The contractor claimed it was entitled to recover costs incurred due to disruptions caused by the government ordering excessive work. While the contractor had calculated the number of disrupted hours, it had not tied any specific work order to a particular disruption. Rather, the contractor sought to prove liability and damages through the “measured-mile” theory, which establishes a disruption by comparing a disrupted period of performance with a period that was not disrupted. The government argued the board should reject the measured mile theory as unreliable. But the ASBCA declined finding that it has long approved of the measured-mile as means of assessing impacts on productivity.
Appeal of Lockheed Martin Aeronautics Company, ASBCA No. 62209
Background
Lockheed Martin Aeronautics Company had a contract with the Air Force to upgrade C-5 Galaxy aircraft. The contract allowed the government to add over and above (O&A) work—i.e., work discovered during the overhaul—that was outside the scope of the contract. The contract gave Lockheed the right to an equitable adjustment for any additional O&A work.
Lockheed submitted a claim alleging that the Air Force had directed it to perform excessive O&A work. Lockheed contended that during performance, the government began requiring the company to repair legacy defects that did not impact flight safety or functionality. While Lockheed had been paid for the direct costs of this work, it claimed that it incurred over $143 million in costs due to disruption caused by the additional O&A work. Lockheed was unable to document the disruption. Instead Lockheed relied on the measured-mile theory for calculating its damages. Under that theory, a contractor can quantify a disruption cost by comparing the productivity of a period impacted by disruption with the productivity of another period that was not disrupted. Here, Lockheed compared the hours it spent working on this contract with the hours on a previous aircraft overhaul contract.
The Air Force didn’t respond to the claim. Lockheed appealed the deemed denial to the ASBCA, alleging constructive change and breach of the implied duty of good faith and fair dealing. The parties both moved for summary judgment.
Analysis
Measured-Mile
The government argued in its motion that Lockheed could not prove liability, causation, or damages through the measured-mile theory. The government claimed that measured-mile throgy was unreliable statistical analysis. Lockheed had not tied any particular request for additional O&A work to specific disruption, and the measured-mile theory could not salvage the unproven claims.
But the board found that Lockheed had not erred in relying on the measured-mile method. The ASBCA has previously approved the method as a means of determining the impact of productivity. The board rejected the government’s arguments to the extent they were predicated on a claim that measured-mile method cannot prove liability and damages.
Constructive Change and Disrupted Work
In Count I of its complaint on appeal, Lockheed alleged the high volume of extra O&A work disrupted its performance by adding over 400,000 extra production hours. In count II, Lockheed alleged that overzealous inspection by the government resulted in the excess O&A work. The government argued that the change claims failed because there had been no change to the volume of O&A work required under the contract. The contract permitted the government to order additional O&A work and did not limit the amount of requests the government could make.
The board, however, disagreed with the government’s premise, namely, that the absence of a cap on requests for O&A work meant there could never be a constructive change. Indeed, the court noted that the SOW contained a baseline level of work, which Lockhedd was told to anticipate, but which it exceeded. The board reasoned there were triable issues on constructive change that precluded summary judgment for the government.
Breach of Duty of Good Faith and Fair Dealing
The government attempted to argue that the board lacked subject matter over count III of the Lockheed complaint,which alleged the government had breached the implied duty of good faith and fair dealing by requiring Lockheed to make unnecessary repairs. The government contended this theory had never been presented in the underlying claim and thus could not be raised on appeal.
The board, however, found that Lockheed had set forth the facts underlying the good faith and fair dealing in its complaint, but had pleaded the specific count as an alternate legal theory. Because the count was not based on a new set of operative facts, the board determined it had jurisdiction.
Release
The parties executed several contract modifications during performance. Each modification contained release language. The government contended that by executing these modifications, Lockheed had released whatever claims it had against the government.
The board didn’t find the government’s argument compelling’. The plain language in the releases indicated they were limited . The releases stated that they only applied to claims “arising out of or in connection with the changes effected hereby.” The releases were thus keyed to the work required and the contract changes brought about each modification. The releases did not apply to all of Lockheed’s potential claims.
Lockheed is represented by Stephen J. McBrady, J. Chris Haile, Skye Mathieson, Michelle D. Coleman, and John Nakoneczny of Crowell & Moring, LLP. The government is represented by Jeffrey P. Hildebrant, Caryl A. Porter
