GRANTED IN PART: September 2, 2011

GRANTED IN PART: September 2, 2011

CBCA 1975

EYAK TECHNOLOGY, LLC,

Appellant,

v.

DEPARTMENT OF HOMELAND SECURITY,

Respondent.

Kathy C. Potter of Benton Potter & Murdock, P.C., Washington, DC; and Janine S.

Benton of Benton Potter and Murdock, P.C., Falls Church, VA, counsel for Appellant.

Susan C. Murray, Office of Chief Counsel, Customs and Border Protection,

Department of Homeland Security, Washington, DC, counsel for Respondent.

Before Board Judges SOMERS, STERN, and HYATT.

STERN, Board Judge.

Appellant, Eyak Technology, LLC (Eyak), moves for summary relief, alleging that

respondent, the United States Customs and Border Protection (CBP) of the Department of

Homeland Security, breached its contract with Eyak. This dispute concerns CBP’s demand

that Eyak provide reports as required by the American Recovery and Reinvestment Act of

2009 (ARRA), Pub. L. No. 111-5, 123 Stat. 115 (2009).

Background

On September 16, 2008, CBP and Eyak executed a delivery order pursuant to which

Eyak, for payment of $1,177,488.09, agreed to deliver communications equipment to CBP

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by March 15, 2009. (Throughout this decision, we also refer to this delivery order as the

contract between the parties.) The original delivery order stated that some of the line items

would be purchased at a later date with fiscal year 2009 funds, “because the work will not

begin until FY 09.” Appeal File, Exhibit 1. Modification one to the contract extended the

delivery date to September 30, 2009.

The ARRA was enacted into law on February 13, 2009. The statute mandates that

“as a condition of receipt of funds under this Act, Federal agencies shall require any

recipient of such funds to provide . . .” certain detailed items of information online.

The Federal Acquisition Regulation (FAR), implementing the statute, provides,

(a)

In any contract action funded in whole or in part by the Recovery Act,

the contracting officer shall indicate that the contract action is being

made under the Recovery Act, and indicate which products or services

are funded under the Recovery Act. This requirement applies

whenever Recovery Act funds are used, regardless of the contract

instrument.

48 CFR 4.1501 (2010) (FAR 4.1501).

The FAR directs agencies to insert FAR clause 52.204-11, “American Recovery and

Reinvestment Act - Reporting Requirements,” into “all solicitations and contracts funded

in whole or in part with Recovery Act funds . . . .” FAR 4.1502. The FAR states,

“Contracting officers may not use Recovery Act funds on existing contracts and orders if the

clause at 52.204-11 is not incorporated.” Id.

Clause 52.204-11 provides, in part:

(b)

This contract requires the contractor to provide products and/or

services that are funded under the American Recovery and

Reinvestment Act of 2009 (Recovery Act). Section 1512(c) of the

Recovery Act requires each contractor to report on its use of Recovery

Act funds under this contract. These reports will be made available to

the public.

The clause requires the contractor to disclose quarterly, online, a number of items, including

the amount of ARRA funds invoiced, numerous items of progress and contract and

subcontract information, the impact of jobs created with the ARRA funds, the names and

total compensation of its five highest officers, and much other information. Contractors that

are required to report, but fail to do so, are placed on a public non-compliant list and are

subject to other negative actions, including negative past performance evaluations.

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CBP unilaterally amended the contract on May 11, 2009, with the issuance of

contract modification 2, increasing the contract funding by $656,960.60, and purchasing the

items that were not initially funded. At the time that modification 2 was issued, the

contracting officer was unaware that the funds that were intended to be obligated with the

execution of that modification were ARRA funds. The clause required by the FAR to be

added to ARRA-funded contracts was not incorporated into the contract. Eyak was not

notified that ARRA funds would be used for the work added pursuant to modification 2.

Thus, Eyak did not accede to the use of ARRA funds and the added work required of a

contractor that receives payments from ARRA appropriations.

The contracting officer was notified at least as early as August 2009 that the moneys

referenced in modification 2 were ARRA funds. Still, Eyak was not informed of the

attempted use of such funding. CBP issued modification 3 to the contract on September 24,

2009, extending the performance period to December 31, 2009. Modification 3 did not refer

to the funding or contain the required ARRA FAR clause. CBP did not notify Eyak until

October 15, 2009, that the funds referenced in modification 2 were ARRA appropriations.

By the time it received this notice, Eyak had already received one payment from these funds.

The CBP’s program manager inspected and verbally accepted performance on

October 13, 2009, though Eyak stayed on the site until October 18, 2009, for clean-up, a

walk-through inspection, and to make adjustments to the equipment. The CBP program

manager executed the government acceptance form (DD Form 250) on October 22, 2009.

Eyak’s only subsequent return to the work site was for warranty work. Thus, Eyak had

essentially completed its performance at the time it received notice of the ARRA funding.

On the same day that CBP notified Eyak that the funds referenced in modification 2

were ARRA appropriations, it sent a letter to Eyak informing it that Eyak was required to

fulfill the online ARRA reporting requirements no later than October 20, 2009. Eyak

refused to comply with the reporting requirements and was subsequently listed on the

recovery.com website as being non-compliant. On December 7, 2009, the Department of

Labor notified Eyak that it was being scheduled for a compliance evaluation due to its

failure to report as required. Eyak responded that its contract was not awarded using ARRA

funds.

In December 2009, CBP engaged in an effort to replace the funding of modification

2 with non-ARRA funds. On December 23, 2009, CBP drafted modification 4 providing

that it was an administrative change to substitute the funding of modification 2. The

modification was posted by CBP on the federal procurement data system website at

www.fpds.gov. The contracting officer had not signed the modification. On December 28,

2009, an official of the Department of Homeland Security confirmed to Eyak that the funds

were being reversed. On December 30, 2009, CBP’s contract specialist sent an e-mail

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communication to Eyak stating that CBP was “almost complete [in its process] to remove

Eyak Technology from the ARRA reporting requirements list . . . . For all intents and

purposes, Eyak Technology has been removed from the ARRA reporting requirements list.

However, there are still activities on our end that need to be completed.” Appeal File,

Exhibit 16. Also, on December 30, 2009, CBP drafted modification 5 and posted it on the

federal procurement data systems website, stating that the purpose was to change the funding

from ARRA funding to other specified funds. Modification 5 deducted $676,960.66 from

the funding. Again, the contracting officer did not sign this modification.

On January 6, 2010, Eyak wrote a letter to the Office of Federal Contract Compliance

Programs, stating that its contract was not funded with ARRA appropriations and requested

the cancellation of any compliance audit. On the same day, the contracting officer sent an

email message to other employees stating that certain government representatives had asked

CBP not to swap the ARRA funds for non-ARRA funds. The contracting officer requested

that another employee so inform Eyak. On January 12 and 13, 2010, the contracting officer

informed Eyak by telephone that the ARRA funds were not removed from modification 2.

By letter dated January 13, 2010, to Eyak, CBP proposed a modification (numbered

5 by CBP) to the contract to include the FAR clause required in contracts using ARRA

funds.

On January 15, 2010, the acting chief procurement officer for the Department of

Homeland Security sent a letter to Eyak strongly encouraging it to sign the modification

incorporating the clause into the contract and to report as required by the clause. This

official stated he had not heard an acceptable answer for Eyak’s failure to report as required.

He noted that the Office of Management and Budget, the press, and other organizations had

already identified this project as the one contract under which the contractor was not

reporting required information.

On January 19, 2010, Eyak wrote the Department of Homeland Security and stated

that it would not agree to the proposed modification 5. Eyak stated that agreeing to this

modification would have the appearance of wrongdoing since it was after the fact and after

the contract performance period had ended. On January 22, 2010, the executive director of

CBP’s procurement directorate responded to Eyak that it was DHS’s only contractor which

did not report as required by the ARRA and stated that it was “regrettable that Eyak chose

not to cooperate with the Government in amicably satisfying a matter of national interest

. . . .” Appeal File, Exhibit 27. On March 9, 2010, Eyak filed a claim with the contracting

officer seeking enforcement of the contract modifications reversing the ARRA funding, a

finding that Eyak was not required to comply with the ARRA reporting requirements, and

reimbursement of unspecified costs and legal fees incurred as a result of CBP’s attempted

enforcement of the ARRA reporting mandates. The contracting officer denied the claim,

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and this appeal resulted.

Discussion

Eyak seeks summary relief on the basis that it was not subject to the ARRA reporting

requirements and should not have been listed as non-compliant. Eyak submits that the

modifications removing the ARRA funds that were drafted and published before being

withdrawn by CBP are valid and binding and that the subsequent proposed modification to

incorporate the ARRA FAR clause is not legally permissible. In this motion Eyak asks the

Board to decide that the modifications are valid and that CBP breached the contract, entitling

Eyak to the costs and legal fees it incurred in opposing CBP’s efforts to add ARRA funds

and have Eyak comply with the statute.1

CBP disagrees with each contention raised by Eyak. CBP argues that the ARRA

funds have been obligated to the Eyak contract and that Eyak must comply with the statutory

and regulatory reporting requirements.

We are guided by the well-established rules applicable to summary relief motions.

Summary relief is only appropriate where there is no genuine issue as to any material fact

(a fact that may affect the outcome of the litigation) and the moving party is entitled to relief

as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986). Any doubt

on whether summary relief is appropriate is to be resolved against the moving party. Celotex

Corp. v. Catrett, 477 U.S. 317, 325 (1986). The moving party shoulders the burden of

proving that no question of material fact exists. Adickes v. S.H. Kress & Co., 398 U.S. 144,

157 (1970). Here, we find that there is no material fact in dispute and that it is appropriate

for us to decide the matter, as set forth herein, on this motion.

The ARRA mandates that as a condition for the receipt of funds the agency must

require the recipient to provide certain information online. The FAR, in implementation of

the statute, requires that the contracting officer indicate in advance that a contract or

modification is being funded with ARRA money. This is a requirement whenever ARRA

funds are used, “regardless of the contract instrument.” The FAR also directs the

contracting officer not to use ARRA funds without insertion of the ARRA clause placing

the contractor on notice of the funds being used and the requirements to be met due to the

use of such funding.

1

We have previously held that while we do not have jurisdiction to order specific

performance or grant injunctive relief in this matter, we can decide the validity of the

contract modifications, which determination may have the effect of providing Eyak with the

relief it seeks. Eyak Technology, LLC v. Department of Homeland Security, CBCA 1975,

10-2 BCA ¶ 34,538.

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As set forth above, CBP, without notice to Eyak, and in violation of the statute and

regulations, added ARRA funds to the contract and subsequently sought Eyak’s compliance

with the provisions of the ARRA and regulations. The ARRA and implementing regulations

clearly require notice to a recipient of ARRA funds in advance of the issuance of a contract

modification seeking to incorporate ARRA funds.

CBP failed to comply with the express statutory and regulatory provisions applicable

to any federal agency using ARRA funds. The statute, as a condition precedent to the use

of ARRA funds, required CBP to impose the reporting requirement upon Eyak. In

implementation of the statute, the regulations required disclosure to Eyak of the use of

ARRA funds and insertion into the contract of the FAR ARRA clause. When it issued

modification 2, CBP did not comply with any of these mandates. Its violation of these

requirements resulted in the failure of Eyak to receive notice of the added requirements that

CBP sought to impose. An action by an agency contrary to the requirements of a statute and

regulation may render the action invalid. In Urban Data Systems v. United States, 699 F.2d

1147 (Fed. Cir. 1983), the Court affirmed a decision of the General Services Board of

Contact Appeals which found certain pricing provisions of a contract invalid and

unenforceable since the provisions expressly violated a statute. The Court, quoting the

Supreme Court, stated that it “is the duty of all courts to observe the conditions defined by

Congress for charging the public treasury.” Id. at 1154 (quoting Schweiker v. Hansen, 450

U.S. 785, 788 (1981); Federal Crop Insurance Corp. v. Merrill, 332 U.S. 380, 385 (1947));

see also Office of Personnel Management v. Richmond, 496 U.S. 414 (1990) (funds may

not be paid in violation of a statutory prohibition); Total Medical Management, Inc. v.

United States, 104 F.3d 1314 (Fed. Cir. 1997). CBP’s use of ARRA funds and its attempt

to impose the reporting requirements on Eyak were invalid.

Eyak did not receive the required notice and did not agree to the added requirements

imposed by the ARRA, which included the filing of numerous items of progress and contract

and subcontract information, a determination of the number of jobs created with ARRA

money, and the disclosure of the names and compensation of its five highest officers. We

find that the contracting officer had no authority to unilaterally impose these requirements

into this contract.

We conclude that Eyak is not required to comply with the ARRA reporting

requirements.2 Any other result would be inherently unfair to Eyak by requiring it to

2

Because of the decision we reach herein, we need not address Eyak’s argument

that the modifications drafted by CBP which purported to remove the ARRA funds were

legally effective. That argument presumes that modification 2, adding the ARRA funds, was

valid. We also do not address the action to be taken by CBP. We note that a substitute of

funding may avert a violation of the ARRA.

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perform added work, including disclosure of its officers’ salaries, without prior notice and

agreement.

Eyak also seeks its costs and legal expenses resulting from CBP’s improper

designation of ARRA funding. It submits that the contract was breached by CBP’s actions

publicly designating it to be a non-compliant contractor. A breach of contract is a violation

of a contractual obligation either by failing to perform one’s promise or by interference with

the other party’s performance.

We find that we do not possess jurisdiction to determine whether Eyak would be

entitled to the costs Eyak seeks, since Eyak has requested these costs without specifying the

dollar amount it seeks. For a claim under the contract to be valid, the Contract Disputes Act

(CDA), 41 U.S.C. §§ 7101-7109 (previously 41 U.S.C. §§ 601-613 (2006)), requires a sum

certain to be stated by the contractor. Absent such specificity, such a claim is not properly

before the Board. See Red Gold, Inc. v. Department of Agriculture, CBCA 2259 (July 6,

2011), and cases cited therein. Eyak has failed to state a sum certain for this portion of its

claim.

Decision

The motion for summary relief is GRANTED IN PART, in accordance with the

foregoing.

_________________________________

JAMES L. STERN

Board Judge

We concur:

______________________________

JERI KAYLENE SOMERS

Board Judge

_________________________________

CATHERINE B. HYATT

Board Judge