Government’s motion to dismiss appeal for lack of jurisdiction is denied in part. The U.S. government had entered a number of contracts to procure supplies and services for armed forces stationed in the Republic of Korea. The government argued, however, that ASBCA lacked jurisdiction under the CDA to hear claims arising out of those contracts. The contracts, the government argued, were not contracts with an executive of agency of the United States because they were funded by the Republic of Korea. The board rejected this argument, reasoning that although the U.S. government did not fund the contracts, the U.S. benefitted from them. Accordingly, the contracts were covered the CDA, and the ASBCA had jurisdiction to hear claims arising out of those contracts.
The U.S. government and the Republic of Korea (ROK) entered agreements under which the ROK would bear the costs associated with the stationing of U.S. Armed Forces in the ROK. While the ROK agreed to fund the U.S. military, the agreements delegated to the U.S. government the authority to solicit its own requirements so long as the work was performed by Korean contractors.
In accordance with these agreements with the ROK, the U.S. government awarded a number of IDIQ contracts, and multiple task orders under those contracts, to Sungwoo E&C Co., Ltd., a Korean company. Under those task orders, Sungwoo provided general construction and paving services to the U.S. Armed Forces in Korea. The task orders, however, were funded by the ROK.
After performing several task orders, Sungwoo asserted multiple claims against the U.S. government. Sungwoo alleged that U.S. government required contractors to forge documents and that it punished Sungwoo for failing to go along with the forgery scheme by (1) giving the company unsatisfactory CPARS ratings, (2) imposing a de facto suspension and debarment by refusing to exercise options under the IDIQs, and (3) wrongfully failing to award Sungwoo additional contracts. Sungwoo sought to recover lost profits arising from the government’s actions as well as punitive damages.
The U.S. government denied Sungwoo’s claims. Sungwoo then appealed to the ASBCA. ASBCA considered the appeals under two different case numbers, one for each of the IDIQ’s under which Sungwoo’s claims arose. The U.S. government moved to strike or to dismiss Sungwoo’s appeals for lack of jurisdiction.
The government contended that ASBCA lacked jurisdiction to hear Sungwoo’s claims under the Contract Disputes Act (CDA). The CDA grants the ASBCA jurisdiction to hear claims involving contracts entered into by an executive agency of the United States. The U.S. government argued that Sungwoo’s contracts were not contracts entered into by an executive agency because they were funded by the ROK. The U.S. government focused in particular on language in one of the agreements between the U.S. and the ROK, which suggested that the U.S. government entered into task orders as an agency for the ROK.
The board was not persuaded by the government’s position. The board noted that under its own and the Federal Circuit’s precedent, it is not the source of funding that determines whether a contract falls under the CDA. Instead, the determining factor is whether the U.S. benefits from the procurement. Here, the board found that the work performed under Sungwoo’s various task orders benefitted the U.S. The agreements between the U.S. and the ROK indicated that the U.S. selected the projects to be funded by the ROK. Further, those agreements state that equipment, supplies, and services funded by the ROK are acquired for the official use of the U.S. Armed Forces. The task orders themselves stated that the work was performed for the benefit of the U.S. The record did not support the government’s contention that the U.S. was acting as a mere purchasing agency for the ROK. Accordingly, the board had jurisdiction to hear the claims arising under Sungwoo’s contracts.
The government also argued that ASBCA lacked jurisdiction to hear Sungwoo’s CPARS related claims. In its complaint, Sungwoo alleged the government had engaged in fraudulent conduct by requiring Sungwoo to forge documents and then penalizing the company for not going along with the fraud by giving it unsatisfactory CPARS ratings. The government contended that ASBCA did not have jurisdiction to hear fraud claims.
The board agreed that it lacked to jurisdiction to consider allegations of fraud. Nevertheless, the board did not agree with the government’s characterization of Sungwoo’s claims. Despite use of the word “fraud,” Sungwoo was really making one assertion—the government acted arbitrarily or in bad faith when it evaluated Sungwoo as unsatisfactory, and when it refused to exercise its options. The board has jurisdiction to hear objections to arbitrary and capricious government conduct. The board viewed the allegations regarding falsification of documents and fraud as supportive of the central, bad faith claim.
The government further argued that ASBCA could not hear Sungwoo’s claim for punitive damages. The board agreed with the government. ASBCA does not have authority to award punitive damages.
The government also moved to strike assertions from Sungwoo’s first appeal in which the company alleged it that the government’s failure to award it additional contracts was a de facto suspension or debarment. The board found that these allegations were in the nature of a bid protest, which it does not have jurisdiction to consider. Accordingly, the board struck the allegations of suspension and debarment.
The government also moved to strike or dismiss allegation from the second appeal concerning suspension and debarment, but the board did not find these problematic. The claims in the second appeal did not seek relief that would require the board to determine whether Sungwoo had been suspended or debarred. Rather, the allegations related to the Sungwoo’s central argument that the government had acted arbitrarily. The board denied the government’s motion with respect to the suspension and debarment issues in the second appeal.
Finally, the board struck allegations concerning two of Sungwoo’s other claims. Sungwoo argued that the government acted in bad faith when it issued a stop work order on one of the task orders. The board found that the parties had actually settled this claim. Additionally, the board struck some other allegations regarding the evaluation of Sungwoo’s performance as duplicative.
Sungwoo is represented by Song Yong Eui of Central IP & Law. The government is represented by Raymond M. Saunders, Dana J. Chase, Major Bruce H. Robinson, and Major Stephen P. Smith of the U.S. Army.
