ConocoPhillips v. United States

73 Fed. Cl. 46, 2006 U.S. Claims LEXIS 269, 2006 WL 2615554
CourtUnited States Court of Federal Claims
DecidedSeptember 12, 2006
DocketNo. 02-1367C
StatusPublished
Cited by3 cases

This text of 73 Fed. Cl. 46 (ConocoPhillips v. United States) is published on Counsel Stack Legal Research, covering United States Court of Federal Claims primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
ConocoPhillips v. United States, 73 Fed. Cl. 46, 2006 U.S. Claims LEXIS 269, 2006 WL 2615554 (uscfc 2006).

Opinion

OPINION

WIESE, Judge.

Plaintiffs sue here to recover the difference between the claimed fair market value and the contract price of fuel delivered to the Defense Energy Support Center (“DESC”) under a series of contracts alleged to have contained illegal economic price adjustment clauses. The case is before the court on defendant’s motion to dismiss or, alternatively, for summary judgment and on plaintiffs’ motion pursuant to RCFC 56(f) to permit further discovery. The court heard oral argument on the parties’ motions on August 9, 2006. For the reasons set forth below, we rule in defendant’s favor and additionally deny plaintiffs’ RCFC 56(f) motion.

BACKGROUND

Between 1984 and 1999, Conoco, Inc., and Phillips Petroleum Co.1 entered into 41 contracts with DESC to provide jet and motor vehicle fuel for use by the United States armed forces. Under the solicitations for these contracts, the pricing of the fuel was governed by DESC-drafted economic price adjustment (“EPA”) clauses. Pursuant to these clauses, bidders were instructed to propose a base price per gallon for each petroleum product to be supplied, which would in turn be adjusted monthly based upon average sales prices of refined petroleum products by region as reported by the Department of Energy in its publication the Petroleum Marketing Monthly (“PMM”).

DESC’s reliance on such price adjustment clauses came under attack, however, in a lawsuit filed in this court in late 1989. In MAPCO Alaska Petroleum, Inc. v. United States, 27 Fed.Cl. 405, 410 (1992), the court struck down the use of a PMM-based EPA clause, finding it in violation of the Federal Acquisition Regulations (“FAR”) since the PMM index constituted “an amalgamation of the previous month’s petroleum sales data,” and did not therefore reflect a “contractor’s established prices” as contemplated by 48 C.F.R. (FAR) § 16.203 (1994).2 Following the MAPCO decision, DESC sought and received permission to deviate from the FAR in order to continue its use of EPA clauses similar or identical to the one struck down by the court. In 1995, however, DESC replaced the PMM index with the widely used Platts Oilgram Price Report (“Platts”) and the Oil Price Information Service (“OPIS”) as the basis for its EPA escalators — a change that allowed DESC to make its monthly adjustments (and hence monthly payments) without the three-month delay in price reporting associated with the PMM.3

Plaintiffs filed suit in this court on October 9, 2002, styling their complaint on the holding in MAPCO and seeking the difference between the claimed fair market value of the fuel they delivered to DESC and the contract price they received for that fuel. Defendant in turn moved for summary judgment with respect to two issues: whether the EPA clauses at issue violated the FAR and whether plaintiffs had waived any rights they may have had to challenge the EPA clauses contained in their contracts. At the parties’ request, however, the court suspended proceedings pending the outcome of the interlocutory appeal in Tesoro Hawaii Carp. v. United States, 405 F.3d 1339 (Fed.Cir.2005), which involved the consolidation of two virtually identical fuel cases—Tesoro Hawaii Corp. v. United States, 58 Fed.Cl. 65 (2003), and Hermes Consol., Inc. v. United States, 58 Fed.Cl. 409 (2003)—each of which, like [49]*49MAPCO, had held a PMM-based EPA clause to be illegal.4

In the resulting decision, the Federal Circuit abrogated the holding in MAPCO, explicitly rejecting the proposition that an EPA clause was required under the FAR to be based on a contractor’s own established fuel prices and upholding DESC’s use of an EPA clause based on the PMM. Tesoro, 405 F.3d at 1348. In light of that ruling, we allowed plaintiffs to amend their complaint to assert a cause of action based on FAR § 15.802(b) (currently codified at FAR § 15.402(a)), a provision setting forth the contracting officer’s duty to ensure that prices offered are fair and reasonable. Plaintiffs now seek discovery concerning the negotiation, award, and performance of the fuel contracts, as well as the prices and indexes contained in those contracts. Defendant, for its part, maintains that there exists no triable issue of fact and accordingly asks the court to dismiss paragraph 46 of plaintiffs’ second amended complaint (challenging DESC’s minority-owned business bidding preferences on equal protection grounds) pursuant to RCFC 12(b)(1) (lack of subject matter jurisdiction) and the remainder of the complaint pursuant to either RCFC 12(b)(6) (failure to state a claim upon which relief can be granted) or RCFC 56(b) (summary judgment).

DISCUSSION

The use of fixed-price contracts with economic price adjustments is governed by FAR § 16.203-1, which provides in part:

A fixed-price contract with economic price adjustment provides for upward and downward revision of the stated contract price upon the occurrence of specified contingencies. Economic price adjustments are of three general types:
(a) Adjustments based on established prices. These price adjustments are based on increases or decreases from an agreed-upon level in published or otherwise established prices of specific items or the contract end items.
(b) Adjustments based on actual costs of labor or material. These price adjustments are based on increases or decreases in specified costs of labor or material that the contractor actually experiences during contract performance.
(e) Adjustments based on cost indexes of labor or material. These price adjustments are based on increases or decreases in labor or material cost standards or indexes that are specifically identified in the contract.

Use of the clauses identified in FAR § 16.203-1 is limited by FAR § 16.203-3, as follows:

A fixed-price contract with economic price adjustment shall not be used unless the contracting officer determines that it is necessary either to protect the contractor and the Government against significant fluctuations in labor or material costs or to provide for contract price adjustment in the event of changes in the contractor’s established prices.

At issue in the instant case is the first of the EPA clauses identified above — those containing adjustments based on “established prices.” In the initial round of briefing, plaintiffs argued that the phrase “established prices” as set forth in FAR § 16.203-1 should be understood to mean the “contractor’s established prices” as contemplated by FAR § 16.203-3.5 Under that reading, price [50]*50adjustments could be based only on changes in the individual contractor’s prices and not on changes in overall market prices.

We rejected that argument in Williams Alaska Petroleum, Inc. v. United States, 57 Fed.Cl. 789, 797 (2003), holding that FAR § 16.203 “not only permits adjustments to a contractor’s established prices to be based on market indexes, but in fact requires it.” As noted above, this understanding was in turn upheld by the Federal Circuit in Tesoro,

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Bluebook (online)
73 Fed. Cl. 46, 2006 U.S. Claims LEXIS 269, 2006 WL 2615554, Counsel Stack Legal Research, https://law.counselstack.com/opinion/conocophillips-v-united-states-uscfc-2006.