MOTION FOR SUMMARY RELIEF IN CBCA 340 DENIED; CBCA 341 DENIED:

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January 6, 2009

CBCA 340, 341

NATIONAL HOUSING GROUP, INC.,

Appellant,

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT,

Respondent.

Sean A. Roberts of The Roberts Law Firm, Houston, TX; and Harold A. Odom, III

of Schiffer Odom Hicks, Houston, TX, counsel for Appellant.

Doris S. Finnerman, Office of General Counsel, Department of Housing and Urban

Development, Washington, DC, counsel for Respondent.

Before Board Judges HYATT, DRUMMOND, and KULLBERG.

KULLBERG, Board Judge.

The Department of Housing and Urban Development (HUD) has moved for summary

relief in the above-captioned appeals brought by appellant, National Housing Group, Inc.

In addition to respondent’s motion for summary relief, the other submissions

from the parties relevant to this decision include appellant’s response and respondent’s reply

brief.

CBCA 340, 341

(NHG), which were originally filed at the HUD Board of Contract Appeals (HUDBCA) as

HUDBCA 05-K-101-C2 and 06-K-102-C3.2 On January 6, 2007, in accordance with section

847 of the National Defense Authorization Act for Fiscal Year 2006, Pub. L. No. 109-163,

119 Stat. 3391, the Civilian Board of Contract Appeals (CBCA) was established, and these

appeals were transferred to this Board. This Board then docketed HUDBCA 06-K-102-C3

as CBCA 340 and HUDBCA 05-K-101-C2 as CBCA 341. We deny HUD’s motion with

regard to CBCA 340, and we grant HUD’s motion with regard to CBCA 341.

Background 3

The Solicitation

On August 5, 2002, HUD issued its request for proposals (RFP) R-OPC-22253 for

services to be provided under one or more contracts for properties in the inventory of HUD’s

Multifamily Property Disposition Centers (MFPDs) in Atlanta, Georgia, and Fort Worth,

Texas. Appeal File (CBCA 341), Vol. 7, Exhibit 2.1 at B-1.4 Multifamily was defined “as

5 or more units of residential housing.” Id. at C-4. The Atlanta and Fort Worth MFPDs held

multifamily properties in five geographic areas of the United States, which together

comprised all fifty states, the District of Columbia, the Commonwealth of Puerto Rico, and

the U.S. Virgin Islands. Id. at B-1. The contract performance period included a base period

of two years and three option years. Id. at I-5. The RFP incorporated in full text the

following Federal Acquisition Regulation (FAR) clauses: 48 CFR 52.216-18 (2001) (FAR

52.216-18), Ordering (Oct. 1995); FAR 52.216-19, Order Limitations (Oct. 1995); and FAR

52.216-22, Indefinite Quantity (Oct. 1995). Id. at I-3-4.

Under the RFP, a combination firm-fixed-price and cost-reimbursement, no-fee,

indefinite delivery/indefinite quantity (IDIQ) contract would be awarded for each of the five

geographic areas. Appeal File (CBCA 341), Vol. 7, Exhibit 2.1 at B-1-2, L-7. The contracts

NHG’s appeal of the denial of its May 24, 2005, claim was docketed as

HUDBCA 05-K-101-C2, and its appeal of the denial of its March 31, 2005, claim was

docketed as HUDBCA 06-K-102-C3.

These findings are made only for the purpose of deciding the Government’s

motion.

Unless otherwise noted, all exhibits are found in either the appeal file for

CBCA 340, which consists of one volume, or the appeal file for CBCA 341, which consists

of eight volumes.

CBCA 340, 341

would be performed by a property manager (PM), which could be an individual, a

partnership, a corporation, or other entity. Id. at C-4. The RFP stated the following:

This is an Indefinite-Quantity contract as defined at Subpart

16.504 of the Federal Acquisition Regulation (FAR) and in

Section I, Clause FAR 52.216, Indefinite-Quantity, herein. A

Firm Fixed Unit Price contract will be awarded. Services

provided by the Property Manager (PM) under this contract shall

be secured by issuance of orders placed in accordance with item

G.7, Ordering Procedures and Section I, Clauses FAR 52.216,

Ordering and FAR 52.216-19, Order Limitations and the clause

Ordering Procedures[.]

Id. at B-1. The RFP provided that the “Government shall order a minimum quantity of . . .

properties [for each geographic area] to be managed during the base year of th[e] contract,

and . . . during each option year period, if exercised.” Id. There was no guarantee that the

Government would order the maximum quantity of properties for any of the geographic

areas. Id. The RFP also stated, “HUD is under no obligation to assign properties exceeding

the minimum quantity specified. Properties may be removed from the PM’s inventory at any

time by issuance of a modification to the task order that assigned the property to the PM.”

Id. at B-2.

Payments under the contracts to be awarded included monthly management fees “for

work required, performed and accepted . . . .” Appeal File (CBCA 341), Vol. 7, Exhibit 2.1

at B-2. Such payments would be “prorated as of the date a property is assigned to the PM

through the date of closing the sale of the property or the property is otherwise removed.”

Id. The management fees did not include property expenses, which were “costs of operation,

repair or maintenance . . . .” Id. Such costs were paid out of an approved property budget.

Id. at B-3.

For each geographic area, the RFP provided a schedule for proposing monthly unit

prices for managing the various types of properties for the base period of two years and three

option years. Appeal File (CBCA 341), Vol. 7, Exhibits 2.1 at B-4-22, 2.4. The guaranteed

minimum numbers of properties that HUD was required to assign for each geographic area

were as follows: area 1, ten properties; area 2, twelve properties; area 3, nine properties; area

4, four properties; and area 5, one property. Id. The maximum number of properties that

HUD could assign for the life of the contracts were the following: areas 1 and 3, 100

properties; areas 2 and 4, seventy-five properties; and area 5, twenty-five properties. Id. The

different types of properties that could be assigned under a contract included residential

housing, retirement service centers, nursing homes, assisted living facilities, hospitals, mobile

CBCA 340, 341

home parks, vacant land, off-line (unfit for occupancy) properties, tenant relocations, and

commercial space. Id.

Attachments 9 and 11 in section J of the RFP included “[a]dditional historical

information . . . .” Appeal File (CBCA 341), Exhibit 2.1 at L-15. Attachment 9 provided

information about “properties by location and number of units.” Id., Attachment 9.

Attachment 9 also advised that the inventory was current as of June 30, 2002, and that the

“[i]nventory [wa]s not constant and subject to change.” Id. Attachment 11 was a “current

inventory by city and provide[d] additional historical information.” Id. at L-15. Attachment

11 identified specific properties in each city, and for each property, information was provided

as to the number of units and the date the property was acquired by HUD. Id., Attachment

11.

The Contracts

On December 31, 2002, NHG, a small, disadvantaged, women-owned business, was

awarded contract C-OPC-22253 (contract 253) for geographic area 1,5 contract C-OPC

22376 (contract 376) for geographic area 2,6 contract C-OPC-22377 (contract 377) for

geographic area 3,7 and contract C-OPC-22378 (contract 378) for geographic area 4.8 Appeal

File (CBCA 341), Vol. 8, Exhibits 2.6, 2.7, 2.37, 2.54, 2.71. Each of the four contracts stated

that the Government shall order a minimum number of “properties to be managed during the

base years of this contract.” Id. at B-1. The required minimum numbers of properties to be

Geographic area 1 included Connecticut, Maine, Massachusetts, New

Hampshire, Rhode Island, Vermont, New Jersey, New York, Delaware, Maryland,

Pennsylvania, Virginia, Washington, D.C., and West Virginia. Appeal File (CBCA 341),

Vol. 7, Exhibit 2.1 at B-1.

Geographic area 2 was divided into geographic area 2(a), which included

Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina, and

Tennessee, and geographic area 2(b), which included the Commonwealth of Puerto Rico and

the U.S. Virgin Islands. Appeal File (CBCA 341), Vol. 7, Exhibit 2.1 at B-1.

Geographic area 3 included Illinois, Indiana, Minnesota, Michigan, Ohio,

Wisconsin, Iowa, Kansas, Missouri, and Nebraska. Appeal File (CBCA 341), Vol. 7, Exhibit

2.1 at B-1.

Geographic area 4 included Arkansas, Louisiana, New Mexico, Oklahoma,

Texas, Colorado, Montana, North Dakota, South Dakota, Utah, and Wyoming. Appeal File

(CBCA 341), Vol. 8, Exhibit 2.71 at B-1.

CBCA 340, 341

assigned under each of the contracts was the same as the minimum quantities shown in the

RFP for geographic areas 1 through 4. Id. All four of the contracts also stated that

“[p]roperties may be removed from the PM’s inventory at any time . . . .” Id.

On February 1, 2003, NHG began to receive assignments of properties that had been

managed by the predecessor contractors. Respondent’s Reply Brief, Exhibit J. HUD

assigned NHG the following numbers of properties: seventeen properties under contract 253,

which exceeded the required minimum of ten properties; nine properties under contract 377,

which equaled the required minimum; and four properties under contract 378, which also

equaled the required minimum. Appeal File (CBCA 341), Vol. 1, Exhibit 1.1 at 2; Vol. 7,

Exhibits 2.6-2.77; Complaint (CBCA 341) ¶ 20. In the case of contract 376, however, HUD

only assigned six properties, which was less than the required minimum number of twelve

properties for geographic area 2. Id.

HUD’s Atlanta office was initially responsible for administration of the contracts, but

Ms. Maggie Pedraza, one of NHG’s principals, alleged that “there was a lot of animosity . . .

to the point we were told that they were not going to be assigning any properties . . . until we

could demonstrate . . . we were qualified to do the work . . . .” Deposition of Maggie Pedraza

(Mar. 12, 2008) at 97. According to Ms. Jo Baylor, a former chief procurement officer at

HUD, one “of the staff members [during a conference call] even said, ‘Well, this firm is not

qualified, and, you know, as far as I’m concerned, I’ll see them bankrupt before I’ll hand

over properties.’” Deposition of Jo Baylor (Mar. 11, 2008) at 9. Ms. Baylor subsequently

complained about that comment, which she claimed had been made by Ms. Norma Cannon,

director of contracting at HUD’s Atlanta office. Appellant’s Response to Respondent’s

Motion for Summary Relief at 21-22 (quoting Baylor Deposition). Responsibility for the

administration of all four of NHG’s contracts was then transferred to HUD’s Fort Worth

office on February 26, 2003. Respondent’s Reply Brief, Exhibit C.

According to Ms. Pedraza, the situation regarding the initial assignment of properties

was “rectified . . . and [NHG] received the initial portfolio . . . but there were things that were

different in the way that work was assigned . . . versus the previous contractors.” Pedraza

Deposition at 97. “[W]here for years [HUD] rolled the portfolio into these management

contracts and held these properties, now the priority was to sell them[.]” Id. at 98. After the

administration of the contracts was transferred to HUD’s Fort Worth office, Mr. Ernest

Worsham was responsible for contract administration. Deposition of Annette Hancock

(May 15, 2008) at 67. Ms. Hancock testified in her deposition that Mr. Worsham reported

to Ms. Cannon, but she knew of no instance in which Ms. Cannon continued to have any

involvement with NHG’s contracts. Id. at 114. NHG continued to complain about the

administration of the contracts after the transfer of contract administration to Fort Worth.

Id. On May 1, 2003, administration of the contracts was transferred a second time from

CBCA 340, 341

HUD’s Fort Worth office to HUD’s Washington, D.C., office, and Ms. Hancock took over

administration of the contracts. Id. at 114-15; Respondent’s Reply Brief, Exhibit D.

NHG’s claim dated March 31, 2005

On March 31, 2005, NHG submitted to HUD a claim in the amount of $8,429,188.40

under contract 376. Appeal File (CBCA 340), Exhibit 1.2 at 4. NHG sought to recover its

“nonrecurring costs/start up expenses, lost profits[,] and other business opportunities caused

by HUD’s decision to order fewer services than the guaranteed minimum and other actions

and omissions . . . .” Id. at 5. NHG’s claim included the fees plus profit that it would have

received for managing six additional properties, which were not assigned, during the base

period of contract 376. Id. at 19. Additionally, NHG’s claim sought $1,597,502 for “change

of scope.” Id.

On April 5, 2005, NHG and HUD executed a “Supplemental Agreement and Partial

Settlement of Breach of Contract Claims.” Appeal File (CBCA 340), Exhibit 1.3. The

agreement stated the following:

On 31 December 2002, the Department of Housing and

Urban Development awarded contract numbers C-OPC-22253,

C-OPC-22376, C-OPC-22377, and C-OPC-22378 to National

Housing Group, Inc. (NHG): four indefinite delivery-indefinite

quantity contracts for multifamily property management

services. NHG continues to perform task orders issued against

these contracts in four regions of the country. NHG is a small

disadvantaged business and the Department’s sole provider of

essential multifamily property management services.

On March 30, 2005, NHG submitted a certified claim for

$8,429,188.40 in connection with contract C-OPC-22376,

identified within paragraph 1. This certified claim was

submitted in accordance with the Disputes Clause,

FAR 52-233-1, and followed several months of negotiations

between the NHG and the Department concerning the matters

underlying NHG’s certified claim. While negotiations are

ongoing, and the parties have not been able to resolve all of the

issues raised by NHG, the parties have made substantial

progress negotiating the matter of HUD’s failure to order the

guaranteed minimums, and NHG’s resultant breach of contract

claim.

CBCA 340, 341

The parties have reached an agreement that the

Department met the guaranteed minimum ordering quantity of

properties under contracts C-OPC-22253, C-OPC-22377, and

C-OPC-22378. The parties, further, agree that the Department

did not meet the guaranteed minimum ordering quantity with

respect to contract C-OPC-22376, where there was a minimum

guaranteed order of property management services for twelve

properties, but the Department ordered (through assignment)

property management services for only six properties.

Whereas, NHG received a fixed, monthly property

management fee based on the type of property unit and

occupancy of the property unit, and NHG incurred costs in

performing these property management services,

Whereas, it has been determined that the Department

assigned six properties under contract C-OPC-22376 containing

approximately 713 units, and that on average, NHG performed

property management services for these six properties for a full

year, and

Having agreed to a provisional property unit rate, and the

Contracting Officer having conducted some examination of

NHG’s claimed costs with respect to the provision of those six

properties,

The parties have reached a partial settlement agreement

in the amount of $427,800, which the parties agree is a fair and

reasonable settlement of the breach of contract claim with

respect to contract C-OPC-22376, pending the final examination

of NHG’s cost proposal and receipt of the formal audit

determination.

In consideration of the foregoing, NHG agrees to allow

a formal audit of its claim and waives any right to the payment

of interest under the Contract Dispute[s] Act on any portion of

the claim associated with not meeting the guaranteed minimum

for contract C-OPC-22376. NHG further agrees that, based

upon the receipt of audit determinations and final analysis of

NHG’s cost proposal, the Contracting Officer shall revisit this

CBCA 340, 341

settlement amount and shall recover any overpayment that the

Department determines is due and owing by any remedies

available to the Department, including set-off against any

contracts that NHG holds with the Department or any other

federal agency. As further consideration for the Department’s

payment of $427,800, NHG waives any future claims against the

Government in connection with the guaranteed minimums in

contracts C-OPC-22253, C-OPC-22376, C-OPC-22377, and

C-OPC-22378.

The parties agree to work in good faith to resolve this

dispute amicably through full negotiations and final settlement

after the results of the audit findings, and the contract terms and

conditions.

10.

Nothing contained herein shall be construed as a waiver

of NHG’s right to contest the audit findings in connection with

the March 30, 2005 claim under Contract C-OPC-22376, or any

contracting officer’s final decision resulting therefrom, or

NHG’s right to appeal such decisions to the appropriate Board

of Contract Appeals.

Id. There is no dispute that HUD paid NHG $427,800.

Subsequent to executing the partial settlement agreement, the Defense Contract Audit

Agency (DCAA) issued on August 19, 2005, its audit report regarding NHG’s March 31,

2005, claim under contract 376. Appeal File (CBCA 340), Exhibit 3.1. The purpose of the

audit was limited to assisting HUD “in evaluating [NHG’s] proposed monthly property

management rate . . . .” Id. at 2. HUD and NHG exchanged letters subsequent to DCAA’s

issuing its report in which HUD questioned the method by which NHG computed its claim,

and NHG reasserted its rationale for computing its damages. Id., Exhibits 1.10-1.12. There

is, however, no evidence that negotiations took place between HUD and NHG to arrive at

a final resolution of the dispute as called for in paragraph nine of the partial settlement

agreement.

On June 6, 2006, the contracting officer’s (CO’s) decision denied NHG’s claim dated

March 31, 2005. Appeal File (CBCA 340), Exhibit 1.1. The CO also found that the payment

of $427,800 under the partial settlement agreement dated April 5, 2005, was excessive and

demanded that NHG repay $164,327. Id. at 8. The CO determined that HUD and NHG had

failed to reach an agreement as to the amount of compensation owed as a result of HUD’s

CBCA 340, 341

assigning less than the required minimum number of properties under the contract. Id. at 2.

While agreeing with NHG’s method for developing its claim, the CO disagreed “with all the

factors used to calculate the amount due except for the number of properties and the unit

price per month per unit set forth in the contract.” Id. The CO calculated NHG’s damages

based upon “historical trends for HUD’s Property Disposition Inventory . . . using the data

derived from the historical information with the largest number of properties managed over

the longest period of time.” Id. at 4. The CO concluded that the proper compensation for

HUD’s failure to assign the required minimum number of properties under contract 376

should have been $236,473. Id. at 8. NHG was, consequently, found to be in debt to HUD

in the amount of $164,327, which it was directed to repay in thirty days. Id. NHG timely

appealed the CO’s decision; the appeal is now docketed as CBCA 340.

NHG’s claim dated May 24, 2005

On May 24, 2005, NHG submitted to the CO its certified claim in the amount of

$6,276,442 for additional costs incurred under all four contracts. Appeal File (CBCA 341),

Vol. 1, Exhibit 1.2. The basis for NHG’s claim included the following:

(1) HUD’s negligent preparation of its estimated work load; (2)

HUD’s failure to disclose vital information to NHG regarding

the scope of the required services and HUD’s plans for these

properties under all four Contracts during the solicitation, (3)

constructive changes to various task orders issued to NHG,

which ca[u]sed NHG’s monthly unit costs increase [to] far

exceed those that could be expected if it had been allowed to

perform the task orders as originally issued, and (4) HUD’s

breach of its implied duties to cooperate and not to hinder

NHG’s performance of these [c]ontracts.

Id. at 1. Additionally, NHG alleged that its proposal assumed “HUD would award at least

the guaranteed minimum number of properties to NHG and that the total estimated number

of properties and units reflected in Attachments 9 and 11 were realistic and a reasonable

estimate of the number of units that would be assigned to NHG over the life of the

Contracts.” Id. at 3. In the case of geographic area 1, NHG contends that it had expected

that the Boston-area properties listed in attachment 11 would be assigned, but HUD failed

to do so. Id. at 3. NHG claimed $1,247,376 for lost revenue due to not being assigned

Boston-area properties. Id. at 13.

Also, NHG contended that HUD constructively changed the orders for the properties

it was assigned by shortening the period of time such properties would be managed. Appeal

CBCA 340, 341

File (CBCA 341), Vol. 1, Exhibit 1.2 at 8. NHG had expected that properties would be

assigned for the full twenty-four month base period, and it was unable to recover its startup

costs as a result of holding properties for shorter periods, which resulted in higher per-unit

costs. Id. at 5. Such actions, according to NHG, were “instances in which HUD’s

Contracting Officer showed animosity toward NHG . . . and the Government breached its

duty to cooperate and not interfere with NHG’s performance of these property management

services.” Id. at 10. NHG also alleged that the shortened periods in which properties were

assigned resulted from “a change in the way HUD manages its inventory of properties and

that a decision ha[d] been made with regard to many of the properties listed in the

solicitation, to sell them at a public auction, rather than continue to manage them.” Id. at 4.

The only item included in NHG’s claim for a lost business opportunity was a property

management contract in the Commonwealth of Puerto Rico. Appeal File (CBCA 341), Vol.

1, Exhibit 1.2 at 13; Vol. 7, Exhibit 1.3, Tab Q. NHG’s claim for not obtaining that contract

totaled $2,536,758. Id. No other lost business opportunity was specifically identified and

set forth in a dollar amount in NHG’s claim.

On July 27, 2005, the CO denied NHG’s claim dated May 24, 2005. Appeal File

(CBCA 341), Exhibit 1.1. The CO noted that NHG’s claim for HUD’s failure to order the

minimum number of properties under contract 376 was the subject of a separate claim, and

his decision did not address that matter. Id. at 2. NHG’s claim was denied in its entirety.

Id. at 9. The CO’s decision found no basis for additional compensation due to HUD’s failure

to assign a greater number of properties than the minimum quantities shown in the contracts

or the length of time that HUD assigned properties to NHG. Id. at 3-8. NHG timely

appealed the denial of its claim; the appeal is now docketed as CBCA 341.

Discussion

HUD moves for summary relief with regard to CBCA 340 on the grounds that NHG’s

appeal is barred by an accord and satisfaction under the terms of the April 5, 2005, partial

settlement agreement. With regard to CBCA 341, HUD moves for summary relief on all

five counts in NHG’s complaint, which included latent ambiguity, contra proferentem,

negligent estimates, constructive change, and breach of duty of good faith and fair dealing.

Additionally, HUD moves for summary relief with regard to NHG’s claim for a lost business

opportunity, which was the award of a contract in the Commonwealth of Puerto Rico.

In ruling upon HUD’s motion, we recognize the following:

Summary relief is this “Board’s analogous procedure to

summary judgment in court . . . .” GE Capital Information

CBCA 340, 341

Technology Solutions-Federal Systems v. General Services

Administration, GSBCA 15467, 01-2 BCA ¶ 31,445, at 155,306.

It is well recognized that granting summary judgment is only

appropriate where there is no genuine issue of material fact.

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

“Only disputes over facts that might affect the outcome of the

suit under the governing law will properly preclude the entry of

summary judgment.” Id. In considering summary judgment, it

is not the judge’s function “to weigh the evidence and determine

the truth of the matter.” Id. at 249. All justifiable inferences

and presumptions are to be resolved in favor of the nonmoving

party. Id. at 255. The moving party has the initial responsibility

of stating the basis for its motion and “identifying those portions

of ‘the pleadings, depositions, answers to interrogatories, and

admissions on file, together with affidavits, if any,’ which it

believes demonstrates the absence of a genuine issue of material

fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The

nonmoving party is then required to “go beyond the pleadings

and . . . designate ‘specific facts showing that there is a genuine

issue for trial.’” Id. at 324.

Navigant SatoTravel v. General Services Administration, CBCA 449, 08-1 BCA ¶ 33,821,

at 167,410. We deny HUD’s motion as it relates to CBCA 340, and we grant HUD’s motion

as it relates to CBCA 341.

CBCA 340

Accord and Satisfaction

HUD argues that the partial settlement agreement dated April 5, 2005, was an accord

and satisfaction that bars NHG’s claim under contract 376. “A claim is discharged by an

accord and satisfaction when ‘some performance different from that which was claimed as

due is rendered and substituted performance is accepted by the claimant as full satisfaction

of his claim.” England v. Sherman R. Smoot Corp., 388 F.3d 844, 849 (Fed. Cir. 2004)

(quoting O’Connor v. United States, 308 F.3d 1233, 1240 (Fed. Cir. 2002)). “An accord is

an agreement by one party to supply or perform, and by the other party to accept, in

settlement or satisfaction of an existing claim, something other than what originally was

due.” C & H Commercial Contractors, Inc. v. United States, 35 Fed. Cl. 246, 252 (1996).

“Satisfaction is the execution and/or performance of the agreement, the actual giving or

taking of some agreed item or service.” Id. An accord and satisfaction binds the parties and

CBCA 340, 341

precludes further payment for a claim that has been satisfied. Spirit Leveling Contractors

v. United States, 19 Cl. Ct. 84, 92-93 (1989). Five elements are necessary to establish an

accord and satisfaction: “(1) proper subject matter; (2) competent parties; (3) resolution of

a bona fide dispute between the parties; (4) meeting of the minds of the parties; and (5)

consideration.” American Telephone & Telegraph Co., Federal Systems Advanced

Technologies, DOT BCA 2479, 93-3 BCA ¶ 26,250, at 130,579 (citing Cyr Construction

Co. v. United States, 27 Fed. Cl. 153 (1992); Commercial Contractors, Inc. v. United States,

25 Cl. Ct. 666 (1992)).9

The third element of an accord and satisfaction, resolution of a bona fide dispute

between the parties, was not met under the terms of the partial settlement agreement in that

it provided for future negotiations by the parties to reach a final resolution, and HUD has not

shown undisputed evidence that a final resolution of the matters in dispute was reached. The

partial settlement agreement contained clear language that called for additional negotiations

before the settlement was deemed final. Paragraph two stated that the parties were engaged

in ongoing negotiations. Appeal File (CBCA 340), Exhibit 1.3. Paragraph six stated that the

parties had “agreed to a provisional property unit rate.” Id. Paragraph eight made reference

to a future audit, the results of which would be the basis for negotiations. Id. Paragraph nine

required that the parties in good faith “resolve this dispute amicably through full negotiations

and final settlement . . . .” Id. Although the partial settlement agreement provided the means

for final resolution of the dispute, it also provided for the failure of the parties to reach such

HUD’s motion cited Brock & Blevins Co. v. United States, 343 F.2d 951 (Ct.

Cl. 1965), to show that the elements necessary to prove an accord and satisfaction were “ (1)

proper subject matter; (2) competent parties; (3) a meeting of the minds of the parties; and

(4) consideration.” Respondent’s Motion for Summary Relief at 18. Although HUD’s

citation to Brock & Blevins Co. makes no mention of a resolution of a bona fide dispute as

an element of an accord and satisfaction, the Court in that case stated:

The essential elements of an effective accord and satisfaction

are proper subject matter, competent parties, meeting of the

minds of the parties, and consideration. And its most common

pattern is a mutual agreement between the parties in which one

pays or performs and the other accepts payment or performance

in satisfaction of a claim or demand which is a bona fide

dispute.

343 F.2d at 955 (quoting Nevada Half Moon Mining Co. v. Combined Metals Reduction Co.,

176 F.2d 73, 76 (10 th Cir. 1950)) (emphasis added).

CBCA 340, 341

a resolution in that paragraph eight allowed the contracting officer to later determine that the

payment of $427,800 was excessive and demand that NHG pay back any overpayment, and

paragraph ten provided that NHG could appeal any such determination.

Our inquiry then turns to whether NHG and HUD engaged in good faith negotiations

under the terms of the partial settlement agreement and resolved the dispute. The only issue

that appears to have been resolved, as evidenced by the CO’s decision dated June 6, 2006,

is that HUD agreed to NHG’s unit price, but all of the other factors related to the

computation of NHG’s March 30, 2005, claim remained in dispute. We find no evidence that

NHG and HUD ever reached a final resolution under the partial settlement agreement. Thus,

a required element of an accord and satisfaction is lacking. To the contrary, HUD’s

contracting officer issued a final decision that denied NHG’s claim and demanded repayment

of $164,327, which NHG appealed. Those actions by HUD and NHG, which were allowed

under the terms of the partial settlement agreement, amount to a continuation of the dispute

as opposed to a final resolution.

HUD argues that payment of $427,800 to NHG, subject to HUD’s demand for partial

repayment, was consideration for the release of NHG’s claim. A “settlement agreement is

a contract and disputes arising from settlement agreements are governed by contract

principles.” Government Marketing Group v. Department of Justice, CBCA 71, 08-1 BCA

¶ 33,834, at 167,461. “To be valid and enforceable, a contract must have both consideration

to ensure mutuality of obligation . . . and sufficient definiteness so as to ‘provide a basis for

determining the existence of a breach and for giving an appropriate remedy.’” Ridge Runner

Forestry v. Veneman, 287 F.3d 1058, 1061 (Fed. Cir. 2002) (quoting Ace-Federal Reporters,

Inc. v. Barram, 226 F.3d 1329, 1332 (Fed. Cir. 2000)). In order “[t]o constitute

consideration, a performance or a return promise must be bargained for.” Id. (quoting

Restatement (Second) of Contracts § 71(1) (1979)). The partial settlement in paragraph

seven referred to $427,800 as a “fair and reasonable settlement of the breach of contract

claim.” Appeal File (CBCA 340), Exhibit 1.3. The issue before this Board is not whether

payment of $427,800 was an accord and satisfaction. The issue is whether a reduced

settlement was consideration for an accord and satisfaction. HUD chose to exercise its rights

under paragraph eight of the partial settlement agreement by reducing the settlement by

$164,327 and demanding repayment of that amount. As a result of the CO making such a

demand, NHG exercised its right of appeal under the agreement. We find that the settlement

agreement at paragraph eight provided for HUD’s right to reduce the $427,800 paid to NHG,

but in bargaining for the CO’s right to demand back some portion of that amount, NHG also

bargained in paragraph ten for the right to appeal such a determination. HUD’s argument

that there was an accord and satisfaction that effectively denies NHG its right to appeal the

reduction of the amount of the settlement amount misreads the terms of the agreement. The

partial settlement agreement provided that the parties could bargain for a settlement of the

CBCA 340, 341

dispute, but the parties also bargained for the continuation of the dispute in the event HUD

determined that it had overpaid NHG. We do not find, therefore, that a reduced settlement

amount was consideration for NHG’s release of its claim.

Additionally, HUD argues that paragraph eight of the partial settlement agreement

provided for NHG’s release of any future claims in connection with any guaranteed

minimums under all four contracts in consideration of the payment of $427,800. Since that

provision referred to future claims, that language could not be construed as a release of

NHG’s March 31, 2005, claim, which was dated before the partial settlement agreement.

Such language can only be read as resulting in a waiver where the parties reached a final

settlement, and, as discussed above, we do not find undisputed evidence of such a final

resolution.

Finally, HUD contends that it would be contrary to law to interpret the payment of

$427,800 under the partial settlement agreement as a “gratuitous gesture” without a final

settlement since expenditure of money for such purposes is prohibited. Respondent’s Reply

Brief at 22. However, the Government’s payment of money to a contractor absent an

agreement between the parties that extinguished the claim is not an accord and satisfaction.

See Howell v. United States, 51 Fed. Cl. 516, 525-26 (2002). As discussed above, HUD has

not shown the undisputed facts necessary to prove the elements of an accord and satisfaction,

and HUD’s payment to NHG does not overcome that deficiency in its case.

Lost Profits

In the alternative, HUD argues that even if there is no accord and satisfaction, the

Board should still grant summary relief regarding CBCA 340 because NHG’s damages for

breach are lost profits, but NHG would not have made a profit even if HUD had not breached

the contract. The issue of whether a party can sustain its burden of proof is “a genuine issue

of material fact precluding the award of summary judgment.” GE Capital Information

Technology Solutions-Federal Systems, 01-2 BCA at 155,306 (quoting Jo-Ja Construction,

Ltd. v. General Services Administration, GSBCA 14786, 00-2 BCA ¶ 30,964, at 152,793).

“Both the existence of lost profits and their quantum are factual matters that should not be

decided on summary judgment if material facts are in dispute.” California Federal Bank v.

United States, 245 F.3d 1342, 1350 (Fed. Cir. 2001). HUD’s motion asserts that the

assignment of six additional properties would have doubled NHG’s revenue to approximately

$311,000, but that increase would have still been less than its incurred expenses of $946,572.

Respondent’s Motion for Summary Relief at 19. NHG, according to HUD, would not have

made any profit even if there had been no breach of contract 376. Id. Aside from merely

doubling NHG’s revenue, HUD does not explain further its methodology for showing that

NHG would have made no profit if there had been no breach, and the Board finds HUD’s

CBCA 340, 341

argument to be little more than conjecture. Additionally, HUD asserts that because NHG

made no profits on its other three contracts with HUD, NHG would not have made a profit

on contract 376. For purposes of ruling on a motion for summary relief, the Board does not

draw inferences in favor of the moving party nor does it weigh evidence. See Anderson, 477

U.S. at 249.

Finally, HUD argues that the deposition testimony of Ms. Wynee Joyner, one of

NHG’s principals, supports its argument that NHG would not have made a profit on contract

376 even if the required minimum of twelve properties had been assigned. In one portion

of her deposition testimony, Ms. Joyner appears to agree that NHG would not have made a

profit. Respondent’s Motion for Summary Relief at 20. Ms. Joyner’s testimony, however,

also included the following exchange:

Okay. Is it not true that NHG would have

also incurred costs to manage those properties?

Yes, they would have incurred some costs.

Leaving you with a net profit, right?

Yes.

Deposition of Wynee Joyner (Aug. 28, 2007) at 127. The Board does not find the excerpts

from Ms. Joyner’s deposition testimony to be sufficient to draw any conclusions on the issue

of damages in that her testimony is not clear as to her belief whether NHG would have made

a profit under those circumstances. The task of determining the weight of Ms. Joyner’s

testimony as well as sifting through the rest of the record in order to determine whether NHG

would have operated at a loss even if there had been no breach of contract, is a matter of

weighing evidence that is not appropriate in deciding a motion for summary relief. “It is well

established that a tribunal should deny summary judgment until the facts have sufficiently

developed to enable it to reasonably apply the law.” GE Capital Information Technology

Solutions-Federal Systems, 01-2 BCA at 155,306 (quoting Jo-Ja Construction, Ltd., 00-2

BCA at 152,793).

CBCA 341

Latent ambiguity and contra proferentem

HUD argues that the Board should dismiss for lack of jurisdiction counts one and two

of NHG’s complaint in that NHG did not make any allegation related to ambiguity in its

CBCA 340, 341

claim. “In order to assert a claim under the Contract Disputes Act, the contractor must

submit to the contracting officer a clear and unequivocal written statement that gives the

contracting officer adequate notice of the basis and amount of the claim.” Weaver

Construction Co., DOT BCA 2034, 91-2 BCA ¶ 23,800, at 119,181 (1990). Additional

theories in a complaint that are advanced in support of a claim are not new claims where such

theories arise from the same set of operative facts. Id. A new theory raised in a complaint

that does not allege a new claim, therefore, will not be dismissed. Lloyd Kidder, AGBCA

84-352-3, et al., 85-3 BCA ¶ 18,247 (1984). The allegations of latent ambiguity in NHG’s

complaint are based on the same operative facts raised in its claim dated May 24, 2005. In

both its claim and complaint, NHG alleged that HUD assigned fewer properties for shorter

periods of time than expected. NHG’s complaint does not assert any new claim for

additional amounts, but, instead, reiterates the same amount asserted in its claim.

Accordingly, the Board denies HUD’s motion to dismiss for lack of jurisdiction counts one

and two in NHG’s complaint.

Even if the Board finds that it has jurisdiction to determine the issue of latent

ambiguity, HUD contends that there is no issue of fact as to the meaning of required

minimum number of properties under NHG’s contracts, and summary relief should be

granted with regard to counts one and two of NHG’s complaint. “Contract interpretation is

a question of law . . . .” California Federal Bank, 245 F.3d at 1346. It is well settled that

determining whether a contract is ambiguous begins with the plain language of the contract.

See Gardiner, Kamya & Associates, P.C. v. Jackson, 467 F.3d 1348, 1353 (Fed. Cir. 2006).

An “interpretation that gives a reasonable meaning to all parts of the contract will be

preferred to one that leaves portions of the contract meaningless; nor should any provision

be construed as being in conflict with another unless no other reasonable interpretation is

possible.” United States v. Johnson Controls, Inc., 713 F.2d 1541, 1555 (Fed. Cir. 1983)

(citing Hol-Gar Manufacturing Corp. v United States, 351 F.2d 972, 979 (Ct. Cl. 1965)). It

has been long recognized that where a contract provision is clear, “[t]he rules of contract

construction should not be permitted to create an ambiguity where none exists or change or

twist the plain meaning of a simple agreement.” WIBCO, Inc., GSBCA 4247,

75-2 BCA ¶ 11,564, at 55,208.

We find no ambiguity in NHG’s contracts as to the required minimum quantities in

that each contract set forth the number of properties that HUD was required to assign. Count

one of NHG’s complaint alleged a latent ambiguity as to the minimum quantities of

properties stated in the contracts, and count two alleges that this Board should apply the

doctrine of contra proferentem to find that the contracts were not IDIQ contracts, but rather,

requirements contracts. NHG alleges in its complaint that “the contracts did not expressly

contain a guaranteed minimum number of units that would be assigned . . . .” Complaint

(CBCA 341) ¶ 21. A multifamily property was defined in the RFP as consisting of five or

CBCA 340, 341

more units, and the schedule in the RFP required unit prices for the different types of

properties that could be assigned. The FAR provides that an IDIQ contract can define a

minimum quantity “as number of units or as dollar values.” 48 CFR 16.504(a) (2001) (FAR

16.504(a)). NHG’s contracts were IDIQ contracts in that the RFP and all four contracts

contained the required clauses (FAR 52.215-18, -19, and -22) for an IDIQ contract.

Id. 16.506. Additional language in the RFP also plainly stated HUD’s intent to award IDIQ

contracts. Each contract defined minimum quantities as numbers of multifamily properties.

The fact that each assigned property could vary in size from five to more than five units is

not an ambiguity in that the purpose of an IDIQ contract is to provide the Government with

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

Centre v. Barram, 236 F.3d 1316, 1318 (Fed. Cir. 2001).

Additionally, since there is no latent ambiguity as to minimum quantities under

NHG’s contracts, it is not necessary to address whether contra proferentem is applicable as

argued in count two of NHG’s complaint. It is well established that contra proferentem is

inapplicable to the interpretation of a contract where the contract’s terms are clear and

unambiguous. See Gardiner, Kamya & Associates. NHG asserts in count two that it

reasonably interpreted that its contracts were requirements contracts. A requirements

contract obligates the Government to purchase all of its requirements from that contractor,

while an IDIQ contract only obligates the Government to purchase a required minimum.

Travel Centre, 236 F.3d at 1319-20. All four of NHG’s contracts contained language that

plainly stated that the contracts were IDIQ contracts. Nothing in the contracts relevant to

these appeals could be reasonably construed as requiring HUD to order anything more than

the required minimums stated in the contracts. Accordingly, we grant HUD’s motion for

summary relief with respect to counts one and two of NHG’s complaint under CBCA 341.

Negligent estimates

HUD argues that the Board should grant summary relief with regard to count three of

NHG’s complaint, which alleges that the RFP contained negligent estimates. Under an IDIQ

contract, the Government is not obligated to order more than the required minimum

quantities, and once those minimum quantities are ordered, the Government’s obligations are

satisfied.

See Travel Centre; Greenlee Construction, Inc. v. General Services

Administration, CBCA 416, 07-1 BCA ¶ 33,514. In Travel Centre, the Court of Appeals for

the Federal Circuit (CAFC) reversed the General Services Administration Board of Contract

Appeals (GSBCA) decision 10 that had found a breach of duty to deal fairly and in good faith

Travel Centre v. General Services Administration, GSBCA 14057, 98-1 BCA

¶ 29,536 (1997), motion for reconsideration denied, 98-1 BCA ¶ 29,541.

CBCA 340, 341

where the General Services Administration (GSA) was aware during the solicitation process

that the potential quantity of business from certain Department of Defense units represented

in a solicitation was incorrect as a result of recent changes in the manner in which those units

planned to obtain travel services. That information was not made available to potential

bidders. In reversing the GSBCA, the CAFC stated that “[r]egardless of the accuracy of the

estimates delineated in the solicitation, based on the language of the solicitation for the IDIQ

contract, Travel Centre could not have had a reasonable expectation that any of the

government’s needs beyond the minimum contract price would necessarily be satisfied under

the contract.” Travel Centre, 236 F.3d at 1319. The CAFC noted that GSA’s “less than ideal

contracting tactics fail[ed] to constitute a breach.” Id. Although NHG has argued that the

historic data in attachments 9 and 11 in the RFP created the expectation that it would be

assigned a greater number of properties or units contained within those properties, HUD was

under no obligation to assign more than the required minimum numbers of properties stated

in NHG’s four contracts. We grant, therefore, summary relief with regard to count three in

NHG’s complaint.

Constructive Change

HUD moves for summary relief with regard to count four of NHG’s complaint that

alleges HUD constructively changed the terms of its contracts. “A constructive change, by

definition, occurs when ‘. . . a contractor performs work beyond the contract requirements,

without a formal order under the changes clause, either by an informal order of the

Government or by fault of the Government.’” Johnson Management Group CFC, Inc., HUD

BCA 96-C-132-C15, et al., 00-2 BCA ¶ 31,116, at 153,683 (quoting CTA Inc. v. United

States, 44 Fed. Cl. 684, 696 (1999)). NHG argues that HUD constructively changed the

terms of the contract in that properties were not assigned for the entire two-year base period,

as expected, and it was unable to recover certain startup costs and incurred higher per-unit

costs. NHG’s contracts, however, did not specify that assignments would be for the entire

base period of the contracts, but rather, the contracts stated that properties could be removed

at any time. When NHG proposed its unit prices for its contracts, the RFP was also clear as

to HUD’s right to remove properties at any time from a contractor’s inventory, and NHG

bore the risk that property assignments could be of a shorter duration than the two-year base

period. See Ocean Technology, Ltd., IBCA 2651, 91-2 BCA ¶ 23,797. Relief under a theory

of constructive change is inapplicable for the purpose of shifting a contractor’s risk to the

Government where there was no direction to NHG to perform its contracts in a manner

different from that specified. Id. Since HUD was allowed under the contracts to remove

properties from NHG’s inventory at any time, there was, consequently, no constructive

change because properties were assigned for periods shorter than NHG expected. We grant

summary judgment as to count four of NHG’s complaint.

CBCA 340, 341

Duty of good faith and fair dealing

HUD moves for summary relief with regard to count five of NHG’s complaint, which

alleges that HUD breached its implied duty of good faith and cooperation by assigning

properties and then removing those properties from its inventory before NHG could recover

its costs. A finding of bad faith requires “‘[w]ell-nigh irrefragable’ proof . . . .” Am-Pro

Protective Agency, Inc. v. United States, 281 F.3d 1234, 1240 (Fed. Cir. 2002). This Board

recently recognized the following in ruling on a motion for summary relief as to whether a

CO acted in bad faith in terminating a contract for convenience:

Government officials are presumed to act in good faith. To

overcome that presumption, a contractor must prove, by clear

and convincing evidence, that the officials had specific intent to

injure the company. Galen Medical Associates, Inc. v. United

States, 369 F.3d 1324, 1330 (Fed. Cir. 2004); Am-Pro Protective

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

2002). . . . The suggestion that the agency’s actions smell bad

is insufficient, however, to create a genuine issue as to bad faith.

A speculative hope of finding evidence that might tend to

support a claim does not raise a genuine issue of material fact.

T&M Distributors, Inc. v. United States, 185 F.3d 1279, 1285

(Fed. Cir. 1999).

Oregon Woods, Inc. v. Department of the Interior, CBCA 1072, slip op. at 9 (Nov. 24, 2008).

NHG argues that a material issue of bad faith has been demonstrated by Ms. Cannon’s

alleged threat to see NHG “bankrupt.” Ms. Cannon, however, ceased to be involved in the

administration of NHG’s contracts on February 26, 2003, which was less than one month

after the initial assignment of properties to NHG and two months after the award of NHG’s

contracts. The transfer of contract administration from HUD’s Atlanta office to its Fort

Worth office was, according to Ms. Baylor, due to Ms. Cannon’s alleged remarks. There is

no evidence that Ms. Cannon had any further involvement in the assignment of properties or

the removal of properties from NHG’s inventory after contract administration was transferred

out of her Atlanta office. Although the alleged statements of Ms. Cannon, if true, would

show evidence of a personal animus toward NHG, such an attitude does not amount to bad

faith where the record contains no evidence that Ms. Cannon or any other HUD official

carried out any action with a specific intent to injure appellant. See Apex International

Management Services, Inc., by Trustee in Bankruptcy, ASBCA 38087, et al., 94-2

BCA ¶ 26,842 (breach of contract established by findings of acts of oppressive conduct).

CBCA 340, 341

NHG has also alleged that HUD changed the manner in which it managed properties

such that properties were held for a shorter period of time, and HUD, consequently, violated

its duty not to interfere with contract performance. It is well settled that:

The covenant of good faith and fair dealing is an implied duty

that each party to a contract owes to its contracting partner. The

covenant imposes obligations on both contracting parties that

include the duty not to interfere with the other party’s

performance and not to act so as to destroy the reasonable

expectations of the other party regarding the fruits of the

contract.

Centex Corp. v. United States, 395 F.3d 1283, 1304 (Fed. Cir. 2005). This Board recognizes

that “[a]n implied covenant of good faith and fair dealing imposes an obligation on the part

of each party to a contract to act reasonably.” Butte Timberlands, LCC v. Department of

Agriculture, CBCA 646, 08-1 BCA ¶ 33,730, at 166,994 (2007).

We find, however, no evidence in the record to support NHG’s allegation that HUD

changed the length of time that it held properties and, consequently, breached its duty of

good faith and fair dealing. In opposing a motion for summary judgment “more is required

than mere assertions of counsel.” Pure Gold, Inc. v. Syntex (U.S.A.), Inc., 739 F.2d 624, 626

27 (Fed. Cir. 1984). The nonmoving party “must set out . . . what specific evidence could

be offered at trial.” Id. at 627. It is not sufficient for purposes of opposing a motion for

summary relief that the nonmoving party rests upon the pleadings alone, but, instead, that

party must show specific facts to establish a genuine issue for trial. Celotex Corp., 477 U.S.

at 324. NHG has only asserted that HUD changed the way in which it managed properties

by establishing a priority to sell rather than hold the properties, and it has failed to show any

evidence to support such an assertion to establish a material issue of fact. We grant HUD’s

motion for summary relief with regard to count five of NHG’s complaint.

Lost business opportunity

Finally, HUD moves for summary relief with regard to NHG’s claim in the amount

of $2,536,758 for a lost business opportunity, which was the award of a property

management contract in the Commonwealth of Puerto Rico. This Board recognizes the

following with regard to such claimed losses:

Longstanding case law of the Federal Circuit and its predecessor

court, the Court of Claims, has held that for a contractor to

recover lost profits those losses must flow from the contract the

CBCA 340, 341

contractor has with the Government, and not from prospective,

independent, or collateral undertakings.

Charles Engineering Co. v. Department of Veterans Affairs, CBCA 582, 07-2 BCA ¶ 33,698,

at 166,824. In the case of an alleged breach of contract, “[d]amages for profits lost on

transactions not directly related to the contract that was breached have routinely been deemed

. . . too uncertain, remote, and consequential to be considered as a part of the damages

occasioned by the breach of a contract.” Id. NHG’s claim alleges only in general terms that

it lost business opportunities as a result of HUD’s actions, and no connection between a

contract in the Commonwealth of Puerto Rico and the contracts relevant to NHG’s appeals

has been established. NHG’s response to HUD’s motion for summary relief did not provide

any discussion of this issue. Accordingly, we grant HUD’s motion for summary relief as to

NHG’s claim for its lost business opportunity, and deny that portion of NHG’s claim.

Conclusion

For the reasons discussed above, we deny HUD’s motion for summary relief as it

pertains to CBCA 340, and we grant HUD’s motion as it pertains to CBCA 341. The only

triable issues that remain before the Board are entitlement and quantum under CBCA 340

due to HUD’s assignment of only six of the required minimum number of twelve properties

under contract 376. We find that there are no triable issues pertaining to entitlement with

regard to contracts 253, 377, and 378. Accordingly, we deny CBCA 341.

CBCA 340, 341

Decision

The Government’s MOTION FOR SUMMARY RELIEF in CBCA 340 is

DENIED.

The Government’s motion for summary relief in CBCA 341 is granted; CBCA 341

is DENIED.

______________________

H. CHUCK KULLBERG

Board Judge

We concur:

_______________________

JEROME M. DRUMMOND

Board Judge

_______________________

CATHERINE B. HYATT

Board Judge

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.