Board of Contract Appeals
General Services Administration
Washington, D.C. 20405
THIS OPINION WAS INITIALLY ISSUED UNDER
PROTECTIVE ORDER AND IS BEING RELEASED
TO THE PUBLIC IN REDACTED FORM ON NOVEMBER 16, 1998
______________________________________________
DENIED: October 30, 1998
______________________________________________
GSBCA 13298, 13507, 13508, 13509, 13510, 13511
ACE-FEDERAL REPORTERS, INC.,
ANN RILEY & ASSOCIATES, LTD.,
ARTI RECORDING, INC.,
CALIFORNIA SHORTHAND REPORTING,
EXECUTIVE COURT REPORTERS,
and
MILLER REPORTING CO., INC.,
Appellants,
v.
GENERAL SERVICES ADMINISTRATION,
Respondent.
Ronald K. Henry and Mark A. Riordan of Kaye, Scholer,
Fierman, Hays & Handler, Washington, DC, counsel for Appellants.
John E. Cornell, Office of General Counsel, General Services
Administration, Washington, DC, counsel for Respondent.
Before Board Judges PARKER, HYATT, and WILLIAMS.
WILLIAMS, Board Judge.
In these appeals, six court reporting companies seek
$4,972,363.85 in lost profits and $2,486,181.90 in consequential
damages due to alleged breaches of their mandatory General
Services Administration (GSA) multiple award schedule contracts
for court reporting services by numerous user agencies. The
facts are largely undisputed, and the parties have submitted
their cases on the record.[foot #] 1
As a threshold matter, respondent argues that a majority of
appellants' claims are barred under the statute of limitations in
the Federal Acquisition Streamlining Act of 1994 (FASA). We
disagree. FASA provides that its statute-of-limitations
provision takes effect on the date specified in its final
implementing regulations. The regulations promulgated pursuant
to that statute unambiguously state that the six-year limitation
period shall not apply to contracts awarded prior to October 1,
1995, and renders the statute inapplicable to the instant
contracts, which were all awarded in 1988.
Respondent has raised several defenses to liability. First,
respondent contends that appellants are not entitled to lost
profits because, absent bad faith, the termination for
convenience clause in the contracts precludes damages for lost
profits. Essentially, GSA is arguing that because the user
agencies' off-schedule purchases were not made in bad faith, the
Board should impose a "constructive termination for convenience"
and deny breach damages.[foot #] 2 Second, GSA
contends that, based upon the equities, appellants are not
entitled to recover because they received orders under the
contracts exceeding the estimated quantities stated in the
request for proposals (RFP). Third, GSA argues that court
reporting for grand jury proceedings is outside the scope of
appellants' contracts. Fourth, respondent contends that each
off-schedule purchase made at a lower price than schedule pricing
was an exception to mandatory use pursuant to the Federal
Property Management Regulation (FPMR), 41 CFR 101-26.401-4(f)(1).
Fifth, respondent contends that appellants' contracts were
illusory because there were numerous exceptions to GSA's promise
that the court reporting requirements would be satisfied through
these contracts and the exceptions taken together vitiated the
value of that promise, respondent's sole consideration.
Appellants vigorously dispute the validity of all of these
defenses, but we do not address their applicability because we
conclude that appellants have not demonstrated that they are
entitled to recover lost profits or consequential damages, under
the terms of their contracts. Appellants' claim for recovery of
lost profits based upon a diversion theory and their reliance on
S&W Tires is misplaced. S&W Tires and other diversion cases are
----------- FOOTNOTE BEGINS ---------
[foot #] 1 The parties filed 131 paragraphs of stipulations.
[foot #] 2 In so arguing, respondent urges the Board to
distinguish S&W Tire Services, Inc., GSBCA 6376, 82-2 BCA
_________________________
16,048, and follow John Reiner & Co. v. United States, 325 F.2d
___________________________________
438 (Ct. Cl. 1963), cert. denied, 377 U.S. 931 (1964), and Kalvar
____________ ______
Corp. v. United States, 543 F.2d 1298, 1304 (Ct. Cl. 1976), cert.
______________________ _____
denied, 434 U.S. 830 (1977).
______
----------- FOOTNOTE ENDS -----------
distinguishable in a critical respect -- those contracts were
requirements contracts and one contractor was guaranteed all of
the users' requirements. Each appellant's multiple award
schedule contract at issue here is not a pure requirements
contract in that no individual contractor was given the exclusive
right to provide all the mandatory user agencies' court reporting
services for the contract term. Rather, the solicitation which
gave rise to these contracts and formed the basis of the parties'
bargain expressly advised offerors that there could be an
unspecified number of "multiple" awards for any geographic area
for which a vendor chose to submit an offer. Further, the
contract did not guarantee to any awardee that any quantities
would be ordered. Nor did the contract guarantee to any
individual awardee a percentage of the totality of the
Government's required court reporting business. Agencies were
free to order services based upon considerations other than
price. As such, contractors bore the risk they might only
receive an unspecified amount of work, possibly none, dependent
upon which of the multiple award schedule contractors user
agencies elected to hire.
User agencies were not free to order services off-schedule,
but the fact that they did so does not give rise to a remedy of
either lost profits or consequential damages under the instant
contracts. Appellants' effort to operate as a consortium of
disappointed vendors claiming breach damages based upon a
diversion of the potential universe of work divided
proportionally among them must fail. The contracts were not
collective endeavors -- each contractor separately and
individually offered to provide services at different,
independent prices. The structure of the individual contracts
cannot be altered post hoc to bestow collective rights and
remedies neither originally contemplated nor bargained for.
Findings of Fact
The Request for Proposals
On or about October 30, 1987, GSA issued RFP number
FCGA-SS-SS205-N soliciting proposals for court reporting and
transcription services contracts. The Statement of Work in the
RFP specified:
The Contractor shall furnish the necessary
personnel, materials, and services and otherwise do all
things necessary for and incidental to the verbatim
reporting and transcription of conferences, courthouse
and/or legal hearings, depositions, advisory board and
committee meetings, arbitration hearings, personnel
grievances and appeal hearings, and other
administrative hearings for various Government agencies
. . . .
Appeal File, Exhibit 1 at 24.
The RFP as amended sought proposals for
transcribing/recording: by electronic device, stenomask,
stenotype, and floppy disk. Appeal File, Exhibit 1 at 24.
Offerors were required to be able to provide at least two of the
above methods of transcribing/recording. Id.
The RFP contemplated multiple awards of what it termed
"requirements contracts" under the federal supply schedule (FSS)
for professional verbatim reporting and transcript services.
Appeal File, Exhibit 1 at 46, 97. Paragraph M.2 of the
solicitation provided:
M.2 MULTIPLE AWARDS (M-FSS-305-B) (APR 1984)
The Government may make multiple awards for
services listed herein to those responsible offerors
whose offers, conforming to the request for proposals,
will be most advantages [sic] to the Government, taking
into consideration the technical proposal and price for
the services offered. Offerors are advised that
agencies which contemplate placing orders for services
contained in the contracts resulting from this request
for proposal[s] will be instructed, except where
precluded by administrative expense or urgency
considerations, to consider equally those contract
sources and other sources to assure that purchases of
such services are made to the best advantage of the
Government, taking into consideration the technical
requirements, price, availability, delivery time and
any other pertinent factors.
Appeal File, Exhibit 1 at 97.
Amendment Two to the solicitation clarified Paragraph M.2,
Multiple Awards, by adding the following:
Where the Government makes multiple awards, ordering
agencies will select a contractor in accordance with
the provisions of this clause taking into consideration
all factors mandated by the clause: technical
requirements, price, availability, delivery time and
any other pertinent factors such as capacity.
Selections need not be based solely on price.
Respondent's Record Submission, Appendix, Exhibit 2, (Declaration
of Doris L. Marsh (Marsh Declaration) (July 14, 1997)), Exhibit
12 at 2.
The solicitation did not advise offerors of any minimum or
maximum number of contract awards which would result from the
instant solicitation. Paragraph B.1 of the solicitation
requested offerors to allow for a minimum of ninety days for
acceptance of their offers. Appeal File, Exhibit 1 at 5.
The RFP and the resultant contracts included the Federal
Acquisition Regulation (FAR) clause entitled "Requirements
(52.216-21) (Apr. 1984)," which provided, in pertinent part:
c) Except as this contract otherwise provides, the
Government shall order from the Contractor all the
supplies or services specified in the Schedule that are
required to be purchased by the Government activity or
activities specified in the Schedule.
Appeal File, Exhibit 1 at 46 (emphasis added).
Amendment One to the RFP stated:
The solicitation provides for the normal supply
requirements of the Federal Government and will be used
as a mandatory source for the articles or services
listed herein by all departments and independent
establishments, including wholly-owned Government
corporations, in the executive branch (excluding the
U.S. Postal Service, Department of Defense, National
Labor Relations Board, and the Equal Employment
Opportunity Commission) for deliver[y] within the 48
Contiguous States and Washington, D.C.
. . . .
TEMPORARY EXCEPTION TO MANDATORY USE PROVISION:
Any agency designated above as a mandatory user shall
be exempt from the mandatory use provision if prior to
issuance of the GSA contract, the agency may have
entered into a prior contract on its own with an
ordering period conflicting with the GSA contract
ordering period. Upon expiration of the agency's
previous commitment, the GSA mandatory use provisions
shall prevail without exception.
Appeal File, Exhibit 1, Amendment One at 3.
The RFP and the contracts contained standard FAR clauses
applicable to service contracts, including "Warranty of Services
(52.246-20) (Apr. 1984)" and "Termination for Convenience of the
Government (Services) (52.249-4)(Apr. 1984)." Appeal File,
Exhibit 1 at 49. The Termination for Convenience clause
provided:
The Contracting Officer, by written notice, may
terminate this contract, in whole or in part, when it
is in the Government's interest. If this contract is
terminated, the Government shall be liable only for
payment under the payment provisions of this contract
for services rendered before the effective date of
termination.
Id.
The RFP's Schedule of Items included line items for each of
the forty-eight contiguous states, Alaska, Hawaii, and
Puerto Rico, followed by sub-items covering Standard Metropolitan
Statistical Areas (SMSAs) or Standard Consolidated Statistical
Areas (SCSAs). Each offeror was requested to mark the
geographical areas covered by its proposal. Offerors could
propose to provide services for an entire state or to provide
services within a designated sub-item. Appeal File, Exhibit 1 at
5.
Prior to the contracts at issue in these appeals, GSA's
regional office in Ft. Worth, Texas, had awarded a single award
schedule contract for court reporting services with one
contractor serving as the exclusive source for all of designated
users' requirements in the geographic locale awarded. Marsh
Declaration 1, 6. The predecessor contract was mandatory for
fourteen agencies. Id. The RFP at issue was mandatory for over
fifty agencies. Id. 1. The Department of Justice was not a
mandatory user of the predecessor contract but was a mandatory
user of the contracts that are the subject of these appeals.
Appeal File, Exhibit 18 at 2. The agencies which were not
covered by the earlier contracts were not asked by GSA to
estimate their requirements prior to award of appellants'
contracts. Stipulation (July 11, 1997) 39 (citing Appeal File,
Exhibit 18 at 5, General Services Administration Report to the
General Accounting Office (GSA Report) at 10 (Feb. 19, 1993)).
According to the contracting officer, "the estimated requirements
do not vary significantly in most locations from the historical
data generated by the prior, single award schedule contract."
Marsh Declaration 5.
In the original solicitation, paragraph B.2, Estimated
Requirements, provided total estimated requirements of $3.5
million for the forty-eight contiguous states, Alaska, Hawaii,
and Puerto Rico. Amendment B to the solicitation clarified
paragraph B.2 as follows:
2. ESTIMATED REQUIREMENTS (B-FSS-FCGA-998)
(APR 1984)
This Request for Proposal includes estimated
requirements of $3.5 million for the 48 contiguous
states, Alaska, Hawaii, and Puerto Rico to cover
Government agencies included in Section I, Clause I-
FSS-102. No guarantee is given that any quantities
will be ordered. Estimated requirements shown on the
amended schedule of items are derived from requirements
of agencies that were mandatory users under the
previous GSA contract and do not encompass requirements
of additional mandatory users of resultant contracts
from this RFP. Resultant contracts from this RFP will
be mandatory for the majority of Federal agencies. The
prices paid under previous contracts can be obtained by
contacting the General Services Administration, Special
Programs Division (FCGA), Washington, DC 20406.
B.3 SCHEDULE OF ITEMS
Estimated dollar requirements as clarified above
have been added for each Special Item Number. Delete
pages 6 through 22 from the solicitation and replace
with pages 1 through 18 of Attachment One.
Appeal File Exhibit 1 at 2 (emphasis added).
The solicitation as amended contained eighteen pages listing
each geographic location nationwide for which an offeror could
propose services and the estimated dollar amount of the
requirements for each, including the following locations
pertinent to this case:
Special Item
Estimated
SCSA # Number State/City Reqmnts
733-4 California $140,000
4480 733-4a Los Angeles/Lg. Bch. 60,100
0360 733-4b Anaheim/Santa Ana 5,000
6780 733-4c Riverside/S.. 2,500
7360 733-4d San Francisco/Oklnd. 34,800
7400 733-4e San Jose 2,500
0680 733-4f Bakersfield 0
2840 733-4g Fresno 3,200
6920 733-4h Sacramento 4,500
7320 733-4i San Diego 10,600
7120 733-4j Monteray (sic) 10,000
7480 733-4k Santa Barbara 5,800
. . . .
Special Item
Estimated
SCSA # Number State/City Reqmnts
8840 733-8 District of Columbia
$100,000
Maryland, Northern
Virginia
. . . .
Special Item
Estimated
SCSA # Number State/City Reqmnts
733-12 Illinois $33,500
1600 733-12a Chicago 32,000
7880 733-12b Springfield 0
6120 733-12c Peoria 1,500
. . . .
Special Item
Estimated
SCSA # Number State/City Reqmnts
733-29 New Jersey $5,000
5640 733-29a Newark 5,000
3480 733-29b Trenton 0
. . . .
Special Item
Estimated
SCSA # Number State/City Reqmnts
733-31 New York $39,500
1280 733-31a Buffalo 3,000
5600 733-31b New York City/N.J. 27,500
0160 733-31c Albany 3,500
5380 733-33d Hempstead 2,500
8160 733-33e Syracuse 3,000
Appeal File, Exhibit 1 at 2, 3, 5, 10, 11.
Offerors were required to propose per-page pricing for each
method of transcribing/reporting offered for each geographical
area to be covered. Appeal File, Exhibit 1 at 1-22. Offerors
were to price three separate delivery times for each method of
service offered: (1) daily, which required transcript delivery on
the next day by not later than 12:00 noon; (2) regular, which
required delivery before 5:00 p.m. (or prior to the close of
business day for the agency) of the twentieth day following the
hearing; and (3) expedited, which required delivery not later
than 5:00 p.m. (or prior to the close of business day for the
agency) of the sixth day following the end of the hearing. Id.
The RFP also required offerors to state their proposed prices for
additional copies and ancillary items such as computer disks.
Id. Finally, offerors were obligated to provide transcripts to
third parties on whatever basis they are ordered at the same
price as the Government for additional copies. Id., Amendment
One at 2.
Section F.6 of the RFP provided that the contractor would be
paid a minimum of $100 per day for work ordered under its
contract under certain listed conditions. Appeal File, Exhibit 1
at 40. Section F.7 of the RFP further provided that the
contractor would be paid overtime in accordance with an
established formula. Id. at 41.
Amendment One, Paragraph I.10, to the solicitation advised
offerors as follows:
Articles or services will be ordered from time to time
in such quantities as may be needed to fill agency
requirements determined in accordance with currently
applicable supply procedures. Since it is impossible
to pre-determine the precise quantities that will be
required during the contract term, each contractor is
obligated within the scope of this contract to deliver
all articles and services ordered.
Appeal File, Exhibit 1, Amendment One at 3.
The RFP did not prohibit subcontracting work, and the
Government recognized that appellants proposed to use
subcontractors or independent contractors as well as their own
full-time employees to fulfill schedule contract requirements.
Appeal File, Exhibits 1, 25 at 5, 28 at 5; see Appellants' Record
Supplement, Exhibit 1 (Affidavit of Robert Monick, President of
Ace-Federal Reporters, Inc. (Ace-Federal) (July 9, 1997)) at 4
("Ace-Federal would have had no difficulty performing the
additional work, because the company had in place a network of
subcontractors and independent contractors the company had used
in the past when orders exceeded the company's in-house
capabilities."); Appellants' Record Supplement, Exhibit 2,
Affidavit of Ann Riley (Riley Affidavit) (July 10, 1997) 5
("Companies in the court reporting business typically use a
combination of employees, independent contractors, and
subcontractors to perform any work that is ordered.");
Appellants' Record Supplement, Exhibit 3, Affidavit of Sandra
Tankoos (Tankoos Affidavit) (July 8, 1997) 10; Appellants'
Record Supplement, Exhibit 5, Affidavit of Marijke Elder (Elder
Affidavit) (July 3, 1997) 9; Appellants' Record Supplement,
Exhibit 7, Affidavit of Michael J. Tallman (July 3, 1997) 7;
Appellants' Record Submission, Exhibit 9, Affidavit of Stephen
Miller (July 8, 1997) 5, 6; Appellants' Record Supplement,
Exhibit 15, Appellant Ace-Federal's Answers to Respondent
Interrogatory No. 35. (In addition to some sixty-seven
subcontractors and independent contractors, Ace-Federal also "had
available to it all of the court reporters listed in the Court
Reporters Source Book, published annually by the National
Shorthand Reporters Association (now known as the National Court
Reporters Association).").
The Pre-Proposal Conference
GSA conducted a pre-proposal conference on November 23,
1987. During the conference, representatives of Heritage
Reporting Corporation (Heritage) asked a GSA representative, Ms.
Trilma Davis, if mandatory users could "get out of using the
Federal Supply Schedule." Stipulation 25. Ms. Davis responded
that to be excused from the schedule an agency would first have
to obtain a waiver, but that GSA had no intention of granting
waivers and that she had input into GSA's decisionmaking when
responding to requests for waivers. Id.; Appeal File, Exhibit 17
at 12.
Proposals
The parties stipulated that each of the appellants submitted
a proposal in response to the RFP with the expectation that, by
receiving award of a schedule contract, each would be able to
develop and maintain ongoing relationships with mandatory user
federal agencies for which they had not previously worked.
Stipulation 43 (citing Appellants' Record Supplement,
Exhibits 1, 2, 4, 6, 8, 10).
Award
GSA awarded a total of ten multiple award contracts covering
various geographic regions as a result of the offers received in
response to the RFP. Appeal File, Exhibit 3. Alaska, Hawaii,
and Puerto Rico were non-mandatory requirements. Id.
At the time of award, each of the appellants was an
established business with a history of performing government
contracts; each had one or more established offices in its
respective areas of award, and each had made capital investments
and developed an organization and structure that permitted it to
accommodate fluctuating workloads through the use of piece-work
or payment-by-the-page labor. Stipulation 46. For example, as
of 1988, Ace-Federal had been in business for twenty-seven years
and employed about eighty-four people. Id. The company's 1988
gross receipts approached $3,000,000, and it had invested in
equipment necessary to conduct its business, including computer
equipment, copiers, stenotype machines, translation systems to
produce transcripts, recording equipment, and delivery vehicles,
valued in excess of $600,000. Id. Further, Ace-Federal had
developed a network of trained subcontractors and independent
contractors to whom it could assign work on a piece-work or per-
page basis. Id.
By letter dated August 24, 1988, GSA advised Ace-Federal
that it had been awarded contract number GS-OOF-03036 for
reporting and transcription services for SMSA 840, special item
number (SIN) 733-8, for the District of Columbia, Maryland, and
Northern Virginia. The letter further advised Ace-Federal:
"Multiple awards will be made for SIN 733-8, and your contract
will be one of several for the area." Appellants' Supplemental
Appeal File, Exhibit 9. Ace-Federal's contract ran from
August 1, 1988, through July 31, 1989, with two one-year options.
Id.
GSA awarded contract number GS-OOF-03035 to Ann Riley &
Associates, Ltd. (Ann Riley) for the same term, with two one-year
options. The contract covered court reporting and transcription
services for the same District of Columbia metropolitan area.
Stipulation 48. In its notification of award to Ann Riley, GSA
stated: "Multiple awards will be made for SIN 733-8 and your
contract will be one of several for the area." Appeal File,
Exhibit 29.
By letter dated August 12, 1988, GSA advised Miller
Reporting Co., Inc. (Miller) that it had received a multiple
award schedule contract for SIN 733-8 and that its contract would
"be one of several for the area." Appeal File, Exhibit 26. The
term of Miller's contract, number GS-OOF-03034, ran from
August 1, 1988, through July 31, 1989, with two one-year options
and also covered court reporting and transcription services for
the District of Columbia metropolitan area. Id.; Stipulation
52. In this contract, the Government expressly reserved the
right to make additional awards under the RFP. Appeal File,
Exhibit 26 at 5.
GSA awarded contract number GS-OOF-03039 to ARTI Recording,
Inc. (ARTI), for the term August 19, 1988, through July 31, 1989,
with two one-year options. The contract covered court reporting
and transcription services for the New York City metropolitan
area, including portions of New Jersey. The New York portion of
this area included Bronx, Kings, New York, Putnam, Queens,
Richmond, Rockland, and Westchester Counties; the New Jersey
portion included only Bergen County. Stipulation 49.
By letter dated September 30, 1988, GSA advised California
Shorthand Reporting (CSR) that it had been awarded contract
number GS-OOF-03045 and that multiple awards had been made for
some areas.[foot #] 3 The term of CSR's contract ran
from September 26, 1988, through July 31, 1989, with two one-year
options, and covered court reporting and transcription services
for California (except Los Angeles County) and Hawaii.
Stipulation 50. At the time of award, GSA's contracting
officer advised CSR's president that multiple awards had been
made in California and that there were two other contractors
which received awards in that state. Appeal File, Exhibit 35
(Letter from Walter Young to Marijke Elder (Nov. 23, 1987)). CSR
acknowledged that it was "very much aware that there [were] other
schedule contractors in the State of California . . . ." Id.
(Letter from Marijke Elder to Walter Young (Dec. 13, 1987)).
By letter dated September 23, 1988, GSA notified Executive
Court Reporters (Executive) that it had received a multiple award
contract for reporting and transcription services covering
special item numbers 733-4a, 8, 12a, 31b, and 49. The
notification further advised Executive: "Multiple awards will be
----------- FOOTNOTE BEGINS ---------
[foot #] 3 CSR's contract covered a nonmandatory area,
Hawaii, and CSR was the only contractor which received an award
for this state. Appeal File, Exhibit 3.
----------- FOOTNOTE ENDS -----------
made for some areas." Appeal File,
Exhibit 32.[foot #] 4 Executive's contract, number
GS-OOF-03043, ran for the term September 23, 1988, through
July 31, 1989, with two one-year options. The contract covered
court reporting and transcription services in Alaska, Los Angeles
County in California, the New York/New Jersey area, the
District of Columbia, and the Chicago metropolitan area. The
contract defined the Chicago metropolitan area to include Cook,
Dupage, Kane, Lake, McHenry, and Will Counties. Id.
GSA awarded contract number GS-OOF-03033 to Heritage, a
company which is not an appellant in this case, for the term of
August 1, 1988, through July 31, 1989, with two one-year options.
The contract covered all types of court reporting and
transcription services for the forty-eight contiguous states and
the District of Columbia. Appeal File,
Exhibit 3.[foot #] 5 In thirty-nine of the contiguous
states, Heritage was the sole contractor for mandatory users and
in the remaining contiguous states and in Washington, D.C.,
Heritage was one of several contractors. Id.[foot #] 6
----------- FOOTNOTE BEGINS ---------
[foot #] 4 Executive's contract covered Alaska, which was a
non-mandatory area, and according to the schedule, Executive was
the only contractor which received an award for this state.
Appeal File, Exhibit 3.
[foot #] 5 Heritage filed its own appeal, and the parties
settled that matter. Heritage Reporting Corp. v. General
_______________________________________
Services Administration, GSBCA 10396 (Aug. 22, 1992).
_______________________
[foot #] 6 Specifically, Heritage was awarded a contract for
SIN 733-4 covering any area in California, including Los Angeles,
___
Long Beach, and all other California metropolitan areas.
Executive also was awarded a contract for Los Angeles and Long
Beach, and CSR was also awarded a contract for SINs 733-4(b)
through (j), covering the Anaheim, Riverside, San Francisco, San
Jose, Sacramento, San Diego, and Salinas areas. Appeal File,
Exhibit 3. Similarly, Heritage was awarded a contract for any
area in the states of Illinois and New York, including the areas
also awarded to Executive in Illinois, and to ARTI and Executive
in New York. Id.
___
In its decision partially adopting the allocation of
liability among various agencies resulting from the settlement of
Heritage's appeal, the General Accounting Office recognized that
Heritage's award was a multiple award schedule (MAS) contract and
stated: "A MAS consists of contracts with more than one supplier
for services at varying prices for delivery within the same
geographic area. In this case, Heritage was listed as the sole
contractor for thirty-nine of the forty-eight contiguous states;
in the District of Columbia and the remaining contiguous states,
Heritage was one of several contractors listed." Heritage
________
Reporting Corp., B-252754, at 6 n.1 (Oct. 6, 1994).
_______________
----------- FOOTNOTE ENDS -----------
The contracting officer attested that a mandatory user under the
schedule contract "is obligated to use the contractors that we
have awarded." Appellants' Record Supplement, Exhibit 22,
Deposition of Doris L. Marsh (Heritage Reporting Corp.,
GSBCA 10396) at 10 (emphasis added).
GSA awarded contract number GS-OOF-03040 to a company which
is not an appellant in this case, Argie Reporting Service
(Argie), for the term of August 19, 1988, through July 31, 1989,
with two one-year options. The contract covered court reporting
and transcription services in Illinois, Nebraska, the Des Moines
and Cedar Rapids metropolitan areas in Iowa, the Kansas City,
Topeka, and Wichita metropolitan areas in Kansas, and the
Kansas City, St. Louis, and Springfield metropolitan areas in
Missouri. Stipulation 57.
GSA awarded contract number GS-OOF-03044 to another entity
which is not an appellant in this case, Arlington Typing and
Mailing (Arlington), for the term of September 26, 1988, through
July 31, 1989, with two one-year options. Stipulation 58. The
contract covered court reporting and transcription services in
Massachusetts. Id.
GSA's Responsibility for the Schedule Contracts
Under the multiple award schedule, individual agencies were
to place orders directly with contractors, but GSA had
supervisory responsibility with respect to the schedule
contracts. Appeal File, Exhibit 22 at 2; 48 CFR 8.405 (1988).
The parties stipulated that:
GSA exercises supervisory authority for the
schedule contracts under 40 U.S.C. 481, which
provides that the Administrator of General Services
shall prescribe policies and methods of procurement and
supply of personal property and nonpersonal services. .
. . Pursuant to 41 U.S.C. 252, the civilian portion
of the executive branch is required to make purchases
and contracts for property and services in accordance
with the provisions of this title and implementing
regulations of the Administrator. . . . The
implementing regulations are the Federal Property
Management Regulations (FPMR), found at 41 C.F.R. 101
et seq. 41 C.F.R. 101-26.401 states, in part, that
"[a]ll executive agencies shall procure needed articles
and services from Federal Supply Schedule contracts in
accordance with the provisions of the appropriate
Federal Supply Schedule." The burden of complying with
mandatory supply schedules is on the user agencies
pursuant to 41 C.F.R. 101-26.401(a) which provides
that "prior to initiating procurement directly from
commercial sources, agencies shall determine whether
the required commodities and services or similar
commodities and services serving the required
functional end-use purpose are available from a Federal
Supply Schedule." Under the FAR, the FPMR, and
existing case law, GSA has been recognized as having
overall supervisory responsibility for the GSA schedule
contracts.
Stipulation 36 (citing 48 CFR 38.00 et seq.; 41 CFR
101-26.491 et seq.; Digital Equipment Corporation, GSBCA 9618,
90-2 BCA 22,808; GSA Report at 2-3).
Contract Terms
Each contract contained all of the above-quoted solicitation
terms, as well as the awardee's schedule of items, which listed
each geographic area, pricing, and the type of court reporting
services the contractor offered. Amendments One and Two to the
RFP were incorporated into the contracts.
Appellants and Heritage, Argie, and Arlington were listed in
the October 31, 1988, FSS (OOSS 7301, Basic Ed., "Professional
Verbatim Reporting and Transcript Services," Industrial Group
733, IG Class 7339). Appeal File, Exhibit 3.
The parties stipulated that "mandatory user agencies had no
authority to amend or terminate, in whole or in part, appellants'
schedule contracts for the convenience of the government. Only
GSA's schedule contracting officer had the authority to amend or
terminate appellants' schedule contracts for the convenience of
the government." Stipulation 70 (citing FAR 8.405-6(a)).
Performance
Upon award of their schedule contracts, appellants began
contacting mandatory user agencies directly to inform the
agencies that mandatory schedule contracts had been awarded and
that the companies were ready to accept orders. Stipulation 65
(citing Elder Affidavit at 5, 6); Tankoos Affidavit at 5,
6.
GSA was responsible for printing and distributing to user
agencies a catalogue of the supplies or services available under
the contract. Stipulation 63 (citing Appeal File, Exhibit 1,
Amendment One; GSA Report at 10, n.7). Although the terms of the
contract were to commence as early as August 1, 1988, or in two
cases in September 1988, the catalogue for this multiple award
schedule was not distributed to the user agencies until
October 31, 1988. Marsh Declaration 7.
During the terms of the schedule contracts, GSA received
several notifications from Heritage that mandatory users subject
to the FSS were issuing solicitations, awarding contracts, and
otherwise procuring court reporting and transcription services
off-schedule in violation of the contracts. Stipulation 75
(citing Appeal File, Exhibits 10, 11, 12, 14, 17). On various
occasions, GSA contacted mandatory user agencies to address
issues of noncompliance with schedule requirements. Stipulation
76.
The contracting officer described performance under this
schedule contract as follows:
Most schedule contracts require very little attention
on the part of GSA after award; agencies place their
orders, the contractor performs and is subsequently
paid by the agency. The schedule contracts for IG-733
[Industrial Group 733 Transcripts Stenographic
Reporting Services] were the exception to this general
rule. In addition to Ms. Benson's complaints that
agencies which should have been mandatory users were
going outside of the contracts to satisfy their
requirements, there were complaints from schedule
contractors that other schedule contractors were
intruding on their territory, and there were complaints
from the customer agencies that on numerous occasions
court reporters would not show up when scheduled, would
be late in producing a transcript, would produce low
quality transcripts, and that the contract rates were
significantly higher than the agency had been used to
paying, and that the quality of service received under
the contract did not justify the price differential.
The issue of price was an ongoing dispute with our
federal agency customers, and there were many more
requests for waivers from mandatory use than was normal
for a schedule of this nature. After much
deliberation, my office concluded that we could not
solve these problems by tinkering with the contract
terms and conditions, and that it would be in the best
interest of the government to not exercise the option
period on these contracts and cancel the schedule for
IG-733.
Marsh Declaration 9.
Each appellant received delivery orders from mandatory user
agencies under its schedule contract. Stipulation 66. CSR
received a total of ******* in revenue under its contract;
Executive, ********; ARTI, *******; Ace-Federal, *******; Ann
Riley, ********; and Miller, ********. Heritage received
**********. Stipulation, Exhibit 2.
By letters dated April 21, 1989, GSA notified each appellant
of GSA's intent to exercise the option of extending each contract
for twelve months, for the period August 1, 1989, through
July 31, 1990, but later reversed its position and notified each
appellant that it would not exercise the option and that
"[a]gencies will be advised that they may procure this service on
an open market basis after July 31, 1989." Appeal File,
Exhibits 13, 15, 27, 30, 33, 36. Twelve agencies formally
requested waivers from mandatory use of the schedule contract.
Appellants' Record Supplement, Exhibit 20, Respondent's Answers
to Appellant's Interrogatories in Heritage Reporting Corp. v.
General Services Administration, GSBCA10396 at 5. GSA granted
waivers to the Federal Communications Commission, the Federal
Energy Regulatory Commission for the Office of Administrative Law
Judges only, and the Department of Labor, Branch of Hearings and
Review. Id. at 6.
Appellants' contracts remained operative through the
scheduled expiration on July 31, 1989, and appellants performed
work under their contracts. Stipulation 69.
Mandatory Users Who Procured Off-Schedule Services
The parties stipulated that during the contracts' periods
some seventy-one federal agencies or components contracted off-
schedule for court reporting and transcription services totaling
3,732,605 original pages. Stipulation 97-98.
On August 28, 1992, the Board granted a joint motion of the
parties in the Heritage appeal to enter a stipulated judgment in
the amount of $7,254,525.60, based upon their
settlement,[foot #] 7 which was subsequently allocated
----------- FOOTNOTE BEGINS ---------
[foot #] 7 The Board did not adjudicate the merits of the
Heritage appeal, and did not itself make any findings of fact or
conclusions of law. Rather, as is the common practice when the
parties settle their claims independent of Board process, the
Board awarded the parties' stipulated settlement amount to
facilitate payment from the Government's permanent indefinite
judgment fund. As such, the settlement in Heritage has no
collateral estoppel effect on these claims. E.g., United States
____ ______________
v. International Building Co., 345 U.S. 502 (1953) ("Unless we
______________________________
can say that [consent judgments] were an adjudication of the
merits, the doctrine of estoppel by judgment would serve an
unjust cause: it would become a device by which a decision not
shown to be on the merits would forever foreclose inquiry into
the merits."); Red Lake Band v. United States, 607 F.2d 930, 934
_______________________________
(Ct. Cl. 1979) ("As a general rule . . . an issue is not
'actually litigated' for purposes of collateral estoppel unless
the parties to the stipulation manifest an intent to be bound in
a subsequent litigation . . . . Moreover, the intention to be so
bound should not be readily inferred."); see generally, Charles
______________
Wright, Arthur Miller, and Edward Cooper, Federal Practice and
_____________________
Procedure 4443 (1981 & Supp. 1998). In the Heritage
_________
settlement, the Government did not indicate an intent to admit
liability under any other schedule contracts. Appellant's Record
Supplement, Exhibit 26. Importantly, the merits of the Heritage
case were not "actually litigated," and the issue on which our
decision rests -- the nature of the contracts -- was never
(continued...)
----------- FOOTNOTE ENDS -----------
among enumerated mandatory user agencies without Board
involvement.[foot #] 8
Facts Pertinent to Appellants' Claimed Lost Profits
The parties stipulated that calculation of the profit rate
which would have been earned by appellants for the original pages
which were ordered off-schedule is determined by examining
appellants' marginal cost of undertaking additional work beyond
the work which was actually received by appellants. Stipulation
117. Payment to labor in the court reporting and transcription
industry is predominantly based upon piece rate or per-page
compensation. Id. If the pages ordered off-schedule by
mandatory users had been ordered under the schedule contracts,
appellants would have met the increased demand by providing
additional piece-work to employees and by retaining additional
independent contractors and subcontractors. Id. The ability to
handle sharp fluctuations in demand through the use of employees,
independent contractors, and subcontractors operating on a piece-
rate or per-page basis is a characteristic of the court reporting
industry. Id. 118.
The total number of pages ordered off-schedule by user
agencies is 3,741,487. Stipulation 111. The parties
stipulated that based upon appellants' share of the market,
appellants' share of the original pages ordered off-schedule was
1,381,731. Id. According to the parties' stipulation,
appellants' share of original pages ordered off-schedule by
mandatory schedule users (1,381,731 pages) times appellants'
----------- FOOTNOTE BEGINS ---------
[foot #] 7 (...continued)
raised. Moreover, Heritage stood in a different posture than any
of the appellants here, since it was the sole and exclusive
schedule contractor in many locations.
[foot #] 8 In a proceeding before the General Accounting
Office (GAO), the Department of Justice, the Securities and
Exchange Commission (SEC), and the Federal Maritime Commission
(FMC) challenged the amount of damages allocated to each of their
agencies in connection with the settlement of Heritage's appeal.
Stipulation 100. GAO denied the Department of Justice's
contention, but agreed that the SEC was not required to reimburse
the judgment fund for the amount attributable to its off-schedule
purchases. GAO found that FMC qualified for a partial exception
from the FSS' mandatory use provisions and ordered that its
contribution to the $7,254,525.60 judgment be reduced by the
proportionate value of 253 pages. Id. (citing Heritage Reporting
___ __________________
Corp., B-252754 (Oct. 6, 1994)). Appellants in this case have
_____
not sought compensation for the 253 FMC pages. When the
adjustment in the FMC's original page count recommended by the
GAO is made, the number of original pages acquired off-schedule
by these agencies becomes 3,732,352.
----------- FOOTNOTE ENDS -----------
average original page price ($4.393) yields $6,069,944.28 as the
amount of lost revenue from the sale of original pages.
Stipulation 116.[foot #] 9
Appellants' average cost per original page for performing
additional assignments is $2.55. Stipulation 119. The parties
stipulated that the average marginal profit rate that would have
been achieved by appellants if additional work had been ordered
under the schedule rather than off-schedule by mandatory users is
41.91%. Id. 120. According to the parties' stipulation,
appellants' lost revenue for original pages ordered off-schedule
($6,069,944.28) times appellants' profit rate for additional work
ordered under the contract yields $2,543,913.65 as appellants'
lost profits for original pages ordered off-schedule by mandatory
users. Id. 121.
According to the stipulation, the off-schedule order of
original transcript pages by mandatory users deprived appellants
of the opportunity to sell copies of those originals.
Stipulation 122. The parties agree that applying appellants'
market share to the off-schedule original pages which were
eligible for copy sales results in 947,503 original transcript
pages eligible for copy sales which were lost to appellants. Id.
124. The parties further stipulated that the average number of
lost copy sales per eligible original page is 2.33, and that the
number of off-schedule original transcript pages eligible for
copy sales (947,503) times the average number of lost copy sales
per original transcript page (2.33) yields 2,207,682 as the
number of copy page sales lost to appellants. Id. 125, 126.
The parties agree that appellants' weighted average price
per copy page was $1.10, and that the number of copy page sales
lost to appellants (2,207,682) times appellants' weighted average
price per copy page (41.10) yields $2,428,450.20 as the amount of
lost copy sale revenue to appellants. Stipulations 127, 128.
The parties stipulated that "[t]he cost of producing copy
pages for sales is nominal. Accordingly, the profit rate for
copy sales is set at 100 percent . . . ." Stipulation 129.
Appellants claimed direct lost profits totaling $4,972,363.85,
consisting of $2,543,913.65 in lost profits from sales of
original transcript pages and $2,428,450.20 from sales of copy
pages. Id. 130.
----------- FOOTNOTE BEGINS ---------
[foot #] 9 The Federal Supply Schedule for court reporting
and transcription services required each offeror to bid basic
per-page prices for each category of services. The contracts
also provided that the amount paid for individual orders would be
increased for additional charges for such items as exhibits or
inserts, minimum appearance fees, delivery, overtime, computer
disks, and other special services. Stipulation 113.
----------- FOOTNOTE ENDS -----------
Discussion
I. Does FASA's Statute of Limitations Bar Any of Appellants'
Claims?
The Federal Acquisition Streamlining Act of 1994 (FASA)
amended the Contract Disputes Act of 1978 (CDA) by imposing a
limitation on the submission of contractor and Government claims
-- "within 6 years after the accrual of the claim." 41 U.S.C.
605(a) (1994); Pub. L. No. 103-355, 2351(a), 108 Stat. 3243,
3322 (1994). FASA was enacted on October 13, 1994. Respondent
contends that the six-year limitation on claims took effect on
that date. Ace's claim was submitted on February 13, 1995, and
Ann Riley's, ARTI's, CSR's, Executive's, and Miller's on
September 28, 1995. Because appellants' claims were all
submitted after FASA's enactment, and because the contracts ran
from August 1, 1988 (or in the case of Executive and CSR,
September 23 and 26, 1988, respectively) through July 31, 1989,
respondent argues that the first half of Ace Federal's claim
should be excluded, and the claims of the remaining appellants
should be excluded in their entirety. Respondent's Reply Brief
at 4. We disagree.
Section 10001 of FASA sets forth the effective dates and
applicability of its various statutory amendments. Section
10001(c) provides that certain enumerated amendments apply as of
October 13, 1994. Section 2351, establishing the six-year time
limitation for the submittal of claims, is not one of the
enumerated amendments.
Section 10001(b) provides that other amendments enacted by
FASA apply as of the date specified in final implementing
regulations. Specifically, Section 10001(b) states:
(1) An amendment made by this Act shall apply, in
the manner prescribed in the final regulations
promulgated pursuant to section 10002 to implement such
amendment, with respect to any solicitation that is
issued, any unsolicited proposal that is received, and
any contract entered into pursuant to such a
solicitation or proposal on or after the date described
in paragraph (3).
(2) An amendment made by this Act shall also apply,
to the extent and in the manner prescribed in the final
regulations promulgated pursuant to section 10002 to
implement such amendment, with respect to any matter
related to--
(A) a contract that is in effect on the date
described in paragraph (3);
(B) an offer under consideration on the date
described in paragraph (3); or
(C) any other proceeding or action that is
ongoing on the date described in paragraph (3).
(3) The date referred to in paragraphs (1) and (2)
is the date specified in such final regulations. The
date so specified shall be October 1, 1995, or any
earlier date that is not within 30 days after the date
on which such final regulations are published.
Section 10002 of FASA, entitled "Implementing Regulations,"
includes these paragraphs:
(a) Proposed Revisions - Proposed revisions to the
Federal Acquisition Regulation and such other proposed
regulations (or revisions to existing regulations) as
may be necessary to implement this Act shall be
published in the Federal Register.
. . . .
(f) Savings Provision - Nothing in this Act shall be
construed to affect the validity of any actions taken .
. . before the date specified in the regulations
pursuant to section 10001(b)(3) except to the extent
and in the manner prescribed in such regulations.
The implementing regulation referenced in the statute,
FAR 33.206(a), provides:
Initiation of a claim.
(a) Contractor claims shall be submitted, in
writing, to the contracting officer for a decision
within 6 years after accrual of a claim, unless the
contracting parties agree to a shorter time period.
This 6-year time period does not apply to contracts
awarded prior to October 1, 1995. . . .
48 CFR 33.206(a) (1997) (emphasis added).
Respondent contends that this regulation is both superfluous
and contrary to the express provisions of FASA. Respondent's
Record Submission at 25. The regulation is hardly superfluous
when the statute expressly provides that certain of its
amendments shall apply in the manner prescribed in the
implementing regulations.
Respondent also contends that the Board should "disregard"
the amendments to FAR 33.206(a) on the ground that those
amendments are contrary to the terms of FASA. Respondent's
Record Submission at 28. Respondent submits that FASA only
authorized regulations necessary to implement the Act and that
FAR 33.206(a) was not "necessary" because of the statement in
FASA Section 2351(a) permitting contractually agreed-upon earlier
statutes of limitations to stand in spite of the Act. Again,
regulations were expressly contemplated by the statute to
establish the effective dates of certain of its provisions.
Other than its interpretation of "necessary," respondent
cites no provision of the regulation which is contrary to FASA.
In fact, the regulation writers took their cue from the statute
and established a bright line rule that the six-year period shall
not apply to contracts awarded prior to October 1, 1995. Thus,
the regulation is consistent with the limited discretion granted
to the regulation writers by the statute on its face.
This regulation is also consistent with precedent addressing
the effective date for the FASA amendments. See, e.g., OAO Corp.
v. Johnson, 49 F.3d. 721, 725 (Fed. Cir. 1995) (FASA amendments
not effective until "the date provided in the final regulations
implementing those amendments, or on October 1, 1995, whichever
is earlier"); Ungermann-Bass Networks, Inc. v. Department of the
Navy, GSBCA 13005-C(12977-P), 95-1 BCA 27,344 at 136,269 (1994)
(FASA takes effect on the earlier of October 1, 1995, or such
date as may be prescribed in regulation); Motorola, Inc.,
ASBCA 48841, 96-2 BCA 28,465, at 142,172 (FASA authorizes a
regulation excluding contracts awarded prior to October 1, 1995).
II. Did the Agencies' Failure to Order Court Reporting Services
from Appellants Breach The Multiple Award Schedule Contracts
and Entitle Appellants to Recover Lost Profits?
It is undisputed that mandatory user agencies ordered court
reporting and transcription services from parties other than
schedule contract awardees. Appellants claim this was a breach
of their schedule contracts and collectively claim entitlement to
lost profits in the amount of $4,972,363.85.
In determining whether there was a compensable breach, we
must first examine the terms of the contracts. In their
stipulations, the parties characterize their multiple award
schedule contracts as requirements contracts, but a reading of
each of the contracts as a whole does not support this
characterization. See Stipulations 19, 47-52.
The determination of the type of contract the parties have
entered into is generally a matter of law. E.g., Maintenance
Engineers, Inc. v. United States, 749 F.2d 724, 726 n.3. (Fed.
Cir. 1984) (citing 41 U.S.C. 609(b) (1982)); Torncello v.
United States, 681 F.2d 756, 760 (Ct. Cl. 1982); see also Crown
Laundry & Drycleaners, Inc. v. United States, 29 Cl. Ct. 506
(1993). The stipulations of the parties characterizing
appellants' contracts as requirements contracts are therefore not
binding on a reviewing tribunal. E.g., Al-Kurdi v.
United States, 16 Cl. Ct. 660 (1989); Bromley Contracting Co. v.
United States, 14 Cl. Ct. 69, 74 (1987), aff'd, 861 F.2d 729
(Fed. Cir. 1988). Nor is the tribunal bound by the name or label
given to a contract in the contract itself. Crown Laundry, 29
Cl. Ct. at 515 (citing A-Transport Northwest Co. v.
United States, 27 Cl. Ct. 206, 214 (1992) aff'd, 36 F.3d 1576
(Fed. Cir. 1993)); Ralph Construction, Inc. v. United States, 4
Cl. Ct. 727, 731 (1984); Mason v. United States, 615 F.2d 1343,
1346 (Ct. Cl. 1980).[foot #] 10
Further, although the contracts contain the standard
Requirements clause, which purports to bind the Government to
order "all" its requirements from each awardee, that clause is
trumped by other contract provisions. The Requirements clause
itself is qualified -- it expressly states "Except as this
contract otherwise provides, the Government shall order from the
Contractor all the supplies or services specified in the Schedule
. . . ." The contract "otherwise provides" that this contract
neither binds the Government to purchase all of its requirements
from any one vendor, nor obligates the Government to purchase any
minimum amount from any one vendor. The schedule itself, as well
as the cover letters transmitting the contracts, advised vendors
that multiple awards were made for all of the mandatory
geographic locales at issue.[foot #] 11 Clause M.2,
Multiple Awards, made clear that ordering agencies could select
any contractor listed on the schedule and that agencies were to
consider schedule contractors equally in determining which source
was most advantageous to the Government. Clause B.2, Estimated
Requirements, expressly provided that "no guarantee is given that
any quantities will be ordered."
It is well established that a requirements contract is
formed when the seller has the exclusive right and legal
obligation to fill all of the buyer's needs for the goods or
services described in the contract. Coyle's Pest Control, Inc.
v. Cuomo, 154 F.3d 1302, 1305 (Fed. Cir. 1998); Ralph
Construction, 4 Cl. Ct. at 731; Mason, 615 F.2d at 1346; Media
Press, Inc. v. United States, 215 Ct. Cl. 985, 986 (1977); Hemet
Valley Flying Service v. United States, 7 Cl. Ct. 512, 515
(1985).
In Media Press, the Court of Claims concluded that an
analogous multiple-award printing contract let by the Government
----------- FOOTNOTE BEGINS ---------
[foot #] 10 As the Court of Appeals for the Federal Circuit
has reasoned: "Case law warns that reliance on labels and
contract provisions is most risky. In any event the
determination of the type of contract the parties entered into is
a matter of law and is not controlled by any label or contract
provision." Maintenance Engineers, Inc., 749 F.2d at 726 n.5.
___________________________
[foot #] 11 In the mandatory geographic areas at issue here,
there were at least two vendors -- one or more appellants, and
Heritage, which held a nationwide contract covering all forty-
eight contiguous states and all areas within those states. See
___
Appeal File, Exhibits 3, 31.
----------- FOOTNOTE ENDS -----------
Printing Office (GPO) was not a requirements contract. Under the
terms of that contract, GPO was obligated to first ask the low-
priced contractor to determine whether or not it could accept an
order; that contractor could only decline if it was unable to
meet a shipping schedule. If this occurred, the Government would
contact the next low bidder and so on until the job was accepted.
The contract provided three exceptions to this method of placing
work. Plaintiff claimed that the Government had wrongly invoked
one of these exceptions such that all orders were not offered to
plaintiff initially. Plaintiff sought lost profits, claiming
that the GPO contract was a requirements contract and that each
failure on the part of GPO to offer it a printing job constituted
a breach. The court held that the contract was not a
requirements contract, reasoning:
A requirements contract has been defined as a contract
in which the purchaser agrees to buy all of its needs
of a specified material from a particular supplier, and
the supplier agrees, in turn, to fill all of the
purchaser's needs during the period of the contract.
Inland Container, Inc. v. United States, 206 Ct. Cl.
478, 482-83, 512 F.2d 1073 (1975); Ready Mix Concrete
Co. Ltd. v. United States, 141 Ct. Cl. 168, 169, 158
F.Supp. 571 (1958); Gemsco, Inc. v. United States, 115
Ct. Cl. 209 (1950); Johnstown Coal and Coke Co. v.
United States, 66 Ct. Cl. 616 (1929). Neither party to
the instant contract is so tightly and exclusively
bound to the other so as to give rise to a requirements
type arrangement. The Government retained the right to
purchase some of its needs from other printers.
Similarly, plaintiff was empowered to refuse orders if
it was unable to meet a delivery schedule. We
conclude, therefore, that such consideration is
insufficient to support plaintiff's construction of the
contract as a requirements contract. See, Goldwasser
v. United States, 163 Ct. Cl. 450, 454-55, 325 F.2d
722, 724 (1963).
Media Press, 215 Ct. Cl. at 986.
Similarly, in the instant case, Government agencies retained
the right to purchase their needs from any of the schedule
contractors, and were not bound to use any particular
awardee.[foot #] 12 No individual appellant was
guaranteed any business, and user agencies were free to utilize
any schedule contractor without regard to price. There could
have been any number of vendors, and there were two or more
vendors in all areas at issue -- none of which was guaranteed the
exclusive right to provide all the court reporting services for a
----------- FOOTNOTE BEGINS ---------
[foot #] 12 Although appellants were not free to turn away
work, they were free to subcontract it out to other reporters who
were not themselves listed on the schedule.
----------- FOOTNOTE ENDS -----------
given geographic area.[foot #] 13 As such,
appellants' schedule contracts are not requirements contracts.
We recognize that in an earlier decision, Locke v.
United States, 283 F.2d 521 (Ct. Cl. 1965), the Court of Claims
suggested in dicta that a multiple award federal supply contract
for typewriter repair and reconditioning was a requirements
contract and ruled that a contractor whose schedule had been
improperly terminated for default could be entitled to breach
damages. Given the clarification in subsequent precedent, Media
Press, we conclude that Locke neither warrants characterizing the
instant schedule contract as a requirements contract nor
justifies an award of lost profits here.
Further, Locke is distinguishable from the instant appeals.
In Locke, plaintiff was removed from the schedule altogether due
to an improper termination of its contract and had no possibility
whatsoever of performing work, thus prompting the Court of Claims
to conclude that the termination deprived it of a lost
opportunity which had "value." In the instant case, all
appellants continued to obtain work throughout the course of the
contract, but mandatory users, for unknown reasons, failed to
o r d e r s o m e s e r v i c e s f r o m s c h e d u l e
contractors.[foot #] 14 No appellant demonstrated
that it would have received business from a particular agency
which utilized an off-schedule vendor. Unlike the court in
Locke, we cannot conclude that any particular vendor received
less "value" than what it bargained for by virtue of the
mandatory user agencies' ordering off-schedule services -- since
----------- FOOTNOTE BEGINS ---------
[foot #] 13 Regulations in effect at the time describing the
multiple award schedule confirm that more than one contractor was
contemplated:
(a) Multiple-Award Federal Supply Schedules cover
contracts made with more than one supplier for
__________________________
comparable items at either the same or different prices
for delivery to the same geographical area.
41 CFR 101-26.408-1 (1981); accord, 48 CFR 8.403-2 (1988)
______
("Multiple award schedules cover contracts made with more than
one supplier for comparable supplies and services. Contracts
are awarded to suppliers of the same generic types of items at
varying prices for delivery within the same geographic area. . .
.").
[foot #] 14 Appellants have not alleged or demonstrated that
either GSA, which administered the schedule, or the user agencies
that ordered off-schedule acted in bad faith. Appellants elected
to present their cases on the record without a hearing, and that
record does not reveal why in every instance mandatory user
agencies elected to procure court reporting services off-
schedule.
----------- FOOTNOTE ENDS -----------
all appellants received more work than estimated, and no vendor
had been guaranteed any business.
Moreover, the Media Press court's definition of a
requirements contract has been consistently applied in subsequent
cases. As the Federal Circuit recently recognized in Coyle's
Pest Control, Inc., 154 F.3d at 1305, "an essential element of a
requirements contract is the promise by the buyer to purchase the
subject matter of the contract exclusively from the seller,"
quoting Modern Systems Technology v. United States, 979 F.2d 200,
205 (Fed. Cir. 1992). Similarly, the court in Torncello v.
United States, 681 F.2d 756, 768-69 (Ct. Cl. 1982), reasoned:
[I]t is the very essence of a requirements contract . .
. that the buyer agree to turn to the supplier for all
of its needs. If there is not a commitment for all
needs, then the relation is not different from an
indefinite quantities contract with no required
minimum, the very type of relation that the Supreme
Court held in Willard, Sutherland & Co. [v. United
States, 262 U.S. 489 (1923)], could not be a contract.
Importantly, the Federal Circuit in Coyle's Pest Control
clarified that "a requirements contract necessarily obligates the
Government to purchase exclusively f rom a single source."
154 F.3d at 1305; accord, Franklin Co., ASBCA 10285, 65-2 BCA
5215, aff'd, Franklin Co. v. United States, 381 F.2d 416 (Ct. Cl.
1967) (Armed Services Board of Contract Appeals disagreed with
parties' characterization of contract as requirements contract
when there were concurrent contracts with overlapping work).
Thus, although each appellant's contract masqueraded as a
requirements contract and contained a misleading label, when read
as a whole each contract is more akin to an indefinite delivery
indefinite quantity (IDIQ) contract enforceable only to the
extent performed. Federal Electric Corp. v. United States, 486
F.2d 1337 (Ct. Cl. 1973); Tennessee Soap Co. v. United States,
126 F. Supp. 439 (Ct. Cl. 1954).
The United States Court of Federal Claims recently analyzed
the differences between a requirements contract and an indefinite
quantity contract in Rice Lake Contracting v. United States, 33
Fed. Cl. 144 (1995). There, the court, consistent with
precedent, defined an indefinite quantity contract as follows:
a contract under which the buyer agrees to purchase and
the seller agrees to supply whatever quantity of goods
the buyer chooses to purchase from the seller. It
differs from a requirements contract in that under a
requirements contract the buyer agrees to purchase all
his requirements from the seller. Under an indefinite
quantit[y] contract, even if the buyer has
requirements, he is not obligated to purchase from the
seller.
33 Fed. Cl. at 152 (citing Mason v. United States, 615 F.2d at
1346 n.5). The court noted that in order for an indefinite
quantity contract to be enforceable there must be a minimum
quantity which the buyer was obligated to purchase; without an
obligatory minimum quantity, the buyer would be allowed to order
nothing, rendering its obligations illusory and, therefore,
unenforceable. Id. at 152-53; accord, Coyle's Pest Control, 154
F.3d at 1306. Under the multiple award contracts at issue, there
was no minimum quantity that agencies were required to order from
any specific contractor, and there was no guarantee that any
quantities would be ordered. We conclude that the contracts at
issue are analytically most akin to indefinite quantity contracts
with no stated mandatory minimum, enforceable to the extent they
were performed, and there is no basis in the contracts to award
damages for the off-schedule orders. Cf. William W. Goodrich,
Jr. and Coralyn G. Mann, Avoiding Disaster in Federal Supply
Service Contracts, 15 Pub. Cont. L.J. 1, 12 (1984) ("Awardees of
multiple award schedule contracts would appear to have no legal
assurance of sales or profit.").
Appellants' collective efforts to obtain an award of damages
representing all off-schedule purchases and divide it among
themselves based upon assumptions and market share must fail.
These contracts do not contemplate such a collective remedy. No
amount of post-contract collaboration can alter the fact that
each appellant filed a separate claim and had its own contract
based upon its individual offer, with different pricing and, in
some cases, different services to be performed in different
locales. At best, each appellant has shown that there should
have been a larger universe of potential work for the schedule
contractors. However, this does not mean that every schedule
contractor's share of that work should necessarily have been
larger. Nor does this diminished universe of potential work
trigger Government liability to each schedule contractor.
Any expectation that an individual appellant would have
received any portion of the additional amount of work claimed is
speculative and not supported by the terms of its multiple award
contract -- which expressly warned that there was no guarantee
that any quantities would be ordered. As such, in addition to
failing to prove a compensable breach, no appellant has
demonstrated that its claimed damages were foreseeable at the
time of contract formation. Cienega Gardens v. United States, 38
Fed. Cl. 64, 73 (1997) ("To the extent that plaintiffs' damages
were foreseeable at the time of contract formation, not at the
time of the breach, they are recoverable. Lucas v.
United States, 25 Cl. Ct. 298, 310 (1992) (citing Globe Refining
Co. v. Landa Cotton Oil Co., 190 U.S. 540, 545-47, 23 S.Ct. 754,
756-57, 47 L.Ed. 1171 (1903).").
Respondent argued that the Board take a different tack in
denying liability here -- suggesting that we impose a
constructive termination for convenience, deny breach damages,
and hold that appellants are entitled only to damages permitted
under the Termination for Convenience clause -- in this case
nothing. Respondent's argument assumes that breach damages would
otherwise be warranted. Given our conclusion that appellants
have not demonstrated entitlement to breach damages under the
terms of their contracts and appellants' stipulation that they
have no termination for convenience costs, we need not address
this argument or any of respondent's other arguments here.
Instead, we hold that the contracts were not requirements
contracts and, under the bargain the parties struck, the
individual schedule contractors cannot recover lost profits for
off-schedule purchases.
III. Are Appellants Entitled to Consequential Damages?
Appellants seek consequential damages in the amount of
$2,486,181.90. Given our conclusion that appellants have not
demonstrated a compensable breach, they cannot recover
consequential damages. Further, appellants' claim for
consequential damages is based solely upon their loss of
incumbency. Appellants' Opening Brief at 53. Appellants rely on
their stipulation that they submitted proposals with the
expectation that by receiving award of a schedule contract they
would each be able to develop and maintain ongoing relationships
with user agencies for which they had not previously worked.
Appellants contend that it was reasonable to expect that the
mandatory user agencies would do business with the awardees for
at least a year. Id. at 53-54. Appellants point out that
incumbency had a particular value here because history revealed
that expiration of mandatory contracts were followed by periods
of informal contracting. Appellants derive their consequential
damages of $2,486,181.90 by "taking the starting incumbent
positions that appellant would have had but for the breach (i.e.,
$4,972,363.85) and reducing the value of that incumbent position
to zero after only one year.
Appellants cite this Board's decision in Stroh Corp. v.
General Services Administration, GSBCA 11029, 96-1 BCA 28,265,
in support of their claim for consequential damages. This case
in no way supports the proposition that appellants are entitled
to consequential damages. To the contrary, the Board in Stroh
stated:
Furthermore, Stroh is not entitled to an award of under
absorbed home office overhead under its modified
Eichleay formula because, in reality, this claim seeks
recovery of consequential damages. See Prudential
Insurance Co. of America v. United States, 801 F.2d
1295 (Fed. Cir. 1986), cert. denied, 479 U.S. 1086
(1987). To be recoverable, consequential damages must
be foreseeable at the time of contract award.
Landmovers, Inc., ENGBCA 5656, 92-1 BCA 24,473.
Foreseeable means within the contemplation of the
parties at the time of award. For damages to be
recoverable there must be no intervening incident; the
Government's actions must produce the effect inevitably
and naturally. Ramsey v. United States, 121 Ct. Cl.
426, 433 (1951); accord Hart, Clark, and Hirt, IBCA
1508-8-81, 84-1 BCA 17,134, at 85,352-53.
96-1 BCA at 109,791.
Appellants have cited no legal support for their
consequential damages claim, and the facts of record do not
demonstrate entitlement to such damages. As our appellate
authority has recognized, "Remote and consequential damages are
not recoverable in a common law suit for breach of contract . . .
especially . . . in suits against the United States for the
recovery of common law damages, such as the instant case."
San Carlos Irrigation & Draining District v. United States, 111
F.3d 1557, 1563 (Fed. Cir. 1997) (quoting Wells Fargo Bank, N.A.
v. United States, 88 F.3d 1012, 1020 (Fed. Cir.), cert. denied,
117 S. Ct. 1245 (1996), and Northern Helex Co. v. United States,
254 F.2d 707, 713, 720 (Ct. Cl. 1975)).
Decision
The appeals are DENIED.
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MARY ELLEN COSTER WILLIAMS
Board Judge
We concur:
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________________________________
ROBERT W. PARKER CATHERINE B. HYATT
Board Judge Board Judge