[00:00:00] Speaker 04:
This is 15-1-8-3-0, DG21 versus Moebius.

[00:00:59] Speaker 04:
We're ready.

[00:01:00] Speaker 00:
Good morning.

[00:01:01] Speaker 00:
May it please the court.

[00:01:02] Speaker 00:
My name is John Dolsky.

[00:01:03] Speaker 00:
I represent DG 21 LLC.

[00:01:07] Speaker 00:
On the face of our appeal, I would be the first one to admit that it looks pretty simple.

[00:01:13] Speaker 00:
You've got a federal government contractor seeking part of his firm fixed price portion of his contract, an equitable adjustment for a fuel rate increases.

[00:01:25] Speaker 00:
I think this court, the Court of Federal Claims,

[00:01:29] Speaker 00:
And the boards have been pretty clear that those types of increases, you're not entitled to an equitable adjustment.

[00:01:39] Speaker 00:
This is different.

[00:01:40] Speaker 00:
And the reason why it's different is because of the location of where the contract was performed.

[00:01:47] Speaker 04:
But when you entered into the contract, that doesn't come as a surprise.

[00:01:50] Speaker 04:
You knew what the location was when you entered into the contract.

[00:01:54] Speaker 00:
Absolutely, Your Honor.

[00:01:55] Speaker 00:
And in fact, I think both parties understood it.

[00:01:58] Speaker 00:
And that's the reason why it's a little bit different.

[00:02:01] Speaker 00:
In our case, and in our contract, there is this fuel consumption or conservation program that they want to put in.

[00:02:09] Speaker 00:
In most federal government contracts, if you have just your typical facility services contract, you wouldn't need a fuel conservation program.

[00:02:19] Speaker 00:
By the very nature of the firm fixed price contract, you already have a contractor

[00:02:27] Speaker 00:
with an incentive to cut consumption.

[00:02:30] Speaker 04:
Well, don't you have more of an incentive to cut consumption the higher the price of the fuel is?

[00:02:34] Speaker 04:
I don't understand your argument with regard to energy consumption in this case, because it seems to me, as I said, that in this case, your concern or your complaint is that you shouldn't have borne the brunt of the increase in fuel costs.

[00:02:49] Speaker 04:
And why, though, is your bearing the brunt of increase in fuel costs not entirely consistent

[00:02:57] Speaker 04:
with an energy consumption program, which is trying to give you an incentive to use less rather than more energy.

[00:03:03] Speaker 00:
And that's where the difference lies.

[00:03:04] Speaker 00:
The difference is, in this case, the sole source of the fuel is from the United States government.

[00:03:12] Speaker 00:
We are on an island in the middle of the Indian Ocean, and there is no commercial access to fuel.

[00:03:20] Speaker 00:
There is no other civilian access to fuel.

[00:03:23] Speaker 00:
The only place we can buy this

[00:03:27] Speaker 00:
The only place is from the United States government.

[00:03:31] Speaker 00:
It's interesting.

[00:03:32] Speaker 00:
Yes, sir.

[00:03:32] Speaker 01:
And they set the price.

[00:03:34] Speaker 01:
And they set the price.

[00:03:35] Speaker 00:
They set the price.

[00:03:36] Speaker 01:
And that's because of the contract.

[00:03:37] Speaker 00:
They set the price depending on whatever the DOD prevailing rate is.

[00:03:41] Speaker 00:
That is correct.

[00:03:43] Speaker 00:
OK.

[00:03:43] Speaker 03:
So when you look at- But you know, what I find hardest to understand is why, in the course of the negotiations of these contracts, that you, your client, deleted the provision that might have

[00:03:57] Speaker 03:
allowed an equitable adjustment for a variation in fuel price?

[00:04:02] Speaker 00:
That's an excellent question, and I'd like to address that.

[00:04:05] Speaker 00:
The reason why we inserted it was we're in the negotiation phase of the contract.

[00:04:13] Speaker 00:
It was an offer to the government, look, for de minimis changes in rates, let's just have an agreement of 10% above or 10% below.

[00:04:23] Speaker 00:
Nobody will ask for equitable adjustment.

[00:04:25] Speaker 00:
But beyond that,

[00:04:27] Speaker 00:
Either party, the government or DG 21, could assert some sort of deductive or inequitable adjustment.

[00:04:35] Speaker 04:
Where does the contract say that?

[00:04:37] Speaker 00:
No, that was during the negotiation phase.

[00:04:42] Speaker 00:
And that was proposed for contract administration for whatever reason that we thought it would be appropriate.

[00:04:49] Speaker 00:
We thought it would be easier for both parties for the 10%.

[00:04:53] Speaker 00:
And it would be consistent with other economic adjustment clauses that are in the FAR.

[00:04:57] Speaker 00:
So that makes sense.

[00:05:00] Speaker 00:
However, the government rejected it.

[00:05:02] Speaker 00:
They said, no, we don't want to insert a 10% plus or minus with fuel rate increases or consumption increases on the contract.

[00:05:13] Speaker 00:
So it was really the United States that pulled that back.

[00:05:17] Speaker 00:
We offered it.

[00:05:18] Speaker 00:
They rejected the offer.

[00:05:19] Speaker 03:
So we went back.

[00:05:20] Speaker 03:
But it was agreed to.

[00:05:23] Speaker 03:
It is in the final arrangement no longer

[00:05:27] Speaker 03:
contains the flexibility that might have been achieved.

[00:05:31] Speaker 03:
But you're now asking the courts to reinstate that.

[00:05:34] Speaker 00:
Well, our position is that contract red as a whole entitled us to an increase in the contract price in the face of an increase in the DOD prevailing rate.

[00:05:48] Speaker 00:
So all what happened was, after negotiations, when the government said, no, we don't want that change,

[00:05:55] Speaker 00:
We went back to the four corners of the contract.

[00:05:58] Speaker 00:
And the four corners of the contract, in our opinion, says that, yes, we're responsible for consumption.

[00:06:06] Speaker 00:
And we will do our best to get our consumption in a manner that's consistent with lowering it, given the island that we're on.

[00:06:13] Speaker 04:
Wait, so it's your view that even though the negotiations you described, you wanted a provision that gave you more control, that kind of fixed the rate in case there were substantial increases.

[00:06:24] Speaker 04:
You agree that you withdrew that provision, and now you're saying we withdrew, and you should read that sort of contract history as saying we withdrew it because we didn't need it, because we thought those provisions applied in any event?

[00:06:39] Speaker 00:
No.

[00:06:40] Speaker 00:
The reason why we proposed it, it was for de minimis changes.

[00:06:45] Speaker 00:
The plus or minus 10% is consistent with other FAR provisions, the economic adjustment clause that is in the FAR.

[00:06:53] Speaker 04:
It's consistent with that.

[00:06:54] Speaker 04:
Point us to what you think in the contract allows you to not have to pay for the adjustment of fuel costs, the rise of fuel costs.

[00:07:03] Speaker 00:
52243-4, the changes clause.

[00:07:09] Speaker 00:
OK.

[00:07:09] Speaker 00:
The changes clauses crystal clear.

[00:07:12] Speaker 00:
And I guess let's go back a little bit.

[00:07:14] Speaker 04:
You want to give me the section?

[00:07:15] Speaker 04:
There's A, B. Is it D?

[00:07:18] Speaker 00:
Yes.

[00:07:18] Speaker 00:
It's FAR 52.243-4.

[00:07:24] Speaker 04:
OK.

[00:07:25] Speaker 04:
I asked you what changes in the contract.

[00:07:27] Speaker 04:
What provisions in the contract itself allow you to have the government absorb the cost?

[00:07:33] Speaker 00:
That is the provision we're relying upon, Your Honor, because that provision

[00:07:39] Speaker 00:
by itself says a change in government furnished material that causes an increased cost to performance were entitled to an equitable adjustment.

[00:07:52] Speaker 01:
In other words, the FAR favors you.

[00:07:56] Speaker 00:
This FAR represents a shift in the risk associated with the DOD prevailing rate increases.

[00:08:04] Speaker 01:
If that's all there were, you win.

[00:08:07] Speaker 00:
Right, if we fall within that provision.

[00:08:09] Speaker 01:
But then there's the contract.

[00:08:11] Speaker 00:
It's part of the contract.

[00:08:13] Speaker 01:
But you've got the express part of the contract that refers to the prevailing DOD rate.

[00:08:21] Speaker 00:
Well, that represents the change.

[00:08:23] Speaker 01:
It means they can make it up.

[00:08:25] Speaker 00:
They decide it.

[00:08:27] Speaker 00:
That's part of our problem, Your Honor.

[00:08:29] Speaker 00:
Exactly.

[00:08:29] Speaker 01:
That's the heart of your problem.

[00:08:31] Speaker 00:
Pardon me?

[00:08:32] Speaker 01:
That's the heart of your problem.

[00:08:34] Speaker 00:
We believe this.

[00:08:35] Speaker 00:
We believe when you read the contract as a whole, if you take into consideration the fuel conservation program that we were required to put in place, where the focus was on consumption, not rate consumption, that when you read that as a whole, it's obvious to us that as long as we took care of our consumption and lowered our consumption, we got to keep the benefit of the lower consumption.

[00:09:04] Speaker 04:
Where does it say that?

[00:09:06] Speaker 04:
Can you point us to anything in the contract?

[00:09:07] Speaker 04:
I mean, you cited the FAR provisions, which are incorporated.

[00:09:10] Speaker 04:
What is there in the contractual language?

[00:09:12] Speaker 04:
The contractual language quite explicitly gives you the burden to pay for increased use costs, right?

[00:09:19] Speaker 00:
that shifts the burden?

[00:09:22] Speaker 04:
No, no, no.

[00:09:22] Speaker 04:
It gives you the responsibility to reimburse the government for the prevailing rate of fuel, which would include increases in fuel.

[00:09:31] Speaker 04:
So that's quite clear.

[00:09:33] Speaker 04:
So your suggestion is that the FAR provision on change overrides a clear provision in the contract?

[00:09:40] Speaker 00:
No, I think they need to be read together.

[00:09:44] Speaker 00:
You've got one provision that says

[00:09:46] Speaker 00:
When you buy gas from the United States government, this is what we're going to charge you, the prevailing rate.

[00:09:52] Speaker 04:
And this is what you're going to pay.

[00:09:53] Speaker 04:
And this is what you're going to be obligated to pay.

[00:09:54] Speaker 04:
This is what you're going to pay.

[00:09:55] Speaker 04:
So doesn't, in our review of our general application of rules of contract construction, doesn't the specific override the general?

[00:10:04] Speaker 04:
And in that case, doesn't the specificity of the contract override the more general FAR provisions?

[00:10:09] Speaker 00:
I don't believe this is a more specific provision to the FAR 52-43-4.

[00:10:16] Speaker 00:
You've got to read them together, right?

[00:10:18] Speaker 00:
What does 52-243-4 say with respect to changes in government furnished material?

[00:10:25] Speaker 01:
Well, the FAR talks about materials, but the contract talks about fuel.

[00:10:32] Speaker 00:
Correct.

[00:10:34] Speaker 01:
And as Judge Prost was saying, isn't fuel more specific than materials?

[00:10:38] Speaker 00:
Well, fuel is defined.

[00:10:40] Speaker 00:
Well, let's back up.

[00:10:40] Speaker 00:
243-4 talks about government furnished material, correct?

[00:10:45] Speaker 00:
Material is defined under the FAR, under 45.101, as something that is consumed during performance of the contract, generally.

[00:10:57] Speaker 00:
Fuel is used or consumed during performance of the contract.

[00:11:02] Speaker 00:
Therefore, fuel is material.

[00:11:06] Speaker 00:
And if fuel is material, if there's a change in the government furnished material,

[00:11:13] Speaker 00:
that causes an increase in our cost of performance, and there's no doubt the increase of the DOD prevailing rate caused us an increased cost of performance, then the contractor is entitled to an equitable adjustment.

[00:11:28] Speaker 04:
Hypothetically, if what you say about the FAR is correct in terms of your reading the FAR, if you're the government negotiator and you say, we want to override that in our contract,

[00:11:38] Speaker 04:
We want to make absolutely crystal clear that with respect to the cost of fuel, the contractor will be responsible for paying DOD at a rate in terms of the prevailing rate.

[00:11:50] Speaker 04:
How would you do that?

[00:11:53] Speaker 00:
I would probably have deleted 52243-4 and not included that in the contract.

[00:11:58] Speaker 04:
But wouldn't you have used the exact language that they used in the contract?

[00:12:02] Speaker 00:
All that shows is what the reimbursable rate was.

[00:12:05] Speaker 00:
That's all that provision says.

[00:12:08] Speaker 00:
The only thing that provision says is when you're buying fuel from us on a reimbursement basement, this is the price.

[00:12:19] Speaker 00:
It doesn't say that any change to that price, we're not going to allow an equitable adjustment to.

[00:12:26] Speaker 00:
It just simply says.

[00:12:27] Speaker 04:
It doesn't say this is the price.

[00:12:29] Speaker 04:
Doesn't it say the contractor shall reimburse the government?

[00:12:32] Speaker 04:
For that price, it just doesn't say, this is the price out there and we'll negotiate about what you have to pay.

[00:12:37] Speaker 04:
It says, this is the price that you will require to reimburse the government.

[00:12:41] Speaker 00:
Right, absolutely.

[00:12:43] Speaker 00:
But that doesn't mean, OK, this is the issue in the case.

[00:12:46] Speaker 00:
You're hitting right on the issue.

[00:12:48] Speaker 00:
The issue becomes then, who bears the risk when that reimbursement rate, the DOD prevailing rate, increases?

[00:12:58] Speaker 00:
What our position is, that's the real issue.

[00:13:01] Speaker 00:
And what our position is, is that 52-243-4 says that if you've got government furnished material, which is fuel, and you change it, and it causes an increased cost of our performance, the changes clause allows for an equitable adjustment.

[00:13:21] Speaker 00:
So the issue isn't necessarily, did the parties plan on fluctuations of DOD prevailing rates?

[00:13:27] Speaker 00:
The answer to that is absolutely yes.

[00:13:30] Speaker 00:
definitely in everybody's mind at the time.

[00:13:33] Speaker 00:
The question is, where does the risk go when those rates increase?

[00:13:37] Speaker 00:
Because remember, we're dealing with the United States Navy.

[00:13:41] Speaker 00:
The DOD prevailing rate is really disconnected to some extent to the contracting agency at this point.

[00:13:46] Speaker 00:
They're just pulling off a DOD prevailing rate for that area of the world, the Asia area.

[00:13:52] Speaker 00:
So I don't know how much the Navy had control of those rates.

[00:13:56] Speaker 00:
DOD did, but maybe not the Navy.

[00:13:59] Speaker 00:
But the point is,

[00:14:00] Speaker 00:
Where does the risk get aplaced under the contract?

[00:14:03] Speaker 00:
Because that's what a contract is in its simplest form.

[00:14:08] Speaker 04:
OK.

[00:14:08] Speaker 04:
I think we have your argument.

[00:14:09] Speaker 04:
Why don't you retain your rebuttal time and let's hear from the governor.

[00:14:11] Speaker 04:
Thank you.

[00:14:11] Speaker 04:
Thank you.

[00:14:18] Speaker 02:
May it please the court.

[00:14:20] Speaker 02:
The court should affirm the board's conclusion that the contract language placed the risk of fluctuations in the price of the fuel

[00:14:28] Speaker 02:
on DG 21.

[00:14:29] Speaker 04:
Is it your position that the contract is unambiguous?

[00:14:33] Speaker 02:
Yes.

[00:14:34] Speaker 04:
Well how can it be unambiguous when the contract incorporates the provision of FAR and at least on their face it appears that there might be some inconsistency between the two provisions as to how they applied the facts in this case, right?

[00:14:47] Speaker 02:
There's no inconsistency, as the board explained in its decision, because the contract needs to be construed as a whole.

[00:14:56] Speaker 02:
And that includes the changes clause.

[00:14:59] Speaker 02:
And what the board did is consider whether or not there was indeed a change in the contract requirements.

[00:15:07] Speaker 04:
Well, let's assume the provision that we've been citing in the contract was not there, and we just had reference in incorporation of the FAR provisions.

[00:15:14] Speaker 04:
How then would you construe the situation here?

[00:15:17] Speaker 04:
Would the contractor be entitled to the increase in cost of fuel?

[00:15:24] Speaker 02:
I don't really see that as a change from the decision that the board rendered.

[00:15:29] Speaker 02:
The FAR provision is incorporated by reference into this contract.

[00:15:34] Speaker 02:
Right.

[00:15:35] Speaker 04:
And what does the FAR provision mean applicable to this circumstance?

[00:15:38] Speaker 04:
Leaving aside what the contract calls for now, just the FAR provision and how it would apply here.

[00:15:44] Speaker 02:
Well, the FAR provision has been construed by this court

[00:15:47] Speaker 02:
in numerous cases.

[00:15:49] Speaker 02:
And what the court looks to is whether there has been a change in the contract requirements.

[00:15:56] Speaker 02:
For example, there is the M.A.

[00:15:59] Speaker 02:
Mortison case from this court, where in that case, there was an anticipation on the contractor's part that a notice of proceed would be issued by a certain date, and then the notice of proceed was issued later by the government.

[00:16:16] Speaker 02:
So the government

[00:16:18] Speaker 02:
did something differently.

[00:16:19] Speaker 02:
But still, that was not a change within the meaning of the changes clause.

[00:16:25] Speaker 04:
OK.

[00:16:25] Speaker 04:
I just want to understand.

[00:16:26] Speaker 04:
Let's assume the contract was silent as to any explicit provision about who's obligated to pay what in connection with fuel costs.

[00:16:34] Speaker 04:
And the fuel costs at the time you signed the contract is $1.79 per gallon.

[00:16:39] Speaker 04:
And a year later, the cost of fuel is $3.79 per gallon.

[00:16:44] Speaker 04:
Does the FAR, in the absence of any other contractual language,

[00:16:48] Speaker 04:
would the FAR provision come into play, i.e.

[00:16:51] Speaker 04:
there's been a change over the past year, cost of fuel has skyrocketed, and this is the kind of change that demands an equitable adjustment?

[00:16:58] Speaker 02:
Okay, well that is indeed a different case because you don't have... No, I understand that.

[00:17:02] Speaker 04:
I'm just trying to understand the FAR provision, how it relates outside of the context of this contract.

[00:17:07] Speaker 02:
The FAR provision is construed

[00:17:11] Speaker 02:
According to this court's decision, you construe the FAR provision in the context of all the other provisions.

[00:17:16] Speaker 02:
And what you do is you decide whether or not there has been a change in the contract requirements, considering what the contract is.

[00:17:26] Speaker 04:
OK, so my hypothetical, if parties enter into a contract and the cost of fuel at the time is $1.79 per gallon, and it unexpectedly skyrockets within a year to more than double that,

[00:17:40] Speaker 04:
with the FAR provision that we're talking about coming into play?

[00:17:44] Speaker 02:
If it's a fixed price contract, I assume that it is a fixed price contract as this contract is, the answer would be no.

[00:17:52] Speaker 02:
It would not come into play because a fixed price contract contemplates that all of these costs are... So even in the absence of the contractual provisions that we've got in this contract, even if they didn't exist,

[00:18:05] Speaker 04:
the obligation would still be on the contractor to bear the burden of the unexpected increase in fuel cost?

[00:18:10] Speaker 02:
Yes, and I would point to the Lakeshore Engineering Services decision of this court, which construes the FAR clause, the very same FAR clause, on a fixed price contract and says that these were costs are part of the contractor's costs, that they are to be incorporated in the contractor's proposal to do the work

[00:18:35] Speaker 02:
for that fixed price, that type of a cost, if there's a fluctuation in that cost, which is part of the contractor's proposal, then you're not entitled to an equitable adjustment under the changes clause.

[00:18:50] Speaker 02:
And I would rely there.

[00:18:51] Speaker 03:
Do you agree that fuel under the contract is a government provided material as opposed to whatever else might be the

[00:19:02] Speaker 03:
responsibility of the contractor and the fixed price contract?

[00:19:07] Speaker 02:
The board made the assumption that the fuel was a government furnished material.

[00:19:15] Speaker 02:
And we believe that the decision can be affirmed based on that assumption.

[00:19:20] Speaker 03:
Are you telling us the assumption is correct or that we should accept it because the board made it?

[00:19:27] Speaker 02:
It could be argued differently.

[00:19:30] Speaker 02:
given that there are all these different specific provisions.

[00:19:32] Speaker 03:
But this is critical to this case, is it not?

[00:19:35] Speaker 03:
Excuse me?

[00:19:36] Speaker 03:
This is critical to how one views the application of the FAR to these cases.

[00:19:41] Speaker 02:
Yes, yes.

[00:19:42] Speaker 02:
And I can.

[00:19:43] Speaker 02:
Yes, I agree.

[00:19:45] Speaker 02:
I'm just saying that it could have been argued differently.

[00:19:48] Speaker 02:
But here we are defending the board's decision based on the board's rationale.

[00:19:53] Speaker 02:
And the board points out that you construe the contract as a whole

[00:19:59] Speaker 02:
in light of all the provisions of the contract, including the provision for contract furnished fuel, 2.5.1.1, which, as the court understands, says that the contractor has to purchase the fuel for these vehicles at the DOD prevailing rate.

[00:20:20] Speaker 03:
I hear you saying that even if that assumption is incorrect, we should accept it because the board made it?

[00:20:28] Speaker 02:
Yes.

[00:20:29] Speaker 02:
Yes, you may.

[00:20:30] Speaker 03:
That's very strange.

[00:20:34] Speaker 03:
Why should a court accept an incorrect assumption, and particularly if the government agrees that it's an incorrect assumption?

[00:20:44] Speaker 02:
We are defending the board's decision based on the board's rationale.

[00:20:47] Speaker 03:
No, we're representing the United States.

[00:20:50] Speaker 02:
Correct.

[00:20:51] Speaker 02:
Alternatively, the court could come to its own conclusion

[00:20:55] Speaker 02:
that the fuel is not a government furnished material based on the fact that if you look at this contract, there are all... There's no basis for that.

[00:21:04] Speaker 03:
Is there?

[00:21:04] Speaker 03:
Excuse me?

[00:21:06] Speaker 03:
There's no basis anywhere in the record for that.

[00:21:09] Speaker 03:
For us to make a conclusion that's contrary to what both sides tell us is the correct interpretation of this relationship.

[00:21:21] Speaker 02:
I'm simply pointing out that there are different provisions for government furnished materials, government furnished fuel, contractor furnished fuel.

[00:21:31] Speaker 02:
And hypothetically, the court could come to its own decision a different way, take a different route to affirm it.

[00:21:40] Speaker 04:
Can you just clarify for me?

[00:21:41] Speaker 04:
I'm very confused by what you're saying.

[00:21:43] Speaker 04:
Is it the government's position that this was government furnished material or that it was not government furnished material?

[00:21:50] Speaker 02:
Yes, that it is government furnished materials.

[00:21:54] Speaker 02:
We're defending the board's decision.

[00:21:55] Speaker 04:
I thought your position was that it was not government furnished material.

[00:21:59] Speaker 02:
No, I understood the court to be asking whether it could be construed differently.

[00:22:04] Speaker 02:
But we're defending the decision based on the board's rationale.

[00:22:08] Speaker 02:
And the board's own rationale is that this is a government furnished material and that there is no change in the government furnished material.

[00:22:20] Speaker 02:
within the meaning of the changes clause.

[00:22:24] Speaker 02:
Because the contract has to be construed as a whole and it was understood and anticipated.

[00:22:30] Speaker 02:
Okay, I'm a little confused.

[00:22:32] Speaker 04:
I understood the board to have concluded that this is not government finished material.

[00:22:35] Speaker 04:
Maybe I'm confusing this with another.

[00:22:37] Speaker 02:
I think if you look back at, I would point the court to page 22 of the board's decision and

[00:22:48] Speaker 02:
This is on page 22.

[00:22:49] Speaker 02:
It's at the center of the page.

[00:22:52] Speaker 02:
And the board says, I quote, even if the fuel at issue was government furnished material within the meaning of FAR 52.243-4, fluctuations in the prevailing DOD rate would not constitute a change.

[00:23:14] Speaker 04:
OK, I thought that was just an alternative argument.

[00:23:17] Speaker 04:
I may be misunderstood.

[00:23:18] Speaker 02:
I'm sorry, Your Honor.

[00:23:19] Speaker 04:
I thought that was an alternative argument.

[00:23:21] Speaker 02:
No, that is the main rationale of the board.

[00:23:25] Speaker 02:
The board's conclusion is based on its reasoning that when the contract is read as a whole, there is no change within the meaning of the changes clause.

[00:23:38] Speaker 02:
And it goes on and it explains that what we're talking about here is

[00:23:44] Speaker 02:
the fuel for the vehicles and the equipment that the contractor operates.

[00:23:51] Speaker 03:
They're not saying that that was a change in the contract.

[00:23:54] Speaker 03:
They're saying it was a change in the conditions under which the contract was performed.

[00:24:00] Speaker 03:
That is the price of fuel change dramatically.

[00:24:05] Speaker 02:
Well, what the board's rationale is, is that when you look at the contract as a whole, the

[00:24:11] Speaker 02:
It was anticipated that there would be changes in the prevailing DOD rate for the fuel for the contractor-operated vehicles.

[00:24:20] Speaker 03:
But there's always a threshold.

[00:24:24] Speaker 03:
There's always a barrier beyond which the conditions in a relationship between contractor and government change to the point where equity intervenes.

[00:24:35] Speaker 03:
or should intervene to provide a fair and equitable relationship between the government and those who are willing to serve the government.

[00:24:46] Speaker 03:
And that's what we're being asked for here.

[00:24:48] Speaker 03:
There was a significant change in conditions.

[00:24:52] Speaker 03:
not contemplated apparently by either party at the time the contract was entered into.

[00:24:58] Speaker 03:
The proposal that might have made it easier to obtain an equitable adjustment was not included in the final contract.

[00:25:09] Speaker 03:
I would think that the price changes in gasoline were a surprise at everybody in fuel at the time of performance.

[00:25:19] Speaker 03:
So it isn't really a change in the contract.

[00:25:23] Speaker 03:
It's a change in the conditions surrounding the contract.

[00:25:27] Speaker 03:
Is that not accurate?

[00:25:33] Speaker 02:
It was anticipated that there could well be escalation in the price of the fuel.

[00:25:39] Speaker 03:
Yes, not such dramatic escalation that equity intervened, or we're being asked that

[00:25:48] Speaker 03:
for it to intervene?

[00:25:50] Speaker 02:
It was pointed out during the negotiations by the government.

[00:25:54] Speaker 02:
The government pointed out that there could well be escalations in the price of the fuel, as well as other parts of the proposal that was submitted, and that there was no provision in the contract and the terms for any economic price adjustment clause, that this was a fixed price contract

[00:26:16] Speaker 02:
And it was the contractor's responsibility to take that into account.

[00:26:22] Speaker 02:
So all that was pointed out in the negotiations.

[00:26:25] Speaker 04:
And so your view is that the contract was absolutely clear.

[00:26:28] Speaker 04:
It wasn't just silent.

[00:26:30] Speaker 04:
It said explicitly that the contractor will reimburse the government for the costs at the time of the use of the fuel, right?

[00:26:37] Speaker 02:
Yes, the contract is clear because the contract language, first of all, it is a fixed price contract.

[00:26:44] Speaker 02:
This is part of the cost that the contractor has to take into account.

[00:26:49] Speaker 02:
And the contract language distinguishes between government furnished fuel and contractor furnished fuel.

[00:26:57] Speaker 02:
And this contractor furnished fuel is only for the vehicles and the equipment that the contractor itself operates.

[00:27:07] Speaker 02:
It's for that part of the contract that the contractor must purchase the fuel.

[00:27:14] Speaker 02:
It purchases the fuel at the DOD prevailing rate.

[00:27:18] Speaker 01:
So it has... The contract says the government will make available fuel for items listed.

[00:27:23] Speaker 01:
Inspect item 2.5.1.1.

[00:27:25] Speaker 01:
Is that item 2.5.1.1 important to us?

[00:27:34] Speaker 02:
That is the contractor operated vehicles and equipment.

[00:27:40] Speaker 02:
So the contractor purchases the fuel

[00:27:43] Speaker 02:
only for the vehicles and equipment that it itself operates.

[00:27:47] Speaker 02:
The contractor drives them around on the base.

[00:27:50] Speaker 02:
So for those vehicles, that equipment, it must purchase the fuel and it must purchase the fuel at the prevailing DOD weight.

[00:27:58] Speaker 01:
Does the government make available fuel for uses other than 2.5, .1, .1?

[00:28:06] Speaker 02:
Yes, that would be government furnished fuel.

[00:28:08] Speaker 02:
And that is fuel that is furnished free of charge.

[00:28:12] Speaker 02:
As the board pointed out in its decision, there's two types.

[00:28:15] Speaker 01:
You say that would be government furnace fuel.

[00:28:17] Speaker 01:
But for driving around, you said it's also government furnace fuel.

[00:28:23] Speaker 01:
Government will make available the 2.5.1.1.

[00:28:26] Speaker 01:
Now you say for other than 2.5.1.1, that's also government furnace fuel.

[00:28:35] Speaker 01:
So it sounds like it's all government-furnished fuel.

[00:28:39] Speaker 02:
No, that's not correct.

[00:28:40] Speaker 02:
If that's how you're interpreting what I said, I must have misspoken.

[00:28:44] Speaker 02:
There are two types of fuel.

[00:28:47] Speaker 02:
The contract-furnished fuel is only for the contractor-operated vehicles.

[00:28:55] Speaker 02:
If the contractor is operating the vehicle itself, then the fuel for that vehicle is contractor-furnished fuel, and the contractor must pay for it.

[00:29:04] Speaker 02:
And all the other fuel used on the base for whatever other reason would be government furnished fuel and is furnished free of charge, as the board pointed out in its decision.

[00:29:16] Speaker 03:
So the government set the fuel price.

[00:29:19] Speaker 03:
But there was nothing in the contract, as I recall, which said that the price set by the government must be the prevailing rate in that part of the world.

[00:29:30] Speaker 03:
Isn't that right?

[00:29:30] Speaker 03:
What was the stop?

[00:29:31] Speaker 03:
the Navy from saying we're just going to double what we're charging you for fuel?

[00:29:39] Speaker 02:
Well, it's correct that the contract says that the contractor must pay the prevailing rate, the DOD prevailing rate.

[00:29:46] Speaker 02:
And that puts the contractor on notice that there could be, well, be fluctuations in this rate.

[00:29:53] Speaker 04:
And the DOD prevailing rate is something that everybody knows, at least at the time it's set, it's something that's known worldwide.

[00:30:00] Speaker 04:
There's one DOD prevailing rate.

[00:30:02] Speaker 02:
Well, the rate may vary.

[00:30:05] Speaker 04:
For example, based on... Right, but at any particular time, it's not like they created a cost of fuel that was different for use on this island than it was elsewhere.

[00:30:15] Speaker 04:
There's one DOD prevailing rate, right?

[00:30:19] Speaker 02:
For example, if Afghanistan.

[00:30:22] Speaker 02:
There might be a different rate for Afghanistan based on conditions there, but there is a...

[00:30:28] Speaker 02:
a DOD rate, which is publicly known, historically known.

[00:30:33] Speaker 02:
It's out there.

[00:30:34] Speaker 02:
It varies over time.

[00:30:36] Speaker 02:
And it's calculated based on certain components, considering transportation costs, storage, the market, price of fuel, all those things go into it.

[00:30:49] Speaker 02:
But it is a publicly known rate historically.

[00:30:56] Speaker 02:
If you have no more questions, we request that the decision be affirmed.

[00:31:07] Speaker 00:
Very quickly.

[00:31:10] Speaker 00:
A couple of things.

[00:31:13] Speaker 00:
With respect to the negotiations at the very beginning and the 10% that DG21 offered, the 10% plus or minus on fuel costs,

[00:31:24] Speaker 00:
With respect to this case, to me, that's parole evidence.

[00:31:29] Speaker 00:
And although there was discussion beforehand, this court is still limited to what eventually ended up in the contract.

[00:31:38] Speaker 00:
And this flows back to whether there's an ambiguity in the contract or not.

[00:31:42] Speaker 00:
If there's an ambiguity in the contract, absolutely, those discussions are relevant, and they should go to the intent of the parties.

[00:31:52] Speaker 00:
There has been no challenge that 52-243-4 is ambiguous.

[00:31:57] Speaker 00:
There hasn't been an allegation or any type of argument that the contract as a whole is ambiguous.

[00:32:07] Speaker 00:
And even though that is a question of law that this court can certainly address today if they wanted to, we still believe in the four corners of the contract, it's still unambiguous.

[00:32:20] Speaker 00:
And because it's unambiguous when you take into consideration all the provisions, the discussions that were happening, the pre-negotiations or the negotiations, pre-award discussions, aren't relevant as a matter of law.

[00:32:33] Speaker 00:
They're not relevant.

[00:32:34] Speaker 00:
I think they're illustrative.

[00:32:35] Speaker 03:
It still doesn't help surrounding the position that this was an assumption of risk.

[00:32:42] Speaker 03:
It was a complex, large contract, and that these provisions,

[00:32:48] Speaker 03:
one aspect or another didn't quite work out.

[00:32:50] Speaker 03:
That just goes with the larger picture.

[00:32:55] Speaker 00:
I think this court still must look at the contract as it ended up, not as it was discussed through negotiations.

[00:33:06] Speaker 00:
And so although I think it's window dressing to some extent, as far as a matter of law, what the interpretation of the contract is,

[00:33:15] Speaker 00:
I don't think it's relevant.

[00:33:16] Speaker 00:
And it's not necessarily relevant.

[00:33:18] Speaker 00:
I don't think it can be used under parole evidence to define what the intent of the party's work was.

[00:33:24] Speaker 03:
All right.

[00:33:25] Speaker 03:
Let's assume it's irrelevant, because I think it's fair to assume that every provision went through proposals and counterproposals.

[00:33:32] Speaker 03:
Right.

[00:33:33] Speaker 03:
Nonetheless, once it's over, the contract stands on its own, on its face, with each side accepting

[00:33:43] Speaker 03:
the risk that things aren't going to work out exactly as provided.

[00:33:48] Speaker 00:
Absolutely.

[00:33:49] Speaker 03:
And at which point I think the most logical contract interpretation is that those aspects which don't quite work out are not subject to review under equity, but are rather stuck with the letter of the contract and the assumption of that risk, which

[00:34:14] Speaker 03:
doesn't help your argument.

[00:34:16] Speaker 00:
I would agree with you up to the point of the definition or the interpretation of the entire contract as a whole.

[00:34:28] Speaker 00:
Is there any other question?

[00:34:29] Speaker 00:
I'm out of time.

[00:34:30] Speaker 00:
I'd love to talk more, but I'm out of time.

[00:34:33] Speaker 00:
At the end, we'd like you to reverse the board's decision and grant the ability to seek an equitable judgment.

[00:34:39] Speaker 00:
Thank you.

[00:34:40] Speaker 04:
Thank you for your time.