In the United States Court of Federal Claims No. 16-1268 Filed: June 11, 2019
) JUST IN TIME STAFFING, ) ) Plaintiff, ) ) Contract Disputes Act; Constructive v. ) Change; Inherently Governmental ) Function; National Labor Relations Act. THE UNITED STATES, ) ) Defendant. ) ) )
Joseph A. Whitcomb, Denver, Colorado, for plaintiff.
Andrew James Hunter, U.S. Department of Justice, Civil Division, Washington, DC, for defendant.
OPINION
FUTEY, Senior Judge
This case is before the Court on defendant’s amended motion to dismiss plaintiff’s
amended complaint, which was filed on July 6, 2017, pursuant to rules 12(b)(1) and 12(b)(6) of
the Rules of the Court of Federal Claims (“RCFC”). Defendant filed its motion on August 23,
2017. Plaintiff filed its response on September 20, 2017, and defendant its reply on October 4,
2017.
Plaintiff seeks costs incurred during labor negotiations, which plaintiff alleges were
sustained performing work in connection with a government contract that the Government
should have performed. Defendant contends that plaintiff fails to state a claim for which relief may be granted, because plaintiff was performing its own legal duty to conduct labor
negotiations with its employees and the Government did not have a duty to intervene in those
negotiations. Defendant further argues that the Court does not possess subject matter jurisdiction
over plaintiff’s claims, because the alleged damages stem from the conduct of third parties and
not the Government.
The Court held oral argument on these matters on November 2, 2017. The matter is now
ripe for decision.
I. BACKGROUND
a. Factual Background
The plaintiff entered into a contract with the United States Army Health Medical
Command’s (“MEDCOM” or “Government”) Health Contracting Activity on March 6, 2014.
Am. Compl. ¶ 1; ECF No. 23-1 at 1 (“Contract”).1 Contract Number V797P-4747A, a non-
personal services contract, required plaintiff to provide medical clerks and other administrative
staffing services at the Carl R. Darnell Army Medical Center (“Medical Center”) in Fort Hood,
Texas. Am. Compl. ¶¶ 5, 9; Contract at 2. Prior to end of the base period of the contract, the
International Union of Operating Engineers Local Union 351, AFL-CIO (“Union”) filed a
petition with the National Labor Relations Board (“NLRB”), which sought to require plaintiff’s
“non-government employee subcontractors to vote to become members of a labor union[.]” Am.
Compl. ¶ 9. The Contracting Officer (“CO”) instructed plaintiff to negotiate a Collective
Bargaining Agreement (“CBA”) with the prospective labor union, representing that any
“reasonable” increase in costs resulting from the labor negotiations would be incorporated into a
1 Plaintiff’s amended complaint states that the Contract was awarded on April 1, 2014. Am. Compl. ¶ 4. The Contract, however, was signed on March 6, 2014. See Contract at 1. Plaintiff confirmed this at oral argument. See ECF No. 26 (“11/2/17 TR 1–102”) at 12.
2 contract modification. Id. ¶ 13. Plaintiff incurred $105,000.76 as a result of the consulting and
legal expenses associated with the labor relations negotiations. Id. ¶ 14. Plaintiff represented at
oral argument that it incurred $92,000 of these expenses as a result of hiring a labor attorney to
negotiate with the prospective union. TR 28. It hired this labor attorney because it believed that it
could be responsible for the costs of an increase in employees’ wages, based upon the CO’s
representation. Id.
The plaintiff requested that MEDCOM not exercise the contract’s first option year,
“[a]fter it became clear that a CBA was likely to be adopted, . . . because the terms of a CBA,
without an equitable adjustment, would have caused [plaintiff] to have to perform at or near an
economic loss.” Id. ¶ 12. Therefore, MEDCOM elected not to exercise the contract’s first option
year and awarded the contract to the predecessor contractor. Id. ¶ 18. On March 9, 2016, plaintiff
requested an equitable adjustment of the contract to include the costs it incurred during labor
relations negotiations. Id. ¶ 14. On April 26, 2016, the CO denied plaintiff’s request. ECF No. 1-
2 at 1.
b. Procedural Background
On October 4, 2016, the plaintiff filed a complaint in this Court and an amended
complaint on July 6, 2017. The amended complaint contains six claims: (1) plaintiff was
impermissibly required to exercise inherently governmental authority, Am. Compl. ¶¶ 23–27; (2)
plaintiff is entitled to an equitable adjustment, id. ¶¶ 28–34; (3) defendant’s conduct constituted a
cardinal change and breach of the contract, id. ¶¶ 34–39; (4) defendant breached the duty of good
faith and fair dealing, id. ¶¶ 40–45; (5) defendant breached the duty to disclose superior
knowledge, id. ¶¶ 46–51; and (6) plaintiff is entitled to attorney fees and costs, id. ¶¶ 52–54.
3 On August 23, 2017, the defendant filed an amended motion to dismiss (“Def. Mot.”) the
amended complaint, pursuant to RCFC 12(b)(1) and 12(b)(6). Plaintiff filed a response (“Pl.
Resp.”) on September 20, 2017 and defendant a reply (“Def. Reply”) on October 4, 2017. On
November 2, 2017, the Court heard oral argument on the motion. This matter was transferred to
the undersigned on May 3, 2019.
II. DISCUSSION
The defendant moves to dismiss plaintiff’s amended complaint for either lack of subject
matter jurisdiction or for failure to state a claim upon which relief may be granted. Def. Mot. at
1. Defendant argues that the Court lacks jurisdiction to adjudicate the claims in the amended
complaint, because plaintiff’s claims are not actually against the United States, but rather are
against its own employees or the Union. Id. at 11–12. Alternatively, defendant argues that each
of plaintiff’s claims fails to state a claim upon which relief may be granted. Id. at 12.
a. Legal Standard
Before reaching the merits, a “court must satisfy itself that it has jurisdiction to hear and
decide” the case. Hardie v. United States, 367 F.3d 1288, 1290 (Fed. Cir. 2004) (quoting
PIN/NIP, Inc. v. Platte Chem. Co., 304 F.3d 1235, 1241 (Fed. Cir. 2002)). Rule 12(b)(1) of this
Court authorizes a party to file a motion asserting a “lack of subject-matter jurisdiction.” RCFC
12(b)(1). “In deciding a motion to dismiss for lack of subject matter jurisdiction, the court
accepts as true all uncontroverted factual allegations in the complaint, and construes them in the
light most favorable to the plaintiff.” Stephens v. United States, 884 F.3d 1151, 1155 (Fed. Cir.
2018) (quoting Estes Exp. Lines v. United States, 739 F.3d 689, 692 (Fed. Cir. 2014)). “The
plaintiff bears the burden of establishing jurisdiction by a preponderance of the evidence.”
Securiforce Int’l Am., LLC v. United States, 879 F.3d 1354, 1359 (Fed. Cir. 2018).
4 Rule 12(b)(6) permits a party to file a motion to dismiss for “failure to state a claim upon
which relief can be granted.” RCFC 12(b)(6). “To survive a motion to dismiss, a complaint must
contain sufficient factual allegations that, if true, would state a claim to relief that is plausible on
its face.” Athey v. United States, 908 F.3d 696, 705 (Fed. Cir. 2018) (internal quotations
omitted); see also Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). And, as with Rule 12(b)(1), the
Court “must accept well-pleaded factual allegations as true and must draw all reasonable
inferences in favor of the claimant.” Athey, 908 F.3d at 705.
b. The Court Possesses Jurisdiction to Adjudicate Some of the Claims in the Amended Complaint
The first issue for the Court to resolve is whether it possesses jurisdiction to adjudicate
plaintiff’s claims.
The Court has jurisdiction, under the Tucker Act, to adjudicate a claim arising under, and
satisfying the requirements of, the Contract Dispute Act (“CDA”), 41 U.S.C. §§ 7101–7109. See
28 U.S.C. § 1491(a)(2). The CDA applies, in relevant part, “to any express or implied
contract . . . made by an executive agency for . . . the procurement of services.” 41 U.S.C. §
7102(a). The contract at issue in this case required plaintiff to provide administrative staffing
services to MEDCOM; it, therefore, falls within the CDA. See Contract at 2; Am. Compl. ¶¶ 5,
9. Consequently, each claim must satisfy the requirements of the CDA for the Court to have
jurisdiction over it.
Under the CDA, “[j]urisdiction requires both that a claim meeting certain requirements
have been submitted to the relevant contracting officer and that the contracting officer have
issued a final decision on that claim.” K-Con Bldg. Sys., Inc. v. United States, 778 F.3d 1000,
1005 (Fed. Cir. 2015). A claim is “a written demand or written assertion by one of the
contracting parties seeking, as a matter of right, the payment of money in a sum certain, the
5 adjustment or interpretation of contract terms, or other relief arising under or relating to th[e]
contract.” Securiforce, 879 F.3d at 1359 (modification in original) (quoting 48 C.F.R. § 52.233-
1(c)).
The Court has jurisdiction over a claim if it arises from the “same operative facts” and
requests “essentially the same relief,” as a claim presented to the CO, even if the complaint
alleges a “slightly different legal theor[y.]” Scott Timber Co. v. United States, 333 F.3d 1358,
1365–66 (Fed. Cir. 2003). A complaint, however, that presents “a materially different factual or
legal theory . . . does create a different claim.” K-Con Bldg. Sys., 778 F.3d at 1006. In other
words, a contractor must include “enough detail to provide adequate notice of the basis” of a
claim to the CO, for the Court to have jurisdiction over that claim. Id. at 1008; see also Contract
Cleaning Maint., Inc. v. United States, 811 F.2d 586, 592 (Fed. Cir. 1987) (holding that the
contractor must provide “a clear and unequivocal statement that gives the contracting officer
adequate notice of the basis and amount of the claim”). The Court must determine whether each
claim satisfies the jurisdictional standard. K-Con Bldg. Sys., 778 F.3d at 1005 (“[T]he
jurisdictional standard must be applied to each claim, not an entire case[.]”).
The plaintiff submitted a request for an equitable adjustment on March 9, 2016. Am.
Compl. ¶ 2; ECF No. 1-1 at 1 (“REA”). The REA requested “a contract adjustment based upon
changed contractual conditions [plaintiff] encountered during its performance of the contract.”
REA at 1. Plaintiff alleged that it “was compelled to undertake additional responsibilities that
were inherently governmental[,]” which caused it to incur $105,000.76 in expenses from
“negotiating with the service employees union on the [G]overnment’s behalf[.]” Id. Plaintiff
further claimed that “no Agency official took any action with regard to the [labor] petition,
6 leaving [plaintiff] to represent the Agency.” Id. at 2. The CO issued a final decision denying the
request on April 26, 2016. Am. Compl. ¶ 2; ECF No. 1-2.
i. The Court Has Jurisdiction to Adjudicate Plaintiff’s Inherently Governmental Function Claim
Count I of the amended complaint alleges that the plaintiff was required to perform an
inherently governmental function in connection with the contract, based on MEDCOM
“[a]brogating its responsibility to address the NLRB petition[.]” Am. Compl. ¶ 27. This claim
was first presented to the CO for a final decision. See REA at 1 (Plaintiff “was compelled to
undertake additional responsibilities that were inherently governmental . . . negotiating with the
service employees union on the [G]overnment’s behalf[.]”). In addition, the claim presented to
the CO was a written demand for a sum certain on which the CO issued a final decision.
Therefore, the Court has jurisdiction to adjudicate this claim.
The defendant’s argument to the contrary is misplaced. Defendant argues that this claim,
“[i]n reality,” is against the plaintiff’s own employees or the labor union. Def. Mot. at 12. This
misunderstands plaintiff’s claim; plaintiff alleges that the Government’s failure to act in
connection with the contract caused it to perform an inherently governmental function and incur
the expense of the labor relations negotiations. It is a claim against the Government, over which
the Court possesses jurisdiction.
ii. The Court Has Jurisdiction to Adjudicate Plaintiff’s Equitable Adjustment Claim
Count II of the amended complaint alleges that the plaintiff “is entitled to receive
$105,000.76 as an equitable adjustment for additional legal expenses it incurred as a result of the
Government’s failure to provide support to [plaintiff] as it was forced to undertake inherent
governmental authority” and that this constituted “a constructive contact change.” Am. Compl. ¶
7 34. While the REA does not explicitly state that the Government’s conduct caused a constructive
contract change, it does allege the facts on which the constructive contract claim is based,
offering “enough detail to provide adequate notice of the basis” of the equitable adjustment
claim. K-Con Bldg. Sys., 778 F.3d at 1006. Count II does not present “a materially different
factual or legal theory” than the REA. Id. The allegations in Count II, therefore, were presented
to the CO. This claim was also a written demand for a sum certain on which the CO issued a
final decision. Consequently, the Court has jurisdiction to adjudicate this claim.
iii. The Court Does Not Have Jurisdiction to Adjudicate Plaintiff’s Cardinal Change Claims
Count III of the amended complaint alleges that the Government “changed the contract
unilaterally” causing a cardinal change. Am. Compl. ¶¶ 36, 39. Specifically, plaintiff alleges that
the CO “instructed [plaintiff] to negotiate with the labor union for costs the [G]overnment stood
to incur” and stated “that [the Government] could not reimburse [plaintiff] for legal costs despite
language in the solicitation and contract to the contrary.” Id. ¶¶ 37–38. These contentions
constitute factual allegations that were not presented to the CO in the REA.
The factual predicate on which the REA relies for its claim to the CO is that the
Government’s failure to act caused plaintiff to encounter changed conditions and perform an
inherently governmental function in negotiating with the union. The factual predicate of Count
III is that the Government affirmatively misled plaintiff by instructing it to negotiate with the
labor union and representing that it would not reimburse plaintiff for its legal costs. This
constitutes a “materially different factual theory” and the REA “fails to allege enough detail to
provide adequate notice of the basis” of this claim. K-Con Bldg. Sys., 778 F.3d at 1006, 1008;
see also Canpro Invs. Ltd. v. United States, 130 Fed. Cl. 320, 336 (Fed. Cl. 2017) (finding that
the claim for superior knowledge was not presented to the CO, because the claim presented to
8 the CO was based on a different factual predicate). Therefore, because Count III was not first
presented to the CO for a final decision, the Court does not possess jurisdiction to adjudicate it.
iv. The Court Does Not Have Jurisdiction to Adjudicate Plaintiff’s Breach of the Duty of Good Faith and Fair Dealing Claim
Count IV of the amended complaint alleges that the Government breached the duty of
good faith and fair dealing in two ways: (1) “when [the CO] instructed [plaintiff] to negotiate on
behalf of the [G]overnment[;]” and (2) “when [the CO] deliberately misled [plaintiff] into
believing that a CBA was already in place and that the prevailing wages listed were the only
labor costs.” Am. Compl. ¶¶ 44–45. The first theory was not presented to the CO for the same
reasons as the cardinal change claim; the second theory also was not presented to the CO,
because the REA provides no facts alleging a misrepresentation by the CO or a representation
that “the prevailing wages listed w[ould be] the only labor costs.” See generally REA. The REA
states that “no collective bargaining agreement was in place” when plaintiff was awarded the
contract. Id. at 1. This statement does not provide adequate notice of the claim in the amended
complaint that “the [G]overnment was aware of the pending CBA before the contract award” and
that the “CO included misleading language in the solicitation that would have led any reasonable
offeror to believe that a CBA was already in place and that the prevailing wage list included in
the solicitation was the only labor costs an offeror would incur.” Am. Compl. ¶¶ 42–43.
Therefore, the Court does not have jurisdiction to adjudicate plaintiff’s good faith and fair
dealing claims. See RMA Eng’g S.A.R.L. v. United States, 140 Fed. Cl. 191, 221 (Fed. Cl. 2018)
(finding that the Court lacked jurisdiction to adjudicate a claim for breach of the duty of good
faith and fair dealing, because the REAs did not contain “the operative facts” of such a claim).
9 v. The Court Does Not Have Jurisdiction to Adjudicate Plaintiff’s Breach of the Duty to Disclose Superior Knowledge
Count V of the amended complaint alleges that the Government had superior knowledge
regarding the “pending N[LR]B decision, but omitted any notice from [the] solicitation and
contract.” Am. Compl. ¶ 50. The REA states that there was no CBA in place at the time of
contract award and a petition was filed with the NLRB “[p]rior to the end of the base contract
period[.]” REA at 1. It does not, however, allege any facts that would suggest the Government
had knowledge of this pending NLRB decision or that the Government withheld superior
knowledge in the solicitation and contract. See generally id. The REA “fails to allege enough
detail to provide adequate notice of the basis” of this claim. K-Con Bldg. Sys., 778 F.3d at 1008;
see also Canpro, 130 Fed. Cl. at 336 (finding the plaintiff’s allegations “regarding superior
knowledge were not first presented to the contracting officer”). Therefore, the Court does not
possess jurisdiction to adjudicate plaintiff’s claim for a breach of the duty to disclose superior
knowledge.
c. Plaintiff Has Failed to State a Claim Upon Which Relief May Be Granted
Having decided that the Court has jurisdiction to adjudicate Counts I and II of the
amended complaint, the Court now turns to defendant’s arguments that both claims fail to state a
claim upon which relief may be granted. The Court analyses each in turn.
i. Plaintiff Did Not Perform an Inherently Governmental Function
Federal Acquisition Regulation (“FAR”) 7.503(a), which applies to “to all contracts for
services” with a few inapplicable exceptions, 48 C.F.R. § 7.502, states that “[c]ontracts shall not
be used for the performance of inherently governmental functions[,]” id. § 7.503(a). FAR 2.101
defines an “inherently governmental function” “as a matter of policy, [as] a function that is so
intimately related to the public interest as to mandate performance by Government employees.”
10 Id. § 2.101. It “includes activities that require either the exercise of discretion in applying
Government authority, or the making of value judgments in making decisions for the
Government.” Id. FAR 7.503(c) lists examples of functions considered to be inherently
governmental; this list includes: “[t]he direction and control of Federal employees[;]”
“[a]warding [prime] contracts[;]” and “[d]etermining whether [prime] contract costs are
reasonable, allocable, and allowable[.]” Id. § 7.503(c)(7), (c)(12)(iv), (c)(12)(vii).
The plaintiff argues that conducting labor relations and “negotiating on behalf of the
[G]overnment was an inherently governmental function.” Pl. Resp. at 9; see also Am. Compl. ¶
26. It argues that any CBA negotiated with its employees would have applied to Federal
employees,2 Am. Compl. ¶ 26, and that, under FAR 52.222-43, included by reference in the
contract, the Government would have had to bear the costs of any increase in plaintiff’s contract
expenses due to the CBA. TR 7–8.
The defendant argues that the plaintiff did not perform an inherently governmental
function, because the National Labor Relations Act (“NLRA”) imposes a duty on employers to
conduct labor relations with their own employees. Def. Mot. at 13. The employees attempting to
unionize in this case were plaintiff’s employees and not the Government’s employees, as
evidenced by the “non-personal services” nature of the contract. Id. at 14–15. In addition,
MEDCOM had no duty or legal authority to provide legal assistance to plaintiff regarding labor
relations. Id. at 17. In response to the plaintiff’s argument that under FAR 52.222-43 the
2 The rationale behind plaintiff’s argument that a CBA would apply to Federal employees is not completely clear. During oral argument, plaintiff appeared to indicate it would so apply for two reasons. First, because of the level of control the Government would exercise over plaintiff’s employees. TR 24–25. And second, because of the contract requirement for a new contractor to offer a right of first refusal to a predecessor contractor’s employees for a base period. This would require the Government to offer the right of first refusal at the rate negotiated by plaintiff, if it decided to not contract out the staffing services. Id.
11 Government would have to pay any increase in wages resulting from the CBA, the defendant
argues that such an increase would have to be accepted by the CO under that same FAR
provision. TR 41.
The NLRA, 29 U.S.C. §§ 151–169, provides employees “the right to self-organization, to
form, join, or assist labor organizations, to bargain collectively through representatives of their
own choosing, and to engage in other concerted activities for the purpose of collective
bargaining or other mutual aid or protection[.]” 29 U.S.C. § 157. Section 158(d) creates a mutual
obligation on employers and the representatives of employees “to meet at reasonable times and
confer in good faith with respect to wages, hours, and other terms and conditions of
employment[.]” Id. § 158(d). The definition of “employer” specifically excludes “the United
States[.]” Id. § 152(2).
The contract at issue required plaintiff to provide medical clerks and other administrative
staffing services to the Government. Contract at 2. In other words, the Government contracted
plaintiff to employ staff at the Medical Center. See, e.g., Contract at 160 (“The Contractor and its
subcontractors shall determine the number of service employees necessary for efficient
performance of this contract and may elect to employ fewer employees than the predecessor
Contractor employed in connection with performance of the work.”). The fact that the employees
were plaintiff’s employees and not the Government’s is further confirmed by the fact that the
contract was one for “Non-Personal Services[,]” which is defined under the FAR as “a contract
under which the personnel rendering the services are not subject, either by the contract’s terms or
by the manner of its administration, to the supervision and control usually prevailing in
relationships between the Government and its employees.” 48 C.F.R. § 37.101. Because the
employees electing to exercise their collective bargaining rights were plaintiff’s employees, it
12 was plaintiff’s responsibility under the NLRA to “meet at reasonable times and confer in good
faith” with their representatives. Id. § 158(d).3 Therefore, the plaintiff has failed to allege
sufficient facts to prove it was performing an inherently governmental function; it has not
plausibly suggested that it was exercising “discretion in applying Government authority” or
making “value judgments in making decisions for the Government.” Id. § 2.101.
The plaintiff is correct that, under FAR 52.222-43, included by reference in the contract,
see Contract at 157, the Government, at least after the contract’s base period, was required to
bear the costs of any increase in plaintiff’s contract costs caused by the CBA. FAR 52.222-43(d),
the so called “Price Adjustment Clause,” states, in part:
The contract price, contract unit price labor rates, or fixed hourly labor rates will be adjusted to reflect the Contractor’s actual increase or decrease in applicable wages and fringe benefits to the extent that the increase is made to comply with or the decrease is voluntarily made by the Contractor as a result of . . . [a]n increased or decreased wage determination [] applied to the contract by operation of law.
Id. § 52.222-43(d). A wage determination applied by operation of law includes “when a
successor contract is bound by the wages and benefits provided in a predecessor contractor’s
collective bargaining agreement[.]” Call Henry, Inc. v. United States, 855 F.3d 1348, 1352 (Fed.
Cir. 2017); see also Lear Sieglar Servs., Inc. v. Rumsfield, 457 F.3d 1262, 1268 (Fed. Cir. 2006)
(“Regulations make clear that the term ‘wage determination’ includes a CBA-defined benefit
level.” (citing 29 C.F.R. § 4.50)). A contractor can also be a successor to itself. See Lear, 457
F.3d at 1268. In addition, if the Price Adjustment Clause is triggered, the Government is required
to adjust the contract costs. Id. In Lear, the United States Court of Appeals for the Federal
3 If the employees were those of the Government, the NLRA would not have applied. See id. § 152(2) (excluding “the United States” from the definition of employer). Instead, such a matter would have been overseen by the Federal Labor Relations Authority. See 5 U.S.C. § 7105.
13 Circuit reversed a decision by the United States Armed Services Board of Contract Appeals and
granted summary judgment to the plaintiff on the grounds that the Government was required to
compensate plaintiff for the increased costs of providing its employees with a defined-benefit
health plan, pursuant to the terms of a CBA. Id. (“We conclude that [the CBA required an actual
increase in fringe benefits] . . . , thereby triggering the government’s obligations under the Price
Adjustment Clause.”). Therefore, in this case, the Government would have been obligated to
adjust the contract price to cover plaintiff’s increased costs of its employees’ wages, pursuant to
the CBA, following the contract’s base period.
The fact that the Government would have been responsible for plaintiff’s additional
expense as a result of the CBA, however, does not convert plaintiff’s duty under the NLRA as a
private employer to negotiate with its employees into an inherently governmental function.
While the Government would have been liable for the additional wage costs resulting from the
CBA, it was not liable for the costs of negotiating the CBA. See Call Henry, 855 F.3d at 1355
(holding that plaintiff’s increased pension benefit costs were not increased costs of complying
with a wage determination). Plaintiff had an independent statutory obligation to “confer in good
faith” with the prospective union. 29 U.S.C § 158(d). The fact that the Government could incur
additional costs as a result of these negotiations does not make this “a function that is so
intimately related to the public interest as to mandate performance by Government employees.”
48 C.F.R. § 2.101.
The Government already exercised its discretion and made a policy decision in the Price
Adjustment Clause that “the government is willing to increase contract price when contractors
incur increased costs as a result of complying with an increase in the wage determination
applicable to their contract.” Call Henry, 855 F.3d at 1351. This is because “the government, as a
14 customer, is willing to pay a premium for services in return for its contractor’s obligation to
compensate service employees adequately and fairly.” Id. The Government is also not opening
itself to a potential exorbitant increase in contract prices, because the NLRA requires employers
to negotiate in good faith. See 29 U.S.C. § 158(d). This situation is, therefore, not analogous to
FAR 7.503(c)(12)(vii)’s example of an inherently governmental function of “[d]etermining
whether [prime] contract costs are reasonable, allocable, and allowable[.]” 48 C.F.R. §
7.503(c)(12)(vii). That determination was already made in awarding the contract. Consequently,
the plaintiff has not alleged sufficient facts to show that it performed an inherently governmental
function in negotiating with the prospective labor union and, therefore, Count I of the amended
complaint must be dismissed.
ii. Plaintiff Is Not Entitled to an Equitable Adjustment Due to a Constructive Change in the Contract
To state a claim for a constructive change, a plaintiff must plausibly allege facts
sufficient to show: “(1) that it performed work beyond the contract requirements, and (2) that the
additional work was ordered, expressly or impliedly, by the government.” Bell/Heery v. United
States, 739 F.3d 1324, 1335 (Fed. Cir. 2014). Plaintiff alleges that the legal expenses incurred
“as a result of the Government’s failure to provide support to [plaintiff] as it was forced to
undertake inherent governmental authority” constituted a constructive contract change. Am.
Compl. ¶ 34. This fails to allege sufficient facts to satisfy either prong of a constructive change
claim.
Regarding the first prong, the plaintiff, as discussed above, did not undertake an
inherently governmental function and had a statutory duty to “confer in good faith” with the
prospective union. 29 U.S.C § 158(d). Several provisions incorporated into the contract made
clear that plaintiff had this statutory duty. The contract incorporates FAR 52.222-40, which
15 requires the contractor to post a notification of employee rights under the NLRA. Contract at
163–64. The required notice informs that the employees’ “employer and the union are required
to bargain in good faith in a genuine effort to reach a written, binding agreement setting [the]
terms and conditions of employment.” 29 C.F.R. Pt. 471, Subpt. A, App. A. FAR 52.222-40(d)
states that the “Contractor shall comply with all provisions of the employee notice and related
rules, regulations, and orders of the Secretary of Labor.” 48 C.F.R. § 52.222-40. The contract
also incorporated FAR 52.222-17. Contract at 160. FAR 52.222-17(i) provides for appropriate
sanctions to be imposed if the contractor is “not in compliance with the requirements of this
clause or any regulation or order of the Secretary [of Labor.]” 48 C.F.R. § 52.222-17(i).
Therefore, the plaintiff has failed to allege sufficient facts to plausibly suggest that negotiating
with the prospective union was work performed beyond the contract requirements, because the
contract required plaintiff to comply with its statutory duty.
As to the second prong, the plaintiff has failed to allege facts sufficient to show that the
Government ordered this work. Plaintiff alleges that “as a result of the union activity that was
directed at [plaintiff’s] subcontracted service providers, [plaintiff] encountered substantially
changed conditions[.]” Am. Compl. ¶ 10.4 This fails to allege that the Government, “expressly or
impliedly,” ordered the work. Bell/Heery, 739 F.3d at 1335. Therefore, the plaintiff has failed to
allege facts plausibly suggesting a constructive change entitling it to an equitable adjustment.
Accordingly, Count II of the amended complaint must be dismissed.
4 As discussed above, the Court does not possess jurisdiction over claims relying on the factual contention that the CO instructed plaintiff to negotiate with the union, because this presents a “materially different factual” theory than the claim presented to the CO. K-Con Bldg. Sys., 778 F.3d at 1006. Count II of the amended complaint does not rely on this factual contention. See Am. Compl. ¶¶ 28–34. The Court, therefore, does not consider whether the alleged fact that the CO instructed plaintiff to negotiate with the union would satisfy the second prong of a constructive change claim.
16 III. CONCLUSION
For the above stated reasons, the following is hereby ordered:
1. Defendant’s amended motion to dismiss is GRANTED.
2. Plaintiff’s amended complaint is DISMISSED.
The Clerk is directed to enter judgment accordingly. No costs.
IT IS SO ORDERED.
s/ Bohdan A. Futey BOHDAN A. FUTEY Senior Judge