                ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeals of --                                  )
                                               )
Art Anderson Associates                        )     ASBCA Nos. 60034, 60035
                                               )
Under Contract No. N00033-14-D-8019            )

APPEARANCES FOR THE APPELLANT:                       Mr. Nikolas Anderson
                                                      President/CEO
                                                     Mr. Simon Ngu
                                                      Chief Financial Officer

APPEARANCES FOR THE GOVERNMENT:                      Ronald J. Borro, Esq.
                                                      Navy Chief Trial Attorney
                                                     Robert M. Elwell, Esq.
                                                      Trial Attorney

                 OPINION BY ADMINISTRATIVE JUDGE DELMAN

       These appeals involve a dispute as to the amounts due and owing Art Anderson
Associates (AAA or appellant) related to the convenience termination of its commercial
services contract. Appellant elected to prosecute these appeals under Board Rule 12.2
and Rule 11. In accordance with Rule 12.2(c ), summary findings of fact and conclusions
relevant to quantum are provided below. 1

Summary ofBackground Facts

        1. The Request for Proposals (RFP), a small business set-aside, was issued on or
about 18 April 2013 (R4, tab 1). According to the Performance Work Statement (PWS),
the scope of work was stated as follows: "In support of the [USS Mount Whitney] this
contract will provide non-personal services to the Engineering Directorate of Military
Sealift Command (MSC) in the areas of marine engineering, naval architecture, electrical
and electronics engineering, maintenance engineering, shipboard testing and inspections
and failure analysis" (R4, tab 1 at 7, PWS ii 2).

        2. On 7 January 2014, the Military Sealift Command (MSC or government)
notified AAA it was the low bidder and that the contract would be awarded to AAA on or
about 14 January 2014 absent a challenge to appellant's business size status (Anderson
decl., ex. 1). On 10 January 2014, Tridentis, LLC (Tridentis), filed a business size protest


1
    Pursuant to Board Rule 12.2(d), this decision shall have no value as precedent, and
        absent fraud, shall be final and conclusive and not subject to appeal.
with the Small Business Administration (SBA). On 13 February 2014, SBA denied the
protest. (Anderson and Ngu decls. ~~ 7, 9)

       3. On or about 25 February 2014, the government awarded this contract to AAA
(R4, tab 1). As stated in paragraph 7 of the contract, it is "a firm fixed-price, indefinite
delivery-indefinite quantity type Contract with reimbursable elements for actual travel
expenses. Under this type of Contract, no work may be performed until directed by Task
Order." (R4, tab 1 at 10) The contract also provided a minimum guarantee of $50,000
for supplies or services (id. at 6).

    4. The contract contained FAR 52.212-4, CONTRACT TERMS AND CONDITIONS-
COMMERCIAL ITEMS (FEB 2012). Section (I) in the contract provided as follows:

              (I) Termination for the Government's convenience. The
              Government reserves the right to terminate this contract, or
              any part hereof, for its sole convenience. In the event of
              such termination, the Contractor shall immediately stop all
              work hereunder and shall immediately cause any and all of
              its suppliers and subcontractors to cease work. Subject to
              the terms of this contract, the Contractor shall be paid a
              percentage of the contract price reflecting the percentage
              of the work performed prior to the notice of termination,
              plus reasonable charges the Contractor can
              demonstrate to the satisfaction of the Government
              using its standard record keeping system, have resulted
              from the termination. The Contractor shall not be
              required to comply with the cost accounting standards or
              contract cost principles for this purpose. This paragraph
              does not give the Government any right to audit the
              Contractor's records. The Contractor shall not be paid for
              any work performed or costs incurred which reasonably
              could have been avoided. [Emphasis added]

(R4, tab 1 at 37)

        5. The contracting officer (CO) issued Delivery Order 0001 on 25 February 2014,
to fund the government's minimum guarantee of $50,000. The delivery order stated that
it provided funding only and was "not an order for services." (R4, tab 2 at 50) The
government did not issue any other delivery orders under the contract.

      6. The contract required a kick-off meeting to be held within two business days
of award (R4, tab 1at10). This meeting was scheduled for 4-5 March 2014 (Anderson
and Ngu decls. ~ 11).


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       7. On 3 March, 2014, Tridentis submitted an agency protest of the award to AAA,
alleging, inter alia, that the CO had improperly awarded the contract because AAA did
not meet the key personnel submission requirements (R4, tab 33). On 4 March 2014, the
CO notified AAA of the agency level protest, and issued a stop work order. The kick-off
meeting was cancelled. (R4, tab 3 at 51)

         8. In an email dated 7 March 2014, the government notified the RFP offerors that
it was taking corrective action in response to the agency protest, making certain
solicitation changes, re-opening the solicitation and inviting prior offerors to submit
revised offers (R4, tabs 30, 31 ). AAA did not file a protest over this government action.
Rather, on 14 March 2014, AAA submitted a revised offer to the government (Anderson
decl. ii 16, Ngu decl. ii 17).

        9. By email dated 17 April 2014, MSC provided notice to appellant and the other
offerors that the government had awarded the contract to Tridentis (R4, tab 5). AAA did
not file a protest over this award. On 20 May 2014, the CO terminated appellant's
contract for the government's convenience, and requested that AAA prepare a
termination settlement proposal (R4, tab 6).

Summary of Termination Proposals and Claims

       10. After receipt of the notice of termination dated 20 May 2014, appellant
submitted a termination proposal to the government on 23 May 2014, updated on 27 June
2014, seeking $71,334.51 (R4, tabs 7, 9). The CO denied appellant's termination proposal
on 8 August 2014, except for the amount of $1,297.27 (R4, tab 10). In response to
appellant's objections, the CO reiterated the government's position in writing on
3 September 2014 (R4, tab 12). The parties were at an "impasse," thereby allowing
appellant to file a claim.

        11. By letter to the CO dated 17 September 2014, appellant submitted a
termination claim to the CO and requested a final decision. There was some initial
uncertainty as to the amount of this claim. Appellant referenced its "initial proposal,"
presumably its proposal for $71,334.51, but at the same time reduced the amount claimed
in this letter to $44,594.21, reserving the right to file a further claim if this claim was not
resolved to its satisfaction. Appellant further confused matters by characterizing its
requested settlement amount as an offer "pursuant to F.R.E. 408." (R4, tab 13) Per
emails to appellant dated 1 and 3 October 2014, the government characterized appellant's
claim amount to be $44,594.21 (R4, tabs 14, 17). Per email dated 3 October 2014,
appellant agreed with this characterization, stating: "Sorry for the misunderstanding.
After further review we are ok with your letter dated 010CT14." (R4, tab 17) Hence,
the claim as submitted for decision to the CO on 17 September 2014 was in the sum
certain amount of $44,594.21.



                                             3
       12. As of24 November 2014, it appears that appellant was willing to accept
$34, 118.29 as a termination settlement (R4, tab 19); the government offered $10,000 (R4,
tab 24). Appellant rejected the counter-offer. Appellant then proposed a lump-sum
settlement of $30,000 (R4, tab 25), which was rejected by the government. The
government issued a CO final decision (COFD) on 31 March 2015, unilaterally
determining the value of the termination claim in the amount of $8,090.38 (R4, tab 26).

        13. By letter to the CO dated 14 April 2015, appellant submitted a second
termination claim to the CO for decision, in the amount of $71,334.51. This "claim"
added additional cost categories and amounts to the termination claim of 17 September
2014. (R4, tab 28) By letter dated 7 May 2015, the government returned the second
termination claim to appellant "without action," stating that the matter "has already been
fully adjudicated" by the COFD of 31 March 2015 (R4, tab 29).

        14. Appellant timely appealed the CO letters of 7 May 2015 and 31 March 2015
to the Board. The Board docketed the appeals as ASBCA Nos. 60034 and 60035.

Jurisdiction

        The government contends that appellant's claim for $71,334.51, per its letter dated
14 April 2015, did not constitute a valid claim, and hence ASBCA No. 60034 must be
dismissed for lack of jurisdiction (answer, affirmative defense no. 1). Appellant contends
we should retain jurisdiction of ASBCA No. 60034 but should dismiss ASBCA No. 60035,
alleging, inter alia, that the parties' subsequent discussion of quantum after appellant's
filing of its claim rendered the original sum requested "uncertain" (app. br. at 1).

       While appellant identified its letter dated 14 April 2015 as a "claim,"
appellant's characterization is not controlling as a matter of law. In fact, appellant's
"claim" of 14 April 2015 is the same basic claim as the one submitted to the CO for
decision on 17 September 2014, i.e., it is a termination claim arising out of the
termination of this contract, and only differs in the costs claimed. As such, the
Board's conclusion in Policy Research, Inc., ASBCA No. 27168, 83-2 BCA i! 16,911
at 84,163 applies here:

                       We conclude that appellant's instant claim is the
               same as that which was previously submitted except for the
               specific damages sought. Both claims are based upon the
               same operative facts.... The fact that the specific item of
               damage that appears in the latter claim was not contained
               in the former is simply an insufficient basis to warrant
               treatment of the latter as a different claim.




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Because appellant's 14 April 2015 letter was not a different claim the CO was not
obligated to issue a final decision, and there was no basis for an appeal. Accordingly,
ASBCA No. 60034 is dismissed.

        On the other hand, appellant timely appealed the COFD dated 31March2015,
which denied appellant's original termination claim, in sum certain, dated
17 September 2014. This appeal was docketed as ASBCA No. 60035. "It is well
settled that after a claim is filed, the contractor may provide additional data in support
of increased damages." DSP, Inc., ASBCA No. 32869, 87-1BCAii19,452 at 98,291.
In essence, this is what appellant has done here, and as it reserved the right to do in its
17 September claim letter (finding 11). 2 Accordingly, we retain jurisdiction of
appellant's termination claim as updated under ASBCA No. 60035.

Contract Labor Rates

       The CO used "Contract labor rates" to compensate appellant for the reasonable
hours expended related to the termination (R4, tab 26 at 210). However, the relevant
portion of the termination for convenience clause does not refer to "contract" or to
"bid" labor rates, 3 but to "reasonable charges" using the contractor's "standard record
keeping system." Such language supports use of appellant's actual, reasonable hourly
pay rates contained in its time sheets, and said rates are used herein to fairly
compensate appellant for this convenience termination settlement.

Summary of Compensation for Appellant's Termination Claim

Initial Proposal Costs (0)

       Appellant has not shown that these costs are recoverable in a termination
settlement. No costs are allowed.




2 The "reservation" in appellant's 17 September 2014 claim did not obviate the sum
       certain that appellant asserted. See Zafer Taahhut lnsaat ve Ticaret A.S.,
       ASBCA No. 56770, 12-1BCAii34,951. Nor did subsequent negotiations
       between the parties obviate that sum certain.
3 FAR12.403(d), Termination forthe Government's convenience, specifically paragraph

       (l)(i)(B), does refer to a convenience termination payout based upon "hourly rate(s)
       in the Schedule," but that regulatory language was added to implement the Services
       Acquisition Reform Act (SARA) of 2003, which expressly authorized the use of
       "time and materials" and "labor-hour" contracts for commercial services under
       certain conditions. See FAC No. 2005-15, 71 Fed. Reg. 74667 (12 December 2006).
       It has not been shown that such a contract was terminated here.
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SBA Size Protest (0)

      This protest was filed by Tridentis prior to the award of appellant's contract.
Appellant has not shown that any costs incurred related to such a protest are
recoverable in a termination settlement. No costs are allowed.

Labor: Review Contract ($778.83)

       Appellant is entitled to recover reasonable costs related to the review of the
contract prior to the termination. The CO allowed $530, using contract labor rates (see
above). Appellant seeks $778.83, based upon its time sheets. Appellant has persuaded
the Board that its costs are reasonable. Appellant is entitled to recover $778.83.

Labor: Recruit, Hire and Train ($442. 09)

        Appellant is entitled to recover reasonable costs in these categories prior to the
termination. Based upon review of appellant's time sheets, and with due consideration
to the stop work order issued 4 March 2014, appellant is entitled to recover the
following reasonable costs: Hull - $417.34 (14 hours x 29.81); Gatzke - $24.75
(1.5 hours x 16.50), for a total of $442.09.


Labor: Work Plan, Travel Arrangement, Meeting Preparation ($1, 160. 76)

       The CO agreed that appellant was entitled to recover the number of hours
claimed by appellant in this category for the employees involved. Using appellant's
actual hourly pay costs as referenced on its time sheets, it is determined that these
reasonable costs are allowable in the amount of $1,160.76 (R4, tab 9 at 71).

Re-Bid Cost (0)

       Appellant has not shown that re-bid costs are recoverable in a termination
settlement. No costs are allowed.

Termination Settlement Proposal ($3, 045. 66)

       The undersigned agrees with the government that these costs should not predate
17 April 2014, the date the government advised appellant of the award to Tri den tis
(finding 9). The government's assessment of hours is reasonable and is accepted as
follows: Anderson - 27.5 hours; Ngu - 33.5 hours; Hutchinson - 7.5 hours. Using
appellant's actual hourly pay rates, appellant is entitled to recover the following
reasonable costs: Anderson $1,322.20 (27.5 hours x 48.08); Ngu $1,558.76
(33.5 hours x 46.53); Hutchinson $164.70 (7.5 hours x 21.96), for a total of$3,045.66.


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Legal Expense Related to Termination Proposal ($1, 718.11)

      Appellant furnished invoices from counsel for legal expense related to the
termination proposal in the amount of $1, 718.11 (R4, tab 19 at 192-93 ). This charge is
reasonable. Appellant is entitled to recover $1, 718.11.

Other Costs, Kick-Off Meeting Expense ($687. 89)

      The parties agree on the reasonable amounts that appellant incurred for mileage
($104.72); tolls ($4.25); parking ($38.30); and hotel ($540.62). Appellant is entitled to
recover $687.89.

Other Costs, Subcontract ($2,462.65)

        Appellant was billed by its subcontractor, BMT Designers and Planners, Inc., for
initial contract start-up action and for its preparation for the kick-off meeting during the
period 7 January 2014 through 17 January 2014 (R4, tab 9 at 145). As of7 January 2014,
the government advised appellant that it would be awarded the contract on or about
14 January 2014 absent a challenge to appellant's business size status (finding 2). These
subcontract costs were reasonably incurred in anticipation of award and performance, and
are allowable. FAR 31.205-32. Appellant is entitled to recover $2,462.65.

Cost Center Overhead and G&A

       Appellant asserts that it is entitled to Cost Center Overhead (72 .11 %) and G&A
(56.23%) on its termination claim. In support, appellant provides a DCAA memorandum
dated 31October2012, related to appellant's FY 2011 incurred cost proposal which
included the above rates and on which DCAA concluded: "Based on the results of our
adequacy evaluation, we consider AAA's FY 2011 incurred cost proposal adequate in
accordance with the requirements in FAR 52.216-7" (R4, tab 9 at 146).

       Although the DCAA review could support a finding of reasonableness for
appellant's FY 2011 rates, it does not follow that this review supports a finding of
reasonableness for appellant's rates for FY 2014, the period in which this contract was
awarded and terminated. Appellant has provided no data for FY 2014, nor has it
provided any evidence to illustrate the relative stability of its overhead and G&A rates in
recent years. As a small business, appellant's rates may vary significantly from year to
year based upon the nature of, and the amount of work performed.

       Appellant is entitled to overhead and G&A but appellant has not proven the
amounts claimed. Employing a jury verdict, the undersigned reduces appellant's claimed
rates by 50%. Cost Center Overhead is allowed in the amount of 36.06%. G&A is
allowed in the amount of 28.12%.


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Profit

       Appellant seeks 15% profit on its costs, excluding its settlement expenses. Appellant
provides no data to support this 15% figure, nor any evidence supporting the reasonableness
of such a profit rate on any related contracts. Appellant is entitled to profit, but appellant
has not proven the amount claimed. Employing a jury verdict, the undersigned reduces
appellant's claimed rate by 50%. Profit is allowable in the amount of 7.5%.

                                      CONCLUSION

      Based upon the foregoing, ASBCA No. 60034 is dismissed. Under ASBCA
No. 60035, appellant is entitled to recover $17,877.49, plus CDA interest from the date
the CO received appellant's claim of 17 September 2014 to the date of payment. See
Summary of Costs in the Table attached to this opinion. 4

         Dated: 4 November 2015




                                                    Administrative Judge
                                                    Armed Services Board
                                                    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 Nos. 60034, 60035, Appeals of
Art Anderson Associates, rendered in conformance with the Board's Charter.

         Dated:



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




4   In the Table, discrepancies of a penny are attributable to rounding.
                                              8
                                    Table: Summary of Costs
                                             Cost Center    G&A
        Contract Charges       Direct Cost   Overhead      Overhead     Total Cost   Profit      Total
Labor                             2381.68         858.83       911.23     4151.75     311.38     4463.13
Expenses (kick-off)                687.89         248.05       263.19     1199.13      89.93     1289.07
Subcontract                       2462.65         888.03       942.21     4292.89     321.97     4614.86
Subtotal                          5532.22        1994.92      2116.63     9643.77     723.28    10367.05

     Settlement Ex~enses
Proposal Preparation              3045.66        1098.26      1165.27     5309.20        0.00    5309.20
Legal & Consulting                1718.11           0.00       483.13     2201.24        0.00    2201.24

SubTotal Settlement Expenses      4763.77        1098.26      1648.40     7510.44        0.00    7510.44

TOTAL ALL COST                   10295.99        3093.18      3765.04    17154.21     723.28    17877.49
