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TRANSCRIPT
BCABA ANNUAL PROGRAM
TAB 1 TABLE OF CONTENTS
Tab 1:Table of Contents
Tab 2:Agenda
Tab 3:BCABA Leadership and Past Award Recipients
Tab 4:Panel Materials
Tab 5:Luncheon Speaker Biography
Tab 6:Survey Feedback Form
(TAB 2: BCABA ANNUAL PROGRAM AGENDA-October 19, 2016)
8:15-8:45REGISTRATION & CONTINENTAL BREAKFAST
8:50 -9:00 WELCOMING REMARKS
Erin Sheppard, Dentons US LLP; President, BCABA and 2016 Program Co-Chair
Kathryn Griffin, Smith Pachter McWhorter PLC; BCABA Vice President and 2016 Program Co-Chair
9:00 -10:50COURT OF FEDERAL CLAIMS, FEDERAL CIRCUIT AND OTHER COURT DECISIONS: KEY DEVELOPMENTS Moderator: Judge Carol Park-Conroy (ASBCA, Ret.) JAMSPanelists: Marshall Doke, Gardere Wynne Sewell LLP, W. Stanfield Johnson, Crowell & Moring LLP; Ralph Nash, Jr., Professor Emeritus, George Washington University School of Law; Neil O’Donnell, Rogers Joseph O’Donnell, PC; Bryant Snee, Deputy Director, Civil Division, U.S. Department of Justice
11:00 -12:00 BOARDS OF CONTRACT APPEALS JUDGES PANEL: Motions Practice Before the Boards
Moderator: Daniel Strouse, Cohen Mohr LLPPanelists: Judge Kenneth Woodrow, ASCBA; Judge Monica Parchment, DC CAB;
Judge Alan Caramella, PSBCA; Judge Marian Sullivan, CBCA; Judge Anthony Palladino, FAA ODRA
12:00-12:10 PRESENTATION OF AWARDS
12:10-1:10 LUNCHEON KEYNOTE SPEAKER: Joseph McDade, Jr., Principal Deputy General Counsel, U.S. Air Force
1:30 -2:30 HOT TOPICS: KEY RECENT REGULATORY DEVELOPMENTS
Moderator: Melissa Meyers, Associate General Counsel, U.S. Air Force
Panelists: Bill Colwell, Assistant General Counsel, Northrop Grumman Corp.;
Mark Teskey, Director, Small Business Programs, U.S. Air Force; David Robbins, Crowell & Moring LLP
2:30 -2:45 NETWORKING BREAK
2:45 -3:45 KEY BCA DECISIONS: THE YEAR IN REVIEW
Moderator: Skye Mathieson, Crowell & Moring LLP
Panelists: Michelle Coleman, Trial Attorney, U.S. Air Force Legal Operations Agency;
Sonia Tabriz, Arnold & Porter LLP; Heidi Osterhout, Trial Attorney, U.S. Department of Justice, Commercial Litigation Branch
3:45 -4:30 2016 BCABA, INC. ANNUAL BUSINESS MEETING & ADJOURNMENT
(TAB 3: BCABA LEADERSHIP AND PAST AWARD RECIPIENTS )
(Immediate Past President:Kristen Ittig Arnold & Porter LLP601 Massachusetts Avenue, NWWashington, DC 20001)Officers
President:
Erin B. SheppardDentons US LLP 1900 K Street, NW Washington, DC 20006
Vice President:Kathryn GriffinSmith Pachter McWhorter PLC
8000 Towers Crescent Drive
Suite 900
Tysons Corner, VA 22812
Secretary:Daniel J. Strouse
Cohen Mohr LLP
1055 Thomas Jefferson Street, NW, Ste. 504
Washington, DC 20007
Co-Treasurers:Kristen Ittig Arnold & Porter LLP601 Massachusetts Avenue, NW
Washington, DC 20001
Thomas H. Gourlay, Jr.U.S. Army Corps of Engineers Office of the Chief Counsel 441 G Street, NW, Room 3G29 Washington, DC 20548
(BOARD OF GOVERNORS)
(Arthur Taylor(2015-2017)Defense Contract Management Agency Contract Disputes Resolution Ctr.14501 George Center Way, 2nd Fl.Chantilly, VA 20151-1788) (Heidi Osterhout(2016-2018)PO Box 480, Ben Franklin StationWashington, DC 20044(w) 202-616-0326) (Robert J. Preston II(2015-2017)Government Attorney5810 Kingstowne Center Drive, Suite 120Alexandria, VA 22315)
(Hon. Peter F. PontzerPostal Service Board of Contract Appeals 2101 Wilson Boulevard, Ste. 600Arlington, VA 22201-3078) (Matthew Keller(2015-2017)Odin Feldman & Pittleman, PC1775 Wiehle AvenueSuite 400Reston, VA 20190) (William A. Wozniak(2016-2018)Williams Mullen8300 Greensboro Drive, Ste. 1100Tysons Corner, VA 22102)
(Hon. Harold (Chuck) Kullberg(2015-2017)Civilian Board of Contract Appeals1800 M Street, NWWashington, DC 20036) (Cherie Owen(2016-2018)Jones Day51 Louisiana Avenue, N.W.Washington, D.C. 20001-2113) (Hon. C. Scott Maravilla(2013-2016)FAA Office of Dispute Resolution for Acquisition800 Independence Avenue, SWWashington, DC 20591)
(Skye Mathieson(2016-2018)Crowell & Moring1001 Pennsylvania Avenue NWWashington, DC 20004)
(BCABA, INC. PAST PRESIDENTS)
(FY 2012 – Francis E. “Chip” PurcellFY 2013 – Don YenovkianFY 2014 – Hon. Gary E. ShapiroFY 2015 – Kristen Ittig)FY 1990 – Marshall Doke
FY 1991 – Hon. Ronald A. Kienlen
FY 1992 – Frank Carr
FY 1993 – Marcia Madsen
FY 1994 – Robert Schaefer
FY 1995 – COL. Steven Porter
FY 1996 – Laura Kennedy
FY 1997 – James Nagle
FY 1998 – Hon. Cheryl Rome
FY 1999 – David Metzger
FY 2000 – Barbara Bonfiglio
FY 2001 – James McAleese
FY 2002 – Peter McDonald
FY 2003 – Richard Gallivan
FY 2004 – Elaine Eder
FY 2005 – Joseph McDade
FY 2006 – Michele Mintz Brown
FY 2007 – Hon. Richard Walters
FY 2008 – Michael Littlejohn
FY 2009 – David Nadler
FY 2010 – Susan Warshaw Ebner
FY 2011 – David Black
(LIFE SERVICE AWARD RECIPIENTS)
· 2015 – Hon. Gary Shapiro, PSBCA
· 2014 – David Black, Holland & Knight LLP
· 2013 – Michele Brown, Leidos
· 2012 – Thomas H. Gourlay, Army Corps of Engineers
· 2011 – Hon. Carol Park-Conroy, JAMS
· 2010 – Susan Warshaw Ebner, Buchanan, Ingersoll & Rooney
· 2009 – James J. McCullough, Fried, Frank, Harris, Shriver & Jacobson
· 2008 – Hon. Richard Walters, CBCA
· 2007 – No selection
· 2006 – Clarence D. Long, USAFLSA/JACN
· 2005 – James F. Nagle, Oles, Morrison, Rinker & Baker
· 2004 – Hon. Stephen Daniels, CBCA
· 2003 - Hon. Paul Williams, ASBCA
· 2002 – David P. Metzger, Arnold & Porter
· 2001 – Peter A. McDonald, Navigant
· 2000 – Hon. Ronald A. Kienlen, ASBCA
(PRESIDENT’S AWARD RECIPIENTS)
2015 - Hon. Ruth C. Burg, ASBCA (Ret.)
2014 - Skye Mathieson, Crowell & Moring LLP
2012 - Daniel J. Strouse, Cohen Mohr LLP
2011 - Ryan E. Roberts, Sheppard Mullin Richter & Hampton
2010 - Thomas H. Gourlay, Army Corps of Engineers
2009 - Peter A. McDonald, Navigant
2008 - Shelley Ewald, Watt Tieder Hoffar & Fitzgerald;
Jennifer Zucker, Patton Boggs
2007 - James J. McCullough, Fried, Frank, Harris, Shriver & Jacobson
2006 - Michele Brown, Leidos
(2016 GOLD MEDAL FIRMS)
The following firms have a 100% BCABA membership rate among their government contracts practice:
Arnold & Porter
Asmar, Schor & McKenna
Bradley Arant Boult Cummings LLP
Covington & Burling LLP
Crowell & Moring
Dentons US LLP
Fried, Frank, Harris, Shriver & Jacobson
Government Contracts Blog
Government Contracts: Publications
Dulske Gluys
Husch Blackwell
Contractor’s Perspective
Oles, Morrison, Rinker & Baker
Perkins Coie
Rogers Joseph O’Donnell
Williams Mullen
(TAB 4: PANEL MATERIALS)
Panel One: COURT OF FEDERAL CLAIMS, FEDERAL CIRCUIT AND OTHER COURT DECISIONS: KEY DEVELOPMENTS
Panel Two: BOARDS OF CONTRACT APPEALS JUDGES PANEL: Motions Practice Before the Boards
Panel Three: HOT TOPICS: KEY RECENT REGULATORY DEVELOPMENTS
Panel Four: KEY BCA DECISIONS: THE YEAR IN REVIEW
(TAB 5: Luncheon Speaker Biography)
(TAB 6: BCABA 2016 SURVEY FEEDBACK FORM)
(NOTE ON CONTINUING LEGAL EDUCATION CREDITS: This course is pending approval for 5.0 hours of credit by the Virginia Mandatory Continuing Legal Education Board. To receive certification forms once approved, please provide your contact information and Bar ID at the registration table. If you have any questions, please contact Dan Strouse at [email protected] or 202-342-2550. )
Panel 1 Packet -
Court Decisions.pdf
"Judge Park-Conroy listens to the parties, perceives their respective business needs, and reasons frankly with them." D.C. Attorney Download vCard
The Resolution Experts T: 202-942-9180 F: 202-942-9186
Email: [email protected]
Case Manager Sally Moreland JAMS 555 13th Street, NW Suite 400 West Washington, DC 20004 202-533-2024 Phone 202-942-9186 Fax Email: [email protected]
Hon. Carol Park-Conroy (Ret.) Hon. Carol Park-Conroy (Ret.) joined JAMS with over 35 years of experience as a
litigator, judge, and neutral in government contracts and commercial cases. While serving as a trial judge on the Armed Services Board of Contract Appeals (ASBCA) for 22 years, she presided over a broad range of construction and commercial disputes arising from manufacturing, service, supply, and other business contracts with the federal government. She is highly skilled at managing cases with complex factual and legal issues.
Judge Park-Conroy has extensive experience as a mediator, case evaluator, and arbitrator. She is recognized for her ability to quickly comprehend complex facts and focus parties on pivotal issues and is known for her thorough preparation, perseverance, and commitment to efficient resolution of disputes. As one corporate counsel in a mediation put it, “she knows how to keep the parties talking.”
Representative Matters Business/Commercial – Disputes involving specialized business sectors such as
computer science and information systems, research and development, technology, and aerospace and other businesses supplying manufactured products and commodities
Successfully mediated complex claims valued in excess of $2 billion relating to Army contract for logistics modernization with a computer sciences company
Mediated to settlement prime, subcontractor, and government disputes in excess of $140 million relating to aircraft purchase terms and conditions and costs due to termination of aerial refueling tanker contract following bid protest
Contracts – Disputes involving contract formation, interpretation, performance and
breach, fraud, prime/subcontractors, and joint ventures arising in manufacturing, service and supply contracts with related issues including cost accounting and defective pricing, wage rates and labor standards, with some surety, bankruptcy and environmental remediation
Settled False Claims Act case brought by Department of Justice involving occupational conflicts of interest following remand by U.S. Court of Appeals for District of Columbia
Successfully mediated contract interpretation claims totaling $150 million for F-22 aircraft tail-up costs
Construction – Disputes involving housing, both new construction and renovation of
all types of buildings, including training facilities, hospitals and aircraft hangers, water facility projects such as well drilling, water mains and pipelines, and major civil works projects, including roads, bridges, ocean piers, locks, dams and dredging
Resolved contractor and owner claims involving defective specifications, delay, changes and defective work arising in construction of Washington D.C. office building
Settled disputes valued at $75 million associated with construction of Seven Oaks Dam in California
Background and Education JAMS, Dispute Resolution Neutral, 2013-present Administrative Judge, Armed Services Board of Contract Appeals Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of
Justice, private practice, law clerk to U.S. District Court Judge
J.D., with honors, George Washington University School of Law B.A., cum laude, University of Wisconsin, Madison
Honors, Memberships, and Professional Activities Judge Park-Conroy’s work mediating $2 billion in disputes is highlighted in “The
ASBCA’s Path to the ‘Mega ADR’ in Computer Sciences Corporation,” The Procurement Lawyer, Vol. 49, No. 1, Fall 2013.
Member, ABA Section of Public Contract Law, Chair, 2011-2012 Lifetime Achievement Award, 2011, Boards of Contract Appeals Bar Association
W. Stanfield Johnson | Page 1
W. Stanfield Johnson is a Senior Counsel in the Washington, D.C. office of the law
firm of Crowell & Moring. From the Firm's founding in 1979, he served regularly on
its Management Committee and four times as its Chairman.
Education: Mr. Johnson graduated with great distinction from Stanford University in
1960 and from the Harvard Law School in 1963. He is a member of Phi Beta Kappa.
Law Practice: Mr. Johnson's practice emphasizes counseling on, litigation of, and
resolution of contract issues. He is recognized as a leading expert in government
contract law. Having been involved in many of the major public contracting issues
for more than five decades, he brings perspective for counseling about current
issues. His record shows successful results for his clients in resolving issues arising
from large and complex contracts - with both government and commercial entities.
Mr. Johnson has been consistently named a top lawyer in the field of Government
Contracts by Chambers USA. In Chambers USA America's Leading Business Lawyers
2006, Mr. Johnson was named "one of the premier litigators of all time in this
business", "the great dean of the Bar", "a wonderful scholar and a great analyst of
the law."; Mr. Johnson is also listed in Best Lawyers in America.
Published Decisions: Mr. Johnson experience is illustrated by favorable settlements
he has negotiated and cases he has litigated to decisions that are a matter of public
record, including:
Award Protests: 47 Comp. Gen. 29 (1967) (upset a $125 million Air Force ADP
hardware award to IBM, a case of first impression interpreting the competitive
negotiations statute); Express One International v. U.S. Postal Service, 814 F. Supp.
93 (D.D.C. 1992) (upset a ten-year, billion-dollar award on conflict of interest
grounds).
W. STANFIELD JOHNSONSENIOR COUNSEL
WASHINGTON, [email protected]: 202.624.2520 Fax: 202.628.5116 1001 Pennsylvania Avenue NW Washington, D.C. 20004-2595
PRACTICES
Government Contracts
Litigation & Trial
Suspension & Debarment
Investigations
ADR
Claims
Aerospace
False Claims Act
Construction
W. Stanfield Johnson | Page 2
Contractor Claims: United Technologies Corp., ASBCA Nos. 46880, etc., 97-1 BCA ¶ 28,818 (established Navy breach
of "dual source" contract, promising jet engine awards, leading to recovery of $150 million in lost profits); Lockheed
Martin Tactical Aircraft Systems, ASBCA Nos. 49530 and 50057, 00-1 BCA ¶ 30,852 (recovered $15 million in
coproduction support costs arising from an agreement between Turkey and Egypt brokered by the United States
during the Gulf War); Emery World Airways v. U.S. Postal Service, 47 Fed Cl. 461 (2000) (declaration that contract
required price redetermination, leading to a $337 million recovery in 2001).
Government Claims: United Technologies, Pratt & Whitney Div., ASBCA No. 51400, etc., 04-1 BCA ¶ 32,556, modified
on recon., ASBCA Nos. 51410, 53089, 53349, 05-1 BCA ¶ 32,860, affirmed, 463 F.3d 1261 (Fed. Cir. 2006) (denying
$299 million Air Force defective pricing claim).
Construction Claims: Mergentime Corp. v. WMATA, 400 F. Supp. 2d 145 (D.D.C. 2005). (Representing public agency in
a subway construction dispute involving a default termination and claims by both parties, resulting in a favorable $41
million judgment).
Subcontractor-Prime Contractor Disputes: Northrop Corporation v. McDonnell Douglas Corp., 705 F.2d 1030 (9th Cir.
1983) (involving disputes over the F-18 teaming agreement).
Fraud/Suspension and Debarment: Peter Kiewit Sons' Co. v. U.S. Army Corps of Eng'rs, 534 F. Supp. 1139 (D.D.C.
1982) (enjoining de facto debarment).
Trade Secrets: National Parks & Conservation Ass'n v. Kleppe, 547 F.2d 673 (D.C. Cir. 1976) (established "competitive
harm”).
Government Contractor Defense: Boyle v. United Technologies Corp., 487 U.S. 500 (1988) (establishing derivative
immunity to defective design claim).
Publications: Mr. Johnson’s publications include:
"Hercules, Winstar and the Supreme Court’s Conspicuous and Potentially Consequential Error,” Public Contract
Law Journal, Vol. 44 (Winter 2015).
“The Federal Circuit’s Abrogation of the NAFI Doctrine: An En Banc Message With Implications for Other
Jurisdictional Challenges?”, Public Contract Law Journal, Vol. 42 (Fall 2012)
The Federal Circuit's Great Dissenter and Her 'National Policy of Fairness To Contractors'," Public Contract Law
Journal, Vol. 40 (Winter 2011).
"Needed: A Government Ethics Code and Culture Requiring Its Officials to Turn 'Square Corners' When Dealing
with Contractors," The Nash & Cibinic Report, Vol. 19, No. 10 (October 2005).
"Interpreting Government Contracts: Plain Meaning Precludes Extrinsic Evidence and Controls at the Federal
Circuit," Public Contract Law Journal, Vol. 34 (Summer 2005).
"Mixed Nuts and Other Humdrum Disputes: Holding the Government Accountable Under the Law of Contracts
Between Private Individuals," Public Contract Law Journal , Vol. 32 (Summer 2003).
"Analysis & Perspective: The Particular Perils of the Sarbanes-Oxley Act for Government Contractors," Federal
Contracts Report, Vol. 78, No. 21 (2002). Co-Author: Frederick W. Claybrook Jr.
"A Retrospective on the Contract Disputes Act," Public Contract Law Journal , Vol. 28 (Summer 1999).
RALPH C. NASH, JR.
Ralph C. Nash, Jr., is Professor Emeritus of Law of The George Washington University,
Washington, D.C., from which he retired in 1993. He founded the Government Contracts
Program of the university's National Law Center in 1960, was Director of the Program from 1960
to 1966 and from 1979 to 1984, and continues to be actively involved in the Program. He was
Associate Dean for Graduate Studies, Research and Projects, of the Law Center from 1966 to
1972.
Professor Nash has specialized in the area of Government Procurement Law. He worked for the
Navy Department as a contract negotiator from 1953 to 1959, and for the American Machine and
Foundry Company as Assistant Manager of Contracts and Counsel during 1959 and 1960.
He graduated magna cum laude with an A.B. degree from Princeton University in 1953, and
earned his Juris Doctor degree from The George Washington University Law School in 1957.
He is a member of Phi Beta Kappa, Phi Alpha Delta, and the Order of the Coif.
Professor Nash is active as a consultant for government agencies, private corporations, and law
firms on government contract matters. In recent years, he has served widely as neutral advisor
or mediator/arbitrator in alternate dispute resolution proceedings. He is active in the Public
Contracts Section of the American Bar Association, is a member of the Procurement Round
Table, and is a Fellow and serves on the Board of Advisors of the National Contract Management
Association.
During the 1990s, Professor Nash was active in the field of acquisition reform. He served on the
"Section 800 Panel" that recommended revisions to all laws affecting Department of Defense
procurement, the Defense Science Board Task Force on Defense Acquisition Reform, and the
Blue Ribbon Panel of the Federal Aviation Administration.
He is the coauthor of a casebook, Federal Procurement Law (3d ed., Volume I, 1977, and
Volume II, 1980) with John Cibinic, Jr. He and Professor Cibinic also coauthored five
textbooks: Formation of Government Contracts (4th ed. 2011) (with Chris Yukins),
Administration of Government Contracts (4th ed. 2006) (with James Nagle), Cost
Reimbursement Contracting (4th ed. 2014) (with Stephen Knight), Government Contract Claims
(1981) and Competitive Negotiation: The Source Selection Process (3d ed. 2011) (with Karen
O’Brien-DeBakey). He is the coauthor with Leonard Rawicz of the textbook Patents and
Technical Data (1983), the three volume compendium, Intellectual Property in Government
Contracts (5th ed. 2001), and the two volume, Intellectual Property in Government Contracts (6th
ed. 2008); coauthor with seven other authors of the textbook Construction Contracting (1991),
coauthor with Steven Feldman of Government Contract Changes (3d ed. 2007), and coauthor
with Steven L. Schooner, and Karen O’Brien-DeBakey of The Government Contracts Reference
Book (4th ed. 2013). He has written several monographs for The George Washington University
Government Contracts Program monograph series, and has published articles in various law
reviews and journals. Since 1987 he has been coauthor of a monthly analytical report on
government contract issues, The Nash & Cibinic Report.
353877.1
Neil H. O’Donnell is a shareholder specializing in government contracts and construction law.
AREAS OF PRACTICE
Mr. O’Donnell is chair of the firm’s Government Contracts Practice Group and co-chair of the Construction Law Practice Group.
PROFESSIONAL QUALIFICATIONS AND ACTIVITIES
In over forty years of practice, Mr. O’Donnell has specialized in public contract and construction law at the federal, state and local levels. He has litigated cases in federal and state trial and appellate courts, the boards of contract appeals and the Government Accountability Office. Representative cases include: a series of successful GAO and Court of Federal Claims bid protests concerning IT, cyber security and satellite communications issues; restructure of a multibillion dollar classified contract on behalf of a major defense contractor; defense of a national construction contractor and its pipe supplier against latent defect claims on a significant aqueduct project; trial of a termination dispute between the prime and subcontractor on a major state IT systems development contract; successful resolution of a multimillion dollar cost accounting standards dispute with the government on behalf of an aerospace material contractor; pursuing actions relating to power plant and water treatment plant construction projects on behalf of general contractors, subcontractors and the suppliers and fabricators of principal components; federal and state false claim act actions, and federal, state and local bid protests relating to equipment, software, construction and service contracts, including the $35 billion Air Force Air Tanker procurement and major post-Katrina hurricane protection projects in and around New Orleans.
Mr. O’Donnell has been named one of the leading government contract lawyers in the country in every edition of Chambers USA, America's Leading Lawyers for Business, since 2005. He is also included in the annual list of “Best Lawyers in America” and is recognized as one of California’s outstanding construction lawyers in Who’s Who Legal: California. He has served as chairman and vice-chairman of several committees of the ABA Public Contract Law Section as well as on the Executive Committee of the California State Bar’s Public Law Section. Mr. O’Donnell has written and lectured on a wide variety of government contract and construction issues. He is presently on the Advisory Committee for The Government Contractor and the Associated General Contractors of California Legal Advisory Committee and is a member of the ABA Forum Committee on the Construction Industry. He is a former president and continues to serve on the Board of Directors of BAVC, one of the nation's leading media arts organizations, and is also on the Board of San Francisco Performances.
EDUCATION
J.D., Yale Law School, 1973 Editor, Yale Law Journal
B.A., Williams College, 1967 Magna Cum Laude, Phi Beta Kappa
BRYANT G. SNEE
Bryant Snee joined PAE Corp. as Associate General Counsel
(Contracts) in September 2016.
From 1990 to August 2016, he served in the National Courts Section,
Commercial Litigation Branch, Civil Division, United States Department of
Justice. As Deputy Director, he assisted in managing an office of 150
attorneys and support staff engaged in litigation on behalf of the United
States, principally in the United States Court of Appeals for the Federal
Circuit, the United States Court of Federal Claims, and the United States
Court of International Trade. His primary areas of practice were contract
disputes and bid protest litigation.
He previously served as a Trial Attorney in the Department of
Justice’s Antitrust Division and, for five years, as an active-duty U.S. Army
Judge Advocate in Germany and Washington, D.C. He holds an LL.M in
Government Procurement Law from George Washington University, a J.D.
from St. Louis University, and a B.A. in History from Washington
University. He currently serves as a Council Member for the ABA’s Public
Contract Law Section.
BCABA PANEL
October 19, 2016
Ralph C. Nash
The following article is taken from the Nash & Cibinic Report
September 2016, STATUTORY INTERPRETATION: Another Federal Circuit Strikeout,
30 N&CR ¶ 50
If the proper construction of contract language is to look for and enforce its plain
meaning, plain meaning is even more important in construing a statute. As we have discussed
repeatedly, the Federal Circuit is firmly wedded to the plain meaning rule when dealing with
contract interpretation. See The Plain Meaning Rule: Too Much of a Good Thing, 20 N&CR ¶
57, and Postscripts at 21 N&CR ¶ 64, 21 N&CR ¶ 27, 21 N&CR ¶ 52, 22 N&CR ¶ 63, 23
N&CR ¶ 49, 25 N&CR ¶ 16, 26 N&CR ¶ 48, 28 N&CR ¶ 32, and 30 N&CR ¶ 3. Yet when it
comes to statutory interpretation, the Federal Circuit has a tendency to shy away from reliance on
the plain meaning. The latest case of this nature is Kingdomware Technologies, Inc. v. U.S., 136
S. Ct. 1969 (June 16, 2016), where the Supreme Court, in a unanimous decision, reversed the
Federal Circuit’s interpretation of a statute requiring the Department of Veterans Affairs to
follow the “Rule of Two” to set aside its contracts for service-disabled and other veteran-owned
small businesses.
The Statutory Words
38 USC § 8127 was enacted in 2006 in an effort to force the Department of Veterans
Affairs to award a fair share of its contracts to small businesses owned by veterans. The statute
provides:
(a) Contracting goals.
(1) In order to increase contracting opportunities for small business concerns owned and
controlled by veterans and small business concerns owned and controlled by veterans
with service-connected disabilities, the Secretary shall--
(A) establish a goal for each fiscal year for participation in Department contracts
(including subcontracts) by small business concerns owned and controlled by
veterans who are not veterans with service-connected disabilities . . .; and
(B) establish a goal for each fiscal year for participation in Department contracts
(including subcontracts) by small business concerns owned and controlled by
veterans with service-connected disabilities . . .
* * *
(b) Use of noncompetitive procedures for certain small contracts. For purposes of meeting the
goals under subsection (a), and in accordance with this section, in entering into a contract with a
small business concern owned and controlled by veterans for an amount less than the simplified
acquisition threshold . . . , a contracting officer of the Department may use procedures other than
competitive procedures.
(c) Sole source contracts for contracts above simplified acquisition threshold. For purposes of
meeting the goals under subsection (a), and in accordance with this section, a contracting officer of
the Department may award a contract to a small business concern owned and controlled by
veterans using procedures other than competitive procedures if--
(1) such concern is determined to be a responsible source with respect to performance of
such contract opportunity;
(2) the anticipated award price of the contract (including options) will exceed the
simplified acquisition threshold . . . but will not exceed $ 5,000,000; and
(3) in the estimation of the contracting officer, the contract award can be made at a fair
and reasonable price that offers best value to the United States.
(d) Use of restricted competition. Except as provided in subsections (b) and (c), for purposes of
meeting the goals under subsection (a), and in accordance with this section, a contracting officer of
the Department shall award contracts on the basis of competition restricted to small business
concerns owned and controlled by veterans if the contracting officer has a reasonable expectation
that two or more small business concerns owned and controlled by veterans will submit offers and
that the award can be made at a fair and reasonable price that offers best value to the United States.
(Italics added)
We have italicized the key words in paragraphs (b), (c), and (d) to show how Congress used the
terms “may” and “shall.”
The litigation dealt with the interpretation of paragraph (d) requiring Contracting Officers
in the Department of Veterans Affairs to follow the “Rule of Two” for these veteran-owned
organizations with the prefatory language that this “was for the purpose of meeting the goals
under subsection (a).”
Kingdomware’s Saga
Kingdomware initially filed a protest in the Government Accountability Office when the
Department awarded a major order under the Federal Supply Schedule to a large business. This
was truly a slam dunk because GAO had already ruled that the statute was mandatory in Aldevra,
Comp. Gen. Dec. B-406205, 2012 CPD ¶ 112. Thus, the GAO sustained the protest in
Kingdomware Technologies, Inc., Comp. Gen. Dec. B-406507, 2012 CPD ¶ 165. However, in
spite of numerous GAO decisions on this issue, the Department refused to follow this
interpretation of the statute because its regulations allowed COs to not follow the statute when
they were issuing orders against the Federal Supply Schedule.
Kingdomware then filed suit in the Court of Federal Claims. The court ruled for the
Government on the ground that the agency regulation was reasonable because the statute did not
address Federal Supply Schedule orders and the “Rule of Two” language was ambiguous because
the prefatory language on goal setting clouded the imperative language on following the rule,
Kingdomware Technologies, Inc. v. U.S., 107 Fed. Cl. 226 (2012).
On appeal, the Federal Circuit affirmed on a 2-1 decision, Kingdomware Technologies,
Inc. v. U.S., 754 F.3d. 953 (Fed. Cir. 2014). The majority agreed that the prefatory language
modified the imperative “shall,” reasoning:
It is a bedrock principle of statutory interpretation that each word in a statute should be given
effect. See Qi-Zhuo v. Meissner, 70 F.3d 136, 139, 315 U.S. App. D.C. 35 (D.C. Cir. 1995) ("An
endlessly reiterated principle of statutory construction is that all words in a statute are to be
assigned meaning, and that nothing therein is to be construed as surplusage."); see also Ariad
Pharms., Inc. v. Eli Lilly & Co., 598 F.3d 1336, 1345 (Fed. Cir. 2010) (concluding that a party's
proposed statutory interpretation "violat[ed] the rule of statutory construction that Congress does
not use unnecessary words.").
Kingdomware's interpretation of subsection (d) assigns dispositive weight to the command term
"shall," but ignores additional statutory language stating that this mandate is "for purposes of
meeting the goals under subsection (a)." Under Kingdomware's interpretation, the statute's mandate
requiring the VA to conduct a Rule of Two analysis would apply to every competitive contract
contemplated by the VA without any regard for the VOSB contracting goals set under subsection
(a), despite the provision's explicit reference to these goals. Indeed, Kingdomware conceded at oral
argument that under its interpretation of 38 U.S.C. § 8127(d), the VA must continue to apply a
Rule of Two analysis for every contract even after it has met the goals set under § 8127(a).
Further, as the VA points out, if § 8127(d) requires the agency to conduct a Rule of Two analysis
for every contract irrespective of the goals set under subsection (a), this goal-setting provision is
itself made superfluous. Because Kingdomware's plain meaning interpretation of § 8127(d) reads
the words "for purposes of meeting the goals under subsection (a)" out of the statute and makes the
mandatory goal-setting statutory provision unnecessary, it cannot stand.
The statutory scheme as a whole links the Rule of Two mandate (denoted by the word "shall") in
subsection (d) to the goals set under subsection (a). The mandate is, therefore, the required
procedure for meeting these goals. It is fully consistent with subsection (a), which requires the VA
to set goals for contracting with VOSBs, but grants the VA considerable discretion to set the value
of these goals. Accordingly, the agency need not perform a VOSB Rule of Two analysis for every
contract, as long as the goals set under subsection (a) are met. The correct reading of the statute
according to its plain meaning puts the "shall" in subsection (d) in harmonious context with the
discretionary "may" provisions of subsections (b) and (c), and assures that the goals of subsection
(a) will be set by the Secretary, not the success or failure of the Rule of Two in the marketplace.
The dissenting judge rejected this analysis, holding that the prefatory words played no
role in interpreting clear statutory language:
To override the clear imperative of § 8127(d), the majority relies on the provision's prefatory
language to reason that requiring a Rule of Two analysis in every VA procurement "makes the
mandatory goal-setting statutory provision unnecessary." Prefatory language is introductory in
nature and does nothing more than explain the general purpose for the Rule of Two mandate. The
Supreme Court has noted, albeit in the context of constitutional construction, that "apart from [a]
clarifying function, a prefatory clause does not limit or expand the scope of the operative clause"
and that operative provisions should be given effect as operative provisions, and prologues as
prologues. District of Columbia v. Heller, 554 U.S. 570, 578, 128 S. Ct. 2783, 171 L. Ed. 2d 637
(2008). Here, the operative clause is that VA contracting officers must award contracts on the basis
of restricted competition if they have a reasonable expectation that the Rule of Two will be
satisfied, a mandate that cannot be limited by its prologue.
The Heller decision cited by the judge is, of course, the well known Constitutional
decision interpreting the Second Amendment which states:
A well regulated Militia, being necessary to the security of a free State, the right of the people to
keep and bear Arms, shall not be infringed.
The Supreme Court held that the prefatory language could serve only the purpose of clarifying
ambiguous language in the “operative” language “the right of the people to keep and bear Arms,
shall not be infringed.” It concluded that since this language was clear, the prefatory militia
language had no effect.
This led to the unanimous decision of the Supreme Court reversing the Federal Circuit
decision. The decision’s reasoning was short and sweet:
[T]he prefatory clause has no bearing on whether § 8127(d)’s requirement is mandatory or
discretionary. The clause announces an objective that Congress hoped that the Department would
achieve and charges the Secretary with setting annual benchmarks, but it does not change the plain
meaning of the operative clause, § 8127(d). See Yazoo & Mississippi Valley R. Co. v. Thomas, 132
U. S. 174, 188, 10 S. Ct. 68, 33 L. Ed. 302 (1889) (explaining that prefatory clauses or preambles
cannot change the scope of the operative clause).
It interesting that the Court cites Yazoo & Mississippi Valley rather than Heller for the
proposition that prefatory language cannot be used to change plain meaning. In that old decision,
the Court held that the preamble to a state statute (a “whereas” clause) could not be used to arrive
an interpretation of the obligatory words of the statute. It seems as if the Heller decision is a
more direct holding that prefatory words cannot be used to alter clear obligatory words.
Plain Meaning of a Statute
This is not the first time that the Federal Circuit has failed to follow the plain meaning of
a statute. When we read the Supreme Court decision we immediately recalled Richlin Security
Service Co. v. Chertoff, 437 F.3d 1296 (Fed. Cir. 2006). There the court interpreted the interest
provision in the Contract Disputes Act to not state its plain meaning. At that time section 611
(now 7109) of the Act stated:
Interest on amounts found due contractors on claims shall be paid to the contractor from the date
the contracting officer receives the claim pursuant to section 605(a) (now 7103(a)) of this title
from the contractor until payment thereof.
The court ruled that the Government did not have to pay interest to Richlin after the board of
contract appeals had ruled that it was owed money because the funds were paid to an escrow
agent not Richlin. This gave a strange meaning to the words “amounts found due contractors”
and seemed to directly conflict with the plain meaning of these words. See our discussion in
Interest on Claims: A New Wrinkle, 20 N&CR ¶ 13, and Decisions of the Federal Circuit: Do
They Reflect an Understanding of the Realities of Government Procurement?, 20 N&CR ¶ 28.
Being reversed by a unanimous decision of the Supreme Court should persuade the
Federal Circuit that the plain meaning of a statute controls its interpretation. Hopefully, this will
end the travails of companies like Kingdomware and Richlin. In addition, we would hope that it
dissuades Government attorneys from arguing that imperative language in statutes does not mean
what it says. Its time to put such arguments to rest.
1 379200.1
BCABA ANNUAL SEMINAR
A Step Toward Clarity On Fraud Jurisdiction Under
The CDA And The Scope Of Maropakis
Laguna Construction Company, Inc. v. Carter,
2016 WL 3854063 (Fed. Cir., July 15, 2016)
Neil H. O’Donnell
ROGERS JOSEPH O’DONNELL
San Francisco, California
Washington, D.C.
The Federal Circuit’s latest foray into the world of the U.S. government’s
contracting efforts in Iraq, Laguna Construction Company, Inc. v. Carter, 2016 WL 3854063
(Fed. Cir., July 15, 2016), provides at least some guidance on three issues of continued
interest: 1) the jurisdiction of boards of contract appeals over fraud allegations, 2) the
availability of the federal common law defense of prior material breach in disputes over
Contract Disputes Act contracts, and 3) the scope of the Circuit’s 2010 Maropakis decision
on the need for final decisions for affirmative defenses.
A. Background Of The Dispute
In 2003 the Air Force awarded Laguna Construction one of its so-called
Worldwide Environmental and Construction contracts. Subsequently the contract was used
as the vehicle to issue Laguna 16 cost reimbursable task orders for construction work in Iraq.
The work was substantial and wide-ranging, included renovation of the Iraqi Ministry of
Defense headquarters complex, construction of two Iraqi Police Commando Facilities and
the Bagdad Police College and miscellaneous effort at U.S. base facilities.
In 2008, the government began an investigation of allegations that Laguna
executives were soliciting kickbacks from Iraqi companies that wished to serve as its
subcontractors on the task order work. In 2010 Laguna’s former area manager for Iraq pled
guilty to charges that he participated in obtaining kickbacks from subcontractors on the Iraqi
work. To add insult to injury, the scheme he described involved having the subcontractors
submit invoices to be paid by the government that included not only legitimate costs but also
the kickbacks for Laguna officials. In 2012, three principal officers of Laguna were indicted
on similar charges and in 2013, a fourth officer, Laguna’s Vice President of Operations, pled
guilty to accepting kickbacks. He admitted that he had manipulated the contracting process
2 379200.1
to ensure work went to those firms that paid kickbacks at the same time that he was
certifying to the government that subcontractors were chosen based on competitive bidding.
In early 2009, well after the criminal investigation began, DCAA commenced
an audit of Laguna’s incurred costs in FY2006. At the end of that audit in 2011, DCAA
disallowed over $17 million of subcontract costs, and, on that basis, in April 2012 rejected
invoices on particular task orders exceeding $3 million. In a puzzling move for a company
already beset with fraud allegations, Laguna immediately filed a certified claim for $2.8
million of that unpaid amount, and when the contracting officer did not timely issue a final
decision, appealed the deemed denial to the ASBCA. After Laguna’s Vice President of
Operations pled guilty in July 2013, the Board permitted the government to amend its answer
to state an affirmative defense based on fraud. Specifically, the Army alleged:
The Government is not liable for LCC's claim ... because
of LCC's breach of Contract No. FA8903-04-D-8690
when its principal officers and employees solicited and
accepted kickbacks for awarding subcontracts under task
orders issued under that contract, which constituted fraud
against the United States.
In September 2014, the ASBCA granted the government’s cross-motion for
summary judgment. Laguna Construction Co., Inc., ASBCA 58324, 14-1 BCA ¶ 35,748.
For purposes of its ruling it accepted the contractor’s allegation that the government had
breached the contract by its failure to pay the contested invoice amounts. But it concluded
that did not matter. Instead the Board relied on the “first material breach” rule to find that
any government failure to pay was excused by the contractor’s earlier beach of the covenant
of good faith and fair dealing contained in every contract. Specifically, the Board found that
the admitted criminal acts of Laguna’s Area Manager and Vice President of Operations were
imputed to Laguna itself and meant that Laguna had breached the good faith covenant by
submitting invoices inflated with the cost of the illegal kickbacks that it had been paid.
The Board’s decision relied on Christopher Village, L.P, v. United States, 360
F.3d 1319 (Fed. Cir. 2004). There the Federal Circuit faced a situation in which a developer
was alleged to have committed fraud in connection with contracts for its property included
within HUD’s Section 8 housing program. In resolving the case the Court relied on the
common law doctrine that “when a “party to a contract . . . is sued for its breach [it] may
ordinarily defend on the ground that there existed at the time [of the breach], a legal excuse
for nonperformance . . . .’” In taking this approach the Board avoided tackling directly a
question which has persisted at the boards for many years, that is the extent to which it may
consider fraud allegations. The Board had given an indication of its views on the issue
earlier in the case by permitting the amendment of the government’s answer to include the
affirmative defense based squarely on fraud. But in making its ruling on the merits, the
Board reverted to characterizing fraudulent activity as breach of a contract provision, and,
therefore, deciding the matter as though it were any other contractual breach rather than
fraud.
3 379200.1
B. Fraud at the Boards of Contract Appeals
The ASBCA’s caution concerning outright reliance on fraud in the Laguna
decision is a reflection of the troubled history of fraud determinations by boards of contract
appeals. Two provisions of the Contract Disputes Act are relevant. The first, 41 U.S.C. §
7103(a)(5), provides:
The authority of this subsection and subsections (c)(1),
(d), and (e) does not extend to a claim or dispute for
penalties or forfeitures prescribed by statute or regulation
that another Federal agency is specifically authorized to
administer, settle, or determine.
The second 41 U.S.C. § 7103(c)(1) reads:
This section does not authorize an agency head to settle,
compromise, pay, or otherwise adjust any claim
involving fraud.
The boards have understandably regarded these provisions as significant
restrictions on their jurisdiction. For example, in Turner Construction Company v. GSA,
GSBCA 16840, 06-2 BCA ¶ 33391, the General Services Board relied on the predecessor to
these provisions and the interpretation of it by the Federal Circuit in Martin J. Simko
Construction, Inc. v. United States, 852 F.2d 540, 545 (Fed. Cir. 1988) to conclude that “it
was the intent of the Congress to eliminate fraud cases from the CDA’s dispute process.” Id.
at 165,551. Other boards also concluded that “Congress did not wish the contract appeal
boards to exercise any jurisdiction over the issue of the existence of fraud in any form.”
Warren Beaves, d/b/a Commercial Marine Services, DOT BCA 1324, 83-1 BCA ¶ 16,232 at
80,648. The boards consistently took the position that they could not determine whether
fraud existed; rather that had to be done by a court of competent jurisdiction. See, e.g.,
Cessna Aircraft Co., ASBCA 43,196, 93-1 BCA ¶ 25,511. Agencies quickly learned a way
around this limitation. They would characterize what could be labeled as fraud as a violation
of a contract provision instead. As the ASBCA put it in M&M Services Inc., ASBCA 28712,
84-2 BCA ¶ 17,405, the “issue of the rights of the parties under the contract and the
determination of whether fraud exists are two separate matters to be decided by different
tribunals.”
In recent years, the ASBCA has gone a step further. It has issued a number of
decisions in which it has permitted the government to use the contractor’s fraud as an
affirmative defense to a claim brought by the contractor. In Dongbuk R&U Engineering Co,
ASBCA 58300, 13-1 BCA ¶ 35389, and AAA Engineering & Drafting, Inc., ASBCA 47940,
01-1 BCA ¶ 31256, that recognition of an affirmative defense based on fraud came after the
fraud had been otherwise established by a court of competent jurisdiction or a plea. But in
other instances, the Board has been willing to entertain such an affirmative defense even
though the fraud has not been previously established. International Oil Trading Co.,
ASBCA 57491, 13-1 BCA ¶ 35393, and Servicios y Obras Isetan S.L., ASBCA 57584, 13-1
4 379200.1
BCA ¶ 35279. See “Postscript: The Affirmative Defense of Contractor Fraud,” 28 Nash &
Cibinic Report ¶ 2 (Jan. 2014). The CBCA has not yet issued a decision accepting fraud as
an affirmative defense, even where it has been previously determined in another forum.
And, understandably given the statutory language, no case at either Board has even
suggested that it has jurisdiction to decide an affirmative claim that is based on an allegation
of fraud.
C. The Circuit’s Decision As To Fraud
The Federal Circuit’s decision in Laguna provided some clarity as to the role
of fraud allegations at the boards, but it hardly resolved all the questions. As to the issue of
whether boards could have jurisdiction over an affirmative defense based on a contractor’s
fraud, the Court delivered a clear yes. It firmly rejected Laguna’s argument that the
government’s reliance on its officers’ guilty pleas to violations of the Anti-Kickback Act
deprived the Board of jurisdiction, stating unequivocally, “We hold that the Board properly
exercised its jurisdiction.”
The Court’s guidance as to the circumstances in which such an affirmative
defense could be entertained was less certain. On the one hand it stressed that in making its
affirmative defense in the case before it the government was not using the contractor’s fraud
to seek the payment of money or the adjustment or interpretation of contract terms. Rather
the agency asked only for the denial of the contractor’s claim. In other words, it was truly an
affirmative defense, not an affirmative claim. But the Court also explained that in the facts
of the Laguna case it was not necessary for the Board to make any factual findings of fraud
because criminal convictions of Anti-Kickback violations had already occurred. Thus, the
court recognized that two elements were present in this case, 1) the government asserted an
affirmative defense only, and 2) the defense did not depend on any new factual findings by
the Board. But the Court was unclear as to whether it was enough for jurisdiction that fraud
was used only as an affirmative defense or whether it was also necessary that the issue of
whether the fraud occurred have already been resolved without the board’s having to make
further findings on that issue.
D. Prior Material Breach
The Court strongly affirmed the Board’s reliance on the prior material breach
doctrine to grant summary judgment to the government. But by accepting the Board’s
characterization of the nature of that prior breach, the decision also served to muddy
somewhat the decision’s message as to the role of fraud in a board proceeding.
As the government pointed out in its appellate brief, prior material breach is
well-established as an affirmative defense in the federal common law. The Court
enthusiastically agreed, joining the Board in pointing to Christopher Village, L.P. v. United
States, 360 F.3d 1319 (Fed. Cir. 2004). The Court concluded that in enacting the CDA,
Congress did not intend to displace this well-established common law doctrine. It also
identified its 1988 decision in J.E.T.S., Inc. v. United States, 838 F.2d 1196 (Fed. Cir. 1988),
as a situation in which it applied the prior material breach doctrine to affirm a board’s denial
5 379200.1
of a contractor’s claim for equitable adjustment of a food service contract because of the
contractor’s prior conviction for fraud. In so doing it rejected Laguna’s claim that J.E.T.S.
was distinguishable for these purposes because it involved illegality in the formation of the
contract and, therefore, the contract was void ab initio.
In this case, however, rather than plainly labeling the prior breach as fraud, the
court adopted the Board’s approach of recharacterizing the fraudulent acts as contractual
violations. Thus, instead of saying that the prior breach was the violation of the Anti-
Kickback Act, that is fraud, the Court held, “We agree with the Board’s determination that
Laguna committed the first material breach by violating the Allowable Cost and Payment
clause . . . .” In the end this formulation does not undermine the clear message that it is
possible for the government to assert an affirmative defense based on fraud at a board of
contract appeals without affecting the board’s jurisdiction. Nor does it lessen the ability of
the government to rely on a contractor’s fraud, albeit described in contractual terms, in
wielding the prior material breach rule to avoid any further obligation to the contractor. But
it is curious that the Court felt it necessary to adopt the Board’s approach of disguising the
contractor’s admitted fraud as the breach of a contract provision given its conclusion that
fraud labeled as such could be an affirmative defense without depriving a board of
jurisdiction.
E. The Continuing Limitation of Maropakis
Perhaps because of the approach taken by Laguna’s attorney on appeal, the
Federal Circuit’s decision contains another intriguing feature. It provides a strong indication
that the Court is amenable to the limitations that have been widely adopted by lower courts
and boards on the breadth of its decision in M. Maropakis Carpentry, Inc. v. United States,
609 F.3d 1323 (Fed. Cir. 2010) concerning the need for final decisions as to affirmative
claims.
In Maropakis, a contractor charged with reroofing and window replacement at
a Navy warehouse completed its work more than a year late. Apparently believing that the
best defense was a good offense, the contractor filed suit at the Court of Federal Claims
seeking damages because of alleged government delays and disruptions of its work. When
the Navy filed a counterclaim for liquidated damages, Maropakis asserted an affirmative
defense that also relied on its allegations of government caused delay. But Maropakis had
not obtained a final decision from the contracting officer before filing suit. Predictably, the
Court upheld the dismissal of the contractor’s affirmative claims for damages on the basis
that a contracting officer’s final decision was a jurisdictional requirement under the CDA.
At the same time the Court also dismissed the contractor’s affirmative defense against the
Navy’s liquidated damages claim, holding that it too had to be the subject of a contracting
officer’s final decision before it could be asserted in a proceeding at a court or board.
The decision was greeted with a combination of confusion and concern. Many
worried openly that it would be necessary to obtain a contracting officer’s final decision
before asserting any affirmative defense. See, e.g., Johnson, et al, “Maropakis: The Federal
6 379200.1
Circuit Imposes Forfeiture of Defenses to Government Claims When Contractor Fails to
Certify Them as Contractor Claims,” 94 FCR 112 (7/12/2010). And the parties in many
cases adopted a policy of asking contracting officers for final decisions as to all affirmative
defenses until there was further clarity as to the scope of this rule.
Fortunately over time the boards and the COFC have taken the lead in
narrowing the reach of Maropakis. In cases like Total Engineering, Inc. v. United States,
120 Fed. Cl. 10 (2015), and J.A. Mobley Associates, Inc. v. GSA, CBCA 2878, 16-1 BCA
¶ 36,209, courts and boards limited the application of the Maropakis rule to situations in
which upholding the affirmative defense would require an adjustment of the terms of the
contract. They pointed out that, in Maropakis, in order to accept that government delay was
a defense to the government’s liquidated damage claim, the court would have had to
conclude that the contract delivery date needed to be extended. If, on the other hand,
accepting an affirmative defense would not require adjusting the contract terms, but rather
only applying them, as in Mobley, or deciding a factual question, as in Total Engineering,
there was no need for a contracting officer’s final decision in order to assert that defense.
In the Laguna decision, the Federal Circuit appeared to adopt this narrow
reading of the application of Maropakis. The issue was before the Court because of the
approach taken by Laguna in its appeal. Its principal argument was not that a board could
not have jurisdiction over an affirmative of contractor fraud but rather that such a defense
required a contracting officer’s final decision before it could be asserted in litigation. The
government disagreed, specifically adopting in its brief the Total Engineering formulation
that Maropakis is not applicable where an affirmative defense does not seek an adjustment of
contract terms.
The Court agreed with the government. It rejected Laguna’s argument that the
affirmative defense of fraud was a “claim” under the CDA, and so required a contracting
officer’s final decision. Instead it found that “the government’s defense plainly does not
seek the payment of money or the adjustment or interpretation of contract terms.” It
specifically distinguished Maropakis as a case “finding no jurisdiction where the contractor
had failed to submit a claim to modify the contract time.”
Thus, the Maropakis alarm is largely over. There may still be some question,
e.g., as to when a defense requires an “interpretation” rather than “adjustment” of contract
terms sufficient to raise the possibility that a “claim” is being asserted. But Laguna confirms
that the Federal Circuit has backed away from the worst case application of Maropakis and
that the concern that every affirmative claim will require a contracting officer’s final decision
can now be set aside.
1 DCACTIVE-37569830.1
BCABA ANNUAL MEETING PROGRAM
October, 2016
Panel on Recent Court Decisions
SUFI NETWORK SERVICES, INC. v. UNITED STATES
W. Stanfield Johnson
Crowell & Moring, LLP
A. Introduction
SUFI Network Services, Inc. v. United States makes its second appearance before this
panel at the BCABA Annual Seminar. The first Federal Circuit decision, 755 F.3d 1305 (Fed.
Cir. 2014), ordered a remand to the ASBCA “for further factual findings consistent with this
opinion.” The second Federal Circuit decision , 817 F.3d 773 (Fed. Cir. 2016), deals with a
government effort to appeal the ASBCA’s remand decision.
There would have been no judicial review of this dispute except for the Circuit’s en banc
decision in Slattery v. United States, 633 F.3d 1298 ( Fed. Cir. 2011), because SUFI’s contract
was with a Non-Appropriated Fund Instrumentality (“NAFI”). Long standing Court of Claims
law established that claims arising from NAFI contracts were not within the Tucker Act
jurisdiction. From the beginning, this NAFI bar was deemed unjust, but nothing was done about
it for 60 years. Certain NAFI’s were specified to be within Contract Disputes Act jurisdiction,
but not all of them. Thus SUFI’s contract provided only for its appeal to the ASBCA without
recourse to court. Slattery opened the way for SUFI’s Tucker Act suit by abrogating the NAFI
bar, allowing judicial review governed by the Wunderlich Act, 41 U.S.C. §321-322 (2006). This
led to the first CAFC decision.
However, as interpreted by the Supreme Court and the Court of Claims, the Wunderlich
Act did not permit government appeals from decisions of its own board of contract appeals.
S&E Contractors v. United States, 406 U.S. 1 (1972); Roscoe Ajax Construction Co. v. United
States, 499 F.2d 639, 644-47 (Ct. Cl. 1974); Fischback & Moore Int’l. Corp. v. United States,
617 F.2d 223, 225-228 (Ct. Cl. 1980). This circumstance set the stage for the second CAFC
decision -- which affirmed rejection of the government’s appeal of the ASBCA’s remand
decision even though the remand order had been precipitated by SUFI’s prior Tucker Act suit.
B. Background
Under a 1996 contract with the Air Force NAFI, SUFI invested money to build and
operate telephone systems at certain Air Force base guest lodgings. SUFI was to earn returns on
those investments from tolls on long distance calls, but the Air Force breached the contract in
various and multiple ways, allowing and facilitating contractually prohibited diversions of calls
from the SUFI phones, depriving SUFI of revenue. The contract permitted SUFI to block access
to other carriers’ networks and required the AF to remove or disable any pre-existing Defense
Switched Networks (DSN) telephones in the lodging hallways and lobbies. Nevertheless, the
2 DCACTIVE-37569830.1
DSN phones remained in place for use after January, 1997 and, with the assistance of Air Force
operators, lodging guests engaged “toll skipping” even when using in-room phones.
In 2003, the Air Force ordered SUFI to “remove from its system all restrictions on toll
free calling.” SUFI challenged this directive as a “material breach” and invoked the contract’s
disputes clause, appealing to the ASBCA. The Board held that the breach was material and
declared that SUFI could therefore stop performance of the contract.. ASBCA No. 54503, 04-2
BCA ¶32,714 and ¶30,788.
SUFI stopped work based on this ASBCA ruling, terminated the contract, and negotiated
a separation agreement, selling the telephone system to the Air Force for $2.275 million. The
agreement reserved SUFI’s claims for breach of contract plus interest. The Air Force took over
the system in June 2005. Shortly thereafter SUFI submitted 28 monetary claims totaling $130.3
million in damages for the Air Force’s numerous and material breaches. The largest claims were
for lost revenues due to the failure of the Air Force to remove the hallway/lobby phones as
required by contract and for lost profits for the expected full term of the contract. When the
contracting officer denied the claims, SUFI appealed to the Board, which found multiple
breaches in addition to its initial material breach ruling, but granted only partial monetary relief,
in a series of decisions between 2006 and 2010. The Board’s final award was approximately
$7.4 million in damages, plus interest.
In 2011, the COFC issued the en banc decision in Slattery v. United States, making it
possible for SUFI to file a contract action seeking judicial review in the Court of Federal Claims
of the Board’s rulings on 22 of its claims. SUFI moved for judgment on the administrative
record. On November 8, 2012, the COFC awarded SUFI additional damages of $114 million
plus interest, for the claims that were appealed. 108 Fed. Cl 287 (2012). The Government
appealed the COFC’s increased award, contesting only the amount of damages. SUFI cross-
appealed, seeking additional damages.
C. The Federal Circuit’s 2014 Decision
The CAFC set aside the COFC’s award of damages, stating that it improperly took the
decision away from the ASBCA. However, the CAFC affirmed the COFC’s reversal of the
ASBCA’s inadequate damages and ordered a remand for further findings “consistent with this
opinion.” The most significant issues for remand (in terms of amounts) involved Count III
(lobby/hallway phones) and Count XVI (post termination lost profits). 755 F.3d 1305 (Fed. Cir.
2015).
Count III
The Federal Circuit agreed with the COFC that the Board erred in determining SUFI’s
lost revenues for Count III, finding three principal deficiencies.
First, “the Board failed to consider whether an adverse inference should be drawn against
the government on the issue of the missing DSN call records, as the Air Force failed to maintain
the records even though it was on notice of this potential contract dispute,” citing Bigelow v.
RKO Radio Pictures, Inc., 327 U.S. 251… (1946) (“… the wrongdoer may not object to the
plaintiff’s reasonable estimate…because not based on more accurate data which the wrongdoer’s
3 DCACTIVE-37569830.1
misconduct has rendered unavailable”). On this basis, the court held that the Board’s rejection of
SUFI’s estimate based on records of “surrogate” phones needed to be reconsidered. 755 F.3d at
1315.
Second, the Board’s “apparent” but unexplained “premise” that SUFI could not charge
for any “official” long-distance calls was questionable. Discarding “87% of the calls on the
hallway/lobby phones” on this premise was “so far from self-evident that it cannot be adopted
without substantial record support and reasoned consideration of the pertinent evidence.” 755
F.3d at 1315.
Third, the Board provided “inadequate support for its rejection of SUFI’s core contention
that its lost revenues due to the Air Force’s failure to remove the hallway/lobby phones could be
calculated based on “the number of non-local minutes these phones were used (reasonably
estimated).” The court noted that the Board “adverted in passing to, though did not rely on,” the
personal cost to the caller of using the SUFI phones as a disincentive, but “did not analyze the
distinctive circumstances of the present case,” or “consider all relevant real-world record facts”
(e.g., “long lines” and “little if any privacy”) that might indicate, “on balance, fewer minutes
were spent on hallway/lobby calls that would have been spent” in guest rooms. In sum, the
Board failed to examine this and possibly other evidence “to set forth a sound basis for rejecting
the number of minutes of calls placed on ‘surrogate’ DSN phones as a reasonable estimate of
measure of minutes lost to SUFI.” 755 F.3d at 1316.
Noting that the “Board’s rationale is deficient for the foregoing reasons,” and specifically
directing a review its “apparent premise about ‘official’ long distance DSN calls,” the court
ordered that Count III be remanded to the Board.
Count XVI
The amount of post termination lost profits under Count XVI was derived in part from
the estimate of lost revenues during performance, but there was also a dispute about the length of
the post termination period – or the expected term of the contract’s performance period. The
COFC had rejected the Board’s reading that the 15-year term ran from the date of contract
award, instead interpreting the differing language of relevant contract clauses as establishing 15-
year terms for each site.
The Circuit panel, reasoning that “it makes sense for the contract to provide a site-
specific performance period to permit recoupment of [installation] investments,” concluded that
“the fairer reading of the contract language considering the economic logic of the bargain” was
“a performance period for each site.” Accordingly, the panel affirmed the COFC conclusion that
post-termination profits “should be calculated based on a term of fifteen years from the date of
completion and acceptance of the telephone system at each site,” rather than the initial contract
award, and remanded with the directive that the Board “recalculate” lost profits based on this
extended period. 755 F.3d at 1322.
D. The ASBCA’s Remand Decisions
On remand, the Air Force requested that the Board reopen the record, admit expert
testimony, and take judicial notice of 11 proposed facts. The Board declined and ordered that the
4 DCACTIVE-37569830.1
evidentiary record remained closed. The ASBCA’s remand decision “identif[ied] the CAFC’s
specific remand instructions” and stated supplemental findings or conclusions “as appropriate.”
15-1 BCA ¶35,878 at 175,394.
Count III
The Board identified the primary issues specified by the CAFC – adverse inference from
missing call records, ‘official calls,’ and “adequate support for rejecting SUFI’s contention” that
the reasonable number of additional network minutes, but for the breaches, was “the number of
non-local minutes on the hallway/lobby phones, including the effect of “real would record facts.”
15-1 BCA at 175,394.
Addressing first “whether SUFI’s lost revenues must exclude official calls,” the Board
noted that a) “SUFI’s contract proposal stated that it expected the “exclusive right” to long
distance calls and “a percentage of revenue” from those calls; b) the contract did not “expressly
or by implication require SUFI to exclude ‘official’ long distance calls,” and c) a modification
confirmed that only local DSN calls were provided “at no cost.” Accordingly the Board held
that “the contract included official calls among the long distance calls to whose revenues SUFI
was entitled.” 15-1 BCA at 175,396.
This changed decision had implications for the acceptability of SUFI’s “surrogate” call
data. As the Board explained, its earlier decision rejected such records because they did not
provide data by which the extent of official and non-official calls could be reasonably
determined. 09-1 BCA ¶34, 018 at 168,142. On remand “in light of the CAFC decision, the
distinction of ‘official’ from ‘nonofficial’ calls is not material under the terms of the contract.”
15-1 BCA at 175,396.
Having thus resurrected the surrogate data, the Board turned to the adverse inference:
“with respect to the risk of uncertainty of proof of damages, we give SUFI the benefit of an
adverse inference drawn from the missing government DSN call records.” Accordingly, the
Board held that “one can reasonably determine from the X4619 long distance call data SUFI’s
lost revenue attributable to hallway/lobby DSN calls …” 15-1 BCA at 175,396.
The remand decision then addressed the Air Force arguments that SUFI’s lost revenues
should be discounted…and the magnitude of ‘real-world record facts’ regarding the effects of
SUFI’s long distance rates. The Board rejected as immaterial evidence of 30 complaints about
SUFI tolls from thousands of guests over 9 years. 15-1 BCA at 175,396.
The ASBCA also rejected the primary Air Force argument on remand – that the Count III
lost revenues should be measured “by comparing SUFI’s actual revenue immediately before and
after the addition or removal of hallway/lobby phones.” The pre/post breach comparison of
revenues had been raised in the earlier Board proceedings but was not effectively supported or
pursued. The revenue comparison argument had not been mentioned in the proceedings before
the COFC or the CAFC. 15-1 BCA at 175,396. In support of its contention, the Air Force
argued on remand from extensive analyses that had not previously been presented to the Board.
In its remand decision, the Board found that “it is apparent that there is no valid before breach
period to compare to the breach period for determining lost revenues.” “Moreover,” the Board
5 DCACTIVE-37569830.1
added, “the government’s new theory was not raised at the Board,” in connection with earlier
Board decisions “and hence was waived, see Roscoe-Ajax Construction Co. v. United States,
499 F.2d 639, 649-650 (Fed. Cir. 1974), and the CAFC’s mandate did not order the Board to
make revised findings and to decide such a theory.” 15-1 BCA at 175,397.
The Air Force moved for reconsideration, arguing generally that the remand decision did
not comply with CAFC’s mandate, found facts that were unsupported by substantial evidence,
and made substantial errors of law. The motion challenged the Count III decision, as
misapplying the adverse inference, mischaracterizing the “before/after” revenue comparisons as
a “new theory,” and relieving SUFI of its burden of proving damages.
The Board, criticized for its reference to revenue comparisons as a “new theory,”
acknowledged that “the before/after studies repeat[ed] prior arguments,” but noted that they had
been previously “rejected,” citing a pre-appeal decision, “and do not qualify for reconsideration.”
15-1 BCA at 175,835.
The Board summarized its rejection of these Air Force complaints as follows:
On remand the Board considered findings [of missing records and
notice of the potential dispute] and drew the adverse inference that
the missing DISA call record evidence does not support the
government’s defenses to Count III damages derived from SUFI’s
surrogate phone…Proof of intentional destruction of evidence or
wrongdoing is not needed to draw such adverse inference. See
Bigelow v. RKO Radio Pictures, Inc. …In this case, that adverse
inference and misinterpretation of the contract terms specifying
SUFI’s earned revenues, supported our holding that SUFI’s
surrogate phone X4619 call data evidence was reasonable estimate
of Count III damages and our rejection of the government’s “real
world record facts” which do not support its theories of discounted
damages and revenue comparison. SUFI XVII, 15-1 BCA ¶35,878
at 175, 396-97. Thus we need not decide the issue of government
waiver of such damage theories…Our foregoing adverse inference
did not dispense with SUFI’s burden of proof of damages as
respondent asserts. [15-1 BCA at 75, 834-35.]
On remand, the ASBCA thus found $52.7 million in Count III damages.
Count XVI
Acknowledging the CAFC ruling that lost profits should be recalculated based on a 15-
year term from the completion and acceptance of each site, “[t]he Air Force argue[d] that
‘completion and acceptance’ of each site occurred at cut-over, SUFI should not receive a
windfall of added years of lost profits by its alleged breach by failing to complete LFTS testing
before cut-over, and its profit rates were unsustainable for 15 years into the future.” The Board
rejected these arguments as “not well taken”:
6 DCACTIVE-37569830.1
We are not free to disregard the CAFC panel’s unambiguous
holding that the 15-year term commenced from the date of
completion and acceptance of LFTS. The Air Force points to no
evidence to substantiate its SUFI breach assertion. The CAFC did
not order the Board to make fact-finding with respect to contract
cut-over, test, and acceptance procedures or profit sustainability.
[15-1 BCA at 175,403.]
The Air Force motion for reconsideration repeated these arguments, which under board
precedents, were therefore rejected. 15-1 BCA ¶35,992 at 175,835.
In sum, on remand of Count XVI, the ASBCA awarded $57 million in post-termination
lost profits. As the Board explained, “the recalculations included (i) lost revenues found by the
Board in counts not challenged in Wunderlich Act review; (ii) lost revenues for counts affirmed
by the Federal Circuit, and (iii) the lost revenue calculations for counts in this remand decision.”
15-1 BCA at 175, 403.
E. The Second Federal Circuit Decision
The ASBCA’s remand decision, taking into account all the disputed claims, gave SUFI
an award of close to $114 million plus interest. Not surprisingly, SUFI was completely satisfied
with the ASBCA’s decision on remand and so advised the COFC. However, the Justice
Department filed a “Notice Regarding Dissatisfaction” and sought review in the COFC and the
CAFC. Applying “the Supreme Court’s principles in S&E Contractors, “the COFC rejected this
request: “SUFI’s satisfaction with the decision is the end of the line” and “[t]he sole
responsibility of the Department of Justice is to implement the Board’s decision.” 122 Fed. Cl.
257, 262 (2015). The Department of Justice appealed to the Federal Circuit, and SUFI moved
for summary affirmance, which the CAFC granted.
CAFC Rejects Exceptions to S&E Contractors
The CAFC endorsed the S&E Contractors principles stated by the COFC, adding that
The Court of Claims long ago summarized the Wunderlich Act
rule: in the absence of fraud or bad faith, ‘the boards [a]re the
agencies and [a]re also the Federal Government’. Fischbach &
Moore, 617 F.2d at 228. [817 F.3d at 777.]
The CAFC noted that in Roscoe Ajax, the Court of Claims recognized a narrow exception: when
the contractor challenges a Board decision in a Tucker Act suit, the Government may assert a
counter claim, but only “when the counter claim is just one ‘facet’ of a single specific dispute
that the contractor is still keeping alive in court.” 499 F.2d at 646. The CAFC hastened to add
that the “limited circumstance” was “doubly inapplicable here,” because “the United States
asserted no counter claims in this case; and in any event the specific dispute is over because the
contractor is satisfied.” 817 F.3d at 777, n.2.
The CAFC rejected the DOJ’s effort to distinguish S&E Contractors on the ground that
the remand decision should be viewed as the result of SUFI’s Tucker Act claim or as a
continuation of the judicial process initiated by SUFI:
7 DCACTIVE-37569830.1
Here the Board’s new decision is not the first Board decision in
this case. But we have been offered no good reason why that fact
provides a basis for a different conclusion under the S&E line of
authority. The new decision is no less the position of the United
States just because it is not the initial decision… Holding the
United States to its Board – determined position is a straight-
forward application of the long-established S&E line of authority
and of the Wunderlich Act policy it implements. [817 F.3d at 778.]
The court also addressed the argument that “a different conclusion is warranted because
‘the Wunderlich Act was repealed’ in 2011 and the Contract Disputes Act…which partly
replaced the Wunderlich Act… clearly does authorize Government appeal” of adverse Board
decisions. This “suggestion” was rejected as a non-sequitur:
The conclusion urged does not follow from its premises. The
repeal of the Wunderlich Act certainly means that the legal issues
presented here are of little if any future significance. But neither
the repeal of the Act nor the different provisions of a different
statute that is inapplicable here…provides any basis for rejecting a
straight-forward application of the precedents under the
Wunderlich Act.
The court noted that the two statutes “co-existed… for three decades,” during which Fischbach
& Moore was decided by applying Wunderlich Act law. 817 F.3d at 778.
The most significant DOJ argument (and one related to the continuing proceeding
concept) to avoid the S&E Contractors doctrine was that a challenge of the contractor-accepted
Board decision should be permitted “to ensure that the Board complied with this court’s 2014
mandate.” The court rejected this contention as having “no sound basis,” because it is contrary
to “the simple, established basis of the doctrine” and because none of the cited mandate
compliance authorities “were rendered in cases that arose under the Wunderlich Act or involved
a contract disputes clause like the one here.” Further, the court added, none address
“circumstances like the ones in this case” – “where the government took a (contract) position
that the [contractor] challenged in court,” and then the contractor “secured a remand for the
government (Board) to reconsider certain matters decided adversely the challenger, and on
remand the government (Board) reached a decision that the challenger fully accepted and that,
had it been made originally, the government could not challenge in court.” 817 F.3d at 778-779.
CAFC Finds No Non-Compliance with the 2014 Mandate
“In any event,” the CAFC considered the mandate compliance argument, and found no
violation of the 2014 mandate in the ASBCA’s remand decision. First, the court stated the
general rules:
After our mandate issues, the mandate rule forecloses
reconsideration of issues implicitly or explicitly decided on appeal.
For an issue to be implicitly decided, it must be decided by
necessary implication … Moreover, in interpreting this court’s
8 DCACTIVE-37569830.1
mandate both the letter and the spirit of the mandate must be
considered. [817 F.3d at 779.]
Then, applying this general rule, the CAFC1 explained what its mandate did not do in a series of
declarative statements:
[Nothing] in our 2014 CAFC Decision or the specific descriptions
of what was to be done on remand – altered the long established
[S&E Contractors] rule…
x x x
..the court in its 2014 decision did not give the United States any
rights in the Board proceedings, substantive or procedural, that the
Board did not already recognize. Indeed the United States did not
ask for any relief against the Board.
x x x
This court did not restrict the Board’s authority to hold the United
States to any waivers or forfeitures of arguments or require to
Board to consider arguments the United States did not present to
this court, or forbid the Board to rely on the existing record in
deciding the remand questions.
x x x
Nor did the court constrain the Board’s “wide discretion”
regarding either the weighing of evidence to find facts (2014 U.S.
Br. 26) or the recitation of evidence and contentions when
explaining its findings of fact.2 [817 F.3d at 779-780.]
The CAFC then turned to the context (and a recurring theme): “we note that no United
States counter claims were before us in 2014 and the court’s 2014 rulings as to deficiencies in
the Board’s decisions on several issues all concerned deficiencies creating potential prejudice to
SUFI.” The court acknowledged that it had criticized the COFC regarding the burden of proof of
damages, but pointed out that it had recognized that the Board itself “did not err in placing the
burden on SUFI.” “More generally, all of the court’s remand directives came in the context of
explanations that the Board had not given SUFI’s arguments and evidence their due.” 817 F.3d
at 780.
In a further alternative, the CAFC stated that “[e]ven if we were to read some of this
court’s explanations of Board deficiency as mandates to the Board favoring the United States, we
would not find that the Board in 2015 committed a mandate violation.” 817 F.3d at 780. The
opinion then reviewed the ASBCA’s compliance with specific directions re Counts III and XVI.
1 The 2016 CAFC panel was the same as the panel that issued the 2014 mandate.: Judges Newman, Lourie,
and Taranto. Judge Taranto wrote both opinions. 2 Citing precedents that a court upholds “a decision of less than ideal clarity if the agency’s path may
reasonably be discerned” and “presumes that a fact finder reviews all the evidence presented, even evidence not
discussed by the fact finder.” 817 F.3d at 780.
9 DCACTIVE-37569830.1
For example, addressing DOJ complaints about the adverse inference concerning proof of
Count III damages, the court said,
…the most we did was to order the Board to consider the adverse-
inference question in light of Bigelow. We also noted – what
cannot help the United States – that “the Air Force failed to
maintain [certain call] records even though it was on notice of this
potential contract dispute”… The Board on remand duly
considered the question in light of Bigelow. [817 F.3d at 780.]
Responding to the argument that “the burden-of-proof discussion in our 2014 decision” ran in
favor of the United States, the CAFC commented: “But the Board on remand specifically noted
that its adverse-inference conclusion ‘did not dispense with SUFI’s burden of proof of damages’,
a burden it had recognized even before the court’s 2014 decision.” 817 F.3d at 780. The
CAFC’s 2016 Decision also recalled that “[t]he United States in this case has relied on this
court’s observation that ‘the amount of damages to award is not an exact science and the
methodology of assessing and computing damages is committed to the sound desertion of the
[trier of fact]’. Ferguson Beauregard/Logic Controls v. Mega System LLC, 350 F.3d 1327, 1345
(Fed. Cir. 2003)….” [817 F.3d at 781.]
With respect to Count XVI the court disposed the DOJ criticism of the remand decision’s
failure to recognize a “completion and acceptance” date at the time of cut-over, by stating, “This
court in 2014 mandated nothing about ‘cut-over’ dates.” 817 F.3d at 780-781 (also noting that
the government made “no argument about cut-over data in the 2014 appeal”).
As a concluding thought, the CAFC noted that “[we] presume that a fact finder reviews
all the evidence presented unless [it] explicitly expresses otherwise,” and speculated that, given
the e