Environmental Safety Consultants, Inc.

Armed Services Board of Contract Appeals·Decided October 23, 2014·No. ASBCA No. 58343·Published

Opinion

ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of-- ) ) Environmental Safety Consultants, Inc. ) ASBCA No. 58343 ) Under Contract No. N62470-95-C-2399 )

APPEARANCE FOR THE APPELLANT: Mr. Peter C. Nwogu President

APPEARANCES FOR THE GOVERNMENT: Ronald J. Borro, Esq. Navy Chief Trial Attorney Ellen M. Evans, Esq. Senior Trial Attorney

OPINION BY ADMINISTRATIVE JUDGE FREEMAN ON THE GOVERNMENT'S RENEWED MOTION TO DISMISS

On 10 July 2014, the government submitted this renewed motion to dismiss the appeal on the grounds that (i) Environmental Safety Consultants, Inc., (ESCI) has not complied with the Board's 20 May 2014 discovery order, and (ii) ESCI's failure to retain cost records as required by the contract has prejudiced the government's ability to respond to ESCI' s allegations in the appeal. ESCI opposes the motion stating that (i) it provided its books and records for government inspection as required by FAR and (ii) the fact that its books and records did not contain evidence of actual incurred costs was no basis for dismissing the appeal or applying sanctions (opp'n at 9). On review ofESCI's responses to the discovery order, we find substantial non-compliances which warrant prohibiting ESCI from producing at hearing any documentary evidence or witness that should have been disclosed in the discovery ordered by the Board. Accordingly, that sanction is ordered and the motion to dismiss is denied.

STATEMENT OF FACTS (SOF) FOR PURPOSES OF THE MOTION

1. The captioned contract, awarded on 13 November 1995, (hereinafter "Contract 2399") was terminated for default on 12 June 1998. On 28 September 2011, the Board sustained an appeal from the default termination. Pursuant to the terms of the contract, that decision converted the default termination to a termination for the convenience of the government. See Environmental Safety Consultants, Inc., ASBCA No. 51722, 11-2 BCA ~ 34,848. Familiarity with that decision is presumed. 2. On or about 5 July 2012, ESCI's submitted to the contracting officer a total cost basis termination settlement proposal with a net payment request of$1,183,366.59 for the termination of Contract 23 99. On 14 September 2012, ESCI converted the proposal to a claim under the Contract Disputes Act of 1978 (CDA), 41 U.S.C. §§ 7101-7109. The contracting officer refused to either negotiate a settlement agreement or issue a final decision on the claim. She alleged that the claim was "conceived in fraud and is permeated by fraud" and that the contracting officer "lacks authority to decide it or settle it." See Environmental Safety Consultants, Inc., ASBCA No. 58343, 14-1BCAif35,681 at 174,666. On 29 September 2012, ESCI appealed the deemed denial of its claim, and that appeal (ASBCA No. 58343) is presently before us.

3. The Federal Acquisition Regulation (FAR) 52.249-2, TERMINATION FOR CONVENIENCE OF THE GOVERNMENT (FIXED-PRICE}-ALTERNATE 1(APR1984) clause (hereinafter "the Termination clause"), of the captioned contract states in pertinent part:

(f) If the Contractor and Contracting Officer fail to agree on the whole amount to be paid the Contractor because of the termination of work, the Contracting Officer shall pay the Contractor the amounts determined as follows ...

( 1) For contract work performed before the effective date of termination, the total (without duplication of any items) of -

(i) The cost of this work;

(h) The cost principles and procedures of Part 31 of the Federal Acquisition Regulation, in effect on the date of this contract, shall govern all costs claimed, agreed to, or determined under this clause.

4. The FAR 31.201-1, "Composition of total cost" provision, in effect on the date of Contract 23 99, stated in pertinent part: "(a) The total cost of a contract is the sum of the direct and indirect costs allocable to the contract, incurred or to be incurred, less any allocable credits," plus any allocable cost of money pursuant to 31.205.10.

2 5. FAR 49.206-2(b )(2), applicable to all contracts that provide for termination for the convenience of the government, 1 states in pertinent part that: "When the total-cost basis is used under a complete termination, the contractor must itemize all costs incurred under the contract up to the effective date of termination."

6. The FAR 52.214-26, AUDIT-SEALED BIDDING (APR 1985) clause of Contract 2399, states at paragraph (b)(2) that: "Records pertaining to appeals under the Disputes clause or to litigation or the settlement of claims arising under or relating to the performance of this contract shall be made available until disposition of such appeals, litigation or claims."

7. ESCI's 5 July 2012 total cost basis termination settlement claim was submitted for audit to the Defense Contract Audit Agency (DCAA) on 22 March 2013. On 24 February 2014, the DCAA issued a "DISCLAIMER OF OPINION" report. The stated reasons for the disclaimer included, among other things, that:

Based upon the results of our adequacy evaluation, we determined that ESCI's July 5, 2012 termination for convenience settlement proposal does not comply with the requirements of FAR 49.206-2(b)(2) Bases for Settlement Proposals, and FAR 49 .206-1 (c ), Submission of Settlement Proposals, and therefore, is inadequate.

ESCI' s termination for convenience settlement proposal was not prepared using actual costs incurred through the effective date of the termination, but iiistead was based on an estimated increased contract price.

(Bd. corr., DCAA Report)

8. On 4 April 2014, the government served 24 discovery requests on ESCI in the captioned appeal. On 14 April 2014, ESCI answered the request with argumentative allegations that the documents had already been provided to the government, or did not exist, or were irrelevant to the issues in the appeal. (Bd. corr.)

9. On 25 April 2014, the government moved for an order to compel discovery (Bd. corr.). On 20 May 2014 the presiding judge issued a discovery order stating in relevant part:

1 See FAR 49 .002.

3 ESCI will deliver to the Atlanta DCAA Branch Office, no later than 20 June 2014, the responsive documents in a separate marked package for each of the following requests in the government's 24 April 2014 motion: Nos. 1, 2, 3, 5, 11, 12, 13, 14, 19, and 20. IfESCI has no responsive documents for a particular request, it shall so state in writing with its submission. After inspection and copy at the DCAA office, the government will return the submitted documents to ESCI. A single document "dump" by ESCI for all of the above-listed requests, without a separate package of documents for each request, or inclusion of clearly non-responsive documents in a package for a particular request, will be considered a non-compliance with this order.

For any non-compliance with the foregoing orders, the Board will entertain a motion for appropriate sanctions, up to and including dismissal of the appeal.

(Id.)

10. On or about 25 June 2014, ESCI submitted its response to the presiding judge's 20 May 2014 order. ESCI's response provided no documents, explanation or other response to four of the ten production requests for which a response was required by the 20 May 2014 order. Those four requests were: Request No. 12 for "copies of all purchase orders for costs incurred under the subject contract"; Request No. 13 for "copies of all receipts for costs incurred under the subject contract"; Request No. 14 for "copies of all subcontractor and vendor agreements relating to this contract"; and Request No.

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