Opinion

Oasis International Waters, Inc. v. United States

Court: United States Court of Federal Claims
Filed: Dec 1, 2017
Status: Published
On the bench: Marian Blank Horn
Cited by: 0 cases
Authority: More cited than 4.1%

“The amended provision, 31 U.S.C. § 3729(a)(1)(B), took effect as if enacted on June 7, 2008 and applies to all claims under the False Claims Act that were pending on or after that date.”

How later courts described this case

“The amended provision, 31 U.S.C. § 3729(a)(1)(B), took effect as if enacted on June 7, 2008 and applies to all claims under the False Claims Act that were pending on or after that date.”
“We begin with the plain language when interpreting a contract . . . . The contract must be considered as a whole and interpreted to effectuate its spirit and purpose, giving reasonable meaning to all parts.” (citations omitted)
indicating that a preferable interpretation of a contract is one that gives meaning to all parts of the contract rather than one that leaves a portion of the contract “useless, inexplicable, void, or superfluous”
plaintiff held not to have resigned his position under duress where threatened with an investigation he could have contested

Written by the judges who cited it.

The opinion

In the United States Court of Federal Claims

No. 10-707C

Filed: April 7, 2017

Reissued: December 1, 20171

* * * * * * * * * * * * * * * *

OASIS INTERNATIONAL WATERS, *

INC., *

Plaintiff, * Trial; Contract Interpretation;

v. * Duress; Fraud; Special Plea in

* Fraud; False Claims Act; Anti-

UNITED STATES, * Fraud Provision of the

* Contract Disputes Act.

Defendant. *

* * * * * * * * * * * * * * *

OPINION

Laurence Schor, Asmar, Schor & McKenna, PLLC, Washington, D.C., for plaintiff.

With him were Susan L. Schor, Dennis C. Ehlers, David A. Edelstein, Robert D. Pratt,

and Allison G. Geewax, Asmar, Schor & McKenna, PLLC, Washington, D.C.

James P. Connor, Senior Trial Counsel, Commercial Litigation Branch, Civil

Division, United States Department of Justice, Washington, D.C., for defendant. With him

were Tanya B. Koenig, Trial Attorney, Commercial Litigation Branch, Stephen C. Tosini,

Senior Trial Counsel, Douglas K. Mickle, Assistant Director, Commercial Litigation

Branch, Robert E. Kirschman, Jr., Director, Commercial Litigation Branch, and Chad A.

Readler, Acting Assistant Attorney General, Civil Division, Department of Justice.

HORN, J.

Plaintiff, Oasis International Waters, Inc. (Oasis), is a contractor that performed a

bottled water contract with the United States military in Iraq during the Iraq War. Oasis is

a Nevada corporation for which the principal place of business is in Utah. After the end of

contract performance, plaintiff filed a certified claim with the contracting officer, which was

denied in its entirety. Plaintiff thereafter filed a complaint in the United States Court of

Federal Claims, and, subsequently, defendant filed fraud counterclaims against plaintiff.

1 The court issued a series of opinions in the above captioned case on August 31, 2016,

April 7, 2017, and November 21, 2017. In response to the court’s November 21, 2017

Order, the parties agreed that all three opinions could be issued without redactions. After

reviewing the opinions, the court agrees with the parties and the original opinions are

hereby unsealed and reissued without redaction.

A trial was held regarding plaintiff’s breach of contract claims, as well as defendant’s fraud

counterclaims. As indicated below, in an earlier opinion in the case, the court, with the

exception of one claim which the court deferred, and which is addressed below, denied

defendant’s counterclaims for the Special Plea in Fraud, False Claims Act, and the anti-

fraud provision of the Contract Disputes Act.

FINDINGS OF FACT

As stipulated by the parties, “[a]fter the start of the Iraq War but prior to the award

of the contract at issue in this case, the Army procured all of its Iraq bottled water

requirements from Turkey, Kuwait, and Jordan and shipped it by truck into Iraq and to the

various U.S. military bases in Iraq.” United States Air Force Colonel Renee M.

Richardson, who served as one of the contracting officers on the contract at issue in this

case from May 2006 until October 2006,2 explained at trial that “[t]he previous approach

was bringing bottled water in from Turkey, Jordan, and Kuwait, of course, which put

soldiers on the road for the transportation.” As noted in the Statement of Work for the

solicitation at issue in this case, Solicitation No. W27P4A-05-R-0002 (the solicitation):

Up to the present time bottled water has been purchased from sources

outside of Iraq. This practice necessitates large numbers of convoys and

escorts to transport the bottled water from Kuwait, Jordan, and Turkey.

Producing bottled water locally would significantly reduce the number of

convoys required to transport water as well as reduce the likelihood of battle

related injuries.

The parties also stipulated that:

On or about March 2, 2005, Maj. Vazquez, a contracting officer with Joint

Contracting Command-Iraq (JCC-I, later Joint Contracting Command-Iraq

Afghanistan – JCC-I/A), serving at Camp Victory, issued a Request for

Information (RFI) “to get information on contractors capable of providing the

following capabilities for construction of re-locatable water purifying and

bottling facilities for distribution at several locations in Iraq. Locations will be

identified at a later date and time. These facilities are to produce clean

drinkable bottled water per all USDA and FDA standards and requirements.”

The RFI generated interest from 71 vendors, and, on April 3, 2005, the government

posted Solicitation No. W27P4A-05-R-0002.3 Proposals were due by May 3, 2005, and

the government received 22 bids in response to the solicitation, and answered 145

questions. A sample of the questions and answers reveals that the bidders had questions

about the pricing, capabilities, the land to be provided in Iraq and the obligations of the

government. For example, one part of question 33 stated: “Is our offer to give the cost per

2In 2006, Colonel Richardson was a Lieutenant Colonel. When she testified at trial, she

was a full Colonel. The court refers to her as Colonel Richardson in this opinion.

3 The government issued 11 amendments to the solicitation.

liter with the personnel built in, seperate [sic] to the cost of the plant and equipment?” The

government replied: “All Costs per liter are to be included.” Likewise, question 40 asked:

“Start up Cost: Since the bid is predicated upon the deliverables per litre bottle of water,

can we assume that all costs(inc personnel and equipment deployment to site) incurred

between contract award and water production will fall upon the successful bidder?” The

government replied: “Yes. It is up to you how you determine the cost per litre taking into

account all costs associated with this endeavor.”

There were a number of questions regarding the obligations of the government.

Question 2 asked, “[i]f projected demand falls short, what are the minimum volume

requirements? Is there a required minimum quantity the Government will procure?” The

government responded: “There are no minimums. The minimum is zero.” Additionally,

question 35, referring to question and answer 2, asked:

The answer to Question #2 states that there are no minimum purchase

quantities. This decision places an unreasonable amount of financial risk on

the contractor, and will likely severely limit the competition for this RFP

[Request for Proposals]. Request that the Government guarantee minimum

purchase quantities base [sic] on the estimated quantities that appear in the

RFP.

The government responded:

The levels of liters required are in the range. This is roughly the production

per day. You might have a day where your levels are lower, however, the

Government contract is a Firm Fixed Price not Indefinite Delivery / Indefinite

Quantity. The Government is entering into a one year contract with three

option years. The only thing that could prevent the basic year from occurring

is a Government decision to Terminate for Convenience or default of the

contractor to perform to the requirements and the Government would then

Terminate for Default.

One bidder questioned the potential for installment payments, asking: “Would the

Government authorize progress or installment payments recognizing 1) the significant

capital investment with establishing new capability and, 2) the ability to credit progress

payments with actual deliveries?” to which the government responded that: “The first

payment will be made once the contractor has the first plant operational and has had an

approved first article test accepted without conditions.”

In response to question 44, the government indicated “[t]he Government will

provide as flat land as possible,” and regarding site conditions, the government indicated

in the answer to question 89, the government stated that “[s]ite prep should be minimal.

The water source has been identified and deemed to have sufficient amounts by the

government to support the operation.” The government also noted in answer to question

89, however, “[i]t is up to you what you do in order to meet the Government’s requirements

and timeframe for delivery.”

One of the 22 bids was submitted by American AquaSource, Inc. (American

AquaSource), and signed by Max Wyeth, President of American AquaSource. Attached

to the American AquaSource proposal was a spreadsheet showing the volumes of

production and an estimate for when each site would begin water production. American

AquaSource’s bid assumed a price of $3.50 per case of water, or a total of

$50,225,000.00, based on the production of 14,350,000 cases.4 At trial, Max Wyeth

explained that he calculated the $50.225 million figure “using our average forecast of

demand, we came up with a case number that would be produced per year, and multiplied

that by the case cost.”5

Major Mauricio Vazquez, who issued the RFI and answered the questions posed

by the potential offerors, contacted Max Wyeth to clarify the proposal and to submit a

“total cost per year for all four years and the Grand total.” Max Wyeth provided Major

Vazquez with a base year price of $50,225,000.00 and three option year prices of

$186,000,000.00, totaling $608,225,000.00. Max Wyeth confirmed in his correspondence

“that the 3.50 price is the only price, regardless of the winter/summer/surge period, for all

years within the contract.” After negotiations between Max Wyeth and Major Vazquez, in

which Major Vazquez asked Max Wyeth to reconsider the option year prices, on May 11,

2005, Max Wyeth submitted an amendment to the American AquaSource proposal, which

included a revised “Summary of Pricing Schedule” with a proposed base year price of

$50,225,000.00 and three option year prices of $112,000,000.00, for a total contract price

of $386,225,000.00. The parties have stipulated that, “[o]ther than AquaSource’s

proposed price, all other offerors whose proposals were found technically acceptable

offered prices in excess of $1 Billion.”6 Major Vazquez awarded contract no. W27P4A-

4 The court notes, however, for the basis of the estimate in the American AquaSource

proposal, American AquaSource assumed annual production of 384 million bottles or 32

million cases of water.

5 Counsel for defendant confirmed during Max Wyeth’s testimony:

Q. So, just so the record is clear, the $50.225 [million] in your proposal is based

upon $3.50 per case?

A. Yes.

6 The government’s own Independent Government Cost Estimate, estimated a total base

year cost of $149,145,842.23, or almost three times American AquaSource’s proposal for

the base year, to construct and operate the eight water bottling facilities in Iraq. Morrell

International, Inc., a corporation, whose Chief Executive Officer was Phil Morrell, also

submitted a separate proposal which provided for a base year price of $899,725,000.00,

option year prices of $831,287,500.00 per year, for a contract total of $3,393,587,500.00.

Phil Morrell, who later became the president of Oasis, the successor contractor to

American AquaSource, testified at trial, however, that his bid was a “bad bid,” and that he

had intended to bid at $5.50 per case of bottled water. Phil Morrell indicated that the

05-C-0002 (the contract) to American AquaSource on May 25, 2005. The contract called

for base year price of $50,225,000.00 and three option year prices of $112,000,000.00

each, for a total contract price of $386,225,000.00.7 Major Vazquez signed the contract

on behalf of the government and Max Wyeth signed on behalf of American AquaSource.

After the contract was awarded to American AquaSource, Paul Morrell contacted

Max Wyeth, and subsequently, in June 2005, Max Wyeth exchanged several emails with

Phil Morrell and Dan Petsche, then the Vice President for Contracts and Compliance for

Al-Morrell Development discussing the bottled water project.8 Paul Morrell testified that

“[o]ur original intent with American AquaSource was to sell our assets to him, as it

appeared that he didn't have the resources and the funding to acquire our assets, much

less build the factories. It morphed or migrated into a partnership between Max and Phil

and myself.” Paul Morrell explained that, initially:

Al-Morrell Development was essentially the performance arm of the

operation. We built the facilities. We financed them. All the employees were

employed by Al-Morrell Development. It was basically the part of the

organizations that really did all the performance. . . . Max's responsibility

was to provide water bottling expertise, because Phil and I were -- had

never built a water bottling plant prior to this.

The original arrangement changed, because as Paul Morrell testified:

Initially, Mr. Wyeth told us that he had the financing lined up, and he just

needed time. He didn't have time, because the first facility had to be up --

we're talking July, and we had basically 90 days to get the first facility up.

So, we really didn't have time. . . . So, our understanding was he would

continue to try to bring his financing option to the table, get money in the

bank. In the meantime, Phil and I would self-fund this first plant so that we

could meet the contractual deadlines. Over the course of the fall, it became

clear that Mr. Wyeth's options were not going to come to fruition, and AMD

[Al-Morrell Development] -- initially it was a parallel track. We were trying to

obtain financing on behalf of AMD while we were waiting for his financing to

request “needed to be right around $5.50 per case,” for “somewhere around the 32 million

cases per year.”

7The cover page to the contract listed the estimated dollar amount as “$386,225,000.00.”

At trial, Major Vazquez testified that this amount was in error and that the amount should

have been $50,225,000.00. Subsequently, on July 15, 2005, United States Air Force

Major Marc A. Lopez, who served as the contracting officer on the contract from June

2005 until September 2005, executed modification P00002 on behalf of the government,

which changed the dollar amount from “$386,225,000.00” to “50,225,000 (NTE),”

because “[o]nly the base year award should have been documented in the contract.”

8Max Wyeth testified that at the time he signed this contract he had no relationship with

Al-Morrell Development, Paul Morrell, Phil Morrell, or Paul Jeffries.

come into place. Ultimately his financing failed, and the AMD financing did

come into place late in the year or early the next year.

Therefore, in July 2005, Phil Morrell, Al-Morrell Development, Max Wyeth, and American

AquaSource entered into a joint development and pre-incorporation agreement to form a

new corporation to fulfill the contract, with the agreement reflecting that the purpose of

American AquaSource’s contract was to “build up to six (6)[9] water bottling plants in the

country of Iraq.” Initially, the corporation was called Iraqua, Inc., but later changed its

name, on July 15, 2005, to Oasis.10 Subsequently, in the fall of 2005, Phil Morrell, Al-

Morrell Development, Max Wyeth, and American AquaSource signed an addendum to

the joint development and pre-incorporation agreement, assigning American

AquaSource’s contract to Oasis. The addendum required Max Wyeth, of American

AquaSource, to execute a novation agreement. The novation agreement was to be a

modification to the contract, and ultimately was modification P00005, discussed below.

On December 5, 2005,11 “American Aqua Source, Inc.,” “Oasis International Water, Inc.,”

and the “United States of America” “enter[ed] into this Novation Agreement. . . as of

August 1, 2005.” Max Wyeth, then-president of Oasis and American AquaSource, signed

the modification on behalf of Oasis on December 2, 2005 and Colonel Brandon Montler

signed for the military on December 5, 2005.12 The modification stated that the “purpose

of this modification” was to reflect the novation agreement transferring all rights and

responsibilities of the bottled water contract from American AquaSource to Oasis. The

modification also stated that, “[a]ll other terms and conditions of the contract remain

unchanged.”

Paul Morrell was the Chief Executive Officer of Al-Morrell Development from

August 15, 2005 through January 2006, and, thereafter, he served as President of Al-

Morrell Development. Paul Morrell also was the Chief Executive Officer of Oasis from

9 As explained below, although the contract, as executed, required eight water bottling

plants, the contract was modified by modification P00001 to require only six water bottling

plants.

10 Paul Morrell testified that “Oasis was originally called Iraqua. Everybody loved that

name except the bankers. The bankers wouldn't allow us [to] own a bank account with

that name Iraqua on it, literally, so we changed the name to Oasis.” Paul Morrell testified

that “Phil [Morrell] and Max [Wyeth] were owners in Oasis, and Phil and I were owners in

Al-Morrell Development, but we made a very -- Phil and I made a very practical decision

that if we were going to invest our funds into the business, that our company was going

to own the assets.”

11In 2005, Colonel Montler was a Major. When he testified at trial, he was a Colonel. The

court refers to him as Colonel Montler in this opinion.

12 At the time of the novation, Max Wyeth testified he was “out of the loop” and his interest

in Oasis was eventually bought out by the Phil Morrell and Paul Morrell. Max Wyeth also

was not involved in the completion of the bottled water plants. Oasis accepted Max

Wyeth’s resignation as president of Oasis on January 5, 2006.

August 15, 2005 through January 2006, and, thereafter, served as President of Oasis.

Phil Morrell was Chairman of Oasis from July 2005 through December 2012. Paul Jeffries

served as both the Chief Executive Officer and Chief Financial Officer of Al-Morrell

Development and Oasis. Paul Jeffries served as Chief Financial Officer of Al-Morrell

Development and Oasis from June 2005 through January 2006, and, subsequently,

served as Chief Executive Officer of Al-Morrell Development and Oasis from January

2006 through 2010. Paul Jeffries was replaced as Chief Financial Officer of Al-Morrell

Development and Oasis by Neil Vos, who served as Chief Financial Officer from February

16, 2006 until June 2011. As noted above, Dan Petsche was the Vice President for

Contracts and Compliance for Al-Morrell Development during initial discussions about the

contract with Max Wyeth, and he also was the Vice President for Contracts and

Compliance for Oasis from 2005 through October 31, 2011. At all times, Paul Morrell and

Phil Morrell13 had a controlling interest in Oasis, and after Max Wyeth was bought out and

resigned as president, Paul Morrell and Phil Morrell controlled 100% of Oasis.

The Contract

As noted above, Major Vazquez awarded contract no. W27P4A-05-C-0002 to

American AquaSource on May 25, 2005. Item no. 0001 of the contract was “NON-

PERSONAL SERVICS [sic]” (capitalization in original) and indicated:

The Contractor shall provide all labor, tools, supervision, personnel,

equipment, transportation, materials, facilities, and other essentials

necessary to perform and sustain 8 separate and independent purified

bottle water plants according to the 20 Mar 05 Statement of Objectives

(SOO). Period of Performance: 25 May 05 through 24 May 06.

The unit price was listed as “$3.50/case” for all amounts of water produced. Following the

item no. 0001 were three items for the three option years, item no. 1001, item no. 2001,

and item no. 3001, changing only the period of performance.14 After item nos. 0001, 1001,

2001, and 3001, there was a summary of the pricing schedule which stated:

SUMMARY OF PRICES FOR BASE YEAR AND THREE OPTION YEARS

TOTAL BASE YEAR $50,225,000.00

FIRST OPTION YEAR $112,000,000.00

SECOND OPTION YEAR $112,000,000.00

THIRD OPTION YEAR $112,000,000.00

13 Phil Morrell and Paul Morrell are brothers.

14 The similarity of the three options years after the base year is reflected in the

typographic error of “NON-PERSONAL SERVICS” in each of the three option years.

(capitalization in original).

GRAND TOTAL (Base Year and Three Option Years) $386,225,000.00

(capitalization and emphasis in original). The period of performance was listed in the

contract as:

BASIC PERIOD 25 May 2005 - 24 May 2006

OPTION PERIOD I 25 May 2006 - 24 May 2007

OPTION PERIOD II 25 May 2007 - 24 May 2008

OPTION PERIOD III 25 May 2008 - 24 May 2009

(capitalization in original). The statement of objectives for the “purified bottled water

services” contract explained:

The purpose of this contract is to provide re-locatable purified bottled water

capabilities at various locations throughout Iraq Area of Operations (AO).

Contractor shall produce the amounts of bottled water as outlined in Figure

1. Contractor shall ensure bottled water capability is able to relocate upon

notification by the Contracting Officer (CO) due to military operational

requirements. Bottled water capabilities shall be established in the order as

listed in Figure 1. Actual locations will be given to the contractor that wins

award. The contractor shall provide all the mechanical equipment required

to produce and prepare for shipment the required amounts of bottled water.

The first bottled water site shall be operational 120 days after the contract

is awarded. This includes military inspection and acceptance. After contract

award, additional bottled water sites shall be established within the

remainder of days from contract award. A full 365 days from contract award,

all sites will be fully operational.

Figure 1, referenced in the statement of objectives, identified the production requirements

at each of the bottled water facilities at different points in the year.

LOCATION TOTAL PRODUCTION REQUIREMENT/DAY in 1K

Liters (winter/summer/surge)

Location 1 75-100K liters / 101-150K liters / 151-200K liters

Location 2 65-100K liters / 101-135K liters / 136-170K liters

Location 3 35-55K liters / 56-75K liters / 76-100K liters

Location 4 60-110K liters / 111-160K liters / 161-210K liters

Location 5 60-110K liters / 111-160K liters / 161-210K liters

Location 6 200-300K liters / 301-400K liters / 401-450K liters

Location 7 80-120K liters / 121-160K liters / 161-200K liters

Location 8 75-110K liters / 111-150K liters / 151-190K liters

(capitalization in original). Figure 1 contemplated three different quantity production

requirements: winter, summer, and “surge.” Colonel Richardson testified, explaining the

different requirements, as follows:

[D]uring the winter, the weather was a lot more reasonable in Iraq; the highs

were around the eighties, nineties. In the summer, temperatures got up to

135 degrees, requiring soldiers to drink more just to stay cool and to stay

hydrated. During surge, what that's really talking to is battle operations. Our

soldiers wind up wearing 60, 70, 80 pounds' worth of gear and then going

out into . . . tanks, which causes them to sweat and causes them to need

more water.

The tasks section of the contract instructed, in part: “The contractor shall provide

re-locatable purified water bottling capability for producing and packaging required

amounts of one liter bottles of water per day as outlined in Figure 1,” “Contractor shall

provide, operate, maintain, and repair all the mechanical equipment required to

accomplish the Government's objectives,” “Contractor shall ensure bottled water meets

or exceeds all US Government quality standards,” and “Contractor shall operate the

purified bottled water capabilities with enough personnel to meet the Government's

requirements.” Regarding payment to the contractor, the invoicing section of the contract

stated:

Invoicing shall occur monthly. The contractor shall invoice to the Contracting

Officer Representative (COR), by the 5th of each month, for the total of all

liters in [sic] produced, per location, for the entire previous month. The

CORs will prepare the DD250s and will submit them with the contractor's

invoice to the Contracting Officer (CO), no later than the 10th of each month.

Bottled Water Facilities

Although the contract, as awarded, required eight bottled water facilities, on May

26, 2005, as noted above, the day after contract award, United States Air Force

Lieutenant Marion Knapp executed a no-cost modification P00001 on behalf of the

government reducing the required number of water bottling facilities from eight to six. The

six bottled water facilities were: LSA Anaconda (Anaconda), Camp Victory, Al Asad

Airbase, Qayyarrah West (Q-West), Speicher, and Camp Taqaddum (TQ). On May 25,

2005, Major Vazquez indicated in an email to Lieutenant Knapp and Captain Patrick

Sturgill, who served as a “liaison” between the contractor and the military, that land would

be provided to the contractor no later than 30 days after contract award, “to ensure no

delay is imposed by the Government to the Contractor.” Although the answer to question

number 44 regarding the solicitation indicated that “[s]ite prep should be minimal,”

defendant had to provide site preparation at every location except Al Asad.15

Anaconda, the first bottled water facility, was contractually required to be

operational by September 22, 2005. Major Lopez executed modification P00004 on

September 18, 2005, on behalf of the government, granting a 12-day extension of the

requirement for Anaconda’s certification until October 4, 2005. Although Anaconda began

producing water on October 10, 2005, Anaconda was not audited and certified operational

until December 14, 2005, after producing almost 2 million liters of water.

Camp Victory, the second bottled water facility, was initially required to be

operational by May 24, 2006. The military authorized land for Camp Victory on September

4, 2005. Camp Victory was certified operational on April 7, 2006, and began producing

bottled water on April 12, 2006. Al Asad, the third bottled water facility, was initially

required to be operational by May 24, 2006. The military authorized land for Al Asad on

August 22, 2005. The contractual deadline to complete Al Asad was extended to June

30, 2006, and Al Asad was certified operational on July 24, 2006.

Q-West, the fourth bottled water facility, was initially required to be operational by

May 24, 2006. The military authorized land for Q-West on September 11, 2005, but on

December 19, 2005, the military directed and authorized land at a different location for

the Q-West plant. The contractual deadline to complete Q-West was extended to June

30, 2006, and Q-West was certified operational on July 9, 2006. Plaintiff indicated it

encountered challenges with the water source at Q-West. Alan Morrell16 testified that “we

opened Q-West and started drawing from that irrigation line, we started getting turbid

water, water so turbid that it was filled with mud and sand. And at that time, it was so

significant that we couldn’t purify it.” As a result, “what it did is it . . . immediately fouled

all of our [equipment] -- we didn't have an ultra filtration system there because it didn't call

for one.” Moreover, the “ROWPU [Reverse Osmosis Water Purification Unit] was

immediately filled with mud, and fouled. And each set of those membranes is $26,000.

And they were ruined. And we couldn't keep them clean and operational enough to

operate and make water there as a result.” In order to fix the problem, Alan Morrell

testified that Oasis “purchased a Pall Aria from northern New York and we also took an

15 In the case of Al Asad, plaintiff claims that: “Defendant refused to provide site prep at

Al Asad, Oasis was forced in December 2005 to hire its own subcontractor to prep the

site, which included filling borrow pits dug by the military, at a cost of $224,100,” and

further spent “$158,110 to abate the flooding and repair the damage caused to the site,”

as a result of the work done by another government contractor, Kellogg, Brown & Root,

at an adjacent site.

16 As noted above, Alan Morrell “was an Oasis consultant from late June 2005 through

October 2005. Specifically, he was the Oasis Contract and Compliance Administrator

from October 2005 through March 2007. He was Director of Contracts and Compliance

from March 2007 through November 2008. He was Project Management Director from

November 2008 through December 2009.”

additional ROWPU system that we had used at Balad [Anaconda] and recommissioned

it, repiped and replumbed the lines at Q-West and solved the problem.”

Speicher, the fifth bottled water facility, was initially required to be operational by

May 24, 2006. The military authorized land for Speicher on August 13, 2005. The

contractual deadline to complete Speicher was extended twice, finally to June 30, 2006,

and Speicher was certified operational on June 20, 2006, and began producing bottled

water on June 24, 2006. Initially, Oasis believed they would receive water provided by the

government via a ROWPU. Alan Morrell testified, however, that “we opened the factory,

we start producing, and within 48 hours, KBR [Kellogg Brown & Root] came in and just

railed on us for consuming their ROWPU'd water. And they got -- they got their KBR

COTR or contractor officer's representative for that site involved and they shut down our

water.” As a result, Alan Morrell testified that:

They’re [Oasis’ contracting officer and COSCOM (United States Corps

Support Command)] beating us up for delivering quantities, but they're

refusing to give us the water they're required to provide us. So, we're dealing

with that at Speicher, and we're dealing with a lack of water delivery at Q-

West to a level we can produce there, too, and we're all running for a

completed amount of or quantity of water, but we can't get to it.

As a solution, Oasis purchased from an American company a “BEV 9 reverse osmosis

system, and in the spring of 2007, installed it, commissioned it, and began to draw well

water.”

Camp Taqaddum, or TQ, the sixth bottled water facility, was initially required to be

operational by May 24, 2006. Although the military initially authorized the land for TQ on

August 24, 2005, the military directed Oasis to use land at different locations twice, the

second time in March 2006. The contractual deadline to complete TQ was twice

extended, to June 30, 2006, and then to October 15, 2006. The site preparation for TQ

was completed by July 2, 2006, and on August 11, 2006, Colonel Richardson gave

approval for Oasis to construct the plant at TQ. TQ was completed on October 23, 2006,

and despite Oasis requesting 40.5 days of excusable delay on September 25, 2006,

United States Air Force Lieutenant Colonel Joel R. Fortenberry, who served as the

contracting officer on the contract from October 2006 until early 2007, executed

modification P00013 on behalf of the government, granting plaintiff only eight days of

excusable delay for TQ. TQ was certified operational on October 25, 2006.

Relevant Modifications

During contract performance there were a series of relevant modifications to the

contract.17 As noted above, after contract award, modification P00001 reduced the

number of bottled water facilities from eight to six, and on July 15, 2005, Major Lopez

executed modification P00002 on behalf of the government, which changed the dollar

17As the parties have stipulated, 13 relevant modification were issued after the contract

was executed.

amount from “386,225,000 (estimated)” to “50,225,000 (NTE).” Subsequently, on August

9, 2005, Major Lopez and Max Wyeth executed modification P00003, which added a

“NTE,” or not to exceed limitation on the quantity of water produced at each plant, and

did not require the government to purchase any minimum number of cases produced by

the contractor. Pursuant to modification P00003, the not to exceed “case quantity was a

total of 14,350,000 cases of water,” and, as modified in modification P00002, the not to

exceed price was $50,225,000.00. As explained above, modification P00004 granted a

twelve day extension of the requirement for the certification of the Anaconda bottled water

plant, and modification P00005 was the novation agreement.

Modification P00006

Prior to the execution of modification P00006, on March 27, 2006, United States

Air Force Lieutenant Colonel James E. Davis,18 who served as the contracting officer on

the contract from September 2005 until January 2006, sent Oasis a letter titled

“Preliminary Notice of Government Intent to Exercise Option CLINs 1001-5, Contract

W27P4A-05-C-0002 for $112M,” which stated: “The Government must withhold its intent

to exercise the option,” which meant the contract would come to an end. The letter

informed Oasis that “[t]he contracting office does not have assurance of adequate

funding.”19 On April 3, 2006, Paul Jefferies sent Lieutenant Colonel Davis a draft proposal,

which would form the basis of modification P00006, and included a way to include a base

year amount of 14,350,000 cases of bottled water at $3.50 per case for a total of

$50,225,000.00.

Modification P00006, which was executed on April 14, 2006 by Lieutenant Colonel

Davis and Phil Morrell, extended the base year of the contract from May 24, 2006 to

August 15, 2006, and required that the bottled water capability be established at the six

sites by June 30, 2006. Modification P00006 extended the contractual deadline for bottled

water plants to be operational to June 30, 2006. According to modification P00006, the

bottled water plants were to be operational in the following order: (1) Anaconda, (2) Camp

Victory, (3) Speicher, (4) Q-West, (5) TQ, and (6) Al Asad.20 Modification P00006 also

required the production of 14.35 million cases of water during the base period of the

contract, and removed the “not to exceed” requirements established in modification

18In 2005 and 2006, Lieutenant Colonel Davis was a Major. When he testified at trial, he

was a Lieutenant Colonel. The court refers to him as Lieutenant Colonel Davis in this

opinion, unless quoting from a document.

19 Phil Morrell testified that “I told them [the government] that would be a really bad thing

to get a letter like that, because that letter would put us in default with our banker. And

that letter did put us in default with our banker, and it cost us $3 million to pull our -- our

contract out of default.” Phil Morrell also testified that Oasis had “already been told that

by Colonel Hay, that they [the government] didn’t have the funding to continue on this.”

20 At the time modification P00006 was executed, Anaconda and Camp Victory were

already operational.

P00003. Finally, the option years were realigned to match the extension of the base year,

so the first option period would run from August 16, 2006 until January 15, 2007, the

second option period would run from January 16, 2007 until January 15, 2008, and the

third option period would run from January 16, 2008 until January 15, 2009. Modification

P00006 also added a fourth option period that would run from January 16, 2009 until

August 16, 2009. The amount of water in the base period, the first option period, and the

newly added fourth option period were different than the second and third option years.

After modification P00006 to the contract, the periods of performance, quantities of water,

and amounts due Oasis were:21

ITEM NO. SCHEDULE OF SUPPLIES/ QTY UNIT UNIT AMOUNT

SERVICES PRICE

0001 Purified bottled water (12 / 1 Liter CASE $3.50

bottles per case)

1001 BASE Period 14,350,000 $50,225,000.00

24 May 2005 to 15 August 2006

2001 OPTION ONE 14,285,715 $50,000,000.00

16 August 2006 to 15 January 2007

3001 OPTION TWO 32,000,000 $112,000,000.00

16 January 2007 to 15 January 2008

4001 OPTION THREE 32,000,000 $112,000,000.00

16 January 2008 to 15 January 2009

5001 OPTION FOUR 17,714,286 $62,000,000.00

16 January 2009 to 16 August 2009

(capitalization in original).

Modification P00011

As noted above, United States Air Force Colonel Richardson served as the contracting

officer on the contract from May 2006 until October 2006. By June 2006, Oasis personnel,

including Paul Morrell, Phil Morrell, Alan Morrell, Paul Jeffries and Dan Petsche had

begun negotiations with Colonel Richardson to further modify the contract. Both parties

had financial challenges, defendant obtaining the funding to exercise the first option, and

plaintiff, which would be in default with its lenders if the contract was terminated for

convenience.22 Internally, Oasis considered the following proposal, as noted in an August

1, 2006 email from Paul Morrell:

I’ve tried a lot of complicated algorithms to try to make a solution that is

equitable to both the Military and US. I’ve concluded that the most equitable

approach for everyone is the following: We gat [sic] paid a flat

$112,000,000/year just as the contract states or $9,333,333/month (5/6 th of

21 Colonel Richardson testified that the modifications “changed the end date of option four

from 16 August 2009 to 16 July 2009. So, it actually decreased the period of performance

for the contractor.”

22According to plaintiff’s post-trial brief, “[d]uring the P00011 discussions, Oasis had an

outstanding debt of over $70 million.”

that until TQ comes online). We agree to deliver up to 32,000,000 cases per

year in aggregate with an annual reconciliation if the actual deliveries

exceed that amount.

The parties discussed several options for how to proceed moving forward, and

ultimately, on August 8, 2006, Oasis, at Colonel Richardson’s request, provided her a

draft proposal, which was consistent with the internal Oasis proposal.23 The draft

proposal24 indicated two options:25

23Paul Jefferies testified at trial that “we were still being asked for significant concessions,

beyond what was outlined that I've tried to outline here. . . . I mean to the tune of $30

million of concessions yet beyond what's on this page.” Paul Jefferies also indicated that:

We didn't really make an offer. The negotiations began with Paul [Morrell]

and I sitting in a room with [Colonel] Renee [Richardson], and I believe her

assistant was there, and they told us that they were being pushed a

particular direction, that she would need concessions from us to pay out the

balance of the funds owed or she would have to move in this other direction.

24 Alan Morrell who earlier had testified about the water issues at the various plants

indicated that regarding the lack of water at Speicher, “on modification P00011, because

this was such a hot issue, again, part of the negotiation was a concession that we would

sort this problem out,” and Oasis “bought another BEV 9 reverse osmosis system.” Alan

Morrell also testified that “[p]art of the concessions that were demanded from us in

P00011 were two site improvements to solve water issues. One was Speicher, and the

other was Q-West.”

25The first option contemplated modifying the contract to not build TQ, but the parties

decided to build the TQ plant.

On August 12, 2006, Paul Morrell and Colonel Richardson executed modification P00011,

which was generally consistent with the Option II in the draft proposal and established a

payment structure by which Oasis would be paid $9,333,333.33 per month, independent

of any amount of water, moving forward in the option periods. Modification P00011 also

modified the fourth option period, ending on July 16, 2009.

The modification explained:

The purpose of this modification is to do the following:

1. Provide a revised CLIN structure to reflect monthly pricing based upon

water production capability.

2. Replace the Contract Statement of Objectives, with Performance Work

Statement, dated 12 August 2006, provided as Attachment 1 to this

modification.

3. Incorporate the contractor's Quality Assurance Plan into the contract

provided as Attachment 2 to this modification.

4. Incorporate the List of Critical Equipment into the contract, provided as

Attachment 3 to this modification.

5. Insert Special Clause, titled “Equipment Leased by the Government”, into

the Contract.

6. Insert clause DFARS 252.232-7007, “Limitation of Government's

Obligation” (May 2006) into the Contract.

7. Replace Contract Section J, List of Documents, Exhibits and Other

Attachments.

8. Decrease the contract amount by $11,604,166.45 from $386,225,000.00

to $374,620,833.55.

9. Decrease the contract funded amount by $5,604,166.35 from

$100,225,000.00 to $94,620,833.65.

10. Change the end date of Option 4 from 16 August 2009 to 16 July 2009.

On August 15, 2006, as part of modification P00011, Oasis submitted a final

invoice to close out the base year in the amount of $24,542,387.00. The total amount of

water produced in the base year was 8,705,992 cases, which translated to

$30,470,972.00 at $3.50 per case. In addition, from the time the contract was awarded to

the end of the base year, Oasis submitted nine invoices for payment at $3.50 per case,

totaling approximately $23 million, which the government paid.26

26 As reflected in the joint stipulations, and as agreed to by the parties regarding invoices

for the base year of the contract: On December 31, 2005, Oasis submitted an invoice to

the Government for 293,160 cases of water from Anaconda at 3.50 per case, for a total

of $1,026,060.00. On January 31, 2006, Oasis submitted an invoice for 356,400 cases of

water from Anaconda at $3.50 per case for a total of $1,247,400.00, and on February 28,

2006, Oasis submitted an invoice for 508,680 cases of water from Anaconda at $3.50 a

case, for a total of $1,780,380.00. On March 31, 2006, Oasis submitted an invoice for

664,320 cases of water from Anaconda at $3.50 per case, for a total of $2,325,120.00.

One month later, on April 30, 2006, Oasis submitted an invoice for 910,020 cases of water

from Anaconda and Camp Victory at $3.50 a case, for a total of $3,185,070.00. On May

31, 2006, Oasis submitted an invoice for 1,126,920 cases of water from Anaconda and

Camp Victory at $3.50 a case, for a total of $3,944,220.00. On June 15, 2006, Oasis

submitted an invoice for 1,381,140 cases of water from Anaconda and Camp Victory at

$3.50 a case, for a total of $4,833,990.00. On July 1, 2006, Oasis submitted an invoice

for 297,540 cases of water from Anaconda and Speicher at $3.50 a case, for a total of

$1,041,390.00. Finally, on July 31, 2006, Oasis submitted an invoice for 1,150,900 cases

The contract ended on July 16, 2009, and Oasis performed on the contract until

that date. Subsequently, Oasis and the government entered into a separate, follow-on

contract regarding bottled water in Iraq. The issues in this opinion relate solely to the base

year of the original contract.

Certified Claim

Prior to the filing of the certified claim, Phil Morrell sent an email to Paul Morrell

and Paul Jeffries on August 4, 2006, with his thoughts on the contract, as follows:

Capabilities for Time Period not Quantity

 Funding was received for purchase of water, but it [sic] the contract

was a capabilities contract

 Should have 2 Contracts

o Capabilities Contract

o Product Procurement Contract

 Funding was received for Contact# _____

 Contract#____ is a capabilities contract not a procurement contract

 $50 million on the table is for capability not water procurement

The general assumption from everybody is that the price of water in the

CLIN is somehow associated with the price of capabilities.

(emphasis in original). At trial, Phil Morrell explained his view of the contract:

When I studied the contract, including when I talked to -- told Max [Wyeth]

that he could get a progress payment, which I did tell Max, way back in the

early days, probably a week into the -- two weeks into the contract, that he

could get a progress payment. Based on all the historic contracting that I

had done, and the way that I submitted my bid, the anticipation that was

there would be, you know, progress payment capabilities, or -- in the

contract. So, looking at Max’s bid, he had put $58 million in for what

appeared to be the construction capabilities, and then out of the $58 million,

based on -- and I read this somewhere, I think it was in the FAR firm fixed

price area -- it says that you -- if it’s for equipment, then you have to deduct

the salvage value of the equipment, and then you could bill for whatever

that was. So, that -- I didn’t actually sit down and do the numbers because

that’s just not what I do, but I – I suggested that we bill against the $52.25

million or $50.225 million as capabilities.

of water from Anaconda, Q-West, Speicher, and Camp Victory, for a total of

$4,028,150.00.

Paul Morrell stated at trial that he agreed with Phil Morrell about the contract being

a capabilities contract after executing modification P00011. Regarding Colonel

Richardson’s correspondence, he testified

she's commenting on the proposal . . . specifically, the 9.33 million per

month for capabilities going forward, and she's saying she thinks that's a

reasonable approach, but this is one of the first times where I hear a contract

officer say the same thing that Phil has been saying for most of the year,

that this is a water production capability contract. And Colonel Richardson

goes on, through the -- post-P00011, and she's very clear that it's a water

production capability contract and it has been all along. They've just been

administering it as if it weren't.

On June 20, 2008, Paul Morrell signed the certified claim, and on July 4, 2008,

Oasis submitted its certified claim to the government. At the beginning of the certified

claim, Paul Morrell, as President of Oasis, stated: “I certify that the claims stated herein

are made in good faith; that the supporting data are accurate and complete to the best of

my knowledge and belief; that the amount requested accurately reflects the Contract

adjustment for which the contractor believes the Government is liable.” Paul Morrell also

submitted a sworn affidavit27 in support of Oasis’ certified claim at the time he submitted

the certified claim, in which he stated:

During the period May 2005 to the present, I was responsible for the day-

to-day management of Contract W27P4A-05-C-0002 (the “Contract”) and

had responsibility for all aspects of Oasis' performance of the Contract I also

had overall responsibility for the cost and accounting issues involving Oasis'

performance of the Contract. This Affidavit is based on my first-hand

knowledge, the collective corporate knowledge of Oasis and the corporate

records of Oasis maintained in the ordinary course of business.

The certified claim identified eight claims for which plaintiff sought payment: Claim

1 was a “Claim for all bottled water supplied in the Contract base year, as extended to

August 15, 2006, excluding bottled water supplied from Camp Anaconda through May,

2006 (5,605,020 cases of bottled water),” for which plaintiff sought $19,617,570.00. Claim

2 was a “Claim for penalty wrongfully assessed for failure to open Camp TQ on time,”

which plaintiff ascribed “solely as a result of Government-caused delays and disruptions,”

for which plaintiff sought $2,270,833.00. The certified claim indicated that Claim 3 was a

“Claim for reduction in Contract consideration for first option period (August 15, 2006

through January 15, 2007) resulting from P00011,” for which plaintiff sought

$3,333,333.00. Claim 4 was a “Claim for water bottling capabilities services provided

through extension of Contract base year,” and plaintiff valued Claim 4 at $11,175,063.00.

Claim 5 sought $808,423.00 as a “Claim for cost of site improvements required,”

specifically at Anaconda, Camp Victory, Al Asad, and TQ. Claim 6 was a “Claim for cost

27 In addition to Paul Morrell, Neil Vos, the then-Chief Financial Officer of Oasis, Lawrence

Schwartz, a certified public accountant, and Alan Morrell also submitted sworn affidavits

in support of the certified claim.

of water supply improvements at Camp Speicher and Camp Qwest,” for which plaintiff

sought $600,000.00. Claim 7 was a “Claim for other penalties assessed re: Government

delays of TQ opening,” related to the “44 days of TQ AQL[28] penalties erroneously

assessed to Oasis due to Government-caused delays in establishing TQ in the first Option

Period” and was valued by plaintiff at $2,053,333.00. The plaintiff’s certified claim

reflected a total amount claimed for the first seven claims of “$39,858,555.” Below the

total for the first seven claims, plaintiff’s certified claim indicated: “Alternative additional

claim for water supplied from Camp Anaconda during initial Contract base year ending

May 2006, 3,100,972 cases of bottled water: $10,853,402.” The certified claim indicated

the plaintiff’s view that:

The Contract is not a model of clarity. The amount payable in the Contract

base year is a firm, fixed-price amount of $50,225,000. . . . However, the

Contract, as written, does not require delivery of any bottled water in the

Contract base year. In the Contract base year, Oasis was entitled to a firm,

fixed-fee payment of $50,225,000. The Contract provides that the entire

payment is for water purification and water-bottling capabilities. Under the

Contract, bottled water was a separately priced commodity to be paid for by

the Government at the price of $3.50 per case under a separate CLN.

(internal citations omitted).

The certified claim was passed between, and considered by, a number of

contracting officers and personnel, including United States Navy Lieutenant Commander

Klingenberg, who was the contracting officer when Oasis submitted its certified claim on

July 4, 2008, United States Air Force Major Jamie Rhone, who served as the contracting

officer from July 2008 until January 2009, and Dean Carsello, a Joint Contracting

Command Iraq Afghanistan (JCC-I/A) policy analyst, who was involved in reviewing the

claim in 2008 and 2009. United States Air Force Lieutenant Colonel Kevin Hobbs29 denied

Oasis’ certified claim in its entirety when he issued the Contracting Officer’s Final Decision

on October 18, 2009.

On October 18, 2010, plaintiff filed its complaint in the United States Court of

Federal Claims. Plaintiff’s complaint alleged eight counts, and the complaint mostly tracks

the claims raised in the certified claim, with the same dollar amounts, albeit framed as

breaches of contract in the complaint. The first count, “Breach of Contract, and Breach

of the Duty of Good Faith and Fair Dealing, for Failure to Pay for water TakenFrom

[sic] Sites other than LSA Anaconda” seeks damages in the amount of

$19,617,570.00, plus interest. (emphasis in original). The second count, “Breach of

Contract For Improper Assessment of a Liquidated Damages Penalty Against Oasis

for Failing to Have All Six Facilities Open by the End of the Base Year, or

Alternatively, for Reducing the Base Year Contract Price Without Consideration,”

28 The parties have stipulated that “AQL” is an acronym for Acceptable Quality Level.

29 In 2009, Lieutenant Colonel Hobbs was a Major. When he testified at trial, he was a

Lieutenant Colonel. The court refers to him as Lieutenant Colonel Hobbs in this opinion.

seeks damages in the amount of $2,270,833.00, plus interest. (emphasis in original). The

third count, “Breach of Contract For Improper Reduction of the Option Period One

Price Without Consideration” seeks damages in the amount of $3,333,333.00, plus

interest. (emphasis in original). The fourth count of the complaint, “Breach of Contract

Resulting from Government Acts and Omissions Impacting and Damaging Oasis

During the Base Year, as Extended” seeks damages in the amount of $11,175,063.00,

plus interest. (emphasis in original). The fifth count, “Breach of Contract Resulting

From Government Failure to Provide Suitable Construction Sites,” seeks damages

in the amount of $808,423.00, plus interest. (emphasis in original). Oasis’ sixth count,

“Breach of Contract and/or Constructive Change for Failure to Provide Suitable

Water at the Purification Facilities as Required by the Contract” seeks $600,000.00,

plus interest. (emphasis in original). The seventh count of the complaint, “Breach of

Contract For Unjustified Imposition of Penalties for Late Opening of TQ and/or

Wrongful Reduction in Contract Price,” seeks $2,053,333.20 plus interest. (emphasis

in original). Finally, the eighth count of the complaint, “Breach of Contract, and Breach

of the Duty of Good Faith and Fair Dealing, for Failure to Pay for Water TakenFrom

[sic] Site LSA Anaconda,” seeks damages in the amount of $10,853,402.00, plus

interest. (emphasis in original).

Defendant filed an answer to Oasis’ complaint on February 15, 2011, and, more

than a year later, on April 12, 2012, filed a motion to amend the pleadings to include fraud

counterclaims. Oasis responded to the amended answer and counterclaims on May 10,

2012, however, on June 6, 2014, defendant moved to, again, amend its pleadings and

filed a second amended answer and counterclaim. In the interim, during highly contested,

and at times uncooperative, discovery the parties filed numerous motions related to

discovery, the production of documents, how documents were maintained, how

documents were to be produced, and in what format, and who would bear the costs,

spoliation, whether or not various privileges applied to various documents, as well as

motions to compel, motions to strike, and motions to quash. The court held numerous

status conferences and hearings to try and resolve the various disputes between the

parties, issued numerous orders, including publishing one substantive, lengthy opinion

on attorney-client privilege and work product prior to trial. See Oasis Int’l Waters, Inc. v.

United States, 110 Fed. Cl. 87 (2013).

The parties also filed motions for summary judgment and motions in limine in

advance of the trial, and after trial, filed a series of lengthy post-trial briefing materials.

The effect of the discovery disputes, and difficult relationships, resulted in discovery

deadlines being repeatedly pushed back, and trial dates repeatedly postponed.

Ultimately, a six week trial was held. Initially, the court issued an opinion regarding the

fraud counterclaims raised by defendant. The court determined that, Paul Morrell, as

signatory to the certified claim, did not have the intent to commit fraud and genuinely

believed in his interpretation of the contract regarding what payments Oasis was entitled

to recover under the contract. The court also found that neither Paul Morrell, nor plaintiff,

acted recklessly when submitting plaintiff’s claims. Therefore, with the exception of Claim

2, which the court deferred, and addresses below, the court denied defendant’s

counterclaims for the Special Plea in Fraud, False Claims Act, and the anti-fraud provision

of the Contract Disputes Act. This opinion addresses the issues of contract interpretation,

duress, and defendant’s remaining fraud counterclaim. The court will separately address

plaintiff’s allegation of spoliation and damages, if any.

DISCUSSION

Contract Interpretation

Initially, plaintiff argues that “[t]he Contract was a firm-fixed-price (FFP) services

contract for water bottling ‘capability,’ pursuant to which Oasis was entitled to

$50,225,000 in the Base Year in exchange for 12 months of performance, irrespective of

the amount of water produced by Oasis and/or purchased by Defendant.” Plaintiff also

contends that “[u]nder the Contract, Oasis was to be paid $3.50 per case of

extracontractual water.” By contrast, defendant claims that “[t]he contract’s payment

terms of $3.50 per case are clear and unambiguous.” Defendant argues that “the Court

should enforce those terms and rule that the contract does not require the Government

to pay Oasis separately for the cost to build the bottled-water facilities,” and pay only

$3.50 a case for the water produced.

“Contract interpretation starts with the language of the contract.” SUFI Network

Servs., Inc. v. United States, 785 F.3d 585, 593 (Fed. Cir. 2015); see also Precision Pine

& Timber, Inc. v. United States, 596 F.3d 817, 824 (Fed. Cir. 2010), cert. denied, 562 U.S.

1178 (2011); Bell/Heery v. United States, 739 F.3d 1324, 1331 (Fed. Cir.), reh’g and reh’g

en banc denied (Fed. Cir. 2014); LAI Servs., Inc. v. Gates, 573 F.3d 1306, 1314 (Fed.

Cir.), reh’g denied (Fed. Cir. 2009); Barron Bancshares, Inc. v. United States, 366 F.3d

1360, 1375 (Fed. Cir. 2004); Foley Co. v. United States, 11 F.3d 1032, 1034 (Fed. Cir.

1993); Nw. Title Agency, Inc. v. United States, 126 Fed. Cl. 55, 57-58 (2016) (citing Foley

Co. v. United States, 11 F.3d 1032, 1034 (Fed. Cir. 1993)) (“The starting point for any

contract interpretation is the plain language of the agreement.”); Beard v. United States,

125 Fed. Cl. 148, 158 (2016); Eden Isle Marina, Inc. v. United States, 113 Fed. Cl. 372,

483–84 (2013).

“‘“In contract interpretation, the plain and unambiguous meaning of a written

agreement controls.’”” Arko Exec. Servs., Inc. v. United States, 553 F.3d 1375, 1379 (Fed.

Cir. 2009) (quoting Hercules Inc. v. United States, 292 F.3d 1378, 1380–81 (Fed. Cir.),

reh’g and reh’g en banc denied (Fed. Cir. 2002) (quoting Craft Mach. Works, Inc. v. United

States, 926 F.2d 1110, 1113 (Fed. Cir. 1991))). “Terms must be given their plain meaning

if the language of the contract is clear and unambiguous.” SUFI Network Servs., Inc. v.

United States, 785 F.3d 585, 593 (Fed. Cir. 2015) (citing Coast Fed. Bank, FSB v. United

States, 323 F.3d 1035, 1038 (Fed. Cir. 2003)); see also Canpro Investments Ltd. v. United

States, 130 Fed. Cl. 320, 347 (2017); Beard v. United States, 125 Fed. Cl. at 158 (“If the

contract language is unambiguous, then it must be given its plain and ordinary

meaning . . . .”). The United States Court of Appeals for the Federal Circuit stated in

Massie v. United States:

In interpreting a contract, “[w]e begin with the plain language.” “We give the

words of the agreement their ordinary meaning unless the parties mutually

intended and agreed to an alternative meaning.” In addition, “[w]e must

interpret the contract in a manner that gives meaning to all of its provisions

and makes sense.’”

Massie v. United States, 166 F.3d 1184, 1189 (Fed. Cir. 1999) (quoting McAbee Constr.,

Inc. v. United States, 97 F.3d 1431, 1435, reh’g denied and en banc suggestion declined

(Fed. Cir. 1996); (internal citations omitted)); Jowett, Inc. v. United States, 234 F.3d 1365,

1368 (Fed. Cir. 2000) (quoting McAbee Constr., Inc. v. United States, 97 F.3d at 1435

and Harris v. Dep’t of Veterans Affairs, 142 F.3d 1463, 1467 (Fed. Cir. 1998)); Harris v.

Dep’t of Veterans Affairs, 142 F.3d at 1467; see also Coast Professional, Inc. v. United

States, 828 F.3d 1349, 1354 (Fed. Cir. 2016); Shell Oil Co. v. United States, 751 F.3d

1282, 1305 (Fed. Cir.), reh’g en banc denied (Fed. Cir. 2014) (noting that a contract must

be interpreted in context, giving meaning to the document as a whole) (citing NVT Techs.,

Inc. v. United States, 370 F.3d 1153, 1159 (Fed. Cir. 2004); Metric Constructors, Inc. v.

Nat’l Aeronautics & Space Admin., 169 F.3d 747, 752 (Fed. Cir. 1999)); McHugh v. DLT

Solutions, Inc., 618 F.3d 1375, 1380 (Fed. Cir. 2010); Giove v. Dep’t of Transp., 230 F.3d

1333, 1340–41 (Fed. Cir. 2000) (“In addition, we must interpret the contract in a manner

that gives meaning to all of its provisions and makes sense. Further, business contracts

must be construed with business sense, as they naturally would be understood by

intelligent men of affairs.”) (citations omitted); Gould, Inc. v. United States, 935 F.2d 1271,

1274 (Fed. Cir. 1991) (indicating that a preferable interpretation of a contract is one that

gives meaning to all parts of the contract rather than one that leaves a portion of the

contract “useless, inexplicable, void, or superfluous”). A Judge of the United States Court

of Federal Claims has explained:

“The words of a contract are deemed to have their ordinary meaning

appropriate to the subject matter, unless a special or unusual meaning of a

particular term or usage was intended, and was so understood by the

parties.” Lockheed Martin IR Imaging Sys., Inc. v. West, 108 F.3d 319, 322

(Fed. Cir. 1997). “Under general rules of contract law we are to interpret

provisions of a contract so as to make them consistent.” Abraham v.

Rockwell Int'l Corp., 326 F.3d 1242, 1251 (Fed. Cir. 2003). “[A]n agreement

is not to be read in a way that places its provisions in conflict, when it is

reasonable to read the provisions in harmony. . . . [T]he provisions must be

read together in order to implement the substance and purpose of the entire

agreement.” Air–Sea Forwarders, Inc. v. United States, 166 F.3d 1170,

1172 (Fed. Cir. 1999). “A reasonable interpretation must assure that no

contract provision is made inconsistent, superfluous, or redundant.” Medlin

Const. Group, Ltd. v. Harvey, 449 F.3d 1195, 1200 (Fed. Cir. 2006) (internal

quotation marks omitted).

Dynetics, Inc. v. United States, 121 Fed. Cl. 492, 512 (2015); see also Marquardt Co. v.

United States, 101 Fed. Cl. 265, 269 (2011) (“In interpreting contractual language, the

court must give reasonable meaning to all parts of the contract and avoid rendering

portions of the contract meaningless.” (citation omitted)).

The Federal Circuit also has indicated that “‘[t]he contract must be construed to

effectuate its spirit and purpose giving reasonable meaning to all parts of the contract.’”

Arko Exec. Servs., Inc. v. United States, 553 F.3d at 1379 (quoting Hercules Inc. v. United

States, 292 F.3d 1378, 1380–81 (Fed. Cir.), reh’g and reh’g en banc denied (Fed. Cir.

2002)); see also LAI Servs., Inc. v. Gates, 573 F.3d at 1314; Gardiner, Kamya & Assocs.,

P.C. v. Jackson, 467 F.3d 1348, 1353 (Fed. Cir. 2006) (citations omitted); Medlin Constr.

Grp., Ltd. v. Harvey, 449 F.3d 1195, 1200 (Fed. Cir. 2006) (reviewing the contract as a

whole to determine the meaning of relevant provisions); Hunt Constr. Grp., Inc. v. United

States, 281 F.3d 1369, 1372 (Fed. Cir. 2002) (“We begin with the plain language when

interpreting a contract . . . . The contract must be considered as a whole and interpreted

to effectuate its spirit and purpose, giving reasonable meaning to all parts.” (citations

omitted)); Beard v. United States, 125 Fed. Cl. at 158 (quoting Pac. Gas & Elec. Co. v.

United States, 536 F.3d 1282, 1288 (Fed. Cir. 2008)) (“In construing the meaning of a

contractual provision, the court does not interpret the disputed term or phrase in isolation,

but “construes contract terms in the context of the entire contract, avoiding any meaning

that renders some part of the contract inoperative.”).

It has been “‘a fundamental precept of common law that the intention of the parties

to a contract controls its interpretation.’” Tri-Star Elecs. Int'l, Inc. v. Preci-Dip Durtal SA,

619 F.3d 1364, 1367 (Fed. Cir. 2010) (quoting Beta Sys., Inc. v. United States, 838 F.2d

1179, 1185 (Fed. Cir. 1988) (quoting Firestone Tire & Rubber Co. v. United States, 195

Ct. Cl. 21, 30, 444 F.2d 547, 551 (1971))); Alvin, Ltd. v. United States Postal Serv., 816

F.2d 1562, 1565 (Fed. Cir. 1987) (“In the case of contracts, the avowed purpose and

primary function of the court is the ascertainment of the intent of the parties.”); see also

Flexfab, LLC v. United States, 424 F.3d 1254, 1262 (Fed. Cir. 2005) (“[I]ntent is

determined by looking to the contract and, if necessary, other objective evidence. In the

absence of clear guidance from the contract language, the requisite intent on the part of

the government can be inferred from the actions of the contracting officer. . . .”); see also

Canpro Investments Ltd. v. United States, 130 Fed. Cl. at 347 (“Contract interpretation

requires determining the intention of the parties.”).

The contract, as awarded, indicated:

The Contractor shall provide all labor, tools, supervision, personnel,

equipment, transportation, materials, facilities, and other essentials

necessary to perform and sustain 8[30] separate and independent purified

bottle water plants according to the 20 Mar 05 Statement of Objectives

(SOO). Period of Performance: 25 May 05 through 24 May 06.

The statement of objectives for the “purified bottled water services” contract explained:

“Bottled water capabilities shall be established in the order as listed in Figure 1. Actual

locations will be given to the contractor that wins award. The contractor shall provide all

the mechanical equipment required to produce and prepare for shipment the required

amounts of bottled water.” Figure 1, referenced in the statement of objectives, identified

30As noted above, modification P00001, issued on May 26, 2005, reduced the required

number of water bottling facilities from eight to six.

the production requirements at each of the bottled water facilities at different points in the

year, ranging from requiring a minimum of 75,000 liters of water a day during winter at

location 3, to the maximum requirement of 210,000 liters of water during surge at locations

5 and 6. The summary of prices for the base year and the three options years stated that

total base year price was $50,225,000.00, and the unit price was listed as “$3.50/case”

for all amounts of water produced. As awarded, the base year of the contract was May

25, 2005 to May 24, 2006. Regarding payment, the contract provided that “[i]nvoicing

shall occur monthly. The contractor shall invoice to the Contracting Officer Representative

(COR), by the 5th of each month, for the total of all liters in [sic] produced, per location,

for the entire previous month.”

The parties view the contract differently, although both parties assert that the

contract is unambiguous. Plaintiff claims that “Oasis’ reading is supported by the plain

meaning of the contract, which must control if the contract is unambiguous,” and the

defendant argues that “[t]he Contract’s payment terms of $3.50 per case are clear and

unambiguous.” As noted above, plaintiff argues that “[t]he Contract was a firm-fixed-price

(FFP) services contract for water bottling ‘capability,’ pursuant to which Oasis was entitled

to $50,225,000 in the Base Year in exchange for 12 months of performance, irrespective

of the amount of water produced by Oasis and/or purchased by Defendant.” Plaintiff also

argues that the contract permitted “the Government to take – at no additional cost –

bottled water from Oasis within specified quantity ranges and time periods. All water taken

outside those ranges or periods (‘extra-contractual water’) was to be paid for separately

at $3.50 per case.” Defendant, however, contends that “the contract is clear and

unambiguous that the Government’s only payment obligation under the bottled-water

contract was to pay $3.50 per case for up to 14,350,000 cases of water.”

The court agrees with plaintiff that the contract is a firm fixed price contract. As

indicated by plaintiff, included in the list of clauses incorporated into the contract is FAR

52.216-1, and the text of the bottled water contract states: “52.216-1 Type of Contract.

(Apr 1984) The Government contemplates award of a Firm Fixed Priced contract resulting

from this solicitation.” (emphasis in original). Moreover, as noted below, in the questions

and answers related to the solicitation, which were subsequently incorporated into the

contract, the government explained that “the Government contract is a Firm Fixed Price

not Indefinite Delivery / Indefinite Quantity.” At trial, Major Vazquez testified that he wrote

the answer to this question, and had the following exchange with plaintiff’s counsel:

[Q.] And you wrote that the contract was a firm fixed price, right?

A. Yes.

Q. Did you believe that to be correct at the time?

A. Yes.

Q. Do you believe that to be correct now?

A. Yes.

The FAR addresses “Firm-Fixed-Price Contracts” at 48 C.F.R. § 16.202-1, and provides:

A firm-fixed-price contract provides for a price that is not subject to any

adjustment on the basis of the contractor's cost experience in performing

the contract. This contract type places upon the contractor maximum risk

and full responsibility for all costs and resulting profit or loss. It provides

maximum incentive for the contractor to control costs and perform

effectively and imposes a minimum administrative burden upon the

contracting parties. The contracting officer may use a firm-fixed-price

contract in conjunction with an award-fee incentive (see 16.404) and

performance or delivery incentives (see 16.402–2 and 16.402–3) when the

award fee or incentive is based solely on factors other than cost. The

contract type remains firm-fixed-price when used with these incentives.

48 C.F.R. 16.202-1 (2017);31 see also Zafer Taahhut Insaat ve Ticaret A.S. v. United

States, 833 F.3d 1356, 1361 (Fed. Cir. 2016) (quoting 48 C.F.R. § 16.202-1) (“‘A firm-

fixed price contract provides for a price that is not subject to any adjustment on the basis

of the contractor's cost experience in performing,’ 48 C.F.R. § 16.202–1, and generally

sets forth a fixed scope of work.”). As indicated by the Federal Circuit, “[t]he essence of

a firm fixed-price contract is that the contractor, not the government, assumes the risk of

unexpected costs.” Lakeshore Eng’g Servs., Inc. v. United States, 748 F.3d 1341, 1347

(Fed. Cir. 2014). Defendant points to two exchanges of trial testimony demonstrating the

knowing risk that plaintiff was taking, first, defendant’s counsel had the following

exchange with Phil Morrell regarding setting up Oasis to perform the contract:

Q. So, it was a big risk you were taking, right?

A. Yes.

Q. And you're a big risk-taker, aren’t you?

A. Yes.

Likewise, defendant’s counsel had the following exchange with Paul Jeffries about the

inherent risk in the contract:

Q. So, essentially Oasis was taking a risk of taking a loss in the first year

with the opportunity to make significant profits in the following two years,

correct?

A. That’s correct.

31Although the court cites to the 2017 version of the Code of Federal Regulations, this

provision is consistent with the provision in effect during the contract award and

performance.

Q. That was the bargain that Oasis entered into, right?

A. That’s correct. Substantial risk for substantial gain.

It is noteworthy that throughout the first year of the contract, plaintiff submitted nine

invoices for various quantities of cases of water, which were paid.

Turning to the terms of the contract, defendant contends that “the Government’s

only payment obligation under the bottled-water contract was to pay $3.50 per case for

up to 14,350,000 cases of water.” Plaintiff argues that “Defendant’s interpretation of the

Contract – which was enforced on Oasis during the Base Year – required Oasis to spend

$70 million to establish the capability to bottle water in the middle of a warzone, with no

guarantee that Defendant would pay Oasis even one (1) dollar.” Plaintiff contends that

“Defendant received the benefit of being able to purchase water locally at a fraction of the

cost it had been paying previously, and Oasis received the benefit of . . . maybe selling

water to Defendant if Defendant wanted to buy water. Such an interpretation offers no

consideration to Oasis, and is illegal.” The plaintiff also claims that “Defendant is arguing,

without actually saying it, that the Contract was an IDIQ, with no minimum, something

that the FAR specifically prohibits.” The court disagrees with plaintiff’s characterization.

As defendant noted, the military provided the land, the fuel, the water, and plaintiff

received the benefit of ownership of the bottled water facilities. Plaintiff also was

compensated for water produced, which is consistent with the contract. Furthermore,

defendant has not argued that the contract was an indefinite delivery/indefinite quantity

contract. Regarding contract development, Major Vazquez testified on cross-examination

that “[t]he way we developed this contract was we wanted to have fixed prices throughout

the life of the contract, whether it be the base year or any option years. And we looked at

it at, as awarded, 0.292 cents per bottle that we requested.” Plaintiff’s counsel followed

up this statement by Major Vazquez by asking “[s]o, the fixed price was the per liter price,”

to which Major Vazquez answered: “The unit price, yes, sir.” Defendant points out that

“Oasis ignores the contract’s plain terms and the testimony of both contract signatories.

In doing so, Oasis concludes that the contract’s plain terms and the testimony of both

contract signatories do not matter because ‘this Contract [is] a ‘firm-fixed-price’ contract.’”

Moreover, Major Vazquez statement of the cost under the contract as 0.292 cents

per bottle is consistent with the four CLINs of the contract representing the base year and

the three options years. As noted above, each of four CLINs (0001, 1001, 2001, 3001),

provided that “[t]he Contractor shall provide all labor, tools, supervision, personnel,

equipment, transportation, materials, facilities, and other essentials necessary to perform

and sustain 8 separate and independent purified bottle water plants according to the 20

Mar 05 Statement of Objectives (SOO). Period of Performance. . . .” Each CLIN

representing a contract year had subCLINs for each of the bottle water plants, with

quantity, unit, and unit prices. For example, the base year of the contract provides:

Each subCLIN refers to the “SOO” or the statement of objectives for the “purified bottled

water services” contract, which explained: