Government’s motion to dismiss and motion for summary judgment on contractor’s appeal are granted. The contractor provided base support services in Djibouti. The contractor, however, cut the number of Djibouti nationals that had been employed under the predecessor contract. What’s more, for those Djibouti nationals who remained, the contractor cut their pay. These actions resulted in a strike by Djibouti nationals, and an embargo by the Djibouti government on the contractor’s employment of foreign nationals. The contractor, asserting a variety of contract theories—breach, duty of good faith and fair dealing, constructive change, mutual mistake— claimed it was entitled to recover costs it incurred as a result of the strike and the embargo. The ASBCA disagreed. The contractor’s claims were all based on the government’s alleged duty to resolve the strike and embargo. But the board found that nothing in the contract obligated the government to resolve labor issues created by the contractor’s own staffing approach. The contract was fixed-price agreement, which required the contractor to bear the risk of its own labor approach.
The Navy awarded Kellogg Brown & Root Services, Inc. (KBR) a contract to provide base support services at Camp Lemmonier in the Republic of Djibouti. KBR’s proposal stated that it intended to staff the contract with U.S. expats, Djibouti nationals, and “third country nations”—i.e., workers from countries other than the U.S. and Djibouti.
The previous contractor at Camp Lemmonier had hired a little over a thousand Djibouti nationals. KBR, however, cut the number of Djibouti nationals in half. What’s more, KBR cut the pay for the nationals it employed.
Needless to say, KBR’s decision was not greeted with enthusiasm. Djibouti nationals went on strike, refusing to work for KBR. The Djibouti government supported the strike. Due to the strategic importance of Camp Lemmonier, officials at DoD and the Department of State got involved, attempting to resolve the strike. Ultimately, the U.S. government decided to obtain more funding to hire additional Djibouti nationals for the contract. The Navy directed KBR to hire 1037 Djibouti nationals at the same pay rates established by the predecessor contract. The parties modified the contract to cover the cost of the additional employees.
But the response to KBR’s labor practices was not limited to a strike. Years before KBR’s contract, the U.S. government had entered an international agreement, called the Access Agreement, with Djibouti. That agreement allowed the U.S. and its contractors unimpeded access to Camp Lemmonier. Around the same that Djibouti nationals were striking against KBR, the Djibouti government began to restrict the access of KBR’s third party country nationals in contravention of the Access Agreement. Djibouti barred third party nationals, deported others that were already there, and began requiring KBR to submit lists of third party nationals to the Djibouti government for approval. KBR complained that these actions violated the Access Agreement, but Djibouti blew the company off.
Once again, officials from DoD and State got involved. The dispute carried on for months. KBR’s third-party country nationals were not able to leave the country for fear of not being able to get back in, and key personnel resigned because they could not enter the country. Eventually, the U.S. government and Djibouti executed a new agreement that reset the countries’ relationship. Under the new arrangement, the U.S. was obligated to require its contractors to provide information about third country employees to the Djibouti government.
KBR submitted claims to the Navy seeking to recover about $3 million in costs incurred as a result of the strike and Djibouti’s embargo on third country nationals. The Navy denied the claims. KBR appealed to the ASBCA, alleging various contract theories, including a claim that KBR was a third party beneficiary under the Access Agreement. The government moved to dismiss KBR’s third party beneficiary theory. Both KBR and the government moved for summary judgment on the other claims.
The board first addressed KBR’s third party beneficiary theory. KBR asserted that it was a third party beneficiary of the Access agreement between the U.S. and Djibouti, and that the government breached that agreement by not invoking its dispute resolution provisions. The failure to invoke those provisions, KBR contended, denied the company the benefits of the Access Agreement and caused it to incur costs arising from the strike and embargo.
The board found that it lacked jurisdiction over the third party beneficiary claim. The board has jurisdiction to hear appeals under the Contract Disputes Act. That Act is a waiver of sovereign immunity that must be strictly construed. Third party claims do not fall within the CDA’s waiver of sovereign immunity. Only a contractor can bring an appeal on a contract. KBR was not a direct party to the Access Agreement and thus could not bring an appeal based on the contract. The board dismissed the third party claim.
Aside from its third party theory, KBR alleged that the Navy breached the company’s base support contract by failing to act fast enough to resolve the strike. The board, however, was not convinced. The contract made KBR, not the government, responsible for furnishing labor necessary for performance. Inherent in that responsibility was the ability to manage host nation conditions on hiring. Nothing in the contract required the government to perform any function related the acquisition of labor, such as resolving strikes. Nor did the government warrant that the desired number of nationals would be available without interference form the Djibouti government.
KBR, however, argued that a partnership provision in the contract had obligated the government to resolve the strike. That provision stated that “the Navy wants its contractors to succeed . . . . [and] the Navy intends to work to find solutions that will be beneficial to both the government and its partners.
But the board found that the partnership provision was merely an aspirational declaration of a desire for success. An intent to find abstract solutions that benefit all is too amorphous to provide any binding obligation. What’s more, even if the board could construe that language as imposing a clear contractual obligation, KBR had failed to identify what actions the government should have taken to satisfy the obligation.
KBR also alleged that the government breached the contract’s implied covenant of good faith and fair dealing when it failed to do everything in its power to prevent Djibouti from obstructing contract performance. The board, however, reasoned that the duty of good faith and fair dealing must be keyed to the an obligation established by the contract. Here, the government made no commitment from a which a duty to resolve the strike could have arisen. Rather, the contract made KBR responsible for procuring labor. The government assumed no responsibilities as to labor or resolving labor strikes. Indeed, the board noted, KBR’s contract was a fixed-price contract that placed market risks on KBR.
KBR attempted to argue that the contract’s aspirational partnership language supplied the implied obligation to timely resolve the strike. Again, however, the board noted that the partnership language was precatory, not obligatory. Additionally, nothing in the partnership agreement stated that the Navy had assumed a duty to alter the behavior of third parties toward KBR.
In addition to its breach theories, KBR contended that the government’s expectation that KBR perform during the strike, and its failure to assist KBR with labor problems constituted a constructive change to the contract. But to prove a constructive change, a contractor must show that it was ordered by the government to perform work beyond the contract requirements. Here, the government had never promised KBR that it only needed to perform if it could obtain labor on the company’s desired terms. And KBR had not presented any evidence that the government ordered the company to perform beyond the contract’s scope.
Next, KBR alleged that the parties had made a mutual mistake of fact that necessitating a reformation of the contract. Specifically, KBR alleged that the parties had mistakenly believed that Djibouti would comply with the terms of the Access Agreement. But the board found that this was not really a mistake of fact. Rather, KBR was alleging that the parties had been mistaken in their predictions about the future availability of local labor. Assumptions about future acts cannot establish a mutual mistake.
KBR further alleged that it was entitled to recover its costs because the government failed to disclose its superior knowledge of labor conditions in Djibouti. KBR claimed that the Navy knew about the possibility of a strike. The board, however, reasoned that a superior knowledge claim cannot be based on the contractor’s alleged ignorance of a possibility. Moreover, KBR neither alleged nor provided any evidence that the company itself lacked knowledge of the possibility of a strike. Rather, KBR had represented that it was a sophisticated contractor with experience working in the Djibouti labor market.
KBR also asserted numerous claims arising out of the government’s alleged failure to solve the embargo on third country nationals. But the board noted that the claims were all based on the same theories as the strike claims, and that they failed for the same reason. The inclusion of KBR’s staffing plan in the contract, which included the use of third country nationals, did not transform the plan into a government warranty against interference from the government of Djibouti.
KBR is represented by Paul A. Debolt, Emily A. Unnasch, Thomas Barrett, David Newsome, and Michael T. Francel of Venable, LLP. The government is represented by Craig D. Jensen, Anthony K. Hicks, and David Koman of the Navy.
