GRANTED: June 20, 2013

GRANTED: June 20, 2013

CBCA 2709

IAP WORLD SERVICES, INC.,

Appellant,

v.

DEPARTMENT OF THE TREASURY,

Respondent.

David J. Craig of IAP World Services, Inc., Cape Canaveral, FL, counsel for

Appellant.

Marianna Lvovsky, Office of Chief Counsel, Internal Revenue Service, Department

of the Treasury, Washington, DC, counsel for Respondent.

Before Board Judges DANIELS (Chairman), SHERIDAN, and STEEL.

DANIELS, Board Judge.

The Internal Revenue Service (IRS), an entity within the Department of the Treasury,

awarded a firm, fixed-price contract to IAP World Services, Inc.1 (IAP) for “all management,

1

The contract was awarded to IAP World Services, Inc. The company is also

referred to, in some filings with the Board, by the name of its parent company, IAP

Worldwide Services, Inc. See, as to the relationship between the two firms,

<<http://investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId=

(continued...)

CBCA 2709

2

supervision, labor, materials, supplies, and equipment necessary for operation and

maintenance of building equipment at [six] IRS facilities.” IAP has filed two claims for

reimbursement of costs it incurred, in addition to those it expected, in performing fixed-price

portions of the contract. The contracting officer denied both of the claims, and IAP

appealed. Last year, we denied the appeal of one of those claims, for removal of snow from

the facility in Ogden, Utah. IAP World Services, Inc. v. Department of the Treasury, CBCA

2633, 12-2 BCA ¶ 35,119. We now consider the appeal of the other claim, for performance

of service calls at the facility in Philadelphia, Pennsylvania.

The IRS maintains that this claim is much like the snow removal matter and should

be denied for like reasons. IAP contends that this one is quite different from the other. We

agree with the contractor and grant this appeal.

Findings of Fact

The IRS awarded the contract to IAP on August 31, 2005. The contract covered a

phase-in period, which per amendment 1 ran until March 13, 2006, and five option periods,

each one year in duration, with the first beginning on March 14, 2006. The IRS exercised

all of the options and later extended the contract through May 8, 2011.

The contract required IAP to provide “basic services,” including facility operation and

performance of service calls and repairs required by the Government, for a fixed price in

each contract period. (Some work could be ordered at additional cost, but the parties agree

that it is not relevant to this appeal.) A “service call” was defined by the contract to be a

demand by the Government to remedy unscheduled building-related problems. Examples

given were “taking measures to respond to and correct building related deficiencies such as

malfunctioning HVAC [heating, ventilation, and air conditioning] systems resulting in

hot/cold complaints, miscellaneous electrical, plumbing, architectural, carpentry, and

structural system repairs.” The contract’s fixed price included the first $2500 of labor,

materials, and subcontract costs of work under each service call.

The IRS included in the request for proposals (RFP) which led to this contract

technical exhibits which showed service call history, equipment to be maintained, and

government furnished items at the various facilities. Among the technical exhibits was

number TE-3-PA, which was entitled “Philadelphia Service Call Analysis FY [fiscal year]

03.” This exhibit shows that during January, February, and March of 2003, there were 472

1

(...continued)

4235284>> (last visited June 19, 2013).

CBCA 2709

3

service calls at the Philadelphia facility and that the service call labor hours there were

distributed in the following way:

Duration

Equal to or less than 1 hour

More than 1 hour to equal to or less than 4 hours

More than 4 hours to equal to or less than 8 hours

More than 8 hours to equal to or less than 12 hours

More than 12 hours to equal to or less than 32 hours

More than 32 hours

Percentage

88.1%

11.4%

0.4%

0.0%

0.0%

0.0%

Questions posed by prospective offerors, and responses to those questions, were

published by the IRS in amendments to the RFP. The interchange demonstrated that

prospective offerors were concerned that the data provided by the agency did not give them

enough information to price the contract work. One company asked the agency to consider

an alternative pricing arrangement. This request was refused. Another company asked for

data covering longer periods of time for several locations, including Philadelphia. The

agency said that it had already provided all available historical data, notwithstanding the fact

that the IRS had been performing all relevant work itself at the Philadelphia site for the

previous five years.

The matter was also raised in this comment by a prospective offeror:

Sub-Factor 2. Service Calls has . . . requirements[] which are difficult to

estimate based upon the uncorrelated data provided by the government . . . , the

limited on-site time available for an examination (with no questions answered

and no documents provided when requested per the CO’s [contracting

officer’s] guidance), and incomplete historical information related to service

calls generated. . . . Additionally, this contract is a firm-fixed price contract,

and as such it is up to the contractor to determine what equipment and supplies

are required to perform the work and to have those available to accomplish the

task. To estimate requirements without having any parameters related to the

work is both risky and foolish.

The IRS responded with the following statement:

Sufficient information on building requirements and equipment is contained

in the Technical Exhibits. When used in conjunction with the offeror’s

experience, it provides a reasonable basis to determine materials and

CBCA 2709

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equipment required to support service call work under $2,500 and service call

materials that should be stocked on-site.

IAP states, and the IRS does not contest, that the contractor proposed its price for

service calls at the Philadelphia facility in reliance on the data provided by the agency in the

RFP. IAP has not provided documentation explaining how it constructed that price, but

because the IRS does not assert that the price was unreasonable, we have no basis for finding

it to be other than reasonable.

In performing the contract, IAP found that it was spending considerably more time

per service call in Philadelphia than had been noted in RFP exhibit TE-3-PA. The contractor

said that its actual labor hour distribution was as follows:

Duration

Percentage

Equal to or less than 1 hour

More than 1 hour to equal to or less than 4 hours

More than 4 hours to equal to or less than 8 hours

More than 8 hours to equal to or less than 12 hours

More than 12 hours to equal to or less than 32 hours

More than 32 hours

72.3%

24.4%

2.4%

0.7%

0.2%

0.0%

The contractor said that for the period between March 2006 and September 2008, its

proposed price for basic service calls in Philadelphia was $279,797.83 and its actual costs

were $759,963 – $480,165.17 more than proposed. It claimed, however, only $308,879.57,

after reducing its number in response to the IRS’s concern that IAP may have been spending

so much time because the skill level of its employees was substandard. The certified claim

was dated August 9, 2011.

The contracting officer denied the claim on the ground that the contract “was awarded

as a firm fixed-price contract and is not subject to any adjustment on the basis of the

contractor’s actual cost experience in performing the contract.” IAP appealed from this

decision.

Discussion

As we explained in our decision on the snow removal claim –

The Federal Acquisition Regulation explains that “[a] firm-fixed-price contract

provides for a price that is not subject to any adjustment on the basis of the

CBCA 2709

5

contractor’s cost experience in performing the contract. This contract type

places upon the contractor maximum risk and full responsibility for all costs

and resulting profit or loss.” 48 CFR 16.202-1. “It is well-established that

absent a special adjustment clause, a contractor with a fixed price contract

assumes the risk of increased costs not attributable to the Government.”

Southwestern Security Services, Inc. v. Department of Homeland Security,

CBCA 1264, 09-2 BCA ¶ 34,139, at 168,777 (citing Gulf Shores, LLC v.

Department of Homeland Security, CBCA 802, 09-1 BCA ¶ 34,024, at

168,305 (2008)).

12-2 BCA at 172,445.

The IRS would have us believe that these statements resolve the Philadelphia service

call claim as well. They do not. As to this matter, the agency specifically told prospective

offerors that the information contained in the RFP’s technical exhibits, including the exhibit

for the Philadelphia facility, should be a basis for determining costs. IAP followed this

instruction and based its offer on that information. We held in Admiral Elevator v. Social

Security Administration, CBCA 470, 07-2 BCA ¶ 33,676, that when an agency directs

offerors to base their contract prices on material, incorrect representations, and the contractor

does so to its detriment, the agency is responsible for the losses which the contractor

consequently suffers. This principle clearly applies to the case now before us. While there

may not have been a “special adjustment clause” explicitly written into the contract, the

agency’s direction as to pricing serves the same purpose as such a clause. The IRS, having

told IAP to base its costs on certain data, must bear the risk that that data did not accurately

represent conditions that the contractor found on the job.

Having disposed of the case in this way, we have no need to make determinations with

regard to various issues raised by IAP -- whether the inaccuracy of the data was caused by

negligence, whether the agency did not disclose superior knowledge about service call

requirements, or whether the increased workload made performance commercially

impracticable. Very simply, we conclude that because the data on which the agency told the

contractor to rely in pricing the contract was faulty, the contractor relied on that data, and the

contractor had to perform work beyond the agency’s representations, the resulting additional

work constituted a constructive change, and the agency must pay for the consequences of that

change. The situation is markedly different from that in the snow removal claim, where the

agency simply provided historical data to prospective offerors and did not direct them to

price their proposals in reliance on that data.

The IRS has made no comment on IAP’s cost calculations, so we accept the

contractor’s claimed amount as reasonable.

CBCA 2709

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Decision

The appeal is GRANTED. The Internal Revenue Service shall pay to IAP World

Services, Inc. the amount of the August 9, 2011, claim, $308,879.57, plus interest on that

sum from the date the contracting officer received the claim until the date of payment. 41

U.S.C. § 7109 (Supp. IV 2011).

_________________________

STEPHEN M. DANIELS

Board Judge

We concur:

________________________

PATRICIA J. SHERIDAN

Board Judge

_________________________

CANDIDA S. STEEL

Board Judge