Jacobs Engineering Group, Inc. v. United States

63 Fed. Cl. 451, 2005 U.S. Claims LEXIS 5, 2005 WL 66900
United States Court of Federal Claims·Decided January 12, 2005·No. No. 02-1500 C·Published·Cited by 3 cases

Opinion

OPINION AND ORDER

GEORGE W. MILLER, Judge.

This matter is before the Court on the parties’ cross-motions for summary judgment. Plaintiff, Jacobs Engineering Group (“Jacobs”) filed a Motion for Partial Summary Judgment. Defendant, the United States (“Government”), filed an Opposition to Plaintiffs Motion for Partial Summary Judgment and a Cross-Motion for Summary Judgment. Jacobs filed an Opposition to Defendant’s Cross-Motion for Summary Judgment and Reply to Defendant’s Opposition to Plaintiffs Motion for Summary Judgment; the Government thereafter filed its Reply. Following oral argument on the cross-motions, the parties filed supplemental briefs at the Court’s request. For the following reasons, defendant’s motion is GRANTED, and plaintiffs motion is DENIED.

BACKGROUND 1

I. Contract Formation and Performance

The United States Department of Energy (“DOE”) has long been interested in gasification, a means of converting coal to electricity and fuel, as an alternative source of energy. Report of the National Energy Policy Development Group, May 2001, D.App. 4-7; United States Department of Energy Report to Congress: Gasification Product Improvement Facility, February 1991, D.App. 12. Once a promising technology like gasification is identified, the DOE often enters into cost-shared research and development contracts with contractors in the private sector for the purpose of advancing the technology to the market. Declaration of Dale K. Schmidt 115, D.App. 1. In 1990, the DOE became interested in testing Integrated Gasification Combined Cycle (“IGCC”) technology through the construction of a small-scale pilot facility in Morgantown, West Virginia. Congress authorized funding for the project, but required the DOE to obtain private sector commitment to share at least 20 percent of the cost of the facility. H.R. Report No. 101— 971, at 62 (October 27,1990).

Contractors who enter into cost-shared research and development contracts generally bear at least 20 percent of project costs. Contractors also bear the risk that the contracts may fail in the development stage. Schmidt Dec. ¶ 5, D.App. 1. In return, the contractors receive financial support in developing new technologies, and the opportunity to derive substantial benefit when those technologies are introduced to the market. Id. 112. Pursuant to 42 U.S.C. § 5908(a), the United States takes title to “subject inventions,” which are any inventions conceived or first actually reduced to practice under research and development contracts, unless the DOE waives its rights in such inventions. A contractor must apply for, and be granted, a patent waiver in order to retain title to a subject invention; such waiver may be granted at the time of contracting. 42 U.S.C. § 5908(c), (d).

On May 24, 1991, the DOE issued a solicitation inviting proposals for the development, design and construction of a gasifier. The solicitation also provided that the successful offeror would acquire a first right of refusal to enter into a cooperative research and development agreement with DOE to further develop gasification technology at the facility. Government’s Proposed Findings of Uncontroverted Facts at 4. CRS Sirrine Engineers, Inc. (“CRSS”) submitted a proposal and commenced negotiations with the DOE. During negotiations, CRSS indicated that it was not willing to commit to bear 20 percent of the costs of the project until it found subcontractors to help absorb the costs. Declaration of Lisa A. Jarr ¶¶ 3-6, D.App. 40-41. The DOE, in turn, was not willing to grant CRSS a patent waiver on the technology it planned to develop during the project unless CRSS [454] committed to bear 20 percent of project costs. The issue was resolved through Clause H.099, a Project Continuance clause, which gave CRSS the right to withdraw through Task 4 of the Contract if the DOE did not grant it a patent waiver, or if CRSS could not obtain a cost sharing partner. The Project Continuance clause stated that:

The parties hereto agree that upon completion and delivery of the Conceptual Design in Task 4 of the Statement of Work, continuance of the project is contingent upon the contractor obtaining adequate cost-sharing [partnering with subcontractors to help pay the 20 percent of the costs] and upon the Contractor being granted an advance patent waiver, satisfactory to Contractor by the DOE Patent Counsel.
In the event that the Contractor elects to discontinue the project, the Contractor will be liable for 20% of the costs incurred during the performance period.

J.App. at 26.

On September 30, 1992, the DOE awarded Contract No. DE-AC21-92MC-28202 (“Contract”) to CRSS to develop, design, fabricate and construct a gasification facility in Morgantown. Compl. ¶ 4. On August 1, 1994, Jacobs purchased CRSS and all of its rights and obligations under the Contract. Compl. ¶ 7.

Contract clause I.020a, Cost Sharing Contract — No Fee, expressly incorporating Federal Acquisition Regulation (“FAR”) § 52.216-12, provided that “[t]he Government shall not pay to the Contractor a fee for performing this contract.” 48 C.F.R. § 52.216-12. Jacobs, therefore, did not collect a fee during the project. Instead, as allowed by DOE regulations, the amount of fee foregone was “considered in establishing the degree of cost participation.” Department of Energy Acquisition Regulation (“DEAR”) § 917.7003(h), D.App. 99. Thus, the Government’s share of the Contract costs included an element of “foregone fee” attributable to Jacobs and its key subcontractors. For billing and payment purposes, all costs incurred by Jacobs and its subcontractors, together with the foregone fee, were submitted to the DOE for payment, and the DOE paid 80 percent of the invoiced amount. PI. Opp. at 12; “Representative Jacobs Invoice,” D.App. 101-07.

As provided for by the Project Continuance clause, Jacobs obtained adequate cost-sharing and was granted an advance patent waiver by the DOE. Transcript of Proceedings, Jacobs Engineering Group, Inc. v. United States, No. 02-1500C at 56 (Fed.Cl. May 17, 2004). During the design and engineering stage of Phase I of the Contract, it became apparent that the costs to complete the project were going to be substantially greater than originally estimated. The DOE and Jacobs tried to reduce the scope of the project but the design changes needed to bring the project within budget were too significant and would have resulted in a facility that did not meet project objectives. Faced with a cost overrun that could not be funded within the DOE’s projected gasification budget, the DOE terminated the contract for convenience. Gov’t Prop. Facts at 12.

II. Cost-Sharing Arrangement Clause

The Contract included a Cost-Sharing Arrangement clause, which specified:

The Contractor and the Government agree to share the cost of the effort for Phase I and Phase II as follows:

Government Contractor Total

(80%) (20%) (100%)

Phase I_$19,850,784_$4,962,696__$24,813,480

Phase II_$ 3,149,515_$ 787,379_$ 3,936,894

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Jacobs Engineering Group, Inc. v. United States, 63 Fed. Cl. 451, 2005 U.S. Claims LEXIS 5, 2005 WL 66900 (uscfc 2005).

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