# DENIED: September 24, 2024

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## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

DENIED: September 24, 2024

CBCA 6032

UNITED FACILITY SERVICES CORPORATION
dba EASTCO BUILDING SERVICES,
Appellant,
v.
DEPARTMENT OF THE TREASURY,
Respondent.

William Weisberg of Law Offices of William Weisberg PLLC, McLean, VA, counsel
for Appellant.
Jonathan D. Tepper, Holly H. Styles, Justin M. Wakefield, and Richard L. Hatfield,
Office of Chief Counsel, Internal Revenue Service, Department of the Treasury, Washington,
DC, counsel for Respondent.
Before Board Judges SHERIDAN, SULLIVAN, and O’ROURKE.
O’ROURKE, Board Judge.
This case involves allegations that the equipment inventory list contained in a
facilities maintenance contract changed significantly during the nearly six-year period of
performance. Appellant, United Facility Services Corporation doing business as
EastCo Building Services (EastCo), contends that the agency, the Internal Revenue Service
(IRS), replaced multiple legacy systems with modern systems and installed new equipment
throughout the facilities yet refused to approve any updates to the equipment inventory list.
This refusal, appellant argues, forced it to perform additional work without compensation.

CBCA 6032

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Appellant submitted a claim to the contracting officer for the extra work in the amount
of $4.6 million, which was deemed denied, and then appealed to the Board. During a hearing
on the merits, the agency argued that appellant was not entitled to additional compensation
because the equipment inventory and maintenance hours actually decreased over the life of
the contract. After a detailed review of the appeal file, the hearing transcript, and arguments
by counsel, we deny the appeal based on insufficient evidence to support the claim.
Findings of Fact
Contract Solicitation and Award
On August 9, 2010, the IRS solicited offers from small businesses to perform facilities
operations, maintenance, repairs, and construction services at the IRS Service Center campus
in Fresno, California. Appeal File, Exhibit 1 at 1.1 The period of performance consisted of
a two-month phase-in term followed by a one-year base period and four option years. Id.
at 20. The agency structured the contract as a firm-fixed-price (FFP) service contract with
an indefinite delivery, indefinite quantity (IDIQ) component, against which the Government
could issue task orders for work that met specified requirements under paragraph 2.3 of the
performance work statement (PWS). Id. at 62–64.
The PWS divided the work into two categories: basic services and additional services.
Exhibit 1 at 61–64. The basic services category included all services necessary to operate
the facility, respond to service calls and repair requests, perform preventive maintenance
(PM), conduct testing, and certify the equipment. Basic services also included project
planning, proposal development activities, and cost estimating for all IDIQ work requested
by the agency. Additional services included service call repairs, new project work exceeding
$3000,2 and any work over $500 that was required to correct deficiencies discovered during
the phase-in period.
Paragraph 3.17 of the PWS identified and explained the function of the Computerized
Maintenance Management Systems (CMMS) as systems for tracking and documenting all
contract activities and deliverables related to the operation and maintenance of the facilities.
Exhibit 1 at 108. The contractor was responsible for updating the CMMS and ensuring its
accuracy. Id. at 78. Relevant to this dispute was the requirement to update the system when
new equipment was installed or when equipment was upgraded or removed from a facility.
Technical exhibit 5 (TE-5), also referred to as the equipment inventory, was generated within
1

2

All exhibits are found in the appeal file, unless otherwise noted.

Work that exceeded that threshold cost was authorized by the contracting
officer in the form of an FFP or time and materials (T&M) task order. Exhibit 1 at 62.

CBCA 6032

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the CMMS and represented the site-specific list of equipment requiring preventive
maintenance. Id. at 79–80. The TE-5 contained 1559 line items of equipment. Exhibit 21.
While most of those line items described an individual piece of equipment, others described
dozens or even hundreds of pieces of equipment on a single line. Each line item on the TE-5
corresponded to an asset number and letter that identified the type of equipment as well as
the required preventive maintenance cycle. Because the TE-5 was a printout report from the
CMMS, changes in the CMMS affected the content of the TE-5. See Transcript, Vol. 1
at 291.
Several provisions of the PWS indicated that the IRS might upgrade equipment during
performance of the contract. For example, paragraph 3.4.9 discussed potential upgrades to
the building automation system (BAS) control system software. Exhibit 1 at 85. Paragraph
4.1.1(b) indicated that the government might decide to upgrade or replace an entire system
even when “the contractor proposes to make a repair” to that system. Id. at 109. The
contractor was also required to provide technical assistance in the form of advice or
consultation for “building or system upgrades.” Id. at 77–78. Most notably, paragraph 3.4.3
of the PWS directed the contractor to “maintain and update the building equipment data in
the CMMS” within seven calendar days after the installation or removal of any equipment.
Id. at 82. Before making those changes, the contractor had to notify the Government and
obtain the Government’s concurrence. Id. This provision also stated:
At the beginning of each new option period, the official TE-5 shall be adjusted
as required to ensure accuracy and to affect the basis for an equitable
adjustment based on a revised and up-to[-]date TE-5 equipment inventory.
Any year during the contract that the PM equipment inventory increases or
decreases with more than a 5% deviation from the original TE-5 inventory
(based on GSA man-hour standards or RS Mean’s man-hours), an equitable
adjustment shall be effected during the beginning of the next option period.
If inventory additions do not result in the 5% threshold being surpassed, then
the Contractor shall maintain the new equipment at no additional cost to the
government. Likewise, if deletions in the equipment inventory do not result
in the 5% threshold being surpassed, the Government will not receive a
reduction in contract cost.
Id. at 82–83.
Paragraph 3.4.2(A) of the PWS stated, “During the Phase-in period, the Contractor
shall review the existing schedule and equipment inventory loaded in the CMMS. The
Contractor shall ensure that the CMMS . . . equipment inventory . . . accurately reflects all
equipment identified in the contract technical exhibits and shall make changes in the CMMS
. . . as necessary.” Id. at 80. This represented the first opportunity that the new contractor

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would have to ensure it was working with an accurate TE-5. Once a baseline was established
for the equipment inventory, the contractor was required to maintain the equipment in
accordance with the terms of the contract. Id. at 80.
Technical exhibit 4 (TE-4) of the solicitation, entitled “General Services
Administration (GSA) [Preventive Maintenance] Guide Cards,”3 was a 363-page document
that described the maintenance steps for every piece of equipment listed on the TE-5.4
Exhibit 20. In addition to relying on the preventive maintenance tasks provided by the guide
cards, the contractor used the GSA Maintenance Time Standards (also referred to as “GSA
man-hour standards”) to allocate the number of hours required to perform those tasks. The
IRS used these time standards to determine whether changes in the equipment inventory
warranted an equitable adjustment. Exhibit 1 at 82–83. The solicitation did not include the
GSA Maintenance Time Standards, which lists the budgetary hours associated with all
preventive maintenance tasks.5 Even if the IRS had included it, a banner on almost every
page of the document cautions that the hours listed “are not the actual PM times and should
not be used as such.” Exhibit 98 at 3; see also Transcript, Vol. 1 at 68–69 (EastCo’s chief
executive officer (CEO), Mr. Brown, testifying that private contractors can do maintenance
in less time than the budgetary hours suggest).
The agency scheduled a site visit for interested offerors. Exhibit 1 at 20, 126. After
the site visit, the IRS issued an amendment to the solicitation identifying the attendees.
EastCo did not have any employees listed on the attendance sheet. Exhibit 9. However,
several companies which EastCo planned to use as subcontractors attended. Id. at 2–3
(identifying attendees from Servi-Tech Controls and Trane); see also Exhibit 14 at 3
3

Although the solicitation referred to TE-4 as a GSA document, the TE-4
attached to the solicitation (Exhibit 20) was entitled “Internal Revenue Service Public
Buildings Preventative Maintenance Guides.” It appears that both IRS and GSA had their
own guide cards. A former IRS program analyst clarified during the hearing that GSA has
guide cards, but for “[c]ertain things that IRS wanted to do that were above-standard for
GSA, IRS would produce its own guide cards. That is why IRS had to create the TE-4—so
it could capture the agency requirements for maintenance in its own guide cards. Transcript,
Vol. 1 at 326.
4

The TE-5 identified which guide card to use for a particular item. The
contractor would then refer to the TE-4 to identify the required preventive maintenance steps
for that item. Transcript, Vol. 1 at 119-20.
5

The copy of the GSA Maintenance Time Standards that was submitted as part
of the appeal file is marked in red capital letters on the first page: “internal document” that
“shall not be in the possession of any . . . contractor.” Exhibit 98 at 1.

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(identifying Servi-Tech Controls, Inc. and Trane Company as “principal subcontractors”).
EastCo occasionally used subcontractors to attend site visits, “especially on the West Coast.”
Transcript, Vol. 1 at 178–79.
EastCo, a small business based in New York, submitted an offer in response to the
solicitation. The offer included a detailed staffing plan discussing which items of work
would be performed by EastCo personnel and which items would be subcontracted. See
Exhibit 14 at 1–12. According to the staffing plan, EastCo intended to subcontract every
subcategory of the contract’s preventive maintenance tasks—either completely or as needed.
Id. at 11. For example, EastCo identified Trane Company as the subcontractor that would
perform all preventive maintenance, repairs, and overhaul of the chillers when required by
the contract. Id. at 2–3. The only exception to this plan was that EastCo would maintain the
CMMS equipment inventory.
On December 7, 2010, the IRS awarded EastCo the contract. EastCo’s phase-in
period ran from March 9 to May 8, 2011. The base year of the contract began on May 9,
2011, and each option year thereafter began on the same date of the subsequent year, with
the total period of performance ending on May 8, 2016. Exhibit 13 at 1, 39.
Contract Performance: System Upgrades, New Equipment, and the TE-5
The contracting officer (CO) modified the contract at various points during
performance in order to add funding, implement prevailing wage rates, exercise options,
extend the contract, and complete various administrative actions.6 See generally Exhibits
30–35, 38, 40–42, 44–51, 53–59, 62, 67, 69–70, 72–76, 80–81. During the phase-in period,
EastCo provided the IRS with an updated TE-5 that included some additions and deletions
based on EastCo’s observation of the facility. Exhibit 95; see also Transcript, Vol. 1 at 12630. The IRS accepted the updated TE-5 and incorporated it into the contract through
modification 0002, which stated that it was “issued to increase funding for Fixed Price
Services for the Base Year.” Exhibit 30 at 2. The total amount of the increase for all fixed
price services was $305,040. Id. For preventive maintenance specifically, this modification
contained two contract line item numbers (CLIN) for increasing funding: CLIN 1001H,
“Preventive Maintenance (PWS 3.4) Fixed,” totaling $75,339 for three months of service,
and CLIN 6001, totaling $7032 for two months to account for an increase in the prevailing
wage rates. CLIN 6001 also stated, “The TE-5 Equipment inventory has been updated.”
Exhibit 30 at 2–3. EastCo disagreed that it was compensated for changes to the TE-5

6

Thirty-one of the thirty-seven modifications in the appeal file were not signed
by the CO or by EastCo. Despite the lack of signatures, neither party has disputed the
validity of these modifications.

CBCA 6032

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identified during the phase-in period but offered no evidence other than a verbal assertion to
that effect. Transcript, Vol. 1 at 128–30.
During performance of the second option year, the parties signed a bilateral
modification (modification 0014)7 that transferred responsibility for all new equipment
installed under a utility energy services contract (UESC) to EastCo. Exhibit 53 at 2 ¶ A.
Modification 0014 expressly stated:
In accordance with contract clause 3.4.3 Changes in Equipment Inventory and
3.4.4 Preventive Maintenance, [EastCo] is responsible for maintaining and
operating equipment at the Fresno Service Center. Effective immediately,
[EastCo] is responsible for the UESC project associated equipment.
At the beginning of Option Year 3, a comprehensive review will be done on the
TE-5 and adjustments will be made as needed.
Id. ¶ B (emphasis added).
The UESC was a multi-million dollar project which involved a different contracting
officer and a different contractor. Through the UESC project, the IRS Fresno office replaced
older, less efficient equipment, such as chillers, cooling towers, pumps, air handlers,
bathroom equipment, and lighting. Transcript, Vol. 2 at 9–13. The BAS was also replaced.
Transcript, Vol. 1 at 328–29; Exhibit 68-A at 12–13. The UESC replacement took
approximately one year to complete. Transcript, Vol. 2 at 10–11.
Four binders containing the “ECM As Built information associated with the UESC
project” were turned over to EastCo’s project manager on December 4, 2013. Exhibit 53
at 2 ¶ A. The UESC contractor was to provide training to personnel who would be
conducting maintenance on the equipment. Transcript, Vol. 2 at 14. The record shows that
EastCo’s training was scheduled for October 2013, but there is no information about whether
the training actually took place. Exhibit 114. Paragraph 3.4.9 of the PWS precluded EastCo
from claiming additional payment for maintaining the new BAS control system as long as
the IRS provided EastCo with training on the new system. Exhibit 1 at 85. At the hearing,
Mr. Brown, EastCo’s CEO, testified that the cost to maintain the new BAS was $585 per
week, as opposed to $58 a month under the old system, but did not elaborate:

7

Modification 0014 was unsigned, but the effective date of the modification was
December 19, 2013. Exhibit 53 at 1.

CBCA 6032

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[W]e ran it for almost three years that way without getting paid. . . . When we
put in the request to be compensated for this, they told us it was a software
update. . . . But then going back to the contract . . . that absolutely didn’t apply.
[The IRS] didn’t change the software, [it] removed the whole unit. You can’t
go back, it had nothing to do with the old unit. It was gone, it was taken out
and there was nothing left.
Transcript, Vol. 1 at 81–82.
It is unclear from the record whether the UESC equipment resulted in an increase that
warranted additional compensation. Modification 0001 of option year three, dated July 1,
2014, adds funding for five months of preventive maintenance in the amount of $3516 per
month, or $17,580 total, but no reference was made to the UESC equipment. The description
of supplies and services stated, “Adjustment to Preventive Maintenance per Delivery
Order 0001, Modification 0002. This funding was accidentally left out.” Exhibit 56 at 2.
However, the referenced delivery order and modification were related to the base year of the
contract, which was prior to the transfer of responsibility of the UESC equipment from the
IRS to EastCo. Modification 0002 of option year three, dated October 9, 2014, added
funding in the amount of $72,313.32, for three months of preventive maintenance, as well
as funding to the other categories of service. Although it did not specifically reference the
UESC equipment, the modification provided increased funding for all categories of basic
services in option year three. Exhibit 59 at 1-4.
By the fourth option year, the IRS upgraded the graphic database interface (GDI) used
to input information into the CMMS. The upgraded system allowed repair and preventive
maintenance tickets to be rejected by the Government if an inspection determined that they
were not adequately performed. See Transcript, Vol. 1 at 284–86; see also Exhibit 66
(discussing the GDI upgrade). Because service and preventive maintenance tickets were
assigned to, and based on, the asset number in the CMMS, a single ticket might include
dozens or hundreds of pieces of equipment if those pieces of equipment were “bundled” in
the CMMS or TE-5. Under this configuration, if the IRS inspection required rework on one
unit in a bundled ticket, the entire ticket would have to be rejected. Transcript, Vol. 1 at 286.
As a result, the IRS directed EastCo to “unbundle” all of the inventory—to change the data
in the CMMS so that each row referred only to a single piece of equipment. Id.; see
Exhibits 65–66.
After this administrative task was accomplished, it appeared as if hundreds of new
equipment items had been added to the TE-5. The IRS stated that only the format had
changed. EastCo disagreed and accused the IRS of using the new format as a way to force
EastCo to absorb more of the repair costs. EastCo explained that for years it had applied the
$3000 repair threshold to an entire system. By breaking it down in this manner, EastCo

CBCA 6032

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complained that the IRS shifted responsibility for many repairs to EastCo in violation of the
contract’s terms. “When you unbundled your TE-5 . . . you exposed my company to every
single individual piece of equipment.” Transcript, Vol. 1 at 148. EastCo accused the IRS
of “chang[ing] the contract mid-contract” without a change order, essentially giving the
Government a “free insurance policy” on every piece of equipment, which was not what
EastCo agreed to when the contract was executed. Id. at 46, 66, 148–49. Whether bundled
or unbundled on the TE-5, the IRS’s view was “a chiller is a chiller.” Id. at 80–81. This
particular issue, however, was not part of EastCo’s claim to the contracting officer.
Exhibit 83.
EastCo’s Increased Costs of Performance
As existing equipment was upgraded or new equipment was installed in an IRS
building, EastCo claimed that its performance costs increased. Using the example of the
chillers, the IRS viewed the installation of the new chillers as merely swapping out old
equipment with new equipment and expected EastCo to carry on with inspections, preventive
maintenance, and repairs as it had prior to their installation. EastCo’s annual preventive
maintenance cost on the old chillers was about $2600. The annual cost on the new chillers
was $3050. Exhibit 115. EastCo understood it was required to perform annual preventive
maintenance on the new chillers and made no issue of the $450 annual increase. However,
EastCo did not include in its original proposal any costs related to first-year maintenance on
brand-new chillers, since EastCo bid on a contract with thirty-year-old chillers. Exhibits 115,
116 at 1.
An email from the contracting officer’s representative (COR) to EastCo stated: “Per
the direction of my CO . . . I am giving EastCo written notification for service to have the
[preventive maintenance] (R-13) base line test [for the chillers] performed as soon as
possible by no later than March 21, 2014. With the expectancy that EastCo will be paying
the entire bill for services rendered.” Exhibit 116 at 9. EastCo pushed back, responding that
R-13 (also referred to as “Eddy current testing”) was performed every three years on the
chillers. EastCo performed the R-13 testing on the old chillers in 2012, making the next one
due in 2015. Id. at 7. The IRS expected EastCo to perform the Eddy current test on the new
chillers in 2014, one year early. EastCo agreed to make that adjustment—not because the
contract required it but because it was willing to work with the agency. But EastCo stated
that it could not perform the first year maintenance without additional funding. Exhibit 115.
EastCo did not include those costs in its preventive maintenance budget when it bid on the
contract. The additional maintenance was costly and usually involved proprietary systems
(“Th[e] quote [from Carrier] came in at $19,450.”). Id. Making the wrong decision on who
provided maintenance risked voiding the manufacturer’s warranty. Transcript, Vol. 1 at 186.

CBCA 6032

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Other smaller items also became more costly when they were replaced or upgraded.
For example, the old bathroom sinks in the facilities consisted of traditional metal faucets
that were turned on and off manually. The new bathroom sinks, however, contained
automation technology. Mr. Brown, EastCo’s CEO, explained the issue at the hearing:
[S]o if you could imagine a regular faucet that costs $19, they [then] put [in]
electronic faucets . . . battery-operated soap dispensers [and] battery-operated
paper-towel dispensers. Everything was automated. They didn’t want to give
me a change on that. Everyday the[re] would be a solenoid breaking, the
cleaning company would knock something off, people would go in and break
the faucets these [new] faucets were $300 to $500, not $19. Not their problem
[the IRS] said . . . .
Transcript, Vol. 1 at 64–65. Mr. Brown added that by unbundling these sinks, ten broken
faucets at $300 a piece would no longer exceed the $3000 threshold since the IRS would
apply that threshold to each faucet. Id. Although this issue was addressed several times
during the hearing, it was not included in EastCo’s claim to the contracting officer.
The record contains multiple examples of the parties’ attempts to keep up with the
equipment changes and their impact on increased costs. Sometimes, the IRS reached out to
EastCo to request an updated copy of the TE-5. Exhibits 66, 117 at 1, 119 at 2. Other times,
EastCo initiated a request for approving an updated TE-5. Exhibit 65. In some instances,
EastCo’s updates were accepted. For example, in 2012, the IRS accepted many requested
additions that EastCo had placed on the TE-5. See generally Exhibit 43-A at 54–69
(accepting additions with “ok”). On other occasions, the IRS rejected them. E.g.,
Exhibits 43-A at 54–69 (rejecting many additions, mostly because they were added on
previous updates); 65 (updated TE-5 denied because of “bundled” items); 120 at 1 (rejecting
TE-5 because EastCo did not unbundle items). Despite these efforts, EastCo insisted that the
IRS failed to approve continued updates to the TE-5, depriving EastCo of fair compensation
for increased performance requirements. Mr. Brown testified that the IRS “was well aware
of all the equipment coming into the facility . . . [and] of the changes being made to the TE-5
. . . but [the IRS] wouldn’t supply the TE-5.”8 Transcript, Vol. 1 at 85.
In April 2016, one month before the expiration of EastCo’s contract, the IRS produced
an updated version of the TE-5 to solicit offers for the follow-on contract. EastCo argued
that the TE-5 attached to the new solicitation was the same as the version that EastCo had
been urging the IRS to approve because it represented the most accurate picture of the
equipment in the facilities at that time. EastCo considered this an acknowledgment of the

8

We interpret the phrase “supply the TE-5” to mean “approve the TE-5.”

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changes and expressed frustration that the IRS did not give EastCo the financial benefit of
the changes—only the responsibility of the additional work.:
[The IRS] wouldn’t let me prosper from the new inventory and they told me
to maintain it at no charge but the new contractor had the ability to bid on the
new inventory . . . . [The IRS] felt I was being paid enough money. [They said
that] I didn’t need more money, [and] that I could maintain the building with
what they were paying. I said that is absolutely ridiculous.
Id. at 86–87.
At the conclusion of the fourth option year, the IRS extended EastCo’s contract twice
for a total of six months. Exhibits 70, 73. The IRS paid EastCo significantly higher prices
during the extension periods. EastCo explained that costs which were previously amortized
over a twelve-month performance period had to be compressed into six months. Exhibit 112
at 1–2. After the final contract extension expired, EastCo continued performing under a
three-month bridge contract, which covered the period from November 9, 2016, through
February 8, 2017.9 Under the bridge contract, the IRS paid EastCo approximately $73,000
more per month for services than during prior years of performance. EastCo contends that
the increase was due to “verifiable and justifiable differences in the inventories and upgrades
that had taken place” over the previous five years. Exhibit 83 at 4. The IRS claimed it had
no other choice but to pay the higher prices since it still had not awarded a follow-on
contract. The contracting officer testified, “We had no choice. Our back was against the
wall. We needed the services.” Transcript, Vol. 1 at 232.
EastCo’s Claim to the Contracting Officer and Subsequent Appeal to the Board
On October 13, 2017, EastCo submitted a certified claim to the contracting officer in
the amount of $4,615,362.83, alleging that: (1) the IRS understated the initial TE-5 by 1736
equipment assets, causing EastCo to miscalculate the true costs of the required work; (2) the
IRS breached the duty of good faith by failing to approve updated TE-5s despite repeated
requests to do so; and (3) the upgrades to the facility’s equipment resulted in EastCo
incurring significant additional costs without compensation. Exhibit 83. According to
EastCo’s claim, the IRS underpaid EastCo each year of the contract as follows:

9

The appeal file does not contain a copy of the bridge contract. Although
Exhibit 77 is listed in the appeal file index as “Bridge Contract (PWS) Performance Work
Statement,” the actual exhibit contains no references to a bridge contract. It is dated June 30,
2010, and appears to be the same PWS that EastCo originally bid on, though a detailed
comparison was not conducted.

CBCA 6032
Contract Year

11
Effective Date

Annual Increase

Base Year

May 9, 2011 - May 8, 2012

$1,175,449.35

Option Year - 1

May 9, 2012 - May 8, 2013

$980,337.65

Option Year - 2

May 9, 2013 - May 8, 2014

$895,285.53

Option Year - 3

May 9, 2014 - May 8, 2015

$817,612.35

Option Year - 4

May 9, 2015 - May 8, 2016

$746,677.95

Total: Five Years

May 9, 2011 - May 8, 2016

$4,615,362.83

Id. at 4.
In support of its claim, EastCo provided a twenty-five-column, 3900-row Microsoft
Excel spreadsheet purporting to analyze the differences between the TE-5 that EastCo bid
on in 2011 and the TE-5 that was attached to the 2016 solicitation of the follow-on contract.
Exhibit 94; Transcript, Vol. 1 at 141. EastCo alleged that each asset identified as “new” on
the spreadsheet was an item added by the IRS that was not on the original TE-5. EastCo
contends that it maintained these new assets without compensation because the IRS refused
to approve subsequent versions of the TE-5s that incorporated the new equipment. The
spreadsheet identified 1736 assets excluded from the original TE-5, then separated those
assets into two groups – assets for which EastCo subcontracted out the maintenance and
assets that EastCo maintained itself. EastCo quantified the total additional hours for each
category and multiplied them by the “hourly loaded rate for subcontractor” work and “hourly
loaded rate for in-house” work. EastCo added profit and overhead to those amounts to
determine the amounts listed in the above table, totaling $4,615,362.83. Notice of Appeal,
Exhibit 2.
The contracting officer did not issue a final decision on EastCo’s claim, and on
February 12, 2018, EastCo timely appealed the deemed denial of its claim to the Board.
Discussion
Burden of Proof
EastCo advances three arguments in support of its claim: (1) the original equipment
list was understated, (2) the IRS breached the duty of good faith and fair dealing when it
failed to approve changes to that list, and (3) the IRS undertook equipment upgrades and
replacements but failed properly to pay EastCo for their maintenance. As the proponent of
its claim, EastCo bears the burden of proving both entitlement and the amount of its

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damages. Choctaw Transportation Co. v. Department of Agriculture, CBCA 2482, et al.,
16-1 BCA ¶ 36,579, at 178,160. First, EastCo must show, by a preponderance of the
evidence, that it is entitled to relief. Vet4U, LLC v. Department of Veterans Affairs,
CBCA 5387, 19-1 BCA ¶ 37,336, at 181,572; see also, 1-A Construction & Fire, LLP v.
Department of Agriculture, CBCA 2693, 15-1 BCA ¶ 35,913. “Preponderance of the
evidence means proof by information that, [when] compared with that opposing it, leads to
the conclusion that the fact at issue is more probably true than not.” 48 CFR 2.101 (2023).
“We have held that ‘a party asserting a claim has met its burden of proof by presenting
corroborating evidence in support of that claim.’” Systems Integration & Management, Inc.
v. General Services Administration, CBCA 1512, et al., 13 BCA ¶ 35,417, at 173,765
(quoting Navigant SatoTravel v. General Services Administration, CBCA 449, 11-1 BCA
¶ 34,765, at 171,103).
After a party establishes entitlement to relief, it has to prove its damages “with
sufficient certainty so that ‘the determination of the amount . . . will be more than mere
speculation.’” Sylvan B. Orr v. Department of Agriculture, CBCA 5299, 17-1 BCA
¶ 36,863, at 179,616 (quoting Willems Industries, Inc. v. United States, 295 F.2d 822, 831
(Ct. Cl. 1961)). “[C]ontract law precludes recovery for speculative damages.” San Carlos
Irrigation & Drainage District v. United States, 111 F.3d 1557, 1563 (Fed. Cir. 1997).
The Initial TE-5 – Superior Knowledge and Negligent Estimate
EastCo alleges that the IRS significantly understated the initial TE-5. We analyze this
allegation under two theories of liability – first, that the agency had superior knowledge of
the facility and failed to share it and, second, that the agency provided prospective offerors
with a negligent estimate. The superior knowledge doctrine permits a contractor to recover
its damages “where the government fails to provide a contractor with vital knowledge in the
government’s possession which bears upon the costs of the contractor’s performance.”
Hercules Inc. v. United States, 24 F.3d 188, 196 (Fed. Cir. 1994). To establish superior
knowledge, a contractor must show four elements:
(1) a contractor undertakes to perform without vital knowledge of a fact that
affects performance costs or duration, (2) the government was aware the
contractor had no knowledge of and had no reason to obtain such information,
(3) any contract specification supplied misled the contractor or did not put it
on notice to inquire, and (4) the government failed to provide the relevant
information.
Id. We apply the superior knowledge doctrine when “the Government fails ‘to disclose to
[the] contractor otherwise unavailable information regarding some novel matter affecting the
contract that is vital to its performance.’” Yates-Desbuild Joint Venture v. Department of

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State, CBCA 3350, et al., 17-1 BCA ¶ 36,870, at 179,688 (quoting Scott Timber Co. v.
United States, 692 F.3d 1365, 1373 (Fed. Cir. 2012)).
EastCo cannot establish the first prong of the test for superior knowledge – that it
undertook the contract without vital knowledge. First, EastCo had an opportunity to visit the
facility prior to submission of its bid. The agency made much of EastCo’s failure to attend
the site visit, but during the hearing, EastCo clarified that when it bid on projects on the West
Coast, it typically had its subcontractors attend the event. The record substantiates that two
of EastCo’s subcontractors attended the site visit. Thus, both EastCo’s opportunity to
participate in a site visit and its confirmation that its subcontractors did so undermine any
contention that information pertaining to the contents of the facilities and the condition of
their equipment was unavailable to EastCo. Second, the terms of the contract not only
contemplated but required EastCo to verify the initial TE-5 during the phase-in period.
Contemporaneous documentation shows that EastCo submitted an updated TE-5 that the IRS
accepted and funded in 2011 and made effective on May 9, 2011 (the first day of the
contract’s base year). Thus, because the contract required EastCo to update the TE-5 at the
outset of performance, the update actually occurred, and EastCo received a substantial
increase in funding, EastCo’s claim cannot be supported under a theory that the agency
withheld superior knowledge.
EastCo’s claim for liability based on a negligent estimate fails for similar reasons.
EastCo argues that the Government’s deficient equipment estimate caused EastCo to
underbid the contract and lose money. Here, the volume of equipment was at the heart of
EastCo’s claim, yet there is no evidence to support EastCo’s contention that the IRS solicited
proposals based on a negligent estimate of the work.10 “[T]he government must act in good

10

It is immaterial that EastCo’s contract was partially an IDIQ. Even though “no
Government liability can exist for negligent estimates in [an IDIQ] contract” because “the
Government’s sole requirement for [such a] contract is to purchase the non-nominal
minimum obligation,” 1 Ralph C. Nash, Jr. & Steven W. Feldman, Government Contract
Changes § 11.35 (3d ed. 2007) (citing Travel Centre v. Barram, 236 F.3d 1316 (Fed. Cir.
2001)), the work that EastCo alleges the negligent estimates affected fell under the FFP part
of the contract. Although negligent estimates claims typically arise under requirements
contracts, they can, in appropriate circumstances, affect other forms of FFP contracts.
American General Trading & Contracting, WLL, ASBCA 56758, 14-1 BCA ¶ 35,587, at
174,378–79; see Engineered Demolition, Inc. v. United States, 70 Fed. Cl. 580, 591–93
(2006) (holding that the Government can be liable for breach for providing negligent
estimates on non-requirements FFP contracts). “What matter[s is] not the type of contract
but whether ‘estimates of volume are material to the contract.’” American General Trading,
14-1 BCA at 174,378 (quoting Rumsfeld v. Applied Cos., 325 F.3d 1328,1340 (Fed. Cir.

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faith and use reasonable care in computing its estimated needs.” Medart, Inc. v. Austin, 967
F.2d 579, 581 (Fed. Cir. 1992). The burden of proving that the estimate was unreasonable
is on the contractor, even for significant deviations. Id. The contractor must prove, by a
preponderance of the evidence, “that the government’s estimates were ‘inadequately or
negligently prepared, not in good faith, or grossly or unreasonably inadequate at the time the
estimate was made.’” Agility Defense & Government Services, Inc. v. United States, 847
F.3d 1345, 1350 (Fed. Cir. 2017) (quoting Medart, 967 F.2d at 581).
EastCo failed to respond to the agency’s comments that items on EastCo’s spreadsheet
were double-counted or credited in previous modifications. However, even if the IRS failed
to account for various equipment items in the initial TE-5, the terms of the contract instructed
EastCo to review the equipment list for accuracy during the phase-in period and make any
necessary updates. Any variation between what was advertised in the solicitation and what
was actually in the building became irrelevant to the extent that EastCo performed the
required update and was paid for the difference. Evidence in the record shows that an
updated TE-5, accompanied by an increase in funding, occurred just after the phase-in
period. Although EastCo disputes this fact, the uncorroborated testimonial evidence
proffered by EastCo’s witness does not overcome the contemporaneous documentation
substantiating the transaction. “‘While [the Board] can make inferences from th[e] evidence
and either accept or deny the probative value of documents, statements or other extrinsic
evidence, in order for us to find for a party, that party’s evidence must establish,’ by a
preponderance of the evidence, ‘that it is entitled to relief.’” 1-A Construction, 15-1 BCA
at 175,551 (quoting Schoenfeld Associates, Inc., VABCA 2104, et al., 87-1 BCA ¶ 19,648,
at 99,472). EastCo has not met that burden here.
The Duty of Good Faith and Fair Dealing
“Implied in every contract is a duty of good faith and fair dealing that requires a party
to refrain from interfering with another party’s performance or from acting to destroy another
party’s reasonable expectations regarding the fruits of the contract.” CAE USA, Inc. v.
Department of Homeland Security, CBCA 4776, 16-1 BCA ¶ 36,377, at 177,347 (quoting
Bell/Heery v. United States, 739 F.3d 1324, 1334–35 (Fed. Cir. 2014)). Conduct that may
breach this duty includes “interference with or failure to cooperate in the other party’s
performance,” as well as “acts or omissions that . . . deprive the other party of the
contemplated value” of the contract. Metcalf Construction Co. v. United States, 742 F.3d
984, 991 (Fed. Cir. 2014).

2003)).

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EastCo’s second argument in support of its claim is that the IRS breached the duty of
good faith and fair dealing by ignoring repeated requests to approve updates to the TE-5 as
required by the contract. This failure prevented EastCo from pursuing full compensation for
its work. The IRS argues that EastCo was in charge of the CMMS, and since the CMMS
populated the TE-5, EastCo was responsible for finalizing the TE-5. We disagree. Under
the terms of the contract, the IRS had final approval authority for the TE-5. Failing to act on
those requests, or delaying such action, would hinder EastCo’s ability to seek compensation
that it felt it was owed. The record shows a pattern of EastCo reaching out to the contracting
officer and to her representative seeking approval for TE-5 updates and related matters but
rarely receiving a meaningful response. While it is unacceptable for agency officials to
neglect the legitimate inquiries of their contracting partners, the issue that we must decide
is whether the agency’s delays and incomplete responses constituted a breach of the duty of
good faith and fair dealing that would entitle EastCo to compensation.
After examining the record, we find that the agency’s conduct, while regrettable, did
not breach this duty. Despite the agency’s sparse communication with EastCo, the record
shows that the contracting officer communicated with the project manager and other IRS
technical personnel on the status of TE-5 reviews to ensure progress was being made, even
if it was slow. At other times, the contracting officer initiated the communication and asked
EastCo to provide an updated TE-5. Furthermore, IRS technical personnel performed several
reviews of TE-5 updates and provided EastCo with feedback on those reviews, including
agreeing to add multiple equipment items to the inventory list. Any rejection or denial of
equipment items being added to the inventory list were found to be redundant or obsolete.
The agency should not have to pay twice for servicing the same equipment. If that was not
the case, we would have expected to see more information from EastCo explaining why the
IRS was wrong to reject the items from being added to the inventory list. As we previously
noted, EastCo bears the burden of proving entitlement to compensation under the theories
set forth in its claim. Based on what EastCo presented, as well as the agency’s actions, we
do not find that the IRS’s overall conduct manifested evidence of breach, which is required
to sustain a violation of this duty. BCPeabody Construction Services, Inc. v. Department of
Veterans Affairs, CBCA 5410, 18-1 BCA ¶ 37,013, at 180,261.
Equipment Upgrades Were Not Changes to the Terms of the Contract
EastCo’s third and final argument in support of its claim was that the extensive
equipment and systems upgrades in the facilities resulted in EastCo incurring significant
additional costs without compensation. EastCo elaborated that the new equipment and
systems were complex and, consequently, required costly specialized and proprietary
subcontractor involvement, which EastCo’s original bid did not include. EastCo argues that
many of these additions and upgrades should have been accompanied by a change order but

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were not. EastCo’s argument is essentially a claim for liability under a constructive change
theory.
Although this final argument employs a different theory, our response is the same.
The contract’s terms contemplated systems and equipment upgrades throughout the period
of performance and provided a mechanism for compensating the contractor when
appropriate. According to the contract’s terms, whenever new equipment was installed or
old equipment was removed or upgraded, EastCo was required to analyze the cost impacts
of those changes and request an equitable adjustment if certain criteria were met. Since this
entire process was built into the contract, EastCo’s constructive change theory is unfounded.
In Crane & Co. v. Department of the Treasury, CBCA 4965, 16-1 BCA ¶ 36,539, the
Board stated that for a constructive change claim, “we look to see whether, during contract
performance, the contracting officer ‘unilaterally . . . alter[ed] the contractor’s duties under
the agreement; the contractor’s performance requirements [were] enlarged; and the additional
work [was] not volunteered but result[ed] from a direction of the Government’s officer.’”
Id. at 178,005 (quoting Len Co. & Associates v. United States, 385 F.2d 438, 443 (Ct. Cl.
1967)). Here, no duties or terms were altered. And to the extent that performance
requirements were expanded as a result of system upgrades or new equipment, it was
EastCo’s responsibility to demonstrate the magnitude of that expansion so it could be
compensated accordingly.
The new BAS installed as part of the UESC contract, which EastCo alleged was forty
times more expensive to maintain than the old BAS, seems to be the most expensive system
upgrade that the IRS installed during the contract. However, the contract specifically
discussed upgrades to the BAS and other control systems and stated that, as long as the
Government provided training to EastCo, EastCo could not claim additional payment for
changing to the new or upgraded software or control programs. EastCo has not alleged that
the training did not occur, and there is evidence in the record that it was scheduled.
Moreover, EastCo’s witnesses testified about the significant increased costs associated with
maintaining the new BAS system but provided no details about the nature of those costs.
Nor did EastCo explain why it should not be bound by the terms of the contract precluding
additional compensation for maintaining the new BAS system if EastCo received the
training.
Overall, EastCo’s claim fails to provide the necessary evidence and analysis that
paragraph 3.4.3 requires in order to establish a compensable adjustment. Neither the
testimony of EastCo’s witnesses nor its spreadsheet provides the required support. The
spreadsheet simply identifies equipment that was added to the inventory after award yet,
according to EastCo, was never formally acknowledged or paid for by the IRS. The
spreadsheet also lists the total additional hours that EastCo asserts it worked and multiplied

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those hours by a fixed dollar amount for in-house work and subcontractor work. Evidence
we would typically look for to support such claims includes repair tickets, subcontractor
invoices, payment receipts, employee time cards, the CMMS printouts, or other
contemporaneous documentation that may substantiate an increase of five percent or more
for preventive maintenance work on new equipment. A spreadsheet can be built at any point,
and while that may be an acceptable method for capturing or summarizing all of the relevant
supporting data, it should be accompanied by the underlying data that populated the
spreadsheet in the first place. See Michael Johnson Logging v. Department of Agriculture,
CBCA 5089, et al., 21-1 BCA ¶ 37,904, at 184,087, aff’d, No. 2022-1210, 2022 WL
17494846 (Fed. Cir. 2022).
Without evidence that EastCo’s duties were altered or its performance requirements
were expanded—when, how, and by how much—we find no entitlement to additional costs
on a theory that the contract was constructively changed. Furthermore, to the extent that
EastCo alleges that the IRS’s unilateral decision to unbundle the equipment inventory list
exposed EastCo to significant additional costs by materially changing the threshold for
outsourcing work, we make no determination on that allegation here since EastCo failed to
present that claim to the contracting officer. See Bob L. Walker v. Department of
Agriculture, CBCA 2131, et al., 18-1 BCA ¶ 36,921, at 179,879 (2017) (citing Lee’s Ford
Dock, Inc. v. Secretary of the Army, 865 F.3d 1361, 1369 (Fed. Cir. 2017)).
EastCo Provided Insufficient Proof of Damages
Even if we could find that EastCo established liability pursuant to its legal theories,
EastCo provided insufficient proof of causation and its claimed damages. The only support
that EastCo provided was its TE-5 comparison spreadsheet. Despite the voluminous data in
that spreadsheet, we cannot discern how this document proves its claim. EastCo did not
explain at the hearing or in its post-hearing brief how the figures in the spreadsheet apply to
the provision in the contract for substantiating an upward equitable adjustment. And yet, on
the “summary sheet” that EastCo provided in support of its claim, EastCo adds up some
number of hours and arrives at a total of 47,346.43 additional maintenance hours; it then
allocates them according to two hourly rates – one for subcontractors and one for in-house.
We are perplexed by having just two flat rates. Costs vary depending on many factors, and
we are not persuaded that all subcontractors charged the same rate, for all categories of work,
over five years.11

11

Exhibit 1 to EastCo’s claim is the TE-5 Equipment Inventories Analysis, which
EastCo asserts “presents [] in-depth analysis information that supports its claim, along with
Exhibits, Attachments and Subcontractors Proposals.” Exhibit 83 at 4. However, the panel
could not locate any of the referenced documents.

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As we already noted, the Board looks for contemporaneous evidence of actual costs
to substantiate EastCo’s claimed costs. The Court of Appeals for the Federal Circuit has held
that “the ‘actual cost method’ is preferred because it provides the court, or contracting
officer, with documented underlying expenses, ensuring that the final amount of the equitable
adjustment will be just that—equitable—and not a windfall for either the government or the
contractor.” Dawco Construction, Inc. v. United States, 930 F.2d 872, 882 (Fed. Cir. 1991),
overruled on other grounds by Reflectone, Inc. v. Dalton, 60 F.3d 1572 (Fed. Cir. 1995).
Because the spreadsheet was built off of budgetary hours, not actual hours, it is an estimate
rather than a reflection of the expenses that EastCo actually incurred. Indeed, EastCo’s CEO
testified that private contractors can do maintenance in less time than the budgetary hours
suggest. EastCo must show how the estimates relate to records of the costs that EastCo
actually incurred in performing the work. EastCo did not supply that documentation.
Therefore, the information presented in EastCo’s spreadsheet is speculative or, at best,
consists of estimates.
Lastly, we reject EastCo’s argument that the higher rate it received during the contract
extensions is an implicit admission by the Government that its damage calculations were
correct. The emails between EastCo and the IRS show that EastCo itself proposed a higher
price because of a shorter amortization period for fixed costs and not because of any changes
to the equipment inventory.
Decision
The appeal is DENIED.

Kathleen J. O’Rourke
KATHLEEN J. O’ROURKE
Board Judge
We concur:

Patricia J. Sheridan
PATRICIA J. SHERIDAN
Board Judge

Marian E. Sullivan
MARIAN E. SULLIVAN
Board Judge

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Acbca%3A23432aa94864aba2. Public record. Not legal advice.