Court Opinion

ID: 9900137
Source: CourtListenerOpinion
Date Created: 2023-11-18 22:01:01.700833+00
Date Added: 2024-06-11T09:21:00.255075
License: Public Domain

ARMED SERVICES BOARD OF CONTRACT APPEALS

 Appeal of -                                   )
                                               )
 StructSure Projects, Inc.                     )   ASBCA No. 62927
                                               )
 Under Contract No. W9127S-17-D-6004           )

 APPEARANCE FOR THE APPELLANT:                     Michael S. Alfred, Esq.
                                                    Hallett & Perrin, PC
                                                    Dallas, TX

 APPEARANCES FOR THE GOVERNMENT:                   Michael P. Goodman, Esq.
                                                    Engineer Chief Trial Attorney
                                                   Michael T. Geiselhart, Esq.
                                                    Engineer Trial Attorney
                                                    U.S. Army Engineer District, Jacksonville

                                                   Allen S. Black, Esq.
                                                    Engineer Trial Attorney
                                                    U.S. Army Engineer District, Little Rock

                OPINION BY ADMINISTRATIVE JUDGE EYESTER
                       PURSUANT TO BOARD RULE 11

        The U.S. Army Corps of Engineers (government or USACE) awarded
StructSure Projects, Inc. (StructSure) a task order to perform design and alteration
services at the David Grant Medical Center, Travis Air Force Base. After StructSure
began work, and due to the COVID-19 pandemic, the agency designated the task order
non-mission essential and precluded StructSure and its subcontractors from any on-site
activities for a period of 44 days.

       StructSure has filed this appeal alleging it is owed money because the
government changed the task order requirements when it continued to use the
temporary phasing facilities and other services provided by StructSure during the 44
days the task order was designated non-mission essential. The parties elected to waive
a hearing and submit the appeal on the record pursuant to Board Rule 11. For the
following reasons, we grant StructSure’s appeal.
                                FINDINGS OF FACT

       1. On July 14, 2017, USACE awarded multiple award task order contract
(MATOC) No. W9127S-17-D-6004 to StructSure 1 for design-build construction
services (R4, tab 1 at 2-3). 2 The MATOC incorporated by reference Federal
Acquisition Regulation (FAR) 52.233-1, DISPUTES (MAY 2014); FAR 52.243-4,
CHANGES (JUN 2007); and FAR 52.249-10, DEFAULT (FIXED-PRICED
CONSTRUCTION) (APR 1984) (id. at 8-9). The MATOC incorporated in full
FAR 52.243-7, NOTIFICATION OF CHANGES (APR 1984) (id. at 26-28). All
orders issued were subject to the terms of the MATOC (id. at 32).

       2. Subsequently, on September 27, 2018, USACE issued order
No. W9127S-18-F-0112 to StructSure in the amount of $35,106,355 (R4, tab 2 at 46).
The order contained several contract line item numbers (CLINs) for various services,
including design and alteration services for the David Grant Medical Center, Travis Air
Force Base (id. at 46, 48-52). Each CLIN set forth a fixed-price amount (id. at 48-52).
StructSure was to complete the work by March 12, 2021 (id. at 56).

        3. As relevant here, CLIN 0006 required StructSure provide temporary phasing
facilities for use at the medical center during the alteration services and was awarded
in the fixed amount of $2,437,055 (id. at 50). There were two temporary phasing
facility sites--one for the Joint Radiation Oncology Center (JROC) and one for all
others, including pediatrics (see R4, tab 13 at 158; Request for Proposal (RFP)
Statement of Work, attach. 01 10 10 SOW D-Drawings (23May18).pdf at 13).
StructSure’s subcontractor for the temporary phasing facilities was Sustainable
Modular Management (Sustainable Modular) (see R4, tab 13 at 158).

       4. On March 21, 2020, the government issued its first of several notices to
StructSure stating that the Wing Leadership designated the task order award as non-
mission essential and therefore StructSure and its subcontractors could not continue
on-site construction activity until later notified (R4, tab 4). The notice advised
StructSure that the government may excuse a contractor’s performance delay pursuant
to FAR 52.249-10 and/or FAR 52.249-14 due to the COVID-19 public health
emergency and StructSure might be entitled to non-compensable days (id.). Several
similar notices followed in March and April (R4, tabs 7-9).

1
  The MATOC was awarded to United Excel Corporation (R4, tab 1 at 3). However,
        on July 1, 2019, the government issued a modification changing the
        contractor’s name to StructSure Projects, Inc. on the MATOC and all task order
        awards (R4, tab 3 at 116).
2
  Citations to the Rule 4 file are to the government’s Bates-stamped numbers.
        Citations to the briefs are to the PDF page numbers.

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       5. On April 29, 2020, the government informed StructSure that it could
recommence on-site construction activities (R4, tab 10). The parties both
acknowledge that due to COVID-19 and the task order’s designation as non-mission
essential, StructSure was unable to perform on site for 44 days (app. br. at 5; gov’t
reply br. at 4).

       6. Two weeks later, StructSure submitted a request for equitable adjustment
(REA) regarding the impacts of the suspension of work, mostly relating to schedule
(R4, tab 11 at 135-36). Some impacts included supply chain issues, remobilization
time, and revised site procedures (id. at 135). In response, on May 19, 2020, the
agency issued bilateral Modification No. A00008, changing the task order completion
date to June 19, 2021, and thereby adding 92 calendar days to the period of
performance (R4, tab 12 at 152-53). The modification did not increase the order price
and explained the delay was due to the COVID-19 pandemic, which required stoppage
of work on the project (id. at 153). The modification, issued pursuant to the default
clause, only accounted for the “non-compensatory time extension” as it was the
government’s “understanding that the contractor plan[ned] to submit an REA for costs
incurred due to the Government’s actions dealing with COVID-19” which would be
reviewed once received for merit (id. at 154).

        7. On July 2, 2020, StructSure submitted another REA stating that the
temporary phasing facilities and associated rental furniture and equipment were in use
by the government during the time the project was classified as non-mission essential
and StructSure could not perform on site (R4, tab 13 at 155). As a result, StructSure
stated it incurred extended rental costs for the facilities, furniture and equipment
because originally, these items were to be on site for only 13 months (id.). However,
due to the stoppage of work at the job site, and per the modification, the temporary
phasing facilities were on site for 16 months (id.). StructSure attached an itemized
sheet of cost impacts for the temporary phasing facilities, furniture rental, medical gas
rental, and initial outfitting services for three months, at a total cost of $278,227 (id.
at 157). In addition, StructSure attached documents showing the rental costs for two
temporary phasing facilities (one for JROC and one for pediatrics), rental furniture,
increased storage of items at the warehouse, and oxygen bottle refills (id. at 158-60).
The agency denied the REA stating that pursuant to FAR 52.249-10, the government
may grant extra time in response to a pandemic or quarantine, but not additional
money (R4, tab 14).

        8. StructSure next submitted an uncertified claim on September 4, 2020,
seeking reimbursement for the same costs (R4, tab 15). According to the claim,
because the government occupied the temporary phasing facilities and utilized the
rental furniture/equipment during the stoppage of work, StructSure did not have the
opportunity to demobilize the facilities from the jobsite to prevent incurring these

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additional costs (id.). The claim was later certified by StructSure on February 3, 2021
(R4, tab 18 at 190).

       9. On March 30, 2021, USACE issued a contracting officer’s final decision
(COFD) denying the claim for two reasons (R4, tab 19). First, the agency stated that
the exclusion from the work site was not a change as it was considered a sovereign act
of the government and therefore pursuant to FAR 52.249-10, the contracting officer
could issue a non-compensable extension for days lost, which the agency did (id.
at 191). Second, while the Coronavirus Aid, Relief, and Economic Security Act
(CARES Act) 3 permitted compensation to a contractor to maintain its workforce,
StructSure must bear the costs here--despite the fact the medical facility continued to
use the temporary phasing facilities during the period StructSure was not allowed
access--because it had a fixed-priced task order (id. at 191-92).

        10. The government does not contest there is evidence (e.g., the subcontractor
invoices) that the temporary phasing facilities cost StructSure $278,227 in additional
rental charges from March-June 2021 (gov’t reply br. at 3-4). In addition, the
government “does not contest that it benefitted from using the [temporary phasing
facilities] during the period from March 19, 2021 to June 19, 2021” (id. at 4). We find
StructSure provided the temporary phasing facilities and the government used them for
patients during the 44-day stoppage of work.

       11. On May 14, 2021, StructSure filed a notice of appeal of the COFD with the
Board and later filed its complaint. In its complaint, StructSure contends the
government used and occupied the temporary phasing facilities during the shutdown,
and for three months beyond the contracted lease terms that ended on February 16,
2021, for the pediatric facility and March 6, 2021, for the JROC unit (compl. ¶¶ 2-3).

                                       DECISION

        StructSure argues that the temporary phasing facilities remained on site for
three months longer than originally anticipated, triggering a clause in its subcontract
with Sustainable Modular and obligating it to pay additional monthly rental payments
(app. br. at 1). According to StructSure, COVID-19 did not stop work at the base, as
evidenced by the fact government personnel continued to use StructSure’s leased
temporary phasing facilities (id.). StructSure argues that it is entitled to an adjustment
for the change pursuant to FAR 52.243-7(e), NOTIFICATION OF CHANGES, and
general equitable principles as the contract price did not reflect the costs associated
with an extended lease period (id. at 2-3). In this regard, StructSure argues that
FAR 52.243-7(e) requires an adjustment to the task order price when government

3
    The COFD is referring to Pub. L. No. 116-136, 134 Stat. 281 (Mar. 27, 2020).

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conduct effects a change causing an increase in the contractor’s cost (app. br. at 3, 11;
app. reply br. at 4-5).

        The government argues that FAR 52.243-7, NOTIFICATION OF CHANGES,
is irrelevant because as its name implies, it only addresses the process for notification
and the processing of changes (gov’t reply br. at 3). While StructSure argues in its
legal briefs that FAR 52.243-7 governs, we conclude the crux of its argument, as set
forth in the REA, claim, complaint, and briefs is that the government changed the task
order requirements. As noted, the task order incorporated by reference FAR 52.243-4,
CHANGES (JUN 2007), which provides that the contracting officer shall make an
equitable adjustment and modify the award for any change causing an increase in the
contractor’s cost. FAR 52.243-4(d).

       Here, the task order and CLIN 0006 were fixed-priced. The government
contends that the risk of a pandemic is always borne by the contractor in a fixed-priced
task order, with the exception of the grant of a non-compensable extension of time
pursuant to the default clause (gov’t reply br. at 3). The default clause, however,
would not apply to performance of CLIN 0006 because StructSure provided the
temporary phasing facilities (finding 10).

       With respect to fixed-priced awards, the FAR explains that they are “not subject
to any adjustment on the basis of the contractor’s cost experience in performing the
contract” and “places upon the contractor maximum risk and full responsibility for all
costs and resulting profit or loss.” FAR 16.202-1. The FAR also states it provides an
“incentive for the contractor to control costs and perform effectively. . . . ” Id.

       The issue in this appeal is not cost control by the contractor. And although
StructSure assumed maximum risk, the government modified the task order and
changed the completion date which required use of the temporary phasing facilities for
a longer period of time. We therefore conclude the government changed task order
CLIN 0006 to utilize the temporary phasing facilities for additional time.

       The government contends, as it did in the COFD, that StructSure cannot recover for
these additional costs incurred due to the sovereign acts defense (gov’t reply br. at 6-9).
The government argues the defense applies here because the base leadership suspended all
non-mission essential activities at the base due to the COVID-19 global pandemic, not just
work relating to StructSure’s task order (id.). In this regard, the government explains
StructSure is only entitled to a non-compensable delay which is why the government
issued bilateral Modification No. A00008 changing the task order completion date to
June 19, 2021 but not increasing the task order price (see id. at 1, 3, 5).

       The sovereign acts defense “is an affirmative defense that is an inherent part of
every government contract.” Aptim Fed. Servs., LLC, ASBCA No. 62982, 22-1 BCA

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¶ 38,127 at 185,218 (quoting Conner Bros. Constr. Co., v. Geren, 550 F.3d 1368, 1371
(Fed. Cir. 2008)). The sovereign acts defense is simply that the government, when
sued as a contractor, cannot be held liable for its general and public acts as a
sovereign. Horowitz v. United States, 267 U.S. 458, 461 (1925); Conner Bros. Constr.
Co., 550 F.3d at 1371; Am. Gen. Trading & Contracting, WLL, ASBCA No. 56758,
12-1 BCA ¶ 34,905 at 171,636. The defense ensures the government, as the
contracting party, is treated the same as a private contractor whose performance is
rendered impossible or impracticable due to an act by the government acting as a
sovereign. Century Exploration New Orleans, LLC v. United States, 110 Fed. Cl. 148,
176 (2013), aff’d, 745 F.3d 1168 (Fed. Cir. 2104). Accordingly, the defense precludes
a contractor from monetary recovery for damages from the government acting akin to
a private contractor resulting from the government separately acting in its sovereign
capacity. See JE Dunn Constr. Co., ASBCA No. 62936, 22-1 BCA ¶ 38,123
at 185,191.

        The following is the test for determining whether the defense applies: (1) the
government’s sovereign act is public, general, and only incidentally falls upon the
contract or order, and (2) the sovereign act renders performance by the government
acting akin to a private contractor impossible or impracticable under the principles of
contract law. Am. Gen. Trading & Contracting, 12-1 BCA ¶ 34,905 at 171,637
(citations omitted). Therefore, “[t]he first question is whether the government’s
performance of the contract has been frustrated or obstructed by a public and general
act (i.e., the sovereign act). Id. In other words, the government acting as a contractor
must have breached the contract. See Century Exploration, 110 Fed. Cl. at 181-82 (the
defense “applies only when there has been a breach of contract” and “the existence of
a breach is a prerequisite to its applicability.”).

       Here, the parties do not dispute that the government’s actions in limiting base
access to only mission essential personnel due to COVID-19, and finding StructSure’s
task order non-mission essential and therefore precluding StructSure from on-site
construction activity, was a public and general sovereign act (see app. reply br. at 2-3;
gov’t reply br. at 7-9). The government, however, also contends that “there is no
dispute that the Government’s actions rendered performance impossible—the
contractor was excluded from accessing the base in order to perform the contract”
(gov’t reply br. at 7 n.4).

        We agree the government prevented StructSure from entering the base to
perform construction work due to a sovereign act. We also agree this caused a delay
in completion of the alteration work to the building and the need for the temporary
phasing facilities for a longer duration. However, supplying the temporary phasing
facilities was a separate CLIN under the fixed-priced task order (finding 3) and
StructSure met its deliverable (see finding 10). In this regard, the government did not
breach the task order and preclude StructSure from delivering or delay the delivery of

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the temporary phasing facilities. See Century Exploration, 745 F.3d at 1180 (because
the court found the government did not breach the implied duty of good faith and fair
dealing, there was no reason to reach the government’s sovereign acts defense);
Anham FZCO, LLC, ASBCA No. 59283, 17-1 BCA ¶ 36,817 at 179,442 (government
failed in its motion for summary judgment to prove that a sovereign act made it
impossible for the agency to cooperate with the contractor’s performance).

       Again, StructSure delivered the temporary phasing facilities and they were used
by the government for ongoing medical treatments of patients (finding 10). This is not
an instance where Structure failed to provide the temporary phasing facilities and may
only be entitled to non-compensable extra time for a delay or relief from default
termination. This is also not an instance where StructSure failed to provide the
temporary phasing facilities and the government would still have needed them, and
needed to acquire them, and therefore pay for them. Accordingly, the sovereign acts
defense does not apply and StructSure is entitled to compensation.

                                    CONCLUSION

       For the foregoing reasons, the appeal is sustained and returned to the parties for
a determination of quantum consistent with this decision.

       Dated: August 7, 2023

                                                  LAURA EYESTER
                                                  Administrative Judge
                                                  Armed Services Board
                                                  of Contract Appeals

 I concur                                          I concur

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

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       I certify that the foregoing is a true copy of the Opinion and Decision of the
Armed Services Board of Contract Appeals in ASBCA No. 62927, Appeal of
StructSure Projects, Inc., rendered in conformance with the Board’s Charter.

       Dated: August 8, 2023

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

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