Philips Lighting North American Corporation

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The decision issued on the date below is subject to an ASBCA Protective Order.

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ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeals of - )

)

Philips Lighting North American ) ASBCA Nos. 61769, 61873, 62391

Corporation )

)

Under Contract No. CQ-12077 )

APPEARANCES FOR THE APPELLANT: Franklin C. Turner, Esq.

Ethan Brown, Esq.

Cara A. Wulf, Esq.

Alexander W. Major, Esq.

Matthew Wright, Esq.

McCarter & English, LLP

Washington, DC

APPEARANCES FOR THE AUTHORITY: Jeffrey Weinstein, Esq.

Chief Counsel

Washington Metropolitan Area

Transit Authority

Washington, DC

Tracye Winfrey Howard Esq.

George E. Petel, Esq.

Wiley Rein LLP

Washington, DC

OPINION BY ADMINISTRATIVE JUDGE WOODROW

This appeal involves a contract to upgrade and replace the lighting systems

at 25 parking garages owned by the Washington Metro Area Transit Authority

(WMATA). Conformed Contract No. CQ-12077, Parking Garage Lighting Efficiency

(the contract), required Philips Lighting North American Corporation (Philips) to

upgrade and replace the lighting fixtures with energy-efficient LED technologies and

install state-of-the art electricity metering equipment in all of WMATA’s parking

garages.

The contract established two phases of performance: the construction phase,

during which Philips agreed to design and install the upgraded lighting and metering

systems at each garage; followed by the maintenance phase, during which Philips

would maintain the system for a period of 10 years. The contract required WMATA to

pay Philips in 20 semi-annual installments over the ten-year maintenance phase based

DOCUMENT FOR PUBLIC RELEASE

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on the energy savings achieved from the project. The contract did not require payment

during the construction phase.

Philips contends that WMATA breached the contract by failing to pay Philips’

invoices for installment payments and also breached the duty of good faith and fair

dealing by causing delays during the construction phase of the contract. On July 30,

2020, we granted partial summary judgment to Philips as to the payment obligations

but denied summary judgment as to Philips’ allegations of the breach of the duty of

good faith and fair dealing. Philips Lighting North American Corp., ASBCA

No. 61769 et al., 20-1 BCA ¶ 37,679 at 182,929.

On September 3, 2020, WMATA filed a motion for reconsideration requesting

that the Board reconsider two aspects of its opinion: (1) the Board’s grant of partial

summary judgment under Count II of Philips’ complaint with respect to the payment

provision in the Lighting Contract, and (2) the Board’s grant of Philips’ motion to

strike WMATA’s affirmative defense of setoff associated with Philips’ alleged

performance delay. In addition to opposing WMATA’s motion, Philips filed a motion

requesting that we order WMATA to make immediate payment under the Lighting

Contract and that we impose sanctions against WMATA for the alleged bad faith in its

motion. On March 11, 2021, we denied both parties’ motions. Philips Lighting North

American Corp., ASBCA No. 61769 et al., 21-1 BCA ¶ 37,821 at 183,652-53.

Starting on March 22, 2021, we held a seven-day hearing to determine quantum

and to resolve Philips’ allegations of bad faith and the breach of the duty of good faith

and fair dealing. Due to the ongoing COVID-19 pandemic, we conducted the hearing

virtually.

Philips contends that WMATA’s breaches entitle Philips to be excused from

further performance and to be compensated at the full value of the contract (app. br.

at 45). Philips advances several alternative theories of breach, including bad faith,

breaches of the duty of good faith and fair dealing, and material breach based upon

nonpayment (app. br. at 10-20). Philips also contends that the Board could view

WMATA’s conduct as a de facto default termination and judicially impose a

termination for convenience remedy (app. br. at 22-24).

In response, WMATA argues that the testimony does not support a finding

of either bad faith or a breach of the duty of good faith and fair dealing (resp’t br.

at 24-30). WMATA further argues that it was justified in refusing to pay Philips’

invoices, because the invoices demonstrated that Philips never met the energy savings

guarantee using the baseline measurement specified by the contract (resp’t br.

at 25-29). With respect to Philips’ theory that WMATA’s conduct amounts to a de

facto default termination, WMATA contends that the contract is ongoing and has not

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been terminated and that the Board does not possess jurisdiction to order the WMATA

contracting officer to issue a termination (resp’t reply br. at 27-28).

As we explain below, we hold that WMATA’s non-payment constitutes a

material breach of the lighting contract. Because Philips continues to maintain the

lighting system pursuant to the contract and has not elected to cease performance, we

award damages based on Philips past performance through February 29, 2024, the last

date for which we have complete information. If Philips continues performance going

forward, WMATA must pay any future invoices pursuant to the terms of the contract

and consistent with this decision.

We further hold that WMATA did not act in bad faith or breach the implied

duty of good faith and fair dealing when it refused to pay Philips’ invoices. We also

hold that Philips is entitled to additional damages for infrastructure repairs, but that

Philips has not met its burden of demonstrating that it is entitled to additional damages

for the cost of installing additional meters. Finally, we hold that Philips is not entitled

to payment for energy savings accrued during the enlarged installation period.

FINDINGS OF FACT

I. The Solicitation and Philips’ Proposal

1. On October 31, 2011, WMATA issued a request for proposal (RFP)

to obtain a lighting system at its parking garages to produce “total cost and energy

savings.” (App. supp R4, tab 3 at 3 1 answer at ¶ 6)

2. The purpose of the lighting project was to, among other things, improve

lighting for customer comfort and safety and reduce WMATA’s energy consumption

and operating costs (R4, tab 1 at 113).

3. The RFP – which later was incorporated into the Contract – provided that

the costs for the project would be financed through operating cost savings (R4, tab 1

at 18; answer at ¶¶ 7, 18).

4. Philips had an opportunity to tour and photograph the garages before bidding

(tr. 2/119; 5/200).

1

The bates-labeling contained in the both the government’s Rule 4 file and

appellant’s supplemental Rule 4 file has leading zeros and the prefixes. We

have removed the prefixes and leading zeros from our citations for clarity.

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5. Paragraph 13 of the RFP stated that it was Philips’ responsibility

to understand the conditions of the garages and the extent of work required (ex. G-84

at 87; R4, tab 1 at 87; tr. 2/202).

6. On August 15, 2013, Philips submitted its proposal to WMATA (ex. G-5 -

12). In its proposal, Philips agreed to “finance 100 percent of all Project costs” and

required no upfront capital outlay from WMATA. (Ex. G-6 at 13313).

7. Philips’ proposal also included “Philips Energy Guarantee,” which Philips

provided WMATA with its energy consumption calculations as part of its proposal,

the final version of which was dated August 30, 2013 (app. supp. R4, tab 492

at 8715-18). The RFP describes the “Philips Energy Guarantee” as follows:

The vendor will provide a guarantee that, over the life of

the Project, the annual energy costs (the difference

between baseline energy cost and energy cost after the

implementation of the Project) will be equal to or less than

the Project's annual cost to the Authority. The Authority’s

Installment Payments to the Vendor shall begin after final

completion of the last of the 25 garages and after the

guaranteed energy savings are verified through the

measurement and verification plan. “Final Completion”

shall mean that that the system installation is completed,

tested, programmed, and providing required lighting levels

with the guaranteed savings per the agreement and that

WMATA has accepted the lighting system as installed.

8. In its proposal, Philips estimated WMATA’s maximum potential energy

consumption to be 22,992,704.88 kilowatt hours (kWh) per year (answer at ¶ 33; app.

supp. R4, tab 492 at 8721).

9. Philips based this estimate on a survey of the total number and type of light

fixtures in the garages multiplied by each fixture’s energy consumption (app. supp.

R4, tab 492 at 8717-18). Philips based its calculations on certain assumptions: first,

that all interior garage lights, stairwell and lobby fixtures, and exterior fixtures would

operate 24 hours per day, seven days per week, for the entire year; and that 10 percent

of these fixtures would be burned out or otherwise non-operational during the baseline

measurement period (ex. G-44, 129; tr. 1/193-96).

10. Using its pre-bid estimate, Philips proposed that its system, once installed,

would use only 7,376,876.45 kWh annually, providing WMATA with an expected

annual kWh energy savings of 15,615,828.43 kWh per year – an annual proposed

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reduction of 67.92 percent. Philips’ expected annual energy savings were incorporated

into the contract. (R4, tab 1 at 5-6; answer at ¶ 34)

II. The Contract

11. WMATA and Philips entered into the contract on October 18, 2013 (R4,

tab 1 at 2; answer at ¶ 37).

12. The contract provides that the Armed Services Board of Contract Appeals

(ASBCA or Board) is “the authorized representative of the Board of Directors for final

decisions on an appeal” taken from a decision of a Contracting Officer on a dispute

“concerning a question of fact arising under or relating to the Contract.” (R4, tab 1

at 63).

13. The contract incorporates various pieces of WMATA correspondence and

related documentation, including five (5) non-consecutive pages of Philips’ proposal,

eight (8) pages of insurance certification paperwork, its own request for proposal, the

Department of Labor Wage Rates (DC130002 08/23/2013), and fifteen (15) pages of

Amendments (R4, tab 1 at 1-196).

14. The contract includes a “PRICE SCHEDULE SHEET” that incorporates

both Table 1 and Table 1A from Philips’ proposal. Philips submitted this table in

response to the solicitation and it is incorporated into the contract. Note that the

“Guaranteed Energy Savings (kWh)” and “estimated kWh hours” are power figures,

not dollar figures. (R4, tab 1 at 5-6)

15. Functionally, the Contract was divided into two phases: a construction

phase, during which Philips would install the lighting system, and a maintenance

phase, during which Philips would maintain that system for a period of ten years

(answer at ¶¶ 43-45). The construction phase required the installation of all lighting

solutions within 730 calendar days from the date of contract award, setting the original

completion date for the construction phase of the contract as October 18, 2015, as

identified in the contract at part II, § 2 at ¶ 2(a) (R4, tab 1 at 84; answer at ¶ 76). The

contract provided that Philips would not receive installment payments during the

construction phase. After completion of the construction phase, Philips was to be paid

by WMATA in twenty semi-annual installments over the ten-year maintenance phase

of the contract, from the savings achieved from the project under the contract at Part

II, § 2 at ¶ 6(a). (R4, tab 1 at 84-85; answer at ¶ 21)

16. Table 1A of the contract sets forth a schedule for WMATA to pay Philips

“twenty (20) semi-annual installments to be made over the ten (10) year maintenance

portion of the Contract (the installment payments) from the savings achieved by the

Project.” (R4, tab 1 at 87). The installment payments identified in the Price Schedule

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Sheet, totaling $16,487,486, anticipated that Philips’ new garage lighting system

would reduce WMATA’s energy demand in these parking structures by approximately

two-thirds, resulting in a “guaranteed energy savings” of 15,615,828 kWh per year.

The price schedule sheet further provided an “estimated kWh used” of 7,376,876 kWh

in each operational year. (R4, tab 1 at 5-6; answer at ¶ 41).

17. In addition to the twenty semi-annual payments, the parties also agreed that

at the end of the ten-year Maintenance Phase, WMATA would have an end of term

purchase option to acquire all lighting system assets in the twenty-five garages for a

sum of $3,713,665. The combined sum of the purchase option and installment

payments equal a total proposed project cost of $20,201,151. (R4, tab 1 at 5)

18. The new lighting system involved the replacement of approximately 16,300

lights, including 1000 pole head lights, 13,000 garage ceiling lights, and a variety of

other stairwell lights, utility room lights, flood lights, step lights, down lights, exit

signs, and wall sconces (tr. 1/231-33).

19. Most of the pole head lights and garage ceiling lights for the new lighting

system included a Limelight sensor, which is part of a wireless mesh network and

control system that includes motion and light sensing technology. This system allows

the lighting system to react to occupancy levels by illuminating only those parts of the

garage that are necessary for the safety of the garage users at any particular time.

(Tr. 1/115) The Limelight system also allowed for centralized control of the lighting

system such that the lights could be selectively dimmed or turned off (thereby using

less energy) while still meeting overall illumination requirements (tr. 1/238). For

example, if part of a garage was sufficiently illuminated by daylight, the lights in that

portion of that garage could be turned off. This feature is known as “daylight

harvesting.” Id.

Measurement of Energy Consumption

20. The contract established terms and conditions pertaining to the

measurement of baseline and actual energy costs, as well as the calculation of energy

savings (R4, tab 1 at 108-09, 121).

21. With respect to the measurement and calculation of baseline and actual

energy costs, the Contract states:

BASELINE AND ACTUAL ENERGY COSTS

a. Baseline energy consumptions shall be established by

directly measuring the power consumption for the current

lighting system at each garage for a minimum period of six

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weeks before installation of the new lighting system. The

measurement shall be accomplished by installing utility

grade meters on all electrical circuits/panels not currently

connected to dedicated meters. The contractor shall submit

a plan for installing the meters within 45 days of notice to

proceed.

b. The utility grade meters shall remain in place and

maintained for the life of this contract in order to measure

actual energy consumption for the new lighting system.

c. The energy cost shall be computed by multiplying price

per Kwh paid by WMATA during the period by energy

consumption for the period.

d. Actual Project/energy savings shall be computed by

multiplying the difference between the measured actual

energy consumption and the baseline energy consumption

by the price per KWh paid [by] WMATA during the

period.

(R4, tab 1 at 109-10)

22. The contract required the contractor to “provide a detailed contract period

energy monitoring and verification plan. The measurement and verification plan shall

be in accordance with the International Performance Measurement and Verification

Protocol, Volume 1, 2012.” (R4, tab 1 at 121)

23. The RFP and contract are silent on whether the baseline should be adjusted

to account for outages (tr. 2/37-40).

Payment Terms

24. The contract provides for semi-annual installment payments to be paid over

the maintenance period. Paragraph 6 of the contract, Payment Terms, provides in

relevant part:

a. The Project costs will be paid in 20 semi-annual

installments over the 10-year maintenance period (the

“Installments Payments”) from the savings achieved from

the Project, to the extent the savings from the Project are

equal to or higher than the Installment Payments. If the

Project savings are less than the scheduled Installment

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payments, then the scheduled Installment payment(s) for

that period are deemed amended to equal the actual

Project savings obtained (the “Amended Installment

Payments”). The difference between the Amended

Installment Payments and the scheduled Installment

Payments shall be non-recourse to Metro.

b. Installment Payments to the Vendor shall begin after

final completion of the last of the 25 garages and after the

guaranteed energy savings are verified through the

measurement and verification plan. “Final Completion”

shall mean that that the system installation is completed,

tested, programmed, and providing required lighting levels

with the guaranteed savings per the agreement and that

WMATA has accepted the lighting system as installed.

(R4, tab 1 at 84-85 (emphasis added))

25. WMATA is required to pay Philips after receipt of a properly completed

invoice under the contract at Part II, § 2 at ¶ 7(a). A “properly completed invoice”

is one that is accompanied by the measurement and verification report verifying the

actual savings obtained during the temporal period to which the invoice relates under

the contract at Part II, § 2 at ¶ 7. (R4, tab 1 at 85; answer at ¶ 142)

26. Paragraph 7, Billing and Payment, provides in relevant part:

a. Payment will be made after receipt of a properly

completed invoice. . . .

b. Invoices shall be supported by the measurement and

verification report verifying the actual savings and shall

contain the following information: date, contract and order

number (if any), item numbers, description of supplies or

services, sizes, quantities, unit prices, and extended totals.

Final invoices must clearly be marked “FINAL” and cite

the amount of the contract, amount previously paid, and

the balance due.

(R4, tab 1 at 85)

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27. The contract requires WMATA to pay Philips within 30 days of receipt of a

properly prepared invoice, less any deductions provided in the contract. Paragraph 30,

Payments, provides that:

The Authority shall pay the Contractor, normally within

30 days of receipt of a properly prepared invoice or

voucher, the prices stipulated in this contract for supplies

delivered and accepted or services rendered and accepted,

less any deductions provided in this contract.

(R4, tab 1 at 72; answer at ¶ 98)

Infrastructure Repairs

28. Paragraph 43 of the contract provides that WMATA shall pay, at its

discretion, the cost of repairing defects in the existing lighting electrical distribution

system. Specifically, paragraph 43 states:

The contractor shall identify details of all defects in the

existing lighting electrical distribution system including

wiring, conduits and other components in the first design

submittal. The submittal shall also include itemized cost

of repairing the defects. At the Authority's sole discretion,

identified defects in the system[s] will be repaired with

WMATA forces OR the contractor shall be directed

to perform and repair of the defects in accordance with the

unit price schedules. This corrective action will have

no recourse for the contractor to submit delay or extended

associated costs. Payment per the unit price schedule

is inclusive of all associated costs.

(R4, tab 1 at 108)

Risk of Construction Delays

29. Paragraph 13 of the contract places the responsibility on the contractor

to ascertain the risk of any delays in the installation of the lighting system on the

contractor.

13. CONDITIONS AFFECTING THE WORK

The Contractor shall be responsible for having taken steps

reasonably necessary to ascertain the nature and extent of

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the work, and the general and local conditions which can

affect the work or the cost thereof. Any failure by the

Contractor to do so will not relieve the Contractor from

responsibility for successfully performing work without

additional expense to the Authority. The Authority

assumes no responsibility for any understanding or

representations concerning conditions made by any of its

officers or agents prior to the execution of this Contract,

unless such understanding or representations are expressly

stated in the Contract.

(R4, tab 1 at 87)

III. Contract Performance

30. On October 18, 2013, WMATA issued the Notice to Proceed to Philips

(R4, tab 1 at 2; resp’t opp’n to app. mot. for partial summary judgment at 7)

Measurement of Baseline Energy Consumption at Each Garage

31. Philips performed circuit tracing on the electrical circuits in each garage,

took a comprehensive inventory of the light fixtures in each garage, installed power

meters, and took real-time measurements of the energy consumed by the existing

lighting system in each garage (app. supp. R4, tabs 477 at 11-15; 481 at 26-30;

tr. 1/239-40).

32. On April 16, 2014, after installing power meters and measuring the energy

consumption for six weeks, Philips provided its measurement and verification (M&V)

plan to WMATA (app. supp. R4, tab 46, 46a at 352-71). Philips’ M&V plan provided

that “[e]ach garage’s existing controls (photocells and time clocks) will be identified

and any adjustments to normalize for seasonality will be investigated and

recommendations will be reviewed between Philips and WMATA.” (App. supp. R4,

tab 46a at 358) Philips’ M&V plan did not contain any explicit discussion of outages

or how to adjust the baseline measurement to account for burned out or missing

fixtures, other than stating that the annual report will note “significant problems such

as burned out fixtures and deviations with the expected number of operating fixtures,

etc.” (App. supp. R4, tab 46a)

33. Philips submitted (M&V) reports pursuant to the contract for each parking

garage. Philips submitted its first M&V report (for the Huntington North garage) on

August 5, 2014 (ex. A-68; tr. 2/7, 196). Philips recorded six-week (or more) baseline

measurements, extrapolated to an entire year for purposes of the Contract payment

provisions in “Section 3, Annual Baseline Energy Consumption,” in the M&V reports

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it submitted to WMATA. (See, e.g., ex. G-148) The total directly measured power

consumption of all of the garages was 19,186,521 kWh per year (tr. 2/172; R4, tab 29

(using half the 19.1 million as the 6-month baseline)).

34. Mr. Gregory Jones is a project manager for construction projects at Philips

and was the project manager for the WMATA project since the contract was signed in

October 2013 (tr 1/215; 225-26). He personally was involved in all aspects of the

project, beginning with the initial identification of circuits for the interior garage

lighting, the installation of meters on the relevant circuits, the negotiation of

subcontractor agreements (tr. 1/213, 215-21, 226). Mr. Jones was the Philips

employee responsible for preparing the M&V reports (tr. 2/7). He was not involved in

the pricing proposal or technical proposal phase of the contract (tr. 12/225-26). The

M&V reports described in detail the steps Philips took to survey, meter, and develop

the baseline level of energy consumption for each garage. The steps included:

(1) conducting fixture counts and circuit surveys; (2) having WMATA employee

escorts turn off individual circuit breakers in order to identify the electrical circuits

powering each fixture; (3) installing meters on each of the relevant circuits in order

to measure the actual energy consumption of the lights on that circuit; (4) performing

independent verification of the measurements by performing spot measurements of

power draw; and (5) comparing spot measurements, measured power draw, and

calculations based upon fixture counts to develop an accurate baseline measurement

for each garage. (Ex. A-68 at 2; tr. 2/7-21)

35. The initial M&V report for Huntington North, one of the first garages for

which an M&V report was prepared, included a light measurement survey to

determine the baseline illumination levels of the existing garage lights (ex. A-68

at 22743). The contract required Philips to provide a certified professional that had

been trained in how to lay out and measure the illumination levels of existing lighting

systems (tr. 2/27). The contract further specified that the new lighting system meet

specific illumination standards, measured in foot candles at points three feet above the

ground (tr. 2/28). However, Philips’s baseline surveys demonstrated that the existing

lights sometimes did not meet this standard, as was the case in the Huntington North

garage (ex. A-68 at 22743; tr. 2/27-30). However, at WMATA’s request, these

surveys were not included in any of the subsequent M&V reports for the other garages

(tr. 2/28).

36. WMATA rejected Philips’ initial M&V report because of defects in the

survey method (Greg Jones decl. at ¶ 17). However, after Philips refined its

methodology, WMATA told Mr. Gregory Jones that it was comfortable with Philips’

M&V methodology and would accept measurements that were within 5 percent of the

calculated amount (tr. 2/20-22).

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37. Each M&V report contained a detailed comparison of the calculated energy

consumption based upon fixture counts and the actual energy consumption as

measured by the installed meters (see, e.g., ex. A-68 at 22740-41; tr. 2/27). In most

garages, the calculated energy consumption was greater than the actual measured

energy consumption (see, e.g., ex A-68 at 22741; tr. 2/27). This discrepancy was due

to missing or burned-out fixtures that were included in the calculated baseline, but

were not included in the measured baseline because they did not draw power and were

not measured by the installed meters. For example, there was an 8.2 percent

difference between the calculated energy usage and the measured energy usage in the

Huntington North garage. (Tr. 2/24) However, when missing or burned-out fixtures

are accounted for in the calculated energy usage, the discrepancy is reduced to only

0.3 percent (tr. 2/23-27). Id. Therefore, if the missing or burned-out lights were

replaced, the energy usage for the entire garage would go up by roughly 8 percent

(tr. 2/24). Mr. Jones described the process by which he reconciled the calculated and

measured wattage on a fixture-by-fixture basis using field surveys (tr. 2/20, 26-27).

Philips generated multiple versions of each M&V report in an effort to adequately

support, from an engineering standpoint, that it had captured an accurate baseline

measurement (tr. 2/20-21).

38. For certain garages, at WMATA’s request, Philips adjusted the baseline

estimates of annual consumption due to changes in daylight on a seasonal basis. For

example, in some garages, the lights are controlled with photocells that automatically

switch the lights on or off based on the amount of ambient daylight reaching the

photocell (tr. 2/31). Mr. Jones testified that these adjustments were necessary only for

three garages (tr. 2/31).

39. In its answers to interrogatories, WMATA claimed that it made “every

effort” to bring all light fixtures in a garage into a working order before the baseline

measurement began for that garage (tr. 2/43; ex. A-522, WMATA’s second

supplemental objections and responses to appellant’s first set of interrogatories

at interrogatory no. 11). Gregory Jones disagreed, stating that in his opinion,

WMATA did not make every effort (tr. 2/44).

40. Exhibit 22 describes steps involved in metering, but these steps were

changed in Amendment 11 to the RFP (R4, tab 1 at 196). However, none of the

amendments to the RFP addressed adjusting the baseline to account for outages

(tr. 2/198-99).

Delays During the Construction Phase

41. In late 2016 and early 2017, Philips’ electrical subcontractors, Lamb Group

Electric (Lamb) and Lighting Maintenance, Inc. (LMI), performed a variety of repairs

to the electrical infrastructure of the parking garages. Lamb and LMI documented

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these repairs in change orders submitted to WMATA. (Ex. A-533 at 30-31, Kaplowitz

Dec’l at 1-2, ex. A). The repairs included troubleshooting circuity and replacing faulty

wire, circuitry, and conduit. In total, these repairs amounted to $88,333. (Ex. A-533

at 72, Schedule 5; tr. 4/70)

42. On March 16, 2016, WMATA issued Modification No. 0001, extending the

construction phase by 319 days, until August 31, 2016 (app. supp. R4, tabs 312,

312a at 4667; answer at ¶ 77). The modification included a two-page memorandum

setting forth a variety of delays attributable to WMATA, including reviewing and

approving proposed replacement light pole designs for top deck light pole

replacement, in the amount of time necessary for WMATA to replace the grounding

system for lighting at the Shady Grove South garage, and in the time necessary

to process security clearances for the contractor’s electricians and in (ex A-260;

tr. 2/85-86). For its part, Philips expended considerable time finding and hiring

electricians who could meet WMATA’s security clearance standards (tr. 2/85-86).

43. During the construction phase, WMATA provided electrician escorts for

Philips’ electrical subcontractors. The primary purpose of the electrician escorts

was to ensure the safety of Philips’ electrical subcontractors when working on the

garage lighting systems (tr. 7/132-34). Pursuant to the contract, WMATA was

obligated to make its escorts available for “a maximum of 8 consecutive [hours]

at each work location” (R4, tab 1 at 107-08). The record demonstrates that WMATA

dedicated five to six full-time escorts to the project (tr. 7/133).

44. Philips did not fully staff the contract during the installation phase

(tr. 5/218). Instead of having two full crews of 12 working at two different garages

simultaneously, Philips worked at only one garage at a time during much of the

installation period (tr. 7/144-45). The record also demonstrates that there were delays

associated with the need to replace Philips’ original subcontractor for the metering

installation (tr. 7/137-41), as well as delays in obtaining the metering equipment

(tr. 7/142).

45. Philips completed the construction phase of the contract on or before

February 1, 2017 (resp’t. reply br. at 16).

IV. Invoices for Payment

46. On August 21, 2017, Philips submitted its initial invoice in the amount of

$1,024,444 for the first six-month period of the maintenance phase from February 1,

2017 through July 31, 2017 (R4, tab 29 at 378). As the cover letter transmitting this

invoice set forth, the invoice utilized the original baseline of 19,186,521.3 kWh for

its calculation of energy savings, explaining that the invoice included “substantial

concessions on our part with respect to . . . entirely reasonable equitable adjustments

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that should have been made to the pre-retrofit baseline energy consumption of the

garages based on the substantial number of non-operating fixtures.” (R4, tab 29

at 375, 380). Moreover, the invoice capped the savings incurred during the

construction phase at $597,732 and used February 1, 2017, as the completion date for

the construction phase (R4, tab 29 at 376).

47. On May 2, 2018, Philips submitted invoices for the first three of the

semi-annual installment payments to be paid over the ten-year maintenance phase (R4,

tab 31). The invoices calculated energy consumption based upon a modified baseline,

increasing the original baseline of 19,186,521.3 kWh to 20,791,478.1 kWh (R4, tab 31

at 397). Philips stated that “[a]djustments to the baseline were made to account for

documented fixture and circuit outages during the pre-install metering period. Outages

were specifically identified for each garage in the Site Specific Measurement and

Verification [M&V] Reports provided to WMATA prior to installation of lights.” (R4,

tab 31 at 397: see also tr. 2/171-72). Each of the invoices included a M&V report

(“WMATA Parking Garage Lighting Retrofit Energy Savings Report”), which

provided WMATA with a six-month savings summary and chart illustrating the

energy savings during each of the respective invoices’ six-month period (R4, tab 31).

48. On May 2, 2018, Philips submitted Invoice WMATA-1 requesting a total

payment of $1,355,608.89, which included the amount due for equipment and services

for the semi-annual period from September 1, 2016 to February 28, 2017. The invoice

requested a “parking garage lighting efficiency payment” of $725,578 less an “energy

savings guarantee shortfall” of $13,155.10. Invoice WMATA-1 also included a

request for $643,185.99, which purportedly represents one-half of the total savings

realized by WMATA during the construction phase (9/14/2014 to 8/31/2016). (R4,

tab 31 at 388)

49. Invoice WMATA-2, also dated May 2, 2018, requested payment of

$1,368,763.99, which included the amount due for equipment and services for the

semi-annual period from March 1, 2017 to August 31, 2017 ($725,578), plus

$643,185.99, which purportedly represents the second half of the total savings realized

by WMATA during the construction phase (R4, tab 31 at 398).

50. Invoice WMATA-3, also dated May 2, 2018, requested payment of

$740,089.50 for equipment and services for the semi-annual period from September 1,

2017 to February 28, 2018 (R4, tab 31 at 408).

51. On October 16, 2018, Philips submitted invoice WMATA-4 in the amount

of $740,089.50 covering the period from March 1, 2018 to August 31, 2018 (R4,

tab 495 at 8944). The invoice included the M&V savings report, the 2018 light level

certification, and an explanation that the light level certification for the Southern

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Avenue garage could not be completed due to repairs being made by WMATA

(app. supp. R4, tab 495 at 8948; tr. 2/162, 171-75).

52. WMATA has not paid any of the invoices that Philips has submitted

(answer at ¶ 158).

V. Notice to Cure Deficiency

53. On March 23, 2018, WMATA sent Philips a notice to cure deficiency (cure

notice) stating that Philips is in breach of the contract for failure to: (1) “[d]eliver the

supplies or to perform the services within the time specified in the contract, herein or

any extension hereof;” and (2) achieve the Guaranteed Energy Savings of 15,615,828

kWh set forth in the Price Schedule Sheet, Amendment A10 Table I. According to the

cure notice, the “measured [e]nergy [c]onsumption for Year 1 ending January 31, 2018

produced an Energy Savings of only 14,729,854 kWh, which is a shortfall of 885,973

kWh of the guarantee.” (App. supp. R4, tab 479)

54. On April 2, 2018, Philips submitted a response to the cure notice (app.

supp. R4, tab 481 at 8385). Philips asserted, in part, that it had completed the

construction phase by August 31, 2016, and that it had produced the energy savings in

accordance with the contract (app supp. R4, tab 481 at 8387). Philips further

contended that, to the extent there was a shortfall in energy savings for any period of

time, the payment terms of the contract still entitle Philips to payment for the work

performed and the energy savings achieved (id. at 8387). Finally, Philips contended

that WMATA had breached the contract by refusing to pay any of Philips’ invoices

(id. at 8407-09).

VI. Procedural History

Certified Claims

55. On June 21, 2018, Philips filed its first certified claim in the amount of

$3,464,462.38 for its first three invoices (WMATA-1, WMATA-2, and WMATA-3)

for semi-annual installment payments related to each 6-month maintenance period

between September 1, 2016 and February 28, 2018 (app. supp. R4, tab 482 at ¶¶ 8468-

69). Invoice Nos. WMATA-1 and WMATA-2 also included invoiced amounts related

to energy savings provided to WMATA during the construction phase that, according

to Philips, ended on August 31, 2016 (R4, tabs 29, 31) Philips requested resolution of

its claim pursuant to the Contract’s Disputes Clause (answer at ¶ 288; app. supp. R4,

tab 482 at ¶¶ 8468-69). WMATA did not respond to Philips’ claim within 60 days

(answer to second amended complaint at 48).

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56. On September 5, 2018, Philips submitted a second certified claim

summarily raising factual issues that Philips had submitted to WMATA as part of its

Cure Notice Response and related correspondence (R4, tab 34 at 428; answer at ¶

298). Specifically, Philips sought to recover $1,342,728.64 in extra-contractual costs

allegedly caused by WMATA-directed changes to the contract’s scope of work, as

well as payment for the full contract price of $ 21,592,511 due as a result of

WMATA’s alleged material breach of the contract. Philips also sought lost profits of

an unspecified amount on future maintenance charges provided under the contract.

(R4, tab 34 at 428-29)

57. On November 1, 2018, WMATA denied Philips’ second certified claim

(R4, tab 35; answer at ¶ 304-05).

58. On December 6, 2019, Philips submitted its third certified claim seeking

payment for three additional invoices (Invoice Nos. WMATA-4, 8913958238, and

8913967667) for semi-annual installment payments related to each 6-month

maintenance period from March 1, 2018 to August 31, 2019 (ex. A-516). On

January 13, 2020, WMATA denied Philips’ third certified claim (ex. A-520).

Appeals Before the Board

59. On August 24, 2018, Philips filed a notice of appeal with the Board based

upon the deemed denial of Philips’ first certified claim, dated June 21, 2018.

60. On November 11, 2018, Philips filed a second notice of appeal with the

Board challenging the contracting officer’s final decision regarding Philips’ second

claim.

61. On December 17, 2018, Philips filed its First Amended Complaint. As of

the date of the First Amended Complaint, Phillips has submitted to WMATA invoices

totaling $4,204,551.88, exclusive of interest (answer at ¶ 155; R4, tab 31 at 386-412;

app supp. R4, tab 495 at 8942-9108).

62. On January 16, 2020, WMATA filed its Answer to Philips’ First Amended

Complaint. WMATA admitted that it had made no payment at all to Philips under the

Contract (answer at ¶ 158).

63. On March 12, 2020, Philips filed its Second Amended Complaint, and on

April 13, 2020, WMATA filed its Answer to Philips’ Second Amended Complaint.

64. On February 28, 2019, Philips moved for partial summary judgment on

Counts II and III of its second amended complaint. Count II alleged that WMATA

breached the contract by failing to pay Philips’ invoices for installment payments.

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Count III alleged a breach of the duty of good faith and fair dealing based, in part, on

delays during the construction phase of the contract. Philips also moved to strike

WMATA’s affirmative defense seeking liquidated damages.

65. On July 30, 2020, we granted partial summary judgment as to the payment

obligations in Count II, but denied summary judgment as to the alleged breach of the

duty of good faith and fair dealing set forth in Count III. We further granted Philips’

motion to strike WMATA’s affirmative defense seeking liquidated damages, holding

that the Board does not possess jurisdiction to entertain WMATA’s request for

liquidated damages, because WMATA’s contracting officer did not issue a final

decision upon the request as required by the disputes clause of the contract. Philips

Lighting North American Corp., ASBCA No. 61769 et al., 20-1 BCA ¶ 37,679

at 182,925-29.

66. On September 3, 2020, WMATA filed a motion for reconsideration of the

Board’s July 30, 2020 Opinion, requesting that the Board reconsider two aspects of its

opinion: (1) the Board’s grant of partial summary judgment as to the payment

obligations under the contract; and (2) the Board’s grant of Philips’ motion to strike

WMATA’s affirmative defense of setoff associated with Philips’ alleged performance

delay (resp’t mot. for recon. at 1).

67. On October 5, 2020, Philips filed its opposition and concurrently moved for

an order directing payment of money now due it and for the imposition of sanctions

against WMATA for the alleged bad faith in its motion (app. opp’n at 1-3).

68. On March 11, 2021, we denied the motions brought by both parties.

Philips Lighting North American Corp., ASBCA No. 61769 et al., 21-1 BCA ¶ 37,821

at 183,647. With respect to Philips’ motion for an order directing payment and for the

imposition of sanctions, we held that our decision granting summary judgment as to

the payment obligations did not establish the quantum owed to Philips. Id. at 183,652.

69. On March 22, 2021, we began a seven-day virtual hearing to determine

quantum for the judgment on Count II of the second amended complaint and to resolve

Philips’ allegations of bad faith and the breach of the duty of good faith and fair

dealing.

70. On May 7, 2021, the parties filed their initial post-hearing briefs, and on

May 28, 2021, they filed their post-hearing rebuttal briefs.

71. On September 22, 2023, at the Board’s request, the parties each filed

supplemental expert reports updating their respective damages calculations to reflect

the period of time since the original expert reports filed prior to the hearing. On

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March 22, 2024, the parties filed a second supplemental report updating their

respective damages calculations to reflect the passage of time.

DECISION

I. What is the Proper Measure of Damages

In our July 30, 2020 opinion, we concluded that the lighting contract expressly

anticipates payments that are less than the scheduled payments. Installment payments

for each period are calculated by subtracting the actual energy usage from the baseline

to calculate the savings. If the savings are less than or equal to the “guaranteed energy

savings” predicted in the contract, WMATA pays Phillips the amount of the savings.

If, on the other hand, the savings exceed the predicted “guaranteed energy savings”

amount, the “guaranteed energy savings” constitute a cap on the payment that

WMATA owes Phillips. Philips Lighting North American Corp., ASBCA No. 61769

et al., 20-1 BCA ¶ 37,679 at 182,926-28.

During the hearing, we heard fact and expert testimony regarding the

calculation of the baseline and whether Philips has met the guaranteed savings level.

The Appropriate Baseline for Determining Semi-Annual Installment

Payments

The parties dispute the figure to be used as the baseline for determining whether

Philips has met the energy savings guarantee. WMATA contends that the appropriate

figure is the measured baseline of 19,186,521 kWh, while Philips contends that the

measured baseline should be adjusted to 20,791,478 kWh to account for light fixtures

that were broken, burned out, or otherwise inoperable during the period when the

measurements were taken (findings 37, 46).

Although the difference of 1,604,957 kWh between the measured baseline of

19,186,521 kWh and the adjusted baseline of 20,791,478 kWh may seem relatively

small, it affects whether the energy savings achieved by Philips is equal to or greater

than the “energy savings guarantee” set forth in Table 1 of the contract. For example,

using Philips’ adjusted baseline, Philips’ expert witness, Ms. Linda Hsaio, calculated

that Philips met the guaranteed energy savings in each six-month period of the contract

since the initial period (ex. A-533 at 21-22). However, if the measured baseline of

19,186,521 kWh is used, then Philips’ expert concedes that Philips achieved roughly

90 percent of the guaranteed level in each six-month period (ex. A-533 at 65 2

(Schedule 4A)).

2

The tables contained in this report do not have bates-label numbering. As such, this

citation is to the PDF page number.

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According to WMATA, the failure to meet the “guaranteed” energy savings is

fatal to Philips’ case and relieves WMATA of any obligation to pay Philips’ invoices

(resp’t br. at 11). The Board has ruled that Philips need not satisfy the 15,615,828

kWh energy savings guarantee to be entitled to payment. Philips Lighting North

American Corp., ASBCA No. 61769 et al., 20-1 BCA ¶ 37,679 at 182,926-28,

WMATA acknowledges this, but “vehemently disputes that conclusion and preserves

its objection.” (resp’t br. at 44).

1. Whether the Baseline Measurement Accounts for Missing or Burned

Out Lights

In support of its adjustment of the baseline measurement, Philips contends that

the contract’s definition of baseline is ambiguous and should be interpreted favorably

to Philips pursuant to the doctrine of contra proferentem (app. reply br. at 17). If the

baseline does not account for missing or burned out lights, then Philips would have to

replace those fixtures for free and additionally fund the energy consumption of those

replaced fixtures for the life of the contract. According to Philips, this would be a

windfall to WMATA that is not included in the parties’ bargain and is contrary to the

intent of the contract (app. br. at 27).

WMATA disagrees, contending that the plain language of the baseline clause

is clear and unambiguous (resp’t br. at 3). To the extent there is any ambiguity,

WMATA insists that it was patent and that it was incumbent upon Philips to clarify the

ambiguity (resp’t reply at 15). WMATA points out that baseline measurement clause

anticipates that the contractor will develop a metering plan that it would submit

to WMATA prior to installation. According to WMATA, Philips should have cleared

up any ambiguities concerning how to measure the baseline electricity consumption

of the existing lighting system at the time it submitted its metering plan (resp’t reply

at 15).

In interpreting a contract, “‘clear and unambiguous [contract provisions]

must be given their plain and ordinary meaning’ . . . and we may not resort to extrinsic

evidence to interpret them . . . .” Coast Fed. Bank, FSB v. United States, 323 F.3d

1035, 1040 (Fed. Cir. 2003) (citations omitted) (en banc). “An ambiguity exists when

a contract is susceptible to more than one reasonable interpretation.” E.L. Hamm &

Assocs., Inc. v. England, 379 F.3d 1334, 1341 (Fed. Cir. 2004). “To show an

ambiguity it is not enough that the parties differ in their respective interpretations of a

contract term. Rather, both interpretations must fall within a ‘zone of

reasonableness.”’ NVT Tech., Inc. v. United States, 370 F.3d 1153, 1159 (Fed. Cir.

2004) (citing Metric Constructors, Inc. v. NASA, 169 F.3d 747, 751 (Fed. Cir. 1999)).

In deciding whether an interpretation is reasonable:

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We must seek to put ourselves in the position of appellant

at the time he bid on the contract, i.e., we must seek the

meaning that would be attached to the language by a

reasonably intelligent bidder in the position of appellant,

who would be expected to have the technical and trade

knowledge of his industry and to know how to read and

interpret technical engineering specifications and perform

construction work in accordance with such specifications.

Adrian L. Roberson, d/b/a Roberson Constr. Co., ASBCA No. 6248, 61-1 BCA

¶ 2857 at 14,915.

If, after applying the above analysis, we determine that a contract term is

ambiguous, we generally read the contract against the party that drafted the contract

under the doctrine of contra proferentem. R.L. Persons Constr., Inc., ASBCA

No. 60121, 18-1 BCA ¶ 37,007 at 180,236 (citing Turner Constr. Co. v. United States,

367 F.3d 1319, 1321 (Fed. Cir. 2004)). However, if the ambiguity is sufficiently

apparent that there was a patent ambiguity, then the contractor must inquire as to the

meaning of that contractual provision. Id. Failure to do so will lead to the ambiguity

being resolved against the contractor. Triax Pacific, Inc. v. West, 130 F.3d 1469, 1475

(Fed. Cir. 1997). Because the doctrine has the effect of relieving the government of

the consequences of its own poorly drafted contract, it is applied narrowly to those

cases where the ambiguity is so patent and glaring that it is unreasonable for a

contractor not to inquire about them. More subtle ambiguities are deemed latent and

accorded an interpretation favorable to the contractor. Id.

The baseline clause states that:

a. Baseline energy consumptions shall be established by

directly measuring the power consumption for the current

lighting system at each garage for a minimum period of six

weeks before installation of the new lighting system. The

measurement shall be accomplished by installing utility

grade meters on all electrical circuits/panels not currently

connected to dedicated meters. The contractor shall submit

a plan for installing the meters within 45 days of notice to

proceed.

b. The utility grade meters shall remain in place and

maintained for the life of this contract in order to measure

actual energy consumption for the new lighting system.

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c. The energy cost shall be computed by multiplying price

per Kwh paid by WMATA during the period by energy

consumption for the period.

d. Actual Project/energy savings shall be computed by

multiplying the difference between the measured actual

energy consumption and the baseline energy consumption

by the price per Kwh paid [by] WMATA during the

period.

(Finding 21).

We conclude that the plain language of the baseline clause is clear and

unambiguous. Philips acknowledges that a “strictly literal reading of this provision

does not reference outages or how to adjust the baseline for outages observed during

metering.” (App. br. at 25) However, Philips attempts to create an ambiguity by

referencing the fact that both parties agreed to adjust the actual measurements for

seasonality, contending that this divergence from the literal reading implies that the

clause is intended to provide for adjustment (app. br. at 25-26).

We do not agree that the decision to adjust the baseline measurement to account

for seasonal lighting changes means that the clause is ambiguous. Because the clause

states that direct measurements will be taken for a period of at least six weeks, it is

logical to conclude that the parties would need to agree to extrapolate the

measurements to produce an annual figure. The fact that the parties did not also agree

beforehand on a need to adjust for outages does not create an ambiguity.

In support of its contention that the baseline provision is ambiguous, Philips

further argues that there is a tension between the baseline provision and the

measurement and verification plan specified in Part III, ¶7(10) of the contract, which

states that “the measurement and verification plan shall be in accordance with the

International Performance Measurement and Verification Protocol, Vol. I (2012)”

(“IPMV Protocol”) (app. br. at 26; finding 22). We do not see the baseline provision

as being in tension with the requirement to follow the IPMV Protocol, nor do we

believe that the requirement to follow the IMPV Protocol creates an ambiguity.

Rather, this provision of the contract places the burden on the contractor to prepare a

measurement and verification plan that accounts for outages. As appellant’s witnesses

extensively testified, the IMPV Protocol specifically addresses outages and provides

detailed guidance about how to make baseline adjustments for fixture outages like

those observed in the garages (tr. 6/227-38). Thus, Philips had an opportunity to clear

up any concern about outages when it submitted its measurement and verification plan

for approval. Tellingly, Philips’ M&V plan did not contain any explicit discussion of

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outages or how to adjust the baseline measurement to account for burned out or

missing fixtures (finding 32).

Although each of Philips’ M&V reports contained extensive documentation of

the outages in each garage (finding 37), the parties did not agree in advance how to

account for outages. The time to raise this issue was before metering started, not after

Philips realized that its savings would not meet the projected level. Indeed, both

Philips’ and WMATA’s experts agreed that baseline adjustments for fixture outages

were considered non-routine and would require the agreement of both parties

(tr. 8/208-09; 7/7-12).

Indeed, Philips applied a 10 percent outage factor in its initial proposal,

demonstrating its understanding that the measured baseline would be affected by

outages (finding 9). Philips’ application of this outage factor further demonstrates that

it understood the contract’s baseline provision to be based solely upon measured

energy consumption without any subsequent adjustment for observed outages. This

demonstrates that – prior to the dispute – the parties agreed that the baseline provision

did not account for outages. Thus, Philips’ pre-bid decision-making relied on the

interpretation that WMATA now espouses, undercutting Philips’ insistence that the

provision is ambiguous. See HPI/GSA-2C v Perry, 364 F.3d 1327, 1334-34 (Fed. Cir.

2004) (holding that contractor must rely on the interpretation it now espouses in order

to apply contra proferentum).

Finally, to the extent that the baseline measurement clause is in any way

ambiguous, we do not believe the ambiguity is patent. A patent ambiguity is limited

to one that is “obvious, gross, or glaring” or is facially inconsistent. An ambiguity in a

government contract is “patent” when the contract contains facially inconsistent

provisions that would place a reasonable contractor on notice and prompt the

contractor to rectify the inconsistency by inquiring of the appropriate parties; such an

ambiguity is obvious, gross, or glaring. NVT Techs., Inc. v. United States, 370 F3d

1153, 1162 (Fed. Cir. 2004).

Because we have concluded that the baseline clause is not ambiguous, there

is no basis to accept Philips’ contention that the measured baseline should be adjusted.

Indeed, the fact that Philips adopted the measured baseline of 19,186,521 kWh in its

first six-month invoice is contemporaneous evidence that Philips did not consider the

baseline provision to be ambiguous (finding 46). Watts Constructors, LLP, 20-1 BCA

¶ 37,563 at 182,386 (holding that “contemporaneous interpretation of a contract prior

to a dispute is entitled to some consideration.”); see also Aegis Def. Services, LLC,

ASBCA Nos. 59082, et al., 17-1 BCA ¶ 36,915 at 179,856 (citing Blinderman Constr.

Co. v. United States, 695 F.2d 552, 558 (Fed. Cir. 1982) (contemporaneous

construction of an agreement prior to dispute is entitled to great weight)).

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Our conclusion also makes it unnecessary to consider WMATA’s challenges

to the reliability of Philips’ observation of fixture outages (resp’t br. at 15). Likewise,

we do not need to consider the proposal of Philips’ expert, Linda Hsiao, to adjust the

baseline only for outages recorded on the site drawings (tr. 7:39-40).

2. What is the Correct Start of the Maintenance Phase?

Philips contends that the construction phase was substantially complete as of

August 31, 2016 (app. br. at 6). In response, WMATA contends that Philips has never

achieved “final completion” as defined in the contract, because it has never met the

“guaranteed energy savings.” (Resp’t br. at 14). According to WMATA, there is

no provision in the contract that identifies “substantial completion” as a trigger for any

payment obligations. WMATA claims that it was not until May 2017 before Philips

satisfied all of the criteria for “final completion” except for meeting the guaranteed

energy savings (resp’t br. at 14-15). However, in a footnote to its brief, WMATA

purports to make a “good faith concession” that it allowed the maintenance phase and

invoicing to begin as of February 1, 2017, despite ongoing installation work (resp’t br.

at 15, n.10).

In support of the earlier start date for the maintenance phase, Philips relies upon

testimonial evidence from Gregory Jones, who stated that, as of August 2016, the only

tasks remaining were “punch list items,” such as installing some exit signs and

difficult-to-reach stairway lights (tr. 2/160-61). Philips also cites to documentary

evidence, including meeting minutes from an August 2016 meeting with WMATA

discussing the transition from the construction phase (R4, tab 408), as well as its own

correspondence stating that, as of August 31, 2016, only 1 percent of the fixtures

remained to be installed (R4, tab 435 at 1).

As WMATA has reluctantly conceded, the February 1, 2017 date is consistent

with the parties’ contemporaneous conduct. WMATA’s contracting officer at the

time, Kunj Behari, agreed to allow payments to begin as of February 1, 2017

(tr. 4/82-83). Likewise, Philips’ August 2017 invoice used the February 1, 2017 date

as the completion date for construction (finding 46).

Therefore, we conclude that the maintenance phase began on February 1, 2017.

3. What Utility Rates Should Be Used to Calculate Energy Savings?

WMATA contends that, in the event of an energy savings shortfall in any

period, the amended payment owed to Philips is calculated using WMATA’s actual

utility rates for the period. The contract states that the amended payment is calculated

by:

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multiplying the difference between the measured actual

energy consumption and the baseline energy consumption

by the price per Kwh paid WMATA [sic] during the

period.

R4, tab 1 at 109. According to WMATA, Philips must calculate the “price per

Kwh paid [by] WMATA” using WMATA’s actual utility rates during the period

(resp’t reply at 19-20). We disagree.

First, we previously held that the parties relied on an agreed-upon imputed

utility rate to calculate the “estimated energy cost to WMATA” in Table 1A of the

contract and that WMATA’s payment obligations depend upon an agreed imputed

utility rate. Philips Lighting North American Corp., ASBCA No. 61769 et al., 21-1

BCA ¶ 37,821 at 163, 649-50. Our decision is the law of the case and is binding on

this issue. WMATA’s arguments do not demonstrate that the Board’s previous ruling

was “clearly erroneous” or would cause a “manifest injustice.” Teledyne Cont’l

Motors, Gen. Prods. Div., ASBCA No. 48364, 96-2 BCA ¶ 28,523 at 142,442

(previous decisions in the appeal are law of the case and will be overturned only if

they are “clearly erroneous and would work a manifest injustice”) (citations omitted).

WMATA admits that it does not know what its actual utility rates are for its

garage lights, because its utility bills include multiple charges and rates and do not

isolate the rate charged for garage lighting (app. reply br. at 12; ex. A-522 at 13).

Indeed, in response to Philips’ interrogatories, WMATA claimed that it would be

“unduly burdensome” to calculate the cost of lighting at each of the 25 garages,

because the garages are subject to six different utility rates which change annually, and

because its utility bills aggregate electrical usage and charges for multiple garages

(app. reply br. at 12-13). Although WMATA eventually produced information

pertaining to its actual utility rates, Philips did not use the information in calculating

its damages. WMATA pounces on this omission and contends that Philips failed to

carry its burden of proving damages (resp’t br. at 44-45). WMATA’s position on this

point is disingenuous, given its reluctance to produce the information in the first place

and its admission that its own utility bills aggregate electrical usage and charges for

multiple garages.

Reading the contract as a whole, it is reasonable to conclude that the imputed

utility rates for each annual period in Years 1-10 embedded in Table 1 are what are

referenced in the payment provision statement “the price per Kwh paid WMATA [sic]

during the period” (R4, tab 1 at 109 (emphasis added)). Philips Lighting North

American Corp., ASBCA No. 61769 et al., 21-1 BCA ¶ 37,821 at 163,649-50.

Finally, as Philips observes in its post-hearing brief, the contract contains no

indication that Philips would be responsible for underwriting the risk of guaranteeing

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WMATA’s actual utility rates over the 10-year repayment period (app. br. at 43). The

difficulty of predicting WMATA’s future utility rates is precisely why the parties

agreed to imputed rates and a 2 percent inflation escalator for Years 1-10 in Table 1.

Indeed, as we previously held, Table 1 of the contract contains all the information

necessary to calculate the amount of an amended installment payment. Philips

Lighting North American Corp., ASBCA No. 61769 et al., 21-1 BCA ¶ 37,821

at 163,650.

Whether Philips’ Invoices Were Properly Submitted Under the

Contract

WMATA contends that the contract places the obligation on Philips to submit a

proper invoice. According to WMATA, the contract permits, but does not require,

partial payments only after submission of a properly executed invoice accepted by

WMATA’s contracting officer. (Resp’t br. at 17-20, 39-40)

In its post-trial briefing, WMATA makes two arguments supporting its decision

to reject Philips’ invoices. First, WMATA contends that Philips’ invoices were not

properly submitted, because Philips has not met the “guaranteed savings” level (resp’t

reply. br. at 14). According to WMATA’s interpretation, the lighting system is not,

and has never been, finally complete because Philips has not met the guaranteed

energy savings level (resp’t reply at 16-17). WMATA takes this a step further,

contending that it has never incurred a payment obligation, because Philips has never

reached “final completion.” (Resp’t reply at 17)

We previously rejected this argument in our July 30, 2020 opinion and, again,

in our decision denying WMATA’s motion for reconsideration, and do so again here,

though without wasting our time by explaining it a third time. Philips Lighting North

American Corp., ASBCA No. 61769, et al., 20-1 BCA ¶ 37,679 at 182,925-29; Philips

Lighting North American Corp., ASBCA No. 61769, et al., 21-1 BCA ¶ 37,821

at 183,647. Our holding is the law of the case. Teledyne Cont’l Motors, Gen. Prods.

Div., ASBCA No. 48364, 96-2 ¶ 28,523 at 142,442-43.

WMATA’s second argument is that it was justified in rejecting Philips’

invoices because the invoices were contractually flawed. The invoices used the wrong

baseline, wrong dates, wrong utility rates, and some sought extra payments for which

Philips was not entitled. (Resp’t br. at 17-20) According to WMATA, each of the

invoices submitted by Philips since May 2018 are not payable because they used a

unilaterally altered baseline and unsupported installation completion date (which were

not agreed to or authorized by the WMATA contracting officer) and would require

WMATA to recalculate the invoice amount using the contractual measured baseline

and actual completion date for installation (resp’t br. at 39).

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In Philips’ view, WMATA cannot justify years of non-payment on the grounds

that Philips has never submitted a “proper invoice” (app. reply br. at 6). According to

Philips, WMATA should have made partial payments based upon an alternative

calculation of energy savings (app. br. at 34).

We specifically addressed the issue of partial payment in our opinion on

WMATA’s motion for reconsideration. Following the Board’s July 30, 2020 decision

finding entitlement, Philips sent letters to WMATA in August 2020 requesting interim

payment for the undisputed value of the energy savings that WMATA admitted in its

interrogatory answers and in other internal documents that Philips’ lighting system has

conferred (which were no less than 14.2 million kWh/year in energy savings, even

when measured against WMATA’s artificially depressed baseline) (app. br. at 34).

Such interim payments would have been without prejudice to the parties’ continuing

disputes pending the Board’s final resolution. WMATA refused Philips’ requests for

payment, contending that payment (if any) should await the Board’s decision on

quantum. Philips Lighting North American Corp., ASBCA No. 61769 et al., 21-1

BCA ¶ 37,821 at 183,652.

In our opinion on WMATA’s motion for reconsideration, we concluded that it

would be inappropriate to rule upon Philips’ request for immediate payment of some

amount of damages in the context of a motion for reconsideration. Philips Lighting

North American Corp., ASBCA No. 61769, et al., 21-1 BCA ¶ 37,821 at 183,651-52.

We were not in position to evaluate Philips’ request for payment, because it was based

upon testimonial evidence, purported admissions in pleadings, and data provided by a

third party. Thus, we found no present obligation for WMATA to make interim

payments to Philips prior to the Board’s ruling on quantum. Philips Lighting North

American Corp., ASBCA No. 61769 et al., 21-1 BCA ¶ 37,821 at 183,652.

However, WMATA cannot rely upon alleged deficiencies in Philips’ invoices

as an excuse to avoid any payment obligations whatsoever. WMATA’s argument that

it has no payment obligation because Philips’ invoices are deficient is a red herring.

WMATA’s payment obligations stem from its contractual obligations, not the format

or content of Philips’ invoices.

Indeed, WMATA acknowledges that the lighting contract permits (but does not

require) partial payments, but only after submission of a properly executed invoice

accepted by the WMATA Contracting Officer’s Technical Representative (resp’t br.

at 39). If WMATA believed that the invoices were flawed, it could have asked Philips

to resubmit its invoices under terms agreeable to it or could have offered to make

partial payment based upon the measured baseline. WMATA could have made such

payments while preserving its arguments before the Board (app. br. at 34-35). The

purported flaws in Philips’ invoices could easily have been corrected with discussions

between the parties and Philips could have amended its claims to reflect any payments

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made by WMATA. These discussions could have occurred at any time – even after

the Board’s decision on entitlement. Indeed, WMATA’s contracting officer retains

jurisdiction to resolve disputes, even after an appeal is filed with the Board. See J.H.

Strain & Sons, Inc., ASBCA No. 34432, 88-3 BCA ¶ 20,909; J.W. Bateson Co.,

ASBCA No. 24425, 84-1 BCA ¶ 16,942; Ralph C. Nash & John Cibinic, Settlement of

Claims: Who Is Authorized To Do What?, 6 Nash & Cibinic Rep. ¶ 52 (Sept. 1992).

II. Whether WMATA Acted in Bad Faith or Violated the Implied Duty of Good

Faith and Fair Dealing

While recognizing the legal distinction between a finding of bad faith and a

finding of a breach of the duty of good faith and fair dealing, Philips argues that the

record demonstrates both. Philips contends that there is clear and convincing evidence

of WMATA’s bad faith and a preponderance of evidence that WMATA breached its

duty of good faith and fair dealing (app. br. at 12-21). According to Philips, either

finding justifies a remedy excusing Philips from further performance together with

payment of the full economic expectation of the lighting contract (app. br. at 20).

WMATA contends that it did not act in bad faith, nor did it breach the duty of

good faith and fair dealing. To the contrary, WMATA asserts that it went above and

beyond its contractual obligations to seek a solution on payment and to assist Philips

with the installation (resp’t br. at 24).

The Legal Standards Differ for Finding of Bad Faith as Opposed to a

Violation of the Implied Duty of Good Faith and Fair Dealing

Count III of Philips’ Second Amended Complaint alleges a breach of the duty

of good faith and fair dealing (compl. ¶¶ 341-54). Specifically, Philips contends that

WMATA delayed the construction phase of the contract by, inter alia, delaying site

inspection and acceptance, failing to appoint a contracting officer, issuing an

unsupported cure notice, and inducing Philips to prepare a remedial proposal that it

had no intention of addressing on the merits (compl. ¶ 344).

Both parties agree regarding the differing legal standards for proving bad faith

and a breach of the duty of good faith and fair dealing (app. br. at 12; resp’t br.

at 33-36). With respect to the duty of good faith and fair dealing, breach requires

interference with performance or failure to cooperate that deprives the other party of

the benefits for which the party bargained. See Metcalf Constr. Co. v. United States,

742 F.3d 984, 991 (Fed. Cir. 2014) (“an act will not be found to violate the duty

(which is implicit in the contract) if such a finding would be at odds with the terms of

the original bargain, whether by altering the contract’s discernible allocation of risks

and benefits or by conflicting with a contract provision.”)

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Bad faith, in contrast, requires clear and convincing evidence of some specific

intent to harm the contractor. Am-Pro Protective Agency, Inc. v. United States,

281 F.3d 1234, 1239-40 (Fed. Cir. 2002).

In addition, the remedies differ for bad faith and breach of the duty of good

faith and fair dealing. Damages for a breach of the duty of good faith and fair dealing

are the same as a breach of the express terms of a government contract: payment for

work performed, in accordance with the contract’s terms. See Catherine Kurkjian,

ASBCA No. 61154, 20-1 BCA ¶ 37,594 at 182,538. On the other hand, if a contractor

meets the heavy burden of proving bad faith, damages such as anticipatory profits on

work not performed may be available. Apex Intern. Mgmt. Servs., Inc., ASBCA

No. 42747 et al., 94-2 BCA ¶ 26,842 (Mar. 4, 1994) (finding that Government acted in

in bad faith and that appellant consequently was entitled to receive traditional breach

of contract damages, including anticipatory profits).

Philips contends that WMATA’s breaches entitle Philips to (1) be excused from

further performance and compensation “at no less than the full value of the contract”;

(2) payment of Philips’ attorney costs for responding to settlement discussions; and

(3) payment of Philips’ attorney costs for responding to the Cure Notice (compl.

¶¶ 352-54; app. br. at 20-21).

We address below whether WMATA’s conduct amounted to either bad faith or

a breach of the duty of good faith and fair dealing.

WMATA’s Refusal to Make Amended Installment Payments to Philips

Was Not Bad Faith

Philips contends that WMATA should have made amended installment

payments to Philips, even if it believed that less than full installment payments were

due. Philips contends that WMATA’s refusal to pay anything is evidence of bad faith.

(app. br. at 35)

We agree that WMATA should have found a way to make partial payments on

Philips’ invoices, even given the disagreement between the parties regarding the

contractual payment obligations. This failure was particularly acute following the

Board’s decision on entitlement, in which the Board concluded that Philips was

entitled to amended installment payments. Philips Lighting North American Corp.,

ASBCA No. 61769 et al., 20-1 BCA ¶ 37,679 at 182,926-27. Indeed, WMATA could

have negotiated a way to make payments subject to a reservation of rights, while

acknowledging the lack of agreement over the proper baseline and other matters.

Despite this failure, we do not believe WMATA’s failure to pay constitutes bad

faith. To constitute bad faith, there needs to be clear and convincing evidence of a

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specific intent to harm the contractor. Am-Pro Protective Agency, Inc. v. United

States, 281 F.3d 1234, 1239-40 (Fed. Cir. 2002). Here, there is clear disagreement

between the parties over the payment terms. Mere disagreement is not bad faith.

S.A.F.E. Export Corp., ASBCA No. 29333, 85-3 BCA ¶ 18,404, at 92,320 (“[S]imply

because a Government official does not agree . . . does not mean that the disagreement

is motivated by any bad faith or as a result of improper conduct.”) Despite WMATA’s

dogmatic insistence that it has no obligation to pay, we find no evidence of a specific

intent to harm Philips.

Moreover, the evidence demonstrates that the contracting officer was acting on

her good-faith interpretation of the contract’s payment terms and that there was a

reasonable, albeit flawed, contract-related basis for her decision to decline payment

(tr. 5/38). There is no evidence that the CO exceeded her discretion or violated any

applicable statutes or regulations. Goodloe Marine, Inc., ASBCA Nos. 62106, 62446,

22-1 BCA ¶ 38,053 at 184,777 (citing Third Coast Fresh Distribution, L.L.C., ASBCA

No. 59696, 16-1 BCA ¶ 36,340 at 177,194) (finding no bad faith where the CO had a

reasonable contract basis for their decision).

Therefore, we conclude that WMATA was not acting in bad faith when it

refused to pay Philips’ invoices.

Whether WMATA’s Conduct Violated the Implied Duty of Good Faith

and Fair Dealing

Philips cites to several specific examples of conduct that it claims violated the

implied duty of good faith and fair dealing. For example, during the installation phase,

Philips claims that WMATA fell short of providing the full eight hours of electrician

escort services for which Philips paid (app. br. at 5).

The primary purpose of the electrician escorts was to ensure the safety of

Philips’ electrical subcontractors when working on the garage lighting systems.

Pursuant to the contract, WMATA was obligated to make its escorts available for “a

maximum of 8 consecutive [hours] at each work location.” (Finding 43) There is no

evidence that WMATA failed to meet this obligation. Instead, the record demonstrates

that WMATA dedicated five full-time escorts to the project (finding 54).

Mr. Charles Secrist, a Shift Supervisor with WMATA during the entirety of the

lighting installation from 2014 until 2017, testified that his team provided safe

electrical access to WMATA’s electrical systems and that supervision was necessary

to prevent the contract electricians from accidentally turning off power or harming

themselves. He further explained that the escort crews were union personnel and

required to follow certain protocols about reporting to work. Moreover, at Philips’

request, Mr. Secrist often would arrive before his escort crews to unlock secure areas

in order to arrive before the contractors. (Finding 8; tr. 7/133-35)

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In terms of delays that occurred during the installation phase, the record

demonstrates that Philips did not fully staff the contract during the installation phase.

Instead of having two full crews of 12 working at two different garages

simultaneously, Philips worked at only one garage at a time during much of the

installation period. The record also demonstrates that there were delays associated

with the need to replace Philips’ original subcontractor for the metering installation,

as well as delays in obtaining the metering equipment. (Finding 44) In sum, we find

substantial evidence that WMATA willingly cooperated with Philips and its

subcontractors during the installation phase of the contract.

Once the lighting system was installed, Philips contends that WMATA

deliberately prevented it from tuning the system controls to realize additional energy

savings (app. br. at 15). According to William McShane, Director of Public Sector

Services, the real energy savings come from controls and the failure to tune the system

is “like [driving] a Ferrari without gasoline” (tr. 1/81). While there was some

testimony that WMATA prevented Philips from tweaking the controls to maximize the

savings, we do not find that this constituted a breach of the duty of good faith and fair

dealing. Instead, it is more indicative of poor communication between the parties

as well as the failure to spell out in the contract which party had the right to alter the

lighting controls. Moreover, to the extent that adjusting the lighting system would

reduce lighting levels below the illumination standards set forth in the contract, it is

reasonable for WMATA to require the lighting to remain at a level that ensures

customer safety (R4, tab 1 at 120; tr. 5/110-11; 5/219-21).

Finally, Philips contends that WMATA violated its duty of good faith and fair

dealing when the contracting officer (CO), T. Suzette Moore, issued a default notice

pursuant to default provision of the contract (finding 5; R4, tab 479). According to

Philips, WMATA had no intention of actually terminating the contract and issued the

“baseless” default notice as cynical attempt to coerce Philips into capitulating in

settlement negotiations (app. br. at 7, 16).

WMATA’s issuance of a default notice – even in the circumstances where

communications between the parties had broken down – is not evidence of bad faith or

a breach of the duty of good faith and fair dealing. Consistent with the presumption

that government contracting officials act in good faith, we cannot infer that

WMATA’s contracting officer issued the cure notice solely for the purpose of

threatening Philips. Based on her testimony, it is more reasonable to infer that

Ms. Moore had multiple reasons for issuing the cure notice, including hoping that

it would encourage Philips to submit a corrective action plan (see tr. 5/69). Indeed,

she freely acknowledged that she intended the default notice to be a “tool” to “put the

project back on track” (tr. 5/69, 94). She further admitted that WMATA was satisfied

with Philips’ performance and that WMATA wanted Philips to continue on the

contract (tr. 5/94). Of course, Ms. Moore issued the default notice with full knowledge

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that if Philips failed to cure the deficiency, then WMATA could terminate the contract

for default (tr. 5/71).

Philips next contends that an internal WMATA spreadsheet turned over during

discovery (the “scenario analysis” spreadsheet) was an admission by WMATA of its

obligations under the contract and that WMATA acted in bad faith when it ignored

those obligations by refusing to pay Philips’ invoices (ex. A-450; app. br. at 7).

WMATA asserts that the spreadsheet merely reflected a potential compromise position

that WMATA was considering in the context of settlement negotiations and objected

to its introduction as evidence (resp’t reply at 12; tr. 5/209-10). While we ruled the

document admissible during the hearing (tr. 5/209), the substance of spreadsheet

does not help Philips.

In our view, WMATA created the “scenario analysis” spreadsheet for internal

deliberation, but that, alone, does not make it privileged. It likely served multiple

purposes, such as informing WMATA management about WMATA’s potential

liability for payments under the contract, as well as illustrating potential outcomes of

the ongoing settlement negotiations (ex. A-450). The spreadsheet does not constitute

an admission that WMATA considered itself obliged to pay Philips any particular

amount, nor does it demonstrate that WMATA willfully ignored its payment

obligations. Instead, it merely quantifies WMATA’s potential liability should the

Board determine that WMATA is obligated to make payments under the contract.

Therefore, we do not view the spreadsheet as demonstrating bad faith.

Our conclusion that WMATA did not act in bad faith or breach the duty of

good faith and fair dealing does not preclude us from awarding the full measure of

damages based upon WMATA’s material breach of the contract.

III. Philips Is Entitled to Damages Based Upon WMATA’s Material Breach of

Contract

Whether the Board Possesses Jurisdiction to Order WMATA to

Terminate the Lighting Contract for Convenience

In the absence of a finding of either bad faith or a breach of the duty of good

faith and fair dealing, Philips contends that WMATA’s conduct amounts to a de facto

default termination and, therefore, gives the Board jurisdiction to terminate the

contract for convenience (app. br. at 22). Philips points to three examples of

WMATA’s actions to justify its position: (1) the CO’s issuance of a termination for

default notice in March 2018; (2) WMATA’s failure to make any payment to Philips;

and (3) the CO’s testimony that Philips continues to be in default of the contract.

Together, Philips contends that these actions constitute a material breach of the

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contract and give the Board jurisdiction to convert the de facto default termination into

a termination for convenience. (App. br. at 23)

WMATA contends that the Board does not possess jurisdiction to excuse

Philips from further performance, which WMATA insists would require the Board

to order the government to terminate the lighting contract for convenience (resp’t br.

at 36-37) (citing Shavers-Whittle Constr., LLC, ASBCA No. 60025, 16-1 BCA

¶ 36,246; see also CDM Constructors, Inc., ASBCA No. 59524, 15-1 BCA ¶ 36,097

(dismissing appellants’ request to declare that “further performance is excused” as a

request for injunctive relief that the Board did “not possess jurisdiction to entertain”)).

WMATA also asserts that Philips’ de facto default termination theory was not pled in

its complaint and is not supported by Malone (resp’t reply br. at 27; appendix A at 4).

WMATA is correct regarding the Board’s jurisdiction to order injunctive relief,

but Philips is not seeking an injunctive remedy per se. Instead, Philips contends that

WMATA’s conduct amounts to a de facto default termination and that the Board

routinely converts default terminations into terminations for convenience. Moreover,

Philips asserts that its expectation damages under the lighting contract area essentially

the same as what it would be entitled to under a termination for convenience (app. br.

at 23).

WMATA contends that there is no authority for the Board to direct an agency

to issue a termination for convenience or similar injunctive-type relief under contracts

subject to the Contract Disputes Act. According to WMATA, excusing Philips from

performance is an “extraordinary remedy” and would require the Board to order a

termination for convenience (resp’t br. at 36-37).

WMATA misses the point. Because WMATA has committed a material breach

of the lighting contract by failing to pay Phillips, there is no need for us to order

injunctive relief to award Philips the damages it seeks. Indeed, we need not conclude

that WMATA’s actions constitute a de facto default termination, nor do we need to

order WMATA to terminate the contract for convenience. Instead, because

WMATA’s non-payment constitutes a material breach of the lighting contract, Philips

is entitled to cease performance and obtain the full measure of damages that would

place it in the same position it would be but-for the breach. Stone Forest Indus. Inc. v.

United States, 973 F.2d 1548, 1550 (Fed. Cir. 1992) (“Upon material breach of a

contract the non-breaching party has the right to discontinue performance of the

contract . . .”).

As we previously held, the contract imposes an obligation on WMATA to

(1) respond to invoices within 30 days and (2) pay for the value of energy savings

conferred—including an obligation to make an amended installment payment in the

event of an energy savings dispute or shortfall. Philips Lighting North American

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Corp., ASBCA No. 61769 et al., 20-1 BCA ¶ 37,679 at 182, 926-28; Philips Lighting

North American Corp., ASBCA No. 61769 et al., 21-1 BCA ¶ 37,821 at 183, 649-50.

As WMATA has admitted, WMATA has not paid Philips any amount under the

lighting contract (finding 52).

WMATA’s Material Breach Gives Philips The Right to Abandon

Performance

We hold that, in the circumstances here, with no attempt made to make even a

partial payment over a period of years, despite the Board’s previous finding that the

contract obligated WMATA to make payments to Phillips, WMATA’s actions and

inactions constituted a material breach of the lighting contract. See Consumers Oil

Co., ASBCA No. 24172, 86-1 ¶ 18,647 at 97,713 (holding that, though such tests were

necessarily imprecise, in circumstances in which late or non-payment constituted a

substantial impairment of the value of the contract or deprived the contracting party

of an expected contractual benefit, the government’s continued failure to make timely

payments was a material breach of contract); see also Nexus Constr. Co., ASBCA

No. 31070, 92-2 BCA ¶ 24,923 at 124,267 (holding that government’s wrongful

withholding of progress payments equivalent to 22 percent of the contract was a

material breach). 3

When confronted with a material breach, the non-breaching party must make a

choice. “When one party commits a material breach of contract, the other party has a

choice between two inconsistent rights – [it] can either elect to allege a total breach,

terminate the contract and bring an action, or, instead, elect to keep the contract in

force, declare the default only a partial breach, and recover those damages caused by

that partial breach . . . .” Scott Timber Co. v. United States, 692 F.3d 1365, 1378 (Fed.

Cir. 2012) (quoting Richard A. Lord, Williston on Contracts § 39:32 (4th ed.)).

However, if the non-breaching party permits the other party to continue to

perform after the breach, the non-breaching party is precluded from rescinding or

declaring a material breach. Scott Timber, 692 F.3d at 1378-79 (quoting Williston on

Contracts § 40:1 (4th ed.)). Indeed, the nonbreaching party, by electing to continue

receiving benefits under the agreement, cannot then refuse to perform its part of the

bargain. See Williston on Contracts § 39:32 (4th ed.).

Because Philips continues to maintain the lighting system pursuant to the

contract and has not elected to cease performance, we award damages based on Philips

past performance through February 29, 2024. If Philips continues performance going

3

To be clear, not every late payment of money or progress payments on a contract

constitutes a material breach: as discussed in Consumers Oil Co., it all depends

on the circumstances. See 86-1 ¶ 18,647 at 97,713

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forward, WMATA must pay any future invoices pursuant to the terms of the contract

and this decision. Although Philips has continued to perform its maintenance duties

pursuant to the lighting contract, Philips has stated in its complaint, at the hearing, and

in its briefs that it intends to abandon performance and seek the full measure of

contract damages placing it in the same position it would have been but for the breach.

If and when Philips does abandon its performance, WMATA will be subject to such

damages, but that is not the case yet. In any event, Philips contends that WMATA’s

breaches entitle Philips to (1) be excused from further performance and compensation

“at no less than the full value of the contract”; (2) payment of Philips’ attorney costs

for responding to settlement discussions; and (3) payment of Philips’ attorney costs for

responding to the Cure Notice (compl. ¶¶ 352-54; app. br. at 20-21).

As more fully explained below, we hold that Philips is not entitled to recover its

attorney costs for responding to settlement discussions or the cure notice.

IV. Calculation of Quantum for WMATA’s Breach

Our factual determinations of the disputed questions concerning the applicable

energy consumption baseline and the maintenance start date guide our choice of

damages scenarios. Our damages award generally follows the third alternative

scenario proposed by Philips’ expert witness, Ms. Linda Y. Hsiao. That scenario relies

upon the measured baseline of 19,186,521 kWh and a maintenance period start date of

February 1, 2017. (App. ex. 533 at 28; schedule 4). It includes payment of the

stipulated amount of $597,732 to account for the energy savings accumulated during

the 730-day installation period (see app. br. at 35).

Philips has proved its damages with reasonable certainty. Shell Oil Co. v.

United States, 896 F.3d 1299, 1312 (Fed. Cir. 2018); Sw. Marine, Inc., ASBCA

No. 54550, 11-2 BCA ¶ 34,871 at 171,525.

1. Lost Revenues from Past Maintenance Periods

Pursuant to the Board’s orders dated July 21, 2023 and February 14, 2024,

Philips supplemented its claims to include invoices through the end of August 2023,

and again through February 29, 2024, and updated its calculation of the net present

value accordingly. Specifically, Philips updated its figures for March 2020 through

January 31, 2024, to reflect the actual energy consumption and savings as stated on

Philips’ semi-annual invoices and savings reports to WMATA. (See March 22, 2024

joint status report, ex. B at 10) Based upon these updated calculations, we award

Philips its lost revenue from the past maintenance periods in the amount of

$10,654,218.

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2. Lost Revenues from Future Maintenance Periods

The second component of Philips’ claimed damages is lost revenue from future

maintenance periods as adjusted for avoided maintenance costs. This component is

based upon Philips being excused from further performance under the contract and is

intended to make Philips whole for the future revenue it would have earned under the

contract and to compensate it for the cost associated with providing and installing the

lighting system. Because Philips has elected to continue performance, we do not offer

an opinion on Philips’ claimed damages from lost revenue from future maintenance

periods. Instead, as long as Philips continues to perform, Philips should submit

invoices to WMATA pursuant to the terms of the contract, based upon the measured

baseline of 19,186,521 kWh, at the conclusion of each remaining six-month period.

V. Whether Philips is Entitled to Additional Damages

Philips contends that it is entitled to three categories of additional damages,

including: (1) additional damages under Part II, Section 2 ¶ 43 of the lighting contract

for $88,333 in infrastructure repairs; (2) $1,314,167 for the installation and continued

metering expenses associated with 74 additional power meters that were installed in

order to fully monitor electricity usage in the garages; and (3) the value of additional

energy savings benefits that WMATA accrued during the extended construction phase

(which amount depends upon our resolution of both the energy consumption baseline

and the maintenance phase start date). (App. br. at 35-36) We address each element

of damages below.

Reimbursement for Infrastructure Repair

Philips claims damages of $88,333 under Part II, Section 2 ¶ 43 of the contract

for in infrastructure repairs. Philips’ subcontractors, Lamb and LMI, performed these

repairs and documented them in change orders submitted to WMATA. (Ex A-533

at schedule 5)

WMATA contends that Philips is not entitled to be paid for these infrastructure

repairs, because the CO did not properly approve or ratify the expenditures. WMATA

asserts that it did not authorize the work and that Philips never invoiced WMATA for

it (resp’t reply at 21). WMATA further contends that Philips failed to follow the

requirements of the lighting contract’s Repair of Existing Defective Electrical

Distribution System provision (R4, tab 1 at 108). Specifically, WMATA complains

that Philips (or its subcontractors) never expressly sought permission from WMATA

to perform the work and that Philips never submitted invoices for the work outside of

these appeals (resp’t reply at 21-22).

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WMATA fails to demonstrate that it was harmed by Philips’ alleged failure to

follow the correct procedures. There is no dispute that the infrastructure repairs were

necessary, or that WMATA had an obligation to pay for the repairs. Paragraph 43 of

the lighting contract sets forth a procedure for identifying needed repairs and WMATA

does not dispute that Philips identified many necessary repairs during the construction

phase. WMATA cannot dispute that its representatives all acknowledged that

WMATA was obligated to pay for necessary infrastructure repairs. Both the current

CO, Suzette Moore, and former CO, Kunj Behari, confirmed that WMATA has the

obligation to pay for any repairs performed by the contractor (tr. 4/70; 5/78-9; 6/89).

Phillip Rogers, WMATA’s Director of Parking, also confirmed that the contract

required WMATA to reimburse Philips for any repairs it directed Philips to make to

the garage infrastructure (6/89).

In addition, paragraph 43 of the contract says nothing about the submission of

invoices and does not set forth any specific process for directing and authorizing the

repairs, other than identifying the needed repairs in the initial design submittal. Other

than arguing that Philips failed to follow the requirements of paragraph 43, WMATA

does not specifically challenge any of the $88,333 in infrastructure repair costs

claimed by Philips (resp’t reply at 21-22). Therefore, we conclude that Philips is

entitled to recover the costs of these repairs. See Goodloe Marine, Inc., ASBCA

No. 61960, 23-1 BCA ¶ 38,387 at 186,520-21 (strict adherence to notice requirement

of suspension of work and other contractual clauses unnecessary when it would serve

no useful purpose).

The fact that Philips’ subcontractors itemized and documenting the repairs in a

series of change orders is sufficient to prove quantum. Therefore, we conclude that

Philips is entitled to infrastructure repair costs in the full amount of $88,333.

Extra Meters and Metering Costs

Philips seeks $1,314,167 for the installation and continued metering expenses

associated with 74 additional power meters that Philips alleges it had no way of

knowing would be required at the outset of the project (app. br. at 35). According to

Philips, WMATA prevented it from conducting any engineering audit or review of the

electrical panels prior to bidding on the project (app. br. at 37). Moreover, WMATA

did not provide (or have) panel or circuit drawings of the existing lighting system in

the garages (id.). Philips argues that the need to install these additional meters was a

cardinal change to the contract (app. br. at 39).

WMATA opposes Philips’ entitlement to any extra costs associated with the

installation of additional meters beyond Philips’ estimated number (resp’t br. at 22).

According to WMATA, the contract was performance based, in that it required Philips

to determine the number of meters required to measure the energy usage of the lighting

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system and placed the risk on the contractor to use its expertise to design and

implement a solution (tr. 5/189). Finally, WMATA contends that there is no evidence

that the CO ever authorized or ratified any extracontractual work (resp’t br. at 23).

In our view, the contract’s requirements for the measurement of the lighting

system’s energy usage (both before and after the installation of the new fixtures) are

performance specifications, rather than design specifications. As a consequence, the

contract places the burden on the contractor to determine the means and methods

necessary to accomplish the objective of measuring the actual energy consumption of

the lighting system.

The difference between performance specifications and design specifications is

well established. D&J Machinery, Inc., ASBCA No. 62019, 22-1 BCA ¶ 38,118

at 185,16465. Performance specifications “set forth an objective or standard to be

achieved, and the successful bidder is expected to exercise his ingenuity in achieving

that objective or standard of performance, selecting the means and assuming a

corresponding responsibility for that selection.” J.L. Simmons Co. v. United States,

188 Ct. Cl. 684, 689 (1969). Design specifications, in contrast, describe in precise

detail the materials to be employed and the manner in which the work is to be

performed. The contractor has no discretion to deviate from the specifications but

is “required to follow them as one would a road map.” Id.

The contract expressly required Philips to determine the number of meters

required the measure the energy usage of the lighting system and to submit a plan for

installing the meters (R4, tab 1 at 108). The baseline provision stated:

Baseline energy consumptions shall be established by

directly measuring the power consumption for the current

lighting system at each garage for a minimum period of six

weeks before installation of the new lighting system. The

measurement shall be accomplished by installing utility

grade meters on all electrical circuits/panels not currently

connected to dedicated meters. The contractor shall submit

a plan for installing the meters within 45 days of notice to

proceed.

(R4, tab 1 at 108) Similarly, section 7.0 of the contract, pertaining to the measurement

of the lighting system after the new fixtures are installed, required Philips to “isolate

the lighting loads and provide actual voltage, current, and energy consumption for the

entire lighting system (not mathematically)” (R4, tab 1 at 120).

The monitoring system shall have the ability to view and

access real-time lighting and total garage energy

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consumption for each garage using utility grade meters.

The necessary number of meters shall be placed on

electrical gear at each garage to isolate the lighting loads

and provide actual voltage, current and energy

consumption for the entire lighting system (not

mathematically). Meter shall remain in place for the entire

contract period. Energy consumption information shall be

available for peak demand and overall energy usage.

(R4, tab 1 at 120) Critically, neither of these provisions dictate the number, brand, or

specific type of meters that Philips must install. Instead, it leaves it up to the

contractor to make those decisions in order to meet the requirements to directly

measure the lighting system’s energy usage (tr. 4/159-60)

Indeed, the contract expressly places the risk upon contractor to ascertain the

nature and extent of the work, stating that “[t]he Contractor shall be responsible for

having taken steps reasonably necessary to ascertain the nature and extent of the work,

and the general and local conditions which can affect the work or the cost thereof”

(R4, tab 1 at 87). Moreover, Philips had an opportunity to tour and photograph the

garages before bidding (finding 3).

Finally, the installation of the additional power meters was not a cardinal

change, because there is no evidence that WMATA ever directed Philips to install the

meters. See Env’t Safety Consultants, Inc., ASBCA No. 51722, 11-2 BCA ¶ 34,8448

at 171,428 (cardinal change is a unilateral modification beyond the scope of the

contract).

Therefore, we conclude that Philips is not entitled to additional damages based

upon the installation of additional power meters.

Payment for Enhanced Construction Phase Savings Conferred as a

Result of WMATA’s Delays

We previously held that the correct start of the maintenance phase is

February 1, 2017. This holding obviates the need to discuss whether Philips is entitled

to compensation for energy savings accumulated by WMATA during the enlarged

installation period from the original deadline of August 31, 2016 until February 1,

2017.

Nonetheless, there are additional reasons Phillips should not be compensated

for energy savings accumulated during the enlarged installation period. First, the

contract provides no basis for compensation during the installation beyond the fixed

installation fee of $597,732 (R4, tab 1 at 5). Unlike the bi-annual installment

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payments based upon energy savings during the maintenance period, the installation

payment is a fixed fee and, as Philips admits, does not depend upon any demonstrated

energy savings (R4, tab 1 at 5; tr. 4/106; app. br. at 17 n.7).

Philips has not met its burden of demonstrating that any delays in meeting the

installation deadline were the fault of WMATA. Mr. Jones, Philips’ project manager,

admitted to concurrent delays (tr. 2/65). Although Philips requested a contract

modification in November 2016 to extend the installation phase until February 2017,

it is also true that this contract modification provided no additional compensation or

any change to the fixed installation fee (R4, tab 14 at 293; tab 22).

Moreover, Philips has provided no evidence that any alleged WMATA delays

were on the critical path. See Contel Advanced Sys., Inc., ASBCA No. 49075, 04-2

BCA ¶ 32,664 at 161,680. In addition, there is unrebutted testimony from WMATA’s

Sustainability Director, Rachel Healy, that Philips failed to adequately staff the

installation, thereby leading to delays in the lighting system installation (tr. 5/218).

Finally, the contract establishes that the risk of any delays in the installation of

the lighting system fall upon Philips (R4, tab 1 at 87). Paragraph 13 of the contract

provides that the contractor is responsible for ascertaining the general and local

conditions affecting the work and that “any failure [to do so] will not relieve the

contractor from responsibility for successfully performing work without additional

expense to the [WMATA]” (Finding 29). Philips contends that the delays were neither

fair nor reasonable, but otherwise fails to rebut WMATA’s argument that the contract

placed the risk of construction delays on Philips (app. br. at 40-41).

CONCLUSION

For these reasons, we conclude that Philips is entitled to receive a total award in

the amount of $10,742,551. If Philips continues performance going forward,

WMATA must pay any future invoices pursuant to the terms of the contract and

consistent with this decision.

Dated: November 15, 2024

KENNETH D. WOODROW

Administrative Judge

Armed Services Board

of Contract Appeals

(Signatures continued)

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The decision issued on the date below is subject to an ASBCA Protective Order.

This version has been approved for public release.

I concur I concur

OWEN WILSON J. REID PROUTY

Administrative Judge Administrative Judge

Acting Chairman Vice Chairman

Armed Services Board Armed Services Board

of Contract Appeals of Contract Appeals

I certify that the foregoing is a true copy of the Opinion and Decision of the

Armed Services Board of Contract Appeals in ASBCA Nos. 61769, 61873, 62391,

Appeals of Philips Lighting North American Corporation, rendered in conformance

with the Board’s Charter.

Dated: November 15, 2024

PAULLA K. GATES-LEWIS

Recorder, Armed Services

Board of Contract Appeals

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