Court Opinion

ID: 9383585
Source: CourtListenerOpinion
Date Created: 2023-03-30 19:00:10.809227+00
Date Added: 2024-06-11T17:17:46.370831
License: Public Domain

ARMED SERVICES BOARD OF CONTRACT APPEALS
 Appeal of -                                    )
                                                )
 Safaa Al-Rawaby Company                        )   ASBCA No. 63146
                                                )
 Under Contract No. H92277-21-C-0013            )

 APPEARANCE FOR THE APPELLANT:                      Bayrak Abbas Fadel
                                                     General Manager

 APPEARANCES FOR THE GOVERNMENT:                    Caryl A. Potter, III, Esq.
                                                     Air Force Deputy Chief Trial Attorney
                                                    Maj James B. Leighton, USAF
                                                     Trial Attorney

                OPINION BY ADMINISTRATIVE JUDGE MCLISH

        In this appeal, Appellant, Safaa al-Rawaby Company (Safaa) seeks relief under
the above-captioned contract (Contract), issued by U.S. Special Operations Command
Central Forward Headquarters (SOCCENT FWD HQ). The Contract required Safaa to
provide and deliver millable wheat grain to a mill in Syria for use by the Syrian
Defense Forces, for a firm-fixed price of $1,689,589.20. The Contract required four
monthly deliveries. The Contract was terminated for default on the ground that Safaa
failed to make the first required delivery.

       Appellant claims “Compensation for losses” in the amount of $212,313 it
allegedly incurred due to its “non-purchase of wheat” under a “prior agreement” with
“the Al-Ubaidi Agricultural Office” (compl. ¶ 1-2). Appellant alleges that the
non-purchase occurred because the quote from Appellant’s “suppliers went up to
$6,944,000 which is a 400% increase” and that it was “the reason the first quantity was
detained for more than a month” (id. at 1). Appellant also requests a “contract
modification” and “price[] increase” to enable it to “buy wheat as per global market
prices” and to “[r]eview prices . . . [s]o if our contract [is increased] up to $6,944,000
which is a 400% increase, we will be successful in delivery” (id. at 1-2).

       Respondent filed a motion for summary judgment on August 10, 2022.
Appellant did not file an opposition. On January 10, 2023, the Board issued an order
to show cause, requiring appellant to file either a response to the motion for summary
judgment or a request for a further extension of time to file a response. The order
informed appellant that the appeal may be dismissed without further notice if appellant
did not make one of those filings within 30 days. In an email to the Board on
January 27, 2023, appellant indicated that it had lost money on the contract and
therefore could not afford counsel to prepare a response to the government’s motion.
Appellant stated that it “was waiting for any compensation for this issue.” (Bd. corr.
email dtd. Jan. 27, 2023) 1

       We grant the government’s motion for summary judgment. 2

           STATEMENT OF FACTS FOR PURPOSES OF THE MOTION

       The following facts asserted by the government in accordance with Board Rule 7(c)
have not been disputed by appellant and are therefore accepted as undisputed for purposes
of deciding the present motion. See Board Rule 7(c)(2).

       1. Effective September 30, 2021, SOCCENT FWD HQ awarded the Contract
to Safaa requiring the delivery of 7,827,600 kg of millable wheat over a period of four
months (1,956,900 kg per month) to one specified location in Syria at a price of
$424,647.30 per month (net price of $1,698,589.20). The initial delivery was due
between October 19 and 28, 2021. The Contract was a firm-fixed price contract for a
commercial item and incorporated Federal Acquisition Regulation (FAR) clause
52.212-4, Contract Terms and Conditions – Commercial Products and Commercial
Services, by reference. (R4, tab 2 at 1, 4, 10, 13)

       2. Safaa produced a document purporting to be an invoice dated October 28,
2021, from Al-Ubaidi Agricultural Office for “$212,323 Dollar” for “Fines for not
buying wheat” addressed to Mr. Bayrak Abbas Fadel (R4, tab 7).

       3. Safaa admits in its complaint that “the first [delivery] quantity was detained
for more than a month” and that all its “means and solutions . . . in order to avoid
losses and to supply the contract . . . [were] rejected and [Safaa was] notified to Stop
Work.” (compl. ¶ 1).

       4. On November 2, 2021, the contracting officer issued a memorandum labeled
a “Cure Notice” via email “for lack of performance” on the Contract. The attached
notice stated that Safaa was notified verbally and via email on October 16, 2021, of the

1
  Although Appellant did not file a formal response to the summary judgment motion,
       we take its recent communications to indicate a desire to continue the appeal.
       (Bd. corr. emails dtd. Jan. 27, 2023, Feb. 13, 2023, and Feb. 26, 2023). In this
       instance, we have chosen to address the merits of the claim rather than dismiss
       it for failure to prosecute.
2
  The government filed a motion on February 24, 2023, seeking dismissal on the
       ground that appellant had not complied with the Board’s Order of January 10,
       2023. Because we grant summary judgment, we deny the motion to dismiss as
       moot.
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need to complete its contractual obligations. It stated further that Safaa failed to
deliver the required wheat supplies on October 28, 2021 and warned that the
Government might terminate the Contract for cause under FAR 52.212-4, unless Safaa
delivered the wheat within ten days. (R4, tabs 3, 4 at 1)

       5. On November 24, 2021, the contracting officer terminated the Contract for
cause in its entirety pursuant to FAR 52.212-4(m) for its “default with the terms and
conditions of the delivery schedule and quantities outlined in the Performance Work
Statement,” effective that day, and directed Safaa to stop work on the Contract (R4,
tab 5). Safaa acknowledged the Termination for Cause on November 30, 2021 (id.).

                                      DECISION

       A. Standard of Review

        Summary judgment is appropriate if there is no genuine issue as to any material
fact and the moving party is entitled to judgment as a matter of law. First Commerce
Corp. v. United States, 335 F.3d 1373, 1379 (Fed. Cir. 2003). The party seeking
summary judgment is initially burdened with establishing the absence of any genuine
issues of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). All
significant doubt over factual issues must be resolved in favor of the party opposing
summary judgment. Mingus Constructors v. United States, 812 F.2d 1387, 1390 (Fed.
Cir. 1987). A party challenging a motion for summary judgment “must set forth
specific facts showing that there is a genuine issue for trial.” Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986) (quoting First Nat’l Bank of Ariz. v. Cities Serv.
Co., 391 U.S. 253, 288 (1968)).

       B. The Termination for Default

        A default termination is “a drastic sanction which should be imposed . . . only
for good grounds and on solid evidence.” J.D. Hedin Constr. Co. v. United States,
408 F.2d 424, 431 (Ct. Cl. 1969). The government bears the burden of establishing
that its termination of the contract was proper. Lisbon Contractors, Inc. v. United
States, 828 F.2d 759, 765 (Fed. Cir. 1987). The contracting officer’s default decision
must not be arbitrary or capricious or an abuse of discretion. Cent. Co., ASBCA
No. 62624, 22-1 BCA ¶ 38,057 at 184,790; Darwin Constr. Co. v. United States,
811 F.2d 593, 597 (Fed. Cir. 1987). The government must reasonably demonstrate
that the contractor’s deficient performance is the actual cause of the termination and
not a mere pretext. Goodloe Marine, Inc., ASBCA No. 62106, 22-1 BCA
¶ 38,053 at 184,776.

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      Once the government has established that the contractor’s deficient
performance was the cause of the termination, the burden shifts to the appellant to
demonstrate that the default was excusable. DCX, Inc. v. Perry, 79 F.3d 132,
134 (Fed. Cir. 1996), cert. denied, 519 U.S. 992 (1996). At this stage the appellant
must show that the default was excusable. Id.; Switlik Parachute Co. v. United States,
573 F.2d 1228, 1233 (Ct. Cl. 1978).

       On the undisputed facts, the government has met its burden to show that the
termination was justified by appellant’s failure to perform. The government may
terminate the contract for cause “in the event of any default by the Contractor, or if the
Contractor fails to comply with any contract terms and conditions . . . .” FAR 52.212-
4(m). Safaa defaulted on its obligation to make its first delivery of wheat by
October 28, 2021. Safaa further failed to deliver the wheat within the 10-day grace
period provided by the government’s Cure Notice. Safaa was provided with both
written and verbal warnings of the need to complete deliveries as specified in the
Contract or risk termination. When it did not make the delivery as required,
termination was justified.

       Safaa also made clear that it would not or could not make any of the other
required deliveries without an increase in the contract price. Safaa repeatedly
communicated that it needed a substantial increase in the price to be able to purchase
the wheat. On October 13, 2021, Safaa informed the government, “so we need
additional prices to keep going delivery . . . [.]” Safaa repeated that warning on
October 14, 2021, and, on October 16, 2021, Safaa sent an email to the contracting
officer stating “[t]he first shipment of 2000 tons will be fixed as mentioned in contract,
but remaining quantities and shipments will be increase 1$ each kilogram as we deal
with new suppliers, the first agreement with dealers canceled from their side causes the
taxes and customs.” (R4, tab 9 at 5-8) Safaa’s announcements to the government that
it would not deliver the wheat at the agreed upon price constituted anticipatory breach
and justified termination for default. See, e.g., New Era Cont. Sales, Inc., ASBCA
No. 56204, 09-2 BCA ¶ 34,147 at 168,795. (“New Era’s 5 July 2006 unequivocal
refusal to perform under Delivery Order No. 0001A months before the 21 November
2006 delivery date was an anticipatory repudiation which would have justified its
termination for default at that time.”)

       The government having demonstrated that the termination was justified by
Safaa’s non-performance, the burden shifts to Safaa to demonstrate that its
non-performance was excusable. By the terms of the Excusable Delays clause, FAR
52.212-4(f), the contractor is liable for default unless nonperformance is caused by an
occurrence beyond the reasonable control of the contractor and without its fault or
negligence. See also Gargoyles Inc., ASBCA No. 57515, 13 BCA ¶ 35,330
at 173,413.

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         Safaa has failed to meet its burden. Safaa alleges in its complaint that “the
  reason the first quantity was detained for more than a month” was because of an
  increase in wheat prices and a fine levied by Safaa’s supplier for Safaa’s non-purchase
  of wheat under an agreement with the supplier (compl. ¶ 1; SOF ¶ 2). The inability to
  finance the increased cost of performance does not excuse default under a firm-fixed
  price contract. A “firm-fixed-price contract provides for a price that is not subject to
  any adjustment on the basis of the contractor’s cost experience in performing the
  contract.” FAR 16.202-1. It “places upon the contractor maximum risk and full
  responsibility for all costs and resulting profit or loss.” Id.; see Lakeshore Eng’g
  Servs., Inc. v. United States, 748 F.3d 1341, 1347 (Fed. Cir. 2014) (“The essence of a
  firm fixed-price contract is that the contractor, not the government, assumes the risk of
  unexpected costs.”); see also New Era Cont. Sales, Inc., ASBCA No. 56661,
  11-1 BCA ¶ 34,738 at 171,023. The Contract did not contain an economic price
  adjustment clause. Accordingly, increases in the price of wheat, even if dramatic, do
  not excuse Safaa’s non-performance. “The normal risk of a fixed price contract is that
  the market price will change.” Seaboard Lumber Co. v. United States, 308 F.3d 1283,
  1295 (Fed. Cir. 2002) (citing N. Ind. Pub. Serv. Co. v. Carbon Cnty. Coal Co.,
  799 F.2d 265, 275 (7th Cir. 1986)).

          Accordingly, there are no disputed issues of material fact, and the government
  is entitled to judgment in its favor as a matter of law.

                                      CONCLUSION

        The government’s motion for summary judgment is granted and the appeal is
  denied.

         Dated: March 15, 2023

                                                  THOMAS P. MCLISH
                                                  Administrative Judge
                                                  Armed Services Board
                                                  of Contract Appeals
(Signatures continued)

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 I concur                                          I concur

 RICHARD SHACKLEFORD                               J. REID PROUTY
 Administrative Judge                              Administrative Judge
 Acting Chairman                                   Vice Chairman
 Armed Services Board                              Armed Services Board
 of Contract Appeals                               of Contract Appeals

     I certify that the foregoing is a true copy of the Opinion and Decision of the
Armed Services Board of Contract Appeals in ASBCA No. 63146, Appeal of Safaa
Al-Rawaby Company, rendered in conformance with the Board’s Charter.

      Dated: March 16, 2023

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

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