Appeal of a final decision denying a claim for lost profits is dismissed for lack of jurisdiction, where the appellant’s initial and amended termination settlement proposal did not include these costs. The board rejected the appellant’s attempt to equate lost profits to lost opportunity costs, which were raised in the initial claim.
NVS Technologies Inc. appealed from two final decisions issued by the Department of Homeland Security contracting officer denying its claim for lost profits, lost opportunity cost, and cost of bad credit. The government moved to dismiss both appeals.
In 2010, DHS awarded NVS a cost-reimbursable, incrementally funded research and development contract, which was terminated for convenience in 2014. NVS submitted a initial termination settlement proposal of $3,790,149.20. The government later made a partial payment of future termination costs of $1,139,729.60. However, after a Defense Contract Audit Agency audit, the CO concluded that the agency had overpaid appellant’s contract costs and termination costs, that there was no further amount due NVS, and that because of the overpayments, NVS owed the government $606,771.
In January 2015, during an attempt to negotiate a resolution of the initial TSP, NVS submitted to the CO what it characterized as a settlement proposal and what the CO characterized as a counter-offer in the amount of $12.7 million. The CO requested supporting documentation, and NVS forwarded a spreadsheet totaling $12,816,468.22 with information allegedly supporting itemized costs which totaled $3,656,197.82. Supporting documentation for two additional categories which totaled $10,300,000 was not submitted. Regarding this amount, NVA claimed $10 million for lost opportunity costs and $300,000 for the cost of bad credit, with some limited descriptions of these amounts.
The CO issued a final decision affirming his original conclusion that the government had overpaid NVS and that NVS owed a refund. The decision noted that NVS had not submitted supporting documentation for its $10.3 million claim for lost opportunity and bad credit costs. These appeals followed. During the appeals process, NVS revised its lost profits claim upward to $281,967,625.
The government moved to dismiss NVS’s claim for lost profits on two grounds. First, the government argued the claim constituted a new claim, that it was not certified, and that it had not been presented to the CO. Second, the government maintained that as a matter of law, lost profits are too remote and speculative to be compensable.
In response, NVS argued this claim was not new, but related to its claim for lost opportunity cost in its counter offer and amended TSP. NVS maintained that the nature of its dispute with the agency had not changed. NVS argued the contract was terminated in bad faith and that it was entitled to damages. The appellant also argued the alleged distinction between lost opportunity costs and lost profits is not accurate because they are both expectation damages whose purpose is to place the non-breaching party in the position that they would have been but for the respondent’s breach of contract.
CBCA disagreed, explaining that it did not view the issue as a semantic argument. While NVS’s argument focused on various phrases in its post-appeal filings and the extensive material in its supporting documentation, the discussion of its post-appeal filings makes no mention of or comparison to the information submitted to the CO in the initial TSP, counter-offer, or amended TSP.
Comparing the original claim to the information during the appeals process, the board first noted the significant discrepancies among the original TSP of $3,790,149.20, the counter-offer and amended TSP of $12,816,468.22, and the alleged lost profits of $281,967,625. The board found the initial and amended TSPs sought lost opportunity costs and that NVS raised lost profits only during the appeal process. Prior to the filing of the pre-hearing brief, NVS had made no claim for lost profits, and the board was not persuaded by the appellant’s attempt to equate lost profits and lost opportunity costs.
Further, the board noted that the initial TSP contained no allegation of lost opportunity cost, and that the CO found no support for its $12 million claim for these costs in the amended TSP, no even the calculation NVS used to arrive at that amount. In light of the paucity of information submitted in the counter-offer, the board declined to find that the claim for lost profits in the amount of $281,967,625 was encompassed within the claim for lost opportunity cost previously submitted to the CO.
Accordingly, the board held the claim was clearly a new, materially different factual and legal claim for relief than was previously submitted to the CO and therefore it lacked jurisdiction to consider it.
The government also moved to dismiss NVS’s claim for lost opportunity cost and cost of bad credit, arguing that the $10.3 million claim was unrecoverable as a matter of law. The government argued that the claims for lost opportunity cost and cost of bad credit are in the nature of a claim for “destruction of business,” and therefore consequential damages. Further, since NVS had not provided supporting documentation for these costs previously, the government argued that NVS attempted, by asserting lost profits, to transform its claim for these costs into an anticipatory profits claim. The government also asserted these costs were not addressed in NVS’s pre-hearing brief, and that they may have been rolled up in the $231 million claim for lost profits.
However, CBCA found it was not clear that NVS had included the previously asserted amounts for lost opportunity costs and cost of bad debit in its lost profits claim. While there was scant information submitted as to lost opportunity cost and cost of bad credit, in the counter-offer and certified amended TSP, both were addressed by the CO’s final decisions. The board deferred ruling on the motion until after the hearing on the merits.
NVS Technologies Inc. is represented by James S. DelSordo of Argus Legal, LLC. The government is represented by Marshall Caggiano and Christopher M. Kovach, Office of the General Counsel, Department of Homeland Security.
