Sand Point Services, LLC ( 2019 )

ARMED SERVICES BOARD OF CONTRACT APPEALS
Appeals of- )
)
Sand Point Services, LLC ) ASBCA Nos. 61819, 61820
)
Under Contract No. NNG14WA50C )
APPEARANCES FOR THE APPELLANT: Traeger Machetanz, Esq.
Nathan W. Rouse, Esq.
· Davis Wright Tremaine LLP
Seattle, WA
APPEARANCES FOR THE ·GOVERNMENT: Scott Barber, Esq.
NASA Chief Trial Attorney
David S~ Schuman, Esq.
Trial Attorney
NASA Goddard Space Flight Center
Greenbelt, MD
OPINION BY ADMINISTRATIVE JUDGE SWEET ON THE GOVERNMENT'S
MOTION TO DISMISS AND/OR FOR SUMMARY JUDGMENT
These appeals involye disputes arising out of a contract between the National
Aeronautics & Space Administration (NASA or government) and appellant Sand Point
Services, LLC (SPS) to repair the Wallops Flight Facility's aircraft parking apron. SPS
alleges that it incurred extra costs and encountered delays as a result of a differing site
condition-namely unsuitable soil. It also alleges that NASA constructively changed
the contract when it waived minor deviations from the contract specifications, and then
insisted upon strict compliance with those specifications. Further, SPS alleges, that
insistence upon strict compliance with the specifications resulted in economic waste.
NASA moves to dismiss, arguing that we lack jurisdiction because the contracting
officer's (CO's) final decision (COFD) was based upon a suspicion of fraud. In the
alternative, NASA moves for summary judgment, arguing that SPS admitted that its
failure to comply with the contract was the fault of Atlantic Contracting and Material,
Inc. (ACM)-SPS's subcontractor. Moreover, NASA argues that a bilateral modification
released SPS's differing site condition claim.
For the reasons discussed below, we deny the motion to dismiss because the
COFD was not based solely upon a suspicion of fraud, and we may resolve these appeals
without making factual determinations of fraud. We also deny NASA's motion for
summary judgment. SPS did not admit that the failure to comply with the specifications
was ACM' s fault, and that issue is not material to SPS' s constructive change and waste
appeal. Further, there are genuine issues of material fact as to whether SPS signed the
modification under duress.
STATEMENT OF FACTS (SOF) FOR PURPOSES OF THE MOTIONS
I. The 5OC Contract
1. On September 8, 2014, NASA entered into Contract No. NNG14WA50C
(50C Contract) with SPS to repair the Wallops Flight Facility's aircraft parking apron
(R4, tab 1 at 1-2, 4, tab 3 at 3).
2. Under the 50C Contract, certain soils were ,unsatisfactory for this project (R4,
tab 66 at 83). The 50C Contract required that SPS remove and replace unsatisfactory
soils, as directed by the CO (id. at 84).
3. The 50C Contract also required SPS to obtain a bond (R4, tab 1 at 4).
JI. Performance
4. On September 9, 2014, SPS obtained a bond from a surety (R4, tab 74, ex. 6).
5. On June 9, 2015, SPS sent NASA a Request for Information (RFI), which
indicated that SPS had encountered unsuitable soil. The RFI presented two options to
address the problem, and sought NASA's guidance. (R4, tab 66 at 86)
6. On June 11, 2015, and July 6, 2015, NASA sent SPS Requests for Proposals
(RFPs) concerning soil removal (R4, tab 66 at 91, 140).
7. In response, SPS submitted a proposal on July 13, 2015, and revised proposals
on July 21, 2015, and July 27, 2015 (R4, tab 66 at 144-70).
8. On August 12, 2015, NASA sent SPS a list of contract violations purportedly
causing delays (R4, tab 18).
9. On August 20, 2015, NASA sent SPS a Show Cause Notice, stating that SPS
failed to perform the SOC Contract within the required time, and requiring SPS to
demonstrate why the contract should not be terminat~d for cause (R4, tab 19 at 1).
10. On August 28, 2015, SPS responded that it had failed to complete performance
on time because NASA had not provided guidance cin how to proceed in light of the
purported differing site condition which was the subject of an RFI submitted on June 9,
2015 (R4, tab 22 at 2).
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11. By letter dated September 4, 2015, NASA responded that a differing site
condition did not cause the delays (supp. R4, tab 2 at 1).
12. After further exchanges, NASA wrote to SPS requesting that it execute
Modification No. 000002. The letter stated that not signing Modification No. 000002
"will leave the Government no choice but to continue with termination for default
proceedings." (R4, tab 25 at 1-2)
13. On September 16, 2015, SPS signed Modification No. 000002 (R4, tab 28
at 1). Modification No. 000002 changed the scope of the contract at no additional cost
to NASA, and extended the completion date (id. at 2). Modification No. 000002 also
contained the following release:
In consideration of the modification agreed herein as
complete equitable adjustment for the Contractor's
proposal for adjustment dated June 19, 2015, July 27,
2015, and August 19, 2015 in response to [the RFPs] ... and
all claims related to this project; the Contractor hereby
releases the Government from any and all liability under.
this Contract for further equitable adjustments attributable
to such facts or,circumstances giving rise to the items
described herein.
(Id. at 2-3)
14. On November 4, 2015, ACM notified NASA that it had completed major
concrete paving operations, and requested a punch list (R4, tab 67 at 35).
15. On December 4, 2015, NASA provided a punch list. The punch list noted,
inter alia, that the concrete texture and the mooring eyes did not meet the specifications.
(R4, tab 67 at 40) NASA required completion of all punch list items within 45 calendar
days. NASA also stated that final acceptance and payment were predicated upon
successful punch list completion. (Id. at 37)
16. SPS requested variances from the concrete texture and mooring eyes
specifications. NASA took the request regarding the concrete texture under advisement.
Regarding the mooring eyes, NASA stated that the request would require an aircraft
tie-down hook inspection. NASA further stated that "[i]fthe mooring eyes are found to
be good enough to be used in some fashion then only a credit will be needed for the
improperly installed eyes." (R4, tab 67 at 278, supp. R4, tab 10)
17. 'On January 21, 2016, SPS sent NASA an email indicating that the mooring
eyes had been hook tested, and NASA had accepted those results (R4, tab 67 at 107).
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NASA responded that "[a]ll mooring eyes can be hooked. Mooring eyes are not installed
within tolerance per plan." (Id. at 106) ·
18. On May 12, 2016, the CO sent SPS an email inquiring about the punch list
status. In particular~ the CO stated that "[i]t is immaterial if the mooring eyes can be used
for tie-downs as they are tripping hazards and fail to meet the contract requirement of
within a 1/4 [inch] to flush with the surface." (R4, tab 67 at 404, Item No. 67) Regarding
the concrete texture, the CO indicated that SPS either had to correct the surface, or
provide a credit (id. at 401-02, Item Nos. 2, 19).
19. The parties exchanged multiple correspondence regarding punch list
completion (R4, tab 67 at 411-588). SPS proposed addressing the mooring eyes with
grinding, or the addition of plates (icl. at 460-61, 471). SPS also insisted that the concrete
texture was functional, even though it did not strictly comply with the specifications (id.
at 438, 470).
III Miller Act Action
20. On January 12, 2017, ACM filed an action in Federal District Court seeking
compensation under the bond from SPS' s surety due to SPS' s failure to pay ACM
pursuant to 40 U.S.C. Title 3131, et seq (Miller Act Action) (R4, tab 74, ex. 6). The
Miller Act Action complaint alleged that "[u]pon information and belief, [SPS] has
entered into an Agreement with NASA whereby [SPS] waived any right to recovery
for the delays that were encountered by" ACM (id.; see also R4, tab 62 at2, 8).
ACM makes no allegation as to whether that release is enforceable, or whether SPS
executed the release under duress (id.).
20. On February 27, 2017, SPS moved to intervene, and to dismiss or stay the
Miller Act Action.· SPS argued that the Miller Act Action was premature because ACM
had not "completed its subcontract work to NASA's satisfaction." (R4, tab 74, ex. 7)
22. In support of the motion, Christopher Woodruff-SPS 's General
Manager-submitted a declaration (R4, tab 74, ex. 8, Woodruff decl.). Mr. Woodruff
declared that ACM had not performed to NASA's satisfaction, stating that "ACM's
subcontract work has not yet been completed, nor has ACM's subcontract work been
accepted by NASA. To the contrary, NASA has rejected portions of ACM's subcontract
work as nonconforming to the contract requirements." (Id. at 2) Likewise, Mr. Woodruff
declared that "ACM has acknowledged the nonconformity of the ACM subcontract work
rejected by NASA, and has agreed to correct the NASA rejected work" (id.). After
discussing how SPS had submitted a Corrective Work Plan, Mr. Woodruff declared that
"ACM has not fully and duly performed its subcontract work under the terms of the
ACM subcontract" (id. at 4). Mr. Woodruff did not declare that the deficiencies were
ACM's fault (id. at 2-4). On the contrary, Mr. Woodruff-declared that there was a
differing site condition that impacted time and costs (id. at 4).
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IV. Procedural History
(
· 23. On October 27, 2017, SPS submitted a Request for Equitable Adjustment
(REA), seeking compensation for the alleged differing site condition of unsuitable soil
(R4, tab 66 at 1, 7-10).
24. On January 19, 2018, SPS submitted an REA seeking compensation for an
alleged constructive change and economic waste regarding the punch list items (R4,
tab 67).
25. By letters dated June 5, 2018, SPS notified the CO that it was converting its
REAs into certified claims, and provided certifications (R4, tabs 69-70).
. 26. On September 19, 2018, the CO issued a COFD (R4, tab 74). First, the CO
stated that SPS released the differing site condition claim in Modification No. 000002,
and that a differing site condition did not cause increased costs or delays (id. at 1-2).
Second, the CO rejected SPS's constructive change and waste claim on the grounds
that pilot safety required compliance with the specifications, and the project was not
functional (id. at 2-3). Finally, the CO stated that the claims appeared fraudulent
because Mr. Woodruff admitted in the Miller Act Action that ACM failed to perform
in accordance with the specifications (id. at 3-5).
27. There is no evidence that the CO referred the matter to the agency official
responsible for investigating fraud.
28. SPS filed a notice of appeal and complaint, which we docketed as ASBCA
No. 61819 (constructive change and waste appeal). In that appeal, SPS admits that the
concrete texture and mqoring eyes were deficient, but alleges that those deficiencies
involved "minor issues" (compl. , 69). Moreover, SPS alleges that NASA constructively
changed the contract when it waived strict compliance with the specifications by accepting
the concrete texture and the mooring eyes, but then insisted upon strict compliance with
the specifications (id. at 57-66). SPS also alleges that insisting upon strict compliance
with the specifications caused economic waste because the concrete texture and mooring
eyes "did not fall within the specified tolerances under the contract but were otherwise
fully functional" (id. at 17, 67-76).
29. SPS also filed a separate notice of appeal and complaint, which we docketed
as ASBCA No. 61820 (differing site condition appeal). In that appeal, SPS concedes
that there were delays, but alleges that those delays were due to NASA's failure to
provide directions after SPS notified it of a differing site condition (compl. ,, 34-4~).
3 0. Discovery has not commenced yet.
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DECISION
I NASA's Motion to Dismiss
We deny NASA's motion to dismiss because we possess jurisdiction over these
appeals. A valid COFD is a prerequisite for Contract Disputes Act (CDA) jurisdiction,
PROTEC, GmbH, ASBCA Nos. 61161, 61162, 61185, 18-1 BCA ,r 37,010 at 180,244,
and an agency does not have the authority to settle, compromise, pay, or otherwise
adjust any claim involving fraud. 41 U.S.C. § 7I03(c)(1). However, "[t]he Board does
have jurisdiction under the CDA to decide the contract rights of the parties even when
fraud has been alleged." SIA Constr., Inc., ASBCA No. 57693, 14-1 BCA ,r 35,762
at 174,984 (quoting Pub. Warehousing Co. K.S.C., ASBCA No. 58078, 13 BCA ,r 35,460
at 173,896). In particular, "[t]hat fraud allegedly may have been practiced in the drafting
or submission of... [a] claim does not deprive this Board of jurisdiction under the CDA."
Nexus Constr. Co., ASBCA No. 51004, 98-1 BCA ,r 29,375 at 146,017 (citing Anlagen
und-Sanierungstechnik GinbH, ASBCA No. 37,878, 91-3 BCA ,r 24,128 at 120,753).
We possess jurisdiction when a COFD is not based so~ely upon a suspicion of fraud.
Daffv. United States, 78 F.3d 1566, 1572 (Fed. Cir. 1996); PROTEC, 18-1 BCA ,r 37,010
at 180,244. Moreover, we possess jurisdiction over an appeal if we do not have to make
factual determinations of fraud. Laguna Constr. Co., Inc. v. Carter, 828 F.3d 1364,
1368-69 (Fed. Cir. 2016); SIA Constr., 14-1 BCA ,r 35,762 at 174,985.
Here, the CO's assertion that SPS's claims involve fraud is undermined by the
fact that she did not refer the matter to the agency official responsible for investigating
fraud (SOF ,r 27), which she would have been obligated to do if she concluded that there
was evidence of fraud. PROTEC, 18-1 BCA ,r 37,010 at 180,244 (citingFAR33.209).
Further, the COFD is not based solely upon a suspicion of fraud (SOF ,r 26).
In addition, we do not have to make factual determinations of fraud to resolve
these appeals, We do not have to determine whether any incorrect statements were
made knowingly and with the intent to deceive. SIA Constr., 14-1 BCA ,r 35,762
at 174,984 (quoting Pub. Warehousing, 13 BCA ,r 35,460 at 173,896). Indeed, we need
not even have to make a factual determination as to whether any statement in the claims
were incorrect. The statements in the claims that the CO found were incorrect were
those that purportedly were inconsistent with Mr. Woodruffs declaration that ACM
failed to perform in accordance with the specifications. (SOF ,r 26) For purposes of
this appeal, SPS concedes that it and ACM did not perform in accordance with the
specifications, (SOF ,r,r 28-29). In particular, ln its differing site condition appeal, SPS
admits performance delays, but-consistent with Mr. Woodruffs declaration-asserts
that those delays were due to a differing site condition (SOF ,r,r 22, 29). Moreover, in
its constructive change and waste appeal, SPS concedes that the concrete texture and
mooring eyes did not meet the specifications, but asserts that those defects were minor,
NASA waived strict compliance with those specifications, and enforcing those
specifications would result in economic waste (SOF ,r 28). Because we need not make
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factual determinations of fraud to resolve those arguments, we possess jurisdiction over
these appeals.
II NASA's Motion for Summary Judgment
A. Standard ofReview
Summary judgment is appropriate only if there is no genuine issue as to any
material fact, and the moving party is entitled to judgment as a matter of law. Celot~x
Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). A material fact is one 'that may affect the
outcome of the decision. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986).
There is a "genuine" dispute as to such a fact if "the evidence is such that a reasonable
[fact-finder] could return a verdict for the nonmoving party." Id.
B. $PS Did Not Admit That Non-Performance Was its Fault
NASA is not entitled to judgment as a matter of law on SPS 's claims on the
grounds that Mr. Woodruff admitted that non-performance was ACM' s fault (gov't mot.
at 15-16). While Mr. Woodruff concededthat ACM did not perform in accordance with
the specifications, he did not declare that that failure was ACM' s fault (SOF ,r 22).
Regarding the differing site condition appeal in particular, Mr. Woodruff specifically
declared that a differing site condition caused delays and increased costs (SOF ,r 22).
Therefore, Mr. Woodruff s declaration is consistent with the allegations in the differing
site condition appeal. Regarding the constructive change and waste appeal, Mr. Woodruff
did not admit that the deficient concrete texture and mooring eyes were ACM' s fault
(SOF ,r 22). Even ifhe had, that admission would not dispose of the constructive change
and waste appeal. That is because on appeal, SP S's argument is that, even if it was
ACM' s fault that the concrete texture and mooring eyes did not meet the specifications,
NASA waived strict compliance with those specifications, and strict enforcement of those
specifications would result in economic waste (SOF ,r 28). Therefore, not only does
Mr. Woodruff s declaration fail to establish a lack of a genuine dispute as to whether the
concrete texture and mooring eyes defects were ACM' s fault, that issue is not material to
this appeal. 1
C. There Is a Genuine Issue ofMaterial Fact as to Whether SPS Released its
Differing Site Condition Claim
1
NASA incorrectly argues that we should defer to the CO's fact findings (gov't mot.
at 16; gov't reply br. at 1-2). Our ''jurisdiction is de novo and the CO's findings
are not subject to any presumption of correctness nor are they binding on
appeal." AeroVironment, Inc:, ASBCA Nos. 58598, 58599, 16-1 BCA ,r 36,337
at 177,178 (citing Wilner v. United States, 24 F.3d 1397, 1401-03 (Fed. Cir.
1994) (en bane)).
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Nor is NASA entitled to judgment as a matter of law on the grounds that
Modification No. 000002 released the differing site condition claim because there is a
genuine issue of material fact as to whether SPS signed Modification No. 000002 under
duress. A release is the product of duress-and therefore is not enforceable-when (1) a
person compels another to as~ent to a release against his will; (2) such assent is induced by
wrongfully threatening action the person has no legal right to take; and (3) the threatened
action, if taken, will cause irreparable damage to the other person. Enviro. Tectonics
Corp., ASBCA No. 23374, 86-1BCA118,649 at 93,784. "It is not duress to threaten to
make good faith use of the remedies prescribed under the contract." Id. at 93,782 (quoting
Johnson, Drake & Piper, Inc. v. United States, 209 Ct. Cl. 313 (1976)). However, the
government must have a good faith belief that it is entitled to take the threatened action.
Id. at 93,782-83; see also Urban Plumbing & Heating Co. v. United States, 408 F.2d 382,
388-92 (Ct. Cl. 1969). Moreover, the government's actions-even if authorized by the
contract-cannot violate ~otions of fair dealing. Enviro. Tectonics, 86-1BCA118,649
at 93,784-85. ·
Here, it is premature to decide the factual issue of whether NASA's threat to
terminate the contract was made in good faith, or violated notions of fair dealing. 2
Resolution of those issues involve fact-intensive inquiries. Id. at 93,785. However,
discovery has not even commenced in these appeals (SOF 1 30). Therefore, we deny
NASA's motion for summary judgment. See FED. R. CIV. P. 56(d). 3
CONCLUSION
NASA's motion to dismiss and its motion for summary judgment are denied .
. Date: August 5, 2019
Administrative Judge
Armed Services Board
of Contract Appeals
(Signatures continued)
2
Likewise, it is premature to decide the factual issue of whether there was economic
waste (gov't mot. at 22-26).
3
NASA's assertion that ACM took the position in the Miller Act Action that
Modification 000002 was binding is inaccurate (gov't reply br. at 6). While
acknowledging that NASA signed a release, ACM made no allegation as to
whether that release was enforceable, or whether SPS signed it under duress
(SOF 120).
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I concur I concur
RICHARD SHACKLEFORD OWEN C. WILSON
Administrative Judge Administrative Judge
Acting Chaimian Vice Chairman
Armed Servic~s 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 ofContractAppea1s in ASBCA Nos. 61819, 61820, Appeals of
Sand Point Services, LLC, rendered in conformance with the Board's Charter.
Dated:
PAULLAK. GATES-LEWIS·
Recorder, Armed Services
Board of Contract Appeals
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