Relyant, LLC ( 2018 )

ARMED SERVICES BOARD OF CONTRACT APPEALS
Appeal of -- )
)
Relyant, LLC ) ASBCA No. 59809
)
Under Contract No. W91B4N-08-D-0011 )
APPEARANCE FOR THE APPELLANT: James H. Price, Esq.
Lacy, Price & Wagner, PC
Knoxville, TN
APPEARANCES FOR THE GOVERNMENT: Raymond M. Saunders, Esq.
Army Chief Trial Attorney
MAJ Jason W. Allen, JA
Trial Attorney
OPINION BY ADMINISTRATIVE JUDGE PROUTY
The dispute before us, 1 which was aired in a three-day hearing, is centered upon
the government's acceptance of certain pre-fabricated relocatable buildings (RLBs) for
use at two different sites in Afghanistan. As will be described in far greater detail
below, different government contracting officer representatives (CORs) at the two
different locations had diverging views regarding whether the RLBs initially provided
by appellant, Relyant, LLC (Relyant), should be permitted under the contract
specifications that applied to both locations. In particular, the RLBs delivered to the
first site passed a First Article Test (FAT) at that site, but were deemed to be out of
compliance with the contract's statement of work (SOW) by the contracting officer
(CO), and were not permitted at the second site. To get around the problem, Relyant
shipped the RLB components first delivered to second site to the first site, where the
local accepting authority (not the CO) apparently turned a blind eye to the RLBs'
failure to comply with the SOW2 ; Relyant then revamped its means of manufacturing
the RLBs to provide RLB components that satisfied the CO (and contract) at the
second site. Yet, despite the equities of the matter superficially weighing in favor of
Relyant for having had some units accepted, we find that we cannot grant it the relief
1
We granted summary judgment in favor of the government in the related appeal of
ASBCA No. 58172. See Relyant, LLC, ASBCA No. 58172, 16-1 BCA ,r 36,228,
aff'd, 683 F. App'x 960 (Fed. Cir. 2017). Citations to the Rule 4 file herein refer
to a single Rule 4 file that was originally submitted for that first appeal and later
supplemented for this one.
2
To be clear, there was only one CO at a time on the contract. As noted, though, there
was more than one COR.
sought. The CO was within her rights to hold Relyant to the specifications contained
within the contract's SOW, and the evidence does not support a finding of superior
knowledge on the part of the government. Moreover, the doctrine of good faith and
fair dealing does not override the express terms of the contract; however, in the
circumstances presented here, it does impose upon the government certain obligations
with regard to timeliness of government responses to Relyant's request to amend the
SOW, for which Relyant is entitled to certain relief. 3
FINDINGS OF FACT
I. The Contract
The idea behind the RLB is rather clever: standard sized steel shipping
containers - ubiquitous in the modem world and designed to be easily transported -
would be modified to be used as modular building blocks to make larger buildings for use
in contingency operations (tr. 1/195-96, 201-04). On 15 May 2008, the Bagram Regional
Contracting Center in Afghanistan (the Army or the government} solicited proposals
for the above-captioned contract (the contract), which was a multiple award,
indefinite-delivery/indefinite-quantity (IDIQ) contract for the manufacture, delivery, and
installation ofRLBs in Afghanistan (R4, tab 1).
The seeds of the dispute that are now before us were sown in Relyant' s4
proposal in response to this solicitation. The SOW accompanying the solicitation for
the contract required the installation of gypsum interior drywall to the interior of
the shipping containers that would cover fiberglass insulation that was a minimum of
three inches thick (R4, tab 1 at 17, 1 4.1.1.1 ). Relyant proposed a different
configuration: this was the use of a sandwich panel, including Styrofoam5 as the
insulator, instead of separate insulation and drywall (R4, tab 243 at 11-12 6 ; see also
tr. 2/124-26). This configuration made all the difference in the world to how Relyant
3 We also resolve a number of motions regarding the entitlement of Relyant to amend
its complaint; the government's entitlement to amend its answer; and whether
an adverse inference should be drawn against the government due to certain
discovery hiccups. Our decisions on those matters - granting, in large part, the
motions to amend the complaint and the answer and denying the motion for an
adverse inference -will be explained herein.
4
Critical Mission Support Services was Relyant' s predecessor in interest for this contract
and, in fact, was the company that bid on and obtained this award (tr. 1/44).
We, nevertheless, generally refer to it as Relyant, herein, for simplicity.
5
Relyant's Chief Executive Officer (CEO), Mr. Smith, testified that the insulating
material in the sandwich panel was polystyrene, as opposed to Styrofoam
(tr. 2/127). For our purposes, this is not a material difference.
6
These pages are numbered 8 and 9 in Rule 4, tab 248.
2
would manufacture the RLBs. Its single sandwich panel would be less likely to be
damaged during shipping than the drywall/insulation combination (tr. 2/155), thus
Relyant could install the sandwich panel at its factory in Turkey prior to shipping it to
Afghanistan, rather than shipping the items separately and installing the drywall in
Afghanistan (id., tr. 2/207). Indeed, the advantages of this method were key to
Relyant's operations plan (see generally tr. 2/196, 206-07).
On 22 September 2008, the Army awarded the above-captioned contract
(the contract)7 under the solicitation to Relyant (R4, tab 1 at 1). The contract signed
by Relyant and the government did not adopt the change to the SOW proposed by
Relyant relating to the substitution of the sandwich panel for the drywall and
insulation interior walls (R4, tab 1), 8 although Relyant's management initially assumed
that the proposal had been adopted (tr. 2/176). As will be seen, this assumption was
unfortunate.
The contract incorporated by reference a number of standard clauses under the
Federal Acquisition Regulation (FAR), including FAR 52.209-4, FIRST ARTICLE
APPROVAL - GOVERNMENT TESTING (SEP 1989) (hereinafter, the first article test
clause or FAT clause), with the words "Shall be incorporated in every delivery order"
immediately following its notation (R4, tab 1 at 39). One provision of this FAT clause
that is of importance to the dispute here is paragraph (b ), which provides in part, "The
notice of... approval [of the test] shall not relieve the Contractor from complying with all
requirements of the specifications and all other terms and conditions of the contract."
Another contract provision that is important with respect to changes to the SOW
is contained in paragraph 3.0 to the SOW portion of the contract, "Modifications,"
which provides that "[a]ll ... modifications to requirements specified in this SOW must
be directed by the Contracting Officer (CO)" (R4, tab 1 at 15).
The contract also included the FAR's Ordering clause (FAR 52.216-18,
ORDERING (OCT 1997)), which provides that, in the event of a conflict between a task
order and the contract, "the contract shall control" (R4, tab 1 at 44).
7 Relyant was not the only awardee under this multiple award task order contract
(tr. 1/45-46).
8
Relyant's proposal was written in such a way that the government was not required
to accept its proposed deviation from the solicitation's SOW (tr. 2/175).
3
II. Delivery Order 1
Delivery Order 1 (DO 1) was issued to Relyant on 22 September 2008 (R4, tab 4 ),
the same day the contract was awarded. DO 1 required the delivery and installation of
nine two-story RLBs to Forward Operating Base (FOB) Sharana, Afghanistan (Sharana)
(id. at 1-2). DOI also included a requirement to submit one of the nine RLBs delivered
to Sharana for first article testing within 180 days (i.e., by 21 March 2009), and included
the previously-discussed FAT clause (id. at 2-3).
Subsequent to the issuance of DO 1, the parties recognized that DO 1 had failed
to make any allowance for the cost differential of delivering the RLBs to Sharana, as
opposed to Bagram Airfield Afghanistan (Bagram) (the contract had a contract line item
number (CLIN) for delivery to FOBs that had been inexplicably left off of the D0 9) (R4,
tab 9 at 1-4). Apparently, because of funding constraints, the number ofRLBs provided
by DO 1 needed to be reduced in order to accommodate the added delivery costs (R4,
tab 6 at 1 (Relyant noting that, absent increased funding, the number of RLBs would
need to be reduced)). The parties also decided to "incorporate mechanical and window
changes into CLIN 0002 unit pricing" (R4, tab 24 at 2). Thus, on 2 and 3 April 2009,
the parties executed bilateral Modification No. POOOOI to DOI that reduced the number
of RLBs provided and installed by Relyant from nine to six, changed the pricing of the
RLBs to some degree, amended the SOW, and added an unpriced CLIN (with a "not to
exceed" amount) for transportation of the RLBs to FOB Sharana (id. at 1-3). The
portion of the SOW that required the drywall/insulation combination remained
unmodified by this change order (see generally R4, tab 24). This modification also
included a "release of claims," stating that the modification constituted "a full, complete
and final accord and satisfaction" of all claims "attributable to the changes contained
herein or the events that give rise to them" (id. at 4). '
III. Delivery Order 2 and Others
On 24 December 2008, the Army awarded to Relyant DOs 2 and 3 for the
delivery and installation of one and two more RLBs, respectively, at Bagram (R4,
tabs 17-18). Three days later, on 27 December 2008, the Army awarded D04 to
Relyant for the delivery and installation of two additional RLBs at Bagram (R4,
tab 19). The RLBs ordered by these DOs were all two stories tall (R4, tab 17 at 1-2,
tab 18 at 1-2). Two additional DOs (5 and 6) were issued on 1 February 2009 for the
9
Though this CLIN referenced transportation from Bagram to Sharana (see R4, tab 1
at 4 ), the parties understood that transportation of RLBs to Sharana would not
necessarily go through Bagram. They understood that what was being priced by
this CLIN was the cost differential of shipping RLBs to Sharana from Turkey,
versus the less expensive option of shipping them to Bagram from Turkey
(tr. 2/106-07, 134-36).
4
installation of two more RLBs at Bagram each (see R4, tab 268 10 at 2), but these, like
DOs 3 and 4, have no bearing upon this appeal. In sum, the government ordered a
total of 15 RLBs from Relyant, 6 of which came from DO 1, one from D02.
IV. Delivery of the RLBs, Government Concerns, and the First Article Test of
the RLB Delivered to FOB Sharana
Manufacture of the "cans" 11 in Turkey began sometime in late 2008 or early
2009 and the first of them were delivered to Sharana sometime in early April 2009,
with their first mention in the record being found in an internal Army email, dated
7 April 2009 (see R4, tab 255 at 330). This email discussed the planning of a
government inspection of RLB cans delivered to Sharana. Although government
officials believed these were non-compliant with the contract for several reasons,
including their being damaged during shipping, 12 Relyant believed it could repair these
(see id.).
DO 1, as noted above, required delivery of a first article RLB for testing at
Sharana, consistent with the contract's requirement for first article testing. D02,
however, required the delivery of an RLB to Bagram. Although the normal, prudent
course of action for a contractor like Relyant might have been to complete the FAT for
DO 1 at Sharana first and then construct the cans for subsequent RLBs, because of
scheduling pressure for D02, Relyant felt that it could not wait to pass the FAT before
it began shipping cans for later RLBs to Bagram (tr. 2/28). Consistent with the parties'
desire to expedite matters, Relyant and the government came to an agreement that,
rather than require a FAT for each DO (as required by the original contract), passing the
FAT for the DO 1 RLB would be sufficient to meet FAT requirements for subsequent
DOs (see tr. 1/52-53). Thus, on 21 May 2009, they executed Amendment 1 to D02 to
make this change to that delivery order (this change also explicitly adopted the FAT
clause into the delivery order as required by the contract) (R4, tab 36), and effected the
change contract-wide through change Modification No. P00004 to the contract,
executed on 18 June 2009 (R4, tab 246).
Part of the motivation for simplifying the FAT procedures was the issue of
progress payments under the contract. Under the FAT clause, the CO believed that no
partial payments could be made to Relyant on a DO until after an RLB for that DO
10
The government's 12 hearing exhibits are renumbered and referenced herein as
Rule 4, tabs 265 through 276.
11
A "can," as used here, refers to a shipping container modified for use as an RLB
component (tr. 1/195-96).
12
There was testimony that some of the damage came from bullets during an ambush
of the convoy that shipped the cans to Sharana (tr. 2/194-95).
5
passed the FAT (tr. 2/32-33). Relyant reasonably sought relief so that it could obtain
cash flow to support its work on the project (see, e.g., R4, tab 41 at 2).
According to Relyant, the first cans were delivered to Bagram (at the "wounded
warrior" site 13 ) on 20 April 2009 (R4, tab 249). This is consistent with a 21 April
2009 email from Air Force First Lieutenant (lLt) Aaron Zorn, the COR at Bagram to
Captain (Capt) Ron Hilliard (the CO at the time) and others in the government which
Relyant now asserts supports its claim of superior knowledge. We do not read this
email the same way that Relyant does (more about this later), but reproduce it in full
here because of the importance Relyant now places on it:
Gentlemen,
[Relyant] made a number of changes to the IDIQ design for
the buildings in Sharana. The "government" there okayed
these changes. From that point, they began construction on
our containers with the new mods. They discussed these
mods with us 2 months ago. For the most part, these
changes made sense, but we asked them to resubmit every
change they made so that our team could bless them off.
They have yet to send us any documentation of the changes
and now the cans are here. I have mentioned this before to
everyone (my bosses, Captain Moore and I'm not sure if I
mentioned it officially to Capt Hilliard). The answer was
"we'll deal with it when they get here." Well, they're here
now. How are we going to go about accepting them? For
example, the walls are not drywall. They even brought us a
sample to a meeting. We said we agreed that the material
had some advantageous qualities, but asked that they
provide paperwork to officially get them approved. In the
process, they would be required to provide the fire ratings
of the material. What if it's no good now? Are we going to
make them rip out the walls? We need to discuss how
we're going to tackle this.
(R4, tab 250)
13 The "wounded warrior" site was the location for the D02 RLB at Bagram (tr. 2/137,
144).
6
This email highlights a contract administration problem that had been
brewing for some time: unauthorized decision-making relating to the SOW.
Both Sharana and Bagram had Field Engineering Teams (FETs) tasked with
overseeing the implementation of the RLB construction efforts from the
government's side (tr. 3/10). The FET in Bagram, however, can best be described
as being senior to the Sharana FET, since it had drafted the original SOW and was
the primary resource of technical expertise for the CO (id.), who alone had the
authority to amend the SOW (tr. 3/11). Nevertheless, in their (understandable)
desire to solve problems and get RLBs completed, the Sharana FET appears to have
prematurely agreed to changes to the SOW without getting proper approval from the
CO (tr. 3/19-20). Captain (Capt) Timothy Moore, the CO who was stationed at
Bagram, took action to rein this in once it came to his attention and raised it in a
meeting with Relyant there (tr. 3/20-21) and on other occasions (tr. 3/23-24). The
point was further made in an email sent by the Sharana COR to Relyant on 6 October
2008, where it was underscored that responses to requests for information that could
potentially affect future DOs and could also affect requirements for all contractors
would be coordinated through Capt Moore at Bagram (R4, tab 30 at 3-4).
After overcoming a number of challenges, including its use of the wrong
standard for electrical wiring (R4, tab 55 at 1-2), Relyant passed the FAT at Sharana
on 25 August 2009 (R4, tab 62). According to testimony by Mr. Smith, Relyant's
CEO, who spent approximately three weeks at Sharana to be on hand for the FAT, the
government personnel conducting the tests at Sharana made no objection, in his
presence, to the use of the sandwich panel in lieu of the drywall/insulation
combination (tr. 2/148-49). Mr. Smith noted that the government official overseeing
the FAT at Sharana, Lieutenant Colonel (Lt Col) Herrington (who was the COR at that
location (tr. 1/39)), must have been aware that they were using the sandwich material,
but there was no testimony that the subject was ever specifically raised to his attention
(tr. 2/149). Ultimately, around 22 August 2009, Lt Col Herrington informed
Mr. Smith that Relyant's RLB in Sharana had passed the FAT (tr. 2/148-49; R4,
tab 62). Upon Lt Col Herrington's recommendation, the CO, Ms. Pleasant, 14 formally
accepted the results of the FAT on 25 August 2009 (R4, tabs 62, 63).
V. Relyant's Request to Use the Sandwich Panel in Deviation from the SOW
Despite allowing Relyant to pass the FAT at Sharana in late August 2009, the
CO had rejected the material substitution of the sandwich panel for the
insulation/drywall earlier that same month. Relyant's efforts to obtain approval for the
14
On 22 April 2009, administrative control of the contract on the government side
passed from Afghanistan, where Capt Hilliard had been the CO, to the Rock
Island Contracting Center (RICC) in Illinois where Ms. Pleasant became the
CO, holding that role through November 2009 (R4, tab 26; tr. 1/38-39).
7
substitution began almost a year earlier. On 1 November 2008, Relyant submitted a
written request to then CO, Capt Moore, to substitute the sandwich panel for the walls
and ceilings, as opposed to the drywall/insulation requirement contained in the SOW
(R4, tab 273 at 3-5). This request was likely discussed with Capt Moore before it was
submitted, although he has no independent recollection of it (tr. 3/15). There is
evidence that this initial request was lost due to a computer systems crash on the part
of the government in November 2008 (tr. 3/59; R4, tab 273). In any event, as will be
discussed shortly, there is no persuasive evidence that the request was ever granted by
the CO, while there is significant evidence that it was not granted.
Relyant claimed to have re-sent the substitution request to the government
shortly after being informed of the computer crash (see R4, tab 257 at 483), but
there was no evidence presented at the hearing from either Relyant or the government
to support that assertion. Contemporary evidence (in the 21 April 2009 email from
lLt Zorn discussed above (R4, tab 250)) supports a finding that the government
was waiting for Relyant' s resubmittal. The first substantiated re-submission of the
request appears in a 22 April 2009 email from Relyant to the government in which
Relyant forwarded the 1 November 2008 substitution request to the government (R4,
tab 257). 15 Relyant sent a follow-up email on 30 April 2009 asking for "information
concerning the submittals" and stating that Relyant would "need documentation to
proceed" (R4, tab 29). On 12 May 2009, Relyant again raised the issue in an email to
lLt Zorn, stating that, "we need approval of the submittals I sent some time ago to
prevent delays in the actual assembly .. .! have not had a reply other than that it is being
looked into" (R4, tab 33). lLt Zorn replied to this email the next day, stating in part:
As far as submittals are concerned, the FET has okayed all
of them, but RICC is going about making it official. I'm
not sure what this process includes. They thought it
was already handled, but they were referring to the main
3 mods that came down. I'm not sure if I can give you the
go ahead- I wouldn't want to direct you and then
something change. At least, so your mind is at ease, the
FET has okayed those changes. Thanks for your continued
aggressiveness on this project execution.
(R4, tab 34 at 1)
15 The author of this email made the statement that he had previously sent another
copy of the substitution request to the government after the November
computer crash, but, as noted above, there is no other evidence of such a
submission.
8
There is no documentation in the record that the subject arose again until
23 July 2009, when lLt Zorn informed Relyant that the material substitution request
needed to be submitted on a different form (R4, tab 237 at 41).
In response to this request from the government, on 30 July 2009, Relyant
forwarded to the CO an "AF IMT 3000" Material Submittal form, seeking approval to
utilize the sandwich panel (R4, tab 248). Consistent with the recommendation made
by lLt Katherine Schultz (who had just succeeded lLt Zorn as COR at Bagram (see
R4, tab 245 at 2)), it was rejected by the CO, Ms. Pleasant, on 5 August 2009 (R4,
tab 248). lLt Schultz had noted that Styrofoam (which she believed to be part of the
panel) was combustible and could bum quickly if the fire retardant additive to the
material were overcome by a larger fire, and that the sandwich panels would not meet
the one-hour firewall requirement in the contract (id. at 3).
The evidence presented by Relyant to support its allegation that an authorized
representative of the government had earlier agreed to the material substitution was not
persuasive. At the hearing, Relyant presented the testimony of Mr. Creed Williams, its
project manager at Bagram, that "one of the first contracting officers ... before Captain
Moote" had approved the sandwich panel substitution relatively early on in contract
performance (tr. 1/120-22). Mr. Mills, Relyant's project manager at Sharana, also
testified to his "understanding" that Capt Moore had "signed off' on the substitution
request before issuing D02 (tr. 2/160). Mr. Williams' testimony was rather vague and
appeared to be based upon what Mr. Mills had told him, notwithstanding his statement
that he had "no question" that the approvals had been submitted (tr. 1/121). Mr. Mills'
"understanding" of what Capt Moore ( as opposed to the CO before Capt Moore, whom
Mr. Williams testified about) had agreed to had an even less firm basis than
Mr. Williams'. It would not be inconsistent with Relyant's general corporate belief
that, in making the contract award to Relyant, the government adopted its technical
proposal (see id.). To the extent that "the government" at Sharana had "Okayed" the
changes, as stated in lLt Zorn's 21 April 2009 email quoted above (see R4, tab 250),
that email is most consistent with unauthorized personnel making such statements,
especially in light of the email's further statements that Relyant had been directed to
submit a formal substitution request months earlier, which had not been forthcoming at
the time of the email (see id.). Although we do not question the sincerity of these
witnesses, we do find their testimony on this matter to be unconvincing.
Indeed, overwhelming evidence supports a finding contrary to this testimony.
First, Capt Moore testified at the hearing that he did not recall approving the
substitution request (tr. 3/16). This is consistent with the contract documents reflected
in the Rule 4 submission, which includes Modification No. POOOOl to the contract (by
numbering convention, the first modification), dated 23 December 2008 (R4, tab 15),
followed next by Modification No. P00002 to the contract, dated 22 April 2009, which
changed the contracting office (R4, tab 26). If there had been any written change after
9
POOOO 1, but before the 22 April 2009 modification, it would have received the P00002
numeration and the 22 April modification would have received a later number.
Further, if Capt Moore or anybody else in the government had approved the
substitution, we would expect that Relyant could produce documents stating as much;
it never did. 16 Moreover, if the two Relyant managers had actually seen such
approvals, we would expect them to have made some sort of statement to the
government, when they resubmitted their substitution requests in April and July 2009,
that Capt Moore or somebody from the government had already approved them.
Instead, they were submitted as if they had already been provided to the government
but not acted upon (see R4, tab 257). Indeed, the notion that the submittals had been
previously submitted, but not acted upon, is inherent in the correspondence from
Relyant in April through June 2009, discussed at length above. This indicated that
Relyant was waiting for the government's approval of its submittals, including the
12 May 2009 statement that, "I have not had a reply other than that it is being looked
into." (R4, tab 33) Thus, we conclude that this is what happened here, and the
government did not approve the deviation.
On 10 August 2009, Relyant sent a letter to the CO informing her that it would
not resubmit the submittals, but would, instead, forward the cans from Bagram to
Sharana, where they were considered to be acceptable (R4, tab 249). 17 The record
does not reflect what, if any, response CO Pleasant made to this letter, but apparently
she permitted noncompliant RLBs to be accepted at Sharana, 18 and all six RLBs built
at Sharana used the sandwich material (tr. 2/147). Indeed, as noted above, the cans
16 As written "evidence" of the submittals having been approved, Relyant's post-trial
brief references pages of tab 237 to the Rule 4 file (app. br. at 5). It turns out
that tab 237 is Relyant's claim to the CO, and the cited pages are Relyant's
narrative assertions of what happened during contract administration. Needless
to say, the evidentiary weight of unsubstantiated assertions contained within a
contractor's claim is nil.
17 Just as we would have expected Relyant to refer to any prior government approvals
of material substitutions when it resubmitted its requests in April and July 2009,
we would also expect that there would be some reference to this key fact in this
letter if it had actually happened. Instead, the letter makes no such assertion,
lending further support to our conclusion that it never did.
18 There is no evidence explaining why noncompliant RLBs at Sharana were accepted
and others, at Bagram, were not. There is anecdotal evidence, though, that
housing shortages in Afghanistan were compelling the government to accept
otherwise inadequate buildings made by other contractors (R4, tab 42 at 2).
That housing shortage was a reason that Lt Col Herrington (who was the COR
at Sharana) did not recommend terminating Relyant's contract in April 2009, at
a time he believed they were delinquent in providing the RLBs (R4, tab 260 at
650-51).
10
previously delivered to Sharana (which used the sandwich panel) were allowed to pass
the FAT just a few weeks later.
The cans at Bagram were, in fact, shipped to Sharana, beginning in August 2009
and continuing through that October (R4, tab 86 at 2, tab 237 at 12, tab 247). Relyant
then changed the process of manufacturing the cans for the remainder of the contract
(the five RLBs to be erected at Bagram under DOs 2, 3, and 4), shipping drywall to
Afghanistan and having much of the work finishing the cans performed there (tr. 2/151).
VI. Subsequent Amendments to D02
Shortly after Relyant passed the FAT, the parties agreed to change portions
of the SOW of the contract going forward and to apply those changes to D02 and
other, later delivery orders. On 11 September 2009, the parties executed Modification
No. P00007, a bilateral modification to the original contract which incorporated
changes into the SOW for the original contract and to amend the prices of several
CLINs (R4, tab 69). On the same day, they executed related bilateral modifications to
DOs 2, 3, and 4 applying the changes in the SOW and in the price reflected in P00007
to these DOs (R4, tabs 70-72). DOI was unchanged, and the changes to the SOW did
not affect the pre-existing requirement for the drywall (id.). None of these changes
included any general releases of claims (id.).
The delivery dates for DO 1 and D02 changed as well. Before the acceptance
of the FAT, on 14 and 15 July 2009, the parties executed Modification 2 to DOI to
extend the first article and production due date of the first RLB to 29 July 2009
(R4, tab 43). Pursuant to this modification, the remainder of the RLBs required by
DO 1 would be delivered in approximately two-week increments starting on 28 August
2009, to be completed by 22 October 2009 (id. at 2). Although there are no further
contract modifications extending the period of performance for DO 1 in the evidence
before us, the final RLBs under that DO (the fifth and sixth ones) were not completed
and accepted by the government until 19 July 2010 (R4, tab 212 at 5, 7).
On 13 and 19 October 2009 the parties executed Modification No. P00004 to
D02, which extended the period of performance for D02 from 30 September 2009 to
3 January 2010 (R4, tab 88 at 1-3). This modification included no general release
of claims (id.). By Modification No. P00005 to D02, dated 3 February 2010, the CO
granted Relyant an additional 45 days (until 21 February 2010) to complete the DO
(R4, tab 140). Again, this modification included no release of claims (id.). The RLB
was, in fact, completed and turned over to the government on 17 March 2010 (R4,
tab 172).
11
VII. Relyant's Claim to the Contracting Officer
On 23 January 2015, Relyant submitted a document captioned, "request for
equitable adjustment" to the CO (R4, tab 237 at 1). We refer to this as "Relyant's
claim," because it included a "total claim" amount of $1,005,051 and included
certification language along with the signature of Relyant's vice president, Mr. Biles
(R4, tab 237 at 16). 19 Although Relyant's claim initially stated that it was for extra
costs incurred on DOs 20 1 and 2 (R4, tab 237 at 1), in response to a question from the
CO, Relyant explained that all of the additional costs should be ascribed to D02 (R4,
tab 239).
Relyant's claim included extended factual recitations (see R4, tab 237 at 1-5)
and what we would characterize as an overview of its entitlement to compensation
(id. at 6-7). Specific legal theories justifying its entitlement to damages followed
(id. at 7-10).
The first legal theory expressed by Relyant in support of its claim was contained in
a section labeled, "Breach," and was that the government wrongly rejected the D02
material submittals, which it alleged had been approved for DOI (R4, tab 237 at 7-8).
Although Relyant's particular theory about why this alleged inconsistency constituted a
breach of contract is not explicitly clear, this "Breach" section of Relyant's claim went on
to argue that the government failed to disclose, for approximately 23 7 days, its superior
knowledge that it might not approve the submittals for D02 that it had for DO 1 (id. at 8).
Earlier in the factual section ofRelyant's claim, it alleged that government staff at
Bagram had informed Relyant that the government would accept the specifications that
Relyant alleged had been accepted at Sharana (id. at 4). Relyant's "overview" of the
claims included the factual allegation that lLt Zorn had informed Relyant, on 13 May
2009, that the submittals "looked good and would be approved" (id. at 7).
The second section ofRelyant's claim, labeled "Change," argued that the
rejection of the D02 submittals constituted a material change to the contract since they
had previously been accepted for DOI (R4, tab 237 at 8-9).
19 A document entitled as a request for equitable adjustment can be considered a claim
under the Contract Disputes Act (CDA), regardless of its title, if it otherwise
meets the requirements of a claim. Reflectone, Inc. v. Dalton, 60 F.3d 1572,
1577-78 (Fed. Cir. 1995). The government has not alleged that Relyant's claim
failed to meet the CDA's requirements and we perceive no basis to question our
jurisdiction.
20 Relyant's claim and associated correspondence consistently refer to the DOs as Task
Orders (e.g., R4, tab 23 7 at 1), which we have observed in some government
correspondence as well. We correct that relatively trivial misnomer throughout.
12
Relyant then asserted that the government was responsible for delay damages
coming from its failure to act in a reasonable time to approve the D02 submittals and
for failing to have the "lay down areas" at Bagram adequately prepared for the cans sent
there (R4, tab 237 at 9). Relyant elaborated that the government's failure to timely act
upon the submittals caused it to suspend its work at Bagram until they were rejected
(id. at 10). Other damages argued to be due were the $381,875 in burdened costs of
shipping the D02 cans to Sharana from Bagram (id. at 12); the $172,004 in burdened
labor costs of individuals at Bagram from April 2009 through August of the same year
(id. at 13)21 ; and $417,064.22 in damages from unabsorbed overhead (id. at 15).
Combined with $34,108.50 interest at the time of the claim and $34,715.89 profit on the
shipping costs, Relyant calculated damages of$1,005,051 (id. at 15).
The CO denied Relyant's claim on 13 November 2014 (R4, tab 240) and this
timely appeal, docketed on 30 January 2015, followed.
PRELIMINARY MATTERS
Before we can reach the merits of this matter, we address three motions whose
resolution will affect the legal theories governing our consideration of this appeal and
the evidence that we consider in resolving it. First, we consider Relyant's motion to
amend its complaint, which we grant in part and deny in part, and the related motion
by the government to amend its answer, which we grant. Next we consider Relyant's
motion to impose an adverse inference upon the government for its inability to find
and produce certain documents in discovery. We deny this motion.
I. The Parties' Motions to Amend
On 20 October 2016, after the close of discovery, Relyant filed a motion to
amend its complaint (app. mot. to amend). Although the amendment purported to be
only for purposes of "clarifying certain aspects" of its claims (see app. mot. to amend
at 1), in fact, it added eight new paragraphs of facts and five new claims for relief (see
id., attach. (redlined complaint) (amended compl.). Indeed, Relyant's initial
complaint filed with the Board is rather Spartan with respect to elucidating the
theories for which it asserts it is entitled to relief, alleging generally that the
government breached its contract by wrongfully rejecting the RLBs (see complaint,
dated 27 February 2015). The proposed new complaint includes far greater emphasis
on the actions of the government in allegedly knowing that Relyant was going forward
with using the sandwich panel and not raising any concerns with Relyant about it for a
21
According to Relyant's claim, this amount can be broken down to $20,188 for the
month of April; $49,126 for May; $33,925 for June; $43,153 for July; and
$25,612 for August (R4, tab 237 at 13). These figures were supported with
uncontroverted testimony during trial (tr. 1/178-81).
13
number of months, and misleading Relyant into thinking that it would be approved
(amended compl. 1121-26). The additional causes of action that went significantly
beyond those in the original complaint included a breach of the implied duty of good
faith and fair dealing (id. 1163-67); failure to disclose superior knowledge (that the
government would not accept the sandwich panels at Bagram) (id. 1168-73); and
promissory estoppel on the notion that the government had led Relyant to believe that
it would approve its use of the sandwich panels (id. 1174-77).
The government opposed, in part, Relyant' s motion to amend, arguing that two
of the additional causes of action (superior knowledge and promissory estoppel) were
not based upon the same operative facts as in Relyant's claim to the CO, thus, we did
not possess jurisdiction to consider these (gov't opp'n to app. mot. to amend). We did
not decide the motion at the time that it was first briefed because we judged it
unnecessary prior to the hearing and did not wish to delay this appeal by issuing a
jurisdictional decision. The parties were instructed to present the same evidence that
they would if the motion to amend were granted.
On 31 October 2016, 11 days after Relyant' s motion to amend, the government
filed a motion to amend its answer to add the affirmative defenses of accord and
satisfaction, release, and waiver (gov't mot. to amend answer). The justification for
this filing was primarily that the requested amendment was permissible and that it was
necessary as a matter of fairness after Relyant's motion to amend its complaint. The
parties were instructed to proceed under the assumption that this motion would be
granted.
Subsequent to the hearing in this matter, at the direction of the presiding judge,
Relyant filed a renewed motion to amend its complaint, which (along with the
government's response) was materially the same as the first motion. The government
also submitted a renewed motion to amend its answer, which Relyant opposed on the
ground that it had not conducted discovery necessary to defend itself against these new
defenses (app. opp'n to gov't mot. to amend answer).
Under Board Rule 6( d), we generally "permit either party to amend its pleading
upon conditions fair to both parties." Indeed, under the Rule, we may permit the
consideration of issues "within the proper scope of the appeal, but not raised by the
pleadings." And, though not binding upon us, we do look to FED. R. CIV. P. 15(a)(2),
with its liberal allowance of amendments to pleadings for guidance upon that matter.
Beyley Constr. Group Corp., ASBCA No. 55692, 08-2 BCA 133,999 at 168,134. In
short, we will not deny a request to amend without a good reason. Id.
Futility, however, is a good reason to deny a motion to amend a pleading, see,
e.g., Foman v. Davis, 371 U.S. 178, 182 (1962), and there is no point in permitting an
amendment to include a cause of action over which we do not possess jurisdiction.
14
Here, the government's primary argument is that two of the additional causes of action
named by Relyant, superior knowledge and promissory estoppel, are not within the
ambit of our jurisdiction because they were not considered by the CO within Relyant's
CDA claims. The government is mistaken because the factual underpinnings of the
arguments were, in fact, presented to the CO.
The seminal case delineating whether a claim submitted to a CO can support
a somewhat different appeal under the CDA is Scott Timber Co. v. United States,
333 F.3d 1358 (Fed. Cir. 2003). In Scott Timber, the Federal Circuit held that
appeals of CO final decisions "do[] not require rigid adherence to the exact language
or structure of the original administrative CDA claim [so long as they] arise from
the same operative facts, claim essentially the same relief, and merely assert differing
legal theories for that recovery." Id. at 1365; see also Maersk Line, Ltd., ASBCA
Nos. 59791, 59792, 16-1BCA136,405 at 177,512.
Here, the operative facts in Relyant's claim fairly covered the operative facts in
the two additional causes of action and the relief sought was the same. First, with
respect to the superior knowledge cause of action, the claim (as noted in the Facts
section, above) made just such an allegation, alleging that the government had failed to
inform Relyant that it might refuse to allow the revised submittals. Thus, we find that
the superior knowledge cause of action was "essentially the same as presented to the
CO," Scott Timber, 333 F.3d at 1366, and that we have jurisdiction to consider it.
Likewise, Relyant's new "promissory estoppel" cause of action is bottomed upon the
factual allegation that the Bagram FET had either approved or promised to approve the
submittals. Given the allegations made in Relyant's claim that lLt Zorn had made
similar representations to Relyant and that CORs at Bagram informed Relyant that its
sandwich panel would be acceptable, we find the CO was presented similar enough
facts in Relyant's claim to support the jurisdictional requirement that the facts
underpinning the promissory estoppel cause of action were presented to the CO.
That does not end our jurisdictional inquiry, however. Though not raised by the
government, we cannot permit Relyant to raise the promissory estoppel cause of action
because that theory requires a contract implied-in-law, over which we do not possess
jurisdiction. See Protecting the Homeland Innovations, LLC, ASBCA No. 58366, 13 BCA
135,398 (promissory estoppel is a contract implied in law); RGW Communications, Inc.,
d/b/a Watson Cable Co., ASBCA Nos. 54495, 54557, 05-2 BCA 132,972 at 163,333-34
(no Board jurisdiction over implied-in-law contracts); see also P.J. Dick, Inc. v. GSA,
CBCA No. 461, 07-1BCA133,534 (Boards of Contract Appeals have no jurisdiction over
promissory estoppel claims).
Thus, we possess jurisdiction to consider Relyant's amended complaint, except
for the claim of promissory estoppel. Moreover, the government has identified no
unfair prejudice to it by our consideration of the complaint nor any other reason that
15
we should not allow the amendment. Accordingly, under the liberal standards that
apply to us pursuant to Board Rule 6(d), we grant Relyant's motion to amend its
complaint, except for count VI, promissory estoppel.
With respect to the government's motion to amend its answer, Relyant presents
no persuasive basis to deny it, especially since we are largely granting Relyant' s
motion to amend. At most, Relyant argues that it should have been able to take
discovery upon the parties' intent regarding the release language, whether Relyant was
under economic duress when it agreed to the modifications with the release terms
within them, and why the parties moved forward with performance after the delays
(app. opp'n to gov't mot. to amend answer). These are not persuasive reasons to deny
the government's motion because the discovery already sought and obtained by
Relyant would embrace much of what it now claims that it would have sought to
address these defenses, and the remainder (such as information supporting the
economic duress claims) consists of knowledge within its own purview, not the
government's. Thus, with respect to fairness to both parties and under the time
honored legal maxim that what is good for the goose is good for the gander, we allow
the government to amend its answer.
II. Relyant's Motion Seeking an Adverse Inference
A few days prior to the original trial date set in this matter, the government
provided to Relyant several emails that had been in the personal possession of
Capt Hilliard, but had not been provided in the Rule 4 file or earlier in discovery
(app. adv. inf. mot. at 2-3; Bd. order 645 F.3d 1336, 1334 (Fed. Cir. 2011)); see also Micron Technology,
Inc. v. Rambus Inc., 645 F.3d 1311, 1319-20 (Fed. Cir. 2011). To obtain sanctions for
spoliation, the moving party must prove:
( 1) [T]he party having control over the evidence had an
obligation to preserve it when it was destroyed or altered;
(2) the destruction or loss was accompanied by a "culpable
state of mind;" and (3) the evidence that was destroyed or
altered was "relevant" to the claims or defenses of the
party that sought the discovery of the spoliated evidence,
to the extent that a reasonable factfinder could conclude
that the lost evidence would have supported the claims or
defenses of the party that sought it.
ADT, 13 BCA 135,307 at 173,324-25 ( citations omitted); see also Ensign-Bickford
Aerospace & Defense Co., ASBCA No. 57929, 13 BCA 135,322 at 173,385. With
respect to the first element here, whether a party has an obligation to preserve
evidence, this is determined by whether litigation is "pending or reasonably
foreseeable." Micron Technology, 645 F .3d at 1320. With respect to the third element
necessary for obtaining sanctions, it is essentially a question of prejudice, and the
moving party has the burden of "com[ing] forward with plausible, concrete
suggestions as to what [the destroyed] evidence might have been." Id. at 1328
(citations omitted). When bad faith is proved, however, there is a strong inference that
the destroyed evidence would have been unfavorable to the party destroying it. Id.
Here, it is evident to us that the destruction of any email occurred before
litigation was reasonably foreseeable. The government argues that the key date for
18
determining foreseeability is when the appeal was filed before the Board (gov't opp'n
adv. inf. mot. at 9). We are not so certain, and entertain the possibility that the better
date could have been when the claim was submitted to the CO or when the claim was
denied. In any event, we need not decide that issue today, because even ifwe assume
that the duty to preserve evidence was triggered by the submission of a claim to the
CO, that event occurred in December 2011, after the emails had likely been
permanently deleted under standard protocol. Thus, there is no spoliation here and we
could deny Relyant's motion without further analysis.
We do note, however, that even if the government negligently allowed the
email to be destroyed at a time that it had a duty to preserve it and that such negligence
constituted a "culpable state of mind" ( a legal consideration which we do not decide
here, although we certainly see no evidentiary basis for a finding of bad faith), we
would find that Relyant has not proved prejudice of the sort that would justify making
the inferences that it requests. Factually, Relyant has produced no evidence,
whatsoever, that would permit us to conclude that the missing emails might support its
version of events. To the contrary, all of the evidence before us supports the
conclusion (as discussed in the facts section, above) that the emails would have
contained no evidence supporting Relyant's desired inference. When we consider the
fact that Relyant, itself, has produced no emails or other documents that should have
been in its own possession supporting its allegation that the CO "approved" its
proposed changes to the SOW, we are even less inclined to believe that Relyant was
wronged: the careful limits placed upon the proper application of sanctions for
spoliation, as discussed in the cases set forth above, make clear the law of spoliation is
not intended to provide an unmerited windfall to a party, contrary to what the actual
facts of a dispute support.
Last, Relyant's argument that an adverse inference is justified by Capt Moore's
"questionable and inconsistent" testimony at the hearing (app. adv. inf. mot. at 6) is a
non-starter. A review of Capt Moore's testimony gives us little reason to question his
sincerity, and those points where his recollection of events diverges from that of other
participants to the same events are nothing but the routine manifestation of flaws in
memory typical of matters that occurred over seven years prior. They are not material
to our decision and do not merit the (effectively) dispositive relief requested by
Relyant here.
DECISION ON THE MERITS
We may have come to different conclusions regarding the advisability of using
the sandwich panel ifwe had stood in the shoes of the CO in 2009, but we did not and
that is not our role. The facts are that the government was within its rights to refuse
the sandwich panel, it never actually approved its use, and the contract makes clear
that acceptance of the FAT does not equal acceptance of the change in the SOW.
19
Moreover, the government's knowledge that it might reject Relyant's proposed change
to the contract was no greater than Relyant' s, given that Relyant was also apprised of
that possibility. We do find, however, that the government's waiting for months to
make up its mind about the sandwich panel while Relyant was left unable to proceed
in Bagram caused compensable injury to Relyant, for which we award the damages
proved by Relyant. Finally, we hold that the damages that we award were not waived
by the bilateral contract modifications referenced by the government.
I. The Government was Within its Contractual Rights to Require Compliance
with the SOW at Bagram
As a straightforward matter of contract interpretation, the SOW required the use
of the drywall/insulation combination, and the government was entitled to hold
Relyant to it, until the contract was modified, regardless of whether it was a good or
bad idea. See, e.g., Rixon Electronics, Inc. v. United States, 536 F .2d 1345, 1351
(Ct. Cl. 1976) (the government "can engage a contractor to make snowmen in August,
if [it spells] it out clearly"); see also Wagner Awning & Mfg. Co., ASBCA No. 19986,
77-2 BCA 1 12,720 at 61,827 (government entitled to strict compliance with contract
terms even if alternative techniques might be suitable). The question before us, then,
is whether the contract's SOW was ever amended, either by the CO or through the
government's approval of FAT. It was not.
A. No Contractual Amendment Allowing Use of the Sandwich Panel was
Ever Approved by the CO
Under the contract, only the CO possesses authority to amend the terms of the
SOW. Indeed, the CO reiterated this principle to Relyant on more than one occasion,
as discussed in the "Facts" section, above. Even if a member or members of the FET
at Sharana got ahead of themselves ( as might have been the case), their unauthorized
approval is insufficient to change the contract. Federal Crop Ins. Corp. v. Merrill,
3 32 U.S. 3 80, 3 84 ( 194 7) (companies dealing with government take risk of ensuring
the persons they deal with are acting within the scope of their authority); see also
Winter v. Cath-dr/Balti Joint Venture, 497 F.3d 1339, 1345-46 (Fed. Cir. 2007) (limits
of authority to amend contract when contract makes clear that only the CO possesses
such authority). As we analyzed in great detail above, we are convinced that Relyant's
allegation that the contract was amended by an unspecified CO is not supported by a
preponderance of the evidence. Such a finding (notwithstanding the vague testimony
ofRelyant's project managers) would be contrary to the great weight of the evidence
before us. Accordingly, we hold that there was no amendment of the SOW to
contractually permit the use of the sandwich panel. 23
23
Relyant also presents an undeveloped "acquiescence" argument in its opening brief,
suggesting that, since the government knew that Relyant was using the
20
B. The FAT does Not Overrule Contract Specifications
Relyant extensively argues that, by virtue of approving the FAT of RLB cans
that utilized the sandwich panel, the government effectively approved an amended
SOW (app. br. at 15-16). Not so. To be sure, on the record before us, we find the
approval of the FAT to be inexplicable, and can only speculate as to why it happened.
Just as we may only speculate about why the nonconforming cans were apparently
accepted at Sharana. Nevertheless, we do not need to know why the FAT was
approved to know that the approval had no effect on the terms of the SOW. That is
because, as noted above, the FAT clause clearly provides in paragraph (b) that, "The
notice of... approval [of the test] shall not relieve the Contractor from complying with
all requirements of the specifications and all other specifications and all other terms
and conditions of the contract." This is especially clear since the CO told Relyant that
its changes to the SOW were rejected before it received the FAT results, and Relyant
never acted as if the FAT results changed its understanding of what was permitted at
Bagram.
Thus, we conclude that the terms of the contract's SOW required use of the
drywall/insulation combination and that the government never changed that
requirement through a contract modification or through the approval of the FAT.
II. The Government did Not Possess Undisclosed Superior Knowledge
Relyant makes the argument that the government failed to inform it that it
would not permit the use of the sandwich panel, thus breaching the contract by failing
to disclose superior knowledge (app. br. at 18-19). This argument founders upon the
facts.
The doctrine of superior knowledge is premised upon the notion that where "the
government has knowledge of vital information that will affect a contractor's
performance, the government is obligated to share that information." Am. Ordnance
LLC, ASBCA No. 54718, 10-1BCA134,386 at 169,787 (citing Helene Curtis
sandwich panel and did not stop it, it tacitly agreed to the contract change (see
app. br. at 15). The evidence discussed later in this opinion, regarding superior
knowledge, demonstrates that the government never did completely agree to
allow the use of the sandwich panel, and it would have been unreasonable for
Relyant to believe the requirement to be "dead." See, e.g., Gresham & Co.
v. United States, 470 F.2d 542, 554 (Ct. Cl. 1972) (waiver requires party to
"reasonably believe[] the requirement to be dead"). The fact that the FAT
approval came after the clear, formal rejection ofRelyant's request to amend
the SOW precludes any argument that FAT approval signaled that the SOW
requirements were inoperative.
21
Industries, Inc. v. United States, 312 F.2d 774 (Ct. Cl. 1963)); see also Hercules, Inc.
v. United States, 24 F.3d 188, 196-97 (Fed. Cir. 1994). The elements of the cause of
action, as set forth in Hercules, are that (1) the contractor undertook to perform
without vital knowledge of a fact that affects performance costs or duration; (2) the
government was aware that the contractor lacked the knowledge and would not have
· reason to obtain it; (3) any contract specification provided either misled the contractor
or did not put it on notice to inquire; and (4) the government failed to provide the
relevant information. 24 F.3d at 196; see also Giesler v. United States, 232 F.3d 864,
876 (Fed. Cir. 2000).
First, the government did not mislead Relyant as to what the SOW required
when it awarded it the contract. To be sure, Relyant made the assumption that its
alternate sandwich panel method was approved, but the contract stated otherwise, and
Relyant conceded that its proposal allowed for the possibility that the government
would choose to stick with the specifications contained within the SOW. The
government had no reason, at the time of contract award, to believe that Relyant
misapprehended the plain language of the contract- a matter for which Relyant bears
sole responsibility.
As contract performance progressed in 2008 through 2009, the government's
multiple requests for Relyant to provide submittals with its alternate sandwich panel
construction would have plainly disabused Relyant of any mistaken belief that the
government had approved its sandwich panel construction. To the extent that Relyant
is arguing that the government withheld from it knowledge that the government always
intended to reject its sandwich panel design, we find the premise to be unsupported.
The only evidence before us is that the government made its definitive decision
regarding rejection of the sandwich panels in August 2009, after lLt Schultz became
COR at Bagram. All other documents and testimony indicate that the decision was in
flux. The 21 April 2009 email from lLt Zorn to others within the government which
Relyant hails as proving that the government was hiding information from it and that
the government knew Relyant was mistaken in its beliefs that the submittal would be
approved (see app. br. at 18), does nothing of the sort. In the email, lLt Zorn makes
clear that Relyant was informed of the need to provide submittals (which it had not yet
done) and that the changes might be approved, but they might not. This is hardly the
smoking gun Relyant asserts it to be. The subsequent Zorn email to Relyant, on
13 May 2009, in which he informs Relyant that the FET had approved the changes,
also cautions Relyant against taking action prematurely, including the statement: "I'm
not sure ifl can give you the go ahead- I wouldn't want to direct you and then
something change." It may well be that lLt Zorn was overoptimistic or simply wrong
regarding the FET's approvals; based upon his statement in the same email that he
believed the change had already been approved, we surmise that he may have confused
other agreed-upon changes to the SOW with the broader notion that all changes had
been approved by the FET. But his clear statement that the CO had not yet approved
22
the changes and that he would not direct Relyant to act in case something changed,
should have made clear to a reasonable contractor in Relyant's position that the
government's agreement to change the SOW was not certain. Thus, the government
possessed no knowledge superior to that of Relyant as that phrase is interpreted by the
law. 24
We note here that although we did not consider Relyant's promissory estoppel
claim because it is based upon a contract implied-in-law, of which we possess no
jurisdiction, we would have rejected such a claim in any event for the reasons
discussed above: it is bottomed upon the notion that lLt Zorn misled Relyant, and
the evidence supports a much more nuanced view of what he told Relyant.
III. The Government's Failure to Act upon the Request for Submittals for Four
Months was a Breach of the Duty of Good Faith and Fair Dealing 25
Though rejecting the sandwich panel was permissible, and we do not find that
the government misled Relyant, we do find that allowing Relyant to, figuratively,
"twist in the wind" from late April to early August 2009 as the government mulled
whether to allow the sandwich panel was contrary to Relyant' s reasonable
contract-based expectations. This is actionable as a breach of the duty of good faith
and fair dealing.
The doctrine of good faith and fair dealing is based upon the notion that every
contract "imposes upon each party a duty of good faith and fair dealing in its
performance and enforcement." MetcalfConstr. Co. v. United States, 742 F.3d 984,
990 (Fed. Cir. 2014) (quoting RESTATEMENT (SECOND) OF CONTRACTS§ 205 (1981));
see also Kelly-Ryan, Inc., ASBCA No. 57168, 18-1 BCA ,r 36,944 at 180,030.
Pursuant to this implicit duty, each party's obligations "include the duty not to
interfere with the other party's performance and not to act so as to destroy the
24
Additionally, if we were to find that the promises of an unauthorized individual that
the CO was going to approve a change were effectively binding (as would be
the case if we were to grant Relyant relief here), we would short circuit the law
cited earlier in this decision that allows the government only to incur
contractual obligations by the actions of those authorized to make such
obligations. Needless to say, we would be loath to do so and the facts at bar
conclude such a determination.
25
Relyant might have potentially argued that this inaction constituted a delay for
which the government was liable, without seeking recourse through the doctrine
of good faith and fair dealing. See, e.g., Rivera Construction Co.,
ASBCA Nos. 29391, 30207, 88-2 BCA ,r 20,750 at 104,854. Relyant did not
make this argument, however, and, given concurrent delays in FAT approval,
we decline to take this approach not requested by Relyant.
23
reasonable expectations of the other party regarding the fruits of the contract."
Metcalf, 742 F.3d at 991 (quoting Centex Corp. v. United States, 395 F.3d 1283, 1304
(Fed. Cir. 2005)).
Yet, this implicit duty "cannot expand a party's contractual duties beyond those
in the express contract or create duties inconsistent with the contract's provisions."
Metcalf, 742 F.3d at 991 (quoting Precision Pine & Timber, Inc. v. United States,
596 F.3d 817,831 (Fed. Cir. 2010)). Thus, the duty "is limited by the original bargain:
it prevents a party's acts or omissions that, though not proscribed by the contract
expressly, are inconsistent with the contract's purpose and deprive the other party of
the contemplated value." Metcalf, 742 F.3d at 991.
Some of the tests set forth in the cases above, read in isolation, are not as
precise as we would like, and may appear to leave too much room for an arbitrary
drawing of lines to obtain results deemed "fair" by a reviewing tribunal. One seeming
inconsistency is that, if the duties cannot be expanded beyond those set forth in the
express contract, how can there be any new duties imposed by good faith and fair
dealing? Yet, plainly the point of the doctrine is that such duties exist. We resolve
this by concluding that the doctrine imposes duties that fall within the broad outlines
set forth by the express terms of the contract, approximating the parties' intent, as
divined by the express terms of the contract, for addressing circumstances not
specifically set forth by the contract. This interpretation is consistent with the Metcalf
court's reference to "faithfulness to an agreed common purpose." 742 F.3d at 991
(quoting RESTATEMENT (SECOND) OF CONTRACTS§ 205 cmt. a). As we noted in a
pre-Metcalf opinion, the proper inquiry regarding the duty often boils down to
questions of "reasonableness" of the government's actions, see Free & Ben, Inc.,
ASBCA No. 56129, 09-1 BCA ,r 34,127 at 168,742, although we do not hold here that
every unreasonable government action necessarily constitutes a breach of the duty.
Thus we tum to the facts of this appeal. The doctrine does not permit us to
change the terms of the SOW or to punish the government for its failure to do so: the
SOW is explicitly defined by the contract and thus may not be altered by the implicit
duty of good faith and fair dealing. On the other hand, though the contract does not
specify how long the government will spend reviewing requests to modify the SOW, 26
if the government's delays in addressing Relyant's requests unreasonably interfered
with contract performance, we could find breach.
At what point did government inaction on Relyant's request tum into breach?
Later than Relyant argues. Although Relyant's first formal request for the relevant
change to the SOW was submitted on 1 November 2008, the government's failure to
deal with it at that time, given the computer problems it encountered, is not a breach of
26 If it did so, those deadlines would be dispositive.
24
the duty of good faith and fair dealing. We have found above that the government
informed Relyant that the request needed to be resubmitted and that Relyant did not, in
fact, resubmit it until 22 April 2009 (notwithstanding Relyant's assertion otherwise in
that 22 April email). Thus, we find that any delay by the government should run from
the time that the 22 April 2009 submittal was provided by Relyant, and not earlier. Of
course, some period of time would have been necessary for the government to consider
and act upon the submittal. Since lLt Schultz was able to make her recommendation
and obtain the CO's concurrence in less than a week in August 2009, we hold that a
reasonable amount of time for approval or rejection of the 22 April 2009 submittal
would have been the first of May 2009 and (in the case before us) further hold that the
government's failure to act by then constituted a breach of the duty of good faith and
fair dealing.
The factors that support this conclusion overlap to some degree and include
that: 1) the requested change to the SOW was one with which the government was
familiar; 2) it was recognized by the government as being reasonable and potentially in
its best interest; 3) the government was aware that Relyant was awaiting its answer for
several months in the spring and summer of 2009, while Relyant continually prompted
it to act; 4) the government was aware that its delay in decision-making was
potentially to the detriment of Relyant in terms of its incurring additional costs during
the waiting period; 5) there were no circumstances that justified an extended wait on
the part of the government before deciding whether to permit the change in the SOW;
and 6) the government's decision-making appears to have been able to have been
accomplished within a matter of days once it turned its attention to the matter. Given
all of these considerations, the government's failure to act in a more timely manner
here was "inconsistent with the contract's purpose and deprive[d] the other party of the
contemplated value." Metcalf, 742 F.3d at 991. These factors should make clear that
our decision today is very fact-specific. For example, in the event that a contractor
requested a change to the SOW for which it had no realistic chance of approval, we
might be less likely to find a breach of the duty if the government took an extensive
period of time to resolve it.
We now tum to damages for the contractual breach. "The remedy for breach of
contract is damages sufficient to place the injured party in as good a position as it
would have been had the breaching party fully performed." Indiana Michigan Power
Co. v. United States, 422 F.3d 1369, 1373 (Fed. Cir. 2005) (citation omitted). Thus,
our 1 May 2009 date has important implications for the calculation of damages due to
Relyant. In particular, since the first D02 RLB cans had already been delivered to
Bagram before that time, the government is not responsible for Relyant' s costs for
transshipping the cans to Sharana after their rejection in August. It also defines the
time that the government should be held responsible for extra costs: May through
early August 2009. But those costs are limited to the costs incurred at Bagram, where
two Relyant employees awaited the go-ahead to begin assembly operations.
25
According to the evidence presented by Relyant and not disputed by the government,
that amount was $151,816 (the $172,004 in burdened labor costs for April through
August 2009 minus the $20,188 for the month of April 2009). The delay in approval
of the submittal appears to have had no impact upon construction at Sharana because
the FAT there was not approved until a time in August 2009 after denial of the SOW
submittals. Since Relyant has not alleged that the FAT was unreasonably delayed and
has provided no evidence that it could have proceeded elsewhere prior to the FAT, we
conclude that it is not entitled to other delay damages. See, e.g., Melka Marine, Inc. v.
United States, 187 F.3d 1370, 1375 (Fed. Cir. 1999) (no overhead damages when
contractor not on standby as a result of government delay); Rex Systems Inc.,
ASBCA No. 59624, 16-1 BCA ,i 36,350.
IV. Relyant did Not Waive its Rights to Challenge the CO's Actions Here
The government has asserted, through its affirmative defense, that Relyant has
waived its claims (gov't br. at 42-46). There are basically three arguments made by
the government here: the first is that Relyant' s continued performance, despite the
government's breach, constituted a waiver of Relyant's rights because Relyant's
silence was to the disadvantage of the government (id. at 42-43); second, that bilateral
modifications to contract due dates acted to eliminate the government's liability for
damages (id. at 43-44) under the theory that once the bilateral modifications are in
place, the parties are to "let bygones be bygones" (id. at 43-44 (quoting Environmental
Devices, Inc., ASBCA No. 37340 et al., 93-3 BCA ,i 26,138 at 129,934)); and third- a
theory which we need not address because we find no government liability for the
matter - is that Relyant' s costs incurred shipping cans from Bagram to Sharana ( once
they were rejected in Bagram) are covered by the release language in Modification
No. P00002 to DOI. 27 The government's first theory, that continued performance of a
contract in the face of a breach constitutes waiver, is a gross misreading of the relevant
law. Likewise, the bilateral modification theory does not, in fact, protect the
government from the liability that we have found above, especially given the glaring
lack of appropriate mutual releases.
With respect to the theory that Relyant' s continued performance of the
contract constituted a waiver, we tum to the law cited by the government - primarily
Ling-Temco-Vought, Inc. v. United States, 475 F.2d 630 (Ct. Cl. 1973) (see
gov't br. at 42), and see that it is not remotely like the circumstances presented here.
In Ling-Temco, the continued performance in the face of an alleged material breach
(of which the government was unaware), placed the government in a significantly
disadvantaged position, essentially invoking considerations of estoppel. 4 7 5 F .2d
27
We note that we would have been skeptical of this argument: inter alia, the release
was executed well before the present disputes and, at first blush, would not
have appeared to cover them.
26
at 638-39. Here, the government posits no plausibly similar circumstances and was
well aware that Relyant considered itself wronged. No injustice was done to the
government by Relyant's timely bringing of its routine claims in this matter pursuant
to the contract's Disputes clause. 28
Turning to the government's argument that a bilateral contract modification
on scheduling acts to eliminate any claim relating to the government's tardiness in
contract administration, an examination of the authority relied upon by the
government, primarily Environmental Devices, demonstrates that the government
overstates its reach. The basic notion in Environmental Devices is that, when the
parties agree to a new completion date for a contract, that is the date that the contractor
is representing it will meet in the absence of new causes of delay. Thus, as stated by
RFI Shield-Rooms, ASBCA Nos. 17374, 77-2 BCA ,r 12,714 at 61,731 (quoted by
Environmental Devices, Inc., ASBCA No. 37430 et al., 93-3 BCA ,r 26,138 at
129,934) "the action of the parties in agreeing upon a new delivery schedule eliminates
from consideration the causes of delay accruing prior to such agreement." Letting
"bygones be bygones," in this context, does not wipe the slate clean as far as the
government's liability for the imposition of all additional costs goes; rather, it only
deals with costs associated with the new schedule. The costs of the Relyant employees
wasting their time in Bagram due to government inaction on the request to amend the
SOW are not such precluded costs. Had the government wished to insulate itself from
such potential costs, it could have negotiated a release clause as it did in the change
order relating to delivery costs. It did not do so and must accept the consequences of
this decision.
28
The government also cites Brand S Roofing, ASBCA No. 24688, 82-1 BCA
,r 15,513, as somehow supporting its position (see gov't br. at 42). Brand S
Roofing did allow, in the circumstances there presented, that the contractor
could be excused from continuing performance in light of a government
material breach. See 82-1 BCA ,r 15,513 at 76,958-59. But we made clear that
under "normal circumstances," compliance with the dictates of the Disputes
clause was to be expected by the contractor. Id. at 76,958. The government
cannot convincingly explain why the dispute here is not a "normal" situation.
27
CONCLUSION
The government did not change the SOW to meet Relyant's desires and was
under no obligation to do so. Nevertheless, under the circumstances presented here, its
inexcusable delay in deciding the request left Relyant in an untenable position for
more than two months. Accordingly, the government is liable to Relyant in the
amount of damages proved, $151,816, with CDA interest starting from the time it filed
its claim, 23 January 2015.
Dated: June 27, 2018
fi;/
J.-REH'fPROUTY
Administrative Judge
Vice Chairman
Armed Services Board
of Contract Appeals
I concur I concur
/1
RICHARD SHACKLEFORD
Administrative Judge Administrative Judge
Acting 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. 59809, Appeal of Relyant,
LLC, rendered in conformance with the Board's Charter.
Dated:
JEFFREY D. GARDIN
Recorder, Armed Services
Board of Contract Appeals
28