               ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of --                                   )
                                               )
Access Personnel Services, Inc.                )      ASBCA No. 59900
                                               )
Under Contract No. N00189-09-C-Zl 14           )

APPEARANCE FOR THE APPELLANT:                         Mr. Tyrone G. Miller
                                                       CEO

APPEARANCES FOR THE GOVERNMENT:                       Ronald J. Borro, Esq.
                                                       Navy Chief Trial Attorney
                                                      Paul C. Scheck, Esq.
                                                       Attorney Advisor
                                                       NA VSUP Fleet Logistics Center Norfolk
                                                       Philadelphia, PA

                OPINION BY ADMINISTRATIVE JUDGE MCNULTY

       This appeal involves the performance of above-captioned personnel services contract
(the contract) for services supporting the Naval Supply Systems Command Fleet Logistics
Center's Naval Inventory Control Point. The contract is a negotiated Small Business
Administration Section 8(a) set aside. The dispute arises from the disallowance of some of the
contractor's subcontractor costs, involving the interpretation of Federal Acquisition Regulation
(FAR) 52.232-7, PAYMENTS UNDER TIME-AND-MATERIALS AND LABOR-HOUR CONTRACTS
(DEC 2002), (the Payments clause). The parties elected to proceed under Board Rule 11. The
government also incorporated a motion for summary judgment with its Rule 11 brief. We
decide entitlement only and, because we find the government failed to pay appellant in
accordance with the Payments clause of the contract, we sustain the appeal.

                                  FINDINGS OF FACT

       1. On 29 September 2009, the contract was awarded to Access Personnel
Services, Inc. (APS or appellant) (R4, tab 1). The contract was a time-and-materials
type contract, which incorporated by reference the Payments clause (R4, tab 1 at 36).
The contract indicated that 23 full-time equivalents would be required to perform the
contract in specific labor categories as follows: four for CAV, two for Carcass
Tracking, three for SIT, one for IWST SSS, two for Code 0341, one for Code 0363,
two for Code 03621, and eight for Code 02 DoD Acquisition 1 (R4, tab 1 at 16-17).

1
    The Performance Work Statement includes descriptions of the duties to be
        performed and the skill sets necessary for each of these labor categories (see
The contract's performance period was for twelve months measured from the date of
award (R4, tab I at 25).

       2. The contract included an estimated number of total labor hours, a ceiling
amount and hourly labor rates for contract line item number (CLIN) 0001 negotiated
by the parties as follows:

                                          Hourly         Estimated   Ceiling Amount
                                          Labor Rate     Labor Hours

   CA V Analyst (College Trainees)        $33.02         8,000         $264,160.00
   Carcass Tracking Specialist I           70.25         2,000          140,500.00
   Carcass Tracking Specialist 2           63.23         2,000          126,460.00
   SIT Specialist I                        70.25         2,000          140,500.00
   SIT Specialist 2                        63.23         4,000          252,920.00
   IWST SSS                                59.71         2,000          119,420.00
   Code 0341 Specialist                    59.71         4,000          238,840.00
   Code 0363 Specialist                    59.71         2,000          119,420.00
   Code 03621 Specialist                   66.74         4,000          266,960.00
   Code 02 Acquisition Specialist I        63.23         4,000          252,920.00
   Code 02 Acquisition Specialist 2        59.71         4,000          238,840.00
   Code 02 Acquisition Specialist 3        56.20         8,000          449,600.00
   Contract Management                    100.00           240           24,000.00

   Total Estimated Hours and Ceiling                    46,240        $2,634,540.00

(R4, tab I at 4)

       3. In accordance with the Payments clause, the hourly rates the contractor was
to charge the government were to include wages, indirect costs, general and
administrative expense, and profit. FAR 52.232-7, in pertinent part, also provided
with respect to subcontract costs:

              (4)(i) The Government will reimburse the Contractor for
              costs of subcontracts that are authorized under the
              subcontracts clause of this contract, provided that the costs
              are consistent with paragraph (b)(5) of this clause.

              (ii) The Government will limit reimbursable costs in
              connection with subcontracts to the amounts paid for

       R4, tab I at 5-19). Resolution of the dispute does not require that we discuss
       these in the opinion.

                                            2
                supplies and services purchased directly for the contract
                when the Contractor has made or will make payments
                determined due of cash, checks, or other forms of payment
                to the subcontractor-



                (iii) The Government will not reimburse the Contractor for
                any costs arising from the letting, administration, or
                supervision of performance of the subcontract, if the costs
                are included in the hourly rates payable under paragraph
                (a)(l) of this clause.

(R4, tab 11 at 14)

       4. Under date of 6 October 2009, APS entered into a subcontract agreement
with Professional Services of America, Inc. (PSA) to perform up to 49% of the work
under the contract (R4, tab 10).

        5. The contract between APS and the government included FAR 52.219-12,
SPECIAL 8(a) SUBCONTRACT CONDITIONS (FEB 1990), which requires a contractor to
obtain written consent from the contracting officer before subcontracting with a lower
tier subcontractor2 (R4, tab 1 at 32-33). Although APS did not seek prior written
consent to subcontract with PSA, the contracting officer subsequently ratified APS
having done so (R4, tab 16). Neither the Defense Contract Audit Agency (DCAA),
nor the contracting officer raised APS's failure to obtain prior written consent to
subcontract as a basis for disallowing APS 's subcontract costs, although the failure to
obtain such consent was asserted by the DCAA as the basis for disallowing all of the
costs charged by another of APS's lower tier subcontractors, Burr Business Solutions
(BBS) 3 (R4, tabs 2, 6, 8).

2
    Pursuant to the Special 8(a) Subcontract Conditions clause APS is recognized as a
        subcontractor to an agreement between the Small Business Administration and
        the Navy's FISC Norfolk Philadelphia Office.
3
    The contracting officer also ratified APS's election to subcontract with BBS and
        issued a modification establishing labor categories and hourly rates to be used
        by APS to bill the government for BBS's services (R4, tab 6). The record
        includes no evidence that a similar modification was issued with respect to
        PSA. In its brief, the government hints at suggesting APS's failure to obtain
        written consent to subcontract as a basis for denying the appeal (gov't br. at 7,
        14-15, 31). Had this argument been fully developed we would not have found
        it persuasive given the contracting officer's ratification of APS's subcontract
        agreement with PSA.

                                             3
       6. With respect to pricing, the subcontract agreement with PSA included a
table setting forth how the parties would divide the work responsibility under the
contract by labor category and the annual fee for the personnel associated with each of
the contract's labor categories (R4, tab 10). The agreement stated:

              Examples of Subcontractor's fees for providing contract
              employees pursuant to this Agreement are as follows:

      Job Titles                 Tasked to PSA       Access Bill Rate   PSA Bill Rate
                                 Or Access           51%                49%
 1    POl-CAV                    PSA                                     $66,035
 2    POl-CAV                    PSA                                      $66,035
 3    POl-CAV                    Access                 $66,035
 4    POl-CAV                    Access                 $66,035
 5    PO I-Carcass Tracking      Access                $140,500
 6    PO I-Carcass Tracking      Access                $126,450
 7    POI-SIT                    PSA                                     $140,500
 8    POI-SIT                    Access                $126,450
 9    POI-SIT                    PSA                                     $126,450
 10   P03-IWST SSS               PSA                                     $119,425
 11   P03-Code 0341              PSA                                     $119,425
 12   P03-Code 0341              PSA                                     $119,425
 13   P03-Code 0363              Access                $119,425
 14   P03-Code 0363              PSA                                     $133,475
 15   P03-Code 0363              PSA                                     $133,475
 16   P02-DoD Acquisition        PSA                                     $126,450
 17   P02-DoD Acquisition        PSA                                     $126,450
 18   P02-DoD Acquisition        Access                $119,425
 19   P02-DoD Acquisition        Access                $119,425
 20   P02-DoD Acquisition        Access                $112,400
 21   P02-DoD Acquisition        Access                $112,400
 22   P02-DoD Acquisition        Access                $112,400
 23   P02-DoD Acquisition        Access                $112,400
      Total Dollars                                  $1,333,345         $1,277,145
      Percentage                                     51.08%             48.92%

(Id. at 3) The table indicates that where the personnel from PSA would be working in
the same labor category as APS's personnel, APS intended for PSA to bill it at the
same hourly rate that APS would bill the government for its own personnel, e.g., PSA
would bill APS $66,035 annually for a CAV Analyst, which equates to the hourly rate


                                           4
of $33.02 set forth in the contract for this labor category when the annual rate is
divided by 2,000 hours and rounded to two places. All of the annual fee rates set forth
in the agreement for PSA's personnel equate to the corresponding hourly rate set forth
in the contract between APS and the government when the annual fee is divided by
2,000 hours and rounded to two places. The agreement also states that PSA had
accepted the same markup on base wages that APS had used in calculating the rates set
forth in the contract (R4, tab 10 at 4 ). Accordingly, the record indicates that APS
intended PSA to bill it at the same hourly rates as APS billed the government.

       7. On 2 February 2011, the DCAA issued a DCAA Form 1, Notice of Contract
Costs Suspended and/or Disapproved to APS, which identified six separate and unrelated
items of costs questioned by DCAA (R4, tab 2).

        8. Only Item No. 1, relating to PSA's subcontractor costs remains in dispute. Under
this item, DCAA disapproved costs totaling $22,236, stating: "APS billed subcontract
direct labor hours at prime contract direct labor rates. We calculated the differences
between the prime contract direct labor rates and the subcontract direct labor rates and
applied the claimed subcontract direct labor hours to the difference." DCAA reviewed the
27 invoices that had been submitted and paid previously and calculated the difference for
each invoice to arrive at the total amount disapproved. (R4, tab 2)

        9. In a letter dated 10 February 2011, APS responded to the DCAA disapproval.
APS acknowledged it had billed its subcontractor's labor hours at the hourly rates set
forth in the contract and that this was more than the hourly rate that its subcontractor had
charged APS for the hours its personnel had worked. APS explained that PSA had made
a mistake in its invoicing and had failed to follow APS' s direction to bill it in
accordance with the billing rates set forth in their subcontract agreement. APS advised
the contracting officer PSA had divided the yearly fee by 2,080 hours instead of the
2,000 hours (a 4% difference) the contract agreement between APS and the government
was based on and that PSA had invoiced separately for its personnel's vacation pay
instead of incorporating it into the hourly rates PSA billed APS. (R4, tab 3) APS
advised it had not included the vacation pay PSA billed it separately, when it billed the
government. APS' s assertions in this regard are confirmed by the invoices it received
from PSA, which show, (1) a 4% difference from the hourly rates included in APS's
contract with the government; and (2) a separate line item charge for vacation pay for
Marion Green. 4 (R4, tabs 12, 14)

      10. PSA's Invoice No. 11, covering the week ending 10 January 2010, for
example, includes the following hourly rates for the personnel that worked during the

4
    The record includes only two of PSA's invoices to APS (R4, tabs 12, 14). It does
        not include all of the invoices PSA submitted to APS.



                                            5
period covered by the invoice: $57.42, $60.79, $64.17, $31.75 and $67.55 (R4, tab 12
at 2). Increasing these rates by 4% equates to the corresponding contract rates of
$59.71, $63.23, $66.74, $33.02 and $70.25 (finding 2). The record indicates APS did
not include the separate vacation pay item charge PSA had included in its Invoice
No. 11 for Marion Green in its invoice to the government corresponding to the period
for the week ending 10 January 2010 (ex. 7, voucher No. 11 at 1-2).

       11. In her final decision dated 28 April 2011, the contracting officer agreed
with the DCAA, stating: "You have incorrectly billed the government for services that
were provided by Professional Services of America (PSA). The amount you billed
exceeds the amount that you were billed by PSA for these services. I concur with
DCAA findings that these costs are disapproved." 5 (R4, tab 6)

        12. APS sought reconsideration of the contracting officer's decision in an
email message sent by its representative, Mr. Tyrone Miller, on 28 April 2011. APS
reiterated that the hourly rates PSA had charged APS in its invoices did not include
allowances for vacation pay, which APS was nevertheless responsible for under its
agreement with PSA. Mr. Miller concluded APS's message by stating: "Ifwe are to
base your decision on what I am be [sic] billed by PSA I would think it has to be based
on the total that I am being billed by them." (R4, tab 7)

        13. Under date of6 May 2011, the contracting officer again denied APS's
claim. In her denial the contracting officer stated: "You cannot bill the Government at
a rate higher than the rate billed to you by your subcontractor. This is a Time and
Material type contract and indirect costs, such as vacation or holiday pay should
behave [sic] been built into the direct labor rate." (R4, tab 8)

       14. The government maintained its position through the end of appellant's
performance of the contract, leading to further disallowances and resulting in a total
current claim of$39,785 (notice of appeal, 20 March 2015).




5   The final decision failed to include the appeal rights language mandated by the
        Contract Disputes Act (41 U.S.C. § 7103(e)) as implemented by FAR 33.211
        (a)(4)(v)). We have previously ruled in this appeal that the failure to include
        the appeal rights language prejudiced appellant, a contractor we described as
        being an "unknowledgeable contractor," neither aware of the dispute process
        generally, nor the Board's existence at the time of the decision denying the
        claim. Access Personnel Services, Inc., ASBCA No. 59900, 16-1 BCA
        ii 36,407.

                                             6
                                         DECISION

        The government contends that under the plain meaning of the Payments clause,
appellant is entitled to be reimbursed only for the hours its subcontractor personnel
worked and at the hourly rates the subcontractor billed appellant (gov't br. at 1-2). It
argues the Payments clause precludes appellant from billing the government at hourly
rates higher than the rates its subcontractor used to bill it. In perhaps the clearest
expression of its position, the government asserts: "Under the contract's Payments
Clause, specifically FAR 52.232-7(b ), APS is entitled to receive reimbursement for the
hours worked by its subcontractor at the actual labor rates of its subcontractor."
(Gov't br. at 2) Appellant's position is that it is entitled to be paid the hourly rates set
forth in the contract for both its own work as well as that of its subcontractor. In this
regard appellant asserts:

              [The government] is erroneously attempting to apply
              Section (b) to an area that clearly falls under the purview
              of Section (a) sentence 1, which reads: (a) Hourly rate.
              (1) The amounts shall be computed by multiplying the
              appropriate hourly rates prescribed in the Schedule by
              the number of direct labor hours performed. This is the
              sole basis of my claim that I be paid at the hourly rates as
              prescribed in my contract.

(App. br. at 2) We hold that both parties have misinterpreted the Payments clause.

        In part, we rely on time-honored rules of contract interpretation to resolve this
dispute. The starting point for contract interpretation is the language of the written
agreement. NVT Technologies, Inc. v. United States. 370 F.3d 1153. 1159 (Fed. Cir.
2004 ). When interpreting the language of a contract, reasonable meaning must be given
all parts of the agreement so as not to render any portion meaningless, or to interpret any
provision so as to create a conflict with other provisions of the contract. Hercules Inc. v.
 United States. 292 F.3d 1378, 1380-81 (Fed. Cir. 2002); Fortec Constructors v. United
States, 760 F.2d 1288, 1292 (Fed. Cir. 1985): United States v. Johnson Controls, Inc.,
713 F.2d 1541. 1555 (Fed. Cir. 1983). The nature of the contract is to be determined bv
an objective reading of its language, i.e .. its plain meaning, not by the parties'
characterizations or their subjective intent. Mc Hugh v. DLT Solutions, Inc., 618 F .3d
 1375, 1380 (Fed. Cir. 2010); Valley Apparel, LLC, ASBCA No. 57606, 12-1 BCA
ii 35,013 at 172,052. The Federal Circuit permits the use of dictionaries to establish the
ordinary or plain meaning of contract terms and does not consider this to constitute
impermissible extrinsic evidence. Teg-Paradigm Envtl., Inc. v. United States, 465 F.3d
 1329, 1340 (Fed. Cir. 2006); see also Vanguard Products Corp. v. Parker Hannifin
Corp., 234 F.3d 1370, 1372 (Fed. Cir. 2000) (involving interpretation of patent claim);



                                             7
Int'! Bus. Mach. Corp. v. United States, 201F.3d1367, 1372 (Fed. Cir. 2000) (involving
interpretation of statute).

        It should be noted the parties do not dispute the number of hours worked by
appellant's subcontractor. The issue is centered on whether appellant is limited to only
receiving reimbursement for the hourly labor rates its subcontractor, PSA, billed it.
Our response to this question is no because the contract's Payments clause does not
state that a contractor will be reimbursed for the hourly rates it is charged by its
subcontractor. Instead, it plainly states the government will reimburse the contractor
for costs of subcontracts. The record does not reflect any dispute regarding whether
the vacation pay that appellant was responsible for under the subcontract agreement is
a subcontract cost or that it is allowable. In fact, the contracting officer's statement
that the hourly rates PSA used in its billing should have included vacation pay,
suggests that she recognized such costs are allowable (finding 13). Nor does the
record reflect any dispute over appellant's contention that it has not been compensated
for the vacation pay for PSA's employees, or that it was obligated to pay it.

        Neither the contract, nor the FAR define "reimburse." Accordingly, as we must,
we give it its common meaning, which is defined as: "To pay back or compensate (a
person) for money spent or for losses or damages incurred." WEBSTER'S II, NEW
RIVERSIDE UNIVERSITY DICTIONARY (1988). The problem we have with the
government's position is that it ignores entirely, or at best is at odds with the meaning of
"reimburse" and the Payments clause's mandate that the contractor be reimbursed for
costs of subcontracts. If we were to adopt the government's position, appellant would
receive no compensation for the cost of the vacation pay it undisputedly has paid to PSA.
There is no language in the Payments clause, or elsewhere in the contract, mandating that
appellant develop an hourly labor rate covering all of its subcontract costs to use in billing
the government as the contracting officer suggested should have occurred, although the
record indicates that this is indeed what appellant intended. 6 (Findings 6, 9, 10) PSA's
failure to bill appellant in accordance with appellant's directive interfered with this plan.

       There is language in the Payments clause with respect to contractors that requires that
an hourly rate, including all direct, fringe benefits, overhead and profit be used when billing
the government for the contractors' employees' time, but, when it comes to subcontractors,
the version of the Payments clause included in the contract plainly states contractors will be
reimbursed for subcontract costs, not hours. We find the government has failed to pay
appellant in accordance with the Payments clause and therefore sustain the appeal.



6
    The contracting officer's statement is somewhat ironic given that, in essence, this
        may be what appellant did or was trying to do by charging the hourly labor
        rates set forth in the contract for its subcontractor's employees (finding 6).

                                             8
        This does not mean, however, that we necessarily agree that appellant is entitled to
all of the costs it seeks, for it too, misinterprets the Payments clause. Appellant also
disregards the language regarding reimbursement of subcontractor costs. Instead of seeking
reimbursement of its subcontract costs, appellant billed the government for its
subcontractor's hours, using the same hourly rate set forth in the contract for its employees'
services. It is possible the resultant total cost billed to the government would be identical to
the reimbursable subcontract cost that appellant is entitled to under the Payments clause,
given the adjustments appellant's subcontractor made to the contract's hourly rates to
account for the vacation pay separately (findings 9, 10). It is also possible that appellant has
under, or over, billed the government for the actual cost of the vacation pay it has paid to its
subcontractor. The record, however, does not permit this determination because it does not
include all of the invoices PSA submitted to appellant, so we are unable to compare the
amount appellant billed the government to what it paid its subcontractor. However, we are
not called upon to make this finding, as the appeal was bifurcated to determine entitlement
only. The appeal is sustained and returned to the parties for resolution of the quantum to be
paid appellant in accordance with our decision. We dismiss the motion for summary
judgment as moot.

       Dated: 7 September 2017




                                                   Administrative Judge
                                                   Armed Services Board
                                                   of Contract Appeals


                                                   I concur



                                                   J. RE1I)l!'PRouTY
 Administrative Judge                              Administrative Judge
 Acting Chairman                                   Vice Chairman
 Armed Services Board                              Armed Services Board
 of Contract Appeals                               of Contract Appeals




                                            9
      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. 59900, Appeal of Access
Personnel Services, Inc., rendered in conformance with the Board's Charter.

      Dated:



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




                                         10
