CB&i Areva Mox Servs., LLC v. United States
| Decision Date | 30 July 2018 |
| Docket Number | No. 18-691C,No. 18-80C,No. 18-522C,No. 18-921C (consolidated),No. 18-677C,No. 17-2017C,No. 16-950C,16-950C,17-2017C,18-80C,18-522C,18-677C,18-691C,18-921C (consolidated) |
| Parties | CB&I AREVA MOX SERVICES, LLC, Plaintiff, v. THE UNITED STATES, Defendant. |
| Court | U.S. Claims Court |
US/Russia Plutonium Management and Disposition Agreement; National Nuclear Security Administration; Cost-Plus-Fee Construction Contract; Rules 12 and 56 Cross-Motions; Availability of Declaratory Relief; Government Claim Under Contract Disputes Act; Statute of Limitations.
Mark J. Linderman, with whom were Dennis J. Callahan and Stephen L. Bacon, Rogers Joseph O'Donnell, PC, San Francisco, California for Plaintiff.
Joseph E. Ashman, Senior Trial Counsel, with whom were P. Davis Oliver and Anthony Schiavetti, Trial Attorneys, and Chad A. Readler, Acting Assistant Attorney General, Robert E. Kirschman, Jr., Director, and Allison Kidd-Miller, Assistant Director, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, Washington, D.C. for Defendant.
Plaintiff CB&I AREVA MOX Services, LLC ("MOX Services") commenced this action on August 5, 2016. The action arises from MOX Services' cost reimbursement contract with the Department of Energy, National Nuclear Security Administration ("NNSA") to construct a Mixed Oxide Fuel Fabrication Facility at the Department of Energy's Savannah River Site, near Aiken, South Carolina. On November 3, 2017, with the Court's approval, MOX Services filed a Supplemental Complaint for Damages and Declaratory Relief consisting of five counts: (1) Breach of Contract (Incentive Fee); (2) Declaratory Relief (Premature Claw Back of Provisional Incentive Fee); (3) Breach of Contract (Fixed Fee On Out-of-Scope Work and for the Realization of Risks NNSA Assumed); (4) Breach of Contract (Request for Equitable Adjustment Preparation Costs); and (5) Declaratory Relief (Request for Equitable Adjustment Preparation Costs).
This case, docket no. 16-950C, was the first in a series of actions that MOX Services filed under the same contract. The cases were filed separately in this Court because of individual claims that MOX Services had submitted to the contracting officer, and because of the NNSA's issuance of individual contracting officer final decisions. On May 15, 2018, the Court ordered the consolidation of these cases for further proceedings and trial.
The present controversy concerns cross-motions that the parties filed under Rules 12 and 56 of the Court. On December 27, 2017, MOX Services filed a motion for partial summary judgment regarding Counts II and V (the declaratory relief counts) of the Supplemental Complaint. MOX Services contends that Count II presents a pure question of contract interpretation on whether the NNSA prematurely clawed back $21.6 million of cost/schedule incentive fee payments it had made to MOX Services. Similarly, MOX Services contends that Count V presents a question of regulatory interpretation on whether the attorneys' fees and other professional consultant costs claimed by MOX Services for reimbursement as contract administration costs in investigating and preparing a Request for Equitable Adjustment ("REA") constitute "legal costs" that must comply with the requirements of 10 C.F.R. Part 719 (2013).2
On February 1, 2018, Defendant filed a motion for partial dismissal regarding Counts II, III, and V of the Supplemental Complaint. Defendant argues that Counts II and V should be dismissed for lack of jurisdiction because they were not presented to the contracting officer, they do not present a case or controversy and are not ripe, and because declaratory relief may not be granted when money damages are adequate. Defendant also moved for partial dismissal of Count III because MOX Services failed to provide required contractual notice of the claim, and because the claim allegedly is time barred by the Contract Disputes Act's six-year statute of limitations, 41 U.S.C. § 7103(a)(4) (2011).
On March 28, 2018, Defendant filed a response to MOX Services' motion for partial summary judgment, and purported to cross-move for partial summary judgment in its favor. However, as MOX Services notes, Defendant's "cross-motion" essentially was only a response, and not a cross-motion, to the arguments advanced by MOX Services. MOX Services, with some justification, objected to Defendant's filing of the final reply brief through the use of a "cross-motion." The Court nevertheless has accepted all of the briefs submitted by the parties, concluding that Defendant did not obtain any advantage by filing the final brief.
The parties completed their briefing by April 25, 2018. The Court heard oral argument on the motions on May 17, 2018. For the reasons explained below, the Court GRANTS MOX Services' motion for partial summary judgment on Counts II and V, and DENIES Defendant's motion to dismiss Counts II, III, and V, and DENIES Defendant's cross-motion for partial summary judgment.
On March 22, 1999, the NNSA awarded Contract No. DE-AC02-99CH10888 to MOX Services' predecessor in interest, Duke Cogema, Stone & Webster, LLC. The Mixed Oxide Fuel Fabrication Facility ("MFFF") is intended to transform weapons-grade plutonium into mixed oxide fuel rods that may be used in commercial nuclear power plants. The MFFF represents the United States' performance of its obligations under the Plutonium Management and Disposition Agreement ("PMDA") between the United States and Russia. Under the PMDA, the United States and Russia agreed to dispose of 34 metric tons of weapons-grade plutonium roughly in parallel.
Construction of the MFFF is a considerable undertaking, and when built will constitute one of the largest and most complex fabrication facilities in the world. According to MOX Services, the main physical plant will require over 4.5 million cubic feet of concrete and 70 million pounds of reinforced steel. The hundreds of process units and other equipment to be installed in the plant, many of which include conveyors and lifts and are sealed within hardened glove boxes, are being fabricated by specialty manufacturers in the United States and around the world at great expense. The controls and utilities that join the building to the equipment will require, among other utility delivery channels, over 80 miles of piping, nearly 1,300 miles of cabling, and over 1.3 million pounds of HVAC ducts. As a nuclear construction project where contractors will be working with weapons-grade plutonium and uranium oxide, the operations are governed by the regulations of the Nuclear Regulatory Commission.
The contract consists of a base contract for the design of the MFFF and three options: Option 1 is for construction of the MFFF (including fabrication and installation of process unit equipment and cold start-up); Option 2 is for the operation of the MFFF; and Option 3 ultimately is for the deactivation of the MFFF.
On May 20, 2008, MOX Services and the NNSA executed Modification 124 to the contract, which definitized the construction phase of the project (Option 1). The NNSA awarded Option 1 to MOX Services on a cost reimbursement basis, with MOX Services eligible to earn various types of fee or profit, including incentive fee. The contract includes the standard Federal Acquisition Regulation ("FAR") clause, FAR 52.243-2 (2007), Changes (Cost Reimbursement). This clause allows the NNSA's contracting officer to make changes within the scope of the project, and requires the contracting officer to make commensurate adjustments to the estimated costs and schedule, fee and other terms. The changes clause also applies to constructive changes performed by the contractor without a formal change order. In particular, the contract described certain risks that were not included in the original scope of work, for which the NNSA would be responsible if the risks materialized. The potential impacts of these risks were significant in terms of cost and schedule, but were difficult, if not impossible, to quantify.
The contract language describes the risks associated with uncertainties in the Congressional appropriations process. To effectively plan and manage a project of the size and scope of the MFFF requires sufficient, predictable, and reliable Congressional funding. The NNSA accepted risks related to the amount and timing of project funding, and agreed to process appropriate changes to the contract if this risk materialized.
As noted, the 1998 PMDA that gave rise to the MFFF project requires the plutonium disposition efforts of the United States and Russia to proceed roughly in parallel with each other. Because the risks associated with implementing the parallelism requirement were not quantifiable and were beyond MOX Services' control, the contract specifically and broadly excluded risks "related to" the Russian parallelism requirement from its scope. Since the NNSA accepted these risks, they were beyond the scope of the contract, and their potential impacts on the project were not included in the MFFF cost or schedule estimates.
The Russian program has lagged behind that of the United States, with the parallelism requirement exerting a drag on MFFF progress. Russia was slow to settle on the MFFF methodology to meet its plutonium disposition obligations. Once Russia determined that it would rely on versions of the same technology MOX Services planned to deploy on the U.S. MFFF, it took years to work out and ratify a liability protocol under which Russia would use the technology.
The cost and schedule of the MFFF has escalated dramatically. Originally, the estimated cost was less than $4 billion, and the completion date was targeted for 2016. At present, the estimated cost is $9.9 billion, and the estimated completion date is in 2029.
Under Option 1 of the contract, beginning in the first quarter of fiscal year 2008, MOX Services was eligible to earn quarterly incentive fees for making progress toward...
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