Government’s motion for summary judgment on claims seeking an equitable adjustment of the contract price is denied in part, where the board found a genuine dispute over the allegation that government officials had indicated to the appellant that the agency would renegotiate pricing after a contract novation, which led the appellant to acquire the assets of the incumbent contractor. The government’s motion is granted in part, where neither the contract nor the modification incorporating the novation required the government to renegotiate pricing, and therefore the appellant could not claim the government broke the covenant of good faith and fair dealing by declining to negotiate pricing.
Cooper/Ports America, LLC appealed the government’s denial of its claims for additional compensation under its contracts for stevedoring services. The government moved for summary judgment.
The United States Transportation Command initially awarded the contract to Shippers Stevedoring Co., and C/P A later purchased Shippers’ interest in the contract and entered into a novation agreement.
During C/P A’s negotiations with Shippers over the purchase of its assets, the appellant learned that Shippers was performing the contract at a loss. C/P A raised this issued with the agency contracting officer, explaining that Shippers’ military contracts had weakened its financial stability to the extent it had to sell its assets. In response, the CO stated that once C/P A novated the contact, it could file a claim and the agency would “work with” the company. The appellant interpreted this statement as an assurance the government would negotiate the contract’s prices. Accordingly, C/P A concluded the purchase of Shippers. C/P A also asserted that a second CO indicated the agency would “work with” the firm on adjusting the contract prices after the novation.
However, when the contract was novated, the agency issued a modification that did not commit the government to change prices or hold any negotiations. On the contrary, it stated that no terms and conditions would change, other than the identify of the contractor performing the work. C/P A asked the agency to revise the contract price, but the agency refused. The appellant filed an intent to file claim asserting its right to contract reformation and later filed a request for equitable adjustment, asserting that the contract should be reformed due to a unilateral mistake. Finally, C/P A filed certified claims, which were denied. This appeal followed, and the government moved for summary judgment.
C/P A argued the government misrepresented its intent to renegotiate the contract price when it stated it would “work with” the appellant after the contract was novated. First, the government argued the board lacked jurisdiction over the misrepresentation claim because it is actually a fraudulent inducement claim, which sounds in tort. However, the board held that the misrepresentation claims relate to a contract by challenging the validity of an express contract.
Second, the government argued the board did not possess jurisdiction over the portion of the misrepresentation claim related to the conversation with the first CO because C/P A did not present those facts to the CO in its initial claim. However, the board noted that C/P A did introduce evidence of the conversation with the second CO, whom the appellant alleged made the same representation about the agency’s willingness to negotiate pricing. While the appellant did not raise the initial conversation in its claim, the introduction of this earlier conversation did not alter the nature of the original claim. Rather, the nature of C/PA’s misrepresentation claim continued to be that the government allegedly misrepresented its intent to renegotiate prices when it stated that it would work with C/PA. Therefore, C/PA’s assertions about the first conversation did not constitute a new claim.
Third, the government argued the COs never stated they would “negotiate” prices during either conversation, and therefore the claim should fail as factually deficient. However, the board noted the appellant disputed this assertion with declarations and testimony from employees who attested that the COs stated the government would “work with” C/P A. Moreover, the board found it reasonable to infer from any statement that the government would work with C/P A that the government would renegotiate the contract’s prices, even if the COs did not use the precise word “renegotiate.” The board held that this genuine dispute precluded summary judgment.
Finally, the government argued C/P A could not rely on the latter conversation because it already had signed the asset purchase agreement with Shippers and submitted a request for novation prior to that conversation. However, the board found that whether C/P A relied upon the October conversation raised factual issues genuinely in dispute. For example, the board questioned whether C/P A understood the alleged October promise as a reaffirmation of any earlier May promise to work with C/P A, or whether C/P A could and would have revoked the asset purchase agreement and novation request absent the October promise.
In its second claim, C/P A asserted the government breached the covenant of good faith and fair dealing by declining to negotiate pricing. The board denied this claim and granted the government’s motion for summary judgment. Even inferring that the COs made pre-modification representations that they would renegotiate the contract’s prices, the contract itself did not require the government to do so. Further, the government’s later refusal to negotiate prices did not eliminate or rescind an existing provision. Therefore, there was no evidence the agency engaged in an improper bait and switch. The board held that C/P A’s claim attempted to create duties inconsistent with the express terms of the contract.
Further, the board explained that the claim related to the formation of the novated contract that made C/P A a party to the agreement. The board held that C/P A attempted to parse the alleged pre-modification promise to renegotiate prices and the alleged post-modification failure to keep that promise. Even though the alleged breach occurred after the modification, it dealt with good faith in the formation of the contract, i.e., pre-award conduct.
Cooper/Ports America LLC is represented by W. Barron A. Avery, William T. DeVinney, William B. O’Reilly, and Katherine L. McKnight of Baker & Hostetler LLP. The government is represented by Jeffrey P. Hildebrant, Air Force Deputy Chief Trial Attorney, and by Lieutenant Colonel Sondra Bell Nensala, USAF, Caryl A. Potter III, Danielle A. Runyan, and Lawrence M. Anderson, Trial Attorneys.
