Court Opinion

ID: 4995672
Source: CourtListenerOpinion
Date Created: 2021-09-29 19:00:14.194536+00
Date Added: 2024-06-11T08:16:53.299702
License: Public Domain

ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of --                                     )
                                                 )
Gulf Pacific Contracting, LLC                    )    ASBCA No. 61434
                                                 )
Under Contract No. FA4417-16-D-0002              )

APPEARANCE FOR THE APPELLANT:                        Laurence J. Zielke III, Esq.
                                                      Zielke Law Firm, PLLC
                                                      Louisville, KY

APPEARANCES FOR THE GOVERNMENT:                      Jeffrey P. Hildebrant, Esq.
                                                      Air Force Deputy Chief Trial Attorney
                                                     Christopher M. Judge-Hilborn, Esq.
                                                     Maj Michelle E. Gregory, USAF
                                                      Trial Attorneys

          MAJORITY OPINION BY ADMINISTRATIVE JUDGE PROUTY

        The Davis-Bacon Act, 40 U.S.C. §§ 3131-3148, is a fact of life in federal
government construction contracting. By requiring the payment of local prevailing
wages to contractor employees in certain circumstances, it may force contractors to pay
their employees more than they might otherwise when they begin contract performance
and to further increase wages in the midst of performance or following the exercise of
options by the government. The Federal Acquisition Regulation (FAR) provides a
contracting officer (CO) multiple ways to address these increased costs through
prescribed clauses to be inserted into a contract. One such clause (which we will refer to
as “the no-adjustment clause” throughout) takes the approach of informing the contractor
that there will be no adjustment to the prices in the awarded contract unless it is provided
for elsewhere in the contract, which implies that (unless there is a separate contract
provision saying otherwise) the contractor should price its option years to take into
account the risk of increased wages. That is the clause that was included in the above-
captioned contract (the contract) which is the subject of today’s dispute.

       This appeal is before us under the auspices of Board Rule 11, which permits its
resolution on the record, without a hearing and live testimony. As detailed below,
appellant, Gulf Pacific Contracting, LLC (Gulf Pacific), had a contract to perform various
construction-related services at Hurlburt Field in Florida. Coincident with the
government’s exercise of its first option year, the Department of Labor (DOL) issued new
wage determinations, with the upshot being that Gulf Pacific needed to pay some of its
employees more during the option period. Gulf Pacific demanded additional

                                             1
compensation from the government and the CO refused, pointing to the no-adjustment
clause, which precluded such additional payment. Gulf Pacific appeals this decision,
arguing that it was not on notice that it would be required to absorb this cost in its option
pricing and that the no-adjustment clause is defective.

        Judge Clarke agrees with Gulf Pacific, contending that the FAR-required
no-adjustment clause contained in the contract did not meet the requirements of the
policy portion of the FAR which set forth the CO’s options for addressing wage
adjustments. We respectfully disagree with Judge Clarke. The drafters of the FAR made
the no-adjustment clause consistent with their earlier dictates about how to handle such
situations. Gulf Pacific also argues that the no-adjustment clause is ambiguous. It is not.
Gulf Pacific, as discussed below, is entitled to no additional compensation.

                                    FINDINGS OF FACT

        On September 26, 2016, the United States Air Force 1st Special Operations
Contracting Squadron awarded to Gulf Pacific the contract, a firm-fixed-price, indefinite-
delivery indefinite-quantity (IDIQ) construction contract, to paint the interior of facilities,
paint the exterior of facilities, and stripe runway pavement at Hurlburt Field in Florida
(R4, tab 4 at 1-4). The base period of performance was one year, with four option years
(id. at 5-6).

       As part of the solicitation that led to the award of the contract, offerors were
required to provide prices for the base year and each option year, and those prices were to
come from a “Line Item List” attached to the solicitation that the contractor was to fill out
(app. supp. R4, tab 14 at 4-6). The Line Item List is an extensive 15-page document and
includes services that may be ordered under separate contract line items, estimated
quantities of those services, and space for the contractor to insert its pricing. It includes
separate pricing lists for the base year and all four individual option years. (See R4, tab
4a) In its initial bid, Gulf Pacific, in fact, priced some components of its option years 1
differently than the base year (compare R4, tab 11 at 13-15 to R4, tab 11 at 19-21). A
number of Gulf Pacific’s prices in the line items went down between the base year and
the option years – enough for the government to raise the issue with Gulf Pacific during
pre-award discussions. In response to these concerns, Gulf Pacific ascribed the decreased

1   Based on the parties’ discussions during the government’s consideration of Gulf
        Pacific’s proposal, we can conclude that there were changes in unit pricing
        between the base year and the option years as well (see R4, tab 2 at 3 (referencing
        discussions about variance in base and option years)), but the Line Item List for
        the base year, as completed by Gulf Pacific does not appear to be part of the
        record for us to report it directly. Apparently, neither party was able to find it
        during discovery (see gov’t br. at 6 n.1), but this is of no significance since the
        matter is not in dispute.

                                              2
prices to its anticipated “increased production efficiency” as it performed the contract
(R4, tab 2 at 3). To be clear, however, at least one 2 price component increased between
option years 1 and 3 (compare CLIN 1004AG, located at R4, tab 11 at 15 to CLIN
3004AG, located at R4, tab 11 at 21).

       The contract incorporates by reference FAR 52.222-6, CONSTRUCTION WAGE
RATE REQUIREMENTS (MAY 2014) (R4, tab 4 at 14). In part, this provision requires
“laborers and mechanics employed or working upon the site of the work will be paid
unconditionally . . . at rates not less than those contained in the wage determination of the
Secretary of Labor which is attached hereto and made a part hereof.” FAR 52.222-
6(b)(1)

        The contract also incorporates by reference FAR 52.222-30, CONSTRUCTION
WAGE RATE REQUIREMENTS—PRICE ADJUSTMENT (NONE OR
SEPARATELY SPECIFIED METHOD) (MAY 2014) (R4, tab 4 at 14). This is the no-
adjustment clause referenced herein. In relevant part, this provision inserts the following
text into the contract:

                 (a) The wage determination issued under the Construction
                 Wage Rate Requirements statute by the [DOL], that is
                 effective for an option to extend the term of the contract,
                 will apply to that option period.

                 (b) The Contracting Officer will make no adjustment in
                 contract price, other than provided for elsewhere in this
                 contract, to cover any increases or decreases in wages and
                 benefits as a result of [such a wage determination]

FAR 52.222-30.

        For the contract at issue here, there is no other mechanism for adjusting the option
price to cover increases or decreases in wages caused by wage determinations “provided
for elsewhere in th[e] contract” (see R4, tab 4). 3
        For unknown reasons, the contract also incorporates by reference FAR 52.216-7,
ALLOWABLE COST AND PAYMENT – ALT I (JUN 2013) (see R4, tab 4 at 14). This

2 The government identified this one particular increase, but no others, and we have not
       compared the remainder of the prices line by line as it is unnecessary for our
       decision today.
3 Gulf Pacific argues that two particular contract provisions may constitute mechanisms

       to pay wage rate increases, which we will address in the Decision section, below,
       but identifies no provision establishing an entitlement to payment for wage rate
       increases.

                                              3
FAR provision, by its terms, governs compensation in cost reimbursement or
time-and-materials contracts and the first line of the clause directs that it is used “as
prescribed in 16.307(a).” FAR 16.307(a), in turn, prescribes the use of the clause in
FAR 52.216-7 in cost reimbursement and time-and-materials contracts. Subpart 16.3 of the
FAR (of which FAR 16.307 is a subsidiary part) is entitled “COST-REIMBURSEMENT
CONTRACTS.” As stated earlier, the contract at issue is not a cost reimbursement contract,
but is a firm-fixed-price contract.

       Of relevance to the arguments advanced by Gulf Pacific here, we also note that the
contract incorporated by reference the clause found in the Department of Defense
Supplement to the FAR (DFARS) 252.243-7002, REQUESTS FOR EQUITABLE
ADJUSTMENT (DEC 2012) (R4, tab 4 at 16).

       On September 8, 2016 (18 days before contract award), the government amended
the solicitation for the contract to include the most recent applicable DOL Wage Rate
Schedule, No. FL160029, dated August 5, 2016 (app. supp. R4, tab 15). Gulf Pacific
submitted its final prices on September 15, 2016 (R4, tab 12) and, as previously noted,
the contract was awarded on September 26, 2016.

       On September 8, 2017, the DOL issued a wage determination increasing the
hourly prevailing wages for painters (see R4, tab 7 at 5). Thus, on September 14, 2017,
while unilaterally modifying the contract to exercise Option Year 1, the CO incorporated
this new wage determination (R4, tab 7).

       Upon receipt of the contract modification the same day, Gulf Pacific asked the CO
how it would be compensated for the increased wage costs. The CO initially responded
in an email stating that it could file a request for equitable adjustment, but reversed
himself 18 minutes later, informing Gulf Pacific that the FAR’s no-adjustment clause,
incorporated into the contract, did not allow for such compensation. (R4, tab 13)

       Gulf Pacific submitted a certified claim to the CO on October 11, 2017, seeking an
equitable adjustment in the amount of $120,000, representing the additional costs it
expected it would incur as a result of the prevailing wage adjustment (R4, tab 8). The CO
denied the claim in a final decision dated October 23, 2017 (R4, tab 9).

      Gulf Pacific timely appealed this decision to the Board.

                                       DECISION

       The question before us is whether the CO’s inclusion in the contract, by reference,
of the FAR’s no-adjustment clause was sufficient to preclude Gulf Pacific from
recovering the extra costs it incurred by imposition of higher wage rates after contract
award. The answer is that it does.

                                            4
       I. The FAR Permits the Government to Make no Compensation to the Contractor
          for Wage Increases if the Contract so Specifies

        The no-adjustment clause is not included in the contract by happenstance, nor is its
wording careless. Rather, it fits within a well-planned regulatory scheme to address the
consequences of the Davis-Bacon Act, which begins with FAR 22.404-12, LABOR
STANDARDS FOR CONTRACTS CONTAINING CONSTRUCTION
REQUIREMENTS AND OPTION PROVISIONS THAT EXTEND BEYOND THE
TERM OF THE CONTRACT (MAY 2014). Subsection (c) of this regulatory provision
requires the CO to include, in fixed price construction contracts, a clause that specifies
one of four methods, “to provide an allowance for any increases or decreases in labor
costs that result from the inclusion of the current wage determination at the exercise of an
option to extend the term of the contract.” The four methods are: 1) no adjustment, but
the contractor may have the opportunity to take the possible changes into account when it
bids the options; 2) some sort of adjustment separately specified in the contract; 3) a price
adjustment based on a percentage rate of a published economic indicator specified by the
contract; and 4) a price adjustment based upon actual costs.

       Since method (1) (no adjustment) was the choice of the CO here, it is helpful to
quote it in its entirety:

                 (1) The contracting officer may provide the offerors the
                 opportunity to bid or propose separate prices for each
                 option period. The contracting officer must not further
                 adjust the contract price as a result of the incorporation of
                 a new or revised wage determination at the exercise of
                 each option to extend the term of the contract. Generally,
                 this method is used in construction-only contracts (with
                 options to extend the term) that are not expected to exceed
                 a total of 3 years.

FAR 22.404-12(c)(1)

        Just a few pages later in the FAR, FAR 22.407 specifies that pre-drafted contract
clauses contained in the FAR are to be inserted into contracts to effect the four particular
options denoted by FAR 52.222-30. As stated in FAR 22.407(e), both the “no
adjustment” method and the “separately specified” method were to be reflected by the
insertion of the contract clause contained in FAR 52.222-30, the no-adjustment clause.
This is what happened here.

       Gulf Pacific argues that, by law, the government is required to compensate a
contractor through the use of an equitable adjustment when compliance with a DOL wage

                                             5
determination increases its costs, and cites our opinion in Sonoran Tech. and Prof’l Svs.,
LLC, ASBCA Nos. 61040, 61101, 17-1 BCA ¶ 36,792, in support of this conclusion (see
app. br. at 13). But in Sonoran Technology, the government used a different type of
contract than present here (it was a services contract, rather than a construction contract),
and, instead of including the no-adjustment clause, the contract (properly) used the clause
in FAR 52.222-43, which expressly required adjustment of the contract price to account
for increased wage rates. See FAR 52.222-43(d) (quoted in Sonoran Tech., 17-1 BCA ¶
36,792 at 179,329).4

        Thus, the FAR permits the government to draft a contract to preclude additional
payment to a contractor for increased costs during performance of an option that are
caused by new Davis-Bacon Act labor rates and direct that the method it uses to do so be
the inclusion of the contract provision set forth in FAR 52.222-30, the no-adjustment
clause.

       II. The No-Adjustment Clause Complies With the FAR’s Davis-Bacon Act
           Framework

       Judge Clarke’s dissenting opinion is based upon the notion that the no-adjustment
clause does not comply with the Davis-Bacon Act framework set forth in FAR 22.404-12.
As Gulf Pacific and Judge Clarke would have it, a FAR-compliant contract provision for the
no-adjustment option would specifically inform the contractor that it would not receive any
adjustment in contract price for labor rate adjustments and direct them to price their option
years accordingly. They argue that the no-adjustment clause does not do so. They are
incorrect both in terms of what the FAR required and about what was included in the
contract.5

4 Sonoran Technology was also a single-judge decision, issued under the auspices of
      Board Rule 12.2, which means that it has no value as precedent. See Sonoran
      Tech., 17-1 BCA ¶ 36,792 at 179,328 n.1. Thus, even if its facts were similar to
      those presented here, it would not be controlling.
5 We do, however, agree with Judge Clarke that whether the contract complies with the

      FAR provisions relating to adjusting payment to account for wage rate increases is
      a matter that may be challenged by a contractor. See Freightliner Corp. v.
      Caldera, 225 F.3d 1361, 1365 (Fed. Cir. 2000).

                                             6
         A. We Read the FAR as a Whole

        The argument that one part of the FAR is not compliant with another, and
therefore must be set aside, is problematic and unsupported by law cited to us. To be
sure, the FAR is comprehensive, spanning multiple volumes, but the R in FAR stands for
regulation: singular. As such, we interpret it as we would any other regulation. Thus,
we read it in a manner that seeks to avoid finding portions of it “inoperative or
superfluous, void or insignificant,” an interpretation that is disfavored by the law. See,
e.g., Baude v. United States, 955 F.3d 1290, 1305 (Fed. Cir. 2020) (quoting Corley v.
United States, 556 U.S. 303, 314 (2009)). Put another way, we generally presume that
the authors of the FAR, the FAR Council, knew what they were doing and drafted their
mandatory contract provisions to be consistent with the portions of the FAR laying out
the policy those provisions were drafted to effect. 6

         B. “May” Does not Mean “Must” and the Mandatory Contract Clause at FAR
            52.222-30 – the No-Adjustment Clause – is Consistent With the Policy set
            Forth in FAR 22.404-12

       Judge Clarke’s dissent argues that the provision in FAR 22.404-12 governing the
“no change” option which states that “[t]he contracting officer may provide the offerors
the opportunity to bid or propose separate prices for each option period” (emphasis
added) means that the no-adjustment clause, in fact, must give the contractor such an
opportunity. The basis for this conclusion is the earlier, introductory language in FAR
22.402-12 stating that the purpose of the mandatory contract clause was “to provide an
allowance for any increases or decreases in labor costs that result from the inclusion of
the current wage determination at the exercise of an option to extend the term of the
contract.” To Judge Clarke, if the contractor were not given an opportunity to propose
separate prices for option years in the mandatory clause, there would be no “allowance
for” the increases or decreases in costs due to wage determinations. We do not find this
argument compelling.

        First, of course, when we interpret a regulation (or statute or contract for that
matter), in addition to reading it as a whole, we generally give its words their normal or
usual meanings. See, e.g., Tesoro Hawaii Corp. v. United States, 405 F.3d 1339, 1346
(Fed. Cir. 2005); Lockheed Corp. v. Widnall, 113 F.3d 1225, 1227-28 (Fed. Cir. 1997)
(plain language and “ordinary meaning”). The normal use of “may” is that it is a
permissive choice, not a command. Indeed, that is the word’s essence, so we see the
FAR Council’s selection of “may” rather than “shall” or “must” to bear particular
significance.

6   Of course, if there were an unresolvable contradiction between a policy portion of the
         FAR and its mandatory contract provisions, we would need to address it. As
         discussed below, we do not have that here.

                                               7
       Second, the fact that the no-adjustment clause does not require the CO to provide
an allowance for separate offers for option periods is also proof that the FAR Council
meant “may” as “may.” At first blush this may seem as circular reasoning, but it is not:
there would need to be good evidence for us to find that the FAR Council intended “may”
to mean “must,” but, instead, the same body that chose “may” in FAR 22.402-12 drafted
the provision in FAR 52.222-30 differently than it would have if “may” meant “must.”
This is good evidence that, yes, “may” meant “may.”

        An argument that rhymes with the previous one (though is not exactly the same) is
that reading “may” as “must” in FAR 52.222-30 would be to make the no-adjustment
clause “inoperative or superfluous, void or insignificant,” see Baude, 955 F.3d at 1305,
which we have already stated is a disfavored interpretation.

        We answer Judge Clarke’s argument, that the no-adjustment clause would not
provide any allowance for an increase in costs if it was not required to allow for them, by
making two observations: the first is that this language may be read as prefatory or
introductory, explaining what the general intent (or aspiration) of the provision is without
imposing direct requirements – the actual requirements being what comes in the
sentences to follow. The second is that the “allowance for cost” is made by the multiple
options that follow in this FAR provision, and that if the CO chooses the one option
where there is no ability to charge for costs and no requirement to permit the submission
of different prices for option years 7, then the very act of stating as much in the contract
provision provides for such an allowance in its own way: the contractor is on notice that
it must price its entire contract so that the possible exercise of an option after a wage
increase is accounted for. Put slightly differently, if the contractor knows before it prices
its contract that it risks its options being exercised after a wage increase and that there
will be no other recompense, it may price its contract to account for such a contingency.
Thus, a contract provision making this statement would meet the goal of “providing an
allowance for the increase or decrease” of labor costs during option years.

       Finally, even if may meant must, nothing in FAR 22.402-12 would require that the
allowance for separately-priced option years be placed in the no-adjustment clause, itself.
The CO would only be required to do that somewhere in the contract. And, of course, the
contract permitted different option year pricing, which Gulf Pacific took advantage of, as
described above in the Facts section.

7   Even though we find this permissible, we find it an extremely unlikely circumstance.
         Although technically possible, we have never seen a solicitation in which the
         government required option year pricing to be exactly the same as that in the base
         year (it certainly did not require it here). To be sure, a contractor might choose to
         bid a contract that way, but that would be by choice, not government mandate.

                                                8
        With all of this in mind, we find that the contract provisions set forth in the FAR’s
no-adjustment clause meet the relatively simple requirements of FAR 22.402-12 since all
that is truly required in the no-adjustment option is that the contracting officer make no
adjustment to the contract price. FAR 22.404-12(c)(1).

       III. The Inclusion of the No-Adjustment Clause in the Contract Precluded
            Payment to Gulf Pacific for Labor Rate Increases During the Option Years

            A. The CO was Within his Rights to Include the No-Adjustment Clause in
               the Contract

       Gulf Pacific makes the argument that the no-adjustment clause was only to be
used in circumstances in which the contract was limited to three years of total
performance (see app. br. at 3; app. reply br. at 5-6). Like Judge Clarke, we find that the
regulation was not so limiting. The regulatory language provided that, “generally,” the
no adjustment provision was to be used in contracts not expected to last more than three
years. See FAR 22.404-12(c)(1). It did not preclude its use in contracts that lasted
longer: it was “general” in application and, indeed, could be read to say when the no-
adjustment clause was to be used, not when it wasn’t.

            B. The Language of the No-Adjustment Clause Included in the Contract is
               not Ambiguous and Precludes Payment to Gulf Pacific

         Having held above that the FAR permits the CO to decide to preclude extra
compensation for wage adjustments and that the language in the no-adjustment clause
effecting that decision is not defective because it does not separately inform the contractor
that it should price its option years to account for the possibility of Davis-Bacon Act wage
adjustments, we turn to the final significant challenge made by Gulf Pacific: its assertion
that the no-adjustment clause is ambiguous. This alleged ambiguity rests upon the clause’s
statement that no adjustment to the price would be made “other than provided for elsewhere
in this contract.” Gulf Pacific argues that both the clause allowing for requests for equitable
adjustment (REAs) and the Allowable Payment clause provide some venue “elsewhere in the
contract” for payment (see app. reply br. at 7-8). The argument is unpersuasive.

       The REA clause incorporated by reference in the contract is DFARS 252.243-7002.
This clause explains how to file an REA for “contract adjustment[s] for which the Contractor
believes the Government is liable.” DFARS 252.243-7002(a) It does not establish
entitlement to the adjustment in the first place. Id. Thus, it does not create an ambiguity
because the REA clause cannot be reasonably read to create an independent basis for the CO
to pay Gulf Pacific for the wage increase. See NVT Tech., Inc. v. United States, 370 F.3d
1153, 1159 (Fed. Cir. 2004) (citing Metric Constructors, Inc. v. NASA, 169 F.3d 747, 751
(Fed. Cir. 1999)) (contract ambiguous if susceptible to more than one reasonable
interpretation).

                                              9
        The Allowable Payment clause, too, does nothing to make the meaning of the no-
adjustment clause ambiguous. As noted above, this standard clause, though included in
the contract, has no applicability to it since, by its terms, it governs cost-reimbursement
contracts. Gulf Pacific argues that it must have some applicability to the contract on the
basis that a contact “must” be read so as to leave no portion superfluous (app. reply br. at
7 (citing NVT, 370 F.3d at 1159)). But the law is not quite what Gulf Pacific says it is. It
does not require the impossible action of forcing a square contractual peg into a round
hole that has no room for it, but merely prefers an interpretation that harmonizes all parts
of the contract, if possible. See NVT, 370 F.3d at 1159 (“interpretation that gives
meaning to all parts of the contract is to be preferred over one that leaves a portion of the
contract useless, inexplicable, void, or superfluous”). Indeed, we have recognized that,
contracts being assembled by people, surplus boilerplate can, on occasion, be included
without changing the meaning of the contract. See Watts Constructors, LLC, ASBCA
No. 61493, 20-1 BCA ¶ 37,563 at 182,385-86. The Allowable Payments clause, since it
cannot be applicable to the contract, creates no vehicle for adjusting the price of the
contract and thus creates no ambiguity.

      Finally, we note that, had there been any confusion on the part of Gulf Pacific, that
confusion should have been eliminated when it looked up the no-adjustment clause in the
FAR. 8 The preface to the clause states that it is inserted pursuant to the direction in FAR
22.407(e). FAR 22.407(e), in turn, refers the reader to FAR 22.404-12(c)(1) and (2),
which underscore exactly how the regulatory scheme is laid out. Thus, Gulf Pacific’s
arguments that the contract was ambiguous are even less supported, just as its
generalized, equitable arguments that it was not on notice that it would need to deal with
Davis-Bacon Act wage adjustments (see app. reply br. at 8-9) are unpersuasive. 9

      With this in mind, there is no basis for us to read the no-adjustment clause in any
way besides precluding additional payment by the CO.

8 Because the clause is incorporated by reference, recourse to the FAR provision would
       be necessary.
9 Of course, Gulf Pacific was on particular notice of the salience of Davis-Bacon Act

       wage adjustments by virtue of the fact that the government required a re-bid just
       prior to contract award when a DOL wage adjustment was issued.

                                             10
                                    CONCLUSION

     For the reasons stated herein, the appeal is denied.

     Dated: September 16, 2021

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

I concur                                         I concur

RICHARD SHACKLEFORD                              JAMES SWEET
Administrative Judge                             Administrative Judge
Acting Chairman                                  Armed Services Board
Armed Services Board                             of Contract Appeals
of Contract Appeals

I concur                                         I dissent (see attached opinion)

BRIAN S. SMITH                                   CRAIG S. CLARKE
Administrative Judge                             Administrative Judge
Armed Services Board                             Armed Service Board
of Contract Appeals                              of Contract Appeals

                                           11
       I respectfully dissent. I would hold that FAR 52.222-30 fails to comply with FAR
22.404-129(c). Gulf Pacific (GP) was not given sufficient pre-award notice of an
opportunity to price its options to account for a possible wage increase as required by
FAR 22.404-12(c). The Air Force (AF) contends that FAR 52.222-30 is clear and
unambiguous and provides sufficient notice and opportunity to increase option prices and
it should be enforced. I disagree.

      This case was originally assigned to me and I drafted the preliminary decision
with which my colleagues disagree. I attach that decision as my dissent.

                                   FINDINGS OF FACTS

       This appeal and decision deal primarily with questions of law which is why there
are no detailed recitation of facts other than the FAR provisions to be interpreted.

        1. On 27 September 2016, the 1st Special Operations Contracting Squadron
awarded to Gulf Pacific Contracting, LLC (GP) a firm-fixed-price, indefinite delivery
indefinite-quantity (IDIQ) construction contract, contract number being FA4417-16-D-
0002 (Contract No. 0002), to paint the interior of the facilities, paint the exterior of the
facilities, and stripe runway pavement at Hurlburt Field in Florida. (R4, tab 4 at 1-4). The
base period of performance is one year, with four option years. (R4, tab 4 at 5-6).

         2. The contract incorporates FAR 52.222-6, CONSTRUCTION WAGE RATE
REQUIREMENTS (AUGUST 2018), subparagraph (b)(1), that requires “laborers and
mechanics employed or working upon the site of the work will be paid unconditionally. .
. at rates not less than those contained in the wage determination of the Secretary of
Labor which is attached hereto and made a part hereof (R4, tab 4 at 14). Attached to
Contract No. 0002 was Schedule of Wage Rates No. FL160029, August 5, 2016 (R4, tab
4 at 33).

     3. FAR 22.404-12, LABOR STANDARDS FOR CONTRACTS CONTAINING
CONSTRUCTION REQUIREMENTS AND OPTION PROVISIONS THAT EXTEND
THE TERM OF THE CONTRACT (MAY 2014), includes10:

                (a) Each time the contracting officer exercises an option to
                extend the term of a contract for construction, or a contract
                that includes substantial and segregable construction work,

10   FAR 22.404-12 is not a FAR Part 52 clause and is not specifically incorporated into the
        contract, thus no cite to the record.

                                              12
the contracting officer must modify the contract to
incorporate the most current wage determination.

....

(c) The contracting officer must include in fixed-price
contracts a clause that specifies one of the following methods,
suitable to the interest of the Government, to provide an
allowance for any increases or decreases in labor costs that
result from the inclusion of the current wage determination at
the exercise of an option to extend the term of the contract:

(1) The contracting officer may provide the offerors the
opportunity to bid or propose separate prices for each option
period. The contracting officer must not further adjust the
contract price as a result of the incorporation of a new or
revised wage determination at the exercise of each option to
extend the term of the contract. Generally, this method is
used in construction-only contracts (with options to extend
the term) that are not expected to exceed a total of 3 years.

(2) The contracting officer may include in the contract a
separately specified pricing method that permits an
adjustment to the contract price or contract labor unit price at
the exercise of each option to extend the term of the contract.
At the time of option exercise, the contracting officer must
incorporate a new wage determination into the contract, and
must apply the specific pricing method to calculate the
contract price adjustment. An example of a contract pricing
method that the contracting officer might separately specify is
incorporation in the solicitation and resulting contract of the
pricing data from an annually published unit pricing book
(e.g., the U.S. Army Computer-Aided Cost Estimating
System or similar commercial product), which is multiplied in
the contract by a factor proposed by the contractor (e.g., .95
or 1.1). At option exercise, the contracting officer
incorporates the pricing data from the latest annual edition of
the unit pricing book, multiplied by the factor agreed to in the
basic contract. The contracting officer must not further adjust
the contract price as a result of the incorporation of the new
or revised wage determination.

                              13
             (3) The contracting officer may provide for a contract price
             adjustment based solely on a percentage rate determined by
             the contracting officer using a published economic indicator
             incorporated into the solicitation and resulting contract. At
             the exercise of each option to extend the term of the contract,
             the contracting officer will apply the percentage rate, based
             on the economic indicator, to the portion of the contract price
             or contract unit price designated in the contract clause as
             labor costs subject to the provisions of the Construction Wage
             Rate Requirements statute. The contracting officer must
             insert 50 percent as the estimated portion of the contract price
             that is labor unless the contracting officer determines, prior to
             issuance of the solicitation, that a different percentage is more
             appropriate for a particular contract or requirement. This
             percentage adjustment to the designated labor costs must be
             the only adjustment made to cover increases in wages and/or
             benefits resulting from the incorporation of a new or revised
             wage determination at the exercise of the option.

             (4) The contracting officer may provide a computation
             method to adjust the contract price to reflect the contractor’s
             actual increase or decrease in wages and fringe benefits
             (combined) to the extent that the increase is made to comply
             with, or the decrease is voluntarily made by the contractor as
             a result of incorporation of, a new or revised wage
             determination at the exercise of the option to extend the term
             of the contract. Generally, this method is appropriate for use
             only if contract requirements are predominately services
             subject to the Service Contract Labor Standards statute and
             the construction requirements are substantial and segregable.
             The methods used to adjust the contract price for the service
             requirements and the construction requirements would be
             similar.

(Emphasis added). I refer to FAR 22.404-12(c)(1) as the “none” method, (c)(2) as the
“separately specified pricing” method, (c)(3) as the “percentage” method and (c)(4) as the
“actual” method. FAR 22.407.

      4. FAR 22.407 Solicitation Provision and Contract clauses, includes:

             (e) Insert the clause at 52.222-30, Construction Wage Rate
             Requirements-Price Adjustment (None or Separately

                                            14
             Specified Pricing Method), in solicitations and contracts if the
             contract is expected to be-

             (1) A fixed-price contract subject to the Construction Wage
             Rate Requirements statute that will contain option provisions
             by which the contracting officer may extend the term of the
             contract, and the contracting officer determines the most
             appropriate contract price adjustment method is the method at
             22.404-12(c)(1) or (2); or

             (2) A cost-reimbursable type contract subject to the
             Construction Wage Rate Requirements statute that will
             contain option provisions by which the contracting officer
             may extend the term of the contract.

             (f) Insert the clause at 52.222-31, Construction Wage Rate
             Requirements-Price Adjustment (Percentage Method), in
             solicitations and contracts if the contract is expected to be a
             fixed-price contract subject to the Construction Wage Rate
             Requirements statute that will contain option provisions by
             which the contracting officer may extend the term of the
             contract, and the contracting officer determines the most
             appropriate contract price adjustment method is the method at
             22.404-12(c)(3).

             (g) Insert the clause at 52.222-32, Construction Wage Rate
             Requirements-Price Adjustment (Actual Method), in
             solicitations and contracts if the contract is expected to be a
             fixed-price contract subject to the Construction Wage Rate
             Requirements statute that will contain option provisions by
             which the contracting officer may extend the term of the
             contract, and the contracting officer determines the most
             appropriate method to establish contract price is the method at
             22.404-12(c)(4).

      5. Contract No. 0002 incorporates FAR 52.222-30 Construction Wage Rate
Requirements-Price Adjustment (None or Separately Specified Method) that reads:

             (a) The wage determination issued under the Construction
             Wage Rate Requirements statute by the Administrator, Wage
             and Hour Division, U.S. Department of Labor, that is

                                           15
             effective for an option to extend the term of the contract, will
             apply to that option period.

             (b) The Contracting Officer will make no adjustment in
             contract price, other than provided for elsewhere in this
             contract, to cover any increases or decreases in wages and
             benefits as a result of-

             (1) Incorporation of the Department of Labor’s wage
             determination applicable at the exercise of the option to
             extend the term of the contract;

             (2) Incorporation of a wage determination otherwise applied
             to the contract by operation of law; or

             (3) An increase in wages and benefits resulting from any
             other requirement applicable to workers subject to the
             Construction Wage Rate Requirements statute.

(R4, tab 4 at 14). FAR 52.222-30 implements both the “none” and “separately specified
pricing” methods, FAR 22.404-12(c)(1) &(c)(2). Surprisingly there is no mention of the
“separately specified pricing” method in FAR 52.222-30.

      6. FAR 52.222-31 implements the “percentage” method:

             (b) The Contracting Officer will adjust the portion of the
             contract price or contract unit price(s) containing the labor
             costs subject to the Construction Wage Rate Requirements
             statute to provide for an increase in wages and fringe benefits
             at the exercise of each option to extend the term of the
             contract in accordance with the following procedures.”

             (1) The Contracting Officer has determined that the portion
             of the contract price or contract unit price(s) containing labor
             costs subject to the Construction Wage Rate Requirements
             statute is __________ [Contracting Officer insert percentage
             rate] percent.

             (2) The Contracting Officer will increase the portion of the
             contract price or contract unit price(s) containing the labor
             costs subject to the Construction Wage Rate Requirements
             statute by the percentage rate published in _____________
             [Contracting Officer insert publication].

                                            16
52.222-31(b)

         7. FAR 22.404-12(c)(3), and FAR 52.222-32 implement the “actual” method:

                (c) The Contracting Officer will adjust the contract price or
                contract unit price labor rates to reflect the Contractor’s actual
                increase or decrease in wages and fringe benefits to the extent
                that the increase is made to comply with, or the decrease is
                voluntarily made by the Contractor as a result of—

       8. The second,11 third and fourth methods provide for an increase in contract price
when an option is exercised to compensate the contractor for the increase in costs caused
by the inclusion of a new wage determination increasing wages, the first “none” method
does not. The only protection available to a bidder when the “none” method is selected
by the contracting officer is setting option prices to anticipate increased wages before
award.

      9. On 8 September 2017, the Department of Labor issued Wage Determination
FL170262, adjusting the hourly prevailing wage for brush, roller, and spray painters to
$16.55, representing $14.54 in wages and $2.01 in fringe benefits. (R4, tab 7 at 5) On
September 14, 2017, while unilaterally modifying the contract to exercise Option Year 1,
the AF incorporated Wage Determination FL170262. (R4, tab 7)

       10. On October 11, 2017, GP filed with the AF a certified claim for an equitable
adjustment in the amount of $120,000, representing the additional costs it would incur as
a result of the prevailing wage adjustment. (R4, tab 8 at 1) GP stated, “[t]here was no
opportunity to negotiate an increase in the event of an increase in the wage
determination” (id. at 2).

       11. On October 23, 2017 the AF issued a final decision, relying on FAR 51.222-
30, denying the claim:

                Contract FA4417-16-D-0002 was awarded on September 26,
                2016. The requirement was set aside for 8(a) competitive
                proposals. The contract is a firm-fixed price IDIQ contract
                with a base and four option years. The contract contains a

11   While FAR 52.222-31 and 32 provide instructions on how the increase for the
        “percentage method” and “actual method” is calculated. FAR 52.222-30 which
        implements both the “none” and “separately specified pricing” methods provides
        no instructions on the “separately specified pricing” method. We see no obvious
        explanation for this omission.

                                               17
              pre-priced schedule for the base year and each option year.
              The contractor was given the opportunity to include pricing
              for wage rate increases in their proposal.

              ....

              As a result of FAR 52.222-30 being incorporated into the
              solicitation and resulting contract, no adjustment in contract
              price will be made. The clause is very specific in stating that
              no adjustment in contract price to cover any increases or
              decreases in wages and benefits will be made as a result of
              incorporation of the wage determination applicable to the
              exercise of the option to extend the term of the contract. This
              is the final decision of the Contracting Officer. You may
              appeal this decision to the agency board of contract appeals.

(R4, tab 9) On November 20, 2017, GP appealed the final decision to the Board (R4, tab
10) and the appeal was docketed as ASBCA No. 61434 on November 24, 2017.

                                        DECISION

Positions of the Parties

        GP relies on three arguments. First, GP states there was nothing in the solicitation
or contract warning GP that its only ability to recover for an increased wage
determination was by adjusting its option bid prices upward before award. (App. reply
br. at 2) It is undisputed that based on FAR 52.222-30, GP was not allowed an
adjustment upon option exercise and incorporation of a new wage determination that
increased GP labor costs. (App. amended br. at 1) According to GP, the inclusion of
FAR 52.222-30 in the contract “does not sufficiently notify the contractor of the mandate
in FAR 22.404-12(c)(1) that the contracting officer must not further adjust the contract
price as a result of the incorporation of a new or revised wage determination.” (App.
amended br. at 11) GP argues that it was entitled to a clear warning pointing out that its
only ability to recover for increased labor costs was to adjust its pre-award option bids
upward to account for the possibility of an increase in wages at option exercise. (id.)
Second, GP argues that the conflicting language of FAR 52.222-30 and FAR 22.404-12
create ambiguity that should be decided in GP’s favor. (App. amended br. at 12) Finally,
the Contract was for a total potential term of up to 5 years. (Finding 1) FAR 22.404-
2(c)(1) includes, “Generally, this method is used in construction-only contracts (with
options to extend the term) that are not expected to exceed a total of 3 years.” (App.
reply br. at 5-6, FAR 22.404-12(c)(1)) GP argues that, based on the 3 year language in
FAR 22.404-2(c)(1), the CO should not have selected the “none” option.

                                            18
        For its part, the AF argues it complied with the requirements associated with FAR
22.404-12(c)(1). The Solicitation incorporated the mandatory clause at FAR 52.222-30,
warning that no price adjustment would be provided. (Gov’t br. at 2) Accordingly, by
virtue of FAR 52.222-30 alone, offerors 12 were provided the opportunity to propose
separate prices for each option period. The AF also points out that offerors were required
to complete the Line Item List, proposing separate unit prices and line item prices for the
base period and each option period. The Line Item List provides each service that may
be ordered and the estimated quantity to be ordered. (Gov’t br. at 5) The AF concludes
by stating that it satisfied the requirements of FAR 22.404-12(c)(1) and it was not
required to highlight a contract clause appellant should have read. See Systems &
Computer Information, Inc., 78- 1 BCA ¶ 12,946. (Gov’t br. at 5-7)

GP May Challenge the AF’s Adherence to FAR 22.404-12(c)

       As a preliminary matter I must determine if GP has a cause of action to challenge
the AF’s adherence with FAR 22.404-12. In this regard I follow the guidance of the
Court of Appeals for the Federal Circuit in Freightliner Corp. v. Caldera, 225 F.3d 1361
(Fed. Cir. 2000):

               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. See Cessna, 126
               F.3d at 1451; Rough Diamond Co. v. United States, 173 Ct.
               Cl. 15, 351 F.2d 636, 640-42 (Ct. Cl. 1965). If, however, the
               regulation exists for the benefit of the Government, then the
               private contractor does not have a cause of action against the
               Government in the event that a contracting officer fails to
               comply with the regulation. See Cessna, 126 F.3d at 1451-52;
               Rough Diamond, 351 F.2d at 642.

(Id. at 1365) FAR 22.404-12(c) starts with:

               The contracting officer must include in fixed-price contracts a
               clause that specifies one of the following methods, suitable to
               the interest of the Government, to provide an allowance for
               any increases or decreases in labor costs that result from the
               inclusion of the current wage determination at the exercise of
               an option to extend the term of the contract:

12   We use “offeror” synonymously with bidder and proposer.

                                             19
(emphasis added) (Finding 3). What follows are four “Methods” to provide relief to the
contractor when a new wage determination is incorporated into their contract at an option
exercise as follows:

      (1) The “none” method. The contracting officer, before award, may allow the
      offerors to increase the price of each option year to account for the risk of a new
      wage determination increasing the wage rate being incorporated into the contract
      upon option exercise.

      (2) The “separately specified pricing” method. The contracting officer may
      include in the contract a separately specified pricing method that permits an
      adjustment to the contract price or contract labor unit price at the exercise of each
      option to extend the term of the contract.

      (3) The “percentage” method. The contracting officer may provide for a contract
      price adjustment based solely on a percentage rate determined by the contracting
      officer using a published economic indicator incorporated into the solicitation and
      resulting contract.

      (4) The “actual” method. The contracting officer may provide a computation
      method to adjust the contract price to reflect the contractor’s actual increase or
      decrease in wages and fringe benefits (combined) to the extent that the increase is
      made to comply with, or the decrease is voluntarily made by the contractor as a
      result of incorporation of, a new or revised wage determination at the exercise of
      the option to extend the term of the contract.

(Finding 3, 5-7) It is clear that each of these four “methods” benefits contractors by
allowing them to account for the risk of mandatory inclusion of new wage determinations
increasing wages at each option exercise. Therefore, GP has a cause of action to
challenge the AF’s compliance with FAR 22.404-12 and may pursue its defense.

FAR 22.404-12(c)(1) is Not Limited to Contracts Lasting Three Years

      FAR 22.404-12(c)(1) ends with the following language:

             (1) The contracting officer may provide the offerors the
             opportunity to bid or propose separate prices for each option
             period. The contracting officer must not further adjust the
             contract price as a result of the incorporation of a new or
             revised wage determination at the exercise of each option to
             extend the term of the contract. Generally, this method is
             used in construction-only contracts (with options to extend
             the term) that are not expected to exceed a total of 3 years.

                                            20
(Finding 3) (Emphasis added) GP argues that because its contract had a base year and
four option years for a total of five years it was improper for the AF to select Method (1).
(App. reply br. at 5-6) I disagree. The word “Generally” cannot reasonably be
interpreted as mandatory language imposing a strict limit on the use of 22.404-12(c)(1) to
contracts lasting no more than three years. It may well have been “inappropriate” for the
AF to select Method (1) for a five year contract, but it was within the CO’s discretion. I
would hold GP’s interpretation is unreasonable.

There is No Ambiguity Between FAR 52.222-30 and FAR 22.404-12

       GP argues:

              At a minimum, the provisions of FAR 52.222-30 and
              FAR 22.404-12 create an ambiguity within the Contract with
              respect to how increased costs resulting from the
              incorporation of a new wage determination during the option
              years will be handled.

(Emphasis added) (App. br. at 14) The flaw in this argument is readily seen in GP’s own
language. FAR 22.404-12 is not “within the Contract.” (Id.) I deal with both FAR Part
52 and Part 22 in this decision. FAR Part 52 contains clauses that may be incorporated
into contracts, the other FAR Parts do not. FAR 22.404-12 provides policy guidance to
procurement officials to include which FAR Part 52 clauses should be incorporated into
contracts.

       The AF cites well-known contract interpretation case precedence:

              The contract terms are interpreted and read as a whole, giving
              reasonable meaning to all of its parts, and without leaving ‘a
              portion of the contract useless, inexplicable, void, or
              superfluous.’ Certified Construction Company of Kentucky,
              LLC, 15-1 BCA ¶ 36,068 at 176,133.

(Gov’t br. at 11) Since FAR 22.404-12 is not incorporated into the “whole” of the
contract this contract interpretation law cannot apply. While ambiguities may exist
between clauses or language within a contract, I know of no precedent finding an
ambiguity between contract clauses within a contract and FAR policy guidance outside of
a contract as is the case with FAR 22.404-12 and FAR 52.222-30. There is no ambiguity.

Line Item List

                                            21
        I disagree with the AF’s argument that the fact offerors were required to break out
prices by line item affords GP the clear warning it believes it is entitled to. I see nothing
in line item pricing that informs offerors that the only way to protect themselves from
wage determination price increases at option exercise was to increase option prices before
award.

Other than FAR 522.222-30(b), the AF did not Inform GP of its Rights and Risks Under
FAR 22.404-12(c)(1)

        It is undisputed that except for FAR 52.222-30(b), the AF did not inform GP in the
solicitation, or otherwise, that its only protection against increases in wages at option
exercise was to adjust its bid prices upward to cover the risk. (App. br. at 2- 6) The AF
does not point to any evidence, other than the language of FAR 52.222-30(b), providing
such notice to GP. (Finding 10) I do not consider FAR 52 222-30(b) to provide such
notice.

FAR 52.222-30(b) is Unambiguous

         The contract incorporates FAR 52.222-30(b) that read in part:

                (b) The Contracting Officer will make no adjustment in
                contract price, other than provided for elsewhere in this
                contract, to cover any increases or decreases in wages and
                benefits as a result of-

                (1) Incorporation of the Department of Labor’s wage
                determination applicable at the exercise of the option to
                extend the term of the contract;

(Finding 5) I agree with the AF that FAR 52.222-30(b) is unambiguous for our
purposes 13. It clearly states that the contracting officer “will make no adjustment in
contract price” for increases in wages resulting from incorporation of DOL wage
determinations at option exercise. However, this case involves other FAR policy
provisions that must be complied with.
.
The Obligation to Read the Contract Does not Extend to FAR Policy

         The AF argues:

13   FAR 22.407(e) directs that FAR 52.222-30 address both the None or Separately
        Specified Pricing Method. (Finding 4) It says nothing about the Separately
        Specified Pricing Method, as do FAR 52.222-31 & 32 do for their pricing
        methods. (Finding 4, 5) This is another flaw in FAR 52.222-30.

                                              22
             By incorporating the mandatory clause at FAR 52.222-30 and
             providing “offerors the opportunity to bid or propose separate
             prices for each option year,” Respondent met the
             requirements of FAR 22.404-12(c)(1). Respondent was not
             required to highlight a contract clause Appellant should have
             read.

(Gov’t br. at 2, 17) I agree that the AF “was not required to highlight a contract clause
Appellant should have read.” However, this argument does not apply to FAR 22.404-12(a) &
(c) and FAR 22.407 that are not contract clauses and not within the scope of the above quote.
They set forth FAR policy, and are not “contract clause[s] that Appellant should have read.” I
would not impose upon offerors an obligation to review FAR’s numerous “Parts” to ferret out
and interpret FAR policy guidance such as FAR 22.404-12 and FAR 22.407 that are not
contract clauses “within the contract.”

Interpreting the First Sentence in FAR 22.404-12(c)(1)

      FAR 22.404-12(c)(1), Method (1), selected by the AF for Contract 0002 reads:

                  (1) The contracting officer may provide the offerors the
                  opportunity to bid or propose separate prices for each
                  option period. The contracting officer must not further
                  adjust the contract price as a result of the incorporation of
                  a new or revised wage determination at the exercise of
                  each option to extend the term of the contract. Generally,
                  this method is used in construction-only contracts (with
                  options to extend the term) that are not expected to
                  exceed a total of 3 years.

(Finding 3) (Emphasis added) I first deal with the perplexing use of the word “may” in
the first sentence. Taken literally it means “may” or “may not.” The “may not”
interpretation seemingly would allow the CO to prohibit offerors from pricing option
years to account for wage determination risk. This is an absurd interpretation because it
is totally at odds with the intent expressed in FAR 22.404-12(c) to protect offerors.
Offerors have the unilateral right to price their offers any way they want. Contracts
should be interpreted so as to avoid such absurd results. Ash Britt, Inc., ASBCA
Nos. 55613, 55614, 09-1 BCA ¶ 34,086 at 168,536 (“Contract construction should avoid
absurd results.” (Citation omitted)); Applied Companies, ASBCA No. 50593, 05-2 BCA
¶ 32,986 at 163,478 (“Construction of contract terms should avoid absurd and whimsical
results.” (Citation omitted)); C.S. McCrossan Construction, Inc., ASBCA No. 49647,
00-1 BCA ¶ 30,661 at 151,381 (“A contract should be construed in a reasonable manner
to ‘avoid absurd and whimsical results.’” (Citation omitted)) To avoid the absurd result I

                                            23
will not interpret the word “may” in FAR 22.404-12(c)(1) literally. The word “may”
without “may not” excludes any interpretation limiting an offeror’s right to price its offer.
Therefore, the most reasonable interpretation under these circumstances is to interpret
“may” to mean “will.” Otherwise, the first sentence might be unenforceably vague.
Metro Machine dba General Dynamics NASSCO Norfolk, ASBCA No. 61817, 20-1 BCA
¶ 37633 at 182,713. Interpreting “may” to mean “will” resolves this potential “can of
worms” and compliments our conclusion that FAR 22.404-12(c) requires the CO to
provide notice to offerors of how they can protect themselves from the risks associated
with the “none” Method (1). This interpretation deals with an ambiguity, but does not
substantially contribute to the interpretation discussed below that I rely upon to reach my
suggested decision.

FAR 22.404-12(c) is Unambiguous

       Next I consider the language of FAR 22.404-12(c):

                  (c) The contracting officer must include in fixed-price
                  contracts a clause that specifies one of the following
                  methods, suitable to the interest of the Government, to
                  provide an allowance for any increases or decreases in
                  labor costs that result from the inclusion of the current
                  wage determination at the exercise of an option to extend
                  the term of the contract:

(Emphasis added) The CO “must” afford the offerors and opportunity to “provide an
allowance for any increases or decreases in labor costs that result from the inclusion of
the current wage determination at the exercise of an option to extend the term of the
contract.” Not-with-standing FAR 22.404(c)(1)’s interpretation, FAR 22.404(c) is clear
and unambiguous and requires notice to bidders of how to mitigate loss from Method (1).

FAR 52.222-30 Does Not Satisfy the Obligation Imposed by FAR 2.404-12(c)

       The AF argues that the “no adjustment” language in FAR 52.222-30 provides
notice and opportunity to adjust option prices to protect against an increase in the wage
determination. The relevant language in FAR 52.222-30 is:

              (b) The Contracting Officer will make no adjustment in
              contract price, other than provided for elsewhere in this
              contract, to cover any increases or decreases in wages and
              benefits as a result of-(1) Incorporation of the Department of
              Labor’s wage determination applicable at the exercise of the
              option to extend the term of the contract;

                                             24
(Finding 4). I disagree that this language provides sufficient notice that “The contracting
officer may 14 provide the offerors the opportunity to bid or propose separate prices for
each option period.” This language says nothing about the greater risk imposed by
Method (1) or explains when and how offerors may make adjustments to account for this
risk. Methods (2), (3), and (4) detailed in FAR 22.404-12(c) and implementing
provisions FAR 52.222-31 & -32 explain how the option price will be adjusted, FAR
52.222-30, Method (1), does not. (Findings 3, 4-7) As stated above, FAR 22.404-12(c)
requires that a warning about the risk of a new wage determination increasing costs and
an opportunity for offerors to address this risk by pricing the options be included in the
implementing Part 52 clause. This is particularly important because under “none”
Method (1) if wages increase there is no ability to recover increased costs after award as
there is with the other three methods. The prohibition against post award option price
increase in FAR 52.222-30 is extremely harsh and FAR 22.404-12(c) demands that it be
made clear to offerors, in the solicitation, that the only opportunity they have to mitigate
the risk is by pricing the option years before award. The AF’s interpretation of FAR
52.222-30 is unreasonable and I would not enforce it.

14   We interpreted “may” to mean “will” above.

                                             25
                                     CONCLUSION

       In accordance with the above I would sustain GP’s appeal.

       Dated: September 16, 2021

                                                   CRAIG S. CLARKE
                                                   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. 61434, Appeal of Gulf
Pacific Contracting, LLC, rendered in conformance with the Board’s Charter.

       Dated: September 16, 2021

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

                                            26