Court Opinion

ID: 4312942
Source: CourtListenerOpinion
Date Created: 2018-09-17 17:00:05.045695+00
Date Added: 2024-06-11T14:44:42.353342
License: Public Domain

ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of --                                   )
                                               )
Parsons Evergreene, LLC                        )      ASBCA No. 61784
                                               )
Under Contract No. FA8903-04-D-8703            )

APPEARANCES FOR THE APPELLANT:                        Douglas S. Oles, Esq.
                                                      James F. Nagle, Esq.
                                                      Adam K. Lasky, Esq.
                                                      Howard W. Roth III, Esq.
                                                       Oles Morrison Rinker & Baker LLP
                                                       Seattle, WA

APPEARANCES FOR THE GOVERNMENT:                       Jeffrey P. Hildebrant, Esq.
                                                       Air Force Deputy Chief Trial Attorney
                                                      Michelle D. Coleman, Esq.
                                                       Trial Attorney

          OPINION BY ADMINISTRATIVE JUDGE PROUTY
  REGARDING ALLEGEDLY TARDY REQUESTS FOR PAYROLL RECORDS

       As stated in footnote 1 of the majority opinion for ASBCA No. 58634 and in
our order issued today on the matter, for reasons of clarity and judicial efficiency,
we *issue this separate opinion under a new appeal number upon the subject of
appellant, Parsons Evergreene, LLC's (PE's), demand for compensation of costs
associated with the Air Force's (AF's) allegedly tardy requests for payroll records.

       Judge Clarke, who presided over the hearing in this matter, believes, for those
reasons set forth in his dissent, that the AF's failure to engage in a "prompt" investigation
of the payroll matter should entitle PE to compensation pursuant to Federal Acquisition
Regulation (FAR) 22.406-1. As we explain below, although we adopt the material
findings of fact made by Judge Clarke's majority opinion in ASBCA No. 58634,
concurrently filed today, PE's appeal based upon FAR 22.406-1 is denied.

* Because the two judges who reviewed Judge Clarke's original opinion in ASBCA
      No. 58634 (Judges Shackleford and Prouty) came to a different conclusion than
      Judge Clarke on the payroll review issue, the remaining two judges from
      Judge Clarke's division were asked to consider it, consistent with Board practice and
      procedure. As reflected below, they concurred with Judges Shackleford and Prouty.
       We deny this appeal because FAR 22.406-1 does not provide a remedy to a
contractor for the government's untimely investigation of complaints relating to labor
standards. Under longstanding law:

                     In order for a private contractor to bring suit against
              the Government for violation of a regulation, that
              regulation must exist for the benefit of the private
              contractor.

Freightliner Corp. v. Caldera, 225 F.3d 1361, 1365 (Fed. Cir. 2000) (citing Cessna
Aircraft Co. v. Dalton, 126 F.3d 1442, 1451 (Fed. Cir. 1997); and Rough Diamond Co.
v. United States, 351 F .2d 636, 640-42 (Ct. Cl. 1965)). Cessna was particularly clear:

              The primary intent of a statute or regulation must be to
              protect or benefit a class of persons in order for that class
              to be able to bring suit against the government for violating
              the statue or regulation.

126 F.3d at 1451 (citing Rough Diamond, 351 F.2d at 640, 642). To be sure, a regulation
may be intended to benefit more than one class of persons, see, e.g., Todd Cons tr., L.P. v.
United States, 656 F.3d 1306, 1314 (Fed. Cir. 2011) (performance evaluation regulation
meant to benefit both government and contractor), but Freightliner and Cessna make
clear that the operative test is not that application of the regulation merely be to the
benefit of the contractor in the particular controversy for which it is bringing suit, but that
the contractor has been an intended beneficiary all along.

        With this in mind, we tum to the text of FAR 22.406-1. That FAR provision is
entitled, "Policy," which underscores, to us, that the section is meant as a broad explanation
of later FAR provisions as well as an instruction for contracting agencies about the goals of
their labor standards programs. Subsection (a) of FAR 22.406-1 provides, in full:

                     General. Contracting agencies are responsible for
              ensuring the full and impartial enforcement of labor
              standards in the administration of construction contracts.
              Contracting agencies shall maintain an effective program
              that shall include -

                     (I) Ensuring that contractors and subcontractors are
              informed, before commencement of work, of their
              obligations under the labor standards clauses of the
              contract;

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                     (2) Adequate payroll reviews, on-site inspections,
               and employee interviews to determine compliance by the
               contractor and the subcontractors, and prompt initiation of
               corrective action when required;

                    (3) Prompt investigation and disposition of
              complaints; and

                     (4) Prompt submission of all reports required by
              this subpart.

The remainder of FAR 22.406-1, subsection (b), directs the issuance ofpreconstruction
letters and the arrangement of preconstruction conferences with contractors.

       Reviewing the full text confirms our view that the FAR' s requiring "prompt
investigation and disposition of complaints," see FAR 22 .406-1 (a )(3 ), was, at most, for the
benefit of labor, for whose advantage labor standards are required to be enforced, not for
the benefit ofthe contractor. See Freightliner, 225 F.3d at 1365. Moreover, nothing in the
language of the FAR provision comes close to suggesting that its "primary intent" was to
"protect or benefit" the contractor class. See Cessna, 126 F.3d at 1451.

       Alternatively, we could conclude that FAR 22 .406-1, in setting out general policies
for contracting agencies to follow, but not specifics, was meant merely for the benefit of
the government as a "housekeeping regulation," providing guidance to government
employees about how to establish their labor standards programs, and thus its violation
gives no class any enforceable rights. See, e.g., Hartman v. Nicholson, 483 F.3d 1311,
1315-16 (Fed. Cir. 2007). Ultimately, we need not decide between whether labor or the
government was the intended beneficiary to determine that the subject provision was not
intended for the benefit of the contractor. Creation of a cause of action against the
government does not occur by happenstance, and there is not enough here to create one
anew. Thus, we respectfully disagree with our colleague and deny the portion of PE's
appeal seeking compensation for the allegedly tardy AF request for payrolls.

       Dated: September 5, 2018

                                                   J .' REID PROUTY
                                                   Administrative Judge
                                                   Vice Chairman
                                                   Armed Services Board
                                                   of Contract Appeals

(Signatures continued)

                                            3
I concur                   I concur

RICHARD SHACKLEFORD        DA YID D' ALESSANDRIS
Administrative Judge       Administrative Judge
Acting Chairman            Armed Services Board
Armed Services Board       of Contract Appeals
of Contract Appeals

I concur                   I dissent (see separate opinion)

ALEXANDER
Administrative Judge       Administrative Judge
Armed Services Board       Armed Services Board
of Contract Appeals        of Contract Appeals

                       4
          DISSENTING OPINION BY ADMINISTRATIVE JUDGE CLARKE
          REGARDING ALLEGEDLY TARDY REQUESTS FOR PAYROLL

         I respectfully disagree with my colleagues.

       PE claims $762,130 for the government's violation of FAR 22.406-1 Policy,
dealing with enforcement of labor standards, in particular payroll reviews. In order for
a contractor to have a cause of action against the government for violation of a
regulation, it must prove that the regulation exists for the benefit of the contractor.
Freightliner Corp. v. Caldera, 225 F.3d 1361, 1365 (Fed. Cir. 2000).

       FAR 22.406-1 requires that if a problem is found during payroll reviews, on-site
inspections and employee interviews there will be "prompt initiation of corrective action,"
"Prompt investigation and disposition of complaints," and "Prompt submission of all reports
required by this subpart" (finding 201 ).* I infer from this that the payroll reviews themselves
must also be prompt or the entire regulatory scheme becomes meaningless.

       PE and its subcontractors submitted payrolls commencing in 2005 (finding 203).
The Air Force (AF) "sampled" payrolls and found no problems until the first labor
interview on 6 December 2007 (id.). The interview caused the AF to look closer at the
payrolls. This started the lengthy process of the AF requiring PE to resubmit past payrolls
and respond to AF questions between 2008 and as late as 2012 (findings 203-07). The
AF took beneficial occupancy on 11 September 2008 (finding 197). I accept PE's
position that the AF's waiting to commence interviews and detailed payroll reviews until
2008, when the contract was almost over, made it much more difficult and expensive for
PE to comply.

        PE has proven that the government failed to conduct payroll reviews promptly and
as a result it was much more difficult and expensive for PE to respond. I conclude that
proof of such direct and predictable harm to a contractor is prima facie evidence that a
regulation, in this case FAR 22.406-1, exists for the benefit of the contractor. The
government is then required to come forward with evidence to contest the prima facie
case. If the government fails to do so, the prima facie case stands uncontroverted and the
party with the burden of proof will have established its case by a preponderance of the
evidence. Environmental Safety Consultants, Inc., ASBCA No. 53485, 05-1 BCA
~ 32.903 at 163,019. In this case. the government presented no evidence or argument on
the benefit issue. I agree with my colleagues that FAR 22.406-1 also benefits workers,

*   References to findings are to the companion decision issued simultaneously with this
         decision.

                                             5
but it is unlikely workers will ever avail themselves of the cause of action so my
colleagues concession is academic. I sustained this claim and awarded PE $571,598 for
the government's violation of FAR 22 .406-1.

      Dated: September 5, 2018

                                                CRAIG CLJ\E
                                                Administrative Judge
                                                Armed Services Board
                                                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. 61784, Appeal of Parsons
Evergreene, LLC, rendered in conformance with the Board's Charter.

      Dated:

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

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