[00:00:00] Speaker 05:
I want to thank Council for their accommodation.

[00:00:02] Speaker 05:
I know this is an unusually scheduled sitting and I really appreciate your willingness to accommodate our timeframe.

[00:00:10] Speaker 05:
First case this morning, this afternoon is 15-1320 Tug Hill Construction versus Army.

[00:00:17] Speaker 05:
Mr. Dugdale, whenever you're ready.

[00:00:28] Speaker 05:
And before I begin, I'll also acknowledge again, we've had a visiting judge, district court judge here this week, and he's back again for this special session.

[00:00:36] Speaker 04:
Happy to be back.

[00:00:36] Speaker 04:
Thank you.

[00:00:37] Speaker 04:
Thank you very much.

[00:00:40] Speaker 04:
Good afternoon.

[00:00:41] Speaker 04:
May it please the court.

[00:00:42] Speaker 04:
My name is Brian Dugdale, the law firm of Varela Lee, that's in Guarino.

[00:00:47] Speaker 04:
With me, my co-counsel, Ray Muller.

[00:00:50] Speaker 04:
And I've reserved at the clerk's office two minutes for a bottle if that's acceptable to the court.

[00:00:55] Speaker 04:
Thank you.

[00:00:58] Speaker 04:
This case is about a set of circumstances that arose out of a problem between the United States Army Corps of Engineers and a set of privatized utility providers at Fort Bliss in El Paso, Texas.

[00:01:14] Speaker 04:
The set of circumstances that arose out of this relationship has been variously and I think very fairly characterized by the government as an irreconcilable conflict, an unbridgeable gap, a dilemma.

[00:01:28] Speaker 05:
And of course- Well, explicitly how?

[00:01:31] Speaker 05:
Because you couldn't get the private utilities to agree?

[00:01:36] Speaker 05:
Or what was the essence of the unbridgeable gap or problem?

[00:01:40] Speaker 04:
Certainly, Your Honor.

[00:01:42] Speaker 04:
And the problem dates back several years before the project.

[00:01:44] Speaker 04:
And essentially, the privatization, at least ostensibly, transferred ownership rights from the Army to the privatized utility providers in the actual physical infrastructure on the project, the pipes, the conduits, the gas lines,

[00:01:59] Speaker 04:
Now, that's done by contract between the Army and the privatized utility providers.

[00:02:05] Speaker 04:
Following that privatization, which took place in 2003 and 2004, the Army separately embarked on a massive construction expansion at Fort Bliss.

[00:02:16] Speaker 04:
And when I say massive, we're talking about four plus billion dollars, tripling the size of the base from 9,000 to 30,000 people.

[00:02:24] Speaker 01:
So let's go back just a little bit.

[00:02:25] Speaker 01:
When you say it privatized the utilities,

[00:02:28] Speaker 01:
So I understand that that means that the US government had no interest in the utilities anymore.

[00:02:36] Speaker 01:
Everything had been transferred over to the private parties.

[00:02:39] Speaker 04:
That's correct, your honor, with the exception that the period of transfer lasts for 50 years and it's subject to renewal.

[00:02:46] Speaker 04:
It's also subject to modification.

[00:02:48] Speaker 04:
So if the army, the department of the army wants to take those systems back, ultimately it has a right to do so.

[00:02:56] Speaker 04:
For the time being, it has not done so.

[00:02:58] Speaker 04:
And so for the period that we're talking about, the ownership of those systems rested with the private utility providers.

[00:03:06] Speaker 02:
And the fact that it was privately owned was made entirely known to your client before they bid on this project, correct?

[00:03:13] Speaker 04:
Your Honor, the word owned was certainly used in the request for proposals.

[00:03:17] Speaker 04:
And throughout my argument, I'll describe why that term is problematic.

[00:03:21] Speaker 02:
Well, what about special notice, which says,

[00:03:24] Speaker 02:
that the existing forklift main post utility systems are privately owned?

[00:03:30] Speaker 04:
It certainly does, your honor.

[00:03:31] Speaker 04:
It says that they are privately owned to a contractor who is awarded work by the government, by the army.

[00:03:39] Speaker 04:
The term owned in terms of a third party is not necessarily indicative that the contractor must take some action outside of its contract with the government in order to perform that work.

[00:03:52] Speaker 01:
What about privately owned?

[00:03:54] Speaker 01:
That's a definite signal that it's outside of the government.

[00:03:58] Speaker 01:
Certainly, your honor.

[00:03:59] Speaker 04:
And I would compare the utility privatization to your home or my home.

[00:04:04] Speaker 04:
If the government hired a contractor to tear down my house and rebuild it to the government specifications, the government would have the obligation to secure the right to do that before it could possibly expect the contractor to go and secure those rights.

[00:04:18] Speaker 05:
Yeah, but that's what, as Judge Stark said, we refer to the special notice.

[00:04:22] Speaker 05:
And that seems pretty clear.

[00:04:24] Speaker 05:
that you were on notice that the circumstances were one where you were responsible for trying to dislodge some of the exercise or whatever, that that was your responsibility and not the government's, right?

[00:04:38] Speaker 04:
Respectfully, I disagree, Your Honor.

[00:04:39] Speaker 04:
The special notice, and this again goes back to a time period prior to the CAB 3 and 4 contract award, the rights of the utility providers as compared to the rights of

[00:04:52] Speaker 04:
government contractors who had been awarded work was the subject of voluminous discussions over a period of years from 2006 through 2010 and leading up until the moment of the CAB 3 and 4 task order award.

[00:05:06] Speaker 04:
Universally, during every single conversation, every analysis, every memorandum and every email, the government internally and including in conversations with council and memorandum from council determined over and over again

[00:05:20] Speaker 04:
that the only viable alternative to solving this problem that they had, and again, the problem being the rights having been transferred and the Army not having incorporated coordination with those utility providers into its design for the expansion program, the only viable alternative for solving that dilemma was that the METOC contractors perform work.

[00:05:43] Speaker 04:
And coordination, that term, is used over and over again in those conversations, and the meaning of coordination

[00:05:50] Speaker 04:
throughout that entire time period, and leading up to the award of CAB 3 and 4, was that the Maytalk contractor would perform the utility system's work.

[00:05:59] Speaker 01:
That may be the case, but we're dealing here with a specific notice that went to Tug Hill.

[00:06:08] Speaker 01:
And it says, typically, utility owners will remove existing utilities, install the new primary utility systems, and make the final connections.

[00:06:18] Speaker 01:
Regardless of what had been understood before, here's a special notice that seems to me to be telling you how this is going to work.

[00:06:27] Speaker 04:
Understood, Your Honor.

[00:06:28] Speaker 04:
And again, respectfully, we disagree with what that notice means.

[00:06:34] Speaker 04:
And the fact that indeed it does say typically, it does not say it must be performed.

[00:06:39] Speaker 04:
It does not say that the contractor must secure the right to perform the work from the utility providers.

[00:06:45] Speaker 04:
It says you must coordinate and finalize the utility work.

[00:06:48] Speaker 02:
And then it goes on to say, contractors shall be responsible for negotiating and finalizing utility system work with the utility providers.

[00:06:57] Speaker 02:
Where's the ambiguity there?

[00:06:59] Speaker 04:
It doesn't say negotiate an agreement.

[00:07:00] Speaker 04:
It doesn't say subcontract to them.

[00:07:03] Speaker 04:
It says coordinate, negotiate, and finalize.

[00:07:07] Speaker 04:
And those terms in the contracting world, we would assert, are terms of art that mean something

[00:07:13] Speaker 04:
different in the context of the entire contract.

[00:07:16] Speaker 01:
So we've pulled out three separate provisions in the special notice and we've asked you about it, and you point out the ambiguities in each one of the provisions, but read as a whole.

[00:07:26] Speaker 01:
When you read that whole, that provision as a whole, isn't it putting the contractors on alert that you need to get together with the utility companies because they own the utilities and typically, most of the time, all the time,

[00:07:44] Speaker 01:
They do the work.

[00:07:48] Speaker 04:
I understand the question, Your Honor, and once again, I think that the special notice, when read in context with the entire contract, and as we've cited in our initial brief, there are many, many provisions of the contract that specifically differentiate work that the contractor would perform from work that the utility provider would perform.

[00:08:06] Speaker 05:
So you're reading this special notice as saying what to you, that you don't have to

[00:08:12] Speaker 05:
be bothered by the fact that these utility systems are privately owned and you can do whatever you want, not withstanding the existing arrangement.

[00:08:20] Speaker 05:
Is that how you read the special notice?

[00:08:21] Speaker 04:
Certainly not, your honor.

[00:08:23] Speaker 04:
And Tug of Hill does not argue that there was no responsibility to coordinate, but as we set forth in the brief coordination in this case, as it meant for every single discussion that the army ever had about this issue,

[00:08:38] Speaker 04:
was to work with the utility providers to connect the new construction to the old construction.

[00:08:44] Speaker 04:
Perhaps the utility providers conduct inspections, work with them in the field as necessary to get those inspections done, but never at any point up through the award of the contract had those terms been used to require a METOC contractor to secure the right to perform work

[00:09:04] Speaker 04:
that the government had already asked it to perform.

[00:09:06] Speaker 01:
You're couching these arguments today under the term mattock.

[00:09:12] Speaker 01:
But really, you didn't make those arguments below, did you?

[00:09:16] Speaker 01:
I mean, your arguments today have been with respect to Tug Hill, the company.

[00:09:22] Speaker 01:
But now you're making the arguments under the mattock label.

[00:09:28] Speaker 04:
And allow me, Your Honor, to explain my reference to the Maytalk.

[00:09:32] Speaker 04:
Tug Hill was in a pool of Maytalk contractors.

[00:09:36] Speaker 04:
Ultimately, they won the award for this particular task order under their Maytalk contract.

[00:09:40] Speaker 01:
They won several other awards as well.

[00:09:42] Speaker 01:
But Tug Hill has a Maytalk contract with the government, correct?

[00:09:45] Speaker 01:
That's correct.

[00:09:47] Speaker 01:
So see, there's two different contracts.

[00:09:50] Speaker 01:
And I think we're only dealing with the one between Tug Hill and the government.

[00:09:55] Speaker 01:
But you're trying to insert the Maytalk

[00:09:57] Speaker 01:
contract and argue good faith in dealing and constructive change.

[00:10:03] Speaker 01:
But you didn't make those arguments below, did you?

[00:10:07] Speaker 04:
Your Honor, I don't think that we specifically enumerated whether good faith and fair dealing arose out of the task order versus the METOC.

[00:10:15] Speaker 04:
But we certainly did argue that the implied covenant of good faith and fair dealing was something that was applicable and was in play throughout the period before the task order award for CAB 3 and 4.

[00:10:26] Speaker 04:
And so by implication, that means it was in play once the May talk was executed.

[00:10:30] Speaker 01:
All of the events leading up to that- Well, you understand that if you didn't make the arguments with respect to the May talk, then we can't entertain those arguments today.

[00:10:39] Speaker 04:
I certainly understand that, Judge.

[00:10:41] Speaker 04:
And again, respectfully, I think that the arguments as they're presented at the lower court necessarily implicate good faith and fair dealing during the pre-task order period.

[00:10:52] Speaker 02:
Let me come back to the special notice for a moment.

[00:10:54] Speaker 02:
That first sentence that I read you about the systems being privately owned, in your view, what is added?

[00:11:01] Speaker 02:
What is the meaning of that provision of the contract?

[00:11:05] Speaker 04:
Well, Your Honor, to Sugg Hill, as the record shows, it certainly was something that raised their attention.

[00:11:16] Speaker 04:
They took a look very specifically at that provision.

[00:11:19] Speaker 04:
They're privately owned.

[00:11:20] Speaker 04:
What does that mean in the context of the contract award that we've already been given, where across 1,000 pages of specifications, it very specifically delineates what work we do versus what the utility providers would do.

[00:11:34] Speaker 04:
And it means exactly that they're privately owned and we have to consider it for purposes of coordination for their work, not for our work.

[00:11:42] Speaker 04:
Whatever arrangements the government may have made to secure the right to perform this contract, that's the government's obligation.

[00:11:48] Speaker 04:
The government designed this expansion program, and throughout the course of the period of years in creating this program- You say it's the government's job, but the special notice does precisely the opposite, which it's your job.

[00:12:01] Speaker 05:
It points out that typically this is what utility owners do, and that you'll be responsible for changes to that circumstance, right?

[00:12:11] Speaker 04:
Well, Judge, I think that the special notice indicates that we will be responsible for coordinating

[00:12:18] Speaker 04:
in the context of the entire contract.

[00:12:20] Speaker 04:
In other words, the work is ours.

[00:12:22] Speaker 04:
And we've got to make sure that it complies with their standards.

[00:12:25] Speaker 04:
We've got to make sure that they inspect it.

[00:12:27] Speaker 04:
We've got to work with them in the field as any contractor.

[00:12:29] Speaker 01:
It doesn't say coordinate.

[00:12:30] Speaker 01:
It says negotiating and finalizing.

[00:12:33] Speaker 04:
Certainly.

[00:12:34] Speaker 04:
And finalizing that work, once it's in the ground, is connecting it to the old system.

[00:12:39] Speaker 04:
What's negotiation then?

[00:12:40] Speaker 04:
And making it work.

[00:12:41] Speaker 04:
What's negotiating?

[00:12:42] Speaker 04:
Whatever discussions need to happen between Tug Hill and that utility provider in the field to make that work,

[00:12:48] Speaker 04:
happen and turn it on at the end of the day, that's coordinating, negotiating, and finalizing that utility system's work.

[00:12:55] Speaker 04:
But there is nothing in the black and white language of that special notice that requires Tug Hill to subcontract all of the utility system's work to the utility providers.

[00:13:05] Speaker 02:
So you might reach a better deal than that with the UPs.

[00:13:08] Speaker 02:
Nobody knows for sure.

[00:13:09] Speaker 02:
But the board found that this predicament, such as it was, was one that the government

[00:13:15] Speaker 02:
tried to outsource, and your client picked it up and knowingly took it.

[00:13:19] Speaker 02:
Where's the error in the board's finding?

[00:13:23] Speaker 04:
Well, Your Honor, I think the error in the board's finding is twofold.

[00:13:27] Speaker 04:
First, with respect to constructive change, once again, Tug Hill does not read that notice to require the arrangements that ultimately were forced upon Tug Hill.

[00:13:36] Speaker 04:
The facts very clearly proved that after the award, Tug Hill didn't have any option.

[00:13:42] Speaker 04:
No self-performance,

[00:13:43] Speaker 04:
no deals with the UP to have a combination of inspections and review.

[00:13:48] Speaker 04:
It was you subcontract the work to us at whatever price we dictate.

[00:13:52] Speaker 04:
It could be $20 million.

[00:13:54] Speaker 04:
It could be $50 million.

[00:13:55] Speaker 04:
It's our work.

[00:13:57] Speaker 04:
And that circumstance is a clear departure from the coordination requirement that had long been understood by the government.

[00:14:08] Speaker 04:
Again, the only viable alternative that the government had ever come up with to solve this problem

[00:14:14] Speaker 04:
was for the Maytalk to perform the work, Tug Hill in this case, and to address the problem with the utility providers internally through government channels.

[00:14:24] Speaker 04:
That did not happen here.

[00:14:25] Speaker 04:
Also with respect to constructive change, we feel that the findings of fact were arbitrary, capricious, not supported by the substantial weight of the evidence.

[00:14:35] Speaker 04:
Eight days of trial, 625 exhibits, 16 witnesses, and the board found 25 findings of fact of which

[00:14:43] Speaker 04:
probably 15 to 18 are not in dispute.

[00:14:47] Speaker 04:
The board completely ignored the period of time following the award of the task order, which of course is critical to determining whether in fact the change occurred.

[00:14:55] Speaker 04:
There were numerous events, including the pre-construction meeting, where the utility providers effectively claimed the work and told Tug Hill, that's our work, you can't do it.

[00:15:06] Speaker 04:
Up to that point, Tug Hill had still been planning on using its own forces and subcontractors to perform the work.

[00:15:11] Speaker 04:
So that critical period is necessary to determine whether a change in fact occurred.

[00:15:19] Speaker 04:
Secondly, Your Honor, we believe the board clearly erred in determining that the implied covenant of good faith and fair dealing did not apply in the post-MATOC pre-task order period, as I discussed earlier.

[00:15:31] Speaker 04:
And secondly, also with respect to the implied covenant of good faith and fair dealing, the findings of fact are again arbitrary, capricious, and not supported by the substantial evidence

[00:15:42] Speaker 05:
Thank you.

[00:15:43] Speaker 05:
You've used your rebuttal time.

[00:15:45] Speaker 05:
We'll restore two minutes if you need it at the end.

[00:15:49] Speaker 05:
Thank you very much.

[00:15:50] Speaker 05:
Mr. Gwynne.

[00:16:19] Speaker 03:
Your Honor, may it please the Court?

[00:16:21] Speaker 03:
First off, I'd like to thank the Court.

[00:16:24] Speaker 03:
I'd like to thank Mr. Dugdale personally and Mr. Dugdale's client, Tug Hill, for their accommodation in this matter.

[00:16:32] Speaker 03:
Your Honor, most of the points I was going to make have already sort of been discussed by the Court.

[00:16:36] Speaker 05:
Well, let me ask you, is it a fair read?

[00:16:40] Speaker 05:
What is your reading, bottom line, to say?

[00:16:42] Speaker 05:
starkly, what does the special notice provide?

[00:16:45] Speaker 05:
Does it say, look, these utility systems are privately owned.

[00:16:49] Speaker 05:
Unless you can get these guys to give something up, you're sunk and you better include that in the costs of what's going on here.

[00:16:56] Speaker 03:
Is that the essence of it?

[00:16:57] Speaker 03:
I think that is absolutely the essence of it, Your Honor.

[00:17:00] Speaker 03:
I would say there is an interplay, I think, that is important.

[00:17:06] Speaker 03:
Instead of just looking at the five sentences alone, there's an interplay of the sentences.

[00:17:11] Speaker 03:
I think the middle sentence is the typical requirement.

[00:17:15] Speaker 03:
In other words, what the government is doing here is putting out a sort of basic scenario of what the government thinks would happen.

[00:17:24] Speaker 03:
And then it uses the phrase, however, tying back to that typically sentence to allow the contractors, the bidders, to make their own private arrangements.

[00:17:35] Speaker 03:
And then the final sentence puts the contractor on notice that

[00:17:39] Speaker 03:
they need to include the costs of those coordination arrangements, those negotiation arrangements, those finalization costs.

[00:17:49] Speaker 05:
But read in its entirety, does it not convey the impression that all of this stuff is up for grabs?

[00:17:56] Speaker 03:
I would say, Your Honor, it is essentially the government saying all of the information that it has without speculating on possible

[00:18:09] Speaker 03:
relationships that the bidders could enter into with the utilities.

[00:18:14] Speaker 03:
So I think that's right.

[00:18:16] Speaker 03:
I would not use the term up for grabs, but I would say it permits a broad spectrum of potential arrangements.

[00:18:25] Speaker 03:
But it allows the bidders to include those costs in their bid.

[00:18:31] Speaker 02:
Isn't there evidence in the record that the government did actually know more though than it disclosed in the special notice?

[00:18:37] Speaker 02:
Didn't it know that the

[00:18:38] Speaker 02:
UPs were probably not going to allow the self-performance by whoever bid on this contract.

[00:18:44] Speaker 03:
I think the key to that is the word probably that you used in the question, Your Honor.

[00:18:50] Speaker 03:
I think there is evidence in the record and there is evidence that Tug Hill was also on notice that the sort of base position that these utility providers were going to have was that they were going to do all the work.

[00:19:04] Speaker 03:
But I think it would be

[00:19:08] Speaker 03:
speculation on the part of the government.

[00:19:10] Speaker 03:
I don't know how to have made this special notice more clear without entering into the world of speculation.

[00:19:17] Speaker 03:
If we had added a sentence that says the utility providers may claim their rights, I actually think that's pretty much covered by the typically sentence where it sets forth.

[00:19:30] Speaker 01:
How about something like utility owners will assert the right to remove

[00:19:35] Speaker 01:
create existing utilities or something that is stronger in the language other than typically, which means sometimes.

[00:19:45] Speaker 03:
I think it's possible that the government could have done that, but I think then that sort of changes the government's approach to this and the part that is codified by that however sentence.

[00:19:58] Speaker 03:
What the government was allowing the bidders to do was to enter into their own universe of arrangements.

[00:20:04] Speaker 03:
And that may not necessarily involve the utility bill.

[00:20:09] Speaker 01:
Well, I see that that's what you would like for them to do, but why kind of hide the ball here?

[00:20:14] Speaker 01:
Why not tell them upfront, this is what needs to be done, or this is the only way it can be done.

[00:20:21] Speaker 03:
Well, I would say, Your Honor, that I wouldn't say it's hiding the ball.

[00:20:25] Speaker 03:
What I would say is this is really the extent of what the government knew without getting into a sort of contemplating further action.

[00:20:33] Speaker 01:
And in addition... So if you issue the special notice with this limited knowledge that you're talking about, or you can only inform so far, or in some limited basis, then why are you holding the Tug Hill to understanding something that you do not want to explain, or that you do not understand, or that you cannot explain?

[00:21:02] Speaker 03:
Well, no, I wouldn't say that I would disagree with that characterization, Your Honor, but I would say that it's not that we couldn't explain it.

[00:21:10] Speaker 03:
First of all, we think the special notice very clearly explains that.

[00:21:14] Speaker 03:
The first sentence talks about the private ownership, and the second sentence specifically says this scope of work includes those negotiations.

[00:21:25] Speaker 03:
To say it's possible that the utility providers or we give it some amount of

[00:21:32] Speaker 03:
level of certainty that the utility providers will assert these rights, I think not only goes too far, but it just doesn't convey accurately what the government's position was.

[00:21:42] Speaker 01:
Well, what was the government's position?

[00:21:44] Speaker 01:
I mean, you argue in part that Togil should have known that they were going to have to deal directly with the utilities.

[00:21:57] Speaker 01:
On another part, you argue, we're not sure what Tug Hill should have done or what would have played out.

[00:22:04] Speaker 03:
I don't think it's that.

[00:22:04] Speaker 03:
I think it's the government's position is that Tug Hill had the freedom to negotiate some deal other than what we would have considered at the time, the typical deal.

[00:22:16] Speaker 01:
No, they didn't have the freedom to negotiate with parties other than the UPs.

[00:22:20] Speaker 01:
Correct?

[00:22:21] Speaker 01:
Correct, Your Honor.

[00:22:22] Speaker 03:
Okay.

[00:22:24] Speaker 01:
So they didn't have that freedom.

[00:22:26] Speaker 01:
That's correct, Your Honor.

[00:22:28] Speaker 02:
And what would have happened if UP refused to negotiate and just decided there's an opportunity to gouge Tug Hill?

[00:22:34] Speaker 02:
Then what?

[00:22:37] Speaker 03:
Well, I think it's, I wouldn't go for speculation in this case, but then I would assume that if there was some sort of impossible impasse, then there may have been some kind of a, you know, Tug Hill would have some sort of claim, but there wasn't in this case.

[00:22:57] Speaker 02:
Didn't they come to you all and you said your only option, your sole remedy, I think, is to negotiate with the UPs and just kind of government washed its hands of it?

[00:23:08] Speaker 03:
That's correct, Your Honor.

[00:23:09] Speaker 03:
We said the only option was to continue to negotiate with the UPs, but that's also because that is within exactly... Why didn't you say that in the notice?

[00:23:18] Speaker 01:
Your only option is to negotiate with the UPs who will do all of the work.

[00:23:24] Speaker 03:
I would say, Your Honor, that I think that's

[00:23:26] Speaker 03:
very much what the special notice does say.

[00:23:28] Speaker 03:
It doesn't use those specific language, but it says, this scope of work includes coordinating project utility requirements with the owners of the privatized utility systems.

[00:23:39] Speaker 03:
And I think that puts them on more than enough notice that those were the people to whom they had to negotiate, to whom they had to coordinate.

[00:23:48] Speaker 05:
Maybe this is completely off base and I'm not going to go with numbers because I'm not sure what's confidential and what's not confidential anymore.

[00:23:55] Speaker 05:
When you got the bids, there was a major discrepancy between the bids that you got.

[00:24:03] Speaker 05:
And the bid that was ultimately awarded, as I understand, was far lower.

[00:24:07] Speaker 05:
Didn't the government get that maybe these people aren't construing what we think the lay of the land is?

[00:24:15] Speaker 03:
No, Your Honor.

[00:24:16] Speaker 03:
And it's not in our pleadings, but in the pleadings below, it notes that there were three bidders.

[00:24:25] Speaker 03:
I believe that either all three or two of them were within the range of the government's estimates.

[00:24:33] Speaker 03:
So they were acceptable.

[00:24:34] Speaker 03:
And out of that, none of the three bids included any costs for coordination.

[00:24:43] Speaker 03:
So we didn't know.

[00:24:46] Speaker 03:
And then further, I think the government would say, there's some element of allowing for risk in this.

[00:24:54] Speaker 03:
Tug Hill as a bidder,

[00:24:55] Speaker 03:
is free to bid to this at whatever value they want, knowing that this is a fixed delivery contract and that they assume the risk for any cost overruns.

[00:25:10] Speaker 05:
Well, that's what raises questions, because you assume that in context of fear dealing and goodwill, everybody takes risks, but you make the assessment based on the same information.

[00:25:22] Speaker 05:
And that's, I guess, why we're here.

[00:25:26] Speaker 03:
That's right.

[00:25:26] Speaker 03:
That's correct.

[00:25:27] Speaker 03:
I wouldn't add another note that there's some discussion about sole source and the issue of private utilities and around that language.

[00:25:39] Speaker 03:
It's not only the special notice that that points out that this is a contractual arrangement whereby the bidder must respect existing property rights.

[00:25:51] Speaker 03:
The FAR includes a provision about that, and that provision was actually part of this contract.

[00:25:57] Speaker 03:
It's the Permits and Responsibilities Clause.

[00:26:00] Speaker 03:
It's FAR 52.236-7.

[00:26:03] Speaker 03:
So the idea that this is some sort of particularly unusual arrangement whereby a bidder or a contractor has to deal with other people's private property, I think the court pointed out correctly, you do that sometimes when you do construction on your own house, but it's also true that that's not a

[00:26:22] Speaker 03:
a particularly unusual arrangement in the term of government contracts.

[00:26:27] Speaker 03:
Um, as for the, um, your honor pointed out the Maytop contract distinguished, uh, uh, point.

[00:26:35] Speaker 03:
And on, on those grounds, I will say, um, none of Tug Hill's briefs, their, their claim to the contracting officer and nothing in any brief, uh, until here, until before this court.

[00:26:49] Speaker 03:
did anything but refer to the contract the way they defined it as the 3-4 contract, the CAB 3-4 contract, the later contract.

[00:27:02] Speaker 03:
And so we would argue that they do not have a valid case before this court because they brought it up at no previous stage.

[00:27:13] Speaker 02:
If we don't find that argument waived, that is the implied covenant under the May talk,

[00:27:18] Speaker 02:
What does the record show?

[00:27:20] Speaker 02:
How could we affirm the board on that?

[00:27:23] Speaker 02:
If you do not find that- If we reach the merits of their implied covenant argument that they're now making.

[00:27:29] Speaker 03:
Well, Your Honor, I would say that there is also no allegation around any duty that would have attached under the May talk.

[00:27:42] Speaker 03:
There's no duty that Tug Hill points to that would have included

[00:27:48] Speaker 03:
any more disclosure than what was disclosed in the plain language of the special notice.

[00:27:54] Speaker 03:
It's true.

[00:27:55] Speaker 03:
I think what Mr. Dugdale points out is that the Corps of Engineers thought about how to handle this arrangement and they contemplated alternate possibilities.

[00:28:05] Speaker 03:
There were previous CAB contracts and those contained different arrangements with how to deal with the utility providers.

[00:28:12] Speaker 02:
So why wouldn't the implied covenant, if it existed as early as the May talk,

[00:28:16] Speaker 02:
have required the government to disclose some of that internal thinking or at least even call out more clearly than they did.

[00:28:23] Speaker 02:
There's a problem here.

[00:28:25] Speaker 02:
There's a soup sandwich, whatever it is.

[00:28:27] Speaker 02:
We're offering it to you rather than be a little more coy about it.

[00:28:31] Speaker 03:
And I would argue the point we point out when we dispute the sort of language that Tug Hill used was that it was a challenge.

[00:28:38] Speaker 03:
It was the kind of contractual arrangements that happened.

[00:28:42] Speaker 03:
all the things that happen in government contracting all the time.

[00:28:45] Speaker 03:
They deal with issues like this or issues that are just as difficult as this.

[00:28:49] Speaker 03:
And it's almost the idea that the government would have to disclose alternate arrangements that it contemplated in making the contract, particularly here where the actual arrangement is very clear and places responsibility squarely on the contractors.

[00:29:10] Speaker 03:
I think goes far beyond any kind of duty of good faith and fair dealing, particularly that that would have accrued under the Maytalk.

[00:29:19] Speaker 03:
Because the Maytalk is simply about selection of the appropriate contractor.

[00:29:24] Speaker 03:
There's nothing in the Maytalk that would imply a duty of good faith to reveal items about utility providers.

[00:29:34] Speaker 03:
Utility providers are specifically

[00:29:37] Speaker 03:
an item that's contemplated in the CAB 3-4 contract.

[00:29:45] Speaker 03:
I would say as far as actions that happened from the execution of the CAB 3-4 contract and up until Tug Hill's agreement with the contractors, the items that Tug Hill talks about as being facts that were not included by the board.

[00:30:04] Speaker 03:
Those are covered in pages 28 to 31 of Mr. Dugdale's brief.

[00:30:09] Speaker 03:
And none of those facts were required by the board because the board found a plain language requirement or the board found that the special notice was clear.

[00:30:18] Speaker 03:
But the items that Mr. Dugdale talks about are a meeting wherein the utility providers asserted their rights.

[00:30:26] Speaker 03:
Well, there's no need to have findings of fact on that because those rights are exactly what's contemplated by the special notice.

[00:30:34] Speaker 03:
So it would be our position that the board did not err in not including facts, and they clearly found enough facts to support their holding.

[00:30:43] Speaker 03:
And for those reasons, Your Honor, we respectfully request that you affirm the opinion of the board.

[00:30:47] Speaker 03:
Thank you.

[00:30:49] Speaker ?:
Whenever you're ready.

[00:30:54] Speaker 04:
Thank you, Your Honor.

[00:30:58] Speaker 04:
Two minutes left.

[00:31:01] Speaker 04:
Briefly, Your Honor, three points in rebuttal.

[00:31:04] Speaker 04:
First, with respect to Your Honor's question as to why the government was not more clear.

[00:31:08] Speaker 04:
Why did the government hide the ball?

[00:31:10] Speaker 04:
I'd remind the court that there was a previous version of a special notice prepared by the Army's project manager, and that version of the special notice was very explicit and mandated that the winning bidder would subcontract the work to the utility providers.

[00:31:26] Speaker 04:
That version was sent to the Office of Counsel, it was rejected, and it was revised.

[00:31:31] Speaker 04:
The reason it was revised is because mandating that a contractor use a particular subcontractor is effectively a sole source requirement and is prohibited under the FAR.

[00:31:43] Speaker 04:
Nonetheless, the project manager, Mr. Wallace, testified in his deposition, which is part of the record, repeatedly that that special notice that was actually issued was a crystal clear sole source requirement.

[00:31:57] Speaker 04:
Likewise, the contracting officer issued her decision in part on the basis

[00:32:01] Speaker 04:
that the special notice was a sole source requirement.

[00:32:05] Speaker 04:
Now, that's, according to Tug Hill's position, quite different than what it actually meant, but that's how it was enforced during the project, the sole source requirement.

[00:32:14] Speaker 04:
Now, and at the board, the government has essentially crafted a new meaning for the special notice, that it was not actually a sole source requirement, but it was something, some form of a hybrid, some form of a negotiation where maybe you could do it, maybe we could do it, but it's not an illegal sole source.

[00:32:30] Speaker 04:
And from Tug Hill's perspective, that's the key to this change argument.

[00:32:34] Speaker 04:
The special notice did not require use of the UPs, but in practice, it was enforced as a sole source.

[00:32:42] Speaker 04:
Secondly, there is adequate evidence in the record that the government knew unequivocally that Tug Hill had not spoken substantively with the utility providers prior to submitting its bid.

[00:32:53] Speaker 04:
And thirdly, with respect to permits, this is entirely distinguishable.

[00:32:58] Speaker 04:
This is not a ministerial

[00:33:00] Speaker 04:
process of obtaining a permit.

[00:33:01] Speaker 04:
This is dealing with ownership rights.

[00:33:04] Speaker 04:
For these reasons, I ask that the court reverse the board's decision.

[00:33:07] Speaker 01:
Thank you.

[00:33:08] Speaker 01:
Has all the work been completed?

[00:33:10] Speaker 01:
Yes, Your Honor.

[00:33:12] Speaker 01:
So if we were to find in your favor, basically you're looking for an $11 million refund reimbursement?

[00:33:21] Speaker 04:
That's correct, Your Honor.

[00:33:22] Speaker 04:
Essentially, Tug Hill came out of pocket to pay the utility providers to perform the utility system's scope of work.

[00:33:29] Speaker 04:
And they accomplished that work, and in fact performed quite well on the project.

[00:33:34] Speaker 04:
There's no issues there.

[00:33:34] Speaker 04:
It just cost substantially more than anticipated based on the involvement of those utility providers.

[00:33:43] Speaker 05:
Thank you.

[00:33:43] Speaker 05:
We thank both counsel.

[00:33:44] Speaker 05:
The case is submitted, and that concludes our proceedings for this afternoon.

[00:33:49] Speaker 03:
All rise.

[00:33:56] Speaker 01:
The court is adjourned for the day to today.