Arko Executive Services, Inc. v. U.S.

• Decision Date: 21 January 2009
• Docket Number: No. 2008-5011.,2008-5011.
• Citation: Arko Executive Services, Inc. v. U.S., 553 F.3d 1375 (Fed. Cir. 2009)
• Parties: ARKO EXECUTIVE SERVICES, INC., Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

553 F.3d 1375

ARKO EXECUTIVE SERVICES, INC., Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.

No. 2008-5011.

United States Court of Appeals, Federal Circuit.

January 21, 2009.

Michael J. Shea, Sutherland Asbill & Brennan LLP, of Washington, DC, argued for plaintiff-appellant. With him on the brief was Lewis S. Wiener.

Michael J. Dierberg, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant-appellee. With him on the brief were Gregory G. Katsas, Assistant Attorney General, Jeanne E. Davidson, Director, and Donald E. Kinner, Assistant Director.

Before RADER and DYK, Circuit Judges, and WALKER,^* Chief District Judge.

WALKER, Chief District Judge.

Plaintiff-appellant Arko Executive Services, Inc ("Arko") appeals from a final order of the Court of Federal Claims granting summary judgment in favor of defendant-appellee United States ("the government") in this services contract dispute brought pursuant to the Contract Disputes Act of 1978, 41 USC §§ 601-613. See Arko Executive Servs., Inc. v. United States, 78 Fed Cl 420 (2007). Because the trial court correctly interpreted the contract at issue, we affirm.

BACKGROUND

Arko, an American security company, contracted with the government to provide guard services to the American Embassy in Nicosia, Cypress. Services were provided pursuant to Contract No S-CY-600-00-0006 ("the contract"), which provided for a base year of service beginning April 1, 2000 and four optional one-year renewals.

The government exercised the four one-year options to renew, and the last of these options was set to expire on March 31, 2005. In November 2004, the government solicited offers for the successor contract, with an anticipated start date of April 1, 2005. Two timely offers were submitted, neither by Arko.

On February 8 and again on February 15, 2005, Arko inquired whether the government would require phase-in, phase-out services after March 31, 2005. On February 16, the government responded that it did "not anticipate the need for any phase-in/phase-out services." Then, on March 4, 2005, the government notified Arko that it would require services through April 30, 2005, citing FAR 52.217-8, the "Option to Extend Services" for its unilateral extension of the performance period.

Arko immediately disputed the government's authority to extend Arko's provision of services under FAR 52.217-8, stating that Arko would perform the services under protest. Arko's position apparently was that the only contractual provision allowing continued services after the exercise of the four one-year options to renew was FAR 52.237-3, the "Continuity of Services" clause, which, unlike FAR 52.217-8, provided for cost-plus reimbursement of expenses incurred by Arko during the extension. By letter dated March 18, 2005, the government notified Arko that its final decision was to invoke FAR 52.217-8 and that it now would require service through May 31, 2005. According to the letter, the government required the additional month of services to ensure time for a replacement contractor to be fully operational and to avoid the need for later extensions. The government issued amended contract modification 21 on March 22, 2005, formalizing its invocation of an extension of services pursuant to FAR 52.217-8. Modification 21 specified that Arko would be paid for services performed from April 1 to May 31, 2005 at the same rate it had been paid for services during the immediately preceding renewal period.

Arko continued performing guard services at the embassy in Nicosia until May 31, 2005. A successor contractor was selected on April 26, 2005 and began performance June 1, 2005.

On November 5, 2005, Arko filed a suit, case no 05-1193C, in the United States Court of Federal Claims ("the trial court") challenging the government's final decision to exercise the government's option to extend services pursuant to FAR 52.217-8 rather than FAR 52.237-3. Arko then submitted a claim to the government seeking compensation of $184,010.10 pursuant to FAR 52.237-3; the government denied that claim on March 21, 2006. On April 14, 2006, Arko filed a new suit in the trial court, case no 06-0296C, challenging the denial of compensation. The trial court consolidated the two cases on May 12, 2006.

Arko filed a motion for summary judgment on the issue whether it was entitled to payment pursuant to FAR 52.237-3. The government moved for summary judgment on liability, arguing that FAR 52.237-3 did not apply to the services performed by Arko from April 1 to May 31, 2005 and that government had the authority to require those services under FAR 52.217-8. The trial court granted summary judgment in favor of the government, finding no genuine issue of material fact whether the government validly exercised the FAR 52.217-8 clause and finding no basis for Arko's contention that the services provided from April 1 to May 31, 2005 were the phase-in, phase-out services contemplated by FAR 52.237-3. See Arko, 78 Fed Cl at 423-25.

The trial court entered final judgment on September 26, 2007, and Arko timely appealed to this court, which has jurisdiction pursuant to 28 USC § 1295(a)(3). We heard oral argument on September 4, 2008.

DISCUSSION

We review the trial court's decisions on summary judgment de novo. St. Christopher Assocs., LP v. United States, 511 F.3d 1376, 1380 (Fed.Cir.2008). Summary judgment is appropriate where there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Here, there are no disputes of material fact, and the case turns on issues of contract interpretation.

This case centers on several labyrinthine provisions of the contract between Arko and the government. Section F.4 of the contract defines the period of performance:

F.4. Period of Performance.

F.4.1. The performance period of this contract is from the date of Notice to Proceed and continuing for 12 months, with four, one-year options to renew. The initial period of performance includes any transition period authorized under the contract.

F.4.2. The Government may extend this contract in accordance with the option clause at Subsection I.1.2, FAR Clauses Incorporated by Full Text (FAR 52.217-9), Option to Extend the Term of the Contract (Deviation), which also specifies the total duration of this contract.

F.4.3 The Government may exercise the option set forth at Subsection I.1.1, "FAR 52.217-8, Option to Extend Services", within the currently ongoing period of performance or within 30 days after funds for the option become available, whichever is later.

FAR 52.217-9, a clause of the Federal Acquisition Regulations ("FAR") incorporated into the contract in full text, provides:

52.217-9 OPTION TO EXTEND THE TERM OF THE CONTRACT (MAR 1989) (DEVIATION)

(a) The Government may extend the term of this contract by written notice to the Contractor within the performance period of the contract or within 30 days after funds for the option year become available, whichever is later.

(b) If the Government exercises this option, the extended contract shall be considered to include this option provision.

(c) The total duration of this contract, including the exercise of any options under this clause, shall not exceed five years.

FAR 52.217-8, a clause of the FAR incorporated by reference into the contract, provides:

Option to Extend Services (NOV 1999)

The Government may require continued performance of any services within the limits and at the rates specified in the contract. These rates may be adjusted only as a result of revisions to prevailing labor rates provided by the Secretary of Labor. The option provision may be exercised more than once, but the total extension of performance hereunder shall not exceed 6 months. The Contracting Officer may exercise the option by written notice to the Contractor within ____ [insert the period of time within which the Contracting Officer may exercise the option].

48 CFR § 52.217-8 (emphasis added). Section F.4.3 of the contract, quoted above, allows the government to exercise the FAR 52.217-8 option "within the currently ongoing period of performance," as the government did in this case.

Finally, FAR 52.237-3, incorporated into the contract in full text, provides:

52.237-3 CONTINUITY OF SERVICES (JAN 1991)

(A) The Contractor recognizes that the services under this contract are vital to the government and must be continued without interruption and that, upon contract expiration, a successor, either the government or another contractor, may continue them. The Contractor agrees to (1) furnish phase-in training and (2) exercise its best efforts and cooperation to effect an orderly and efficient transition to a successor.

(B) The Contractor shall, upon the contracting officer's written notice, (1) furnish phase-in, phase-out services for up to 90 days after this contract expires and (2) negotiate in good faith a successor to determine the nature and extent of phase-in, phase-out services required. The plan shall specify a training program and a date for transferring responsibilities for each division of work described in the plan, and shall be subject to the Contracting Officer's approval. The Contractor shall provide sufficient experienced personnel during the phase-in, phase-out period to ensure that the services called for by this contract are maintained at the required level of proficiency.

(C) The Contractor shall allow as many personnel as practicable to remain on the job to help the successor maintain the continuity and consistency of the services required by this contract. The Contractor also shall disclose necessary personnel records and allow the successor to conduct on-site interviews with these employees. If selected employees are agreeable to the change, the...