Aerospace Facilities Group, Inc. ( 2020 )

ARMED SERVICES BOARD OF CONTRACT APPEALS
Appeal of -- )
)
Aerospace Facilities Group, Inc. ) ASBCA No. 61026
)
Under Contract No. W912NW-12-C-0035 )
APPEARANCES FOR THE APPELLANT: Theodore P. Watson, Esq.
Watson and Associates LLC
Washington, DC
Wojciech Z. Kornacki, Esq.
Watson & Associates LLC
Denver, CO
APPEARANCES FOR THE GOVERNMENT: Scott N. Flesch, Esq.
Army Chief Trial Attorney
Robert B. Neill, Esq.
MAJ Mark T. Robinson, JA
Trial Attorneys
OPINION BY ADMINISTRATIVE JUDGE MCILMAIL
Appellant, Aerospace Facilities Group, Inc. (AFG), appeals from the
termination of its contract to deliver “paint booth equipment” (for the painting of
helicopters) to the Corpus Christi Army Depot; AFG also seeks breach damages
(app. br. at 1, 32). Only entitlement is before us (tr. 1/7).
STATEMENT OF FACTS
In Aerospace Facilities Grp., Inc., ASBCA No. 61026, 18-1 BCA ¶ 37,105
at 180,602-03, we recited facts that we incorporate here by reference. Familiarity with
that opinion is presumed. In addition, the contract incorporates by reference Federal
Acquisition Regulation (FAR) 52.249-1, TERMINATION FOR CONVENIENCE OF
THE GOVERNMENT (FIXED PRICE) (SHORT FORM) (APR 1984), and
FAR 52.249-8, DEFAULT (FIXED-PRICE SUPPLY & SERVICE) (APR 1984)
(R4, tab 1 at 68). AFG contracted with Global Finishing Solutions (GFS) to obtain the
paint booth equipment required by the contract (see app. br. 1, 6 ¶ 14). On
November 9, 2015, Contracting Officer June Gowen issued the following unilateral
modification, withholding payment of $342,600 under the contract at issue here until
AFG provided four pieces of equipment called “ergo test stands” due under a different
contract between AFG and the government (Contract No. W912NW-12-C-0031),
which were also meant for the Corpus Christi Army Depot:
1. BACKGROUND: Aerospace Facilities Group has
failed to deliver and install four ergo test stands called for
in the specifications of Contract No. W912NW-12-C-0031.
2. ACTIONS TAKEN: Because of this, funding will be
withheld from another Aerospace Facilities Group contract,
W912NW-12-C-0035 until such time as Aerospace
Facilities Group delivers and installs the four ergo test
stands at the Corpus Christi Army Depot. The amount of
$342,600.00 has been moved out of CLIN 0001AA into
new CLIN 0002. This amount will be withheld from
payments in contract W912NW-12-C-0035 until such time
as Aerospace Facilities Group delivers and installs the four
ergo test stands at the Corpus Christi Amount Depot [under
Contract No. W912NW-12-C-0031].
R4, tab 35 at 1 (alteration added)
On January 28, 2016, Ms. Gowen issued a unilateral modification that purports
to incorporate into the contract FAR 52.212-4, CONTRACT TERMS AND
CONDITIONS – COMMERCIAL ITEMS (MAY 2015) (R4, tab 49 at 1). On
March 30, 2016, the parties modified the contract to extend the period of performance
through June 28, 2016 (see R4, tab 92 at 1-3). That modification also provides:
Installation payments were erroneously paid to contractor
prior to installation efforts being performed. All funding
prematurely and erroneously paid on CLINS 0001AF in
the amount of $772,550.48 and 0001AS in the amount of
$837,298.93, totaling $1,609,849.41, shall be returned to
the Government by AFG via credits to all future invoices
until paid in full.
(Id. at 3)
AFG did not deliver the paint booth equipment to the government by the
contract’s June 28, 2016 deadline; indeed, AFG never delivered any of the paint booth
equipment required by the contract (see app. br. at 1; tr. 1/31, 193). On July 8, 2016,
Contracting Officer Peggy Echols issued to AFG an Order to Show Cause, informing
AFG that the government was considering terminating the contract for default (R4,
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tab 133). On July 27, 2016, AFG responded, admitting that it did not deliver the paint
booth equipment on time--even though, according to AFG, the paint booth equipment
had been manufactured and was in AFG’s storage--because, AFG said, the
government had not made a $342,600 payment to AFG:
All of the equipment for contract (W912NW-12-C-0035)
has been manufactured and in our storage since June 2015
awaiting the government to complete the ACCF building
where the equipment is going to be installed. . . . The
equipment delivery date (June 2016) given to AFG by the
government could not be met by [sic] due to the fact that
the government held up the contractual agreed payments of
$304,406.32, so in turn AFG could not fulfill our
contractual agreements with our suppliers.
(R4, tab 157 at 4) AFG admitted to its “failure to perform on this contact [sic],” and
explained that, in its view, that failure was “due to the government issui[ng a h]old on
our contractual payment schedule set up for this contract” (id. at 3-4 (referencing
“AFG failure to perform on this contract”)). Through counsel, AFG reaffirms that
admission, stating that “the cause of the non-delivery” was AFG’s “subcontractor not
getting paid” (app. br. at 14), and that AFG “did not pay their subcontractors”
(tr. 1/79). Indeed, in its post-hearing brief, AFG states:
[AFG] also explained [to the government] that it could not
meet the delivery date imposed by [the government]
because [the government] did not make contractual
payments to [AFG] which prevented [AFG] from making
payments to the sub-contractor.
(App. br. at 11 ¶ 53) (alterations added)
However, AFG could have paid GSF for the paint booth equipment, from
corporate funds. During the hearing of this appeal, AFG’s owner, Dennis Robinson,
read the following from his deposition:
Question: “But you could have paid Global Finishing
Solutions with the money you had in the corporate
account. Correct?” Answer: “Yes.”
(Tr. 2/135, 171) AFG simply decided not to pay GFS because, in AFG’s view, the
government owed AFG money:
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Question: Is the reason why you didn’t pay Global
Finishing Solutions because you believed that the
Government owed you money on those additional invoices
you submitted?
[Mr. Robinson] Yes.
...
Question: So [the Order to Show Cause is] dated July 8,
2016. And so by that date, the final delivery date
established in modification 6 had passed. Did you still not
intend to deliver the paint booths until you received the
payments that you believed were owed under the contract
to you in order to pay Global Finishing Solutions?
[Mr. Robinson] That is correct.
(Id. at 171, 193) Additionally, Mr. Robinson testified that AFG could have paid its
supplier from corporate funds, but chose not to do so because “[AFG] wasn’t going to
be the bank for the government” (id. at 172, 216).
Finally, the government was ready to receive the paint booth equipment when it
was due: on this point, on May 31, 2016, Ms. Echols wrote to AFG that “the
government has identified storage space for the remaining paint booth equipment”
(R4, tab 114). In addition, the judge who presided over the hearing elicited the
following answer to the following question:
JUDGE YOUNG: So does this mean that, even though
there was a concern about storage costs, the Government
was ready to receive equipment?
[Ms. Gowen]: Yes.
(Tr. 1/212)
On August 4, 2016, Ms. Echols issued a modification terminating the contract
for default (using the term “Termination for Cause”), citing FAR 52.212-4(m) and
stating that AFG had “failed to deliver in accordance with the terms of the contract”
(R4, tab 158 at 1-2; see also tab 159 (cover letter to AFG)).
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DECISION
Termination for default
The government says that FAR 52.212-4 is incorporated into the contract by the
Christian doctrine (gov’t br. at 29). We need not address that issue, nor whether
Ms. Gowen’s unilateral modification, purporting to incorporate that clause into the
contract, is a nullity. The contract incorporates FAR 52.249-8, Default, which
provides, at paragraph (a)(1):
The Government may . . . by written notice of default to
the Contractor, terminate this contract in whole or in part if
the Contractor fails to—
(i) Deliver the supplies or to perform the services
within the time specified in this contract or any
extension.
FAR 52.249-8, itself, provides the contractual authority to terminate the contract under
the circumstances of this case. See CKC Sys., Inc., ASBCA No. 61025, 19-1 BCA
¶ 37,385 at 181,749-50.
The government says that the termination is justified because AFG failed to
deliver the paint booth equipment by the contract delivery date (gov’t br. at 1). We
agree. Because AFG did not deliver the paint booth equipment by the contract
completion date, AFG defaulted; consequently, the termination for default is justified.
See Truckla Services, Inc., ASBCA Nos. 57564, 57752, 17-1 BCA ¶ 36,638
at 178,445.
Now it’s up to AFG to demonstrate that its default is excused. HK&S Constr.
Holding Corp., ASBCA No. 60164, 19-1 BCA ¶ 37,268 at 181,352. AFG says that
the government caused the default (including in bad faith) by withholding a $342,600
payment to AFG that AFG says it needed to pay GFS for the paint booth equipment
(app. br. at 1, 12-17, 23-27). We conclude otherwise: AFG is responsible for the
default by not paying GFS for the paint booth equipment, even though it could have
done so out of its corporate funds. ∗ Cf. Puma Energy Honduras, S.A. De C.V.,
ASBCA No. 61966, 20-1 BCA ¶ 37,507 (granting summary judgment; finding no
∗
In view of this conclusion, we need not decide whether, as AFG’s July 27, 2016
letter ostensibly indicates, AFG actually had the paint booth equipment in its
storage, available for AFG to deliver to the government notwithstanding any
payment owed by the government to AFG (R4, tab 157 at 4 (“All of the
equipment . . . has been manufactured and in our storage since June 2015”)).
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dispute that contractor’s internal business practices, as well as its own invoicing errors,
were the reason it failed to perform). In addition, the parties modified the contract to
provide for the return to the government of up to $1,609,849.41 paid to AFG “via
credits to all future invoices until paid in full,” expressly providing the government a
contractual right to set off money owed to AFG against money that AFG owed to the
government. Moreover, the government always had the same, common-law right
“which belongs to every creditor, to apply the unappropriated moneys of his debtor, in
his hands, in extinguishment of the debts due to him.” United States v. Munsey Tr. Co.
of Washington, D.C., 332 U.S. 234, 239 (1947); accord Johnson v. All-State Constr.,
Inc., 329 F.3d 848, 852 (Fed. Cir. 2003) (“The set-off right applies to government
claims both under other contracts . . . and under the same contract.”); Raytheon Co.,
Space & Airborne Sys., ASBCA No. 57801, 15-1 BCA ¶ 36,024 at 175,952 (“the
government could use Contract II to offset debts that arose on other contracts”).
AFG also says that it directed GFS to deliver the paint booth equipment, but
that GFS refused (app. br. at 16-17, 31); but, if that is so, AFG is still responsible for
the failure to deliver the paint booth equipment, because a contractor is responsible for
the unexplained failures of its subcontractors. See Williamsburg Drapery Co. v.
United States, 369 F.2d 729, 742 (Ct. Cl. 1966); United Schools of America, Inc.,
ASBCA No. 38628, 90-3 BCA ¶ 23,199 at 116,426. AFG also appears to blame
government communications with GFS for AFG’s failure to deliver the paint booth
equipment (app. br. at 16-17); but we find AFG’s admissions that the default was the
result of non-payment to GFS conclusive on this point. In addition, AFG appears to
say that the government acted in bad faith to remove AFG so that it could contract
with GFS (app. br. at 23-27), but we find none of the clear and convincing evidence
that government officials acted from personal animus with the specific intent to injure
AFG that would be necessary for AFG to overcome the presumption that the
government officials who administered the paint booth equipment contract acted in
good faith. See Watts Constructors, 19 BCA ¶ 37,382 at 181,728; Road and Highway
Builders, LLC v. United States, 702 F.3d 1365, 1368 (Fed. Cir. 2012); Am-Pro
Protective Agency, Inc. v. United States, 281 F.3d 1234, 1240 (Fed. Cir. 2002); Grow
Life Gen. Trading, LLC, ASBCA No. 60938 et al., 19-1 BCA ¶ 37,361 at 181,676;
Puget Sound Envtl. Corp., ASBCA No. 58828, 16-1 BCA ¶ 36,435 at 177,597-98.
Finally, AFG says that had it delivered the paint booth equipment on time, the
government would have had no place to store it (app. br. at 17). We reject this
argument, for two reasons. First, AFG does not demonstrate that its obligation to
deliver the paint booth equipment was contingent upon the government identifying a
place to store it. Second, we have found that the government was ready to receive the
paint booth equipment when it was due.
AFG says that we should convert the default termination to one for the
convenience of the government because, it says, Ms. Echols did not follow the
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termination consideration factors listed at FAR 49.402-3(f) (app. br. at 17-21). We
disagree. In McDonnell Douglas Corp. v. United States, 35 Fed. Cl. 358, 371-72
(1996), the court found that the contracting officer had not considered the
FAR 49.402-3(f) termination factors and had not exercised discretion in terminating
the contract for default, holding that the termination was prompted not by the
contractor’s default, but by the decision of the Secretary of Defense to withdraw
funding for the A-12 program. The United States Court of Appeals for the Federal
Circuit reversed, holding that the contracting officer terminated the contract for
reasons related to contract performance: “the government denied additional funding
for the A-12 program and terminated the contract for default because of concerns
about contract specifications, contract schedule, and price—factors [all of which] are
fundamental elements of contract performance.” McDonnell Douglas Corp. v. United
States, 182 F.3d 1319, 1329 (Fed. Cir. 1999).
Here, even if Ms. Echols did not address each of the factors in FAR 49.402-3(f),
timely delivery of the paint booth equipment was a fundamental element of contract
performance, and AFG’s failure to satisfy that fundamental element constitutes default.
However Ms. Echols arrived at her termination decision, the government may rely upon
AFG’s failure to do its job to justify the termination. HK&S, 19-1 BCA ¶ 37,268
at 181,352; see Watts Constructors, LLC, ASBCA No. 61518, 19-1 BCA ¶ 37,382
at 181,728 (citing and parenthetically quoting HK&S with approval). To paraphrase the
Federal Circuit, if the government can establish that a contractor was in default, then
the termination of the contract for default is valid.
AFG says that the government waived the default termination by engaging in
post-termination discussions with AFG in an attempt to obtain the paint booth
equipment (app. br. at 27). In Aerospace Facilities, 18-1 BCA ¶ 37,105 at 180,605,
for purposes of determining whether the notice of appeal was untimely, we held that
“[t]he [government’s] willingness to engage AFG, discuss the facts surrounding the
termination on three separate occasions and discuss whether AFG would deliver the
paint-booth equipment served to keep the matter open and destroyed the finality of the
termination notice.” However, we do not agree that the government “waived” its
termination of the contract for default by engaging in post-termination discussions in
an effort to obtain the paint booth equipment.
AFG says that Ms. Echols did not exercise independent discretion in
terminating the contract, but was directed to do so by her superiors (see tr. 1/184-85;
app. br. at 36-37). We need not decide that issue. The contract incorporates
FAR 52.249-8(a)(1), which provides (emphasis added) that “[t]he Government may
. . . terminate this contract” for default; consequently, it does not matter whether
Ms. Echols was directed by her superiors to terminate the contract. See Schlesinger v.
United States, 390 F.2d 702, 709 & n.9 (Ct. Cl. 1968).
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Breach of contract
Finally, the government says that the Board does not possess jurisdiction to
entertain claims for money damages for alleged government breaches of contract
because AFG has not presented a claim for those damages to a contracting officer
(gov’t br. at 41). The Board’s jurisdiction to entertain a contractor’s claim depends
upon the contractor first submitting that claim to a contracting officer for a final
decision. CDM Constructors, Inc., ASBCA No. 59524, 15-1 BCA ¶ 36,097
at 176,238. Moreover, AFG must prove by a preponderance of the evidence that the
Board possesses jurisdiction to entertain its monetary claims. See Parsons Gov’t
Servs., Inc., ASBCA No. 62113, 20-1 BCA ¶ 37,586 at 182,508. AFG does not point
to any money claim (or any claim at all) that it presented to the contracting officer;
indeed, AFG seems to argue that it is not necessary for it to have done so (see app. br.
at 32 (“To somehow suggest that [] there should be a concise [Contract Disputes Act]
claim submitted to the contracting officer is unreasonable.”)). Because AFG has not
proven that the Board possesses jurisdiction to entertain its money claims, those claims
are dismissed.
CONCLUSION
AFG’s money claims are dismissed for lack of jurisdiction. Otherwise, the
appeal is denied.
Dated: August 11, 2020
TIMOTHY P. MCILMAIL
Administrative Judge
Armed Services Board
of Contract Appeals
I concur
LIS B. YOUNG
Administrative Judge
Armed Services Board
of Contract Appeals
(Signatures continued)
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I concur I concur
RICHARD SHACKLEFORD OWEN C. WILSON
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. 61026, Appeal of
Aerospace Facilities Group, Inc., rendered in conformance with the Board’s Charter.
Dated: August 11, 2020
PAULLA K. GATES-LEWIS
Recorder, Armed Services
Board of Contract Appeals
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