           In the United States Court of Federal Claims
                                           No. 16-1268
                                       Filed: June 11, 2019


                                               )
 JUST IN TIME STAFFING,                        )
                                               )
                       Plaintiff,              )
                                               )       Contract Disputes Act; Constructive
 v.                                            )       Change; Inherently Governmental
                                               )       Function; National Labor Relations Act.
 THE UNITED STATES,                            )
                                               )
                        Defendant.             )
                                               )
                                               )


        Joseph A. Whitcomb, Denver, Colorado, for plaintiff.

       Andrew James Hunter, U.S. Department of Justice, Civil Division, Washington, DC, for
defendant.


                                            OPINION

FUTEY, Senior Judge

        This case is before the Court on defendant’s amended motion to dismiss plaintiff’s

amended complaint, which was filed on July 6, 2017, pursuant to rules 12(b)(1) and 12(b)(6) of

the Rules of the Court of Federal Claims (“RCFC”). Defendant filed its motion on August 23,

2017. Plaintiff filed its response on September 20, 2017, and defendant its reply on October 4,

2017.

        Plaintiff seeks costs incurred during labor negotiations, which plaintiff alleges were

sustained performing work in connection with a government contract that the Government

should have performed. Defendant contends that plaintiff fails to state a claim for which relief
may be granted, because plaintiff was performing its own legal duty to conduct labor

negotiations with its employees and the Government did not have a duty to intervene in those

negotiations. Defendant further argues that the Court does not possess subject matter jurisdiction

over plaintiff’s claims, because the alleged damages stem from the conduct of third parties and

not the Government.

       The Court held oral argument on these matters on November 2, 2017. The matter is now

ripe for decision.

  I.   BACKGROUND

           a. Factual Background

       The plaintiff entered into a contract with the United States Army Health Medical

Command’s (“MEDCOM” or “Government”) Health Contracting Activity on March 6, 2014.

Am. Compl. ¶ 1; ECF No. 23-1 at 1 (“Contract”).1 Contract Number V797P-4747A, a non-

personal services contract, required plaintiff to provide medical clerks and other administrative

staffing services at the Carl R. Darnell Army Medical Center (“Medical Center”) in Fort Hood,

Texas. Am. Compl. ¶¶ 5, 9; Contract at 2. Prior to end of the base period of the contract, the

International Union of Operating Engineers Local Union 351, AFL-CIO (“Union”) filed a

petition with the National Labor Relations Board (“NLRB”), which sought to require plaintiff’s

“non-government employee subcontractors to vote to become members of a labor union[.]” Am.

Compl. ¶ 9. The Contracting Officer (“CO”) instructed plaintiff to negotiate a Collective

Bargaining Agreement (“CBA”) with the prospective labor union, representing that any

“reasonable” increase in costs resulting from the labor negotiations would be incorporated into a


       1
          Plaintiff’s amended complaint states that the Contract was awarded on April 1, 2014.
Am. Compl. ¶ 4. The Contract, however, was signed on March 6, 2014. See Contract at 1.
Plaintiff confirmed this at oral argument. See ECF No. 26 (“11/2/17 TR 1–102”) at 12.



                                                 2
contract modification. Id. ¶ 13. Plaintiff incurred $105,000.76 as a result of the consulting and

legal expenses associated with the labor relations negotiations. Id. ¶ 14. Plaintiff represented at

oral argument that it incurred $92,000 of these expenses as a result of hiring a labor attorney to

negotiate with the prospective union. TR 28. It hired this labor attorney because it believed that it

could be responsible for the costs of an increase in employees’ wages, based upon the CO’s

representation. Id.

          The plaintiff requested that MEDCOM not exercise the contract’s first option year,

“[a]fter it became clear that a CBA was likely to be adopted, . . . because the terms of a CBA,

without an equitable adjustment, would have caused [plaintiff] to have to perform at or near an

economic loss.” Id. ¶ 12. Therefore, MEDCOM elected not to exercise the contract’s first option

year and awarded the contract to the predecessor contractor. Id. ¶ 18. On March 9, 2016, plaintiff

requested an equitable adjustment of the contract to include the costs it incurred during labor

relations negotiations. Id. ¶ 14. On April 26, 2016, the CO denied plaintiff’s request. ECF No. 1-

2 at 1.

             b. Procedural Background

          On October 4, 2016, the plaintiff filed a complaint in this Court and an amended

complaint on July 6, 2017. The amended complaint contains six claims: (1) plaintiff was

impermissibly required to exercise inherently governmental authority, Am. Compl. ¶¶ 23–27; (2)

plaintiff is entitled to an equitable adjustment, id. ¶¶ 28–34; (3) defendant’s conduct constituted a

cardinal change and breach of the contract, id. ¶¶ 34–39; (4) defendant breached the duty of good

faith and fair dealing, id. ¶¶ 40–45; (5) defendant breached the duty to disclose superior

knowledge, id. ¶¶ 46–51; and (6) plaintiff is entitled to attorney fees and costs, id. ¶¶ 52–54.




                                                  3
       On August 23, 2017, the defendant filed an amended motion to dismiss (“Def. Mot.”) the

amended complaint, pursuant to RCFC 12(b)(1) and 12(b)(6). Plaintiff filed a response (“Pl.

Resp.”) on September 20, 2017 and defendant a reply (“Def. Reply”) on October 4, 2017. On

November 2, 2017, the Court heard oral argument on the motion. This matter was transferred to

the undersigned on May 3, 2019.

 II.   DISCUSSION

       The defendant moves to dismiss plaintiff’s amended complaint for either lack of subject

matter jurisdiction or for failure to state a claim upon which relief may be granted. Def. Mot. at

1. Defendant argues that the Court lacks jurisdiction to adjudicate the claims in the amended

complaint, because plaintiff’s claims are not actually against the United States, but rather are

against its own employees or the Union. Id. at 11–12. Alternatively, defendant argues that each

of plaintiff’s claims fails to state a claim upon which relief may be granted. Id. at 12.

           a. Legal Standard

       Before reaching the merits, a “court must satisfy itself that it has jurisdiction to hear and

decide” the case. Hardie v. United States, 367 F.3d 1288, 1290 (Fed. Cir. 2004) (quoting

PIN/NIP, Inc. v. Platte Chem. Co., 304 F.3d 1235, 1241 (Fed. Cir. 2002)). Rule 12(b)(1) of this

Court authorizes a party to file a motion asserting a “lack of subject-matter jurisdiction.” RCFC

12(b)(1). “In deciding a motion to dismiss for lack of subject matter jurisdiction, the court

accepts as true all uncontroverted factual allegations in the complaint, and construes them in the

light most favorable to the plaintiff.” Stephens v. United States, 884 F.3d 1151, 1155 (Fed. Cir.

2018) (quoting Estes Exp. Lines v. United States, 739 F.3d 689, 692 (Fed. Cir. 2014)). “The

plaintiff bears the burden of establishing jurisdiction by a preponderance of the evidence.”

Securiforce Int’l Am., LLC v. United States, 879 F.3d 1354, 1359 (Fed. Cir. 2018).




                                                  4
        Rule 12(b)(6) permits a party to file a motion to dismiss for “failure to state a claim upon

which relief can be granted.” RCFC 12(b)(6). “To survive a motion to dismiss, a complaint must

contain sufficient factual allegations that, if true, would state a claim to relief that is plausible on

its face.” Athey v. United States, 908 F.3d 696, 705 (Fed. Cir. 2018) (internal quotations

omitted); see also Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). And, as with Rule 12(b)(1), the

Court “must accept well-pleaded factual allegations as true and must draw all reasonable

inferences in favor of the claimant.” Athey, 908 F.3d at 705.

            b. The Court Possesses Jurisdiction to Adjudicate Some of the Claims in the
               Amended Complaint

        The first issue for the Court to resolve is whether it possesses jurisdiction to adjudicate

plaintiff’s claims.

        The Court has jurisdiction, under the Tucker Act, to adjudicate a claim arising under, and

satisfying the requirements of, the Contract Dispute Act (“CDA”), 41 U.S.C. §§ 7101–7109. See

28 U.S.C. § 1491(a)(2). The CDA applies, in relevant part, “to any express or implied

contract . . . made by an executive agency for . . . the procurement of services.” 41 U.S.C. §

7102(a). The contract at issue in this case required plaintiff to provide administrative staffing

services to MEDCOM; it, therefore, falls within the CDA. See Contract at 2; Am. Compl. ¶¶ 5,

9. Consequently, each claim must satisfy the requirements of the CDA for the Court to have

jurisdiction over it.

        Under the CDA, “[j]urisdiction requires both that a claim meeting certain requirements

have been submitted to the relevant contracting officer and that the contracting officer have

issued a final decision on that claim.” K-Con Bldg. Sys., Inc. v. United States, 778 F.3d 1000,

1005 (Fed. Cir. 2015). A claim is “a written demand or written assertion by one of the

contracting parties seeking, as a matter of right, the payment of money in a sum certain, the



                                                   5
adjustment or interpretation of contract terms, or other relief arising under or relating to th[e]

contract.” Securiforce, 879 F.3d at 1359 (modification in original) (quoting 48 C.F.R. § 52.233-

1(c)).

         The Court has jurisdiction over a claim if it arises from the “same operative facts” and

requests “essentially the same relief,” as a claim presented to the CO, even if the complaint

alleges a “slightly different legal theor[y.]” Scott Timber Co. v. United States, 333 F.3d 1358,

1365–66 (Fed. Cir. 2003). A complaint, however, that presents “a materially different factual or

legal theory . . . does create a different claim.” K-Con Bldg. Sys., 778 F.3d at 1006. In other

words, a contractor must include “enough detail to provide adequate notice of the basis” of a

claim to the CO, for the Court to have jurisdiction over that claim. Id. at 1008; see also Contract

Cleaning Maint., Inc. v. United States, 811 F.2d 586, 592 (Fed. Cir. 1987) (holding that the

contractor must provide “a clear and unequivocal statement that gives the contracting officer

adequate notice of the basis and amount of the claim”). The Court must determine whether each

claim satisfies the jurisdictional standard. K-Con Bldg. Sys., 778 F.3d at 1005 (“[T]he

jurisdictional standard must be applied to each claim, not an entire case[.]”).

         The plaintiff submitted a request for an equitable adjustment on March 9, 2016. Am.

Compl. ¶ 2; ECF No. 1-1 at 1 (“REA”). The REA requested “a contract adjustment based upon

changed contractual conditions [plaintiff] encountered during its performance of the contract.”

REA at 1. Plaintiff alleged that it “was compelled to undertake additional responsibilities that

were inherently governmental[,]” which caused it to incur $105,000.76 in expenses from

“negotiating with the service employees union on the [G]overnment’s behalf[.]” Id. Plaintiff

further claimed that “no Agency official took any action with regard to the [labor] petition,




                                                  6
leaving [plaintiff] to represent the Agency.” Id. at 2. The CO issued a final decision denying the

request on April 26, 2016. Am. Compl. ¶ 2; ECF No. 1-2.

                   i. The Court Has Jurisdiction to Adjudicate Plaintiff’s Inherently
                      Governmental Function Claim

       Count I of the amended complaint alleges that the plaintiff was required to perform an

inherently governmental function in connection with the contract, based on MEDCOM

“[a]brogating its responsibility to address the NLRB petition[.]” Am. Compl. ¶ 27. This claim

was first presented to the CO for a final decision. See REA at 1 (Plaintiff “was compelled to

undertake additional responsibilities that were inherently governmental . . . negotiating with the

service employees union on the [G]overnment’s behalf[.]”). In addition, the claim presented to

the CO was a written demand for a sum certain on which the CO issued a final decision.

Therefore, the Court has jurisdiction to adjudicate this claim.

       The defendant’s argument to the contrary is misplaced. Defendant argues that this claim,

“[i]n reality,” is against the plaintiff’s own employees or the labor union. Def. Mot. at 12. This

misunderstands plaintiff’s claim; plaintiff alleges that the Government’s failure to act in

connection with the contract caused it to perform an inherently governmental function and incur

the expense of the labor relations negotiations. It is a claim against the Government, over which

the Court possesses jurisdiction.

                   ii. The Court Has Jurisdiction to Adjudicate Plaintiff’s Equitable
                       Adjustment Claim

       Count II of the amended complaint alleges that the plaintiff “is entitled to receive

$105,000.76 as an equitable adjustment for additional legal expenses it incurred as a result of the

Government’s failure to provide support to [plaintiff] as it was forced to undertake inherent

governmental authority” and that this constituted “a constructive contact change.” Am. Compl. ¶




                                                 7
34. While the REA does not explicitly state that the Government’s conduct caused a constructive

contract change, it does allege the facts on which the constructive contract claim is based,

offering “enough detail to provide adequate notice of the basis” of the equitable adjustment

claim. K-Con Bldg. Sys., 778 F.3d at 1006. Count II does not present “a materially different

factual or legal theory” than the REA. Id. The allegations in Count II, therefore, were presented

to the CO. This claim was also a written demand for a sum certain on which the CO issued a

final decision. Consequently, the Court has jurisdiction to adjudicate this claim.

                  iii. The Court Does Not Have Jurisdiction to Adjudicate Plaintiff’s
                       Cardinal Change Claims

       Count III of the amended complaint alleges that the Government “changed the contract

unilaterally” causing a cardinal change. Am. Compl. ¶¶ 36, 39. Specifically, plaintiff alleges that

the CO “instructed [plaintiff] to negotiate with the labor union for costs the [G]overnment stood

to incur” and stated “that [the Government] could not reimburse [plaintiff] for legal costs despite

language in the solicitation and contract to the contrary.” Id. ¶¶ 37–38. These contentions

constitute factual allegations that were not presented to the CO in the REA.

       The factual predicate on which the REA relies for its claim to the CO is that the

Government’s failure to act caused plaintiff to encounter changed conditions and perform an

inherently governmental function in negotiating with the union. The factual predicate of Count

III is that the Government affirmatively misled plaintiff by instructing it to negotiate with the

labor union and representing that it would not reimburse plaintiff for its legal costs. This

constitutes a “materially different factual theory” and the REA “fails to allege enough detail to

provide adequate notice of the basis” of this claim. K-Con Bldg. Sys., 778 F.3d at 1006, 1008;

see also Canpro Invs. Ltd. v. United States, 130 Fed. Cl. 320, 336 (Fed. Cl. 2017) (finding that

the claim for superior knowledge was not presented to the CO, because the claim presented to



                                                  8
the CO was based on a different factual predicate). Therefore, because Count III was not first

presented to the CO for a final decision, the Court does not possess jurisdiction to adjudicate it.

                  iv. The Court Does Not Have Jurisdiction to Adjudicate Plaintiff’s
                      Breach of the Duty of Good Faith and Fair Dealing Claim

       Count IV of the amended complaint alleges that the Government breached the duty of

good faith and fair dealing in two ways: (1) “when [the CO] instructed [plaintiff] to negotiate on

behalf of the [G]overnment[;]” and (2) “when [the CO] deliberately misled [plaintiff] into

believing that a CBA was already in place and that the prevailing wages listed were the only

labor costs.” Am. Compl. ¶¶ 44–45. The first theory was not presented to the CO for the same

reasons as the cardinal change claim; the second theory also was not presented to the CO,

because the REA provides no facts alleging a misrepresentation by the CO or a representation

that “the prevailing wages listed w[ould be] the only labor costs.” See generally REA. The REA

states that “no collective bargaining agreement was in place” when plaintiff was awarded the

contract. Id. at 1. This statement does not provide adequate notice of the claim in the amended

complaint that “the [G]overnment was aware of the pending CBA before the contract award” and

that the “CO included misleading language in the solicitation that would have led any reasonable

offeror to believe that a CBA was already in place and that the prevailing wage list included in

the solicitation was the only labor costs an offeror would incur.” Am. Compl. ¶¶ 42–43.

Therefore, the Court does not have jurisdiction to adjudicate plaintiff’s good faith and fair

dealing claims. See RMA Eng’g S.A.R.L. v. United States, 140 Fed. Cl. 191, 221 (Fed. Cl. 2018)

(finding that the Court lacked jurisdiction to adjudicate a claim for breach of the duty of good

faith and fair dealing, because the REAs did not contain “the operative facts” of such a claim).




                                                  9
                   v. The Court Does Not Have Jurisdiction to Adjudicate Plaintiff’s
                      Breach of the Duty to Disclose Superior Knowledge

       Count V of the amended complaint alleges that the Government had superior knowledge

regarding the “pending N[LR]B decision, but omitted any notice from [the] solicitation and

contract.” Am. Compl. ¶ 50. The REA states that there was no CBA in place at the time of

contract award and a petition was filed with the NLRB “[p]rior to the end of the base contract

period[.]” REA at 1. It does not, however, allege any facts that would suggest the Government

had knowledge of this pending NLRB decision or that the Government withheld superior

knowledge in the solicitation and contract. See generally id. The REA “fails to allege enough

detail to provide adequate notice of the basis” of this claim. K-Con Bldg. Sys., 778 F.3d at 1008;

see also Canpro, 130 Fed. Cl. at 336 (finding the plaintiff’s allegations “regarding superior

knowledge were not first presented to the contracting officer”). Therefore, the Court does not

possess jurisdiction to adjudicate plaintiff’s claim for a breach of the duty to disclose superior

knowledge.

           c. Plaintiff Has Failed to State a Claim Upon Which Relief May Be Granted

       Having decided that the Court has jurisdiction to adjudicate Counts I and II of the

amended complaint, the Court now turns to defendant’s arguments that both claims fail to state a

claim upon which relief may be granted. The Court analyses each in turn.

                    i. Plaintiff Did Not Perform an Inherently Governmental Function

       Federal Acquisition Regulation (“FAR”) 7.503(a), which applies to “to all contracts for

services” with a few inapplicable exceptions, 48 C.F.R. § 7.502, states that “[c]ontracts shall not

be used for the performance of inherently governmental functions[,]” id. § 7.503(a). FAR 2.101

defines an “inherently governmental function” “as a matter of policy, [as] a function that is so

intimately related to the public interest as to mandate performance by Government employees.”



                                                 10
Id. § 2.101. It “includes activities that require either the exercise of discretion in applying

Government authority, or the making of value judgments in making decisions for the

Government.” Id. FAR 7.503(c) lists examples of functions considered to be inherently

governmental; this list includes: “[t]he direction and control of Federal employees[;]”

“[a]warding [prime] contracts[;]” and “[d]etermining whether [prime] contract costs are

reasonable, allocable, and allowable[.]” Id. § 7.503(c)(7), (c)(12)(iv), (c)(12)(vii).

       The plaintiff argues that conducting labor relations and “negotiating on behalf of the

[G]overnment was an inherently governmental function.” Pl. Resp. at 9; see also Am. Compl. ¶

26. It argues that any CBA negotiated with its employees would have applied to Federal

employees,2 Am. Compl. ¶ 26, and that, under FAR 52.222-43, included by reference in the

contract, the Government would have had to bear the costs of any increase in plaintiff’s contract

expenses due to the CBA. TR 7–8.

       The defendant argues that the plaintiff did not perform an inherently governmental

function, because the National Labor Relations Act (“NLRA”) imposes a duty on employers to

conduct labor relations with their own employees. Def. Mot. at 13. The employees attempting to

unionize in this case were plaintiff’s employees and not the Government’s employees, as

evidenced by the “non-personal services” nature of the contract. Id. at 14–15. In addition,

MEDCOM had no duty or legal authority to provide legal assistance to plaintiff regarding labor

relations. Id. at 17. In response to the plaintiff’s argument that under FAR 52.222-43 the


       2
          The rationale behind plaintiff’s argument that a CBA would apply to Federal employees
is not completely clear. During oral argument, plaintiff appeared to indicate it would so apply for
two reasons. First, because of the level of control the Government would exercise over plaintiff’s
employees. TR 24–25. And second, because of the contract requirement for a new contractor to
offer a right of first refusal to a predecessor contractor’s employees for a base period. This would
require the Government to offer the right of first refusal at the rate negotiated by plaintiff, if it
decided to not contract out the staffing services. Id.



                                                  11
Government would have to pay any increase in wages resulting from the CBA, the defendant

argues that such an increase would have to be accepted by the CO under that same FAR

provision. TR 41.

        The NLRA, 29 U.S.C. §§ 151–169, provides employees “the right to self-organization, to

form, join, or assist labor organizations, to bargain collectively through representatives of their

own choosing, and to engage in other concerted activities for the purpose of collective

bargaining or other mutual aid or protection[.]” 29 U.S.C. § 157. Section 158(d) creates a mutual

obligation on employers and the representatives of employees “to meet at reasonable times and

confer in good faith with respect to wages, hours, and other terms and conditions of

employment[.]” Id. § 158(d). The definition of “employer” specifically excludes “the United

States[.]” Id. § 152(2).

        The contract at issue required plaintiff to provide medical clerks and other administrative

staffing services to the Government. Contract at 2. In other words, the Government contracted

plaintiff to employ staff at the Medical Center. See, e.g., Contract at 160 (“The Contractor and its

subcontractors shall determine the number of service employees necessary for efficient

performance of this contract and may elect to employ fewer employees than the predecessor

Contractor employed in connection with performance of the work.”). The fact that the employees

were plaintiff’s employees and not the Government’s is further confirmed by the fact that the

contract was one for “Non-Personal Services[,]” which is defined under the FAR as “a contract

under which the personnel rendering the services are not subject, either by the contract’s terms or

by the manner of its administration, to the supervision and control usually prevailing in

relationships between the Government and its employees.” 48 C.F.R. § 37.101. Because the

employees electing to exercise their collective bargaining rights were plaintiff’s employees, it




                                                 12
was plaintiff’s responsibility under the NLRA to “meet at reasonable times and confer in good

faith” with their representatives. Id. § 158(d).3 Therefore, the plaintiff has failed to allege

sufficient facts to prove it was performing an inherently governmental function; it has not

plausibly suggested that it was exercising “discretion in applying Government authority” or

making “value judgments in making decisions for the Government.” Id. § 2.101.

        The plaintiff is correct that, under FAR 52.222-43, included by reference in the contract,

see Contract at 157, the Government, at least after the contract’s base period, was required to

bear the costs of any increase in plaintiff’s contract costs caused by the CBA. FAR 52.222-43(d),

the so called “Price Adjustment Clause,” states, in part:

                The contract price, contract unit price labor rates, or fixed hourly
                labor rates will be adjusted to reflect the Contractor’s actual increase
                or decrease in applicable wages and fringe benefits to the extent that
                the increase is made to comply with or the decrease is voluntarily
                made by the Contractor as a result of . . . [a]n increased or decreased
                wage determination [] applied to the contract by operation of law.

Id. § 52.222-43(d). A wage determination applied by operation of law includes “when a

successor contract is bound by the wages and benefits provided in a predecessor contractor’s

collective bargaining agreement[.]” Call Henry, Inc. v. United States, 855 F.3d 1348, 1352 (Fed.

Cir. 2017); see also Lear Sieglar Servs., Inc. v. Rumsfield, 457 F.3d 1262, 1268 (Fed. Cir. 2006)

(“Regulations make clear that the term ‘wage determination’ includes a CBA-defined benefit

level.” (citing 29 C.F.R. § 4.50)). A contractor can also be a successor to itself. See Lear, 457

F.3d at 1268. In addition, if the Price Adjustment Clause is triggered, the Government is required

to adjust the contract costs. Id. In Lear, the United States Court of Appeals for the Federal



        3
         If the employees were those of the Government, the NLRA would not have applied. See
id. § 152(2) (excluding “the United States” from the definition of employer). Instead, such a
matter would have been overseen by the Federal Labor Relations Authority. See 5 U.S.C. § 7105.



                                                  13
Circuit reversed a decision by the United States Armed Services Board of Contract Appeals and

granted summary judgment to the plaintiff on the grounds that the Government was required to

compensate plaintiff for the increased costs of providing its employees with a defined-benefit

health plan, pursuant to the terms of a CBA. Id. (“We conclude that [the CBA required an actual

increase in fringe benefits] . . . , thereby triggering the government’s obligations under the Price

Adjustment Clause.”). Therefore, in this case, the Government would have been obligated to

adjust the contract price to cover plaintiff’s increased costs of its employees’ wages, pursuant to

the CBA, following the contract’s base period.

       The fact that the Government would have been responsible for plaintiff’s additional

expense as a result of the CBA, however, does not convert plaintiff’s duty under the NLRA as a

private employer to negotiate with its employees into an inherently governmental function.

While the Government would have been liable for the additional wage costs resulting from the

CBA, it was not liable for the costs of negotiating the CBA. See Call Henry, 855 F.3d at 1355

(holding that plaintiff’s increased pension benefit costs were not increased costs of complying

with a wage determination). Plaintiff had an independent statutory obligation to “confer in good

faith” with the prospective union. 29 U.S.C § 158(d). The fact that the Government could incur

additional costs as a result of these negotiations does not make this “a function that is so

intimately related to the public interest as to mandate performance by Government employees.”

48 C.F.R. § 2.101.

       The Government already exercised its discretion and made a policy decision in the Price

Adjustment Clause that “the government is willing to increase contract price when contractors

incur increased costs as a result of complying with an increase in the wage determination

applicable to their contract.” Call Henry, 855 F.3d at 1351. This is because “the government, as a




                                                 14
customer, is willing to pay a premium for services in return for its contractor’s obligation to

compensate service employees adequately and fairly.” Id. The Government is also not opening

itself to a potential exorbitant increase in contract prices, because the NLRA requires employers

to negotiate in good faith. See 29 U.S.C. § 158(d). This situation is, therefore, not analogous to

FAR 7.503(c)(12)(vii)’s example of an inherently governmental function of “[d]etermining

whether [prime] contract costs are reasonable, allocable, and allowable[.]” 48 C.F.R. §

7.503(c)(12)(vii). That determination was already made in awarding the contract. Consequently,

the plaintiff has not alleged sufficient facts to show that it performed an inherently governmental

function in negotiating with the prospective labor union and, therefore, Count I of the amended

complaint must be dismissed.

                    ii. Plaintiff Is Not Entitled to an Equitable Adjustment Due to a
                        Constructive Change in the Contract

         To state a claim for a constructive change, a plaintiff must plausibly allege facts

sufficient to show: “(1) that it performed work beyond the contract requirements, and (2) that the

additional work was ordered, expressly or impliedly, by the government.” Bell/Heery v. United

States, 739 F.3d 1324, 1335 (Fed. Cir. 2014). Plaintiff alleges that the legal expenses incurred

“as a result of the Government’s failure to provide support to [plaintiff] as it was forced to

undertake inherent governmental authority” constituted a constructive contract change. Am.

Compl. ¶ 34. This fails to allege sufficient facts to satisfy either prong of a constructive change

claim.

         Regarding the first prong, the plaintiff, as discussed above, did not undertake an

inherently governmental function and had a statutory duty to “confer in good faith” with the

prospective union. 29 U.S.C § 158(d). Several provisions incorporated into the contract made

clear that plaintiff had this statutory duty. The contract incorporates FAR 52.222-40, which



                                                  15
requires the contractor to post a notification of employee rights under the NLRA. Contract at

163–64. The required notice informs that the employees’ “employer and the union are required

to bargain in good faith in a genuine effort to reach a written, binding agreement setting [the]

terms and conditions of employment.” 29 C.F.R. Pt. 471, Subpt. A, App. A. FAR 52.222-40(d)

states that the “Contractor shall comply with all provisions of the employee notice and related

rules, regulations, and orders of the Secretary of Labor.” 48 C.F.R. § 52.222-40. The contract

also incorporated FAR 52.222-17. Contract at 160. FAR 52.222-17(i) provides for appropriate

sanctions to be imposed if the contractor is “not in compliance with the requirements of this

clause or any regulation or order of the Secretary [of Labor.]” 48 C.F.R. § 52.222-17(i).

Therefore, the plaintiff has failed to allege sufficient facts to plausibly suggest that negotiating

with the prospective union was work performed beyond the contract requirements, because the

contract required plaintiff to comply with its statutory duty.

       As to the second prong, the plaintiff has failed to allege facts sufficient to show that the

Government ordered this work. Plaintiff alleges that “as a result of the union activity that was

directed at [plaintiff’s] subcontracted service providers, [plaintiff] encountered substantially

changed conditions[.]” Am. Compl. ¶ 10.4 This fails to allege that the Government, “expressly or

impliedly,” ordered the work. Bell/Heery, 739 F.3d at 1335. Therefore, the plaintiff has failed to

allege facts plausibly suggesting a constructive change entitling it to an equitable adjustment.

Accordingly, Count II of the amended complaint must be dismissed.


       4
         As discussed above, the Court does not possess jurisdiction over claims relying on the
factual contention that the CO instructed plaintiff to negotiate with the union, because this
presents a “materially different factual” theory than the claim presented to the CO. K-Con Bldg.
Sys., 778 F.3d at 1006. Count II of the amended complaint does not rely on this factual
contention. See Am. Compl. ¶¶ 28–34. The Court, therefore, does not consider whether the
alleged fact that the CO instructed plaintiff to negotiate with the union would satisfy the second
prong of a constructive change claim.



                                                  16
III.   CONCLUSION

       For the above stated reasons, the following is hereby ordered:

           1. Defendant’s amended motion to dismiss is GRANTED.

           2. Plaintiff’s amended complaint is DISMISSED.

The Clerk is directed to enter judgment accordingly. No costs.


       IT IS SO ORDERED.


                                                            s/ Bohdan A. Futey
                                                            BOHDAN A. FUTEY
                                                            Senior Judge




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