Court Opinion

ID: 4451025
Source: CourtListenerOpinion
Date Created: 2019-10-29 16:00:39.08501+00
Date Added: 2024-06-11T14:25:26.451515
License: Public Domain

United States Court of Appeals
      for the Federal Circuit
                ______________________

 GUARANTEE COMPANY OF NORTH AMERICA,
                USA,
              Appellant

                           v.

                   IKHANA, LLC,
                       Appellee
                ______________________

                      2018-1394
                ______________________

    Appeal from the Armed Services Board of Contract Ap-
peals in Nos. 60462, 60463, 60464, 60465, 60466, 61102,
Administrative Judge James R. Sweet.
                 ______________________

               Decided: October 29, 2019
                ______________________

  PATRICK MICHAEL PIKE, Pike & Gilliss LLC, Towson,
MD, argued for appellant.

   WILLIAM ATKINS SCOTT, Pederson & Scott, P.C.,
Charleston, SC, argued for appellee.
                 ______________________

   Before DYK, WALLACH, and HUGHES, Circuit Judges.
  Opinion for the court filed by Circuit Judge HUGHES.
2     GUARANTEE COMPANY OF NORTH AMERICA v. IKHANA, LLC

     Concurring opinion filed by Circuit Judge WALLACH,
           in which Circuit Judge DYK joins.
HUGHES, Circuit Judge.
     This case involves a government contract dispute. Af-
ter a contracting officer determined that Ikhana, LLC de-
faulted on a construction contract with the Army Corps of
Engineers, Ikhana filed an appeal to the Armed Services
Board of Contract Appeals. Guarantee Company of North
America (GCNA), a surety that indemnified Ikhana, moved
to intervene because the indemnity agreement authorized
it to assume all contractual rights in the event of default.
The Board denied GCNA’s motion, finding that GCNA
lacked standing. Appeals of Ikhana, LLC, ASBCA No.
60462, 17-1 BCA ¶ 36,871 (Oct. 18, 2017). Because GCNA
executed its settlement agreement with the Corps after the
claims at issue arose, we affirm.
                              I
    In September 2013, the United States Army Corps of
Engineers awarded Ikhana a construction contract to build
a secured access lane and remote screening facility at the
Pentagon by October 12, 2015. The contract required
Ikhana to furnish performance and payment bonds.
Ikhana procured these bonds from GCNA.
    As a condition for issuing the bonds, GCNA required
Ikhana to execute a general indemnity agreement. The in-
demnity agreement included a provision that assigned
GCNA all rights under the contract if Ikhana defaulted or
if GCNA made payment on any bond.
    Construction did not go as planned. As Ikhana began
working on the project, it encountered multiple problems
with the work site that were not in the contract’s specifica-
tion. Each time Ikhana discovered a new problem, it had
to halt work until the Corps issued a unilateral change to
the contract. These stoppages and contract modifications
caused significant delays and cost overruns.            One
GUARANTEE COMPANY OF NORTH AMERICA v. IKHANA, LLC        3

modification required the Corps to schedule a power outage
at the Pentagon for the project to continue, but the Corps
never scheduled the outage, and by mid-October 2015, con-
struction had stopped.
    Between October 13–27, 2015, Ikhana submitted four
claims to the contracting officer seeking additional com-
pensation and an extension of the project deadline. Ikhana
argued that the unforeseen site conditions and unilateral
changes to the contract significantly altered the scope of
the contract. The Corps never issued a final decision on
Ikhana’s claims.
    Between November 2015 and June 2016, seven of
Ikhana’s sub-contractors filed claims against GCNA’s pay-
ment bond. Corps terminated Ikhana for defaulting on the
contract and made a claim on the performance bond. On
February 25, 2016, Ikhana appealed the termination deci-
sion and its four claims for additional compensation to the
Armed Services Board of Contract Appeals.
    GCNA sent Ikhana a letter demanding collateral under
the indemnity agreement. The letter stated that if Ikhana
did not deliver over four million dollars in collateral,
“GCNA [would] take all appropriate steps to protect its
rights” under the indemnity agreement. J.A. 292. Ikhana
responded that the demand for collateral was premature
and unreasonably high.
    GCNA and the Corps began to negotiate for GCNA to
tender a completion contractor. During the negotiations,
Ikhana informed GCNA that it would “not [forgo] its claim
against the Corps under any circumstances.” J.A. 444.
GCNA invoked its powers under the indemnity agreement
and entered into a settlement agreement with the Corps on
September 30, 2016. As part of the settlement agreement,
GCNA agreed to “cause the dismissal, with prejudice, of the
current pending appeals before the [Board].” J.A. 365.
4     GUARANTEE COMPANY OF NORTH AMERICA v. IKHANA, LLC

    GCNA sued Ikhana for declaratory judgment in the
United States District Court for the Eastern District of Vir-
ginia. GCNA sought a declaration that the indemnity
agreement authorized it to “settle [Ikhana’s] dispute with
the [Corps] and dismiss the [Board] appeal.” Guarantee
Co. of N. Am. USA v. Ikhana, LLC, No. 1:16-CV-1484, 2017
WL 1821106, at *2 (E.D. Va. May 4, 2017). The district
court stayed GCNA’s action pending resolution of Ikhana’s
Board appeal. Id. at *4.
    GCNA moved to intervene and withdraw Ikhana’s ap-
peal before the Board on the grounds that Ikhana had as-
signed all contractual claims to GCNA. Ikhana opposed
the motion. The Board denied the motion because GCNA
lacked standing.
    GCNA now appeals from the order denying interven-
tion. We have jurisdiction over the Board’s final decision
under 28 U.S.C. § 1295(a)(10) and 41 U.S.C. § 7107(a)(1).
                             II
     We review the Board’s conclusions of law de novo. Win-
ter v. Bath Iron Works Corp., 503 F.3d 1346, 1350 (Fed Cir.
2007). The Board’s jurisdictional determinations are con-
clusions of law. England v. Swanson Grp., Inc., 353 F.3d
1375, 1378 (Fed. Cir. 2004). “The Board’s jurisdiction is
defined by the Contract Disputes Act [(CDA)]. Parties can-
not, by agreement, confer upon a tribunal jurisdiction that
it otherwise would not have.” United Pac. Ins. Co. v. Roche,
380 F.3d 1352, 1356 (Fed. Cir. 2004).
    The issue here is whether the Board correctly denied
GCNA’s attempt to intervene and replace Ikhana as the
appellant. The Board’s rules of procedure do not include
instructions for third-party practice. See In Re S. Powell
Constr. Co., AGBCA No. 2004-122-1, 04-2 BCA ¶ 32,725
(Aug. 26, 2004). The limited Board decisions on the subject
do not provide any clear guidance over what standards the
Board uses for determining the propriety of intervention or
GUARANTEE COMPANY OF NORTH AMERICA v. IKHANA, LLC          5

whether intervention is even permitted. See id. (collecting
cases and discussing intervention under the CDA). But
while the scope of third-party practice rules is murky, the
outer bounds are limited by the Federal Rules of Civil Pro-
cedure, which the Board may adopt at its discretion. Id. A
party seeking to supplant the plaintiff must be able to show
that it could have initiated the complaint on its own. Cf.
United States v. 936.71 Acres of Land, More or Less, in Bre-
vard Cty., State of Fla., 418 F.2d 551, 556 (5th Cir. 1969)
(noting that the real-party-in-interest requirement applies
equally to intervenors as it does to plaintiffs). Thus, GCNA
cannot commandeer Ikhana’s appeal if it could not directly
appeal the contracting officer’s decisions to the Board un-
der the CDA.
     As explained below, we find that GCNA fails to meet
this threshold requirement.
     Congress designed the CDA “to prevent duplicative
claims [being brought] before the boards and the courts.”
Admiralty Constr., Inc. v. Dalton, 156 F.3d 1217, 1221
(Fed. Cir. 1998). The CDA prevents duplicative adjudica-
tion “by supplying a single point of contact for contract
claims.” Id. (internal quotation marks omitted). Under the
CDA, only contractors can appeal a contracting officer’s de-
cision to the Board. 41 U.S.C. § 7104; Winter v. FloorPro,
Inc., 570 F.3d 1367, 1370–71 (Fed. Cir. 2009). The CDA
defines “contractor” as “a party to a Federal Government
contract other than the Federal Government.” 41 U.S.C.
§ 7101(7). This rule is strictly enforced as a jurisdictional
prerequisite to any appeal before the Board. Fireman’s
Fund Ins. Co. v. England, 313 F.3d 1344, 1350 (Fed. Cir.
2002).
    Generally, a surety that enters into an indemnity
agreement with a contractor is not in privity with the gov-
ernment or considered the contractor in the context of the
CDA. See id. at 1351–52. But there is an exception to this
rule. Under Fireman’s Fund and its progeny, when a
6     GUARANTEE COMPANY OF NORTH AMERICA v. IKHANA, LLC

surety executes a takeover agreement with the government
to complete a contract, it is treated as a contractor under
the CDA and can assert claims to the Board. Lumbermens
Mut. Cas. Co. v. United States, 654 F.3d 1305, 1320 (Fed.
Cir. 2011). However, the only contract between the surety
and the government is the takeover agreement. Id. (citing
Fireman’s Fund, 313 F.3d at 1346). “For a claim to ‘arise
under’ such a contract, the operative facts upon which the
claim is based must have occurred after the pre-takeover
contract was executed.” United Pac. Ins. Co. v. Roche, 380
F.3d 1352, 1355–56 (Fed. Cir. 2004). “Stated differently,
the Board ha[s] no jurisdiction over . . . claims . . . based
upon events that occurred prior to the takeover agree-
ment.” Id. at 1356.
     Here, GCNA entered into a settlement agreement with
the Corps on September 30, 2016. Under Fireman’s Fund,
even if this agreement constitutes a takeover agreement, it
would not entitle GCNA to assert claims that arose prior to
this date. Because Ikhana lodged its appeal with the Board
on February 25, 2016, all the claims at issue in this case
necessarily arose before GCNA contracted with the Corps.
As a result, GCNA cannot commandeer this appeal because
it could not assert these claims in the first instance.
    GCNA raises several other arguments concerning the
effect of the settlement agreement. The Corps advanced
similar theories before the Board, and the Board rejected
them. Because these issues are part of an ongoing adjudi-
cation, we decline to address them until the Board issues a
final decision.
                               III
     Because all claims at issue here arose before GCNA en-
tered into its settlement agreement with the Corps, GCNA
could not assert them before the Board. As a result, we
affirm the Board’s dismissal of GCNA’s motion to inter-
vene.
GUARANTEE COMPANY OF NORTH AMERICA v. IKHANA, LLC   7

                     AFFIRMED
  United States Court of Appeals
      for the Federal Circuit
                  ______________________

  GUARANTEE COMPANY OF NORTH AMERICA,
                 USA,
               Appellant

                             v.

                     IKHANA, LLC,
                         Appellee
                  ______________________

                        2018-1394
                  ______________________

    Appeal from the Armed Services Board of Contract Ap-
peals in Nos. 60462, 60463, 60464, 60465, 60466, 61102,
Administrative Judge James R. Sweet.
                 ______________________

WALLACH, Circuit Judge, concurring, in which DYK, Cir-
cuit Judge, joins.
     I write not to contest the outcome of the above decision;
it rests squarely on this court’s precedent. Instead, I raise
a concern regarding the rationale underlying that prece-
dent.
      I. THE CONTRACT DISPUTES ACT AND SURETIES
    My concern arises from this court’s precedent regard-
ing two fields of public contract law. First is the Contract
Disputes Act (“CDA”), which regulates how U.S. executive
agencies (“the Government”) may contract with non-gov-
ernmental entities. See 41 U.S.C. §§ 7101–7109 (2012).
2       GUARANTEE COMPANY OF NORTH AMERICA v. IKHANA, LLC

Relevant here, the CDA provides the statutory framework
for contract dispute resolution. See id. § 7104(a). Under
the CDA, “[a] contractor[1] . . . may appeal the decision [by
a Government contracting officer] to an agency board[,]”
id. § 7104(a)—here, the Armed Services Board of Contact
Appeals (“ASBCA”), id. § 7105(a). Limiting such appeals
to the contractor is based on the policy rationale of winnow-
ing down all claims to a “single point of contact” and so pre-
venting a deluge of duplicative claims—with their
associated costs—against the Government for any given
contract. See S. Rep. No. 95-1118, at 16 (1978) (“the Senate
Report”).
    The second—the Miller Act—requires all contractors in
privity with the Government to post performance and pay-
ment bonds on all federal construction contracts. See 40
U.S.C. § 3131(b) (2008); 2 see also STEVEN PLITT, ET AL.,

    1    In the 2011 revision and recodification of the CDA,
the definition of “contractor” was amended to include the
addition of “Federal” in describing “Government.” Com-
pare 41 U.S.C. § 601(4) (2000) (explaining that a “contrac-
tor” is “a party to a Government contract other than the
Government”) with 41 U.S.C. § 7101(a) (2012) (providing
that a “contactor” is “a party to a Federal Government con-
tract other than the Federal Government”). This insertion
does not invalidate or otherwise render inapplicable our
precedent regarding the CDA predating the 2011 revision,
as our cases exclusively reviewed Federal Government con-
tracts. See 28 U.S.C. 1295(a)(10) (2006) (granting jurisdic-
tion to the Federal Circuit over cases arising from
executive agency board of contract appeals). Accordingly,
we continue to rely upon the statutory interpretation of our
prior authority. Unless otherwise noted, I refer to the up-
dated definition of “contractor.”
    2    This statute was codified at Title 40, United States
Code § 270a, under the Miller Act, until 2002. See Pub. L.
GUARANTEE COMPANY OF NORTH AMERICA v. IKHANA, LLC             3

STATUTORY        BOND      REQUIREMENTS–ON          FEDERAL
CONSTRUCTION (MILLER ACT), 11A COUCH ON INS. § 163:25
(3d ed. 2019) (“Couch on Ins.”) (explaining that “under the
Miller Act, [federal construction projects] require a specific
form of payment and performance bonds”). A surety must
post the bond, ensuring that, in the event of the contrac-
tor’s default, the contract is nevertheless completed. See
40 U.S.C. § 3131(b). The surety ensures that the contract
is completed by one of a variety of means, such as taking
over the contract, finding a replacement contractor, or
funding the original contractor in the case of insolvency.
See Admiralty Const. by Nat’l Am. Ins. Co. v. Dalton, 156
F.3d 1217, 1220–21 (Fed. Cir. 1998).
     Where a surety takes over the contract, we have held
that the surety steps into the shoes of the original contrac-
tor and so has privity with the Government, albeit solely
with respect to the contract’s outstanding performance; ac-
cordingly, the surety has standing to seek redress under
the CDA for claims arising out of the outstanding perfor-
mance. See Fireman’s Fund Ins. Co. v. England, 313 F.3d
1344, 1351 (Fed. Cir. 2002) (determining that, as the surety
“was not a party to any contract with the government prior
to the takeover agreement it had with the government” af-
ter the contractor defaulted, the surety was not a contrac-
tor for the purposes of the CDA and so could not bring CDA
claims against the government).
    Before the surety takes over—or in situations where
the surety never executes a takeover agreement with the
Government and instead ensures the contract is carried out
by one of the other means—we have concluded that the
surety is not in privity with the Government and is not per-
mitted to bring claims under the CDA. See Admiralty, 156
F.3d at 1220–21; Fireman’s Fund, 313 F.3d at 1351–52. It

107-217, §1, 116 Stat. 1147 (2002). Unless specified to the
contrary, I will refer to the recodified version of the statute.
4      GUARANTEE COMPANY OF NORTH AMERICA v. IKHANA, LLC

is my position that the two opinions upon which our subse-
quent decisions are built, Admiralty and Fireman’s Fund,
were wrongly decided because they bring Government con-
tracting law into conflict with basic principles of suretyship
and contract law.
            II. ADMIRALTY AND FIREMAN’S FUND
    In Balboa Insurance Co. v. United States, we first ad-
dressed the relationship between the Government, a con-
tractor, and a surety in the event of default, but we stopped
short of determining whether a surety was in privity with
the Government upon the default of the contractor. 775
F.2d 1158, 1160–61 (Fed. Cir. 1985). We did, however, stop
short of determining whether a surety and the Government
were in privity. See id. (“Although it is conceivable that
under certain circumstances a surety could assert rights
against the Government under the third-party beneficiary
rule . . . or even as one in privity in contract with the Gov-
ernment . . . the traditional means of asserting a surety’s
claim is under the equitable doctrine of subrogation.”); see
also Ins. Co. of the W. v. United States, 243 F.3d 1367, 1370
(Fed. Cir. 2001) (“[I]n Balboa we reserved the question
whether there was a contract or privity of contract between
the government and a surety.”).
    We took up the unanswered question in Admiralty and
decided that no such privity existed. See Admiralty, 156
F.3d at 1220–21. In doing so, we noted that “the central
issue in this case is whether the CDA permits [the surety]
to bring a claim on behalf of [the contractor]” and concluded
that both because a surety is not a contractor as defined by
the CDA, see supra Section I, and because “[t]he CDA limits
the eligibility to appeal to the boards of contract appeals to
contractors with claims on contracts entered by a Govern-
ment agency,” which the surety had not done, the surety
lacked the standing to bring such an appeal, see Admiralty,
156 F.3d at 1220–21. (emphasis added).
GUARANTEE COMPANY OF NORTH AMERICA v. IKHANA, LLC          5

    We next addressed “whether [the surety] can represent
[the contractor] in an appeal to the [ASBCA]” and deter-
mined that, in the “limited circumstances” where the
surety “take[s] over contract performance or finance[s] the
completion of the defaulted contract under its performance
bond,” the surety may be “entitl[ed] . . . to succeed to the
contractual rights of the contractor against the govern-
ment.” Id. at 1222 (internal quotation marks and citations
omitted). In Fireman’s Fund, we clarified this determina-
tion, concluding that the surety could only raise claims
against the Government that arose from the work the
surety itself did following the takeover of the contract and
not any claims pertaining to the prior period. 313 F.3d at
1351 (“[The surety] was not a party to any contract with
the government prior to the takeover agreement it had
with the government, and its pre-takeover claims did not
arise under such a contract.”).
    Our analysis in Admiralty, and by extension Fireman’s
Fund, gave short shrift to the argument that, because the
surety and the contractor had agreed that the contractor
would cede all legal rights to the surety in the event of de-
fault, the surety should assume all of the contractor’s legal
rights—including those to appear before a board such as
the ASBCA—with respect to the contract. See generally
Admiralty, 156 F.3d at 1220–22. Instead, we focused pri-
marily on the Senate Report that addresses the policy ra-
tionales supporting the creation of the CDA. Id. at 1221. 3

    3   We also conducted a brief analysis of the plain lan-
guage of the statute, noting that a surety failed to consti-
tute a contractor as defined by the CDA. See Admiralty,
156 F.3d at 1220–21 (citing 41 U.S.C. § 7101(a)). If, as is
explained below, the surety assumes the legal rights of the
contractor at the time of default, the plain language of the
statute would support the implication that the surety is a
party to a Government contract. Accordingly, the following
6      GUARANTEE COMPANY OF NORTH AMERICA v. IKHANA, LLC

Undergirding the rationale “for limiting the appeal right to
a single ‘contractor’ [in] the Senate Report,” we noted, was
the goal to narrow the claims to those between the Govern-
ment and “a ‘single point of contact’—the prime contrac-
tor.” Id. at 1220 (citing S. Rep. No. 95-1118, at 16).
Limiting appeals to only a single contractor “would prevent
multiple, duplicative claims and appeals by subcontrac-
tors.” Id. (citing S. Rep. No. 95-1118, at 16). The CDA,
therefore, “makes only a single ‘contractor’ eligible to ap-
peal a contracting officer’s final decision.” Id. We ex-
plained that the Senate Report itself suggested the best
system was one of a “single point of contact,” or ensuring
that only the contractor could pursue claims against the
Government before the ASBCA and all other claims would
be litigated elsewhere, such as between the contractor and
subcontractors in district court. See id.; see also S. Rep. No.
95-1118, at 16.
     A closer read of the Senate Report, however, indicates
that the portion relied upon by our precedent relates
wholly to precluding subcontractors from the administra-
tive remedies of the CDA, see S. Rep. No. 95-1118, at 16–
17, and speaks nothing of sureties, see generally id. See,
e.g., S. Rep. No. 95-1118, at 16 (explaining that “[t]he rec-
ommendations . . . specifically exclude bringing subcon-
tractors under the provisions of” the CDA) (emphasis
added), id. (“If direct access were allowed to all Government
subcontractors, contracting officers might, without appro-
priate safeguards, be presented with numerous frivolous
claims that the prime contractor would not have spon-
sored.”) (emphasis added), id. (contending that “[b]y forcing
the prime contractor to administer its subcontractor net-
work, the Government permits prime contractors and sub-
contractors” to resolve contract disputes through “their

analysis is directed toward determining the legal rights of
a surety upon a contractor’s default.
GUARANTEE COMPANY OF NORTH AMERICA v. IKHANA, LLC          7

familiar commercial procedures”), id. at 17 (concluding
that “denying the subcontractors direct access” to the CDA
would “forc[e] the prime contractor and the subcontractor
to negotiate their disputes”); see also Admiralty, 156 F.3d
at 1220 (citing S. Rep. No. 95-1118, at 16), Fireman’s Fund,
313 F.3d at 1351–52 (same). Congress did not mention
sureties when discussing the limits of the CDA’s adminis-
trative remedies jurisdiction. See generally S. Rep. No. 95-
1118, at 16–17. In Admiralty and Fireman’s Fund, we
equated a surety to a subcontractor without any support.
    Our court has repeatedly turned to these two cases and
specifically to the two pages of the Senate Report to support
the assertion that a surety is not in privity with the Gov-
ernment upon a contractor’s default. See Lumbermens
Mut. Cas. Co. v. United States, 654 F.3d 1305, 1321 (Fed.
Cir. 2011) (relying on Admiralty and the Senate Report at
pages 16 and 17 to support the assertion that “[t]his legis-
lative history suggests that claims by third parties who are
not in privity of contract with the government are not cov-
ered by the CDA”); Hardie v. United States, 19 F. App’x
899, 905 (Fed. Cir. 2001) (explaining that, in Admiralty and
the court, in reliance on the Senate Report, determined
that “[d]ue to the strong policy interest in maintaining a
‘single point of contact’ with the United States, there is a
correspondingly strong resistance to extend the concept of
‘privity’ beyond the actual parties with which the United
States originally contracted explicitly” (citation omitted));
Ins. Co. of the W., 243 F.3d at 1370–71 (relying on Admi-
ralty to conclude that “there is no such [privity] relation-
ship” between the Government and a surety).
III. GENERAL PRINCIPLES OF CONTRACT LAW SHOULD APPLY
    The roles and responsibilities of sureties—including
the assumption of all legal rights—are well-defined within
contract law and are applicable to both private and public
contracts; they should apply here. A suretyship is a con-
tractual relationship “where one person,” the obligee, “has
8      GUARANTEE COMPANY OF NORTH AMERICA v. IKHANA, LLC

undertaken an obligation and another person[,]” the
surety, “is also under an obligation or other duty to the ob-
ligee” to perform that obligee’s duty “rather than the [obli-
gee].” Restatement (First) of Security § 82 (Am. Law Inst.
1941). Where an obligee, such as a contractor, enters into
a contractual relationship, the surety agrees to assume the
contractor’s obligations—such as the performance and
debts—of the contractor in the event of default. See Re-
statement (Third) of Suretyship & Guaranty § 1 (Am. Law
Inst. 1996); see also Couch on Ins. §§ 1:14–15.
     A surety benefits both the contractor and the party
seeking performance, here the Government, because the
surety’s agreement with the contractor ensures that, in the
event of default, the contracted performance is executed
without significant delay (a “performance” bond) and sub-
contractors’ valid costs are paid in a timely manner (a “pay-
ment” bond), while the cause of the default can be litigated.
See 40 U.S.C. § 3131(b) (requiring Government contractors
to possess both performance and payment bonds); see also
Couch on Ins. §§ 1:15, 163:10. If a surety fails to execute
its obligations under either bond, the Government may sue
the surety. See Balboa, 775 F.2d at 1160 (concluding that
“a surety, as [a] bondholder is as much a party to the Gov-
ernment contract as the contractor” and so may be sued by
the Government).
     If a contractor defaults on its performance, the surety
possesses several ways to discharge the performance bond.
The surety “is not obligated to perform the contract of the
contractor though it may do so[,]” but it may “tak[e] over
the contract and complet[e] performance, assum[e] liability
for the government’s costs in completing the contract that
exceed the contract price, or . . . provid[e] funds to an insol-
vent contractor to complete the performance.” Couch on
Ins. § 164:14. The payment bond is discharged through ne-
gotiation or possibly litigation with subcontractors. See
Couch on Ins. § 164:16.
GUARANTEE COMPANY OF NORTH AMERICA v. IKHANA, LLC               9

    A surety is different from a subcontractor in many re-
spects. Significantly, the surety is obligated to engage and
negotiate with the party seeking performance to ensure
that it is completed. See Dependable Ins. Co. v. United
States, 846 F.2d 65, 66–67 (Fed. Cir. 1988) (determining
that a performance bond guarantees that the surety will
insure that the contracted performance will be completed,
even upon the default of the contractor). These differences
are showcased in the appeal at hand, regarding the perfor-
mance and payment bonds (“the Bonds”) of Guarantee
Company of North America (“GCNA”) and Ikhana, LLC.
Here, as in Fireman’s Fund, the terms of the Bonds in-
cluded an indemnity agreement in which the contractor as-
signed all rights under the contract and all legal actions
and claims that the contractor may have had. See J.A. 2
(granting to GCNA, in the event of default, the right to “as-
sert and prosecute any right or claim hereby assigned,
transferred or otherwise conveyed in the name of [Ikhana]
and to compromise and settle any such right or claim on
such terms as it considers reasonable . . . in its sole and ab-
solute discretion”); see also Fireman’s Fund, 313 F.3d at
1346 (explaining that the surety’s bond included the “Gen-
eral Indemnity Agreement” in which the contractor as-
signed       “all    of      their      rights      under      the
contract . . . including . . . all actions, causes of actions, and
claims and demands whatsoever which the [contractor]
may have in . . . [the] contract covered by such [b]ond”).
    A surety must pick up where the contractor left off in
the defaulted contract; in any normal surety relationship,
this could include addressing pertinent pending litigation
involving the contractor. Because of Admiralty and Fire-
man’s Fund, a surety of a government contract has its
hands tied when it comes to resolving ongoing litigation
against the Government and executing performance. In-
deed, this is the dilemma that faced GCNA following the
Government’s termination of Ikhana from the contract:
Ikhana had filed claims against the Government for its
10     GUARANTEE COMPANY OF NORTH AMERICA v. IKHANA, LLC

default termination, the Government sued GCNA on its
performance bond, subcontractors sued GCNA on the pay-
ment bond, and GCNA stepped in to ensure the contract
was executed despite the default. J.A. 2. To do so, GCNA
entered into a settlement agreement with the Government
to resolve the Government’s claim on the performance
bond. J.A. 257. GCNA tendered a new contractor to com-
plete the work. J.A. 4. At the same time, GCNA agreed to
dismiss Ikhana’s appeal against the Government and the
Government agreed to release GCNA from all liability re-
lating to the performance and payment bonds. J.A. 4. This
plan was stymied, however, as GCNA was denied standing
before the ASBCA. J.A. 6.
     The facts of this case are representative of the nature
of a surety’s work—bringing efficient resolution to contract
disagreements, assuming financial risk, and ensuring exe-
cution—and of the necessity for granting sureties the legal
rights they need to ensure speedy resolutions. The signifi-
cance of this negotiating tool should not be understated.
Lengthy delays in public projects could be problematic, ex-
pensive, and even dangerous. Moreover, sureties for gov-
ernment contracts may recognize the downstream
problems of our precedent and either opt out of providing
the service or, in recognizing the potential for heightened
financial risk, charge a higher rate for their services.
Whatever the outcome, the overall cost of doing business
will be higher for all parties and U.S. taxpayers will be left
paying the tab.
                        CONCLUSION
    The instant case is an appropriate vehicle to review our
precedent and to resolve a question of exceptional im-
portance, as the issue is raised squarely by these facts.