NANCY B. FIRESTONE, Judge.
Pending before the court is the United States' ("the government" or "the defendant") motion for summary judgment in this action brought by The Ravens Group, Inc. ("the plaintiff" or "TRG"), for breach of contract in connection with a contract between TRG and the U.S. Army ("Army") to provide housing maintenance services at Fort Myer, Virginia and Fort McNair, Washington, D.C. The contract, which was awarded to TRG on August 16, 2004, is identified as a "combined Fixed Price Indefinite Delivery Indefinite Quantity Contract." TRG filed a six-count complaint under the Contract Disputes Act ("CDA"), 41 U.S.C. § 7103
The undisputed facts show that that estimate of the number of calls was not correct and that TRG began responding to over 90 service calls per month shortly after the contract was awarded.
The government seeks summary judgment as to all of plaintiff's claims. The government argues that the undisputed facts establish that the Army did not provide negligent or misleading estimates to TRG and that the plaintiff's claim for additional payment associated with responding to more than 50 service calls per month must be rejected on the grounds that TRG failed to keep proper labor hour records to support a claim for additional payment under the terms of the contract. The government also argues that it did not breach the contract by requiring TRG to perform work at certain units not listed in the contract on the grounds that TRG in fact never provided services to more than 49 units as required by the contract.
In the alternative, the government seeks summary judgment on the plaintiff's methodology for establishing damages. Assuming TRG can establish that the government breached the contract regarding its estimate in the first instance, the government argues, the plaintiff has nonetheless wrongly assumed it was injured solely for having had to respond to additional calls. Rather, the government argues, where the contract required TRG to maintain records of its service call labor hours, damages may only be established with evidence of excess hours worked.
For the reasons set forth below, the court finds that disputed issues of fact preclude summary judgment with regard to the plaintiff's claim that the government breached the contract by providing negligent or misleading estimates. The court finds that the government is entitled to summary judgment with regard to the plaintiff's claim for breach of contract based on having to provide services at more than 49 units. The court also finds that the government is entitled to summary judgment regarding plaintiff's improper reliance on the jury verdict method in this case.
General and Flag Officers Quarters ("GFOQ") is military housing specifically designated for senior officers of the United States military and their families. The GFOQ Executive Management Office ("EMO") was established to provide program management for the maintenance and repair of GFOQ housing. The GFOQ units at Fort Myer and Fort McNair, which are the subject of this litigation, were each built roughly a century ago. Prior to August 2004 and the establishment of the EMO, they used "in-house" personnel to respond to the majority of the maintenance and repair service calls at GFOQ housing. Spellman Dep. 16, Def.'s Appx. 239. The housing office at the time also used private contractors to provide certain maintenance and repair services in cases where the in-house government personnel were unavailable or unable to perform the required services. TRG, a service disabled, veteran owned small business, was one of the private vendors that serviced GFOQ housing at Fort Myer and Fort McNair prior to the contract award at issue in this litigation. TRG was founded by Lieutenant General (Retired) Joe Ballard, who previously served as Commander of the United States Army Corps of Engineers and had lived in GFOQ housing at Fort McNair.
The EMO was established in response to criticism by senior officers and their families regarding the failings of this patchwork of private vendors and government personnel. Spellman Dep. 16, Def.'s Appx. 239. Specifically, there were complaints related to the "lag time" between placing service call requests and the completion of maintenance. Clark-Evans Dep. 8, Pl.'s Appx. 2729. In addition, despite their age, GFOQ housing units did not receive "much maintenance" prior to the contract award. Spellman Dep. 29, Pl.'s Appx. 3441-42.
In response to the poor reviews and housing conditions at Fort Myer and Fort McNair, Ms. Dee Spellman, who previously served as the GFOQ policy manager at Army headquarters, was hired to start the EMO and to serve as its first director. In her previous position as the GFOQ policy manager at Army Headquarters for housing, Ms. Spellman "worked very closely with all the general and flag officer managers throughout Army-wide." Spellman Dep. 14-15, Pl.'s Appx. 3435-36. Once created, the EMO tasked Ms. Lenora Clark-Evans, the director of contracting at the United States Army Contracting Agency at the Capital District Contracting Center ("CDCC"),
Because this contract was a new initiative, the CDCC sought the assistance of TRG to help draft the performance work statement ("PWS") in the early summer of 2004. The plaintiff's work on the GFOQ PWS was performed under purchase request No. WT3RTQ-4182-0602. Beginning with only a "generic" statement of work, TRG worked with the government to develop a more robust and specific scope for the contract work. Clark-Evans Dep. 12, Pl.'s Appx. 2733. TRG prepared the PWS along with the CDCC and provided the CDCC and the EMO with a "master document." Ballard Dep. 129, Pl.'s Appx. 2880.
Early in developing the PWS, TRG specifically asked Mr. William Campbell, a division chief for contract administration at the CDCC, for access to the military service call records for GFOQ housing at both bases. TRG wanted historical service data to prepare the PWS as well as its own bid proposal. Mr. Campbell requested the information through Ms. Spellman, who in turn relayed the request to the Army's Department of Public Works ("DPW").
According to Mr. Campbell and Ms. Spellman, the DPW had little or no historical data.
Spellman Dep. 28, Pl.'s Appx. 3441. In contrast to Ms. Spellman's views, Gen. Ballard, on behalf of TRG, stated that he believed that the historical record was not only relevant but also essential to preparing the scope of work and preparing a bid. Ballard Dep. 218, Pl.'s Appx. 2928. Without available data, TRG requested access to the GFOQ units to run inspections and to get a better sense of their condition. Gen. Ballard stated that the EMO denied TRG's request to enter the housing units to conduct inspections. Ms. Spellman maintains, however, that the EMO never denied TRG access. Spellman Dep. 41, Pl.'s Appx. 3452.
In recognition of the need for some number to use in preparing the PWS, the EMO and CDCC decided that they "would come up with a number as far as service calls to be performed." Campbell Dep. 25, Pl.'s Appx. 3012. Although Ms. Spellman knew that "the number of service calls was unknown to either [the EMO or TRG]," Spellman Dep. 43, Pl.'s Appx. 3454, she orally informed TRG during pre-contract discussions that the contractor could expect 50 monthly service calls and one to two emergency calls per year.
TRG submitted the PWS to the EMO in July 2004. The plaintiff included in the PWS a line item for "service calls" which provided for a unit price of $15,000 per month for a twelve month period, totaling $180,000. According to plaintiff, this number was computed by assuming 50 service calls per month, at an average of $300 per call.
The contract work was expressly split into two sections—an FFP component and a separate indefinite delivery/indefinite quantity ("IDIQ") component. The IDIQ portion of the contract provided for a range of specific work including change of occupancy maintenance (C.6.2) and spot painting (C.6.2.3). In regard to specific work performed under the IDIQ portion, the contract provided:
GFOQ contract C.7.1. The contract further included a "maximum quantities" clause, which provided:
GFOQ contract C.9.6.
With regard to the FFP component of the contract, TRG was responsible for a preventative maintenance and inspection program (C.5.2), pest control services (C.5), grounds maintenance service (C.5.4), annual inspection of facilities, grounds, and pavements (C.5.5), custodial services (C.5.6), and warehouse operation (C.5.7). The FFP component of the contract also included the contract's service call management provisions.
With regard to service calls, as noted above, TRG agreed to a monthly FFP of $15,000 for all service calls. Under the terms of the contract, the plaintiff was required to "[r]eceive, classify and respond to service calls for military family housing units and related support facilities." GFOQ contract ¶ C.5.1. TRG or the government could classify each service call into one of three categories: "emergency," "urgent," or "routine." The Army reserved the right to reclassify service calls.
"Emergency" calls involved "the correction of conditions that constitute an immediate danger to personnel, threaten property, or require action to restore essential services."
The contract provided that routine and urgent service calls were those calls where the work, as estimated by the government, would cost $2,000 or less.
The contract contained several provisions relating to developing, maintaining and providing records related to the contract work. For instance, the contract provided that the "historical number and scope of service calls and [sic] by month of the year are maintained within the GFOQ office and shall be made available to Contractor for review upon request." GFOQ contract ¶ C.5.1.8. It is not disputed that despite requests from TRG, the GFOQ never provided these data. The contract also required TRG to document all work including time started and completed. C.5.1.7. and C.5.1.9.1.
As noted, the contract provided a mechanism by which TRG could seek adjustments to compensation beyond the monthly $15,000 FFP for service calls. Specifically, the Army and TRG "agreed that the Contractor will be compensated for that portion of actual Routine and Urgent service call workload which exceeds the cumulative figures for the three (3) month period." GFOQ contract ¶ C.5.1.8.1. TRG was to measure charged labor hours in 15 minute increments.
Example. The adjustment and calculations will be done as follows:
Soon after the contract was awarded, TRG began to experience a service call volume greater than what it had anticipated based on the oral estimate of 50 service calls a month provided by the Army. Further, TRG noted that it was being asked to take on the responsibility of maintaining four additional units that were not on the initial list of 49 units provided to it when the contract was awarded.
TRG arranged for a meeting with the CDCC and the EMO on February 9, 2005 to discuss, among other items, the call volume it was experiencing. At the meeting, TRG noted that it was losing money on the service calls and that it remained unaware of the "historical data for GFOQ during the development of the contract." GFOQ contract Renegotiation Meeting Minutes 1, Feb. 9, 2005 ("Feb. 9 Minutes"), Def.'s Appx. 141. It also noted that since the beginning of the contract period, TRG only received one "true" emergency call and that while most of the calls had been routine, TRG responded as if they were urgent.
Following the February 9, 2005 meeting, TRG submitted a revised CLIN pricing proposal to Mr. Campbell proposing a service call price increase for the FFP unit price from $15,000 monthly to $102,675 monthly for a total CLIN price of $1,269,063. TRG Line Item Proposal, Def.'s Appx. 148. TRG noted that the government's inability to provide estimates, coupled with its "best guess" for the number of service calls, caused TRG to provide "a rather severe under estimation in the workload and material requirements for this particular CLIN."
TRG and the Army held a second contract negotiation meeting on April 19, 2005. TRG's notes from the meeting indicate, under a heading titled "CDCC Change Answers," that the Army would "control the service desk so the service calls do not exceed the contract requirements established when estimating $15,000." GFOQ contract Renegotiation Meeting Minutes 1, Apr. 19, 2005 ("Apr. 19 Minutes"), Def.'s Appx. 156 The notes further indicated an agreement to remedy the service call overage: "Although triage of service calls will be done by EMO, there will be fair dealing with The Ravens Group as it concerns types of service calls received and use of outside vendors when the service calls exceed the 50 calls for the month."
On June 15, 2005, the Army sent TRG a letter notifying it that the GFOQ contract was scheduled to expire on August 15, 2005. Notification Letter, Def.'s Appx. 159. Subsequent to the notification letter, on August 12, 2005, TRG and the Army executed a bilateral modification, P00004, extending the contract for six months to February 14, 2006. Contract Modification P0004 1, Def.'s Appx. 98. The contract provided the following release:
On September 29, 2006, TRG submitted a claim and request for a contracting officer's ("CO") final decision, seeking $1,488,616.80 plus interest in connection to a range of issues associated with the GFOQ contract. GFOQ Contracting Officer Claim 1, Def.'s Appx. 170. TRG stated that it answered an average of 93 service calls per month—far more than the 50 it was quoted prior to contract formation. Moreover, the claim stated that TRG was told it could expect to respond to one or two emergency calls per year but actually responded to 10 per month in addition to 13 urgent service calls on a monthly basis.
In its claim, TRG noted that it had previously submitted a request for equitable adjustment on May 10, 2006 but had received no response from the Army. Among its claims, TRG alleged that the Army provided it misleading estimates and breached the implied duty of good faith and fair dealing by failing to provide historical workload data after contract formation. It further alleged that the Army constructively changed the contract by requiring TRG to respond to more service calls, forcing it to purchase more supplies and equipment while doubling its workforce.
By letter dated December 21, 2006, the CO, Mr. Campbell, issued his final decision, agreeing to pay $53,966.77 to TRG for claims relating to garbage disposal, mulching, and snow removal. December 2006 Final Decision Letter, Def.'s Appx. 183. The CDCC agreed to pay an additional $5,718.09 for a separate claim.
At the request of the Army, the Defense Contract Audit Agency ("DCAA") in a report, dated May 9, 2011, audited TRG's claim. The report noted that during its examination of TRG's claims, "the contractor was unable to provide adequate, verifiable supporting documentation for the claimed costs." DCAA Report 2, Def.'s Appx. 189. TRG calculated its claims for additional service calls over the 50 calls per month by assigning a value of $300 per routine call. TRG claimed this amount by dividing the value of the monthly CLIN ($15,000) by the number of calls provided in the oral estimate (50). TRG did not provide the auditors with the number of hours associated with each service call. TRG did not maintain any labor hour records, so it instead used the $300 per call estimate. TRG then marked up the value of the routine calls by 25% and 50% to calculate the cost of each urgent and emergency call over the one to two call threshold at $375 and $450 respectively. Because TRG did not have any evidence of the exact hours spent on each call, the DCAA questioned TRG's claims in their entirety.
With regard to the service call overage, the audit found that TRG did not provide "adequate supporting documentation" for the overage as required by paragraph C.5.1.7 of the contract. DCAA Report 4, Def.'s Appx. 191. The audit further concluded that no adjustments could be made under paragraph C.5.1.8.1 since the contractor did not maintain adequate data necessary to determine overages.
TRG responded to the audit in February 2012 with its own expert, Kenneth Bricker, who in his affidavit concluded that TRG's calculations regarding excess service calls and for increased personnel costs associated with meeting the service call increase were reasonable and supported. Specifically, Mr. Bricker supported TRG's claim that regardless of hours spent on each call, it was reasonable to assume an average cost of $300 a call used to establish the $15,000 price and to multiply that number by the alleged 388 additional calls for an unpaid amount for routine calls at $116,400. Mr. Bricker then applied a modified formula with a 25% per call markup to calculate the amount owed for 126 urgent calls in the amount of $47,250 and a 50% per call markup to calculate the amount for 44 emergency calls in the amount of $19,800. In addition, Mr. Bricker calculated costs of $354,896 for increased personnel relating to TRG having to hire additional employees and subcontractors to respond to the increased service calls.
This motion for summary judgment followed.
In considering a motion for summary judgment, the court's role is to determine whether there exists a genuine issue of material fact for trial, and not "to weigh the evidence and determine the truth of the matter."
Once the movant has shown that no genuine issue of material fact exists, the party opposing summary judgment must demonstrate that such an issue does, in fact, exist.
The primary focus of the government's motion for summary judgment revolves around whether the Army breached the contract by providing TRG with an estimate of 50 calls per month before TRG prepared its bid. It is recognized in this court that while government estimates are not guaranteed, bidders are ordinarily entitled to rely on estimates as representing honest and informed conclusions when preparing their bids.
The three standards tend to overlap and generally involve an inquiry into what efforts the government took in locating and integrating relevant information into the estimate formulation. The good faith standard, for instance, "requires [the government] to seek the most current information available, and either reformulate its estimate when warranted by the information available, or to notify offerors of situations or factors likely to affect the estimate."
Tested by these standards, the court finds that disputed issues of fact preclude summary judgment as to whether the Army provided a negligent or misleading estimate to TRG when it told TRG that it could expect 50 service calls each month. The government argues that its estimates were not negligently prepared or misleading because the undisputed evidence shows that no data were available to make accurate estimates and TRG was aware of their general unavailability. The plaintiff argues that the government's claims that TRG knew that 50 calls per month constituted nothing more than an uninformed guess and that historical service call data or other data did not exist are not "credible." Pl.'s Opp. 27. TRG points first to a provision in the contract that states: "The historical number and scope of service calls and [sic] by month of the year are maintained within the GFOQ office and shall be made available to Contractor for review upon request." GFOQ contract ¶ C.5.1.8. TRG next argues, based on the testimony of Ms. Spellman, that the EMO should have had these data because, as she explained, the EMO closely watched "every penny" spent on GFOQ housing and generally tracks expenditures on associated housing maintenance. Pl.'s Resp. 5 (citing Spellman Dep. 47-48, Pl.'s Appx. 3458-59). Similarly, Gen. Ballard recalls from his time as a resident living in GFOQ at Fort McNair that records were kept for all maintenance calls.
The plaintiff further asserts that even if it were true that the government no longer had historical data for service calls at Fort McNair and Fort Meyer, the Army was still negligent by providing the 50 call estimate without endeavoring to confirm the estimate with alternative sources of information. TRG argues that data from Fort Belvoir and Fort Meade—two other forts in the National Capital Region—were potential sources of relevant information that should have been consulted or at least considered to calculate an estimate. TRG notes that Mr. Campbell testified that he did not attempt to conduct any further investigation to determine whether the 50 call per month estimate provided by Ms. Spellman was accurate even though he knew it was not supported by any data. Finally, TRG asserts that it had no reason to believe that the provided estimate was not rooted in some sort of data and represented nothing more than mere guesswork.
The government argues that these facts do not give rise to a material dispute because, it contends, the plaintiff has not produced any relevant evidence to show that data regarding service calls were reasonably available at any other military installation. The government further argues that TRG helped prepare the PWS and thus "knew" that the Army did not have any data. In such circumstances, the government argues, TRG could not have been misled and assumed the risk of variance in calls by relying on the information. Finally, the government argues that the contract provisions providing for modifications for variances of 5% above the estimated workload demonstrate that TRG could not rely on the 50 call estimate. In essence, the government argues, TRG cannot pursue a claim for breach where the contract provided for an acceptable variance and adjustments beyond that variance.
The court finds that TRG has provided sufficient evidence to defeat the government's motion for summary judgment regarding the oral estimates provided to TRG during the bid process. In particular, the court finds that the plaintiff has presented evidence to show that it had no reason to know that the 50 call number was wholly fabricated.
The court also rejects the government's argument that TRG is barred from recovering any damages based on the contract's variance and equitable adjustment clause. The court finds that the contract's variance and equitable adjustment clause served only to protect the government from unforeseen circumstances at the time of contract formation.
TRG also claims that the government breached the contract by requiring it to perform work on four housing units that were not included on the list provided at the time of contract formation. TRG contends that it "remained responsible for maintenance for the 49 units on the original list as well as [4] additional units" without receiving additional compensation. Pl.'s Resp. 8.
The government argues that there is no evidence to support TRG's contention that TRG performed work on any more than 49 GFOQ units. The government asserts that TRG's own daily status reports establish that TRG performed work on no more than 49 units. The government concedes that the daily status reports include three units that were not identified on the government's original list: MY24AU,
In view of the foregoing undisputed facts, the court agrees with the government that TRG has failed to show that there is a genuine issue of fact as to whether it performed work on more than 49 housing units. To the contrary, as noted above, TRG's own daily housing reports indicate that TRG serviced only 49 units. In such circumstances, the government is entitled to summary judgment on TRG's claim that is entitled to additional compensation for performing services for more than 49 units.
The government also seeks summary judgment barring TRG from using the "jury verdict" method for calculating damages in the event that the plaintiff establishes a breach of contract. The jury verdict method is an approach to approximating damages based on the entire record.
The government's motion requires the court to resolve (1) whether TRG has demonstrated the clear proof of injury necessary to use the jury verdict method and (2) whether there is a more reliable method for computing damages. The government argues that the plaintiff's reliance on the jury verdict approach is fundamentally flawed because it ignores the import of the $15,000 monthly payment guaranteed under the contract and the contract's provisions on overage compensation. The government argues that even if the $15,000 was estimated based on 50 service calls per month, the plaintiff fails to recognize that the number of calls estimated served merely as a proxy for calculating the number of labor hours to be spent on service calls. Therefore, according to the government, the plaintiff can only show an injury if it can demonstrate that it incurred labor costs over and above the $15,000 a month threshold provided for under the contract based upon expended labor hours. Because the plaintiff did not keep records, the government continues, TRG cannot show that it incurred more than $15,000 worth of labor hours in any given month—or on average over any given three-month period—and thus it cannot establish an injury in connection with any breach. The government asserts, moreover, that the court cannot simply rest a finding of "clear proof of injury" by assuming that each and every service call resulted in $300 or more of labor charges. For this same reason, the government argues that the plaintiff's reliance on the jury verdict method is not a reliable approach for calculating damages.
TRG contends, in response, that the alleged misleading estimate and the resulting number of calls beyond that estimate are inherently "clear proof of injury" because TRG was not contractually required to keep labor hour records and that to the extent it was required to keep labor hours, the government waived such requirements through its course of dealing. Pl.'s Resp. 35-36. TRG asserts that without records noting the labor hour spent per call, the jury method presented by its expert, Mr. Bricker, is a reliable basis for both finding and awarding damages.
The court agrees with the government that TRG cannot rely on the jury verdict method to establish damages in this case. It is elemental that in order to recover for breach of contract, a party must allege and establish (1) a valid contact 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.
The court agrees with the government that TRG's response to service calls above the 50 call oral estimate does not alone establish economic injury. TRG improperly assumes that any service call beyond the oral estimate of 50 calls necessarily resulted in an economic injury compensable by an award of damages. Rather, to establish an injury in this case, the plaintiff must show that it incurred labor hours as a result of those calls above the 50 call monthly estimate requiring compensation in excess of the monthly $15,000 FFP payment. This approach corrects the central fallacy of the plaintiff's argument that "routine service calls were priced at $300 each." Pl.'s Reply Suppl. Brief 9. The plaintiff's assumption that the government agreed to a fee of $300 per service call by simply dividing $15,000 by 50 calls is wholly unsupported by the contract.
Specifically, the contract measured overage costs beyond the agreed upon $15,000 FFP primarily as a function of labor hours expended, and not the number of service calls performed.
The court holds that under the terms of this contract, the plaintiff must show that it incurred labor hours above the $15,000 guaranteed each month in order to demonstrate injury.
The court further holds that, assuming TRG can show that the government breached the contract and that the breach resulted in economic injury, it cannot rely on the jury verdict method to calculate damages because there appears to be sufficient information to adequately reconstruct the labor hours TRG spent on service calls. The evidence presented to the court and highlighted by TRG, Pl.'s Resp. 37, consists of daily work sheets recording the number of service calls, the type of service call, and the type of work performed by TRG for each call during the period of the contract. Pl.'s Appx. 10-50. Also before the court are TRG's financial statements and general ledgers for the entire period of contract performance.
For the foregoing reasons, the government's motion for summary judgment is
GFOQ contract ¶ C.5.1.1.
GFOQ contract ¶ C.5.1.2.