                ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeals of --                                 )
                                              )
Aegis Defense Services, LLC,                  )      ASBCA Nos. 59082, 60111, 60259
 f/k/a Aegis Defence Services Ltd.            )
                                              )
Under Contract No. W52P1J-l 1-D-0082          )

APPEARANCES FOR THE APPELLANT:                       Armani Vadiee, Esq.
                                                     Ashley N. Amen, Esq.
                                                      Smith Pachter McWhorter, PLC
                                                      Tysons Comer, VA

APPEARANCES FOR THE GOVERNMENT:                      Raymond M. Saunders, Esq.
                                                      Army Chief Trial Attorney
                                                     MAJ David H. Stem, JA
                                                      Trial Attorney

                 OPINION BY ADMINISTRATIVE JUDGE PROUTY

       Although the facts of these appeals are intriguing, involving, as they do, the
Milo Minderbinderesque (see JOSEPH HELLER, CATCH-22 (Simon & Schuster 1961))
machinations sometimes necessary to do business in Iraq, in the end the issues
presented are quite straightforward: what are the government's obligations to a
contractor to which it gave a right of first refusal to purchase armored sport utility
vehicles (SUVs), known as LAVs (short for "light armored vehicles") at the
completion of contract performance, so long as it had no further need for them? And
did the government meet those obligations when it refused to sell the LAVs to its
contractor and, instead, gave them to the Government of Iraq, unbidden? As explained
below, although the United States had its reasons for declining to make the sale to its
contractor, those reasons do not excuse it from complying with its contractual
obligations.

                                 FINDINGS OF FACT

   I.     The Contract and Efforts of the Government to Furnish Aegis with LAVs

       On 1June2011, the Rock Island Contracting Center (the Army) awarded
the above-captioned contract (the contract) to appellant's predecessor in interest,
Aegis Defence Services Ltd. (Aegis), a company doing business in the United
Kingdom (R4, tab 1 at 1). As explained at the hearing, Aegis is primarily in the
business of providing private security services to governments and commercial
organizations (tr. 1/14). The contract, which was a multiple-award
indefinite-delivery/indefinite-quantity (ID/IQ) contract 1, was for the provision of
security support services to the United States Department of Defense and Department
of State in Iraq (R4, tab 1 at 4, 24; tr. 1117-18).

        Aegis was awarded Task Order No. 0002 (TO 2) on the contract on 2 September
2011, and both parties executed it on 13 September 2011 (R4, tab 3 at 203). TO 2 was
intended to provide mobile and staffing security to various sites within Iraq (tr. 1/23).
This task order required Aegis to reach "full operational capability" by the end of the
month, and included a period of performance for the base year to conclude at the end of
2011 (R4, tab 3 at 206). TO 2 was priced at more than $28 million for this first period
of performance (id. at 230), and it included the prospect of up to four additional option
years (id. at 206).

        With respect to the LAVs that are at the heart of this dispute, TO 2, which
contemplated the government's providing such vehicles, took a very different approach
than the original contract, which required the contractor to provide them and to keep
ownership of them through the conclusion of contract performance. The original contract
directed, in section 13 .1.5 .1, that Aegis would "provide all weapons, ammunition, LAV s
[and other equipment]" (R4, tab 1 at 73). Section 13.1.5.2 of the contract further stated
that "Vehicles [including LAVs] provided by the Contractor in support of providing
transportation services for this contract shall remain the Contractor's property. The
Government will not own or accept ownership of any vehicles furnished to it by the
Contractor." (Id.) The Performance Work Statement (PWS) of TO 2, by contrast, stated,
in paragraph 11.0, that, "[t]he Government will provide 155 LAVs for use to perform the
required services under this task order" (R4, tab 3 at 235). The TO 2 PWS further
elaborated, in paragraph 12.0, that, except for the LAVs, the remainder of the equipment
utilized by Aegis would be "Contractor furnished" (id.), consistent with the dictates of
the original contract (see also tr. 1/23-27).

        When Aegis bid on TO 2, it took into account the fact that it would not be
required to provide its own LAVs, and priced its offer accordingly (tr. 1/25-26).
Almost immediately after Aegis began performance of TO 2, though, it became clear
that the notion of government-provided LAVs was problematic.


1
    A multiple-award ID/IQ contract is a contractual vehicle by which the government
        awl:j.rds similar contracts to several different contractors and then (subject to any
        requirement to make minimum awards to each contractor) awards separate task
        orders on that contract to whichever contractor it chooses for the particular task
        order. Typically, contractors submit competing bids to the contracting officer to
        vie for the award of the task orders. See, e.g., Relyant, LLC, ASBCA No. 58172,
        16-1BCA~36,228 at 176,748-49.


                                              2
        Iraq in 2011 was a country in the midst of a significant transition, with the
 expectation that American military forces would soon leave the country as a result of
the United States keeping its commitment to remove its military presence from that
sovereign nation (tr. 1124-25). One of the consequences of this transition was the Iraqi
government's greater involvement in the regulation of private security contractors
(PSCs) operating within its territory- even those PSCs working on behalf of the
United States. With respect to LAVs operating on the open road in Iraq, the Private
Security Department of the Iraqi Ministry of the Interior required a "vehicle sticker"
on such vehicles (tr. 1126). Before providing such a sticker, the Iraqi Ministry of the
Interior required proof of ownership, which had to be obtained through the Iraqi
Ministry of Transport (tr. 1/26-27). And without such a sticker, Aegis had a real
concern that, as soon as one of its LAVs encountered a checkpoint manned by Iraqi
troops, the LAV would be impounded and its occupants arrested (tr. 1/18-19, 28).

       The United States Government Office of Security Cooperation - Iraq (OSC-1)
worked with Aegis to get stickers from the Iraqi government for the LAVs that the
Army intended to provide (tr. 1128-30). These efforts were extensive, involved
embassy and other personnel, and lasted through November 2011, culminating in
OSC-I's obtaining a letter from a senior Iraqi official that, unfortunately, proved
insufficient for registration purposes (id.). At some point, it was suggested that the
matter could be resolved if Aegis purchased LAVs in its own name and then
approached the appropriate Iraqi ministries as the actual owner ofthe LAVs (tr. 1129).
Ms. Melissa Burant, the contracting officer (CO), ultimately requested Aegis to submit
a formal proposal to do just that (tr. 1131-32).

      IL    Aegis and the Government Agree that Aegis will Purchase the LAVs; They
            also Agree upon Terms Regarding the Possible Procurement of the LAVs by
            Aegis after Completion of Contract Performance

        In response to Ms. Burant' s request, Aegis investigated the commercial
marketplace for such vehicles and found an Iraqi commercial supplier. Aegis then
prepared a proposal that it submitted to the Army, based upon obtaining the LAVs from
the Iraqi supplier2 (tr. 1/32). The first informal proposal, for between 50 and 80 LAVs,
was sent from Aegis to the Army on 11November2011 (supp. R4, tab 72). After
some back and forth, a more formal amended proposal was sent by Aegis to the Army
on 11 December 2011 (tr. 1133-34; app. supp. R4, tab 1).




2
    The LAVs were "up-armored" commercial SUVs. Though Aegis proposed using the
         Toyota Land Cruiser for its lower "profile," American personnel strongly
         preferred the relatively roomier Chevrolet Suburban, which was what they got
         (tr. 1/34-35).

                                           3
        The 11 December proposal (drafted by Aegis's in-house counsel, Ms. Sylvia White
(see tr. 1137)), was for the purchase of 54 LAVs at $138,375 per unit (app. supp. R4,
tab 1 at 8319 3) and included three provisions relevant to the dispute here. First, the
revised proposal included a statement regarding the costs of transferring ownership from
Aegis to the government at the end of contract performance:

                For the avoidance of doubt any costs associated with
                transferring ownership to the Government at the end of the
                Contract will be for the Government's account.

(App. supp. R4, tab 1 at 8319) To be clear, what Aegis meant was that costs incurred
in transferring ownership to the government would be paid by the government (tr. 1/36).

        The second material provision in the Aegis proposal states that, "the [LAVs]
would be ~he property of the Government (as CAP), [but] Aegis would hold the
vehicles to the Government's order, but in Aegis name" for purposes of getting them
registered with the Iraqi government (app. supp. R4, tab 1 at 8320). Ms. White
testified that she, herself, was not particularly well-acquainted with the term, CAP,
which she took to mean "contractor acquired property," as utilized by the Federal
Acquisition Regulation (FAR), but that she included it in an attempt to conform the
proposal to the FAR (tr. 1175-76).

         The third, and final, material provision provided that:

               At the end of the Contract Aegis will be given the right of
               first refusal to purchase the vehicles in the event the
               Government has no further use for them. We propose a
               straight line amortization over a 2 year period with a 5%
               residual value.

(App. supp. R4, tab 1 at 8320 (footnote omitted))

       Notably, Ms. White testified that, when she drafted the proposal on behalf of
Aegis, she envisioned the LAVs as being owned by the government, notwithstanding
their being titled to Aegis with the Iraqi government (tr. 1176).


3   The pages in appellant's supplemental Rule 4 file include consecutive numbers both
         at the upper right-hand comers of each page and at the bottom right-hand
         comers of the pages, which appear to be the numbers utilized when the
         government produced the documents in discovery. Because, during the trial,
         counsel and the witnesses tended to reference the consecutive number on the
         bottom right-hand comer of the document, that is the number we use herein.

                                             4
        On 19 December 2011, Ms. Burant sent an email to Ms. White of Aegis,
forwarding a notice to proceed (NTP) with the purchase of 14 LAVs at the
11 December proposal price of $138,375 each (app. supp. R4, tab 2 at 227-29;
see also tr. 1/40). Funding issues, apparently, were the reason for the discrepancy
in the number of LAVs proposed on 11 December and the number ordered
through the NTP (tr. 1/40). On 20 December 2011, as requested by Ms. Burant
(see app. supp. R4, tab 2 at 227), Aegis acknowledged acceptance of the terms of the
NTP (which was to be formalized by a modification to the TO), but added a
handwritten note above the signature block from Ms. White:

              Except with respect to numbers of vehicles to be
              purchased, which is limited by the value of funding in this
              NTP all other terms included in Aegis' proposal dated
              11 December 2011 apply to this purchase.

(App. supp. R4, tab 2 at 230; tr. 1/41)

       Ms. White continued discussions with government personnel in an attempt
to reach agreement upon the terms of the contract modification so that it could be
completed and Aegis's invoices for the LAVs could be paid before the New Year
(app. supp. R4, tab 4). On 23 December 2011, the parties executed Modification
No. 06 to TO 2 (Mod 6) (R4, tab 13 at 385). The purpose of Mod 6 was to fund the
purchase of the 14 LAVs, and it expressly provided that, "Aegis proposal, submitted
via e-mail, dated 19 December 2011 is incorporated to the award" (id. at 387). We are
aware of no proposal from Aegis to the government dated 19 December 2011 as
referenced in this modification, but Mod 6 includes the 11 December 2011 proposal as
an attachment (id. at 390-94).

         In the meantime, the parties negotiated amendment of the terms of the TO 2
PWS to provide for the use of the Aegis-acquired LAVs. As communicated to Aegis
in a 19 December 2011 email, the government's view about the sentence in its
proposal that Aegis would have the right of first refusal if the government had "no
further use for" the LAVs was that the condition was acceptable, inasmuch it was
stated to be "incorporated" into the government-proposed PWS revision without
further comment (R4, tab 15 at 408). The government, however, did not agree to the
proposed straight-line depreciation for the LAVs, and preferred language simply
specifying that the government would negotiate with Aegis at the end of the contract if
it were not taking the vehicles (id.). Ms. White's response to the government's draft
did not address these particular matters (id. at 403), tacitly suggesting that Aegis was
satisfied with the proposed revised PWS provisions regarding the right of first refusal
and pricing issues. The record includes no further correspondence regarding the right
of first refusal language prior to the conclusion of negotiations over the PWS revision.



                                           5
       Modification No. 07 to TO 2 (Mod 7), effecting the revision of the PWS to
account for the purchase of the LAVs, was executed on 9 January 2012 (app. supp. R4,
tab 7 at 1977). The modified PWS (dated 3 January 2012) incorporated into TO 2 by
Mod 7, provided in relevant part:

                All LAVs purchased by the contractor for use on this
                contract will be registered and licensed in contractor's
                name to facilitate [Government of Iraq] licensing. Govt
                will provide reimbursement for costs associated with
                licensing, registration, taxes, renewal fees and title transfer
                fees imposed by the Government of Iraq. At the end of
                contractor's performance period on this Task Order, USG
                will retake title to LAV s. If USG does not wish to take
                title to the vehicles, contractor will be given first right of
                refusa1£4l on negotiating and possible procurement of said
                vehicles.

(App. supp. R4, tab 7 at 1983) Nothing in this modification referenced Mod 6 or
addressed what was to be done in the event that its terms were inconsistent with the
terms of Mod 6 (see app. supp. R4, tab 7).

        The government obtained more funding for LAVs shortly thereafter, and on
25 January 2012, presumably at the government's request, Aegis submitted an updated
proposal to Ms. Burant for the purchase of an additional 38 LAVs (app. supp. R4,
tab 8 at 571-72). The terms of the proposal were similar to those in Aegis's
11 December 2011 proposal, with a few variances not relevant to the present dispute.
In particular, the 25 January proposal included, word-for-word, the clause providing
for Aegis's "right of first refusal" to purchase the LAVs at the end of performance if
"the Government has no further use for them" (app. supp. R4, tab 8 at 573). On
30 January 2012, Ms. Burant sent Ms. White an email forwarding an NTP to purchase
the additional 38 LAVs "in accordance with" the 25 January proposal (id. at 570).

       On 13 February 2012, the parties executed Modification 10 to TO 2 (Mod 10),
to effect the purchase of the 38 LAVs provided for in the 30 January NTP (R4,
tab 23 at 615). Like Mod 7, it included an amendment to the TO 2 PWS using the
same exact language stating that at the end of performance period, the government
would retake title of the LAV, but that if the government "does not wish to take title to
the vehicles, contractor will be given first right of refusal on negotiating and possible

4
    Here, the language departed from the "right of first refusal" used in earlier
         correspondence to become "first right of refusal." Neither party has remarked
         upon the difference, and we see no material difference in the phrases, which we
         consider to be interchangeable.

                                              6
procurement of said vehicles" (R4, tab 23 at 623). The record includes no
intermediate modification affecting the NTP for the 38 LAVs in the way that Mod 6
did for the first 14 LAV s. In any event, nothing in Mod 10 referenced the NTP or
addressed what was to be done in the event that Mod 10' s terms were inconsistent with
the terms of the NTP (see R4, tab 23).

        Aegis purchased the 52 LAVs embraced by Mods 6, 7, and 10, took title
to them, and successfully registered them with the appropriate Iraqi authorities
(tr. 1152-53). There were no disputes between the parties regarding their use.

   III.   The Government Refuses to Sell the LAVs to Aegis

       As contract performance neared completion, Aegis expressed a desire to
negotiate the purchase of the LAVs from the government. The first evidence of this
expression in the record is an internal Army email dated 4 June 2013 in which an
Army contracting specialist named Trisha Polfliet notified her chain of command of
Aegis's wish to obtain the LAV s, and inquired whether the government wanted to
keep the LAVs for itself (R4, tab 33 at 722; see also tr. 1158 (Ms. White recalls
making inquiries regarding keeping the LAVs approximately July 2013)).

        In response to Ms. Polfliet' s email, the government began the process of
deciding whether it had a use for the vehicles (R4, tab 33 at 719-21). The Defense
Contract Management Agency (DCMA) property managers to whom this task was
forwarded were taken by surprise, to say the least (see generally, R4, tab 34). On
6 June 2013, Jeff Garrett, the Department of Defense (DoD) Demilitarization Program
Manager, responded to the internal inquiry by stating that DoD was "not authorized to
sell excess military equipment in Iraq especially Armored vehicles" and explained that
the LAVs needed to be "turned in to OSC-I" (id. at 724).

        By 21June2013, however, it appeared that those being consulted were in
favor of selling the vehicles to Aegis and that any internal obstacles to the sale
had been overcome. On that date Army L TC John Turner, in an email on behalf
of OSC-1, responded to renewed questions about the LAVs by stating, "If Aegis
wants the vehicles, that is their right IA W the contract. No argument from OSC-1."
(R4, tab 36 at 731) After a few additional email exchanges about the mechanics of the
LAV sale to Aegis, on 25 June 2013, Ms. Polfliet asked LTC Turner for confirmation
regarding their use before she could move forward: "Basically we need the USG
to state they don't need them." She also expressed her desire to sell the LAVs to
Aegis so that the government could obtain the money to put towards the contract.
(R4, tab 37 at 734) LTC Turner's response later the same day was, "please use this
email to serve as official notice that the USG will not require the 52 purchased
vehicles for operations post site closure and normalization." He then offered to
provide a memorandum more formally stating the same if the email were insufficient.


                                          7
(Id.) Ms. Polfliet forwarded this email to Mr. John Gorman, the DCMA Property
Manager for Iraq, who responded that it satisfied him and told her to go ahead and
"negotiate directly with Aegis on the purchase of these vehicles" (R4, tab 39 at 752).

       That was not, however, the end of the story. On 2 July 2013, in an email
response to Ms. Pol:fliet, who was ensuring that she "cross[ed] all of our T's" for the
negotiation with Aegis (R4, tab 40 at 755), Mr. Garrett, the DoD Demilitarization
Program Manager, who earlier sent the email stating that such sales were forbidden,
again voiced his concerns. In short, Mr. Garrett explained that up-armored SUVs were
considered to be subject to the Department of Commerce Arms Export Regulation,
and, as such, DCMA had no authority to release them to Aegis. He did hold out the
possibility that a purchase could be coordinated through the "LM&R" office of the
Office of the Secretary of Defense. (Id. at 754)

         Apparently unaware of any flies in the ointment, on the 4th of July 2013, Aegis
sent ACC-RI additional information regarding the 52 LAVs that it wished to purchase
(R4, tab 41 at 772). An internal government discussion followed (see, inter alia, R4,
tab 44). In a 10 July 2013 email that was part of this discussion, an OSC-I
representative explained that OSC-I's need to rapidly wind down sites meant that its
:flexibility in dealing with the vehicles continually diminished, and that the "default
position" was to "FEPP"5 the vehicles to the Government of Iraq (id. at 806-07). In a
further email exchange the same day, after agreeing that the export controls on the
armored vehicles had an exception that allowed their transfer to the Government of
Iraq, Mr. Garrett reiterated to Ms. Pol:fliet that, "[c]urrently DOD can't sell or release
Demil Code Q/3 (sensitive) [which is the category that he earlier explained applied
to the LAVs] out DOD [sic] to civilians" (id. at 804-05). He further noted that the
DoD policy on the matter was being updated, but that he expected "no major change"
(id. at 804). Ms. Pol:fliet forwarded the material part of Mr. Garrett's email to
Ms. White, of Aegis, the next day (R4, tab 45 at 826).

        In her email response to Ms. Polfliet sent on 12 July 2013, Ms. White
thanked her for the information and informed her that she would have Aegis's
American attorneys look into the issue "to see if they have any bright ideas" (R4,
tab 45 at 825-26). In a follow-up email sent the 23rd of July, Ms. White inquired about
why the LAVs were considered to be "Demil Code Q/3 and whether they [had] ever
officially been classified as such by the US Government." She further shared that
Aegis was of the opinion that the LAVs should not be considered to be subject to
the Department of Commerce demilitarization classifications since they were
purchased, titled, and registered to Aegis, not the United States. (R4, tab 45 at 825)
Responding to Ms. Polfliet's email forwarding this exchange on the 24th of July,

5
    "FEPP" stands for Foreign Excess Personal Property. "FEPPing," in this context,
        means transferring ownership of property to the Government oflraq. {Tr. 1/84)


                                            8
Mr. Gorman, the DCMA Iraq Property Manager, appeared to agree that the LAV s
were contractor-furnished equipment and thus not covered by the demilitarization rules
(id. at 824).

        Nevertheless, by the next day, the 25th of July, Ms. Polfliet received new
direction that would end up as the final government position. As she explained to
Ms. White, since the LAVs were bought with government funds, they were considered
to be government-furnished equipment to which the demilitarization rules applied.
And noncombat commercial armored vehicles were apparently classified as "Q."
(R4, tab 49 at 872) Although the record is unclear, it appears to us that Ms. Polfliet's
position was based upon direction given to her by the new CO, Ms. Jodie Bennett
(see tr. 11141-43).

       According to her testimony, which we find to be credible, Ms. Bennett's
decision-making with respect to the disposition of the LAVs was driven almost
completely by the advice she received from Mr. Garrett, the DoD demilitarization
expert, who had communicated that the sale of the LAVs would be contrary to
governing regulations (tr. 11143). She did not FEPP the LAVs to the Government of
Iraq because the United States had a particular need to give them to the Iraqis; rather,
she did so because the vehicles needed to be disposed of at the end of the contract and
FEPPing them to the Iraqis was preferred to simply destroying them, which was also
an option (tr. 11143-44). Thus, we specifically find that the decision to FEPP the
LAVs, rather than sell them to Aegis, was not made for reasons involving national
security or foreign policy, but was simply the path taken to dispose of them once the
government, rightly or wrongly, internally decided that it could not transfer them to
Aegis on contract completion.

        We also find that the government had no use for the LAVs upon contract
completion. This finding is based upon CO Bennett's earlier-discussed testimony
regarding her motivation for disapproving the sale as well as her testimony, in
response to the Board's questions, that nobody had actually particularly wanted to give
the LAVs to Iraq, except as a means of their disposal (tr. 11143-44) and OSC-l's
earlier-noted statement that the government had no further use for the LAVs. 6
Interestingly, in early August 2013, some government personnel explored the options
available for exporting at least some of the LAVs to other countries in the region for
use in security contracts so that the money already spent on them would not be wasted.
To that end, the persons involved in this discussion affirmatively did not wish for the


6   To the government's credit, the CO's final decision in response to Aegis's non-monetary
         claim upon this matter did not assert that there was a use for the vehicles; stating,
         instead, that the future use of the vehicles was irrelevant to the government's
         decision-making (R4, tab 63 at 1042-43).

                                             9
LAVs to be FEPP'd to the Iraqis (see R4, tabs 47-48). Unfortunately, however, the
export of these LAVs proved to be impracticable (see R4, tab 48).

        Through a series of emails in early to mid-August 2013 to Ms. Bennett and her
supervisor, Ms. Christine Berry, Ms. White attempted to persuade the government to
change its mind regarding the LAVs prior to their transfer to the Iraqis (R4, tabs 49,
52-53). One matter of particular concern to Ms. White was the possibility that LAVs
FEPP'd to the Government of Iraq might simply be handed over to a different security
contractor by that government (R4, tab 53 at 934-35). CO Bennett agreed that such a
thing had happened, though it should not have (app. supp. R4, tab 24 at 4428-29). In
the end, however, the government felt that it could not budge (R4, tab 53 at 936). On
17 September 2013, Ms. White submitted a non-monetary claim to the CO seeking a
contractual interpretation permitting the sale of the LAVs to Aegis as part of an effort
to get the government to reconsider and make a definitive decision7 (see R4, tab 56;
tr. 1/60). This claim was denied in due course in a final decision by CO Bennett dated
25 October 2013 (R4, tab 63). That decision was appealed on 20 December 2013 and
docketed as ASBCA No. 59082.

        In the end, the LAVs were a11 8 FEPP'd to the Iraqis in April 2014 (supp. R4,
tab 95). The FEPP paperwork included a statement by the Deputy Chief of OSCI-C
that the FEPP transfer was "for the benefit of both the [Government of Iraq] and the
United States (US) Government," and ''will contribute significantly to [US] efforts [to
help] Iraqi Security Forces" (supp. R4, tab 95 at 2936).

       Aegis submitted two monetary claims to the CO in 2015. The first, in the
amount of$3,709,843.75, was submitted on 7 May 2015 for 37 LAVs (supp. R4,
tab 96). It was denied by the CO on 4 June 2015 (supp. R4, tab 97), appealed by
Aegis on 27 July 2015, and docketed as ASBCA No. 60111. The second monetary
claim, in the amount of$1,081,187.50, for 13 LAVs, was submitted by Aegis on

7
  The claim turned out not to be quite the last effort on Aegis's part. In early
       October 2013, Aegis's director, Brigadier James Ellery, sent an email directly
       to L TG John Bednarek, chief of OSC-I in an attempt to get the government to
       change its mind. The two engaged in what appears to have been a friendly and
       constructive colloquy about the issue, with L TG Bednarek ultimately
       explaining that the government would have liked to have sold the LAVs to
       Aegis and been paid for them, but had felt compelled to follow its interpretation
       of the regulations that precluded such a sale. (R4, tab 62)
8
  The FEPP paperwork indicates that only 50 LAVs were FEPP'd to the Government
       of Iraq (app. supp. R4, tab 28 at 463), rather than the full 52 at issue in the
       contract. The discrepancy is likely resolved by the fact that at least 1, and
       perhaps 2 of the original 52 LAVs had become inoperable by the time of
       contract completion (see tr. 1/61-62).

                                          10
27 July 2015 (supp. R4, tab 98). The record does not include a CO's final decision
upon this claim, and its deemed denial was appealed by Aegis on 2 October 2015 and
docketed as ASBCA No. 60259.

                                        DECISION

        We do not second guess the government's motives in its apparently sincerely held
belief that it was precluded from selling the LAVs to Aegis, as contrary to common sense
as it may seem. The consequence of acting upon that belief, however, is that the
government broke its contractual promise to Aegis to give it a right of first refusal to
purchase the LAVs if the government had no use for them. As the government, in fact,
had no use for the LAVs and as the contract was definite enough to pass legal muster and
no other circumstances were proved to excuse performance, we rule in favor of Aegis on
entitlement.

   I.     The Contractual Language Required the Government to Offer to Sell the
          LAVs to Aegis if the Government had No Use for Them

        The terms of the contract material to this dispute are, at first blush, not as clear
as we would like them to be. The government argues, consistent with the terms of the
amended PWS, that the sole determinant of triggering Aegis's right of first refusal was
whether the government wished to take back "title" to the LAVs (gov't br. at 19-24).
This would make Aegis's rights tum upon the subjective desires of the government
and have nothing to do with whether the government had an alternate use for the
LAVs. The contract terms, however, are not so plainly focused upon the term, ''title,"
as the government would like and, as will be seen, ultimately support Aegis's
preferred reading: that Aegis had the right of first refusal if the government had no
further use for the LAV s.

       To resolve this issue, we begin with the law of contract interpretation. Under
basic principles of the law, a contract is interpreted "in terms of the parties' intent, as
revealed by language and circumstance." United States v. Winstar Corp., 518 U.S. 839,
911 (1996) (citations omitted). Generally, this process begins and ends with the
language of the contract. TEG-Paradigm Environmental, Inc. v. United States,
465 F.3d 1329, 1338 (Fed. Cir. 2006). And in reviewing this language, the Board
should read the contract "as a whole and [interpret it] to harmonize and give reasonable
meaning to all its parts," if possible, leaving no words "useless, inexplicable,
inoperative, insignificant, void, meaningless or superfluous." Precision Dynamics, Inc.,
ASBCA No. 50519, 05-2 BCA ~ 33,071at163,922; see also Hercules, Inc. v.
United States, 292 F.3d 1378, 1381 (Fed. Cir. 2002) ("contract must be construed to
effectuate its spirit and purpose giving reasonable meaning to all parts of the contract");
Hunkin Conkey Constr. Co. v. United States, 461F.2d1270 (Ct. Cl. 1972) (rejecting
contract interpretation that would render a clause in the contract meaningless).


                                            11
        With this in mind, we tum to the terms of the contract, which are more expansive
than admitted by the government. The government's insistence that we are limited to
the terms of the PWS is contradicted by the parties' adoption of the terms of Aegis's
11 December 2011 proposal into Mod 6 as well as the government's adoption of those
terms into the NTP that preceded Mod 6 and into the NTP that preceded Mod 10. That
proposal, of course, included the language granting the right of first refusal to Aegis if
the government had no use for the LAVs. Because Mod 6 is part of the contract9 and
because Mod 7 made the revised PWS part of the contract (without explicitly replacing
or rejecting the terms of Mod 6), we are presented with a requirement to reconcile these
contractual terms. See, e.g., Hunkin Conkey, 461F.2d1270.

         The most direct way to reconcile the seemingly different contract terms ("no
further use" in the proposal versus the government's '\vish[ing] to take title" LtJ. the
PWS) is to interpret the title language in the PWS as the equivalent of the use language
in the earlier-drafted proposal. To understand how this can be so, we digress slightly to
discuss the meaning of "title" in the PWS. Although the parties were both of the belief
that, as property acquired under the contract, the LAVs were the government's
property, both parties also recognized that the LAVs had to be titled to Aegis so that it
could engage with the Iraqi government to obtain the necessary sticker. At the end of
the contract, even if the government had always equitably owned the LAVs, in order to
use them in Iraq or elsewhere, it would need to take title to them. To the contrary, ifthe
LAV s were only to be destroyed or handed to a different contractor (or the Government
of Iraq), there would be no need for the government to take title for itself. Thus, taking
title, as a practical matter, would only be done in the event that the government had use
for the LAVs, and would not be done if it did not. We do not perceive - and the
government does not present - an alternate interpretation of the contract that reconciles
the two writings. Moreover, this interpretation has the great merit of being exactly
what the parties intended 10, as reflected in the government's previously-discussed 19
December 2011 email correspondence with Aegis, in which it informed Aegis that its
proposal, regarding a right of first refusal to purchase the LAVs if the government had
no use for them, had been incorporated into the PWS except for the straight-line
depreciation issue. See Blinderman Constr. Co. v. United States, 695 F.2d 552, 558

9
  The government asserts, without support, that the PWS in Mods 7 and 10 "superseded"
       the incorporation of Aegis's proposal by Mod 6 (gov't hr. at 20). Nothing in
       Mod 7 or Mod 10 supports this conclusion with respect to the terms at issue here.
10
   Aegis asks us to make an adverse inference against the government with respect to its
       intent because of its failure to produce Ms. Burant as a witness (app. br. at 25-27).
       Drawing such an inference is unnecessary here, given that the documentary
       evidence amply explains the parties' intents and there is no reason to believe
       that Ms. Burant's testimony would be materially any different than Ms. White's.
       The government's failure to call a witness that the appellant believes would be
       helpful to appellant's case, without more, does not justify an adverse inference.

                                           12
(Fed. Cir. 1982) (contemporaneous construction of an agreement prior to dispute is
entitled to great weight).

        Additionally, we reject the government's attempt to make hay of the fact that
there was no equivalent to Mod 6, incorporating the terms of the Aegis proposal for
the purchase of the first 14 LAVs (which preceded Mod 7), for Mod 10, involving the
later 38 LAVs (see gov't br. at 22). Through reconciliation of the terms of Mods 6 and
7, the meaning of the revised PWS was already established by the time of Mod 10;
there is simply no need to revisit its interpretation.

   II.     The Government Had No Use for the LAVs After Contract Performance

        Althoug.li the government asserts that its handing the LAV s to the Iraqi
government furthered a valid national security aim and thus advanced a legitimate
government purpose (see gov't br. at 22), the overwhelming weight of the evidence is
to the contrary. LTC Turner's emails on behalf of OSC-I certifying that the
government had no use for the LAVs are convincing evidence that there was no
government need for them. Ms. Bennett's candid testimony that her decision to FEPP
the vehicles was based completely upon the advice she received forbidding their sale,
and had nothing to do with any government need for them constitutes further
persuasive evidence that the government had no remaining use for them. There is also
the notable absence in the email correspondence of any argument, whatsoever, that
FEPPing the LAVs to the Iraqi government would be of any use to the United States
Government.

        To counter this evidence, the government presents the fact that the apparently
standard government memorandum to justify the FEPPing of the LAVs included
language stating that it was done in the interest of the government and for Iraqi
security (gov't br. at 13). The government also states, in one sentence of its brief
that, in being transferred to the Iraqi government, the LAVs were being legitimately
used by the United States (id. at 22). There is nothing in the FEPPing memorandum
that gives us any reason to believe that the statement about the use of the LAVs
was anything more than a standard incantation with little evidentiary worth. The
contemporaneous statements of LTC Turner; the extensive email thread; and
Ms. Bennett's sworn testimony all prove otherwise.

       Under the terms of the contract, the government had no use for the LAVs and was
obligated to give Aegis the right of first refusal for their purchase, which it did not do.




                                           13
    III.   Aegis May be Entitled to Monetary Damages

        Due to prior agreement at the pretrial stage of these appeals, we only decide
entitlement at this stage of the proceedings. Nevertheless, the government has argued
that the terms of the contract are such that the damages are too speculative to support a
finding of entitlement to money damages, as sought in Aegis's second and third claims
and appeals (gov't hr. at 27-30). In response, Aegis contends that arguments about
damages are premature at this point in the litigation and that it is not seeking
speculative damages; only the difference between what it paid for replacement LAVs
and what it would have paid for the LAVs had the government complied with the
contract and sold them to Aegis (app. reply hr. at 11-13). Neither side's argument is
completely correct.

        We start by noting that the theory upon which Aegis appears to be seeking
damages is flawed. That damages theory is that, in accepting Aegis's 11 December
2011 proposal, the government agreed to a straight-line depreciation of the price of the
LAVs over a two-year period with a 5% residual value. Damages, then, would be
calculated by subtracting the depreciated price of the contractually obtained LAVs
from the price that Aegis ultimately paid on the market for other LAVs that it bought
to replace them for use in its post-contract Iraqi business (see supp. R4, tab 96 at 4
(damage analysis in first monetary claim), tab 98 at 1 (second monetary claim,
adopting analysis of first)). But the contract did not mandate that the government
depreciate the LAVs to almost nothing as Aegis first proposed.

         To be sure, as we discussed at length above, the contract incorporated both
Aegis's 11December2011 proposal and its revised PWS. But while the proposal was
firm that the right of first refusal would be triggered if the government had no use for
the vehicles, it was not so firm about the means of calculating their price. With respect
to use, the language was: "At the end of the Contract Aegis will be given the right of
first refusal to purchase the vehicles in the event the Government has no further use for
them" (app. supp. R4, tab 1 at 8320 (emphasis added)). By contrast, the price
language, which immediately followed was: "We propose a straight line amortization
over a 2 year period with a 5% residual value" (id.). Moreover, unlike the terms of the
PWS that could be harmonized with the use language of the proposal, the PWS
language on the terms of the sale specifically rejected the set price proposed by
Aegis's proposal, and stated: "If USG does not wish to take title to the vehicles,
contractor will be given first right of refusal on negotiating and possible procurement
of said vehicles" (app. supp. R4, tab 7 at 1983 (emphasis added)). This was consistent
with the government's written response to Aegis's proposal in which it specifically
rejected the set depreciation rate and proposed negotiations, instead (R4, tab 15 at
408). We thus interpret the contract modifications together, to provide that Aegis and
the government agreed to negotiate a price for the LAVs if the government had no use
for them, but not to adopt the pricing formula proposed by Aegis.


                                           14
       Although this interpretation might diminish Aegis's damages - and certainly
makes them less easily quantifiable - it does not prevent us from finding a breach of
contract or making a monetary award. What we are presented with in this contract is
an agreement to negotiate over a matter- in other words, an "agreement to agree,"
which imposes upon the parties an obligation to negotiate in good faith. North Star
Steel Co. v. United States, 477 F.3d 1324, 1332 (Fed. Cir. 2007). Such agreements to
agree have been held to be sufficiently definite to support the finding of the existence
of a contract, see, e.g., Gardiner, Kamya & Assocs., P.C. v. Jackson, 369 F.3d 1318,
1322 (Fed. Cir. 2004) (citing cases), and we see no reason to depart from this
precedent at this time. Of course, ifthe parties are unable to resolve the quantum of
this appeal upon remand, Aegis will be obligated to present evidence of the value of its
agreement that was breached by the government, but we have no need to further
address the measure of damages here and now.

   IV.    The Government Has Not Presented a Legal Impossibility Defense

        Finally, we briefly address the matter of a defense that has not been raised by
the government, but is so implicit in the facts leading up to the contract breach that we
feel obligated to acknowledge it: was the government legally barred from selling the
LAVs to Aegis? If so, does this suggest that both parties were under the
misapprehension when they agreed to Mods 6, 7 and 10, that the government could
sell the LAVs to Aegis when, in fact, it could not, thus presenting the defense of
mutual mistake of law?

        Mutual mistake is an affirmative defense. See, e.g, K-Con Building Systems,
Inc. v. United States, 131 Fed. Cl. 275, 332 (2017); Ameriserv Trust v. United States,
125 Fed. Cl. 733, 747 (2016); see also East-Wind Industries, Inc., ASBCA No. 25684,
86-1 BCA ~ 18,698 at 93,987 (holding that mutual mistake is "not merely" an
affirmative defense, but also, effectively, a counterclaim). As an affirmative defense,
it must be pied and proved. See Board Rule 6(b) (requiring affirmative defenses to
be pied in the government's answer); Northrop Worldwide Aircraft Services, Inc.,
ASBCA Nos. 45216, 45877, 96-2 BCA ~ 28,574 at 142,630-31 (failure to timely
raise affirmative defense may waive it); Kellogg Brown & Root Services, Inc.,
ASBCA No. 58175, 15-1BCA~35,988 at 175,823 (burden of proof). The
government did neither here.

       The defense of mutual mistake is not present in the government's answer or in
any pre- or post-trial filing in this appeal. Moreover, even when Aegis raised a related
matter in its opening post-trial brief (primarily arguing that, because it had not been
raised as a defense, the government could not rest upon a DoD regulation to excuse its
performance (see app. br. at 36)), the government never claimed that it was presenting
such a defense. Finally, at the hearing, the government presented no evidence (such as
proof that the regulation actually prohibited the sale versus whether it was merely


                                           15
perceived to do so) to prove such a defense. 11 The defense is thus both waived and
unproved.

                                     CONCLUSION

        The government agreed to give Aegis a "right of first refusal" to negotiate a
purchase of the LAVs obtained under the contract after the contract was over, so long
as the government had no use for them. The government, in fact, had no use for the
LAVs, but declined to sell them to Aegis because of its belief that it was not permitted
to do what it had agreed to do under the contract. This was a breach of the contract for
which the government has presented and proved no defense. Accordingly, Aegis is
entitled to those damages it can properly prove came from that breach. The appeals
are sustained and remanded to the parties to negotiate quantum.

         Dated: 15 November 2017



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



                                                  I concur



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




11
     We do not know or speculate why the government chose this strategy, but recognize
        that there may have been very good reasons for it to do so.

                                           16
       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. 59082, 60111, 60259,
Appeals of Aegis Defense Services, LLC, f/k/a/ Aegis Defence Services Ltd., rendered
in conformance with the Board's Charter.

      Dated:



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




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