Appeal of a claim seeking to recover wages for actors hired by the contractor is denied. The contractor provided actors to the Army for training at bases in California. While the contractor was performing the contract, the California Supreme Court ruled that employees working a 24-hour shift had to be paid for 24 hours. The actors, who were working 24-hour shifts but only being paid for 13 hours, sued the contractor seeking additional compensation. The contractor settled the suit and then submitted a claim for the costs of the settlement and for attorneys fees. The ASBCA determined the contractor could not recover these costs from the government. The contractor had a firm-fixed prize contract under which it was required to bear the risk of increased costs. Also, the contractor could not recover under the Service Contract Act clause because that onlyapplies to federal, not state, wage determinations. The board further found that the contractor could not recover under a mistake of fact theory because a mistake about a state wage determination is a mistake of law, not fact.
The Army awarded two task orders to Parsons Government Services, Inc. for the provision of role players, i.e., actors, as bases on California. The Army uses actors to train soldiers. The actors help soldiers interact more realistically with inhabitants of another country.
The task orders were firm-fixed price contracts. The Army had notified Parsons prior to proposals that the task orders would be subject to Department of Labor (DOL) wage determinations as well as California wage rates and overtime laws. Prior to issuance of the task orders, the DOL had determined that actors working for the Army in 24-hour shifts had to be paid a minimum of 13 hours. In accordance with this DOL determination, Parsons had proposed to compensate the actors for 13 hours of payment for each 24-hours day the actors were onsite.
After the Army issued the task order, the California Supreme Court held that under a California state wage order, security guards working 24-hour on-call shifts were entitled to 24 hours of payment. Based on this holding, actors employed under Parsons’ tasks order brought a class action suit in federal district court against Parsons seeking compensation for 24-hour workdays. Parsons settled the suit before trial. The district court never actually decided whether the California Supreme Court case applied to the actors.
Following its settlement of the class action, Parsons requested a $2.4 million equitable adjustment from the Army. This amount represented Parsons’ settlement with the actors as well the attorneys’’ fees from the class action suit. The Army denied the request. Parsons submitted a certified claim for the $2.4 million, but the Army denied that too. Parsons then appealed to the ASBCA.
On appeal, Parsons argued that it was entitled to recover its settlement and attorneys’ fees under the FAR subpart 31.2 cost principles. The board, however, found those cost principles inapplicable. Parsons’ task orders were firm-fixed price, not cost-reimbursable contracts. Under a firm-fixed arrangement, Parsons assumed the risk and responsibility for all costs and resulting loss or profit. Indeed, the board noted, the Army had put Parsons on notice that the task orders were subject to California wage regulations. To the extent the California Supreme Court case on security guard wages prompted Parsons to settle its case with the actors, Parsons bore the risk of that exposure.
Parsons next argued that it was entitled to recover costs under the Service Contract Act (SCA) clause in the task orders. The SCA clause requires contractors to comply with DOL wage determinations in effect during the term of a contract. If DOL makes a wage determination that increases wages, the SCA clause requires the government to adjust the contract price to reimburse the contractor for the increase. Parsons contended that the California Supreme Court decision qualified under the SCA clause as an increased wage determination, and that the Army should have adjusted the contract price accordingly.
The board rejected this argument, reasoning that the SCA clause applies to DOL wage determinations. Nothing in the clause suggests that the government is to assume the costs of wage increases resulting from state wage orders. Moreover, the board continued, even if SCA applied to state orders, the district court in the actors’ class action had never actually determined that the California decision applied to Parsons’ task orders.
Finally, Parsons argued that the parties made a mutual mistake of fact regarding the actors’ wages and that the contract should be reformed to correct the mistake. Parsons contended that the parties mistakenly believed that Parsons would only have to pay the actors for 3 hours a day. But the board opined that a mistake about whether a state wage order applies is not a mutual mistake of fact but a mistake of law. A mistake of law is not grounds for reformation.
Moreover, Parsons was not alleging that the parties made a mistake based on a fact existing at the time of contracting. Rather, Parsons was alleging that the parties were mistaken about the costs Parsons would incur during performance. Assumptions about future costs cannot establish a mutual mistake claim.
Indeed, even if the alleged mistake was a mistake of fact, it was not clear it was really a mistake. Again, Parsons settled the class action before the district court ruled on whether the California Supreme Court decision applied to the task orders. Thus, whether Parsons was subject to the California wage order was still a question, not a fact of which parties could be mistaken.
Parsons also alleged the parties made a mistake in believing that DOL had required that the actors could be paid no more than 13 hours. Again, the board noted that a mistake about a DOL order is not a mistake of fact but a mistake of law. Moreover, nothing in the record indicated that either party actually believed the DOL restricted payment to 13 hours a day.
Parsons is represented by Michael R. Rizzo of Pillsbury Winthrop Shaw Pittman LLP. The government is represented by Scott N. Flesch and Captain Richard W. Hagner of the Army.
ASBCA - Parsons Government Services