Lockheed Support System, Inc. v. United States

36 Fed. Cl. 424, 3 Wage & Hour Cas.2d (BNA) 785, 1996 U.S. Claims LEXIS 155, 1996 WL 489098
CourtUnited States Court of Federal Claims
DecidedAugust 21, 1996
DocketNo. 94-613C
StatusPublished
Cited by5 cases

This text of 36 Fed. Cl. 424 (Lockheed Support System, Inc. 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
Lockheed Support System, Inc. v. United States, 36 Fed. Cl. 424, 3 Wage & Hour Cas.2d (BNA) 785, 1996 U.S. Claims LEXIS 155, 1996 WL 489098 (uscfc 1996).

Opinion

OPINION

FUTEY, Judge.

This contract’s case is before the court on cross-motions for summary judgment. Plaintiff, Lockheed Support Services, Inc., seeks to recover general and administrative costs (G & A), as well as overhead and profit, [426]*426associated with wage revisions made during the base period of the contracts at issue in this case. Defendant, United States, asserts that the Price Adjustment Clause included in the contracts prohibits recovery of these costs.

Factual Background

The Postal Service, on behalf of defendant, entered into four contracts with plaintiff seeking services required to support a Remote Bar Coding System (RBCS) at Remote Encoding Sites (RES) for 16 General Mail Facilities (GMF’s). Defendant implemented the RBCS to improve and expand its existing automated letter processing capabilities by increasing the volume of mail that could be sprayed with a machine-readable bar code. The contracts called for plaintiff to provide Key Entry Operators (KEO’s), who manually addressed mail incapable of being read by the automated system.

Payment for these KEO’s was governed by the Service Contract Act of 1965 (SCA), as amended, 41 U.S.C. §§ 351-358, and by the regulations of the Secretary of Labor issued under the SCA. See 29 C.F.R. § 4 (1996). The SCA requirements are incorporated in § H.28 of each contract:

each service employee employed in the performance of this contract by the contractor or by any subcontractor must be paid (a) no less than the minimum monetary wages and (b) furnished fringe benefits in accordance with the ages and fringe benefits determined by the Secretary of Labor or authorized representative, as specified in any wage determination attached to this contract.

Thus, the contracts ensured the KEO’s would be paid at least the federal minimum, stating, “no employee engaged in performing on this contract may be paid less than the currently applicable minimum wage specified under section 6(a)(1) of the Fair Labor Standards Act of 1938, as amended.”1 In order to comply with this requirement, the Contracting Officer (CO) requested wage determinations for the RES in Nashville, Tennessee, from the Department of Labor (DOL) on September 29, 1992. Once the DOL issued those wage determinations, they were incorporated into the contracts.

Defendant awarded the four contracts to plaintiff on May 29, 1992: 104230-92-B-4417, -4418, -4419, -4421. Plaintiff, pursuant to the contracts, agreed to establish a Nashville RES, which would provide services for GMF’s located in Santa Ana, California (contract 4417); Ft. Lauderdale, Florida ( — 4418); Phoenix, Arizona (-4419); and St. Louis, Missouri (-4421). Performance under the contracts proceeded in two phases: (1) a pre-production phase which required plaintiff to conduct training and provide installation support and preparation services; and (2) a two year base period for services on production basis. The contracts also included an option for an additional two year production period.

During the pre-production phase of the contracts, plaintiff contacted the CO and stated the wage determination was inaccurate. In response, the CO told plaintiff to pursue the claim with the DOL. After plaintiff did so, the CO received a letter from the DOL dated September 11, 1992, which enclosed the revised wage determinations for the Nashville area. More importantly, the letter stated that the revised wage determinations must be incorporated into the contracts, pursuant to 29 C.F.R. § 4.5(a)(2),2 [427]*427effective upon the commencement of these contracts. The DOL, however, mistakenly believed the commencement date for all of the contracts was not until September 24, 1992, while the contracts state, and both parties concede, that the contracts had already commenced on May 29, 1992. The revised wage determinations increased the minimum hourly wage for Level I KEO’s to $6.75 per hour, and the applicable health and welfare benefits increased to $2.23 per hour. By letter dated September 21, 1992, the CO confirmed to plaintiff that the contracts would be modified to incorporate the wage determinations included in the DOL letter.

On September 23, 1992, the CO issued a unilateral modification to each of the four contracts to incorporate the revised wage determinations. On September 29, 1992, plaintiff advised the CO that, because of the wage changes, plaintiff anticipated problems in qualifying and hiring KEO’s at the Nashville RES due to the increased costs involved with the revised wage determinations. More than a year later, plaintiff and defendant agreed to abilateral modification for the contracts to compensate plaintiff in full for all the direct costs caused by the revised wage determinations. These modifications increased defendant’s payments under the contracts by $1,314,082.00. The modifications, however, did not include recovery for G & A, overhead, and profit, which amounted to $639,142.56. On December 30,1993, plaintiff requested that the CO modify the contracts to compensate for these indirect costs in association with the previously increased direct costs resulting from the revised wage determinations. On February 15, 1994, the CO denied plaintiffs request, referring to the Fair Labor Standards Acts and Service Contract Act-Price Adjustment Clause included in section H.29 of the contracts, which limits compensation due to wage changes. This clause states in section (c):

When, as a result of determinations of minimum prevailing wages and fringe benefits applicable at the beginning of the renewal option period, or when an increased or decreased wage determination is otherwise applied to this contract, or when as a result of any amendment to the FLSA enacted after award that affects the minimum wage, and whenever such determination becomes applicable to this contract under law, the contractor increases or decreases wages or fringe benefits of employees working on the contract to comply, the contract price or unit price labor rates will be adjusted accordingly. This adjustment is limited to increases or decreases in Social Security, unemployment, taxes, and workers’ compensation insurance, but may not otherwise include any amount for general and administrative costs, overhead, and profit.3

On March 1, 1994, plaintiff submitted four letters to the CO, demanding that the contracts be modified to include G & A, overhead, and profit for the increased labor resulting from the increased wage determinations, claiming it was entitled to a sum of $639,142.56 for the four contracts involved. On March 11, 1994, the CO issued his final decisions denying each of the claims. Plaintiff filed suit in this court on September 14, 1994.

Discussion

I. Summary Judgment

Summary judgment is appropriate when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. RCFC 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 2509-10, 91 L.Ed.2d 202 (1986); Jay v. Secretary, DHHS,

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Bluebook (online)
36 Fed. Cl. 424, 3 Wage & Hour Cas.2d (BNA) 785, 1996 U.S. Claims LEXIS 155, 1996 WL 489098, Counsel Stack Legal Research, https://law.counselstack.com/opinion/lockheed-support-system-inc-v-united-states-uscfc-1996.