Burnside-Ott Aviation Training Center v. Dalton

• Decision Date: 25 February 1997
• Docket Number: No. 96-1227,BURNSIDE-OTT,96-1227
• Citation: 107 F.3d 854
• Parties: 41 Cont.Cas.Fed. (CCH) P 77,043 AVIATION TRAINING CENTER, Appellant, v. John H. DALTON, Secretary of the Navy, Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

Page 854

107 F.3d 854

41 Cont.Cas.Fed. (CCH) P 77,043

BURNSIDE-OTT AVIATION TRAINING CENTER, Appellant, v. John H. DALTON, Secretary of the Navy, Appellee.

No. 96-1227.

United States Court of Appeals, Federal Circuit.

Feb. 25, 1997.

Rehearing Denied March 20, 1997.

Harvey G. Sherzer, Howrey & Simon, Washington, DC, argued for appellant. With him on the brief were Scott Arnold and Richard B. Clifford, Jr.

Tarek Sawi, Attorney, Commercial Litigation Branch, Civil Division, Department of Justice, Washington, DC, argued for appellee. On the brief were Frank W. Hunger, Assistant Attorney General, David M. Cohen, Director, Kirk T. Manhardt, Assistant Director, and Lydia K. Griggsby, Attorney. Of counsel on the brief was Robert C. Ashpole, Trial Attorney, Department of the Navy, Arlington, Virginia.

Before RICH, CLEVENGER, and RADER, Circuit Judges.

CLEVENGER, Circuit Judge.

Burnside-Ott Aviation Training Center (Burnside-Ott) appeals from the decision of the Armed Services Board of Contract Appeals (Board), Burnside-Ott Aviation Training Center, ASBCA No. 43184, 96-1 BCA p 28,102, 1995 WL 757005 (Dec. 14, 1995). The Board denied Burnside-Ott's claim seeking recovery of contract award fees that Burnside-Ott alleges were improperly withheld by the Navy. Because the Board's decision lacks reversible error, we affirm.

I

The present dispute originated from a request for proposals (RFP) issued by the Navy on December 31, 1987, for a cost-plus-award-fee (CPAF) contract covering aircraft maintenance, repair, and overhaul at six naval air stations. A contractor is compensated under a CPAF contract for all of the contractor's allowable costs plus a "base fee" which is a percentage of the total estimated contract cost. The contractor is also eligible for an "award fee" that is tied to performance ratings received by the contractor during the course of fulfilling the contract and is based on a percentage of the total estimated contract cost. Burnside-Ott was the recipient of the contract and received good performance ratings. Burnside-Ott's claim here centers on the government's calculation of the award fee pursuant to a conversion chart that was not included in the RFP or the contract.

Burnside-Ott's award fee was governed by clauses H-20 and H-21 of the RFP. Clause H-20 provided that the maximum base fee allowable for the contract was three percent of total estimated costs, and that the total available fee (base fee plus award fee) was not to exceed ten percent of total estimated costs. These amounts were later amended to a zero base fee with a ten percent total available fee. Clause H-20 also noted that the award fee was to be awarded on a quarterly basis, "based on a unilateral determination by the Government," and calculated as set forth by evaluation criteria in Clause H-21. Clause H-21 listed "Performance Evaluation Report Criteria" with corresponding numerical ratings as follows:

0"60 Submarginal

61"70 Marginal

71"80 Average

81"90 Above Average

91"100 Excellent

The clause defined "Submarginal" performance as performance that "does not meet the contract minimum requirements and may result in termination." Clause H-21 also stated that the amount of the award fee was to be determined by the Fee Determining Official (FDO), and noted, in accordance with Federal Acquisition Regulation (FAR) 16.404-2(a): "The Award Fee decision is a unilateral determination made by the FDO and is not subject to the 'DISPUTES' Clause of the contract."

The precise language of FAR 16.404-2(a) is:

The amount of the award fee to be paid is determined by the Government's judgmental evaluation of the contractor's performance in terms of the criteria stated in the contract. This determination is made unilaterally by the Government and is not subject to the Disputes clause.

Under FAR 16.405, "Contract Clauses," CPAF contracts must contain a clause that "[e]xpressly excludes from the operation of the Disputes clause any disagreement by the contractor concerning the amount of the award fee."

The resulting contract between Burnside-Ott and the Navy was known as the Aircraft Intermediate Maintenance Department (AIMD) contract, and contained the required portions of Clauses H-20 and H-21. Neither the RFP nor the AIMD contract, however, contained any method or chart for converting performance ratings to award fees (i.e., converting scores to money). The FDO thus selected a conversion method that had been used on other CPAF contracts, which awarded fees from zero percent to 100 percent of the award pool spread linearly over performance ratings from 60 to 100 at a rate of 2.5 percent of the potential award fee per rating point. Under this method, Burnside-Ott would only receive an award fee for performance that received a rating greater than 60--i.e., that was better than "Submarginal."

Neither Burnside-Ott nor any other offeror ever questioned the Navy before the contract was awarded regarding the method for conversion of performance ratings into award fee percentages covered by the contract. In spite of--or perhaps because of--the missing conversion method, Burnside-Ott believed the contract required a "1-to-1" method for calculating award fees. Under Burnside-Ott's interpretation, the contract would result in award fees from zero to 100 percent of the award pool spread linearly over performance ratings from 0 to 100 at a rate of one percent per rating point (rather than over the narrower ratings range of 60 to 100 with a 2.5 percent step, as under the FDO's chosen method). As an example, under the "1-to-1" conversion method, a performance rating of 80 would result in an award fee of 80 percent of the award pool. Under the method used by the FDO, in contrast, a rating of 80 would only result in an award fee of 50 percent of the award fee pool (80 less 60, multiplied by 2.5 percent). Burnside-Ott completed the contract on September 30, 1993, earning an average performance score of 93.65 and receiving 84.15 percent of the available award fee pool, instead of the 93.65 percent of the pool to which it felt it was entitled under its "1-to-1" conversion method.

Burnside-Ott disputed the award fee determination method used by the FDO throughout the performance of the AIMD contract. By letters in September and October 1990, Burnside-Ott complained to the Contracting Officer (CO) that the imposition of a conversion chart to calculate award fees was "without contractual basis." The CO replied to the complaints, asserting that the FDO had acted properly in using a conversion chart to determine the award fees. Burnside-Ott submitted a certified claim to the CO, dated April 8, 1991, seeking additional award fees based on a "1-to-1" conversion formula. The CO responded to the claim on June 11, 1991, by repeating the government's earlier position and stating: "the determination of award fee is excluded from the Disputes clause and ... there is no right to appeal such determinations." Burnside-Ott filed a timely appeal to the Board.

II

Before the Board, the government moved to dismiss for want of jurisdiction, citing Clause H-21 of the contract and arguing that the effect of the clause is to deprive the Board of jurisdiction to hear the dispute. Burnside-Ott countered that the clause is ineffective to remove the statutory right of appeal found in the Contract Disputes Act of 1978(CDA), 41 U.S.C. §§ 601-613 (1994), and that the appropriate standard of review of CO decisions is de novo before the Board.

The Board rejected the positions of both parties, and concluded that it had jurisdiction, but that the extent of its review was limited to ascertaining whether the CO acted arbitrarily or capriciously in approving the FDO's conversion method, in effect adopting the Wunderlich Act standard of review for instances in which the parties seem to have contracted away their full CDA de novo review rights. ¹ On the merits, the Board held that the CO and FDO acted reasonably and within their discretion, and violated no contractual, statutory, or regulatory requirements. The Board also held that Burnside-Ott's interpretation of Clause H-21 was inconsistent with prior practice and with the purpose of award fee contracting; the Board thus concluded that Burnside-Ott was required to call the inconsistency to the government's attention before taking advantage of any ambiguity in the clause.

III

On appeal here, the parties in their briefs essentially repeat the positions they took before the Board, insofar as the Board's jurisdiction to hear Burnside-Ott's claim is concerned. In particular, the government argues that Clause H-21 removed the Board's jurisdiction and Burnside-Ott argues that the clause was ineffective to remove jurisdiction. In addition, the government in the alternative argues in its brief that if we find there is jurisdiction in the Board to hear Burnside-Ott's claim, then the Board's review standard should be restricted to a determination of whether the CO's actions were arbitrary and capricious, and that our review of the Board's factual findings should be limited to a determination of whether those findings are arbitrary, capricious, based upon less than substantial evidence, or rendered in bad faith. See 41 U.S.C. § 609(b) (1994).

During oral argument, the court expressed its view that the government's lead argument on jurisdiction, as expressed in its brief, was that the Board lacked jurisdiction in this case. The government disagreed with that reading of its brief, and instead asserted that the Board indeed had jurisdiction to hear this case pursuant to the CDA, and that its review was de novo. In particular, the government asserted that the Board had de novo review to decide whether Clause H-21 required the FDO to use the "1-to-1" conversion method espoused by Burnside-Ott. As a result, the parties now agree that CDA jurisdiction lay at the Board to hear the dispute; they only differ as to the outcome that should be reached on the...