[00:00:14] Speaker ?:
Okay.

[00:01:19] Speaker 01:
Okay, the next case is number 16, 2090, Highland Alvin John's Company against Spear.

[00:01:41] Speaker 01:
Mr. Brown.

[00:01:42] Speaker 03:
Good morning, your honor.

[00:01:45] Speaker 03:
May it please the court.

[00:01:48] Speaker 03:
This case is, before you're on, I always say it's an important case, but it is.

[00:01:58] Speaker 03:
It involves the standard payment clause in fixed price construction contracts.

[00:02:09] Speaker 03:
It also involves the scheduling clause that are found in fixed price construction contracts.

[00:02:18] Speaker 03:
I would like to hand up, if I may have permission, the standard scheduling clause because the board only quoted part A of the scheduling clause, not the entire clause B and C. And if the court wouldn't mind looking at the entire clause, then you can see

[00:02:48] Speaker 03:
the argument that A only applies to what we call a base schedule, a baseline schedule, the initial schedule to be submitted by the contractor at the start of the project.

[00:03:08] Speaker 03:
And that's what A goes to.

[00:03:11] Speaker 03:
If you look at clause B,

[00:03:15] Speaker 03:
of the scheduling clause.

[00:03:17] Speaker 02:
But Counselor, your client said it wouldn't perform, it wouldn't provide temporary power.

[00:03:24] Speaker 02:
Yes.

[00:03:25] Speaker 02:
And the government found that, and the board found that that was a repudiation of a contract.

[00:03:32] Speaker 03:
Yes, but what this case really involves, or I'll call it the orphan in the room, really involves a first breach.

[00:03:43] Speaker 03:
What happened is the government stopped paying after March 1st for not only the fuel and generators, but also 100% of the progress payments.

[00:04:00] Speaker 02:
And that occurred... Is your dispute 100% versus 10%, is that the point?

[00:04:07] Speaker 02:
Excuse me, Your Honor.

[00:04:09] Speaker 02:
Is it a question of whether they could withhold 100% rather than 10%?

[00:04:15] Speaker 02:
Is that the issue?

[00:04:16] Speaker 03:
That's the issue.

[00:04:18] Speaker 03:
The payment clause that's in the contract and in the FARs said that if, in fact, you're not performing on time, you're not performing correctly, the government can withhold

[00:04:36] Speaker 03:
as part of retention, a maximum of 10%.

[00:04:41] Speaker 03:
And that's when the new contracting officer took over.

[00:04:49] Speaker 03:
She started withholding 10%.

[00:04:52] Speaker 03:
And then when it came to March 1, 2012, which was the initial target date for the completion

[00:05:07] Speaker 03:
The government withheld 100% of the progress payments and withheld all the payments for the diesel fuels and the generators.

[00:05:22] Speaker 03:
So all the payments.

[00:05:24] Speaker 03:
And the case really turns on the first breach concept.

[00:05:30] Speaker 03:
Basically, the concept was established in common law that an initial breach

[00:05:37] Speaker 03:
of contract, of a lack of payment, of progress payments, is as long as it's material, that excuses performance.

[00:05:55] Speaker 03:
And that's what occurred here.

[00:05:57] Speaker 03:
The contractor never said, I refuse to perform unless I get an extra work or something like that.

[00:06:07] Speaker 03:
said that I'm no longer financially able to perform because I have a million dollars coming from him.

[00:06:16] Speaker 03:
He submitted all the fuel paid for in cash between March 1st and the middle of April.

[00:06:27] Speaker 03:
That was around $600,000 paid invoices for the fuel and the generator.

[00:06:34] Speaker 03:
He submitted $300,000

[00:06:36] Speaker 03:
of approved progress payments, none of which was paid.

[00:06:41] Speaker 03:
There has been no case of, we go back a long time.

[00:06:46] Speaker 04:
I'm a little confused about part of that.

[00:06:48] Speaker 04:
Are you saying, I'm a little confused about part of what you're talking about.

[00:06:52] Speaker 04:
You're saying you submitted invoices for $600,000 of fuel.

[00:06:58] Speaker 04:
For what dates?

[00:07:00] Speaker 03:
That occurred between March 1st.

[00:07:03] Speaker 03:
and April 23rd.

[00:07:05] Speaker 04:
But what basis were you entitled to that fuel cost?

[00:07:08] Speaker 04:
Didn't you sign away that right in the modification that said after March 2012, you were wholly responsible for providing temporary power?

[00:07:20] Speaker 03:
Well, if you read the modification as reading out of the clause, again, I go back to over as

[00:07:34] Speaker 03:
Council will know.

[00:07:36] Speaker 03:
I go back to Whitaker and Davis who I worked for back in the early 60s.

[00:07:46] Speaker 03:
So it's a long time though.

[00:07:49] Speaker 03:
But what Davis said,

[00:07:55] Speaker 03:
is that they don't read out of the clause, out of the contract, mandatory clauses.

[00:08:02] Speaker 03:
Mandatory clause meaning when they signed p.

[00:08:06] Speaker 03:
213, did the parties agree to throw out the dispute clause, the mandatory dispute clause, or the war risk clause that was specially put in this contract in Afghanistan?

[00:08:19] Speaker 03:
It didn't do that.

[00:08:21] Speaker 03:
You know, basically everybody thought that the power plant would be built by this other contractor that was building the power plant.

[00:08:32] Speaker 03:
And no one knew all these events that would occur in about a month later.

[00:08:42] Speaker 03:
Poo 13 was signed in late

[00:08:46] Speaker 03:
September by the contractor, early the first week in October of 2011 by the government.

[00:08:56] Speaker 03:
That's when the modification was signed.

[00:09:01] Speaker 03:
In November, the floods occurred that flooded the entire site.

[00:09:08] Speaker 03:
What we're talking about here, what was the critical item on the site was the electrical distribution system, which is underground conduits.

[00:09:20] Speaker 03:
In those conduits, they're about six inches.

[00:09:23] Speaker 04:
I'm not at all sure how this is relevant to the notion that you weren't required under the modification to provide the temporary power after March 2012.

[00:09:33] Speaker 04:
That's what the modification says.

[00:09:36] Speaker 04:
All these other things about changes in site conditions and things like that might have been compensable if you submitted claims or the likes, but it didn't permit you to anticipatorily repudiate your obligation under the mod, did it?

[00:09:53] Speaker 03:
But you still have, Your Honor, you still have excusable delay

[00:09:59] Speaker 04:
You know, a basically the book continued to perform the contract as, as you agreed to and paid for the fuel after March, 2012, you probably could have submitted a claim saying we're entitled to some of that money back because the temporary power or whatever was not within our control or the permanent power wasn't within our control.

[00:10:23] Speaker 04:
But you agreed on the face of the mod.

[00:10:26] Speaker 04:
specifically without any reservation to provide temporary power after March.

[00:10:34] Speaker 03:
The fuel and the generators cost about $250,000 a month.

[00:10:40] Speaker 03:
All right.

[00:10:42] Speaker 03:
And the buildings was taking place on it.

[00:10:45] Speaker 03:
What happened is they didn't stop on March 1st and say, oh, we're not supplying the fuel.

[00:10:54] Speaker 03:
They bought the fuel.

[00:10:56] Speaker 03:
They paid for the generators between March 1st and March 31st.

[00:11:03] Speaker 03:
The government came back on, I guess it was March 28th or something like that, and says, we're not going to pay you for the fuel.

[00:11:16] Speaker 03:
We're not going to pay you for your progress payments.

[00:11:21] Speaker 03:
We're going to hold back 100% of your progress payments also.

[00:11:28] Speaker 03:
That was the first material breach of contract.

[00:11:35] Speaker 03:
Until that time, they were paying the invoices are found, paid invoices are found for the fuel and for the generator in the record.

[00:11:47] Speaker 04:
Well, sure.

[00:11:48] Speaker 04:
Until March, they were obligated by that modification to pay for it.

[00:11:53] Speaker 04:
After March, they weren't.

[00:11:55] Speaker 03:
So they paid for it between March

[00:11:58] Speaker 03:
for almost two months, March and April.

[00:12:02] Speaker 03:
And two, they ran out of money.

[00:12:05] Speaker 04:
So they went beyond what they were required to do by the modification.

[00:12:08] Speaker 04:
Look, I think we're on a sidetrack on this fuel, frankly.

[00:12:11] Speaker 04:
I don't understand why you're arguing this point.

[00:12:13] Speaker 04:
Your point seemed to be, or at least your strongest point seemed to be, that other parts of the progress payments that don't relate to this fuel issue were withheld improperly because they relied on the fact that you no longer had

[00:12:27] Speaker 04:
reliable schedule and that there were issues with subcontractor payments?

[00:12:32] Speaker 03:
Yes.

[00:12:33] Speaker 04:
Why couldn't, if there's no schedule and there are problems with subcontractor payments, they withhold all of the progress payments?

[00:12:42] Speaker 03:
The board found, not discussed in the legal reasoning, the board found that, in fact, the schedule was submitted on April 4, 2011.

[00:12:57] Speaker 03:
that showed, if you look at that schedule that was submitted in the appendix, it showed that what was missing was the cable.

[00:13:14] Speaker 03:
The cable was at zero that goes into the conduits.

[00:13:22] Speaker 03:
Basically, it was four inch cable.

[00:13:25] Speaker 03:
And one of the problems is,

[00:13:27] Speaker 03:
that because of this helicopter incident, the border between Pakistan and Afghanistan was closed by Pakistan because of that embargo.

[00:13:44] Speaker 03:
And it stayed closed for seven months between the end of November, right after Thanksgiving, and July

[00:13:56] Speaker 03:
when the Secretary of State apologized for the incident.

[00:14:01] Speaker 03:
And all 15,000 NATO trucks filled with supplies was held up during that period of time.

[00:14:11] Speaker 03:
And you couldn't truck in these reels.

[00:14:14] Speaker 03:
You remember, there's four inches of cables that go into a six-inch duct.

[00:14:20] Speaker 04:
How does any of this relate to the fact that you didn't submit a schedule or that you weren't paying your subcontractors?

[00:14:30] Speaker 03:
How is this related that you weren't paying the subcontractor?

[00:14:34] Speaker 04:
Or that you didn't ever supply them a satisfactory schedule.

[00:14:38] Speaker 04:
I understand this is an awful difficult contract.

[00:14:41] Speaker 04:
There were tons of delays caused by lots of different things.

[00:14:46] Speaker 04:
What we're looking at is whether they were justified in withholding progress payments based upon your failure to deliver a new schedule and their perceived failure that you weren't paying their subcontract.

[00:14:58] Speaker 03:
One, the schedule was delivered on April 4th.

[00:15:02] Speaker 03:
On that same day, the government had a meeting.

[00:15:05] Speaker 02:
But that's a finding of fact, isn't it?

[00:15:08] Speaker 03:
What?

[00:15:08] Speaker 02:
That's a finding of fact.

[00:15:10] Speaker 02:
Yes.

[00:15:10] Speaker 02:
We have to accept the facts found by the board.

[00:15:13] Speaker 03:
Could you give me the appendix where the board found that the schedule was delivered?

[00:15:22] Speaker 04:
But the board never found you delivered a sufficient schedule.

[00:15:25] Speaker 04:
The government continues.

[00:15:26] Speaker 03:
It didn't find that it wasn't.

[00:15:27] Speaker 03:
There was nothing.

[00:15:29] Speaker 04:
The government continuously rejected your schedule as insufficient.

[00:15:33] Speaker 03:
There's no finding that the government rejected that schedule.

[00:15:37] Speaker 03:
On April 4th, there is a CQC report by the government saying we're terminating the contract.

[00:15:46] Speaker 04:
Wait, wait, wait.

[00:15:47] Speaker 04:
What April are you talking about?

[00:15:49] Speaker 04:
Are you talking about April 2012?

[00:15:50] Speaker 04:
April 4th, 2012.

[00:15:54] Speaker 04:
Well, how does that help you?

[00:15:56] Speaker 04:
Because by that time, you'd already breached in March, or at least some time after refusing to make the payments for the fuel.

[00:16:08] Speaker 04:
I think we're getting wound up in facts again.

[00:16:10] Speaker 04:
If you want to spend your time arguing about whether there's a finding the board that you didn't submit a sufficient schedule, you can.

[00:16:19] Speaker 04:
But what I'm more interested in is the legal argument about whether the government can deny payments based upon an insufficient schedule.

[00:16:29] Speaker 04:
OK.

[00:16:30] Speaker 03:
May I bring this up?

[00:16:32] Speaker 03:
I have it.

[00:16:32] Speaker 03:
I have it far in front of me.

[00:16:35] Speaker 03:
All right.

[00:16:36] Speaker 03:
B and C.

[00:16:40] Speaker 03:
which is incited by the board, he talks about a schedule, an updated schedule.

[00:16:48] Speaker 03:
And C is if the contractor fails to deliver an updated schedule, okay, the contracting officer may terminate.

[00:17:02] Speaker 04:
So it's your position essentially, because I'm looking at A too,

[00:17:06] Speaker 04:
if you deliver an initial schedule that's accepted, then the only alternative for the government if you fail to deliver an updated timely schedule is default.

[00:17:18] Speaker 03:
Why would you have B in there at all?

[00:17:24] Speaker 03:
Because that's almost what common law is.

[00:17:29] Speaker 03:
Because what you're trying to do

[00:17:31] Speaker 04:
Can you just address the words in A that say the contracting officer shall within five days or within another period of time determined by the contracting officer deliver schedule?

[00:17:43] Speaker 04:
Why doesn't that suggest that the contracting officer, when it finds the initial schedule has gotten out of line, request a revised schedule?

[00:17:51] Speaker 04:
And if it's not met, that's part of A. Because the original schedule

[00:17:57] Speaker 03:
is baseline.

[00:17:59] Speaker 03:
So what they're saying is, until you give me something for me to compare, our baseline schedule, your first schedule, there's nothing for us to compare.

[00:18:11] Speaker 03:
We're not going to release any payments to you, as far as that goes, because we use that baseline schedule to compare all the updates and everything else.

[00:18:24] Speaker 03:
And that's what makes sense.

[00:18:27] Speaker 03:
to answer your question, Your Honor, Judge Hughes, is that when you elect to withhold progress payments that you're supposed to make, you're saying, I'm not going to pay you, Mr. Contractor.

[00:18:48] Speaker 03:
Let's assume that you're the government.

[00:18:49] Speaker 03:
I'm not going to pay you, but I want you to finish.

[00:18:52] Speaker 03:
I want you to be on that job for next year,

[00:18:58] Speaker 03:
pay a quarter million dollars every month and be on that job because that's what you signed up for.

[00:19:06] Speaker 03:
Forgetting about what Judge Davis says about sticking your head in a lion's mouth hoping it would turn out to be a vegetarian.

[00:19:18] Speaker 03:
That's what you say that the contractor was that dumb that it signed this proof 13 without any recourse to it.

[00:19:28] Speaker 03:
the fall clause, without any recourse to the excusable delays, without any recourse for government concurrent delay, because there was never any permanent power.

[00:19:41] Speaker 03:
To this day, I believe, there's no permanent power to service these additional buildings.

[00:19:52] Speaker 03:
And that's what basically you're saying.

[00:19:57] Speaker 03:
The problem on the first breach, when you do first breach, you're saying to the other breaching party, I'm not paying you, but I want you to do the contract.

[00:20:09] Speaker 03:
Well, you can't have it both ways.

[00:20:11] Speaker 03:
And that's what the payment clause, when they drafted the FARs, and maybe I'm just too old for this thing.

[00:20:18] Speaker 03:
When the FARs was drafted, that's what they looked at.

[00:20:22] Speaker 03:
on the scheduling clause.

[00:20:25] Speaker 03:
Yes, if you don't come up with a schedule and you don't have a approved schedule, we can terminate you.

[00:20:31] Speaker 03:
But you can't have it both ways.

[00:20:34] Speaker 03:
You can't have, I'm not going to pay you, but you better do perform your contract.

[00:20:41] Speaker 03:
And that's what it all boils down to.

[00:20:44] Speaker 03:
And that's not what the FAR says, that's not what the contract says.

[00:20:47] Speaker 03:
And that's why, you know, when the FARs were revised to eliminate the 10% retention, it said if you don't, if you're tardy and you don't perform correctly, they can hold back a maximum of 10% retention because they know they can break any contract by holding back all payments.

[00:21:12] Speaker 03:
And you're saying that forgetting about the first breach situation, you could hold back 100% of payments, you could hold back 100% of the fuel and the generators,

[00:21:25] Speaker 03:
and saying, Mr. Contractor, you're still going to go ahead and continue performing the remaining 10% of the contract.

[00:21:35] Speaker 03:
You're going to supply fuel for the existing buildings, for the 11 existing buildings at a quarter million bucks every month from now to whenever we get the plant built, if ever.

[00:21:51] Speaker 02:
Council, I don't think you need to shout at us.

[00:21:54] Speaker 03:
Oh, I'm sorry, Your Honor.

[00:21:55] Speaker 03:
I mean, you know, one of the things is, and Steve knows, they found the judge, he had a great sense of justice, okay?

[00:22:11] Speaker 03:
He had a great sense of justice, and Judge Davis, you know, and they were opposite, was such a great academic and knowledgeable person,

[00:22:24] Speaker 03:
about the law.

[00:22:26] Speaker 03:
But between the two of them, that's what I learned.

[00:22:29] Speaker 03:
I learned what a sense of justice is, and I learned what the law really is, and what this court is really about.

[00:22:42] Speaker 03:
And I still feel that that's what we're here for.

[00:22:50] Speaker 01:
Let's hear from the other side, and we'll

[00:22:53] Speaker 01:
Save your rebuttal time.

[00:22:55] Speaker 01:
Yes.

[00:22:55] Speaker 01:
Thank you.

[00:23:03] Speaker 01:
Mr. Gilliam, tell us what went wrong here.

[00:23:08] Speaker 01:
Obviously, these circumstances were extraordinarily difficult.

[00:23:14] Speaker 01:
And the mod was signed to provide fuel, to continue to provide fuel at the contractor's cost.

[00:23:23] Speaker 01:
But it's hard to reconcile that with, instead of paying the 90%, as seems to have been agreed in the contract, there was a total termination.

[00:23:36] Speaker 01:
What happened?

[00:23:38] Speaker 00:
Well, the termination, of course, was because of, as the board judge found, anticipatory repudiation.

[00:23:43] Speaker 00:
He cited a long string of events starting on April 14, 2012 and culminating on April 23, 2012, where

[00:23:53] Speaker 00:
Basically, Highland said, we're not going to perform the contract.

[00:23:57] Speaker 00:
There's lots of back and forth.

[00:23:59] Speaker 00:
Are you sure you're not going to perform the contract?

[00:24:00] Speaker 00:
We're not going to perform the contract.

[00:24:02] Speaker 00:
Eventually, he came down to negotiating, tell us when you're going to turn the power off.

[00:24:05] Speaker 00:
And when they did, it was turned over to another contract who supplied the power.

[00:24:10] Speaker 00:
This case is really about the failure to earn payment.

[00:24:12] Speaker 00:
The law at 10 USC 2307 cited by the board, Judge explains, in order to be paid, three things have to be present.

[00:24:19] Speaker 00:
Number one, the contractor must

[00:24:22] Speaker 00:
The progress payments may only be paid as commensurate with the work actually accomplished.

[00:24:28] Speaker 00:
Number two, it has to be according to the contract specifications.

[00:24:32] Speaker 00:
And number three, it has to be accompanied by a prompt payment certificate, which not only certifies that the work has actually been done, but that the contractor, subcontractors have been paid.

[00:24:41] Speaker 00:
And just about all of this job was subcontracted out.

[00:24:46] Speaker 00:
There was plenty of testimony to the fact that that was not going on at all.

[00:24:50] Speaker 00:
And I can show you in the accounting documents, first of all, there's no bills whatsoever for fuel here.

[00:24:59] Speaker 00:
What's at issue is prompt payment requests 44 and 45.

[00:25:02] Speaker 00:
They were for a bunch of miscellaneous things.

[00:25:04] Speaker 00:
They totaled $315,000 and they were not paid.

[00:25:08] Speaker 00:
I can show you in the accounting documents not only that there was, under CLIN 17, that there was no request for fuel at all.

[00:25:15] Speaker 00:
You can just go right down the pages and see 17000 requested.

[00:25:20] Speaker 00:
You can then look at the government's own estimate of how much work has been done, and you'll see that what they've said is that they've deducted, but not retained, the $315,000, having found the work simply was not in place.

[00:25:36] Speaker 00:
And then if you go further to the, in the record also, at page 1235 is a history of payments, and you'll see that the retainages are well within 10%.

[00:25:46] Speaker 00:
In fact, even if you were to say, so the distinction is work having been accomplished in the first place.

[00:25:50] Speaker 00:
And the government obviously had no faith it was.

[00:25:54] Speaker 00:
And there's numerous documents in the record and numerous testimony to the effect of that Highland was consistently asking for more than it was due.

[00:26:02] Speaker 00:
The board, for example, found that in one case, Highland had insisted they had performed 50 to 80% of the work and they had performed no percent of the work.

[00:26:13] Speaker 00:
There was a document where a contract administrator wrote to Highland and said, you've claimed that work is being done, but we see no work being done.

[00:26:24] Speaker 00:
So there was a real lack of faith that any work was being done and the government was not about to pay for work that was not done.

[00:26:30] Speaker 00:
But the documents themselves show that what work was credited as being done was only subject to the 10 percent retainage.

[00:26:38] Speaker 02:
a dispute as to who breached first.

[00:26:41] Speaker 02:
And the government's view is that Highland breached first by saying, we're not going to perform anymore.

[00:26:50] Speaker 00:
That's right.

[00:26:50] Speaker 00:
And that's what the judge found.

[00:26:51] Speaker 00:
That was the basis upon which the contracting officer terminated on April 23rd.

[00:26:56] Speaker 02:
So that's the justification for not paying 100% rather than withholding just 10%.

[00:27:05] Speaker 00:
Well, again, the justification for not paying on

[00:27:08] Speaker 00:
on progress payment request 44 and 45, which totaled $315,000, was that the fuel simply had not been delivered.

[00:27:18] Speaker 00:
So if you look at the documents that assess that, the pay estimates, for example, they're found in appendix page 878 and 884, they show $315,000 as having been deducted.

[00:27:29] Speaker 00:
And the reason there was a deduction was, as the contracting officer explained in her termination letter, found that appendix 76,

[00:27:36] Speaker 00:
The government was actually owed $903,000 because the survey had showed they had overpaid by $903,000.

[00:27:42] Speaker 00:
So they weren't about to pay another $315,000.

[00:27:45] Speaker 00:
And that's why at that government assessment of actual work delivered at appendix 878 and 884, you'll see $315,000 deducted, but nothing retained.

[00:27:58] Speaker 02:
Well, how many points out that they were broke?

[00:28:01] Speaker 02:
They didn't have any more money, and that they were impeded by the Pakistani closure of the border.

[00:28:09] Speaker 02:
There were reasonable excuses.

[00:28:11] Speaker 02:
And they couldn't perform because they didn't have any more money.

[00:28:14] Speaker 00:
Right.

[00:28:14] Speaker 00:
So under this court's precedent in Maripakos, if they wanted to claim excusable delay or even compensable delay, they were required to submit a claim, and they never did that.

[00:28:24] Speaker 00:
The board judge found that neither any of the documents, including their schedules, including the ones submitted on April 4th, did they actually explain

[00:28:31] Speaker 00:
that there is excusable delay or given excuses for why things weren't delivered.

[00:28:35] Speaker 00:
There was lots of testimony in this five-day trial, and the record is very long, I assure you.

[00:28:40] Speaker 00:
I think it's 1,629 pages, something like that.

[00:28:43] Speaker 00:
And there was lots of testimony about the flooding and so forth.

[00:28:46] Speaker 00:
And what the government witnesses testified to and what the judge credited was that these things were never shown to be on a critical path.

[00:28:53] Speaker 00:
So for example, in the case of the Pakistani border closure, the contracting officer testified

[00:28:57] Speaker 00:
If you would have shown me that you actually had those generators there, I could have contacted NATO officials.

[00:29:03] Speaker 00:
They could have determined whether they were actually there.

[00:29:07] Speaker 00:
And then I also would have assessed whether you needed them, whether they were on a critical path.

[00:29:11] Speaker 00:
Now, in fact, the generators, except for three that were allegedly stolen, did show up in February of 2012, several months, almost three months before termination.

[00:29:22] Speaker 00:
So that was just never shown to be an excuse that actually affected the work.

[00:29:26] Speaker 00:
The rain, which was I think a day or two in November of 2011, was assessed.

[00:29:32] Speaker 00:
Contracting representatives were at the site every day and basically reported there was no work going on and it did not, it was not on a critical path.

[00:29:42] Speaker 00:
I think in that case they said the permits had not even been obtained that would have had to have been obtained in order for that work to do.

[00:29:48] Speaker 00:
So whether it was a Pakistani border closure, the rain or other miscellaneous and generalized complaints

[00:29:55] Speaker 00:
some of which had to do with the subcontractors themselves, which, of course, in a fixed price contract, is the obligation of the contractor.

[00:30:02] Speaker 00:
It was no doubt a difficult environment, and the bidders knew this.

[00:30:04] Speaker 00:
As the board judge found, there was at least one or two questions where bidders said, won't there be a special clin in case we cannot deliver by the delivery date, which then was 2009, I think.

[00:30:16] Speaker 00:
It wound up being much later, 2012.

[00:30:18] Speaker 00:
And the government said, no, you have to be sure that if you cannot deliver these facilities

[00:30:24] Speaker 00:
ready for occupancy, including power, then you will provide temporary facilities and temporary power.

[00:30:31] Speaker 00:
And that was very difficult.

[00:30:32] Speaker 00:
And the government said you have to price accordingly.

[00:30:35] Speaker 01:
I'm sorry.

[00:30:35] Speaker 01:
But this is really what seems to be so disturbing.

[00:30:38] Speaker 01:
You have an active war zone.

[00:30:40] Speaker 01:
Sure.

[00:30:41] Speaker 01:
And so this contractor, a very large contract, agrees.

[00:30:45] Speaker 01:
And actually, and this seems to be an unusual circumstance, if difficulties arise, never mind.

[00:30:52] Speaker 01:
We'll pay 90%.

[00:30:54] Speaker 01:
Nonetheless, the difficulties did arise, and that the government just cut it off.

[00:31:02] Speaker 01:
And that doesn't seem to fit with the commitment and the basis for the 90%.

[00:31:09] Speaker 00:
No, and I want to make clear, Your Honor, that in this case, only 10% of actual earning work accomplished was withheld.

[00:31:16] Speaker 00:
And you can see that in the government, in the pay histories of 1235.

[00:31:22] Speaker 00:
You can see it in the earnings reports.

[00:31:24] Speaker 00:
that I identified to you.

[00:31:27] Speaker 00:
And you can also see it in the government's tally of their obligations.

[00:31:30] Speaker 00:
The government operates a checkbook and for each item to be paid.

[00:31:36] Speaker 00:
In other words, you're saying the other 90% weren't due because there was no progress.

[00:31:42] Speaker 00:
100% wasn't due because no work was accomplished.

[00:31:44] Speaker 00:
Again, the statute and the FAR and the payment clauses also cited by the judge make clear that without a contract,

[00:31:52] Speaker 00:
The contract is the basis for assessing whether work is in place.

[00:31:55] Speaker 00:
The government had doubts as to whether the work was in place.

[00:31:59] Speaker 00:
They were not about to pay for nothing.

[00:32:01] Speaker 00:
As the contracting officer explained at pages 21, 94 and 95 of her testimony, I simply can't pay on an allegation that you've done work.

[00:32:08] Speaker 00:
And given the inspections in the field, given submissions of inflated people on the job, of inflated progress, she simply had no confidence that work was actually being accomplished.

[00:32:19] Speaker 00:
If she had agreed that work was accomplished,

[00:32:22] Speaker 00:
She would then have had to pay whatever was left remaining on that particular activity's budget, and then she could have only subtracted 10%.

[00:32:29] Speaker 00:
There's no question about that.

[00:32:31] Speaker 00:
This was really a question about whether the work had been accomplished, whether it was, whether it met the contract standards, and whether the prompt payment certificate was accurate.

[00:32:43] Speaker 00:
And those things are required by 10 U.S.C.

[00:32:46] Speaker 00:
2703.

[00:32:46] Speaker 00:
They're required by the FARC laws 52-232.

[00:32:52] Speaker 00:
They're required by the basis for payment clause, found at page 585, and in particular, paragraph 3.4.4, which says, payment shall be based on earnings.

[00:33:05] Speaker 00:
And payment shall not be made for work that contains quality defects, at paragraph 3.4.3, at appendix 587.

[00:33:12] Speaker 00:
It says, provided the contractor has provided a complete schedule

[00:33:18] Speaker 00:
These various reports shall serve as a basis for determining contractor payment.

[00:33:22] Speaker 00:
Updated reports are required.

[00:33:27] Speaker 00:
And so having explained, as did other engineers, that if work was not going to be performed, they could not pay for it.

[00:33:34] Speaker 00:
But we agree 100% that if the work had been in place, if they'd gone out and inspected and found something that had been paid for, met quality standards, they would have had to pay for it, and they could only have subtracted 10%.

[00:33:48] Speaker 00:
as the contracting officer said in her termination letter, founded Appendix 76.

[00:33:52] Speaker 00:
In fact, the government had overpaid on a job by $900,000.

[00:33:57] Speaker 00:
But even if you reject what I'm telling you and say, well, it sounds like they had a sufficient allegation they had done the work, and we should assess this under the retainage clause, $315,000 withheld

[00:34:09] Speaker 00:
is by my count now that point the government paid out uh... thirty two point two six seven three six two million dollars thirty two million two hundred sixty seven three hundred sixty two dollars and that's found in the pay history at appendix page twelve thirty five three hundred fifteen thousand dollars over three hundred thirty two million equals uh... point nine percent that is eleven point one times less or one thousand one hundred one hundred ten percent less

[00:34:38] Speaker 00:
than the 10% that clause allows.

[00:34:40] Speaker 00:
So even if the 10% applied to these deductions, as the government called them, not retainages, the government was well within the 10% standard.

[00:34:56] Speaker 00:
Unless the court has particular questions, I'm not sure I have anything further to add, because the judge basically found all the questions as fact.

[00:35:07] Speaker 00:
whether the progress was actually made, whether work was actually accomplished, whether the parties agreed that this particular work, the power work, was severable.

[00:35:19] Speaker 00:
It was not.

[00:35:19] Speaker 00:
It was integral from the very beginning that these buildings, these barracks, have power.

[00:35:26] Speaker 00:
The board judge explained that without power, there was no electricity, there was no water, there was no sewage, there were no ablution facilities, which were important for

[00:35:37] Speaker 00:
for people of the Muslim faith who washed their hands before praying.

[00:35:42] Speaker 00:
And when power was shut off, that temporary power was shut off, there were riots.

[00:35:47] Speaker 01:
But meanwhile, another contractor had been assigned and apparently defaulted on building the power plant.

[00:35:55] Speaker 00:
So there's two things going on there.

[00:35:57] Speaker 00:
There was always a base operating.

[00:36:00] Speaker 00:
There was a location there with power.

[00:36:02] Speaker 00:
And as the board judge found,

[00:36:05] Speaker 00:
At an opinion page 20 or 14 in, I think it's finding a fact 27, all the witnesses agreed that all the contractor had to do here was take the power to run cables through ducts and connect to existing power on the base.

[00:36:20] Speaker 00:
Now, at some point, they were thinking of expanding the base to house more soldiers than they wound up housing.

[00:36:25] Speaker 00:
If that had happened, there would have been an expansion of the power plant.

[00:36:29] Speaker 00:
But instead of housing those additional soldiers, because of difficulties in expanding the power plant,

[00:36:34] Speaker 00:
They simply cut out the power plant out of both Highland's work and of a follow on contractor's work.

[00:36:40] Speaker 00:
But there was sufficient power and as I said the board judge credited testimony that in fact all they had to do was connect to the existing power and that would have been sufficient to run power from Camp Hero over to the Combat Support Battalion base which they were constructing.

[00:36:56] Speaker 00:
So it would not have been worthless.

[00:36:58] Speaker 00:
It was important work and in fact it was completed by a follow on contractor.

[00:37:04] Speaker 00:
If the court has no further questions, I will end my remarks.

[00:37:10] Speaker 01:
Thank you, Mr. Brown.

[00:37:15] Speaker 01:
Mr. Brown, do you have some rebuttal time if you wish?

[00:37:23] Speaker 03:
Two things I'd like to raise is that if you're on Appendix 146,

[00:37:35] Speaker 03:
is the site electrical distribution system request for proposal.

[00:37:45] Speaker 03:
And it was specifically saying that the existing electrical distribution system would not, and it capitalizes not, support the additional load for this project.

[00:38:01] Speaker 03:
So it was always stated

[00:38:03] Speaker 03:
that you need additional expansion at the power plant in order to have permanent power given to the CSB buildings.

[00:38:15] Speaker 03:
That's the first sentence on Appendix 146.

[00:38:21] Speaker 03:
And that never changed except for the attempted testimony that, oh, we could have shut off some Camp Hero buildings

[00:38:33] Speaker 03:
and provided power to these buildings.

[00:38:37] Speaker 03:
The other thing is that if you look at Appendix 1235, it is the Corps of Engineers official progress payment history, where they say that they approved on March 1, 2012, that first two-week period of time between March 1 and March 15,

[00:39:02] Speaker 03:
$238,690 in progress payments, which is 44.

[00:39:10] Speaker 03:
In 45, they approved another $76,829, $315,000.

[00:39:18] Speaker 03:
And they said that they're just not paying it.

[00:39:22] Speaker 03:
So basically, the government had approved those numbers.

[00:39:28] Speaker 03:
They had a group of Corps of Engineers,

[00:39:33] Speaker 03:
go through the buildings and approved it.

[00:39:36] Speaker 03:
It wasn't until way after the termination they came up with this, oh, you only finished 86 percent, not 90 percent of these 31 buildings.

[00:39:51] Speaker 03:
But the official documents showed that they approved the progress payments, you know, after all the Corps of Engineers looked at it.

[00:40:00] Speaker 03:
There is no finding

[00:40:03] Speaker 03:
by the board or by Judge Thrasher that there was any overpayment.

[00:40:10] Speaker 03:
You could read, you know, his 150-page opinion.

[00:40:14] Speaker 03:
You'll see nothing about the overpayments in his opinion.

[00:40:25] Speaker 03:
Thank you.

[00:40:28] Speaker 01:
Thank you.

[00:40:28] Speaker 01:
Thank you both.

[00:40:29] Speaker 01:
The case is taken under submission.