Northrop Grumman Systems Corporation v. United States

In the United States Court of Federal Claims

No. 12-286C

(Filed: October 17, 2018)

(Re-Filed: October 31, 2018)1

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NORTHROP GRUMMAN SYSTEMS Contracts; Contract

CORPORATION, Disputes Act, 41 U.S.C.

§§ 7101-7109 (2012);

Plaintiff, motions to dismiss;

variance between claim

v. and complaint; motions

for summary judgment;

THE UNITED STATES, contract interpretation.

Defendant.

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John W. Chierichella, Washington, DC, with whom were Anne B.

Perry, David S. Gallacher, and Christopher M. Loveland, for plaintiff.

Maureen Del Duca and Linda T. Maramba, of counsel.

Cameron Cohick, Senior Trial Counsel, United States Department of

Justice, Civil Division, Commercial Litigation Branch, Washington, DC,

with whom were Barbara E. Thomas, Jeffrey D. Klingman, Rebecca S.

Kruser, Trial Attorneys, for defendant. Michael F. Kiely, United States Postal

Service, Law Department, of counsel.

OPINION

BRUGGINK, Judge.

United States Postal Service (“the Postal Service”) entered into a

contract with Northrop Grumman Systems Corporation (“Northrop”)

pursuant to which Northrop would produce and deliver a number of a mail-

1

This opinion was originally issued under seal. The parties agree that no

redactions are necessary and thus this opinion is reissued without redactions.

processing machines known as the Flats Sequencing System machine (“FSS

machine”) for a fixed price of approximately $874 million. The contract was

eventually performed, but Northrop has filed suit pursuant to Contract

Disputes Act, 41 U.S.C. §§ 7101-7109 (2012) (“CDA”), claiming that the

Postal Service breached the contract in a number of ways. The Postal Service

has counter-claimed, asserting that Northrop breached its own contractual

obligations.

Pending are the parties’ motions to dismiss and motions for partial

summary judgment. Northrop’s motion to dismiss seeks dismissal of the

Postal Service’s counterclaim counts one and four for lack of subject matter

jurisdiction. Plaintiff also moves for summary judgment on the majority of

the counts in the Postal Service’s counterclaim.

The Postal Service moves to dismiss Northrop’s count one for lack of

subject matter jurisdiction. Defendant also moves for partial summary

judgment on Northrop’s count five, summary judgment on count seven, and

partial summary judgment on elements of the claims imbedded in counts

three through five. The court allowed the parties to submit briefing far in

excess of the rule limits. Northrop’s motion was fully briefed on June 29,

2018, and defendant’s motion was fully briefed on July 20, 2018. We held

oral argument on both parties’ motions on September 12 and 14, 2018.

BACKGROUND

The Postal Service took its first steps toward ending manual flat mail

(bulk mail) sorting on July 10, 2003, when it issued a solicitation seeking

proposals to provide research and development for a flat mail sequencing

system machine. On October 28, 2003, Northrop and the Postal Service

entered into a pre-production contract for Northrop to design a prototype of

a machine to sort flat mail. While the pre-production contract was ongoing,

the Postal Service issued on May 8, 2006, a non-competitive solicitation to

Northrop for the production of 100 FSS machines. On February 23, 2007,

well before the research and development contract had been fully performed,

Northrop entered into a production contract with the Postal Service to design,

deliver, and install the FSS machines.

Shortly after entering the production contract and continuing through

the end of both contracts, the parties experienced delays and disagreements

regarding the design and installation of the FSS machines. The Postal

Service’s need for flat mail sorting evolved as well. Nevertheless, despite the

difficulties, Northrop installed the last of the FSS machines by August 2011.

2

From 2007 through 2009, the parties were consistently negotiating the

scope of the work required by the contract, which resulted in the generation

of the Puts and Takes List2 by Northrop and a series of equitable adjustments

memorialized in modifications to the production contract.

On March 31, 2009, Northrop submitted a request for equitable

adjustment, referred to by the parties as the Program REA, claiming

approximately $63 million for a large number of alleged constructive

changes and delay and disruption claims. On April 28, 2010, the contracting

officer denied the vast majority of Northrop’s request, but on a number of

specific claims he directed Northrop to submit a cost proposal so that the

parties could negotiate the equitable adjustment.

Northrop submitted its first certified claim to the Postal Service in July

2010, asserting claims largely related to the Program REA. In May 2011, the

contracting officer issued a decision denying the majority of Northrop’s

claim.

Northrop submitted its second certified claim on August 4, 2011,

asserting entitlement to approximately $71 million in damages dating from

June 2009 forward. On October 28, 2011, Northrop submitted its third

certified claim for approximately $63 million in invoices that it alleged the

Postal Service had improperly failed to pay. The contracting officer issued

his final decision on April 12, 2012, largely denying the second certified

claim, and asserting the Postal Service’s claims against Northrop totaling

approximately $410 million. Against this he offset the value of the unpaid

Northrop invoices plus the amount to which Northrop was entitled based

upon one portion of the second certified claim against the counterclaim

damages netting a total amount owed the Postal Service of $341 million.

Northrop filed suit in this court on May 4, 2012. The Postal Service

filed a counterclaim, which was amended in 2018.

DISCUSSION

Although both parties have filed motions to dismiss and for partial

summary judgment, neither party cross-moved for summary judgment on

any of the counts put at issue by their opponent, arguing, in substance, that

2

Northrop created the Puts and Takes List to identify work that it believed

was beyond the scope of the contract and submitted this list along with other

report deliverables. The Postal Service was aware of the list and the

contracting officers appear to have reviewed some version of the list.

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disputed issues prevent granting the motions for summary judgment. We

begin our discussion with the parties’ motions to dismiss.

I. Motions to Dismiss

Both parties argue that certain of their opponent’s claims are outside

this court’s subject matter jurisdiction. The party bringing an affirmative

claim bears the burden of establishing the court’s jurisdiction over it. McNutt

v. Gen. Motors Acceptance Corp. of Ind., 298 U.S. 178, 189 (1936). On a

motion to dismiss for lack of subject matter jurisdiction, the court generally

“considers the facts alleged in the complaint to be true and correct,” but when

a party challenges the jurisdictional facts, the court may consider relevant

evidence to resolve whether it has jurisdiction. Reynolds v. Army & Air Force

Exch. Serv., 846 F.2d 746, 747 (Fed. Cir. 1988). If the non-moving party does

not establish jurisdiction, the court must dismiss the claim. Rules of the

United States Court of Federal Claims 12(h)(3) (“RCFC”).

Because Northrop has not established jurisdiction over its count one,

we grant the Postal Service’s motion to dismiss that count. The Postal Service

has established the court’s jurisdiction over count one of its counterclaim, so

we deny plaintiff’s motion to dismiss that count. We grant in part Northrop’s

motion regarding count four of the counterclaim.

A. Defendant’s Motion to Dismiss Plaintiff’s Count One

In count one, Northrop alleges that the Postal Service affected a

cardinal change to the contract and, as a remedy, seeks reformation of the

contract so that the parties may determine the amount that the Postal Service

should reimburse Northrop for costs incurred. The Postal Service argues that

Northrop did not submit a proper claim to the contracting officer because its

claim is a monetary one for which Northrop did not seek payment in a sum

certain. Thus, the Postal Service contends, the claim falls outside of this

court’s jurisdiction under the CDA.

The contractor must “submit in writing to the contracting officer a

clear and unequivocal statement that gives the contracting officer adequate

notice of the basis and amount of the claim.” Contract Cleaning Maint., Inc.

v. United States, 811 F.2d 586, 592 (Fed. Cir. 1987). The contractor “must

make a written, non-routine demand to a contracting officer, request a final

decision, and seek the payment of money in a sum certain, the adjustment or

interpretation of contract terms, or other relief arising from or relating to the

contract.” Ace Constructors, Inc. v. United States, 70 Fed. Cl. 253, 266

(2006), aff’d, 499 F.3d 1357 (Fed. Cir. 2007).

4

Plaintiff may not circumvent the requirement to state a sum certain in

its claim by camouflaging a monetary claim as one seeking only declaratory

relief. “If ‘the only significant consequence’ of the declaratory relief sought

‘would be that [the plaintiff] would obtain monetary damages from the

federal government,’ the claim is in essence a monetary one.” Securiforce

Int’l America, LLC v. United States, 879 F.3d 1354, 1360 (Fed. Cir. 2018)

(quoting Brazos Elec. Power Coop., Inc. v. United States, 144 F.3d 784, 787

(Fed. Cir. 1998)). The court determines whether the claim is “in essence a

monetary one” by examining the substance of the pleadings. Id.

Northrop’s first certified claim stated that, taken collectively, the

Postal Service’s actions constituted a cardinal change. Def.’s Mot. to Dismiss

A1566.3 As a remedy, Northrop asked the contracting officer “to reform the

contract to a cost-plus-fixed-fee structure, pursuant to which [Northrop] shall

be reimbursed for all allowable and reasonable costs allocable to this

Contract . . . plus a reasonable fee thereon.” Id. at A1567. Northrop concedes

that it did not state a sum certain but argues that it was not required to do so

because this it is making a claim for adjustment or interpretation of contract

terms or other relief arising from or relating to the contract. We disagree.

“A cardinal change is a substantial deviation from the original scope

of work that changes the nature of the bargain between the parties.”

ThermoCor, Inc. v. United States, 35 Fed. Cl. 480, 490 (1996). It is such a

fundamental change that the parties cannot redress the change under the

contract. Demanding performance thus, places the government in breach of

the contract. Allied Materials & Equip. Co. v. United States, 569 F.2d 562,

564 (Ct. Cl. 1978). The default remedy for breach of contract is payment of

money. Holmes v. United States, 657 F.3d 1303, 1314 (Fed. Cir. 2011).

Reformation, on the other hand, is an equitable remedy employed in cases of

mistake or fraud that requires reforming the terms to reflect the parties’

intended bargain. CIGNA Corp. v. Amara, 563 U.S. 421, 440-41 (2011).

Consistent with the theory of cardinal change, Northrop claimed that

the Postal Service fundamentally altered the nature of the contract by

wresting design control from the contractor. Northrop expressly stated in its

first certified claim that the government’s insistence on a cardinal change

renders it in breach and that “[t]he remedy for a cardinal change is breach

damages.” Def.’s Mot. to Dismiss A1566. Thus, as its own claim concedes,

Northrop did not seek the adjustment or interpretation of contract terms.

3

Citations to the parties’ appendices are preceded by an “A” as shown.

5

The cardinal change claim likewise was not a claim for other relief

arising from or relating to the contract, because Northrop’s claim is not for

any relief other than the traditional relief for breach of contract, namely,

money. Although Northrop argues that the Postal Service would not be

paying Northrop money damages if the contract were reformed but instead

would be reimbursing Northrop for costs incurred, that is a distinction

without a difference. Despite Northrop’s creativity in stating this claim, the

theory of cardinal change calls for a breach remedy–money damages–and

Northrop is in fact seeking a payment of money from the Postal Service.

Indeed, Northrop has hired an expert who has calculated the amount he

believes the Postal Service owes plaintiff: approximately $252 million. Id. at

A1766.

Because Northrop’s claim is clearly a monetary one, Northrop had the

obligation to include in its claim submitted to the contracting officer its best

effort to state a sum certain, albeit one that could have been modified later to

fit the proof. Because Northrop did not submit a valid claim to the contracting

officer, count one is outside of this court’s CDA jurisdiction. See 28 U.S.C §

1491(b) (citing 41 U.S.C. § 7104(b)(1)); 41 U.S.C. § 7103(a)(1). We

therefore grant the Postal Service’s motion to dismiss.

B. Plaintiff’s Motion to Dismiss Defendant’s Count One

The Postal Service’s counterclaim count one alleges that it suffered

$180,782,291 in lost savings due to Northrop’s failure to install the FSS

machines by the contractually required dates. Northrop argues that the court

lacks jurisdiction over count one because it is not within the scope of the

contracting officer’s statement of the Postal Service’s claim.

It is a fundamental principle of government contract law that contract

claims, whether asserted by the contractor or the government, must be the

subject of a contracting officer’s final decision. 41 U.S.C. § 7103(a)(1)-(3)

(2012); Raytheon Co. v. United States, 747 F.3d 1341, 1354 (Fed. Cir. 2014).

The requirement is prompted by the hope that the claim can be resolved at

the contracting officer level, and that goal is hindered if the claim a party

presents in court is substantially different from the claim presented to or by

the contracting officer. M. Maropakis Carpentry, Inc. v. United States, 609

F.3d 1323, 1331 (Fed. Cir. 2010). To determine whether the claim is the same

as that in the contracting officer’s final decision, the court considers whether

the claims “(1) are based on the same underlying theory; (2) seek the same

relief; and (3) arise from the same operative facts.” Kansas City Power &

Light Co. v. United States, 131 Fed. Cl. 161, 165 (2017) (citing Scott Timber

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Co. v. United States, 333 F.3d 1358, 1365-66 (Fed. Cir. 2003)). Defendant’s

counterclaim easily satisfies this test.

The “essential facts that give rise to a cause of action” are the

operative facts. Kiewit Constr. Co. v. United States, 56 Fed. Cl. 414, 420

(2003). “[I]f the claim presented to the contracting officer requires

examination of a different or unrelated set of operative facts, then the claims

are separate.” Affiliated Constr. Grp., Inc. v. United States, 115 Fed. Cl. 607,

612 (2014) (internal citations and quotation marks omitted). “When the

claims differ in the underlying factual basis for relief, and when the claims

require different kinds of proof, they are different claims for purposes of the

CDA.” Id. (citing Placeway Constr. Corp. v. United States, 920 F.2d 903,

909 (Fed. Cir. 1990); AAB Joint Venture v. United States, 75 Fed. Cl. 414,

422-23 (2007)).

The contracting officer stated a claim for lost savings due to

Northrop’s failure to install the FSS machines by the contractually required

dates. The Postal Service’s count one alleges that the Postal Service lost

savings due to Northrop’s failure to install the FSS machines by the

contractually required dates. The Postal Service did not change its legal

theory or relief it seeks.

The parties dispute, however, whether the Postal Service’s count one

uses the same essential facts that gave rise to the claim stated by the

contracting officer. The final decision states that the contract schedule was

the schedule adopted in Modification (“Mod.”) 2 to the contract. Pl.’s Mot.

to Dismiss A150. Using the installation dates set forth in the October 2007

Mod. 2 schedule, the contracting officer determined the time the Postal

Service was unable to use the machines by comparing the Mod. 2 installation

dates to the actual installation dates. The Postal Service’s counterclaim uses

the same language: Mod. 2 is the applicable schedule and the government

alleges that Northrop failed meet Mod. 2 and the Mod. 17 schedule. Def.’s

Am. Countercl. ¶¶ 37, 42, 45-49.

The Postal Service now uses different anticipated installation dates to

calculate lost savings, however. The Postal Service’s experts used an

installation schedule referred to as “Rev J,” which followed the Mod. 2

schedule, decreasing the Postal Service’s claim to approximately $180

million. Northrop argues that the same evidence will not be used to show that

Northrop failed to meet the Rev J installation dates instead of the Mod. 2

installation dates. The question is whether Rev J was a fundamentally

different schedule than the one relied on in the contracting officer’s decision.

We believe it was not.

7

Statement of Work (“SOW”) C governs deployment. Section 6.2,

states, “The Supplier shall develop a deployment schedule subject to USPS

approval within 4 weeks after contract award from the deployment data.” Id.

at A159. SOW B deliverables spreadsheet lists this deliverable as C-19. In

Award Data Sheet, paragraph 2, the parties agreed to incorporate into the

contract “a mutually agreeable FSS Production deployment schedule in

accordance with the statement of work” within eight weeks after Northrop

submitted C-19. Def.’s Resp. Mot. to Dismiss A578. Section 6.3 states that

the contracting officer would “provide individual changes to the deployment

schedule” Northrop. Def.’s Resp. A160. Northrop would then “incorporate

these changes into a revised/updated deployment schedule monthly . . . .” Id.

SOW B lists the SOW C 6.3 deliverable as C-21.

Northrop submitted the C-19 schedule on March 16, 2007 and

subsequently submitted two revisions. Def.’s Resp. A591, A598. The parties

executed Mod. 2 on October 2, 2007, incorporating “Section - C-19

Deployment Schedule, 2007-06-26 Rev 0.” Pl.’s Mot. to Dismiss A108-09.

With the C-19 schedule in place, the parties continued to adjust their

scheduling expectations through the C-21 deliverable. On October 19, 2007,

the Postal Service sent a response letter to a draft C-21 deliverable Northrop

had submitted, stating, “[F]ollowing the approval of the C-19 Deployment

Schedule, now a part of the contract via Mod 002, 1) the deployment

schedule shall here forward be referred to as C-21 and 2) can only be changed

by NGSC by receiving authorized direction to do so from the USPS.” Def.’s

Resp. A706.

Northrop submitted an “Updated Deployment Schedule,” referring to

“SOW Schedule B, Item C-21 paragraph 6.3” on November 5, 2007. Id. at

A708. Northrop submitted C-21 Rev J on December 5, 2008. Id. at A838.

The parties agreed on updated deployment schedules through May 5, 2011,

Rev M, totaling more than ten deployment schedules.

As the Postal Service sees it, there is essentially only one schedule

operative at any given time and the facts essential to its claim are that

Northrop failed to meet whatever were the required delivery dates. It views

the C-19 schedule incorporated through Mod. 2 and the updated deployment

schedules that followed as serving the same purpose: reaching machine

installation. Rev J delivery dates are merely the most accurate dates available

to calculate lost savings, according to the Postal Service. Regardless of which

dates are the controlling dates for installation, the proof is the same: a

comparison of required versus actual delivery dates.

8

It is unnecessary for the court to determine at this point the precise

operative dates for installation for any given machine. That determination is

primarily one of law and is premature at the present. It is sufficient to observe

that the contracting officer’s decision and count one are based on the same

underlying theory–failure to perform on time; they seek the same relief–

damages for loss of the use of the machines; and they rely on the same

comparison between the controlling schedule and the dates the machines

were installed. Therefore, we deny plaintiff’s motion to dismiss count one.

C. Plaintiff’s Motion to Dismiss Defendant’s Count Four

The Postal Service alleges in counterclaim count four that it suffered

$2,323,635 in costs due to Northrop’s failure to supply the contractually

required number of spare parts in spare parts kits. Northrop argues that the

operative facts underlying the Postal Service’s claim here are substantially

different from those reflected in the claim asserted by the contracting officer.

The contracting officer issued a final decision on April 12, 2012,

claiming that Northrop owed the Postal Service $3.9 million for failing to

provide sufficient parts. He attached to the decision a series of spreadsheets

itemizing the spare parts allegedly omitted.

The legal theory and type of relief requested are identical. Both

amount to an assertion that the promised spare parts were not furnished, and

the relief consists of the asserted replacement cost of the missing parts,

although count four decreases the amount allegedly owed to $2.3 million. In

addition, both the final decision and count four trace the parties’

disagreement to differences in how SOW H section 2.3 and 2.3.5 should be

interpreted. We address the contract interpretation question in the summary

judgment section on count four. For purposes of the motion to dismiss, it

suffices to state that the contract provided the supply and re-supply levels of

parts and a process by which the Postal Service would list for Northrop the

type and depth of specific parts. Both the contracting officer’s final decision

and the claim here rely on lists of spare parts that Northrop allegedly was

required to but failed to supply.

There the similarity ends, however. Count four relies on a virtually

new list of unique parts upon which the contracting officer’s final decision

was based. The Postal Service’s proof is a substantially different data set that

includes different parts, quantities, and prices than those listed in the

contracting officer’s decision.

9

The differences involve the majority of the parts on each list, leaving

minimum overlap between the final decision and count four. If we were

confronted with a final decision claiming that Northrop failed to supply a

single spare part, and the counterclaim asserted the absence of a completely

different part, we could readily conclude that the claims were based on

materially different facts. If, on the other hand, the final decision asserted the

failure to produce 100 assorted spare parts, and the counterclaim reduced that

list but reasserted the balance, we could conclude readily that the claim was

not materially different. The counterclaim also does not, for example, merely

adjust the particular quantities of the same parts nor does it tweak the value

of the missing parts. Here, we are confronted with something unlike any of

these examples. The contract required Northrop to provide certain parts at a

particular supply and re-supply level. The counterclaim reasserts the final

decision to the extent that many of the same parts are asserted to be missing,

but also adds dozens of parts that do not appear on the original lists. The

counterclaim also substantially alters the quantity of parts.

This is more than a mere correction of specifics or an adjustment to

the quantum of damages. The Postal Service would have to rely on an entirely

different set of evidence to prove its claim. We view count four as too far a

departure from the final decision. Accordingly, we grant Northrop’s motion

to dismiss count four in part. The government may pursue count four but only

to the extent the same parts in the counterclaim appear in the final decision,

irrespective of quantity or price.

II. Motions for Summary Judgment

The court will grant summary judgment when “there is no genuine

dispute as to any material fact and the movant is entitled to judgment as a

matter of law.” RCFC 56(a). Material facts are those “facts that might affect

the outcome of the suit under the governing law.” Anderson v. Liberty Lobby,

Inc., 477 U.S. 242, 248 (1986). Even if the facts in dispute are material, the

dispute must also be genuine, meaning “the evidence is such that a reasonable

[factfinder] could return a verdict for the non-moving party.” Id. at 248.

A. Plaintiff’s Partial Motion for Summary Judgment

Northrop moves for partial summary judgment on the Postal Service’s

counterclaim, except for count six on repair specifications.

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1. Count One: Lost Savings

The Postal Service’s count one claims lost savings due to Northrop’s

failure to install the FSS machines by the contractually required dates.

Northrop argues, in the alternative to its motion to dismiss, that it is entitled

to summary judgment because (1) the Postal Service did not suffer lost

savings; (2) 398 days of delay constituted excusable delay; (3) the Postal

Service’s re-planning rendered the Mod. 2 Schedule irrelevant; and (4) the

Rev J planning schedule cannot form the basis for any delay claim.

First, Northrop argues that the Postal Service’s actual accounting data

on actual hours worked and routes serviced by carriers demonstrates that the

Postal Service did not suffer lost savings. Both parties’ experts used the

Postal Service’s data, while applying different factors each believes relevant,

and reached divergent conclusions on whether there were lost savings. The

Postal Service argues that the questions of what data is superior and what the

data proves are fact questions. We agree. We are confronted with competing

damage and delay calculations which require presentation at trial.

Second, Northrop argues that its performance was excusably delayed

between June 5, 2009, and July 8, 2010, when the Postal Service made

performance impossible due to changes to the Carrier Automated Street Tray

Rack (“CASTR”). It argues that CASTR was on the critical path. The Postal

Service responds with its own evidence to argue that CASTR was not on the

critical path and that performance was possible during the cited period. There

is a genuine fact dispute regarding the source of the delay and whether the

delayed diverted Northrop from continuing progress on the critical path.

Northrop’s final arguments relate to the controlling schedule for FSS

machine installations. Northrop argues that the Postal Service’s “re-planning

effort rendered the delivery schedule then in place irrelevant”–referring to

the Mod. 2 schedule–and that the Postal Service “cannot rely on an irrelevant

delivery schedule to support its delay claim.” Id. at 4. Northrop contends that

the re-planning effort led to the number and location of sites changing such

that all schedules, incorporated into the contract or planning schedules, prior

to the Mod. 17 schedule were rendered irrelevant. Similar to excusable delay,

the extent and consequences of the re-planning effort are bound up in fact

disputes concerning what happened in the period between Mods. 2 and 17.

Relatedly, there are fundamental factual disputes concerning the

evolution of the performance schedule and whether Northrop adhered to it.

There are disputes concerning which deployment schedule was operative,

whether the re-planning effort rendered the schedule irrelevant, the causes of

11

delay, and whether the events in question were on the critical path. We thus

deny Northrop’s motion for summary judgment on count one.

2. Count Two: Deficient Handbook

The Postal Service alleges in count two that Northrop submitted the

FSS machine handbook to the Postal Service with defects, even though the

contract required a defect free handbook. Because Northrop failed to correct

those defects, the Postal Service alleges that it spent $1,086,978 in costs to

correct the handbook.

Northrop argues that the Postal Service constructively accepted the

handbook when it failed to complete a 100% review and identify defects

within a 90-day review period. Northrop also argues that, even if the Postal

Service properly rejected the handbook, Northrop is liable only for the costs

to fix the defects above the allowable number of defects. Finally, Northrop

argues that the Postal Service cannot identify which defects were caused by

Northrop. The government responds that Northrop’s contract interpretation

is flawed and that factual disputes preclude summary judgment.

SOW L regarding Technical Publication Maintenance Handbook

governs the submission of the handbook. SOW L 8.6.10 provides that the

“MS Handbook(s) shall be delivered in an incremental fashion as described

below.” Pl.’s Mot. Summ. J. A1316. The section sets out an iterative process

for draft volumes, a preliminary handbook, and then subsequent handbook

releases. Section 8.6.10.5 states, “The Supplier shall deliver maintenance

documentation updates according to the following schedule: . . . 4. TL1, CH2

(final) - 1 month prior to last deployed unit.” Id. at A1317. The parties agree

that what is at issue is the release of the final handbook.

Northrop correctly states that section 8.6.4 provides, “The following

deliverables will have a 90 day calendar review time: Entire MS

Handbooks.” Id. at A1314. The undisputed series of exchanges on this

handbook deliverable were as follows: Northrop submitted the handbook on

June 15, 2001. The Postal Service rejected Northrop’s submission, on

September 28, 2011. The Postal Service sent Northrop more comments on

the first submission on November 1, 2011. Northrop submitted a revised

version on January 26, 2012. The Postal Service rejected the updated

submission on February 29, 2012. Based on the first two exchanges, the

Postal Service apparently did not review the submission of the final

handbook within ninety days. The Postal Service’s delayed review, however,

is not the end of the inquiry.

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We next consider Northrop’s duty regarding any defects in its

submission. SOW L 8.2, Quality Assurance, states, “Quality will be

measured by ensuring adherence to the requirements and that the content of

all final MS Handbook deliverables match the fielded physical equipment.

In order to ensure defect free deliverables, the Supplier shall perform” the

requirements listed in the balance of section 8.2. Id. at A1308.

Section 8.6.6 states, more specifically, “The Supplier shall warrant all

deliverables required in this section as complete, accurate, and free of defects

according to the requirement of this SOW at the time they are shipped,

mailed, or otherwise delivered to USPS.” Id. at A1314. Thus, independent of

any Postal Service review, Northrop had a duty to warrant that its

deliverables were free of defects. Sections 8.6.5 and 8.6.7 also provide that

Northrop bore the risk of deliverables submitted with defects.

Section 8.6.5 provides deliverable acceptance criteria. It states that the

Postal Service’s approval process is not limited to the initial review, but that

the “approval process includes the review, evaluation, verification, and

validation of all MS Handbook deliverable content.” Id. The section

concludes, “Notification of deliverable acceptance . . . does not relieve the

Supplier of any obligation to correct errors, deficiencies, or omissions

discovered in the use of the deliverable, for the life of the contract.” Id.

Section 8.6.7 provides that, if the Postal Service were to reject a

deliverable, it would identify the criteria on which Northrop was deficient.

The Postal Service would provide “[c]omments detailing deficiency type and

location,” but “[t]hese comments will be of a specific or global nature, they

will not necessarily be inclusive of all deliverable deficiencies, and will

identify general deficiency issue and trends.” Id. The section obligates

Northrop to “review the delivery, [and] search for and correct any instances

of the deficiency.” Id. These sections indicate that the approval process

involved more than the 90-day review and, whether accepted or rejected,

Northrop retained the responsibility to correct defects. The Postal Service

thus did not constructively accept the handbook after ninety days elapsed.

Northrop also argues that “defect free” actually means, “defect free,

except for those defects below the allowable level.” Northrop draws this

interpretation from section 8.2.3. The Postal Service “will review all

deliverables and identify any defects found, classified by the following

categories below”: “Major defects (incorrect, incomplete, or missing)” and

“Minor defects.” Id. at A1309. However, the Postal Service “may identify

additional categories of defects applicable to the specific products being

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delivered.” Id. This section does not state that either kind of defect is

allowable or set an allowable level of defects.

This classification system is referenced in section 8.2.4, Deliverable

Development Audit, and section 8.2.5, Validation or Verification Audits.

Section 8.2.4 provides that “[t]he audit of deliverables will be considered

deficient based on the following criteria: 1. Average of one major defect (per

50 pages) 2. Average of twelve minor defects (per 50 pages).” Id. at A1310.

If the Postal Service deemed the deliverable deficient, the section continued

to provide a process for Northrop to correct the deficiency.

Section 8.2.5 likewise states, “At USPS discretion, a validation or

verification may be suspended, and/or rejected based on the following

criteria: 1. Average of one major defect (per 50 pages) 2. Average of twelve

minor defects (per 50 pages).” Id. at A1311. The section also provides

Northrop’s obligation to submit a process improvement plan if validation or

verification are suspended or rejected. Thus, although defects were to be

classified as major or minor for all parts of the approval process, the only

place that the concept of a permissible number of defects is referenced is in

deciding whether a deliverable is sufficient to pass an audit, verification, or

validation. The criteria in sections 8.2.4 and 8.2.5 must be read together with

Northrop’s duty to warrant a defect free handbook. The contract thus does

not excuse Northrop from correcting defects below the above-stated levels.

Northrop contends that the Postal Service was required to review

100% of the handbook for defects within the review period. Section 8.3

covers the on-equipment validation. Section 8.3.1 states that part of the

validation process was a Northrop-submitted validation plan, which “must

allow time to complete a 100% validation, correct defects found during the

validation, and revalidate . . . .” Id. at A1311. Section 8.3.3 repeats the same

requirement. These appear to be the only references to a one hundred percent

validation requirement and it is imbedded in a provision that time must be

allowed for both parties to complete a full validation, rather than a provision

that shifts the burden to the Postal Service to identify every defect or risk

being stuck with the cost of fixing them. None of Northrop’s arguments

relating to constructive acceptance and an allowable level of defects are

consistent with SOW H 8.0.

Finally, Northrop argues that summary judgment is appropriate

because the Postal Service cannot prove that Northrop caused the defects.

Northrop argues that both parties made changes to the handbook after

submission and that the Postal Service cannot differentiate between the two

sets of changes. The Postal Service responds that the contracting officer was

14

able to identify Northrop-submitted defects and that the editing process

allowed it to differentiate between the two sets of changes. The materials

submitted are sufficient to demonstrate that there is a genuine dispute

regarding the existence and cause of any defects. We deny Northrop’s motion

on count two.

3. Count Three: Deficient Relocation Manual

The Postal Service alleges in count three that the contract obligated

Northrop to submit a relocation manual free of deficiencies and that it failed

to do so. The Postal Service alleges that it sustained $533,147.25 in damages

to correct the deficient manual. Northrop argues that the Postal Service

constructively accepted the manual because the Postal Service did not review

the manual within the review period. Even if the Postal Service properly

rejected its manual, Northrop contends, the replacement manual for which

the Postal Service contracted with Siemens constitutes unreasonable cover.

SOW F 9.0 addresses installation and relocation manuals. Section 9.2

on the relocation manual states:

The Supplier shall develop and deliver a relocation manual

containing detailed step-by-step procedures required to

disassemble, pack, ship, unpack, reassemble, integrate, align,

adjust, troubleshoot, and test a complete FSS system. The

relocation manual must be of sufficient detail and in sequential

order to complete the relocation. No steps shall be omitted or

assumed. . . .

The USPS will validate the completeness and adequacy of the

relocation manual 12 months after the acceptance of the first

production FSS. All corrections, additions, or clarifications

identified by the USPS during this validation must be

incorporated into an updated relocation manual and submitted

to the USPS 8 weeks after the relocation manual discrepancies

are identified to the supplier by the USPS. The USPS will

review the updated manual and provide acceptance or rejection

within four weeks of receipt. . . .

Id. at A1621-22.

SOW B Rev F, incorporated by Mod. 23, is a spreadsheet of

deliverables, specifying, where applicable, a deliverable review period. Id. at

A1319. It provides that the manual’s review period is four weeks and that

15

Northrop “shall update per validation comments and resubmit 8 weeks later

USPS will review and provide acceptance or rejection within 4 weeks of

receipt.” Id. at A1323. The timelines in these two sections are consistent: one

year after the acceptance of the first production FSS machine, the Postal

Service would validate the manual; eight weeks after the Postal Service

identifies revisions to Northrop, Northrop must submit an updated manual;

and finally, the Postal Service had to accept or reject the updated manual

within four weeks.

The Postal Service accepted the first production FSS machine on July

23, 2010. Id. at A1503. Applying section 9.2 means validation of the manual

would begin July 23, 2011. Northrop submitted a draft manual on April 8,

2011, approximately eight months later. Id. at A1624. Northrop then

submitted another version, which it identified as its final submission, on

September 2, 2011. Id. at A1628. The Postal Service provided its response,

identifying defects, on November 22, 2011. At that point, Northrop had eight

weeks to respond. Northrop submitted its revision on February 10, 2012,

which with holidays appears to be within the eight week window. The Postal

Service identified seven critical and six major deficiencies in the manual and

rejected its second submission on March 1, 2012, less than three weeks later.

The party’s dispute, however, which of Northrop’s submissions

triggered the eight week review period. Northrop argues that the Postal

Service should have responded to the April 2011 submission within eight

weeks, citing to internal Postal Service communications suggesting that the

submission had been accepted by the agency’s failure to respond. Id. at

A1641. The Postal Service cites to August 2011 emails stating that the

relocation manual was incomplete. Def.’s Resp. Mot. Summ. J. A1507-08.

Thus, there is at a minimum a reasonable inference that the Postal Service

followed the timeline provided in section 9.2, precluding summary judgment.

As to unreasonable cover, Northrop argues that the Postal Service’s

replacement manual materially differed from the contract requirements. For

example, the new statement of work consisted of twenty pages, whereas

SOW F dedicated three paragraphs to the relocation manual. The contract for

a replacement manual was a cost-reimbursable contract rather than firm fixed

price, which, Northrop argues, gave the new supplier less concern for money

spent on developing the replacement manual. The new supplier also had the

benefit of recording the process of relocation. The Postal Service claims that

each of the differences was reasonable based on the detail necessary to

successfully relocate a machine. The reasonableness of the cover is fraught

with fact questions. We deny Northrop’s motion on count three.

16

4. Count Four: Deficient Spare Parts

The Postal Service alleges in count four that Northrop had a duty to

provide a certain level of spare parts for the FSS machines and that it failed

to provide the required amount of spare parts in two respects. First, during

the period prior to February 10, 2012 (“the deployment period”), Northrop

failed to provide spare parts to the level required by the contract, resulting in

a spare parts cost to the Postal Service of $1,179,636. Second, measuring

from February 10, 2012 (“the post-deployment period”), Northrop failed to

provide sufficient parts to bring the Depot Spare Parts Kit (“the Depot”)4 up

to the required six-month re-supply level, resulting in a spare parts cost to

the Postal Service of $1,143,999. Northrop moves for partial summary

judgment on the Postal Service’s claim that Northrop failed, in the post-

deployment period, to provide a six-month re-supply level in the Depot.

Northrop raises a question of contract interpretation: what was

Northrop’s obligation to replenish the Depot following the acceptance of the

final FSS machine? Northrop argues that, in the post-deployment period,

Northrop was required “to replenish the [Depot] with parts that, when

combined with those parts already on hand in the various Site Spare Parts

Kits [], would sustain the machines at the sites for a period of six months.”

Pl.’s Reply 35. The Postal Service responds that the contract requires that the

Site Spare Parts Kits must contain sufficient parts for two systems for six

months. The Postal Service argues that, in addition to the Site Spare Parts

Kits, Northrop must stock the Depot with parts sufficient to ensure

uninterrupted re-supply of all sites for at least six months and replenish that

Depot to maintain that re-supply level through February 10, 2012.

To understand Northrop’s duty relating to spare parts in the Depot in

the post-deployment period, we turn to SOW H.5 SOW H 1.0 provides

Northrop’s general obligation to “provide all parts necessary to maintain the

integrity and quality performance of all equipment . . . beginning with the

U.S. Postal Service acceptance of the first equipment.” Pl.’s Mot. Summ. J.

A1776. SOW H 1.5 explains that Northrop and the Postal Service “shall meet

in provisioning conferences and review meetings to exchange information

4

The contract refers to “Depot Spare Parts Kits,” plural, in the SOW H

Section 2.3 heading and then refers to a “Depot Spare Parts Kit,” singular, in

the text of section 2.3. The parties consistently refer to this kit as the Depot

or the DSPK, a single depot for spare parts for the FSS machines. We thus

adopt their terminology and refer to this kit as the Depot.

5

SOW H was incorporated into the Contract via Mod. 14 as SOW H Rev A,

dated April 28, 2010. Pl.’s Mot. Summ. J. A1767-70.

17

where the US Postal Service will determine the range, depth and location of

the spare parts, and the final composition of the spare parts kits.” Id. at

A1776.

Northrop was required to provide three types of spare parts kits:

Supply Items Kit, Site Spare Parts Kits, and the Depot. We are concerned

with the relationship between the Site Spare Parts Kits and the Depot. Section

2.2 provides that Northrop “shall provide a full and complete Site Spare Parts

Kit concurrent with the delivery of the first system at each FSS deployment

site.” Id. at A1777. A Site Spare Parts Kit “shall contain assemblies, sub-

assemblies, and components necessary to support the equipment at the Field

Replaceable Unit level (FRU) at each USPS site.” Id. If the site received

more than two FSS machines, Northrop was required to provide

supplemental Site Spare Parts Kits such that there was one kit for every two

machines. Id. Section 2.2.3 states that a Site Spare Parts Kit “shall contain,

at a minimum, a supply of items, to ensure continuous, uninterrupted

equipment operation for two systems, eighteen (18) hours a day, seven (7)

days per week, for a period of six months.” Id.

In addition to the Site Spare Parts Kits, section 2.3 requires Northrop

to provide “a full and complete Depot Spare Parts Kit [] to the USPS. The

Supplier shall deliver the [Depot] concurrent with delivery of the second

production field unit.” Id. at A1778. “The [Depot] shall contain assemblies,

sub-assemblies, and components necessary to support the re-supply of the

stockrooms at each USPS site and shall include insurance and other items not

provided as part of the [Site Spare Parts Kit].” Id. The Depot, according to

section 2.3.1, “shall contain spare parts and supplies necessary to ensure

uninterrupted re-supply of all sites for a minimum period of six (6) months,

based on a system population of 100 FSS.” Id.

Section 2.3.5 provides that Northrop “shall replenish the [Depot] from

the time the [Depot] is delivered to the USPS until one year after the final

acceptance of the last deployed FSS system.” Id. at A1779. Mod. 17 changed

the end of the Depot replenishment period to 30 weeks after the planned

acceptance of the last machine (February 10, 2012). Id. at A587. The parties

do not dispute that whatever the content of the Depot, that content had to be

sufficient to ensure uninterrupted re-supply of all sites for at least six months.

The dispute centers on what parts were required to fulfill the six-

month re-supply level standard. Northrop contends that the contract did not

require it to replenish the Depot such that the Site Spare Parts Kits and the

Depot contained duplicates, i.e., that the site kits contained sufficient parts

for an uninterrupted six months of operation and that the Depot contained the

18

same parts sufficient for six months of re-supply. Section 2.3 requires

precisely that, however: “assemblies, sub-assemblies, and components

necessary to support the re-supply of the stockrooms at each USPS site . . .

.” Id. at A1778. These are the same categories listed in the Site Spare Parts

Kits provision: “assemblies, sub-assemblies, and components necessary to

support the equipment at the Field Replaceable Unit level (FRU) at each

USPS site.” Id. at A1777. The Depot also was required to go beyond those

categories to provide “insurance and other parts not provided as a part of the

[Site Spare Parts Kit].” Id. at A1778.

Northrop contends that this duplication of parts is an irrational result,

but it is no more rational to suggest that the Site Spare Parts Kits contained

six months of spare parts and that the Depot would hold only parts not in the

site kits. The Depot was intended to re-supply, which in plain language

means to supply again, or to replace a supply that had previously existed.

Indeed the entire spare parts kits section indicates that the goal was to avoid

gaps in the supply of spare parts. Because the contract unambiguously

anticipated such duplication, we agree with the Postal Service that it is not

claiming more than the contract obligated Northrop to provide.

Northrop also argues that, even if it did not supply the contractually

required amount of spare parts, the Postal Service “waived its right to claim

entitlement for spares demanded outside and after the conclusion of [the

Post-Deployment Parts Provisioning Conference].” Pl.’s Mot. Summ. J. 60.

Northrop’s argument is that (1) the provisioning conference was the sole

contractual method for determining what parts would fill the Depot; (2) the

Postal Service ended the conference prior to finalizing what parts would be

included; and thus, (3) the Postal Service waived a claim for deficient spares

for any parts not covered during the conference. The Postal Service responds

that halting the Post-Deployment Parts Provisioning Conference in favor of

a more efficient process did not constitute a Postal Service waiver of its

entitlement to the contractually required amount of spare parts.

The contract defines waiver as “[a] U.S. Postal Service approved

relinquishment of an accepted policy, procedure, or requirement.” Def.’s

Resp. A101 (Section A1 2.0). The Federal Circuit consistently has stated that

“[a] waiver is ‘an intentional relinquishment or abandonment of a known

right.’” Laguna Constr. Co. v. Carter, 828 F.3d 1364, 1372 (Fed. Cir. 2016)

(quoting Massie v. United States, 166 F.3d 1184, 1190 n.** (Fed. Cir. 1999)

(internal quotation marks and citation omitted)). A waiver may be express or

implied, but the statement or conduct constituting the waiver must

unequivocally demonstrate that the party relinquished its contractual right.

Miller Elevator Co. v. United States, 30 Fed. Cl. 662, 686-87 (1994); see also

19

Sandler v. AII Acquisition Corp., 954 F.2d 382, 385 (6th Cir. 1992). The

waiver doctrine is “designed to prevent the waiving party from lulling the

other party into a belief that strict compliance with a contractual duty will

not be required and then either suing for noncompliance or demanding

compliance for the purpose of avoiding the transaction.” 13 Williston on

Contracts § 39:15 (4th ed.).

SOW H 1.5 provided that the Postal Service would determine the

range, depth, and location of parts and the final composition of the spare parts

kits through provisioning conferences and review meetings. Section 5.0 sets

out the details, stating that Northrop “shall host a spares review meeting and,

at a minimum, two (2) provisioning conferences.” Pl.’s Mot. Summ. J.

A1790. The Postal Service would “utilize the three meetings/conferences . .

. to define the range and depth of spares kits, but may utilize additional parts

provisioning conferences to correct range and depth issues identified through

actual parts demand and consumption. At the meeting and conferences, the

USPS shall direct the Supplier to modify” the kits and the Depot. Id.

The “three meetings/conferences” are the 5.2 Spares Review Meeting,

5.3 Pre-Deployment Parts Provisioning Conference, and 5.4 Post-

Deployment Parts Provisioning Conference. The pre-deployment

discussions would center on adding, deleting, and modifying the spare parts

list.

At issue here is the Post-Deployment Parts Provisioning Conference.

Section 5.4 states that Northrop “shall host a post-deployment provisioning

conference.” Id. at A1792. The delivery schedule set the date of the

conference, but it could be held “no later than 60 days prior to scheduled

delivery of base buy final production equipment and after acceptance of the

production baseline TDP and production baseline provisioning

documentation by the USPS. The intent of this conference is to finalize

provisioning requirements . . . .” Id.

Section 5.4.1 continues that Northrop and the Postal Service shall

“jointly review” the “[c]onfiguration of all spare parts kits . . . during the

post-deployment parts provisioning conference.” Id. The Postal Service “will

direct the addition of items, delete items, and/or modify quantities of items

during the post-deployment parts provision conference.” Id.

Northrop contends that the waiver occurred when the Postal Service

halted the review of the spare parts kits and failed to finalize additions,

deletions, and modifications during the Post-Deployment Parts Provisioning

20

Conference. Northrop cites to meeting notes that indicate that the contracting

officer attended the conference. The notes state that,

The team reviewed the NGSC sparing recommendations for all

items down to a USPS demand quantity (six month forecast)

of 14 (approximately 156 line items). . . . At this point, USPS

determined that it will be more efficient to stop the line by line

review of the data at the group level and conclude the meeting.

USPS assumed the action to complete their own internal

review of the remaining items and submit the resulting

recommendations by Jul 1st 2011 . . . .

Id. at A1813. Northrop also cites to deposition testimony in which a Postal

Service representative stated, “There were several spares meetings. . . . But

provisioning conference as specified in the SOW did not occur.” Id. at

A1818.

The Postal Service responds that the section 5.4 provisioning

conference did not occur because Northrop failed to provide the production

baseline TDP and production baseline provisioning documentation to the

Postal Service prior to scheduling the post-deployment conference. The

Postal Service highlights that the conference notes do not reference those

documents. The Postal Service also cites a declaration from a Postal Service

Maintenance Specialist, Thomas J. Fuchs, in which he states, “As of May 30,

2011, the FSS was not stable enough to finalize provisioning requirements,

validate spare parts kits configuration, or validate level of repair . . . .” Def.’s

Resp. A3792-93.

Because the Postal Service concluded the conference and initiated a

separate process for finalizing the spare parts list, we can agree with Northrop

that this constitutes a relinquishment of the parts provisioning conference

process, particularly because the contracting officer was present. But

Northrop further argues that we should extend that relinquishment to the

underlying requirement that Northrop must provide a particular level or

amount of parts in the Depot during the post-deployment period. We

disagree. Even if the Postal Service waived the process to finalize the list

during the conference, this waiver does not extend as far as Northrop argues.

The notes that Northrop cites are susceptible to the reading that the

parties agreed to extend the process of finalizing a spare parts list because

the in-person process was unwieldy and the parties were not fully prepared.

The notes state, “It was agreed that NGSC will review the USPS inputs . . . .

At the point where all recommendations are recorded on each part’s portion

21

of the spreadsheet, the completed document will be distributed, and the

Provisioning conference will be complete.” Pl.’s Mot. Summ. J. A1813-14.

The Postal Service did not trap Northrop into the expectation that the Postal

Service would not finalize the list of parts or request replenishment. Instead,

the Postal Service followed this meeting with correspondence regarding the

spare parts list. Id. at A1830, A1833-1965.

Likewise, the Postal Service deposition testimony, in addition to Mr.

Fuchs declaration, does not state unequivocally that the Postal Service

abandoned the contract procedure, but rather that the Postal Service did not

believe the provisioning conference was convened properly. We cannot

agree with Northrop that the facts presented demonstrate that the Postal

Service waived its claim for a failure to replenish the Depot to the required

level by waiving the process set out in SOW H 5.4 and 5.4.1.

In sum, the contract provides for the existence of duplicates between

the Site Spare Parts Kits and the Depot. The Postal Service did not waive its

right to a claim for any parts ultimately required but missing from the spare

parts list. The fact question remains whether Northrop provided the parts that

the Postal Service alleges it failed to provide. Thus, we deny Northrop’s

partial motion for summary judgment on count four.

5. Count Five: Costs Incurred During the FSS Machine Retest

In count five, the Postal Service alleges that it incurred $1,589,747.41

in costs due to Northrop’s FSS machine failing to pass the first article test

and field acceptance tests, leading to retests. Northrop argues that the Postal

Service incurred no unanticipated cost because, even with the retesting, the

testing period lasted less than the eight weeks anticipated by the contract.

Northrop also maintains that, even if it must reimburse the Postal Service for

costs associated with the retesting, the contract only requires payment for

Postal Service personnel, and that the payment should be at the actual rate

rather than the contractual rate.

The relevant contract sections are SOW A 8.1.4 and 8.5. Section 8.1.4

provides that the Postal Service “will formally perform an operational test of

the system in a live mail environment, with a per day duration of up to 16

hours of operation. The Active test is an eight week formal acceptance test .

. . .” Id. at A2055. Section 8.5 states, “[I]f the FSS fails to pass all of the

requirements in the contract or the Supplier elects to stop the acceptance test

prior to acceptance, the Supplier shall reimburse the USPS for the cost

associated with the retest. This reimbursement is over and above other

remedies specified in the contract terms and conditions.” Id. at A2056. The

22

section provides that Northrop “will be charged at a rate of $60 per work

hour for . . . [t]he total time spent by the USPS Test Director and other test

personnel . . . .” Id.

Although Northrop may be correct that the field first article test plus

the retests together spanned less than eight weeks, the trigger for Northrop

reimbursing the Postal Service for the costs associated with retest is not the

passage of eight weeks. Instead, reimbursement is required if “the FSS fails

to pass all of the requirements in the contract or the Supplier elects to stop

the acceptance test . . .” Id. at A2055. As we indicated at oral argument,

whether the FSS machine met the contract requirements involves disputed

facts.

Northrop’s argument regarding the reimbursement rate is similarly

unavailing. Section 8.5 sets a contract rate of reimbursement that

hypothetically could be higher or lower than the actual cost incurred due to

retesting. Setting a contractual rate, as the parties did here, accounts for the

risk associated with the FSS machine failing the first article test and needing

retests. Northrop’s attempt to narrow the category of personnel it would

reimburse also defies the plain reading of section 8.5 that reimbursement

covers the USPS Test Director, a singular person from the Postal Service,

and any other test personnel that the Postal Service uses. There is no inherent

limit in the phrase “other test personnel” to Postal Service employees. We

deny Northrop’s motion for summary judgment on count five.

6. Count Seven: On-Site Software Testing and Support

The Postal Service alleges in count seven, paragraphs 103-106, that

Northrop had a contractual duty to provide on-site support for Pre-Beta and

Beta testing of Software Release 2.5.4 and that it failed to do so. 6 Northrop

moves for partial summary judgment on count seven, arguing that the Postal

Service’s contemporaneous documents demonstrate that Northrop offered to

provide on-site support but that the Postal Service declined Northrop’s offer.

The Postal Service contends that there is a genuine dispute regarding whether

Northrop provided on-site support.

6

On June 11, 2018, the court granted the Postal Service’s motion to amend

its counterclaim, including these paragraphs, to specify that Northrop failed

to provide the on-site software testing support rather than more broadly

stating that Northrop failed to perform its software testing obligations under

SOW E. The parties agree that Northrop did not have an obligation to

perform the testing of the Pre-Beta and Beta software release.

23

SOW E 6.0 covers software testing. Section 6.4 states, “After

successful completion of all development testing and once code corrections

are made and re-tested, the Supplier shall provide on-site support when the

USPS Engineering or designated test contractor is present during Pre-Beta

and Beta testing.” Id. at A2121. Northrop cites emails to show that Northrop

offered, and the Postal Service declined, Northrop’s on-site support. We

note, however, that Northrop does not cite correspondence from Northrop’s

software manager, or anyone else from Northrop, offering to perform the

support. Instead Northrop cites a January 2012 email in which the Postal

Service software manager states, “I met Cathryne [Northrop’s software

manager] and obtained the 2.5.4 media and stated, we would do the testing.”

Pl.’s Reply A2786. The email provides no more information about that

conversation. The sentence does not refer to Northrop’s support obligation.

The cited correspondence does not refer to testing or support again.

On the other hand, in deposition testimony, the Postal Service stated

that Northrop was required to support testing, but Northrop “did not come

and support us on the pre-beta. They did not come and support us on the

beta.” Pl.’s Mot. Summ. J. A1708; see also Pl.’s Reply A2795. Northrop’s

citations do not establish an absence of dispute over whether Northrop

provided on-site support when the Postal Service tested the software. We

deny Northrop’s partial motion for summary judgment on count seven.

7. Count Eight: Breach of Warranty

The Postal Service alleges in count eight that the contract required

Northrop to provide warranty coverage for defects in FSS machines from the

acceptance of the first FSS machine until nine months after the acceptance

of the twelfth FSS machine. The Postal Service argues that it invoked its

warranty coverage for twenty-six design defects by letter to Northrop dated

June 9, 2011. Pl.’s Mot. Summ. J. A2195-A2198. Northrop responded

August 10, 2011, denying the validity of the claims.

In the April 2012 final decision, the contracting officer asserted a

claim against Northrop for “Design Warranty Issues,” and concluded that

Northrop owed the Postal Service $4,797,151 “in consideration for the

design warranty tasks not performed.” Id. at A947. The contracting officer

provided a spreadsheet that listed twenty-one alleged defects. Id. at A966A-

A966C.

The Postal Service now alleges that Northrop breached the contract

by refusing to fulfill its contractual warranty obligations regarding the

defects that the Postal Service identified in its letter, leading to $4,425,496

24

in damages. The Postal Service’s engineer identified in his damages estimate

four additional alleged defects that were not listed in the contracting officer’s

final decision.7 Id. at A2198-99. The final number of warranty claims is

twenty-six, the same number and type as were identified in the June 2011

letter.

Northrop agrees that the contract required it to provide certain

warranty coverage, but contends that the Postal Service did not raise the

claims properly under the contract’s warranty provisions. Before turning to

the warranty provisions, Northrop moves to dismiss warranty claims that do

not include an assertion of damages on the Postal Service’s design-warranty

damages spreadsheet.8 Pl.’s Mot. Summ. J. 71 n.29. The Postal Service

agrees, “[N]o damages for those items are claimed. Consequently, there is no

portion of Count VIII based upon these items, and there is nothing to

dismiss.” Def.’s Resp. 83-84. Insofar as concerns those six items, we grant

Northrop’s motion to dismiss.

Northrop also contends that the four claims that were not included in

the contracting officer’s final decision must be dismissed. Northrop notes

that for Nos. 3 and 10, the Postal Service has not alleged any damages

relating to the defect. Regarding those two claims, the Postal Service agrees:

Nos. “3 and 10 are not issues for which the Postal Service asserts damages,

and so are not part of a claim in this litigation.” Id. at 87. Thus, on Nos. 3 and

10, we grant Northrop’s motion to dismiss.

Regarding Nos. 21 and 24, the Postal Service argues that they “were

combined with items 15 and 23, respectively, in the contracting officer’s

analysis” and that the contracting officer broadly stated his decision

concerned the items identified in the June 9, 2011 letter. Def.’s Resp. 87,

A1777, A1812-14. No. 21 is a claim for defect in the “CASTR Guide

Hardware” and No. 15 is a claim for defect in the “Left CASTR Guide Rail.”

No. 24 is a claim for defect in the “FSS Electrical Cabinet Disconnect

Switches” and No. 23 is a claim for defect in the “ITC Electrical Cabinet

Disconnect Switches.” In both of these cases, the item involved is hardware,

the same hardware is implicated in both claims, and the difference between

the contracting officer’s final decision and the claim currently before the

court is a matter of modifying or adjusting the same claim to be more

specific. We deny Northrop’s motion to dismiss claims on Nos. 21 and 24.

7

These are claim Nos. 3, 10, 21, and 24.

8

These are claim Nos. 12, 13, 19, 20, 22, and 25.

25

The question on the remaining eighteen warranty claims is whether

the contract unambiguously provides for a particular process by which the

Postal Service was required to raise each warranty claim. This is a legal

question, the answer to which begins with identifying the contract’s warranty

provisions.

In Award Data Sheet paragraph 23, Northrop “warrants to (1) correct

design defects including the retrofit/replacement of accepted, installed, and

work in process systems, assembly process, parts storage, site and depot kits,

pending replenishment orders, maintenance and training documentation and

course materials at no additional cost to the Postal Service for a period

beginning at first system acceptance and ending 9 months after the

acceptance of the 12th production field system . . . .” Pl.’s Mot. Summ. J.

A116.

Clause 2-8 Warranty (March 2006) (Modified) provides,

a. The supplier warrants for the period at acceptance of any

supplies beginning at acceptance of the first system and ending

at one year after the acceptance of the final (100th) system, that

all supplies furnished under this contract, including packaging

and markings, will be free from defects in material or

workmanship and will conform with the specifications and all

other requirements of this contract.

b. Within the warranty period specified above, the contracting

officer must give written notice to the supplier of any breach

of warranty and either:

(1) Require the prompt correction or replacement of any

defective or nonconforming supplies; or

(2) Retain them, reducing the contract price by an amount

equitable under the circumstances. . . .

f. Repair, correction or replacement in the manner provided

above shall constitute fulfillment of Seller’s obligations under

this assurance. Such assurance shall apply to design, but not to

any equipment or parts which have been subject to accident,

misuse or unauthorized alteration . . . . The procedure for

evaluation of design failures and remedies for design defects

shall be as stated in Section A11.0 – A11.3 of the Statement of

Work. This assurance shall apply to and include correction of

Technical Data pertinent to defective work and equipment as

the extent delineated. This warranty concerns hardware and not

26

computer software. The warranties for computer software are

provided in Clause 4-13, Software License Warranty and

Indemnification (March 2006), and Clause 4-14, Software

Development Warranty (March 2006). Nothing in this clause

shall be construed to negate any provisions of the Statement of

Work, including but not limited to those referring to the Failure

Reporting, Analysis and Corrective Action Systems

(FRACAS).

g. The foregoing covenants are exclusive and are in lieu

of any warranty of merchantability, fitness for particular

purpose or other warranty of quality, whether express,

statutory or implied. In no event shall seller be liable for

special, indirect, incidental, or consequential damages

resulting from any defects or deficiencies in accepted items. . .

.

Id. at A68 (emphasis omitted).

Clause 2-8 refers to SOW A 11.0 through 11.3 for the procedure to

evaluate design failures and remedies for design defects. SOW A section 11.0

states, “The manufacturer shall warrant each and every FSS unit/system to

be free from defects in material, workmanship, and design for the period

starting at first system acceptance through one year after the acceptance of

the final (100th) field unit. The warranty provided within [Clause 2-8]

applies to all requirements of this SOW.” Id. at A2059.

Sections 11.2 and 11.3 provide the “PC Board Warranty” and for

“Burn-In of Electronic Components,” respectively. Section 11.1 states,

The Supplier shall provide for the replacement/retrofit of failed

parts due to defects in materials, workmanship, and design.

Any replacement/retrofit shall include all systems, parts,

updates to the system technical data and logistic support

deliverables, each at no additional cost to the USPS.

The Supplier shall implement a Failure Reporting, Analysis,

and Corrective Action System (FRACAS) process per the

requirements in this Section and in conjunction with

requirements in Sections D, F, H, J, and M.

The FRACAS program shall collect failure data, receive and

store failed hardware, document all failure events in a common

27

FRACAS database, analyze all failure data and perform failure

analysis to determine if a trend has occurred. Failure Analysis

is defined as performance to a) verify a failure, and b) isolate a

failure to FRU, subassembly and/or piece-part.

Once a failure trend has been identified, the Supplier shall

perform detailed root cause analysis on all trend failures, and

implement and/or recommend the appropriate corrective action

to prevent failure recurrence. . . . A failure trend is defined as

3 or more of the same unit part number failing in the population

of FSS, when the FRU/component has a population of 10 or

less in each FSS. . . .

The Supplier shall design/develop, propose and implement

corrective actions for all failure trends at no additional cost to

the USPS.

Based on the root cause analysis results, trend failures shall be

separated into the following failure categories:

1. Design defects,

2. Manufacturing defects.

3. Physical or functional degradation below specification

limits. . . .

Based on root cause analysis and the failure categorization,

applicable corrective measures shall be proposed by the

Supplier or review and acceptance by the USPS prior to

Supplier redesign, retrofit or support process change. The

Supplier proposed corrective action must include retrofit of

deployed systems, modification of any logistic support system

affected by the corrective action or impacted by a change to the

unit design, where applicable. The Supplier shall perform such

corrective actions at no additional cost to the USPS. . . .

Corrective measure options shall include, but are not limited

to, the following:

1. Hardware design modification.

2. S/W and/or firmware modification. . . .

The Supplier shall not implement any corrective action without

USPS review of root cause analysis and approval of proposed

corrective actions. Any Supplier proposed corrective action

28

must not increase USPS maintenance workload, unless

approved by the Contracting Officer.

Id. at A2059-60.

Finally, Clause 4-14 Software Development Warranty (March 2006)

(Modified) provides,

If any time during the 12-month period immediately following

acceptance, the supplier or the Postal Service discovers defects

or errors in the software or any respect in which the software

fails to conform to the provisions of any other warranty

contained in this contract, the supplier must, entirely at its own

expense, promptly correct the defects, errors, or nonconformity

. . . as may be necessary to keep the software in operating order

in conformity with the warranties in this contract.

The Postal Service will provide written notice of the defects,

errors or nonconformity to the Supplier within the 12-month

period immediately following acceptance of the software. The

foregoing covenants are exclusive and are in lieu of any

warranty of merchantability, fitness for particular purpose or

other warranty of quality, whether express, statutory or

implied.

Id. at A82 (emphasis omitted).

Based on the foregoing provisions, Northrop argues the Postal Service

was required to raise the alleged defects through the contractually-prescribed

process. Northrop purports to divide the claims into software, hardware, and

mixed defect claims, each of which must have been raised under a specific

provision. Specifically regarding the ten claims9 it regards as software

defects, Northrop argues that the exclusive warranty clause was Clause 4-14.

The Postal Service cited Award Data Sheet paragraph 23 in its June

2011 letter and in the contracting officer’s final decision. Paragraph 23 states

a warranty for design defects. It does not list any particular means to invoke

the warranty. It provides that design defects include the systems, assembly

process, various claims related to spare parts, and maintenance and training

materials. Even reading the “including” clause to limit the phrase “design

defects,” the items on the Postal Service’s list appear to relate to the system,

9

These are claim Nos. 2, 4, 5, 8, 9, 17, 19, 20, 22, and 25.

29

its assembly, and the FSS machine parts. Northrop’s argument that this

paragraph is too narrow to include any of the claims is inconsistent with the

broad term “design defects” and the accompanying examples.

We disagree that Clause 4-14 provides the exclusive remedy for the

Postal Service’s claims. The contract unambiguously provides, in Clause 4-

14 and elsewhere, several software warranties. Clause 4-14 itself explicitly

states that if there is a software defect or the software does not conform to

any other warranty provision, the Postal Service may inform Northrop and

Northrop must correct the defect, error, or nonconformity. Clause 4-14 goes

on to repeat the assurance that the software must operate in conformance with

the warranties—plural—in the contract.

Not only does Clause 4-14 state twice that software must conform to

all warranty provisions, Clause 4-13 and SOW A 11.4 provide two other

software-specific warranties. In Clause 4-13, Northrop warrants that it has

“full power and authority to grant the rights contained in this contract with

respect to the software without consent of any other person.” Pl.’s Mot.

Summ. J. A82. SOW A 11.4 provides a software warranty, stating, “In

addition to the basic warranty described in the contract, the Supplier shall

provide a software design warranty for the period through six (6) months

after acceptance of the last production FSS. The software design warranty

provides software corrections from defects beyond the standard warranty

coverage and scope.” Id. at A2060. The contract contradicts Northrop’s

argument that Clause 4-14 was the sole remedy the Postal Service had for

software defects.

Notably, even if we agreed that the Postal Service’s software defect

remedy was to invoke the Clause 4-14 warranty, the Postal Service fulfilled

the procedure set out in that clause: provide written notice of the defects. If

Northrop had responded to the Postal Service’s June 2011 letter stating that

Clause 4-14 was the proper warranty to invoke, the Postal Service would

need to change nothing about its claim to satisfy Clause 4-14’s procedure.

Presumably, Northrop is arguing that the notice must state, “The Postal

Service relies on Clause 4-14.” We find that the terms of Clause 4-14, read

together with the other warranty provisions, do not bar the Postal Service

from citing Paragraph 23 for its claims or require the Postal Service to

expressly mention Clause 4-14.

Shifting from software to hardware, Northrop contends that sixteen

warranty claims are hardware claims that must be asserted under Clause 2-

8’s warranty for supplies, including related services. It makes the distinction

that the clause provides a warranty for hardware, not software. To invoke

30

Clause 2-8, the contracting officer make the claim in writing and either

require Northrop to repair or replace the parts or state the Postal Service’s

intention to retain the supplies and reduce the contract price accordingly.

The Postal Service contracting officer informed Northrop of its breach

in writing. Nothing in Clause 2-8 requires the Postal Service to literally state,

“We invoke Clause 2-8.” And the Postal Service instructed Northrop to

respond with a plan to correct the design defects, including “[r]ecommend

when and how the retrofit or replacement will occur, i.e. replace all parts

immediately in field and depot, replace as fail, etc. Provide date when retrofit

or replacement of each item will be complete.” Id. at A2196.

Moreover, both Clause 2-8 and Award Data Sheet paragraph 23

provide a warranty against design defects. The list following “design defect”

in Paragraph 23 includes at least two types of hardware: the FSS machines

and the accompanying spare parts. We find that the Postal Service met its

Clause 2-8 requirements to invoke the Clause 2-8 warranty and that there is

nothing inconsistent in expressly invoking Paragraph 23.

Related to Northrop’s hardware defects argument is its argument that

the contract provided an exclusive process for identifying defects and

resolving them: FRACAS. We disagree. SOW A 11.1 reiterates the Section

11.0 warranty guaranty and then launches into a lengthy process for Northrop

to identify failure trends and how to correct trends that Northrop discovers.

The Postal Service does not perform or trigger FRACAS. It is a free-standing

review process related to discovering and resolving failure trends. Taking

section 11.3 at face value means that the FRACAS process occurs without

impeding the design defect warranties provided in Section 11.0, Clause 2-8,

and Award Data Sheet paragraph 23. We find that the FRACAS process does

not preclude the Postal Service from invoking the warranties provided in the

contract. Northrop’s argument that the hardware-related claims must be

subject to FRACAS prior to being a valid claim is thus unavailing.

In sum, Award Data Sheet paragraph 23 provided a warranty that

includes these design defects claims, the other warranty clauses did not

preclude the Postal Service from invoking Paragraph 23, and the Postal

Service met the requirements under any of the three clauses to invoke the

warranty for a design defect. We deny Northrop’s motion for summary

judgment on the warranty claims except Nos. 3, 10, 12, 13, 19, 20, 22, and

25, on which we granted Northrop’s motion to dismiss.

31

8. Count Nine: Repudiation of the Life Cycle Support

In count nine, the Postal Service alleges that it will sustain $1,880,800

in damages due to Northrop repudiating its obligation to provide life cycle

support for the FSS machines. Northrop argues that it is entitled to summary

judgment because the undisputed facts demonstrate that Northrop did not

repudiate its obligation to provide life cycle support.

SOW H 6.0 covers life cycle support. It begins with a summary of

Northrop’s life cycle support obligations: “to provide adequate sources for

purchase of commercially available items for the life of the equipment; . . .

to provide adequate technical data for the life of the system not just during

the initial phases of the equipment life; . . . to document life-cycle support in

a Life Cycle Support Plan.” Id. at A2291. The section proceeds to detail how

Northrop will accomplish the three goals.

To demonstrate Northrop’s purported repudiation, the Postal Service

cites to Postal Service deposition testimony that Northrop had ended the FSS

program, to an internal email indicating that Northrop was ending the

program, and to other communications and deliverable spreadsheets

indicating that Northrop was closing out its obligations to the program at a

time when it had not confirmed its continuing life cycle support obligations.

Def.’s Resp. 88-89. To demonstrate that Northrop did not perform life cycle

support, the Postal Service cites to agency-generated Problem Reports, which

it explains are part of the basis for its damages claim. E.g., Pl.’s Mot. Summ.

J. A1764.

The Postal Service does not provide a citation to any document in

which Northrop unequivocally states it would not perform the duties listed

in SOW H 6.0 or that it did not intend to provide life cycle support to the

Postal Service. Northrop in fact submitted a life cycle support plan as called

for in SOW H 6.0. Id. at A2311-2320. The Postal Service also does not

suggest that it contacted Northrop for any life cycle support or to fulfill a

specific aspect of parts sourcing called for in SOW H 6.0.

Northrop’s internal communications are not sufficient to create a

reasonable inference that Northrop repudiated its obligation to accomplish

three specific tasks, particularly when Northrop accomplished one of those

tasks–submitting the support plan. Likewise, citations to Problem Reports,

without a tie to an obligation in SOW H 6.0 and without citation to when the

Postal Service made Northrop aware of these problems, is not sufficient to

support an inference that Northrop refused to perform life cycle support

related to parts. Because there is no genuine dispute of material fact and

32

because the undisputed facts cannot reasonably support a conclusion that

Northrop repudiated or failed to perform its life cycle support obligations,

we grant Northrop’s motion on the Postal Service’s count nine.

B. Defendant’s Partial Motion for Summary Judgment

The Postal Service moves for partial summary judgment on

Northrop’s counts three, four, and five, and for summary judgment on

Northrop’s count one and seven. Because we granted the Postal Service’s

motion to dismiss Northrop’s count one asserting a cardinal change, we need

not consider the alternative motion for summary judgment on the same count.

For the reasons set out below, we deny the Postal Service’s motion

regarding the delay in beginning Phase III Maintenance Training, relating to

count four paragraphs 69-71. We grant the Postal Service’s motion regarding

failure to provide on-site representatives to manage handbook disputes,

stated in count five ¶ 258(f). We grant-in-part the Postal Service’s motion

regarding Northrop’s count five. Finally, we grant the Postal Service’s

motion for summary judgment on count seven regarding a defective

specification.

1. Count Four ¶ 69-71: Phase III Maintenance Training

Northrop alleges that the Postal Service delayed Phase III

Maintenance Training by rejecting Northrop’s handbook submission and

requiring Northrop to submit a handbook that went beyond the contract’s

requirements. The Postal Service argues that the contract unambiguously

provided that the handbook had to be complete to begin training and that

Northrop’s handbook was not complete, thus precluding a delay and

disruption claim. The disputed provision of the contract is in Mod. 7:

The FSS Phase III Maintenance Technician course training

validation will not begin until the Postal Service determines the

following requirements have been met, and then gives Supplier

approval to proceed: a. FSS Phase-II Maintenance Technician

training course; b. Supplier validated PH1-1 electronic

handbook; and c. Preliminary MDSS functionality, in

accordance with ATTACHMENT A, Table 1.

Def.’s Mot. Summ. J. A1114-15.

Mod. 7 sheds no light on the standard for completeness. Northrop and

the Postal Service advance different interpretations of the content required in

33

PH1-1 handbook before training began. Northrop cites to communications

with the Postal Service leading up to and after July 2009 concerning what

had to be included in the handbook to begin training. The Postal Service cites

to other contract provisions on standards for the handbook deliverable as well

as communications between the parties at the time.

We find that Mod. 7 introduced ambiguity into the contract regarding

the contents of the PH1-1 handbook. The contract provisions regarding the

FSS maintenance handbook do not clarify whether the handbook was

permitted to be partial or was required to be complete. Both parties have

provided extrinsic evidence regarding the meaning of “Supplier validated

PH1-1 electronic handbook”. The Postal Service advances a reasonable

interpretation of the clause. There is a fact question regarding what the parties

intended to be in the handbook prior to Phase III Maintenance Training and

whether the Postal Service interfered with the submission of the handbook.

We deny the Postal Service’s motion for summary judgment regarding the

delay in beginning Phase III Maintenance Training, as asserted in count four

and to the extent it is asserted in other counts.

2. Count Five ¶ 258(f): On-Site Representatives

As part of count five’s constructive change claim 46, Northrop alleges

that the Postal Service caused additional costs from 2007 to 2009 by failing

“to have representatives on site” at Northrop with the authority to resolve

certain disputes. Pl.’s Am. Compl. ¶ 258(f). The Postal Service moves for

summary judgment on this portion of claim 46 on the grounds that the

contract did not require the Postal Service to provide on-site representatives

at Northrop to resolve disputes related to the handbook.

Northrop does not cite to a contract provision requiring the Postal

Service to provide such support. Instead, Northrop argues in its response to

the Postal Service’s motion that the Postal Service breached its duty of good

faith and fair dealing by failing to provide the on-site support. Northrop

argues that it justifiably expected such support to avoid and quickly resolve

handbook-related disputes. The Postal Service responds that Northrop’s only

support for such an obligation are pre-contract expectations that were not

incorporated in the contract. The Postal Service contends that Northrop

cannot use the implied duty of good faith and fair dealing to expand the Postal

Service’s substantive duties.

The implied duty of good faith and fair dealing acts as a complement

to the duties expressly provided for in the contract by preventing either party

from interfering in performance or acting in a manner that deprives the other

34

party of the benefit of the contract. Metcalf Const. Co., Inc. v. United States,

742 F.3d 984, 994 (Fed. Cir. 2014). A party need not point to an express

contract provision that has been violated to invoke this implied duty, but it

cannot use the implied duty of good faith and fairing dealing to create duties

inconsistent with the express terms of the contract. See Precision Pine &

Timber, Inc. v. United States, 596 F.3d 817, 829-31 (Fed. Cir. 2010); Centex

Corp. v. United States, 395 F.3d 1283, 1304-07 (Fed. Cir. 2005).

Northrop cites to its November 2006 pre-contract technical proposal

in which it included language demonstrating that it expected on-site support.

No such commitment was incorporated into the contract, however, and

Northrop has not cited to any communication during performance that would

suggest the Postal Service acknowledged the need for on-site agency support

or that it agreed to provide it as a precondition to Northrop’s performance.

The parties made specific provision in the contract governing handbook

deliverables that does not include on-site support. We therefore grant the

Postal Service’s motion for summary judgment regarding Northrop’s

assertion that the Postal Service failed to provide on-site support for

handbook-related disputes in count five paragraph 258(f) and to the extent it

is asserted in other counts.

3. Count Five: Discretely Priced Constructive Changes

Northrop’s count five claims damages for 50 discretely priced

constructive changes regarding hardware-related design, totaling

$42,712,265. The Postal Service moved for summary judgment with respect

to the first 43 constructive-change claims enumerated in complaint

paragraphs 75 through 244, $11,012,625 of the total claimed for constructive

changes. The Postal Service argues that (1) Northrop has not identified a

Postal Service representative with contracting authority who gave a direction

constituting a change and (2) Northrop cannot establish that it gave the Postal

Service timely notice that it viewed such direction as beyond the scope of the

contract.

Advancing a gestalt view of its constructive change claims, Northrop

contends that it “has provided a compilation of evidence that, read as an

integral whole, raises genuine issues of material fact regarding the notice and

direction elements of a change.” Pl.’s Sur-Reply 7. This ‘whole-is-greater-

than-its-parts’ approach cannot suffice, however, if there is an absence of any

specific evidence of authority or notice. Instead of addressing the 43 claims

individually, we will address Northrop’s theories of authority and notice

underlying these claims, using individual claims to test Northrop’s argument.

35

We begin with the theory of constructive change. When a contracting

officer, without issuing a formal change order, requires the contractor to

perform work that it regards as being beyond the contract requirements, the

contractor may elect to treat the contracting officer’s directive as a

constructive change and pursue an equitable adjustment. See Ets-Hokin

Corp. v. United States, 420 F.2d 716, 720 (Ct. Cl. 1970). The Changes Clause

in the FSS production contract provides:

(1) The contracting officer may, in writing, without notice to

any sureties, order changes within the general scope of this

contract in the following: (a) - (f) . . . .

(2) Any other written or oral order (including direction,

instruction, interpretation, or determination) from the

contracting officer that causes a change will be treated as a

change order under this paragraph, provided that the supplier

gives the contracting officer written notice stating (a) the date,

circumstances, and source of the order and (b) that the supplier

regards the order as a change order.

(3) If any such change affects the cost of performance or the

delivery schedule, the contract will be modified to effect an

equitable adjustment.

(4) The supplier’s claim for equitable adjustment must be

asserted within 30 days of receiving a written change order. . .

.

Def.’s Mot. Summ. J. A77-78.

A successful constructive change claim thus requires demonstration

of (1) authority to direct Northrop to perform work beyond the contract’s

scope and (2) written notice that Northrop regarded the direction as a change

order.

a. Authority

Turning first to authority, for six of its claims, Northrop argues that

the contracting officer provided the direction that constituted a change. On

another nine of the claims, Northrop argues that a Postal Service contract

specialist had actual authority to give the direction. For the remaining claims,

and in the alternative on the fifteen referenced in the two preceding

sentences, Northrop argues that the contracting officer ratified a direction

given by non-authorized Postal Service personnel. Additionally, on all but

four of the claims, Northrop argues that the Postal Service admitted in its

answer that the direction was given by authorized personnel and that

36

Northrop informed the Postal Service that it regarded the direction as a

change order.

i. Direction from Contracting Officer

The contract expressly states that the contracting officer is the Postal

Service official with the authority to give an informal order that may be

considered a change. Northrop argues the contracting officer gave a direction

that amounted to a change in claims 15, 17, 18, 24, 29, and 39.

Claim 39 was the only claim for which we could readily ascertain that

the contracting officer may have directed the work himself. In claim 39,

Northrop asserts that certain electrical cabinets were contractually required

to have warning labels. After Northrop designed what it alleges were

compliant labels, the Postal Service directed Northrop between October 2007

and January 2008 to change them. Later, in a September 2008 letter,

contracting officer David Milnes wrote that Northrop “must resolve all of

these non-compliant issues,” including changing the labels. Def.’s Supp.

App. Vol. 5 A886-911. That September 2008 letter to Northrop is followed

by citations to similar letters from the contracting officer characterizing the

labels as noncompliant. The Postal Service concedes in its motion that these

letters would be sufficient to demonstrate an authorized direction to do the

work, but it points out that Northrop offers no evidence that it viewed the

direction as a change order.

For the other claims Northrop provides lists of citations and states that

the contracting officer directed the change among many other asserted

authorization theories. Our review reveals that, by and large, these citations

do not point to any evidence that the contracting officer was the person who

directed Northrop to perform the work at issue. If Northrop can cite to direct

communication, written or verbal, from the contracting officer, such as the

letter supporting claim 39, we agree that there is a fact question regarding

whether the contracting officer provided the direction. For any claim that

Northrop cannot cite to such direct communication, Northrop’s argument

that the contracting officer directed the change fails.

ii. Implied Actual Authority

Northrop alternatively relies on implied actual authority regarding

nine of its constructive change claims.10 “Actual authority may be either

10

Northrop argues implied actual authority regarding claims 3, 7, 15, 17, 18,

24, 27, 30, and 38.

37

express or implied.” Liberty Ammunition, Inc. v. United States, 835 F.3d

1388, 1402 (Fed. Cir. 2016). “An employee of the Government has implied

actual authority to enter an agreement only when that authority is an ‘integral

part of the duties assigned to [the] government employee.’” Id. (quoting H.

Landau & Co. v. United States, 886 F.2d 322, 324 (Fed. Cir. 1989) (internal

quotation marks omitted)). “Authority is integral ‘when the government

employee could not perform his or her assigned tasks without such

authority.’” Id. (quoting Flexfab, LLC v. United States, 62 Fed. Cl. 139, 148

(2004), aff’d, 424 F.3d 1254 (Fed. Cir. 2005)). Furthermore, this court has

held that implied actual authority cannot exist where the agency’s regulations

grant the authority at issue to other agency employees. Flexfab, LLC, 62 Fed.

Cl. at 148 (citing Roy v. United States, 38 Fed. Cl. 184, 189-90 (1997)); see

also Leonardo v. United States, 63 Fed. Cl. 552, 557 (2005), aff’d, 163 F.

App’x 880 (Fed. Cir. 2006).

As a general matter, the Federal Circuit has distinguished between

actual and apparent authority. Apparent authority exists when “an agent with

no actual authority holds himself out to have such authority to another’s

detriment.” Liberty Ammunition, Inc., 835 F.3d at 1401. “A Government

agent must have actual authority to bind the Government to a contract. . . .

[T]he Government is immune to actions of its agents who merely possess

apparent authority.” Id. (internal citation omitted). “A contractor who enters

into an arrangement with an agent of the government bears the risk that the

agent is acting outside the bounds of his authority, even when the agent

himself was unaware of the limitations on his authority.” CACI, Inc. v. Stone,

990 F.2d 1233, 1236 (Fed. Cir. 1993) (internal citations omitted).

The contract vests the authority to give a direction that constitutes a

change in the contracting officer. Postal Service regulation effective

November 2007, 39 C.F.R. § 601.104 (2018), provides,

Only the Postmaster General/CEO; the Postal Service’s vice

president, Supply Management; contracting officers with

written statements of specific authority; and others designated

in writing or listed in this part have the authority to bind the

Postal Service with respect to entering into, modifying, or

terminating any contract regarding the acquisition of property,

services, and related purchasing matters.

Northrop does not argue that Mr. Batts was a contracting officer, that

his role (contract specialist) was listed in Postal Service regulations as having

authority to modify a contract, or that he was designated in writing to have

the authority to make a change to the contract. Thus, for the changes occurred

38

after November 2007, the Postal Service regulations foreclose Mr. Batts

having actual authority to effect changes to the contract.

Beyond the Postal Service regulation, the relevant question is what

Mr. Batts’ status and duties at the Postal Service in fact were. From

Northrop’s citations, we know that Mr. Batts was a contract specialist with

the Postal Service who listed the contracting officer’s name in his email

signature block and copied the contracting officer on emails discussing

changes with Northrop. Mr. Batts stated in deposition testimony that he

included the contracting officer’s name in his signature line to communicate

to Northrop that he was speaking on the contracting officer’s behalf. Yet

Northrop did not cite any evidence, even as simple as a contractual

description of Mr. Batts’ duties, that would suggest his duties included giving

directions that would entitle Northrop to payment from the Postal Service.

Instead, Mr. Batts’ emails appear to be a classic example of apparent

authority. He made statements and copied the contracting officer on those

statements that would lead Northrop to believe that it received a direction

from authorized Postal Service personnel, when in fact Mr. Batts did not have

the authority to change the contract. Northrop’s citations are insufficient to

raise a genuine issue that Mr. Batts’ duties included giving or ratifying

directions that constituted a change to the contract, and therefore Northrop

cannot rely on its implied actual authority argument to support these

constructive change claims.

iii. Ratification

Northrop next argues that the contracting officer ratified the

direction in question for all 43 constructive change claims. “Ratification is

‘the affirmance by a person of a prior act which did not bind him but which

was done or professedly done on his account, whereby the act, as to some or

all persons, is given effect as if originally authorized by him.’” Schism v.

United States, 316 F.3d 1259, 1289 (Fed. Cir. 2002) (quoting Restatement

(Second) of Agency § 82 (1958)). Ratification occurs where the individual

affirming the action “(1) possesses the actual authority to contract; (2) fully

knew the material facts surrounding the unauthorized action of his or her

subordinate; and (3) knowingly confirmed, adopted, or acquiesced to the

unauthorized action of the subordinate.” Villars v. United States, 126 Fed.

Cl. 626, 633 (2016); see also United States v. Beebe, 180 U.S. 343, 354

(1901) (“Where an agent has acted without authority and it is claimed that

the principal has thereafter ratified his act, such ratification can only be based

upon a full knowledge of all the facts upon which the unauthorized action

was taken.”).

39

We discussed constructive change claims 35, 37, and 43 at oral

argument. On each of these constructive change claims we find that Northrop

has not cited evidence sufficient to create a justifiable inference that Northrop

will be able to prove the authority and notice elements of a constructive

change claim, even with its ratification theory.

Constructive change claim 35 alleges that the Postal Service directed

Northrop to redesign the Street Tray Labeler cabinet to close a 5-inch

opening. Constructive change claim 37 alleges that the Postal Service

directed Northrop to redesign the Street Tray Labeler’s tray pusher so that it

applied less force against the tray. Constructive change claim 43 alleges that

the Postal Service directed Northrop to make certain operator panel indicator

lights larger. Northrop argues that the contracting officer ratified the

unauthorized Postal Service personnel’s direction. For each of these claims,

Northrop argues that it is reasonable to infer that the contracting officer

ratified this instruction from unauthorized Postal Service personnel and that

sufficient notice was provided through discussion between the parties.

Northrop adds on claim 43 that it provided notice of its election to treat this

direction as a change at a safety walkthrough and through discussion with

the Postal Service.

The citations for these three claims are the same: a February 9, 2011

interview of Don Crone, the FSS Program Manager for the Postal Service,

and deposition testimony from Northrop Grumman’s FSS Program Manager.

Neither the interview nor the testimony suggest that the Postal Service

contracting officer gave the direction involved in these constructive change

claims. Thus, plaintiff relies on ratification of an unauthorized person’s

direction. Mr. Crone would have had authority to ratify a direction as the

contracting officer, but knowledge of material facts and knowingly ratifying

the direction simply cannot be inferred from plaintiff’s citations.

The pages cited do not mention the cabinet redesign, the tray pusher

design, or the indicator light enlargement. Instead, the interview and

testimony contain broad discussion of the fractious, tug-of-war relationship

that developed between Northrop and the Postal Service over the life of the

contract. Perhaps, as Northrop argued, the contracting officer might have sat

in meetings or reviewing progress reports, but these blanket citations do not

create a triable question of whether the contracting officer had a full

knowledge of the facts of these directions or that he knowingly agreed or

acquiesced to any of the highly specific directions regarding design.

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We thus grant the Postal Service’s motion for summary judgment on

constructive change claims 35, 37, and 43. Because Northrop’s claims 2 and

5 also rely solely on these citations to support Northrop’s ratification theory,

we grant the Postal Service’s motion for summary judgment on those claims.

iv. Puts & Takes List, Action Items, Deliverables

Northrop lists the Puts and Takes List, PDR or CDR Action Items,

Safety Directions, and related deliverables as a separate basis for

demonstrating that a fact question exists regarding authority. Each of these

items purports to show that the contracting officer affirmed or acquiesced to

directions given by unauthorized Postal Service personnel and thus fall

within a ratification theory of authority. Since Northrop discusses these items

separately, however, we will address them in their own section.

The parties do not dispute that Northrop created the Puts and Takes

List to provide a list to the contracting officer of what work it deemed to be

beyond the scope of the contract. If an item appears on the Puts and Takes

List, the Postal Service cannot demonstrate that there is an absence of dispute

of material fact. Other deliverables, such as the A-30 Deliverable, or

contemporaneous review notes that would be reviewed by the contracting

officer also fall within the category of citations sufficient to indicate the

presence of a dispute of fact regarding authority. Whether Northrop can

successfully demonstrate that the contracting officer reviewed these lists

within a meaningful period, i.e., within sufficient time to reign in the

unauthorized Postal Service personnel, and whether the work is actually

beyond the scope of the contract remains to be seen.

Northrop also alleges that Postal Service personnel gave the order

through a Preliminary Design Review (“PDR”) or Critical Design Review

(“CDR”) Action Item that Northrop was obligated to implement. Pl.’s Resp.

A49. The design review process is set out in the pre-production contract

SOW A. Section 6.1 states that “PDR is conducted after preliminary design

efforts, but before start of detail design. This review is the first opportunity

for the Postal Service to closely observe the Contractor’s hardware and

software design.” Def.’s Mot. Summ. J. A64.

PDR included three entry criteria: “Successful completion of all

action items related to the previous meetings. Published agenda (Several days

prior to the conference). Acceptance of all applicable Requirements.” Id. at

A64-65. PDR also included three exit criteria: “Completion of all action

items assigned to the contractor. Acceptance of any requirements due at the

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PDR. Concurrence from the Government/Contractor members that all issues

in the conference agenda have been addressed.” Id.

Section 6.2 lists seven tasks for the CDR such as “[d]etermine that

detail design of the configuration item under review satisfies cost schedule,

and performance requirements[;] [f]or new development hardware

configuration items; assess the result of producibility analyses conducted on

system hardware[;] FSS software design review.” Id. at A65. CDR includes

entry and exit criteria as well. The entry criteria includes “[s]uccessful

completion of all action items related to the previous conference (PDR).” Id.

The exit criteria includes “[c]ompletion of all action items assigned to the

contractor” and “[c]oncurrence from US Postal Service/Contractor members

that all issues in the review agenda have been addressed.” Id. at A66.

This section does not state who will be present at the reviews. It does

not provide who assigns action items or their content. Northrop does not

suggest that the mere inclusion of an action item at either review would mean

that it was within or beyond the scope of the contract and, in any event,

whether Northrop viewed it as a change order. We agree with the Postal

Service that Northrop cannot rely on the PDR or CDR Action Items alone to

support an inference of ratification. Northrop itself appears to concede that it

cannot “rely on any 1 document to establish a genuine issue with respect to”

authority or notice, but, because Northrop relies on this method as one theory

of authority and notice, we include this clarifying point. Pl.’s Sur-Reply 7.

Constructive change claim 1 is an example of this reliance on the PDR or

CDR action items, and the similar Mandatory Safety Direction, on their own

that does not demonstrate that support a triable question on authority.

The contracting officer hypothetically could provide a direction that

constituted a change and that the vehicle for that direction was a PDR or CDR

action item. Alternatively, an unauthorized Postal Service employee might

direct a change and include it on the Action Items list that the contracting

officer would ultimately affirm. Thus, to the extent that Northrop had

included the PDR and CDR Action Items as one type of list, among many,

we agree that the action items raise an inference that the contracting officer

might review and affirm in the course of performance.

iv. Admission

In addition to its arguments regarding authority at or near the time the

direction was given, Northrop argues that, “with regard to 39 of the

constructive changes challenged in the Motion, the USPS has either: (1)

admitted in its Answer that effort was directed by USPS personnel, or (2)

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averred that USPS personnel instructed NGSC to address particular design

issues.”11 Pl.’s Resp. 30. Northrop is not arguing that the answer admits that

the contracting officer directed the effort at issue or that Northrop provided

written notice to the Postal Service that it regarded the direction as a change

order. Instead Northrop argues, “[i]mplicit in these admissions that the USPS

‘directed’ or ‘required’ NGSC to act is the authority of the person ‘directing’

or ‘requiring’ such action to do so,” id., or, at the very least, that the answer

raises a triable question of fact as to authority or notice.

This argument is a bridge too far. We use claims 1 and 35 as examples

of how Northrop’s admission theory does not raise a triable issue of fact as

to authority or notice. Northrop asserts claim 1 in paragraphs 75 through 78.

Northrop states what the original belt width was per the contract and then

alleges that the Postal Service insisted on a change to the width among “a

number of other Postal Service preferences.” Pl.’s Am. Compl. ¶ 76. In its

amended answer, the Postal Service admits the contractual width of the belt

and then states that the balance of the count constitutes conclusions of law

or, to the extent they are considered allegations of fact, denies those facts.

The Postal Service adds that in 2007 it identified “aspects of Northrop’s

design that were inconsistent with the contract.” Def.’s Am. Answer ¶ 76.

Northrop asserts claim 35 in paragraphs 210 through 213. Northrop

states that it designed the Street Tray Labeler cabinet with a 5-inch opening

on the back side. Northrop goes on to allege that the Postal Service directed

Northrop to re-design the labeler cabinet to close the 5-inch opening and that

this change was beyond the scope of the contract’s requirements. In its

amended answer, the Postal Service admits that Northrop designed the

cabinet with the 5-inch opening. The Postal Service states that the balance of

the count constitutes conclusions of law or, to the extent Northrop’s

allegations are considered allegations of fact, denies those facts. The Postal

Service again adds that in 2007 it identified “aspects of Northrop’s design

that were inconsistent with the contract.” Def.’s Am. Answer ¶ 211.

The tension between the parties’ statements is whether changing the

belt width or the cabinet opening was work that Northrop performed beyond

the scope of the contract or if Northrop had completed work inconsistent with

the contract. The Postal Service’s contention that Northrop’s work was

“inconsistent with” the contract is not an admission that an authorized

representative directed work beyond the scope and that Northrop then

11

Northrop argues that the Postal Service’s answer admits authority and

notice on every constructive change claim except claims 10, 28, 37, and 43.

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notified the Postal Service in writing that it would treat the direction as a

change.

We have reviewed Northrop’s amended complaint and the Postal

Service’s amended answer regarding the remaining 37 constructive change

claims. As with the above claims, the Postal Service did not concede the

elements of authority or notice and did not inadvertently create triable

questions of fact by framing their amended answer to suggest that authority

or notice existed regarding the constructive change claims.

In sum, we grant the Postal Service’s motion for summary judgment

with respect to constructive change claims 1, 2, 5, 35, 37, and 43. As to the

remaining constructive change claims, plaintiff’s response to the Postal

Service’s argument that the undisputed facts demonstrate that Northrop

failed to adhere to the contract’s changes clause was to provide hundreds of

pages of documents to the court regarding authority and notice for each

claim. When we reviewed the citations using Northrop’s chart, we found that

the following arguments and accompanying citations are unavailing to create

even an inference in plaintiff’s favor that proper authority existed for the

direction: that the contracting officer directed the change when there is no

direct communication from the contracting officer; implied actual authority

of Mr. Batts; relying solely on the citations listed for claims 35, 37, and 43;

the PDR or CDR action items standing alone; or admissions in the Postal

Service’s amended answer.

b. Notice

We turn now to whether Northrop notified the contracting officer in

writing that it elected to treat the direction as a change order, keeping in mind

that the purpose of the notice provision is to give the government the

opportunity to mitigate costs associated with making the change. The

government will be prejudiced by the lack of notice if receiving notice would

have allowed the government to mitigate the cost or if time has obscured the

claim. See Shepherd v. United States, 113 F. Supp. 648, 651–52 (Ct. Cl.

1953); Ace Constructors, Inc., 70 Fed. Cl. at 272.

Northrop contends that it gave sufficient notice in at least one of

eleven ways and, in most instances, Northrop argues that it notified the Postal

Service by more than one means. Northrop’s theories of sufficient notice,

drawn from plaintiff’s chart listing its theories of authority and notice and its

accompanying citations, are as follows: (1) the order was in a letter sent to

or received from a contracting officer; (2) Northrop discussed the order with

the Postal Service in an email; (3) the order appeared on the Puts and Takes

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List; (4) the order was directed through a PDR or CDR Action Item; (5)

Northrop discussed the order during a PDR or CDR representation and the

contracting officer reviewed the supporting materials; (6) the Postal Service

provided the direction through an Action Item, documented on the Actions

Item lists, discussed during TRMs, and provided monthly to the contracting

officer through the A-30 deliverable; (7) the Postal Service provided the

direction during a safety walkthrough or during a safety and ergonomics

meeting; (8) the order appeared in a Briefing Sheet that was either prepared

or reviewed by a contracting officer; (9) Northrop discussed the order with

the Postal service at a TRM presentation or breakout meeting, and the order

is reflected in TRM presentation slides, meeting minutes, or witness

testimony; (10) Northrop discussed the order with the Postal Service (shown

through testimony); and (11) that the Postal Service’s answer admits the

Postal Service received notice or was aware of the order.

As is immediately apparent, Northrop consistently did not follow the

simple procedure set forth in the contract to notify the contracting officer that

the direction provided to Northrop constituted a change. Drawing all

reasonable inferences in Northrop’s favor, this disorder appears to flow from

the volume and pace of changes necessary due to how the Postal Service

managed the program. Nevertheless, a few of these methods cannot

justifiably be considered evidence supporting an inference that Northrop

elected to treat a direction from anyone at the Postal Service as a change

order. Because Northrop argues, as it did with respect to authority, that, taken

together, its citations indicate that the Postal Service had sufficient notice,

we first will use the change claims discussed at oral argument to illustrate in

what respects Northrop’s notice theories are insufficient.

For constructive change claims 35, 37, and 43, Northrop argues that

its citations show that Northrop discussed the changes with the Postal

Service, as reflected by deposition testimony. The deposition testimony is

not contemporaneous with the alleged change. Moreover, these citations do

not in fact suggest that Northrop notified the contracting officer, or other

Postal Service personnel, in writing or otherwise, of its election to treat

design directions as changes to the contract. The Northrop program manager

testified that Northrop in fact considered many directions received from

Postal Service personnel “changes,” but equivocated regarding whether

Northrop provided notice prior to the request for equitable adjustment.

Regarding claim 43 specifically, plaintiff’s chart supporting its notice

argument lists a safety walkthrough and mandatory safety direction, but the

citations do not discuss these events.

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These general citations are insufficient for the court to reasonably

infer that the contracting officer had notice of these directions in sufficient

time to stop the change and assess the Postal Service’s options. As stated in

the authority section, because Northrop relies solely on these citations to

demonstrate that there is a triable question regarding notice, we grant the

Postal Service’s motion for summary judgment on claims 2, 5, 35, 37, and

43. The government likewise cannot rely on its admission argument to

support that there is a triable question on notice.

Each of the other notification methods track to citations that, when

read together and favorably to the non-movant, create a triable question

regarding notice. As discussed in the authority section, the back and forth

between the Postal Service and Northrop on the Puts and Takes List, PDR or

CDR Action Items, and other Action Items appearing in deliverables

reviewed by the contracting officer, when read together, supports the

inference that the contracting officer was aware that Postal Service personnel

were giving Northrop design directions and that Northrop planned to follow

through to successfully close deliverables. It is possible that Northrop will

not be able to successfully demonstrate that this scattershot approach to

notice provided the contracting officer with meaningful notice in time to alter

the Postal Service’s course. For now, however, the remaining methods of

notice taken together are sufficient basis to deny the government’s motion

for summary judgment.

We therefore grant the Postal Service’s motion for summary judgment

on count five with respect to constructive change claims 1, 2, 5, 35, 37, and

43. As to the remaining claims, plaintiff is directed to reassert a revised list

of constructive change claims on which it argues a triable question remains

on authority and notice.

4. Count Seven: Defective Specification; Count Five:

Constructive Change 45

Northrop’s count seven claims $973,733 in damages resulting from a

defective specification regarding the requirement for the contractor to submit

certain drawings to the Postal Service using Autodesk Inventor Release 10

(“Inventor 10”) format. After entering into the contract, Northrop created

these drawings in Mechanical Desktop and then submitted the drawings,

consistent with the contract, using Inventor 10 format. The drawings created

in Mechanical Desktop did not convert properly to Inventor 10. Thus,

Northrop alleges that the requirement to submit drawings in Inventor 10

amounted to a defective specification. The Postal Service moves for

summary judgment on this count, arguing that the parties do not dispute the

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material facts underlying the claim and that those facts do not support

Northrop’s claim.

SOW G 5.0 states, “All TDP deliverables shall be submitted in one or

more of the following soft-copy (electronic) file formats.

a) All new drawings shall be submitted utilizing Autodesk

Inventor Release 10 format. . . . Exceptions to the Autodesk

Inventor format would be drawings such as . . . . Prior releases

of AutoCAD and Mechanical Desktop may be used with prior

approval from the USPS TDM. . . Should the Supplier

determine that this requirement cannot be satisfied, the

Supplier shall request a deviation from this requirement . . .

b) The USPS TDM will accept drawings that have been

submitted on previous USPS programs that are in a file format

other than Autodesk Inventor. However, these drawings shall

be in their original file format and previously accepted in their

original file format by the USPS TDM.

Def.’s Mot. Summ. J. A659.

To prevail on a defective specification claim, the contractor must

demonstrate that it complied with a specification that was defective and that

the defect caused additional cost. White v. Edsall Constr. Co., 296 F.3d 1081,

1084-85 (Fed. Cir. 2002). Here, Northrop cannot demonstrate that the

specification was defective. The only requirement that this section sets out is

the format in which the drawings must be submitted: new drawings must be

submitted in Inventor 10 format. There was no dispute that Northrop created

these drawings in one program and knew that the contract required the

drawings had to be submitted in another format. Northrop does not allege

that this requirement could not be met; rather it contends that it could not

convert to Inventor 10 the drawings it had created using other software. The

contract cannot be read to warrant that Mechanical Desktop would convert

to Inventor 10. Because the contractor cannot demonstrate that the

specification was defective, we grant the Postal Service’s motion on count

seven.

Regarding constructive change claim 45, Northrop argues that the

contract required that Mechanical Desktop drawings be converted to Inventor

10 and that the conversion mechanism failed. The Postal Service continued

to direct use of Inventor 10 even after the conversion problem arose, until the

parties agreed to the use of Inventor 2009. Mod. 9 to the contract provided

that the Postal Service would pay the cost of upgrading to Inventor 2009.

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Northrop argues in constructive change claim 45 that the Postal Service

should be required to pay “the costs associated with the needless conversion

of certain drawings from Mechanical Desktop to Inventor 10” because the

continued use of Inventor 10 constituted a work beyond the scope of the

contract. Plainly not. The agency was merely enforcing the contract as

written prior to the execution of Mod. 9. The Postal Service’s expectation

that these drawings be submitted in Inventor 10 is within the scope of SOW

G 5.0 and thus not a change to the contract. We therefore grant the Postal

Service’s motion for summary judgment on Northrop’s count five with

respect to constructive change claim 45 as it relates to Inventor 10

conversion.

CONCLUSION

In sum, we grant-in-part plaintiff’s motion to dismiss and grant

defendant’s motion to dismiss. We grant-in-part and deny-in-part plaintiff’s

motion for summary judgment and grant-in-part and deny-in-part

defendant’s motion for summary judgment. Plaintiff is directed to file a

status report on or before November 16, 2018 in which it lists those

constructive change claims on which it argues a triable question remains on

both authority and notice. The parties are directed to communicate and

propose a schedule for pretrial proceedings in a joint status report on or

before December 7, 2018.

s/Eric G. Bruggink

ERIC G. BRUGGINK

Senior Judge

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