Innoventor, Inc. ( 2017 )

ARMED SERVICES BOARD OF CONTRACT APPEALS
Appeal of -- )
)
Innoventor, Inc. ) ASBCA No. 59903
)
Under Contract No. FA8224-l l-C-0043 )
APPEARANCES FOR THE APPELLANT: Darrell W. Cook, Esq.
Stephen W. Davis, Esq.
Darrell W. Cook & Associates
Dallas, TX
APPEARANCES FOR THE GOVERNMENT: Jeffrey P. Hildebrant, Esq.
Air Force Deputy Chief Trial Attorney
Christopher S. Cole, Esq.
Lt Col Kevin P. Stiens, USAF
Trial Attorneys
OPINION BY ADMINISTRATIVE JUDGE SWEET
ON THE PARTIES' MOTIONS FOR PARTIAL SUMMARY JUDGMENT
This is an appeal of a contracting officer's final decision (COFD) rejecting the
claim of appellant Innoventor, Inc. (Innoventor) asserting that it was entitled to an
equitable adjustment due to defective specifications, undisclosed information, a
constructive change, and technical impossibility. Innoventor and the government have
cross-moved for partial summary judgment on the constructive change theory only. We
grant the government's motion and deny Innoventor's cross-motion.
STATEMENT OF FACTS (SOF) FOR PURPOSES OF THE MOTIONS
I. The Contract
1. On 19 April 2011, the United States Air Force issued Solicitation
No. F A8224-l l-R-0027 for the general design and performance requirements to design
and build the replacement for a Dynamic Brake Test Stand (DBTS) (R4, tab 4 at 4). As
set forth in the solicitation, the DBTS was intended to be capable of testing the latest
version of seven different components of such brake assemblies. These components are
referred to as Units Under Test (or UUTs). (R4, tab 1 at 15)
2. During the bidding process, one contractor inquired whether the Air Force
would provide drawings of the legacy DBTS that the solicited DBTS would replace. The
Air Force responded, "No, this is a design and manufacture effort for a new product. The
Government does not have access to any of the drawings" of the legacy DBTS. (Supp.
R4, tab 54 at 3) 1
3. In response to the solicitation, Innoventor submitted a proposal. In its
proposal, Innoventor asserted that it had experience delivering test stands to replace
legacy test stands. (R4, tab 7 at 12-15)
4. On 28 July 2011, the Air Force awarded Contract No. FA8224-11-C-0043
(contract 0043) to Innoventor. Contract 0043 was a $357,628 fixed-price contract. (R4,
tab 1 at I)
5. Contract 0043 's purchase specification (PS) required that the DBTS "shall
be capable of accurately testing" UUTs in accordance with various technical orders
(TOs ), which provided test protocols and requirements for testing the UUTs (R4, tab 1
at 7-8, 15, tabs lb-Id). One ofthe TOs with which the PS required the DBTS to
comply was TO 33A2-2-51-1 (R4, tab 1 at 7).
6. TO 33A2-2-51-1 provided instructions for the operation of pressure circuits of the
DBTS. In describing that operation, the TO cautioned to "Monitor 33D STATIC TEST
PRESSURE gauge (2) closely while making pressure adjustments. Pressure will increase
sharply and may result in damage to the item being tested." (App. resp., ex. 8 at 686, 689)
7. The PS required that the new DBTS's accuracy and functionality be the same
as-or better than-the legacy DBTS's accuracy and functionality by stating that the
primary requirement is that the DBTS "shall be designed to combine the functionality of
the current Dynamic Brake Test Stand (see TO 33A2-2-40-1) with increased accuracy,
reliability, and automation and hydraulic testing (see TO 16Al-17-4-3, Section 7.2.2) as
specified herein" (R4, tab 1 at 9). The PS required "uniform functionality and accuracy"
between the new DBTS and the legacy DBTS (R4, tab 2 at 16).
8. The PS required that the new DBTS undergo and pass testing. The PS stated that:
4.3 Final Machine Review: At least one month prior to
the approved shipping date from the manufacture facility
to the destination, a final machine build inspection review
at the manufacture facility will be conducted. The review
1
It appears that the contractor posed the question during a 27 April 2011 site visit, and
that the answer was provided to the attendees (supp. R4, tab 54). While Innoventor
is listed on the sign-in sheet, its representatives did not sign the sign-in sheet.
2
will include a functional performance test cycle performed
on [UUTs]. Items must pass all tests in applicable TOs.
(R4, tab 1 at 16)
9. The PS, as modified, 2 also stated that:
4.17 Tests. The [DBTS] shall pass the following tests or
shall be rejected ....
4 .1 7.1 Operational Test. The [DB TS] shall be operated
without connection to a UUT to determine functionality.
Proper operation of all controls, pumps, adjusting
mechanisms, valves, and other accessories shall be verified
during the trial period. If the [DBTS] fails it shall not be
connected to a UUT until it passes.
4.19.2 Performance Tests. The [DBTS] shall perform all
test cycles identified in TO 9H2-4-183-3 and 16Gl-137-3
related to UUTs listed in Table 3.1 of this PS. The test
cycles shall be performed by the Government operator (after
onsite training) and verified by the Contractor technician.
The UUT shall also be tested on existing test equipment to
determine uniform functionality and accuracy. The tests
will most likely be performed on the exact same
components to ensure continuity between the tests.
(R4, tab 2 at 15-16) "If the [DBTS] fails to pass any test in the requirements of this
Purchase Specification it shall be rejected" (R4, tab 1 at 23).
10. The PS incorporated by reference FAR 52.243-1, CHANGES-FIXED-PRICE
(AUG 1987) (R4, tab 1 at 34 ). Under the PS, "Government personnel, other than the
Contracting Officers [COs] and authorized Government Representative, may (with CO
coordination) observe Contractor operations. However, these personnel may not
interfere with Contractor performance or make any changes to the contract." Rather,
"[a]ny matter concerning a change to the scope, prices, terms or conditions of this
contract shall be referred to the Contracting Officer." (R4, tab 1 at 26)
2 On 21 September 2011, the Air Force modified the 0043 contract to include
milestone payments, to include a loan agreement for Government-Furnished
Equipment, and to modify the PS (R4, tab 2 at 1).
3
II. Performance
11. At a kickoff meeting, the Air Force technical team presented a slide
indicating that:
You are hereby notified that this team DOES NOT have
the authority to direct you in any way to alter your
contractual obligations. Further, if the Government, as a
result of the information obtained from today's discussion
DOES desire to alter your requirements, changes will be
issued in writing and signed by the contracting officer.
You should take no action on any change unless and until
you receive such a contract modification.
(R4, tab 8 at 9)
12. In the summer of 2013, Innoventor began testing the new DBTS using UUTs
provided by the government. Charles Wolfersberger, Innoventor's Senior Mechanical
Technical Lead Engineer, emailed Daniel Hansen, the Air Force's process engineer point
of contact. In that email, Mr. Wolfersberger stated that "[w]e have tested 4 gear cases and
have found two units with traces showing near identical input and output torque which
suggests that the units do not pass the proof load test." (R4, tab 11 at 1-2)
13. In September 2013, Mr. Hansen traveled to Innoventor's facility for the
performance of the Initial Operational Testing & Evaluation (September 2013 IOT&E).
The first UUT did not fit the test stand, and the DBTS "failed to run properly and
destroyed the [second] UUT." Innoventor tested the remaining UUTs without incident.
Moreover, "O of 5 UUTs passed tests." (R4, tab 14 at 2) However, Mr. Hansen could not
make sense of all the test results.
14. Mr. Hansen concluded that Innoventor was "not even close to prepared. Not a
single task was successfully completed .... Based on our findings it is estimated that
[Innoventor] has a slim hope of successfully completing this contract." Mr. Hansen
recommended that the government deliver a cure notice, and allow Innoventor to attempt
to correct the deficiencies. Another JOT &Ethen would be required. If Innoventor could
not cure, Mr. Hansen recommended termination. (R4, tab 14 at 4)
15. On 17 September 2013, Mr. Hansen sent Innoventor a list of action items
that needed to be addressed on the DBTS. Among the items was the following:
0 of 5 UUTs were successfully tested. It is unclear what
your intended corrective action entails, but this is a serious
concern. The contract clearly stated the [UUTs] shall be
4
tested in accordance with the applicable technical orders.
If the test stand cannot meet this most critical design
requirement then the test stand cannot be accepted.
(R4, tab 15 at 4) (Emphasis omitted)
16. On 19 November 2013, Mr. Wolfersberger emailed Mr. Hansen a report card on
Innoventor's testing of five UUTs. The report card stated that the DBTS broke one UUT,
and that the other four UUTs failed at least one test. Mr. Wolfersberger concluded that "I
am hoping for a better looking report card with the new Class A assets." (R4, tab 18 at 1)3
17. The Air Force sent Innoventor six Class A UUTs, which Innoventor received
and tested in late November 2013 (gov't mot., attach. 4 at 1). In a 27 November 2013
report card, Mr. Wolfersberger indicated that one UUT broke, three UUTs failed at least one
test, and the remaining two UUTs received marginal or passing scores on all of the tests
(R4, tab 19 at 1). 4
18. In December 2013, Mr. Hansen again traveled to Innoventor for an IOT &E
(December 2013 IOT&E). Innoventor resolved most of the action items. However, the
DBTS damaged one UUT, and "none of the UUT's were passing the tests even though
they were supposed to be 'A' condition assets." Thus, Mr. Hansen concluded that "[w]ith
the exception of not having any of the UUTs pass testing, and the damage that was done to
some of the UUTs, indications are that the test stand is functioning properly." Mr. Hansen
decided that the Air Force would test the same UUTs on the legacy DBTS to determine
the true condition of the UUTs. Mr. Hansen wrote that his recommendations:
[D]epend heavily on the outcome of the testing we conduct
this week on the UUTs with the legacy test stand here at
Hill AFB. If testing reveals that the UUTs are faulty, then
we should no longer suspect the new test stand of being
3
A Class A asset is a serviceable asset without qualification, which means that it is
new, used, repaired, or reconditioned material which is serviceable and issuable
to all customers without limitation or restriction (gov't mot., attach. 5).
4
The November 2013 tests were different from, and in addition to the IOT&Es, in that
Air Force personnel did not attend the November 2013 tests. It is unclear whether
the UUT that the 19 November 2013 report card indicated was broken was the
same UUT that broke during the September IOT & E (compare R4, tab 14, with
R4, tab 18). However, it is clear that the UUT that the 27 November 2013 report
card indicated was a new break (i.e., occurred during the 27 November 2013
testing) because the Air Force sent new UUTs for the 27 November 2013 tests
(gov't mot., attach. 4 at 1), and Innoventor got through three tests before the new
UUT broke (R4, tab 19 at 1).
5
faulty. If the test results are not similar to those of the
[Innoventor] test stand then we'll need more time to
resolve the issues. That process will likely require more
information that we currently do not have. [Innoventor]
has designed and built the test stand to meet the
requirements with the information they were given. I felt
that there was information that the government was unable
to provide to [Innoventor] that would be helpful, but it was
information that we did not have and it was uncertain
whether it was required.
(R4, tab 20 at 2-3)
19. On 5 December 2013, Mr. Hansen signed a document indicating that "[w]e
agree that the Dynamic Brake Test Stand IOT &E activities have been satisfactorily
completed" (app. resp., ex. 6 at 3). Mr. Hansen claims he signed the document for
Innoventor's internal purposes, and that he thought the tests were complete enough to
seek progress payments, but that the DBTS remained deficient because it did not meet
the contractual requirements (gov't reply, attach. 14 at 1).
20. Mr. Wolfersberger traveled to Hill Air Force Base to observe the testing of the
UUTs that had been tested on Innoventor's DBTS and on the legacy DBTS. On
10 December 2013, Mr. W olfersberger sent an email summarizing the first day of testing,
during which the Air Force tested two UUTs. The first UUT-which had passed three out of
eight tests using Innoventor's DB TS-passed seven out of eight tests on the legacy DBTS.
The second UUT passed two out of the eight tests on both DBTSs. (Supp. R4, tab 120 at 1)
21. Mr. Hansen forwarded that email to other Air Force personnel. In the
forwarding email, Mr. Hansen stated that, while "it appears as though the two [DBTSs]
are further apart[,] [i]n reality, I think the results on the two [DBTSs] are very
reasonable and maybe a little closer than I even expected." Mr. Hansen also stated that
modifying the Innoventor DBTS to reduce inertia-which the parties were discussing-
"should lessen the likelihood of breaking a" UUT. (App. resp .. , ex. 1 at 429)
22. After the completion of testing on the legacy DBTS, Mr. Hansen sent an
email discussing the results vis-a-vis Innoventor's DBTS on 12 December 2013.
Mr. Hansen summarized that "I'll just say this up front - the results are VERY similar
to those we collected with the Innoventor test stand last week." (Supp. R4, tab 121 at
1, see also id. at 2 (reiterating that "Innoventor test stand and Hill's legacy test stand
produced very similar results.")) Mr. Hansen stated that, ifthe legacy DBTS "inertia
is much smaller than [Innoventor' s] inertia it may explain why their test stand has
broken [UUTs] at such a high rate. If there is a drastic difference we'll likely make
modifications to the input and output shafts to reduce their inertia." (Id. at 2)
6
23. The 12 December 2013 email also stated that "[ w ]e got halfway through
testing at Hill when the gearcase broke a gear tooth and cracked the housing just like"
the UUT that Innoventor's DBTS had broken (supp. R4, tab 121 at 2). In a declaration
submitted in support of the government's summary judgment motion, Mr. Hansen
suggests that the UUT might have been damaged during the prior week's testing on
Innoventor's DBTS. Historically, the UUTs damaged by the legacy DBTS were "very
minimal." The single instance of the legacy DBTS damaging an UUT of which
Mr. Hansen was aware occurred in 2008. (Gov't reply, attach. 15 at 1)
24. On 13 December 2013, Mr. Hansen sent an email to other Air Force
personnel and Mr. Wolfersberger reiterating that he was "seeing consistent results" on
most of the tests. However, Mr. Hansen stated that he and Innoventor were "trying to
figure out why their test stand is cracking [UUTs] at a higher rate." In particular, they
were looking at inertia and spring rates. (App. resp., ex. 1 at 431)
25. On 18 December 2013, Mr. Wolfersberger sent Mr. Hansen an email
stating that, "[t]he more I look into this, the more important that spring rate is to this
test. The spring will have the effect of lengthening the time it takes to decelerate the
spinning components and will therefore lower the torques and stresses imposed on the
UUT. This is a huge 'discovery.'" Mr. Hansen responded, "[ o]ur previous engineer,
Jay Ostler, had brought this up due to the requirement he found in the A TP-1 guess
we shouldn't have dismissed it. We're working through the issues in a manner that
makes sense to us, and it just happens that the focus can now be shifted to include the
spring rate." Mr. Wolfersberger also stated that tuning a spring-mass system was a
"sorcerer's art," and that "the best approach will be to match the legacy stand's
characteristics as much as practical. I do not feel comfortable deviating much from the
spring rates that we have determined." (R4, tab 22 at 1)
26. Mr. Hansen then emailed Innoventor, stating that "I spoke with my
contracting officer about what it would take to modify the contract for the spring rate
design changes." Mr. Hansen asked for a quote on what it would take to make the
modification. (App. resp., ex. 2 at 440)
27. On 6 January 2014, Mr. Hansen emailed Mr. Wolfersberger a proposed
modification. In the cover letter, Mr. Hansen stated that:
As part of the modification to address the spring rate the
contracting officer is requiring me to modify the purchase
specification to align with our changes, as well as provide
a narrative of why these changes are necessary. I have
attached a modified PS and would like some feedback
7
from you. I don't think the CO would like the idea of me
getting your feedback, but I think it makes the most sense
if you agree that it is clearly stated.
(R4, tab 24 at 1) The cover letter continued that:
I can't come out and specifically say something like "the
test stand shall have a spring rate of 30,000 in-lbs/rad" or
"the inertia of the system shall be 0.2348 in-lbs-sec/\2" -
mostly because I'm not convinced that we're sure what it
should be. I also should avoid putting specifics in there
because the contracting office does not like that type of
requirement. The government almost always tries to
provide the requirement and not the design criteria. This
can be considered either, depending on who's defining it.
As a side note, I know you guys are working towards
replicating the inertia and spring rate found on the legacy
equipment- that's fine. That's probably the right answer,
but I'm not going to say it is the right answer for certain.
(R4, tab 24 at 1)
28. The proposed modification attached to Mr. Hansen's letter included the following:
4.3 Final Machine ReYiewlnitial Operational Test &
Evaluation (JOT&E). At least one month prior to
the approved shipping date from the manufacture
facility to the destination an JOT &Efinal machine
build inspection revie'N at the manufacture facility
will be conducted. The reviewIOT &E will include
a functional performance test cycle performed on
Government furnished components (Listed in 3 .4)
determined at the meeting identified in section 4.2.
Items must pass all tests in applicable TOs. In
addition to passing the specific TO tests, the
Government must be satisfied that the [DBTSJ is
100% functional and is capable of performing all of
said tests in a safe manner - safe with respect to
personnel and safe with respect to the condition of
the UUTs. Since the [DBTSJ shall replicate the
testing capabilities of the original Dynamic Break
Test Stand the [DBTSJ shall not damage UUTs as a
result of testing. The Government Project Manager
8
will have the authority to determine whether the
[DBTS] design is performing the tests in an
acceptable manner. This includes parameters which
are otherwise undefined in the technical data, such
as system inertia and spring rate.
(R4, tab 24 at 11) 5
29. In response to the proposed modification, Innoventor submitted a proposal to
adjust the spring rate for $163,230 in February 2014 (R4, tab 25 at 12). Innoventor also
submitted a request for equitable adjustment (REA), asserting that, due to "instability of
expectations," it was entitled to $893,358 in extra costs it incurred through December 2013
(id. at 1, 13 ). Innoventor never fully defined the term "instability of expectations," which we
take to mean changes in the contract's performance specifications during performance (id. at 2).
30. On 18 February 2014, the CO sent an email to Innoventor stating that the
REA was incorrectly being invoked because the government had not issued a
modification directing a change. Moreover, the CO stated that:
I cannot accept a proposal for a submitted change as the
government has not provided any amended purchase
specification for you to propose to. The engineer does not
have the authority to amend the purchase specification and
ask for proposals when making changes to the contract.
Any issue that could change the 'scope' or falls outside
what was part of the original contract must be worked
through the contracting officer.
(R4, tab 26 at 1)
31. On 27 March 2014, Mr. Hansen sent an email to other Air Force personnel
providing a history of contract 0043. Mr. Hansen stated that "[t]he PS written by 309
CMXG/ENH is not perfect and there are some potential gray areas of interpretation."
(R4, tab 3 at 172-73) Mr. Hansen also stated that Innoventor failed the September
2013 IOT&E. Regarding the December 2013 IOT&E, Mr. Hansen stated that
"[c]ontract requirements met, other than the test stand is cracking gear teeth on some
gearboxes being tested." Mr. Hansen stated that Innoventor was proposing to fix the
problem for $163,230, but that the changes could be done for much less-about
$20,000-because Innoventor' s "test stand is quite good and the required changes,
5 The edits in the above quotation-i.e., the underlined proposed additions and the
strike-through proposed deletions-are the Air Force's proposed modifications
to the 0043 contract.
9
although they have significant impacts, are relatively minimal." Thus, Mr. Hansen
indicated, the plan was to have Innoventor deliver the DBTS "as-is," pay the contract
price of $356,378, and make the necessary changes in-house. (R4, tab 3 at 173)
32. In the summer of 2014, Innoventor generated an Acceptance Test
Procedures form. On the form, it appears that Mr. Hansen initialed that the DBTS
passed various operational and safety characteristics. Nothing on the form indicates
that the DBTS did not break UUTs. (App. resp., ex. 7 at 377-411)
33. In a memorandum from 2014, Mr. Hansen stated that the test requirements
are defined by certain RPM and a certain torque measurement on the input and output
of the UUTs, but "[t]here are no other design or test criteria available." He continued:
Even though the speed and torque sensors indicated
measurements within the acceptable ranges, several
[UUTs] have cracked gears while being tested on
[Innoventor] 's test stand. All engineering
personnel. .. believe that the combined spring rate of the
test stand components is too high (too rigid) and that is
causing a faster/harder impact when the brake engages.
We have attempted to resolve the deficiency with
[Innoventor] but they have responded with a Request for
Equitable Adjustment.... Their claims are unsupported.
RECOMMENDATION
309 CMXG/ENH believes that it is in the best interest of
the government to continue with the project knowing that
the spring rate of the test stand is the most likely cause for
damage to units under test. It is proposed that we accept
the test stand "as-is" and correct the deficiency using our
own resources. [Innoventor] will still be responsible for
all other remaining deliverables. The government will pay
the remainder of the full contract price for the test stand.
309 CMXG/ENH believes this is the quickest path
towards resolution and completion of this test stand. This
will also allow us to distance ourselves from [Innoventor],
a company with repeated delays and failures.
(R4, tab 29 at 1)
10
III. Claim History
34. On 8 September 2014, Innoventor submitted a certified claim to the CO for
$1,138,552. Innoventor claimed defective specification, undisclosed information, a
constructive change, and technical impossibility. The amount sought in the claim
increased relative to the REA because Innoventor added 2014 costs, and applied overhead
to costs by each calendar year. (R4, tab 46)
· 35. On 8 January 2015, the CO issued a COFD, denying the
claim. In addressing the constructive change claim, the CO stated that:
The requirement has always been to replicate the test
results of the legacy test stand.... The Government
believes the legacy test stand was designed with careful
consideration to the operating conditions and test
parameters that are no longer openly stated in the
.documentation available. In other words, even though
parameters such as inertia are unknown, they can be
calculated through reverse-engineering efforts to replicate
the characteristics of the legacy test stand.
(R4, tab 53 at 9)
36. Innoventor then filed this timely appeal dated 20 March 2015 with the Board.
37. Innoventor and the Air Force cross-moved for partial summary judgment
on entitlement under the constructive change theory.
DECISION
I. The Standards for Summary Judgment6
Summary judgment will be granted if a moving party has shown that there are no
genuine issues of material fact and it is entitled to judgment as a matter of law. Celotex
Corp. v. Catrett, 477 U.S. 317, 322 (1986). A non-movant seeking to defeat summary
judgment by suggesting conflicting facts must set forth specific facts showing that there
is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
Thus, if the non-moving party carries the burden of proof at trial for elements of its case
and fails to provide such proof, the moving party is entitled to summary judgment.
Dairyland Power Coop. v. United States, 16 F.3d 1197, 1202 (Fed. Cir. 1994). In
6
Board Rule 7(c)(2) provides that we look to FED. R. CIV. P. 56 for guidance on
dealing with motions for summary judgment.
11
deciding summary judgment motions, we do not resolve controversies, weigh evidence,
or make credibility determinations. Liberty Lobby, 477 U.S. at 255. Moreover, we draw
all reasonable inferences in favor of the non-movant. Id. Where, as here, the parties have
filed cross-motions for summary judgment, we evaluate each motion on its own merits,
taking care to draw all reasonable inferences against the party whose motion is under
consideration. Mingus Constructors, Inc. v. United States, 812 F.2d 1387, 1391 (1987);
ECCI-C Metag, JV, ASBCA No. 59031, 15-1BCAii36,145 at 176,419.
II. The Government's Motion for Summary Judgment
The government is entitled to judgment as a matter of law on the constructive
change theory because there is no evidence suggesting an authorized government
representative required Innoventor to perform work not required under the terms of
contract 0043. In order to recover for a constructive change, a contractor must
prove that:
( 1) [T]he CO compelled the contractor to perform work not
required under the terms of the contract, (2) the person
directing the change had contractual authority unilaterally
to alter the contractor's duties under the contract, (3) the
contractor's performance requirements were enlarged, and
(4) the added work was not volunteered, but resulted from
the direction of the government's officer.
Dan Rice Constr. Co., ASBCA No. 52160, 04-1 BCA ii 32,595 at 161,262. Here,
Innoventor appears to claim that the government changed its performance
requirements by directing it to replicate the legacy DBTS's performance and test
results (app. resp. at 24-25). The government is entitled to judgment as a matter of law
on that theory because there is no evidence suggesting that the government changed
Innoventor's performance requirements, let alone that anyone with authority to do so
directed any such changes.
A. There is No Evidence Suggesting that the Government Changed
Innoventor's Performance Requirements
There is no evidence suggesting that the government changed Innoventor' s
contract's performance requirements because contract 0043 unambiguously required that
the new DBTS pass the tests and function at least as well as the legacy DBTS. "In order
to decide whether a constructive change has occurred, we examine the pertinent contract
language ... to interpret the contract requirements." Lamb Eng'g & Constr. Co., ASBCA
No. 53304 et al., 06-1 BCA ii 33, 178 at 164,417. Where the provisions of a contract are
"clear and unambiguous, they must be given their plain and ordinary meaning, and we
12
may not resort to extrinsic evidence to interpret them." Coast Fed. Bank, FSB v. United
States, 323 F.3d 1035, 1040 (Fed. Cir. 2003) (en bane) (citations omitted).
"An ambiguity exists when a contract is susceptible to more than one
reasonable interpretation." E.L. Hamm & Assocs., Inc. v. England, 379 F.3d 1334,
1341 (Fed. Cir. 2004). As we have held:
Determining whether ... differing interpretations are
reasonable begins with an examination of the plain
language of the contract, construing the contract so as "to
effectuate its spirit and purpose giving reasonable meaning
to all parts of the contract." In order to fall within the
"zone of reasonableness," a party's interpretation must be
logically consistent with the contract and the parties'
objectively ascertainable intentions.
ECCJ-C Me tag, 15-1 BCA ~ 36, 145 at 176,418 (citations and quotations omitted).
Here, the only interpretation of contract 0043 that is logically consistent with the
contract language and the parties' objectively ascertainable intentions is that the new
DBTS had to pass the tests and function at least as well as the legacy DBTS. Contract
0043 plainly stated that the new DBTS "shall pass the following tests or shall be
rejected" (SOF ~ 9). It also stated that the primary requirement for Innoventor's DBTS is
that it "shall be designed to combine the functionality of the current Dynamic Brake Test
Stand ... with increased accuracy, reliability, and automation and hydraulic testing" (SOF
~ 7 (emphasis added)). Moreover, contract 0043 required "uniform functionality and
accuracy" between Innoventor's DBTS and the legacy DBTS (SOF ~ 9 (emphasis
added)). Thus, contrary to Innoventor's suggestion, contract 0043 unambiguously
required that the new DBTS pass the tests and function uniformly with the legacy DBTS.
Also contrary to Inn oventor's suggestion, there is no genuine issue of material
fact but that the new DBTS failed the September 2013 IOT&E test. As Mr. Hansen
reported, "O of 5 UUTs passed tests," and "[n]ot a single task was successfully
completed" (SOF ~~ 13-14 ). There is no contradictory evidence suggesting that
Innoventor's DBTS passed the September 2013 IOT&E. Therefore, at a minimum,
any costs incurred to modify Innoventor's DBTS so that it could pass the follow-up
December 2013 IOT&E test cannot be recovered under a constructive change theory
because Innoventor incurred those costs to meet the contract's requirement that
Innoventor's DBTS pass the tests.
There is evidence that, at a minimum, raises a genuine issue of material fact as to
whether Innoventor's DBTS passed the December 2013 IOT&E test in the sense that its
13
accuracy in testing the UUTs under the TOs was comparable to that of the legacy DBTS.
In particular, Mr. Hansen stated that (1) the IOT &E had been "satisfactorily completed";
(2) "the two [DBTSs] are very reasonable"; (3) the "results [for the legacy DBTS test] are
VERY similar to those we collected" during the December 2013 IOT&E; and (4) he was
"seeing consistent results" between the December 2013 IOT&E and the tests on the legacy
DBTS. (SOF iii! 19-24)
However, contract 0043 also required uniform functionality (SOF ii 7). "Uniform"
means "conforming to one ... unvarying standard; not different at different times or
places ... applying to all within a class; sameness." BLACK'S LAW DICTIONARY, 1530 (6th
ed. 1990). "Function" means "to perform, execute [or] administrator. The nature and
proper action of anything." Id. at 673. Thus, in order to comply with the contract's
uniform functionality requirement, Innoventor's DBTS had to perform the same as the
legacy DBTS. The undisputed evidence shows that Innoventor's DBTS was not
performing the same as the legacy DBTS because Innoventor's DBTS was breaking UUTs
at a much higher rate than the legacy DBTS. In the 12 December 2013 email, Mr. Hansen
complained that Innoventor's DBTS "has broken [UUTs] at such a high rate" (SOF ii 22).
Likewise, in his 13 December 2013 email, Mr. Hansen stated that they were "trying to
figure out why [Innoventor's] test stand is cracking [UUTs] at a higher rate" (SOF ii 24).
And in his 27 March 2014 email, Mr. Hansen stated that the "[c]ontract requirements
[were] met, other than the test stand is cracking [UUTs]" (SOF ii 31). Mr. Hansen's 2014
memorandum also stated that "several [UUTs] have cracked gears while being tested on
[Innoventor]'s test stand" (SOF ii 33). Because the undisputed evidence shows that
Innoventor's DBTS was breaking UUTs at a higher rate than the legacy DBTS, there was
not uniform functionality between the DBTSs.
In response, Innoventor points to the fact that the legacy DBTS also broke a
UUT during testing (SOF ii 23). While the government suggests that the UUT could
have been broken during testing on Innoventor's DBTS a week earlier, for purposes of
deciding the government's summary judgment motion, we must draw the reasonable
inference that the legacy DBTS broke the UUT. However, even drawing that inference,
that merely would establish that the legacy DBTS broke two UUTs over several years.
(SOF ii 23) Innoventor's DBTS undisputedly broke four UUTs over several months
(SOF iiii 13, 16-18). Thus, the undisputed evidence confirms Mr. Hansen's conclusion
that Innoventor's DBTS was breaking UUTs at a higher rate than the legacy DBTS.
Innoventor also argues that the Air Force retroactively tried to change the
contract's requirements because the version of TO 33A2-2-51-1 in effect during the
IOT &Es, permitted damage to UUTs, but the 2014 proposed modification would have
altered that fact by prohibiting such damage (app. resp. at 3-4, 30, 35; app. reply at 5).
As an initial matter, TO 33A2-2-51-1 merely warned that damage may result to the
14
UUT if pressure increases sharply as a result of failing to properly monitor the 33D
static test pressure gauge. It does not say that such damage is acceptable. (SOF ii 6)
In any event, Innoventor's argument is beside the point. As discussed above,
the problem with Innoventor's DBTS was not that it broke a UUT. Rather, the
problem was the lack of uniform functionality because Innoventor's DBTS broke
UUTs at a significantly higher rate than the legacy DBTS. Regardless of whether the
unaccepted 2014 proposed modification would have prohibited damage to the UUTs,
the PS in effect during testing required uniform functionality and accuracy between the
new DBTS and the legacy DBTS.
Innoventor further complains that the Air Force was unsure of the design
specifications during performance (app. resp. 31-32; app. reply at 7-8). That
complaint ignores the fact that contract 0043 provides performance specifications, not
design specifications. "A design specification describes the details of performance
while a performance specification only sets forth the end results leaving the contractor
the discretion to determine the details of performance to achieve those end results."
Brinderson Corp., ASBCA No. 30938, 86-3 BCA ii 19,107 at 96,590-91; see also
Stuyvesant Dredging Co. v. United States, 834 F.2d 1576, 1582 (Fed. Cir. 1987).
Here, contract 0043 did not describe the details of performance. Rather, it only set
forth the end result-requiring that the new DBTS be designed to combine the
functionality of the legacy DBTS with increased accuracy, reliability, and automation
and hydraulic testing-leaving Innoventor the discretion to determine the details of
performance to achieve those end results (SOF ~ 7). Indeed, in response to a question
during the bidding process, the Air Force stated that "this is a design and manufacture
effort" (SOF ii 2, see also SOF ii 27 ("[T]he contracting office does not like [design
specifications]. The government almost always tries to provide the requirement and
not the design criteria.")).
Nor is there evidence suggesting that the Air Force imposed design
specifications-such as inertia or spring rates-when contract 0043 only contained
performance specifications. As we have held:
To be compensable ... the change must be one that the
Government ordered the contractor to make. The
Government's representative, by his words or his deeds,
must require the contractor to perform work which is not a
necessary part of his contract. This is something which
differs from advice, comments, suggestions, or opinions
which Government engineering or technical personnel
frequently offer to a contractor's employees.
15
Quality Plus Equip., Inc., ASBCA No. 46932, 96-2 BCA ~ 28,595 at 142,759
(emphasis added) (citation omitted).
Here, there is no evidence suggesting that the Air Force required-as opposed
to advised, suggested, or opined-that Innoventor meet any design specifications.
Innoventor relies upon Mr. Hansen's statement that "[a]s a side note, I know you guys
are working towards replicating the inertia and spring rate found on the legacy
equipment-that's fine. That's probably the right answer, but I'm not going to say it
is the right answer for certain." (SOF ~ 27 (emphasis added); see also app. resp. at
32). As the emphasized language indicates, that statement was, at most, advice,
comment, suggestion, or opinion on Innoventor's decision to replicate the DBTS's
inertia and spring rate. Mr. Hansen's statement cannot reasonably be read as requiring
that Innoventor replicate the legacy DBTS's inertia and spring rate. 7
Innoventor also relies upon the COFD to demonstrate that the government
compelled Innoventor to reverse engineer the legacy DBTS (app. resp. at 18). The fact
that the CO issued the COFD after performance precludes a finding that the COFD
constituted an order compelling Innoventor to perform work not required under the
terms of the contract (SOF ~ 35). Moreover, the COFD did not require Innoventor to
replicate the legacy DBTS. Rather, the COFD stated that the new DBTS had to
"replicate the test results of the legacy stand" (id. (emphasis added)). The COFD merely
stated that replicating the test results "can be" accomplished through reverse engineering
(id.). The word "can" is permissive, not mandatory. Alloc, Inc. v. Int'! Trade Comm 'n,
342 F.3d 1361, 1378 (Fed. Cir. 2003). Therefore, the COFD merely was advising,
suggesting, or opining that Innoventor could have reverse engineered the legacy DBTS,
instead of requiring that Innoventor had to reverse engineer the legacy DBTS.
To demonstrate that the contract was ambiguous, lnnoventor also relies upon a
statement by Mr. Hansen in an internal email that the PS is "not perfect and there are
some potential gray areas of interpretation" (app. resp. at 34 (quoting R4, tab 3 at 173,
~ 5)). It cannot reasonably be inferred from that general statement that Mr. Hansen
believed that the PS was unclear about whether the PS required uniform functionality
because, in that same email, Mr. Hansen stated that the "[c]ontract requirements
[were] met, other than the test stand is cracking gear teeth on some gearboxes being
tested" during the December 2013 IOT&E (id.) (emphasis added). In any event,
extrinsic evidence of internal debates within an agency about the meaning of a contract
7
Mr. Hansen's statement in the 18 December 2013 email that "I guess we shouldn't
have dismissed" an earlier suggestion by Mr. Ostler about the spring rate is
even less helpful because that merely shows that the Air Force engineering
personnel were working with Innoventor in an attempt to help it lower the rate
at which its DBTS broke UUTs (SOF ~ 25; see also app. resp. at 5).
16
provision cannot override the plain language of the contract. Raytheon Co., ASBCA
No. 57576 et al., 15-1 BCA ~ 36,043 at 176,056.
B. There is Evidence Suggesting that the Person Directing any Changes had
Authority To Do So
Alternatively, there is no evidence suggesting that the person directing any changes
had authority to alter Innoventor's duties under contract 0043. When a contract expressly
provides that only the CO has the authority to change a contract, other government
employees do not possess actual express or implied authority to change the contract. Winter
v. Cath-dr/Balti JV, 497 F.3d 1339, 1345-46 (Fed. Cir. 2007). Here, contract 0043
expressly provided that "[a]ny matter concerning a change to the scope, prices, terms or
conditions of this contract shall be referred to the Contracting Officer" (SOF ~ 10).
Likewise, at the kickoff meeting, the technical team reiterated to Innoventor that it did not
have the authority to change the contract (SOF ~ 11 ). Therefore, Mr. Hansen did not have
the authority to alter Innoventor's duties.
Nor does the 6 January 2014 email raise a genuine issue of material fact as to
whether the CO directed the purported changes to the contract requirements for which it
seeks to recover (app. resp. at 37). In the 6 January 2014 email, Mr. Hansen stated that,
"[a]s part of the modification to address the spring rate the contracting officer is requiring
me to modify the purchase specification to align with our changes" (SOF ~ 27). That
statement does not evidence the CO ordering Innoventor to perform additional work
because the government rejected Innoventor's proposed modification to address the
spring rate for $163,230 (SOF ~ 29). Because the government never issued the proposed
modification that the CO had ordered, Innoventor did not perform additional work to
address the spring rate pursuant to the proposed modification. Instead, the government
accepted the DBTS without the adjustments to the spring rate, and the government
performed the spring rate adjustments itself (SOF ~~ 31, 33).
Innoventor' s argument improperly conflates the unissued proposed modification
to address the spring rate with the purported constructive changes for which Innoventor
seeks to recover. The 6 January 2014 email states that the CO ordered the unissued
proposed modification to address the spring rate is separate from the REA for the
purported additional work as a result of the purported "instability of expectations" that
forms the basis of the constructive change claim (SOF ~~ 27, 29). The 6 January 2014
email does not address the purported additional work as a result of the purported
"instability of expectations," much less provide proof that the CO ordered any such
work (SOF ~ 27). On the contrary, in the 18 February 2014 email in response to the
REA, the CO stated that he did not order any additional work as a result of purported
unstable expectations (SOF ~ 30). Thus, there is" no evidence suggesting that the CO
ordered the purported additional work for which Innoventor seeks to recover.
17
III. Innoventor's Cross-Motion for Summary Judgment
Innoventor is not entitled to judgment as a matter of law because, as discussed above,
contract 0043 unambiguously required that Innoventor's DBTS pass the tests and function
at least as well as the legacy DBTS, which requirements were not satisfied. Moreover, there
is no evidence suggesting that anyone with authority required any changes.
CONCLUSION
The government's motion for summary judgment is granted. Innoventor's
cross-motion for summary judgment is denied. Judgment is entered in the government's
favor on the constructive change theory.
Dated: 11 July 2017
JAMES R. SWEET
Administrative Judge
Armed Services Board
of Contract Appeals
I concur I concur
RICHARD SHACKLEFORD
Administrative Judge Administrative Judge
Acting Chairman Acting Vice Chairman
Armed Services Board Armed Services Board
of Contract Appeals of Contract Appeals
I certify that the foregoing is a true copy of the Opinion and Decision of the
Armed Services Board of Contract Appeals in ASBCA No. 59903, Appeal of
Innoventor, Inc., rendered in conformance with the Board's Charter.
Dated:
JEFFREY D. GARDIN
Recorder, Armed Services
Board of Contract Appeals
18