Court Opinion

ID: 2734476
Source: CourtListenerOpinion
Date Created: 2014-09-19 01:23:05.899337+00
Date Added: 2024-06-11T13:26:42.933624
License: Public Domain

ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of --                                 )
                                             )
Environmental Safety Consultants, Inc.       )      ASBCA No. 58343
                                             )
Under Contract No. N62470-95-B-2399          )

APPEARANCE FOR THE APPELLANT:                       Mr. Peter C. Nwogu
                                                     President

APPEARANCES FOR THE GOVERNMENT:                     Ronald J. Borro, Esq.
                                                     Navy Chief Trial Attorney
                                                    Ellen M. Evans, Esq.
                                                     Senior Trial Attorney

      OPINION BY ADMINISTRATIVE JUDGE FREEMAN ON THE
   GOVERNMENT'S MOTION TO DISMISS FOR LACK OF JURISDICTION

        Environmental Safety Consultants, Inc., (ESCI) appeals the deemed denial of
its termination settlement claim under the captioned contract (hereinafter "Contract
2399"). The Board, sua sponte, noted the possible lack of jurisdiction over a
substantial amount of the claim and requested the parties to brief the issue. The
government's brief concludes that: "the board lacks authority over the entire case,"
and that "the appeal should be dismissed for lack of jurisdiction." We construe this
conclusion as in substance a motion to dismiss.

       ESCI opposes the motion on the grounds of (i) equitable tolling of the statute
of limitations and (ii) that the claim for increased costs over and above the contract
price did not accrue until 12 June 2012 when the government withdrew its appeal to
the Federal Circuit from the Board's 28 September 2011 decision converting the
termination for default to a termination for convenience. We grant the government's
motion in part.

      STATEMENT OF FACTS (SOF) FOR PURPOSES OF THE MOTION

      1. This appeal arises out of our decision of 28 September 2011 converting the
government's termination for default of Contract 2399 to a termination for
convenience of the government. See Environmental Safety Consultants, Inc.,
ASBCA No. 51722, 11-2 BCA if 34,848. Familiarity with that decision is assumed.
       2. Contract 2399 was a firm-fixed-price construction contract. At award on
13 November 1995, the firm-fixed-price was $561,764.25 (R4, tab 1at15). 1 On
7 April 1997, ESCI submitted to the contracting officer a comprehensive proposal for
an increase of$205,463.60 in the contract price for the costs of additional work and
delays allegedly caused by the government (R4, tab 12 at 9).

       3. In bilateral Modification No. P00006, effective 24 June 1997, the parties
modified the contract deleting five items of specified work and adding nine items of
additional work. The additional work items included among others:

               j. Subcontract all remaining work, including supervision,
               quality control, and punchlist items.

               k. Provide additional overhead costs incurred due to
               subcontracting.

               m. Provide additional labor and time for entering,
               leaving, and working in the Q-Area.

               n. Provide extended overhead for the Government delays
               under this contract.

(R4, tab 2 at 11-12)

       4. Modification No. P00006 concluded with a summary of the agreed price
adjustment and contract completion date for the additions and deletions of work and
a general release as follows:

               2. TOTAL AMOUNT OF ADDITIONAL WORK                        $199,301.00
                  TOTAL AMOUNT OF CREDITS                                $199, 192.00

               The total contract price is increased by $109 .00 from
               $561,764.25 to $561,873.25.

               The contract completion date is extended by 308 calendar
               days from August 26, 1996, to June 30, 1997.

               The foregoing is agreed to as constituting full and
               equitable adjustment and compensation (both time and

1
    All Rule 4 citations refer to the Rule 4 filed in ASBCA No. 51722.

                                            2
              money) attributable to the facts of [sic] circumstances
              giving rise to the change directed hereby, including but
              not limited to, any changes, differing site conditions,
              suspensions, delays, rescheduling, accelerations, impact,
              or other causes as may be associated therewith.

(R4, tab 2 at 2)

        5. Modification No. P00006 was signed by Peter Nwogu on behalf ofESCI
without reservations on 23 June 1997 (R4, tab 2 at 1). Also on 23 June 1997,
Peter Nwogu signed ESCI's Invoice No. 7 which among other things stated that
the total contract value was $561,873.25 (the amount agreed to in Modification
No. P00006) (R4, tab 14 ).

        6. No work was performed on the contract after 16 June 1997. Environmental
Safety Consultants, 11-2 BCA ~ 34,848 at 171,430, finding 19. On 12 June 1998, the
contract was completely terminated for default for failure to make progress to ensure
completion of the work and failure to perform the work within the specified time
(R4, tab 2 at 13). There were no contract modifications increasing the contract price
after Modification No. P00006. At termination, the contract price was the price
agreed to by the parties in Modification No. P00006 ($561,873.25). Over the course
of the contract, the government paid ESCI a total amount of $303,990.00 in progress
payments (R4, tab 13 at 1, tab 14 at 1).

        7. Pursuant to paragraph (c) of the FAR 52.249-10, DEFAULT (FIXED-PRICE
CONSTRUCTION) (APR 1984) clause of the contract, and as a result of our decision
sustaining the appeal from the default termination, "the rights and obligations of the
parties will be the same as if the termination had been issued for the convenience of
the Government" (R4, tab I at 69).

      8. The 52.249-2, TERMINATION FOR CONVENIENCE OF THE GOVERNMENT
(FIXED-PRICE) (APR 1984}-ALTERNATE I clause in Contract 2399 stated in pertinent
part:

                      ( d) After termination the Contractor shall submit a
              final termination settlement proposal to the Contracting
              Officer in the form and with the certification prescribed
              by the Contracting Officer ....

                     (e) Subject to paragraph (d) above, the Contractor
              and the Contracting Officer may agree upon the whole or
              any part of the amount to be paid because of the
              termination .... However, the agreed amount, whether

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                under this paragraph (e) or paragraph (t) below, exclusive
                of costs shown in subparagraph (t)(3) below, [ZJ may not
                exceed the total contract price as reduced by ( 1) the
                amount of payments previously made and (2) the contract
                price of work not terminated ....

                        ( t) If the Contractor and Contracting Officer fail
                to agree on the whole amount to be paid the Contractor
                because of the termination of work, the Contracting
                Officer shall pay the Contractor the amounts determined
                as follows, but without duplication of any amounts agreed
                upon under paragraph (e) above:

                       ( 1) For contract work performed before the
                effective date of termination, the total (without
                duplication of any item) of-

                       (i) The cost of this work;

                       (ii) The cost of settling and paying termination
                settlement proposals under terminated subcontracts that
                are properly chargeable to the terminated portion of the
                contract if not included in subdivision (i) above; and

                        (iii) A sum, as profit on (i) above, determined by
                the Contracting Officer under 49 .202 of the Federal
                Acquisition Regulation, in effect on the date of this
                contract, to be fair and reasonable, however, if it appears
                that the Contractor would have sustained a loss on the
                entire contract had it been completed, the Contracting
                Officer shall allow no profit under this subdivision (iii)
                and shall reduce the settlement to reflect the indicated
                rate of loss.

                       (2) The reasonable costs of settlement of the work
                terminated, including-

2
    There is no subparagraph ( t)(3) in the Alternate I clause, but the same provisions
        that are in subparagraph (t)(3) of the basic clause are in subparagraph (t)(2) of
        the Alternate I clause.

                                             4
                     (i) Accounting, legal, clerical, and other expenses
              reasonably necessary for the preparation of termination
              settlement proposals and supporting data;

                     (ii) The termination and settlement of subcontracts
              (excluding the amounts of such settlements); and

                     (iii) Storage, transportation, and other costs
              incurred, reasonably necessary for the preservation,
              protection or disposition of the termination inventory.

       9. On 5 July 2012, ESCI submitted to the contracting officer a Standard Form
(SF) 1436 "SETTLEMENT PROPOSAL (TOTAL COST BASIS)" for the
termination of Contract 2399. The net proposed settlement was $1,183,366.59.
(App. supp. R4, vol. I, tab 3 at 1-4) The contracting officer did not respond to this
proposal. On 14 September 2012, ESCI submitted the proposal as a certified claim
under the Contract Disputes Act of 1978 (CDA), 41 U.S.C. §§ 7101-7109 (app. supp.
R4, vol. I, tab 5 at 1-2). The contracting officer refused to either negotiate a
settlement agreement or issue a final decision on the claim. In her opinion, the claim
was "conceived in fraud and is permeated by fraud, [and] the contracting officer
lacks authority to decide it or settle it." (Answer if 8)

       10. On 29 September 2012, ESCI appealed the deemed denial of its
termination settlement claim. The appeal was docketed as ASBCA No. 58343. The
monetary elements ofESCI's termination settlement claim were:

              Direct Material                           $        0.00
              Direct Labor                               1,021,306.00
              Other Costs                                   13,000.00
              General & Administrative                      17,000.00
              Profit                                       155,145.90
              Settlement with Subcontractors               252,503.97
              Settlement Expenses                          175,248.40
              Finished Product Invoiced                    (268,326.62)
              Disposal & Other Credits                     (182,511.19)
              Net Proposed Settlement                   $1,183,366.59

(App. supp. R4, vol. I, tab 3 at 1)

       11. Pursuant to paragraph (e) of the Termination for Convenience clause the
termination settlement, exclusive of the termination settlement expenses, cannot
exceed the total contract price as reduced by ( 1) the amount of payments previously
made and (2) the contract price of work not terminated (see SOF if 8). The total

                                           5
amount of costs and profit in ESCI's termination settlement claim, excluding the
settlement expenses ($175,248.40), was $1,458,955.87. This claimed amount was
$897,082.62 more than the total contract price at termination. (See SOF ~ 10)

       12. ESCI contends that the settlement amount it claims in excess of the
contract price at termination is due to the increased cost it incurred in performing the
work as a result of government changes and delays which require an equitable
adjustment to the contract price. We assume for purposes of the motion that this
contention is correct.

        13. The FAR 52.233-1, DISPUTES (MAR 1994) clause in Contract 2399 stated
in pertinent part:

                    (a) This contract is subject to the Contract
              Disputes Act of 1978, as amended (41 U.S.C. 601-613).

                     (b) Except as provided in the Act, all disputes
              arising under or relating to this contract shall be resolved
              under this clause.

                     (c) "Claim," as used in this clause, means a
              written demand or written assertion by one of the
              contracting parties seeking, as a matter of right, the
              payment of money in a sum certain, the adjustment or
              interpretation of contract terms, or other relief arising
              under or relating to this contract.... However, a written
              demand or written assertion by the Contractor seeking the
              payment of money exceeding $50,000 is not a claim
              under the Act until certified as required by subparagraph
              (d)(2) below.

                     (d)( 1) A claim by the Contractor shall be made in
              writing and submitted to the Contracting Officer for a
              written decision.

(R4, tab 1 at 68)

       14. When Contract 2399 was awarded, Section 605(a) 3 of the CDA stated in
pertinent part: "Each claim by a contractor against the Federal Government relating

3
    Now 41 U.S.C. § 7103(a)(4)(A).

                                            6
to a contract shall be submitted to the contracting officer for a decision," and "Each
claim by a contractor against the Federal Government relating to a contract. .. shall be
submitted within 6 years after the accrual of the claim." When Contract 2399 was
awarded, FAR 33.201 stated that: '"Accrual of a claim' occurs on the date when all
events, which fix the alleged liability of either the Government or the contractor and
permit assertion of the claim, were known or should have been known." FAC 90-32,
October 1, 1995 at 33-7.

        15. Considering that ESCI's proposal for a price adjustment for
government-responsible changes and delays of the work was submitted to the
government in the amount of$205,463.60 on 7 April 1997, and that no work on the
contract was performed after 16 June 1997, we conclude that all of the events fixing
the liability of the government, and permitting the assertion of a claim for equitable
adjustment of the contract price for the alleged increased incurred cost of the contract
work, were known or should have been known by ESCI no later than the date the
contract was terminated for default on 12 June 1998.

       16. ESCI's 7 April 1997 letter was a "proposal" for a price adjustment in the
amount of $205,463.60. It did not request a contracting officer's final decision on
the proposed adjustment. It did not provide the certification for a claim in that
amount as required by the CDA. (R4, tab 12) Neither the 7 April 1997 proposal nor
any other communication in the record before us on the motion was a CDA claim for
an equitable adjustment in the Contract 2399 price prior to the inclusion of these
increased costs in the 14 September 2012 termination settlement claim.

                                       DECISION

         Our jurisdiction over the claimed price adjustment for excess costs included in
ESCI's 14 September 2012 termination settlement claim depends on (i) when did the
claim or claims for price adjustment for the alleged increased costs "accrue," and (ii)
when did ESCI submit a CDA claim to the contracting officer for a price adjustment
for those costs. ESCI does not contest the fact that it did not submit a certified CDA
claim for its alleged costs that exceeded the contract price until it included those costs
in its termination settlement claim submitted on 14 September 2012. That
submission was 14 years after the claim for equitable adjustment had accrued and
eight years after the six-year statute of limitations had run. Citing Arctic Slope
Native Ass'n, Ltd. v. Sebelius, 699 F.3d 1289 (Fed. Cir. 2012) (hereinafter "Arctic
Slope II"), ESCI argues that the running of the CDA statute of limitation for its
increased cost claim was tolled until the default termination was converted to a
termination for convenience because: "Appellant could not have reasonably filed for
payment of completed work and increases [sic] contract costs while it was pursuing
government's default termination from June 30, 1997 to September 28, 2011" (app.
br. at 7).

                                            7
        Equitable tolling of a statute of limitations applies where the litigant proves:
"(l) that he has been pursuing his rights diligently, and (2) that some extraordinary
circumstance stood in his way and prevented timely filing." Arctic Slope II at 1295.
In Arctic Slope II, the court held that the plaintiff Indian tribe had diligently
monitored a class action suit against the government, and as a putative member of the
class reasonably believed that it was not necessary to file an individual claim on the
same matter that the class action was prosecuting. The court also held that, as an
extraordinary circumstance, "the federal government's 'unique and continuing
relationship with, and responsibility to, individual Indian tribes and to the Indian
people as a whole"' required that "we must judge the government's conduct with the
Indian tribes by 'the most exacting fiduciary standards."' Id. at 1297-98.

       There are no such extraordinary circumstances in ESCI's case here. ESCI is
not an Indian tribe or other entity with which the government had to conduct its
business by "the most exacting fiduciary standards."

        ESCI contends that "the government's default termination claim had to be
resolved before appellant could reinstate its request for equitable adjustment pursuant
to [the] CDA" (app. br. at 12). We disagree. All events necessary to fix liability on
the government for any incurred increased costs of performing the contract were
known or should have been known no later than 12 June 1998, the date the contract
was terminated for default (see SOF ~ 15). There were no legal or other impediments
at that time or thereafter to ESCI submitting an affirmative claim for equitable
adjustment of the contract price.

        A timely written notice to the contracting officer demanding as a matter of
right a price adjustment in a sum certain for the increased costs, and certifying that
demand as required by the CDA, was all that was necessary for ESCI to assert its
claim for a contract price adjustment for purposes of the statute of limitations. There
is no evidence that some ''trickery" or misleading action of the government caused
the untimely submission of such a claim. Absent evidence otherwise, we believe that
ESCI' s untimely submission was caused by its lack of due diligence in preserving its
legal rights under the contract. Such "garden variety claim of excusable neglect," is
not a basis for equitable tolling of the statute of limitations. See Bernard Cap
Company, ASBCA No. 56679 et al., 10-1BCA~34,387 at 169,801.

       Excluding the claimed termination settlement expenses ($17 5,248 .40 ), the
total amount of ESCI' s termination settlement claim for the cost and reasonable
profit of performing the contract up to the date of termination ($1,458,955.87)
exceeded the total contract price ($561,873.25) by $897,082.62 (see SOF ~ 11).
Since a CDA claim for a price adjustment for those alleged increased costs was not
timely submitted to the contracting officer, we have no jurisdiction over that claimed
amount in this appeal and give it no further consideration. Voices R Us, Inc.,

                                           8
ASBCA Nos. 51565, 52307, 01-1BCAif31,328 at 154,748; Skip Kirchdorfer, Inc.,
ASBCA No. 40515 et al., 93-3 BCA if 25,899 at 128,837.

        The government argues that, without ESCI "properly segregating the costs
associated with the time-barred claims, the entire appeal should be dismissed (gov't
br. at 6). We disagree. The termination settlement expenses ($175,248.40) that are
excluded from the paragraph (e) limit, and the termination settlement amount up to
the contract price ($561,873.25) remain within our jurisdiction.

       The motion to dismiss is granted with respect to the $897,082.62 that exceeds
the contract price and is denied in all other respects.

       Dated: 25 July 2014

I concur                                         I concur

                                                   ~~
~~~
Administrative Judge
                                                      ?--
                                                         ~

                                                 JACK-DELMAN
                                                 Administrative Judge
                                                                                 ~c>-~~~-_.,.

Acting Chairman                                  Acting 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. 58343, Appeal of
Environmental Safety Consultants, Inc., rendered in conformance with the Board's
Charter.

      Dated:

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

                                          9