              ARMED SERVICES BOARD OF CONTRACT APPEALS

Application Under the Equal Access            )
 to Justice Act of --                         )
                                              )
SST (Supply & Service Team) GmbH              )      ASBCA No. 59630
                                              )
Under Contract No. W912PB-06-D-001 l          )

APPEARANCE FOR THE APPELLANT:                        Paul D. Reinsdorf, Esq.
                                                      Frankfurt/Main Germany

APPEARANCES FOR THE GOVERNMENT:                      Raymond M. Saunders, Esq.
                                                      Army Chief Trial Attorney
                                                     CPT Jessica E. Hom, JA
                                                      Trial Attorney

                OPINION BY ADMINISTRATIVE JUDGE PROUTY

       Before the Board is the fully briefed application for fees pursuant to the Equal
Access to Justice Act (EAJA), 5 U.S.C. § 504, filed by appellant, Supply & Service
Team GmbH (SST). Because SST is small enough a business to be eligible for fees,
was the prevailing party, and the government's position was not substantially justified,
we grant SST's application.

                                   BACKGROUND 1

        This appeal involves a contract2 (the contract) between the United States Army
(Army) in Germany and SST to provide role-playing actors for the purpose of helping
to train soldiers for interactions with civilians on the battlefield. After the Army
changed the contract's terms to require the use of Arabic and Pashto-speaking role
players, SST encountered difficulty complying with the terms of the contract as
originally negotiated. Ultimately, the parties made some adjustments to their
expectations and executed a contract modification (Mod 4) in response to SST's
request for equitable adjustment. All appeared to be well until an Army Audit Agency
(AAA) audit was conducted several months later. This audit concluded that SST had
not fully complied with its contractual obligations and resulted in the Army's seeking
the return of €688,531 supposedly overpaid to SST. This demand ultimately led to the
appeal before us.

1
  Unless otherwise noted, these facts are all taken from our earlier decision granting
       summary judgment in favor of SST: Supply & Service Team GmbH,
       ASBCA No. 59630, 17-1BCA~36,678, reconsideration denied, 17-1 BCA
       ~ 36,742.
2
  Contract No. W912PB-06-D-0011.
       Upon consideration of a fully-briefed motion for summary judgment, we granted
judgment in favor of SST. In so doing, we concluded that the terms of Mod 4 precluded
new claims from either party, including the government. We also held that the Army
could not maintain an affirmative defense of fraud that it had advanced before us
because there was no evidence from another tribunal supporting a finding of fraud. The
government submitted a motion for reconsideration elaborating on certain arguments
presented in its original opposition to the motion for summary judgement, which we
denied. Supply & Service Team GmbH, ASBCA No. 59630, 17-1 BCA if 36,742.

                                        DECISION

        EAJA provides that a business with a net worth less than $7,000,000 that
prevails before the Board "shall [be] award[ ed]" the fees and other expenses that it
incurred unless the position of the government was "substantially justified" or other
circumstances make such an award unjust. 5 U.S.C. § 504; see also Rex Systems, Inc.,
ASBCA No. 52247, 02-1BCAif31,760 at 156,854. The government has helpfully
conceded that SST is the prevailing party, that its application is timely, and that it is of
a size to be eligible for an EAJA award (gov't br. at 4-5). Moreover, its opposition to
SS T's filing does not contest the amount sought by SST. Instead, the entirety of the
government's opposition to SST's EAJA application rests upon the notion that the
government's position was "substantially justified" as that term is used in the EAJA
statute (gov't br. at 5-11 ). In particular, the government argues that the contracting
officer acted justifiably when he relied upon the findings of the AAA to offset SST's
costs (id. at 6-8); that its interpretation of Mod 4 to be only a limited waiver of its
rights was substantially justified (id. at 8-9); and that it was substantially justified in
relying upon its affirmative defense of fraud (id. at 9-11 ). We disagree on all these
particulars.

       The law regarding "substantial justification" has changed little of late. To
prevail, the government is not required to prove that it had a substantial likelihood of
victory in the litigation, but it does bear the burden of proof to demonstrate that "a
reasonable person could think [the government's position is] correct, that is [that] it
has a reasonable basis in law and fact." Pierce v. Underwood, 487 U.S. 552, 566 n.2
(1988); Rex Systems, 02-1BCAif31,760 at 156,854. Our decision in Rex Systems
includes an extensive discussion of matters to be considered in substantial justification
determinations, amongst them, whether the appeal presented a novel issue and whether
there was contrary precedent. 3 Id. at 156,854-55 (citations omitted). Put another way,
the government position is more likely to be substantially justified when greater "legal
uncertainty" is presented. Id. at 156,855 (citing Pat's Janitorial Services, Inc.,
ASBCA No. 29129, 86-2 BCA if 18,995 at 95,923).

3
    Rex Systems also included whether the matter was one of first impression, see
         02-1BCAif31,760 at 156,854, but we see that as little different than whether
         the issue presented was "novel."
                                           2
        With this in mind, we tum to the arguments presented by the government.
First, the government is mistaken in presenting its reliance upon the AAA audit as a
reasonable basis for its administrative and litigation decisions separate and apart from
its interpretation of Mod 4. As we explained in our earlier decision, Mod 4 - executed
by the parties well before the AAA audit - constituted an agreement "that all actions
under [the relevant task order] were final" and was a waiver of the Army's "rights to
make future challenges upon the money paid to SST." SST, 17-1 BCA ,-r 36,678 at
 178,600-01. Thus, even if the AAA findings had merit (which we need not decide) or
it was appropriate for the contracting officer to rely upon them, they would not offer
justification for the contracting officer's decision because the government had
previously waived its right to act upon such findings.

        This, then, begs the question of whether the government was substantially
justified in its preferred interpretation of Mod 4: that it was not a wholesale waiver of
the government's rights with respect to the salient task order. Though our decision
with respect to the scope of Mod 4 did require the interpretation of superficially
ambiguous contract terms, we engaged in our analysis using the written terms of
Mod 4, the straightforward application of well-settled law on contract interpretation,
and workaday logic. SST, 17-1BCA,-r36,678 at 178,600. We found, in fact, that
there was no ambiguity in Mod 4 and that our reading was "the only plausible reading
of the release language." Id. No legal uncertainty was presented that would preclude
a party from engaging in the same analysis, and merely because a matter is
complicated does not mean that taking the incorrect side of it is reasonably supported
by law and fact. The waiver in Mod 4 was sweeping, and interpreting it otherwise was
not a substantially justified position.

       Finally, we tum to the question of whether the government's fraud defense
was substantially justified. The government argues that, since we relied upon the
Federal Circuit decision in Laguna Construction Co. v. Carter, 828 F.3d 1364
(Fed. Cir. 2016), to dispose of this defense, and that decision was only issued in the
midst of this litigation, its reliance upon that defense was substantially justified
(gov't br. at 10-11). The government is mistaken.

       We raised Laguna with the parties because it was evident that the government's
affirmative defense rested upon a theory that was most directly articulated when
Laguna was argued before the Board (prior to the instant appeal). See Laguna
Construction Co., ASBCA No. 58324, 14-1BCA,-r35,748. But the portion of the
Federal Circuit's holding in Laguna that was fatal to the government's defense (that
part which noted that the Board, itself, could not make findings of fraud, but needed to
rely upon the findings of other bodies) relied on a previous decision of ours that has




                                            3
not been challenged and is more than fifteen years old. 4 See Laguna, 828 F.3d at
 1368-69 (citing AAA Eng'g & Drafting, Inc., ASBCA No. 47940 et al., 5 01-1 BCA ~
31,256). Because there was no recent change in the law excusing the government's
belief that it could present a fraud defense to us without factual findings of fraud from
another body, the government's reliance upon such a defense was not substantially
justified.

                                     CONCLUSION

        The government has conceded SST's entitlement to fees under EAJA and has
not carried its burden to prove that its defense of this appeal was substantially justified.
Moreover, the government has not challenged the quantum of $39,767.79 in fees and
expenses sought by SST, which is amply supported by invoices and affidavits and
which appears to us to be reasonable. SST's application for the award of $39,767.79
in fees and expenses is granted.

         Dated: 12 December 2017



                                                    J. REID WoUTY
                                                    Administrative Judge
                                                    Vice Chairman
                                                    Armed Services Board
                                                    of Contract Appeals

    I concur



    RICHARD SHACKLEFORD                             REBA PAGE
    Administrative Judge                            Administrative Judge
    Acting Chairman                                 Armed Services Board
    Armed Services Board                            of Contract Appeals
    of Contract Appeals




4
  In our opinion on the merits we noted that this law might have been ripe for
       re-evaluation, but that the Army declined to argue for it. SST, 17-1 BCA
       ~ 36,678 at 178,601-02.
5 The Laguna decision included an incorrect ASBCA number for AAA Engineering,

       which we have corrected here.
                                             4
          I certify that the foregoing is a true copy of the Opinion and Decision of
    the Armed Services Board of Contract Appeals on an application for fees and other
    expenses incurred in connection with ASBCA No. 59630, Appeal of SST (Supply
    & Service Team) GmbH, rendered in accordance with 5 U.S.C. § 504.

          Dated:



                                                    JEFFREY D. GARDIN
                                                    Recorder, Armed Services
                                                    Board of Contract Appeals




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