. (Tr. 1/59)

 COE Refuses to Pay NALCO 's Mobilization Costs in its Bid

          21. On 22 January 2014 NALCO submitted an invoice for $874,226.40 which
, was 60% ofNALCO's total mobilization costs of $1,457,044.00 in NALCO's bid as
  authorized by paragraph (a) (ex. A-12). CO Kidd testified that she did not believe the
  60% of CLIN 0001 "bore a reasonable relation to the cost of the work in the contract,
  holistical1y" because the "line items were not balanced" and CLIN 0001 included costs
  that should have been CLINs 0002-0004 for dredged material quantities (tr. 2/298-300).
  She said "you can't even fuel a dredge for this work at the cost [$2.50] of the line item
  for the quantities" (tr. 2/299). She understood that the dredged quantity price of $2.50
  would not compensate NALCO for the costs of the dredge, pipe, survey etc. and that
  NALCO had placed those costs in the CLIN 0001 Mobilization/Demobilization costs

                                            10
(tr. 2/299-300). She testified that NALCO's mobilization cost was not out-of-line with
the other bid but was a little bit more than the government estimate (tr. 2/300).

      22. In a 22 January 2014 email to ACO Morocco, Mr. Steams stated that
NALCO had all of their "plant and material onsite" and were preparing to start
dredging (app. supp. R4, tab 125 at 133). Mr. Steams also-wrote:

             The President of NALCO, Sung Man Kim, kept
             mentioning that NALCO is short on cash at the moment
             and they needed to be paid for mobilization. I told him in
             a separate e-mail today that NALCO needs to provide
             backup documentation to justify their mobilization and that
             1) USACE could not provide advance payments since it's
             not part of the contract and 2) that I highly doubted
             USACE would pay for procurement costs of a new dredge.

(Id.) Also on 22 January 2014, Mr. Dolan, COE, sent an email to ACO Morocco, copy
to CO Kidd and Mr. Walsh, stating:

                        We had discussions about closely monitoring the
            · contractor's performance and being quick with the letters
              to document non-performance. Obviously we will work ·
              with the contractor and hope he can perform, but if [he]
              can't we are going to aggressively administer the contract
              to protect the Governrnent[']s rights under the contract. At
              this point, the company seems very willing to work with
              us ... time will tell. ·

(App. supp. R4, tab 126 at 135)

      23. By email dated 27 January 2014 to ACO Morocco and CO Kidd,
Mr. Steams wrote:

            . I just got off the phone with Sung Man Kim ofNALCO
              and he was not in a happy mood regarding our initial
              stance of what we feel are allowable costs for mobilization
              (See attached memo). He stated that ifwe gave him any
              less than the requested 60% ofNALCO's -
              mobilization/demobilization bid item (Totals $874,226.40),
              we would put NALCO in a position where they could not
              perform/work and would go bankrupt. Even at the request
              of $874,226.40, he stated NALCO would still be in a bad

                                          11
               position since, as you can tell from my memo, all his costs
               are tied into the purchase of new materials and equipment.

               The attached memo gives good reasoning as to why we
               feel only $1 OOk in mobilization is currently justifiable but
               if any [of] my positions are erroneous, I am willing to
               recant on them. Of course, the final determination comes
               from the Contracting Officer so ultimately whatever is
               agreed to, I'll be happy to pay it.

 (App. supp. R4, tab 127 at 138) The attached memo by Mr. Steams, also dated
 27 January 2014, stated that CO Kidd decided to allow only actual mobilization and
 transportation costs because NALCO's bid was unbalanced (id. at 140). Mr. Steams
 disallowed all equipment costs (dredge, pipe, fusion machine, tractor, etc.) to arrive at
 a payment of $101,102.70 (id. at 142).

 NALCO Notifies COE ofSevere Cash Flow Problems Jeopardizing Performance

          24. On 28 January 2014 NALCO wrote a seven-page mobilization justification
  memorandum expressing "major concerns" (R4, tab 27). NALCO informed the COE
  that it was being "severely penalized" by the COE's position not to pay NALCO's bid
  mobilization costs and that the result would be that NALCO would have difficulty
  performing with the resultant negative_ cash flow (id. at 3, 5-8). NALCO stated "no
  contractor can be reasonably expected to finish with a high probability of success and
  low risk on a project of this magnitude with negative cash flow" (id. at 6); In all,
. NALCO presented multiple supporting arguments:

            -- 1. NALCO's bid was not materially unbalanced.

               2. The fact that CLIN 0001 was 86% of total price was due
               to aggressive bidding strategy that benefited the
               government.

               3. NALCO's cash flow is being severely restricted as a
               result of providing the COE a significant discou~t.

               4. NALCO's proposed mobilization costs are reasonably
               related to the absolute cost of the work.

               5. Withholding mobilization costs provides multiple
               disincentives to performance.                ·

                                             12
               6. NALCO cannot be reasonable expected to complete the
               contract with such a high magnitude of negative cash flow.

  (Id. at 2-6) NALCO requested a meeting on 29 January 2014 to discuss the
  memorandum and mobilization payment dispute, On 18 January 2014 NALCO' s
  request and memorandum was distributed within the COE. · Mr. Dolan, COE,
  commented by 28 January 2014 email, "Yikes .. .I know it is late in the day, but that
  made no sense to me. I will reread later, but seven pages ofblablabla... it is not my
  fault because I didn't realize what I was doing when I signed the contract is not a legal
. defense" (app. supp. R4,.tab 130 at 171). CO Kidd recalled meeting with NALCO to
  discuss these payment issues (tr. 2/246).

        25. In response to NALCO' s continued requests for more payments, CO Kidd
 sent NALCO a letter dated 30 January 2014 explaining her decision to exercise ·
 paragraph (b) ofDFARS 252236-7004 (tr. 2/247; R4, tab 28). CO Kidd would only
 allow the following mobilization costs:

                  •   Crane $18,375.00
                  •   Trucking Equipment $9,968.00
                  •   Trucking Dredge $16,060.00
                  •   Pipe Float Shipping $900.00
                  •   Office Trailer $828.70
                  •   Real Estate Rental $3,975.00
                  •   Bond $50,996.00

(Id. at 2) The total amount approved was $101,102.70. This was the same breakdown of
allowed mobilization costs in Mr. Steam's 27 January 2014 memo (app. supp. R4, tab 127
at 142f Mr. Kim testified that NALCO expected to be paid approximately $800,000 for
mobilization costs but was only paid about $100,000. This adversely impacted NALCO's
ability to perform. (Tr. 1/68-69) CO Kidd stated that the remaining costs for mobilization
in N.ALCO's bid "are not costs that may be attributed to mobilization" (R4, tab 28 at 2). ·
She denied costs for the pipe, pipe float, fusion machine, Kubota RTV 900, work
preparation (fuel/utilities) an~ the dredge as ''not inherently associated with mobilization"
(id. at 2-3; tr. 2/203). CO Kidd testified that including the cost of the equipment, i.e.,
dredge, pipe etc., in the mobilization costs did not make any sense to her (tr. 2/305). She
believes that as a result she came up with the language "not inherently associated with
mobilization" (tr. 2/304-05, 307). In the 30 January 2014 letter to NALCO, CO Kidd
acknowledged NALCO's cash flow concerns:

                     Your letter dated 28 January 2014 also presented
               your concerns about your company's cash flow, based upon
               my decision to require you to justify the contract lump sum

                                             13
              price for mobilization. It is not the practice of the U.S.
              Army Corps of Engineers to counsel contractors on their
              cash flow concerns or provide financing to contractors who
              experience cash flow problems. Resources that provide
              financing are available to the general public and to small
              businesses. Your decision to pursue or not pursue these
              resources is your business decision. ·

  (R4, tab 28 at 3) CO Kidd stated that NALCO was currently in default and threatened
. termination for default (id. at 3-4). CO Kidd also warned NALCO about the "serious
  consequences" of "unsatisfactory contractor performance ratings" on potential future
  business NALCO might seek (id. at 4).,

        26. CO Kidd recognized she had discretion to exercise paragraph (b) of
DFARS 252.236-7004 or not (tr. 3/38). She agreed that NALCO would be paid all of
the bid CLIN 0001 mobilization and demobilization costs that she initially disallowed
at the end of the contract when final payment was_made (tr. 3/40-41). CO Kidd
testified that she had concerns about NALCO's ability to perform when she put off
payment of the majority of the CLIN 0001 costs to the end of the contract even though
she knew that NALCO needed the dredge and pipe to perform the contract (tr. 3/41).
However, she exercised her discretion to follow paragraph (b) to limit risk to the
government (tr. 3/41-42). She testified that if they paid for the dredge up front "there
was no reason for the contractor to continue performance once they had the money
because there is no money on the line items [for dredged material]" (tr. 3/42). She did ,
what she did knowing that the $2.50 CY dredged material rate was not enough to put
fuel in the dredge much less reimburse NALCO for the dredge, pipe and other
equipment needed to perform (tr. 2/299, 3/43-44). During the hearing the Judge asked
CO Kidd when NALCO would get money to perform:

                    Q. So when was he going to get his money to
              perform?

                      A. Well, he's, would, he would be financing.· But
              his, the way that he structured-his bid put him in that
              position --

                     Q. Only because you exercised your discretion to do
              B rather than A. That's what put him in the position.

                     A. I would argue that there was already a risk, and
              that's why we did B instead of A.

(Tr. 3/44)

                                           14
       27. The COE authorized payment of $101,102.70 for CLIN 0001 Mobilization
Costs (R4, tab 29). CO Kidd told NALCO to resubmit the invoice for $101,102.70
which was the amount she was willing to pay for mobilization costs (tr. 2/201; R4,
tab 29). Since the COE would not pay for the mobilization costs as bid by NALCO, it
did not have the money to pay for the survey. That is why, according to Mr. Paul Kim,.
NALCO' s vice president, NALCO did not have survey support for the contract.
(Tr. 2/198)

NALCO Starts Dredging.

        28. The revetment was completed by 7 February 2014 (tr. 3/52-53). NALCO
started dredging on 10 February 2014 (R4, tab 72 at 47). Mr. Kim testified that the
revetment was a "big problem" because the dredging material could undermine the wall
and cause itto collapse. NALCO had to protect the revetment and could only work at
low tide in the vicinity of the revetment. (Tr. 1/47-50, 52-53; R4, tab 4c at 3, 7)
It wasn't until t~e end of March that NALCO passed the revetment portion of the
disposal area (tr. 1/50). Mr. Paul Kim is the vice president of NALCO and was the
dredge operator (tr. 2/195). Mr, Paul Kim testified there were a "large degree of stop
and starts of the dredge" on this project. NALCO had a "watcher" on the beach who
was in constant communication with the dredge. When there was too much water
getting close to the revetment (wall) they would stop the dredge. (Tr. 2/195) Stopping
a dredge is not a simple matter because the operator must first clean out the discharge
pipe (tr. 2/195-96).

        29. On 18 February 2014 ACO Morocco sent a letter to NALCO stating that
after one week of work NALCO's production/dredging rate was only about 100 CY.
Since only 41-dredge days remained until the cut-off date of 31 March 2014,
ACO Morocco requested that NALCO submit a production plan indicating how it. ·
would complete the project. (R4, tab 30) NALCO responded by letter also on
18 February 2014 stating that weather prevented more dredging during the first week
and that it would implement 24 hour work days to remedy the issue (R4, tab 31 ).
ACO Morocco responded on 20 February 2014 acknowledging the bad weather during
the first week of dredging and asking NALCO to "elaborate on NALCO's original
responses from the letter dated 18-FEB-2014." ACO Morocco threatened to issue a
cure notice "unless we see immediate corrective action." (R4, tab 32) Mr. Kim
"responded verbally' stating that he did not have time to respond to letters due to the
need to oversee dredging operations (R4, tab 34).

       30. NALCO submitted another invoice on 23 February 2014 for $22,188.82 for
additional mobilization costs which the COE agreed to pay (tr. 2/202; R4, tab 33).

                                          15
        _ 31. Mr. Walsh recalls that he received a 24 February 2014 email from
 Ms. Jackson, PNCC, complaining that NALCO's discharge was causing exc_essive
  erosion on the beach in front of the revetment. A picture was included with the email.
  (Tr. 3/54; R4, tab 66 at 4) Mr. Walsh testified that there was "no protection required
·-of a-coastal revetment, except protect it against negligent operation, or the discharge
  end of the pipe" (tr. ~/75). _

 NALCO 's Financial Hardship

  --- -- 32. B_ecause-the COE would rtot pay for the dredge and pipe as mobilization
 costs, Mr. Kim could not pay NALCO's bills and he was getting communications from
 collection companies. Mr. Kim decided to get a loan using his personal house and
 equipment as collateral. (Tr. 1/65-66) Mr. Kim also borrowed $100,000 from
 members of his church to make payroll (tr. 1/68-69). Mr. Kim eventually lost his
 house, equipment and his business to creditors (tr. 1/65-66).

 COE Issues Cure Notice

        33. On 28 February 2014 CO Kidd issued a cure notice due to "low dredging
 production." CO Kidd requested a written plan on how NALCO wquld cure the
 problem and suggested a termiriation for default might be issued if the situation was
 not cured. (R4, tab 34)

         34. Mr. O'Connor was a project engineer on this project working with
 ACO Morocco (tr. 3/77-78). He took over from Mr. Steams who left in February 2014
 (tr. 3/78-79). When Mr. O'Connor first arrived Mr. Kim explained his cash flow
 problems and Mr. O'Connor felt something should be done to pay NALCO more for
 performance (tr. 3/101-02). In a 3 March 2014 email to ACO Morocco, subject Mob
 Payment for NALCO, Mr. O'Connor writes:

               Current scenario is the contractor completes 59% of the
               work but we pay him for only 15% of the contract amount
               until we settle the situation with his totally unbalance[ d]
               bid?

               This does not seem fair to the contractor.

  (App. supp. R4, tab 144 at 232) Mr. O'Connor's 6 March 2014 email to Mr. Walsh
· suggested that NALCO should be paid about $200,000 for performance (id. at 231).
  Mr. Walsh responded, "I am.in favor of giving to NALCO whatever compensation you
  believe they are due. The sooner the better considering their cash-flow problems."
  ~)                                                                   -

                                            16
         · 35. By letter dated 4 March 2014 to CO Kidd, NALCO reiterated its argument
 that it should be paid its bid mobilization price because it had been paid only
 $123,291.52 of the $874,226.40 it claimed (R4, tab 35). NALCO explained its
 positio_n that the dredge and pipe are properly part of mobilization costs. NALCO
 stated:

                Moreover, the Corps' refusal to pay NALCO for its
                mobilization expenses is presently seriously hindering
                NALCO's ability to implement a 24 hour work day in
                order to recover the project schedule. NALCO shall not be
              . responsible for delays to the project scheduling caused by
                the referenced adverse weather as exacerbated by the
                Corps' position on the mobilization payment issue.

  (Id. at3-4) CO Kidd testified about this letter and stated that the cost of the dredge,
  pipe, etc., was not a mobilization cost because it was "not related to getting equipment
  to the site" (tr. 2/254). She testified that the cost for these items should be put in the
  price of the dredge quantity line item (tr. 2/254-55). CO Kidd replied to NALCO's
· 4 March 2014 letter on 7 March 2014 stating that NALCO had not submitted its plan
  to cure the deficiencies and suggested the contract would be terminated for default
  (R4, tab 36). NALCO responded on 9 March 2014 requesting a meeting and assuring
  the COE that it was committed to completing the contract (R4, tab 38). A series of
  correspondence ensued culminating with a 17 March 2014 COE letter informing
  NALCO that it would riot be allowed to perform beyond 31 March 2014 and stating
  that if performance was not completed by that date a termination for default may be
  issued (R4, tabs 39-41). In a 24 March 2014 letter to NALCO, CO Kidd reiterated the
  COE's position that it would not consider any "interim payment requests from
  NALCO" and that workmay not proceed past 31 March 2014 (R4, tab 43).

Protecting the Revetment

        36. Contract specification section 35 20 23, Hydraulic Dredging, paragraph
3.5.7, Safety of Structures and Utilities, required NALCO to protect PNCC's new
revetment (R4, tab 4d at 170). Mr. Kim testified that as of7 March 2014 NALCO
continued to protect the revetment from damage but as a result of the revetment
NALCO had a very small work area that slowed down the dredging (tr. 1/79-80;
app. supp. R4, tab 145). The need to protect the wall in the discharge area caused
NALCO to stop pumping "[e]very day, every day, because if it's high tide we
stopped" to prevent "digging underneath" the wall (tr. 1/100, 102). Mr. Kim testified,
"If there were no wall, we would have been able to fly through the work" because they
co:uldjust pump sand on the beach (tr. 1/80).

                                             17
         37. In an 11 March 2014 email to Mr. O'Connor and CO Kidd, ACO Morocco
wrote,

               Jessica--please remember that the contractor is working
               odd hours and at the mercy ofthe'tides while·we have
               somebody 8 hours/day. The contractor has a lot of stop
               and start due to,waiting for the tide, putting out pipe, then
               dredging if the tides allow. It was very inefficient.

(App. supp. R4, tab 152 at 259)

COE Drafts Termination for Default

       38. In a 12 March 2014 email to ACO Morocco, CO Kidd wrote, "I'm drafting
the T4D letter today for Counsel's review, and I'd like to send your completed report
down with my letter, hopefully tomorrow? At this point, we're still on track for T4D
Friday." (App. supp. R4, tab 154 at 282) Also on 12 March 2014 Ms. Cameron, COE,
emailed CO Kidd a draft termination for default letter (app. supp. R4, tab 155).

PNCC Needs Access to the Revetment

       39. By email dated 14 March 2014 to NALCO, Mr. O'Connor stated that
PNCC needed to place sand over the revetment and would need an 18-foot access in
front of the revetment to allow the equipment to get in to place the sand (tr. 3/86-87;
R4, tab 47 at 7-8; app. supp. R4, tab 158 at 290-92). The work took three days, 21 to
23 March 2_014 which caused NALCO to stop pumping (tr. 1/106-07, 3/73-74)..
Mr. Walsh testified that this was "absolutely'; a change (tr. 3/74).

NALCO Notified COE ofPossible REA

        40. By letter dated 25 March 2014 to CO Kidd, Mr. Kim notified her that the .
revetment in the disposal area was interfering with NALCO's dredging and constituted
a differing site condition (R4, tab 44). He explained that protection of the revetment
required NALCO to maintain a second sand dike to direct flow of dredging discharge
away from the revetment. Mr. Kim informed CO Kidd that NALCO "might make a
request for an Equitable Adjustment." (Id.) Mr. Kim sent the letter because the COE
wanted to close the project on 31 March 2014 (tr. 1/90). He believed that CO Kidd
would give NALCO an extension so they could finish the job (tr. 1/91). CO Kidd did
not give NALCO a time extension (id.).

                                             18
       41. By letter dated 25 March 2014 to CO Kidd, NALCO stated: -
       \       -

              The protection of the adjacent stone and sand bag walls
              constructed during the performance of our contract by the
             --Prout's.Neck Country-Club, is a site condition that was not
              identified in the contract documents which has and
              continues to impact NALCO's time to perform its contract
              and its cost. NALCO believes this is a differing site
              condition within the parameters of the contract.

              The protection of the Country Club's structures requires
              NALCO to maintain a second sand dike to direct the flow
              of dredging discharge away from the structures which
              could neither be anticipated nor included in NALCO' s bid.
              NALCO feels an Equitable Adjustment and a time
              extension is just and warranted as a result of the changed
              condition.

(R4, tab 44) CO Kidd agreed that the revetment built by the country club was not
specified in the contract (tr. 3/7). She testified, "clearly the revetment was not in the
contract specifications, that the impact of it was minimal" or "extremely minimal"
(tr. 3/10, 12-13). CO Kidd testified that it was NALCO's "incompetence" and
"mismanagement of the disposal''_that caused problems, not the presence of the
revetment (tr. 3/16-17).

NALCO Demobilizes

       42. Mr. K-im testified that by the end-of March 2014 NALCO had moved
beyond the revetment in the disposal area (tr. 1/50). Mr. Kim asked CO Kidd for a
two-week extension based on the delay caused by the revetment. NALCO was not
given an extension and, on 31 March 2014, was told to remove the dredge and pipe
immediately or they would be terminated for default. NALCO removed all of the
equipment in two days. (Tr. 1/50-51, 94) NALCO was not paid for its mobilization
and demobilization and other costs (tr. 1/95).

       43. In a 4 April 2014 internal COE email, Mr. O'Connor stated:

              Verbal Directions to NALCO on the beach: ·
                    There were ongoing directions to protect the golf
              course's newly constructed stone wall from hydraulic
              pumping discharge.
                    Last Friday 3-28-2014 told them in an on-site
              conversation to wrap up the dredging and concentrate on

                                            19
                  grading the beach. Followed up with a couple-of phone
                  calls on Sat and Sun (3/29 & 3/30)[.]

  (App. supp. R4, tab 189)

         44. In another 4 April 2014 internal COE email, ACO Morocco stated that
  NALCO had removed all equipment and material from the beach (app. supp. R4,
  tab 191 at 389). In response, Mr. Walsh wrote, "I am not surprised. If nothing else
  NALCO has put their best foot forward and approached this project with integrity and a
  good faith effort to meet their obligations under this contract." (Id.) In a 7 April 2014
  email Mr. O'Connor stated, "The unofficial COE survey shows NALCO['s] work was
_ very good considering they had no survey work" (app. supp. R4, tab 192 at 392).

         45. By email dated 9 April 2014 to CO Kidd and other COE personnel,
  Mr. Walsh provided a copy of the COE dredging survey(app. supp. R4, tab 201). The
  survey found that NALCO had dredged 16,078 cubic yards -of required and over-depth
  material from the 8-foot entrance channel that was compensable under CLIN 0002AA.
  It found that NALCO removed an additional 8,704 cubic yards that was either outside
  the channel or over depth that was not compensable. (Id. at 445) Mr. Walsh
  explained:

                  So they removed a total of 24,702 cubic yards from the
                  river, but we would only pay for 16,078 of that volume.
                  This is why we insist in the contract that the contractor
                  have survey support.· Otherwise they are dredging blind
                  and can waste time and their own money dredgin_g material
                  we will not pay for.

  (Id.)

         46. By email dated 23 April 2014 from Mr. O'Connor to CO Kidd and other
  COE personnel, Mr. O'Connor reported the results of his review of NALCO' recent
  pay request for $929,623 (app. supp. R4, tab 204). He discussed "a lot of problems"
  with the pay request, but concluded that a final settlement might be $740,000 to
  $790,000 (id.). CO Kidd responded on the same day stating that his analysis was "spot
  on," but cautioned Mr. O'Connor to explain in writing why NALCO's request.was
  rejected (id.). 8                                               ·

  8
      There was no testimony about this email during the hearing.

                                              20
Photographs.

        47. Dated photographs show the conditions in January, February and March
2014. Photo No. 3, 28 January 2014, show the partially-completed revetment and
"sandbags" (R4, tab 66 at 3). Photo No. 4, 24 February 2014, shows dredging
discharge and the lack of protection of the revetment and the relatively small.discharge
area between the revetment and the water (id. at 4). Photo Nos. 6 and 7, 6 March
2014, show the dredging discharge, protection of the revetment, and, small discharge
area (id. at 6-7). Photo No. 8, 15 March 2014, is an aerial photo showing the dredge
and pipe ending at the revetment (id. at 8). Photo No. 9, 16 March 2014, shows
dredging discharge in front of the protected revetment (id. at 9).

·Daily Reports

       48. The record includes NALCO's daily quality control reports from
27 December 2013 through 1 April 2014 (R4, tab 72) and COE's daily quality
assurance reports from 21 January 2014 through 15 April 2014 (R4, tab 73).
There was no testimony on these reports at the hearwg. However, NALCO's reports
are typewritten and identify delay caused by the revetment. The COE's reports are
handwritten and not as detailed. NALCO reviewed its and the COE's daily reports.
There were 156 hours of delays caused by the revetment documented in NALCO's
reports (app. proposed findings of fact ,r 163). 9 There were numerous days of weather
delays documented on NALCO's daily reports. 10 The COE's daily reports were not as
clear but did not contradict the entries in NALCO's daily reports (id. ,r,r 164-65).

Preparations for Settlement Negotiations

        49. Mr. Kim hired a local attorney, Mr. Giffune, to assist in settlement
negotiations with CO Kidd (tr. 1/97). On 4 April 2014 Mr. Giffurie sent CO Kidd a
letter with a spreadsheet attached documenting on a daily basis impacts to the work
caused by having to protect the revetment and weather issues (R4, tab 47). Mr. Kim
recalled that Mr. Giffune reported that CO Kidd would not consider paying for the
dredge rental, the new pipe and differing site condition (tr. 1/98). CO Kidd recalled a.
phone conversation with Mr. Giffune where they discussed the possibility of
settlement as an alternative to termination for default (tr. 2/264-65).

      50. Also on 4 April 2014 CO Kidd wrote NALCO to remind it that the
performance period ended on 31 March 2014 and that NALCO must remove its
equipment and materials from the area: She informed NALCO that if she decides to

9
     We verified the accuracy ofNALCO's tally by looking at the entries on the reports.
10
     NALCO alleged 53 days of weather delay but we were only able to verify 27 days
         of critical delay (R4, tab 64 at 4-5; app. proposed findings of fact ,r 209).

                                            21
terminate the contract for default, NALCO would be responsible for excess
re-procurement costs. (R.4, tab 48) CO Kidd recalled discussions with NALCO's
attorney over a no-_cost settlement and that she was looking for a settlement proposal
(tr: 2/266-67).

       51. By email dated_ 25 April 2014 to Mr. Kim, CO Kidd stated:
                                                                                         (
             To clarify Mr. O'Connor's statement, labor and equipment
             costs for dredging are not currently payable. The terms of
             your contract allow for payment of a firm fixed price for
             the unit cost of dredged materials. We are only
             considering costs for your mobilization and demobilization
             line items because we invoked DFARS 252.236-7004
             when we awarded this contract, which allows us to pay
             actual costs.

             Because you did not complete performance under the
             contract, we will need to determine how to conclude our
             business arrangement. At that time, the Government may
             consider all of the costs you incurred under the contract,
             including those related to labor and equipment for
             dredging. These costs cannot be considered now, however.

(App. supp. R4, tab 209 at 483)

       52.- By email dated 1 May 2014 to various COE employees, CO Kidd wrote:

             Yesterday Terry and I spoke-to the attorney and surety for
             NALCO.

             -We spoke about NALCO's "pre-claim" statements and I
             let their lawyer know that I didn't find any claims to have .
             merit. ...

             -We discussed the path forward for the contract. We've
             discussed these before, but to remind you the three options .
             before us are:
             1. T4D - Surety tenders payment for payment bond.
             2. T4D - Surety takes over.
             3. No-cost settlement as T4D alternative. I stressed the
             benefits of this to NALCO's attorney, and he plans to
             present this option to his client. It is my hope that we can

                                           22
              go down this path, but that depends on NALCO' s
              willingness.

(App. supp. R4, tab 214) CO Kidd again told Mr. Kim's lawyer that she would not
consider the dredge rental, pipe purchase, etc. or differing site condition (tr. 1/119,
              -                                                                 -

172, 174).

       53. By email dated 7 May 2014 to various COE employees, CO Kidd wrote:

              Terry and I met again today with NALCO's ·counsel and
              surety. NALCO has agreed to pursue a no-cost settlement
              with us, which was our desired path forward. Please
              remember ~at, until the settlement is negotiated and
              finalized, NALCO could back out and we would still need
              to issue a T4D. Also please remember that money
              obligated on the contract remains obligated until it is
              deobligated, and any remaining funds won't be deobligated
              until after we settle.

(App. supp. R4, tab 218) Mr.-Kim testified that at the time, he had no choice but to
agree to what CO Kidd offered (tr. 1/118).

       54. Bilateral Modification No. POOOOl, dated 7 May 2014 was issued to
exercise "optional task 5 Derelict Mooring Removal and Disposal (5) times" for a total
of $1,730.00 (R4, tab 49) .

      . 55. On 9 May 2014 Mr. O'Connor sent an email_to ACO Morocco suggesting that
a settlement cost would be around $616,000 (app. supp. R4, tab 220 at 509). Also on
9 May 2014 ACO Morocco sent an email to CO Kidd informing her of Mr. O'Connor's
settlement estimate of "in the $600,000 range" (app. supp. R4, tab 221).

       56. On 12 May 2014 NALCO submitted invoice No. 3 for $60,742.86 for
mobilization and demobilization costs and $40,195 for dredged material for a total of
$100,937.86 (tr. 2/207; ex. A~2). ~Mr. Kim sent an email to the COE inquiring about
the payment of invoice No. 3 that had not been received (app. supp. R4, tab 225).
Mr. Kim testified that the $60,742.86 in invoice No. 3 for-demobilization costs was
never paid (tr. 1/126, 2/207-08). The $40,195 may have been paid to the bonding
company (tr. 2/206).

       57. On 3 June 2014 Mr. O'Connor emailed Mr. Walsh stating that NALCO
was still not paid the majority of their money for work completed (app. supp. R4,
tab 227). By letter dated 5 June 2014 to NALCO, CO Kidd acknowledged that
Modification No. P00002 authorized that NALCO's payment request for $41,925 be

                                            23
paid to its surety, National American Insurance Co. CO Kidd also reminded NALCO
that she was waiting for a settlement proposal. (R4, tab 50)

   .    58. On 16 June 2014 NALCO's attorney submitted a settlement proposal in the
-amount of $1,023,898 that included costs,-for the-dredge, pipe, miscellaneous
 equipment, payroll, overhead, demobilization, and differing site conditions (R4,
 tabs 53, 77). The proposal included the following:

                    To date, NALCO has been paid a total of $165,216.
             By comparison, its expenses on this project are estimated
             at well in excess of $1,000,000. I cannot stress to you
             enough how severely this loss has impacted my client, its
             principals and employees. As you consider this proposal,
             be please [sic] mindful that NALCO is a small,
             family-owned business and that its survival may well
             depend on the resolution of this project. -

(R4, tab 53 at 2) NALCO offered to settle the matter for $700,000 (id. at 5).

        59. On 24 July 2014 a prenegotiation objective memorandum (POM) was
signed by Mr, O'Connor, ACO Morocco and CO Kidd (R4, tab 76). The POM
included an IGE of $348,508.18 as the amount owed to NALCO (id. at 3). Within the
POM was an acknowledgement that "[t]here were difficulties in completing work in
the area of Section A-A on sheet C-104 as called for in the contract. The combination
of the privately owned structure [revetment] and narrow beach made performing
contract work mo_re difficult." (Id. at 8)

-The 1 August 2014 Meeting & Modification No. P00003

         60. Negotiations were held.between NALCO and the COE on 1 August 2014
(tr. 2/269). CO Kidd testified, "I think that they [NALCO] knew that the alternative to
coming to a negotiated agreement was to-be terminated for default" and "the whole
purpose of the negotiations was to come to a settlement so that; to avoid the situation
where we would have to negotiate for default" (tr. 3/19). CO Kidd explained that she
and "her team" believed termination for default was justified, "The revetment had very
little to do with the failure; it was the mismanagement and incompetence, not only in
the disposal, but also in the dredging itself' (tr. 3/20).

       61. Mr. Kim recalled attending the 1 August 2014 meeting with CO Kidd. She
offered $350,000. Mr. Kim and his lawyer left the meeting and went to a separate
room. Mr. Kim told his lawyer he could not accept $350,000. The lawyer went back
to the meeting and returned to Mr. Kim with an offer of $375,000. CO Kidd told his ·
lawyer that $375,000 was take it or leave it and if NALCO did not take it she would

                                          24
terminatethecontractfordefault. (Tr.1/129, 131.a.33, 169,175) Mr.Kim understood
that if the contract was-terminated for default he would get no money and the bond
company would auction off his personal house, property andNALCO's equipment
(tr. 1/133). Mr. Kim decided to call a Small Business Administration (SBA)
ombudsman. He talked to the ombudsman and told her he had a dilemma, either take
$375,000 or face termination for default. (Tr. 1/133) According to Mr. Kim, the
ombudsman told him that the COE was trying to force NALCO into bankruptcy and
that ifhe didn't take the money offered he would lose his house. She suggested that he
sign and could go.to court and that a judge might help him. (Tr. 1/134) Mr. Kim went
back into the meeting with CO Kidd and signed the offer (tr. 1/134-37). He testified it
was a "take it or leave it" situation (tr. 1/i 76). CO Kidd sent Mr. Kim an email after
the meeting instructing him how to request an "interim payment" of$374,000 with the
final $1,000 at final payment and release of claims (app. supp. R4, tab 237).

NALCO Complains About COE's Settlement Terms

       62. By email dated 5 August 2014 to "chysler@maine.rr.com, 11 " Mr.
O'Connor stated "Settled on a price and NALCO will not be hit with a termination"
(app. supp. R4, tab 238). By email dated 6 August 2014 to the COE inspector general
(IG), NALCO asked for help. The email read in part:

                  Eventually talks came to a No Cost Settlement which
                  occurred last Friday (8/1/2014) and we felt almost forced
                  to accept as we had various vendors that we needed to pay.
                  Of the agreed upon settlement price ($375,000), there was
                  $0 allocated to the_ dredge, $0 from the pipes, and $0 from
                  the differing site condition which we believe was unfair.
               ·· Also, payroll as well as equipment costs incurred during
                  the dredging period were disallowed as well. They said
                  they would be unable to justify any sort of payment for the
                  dredge and pipe if they were audited in the future. From
                  our understanding, the contracting officer beli,eved that the
                  differing site condition had no bearing on the project and
                  rejected them completely.

(App. supp. R4, tab 240 at J-2; tr. 1/140-41) The IG responded on 7 August 2014
stating that the IG could not help and referred NALCO to the disputes clause
(app. supp. R4, tab 241). NALCO responded the same day stating in part, "We were
just looking to receive a fair amount and we showed our costs which exceeded
$1,000,000 on the project but requested $700,000 to have an amicable split but they
completely blew off a few of our costs saying it was not payable" (id.). By email

11
     The identity of the person at this email address is not in the record.

                                               25
  dated 8 August 2014, NALCO sent the same 6 August 2014 text to Mr. Hazlett, COE
- director ofcontracting (app. supp. R4, tab 242; tr. 1/141). Mr. Hazlett responded on
  11 August 2014 stating that his staff would look into the action and get back with
  NALCO (app. supp. R4, tab 243; tr. 1/141-42).

  Modification No.· P00003

          63. A few days after the 1 August 2014 meeting, Mr. Kim received draft
  Modification No. P00003 in the mail incorporating the $375,000 settlement and
  deobligating the remaining $1,159,647.48. He received an email·asking him to sign
  and return to CO Kidd. (Tr. 1/140) Mr. Kim signed Modification No. P00003
  on 11 August 2014 and CO Kidd signed it on 12 August 2014 (R4, tab 54). He recalls there
  was a release, but he was so angry he just signed it to get the money (tr. 1/136-40). Mr. Kim
  testified that he signed the rpodification under protest and did not agree with its content
  (tr. 1/143). CO Kidd knew that Mr. Kim was not happy with the settlement agreement and
  had told her that he felt forced to ehter into the settlement agreement (tr. 3/24-25).

         64. Modification No. P00003 had release language in two places:

                SUMMARY OF CHANGES

                  The Contractor understands and agrees that final payment
                  of $375,000 will constitute compensation in full on behalf
                  of the Contractor, its subcontractors and suppliers for all
                  costs and markups directly or indirectly attributable to
                 work performed under the Contract, including any
                  modifications or changes attributable hereto. The
              - · Contractor will,·by-receipt of-said payment for itself, its
                  successors and assigns, remise, release and for[ e]ver
                  discharge the United States, its officers, agents, and
                  employees of and from all liabilities, obligations, and
                  claims whatsoever arising under or by virtue of said
                  contract.

                RELEASE - CONTRACTOR TO GOVERNMENT: This
                contract having been completed and finally accepted, the
                United States, its Officers and Agents are hereby released
                from all claims and demands whatsoever arising under or
                by virtue of said contract.

  (R4, tab 54 at 3, 5)

                                             26
    - 65. -In a 13 August-2014 email to NALCO, Mr. Kim's accountant
recommended against a review ofNALCO's finances at that time because the review
would have to include the statement, "The Company is not a going concern" (ex. A-3).

       66. On 13 August 2014 CO Kidd sent an internal email updating the recipients
on the "Scarborough settlement." The email read in part:

             Also on Monday, NALCO sent an e-mail to Mr. Hazlett,
             the Director of Contracting for USACE. In the email,
             NALCO made many of the same allegations they've made
             before, including differing site conditions, lack of
             payment, etc. They also said they felt "forced" into a
             settlement because they had to pay their subs.

(App. supp. R4, tab 245 at 587; tr. 1/144-45)

Mr. Hazlett Responds to NALCO

      67. On 15 Augus_t 2014 Mr. Hazlett responded to Mr. Kim's 8 August 2014
email with the following:

              The Corps of Engineers shares your disappointment that
              the time-sensitive dredging work could not be completed
              under the terms and conditions of the contract. However,
              having reviewed carefully the salient facts, it appears that
              our New England District not only acted in good faith at
            · every step in awarding and administering this contract, but
              also took extra measures to limit financial damage to your
              company while acting within the bounds of the law and the
              best interests of the government. I am informed that a
              mutually acceptable resolution was achieved by both
              parties on August 1, 2014 at the New England District. At
              that meeting, NALCO agreed to accept a total of $375,000
              as fair compensation to resolve any and all claims against
              the United States under this contract. All other value on
              the contract was to be de-obligated via bilateral
              modification. The contracting officer advises that in
              consultation with your attorney who was present, you
              chose to accept these terms. Accordingly, I see no basis
              for recommending that the contracting officer reconsider
              the settlement agreement. Please address further concerns

                                          27
              you may have regarding this contract to- the responsible
              contracting officer.

(App. supp. R4, tab 249 at 601) -

       68. CO Kidd testified that Modification No. P00003 authorized NALCO to be
paid $374,000 with the final $1,000 to be paid at final payment (tr. 2/279-80). NALCO
was paid $374,000 on 26 August 2014 (tr. 1/137, 146; app. supp. R4, tab 250). The
COE withheld $1,000. The $1,000 was paid about a year later in the summer of 2015
after NALCO filed its certified claim. (Tr. 1/146-47)               ·

       69. On 1 October 2014, Mr. Kim wrote Secretary of Defense Chuck Hagel
asking him to "straighten out the situation" (tr. 1/137; app. supp. R4, tab 255 at 619).
By letter dated 28 October 2014 to Mr. Kim, Mr. Hazlett, responding on behalf of
Secretary of Defense Hagel, recounted many of the facts of interactions between
NALCO and the New England District COE and included:                -

              Because the Corps elected to invoke DFARS clause
              252.236-7004 and to pay·actual mobilization costs, it was
              necessary for you to establish actual mobilization costs.
              You state that you had costs associated with mobilization
              that the Corps did not agree to pay. DFARS clause
              252.236-7004(b)(2) states that the Contracting Officer's
              determination of the actual costs is not subject to appeal.
              Regulation does not define mobilization costs, but industry
              standards exist. In determining allowable mobilization
              costs, the Contracting Officer relied upon the input of the
            --Construction Division of the New England District. The
              District's Administrative Contracting Officer worked very
              closely with you to identify any potential allowable costs
              that could be associated with mobilization. At your request,
              you also met with the Contracting Officer, Administrative
              Contracting Officer, and.Chief of Construction to discuss
              allowable mobilization costs. The goal of the Corps in this
              matter was to provide you with the resources necessary to
              complete the project while limiting risk to the government.
              You were paid for those mobilization costs that were
              allowable and substantiated with documentation.
              Ultimately, the Contracting Officer's informed decision
              regarding which mobilization costs were allowable is final
              in accordance with DFARS clause 252.236-7004(b)(2).

                                            28
                        I share your disappointment that the project was not
               - completed in a timely manner. The Corps is committed to
                 partnering with our small business community to meet our
                 mission requirements. However, after review, it appears
                 that our New England District acted in good faith in
                 awarding and administrating this contract and also took
                 extra measures to limit financial damage to your company
                _while acting within the bounds of the law and the best
                 interests of the government. Accordingly, there is no basis
                 for reconsideration of the settlement agreement.
           -                   -
(App. supp. R4, tab 265 at 663-65) CO Kidd drafted this letter to NALCO signed by
Mr. Hazlett on 28 October 2014 (tr. 3/36; app. supp. R4, tabs 259-60).

        70. On 18 November 2014, Mr. Kim met with-Mr. Hazlett and Ms. Fontana,
associate director, COE Sinall Business Programs (app. supp. R4, tab 269).
Mr. Hazlett told him his assistant would call to help him submit a certified claim
(tr. 1/138-39).

The Cashman Memo

        71. Mr. Cashman is the director of contracting for the COE New York District
(tr. 2/5-6). Mr. Hazlett asked Mr. Cashman if he would be part of a team that would
review the Scarborough dredging project (tr. 2/7). By email dated 8 December 2014 to
Ms. Lee, COE attorney, Mr. Cashman wrote, "Lorraine - talking to the NAE KO - she
said the settlement agreement:~vas in lieu of a termination for default" (ex. A-5). Also
on 8 December 2014, Mr. Cashman sent a memorandum to Mr. Hazlett presenting a
detailed analysis of the NALCO dispute with the COE (app. supp. R4, tab 271).
Mr. Cashman concluded with Recommendations that included the following:

                Due to the facts, that it appears from the contractor's
                understanding of modification P00003, there-was not a
                meeting of the minds regarding this to be a final
                settlement-this review team recommends that both parties
                discuss this matter further. NAE should review any new
                REA. If the contractor can justify that they are entitled to
                additional compensation in addition to the agreed upon
                $375K, the Contracting Officer should work out a final
                bilateral modification with a release of claims for this
                contract.

(Id. at 690) Nothing happened as a result of this recommendation.

                                             29
· COE Small Business Offiee Agrees with NALC0-

         72. On 16 December 2014, Ms. Fontana, sent an email to various COE
  personnel including CO Kidd and COL Stoddard, Mr. Hazlett's Deputy (app. supp.
  R4, tab 277 at 718-19). Ms. Fontana wrote·that the COE had treated NALCO
  improperly. She concluded that DFARS clause 252.236-7004 Mobilization and
  Demobilization was "misappli~d" and the COE's refusal to pay NALCO the full
  amount of CLIN 0001 was unreasonable. She found the COE's denial ofNALCO's
 request for equitable adjustment for "significant differing site conditions" was
  unreasonable. She also asserted that Modification No. P00003 was not valid due to the
  COE's "improper actions." She concluded the email with, "It is CESB's professional
  opinion and advisement that NALCO, is entitled to fair and reasonable treatment to
  include full payment ( CLIN 0001 value $1.46M) for services already provided under
  CLIN 0001, mobilization/demobilization, as well as compensation for differing site
. conditions, at a minimum .." She also stated that if the matter was not resolved "our
  office will proceed to advise NALCO to pursue the Claims process." (Id. at 719)

       73. In a 22 December 2014 email to COL Stoddard, NALCO wrote the
following:

              Just for clarification, of the agreed upon settlement price
              ($375,000), there was $0 allocated to the dredge, $0 for the
              pipes, and $0 for the differing site conditions (extra work)
              which we believe was unfair but they just would not
              consider any of those costs at all. There was also $0 of the
              costs incurred during the dredging period due to them
              excluding all costs during that work period. Als.o, we
              believe we should have received $1,498,969.00 from the
              firm-fixed-price contract based on the amount that was
              dredged but had only received $538,486.52.

              The only reason we accepted this settlement was due to
              various government-agencies recommending that we do so
              in order to prevent bankruptcy as explained in the
              November 18[,] 2014 meeting with Mr. Hazlett and
              Ms. Fontana. We had spoken with the Congressman's
              office as well as the National Ombudsman which is where
              we had received the advice due to the financial damage we
              had received from the project. Also, we were told that we
              could receive additional compensation afterwards.

(App. supp. R4, tab 280 at 725)

                                          30
 Final Payment·

        74. By letter dated 23 January 2015 to NALCO, CO Kidd acknowledged that
 $1,000 remained unpaid and asked NALCO to fill out a form to "assist us in the
 closeout effort" (app. supp. R4, tab 297 at 788). CO Kidd recalled that the $1,000 was
 paid unilaterally because NALCO would not submit a final payment request (tr. 2/280;
 R4, tab 62).

· Certified Claim

          75. NALCO submitted a certified claim in the amount of $2,165,093.11 on
  14 January 2015 (R4, tab 57). ·By letter dated 5 February 2015 to NALCO, the COE
 stated that the certification in NALCO's claim was not in accordance with the FAR's
 certification requirement (R4, tab 60). On 19 February 2015 NALCO submitted a
 properly certified claim (R4, tab 61): On 30 April 2015, NALCO submitted a
 supplemental certified claim for a 94-day time extension and rescission/repudiation of
 th:e settlement agreement (R4, tab 2 at 19).

        76. On 2 July 2015 CO Kidd issued a final decision denying NALCO's claim
 (R4, tab 2 at 24). NALCO appealed the final decision to the Armed Services Board of
 Contract Appeals (ASBCA) and on 28 September 2015 the appeals were docketed as
 ASBCA Nos. 60235 Contract Balance, 60236 Unabsorbed Overhead, 60237 Differing
 Site Condition, and 60238 Time Extension (R4, tab 1).

 Expert festimony & Reports

 Mr. Carlos Pena

          77. Mr. Carlos Pena is advil engineer with experience in dredging and
  waterfront engineering and works for CLE Engineering in Marion, Massachusetts
  (tr. 2/88). The Board accepted Mr. Pena·as NALCO's expert in dredge construction
  and performance (tr. 2/92-93). Mr. Pena wrote an expert report wherein he listed the.
· documents he reviewed and offered some opinions(ex. A-8). He learned that the golf
  course built a stone revetment which is a slanted sea wall that protects the landward
  side from erosion (tr. 2/95-96). The COE drawings for the original Scarborough
  project did not show the stone revetment constructed by the golf course (tr. 2/108-09,
  3/99-100; R4, tab 4c, drawing C-104, section A-A). Drawings for the country club
  revetment, dated 24 June 2013, show a "probed wall 2011" and th~ new revetment
  seaward of the probed wall. Drawing note 1 states that an existing stone wall was
  constructed in the 1930's. The old wall influenced the location of the new revetment.
  Mr. Pena testified that the existence of the new stone revetment required NALCO to·
  protect it from "scouring" that would undermine the revetment and cause it to collapse.

                                            31
(Tr. 2/133-37) If the ')et" of the slurry were to hit the sand below the revetment it
cou-ld erode the sand and the revetment would "fall apart" (tr. 3/204-05). The contract
required NALCO to start pumping the dredged material on the country club's property
where the new revetment was built (tr. 2/138-42; R4, tab 4c at 3, sheet G-101, tab 4d
at 171).                --- - -- -- --- -

       78; Mr. Pena reviewed NALCO's records and found that it was less than 30%
efficient and spent most of its time trying to protect the revetment (tr. 2/150). Once
NALCO could move beyond the revetment it could "normalize operations and achieve
a higher production rate" (tr. 2/15 l).

       79. Mr. Pena discussed various pictures taken in February and March 2014 that
showed the revetment and dredging discharge operations. The pictures show the
access road NALCO provided to the country club and the protection berms used to
protect the revetment. (Tr. 2/145-49; ex. A-11)

Mr. Roger Bullock

       80. Mr. Roger Bullock is deputy chief of operations and chief of navigation,
COE, Wilmington District ofNorth Carolina (tr. 3/111). Mr. Bullock was accepted by
the Board as an expert in dredging (tr. 3/120, 125). Mr. Bullock wrote an expert report
dated 7 April 2017 (R4, tab 78).

        81. In his expert report Mr. Bullock first reviewed the abstract of bids. He
stated that "NALCO's bid presented warning signs as it was significantly lower than
the independent government estimate (IGE). The contractor calculated excessive
mobilization and minimarunit costs, particularly when compared to the IGE unit cost."
(R4, tab 78 at 4) NALCO's CLIN 0002A unit costwas $2.50 compared to the IGE of
$19.34 (id., R4, tab 8). Mr. Bullock could not see how NALCO could operate the-
equipment and personnel at such a low price (id.).

     -82. Mr~ Bullock reviewed the contract documents and opined that the COE's
concern over NALCO's dredge was appropriate:

              It is my opinion that US.ACE presented an appropriate
              level of concern with respect to NALCO's bid and gave
              NALCO a prudent opportunity to improve its approach or
              withdraw due to clear indications that the contractor
              proposed inadequate equipment and showed
              inattentiveness to the level of effort required for success.

(R4, tab 78 at 5)

                                           32
         83. Mr. Bullock commented on NALCO's performance. He stated "NALCO
did not achieve the production capability of the Ellicott 670 because NALCO did not
alter its manning approach to account for the larger plant [dredge]." (R4, tab 78 at 6; ·
tr. 3/145-48) Concerning placement of the dredged material, the pipeline route was
along the mea:n high waterline and the'discharge point depends on what the site looks
like (tr. 3/150).

        84. Mr. Bullock commented on the stone revetment. He stated, "The
revetment was a known physical presence before and after bidding, which could have
been noted by the Contractor had it conducted a site visit." 12 He acknowledged that
the revetment was not on the plans and drawings. (R4, tab 78 at 8; tr. 3/152)
Mr. Bullock did not believe that the revetment should impact NALCO's production
(tr. 3/153). He opined that NALCO's problems with the revetment were the result of,
"inattention to detail and housekeeping of the beach with constant contouring of the
material as the project progressed, again indicated insufficient supervisory, workforce,
technical knowledge, and/or management of the contract requirements" (id.).

                                       DECISION

Preliminary Matter

       We want to make it clear that, although we refer to CO Kidd often in this
decision, we do not intend to single her out. Her decisions were made collectively
with the support of other COE personnel, "her team" (finding 60), as discussed herein.
Responsibility for CO Kidd's actions and decisions are shared by all COE personnel
involved.

Pre-Award Interference

       We understand that the government's pre-award actions· cannot violate the
implied duty of good faith and fair dealing because the implied duty does not arise
before the contract-is awarded. Tug Hill Construction, Inc., ASBCA No. 57825,
14-1 BCA ,r 35,777 at 175,025 (Although every contract imposes upon each party a
duty of good faith and fair dealing in its performance and its enforcement, that duty
does not deal with good faith in the fonnation of a contract.). We discuss the COE's
pre-award actions because they are relevant to the COE's breach of the implied duty of
good faith and fair dealing after award.

      Bids were publicly opened on 23 September 2013 (finding 7). Three days later,
on 26 September 2013, Village Dock, the only other bidder, filed a pre-award agency

12
     This statement is clearly incorrect. He may have confused the "probed wall" with
         the new revetment.

                                            33
protest contending that NALCO's bid was "grossly unbalanced" (finding 9). It is
obvious from the Abstract of Bids that NALCO's bid was in fact "grossly unbalanced,"
but it ·offered a really cheap price that appealed to the COE (finding 7). While the
protest was pending the COE reviewed NALCO's bid. NALCO proposed to use an
Ellicott 370 Dragon dredge that it owned (finding 10). On 1'8 October 2013 the COE
informed NALCO that its 370 dredge was not acceptable and that NALCO had a choice
to make, it could withdraw its bid or propose a larger dredge otherwise its bid would be
rejected (id.). NALCO agreed to offer a larger dredge, the Ellicott 670, but had to rent
it for the additional cost of $70,000 per month with a four-month minimum plus
$70,000 security deposit. NALCO asked for an additional $328,624 to compensate it
for the larger dredge. However, NALCO stated if it was not possible to increase its bid
it would agree to complete the project at the original bid price. On -1 November 2013,
NALCO confirmed that it would not withdraw its bid and would use a larger dredge,
the Ellicott 670, at the original bid price. (Id.) The COE did not increase NALCO's
bid price as NALCO requested (findings 10, 12). The COE also recalculated its IGE
based on NALCO's bid in order to justify award to NALCO in violation of the
certification printed on the IGE form (finding.7).

        In responding to Village Dock's protest, CO Kidd concluded that NALCO's bid
was mathematically unbalanced but not materially unbalanced because ''there is no
reasonable basis for viewing the bid as representing other than the lowest cost to the
government" (finding 9). CO Kidd argued there was no risk to the government
because the COE could pay for "mobilization at cost with remaining funds in the
mobilization/demobilization line item paid at project completion" (id.). Village
Dock's protest was denied on 22 November 2013 (finding 11). The COE awarded
Contract No. W912WJ-14-C-0004 tb NALCO on 2 December 2013 at the prices in
NALCO's bid (finding 12). In the award letter CO Kidd imposed DFARS
252.236-7004(b) and stated that NALCO was required to furnish actual cost data to
justify payments for mobilization and demobilization (id.).

       CO Kidd testified that the COE had a right to refuse to accept NALCO's use of
its 370 dredge or have its bid rejected (finding 10). Contrary to the COE's belief, it
had no right to allow NALCO to amend its bid and offer a larger dredge in the middle
of a sealed bid competition. FAR 14.404-2(e), Rejection of Individual Bids, does not
allow the government to request bid changes that go to the substance of the bid or
prejudice other bidders. 13 In this case the COE did both: it changed the substance of
NALCO's bid and it prejudiced Village Dock. The.COE had three alternatives after
bid opening, (1) reject NALCO's bid as non-responsive because of the 370 dredge and

13   FAR 14.404-2(e) reads in part, "A low bidder may be requested to delete
        objectionable conditions from a bid provided the conditions do not go to the
        substance, as distinguished from the form, of the bid, or work an injustice on
        other bidders."

                                             34
  award to Village Dock, (2) award to NALCO based on its original bid that proposed
· the 370 dredge, or~(3) cancel the solicitation. Of Gourse if the COE awarded the
  contract to Village Dock, it would have to pay substantially more. (Finding 7) It is
  clear to us that the COE violated FAR to get the low price offered by NALCO, but
  with the larger more expensive dredge at no additional cost. It was unfair and
  prejudicial to require NALCO to absorb the additional $3 50K for the larger dredge. It
  is also clear from CO Kidd's analysis of the protest that a significant justification for
  denying the· protest was her plan to impose DF ARS 252.236-7004(b) to limit
  mobilization "to cost" and defer payment of the remainder of the CLIN 0001 amount
  to the end of the contract. (Finding 9) The COE gave no thought to the effect of this
  plan on NALCO's cash flow. Therefore, before award, the COE improperly
  recalculated the IGE to support award to NALCO, improperly manipulated NALCO's
  bid to justify award at the lowest price, in so doing unfairly increased NALCO's cost
  of performance by requiring-a larger dredge, and simultaneously planned to act to
  deprive NALCO of the cash flow it needed to perform the contract.

 Invoking DFARS 252.236-7004(b) was an Abuse of Discretion

        No one in the COE gave any critical thought to the language in
 DFARS 252.236-7004(b) that set forth the criteria that must be satisfied before
 CO Kidd had the right to impose paragraph (b) on NALCO. If they had, it should
 have become apparent that the language is ambiguous. This in tum requires a
 multi-step. legal analysis to sort out the interpretation to be applied. That analysis is
 what we do in this decision.

         Contract interpretation under the Contract Disputes Act (CDA) is a question of
 law. States Roofing Corp. v. Winter, 587 F.3d 1364, 1368 (Fed. Cir. 2009). 14
 DFARS 252.236-7004, Payment for Mobilization and Demobilization, provides
 initially:

                  (a) The Government will pay all costs for the mobilization
                  and demobilization of all of the Contractor's-plant and
                  equipment at the contract lump sum price for this item.

                      (1) Sixty percent of the lump surrt price upon
                      completion of the contractor's-mobilization at the
                      work site.

 14
      Appellant offered a contract interpretation analysis, in its reply brief, but it focused
         on the words "actual mobilization costs" rather than the prerequisite
         requirement needed to justify imposing paragraph (b) (app. reply br. at 5-7).

                                                35
                     (2) The remaining 40 percent upon completion of
                     demebili-zation~
                             -
  (Finding 3) The lump sum price in this case is NALCO's CLIN 0001 price of
  $1,457,044 (finding 7). Under paragraph (a) NALCO would-be entitled to be paid
  60% of$1,457,044 or $874,226.00, (a)(l), for mobilization and 40% or $582,817.60,
  (a)(2), for demobilization of its "plant and equipment." There is no definition of
  "mobilization" in the contract. We interpret the factthat "plant" is listed separately
  from "equipment" to mean that "plant" is something different than equipment. There
  is no-definition of"plant" in the contract. It is clear from NALCO's bid that it
  interpreted "mobilization" of its "plant and equipment" to allow for reimbursement for
  its equipment costs (dredge, pipe, etc.) which was required for performance.
  (Findings 7, _14} It is equally clear that CO Kidd interpreted "mobilization" of "plant
  and equipment" to be limited to transportation and other non-performance related costs
  (findings 23, 25). CO Kidd believed that recoupment of the equipment/performance ·
  costs should be in CLINs 0002 to 0004 unit prices for cubic yards of dredged material
  ( finding 21 ). However, there is nothing in the solicitation informing bidders of this
  interpretation. It is equally-clear CO Kidd knew that NALCO put its
  equipment/performance costs in CLIN 0001 15 because, she testified that CLINs 0002
  to 0004 at $2.50 per CY was not enough to put fuel in the dredge (finding 26). She
- therefore knew that invoking DFARS 252.236-7004(b) would deprive NALCO of the
  funds it needed to perform.                   ·

       DF ARS 252.236-7004(b) gives the CO the discretion to impose an alternative
 method of payment for mobilization:

                 (b) The Contracting Officer may require the Contractor to
                 furnish cost data to justify this portion of the bid if the
                 Contracting Officer believes that the percentages in
                 paragraphs (a)(l) and (2) of this clause do not bear a
                 reasonable relation to the cost of the work in this contract.

                     ( 1) Failure· to justify such price to the satisfaction of
                     the Contracting Officer will result in payment, as
                     determined by the Contracting Officer, of-

                          (i) Actual. mobilization costs at completion of
                          mobilization;

                          (ii) Actual demobilization costs at completion of
                          demobilization; and

 15   Village Dock did the same thing because its CLIN 0001 price was $1.5M (finding 7).

                                               36
                         (iii) The remainder of this item in the final
                         payment under this contract.

                      (2) The Contracting Gfficer's determination of the
                      actual costs in paragraph (b )( 1) of this clause is not
                    · subject to appeal.

(Finding 3) The use of the word "may" in the first sentence "presupposes" discretion.
Smart Way Transport Services, ASBCA No. 60315, 16-1BCA136,569 at 178,110.
This grant of discretion is limited by paragraph (b) and does not preclude the
possibility that exercising paragraph (b) could be an abuse of discretion. 16

      We considered abuse of discretion recently in Raytheon Co., ASBCA
No. 57743 et al.. 17-1 BCA 136,724:

                       In determining whether a CO's decision is arbitrary
                or capricious or an abuse of discretion we consider
                (I) whether there is evidence of subjective bad faith on the
                part of the CO; (2) whether the CO had a reasonable,
                contract-related basis for the decision; (3) the amount of
                discretion given to the CO; and (4) whether there was a
                proven violation of a statute or regulation. There is no
                need for each of the four factors to be present in order to
                establish arbitrary and capricious action by the CO. For
                example, proof of the fourth factor might be enough to
                show that the co·s conduct was arbitrary and capricious.
                However, the regulatory violation must have been·
                prejudicial.

                        The Board's scope of review of alleged arbitrary
                and capricious action is narrow and we are not to substitute
                our judgment for that of the agency. However, the agency
                must have examined the relevant data and be able to
                articulate a satisfactory explanation for its action, including
                a rational connection between the facts and the action.

Id. at 178,845 (citations omitted).

16
     The immunity from appeal in subparagraph (b)(2) applies only to the CO's determination
         of actual cost of mobilization/demobilization in subparagraph (b )(I), not the decision
         to impose paragraph (b ).

                                               37
        We consider these four elements. There is no evidence of "subjective bad
faith," element (1). Viewed in a vaGuum. CO-Kidd's decision to impose (b) to defend
against the protest seems reasonable, element (2). The amount of CO Kidd's
discretion, element (3 ), is limited by the test stated in (b ). The optional method of
payment in paragraph (b) may be imposed only if "the Contracting Officer believes
that the percentages in paragraphs (a)(l) and (2) of this clause do not bear a reasonable
relation to the cost of the work in this contract." The comparison required by (b) is to
the "cost of the work in this contract." It does not say the actual cost of transportation
of plant and equipment as CO Kjdd interpreted the language. So the central question
in int6rpretingthis language is "what work"? It is apparent from NALCO's bid that it
interpreted the "cost of the work in this contract" to mean the total cost of the contract.
NALCO said as much in its 28 January 2014 Mobilization Justification Memorandum,
"NALCO's proposed mobilization costs are reasonably related to the absolute cost of
the work" (R4, tab 24 at 4), but the COE failed to appreciate the point. CO Kidd
interpreted "work" to mean only the actual cost transportation costs, bond costs, etc.
but not the cost of equipment needed to perform the work (finding 25).

        Language is legally ambiguous if it is susceptible to two reasonable
interpretations. MA. Mortenson Co., ASBCA No. 50383, 00-2 BCA, 30,936 at 152,705
("It is a settled legal principle that a contract or its terms are considered ambiguous only
when susceptible to two different reasonable interpretations, each of which is consistent
with the contract language.") (citations omitted). We think the most reasonable
interpretation of "the cost of the work in this contract" is the total cost of work in the ·
contract or the total price ofCLINs 0001 to 0004 or $1,698,134 17 (finding 12). As-stated
above, "the percentages in paragraphs (a)(l) and (2)" are $874,226.40 and $582,817.60
respectively or $1,457,044.00. Applying the amounts as required by the language means
that to exercise paragraph (b) CO Kidd must find that $1,457,044 does not bear a
"reasonable relation" to the total price of $·1,698, 134. The clause provides no help in
understanding what "reasonable relation" means. We see no reason why $1,457,044 does
not bear a "reasonable relation" to $1,698,134 and, if correct, CO Kidd would not have
had the discretion to invoke (b). However, we must also look at CO Kidd's interpretation
to see if it is also reasonable. In determining reasonableness it is only necessary that the
interpretation be in the "zone of reasonableness." States Roofing, 587 F.3d at 1369 ("A
contractor's reasonable interpretation need not be the best interpretation. It need only be
within the zone of reasonableness/'). Therefore, we look closely at CO Kidd's
interpretation of paragraph (b ). CO Kidd testified that she did not believe the 6_0% of
CLIN 0001 or $874,226.40 "bore a reasonable relation to the cost of the work in the
contract, holistically" because the "line items were not balanced" 18 and CLIN 0001

17
   We are not sure why the contract award amount was slightly different that the
       $1,699,864 shown on the abstract of bids (finding 7).
18 When it benefited the COE to defend the unbalanced bid, it did so in response to the

      protest (finding 9) to capture NALCO's low price. However, after award the

                                            38
  included costs that should have been in CLINs 0002 to 0004 for dredged material.
  (Finding 21) We do not know what she meant by "holistically." We do not know what
  the unbalanced bid has to do with this test. The contract did not inform bidders they
  could only recover equipment/performance costs in CLINs 0002 to 0004. CO Kidd
  clarified her reasoning stating that the equipment costs·in CLIN 0001 "are not costs that
  may be attributed to mobilization" and "not inherently associated with mobilization."
  (Finding 25) Therefore, CO Kidd's interpreted "work" to be limited to the actual costs of
  moving equipment to the work site and other non-performance related costs, i.e., not
· costs for the dredge, pipe, etc. Her test was therefore, that $874,226.40 did not bear a
  reasonable relationship to the actual cost of transportation and other non-performance
  related costs which she valued at $101,102.70. We find that this interpretation, although
  not the best in our opinion, is within the "zone of reasonableness." Having two
  reasonable
         .
              interpretations, the language "do not bear a reasonable relation to the cost of
                                                                                      -

  the work in this contract" is ambiguous as a matter of law.

           The next step in the interpretation analysis is to use parole/extrinsic evidence to
    clear up the ambiguity. Teg-Paradigm Environmental, Inc. v. United States, 465
   ·F .3d-l329 ar-1338.:39 (Fed. ·Cir:·2006) (Although the parol evidence rule bars the use of
    extrinsic evidence to supplement or modify a written agreement, the rule does not bar
    the use of extrinsic evidence to interpret the terms of a contract when the plain and
    ordinary meaning is not clear' from the contract itself.). There is no extrinsic evidence in .
    the record to assist us in ascertaining what the drafters of the criteria in paragraph (b)
    had in mind. The next step is to consider the ambiguity and duty to inquire. If an
    ambiguity is patent a duty to inquire arises. NVT Technologies v. United States, 370
    F.3d 1153 at 1162 (Fed. Cir. 2004) (If the ambiguity is patent, it triggers a duty to
    inquire. A patent ambiguity is one th.at is "obvious, gross, [or] glaring, so that plaintiff
    contractor had a duty to inquire about it at the start."). The ambiguity in this case is the
·-1anguage ofDFARS 252.236-7004(b), one of many clauses incorporated into the
  ·contract. We find that this ambiguity was not patent and NALCO was not obligated to
    inquire. This leads us to the final ·step. The government wrote DFARS 252.236-7004(b)
    and we interpret paragraph (b) against the government under contra proferentem:

                If the ambiguity is not patent, but latent, we construe it
                against the drafter under the rule of contra proferentem.
                Metric Constructors, Inc. v. NASA, 169 F.3d 747, 751
                (Fed. Cir.-1999). For the rule to apply, however, the
                nondrafting party must prove that it relied on its
                interpretation during bidding. Fruin-Calnan Corp. v.
                United States, 912 F.2d 1426, 1430 (Fed. Cir. 1990).

         COE uses the unbalanced bid as justification to refuse to pay NALCO its
         CLIN 0001 mobilization price (finding 23).

                                               39
Weis Builders, Inc., ASBCA No. 56306, 10-1 BCA, 34,369 at 169,722. It is clear
from NALCO's bid that it relied upon its interpretation of CLIN 0001 "mobilization"
of its "plant and equipment" to allow for partial reimbursement for its equipment
(dredge, pipe, etc.) needed to perform the contract (findings 7, 14). This is the
interpretation-we will enforce. We will not enforce CO Kidd's interpretation that
CLIN 0001 only allows for transportation costs and not equipment costs based on
contra proferentem. Therefore, CO Kidd's decision violated element (3) in that her
discretion was limited and element (4) in that she violated a regulation, which is
OF ARS 252.236-7004(b ).

        There are other independent facts supporting our conclusion that CO Kidd abused
 her discretion in invoking paragraph (b ). Before award in defending the protest she
 recognized NALCO's bid was unbalanced and decided to implement (b) knowing
 NALCO's performance costs were in CLIN 0001. (Finding 9) She testified "you can't
 even fuel a dredge for this work at the cost [$2.50] of the line item for the quantities" 19
 (finding 21). This testimony proves that CO Kidd knew that NALCO could not possibly
 pay for its costs of performance through the per cubic yard prices in CLINs 0002 to
 0004: -She knew that NALCO had frontloaded its equipment/performance costs in·
 CLIN 0001. (Findings 23, 25) Nowhere in the solicitation are the bidders warned that
 only actual transportation and related costs would be paid for in CLIN 0001 and that
 bidders must recover all other costs needed to perform the contract in CLINs 0002 to
 0004 unit prices for each cubic yard of dredged material. The total amount approved by
 CO Kidd for mobilization was $101,102.70 reserving $773,123.70 for payment only
 when performance was complete. (Finding 25) CO Kidd knew NALCO needed this
 money to perform. She also knew that the COE' s insistence that NALCO offer a larger
 dredge at no additional cost would increase NALCO's cost of performance thereby
 adversely affecting cash flow. She further justified her decision by testifying that if the
 COE paid for the-dredge and other equipment up front "there was no reason for the
 contractor to continue performance once they had the money because there is no money
 on the line items [for dredged material]." (Finding 26) It is astonishing to us that the
 COE would enter into this contract assuming that NALCO would not perform if it were
-paid 60% of its CLIN 0001 bid mobilization price as authorized by paragraph (a). In
 response to NALCO's plea for payment (finding 24), CO Kidd wrote, "It is not t~e
 practice of the U.S. Army Corps of Engineers to counsel contractors on their cash flow
 concerns or provide financing to contractors who experience cash flow problems"
 (finding 25). This shows a degree of callousness unexpected from the government since
 the government caused NALCO's cash flow crisis. When asked by the trial judge how
 NALCO was supposed to pay for performance, CO Kidd testified that NALCO would
 have to get private financing and that the way NALCO structured its bid caused the cash
 flow problem (finding 26). Again this is proof that the CO Kidd understood that

19
     The COE's dredging expert, Mr. Bullock, agreed that NALCO could not operate its
         equipment at a per cubic yard price on $2.50 (finding 81).      ·

                                            40
 NA~CO front-loaded its performance costs in CLIN 0001. The judge suggested it was
·CO Kidd's decision to exercise paragraph (b) that caused NALCO's cash flow problem
 (id.). CO Kidd responded that there was already risk (id.). While these facts arguably
 do not support a finding of "subjective bad faith," they provide further support for our .
 finding of abuse of discretion be-cause CO Kidd knew that invoking paragraph (b) would
 cause NALCO severe cash flow problems. In fact, CO Kid4 knew all of this before
 award in defending the protest but was focused on capturing NALCO's low bid and
 protecting the COE rather than focusing on successful performance. (Findings 7, 9)
 Arguably, CO Kidd should have taken this knowledge and decided notto award to
 NALCO because its bid violated her-interpretation of the clause.

      For the reasons discussed above we find that CO Kidd abused her discretion
when she invoked DF ARS 252.236-7004(b ).

      The COE Breached the Implied Duty of Good Faith & Fair
Dealing/Non-Interference -

      ··Previously we dealt with·the-implied'duty-of good -faith and fair· dealing in
Raytheon Missile Systems Co., ASBCA No. 57594, 13 BCA ,r 35,264. We followed
the Federal Circuit's guidance in Precision Pine & Timber, Inc. v. United States,
596 F .3d 817 (Fed. Cir. 2010), that required a determination that the government's
action: (1) was "specifically targeted" at the contractor, and (2) "reappropriated" a
benefit guaranteed by the contract to the contractor. Raytheon, 13 BCA ,r 35,264
at 173,116. The Federal Circuit clarified Precision Pine in Metcalf Construction Co.
v. United States, 742 F.3d 984 (Fed. Cir. 2014). The Court began with the general
principle:

                     · "Every contract imposes upen each party a duty of
               good faith and fair dealing in ·its performance and
               enforcement." Restatement (Second) of Contracts§ 205
               (1981) ("Restatement"), quoted in Alabama v. North
               Carolina, )60 U.S. :BO, 130 S. Ct. 2295, 2312, 176 L. Ed.
               2d 1070 (2010). Failure to fulfill that duty constitutes a
             · breach of contract, as does failure to fulfill a duty
               "imposed by a promise stated in the agreement."
               Restatement§ 235. We have long applied those principles
               to contracts with the federal government. E.g., Precision
               Pine & Timber, Inc. v. United States, 596 F.3d 817, 828
               (Fed. Cir. 2010); Malone v. United States, 849 F.2d 1441,
               1445-46 (Fed. Cir. 1988).

Metcalf, 742 F.3d at 990. The Court then explained that the lower court's decision
misread Precision Pine:

                                           41
                           The trial court's decision in this case rests on an
                    unduly narrow view of the duty of good faith and fair
                    dealing. Relying almost entirely on Precision Pine, it held
                    that "a breach of the duty of good-faith and fair dealing-
                    claim against the Government can only be established by a
                    showing that it ·'specifically designed to reappropriate the
                    benefits [that] the other party expected to obtain from the
                    transaction, thereby abrogating the government's
                    obligations under_the contract."

                            The trial court misread Precision Pine, which does
                    not impose a specific-targeting requirement applicable
                    across the board or in this case. The cited portion of
                    Precision Pine does not purport to define the scope of
                    good..;faith"and'"fair-dealing claims-for al-lcases;-let alone
                    alter earlier standards.

    Id. at 992-93. Accordingly, we no longer need to find "specific targeting" or
    "reappropriation" of benefits to establish a breach of the implied duty of good faith
    and fair dealing. The Federal Circuit directs us to follow "the familiar broader
    standards reflected in the passages from Centex [Corp. v. United States, 395 F.3d 1283
    (Fed. Cir. 2005)]; and Malone [v. United States, 849 F.2d 1441 (Fed. Cir. 1988)]."
    Metcalf, 742 F.3d at 994. Centex provides, "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,
    395 F.3d at 1304 .. We follow Centex and Malone.

           In applying this guidance, we cannot ignore the COE's disturbing attitude
    toward NALCO as seen in the record. Before award there was the improper direction
    to use a bigger dredge at no additional cost or have its bid rejected (finding 10). This
    increased NALCO's equipment costs and reduced the cash flow available to pay for
    such things as labor, gas, survey support-, overhead and profit. When the NTP was
    issued on 12 December 2013, Messrs. O'Donnell, Walsh, Morocco and Steams joked
    that NALCO needed "babysitting" and that the dredge· might sink 20 (finding 16). On
    27 January 2014 Mr. Kim told Mr. Steams that ifhe didn't get the 60% of his
    mobilization_bid price NALCO could not perform and would go bankrupt to no avail
    (finding 23). On 28 January 2014, Mr. Kim submitted a seven-page memorandum to

    20
·        Innocuous standing alone but not under the circumstances of this appeal.

                                                  42
  the COE arguing that NALCO should be paid for its mobilization costs as bid
  (-finding 24); The memorandum was dismissed by th€ COE as evidenced by
  Mr. Dolan's 28 January 2014 internal email mocking NALCO's 28 January 2014
  memorandum (id.). This memorandum contained a number of completely valid
  arguments that if taken -serinusly may have avoid-ed-the-destruction of NALCO and
  this litigation (id.). Then there is CO Kidd's belief that NALCO would not perform if
  she paid the 60% of its CLIN 0001 price which was clearly authorized in
  DFARS 252.236-7004(a) (finding 26). When Mr. Kim informed Mr. Steams that the
  revetment in the disposal area was a problem, Mr. Kim recalled Mr. Steams saying the
  COE didn't care if NALCO finished, they were just following procedures 21
  (finding 20). CO Kidd attributed NALCO's problems with the revetment to its
 -"incompetence" an-d "mismanagement of the disposal" (finding 41), when the
  revetment clearly was a change that encroached on NALCO's disposal area and
  interfered in its dredging (findings 36, 41). Mr. Walsh testified on the revetment that a
  "changed site condition like that is problematic after you've awarded" a contract
  (finding 13). There is also the way Mr. Kim was coerced into signing Modification
  No. P00003 to avoid CO Kidd's threat to terminate for default if he did not accept her
- take-it:-or-leave;;;it offerof-$-3-9 5,000; 22 ·a threat-she had- no-right to make because
  NALCO was not in default (see decision below). CO Kidd wrote the 28 October 2014
  Hazlett letter to Mr. Kim stating in part:

                 The goal of the Corps in this matter was to provide you
                 with the resources necessary to complete the project while
                 limiting risk to the government. ...

                 .-.;-'The Corps is committed to partnering with our small
                 business community to meet our mission requirements.
                 However, after review, it appears that our New England
                 District acted in good faith in awarding and administrating
                 this contract and also took extra measures to-limit financial
                 damage to your company while acting within the bounds of
                 the law and the best interests of the government.

- (Finding 69) -Nothing could be further fromthe truth. CO-Kidd drafted this letter
  (id.). The COE certainly did not partner with NALCO or attempt in any way to
  provide NALCO "resources necessary to complete the project" or "limit financial
  damage." As a result of the COE's actions, Mr. Kim lost his home, equipment and

 21
      Mr. Kim's testimony is unrebutted in the record and we find it credible.
 22
      This amount is much less that estimates from other COE personnel that valued the
          settlement at $600,000 or $700,000 (findings 46, 55).

                                              43
business. (Finding 32) Even with all the harm that the COE caused NALCO,
it performed well (findings 44-45). -When presented with evidence of the validity of
NALCO's claims, COE senior management failed to act to remedy the problems
(finding 71). These examples are not merely anecdotal. At every point where an
important decision had to he made, the COE chose to protect itself rather thart act to
successfully complete the contract or redress NALCO's legitimate claims.

        To be fair, there were a few in the COE who seemed to sense the predicament
NALCO faced. Mr. Walsh testified the revetment was a changed site condition
(finding 13). In March 2014 Mr. Walsh understood that asking NALCO to provide for
access for PNCC to place sand over the revetment was an unreasonable imposition on
NALCO and a change to the contract (finding 39). Mr. O'Connor's 6 March 2014
email to Mr. Walsh suggested that NALCO should be paid about $200,000 for
performance. Also in March 2014 Mr. Walsh wrote that NALCO should be paid
something "the sooner the better considering their cash-flow problems." (Finding 34)
In March 2014 Mr. O'Connor recognized that paying NALCO 15% of the contract
amount for 59% of the work until settlement was unfair (finding 34). He also wrote,
"Tneunnfficial EOE survey shows·NAI::eO[-'s] work was very good consideri~g they
had no [could not afford] survey work" (finding 44). In April 2014 email Mr. Walsh
wrote that NALCO "approached this project with integrity and a good faith effort to
meet their obligations under this contract" (id.). In April 2014 Mr. O'Connor
suggested settlement in the $740,000 to $790,000 range (finding 46). In May 2014
ACO Morocco informed CO Kidd that Mr. O'Connor's settlement estimate was in the
$600,000 range (finding 55). In June 2014 Mr. O'Connor emailed Mr. Walsh stating
that NALCO had still not been paid for the majority of the work performed         ·
(finding 57). Unfortunately these voices of reason fell on deaf ears. In December
2014, Mr. Cashman's memorandum to Mr. Hazlett recognized weaknesses in the
COE's position and recommended reopening the negotiations, nothing happened
(finding 71). Also in December 2014 Ms. Fontana recognized that NALCO was
entitled to relief but her·arguments were not acted upon (finding 72).

       The COE breached the implied duty of good faith and fair dealing/non-
interference generally based on its treattnerit ofNALCO discussed above. We held
above that invoking DF ARS 252.236-7004(b) was an abuse of discretion. This in tum
interfered with NALCO by limiting the CLIN 0001 payment to $101,102.70 rather than
$874,226.40 improperly denying NALCO $-773,123.70 it needed to perform the contract
(finding 23). The interference was exacerbated by the COE's improper pre-award
insistence that NALCO offer a larger more expensive dredge at the same bid price
(finding 10). The drastic reduction in cash flow destroyed NALCO's reasonable
expectations regarding the "fruits of the contract" i.e., being able to perform and be paid
for completion of the contract. Centex, 395 F.3d at 1304. This constitutes a breach of
the implied covenant of good faith, fair dealing and non-interference.
                         .    '

                                           44
The Rock Revetment is a Constructive Change

       The solicitation/contract required NALCO to place dredged material on the
western beach starting from Ferry Rock to the north then south along the beach
adjacent to the PNCC ahd beyond (findings-4, 15). The solicitation/contract drawings
of the disposal area did not show the new rock revetment or otherwise disclose that
PNCC planned to construct a rock revetment at the northern end of the disposal area
where NALCO was to start disposing of dredged material (finding 17).

       -The day after the contract was awarded, the COE learned that PNCC was going
to construct a rock revetment along the western beach disposal area adjacent to and
seaward of PNCC's property (finding 13). Minutes from a 17 December 2013            .
coordination meeting indicate that the revetment was discussed. Mr. Kim expressed
concern over the revetment but was told by Mr. Walsh to continue work "as is" and
that the COE would "resolve this problem" (finding 17). No resolution of the
"problem" by the COE was forthcoming.

      - Mr: Kim asked iftherevetment could be postponed until after NALCO had·
completed dredging (finding 20). The revetment was not postponed and was
completed by 7 February 2014, just before NALCO started dredging ( finding 28).
Mr. Kim and his son Mr. Paul Kim, the dredge operator, testified about the adverse
effect the revetment had on dredging. The revetment encroached on the beach making
it narrower reducing NALCO's work area. To avoid undermining the revetment and
causing it to collapse, 23 NALCO had to work at low tide which caused a ''large degree
of stop and starts of the dredge." (Finding 28) This testimony is corroborated by
ACO Morocco's 11 March 2014 email, written when NALCO was still working at the
revetment, stating that NALCO "has a lot of stop and start-due to waiting for the tide,
putting-out pipe~ then dredging if the tides allow. It was very inefficient."
(Finding 3 7) The Kims' testimony is also corroborated by photographs taken in
March 2014 (finding 47). The Kims' testimony is also corroborated by the daily
quality control reports (finding 48). Mr. Kim testified that NALCO could "fly through
the work" if the revetment had not been there 24 ( finding 36). The COE, however,
attributed NALCO'-s problems to its "incompetence" and "mismanagement of the
disposal" not the revetment (finding 41). The COE's position is not supported by the
record. We find Mr. Kim's and Mr. Paul Kim's testimony, corroborated by
contemporaneous documents and photographs, is credible and we find that the

23
     NALCO's dredging expert, Mr. Pena, agreed that the presence of the revetment
         forced NALCO to protect it from "scouring" by the "jet" of the slurry
         (finding 77).
24
     Mr. Pena agreed that once NALCO progressed past the revetment, it could resume
         normal operations with greater efficiency (finding 78).

                                           45
revetment significantly interfered with NALCO's ability to make progress in its
dredging work.

       Having held that the revetment interfered with NALCO's ability to perform, we
·consider if this ·was a constructive change: 25

                A constructive change occurs ,vhere a coi:itractor perfonns
                work beyond the contract requirements without a formal
                order under the Changes provision of the contract, due
                either to an informal order from, or through the fault of: the
                government. If the CO or other authorized person, without
                issuing a fonnal change order, requires the contractor to
                perform work or to utilize materials which the contractor
                regards as being beyond the requirements of the pertinent
                contract specifications or drawings, the contractor may
                elect to treat the CO's directive as a constructive change
                order and prosecute a claim for an equitable adjustment.

Lamb Engineering & Construction Co., ASBCA No. 53304 et al., 06-1BCA133,178
at 164,417 (citations omitted).

       The first time the revetment was discussed with NALCO was at the
17 December 2013 coordination meeting when Mr. Walsh, COE project engineer, told
Mr. Kim to "continue to work as is, and [he did] not see any problems with this [the
revetment] and that USACE would resolve this issue." Mr. Stearns, COE project
manager, was present at the meeting. (Finding 17) Mr. Walsh and Mr. Stearns were
not contracting officers, however, as project engineer and project manager we find that
based on their positions they had implied actual authority to direct NALCO's work.
Cate!, Inc., ASBCA No. 54627, 05-1 BCA 132,966 at 163,298 ("Under appropriate
circumstances. an implied-in-fact contract may arise where a government
representative without express contracting authority has implied actual authority to
bind the government. Such authority must be-' an integral part of the duties assigned to
the Government employee who created the obligation."').

     Ifwe were to find that Mr. Walsh's and Mr. Stearn's direction to NALCO was
somehow unauthorized, we would find ratification. -ACO Morocco knew about the

25
     FAR 52.236-2, Differing Site Conditions, identifies two types of conditions .. First,
        subsurface or latent physical conditions which differ materially from those
        indicated in the contract. Second, unknown physical conditions at the site of an
        unusual nature which differ materially from those ordinarily encountered. We
        do not view the revetment as a differing site condition because it did not exist
        before contract award.

                                             46
revetment on 16 January 2014 (finding 20). On 22 January 2014, CO Kidd was
informed of NALCO's problems (finding 22). They had actual knowledge that
NALCO would have to deal with the previously undisclosed revetment located in the
disposal area and that Mr. Walsh and Mr. Steams were monitoring NALCO's work.
We find CO Kidd and ACO Morocco-adopted the actions -of Mr. Walsh and
Mr. Steams and therefore ratified their actions both at the 17 December 2013 meeting
and thereafter. Cate!, 05-1 BCA ,r 32,966 at 163,298 (A government representative ·
with contract authority, who has actual or constructive knowledge of the material facts
with respect to an unauthorized contract action by a government representative, may
ratify the aGtion so as to bind the government provided the authorized representative
expressly or by implication adopts the unauthorized coritract action.); Winter
v. Cath-dr/Balti Joint Venture, 497 F.3d 1339, 1347 (Fed. Cir. 2007) (Ratification
requires knowledge of material facts involving the unauthorized act and approval of
the activity by one with authority.). The additional work caused by the revetment was
not work required under the contract. We find that NALCO did not volunteer to deal
with the significant added difficulties caused by the revetment and that the COE
directed NALCO to protect the revetment without additional compensation. The
revetment was a constmctive change-to NAt-CO:s contract: NALCO was and is
entitled to an equitable adjustment for increased costs and time to perform caused by
the revetment. Lamb Engineering, 06-1 BCA ,i 33,178 at 164,417.

,The Modification No. P00003 Release is Unenforceable

        We have found that the CO Kidd's decision to invoke DFARS 252.236-7004(b)
was an abuse of discretion. This breach deprived NALCO of cash flow needed to
perform the contract. Consequently, we found that the COE breached the implied duty
of good faith, fair dealing and non-interference. Therefore, NALCO's failure to
perform due to financial difficulties is excusable. Cantril! Development Corp.,
ASBCA No. 30160 et al., 89-2 BCA ,r 21,635 at 108,850 ("If CDC's financial
incapacity was Government caused the resulting inability to perform would be due to a
cause not within the contractor's control or due to its fault or negligence and thus
would be excused."). We then found that the construction of the rock revetment by
PNCC was a constructive change that entitled NALCO to an equitable adjustment to
both cost and time to perform. For these reasons NALCO's failure tci complete by
31 March 2014 26 was excusable and NALCO was not in default. CO Kidd had no
right to terminate for default and therefore no right to threaten to terminate for default.
Such threats can be coercive. Milton Beatty v. United States, 168 F. Supp. 204, 207 (A
party is always entitled to say that if his offer is not accepted, he will avail himself of
his legal rights; it is only the threat of a wrongful or unlawful act that may constitute

26
     NALCO asked CO Kidd for a time extension because it believed having passed the
        revetment, it could finish the contract (findings 40-41). An extension was not
        granted.

                                            47
duress. Such a threat will amount to duress only if it is sufficient to overpower the will
of the other party and prev:ent the free exercise of his will.); B&H Construction Co.,
ASBCA Nos. 24558, 24587, 80-2 BCA ,i 14,568 at 71,840 (citations omitted):

                    - The coercion of which appellant complains-in each
              instance was the threat by the contracting officer to
              terminate the contract for default. We must therefore
              determine whether the contracting officer would have been
              justified in terminating the respective contracts for default
              at the_time of makinKthe threats, since it is not coercion, or
              duress. for a party to do or threat~n to do_ what it has a legal
              right to do ....

                      In the ~atters before us, the propriety of the
               Government's threats to terminate for default hinges upon
              whether the delays arose from unforeseeable causes
               beyond the control and without the fault and negligence of
           - --appellant and ·its subcontractors-and suppliers at any tier.

       We now consider if CO Kidd's threats to terminate NALCO for default amount
to duress. In Freedom NY, Inc., ASBCA No. 43965, 04-2 BCA 'ii 32,775, we
considered duress:

                      To render a contract unenforceable for duress, the
              party "must establish that (1) it involuntarily accepted [the
              other party's] terms, (2) circumstances pennitted no other
              alternative, and (3) such circumstances were the result of
              [the other party's] coercive acts." Rumsfeld v. Freedom
              NY, Inc., 329 F.3d at 1329, quoting Dureiko v. United
              States, 209 F.3d 1345, 1358 (Fed. Cir. 2000). ·'[C]oercion
              requires a showing that the government's action was
              wrongful-i.e. that-it was (I) illegal, (2) a breach of an
              express provision of the contract without a good faith
              belief that the action was pennissible under the contract, or
              (3) a breach of the implied covenant of good faith _and fair
              dealing." Id. at 1330.

Id. at 162,066. We follow this guidance.

      We look at the events leading up to the 1 August 2014 negotiations and
Mr. Kim's signing Modification No. P00003 on 12 August 2014. On 23 April 2014
Mr. O'Connor suggested to CO Kidd that a settlement with NALCO "might be

                                            48
   $740,000 to $790,000." CO Kidd responded saying his analysis was "spot on."
   (Finding 46)

           CO Kidd suggested negotiation of a settlement as an alternative to termination
   for default (finding 49). -On 1 May 2014, CO Kidd wrote NALCO presenting three
   "options" (previously discussed): (1) T4D - Surety tenders payment for payment
   bond, (2) T4D - Surety takes over, or (3) No-cost settlement27 as a T4D alternative
   (finding 52). CO Kidd also took the position that the COE would not include
   equipment costs, i.e., dredge, pipe, etc. or costs arising from the "differing site
   conditi.on" (revetment) in the settlement (finding 49).                            ·

          On 30 April 2014 CO Kidd discussed settlement with NALCO's attorney.
   CO Kidd reiterated her position that she would not consider costs for the dredge, pipe
   and differing site condition. On 7 May 2014 CO Kidd met with NALCO's attorney
   and agreed to pursue settlement. Mr. Kim testified that at the time he felt he had no
   choice but to agree to what CO Kidd offered. (Findings 52-53)

             Before meeting with CO Kidd, NALCO submitted a settlement proposal in the
     amount of $1,023,898 that included costs for the dredge, pipe, miscellaneous
     equipment, payroll, overhead, demobilization, and differing site conditions
     (finding 58). The parties met on 1 August 2014 to discuss settlement. The COE
   . initially offered $350,000 and raised it to $375,000 when NALCO would not accept
     the-first offer. CO Kidd told NALCO's lawyer that $375,000 was take it or leave it
     and if NALCO did not take it she would terminate the contract for default.
     (Finding 61) Mr. Kim understood that if the contract was terminated for default he
     would get no money and the bonding company would auction off his property such as
     his personal house and NALCO's equipment. Mr. Kim decided to call an SBA
~- - ombudsman.· Mr. Kim testified that the ombudsman told him the COE was trying to
     force NALCO into bankruptcy and that ifhe didn't take the money offered he would
     lose-his house. She suggested that he could go to court and that a judge might help
     him. Mr. Kim went back into the meeting with CO Kidd and signed the offer.
     (Finding.61) He testified it was a "take it or leave it" situation. CO Kidd knew that
     Mr. Kim was not happy with the settlement. Mr. Kim told her he felt forced into the
     agreement. (Findings 61, 63) The 1 August 2014 agreement was formally
     implemented in Modification No. P00003 submitted to NALCO after the meeting.
     Before Mr. Kim signed Modification No. P00003, he complained to the COE IG and
     Mr. Hazlett, COE director of contracting, stating that the $375,000 was unfair because
     it did not include anything for the dredge, pipe and differing site conditions.
     (Finding 62) On 12 August 2014·Mr. Kim signed Modification No. P00003

   27
        This is a misnomer because Modification No. P00003 included a payment (finding 63)

                                              49
   implementing the settlement, however, the COE held back $1,000 28 (finding 63). On
   26 August 2014 NALCO was pa-id $374,000 (finding 68). Mr. Kim testified that he
   signed under protest and did not agree with the content of the modification but signed
   to get the money (finding 61). Based on this record we find that NALCO involuntarily
   accepted the COE's terms. We also find that because NALCO was effectively out of
   business-(finding 6-5), and Mr. Kim's personal house, and NALCO's equipment was
   about to be sold to pay creditors (findings 32, 61 ), Mr. Kim had no other alternative
   but to accept the COE's terms.

           Finally we must consider if the COE's actions were coercive, i.e. (1) illegal,
   (2) a breach of an express provision of the contract without a good faith belief that the
   action was permissible under the contract, or (3) a breach of the implied covenant of
   good faith and fair dealing. Freedom, 04-2 BCA ,i 32,775 at 162,066. We start with
   illegal act; we do not consider CO Kidd's actions to be illegal.

            The default clause in NALCO's contract is FAR 52.249-10, Default (Fixed-Price
    Construction) (finding 3). It provides that a contractor's right to proceed "shall not be
    terminated"-ifthe-"delay in completingthe work arises from unforeseeable causes
    beyond the control and without the fault or negligence of the Contractor." We found
    that CO Kidd had no right to threaten NALCO with termination for default-a violation
    of the Disputes clause. So the question becomes did CO Kidd have a "good faith belief
    that the action was permissible under the contract"? CO Kidd explained that she and
    "her team" believed termination for default was justified, "The revetment had very little
    to do with the failure; it was the mismanagement and incompetence, not only in the
    disposal, but also in the dredging itself." (Finding 60) We do not accept this as a good
    faith position. CO Kidd ignored the fact that the revetment reduced the space on the
    beach NALCO had to work. NALCO had to work at low tide to avoid damaging the
-- -revetment (Finding 28) Mr. O'Connor's 11 March 2014 email, written at the time
    NALCO was working near the revetment, informing CO Kidd that NALCO was
    experiencing "a lot of stop and start due to waiting for the tide" and was very
    inefficient, contradicts CO Kidd's position (finding 37). The record is replete with
    evidence that NALCO's failure to perfonn was excusable. We find CO Kidd violated
    an express provision of the contract, the Default clause, without a good faith belief that
    the action was permissible under the contract,

         We found that the COE improperly invoked DFARS 252.236-7004(b) depriving
  NALCO of significant cash flow thereby breaching the implied covenant of good faith
  and fair dealing. We found that CO Kidd did not have the right to threaten NAJ_,CO
  with termination for default. Therefore, we find that CO Kidd's take it or leave it price

  28
       Because we find coercion we need not consider the issue of consideration for the
           modification and release.

                                              50
of$375,000 and threat to terminate NALCO for default if Mr. Kim did not agree to that
price was another breach of the implied covenant.

      Having found two of the three indicia of coercion, we find that NALCO was
coerced into signing Modification No. P00003 and its release is unenforceable.

                                   CONCLUSION

        ASBCA No. 60235-Contract Balance and Recession, Repudiation of
Settlement Agreement for Duress. We found that the COE coerced Mr. Kim into
signing the deal embodied in Modification No. P00003 and therefore the modification
and its releases are unenforceable. Additionally, we found that under these
circumstances the implementation of DFARS 252.236-7004(b) was a violation of the
implied covenant of good faith and fair dealing. ASBCA No. 60235 is sustained,
however, the exact amount NALCO is entitled to is left to quantum to be detennined
in accordance with this decision and the terms of the contract.

        ASBCA No. 60236-Unabsorbed Overhead. The only factual suppo1i for this
claim is proposed finding 302. That finding dtes to Mr. Kim's testimony that
identified some continuing expenses and ends with, "NALCO remains in standby
mode pending resolution of this claim." We disagree. The project has been completed
and there is no prospect that NALCO will be called upon to continue dredging on the
project. ASBCA No. 60236 is denied.

         ASBCA No. 6023 7-Differing Site Conditions. There are two alleged
differing site conditions in NALCO's claim; first is the material NALCO was
dredging. No evidence was presented on the differing dredge material claim; NALCO
failed to meet its burden of proof. Additionally, NALCO withdrev.r the dredged
material part of its claim (appellant's proposed conclusions oflaw, at 7 n. l). 'I'hat
portion of ASBCA No. 60237 is denied. 'fhe second alleged differing site condition is
the revetment. \Ve found that building the revetment after contract award interfered
with NALCO's dredging work and was a constructive change. The PNCC revetment
portion of ASBCA No. 6023 7 is sustained, however, the amount NALCO is entitled to
is left to quantum.

        ASBCA No. 60238----Time Extension. We found that the COE breached
the implied duty of good faith and fair dealing by improperly imposing
DFARS 252.236-7004(b) that deprived NALCO of mobilization funding needed to
perform the contract. \Ve found that the revetment was a constructive change entitling
NALCO to both compensation and a time extension. However, in its brief NALCO
concedes that its request for a time extension is "moot in light the reprocurement
work." We sustain ASBCA No. 60238, but there is no independent quantum aspect to
this claim.

                                          51
        For the reasons stated above, the appeal is sustained in part and remanded to the
parties to determine quantum. CDA interest shanbe paid from 19 February 2015.

       Dated: 9 August 2018

                                                  CRAIG S. CLARKE            .
                                                  Administr:ive Judge
                                                  Armed Services Board
                                                  of Contract Appeals

I concur in result (see separate opinion)         I concur in result (and join Judge Prouty's
                                                  opinion)

J ~                                               RICHARD SHACKLEFORD
Administrative Judge                              Administrative Judge
Vice Chairman                                     Acting Chairman
Armed Services Board                              Armed Services Board
of Contract Appeals                               of Contract Appeals

                                            52
                OPINION BY JUDGE PROUTY CONCURRING IN RESULT

           We concur in the result, but not in some of the reasoning followed by
   Judge Clarke. In particular, we agree with Judge Clarke's findings that the presence of
   the revetment at the disposal location constituted a constructive change to the contract
   for which the government is liable for proven damages and which would preclude any
   termination for default of NALCO on the grounds of its failure to complete the
   ·contract on time. We also agree with Judge Clarke's findings that the release executed
   by NALCO was made under economic duress and is thus void (we do so, however,
   without agreeing that there was necessarily a breach of the duty of good faith and fair
    dealing). The consequence of these findings is that NALCO is entitled to termination
   for convenience damages: the whole of CLIN 0001 (mobilization and
    demobilization); the work done on the other CLINs; and the extra costs incurred_
   through the constructive change. This is the entirety of what Judge Clarke aw~rds.

              We part company with Judge Clarke on two matters that need not be reached to
      obtain his result, namely, the finding that the CO actionably abused her discretion by
-- -- exercising the right to deferpaying·certain-mobilization-costs, and the finding of the
      breach of the duty of good faith and fair dealing. With respect to the contract clause
      that the CO utilized to avoid early payment ofNALCO's mobilization costs, Defense
      Federal Acquisition Regulation Supplement (DFARS) 252.236-7004(b) (the DFARS
      clause), two things prevent us from joining Judge Clarke's opinion: first, the terms of
      this contract provision insulate it from review; second, it is not so clear to us that the
      CO applied the provision improperly.

           The DFARS clause, set forth in Judge Clarke's opinion, above, provides, in
    section (b ), that the CO:

                  [M]ay require the Contractor to furnish cost data to justify
                  [the mobilization/demobilization] portion of the bid if the
                  [CO] believes that the percentages in paragraphs (a)(l) and
                  (2) of this clause do not b~ar a reasonable relation to the
                  cost of the work in this contract.

    Subsection (b)(l) ofthe DFARS provision allows the CO to pay only "actual"
    mobilization and demobilization costs, as determined by the CO, if the contractor
    "[f]ail[s] to justify such price to the satisfaction of' the CO. Next, subsection (b)(2) of
    the DFARS clause provides that "[t]he Contracting Officer's determination of the
    actual costs in subparagraph (b )(1) of this clause is not subject to appeal."

           Judge Clarke has determined that the CO here abused her discretion by invoking
    section (b) of the DFARS clause (he does not c·ontend a violation of subsection (b )(1 )). ·
    But section (b) is only about requiring the contractor to furnish cost data in the

                                                 53
circumstances where the CO "beiieves" that the mobilization and demobilization
CLINs did not bear a "reasonable relation" to the contract's costs. The CO's requiring
the provisio~ of cost data by NALCO is not how NALCO was (or alleged it was)
harmed. NALCO was hurt by the CO's decision, pursuant to subsection (b)(l), to only
pay "actual" mobilization costs. That determination-actually, the determination of
what the actual mobilization costs should be, which is effectively the same thing in
these circumstances-is insulated from review by subsection (b )(2) of the DF ARS
clause, thus we should not decide it and should end our inquiry. We note that
subsection (b)(l)(iii) ofthe clause provides that any money agreed to be paid for the
mobilization/demobilization CLIN that was not paid at the time of mobilization or
demobilization will be paid at the time of the final payment on the contract. In other
words, the CO's unappealable discretion here is not about whether to pay NALCO the
amount set forth under the mobilization/demobilization CLIN, but about exactly when
to pay the full amount.

        Were we to, nevertheless, find that we could review the CO's exercise of
discretion under the DF ARS clause, we would not conclude that it was unreasonable.
Judge Clarke's-basis for determining this exercise to-be-unreasonable is his view that
the CO's belief that the mobilization/demobilization amounts in the CLIN "did not
bear a reasonable relation to the cost of the work in this contract" was simply wrong.
To that end, he essentially found that any amount of mobilization/demobilization costs
that was less than the total contract price would bear a "reasonable relation" to the cost
of work in the contract. We find this to be an untenable interpretation of the DFARS
clause's terms.

       It is well established that to interpret a contract, the Board should read it "as a
whole and interpreted to harmonize and give reasonable meaning.to all its parts," if
possible, leaving no words "useless, inexplicable, inoperative, insignificant, void,
meaningless, or superfluous." Precision Dynamics, Inc., ASBCA No. 50519, 05-2 BCA
133,071 at 163,922; see also Hunkin Conkey Constr. Co: v. United States, 461 F.2d
1270 (Ct. Cl. 1972) (rejecting contract interpretation that would render another clause in
the contract meaningless). If "reasonable relation" meant that the cost of the CLIN were
simply less than or equal to the cost of the entire contract, as Judge Clarke appears to
imply, it would render the entire DFARS clause meaningless, because, as a matter of
mathematics, in the absence of negative payments, all CLINs are less than or equal to_
the entirety of the contract price. Thus, as a matter of contract interpretation, the phrase
must mean more than Judge Clarke is allowing. The most reasonable interpretation we
can read into it is that, in the CO's judgment, the mobilization/demobilization costs not
be too disproportionately large a part of the contract's costs.

      The DF ARS clause does not explain what exactly constitutes an overly large
proportion of mobilization/demobilization costs, but leaves it to the discretion of the
CO, which is consistent with the general scheme implemented by the DF ARS clause:

                                             54
nominally, the mobilization/demobilization CLIN is paid 60-40 at the completion of
mobilization and the completion of demobilization; but if the CO believes that the
numbers are too disproportionate; she may ask for more backup on actual costs; 29 after
she receives that backup and analyzes it, she may decide what to pay prior to contract
completion. Thus, though the.term is somewhat vague, it is not impermissibly so in
this context, and certainly cannot be read to forbid what the CO did.

        Judge Clarke also argues that "other independent facts" support his conclusion
that the CO abused her discretion by invoking the DF ARS clause. Generally, we
understand iudge-clarke's concerns to be that the CO knew that limiting up-front
payments to NALCO through the DF ARS clause would have serious cash flow
implications upon the company, and that the solicitation would not have given
NALCO any reason to expect that only a portion of the costs would be paid up-front.
Judge Clarke concedes, however, that these facts do not prove subjective bad faith on
the part of the CO.

        In the absence of subjective bad faith and inasmuch as it was consistent with the
contract, we do not find that these extra reasons make the CO's actions into an abuse of
discretion as we define the term in Raytheon Co., ASBCA No. 577 43 et al., 17-1 BCA
,i 36,724 at 178,845, which was cited by Judge Clarke. To be sure, we are not happy with
the way the Corps acted on this issue: it was irresponsible, to say the least, of the Corps
to make this contract award knowing full well how imbalanced the CLINs were, but
NALCO also chose to make an unbalanced bid and to agree to the more expensive
dredger. The DFARS clause was not a secret, and did put NALCO on notice that it might
not receive the entirety of its mobilization/demobilization costs at the beginning of
performance. Moreover, the relatively short time frame for performance here (five
months) was such that it was not impossible for NALCO to perform without a
government pre-payment (and, indeed, NALCO did so).

       Similarly, like Judge Clarke, we find the government's general behavior
throughout the award and performance of the contract to be abhorrent. Nevertheless,
for reasons having nothing to do with the good faith of the government, we find it
inappropriate to apply the implicit doctrine of good faith and fair dealing as
Judge Clarke does.

29
     The Federal Acquisition Regulation (FAR) has, on other occasions, permitted a
         CO's suspicions to trigger a requirement that a contractor provide more
         substantiation for certain costs. For example, in FAR 31.201-3, all that is
         necessary to impose upon a contractor the burden of proof of demonstrating a
         particular cost to be reasonable is the CO's "challenge" of that cost after "an
         initial review of the facts." FAR 3 l.201-3(a). Like the DFARS clause we have
         discussed above, this FAR provision does not go into detail about what is
         sufficient for the CO to bring such a challenge.

                                            55
         Primarily, we decline to apply the doctrine because it requires more than the
 government act badly; it does not apply when the contract otherwise addresses the
 action complained of, and, like any breach, it must lead to damages. See Relyant,
 LLC, ASBCA No. 59809, 2018 WL 3387700 (good faith and fair dealing does not
 expand duties beyond those explicitly set forth in contract, but addresses ·
 circumstances not specifically set forth by the contract). Judge Clarke finds a breach
 of the duty by the government "generally based on its treatment of NALCO discussed
 above." But general bad treatment, obnoxious though it may be (and it truly is here),
 is not enough for a cause· of action - it must lead to some tangible damage.
 Judge Clarke does allege that the CO' s exercise of the DFARS clause is one instance of a
 particular action that breached the duty of good faith and fair dealing. We have addressed
 this above, however: by the contract's terms, it is effectively not reviewable; moreover, the
 CO appears to have acted within her broad discretion in delaying payment of the CLIN.

          We underscore that we join Judge Clarke's general condemnation of the means ,
  by which the government administered this contract. And we find that the government
  breached the contract through the constructive change -and that the release it secured
---from -NA:t:co-wair obtatrre-d-tnr-ough ·duress~-· Had-the-government acted reasonably
  throughout, and treated NALCO fairly, it is highly likely that it could have obtained a
  properly enforceable release that would have far better served both its purposes and
  NALCO's than the results of this litigation will. Thus, though the government is
  technically absolved of one cause of action, it is no victory and the results are the same .

        .In all other respects, we concur with Judge Clarke's opinion.

         Dated: 9 August 2018
                                                       @:://
                                                      J. REID PROUTY
                                                      Administrative Judge
                                                      Vice Chairman
                                                      Armed Services Board
                                                      of Contract Appeals
   I concur

   RICHARD SHACKLEFORD
   Administrative Judge
   Acting Chairman
   Armed Services Board
   of Contract Appeals

                                              56
       I certify that the foregoing is a true copy of the Opinion and Decision of the
Armed Services Board of Contract Appeals in ASBCA Nos. 60235, 60236, 60237,
60238, Appeals of North American Landscaping, Construction and Dredge, Co., Inc.,
rendered in conformance with the Board's Charter.

      Dated:-

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

                                          57