# Philips Lighting North American Corporation

> Armed Services Board of Contract Appeals · November 15, 2024

URL: https://www.frixlaw.com/law-library/cases/10753670

## Case

- **Court:** Armed Services Board of Contract Appeals
- **Decided:** November 15, 2024
- **Precedential status:** Published
- **Opinion:** Opinion
- **Judges:** Woodrow
- **Cited by:** 0 later opinions in the Frix Law Library

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## How later opinions describe it (automated extraction)

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## Opinion text

DOCUMENT FOR PUBLIC RELEASE
The decision issued on the date below is subject to an ASBCA Protective Order.
This version has been approved for public release.
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
The decision issued on the date below is subject to an ASBCA Protective Order.
This version has been approved for public release.
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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The decision issued on the date below is subject to an ASBCA Protective Order.
This version has been approved for public release.
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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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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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10753670. Public record. Not legal advice.