MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM DENIED;

MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM DENIED;

MOTION TO DISMISS FOR LACK OF JURISDICTION DISMISSED AS MOOT:

May 10, 2024

CBCA 7822

PARSONS GOVERNMENT SERVICES, INC.,

Appellant,

v.

DEPARTMENT OF ENERGY,

Respondent.

Stephen J. McBrady, Robert J. Sneckenberg, Tyler A. O’Connor, Michelle D.

Coleman, and Eric K. Herendeen of Crowell & Moring LLP, Washington, DC, counsel for

Appellant.

Lucy M. Knowles, John J. Murphy III, Thomas F. England, and Bernice M. Jenkins,

Office of Chief Counsel, Department of Energy, Aiken, SC, counsel for Respondent.

Before Board Judges BEARDSLEY (Chair), RUSSELL, and ZISCHKAU.

ZISCHKAU, Board Judge.

This appeal involves claims by appellant, Parsons Government Services, Inc.

(Parsons), seeking from respondent, the Department of Energy (DOE), a $6 million incentive

fee and an upward adjustment of its contractor performance assessment report (CPARS)

rating. The claims arise out of a contract between Parsons and EPA to design, construct,

commission, and operate a salt waste processing facility. DOE has moved to dismiss the

portion of the appeal relating to the incentive fee for failure to state a claim upon which relief

can be granted, arguing that Parsons has failed to allege facts that would entitle it to a legal

CBCA 7822

2

remedy. DOE separately moves to dismiss for lack of jurisdiction the portion of the appeal

seeking the upward adjustment of the CPARS ratings. We deny DOE’s motion to dismiss

for failure to state a claim because Parsons has alleged sufficient facts in its complaint to

provide a legal basis for DOE liability if proven. The motion regarding the CPARS ratings

is now moot because we have granted Parsons’ request to amend its complaint and remove

the language asking the Board to adjust the ratings. Our review of the record indicates that

we have jurisdiction over these disputes under the Contract Disputes Act (CDA), 41 U.S.C.

§§ 7101–7109 (2018).

Background

According to the complaint, Parsons was awarded a contract by DOE to design,

construct, commission, and operate a first-of-its-kind salt waste processing facility (SWPF)

at DOE’s Savannah River Site. The SWPF was to be designed to treat and reduce liquid

radioactivity in nuclear waste from existing storage facilities. The contract required Parsons

to perform in four major stages, spread across two contract phases: phase I, consisting of

design and construction, and phase II, consisting of hot and cold commissioning

(commissioning) and one year of operations (OYO). Parsons performed the phase II tasks

under cost-plus-incentive-fee terms. Phase II had no fixed fee. If Parsons did not receive an

incentive fee payment, it made no profit. Parsons states that, in accordance with the

operative schedule, it completed the phase I facility design by December 2008 and the

construction phase in April 2016. Parsons then proceeded to phase II commissioning. Once

Parsons completed commissioning and entered the OYO period of phase II, the parties

negotiated to reduce to terms, among other things, provisions regarding incentive fees that

Parsons could earn during OYO based on the volume of waste that Parsons processed.

Contract modification 02461 memorialized the applicable fee provisions for OYO. This

dispute involves Parsons’ request for compensation related to alleged constructive changes

that impeded the quantity of waste that Parsons was able to process during OYO. In

addition, Parsons claims that DOE’s contracting officer gave Parsons erroneous CPARS

ratings for OYO.

On March 1, 2023, Parsons submitted to the contracting officer a certified claim

demanding $6 million—the amount that Parsons claims it should have earned had the

simulant (the testing material manufactured to simulate the actual radioactive waste) used

during cold commissioning not differed materially from the actual waste that it processed

during OYO or, in the alternative, the amount that Parsons should have earned had DOE

accepted an engineering change proposal which, according to Parsons, would have allowed

it to process sufficient waste to earn the $6 million fee in OYO. In its claim, Parsons also

demanded an upward adjustment to the quality, schedule, and management ratings of

Parsons’ CPARS report for the period July 1, 2021, through March 27, 2022. On June 28,

CBCA 7822

3

2023, the contracting officer issued a final decision denying the incentive fee and CPARS

claims in their entirety. On July 8, 2023, Parsons filed its appeal with the Board.

Discussion

DOE’s Motion to Dismiss for Failure to State a Claim

To survive a motion to dismiss for failure to state a claim upon which relief may be

granted under Board Rule 8(e) (48 CFR 6101.8(e) (2023)), Parsons “must point to factual

allegations that, if true, would state a claim to relief that is plausible on its face, when the

Board draws all reasonable inferences in favor of the contractor.” UnitedHealthcare

Insurance Co. v. Office of Personnel Management, CBCA 7357, 23-1 BCA ¶ 38,375, at

186,419 (quoting B.L. Harbert International, LLC v. General Services Administration,

CBCA 6300, et al., 19-1 BCA ¶ 37,335, at 181,569). Parsons’ factual allegations need only

be sufficient “to raise a right to relief above the speculative level.” Bell Atlantic Corp. v.

Twombly, 550 U.S. 544, 555 (2007). “Dismissal for failure to state a claim should not be

granted unless it appears beyond doubt that the appellant cannot prove any set of facts in

support of its claim that would entitle it to relief.” Kiewit-Turner, A Joint Venture v.

Department of Veterans Affairs, CBCA 3450, 14-1 BCA ¶ 35,705, at 174,846. In analyzing

a motion to dismiss for failure to state a claim, we need not adopt an appellant’s legal

conclusions, Twombly, 550 U.S. at 555, but we must assume the veracity of well-pleaded

factual allegations. Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).

Parsons alleges three separate counts in its complaint: (1) superior knowledge by

DOE; (2) impracticability of performance; and (3) breach by DOE of the duty of good faith

and fair dealings. Parsons has alleged facts that, if proven, state a claim upon which relief

may be granted.

Parsons alleges in its complaint that Parsons used DOE-approved, non-radioactive

simulant as required during commissioning and that the characteristics, qualities, and size of

the simulant used would replicate the salt waste that Parsons would process during the OYO

performance period. Parsons further alleges that the contract expressed the expectation that

the tested simulant would replicate and perform like the actual waste to be processed during

OYO. Parsons claims that it achieved a processing quantity during commissioning that was

substantially more than the three million gallons per year necessary to entitle Parsons to earn

the minimum OYO incentive fee of $6 million. According to Parsons’ complaint, once

performance began in the OYO stage, unexpected problems that were beyond Parsons’

control arose. Parsons alleges that those problems were known to DOE but never disclosed

and that they prevented Parsons from earning any fee. The SWPF’s filters performed much

less effectively in the OYO stage than they did during cold and hot commission testing

because the filters clogged and other equipment became fouled. Filter clogging slowed down

CBCA 7822

4

production. Parsons claims that it later learned that the filter clogging was caused by the

much smaller particle size found in the actual waste being processed compared to the particle

size found in the waste simulant used during commissioning. Parsons states that it repeatedly

had to shut down the production so it could clean equipment and filters. According to

Parsons, these shutdowns caused a significant decrease in waste production volume. In its

complaint, Parsons asserts that if the actual waste had replicated the DOE-approved simulant

used during commissioning, Parsons would have processed far in excess of three million

gallons per year and thus would have earned a $6 million fee. Parsons also alleges that the

lack of meaningful information from DOE on the actual waste particle size, and the

significance of the particle size impact on processing operations, prevented Parsons from

designing and constructing the SWPF to address the specific characteristics of the actual

waste.

Parsons’ complaint sets forth its additional allegations that its performance was

objectively impracticable and that any similarly situated contractor would have encountered

the same difficulties due to the particle size of the waste. In its complaint, Parsons states that

DOE breached its duty of good faith and fair dealing by, among other things, failing to notify

Parsons of the particle size differential between the simulant waste and the actual waste and

the effect that the particle size would have on processing operations during OYO. Parsons

also alleges that DOE impeded Parsons’ ability to implement an engineering change proposal

that would have allowed Parsons to increase production of the waste by altering the

processing methodology.

DOE responded that the record demonstrates it provided information about particle

size to Parsons in 2014, that DOE met its contractual obligation to provide SWPF preconceptual design and supporting information to Parsons, and that it did not withhold any

information from Parsons. Further, DOE argues that, under the contract, its review of

deliverables did not make DOE responsible for the adequacy and completeness of Parsons’

work and that Parsons remained solely responsible for the design, construction,

commissioning, and performance of the processing facility to meet or exceed all functional

and performance specifications and requirements.

Taking Parsons’ factual allegations as true, as we must at the pleadings stage, Parsons’

claims could entitle it to a remedy under any one of the three counts of the complaint. What

the record ultimately shows regarding the anticipated particle size versus actual particle size

of the salt waste, whether or not DOE disclosed information on the particle size, and what

its effect on the processing capabilities would be must await further factual development.

It is not yet possible for us to conclude whether the contract provisions cited by DOE shield

it from liability should Parsons prove its allegations on the superior knowledge,

impracticability of performance, and good faith and fair dealings claims.

CBCA 7822

5

CPARS Challenge

DOE, by separate motion, moved to dismiss the portion of Parsons’ claim dealing

with the CPARS ratings given by the contracting officer. Parsons initially asked, as part of

the remedy sought, that the Board increase the ratings. However, Parsons subsequently

amended its complaint to remove that language. Accordingly, the issue is now moot.

Decision

We DENY DOE’s motion to dismiss for failure to state a claim because Parsons has

alleged facts that, if proven, state a claim upon which relief may be granted. We DISMISS

AS MOOT DOE’s motion to dismiss the CPARS ratings claim for lack of jurisdiction as

Parsons has amended its complaint to remove its request that the Board change the ratings.

Jonathan D. Zischkau

JONATHAN D. ZISCHKAU

Board Judge

We concur:

Erica S. Beardsley

ERICA S. BEARDSLEY

Board Judge

Beverly M. Russell

BEVERLY M. RUSSELL

Board Judge