MOTION FOR PARTIAL SUMMARY JUDGMENT GRANTED IN PART:

MOTION FOR PARTIAL SUMMARY JUDGMENT GRANTED IN PART:

December 3, 2018

CBCA 3506, 6167

FIRST KUWAITI TRADING & CONTRACTING W.L.L.,

Appellant,

v.

DEPARTMENT OF STATE,

Respondent.

Grant H. Willis, Peter F. Garvin, III, Ryan P. McGovern, Alexander M. Yabroff, and

Robin A. Overby of Jones Day, Washington, DC, counsel for Appellant.

Thomas D. Dinackus, John C. Sawyer, Erin M. Kriynovich, and Randal W. Wax,

Office of the Legal Adviser, Buildings and Acquisitions, Department of State, Washington,

DC, counsel for Respondent.

Before Board Judges HYATT, DRUMMOND, and SULLIVAN.

SULLIVAN, Board Judge.

First Kuwaiti Trading & Contracting, W.L.L. (FKTC) appealed the denial of its claims

by the Department of State (DOS) arising from the construction of the embassy compound

in Baghdad, Iraq. FKTC presented approximately 200 cost claims that totaled $270 million.

DOS moved for summary judgment on thirteen of those cost claims, challenging FKTC’s

reliance upon the War Risks clause, the superior knowledge doctrine, the Changes clause,

and the implied duty of good faith and fair dealing as the basis for these claims. DOS also

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asserts that actions underlying FKTC’s changes claims constitute sovereign acts, precluding

liability pursuant to the sovereign acts doctrine.

We grant DOS’s motion regarding the scope of the War Risks clause and superior

knowledge doctrine, thereby denying seven of FKTC’s claims that are premised solely upon

these bases. We deny DOS’s motion regarding the claims that are also based upon the

Changes clause or the implied duty of good faith and fair dealing, finding that there are

disputed issues of fact. We also deny DOS’s motion regarding the sovereign acts doctrine,

finding that DOS has not established the applicability of that doctrine on the current record.

Six of the thirteen claims subject to the motion survive DOS’s challenge on this basis.

Statement of Facts

I.

Contracts and Their Relevant Terms

In 2005, DOS and FKTC entered into five contracts for the construction of facilities

at the new embassy compound (NEC) in Baghdad, Iraq. The contracts required FKTC to

undertake site preparation and construct infrastructure, housing, support facilities, and a new

office building (NOB). Exhibits 1, 313, 637, 959, 1825.1

A.

Contract Price and Provisions Allowing for Adjustment of Contract Price:

The contract price for each contract included all labor and materials necessary to

complete the work:

B.1

Pricing

B.1.1. The Contract Price includes all labor, materials, equipment and services

necessary to accomplish the design and construction required by the Contract

Documents, including applicable customs duties, transportation to the site,

storage, premiums for insurance required by the Solicitation Documents and/or

items called for by the contract or otherwise necessary for performance of the

1

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

only one claim in these appeals arising from the contract dealing with site preparation

(Exhibit 1825), and that claim is not among the thirteen that DOS challenges in its motion.

Appellant’s Statement of Genuine Issues at 30 n.9. The citations for the contract terms are

to the infrastructure contract. With the exception of the site preparation contract, the

relevant terms for all the contracts are the same.

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3

contract. The Contract Price may be adjusted only be a written Contract

modification signed by the Contracting Officer.

Exhibit 1 at 14. Each of these contracts was a firm, fixed-price contract:

B.3

Type of Contract

This contract is Firm Fixed-Price payable entirely in the currency indicated on

the SF [Standard Form] 1442. No additional sums will be payable on account

of any escalation in the cost of materials, equipment or labor, or because of the

contractor’s failure to properly estimate or accurately predict the cost or

difficulty of achieving the results required by this contract. Nor will the

contract price be adjusted on account of fluctuations in currency exchange

rates. Changes in the contract price or time to complete will be made only due

to changes made by the Government in the work to be performed, or by delays

caused by the Government.

Id. at 17. The contracts also required FKTC to bear all the costs of transportation of

materials to the site:

H.45 Imported Materials, Equipment, and Personnel

H.45.1 Costs to be borne by Contractor. The Contractor is responsible for

paying all charges, whatsoever, except customs duties as provided herein,

incurred in obtaining materials that must be imported for the project and in

transporting the materials from their place of origin to the construction site.

Moving costs shall include, but not necessarily be limited to, packing,

handling, cartage, overland freight, ocean freight, transshipment, port,

unloading, customs clearance and duties (other than customs duties as

provided herein), unpacking, storage, and all other charges including

administrative costs in connection with obtaining and transporting the

materials from their source to the project site.

Id. at 53.

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FKTC could obtain time extensions, but not money, for excusable delays:

F.9

Excusable Delays

F.9.1 The Contractor will be allowed time, not money, for excusable delays

as defined in FAR [Federal Acquisition Regulation] 52.249-10, Default [48

CFR 52.249-10 (2005)]. Examples of such cases include (1) acts of God or of

the public enemy, (2) acts of the United States Government in either its

sovereign or contractual capacity, (3) acts of the government of the host

country in its sovereign capacity, (4) acts of another contractor in the

performance of a contract with the Government, (5) fires, (6) floods, (7)

epidemics, (8) quarantine restrictions, (9) strikes, (10) freight embargoes, (11)

delays in delivery of Government furnished equipment and (12) unusually

severe weather.

Exhibit 1 at 32. But the contracts permitted an adjustment to the contract price if there were

changes to the scope of work as defined in the contract:

H.31.1 Bases for Equitable Adjustments. Any circumstance for which the

contract provides an equitable adjustment, that causes a change within the

meaning of paragraph (a) of the “Changes” clause shall be treated as a change

under that clause; provided, that the Contractor gives the Contracting Officer

prompt written notice within a limit of 20 calendar days stating (a) the date,

circumstances, and applicable contract clause authorizing an equitable

adjustment and (b) that the Contractor regards the event as a changed condition

for which an equitable adjustment is allowed under the contract.

Id. at 57. The contracts also incorporated by reference two Changes clauses. One requires

compensation for any additional work performed by the contractor at the direction of the

contracting officer. Id. at 81 (incorporating FAR 52.243-4). The other provides that any

written or oral order from the contracting officer that causes a change shall be treated as a

change under the clause:

(b) Any other written or oral order (which, as used in this paragraph (b)

includes direction, instruction, interpretation, or determination) from the

Contracting Officer that causes a change shall be treated as a change order

under this clause; Provided, that the Contractor give the Contracting Officer

written notice stating (1) the date, circumstances, and source of the order; and

(2) that the Contractor regards the order as a change order.

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....

(d) If any change under this clause causes an increase or decrease in the

Contractor’s cost of, or the time required for, the performance of any part of

the work under this contract, whether or not changed by any such order, the

Contracting Officer shall make an equitable adjustment and modify the

contract in writing. However, except for an adjustment based on defective

specifications, no adjustment for any change under paragraph (b) of this clause

shall be made for any costs incurred more than 20 days before the Contractor

gives written notice as required.

Id. at 81 (FAR 52.243-4). The contracts also incorporated by reference the Suspension of

Work clause that requires compensation for any unreasonable delays or suspensions by the

contracting officer. Id. at 83 (incorporating FAR 52.242-14).

B.

War Risks Clause

The contracts also contained a War Risks clause upon which FKTC relies as the basis

for twenty-two of its claims, including the thirteen claims at issue in this decision. Because

the parties dispute the meaning of this clause, we recite it here in its entirety without

characterization and leave to the discussion our interpretation of the clause:

H.21 War Risks

H.21.1 Notwithstanding any other provision of this contract to the contrary,

and except as set forth in paragraph H.21.6 below: The Government assumes

the risk of loss or damage to and/or destruction of, completed or partially

completed work performed under this contract, and materials delivered to site,

where such loss, damage, and/or destruction occurs by, or as a result of war

risks such as civil commotion, riot, sabotage, insurrection, rebellion,

revolution, or hostile or warlike action, including action in hindering,

combating, or defending against an actual impending or expected attack by any

government or sovereign power (de jure or de facto) or by any authority using

military, naval or air forces, and agrees that the Contractor shall not be

responsible for such loss, damage and/or destruction. If directed in writing by

the Contracting Officer, the Contractor shall proceed to replace and/or repair

such part of the completed work as may have been lost, damaged, and/or

destroyed as herein set forth, and in such event, an equitable adjustment shall

be made in accordance with existing procedures.

CBCA 3506, 6167

H.21.2 The Contractor agrees that if it carries any insurance which is deemed

by the Contracting Officer to cover any of the risks assumed by the

Government under this clause, to make demand against the insurer in the

amount recoverable, and to reduce its claim hereunder by the amount

recovered from the insurer or, at the option of the Contracting Officer, to

assign to the Government its rights against the insurer for the risks covered by

this clause and, upon the request of the Contracting Officer, to furnish to the

Government, and at the Government’s expense, all reasonable assistance and

cooperation (including the prosecution of suit and the execution of instruments

of assignment or subrogation in favor of the Government) in obtaining

recovery. Any indemnification or other coverage of such risks under the laws

or regulations of the countries in which the work is performed or from other

source shall be treated in the same manner as above in this paragraph. If the

total amount of compensation from the above sources exceeds the amount of

the allowable claim, such excess shall be paid to the Government.

H.21.3 The Contractor shall give the Contracting Officer prompt notice of any

loss of, damage to, and/or destruction of, property for which the Government

has assumed the risk under this clause, and shall furnish evidence or proof of

such loss, damage, and/or destruction in such manner or form as may be

required by the Contracting Officer.

H.21.4 The Government is not obliged to replace or repair the work that has

been lost, destroyed, or damaged. Except for payments by the Government,

if the Contractor is in any way compensated for any loss or destruction to the

work, the Contractor, as directed by the Contracting Officer shall:

H.21.4.1 Use the proceeds to repair, renovate, or replace the work involved;

or

H.21.4.2 Pay such proceeds to the Government.

H.21.5 The Contractor shall indemnify and save harmless the Government

from and against all claims, damages, losses and expenses, direct, indirect or

consequential arising out of or resulting from any act or omission of the

Contractor, its agents, employees, or any subcontractor, in the execution or

protection of the work. The Contractor’s assumption of liability continues

independent of the insurance policies.

6

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H.21.6 Failure to agree to any adjustment contemplated under this provision

shall be a dispute within the meaning of the Disputes Clause. However,

nothing in this clause shall excuse the Contractor from proceeding with the

work, including the repair and/or replacement as herein provided.

Id. at 53–54.

C.

Security Requirements and Warnings:

The contracts directed that FKTC “use only established site entrances and roadways”

for vehicular access, Exhibit 1 at 59, and to employ watchmen to provide security for the

construction site, transit, and storage site:

H.43 Watchmen

The Contractor shall provide sufficient personnel and materials to provide

adequate protection of property at the site, in transit and storage including but

not limited to measures specifically required by the Contract Documents and

any security requirements under this contract.

Id. at 63. DOS was to provide perimeter security and protection from attacks by insurgents.

See, e.g., Exhibit 44 at 6–7.

The contracts warned that the contractor could face danger in performance of the

contracts and that it was responsible for providing support for all of its personnel on the

contract:

H.51 Contractor personnel performing under Department of State Contracts

outside the United States

H.51.2 General. Performance of this contract may require that contractor

personnel work at locations outside the United States in support of one or more

United States diplomatic or consular missions. Contract performance in

support of such missions may be inherently dangerous.

H.51.3 Support

H.51.3.1 Unless specified elsewhere in the contract or as provided in

paragraph (c)(2) of this clause, the Contractor is responsible for all

CBCA 3506, 6167

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administrative, logistical, and security support required for contractor

personnel engaged in this contract.

H.51.3.2 The Government may authorize or may require the use of certain

Government-provided administrative, logistical, security, or in-country

support.

Exhibit 1 at 69–70.

II.

FKTC’s Claims Challenged by DOS

The contracts required FKTC to build the embassy compound in a war zone. DOS

highlights evidence of dangerous attacks and increasing violence before the contracts were

awarded; FKTC highlights evidence of dangerous attacks and increasing violence during the

period of contract performance. Appellant’s Statement of Genuine Issues (ASGI)

¶¶ 105–130. With its claims, FKTC seeks to recover the costs that it incurred as a result of

these attacks and dangerous conditions. DOS seeks a ruling that thirteen of FKTC’s claims

have no proper legal basis. We set forth here the facts underlying the challenged claims

before we analyze the legal support for those claims.

A.

Duck and Cover Alarms

DOS installed at the NEC site an alarm system that would sound if there was an

incoming attack of rockets, mortars, or small arms fire. Exhibit 3851 at 17. When the alarm

sounded, personnel at the site would stop work, move to a secure location, and wait for the

signal that the attack was over. Complaint ¶¶ 102–104. The contract does not mention the

use of this alarm system; it appears that the system was installed after performance of the

contract started. Exhibit 3851. The alarms were sounded by the DOS regional security

officer (RSO). Respondent’s Statement of Uncontested Facts (RSUF) ¶ 150; Exhibit 3851

at 16.

Apparently, the system did not perform as well as DOS would have liked; there were

false alarms and delays waiting for the all-clear signal to be sounded. Exhibits 5177 at

133–37; 5473 at 84. The parties dispute whether FKTC and its personnel were directed to

comply with the alerts or whether FKTC personnel took cover when an alarm sounded as a

safety precaution. ASGI ¶¶ 177–178 (citing conflicting evidence).

CBCA 3506, 6167

B.

9

Rocket Attacks—Three claims

With its claims, FKTC seeks costs attributable to five rocket attacks on the NEC.

Complaint ¶¶ 53–81. In its motion, DOS challenges FKTC’s entitlement to the costs of lost

worker and equipment time attributable to three of the five rocket attacks on the site.

RSUF ¶ 167.

C.

Equipment Repositioning

At the end of each work day, after the local Iraqi personnel had left the site, FKTC

scattered its construction equipment and supplies among several camps so that the material

would be safer in case of an insurgent attack. FKTC then returned the equipment to the

construction site each morning. Complaint ¶¶ 118–119. FKTC personnel suggested that it

undertake this repositioning effort and DOS personnel agreed that it was a good practice.

Exhibit 3901 at 130–31.

D.

Extra Security

As noted above, the contract assigned FKTC responsibility for providing security for

its personnel, equipment, and supplies, and DOS responsibility for providing perimeter

security. FKTC provides evidence of instances when it was assigned additional security

tasks during the course of contract performance. For example, in November 2005, DOS sent

an email advising of a new policy for escorting third-country nationals. Exhibit 3842.

Although DOS asserts that the new policy was instituted by the United States Army or at the

direction of the Army, the policy itself currently is not included in the record. In March and

April 2006, DOS personnel sent emails advising that FKTC was to assume greater

responsibility for the access to and interior security of the NEC site. Exhibits 3841, 3866.

In August 2006, FKTC was directed to provide additional security for escorts onto the site

because the usual access gate was closed due to road construction. Exhibit 3850. FKTC also

asserts that additional security was needed to usher employees to secure locations when the

duck and cover alerts sounded. See Exhibits 3202, 4044 at 174.

E.

Retention Bonuses and Danger Pay

FKTC was required to pay retention bonuses and danger pay to recruit and retain its

employees in the face of the increasing violence in and around the project. Complaint

¶¶ 140, 141. FKTC notified DOS that it was required to make these payments. Exhibits

3516. DOS employees on the project received retention bonuses and danger pay. See, e.g.,

Exhibits 3808, 4467 at 198.

CBCA 3506, 6167

F.

10

Air Transport—Labor Hours

In July 2005, FKTC purchased an airplane to transport employees and cargo from

Kuwait to Bagdad. Exhibit 4042 at 182–85. In its motion, DOS challenges FKTC’s

entitlement to the labor hours included in the air transport claims. RSUF at 62 n.21. DOS

personnel also traveled by air to reach Baghdad. Exhibit 3856.

G.

Sand and Gravel Double-Handling

FKTC obtained sand and gravel needed to make the cement for the project from local

Iraqi vendors. As hostilities increased, local vendors refused to deliver materials directly to

the site for fear of retaliation. Respondent’s Appendix (Resp. App.), Exhibit 27 at 23–26;

Complaint ¶ 176. Instead, local vendors delivered the materials to another site and FKTC

used its personnel and equipment to deliver the material to the work site. Complaint ¶ 177.

FKTC’s double-handling procedure also reduced the risk of hidden explosives and allowed

the movement through checkpoints at the site, a security precaution that FKTC identified in

its proposal. See Exhibit 1832 at 174–75. DOS contends that FKTC developed this doublehandling system on its own without the involvement or assistance of DOS. Resp. App.,

Exhibit 27 at 27. FKTC counters that DOS directed FKTC to undertake this arrangement to

address security concerns. See Exhibits 3820 at 2, 5176 at 272–73.

H.

Truck Convoy Delays, Truck and Driver Protection Requirements, and Truck

Convoy Support Requirements

FKTC brought materials needed for the project from Kuwait in convoys operated by

the Army. FKTC experienced delays while waiting for space in the convoys to become

available. Complaint ¶ 188. FKTC contends that DOS directed FKTC to travel in Army

convoys. Exhibits 2457 at 1; 3878. DOS counters that it only facilitated FKTC’s

participation in the convoys and that FKTC had no other safe way to bring the needed

materials to the project. Resp. App., Exhibit 12 at 8–12; Exhibit 5177 at 46–47.

The Army imposed requirements for truck and driver protection upon those entities

that participated in the convoys. Complaint ¶¶ 213–214. These requirements included items

such as helmets and bullet proof vests for all drivers and tow bars for trucks. Exhibit 4773

at 19–201. The Army also imposed requirements for convoy support to ensure that vehicles

did not become disabled or, if they did, they could be repaired quickly. RSUF ¶¶ 264–265

(citing Complaint ¶ 224).

CBCA 3506, 6167

I.

11

Superior Knowledge Claims

As support for its superior knowledge claims, FKTC relies upon two primary

contentions regarding DOS’s knowledge about the security situation and FKTC’s failure to

include certain costs in its bids. We recite the evidence that underlies those contentions here

and discuss the contentions below.

FKTC contends that, because DOS had a close working relationship with the Army,

it knew more about the security situation than FKTC could have known. To show this close

working relationship, FKTC relies upon a memorandum of agreement (MOA) between DOS

and the Department of Defense (DOD) that provides how DOD will provide support for DOS

personnel in Iraq. Exhibits 3232, 3862. FKTC also notes that the DOS security chief met

regularly with the “security and intelligence” community. Exhibit 2422 at 1. FKTC also

cites a January 2005 DOS cable regarding the difficult and dangerous security situation and

the difficulty in retaining foreign national workers and local contractors. Exhibit 5547 at 2.

FKTC highlights the deposition testimony of a DOS employee who declined to testify about

classified threat lists, Exhibit 4891 at 64–65. DOS issued travel alerts in 2004 and 2005 that

warned of the dangerous situation in Iraq. Exhibits 1493, 1932.

FKTC also asserts that DOS knew or should have known that FKTC had not included

wartime costs in its bid. FKTC cites to two documents that show the embassy compound in

Baghdad was less expensive on a square meter basis than the compound in Beijing. Exhibits

3847, 3898. FKTC’s contracts for the NEC project did not include any classified spaces.

See Exhibit 959. Also, one of the documents shows that the embassy in Kabul, Afghanistan,

which was also built in a war zone, cost less per square meter than the Baghdad compound.

Exhibit 3847. DOS has included in the record the bid evaluation documents for the

contracts, none of which reflect DOS’s concerns about costs that may or may not have been

included. Exhibits 2016, 2099, 2200.

Discussion

I.

War Risks Clause Does Not Provide for Recovery on the Thirteen Challenged Claims

DOS seeks a ruling that the War Risks clause does not permit recovery on the thirteen

challenged claims because it is limited to claims arising from the “loss or damage to and/or

destruction of, completed or partially completed work performed under this contract, and

materials delivered to the site.” Claims for danger pay to employees or delays encountered

in truck convoys are not, DOS argues, among the items recoverable under this clause. Given

the fixed-price nature of the contracts and the narrow transfer of war risks in this clause,

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DOS asserts that FKTC bears the risk and resultant costs of operating in a wartime

environment.

FKTC counters that the clause should be read broadly to encompass all costs arising

from the dangerous conditions that existed or arose during contract performance. Because

the word “loss” is not connected to “work” and “materials” in the limiting phrase “completed

or partially completed work,” FKTC argues that “loss” is not limited to work or materials and

can include costs incurred as the result of other war risks.

In interpreting a contract, the Board must apply an objective test and determine what

a “similarly situated, reasonably prudent contractor would have understood the contract

language to mean.” KMS Fusion, Inc. v. United States, 36 Fed. Cl. 68, 77 (1996) (citing City

of Oxnard v. United States, 851 F.2d 344, 347 (Fed. Cir. 1988)). “Where a contract is

amenable to only one reasonable construction, it should be enforced according to its tenor

as a whole.” Dana Corp. v. United States, 470 F.2d 1032, 1043 (Ct. Cl. 1972). Applying

these maxims, we hold that DOS’s interpretation, as applied to the thirteen claims that it

challenges, is correct based upon the plain meaning of the clause. The clause shifts to DOS

liability for the costs to repair or replace any completed or partially completed work or any

materials at the site. Given that these contracts were fixed-price contracts, it is reasonable

to shift the liability for physical damage caused by actual acts of war to DOS. If a rocket

attack destroys a portion of a building already constructed or materials delivered to the site,

it makes DOS responsible for the costs to repair or replace that building or materials.

However, the War Risks clause does not encompass all costs that a contractor might incur

as the result of performing a contract in a wartime environment.

The premise for FKTC’s interpretation is that the term “loss,” because it is not set off

by a comma or modified with the word “of,” should be read independently from the phrase

“completed or partially completed work or materials delivered to the site.” FKTC urges its

interpretation based upon the rule of the “last antecedent,” which “provides that [r]eferential

and qualifying words and phrases, where no contrary intention appears, refer solely to the last

antecedent, which consists of ‘the last word, phrase, or clause that can be made an antecedent

without impairing the meaning of the sentence for purposes of statutory construction.’”

Ozdemir v. United States, 89 Fed. Cl. 631, 636 (2009) (quoting Anhydrides & Chemicals,

Inc. v. United States, 130 F.3d 1481, 1483 (Fed. Cir.1997)). “In contrast, ‘[w]hen a modifier

is set off from a series of antecedents by a comma, the modifier should be read to apply to

each of those antecedents.’ ” Finisar Corp. v. DirecTV Group, Inc., 523 F.3d 1323, 1336

(Fed. Cir. 2008) (quoting Kahn Lucas Lancaster, Inc. v. Lark International Ltd., 186 F.3d

210, 215 (2d Cir. 1999)). The Court of Appeals for the Federal Circuit has noted that this

rule and “its corollary, the rule of punctuation, are more guidelines than absolute rules.” Id.,

at 1336. We are also mindful of the Supreme Court’s caution that “a purported

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plain-meaning analysis based only on punctuation is necessarily incomplete and runs the risk

of distorting a statute’s true meaning.” United States National Bank of Oregon v.

Independent Insurance Agents of America, Inc., 508 U.S. 439, 454 (1993).

The answer to FKTC’s contention is found in the Federal Circuit’s recitation of the

rule of the last antecedent “where no contrary intention appears.” The phrase “loss, damage

and/or destruction” appears three times in the first sentence of the clause. Only in the first

instance is the term “loss” not set off by a comma. In the subsequent phrases,“loss” is

connected to “damage to and/or destruction” with commas and further modified by “such,”

indicating that the phrase is to be read together and tied to “completed or partially completed

work.” The Board also “must interpret the contract in a manner that gives meaning to all of

its provisions and makes sense.” McAbee Construction, Inc. v. United States, 97 F.3d 1431,

1435 (Fed. Cir. 1996). “[I]f the ‘provisions are clear and unambiguous, they must be given

their plain and ordinary meaning,’ and the [Board] may not resort to extrinsic evidence to

interpret them.” Id. (citations omitted). We cannot find that “loss” has a broader meaning

in the first instance that it does in the remainder of the clause. See Dobyns v. United States,

118 Fed. Cl. 289, 314–15 (2014) (declining to find same word in contractual provision had

two different meanings).

FKTC’s interpretation, that loss should be read independently from “completed or

partially completed work,” also creates a conflict with other clauses in the contract and is not

in keeping with the tenor of the contract. The standard rules of interpretation require us to

give “a reasonable meaning to all parts of the contract,” instead of “one that leaves portions

of the contract meaningless.” Fortec Constructors v. United States, 760 F.2d 1288, 1292

(Fed. Cir.1985). “An agreement should be read as a whole so as to avoid conflicts between

provisions within the contract.” City of Tacoma v. United States, 38 Fed. Cl. 582, 588 (1997)

(citing Reliance Insurance Co. v. United States, 931 F.2d 863, 865 (Fed.Cir.1991)). FKTC’s

interpretation conflicts with other terms of the contracts such as the Price clause, which

clearly states the contracts are fixed-price, and the Excusable Delays clause, which provides

that FKTC may receive a schedule extension for delays attributable to acts of war. Other

clauses make FKTC responsible for all transportation costs and logistics costs for its

employees. A narrow reading, that the clause only shifts risk for damage to work completed

under the contract, gives meaning to all of these other clauses.

FKTC’s answer to the conflict created with these other provisions is that the clause

begins with the phrase “notwithstanding any other provision of this contract to the contrary.”

Rather than burden this phrase with the entirety of FKTC’s interpretation, we interpret the

war risks clause in concert with these provisions. “‘The fact that an improvident

interpretation placed by a contractor upon the specifications may even be considered

conceivable, is not a sufficient basis alone for construction of the contract against the author

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of the language, if not reasonable when the contract is considered as a whole and in light of

the purpose of the contract.’” Dana Corp., 470 F.2d at 1043 (quoting Bishop Engineering

Co. v. United States, 180 Ct. Cl. 411, 416 (1967)).

In reaching this conclusion, we can apply another canon of interpretation—“expressio

unius est exclusio alterius, which states that the general terms of a document are limited by

the specific terms.” Bromley Contracting Co., DOT CAB 78-1, 81-2 BCA ¶ 15,191, at

75,201; see MW Builders, Inc. v. United States, 134 Fed. Cl. 469, 495 (2017); Nicholson v.

United States, 29 Fed. Cl. 180, 196–97 (1993) (“Where certain things are specified in detail

in a contract, other things of the same general character relating to the same matter are

generally held to be excluded by implication.”). If the parties had intended DOS to

compensate FKTC for all its losses attributable to wartime conditions, that intention would

have been clearly stated in the contract, rather than implied in the lack of a comma and

modifier “of” within the clause. See, e.g., TGS International, Ltd., ASBCA 35295, 90-2

BCA ¶ 22,891, at 114,955 (War Risks clause specifically mentioned “increase[s] in the cost

of performance” incurred as the result of “hostilities or threat of hostilities.”), aff’d in part,

rev’d in part, remanded, 949 F.2d 402 (Fed. Cir. 1991). The Board declines to rewrite the

terms of the war risks clause to expand DOS’s liability for costs incurred in performance of

the contract.

FKTC further argues that the clause is, at least, ambiguous and that ambiguity is

latent. Because FKTC’s interpretation is reasonable and DOS drafted the clause, FKTC

asserts that its interpretation is sufficient, pursuant to the doctrine of contra proferentum, to

overcome DOS’s motion for summary judgment.

If one accepts that the failure to set off the first instance of the term “loss” with a

comma or modifier “of” creates an ambiguity, we find that it is a patent ambiguity. A patent

ambiguity is one that is “so ‘patent and glaring’ that it is unreasonable for a contractor not

to discover and inquire about them. Triax Pacific, Inc. v. West, 130 F.3d 1469, 1475 (Fed.

Cir. 1997). Here, the lack of a comma in one use of the word loss and not in the other two

uses was apparent on the face of the clause. If FKTC believed that it could ascribe as much

meaning as it has to this apparent discrepancy, it had the duty to inquire regarding its

interpretation to avoid the dispute that is before the Board. Id.; C.W. Over & Sons, Inc. v.

United States, 44 Fed. Cl. 18, 30 (1999) (“facial inconsistency” in contract provisions based

upon contractor’s interpretation triggered duty to inquire). FKTC’s status as a first-time

general contractor does not eliminate the duty to inquire because the duty is not tied to

FKTC’s actual knowledge. Triax Pacific, Inc., 130 F.3d at 1475; HRH Construction Corp.

v. United States, 428 F.2d 1267, 1272 (Ct. Cl. 1970).

CBCA 3506, 6167

II.

15

FKTC Has Failed To Identify a Sufficient Basis for Its Superior Knowledge Claim

As an alternative to the War Risks clause as the basis for its claims, FKTC also relies

upon the superior knowledge doctrine, asserting that DOS possessed superior knowledge

regarding the security situation and its interpretation of the contract terms that DOS should

have conveyed to FKTC prior to the submission of its bid. DOS moves for summary

judgment, arguing that FKTC cannot show any of the required elements of the superior

knowledge doctrine.

To recover under the superior knowledge doctrine, a contractor must show four

elements:

The doctrine of superior knowledge is generally applied to situations where

(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.

Scott Timber Co. v. United States, 692 F.3d 1365, 1373 (Fed. Cir. 2012) (quoting Hercules,

Inc. v. United States, 24 F.3d 188, 196 (Fed. Cir. 1994)). The doctrine “only requires

disclosure of ‘the vital and essential information’ that a contractor needs, as it develops its

proposal or bid, to understand the performance or cost risks that it would be undertaking if

awarded the contract in question.” Yates-Desbuild Joint Venture v. Department of State,

CBCA 3350, et al., 17-1 BCA ¶ 36,870, at 179,688.

FKTC has failed to adduce evidence sufficient to overcome DOS’s motion for

summary judgment. “A contractor asserting that the Government withheld vital information

bears the burden of establishing by ‘specific evidence’ each element of its superior

knowledge claim.” Yates-Desbuild, 17-1 BCA at 179,688. To preclude summary judgment,

FKTC “must make a showing sufficient to establish the existence of every element essential

to [its] case, and on which [FKTC] has the burden of proof at trial.” Charles M. Pate, CBCA

1038, 08-2 BCA ¶ 33,973, at 168,047–48 (citing Celotex Corp. v. Catrett, 477 U.S. 317,

322–23 (1986)). FKTC must “set forth specific facts showing there is a genuine issue” for

hearing. Id. at 168,048.

In response to DOS’s motion, FKTC alleges that DOS knew more about the security

situation due to its close working relationship with the Army. This allegation is based upon

MOAs between DOS and the Army as well as other evidence regarding the close working

CBCA 3506, 6167

16

relationship between DOS security and Army personnel. None of this evidence shows DOS

possessed knowledge about specific threats to FKTC’s performance of the contracts. Even

assuming that DOS did possess information about the security situation that FKTC did not

have, FKTC has failed to allege what “specific and vital” information DOS learned from the

Army about the security situation, a difficult challenge given the wartime environment in

which FKTC agreed to perform. Fluor Intercontinental, Inc., v. Department of State, CBCA

1559, 13 BCA ¶ 35,334, at 173,430. FKTC also asserts that the security situation became

worse during contract performance. But, this allegation does not support a superior

knowledge claim where the focus of the Board’s inquiry is the Government’s knowledge at

the time of contracting. Yates-Desbuild, 17-1 BCA at 179,688.

FKTC also contends that DOS knew or should have known that FKTC failed to

account for wartime costs in its bid. As support for this contention, FKTC only cites white

papers showing a difference in construction costs between the embassies built in Baghdad

and Beijing. This evidence is summary in nature and does not provide a sufficient basis to

compare these construction costs, including security, design, and other factors that may have

made the embassy in Beijing more expensive on a per-square-meter basis. This evidence

does not show that DOS knew or should have known that FKTC had failed to properly

account in its bid for the increased costs of performing in a war zone. Moreover, the bid

evaluation record shows that FKTC’s bid, for each of the contracts except the NOB contract,

was the highest of the bids submitted. Nothing in these proposal evaluation materials shows

DOS knew anything about whether FKTC had properly accounted for the costs of the project

undertaken in a wartime environment. Without more, this evidence would not establish that

DOS knew or should have known that FKTC had failed to incorporate wartime risk costs into

its proposal.

FKTC’s other cited evidence similarly fails. FKTC contends that DOS possessed

superior knowledge about the duck and cover alarm system because DOS operated it. But

FKTC does not identify the specific knowledge that DOS possessed about the system that

it needed to know prior to contract award about that system. FKTC contends that DOS

should have notified it that it paid its employees bonus pay and danger pay and that it

transported its employees by air, but fails to explain how DOS knew that FKTC needed to

know this information. Finally, FKTC asserts that DOS knew or should have known that it

would require FKTC to travel exclusively in Army convoys. The evidence, however,

indicates that the decision to use only Army convoys came after contract award. While

FKTC may assert a claim based upon the Changes clause, it has not provided evidence to

support recovery based upon the superior knowledge doctrine.

CBCA 3506, 6167

III.

17

Disputed Issues of Fact Preclude Summary Judgment on FKTC’s Changes Claims

A.

FKTC Has Shown Disputed Issues of Fact with Regard to Changes Clause on

Six Claims

In addition to asserting a right to recover based upon the War Risks clause or the

superior knowledge doctrine, FKTC also seeks to recover under the Changes clause on six

of the challenged claims, those related to the “duck and cover” alarm system, extra security

requirements, sand and gravel double-handling, and three tied to Army convoy requirements.

DOS challenges FKTC’s reliance upon the Changes clause, arguing that FKTC cannot

establish that the scope of work changed as the result of direction by DOS.

“The government constructively changes a contract to which it is a party when ‘a

contractor performs work beyond the contract requirements without a formal order, either by

an informal order or due to the fault of the Government.’” Agility Public Warehousing Co.

KSCP v. Mattis, 852 F.3d 1370, 1385 (Fed. Cir. 2017) (quoting International Data Products

Corp. v. United States, 492 F.3d 1317, 1325 (Fed. Cir. 2007)). “To demonstrate that the

government has constructively changed the terms of a contract, ‘a plaintiff must show (1) that

it performed work beyond the contract requirements, and (2) that the additional work was

ordered, expressly or impliedly, by the government.”’ Id. (quoting Bell/Heery v. United

States, 739 F.3d 1324, 1335 (Fed. Cir. 2014)).

To evaluate FKTC’s claims based upon the Changes clause, “we must first determine

what the contract actually required and then determine whether the work actually performed

was ‘in addition to or different from that required.’” VSE Corp. v. Department of Justice,

CBCA 5116, 18-1 BCA ¶ 36,928, at 179,911 (quoting Miller Elevator Co. v. United States,

30 Fed. Cl. 662, 678, appeal dismissed, 36 F.3d 1111 (Fed. Cir. 1994)). “If the Government

was merely exercising its ‘right to insist on performance in strict compliance with the

contract specifications,’ as properly interpreted, there is no ‘change’ upon which to build a

constructive change claim.” Id. (quoting NavCom Defense Electronics, Inc. v. England, 53

F. App’x 897, 900 (Fed. Cir. 2002)). We examine each of FKTC’s claims challenged by

DOS based upon these precepts.

Duck and Cover Alarms. The duck and cover alarms were installed after contract

performance began pursuant to DOS’s responsibility for protecting the site from insurgent

attacks. FKTC has provided evidence in support of its allegation that the alarms were faulty

and delayed its work on the contracts. The parties dispute whether DOS required FKTC to

direct its personnel to comply with these alarms.

CBCA 3506, 6167

18

DOS also asserts that FKTC’s claim for delays arising from the operation of the duck

and cover system should be evaluated under the Suspension of Work clause rather than the

Delays clause because it involves delays in performance of an existing requirement rather

than imposition of a new requirement. Triax-Pacific v. Stone, 958 F.2d 351, 354 (Fed. Cir.

1992). The Suspension of Work clause permits a contractor to recover costs incurred as the

result of unreasonable delays in performance of the contract. Id. Such delays can include

actions or inactions by the contracting officer in administration of the contract. Tidewater

Contractors, Inc. v. Department of Transportation, CBCA 50, 07-1 BCA ¶ 33,525, at

166,103. DOS asserts that FKTC cannot recover under this clause because it cannot show

that the delays FKTC attributes to the duck and cover alert system were the “sole proximate

cause” for the costs incurred. Triax-Pacific, 958 F2d. at 354 (citing Merritt-Chapman &

Scott Corp. v. United States, 528 F.2d 1392, 1397 (Ct. Cl. 1976)). If there are other reasons

that performance of the contract was delayed or the costs were incurred, the contractor cannot

recover the costs. FAR 52.212-12 (“no adjustment shall be made under this clause for any

suspension, delay, or interruption to the extent that performance would have been so

suspended, delayed, or interrupted by any other cause, including the fault or negligence of

the Contractor”). The contractor bears the burden to establish that the Government was

solely responsible for the alleged delays. Tidewater Contractors, 07-1 BCA at 166,103.

DOS contends that FKTC cannot show the absence of concurrent delays attributable

to the duck and cover alarms. It appears that this contention is answered by the nature of the

delay itself. As described by the parties, it appears that work stopped when the alert sounded

as people were directed to shelter and remained there until the all-clear signal was given.

FKTC has shown sufficient evidence to survive DOS’s challenge on summary judgment

under either the Changes or the Suspension of Work clauses.

Extra Security Requirements. FKTC was responsible for providing security for its

personnel and equipment on the site. In response to DOS’s motion, FKTC has adduced

evidence showing that it was required to perform security tasks over and above those

required in the contract. This evidence is sufficient to create a disputed issue of material fact

to be decided after a hearing on the merits.

Sand and Gravel Double-Handling. FKTC was required to arrange for the transport

of all the materials necessary for performance to the site. Local vendors were unwilling or

unable to deliver the materials to the site, thereby necessitating FKTC to arrange for delivery

by local vendors elsewhere and use its own trucks and personnel to deliver the sand and

gravel to the batch plant. DOS contends that local vendors refused to deliver the materials

directly to the site. FKTC has adduced evidence that DOS (or the Army) restricted deliveries

by local vendors to the site and imposed other security requirements. The Board is unable

to resolve this dispute on DOS’s motion.

CBCA 3506, 6167

19

Truck Convoy Delays, Protection Requirement, and Support Requirements. Again,

the contracts required FKTC to transport all materials to the site. FKTC contends that DOS

required FKTC to travel in Army convoys. DOS counters that it merely facilitated FKTC’s

participation in Army convoys because there was no other safe route on which FKTC could

transport materials. The parties do not dispute that the Army imposed truck and driver

protection requirements, but DOS contests FKTC’s allegation that the Army required FKTC

to maintain support facilities at Army convoy checkpoints. Because the protection and

support requirements flow from FKTC’s participation in the convoys, we will decide all of

these disputes after the hearing in this matter.

B.

DOS Has Not Provided Evidence to Support a Sovereign Acts Defense

In addition to challenging FKTC’s reliance on the Changes clause, DOS asserts that

it should not be held liable for its actions underlying these six claims by operation of the

sovereign acts doctrine.

The sovereign acts doctrine “is an affirmative defense that is an inherent part of every

government contract.” Conner Brothers Construction Co. v. Geren, 550 F.3d 1368, 1371

(Fed. Cir. 2008). “[T]he object of the sovereign acts defense is to place the Government as

contractor on par with a private contractor in the same circumstances.” United States v.

Winstar Corp., 518 U.S. 839, 904 (1996). Therefore, “whatever acts the government may

do, be they legislative or executive, so long as they be public and general, cannot be deemed

specially to alter, modify, obstruct or violate the particular contracts into which it enters with

private persons.” Horowitz v. United States, 267 U.S. 458, 461 (1925) (quoting Jones v.

United States, 1 Ct. Cl. 383, 384 (1865)).

A governmental action will qualify as “public and general,” for the purpose of the

defense, “so long as the action’s impact upon public contracts is . . . merely incidental to the

accomplishment of a broader governmental objective.” Winstar, 518 U.S. at 897–98

(analyzing the scope of public and general acts in the context of an impossibility defense for

the Government’s breach of contract); see also Conner Brothers, 550 F.3d at 1371–75

(applying the Winstar standard for the scope of public and general acts in the context of the

Government’s obstruction of a contractor’s performance).2 “The sovereign act inquiry does

2

Under the two-part test established by the Supreme Court in the Winstar

plurality, first, the Government must establish that its relevant act is not “properly attributable

to the Government as [a] contractor,” because it qualifies as a public and general act. 518

U.S. at 896. Second, the Government must show that the act would “otherwise release the

Government from liability under ordinary contract principles.” Id. In light of the

CBCA 3506, 6167

20

not rest on a mechanical determination of how many contractors are affected, but rather

focuses on the nature and scope of the governmental action.” Conner Brothers, 550 F.3d at

1377. When pleading a sovereign acts defense in a motion for summary judgment, the

Government bears the burden of proving that the governmental action was public and

general. See Jazz Photo Corp. v. International Trade Commission, 264 F.3d 1094, 1102

(Fed. Cir. 2001) (“The burden of establishing an affirmative defense is on the party raising

the defense.”), abrogated on other grounds by Impression Products, Inc. v. Lexmark

International, Inc., 137 S. Ct. 1523 (2017).

DOS asserts the sovereign acts defense in briefing but fails to support its assertion

with evidence that shows the broader governmental objective or how the governmental

actions were public and general acts that were merely incidental to the accomplishment of

a broader governmental objective. See, e.g., Weaver Construction Co., DOT BCA 2034,

91-2 BCA ¶ 23,800, at 119,183 (Government failed to provide evidence that governmental

actions were protected sovereign acts). None of DOS’s proposed findings go to these

elements. See RSUF; Transcript at 46 (Oct. 1, 2018) (counsel’s acknowledgment at oral

argument that no evidence is currently in the record). Counsel for DOS explained that the

absence of evidence was due in part to poor record keeping by the Army during the Iraq war.

Transcript at 47. Regardless of the cause, DOS has not yet provided a basis upon which to

evaluate DOS’s sovereign acts defense.

IV.

Disputed Issues of Fact Preclude Summary Judgment on FKTC’s Implied Duty of

Good Faith and Fair Dealing Claim

DOS challenges FKTC’s reliance on the implied duty of good faith and fair dealing

in support of its claims related to the duck and cover alarms. The “implied duty of good faith

and fair dealing exists in government contracts and applies to the government just as it does

to private parties.” Agility Public Warehousing, 852 F.3d at 1383–84. Failing to fulfill the

duty of good faith and fair dealing is as much of a breach of contract as failing to fulfill an

Government’s failure to perform under the contract, the Winstar Court focused its analysis

on the common-law doctrine of impossibility. See id. at 904. Following Winstar, the Federal

Circuit has used the two-prong test for cases in which the Government asserts a sovereign

acts defense for its failure to perform. See, e.g., Klamath Irrigation District v. United States,

635 F.3d 505, 521–22 (Fed. Cir. 2011). However, unlike cases involving the Government’s

failure to perform, the appeal presently before the Board involves the Government’s

interference with the contractor’s performance. Therefore, we do not need to consider

whether performance was impossible, but rather only whether the governmental action was

public and general in nature.

CBCA 3506, 6167

21

express contractual promise. See Metcalf Construction Co. v. United States, 742 F.3d 984,

990 (Fed. Cir. 2014). The “implied duty [of good faith and fair dealing] exists because it is

rarely possible to anticipate in contract language every possible action or omission by a party

that undermines the bargain.” Id. at 991.

Within the scope of the duty of good faith and fair dealing is the requirement to “not

only . . . avoid actions that unreasonably cause delay or hindrance to contract performance,

but also to do whatever is necessary to enable the other party to perform.” Kiewit-Turner v.

Department of Veteran Affairs, CBCA 3450, 15-1 BCA ¶ 35,820, at 175,176. However, the

level of diligence and cooperation required of a contracting party is not without limit. See

Precision Pine & Timber, Inc. v. United States, 596 F.3d 817, 831 (Fed. Cir. 2010) (“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.”).

Rather, “[w]hat 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.’”

Metcalf, 742 F.3d at 991 (quoting Malone v. United States, 849 F.2d 1441, 1445 (Fed. Cir.

1988)). The Federal Circuit’s decision in Metcalf outlined the scope of the duty by

explaining that “an 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. “To 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, 15-1 BCA at 175,176–77.

DOS contends that when “evaluated holistically, there is no reason to believe that the

duck and cover alarm system hindered FKTC’s performance of its contracts.” Respondent’s

Reply to Appellant’s Opposition at 56. DOS also argues that, “although some production

time was lost during the alarms, the system protected FKTC personnel and helped prevent

a catastrophic loss of productivity.” Id. We agree that if the time lost due to the alarms

resulted solely from rocket attacks, and not from DOS’s missteps, the resulting delays could

not be used to show a breach of the duty. See, e.g., Scott Timber, 692 F.3d at 1375 (delay in

performance caused by court order and, later, “to prevent serious environmental degradation

or resource damage”); Precision Pine, 596 F.3d at 828 (delay in performance caused by court

order). But, FKTC has brought forth evidence which indicates that the duck and cover alarm

system had failings that may have contributed to its delays in performing the contract. Given

these disputed issues, we deny DOS’s motion for summary judgment on this allegation.

CBCA 3506, 6167

V.

22

Purported Lack of Contemporaneous Documentation is not Grounds for Summary

Judgment

Finally, DOS urges the Board to grant summary judgment on FKTC’s claims because,

DOS contends, FKTC cannot show that it contemporaneously complained about many of the

issues underlying the claims. As established in the cases cited by DOS, the absence of

contemporaneous evidence can be a factor in weighing the evidence, see, e.g., Fisk Building

& Investments, GSBCA 7480, 85-1 BCA ¶ 17,888, at 89,593, or judging the credibility of

the witnesses. See, e.g., Mil-Pak Co., GSBCA 6222, 83-1 BCA ¶ 16,486, at 81,965–66.

However, the lack of contemporaneous evidence does not provide a legal ground upon which

the Board can grant summary judgment. Therefore, we leave for the final decision on the

merits the evaluation of the lack of any contemporaneous complaints by FKTC.

Decision

Respondent’s motion for partial summary judgment is GRANTED IN PART.

Appellant’s claims based solely upon the War Risks clause and the superior knowledge

doctrine challenged by Respondent are denied. The hearing in this matter will commence

on January 22, 2019.

Marian E. Sullivan

MARIAN E. SULLIVAN

Board Judge

We concur:

Catherine B. Hyatt

CATHERINE B. HYATT

Board Judge

Jerome M. Drummond

JEROME M. DRUMMOND

Board Judge