               ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of --                                 )
                                             )
Public Warehousing Company, K.S.C.           )      ASBCA No. 59020
                                             )
Under Contract Nos. SP0300-03-D-3061         )
                    SPM300-05-D-3119         )
                    SPM300-05-D-3128         )

APPEARANCES FOR THE APPELLANT:                      Michael R. Charness, Esq.
                                                    Jamie F. Tabb, Esq.
                                                     Vinson & Elkins LLP
                                                     Washington, DC

APPEARANCES FOR THE GOVERNMENT:                     Daniel K. Poling, Esq.
                                                     DLA Chief Trial Attorney
                                                    John F. Basiak, Jr., Esq.
                                                    Nathaniel A. Work, Esq.
                                                    Keith J. Feigenbaum, Esq.
                                                     Trial Attorneys
                                                     DLA Troop Support
                                                     Philadelphia, PA

          OPINION BY ADMINISTRATIVE JUDGE THRASHER
  ON THE GOVERNMENT'S PARTIAL MOTION TO DISMISS FOR LACK OF
SUBJECT MATTER JURISDICTION AND MOTION FOR SUMMARY JUDGMENT

       This appeal arises from the three captioned Prime Vendor contracts between
appellant, Public Warehousing Company, K.S.C. (PWC), and the Defense Supply Center
Philadelphia (DSCP), since renamed DLA Troop Support, a component of the Defense
Logistics Agency (DLA). PWC appeals from the denial of its 5 December 2011 certified
claim, as revised by its 26 February 2013 letter, seeking $4,605,594.53 in interest
penalties allegedly due pursuant to the Prompt Payment Act, as amended, 31 U.S.C.
§§ 3901-3907, and the terms of the captioned contracts. Our jurisdiction to entertain this
appeal derives from the Contract Disputes Act of 1978 (CDA), 41 U.S.C. §§ 7101-7109.

        The government originally moved to dismiss this appeal, in part, for lack of
jurisdiction, alleging that portions of appellant's claim were barred by the CDA's
six-year statute of limitations, 41 U.S.C. § 7103(a)(4)(A). Following full briefing on the
government's partial motion to dismiss, the United States Court of Appeals for the
Federal Circuit issued its decision in Sikorsky Aircraft Corp. v. United States, 773 F.3d
 1315 (Fed. Cir. 2014). By order dated 15 December 2014, the Board requested
supplemental briefing regarding the impact of Sikorsky on the government's motion.
       In response to the Board's 15 December 2014 order, the government filed a
document titled, "DLA's Motion for Summary Judgment and Supplemental Brief in
Support ofDLA's Partial Motion to Dismiss." In this submission, the government
"renews its Partial Motion to Dismiss for Lack of Subject Matter Jurisdiction and also
moves for Summary Judgment on the grounds that ... PWC's untimely requests for
[Prompt Payment Act] interest are barred" (gov't mot. at 2). 1 In addition, the government
seeks summary judgment on the basis that the exception for payments related to military
contingency operations in the Office of Management and Budget's (OMB's) regulations
implementing the Prompt Payment Act, 5 C.F.R. § 1315. l(b)(2), precludes PWC from
succeeding on its claim (gov't mot. at 2, 13-16).

        In Sikorsky, as the government acknowledges, the Federal Circuit held that the
six-year statute of limitations in the CDA is not a jurisdictional bar. 773 F.3d at 1320-22.
The court's decision in Sikorsky is binding on this Board. Kellogg Brown & Root
Services, Inc., ASBCA No. 58175, 15-1BCAii35,988 at 175,825; Combat Support
Assocs., ASBCA Nos. 58945, 58946, 15-1 BCA ii 35,923 at 175,591, vacating on recon.
 14-1BCAii35,782. Because the CDA's six-year statute of limitations "provides no
basis to dismiss an appeal for lack of jurisdiction," Combat Support, 15-1BCAii35,923
at 175,591, the government's partial motion to dismiss for lack of subject matter
jurisdiction is denied. Accordingly, we address only the government's motion for
summary judgment below.




1
    The government acknowledges that the Federal Circuit held in Sikorsky that the CDA's
         six-year statute of limitations is not jurisdictional (gov't mot. at 16-17). However,
         the government argues that, with respect to the statute of limitations issue,
         dismissal for failure to state a claim upon which relief can be granted is
         appropriate (id. at 18-20). Although the government casts its statute of limitations
         argument in terms of dismissal for failure to state a claim, the government does
         not cite to the allegations in PWC's complaint, but rather speaks of an absence of a
         dispute of material fact (id. at 19-20). In its response, PWC treats the
         government's submission as seeking summary judgment on the statute of
         limitations issue (see app. resp. to gov't mot. at 58-59). The government does not
         contradict this characterization in its reply. We therefore treat the government's
         submission as seeking partial summary judgment based upon the CDA's six-year
         statute of limitations. Cf Dick Pacific/GHEMM, JV, ASBCA No. 55829, 08-2
         BCA ii 33,937 at 167,941 (noting that where the parties present matters outside the
         pleadings that are not excluded by the Board, a motion to dismiss for failure to
         state a claim is typically treated as a motion for summary judgment).
         STATEMENT OF FACTS (SOF) FOR PURPOSES OF THE MOTION

The Prompt Payment Act and Its Implementing Regulations

        1. Congress enacted the Prompt Payment Act, Pub. L. No. 97-177, 96 Stat. 85
(1982), to "provide incentives for the Federal Government to pay its bills on time" and to
"relieve private vendors of the unfair burdens which they frequently must bear as a result
of doing business with the Government." H.R. Rep. No. 97-461, at 1, 11 (1982),
reprinted in 1982 U.S.C.C.A.N. 111, 121. To accomplish these goals, if a federal agency
failed to make a payment by the required payment date, the Prompt Payment Act required
the agency to pay an interest penalty in accordance with regulations prescribed by the
Director of the Office of Management and Budget (OMB). Pub. L. No. 97-177,
§ 2(a)(l), 96 Stat. 85.

       2. OMB implemented the Prompt Payment Act by issuing OMB Circular A-125.
Issuance of Circular A-125, "Prompt Payment," 47 Fed. Reg. 37,321(Aug.25, 1982).
OMB revised Circular A-125 in 1984, 1985, and 1987. Issuance of Attachment to OMB
Circular A-125, Prompt Payment, 49 Fed. Reg. 28,140 (July 10, 1984); Issuance of
Attachment 2 and Other Revisions to OMB Circular A-125, "Prompt Payment," 50 Fed.
Reg. 14,688 (Apr. 12, 1985); Revision to Circular No. A-125, "Prompt Payment," 52 Fed.
Reg. 21,926 (June 9, 1987). In February 1988, the Federal Acquisition Regulation (FAR)
was amended to implement the Prompt Payment Act and OMB Circular A-125 by adding
FAR Subpart 32.9 and a Prompt Payment clause at FAR 52.232-25. Federal Acquisition
Regulation; Ratification of Unauthorized Commitments and Prompt Payment, 53 Fed.
Reg. 3,688 (Feb. 8, 1988).

       3. Concerned that full compliance with the Prompt Payment Act had not been
achieved and that problems remained, H.R. Rep. No. 100-784, at 9, 12-13 (1988),
reprinted in 1988 U.S.C.C.A.N. 3036, 3037, 3040-41, Congress enacted the Prompt
Payment Act Amendments of 1988, Pub. L. No. 100-496, 102 Stat. 2455. As amended
by the 1988 amendments, the Prompt Payment Act provides that, in accordance with
regulations prescribed by OMB, "the head of an agency acquiring property or service
from a business concern, who does not pay the concern for each complete delivered item
of property or service by the required payment date, shall pay an interest penalty to the
concern on the amount of the payment due." 31 U.S.C. § 3902(a). The interest penalty
"shall be paid for the period beginning on the day after the required payment date and
ending on the date on which payment is made" and "such penalty shall be paid without
regard to whether the business concern has requested payment of such penalty." Id.
§ 3902(b), (c)(l). The Act requires the head of the agency to pay the interest penalty •·out
of funds made available to carry out the program for which the penalty is incurred." Id.
§ 3902(f).

      4. The Prompt Payment Act, as amended by the 1988 amendments, directs the
Director of OMB to prescribe regulations to implement section 3902 and provides

                                             3
detailed instructions regarding the content of the regulations. 31 U.S.C. § 3903. The Act
requires the OMB regulations to generally provide a required payment date of 30 days
after receipt of a proper invoice if no other payment date is established by contract, but
also requires the regulations to prescribe earlier payment dates for payments related to
certain food and agricultural products. Id. § 3903(a)(l)-(4). The Act also requires that
the OMB regulations "permit an agency to make payment up to 7 days prior to the
required payment date, or earlier as determined by the agency to be necessary on a
case-by-case basis." Id. § 3903(a)(8). Lastly, the Prompt Payment Act Amendments of
1988 require the modification of the FAR to provide appropriate solicitation provisions
and contract clauses to implement the Prompt Payment Act and OMB's regulations.
Pub. L. No. 100-496, § 11, 102 Stat. 2455, 2463-65 (codified at 31 U.S.C. § 3903 note).

        5. In 1989, OMB revised Circular A-125 to implement the 1988 amendments to
the Prompt Payment Act. Revision to Circular No. A-125, "Prompt Payment," 54 Fed.
Reg. 52,700 (Dec. 21, 1989). The revised Circular A-125 prescribed policies and
procedures to be used by agencies to comply with the Prompt Payment Act as amended.
The revised Circular A-125 prescribed rules for determining whether a proper invoice has
been submitted and determining the payment due date, directing agencies to make
payment no more than 7 days prior to the payment due date unless it determines that
earlier payment is necessary on a case-by-case basis, and providing guidance for
calculating interest due on late payments. See id. at 52,706-13. As relevant here, the
revised Circular A-125 did not include an exception for payments related to military
contingency operations.

       6. In 1998, OMB issued a proposed rule that would make numerous revisions to
OMB's prompt payment rules and replace OMB Circular A-125 with codified
regulations. Prompt Payment, 63 Fed. Reg. 33,000 (June 17, 1998). OMB proposed to
add "one additional exception to the Prompt Payment Act requirements ... for payments
related to certain specified emergencies and military operations." Id. at 33,001. OMB
also proposed to add a section that would provide for "early payment for ... payments
related to emergencies and disasters, as well as for military deployments." Id.

        7. In September 1999, OMB promulgated the final rule codifying its revised
prompt payment regulations in Part 1315 of Title 5 of the Code of Federal Regulations.
Prompt Payment, 64 Fed. Reg. 52,580 (Sept. 29, 1999). As revised, OMB's prompt
payment regulations provide that "[a]ll Executive branch vendor payments and payments
to those defined as contractors or vendors ... are subject to the Prompt Payment Act with
the following exceptions: ... (2) Payments related to ... military contingency operations
(as defined in 10 U.S.C. 10l(a)(13))." 5 C.F.R. § 1315.l(b)(2). 2 OMB's regulations also
provide:


2
    Section 1315 .1 (b )(2) also excepts payments related to emergencies and the release or
         threatened release of hazardous substances from the Prompt Payment Act.
                                               4
             An agency shall make payments no more than seven days
             prior to the payment due date, but as close to the due date as
             possible unless the agency head or his designee has
             determined, on a case-by-case basis for specific payments,
             that an earlier payment is necessary.. . . An agency may use
             the "accelerated payment methods" in § 1315. 5 when it
             determines that such earlier payment is necessary.

5 C.F.R. § 1315.40). Section 1315.5, titled "Accelerated payment methods," in tum provides
at paragraph (c) that "payments made under a military contingency (as defined in 10 U.S.C.
10l(a)(l3)) may be made as soon as the contract, proper invoice, receipt and acceptance
documents or any other agreement are matched. Vendors shall be entitled to interest penalties
if invoice payments are made after the payment due date." C.F.R. § 13 l 5.5(c).

       8. In October 1999, Congress amended section 3903 of the Prompt Payment Act
to provide:

                     (c) A contract for the procurement of subsistence items
             that is entered into under the prime vendor program of the
             Defense Logistics Agency may specify for the purposes of
             section 3902 of this title a single required payment date that is
             to be applicable to an invoice for subsistence items furnished
             under the contract when more than one payment due date
             would otherwise be applicable to the invoice under the
             regulations prescribed under paragraphs (2), (3), and (4) of
             subsection (a) or under any other provisions oflaw. The
             required payment date specified in the contract shall be
             consistent with prevailing industry practices for the
             subsistence items, but may not be more than 10 days after the
             date of receipt of the invoice or the certified date of receipt of
             the items. The Director of the Office of Management and
             Budget shall provide in the regulations under subsection (a)
             that when a required payment date is so specified for an
             invoice, no other payment due date applies to the invoice.

National Defense Authorization Act for Fiscal Year 2000, Pub. L. No. 106-65, § 1009(2),
113 Stat. 512, 738-39 (1999).

        9. On 22 May 2008, the Inspector General (IG) of the United States Department
of Defense (DoD) issued Report No. D-2008-098 titled, "Internal Controls Over
Payments Made in Iraq, Kuwait and Egypt" (app. resp. to gov't mot., ex. K). In this
report, the DoD IG noted an apparent conflict between 5 C.F.R. §§ 1315.1and1315.5,
and recommended that the "Under Secretary of Defense for Acquisition, Technology, and
Logistics update the [FAR] and the Defense Federal Acquisition Regulation Supplement

                                             5
[DFARS] to provide guidance that addresses [OMB's] exception to the Prompt Payment
Act for payments related to military contingency operations" (id. at 22-25).

        10. On 19 August 2009, the Director of Defense Procurement and Acquisition
Policy issued a class deviation from FAR Subpart 32.9, which implements the Prompt
Payment Act and OMB's regulations, for all DoD "contracting activities supporting
payments covered by" 5 C.F.R. § 1315.l(b)(2) (app. resp. to gov't mot., ex. L). The class
deviation applied when such payments "are either certified for payment in an operational
area, or are contingent upon the receipt of necessary supporting documentation ... emanating
from an operational area" (id. at 1). The class deviation granted the head of the contracting
activity the authority to incorporate a special payment clause into contracts when he
determined that an unstable business environment exists, and directed the head of the
contracting activity to "make subsequent determinations as the operational area evolves into
a more stable business environment to enable the provisions of the Prompt Payment Act to
apply" (id. at 1-2).

        11. In July 2010, citing the 22 May 2008 DoD IG report, the DoD issued an
interim rule amending the DFARS to "bring DoD into compliance with OMB
implementation of the Prompt Payment Act by exempting military contingencies" at
5 C.F.R. § 1315.l(b)(2). Defense Federal Acquisition Regulation Supplement; Payments
in Support of Emergencies and Contingency Operations (DFARS Case 2009-D020),
75 Fed. Reg. 40,712, 40,712 (July 13, 2010). The interim rule added DFARS 232.901,
which provides that FAR Subpart 32.9, Prompt Payment, does not apply when (i) there is,
as relevant here, a contingency operation, (ii) the head of the contracting activity has
made a determination that conditions exists that limit normal business operations, and
(iii) payments will be made in the operational area or made contingent upon receiving
supporting documentation from the operational area. 75 Fed. Reg. 40,713;
DFARS 232.901(1). The interim rule also added a new DFARS clause, DFARS
252.232-7011, PAYMENTS IN SUPPORT OF EMERGENCIES AND CONTINGENCY
OPERATIONS (JUL 2010), which would apply in such situations and does not provide for
the payment of interest penalties for late payments. 75 Fed. Reg. 40,714. Pursuant to
DFARS 232.901, however, ifthe head of the contracting activity subsequently
determines that "the operational area evolves into a more stable environment," the
contracting officer is required to modify contracts being performed in the operational area
to "deactivate[] clause 252.232-7011 and activate[] the applicable FAR Prompt Payment
clause in the contract." DFARS 232.901(3)(i). In March 2011, DoD adopted the interim
rule as final, with one minor, clarifying change. Defense Federal Acquisition Regulation
Supplement; Payments in Support of Emergencies and Contingency Operations (DF ARS
Case 2009-D020). 76 Fed. Reg. 11,371 (Mar. 2, 2011). As will be seen DFARS 232.901
and the clause at DFARS 252.232-7011 were issued after award of the contracts at issue
here.




                                             6
The Prime Vendor Contracts and Military Operations in Iraq

        12. On 10 May 2002, DSCP issued Solicitation No. SP0300-02-R-4003 (the 4003
solicitation) to establish indefinite-delivery/indefinite-quantity (IDIQ) contracts for the
distribution of food and non-food products in three geographic zones under the Prime
Vendor Program (R4, tab 14 at 1, 7). For Zone III - Middle East, DSCP anticipated
making two awards, one for Kuwait and Qatar and one for Saudi Arabia (id. at 7). In
addition to the required delivery locations (id. at 59), the 4003 solicitation advised that
"the Prime Vendor must have the ability to support an unknown number of troops
deployed in its respective operational deployment areas," which for Zone III included
Iraq, upon 30 days notice (id. at 62-63 ).

        13. The 4003 solicitation included FAR 52.212-4, CONTRACT TERMS AND
CONDITIONS-COMMERCIAL ITEMS (FEB 2002) (R4, tab 14 at 84-87). Paragraph (i) of
that clause provided:

                     Payment shall be made for items accepted by the
              Government that have been delivered to the delivery
              destinations set forth in this contract. The Government will
              make payment in accordance with the Prompt Payment Act
              (31 U.S.C. 3903) and OMB prompt payment regulations at 5
              CFR part 1315. In connection with any discount offered for
              early payment, time shall be computed from the date of the
              invoice. For the purpose of computing the discount earned,
              payment shall be considered to have been made on the date
              which appears on the payment check or the specified date if
              an electronic funds transfer payment is made.

(Id. at 86) The 4003 solicitation also contained the following regarding payment:

                      B. Payments of delivery orders will be made in
              accordance with the terms and conditions of Paragraph (i) of
              Clause 52.212-4 "Contract Terms and Conditions -
              Commercial Items", appearing in the section of this
              solicitation entitled "Contract Clauses".

                     C. Payment is currently being made in approximately
              7 days after the receipt of a proper invoice; however, it is still
              subject to the terms and conditions of the Prompt Payment
              Act (31 U.S.C. 3903).

(Id. at 67)



                                              7
        14. DSCP issued Amendment No. 0002 to the 4003 solicitation on 15 July 2002
(R4, tab 16). Section II of the amendment consisted of answers to offeror questions,
which were provided "for clarification purposes only" and did "not change the
solicitation language" (id. at 136). Among the questions and answers provided was the
following:

               Question # 94:

                      The solicitation states that payments are currently
               being made in 7 days after the receipt of a proper invoice
               (page 67). The solicitation states that these payments are
               subject to the Prompt Payment Act (31 U.S.C. 3903).
               However, the solicitation additionally notes that Fast Payment
               Procedures£31 apply versus the Prompt Payment Act (page 87).
               Please clarify the payment procedures that will apply under
               the contract.

               Answer: The solicitation does not note that Fast Payment
               procedures apply. The Fast Pay block on page #87 is not
               checked, and does not apply. Prime Vendor contracts are
               paid via the Prompt Payment Act, meaning 7 day payment
               terms.

(Id. at 156)

       15. In October 2002, Congress passed the Authorization for Use of Military Force
Against Iraq Resolution of 2002, Pub. L. No. 107-243, 116 Stat. 1498. Section 3(a)
authorized the President to "use the Armed Forces of the United States as he determines
to be necessary and appropriate in order to-- ( 1) defend the national security of the
United States against the continuing threat posed by Iraq; and (2) enforce all relevant
United Nations Security Council resolutions regarding Iraq." 116 Stat. 1501. On
19 March 2003, the President directed the United States Armed Forces to commence
combat operations against Iraq. Letter to Congressional Leaders Reporting on the
Commencement of Military Operations Against Iraq, 39 WEEKLY COMP. PRES. Doc.
348, 348 (Mar. 21, 2003).




3
    Section 1315.6 ofOMB's prompt payment regulations, titled "Payment without
         evidence that supplies have been received (fast payment)," allows payment to be
         made in limited situations absent evidence of receipt of supplies. 5 C.F .R.
         § 1315.6; see also FAR Subpart 13.4; FAR 52.213-1.
                                             8
       16. DSCP awarded Contract No. SP0300-03-D-3061 4 (the PVI contract),
covering Kuwait and Qatar, to PWC on 28 May 2003 (R4, tab 20). The PVI contract
expressly incorporated the 4003 solicitation and all five amendments thereto (id. at 2).
The PV 1 contract also stated the following regarding payment:

                         B. Payments of delivery orders will be made in
                 accordance with the terms and conditions of Paragraph (i) of
                 Clause 52.212-4 "Contract Terms and Conditions -
                 Commercial Items", appearing in the section of this
                 solicitation [sic] entitled "Contract Clauses".

                        C. Payment is currently being made in approximately
                 7 days after the receipt of a proper invoice; however, it is still
                 subject to the terms and conditions of the Prompt Payment
                 Act (31 U.S.C. 3903).

(Id. at 15-16)

       17. On or about 30 June 2003, the parties executed bilateral Modification
No. POOOO 1 to the PVl contract (R4, tab 21 ). The modification added the "Iraq
Deployment Zone" to the PVI contract and "establishe[d] separate ordering and delivery
requirements for Operation Iraqi Freedom (OIF) initiatives in the country of Iraq area of
operations" (id. at 2).

       18. On or about 9 July 2003, the parties executed bilateral Modification
No. P00002 to the PVI contract, which "establishe[ d] the mutually agreed upon pricing
structure for 1) the Iraq Deployment Zone ... , and 2) distribution costs to deliver
Government Furnished Material (GFM) of various food types" (R4, tab 22). Neither
Modification No. POOOO 1 nor Modification No. P00002 exempted payments related to
military contingency operations from the PVl contract's payment terms.

        19. On 20 August 2004, the parties executed bilateral Modification No. P00025
to the PVl contract, which added the clause at FAR 52.213-1, FAST PAYMENT
PROCEDURE (FEB 1998), to the contract (R4, tab 27). According to the modification, the
Fast Payment Procedure clause was added pursuant to a 12 July 2004 FAR Deviation
which authorized the use of"Fast Payment procedures for OCONUS Subsistence Awards
in Support of Contingency Operations" (id. at 1). Under the terms of the modification,

4
    On 4 November 2004, the contracting officer issued unilateral Modification No. P00030,
         changing the contract number of the PVl contract from SP0300-03-D-3061 to
         SPM300-04-D-3061 (R4, tab 28). The contracting officer issued unilateral
         Modification No. P00033 on 1 December 2004, correcting Modification No. P00030
         and changing the contract number of the PVl contract to SPM300-05-D-3061 (Bd.
         corr., joint filing dtd. 22 July 2015).
                                                 9
fast payment procedures were applicable to invoices "for a delivery into the Iraq
deployment zone that does not exceed $500,000.00," and did not apply to invoices for
deliveries to Kuwait and Qatar (id. at 3).

        20. DSCP issued Solicitation No. SPM300-04-R-0323 (the 0323 solicitation) on
3 September 2004 (R4, tab 36). The 0323 solicitation sought to establish IDIQ contracts
for the distribution of food and non-food products for five Middle Eastern geographic
zones under the Prime Vendor Program. Zone 1 encompassed Kuwait, Iraq, and Jordan.
The 0323 solicitation advised offerors that "[a]ll zones to be supported under this
solicitation have been designated as contingency operations" as defined in FAR 2.101.
(Id. at 10)

        21. The 0323 solicitation included FAR 52.212-4, CONTRACT TERMS AND
CONDITIONS-COMMERCIAL ITEMS (OCT 2003) (R4, tab 36 at 250-55). Paragraph (i)(2)
of that clause stated that the "Government will make payment in accordance with the
Prompt Payment Act (31 U.S.C. 3903) and prompt payment regulations at 5 CFR 1315"
(id. at 252). The 0323 solicitation also contained the following regarding payment:

                      B. Payments of delivery orders will be made in
              accordance with the terms and conditions of Paragraph (i) of
              Clause 52.212-4 "Contract Terms and Conditions -
              Commercial Items", appearing in the section of this
              solicitation entitled "Contract Clauses".

                     C. Payment is currently being made in approximately
              7 days after the receipt of a proper invoice; however, it is still
              subject to the terms and conditions of the Prompt Payment
              Act (31 U.S.C. 3903).

(Id. at 79)

       22. On or about 17 February 2005, the parties entered into Contract
No. SPM300-05-D-3 l l 9 (the PV Bridge contract), with a term from 16 February 2005
until 15 December 2005, by executing Modification No. P00036 to the PVl contract (R4,
tab 30). The PV Bridge contract incorporated the terms and conditions of the PVl
contract (id.).

       23. Pursuant to the 0323 solicitation, DSCP awarded Contract No. SPM300-05-D-3128
(the PV2 contract) for Zone 1 (Iraq, Kuwait, and Jordan) to PWC on 7 July 2005 (R4, tab 41 ).
The PV2 contract expressly incorporated the 0323 solicitation (id. at 2).

      24. By letter dated 28 November 2011, PWC submitted a certified claim seeking
$5,381,777.62 in late payment interest penalties allegedly due pursuant to the Prompt
Payment Act and the terms of the PVl, PV Bridge, and PV2 contracts (R4, tab 1). PWC

                                              10
attached to its claim two spreadsheets, totaling over 400 pages, detailing the interest
penalties alleged due (app. supp. R4, tab 49). Although dated 28 November 2011, the
parties do not dispute that PWC submitted its claim on 5 December 2011 (gov't mot. at 9,
~ 21; app. resp. to gov't mot. at 17, ~ 21).


       25. By letter dated 26 February 2013, following multiple communications between
the parties, PWC revised its claim downward to $4,605,594.53 (R4, tab 7 at 1-4).

      26. The contracting officer issued a 1 November 2013 final decision denying
PWC's claim in its entirety (R4, tab 13). PWC appealed the denial of its claim to this
Board by letter dated 19 November 2013.

                                         DECISION

        Having already denied the government's partial motion to dismiss on jurisdictional
grounds, we are left with two pending arguments. First, the government argues that it is
entitled to summary judgment because 5 C.F.R. § 1315.l(b)(2) precludes PWC from
recovering Prompt Payment Act interest. Second, the government argues that it is
entitled to partial summary judgment as to a portion of PWC's claim that it contends is
barred pursuant to 41 U.S.C. § 7103(a)(4)(A) as untimely submitted.

       Summary judgment is properly granted where there are no genuine issues of
material fact and the moving party is entitled to judgment as a matter of law. Mingus
Constructors, Inc. v. United States, 812 F.2d 1387, 1390 (Fed. Cir. 1987). The
government, as the moving party, bears the burden of proving the absence of a genuine
issue of material fact and all significant doubt over factual issues is resolved in
appellant's favor. Colorado River Materials, Inc. d/b/a/ NAC Constr., ASBCA
No. 57751, 13 BCA ~ 35,233 at 172,991. The Board's task is not to weigh evidence and
resolve factual issues, but to determine whether triable issues of fact exist. US. Coating
Specialties & Supplies, LLC, ASBCA No. 58245, 15-1BCA~35,957 at 175,707.

The Military Contingency Operation Exception

      The parties' primary dispute concerns the proper interpretation of 5 C.F.R.
§ 1315. l(b )(2). 5 Section 1315. l(b )(2) provides, as relevant here, that "[a]ll Executive

5
    PWC states that the Prompt Payment Act "itself has never included an exception for
       payments related to military contingency operations," that "it is uncertain what
       authority OMB relied upon in creating the exception," and that "there is no
       indication in the regulatory history of the source or rationale for OMB's military
       contingency exception" (app. resp. to gov't mot. at 50; app. surreply to gov't reply
       to app. resp. to gov't mot. at 10). PWC does not, however, argue that 5 C.F.R.
       § 1315.l(b)(2) is not entitled to deference under Chevron, US.A., Inc. v. Natural
       Resource Defense Council, Inc., 467 U.S. 837 (1984), and its progeny.
                                               11
branch vendor payments and payments to those defined as contractors or vendors ... are
subject to the Prompt Payment Act with the following exceptions: ... (2) Payments
related to ... military contingency operations (as defined in 10 U.S.C. 101 (a)(l3))." The
government interprets 5 C.F.R. § 1315.l(b)(2) as prohibiting the application of the
Prompt Payment Act to payments related to military contingency operations (see gov't
reply to app. resp. to gov't mot. at 4 ). Relying on the 22 May 2008 DoD IG report (SOF
~ 9), PWC contends that the government's interpretation creates a conflict between
5 C.F.R. §§ 1315.l(b)(2) and 1315.5(c) (app. resp. to gov't mot. at 51-52). Under PWC's
interpretation, although the Prompt Payment Act may not apply of its own force to
payments related to military contingency operations pursuant to 5 C.F.R. § 1315. l(b)(2),
section 1315 .1 (b )(2) does not deprive an agency of the discretion to nonetheless
contractually agree to make such payments in accordance with the terms of the Prompt
Payment Act (id. at 46-4 7, 50). PWC maintains that DSCP exercised such discretion
with respect to the three Prime Vendor contracts at issue by incorporating contract
clauses stating that payment would be made in accordance with the Prompt Payment Act
and its implementing regulations (id. at 42-45).

        We construe a regulation using the same interpretive rules used in construing a
statute. Lengerich v. Dep 't ofInterior, 454 F.3d 1367, 1370 (Fed. Cir. 2006); Tesoro
Hawaii Corp. v. United States, 405 F.3d 1339, 1346 (Fed. Cir. 2005). We must read the
disputed provision "in the context of the entire regulation as well as other related
regulatory sections." Vazquez-Claudio v. Shinseki, 713 F.3d 112, 115 (Fed. Cir. 2013);
see also Mass. Mut. Life Ins. Co. v. United States, 782 F.3d 1354, 1365 (Fed. Cir. 2015)
(noting that in construing a regulation a tribunal considers "the text of the regulation as a
whole, reconciling the section in question with sections related to it"). A regulation, like
a statute, should be construed so that "no clause, sentence, or word shall be superfluous,
void, or insignificant." Raytheon Co., ASBCA No. 54907, 11-2 BCA ~ 34,870 at
171,519 (quoting TRW Inc. v. Andrews, 534 U.S. 19, 31 (2001)) (internal quotation marks
omitted); see also Princess Cruises, Inc. v. United States, 201F.3d1352, 1362 (Fed. Cir.
2000) ("It is a long-held tenet of statutory interpretation that one section of a law should
not be interpreted so as to render another section meaningless.").

       The government's interpretation of 5 C.F .R. § 1315. l(b )(2) as prohibiting the
application of the Prompt Payment Act to payments related to military contingency
operations is perhaps a permissible reading of section 1315 .1 (b )(2) itself. However, we
agree with PWC that the government's interpretation runs headlong into 5 C.F.R.
§ 1315.5(c). Section 1315.5(c), which allows accelerated payment methods for payments
made under a military contingency, states that vendors "shall be entitled to interest
penalties if invoice payments are made after the payment due date." Section 1315.5(c),
promulgated simultaneously with section 1315.l(b)(2) (SOF ~~ 6-7), thus anticipates
some application of the terms of the Prompt Payment Act to payments related to military
contingency operations. In promulgating 5 C.F.R. § 1315.5(c), OMB noted that the
accelerated payment methods provided in that section, to be used when an agency
determines that early payment in necessary in accordance with 5 C .F .R. § 1315 .4(j ),

                                             12
implement§ 3903(a)(8) of the Prompt Payment Act. Prompt Payment, 64 Fed. Reg.
52,580, 52,582-83 (Sept. 29, 1999). Therefore, if we interpret 5 C.F.R. § 1315. l(b )(2) as
prohibiting any application of the Prompt Payment Act to payments related to military
contingency operations, then§ 1315.5(c) ofthe regulations would have no effect. We are
hard-pressed to conclude that OMB would promulgate a regulation that would be
meaningless upon promulgation.

        Moreover, the government's interpretation of 5 C .F .R. § 1315 .1 (b )(2) calls into
question the validity ofDFARS 232.901. 6 DFARS 232.901 was promulgated to
implement the exception for payments related to military contingencies in 5 C.F .R.
§ 1315.l(b)(2) (SOF ~ 11). DFARS 232.901(1) provides that FAR Subpart 32.9, which
was promulgated to implement the Prompt Payment Act and OMB's prompt payment
rules (SOF ~ 2), does not apply to military contingencies if two additional criteria are
met. If those criteria cease to exist, DFARS 232.901(3) calls for the application of the
standard FAR prompt payment clauses. DFARS 232.901 does not preclude application
of the Prompt Payment Act to payments related to military contingencies operations in all
circumstances. Interpreting 5 C.F.R. § 1315.l(b)(2) as prohibiting any application of the
Prompt Payment Act to payments related to military contingency operations thus creates
a conflict between that section and DFARS 232.901. PWC's construction, which avoids
this conflict and allows for a more concordant regulatory scheme, is therefore the better
interpretation of5 C.F.R. § 1315.l(b)(2). See Kearfott Guidance & Navigation Corp. v.
Rumsfeld, 320 F.3d 1369, 1377 (Fed. Cir. 2003) (noting the canon of construction that
there is a presumption in favor of finding harmony between two regulations dealing with
similar subjects); Rice v. Martin Marietta Corp., 13 F.3d 1563, 1568 (Fed. Cir. 1993)
(same). Accordingly, we hold that 5 C.F.R. § 1315.l(b)(2) does not preclude an agency
from contractually agreeing to make payments related to military contingency operations
pursuant to the terms of the Prompt Payment Act.

        All three contracts at issue in this appeal included clauses stating that payment
would be made in accordance with the terms of the Prompt Payment Act. The PV 1
contract expressly stated that payment was "subject to the terms and conditions of the
Prompt Payment Act" (SOF ~ 16). The PVl contract also incorporated the 4003
solicitation, which included FAR 52.212-4, CONTRACT TERMS AND CONDITIONS -
COMMERCIAL ITEMS (FEB 2002). That clause similarly provided that the government
would make payment in accordance with the Prompt Payment Act and OMB' s prompt
payment regulations. (SOF ~~ 13, 16) In modifying the PVl contract to include

6
    We agree with the government that DFARS 232.901 and the accompanying clause at
        DF ARS 252.232-7011 do not apply to the contracts in dispute because the
        regulations were issued after contract award. See Tech. for Commc 'ns Int' l, ASBCA
        Nos. 36265, 36841, 93-3 BCA ~ 26,139 at 129,947 (applying the prompt payment
        regulations in effect at the time of contract award). However, PWC does not argue
        that these DF ARS provisions are applicable to its contracts; PWC simply cites these
        provisions to support its interpretation of5 C.F.R. § 1315.l(b)(2).
                                             13
deliveries to locations in Iraq, the parties did not exempt payments related to military
contingency operations from these payment provisions (SOF if 18). The PV Bridge
contract incorporated the terms and conditions of the PVI contract (SOF if 22). The PV2
contract incorporated the 0323 solicitation. Although that solicitation advised that all
zones were designated as contingency operations, it included FAR 52.212-4, CONTRACT
TERMS AND CONDITIONS - COMMERCIAL ITEMS (OCT 2003 ), which stated that payments
would be made in accordance with the Prompt Payment Act and OMB's prompt payment
regulations. (SOF iii! 20-21, 23) Because the government contractually agreed to make
payments under all three contracts in accordance with the terms and conditions of the
Prompt Payment Act without exception, 5 C.F.R. § 1315.l(b)(2) does not bar any portion
of PW C's claim.

Statute of Limitations

       The CDA requires that "each claim by a contractor against the Federal
Government relating to a contract. .. shall be submitted within 6 years after the accrual of
the claim." 41 U.S.C. § 7103(a)(4)(A). A claim accrues "when all events, that fix the
alleged liability of either the Government or the contractor and permit assertion of the
claim, were known or should have been known." FAR 33.201. A party's failure to
submit a claim within six years of accrual is an affirmative defense to the claim. Kellogg
Brown & Root Servs., Inc., ASBCA No. 58175, 15-1 BCA if 35,988 at 175,825; see also
Do-Well Mach. Shop, Inc. v. United States, 870 F.2d 637, 639 (Fed. Cir. 1989) ("The
reason that the time bar was fatal is that it constituted a valid affirmative defense."). As
the proponent of its affirmative defense, the government bears the burden of proving that
PWC's claim was untimely. Kellogg Brown & Root, 15-1BCAif35,988 at 175,825;
Lockheed Martin Corp., ASBCA No. 57525, 12-1 BCA if 35,017 at 172,065; see also
Brunswick Bank & Trust Co. v. United States, 707 F.2d 1355, 1360 (Fed. Cir. 1983)
(party raising an affirmative defense normally bears the burden of proof).

       The parties do not dispute that PWC submitted its claim on 5 December 2011
(SOF if 24). To be untimely, PWC's claim must have accrued prior to 5 December 2005.
The government seeks partial summary judgment, arguing that a portion of PW C's claim
accrued more than six years prior to submittal. Specifically, the government argues that
the events that fix liability for late payment interest penalties occur, and a claim for the
interest penalties accrues, once the government fails to make timely payment on an
invoice, that is the day after the payment due date. The government thus argues that
PWC's claim with respect to an unspecified number of invoices, those where the
government's alleged failure to make timely payment occurred prior to 5 December
2005, is barred by the CDA's six-year statute of limitations. (Gov't mot. at 19-20) We
deny the government summary judgment for two reasons.

       First, the government conflates two separate obligations-the obligation to make
timely payment on an invoice and the obligation to pay an interest penalty for late
payments. For claim accrual purposes, in determining when the alleged liability is fixed,

                                             14
we begin by examining the legal basis of the claim. Gray Personnel, Inc., ASBCA
No. 54652, 06-2 BCA ii 33,378 at 165,475. The Prompt Payment Act, the provisions of
which we have found to be applicable to the three contracts at issue, imposes an
obligation on a government agency to pay an interest penalty when it fails to make a
payment by the required payment date. 31 U .S.C. § 3902(a). That interest penalty is
calculated for the period from the day after the required payment date to the date of actual
payment, and is to be paid without regard to whether such an interest penalty was
requested. 31 U.S.C. § 3902(b)-(c)(l). The Prompt Payment Act provides that a ''claim
for an interest penalty not paid" may be filed under the CDA. 31 U.S.C. § 3907(a)
(emphasis added). Reading these sections together, we conclude that the government has
an obligation to pay the interest penalty for late payments automatically and that the
government breaches this obligation by failing to pay the interest penalty upon paying the
underlying invoice, thus creating a claim for the interest penalty not paid. Our conclusion
is bolstered by 31 U.S.C. § 3902(c)(3) which provides for an additional interest penalty if
the government fails to pay the interest penalty due within 10 days of the underlying
payment and the contractor makes a written demand for the interest penalty due within
40 days of such payment. Moreover, our conclusion is consistent with the Prompt
Payment Act's legislative history. The House Report accompanying the Prompt Payment
Act states that if "a Federal agency owes an interest penalty ... , and then fails to pay that
interest penalty, the business concern to which the penalty is owed may file a claim for
the amount of interest due under the Contract Disputes Act of 1978." H.R. Rep.
No. 97-461, at 15 (1982), reprinted in 1982 U.S.C.C.A.N. 111, 125. Accordingly, the
events that fix the government's alleged liability and allow a claim for interest penalties
to be asserted do not occur until the government pays the underlying invoice without
paying the interest penalty due.

        Second, the government has failed to establish the absence of a material dispute of
genuine fact with regard to the statute of limitations question. Because interest penalties are
tied to specific payments, claim accrual must be determined on an invoice-by-invoice basis.
In its motion, however, the government does not present specific facts regarding the
invoices for which it seeks summary judgment. Rather the government argues in general
terms. The government fails to establish the facts regarding the date of the specific invoices
for which it seeks summary judgment, the amount of such invoices, or the date such
invoices were paid, precluding an assessment of when the government's alleged liability
with regard to any particular invoice was fixed. Moreover, the government fails to
introduce any facts regarding the potential applicability of31 U.S.C. § 3903(a)(2)-(4)
(earlier payment dates for certain food and agricultural products) (SOF ii 4) or§ 3903(c),
which applies specifically to DLA's Prime Vendor Program (SOF ii 8). The failure to
introduce invoice-specific facts also precludes application of the "should have known test"
for claim accrual, which includes a reasonableness component that turns upon what facts
were reasonably known to the claimant. See The Ryan Co., ASBCA No. 58137, 15-1 BCA
ii 35,998 at 175,862 (citing Laguna Constr. Co., ASBCA No. 58569, 14-1BCAii35,618 at
174,459). Accordingly, summary judgment on the government's affirmative defense that
the CDA's six-year statute of limitations bars a portion of PWC's claim is inappropriate.

                                             15
                                     CONCLUSION

       The government's partial motion to dismiss for lack of subject matter jurisdiction
and the government's motion for summary judgment are denied.

      Dated: 2 May 2016




                                                  dministrative Judge
                                                 Armed Services Board
                                                 of Contract Appeals


I concur                                         I concur




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



     I certify that the foregoing is a true copy of the Opinion and Decision of the
Armed Services Board of Contract Appeals in ASBCA No. 59020, Appeal of Public
Warehousing Company, K.S.C., rendered in conformance with the Board's Charter.

      Dated:



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




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