July 21, 1994

Appeal of

ALTA CONSTRUCTION COMPANY

Under Contract No. 239952-85-V-0073

PSBCA Nos. 1463 & 2920

 

APPEARANCE FOR APPELLANT:

Thomas M. Rhule, Jr.

 

APPEARANCE FOR RESPONDENT:

D. D. Anna, Esq.

 

OPINION OF THE BOARD ON MOTION FOR SUMMARY JUDGMENT

 

            Appellant, Alta Construction Company, seeks to recover legal fees incurred following the termination for default of its term construction contract, which termination was later converted by the Contracting Officer to a termination for convenience of the Postal Service.

Background

            These appeals have been the subject of three previous Opinions:  Appeal of Alta Construction Company, PSBCA No. 1463, 90-1 BCA ¶ 22,527 and 90‑3 BCA ¶ 22,966; and PSBCA Nos. 1463 & 2920, 92-2 BCA ¶ 24,824, recon. denied 92-3 BCA ¶ 25,128.  The reader's familiarity with those Opinions is presumed and only a limited exposition of the facts is included in this Opinion.

            In the spring of 1985, Respondent issued a solicitation seeking bids on term construction contracts for work on Postal Service facilities in southern West Virginia.  Notwithstanding Appellant's protests, the solicitation contained provisions allowing multiple awards to be made.  Appellant was the second low bidder under the solicitation and, over its objections, was awarded contract no. 239952-85-V-0073.

            Appellant's contract was terminated for default on August 20, 1985.  The legal services under consideration here were rendered between September 12 and October 14, 1985, shortly after the default termination.  Appellant filed its notice of appeal on or about November 14, 1985.  In February 1990, after the Board declined to grant summary judgment in Respondent's favor on the issue of the propriety of the default termination, see 90-1 BCA ¶ 22,527, supra, the Contracting Officer issued a letter converting the termination to one for the convenience of the Postal Service.

            In our Opinion at 92-2 BCA ¶ 24,824, supra, we determined that Appellant was not entitled to recover its bond costs under the termination for convenience clause, although they would ordinarily be recoverable, because Appellant had already been paid the maximum amount allowable under that clause -- i.e., the "total contract price."  Therefore, summary judgment on that issue was entered in Respondent's favor.  However, as to the legal costs which comprised the last remaining element of these appeals and which were potentially recoverable even beyond the total contract price [see Finding 1, below], we concluded that the record was insufficiently developed to allow judgment to be rendered in a summary proceeding.  In particular, we noted that the record did not provide sufficient detail as to the nature of the legal services procured by Appellant to allow a determination of liability to be made.

            In the course of subsequent proceedings, Appellant attempted to conduct extensive discovery.  Those discovery efforts were opposed by Respondent on the basis that Appellant had not shown its discovery requests to be related to the single issue left before the Board.  The Board sustained Respondent's opposition to Appellant's discovery requests, noting repeatedly the very limited nature of the issue still before the Board and concluding that Appellant had still not provided a sufficient explanation of the nature of the legal services for which it sought recovery.  Ultimately, the Board ordered an end to discovery, concluding that it did not appear that there existed genuine issues of material fact to be decided.  Therefore, the Board elected to treat two submissions by Respondent as a motion for summary judgment.  Appellant was given the opportunity to reply to the "motion" and demonstrate that summary judgment was not appropriate.  In reply, Appellant submitted numerous documents, including an affidavit that explained both the circumstances under which it sought legal advice and also, to a limited degree, the nature of the matters worked on by its attorney.  Appellant also offered extensive arguments, which have been considered to the extent relevant in drafting this Opinion.

FINDINGS OF FACT

            For the purpose of deciding whether summary judgment should be granted, we make the following findings of fact, generally supplementing those facts found in connection with our Opinion at 92-2 BCA ¶ 24,824:

            1.  The "Termination for Convenience of the Postal Service," clause of the July 1984 version of PS Form 7391, "GENERAL PROVISIONS FOR FIXED-PRICE CONSTRUCTION CONTRACTS," provided that as to work performed, the contractor was to be paid the cost of such work, the cost of settling claims arising out of the termination of subcontracts, and a reasonable profit.  Under the clause, allowability of such costs was to be governed by the principles set out in Section 15 of the Postal Contracting Manual (PCM).  The clause also provided that the amount of such payments could not exceed the "total contract price...."  Excepted from this maximum payment limitation was

"The reasonable cost of the preservation and protection of property incurred pursuant to [paragraph (b)(9); and any other reasonable cost incidental to][1] termination of work under this contract, including expense incidental to the determination of the amount due to the Contractor as the result of the termination [of]1 work under this contract."  (Respondent's Appeal File Tab (RAF) 1).

 

            2.  PCM section 15-205.42, "Termination Costs," provided, in part,

"Contract terminations generally give rise to the incurrence of costs, or the need for special treatment of costs, which would not have arisen had the contract not been terminated.  Cost principles covering these items are set forth below.  They are to be used in conjunction with the remainder of this part in termination situations.

 

***

 

"Settlement Expenses.  Settlement expenses, including the following are generally allowable:

(1) Accounting, legal, clerical, and similar costs reasonably necessary for:

(i) The preparation and presentation to contracting officers of settlement claims and supporting data with respect to the terminated portion of the contract..., and

(ii)  The termination and settlement of subcontracts...."  (RAF 38).

 

            3.  PCM section 15-205.31, dealing with "Professional and Consultant Service Costs," provides, in part:

"Cost of legal ... services ..., incurred in connection with ... the prosecution of claims against the Postal Service, are unallowable ...."  (Id).

 

            4.  The legal services at issue here were rendered between September 12 and October 14, 1985, as follows:

            "9/12/85  Telephone conference w/Tom Rhule re. procurement; meeting w/co-counsel re. same  1.85

 

            9/18/85  Meeting w/Tom Rhule, Jr. re. overview and letter to bond company  3.25

 

            9/23/85  Conference w/ client  .6

 

            9/23/85  Preparation of letter to bonding company re. procurement against bond  2.0

 

            9/24/85  Telephone conference w/Dennis Wills re. procurement; telephone conference w/Robert Coven; meeting w/T. Rhule  3.25

 

            9/25/85  Conference w/co-counsel  .0

 

            9/26/85  Conferences w/co-counsel re response to letter  1.6

 

            10/1/85  Telephone conferences w/client re. status of situation w/bonding company  .75

 

            10/11/85  Telephone conferences w/Erie Insurance re. Alta Construction bond  .55

 

            10/14/85  Meeting w/client re. necessity of suit   3.0 

 

17.85

 

Professional Services:

 

17.85 hours at $85 per hour  $1,517.25" (RAF 30).

 

            5.  In his affidavit, Thomas Rhule, Jr., explained that Appellant believed it had been unfairly treated under an earlier term construction contract.  Appellant believed that the Postal Service managers had assigned it, as second low bidder, only difficult construction jobs at remote locations -- jobs which were difficult or impossible for it to perform at a profit.  Appellant believed, further, that the Postal Service managers had been specifically biased in favor of the other term construction contractor in the assignment of projects.  As a result, Appellant attempted to avoid the award of a contract to it in this instance when it became aware that it was again the second low bidder.  Following the default termination of its contract, Appellant sought legal advice in its dealings with both its bonding company and with the Postal Service office administering the contract.  Appellant's attorney was also specifically asked to try to persuade the Postal Service to quickly convert the default termination to one for convenience.  On October 14, Mr. Rhule discussed with the attorney strategies Appellant might use if the Postal Service again attempted to assign it only the most costly and difficult assignments.  In that regard, Appellant's discussions with its attorney

"centered around the [Postal Service office's] past unfair contracting actions, and methods of preventing their continuation while avoiding the pitfall of legal action against both the USPS and our bonding company."  (Affidavit of Thomas M. Rhule, Jr., pages 18-19).

 

DECISION

 

            Summary judgment may be granted only if no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law.  Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Mingus Constructors, Inc. v. United States, 812 F.2d 1387, 1390 (Fed. Cir. 1987); Rood Trucking Co., Inc., PSBCA Nos. 3121, 3132, 93-2 BCA ¶ 25,564; On Time Postal Services, Inc., PSBCA No. 2528, 90-2 BCA ¶ 22,698.  Doubts concerning factual issues must be resolved in favor of the nonmoving party.   United States v. Diebold, 369 U.S. 654, 655 (1962); Vienna/Vienna, PSBCA Nos. 2505, 2816, 92-3 BCA ¶ 25,042.

            By converting the termination for default to one for the convenience of the Postal Service, the Contracting Officer conceded that the default termination had been improper.  Alta Construction, supra, 90‑3 BCA ¶ 22,966.  Under these circumstances, the termination for convenience is retroactive to the date of the default termination for the purposes of determining Appellant's recovery under the termination for convenience clause.  Reese Industries, ASBCA No. 29029, 86-2 BCA ¶ 18,962; Baifield Industries, Division of ATO, ASBCA No. 20,006, 76-2 BCA ¶ 12,096.  Legal fees incurred during the period following the default termination which are not costs of prosecution of a claim against the government may be recoverable.  Acme Process Equipment Co. v. United States, 347 F.2d 538 (Ct. Cl. 1965); Baifield, supra; Western States Painting Co., ASBCA No. 13843, 69-1 BCA ¶ 7616.  Therefore, we must examine the legal fees claimed by Appellant to determine whether they are recoverable under the termination for convenience clause or whether they are claim prosecution costs that are not recoverable.

            In these appeals, since Appellant has been paid an amount equal to the "total contract price," it may not recover further under the termination for convenience clause unless it can show that the legal fees it seeks fall under the exception to the maximum payment limitation [see Finding 1, above].  That is, in order to prevail in its appeals, Appellant must show that the legal fees it incurred were "reasonable cost[s] incidental to termination of work under this contract, including expense incidental to the determination of the amount due to the Contractor as the result of the termination of work under this contract."  Further, as explained above, Appellant must show the fees were not incurred in connection with the prosecution of claims against the Postal Service.

            At the time we decided to treat these appeals as though they had been submitted for summary disposition, Appellant had not provided any details of the work performed by its attorney.  In his affidavit, Mr. Rhule provided some details of some of the attorney's work for Appellant.  Although still not complete, Appellant's explanation, when viewed with the "corrected" version of the termination for convenience language,[2] persuades us that summary disposition of these appeals is not appropriate.  Accordingly, summary judgment will not be granted.  Appellant will be given the opportunity to show that the legal fees at issue are recoverable above the "total contract price."

            Within 30 days of receipt of this Opinion, the parties are to confer and inform the Board whether they wish to have a hearing on this matter.  If so, they are to attempt to agree to a location and to suggest hearing dates for the Board's consideration.  If they are unable to agree, the parties are to submit separate responses.  Appellant is again reminded that the issues before the Board are very narrow and will most likely turn on evidence concerning the precise nature of the legal services for which recovery is sought.

David I. Brochstein

Administrative Judge

Board Member

 

I concur:

James A. Cohen

Administrative Judge

Chairman


[1]  The Board concludes that, at least for the purpose of determining whether summary judgment is appropriate, the termination for convenience clause will be read to include the "bracketed" language (although that language does not appear in the July 1984 version of PS Form 7391 incorporated into the contract), since that language was included at §18-541.7 of the Postal Contracting Manual, which contained the termination for convenience clause that was required to be used at the time this contract was awarded.  See PCM Transmittal Letters 33-35; PCM Circulars 84-4 through 85-4.  See also Enclosure A to RE&B Bulletin No. DC-84-1, dated January 6, 1984 (which provides for use of the October 1979 version of PS Form 7391 in term construction contracts); G.L. Christian & Associates v. United States, 160 Ct. Cl. 1, 312 F.2d 418, reh. den. 320 F.2d 345, cert. den. 375 U.S. 954 (1963).

[2]  The "corrected" version of the termination for convenience clause [see footnote 1] provides a broader basis for recovery than did the original language, by providing for recovery of reasonable costs incidental to the "termination of work" and not just those costs incidental to the determination of the amount due because of the termination.