The Public Warehousing Company

ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of -- )

)

The Public Warehousing Company ) ASBCA No. 56022

)

Under Contract Nos. SP0300-03-D-3061 )

SPM300-05-D-3119 )

APPEARANCES FOR THE APPELLANT: Michael R. Charness, Esq.

Adrianne L. Goins, Esq.

Bryan T. Bunting, Esq.

Erin N. Rankin, Esq.

Vinson & Elkins LLP

Washington, DC

APPEARANCES FOR THE GOVERNMENT: Daniel K. Poling, Esq.

DLA Chief Trial Attorney

Kristin K. Bray, Esq.

Senior Trial Attorney

Elizabeth Amato-Radley, Esq.

Trial Attorney

DLA Troop Support

Philadelphia, PA

OPINION BY ADMINISTRATIVE JUDGE TING

The Public Warehousing Company (PWC) contracted with Defense Supply

Center Philadelphia (DSCP) to supply and deliver food to government customers at

various locations inside Iraq's Operational Deployment Zone. PWC submitted a

$12.49 million claim, subsequently increased to $13.37 million, said to have resulted

from some of its delivery trucks being held in Iraq for various reasons for over 29 days

before returning to Kuwait. The contracting officer (CO) denied the claim on the

bases that PWC agreed to the 29-day cap when it executed Modification No. P00027

(Mod. 27) and PWC failed to demonstrate that the transportation fees it received up to

the 29-day cap - established at twice the average truck return duration - were unfair,

unreasonable or inequitable. PWC timely appealed the CO's decision. The parties

presented only entitlement issues for decision. We have jurisdiction under the

Contract Disputes Act (CDA), 41 U.S.C. §§ 7101-7109.

FINDINGS OF FACT

1. PWC, now known as Agility, is a public company organized under the laws

of Kuwait. DSCP, now known as DLA Troop Support, is a sub-agency of the Defense

Logistics Agency (DLA), an agency within the Department of Defense (DoD). DSCP

supports U.S. military personnel by providing them with food, clothing and medicines,

among other supplies. 1

2. The Subsistence Prime Vendor (SPY) Program is a regionally based

program under which DSCP contracts with commercial enterprises to supply and

distribute food to government customers (tr. 2/20).

3. On 10 May 2002, DSCP issued Solicitation No. SP0300-02-R-4003 for an

Indefinite-Delivery/Indefinite-Quantity (IDIQ) commercial item type contract to

provide food and non-food products to the military and other DLA customers in three

overseas zones (OCONUS): Zone I-Northern Europe, Zone II-Southern Europe and

Zone III-Middle East (R4, tab 1 at 1, 7). Offerors were requested to submit pricing for

all core items in the applicable zone based on this pricing formula: Unit Price =

Delivered Price+ Fixed Distribution Price (or Fee) (id. at 11).

4. On 30 May 2003, DSCP awarded Contract No. SP0300-03-D-3061

(Contract 3061 or PVl contract) to PWC. The contract, in the estimated award

amount of$22,391,904.00, was for PWC to provide "Full Line Food and Non-Food

Distribution" for authorized customers in the Middle East Zone (Kuwait & Qatar) for

one year, starting from the date of the first order. (R4, tab 10 at 1) The contract

allowed the CO to extend its term for "four (4) additional one-year period(s) by written

notice" (id. at 19).

5. In connection with the pricing formula (Unit Price= Delivered Price+ Fixed

Distribution Price), Contract 3061 defined "Unit Price" as "the total price (in U.S.

currency) that is charged to DSCP per unit for a product delivered to the Government."

"Delivered Price" for CONUS purchases is defined as "the manufacturer/supplier's

actual invoice price (in U.S. currency) to deliver product to the Prime Vendor's

CONUS distribution point." The "Delivered Price" for OCONUS purchases is defined

as "the manufacturer/supplier's actual invoice price (in U.S. currency) to deliver

product to the Prime Vendor's OCONUS distribution point." The "Distribution Price"

is defined as "a firm fixed price, offered as a dollar amount, which represents all

elements of the unit price, other than the delivered price." The contract pricing

provision states that the distribution price "typically consists of the Prime Vendor's

projected general and administrative expenses, overhead, profit, packaging costs,

1

See our previous decision - The Public Warehousing Co., ASBCA No. 56022, 11-2

BCA if 34,788 at 171,219.

2

transportation cost from the Prime Vendor's OCONUS distribution facility(s) to the

final delivery point or any other projected expenses associated with the distribution

function." (R4, tab 10 at 3, 4) This appeal concerns the distribution price component

of the pricing formula as subsequently modified by the parties.

Mod. 1

6. The parties entered into bilateral Modification No. POOOO 1 (Mod. 1) in

June 2003. C.T. Switzer, PWC's General Manager (GM Switzer) signed for PWC,

and Thomas E. Haley (CO Haley) signed for DSCP. Mod. 1 was effective as of

27 June 2003. (R4, tab 11 at 1) It implemented the Operational Deployment Zone

provision referenced in the solicitation and incorporated as a part of Contract 3061. It

established "separate ordering and delivery requirements for Operation Iraqi Freedom

(OIF) Initiatives in the country of Iraq area of operations." (Id. at 3)

7. Paragraph 2 of Mod. 1 estimated that there would initially be approximately

24 Army and 3 Air Force delivery sites in Iraq. It estimated that requirements under

the contract could increase by as much as 1,200% over the original estimated contract

dollar amount. Paragraph 2 also projected that "[t]he round-trip from this PWC

distribution platform in Salat, Kuwait could vary from one (1) day for the closest

proximity customers to seven (7) days for the farthest proximity customers." The

paragraph required PWC delivery trucks "travel as part of a U.S. military escorted

convoy" and stated that "[t]his operational process could be subject to change should

the zone achieve a more stable environment and transition." (R4, tab 11 at 3)

8. Paragraph 4 of Mod. 1 provided, in part, that "[t]rucks will return to PWC

upon completion of unloading, and trucks will not be used at the sites for storage

purposes" (R4, tab 11 at 4 ). PWC would later contend that this provision was never

changed and remained as a part of DSCP's contractual obligations.

9. Paragraph 6 of Mod. 1 provided:

Except as provided herein, the Government does not

assume any liability for any loss incurred by the Prime

Vendor in the performance of this Iraq Deployment Zone,

including but not limited to, loss of vehicles, personnel, or

product. Furthermore, the Government is not liable for any

loss resulting from any delays in assembling or deploying

3

the aforementioned military escorted convoy provided to

the Prime Vendor by the Government.

(R4, tab 11 at 6)

10. Anticipating that the distribution prices might have to be adjusted in a war

zone, paragraphs 7 and 8 of Mod. 1 provided:

7. If additional deployment zone fees are warranted

above those distribution prices awarded, these fees will be

negotiated at a later date.

8. The Government reserves the right to re-negotiate

trucking transport fees, once stabilization and transition

has occurred in Iraq, resulting in U.S. military convoys to

be no longer necessary.

(R4, tab 11 at 7)

Mod.2

11. PWC's GM Switzer and CO Haley signed Modification No. P00002

(Mod. 2) on 7 and 9 July 2003 respectively. Mod. 2, effective 1 July 2003,

established, among other things, "the mutually agreed upon pricing structure for ... the

Iraq Deployment Zone, to include additional transport costs to be paid by the

Government, above the awarded distribution ... fee structure." The additional transport

costs associated with deliveries to the Iraq deployment zone agreed upon were to be

determined as follows:

Refrigerated Truck Transport to Iraq from PWC

- 3 day round trip minimum $2050.00 per truck

- Additional days over (3) $645.00 per truck per day

Dry Truck Transport to Iraq from PWC

- 3 day round trip minimum $1600.00 per truck

- Additional days over (3) $475.00 per truck per day

(R4, tab 12 at 1-3)

12. Mod. 2 provided that for both refrigerated trucks (reefers) and dry trucks,

"[d]ays will be charged based upon time of reporting ofloading until truck(s) return(s)

to PWC distribution facility in Kuwait" (R4, tab 12 at 3). There was no maximum or

cap on the additional transport fees payable under Mod. 2. Thus, if a truck did not

4

return for an extended period of time that truck's per day fee would keep accumulating

without limitation. A price analysis in the record indicates that DSCP determined that

the $645.00 per day for a reefer and the $475.00 per day for a dry truck returning after

the 3-day round trip were reasonable (app. supp. R4, tab 731).

Ramp-Up Period

13. Delivery of food into Iraq did not take place right after award of

Contract 3061 in May 2003. For a contract of "this magnitude" and "outside the

United States," there was a "ramp up period" before "physical distribution [could]

actually take place" (tr. 2/22). The troops initially relied on operational rations such as

meals-ready-to-eat (MREs). Later, the troops were supplemented with "fruits and

vegetables or energy bars or energy drinks." The Army then transitioned into "a

cafeteria type ... food from the prime vendor" sourced from the United States. Initially,

PWC was delivering rations, and it gradually transitioned into delivering other types of

food. (Tr. 2/24) After what was described as a "crawl/walk/run" type of tempo,

delivery into Iraq began "later in the calendar year" (tr. 2/23).

14. When PWC began deliveries during the ramp-up period, it had numerous

problems: PWC had no in-transit visibility of its trucks; the military did not have

enough storage facilities to store offloaded food from the trucks thus delaying their

return; PWC's drivers were not in place when the convoys were ready to leave; and

there were truck breakdowns, accidents, and sniper activities that delayed deliveries

and returns. (Tr. 1/35-36)

The Hub and Spoke System

15. Iraq is about two-thirds the size of the State of Texas (tr. 4/97). For

military supply purposes, it was traversable only by major roads (tr. 6/32-33). Going

north from Kuwait into Iraq, the Army established a "hub and spoke" system. A hub

contained "a large concentration of logistics people and units" and dining facilities

(DFACs). A spoke site was a "customer site" or a forward operating base (FOB)

supported by a hub. (Tr. 6/135-37, 4/40) Spoke sites had mobile kitchen trailers

(MKTs) (tr. 1/96).

16. Proceeding north from Navistar in Kuwait into Iraq, the Army established

hubs at Cedar, Scania, BIAP (Baghdad International Airport), Taji, Anaconda and

Speicher. Major hubs such as BIAP supported as many as 27 spoke sites. Smaller

hubs such as Cedar and Taji supported two spoke sites. (App. supp. R4, tab 509;

tr. 6/13, 8110-11)

17. Before entering a hub, PWC's trucks would be inspected (tr. 6/50). The

trucks would then go into a "control area." From there, trucks were moved by

5

ordering customers, under escort, to their destinations (DF A Cs or MK.Ts) to unload.

Upon unloading, the customers would return the trucks, again under escort, to the hub

where they would wait for a convoy to return to Kuwait. (Tr. 6/27, 50, 100-01)

18. During the war, the Marines' area of responsibility (AOR) included

western Iraq, the Al-Asad area, and the border areas with Jordan and Syria (tr. 7/40).

At the Marine FOBs, conditions were "very austere." There were no "fixed feeding

facilities," and the MK.Ts had no refrigeration. At these sites, the soldiers would keep

the refrigerated trucks for storage for milk and fresh fruits and vegetables. (Tr. 6/148)

In addition, Marines were given the authority to control movement of trucks into and

out of their AOR. Marine officers "made the call" on when to use "combat assets" to

escort PWC trucks to and from the hub. (Tr. 61156-57)

Convoy and Escort Delays

19. In addition to truck returns being delayed by storage issues, truck returns

could be affected by convoy and escort delays. Convoys were controlled by the

Military Control Teams or Military Control Battalions of the Multi-National

Forces-Iraq (MNF-I) (tr. 2/28). Military escorts consisted of "armored vehicle[s] with

heavy machine guns and communications and control equipment." PWC trucks were

not allowed to move without escort. (Tr. 61101)

20. Truck movements were dictated by a movement order or a FRAG0. 2

FRAGOs were signed daily by the general in charge. They contained instructions on

what routes were opened, what roads to take, and when convoys could be on the roads.

(Tr. 61139) Convoys travelled within a "movement window," a period of time

generally four or five hours at night during which military commanders determined

convoys could be on the roads (tr. 6/104)

21. Convoy movements were planned through nightly meetings at the Joint

Distribution Board (JDB) and through morning meetings at the Joint Coordination and

Logistics Board (JCLB) (tr. 6/52). The planning sessions involved commodity

managers of every class of supply: food, fuel, ammunition, construction and medical

supplies. Based upon which commodities were running low, the Army determined

"who moved what each night." (Tr. 6/114-15)

22. On any given day during late 2004 into 2005, there were roughly 1,200 to

1,300 PWC trucks in Iraq (tr. 4/11 ). Loaded food trucks leaving PWC facilities would

go to Navistar in Kuwait to travel as a part of a military escorted convoy. After trucks

crossed the border into Iraq, they would go to Cedar, the first hub. If a truck's

2

A FRAGO is a "Fragmentary Order," an order affecting a piece, or fragment, of a

previously issued Operations Order (app. br., ex.Bat 3).

6

destination was further north, it would proceed from hub to hub until it reached its

destination hub. (Tr. 8111-12)

23. When PWC trucks traveled on Iraq's main supply routes (MSRs), they

were under the Army's control (tr. 6/53). When trucks reached a destination hub, they

were sent to a staging area where they would wait for customer escorts to the ordering

DFACs and the MK.Ts. The customers at the destinations controlled offloading of the

trucks. (Tr. 6/54) After trucks were offloaded, empty trucks would be escorted back

from the DFACs and MK.Ts to the hub for their return to Kuwait (tr. 6/55).

24. According to LTC (retired) Mary Ann O'Connor, who was the Chief of

Operations, Transportation and Logistics for the 1st Corps Support Command, from

October 2004 to November 2005 (tr. 6/96), combat operations could affect the priority

of truck movements. If there were combat operations south of Baghdad, they could

affect the truck movement scheduled for BIAP and beyond (tr. 6/117-18). And, when

trucks did not move one night, trucks scheduled for the next day would be "backed up"

(tr. 6/118). In addition, trucks did not move without "a helicopter with a lifesaving

crew" or without JSTARS ("a flying ... emergency ops center") coverage (tr. 6/119-20,

7/35).

25. The Army was under a standing order from the commanding officer to

move trucks from hub to hub within 48 hours. Thus, trucks were moved within the

first two nights after they arrived at a hub. Trucks that took longer than two nights to

depart would be reported at nightly briefings. (Tr. 6/141) The evidence indicates, and

we find, that hub-to-hub truck movements were seldom delayed beyond 72 hours

(tr. 6/142).

26. Darrell Gifford was PWC's network administrator responsible for installing

and maintaining PWC's MircoTransport System (tr. 4/18), a web-based real-time truck

tracking software solution at every hub in Iraq (tr. 4/16, 20). According to Gifford, all

trucks travelling into Iraq "should be able to get to destination and back in 10 days."

Trips over 10 days would be considered "outside of the norm." (Tr. 4/68)

27. Gifford testified that from time to time, food trucks would be delayed from

hub-to-hub by sandstorms 3, national events (e.g., elections) or IED (improvised

explosive device) attacks. These delays on the MSRs or alternate MSRs would last "a

day or so." (Tr. 4171-73) He testified convoy movement was generally reliable both

northbound into Iraq from Kuwait and southbound from Iraq into Kuwait (tr. 4/74).

3

The MSRs would be shut down during sandstorms, known as "shamals," because

they would present "whiteout conditions" with poor visibility. Sandstorms

would last "a day or two." (Tr. 6/43, 7/33)

7

On the other hand, escorts from the hubs to the outlying military units and from those

units back to the hubs were "more sporadic" (tr. 4/75).

Storage-Related Delays

28. Not all hubs and DFACs had the same food storage capacity. The Marine

MK.Ts out in the remote areas had very little storage capacity. (Tr. 3/22) The majority

of the storage issues - estimated at 80% to 90% - occurred in the Marine Expedition

Force (MEF) area to the west of BIAP (tr. 4/95-96). Reefers would be delayed at the

outlying sites because they were used for storage (tr. 4178). According to

Sabrina Viruet, who worked for PWC from August 2004 to October 2010 as a truck

coordinator and a liaison officer (tr. 817-8), "[s]ometimes trucks wouldn't come back"

from outlying sites because the military did not have enough reefers, and were using

"non-moving container[ s]" of the reefers for storage, or the military did not have

enough storage "so they would hold the trucks for storage" (tr. 8/32).

29. Customers at the outlying sites would also wait to escort trucks from the

hubs because they lacked storage. With no capacity to store food, the soldiers did not

want to be responsible for the drivers and the food trucks waiting to be unloaded.

(Tr. 4176-77) According to Viruet, the Marines caused "the biggest delay" because

they were on combat missions and could not come to the hubs to get the food trucks.

She testified "sometimes we had trucks sitting in the yard with food for 10 days

waiting for them." (Tr. 8/30-31) While escorts could delay a truck's return "a week or

two," major delays occurred when a truck was used for storage (tr. 4/80).

Truck Delays Due to Redirection

30. Redirection of food trucks occurred because a DFAC or MKT

over-ordered, and because of the "fluidity of the war zone" requiring soldiers to move

from place to place (tr. 3/31 ). When a DF AC over-ordered, the food would be

redirected, with permission of the Army's theater food advisor, to a larger site so that

the food could be used quickly (tr. 7/52). While redirecting food trucks was not a

daily occurrence, it did occur frequently (tr. 3/30).

31. PWC would get "very upset" when its trucks were redirected (tr. 3/37).

When a redirected truck had to go to another hub, it had to travel in a convoy, adding

more time and paperwork (tr. 7/53, 56). Redirection delayed a truck's return making it

unavailable for the next mission (tr. 3/38, 7/56). Contracting officer representative

Paul A. Burkett (COR Burkett) testified the redirection issue eventually "went away"

(tr. 3/38), and he authorized payment for redirections if they fell within the 29-day cap

(tr. 3/39) which was later imposed by Mod. 27 (see findings 57-71, infra).

8

Mod. 19 - Operation Prime Mover

32. To "optimize throughput," a six-day order cycle was developed. After an

electronic order was received on day one, PWC would verify the order with the

ordering customer on day two. By day three, PWC would know how many trucks

would be needed to deliver the order. The trucks would be loaded on day four and

staged on day five. Since PWC's trucks were required to travel in a military convoy,

they would depart based upon their assigned priority and when the convoy was

ordered to leave. (Tr. 2/26-28)

33. At some point, the Coalition Joint Task Force 7 (CJTF7) made a request for

PWC to locate transport liaison officers (TLOs) at the hubs. In response to DSCP's

request, PWC's GM Switzer by email on 29 March 2004 submitted a plan entitled

"Operation Prime Mover." (Ex. G-1005) As reflected by its mission statement,

Operation Prime Mover was designed "[t]o facilitate the Subsistence Prime Vendor

mission by strengthening the PWC transport and distribution network throughout Iraq

through the deployment of PWC [TLOs] at key transit points ('Hubs') together with

the necessary life support facilities and equipment required to achieve mission

objectives" (id. at 7). The plan showed PWC's initial TLOs deployment would cover

five hubs: Scania, BIAP, Taji, Anaconda, and Speicher (id.). PWC estimated that an

annual budget of $6.5 million would be necessary to fund the program (id. at 3).

34. Since the TLOs were to be stationed at the hubs and had communication

capabilities, they were able to report truck movements from hub-to-hub (tr. 2/68).

Because TLOs were not located with the Marines, however, information from the

Marine sites "was a lot more sketchy than at the main hubs" (tr. 3/29).

35. On 10 May 2004, DSCP issued unilateral and undefinitized Modification

No. P00019 (Mod. 19) to implement Operation Prime Mover. Under Mod. 19, PWC

was required to deploy a maximum team of 25 TLOs to eight hub sites: Anaconda,

BIAP, Camp Cedar, Navistar, Ridgeway, Scania, Speicher and Taji. The TLO's

responsibilities were to (a) promote smooth throughput of PWC vehicles to the

delivery drop points or Military Dining Facilities; (b) improve round trip transit time

of PWC trucks; (c) provide 24 x 7 on-site point of contact for SPY transport

operations; (d) improve fleet and asset shipment visibility and trace ability;

(e) expedite response to breakdowns and incidents and facilitate rapid recovery of

assets and personnel, and (f) enhance customer service within the Iraq SPY Program.

(Supp. R4, tab 153 at 1-2)

Subsistence Prime Vendor Summit

36. The logistic coordination issues such as trucks being held for storage led

MNF-I to convene a meeting of all key parties, including PWC, "to come together and

9

work as a team ... to help out PWC ... [to] manage[] their distribution assets" (tr. 2/29).

A "Subsistence Prime Vendor Summit" (Summit) to discuss logistics was convened

from 17 to 19 May 2004 at Camp Arifjan in Kuwait (supp. R4, tab 190 at 3; tr. 2/165).

In addition to PWC personnel including GM Switzer, representatives from DSCP,

Army Center for Excellence from Fort Lee, Virginia, Army Central Command

Forward (CENTCOM) in Kuwait, Defense Contract Management Agency (DCMA)

and the LOGCAP 4 contractor who ran the DF A Cs were at the Summit (tr. 2/30-31 ).

37. At the time the Summit was held, PWC still "did not have ... personnel at

those hubs to manage inside Iraq." PWC's trucks were still being delayed by

sandstorms and other weather issues, truck breakdowns, drivers not being available,

and insufficient storage facilities at various sites. (Tr. 2/35)

38. At the Summit, PWC's message was "we need help ... [in] getting our assets

back" (tr. 2/31). A PowerPoint presentation prepared by DSCP (dated 10 May 2004)

stated that one of the Class I challenges was a "Lack of Refrigerated Storage

throughout Iraq" (app. supp. R4, tab 620 at 3). The presentation contained the

following "Problem Statement":

Insufficient permanent/semi-permanent refrigerated

storage capacity exists at both Dining Facilities (DFACs)

and Field Feeding (MKT) locations throughout AOR. This

results in:

1. Subsistence Prime Vendor (SPV) owned/leased

transportation assets held "on customer site'',

incurring temporary holding charges and

significant costs.

2. Minimized distribution efficiencies; limited# of

SPV delivery assets available.

3. Addition of significant risk to food safety and

spoilage[.]

(Id. at 4)

39. A DSCP PowerPoint presentation at the Summit entitled "Costs Incurred

Due to PWC Reefer Detention," showed that, while its expectation was that average

truck "tum-around" time for Iraq was 7 days (3 up, 1 on-station, 3 back), the "[a]ctual

'turnaround time,"' based on November 2003 to March 2004 data was averaging

15 days. The same presentation showed that the Army was paying $4.6 million in

4

LOGCAP means Logistics Civil Augmentation Program.

10

average monthly detention costs for the SPY Program; and that costs were forecasted

to increase to $12.2 million at full SPY by June 2004. (App. supp. R4, tab 620 at 5)

In its '"Detention' versus Buy" analysis, DSCP estimated that "adequate refrigeration

storage could be purchased and installed in 180 days for $52.4 M" (id. at 9).

40. As a result of the Summit, LTG Thomas F. Metz at the Multi-National

Corps-Iraq Headquarters in Baghdad drafted a "Policy for Subsistence Prime Vendor

Distribution" (policy memorandum) on 29 June 2004. This policy memorandum

established the following procedures for PWC trucks to return in 48 hours:

(a) The PWC [TLO] at each hub will notify the

DF AC/escort unit at destination within 6 hours of

convoy arrival at hub.

(b) MSCs will send escorts to the hub (staging area)

within 12 hours of notification to escort subsistence

trucks to the designated DF AC.

(c) Once subsistence trucks arrive at the DF AC,

contractors will be required to download the trucks

within 24 hours.

(d) Upon completion of downloading subsistence

trucks, units will escort PWC assets back to the

staging area within 6 hours for retrograde back to

PWC headquarters in Kuwait.

(App. supp. R4, tab 506 at GOV1293-l)

41. The copy ofLTG Metz's policy memorandum in the record was not signed.

The record is not clear as to whether the policy memorandum was actually issued.

(Tr. 2/167) The Army was responsible for procuring the needed storage units

(tr. 11137). As our findings to follow will make clear, despite the goals set out in the

policy memorandum, the Army was unable to deliver the necessary storage units in a

timely manner. Consequently, the procedures set out in the policy memorandum were

not always followed.

42. Army CPT Chris Sinclair's 21 July 2004 email reported to his superiors

and GM Switzer that "[c]urrently there are 35 PWC trucks in the yard waiting to be

down loaded," and "DFACs are holding onto the [reefers] from anywhere between two

to four weeks." He also reported there was a problem with PWC's vehicle

maintenance, and it was "not uncommon for either the trucks or the [reefers] to

breakdown while enroute or while there at Al Asad." (App. supp. R4, tab 507)

11

43. After visiting the MEF (Marine) area, CPT Sinclair reported to his

superiors and GM Switzer on 31 July 2004 that he observed "over seventy [PWC]

assets at Al Asad either waiting to be down loaded or waiting to be returned to

Kuwait." His email went on to say "The MEF area has a lack of cold storage ... which

contributes to the length of time the [reefers] spend at these sites." He said he believed

"PWC's mission in the MEF area will grow and the need for a T.O. [transportation

officer] team will also increase." (App. supp. R4, tab 510 at 4335)

Unlimited Truck Charges Under Mod. 2

44. Data kept by DSCP indicates that from November 2003 to March 2004,

when Mod. 2 was in effect, the average turnaround time for dry trucks was between

7 to 12 days and the average turnaround time for reefers was between 13 to 24 days.

The average turnaround time for all trucks was between 10 to 21 days. (Ex. G-1000;

tr. 1/52-53)

45. A spreadsheet in the record showed 1,000 trucks were deployed into Iraq

from 1-15 June 2004. One reefer departed PWC's facility on 5 January 2004 but did

not return until 6 June 2004. In that case, PWC charged, and the government paid, a

minimum 3-day charge of $2,050 and an extra 151-day charge of $97 ,395 for a total

charge of $99,445. (Ex. G-1001at1) Other examples on the same spreadsheet

showed PWC charged $82,030, $65,905, and $63,325 for similarly situated reefers

(id.). DSCP offered the spreadsheet to show what CO Linda L. Ford (CO Ford) was

concerned about when she entered into negotiations with GM Switzer to restructure

the Mod. 2 distribution fee (tr. 1/47-48).

46. CO Ford testified when Mod. 2 was written, "there was no anticipation that

truck trips would take that long" and "having a contract written where you'll pay $645

a day, every day that the truck [was] out [would] end up paying ... for the truck." She

testified that she decided to put a cap on the number of days that the government

would pay for a truck trip in the upcoming negotiations with PWC because the

government was not "in the business of paying for a truck," but "in the business of

paying for deliveries." (Tr. 1/54-55)

Negotiations Preceding Execution of Mod. 27

47. As reflected by GM Switzer's and CO Ford's email exchanges, discussions

relating to an adjustment to the distribution fee began in August 2004. On 11 August

2004, GM Switzer sent CO Ford by email PWC's budget and pricing proposal relating

to the "Iraq Transport Operations and Squad Leader Initiative." GM Switzer stated in

his email "With regard to the adjustment of distribution fee to accommodate the rise in

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the cost of the TO & SL missions we have run our analysis and arrived at a proposed

blanket increase of 58% to the distribution fee." His email went on to say,

As our mission objectives are achieved we will [have] a

reduction in transit times and consequently less trucks in

the IZ. The savings to DSCP derived from a faster tum

time and less assets in theatre will easily cover the cost of

this mission. Couple this consideration with other less

tangible benefits such as less people in theatre, reduced

demand on life support, reduced demand on security

resources.

(App. supp. R4, tab 523 at 5190-91)

48. The Transport Operations and Squad Leader Initiative or Program (TO &

SL Program) was designed to improve PWC's logistics. Unlike the TLOs who

coordinated truck movements from the hubs, SLs traveled with the convoys. They

coordinated with TLOs and went to outlying areas if driver issues needed to be

resolved or delivery notes needed to be signed. (Tr. 4/92-93, 8/59) A part of the

negotiations in what would become Mod. 27 involved adding TLOs and SLs to the

new distribution fee structure. CO Ford testified "there was no way I could pay for a

transportation officer [TLO] and squad leader program without putting a cap" on the

open-ended fees PWC was charging under Mod. 2 (tr. 11110).

49. In response to GM Switzer's proposal, CO Ford's 8 September 2004 email

attached an "interim mod authorizing the additional TLO personnel numbers," and

advised that "[c]ustomer approval on the SL initiative remains pending." CO Ford's

email then went on to say "As we discussed earlier, I also placed a cap on the number

of allowable [days for] fees and restructured the transportation fees to better fit the

current Iraq operation without making changes to the fee." CO Ford then told

GM Switzer "Your comments/suggestions in regard to this language are welcome."

(App. supp. R4, tab 523 at 5190)

50. GM Switzer's 9 September 2004 email to CO Ford expressed surprise that

the SL program had not yet been approved and asked if PWC should stop because it

had "already spent a lot of money to get this started." He then said "The rest of the

Mod's intention is basically OK with us as we discussed over the phone. This

structure will force more discipline into the system which our T[L ]Os and SLs will be

enforcing." With respect to Paragraph 3 of the proposed modification, GM Switzer

commented that it would be "a major administrative burden for the Military, PWC,

and DSCP to track, especially since there is still limited discipline in the IZ [Iraq

Zone] with events happening all the time that are out of our control to manage even

with the TO program." He then said "I can see the cap in place with documentation

13

required for any trucks exceeding the cap. But to do this for your established

minimums when they are all doing it and our round-trip average is around 18 days,

will be extremely burdensome at this time." (App. supp. R4, tab 523 at 5189)

51. From this email reply, we find GM Switzer understood the consequences of

establishing a cap on the transportation fee structure proposed by CO Ford. We find

that if GM Switzer disagreed with the concept of a cap, he would have voiced his

objection just as he questioned the practicality of requiring documentation for the

established minimum truck trip fees CO Ford included in her proposed mod. Instead,

he stated "The rest of the Mod's intention is basically OK with us as we discussed over

the phone" (app. supp. R4, tab 523 at 5189).

52. CO Ford's 9 September 2004 email reply confirmed a teleconference that

morning in which GM Switzer was advised that DSCP was "still seeking to obtain the

required authorization" for the SL program. CO Ford advised GM Switzer that she

had "no objection to separating the TO and SL budgets in an attempt to speed up the

process." CO Ford went on to say that GM Switzer's comments on documentation for

trucks subject to round trip minimums were well taken, and she had made changes

accordingly. (App. supp. R4, tab 523 at 5188)

53. GM Switzer's email to CO Ford the following day, IO September 2004,

stated "The changes to the Mod are appreciated and I think they are workable. Unless

anyone else has an issue, I will have this signed and to you by tomorrow. When will

the new fee structure begin?" (App. supp. R4, tab 523 at 5188) In noticing details like

when the new free structure would begin, we find GM Switzer as someone who would

unlikely leave issues unresolved which could present problems later on.

54. GM Switzer's 14 September 2004 email to CO Ford reminded her that

PWC needed a start date for the new rates for billing purposes. In the same email,

GM Switzer expressed "real reservations about the maximum cap being unqualified."

He said beginning 1 September 2004, PWC would report all vehicles out 22 days as

potentially exceeding the 29-day cap. To protect PWC, he asked ifDSCP and the

government would support PWC's demand to return its trucks that had not completed

their missions. He indicated that PWC would "prefer to have the ability to submit

exceptions to the 29 day rule ifthe situation is unavoidable despite our best efforts to

prevent it." His email said that he looked forward to CO Ford's comment "so that we

can proceed with signing the Mod." (App. supp. R4, tab 527 at 342-43)

55. We find GM Switzer understood before he signed Mod. 27, that the 29-day

cap CO Ford established was unqualified or without exception as to the causes of

delay. We find that GM Switzer indicated a preference for an ability to submit

exceptions to the 29-day cap but did not insist upon that ability as a deal breaker.

14

56. As reflected in CO Ford's 15 September 2004 email reply the next day, she

had a discussion with GM Switzer "earlier" that day. The record does not reveal what

was discussed. As a result of that discussion, CO Ford's email attached a copy of a

"revised mod" that established 16 September 2004 as the start date for the new

transportation fees. The revised mod did not remove the 29-day cap. CO Ford's email

said, however, "exceptions to the 29 day rule will only be considered in the form of a

claim." The email revised the minimum number ofTLOs to perform on a 24 hour/7

day per week schedule from 72 to 81. CO Ford's email told GM Switzer to "Please

sign and return the attached mod or advise if additional changes are required." (App.

supp. R4, tab 527 at 342) (Emphasis added)

Mod. 27 as Signed by the Parties

57. GM Switzer did not advise any additional changes were required; he signed

Mod. 27 on 19 September 2004. CO Ford signed Mod. 27 the next day on

20 September 2004. Block 3 of the modification indicated 16 September 2004 as the

effective date. Block 14 of the modification stated "Except as provided herein, all

terms and conditions of the [Contract] as heretofore changed, remains unchanged and

in full force and effect." (R4, tab 13)

58. As signed by the GM Switzer on behalf of PWC and CO Ford on behalf of

DSCP, Mod. 27 provided:

1. The requirement for PWC to deploy a maximum team

of 25 Transportation Liaison Officer's (TLO's) into

the Iraq Theater was added to the PWC contract

number SP0300-03-D-3061 via Contract

Modification POOO 19 dated to be effective on 10 May

2004. This contract modification P00027 establishes

an increased requirement for the maximum number of

TLO team members from 25 to 94. As a minimum,

81 TLO's are required to perform on a 24 hour, 7

days per week schedule.

2. Transportation fees paid by the Government, above

the awarded distribution category fee structure, were

established for the Iraq Deployment Zone via

Contract Modification P00002, dated to be effective

on 01 July 2003. This contract modification P00027

restructures the transportation fees for the Iraq

Deployment Zone to better fit the current deployment

zone structure without modifying the fee and

establishes a maximum number of days applicable for

15

the transportation fees as follows. The start date for

the following rates is September 16, 2004. The rates

shall apply to all PWC trucks that depart from Kuwait

to Iraq on or after September 16, 2004.

a. Truck Transport to Iraq "South" (South of

Scania) from PWC Kuwait:

- 4 day round trip minimum

- $2,695.00 per refrigerated truck

- $2,075.00 per dry truck

b. Truck Transport to Iraq "Central" (between

Scania & Anaconda) from PWC Kuwait:

- 5 day round trip minimum

- $3,340.00 per refrigerated truck

- $2,550.00 per dry truck

c. Truck Transport to Iraq "North" (North of

Anaconda) from PWC Kuwait:

- 10 day round trip minimum

- $6,565.00 per refrigerated truck

- $4,925.00 per dry truck

d. Additional days beyond the established

mm1mum:

- $645.00 per refrigerated truck per day

- $475.00 per dry truck per day

e. The maximum number of allowable trip days is

29. The Government will not pay

transportation fees beyond this established

maximum. The maximum number of days

shall apply to all PWC trucks that depart from

Kuwait to Iraq on or after September 16, 2004.

3. The "additional days beyond the established

minimum" fees are only applicable ifthe delay is

customer caused; i.e. Hub, DF AC or MKT not having

the capability to off load and return the truck.

4. All invoices must be verified and certified by the

DSCP Contracting Officer Representati[ ve ],

Administrative Contracting Officer or Contracting

Officer.

(R4, tab 13) (Emphasis added)

16

59. We find the transportation fee structure established by agreement of the

parties and effective 1 July 2003 in Mod. 2 was replaced by a different fee structure in

bilateral Mod. 27 effective 16 September 2004.

60. Unlike Mod. 2, Mod. 27 divided truck transportation into Iraq into three

separate zones: South, Central and North. Also unlike Mod. 2, Mod. 27 established a

different round trip minimum fee for refrigerated and dry trucks for each zone: For

trucks going into South Iraq, Mod. 27 allowed a 4-day round trip minimum fee at

$2,695.00 per refrigerated truck and $2,075.00 per dry truck (R4, tab 13, ii 2.a.); for

trucks going into Central Iraq, Mod. 27 allowed a 5-day round trip minimum fee at

$3,340.00 per refrigerated truck and $2,550.00 per dry truck (R4, tab 13, ii 2.b.); and

for truck going into North Iraq, Mod. 27 allowed a 10-day round trip minimum fee at

$6,565.00 per refrigerated truck and $4,925.00 per dry truck (R4, tab 13, ii 2.c.).

61. Mod. 27 did not change the Mod. 2 rate of $645.00 per refrigerated truck

per day for additional days a truck was out beyond the minimum round trip days (R4,

tab 13, ii 2.d.). Similarly, Mod. 27 did not change the Mod. 2 rate of $475.00 per dry

truck per day for additional days that truck was out beyond the minimum round trip

days (id.). Unlike Mod. 2, which allowed the $645.00 per day per refrigerated truck

and the $475.00 per day per dry truck to accumulate without limitation, Mod. 27

established a 29-day cap for trip days allowable: Paragraph 2.e. of Mod. 27 stated:

"The maximum number of allowable trip days is 29. The Government will not pay

transportation fees beyond this established maximum." Notably absent from Mod. 27

was any mention of any exceptions to the 29-day cap.

Application of the 29-Day Rule

62. Under Mod. 27, for example, a reefer going to South Iraq would be paid a

4-day round trip minimum of $2,695.00 even ifthat truck returned in two days. If that

reefer returned to Kuwait in 60 days, and it was delayed at a DF AC for 42 days due to

lack of storage at that site, PWC would be paid $16,125.00 ($645.00 x 25 days

(29 days -4 days)) plus the $2,695.00 or a total of$18,820.

63. Similarly, a reefer going to Central Iraq would be paid a 5-day round trip

minimum of $3,340.00. If that reefer returned to Kuwait in 35 days, and it was

delayed at a DF AC for 30 days due to lack of storage at that site, PWC would be paid

$15,480.00 ($645.00 x 24 days (29 days - 5 days)) plus the $3,340.00 or a total of

$18,820.00.

64. Likewise, a dry truck going to North Iraq would be paid a 10-day round trip

minimum of $4,925.00. If that dry truck returned to Kuwait in 50 days because it was

redirected to another site and was delayed for 30 days, PWC would be paid $9,025.00

($475.00 x 19 days (29 days - 10 days)) plus the $4,925.00 or a total of $13,950.00.

17

65. With the 29-day cap, we find Mod. 27 essentially converted Mod. 2's

open-ended distribution fee structure of $645.00 per reefer per day and $475.00 per

dry truck per day for additional days beyond the established minimum into a fixed

liability transportation fee structure not to exceed $18,820.00 per reefer and

$13,950.00 per dry truck.

Rationale for the 29-Day Cap

66. Because GM Switzer was located in Kuwait in 2004, and CO Ford was

located at DSCP in Philadelphia, negotiations between them on the terms of Mod. 27

were conducted by email and telephone (tr. 11115). Thus, testimony and the words

used in the emails are important in understanding the parties' intent. In this case,

CO Ford testified and explained her understanding of Mod. 27, and she was

extensively cross-examined by PWC counsel. GM Switzer did not testify. 5

Consequently, without his testimony we are left with no explanation of why he signed

Mod. 27 with a 29-day cap which he understood to be "unqualified," and which did

not include what he had "real reservations about" when he was given the opportunity

to "advise if additional changes are required" (findings 54, 56).

67. CO Ford explained at the hearing that even though the number of trucks out

for over 29 days was insignificant, some trucks could be out for long periods of time

and "it didn't make sense to pay $99,000 for a truck trip, given that we were paying

PWC to place people [TLOs and SLs] in the field and to minimize truck trip time"

(tr. 1/112). She explained that given the average truck trip time was 15 days

(tr. 11115), establishing a 29-day cap meant the government was "paying for all of the

risks associated with the contract" up to 29 days (tr. 11112).

68. CO Ford testified that paragraph 2.e. of Mod. 27 established "the absolute

maximum that we would pay for a truck trip for any one individual truck" and that

"amounted to about $18,000 or a little over $18,000 at the max" 6 (tr. 1156). She

testified the 29-day would apply regardless of "the cause of delay," even if a DF AC

held a truck for storage (tr. 1/57, 59) or a truck's return was delayed by military escort

(tr. 1157).

69. The fact that CO Ford established a 29-day cap - almost double the 15-day

average truck return time experienced at the time - suggests that both parties

5

On advice of his own counsel, GM Switzer chose not to testify in this appeal (see

DLA letter of 27 May 2014 ). PWC did not list or call GM Switzer as its

witness.

6

CO Ford was apparently referring to a reefer. A dry truck would have a different

maximum amount (see finding 64 ).

18

understood the cap was intended to shift the risks of an open-ended fee structure under

Mod. 2 to a shared risk fee structure under Mod. 27. PWC was not unfamiliar with

contingencies operating in a war zone. The bulk of the people it hired at its leadership

levels in transportation and other areas were retired military. GM Switzer was a

retired Navy officer. (Tr. 3/34)

70. Apparently in one of their conversations, GM Switzer had suggested

eliminating the 29-day cap. CO Ford testified that she "pretty much rejected .. .lifting

the 29-day cap." She acknowledged she told GM Switzer that she "would consider

exceptions to the 29 days in the form of a claim." (Tr. 1/90) When pressed on

cross-examination whether that statement meant PWC would be allowed to submit

claims in excess of the 29 days, CO Ford testified it was "our understanding ... at the

time or my understanding ... at the time" that she would consider granting relief where,

for example, all of the trucks "were out over 29 days. And for some reason [PWC

was] going to be out of business beyond his losses." She explained she could not let

that happen because "[o]ur primary goal in the war zone was to make sure that we fed

the troops ... [and] if PWC went out of business, we would have had a difficult time

doing that." As for submitting a claim for relief, CO Ford testified it was her

understanding that "[a] contractor is always entitled to submit a claim if he doesn't

think he's been [treated] equitably or something was unfair or unjust or inequitable."

(Tr. 1191)

71. Although at times less than precise in her language, we find overall what

CO Ford was saying was the 29-day cap - being at about twice the average 15-day

truck return time experienced at the time -was more than generous. We find she

offered to leave the door open for claims in the event the 29-day cap caused PWC such

economic hardship to the point where its ability to continue performance under the

contract was threatened.

Aftermath of Mod. 27

72. On 23 October 2004, PWC's senior transport manager,

Mark B. Fredenburgh (Fredenburgh) sent an email to CO Ford and others in DSCP,

attaching a weekly over 10-day report. The email reported "As you can see from the

pivot table, many vehicles remain at DF A Cs. Most of those at the hubs are returning.

Storage issues continue to hamper the tum around time at some locations." (App.

supp. R4, tab 546 at 86)

73. Following up, GM Switzer's 24 October 2004 email to CO Ford and others

at DSCP said:

After reviewing this [weekly over 10-day] report, we do

have the makings of a problem with the new Transport

19

Mod that limits our billing for only 29 days. What are we

suppose to do with the 105 vehicles now over 29 days?

This really adds up as well as the 57 that are right behind

in the 22-29 category. There are a lot of issues driving this

but most of them are out of our control even with the TOs.

I still believe Squad Leaders would help expedite trucks

being held, but again, that is only part of the solution. We

need action up in Iraq to expedite the movement [from] the

customer side.

(App. supp. R4, tab 546 at 86)

74. We find GM Switzer's acknowledgment that Mod. 27 limited PWC's

billing "for only 29 days," and that Mod. 27 "have the makings of a problem" reflected

his understanding at the time that Mod. 27 provided no relief just because trucks did

not return in 29 days. If GM Switzer had understood CO Ford to have agreed to

provide relief for any customer-caused delays beyond 29 days, he would not have

asked "What are we suppose to do with the 105 vehicles now over 29 days?"

(Finding 73)

75. PWC's Fredenburgh provided CO Ford another 10-day report by email on

9 November 2004. This email quantified the financial impact of the 29-day cap. He

reported that financial impact to PWC equated to $743,685 as of8 November 2004.

He reported that 48 trucks had returned past the 29-day mark equating to 274

non-billable truck days and 95 trucks departed after 15 September 2004 had not

returned equating to 879 non-billable truck days. The email stated "As these trucks

return, claims will be filed for the days exceeding the maximum." Fredenburgh asked

DSCP to provide information relating to the storage capacity and meals served per day

at each DF AC and MKT site so that PWC "could help provide specifics on where

more storage is needed." (App. supp. R4, tab 559; tr. 1/95-96)

76. Fredenburgh's 16 November 2004 email reported to CO Ford that the

financial impact of the 29-day cap continued to grow. He reported that "[c]losed

missions over 29 days equate to 77 vehicles with 515 days over in non-billable days

($332,175)" and "[e]xisting in mission trucks over 29 days is 138 vehicles for 1481

non-billable days ($955,245)." The email stated that "[w]ithin 2 months this is now

above the $1 [m]illion mark" and asked "How can we address this?" The email

blamed the over 29-day mission to "instances on over ordering," to "DF AC storage

issues effecting [sic] the downloading of vehicles, DFAC's taking our trailers for

storage, MSR closes, etc." (App. supp. R4, tab 562; tr. 1/96-97)

77. When the storage capacity of a DFAC was "maxed out," the Army would

"eat through a truck" meaning the DF A Cs would "grab food off the truck and just build

20

menus off ofwhat they pull off the truck" (tr. 7/23). In addition to the lack of storage

capacity at various locations, over ordering food also contributed to delays in truck

returns (tr. 7112). The record shows MNC-I representative David L. Zimmerman's

12 November 2004 email to the Army's Theater Food Advisor, P. Peleti, complaining

that Taji DFAC's ordering "appears to be out of control and they have too many trucks

at their location ... still!!" Peleti's 12 November 2004 email to the customer service

representative at Taji stated "Need your help on getting these folks on ground to free up

these PWC trucks and stop holding them hostage. Also if they need to minimize their

order then we need to know." (App. supp. R4, tab 560)

78. Fredenburgh's 29 November 2004 email to CO Ford complained that food

was being redirected due to lack of storage and over-ordering. The email cited

instances where trucks were sitting at DFACs for 30 days or more and then being

redirected with partial contents. The email stated "Days accumulated in total has now

climbed above the $2.3 [m]illion mark for closed and in-mission vehicles." His email

went on to say "I believe the intent of Mod 29 [sic] was to ensure PWC was managing

their transportation effectively .... I do not believe the intention of the mod was to

penalize PWC for areas beyond our control. What can we do about this situation?"

(App. supp. R4, tab 566)

79. In the meantime, in preparation for the upcoming expiration of Contract

3061, DSCP's Peggy Grady advised GM Switzer in her 3 December 2004 email that a

contract modification would be issued to extend the contract for six months. The

email stated that "The contract modification will incorporate all current and modified

actions in effect at time of signing." Grady's email requested that "the contract

extension not be held up due to PWC's concern on the recent TO mod that limited the

transport [fees] to 29 days," and stated that "[a]n alternate proposal may be submitted

separately at any time." (App. supp. R4, tab 571 at 15733-34)

80. In response, GM Switzer's 8 December 2004 email stated:

We are willing to accept the contract extension. However,

at this time I cannot take lightly the effects of Mod 27's

limitation on the transport charges. Unfortunately, the

Theater has taken a tum for the worse and despite all our

extra visibility and management, we are not able to move

our trucks through the mission in a timely manner. The

military control of our trucks and the situation has caused

substantial delays where the possibility and reality of

having our trucks on mission for over 29 days is more of

the norm, not an infrequent exception. We do not have the

ultimate control of our trucks.

21

Although DSCP has indicated they would be willing to

accept a claim or maybe a request for equitable adjustment

for compensating for the delays, this is no guarantee of

being paid or ifpaid, what delays will be involved.

I would therefore like this matter be reviewed and

discussed ASAP with a view towards resolving our

situation here.

(App. supp. R4, tab 571) We find GM Switzer understood that CO Ford's willingness

to consider granting a claim was a matter of discretion given the right circumstances

and not a matter of contract right.

81. A 6 January 2005 email from an MNF-I representative Zimmerman to

CO Ford and others reported that the company awarded the contract to provide cold

storage units for the MKT sites had fallen behind in production. Instead of delivering

50 cold storage units on 28 December 2004, it would now ship 100 units on

10 February 2005. (App. supp. R4, tab 577) CO Ford acknowledged that until the

MKTs received their cold storage units, they had to use reefers for storage (tr. 11108).

We find that having sufficient storage units remained a problem nearly eight months

after the SPY Summit.

82. In response to CO Ford's 13 January 2005 inquiry on whether PWC would

accept a modification to extend Contract 3061 for 8 additional months, GM Switzer's

reply of the same day said he had "no problem with extending the contract at the same

terms." His email, however, wanted CO Ford to rescind the 29-day cap:

My only request was that the 29 day transport limitation

rule for Iraq be rescinded. We have almost done as much

as we can with our TO and Squad Leader Programs to

provide visibility and local management of the trucks in

Iraq. However there are still delays that are virtually out of

our control and are driven by either the military mission,

situation, or other controlling parties' inefficiencies and yet

PWC is penalized for doing the work .

.. . However, making us go through the claims process that

will either be rejected or cause us significant delays in

receiving compensation places us in a[ n] inappropriate

situation of either ignoring (even if we can) the military

request and situation or absorbing costs that are not under

our control. Unfortunately this has not been isolated

incidents but occur on a regular and frequent case.

22

Additionally with the projected road closures and new

DFA Cs opening, the situation will likely get worse than

get better.

(App. supp. R4, tab 580 at 15731-32) Based on this email, we find GM Switzer

understood the 29-day cap shifted the risk of truck delays, for whatever reason, beyond

29 days to PWC.

83. CO Ford's 13 January 2005 email declined to rescind Mod. 27 but urged

PWC to submit an alternate proposal "based on actual cost and historical truck tum

around time frames." She explained why the 29-day cap was established in the first

place:

When mod 27 was written, it was my understanding that

we were in agreement that a transport limitation rule was

absolutely necessary given the history of delayed truck

movement and the establishment of a transportation officer

program.. . . We considered the average tum around time

per truck at 18 days and agreed that only a small

percentage of trucks remained out more than 29 days. To

date, these figures have not significantly changed.

Furthermore, it was not reasonable that PWC

transportation costs continued at a rate of $645 per day for

an infinite number of days. Therefore, we can not simply

rescind mod 27 without doing some additional analysis.

(App. supp. R4, tab 580 at 15731)

84. Because he did not testify, there is no rebuttal to CO Ford's statement,

made during the course of performance to the effect that the parties "were in

agreement that a transport limitation rule was absolutely necessary." That CO Ford

urged PWC to submit an alternate proposal "based on actual cost and historical truck

tum around time frames," and her comment that she could not "simply rescind mod 27

without doing some additional analysis" support a finding that, as far as CO Ford was

concerned, "exceptions to the 29 rule" would only be considered if it put PWC in an

economic hardship situation. (Finding 83)

85. PWC's daily INTSUM 7 for 20 January 2005, four months after Mod. 27

was signed, reported that PWC had 1,232 trucks in the Iraq Zone (IZ), and that

"[m]ovement across the theater, for the most part, is happening .... but the single

biggest issue in the IZ right now is storage at the DFACs" (app. supp. R4, tab 587).

7

An INTSUM was a snapshot of truck movements at all hub locations (tr. 7/37).

23

PWC's daily INTSUM for 26 January 2005 reported that "Anaconda is continuing to

struggle getting trucks back from the DFACs due to a lack of cold ground storage,"

and the "single biggest issue" at BIAP AOR "is storage capacity at the DFA Cs, which

is causing trucks to be held" (app. supp. R4, tab 590 at 644).

86. Despite CO Ford's refusal to rescind Mod. 27, PWC entered into a bridge

contract with DSCP. The bridge contract (Contract No. SPM300-05-D-3119 or PV

Bridge contract), in the estimated value exceeding $1 billion, was a follow-on contract

to Contract 3061. It was executed as Modification No. P00036 (Mod. 36) to Contract

3061 and it was for the period 16 February 2005 through 15 December 2005. The

bridge contract provided that "[a]ll other terms and conditions of the 3061 contract

remain unchanged and are hereby incorporated into contract SPM300-05-D-3119."

(App. supp. R4, tab 156) Thus, knowing CO Ford's interpretation of Mod. 27 -that

PWC assumed all risks of delay over 29 days - PWC agreed to extend Contract 3061

for I 0 more months.

87. Trucks would be reported as in a "black" status when they remained at a

hub for more than 72 hours (3 days), or at a DFAC for more than 96 hours (4 days), or

at a MEF site for more than 120 hours (5 days) (app. supp. R4, tab 648; tr. 21173, 175).

PWC's daily INTSUM for 24 February 2005, five months after Mod. 27 was signed,

reported the number of trucks across the IZ had spiked considerably, with 463 trucks

in the "black," and with the majority of those resulting from "lack of storage at the

MEF sites." It was reported that of all the trucks in a "black" status, only 1% were

related to escort issues. (App. supp. R4, tab 601 at 824)

Submission of Over 29-Day Claims

88. By email on 24 February 2005, PWC's Contract Administration Officer

sent CO Ford an advance copy of a "claim" 8 for additional transportation fees

associated with trucks that had returned from Iraq to PWC after 29 days. The claim

was in the amount of$2,951,335.00 and covered the period from 16 September 2004

to 31 December 2004. (App. supp. R4, tab 604)

89. Confused by PWC's submission, COR Burkett, who usually verified

PWC's requests for payment before sending them to the CO, emailed CO Ford on

24 February 2005 and stated that he had not seen the supporting documentation for the

truck trips claimed (app. supp. R4, tab 606 at 2492-0002).

8

This was not a formal CDA claim. The word "claim" was used to denote that the

submission was based on CO Ford's email agreement to consider "Exceptions

to the 29 day rule .. .in the form of a claim."

24

90. CO Ford's 24 February 2005 email explained to COR Burkett that what

PWC had submitted was not based on a contract right: "Claims are different from

invoices in that PWC has no written contractual right to payment; therefore, your

verification and signature is not required up front." CO Ford's email explained

"Basically, PWC is instructed to submit claims directly to this office for review and

decision." She went on to explain that having paid dearly for the TO & SL Program,

any relief must be supported by PW C's "cost":

Based on limited review, I can tell you right now that I'm

not in favor of paying for this. We paid PWC 8.7 million

for these 467 trucks and they want another 2.9 million. I

will be requesting more cost verification data. Cost data

that may not have been available before, should be

available now. I'm also struggling with the idea of paying

15.7 million for a TO program and negotiating another 6.6

million for a SL program if we can't clearly see greater

command and control of truck days out.

(App. supp. R4, tab 606 at 2492-0002)

91. When asked on cross-examination why she asked for cost data if

transportation fees were capped at 29 days, CO Ford explained that she wanted to

"[review] the reasonableness of [PWC's] request," and "[i]f PWC could prove that

mod 27 was completely unreasonable, or unfair, or inequitable, then I would have

considered paying the claim." She testified that she requested PWC's cost data

because knowing how much it cost PWC to perform the trucking service would show

ifPWC was losing money. (Tr. 11130-31)

92. COR Burkett testified that most of the time, trucks would return in seven to

nine days, and it was his practice to "approve payment up to 29 days" when the trucks

returned (tr. 3/41-42). He testified in approving invoices up to 29 days, he would err

on the side of PWC even in instances of unsigned delivery documents (tr. 3/53). He

acknowledged most of the time delays such as convoy/escort delays, redirections, and

using trucks for storage, were customer-caused (tr. 3/54). He testified when PWC

argued "they should be paid for every day the truck was up in Iraq" due to

contingencies beyond its control, CO Ford would point to the 29-day cap and said

"Paul, this is what the contract states. This is what we both agreed on, so this

[29 days] is what will be paid." (Tr. 3/43) There is no evidence that COR Burkett

approved any over 29-day truck trips.

93. CO Ford's testimony at the hearing was consistent with her interpretation

of Mod. 27 during contract performance: (1) Having agreed to pay for the TO & SL

Program, and having established the 29-day cap far above the 15-day average truck

25

return time, PWC was expected under the terms of Mod. 27 to assume the risk of all

truck return delays over 29 days; and (2) Exceptions to the 29-day rule would be

considered, under the right circumstances and supported by cost data, so that PWC's

continued performance under the contract in keeping the troops fed would not be

interrupted.

94. By email dated 8 March 2005, PWC's senior contract manager,

Randolph Sawyer, advised CO Ford that PWC was gathering supporting data for

additional trucks returned over 29 days from Iraq for January and February of 2005,

and would submit an additional claim. Sawyer's email advised that PWC had decided

to change its invoicing procedure and stated:

We will start invoicing on the 29th day for trucks that

departed after 16 September 2005 [sic] and are still

remaining in Iraq (Mod. P00027). Once the truck

returns ... we expect to submit a claim for the additional

days over 29. We will not wait until the asset returns

before we submit an initial invoice.

(App. supp. R4, tab 616 at 6556) CO Ford advised Sawyer by email on 9 March 2005

that "DSCP will not accept invoices for trucks that have not returned to Kuwait as part

of the normal invoicing procedure" 9 (id. at 6555). Sawyer's 28 March 2005 email

stated that PWC believed the additional costs claimed were justified because "the

customer IS holding our trucks as storage. This is in direct violation of the terms of

POOOO 1, paragraph 4, which states, 'Trucks will return to PWC upon completion of

unloading, and trucks will not be used at the sites for storage purposes.'" (Id. at 6554)

95. In response to CO Ford's 13 January 2005 invitation to submit a proposal

as an alternative to Mod. 27, PWC's 14 March 2005 email forwarded a proposal from

GM Switzer. The proposal asked that Mod. 27's 29-day cap be lifted. Based on its

finding that the cost to overhaul a storage unit after sitting idle was $6,800.00,

GM Switzer proposed a charge of $6,800.00 to recoup this additional cost when

"PWC's trucks are used for storage purposes." Alternatively, if DSCP chose to set "a

max allowable trip ceiling," GM Switzer proposed "a demurrage fee of $500 per day

per reefer" where its asset was used for storage. (App. supp. R4, tab 610

at 2513-2514_0002)

96. CO Ford rejected GM Switzer's proposal (tr. 11161). She testified she told

PWC she would not lift the cap because the data she had showed "the average trip

times were going down" (tr. 11154). She explained when Mod. 27 was put in place,

9

CO Ford took this position presumably because loss of vehicle was PWC's risk

(finding 6, Mod. 1, if 6).

26

"we never thought that [truck trips exceeding 29 days] would be eliminated totally."

She testified PWC might have a case for relief "if all the truck trips ended up being

more than 29 days ... because it was different from the data that we had before we ... put

mod 27 in place." (Tr. 1/155-56)

97. Following through on his 8 March 2005 email, Sawyer submitted PWC's

second claim on 25 May 2005. 10 This claim, in the amount of$4,161,020, was for

PWC trucks out over the 29 days during the months of January and February of 2005.

(App. supp. R4, tab 717 at 15740)

98. Mr. Matthew Paice, PWC's invoicing supervisor, advised CO Ford by

email on 7 August 2005 that he had taken over responsibility for the "MOD27 over

29 days claims." Instead of sending "mountains of paperwork," Paice asked CO Ford

what he needed to submit for claims that differed from normal billings. (App. supp.

R4, tab 677 at 2500_ 0002) This was the same issue that confused COR Burkett.

99. CO Ford's 16 August 2005 email reply to Paice stated:

Send me the mountains of paperwork. Claims must be

fully supportable, we can not accept random samples of

support documentation for claims. Please be sure that your

paper trail is clear and concise. You must show that each

delay was in fact customer caused.

Ifwe can agree that there was delay and the delay was

customer caused, we will still need to negotiate an amount

due, if any. As I have mentioned several times before, it

would be helpful for PWC to submit actual demurrage

cost data. For example, your first claim implies that the

Gov't owes PWC $2.9M on 467 deliveries. However, we

have already paid $8.7M for those deliveries. Where is the

actual cost data to support an additional payment of

$2.9M? Did your cost actually exceed $8.7M for the 467

deliveries? If so, by how much?

(App. supp. R4, tab 677 at 2500) (Emphasis added)

100. Had CO Ford agreed to pay $645.00 per reefer and $475.00 per dry truck

as exceptions to the 29-day cap for each day these trucks were out over 29 days

10

Like PWC's 24 February 2005 (first) claim, this was not a CDA claim. The word

"claim" was used to denote that it was based upon CO Ford's email agreement

to consider "[ e]xceptions to the 29 day rule ... in the form of a claim."

27

beyond PWC's control, she would not have asked PWC for "actual demurrage cost

data," "actual cost data," and whether PW C's "cost actually exceed[ ed]" the

$8.7 million paid. The fact that CO Ford repeatedly asked for cost data supports a

finding that, in her mind: ( 1) PWC had not demonstrated that, while some trucks were

delayed for over 29 days, the 29-day cap for all trucks was unfair, unreasonable, or

inequitable; and (2) PWC had not demonstrated that it had reached a point where its

ability to continue performance under Contract 3061 was threatened. We find

CO Ford was consistent in her interpretation of the circumstances under which

exceptions to the 29-day rule would be considered. PWC presented no contrary

interpretation from GM Switzer.

101. The position CO Ford took in 200 5 was reinforced by her testimony at the

hearing. CO Ford testified that in addressing PWC's over 29-day claim, she applied a

two-part test. Part I was to determine if all of the delays claimed related to the storage

issue. Assuming Part I was satisfied, Part II was to determine from PWC's cost data

that the costs PWC incurred showed that capping truck fees at 29 days was not

"realistic." She testified it would not be enough for PWC to show it was less

profitable because of the truck delays. (Tr. 1/181-83) She testified that from the

documents PWC submitted, she could not determine that all of the delays claimed

"were related to the storage issue" 11 (tr. 1/181), and PWC provided "no data ... to

support that it [the 29-day cap] wasn't equitable" (tr. 11183).

102. On 26 October 2005, PWC submitted a third "claim" 12 for over 29-day

truck trips for the month of March 2005 (app. supp. R4, tabs 703, 704). This claim

was in the amount of$1,138,370 (app. supp. R4, tab 717).

103. CO Ford's 17 November 2005 email advised PWC that "it is our intent to

deny the 'over 29 day' claims for inadequate support .... Our final decision will be

communicated no later than 9 Dec 05. PWC may submit additional information for

DSCP review prior to the anticipated decision date." (App. supp. R4, tab 708 at 1972)

104. In January 2006, PWC began performance under a new Prime Vendor

Contract (Contract No. SPM300-05-D-3128) (Contract 3128 or PV2 Contract). Under

Contract 3128, DSCP and PWC agreed to a wholly different fee structure for trucks

going into Iraq. The events underlying the claims in this appeal occurred during

Contract 3061 (PVl Contract) and Contract 3119 (PV Bridge). That period began on

11

Contract 3061 assigned certain risks to PWC such as loss of vehicles and delays in

assembling or deploying military escorted convoys (see finding 9).

12

Like PWC's 24 February 2005 (first) and 25 May 2005 (second) claims, the word

"claim" was used to denote that it was based upon CO Ford's agreement to

consider "[e]xceptions to the 29 day rule .. .in the form of a claim."

28

the effective date of Mod. 27, 16 September 2004, and ended 15 December 2005, the

expiration date of Contract 3119. 13

Events Leading to PWC's Submission of its Request for Equitable Adjustment

CREAs) and Certified Claim

105. The events leading to PWC' s submission of its REA and certified claim

were the subject of a Board decision denying DSCP's motion to dismiss for lack of

jurisdiction. See Public Warehousing Company, ASBCA No. 56022, 11-2 BCA

ii 34,788. For continuity and consistency, we restate or summarize, as necessary, the

relevant findings in that decision.

106. After Contract 3061 expired, PWC reminded DSCP by letter dated

18 December 2005 "there is an additional $13 .1 [million] outstanding from the trucks

that returned after 29 days, being pursued as an REA." PWC's letter said it would be

submitting an REA on a portion of the Mod. 27 amounts with supporting documents

later that month. 11-2 BCA ii 34,788 at 171,224, finding 28.

107. On 20 December 2005, PWC submitted an REA with Attachments A through

F. The REA was signed by PWC's Assistant General Manager Stephen J. Lubrano. The

government contended that it never received attachments A through F. 11-2 BCA

ii 34, 788 at 171,224, finding 29.

108. On 24 May 2006, following an inquiry from Paice, CO Ford sent him an

email asking him to send a copy of the certified REA letters associated with the trucks

that were out over 29 days or a summary sheet of the submission. Paice replied on

29 May 2006 with a copy of the REA letter and copies of Attachments B, C, D, and E.

Attachments A and F were not included with the email. 11-2 BCA ii 34, 788

at 171,224, finding 30.

109. Not having heard from CO Ford, Paice emailed her on 28 August 2006.

The email stated:

On March 10, 2006, the Government verified receipt of a

"hard" copy "Request for Equitable Adjustment (REA),

October 2004 - September 2005, Submissions I, II & III"

submitted to your office, concerning the retention of PWC

assets past the 29-day contractual window. In addition, per

the Government's request on May 24, 2006, PWC

13

See Public Warehousing Company, K.S.C., ASBCA No. 56116, 08-1 BCA

ii 33,787 at 167,223, ii 2; (see also app. br. at 11).

29

submitted a "soft" copy, via email, of the certified REA on

May 29, 2006.

Paice asked the CO to "provide a date for a response to and resolution of these pending

amounts." 11-2 BCA ii 34,788 at 171,224-25, finding 31.

110. On 21 December 2006, PWC submitted a two-page certified claim to

CO Ford. The claim letter stated: "On December 20, 2005, PWC submitted a certified

Request for Equitable Adjustment (REA), for which the company has received

additional information request but no written disposition on the REA." The claim

sought payment in the amount of $12,490,060.00. It attached "the documentation

submitted in the earlier REA (specifically, Submissions I, II, and III on 20 December

2005), with the inclusion of the newly added Submission IV, for the costs incurred by

PWC due to the Government's utilization of PWC truck asset past the 29 day

maximum." In referencing and attaching them, we find that PWC had incorporated

and made its 12-page 20 December 2005 REA and attachments a part of its certified

claim. The claim, certified by PWC's Senior Contract Manager, James A. Kibbee, Jr.,

was based on the legal theory of unjust enrichment:

Pursuant to Common Law, and under the definition of

"unjust enrichment", the Government has gained a

windfall (receives additional services) at the expense of

PWC. As a legal doctrine, it states that the party who has

thus gained must return the property (restitution) to its

rightful owner, even though the property was not obtained

illegally ....

In invoking the legal theory of unjust enrichment, the claim letter went through a

five-step question and answer analysis of the theory's legal elements. 14 11-2 BCA

ii 34,788 at 171,225, finding 32.

111. The REA included a 12-page narrative and referenced Attachments A

through F. Attachment A was said to provide "The breakdown of costs." Attachments

B, C, and D contained spreadsheets listing its trucks returning after 29 days during the

period October through December 2004 (Submission I), January through February

2005 (Submission II), and March through September 2005 (Submission III).

Attachment E provided a summary for Attachments B, C, and D. Attachments B, C,

and D spreadsheets show how PWC arrived at the amount it claimed for each truck

trip into Iraq. Attachment F was said to show "a matrix of events during the time

period in question ... depicting road closure dates, escort issues, elections etc, which

14

The five-step analysis was apparently undertaken pursuant to a website on the subject

of unjust enrichment. See http://en.wikipedia.org/wiki/Unjust_enrichment.

30

when viewed in conjunction with the dates these trucks were deployed explain a

portion of the additional days." 11-2 BCA ii 34,788 at 171,225, finding 33.

112. PWC also forwarded separately other supporting documents including

(1) Delivery Notes which indicate "when the truck has entered the camp, when it has

been downloaded, and when it leaves, along with any comments or notes made,"

(2) MicroTransport Reports which provide trip length data and Transport Officer

comments along the journey, (3) Convoy Reports which report on cargo departure

time, destination, and (4) Squad Leader Reports which provide information from

"eyes-on personnel." These documents occupy the bulk of the ten-volume Rule 4 file.

11-2 BCA ii 34,788 at 171,225, finding 34.

113. PWC's REA said there were "many reasons" why its trucks failed to

return from Iraq "within the stipulated times as stated in the contract" including these

six bullet point reasons listed on page 3 of the REA:

• Lack of convoy escorts

• Road closures

• Lack of storage

• Vehicles being used for missions by the Military

• Vehicles being used by other contractors

• PWC assets being utilized for recovery or other delivery

m1ss10ns.

11-2 BCA ii 34,788 at 171,225, finding 35.

114. CO Ford denied PWC's claim by decision dated 9 April 2007 for the

following reasons:

Bilateral Modification P00027, effective September 16,

2004, established a maximum number of days applicable

for Iraq transport fees. It states "The maximum number of

allowable trip days is 29. The Government will not pay

transportation fees beyond this established maximum."

The 29 day cap on the truck transport fee was established

in reference to the Transportation Officers (TO) program

objectives and responsibilities, awareness of the detention

situation in Iraq, and the 14 day average truck transport

31

time. PWC was aware of this at the time it executed

P00027 and agreed to the 29 day cap. Furthermore, while

the subject claim acknowledges that distribution fees were

already paid for each of the stated deliveries, it offers no

evidence to substantiate that the amount paid was unfair,

unreasonable, or inequitable. The distribution fees paid for

each of the deliveries stated in the claim were fair,

reasonable, equitable, and in line with the intent of

P00027. As such, PWC is not entitled to an equitable

adjustment.

11-2 BCA if 34,788 at 171,226, finding 37.

115. PWC through its vice president and general counsel, appealed the CO

decision by notice dated 29 May 2007. The Board docketed the appeal on 1 June

2007. 11-2 BCA if 34, 788 at 171,226, finding 3 8.

116. The total number of trucks, truck days, and the amounts PWC claimed for

each of the four periods are summarized in the table below:

Time Period No. of Trucks Truck Days Claimed Amount

Submission I (Oct - Dec 2004) 426 4,412 $ 2,798,650.00

Submission II (Jan - Feb 2005) 367 4,801 $ 3,085,425.00

Submission III (Mar - Sept 2005) 859 9,461 $ 6,084,155.00

Submission IV (Oct 2005 - Feb 2006) 129 818 $ 521,830.00

TOTAL 1,781 19,492 $12,490,060.00

(R4, tab 14, attach. E) PWC derived the amount claimed for each period by

multiplying the total number of truck days over the 29-day cap by the appropriate

$645.00 or $475.00 per truck per day rates beyond the established minimum rates set

out in if 2.d. of Mod. 27. In doing so, it disregarded the 29-day cap established in

paragraph 2.e. of Mod. 27.

Prior Litigation

117. On 8 October 2010, the government moved to dismiss PWC's appeal, and in

the alternative, for summary judgment. The government contended that an unjust

enrichment claim required the absence of a valid contract, and since there was an express

contract - Contract 3061 and Contract 3119 (Mod. 27) - addressing directly transport

fees up to and exceeding 29 days, there could not be a separate "implied-in-law" contract

covering the same subject. The government contended that "[t]he only legal basis

presented by PWC for its claim and appeal is unjust enrichment," and since unjust

enrichment is "premised on the existence of a contract implied by law," and since the

32

Board had no jurisdiction over implied-in-law contracts, the Board "lacks jurisdiction

over PWC's appeal." 11-2 BCA ~ 34,788 at 171,226, finding 41. In moving for

summary judgment, the government contended that the appeal turned on the

interpretation of Mod. 27 which "clearly addressed the Government's liability for

transportation fees in Iraq," and which "clearly established a maximum liability for each

trip." 11-2 BCA ~ 34,788 at 171,226, finding 42.

118. In response, PWC moved to amend its complaint. Its motion was

accompanied by its first amended complaint. PWC urged the Board to grant its

motion because amending its complaint "does not change the essential nature or

operative facts of the Claim," "would further frame and join the issues," and "would

be fair to both parties." In moving to amend its complaint, PWC did not challenge the

government's position on unjust enrichment. Nor did it address the government's

motion for summary judgment. The introductory paragraph of its first amended

complaint said: "Amending the Complaint will also moot portions of the

Government's Motion to Dismiss and in the Alternative for Summary Judgment."

11-2 BCA ~ 34,788 at 171,226, finding 43.

119. The government's 7 December 2010 response opposed PWC's motion to

amend. The government asserted that PWC sought to amend its complaint by adding

"new legal theories based on new factual allegations," and that PWC's "new

counts ... exceed the scope of the claim submitted to the contracting officer." 11-2

BCA ~ 34,788 at 171,227, finding 45.

120. The government's motion for summary judgment was based on contract

interpretation. Pointing exclusively to Mod. 27 and its language, the government

maintained that "Bilateral Modification P00027 could not state more clearly that PWC

is entitled to a maximum of 29 days of fees for trips into Iraq." In moving to amend its

complaint, PWC stated if we were to grant its motion to amend to change its legal

theory of recovery, the government's summary judgment motion could be rendered

moot. PWC said that government counsel agreed that PWC's response to the

summary judgment motion should be deferred pending resolution of the government's

motion to dismiss. With the parties' agreement, we decided that the government's

motion for summary judgment was not ready for decision at that point. 11-2 BCA

~ 34,788 at 171,230.

121. In a decision issued on 22 June 2011, we agreed with the government that

our jurisdiction does not extend to contracts implied-in-law or unjust enrichment. We

denied the government's motion to dismiss for lack of jurisdiction and granted PWC's

motion to amend its complaint on the basis that we have jurisdiction to resolve

contract disputes:

33

Because the operative facts underlying the legal

theories PWC presented in its first amended complaint are

derived from common or related operative facts which

were the subject of numerous e-mails between PWC and

the CO and because these same operative facts were

presented to the CO as bullet points in its REA attached to

and made a part of the certified claim, we conclude that the

first amended complaint did not advance new claims not

previously presented to the CO.

11-2 BCA ~ 34,788 at 171,230. The government filed its amended answer to PWC's

first amended complaint on 6 September 2011. It did not renew it motion for summary

judgment.

Representative Truck Trips Presented at the Hearing

122. By letter dated 26 January 2012, PWC counsel sent DSCP counsel a

53-page revised spreadsheet of over 29-day truck trips subject to the Mod. 27 appeal.

The letter said the spreadsheet provided previously missing information, corrected

incorrect information, removed truck trips no longer being pursued, and added truck

trips for which supporting documentation had now been found. The revised

spreadsheet included 1,750 truck trips totaling $13,367,540 in claims. (Gov't supp.

R4, tab 165 at 55) For purposes of the hearing, the parties agreed on 50 truck trips as

representative of the 1, 750 over 29-day truck trips claimed. 15 Summarizing its

trip-by-trip presentation at the hearing, PWC's post-hearing brief contends that, of the

50 samples, it is entitled to 641 of the 645, or over 99.38%, of the over 29-day truck

days claimed (app. br., ex. A).

DECISION

Relying upon the language in paragraph 4 of Mod. 1 - "Trucks will return to

PWC upon completion of unloading, and trucks will not be used at the sites for storage

purposes" - PWC contends this "dual obligation" was not "eliminated or modified by

any subsequent contract modifications" (app. br. at 31-32). PWC contends that "[t]he

Government breached the express terms of the Contract by failing to 'return [trucks] to

PWC upon completion of unloading' and by using the trucks 'at the sites for storage

purposes"' (id. at 30).

15

Pursuant to the Board's 14 January 2014 letter, PWC's letter of 18 February 2014

advised the parties had stipulated that "the 50 truck trips in the sample set to be

litigated are representative of the 1, 750 truck trips in the Claim giving rise to

this Appeal."

34

PWC contends next that "[t]he Government's use of PW C's trucks as storage

and instructions to re-direct deliveries to alternate locations caused PWC's trucks to be

delayed in returning to its facility in Kuwait, sometimes over 29 days." It contends

these actions were constructive changes to the contract for which it is entitled to

compensation. (App. br. at 40)

PWC also contends that the government breached its implied duty to cooperate

in failing to "address its severe lack of refrigerated storage capacity in Iraq." PWC

said that before agreeing to the 29-day limitation, it expressed "real reservations about

the cap being unqualified," and it "reasonably expected that, in agreeing to Mod. 27, it

did not assume the risk that it would be required to provide temporary storage units -

its trucks - to the Government without compensation," when CO Ford agreed to

consider "exceptions to the 29 day rule." (App. br. at 41-42)

We need not decide whether the government constructively changed contract

performance or whether it breached its implied duty of cooperation. At its core,

whether the government breached the contract comes down to contract interpretation.

Paragraph 4 o(Mod. 1 was Modified by Paragraphs 2 and 3 o(Mod. 27

PWC contends that the government's "absolute maximum" interpretation of

Mod. 27's 29-day cap with no exceptions would "render inoperative and meaningless

Mod 1's express prohibition on the Government's use of PWC's trucks for storage,"

and would similarly "render meaningless the requirement in Mod 1 that the

Government shall 'return [PWC's trucks] to PWC upon completion of unloading"'

(app. br. at 46-47). PWC asks us to reject the government's post-dispute contention

that the parties understood Mod. 1 "deleted" or "voided" the storage prohibition of

Mod. 27 (app. br. at 53). PWC contends that, "[b]y its terms, Mod 27 did not revoke

any of the terms in Mod 1" but states instead that "[a]ll terms and conditions of the

documents referenced in [the Contract] as heretofore changed remain unchanged in

full force and effect" (app. br. at 53-54).

DSCP counters that Mod. 1, ~ 4, "did not create a contractual obligation that the

government would not use trucks for storage." It argues that "[t]o the extent Mod 1

did contain such a requirement, it was constructively changed prior to the signing of

bilateral Mod 27, and hence has no applicability to truck trips under ... Mod 27 or this

appeal because it no longer existed when Mod 27 was signed." (Gov't br. at 122)

DSCP's constructive change argument is said to be based upon CO Ford's knowledge,

approval, and ratification that "PWC's trucks were routinely used for storage" as soon

as PWC began delivering food into Iraq in early 2004 and well before Mod. 27 was

issued. According to DSCP, ~ 4 of Mod. 1 "was a nullity long before Mod 27 was

issued," because it was constructively changed "during the performance of Mod 2" (id.

at 121).

35

It is undisputed that~ 4 of Mod. 1 states that "[t]rucks will return to PWC upon

completion of unloading, and trucks will not be used at the sites for storage purposes"

(finding 8). These commitments, however, were modified by Mod. 27 which

GM Switzer signed. Paragraph 3 in conjunction with ~ 2 of Mod. 27 specifically

allowed the use of PWC trucks for storage: Paragraph 2.e. of Mod. 27 allowed the

payment of transportation fees beyond the minimums established in~ 2.a. (to Iraq

"South"),~ 2.b. (to Iraq "Central") and~ 2.c. (to Iraq "North") up to a maximum of

29 days. Paragraph 3 of Mod. 27 provides that "[t]he 'additional days beyond the

established minimum' fees are only applicable if the delay is customer caused."

"Customer caused" delay is defined as "Hub, DF AC or MKT not having the capability

to off load and return the truck." (Finding 58) As the facts of this case made clear, the

lack of capacity to off load and return trucks were quintessentially storage-related

issues, we conclude that~ 2 and~ 3 of Mod. 27, when read together, modified~ 4 of

Mod. l's requirements to return trucks upon completing of unloading and not to use

them at the sites for storage.

Additionally, PWC's interpretation would ignore the provision in Mod. 27

which states "Except as provided herein, all terms and conditions of the document

referenced in [the Contract] as heretofore changed, remains unchanged and in full

force and effect" (finding 57) (emphasis added). Paragraphs 2 and 3 of Mod. 27 are

the exceptions "provided herein." Paragraph 3 allows the payment of transportation

fees beyond the established minimums up to 29 days; it allows such payment only if

the delays are customer caused. "Customer caused" delay is defined as "Hub, DFAC

or MKT not having the capability to off load and return the truck." Inability to off

load and to return trucks were storage-related issues. (Finding 58)

When interpreting a contract, the contract must be considered as a whole and

interpreted so as to harmonize and give reasonable meaning to all of its parts. NVT

Technologies, Inc. v. United States, 370 F.3d 1153, 1159 (Fed. Cir. 2004). Moreover,

an interpretation that gives meaning to all parts of the contract is to be preferred over

one that leaves a portion of the contract useless, inexplicable, void, or superfluous.

Gould, Inc. v. United States, 935 F.2d 1271, 1274 (Fed. Cir. 1991). We cannot

harmonize~ 4 of Mod. 1 with~~ 2 and 3 of Mod. 27, if, as PWC contends,~ 4 of

Mod. 1 remained unmodified requiring all trucks, without exception, to be returned

upon unloading and not used for storage. That would leave~~ 2 and 3 of Mod. 27 in

the same contract useless and inexplicable. On the other hand,~ 4 of Mod. 1 can be

harmonized with~~ 2 and 3 of Mod. 27 allowing trucks to be kept and used for storage

with payment of $645.00 (per reefer) and $475 (per dry truck) per day for "[a]dditional

days beyond the established minimum fees" specified in~~ 2.a., 2.b., and 2.c. up to a

maximum of29 days as prescribed in~ 2.e., if~ 4 of Mod 1 is interpreted to have been

modified by~~ 2 and 3 of Mod 27. (Finding 58)

36

GM Switzer Agreed to the 29-Dav Cap As an Absolute Maximum Allowable

for Transportation Fees When He Signed Mod. 27

Learning from the open-ended payment structure under Mod. 2, CO Ford

proposed "a cap on the number of allowable [days for] fees" when she renegotiated the

transport fee structure with GM Switzer in September 2004 (finding 49). GM Switzer

initially did not have a problem with the concept of a cap and was ready to sign a new

modification (findings 50, 53). In his 14 September 2004 email to CO Ford, however,

GM Switzer expressed "real reservations about the maximum cap being unqualified"

and indicated that PWC would "prefer to have the ability to submit exceptions to the

29 day rule if the situation is unavoidable despite our best efforts to prevent it"

(finding 54).

CO Ford and GM Switzer had a discussion the following day, 15 September

2004. As a result of that discussion, CO Ford forwarded a "revised mod" that·

established 16 September 2004 as the start date for the new transportation fees. The

revised mod did not remove the 29-day cap. CO Ford's email transmitting the revised

mod said "exceptions to the 29 day rule will only be considered in the form of a

claim." The email told GM Switzer to "Please sign and return the attached mod or

advise if additional changes are required." (Finding 56) (Emphasis added)

Given the opportunity to make additional changes, GM Switzer did not take

that opportunity. Instead, the Mod. 27 that he signed on 19 September 2004, four days

later, included the provision at ii 2.e. that stated "The maximum number of allowable

trip days is 29. The Government will not pay transportation fees beyond this

established maximum." (Findings 57, 58) (Emphasis added) We found that

GM Switzer understood before he signed Mod. 27 that the 29-day cap CO Ford

proposed was, in his word, "unqualified" (findings 54, 55). Because GM Switzer

understood the 29-day limitation was "unqualified," he necessarily understood that all

risks associated with delays caused by lack of adequate storage and redirection,

convoy and escort, weather and road closures, incurred by PWC beyond 29 days were

its risks and would not be compensated by the government. Moreover, if GM Switzer

was under the impression that by agreeing to consider exceptions to the 29-day cap,

CO Ford had abandoned her idea of establishing a cap altogether - the position that his

company, PWC, is now taking in advancing its claim - that impression simply did not

square with the prohibition plainly stated in ii 2.e. of Mod. 27. That GM Switzer did

not believe CO Ford would abandon the 29-day cap and chose to go along with the

29-day cap was, to us, the more likely scenario. By not insisting that any exceptions

he envisioned to be included as a part of Mod. 27, we conclude that GM Switzer

agreed to the terms of Mod. 27 as written when he signed it.

It is well settled that a person's signature on a written instrument signifies

assent to the terms of that document. Alaska American Lumber Co. v. United States,

37

25 Cl. Ct. 518, 529 (1992). Long ago, the Supreme Court stated: "[i]t will not do for a

man to enter into a contract, and, when called upon to respond to its obligations, to say

that he did not read it when he signed it, or did not know what it contained." Upton v.

Tribilcock, 91 U.S. 45, 50 (1885).

GM Switzer Knew and There(ore PWC is Bound bv CO Ford's Interpretation

of the 29-Dav Rule

It is also a rule of contract interpretation that "[i]f one party to a contract knows

the meaning that the other intended to convey by his words, then he is bound by that

meaning." Cresswell v. United States, 146 Ct. Cl. 119, 127 (1959); Perry and Wallis,

Inc. v. United States, 427 F.2d 722, 725 (Ct. Cl. 1970); United Technologies Corp.,

Pratt & Whitney Group, Government Engines and Space Propulsion, ASBCA

Nos. 46880, 46881, 97-1BCA,-\28,818 at 143,800 (Navy personnel assured contractor

that use of the word "intends" was purely for the purpose of overcoming an internal

legal objection and was not meant to diminish the Navy's guarantee that contractor

would be awarded 30% of the engine procurement over five years.).

In this case, even though CO Ford said in her 15 September 2004 email that

"exceptions to the 29 day rule will only be considered in the form of a claim"

(finding 56), GM Switzer knew that did not mean that the government would pay for

all over 29-day truck delays as PWC is now contending. We know this because after

reviewing PWC's weekly over-10 day report, GM Switzer emailed CO Ford on

24 October 2004, a month after Mod. 27 was signed, and commented "we do have the

makings of a problem with the new Transport Mod that limits our billing for only

29 days." He asked "What are we suppose to do with the 105 vehicles now over

29 days?" (Finding 73)

We found GM Switzer's acknowledgment that Mod. 27 limited PWC's billing

"for only 29 days," and that Mod. 27 "[had] the makings of a problem" reflected his

understanding at the time that Mod. 27 provided no relief for trucks that did not return

in 29 days. If GM Switzer had understood that CO Ford had agreed to provide relief

for any customer-caused delays beyond 29 days, he would not have asked "What are

we suppose to do with the 105 vehicles now over 29 days?" (Finding 74)

In December 2004, DSCP approached GM Switzer about extending

Contract 3061 (finding 79). Based on GM Switzer's 8 December 2004 response that

"this is no guarantee of being paid" under the 29-day rule, we found that he understood

CO Ford's willingness to consider granting a claim was a matter of discretion given

the right circumstances and not a matter of contract right (finding 80).

In response to CO Ford's 13 January 2005 email, GM Switzer's reply of the

same day said he had "no problem with extending the contract at the same terms" but

38

asked that "the 29 day transport limitation rule for Iraq be rescinded" (finding 82).

Despite CO Ford's refusal to rescind the 29-day rule, PWC agreed to extend Contract

3061from16 February through 15 December 2005 by way of a bridge contract

(Contract 3119 or PV Bridge contract) on the same contract terms. Thus, knowing

CO Ford's interpretation of Mod. 27 - that PWC assumed all risks of delay over

29 days - PWC nonetheless agreed to extend Contract 3061 for 10 more months.

(Finding 86) In terms of PWC's certified claim, the PV Bridge contract covered the

last two weeks of Submission II (Jan - Feb 2005), all of Submission III (Mar - Sept

2005) and all of Submission IV (Oct 2005 - Feb 2006) (finding 117).

Because GM Switzer knew how CO Ford was applying the 29-day rule before

he signed Mod. 27 and before he agreed to extend Contract 3061, we hold that PWC,

is bound by CO Ford's interpretation.

CO Ford's Pre-Dispute Interpretations were Consistent that PWC's Claims

did not Qualify as Exceptions to the 29-Day Rule

PWC argues that we "should give the parties' pre-dispute interpretation of the

Contract great weight" (app. br. at 47). PWC asks us not to "ignore the overwhelming

course-of-performance evidence, and accept the CO's uncorroborated, self-serving

testimony that the 29-day cap was an 'absolute maximum' with no exceptions" (app.

br. at 53).

In support, PWC said that COR Burkett testified that during performance of

Mod. 27 "he understood that DSCP interpreted the 29-day cap to permit exceptions."

His understanding was said to have been derived from conversations with CO Ford.

(App. br. at 49)

According to PWC, when it submitted its first claim based on exceptions to the

29-day rule, on 24 February 2005, neither CO Ford nor anyone at DSCP reacted with

surprise or took the "hard-line stance" that Mod. 27 "imposed an 'absolute cap"' (app.

br. at 50); instead, CO Ford asked DSCP contract specialist to review and analyze

whether storage caused the excess trip days (app. br. at 51). PWC says when it

submitted its second claim based on exceptions to the 29-day rule, on 25 May 2005,

CO Ford did not flatly reject the claim but agreed to continue discussion (app. br.

at 51 ). PWC tells us that, in September 2005, over a year after Mod. 27 was executed,

CO Ford in an internal email stated "[m]y intent was to deny both claims based on lack

of supporting cost data." PWC contends that CO Ford did not base her intent to deny

PWC's claims "on the 29-day cap." (App. br. at 51) PWC tells us when it filed its

third claim based on exception to the 29-day rule on 26 October 2005, CO Ford

advised "it is [DSCP's] intent to deny the 'over 29-day' claim for inadequate support

documentation" and "did not rely on any 'absolute maximum'" (app. br. at 52).

39

It has long been recognized that in contract interpretation disputes, "the greatest

help comes, not from the bare text of the original contract, but from external

indications of the parties' joint understanding, contemporaneously and later, of what

the contract imported." Another way of putting this legal concept is "how the parties

act under the arrangement, before the advent of controversy, is often more revealing

than the dry language of the written agreement by itself." Macke Company v. United

States, 467 F.2d 1323, 1325 (Ct. Cl. 1972); Alvin, Ltd. v. United States Postal Service,

816 F.2d 1562, 1566 (Fed. Cir. 1987) ("One may not ignore the interpretation and

performance of a contract, whether termed 'mistake' or not, before a dispute arises.");

WDC West Carthage Associates v. United States, 324 F.3d 1359, 1363 (Fed. Cir.

2003); Chase & Rice, Inc. v. United States, 354 F.2d 318, 321 (Ct. Cl. 1965) (stating

that interpretation of contract by the parties before contract becomes the subject of

controversy is deemed to be of great, if not controlling weight).

Like many who were not directly involved with the negotiations of Mod. 27,

COR Burkett was initially confused about the submission of PWC's 24 February 2005

(first) over 29-day claim (finding 89). It did not take long for CO Ford to explain to

COR Burkett that PWC had "no written contractual right to payment" and PWC's

claim was "different from invoices" it submitted for truck trips within the 29-day cap

(findings 90, 92). The fact that CO Ford told COR Burkett that she "will be requesting

more cost verification data" on PWC's 24 February 2005 claim (finding 90) indicates

that she did not agree to allow payment of over 29-day truck trips simply because they

were beyond PWC's control. There is no evidence that CO Burkett approved any

over-29 day truck trips (finding 92).

When GM Switzer asked CO Ford in January 2005 to rescind the 29-day rule in

connection with extending Contract 3061 (finding 82), CO Ford replied she could not

"simply rescind mod 27 without doing some additional analysis" because the average

turnaround time considered in imposing the 29-day cap had "not significantly

changed." She urged GM Switzer to submit an alternate proposal "based on actual

cost and historical truck tum around time frames." (Finding 83) CO Ford's refusal to

rescind the 29-day rule without additional analysis and her request for an alternate

proposal "based on actual cost" do not support a conclusion that she agreed with

PWC's interpretation that all over 29-day truck trips qualified as "exceptions" to the

29-day rule.

The evidence shows when GM Switzer submitted PWC's alternate proposal on

14 March 2005 (finding 95), CO Ford rejected the proposal because her data showed

"the average trip times were going down" (finding 96). Average truck trip data would

have been irrelevant to CO Ford if she had interpreted her agreement with GM Switzer

to allow payment of over 29-day truck trips as exceptions to the 29-day rule.

40

When Paice took over responsibility for PWC's over 29-day claims, he emailed

CO Ford on 7 August 2005 and asked what he needed to submit for over 29-day

claims that differed from normal billing (finding 98). CO Ford's 16 August 2005

email asked Paice to send "mountains of paperwork" to show that the delays claimed

were "in fact customer caused." More importantly, CO Ford asked for "actual

demurrage cost data," and "actual cost data" in support of the $2.9 million claimed in

addition to the $8.7 million paid. (Finding 99)

Had CO Ford agreed to pay $645.00 per reefer and $475.00 per dry truck as

exceptions to the 29-day cap for each day these trucks were out over 29 days beyond

PWC's control, she would not have asked PWC for "actual demurrage cost data,"

"actual cost data" and whether PWC's "cost actually exceeded" the $8.7 million paid.

We found the fact that CO Ford repeatedly asked for cost data reflected her

understanding or interpretation that to qualify as exceptions to the 29-day rule, PWC

must demonstrate by cost data that ( 1) the generous 29-day cap for all trucks was

unfair, unreasonable, or inequitable and (2) it had reached a point where its ability to

continue performance under Contract 3061 was threatened. We found CO Ford was

consistent in her position on the circumstances under which exceptions to the 29-day

rule would be considered. (Finding 100)

Contrary to PWC's contentions, we conclude CO Ford consistently took the

position during the course of performance that PWC's over 29-day claims did not

qualify as "exceptions" to the 29-day rule.

CONCLUSION

Because PWC agreed to the terms of Mod. 27 providing that the government

would not pay transportation fees beyond 29 trip days, because PWC has failed to

prove that the government interpreted Mod. 27 inconsistently, and because PWC failed

to prove that its claims qualified as exceptions to the 29-day cap, we deny the appeal.

Dated: 5 August 2015

'

PETER D. TING

Administrative Judge

Armed Services Board

of Contract Appeals

(Signatures continued)

41

I concur I concur

~~-wf;f---

MARKN.~ER J <'if ,~

AK--

RICHARD SHACKLEFORD

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 No. 56022, Appeal of The

Public Warehousing Company, rendered in conformance with the Board's Charter.

Dated:

JEFFREY D. GARDIN

Recorder, Armed Services

Board of Contract Appeals

42