DENIED: May 26, 2016

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CBCA 4776

CAE USA, INC.,

Appellant,

DEPARTMENT OF HOMELAND SECURITY,

Respondent.

Joseph P. Hornyak and Gregory R. Hallmark of Holland & Knight LLP, Tysons

Corner, VA, counsel for Appellant.

William H. Butterfield and Julia A. LoBosco, U.S. Coast Guard, Department of

Homeland Security, Washington, DC, counsel for Respondent.

Before Board Judges DANIELS (Chairman), WALTERS, and LESTER.

LESTER, Board Judge.

Appellant, CAE USA, Inc. (CAE), seeks to recover the costs that it incurred in

developing a full-motion flight simulator (FFS), which it had planned to use to provide

avionics training services under an indefinite-delivery/indefinite-quantity (IDIQ) contract

with the United States Coast Guard (Coast Guard). Under the IDIQ contract, CAE had to use

FFSs, which CAE was to furnish, to provide training for two different kinds of aircraft, the

HC-130H and an upgraded version of that aircraft, the Avionics 1 Upgrade (A1U). The

Coast Guard ordered a sufficient quantity of HC-130H aircraft training services to satisfy its

CBCA 4776

minimum ordering obligations under the contract, but it never ordered any A1U services

because it canceled the A1U program.

CAE does not complain about the Coast Guard’s failure to order any A1U training

services. Nevertheless, it argues that, under the contract, the Coast Guard was required to

provide (as Government-furnished equipment (GFE)) a set of A1U avionics that CAE would

incorporate into one of its FFSs. Although the Coast Guard delivered the A1U avionics

package to CAE, the Coast Guard requested its return soon after canceling the A1U program.

CAE argues that it was entitled to hold the A1U avionics package throughout the life of the

IDIQ contract (including option years), even if the Coast Guard did not order any A1U

services, and that the Coast Guard’s breach of CAE’s possessory rights precluded CAE from

earning income through the provision of A1U training services to third parties. CAE further

argues that, even if the contract language itself does not provide it with an absolute right to

keep the A1U avionics for the life of the contract, the Coast Guard breached its implied duty

of good faith and fair dealing, either by not allowing CAE to continue to hold the avionics

or by failing to provide CAE with greater information about the possibility that the Coast

Guard might cancel the A1U program (so that CAE could have avoided the costs of

developing its FFS). As a damage for the Coast Guard’s breach, CAE seeks to recover more

than $8 million in costs that it incurred in developing its FFS.

Both parties have filed motions for summary relief, and, with limited exception,

neither party has contested the other’s statement of uncontested facts. After studying the

parties’ briefs, as well as the provisions of the contract at issue and the relevant case law, we

must deny CAE’s motion and grant summary relief to the Coast Guard.

Statement of Facts

The History of the HC-130H Aircraft and the A1U Development

The HC-130H, the Coast Guard’s Long Range Surveillance legacy aircraft, has

been in service for more than thirty years. Respondent’s Statement of Uncontested Facts

(RSUF) ¶ 1 (citing Appeal File, Exhibit 3 ¶ 1.2).

Since at least 2008, CAE was the incumbent contractor under contract no.

HSCG23-08-D-PBR005, providing simulator and other related training to the Coast Guard

on the HC-130H aircraft. RSUF ¶ 3; Appellant’s Statement of Uncontested Facts (ASUF)

¶ 3; Exhibit 6 at 4.

In early 2010, CAE issued a press release announcing that it had developed “a

new C-130H full-mission simulator,” featuring “C-130 glass cockpit avionics systems” that

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CAE “offers to C-130 operators considering avionics modernization programs for existing

C-130 Hercules aircraft.” RSUF ¶ 4; Exhibit 1 at 1. In the press release, CAE indicated that

its Tampa training center had “three C-130E/H reconfigurable full-mission simulators” and

that it had “the largest installed base of civil and military full-flight simulators and training

devices” in the world. RSUF ¶ 4; ASUF ¶ 10; Exhibit 1 at 1.

An FFS is a complex device used to train pilots and other aircrew by simulating

the experience of flying a real airplane. ASUF ¶ 1. An FFS generally consists of an enclosed

capsule that contains a mock cockpit, an elevated platform on which the cockpit sits, and

machinery that makes the cockpit and platform turn, tilt, and make other movements. Id.

The cockpit contains displays and controls designed to represent the appearance and

workings of a real aircraft, and the instruments in the cockpit include avionics equipment.

Id. “Avionics” are electronic systems used on aircraft and include communications,

navigation, flight control, and many other systems. Id.

The Coast Guard needed to prolong the life of its aging HC-130H aircraft fleet.

To this end, the Coast Guard undertook a program known as the A1U project, which was

intended to keep the HC-130H viable and operational until 2027. RSUF ¶ 5; Exhibit 2 at 1.

The Solicitation of HC-130H and A1U Training Services

On or about July 26, 2010, the Coast Guard posted a synopsis of its intent to

award a sole source contract to CAE, through which CAE would “incorporate the A1U’s

glass cockpit” into its ongoing HC-130H training services. RSUF ¶ 6. The 2010 synopsis

was an effort to add A1U upgrade training to CAE’s existing contract. Id.

When the synopsis was published, other potential offerors expressed an interest

in performing the A1U training work. RSUF ¶ 7. The Coast Guard contracting officer

determined that, because of that expressed interest from capable bidders, it would be

inappropriate to amend CAE’s contract to add the A1U work on a sole source basis. Id.

On October 26, 2011, the Coast Guard issued request for proposals (RFP) no.

HSCG23-12-R-PBR006, soliciting offers for its training requirements related to the

HC-130H aircraft. Exhibit 3, Attachment 1 at 1 ¶ 1.1; see RSUF ¶ 8; ASUF ¶ 4. It required

training on both the standard HC-130H and the upgraded HC-130H (A1U). Exhibit 3 at

2-35; RSUF ¶¶ 8, 9; ASUF ¶ 5.

The RFP contemplated the award of an IDIQ contract, with a guaranteed

minimum order value of $25,000. Exhibit 3 at 2.

CBCA 4776

10.

The RFP provided that the awardee would have to provide and utilize an FFS

as contractor-furnished property for each training course that the contract permitted the Coast

Guard to order:

4.0 CONTRACTOR FURNISHED PROPERTY.

The Contractor shall furnish all facilities, materials, equipment and services

necessary to fulfill the requirements of this contract, except for the

Government Furnished Resources as specified in this work statement.

.....

4.3 The contractor will furnish a Full Motion Flight Simulator (FFS) for the

simulator phase of instruction for each course outlined below. The FFS shall

be a faithful representation of the HC-130H & A1U cockpit. The FFS will

comply with FAA designation of “Level C” fidelity at a minimum.

Exhibit 3, Attachment 1 at 8 ¶ 4.0; see RSUF ¶ 10. Because the avionics for the A1U are

very different from the standard HC-130H avionics, the same FFS could not be used to train

for both the A1U and the standard HC-130H aircraft. ASUF ¶ 9. Accordingly, under the

RFP, the contractor would need to have an FFS for A1U training and another FFS for

standard HC-130H training. Id.

11.

To provide FFS training for the A1U variant of the HC-130H, a set of avionics

particular to the A1U variant would have to be incorporated into an FFS. ASUF ¶ 7.

Accordingly, the RFP stated that the Government would provide the upgraded avionics

package as GFE twelve months before the required start date of any A1U-specific training

courses, which the contractor would then install into the contractor-provided FFS:

3.0 GOVERNMENT FURNISHED PROPERTY/MATERIALS:

The Government will provide the following resources and information to the

Contractor for work required under this contract:

.....

3.3 The Contractor will be provided A1U GFE twelve months prior to the

required start date of A1U specific training courses. The A1U GFE will

consist of:

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3.3.1 Two ship sets for installation in FFS and FTD [flight training

device]. A1U ship sets will be installed by the training contract

provider.

.....

3.3.3 Three complete sets of ANVS-9 [Night Vision Goggles] for

Mission/Operational Training

Exhibit 3, Attachment 1 at 7-8 ¶ 3.0; see RSUF ¶ 11; ASUF ¶ 7.

12.

The RFP identified the following requirements for A1U co-pilot initial training,

but indicated that training classes would not commence until twelve months after the

Government had delivered the A1U GFE pursuant to an individual task order:

5.4 C130(A1U) CO-PILOT INITIAL TRAINING (502374).

The contractor shall provide a co-pilot initial ground course that successfully

trains Coast Guard personnel to fly as Co-pilots in C130A1U aircraft. The

Contractor shall provide Co-Pilot students with classroom, CBT [computerbased training], FTD, and FFS training on the C-130(A1U) aircraft.

.....

5.4.2 Course Convening: The Contractor shall provide up to 5 training classes

to teach up to 20 co-pilots per year. Each class will consist of two, three, or

four students. Training classes will commence twelve months after delivery

of A1U specific Government Furnished Property which will be provided under

an individual task order. (see paragraph 3.0 GOVERNMENT FURNISHED

PROPERTY/MATERIALS).

Exhibit 3, Attachment 1 at 12 ¶ 5.4 (emphasis added); see RSUF ¶ 11. The contract

contained the same twelve-month lead time for delivery of A1U GFE prior to the provision

of A1U requalification/first pilot ground training, A1U flight engineer class training, A1U

instructor pilot ground school training, A1U transition training, and A1U proficiency

(P-course) training. Id. at 13, 15, 18-20.

13.

In the Questions and Answers (Q&A) to the RFP, which became a part of the

solicitation, the Coast Guard answered the following question from CAE about whether, once

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the A1U GFE was loaded into the successful contractor’s FFS, the contractor could use it to

train other entities:

Can the full motion simulator using the [A1U] GFE be used to train other

customers?

Operationally, the GFE can be used to train other customers on a “not

to interfere” basis.

Exhibit 4 at 1; see ASUF ¶ 16. CAE has represented, and the Coast Guard has not disputed,

that other potential customers for A1U FFS training included private air cargo services and

foreign militaries such as the Royal Thai Air Force, the Republic of Singapore Air Force, the

Royal New Zealand Air Force, and Lynden Air Cargo. ASUF ¶ 15.

14.

CAE submitted the only proposal in response to the RFP. RSUF ¶ 12. In its

proposal, CAE indicated that it had “over 60 years of experience in providing cutting-edge

simulation products and training services” and represented that it “will furnish two FFSs as

part of this contract. One will represent the C-130H and the other a C-130H A1U

configuration to be used for the simulator phase of instruction for each of the courses.”

Exhibit 6 at 2, 10; see RSUF ¶ 12; ASUF ¶ 9. CAE represented in its proposal that, “[f]or

C-130H A1U aircrew training courses, CAE will develop and provide a new FFS to have a

faithful representation of the A1U cockpit,” rather than use one of its existing FFSs. Exhibit

6 at 11; see ASUF ¶ 13.

15.

In its statement of uncontested facts, CAE asserts that, although it originally

had three simulators available to it, it had no choice but to develop a new FFS for the A1U

work because it had sold one of its three FFSs, it needed to use one for the standard

HC-130H training, and reconfiguring the third to accommodate A1U would not have been

cost effective. ASUF ¶¶ 10-12. CAE also represents that, when preparing its proposal, it

determined that, because of the large investment needed to build a new FFS, the contract at

issue would not be economically feasible if the contractor could only train the Coast Guard

on the A1U FFS, so it relied on the Coast Guard’s representation in response to Q&A no. 1

as a guarantee that it would be able to use the A1U GFE on a “not to interfere” basis to train

other customers over the course of the five-year life of the contract. ASUF ¶¶ 14, 18. CAE

does not allege any verbal representations by the Coast Guard to that effect, but relies solely

on the Q&A as the basis of the guarantee. Absent that guarantee, CAE asserts, it would not

have submitted a proposal for the contract. Id. ¶ 18. Although CAE’s proposal indicated that

CAE would build a new FFS for the A1U work, CAE did not explain in the proposal the

reason that it decided to develop a new FFS or indicate that CAE’s proposal was dependent

CBCA 4776

upon its ability to use the A1U GFE for outside training purposes for a five-year period. See

Exhibit 6.

The Contract

16.

On or about July 20, 2012, the Coast Guard awarded to CAE contract no.

HSCG23-12-D-PBR006, a one-year IDIQ contract with four one-year options and a total

guaranteed minimum order value of $25,000:

This is an Indefinite Delivery Indefinite Quantity (IDIQ) type contract

consisting of a one (1) year base period with four (4) one-year options will be

awarded [sic]. The guaranteed minimum value for this contract is $25,000.

The total estimated maximum amount of this contract shall not exceed

$11,910,605. The Contractor will provide a series of courses designed to

provide Coast Guard personnel, HA-130H/A1U aircrew training, and

HC-130H/J & HC-144 Loadmaster training in accordance with the

Performance Work Statement.

Exhibit 7 at 2; see RSUF ¶ 13; ASUF ¶ 20. The contract’s “Option to Extend the Term of

the Contract” clause, using the language from Federal Acquisition Regulation (FAR)

52.217-9, 48 CFR 52.217-9 (2012), provided as follows regarding extension of the IDIQ

contract beyond one year:

(a) The Government may extend the term of this contract by written notice to

the Contractor within 30 days; provided that the Government gives the

Contractor a preliminary written notice of its intent to extend at least 30 days

before the contract expires. The preliminary notice does not commit the

Government to an extension.

(b) If the Government exercises this option, the extended contract shall be

considered to include this option clause.

under this clause, shall not exceed five (5) years.

Exhibit 7, Attachment 1 at 50. As for the minimum order value, the RFP did not guarantee

a specific minimum quantity for each type of training identified in the contract (for example,

$25,000 for HC130-H training, and $25,000 for A1U training), but instead only guaranteed

an aggregated minimum quantity of services without specifying which of the services

covered by the contract the Coast Guard would order. See id.

CBCA 4776

17.

Consistent with the RFP, the contract required CAE to provide and utilize an

FFS as contractor-furnished property for each training course provided under the contract.

Exhibit 7, Attachment 1 at 7-8 ¶ 4.0. Further, the contract required the Government to

provide CAE with an upgraded A1U avionics package as GFE twelve months before the

required start date of any A1U-specific training courses. Exhibit 7, Attachment 1 at 7, 11

¶¶ 3.0, 5.4. Other than its reference to that twelve-month window, the contract did not

identify any specific date by which the Coast Guard had to deliver the A1U avionics package

to CAE. See id.

Contract Performance

18.

The guaranteed contract minimum was achieved upon contract execution, and,

to date, the Coast Guard has ordered more than $3 million in services from CAE under the

contract. RSUF ¶ 14.

19.

In September 2012, the Coast Guard initiated a regular weekly meeting of the

“A1U Team,” which consisted of Navy, Coast Guard, and various contractor personnel

supporting the development of the A1U FFS. ASUF ¶ 22.

20.

By early July 2013, the Coast Guard knew that it was likely to cancel the A1U

upgrade program and not order any A1U training services under CAE’s IDIQ contract.

ASUF ¶ 23. On July 1, 2013, a third-party contractor on the A1U Team notified CAE and

others that the weekly meetings of the A1U Team were canceled “until further notice.”

Exhibit 38 at 1; see ASUF ¶ 23(a). Then, on July 3, 2013, CAE received an email message

informing it that a Coast Guard solicitation seeking proposals for maintenance training for

A1U aircraft was being canceled, although the message indicated that “[t]he solicitation for

the A1U may at some point go forward with another component at [the Coast Guard].”

Exhibit 40 at 1; see ASUF ¶ 23(c). Further, that same day, CAE received a copy of an email

message from a Navy representative indicating that there was a “USCG C130H Program

Change” and that there was a “new direction from the [Coast Guard] in regards to the C130H

program” that involved stopping all but a few efforts on the A1U program. ASUF ¶ 23(d).

In response to CAE’s subsequent question as to whether this change in direction would affect

CAE’s contract, the Coast Guard contracting officer represented that he was not aware of any

formal decisions to cancel the A1U program:

I apologize for your being included on pre-decisional internal Government

emails. I have no further information related to the subject of the email. I am

not aware of any formal decisions. Therefore it would not be proper for me to

speculate or prognosticate. If and when there is a need for any contractual

CBCA 4776

changes the information will come from a [contracting officer] or a [contract

specialist].

Exhibit 39 at 1; see ASUF ¶ 23(e). Subsequently, on July 11, 2013, CAE asked for a

telephone conference to discuss the status of the A1U contract, ASUF ¶ 23(b), but the

contracting officer responded that “at this moment there is nothing to discuss. We have a

C-130 Training contract with a few A1U courses. I will contact [another office] to determine

issues related to GFE.” Exhibit 41 at 1.

21.

On October 10, 2013, CAE asked the contracting officer whether the Coast

Guard was “still planning on scheduling courses in the A1U simulator.” Exhibit 44 at 1.

CAE indicated that, “[w]hen we last talked, there were some rumors about the A1U program

being cancelled.” Id. CAE further expressed its concern that the Coast Guard and the Navy

had “cancelled the weekly [A1U Team] meetings,” which had “not been rescheduled.” Id.

CAE indicated its understanding that “there was some sort of [Coast Guard] decision” about

the A1U program “that was to be made by the end of September.” Id. CAE stated that “[w]e

are moving forward 100% with the development” of the A1U FFS, but that, “for planning

purposes, we need to know the [Coast Guard’s] expectation for upcoming A1U specific

courses.” Id. The contracting officer responded by saying that he had no funds for any

future courses at that moment, but that he was working to provide CAE with the A1U GFE,

that he had not been told to stop doing that, and that he did not know anything else at that

point. Id.

22.

By mid-October 2013, CAE had received more than ninety-five percent,

although not all, of the GFE under the contract. Exhibit 45 at 3. On November 6, 2013, the

Coast Guard delivered the final components of the A1U GFE to CAE. Complaint ¶ 33;

Answer ¶ 33; Exhibit 25 at 6.

23.

In December 2013, Congress passed, and the President signed, the National

Defense Authorization Act for Fiscal Year 2014, which effected substantial changes to the

Coast Guard’s fleet of aircraft. RSUF ¶ 15; Exhibit 10. The Act required the Coast Guard

to transfer seven HC-130H aircraft to the United States Forest Service (through the United

States Department of the Air Force (Air Force)) and required the Air Force to transfer

fourteen C-27J aircraft to the Coast Guard. Exhibit 10 at 23. The C-27J aircraft performs

essentially the same function (maritime surveillance) as does the HC-130H aircraft. RSUF

¶ 15.

24.

Given the new mix of aircraft mandated by the Act, the Coast Guard made

several program decisions concerning such issues as logistics, training, maintenance, and the

overall deployment of its revised aircraft fleet. RSUF ¶ 16; Exhibit 15. One of those

CBCA 4776

decisions, which the Vice Commandant of the Coast Guard made on March 19, 2014, was

to “cancel the HC-130H Avionics One Upgrade (A1U).” Exhibit 15 at 3, 18; see RSUF ¶ 17.

25.

Five days later, on March 24, 2014, the Coast Guard contracting officer

notified CAE by email message that the Coast Guard had canceled the A1U program,

meaning that it would no longer need A1U training services:

I’ve received word that the A1U program has been cancelled. That would

mean there is no longer a need for A1U training under your pilot training

contract from the [Coast Guard]. We are not aware of other US customers

planning to use A1U at this time. Please respond to this email should you have

questions.

Exhibit 16 at 1; see RSUF ¶ 18; ASUF ¶ 25.

26.

In response, a CAE representative asked whether the Coast Guard would

follow up with a formal notification partially terminating the contract for convenience.

Exhibit 17 at 3. The contracting officer questioned “[w]hat specifically would be

terminated,” given that “[t]here is no obligation to order those [A1U] courses.” Id.

Following a verbal conversation, the contracting officer on March 26, 2014, informed CAE

by email message that the Coast Guard would be withdrawing the A1U GFE and that, if CAE

viewed that as compensable, it should submit something in writing. Id. at 1. He indicated

that, although the Coast Guard was removing the A1U GFE, “the remainder of the contract

will remain unchanged.” Id.; see RSUF ¶ 19.

27.

In late April 2014, the Coast Guard picked up the A1U equipment from CAE’s

facility. RSUF ¶ 20; ASUF ¶ 26.1

The Claim and Appeal

28.

On July 17, 2014, CAE submitted a request for equitable adjustment (REA) to

the Coast Guard contracting officer “for the costs incurred for the procurement of the GFE

replacement parts removed from the FFS.” Exhibit 23 at 2; see RSUF ¶ 21. CAE asserted

that, when it learned in March 2014 that the A1U program was canceled, its “A1U simulator

Oddly, the appeal file seems to indicate that, as of July 8, 2014, CAE was still in

the process of packaging the A1U GFE for a pick-up later that month. See Exhibit 18 at 1.

Nevertheless, the parties have stipulated to the April 2014 pick-up date, and we rely on that

stipulation here.

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was 90% complete and the GFE fully integrated into the simulator. If CAE USA had known

earlier that the A1U program was likely to be canceled, it would have ceased all efforts and

stopped the build of the simulator, thus incurring only minimal costs, versus the full costs of

the FFS.” Exhibit 23 at 2. CAE further represented in its REA that the Coast Guard had

“committed to maintain the GFE for a period of 5 years and authorized CAE to train other

US government’s customers in the A1U simulator on a non-interference basis.” Id. at 1. By

letter dated August 25, 2014, the Coast Guard contracting officer denied the REA, but

indicated that, pursuant to the GFE property clause at FAR 52,245-1(d), CAE could submit

a revised REA relating to the costs that CAE incurred for removal and packaging of the A1U

equipment for its return to the Coast Guard. Exhibit 24 at 2.

29.

On December 17, 2014, CAE submitted a certified claim to the contracting

officer, seeking $8,432,339 as “CAE’s total costs to build the flight simulator.” Exhibit 25

at 12.

30.

By decision dated April 17, 2015, the contracting officer denied CAE’s claim.

Exhibit 26; RSUF ¶ 24.

31.

On June 5, 2015, the Board docketed CAE’s June 1, 2015, appeal of the

contracting officer’s decision. The parties subsequently filed cross-motions for summary

relief.

Discussion

Standard of Review

“Summary relief is appropriate when the moving party is entitled to judgment as a

matter of law, based on the undisputed material facts.” MLJ Brookside, LLC v. General

Services Administration, CBCA 3041, 15-1 BCA ¶ 35,935, at 175,623. “A material fact is

one that will affect the outcome of the case.” Turner Construction Co. v. Smithsonian

Institution, CBCA 2862, et al., 15-1 BCA ¶ 36,139, at 176,394.

In considering a request for summary relief, all reasonable inferences and

presumptions are resolved in favor of the non-moving party. Anderson v. Liberty Lobby,

Inc., 477 U.S. 242, 255 (1986). “When both parties move for summary relief, each party’s

motion must be evaluated on its own merits and all reasonable inferences must be resolved

against the party whose motion is under consideration.” Systems Management & Research

Technologies Corp. v. Department of Energy, CBCA 4068, slip op. at 11 (Apr. 6, 2016)

(quoting Government Marketing Group v. Department of Justice, CBCA 964, 08-2 BCA

¶ 33,955, at 167,991). Nevertheless, “[o]nly disputes over facts that might affect the outcome

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of the case under governing law will preclude the entry of summary [relief].” Anderson, 477

U.S. at 248. “The purpose of summary relief is not to deprive a litigant of a hearing, but to

avoid an unnecessary hearing when only one outcome can ensue.” Fortis Networks, Inc. v.

Department of the Interior, CBCA 4176, 15-1 BCA ¶ 36,066, at 176,123 (citing Vivid

Technologies, Inc. v. American Science & Engineering, Inc., 200 F.3d 795, 806 (Fed. Cir.

1999)).

II.

CAE’s Contractual Language Argument

CAE argues that the contract, as written, required CAE to manufacture an FFS and

imposed an obligation upon the Government not only to provide CAE with the A1U avionics

to place into that FFS, but also to allow CAE to hold the A1U avionics for the length of the

contract (both the base year and possible option years) for CAE’s use in training third parties

(from which CAE would earn income):

Unlike the typical IDIQ services contract, the Contract required CAE to

engage in a costly and time-consuming manufacturing-like effort to

incorporate certain government-furnished electronics equipment (“avionics”)

particular to the A1U variant into a very complex device, a full motion flight

simulator (“FFS”). Any contractor would have had to incur millions of dollars

to develop the A1U simulator in preparation to perform in the event that the

Coast Guard were to order the A1U training services. CAE determined that

this would not be an economically viable arrangement if the Coast Guard was

the only potential customer for training on the FFS with the governmentfurnished equipment (“GFE”) A1U avionics. So, before submitting a

proposal, CAE sought and received from the Coast Guard assurances that CAE

could spread the costs of its investment by utilizing the finished A1U FFS,

including the GFE avionics, to provide training services to other customers.

But, just as CAE was nearing completion of the A1U FFS, the Coast Guard

cancelled the program for which the training had been required – despite

having encouraged CAE to continue investing heavily in the development of

the simulator rather than warning it of the known likelihood of the cancellation

– and then demanded the return of the GFE without allowing CAE to use it to

recoup the costs of its investment by training other customers.

Appellant’s Motion for Summary Relief at 1-2.

The problem with CAE’s argument is that its description of what the contract says

stretches the contract language far beyond what that language can reasonably support.

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Nothing in the contract language or in the factual record provides the guarantee that CAE

wants.

The contract here was an IDIQ contract, a contract type under which a contractor is

to provide “[a]n indefinite quantity, within stated limits, of supplies or services during a fixed

period” of time during which the Government will “place[] orders for individual

requirements.” 48 CFR 16.504(a). This type of contract “provide[s] the government

purchasing flexibility for requirements that it cannot accurately anticipate.” Travel Centre

v. Barram, 236 F.3d 1316, 1318 (Fed. Cir. 2001). While an IDIQ contract “provides that the

government will purchase an indefinite quantity of supplies or services from a contractor

during a fixed period of time, it requires the government to order only a stated minimum

quantity of supplies or services.” Id. at 1319; see Mason v. United States, 615 F.2d 1343,

1349 (Ct. Cl. 1980) (“A guaranteed minimum purchase amount is . . . essential to there being

an enforceable indefinite quantities contract.”). Accordingly, “under an IDIQ contract, the

government is required to purchase the minimum quantity stated in the contract, but when

the government makes that purchase its legal obligation under the contract is satisfied.”

Travel Centre, 236 F.3d at 1319.

CAE’s contract provided a minimum purchase guarantee of $25,000 of HC-130H

and/or A1U training services. That is, the contract only guaranteed the purchase of $25,000

of any of the training services identified in the contract. So long as the Coast Guard ordered

at least $25,000 of HC-130H training services, which it did, the contract did not require the

Coast Guard to purchase any A1U training services. In fact, CAE does not dispute that the

Coast Guard’s purchase of more than $25,000 of HC-130H services satisfied the purchase

requirements of the contract.

Nevertheless, CAE argues that the contract was not only an IDIQ contract, but also

covered CAE’s development of a new FFS (into which CAE would install the Coast Guard’s

A1U avionics GFE). The contract does not say that. Instead, the plain language of the

contract indicates that the Coast Guard was acquiring training services through this contract,

and nothing more:

The Contractor is to provide a series of courses for US Coast Guard personnel;

HC-130H/A1U aircrew training, and HC-130H/J & HC-144 Loadmaster

training . . . .

The courses will incorporate classroom, computer-based training (CBT) aids

and full motion simulator practical training in the appropriate Coast Guard

cockpit and flight deck configuration(s) (HC-130H/J/A1U or HC-144A). The

contractor shall be required to provide training facilities; appropriate flight

CBCA 4776

training devices configured to emulate [Coast Guard] aircraft, and qualified

instructors with the appropriate technical knowledge and instructional

experience. Services will include instructor-led training, curriculum

development and performance analysis.

Exhibit 7 at 1-2. The only items that were priced out in this IDIQ contract were training

services, and every item that the Coast Guard ordered through task orders under this IDIQ

contract was training. See id. at 3-40. Under the Payments clause incorporated by reference

into this contract, see Exhibit 7, Attachment 1 at 42 (incorporating FAR 52.232-1), the Coast

Guard was to pay, “upon the submission of proper invoices or vouchers, the prices stipulated

in this contract for . . . services rendered and accepted, less any deductions provided in this

contract.” FAR 52.232-1. There is no line item covering the development, or providing for

payment, of a new FFS.

In fact, the contract required the contractor to provide the necessary FFS as part of

the contract, without reference to how CAE elected to acquire it. See Exhibit 7, Attachment

1 at 8 ¶ 4.0. Although CAE’s proposal indicated that CAE, on its own initiative, had decided

to build a new FFS for the A1U training, see Exhibit 6 at 11, that disclosure does not

somehow shift to the Government the financial responsibility for the cost of the FFS. To

make CAE’s representation about manufacturing a new FFS a part of the contract, the

contract would have to “use language that leaves no . . . ‘reasonable doubt about the fact that

the [technical proposal],” or at least the FFS manufacturing requirement, “is being

incorporated into the contract.’” IBM Corp. v. United States, 119 Fed. Cl. 145, 154 (2014)

(quoting Lakeshore Engineering Services, Inc. v. United States, 748 F.3d 1341, 1347 (Fed.

Cir. 2014) (quoting Northrop Grumman Information Technology, Inc. v. United States, 535

F.3d 1339, 1344 (Fed. Cir. 2008))). The contract here does not reference the technical

proposal, much less purport to incorporate some or all of it into the actual contract.

Accordingly, the contract itself did not require CAE to build a new FFS.

Further, CAE’s assertion that it “sought and received from the Coast Guard assurances

that CAE could spread the costs of its investment by utilizing the finished A1U FFS,

including the GFE avionics, to provide training services to other customers” over the course

of the contract’s five-year life, Appellant’s Motion for Summary Relief at 2, has no support

in the factual record. CAE does not allege reliance on any verbal representations by Coast

Guard representatives, but instead cites only to a question that it submitted during the

procurement process about whether it could use the FFS with the A1U GFE in it “to train

other customers,” to which the Coast Guard responded by stating that, “[o]perationally, the

GFE can be used to train other customers on a ‘not to interfere’ basis.” Exhibit 4 at 1. That

statement is a far cry from a representation that CAE could “spread the costs of its

CBCA 4776

investment” over a five-year period by selling training services to entities other than the

Coast Guard, for the following reasons:

First, the contract here was for one base year, with four one-year options. CAE had

no contractual right to assume that the Coast Guard would exercise all four options. CAE

certainly could not compel the Coast Guard to do so if the Coast Guard elected not to. See

Government Systems Advisors, Inc. v. United States, 847 F.2d 811, 813 (Fed. Cir. 1988) (if

a contract is renewable “at the option of the Government,” the Government is under no

obligation to exercise the option); Jones Automation, Inc. v. United States, 92 Fed. Cl. 368,

372 (2010) (contractor cannot compel the Government to exercise option). CAE could not

assume that it had a five-year contract, and the Coast Guard made no representation that it

did.

Second, the contract made clear that the Coast Guard did not have to provide CAE

with the A1U GFE unless, and until twelve months before, it ordered A1U training services.

Exhibit 3, Attachment 1 at 7-8, 12, 13, 15, 18-20; Exhibit 7, Attachment 1 at 7, 12,13, 15,

18-20. If the Coast Guard did not order A1U training services until the last option year, the

Coast Guard would not have to deliver the A1U GFE until the fourth year of the contract –

twelve months before A1U training services would begin. There is no language in this

contract requiring the Coast Guard to deliver the A1U GFE at the outset of the contract or

at any specific subsequent time, other than through the twelve-months-prior-to-A1U-training

language. Accordingly, for CAE to believe that it had some contractual right to use the A1U

GFE for the full life of the contract would be unreasonable, even if it hoped that such use

might happen. In fact, the Coast Guard did not deliver the A1U avionics until November

2013, almost a year-and-a-half into the contract performance period, and CAE never

complained during that time that the delivery was late or somehow constituted a breach of

contract.

Third, and most importantly, the contract, as previously discussed, is an IDIQ contract

covering not only A1U training services, but other training services as well. The $25,000

minimum value written into the contract guaranteed that the Coast Guard would order at least

$25,000 of the identified training services, but the Coast Guard could (and did) fulfill that

guarantee by ordering services other than A1U training services. The contract did not

guarantee that the Coast Guard would ever order the A1U services. As a result, from the

outset of this contract, because CAE had no guarantee that the Coast Guard would ever order

A1U training services, CAE had no guarantee that the Coast Guard would ever be obligated

to provide it with the A1U GFE. If the Coast Guard never had an obligation to provide CAE

with the A1U GFE in the first place, CAE has no basis for complaining that, once the Coast

Guard delivered the A1U GFE, the Coast Guard was contractually barred from seeking its

return once it determined that it was not going to order any A1U training services.

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In light of the nature of this IDIQ contract and its other provisions, we cannot interpret

the language of the Q&A – that the FFS “using the [A1U] GFE [could] be used to train other

customers” on “a ‘not to interfere’ basis” – as guaranteeing that CAE would be able to hold,

and use, the A1U GFE for a full five-year period. The Q&A is more reasonably read here

as permitting CAE to use the A1U GFE for whatever period it might have the GFE in its

possession. Had CAE truly wanted a five-year guarantee (with a requirement that the A1U

GFE be provided at the outset of the contract performance period and that CAE be allowed

to retain for a full five-year period, even if options were not exercised), it could have

demanded that guarantee and, before executing the contract, negotiated a clear and

unambiguous contractual provision to that effect or, at the very least, requested an answer

through a Q&A that more clearly and directly addressed CAE’s true intention. See DG21,

LLC v. Mabus, No. 2015-1830, 2016 WL 2860725, at *4 (Fed. Cir. May 6, 2016) (“If [the

contractor] wanted to protect itself . . . , it could have bargained for such protections.”). CAE

did not do so. Instead, it is attempting to rely on a vague representation that does not clearly

state when or for how long CAE would hold the A1U GFE as creating an absolute right of

access to the A1U GFE for the full life of the contract. Neither the language of the contract,

the contract type, nor the history of the contract’s development support CAE’s position.

“Having failed to protect itself during contract negotiation, . . . [the contractor] ‘cannot now

rewrite the clauses to provide it protections the government did not agree to.’” DG21, 2016

WL 2860725, at *4 (quoting Lakeshore Engineering, 748 F.3d at 1348).

III.

CAE’s Implied Duty Breach Claim

Defining 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.” Bell/Heery v. United

States, 739 F.3d 1324, 1334-35 (Fed. Cir. 2014). “The covenant . . . requires a party to

respect and implement the contract in accordance with its terms.” First Nationwide Bank v.

United States, 431 F.3d 1342, 1350 (Fed. Cir. 2005). IDIQ contracts are not exempt from

this implied duty. E&E Enterprises Global, Inc. v. United States, 120 Fed. Cl. 165, 182

(2015); see ALK Services, Inc. v. Department of Veterans Affairs, CBCA 1789, 10-2 BCA

¶ 34,518, at 170,246 (“every contract includes the implied obligation that the parties will act

in good faith during performance and that, while an IDIQ contract may only obligate the

Government to order a specified amount of services, the contractor nonetheless is entitled to

rely on other contract provisions implying that it will be fairly considered for additional

work, if required by the Government”).

CBCA 4776

Although the existence of the implied duty of good faith and fair dealing is widely

acknowledged, exactly what that duty entails has proven more difficult to define. At least

one commentator has noted that “[g]ood faith is an intangible and abstract quality with no

technical meaning or statutory definition.” Edward J. Imwinkelried, The Implied Obligation

of Good Faith in Contract Law: Is It Time to Write Its Obituary?, 42 Tex. Tech. L. Rev. 1,

1 (2009) (quoting Black’s Law Dictionary 693 (6th ed. 1990)); see Market Street Associates

Ltd. Partnership v. Frey, 941 F.2d 588, 593 (7th Cir. 1991) (“cases are cryptic as to its

meaning though emphatic about its existence”). Further, the duty is not truly a single concept

capable of a concise definition, but a duty that encompasses numerous concepts. One of the

first and foremost commentators on the implied duty of good faith was Professor Robert

Summers, who, in 1968, identified six types of violations of good faith duties that had been

found to occur during contract performance: evading the spirit of the deal; wilfully rendering

imperfect or merely “substantial” performance; abusing powers to determine contractual

compliance; interfering with the other party’s contract performance; and failing to cooperate

in the other party’s performance. B.J. Reitier, Good Faith in Contract, 17 Val. U. L. Rev.

705, 710 (1983) (citing Robert S. Summers, “Good Faith” in General Contract Law and the

Sales Provisions of the Uniform Commercial Code, 54 Va. L. Rev. 195, 234-42 (1968)

[Summers I]). Some or all of these varying types of violations – some which involve

inappropriate affirmative conduct by a contracting party, and some of which involve an

inappropriate failure to act – have been accepted as actionable by the United States Court of

Appeals for the Federal Circuit, the Court of Federal Claims, and/or the boards of contract

appeal. See, e.g., Precision Pine & Timber, Inc. v. United States, 596 F.3d 817, 829 (Fed.

Cir. 2010) (affirmative bait-and-switch action “specifically designed to reappropriate the

benefits the other party expected to obtain from the transaction, thereby abrogating [that

party’s] obligations under the contract”); Lewis-Nicholson, Inc. v. United States, 550 F.2d

26, 32 (Ct. Cl. 1977) (interference that hinders the other’s performance); Kehm Corp. v.

United States, 93 F. Supp. 620, 623 (Ct. Cl. 1950) (failing to take actions necessary to enable

the other party to perform); Barseback Kraft AB v. United States, 36 Fed. Cl. 691, 705-06

(1996) (party who is vested with discretion under the contract must exercise that discretion

reasonably), aff’d, 121 F.3d 1475 (Fed. Cir. 1997); Celeron Gathering Corp. v. United States,

34 Fed. Cl. 745, 753 (1996) (affirmative duty of cooperation); South Atlantic Gas Co.,

GSBCA 359, 1959 WL 11548 (Jan. 9, 1959) (intentional departure or wilful default in

performance of a substantial requirement of contract).

The ultimate goal underlying all of these concepts is to ensure the availability of “a

‘safety valve’ to which judges may turn to fill gaps and qualify or limit rights and duties

otherwise arising under rules of law and specific contract language.” Robert S. Summers,

The General Duty of Good Faith – Its Recognition and Conceptualization, 67 Cornell L.

Rev. 810, 811 (1981) [Summers II]. Nevertheless, the numerosity of both affirmative and

negative concepts that comprise the implied good faith duty make it virtually impossible to

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develop a specific and singular test for evaluating whether a particular action (or inaction)

violates that duty. In fact, commentators have argued that any attempt to define the term

“good faith” under contract law through an affirmative all-encompassing definition would

result in something so broad and amorphous that it could potentially encompass almost any

action that one party (or a judge) might not like and would provide no means by which

contracting parties, at the outset of their contractual relationship, could reliably understand

their true rights and obligations. See, e.g., Russell A. Eisenberg, Good Faith Under the

Uniform Commercial Code – A New Look at an Old Problem, 54 Marq. L. Rev. 1, 7 (1971)

(if good faith is “simply what a judge says it is,” each judge could “determine what his own

personal standards are and apply them to the case at hand, even if the litigants themselves

have different standards which they both agree upon”); Imwinkelried, supra, at 5 (discussing

view that “purported reliance on a general, invariant meaning [of good faith] would lead to

vacuous opinions and unpredictability”).

Yet, “[i]f the potential of the good faith requirement is to be realized in practice,

judges . . . must give meaning to the phrase and must impose specific duties of good faith.”

Summers I, supra, at 199 (emphasis added). Professor Summers proposed that, to achieve

that definitional goal in contract law, the good faith duty should be defined by reference to

what it excludes:

Summers recommended a very different way of conceptualizing good faith –

as an excluder. He proposed deriving a meaning of good faith from its

opposites. He argued that rather than considering the broad, loose language

in each opinion, students of the good faith opinions should carefully examine

the specific conduct the judge rules out. Summers maintained that it was more

useful to identify the particular forms of bad faith the courts had prohibited.

Thus, the meaning of good faith could be defined by way of contrast to the

various types of bad faith the courts had condemned. In his view, however, the

concept of good faith is too “circumstance bound” to permit any further

generalization.

Imwinkelried, supra, at 5-6; see Summers II, supra, at 818 (good faith duty “was not

appropriately formulable in terms of some general positive meaning – through the

specification of a set of necessary and sufficient conditions, for example; rather, it functioned

as an excluder to rule out a wide range of heterogeneous forms of bad faith”). We will apply

that rationale in evaluating CAE’s implied duty breach claim.

Beyond the lack of a precise definition for evaluating the overarching good faith duty,

there is a modern division of judicial sentiment over the basis of the contractual duty. “A

distinct minority of jurisdictions take the position that the obligation creates a separate

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contract duty and that its breach will support an independent cause of action,” meaning that

“the alleged breach need not violate any express duty in the contract.” Imwinkelried, supra,

at 9. Conversely, the majority of jurisdictions “treat the obligation in a far more restrictive

fashion,” holding that, “if the express terms” of a contract “authorize the [party’s] conduct,

the implied obligation cannot be invoked to convert that conduct into a breach.” Id. at 9-10.

In those jurisdictions, “[t]he implied obligation is derivative in nature and arises from the

express substantive duties” of the contract, and it “cannot be invoked to add or create rights

beyond those expressly conferred by the contract’s terms.” Id. at 11.

It is the majority approach that the Court of Appeals for the Federal Circuit, whose

precedential decisions are binding upon us, has adopted. As the Court recognized in Metcalf

Construction Co. v. United States, 742 F.3d 984 (Fed. Cir. 2014), “what [the duty of good

faith and fair dealing] entails depends in part on what that contract promises (or disclaims).”

Id. at 991 (quoting Precision Pine, 596 F.3d at 828). The Court held that, “while the implied

duty exists because it is rarely possible to anticipate in contract language every possible

action or omission by a party that undermines the bargain, the nature of that bargain is central

to keeping the duty focused on ‘honoring the reasonable expectations created by the

autonomous expressions of the contracting parties.’” Id. (quoting Tymshare, Inc. v. Covell,

727 F.2d 1145, 1152 (D.C. Cir. 1984) (per Scalia, J.)). Accordingly, “the ‘implied duty of

good faith and fair dealing cannot expand a party’s contractual duties beyond those in the

express contract or create duties inconsistent with the contract’s provisions.’” Id. (quoting

Precision Pine, 596 F.3d at 831). “[A]n act will not be found to violate the duty . . . if such

a finding would be at odds with the terms of the original bargain, whether by altering the

contract’s discernible allocation of risks and benefits or by conflicting with a contract

provision.” Id.

The Absence of Bad Faith

In its motion for summary relief, the Coast Guard labels CAE’s argument a “Bad Faith

Theory” and argues that the record contains no evidence of any bad faith by the Government

towards CAE. Certainly, bad faith conduct will constitute a violation of the implied duty of

good faith and fair dealing if it affects the contractor’s reasonable contract expectations.

Brock v. United States, No. 11-176C, 2012 WL 2057036, at *10 (Fed. Cl. June 7, 2012). To

prove bad faith by the Government, a contractor must establish, by clear and convincing

evidence, that a government official acted with “some specific intent to injure the

[contractor].” Am-Pro Protective Agency, Inc. v. United States, 281 F.3d 1234, 1240 (Fed.

Cir. 2002) (quoting Kalvar Corp. v. United States, 543 F.2d 1298, 1302 (Ct. Cl. 1976)).

CAE has not alleged any such intent.

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Yet, “[t]o show a violation of the duty of good faith and fair dealing, a party need not

prove that the other party to a contract acted in bad faith.” Kiewit-Turner v. Department of

Veterans Affairs, CBCA 3450, 15-1 BCA ¶ 35,820, at 175,176 (2014); see TigerSwan, Inc.

v. United States, 110 Fed. Cl. 336, 346 (2013) (“proof of ‘bad faith’ is not required to show

a breach of the implied duty of good faith and fair dealing”). To the contrary, “[p]arties can

show a breach of the implied duty of good faith and fair dealing by proving lack of diligence,

negligence, or a failure to cooperate,” meaning that “[e]vidence of government intent to harm

the contractor is not ordinarily required.” TigerSwan, 110 Fed. Cl. at 345-46. The absence

of any “bad faith” allegation by CAE is not fatal to its implied duty of good faith and fair

dealing claim.

CAE’s Allegations of an Implied Duty Breach

CAE has alleged two different breaches of the implied duty. First, it claims that the

Coast Guard breached the duty by failing to allow CAE to hold the A1U avionics package

(so that it could use it to make money providing A1U training services to third parties) for

the entire five-year anticipated duration of this contract. Second, it claims that the Coast

Guard breached the duty by failing to warn CAE that the Coast Guard was considering

terminating the A1U program while, at the same time, the Coast Guard knew that CAE was

manufacturing a FFS specifically for use in providing A1U training services to the

Government and to third parties.

Failure to Lend A1U GFE Until End of Contract

With regard to its first claim of an implied duty breach – that the Coast Guard should

have allowed it to hold and use the A1U avionics for the life of its IDIQ contract – that claim

appears to be tied to the theory that the Coast Guard failed to satisfy its duties to cooperate

and not to hinder the other party’s contract performance. “In any case where the plaintiff’s

performance requires the cooperation of the defendant, . . . the defendant, by necessary

implication, promises to give this cooperation and if he fails to do so he is immediately liable

though his only express promise is to pay money at a future day.” George A. Fuller Co. v.

United States, 69 F. Supp. 409, 411 (Ct. Cl. 1947) (quoting Williston on Contracts § 1318).

Nevertheless, “any breach of [the good faith] duty has to be connected, though it is not

limited, to the bargain struck in the contract.” Metcalf Construction, 742 F.3d at 994. “What

is promised or disclaimed in a contract helps define what constitutes ‘lack of diligence and

interference with or failure to cooperate in the other party’s performance.’” Id. at 991

(quoting Malone v. United States, 849 F.2d 1441, 1445 (Fed. Cir. 1988)).

Here, as previously discussed, the contract does not require the Coast Guard to

provide CAE with A1U avionics unless, and until twelve months before, it is going to order

CBCA 4776

A1U training services, and the contract does not require the Coast Guard ever to order such

services if, as here, it has satisfied its minimum order obligations through the ordering of

HC-130H training services. Accordingly, what CAE is seeking here is something beyond

what the contract requires. That is not the purpose of the implied duty of good faith and fair

dealing. “[T]his implied covenant guarantees that the government will not eliminate or

rescind contractual benefits through action that is specifically designed to reappropriate the

benefits and thereby abrogate the government’s obligations under the contract.” Bell/Heery,

739 F.3d at 1335 (emphasis added). It is not designed to give the contractor additional rights

beyond, or greater rights than, those that the contract provides.

Would it have been nice of the Coast Guard to let CAE hold the A1U avionics for a

longer period of time? Certainly.2 But the good faith and fair dealing duty “is not limitless.”

West Run Student Housing Associates, LLC v. Huntington National Bank, 712 F.3d 165, 170

(3d Cir. 2013). It does not entitle contractors to extra-contractual benefits, or require the

Government to take extra-contractual steps, simply because such generosity would be nice,

even if gratuitous. See Excel Services, Inc., ASBCA 30565, 85-3 BCA ¶ 18,369, at 92,159

(duty to cooperate “does not obligate the Government to assist a contractor” outside the

requirements of the contract “by taking positive actions” that the contract does not require).

If the Government is not contractually obligated to do certain things, it is not financially

liable – under a breach of contract theory – for failing to do them. Unless CAE’s right to

retain the A1U GFE for the full life of this contract was “a bargained-for benefit of” the

contract, that right was not “a ‘fruit’ of” the contract, and the “obligation of the government”

to grant that right could not “be abrogated when no such obligation existed.” Westlands

Water District v. United States, 109 Fed. Cl. 177, 205 (2013). Based upon the language of

this contract, CAE had no contractual right to hold the A1U GFE for the life of the contract,

and it has not identified any basis for seeking damages for the Coast Guard’s failure to allow

CAE to hold the A1U avionics package for a longer period of time than it did.

Failure to Disclose Likely A1U Program Termination

In its second claim of an implied duty breach, CAE argues that the Coast Guard did

not discourage it from continuing to prepare to provide A1U training services (and to build

its new FFS) after the Coast Guard knew that it was likely that it would cancel the A1U

program. Although CAE concedes that the Coast Guard did not actually decide to cancel the

A1U program until March 2014, it has cited to evidence showing that, by July 2013, the

The Coast Guard indicates that it requested the return of the A1U avionics based

upon another agency’s need. The reason for the recall, however, is not relevant here.

CBCA 4776

Coast Guard knew that it was likely to cancel the program and that, at the same time, it knew

that CAE was continuing to develop the new FFS.

“In government contracts law, under certain circumstances the government owes a

duty to disclose critical information to a contractor that is necessary to prevent the contractor

from unknowingly pursuing ‘a ruinous course of action.’” McDonnell Douglas Corp. v.

United States, 182 F.3d 1319, 1329 (Fed. Cir. 1999) (quoting Helene Curtis Industries, Inc.

v. United States, 312 F.2d 774, 778 (Ct. Cl. 1963)). “Although it is not a fiduciary toward

its contractors, the Government – where the balance of knowledge is so clearly on its side –

can no more betray a contractor into a ruinous course of action by silence than by the written

or spoken word.” Helene Curtis, 312 F.2d at 778. “Failure to disclose such critical

information may result in a finding that the government breached its contractual duty.”

McDonnell Douglas Corp. v. United States, 323 F.3d 1006, 1020 (Fed. Cir. 2003). This

doctrine, known as the “superior knowledge” doctrine, GAF Corp. v. United States, 932 F.2d

947, 949 (Fed. Cir. 1991), “is consistent with the general contract law principles of good

faith and fair dealing. Northrop Grumman Corp., Military Aircraft Division v. United States,

63 Fed. Cl. 12, 15 (2004).

Historically, the superior knowledge doctrine has been applied to the Government’s

failure to disclose information during the pre-award process. See, e.g., American Ship

Building Co., 654 F.2d 75, 79 (Ct. Cl. 1981); Helene Curtis, 312 F.2d at 777; HardemanMonier-Hutcherson v. United States, 458 F.2d 1364, 1371 (Ct. Cl. 1972).3 Here, though,

CAE alleges that the Government, after contract award and during contract performance,

acquired information that it then failed to disclose: namely, that the Government was

considering terminating the A1U program while, at the same time, it failed to discourage

In the past, several tribunals had held that such a failure to disclose pre-award

superior knowledge is a breach of the implied duty of good faith and fair dealing. See, e.g.,

Florida Engineered Construction Products Corp. v. United States, 41 Fed. Cl. 534, 542

(1998), appeal dismissed, 185 F.3d 880 (Fed. Cir. 1999); Miller Elevator Co. v. United

States, 30 Fed. Cl. 662, 674, appeal dismissed, 36 F.3d 1111 (Fed. Cir. 1994); Odebrecht

Contractors of California, Inc., ENG BCA 6372, 00-2 BCA ¶ 30,999, at 153,071. But the

Federal Circuit has more recently held that the duty of good faith and fair dealing does “not

exist until the contract [is] signed” and “‘does not deal with good faith in the formation of

a contract.’” Scott Timber Co. v. United States, 692 F.3d 1365, 1372 (Fed. Cir. 2012)

(quoting Restatement (Second) of Contracts § 205 cmt. c (1981)). Accordingly, as applied

to pre-award failures to disclose vital information, the implied duty to disclose superior

knowledge is something separate and distinct from the implied duty of good faith and fair

dealing, even if they involve similar principles. See Northrop Grumman, 63 Fed. Cl. at 15.

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CAE from continuing to prepare to provide A1U training. CAE asserts that it would not

have spent money to build the new FFS if the Coast Guard had been more forthright about

its future A1U program plans and if the contracting officer had conducted a more rigorous

investigation to learn what higher-level agency plans were for the A1U program. It is far

from clear whether the superior knowledge doctrine applies to information that the

Government acquires after award. Compare Louis D. Victorino, E. Richard Southern, &

Julia A. Soyars-Berman, Government Failure to Disclose, 92-10 Briefing Papers 1, 2 (Sept.

1992) (“a failure to disclose can, at least theoretically, relate to information gained by the

Government after contract award” (emphasis in original)), with Ralph C. Nash,

Nondisclosure of Superior Knowledge: The Scope of the Government’s Duty, 20 Nash &

Cibinic Report ¶ 1 (Jan. 2006) (“the ‘duty’ to disclose ‘superior knowledge’ has nothing to

do with contract administration or contract disputes – it is an obligation that arises before a

contract is entered into, in the contract formation process” (emphasis in original)). We need

not resolve this conflict between the commentators because, if we were to apply the doctrine

to post-award information, CAE could not prevail.

The superior knowledge doctrine only applies “in limited circumstances.” GAF Corp.,

932 F.2d at 949. To show a contract breach under the superior knowledge doctrine, a

contractor claiming a breach by non-disclosure must establish the following:

The doctrine of superior knowledge is generally applied to situations where:

(1) a contractor undertook 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.

Giesler v. United States, 232 F.3d 864, 876 (Fed. Cir. 2000).

CAE cannot satisfy the second prong of that test, as it failed to identify any

information that the Coast Guard possessed about A1U program plans of which CAE was

not made aware. CAE does not challenge the Coast Guard’s factual representation that the

decision to cancel the A1U program was not made until March 19, 2014, and that, within five

days, the Coast Guard told CAE of that decision. See RSUF ¶¶ 17-18. CAE’s complaint is

that it should have been informed of the possibility of that decision much earlier. It asserts

that, by July 2013, “the Government knew of the likelihood that the A1U training services

would not be ordered or failed to reasonably inquire into the A1U program’s status long

before the program was actually cancelled.” Appellant’s Motion for Summary Relief at 16.

It is this information – about the possibility of the program’s cancellation – that CAE

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allegedly did not have. Yet, CAE repeatedly cites to record evidence establishing that, in

July 2013, CAE was well aware that the Government was considering cancelling the A1U

program. It cites to a July 3, 2013, email message that it received referring to a “‘new

direction from the USCG in regards to the C130H program’ that involved stopping all but

a few efforts on the A1U program.” ASUF ¶ 23(d) (quoting Exhibit 39 at 3). It cites to

another July 3, 2013, email message titled “A1U Cancellation” in which a Coast Guard

contract specialist informed CAE that the Coast Guard was cancelling a solicitation for A1U

maintenance training and that he did not know “if it will be solicited again.” Exhibit 40 at

1; see ASUF ¶ 23(c). It cites to the cancellation on July 1, 2013, of all further regular weekly

meetings of the “A1U Team” at which interested parties had been discussing the A1U

development. ASUF ¶ 22. A viable superior knowledge claim requires that the contractor

“undertook to perform without vital knowledge of a fact that affects performance costs or

duration.” Giesler, 232 F.3d at 876. CAE plainly knew in July 2013 that the Government

was considering what to do with the A1U program and that it might be canceled, which

precludes a superior knowledge complaint.

CAE asserts that the information it received in the July 2013 email messages about

possible A1U program cancellation was incomplete and insufficient because “CAE did not

and could not know exactly what the emails portended for the A1U program” and represented

“only vaguely troubling and confusing developments.” Appellant’s Reply at 6. Yet, it is

clear that the actual decision not to proceed with the A1U program was not made until March

2014. CAE has identified no information that the Government withheld from it about the

Coast Guard’s internal deliberations that would have assisted it in deciding whether to delay

manufacturing its FFS. “A mere governmental failure to disclose each and every bit of

information it has clearly is not, in and of itself, enough to serve as a basis for contractor

recovery.” Piasecki Aircraft Corp. v. United States, 667 F.2d 50, 59 (Ct. Cl. 1981). CAE

plainly had the “vital” and “essential” information: that the Coast Guard was contemplating

cancelling the A1U program. That is the only information that the superior knowledge

doctrine requires be disclosed. See ECOS Management Criteria, Inc., VABCA 2058, 86-2

BCA ¶ 18,885, at 95,260 (a necessary element of superior knowledge claim is that “the

‘special’ knowledge withheld was ‘vital to the successful completion of the contract’”

(quoting Piasecki Aircraft, 667 F.2d at 59 (quoting H.N. Bailey & Associates v. United

States, 449 F.2d 376, 382-83 (Ct. Cl. 1971))).

CAE also complains that it could not have had “equal knowledge” to the Government,

apparently because CAE was not privy to the Government’s internal deliberations,

Appellant’s Reply at 7, but the superior knowledge doctrine does not require that. It only

requires, in appropriate circumstances, the disclosure of vital or essential information of

which the contractor is unaware. Bannum, Inc. v. United States, 80 Fed. Cl. 239, 246 (2008).

CBCA 4776

CAE was aware that the Government was contemplating canceling the A1U program. That

was the essential information that it needed for decision-making purposes.

CAE’s real complaint seems to be that the Government did not decide to cancel the

A1U program earlier than it did. Had the Government done so, CAE asserts, CAE would not

have manufactured the new FFS. Yet, we can find nothing in the implied duty doctrine that

would compel the Coast Guard to decide to cancel the A1U program at an earlier date. See

SupplyCore, Inc., ASBCA 58676, 16-1 BCA ¶ 36,262, at 176,907 (Government did not

violate implied duty of good faith and fair dealing by failing “to provide earlier notice that

the fourth option year would not be exercised” (emphasis in original)). Certainly, CAE has

not made any allegations that the Coast Guard intentionally delayed that decision or acted in

bad faith in reaching the decision.

Further, given that CAE elected to proceed with its FFS manufacturing efforts after

learning that the Government might cancel the A1U program, CAE has no basis for

complaint. CAE did not have to begin A1U training services for the Government until

twelve months after receiving the A1U GFE, which it did not receive until November 2013

(five months after it became aware that the Government was considering cancelling the A1U

program). Yet, after learning that the A1U program was being reconsidered, and beginning

before it had received the A1U GFE (and before the twelve-month clock had started

running), CAE chose to incur more than $5 million in costs to develop the new FFS anyway,

presumably because CAE wanted to be ready to earn money providing A1U training services

to third parties as soon as it received the A1U GFE. That was a business decision that CAE

was entitled to make, but, because the contract did not cover (even if it did not preclude) the

provision of third-party training services, that decision does not become compensable simply

because the Government took longer than CAE would have liked before deciding to cancel

the A1U program. CAE has not identified an actionable failure to disclose superior

knowledge or any viable implied duty theory.

CAE also complains that the contracting officer, who (as CAE seems to acknowledge)

honestly did not know what would happen with the program, failed to try hard enough

(beginning in July 2013) to gather more information about the likelihood of A1U program

termination and report it to CAE. That appears to refer to an alleged breach of the duty to

cooperate – that is, the Coast Guard “fail[ed] to help in the solution of a problem that has

arisen during contract performance.” John Cibinic, Jr., Ralph Nash, & James F. Nagle,

Administration of Government Contracts 302-03 (4th ed. 2006). But CAE does not identify

what information the contracting officer would have found had he done so. CAE does not

allege that the actual decision to terminate the A1U program was made any earlier than

March 2014, and it does not explain how a day-by-day analysis of the current thinking of

particular government representatives would have assisted it in deciding how to proceed.

CBCA 4776

Further, both CAE and the Coast Guard were equally aware that, in December 2013,

Congress, through the National Defense Authorization Act for Fiscal Year 2014, effected

substantial changes to the Coast Guard’s fleet of aircraft, requiring the Coast Guard to

transfer seven of its HC-130H aircraft to the United States Forest Service. Exhibit 10 at 23;

RSUF ¶ 15; see Federal Crop Insurance Corp. v. Merrill, 332 U.S. 380, 384 (1947) (persons

are charged with knowledge of the law). Given CAE also knew that the Government was

contemplating A1U program cancellation, CAE has identified no vital information that the

Government possessed between July 2013 and March 2014 that was different from what

CAE itself knew.4

CAE has also not identified any “sharp dealing” or affirmative misconduct by the

contracting officer. At least one court has held that, if a contracting party tries to “take

deliberate advantage of an oversight” or a lack of knowledge “by [a] contract partner

concerning his rights under the contract,” that intentional conduct can be viewed as “sharp

dealing” that may violate the implied duty. Market Street Associates, 941 F.2d at 594. But,

here, there is no allegation that the contracting officer was making false misrepresentations

to the contractor: he indicated that he did not know what the future A1U program status

would be, but that, until he received different information, he had a contract with CAE

through which, at some point, CAE might be called upon to provide A1U training services.

That statement, when it was made, was true. There was no “sharp dealing” on the record

before us and, therefore, no implied duty breach on that basis.

Having excluded the various concepts discussed above as viable bases for a breach

claim here, we find that CAE has failed to allege and support, for purposes of summary

relief, that the Coast Guard breached its implied duty of good faith and fair dealing.

Constructive Termination

CAE appears to argue that the Coast Guard’s decision in March 2014 not to order any

A1U training services could be viewed as a constructive termination for convenience, which

would entitle it to termination settlement expenses (including the lost costs of developing its

FFS).5 See Appellant’s Cross-Motion for Summary Relief at 17. Yet, under an IDIQ

CAE suggests that the Coast Guard contracting officer should have contacted other

agencies to obtain information about their plans for the A1U program, but CAE does not

identify what information, beyond continued uncertainty about whether the program would

continue, the contracting officer would have obtained from other agencies.

The Coast Guard asserts that CAE is also seeking anticipatory profits through its

constructive termination argument and asks us to deny that request. CAE has disclaimed that

CBCA 4776

contract, after the government purchases the minimum quantity stated in the contract, “its

legal obligation under the contract is satisfied.” Travel Centre v. Barram, 236 F.3d 1316,

1319 (Fed. Cir. 2001). Even if an IDIQ contract is terminated for convenience, a contractor

cannot recover convenience termination settlement costs if the Government has satisfied the

minimum order requirements of an IDIQ contract. International Data Products Corp. v.

United States, 492 F.3d 1317, 1324 (Fed. Cir. 2007). Similarly, if the Government

determines that it is not going to order any additional supplies or services under a particular

IDIQ contract, the Government does not breach its contract obligations, assuming it has met

its minimum ordering obligation, by allowing the IDIQ contract to lapse according to its

terms rather than terminating it early. J. Cooper & Associates, Inc. v. United States, 53 Fed.

Cl. 8, 21 (2002), aff’d, 65 F. App’x 731 (Fed. Cir. 2003). CAE cannot recover damages

under a constructive termination for convenience theory where, as here, the Coast Guard had

already satisfied its minimum ordering obligations before recognizing that it would not order

any A1U training services.

Decision

For the foregoing reasons, we grant the Coast Guard’s motion for summary relief and

deny CAE’s cross-motion for summary relief. Accordingly, CAE’s appeal is DENIED.

________________________________

HAROLD D. LESTER, JR.

Board Judge

We concur:

____________________________

STEPHEN M. DANIELS

Board Judge

_____________________________

RICHARD C. WALTERS

Board Judge

it is seeking anticipatory profits. See Appellant’s Motion for Summary Relief at 17-18.

Accordingly, we need not address the Coast Guard’s argument.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.