INTERIMAGE, INC. v. USA
Filing
70
REPORTED ORDER denying 45 Motion for Summary Judgment. Schedule due by 7/31/2017. Signed by Senior Judge Nancy B. Firestone. (ay) Copy to parties.
In the United States Court of Federal Claims
No. 15-582C & No. 16-1300C
CONSOLIDATED
(Filed: July 18, 2017)
INTERIMAGE, INC.,
Plaintiff,
v.
THE UNITED STATES,
Defendant.
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Motion for Summary Judgment;
RCFC 56; Limitation of Cost;
FAR § 52.232-20; Limitation of
Funds; FAR § 52.232-22; Limitation
of Liability - Incremental Funding;
NAVSUP 5252.232-9400;
Incorporation of Limitation of Funds
into Delivery Orders
Jerry Stouck, Washington, DC, for plaintiff. Ryan Bradel, Washington, DC, of
counsel.
Sheryl L. Floyd, Commercial Litigation Branch, Civil Division, United States
Department of Justice, Washington, DC, with whom were Kenneth M. Dintzer, Deputy
Director, Robert E. Kirschman, Jr., Director, and Chad A. Readler, Acting Assistant
Attorney General.
OPINION DENYING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT
FIRESTONE, Senior Judge
Pending before the court in these consolidated contract cases is plaintiff
InterImage, Inc.’s (“InterImage”) motion for summary judgment. InterImage claims that
it is entitled to a final closeout contract payment of approximately $700,000 based on a
certified claim filed in August 2015. The dispute arises in connection with a cost-plusfixed-fee contract (Contract No. N00140-05-D-0058) “to provide full life cycle software
development services . . . for a new Criminal Incident and Case Management System”
which was awarded by the Naval Criminal Investigative Service (“the Navy”) to
InterImage in 2005. The contract included eleven delivery orders. In January 2013,
InterImage submitted a final invoice for approximately $990,000 and related close-out
documents. Pl.’s Mot. for Summ. J. 3, Ex. 3 (“Pl.’s MSJ”) (ECF No. 45); Def.’s Resp. to
Pl.’s Mot. for Summ. J. 4 (“Def.’s Resp.”) (ECF No. 51). 1 In its final invoice, InterImage
stated that the “funded” total for the contract was $23,155,514.01, including
$21,655,876.37 for costs and $1,499,637.64 for its fee, and that after the audit performed
by the Defense Contract Audit Agency (“DCAA”) to set indirect rates, the “settled” total
was $21,555,051.64, including $20,055,414.00 for total costs and $1,499,637.64 for total
fee. Pl.’s MSJ Ex. 3. InterImage represented in its final invoice that it had been paid
$20,564,478.32, including $19,304,651.49 for costs and $1,259,826.83 for the fixed fee.
Pl.’s MSJ Ex. 3; Pl.’s Reply 8-9. The $990,000 represented the difference between the
amount paid and the amount InterImage claimed it was owed for both costs and fee.
Over the course of the next year, the government paid InterImage approximately
$295,000 of the $990,000 claimed in its final invoice. However, when the government
ran out of funding it stopped paying InterImage. Thereafter, on August 18, 2015
InterImage submitted a certified claim to the contracting officer for $695,684.48, the
amount it claims is remaining to be paid on the final invoice. Def.’s Resp. App. A130
(“Def.’s App.”) (ECF No. 53). On February 3, 2016, the contracting officer issued a final
1
All filings are in Case No. 15-582C unless otherwise stated.
2
decision (“COFD”) finding that InterImage was due $660,023.72 plus $40,123.89 in
interest for a total of $700,147.61. Pl.’s MSJ Ex. 1; Def.’s App. A139.
Relying on the COFD, InterImage attempted to secure payment, but was told that
funding would need to come from other appropriations because the funds to pay
InterImage had been de-obligated. See Joint Prelim. Status Report (ECF No. 31, filed
Apr. 25, 2016) (representing with regard to the approximately $700,000 in dispute, that
“the funding assigned to InterImage’s task orders expired and was de-obligated. In order
for InterImage to be paid under the . . . COFD, the Navy must identify additional sources
of funding, and such funding must be obligated”). Thereafter, the Navy conducted a new
review of InterImage’s claim and in a series of e-mails InterImage learned that upon
review the Navy had determined that InterImage was seeking payment for both costs and
fee above various delivery order ceiling limitations and that the government now believed
that it did not owe InterImage any additional money. Pl.’s MSJ Ex. 14.
InterImage filed the pending action on October 7, 2016. ECF No. 1 in Case No.
16-1300C. InterImage has set forth four Counts in its complaint seeking payment of
$695,684.48 and attorney’s fees. Count I is for breach of contract based on the
government’s failure to pay InterImage the amount of $695,684.48 for the work it
performed and invoiced but is still due and owing under the contract. Count II is for
quantum meruit based on the same facts as alleged in Count I. Count III is a claim to
enforce the contracting officer’s February 3, 2016 decision. Count IV is a claim for
attorney’s fees.
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InterImage filed the pending motion for summary judgment (ECF No. 45) on
Count I of its complaint on November 4, 2016 arguing that as a matter of law InterImage
is entitled to payment for amounts claimed but not paid. InterImage argues that it is
undisputed that the amounts claimed for costs are within the base contract ceiling, as
amended, and that the contract, and not the individual delivery orders, is controlling with
regard to the contract ceiling limitation. InterImage also argues that the government’s
objections to InterImage’s claim for its fee must be rejected on the ground that the
government can only change the fixed fee through an equitable adjustment, which was
not done. InterImage further argues that the amount InterImage has claimed for the fixed
fee is justified based on the total hours of work performed under the contract as a whole.
The government in its response to InterImage’s summary judgment motion has
attached numerous contract related documents and the sworn statements of Ms. Stacey
Ellingsen, the new contracting officer, and Ms. Meredith Caskey, a senior auditor with
the DCAA, to show that disputed issues of fact preclude summary judgment.
Specifically, the government argues that the individual delivery orders and not the base
contract set ceilings for costs and that InterImage is seeking payments above the ceilings
set in the delivery orders in contravention of the limitation of cost and funds clauses in
the Federal Acquisition Regulations (“FAR”) and incorporated into the contract and
delivery orders. With regard to the fixed fee, the government argues that InterImage’s
fixed fee also must be adjusted under the terms of the contract because the delivery
orders provide limitations inclusive of fee and because InterImage did not perform the
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required hours under certain delivery orders and is thus not entitled to the amount of
fixed fee now claimed.
Argument was held on May 5, 2017. Thereafter, the parties filed supplemental
briefs. 2 For the reasons set forth below, InterImage’s motion for summary judgment is
DENIED.
I.
BACKGROUND AND PROCEDURAL HISTORY
The following facts are not in dispute.
2
It became clear after the argument that the COFD was based on incomplete information and
thus was factually incorrect. The record showed that the contracting officer had based her
decision on the DCAA audit and the cumulative allowable cost worksheet the DCAA prepared.
However, the record also shows that the contracting officer did not use the most up to date
information in her final decision. For example, in her two-page decision the contracting officer
stated that the amount paid by the government to InterImage under the contract was
$18,834,743.08 and that the amount approved for payment was $19,494,766.80. The amounts
identified are less than the actual contract amounts or the amounts paid by the government to
InterImage. Pl.’s MSJ Ex. 1; Def.’s App. A139-40. The court asked for supplemental briefing to
better understand the COFD. The briefing confirmed that the contracting officer did not use the
most up to date information and thus could not be relied upon as InterImage indicated in its
initial briefing on the motion for summary judgment. Specifically, in its motion for summary
judgment, InterImage stated that it “is seeking to obtain the relief that Defendant has already
conceded InterImage is entitled to receive in a contracting officer’s final decision issued by
Defendant on February 3, 2016.” Pl.’s MSJ 1. InterImage further stated that the COFD “is
absolutely correct” and “[t]his Court has jurisdiction to agree with the contracting officer that
InterImage’s certified claim is meritorious and to enter judgment in favor of InterImage
notwithstanding Defendant’s apparent and recently-developed attempt to disavow the COFD.”
Id. at 2. InterImage continued, “[t]he Court has jurisdiction to enforce the COFD,” id. at 7, and
“Defendant should be precluded from taking a position contrary to its COFD,” id. at 10.
InterImage urged the court to “enforce the COFD because the COFD is correct,” id. at 12, and
“enforce the COFD issued by Defendant on February 3, 2016,” id. at 14.
For the reasons discussed infra, the court finds that the errors in the COFD do not
preclude the court from ruling on InterImage’s summary judgment motion on the legal question
underlying the dispute between the parties—namely whether the ceiling amounts provided for in
the base contract and its modifications control InterImage’s right to payment or whether the
ceiling amounts provided for in the individual delivery orders as modified are controlling.
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A.
Base Contract Provisions
On September 27, 2005, the Navy awarded InterImage Contract No. N00140-05D-0058, a cost-plus-fixed-fee contract “to provide full life cycle software development
services . . . for a new Criminal Incident and Case Management System.” Pl.’s MSJ 2-3;
Def.’s Resp. 3; Def.’s App. A1, A19. The contract included, among other things, a
schedule of supplies/services and prices/costs and acquisition provisions incorporated by
full text and by reference. Def.’s App. A2, A15, A18, A35. The contract states on the
solicitation/contract form (Item 20) that $1,676,698 was authorized. In section I of the
contract, titled “Contract Clauses,” the Navy incorporated by reference several FAR
provisions, including FAR § 52.232-20, titled “Limitation of Cost.” Def.’s App. A38. 3
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The limitation of cost clause, FAR § 52.232-20, is used “in solicitations and contracts if a fully
funded cost-reimbursement contract is contemplated, whether or not the contract provides for
payment of a fee.” FAR § 32.706-2(a); see also 48 Fed. Reg. 42,102-01-H, 42,561 (Sept. 19,
1983) (directing agencies to insert FAR § 52.232-20 “in solicitations and contracts if a fully
funded cost-reimbursement contract is contemplated . . . whether or not the contract provides for
payment of a fee”); FAR § 32.703-1(a) (“If the contract is fully funded, funds are obligated to
cover the price or target price of a fixed-price contract or the estimated cost and any fee of a
cost-reimbursement contract.”).
As incorporated into the contract, FAR § 52.232-20 provided in relevant part:
. . . The 60-day period may be varied from 30 to 90 days and the 75 percent from
75 to 85 percent. “Task Order” or other appropriate designation may be
substituted for “Schedule” wherever that word appears in the clause.
Limitation of Cost (APR 1984)
(a) The parties estimate that performance of this contract, exclusive of any
fee, will not cost the Government more than . . . the estimated cost specified in the
Schedule . . .
(b) The Contractor shall notify the Contracting Officer in writing
whenever it has reason to believe that—
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The contract also incorporates FAR § 52.232-22, titled “Limitation of Funds.” Def.’s
Resp. 17-18; Def.’s App. A38. 4
Also incorporated by reference is FAR § 52.216-18 regarding Indefinite Delivery
Indefinite Quantity (“IDIQ”) contracts. Def.’s App. A39. The provision states in
relevant part that “[a]ny supplies and services to be furnished under this contract shall be
(1) The costs the contractor expects to incur under this contract in the next
60 days, when added to all costs previously incurred, will exceed 75 percent of
the estimated cost specified in the Schedule; or
(2) The total cost for the performance of this contract, exclusive of any
fee, will be either greater or substantially less than had been previously estimated.
(c) As part of the notification, the Contractor shall provide the Contracting
Officer a revised estimate of the total cost of performing this contract.
(d) Except as required by other provisions of this contract, specifically
citing and stated to be an exception to this clause—
(1) The Government is not obligated to reimburse the Contractor for costs
incurred in excess of . . . the estimated cost specified in the Schedule . . . .
Def.’s Resp. 18 n.4; see also 48 Fed. Reg. 42,102-01-H, 42,561 (Sept. 19, 1983).
4
The limitation of funds clause, FAR § 52.232-22, is used “in solicitations and contracts if an
incrementally funded cost-reimbursement contract is contemplated.” FAR § 32.706-2(b); see
also 48 Fed. Reg. 42,102-01-H, 42,562 (Sept. 19, 1983) (directing agencies to insert FAR §
52.232-22 “in solicitations and contracts if an incrementally funded cost-reimbursement contract
is contemplated”); FAR § 32.703-1(b) (“If the contract is incrementally funded, funds are
obligated to cover the amount allotted and any corresponding increment of fee.”).
As incorporated into the contract, FAR § 52.232-22 provided in relevant part that “[t]he
Contractor shall notify the Contracting Officer in writing whenever it has reason to believe that
the costs it expects to incur under this contract in the next 60 days, when added to all costs
previously incurred, will exceed 75 percent of (1) the total amount so far allotted to the contract
by the Government . . . .” 48 Fed. Reg. 42,102-01-H, 42,562 (Sept. 19, 1983). The introductory
language of FAR § 52.232-22 also provided that “[t]he 60-day period may be varied from 30 to
90 days and the 75 percent from 75 to 85 percent” and that “‘Task Order’ or other appropriate
designation may be substituted for ‘Schedule’ wherever that word appears in the clause.” Id.
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ordered by issuance of delivery orders . . . by the individuals or activities designated in
the Schedule.” FAR § 52.216-18 further provides that “[a]ll delivery orders . . . are
subject to the terms and conditions of this contract” and that “[i]n the event of conflict
between a delivery order . . . and this contract, the contract shall control.”
Under the heading “LEVEL OF EFFORT (COST TYPE CONTRACT) (FISC
DET PHILA) (JUN 1995),” the contract provides:
The level of effort for the performance of this contract during the period
from the start of contract performance to 6 months thereafter is based upon
15,840 estimated manhours of direct labor. If all options are exercised by
the government, the level of effort for the performance of this contract will
be increased by an additional 92,692 estimated manhours of direct labor,
for a total level of effort of 108,532 estimated manhours of direct labor
(hereinafter referred to as the “Estimated Total Hours”).
Def.’s App. A16 (contract page 16 of 43).
Under the heading “LEVEL OF EFFORT – DELIVERY/TASK ORDER
PERFORMANCE (FISC DET PHIL) (Oct 1992),” the contract also provides that:
It is understood and agreed that the number of hours and the total dollar
amount for each labor category specified in any delivery/task order issued
under this contract are estimates only and shall not limit the use of hours or
dollar amounts in any labor category which may be required and provided
for under an individual delivery/task order. Accordingly, in the
performance of any delivery/task order, the contractor shall be allowed to
adjust the quantity of labor hours provided for within labor categories
specified in the order provided that in so performing the contractor shall not
in any event exceed the ceiling price restrictions of any order, including
modifications thereof.
Id. at A17 (contract page 17 of 43).
The contract further states, under the heading “PAYMENT OF FIXED FEE
(INDEFINITE DELIVERY, COST PLUS FIXED FEE) (FISC DET PHILA) (OCT
8
1992)”:
The fixed fee for work performed under this contract is $120,496.15*
provided that approximately 15,840 hours of technical effort are employed
by the contractor in performance of this contract. If substantially fewer
than 15,840 hours of said services are so employed, the fixed fee shall be
equitably reduced to reflect the reduction of work. The Government shall
make monthly payments of the fixed fee at the rate of $ 7.60* per direct
labor hour invoiced by the contractor. All payments shall be in accordance
with the provisions of FAR 52.216-8, “Fixed Fee,” and FAR 52.216-7,
“Allowable Cost and Payment.” The total of all such payments shall not
exceed eighty-five (85%) percent of the fixed fee specified under each
applicable delivery/task order. Any balance of fixed fee due the contractor
shall be paid to the Contractor, and any over-payment of fixed fee shall be
repaid to the Government by the Contractor, or otherwise credited to the
Government at the time of final payment.
Id.
Under the heading “LIMITATION OF LIABILITY - INCREMENTAL
FUNDING (NAVSUP 5252.232-9400) (JAN 1992),” the contract also provides:
This contract is incrementally funded and the amount currently available
for payment hereunder is limited to $ __ * __ inclusive of fee. It is
estimated that these funds will cover the cost of performance through
_____ ** _____. Subject to the provisions of the clause entitled
“Limitation of Funds” (FAR 52.232-22) of the General Provisions of this
contract, no legal liability on the part of the Government for payment in
excess of $ __ * __ shall arise unless additional funds are made available
and are incorporated as a modification to this contract.
NOTE: Individual Delivery Orders may be incrementally funded and will
provide[] the necessary information.
Id. at A30 (contract page 30 of 43).
The contract also provides accounting and appropriation data. It provides an
amount of $167,669.80 and states that “[t]his funding constitutes the contract minimum
9
and will be utilized to fund individual delivery orders until it is exhausted.” Id. at A43
(contract page 43 of 43).
B.
Modifications to the Base Contract
There were several modifications to the contract. Def.’s App. A44-70.
Modification No. P00001, dated December 22, 2005, increased the total contract cost
from $1,676,698.00 to $1,700,240.55, added a line item, and revised the schedule of
supplies/services. Id. at A44-53.
Under the heading “LEVEL OF EFFORT (COST TYPE CONTRACT) (FISC
DET PHILA) (JUN 1995),” Modification No. P00001 to the contract provides:
The level of effort for the performance of this contract during the period
from the start of contract performance to 6 months thereafter is based upon
16,080 estimated manhours of direct labor. If all options are exercised by
the government, the level of effort for the performance of this contract will
be increased by an additional 92,692 estimated manhours of direct labor,
for a total level of effort of 108,772 estimated manhours of direct labor
(hereinafter referred to as the “Estimated Total Hours”).
Id. at A45-46.
Under the heading “PAYMENT OF FIXED FEE (INDEFINITE DELIVERY,
COST PLUS FIXED FEE) (FISC DET PHILA) (OCT 1992),” Modification No. P00001
to the contract also provides:
The fixed fee for work performed under this contract is $122,240.04*
provided that approximately 16,080 hours of technical effort are employed
by the contractor in performance of this contract. If substantially fewer
than 16,080 hours of said services are so employed, the fixed fee shall be
equitably reduced to reflect the reduction of work. The Government shall
make monthly payments of the fixed fee at the rate of $ 7.60* per direct
labor hour invoiced by the contractor. All payments shall be in accordance
with the provisions of FAR 52.216-8, “Fixed Fee,” and FAR 52.216-7,
“Allowable Cost and Payment.” The total of all such payments shall not
10
exceed eighty-five (85%) percent of the fixed fee specified under each
applicable delivery/task order. Any balance of fixed fee due the contractor
shall be paid to the Contractor, and any over-payment of fixed fee shall be
repaid to the Government by the Contractor, or otherwise credited to the
Government at the time of final payment.
Id. at A47.
Modification No. P00002, dated February 27, 2006, states that “[t]he total cost of
this contract was increased by $612,241.56 from $1,700,240.55 (EST) to $2,312,482.11
(EST)” (although it also states that “the total maximum value of this contract is
unchanged by this modification”). Id. at A55. The modification revised the
“estimated/max cost,” fixed fee, and total cost of one line item and added a new line item.
Id. at A54-56. Under the heading “PAYMENT OF FIXED FEE (INDEFINITE
DELIVERY, COST PLUS FIXED FEE) (FISC DET PHILA) (OCT 1992),”
Modification No. P00002 states:
The fixed fee for work performed under this contract is $122,240.04*
provided that approximately 16,080 hours of technical effort are employed
by the contractor in performance of this contract. If substantially fewer
than 16,080 hours of said services are so employed, the fixed fee shall be
equitably reduced to reflect the reduction of work. The Government shall
make monthly payments of the fixed fee at the rate of $ 7.60* per direct
labor hour invoiced by the contractor. All payments shall be in accordance
with the provisions of FAR 52.216-8, “Fixed Fee,” and FAR 52.216-7,
“Allowable Cost and Payment.” The total of all such payments shall not
exceed eighty-five (85%) percent of the fixed fee specified under each
applicable delivery/task order. Any balance of fixed fee due the contractor
shall be paid to the Contractor, and any over-payment of fixed fee shall be
repaid to the Government by the Contractor, or otherwise credited to the
Government at the time of final payment.
Id. at A55-56.
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Modification No. P00003, dated March 23, 2006, was a unilateral modification to
extend the term of the contract. Id. at A57. The summary of changes states that “[t]he
total MAXIMUM cost of this contract was increased by $3,896,844.01 from
$2,312,482.11 (EST) to $6,209,326.12 (EST).” Id. at A58.
Modification No. P00004, dated March 29, 2007, was a bilateral modification to
exercise Option II to extend the term of the contract. Id. at A59. The summary of
changes states that “[t]he total cost of this contract was increased by $2,155,790.87 from
$6,209,326.12 (EST) to $8,365,116.99 (EST).” Id. at A60.
Modification No. P00005, dated August 31, 2007, was a unilateral modification to
exercise Option III to extend the term of the contract. Id. at A62. The summary of
changes states that “[t]he total cost of this contract was increased by $1,503,152.61 from
$8,365,116.99 (EST) to $9,868,269.60 (EST).” Id. at A63.
Modification No. P00006, dated February 26, 2008, was a unilateral modification
to exercise Options IV and V to extend the term of the contract. Id. at A64. The
description of the modification states that “funding will be provided on individual
delivery orders.” Id. The summary of changes states that “[t]he total cost of this contract
was increased by $2,241,544.41 from $9,868,269.60 (EST) to $12,109,814.01 (EST).”
Id. at A65.
Modification No. P00007, dated June 23, 2008, was a bilateral modification “to
add hours to the contract that will be available for ordering.” Id. at A67. The summary
of changes states that “[t]he total cost of this contract was increased by $9,787,642.10
from $12,109,814.01 (EST) to $21,897,456.11 (EST).” Id. at A68. The summary of
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changes also lists changes in the descriptions, estimated/max costs, fixed fees, and total
costs for several line items and provides new “level of effort” figures for various labor
categories. Id. at A68-69.
Under the heading “LEVEL OF EFFORT (COST TYPE CONTRACT) (FISC
DET PHILA) (JUN 95),” Modification No. P00007 lists labor categories with associated
total hours and states that “[t]his increases the total level of effort of the contract by
93,813 from 108,772 to 202,585.” Id. at A69.
In addition, under the heading “LEVEL OF EFFORT - DELIVERY/TASK
ORDER PERFORMANCE (FISC DET PHILA) (OCT 1992),” Modification No. P00007
provides as follows:
It is understood and agreed that the number of hours and the total dollar
amount for each labor category specified in any delivery/task order issued
under this contract are estimates only and shall not limit the use of hours or
dollar amounts in any labor category which may be required and provided
for under an individual delivery/task order. Accordingly, in the
performance of any delivery/task order, the contractor shall be allowed to
adjust the quantity of labor hours provided for within labor categories
specified in the order provided that in so performing the contractor shall not
in any event exceed the ceiling price restrictions of any order, including
modifications thereof.
Id. at A69.
Under the heading “PAYMENT OF FIXED FEE (INDEFINITE DELIVERY,
COST PLUS FIXED FEE) (FISC DET PHILA) (OCT 1992),” Modification No. P00007
also provides:
The fixed fee (on labor) for work performed under this contract is
$702,659.37* provided that approximately 93,813 hours of technical effort
are employed by the contractor in performance of this contract. If
substantially fewer than 93813 hours of said services are so employed, the
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fixed fee shall be equitably reduced to reflect the reduction of work. The
Government shall make monthly payments of the fixed fee at the rate of
$ 7.49* per direct labor hour invoiced by the contractor. All payments shall
be in accordance with the provisions of FAR 52.216-8, “Fixed Fee,” and
FAR 52.216-7, “Allowable Cost and Payment.” The total of all such
payments shall not exceed eighty-five (85%) percent of the fixed fee
specified under each applicable delivery/task order. Any balance of fixed
fee due the contractor shall be paid to the Contractor, and any over-payment
of fixed fee shall be repaid to the Government by the Contractor, or
otherwise credited to the Government at the time of final payment.
The fixed fee on additional OPN Hardware / Software is $7,770.00.
Id. at A69-70.
C.
Delivery Orders
The government issued eleven delivery orders under the contract. Def.’s Resp. 3.
At oral argument, the government proffered a copy of Delivery Order No. 0002, dated
March 28, 2006, and seven modifications of that delivery order. 5
Under the heading “LEVEL OF EFFORT (COST TYPE CONTRACT) (FISC
DET PHILA) (JUNE 1995),” Delivery Order No. 0002 provides that the estimated total
hours for the delivery order would be 27,552. Delivery Order No. 0002 at 4-5 of 6.
Under the heading “PAYMENT OF FIXED FEE (INDEFINITE DELIVERY,
COST PLUS FIXED FEE) (FISC DET PHILA) (OCT 1992),” Delivery Order No. 0002
provides:
The fixed fee for work performed under this contract is $213,941.01
provided that approximately 27,552 hours of technical effort are employed
5
InterImage objected to the government’s reliance on documents at oral argument that had not
been attached to its opposition to summary judgment. While troubled by the government’s
failure to follow the court’s rules, the court has reviewed Delivery Order No. 0002 and the
modifications provided for purposes of understanding the terms of individual delivery orders to
the base contract.
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by the contractor in performance of this contract. If substantially fewer
than 27,552 hours of said services are so employed, the fixed fee shall be
equitably reduced to reflect the reduction of work. The Government shall
make monthly payments of the fixed fee at the rate of $ 7.63 per direct
labor hour invoiced by the contractor. All payments shall be in accordance
with the provisions of FAR 52.216-8, “Fixed Fee,” and FAR 52.216-7,
“Allowable Cost and Payment.” The total of all such payments shall not
exceed eighty-five (85%) percent of the fixed fee specified under each
applicable delivery/task order. Any balance of fixed fee due the contractor
shall be paid to the Contractor, and any over-payment of fixed fee shall be
repaid to the Government by the Contractor, or otherwise credited to the
Government at the time of final payment.
Id. at 5 of 6.
Under the heading “LIMITATION OF LIABILITY – INCREMENTAL
FUNDING (NAVSUP 5252.232-9400) (JAN 1992),” Delivery Order No. 0002 provides:
This order is incrementally funded and the amount currently available for
payment hereunder is limited to $745,036.50 inclusive of any fee. It is
estimated that these funds will cover the cost of performance through 27
June 2006. Subject to the provisions of the clause entitled “Limitations of
Funds” (FAR 52.232-22) of the General Provisions of the contract, no legal
liability on the part of the Government for payment in excess of
$745,036.50 shall arise unless additional funds are made available and are
incorporated as a modification of this order.
Id. Delivery Order No. 0002 also provides accounting and appropriation data. Id. at 6 of
6.
Modification No. 01 to Delivery Order No. 0002, dated April 20, 2006, changed
the provision titled “LIMITATION OF LIABILITY – INCREMENTAL FUNDING
(NAVSUP 5252.232-9400) (JAN 1992),” increasing the total funded amount and
extending the applicable period of performance through July 31, 2006. Modification No.
01 to Delivery Order No. 0002 at 2 of 2. The summary of changes states “[a]s a result of
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this modification, the total funded amount for this document was increased by
$208,453.97 from $745,035.00 to $953,488.97.” Id.
Modification No. 02 to Delivery Order No. 0002, dated June 7, 2006, revised the
provisions titled “LEVEL OF EFFORT (COST TYPE CONTRACT) (FISC DET
PHILA) (JUNE 1995),” “PAYMENT OF FIXED FEE (INDEFINITE DELIVERY,
COST PLUS FIXED FEE) (FISC DET PHILA) (OCT 1992),” and “LIMITATION OF
LIABILITY – INCREMENTAL FUNDING (NAVSUP 5252.232-9400) (JAN 1992),”
increasing the estimated number of hours to 28,392, increasing the fixed fee to
$220,350.21, and increasing the total funded amount. Modification No. 02 to Delivery
Order No. 0002 at 2-4 of 4. The summary of changes states that “[t]he total cost of this
contract was increased by $86,665.42 from $2,918,203.66 (EST) to $3,004,869.08
(EST)” and that “[a]s a result of this modification, the total funded amount for this
document was increased by $1,351,271.60 from $953,488.97 to $2,304,760.57.” Id.
Modification No. 03 to Delivery Order No. 0002, dated September 18, 2006,
amended the same three provisions, increasing the estimated number of hours to 28,645,
increasing the fixed fee to $222,280.60, and increasing the total funded amount.
Modification No. 03 to Delivery Order No. 0002 at 5-6 of 6. The summary of changes
states that “[t]he total cost of this contract was increased by $659,710.51 from
$3,004,869.08 (EST) to $3,664,579.59 (EST)” and that “[a]s a result of this modification,
the total funded amount for this document was increased by $1,093,018.99 from
$2,304,760.57 to $3,397,779.56.” Id. at 2-3 of 6. The limitation of liability provision
16
was also revised to state that “[i]t is estimated that these funds will cover the cost of
performance through 27 March 2007.” Id. at 6 of 6.
Modification No. 04 to Delivery Order No. 0002, dated September 27, 2006,
revised the provision titled “LIMITATION OF LIABILITY – INCREMENTAL
FUNDING (NAVSUP 5252.232-9400) (JAN 1992),” increasing the total funded amount
and extending the period of performance through June 27, 2006. Modification No. 04 to
Delivery Order No. 0002 at 2 of 2. The summary of changes states that “[a]s a result of
this modification, the total funded amount for this document is increased by $10,343.38
from $3,397,779.56 to $3,408,122.94.” Id.
Modification No. 05 to Delivery Order No. 0002, dated November 22, 2006,
revised the provision titled “LIMITATION OF LIABILITY – INCREMENTAL
FUNDING (NAVSUP 5252.232-9400) (JAN 1992),” to increase the total funded amount
and extend the period of performance through March 27, 2007. Modification No. 05 to
Delivery Order No. 0002 at 3 of 3. The summary of changes states that “[t]he total cost
of this contract is increased by $397,634.22 from $3,664,579.59 (EST) to $4,062,213.81
(EST)” and that “[a]s a result of this modification, the total funded amount for this
document is increased by $1,160,633.22 from $3,408,122.94 to $4,568,756.16.” Id. at 23 of 3.
Modification No. 06 to Delivery Order No. 0002, dated May 8, 2007, revised the
provisions titled “LEVEL OF EFFORT (COST TYPE CONTRACT) (FISC DET
PHILA) (JUNE 1995),” “PAYMENT OF FIXED FEE (INDEFINITE DELIVERY,
COST PLUS FIXED FEE) (FISC DET PHILA) (OCT 1992),” and “LIMITATION OF
17
LIABILITY – INCREMENTAL FUNDING (NAVSUP 5252.232-9400) (JAN 1992),”
increasing the estimated number of hours to 41,716, increasing the fixed fee to
$318,293.08 (“represent[ing] only the fee on labor”), and increasing the total funded
amount. Modification No. 06 to Delivery Order No. 0002 at 4-5 of 6. The summary of
changes states that “[t]he total cost of this contract was increased by $1,216,921.37 from
$4,062,213.81 (EST) to $5,279,135.18 (EST)” and that “[a]s a result of this modification,
the total funded amount for this document was increased by $710,379.02 from
$4,568,756.16 to $5,279,135.18.” Id. at 2, 5 of 6.
Modification No. 07 to Delivery Order No. 0002, dated August 29, 2007, does not
amend the provisions described above. The description of the modification states that
“[t]he purpose of this modification is to deobligate excess R&D and O&M,N funding
from delivery order 0002 in order to make that funding available for current delivery
orders.” Modification No. 07 to Delivery Order No. 0002 at 1 of 2. The summary of
changes states that “[a]s a result of this modification, the total funded amount for this
document was decreased by $15,043.84 from $5,279,135.18 to $5,264,091.34.” Id. at 2
of 2.
D.
InterImage’s Performance and Claims for Payment
InterImage completed its performance under the contract in 2010. Def.’s Resp. 2.
InterImage submitted its final incurred cost proposals and executed its certificate of final
indirect costs in August 2010. Id. at 4. In September 2012, following an audit by the
DCAA, InterImage entered into an agreement accepting DCAA’s proposed final indirect
rates for each applicable fiscal year. Pl.’s MSJ 3, Ex. 12 Attach. 2; Def.’s Resp. 4. A
18
“schedule of cumulative allowable cost” states that the “total direct & indirect costs using
settled rates” for the contract at issue in this case were $20,055,414 for costs and
$1,499,638 for fees. Pl.’s MSJ Ex. 12 Attach. 2. A note to the schedule states that “[t]he
cumulative allowable amounts in [the total direct and indirect costs using settled rates]
column are not-to-exceed contract ceiling amounts.” Id. The schedule identified each
year of performance but did not separate out any individual delivery orders.
In January 2013, InterImage submitted a final invoice for $990,528.15 and related
close-out documents. Pl.’s MSJ 3, Ex. 3; Def.’s Resp. 4. As noted above, in its invoice,
InterImage stated that the “funded” total for the contract was $23,155,514.01, including
$21,655,876.37 for costs and $1,499,637.64 for fees, and that the “settled” total was
$21,555,051.64, including $20,055,414.00 for costs and $1,499,637.64 for fees. Pl.’s
MSJ Ex. 3. InterImage further stated that it had previously invoiced and been paid
$20,564,478.32, including $19,304,651.49 for costs and $1,259,826.83 for fees. Pl.’s
MSJ Ex. 3. Based on its current invoice, InterImage claimed that it was owed
$990,528.15. Pl.’s MSJ Ex. 3.
In June 2013, in response to the Navy’s comments that funding had been made to
individual delivery orders, InterImage revised and resubmitted its invoice as multiple
invoices, one for each of the eleven delivery orders. Pl.’s MSJ Ex. 4. In August 2013,
per the government’s instructions, InterImage resubmitted its invoices to the DCMA and
the government’s Wide Area Workflow (“WAWF”) system. Pl.’s MSJ Ex. 4.
19
Between September 12, 2013 and November 19, 2013 the Navy made partial
payments, totaling approximately $295,000, to InterImage on those invoices. Pl.’s MSJ
Ex. 8; Def.’s Resp. 4.
On June 10, 2014, the contracting officer issued two final decisions imposing
$106,477.97 in penalties and interest for 2007 and $12,096.81 in penalties and interest for
2008. Def.’s App. A71, A77. On June 8, 2015, InterImage filed the first complaint in
this case challenging the June 10, 2014 final decisions. ECF No. 1. On May 9, 2016, the
court remanded the case to the contracting officer. ECF No. 33. On June 16, 2016, the
contracting officer granted InterImage’s request for a waiver of the penalties and interest
pursuant to FAR § 42.709-5(c). Def.’s App. A367-73.
While disputing the penalties, InterImage continued its efforts to collect the
remaining amount on its final invoice. Def.’s Resp. 5. On September 23, 2014,
InterImage submitted a final invoice on the contract for $697,926.97. Id. The
government explained that it was unable to make additional payments because funding
for the contract had been de-obligated and thus the government needed to find funding
from another source. Pl.’s MSJ Ex. 9, 10, 11; Def.’s App. A106.
It was at this time that issues first arose between the government and InterImage
over whether the ceilings in the delivery orders precluded any additional payments to
InterImage. Def.’s App. A106-10. In January 2015, the Director of the DCMA’s
Contract Closeout Center, Mr. Fred Roitz, explained to Ms. Leslie Steele, InterImage’s
CEO, that, after reviewing the contract, delivery orders, and modifications to the contract
and delivery orders, he believed InterImage had received payments in excess of the
20
delivery order ceilings in several instances. Mr. Roitz stated that “[p]art of the issue
appears to be DCAA’s audit did not limit the direct and indirect cost to the contract
ceiling and funding limitations for each [delivery order] on The Schedule of Cumulative
Allowable Cost by Contract.” Id. at A109. Mr. Roitz stated that he believed the DCAA’s
schedule of cumulative allowable cost was incorrect in that the worksheet should have
included entries for contract ceilings for each delivery order based on three contract
provisions: (1) “Base Contract – Limitation of Cost (Apr 1984)”; (2) “Base Contract –
Limitation of Funds (Apr 1984)”; and (3) “Task Orders – Limitation of Liability –
Incremental Funding (NACSUP 5252.232-9400) (Jan 1992).” Id. at A109.
In January 2015, Ms. Steele sought assistance from elected officials in her effort to
get paid the amount remaining on her final invoice. Id. at A111-16. In a letter to Senator
Tim Kaine dated January 23, 2015, Ms. Steele stated that the government was refusing to
pay InterImage and that the government had made mistakes in administering and
deobligating funds. Id. at A115. Ms. Steele also noted that DCMA was attempting to
treat each delivery order as a separate contract despite:
○
the existence of the Basic Contract which established the obligation
of the Federal Government to pay legitimate costs
○
delivery order funding documents that refer to the Basic Contract
and treat each as a modification to the contract obligations versus as
separate funding streams
○
contract cited FAR provisions 52.216-7, 52.216-8 and 52.232-22
which reference determination of costs at the contract level.
Id. at A115.
21
In March 2015, Mr. Roitz consulted with the DCAA regarding the cost ceilings in
the delivery orders and the application of the limitation of cost and limitation of funds
clauses to the delivery orders. Id. at A117. DCAA stated that although DCAA had
“potentially made an ‘error’ on the [cumulative allowable cost worksheet] . . . we all
agree that the [cumulative allowable cost worksheet] is only a guideline for the
Contracting Officer and the actual contract terms and ceiling limitations hold the ultimate
authority.” Id. Mr. Roitz asked DCAA to “look at the [cumulative allowable cost
worksheet] and insert the Column Titled ‘Less: Contract Limitations” the limitation per
Task Order . . . .” Id. at A120. On March 23, 2015, DCAA sent Mr. Roitz a revised
worksheet with the additional column Mr. Roitz had requested. Id. at A123-24. DCAA
stated that “[t]he ceiling limitation column . . . should subtract out any costs in excess of
the funded amount per the latest delivery order modification.” Id. at A123.
On August 18, 2015, InterImage submitted a certified claim for $695,684.48 to the
contracting officer. Pl.’s MSJ Ex. 12, Def.’s App. A130. InterImage states that its
certified claim is based on an overall contract ceiling of $21,555,007, including
$20,055,369 for costs and $1,499,638 for its fee, not taking into account the alleged
contract limitations applicable to individual delivery orders. Pl.’s Reply 5-9. 6 InterImage
further states that its certified claim is based on total payments of $20,859,323, equal to
$20,564,478 paid before the DCAA audit, plus $294,500 in post-audit incremental
6
InterImage states that the total cost amount is $45 less than the amount it agreed to in
September 2012 due to a transposed figure in the DCAA’s work papers. Pl.’s Reply 7.
22
payments, plus $344 paid before InterImage submitted its final invoice. Id. at 8-9,
Second Steele Decl. ¶ 17.
On February 3, 2016, the contracting officer issued a final decision finding that
InterImage was due $660,023.72 plus $40,123.89 in interest for a total of $700,147.61.
Pl.’s MSJ Ex. 1; Def.’s App. A139. In the two-page decision, which did not specify
separately costs and fee, the contracting officer identified the amount approved for each
year 2006 through 2009 based on total contract amounts and not individual delivery
orders. Pl.’s MSJ Ex. 1; Def.’s App. A139. The contracting officer stated that the
amount paid by the government to InterImage under the contract was $18,834,743.08 and
that the amount approved for payment was $19,494,766.80. Pl.’s MSJ Ex. 1; Def.’s App.
A139-40. After adding interest from January 8, 2013, the contracting officer found that
the amount due InterImage was $700,147.61. Pl.’s MSJ Ex. 1; Def.’s App. A140. The
contracting officer did not mention the issues of deobligated funding or cost ceilings.
Pl.’s MSJ Ex. 1; Def.’s App. A139-40.
As noted above, InterImage and DCMA attempted to arrange for payment
pursuant to the COFD. However, the Navy did not pay InterImage because the funding
assigned to InterImage’s delivery orders had expired and had been de-obligated. The
matter was assigned to a different contracting officer, Ms. Stacey Ellingsen, for purposes
of resolving the payment issue, in August 2016. Def.’s App. A135. In mid-September
through early October 2016, Ms. Ellingsen questioned whether the previous contracting
officer had properly applied certain contract provisions in reaching the February 3, 2016
COFD. Def.’s Resp. 9-12. Ms. Ellingsen indicated, based on the cumulative allowable
23
cost worksheet Mr. Roitz had used, that InterImage had not properly taken into account
the contract’s limitation of cost and limitation of funds provisions applicable to the
individual delivery orders. Def.’s Resp. 10. In an e-mail to InterImage’s staff accountant
dated October 7, 2016, Ms. Ellingsen stated that she had “found discrepancies” regarding
contract limitations and that “[i]f we can address each of the Task Orders individually, I
will be able to place any money owed on the contract at that time.” Def.’s App. A241.
E.
Summary Judgment Filings
InterImage filed the pending motion for partial summary judgment for breach of
contract under Count I on November 4, 2016 with supporting attachments. On December
13, 2016, the government filed its response to InterImage’s motion for summary
judgment. The government also filed an appendix and a supplement to the appendix.
ECF Nos. 53, 55. 7
In its response, the government provided the declaration from the new DCMA
administrative contracting officer, Ms. Ellingsen, dated December 12, 2016, and a
declaration from the DCAA senior auditor, Meredith Caskey, dated December 9, 2016.
Def.’s App. A248, A335.
In her declaration, Ms. Ellingsen states that she read each delivery order and
modification and sought the assistance of the DCAA to determine whether InterImage
7
In addition, on December 13, 2016, the government filed a motion to dismiss Counts II, III, and
IV of the complaint in Case No. 16-1300C for lack of jurisdiction or failure to state a claim.
ECF No. 52. On January 4, 2017, the court granted InterImage’s unopposed motion to stay
briefing on the government’s motion to dismiss until resolution of InterImage’s motion for
summary judgment on Count I of the complaint. ECF No. 59.
24
was underpaid or overpaid. Ms. Ellingsen states that “Task Orders 0001 and 0002 had
bi-lateral modifications de-obligating excess funds, lowering the Task Order ceiling to
accommodate new work being issued on new task orders.” Id. at A250. Ms. Ellingsen
also states that “[i]n this case, each Task Order receives a ‘flow-down’ of clauses that
define the limit of the authority to execute the contract vehicle, i.e. total ceiling for IDIQ
will govern amount competition and acquisition plan.” Id. at A251-252. Ms. Ellingsen
states that “[e]ach Task Order issued under the IDIQ is a Contract, defining any terms
and conditions that are specific to that effort, such as ceilings and fees.” Id. at 252. Ms.
Ellingsen also states in her December 12, 2016 declaration that she “provided to Ms.
Caskey the allowable fee using the total direct labor hours stated in the final voucher *
unit cost, unless it exceeds the funding ceiling.” Id. at A254. Ms. Ellingsen continues,
“[a]lthough InterImage believes that it is allowed to recover the total fee under the
Contract, it is my position that the allowed fee should be based upon the actual hours
incurred, taking into consideration the limit prescribed by each [delivery order].” Id.
Ms. Caskey, the new DCAA auditor, using the invoices provided by InterImage
and information in payment files, concluded that InterImage had been overpaid by
$434,211. Id. at A345, A358. Ms. Caskey states in her declaration that she did not
perform the original audit involved in this case and was similarly unable to locate the
information used by prior auditors. Ms. Caskey states that she determined funding
ceilings for each delivery order “by reviewing and summarizing pertinent terms of
contract number N00140-05-D-0058 and all the subsequent modifications to this
contract.” Id. at A339. Ms. Caskey states that she then determined disbursement
25
amounts based on information she received from Ms. Ellingsen and Defense Finance and
Accounting Services (“DFAS”), and determined InterImage’s incurred allowable costs
based on her review of invoices attached to InterImage’s motion for summary judgment.
Id. at A339-40. Based on this information, Ms. Caskey concludes that InterImage’s
incurred costs were above funding ceilings for delivery orders 1 through 8 and below
funding ceilings for delivery orders 9 through 11. Id. at A340-41, A358. Ms. Caskey
also states that the total authorized fee in her worksheet was calculated by DCMA. Id. at
A342 n.2. According to the government’s worksheets, the overall contract ceiling is
$20,422,731, including $19,376,352 for costs and $1,046,379 for fees and taking into
account the alleged contract limitations applicable to delivery orders, and the amount
disbursed is $20,856,943. Id. at A346, A358. 8
In her December 12, 2016, declaration, Ms. Ellingsen accepted Ms. Caskey’s
evaluation and concluded that InterImage had been overpaid. Id. at A254. Ms. Ellingsen
states that “[b]ased on the evaluation of the known costs, [she] identified that the
contractor owes the Government $434,211.” Id.
8
Attached to the supplemental briefing (ECF No. 67, 69) provided after the argument, the court
received another sworn statement from Ms. Caskey (Second Declaration of Meredith Caskey,
ECF No. 67-2, App. A3-12) offering her explanation of the COFD and two new sworn
statements. One is from Lewis R. Sully with the DCMA who states that he has reviewed Ms.
Caskey’s work and concurs in her determination and that of the contracting officer, Ms.
Ellingsen, that InterImage is not entitled to additional payments because of the limitations in
each of the delivery orders. The other is from John Scarsellone, who is also with the DCMA.
His statement adds some history regarding DCMA’s consideration of InterImage’s claim and
states that he concurs with Ms. Ellingsen’s conclusion that InterImage’s claim is limited by the
ceiling amounts in the delivery orders.
26
InterImage filed its reply in support of its motion for summary judgment on
January 18, 2017. ECF No. 61. In response to the government’s declarations, InterImage
states that there is virtually no difference between the government and InterImage with
regard to the total cost and fee figures set forth in the December 8, 2016 cumulative
allowable cost worksheet submitted by the government on the base contract with
modifications save for a $2,380 difference on an invoice. Pl.’s Reply 2; Def.’s App. 358.
InterImage also provides a declaration by its CEO, Ms. Steele, dated January 18,
2017. Pl.’s Reply Second Steele Decl. 1. Ms. Steele states in her January 18, 2017
declaration that under the contract at issue there were several modifications to the
contract, eleven delivery orders, and multiple modifications to each delivery order. Id. ¶
10. Ms. Steele further states that the “delivery orders were generally used to cover
different periods of performance by exercising options on the Contract, different stages of
the software development, and/or to apply additional funding” to what Ms. Steele
characterizes as a “single, unified piece of work.” Id. ¶ 11. According to Ms. Steele,
InterImage and the contracting officer at the time “did not treat the delivery orders as
separate contracts, each with their own funding” and “[t]he contracting officer frequently
moved funding from one delivery order to another in order to capture different sources of
funding and increase the overall amount of funding available for the Contract.” Id. ¶ 12.
Ms. Steele states that InterImage personnel closely watched costs in light of the contract’s
overall funding ceiling and “let [the contracting officer] know when additional funding
would be needed so that he could execute a modification to add additional funding.” Id.
27
¶¶ 13-14. Ms. Steele also states that InterImage never submitted an invoice for costs in
excess of the amount available for the contract or any delivery order. Id. ¶¶ 14-16. 9
II.
JURISDICTION AND LEGAL STANDARDS
Under the Tucker Act, 28 U.S.C. § 1491(a)(1), this court has “jurisdiction to
render judgment upon any claim against the United States founded . . . upon any express
or implied contract with the United States . . . .” The Contract Disputes Act (“CDA”), 41
U.S.C. § 7104(b)(1), provides that “in lieu of appealing the decision of a contracting
officer under [41 U.S.C. § 7103] to an agency board, a contractor may bring an action
directly on the claim in the United States Court of Federal Claims, notwithstanding any
contract provision, regulation, or rule of law to the contrary.”
There is no dispute that the Tucker Act and the CDA provide jurisdiction for the
court to hear InterImage’s claim for payment. InterImage submitted a proper claim and
the contracting officer issued a final decision. See Guardian Angels Med. Serv. Dogs,
Inc. v. United States, 809 F.3d 1244, 1247 (Fed. Cir. 2016) (“[O]nly final contracting
officer decisions may be appealed.” (citations omitted)); K-Con Bldg. Sys., Inc. v. United
States, 778 F.3d 1000, 1005 (Fed. Cir. 2015) (“Jurisdiction [under the CDA] requires
both that a claim meeting certain requirements have been submitted to the relevant
9
Attached to InterImage’s supplemental brief following the argument, InterImage included an
e-mail from Ms. Steele to her counsel. She explains that the schedule used by the contracting
officer was correct but not up to date and provides her explanation of what payments were made
on the contract and what amounts remain unpaid. ECF No. 66.
28
contracting officer and that the contracting officer have issued a final decision on that
claim.” (citation omitted)).
Under Rule 56(a) of the Rules of the United States Court of Federal Claims
(“RCFC”), summary judgment is appropriate “if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter
of law.” A dispute is “genuine” when “the evidence is such that a reasonable jury could
return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 248 (1986). A fact is material if it could “affect the outcome of the suit under the
governing law.” Id. In determining whether there is a genuine issue of material fact,
“[o]n a motion for summary judgment, ‘all evidence must be viewed in the light most
favorable to the nonmoving party, and all reasonable factual inferences should be drawn
in favor of the nonmoving party.’” Frankel v. United States, 842 F.3d 1246, 1249-50
(Fed. Cir. 2016) (quoting Dairyland Power Coop. v. United States, 16 F.3d 1197, 1202
(Fed. Cir. 1994)).
III.
DISCUSSION
A.
The Individual Delivery Orders Limit Payment to InterImage for Both
Costs and Fees.
At the heart of the dispute between the parties on summary judgment is whether
InterImage’s right to payment is governed by only the base contract or also by the
individual delivery orders. The contract clauses that the government argues limit
payment to InterImage are the limitation of cost and limitation of funds clauses together
with NAVSUP 5252.232-9400 (JAN 1992). FAR § 52.232-20, titled “Limitation of
29
Cost,” is used in fully funded cost-reimbursement contracts, see FAR § 32.706-2(a), and
“limits the government’s payment to the costs as originally estimated unless the
contractor notifies the government of any prospective overrun in advance.” Titan Corp.
v. West, 129 F.3d 1479, 1480 (Fed. Cir. 1997). The notice requirement “protects the
contractor by either providing assurance of reimbursement or permitting the contractor to
cease performance. It protects the government from paying more than it had expected for
the project. The choice as to whether to incur additional costs is the government’s, not
the contractor’s.” Id. at 1482; see also Advanced Materials, Inc. v. Perry, 108 F.3d 307,
310 (Fed. Cir. 1997) (“Under the unambiguous language of the cost limitation provision,
the estimated cost shown in the contract constitutes a ceiling on the government’s
contractual liability.”). FAR § 52.232-22, titled “Limitation of Funds,” is used in
incrementally funded cost-reimbursement contracts, see FAR § 32.706-2(b), and
“provides that the government’s liability for a contract is limited to the ‘total amount
allotted by the government to the contract,’ unless notice is given and more money is
authorized.’” Viacom, Inc. v. United States, 70 Fed. Cl. 649, 657 (2006), on
reconsideration sub nom. CBS Corp. v. United States, 75 Fed. Cl. 498 (2007). Under the
“LIMITATION OF LIABILITY - INCREMENTAL FUNDING (NAVSUP 5252.2329400) (JAN 1992),” the base contract provided:
This contract is incrementally funded and the amount currently available
for payment hereunder is limited to $ __ * __ inclusive of fee. It is
estimated that these funds will cover the cost of performance through
_____ ** _____. Subject to the provisions of the clause entitled
“Limitation of Funds” (FAR 52.232-22) of the General Provisions of this
contract, no legal liability on the part of the Government for payment in
30
excess of $ __ * __ shall arise unless additional funds are made available
and are incorporated as a modification to this contract.
NOTE: Individual Delivery Orders may be incrementally funded and will
provide[] the necessary information.
Def.’s App. A30 (contract page 30 of 43).
As discussed above, the government states in sworn declarations that each of the
delivery orders contained the incremental funding clause, NAVSUP 5252.232-9400. See
id. at A250; Sully Decl. ¶ 10. For example, Delivery Order No. 0002 as modified
included the following provision under the heading “LIMITATION OF LIABILITY –
INCREMENTAL FUNDING (NAVSUP 5252.232-9400) (JAN 1992)”:
This order is incrementally funded and the amount currently available for
payment hereunder is limited to $5,279,135.18 inclusive of any fee. It is
estimated that these funds will cover the cost of performance through 27
March 2007. Subject to the provisions of the clause entitled “Limitations
of Funds” (FAR 52.232-22) of the General Provisions of the contract, no
legal liability on the part of the Government for payment in excess of
$5,279,135.18 shall arise unless additional funds are made available and are
incorporated as a modification of this order.
Modification No. 06 to Delivery Order No. 0002 at 5 of 6.
It is not disputed that the government may apply the limitation of cost clause or
limitation of funds clause to individual delivery orders. When the government does so,
those clauses govern each individual delivery order. See e.g., International Technology
Corp., ASBCA No. 54136, 06-2 BCA ¶ 33,348. InterImage argues that in this case, the
government did not expressly incorporate the limitation of cost or funds clauses into the
delivery orders and thus the base contract governs, citing Boeing Co., ASBCA No.
57409, 14-1 BCA ¶ 35,474. In Boeing, the Armed Services Board of Contract Appeals
31
found that a limitation of funds clause in a base contract applied to the funding of the
contract as a whole, and not to individual engineering assignments under the contract, in
part because the government did not expressly substitute “task order” or “engineering
assignment” or any other such term for “Schedule.” Id. However, in Boeing, the Board
also found that the contract “included a specific provision for limitation of funds in
individual engineering assignments,” titled the “H-841 clause,” which provided that
“[n]otification will be given to the PCO upon 85% usage of the funds obligated and upon
100% usage the contractor will cease work until additional funds are provided.” Id. The
Board found that “[g]iving a reasonable meaning to both the [limitation of funds] clause
and the H-841 clause, . . . the [limitation of funds] clause applies to the funding of the
contract Schedule as a whole and the H-841 clause governs the funding allotted to each
individual engineering assignment.” Id.
Here, the court finds, based upon its review of the base contract as well as
Delivery Order No. 0002 together with the various modifications to both and the
declarations, that the funding ceilings set in the individual delivery orders govern
InterImage’s right to payment. Specifically, the court agrees with the government that
the incremental funding clause, NAVSUP 5252.232-9400 (JAN 1992), which was
identified in the base contract and, the government asserts, included in each delivery
order, set funding ceilings and thus limits InterImage’s payment for costs and fee. As
quoted above, the incremental funding clause in the base contract expressly states that
each delivery order which incorporated the clause would be “[s]ubject to the provisions
of the clause entitled “Limitation of Funds” (FAR 52.232-22) of the General Provisions
32
of this contract.” In addition, the incremental funding clause in the base contract
expressly states that “Individual Delivery Orders may be incrementally funded and will
provide[] the necessary information.” Def.’s App. A30 (contract page 30 of 43). Further,
it is clear from the incremental funding clause, NAVSUP 5252.232-9400 (JAN 1992), in
Modification No. 6 to Delivery Order No. 0002 that the delivery order was incrementally
funded and that incremental funding under the delivery order was available expressly
“[s]ubject to the provisions of the clause entitled “Limitations of Funds” (FAR 52.23222) of the General Provisions of the contract.” Modification No. 06 to Delivery Order
No. 0002 at 5 of 6 (emphasis added). The Delivery Order, as modified, goes on to state
that “no legal liability on the part of the Government for payment in excess of
$5,279,135.18 shall arise unless additional funds are made available and are
incorporated as a modification of this order.” Id. (emphasis added). Thus, by their
terms, the delivery orders were made “subject to the provisions” of the limitation of funds
clause, FAR § 52.232-22, and the delivery orders (not only the base contract) capped the
amount of funding available for payment. See also George G. Sharp, Inc., ASBCA No.
55385, 07-2 BCA ¶ 33,696 (finding that incrementally funded delivery orders which
included a similar “limitation of liability/incremental funding” provision incorporated the
base contracts’ limitation of funds clauses).
The conclusion that the funding limitations in the delivery orders govern the
amount that InterImage can be paid is also confirmed by FAR § 52.216-18, which was
incorporated into the base contract. FAR § 52.216-18 provides that “[a]ll delivery orders
or task orders are subject to the terms and conditions of this contract.” Thus, the
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provision made the delivery orders subject to the limitation of cost and funds clauses.
Moreover, although FAR § 52.216-18 states that “[i]n the event of conflict between a
delivery order or task order and this contract, the contract shall control,” by virtue of the
inclusion of NAVSUP 5252.232-9400 (JAN 1992) in the delivery orders, there could not
be a conflict between the base contract and the delivery orders with regard to the amount
of funding available for the work identified in the order. The funding ceilings were set in
the delivery orders. Accordingly, InterImage is only owed additional money from the
government if it can establish that the amount sought for unpaid costs does not exceed the
funding ceilings in the eleven delivery orders as modified.
The court finds based on the language in the base contract and delivery orders that
InterImage’s motion for summary judgment for its unpaid fixed fee also must be denied.
The government argues that the actual fee allowed under the contract “is determined by
the limits contained in the modifications to the [delivery orders], in addition to the level
of effort formulas contained in the [contract].” Def.’s Resp. 21-22. The government
argues that InterImage is not entitled to summary judgment regarding the additional
amount of fee it contends it is owed based on the sworn declaration of Ms. Ellingsen.
Ms. Ellingsen in her December 12, 2016 declaration stated that she “provided to Ms.
Caskey the allowable fee using the total direct labor hours stated in the final voucher *
unit cost, unless it exceeds the funding ceiling.” Def.’s App. A254. Ms. Ellingsen
explains in her declaration, “[a]lthough InterImage believes that it is allowed to recover
the total fee under the Contract, it is my position that the allowed fee should be based
upon the actual hours incurred, taking into consideration the limit prescribed by each
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[delivery order].” Id. In support of this position, the government relies primarily on the
“LEVEL OF EFFORT – DELIVERY/TASK ORDER PERFORMANCE (FISC DET
PHIL) (Oct 1992)” clause in the base contract, which states in relevant part that “the
contractor shall be allowed to adjust the quantity of labor hours provided for within labor
categories specified in the order provided that in so performing the contractor shall not in
any event exceed the ceiling price restrictions of any order, including modifications
thereof.” Def.’s Resp. 21-22; Def.’s App. A17 (contract page 17 of 43), A69
(Modification No. P00007). InterImage acknowledges that a contracting officer may
equitably adjust the fixed fee under its base contract if all of the estimated hours are not
performed, but argues that it is entitled to its entire fee in this case because the
contracting officer never issued an equitable adjustment. Pl.’s Reply 25-26.
There is no dispute that there has not been an equitable adjustment presented to the
court. However, as discussed above, the court has concluded that the individual delivery
orders and not only the base contract govern. The delivery orders established the amount
of funding available “inclusive of any fee.” Because InterImage’s fixed fee is limited by
the funding ceilings specified in the individual delivery orders, the court cannot grant
summary judgment regarding its claim for unpaid fee. Whether InterImage is owed any
additional fixed fee will turn on whether the fee it argues it is owed fits within the
funding ceilings in the delivery orders.
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IV.
CONCLUSION
For the reasons above, InterImage’s motion for summary judgment is DENIED.
The parties shall have until July 31, 2017 to propose a schedule for next steps in this
litigation.
IT IS SO ORDERED.
s/Nancy B. Firestone
NANCY B. FIRESTONE
Senior Judge
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