        In the United States Court of Federal Claims
                              Nos. 13-55C, 13-97C (Consolidated)

                                      (Filed: August 18, 2015)

**************************************** *
                                         *
AGILITY DEFENSE & GOVERNMENT             *
SERVICES, INC.,                          *                    Government Contract Claim for
                                         *                    Disposal of Surplus Property in
                    Plaintiff,           *                    Middle East; Requirements Contract;
                                         *                    Firm-Fixed-Price; Reasonableness of
v.                                       *                    Historical Data; Constructive Change
                                         *                    Claim; Assumption of Risk.
THE UNITED STATES,                       *
                                         *
                    Defendant.           *
                                         *
*****************************************

W. Brad English, with whom were J. Andrew Watson III, Jon D. Levin, and Emily D.
Chancey, Maynard Cooper & Gale, P.C., Huntsville, Alabama, for Plaintiff.

Michael D. Austin, with whom were Veronica N. Onyema, Trial Attorney, Joyce R.
Branda, Acting Assistant Attorney General, Robert E. Kirschman, Jr., Director, and
Kenneth M. Dintzer, Deputy Director, Commercial Litigation Branch, Civil Division, U.S.
Department of Justice, Washington, D.C., James Hewitt, Defense Logistics Agency, Of
Counsel, for Defendant.

                                     OPINION AND ORDER

WHEELER, Judge.

       This case involves a claim for increased costs arising from a firm-fixed-price
government contract between Agility Defense & Government Services, Inc., Huntsville,
Alabama (“Agility”)1 and the Defense Reutilization Management Services, an arm of the
Defense Logistics Agency. The contract called for Agility to dispose of surplus property
received from the military services as troops were departing from areas of operation in Iraq,
Afghanistan, and Kuwait. Agility seeks approximately $6,900,000 in labor costs it
1
   The party named in the contract is Taos Industries, Inc., a subsidiary of Agility. For simplicity, all
references to Agility in this opinion shall include Taos Industries.
incurred to process property in excess of anticipated quantities. The case is governed by
the Contract Disputes Act, 41 U.S.C. § 7101 et seq.,

        Agility submitted two certified claims to the contracting officer, the first on January
31, 2012 for $4,359,071.79 covering the period April 1, 2008 through March 26, 2009, and
the second on February 6, 2012 for $1,602,148.67 covering the period March 27, 2009
through June 30, 2010.2 The Government terminated the contract for convenience on June
30, 2010, after approximately 27 months of Agility’s performance. In addressing Agility’s
certified claims, the contracting officer issued two final decisions on June 14, 2012, finding
that Agility was entitled to $236,363.93 on the first claim, but zero on the second claim.
Agility timely appealed these final decisions to this Court on January 23, 2013 and
February 5, 2013 respectively, and they were docketed as case numbers 13-55C and 13-
97C. By order dated April 2, 2013, the Court consolidated these two actions for all
purposes.

       The case involves an unusually high-risk contract where the contractor, Agility, was
responsible for disposing of all property received at designated locations regardless of
quantity, and yet the compensation to the contractor was on a firm-fixed-price basis. If the
quantities were significantly higher than expected, as they were, the chances of exceeding
the firm-fixed-price were great. The Court must determine which party, Agility or the
Government, assumed the risk that the costs of performance would be higher than
anticipated.

       This contract also was a first of its kind, as previously the Defense Reutilization
Management Services performed surplus property disposal on its own. The Court must
consider the reasonableness of the historical quantities provided by the Government, and
Agility’s own estimates of costs for its contract proposal. Mitigating the contractor’s risk
somewhat was a provision allowing Agility to keep the revenue it received from the sale
of scrap material under the contract. Thus, if contract quantities were higher than expected,
theoretically the contractor’s revenue from the sale of scrap also would be higher. In this
way, the contractor would receive scrap revenue offsetting its contract performance costs.

      The Government drafted a clause, H.19 “DRMO Workload Changes,” which was
aimed at adjusting the contract price if quantities were substantially higher or lower than
expected. This clause had never been used before, and as will be seen, its provisions were
so complex and uncertain that it offered essentially no protection at all to the contractor.
Nevertheless, clause H.19 received considerable attention and dialogue during
performance, and therefore is relevant in understanding the actions of the parties.


2
   Agility amended its claim amounts after it filed suit, increasing the claims to $4,932,118.89 and
$1,974,220.31 respectively. See December 19, 2013 Motion for Leave to Amend (Dkt. No. 13), granted
by the Court on December 30, 2013.

                                                 2
       The Court conducted a three-day trial in Huntsville, Alabama during January 27-29,
2015. The six witnesses at trial were: Doug Baker, Agility’s Marketing Manager and
Vice-President of Business Development; Karen Chillcott, Agility’s Vice-President of
Contracts and Procurement; Roy Mohr, Agility’s Program Manager; Hobie Frady,
Agility’s Chief Financial Officer and Proposal Manager; James Washington, a
Government Contracting Officer; and Marlowe Burns, a Contracting Officer’s
Representative. The parties filed proposed post-trial findings of fact and conclusions of
law on April 24, 2015, and post-trial response briefs on May 21, 2015. The Court heard
closing arguments in Washington, D.C. on June 25, 2015.

        For the reasons explained below, the Court finds that the Government’s estimated
quantities provided to prospective offerors were based on accurate historical data. Even
though the estimates proved to be low in comparison to the actual quantities encountered
during contract performance, the Government was not negligent in furnishing the historical
data. To be sure, Agility assumed a higher than normal risk in agreeing to a contract of
this type, but that was a choice it voluntarily made. In a firm-fixed-price contract like this
one, the contractor assumes the risk of controlling its costs of performance, unless it can
show that the Government’s estimates of quantities were negligent in some respect. The
evidence does not support Agility’s attempt to shift the risk to the Government, and
therefore Agility’s claims are denied.

                                          Findings of Fact3

        A. Background

       The Defense Logistics Agency (“DLA”) provides supplies to the military services
and supports Department of Defense acquisition activities. Stip. ¶ 1. The Defense
Reutilization Management Services (“DRMS”) is a primary field activity of DLA. Id.
DRMS is responsible for the disposal of all excess personal property generated by the
military services worldwide. Stip. ¶ 2. To accomplish its mission, DRMS has established
Defense Reutilization and Marketing Offices (“DRMOs”) at locations throughout the
world. Id. Each DRMO is a receiving and processing facility for surplus property. Stip.
¶ 3; Mohr, Tr. 156.

       The Government employs a record-keeping system to keep track of surplus property
received, and the type and amount of the property in its inventory.4 Once the property is

3
  The Findings of Fact are based upon the evidentiary record created at trial. Citations to the record in this
opinion are as follows: (1) January 14, 2015 Joint Stipulations of Fact (Stip. ¶ __); (2) Trial testimony
(Witness name, Tr. ___); (3) Joint Exhibits, JX __; (4) Plaintiff’s Exhibits, PX __; and (5) Defendant’s
Exhibits, DX __.
4
  When surplus property is turned in at a DRMO, it is accompanied by a Defense Turn-in Document
(“DTID”). The DTID describes the property before it is placed in a physical inventory. Mohr, Tr. 157.

                                                      3
received, it is designated for reutilization by the military, or it is reduced to scrap. Mohr,
Tr. 160-61. Some items must be demilitarized before they are converted to scrap. Mohr,
Tr. 161. The Government employs two computer programs to facilitate the management
of the surplus property. One program is known as “DAISY” and the other is known as
“MIDAS.” Mohr, Tr. 159; Burns, Tr. 480. The DAISY program is the information
database, and the MIDAS program is the search tool that extracts information from DAISY.
Mohr, Tr. 162-63; Burns, Tr. 480. Information entered into the DAISY program typically
becomes accessible within 18-24 hours. Burns, Tr. 552.

       Prior to 2007, the Government performed in-house all of the work relating to the
receipt and processing of surplus property. Stip. ¶ 4. In December 2006, the Director of
DRMS determined that the agency could not adequately support the surplus property
functions in the future. Washington, Tr. 416-17. Agency management was concerned that
the “planned movement of U.S. Military forces” would create more work than the agency
could handle. JX 20 at 2. At that point, the agency decided to solicit and award an outside
contract for this work. Stip. ¶ 4; Washington, Tr. 416-17.

       B. The Solicitation

       On January 18, 2007, DRMS issued Solicitation No. SP4410-07-R-007 seeking a
contractor to perform all surplus property disposition services at six locations in Southwest
and Central Asia. Stip. ¶ 5; JX 2. The six locations were at Bagram, Afghanistan; Camp
Arifjan, Kuwait; and Camps Anaconda, Victory, Al Asad, and Speicher, Iraq. JX 2. In
Block 7 of the coversheet to the Solicitation, the Government explained:

                      All potential firms should understand that this [Request
               for Proposal] is accompanied by a Statement of Objective
               (attachment 1). The goal is for firms to develop and submit a
               Performance Work Statement that will outline in detail how it
               proposes to fulfill the mission requirements of DLA/DRMS.
               Firms are encouraged to where practical offer efficient
               commercial solutions that will enhance the mission while at the
               same time reduce cost.

Id. at 1. The Solicitation as amended contemplated the award of a single contract for a
base year and four one-year options. Id. at 48; JX 4 at 6.5 The Government planned to
award a combined firm-fixed-price, time and materials, and cost reimbursement contract.
JX 4 at 6. The firm-fixed-price portion covered the first six contract line items, one for
each of the six designated locations, and the time and materials portion covered other
locations within Iraq, Afghanistan, or Kuwait where work might be required. Id. at 7-12.

5
  There were at least nine amendments to the Solicitation, although not all of them are included in the
evidentiary record. See JX 2 – JX 8.

                                                  4
However, the contract is predominantly for a firm-fixed-price, and only the firm-fixed-
price line items are at issue in this case. Section M of the Solicitation as amended stated
that award would be made on a best value basis, considering past performance, price and
the other evaluation factors listed. Id. at 57.

     In Amendment 004 to the Solicitation, the Government added clause H.19,
“DRMO Workload Changes,” that stated:

             During operation of the DRMO locations, the contractor may
             experience significant workload increases or decreases. When
             workload increases at any DRMO location by more than 150%
             above the average workload at the DRMO location for the
             preceding three (3) consecutive months and a determination is
             made jointly by the [Contracting Officer’s Representative] and
             On-site contractor representative that the increase will continue
             for more than two (2) months and contractor staff at the DRMO
             is insufficient to manage the workload increase, the contractor
             may submit a proposal to add labor and materials to handle the
             increase under the Time and Material CLINs. When there is a
             significant workload decrease at a DRMO that has not
             experienced a significant workload increase, and the decrease
             extends to three (3) consecutive months, the Government shall
             have the right to terminate the CLIN that covers the DRMO
             and renegotiate the price paid the contractor to operate the
             DRMO. When the Government notifies the contractor in
             writing of its intent to terminate the CLIN for the purpose of
             renegotiation, the contractor will be required to submit a
             proposal to continue operating the DRMO based upon the
             average workload at the location for the previous six (6)
             months excluding surges or significant workload increases.

JX 4 at 26-27. The Government designated this clause as “DRMS (Feb 2007),” indicating
that clause H.19 was a new clause drafted for this contract. Id.; Washington, Tr. 428.

       The Government finalized the scrap sales provisions in the Solicitation, Amendment
004, stating:

             Proceeds. The contractor is entitled to all sales proceeds
             collected excluding customs duties and fees. The Government
             anticipates such sales will offset some of the costs incurred in
             performing this contract. Offerors must outline in their
             proposals how they will conduct and enhance the sale of scrap
             and other property to achieve the highest revenue and show

                                            5
              how its overall offer for this contract was reduced based on
              these anticipated sales.

JX 4 at 84.

       Amendment 004 to the Solicitation contained a listing of the questions and answers
between the agency and the offerors prior to the Preproposal Conference. JX 4 at 131-58.
Question 122 asked the Government to provide the workload history and projection by
category and location. The Government responded by stating “[w]orkload history and
current inventory levels can be found at http://www.drms.dla.mil/newproc/index and link
to ‘DRMS information for Southwest/Central Asia.’ The Government does not have
workload projections.” JX 21 at 201-02.

       The agency’s website contained historical workload information for each of the six
DRMO locations covered by the contract. Washington, Tr. 421-22, Baker, Tr. 43. The
agency updated the website’s workload data on a regular basis. Washington, Tr. 422. The
workload was measured by the weight of scrap processed and by the number of line items.
Baker, Tr. 43, 47, 48. The website also showed the number of direct and contract staff
members employed by DRMS at each location. Baker, Tr. 48; JX 50 at 3; JX 59 at 4; JX
66 at 4; JX 73 at 3; JX 76 at 4; JX 80 at 4. DRMS used the workload data for August 4,
2007 as the baseline when issuing delivery orders under the contract. Id.

       Amendment 007 to the Solicitation contained a two-page spreadsheet showing the
amount of scrap “turn-ins” to expect over the life of the contract. JX 6 at 11-12. The
spreadsheet showed the number of expected turn-ins by weight for each of the six DRMO
locations for the base year and each option year in the following categories: non-ferrous,
ferrous, tires, rubbish, scrap vehicle, fuels/oils, electronic, and other. Id. Amendment 007
contained questions and answers with offerors added since the issuance of Amendment
004. Question 61 asked in part “[p]ut another way, does this proposition stand for an
expectation that offerors should not be able to retain scrap revenues ‘free and clear’ without
some reduction being reflected in the overall offer for this contract.” Id. at 31. The
Government responded:

              The contractor will be able to keep the proceeds from the sale
              of scrap “free and clear” without any type of reduction in
              payments. The Government requests that offerors describe
              their sales plan as well as reflect that amount of anticipated
              proceeds and how this was considered in their bid. The
              purpose of the requirement is to show how the bid price was
              influenced by anticipated proceeds and to demonstrate the
              Government received consideration for providing the scrap as
              [Government-furnished material] under this contract.


                                              6
Id. at 32.

       Prior to 2007, Agility acquired Taos Industries, Inc., a small firm based in
Huntsville, Alabama. Taos specialized in performing logistics contracts for the U.S.
Government, but it had not previously operated a DRMO. Baker, Tr. 38. Agility hired
three former DLA employees to provide expertise in preparing its proposal in response to
the Solicitation, including the development of a Performance Work Statement (“PWS”).
Baker, Tr. 39.

        Agility was one of three offerors to submit a proposal in response to the Solicitation.
Stip. ¶ 14. The agency’s Source Selection Authority determined that Agility’s proposal
provided the best overall value to the Government. Agility’s final price was
$45,233,914.92. Baker, Tr. 68; JX 16 at 8. The final price reflected a $20,342,608.00
offset for revenues expected from scrap. JX 10 at 17. Agility’s proposal was based upon
a staffing plan of 174 persons. Baker, Tr. 40; JX 10 at 35-38.

       C. The Contract

       DRMS notified Agility on November 29, 2007 that its proposal had been accepted
for award. Stip. ¶ 16. The parties executed Contract No. SP4410-08-D-2000 (“the
Contract”) on the same day. JX 21. The Contract contained six line items, one for each of
the DRMO locations, and each line item had a firm-fixed-price to be paid on a monthly
basis. Id. at 51. The Contract also contained clause H.19, “DRMO Workload Changes.”
However, the version of clause H.19 in the Contract had been modified slightly to address
potential workload decreases:

              During operation of the DRMO locations, the contractor may
              experience significant workload increases or decreases. When
              workload increases at any DRMO location by more than 150%
              above the average workload at the DRMO location for the
              preceding three (3) consecutive months and a determination is
              made jointly by the [Contracting Officer’s Representative] and
              On-site contractor representative that the increase will continue
              for more than two (2) months and contractor staff at the DRMO
              is insufficient to manage the workload increase, the contractor
              may submit a proposal to add labor and materials to handle the
              increase under the Time and Material CLINs. When there is a
              significant workload decrease in excess of 50% or more at a
              DRMO that has not experienced a significant workload
              increase, and the decrease extends to four (4) consecutive
              months, the Government shall have the right to terminate the
              CLIN that covers the DRMO and renegotiate the price paid the
              contractor to operate the DRMO. When the Government

                                              7
              notifies the contractor in writing of its intent to terminate the
              CLIN for the purpose of renegotiation, the contractor will be
              required to submit a proposal to continue operating the DRMO
              based upon the average workload at the location for the
              previous six (6) months excluding surges or significant
              workload increases.

JX 21 at 71-72 (changes shown in italics). This version of clause H.19 was designated as
“DRMS (JUL 2007).”

       The agency ordered work under the Contract by placing Delivery Orders for each
DRMO site. Washington, Tr. 453. The initial Delivery Orders were issued in January and
February 2008. The Delivery Orders incorporated the “workload baseline” for each
DRMO site as reflected by the historical data in the website update for August 4, 2007.
The agency calculated the monthly baseline from the August 4, 2007 website update by
adding together the two figures for “Received Line Items,” each for a one-week period,
and then doubling the total to obtain the monthly line items. The baselines were as follows:

           DRMO                     Monthly Baseline              Annualized Baseline
 Speicher                               1,064                          12,768
 Victory                                1,166                          13,992
 Al Asad                                1,218                          14,616
 Anaconda                               1,662                           19,994
 Arifjan                                9,130                          109,560
 Bagram                                  540                            6,480

JX 50 at 3; JX 59 at 4; JX 66 at 4; JX 73 at 3; JX 76 at 4; JX 80 at 4; PX 114 at 2. The
annualized baselines are derived simply by multiplying the monthly baseline by twelve.

      From the beginning of performance, the actual workload experienced at each of the
six DRMO locations, with the exception of Camp Speicher, Iraq, was much greater than
the workload baselines established in the August 4, 2007 Historical Data. Mohr, Tr. 172;
PX 114 at 1-3, JX 186 at 1-2. The actual annual workloads experienced from March 2008
to March 2009, by number of line items, were as follows:

           DRMO                     Actual Workload            % of Annualized Baseline
 Speicher                                9,561                         74.9%
 Victory                                 21,899                        156.5%
 Al Asad                                 24,392                        166.9%
 Anaconda                                71,653                        358.4%
 Arifjan                                242,401                        221.3%
 Bagram                                  15,364                        237.1%

                                             8
In total, the pre-March 2009 workload for all six locations was 217.2% of the annualized
workload derived from the single-month baseline provided in the Delivery Orders.

       Agility began contract performance at Camp Arifjan, Kuwait, where more than 60%
of the contract work would be performed. At Arifjan, Agility inherited a backlog of
approximately 70,000 line items. Mohr, Tr. 168, 271; Burns, Tr. 556-57. In addition to
the backlog, the volume of property received at Arifjan was greater than anticipated from
the very beginning. Mohr, Tr. 172. Agility did not have the necessary staff in place to
process both the backlog work and the higher than expected level of new work. Baker, Tr.
82-83; Mohr, Tr. 167.

       In May 2008, Agility began performance at the other five DRMO locations. JX
166. Agility encountered backlogs at these locations as well, but not to the same extent as
the Arifjan backlog. Burns, Tr. 559-60. Early in contract performance, Lt. Gen. Dail,
Director of DLA, visited the DRMO locations to assess the status of the work. Stip. ¶ 18;
Mohr, Tr. 176. On June 8, 2008, Lt. Gen. Dail convened a meeting of DRMS personnel
and Agility’s senior staff to address Agility’s performance issues. Stip. ¶ 18; Mohr, Tr.
175-76. Lt. Gen. Dail informed Agility that he would terminate the contract if Agility’s
performance did not improve. Mohr, Tr. 176.

       Concurrently with Lt. Gen. Dail’s visit to the DRMO locations, Contracting Officer
Karen Hammontree sent a June 6, 2008 letter to Agility describing the staffing and other
problems Agility was encountering at the DRMO locations. JX 163. On June 12, 2008,
William Pratt, Agility’s Vice President of Operations, responded that, “our planning wasn’t
perfect and we underestimated resource requirements in some areas. We are making
staffing and automation adjustments where appropriate.” JX 166 at 1.

       Following the meeting with Lt. Gen. Dail, Agility submitted a Corrective Action
Plan to the Government addressing the identified deficiencies in performance, most of
which related to additional staffing needs, and in some cases, additional equipment. Mohr,
Tr. 176-79; JX 167. John Hamilton, President and CEO, stated that he would increase the
staffing at the DRMOs “by more than 50% at no additional cost to the [G]overnment.” JX
167 (email transmission). Agility hired 105 extra personnel, 66 of which were assigned to
Camp Arifjan. Mohr, Tr. 180-81; JX 167. Agility also dispatched fifteen additional
employees from its headquarters to improve Agility’s performance. Mohr, Tr. 182. Agility
understood that the initial number of staff assigned to the Contract was insufficient and that
more employees would be needed. Mohr, Tr. 167, 224.

        Despite Agility’s assertion that there would be no additional cost to the Government,
Agility attempted to obtain the Government’s consent to fund its additional personnel.
Mohr, Tr. 174-75, 186, 314-17. The Government was aware that Agility had added extra
staff and was processing work in excess of the Delivery Order baselines, but insisted that

                                              9
the requirements of clause H.19 had not been met. Mohr, Tr. 314-17. In order to warrant
a funding adjustment, clause H.19 required an increase above 150% of the workload for
the previous three months. Since the workload from the beginning of performance was
high, there never was a time that the increase was above 150%. Agility did not submit a
formal proposal to increase staff under clause H.19. Mohr, Tr. 296.

       In March 2009, after months of dialogue, the parties entered into a bilateral
modification amending clause H.19 so it would apply whenever the workload was more
than 25% above the fiscal year 2008 average for a given DRMO location. JX 35 at 2-3.

        On November 13, 2008, the Government exercised the first option year. JX 31.
During the entire period of contract performance, Agility realized $44,182,364.35 in scrap
sales. DX 7 at 11. In the fall of 2009, Public Warehouse Company (“PWC”), the parent
company of Agility, was accused of fraud against the United States, and PWC and its
affiliates, including Agility, were barred from contracting with the Government. On June
30, 2010, the Government terminated the contract for convenience. Stip. ¶ 23. On June
29, 2011, Agility submitted a claim for termination settlement costs in the amount of
$2,194,509.56. JX 48 at 2. On December 20, 2012, the parties negotiated a settlement of
this claim for $757,972.63. Id.

                                        Discussion

       A. Jurisdiction

       This Court has jurisdiction over claims for an equitable adjustment to a government
contract pursuant to the Tucker Act, 28 U.S.C. § 1491(a)(1). The Court hears contractor
appeals from the final decision of a contracting officer under the Contract Disputes Act, 41
U.S.C. § 7104(b). Agility timely appealed from the contracting officer’s final decisions
within twelve months from receipt. Id.

       B. Standard of Review

        The Court reviews an appeal of a contracting officer’s final decision de novo under
41 U.S.C. § 7104. Case law interpreting the Contract Disputes Act makes clear that “when
suit is brought following a contracting officer’s decision, the findings of fact in that
decision are not binding upon the parties and are not entitled to any deference.” Wilner v.
United States, 24 F.3d 1397, 1401 (Fed. Cir. 1994); see also Assurance Co. v. United
States, 813 F.2d 1202, 1206 (Fed. Cir. 1987). Once an appeal is taken, the contractor “has
the burden of proving the fundamental facts of liability and damages de novo.” Servidone
Constr. Corp. v. United States, 931 F.2d 860, 861 (Fed. Cir. 1991). A contractor is not
entitled to the benefit of any presumption arising from the contracting officer’s decision.
Id. De novo review precludes reliance upon the decision’s presumed correctness. Id.


                                            10
(citation omitted). “Thus, once an action is brought following a contracting officer’s
decision, the parties start in court . . . with a clean slate.” Wilner, at 1402.

       C. Type of Contract

        A threshold inquiry in this case is to determine the type of contract at issue. The
parties agree that this was mainly a firm-fixed-price contract. Regarding the quantity term,
there are three possible types of supply contracts: those for a definite quantity, those for
an indefinite quantity, and those for requirements. Crown Laundry and Dry Cleaners, Inc.
v. United States, 29 Fed. Cl. 506, 515 (1993). The question here is whether the contract is
one for a definite quantity, as the contract itself states, or for requirements, as Agility
claims. The Court is not bound by the name or label included in the contract itself. Id.
Rather, it must “look beyond the first page of the contract to determine what were the legal
rights for which the parties bargained, and only then characterize the contract.” Id. “[I]f a
contract is susceptible of interpretation as . . . one for requirements . . . the court should
uphold it as of the requirements type.” Ralph Constr., Inc. v. United States, 4 Cl. Ct. 727,
732 (1984); A-Transport Northwest Co. v. United States, 27 Fed. Cl. 206, 214 (1993).

       A definite quantity contract contemplates a “fixed, definite quantity of goods or
services be purchased and provided.” Ralph Constr., 4 Cl. Ct. at 731 (citation omitted). A
contract that provides only estimates and not definite quantities is not a definite quantity
contract. See Rice Lake Contracting, Inc. v. United States, 33 Fed. Cl. 144, 152 n.9 (1995).
On the other hand, a requirements contract is formed when the seller has the exclusive right
and obligation to fill all of the buyer’s needs for the goods or services described in the
contract. Modern Sys. Technology Corp. v. United States, 979 F.2d 200, 205 (Fed. Cir.
1992). An essential element of a requirements contract is the promise by the buyer to
purchase the contract subject matter exclusively from the seller. Id.

       Here, the contract is labeled as a definite quantity contract. JX 4 at 31-32 (adding
“Definite Quantity” clause, FAR 52.216-20, to Solicitation). However, the Solicitation
referred only to historical quantities processed at each DRMO site, which were intended
for offerors to use in forming their own estimates for staffing the DRMOs. The
Government agrees that it “used [Agility] exclusively to perform all services required
under the contract” and there was “no limit on the number of orders that may be issued.”
The Government sought a contractor that would perform “all tasks DRMS performs in
support of the Department of Defense mission.” JX. 2 at 50. Thus, the Court concludes
that Agility’s contract with the Government was a requirements contract.

       More important, however, is that the contract was one for a firm-fixed-price.
“Where one agrees to do, for a fixed sum, a thing possible to be performed, he will not be
excused or become entitled to additional compensation, because unforeseen difficulties are
encountered.” Northrop Grumman Corp. v. United States, 47 Fed. Cl. 20, 56 (2000)
(quoting United States v. Spearin, 248 U.S. 132, 136 (1918)). “In firm fixed-price

                                             11
contracts, risks fall on the contractor, and the contractor takes account of this through his
prices.” McNamara Constr. of Manitoba, Ltd. v. United States, 509 F.2d 1166, 1170, 206
Ct. Cl. 1, 8 (1975). The assumption of risk in the contract is more material to the Court’s
analysis than the quantity term.

       D. Effect of Clause H.19

       Agility argues that clause H.19 is not a valid economic price adjustment clause
under the Federal Acquisition Regulation (“FAR”), and that clause H.19 is inapplicable
because it has no discernible effect. Agility established at trial that clause H.19 is complex
and confusing, a conclusion that the Court readily accepts upon a full reading. Agility also
argues that clause H.19 does not foreclose Agility’s other avenues of recovery because of
the Government’s alleged withholding of superior knowledge. In response, the
Government argues that clause H.19 is a valid economic price adjustment clause and is the
exclusive vehicle for Agility to recover costs for increased workloads.

        The Court need not determine the precise meaning of clause H.19 because it was
agreed upon by the parties and Agility never challenged it until after contract performance
had begun. In fact, Agility addressed clause H.19 in its proposal in a section entitled
“Handling Workload Increases (H.19).” JX 21, at 285. Agility acknowledged that “[w]hen
it is clear that a surge is imminent, our DRMO Site Managers will hire additional . . .
personnel, and transfer them to the appropriate location. . . . The impact of workload surges
will be mitigated by our continuous and open communications with generators and other
customers. By working closely with customers to understand their projected requirements,
we can plan for surges and shift resources to meet those requirements.” Id.

        In interpreting proposed contract provisions appearing in a solicitation, the Federal
Circuit has held that “a party who has the opportunity to object to the terms of a government
solicitation containing a patent error and fails to do so prior to the close of the bidding
process waives its ability to raise the same objection subsequently in a bid protest action in
the Court of Federal Claims.” Blue and Gold Fleet, L.P. v. United States, 492 F.3d 1308,
1313 (Fed. Cir 2007). The reasoning of Blue and Gold “applies to all situations in which
the protesting party had the opportunity to challenge a solicitation before award and failed
to do so.” COMINT Sys. Corp. v. United States, 700 F.3d 1377, 1382 (Fed. Cir. 2012).
Agility claims that clause H.19 is so patently confusing and useless that it should be
ignored, yet Agility agreed to clause H.19 and referenced the clause in its proposal.
Although the Court agrees that the clause is difficult to employ and potentially unhelpful,
it nevertheless declines to relieve Agility from the contract terms to which it expressly
agreed.

       Further, as will be explained, the Court does not need to address whether clause
H.19 forecloses Agility’s claims of constructive change or negligent estimate because those
claims otherwise fail on their merits. The Government did not act negligently or culpably

                                             12
in the solicitation process. For the reasons stated below, the Government did not legally
err when it provided historical workload data in the Solicitation instead of creating
projections or estimates.

       E. Agility’s Theories of Recovery

       For its pre-March 2009 claim, Agility advances three theories in support of its
equitable adjustment claim: (1) that a constructive change occurred; (2) that the
information provided to offerors during the competitive acquisition phase constituted a
negligent estimate; and (3) that DRMS breached the warranty of reasonable accuracy
regarding the information provided during the competitive acquisition phase.

              1. Constructive Change

       A constructive change occurs when the contractor performs work exceeding the
contractual requirements, without a formal change order, either because of an informal
government order or through the fault of the government. LB&B Assocs. Inc. v. United
States, 91 Fed. Cl. 142, 153 (2010). The change component of a constructive change
requires proof of work not required by the contract. Delhur Indus., Inc. v. United States,
95 Fed. Cl. 446, 461 (2010). The order/fault element requires proof that the additional
work was caused by the government. Miller Elevator Co. v. United States, 30 Fed. Cl. 662,
678 (1994). When proceeding under the “fault” theory, the contractor must demonstrate a
deficiency in the contract, such as a defective specification or non-disclosure, or some
misconduct by the government in the administration of the contract. Id. This is the only
theory that Agility advances.

       Agility contends that a constructive change occurred based upon DRMS’s non-
disclosure of its superior knowledge about scrap estimates and troop movements. A
constructive change predicated upon the government’s non-disclosure of superior
knowledge is proven by demonstrating the following: (1) “a contractor undertook to
perform without vital knowledge of a fact that affects performance costs or duration;” (2)
“the government was aware the contractor had no knowledge of and had no reason to obtain
such information;” (3) “any contract specification supplied misled the contractor or did not
put it on notice to inquire;” and (4) “the government failed to provide the relevant
information.” Id. at 675. The Government argues that Agility does not actually advance
any evidence of a constructive change, but instead “contests the Government’s method of
informing offerors of the possibility that the workload the contractor was required to handle
could fluctuate.” Gov.’s Reply at 11. According to the Government, Agility is basically
arguing that providing historical workload data was the wrong choice, and the Government
should have provided estimates and projections instead. Weighing these positions, the
Court agrees with the Government.



                                             13
       Amendment 4 to the Solicitation contained questions and answers from prospective
offerors, which included Question 11:

             Technical Exhibit (TE) -1, Para (a) – Offerors are required to
             anticipate variations in property flow during the contract.
             Considering the current increase in war fighters and plans to
             reduce troop strength during the life of the contract, variations
             in flow should be substantial. Therefore, to help alleviate
             pricing contingencies, could the government estimate the
             magnitude of the flow variations?

JX 4, at 135. The Government answered, “[w]e anticipate an increase in property turn-
ins.” Id. The Government also explicitly declined to provide workload projections. JX 21
at 202. It did, however, provide historical workload data.

       Agility offered no evidence at trial that DRMS had knowledge of specific planned
troop movements, or even how this knowledge would have been helpful to Agility in
staffing the DRMOs. Agility presented no evidence that troop movements are predictable,
reliable events, and the Court finds that the opposite is likely true in a warzone
environment. Predicting future troop movements over the coming year is akin to asking
the Government “to be clairvoyant,” which it is not required to do. See Service
Technicians, Inc. v. United States, 37 Fed. Cl. 383, 387 (1997) (quoting Womack v. United
States, 389 F.2d 793, 802, 182 Ct. Cl. 399, 412-13 (1968)). In fact, any scrap estimates
based on forecasted troop movements would likely be inaccurate, and potentially more
misleading than historical workload data.

       Further, Agility’s argument that the Government possessed “estimates” that it
withheld from offerors is not persuasive. The Government’s decision not to provide
estimates does not amount to fault or superior knowledge. The Federal Circuit has held
that a decision to provide reasonably available historical data instead of generating
estimates for a complex contract is reasonable, and the Government need not “search for
or create additional information.” Medart, Inc. v. Austin, 967 F.2d 579, 582 (Fed. Cir.
1992). The Court finds that Agility cannot criticize the Government for providing
historical data instead of estimates. The Government did not constructively change the
contract by failing to provide estimates of future troop movements.

             2. Negligent Estimate

       Although similar in theory, a contractor’s right to disclosure of the Government’s
superior knowledge is not coextensive with a contractor’s right to non-negligent estimates
in requirements contracts. Fed. Group, Inc. v. United States, 67 Fed. Cl. 87, 102 (2005).
When awarding a requirements contract, the FAR requires the Government to provide an
estimate of its contract requirements in the solicitation. According to FAR 16.503(a)(1):

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              For the information of offerors and contractors, the contracting
              officer shall state a realistic estimated total quantity in the
              solicitation and resulting contract. This estimate is not a
              representation to an offeror or contractor that the estimated
              quantity will be required or ordered, or that conditions
              affecting requirements will be stable or normal. The
              contracting officer may obtain the estimate from records of
              previous requirements and consumption, or by other means,
              and should base the estimate on the most current information
              available.

       Government estimates are “not guaranteed, [but] bidders are ordinarily entitled to
rely on estimates as representing honest and informed conclusions when preparing their
bids.” Ravens Group, Inc. v. United States, 112 Fed. Cl. 39, 50 (2013). Where a contractor
can demonstrate by a preponderance of the evidence that estimates were “inadequately or
negligently prepared, not in good faith, or grossly or unreasonably inadequate at the time
the estimate was made[,]” the Government can be held liable for resulting damages.
Medart, Inc., 967 F.2d at 581 (quoting Clearwater Forest Indus., Inc. v. United States, 650
F.2d 233, 239, 227 Ct. Cl. 386, 395 (1981)).

        Agility cites cases where a contractor was granted an equitable adjustment after a
negligent government estimate, primarily relying on Crown Laundry, 29 Fed. Cl. 506, and
Chemical Technology, Inc. v. United States, 645 F.2d 934, 227 Ct. Cl. 120 (1981). In
Crown Laundry, the Government negligently overestimated its needs for laundry and dry
cleaning services in a fixed-price requirements solicitation. In forming its estimates, the
Contracting Officer’s Representative (“COR”) simply asked the Redstone Arsenal’s using
activities to determine the types and quantities of services anticipated for the coming year.
The COR used these estimates instead of providing pickup and delivery tickets from the
previous year, or verifying the estimates by other means. This Court found that the
Government negligently and inaccurately estimated its needs in the solicitation. The Court
noted that the Government “is not free to carelessly guess at its needs.” Crown Laundry,
29 Fed. Cl. at 520 (quoting Medart, 967 F.2d at 581). Importantly, the Court stressed that
if the COR had “felt it unnecessary to search for or to create additional information since
using activities are supposed to know their needs,” it would be “hard to criticize the
government if subsequently, the estimates turned out to be higher than later events
established they should have been.” Id. at 523. However, the COR in Crown Laundry had
reason to believe the estimates were exaggerated, and were likely careless guesses. Thus,
the COR should have verified the estimates with actual pickup and delivery tickets.

       Contrary to Agility’s characterization, the facts in the present case establish the
opposite scenario. Rather than carelessly forming estimates by asking the DRMOs to guess
their upcoming needs, DRMS provided objective, historical workload data from which the

                                             15
offerors could extrapolate future needs. The Government indicated to offerors that the
property turn-ins would increase, and troop drawdowns were publicly anticipated.
Agility’s analogy to Crown Laundry must fail.

       In Chemical Technology, the Navy invited bids for the procurement of mess
attendant services in a food service building at the Naval Construction Battalion Center in
Port Hueneme, California. 227 Ct. Cl. 120. The contract included a price adjustment
clause, but otherwise was for fixed-price requirements. Id. at 122-23. The Chief Warrant
Officer (“CWO”) prepared a monthly meal estimate for the contract by asking the
personnel offices to provide their anticipated manpower in the coming year. Id. at 125.
The CWO also consulted the previous year’s meal count and barracks records to derive a
percentage “utilization factor.” Id. The CWO was guided by Naval Supply Systems
Command Instructions, which required him to base estimates on recent past experience and
adjust them for “known or anticipated changes.” Id. at 126. The Naval Supply System
Instructions also required the CWO to itemize nonrecurring events, or “Special Events.”
Id. The CWO completely omitted Special Events from the solicitation and the contract.

       The CWO was or should have been aware that reserve battalions sometimes
conducted a two-week active duty for training at Port Hueneme, and two such battalions
were on the base and eating at the CWO’s mess hall at the time he was compiling the
estimates. Id. at 127-28. Still, the CWO failed to include reserve battalion training in the
estimates for offerors. Thus, offerors had “no notice whatsoever” that “there remained the
possibility that during the course of the contract several reserve Naval Construction
Battalions might show up to train and be fed at Port Hueneme.” Id. at 129. In fact, four
reserve battalions trained and ate at the base during the contract year. The Court found that
an effectively “zero estimate” of the number of reservists training and eating at the facility
was unreasonable, and may have “actually misled the contractor.” Id. at 142. The Court
granted an equitable adjustment for the cost of feeding the four battalions. Id. at 148.

         At first glance, the facts and reasoning of Chemical Technology appear to be
relevant to the present case. However, the Court finds key distinctions that make those
facts inapposite. First, the solicitation in Chemical Technology provided “no notice
whatsoever” to offerors that a volume variation might occur due to the influx of reservists
to the mess hall. In contrast, the offerors in this case were well aware of volume variations
in the processing of surplus property. Agility offered no evidence that a specific type of
foreseeable event, of which it was completely unaware, caused the workload increases.
Second, the CWO in Chemical Technology ignored a Naval Supply Systems Instruction to
provide offerors with estimates of Special Events. Agility has proffered FAR regulations
and case law outlining the Government’s duty to use information reasonably available to
it, but these broad requirements do not amount to a specific failure to adhere to regulations
and put offerors on notice of special events that occurred in Chemical Technology.
Importantly, the Court in Chemical Technology only awarded an equitable adjustment for
the cost of feeding the four reserve battalions at the base. Here, in contrast, Agility points

                                             16
to no specific cause-and-effect links to isolate its damages; instead, Agility claims the
inadequacy of the workload data constituted general negligence that affected the entire
solicitation and caused the ensuing contract performance issues. Third, Chemical
Technology was decided in 1981 under the then-current leading case of Womack, 182 Ct.
Cl. at 413. The Court now looks to the Federal Circuit’s more recent decision in Medart
as the lead case for negligent estimate claims.

       Under the holding in Medart, the fact that other methods of providing information
to offerors “might have improved the accuracy of the government estimates . . . does not
mean the approach selected was not reasonable.” 967 F.2d at 581-82. When the scope of
a contract is extensive or complex, like the unpredictable demilitarization of vehicles,
weapons and other property in the Middle East, there may be “no central point to obtain
accurate predictions of orders.” Id. at 582. In that case, if the Government “used
information that was reasonably available[,] . . . it need not search for or create additional
information.” Id. The Government here used reasonably available historical data and did
not negligently estimate its needs in the Solicitation.

              3. Breach of Warranty of Reasonable Accuracy

        Alternatively, Agility contends that it is entitled to an equitable adjustment due to
an alleged breach of the warranty of reasonable accuracy. The warranty of reasonable
accuracy is a corollary to the concept of negligent estimate, which applies even in the
absence of a finding of fault. See Troise v. United States, 21 Cl. Ct. 48 (1990). However,
to prevail on this theory, Agility must prove that DRMS made a material representation as
part of the Solicitation, without a caveat or disclaimer, upon which Agility actually and
justifiably relied, to its detriment. See, e.g., Everett Plywood & Door Corp. v. United
States, 419 F.2d 425, 431, 190 Ct. Cl. 80, 92 (1969).

        This theory does not aid Agility. The Government expressly declined to provide
estimates to offerors, and thus cannot be held to have made a material representation upon
which Agility could have justifiably relied to its detriment. Instead, the Government
provided reasonably accurate historical information and asked offerors to form their own
estimates. See Cedar Lumber, Inc. v. United States, 5 Cl. Ct. 539, 546 (1984) (stating that
“if the purchaser warrants in the contract that it relies on its own information for bidding
purposes and not on the information embodied in a government estimate . . . the warranty
of reasonable accuracy in the bidding estimate will be a nullity.”) (citations omitted). The
Court finds no breach of a warranty of reasonable accuracy by the Government.

       F. Equitable Adjustment for Post-March 2009 Work

       Agility’s claims for equitable adjustment for work performed after the March 2009
contract modification depend largely on its theories of recovery for work performed prior
to the modification. As the Court has found that Agility is not entitled to recovery for its

                                             17
pre-March 2009 claims, it must also find that Agility fails on its post-March 2009 claims.
The Government did not negligently estimate the workloads or constructively change the
contract. Therefore, Agility is not entitled to recover damages for initially relying on the
historical workload data and later augmenting its staff for Fiscal Year 2008. Agility
voluntarily entered into the bilateral modification and was compensated according to the
modification’s terms.

                                        Conclusion

        The ultimate goal of an equitable adjustment is to do equity. Ralph L. Jones Co.,
Inc. v. United States, 33 Fed. Cl. 327, 331 (1995). Agility entered into a firm-fixed-price
requirements contract with the Government for the operation of DRMO facilities at bases
in the Middle East. The considerable risk of the contract is apparent on its face. The
Government allowed the contractor to keep all proceeds from scrap sales in order to offset
at least some of the risk. Although Agility faced workloads significantly in excess of what
it anticipated, Agility still received over $44 million in scrap proceeds over the 27 months
of the contract. DX 7 at 11. The fact that the scrap proceeds were “22.9% lower” than
Agility’s projections does not move the equities in Agility’s favor. Id. For the reasons
stated above, the Court DENIES Agility’s claim for an equitable adjustment, and the
complaints are dismissed with prejudice.

       IT IS SO ORDERED.

                                                        s/ Thomas C. Wheeler
                                                        THOMAS C. WHEELER
                                                        Judge




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