       In the United States Court of Federal Claims
                                         No. 8-415C
                                     Filed: May 25, 2017
    * * * * * * * * * * * * * * *               *
    HORN & ASSOCIATES, INC.,                    *
                                                *
                        Plaintiff,              *
                v.                              *      Contract; Breach; Good Faith and
                                                *      Fair Dealing; Bad Faith; Recovery
    UNITED STATES,                              *      Audit; NASA; Trial.
                                                *
                       Defendant.               *
                                                *
    * * * * * * * * * * * * * * *               *

       Robert H. Brunson, Nelson Mullins Riley & Scarborough LLP, Charleston, S.C.,
for the plaintiff. With him was Patrick C. Wooten, Nelson Mullins Riley & Scarborough
LLP, Charleston, S.C.

       Anna Bondurant Eley, Trial Attorney, Commercial Litigation Branch, Civil
Division, United States Department of Justice, Washington, D.C., for the defendant. With
her were Kenneth Woodrow, Trial Attorney, Zachary Sullivan, Trial Attorney, Robert
E. Kirschman, Jr., Director, Commercial Litigation Branch and Chad A. Readler, Acting
Assistant Attorney General, Civil Division, Department of Justice.

                                        OPINION

HORN, J.

                                     FINDINGS OF FACT

       Plaintiff, Horn & Associates, Inc. (Horn & Associates), is a recovery audit firm which
performed a recovery audit for the National Aeronautics and Space Administration
(NASA). Recovery audit firms, like Horn & Associates, identify payment errors and
provide assistance in the recovery of erroneous payments from the suppliers or
contractors which received the erroneous payments.

      Horn & Associates was founded in February 2003 with the intention of performing
recovery auditing work for federal, state and local government entities, in addition to
recovery auditing work for the private sector.1 The principals of Horn & Associates were

1As indicated in the complaint, Horn & Associates was incorporated as a “veteran-owned
small business, organized and existing under the laws of Utah, with its principal place of
business in Salt Lake City, Utah.”
Tom Horn, Larry Farrar, and Michael Lowery.2 Tom Horn was the President of Horn &
Associates. At the time of the NASA recovery audit, Mr. Lowery was the Chief Executive
Officer of Horn & Associates and was responsible for marketing and finding clients,3 and
Mr. Farrar served as Vice President of Marketing and Operations for Horn & Associates.
At trial, Mr. Farrar testified, as of the time of trial, that “[w]e’ve done some county, cities,
states, some other federal agencies as well as NASA. Probably 10 or 12 audits at this
point.” Among the federal agency recovery audits preformed, Horn & Associates worked
for the United States Department of Transportation, the United States Department of
Homeland Security, the United States Patent and Trademark Office, and the United
States Census Bureau.4

       Horn & Associates’ focus on recovery audits for the federal government stemmed
from the passage of Section 831 of the Defense Authorization Act for Fiscal Year 2002.
See Defense Authorization Act for Fiscal Year 2002, Pub. L. 107-107, 115 Stat. 1012
(2001). As indicated in plaintiff’s November 20, 2007 certified claim, described below:

       Congress recognized the need for such recovery audits by passing Section
       831 of the Defense Authorization Act for Fiscal Year 2002. This section
       added a new subchapter to the U.S. Code (31 U.S.C. §§ 3561-3567) that
       requires federal agencies that enter into contracts exceeding $500,000,000
2 Tom Horn testified that he started his first accounting firm in 1980. Mr. Farrar testified
he worked for private companies for twenty years, most recently as Vice
President/Controller for Montgomery Ward until 1993 when he joined the largest recovery
audit firm in the country. Another Horn & Associates employee, Jennifer Harris, testified
that Mr. Lowery was involved in auditing for over thirty years, and he “was an incredibly
innovative pioneer in the accounts payable recovery business.”
3 The court noted during the trial that Mr. Lowery was unable to testify at trial for medical
reasons, and, with the court’s permission, the parties designated his earlier taken
deposition as his testimony.
4 Horn & Associates also employed a number of auditors as subcontractors during
contract performance. Typically, the subcontractors, had agreements with plaintiff that
stated: “During the term of this agreement Contractor shall earn a commission equal to
40% of revenue generated by claims identified by Contractor and collected for the client
by H&A [Horn & Associates]. The commission is calculated as 40% of actual net revenues
received from the client for the life of the audit.” By the terms of its contract with NASA,
Horn & Associates was entitled to a contingency fee of 13.5% for any recovery by NASA
that plaintiff identified. Specifically, the contract provided:

       The amount of the Contingency Fee for this order is 13.5%. Payments to
       the contractor for services under this order will be based on a Contingency
       Fee Basis after NASA has recovered and received funds for the basic
       requirements as set forth in the Statement of Work (SOW). There will be no
       out-of-pocket expenses, costs or other financial obligations or liabilities
       incurred by NASA, other than the fees identified in this order.
                                               2
         in a fiscal year to carry out a “cost-effective program for identifying any
         errors made in paying the contractors and for recovering any amounts
         erroneously paid to the contractors.” Thus, recovery audits became
         mandated for certain federal agencies like NASA.[5]

The joint stipulations of fact submitted to the court state: “[o]n January 16, 2003, the White
House Office of Management and Budget issued Memorandum M-03-07, titled,
“Programs to Identify and Recover Erroneous Payments to Contractors.” (internal citation
omitted) (OMB Memorandum M-03-07). OMB Memorandum M-03-07 indicated the
Memorandum was “intended to assist agencies to successfully implement recovery
auditing and recovery.” OMB Memorandum M-03-07 also stated that “[a]ll classes of
contracts and contract payments should be considered for recovery audits.” As also jointly
stipulated to by the parties, OMB Memorandum M-03-07 indicated that “[a]gency heads
may exclude classes of contracts and contract payments from recovery audit activities if
the agency head determines that recovery audits are inappropriate or are not a cost-
effective method for identifying and recovering erroneous payments.”

        The General Services Administration (GSA) had awarded Contract No. GS-23F-
0258N (the GSA Contract) to Horn & Associates on June 12, 2003. The GSA Contract
was a blanket purchase agreement, pursuant to which various executive agencies could
solicit offers to contract for recovery auditing services. To comply with the Defense
Authorization Act of 2002 and the Improper Payment Information Act of 2002,6 NASA
issued Request for Quote NNH04068239Q (the RFQ) for Audit Recovery Services, and
the Contracting Officer issued the RFQ to four companies, including Horn & Associates.
As indicated in the Contracting Officer’s cover letter to the four companies:

         National Aeronautics and Space Administration (NASA) is requesting offers
         under Request for Quote (RFQ) NNH04068239Q for Audit Recovery
         services described in the attached Statement of Work (SOW). NASA
         intends to acquire these services by competing this requirement among
         several sources on the GSA Federal Supply Schedule Contract, Schedule
         Number 520 SIN 9, entitled “Financial and Business Solutions (FABS).”
         Your company is being solicited since it appears on the GSA FABS
         Schedule’s list of eligible contractors.
5   As further indicated by Tom Horn at trial:

         We were beginning to do research and we discovered that in 2002 the
         Defense Authorization Act was -- there was a piece in there, Section 831
         on recovery auditing that was passed that mandated recovery auditing on
         the federal government, and also that there was an Improper Payments
         Information Act that was passed as well that mandated some testing on
         improper payments at government agencies.
6As noted in its post-trial briefing, defendant states that “[p]ursuant to an Act of Congress,
NASA hired Horn and Associates to conduct a recovery audit to return to the Government
hundreds of millions of dollars overpaid to vendors.” (internal reference omitted).
                                                 3
A Statement of Work was attached to the RFQ, which stated: “The contractor shall
perform recovery-auditing services at all 10 NASA Centers for the period beginning
October 1, 1997 through September 30, 2003.” The Statement of Work attached to the
RFQ indicated that: “The audits will be conducted on payments made from all fixed price
contracts.”

      NASA received two proposals in response to the RFQ, one from Horn & Associates
and one from Connolly Consulting, Inc. (Connolly Consulting). In the Memorandum for
the Record, for the “Award of Contract NNH05CC28D to Horn and Associates, Inc.,” Janet
Langweil 7 stated that:

      It was determined by both the Office of Chief Counsel and the Contracting
      Officer that the proposal received from Connolly Consulting was considered
      to be non-compliant with the requirements of the RFQ. Connolly Consulting
      did not provide a contingency fee with a fixed percentage [of recovery], but
      instead proposed an estimated contingency fee range conditioned upon
      additional information.

As a result, Horn & Associates was the only responsive offeror. In its proposal, Horn &
Associates stated that, in its opinion, NASA needed “a 100% look at the Department’s
data to gain the full benefit of the recovery audit” and that Horn & Associates “would like
to have access to all contracts, agreements and documents that would reflect pricing,
terms, allowances, rebate programs, etc.”8

       On December 23, 2004, NASA awarded the Order for Supplies or Services, Order
No. NNH05CC28D (the contract) to Horn & Associates for the furnishing of “Recovery
Audits,” pursuant to the GSA Contract. The contract indicated that it was “subject to all
the terms and conditions of the contractor’s GSA Schedule Contract GS-23F-0258N and
as amended by the clauses contained herein.” Included as an attachment to the contract
was a Statement of Work. The contract’s Statement of Work indicated: “The contractor
shall perform a primary audit recovery on all contract payments for the period beginning
October 1, 1997 through September 30, 2003, identifying overpayments and/or
underpayments.”9 The contract also included a unilateral option for NASA which stated:
7The Contracting Officer who sent the issued for the Memorandum for the Record was
Janet Langweil. Dean Patterson replaced Ms. Langweil as the contracting officer during
performance of the contract in July 2006.
8The Contracting Officer noticed a discrepancy in the option periods, specifically option
year one, in Horn & Associates’ proposal, and requested that Horn & Associates
acknowledge the option years as stated in the RFQ. By email, Horn & Associates
acknowledged, and agreed to, the option years as stated in the RFQ.
9 As noted above, and explained further below, the Statement of Work attached to the
RFQ differed from the contract and stated: “The audit will be conducted on payments from
all fixed price contracts.” (emphasis added).
                                            4
       (a)    The Government may extend the term of this contract by written
       notice to the Contractor within 30 days; provided that the Government gives
       the Contractor a preliminary written notice of its intent to extend at least 60
       days before the contract expires. The preliminary notice does not commit
       the Government to an extension.

       (b)   If the Government exercises this option, the extended contract shall
       be considered to include this option clause.

       (c)    The total duration of this contract, including the exercise of any
       options under this clause, shall not exceed 5 years.

The contract further stated, “[t]he Contracting Officer may exercise the option by written
notice to the Contractor within the period specified in the schedule.”

        The contract included four option years to extend the term of the audit recovery
period. The original period of performance of the contract was December 23, 2004 (the
date the contract was awarded) to December 22, 2005. Each option year extended the
period of performance by one year and expanded the audit recovery period. For option
year 1, the period of performance would be October 1, 200510 to September 30, 2006,
and the corresponding audit recovery period was 2004-2005. For option year 2, the period
of performance was October 1, 2006 to September 30, 2007, and the corresponding audit
recovery period was 2006, option year 3 contemplated the period of performance would
be October 1, 2007 to September 30, 2008, and the corresponding audit recovery period
would be 2007. Finally, for option year 4, the period of performance would be October 1,
2008 to September 30, 2009, and the corresponding audit recovery period would be 2008.
For all option years, the contingency fee remained 13.5%.

        The contract indicated that “the contractor shall perform a primary audit recovery
on all contract payments for the period beginning October 1, 1997 through September 30,
2003,[11] identifying overpayments and/or underpayments,” (emphasis added) but did not
specify the types of contract payments Horn & Associates should review and present for
recovery to NASA. In its certified claim, Horn & Associates indicated that

       Horn presented NASA over 400 claims for recovery in 15 different classes
       on September 30, 2006. The claims fell into the following classes:
       Obligations over paid; Prompt Pay Interest Calculation Errors; Statement
10Despite the original period of performance of the contract ending December 22, 2005,
the first option period began on October 1, 2005. Neither party raised this discrepancy as
an issue at trial, and it does not impact the court’s decision in this opinion.
11 As indicated in the defendant’s responses to plaintiff’s interrogatories and in the parties’
joint stipulations of fact, the total amount of contract payments made by NASA during
fiscal year 2004 was estimated at $10,872,558,720.53, and the total amount of contract
payments made by NASA during fiscal year 2005 was estimated at $10,806,837,873.44.
                                              5
      Claims; Payment Errors; Cash Discounts; Regular Duplicate Payments;
      Award Fees Overpaid; Interest on Overpayments; Prepayment Discounts;
      Pricing Claims; Miscellaneous Charges; Obligation Overpaid; and Tax
      Charged in Error.

          Payment Centers

       Horn & Associates attempted to perform recovery audits at nine of NASA’s
payment centers. The centers were: the Goddard Space Flight Center (Goddard), the
Lyndon B. Johnson Space Center (Johnson), the John F. Kennedy Space Center
(Kennedy), the John C. Stennis Space Center (Stennis), the George C. Marshall Space
Flight Center (Marshall), the John C. Glenn Research Center (Glenn), the Langley
Research Center (Langley), the Hugh L. Dryden Flight Research Center (Dryden), and
the Ames Research Center (Ames) (collectively, the NASA Centers). After award of the
contract, Horn & Associates held planning meetings with the NASA Centers to discuss
the audit.12 During performance of the contract, according to defendant, Horn &
Associates submitted a total of 402 claims to NASA for collection and payment. NASA
approved and paid 40 of them.

       Prior to the planning meetings at the NASA Centers, on February 8, 2005, Horn &
Associates participated in a pre-audit planning meeting at NASA headquarters. On March
4, 2005, after the pre-audit planning meeting, an internal NASA memorandum was issued
by Gwendolyn Sykes, NASA’s Chief Financial Officer, to all NASA Centers, which
indicated that Horn & Associates was to audit “payment records of fixed price contracts.”
The contracting officer technical representative at the time, Melvin DenWiddie, issued an
email to all NASA Centers on May 18, 2005, stating the contract for Horn & Associates’
recovery audit was for the audit of “all contract payments.” NASA, therefore, eventually
provided Horn & Associates with payment data for all contracts, not just payment data for
fixed price contracts. As acknowledged by defendant, “[t]he data itself, however, was
admittedly not perfect.”

       Mr. DenWiddie testified that “at the various NASA centers, we had what was known
as the Legacy accounting systems. And most of those systems were manual systems
that were not automated and of course, they were not integrated,” and, that, further, each
center had its own accounting system. NASA, therefore, switched to a SAP system. Mr.
DenWiddie, indicated, however, that “[i]t was somewhat of an unfortunate event actually,
because the Legacy systems that we had throughout the centers, at the time of the
implementation of the SAP system, those systems were disconnected and the SAP
system was installed to become the official integrated system of record.” As Mr.
DenWiddie explained when asked what happened to the financial data that had been
12Horn & Associates held planning meetings in April of 2005 at the following NASA
Centers: at Stennis on April 1, 2005, at Kennedy on April 19, 2005, at Glenn on April 20,
2005, at Marshall on April 21, 2005, at Goddard and at NASA Headquarters on April 22,
2005, at Langley on April 26, 2005, at Johnson on April 27, 2005. In May of 2005, Horn
& Associates held planning meetings at Dryden on May 16, 2005, and at Ames on May
17, 2005.
                                            6
associated with the Legacy system after the transition to the SAP system, he indicated
that “information was virtually lost because typically what should normally happen, there
should be a parallel running of the two systems together so that you could make sure that
there was some compliance. In this case, that did not take place so the information from
the Legacy systems just disappeared.” As a result, in its post-trial briefs, defendant now
concedes that, although NASA produced the SAP data to Horn & Associates, that “[t]he
production of NASA’s SAP data was more problematic” than the production of the Legacy
data. The parties, especially, the defendant, were unable to identify the total amount of
contract payments for fiscal years 1998-2003, at issue in the contract, which called for
Horn to “perform a primary audit recovery on all contract payments for the period
beginning October 1, 1997 through September 30, 2003, identifying overpayments and/or
underpayments.” The parties have stipulated that:

         NASA’s financial system no longer contains data for contract payments
         made by NASA during FY1998 through FY2003, and therefore NASA was
         unable to identify the total amount of money it expended on contract
         payments during those fiscal years, or during the FY1998-2005 period of
         the Horn Recovery Audit, in response to requests for that information from
         Horn during discovery. NASA did not reconstruct an estimate of the amount
         of total contract payments for FY 1998-2005 in response to discovery
         requests seeking this information.

         On June 30, 2006, Mr. DenWiddie wrote a letter to Horn & Associates, indicating:

         Your work on this project has been very impressive. Because our payment
         files were in several locations on multisystems, some in a manual format, I
         wondered how you would overcome that challenge and conduct an effective
         Agency-wide recovery audit of our payments.

         It soon became apparent that your technical capability was centered on your
         highly-experienced staff. The extensive financial management and recovery
         auditing experience allowed each challenge to be broken into small
         components that were easier to resolve. The customizable audit
         methodology was beneficial in addressing specific unique needs of each
         NASA Center.

During his testimony, Mr. DenWiddie explained,

         I wrote this letter because as I’ve testified before [13] during this testimony,
         I thought that Horn was doing an outstanding job. I thought that they were
13   Mr. DenWiddie had previously testified during the trial:

         The recovery audit was a low priority. It was a low priority because the
         overall audit of the overall financial statements was so very important that
         the recovery audit activity was something that we had to do because it was
         a mandate from the presidential level down through OMB. We had to do it.
                                                7
       working under very adverse conditions, namely the accounting systems that
       they had to audit, the people who they had to work with who were opposed
       to them doing their work, and the fact that they had somehow managed to
       do an outstanding job, in my view, I thought that somebody, somebody
       needed to say thank you. And I decided that I would be the one and I did.

Mr. DenWiddie testified that the letter was “my last written communication as a
government employee,” as he retired on the same day, June 30, 2005.

       On September 8, 2005, the contract was extended for one year through September
30, 2006 by an “Amendment of Solicitation/Modification of Contract,” with all terms
remaining the same, except the period of performance. The description of the Modification
stated in its entirety:

       The purpose of this modification exercises Option 1 to conduct Audit
       Recovery for the period of 2004-2005 as identified in Item 13 of the basic
       order [the option to extend the term of the contract].

       1.      Clause 7, PERIOD OF PERFORMANCE, shall commence on the
       effective date of this contract through September 30, 2006.

       2.     The total value of this order remains unchanged.

       All other terms and conditions remain the same.

(emphasis in original).

      Below is an overview of the 402 claims identified and submitted to NASA by Horn
& Associates and illustrative examples of the Horn & Associates’ interactions with NASA
personnel at the NASA Centers.14 As indicated by defendant, NASA recovered payments,
and paid Horn its contingency fee, on 40 of those submissions during the audit period.”

       But it was not nearly as important as getting a clean, unqualified opinion on
       the overall financial statements.
14 The court notes that the number of claims at the various NASA Centers in this opinion
differs from those in the court’s earlier opinion. See generally Horn & Assocs., Inc. v.
United States, 123 Fed. Cl. 728 (2015). In the earlier opinion the court indicated that
“[u]nfortunately, after discovery, trial, and even post-trial briefing, the parties still do not
agree on the number of claims submitted by plaintiff to NASA. The court uses the
defendant’s numbers for the claims, without, at this time, concluding whether the numbers
submitted by either party is correct. When there is a discrepancy, the court has footnoted
the plaintiff’s numbers of claims.” Id. at 735 n.16. After the court issued its decision, the
court instructed the parties to work together to generate a joint submission reflecting all
of the claims. The parties, although still at odds about the merits of the claims, were able
submit the joint submission, which the court uses as a basis to discuss the number of
claims at each of the NASA Centers.
                                               8
             Goddard

       According to parties, Horn & Associates identified and submitted to NASA a total
of 223 claims related to the Goddard recovery audit. This was by far highest portion of
the claims identified by Horn & Associates and submitted to NASA.15 Prior to the audit,
Mr. Farrar testified that he believed “Goddard was designated as one of the biggest
centers and certainly one of the bigger opportunities that we had.”16 Despite this, the sole
claim for Goddard approved and processed by NASA was an SGT Inc. claim, for
$1,163.44 dollars.17

       Initially, Maggie Baumbach was the primary subcontractor for Horn & Associates
to work at Goddard.18 Ms. Baumbach begin work at Goddard in September 2005. Mr.
Farrar offered testimony that three months after arriving at Goddard, Ms. Baumbach “was
becoming very frustrated because she was having an extremely hard time getting her
claims presented. And at that point, she -- I don’t believe she had any claims processed,
15In its certified claim, Horn & Associates explained the difference in the number of claims
generated by the different NASA locations:

         The differences in claim potentials found at each of the above payment
         centers can be explained in a couple of ways. It is partially a reflection of
         the size of the payment center but more likely the amount of contract
         payments administered by the center. But, the more important reason for
         this claim's purposes is the fact that it is a reflection of the level of
         cooperation, or lack thereof, by that payment center with Horn staff [sic] The
         level of cooperation in many instances was so bad (i.e. it was a breach of
         the duty of cooperation imposed by the contract on NASA), that Horn had
         to reassign some of its audit teams on one or more occasions at some of
         the centers to other locales.
16   Mr. Farrar also indicated:

         When we did our initial look at the centers and we also discussed them in
         our meeting with Melvin [DenWiddie] the first of February, we were trying to
         identify which centers were bigger than others, where the biggest
         opportunity might have been. So we identified, with Melvin, basically in that
         meeting the four centers that were the largest and had the biggest
         opportunity would be Goddard, Kennedy, Johnson and Marshall.
17Defendant has indicated to the court that it now believes that 14 claims identified and
submitted by Horn & Associates at Goddard were valid, and another 2 claims were
partially valid. At the time of the audit, however, NASA approved two claims, but only
processed the one claim for SGT Inc. The other claim, a different Aerospace Corp. claim,
was approved for payment, but not processed by NASA.
18Ivan Sherman worked at Goddard with Ms. Baumbach. Mr. Sherman, however, only
worked part-time.
                                               9
and certainly none collected,” and that “nobody would meet with her.”

        After eight months of working at Goddard on the recovery audit, Ms. Baumbach
left the Goddard recovery audit, claiming during her testimony at trial that “I couldn’t afford
to continue with no income. I had been months and months at this and we had, nobody
had a claim that was in the channel to be paid, to be collected from the vendor, and so
that was a big factor.” In an email dated April 17, 2006, to Mr. Lowery, Mr. Farrar, and
Jennifer Harris, another Horn & Associates employee, Tom Horn explained that he spoke
with Ms. Baumbach and she indicated that it was “just too hard and doesn’t want to be
the front person. I told her we were staffing the place with more people and that we would
have a good person to handle the communications . . . and give guidance if she wants to
continue to help us, but she pretty much declined.” The email indicated, however, “[t]his
actually may not be all bad as she seems to be willing to help us with the outstanding
items (so she can get paid) and help with a smooth transition to the new guys.” The email
from Tom Horn to Mr. Lowery, Mr. Farrar, and Jennifer Harris continued: “It does not
sound like she has really audited that much at Goddard. She said she did a few contract
reconciliations, looking mainly for dups [duplicate payments] and believes she has only
skimmed the surface. She hasn’t looked at possible interest claims, or for that matter, a
lot of other claim types which may or may not be there.”

       Subsequently, in May of 2006, three auditors replaced Ms. Baumbach: Dan
Lizana,19 Steven Smith and Marie Beckey. Mr. Lizana indicated that once he arrived at
Goddard, “the two individuals that I recall and we were introduced to, the points of contact
was [sic] Yvette Blackwell -- she was the Supervisor for the examiners and she was our
point of contact -- and that week we were introduced to Sandra Brown, who was her
superior, who was going to be responsible for denying and accepting the claims.”20 Like
Ms. Baumbach, Mr. Lizana felt frustrated at NASA’s handling of Horn & Associates’
claims. For example, according to Mr. Lizana, one claim “was not outright rejected. But
our explanation was NASA was not interested really in pursuing this claim because this
was a cost type contract and DCAA [Defense Contract Audit Agency] will check it at close-
out.” As indicated in an email from Ms. Brown to Mr. Lizana:

       My position remains that until either Procurement and/or DCAA determines
       that Swales [& Associates] has violated their contractual agreement with
       NASA Goddard, I am at no liberty to act upon your claim. Validation of your
       claim has to be supported in conjuction [sic] with the audit/findings of
19 Regarding his position with Horn & Associates, Mr. Lizana testified at trial that he “first
heard about the position through Craigslist.” Mr. Lizana described his philosophy of
recovery auditing as follows: “I think recovering auditing, it's not a quantitative assessment
of your skills, meaning it's not having done it for 30 years, in my opinion, whether you
have a CPA and so forth. I think recovering auditing is about the type of skills that you
have.”
20In between the time of the recovery audit and the testimony at trial, Sandra Brown
changed her name to Sandra Gardin.


                                              10
       Procurement and/or DCAA.[21]

Mr. Lizana worked on the Goddard recovery audit until the end of contract performance.

          Johnson

       According to parties, Horn & Associates identified and submitted to NASA a total
of 121 claims related to the Johnson recovery audit, only 19 of which were approved and
processed by NASA.22 Johnson was the center that generated the second most claims in
Horn & Associates’ recovery audit, and the 121 claims from Johnson are more than were
generated at every other center combined, excluding Goddard.

       Tom Hott was an accountant and the primary subcontractor who worked for Horn
& Associates at Johnson. Michael Colby also worked on the Johnson recovery audit. The
Johnson recovery audit was the first recovery audit for Mr. Colby. Mr. Hott’s wife, Beth
Hott, worked off-site supporting the Johnson recovery audit. Tom Hott testified that neither
he nor his wife had ever performed a recovery audit of a federal government agency
before the Johnson recovery audit.

        Regarding the Johnson recovery audit, Mr. Hott indicated that, initially, the audit
“went fine. We had access to their records and we had a nice place to work in front of the
vault where the records were kept, and it was easy for us to come up with a program to
start the audit effectively and efficiently.” Mr. Hott, explained, however, “[t]hen when we
began turning in claims, they were, the claims were immediately denied.” Regarding the
process for presenting claims, Mr. Hott testified:

       On a regular basis, the first person was Pat Bright. Pat was the supervisor
       of the accounts payable department. She reported to June Boeckel who
       was, as I understand it, the director of accounting at the time. And June
       reported to Marilyn Sampay who was the deputy CFO responsible for the
21The role that the Defense Contract Audit Agency (DCAA) played in the NASA audit by
Horn & Associates was a source of ongoing tension between the parties. Ms. Brown, in
explaining the above quoted email testified:

       They [DCAA] are our periodic auditors for these type contracts, cost types.
       They perform periodic audits and sometimes not in the contractual
       agreement that goes back and they look at where they’ve not adjusted a
       rate or use the wrong rate, and all those things. They do that performance
       audit that we look to happen that will take care of that 40 million [in the
       Swales & Associates claim identified by Mr. Lizana] if in fact that was a valid
       adjustment that had not happened.
22 Defendant states, however, that although one of the claims, the West Group Payment
Center claim, was approved and processed, it was not a valid claim because “it is for an
amount of less than $100, and was submitted by Horn in contravention of the plain terms
of Horn’s scope of work in its contract.”
                                             11
         conduct of the audit, according to our contract. And then I had a few
         occasions with John Beall, the CFO of the Johnson Space Center.

When asked on cross-examination why he did not hire more people to work on the audit
with him, Mr. Hott testified that “[i]t didn’t make a lot of sense to spend a tremendous
amount more money to bring in additional resources. We were already getting screwed
to the hilt.”23

            Kennedy

       According to parties, Horn & Associates identified and submitted to NASA a total
of eighteen claims related to the Kennedy recovery audit, only two of claims submitted
were collected, and neither claim was approved by NASA. Brock Young was the primary
subcontractor for Horn & Associates to work at Kennedy. Mr. Young had not performed
a federal government agency audit before the Kennedy recovery audit. He indicated that
he would recover forty percent “of what was collected by Horn & Associates” for the
recovery audit claims that he identified.24 Mr. Young took part in the pre-audit meeting at
Kennedy on April 15, 2005, and he testified that Mr. Farrar and Jennifer Harris, from Horn
& Associates attended the meeting along with Sam Lenck, Deputy Chief Financial Officer
for Kennedy and Brenda Brooks, the Kennedy supervisor over accounts payable from
Kennedy.

        Mr. Young expressed frustration with the lack of action by NASA with respect to
the claims he submitted to NASA. Mr. Young also was frustrated by the role of Mr. Lenck,
who viewed his role as “to act as the middleman between Mr. Young and the contracting
officer, Ms. Solum.”25 Mr. Young indicated that he first talked to Mr. Lenck and he would
23   Mr. Hott explained his frustration at working on the Johnson recovery audit:

         June Boeckel, who was Pat's supervisor, was very reluctant to accept or
         approve claims and would create argumentation on the claims that had
         nothing to do with the merits of the claims themselves, again causing
         unusual time delays, especially when you consider the fact that we would
         turn in a claim and it would be weeks or months before we would get the
         information back. This caused a severe time problem because we continued
         to try to work under one scenario and knowing full well that we would have
         to go back and go through all of the claims, all of the contracts again and all
         of the payments again.
24As noted above, forty percent was a typical percentage among Horn & Associates’
subcontractors, although Jennifer Harris testified that her agreement with Horn &
Associates called for a fifty percent payout. In May of 2006, Ms. Harris became an
employee of Horn & Associates.
25Ms. Solum was a contracting officer who worked on the contracts awarded at Kennedy,
but was not the contracting officer for the Horn & Associates recovery audit for the
contract.
                                               12
take the documents, “which would be the contract file, the mods [modifications], and the
invoices in question, and we'd go through it in that form. And that's what I'd review with
NASA is all the data with them so they would have everything they needed to look at the
claim.” After that, Mr. Young testified,

         I would typically never hear back from them. So what I thought was
         happening was Sam was going to approve it and send it where it needed to
         be sent, like to the vendor, things of that nature. Later on I found out what
         he was really doing was he was facilitating the process, but he was leaving
         it up to the contracting officers to approve. So then at that point, I was
         assuming they were going to the contracting officers. The thing is I was
         never getting anything back, so I don’t know what actually happened.26

Mr. Young continued to work on the Kennedy recovery audit until the end of contract
performance.

         Marshall

        According to the parties, Horn & Associates identified and submitted to NASA a
total of nineteen claims related to the Marshall Recovery audit, eleven of which were
approved and processed by NASA.27 James “Chip” Edgerton, was the primary


26   Mr. Young also testified:

         [W]e called a meeting. In that meeting, we had Leslie Solum, we had
         Leslie's boss, we had a legal representative as well there. Steve Chance
         was the COTR, that’s the Contract Officer Technical Representative is what
         a COTR is, COTR. And then we had myself, Sam Lenck, Brenda Knox, or
         Brenda Brooks was there, and I think one or two other people as well. So it
         was a pretty big meeting. There’s [sic] roughly 10 people in this meeting.
         We went through everything, decided that yes, there's definitely something
         there and we were to pursue it.
                                            ...

         When I left that meeting, what was supposed to take place next was Leslie
         Solum should have had it reviewed and sent out a letter to the vendor to try
         to collect the money. The agreement was that yes, it looks like something
         was there, so what was supposed to happen was she was supposed to
         send the information to the vendor saying either explain to us why it is not
         valid or remit the money.

Mr. Young testified, however, that “[n]othing happened actually,” and “that was the last
anything ever happened to it.”
27Defendant states, however, that although the SAP Public Services Inc. claim was
approved and processed, the claim was only a partially valid claim. The court also notes
                                              13
subcontractor for Horn & Associates to work at Marshall. He employed two additional
auditors to work with him, John Crochet and Michael Mescher, with whom he had worked
on pervious recovery audits. Consistent with other subcontractors, Mr. Edgerton indicated
that he would recover 40 percent of whatever Horn & Associates was able to recover for
its audit claims that he identified. Mr. Edgerton attended the April 21, 2005 pre-audit
meeting at Marshall with Mr. Mescher, Mr. Farrar, and Jennifer Harris from Horn &
Associates, and John Alexander and Becky Black from Marshall.

        Mr. Edgerton indicated that he began the recovery audit in June 2005 with Mr.
Crochet and Mr. Mescher, but after a week, Mr. Crochet did not return because “[t]here
was never enough work for three people,” and Mr. Masker worked for two or three weeks
a month for the rest of 2005, but did not return in 2006 because “[w]e didn’t have enough
complete files to audit.” Mr. Edgerton also indicated that he frequently had to request
documents again and again. Mr. Edgerton left Marshall at the end of May 2006, with the
intention of returning once

      it was worked out of how to get the complete files, then we could ramp it
      back up, bring in either Mike [Mescher], Jack [Crochet] and myself or bring
      in some, if we had other audits going on right then we couldn’t drop those,
      so we would find other associates that we could use to bring in to help work
      on the audit.

Mr. Edgerton, however, did not return to Marshall. When asked to summarize his
experience at Marshall, Mr. Edgerton indicated that “[t]hey were nice people, but . . . you
know, that they had their work to do and their work came first. And so our files came
second. So it was, you know, it was a -- it wasn’t a combative relationship, it's just that
their jobs came first and ours came second.”

          Langley

        According to the parties, Horn & Associates identified and submitted to NASA a
total of seven claims related to the Langley recovery audit, and NASA paid plaintiff its
contingency fee for one of the claims. According to James Michael, Deputy Chief
Financial Officer for Finance at Langley, Ken Respess worked on the Langley recovery
audit for Horn & Associates, arriving in October of 2005.28 He worked for approximately
two weeks. Jennifer Harris submitted claims related to Langley as well.29

that one claim at Marshall, which was approved and processed by NASA was for Bulk
Gas Helium.
28According to Mr. Michael, auditors had originally arrived in July 2005, but he could not
remember how many, only testifying that “I think it was about three or four, but I don’t
know exactly how many. It was more than one, less than five, but I don’t remember exactly
how many.”
29In particular, Jennifer Harris had sent out letters for collection with the signature of
Langley’s Deputy Chief Financial Officer Kerry Christian. Four vendors submitted
                                            14
           Ames

      According to parties, Horn & Associates submitted a total of six claims related to
the Ames recovery audit, but only two of the six claims were approved and processed by
NASA.30 According to John Lee, Deputy Chief in Financial Management Division for
NASA at Ames, Bob Schuler was the only subcontractor for Horn & Associates to work
at Ames. He began working in November 2005, and stayed at Ames for three weeks.

           Dryden

       According to parties, Horn & Associates identified and submitted to NASA a total
of two claims related to the Dryden recovery audit, two of which were approved and
processed by NASA.31 Valerie Zellmer, NASA’s Chief Financial Officer at Dryden testified
that two auditors, Penny Parker and Jim Cudlip, worked on the Dryden audit. 32 Ms.
Zellmer testified the auditors arrived at the end of July 2005 and “left before Labor Day of
2005.” Ms. Zellmer indicated that she expected the auditors to return after Labor Day, but
neither Ms. Parker nor Mr. Cudlip returned to Dryden.

           Glenn

       According to parties, Horn & Associates identified and submitted to NASA a total
of six claims related to the Glenn recovery audit, five of which were approved and
processed by NASA According to Vickie Hagerman, Supervisor of NASA Accounting

payments to NASA in response to the letters. Langley did not approve of Ms. Harris’
actions. As Mr. Michael testified at trial, after discovery of Mr. Harris’ actions, “at that point
I know that we expressed our dissatisfaction. I don’t recall in what way we did. I know that
Kerry Christian was very upset at that time that that letter had gone out with his name at
the bottom of it.” Further Langley did not believe the claims were valid, as Mr. Michael
testified that Langley “did not believe they were overpayments at all,” and indicated that
“as the contract is audited and closed out in the end or during the life of the contract, that
we would receive those amounts back or that our final payment would be less because
of that. Mr. Michael also testified that NASA “actually received checks from the vendor.”
NASA did not pay Horn & Associates a contingency fee for three of the vendors, but did
pay a contingency fee for a National Instruments claim.
30The defendant states, however, that although one of the claims, the Physical Sciences
Inc. claim, was approved and processed, it was not a valid claim “because it falls below
the $100 threshold established by Horn's contract.”
31Defendant states that for one of the claims, the Infinity Tech claim, the claim partially
valid, but “Dryden did not collect the discount amount because of its small size, and the
fact that it had occurred so far in the past.”
32Ms. Zellmer also indicated that, “I can remember two. I thought there were three, but I
definitely remember two,” which she identified as Penny Parker and Jim Cudlip.
                                               15
Reports Branch, and the point of contact for the recovery audit at Glenn, Tom Reese was
the subcontractor for Horn & Associates to work at Glenn, and began working in
November 2005, and worked for “about six months, onsite, offsite.” Jennifer Harris
submitted claims related to Glenn as well on behalf of plaintiff.

          Stennis

       The parties agree that Horn & Associates did not submit any claims regarding its
recovery audit for Stennis. Mr. Edgerton, was the primary subcontractor for Horn &
Associates to work at Marshall, testified that he was expected to handle the recovery audit
at Stennis, but he decided not to go, believing he would encounter the same problems
with NASA that he had at Marshall. Mr. Edgerton testified that he did not go to Stennis
because

       [w]e were working at Marshall. We were trying, that was one of the big
       centers that had a lot of accounts payable. It had a lot of records. If we
       weren’t getting the records from Marshall why would, you know, why take
       the time and money to go down to Stennis and have the same problem and
       just, you know, create another problem?

       End of the Contract

       On July 17, 2006, Terry Bowie, Deputy Chief Financial Officer of NASA, indicated
to NASA personnel at Johnson that “I have asked the legal people to look into suspending
the contract until we have settled out on the issues raised by Horn in terms of what the
contract calls for and what they are entiltle [sic] too [sic] for payment.” According to the
parties’ joint stipulations, on July 24, 2006, the NASA Centers were informed that they
were to limit Horn & Associates’ recovery audit to fixed price contracts only. Dean
Patterson, who had become the Contracting Officer in July 2006, 33 informed Horn &
Associates on July 31, 2006, that:

       In light of performance concerns that NASA has regarding Contract
       NNH05CC28D, you are advised to restrict your current audit recovery
       reviews to fixed priced contracts. A meeting will be held, with your
       participation, to address performance concerns, contract interpretations
       and whether or not it is in the government's best interest to exercise the
       option.

On August 15, 2006, Mr. Bowie issued a memorandum to all NASA Centers regarding
the March 4, 2005 internal memorandum from Gwendolyn Sykes, the NASA Chief
Financial Officer and stated:

       A previous message regarding the program and contract with Horn and
       Associates, Inc[.] (Horn) indicated the company would be working with each
33As indicated above, Janet Langweil was contracting officer for the contract before Dean
Patterson becoming the contracting officer for the contract in July 2006.
                                            16
       Center to conduct an examination of payment records of only fixed price
       contracts. This limitation is not consistent with language in the NASA-Horn
       contract. Therefore, Centers please work with Horn to conduct an
       examination of all contracts. This direction is valid until September 30, 2006,
       when the current performance period on the Horn contract will expire.

        Ten days after Mr. Bowie’s memorandum to the NASA Centers, on August 24,
2006, Contracting Officer Patterson informed Horn & Associates that NASA would not
exercise a second option year on the contract, and, on September 30, 2006, the period
of performance under the contract would end. On August 28, 2006, Contracting Officer
Patterson sent an email to all NASA Centers informing them “that a decision has been
made not to exercise the option under [the contract] and to let the current period of
performance end September 30, 2006. Until that time, the contract permits Horn & Assoc.
to review all contractual documents and associated financial records in the performance
of their audit recovery activities.”

        Thereafter, on August 31, 2006, Charles McIntosh, a NASA branch manager and
the assistant to Mr. Bowie sent an email to each of the offices of the deputy chief financial
officers for each of the payment centers and asked them to identify all the claims related
to the Horn & Associates audit. Mr. McIntosh wrote:

       As you know, there has been quite a bit of discussion over work that has
       been done by Horn & Associates, Inc. regarding recovery audits and claims
       that resulted from their work. In order for the agency to collect monies that
       they claim are due, a thorough review of the claims in the attached
       document, including contract and any other document as necessary to
       support or deny the claim.

       Please review the attachment and determine:

       1) If the claim is a valid claim that represents an amount that can/should be
       recovered (note: Horn receives payment on amounts that have actually
       been collected)
       2) If the amount should be recovered, please establish an accounts
       receivable in SAP and request a refund
       3) If the amount of the claim is not a valid amount that is deemed
       recoverable, please provide information that explains/supports why we do
       not consider the amount to be valid
       Keep in mind that we normally do not request refunds on the following, (but
       not limited to) types of contracts:

              (A) Open contracts that are subject to final review at close-out
              (B) Contracts with provisional rates that are pending audit by
              DCAA




                                             17
                (C) Contracts with provisions for advanced payments for
                nonprofit organizations that conduct experimental or research
                and development work
                (D) Contracts which authorize progress payments.

NASA personnel used this A-D framework to decline to process Horn & Associates’
claims after the end of contract performance. For example, on February 8, 2007, NASA
produced a document entitled “Goddard Space Flight Center/Regional Finance Office
Determination of the Validity/Non-validity of Horn Claims.” The document indicated: “We
have reviewed this spreadsheet we received from headquarters OCFO on January 31,
2007 . . . . We used the criteria received below from headquarters OCFO to make our
determinations.” The document indicated, among other criteria:

         Generally, NASA will consider claims for contract payment errors under the
         following circumstances to be inappropriate:

         a. Resulting from cost-type contacts subject to final contract audit that have
         not been completed.

         b. Resulting from cost-type contacts subject to final contract audit that were
         completed and prior to final payment of the contractor's final voucher, all
         prior interim payments made under the contract were accounted for and
         reconciled.

In an email from June Boeckel, referring to the A-D framework, Ms. Boeckel indicated:
“As you can see from the above clarification, many of the claims you have submitted fall
into this category and we will not be approving them for recovery.”34 At trial, Ms. Boeckel
confirmed that she took the lead in reviewing Horn & Associates’ claims at Johnson, and
that she did not approve claims that fell within the A-D categories.

       As indicated above, Horn & Associates identified and submitted a total of 402
claims35 to NASA, and NASA approved and paid 40 claims. In its amended complaint,
Horn & Associates noted that “[i]n spite of the improper impediments raised by NASA,
Horn identified approximately $121 million of claims for various classifications of improper
payments. Each claim was submitted to NASA with supporting documentation proving
the improper payment. Yet to date, only $197,285.47 dollars [sic] of claims have been
processed by the Payment Centers.” Despite having only been compensated in the
amount of $197,285.47, Horn & Associates claims in the amended complaint that “Horn
found the following recovery audit claim potentials at each NASA Payment Center
34  The court notes that Ms. Boeckel’s email was not addressed to plaintiff, but was
language that she drafted for her colleague John Beall to send to Horn & Associates. At
trial, plaintiff’s counsel asked Ms. Boeckel: “And then at the top there's the email back
from you to Mr. Beall. And in that email you’re writing for Mr. Beall a memo for him to
send to Mr. Hott. Is that right?” Ms. Boeckel answered: “Yes.”
35   As reflected above, plaintiff identified and submitted a total of 402 claims.
                                               18
included in the recovery audit process: Ames - $138,536.17; Dryden - $12,443.76; Glen
- $17,318.44; Goddard - $97,799,329.39; Johnson - $20,183,307.33; Kennedy -
$2,915,935.08; Langley - $40,451.99; and Marshall - $272,041.50. The total recovery
audit claim potentials for all Payment Centers were $121,379,363.66.”36

        As noted above, the contract ended on September 30, 2006. After the end of the
recovery audit, NASA declined Horn & Associates’ offer of a “formal review” of all claims,
ostensibly to try and demonstrate entitlement to the $121,379,363.66 in potential claims.
NASA, however, did meet with Horn & Associates personnel to discuss the various
remaining claims. In the meeting at the end of January 2007, Mr. Lowery, Mr. Lizana, and
Marie Beckey, another subcontractor, from Horn & Associates, met with Bruce Ward, the
chief assistant in NASA’s Chief Financial Officer’s office, Andrea Davis, a contract
specialist, Jon Wolz,37 the Goddard Deputy Chief Financial Officer, Sandra Brown, and
Contracting Officer Patterson, from NASA in which Horn & Associates presented
information showing it had identified claims with approximately $81 million in improper,
erroneous overpayments, as well as an additional $40 million of interest and penalty
claims. Mr. Lizana indicated, however, that as soon as Horn & Associates began their
presentation of claims, both Mr. Ward and Ms. Davis said “that they could not approve
this [Swales & Associates] claim because it was in the purview of DCAA, and it was a
cost type contract.”38 Mr. Lizana emphasized that for each claim NASA’s “response was
more of the same. It was, okay this is DCAA involved matters, and it’s a cost type contract.
Move on there's nothing to see here, and so forth. And so it was -- Frankly, it was
frustrating.” Mr. Lizana testified that the meeting

         got to a point where, at one point in the meeting Mike [Lowery] leaned over
         and said, listen, I’ve been in a recovery auditing bill [sic] for a long time.
         Every client that I’ve ever worked for, they wanted the money back. They
         were helpful and cooperative. Can you tell me why NASA doesn’t want the
         money?

On January 31, 2007, Bruce Ward sent an email to a number of NASA personnel, which
stated, in part:


36Plaintiff does not seek a 13.5% contingency fee of the $121,379,363.66 in damages,
but in its post-trial brief, plaintiff identified “$54,730,976 in estimated contingency fees
Horn would have received in the non-breach world.” According to plaintiff, subtracting the
$26,634.00 in contingency fees that Horn & Associates actually received, “results in lost
profits damages of $54,704,343.”
37   Mr. Wolz is incorrectly identified incorrectly as “John Walls” in the trial transcript.
38 In discussing the Swales & Associates claim at issue in the meeting with Mr. Ward and
Ms. Davis, Mr. Lizana testified, “[t]his claim, it's big. It's a big claim . . . it could be 20
million dollars, it could be 15 million dollars, depending on what rate, a formal rate
information we get.”


                                                 19
         Center CFOs: The contracting officers and I met with representatives of
         Horn and Associates (HA) today to discuss the status of the claims for
         Improper payments. As a result of this meeting and with legal counsel
         concurrence, we agreed to begin a process of meeting at the Centers with
         the Contracting Officer, HA and me to review the documents and
         justification that the Centers used to deny the claims, for the purpose of
         reaching a final determination on the validity or non-validity for each claim.

                                              ...

         Terry Bowie wanted me to make sure that the respective Center CFO
         signed off on the denied Invalid claims before we have the meetings with
         HA at the Centers. I have attached the file that we will use for selection and
         you can easily see the claim numbers and information for each claim that
         will be reviewed. Starting with Goddard, prior to the meeting, the Center
         CFO should deliver to me a signed statement that they have reviewed the
         claims and determined that they are not valid claims for improper payments.
         Probably the easiest way to do this would be to prepare a memorandum
         stating your determination of invalidity, with the claim numbers Indicated
         thereon.

Horn & Associates’ final meeting with NASA took place on February 9, 2007, again
attended by Mr. Lowery, Ms. Beckey, and Mr. Lizana on behalf of Horn & Associates, and
Mr. Ward, Ms. Davis, Mr. Wolz, Ms. Brown, and Contracting Officer Patterson, on behalf
of NASA. Horn & Associates represented in the certified claim that, “[t]he only thing
accomplished during this meeting was the commitment from NASA that someone from
the CFO’s [Chief Financial Officer’s] Office would supply Horn with a list of all our claims
with comments on whether the claim was approved or denied and why the claim was
being denied. Such a complete report has never been received.”

        Subsequently, NASA internally reviewed the Horn & Associates claims that were
presented to NASA. For example, in February 2007, at Johnson, Gwen Obert re-reviewed
the claims submitted by Horn & Associates at Johnson. Ms. Obert subsequently denied
all of the claims that were originally denied during contract performance at Johnson.
Another example of the review is the February 8, 2007, “Goddard Space Flight
Center/Regional Finance Office Determination of the Validity/Non-validity of Horn
Claims.”39 After review, Contracting Officer Patterson sent a March 13, 2007 letter to Horn
& Associates, regarding the agency position with respect to issues between Horn &
Associates and NASA. Contracting Officer Patterson stated, “[w]hile the contract
document (citation to SOW [statement of work]) gave Horn the right to review all contracts,
at this time it is inappropriate to determine if in fact overpayments have taken place on
cost-type contracts that have not been completed.” (emphasis in original). Contracting
Officer Patterson explained, “[t]his is due to the fact that open contracts are still in the
administrative phase of open payment cycles.” Regarding interest on overpayments,
Contracting Officer Patterson indicated:
39   The document was generated one day before the final meeting with Horn & Associates.
                                              20
       The $40,619,548.71 identified by Horn as “interest on overpayments” can
       not [sic] be accepted as valid claims. This is because they are from open
       cost contracts or in accordance with the Federal Acquisition Regulation
       32.614, “the responsible official shall apply interest charges to any contract
       debt unpaid after 30 days from the issuance of a demand.”

(internal citation omitted). In addition, Contracting Officer Patterson tried to explain that,
“[w]ith further respect to those claims that were identified as overpayments, but the
CFO/DCFO [Chief Financial Officer/Deputy Chief Financial Officer] determined that the
overpayment had been satisfied by a setoff against another invoice in accordance with
FAR 32.611, the Debt Collection and Offset Act and the authority granted by the treasury
to setoff debts due the government, that such payments are not in fact debts due to the
government.”40 Contracting Officer Patterson concluded that:

       At this time NASA has determined that $221,310.39 has been approved for
       debt collection under the contract. The fee on this amount will be remitted
       to Horn once collection has been made. An amount of $7,862.71 has been
       remitted to Horn & Associates to date.[41]

Additionally, Contracting Officer Patterson informed Horn & Associates that “[t]his is the
final agency position with respect to of [sic] the issues between the parties. NASA is
committed to an equitable closeout of the subject contract.”

        On November 20, 2007, Horn & Associates filed a certified claim with NASA. The
certified claim was addressed to “Dean S. Patterson, Procurement Manager, Janet S.
Langweil, Contracting/Ordering Officer, Carrie Causey, Procurement Manager,
NASA/Headquarters Procurement Office,” and was signed by Tom Horn as president of
Horn & Associates. On January 25, 2008, Contracting Officer Patterson issued a four
page final decision. Contracting Officer Patterson stated that: “This letter is in response
to Horn and Associates, Incorporated, hereafter referred to as Horn, claims for
$279,000,000.00, $14,700,000.00 and $7,028,200.96 for alleged material breach of
NASA Delivery Order NNH05CC28D for Recovery Audit services. The claim is denied in




40 Citingthe contract, Contracting Officer Patterson indicated that NASA would not accept
claims for payments outside the scope of period of performance, or for claims less than
$100.00. Contracting Officer Patterson also indicated that, “[w]ith respect to Prompt
Payment Interest calculation, the cited Prompt Payment Act Provision applies only to
interest on progress payments under construction contracts, when the performance for
which the payment was made is deficient and thus the payment has not been earned.
This provision does not apply by analogy to other contract payment adjustments.”
41At trial, defendant’s expert witness indicated that the amount of claims recovered by
NASA was $208,954.91, and Horn & Associates was paid $28,209.00.
                                             21
its entirety.”42 Contracting Officer Patterson stated that “Horn asserts that it received no
compensation due to a material breach of the order by NASA. To the contrary, Horn
received compensation in accordance with the payment terms of the order that was
awarded on a contingency fee basis.” Contracting Officer Patterson continued:

         The ultimate decision as to what constitutes a debt lies not with Horn, but
         with the responsible NASA official at each Center in accordance with the
         SOW and FAR Part 32. Horn did not comply with the delivery order terms
         and audit as stated under the basic years as awarded, 1998-2003 or fiscal
         years 1997-2002, and failed to submit the required management report at
         the end of the initial basic period to allow NASA to evaluate the progression
         of the audit and make any necessary adjustment to the audit project plan
         as stated in Task 3 of the order.

         Ultimately, prior to trial, NASA identified several claims which had been denied
during or shortly after the recovery audit, but which NASA subsequently concluded were
valid claims that should have been approved for collection, rather than denied. In its post-
trial briefing, defendant acknowledged that there were $992,557.38 in valid overpayments
that NASA had failed to pursue and process on which Horn & Associates was owed a
contingency fee. The court notes, however, that plaintiff takes issue with defendant’s
characterization of “valid,” arguing that:

          Nearly all of the recommended debts submitted by Horn to NASA were
          valid, meaning that based on the information available to Horn during the
          audit, the individual claim should have been pursued. As numerous
          witnesses testified, Horn had no incentive (and, because of the contingent
          fee nature of the Contract, actually had a disincentive) to spend time
          working on and submitting recommended debts that Horn’s auditors knew
          to not be valid. Each individual claim submitted by Horn was based on the
          information available to the Horn auditors at the time, and Horn believed
          each of those individual claims to have been valid.[43]


42Prior to the issuance of the final decision, Mr. Ward, the chief assistant in NASA’s Chief
Financial Officer’s office indicated, on December 19, 2007 that “he believed the Horn
Certified Claim should be investigated as a ‘false claim’ to the Government.”
43   Plaintiff also argues that:

         Horn contends that the present collectability of any of the individual claims,
         now 7 or 8 years after Horn’s auditors submitted them to the NASA Centers
         and lacking the complete documentation that was available during the
         period of performance, is irrelevant to the question of whether NASA
         materially breached the Contract in 2005-07, and what Horn’s damages
         should be as a result of NASA’s breaches. Horn has proved breach by
         demonstrating NASA’s gross misconduct during the period of performance
         and it has proved damages by establishing what would have happened in
                                              22
       After Contracting Officer Patterson issued his final decision, on June 6, 2008, Horn
& Associates timely filed a complaint in this court. Like in the certified claim, Horn &
Associates raised three alternative causes of action, and sought the same amounts:
$279,000,000.00 for breach of contract, $17,599,550.00 for constructive partial
termination for convenience, and $7,028,200.96 for equitable relief. In an opinion issued
by the court prior to trial, the court granted plaintiff’s motion for partial summary judgment
regarding contract interpretation. Plaintiff claimed that the contract’s Statement of Work
directed Horn & Associates to perform a primary audit recovery on all contract payments
between October 1, 1997 through September 30, 2003,44 whereas defendant argued that
“the purchase order was for the auditing of fixed price contracts,” for that same time period
because the RFQ was limited to audits “on payments made from all fixed price contracts.”
(emphasis in original). The court concluded that the Statement of Work attached to the
contract signed by Horn & Associates and the Contracting Officer determined the scope
of the agreement between the parties and required the plaintiff to perform a primary audit
recovery on all contract payments for the time period specified. See Horn & Assocs., Inc.
v. United States, 104 Fed. Cl. 121, 136 (2012).

        After the court’s decision, plaintiff filed an amended complaint, albeit without
specific mention of the three claims and their specific dollar amounts. Instead, plaintiff
listed a single cause of action, breach of contract, and in the prayer for relief requested
that “the Court enter judgment for Horn and against NASA on the breach of contract cause
of action and award Horn expectation damages, reliance damages, and/or any other type
of damages which the Court deems appropriate, in an amount to be proven at trial.” In
response, defendant filed an answer to the amended complaint and a counterclaim.
Defendant asserted a counterclaim in this court against plaintiff under the False Claims
Act, 31 U.S.C. § 3729 (2012), as well as an affirmative defense under the Special Plea in
statute, 28 U.S.C. § 2514 (2012) and the anti-fraud provision of the Contract Disputes
Act, 41 U.S.C. § 7103(b)(1) (2012).

       In its post-trial briefing the defendant stated:

       The Government does not pretend that its own performance in connection
       with the recovery audit was perfect. Indeed, for reasons that we
       acknowledge fully below, it was not, with the result that, at the conclusion
       of the audit, Horn was owed an additional contingency fee based upon
       $992,557.38 in valid overpayments that NASA failed to pursue and process.
       Horn’s own subsequent conduct, however, has wiped out its entitlement to

       the “but for world” if NASA had performed as agreed. The claims files today
       are a very extensively proved, but marginally relevant side show.
44 As noted above, although the contract had originally called for Horn & Associates to
conduct the recovery audit for contract payments made during October 1, 1997 through
September 30, 2003, the contract subsequently was modified to cover contract payments
from October 1, 1997 through September 30, 2005.


                                              23
       even that amount, and renders it liable to the Government for substantial
       damages in fraud.

        Following a lengthy trial, and after reviewing of all the information in the record, the
court first addressed defendant’s fraud counterclaims due to the potential forfeiture of
plaintiff’s claims under the Special Plea in Fraud statute, or the potential forfeiture of the
unsupported portions of plaintiff’s claims under the anti-fraud provision of the Contract
Disputes Act, and denied all of defendant’s fraud counterclaims. See generally Horn &
Assocs., Inc. v. United States, 123 Fed. Cl. 728. The court concluded that the defendant
had failed to establish that Horn & Associates intended to deceive the government, which
is required to establish liability under the False Claims Act or to warrant forfeiture under
the Special Plea in Fraud statute or the antifraud provision of the Contract Disputes Act.
See id. at 787-88. This opinion addresses the issue of plaintiff’s allegations of breach of
contract by NASA, and the government’s counter allegations of breach of contract by
Horn & Associates under the contract. The court, therefore, turns to plaintiff’s claims of
breach of contract.

                                        DISCUSSION

        Plaintiff states that “[i]n this suit, Horn is pursuing a single cause of action for
breach of contract,” and “NASA committed numerous breaches of its duties under the
contract.” Defendant responds that “Horn breached its contract with NASA,” and claims
that, regarding plaintiff’s allegations, “Horn has not met its burden of proving that the
centers failed to timely review and pay Horn’s claims within a reasonable time.”

       Prior to addressing the breach of contract allegations, the court identifies the
relevant contract sections, as well as the legal standards for contract interpretation. To
review, on December 23, 2004, NASA awarded the contract to Horn & Associates for the
furnishing of “Recovery Audits.” The contract indicated that it was “subject to all the terms
and conditions of the contractor’s GSA Schedule Contract GS-23F-0258N and as
amended by the clauses contained herein.” Regarding the data available to plaintiff, the
contract provided, in part: “In the performance of this contract, it is anticipated that the
Contractor may have access to, be furnished, or use the following categories of data
(which may be technical data, computer software, administrative, management
information, or financial, including cost or pricing). . . .” Regarding payment to Horn &
Associates, the contract provided:

       The amount of the Contingency Fee for this order is 13.5%. Payments to
       the contractor for services under this order will be based on a Contingency
       Fee Basis after NASA has recovered and received funds for the basic
       requirements as set forth in the Statement of Work (SOW). There will be no
       out-of-pocket expenses, costs or other financial obligations or liabilities
       incurred by NASA, other than the fees identified in this order.

        The contract included four unilateral options for NASA, and the contract stated,
“[t]he Contracting Officer may exercise the option by written notice to the Contractor within

                                              24
the period specified in the schedule.” Each option year extended the period of
performance by one year and expanded the audit recovery period. For option year 1, the
period of performance would be October 1, 2005 to September 30, 2006, and the
corresponding audit recovery period was 2004-2005. For option year 2, the period of
performance was October 1, 2006 to September 30, 2007, and the corresponding audit
recovery period was 2006, option year 3 contemplated the period of performance would
be October 1, 2007 to September 30, 2008, and the corresponding audit recovery period
would be 2007. Finally, for option year 4, the period of performance would be October 1,
2008 to September 30, 2009, and the corresponding audit recovery period would be 2008.
For all option years, the contingency fee remained 13.5%. As indicated above, only the
first option year was executed.

      Incorporated into the contract as an attachment to the contract was a Statement
of Work. The Scope of Work for the Statement of Work indicated: “The contractor shall
perform a primary audit recovery on all contract payments for the period beginning
October 1, 1997 through September 30, 2003, identifying overpayments and/or
underpayments.”

      Subtask 3.2 of the Statement of Work provided that:

      The strategy for identifying lost funds should address all tasks required to
      identify lost funds due to overpayment. At a minimum, the strategy should
      include: (1) a methodology for identifying documents for auditing; (2) a plan
      for acquiring and verifying only the documents and data in the possession
      of NASA; (3) a process for obtaining and analyzing financial data required
      for the audit; (4) criteria and outline for analyzing discrepancies; (5) review
      of payment processing procedures; and (6) outline of the audit process.

      Subtask 3.3 of the Statement of Work provided that:

      The contractor shall identify all lost funds, discrepancies and improprieties.
      The contractor shall calculate the proper amount to be collected. The
      Contractor shall provide a list of all recommended debts to the NASA CFO
      and the appropriate Center Deputy CFO for Finance. The Center Deputy
      CFO shall be responsible for posting approved debts to the accounting
      system.

      Individual debts must be for amounts of $100 or greater and cannot consist
      of more than two unique invoices.
      For each debt recommended for collection, the Contractor shall:
      1. provide documentation to support that the claim is owed
      2. provide the original accounting classification of the improper payment
      3. calculate the total amount of the debt. Total amount of the debt should
      include:




                                            25
             a. Principle (original) amount of the debt
             b. Accrued interest for debts greater than days past due.
             c. Penalties for debts over 90 days past due.
             d. Administrative costs associated with tracking the unpaid debt.

      NASA will review and verify all debts. All debts will be posted by NASA
      within a reasonable time. Once the NASA has verified the debt and posted
      the debt to the accounting system, NASA will provide the contractor a claim
      number for tracking purposes. NASA will pay the contractor's fee monthly
      based on the amount debts collected.

Attachment B to the Statement of Work stated in chart form the option years, the periods
of review and the percentage of recovery plaintiff would receive:




         “Contract interpretation starts with the language of the contract.” SUFI Network
Servs., Inc. v. United States, 785 F.3d 585, 593 (Fed. Cir. 2015); see also Precision Pine
& Timber, Inc. v. United States, 596 F.3d 817, 824 (Fed. Cir. 2010), cert. denied, 562 U.S.
1178 (2011); Bell/Heery v. United States, 739 F.3d 1324, 1331 (Fed. Cir.), reh’g and reh’g
en banc denied (Fed. Cir. 2014); LAI Servs., Inc. v. Gates, 573 F.3d 1306, 1314 (Fed.
Cir.), reh’g denied (Fed. Cir. 2009); Barron Bancshares, Inc. v. United States, 366 F.3d
1360, 1375 (Fed. Cir. 2004); Foley Co. v. United States, 11 F.3d 1032, 1034 (Fed. Cir.
1993); Nw. Title Agency, Inc. v. United States, 126 Fed. Cl. 55, 57-58 (2016) (citing Foley
Co. v. United States, 11 F.3d 1032, 1034 (Fed. Cir. 1993)) (“The starting point for any
contract interpretation is the plain language of the agreement.”); Beard v. United States,
125 Fed. Cl. 148, 158 (2016); Eden Isle Marina, Inc. v. United States, 113 Fed. Cl. 372,
483–84 (2013).


                                            26
        “‘“In contract interpretation, the plain and unambiguous meaning of a written
agreement controls.’”” Arko Exec. Servs., Inc. v. United States, 553 F.3d 1375, 1379 (Fed.
Cir. 2009) (quoting Hercules Inc. v. United States, 292 F.3d 1378, 1380–81 (Fed. Cir.),
reh’g and reh’g en banc denied (Fed. Cir. 2002) (quoting Craft Mach. Works, Inc. v. United
States, 926 F.2d 1110, 1113 (Fed. Cir. 1991))). “Terms must be given their plain meaning
if the language of the contract is clear and unambiguous.” SUFI Network Servs., Inc. v.
United States, 785 F.3d 585, 593 (Fed. Cir. 2015) (citing Coast Fed. Bank, FSB v. United
States, 323 F.3d 1035, 1038 (Fed. Cir. 2003)); see also Northwest Title Agency, Inc. v.
United States, 2017 WL 1521598, at *3 (Fed. Cir. Apr. 28, 2017); Canpro Investments
Ltd. v. United States, 130 Fed. Cl. 320, 347 (2017); Beard v. United States, 125 Fed. Cl.
at 158 (“If the contract language is unambiguous, then it must be given its plain and
ordinary meaning . . . .”). The United States Court of Appeals for the Federal Circuit stated
in Massie v. United States:

       In interpreting a contract, “[w]e begin with the plain language.” “We give the
       words of the agreement their ordinary meaning unless the parties mutually
       intended and agreed to an alternative meaning.” In addition, “[w]e must
       interpret the contract in a manner that gives meaning to all of its provisions
       and makes sense.’”

Massie v. United States, 166 F.3d 1184, 1189 (Fed. Cir. 1999) (quoting McAbee Constr.,
Inc. v. United States, 97 F.3d 1431, 1435, reh’g denied and en banc suggestion declined
(Fed. Cir. 1996); (internal citations omitted)); Jowett, Inc. v. United States, 234 F.3d 1365,
1368 (Fed. Cir. 2000) (quoting McAbee Constr., Inc. v. United States, 97 F.3d at 1435
and Harris v. Dep’t of Veterans Affairs, 142 F.3d 1463, 1467 (Fed. Cir. 1998)); Harris v.
Dep’t of Veterans Affairs, 142 F.3d at 1467; see also Coast Professional, Inc. v. United
States, 828 F.3d 1349, 1354 (Fed. Cir. 2016); Shell Oil Co. v. United States, 751 F.3d
1282, 1305 (Fed. Cir.), reh’g en banc denied (Fed. Cir. 2014) (noting that a contract must
be interpreted in context, giving meaning to the document as a whole) (citing NVT Techs.,
Inc. v. United States, 370 F.3d 1153, 1159 (Fed. Cir. 2004); Metric Constructors, Inc. v.
Nat’l Aeronautics & Space Admin., 169 F.3d 747, 752 (Fed. Cir. 1999)); McHugh v. DLT
Solutions, Inc., 618 F.3d 1375, 1380 (Fed. Cir. 2010); Giove v. Dep’t of Transp., 230 F.3d
1333, 1340–41 (Fed. Cir. 2000) (“In addition, we must interpret the contract in a manner
that gives meaning to all of its provisions and makes sense. Further, business contracts
must be construed with business sense, as they naturally would be understood by
intelligent men of affairs.”) (citations omitted); Gould, Inc. v. United States, 935 F.2d 1271,
1274 (Fed. Cir. 1991) (indicating that a preferable interpretation of a contract is one that
gives meaning to all parts of the contract rather than one that leaves a portion of the
contract “useless, inexplicable, void, or superfluous”). A Judge of the United States Court
of Federal Claims has explained:

       “The words of a contract are deemed to have their ordinary meaning
       appropriate to the subject matter, unless a special or unusual meaning of a
       particular term or usage was intended, and was so understood by the
       parties.” Lockheed Martin IR Imaging Sys., Inc. v. West, 108 F.3d 319, 322
       (Fed. Cir. 1997). “Under general rules of contract law we are to interpret
       provisions of a contract so as to make them consistent.” Abraham v.

                                              27
       Rockwell Int'l Corp., 326 F.3d 1242, 1251 (Fed. Cir. 2003). “[A]n agreement
       is not to be read in a way that places its provisions in conflict, when it is
       reasonable to read the provisions in harmony. . . . [T]he provisions must be
       read together in order to implement the substance and purpose of the entire
       agreement.” Air–Sea Forwarders, Inc. v. United States, 166 F.3d 1170,
       1172 (Fed. Cir. 1999). “A reasonable interpretation must assure that no
       contract provision is made inconsistent, superfluous, or redundant.” Medlin
       Const. Group, Ltd. v. Harvey, 449 F.3d 1195, 1200 (Fed. Cir. 2006) (internal
       quotation marks omitted).

Dynetics, Inc. v. United States, 121 Fed. Cl. 492, 512 (2015); see also Marquardt Co. v.
United States, 101 Fed. Cl. 265, 269 (2011) (“In interpreting contractual language, the
court must give reasonable meaning to all parts of the contract and avoid rendering
portions of the contract meaningless.” (citation omitted)).

       The Federal Circuit also has indicated that “‘[t]he contract must be construed to
effectuate its spirit and purpose giving reasonable meaning to all parts of the contract.’”
Arko Exec. Servs., Inc. v. United States, 553 F.3d at 1379 (quoting Hercules Inc. v. United
States, 292 F.3d 1378, 1380–81 (Fed. Cir.), reh’g and reh’g en banc denied (Fed. Cir.
2002)); see also Northwest Title Agency, Inc. v. United States, 2017 WL 1521598, at *3;
LAI Servs., Inc. v. Gates, 573 F.3d at 1314; Gardiner, Kamya & Assocs., P.C. v. Jackson,
467 F.3d 1348, 1353 (Fed. Cir. 2006) (citations omitted); Medlin Constr. Grp., Ltd. v.
Harvey, 449 F.3d 1195, 1200 (Fed. Cir. 2006) (reviewing the contract as a whole to
determine the meaning of relevant provisions); Hunt Constr. Grp., Inc. v. United States,
281 F.3d 1369, 1372 (Fed. Cir. 2002) (“We begin with the plain language when
interpreting a contract . . . . The contract must be considered as a whole and interpreted
to effectuate its spirit and purpose, giving reasonable meaning to all parts.” (citations
omitted)); Beard v. United States, 125 Fed. Cl. at 158 (quoting Pac. Gas & Elec. Co. v.
United States, 536 F.3d 1282, 1288 (Fed. Cir. 2008)) (“In construing the meaning of a
contractual provision, the court does not interpret the disputed term or phrase in isolation,
but “construes contract terms in the context of the entire contract, avoiding any meaning
that renders some part of the contract inoperative.”).

        It has been “‘a fundamental precept of common law that the intention of the parties
to a contract controls its interpretation.’” Tri-Star Elecs. Int'l, Inc. v. Preci-Dip Durtal SA,
619 F.3d 1364, 1367 (Fed. Cir. 2010) (quoting Beta Sys., Inc. v. United States, 838 F.2d
1179, 1185 (Fed. Cir. 1988) (quoting Firestone Tire & Rubber Co. v. United States, 195
Ct. Cl. 21, 30, 444 F.2d 547, 551 (1971))); Alvin, Ltd. v. United States Postal Serv., 816
F.2d 1562, 1565 (Fed. Cir. 1987) (“In the case of contracts, the avowed purpose and
primary function of the court is the ascertainment of the intent of the parties.”); see also
Flexfab, LLC v. United States, 424 F.3d 1254, 1262 (Fed. Cir. 2005) (“[I]ntent is
determined by looking to the contract and, if necessary, other objective evidence. In the
absence of clear guidance from the contract language, the requisite intent on the part of
the government can be inferred from the actions of the contracting officer. . . .”); see also
Canpro Investments Ltd. v. United States, 130 Fed. Cl. at 347 (“Contract interpretation
requires determining the intention of the parties.”).


                                              28
       As indicated above, the court previously issued a decision on contract
interpretation. In considering the plaintiff’s motion for partial summary judgment on an
issue of contract interpretation, plaintiff claimed that the contract’s Statement of Work
directed Horn & Associates to perform a primary audit recovery on all contract payments
between October 1, 1997 through September 30, 2003, whereas defendant argued that
“the purchase order was for the auditing of fixed price contracts,” for that same time period
because the RFQ was limited to audits “on payments made from all fixed price contracts.”
(emphasis in original). The court determined that “[t]he Statement of Work attached to the
Order signed by Horn and the Contracting Officer determined the scope of the agreement
between the parties and required the plaintiff to perform a primary audit recovery on all
contract payments for the time period specified.” See Horn & Assocs., Inc. v. United
States, 104 Fed. Cl. at 136.45

       In this court, Horn & Associates has alleged a breach of its contract by NASA, first
alleging that “NASA committed numerous breaches of its duties under the contract.” More
colorfully, plaintiff contends that NASA “failed to heed its duty to cooperate, deliberately
breached its contract, ignored its duty of good faith, covered its tracks with lies, and left
Horn & Associates for dead. NASA must be held accountable by this Court, if not for its
betrayal of the trust of the American people, then at least to Horn for its proven losses.”

        It is well settled that “[t]o recover for breach of contract, a party must allege and
establish: (1) a valid contract between the parties, (2) an obligation or duty arising out of
the contract, (3) a breach of that duty, and (4) damages caused by the breach.” 46 San
Carlos Irr. & Drainage Dist. v. United States, 877 F.2d 957, 959 (Fed. Cir.), reh’g denied
(Fed. Cir. 1989); see also Shell Oil v. United States, 130 Fed. Cl. at 34; Barlow & Haun,
Inc. v. United States, 118 Fed. Cl. 597, 620 (2014); Cooley v. United States, 76 Fed. Cl.
549, 555–56 (2007) (citing San Carlos Irr. & Drainage Dist. v. United States, 877 F.2d at
959).


45 The defendant argues in its post-trial briefs that the court’s decision did not “actually
rule on summary judgment that a breach of the parties’ contract had occurred. As such,
the question of the occurrence of breach, and the materiality of that breach, remains for
the Court to decide based upon the trial record.” The defendant also states that “[f]or
purposes of this post-trial brief only, and, without prejudice to any future right to appeal,
the Government recognizes as law of the case the Court’s March 20, 2012 summary
judgment holding that the parties’ contract ‘determined the scope of the agreement
between the parties and required the plaintiff to perform a primary audit recovery on all
contract payments for the time period specified.’” (quoting Horn & Assocs., Inc. v. United
States, 104 Fed. Cl. at 136).
46 As recently indicated by a Judge of the United States Court of Federal Claims, “[t]o
satisfy this fourth element, the plaintiff also must show that: ‘(1) the damages were
reasonably foreseeable by the breaching party at the time of contracting; (2) the breach
is a substantial causal factor in the damages; and (3) the damages are shown with
reasonable certainty.’” Shell Oil v. United States, 130 Fed. Cl. 8, 34 (2017) (quoting
Indiana Michigan Power Co. v. United States, 422 F.3d 1369, 1373 (Fed. Cir. 2005)).
                                             29
      The court first notes that it is uncontested that Horn & Associates had an express
contract with the government. The joint stipulations of facts state, “[o]n December 23,
2004, NASA awarded Order No. NNH05CC28D to Horn for Recovery Audit Services.”
Moreover, plaintiff states that “[i]t is undisputed that a valid contract existed between Horn
and NASA,” and, moreover, in defendant’s post-trial briefs, defendant notes that “[t]he
contract that NASA awarded Horn was an enormous undertaking.”

       NASA Headquarters

        Horn & Associates first points to the conduct of NASA’s headquarters and argues
that “NASA’s thorough, material breach of the Contract began with the initial apathy and
indifference of NASA Headquarters (‘HQ’)’s senior financial management to the Recovery
Audit. This resulted in a series of structural and operational impediments to Horn’s ability
to complete a successful Recovery Audit,” and claims that “NASA HQ’s failure to
cooperate, as manifested in structural/operational impediments to a successful Recovery
Audit.” Plaintiff, citing to the testimony of the original contracting officer’s technical
representative, Melvin DenWiddie, argues that the “recovery audit was a low priority,” and
argues that “[i]ndeed, the Recovery Audit was such a low priority for NASA senior
management (outside of Mr. DenWiddie), that when Mr. DenWiddie retired at the end of
June 2006, NASA’s remaining senior financial management actively contemplated
suspending the Recovery Audit ‘till we get a handle on what we want the contractor [Horn]
to do.” Plaintiff notes that “[e]ighteen (18) months into the Contract, and more than a year
after Horn auditors had first begun submitting recommended debts to the Centers, the
NASA Deputy CFO did not know what NASA wanted Horn to be doing.”

         Plaintiff also points to the data it did, and did not, receive from NASA as evidence
of a breach. The plaintiff argues that “[n]ot only did NASA fail to provide a complete set
of this payment data in a timely manner, but NASA never provided a complete set of this
payment data.” (emphasis in original). The defendant responds that “Horn’s expectations
were also not based upon the terms of the parties’ actual contract; indeed, the contract
contains no requirements whatsoever for the provision of electronic data, let alone
requirements of the type envisioned by Horn,” and that “the contract does not obligate
NASA to provide its electronic data in any particular format, it does not obligate the agency
to filter the data in any particular way for Horn’s benefit, and it does not establish any
timetable by which data will be provided.”47 (emphasis in original).

        The court notes, however, as indicated above, the defendant has conceded that
“[t]he data itself, however, was admittedly not perfect.” As explained in the findings of fact,

47The court agrees with defendant that the contract does not explicitly state when NASA
specifically had to provide data to plaintiff, but it did provide that plaintiff was to conduct
the audit and provided that “[i]n the performance of this contract, it is anticipated that the
Contractor may have access to, be furnished, or use the following categories of data . . .”
and the Statement of Work, which was incorporated into the contract as an attachment,
required plaintiff to have a strategy to have “a plan for acquiring and verifying only the
documents and data in the possession of NASA;” as well as “a process for obtaining and
analyzing financial data required for the audit. . . .”
                                              30
NASA had switched accounting systems from a Legacy system to the SAP system, and
in the process, “the information from the Legacy systems just disappeared.” Therefore,
although Horn & Associates received SAP data from NASA, the defendant agency, was
unable to identify the total amount of contract payments for fiscal years 1998-2003, and
the defendant admits “[t]he production of NASA’s SAP data was more problematic” than
the production of the Legacy data.48

        The defendant also claims that plaintiff’s desire to have the data within 30 days of
the engagement was “formed solely from Horn’s private sector experience. Horn had
clearly performed no due diligence to gain an understanding of the complexities of
NASA’s electronic payment data prior to contract award and apparently was surprised to
learn about NASA’s massive, and extremely disruptive, transition to SAP in the year 2003,
and its varied legacy data systems throughout the payment centers at the time of the
initial preaudit planning meeting.” Defendant further argues that, nevertheless, “the
evidence at trial demonstrated that NASA did attempt to comply with Horn’s requests,”
and cites to Larry Farrer’s testimony that in a “typical audit,” “when we go in and try to get
the data is anywhere from a 30- to 60-day process.” Defendant claims that “[t]he evidence
of record shows that, in the April and May 2005 timeframe, Horn met with the various
NASA payment centers, and had obtained most of the Legacy data by June.” (internal
citations omitted). Defendant also claims that “[t]he story is fairly similar with respect to
NASA’s SAP data,” and that plaintiff was contacted by Melvin Denwiddie [sic] about
productions of the SAP data in May of 2005, “[a]fter Horn responded in May 2005, NASA
produced its SAP data to Horn in July 2005, i.e., again within the 30 to 60-day window
that the Horn witnesses described as reasonable based upon their experience in the
private sector.”

      Plaintiff disagrees with defendant that the data was provided within that window,
and points to the testimony of Jennifer Harris who worked on obtaining and analyzing
NASA’s data. In response to plaintiff’s counsel’s question at trial: “What, if any,
communications had Horn & Associates had with Ms. Kroeger[49] between February and
May [of 2005] with respect to the SAP data?” Ms. Harris testified that “[w]e had not made
any progress.” In response to the question, “then after May 2, [2005] do you recall when


48   As noted above, the parties have stipulated that:

         NASA’s financial system no longer contains data for contract payments
         made by NASA during FY1998 through FY2003, and therefore NASA was
         unable to identify the total amount of money it expended on contract
         payments during those fiscal years, or during the FY1998-2005 period of
         the Horn Recovery Audit, in response to requests for that information from
         Horn during discovery. NASA did not reconstruct an estimate of the amount
         of total contract payments for FY 1998-2005 in response to discovery
         requests seeking this information.
49Ms. Harris testified that Pam Kroeger was the individual who was responsible for getting
the SAP data for plaintiff.
                                              31
Horn & Associates finally received SAP data?” Ms. Harris responded, “I believe we
received it sometime in June.” Ms. Harris also noted that:

       [W]e signed a contract in December of 2004. So, at this point, it was
       September of 2005. We were running to the end of our deadline, you know,
       and we were still at the point in trying to just gather the data needed to do
       the audit. So it was becoming critical. You know, certainly this is something
       we would expect to get in the first 30 days of an engagement traditionally.
       So it was certainly concerning that we had not received it, you know, nine
       months after. We really still didn't feel that comfort level that we'd received
       100 percent of the information we needed to do a good job.

In response to the question at trial, “[w]hat was the state of the SAP data when it was
provided to Horn & Associates?” Ms. Harris answered that “it was very clear that it was
incomplete. There was quite a bit of missing information, which led to a lot of concern
because, you know, without that information the data is suspect.”

       The court agrees with plaintiff that “[f]irst and foremost, the Contract here, by its
very nature, created a unique interdependence between the good faith performance of
NASA and the ability of Horn or any recovery auditor to succeed.” Plaintiff was dependent
on NASA providing data in the first instance and in a format that was usable to perform
the audit plaintiff was contracted to perform. The court finds compelling plaintiff’s
argument that “[t]he notion that NASA expected Horn, under the Contract, to perform a
recovery audit on tens of billions of dollars in payments over six fiscal years without
electronic data, and to complete that task within one year (or two years after the Contract
was extended), is completely unrealistic.” (emphasis in original).

         In addition, plaintiff points to “misinformation” about the scope of the audit. As
noted above, after a February 8, 2005 pre-audit planning meeting at NASA headquarters,
Gwendolyn Sykes, NASA’s Chief Financial Officer, issued an internal NASA
memorandum on March 4, 2005 indicating that Horn & Associates was to audit “payment
records of fixed price contracts.” Despite Mr. DenWiddie’s May 18, 2005 email to the
NASA Centers that the contract for Horn & Associates’ recovery audit was for the audit
of “all contract payments,” plaintiff argues that “Ms. Sykes’ memorandum, and the concept
behind it, continued to reverberate even after the Recovery Audit had ended.” As
discussed below, at Johnson, NASA personnel, at times, limited review of the audit to
fixed price contracts. Horn & Associates’ auditor at Johnson, Tom Hott, testified at trial
that “[a]pparently, June Boeckel discovered, somehow or another, a memo or a
communication of some sort from Gwendolyn Sykes who was the CFO of all of NASA as
I understand. She sent a memo to the Center CFOs indicating that we were to look at
fixed-price contracts.” Plaintiff argues that “Horn was significantly damaged by the Sykes
memorandum because of the confusion it caused before the Recovery Audit had even
begun at the Centers, but also because it continued to plague the entire Recovery Audit
effort.”




                                             32
        Plaintiff argues, in addition, that NASA’s headquarters “lack of guidance from
NASA HQ regarding how to process claims and to pay Horn” was a breach of the contract.
Plaintiff notes that:

       Although NASA awarded the Contract to Horn in December 2004—and
       although Horn auditors were submitting recommended debts to the Centers
       in earnest by the summer of 2005— not until the Recovery Audit was almost
       over in September 2006 did NASA HQ develop and finalize a protocol by
       which the Centers should approve recommended debts, post those debts
       to their financial management systems, and then account for recaptured
       funds and paying Horn’s contingent fee.

      Plaintiff cites to an April 2006 email from John Alexander, the Deputy Chief
Financial Officer at Marshall, to Mr. DenWiddie and Charles McIntosh, which stated, in
part,

       we believe that HQ should be responsible for the payments to Horn and
       Associates. HQ has this se [sic] up as their contract now and is carrying the
       obligation for the agency. It seems logical, therefore, that HQ should make
       the disbursements against that contract. If the centers pay their portion, we
       will have to set up Horn and Associates as a vendor and then part of the
       costs will be on the Center and the rest on HQ. We believe this will be a
       more difficult, tedious process than if HQ paid all of the items.

Plaintiff argues this failure to have a system in place “to approve recommended debts,
collect the outstanding funds, and compensate Horn . . . nearly a year after Horn auditors
began submitting recommended debts to the Centers” was a breach of the contract.

       Plaintiff also points to the conduct of NASA headquarters at the end of the contract
to prove breach. As indicated above, the Deputy Chief Financial Officer of NASA, Terry
Bowie, indicated to NASA personnel in an July 17, 2006 email that “I have asked the legal
people to look into suspending the contract until we have settled out on the issues raised
by Horn in terms of what the contract calls for and what they are entiltle [sic] too [sic] for
payment.” According to the parties’ joint stipulations, on July 24, 2006, NASA Centers
were informed that they were to limit Horn & Associates’ recovery audit to fixed price
contracts only. The Contracting Officer, Dean Patterson, subsequently informed plaintiff
that:

       In light of performance concerns that NASA has regarding Contract
       NNH05CC28D, you are advised to restrict your current audit recovery
       reviews to fixed priced contracts. A meeting will be held, with your
       participation, to address performance concerns, contract interpretations
       and whether or not it is in the government's best interest to exercise the
       option.




                                             33
On August 15, 2006, Mr. Bowie issued a memorandum to all NASA Centers regarding
the March 4, 2005 internal memorandum from Gwendolyn Sykes, the NASA Chief
Financial Officer and stated:

       A previous message regarding the program and contract with Horn and
       Associates, Inc[.] (Horn) indicated the company would be working with each
       Center to conduct an examination of payment records of only fixed price
       contracts. This limitation is not consistent with language in the NASA-Horn
       contract. Therefore, Centers please work with Horn to conduct an
       examination of all contracts. This direction is valid until September 30, 2006,
       when the current performance period on the Horn contract will expire.

       Ten days after Mr. Bowie’s memorandum to the NASA Centers, on August 24,
2006, Contracting Officer Patterson, informed Horn & Associates that NASA would not
exercise a second option year on the contract, and, on September 30, 2006, the period
of performance under the contract would end. Thereafter, on August 31, 2006, Charles
McIntosh, a NASA branch manager and the assistant to Mr. Bowie, sent an email to each
of the offices of the deputy chief financial officers for each of the centers and asked them
to identify all the claims related to the Horn & Associates audit. Mr. McIntosh wrote:

       As you know, there has been quite a bit of discussion over work that has
       been done by Horn & Associates, Inc. regarding recovery audits and claims
       that resulted from their work. In order for the agency to collect monies that
       they claim are due, a thorough review of the claims in the attached
       document, including contract and any other document as necessary to
       support or deny the claim.

       Please review the attachment and determine:

       1) If the claim is a valid claim that represents an amount that can/should be
       recovered (note: Horn receives payment on amounts that have actually
       been collected)
       2) If the amount should be recovered, please establish an accounts
       receivable in SAP and request a refund
       3) If the amount of the claim is not a valid amount that is deemed
       recoverable, please provide information that explains/supports why we do
       not consider the amount to be valid
       Keep in mind that we normally do not request refunds on the following, (but
       not limited to) types of contracts:

              (A) Open contracts that are subject to final review at close-out
              (B) Contracts with provisional rates that are pending audit by
              DCAA
              (C) Contracts with provisions for advanced payments for
              nonprofit organizations that conduct experimental or research
              and development work

                                             34
             (D) Contracts which authorize progress payments.

This guidance was applied by the NASA Centers. For example, at Johnson, in a
September 6, 2006 email from June Boeckel, regarding plaintiff’s claims, she referred to
the A-D framework and indicated: “As you can see from the above clarification many of
the claims you have submitted fall into this category and we will not be approving them
for recovery.”50 At trial, Ms. Boeckel confirmed that she took the lead in reviewing Horn &
Associates’ claims at Johnson, and that she did not approve claims that fell within the A-
D categories. Ms. Boeckel also had the following exchange with plaintiff’s counsel on
cross-examination about the McIntosh email:

      [Q.] That was an email that Mr. Macintosh [sic] sent from NASA
      headquarters to all of the centers or at least, certainly he sent to Johnson
      Space Center, right?

      A. Correct.

      Q. And when you read this statement, "Keep in mind we normally do not
      request funds on the following, but not limited to types of contracts." And
      then he listed A, B, C, and D.

      A. Request refunds.

      Q. Refunds do not normally request refunds.

      A. Mm-hmm.

      Q. You understood that criteria as eliminating all the cost plus contracts from
      the scope of the recovery audit at Johnson, correct?

      A. Correct.

      Q. You understood that was guidance from headquarters not to consider
      cost contracts, right?

      A. Correct.

      Q. Marilyn Sampay forwarded that to you and asked you to take the lead on
      applying these criteria to the claims that had been submitted by Horn and
      Associates at Johnson, right?


50As noted above, Ms. Boeckel’s email was not addressed to plaintiff, but was language
that she drafted for her colleague John Beall to send to Horn & Associates. At trial,
plaintiff’s counsel asked Ms. Boeckel: “And then at the top there's the email back from
you to Mr. Beall. And in that email you’re writing for Mr. Beall a memo for him to send to
Mr. Hott. Is that right?” Ms. Boeckel answered: “Yes.”
                                            35
       A. Right.

In addition, Ms. Boeckel sent an email to Mr. McIntosh on September 18, 2006, in which
she said: “You will notice that we denied many claims based on the criteria you sent us
and it is provided on the spreadsheet.” Plaintiff argues that the McIntosh email “essentially
gutted” the earlier NASA headquarters message that “Centers please work with Horn to
conduct an examination of all contracts.” Moreover, plaintiff claims that “[t]he effect of the
McIntosh memorandum on the efforts of Horn to perform the recovery audit was
immediate and devastating.” The plaintiff also noted that Charles McIntosh did not testify
at trial, and regarding NASA’s conduct under the audit, indicated that “the only
representative from NASA headquarters who appeared to explain this conduct at trial was
Terry Bowie – and he was under subpoena from the Plaintiff.”

       In addition, NASA personnel used this A-D framework to decline to process Horn
& Associates’ claims after the end of contract performance. For example, on February 8,
2007, NASA produced a document entitled: “Goddard Space Flight Center/Regional
Finance Office Determination of the Validity/Non-validity of Horn Claims.” The document
indicated: “We have reviewed this spreadsheet we received from headquarters OCFO
[Office of Chief Financial Officer] on January 31, 2007 . . . . We used the criteria received
below from headquarters OCFO to make our determinations.” The document indicated,
among other criteria:

       Generally, NASA will consider claims for contract payment errors under the
       following circumstances to be inappropriate:

       a. Resulting from cost-type contacts subject to final contract audit that have
       not been completed.

       b. Resulting from cost-type contacts subject to final contract audit that were
       completed and prior to final payment of the contractor's final voucher, all
       prior interim payments made under the contract were accounted for and
       reconciled.

       Regarding the McIntosh email, defendant cites to the testimony of Gwen Obert,
who reviewed the claims after the end of the contract at Johnson. Ms. Obert testified that
her view of the four categories from the McIntosh email was that, “[b]asically these were
general categories that claims were falling into. However, it was my understanding that
we were to look at each claim independently and review each claim regardless of what
category it fell into.” Therefore, the defendant argues that

       having abdicated to its responsibility to present anything but speculation as
       to the meaning of this document, Horn has failed to meet its burden of
       proving that the McIntosh email, in fact, constituted a breach of contract in
       this case, particularly in a context where the evidence of record
       demonstrates that it had virtually no net effect upon the manner in which
       claims were reviewed, and where any short term effect that the email may

                                             36
       have had at Johnson was quickly corrected by the full merits review
       ultimately conducted by Gwen Obert and her team. As such, the McIntosh
       email is insufficient to establish breach.

       The court disagrees with defendant’s characterization. The McIntosh
memorandum had effects at Johnson, which were testified to at trial by Ms. Boeckel.
Moreover, although Ms. Obert claimed to have re-reviewed all the Johnson claims, her
review took place after the end of the contract, in February 2007, and as plaintiff stated,
“[t]he fundamental problem with the Government’s position is that NASA’s breach
persisted throughout the time Horn was attempting to conduct the audit. The Boeckel
review took place in September 2006 at the very end of the contract period. NASA could
not undo its breach five months after the performance period of the contract is over. The
harm was already done.”51 Furthermore, on cross-examination, plaintiff’s counsel and Ms.
Obert had the following exchange

       [Q.] it says that you didn't retain copies of initial denied claims if there were
       no objections to the determination. That's not based on anything you knew
       based on your firsthand knowledge, is it?

       A. Based on review with Pat at the time when we were doing this letter, that
       is the information that I understood.

       Q. Right. You never personally interacted with Tom Hott, much less gave
       him back his files, true?

       A. Right, but I did have the compact disc.

       Q. Okay. And the compact disc that you're referring to. Do you have any
       idea where that came from or what the circumstances were of its creation?

       A. They were provided by the auditor.

       Q. To whom?

       A. To Pat Bright.

       Q. And did you understand that that was the same compact disc that had
       been provided to headquarters?

       A. I was not aware of that.

       Q. Did you understand that that compact disc did not purport to include all
       of the documentation relating to the claims?
51Without determining whether or not she was correct in her post-contract evaluations,
the court notes that Ms. Obert did not change any of the original denials of plaintiff’s claims
by Ms. Boeckel.
                                              37
       A. It was my understanding that they should have, but I was completely
       aware --

       Q. Did you think they did or not?

       A. They did not because I looked at -- we were saying they did not, and I
       looked at those discs. I have those discs.

       Q. So is it fair to say for the claims that have an asterisk on them on your
       spreadsheet, as a generalization you did not have enough information to
       know whether those were good claims or not?

       A. I reviewed the notes and information that Pat had and she was in those
       meetings, and I had no objection to the information she provided.

       Q. The question was is it fair to say for the claims that have an asterisk by
       them on your list on this exhibit that you did not have enough information
       yourself to make a determination as to whether or not they were valid
       claims?

       A. When I drafted this letter I felt comfortable with the information that I did
       have from Pat Bright, but we did not have all the backup.

From Ms. Obert’s own testimony, the record suggests that she did not have all the
materials that Mr. Hott had when he originally compiled and presented the claims to NASA
officials, not did she meet with Mr. Hott. Moreover, as plaintiff argues in its post-trial briefs,
“Ms. Obert’s claims review ‘do over’ five months after the audit and without the benefit of
a full set of documents2 or any input from the Horn auditors does not somehow ‘cure’ the
admitted breach that occurred during the period of performance. Again, NASA failed to
perform at the time performance was due, and that is a breach of contract.”

       In addition to the allegations of breach by NASA headquarters, Horn & Associates
also raised allegations of breach related to specific NASA Centers where the plaintiff
preformed the recovery audit. Defendant generally responds that each of the centers did
not breach the contract and specially argues that “Horn has not met its burden of proving
that the centers failed to timely review and pay Horn’s claims within a reasonable time.”
As the court examined the impact of the McIntosh email at Johnson, the first NASA Center
that the court examines is Johnson.

       Johnson

       As noted above, the Johnson recovery audit generated the second most claims,
but only a fraction of the claims were approved and recovered.52 Horn & Associates’ main
52Plaintiff identified and submitted 121 claims for Johnson only 19 of which were
approved and processed by NASA.
                                               38
on-site auditor was Tom Hott, although Michael Colby also worked on the Johnson
recovery audit and Beth Hott, supported the Johnson recovery audit off-site. Mr. Hott
indicated that initially the audit “went fine. We had access to their records and we had a
nice place to work in front of the vault where the records were kept, and it was easy for
us to come up with a program to start the audit effectively and efficiently.” Mr. Hott,
explained, however, “[t]hen when we began turning in claims, they were, the claims were
immediately denied.” Mr. Hott explained when NASA personnel began to work with Horn
& Associates, at the beginning of the contract they relied on the Gwendolyn Sykes
memorandum. Mr. Hott testified “she [Marilyn Sampay] and June and Pat basically said
they were going to ignore Mr. Denwiddie’s [sic] direction and they were going to bank on
the letter by Ms. Gwendolyn Sykes at the start of the audit which indicated we could only
look at fixed-price contracts.” Regarding the process for presenting claims, Mr. Hott
testified:

      On a regular basis, the first person was Pat Bright. Pat was the supervisor
      of the accounts payable department. She reported to June Boeckel who
      was, as I understand it, the director of accounting at the time. And June
      reported to Marilyn Sampay who was the deputy CFO responsible for the
      conduct of the audit, according to our contract. And then I had a few
      occasions with John Beall, the CFO of the Johnson Space Center.

Mr. Hott was generally unsuccessful in getting the claims he submitted approved. He first
noted that he had challenges working with Ms. Sampay and Mr. Beall:

      Marilyn Sampay, who was the deputy CFO charged with the responsibility
      under our contract guidelines and under our contract, period, to process the
      claims, had pushed the process down so far down the line in the
      management spectrum that she distanced herself from the audit and would
      not, would not, I guess, force her folks that worked for her to process claims
      or to review them on the merits. That caused a detachment of management
      from the audit process which is extremely detrimental. And John Beall
      exacerbated that situation from the standpoint that he completely distanced
      himself and would not hold Marilyn accountable to do her job as it was
      spelled out in our contract. It was such an extreme degree that it kept us
      from getting to -- through the audit.

Mr. Hott also indicated at trial that he encountered challenges with the NASA personnel
that he worked with more closely. Regarding Pat Bright, he testified at trial:

      Pat was very cordial, initially, and Pat, we had very good access, all the
      records, and we had a nice place to do our work. She was certainly reluctant
      to accept any kind of a claim which is understandable because it's on her
      watch. However, when claims that were very clear were being presented
      and turned down with denials, without discussion and review on the merits
      of the claim, it caused unusual amounts of time of research and of further
      discussion with trying to get meetings with others to try to get the claims

                                           39
       understood and processed. There was a reluctance to have those kinds of
       discussions and meetings and there was a lot of talk about, well, we don't
       do it that way. We don't file those kinds of claims against our customers.

      From his trial testimony, however, it appeared that most of the challenges Mr. Hott
faced were with Ms. Boeckel. Mr. Hott testified regarding Ms. Boeckel:

       June Boeckel, who was Pat's supervisor, was very reluctant to accept or
       approve claims and would create argumentation on the claims that had
       nothing to do with the merits of the claims themselves, again causing
       unusual time delays, especially when you consider the fact that we would
       turn in a claim and it would be weeks or months before we would get the
       information back. This caused a severe time problem because we continued
       to try to work under one scenario and knowing full well that we would have
       to go back and go through all of the claims, all of the contracts again and all
       of the payments again.

       Mr. Hott explained that he was willing to do the work again, “[b]ut the delay of the
claims, and delay and the like of interchange of information back and forth, which we
would normally be accustomed to in a recovery audit, caused considerable, considerable
time delays.” As a result, Mr. Hott testified that “the time delays made it virtually
impossible, and the stumbling blocks that we ran into made it virtually impossible to
complete the audit on a timely basis, because too much work was doubled and redoubled
and redoubled again, unfortunately.”

       As explained above, Ms. Boeckel also relied on the guidance in the McIntosh email
to deny all claims based on interest on overpayment if they were cost-type contracts or if
the claims were based on contracts with provisional rates which were included in the A-
D framework. Even before the guidance from NASA headquarters, Johnson was not
moving quickly to resolve plaintiff’s submitted claims. For example, regarding claims for
cost rate adjustments, Ms. Boeckel testified on direct examination with plaintiff’s counsel:

       Q. Now you see the email from Ms. Lile to you on June 28th, 2006 here?

       A. I see it.

       Q. And she indicates, I believe, that as of the end of now, June 2006, the
       issue of claims on cost rate adjustments was still not resolved. Is that fair?

       A. I'm reading it.

       Q. It's right after the $7,500 number, the remaining claims relate to cost rate
       adjustments which is still not totally resolved.

       A. Correct.



                                             40
      Q. So it's true, as of June 2006, the issue of whether these types of claims
      on the cost rate adjustments could be approved or not?

      A. Correct.

      Q. And you were in a holding mode on these claims at this time, correct?

      A. Correct.

      Q. And would it be fair to you to characterize your knowledge at this point
      that based on the fact these claims were in A. holding pattern that they were
      in fact continuing to stack up at this time?

      A. If he was still doing, if he was still working on them I assume that they
      would be, which, whatever ones he had worked up would be on hold.

      Q. And that means they hadn't been resolved one way or the other?

      A. Correct.

     Moreover, Mr. Hott testified that at the end of the contract, he had submitted a
number of claims that were not yet acted upon to NASA. Mr. Hott indicated that

      initially they were -- and weeks before that or months before that they were
      allowing the claims to stack up. And when the stacks got too high on Pat
      Bright's desk she asked me to hold them in my office, and we had three
      desks full of claims that were not being reviewed. And then eventually she
      started reviewing them and giving us, giving them back to us with a denial
      by, she had created a cover sheet which was with the A-B-C-D, and then
      began circling those as she felt that they applied to that particular claim.

At trial, plaintiff’s counsel also referred Mr. Hott to a September 11, 2006 email he
received from John Beall which stated in part:

      This past week we did receive a list of the JSC [Johnson Space Center]
      claims you submitted to Headquarters for recovery consideration. We also,
      as I believe you know, received a reminder from Headquarters that we do
      not normally request refunds on the following type contracts:

      a. Open contracts that are subject to final audit at close-out.

      b. Contracts with provisional rates that are pending audit by DCAA.

      c. Contracts with provisions for advanced payments for non-profit
      organizations that .conduct experimental or research and development
      work.

                                            41
       d. Contracts which authorize progress payments.

       We also, apologize for any delay in reviewing the claims as we waited for
       clarification from Headquarters. Now that we have the clarification we are
       in the process of reviewing the claims and will provide feedback as soon as
       possible on our findings. Please keep in mind that if any of the claims
       submitted fall into the above categories we may not be approving them for
       recovery. Thanks for your patience and understanding. I look forward to a
       successful completion of this recovery effort.

Mr. Hott had the following exchange with plaintiff’s counsel at trial regarding the email:

       A. That's when I was notified that JSC [Johnson Space Center] and
       headquarters were recommending that our claims not be processed on
       open contract items for the A-B-C-D reasons.

       Q. Well, you see the A-B-C-D on this document?

       A. Yes, I do.

       Q. Okay, are those the A-B-C-D reasons you're referring to?

       A. Yes, they are.

       Q. What was your understanding was the origin of that list and what it
       meant?

       A. The origin of the list came from headquarters as I understood it. How it
       was developed I don't know exactly, but what it meant was our efforts of a
       year and a half would be relatively useless.

Mr. Hott also testified that “I had no idea that it [the list] was being sent to headquarters,
but the corporate office of Horn was responsible for sending information into the
contracting officer on a periodic basis, as I understand it. I'm not sure what they were
sending them.” Furthermore, plaintiff’s counsel had the following exchange with Mr. Hott
about the email:

       [Q.] If those types of contracts were not to be approved, claims on those
       types of contracts, is that what was causing you concern?

       A. Extreme heartburn. Yes, sir.

       Q. And again, why would that cause you heartburn?




                                             42
      A. We would have a lot of our efforts over a year and a half, all the claims
      that we would have written, 98 percent of the dollar value would be wiped
      out and we would receive no revenue for our efforts for a year and a half.

      Q. Before September of 2006, and this is about two weeks before the end
      of the contract period, what notice did you have that you were limited to
      fixed- price contracts in your review at the Johnson Space Center?

      A. The only definitive -- I didn't have anything definitive. I had discussions
      from June Boeckel and Pat Bright and Marilyn Sampay in June, and of
      course in that period on through July and August and September we did not
      have anything definitive until this memo came down from John Beall. And
      at that point I did not consider it definitive even at that time.

        Defendant responds to plaintiff’s arguments about the audit at Johnson by arguing
that although

      Mr. Hott testified as to claims ‘stacking up’ at Johnson, and Horn relies upon
      that testimony heavily in its brief, the evidence at trial previously noted
      proves that a major cause of any such delays was Mr. Hott’s own
      aggressive and repeated submission of meritless claims in areas (notably
      cash discount and interest) where he had been unequivocally informed by
      the agency that his approach to the recommended debts was contrary to
      Federal law and Government contracts practice.

(internal citation and footnote omitted; emphasis in original). Therefore, defendant argues
that “[h]aving created or substantially contributed to the alleged review and processing
problem, Horn should not be heard to complain.”

      Goddard

       The center with the most claims identified by Horn & Associates in the audit was
at Goddard. As Mr. Farrar, one of the principals of Horn & Associates, testified, prior to
the beginning of the audit, “Goddard was designated as one of the biggest centers and
certainly one of the bigger opportunities that we had.” As explained above, only one claim
at Goddard was approved and processed by NASA, which was the SGT Inc. claim, for
$1,163.44 dollars, despite the 223 claims submitted to NASA for review by plaintiff during
the course of the audit.

       Initially, the auditor on site at Goddard for Horn & Associates was Maggie
Baumbach. In addition, Ivan Sherman worked part-time at Goddard with Ms. Baumbach.
Ms. Baumbach begin work at Goddard in September 2005. At Goddard, Jon Wolz was
Deputy Chief Financial Officer for finance, and for the recovery audit, Mr. Wolz delegated
the review and approval process to Sandra Brown.




                                            43
       Mr. Farrar offered testimony that three months after arriving at Goddard, Ms.
Baumbach “was becoming very frustrated because she was having an extremely hard
time getting her claims presented. And at that point, she -- I don’t believe she had any
claims processed, and certainly none collected,” and that “nobody would meet with her.”
Mr. Farrer visited Goddard himself in December and testified that:

         [W]e were still having the same issues, meaning that Maggie was still
         generating claims, she was having an extremely hard time getting meetings
         set up to present those claims. So I flew out there to both do training with
         Maggie in addition to trying to set meetings up to possibly review the claims
         while I was there. I personally tried to set meetings up with John Wolz . . .
         the DCFO at Goddard. I tried to set meetings up with him. I tried to set
         meetings up with his assistant who he referred us to occasionally, and I
         can't remember his last name, but it was Tim[53] somebody. And Sandra
         Brown. I never could get a meeting set up with Wolz or Tim, but I did run
         into Sandra in the hallway and told her that we were having problems getting
         the claims presented. She said that she would meet, she wasn't available
         to meet with me while I was there, but she would meet with Maggie the
         following week.

At trial, Ms. Baumbach discussed with plaintiff’s counsel one claim in particular that she
believed had merit, and the process at Goddard.

         Q. So this duplicate payment took place on Christmas Eve 2003, right?

         A. Yes.

         Q. And you identified this two years later, in 2005.

         A. Yes.

         Q. It's still sitting there on the books.

         A. Correct.

         Q. And everybody agrees it's still there on the books.

         A. Right.

         Q. What happened next?

         A. Well, then I guess I went to Tim Kelly to see if he would, see what we
         can do next to pursue this, and then he suggested I talk to the contracting
         officer even though it's purely a financial issue, it's not, I don't know, it only,
         it's only finance that did this, that paid it twice. Anyway, so I met, I guess I
53   The individual was Tim Kelly.
                                                 44
       met with the contracting officer and I think they couldn't just reverse it. I don't
       know why they couldn't. I think the contracting officer can't really reverse
       things. It would have to be your finance arm that would do that. I guess there
       would be months that would go by. With this one I think it was a contracting
       officer couldn't meet with me until like a month and a half later or something
       because they were very busy with something. Sorry. I'm remembering this
       in bits and pieces. So anyway, then after the contracting officer did have
       time and agreed it was a duplicate payment, they still said but NASA owes
       for other invoices so they're not sure what to do. I guess then after that I
       think I would periodically bring it up with Tim Kelly and the finance people
       to see what we can do. Can we try to resolve this in some way.

       Q. What would they say?

       A. They didn't -- I guess I never got a outright no and I never got a outright
       yes. It would just sort of shift around, like maybe go talk to this person. It
       just seemed to get lost and nobody coming out with a decision or how to,
       when to pursue it as a bill of collection.

       Q. When you stopped working on the NASA audit in May of 2005, had this
       claim been collected?

       A. No, it had not. It was very frustrating to me that such a black and white
       claim had not been collected or even forwarded to a point where it would
       initiate the collection of it.[54]

       After eight months of working at Goddard on the recovery audit, Ms. Baumbach
left her position as plaintiff’s auditor for the Goddard recovery audit, claiming that “I
couldn’t afford to continue with no income. I had been months and months at this and we
had, nobody had a claim that was in the channel to be paid, to be collected from the
vendor, and so that was a big factor.” Ms. Baumbach continued: “And that NASA, that it
was so frustrating to not be able to get claims that were agreed to processed. It seemed
pretty dismal that I would be making any money. When I started I had high hopes that
there would be a nice audit here and that I'd have a decent string of income from it, but it
just wasn't panning out because claims were not being processed.”



54 In a footnote to its post-trial brief, plaintiff notes, “in 2009, more than two years after the
Recovery Audit ended, and after this lawsuit was filed, Goddard did collect the
$481,219.30 duplicate payment back from the vendor, although NASA has not paid Horn
its 13.5% contingent fee.” (emphasis in original). Plaintiff concludes: “It goes without
saying that NASA’s denial of a valid duplicate payment claim during the Recovery Audit,
and then subsequent collection of the same without compensating Horn, is a clear breach
of the express terms of the Contract and the duties of good faith and fair dealing.” The
court addresses plaintiff’s allegations of the breach of the duty of good faith and fair
dealing below.
                                               45
       In an email dated April 17, 2006, to Mr. Lowery, Mr. Farrar, and Jennifer Harris,
another Horn & Associates employee, Tom Horn explained that he spoke with Ms.
Baumbach and she indicated that it was “just too hard and doesn’t want to be the front
person. I told her we were staffing the place with more people and that we would have a
good person to handle the communications . . . and give guidance if she wants to continue
to help us, but she pretty much declined.” The email indicated, however, “[t]his actually
may not be all bad as she seems to be willing to help us with the outstanding items (so
she can get paid) and help with a smooth transition to the new guys.” The email from Tom
Horn to Mr. Lowery, Mr. Farrar, and Jennifer Harris continued, “It does not sound like she
has really audited that much at Goddard. She said she did a few contract reconciliations,
looking mainly for dups [duplicate payments] and believes she has only skimmed the
surface. She hasn’t looked at possible interest claims, or for that matter, a lot of other
claim types which may or may not be there.”55

       Subsequently, in May of 2006, three auditors replaced Ms. Baumbach: Dan
Lizana, Steven Smith and Marie Beckey. Mr. Lizana indicated that once he arrived at
Goddard, “the two individuals that I recall and we were introduced to, the points of contact
was [sic] Yvette Blackwell -- she was the Supervisor for the examiners and she was our
point of contact -- and that week we were introduced to Sandra Brown, who was her
superior, who was going to be responsible for denying and accepting the claims.” Plaintiff
also points to an email sent by Mr. Wolz on May 10, 2006 to John Blair and Melvin
DenWiddie, in which Mr. Wolz states: “Jack/Melvin: Tom Horn wants to meet with me and
my staff next week for 30 minutes. At this time, I don’t know how much longer they plan
on being here. I’d like for them to leave.” Mr. DenWiddie testified on direct examination:

       Q. Do you recall Mr. Wolz expressing that he would like the Horn associate
       audit team to leave Goddard Space Flight Center?

       A. Yes, many times. I'm surprised that he decided to put it in writing.

       Q. You said many times, what do you recall being the reason Mr. Wolz
       wanted Horn and Associates to leave?

       A. Mr. Wolz, the Goddard Space Flight Center had several incidences of
       improper payments. So Horn and Associates were not necessarily favorites
       at the Goddard Space Flight Center because there were many opportunities
       to find payments that had been made improperly.[56]

Like Ms. Baumbach, Mr. Lizana felt frustrated at NASA’s handling of Horn & Associates’
claims, although he did testify that Ms. Brown was frequently available for meetings. Also,
55 As indicated from Ms. Baumbach’s testimony, quoted above, she was frustrated that
she could not get claims approved or processed by NASA personnel and had difficulty,
at times, even meeting with NASA personnel.
56As indicated above, only one claim was approved and processed by NASA at Goddard
during the recovery audit.
                                            46
despite his frustrations, Mr. Lizana worked on the Goddard recovery audit until the end of
contract performance. Mr. Lizana testified, however, that there was often not resolution
of the claims. He testified on direct examination:

      So when we present a claim, and in this case we mostly present it to Sandra
      Brown. When we sit down, we have all the information. And we're looking
      for a response that explains anything that's a technicality, anything that
      requires us to go get information, all right, anything that perfects the claim.
      So we're saying, okay, your feedback is helpful because we will know how
      to segment these claims and how to prepare them in a way that allows you
      to make a very binary decision, yes or no, approved or denied.

After this process, when asked if the claim was approved or rejected, he testified:

      Rejected, no, not outright rejected during the recovery audit, meaning the
      time that we were at the facility, no.

      Q. Okay. So if it wasn't accepted or outright rejected during the period you
      were at the site, what did happen during the period at the site?

      A. Well, we provided these claims. And essentially, as I said, we wanted a
      yes or no decision, all right. What is it that I need to provide for a yes or no
      decision?

Mr. Lizana testified that it would have been helpful to have an answer, even if the answer
was no. He indicated without that,

      it left us in limbo, because it wasn’t a rejection and it wasn’t approval. You
      can learn a lot from rejecting a claim. If you reject a claim on the technical
      details, it teaches me, at least as an auditor, okay, these are the things I
      need to be concerned with from a technical point of view. But if you just
      reject a claim outright for something that really was nebulous in our
      understanding, it wasn’t instructful -- it didn’t provide us instructions to go
      back and say, hey, this is what we should be doing. And so it was kind of
      frustrating because you have these responses that really didn't allow us to
      be more efficient in the way that we presented the claim.

Mr. Lizana also had the following exchange with plaintiff’s counsel about presenting
claims:

      Q. Does anyone at Goddard Space Flight Center, when you would present
      a claim that included overpayments during the audit period and
      overpayments prior to the audit period or after the audit period, did anyone
      at Goddard Space Flight Center tell you that was beyond your scope? You
      should remove those and only focus on the period in the audit?



                                            47
       A. At the time of us presenting the claim, no. They didn't bring that up as an
       issue at the time it presented it.

       Q. If someone had brought that up as an issue, would you have complied
       with those wishes and removed those and reformatted the claim?

       A. Absolutely.

In addition, Mr. Lizana testified, even when he was given a reason, it was one that often
did not make sense to him. For example, according to Mr. Lizana, one claim “was not
outright rejected. But our explanation was NASA was not interested really in pursuing this
claim because this was a cost type contract and DCAA [Defense Contract Audit Agency]
will check it at close-out.” Mr. Lizana said he was also provided the following explanations
for not approving the claims by Goddard:

       The response was mostly this is a cost reimbursable contract, and we can't
       go back for this because it’s that contract. And therefore we don't recognize
       this as being a contract that Horn should be doing recoveries on. In addition
       to that, you also at times you heard the excuse of, okay, this is DCAA, they’ll
       catch it, what have you. And so those were mainly the responses that we
       would get from most of our claims that we presented.

As indicated in an email from Ms. Brown to Mr. Lizana:

       My position remains that until either Procurement and/or DCAA determines
       that Swales [& Associates] has violated their contractual agreement with
       NASA Goddard, I am at no liberty to act upon your claim. Validation of your
       claim has to be supported in conjuction [sic] with the audit/findings of
       Procurement and/or DCAA.[57]

In light of the foregoing, plaintiff argues that “[b]y not approving or denying recommended
debts, Ms. Gardin [Brown] not only breached the express terms of the Contract to validate
the recommended debts in a reasonable time, but also breached the duty to cooperate


57Mr. Lenck, the Deputy Chief Financial Officer at Kennedy, discussed below, testified
about the role of DCAA in NASA’s contract process:

       In cases where NASA is the administrative contracting officer, the Defense
       Contract Audit Agency will issue an audit report to the administrative
       contracting officer and then the administrative contracting officer for NASA
       will actually use that as a guide in negotiating the rates with the contractor.
       We are not required to accept all of the DCAA recommendations. It's a
       negotiation process. But we certainly use it as a guide and I will tell you if we
       don't use a recommendation they make, we will document the files as to why
       we did not use the rates the Defense Contract Audit Agency recommended.


                                             48
and the duty not to hinder.”58 Plaintiff also argues that “Ms. Gardin also did not provide
the Horn auditors with information they requested that was necessary to complete the
Recovery Audit and to perfect the recommended debts.”

      In response, defendant first concedes that “there were specific problems with
review at Goddard,” and that “Goddard was slow to evaluate claims, and, at or near the
end of the audit, denied Horn’s overwhelmingly meritless claims for reasons that were
inconsistent with the terms of the Horn recovery audit contract.” Defendant notes that Ms.
Brown

         testified that she did not initially understand that Horn’s contract provided
         for an audit of all contracts. Thereafter, Ms. Gardin and Goddard Deputy
         Chief Financial Officer Jon Wolz took the view that, based upon their
         interpretation of guidance issued by the Office of Management and Budget
         (OMB),[59] cost contracts should be excluded from Horn’s review,
         notwithstanding the terms of Horn’s contract, unless the alleged
         overpayment involved “[a] true duplicate payment on an invoice” or “a
         mathematical error possibly.” Ms. Gardin was also of the view that OMB
         guidance did not address Horn’s attempt to assess interest on
         overpayments (again, notwithstanding the terms of Horn’s contract). Claims
         on cost contracts and for interest were denied accordingly.

(internal citations omitted).

        In addition, years after the audit, the Department of Justice informed the court, and
plaintiff, that it believes that14 claims identified and submitted by Horn & Associates at
Goddard were valid, and another 2 claims were partially valid. During the period of
58As noted above, in between the time of the recovery audit and the testimony at trial,
Sandra Brown changed her name to Sandra Gardin. The court refers to her by her name
during the recovery audit, Ms. Brown.
59   Plaintiff argues that:

         [U]nbeknownst to the Horn auditors until the last few days of the Recovery
         Audit, the Goddard officials charged with reviewing and validating
         recommended the debts had reached the conclusion on their own that the
         scope of the Recovery Audit as set forth in the Contract was inconsistent
         with the U.S. Code and guidance from the Office of Management and
         Budget (“OMB”) and, therefore, was “illegal.” On that basis, at the
         conclusion of the Recovery Audit the officials at Goddard approved only
         three recommended debts submitted by Horn auditors and denied tens of
         millions of dollars of recommended debts that had been written on cost-type
         contracts and contracts with provisional rates.

Plaintiff also contends that “[t]he Government now concedes that it breached the Contract
to the extent it denied interest claims because they were written on open cost contracts.”
                                              49
contract performance, NASA approved two claims, but only processed the one claim for
SGT Inc. The other claim, a different Aerospace Corp. claim, was approved for payment,
but not processed by NASA. Defendant agrees that these claims were: “(1) well grounded
and justifiable at the time they were submitted, and (2) denied by Goddard in error.”
Despite the foregoing, defendant argues, “Mr. Lizana and Mr. Smith, along with Ms.
Beckey, proved to be grossly incompetent auditors who, for reasons not reasonably
attributable to any action or inaction on the part of NASA, were incapable of performing
the work of the contract.” Defendant argues that the balance of the claims that were
denied by Goddard were proper and therefore, argues that NASA did not breach the
contract.

      Kennedy

      Brock Young was the primary auditor for the Horn & Associates recovery audit to
work at Kennedy. Mr. Young started the recovery audit at Kennedy in May 2005 and Mr.
Young continued to work on the Kennedy recovery audit until the end of contract
performance. Only two of the claims submitted to NASA at Kennedy were collected. The
main point of contact for Mr. Young was Sam Lenck, Deputy Chief Financial Officer for
Kennedy and Brenda Brooks, the Kennedy supervisor over accounts payable.

      At trial, Mr. Young first expressed frustration with the data. He indicated on direct
examination with plaintiff’s counsel:

      [A.] Well, you really can’t do an audit without the data. You can do some
      things. I mean, you can look at the physical paper. Like with NASA, they
      had paper for everything, so I could go and look at the contract, which is in
      paper form, and even the transmittals, the payments in paper form. But until
      you have the data you can’t really see what was actually paid. You can’t
      see if you're missing any paper in the audit. You have to have the data to
      actually do the final part.

      Q. When did you receive usable payment data for Kennedy?

      A. The data was received either the end of August, first of September 2005
      range.

Mr. Lenck confirmed some of the issues with the Mr. Young and data at trial, testified on
direct examination that, referring to Mr. Young:

      We attempted to provide anything he asked for. I know he was interested in
      the electronic data, which we attempted to secure for him. It was a little
      difficult and it was probably a little different at each center. When he came,
      we were under -- our accounting system was SAP . . . those records were
      still available, but the system was not operating. So I think our IT people
      had to get the system back up and running in order to print out, get



                                            50
       electronic information for him, for the auditor. So that may have taken a little
       time to do that.

Mr. Lenck, however, emphasized that “[t]he records were certainly made available to him.
We had records -- our accounts payable files would have included the purchase order or
the contract, in addition to all of the billings that the vendors or contractors had requested.
He would have certainly had access to those.”

        Mr. Young also was frustrated by Mr. Lenck, who viewed his role as “to act as the
middleman between Mr. Young and the contracting officer, Ms. Solum.”60 Mr. Young
indicated that he first talked to Mr. Lenck and he would take the documents, “which would
be the contract file, the mods [modifications], and the invoices in question, and we'd go
through it in that form. And that's what I'd review with NASA is all the data with them so
they would have everything they needed to look at the claim.” After that, Mr. Young
testified,

       I would typically never hear back from them. So what I thought was
       happening was Sam was going to approve it and send it where it needed to
       be sent, like to the vendor, things of that nature. Later on I found out what
       he was really doing was he was facilitating the process, but he was leaving
       it up to the contracting officers to approve. So then at that point, I was
       assuming they were going to the contracting officers. The thing is I was
       never getting anything back, so I don’t know what actually happened.

Plaintiff argues that “[b]y deferring to Ms. Solum to make the decisions about the
Cendant[61] recommended debts, Mr. Lenck abdicated the role assigned to him by the
Contract and placed approval of the Cendant recommended debts in the hands the
person who had a personal and professional interest in finding that she had not approved
overpayments.”

       Mr. Young also explained an additional frustration with Mr. Lenck’s process:

       [W]e called a meeting. In that meeting, we had Leslie Solum, we had
       Leslie's boss, we had a legal representative as well there. Steve Chance
       was the COTR, that's the Contract Officer Technical Representative is what
       a COTR is, COTR. And then we had myself, Sam Lenck, Brenda Knox, or
       Brenda Brooks was there, and I think one or two other people as well. So it
       was a pretty big meeting. There's [sic] roughly 10 people in this meeting.


60 As noted above, Ms. Solum was a contracting officer for the contracts awarded at issue
at Kennedy, and not the contracting officer for the contract at issue in this case.
61As indicated in defendant’s post-trial brief, “Cendant was a relocation contractor that
would assist employees transferred to different NASA Centers by purchasing their homes
and providing related services.” Mr. Young submitted four claims regarding Cendant
during the recovery audit period.
                                              51
       We went through everything, decided that yes, there's definitely something
       there and we were to pursue it.

Mr. Young testified, however, in response to the question, “what did you understand was
supposed to take place next?”

       A. When I left that meeting, what was supposed to take place next was
       Leslie Solum should have had it reviewed and sent out a letter to the vendor
       to try to collect the money. The agreement was that yes, it looks like
       something was there, so what was supposed to happen was she was
       supposed to send the information to the vendor saying either explain to us
       why it is not valid or remit the money.

       Q. What actually did happen?

       A. Nothing happened actually.

       Q. What do you mean nothing happened?

       A. Well, that was the last anything ever happened to it. I followed up with it
       in January, mid to late January, to find out what had happened with it, where
       were we. And at that point, that's when I was told that Leslie and Dawn
       Oliver, the legal representative, was reviewing it and wanted to make some
       changes. I didn't know that earlier. We would have took care of it earlier.

At trial Mr. Lenck explained his style to defendant’s counsel, indicating:

       Based on my many years experience in that role -- when I first got there, I
       thought I knew everything and could make decisions, boom, boom, boom.
       The longer I was there, I realized that everyone has input. And even if it's
       like three against one, that one person might be right. So let's hear
       everybody's opinion and try to see what the facts are. And some people do
       complain that NASA takes too long to make decisions, but that's why it takes
       us some time. We want to assure ourselves that we have all the facts, not
       just facts as told by one person.

      Mr. Young expressed further frustration with the lack of action by NASA with
respect to the claims he submitted to NASA, one time referring to the process as:

       I’d call it the abyss where all the claims went to and I never heard back from
       them. So it was kind of like getting this area where I was left out standing
       on okay, what do I do with this? Because it wasn't approved, it wasn’t
       denied. It was just in this limbo of processing role, which didn't make sense
       to me. And I would never hear back.




                                            52
Mr. Young also provided a specific example of one claim, in an exchange with plaintiff’s
counsel:

       Q. You submitted it to him, he agreed it was a good claim?

       A. He agreed it was a valid claim at that point. So then I went back and
       wrote it up.

       Q. And that's what Exhibit No. 8 reflects, correct?

       A. Correct.

       Q. And what happened after you submitted this?

       A. Well, after I submitted it I turned it in to Sam [Lenck] again as an official
       claim at this point, and as the official claim, he was going to do what he did.
       Now this would have been --

       Q. Well, just tell me what he did. What happened with respect to this claim?
       Did he approve it or not?

       A. He did not approve it. He said it had to go to the contracting officer for
       approval. And at that point, I don't know what happened to it. I never saw
       the claim again until the very end when they were trying to wrap up the
       audit.[62]

Plaintiff also points to the only two claims that were paid at Kennedy as evidence of the
reluctance of NASA to pursue claims. On cross-examination with plaintiff’s counsel, Mr.
Lenck testified:

       Q. So am I correct in understanding from your testimony that Kennedy
       Space Center never actually approved claims 2085 and 2056, right?

       A. I would say more like we pocket approved it because we did not
       disapprove it.

       Q. Okay.

       A. We just accepted the money and closed our eyes.

       Q. Okay. But Kennedy Space Center did not send those two out for
       collection, right?


62The description of this process repeated itself at trial in a dialogue with plaintiff’s
counsel, with Mr. Young referring to one example: “I don't know what happened with it. I
never saw it again, and so there was nothing for me to do with it. It was in this limbo land.”
                                             53
       A. No, we didn't.

       Q. You got money notwithstanding that you didn't send it out?

       A. Correct. And we're assuming it's correct. I never went back and looked.

Mr. Lenck also responded by plaintiff’s counsel’s question: “And none of the other claims
that Mr. Young submitted, with the exception of the Cendant claims, were ever actually
even sent out for collection; correct?” by answering: “Claims themselves, no.” Defendant
responds that “[t]he notion that the Government actually breached its contractual
obligation to review and validate claims by reviewing Horn’s claims closely through
multiple levels of evaluation is entirely absurd.” Defendant, argues, as with the other
centers, that the auditors, not the government personnel at Kennedy, were the problem,
indicating “[i]ndeed, Mr. Young emerged as a major contributor to delay due to the poor
quality of his initially submitted claims.” Plaintiff responds that “[e]ven if certain claims
submitted by Mr. Hott had been meritless, such submissions would not excuse Johnson
of its obligation under the Contract to timely review any recommended debt that Mr. Hott
presented.” (footnote omitted; emphasis in original).

       Marshall

        James “Chip” Edgerton, was the primary subcontractor for Horn & Associates to
work at Marshall. Initially, he employed two additional auditors to work with him, John
Crochet and Michael Mescher, with whom he had worked on pervious recovery audits.
His point of contact for the recovery audit was John Anderson, the Deputy Chief Financial
Officer for finance. Mr. Edgerton testified at trial that he began the recovery audit in June
2005 with Mr. Crochet and Mr. Mescher, but after a week, Mr. Crochet did not return
because “[t]here was never enough work for three people,” and Mr. Masker worked for
two or three weeks a month for the rest of 2005, but did not return in 2006 because “[w]e
didn’t have enough complete files to audit.” Mr. Edgerton also indicated that he frequently
had to request documents again and again. Mr. Edgerton left Marshall at the end of May
2006, with the intention of returning once

       it was worked out of how to get the complete files, then we could ramp it
       back up, bring in either Mike [Mescher], Jack [Crochet] and myself or bring
       in some, if we had other audits going on right then we couldn’t drop those,
       so we would find other associates that we could use to bring in to help work
       on the audit.

Mr. Edgerton, however, did not return to Marshall. When asked to summarize his
experience at Marshall, Mr. Edgerton indicated that “[t]hey were nice people, but . . . you
know, that they had their work to do and their work came first. And so our files came
second. So it was, you know, it was a -- it wasn’t a combative relationship, it's just that
their jobs came first and ours came second.” Specifically, regarding the files he requested,
typically from Ms. Becky Black, Mr. Edgerton indicated that “[o]f the files I requested I



                                             54
probably received, maybe 60 to 70 percent of a complete file.” Mr. Edgerton explained at
trial why this was such an issue:

         We didn't have enough complete files to audit. We were -- I was
         continuously requesting documents or re-requesting documents. And some
         of these files are, like balloon. They can be, the contract can be for three or
         four years, five years, you know, ten years, and you would have 20, 30, 40,
         50 folders, order folders, that relate to that. If you're missing one of those
         order folders and you have something, you're missing a later audit folder
         and you're looking at this audit folder and it says that there was a mistake
         in payment, how do you know it wasn't corrected in that next one? If you
         don't have it you can't determine that. So if you don't have the complete file
         you can't do a complete audit.

Mr. Edgerton testified, regarding Mr. Alexander, although he was available to meet and
discuss the claims initially,63 “it got harder to find him or get in to see him,” and when he
did, there often was not resolution. For example, Mr. Edgerton discussed the process of
review for one claim on direct examination:

         Q. So what was the outcome of this claim at the first meeting you had with
         Mr. Alexander?

         A. The additional research as to find out if NASA had these Dewars.[64]

         Q. Did you present Mr. Alexander with that additional research showing the,
         I think you mentioned a moment ago, an additional order or purchase order
         that indicated that NASA had at least 40 of these Dewars?

         A. Yes, there was, it was either email or the order that had the bill of lading
         that showed the listing of the Dewars and the serial numbers that were on
         that purchase order or bill of lading. There was a letter that, or an email that
         was a note that would be, they would check out, make sure that was the
         case in McCloud, at McCloud.

         Q. After you presented this additional information to Mr. Alexander about
         this claim, did you follow up with him about having it approved?

         A. Yes, I did.

         Q. Was it approved at that point?

         A. No, it wasn't.
63In fact, Mr. Edgerton had far greater success in having claims approved and collected
than the other Horn & Associates auditors, as more than half of his claims were approved.
64   A dewar is a storage tank used to store compressed gas.
                                               55
       Q. How many times did you follow up with Mr. Alexander about this claim?

       A. At least three times.

       Q. At the point when you ended your participation or your work on the
       recovery audit at Marshall Space Flight Center, what was the status of this
       claim?

       A. It was outstanding, still pending.

       Q. Was there any additional information that Mr. Alexander was waiting for?

       A. From the information back from the contracting officer or whoever this
       person was at McCloud.

       Q. When the recovery audit ended on September 30th, 2006, what was the
       status of this claim?

       A. It's pending.

       Q. What is the status of this claim as you stand here today, to the best of
       your knowledge?

       A. Pending.

Defendant argues that “[a]lthough Mr. Edgerton complained at trial that it became harder
over time to get meetings with Mr. Alexander to discuss claims, the examples of purported
delays cited by Horn in its brief do not support the inference that Marshall was not
evaluating claims appropriately on any large scale.”

       Plaintiff also points to a September 27, 2006 email from Mr. Alexander to Mr.
Edgerton indicating that NASA “received a listing from HQ on items you say were overpaid
and asked us to verify.” Plaintiff claims that “[t]his e-mail confirms that although the Horn
auditors had submitted recommended debts at Marshall between June 2005 and May
2006, as of September 2006 most were still outstanding, and Mr. Alexander was only
then turning his attention to his contractual obligation to verify the recommended debts at
the prompting of NASA HQ.”

       Plaintiff also argues that NASA was in breach because of the incomplete
production of the files to Mr. Edgerton, and claims that because “Ms. Black was not
prompt or complete in her efforts to deliver requested files to the Horn auditors,” “[t]he
bottleneck created by Ms. Black had a significant impact on Horn’s ability to perform the
Recovery Audit at Marshall.” Defendant, however, points to Ms. Black’s testimony argues
that “even assuming some delay in processing at Marshall, Horn has failed to establish
that such a delay would amount to a material breach of its contract with NASA.” In

                                               56
addition, defendant claims that “[e]ven acknowledging some delay in claims review at
Marshall, when one looks beyond Horn’s generalized complaints concerning the issue, it
appears that the essence of Horn’s allegation of breach is, at most, that Marshall delayed
completing its review of Horn’s meritless claims to Horn’s satisfaction.”

      The conduct of NASA, both at NASA headquarters, and at some of the NASA
Centers was not in line with plaintiff’s reasonable expectations under the contract, as
NASA did not timely review Horn & Associates submitted claims, nor did all of the centers
properly consider the claims in accordance with the language of the contract.

       Duty of Good Faith and Fair Dealing

        Plaintiff also alleges that NASA breached the duty of good faith and fair dealing.
“Every contract imposes upon each party a duty of good faith and fair dealing in its
performance and enforcement.” Alabama v. North Carolina, 560 U.S. 330 (2010) (quoting
Restatement (Second) of Contracts § 205 (1981)). “Failure to fulfill that duty constitutes
a breach of contract, as does failure to fulfill a duty ‘imposed by a promise stated in the
agreement.’” Metcalf Const. Co. v. United States, 742 F.3d 984, 990 (Fed. Cir. 2014)
(quoting Restatement (Second) of Contracts § 235). “The covenant of good faith and fair
dealing . . . imposes obligations on both contracting parties that include the duty not to
interfere with the other party's performance and not to act so as to destroy the reasonable
expectations of the other party regarding the fruits of the contract.” Metcalf Const. Co. v.
United States, 742 F.3d 984, 991 (Fed. Cir. 2014) (quoting Centex Corp. v. United States,
395 F.3d 1283, 1304 (Fed. Cir .2005) (emphasis in Metcalf Const. Co. v. United States));
see also Agility Public Warehousing Co. KSCP v. Mattis, 852 F.3d 1370, 1383-84 (Fed.
Cir. 2017). As explained by the Federal Circuit, “while the implied duty exists because it
is rarely possible to anticipate in contract language every possible action or omission by
a party that undermines the bargain, the nature of that bargain is central to keeping the
duty focused on ‘honoring the reasonable expectations created by the autonomous
expressions of the contracting parties.’” Metcalf Const. Co. v. United States, 742 F.3d at
991 (quoting Tymshare, Inc. v. Covell, 727 F.2d 1145, 1152 (D.C. Cir. 1984)); see also
CanPro Investments Ltd. v. United States, 130 Fed. Cl. 320, 350 (2017).

       “Both the duty not to hinder and the duty to cooperate are aspects of the implied
duty of good faith and fair dealing.” Metcalf Const. Co. v. United States, 742 F.3d 984,
991 (Fed. Cir. 2014) (quoting Precision Pine & Timber, Inc. v. United States, 596 F.3d
817, 820 n.1 (Fed. Cir. 2010)); see also Baistar Mechanical, Inc. v. United States, 128
Fed. Cl. 504, 525 (2016). Notably, “[i]t is well settled that the parties' duty of good faith
and fair dealing must be rooted in promises set forth in the contract.” Helix Elec., Inc. v.
United States, 68 Fed. Cl. 571, 587 (2005). Thus, “[t]he implied duty of good faith and fair
dealing cannot expand a party's contractual duties beyond those in the express contract
or create duties inconsistent with the contract's provisions.” Precision Pine & Timber, Inc.
v. United States, 596 F.3d 817, 831 (Fed. Cir. 2010) (citing Centex Corp. v. United States,
395 F.3d 1283, 1304–06 (Fed. Cir. 2005)); see also Agility Public Warehousing Co. KSCP
v. Mattis, 852 F.3d at 1384; Jarvis v. United States, 43 Fed. Cl. 529, 534 (1999) (“The
implied duty of good faith and fair dealing does not form the basis for wholly new contract

                                             57
terms, particularly terms which would be inconsistent with the express terms of the
agreement.”).

       As indicated by a Judge of the United States Court of Federal Claims, “[t]he court
applies a reasonableness standard in assessing whether a party breached its duty to
cooperate, which requires a factual inquiry that depends upon ‘the particular contract, its
context, and its surrounding circumstances.’” Baistar Mechanical, Inc. v. United States,
128 Fed. Cl. at 525 (quoting Axion Corp. v. United States, 75 Fed. Cl. 99, 121 (2007)).

        In Precision Pine & Timber, Inc., the United States Court of Appeals for the Federal
Circuit indicated that “[n]ot all misbehavior, however, breaches the implied duty of good
faith and fair dealing owed to other parties to a contract.” Precision Pine & Timber, Inc. v.
United States, 596 F.3d 817, 829 (Fed. Cir. 2010). The Federal Circuit further explained
that:

       Cases in which the government has been found to violate the implied duty
       of good faith and fair dealing typically involve some variation on the old bait-
       and-switch. First, the government enters into a contract that awards a
       significant benefit in exchange for consideration. Then, the government
       eliminates or rescinds that contractual provision or benefit through a
       subsequent action directed at the existing contract. See, e.g., id. at 1350–
       51; Centex Corp. v. United States, 395 F.3d 1283, 1304–07 (Fed. Cir.
       2005); see also Hercules, 516 U.S. 417, 116 S. Ct. 981, 134 L.Ed.2d 47.
       The government may be liable for damages when the subsequent
       government action is specifically designed to reappropriate the benefits the
       other party expected to obtain from the transaction, thereby abrogating the
       government's obligations under the contract.

Precision Pine & Timber, Inc. v. United States, 596 F.3d at 829 (citing Centex Corp. v.
United States, 395 F.3d at 1311). The Federal Circuit subsequently expanded on the
language of Precision Pine, after finding a Judge of the United States Court of Federal
Claims had read the language of the decision too narrowly. In Metcalf, the Federal Circuit
explained that:

       The trial court misread Precision Pine, which does not impose a specific-
       targeting requirement applicable across the board or in this case. The cited
       portion of Precision Pine does not purport to define the scope of good-faith-
       and-fair-dealing claims for all cases, let alone alter earlier standards. The
       passage cited by the trial court, after saying as a descriptive matter that
       cases of breach “typically involve some variation on the old bait-and-switch,”
       Precision Pine, 596 F.3d at 829, says that the government “may be liable”—
       not that it is liable only—when a subsequent government action is
       “specifically designed to reappropriate the benefits the other party expected
       to obtain from the transaction.” Id. (emphasis added). Precision Pine then
       states its holding as rejecting breach for two reasons combined: the
       challenged government actions “were (1) not ‘specifically targeted[’ at the


                                             58
      contracts,] and (2) did not reappropriate any ‘benefit’ guaranteed by the
      contracts.” Id.

      As that statement indicates, the court in Precision Pine did not hold that the
      absence of specific targeting, by itself, would defeat a claim of breach of the
      implied duty—i.e., that proof of specific targeting was a requirement for a
      showing of breach. When the court said that specific targeting would have
      been required for breach of the duty in that case, id. at 830, it did so in a
      context in which the more general bargain-impairment grounds for breach
      of the duty were unavailable, because the suspension-by-court-order
      provision expressly authorized the suspension, without limitation on the
      time of compliance with the order. That is enough to make clear that specific
      targeting is not a general requirement. In addition, the challenged
      government conduct in Precision Pine occurred in implementing a separate
      government authority and duty independent of the contract, namely,
      enforcement of and compliance with the injunction. In that context—as in
      the legislative context from which Precision Pine borrowed its reference to
      specific targeting, 596 F.3d at 830 (citing Centex and First Nationwide
      Bank)—the “specifically targeted” language protects against use of the
      implied contract duty to trench on the authority of other government entities
      or on responsibilities imposed on the contracting agency independent of
      contracts. The present case involves no such concern.

Metcalf Const. Co. v. United States, 742 F.3d at 993. The Federal Circuit instructed the
trial court to focus on the broader language of the Federal Circuit’s earlier opinions, and
specifically:

      The covenant of good faith and fair dealing . . . imposes obligations on both
      contracting parties that include the duty not to interfere with the other party's
      performance and not to act so as to destroy the reasonable expectations of
      the other party regarding the fruits of the contract.” Centex Corp. v. United
      States, 395 F.3d 1283, 1304 (Fed. Cir. 2005) (emphases added). “Both the
      duty not to hinder and the duty to cooperate are aspects of the implied duty
      of good faith and fair dealing.” Precision Pine, 596 F.3d at 820 n. 1. What is
      promised or disclaimed in a contract helps define what constitutes “lack of
      diligence and interference with or failure to cooperate in the other party's
      performance.” Malone, 849 F.2d at 1445.

Metcalf Const. Co. v. United States, 742 F.3d at 991 & 993 (emphasis in original).

        In considering the conduct of NASA’s headquarters and the four centers
discussed, the court believes that the delays by NASA in providing plaintiff the data and
the files at the centers, and the confusion discussed above about what was the proper
scope of NASA’s contracts for plaintiff to review or for NASA to evaluate, what was a
proper claim, the length of time NASA personnel took to review plaintiff’s claims, as well
as NASA personnel’s attitude and lack of willingness to necessarily interact with the Horn

                                             59
& Associates personnel, all had a material impact on Horn & Associates ability to
effectively perform the audit during the time allocated for contract performance. All of the
foregoing, as described above, all worked against the ability of the plaintiff to perform and
ran counter to Horn & Associates’ reasonable expectations of NASA’s cooperation during
contract performance.

       Moreover, it appears to the court, even without examining claim by claim, that the
processes NASA establish for the evaluation of, and the processing of, the claims by
NASA, once submitted by plaintiff to NASA for review and processing, materially impacted
Horn & Associates’ ability to recover fees. As indicated in the Goddard discussion above,
defendant states that 16 claims were: “(1) well grounded and justifiable at the time they
were submitted, and (2) denied by Goddard in error.” Defendant also stated that: “The
Government does not pretend that its own performance in connection with the recovery
audit was perfect. Indeed, for reasons that we acknowledge fully below, it was not, with
the result that, at the conclusion of the audit, Horn was owed an additional contingency
fee based upon $992,557.38 in valid overpayments that NASA failed to pursue and
process.”

        Despite the defendant’s arguments to the contrary, NASA’s delays in evaluating
the claims is evidence of a breach. As noted above, defendant conceded that “Goddard
was slow to evaluate claims.” At Marshall, Mr. Edgerton testified about the claims he
submitted in 2005 still being reviewed and considered at the end of contract performance
in September 2006. At Kennedy, Mr. Young testified to claims being discussed, and in
some instances, initially approved, but final approval never materializing, and claims
disappearing into an “abyss” with no decisions issued by NASA. At Johnson, defendant
admitted that “there was a period of time in September 2006 when Johnson did deny
claims based on the fact that they were written on cost contracts. . . .” (emphasis in
original). Although defendant points to Ms. Obert’s subsequent review in 2007 and claims
that Ms. Boeckel’s actions were “transient in nature at the center,”65 the fact remains the
plaintiff’s claims were not timely reviewed and decisions were not reached in a timely
fashion, often at the very end of the contract, or in the case of Ms. Obert’s review, months
after the contract concluded. Likewise, the final review by NASA headquarters, although
in the presence of Horn & Associates personnel, took place in January and February
2007, months after the contract ended. As noted above, NASA declined plaintiff’s offer
for a formal review of all of Horn & Associates’ claims after the end of contract
performance. The contract provided that “NASA will review and verify all debts. All debts
will be posted by NASA within a reasonable time.” NASA’s review, across the board, was
not timely and materially affected Horn & Associates. NASA’s conduct both hindered Horn
& Associates’ ability to perform the contract and, moreover, Horn & Associates did not
receive the necessary cooperation from NASA personnel at the centers to effectively
perform under the contract. See Metcalf Const. Co. v. United States, 742 F.3d at 991.


65 Although the defendant argues the denial of claims on cost contracts was “transient,”
the court notes that defendant’s position in this litigation, as detailed above, was that the
contract was limited to review of only fixed price contracts until the court’s ruling in
plaintiff’s favor on plaintiff’s motion for partial summary judgment.
                                             60
        As conceded by defendant in a post-trial submission, “[i]t is undisputed that, at
Goddard, and also for a time at Johnson, NASA denied all (in the case of Goddard) and
most (in the case of Johnson) claims that Horn wrote on cost contracts, regardless of their
merits, and that this practice affected both centers’ disposition of hundreds of claims
submitted by Horn.” Defendant, in the next breath argues, “[h]owever, in the final analysis,
for all of Horn’s allegations of extensive contractual breach by the agency on these and
other bases, only 18 of the 363 claims that NASA denied were meritorious, in whole or in
part.” The court, however, believes this is evidence of a breach by NASA during
performance of the contract. The court also finds that the lack of cooperation was directly
related to Horn & Associates’ ability to review all the contracts in a timely fashion, and
NASA’s review of the claims that Horn & Associates presented to NASA hindered
plaintiff’s ability to timely review additional contract files at the NASA Centers, including
the centers plaintiff did not focus on initially. As the court finds NASA’s conduct was
related to the contract, the court believes that this comports with the requirement of the
implied duty of good faith and fair dealing to “be rooted in promises set forth in the
contract.” Helix Elec., Inc. v. United States, 68 Fed. Cl. at 587; see also Precision Pine &
Timber, Inc. v. United States, 596 F.3d at 831. Moreover, NASA’s actions, described
above, materially interfered with Horn & Associates’ performance under the contract and
destroyed plaintiff’s reasonable expectations the under the contract. See Centex Corp. v.
United States, 395 F.3d at 1304; see also Metcalf Const. Co. v. United States, 742 F.3d
at 993; Kogan v. United States, 112 Fed. Cl. 253, 265 (2013).

         In sum, the court concludes that the conduct by NASA headquarters, and the
actions taken at the some of the NASA Centers evidences a breach. Although there were
not breaches at all the NASA Centers, and, as noted above, plaintiff did not even complete
an audit at all the centers, as plaintiff correctly notes, “Horn’s Contract was with NASA as
a whole, not 10 separate contracts with each of the Centers. A breach by any of the
Centers constitutes a breach by NASA.” Even if each individual action did not in and of
itself rise to a breach, the cumulative effect of all the problems in administering the
contract by NASA had a material negative impact on plaintiff and demonstrate a clear
breach and interference with contract performance.

        Despite the foregoing, and as indicated above, however, “[t]he implied duty of good
faith and fair dealing does not form the basis for wholly new contract terms, particularly
terms which would be inconsistent with the express terms of the agreement.” Jarvis v.
United States, 43 Fed. Cl. 529, 534 (1999). Defendant claims that “Horn’s brief
categorizes every missed advantage and every perceived slight from NASA during the
life of the parties’ contract as a breach of the implied duty.” Rhetoric aside, defendant
more specifically argues:

       That Horn misunderstands applicable legal framework is apparent in its
       contentions that NASA breached the implied duty of good faith and fair
       dealing, because, allegedly: (1) the audit was a “low priority for senior
       officials,” (2) “any overpayments that Horn identified and which were
       recovered on closed appropriations were not returned to NASA for use, but
       rather were returned [by operation of law, 31 U.S.C. 1552(b)] directly to the

                                             61
       U.S. Treasury,” thus creating a “substantial disincentive” for NASA Centers
       to approve and collect overpayments on closed or soon-to-be-closed
       appropriations” and NASA did not inform Horn that that was the case, (3)
       NASA did not promulgate actual guidance concerning what constituted a
       valid recommended debt or concerning how to process debts and pay Horn,
       and (4) the Goddard Deputy CFO generally had a negative “attitude” toward
       the audit.

(internal citations omitted). The court agrees with defendant that not every action taken
by NASA over the life of the contract gave rise to a breach of the implied duty of good
faith and fair dealing. Taking the performance under the contract as a whole, however,
plaintiff’s performance was severely impeded, and defendant’s conduct, including a lack
of cooperation, prevented plaintiff’s ability to complete the totality of the contract
requirements. Defendant’s conduct demonstrates breach on defendant’s part.

Bad Faith

        In addition to arguing that NASA breached its implied duty of good faith and fair
dealing, plaintiff also suggests that NASA operated under the contract in bad faith, first
suggesting that after Melvin DenWiddie retired there was an “era of bad faith,” and
furthering suggesting that “[t]he evidence reveals NASA’s duplicitous scheme to dispatch
Horn while using the audit results to mislead the public.” Plaintiff alleges that “NASA’s
breach of its duties to Horn seem to have been a key part in a nefarious scheme to rid
itself of Horn, while simultaneously using the results of the Horn audit to convince
Congress that NASA did not have excessive improper payments,” and claims that NASA
was able to accomplish this “by whipsawing Horn – telling it to ‘review’ all contracts, while
secretly informing the centers generally not to approve claims on cost type contracts.”
Plaintiff continues:

       By informing Horn that it would allow a review of all contract types in the
       Recovery Audit in the August 15, 2006, Bowie Memo, but instructing the
       centers not to approve recommended debts on cost type contracts in the
       McIntosh memo, NASA was able to represent to Congress that it had
       conducted a review of all contract types, while guaranteeing results
       extremely favorable to NASA. NASA could report the auditors had reviewed
       all types of contract payments, while reflecting a very low error rate because
       NASA was secretly approving only claims on the very small percentage of
       fixed price contracts. At the same time, NASA would be able to end the
       relationship with Horn without paying significant fees and then re-bid a new
       contract for an audit limited to fixed price contracts. If challenged by Horn,
       NASA could take the position that the contract was limited to fixed price only
       (as it did until the Court ruled otherwise) and it could claim Horn was
       incompetent because it submitted very few claims that were approved by
       NASA. This might seem like a plot from a John Grisham novel, but it is
       exactly what these very high ranking NASA officials – Terry Bowie, Charles
       McIntosh, and Bruce Ward – did.

                                             62
(internal citations omitted). Defendant responds that “NASA did not act in bad faith,” and
“Horn’s evidence of bad faith falls far short” of the burden to prove bad faith. Defendant
further claims that:

       In a context where Horn bears the burden of proving bad faith with well-nigh
       irrefragable proof, a close examination of the trial record reveals that Horn’s
       “bad faith” case actually is nothing more than smoke and mirrors, resting
       upon various Horn witnesses’ perception of NASA’s acts, coupled with
       attorney argument concerning the manner in which a selection of
       completely innocuous documents should be interpreted

(emphasis in original).

        Bad faith is a very high bar to overcome. In 2002, the Federal Circuit stated that
“for almost 50 years this court and its predecessor have repeated that we are ‘loath to
find to the contrary [of good faith] and it takes, and should take, well-nigh irrefragable
proof to induce us to do so.’” Am-Pro Protective Agency, Inc. v. United States, 281
F.3d 1234, 1239 (Fed. Cir. 2002) (quoting Schaefer v. United States, 224 Ct. Cl. 541,
633 F.2d 945, 948-49 (1980)) (alteration in original). In 2013, the Federal Circuit
reiterated that a plaintiff must overcome the well-established presumption that
government officials act in good faith. See Croman Corp. v. United States, 724 F.3d 1357,
1364 (Fed. Cir. 2013) (“The presumption that government officials act in good faith is
enshrined in our jurisprudence.”); see also Galen Med. Assocs., Inc. v. United States, 369
F.3d at 1337. The Federal Circuit explained that:

       Government officials are presumed to “act ‘conscientiously in the discharge
       of their duties.’” Kalvar Corp., Inc. v. United States, 543 F.2d 1298, 1301
       (Ct. Cl. 1976) (quoting Librach v. United States, 147 Ct. Cl. 605, 612
       (1959)). Courts have always been “loath to find to the contrary,” and to
       induce a court to abandon the presumption of good faith dealing, “requires
       ‘well-nigh irrefragable proof.’” Id. at 1301-02 (quoting Knotts v. United
       States, 128 Ct. Cl. 489, 492, 121 F. Supp. 630 (1954)). Thus, [a protestor]
       must offer clear and convincing evidence that [the government] did not act
       in good faith in order to prevail on this issue. Am-Pro Protective Agency,
       281 F.3d at 1239-40.

Croman Corp. v. United States, 724 F.3d at 1364; see also Savantage Fin. Servs. v.
United States, 595 F.3d 1282, 1288 (Fed. Cir. 2010); Galen Med. Assocs., Inc. v. United
States, 369 F.3d 1324, 1330 (Fed. Cir.), reh’g denied (Fed. Cir. 2004) (“[W]hen a bidder
alleges bad faith, ‘in order to overcome the presumption of good faith [on behalf of the
government], the proof must be almost irrefragable.’” (quoting Info. Tech. & Applications
Corp. v. United States, 316 F.3d 1312, 1323 n.2 (Fed. Cir.), reh’g and reh’g en banc denied
(Fed. Cir. 2003)) (alteration in original); CACI, Inc.-Federal v. United States, 719 F.2d
1567, 1582 (Fed. Cir. 1983) (determining that suspicion and innuendo, and the
possibility and appearance of impropriety, without “hard facts” inferring actual misconduct,
provide an inadequate basis for withholding award of the contract); Torncello v. United
                                             63
States, 231 Ct. Cl. 20, 45, 681 F.2d 756, 770 (1982) (stating “the government . . . is
assumed always to act in good faith, subject only to an extremely difficult showing by the
plaintiff to the contrary.”) (citation omitted); Kalvar Corp. v. United States, 211 Ct. Cl. 192,
198-99, 543 F.2d 1301-1302 (1976), cert. denied, 434 U.S. 830 (1977); Librach v. United
States, 147 Ct. Cl. 605, 612 (1959) (stating that “clear evidence to the contrary” is
necessary to overcome the presumption in favor of the government); Square One
Armoring Serv. Inc. v. United States, 123 Fed. Cl. 309, 329 (2015) (holding that a plaintiff
alleging that the government has acted in bad faith must offer well-nigh irrefragable proof
in support of its claim); Austin v. United States, 118 Fed. Cl. 776, 790 (2014) (“To
overcome this presumption, the plaintiffs must produce ‘well-nigh irrefragable proof’ of
bad faith on the part of the government.”); Kogan v. United States, 112 Fed. Cl. at 266.

       In Am-Pro Protective Agency, Inc. v. United States, the Federal Circuit considered
the extent of proof required to demonstrate that the government acted in bad faith and
modernized the language of the “well-nigh irrefragable proof” standard, consistent with
its “well-established precedent that a high burden must be carried to overcome” the
presumption of good faith. Am-Pro Protective Agency, Inc. v. United States, 281 F.3d at
1239. The court determined that the “clear and convincing” standard of proof “most
appropriately describes the burden of proof applicable to the presumption of the
government’s good faith.” Id. “Based on this well-established precedent, it logically follows
that showing a government official acted in bad faith is intended to be very difficult, and that
something stronger than a ‘preponderance of evidence’ is necessary to overcome the
presumption that he acted in good faith, i.e., properly.” Id. at 1240; see also Galen Med.
Assocs., Inc. v. United States, 369 F.3d at 1330 (“‘Almost irrefragable proof’ amounts
to ‘clear and convincing evidence.’” (quoting Am-Pro Protective Agency, Inc. v. United
States, 281 F.3d at 1239-40)).

        In Am-Pro Protective Agency, Inc. v. United States, the Federal Circuit considered
the extent of proof required to demonstrate that the government acted in bad faith and
modernized the language of the “well-nigh irrefragable proof” standard, consistent with its
“well-established precedent that a high burden must be carried to overcome” the
presumption of good faith. Am-Pro Protective Agency, Inc. v. United States, 281 F.3d at
1239. The court determined that the “clear and convincing” standard of proof “most
appropriately describes the burden of proof applicable to the presumption of the
government’s good faith.” Id. “Based on this well-established precedent, it logically follows
that showing a government official acted in bad faith is intended to be very difficult, and that
something stronger than a ‘preponderance of evidence’ is necessary to overcome the
presumption that he acted in good faith, i.e., properly.” Id. at 1240; see also Galen Med.
Assocs., Inc. v. United States, 369 F.3d at 1330 (“‘Almost irrefragable proof’ amounts to
‘clear and convincing evidence.’” (quoting Am-Pro Protective Agency, Inc. v. United States,
281 F.3d at 1239-40)). The Federal Circuit in Am-Pro Protective Agency described the “clear
and convincing” standard of proof, as follows:
       A requirement of proof by clear and convincing evidence imposes a heavier
       burden upon a litigant than that imposed by requiring proof by preponderant
       evidence but a somewhat lighter burden than that imposed by requiring
       proof beyond a reasonable doubt. “Clear and convincing” evidence has

                                               64
       been described as evidence which produces in the mind of the trier of
       fact an abiding conviction that the truth of a factual contention is “highly
       probable.”

Am-Pro Protective Agency, Inc. v. United States, 281 F.3d at 1240 (quoting Price
v. Symsek, 988 F.2d 1187, 1191 (Fed. Cir. 1993)). The Federal Circuit also described the
type of proof necessary to establish that a government official acted in bad faith by “clear
and convincing” evidence, or “well-nigh irrefragable proof,” as it was previously termed:
       In the cases where the court has considered allegations of bad faith,
       the necessary “irrefragable proof” has been equated with evidence of
       some specific intent to injure the plaintiff. Thus, in Gadsden v. United
       States, [111 Ct. Cl. 487, 489-90 (1948)] the court compared bad faith to
       actions which are “motivated alone by malice.” In Knotts, [v. United States,
       128 Ct. Cl. 489, 492 (1954)], the court found bad faith in a civilian pay suit
       only in view of a proven “conspiracy . . . to get rid of plaintiff.” Similarly, the
       court in Struck Constr. Co. v. United States, [96 Ct. Cl. 186, 222 (1942)]
       found bad faith when confronted by a course of Governmental conduct
       which was “designedly oppressive.” But in Librach, [v. United States, 147
       Ct. Cl. 605 (1959)], the court found no bad faith because the officials
       involved were not “actuated by animus toward the plaintiff.”

Am-Pro Protective Agency, Inc. v. United States, 281 F.3d at 1240 (quoting Kalvar Corp.
v. United States, 211 Ct. Cl. at 192, 543 F.2d at 1302) (citations omitted); see also
Galen Medical Assocs., Inc. v. United States, 369 F.3d at 1330 (“‘In the cases where the
court has considered allegations of bad faith, the necessary “irrefragable proof” has been
equated with evidence of some specific intent to injure the plaintiff.’” (quoting Torncello v.
United States, 231 Ct. Cl. at 45, 681 F.2d at 770)).

        Although the court has found breach on the part of the defendant, the court does
not find sufficient support for a finding of bad faith on the part of NASA. As defendant
conceded above, “the trial record certainly reflects enormous intra-agency confusion over
the scope of Horn’s contract and over the path forward to deal with the administrative
error of having attached the wrong scope of work,” however, that alone does not rise to
the level of bad faith. Plaintiff’s contention that the McIntosh email demonstrates “the bad
faith exhibited by NASA in sending this e-mail and in the events surrounding this e-mail,
and the fatal blow this e-mail had on what had already become an impossible audit for
Horn” is unsupported in the record. The defendant notes in response that “[t]he email in
question appears to be nothing more than an additional example of the agency’s
personnel issuing confusing directions and triggering wholly uncoordinated results.
Furthermore, the email was not secret. Although the actual text of the September 1, email
was not shared with Horn (nor was there any reason or obligation to do so), there is no
question that its substance, as interpreted by the centers who received it, was openly
disclosed by those centers with the Horn auditors.” The McIntosh email does not indicate
bad faith. The McIntosh email, and the conduct of the NASA personnel, discussed
extensively above, while inappropriate and improper, does not demonstrate a specific


                                               65
intent to injure Horn & Associates. See Caldwell & Santmyer, Inc. v. Glickman, 55 F.3d
1578, 1581.

        Moreover, as indicated by defendant, even a breach of the implied duty of good
faith and fair dealing “does not necessarily mean that the party has engaged in any bad
faith conduct in connection with the performance of contractual duties.” As indicated by a
Judge of the United States Court of Federal Claims, “proof of ‘bad faith’ is not required to
show a breach of the implied duty of good faith and fair dealing.” Kogan v. United States,
112 Fed. Cl. at 265 (quoting TigerSwan, Inc. v. United States, 110 Fed. Cl. 336, 346
(2013)). Furthermore, the court does believe that plaintiff’s statement that the government
“did not call a witness from the agency at all to testify in defense of the claims of breach
of contract, including allegations of bad faith and lying to Congress,” demonstrates that
the government was, in fact, operating in bad faith. The allegations of bad faith raised by
plaintiff do not meet the high standards required to prove bad faith.

       Defendant’s Breach Allegations

        Defendant, in addition to defending the government’s conduct in performance of
the contract, also alleges that “Horn breached its contract with NASA,” arguing that “[t]he
overwhelming evidence at trial proved that Horn was – for reasons not traceable to any
wrongdoing on the Government’s part – unequipped, unqualified, and incompetent to
perform the most basic contractual service that NASA required, i.e., the work of identifying
lost funds due to overpayments.” Defendant continues, alleging that: “All of the Horn
auditors lacked the requisite basic knowledge of government contracting that would allow
them to accurately and properly evaluate the transactions they were auditing, and, during
the life of the recovery audit, they flooded NASA’s payment centers with piles of
recommended debts that were inherently worthless.” (emphasis in original; internal
citation omitted). Defendant also claims that plaintiff was a “poor performer” under the
contract. Plaintiff responds that “[s]etting aside NASA’s trumped up and unsupported
rhetoric about Horn’s incompetence, the testimony at trial showed that Horn and its
auditors were competent individuals who were ready, willing, and able to perform the
recovery audit in the non-breach world.”66 Horn & Associates also points out its extensive
recovery audit experience of its employees and subcontractors in the private sector,
although indicating that, regarding the lack of experience for federal audits, “[w]hile Horn
did not have significant experience performing recovery audits for federal government
clients, no recovery auditors had such experience at the time because recovery auditing
was not used by the federal government until around the time of the NASA audit.” The
court notes that Melvin DenWiddie, as the Contracting Officer Technical Representative,
wrote a letter to Horn & Associates on June 30, 2006, indicating:

       Your work on this project has been very impressive. Because our payment
       files were in several locations on multisystems, some in a manual format, I
       wondered how you would overcome that challenge and conduct an effective
       Agency-wide recovery audit of our payments.
66The court notes the defendant, at trial and in its post-trial briefing, was far more focused
on what it perceived as the plaintiff’s faults, rather than its own conduct under the contract.
                                              66
       It soon became apparent that your technical capability was centered on your
       highly-experienced staff. The extensive financial management and recovery
       auditing experience allowed each challenge to be broken into small
       components that were easier to resolve. The customizable audit
       methodology was beneficial in addressing specific unique needs of each
       NASA Center.

On direct examination at trial, Mr. DenWiddie explained,

       I wrote this letter because as I’ve testified before during this testimony, I
       thought that Horn was doing an outstanding job. I thought that they were
       working under very adverse conditions, namely the accounting systems that
       they had to audit, the people who they had to work with who were opposed
       to them doing their work, and the fact that they had somehow managed to
       do an outstanding job, in my view, I thought that somebody, somebody
       needed to say thank you. And I decided that I would be the one and I did.

       Defendant also argues that “there was no testimony or evidence at trial that Horn
as a company ever attempted to recruit from the pool of experienced auditors that it
supposedly had at its fingertips, let alone that any such efforts were rebuffed due to
concerns about any aspect of the audit at Goddard or NASA,” and notes that “[t]o that
end, Horn solicited auditors for Goddard through an advertisement on Craigslist, rather
than from any pre-established pool.” Regarding his position with Horn & Associates, Mr.
Lizana testified at trial that he “first heard about the position through Craigslist.” Mr. Lizana
described his philosophy of recovery auditing as follows: “I think recovering auditing, it's
not a quantitative assessment of your skills, meaning it's not having done it for 30 years,
in my opinion, whether you have a CPA and so forth. I think recovering auditing is about
the type of skills that you have.” Regarding performance at Johnson, although the
Johnson recovery audit was the first recovery audit for Mr. Colby, Mr. Hott testified that
he had 30 years of experience as a certified public accountant. At Kennedy, Mr. Young
had not performed a federal government agency audit before the Kennedy recovery audit,
but had been performing audits for 16 years and testified that he had years of experience
as an auditor and had performed audits on companies like Albertson’s and Winn-Dixie,
both of which had billions of dollars of sales per year. At Marshall, Mr. Edgerton testified
that he had not performed a federal audit before, but testified that he had been a certified
public accountant since 1979 and had performed numerous recovery audits in the private
sector.

        In addition, the government argues that “Horn breached the parties’ contract by
failing to provide the resources necessary to complete the audit at the vast majority of
NASA’s payment centers.” Defendant continues:

       To that end, the parties’ contract required Horn to “provide all resources
       necessary . . . to perform the work specified in the [scope of work].” In
       combination, Horn’s eight month-long, gross understaffing of the Goddard

                                               67
       audit, its abandonment of the work at Marshall, and its failure to provide a
       meaningful presence (or, in the case of Stennis, any presence at all) at the
       remaining payment centers that it did not consider worth its financial
       constitutes a partial repudiation of its agreement, as well as a material
       breach.

(internal citations omitted). As explained above, the reason that the centers were not fully
staffed was, in plaintiff’s view, that there was not enough work to employ more people,
especially given NASA’s recalcitrance to provide files and process claims and that
plaintiff’s employees and subcontractors could have accomplished the work of the
contract had NASA cooperated with plaintiff and not impeded plaintiff’s progress. As
indicated above, at Marshall, Mr. Edgerton testified at trial that he began the recovery
audit in June 2005 with Mr. Crochet and Mr. Mescher, but after a week, Mr. Crochet did
not return because “[t]here was never enough work for three people,” and Mr. Masker
worked for two or three weeks a month for the rest of 2005, but did not return in 2006
because “[w]e didn’t have enough complete files to audit.” Mr. Edgerton testified he would
have returned to Marshall, but that there were not enough completed files to review. Mr.
Hott, believed that given the lack of direction he received at Johnson and without claims
being approved and processed, there was not a need for additional personnel. When
asked on cross-examination why he did not hire more people to work on the audit with
him, Mr. Hott testified that “[i]t didn’t make a lot of sense to spend a tremendous amount
more money to bring in additional resources. We were already getting screwed to the hilt.”
Although Horn & Associates eventually replaced Ms. Baumbach at Goddard with three
auditors, Ms. Baumbach noted that “it was so frustrating to not be able to get claims that
were agreed to processed. It seemed pretty dismal that I would be making any money.
When I started I had high hopes that there would be a nice audit here and that I'd have a
decent string of income from it, but it just wasn't panning out because claims were not
being processed.” Finally, at Kennedy, Mr. Young testified that:

       Q. If you had received the normal and expected level of cooperation at
       Kennedy, would you have been able to bring in other resources?

       A. Oh, yeah.

       Q. And how did you have those at your disposal?

       A. Well, I had some resources that I could work on the audit for a little bit,
       and they stopped when they realized none of the claims were getting
       approved. They would have kept working. I also had other people that I
       could bring in on top of that. So I had people that I used for other audits that
       I could have easily brought in.

      Regarding the smaller centers, defendant argues that “[i]t is apparent that Horn
lacked the resources to staff NASA’s smaller centers appropriately over time.” Defendant
also emphases that “Horn could not staff anyone in those [Ames, Dryden, Glenn, and
Langley] locations long term.” Plaintiff responds that “Horn made a conscious decision to

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approach the audit by tackling the larger Centers first.” Indeed, at trial, Mr. Farrer was
asked: “Was it your intention to fully staff and conduct audits at the smaller centers
simultaneously with the larger centers?” and Mr. Farrer responded: “No,” and elaborated
that

       our intent when we went to Ames and Dryden was to simply take the
       routines that we had developed electronically, and see if we could get some
       easy claims going in both of those centers while we had the big centers
       running with full staffing, generating claims and seeing what we could learn
       from the bigger centers that we could take back to complete the audits at
       the smaller centers.

Mr. Farrar also indicated:

       When we did our initial look at the centers and we also discussed them in
       our meeting with Melvin [DenWiddie] the first of February, we were trying to
       identify which centers were bigger than others, where the biggest
       opportunity might have been. So we identified, with Melvin, basically in that
       meeting the four centers that were the largest and had the biggest
       opportunity would be Goddard, Kennedy, Johnson and Marshall.

Mr. Edgerton, who conducted plaintiff’s audit at Marshall explained at trial that he also
had intended to perform the audit at Stennis, where plaintiff ultimately did not submit any
claims. Mr. Edgerton testified that did not go to Stennis because:

       We were working at Marshall. We were trying, that was one of the big
       centers that had a lot of accounts payable. It had a lot of records. If we
       weren’t getting the records from Marshall why would, you know, why take
       the time and money to go down to Stennis and have the same problem and
       just, you know, create another problem?

       The court finds that the plaintiff’s approach to the audit, to specifically focus on the
largest centers initially was reasonable. The court, as indicated above, believes that
NASA’s conduct made it difficult for plaintiff to perform the audit at the largest centers.
The failure to timely review the claims and work with the plaintiff’s auditors at the largest
centers had the trickle-down effect of preventing plaintiff from effectively performing the
recovery audit on the smaller centers or investing the requisite time and resources given
the government’s conduct at the largest centers.

         Defendant also argues that the failure of the NASA audit stemmed, not from the
mistakes of NASA, but from plaintiff’s mistaken interpretation of the types of claims the
auditors could recover. As was evident at trial, and made more plain in the post-trial
briefing, the parties have a fundamental disagreement about what types of claims were
recoverable and which types of claims could not be recovered under the contract. Both
at trial and in the briefings, the parties spent considerable time analyzing specific claims



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and trying to justify, or undermine, the reasons for submitting the claims, and why, or why
not, NASA denied the claims.

       The defendant does not claim that any failures on plaintiff’s part under the contract
would preclude the court’s finding that defendant breached the contract. Defendant
specifically states:

       The Government does not, however, take the position that Horn’s breaches
       excused NASA from any of the agency’s own obligations under the contract.
       Rather, as we will discuss in greater detail in Part XIV of this brief, Horn’s
       performance failures establish that Horn’s expectation damages model is
       speculative and does not prove Horn’s damages with reasonable certainty,
       reflecting incomplete or flawed analysis by Horn’s expert, Mary Karen Wills.

Plaintiff, naturally, agrees, noting that, “[b]oth parties agree that the experience and
competence of Horn is irrelevant when determining whether or not the Government
breached the Contract and that no level of inexperience or incompetence on the part of
Horn would excuse the Government’s breach.” As the parties agree, none of defendant’s
arguments would preclude the court from finding that defendant committed a breach, the
court finds a determination of plaintiff’s alleged failures, if any, as relevant only to a
damages calculation.

                                      CONCLUSION

      For the reasons discussed above, the court finds that defendant breached the
contract with Horn & Associates.


       IT IS SO ORDERED.

                                                           s/Marian Blank Horn
                                                           MARIAN BLANK HORN
                                                                    Judge




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