Kellogg Brown & Root Services, Inc.

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ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeals of - )

)

Kellogg Brown & Root Services, Inc. ) ASBCA Nos. 62681, 62843, 62844

)

Under Contract No. W912GB-13-C-0011 )

APPEARANCES FOR THE APPELLANT: Daniel J. Kraftson, Esq.

Sean M. Howley, Esq.

Jonathan J. Straw, Esq.

Kraftson Caudle PLC

McLean, VA

APPEARANCES FOR THE GOVERNMENT: Michael P. Goodman, Esq.

Engineer Chief Trial Attorney

Paul L. Huhtanen, Esq.

Herbert J. Aldridge, Esq.

Paul Cheverie, Esq.

LuzDanielle O. Bolong, Esq.

Engineer Trial Attorneys

U.S. Army Engineer District, Europe

OPINION BY ADMINISTRATIVE JUDGE HERZFELD

ON THE GOVERNMENT’S MOTION TO AMEND ITS ANSWER

The United States Army Corps of Engineers (Corps of Engineers) moves to

amend its answer to add an affirmative defense that Kellogg Brown & Root Services,

Inc. (KBR) made material misrepresentations in its proposal, rendering the

fully-performed contract void ab initio. For the reasons discussed below, we grant the

Corps of Engineers’ motion to amend its answer to add the material misrepresentation

affirmative defense. The Board will consider this legal defense on the merits.

BACKGROUND

On July 9, 2013, the Corps of Engineers and KBR executed Contract

No. W912GB-13-C-0011 for a firm, fixed-price amount of $134,211,592 to construct

an Aegis Ashore Missile Defense System site on Deveselu Air Base in Deveselu,

Romania (R4, tab 3 at 1-2); Kellogg Brown & Root Servs., Inc., ASBCA No. 62681

et al., 22-1 BCA ¶ 37,974 at 184,424. Later in July, two unsuccessful offerors

protested the award to the U.S. Government Accountability Office (GAO), asserting

that the Corps of Engineers conducted an improper price realism analysis, which

should have found KBR’s price unrealistically low, and that the agency should have

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given the protesters higher technical ratings and KBR lower technical ratings. AMEC

Programs, Inc., B-408708 et seq., Dec. 4, 2013, 2014 CPD ¶ 50 at 7-9. On December

4, 2013, GAO denied the protests, concluding that (1) the Corps of Engineers’ price

realism analysis was reasonable and (2) because neither protester argued that “their

own proposal should have been found technically superior to KBR’s” and the price

disparity in the proposals, neither protester could show a “reasonable possibility of

prejudice” even if GAO accepted the “protesters’ technical evaluation challenges.” Id.

at 9-10.

KBR substantially completed the project on December 19, 2015, on an

expedited schedule to meet a presidential mandate to have the system operational “in

the 2015 timeframe” (R4, tab 38; consolidated & amended compl. ¶ 73; gov’t answer

to appellant’s consolidated & amended compl. ¶ 73); Kellogg Brown, 22-1 BCA

¶ 37,974 at 184,424.

Thereafter, KBR submitted a certified claim, which the Corps of Engineers

denied, and KBR filed its first timely notice of appeal to this Board on September 24,

2020. Kellogg Brown, 21-1 BCA ¶ 37,974 at 184,425-27. Subsequently, the Corps of

Engineers issued two demand letters seeking liquidated damages, which KBR timely

appealed to this Board on March 8, 2021. Id. at 184,427-29. The Corps of Engineers

moved to dismiss the appeals as untimely, which we denied on November 22, 2021.

Id. A month later, the Corps of Engineers filed another motion to dismiss, asserting

that the appeals should be dismissed because KBR’s certified claim did not include a

sum certain in its claim. We have not ruled on that motion yet.1

On July 14, 2023, the Corps of Engineers moved to amend its answer to allege

an affirmative defense that KBR’s material misrepresentations in its proposal induced

the Corps of Engineers to enter the contract with KBR, which should result in voiding

the contract. Fact discovery had ended on June 23, 2023. Notwithstanding the Corps

of Engineers’ delay in formally amending its answer, KBR was aware of the potential

affirmative defense before the conclusion of fact discovery (as reflected in its

deposition of the contracting officer on these issues).

The Corps of Engineers’ proposed affirmative defense alleges KBR made eight

material misrepresentations in its proposal, which the agency relied on in awarding the

contract and defending the GAO protest. The Corps of Engineers asserts that those

material misrepresentations render the contract void ab initio (gov’t mot. at 1-3).

1

We intend to seek supplemental briefing from the parties in light of the U.S. Court of

Appeals for the Federal Circuit’s decision in ECC Int’l Constructors, LLC v.

Sec’y of Army, 79 F.4th 1364 (Fed. Cir. 2023).

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First, the Corps of Engineers alleges KBR misrepresented that it had “obtained

‘firm subcontract and vendor quotes for over 97 percent of the tasks and materials’ in

the project and only $3,637,386 or 2.93 percent of KBR’s proposal was estimated”

(gov’t mot. at 1). In February 2014, after performance began, the Corps of Engineers

realized that KBR did not have all their subcontractors “bought out” and that the

“97 percent firm quotes and 2.93 percent” figure in KBR’s proposal had not been

accurate (app. resp., ex. 1 – Deposition Transcript of Contracting Officer Rachael

Raposa (CO tr.) at 15)). The Corps of Engineers did not attempt to void the contract at

that point, “[b]ecause we wanted KBR to just get back on track” with an interest in

“KBR performing the work” (CO tr. at 17-18).

Second, the Corps of Engineers alleges KBR misrepresented that “it had ‘firm

fixed prices’ and ‘acceptance of subcontract terms and conditions from all major

subcontractors’” (gov’t mot. at 1). Like the first alleged misrepresentation, the

contracting officer stated she knew in February 2014 that “KBR had not bought out all

its subs” (CO tr. at 21).

Third, the Corps of Engineers alleges KBR misrepresented the “scope and value

of the work subcontracted to its ‘key subcontractor’ US International Development

Consortium, Inc” (USIDC) (gov’t mot. at 1). The contracting officer acknowledged

she knew in late 2013 that KBR intended to use a different subcontractor, Schneider

Electric Buildings Critical Systems, Inc., instead of USIDC to do this security systems

work (CO tr. at 109). For example, in the second partnering conference between the

Corps of Engineers and KBR in 2014, the contracting officer noted that KBR’s

performance seemed like a “bait and switch” (CO tr. at 115-16). Nevertheless, at that

time, the Corps of Engineers wanted KBR to perform and did not consider defaulting

KBR or seek to void the contract (CO tr. at 109, 117).

Fourth, the Corps of Engineers alleges KBR misrepresented that it “would self-

perform 25 percent of the total amount of work by value under the Contract, as

required by the Solicitation clause 52.236-1 ‘Performance of Work by the Contractor’”

(gov’t mot. at 1-2). “[S]hortly after award when we couldn’t get anybody to the site”

(and no later than September 2014), the contracting officer suspected that KBR might

not comply with the requirement to perform 25% of the work (CO tr. at 137-38, 153,

159). However, the contracting officer hoped that KBR “would come forward” with

more staff during the project because the Corps of Engineers was “driving towards

performance” and “looking at the finish line” of the project (CO tr. at 155-56).

Fifth, the Corps of Engineers alleges KBR misrepresented that it “already

submitted its Technical Assistance Agreement [TAA] to the Directorate of Defense

Trade Controls (DDTC) before its May 28, 2013 revised proposal” (gov’t mot. at 2).

In November 2013, the contracting officer doubted that representation, questioning

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why KBR had not completed this task given that KBR’s “revised technical proposal

stated you had already started this process” (R4, tab 221 at 2510390). 2

Sixth, the Corps of Engineers alleges KBR misrepresented that the “‘relevant’

rate for calculating average Romanian labor costs was $5.25/hour for construction”

(gov’t mot. at 2). In 2017, when KBR was negotiating for an equitable adjustment, the

Corps of Engineers learned that the “hourly wage rate of $5.25 was not a proposed

rate” and that KBR had used rates varying from $18 to $23 for paying Romanian

workers (app. supp. R4, tab 1-312 at 16946-47).

Seventh, the Corps of Engineers alleges KBR misrepresented that its “Quality

Control Manager specifically identified by name and qualifications in its proposal

would be available to perform this role on the Project” (gov’t mot. at 2). The Corps of

Engineers approved a replacement soon after the request in 2013 (weeks after award)

and did not seek to void or default the contract (CO tr. at 229-30, 233).

Eighth, the Corps of Engineers alleges KBR misrepresented that “its revised

Subcontracting Plan was based on actual ‘bids received’ from the various

socioeconomic types of U.S. small businesses as stated in KBR’s discussion letter

response” (gov’t mot. at 2). During performance in February 2014, KBR informed the

Corps of Engineers that KBR’s proposed small business subcontractors had “since

refused to submit pricing or sign contracts to perform work” on the contract, and it

would not meet the goals in its subcontractor plan (R4, tab 250). For the

September 2014 Contractor Performance Assessment Report, the Corps of Engineers

gave KBR an “Unsatisfactory” past performance rating for utilization of small

businesses based on KBR’s “complete disregard to comply” with the small business

subcontracting plan (R4, tab 83 at 3, 6). The contract also included a provision

permitting the Corps of Engineers to impose liquidated damages for failure to make a

good faith effort to meet the requirements of a small business plan (R4, tab 4 at 30, 35,

56 (incorporating by reference FAR 52.219-16(b) – LIQUIDATED DAMAGES-

SUBCONTRACTING PLAN (JAN 1999)). At that time, the contracting officer knew

that KBR had failed to meet the targets in its subcontracting plan but did not impose

2

Out of an abundance of caution we have marked this decision as protected based on

citation to R4, tab 221, which is the only document cited in this decision that

bears a protective legend. However, both parties directly or indirectly cited this

protected document but neither marked the information as protected. Like the

parties, we do not believe the discussion of this document includes anything

meeting the criteria of protected information in the Protective Order. However,

on or before December 22, 2023, the parties shall (1) indicate whether the

Board may re-issue this decision without the protective legend or (2) provide a

legal basis supporting any redactions.

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liquidated damages or threaten to default KBR for failing to meet this requirement

(CO tr. at 312-13).

Ultimately, the Corps of Engineers knew of seven of the eight alleged material

misrepresentations in 2013 and 2014 while performance was ongoing and knew of the

other alleged material misrepresentation by 2017.

After filing its motion to amend, the Corps of Engineers (1) moved for

summary judgment on the newly alleged affirmative defense, and (2) moved to stay

this appeal (including the hearing then scheduled to begin November 1, 2023) until the

parties briefed and the Board ruled on the motion for summary judgment. On

August 2, 2023, KBR requested that we deny the motion to stay and defer briefing on

the summary judgment motion, given that the hearing was so close. After a status

conference call, we denied the Corps of Engineers’ motion to stay the hearing,

deferred ruling on the summary judgment motion, and awaited completion of the

parties’ briefing of the motion to amend. See Alistiqama Co., ASBCA Nos. 62501,

62502, 20-1 BCA ¶ 37,720 at 183,100 at n.1 (deferring “consideration of the motion

for summary judgment to the merits briefing” and issuing order before responding

party files brief). The parties completed briefing of the motion to amend on

September 20, 2023. On October 11, 2023, KBR requested that we postpone the

hearing until after the Board ruled on the Corps of Engineers’ motion to amend. On

October 16, 2023, we granted that request by cancelling the scheduled hearing. We

now turn to ruling on the motion to amend.

DECISION

KBR opposes the Corps of Engineers’ motion to amend its answer, asserting

that the Corps of Engineers delayed and otherwise acted prejudicially in raising its

material misrepresentation affirmative defense (app. resp. at 9-38). KBR also asserts

that any amendment is futile because (1) the Board lacks jurisdiction due to the

agency’s failure to raise the affirmative defense in a contracting officer’s decision, (2)

the Board has no authority to make findings of fact regarding material

misrepresentations, and (3) the Corps of Engineers waived this defense by permitting

KBR to complete its performance rather than voiding the contract when it knew of

these alleged misrepresentations during performance (app. resp. at 9-54).

I. Standard of Review

“The Board may permit either party to amend its pleading upon conditions fair

to both parties” and “[w]hen issues within the proper scope of the appeal, but not

raised by the pleadings, are tried . . . by permission of the Board, they shall be treated

in all respects as if they had been raised” in the pleadings. ASBCA Rule 6(d). The

Board “looks to Fed. R. Civ. P. 15(a)(2), with its liberal standard for amendment, for

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guidance.” Chugach Fed. Sols., Inc., ASBCA No. 61320, 18-1 BCA ¶ 37,111

at 180,620. This liberal standard affords a litigant the ability to test a claim or defense

“on the merits.” Foman v. Davis, 371 U.S. 178, 182 (1962); ABB Enter. Software,

Inc., ASBCA No. 60314, 17-1 BCA ¶ 36,586 at 178,202. Absent “undue delay, bad

faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies

by amendments previously allowed, undue prejudice to the opposing party by virtue of

allowance of the amendment, [or] futility of amendment,” we “freely” permit

amendment of pleadings. Foman, 371 U.S. at 182; Shell Oil Co. v. United States, 896

F.3d 1299, 1315 (Fed. Cir. 2018); Pub. Warehousing Co. K.S.C., ASBCA No. 57510,

17-1 BCA ¶ 36,700 at 178,720.

II. Neither Undue Delay Nor Prejudice Justify Denying the Motion to Amend

KBR contends that the Corps of Engineers unduly delayed raising this

affirmative defense, pointing out that the contracting officer admitted knowledge of

almost all the alleged material misrepresentations nine or ten years before seeking

leave to amend its answer (app. resp. at 16-17). Pointing to one of our decisions, the

Corps of Engineers asserts that “regardless of the length of delay that factor alone is

insufficient reason to prohibit amendment” of an answer. Space Age Eng’g, Inc.,

ASBCA No. 25761 et al., 83-2 BCA ¶ 16,789 at 83,441 (relying on precedent from

circuits other than the Federal Circuit or Court of Claims); (gov’t mot. at 5-6). But, as

KBR points out, the Federal Circuit subsequently stated that “[d]elay alone, even

without a demonstration of prejudice, has . . . been sufficient grounds to deny

amendment of pleadings.” Te-Moak Bands of W. Shoshone Indians of Nev. v. United

States, 948 F.2d 1258, 1260-61 (Fed. Cir. 1991) (Te-Moak Indians); (app. resp. at 31).

We have clarified that “delay alone is enough to deny the motion to amend” where it

involves “extreme delays that were entirely the responsibility of the party seeking

leave to amend . . . .” Pub. Warehousing, 17-1 BCA ¶ 36,700 at 178,722.

Extreme delays (standing alone) usually must encompass both (1) significant

delay in raising a defense after a party knows the underlying facts of a defense and

(2) significant delay in raising the defense during the litigation (for example, raising it

after the trial has begun, the case has already been appealed, or after court-imposed

deadlines to amend pleadings). Shell Oil, 896 F.3d at 1316 (finding undue delay in

raising affirmative defense on a 50-year old World War II-era contract, where the

government was aware of its defense for 20-25 years and raised the defense 10 years

into the litigation only after two trips to the Federal Circuit); Cencast Servs., L.P. v.

United States, 729 F.3d 1352, 1356-57, 1363-64 (Fed. Cir. 2013) (finding undue delay

in amending pleading, where party knew of the claim 15 years prior to raising the new

theory, seven years after filing suit, and three years after the Court-imposed deadline

for amending pleadings); Te-Moak Indians, 948 F.2d at 1262-63 (finding undue delay

in a 40-year case and eight-year delay in amending pleadings).

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As to the first component, KBR has demonstrated that the Corps of Engineers

significantly delayed raising this defense since obtaining the underlying knowledge of

the facts nearly ten years ago. However, as to the second component, the Corps of

Engineers did not unduly delay raising this defense in this litigation, having formally

moved to amend before the hearing and apprising KBR of the likely defense during

fact discovery. Thus, the Corps of Engineers’ delay does not rise to the “extreme

delay” necessary to deny its motion to amend the pleadings.

KBR also asserts that the Corps of Engineers’ delay in raising this defense

during this appeal has prejudiced KBR and was done in bad faith (app. resp. at 36-38).

Government officials are presumed to act in good faith and KBR has not established

by clear and convincing evidence that the Corps of Engineers acted in bad faith. Am-

Pro Protective Agency, Inc. v. United States, 281 F.3d 1234, 1239-40, 1243 (Fed. Cir.

2002). Indeed, KBR acknowledges that it has deposed the contracting officer and

obtained some discovery regarding the material misrepresentations asserted as the

basis for the Corps of Engineers’ affirmative defense (and its brief opposing

amendment attaches and cites that deposition frequently to respond to some of the

alleged material misrepresentations). Moreover, the Corps of Engineers has laid out

the evidence it intends to rely upon in its now-deferred motion for summary judgment.

However, given the timing of the Corps of Engineers’ motion to amend and to avoid

any prejudice, we will include additional time for KBR to conduct fact discovery to

prepare for the hearing (particularly given KBR’s request to delay the hearing).

Raytheon Co., ASBCA Nos. 60448, 60785, 18-1 BCA ¶ 37,029 at 180,301.

III. The Proposed Amendment to the Answer is Not Futile

The Corps of Engineers asserts that KBR’s futility argument is “irrelevant” and

we need not consider it (gov’t reply at 8-9). We disagree – the argument is relevant

and must be assessed. “Our cases have found futility of amendment and denied leave

to amend where the litigant cannot prove any set of facts in support of a claim or

defense that would entitle it to relief.” Engility, LLC, ASBCA No. 61281, 19-1 BCA

¶ 37,430 at 181,922. To deny the motion, “we would need to assume that the [agency]

is essentially asserting a defense with no basis in law.” Chugach, 18-1 BCA ¶ 37,111

at 180,620. Like a motion to dismiss for failure to state a claim upon which relief may

be granted, we do not consider facts outside the proposed pleading to judge any futility

objection to a motion to amend. Id. (citing FED. R. CIV. P. 12(D)). Here, the Corps of

Engineers’ proposed amendment meets these notice pleading requirements. 3

3

The Federal Circuit has not addressed in a precedential decision whether an

affirmative defense needs to meet the plausibility standards applicable to a

complaint. Chugach, 18-1 BCA ¶ 37,111 at 180,620 (discussing whether the

plausibility standard in Bell Atl. Corp. v. Twombly, 550 U.S. 544, 547 (2007)

and Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) applies to affirmative

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First, KBR asserts that we lack jurisdiction over this appeal because there was

no contracting officer’s decision on the affirmative defense (app. resp. 39-48).

Material misrepresentation (or fraud in the inducement) is a common-law affirmative

defense. Hollymatic Corp., ASBCA Nos. 61920, 61956, 21-1 BCA ¶ 37,823

at 183,665 (“The common law defense of fraud in the inducement may be established

either by proof of fraud or material misrepresentation. It is well established that when

one party to a contract induces the other party to enter into an agreement through fraud

or misrepresentation, the cont[r]act is void ab initio.” (internal citations omitted)),

aff’d, No. 2021-2158, 2022 WL 1041187 (Fed. Cir. 2022). A common-law affirmative

defense, such as material misrepresentation, “is not subject to a contracting officer’s

final decision because the defense neither seeks the payment of money nor the

adjustment of contract terms.” Frazier Invs. d/b/a Optimum Constr., ASBCA

No. 63001, 23-1 BCA ¶ 38,313 at 186,044; see also Securiforce Int’l Am., LLC v.

United States, 879 F.3d 1354, 1362-63 (Fed. Cir. 2018) (“[I]f a party raises an

affirmative defense under the contract as written—for example, common-law defenses

of fraud or prior material breach—it need not first be presented to the CO for a final

decision, since a defense is not a claim for money, and the CO has no necessary role in

assessing the defense.”); Laguna Constr. Co. v. Carter, 828 F.3d 1364, 1368 (Fed. Cir.

2016) (concluding that affirmative defense of fraud was not a CDA “claim” because

“the government’s defense plainly does not seek the payment of money or the

adjustment or interpretation of contract terms”).

KBR asserts that the Corps of Engineers’ defense to void the contract

constitutes a remedy that requires the adjustment of contract terms and, thus, a

contracting officer’s decision (app. resp. at 39-48). KBR points to CanPro

Investments, where the U.S. Court of Federal Claims found no Contract Disputes Act

jurisdiction over a contractor’s claim for rescission because that remedy was not

presented to the contracting officer for a final decision (app. resp. at 43). CanPro Invs.

Ltd. v. United States, 130 Fed. Cl. 320, 340 (2017). Notably, however, the court found

that it had jurisdiction over a claim for a “[m]isrepresentation in the inducement of a

contract” that typically permits a party to void a contract or make it voidable. Id.

at 338. The court’s apparent disconnect between claim and remedy may explain what

the court meant by “rescission.” The court appears to have rejected a claim for an

“agreement of rescission,” citing that provision of the Restatement. Id. at 340 (citing

RESTATEMENT (SECOND) OF CONTRACTS § 283). Indeed, that section of the

Restatement notes the difference between an “agreement of rescission” (what the

CanPro court was apparently discussing) and the use of “rescission” to signify

avoidance of a contract (as we have here). RESTATEMENT (SECOND) OF CONTRACTS

§ 283, cmt. a (1981) (“The term ‘agreement of rescission’ is used in this Restatement

defenses). Even assuming that standard applied and looking only at the

pleadings, the Corps of Engineers has plausibly pleaded its proposed

affirmative defense of material misrepresentation.

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to avoid confusion with the word ‘rescission,’ which courts sometimes use to refer to

the exercise by one party of a power of avoidance (§ 7).”). And, when a tribunal voids

a contract it need not adjust any contract terms (such as reforming a contract), because

there is “not a contract at all” and “it is the ‘promise’ or ‘agreement’ that is void of

legal effect.” RESTATEMENT (SECOND) OF CONTRACTS § 7, cmt. a. (1981). A voided

contract wipes away any contractor or government claims (including liquidated

damages). ABS Dev. Corp., ASBCA No. 60022 et al., 19-1 BCA ¶ 37,234 at 181,233.

Moreover, we have adjudicated an agency’s material misrepresentation

affirmative defense without a contracting officer’s final decision relating to that

affirmative defense. Dongbuk R&U Eng’g Co., ASBCA No. 58300, 13 BCA ¶ 35,389

at 173,636 (appellant appealed “based on lack of receipt of a final CO decision”); see

also ABS Dev. Corp., ASBCA Nos. 60022, 60023, 17-1 BCA ¶ 36,842 at 179,522

(permitting agency to amend the answer to raise a void ab initio defense where there

was no contracting officer’s decision), and ABS Dev. Corp., ASBCA No. 60022 et al.,

17-1 BCA ¶ 36,784 at 179,301 (refusing to dismiss appeal despite agency’s failure to

issue contracting officer’s final decisions). Thus, we have jurisdiction to hear the

Corps of Engineers’ material misrepresentation defense without a contracting officer’s

final decision.

Second, KBR asserts that we lack the authority to make findings of fact

regarding a defense of material misrepresentation because it would require the Board

to make determinations of fraud, which is outside our jurisdiction (app. resp. at 48-52).

We disagree. The Contract Disputes Act “does not authorize an agency head to settle,

compromise, pay, or otherwise adjust any claim involving fraud.” 41 U.S.C.

§ 7103(c)(1). The Federal Circuit has explained, “[c]ertain fraud-related claims are

outside of the Board’s jurisdiction,” including “claims relating to 41 U.S.C. § 7103

(formerly 41 U.S.C. § 604), 28 U.S.C. § 2514 (Special Plea in Fraud), and 31 U.S.C.

§§ 3729–31 (False Claims Act).” Laguna, 828 F.3d at 1368. While we lack

jurisdiction to hear the types of fraud claims noted by the Federal Circuit, we possess

jurisdiction over a void ab initio defense where the agency challenges “whether the

contractor can establish . . . a contract with the government in the first place . . . .”

ABS Dev. Corp., 17-1 BCA ¶ 36,842 at 179,522. Indeed, a material misrepresentation

without fraud may still result in contractual avoidance. RESTATEMENT (SECOND) OF

CONTRACTS § 162, cmt. c (1981) (“[A] non-fraudulent misrepresentation will not

entitle him to relief unless it is material.”). While the Board may not make factual

findings relating to the types of fraud claims for which we lack jurisdiction, “we may

make findings as to the material facts relating to material misrepresentation and the

contract and how the acquisition regulations, statutes[,] and contract clauses operate

given those findings.” Hollymatic, 21-1 BCA ¶ 37,823 at 183,665. Here, the Corps of

Engineers asserts material misrepresentations during contract formation, not fraud

derived from claims for which we lack jurisdiction. Thus, the Board possesses

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jurisdiction to make factual findings regarding the Corps of Engineers’ common law

material misrepresentation defense.

Finally, KBR asserts that the Corps of Engineers’ delay in raising the material

misrepresentation defense should result in waiver, demonstrating the futility of raising

the affirmative defense (app. resp. at 52-53). Relying on evidence outside of the

pleadings, KBR has asserted that the Corps of Engineers accepted the benefits of

performance and never cancelled the contract until after performance concluded. See

Aydin Corp., ASBCA No. 34054, 89-1 BCA ¶ 21,206 at 106,998 (“When a material

misrepresentation of fact is discovered, the non[-]misrepresenting party has the option

of allowing the contract to proceed and seek damages, or rescind the contract. The

election to rescind, however, must be made with reasonable promptness, under the

circumstances, after the misrepresentation is made known. If a party does not rescind

in a timely manner, it will lose its right to rescind. One party will not be allowed to

permit an unwary party to continue performance and incur large expenses.”); see also

Godley v. United States, 5 F.3d 1473, 1476 (Fed. Cir. 1993) (“In the event it

determines that Mr. Godley’s contract was voidable, the trial court must also

determine whether the Government cancelled the contract within a reasonable time

after discovery of the illegality.”); Pac. Architects & Engrs., Inc. v. United States, 491

F.2d 734, 742-43 (Ct. Cl. 1974) (“The option to avoid a contract for fraud or

misrepresentation is lost if after acquiring knowledge thereof the injured party

continues with performance. He is deemed to have affirmed or ratified the voidable

contract.”). “[A] misrepresentation may prevent the formation of a contract or may

make a contract voidable.” Long Island Savs. Bank, FSB v. United States, 503 F.3d

1234, 1245 (Fed. Cir. 2007). “[A] Government contract tainted by fraud or

wrongdoing is void ab initio. . . . A contract without the taint of fraud or wrongdoing,

however, does not fall within this rule.” Godley, 5 F.3d at 1476 (citing J.E.T.S., Inc. v.

United States, 838 F.2d 1196, 1200 (Fed. Cir. 1988); United States v. Miss. Valley

Generating Co., 364 U.S. 520, 564 (1961)). A party can waive a material

misrepresentation defense if the contract is voidable but not if it is void ab initio.

Godley, 5 F.3d at 1475-76; Supreme FoodService GMBH, ASBCA No. 57884 et al.,

16-1 BCA ¶ 36,387 at 177,396.

The Corps of Engineers alleges that KBR’s material misrepresentations render

the contract void ab initio. At this stage, we must treat the Corps of Engineers’

pleadings as true in considering its motion to amend. Chugach, 18-1 BCA ¶ 37,111

at 180,620. Because of that deference at this stage, KBR cannot demonstrate futility

and the Corps of Engineers’ pleadings pass muster. However, it remains to be seen

whether the agency can prove the alleged material misrepresentations and, if so,

whether that renders the contract void ab initio (no waiver) or voidable (which would

allow KBR to assert the agency waived this argument by accepting performance).

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DOCUMENT FOR PUBLIC RELEASE

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

This version has been approved for public release.

CONCLUSION

For the foregoing reasons, we grant the Corps of Engineers’ motion to amend

its answer to add its material misrepresentation affirmative defense.

Dated: December 13, 2023

DANIEL S. HERZFELD

Administrative Judge

Armed Services Board

of Contract Appeals

I concur I concur

RICHARD SHACKLEFORD OWEN C. WILSON

Administrative Judge Administrative Judge

Acting Chairman Vice Chairman

Armed Services Board Armed Services Board

of Contract Appeals of Contract Appeals

I certify that the foregoing is a true copy of the Opinion and Decision of the

Armed Services Board of Contract Appeals in ASBCA Nos. 62681, 62843, 62844,

Appeals of Kellogg Brown & Root Services, Inc., rendered in conformance with the

Board’s Charter.

Dated: December 13, 2023

PAULLA K. GATES-LEWIS

Recorder, Armed Services

Board of Contract Appeals

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