June 28, 1993

Appeal of

GOLDEN WEST BUILDERS

Under Contract No. 059984-90-B-0044

PSBCA No. 3378

 

APPEARANCE FOR APPELLANT:

Robert L. Leslie, Esq.

 

APPEARANCE FOR RESPONDENT:

Mark Brent Ezersky, Esq.

 

OPINION OF THE BOARD

            The Postal Service, Respondent, failed to place any orders under an indefinite quantity contract with Appellant, Golden West Builders.  After expiration of the term of the contract, Appellant filed a claim for a sum equal to the minimum amount of work the contract stated would be ordered.  Appellant has appealed from the contracting officer's denial of that claim.  This appeal is being decided on the record pursuant to 39 C.F.R. § 955.12, and, at Appellant's request, is being

processed under the Board's Accelerated Procedure, 39 C.F.R. § 955.36.  Both entitlement and quantum are being decided.

FINDINGS OF FACT

            1.  On June 13, 1990, the Postal Service awarded Appellant contract number 059984-90-B-0044 ("contract 0044"), an indefinite quantity contract for underground storage tank remediation in an area including Oakland and Sacramento, California (Appeal File Tabs ("AF") 8, 10; Declaration of D. Baily Neff ("Neff Decl.") ¶ 4).

            2.  The contract contemplated issuance of work orders to Appellant for individual underground storage tank projects to be identified by Respondent.  The contract was for a two year term (AF 8, 10, Sections C.12, C.14).

3.  Section B.4 of the contract provided, in part:

"QUANTITY OF WORK (INDEFINITE-QUANTITY)  (Clause FB-248) (March 1989)

 

a.  The initial contract value is $250,000.00 where the total quantity of work ordered during the term of this contract will not be less than $10,000 nor more than one million dollars ($1,000,000)."  (AF 8, 10)

 

            4.  The day before it awarded contract 0044, Respondent awarded Appellant contract 059984-90-B-0045, an indefinite quantity contract with an identical Quantity of Work provision, to perform underground storage tank remediation work in an area including San Francisco and San Jose, California (Neff Decl. ¶¶ 3, 4).

            5.  Based on the contract documents, the required bond amounts, and conversations with Postal Service personnel, Appellant estimated it would have to perform about $500,000 of work under the two contracts, but had to be prepared for at least $2,000,000, notwithstanding the stated minimum and maximum amounts in the contracts (Neff Decl. ¶ 9).

            6.  Respondent issued no work orders under contract 0044 before it expired in June of 1992 and issued orders totaling $30,000 under contract 059984-90-B-0045 before it expired (Neff Decl. ¶ 14).

            7.  Before award of contract 0044, Appellant obtained payment and performance bonds in the amounts of $125,000 and $250,000, respectively, as required by the contract (AF 8, 9, 10; Neff Decl. ¶ 7).  After the contract expired, Appellant's bonding company refunded $4719 of the $5000 cost of the bonds without interest (Neff Decl. ¶ 8).

            8.  In part because of these two contracts Appellant purchased additional equipment, including two excavators, increased its overhead in order to be able to perform the contracts, and had available a project manager who was underutilized because work under the contracts did not materialize as expected (Neff Decl. ¶¶ 10, 11, 12).

            9.  On July 17, 1992, Appellant wrote to the contracting officer regarding contract 0044 and included an invoice for $10,000, the minimum amount of work to be ordered under the contract (AF 6).

            10.  In an August 19, 1992 reply, the contracting officer declined to pay the $10,000, but offered to pay a reasonable profit on the minimum order (he

suggested ten percent (10%) as normal in the industry) plus any provable standby costs Appellant incurred (AF 5).

            11.  On October 19, 1992, Appellant, through counsel, asked the contracting officer to issue a final decision, and on October 26, 1992, the contracting officer did so.  The contracting officer restated Respondent's position that the contractor was entitled only to a reasonable profit on the contractual minimum plus incurred standby costs, but he denied the claim because Appellant had not shown what a reasonable profit would be or demonstrated any standby costs.  This appeal followed.

DECISION

            Appellant argues that this appeal is controlled by Maxima Corp. v. United States, 847 F.2d 1549 (Fed. Cir. 1988).  In that case, the Government failed to order the minimum amount of services called for in an indefinite quantity contract and after expiration of the contract term paid the contractor's invoice for the difference between the guaranteed minimum payment stated in the contract and the amount previously paid for work ordered by the Government and performed by Maxima.  A year later, the Government attempted to terminate the contract for convenience retroactively and recover from the contractor the difference between the payment made and what the contractor would have been entitled to under a termination for convenience.  The Court of Appeals concluded the Government could not assert a termination for convenience after the term of the contract had expired.  The court, therefore, allowed the contractor to retain the payment of the difference between the contract price of services ordered and the guaranteed minimum payment.  Appellant asserts that it is similarly entitled to recover the $10,000 price of the minimum order under contract 0044.

            Respondent admits that Appellant is entitled to damages, which may include lost profits, for the Postal Service's failure to order the minimum amount of work stated in the contract, but argues that, under general contract principles, Appellant is not entitled to the dollar amount of the minimum order total stated in the contract.  Rather, Respondent urges, Appellant is entitled to be put in as good a position as if Respondent had fulfilled its obligation under the contract.  Respondent would distinguish Maxima from this appeal as here the Postal Service did not attempt to terminate contract 0044 for convenience and deny Appellant recovery of anticipated profits.  In fact, the contracting officer offered to pay Appellant its anticipated profits.  Additionally, according to Respondent, unlike the circumstances in Maxima, Respondent is not seeking repayment of funds "mistakenly" paid to Appellant, there was no lengthy delay in Respondent's statement of its position regarding payment of the minimum order amount, and Appellant did not advise Respondent during the term that the minimum order requirement was not being met.  As we find Maxima not controlling for other reasons, we need not address Respondent's arguments.

            The majority in Maxima concluded that under the language of Maxima's contract, the Government guaranteed the contractor the minimum dollar amount of payment stated in the contract in exchange for Maxima's capability to provide the contract services.  Id. at 1551,[1] 1552 n.3; PHP Healthcare Corp., ASBCA No. 39207, 91-1 BCA ¶ 23,647 at 118,452-53.  The contract at issue in this appeal, on the other hand, does not guarantee any minimum payment but, rather, states that "the total quantity of work ordered during the term of this contract will not be less than $10,000 ..." (Finding 3), a commitment far different from a promise to pay a minimum dollar amount under the contract.  See PHP Healthcare Corp., supra.  Maxima does not require that a contractor be paid the full price of the minimum order under an indefinite quantity contract that obligates the agency to order a minimum amount of work but does not establish a guaranteed minimum payment.

            Thus, Appellant is not entitled automatically to the minimum order amount in the contract.  It is entitled to damages sufficient to place it "in as good a position pecuniarily as [it] would have been by performance of the contract," Miller v. Robertson, 266 U.S. 243, 257, 45 S.Ct. 73, 78, 69 L.Ed. 265 (1924), but not "in a better position than it would have been if it had to perform and bear the expense of full performance."  PHP Healthcare Corp., supra, at 118,452.

            Appellant's sole argument was that it was entitled to the price of the minimum order under the contract, and it presented no evidence of damages resulting from Respondent's failure to place the minimum order.[2]  Nevertheless, once entitlement to damages is shown or conceded, the contractor need not prove quantum with mathematical precision; it is enough if the evidence allows determination of a fair and reasonable approximation.  See Specialty Assembling & Packing Co., Inc. v. United States, 174 Ct. Cl. 153, 184 (1966); Kings Electronics Co., Inc. v. United States, 169 Ct. Cl. 433, 444 (1965); M.R. Kaplan, et al., PSBCA Nos. 1147, 1298, 1303, 1310, 88-3 BCA ¶ 20,827 at 105,318.

            In his letter of August 19, 1992, the contracting officer conceded liability for anticipated profits on the minimum order and provable standby costs, and he suggested ten percent as a reasonable expected profit on the minimum order.  Absent any evidence in the record to suggest a greater amount is warranted, we accept that figure and award Appellant $1,000 for its lost profits.  Appellant has not shown any other costs to be attributable to the Postal Service's failure to order $10,000 of work (see footnote 2, above).

            The appeal is sustained in the amount of $1,000 plus interest as provided in the Contract Disputes Act of 1978 and is otherwise denied.

Norman D. Menegat

Administrative Judge

Board Member

I concur:

James A. Cohen

Administrative Judge

Chairman


[1]In its footnote 2, the court identified the features of the contract that led it to conclude that the agency agreed to pay Maxima the annual "Guaranteed Minimum" dollar amount:

 

"The contract shows the following on its first page, entitled 'Award/Contract' and bearing the signatures of both parties:

 

Production Requirements Year 1-- 419,009.00

Guaranteed Minimum

Equipment Charges--Year 1                          79,689.00

Travel Charges--Year 1--Guaranteed             1,525.00

Minimum

Total Guaranteed Minimum 500,223.00

 

The 'Quantity' and 'Unit Price' columns are not otherwise filled, and the contract is described as 'Fixed Price--Indefinite Quantity'."

[2]Appellant submitted declarations of its employees which identified costs it claims to have incurred, but those costs were incurred in preparation for performance of both contracts and resulted from Appellant's expectation that the amount of work under the two indefinite quantity contracts it was awarded would substantially exceed the minimums stated in the contracts (see Findings 5, 7, 8).  Prior to submitting its proposal for contract 0044, Appellant was on notice of the minimum amount Respondent agreed to order and bore the risk that it might receive no more than the $10,000 minimum.  See Deterline Corp., ASBCA No. 33090, 88-3 BCA ¶ 21,132 at 106,688; Okaw Indus., Inc., ASBCA Nos. 17863, 17864, 77-2 BCA ¶ 12,793 at 62,226.  The bases for Appellant's expectation that Respondent would order substantially more than the $10,000 minimum (Finding 5) are insufficient to overcome the clear language in the contract.  The failure to order any work in excess of $10,000 would not have breached any obligation of Respondent under the contract, Alta Constr. Co.,  PSBCA No. 1395, 87-2 BCA ¶ 19,720 at 99,853, and, therefore, Respondent is not liable for costs Appellant incurred to prepare to perform anticipated orders in excess of $10,000.