Precision Standard, Inc. ( 2015 )

ARMED SERVICES BOARD OF CONTRACT APPEALS
Appeal of -- )
)
Precision Standard, Inc. ) ASBCA No. 59116)
Under Contract No. SPM4A7-08-M-B239 )
APPEARANCE FOR THE APPELLANT: Nancy M. Camardo, Esq.
Camardo Law Firm, P.C.
Auburn, NY
APPEARANCES FOR THE GOVERNMENT: Daniel K. Poling, Esq.
DLA Chief Trial Attorney
Robert E. Sebold, Esq.
Trial Attorney
DLA Aviation
Richmond, VA
OPINION BY ADMINISTRATIVE JUDGE HARTMAN
ON THE GOVERNMENT'S MOTION FOR SUMMARY JUDGMENT
The government moves for summary judgment, asserting that its contracting
officer (CO) appropriately terminated appellant's contract for default because
Precision Standard, Inc. (PSI) was delinquent in submitting the contractually required
first article and PSI has provided no evidence of excusable delay. Appellant asserts
the government's motion should be denied because there are genuine issues of material
fact regarding: ( 1) why the CO did not exercise her discretion to terminate the
contract at "no cost" and (2) why its lack of delivery of the first article here was not
"excusable." According to PSI, it could not schedule the quality assurance
representative (QAR) inspection necessary for first article delivery due to QAR
scheduling problems arising from the "sequester" and furlough of government
employees.
STATEMENT OF FACTS FOR PURPOSES OF THE MOTION
In June 2008, the Defense Supply Center, Richmond (which has been renamed
Defense Logistics Agency Aviation), a field activity of the Defense Logistics Agency
(DLA), awarded a contract, No. SPM4A7-08-M-B239, for the supply of 32 aircraft
"formers" for A-10 aircraft, National Stock Number (NSN) 1560-01-553-7553, part
number 160414007-74, to appellant, PSI (R4, tab 1at1, 3). Aircraft "formers" are a
"CRITICAL APPLICATION ITEM," where "failure ... could injure personnel or
jeopardize a vital agency mission" (R4, tab 1 at 5; Federal Acquisition Regulation
(FAR) 46.203(c)).
The parties' contract required PSI to submit a first article for testing by the
Engineering Support Activity (ESA) for the A-10 aircraft program at Hill Air Force
Base in Ogden, Utah (R4, tab 1 at 4-5, 10, 13-14). The first article was due 9 February
2009, and ESA had 120 days to evaluate that article. If ESA approved the article, the
production quantity of 32 was due 200 days after the approval. (R4, tab 1 at 2, 9)
The parties' contract incorporated by reference various standard clauses,
including FAR 52.209-4, FIRST ARTICLE APPROVAL - GOVERNMENT TESTING
(SEP 1989); and FAR 52.249-8, DEFAULT (FIXED-PRICE SUPPLY AND SERVICE)
(APR 1984). (R4, tab 1at15; FAR 52.252-2, CLAUSES INCORPORATED BY REFERENCE
(FEB 1998)) The initial clause states:
(a) The Contractor shall deliver _ _ unit(s) of
Lot/Item _ _ within _ _ calendar days from the date of
this contract to the Government at [insert name and
address of the testing facility] for first article tests ....
(b) Within _ _ calendar days after the
Government receives the first article, the Contracting
Officer shall notify the Contractor, in writing, of the
conditional approval, approval, or disapproval of the first
article ....
( c) If the first article is disapproved, the Contractor,
upon Government request, shall submit an additional first
article for testing .... The Contractor shall furnish any
additional first article to the Government under the terms
and conditions and within the time specified by the
Government ....
( d) If the Contractor fails to deliver any first article
on time, or the Contracting Officer disapproves any first
article, the Contractor shall be deemed to have failed to
make delivery within the meaning of the Default clause of
this contract.
The latter clause states:
(a)(l) The Government may, subject to paragraphs
(c) and (d) of this clause, by written notice of default to the
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Contractor terminate this contract in whole or in part ifthe
Contractor fails to -
(i) Deliver the supplies ... within the time
specified in this contract or any extension;
(c) [Unless] the failure to perform the contract
arises from causes beyond the control and without the fault
or negligence of the Contractor.
PSI did not submit the first article by its due date, 9 February 2009 (R4, tab 8
at 6). Over three months after the due date, on 21May2009, PSI submitted a first
article but material certifications, as well as process specifications for the passivate
and heat treatment, were missing (R4, tab 8 at 6-21, tab 9 at 1-2). When PSI did not
respond to requests for the missing materials, ESA disapproved the first article (R4,
tab 10). By letter dated 17 November 2009, DLA's CO advised PSI that ifit paid
extra costs incurred for government testing and offered DLA some other consideration
for its contractor-caused delay, it could re-submit the disapproved first article after it
had corrected the following discrepancies:
1. Print requirement is .32 R +/- .03; Actual measurement
is one side is .28[,] the other is .32.
2. As per the contract page 4 item numbers 4, and 5
require that all material certs, and process certs and
purchase orders; None were sent with the First Article,
and these certifications were requested again through
the DLA contracting office. The contractor sent none
of the requested certifications.
The CO added that, on resubmission of the first article, a new delivery date would be
established and memorialized in a contract modification. The CO further advised that
PSI could alternatively: ( 1) submit a rebuttal letter regarding the first article test for
review by both DLA and ESA or (2) request a no-cost cancellation/termination of the
parties' contract and, if the request was acceptable to DLA, the parties' contract would
be "cancelled or terminated." The CO stated PSI shall respond to her letter within
ten workdays after receipt of her letter and, if it did not, the "contract may be cancelled
or terminated without further notification." (R4, tab 10)
PSI submitted a rebuttal in January 2010 asserting, among other things, that it
rejected any "no-cost" termination; the disparity in first article dimension could be
readily corrected in production at minimal cost; and the sole material certification was
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attached to the test report it submitted with the first article. It did not, however,
furnish a copy of that certification (R4, tabs 13, 16). In June 2011, DLA's CO gave
PSI the opportunity to submit a second first article and propose a revised delivery
schedule for the contract (R4, tab 17 at 2).
By bilateral contract Modification No. POOOOl executed 18 December 2012, the
parties established a new delivery date of 22 January 2013 for the first article (R4,
tab 2 at 1-2, tabs 18, 19). PSI, however, did not submit a second first article by the
specified date (R4, tab 21 ).
By letter dated 29 July 2013, DLA's CO sent PSI a letter stating she was
considering terminating the parties' contract for default and PSI was being given the
opportunity to present facts bearing on the question within ten days after receipt
(R4, tab 21). While PSI received the CO's letter, it did not respond within the time
specified (R4, tabs 22, 23).
DLA, however, provided PSI a third opportunity to submit a first article. By
bilateral contract Modification No. P00002, the parties established a new delivery of
18 October 2013 for the first article. The parties also modified their contract to provide:
[I]fthe First Article re-submission is not delivered by the
date ... [due] or ifthe First Article is disapproved, (second
disapproval), this contract may be terminated in its entirety
at no cost to the Government.
(R4, tab 3)
PSI again failed to submit a first article by the specified date (R4, tab 23 at 3,
tab 24). By final decision dated 13 December 2013, DLA's CO notified PSI that its
contract was "terminated for default effective immediately" based on its "failure to
perform in accordance with the terms and conditions of the contract, specifically your
failure to deliver the supplies in accordance with the established delivery schedule"
(R4, tabs 4, 25). PSI timely appealed the CO's decision to this Board.
DLA filed a motion for summary judgment in the appeal. PSI filed an
opposition to DLA's motion asserting, among other things, that it was delayed in
submitting a first article due to unavailability of an inspector and appending an
affidavit from its chief operating officer providing in pertinent part:
The Government, in its Motion, attempts to allege that the
only effect that the sequester would have on the inspection
was during the five-day furlough period, occurring
between October 1 through October 5, 2013. However,
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what the Motion failed to note [was] that the sequester
affected a time period far beyond those date[ s]. For a
number of months the QARs were allowed to work only
four days a week. This made scheduling inspections
significantly more difficult. This difficulty is exacerbated
by the fact that each QAR services numerous contractors
and contract[]s.
(App. resp., aff. at 3, ii 7) Nowhere in the affidavit, however, does the affiant state that
he or anyone else from PSI ever actually attempted to schedule an inspection of the first
article with a QAR (id. at 1-3). DLA appended to its reply an affidavit from a quality
assurance specialist with the Defense Contract Management Agency in Detroit,
Michigan, who was assigned to PSI between September and December of 2013 stating:
During the September through December of 2013 time
frame I was in Precision Standard's facility for several
different business matters and had no knowledge that the
first article test for contract SPM4A7-08-M-B239 was
ready for inspection. To the best of my knowledge this
first article test was never presented to the government for
inspection.
(Gov't reply, decl. ii 2)
DECISION
DLA terminated PSI's contract for default based upon a failure to deliver the
first article by the contractually specified date. It seeks summary judgment that its
default termination was proper based upon the fact it is undisputed that PSI did not
deliver the first article by its due date. (Gov't mot. at 2; compl. ii 16(c))
The standards set forth in FED. R. C1v. P. 56 guide us in resolving summary
judgment motions. J W Creech, Inc., ASBCA Nos. 45317, 45454, 94-1 BCA
ii 26,459 at 131,661; Allied Repair Service, Inc., ASBCA No. 26619, 82-1 BCA
ii 15,785 at 78,162-63; Board Rule 7(c)(2). We will grant a summary judgment
motion only if pleadings, depositions, interrogatory answers, and admissions on file,
together with any affidavits or other evidence, show that there is no genuine issue as to
any material fact, and the moving party is entitled to judgment as a matter of law.
DLA, the party here seeking summary judgment, has the burden of demonstrating both
ofthese elements. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Mingus
Constructors, Inc. v. United States, 812 F.2d 1387, 1390 (Fed. Cir. 1987); Comptech
Corp., ASBCA No. 55526, 08-2 BCA ii 33,982 at 168,082. PSI, who is the
nonmoving party, is entitled to have all reasonable inferences drawn in its favor.
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Celotex Corp., 477 U.S. at 322-24; Elekta Instrument SA. v. 0. UR. Scientific Int'!,
Inc., 214 F.3d 1302, 1306 (Fed. Cir. 2000).
It is well established that a default termination is a drastic sanction, which
should be imposed and sustained only upon "good grounds and on solid evidence."
E.g., Lisbon Contractors, Inc. v. United States, 828 F.2d 759, 765 (Fed. Cir. 1987);
J.D. Hedin Constr. Co. v. United States, 408 F.2d 424, 431 (Ct. Cl. 1969). Contract
provisions authorizing termination for default are a species of "forfeiture" and are to
be strictly construed. De Vito v. United States, 413 F.2d 1147, 1153 (Ct. Cl. 1969);
King v. United States, 37 Ct. Cl. 428, 434 (1902). DLA bears the burden of proving
that a termination for default was justified. Once DLA has established a prima facie
case in that regard, the burden of production - or of going forward - shifts to PSI.
DCX, Inc. v. Perry, 79 F.3d 132, 134 (Fed. Cir.), cert. denied, 519 U.S. 992 (1996);
Lisbon Contractors, Inc., 828 F.2d at 764-65; Hanley Indus., Inc., ASBCA No. 56584,
14-1BCA~35,699 at 174,812.
The parties' contract expressly provides that DLA may "by written notice of
default to [PSI] terminate this contract in whole or in part if [PSI] fails to - (i) Deliver
the supplies ... within the time specified in this contract or any extension," unless "the
failure to perform the contract arises from causes beyond the control and without the
fault or negligence of [PSI]." FAR 52.249-8( a)( 1), (c). DLA has shown, and it is
undisputed, that PSI did not deliver the First Article by the contractually specified
date. DLA, thus, has made a prima facie demonstration that its default termination
was justified and the burden of production shifts to PSI to show "excusability."
See DCX, 79 F.3d at 134; Hanley Indus., 14-1 BCA ~ 35,699 at 174,812; Capy Mach.
Shop, Inc., ASBCA No. 59085, 14-1BCA~35,783 at 175,044.
PSI contends that its failure to submit the first article by the contractually-agreed
date was excusable because it had the article "test and report ready for QAR
inspection/approval before the due date of October 18, 2013 ," but "was unable to have the
inspection performed by the due date, or at anytime shortly thereafter," due to the
"sequester." According to PSI, because its contract had a "C" rating (the lowest in terms of
priority) and QARs were only working four days a week, the scheduling of its inspection
was made more difficult. (App. resp. at 10-11) As support for these contentions, PSI
submitted an affidavit from its chief operating officer providing:
The Government, in its Motion, attempts to allege that the
only effect that the sequester would have on the inspection
was during the five-day furlough period, occurring
between October 1 through October 5, 2013. However,
what the Motion failed to note [was] that the sequester
affected a time period far beyond those date[ s]. For a
number of months the QARs were allowed to work only
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four days a week. This made scheduling inspections
significantly more difficult. This difficulty is exacerbated
by the fact that each QAR services numerous contractors
and contract[]s.
(App. resp., aff. at 3) Nowhere in the affidavit however does the affiant state that he
or anyone else from PSI ever actually attempted to schedule an inspection of the First
Article with a QAR (id. at 1-3 ).
DLA asserts there is no evidence of the government delaying PSI in obtaining
an inspection of a First Article during fall 2013. It notes that PSI does not offer any
evidence in the form of an email or other correspondence that it attempted to schedule
an inspection. DLA also appends to its reply a declaration from the quality assurance
specialist with the Defense Contract Management Agency in Detroit, Michigan, who
was assigned to PSI between September and December of 2013, stating:
During the September through December of 2013 time
frame I was in Precision Standard's facility for several
different business matters and had no knowledge that the
first article test for contract SPM4A7-08-M-B239 was
ready for inspection. To the best of my knowledge this
first article test was never presented to the government for
inspection.
(Gov't reply, decl. ii 2)
PSI may not rest upon vague, unsupported allegations of a delay in government
inspection of the First Article to defeat DLA's summary judgment motion. "The very
mission of the summary judgment procedure is to pierce the pleadings and to assess
the proof in order to see whether there is a genuine issue for trial." Penn Screw and
Machine Works, Inc., ASBCA No. 32382, 89-3 BCA ii 22,205 at 111,694. Based on
our examination of the evidence presented and cited in response to DLA's motion, and
drawing all reasonable inferences in favor of PSI, the nonmovant, we conclude PSI has
failed to show that a reasonable fact finder could decide PSI was delayed in obtaining
a First Article inspection as a result of the sequester when there is no evidence PSI
requested such an inspection prior to its contractually-required delivery date. See
DCX, Inc., 79 F.3d at 134 (no evidence actual contractor inspection delayed to meet
requirements of higher priority contracts; contractor thus failed to meet burden to show
excusable delay in inspection); Mingus Constructors, 812 F.2d at 1390-91 (party
opposing summary judgment must show an evidentiary conflict on record; mere
denials or conclusory statements are insufficient).
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PSI further contends in opposition to DLA's motion that, by entering into
bilateral Modification No. P00002 extending the First Article delivery date, DLA
represented a no-cost termination could be issued if PSI failed to timely deliver and
PSI consented to a "no-cost termination" (app. resp. at 9-10). PSI argues that there are
"[m]aterial questions of fact" in this appeal "whether the Government even considered
a no-cost termination for convenience as promised in the agreed-upon Modification
P00002," which require the factual record be more fully developed concerning the
reasonableness of the COs' action and which preclude grant of summary judgment to
DLA (id.).
DLA argues that the CO's actions were wholly consistent with the language of
contract Modification No. P00002 and that there are no genuine issues of material fact
regarding compliance with that modification because the question of whether the
language in the modification precluded the CO from terminating the contract for default
is a question of "law," not a question of "fact." According to DLA, contract Modification
No. P00002 simply authorizes the parties' contract to be terminated in its entirety "at no
cost to the Government," not at no cost to PSI. (Gov't reply hr. at 3-5)
DLA is correct that contract interpretation is a question of law and therefore
amenable to resolution by motion for summary judgment. E.g., Sevenson
Environmental Servs., Inc. v. Shaw Environmental, Inc., 477 F.3d 1361, 1364 (Fed.
Cir. 2007); P.J Maffei Building Wrecking Corp. v. United States, 732 F.2d 913, 916
(Fed. Cir. 1984). We interpret a contract in accordance with its express terms and
begin with the plain language of that agreement. E.g., C. Sanchez & Son, Inc. v.
United States, 6 F.3d 1539, 1543 (Fed. Cir. 1993); Gould, Inc. v. United States, 935
F.2d 1271, 1274 (Fed. Cir. 1991). If the "provisions are clear and unambiguous, they
must be given their plain and ordinary meaning." E.g., United Int'! Investigative
Servs. v. United States, 109 F .3d 734, 73 7 (Fed. Cir. 1997); Alaska Lumber & Pulp
Co. v. Madigan, 2 F.3d 389, 392 (Fed. Cir. 1993).
Modification No. P00002 to the parties' contract expressly provides that, "ifthe
First Article re-submission is not delivered by the date [due] ... , this contract may be
terminated in its entirety at no cost to the Government" (emphasis added). While PSI
appears to desire a termination of the contract for the convenience of the government
that would result in no cost to PSI, the modification does not require a termination at
no cost to PSI if PSI fails to deliver by the due date. Nor does it mention a termination
for the convenience of the government. By its plain language, it simply authorizes a
termination which results in no cost to DLA. A termination for default is such a
termination and clearly within the express terms of the contract modification. See
Lockheed Martin IR Imaging Sys., Inc. v. West, 108 F.3d 319, 322 (Fed. Cir. 1997)
(words of a contract are deemed to have their ordinary meaning); Churchill Chemical
Corp. v. United States, 602 F.2d 358, 362 (Ct. Cl. 1979) (it is well established that a
contract may be terminated for default pursuant to default clause if contractor fails to
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comply with the delivery schedule); Artisan Electronics Corp. v. United States, 499
F .2d 606, 611 (Ct. Cl. 197 4) (default may lie even where an incremental delivery date
is missed); Environmental Devices, Inc., ASBCA No. 37430 et al., 93-3 BCA ii 26,138
at 129,934 (if parties execute modification establishing new delivery date, contractor
must deliver by new date unless delayed by excusable causes arising after contract
modification execution).
PSI asserts additionally that FAR 49.101 (b) mandates the CO effect a no-cost
settlement instead of a termination for default where it is known the contractor will
accept one, no government property was furnished the contractor, and there are no
outstanding payments or debts that the contractor owes the government, as PSI asserts
is the case here, and there are "[ m]aterial questions of fact" in this appeal whether
DLA "considered a no-cost termination for convenience." We have held, however,
that the government, i.e., DLA, "owes no duty to contractors" to terminate contracts in
default for the "convenience of the government," which generally results in the
government having to pay monies to the contractor for the costs that the contractor has
incurred. Contact Int'! Corp., ASBCA No. 44636, 95-2 BCA ii 27,887 at 139,119,
aff'd, 106 F.3d 426 (Fed. Cir. 1996) (table); Rotair Indus., Inc., ASBCA No. 27571,
84-2 BCA ii 17,417 at 86,749-51; see generally FAR 49.20l(a).*
Moreover, it is well established a fact is "material" only if it may affect the
outcome, i.e., the finding of that fact is relevant and necessary to the proceeding. A
genuine dispute arises regarding that material fact if sufficient evidence is presented
that a reasonable fact finder could decide that fact in favor of the nonmoving party.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-50 (1986); Opryland USA Inc. v.
Great American Music Show, Inc., 970 F.2d 847, 849-50 (Fed. Cir. 1992). In sum, as
the nonmoving party here, PSI must present sufficient evidence showing that a specific
conflict exists regarding a "material fact." Opryland USA, 970 F.2d at 850; Lemelson
v. TRW, Inc., 760 F.2d 1254, 1261 (Fed. Cir. 1985). PSI, however, has failed to show
that there is any genuinely disputed question of material fact which precludes grant of
summary judgment to DLA here.
* We note that, while PSI asserts FAR 49.101 (b) requires a CO to consider a "no-cost"
settlement instead of a default termination when it is known that the contractor
will accept one and certain other factors exist (app. opp'n at 8), even if we were
to assume PSI's interpretation of FAR 49.lOl(b) was correct, there is no reason
to believe here that the CO thought PSI would accept such a settlement since
PSI expressly rejected such a "no-cost" termination for convenience when it
was previously offered by the CO.
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CONCLUSION
We grant the government's motion for summary judgment. The appeal is
denied.
Dated: 13 July 2015
TERRENCES.HARTMAN
Administrative Judge
Armed Services Board
of Contract Appeals
I concur I concur
//;;?;/ / L ,/ /'
/~~~~~··· RICHARD SHACKLEFORD
Administrative Judge Administrative Judge
Acting Chairman 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. 59116, Appeal of
Precision Standard, Inc., rendered in conformance with the Board's Charter.
Dated:
JEFFREY D. GARDIN
Recorder, Armed Services
Board of Contract Appeals
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