AEON Group, LLC

ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeals of -- )
)
AEON Group, LLC ) ASBCA Nos. 56142, 56251
)
Under Contract No. HQ0423-04-C-0003 )

APPEARANCE FOR THE APPELLANT: Michael R. Rizzo, Esq.
McKenna Long & Aldridge LLP
Los Angeles, CA

APPEARANCES FOR THE GOVERNMENT: Neil Bloede, Esq.
Thomas S. Tyler, Esq.
Snider Page, Esq.
Trial Attorneys
Defense Finance and Accounting Service
Indianapolis, IN

OPINION BY ADMINISTRATIVE JUDGE DICKINSON

AEON Group, LLC, (AEON) appealed in ASBCA No. 56142 from the termination
for default by the Defense Finance and Accounting Service (DFAS or government) of
Contract No. HQ0423-04-C-0003 for the "rehosting" of the Department of Defense
(DoD) Mechanization of Contract Administration System (MOCAS) from its existing
software platform to a new platform. AEON appealed in ASBCA No. 56251 from the
government's final decision and demand to recover unliquidated performance-based
payments in the amount of $12,905,117.22. The parties' previous cross-motions for
summary judgment were denied. AEON Group, LLC, ASBCA Nos. 56142, 56251, 09-2
BCA if 34,263. We have jurisdiction under the Contract Disputes Act (CDA), 41 U.S.C.
§§ 7101-7109. Only entitlement is before us.

FINDINGS OF FACT

A. Background, Solicitation and Proposal

1. The MOCAS system at issue in these appeals is a "Critical system in the DoD
contracting and entitlement process supporting the Warfighter, Homeland Security and
Disaster relief' (app. supp. R4, tab 281 at 6). MOCAS is used by DoD for two primary
purposes: by the Defense Contract Management Agency (DCMA) for contract
administration, quality assurance, property management, contract payments and financial
administration; and, by DF AS to provide accounting services and payment functions for
wages and contracts. 1 Over 8600 users ofMOCAS enter data into the system on-line
during the day; a batch cycle runs at night and the system then automatically generates
reports and payments. Contract payments are automatically generated by MOCAS when
the system is able to match up a contract, a receiving report and a contractor invoice.
(Tr. 1/42, 3/380, 4/753, 5/940, 1076, 1091; R4, tab 3 at 773) The MOCAS system is used
to pay out about $78 billion per month under government contracts (app. supp. R4,
tab 283 at 3; tr. 3/380-81). The existing MOCAS system (hereinafter "As-Is MOCAS")
had three regional databases, referred to as MOCs: MOCG (southern region); MOCH
(eastern region); and, MOCL (western region) (tr. 3/383, 577, 599, 4/785; R4, tab 3 at
773). The As-Is MOCAS at the time of the contract at issue was complex and comprised
of over 1600 different programs (supp. R4, tab 106 at 14 ), was very old2 and had
maintenance issues (tr. 1/44). Further, because the system was so old and "there had been
a lot of software coders that had played with the system" over time, "probably nobody
really had a full grip as to how good or how bad" the coding of the As-Is MOCAS was
(tr. 1/74). Documentation for much of the As-Is MOCAS system was nonexistent:

[T]he paperwork for MOCAS is not current. The system is
basically over 40 years old, and during that time a lot of the
changes that were made and everything, the paperwork on
them were lost.... As we make changes we try to baseline
what changes we are making, but no ... we do not have a good
set of baseline documentation for the whole MOCAS system.

(Tr. 5/984) The As-Is MOCAS system used a SUPRA database which, at the time of
contract award had only about 200 users worldwide, compared to hundreds of thousands
of users of newer software like DB2. The government was concerned that the SUPRA
software was going to become unsupported, creating a variety of issues, in particular
security issues. (Tr. 4/688) In spite of these challenges, the As-Is MOCAS system
"operated pretty well" (tr. 4/733).

2. The government sought to have its MOCAS system be compliant with
then-current DoD regulations and to take advantage of newer technology and software.
Rather than incur the expense of a complete replacement of the entire system, after
consideration of various options, the government made the decision to update the existing
MOCAS system incrementally in steps. (App. supp. R4, tabs 100, 283, 290; tr. 4/685-86)

The goal of the program was to simply get MOCAS on a
platform that was maintainable, THEN, enhancements could

1
DCMA owns 65% of the MOCAS system and holds all of the system's
accreditations. DFAS owns 35% of the MOCAS system. (Tr. 3/557)
2
"[C]irca 1960" (app. supp. R4, tab 290).

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 be incrementally introduced by a [readily] available
[government] workforce, based on current and accurate
documentation ....

The Undersecretary of Defense, Comptroller made the
decision to initiate a spiral acquisition program beginning
with the replacement of the underlying DBMSY 1 This type of
program is not new or cutting edge. It has been successfully
performed numerous times and is nowhere near the risk [of] a
complete new development or modernization effort.

(App. supp. R4, tab 283 at 3)

In order to limit scope and minimize risk, the requirement was
to be completely technical, providing the exact look and feel
with 100% of the existing system functionality. There was to
be no functional change.

(App. supp. R4, tab 290)

As a technical upgrade, no new or altered functionality was
being introduced into the system as part of the Rehost. This
significantly reduced the potential for scope creep and
training requirements, increased user acceptance, and reduced
the need to interpret and refine requirements. These are
common risk areas in all projects that often result in schedule
and cost overruns, rework and disruption to production
operations. As such, per the [Statement of Work] (SOW),
"The contractor shall ensure that the rehosted MOCAS has
100% of the functionality of the As-Is MOCAS system." The
SOW further clarified this requirement for the human-PC
interfaces, system interfaces, reports and queries, on-line
updates, batch updates, and error messages. In summary, all
outputs of the system were required not to have any visibility
of a change to the end user, and support the same business
and technical capability uses as the current system.

(Supp. R4, tab 106 at 1) The government expressed in its answers to prospective
offerors' questions prior to contract award that it wanted the computer screens, reports

3
Data Base Management System.

3
and all system output to remain exactly as it was before the update but to have all the
code, interfaces and documentation behind the output be updated.

QUESTION 118: Reference section 7 ofthe SOW, The
rehosted system will evidence no change to the screen layouts,
order of fields, character input, screen resizing capabilities,
help buttons, or any other characteristic.
ANSWER: Comment acknowledged. NO CHANGES to any
characteristics are permitted by the solicitation.

(R4, tab 1 at 183) The government considered its approach to present "limited
requirements" that made a firm-fixed-price contract appropriate (tr. 5/1079-80). A
firm-fixed-price contract "places upon the contractor maximum risk and full
responsibility for all costs and resulting profit or loss" (FAR 16.202-1) and
FAR 16.202-2(d) specifies that a firm-fixed-price contract is appropriate where:
"Performance uncertainties can be identified and reasonable estimates of their cost impact
can be made, and the contractor is willing to accept a firm[-]fixed[-]price representing
assumption of the risks involved." The government also considered the use of a
firm-fixed-price contract to mean that the government's oversight and involvement in the
work performed under the contract had to be limited (supp. R4, tab 106 at 3; tr. 1/135-36,
3/520-22).

[O]ne of our concerns was that we did not hinder [the
contractor] from their efforts. We did not want to be the
cause of any delays.

We certainly didn't claim to have all the expertise.
[The contractor] was supposed to develop their own test
plans, own project management plans. It was pretty much
hands off, and they were supposed to complete everything,
and tum it over for Government testing, and at that point, we
would test the functionality.

(Tr. 4/710-11, see also tr. 5/909)

3. The government made the decision to provide the successful offeror a
"complete operation copy" of the As-Is MOCAS (tr. 4/660).

That was important because they were to deliver a system that
looked, felt, operated identical to the current as-is. So that
was the baseline. Everything was to be - we called it the gold
tape. Everything was to be compared to that, and that is what

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 they were supposed to deliver, and it was very expensive by
the way. It was unheard of.

I think it was the first time that we had ever seen that
done, where a complete copy of the MOCAS was given, that a
complete operational copy was given.

A Over the course of the contract [it cost the
government] probably over a million dollars.

(Id.)
Q ... Did the Government furnish a detailed
design?

A We furnished a complete as-is, which is
better than any design document that you could ever
hope for.

A AEON was supposed to develop [the]
design ....

(Tr. 4/729-30, see also tr. 4/874, lines 6-11) On 9 November 2005 AEON expressed its
understanding that there were usually no design specifications for a conversion project
such as the one at issue:

In the new development project business and systems
requirements specifications are available. From these
specifications, architecture and designs are developed and
documented. The design documents are used to create
program specifications which in tum enable program
development. Programmers develop their programs in
accordance with the program specification. When the
program is developed the programmer unit tests the program
against the program specifications. For conversion projects
such as MOCAS Rehost there usually are no business or
systems requirements and no design or program
specifications. Further, the programs are partially or fully
converted using a tool.

5
(Supp. R4, tab 68 at 2) (Emphasis added) We find that the copy of the As-Is MOCAS
system provided to the successful bidder was the performance specification to which
AEON was to design and produce the Rehosted MOCAS.

4. On 25 July 2003 DF AS issued Solicitation No. MDA240-03-R-0003 for the
MOCAS Rehost project which was described as:

1. Scope
The scope of this procurement is all services and supplies
associated with, or supportive of, the rehost of the [MOCAS]
including but not limited to:
• Technical migration ofMOCAS to execute on a
Defense Information System Agency (DISA)
Standard Operating Environment (SOE)
compliant Relational Database Management
System (RDBMS).
• Development of all system and project
documentation.
• Repair of the rehosted MOCAS after
installation

2. Background
MOCAS is an automated integrated financial and contract
administration system developed in the late 1950' s and
enhanced over the years to maintain regulatory compliance
and to support new business functionality. The system has
over 8,600 authorized end users from the [DF AS], [DCMA]
and other DoD components who access the system from
locations worldwide. MOCAS resides on a DISA mainframe
at the Defense Enterprise Computing Center (DECC),
currently in Columbus, Ohio, and consists of three separate
databases (MOCH, MOCL, MOCG) that serve two regions:
East and West. Each database has its own copy of
executables (programs) and Job Control Language (JCL).
MOCAS consists of both interactive on-line (MANTIS and
Customer Information Control System (CICS)) and batch
system processing. The primary programming languages are
COBOL and MANTIS, and a few programs written in
Assembler. There are a number of systems that interface with
MOCAS using a variety of platforms and interface methods
that are critical to the overall functions of MOCAS. These

6
 systems are not part of the MOCAS rehost, but their
interfaces must be maintained. There are approximately 1.5
million lines of source code maintained using a single source
code library. The executables are, in large part, mirrored in
each of the three databases.

3. Objective
The objective of this program is to begin the incremental
progression ofMOCAS toward a modem, integrated business
solution. DFAS is, in furtherance of this objective, rehosting
MOCAS. This will provide a foundation for future business
process improvements, technical capabilities, and reduced
costs. However, none of those improvements are included in
this contract.

(R4, tab 1 at 8)

5. On 12 August 2003 DFAS held the MOCAS Rehost Request for Proposal
(RFP) Conference at which Mr. Art Gold, 4 Director of Systems for Commercial Pay
Business Line (CPBL), presented information to prospective bidders in the form of
PowerPoint slides (R4, tab 1at94-121; tr. 1147). Over 30 companies expressed interest
in the project (supp. R4, tab 120 at 2). AEON was represented at the conference by
Mr. Glenn Henry (R4, tab 1 at 124). The conference slides described the existing As-Is
MOCAS system as follows:

• MOCAS was developed in the late 1950's

• The last significant upgrade was in the early 1980' s migrating
MOCAS from Honeywell to Total Information System (TIS)

• In 1998 MOCAS was moved to its current technology,
SUPRA DBMS

• Minor compared to Honeywell to TIS move
• Hierarchical DBMS with link paths to data

4
Mr. Gold was one of the principal architects of the MOCAS rehost project
(tr. 2/273-76). Mr. Gold worked for AEON after his retirement from DFAS,
which occurred sometime before the contract at issue was terminated for default
(tr. 2/274).

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 • MOCAS contains approximately 1.5 million lines of code

• COBOL- IM lines
• MANTIS - 450K lines
• JCL- 73K lines
• Assembler - 5K lines

• MOCAS has over 50 interface applications

• Shared Data Warehouse (SDW)

• Integrated extension of MOCAS SUPRA resident
database
• Provides reporting and query capabilities
• Linked and populated via a hardware/software
configuration referred to as "Forward Technical
Bridge (FTB)"
• All changes to MOCAS data is [sic] captured by a
"change detector element" of the FIB and flows
to/updates the SDW

• The existing documentation is outdated and incomplete

(R4, tab 1 at 101-03) The desired period of performance was presented to the prospective
bidders as a total of 720 days or 2 years consisting of 540 days for contractor
development and test, after which the Rehosted MOCAS was to be delivered to the
government for 180 days of Government Test and Evaluation (GT&E)5 consisting of
90 days for functionality testing and followed, if functionality testing was successful, by
90 days of production testing of the installation of all three MOCs (R4, tab 1 at 109;
finding 18).

6. All questions and comments submitted by potential bidders as well as the
government's answers (R4, tab 1 at 156-212) were posted at
www.dfas.mil/aso/contract/index.htm and available to all potential offerors by 22 August
2003 (R4, tab 1 at 165). Among those pertinent to these appeals were:

5
User acceptance testing (UAT) and GT&E are used throughout the record to refer to the
same phase of the contract (tr. 3/427).

8
 QUESTION 15: Will subject matter experts [SMEs] be
readily available as required, or should we plan for delays in
having access to subject matter experts and further delays in
their responses to our questions? What standard of timeliness
of access and response will DF AS provide to the vendor?
ANSWER: The Government will not provide SMEs. The
Government does not guarantee that it will answer any
particular question that is submitted, however, questions may
be submitted IAW par. 5 of the statement of work. There is
no standard of timeliness of responses.

QUESTION 16: [a] Will application operational personnel be
readily available as required to demonstrate operation of the
programs, or [b] should we plan for delays in access to
application operational personnel and/or time constraints on
our use of their time in demonstrating operation of the
programs? [c] What standard of access and availability will
DF AS provide to the vendor?
ANSWER: a.) No. b.) Questions may be submitted IA W
par. 5 of the statement of work. c.) None

(R4, tab 1 at 159)

QUESTION 29: The contractor shall submit, as part of its
proposal, and in accordance with the terms of the solicitation,
a Software Test Plan. The Government will use the test plan,
during the course of the contract, to monitor the contractor's
progress toward timely and acceptable performance and to
determine whether deviations from this plan are conditions
threatening performance. There's no mention of Government
participation during testing. We request that the Government
participate during all testing to ensure successful testing and
that the size of the Government team be agreed upon 60 days
prior to the test period.
ANSWER: See SOW section 9. The Government may
observe but will not participate in contractor testing.

QUESTION 30: ... [A] complete copy ofMOCAS .... one
time snapshot of full-production data. Will this snapshot
include enough data to be representative of the 100%
functionality (Daily, Monthly, Yearly, etc) ofMOCAS to
include error processing and exception reporting?

9
 ANSWER: Not necessarily, there is the possibility that
specific types of data may not be included in the snapshot at
the time it is replicated. The as-is snapshot will be able to
process any and all data that the corresponding production
database can. Therefore, the contractor can simulate any type
of data and process it through the as-is environment. This
includes the data for error processing and exception reporting.

(R4, tab 1 at 162)

QUESTION 33: Reference: Section C, paragraph 2 "The
executables are, in large part, mirrored in each of the three
databases." Concerning the "mirrored" executables in the
3 environments that are "in large part" the same, should the
contractor assume that the code is exactly the same, or should
a percentage delta factor be assumed? Please supply this
factor if known.
ANSWER: A significant portion of the performance under
this contract is to ascertain the as-is environment. The
Government is aware that the three environments are "in large
part" mirror images. The Government suspects that the three
are the same. However, the Government does not know the
precise extent of possible variances between the three
environments.

(R4, tab 1 at 163)

QUESTION 36: Will the Government have access to the
as-is legacy MOCAS system (as awarded to the contractor)
that will permit testing against this baseline as well as
verification? ·
ANSWER: The Government will have access to the as-is
system, and a back copy of the as-is system, at all times. The
Government will not interfere in the contractor's use of the
as-is system during development and testing. After delivery,
the Government will use the as-is system as its benchmark.

QUESTION 38: Will contractor staff be permitted to
schedule MOCAS re-host activities such as online and batch

10
 jobs at their priority and discretion or will the Government
require prior coordination?
ANSWER: The as-is MOCAS, the testing environment and
the development environment will all reside on the same
mainframe and will be available and dedicated to the MOCAS
rehost project. The Government will not interfere in the
contractor's use of the as-is, development, or testing system.

QUESTION 49: ... [W]hat criteria will the Government use
to assess 100% functionality in the rehost?
ANSWER: See SOW sections 7 and 11.

(R4, tab 1 at 164, 166)

QUESTION 62: Do Test Scripts or a Software Test Plan
exist for MOCAS As-Is? Even informal test scripts may be
beneficial to the vendors bidding on' this solicitation
ANSWER: The Government will not provide Software Test
Plans for the MOCAS As-Is. However, ifthe contractor,
during the course of performance, discovers additional
documents, they may be requested through the [Contracting
Officers Representative] (COR).

(R4, tab 1 at 169)

QUESTION 74: On several occasions within the RFP, the
Government states that it cannot guarantee its ability to
answer questions related to the MOCAS as-is system due to
incomplete/outdated knowledge of the system. How does the
Government expect an offeror to provide the required plans
identified in Section Four Project Management in any
meaningful detail or substance without having had an
opportunity to conduct an assessment of the MOCAS As-Is
environment, and an analysis of approximately 1.5 million
lines of code?
ANSWER: The Government is seeking a contractor with the
expertise to do so.

(R4, tab 1at171)

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 QUESTION 77: The Government specifies in Section Seven
Functionality that it requires the re-hosted system will have
100% functionality of the as-is system. Can the Government
define 100% MOCAS functionality? Can the definition be
provided in specific terms, quantified by the number of
conditions, parameters and screen definitions that constitute
MOCAS 100% functionality?
ANSWER: See SOW par. 7.

(R4, tab 1 at 172)

QUESTION 98: Will DFAS consider the test coverage to be
sufficient if it covers the program logic exercised in a
simulated normal operational cycle for each program? Or will
DFAS want the test coverage to be forced to follow all
accessible logic paths?
ANSWER: The contractor must determine what testing is
sufficient to ensure the rehosted MOCAS complies with the
contract requirements.

(R4, tab 1 at 178)

QUESTION 101: ... [A] complete copy ofMOCAS .... one
time snapshot of full-production data. Will this snapshot
include internal and external interfaces to include incoming
and outgoing?
ANSWER: The Government will provide an as-is snapshot
that is a replica of the production environment. The snapshot
will be able to process any and all data that the corresponding
production database can. There is the possibility that specific
types of data may not be included in the snapshot at the time it
is replicated. The snapshot will contain the programming,
within MOCAS, necessary to operate the interfaces. To
conduct testing of those interfaces, see SOW section 9.

(R4, tab 1 at 179)

7. AEON submitted its proposal on 1December2003 in which it stated that it had
"just completed another successful conversion of MANTIS and SUPRA to CICS COBOL
and DB2 with full production implementation .... This proposal will demonstrate how we
can achieve the same success for DFAS." (R4, tab 2 at 220, 222-23) AEON's proposal

12
demonstrated its understanding of the government's decision to modernize MOCAS
incrementally and to make the Rehosted MOCAS transparent to its users:

The Government is embarking on a long term project to
incrementally transition the MOCAS system to a modem
integrated business solution. The MOCAS Rehost Project is
the first step in that transition. MOCAS will be moved to a
modem technical infrastructure without impact to the
MOCAS user community as the functionality, look and feel of
the system will mirror the current MOCAS environment.

(R4, tab 2 at 220) The proposal also stated:

MOCAS end users will not experience any change in system
functionality, data content and quality. The current business
processes and workflow will remain unchanged and the
functionality, look and feel of the MOCAS Rehosted System
will mirror the current system. Therefore, the system changes
will be transparent to the user community.

(R4, tab 2 at 221) AEON's proposal continued:

We believe we are uniquely qualified to assist you with this
major undertaking because of our:

• Team - Our highly skilled management and
technical team with in-depth MANTIS,
SUPRA, DB2 and MOCAS knowledge and
expertise, complex and large conversion
projects, effective testing and extensive project
management experiences will reduce the risks
inherent to a project of this magnitude.

• Methods, Processes and Best Practices - Our
Rapid conversion life cycle approach and
process, industry recognized standards of CMM
and PMI (Project Management Institute) for our
program management, our testing best practices
and our ability to properly manage risk, avoid
potential project pitfalls will produce high
quality, timely deliverables.

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 • NPGen Conversion Tool - Our proven
MANTIS and SUPRA specific conversion tool
will expedite the conversion process while
producing consistent and high quality
deliverables.

• Our Extensive Experience - While others
may claim that they can do it, we have done it
successfully many times.

(R4, tab 2 at 221, 254) AEON listed 11 previous projects, 6 in detail, of which 2 were
previous DF AS projects. One in particular, the DF AS SCRT project, was identified by
AEON as having multiple similarities to the MOCAS Rehost project. (R4, tab 2 at
222-25, 255-59) AEON proposed to complete the contract work in 24 months at a
firm-fixed-price of$14,899,316.00 and was the highest of the bids submitted to the
government (R4, tab 2 at 215, 242, tab 3 at 765; tr. 1/68-69, 4/656-58; finding 10). AEON
proposed to use "our proven conversion tool, NPGen, a rapid conversion approach" that it
represented to be "our proprietary" and "internally-developed" software conversion tool
(R4, tab 2 at 220, 227, 229-30, 262, 264-66; tr. l/S0-51, 4/658). AEON's proposal further
included key management personnel: John Allwood as Project Manager and Lech
Lakomy as Technical Manager6 , as well as a dedicated Program Manager (Dori Overby) to
provide additional oversight and an Internal Audit Executive (Shirin Javid) who would
spend two days per month for the duration of the project reviewing and validating the
project processes (R4, tab 2 at 237-39, 286-90, 300-31, 338-42, 372-76). The government
found AEON's proposal to present "strong management plans and had consistent, easily
understood, documented processes that appeared repeatable .... With ... strong technical
and management qualifications, and several value added features, the Government selected
AEon's proposal as representing the best value." (Supp. R4, tab 106 at 4-5; tr. 5/892-93)
AEON also proposed to use its "successful automated testing approach," grouped into ten
major categories (see finding 55), to provide "more comprehensive testing with fewer
people and for a shorter period of time leading to increased testing productivity,
consistency, quality and ultimately reducing the conversion risk" (R4, tab 2 at 232-33,
270-72).

6
The proposal also identified Mr. Lakomy as the "sole developer ofNPGen, a highly
sophisticated PC based tool suite used to inventory, parse and analyze MANTIS,
COBOL and SUPRA/TOTAL which will be the conversion tool used on the
MOCAS project" (R4, tab 2 at 238).

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 8. AEON's proposal included an extensive risk analysis and proposed specific
means by which AEON intended to manage the risks it identified. The proposal included
"several million dollar[s]," stated as a contingency, to cover the various risks identified by
AEON (tr. 4/657).

The most significant risk to the MOCAS project is the lack of
participation by the MOCAS technical and business users.
We will minimize the risk by using [Computer Sciences
Corporation] cscPJ resources that bring a wealth of DF AS
and MOCAS related experience to the project team in the
form of the Functional Manager, QA leader, testers and
programmers. We have additional team members who have
MOCAS and/or contract management and/or DF AS
experience to further minimize the risk. [SJ

(R4, tab 2 at 236, 275)

9. A total of five proposals, including AEON' s, were submitted in response to the
solicitation and evaluated by the government (supp. R4, tab 120 at 2; tr. 1/99, 4/656,
5/892).

B. Contract

10. On 1April2004 Contract No. HQ042'.3-04-C-0003 for the MOCAS Rehost
Program was awarded to AEON for the firm-fixed-price of $14,899,316.00. "This
contract will convert/rewrite all existing MOCAS software programs to a [RDBMS]
which will enable DFAS to begin its incremental progression toward a modem, integrated
business solution that is compliant with the DoD Business Enterprise Architecture."
(R4, tab 3 at 765) Contract line item no. (CLIN) 0001, Rehost MOCAS System, in the
amount of $14,849,316.00 (all but $50,000 of the total contract price) was described as:

7
AEON's proposal identified CSC and IBM as "alliance partners" (R4, tab 2 at 220, 253,
261-62).
8
AEON hired employees who had "a lot" of MOCAS experience. A few of them were
identified at the hearing as: Dwight Layden, whose nickname was said to be
"Mr. MOCAS" (division chief of programming under DLA before DCMA and
DF AS were split oft), Sandra Livingston, Don Miller, Ruth Owen (programming
supervisor in the financial area), Sheila Gretar (financial analyst and functional
analyst in MOCAS), Jim Wheeler (DISA) (tr. 4/782-83, 5/942-43).

15
 The contractor shall provide all tasks identified in the
statement of work including installation on the test and
production platforms of the rehosted MOCAS; delivery of
rehosted MOCAS and migration programs, both with full
documentation; and sequential migrations of the as-is data to
the rehosted MOCAS. This CLIN excludes statement of work
tasks for Government directed travel, and the repair and
software license options.

(R4, tab 3 at 770) CLIN 0002, Government Directed Travel, was priced in the amount of
$50,000 and CLIN 0003, Option-Repair, never exercised (tr. 1111 O; see also
finding 71), was priced in the amount of $668,316 (R4, tab 3 at 771-72).

11. The SOW~ 4, Project Management, required AEON to submit as deliverables
under CLIN 0001, as well as update throughout contract performance, a Program
Management Plan (PMP), 9 Program Quality Assurance Plan (PQAP), Software
Development Plan (SDP), Configuration Management Plan (CMP), Software Test Plan
(STP) 10 and a Transition Plan that AEON was to use to manage its performance under the
contract. "The Government will use these plans, during the course of the contract, to
monitor the contractor's progress toward timely and acceptable performance. The
Government may determine that deviations from these plans are conditions threatening
performance." (R4, tab 3 at 773) AEON was also required to provide a biweekly status
report identifying work performed and issues impacting performance, minutes of monthly
In Process Review (IPR) meetings, and a single, ongoing document in which each
milestone met was documented so that it reflected the total progress of all the milestones
identified in the PMP (see, e.g., app. supp. R4, tab 172 at 8; see also findings 21, 24, 49,
63, 65, 70). (R4, tab 2 at 236, tab 3 at 773-74; app. supp. R4, tab 169; tr. 21191,
3/397-99) SOW~ 4 provided that:

The Government expressly reserves the right to observe,
shadow, question, make suggestions to, and otherwise interact
with the contractor during the performance of the contract.
However, the contractor is responsible to notify the
Contracting Officer (CO), in writing, if at any time it believes
that the communication under this term is interfering with the
performance of the contract and provide the Government

9
The PMP was a "living document" that was updated throughout contract performance,
the most current version of which was submitted to the government on a regular
basis. See R4, tab 25 for what is annotated as the final PMP (Sept 2006).
10
See finding 16.

16
 24 hours to evaluate the objection and if appropriate,
discontinue the behavior.

(R4, tab 3 at 774)

12. SOW~ 5, As-Is MOCAS, provided:

The contractor, in order to reproduce the current MOCAS
functionality in a RDBMS, must ascertain the functionality of
the current, as-is MOCAS. The contractor will have:
• ... [A] complete copy ofMOCAS systems loaded with a
one-time snapshot of full-production data. The
boundaries of the as-is MOCAS are contained in
section J, attachment 1.7, MOCAS Rehost As-Is
Documentation - MOCAS Technical Environment
Chart.... [I]nterfaces, applications, or files not
designated as part of the as-is MOCAS in that
attachment [may not be changed].
• The as-is documentation provided as an attachment
to this [contract]. The as-is documentation only
represents a high-level approximation ofMOCAS.
It is based on incomplete and/or outdated
documentation. [I I]
• The option of submitting questions, in writing, through
the COR.
• However, the Government does not guarantee
that it will be able to answer any particular
question that is submitted because of the
incomplete and/or outdated knowledge of
MOCAS.
• These questions and answers do not relieve the
contractor from responsibility for ensuring that
it has a thorough and correct understanding of
the as-is functionality.
• The Government will acknowledge the
contractor's requests within two business days.

11
One of the purposes of the contract to rehost MOCAS was to provide updated
documentation (tr. 5/1087; see also findings 4, 10, 18, 19, 52, 54, 71, 115).

17
(R4, tab 3 at 774) With respect to the provision of the "one-time snapshot of full-production
data":

We provided a -- we went to DISA and asked them
that since we knew that this documentation on the MOCAS,
was antiquated, we wanted to make sure that they had a
system that they could go back to, so that when they were
converting on this side, they can go back and test over on the
current system to make sure that it was doing the same thing
as it was doing over here, and it would be doing the same
thing when they converted it.

So we provided them a one time snapshot of all three
databases for them to use, which was very costly. [121

We provided [AEON] with a system so that they can
compare and they can see how the system was functioning.
They could go and do a test and use that so when they were
over here, and they were having difficulties, they could go
back to the other system to compare .

... [T]hey can get new log-ins, and a new sign-on, and
enter data, and go in and see how it works, and basically to
see how it was working today, and then when they went and
converted it, they could go back and check and see if it was
doing the same thing in the old system when they converted it
over to the new system.

(Tr. 3/405-07; see also tr. 5/908-09)

13. SOW ~ 6, System Development, provided:

The contractor will - -
• update, convert or rewrite MOCAS's MANTIS,
COBOL, and all other programs and batch JCL
jobs,

12
(See finding 3).

18
 • using, on the mainframe, only programming
languages, conversion or development tools that
are listed as GFP, or that have received a waiver
from the CO,
• and using, on a workstation connected to the
ELAN, only software listed in section J,
attachment 2.1, provided as part of the standard
DF AS office automation software load, or that
has received a waiver from the CO
• to execute using a contractor developed/converted
database utilizing a Government-furnished,
Government-installed RDBMS as identified in
section 16 ofthis SOW,
• that accommodates the consolidation of the
current three physical databases into a single
instance with a single set of executable files and
JCL,
• mapping the as-is MOCAS database file structure
to the rehosted MOCAS database,
• which shall reside on a Government-provided
mainframe,
• running a Government-tailored operating system
loaded with all software listed in section J,
attachment 2 .4.
The Government will - -
• no later than 90 days after the date of award,
provide the contractor test and development
environments running a Government-tailored
OS-390 operating system loaded with all GFP
software,
• and on or before September 30, 2004, inform the
contractor that a Government-tailored installation
package to upgrade to a Z/OS operating system
with a list of the Government-provided software
that is included in the package is available,
• over the course of no longer than 72 hours, install
the available installation package within 30 days
of the contractor's written request or one week
prior to the beginning date for delivery of
CLIN 0001, whichever is earlier,

19
 Any product used in support of this contract, but not
required to be used in the Government testing and
production environments may be loaded on a stand-alone
workstation.

The Government will maintain and ensure operability of
the mainframe hardware and the government-tailored
operating system. Ifthere is a failure of the mainframe
or government-tailored operating system, the
Government will repair or replace it within 48 hours.

Access to the mainframe via PC and ELAN will be
available to the contractor 24 hours per day, every day of
the year except for up to two 24-hour periods per month.
The contractor will not have physical access to the
mainframe.

(R4, tab 3 at 774-75)

14. SOW~ 7, Functionality, provided the following:

The contractor shall ensure that the rehosted MOCAS has
100% of the functionality of the as-is MOCAS system.
Functionality is:
• the ability of the software delivered under this
contract to operate on the
Government-furnished hardware provided under
the terms of this contract
• while supporting every one of the same
Government business uses that can be
performed using the as-is MOCAS system (for
example reports, inputs, processes, outputs,
screen layouts, interfaces, system accessability
to users, windows of availability) without any
visibility of a change to the end users
• while supporting every technical capability, use,
and purpose of the as-is MOCAS system (for
example internal controls, edits, screen scrapes,
system response times, capacity for ongoing
operations, performance characteristics, archive
capability, scalability, back-up and restores)

20
 • and, while ensuring that the Government is able
to retain or obtain the same level of security
accreditation as the as-is MOCAS system ....

The contractor shall read the definition of functionality
broadly, that is, to be inclusive of features rather than
exclusive of features. Functionality includes but is not limited
to:
• The human-PC interface. The rehosted system will
evidence no change to the screen layouts, order of fields,
character input, screen resizing capabilities, help buttons,
or any other characteristic. For example, if a special key
must be struck today, then that same key must be used in
the new system. In addition, end users must have access
only to that portion of the MOCAS data as they have in
the current MOCAS system. The contractor must ensure
that the same emulators used today by end users can
remain in use in the rehosted system.
• System interfaces. The rehosted system must maintain all
system interface capability as the as-is MOCAS system,
without requiring any changes to non-MOCAS systems.
• The contractor must retain all interface
functionality. Where any part of a system
interface, whether files or programs, are
identified as part of the as-is MOCAS, the
contractor may change them, while maintaining
full functionality. If they are not identified as
part of the as-is MOCAS, the contractor may
not change them, and as with all interfaces, their
functionality must be maintained. The
contractor shall notify the COR of any
applications not indicated on the MOCAS
Technical Environment Diagram as soon as they
are identified by the contractor. As with all
interfaces:
• Any file transferred with a particular file
transfer protocol must remain capable of being
transferred with that protocol.
• Where systems interface with MOCAS via
emulators on a PC, the contractor must ensure

21
 that the interfaces are maintained using the
same emulators.
• Reports and queries. All reports and queries will have the
same data elements, formats, information, order,
distribution (for example reports via the Mechanization of
Reports Distribution System (MORDS)) and all other
characteristics as generated by the as-is MOCAS system.
Specifically, all reports must be based only on the portion
of the data from which it is drawn in the as-is MOCAS.
For example, if a report in the as-is system is drawn only
from the "West" database, it must still only be drawn from
that data in the rehosted system.
• On-line updates. Any updates performed on-line in the
as-is MOCAS system will be performed on-line in the
rehosted system. The same on-line edits will be
performed in the rehosted system as in the as-is MOCAS
system.
• Batch updates. Any updates performed in batch in the
as-is MOCAS system will be performed in batch in the
rehosted system. The same batch edits will be performed
in the rehosted system as in the as-is MOCAS system.
The system must allow for timing of batch processing
(including all pre-cycle and post-cycle maintenance,
back-ups and restores), which does not alter the as-is
MOCAS system on-line availability for each time zone.
• Error messages. Error messages generated by the
MOCAS application software will be numbered and
worded in the rehosted system the same as they are
numbered and worded in the as-is MOCAS system.

The contractor shall, if it determines that any component of
the as-is MOCAS code does not perform a function, prepare a
written explanation of the rationale, prepare complete
documentation of the code, and submit it to the COR for
permission prior to making a determination that it is not part
of the system functionality. The contractor understands that it
is unlikely that the Government will give permission to omit
from the rehosted MOCAS code believed to be inactive.

(R4, tab 3 at 775-76) Under this requirement, the rehosted system was to look and
operate exactly the same as the As-Is MOCAS system so there was no need to retrain the

22
government users (tr. 1/74-79, 511087-88). DFAS MOCAS Program Manager Castrillo
described it as follows:

Q How was the rehosted MOCAS supposed to
operate when it was delivered to the government?

A No different than as-is MOCAS. One of the
examples I always gave was, because we acknowledged that
there's things that MOCAS did that probably wouldn't be
correct.. .. I'll give you a high level example. IfMOCAS
said 2 plus 2 is 5, if the as-is MOCAS said that, the
expectation was that when it's rehosted 2 plus 2 would equal
5. Because there were a couple times that, you know, we got
approached, hey we could correct this or, you know, we could
correct something, and I would say, no, you've got to make it
work, if it's wrong it's wrong. I mean, you know, it just has
to do what MOCAS is doing today, don't make it do
something [else].

(Tr. 5/1087-88)

15. Contracting Officer (CO) Gladski was identified as a Buyer up to and
including the date of contract award. He then became the primary CO on this contract
until he retired from DFAS in June 2008 (tr. 1/30). CO Gladski was involved in drafting
the terms and conditions of the solicitation and resulting contract (R4, tab 3 at 765;
tr. 1/46, 62, 75, 2/267). Both documents, due to minimal existing documentation, made
identification of the functionality of the As-Is MOCAS the responsibility of the contractor
(tr. 1/73-74, 2/235-36).

The requirement was pretty clear that the rehosted
system was basically a form fit function replacement of the
as-is, and was to mirror exactly the functionality of the old
system as it would have been transported or converted on to a
new platform.

(Tr. 1/76)

By limiting the conversion effort to 100% functionality
of the As-Is system, the Rehost project was unique in
that the test results from the[] rehosted system should
exactly match the results of running the same transaction
through the original system.

23
(Supp. R4, tab 106 at 16)

16. SOW~ 9, Contractor Testing, provided:

The contractor shall submit, as part of its proposal, and in
accordance with the terms of the solicitation, [an STP]. The
Government will use the test plan, during the course of the
contract, to monitor the contractor's progress toward timely
and acceptable performance and to determine whether
deviations from this plan are conditions threatening
performance. The test plan will include, at a minimum:
• unit testing,
• integration testing, which includes exception
testing, interface testing, and testing the rehosted
MOCAS functionality
• performance testing, which includes expected
level and stress level testing of system
availability, volume and response time capability
• trial migrations including at least one complete
migration of all the data in the as-is MOCAS
databases by incrementally migrating one
database at a time until all the data is copied into
the rehosted MOCAS system on the test platform

The Government may, during the performance period,
recommend exception and other testing scenarios that the
contractor may consider in its testing process.

Notwithstanding any contractor testing, the Government
expressly reserves the right to conduct any testing in order to
determine that the rehosted MOCAS complies with all the
terms of this contract. No testing by the Government will
relieve the contractor from its responsibility to comply with
all the terms of this contract.

(R4, tab 3 at 776-77; tr. 4/739-43) (Emphasis added)

24
 17. SOW~ 10, System Delivery and Set-up, provided:

The contractor shall deliver, as part of CLIN 0001, all the
source code, executable objects and all other development
products or programs for the rehosted MOCAS.

The contractor will have included in its Project Plan, the
following tasks, task durations, and shall:
• No later than the beginning delivery date for CLIN 0001,
completely purge the test platform of all data and
programmmg.
• On the beginning date of delivery for CLIN 0001, in the
presence of the COR and any other Government
representatives, install the rehosted MOCAS programs
and new MOCAS database on the testing platform.
• Complete the installation within 24 hours.
• Upon completion of the installation, using the ET&L
programs provided in paragraph 8, above, migrate the
data from one of the three as-is databases to the rehosted
MOCAS.
• On the ih calendar day after completion of the migration
of the first database, migrate the second as-is MOCAS
database to the test platform.
• On the 7th calendar day after completion of the migration
of the second database, migrate the third as-is MOCAS
database to the test platform.
• The Government will, for each database, no later than
30 days after the third migration, notify the contractor to
migrate any government-edited data from the ET &L
suspense file to the test platform.
• The contractor shall have 24 hours to complete each
migration.

(R4, tab 3 at 777-78)

18. SOW~ 11, Acceptance/Rejection, provided:

The Government shall accept or reject CLIN 0001 within
30 days from the final migration of live, legacy production
data to the rehosted MOCAS. At any time prior to final
acceptance, any discrepancy between the functionality of

25
 the rehosted MOCAS and the as-is MOCAS, or any other
failure to meet the requirements of this solicitation, may
be a basis for rejection. Documentation may be rejected if:
(1) there is any instance where the documentation does
not reflect the configuration or function of the
rehosted MOCAS
(2) it does not provide sufficient instructions to
operate or maintain any portion of the rehosted
MOCAS, and/or
(3) it does not comply with any other requirement in
this contract.

(R4, tab 3 at 778) (Emphasis added) SOW if 11 also included the following timeline:

Example Timeline

sodays I
••• •••
I 80 Da)"S Government
; TestmglAcccpmncc

CLIN 0003 Renair

Wamllltv

A The due date for the beginning of delivery of CLIN 000 I
B Installation for production testing- beginning 90 days after the due date for the beginning of delivery of CLIN
0001. Beginning of option CUN 0003, if exercised.
C Deadline for Government's Accentance or Reicction

(R4, tab 3 at 778) The timeline was explained as follows:
The delivery of the rehosted MOCAS and documentation
defined within the SOW was to occur over 180 days during
Government Testing and Acceptance phases. The
Government estimated that it would require 90 days to
perform (the initial GT &E period of functionality testing].
Upon successfully testing the system [A-->B], the production
MOCs would be migrated to the rehosted system over a 90
day I 3 month period [B-->C] in which one of the three MOCs
would be migrated each month. The Government would
accept or reject the system and documentation within 30 days
from the final migration. At the time the SOW was written,
the Government felt that this was a reasonable estimate, but it

26
 was dependent on the contractor properly testing the system
(i.e. unit and system integration testing) to ensure that the
rehosted MOCAS had 100% of the functionality of the as-is
MOCAS system. Assuming this contract term was met, a 90
day GT &E was more than sufficient for conducting the
Government's tests.

(Supp. R4, tab 106 at 3-4; see also findings 2, 5) Program Manager Castrillo described
the process as follows:

[GT &E] was the government testing and evaluation, it was
the government's opportunity to test and evaluate what was
being delivered. This system issues millions upon millions of
dollars in payments a year, or in a day I think $20 million. So
we didn't want to put it in production and have ... any fatal
errors or any problems. So we set aside 90 days in the
contract to do whatever testing we wanted or we felt was
necessary, and then so that was our period before we put it
into production .

... [O]ur evaluation period was actually I believe 180
days, 90 days was to do it outside of production and then 90
days within production.... [W]e go one MOC at a time
because again being an old system, you know, you want to be
careful about how you proceed .

...[I]t was our full responsibility to determine that the
terms of the contract were met, that we had an adequate
system, that we had a rehosted system that would fully operate
the way as-is MOCAS [operated].

(Tr. 5/1088-89) When asked what AEON's role was to be during GT&E, Castrillo
testified that AEON didn't really have a role in GT &E, stating that "their job should have
been done" (tr. 5/1089-90).

AEON was responsible for ensuring the system was delivered
with 100 percent functionality. So it was a working system.

They were responsible for doing the testing [see
finding 16]. Once it was turned over to the Government,

27
 AEON's testing of the system is over, and it is Government
testing from there. So they would not have an opportunity to
test once it is turned over.

So, by default, they have to complete their testing and
ensur[ e] 100 percent functionality before they tum it over to
us.

(Tr. 4/669; see also 5/894)

19. SOW ii 14, Documentation, provided:

On the date of the beginning of delivery of CLIN 0001, the
contractor shall deliver full documentation of both the ET &L
programs and the rehosted MOCAS including the final
version of all documentation created by the contractor during
the performance of the contract. ...

(R4, tab 3 at 779) "Full documentation" included, but was not limited to, a list of
24 reports, manuals, guides and other documents enumerated in the contract (R4, tab 3 at
779).

20. SOW ii 16, Government Furnished Property, required the government to
provide to AEON computer workstations loaded with standard DFAS network access,
access to printers, copiers, fax machines and email, desk space, telephones, general office
supplies, mainframe resources, software listed in Section J of the SOW, attachments 2.4
and 2.5, and other enumerated items (R4, tab 3 at 780). There is no other provision in the
contract that required the government to provide items in addition to those specifically
listed. In particular, there was no contract requirement for the government to provide the
government's GT&E test scripts or test plans to AEON: "[AEON was] supposed to
develop their own test plans and project management plans as they were responsible for
all the tests of the product before the delivery of the system for our testing" (tr. 4/661;
finding 16).

21. For purposes of payment, the MOC AS Rehost contract, CLIN 0001, was
structured to identify eight distinct payment events (also referred to as "Milestones"
throughout the record (see, e.g., findings 11, 49) associated with CLIN 0001 tasks, the
successful completion of which entitled AEON to receive event-based payments. The
contract contained the following in full text:

28
 Performance Based Payment Events As Implemented By
FAR 52.232-32 PERFORMANCE-BASED PAYMENTS
(FEB 2002)

1. Placement of purchase orders for vendors, subcontractors,
suppliers for labor, travel, supplies and equipment within
30-45 days after contract award.

2. Discovery Phase completion identified by the delivery of
the Discovery Findings and implications report and scheduled
for the end of the 1st quarter of performance[.]

3. Proof of Concept completion identified by the results of
the proof of concept and scheduled for the end of the 2nd
quarter of performance.

4. Design Phase completion identified by the completion of
database and application (online & batch) design and
scheduled for[] the end of the 3rd quarter of performance.

5. Data conversion completion identified by the loading of
the database into DB2 and scheduled for the end of the 4th
quarter of performance.

6. Conversion completion identified by the successful
completion of unit testing and moving all code from the
development to the QA/testing environment scheduled for the
end of the 5th quarter of performance.

7. QA/Testing Phase completion identified by moving
software from QA/Test to User Acceptance environment and
scheduled for the end of the 6th quarter of performance.

8. Completion of the delivery and acceptance of CLIN 0001
in the Production environment scheduled for the end of the ?1h
quarter of performance.

(R4, tab 3 at 785) The payment events, designed by AEON and contained in its proposal,
were designed to track AEON's progress through contract performance and to establish a
basis for making progress payments to AEON upon its completion of the enumerated
milestones roughly once a quarter (R4, tab 2 at 628-29; tr. 1162-65, 21189-90, 5/1081).
The eight payment events/milestones remained in place throughout contract performance;

29
however, the later payment events were subdivided into smaller, more refined segments to
provide a basis for making payments to AEON more frequently (findings 49, 63, 65, 70;
tr. 3/394-97, 5/1081-85). There is nothing in the payment events identified in the
contract or subsequent modifications to indicate that they included any tasks other than
those associated with CLIN 0001 (tr. 5/1085). The amount of payment associated with
each of the eight (8) payment events was l/8th (or 12.5%) of the total contract price for
CLIN 0001 (R4, tab 2 at 628-29). There was no liquidation schedule contained in the
contract (tr. 11155-56).

22. FAR 52.232-32, PERFORMANCE-BASED PAYMENTS (FEB 2002), incorporated
in the contract by reference, provided:

(c) Approval and payment of requests. (1) The Contractor
shall not be entitled to payment of a request for
performance-based payment prior to successful
accomplishment of the event or performance criterion for
which payment is requested. The [CO] shall determine
whether the event or performance criterion for which payment
is requested had been successfully accomplished in
accordance with the terms of the contract. The [CO] may, at
any time, require the Contractor to substantiate the successful
performance of any event or performance criterion which has
been or is represented as being payable.

(2) A payment under this performance-based payment clause
is a contract financing payment under the Prompt Payment
clause of this contract and not subject to the interest penalty
provisions of the Prompt Payment Act.... The payment
period will not begin until the [CO] approves the request.

(3) The approval by the [CO] of a request for
performance-based payment does not constitute an acceptance
by the Government and does not excuse the Contractor from
performance of obligations under this contract.

(d) Liquidation of performance-based payments.
(1) Performance-based finance amounts paid prior to payment
for delivery of an item shall be liquidated by deducting a
percentage or a designated dollar amount from the delivery
payment. If the performance-based finance payments are on a
delivery item basis, the liquidation amount for each such line
item shall be the percent of that delivery item price that was

30
 previously paid under performance-based finance payments or
the designated dollar amount. If the performance-based
finance payments are on a whole contract basis, liquidation
shall be by either predesignated liquidation amounts or a
liquidation percentage.

(e) Reduction or suspension of performance-based payments.
The [CO] may reduce or suspend performance-based
payments, liquidate performance-based payments by
deduction from any payment under the contract, or take a
combination of these actions after finding upon substantial
evidence any of the following conditions:

(1) The Contractor failed to comply with any material
requirement of this contract ....

(2) Performance of this contract is endangered by the
Contractor's (i) failure to make progress, or (ii) unsatisfactory
financial condition.

U) Special terms regarding default. If this contract is
terminated under the Default clause, ( 1) the Contractor shall,
on demand, repay to the Government the amount of
unliquidated performance-based payments, and (2) title shall
vest in the Contractor, on full liquidation of all
performance-based payments, for all property for which the
Government elects not to require delivery under the Default
clause of this contract. The Government shall be liable for no
payment except as provided by the Default clause.

(R4, tab 3 at 802-04)

23. Under FAR Subpart 32.10, PERFORMANCE-BASED PAYMENTS, at 32.1001,
POLICY, performance-based payments "are the preferred Government financing method"
and they "are contract financing payments that are not payment for accepted items."
FAR 32.lOOl(a), (b). FAR 32.lOOl(c) provides that performance-based payments are
"fully recoverable, in the same manner as progress payments, in the event of default."
Further, FAR 32.1004, PROCEDURES, provides:

31
 Performance-based payments may be made either on a
whole contract or on a deliverable item basis, unless
otherwise prescribed by agency regulations. Financing
payments to be made on a whole contract basis are applicable
to the entire contract, and not to specific deliverable items.
Financing payments to be made on a deliverable item basis
are applicable to a specific individual deliverable item.
(A deliverable item for these purposes is a separate item with
a distinct unit price. Thus, a contract line item for 10
airplanes, with a unit price of $1,000,000 each, has 10
deliverable items-the separate planes. A contract line item
for 1 lot of 10 airplanes, with a lot price of $10,000,000 has
only one deliverable item-the lot.)

(a) Establishing performance bases. (1) The basis for
performance-based payments may be either specifically
described events (e.g., milestones) or some measurable
criterion of performance. Each event or performance criterion
that will trigger a finance payment must be an integral and
necessary part of contract performance and must be identified
in the contract, along with a description of what constitutes
successful performance of the event or attainment of the
performance criterion .... An event need not be a critical
event in order to trigger a payment, but the Government must
be able to readily verify successful performance of each such
event or performance criterion.

(2) Events or criteria may be either severable or
cumulative. The successful completion of a severable event
or criterion is independent of the accomplishment of any other
event or criterion. Conversely, the successful
accomplishment of a cumulative event or criterion is
dependent upon the previous accomplishment of another
event.... The contracting officer must include the following
in the contract:

(i) The contract must not permit payment for a
cumulative event or criterion until the dependent event or
criterion has been successfully completed.

32
 (ii) The contract must specifically identify severable
events or criteria.

(iii) The contract must identify ... which events or
criteria are preconditions for the successful achievement of
each cumulative event or criterion.

(v) If payment of performance-based finance amounts
is on a deliverable item basis, each event or performance
criterion must be part of the performance necessary for that
deliverable item and must be identified to a specific contract
line item or subline item.

(b) Establishing performance-based finance payment
amounts. (1) The [CO] must establish a complete, fully
defined schedule of events or performance criteria and
payment amounts when negotiating contract terms ....

(3) The contract must specifically state the amount of
each performance-based payment either as a dollar amount or
as a percentage of a specifically identified price (e.g., contract
price, or unit price of the deliverable item) ....

( d) Liquidating performance-based finance payments.
Performance-based amounts must be liquidated by deducting
a percentage or a designated dollar amount from the delivery
payments. The [CO] must specify the liquidation rate or
designated dollar amount in the contract. The method of
liquidation must ensure complete liquidation no later than
final payment.

(1) If the [CO] establishes the performance-based
payments on a delivery item basis, the liquidation amount for
each line item is the percent of that delivery item price that
was previously paid under performance-based finance
payments or the designated dollar amount.

33
 (2) If the performance-based finance payments are on
a whole contract basis, liquidation is by predesignated
liquidation amounts or liquidation percentages.

24. Prior to invoicing the government for any performance-based payment,
AEON was required by the contract to submit a Milestone Payment Event Delivery
Report (MPEDR) which was a living document to which, before submission for each
payment, was added the most recently updated information (see, e.g., app. supp. R4,
tab 169; tr. 2/191, 4/716). On each MPEDR AEON indicated the work that had been
done to justify the payment requested. The CO authorized the release of
performance-based payments only after the DFAS Program Management Office (PM0) 13
verified that the items reported by AEON as completed were the items required to be
completed by any particular payment event. (Tr. 1169-70, 2/174-75, 189-90, 3/397,
4/716-19, 511082) The PMO did not perform an independent check or test to determine
whether the work reported as completed by AEON was actually completed (tr. 4/719).
AEON's MPEDR dated 1December2006 14 included the following statement by AEON:

System Background

1.1.1 Business and System Objectives

The objective of the MOCAS Rehost Project is to perform a
technology update, migrate the MOCAS system from the
proprietary environment of MANTIS/SUPRA to the
non-proprietary software environment of CI CS/COBOL and
DB2, and merge the three existing databases into one
consolidated database. The rehosted MOCAS system will
contain all of the functionality of the current MOCAS system
and, from a business and end user perspective, will mirror the
current system. Therefore the changes that occur as a result
of rehosting the system will be totally transparent to the users.

(App. supp. R4, tab 169 at 12)

13
(See finding 26).
14
This is the report that sought payment through Payment Event 7A-2 (app. supp.
R4, tab 169 at 2). There is no evidence in the record that the quoted language
was absent or different from any previous iteration of the MPEDR.

34
 25. The contract incorporated FAR 52.249-8, DEFAULT (FIXED-PRICE SUPPLY
AND SERVICE) (APR 1984) (R4, tab 3 at 787), which provided in pertinent part:

(a)(l) The Government may, subject to paragraphs
( c) and (d) of this clause, by written notice of default to the
Contractor, terminate this contract in whole or in part ifthe
Contractor fails to-

(i) Deliver the supplies or to perform the services
within the time specified in this contract or any extension;

(ii) Make progress, so as to endanger performance of
this contract (but see subparagraph (a)(2) below); or

(iii) Perform any of the other provisions of this
contract (but see subparagraph (a)(2) below).

(2) The Government's right to terminate this contract
under subdivisions (a)(l )(ii) and (1 )(iii) above, may be
exercised if the Contractor does not cure such failure within
10 days (or more if authorized in writing by the Contracting
Officer) after receipt of the notice from the Contracting
Officer specifying the failure.

(f) The Government shall pay contract price for
completed supplies delivered and accepted ....

C. Contract Performance

26. The PMO "had the day to day responsibility to ensure that this program was
proceeding forward at the anticipated pace that it should, and to ensure that various events
and milestones were being achieved" (tr. 1141 ). At all times relevant to this appeal, the
DF AS MOCAS Program Manager was Anthony Castrillo. The PMO consisted primarily
of Mr. Castrillo, COR Hecker 15 (deputy project manager and the primary COR from

15
COR Hecker was part of the DFAS/DCMA team that wrote the SOW for the Rehosted
MOCAS (tr. 4/658-59, 696) and was the lead on the cost evaluation team that
reviewed proposals, including AEON's (tr. 4/655, 5/891-92).

35
 16
contract award through October 2005) and COR Thrower (the primary COR from
October 2005 through the end of the contract). (Tr. 1/4 I, 4/65 I, 4/654, 5/1069-76) The
COR was the primary day-to-day contact for AEON (tr. 3/387-88, 400-0I, 506). During
GT&E, COR Thrower was the liaison between the CO, AEON and the government
testers (tr. 3/393).

27. AEON's MOCAS Rehost Project Plan identified the various phases of the
contract work as WBS I-I I (see, e.g., app. supp. R4, tab I 72 at 5-6). WBS I-8 correlated
to Payment Events I-8 identified in the contract (finding 2 I).

I. WBS I, PREPARE & INITIATE

28. WBS I correlated to Payment Event 1, the required tasks for which were
identified in the contract as "Placement of purchase orders for vendors, subcontractors,
suppliers for labor, travel, supplies and equipment within 30-45 days after contract
award" (finding 2 I).

29. AEON's 29 December 2006 MOCAS Rehost Project Plan showed that
WBS I/Payment Event I was started on 28 May 2004 and completed on 30 August 2004
(app. supp. R4, tab I 72 at 5). AEON was paid for WBS I/Payment Event I on I June
2004 (app. supp. R4, tab I 72 at 8).

30. Shortly after award of the contract the government learned that AEON's
proposed Project Manager, John Allwood, and Technical Manager, Lech Lakomy, were
not AEON employees and that the NPGen automated conversion tool proposed by AEON
to be its proprietary product was actually the property of SOC Software, Inc. (SOC)
which was owned by Allwood and Lakomy. Apparently, AEON had not reached an
agreement with SOC and, almost immediately upon starting work on the project, AEON
and SOC, along with Allwood and Lakomy, parted ways. (Finding 7; supp. R4, tab 106
at 5) On I6 November 2004, eight months into the contract performance period and
almost three months after the start of its design process (findings 37, 39), AEON formally
requested permission from the government to use conversion tools other than NPGen:

16
COR Thrower was a member of the DF AS/DCMA team involved in the drafting of the
SOW, particularly in the area of the description of the As-Is MOCAS (tr. 3/387).
At the time of her testimony, Thrower had 25 years of experience with the
MOCAS system, I 8 years with the DISA and nearly 7 years with DF AS. While
employed by DISA, where the MOCAS system was hosted on a DISA mainframe
(tr. 3/384-85; finding 4), one of her responsibilities was to install software changes
to MOCAS (tr. 3/377-78). Thrower also participated in the evaluation of AEON's
technical proposal (tr. 3/523-24, 4/656).

36
 [AEON] performed a risk assessment study focusing on the
code conversion toolset. Our goal was to identify the best
toolset for the MOCAS Rehost Project .... We identified 13
viable CCT£1 7l vendors and narrowed the list to 2 finalists:
NPGen which we originally proposed and TMGi-Transformer
toolset from Trinity-Millennium Group, Inc. (TMGi). Our
detailed evaluation resulted in TMGi equaling or exceeding
the NPGen functionality in every evaluation category.
Therefore, we are seeking DF AS approval to amend the
MOCAS Rehost Project Contract to replace TMGi CCT and
iSAT repository for the NPGen CCT and NPGen Repository
that was originally proposed.

Benefits. The TMGi-Transformer CCT and the related iSAT
Repository provide excellent capabilities, specifically tailored
code conversions to CICS COBOL and DB2 from Mantis and
Supra respectively. TMGi also offers technical support
services related to both the user of the CCT and the normal
activities associated with code conversions. TMGi specializes
in IT portfolio modernization and offers extensive
documentation services as well as actual code conversion.
[AEON] is currently using TMGi's Knowledge Mining
services to support our program documentation activities.
Adding the TMGi transformation services provides an
integrated solution appropriate for the MOCAS Rehost
Project.

Impact If No Approval. [AEON] could continue to use the
NPGen code conversion tool and repository as originally
proposed. However, [AEON]' s recent assessment indicated
that the project risks are higher and the CCT capabilities
would be less than ifTMGi-Transformer were substituted.

[AEON] would extend the current agreement with TMGi to
include code conversion services. From a DFAS perspective
there would be little or no change to the [AEON] approach
proposed for the MOCAS Rehost Project. The project
repository content would continue to be stored on the project

17
We understand this to be an acronym for Code Conversion Tool.

37
 servers using SQL Server and MS Visual SourceSafe, a
widely-used COTS product for configuration management,
would [be] substituted for the proprietary CM[ I SJ capabilities
that were to be incorporated into the NPGen Repository. The
COTS approach to CM is a less risky approach tha[ n] the
custom developed, proprietary approach associated with
NPGen. As an added benefit, TMGi delivers an easy to use,
browser-based user interface to front-end the iSAT repository
that is delivered along with their services.

Cost Impact. None. The proposal to utilize TMGi has an
additional cost to the project. However, we believe the
breadth of capabilities of the TMGi-Transformer toolset will
allow us to accomplish the rehost project objectives with
fewer staff. The staff efficiencies associated with the use of
TMGi offset the costs of their toolset/services and some of the
additional scope/costs identified during the Discovery
Phase ....

Team Impact. Minimal. The proposed toolset and
associated repository are easier to tailor and use than the
approach originally proposed.

(R4, tab 9 at 959-60) The government approved the request on 8 December 2004 (R4,
tab 9 at 961) because it "saw benefit" in the use of the TMGi tools and services AEON
requested to use in place of the NPGen tool:

[W]hen [AEON] changed to the [TMGi] tool, that tool
brought to them a discovery method that would allow you to
go in and extract the information from the system, which was
a lot more accurate than a handwritten document[ ation]. So
they had the opportunity to get [system] information from
things that they developed.

{Tr. 5/906-07) The lack of an agreement with SOC for the NPGen conversion tool also
meant that key individuals Allwood and Lakomy in AEON's proposed management team

18
Configuration Management (R4, tab 25 at 1187).

38
(finding 7) were no longer going to participate in the project (supp. R4, tab 106 at 5-6;
tr. 1/52, 57-60, 2/280-87, 4/738-39).

As a result of these initial changes AEon requested, their
whole approach and management structure was changed from
their proposal. The number and nature of the changes raised
concern with the Government. The main concern being that
many of the items (i.e. Management and tool set) being
replaced were those items the Government saw as strengths in
their proposal and were important reasons for selecting AEon.
Despite these concerns, the PMO honored the premise of a
Firm Fixed Price Contract, in that the Government should not
direct the contractor in how they perform their work; honored
the premise that the contractor should be the best judge of
their competency and tools required; and in good faith
allowed AEon to proceed with their changes.

(Supp. R4, tab 106 at 6)

2. WBS 2, DISCOVERY

31. WBS 2 correlated to Payment Event 2, the required tasks for which were
identified in the contract as "Discovery Phase completion identified by the delivery of the
Discovery Findings and implications report and scheduled for the end of the 1st quarter of
performance" (finding 21). AEON's 29 December 2006 MOCAS Rehost Project Plan
showed that WBS 2/Payment Event 2 was started on 16 August 2004 (app. supp. R4,
tab 172 at 5).

32. The discovery phase of the contract was considered a significant portion of
contract performance (findings 6 (at Questions 33, 74), 12). CO Gladski testified that the
government built the discovery phase into the contract so AEON had an opportunity to
analyze the As-Is MOCAS:

[U]p front, even before they started to do any coding.. . . And
we paid them very well for that particular phase. We
considered that probably one of the most critical steps of the
program, was for them to know what was inside that [As-Is]
MOCAS ....

(Tr. 1199, 4/665; see also tr. 11132-34, 2/235-41; app. supp. R4, tab 169 at 12-13) The
government's only role in the discovery phase was to provide the As-Is MOCAS
(findings 1, 12) to AEON for its study and analysis (tr. 11100). The discovery phase:

39
 [I]s one where you would discover scope issues, as well as
complexity issues. I mean, for example, there may have been
a lot more code than was originally understood to be there.

The code may be way more complicated than folks had
originally expected, and things of that sort.

Because typically when one proposes, there is a certain
amount in any program -- well, let's just say uncertainty and
over-optimism ... [and the discovery phase helps eliminate that
type of problem].

(Tr. 7/1191-92, 1247)

33. In its 15 October 2004 Discovery Findings Report (Version OlA), AEON
identified 4, 100 hours of additional work identified during the discovery phase of the
contract (R4, tab 7 at 950-51 ). In the 27 October 2004 PMO review of the report, the
government acknowledged that some of the source code had been missing and either
provided additional information to AEON or expressed that additional research would be
done (R4, tab 7 at 949, ~~ 6, 16, 23, at 950-51, 953, ~~ 8, 17-18, 29-32, at 952, ~~ 20, 26;
tr. 4/665-67, 743). In response to AEON's request for test data, the government reminded
AEON that test data and copies of production interface files were not identified in the
solicitation as government-furnished items (R4, tab 7 at 950, ~ 7; see also finding 20).
The government further stated in response to AEON' s various requests for test data:

Although the government will try to accommodate any
request for copying inbound data sets from production, we
will not guarantee these data sets test 100% functionality.
Aeon must recognize that it is Aeon's contractual
responsibility to develop test data to ensure the rehosted
system meets the contract requirements. The Government
will not provide test data. The Government provided an as-is
snapshot that is a replica of the production environment that is
able to process any and all data that the corresponding
production database can. There was always a possibility that
specific types of data may not be included in the snapshot at
the time it was replicated. Test data and copies of production
interface files were not identified as government furnished
property in the solicitation.

40
(R4, tab 7 at 949-54, iii/ 5, 28, 34, 35; see also findings 6, 12)

34. AEON's 29 December 2006 MOCAS Rehost Project Plan showed that
WBS 2/Payment Event 2 was completed on 15 November 2004 (app. supp. R4, tab 172
at 8). AEON was paid for WBS 2/Payment Event 2 on 19 November 2004 (app. br. at
12-16).

35. On 2 December 2004 AEON advised the government that: "The AEON
Group, LLC has completed our impact assessment on cost and schedule based on the
phase 2 Discovery Report Findings and are pleased to report that there will be no change
to price and schedule as a result of these findings" (R4, tab 8) (emphasis added).

3. WBS 3, DESIGN

36. WBS 3 correlated to Payment Event 4, the required tasks for which were
identified in the contract as "Design Phase completion identified by the completion of
database and application (online & batch) design and scheduled for[] the end of the 3rd
quarter of performance" (finding 21).

37. AEON's 29 December 2006 MOCAS Rehost Project Plan showed that
WBS 3/Payment Event 4 and WBS 4/Payment Event 3 (see finding 39) were both started
on 16 August 2004 (app. supp. R4, tab 172 at 5).

38. AEON's 29 December 2006 MOCAS Rehost Project Plan showed that
WBS 3/Payment Event 4 was completed on 31January2005 (app. supp. R4, tab 172 at 5;
supp. R4, tab 106 at 8-9). AEON was paid for WBS 3/Payment Event 4 on 18 April 2005
(app. supp. R4, tab 172 at 8).

4. WBS 4, PROOF OF CONCEPT

39. WBS 4 correlated to Payment Event 3, the required tasks for which were
identified in the contract as "Proof of Concept completion identified by the results of the
proof of concept and scheduled for the end of the 2nd quarter of performance"
(finding 21). AEON's 29 December 2006 MOCAS Rehost Project Plan showed that
WBS 4/Payment Event 3 and WBS 3/Payment Event 4 (see finding 36) were both started
on 16 August 2004 (app. supp. R4, tab 172 at 5). "The conversion process was divided
into several concurrent phases to include the conversion of the database, on-line
programs, batch programs, SDW interface and Contract Transfers" (supp. R4, tab 106 at
9).

41
 40. AEON's 29 December 2006 MOCAS Rehost Project Plan showed that
WBS 4/Payment Event 3 was completed on 25 February 2005. AEON was paid for
WBS 4/Payment Event 3 on 18 April 2005. (App. supp. R4, tab 172 at 8)

5. WBS 5, CONVERT

41. WBS 5 correlated to Payment Events 5 and 6. The required tasks for Payment
Event 5 were identified in the contract as "Data conversion completion identified by the
loading of the database into DB2 and scheduled for the end of the 4th quarter of
performance." The required tasks for Payment Event 6 were identified in the contract as
"Conversion completion identified by the successful completion of unit testing and
moving all code from the development to the QA/testing environment scheduled for the
end of the 5th quarter of performance." (Finding 21) AEON's 29 December 2006
MOCAS Rehost Project Plan showed that WBS 5/Payment Event 5 was started on
3 January 2005 and continued through 11 October 2006 (app. supp. R4, tab 172 at 5).
The record shows that AEON was paid for Payment Event 5 on 21 June 2005 (app. supp.
R4, tab 172 at 8).

42. Michael Krajnak became involved in the MOCAS Rehost project during the
discovery phase in September 2004 as an employee of CSC (see finding 8), to whom
AEON subcontracted certain contract work. His primary work was as the lead on-line
programmer responsible for converting the MANTIS code to COBOL. Toward the end
of his tenure with the project in 2006 he became the "transition planner" and worked on
the MOCAS Rehost project through May 2006 (see finding 51 ). Krajnak had extensive
experience with computer programming and testing beginning in 1981. He had
previously worked on a project performed by Boeing involving the Shared Data
Warehouse (SDW), a separate system linked to the MOCAS (finding 5). (Tr. 4/838-45,
853-55, 860-61, 866-68, 870-73) Krajnak described his duties as oversight of
programming and conversion work by AEON and contract employees, as well as working
with the AEON testing team (tr. 4/845).

43. In a 13 April 2005 internal email, just four months after its approval
(finding 30), AEON identified numerous "issues" with the TMGi conversion tool:

~ Tool Development Issues:
o The tool was developed from scratch using
VB£ 19l at our expense.
o We paid and are paying for it.
o The tool that was shown to us originally was a
Rex based tool.

19
We understand this to be a reference to Visual Basic, a programming language.

42
 o We were led to believe that TMGi has a tool
that can convert Mantis to CICS COBOL and
SUPRA to DB2. This tool only needed to be
customized to the MOCAS unique requirements
o We provided all the specs for the development
of the VB tool
o Chuck [Cotton] spent a great deal of his time
debugging the tool and assisting TMGi with
tool design, development and improvements
o TMGi lacked Mantis, CICS and DB2
knowledge and expertise. We provided these
capabilities for TMGi

~ Transformation project performance issues:
o The project plan developed by TMGi was not
adhered to and no updated plans have been
given to Aeon. All to-date pre-production dates
have been missed:
• The final transformation for the first two
online deliverables, due in February,
have not occurred yet. We have not been
notified of a new date for their delivery.
Based on the quality of work we can not
assess or assume a delivery date
• The other online groups planned for
March and April have not been delivered
and no new dates have been provided to
us.
• The batch commitments have not been
met. The work on interface
transformation has not started
• The TMGi missed dates have had a
significant negative impact for the
delivery of our code to QA. Without
significant intervention and addition of
new resources by Aeon, this can cause us
to miss our commitments to our client by
about 6-8 weeks (first major online
deliverable, YC02 with 400 programs,
was due to move to QA on 4126105 based

43
 on its delivery from TMGi to Aeon in
February 2005. The new date is 6/17/05)
Aeon by [sic].

o The project quality has been inconsistent and
poor;
• Progress achieved in December and
January was considerably deteriorated
until the mid March time frame when it
started improving. We had 180,000
errors in the first two online groups
(YSUOl & YCU02). These errors were
subsequently grouped by Aeon into 10
groups for the purpose of discussions
with the client. Some of the errors
were Aeon related but majority were
TMGi. We assume contributing factors
to the deterioration are the events that
occurred during the role change between
Stan and Mike. Mike had been involved
in the online and Stan in the batch
transformation. During the end of
January and early February, Mike handed
off the online to Stan and Stan handed
off the batch to Clarence. The
consolidation of the transformers on
Mike and Stan's PCs caused major tool
confusion and led to numerous errors.
• Work quality on the weekly handoffs
from TMGi are very inconsistent. Some
weeks the work is good and many weeks
the work deteriorates as compared to the
previous handoffs. To-date there are
80,000 errors on the above mentioned
two online groups.
• Considerable overtime charged to Aeon
during the period when the hand-off
occurred and tool was considerably
deteriorated. While we did not support
the minimization of Mike's involvement
and the handoff of the online to Stan, we
expected a smooth transition and did not

44
 expect to pay overtime for deteriorating
work quality.

o Lack of a development environment at TMGi
office to perform the work to produce its
committed 100% comp liable code:
• While TMGi insisted to work one week
onsite and one week [oft] site, TMGi did
not have a development environment
similar to MOCAS (mainframe) to
perform compilation and assess its tool
and transformation quality before
handoff to Aeon.
• Since Aeon was using Micro Focus
COBOL for its development
environment, Aeon provided TMGi with
a thirty day trial Micro Focus COBOL
software. Aeon's understanding was that
TMGi will procure its own license at the
end of the thirty days. We are told that
the 30 days trial license has expired and
TMGi has not procured its own license.
As a result TMGi can no longer compile
and test its tool and transformed code
prior to hand off to Aeon. This can
explain the inconsistent work quality
received by Aeon.

? Aeon issues:
o Aeon has not been paying TMGi invoices on a
timely fashion due to internal process problems.
This has been remedied and new processes have
been established to avoid the delay
o Aeon has not provided some information to
TMGi on a timely fashion. Other information
needed by TMGi, copy books, has been made
available to TMGi and can only be accessed
while TMGi is onsite [every other week.]

45
(Supp. R4, tab 52) (Emphasis added) Thereafter, in or around the second quarter of 2005,
AEON parted ways with TMGi after experiencing significant problems with the TMGi
tool "not converting the anticipated amount of code or MANTIS functionality" (supp. R4,
tabs 63, 106 at 9-10). From that point on, the conversion process included much more
manual conversion and experienced multiple delays (supp. R4, tab 106 at 10, 13-14; R4,
tab 64; tr. 1/88, 4/743, 857-59).

44. In an internal email dated 5 October 2005, and identified as "Updated
Situation Analysis," AEON's Program Manager (see R4, tab 25 at 1162), acknowledged
that AEON had not disclosed to the government "the poor quality of the TMGi tool" and
that AEON "need[ed] some time to address all the deficiencies we have discovered"
(supp. R4, tab 63). Also on 5 October 2005, and in apparent preparation of the same
"Updated Situation Analysis," AEON contractor employee Krajnak (finding 42)
expressed concerns about the ability of AEON to meet the contract delivery dates and
functionality requirements:

Need to tell the client that the project will be delayed at
least six months and that UAT will not start on Jan 2006 but
on July 2006. The government expects both batch and online
programs to function properly at the start ofUAT. The 377
unconverted online programs will take 2 months to get ready
for QA testing. The online and batch programs will need 4
months to fix defects in order to pass the QA functionality
tests. Performance, Interface, and System tests will take an
additional 3 months.

(Supp. R4, tab 64)

45. On 5 October 2005 AEON formally requested an extension of just 1Yz months
to complete the conversion process (supp. R4, tab 106 at 10), not the six months
recommended by Krajnak (finding 44) and, with respect to its QA testing, stated to the
PMO:

This is a very complex project that needs continuous
management attention. This is the reason that the internal
audit function has focused on proactive improvement
recommendation rather than periodic statements of
assessment. I would also like to explicitly express our QA
strategy and approach for the project:

• QA is a five month set of continuous activities that
produces a deliverable (fully tested Rehosted MOCAS)

46
 at its conclusion. While we have specific tests that we
will be conducting at different times during the five
months duration, these are internal progress points and
QA has a single final deliverable.
• The functionality testing to be completed by 12/30/05
is intended to provide enough verification of the
functionality that would enable the remainder of our
QA (systems testing) activities to be conducted. We
recognize and believe that we may have functionality
defects that will be identified and corrected throughout
the five months QA period.

(Supp. R4, tab 68 at 4) In a 7 October 2005 email, AEON advised the PMO that:

Impact to QA:

It was determined that the time remaining to perform
functional testing and defect resolution was insufficient to
produce a fully functional quality product ready for system
testing. Therefore functional testing was extended from
10/14/05 to 12/30/05 in order to achieve that objective.

(R4, tab 65) AEON also stated in the email that "some lines of code were dropped during
the transformation process" when the "transformation tool was unable to handle specific
MOCAS code complexities." Even though the record makes clear that AEON was aware
of significant TMGi conversion problems no later than April 2005 (finding 43), it
reported to the PMO that this problem with the "transformation tool" was "discovered
during QA testing in August [2005] and caused additional work in September [2005]."
(Supp. R4, tab 65) The AEON request in early October 2005 for an extension to
complete the conversion process was the first indication the government had that AEON's
ability to meet the contractual milestone dates was slipping (tr. 3/430-32).

46. On 19 October 2005 AEON contract employee Krajnak reported:

Initial defect rate of the online programs is extremely
poor. Zero programs have passed QA testing. YINV has 13
critical defects for 4 programs. YSUl has 16 critical defects
for 24 programs. The lack of real unit testingczo1 is a risk to
completing the QA functional testing before system I
performance test starts on Jan 2006. It is an extremely tight

20
(See findings 16, 47, 55-59).

47
 schedule to test and resolve all functional errors by Dec 2005.
Suggest adding additional 3 months delay to the schedule to
ensure that all known functional errors are resolved before
government testing.

(Supp. R4, tab 66) As of 9 November 2005, Krajnak was still reporting significant
failures of programs in QA testing (supp. R4, tab 66).

4 7. On 4 November 2005 the government was advised that AEON had removed
its QA and Test Manager from the project (supp. R4, tab 69). Despite record evidence of
the significant code conversion problems due to the failure of the TMGi tool and the
failure of AEON to perform unit testing (findings 43-46), on 9 November 2005 AEON
management glossed over the conversion tool problems and insisted to the PMO that,
with respect to unit testing:

• We have and will continue to conduct unit testing.
• Unit testing is the category of testing that developers
perform on a single program. This test is performed
against a program specification to ensure that each
program performs in accordance with its program
specifications. Unit testing is not a user/business
functionality testing because usually a single program
does not address the full scope of each user function.
User functions are usually addressed across several
programs. When programs specifications are not
available, the unit testing becomes "reasonability"
testing.
• Unit testing for conversion projects is very different
from new development projects. In the new
development project business and systems
requirements specifications are available. From these
specifications, architecture and designs are developed
and documented. The design documents are used to
create program specifications which in tum enable
program development. Programmers develop their
programs in accordance with the program
specification. When the program is developed the
programmer unit tests the program against the program
specifications. For conversion projects such as
MOCAS Rehost there usually are no business or
system requirements and no design or program
specifications. Further the programs are partially or

48
 fully converted using a tool. Therefore, there are no
specifications to use to test the program against and the
programmer does not have an in-depth knowledge of
the program in order to conduct a comprehensive unit
testing. In such cases limited tests are conducted to
confirm reasonableness of the converted code. These
tests are conducted to verify that each program is
compiled correctly, can be executed and run without
error. Further, screens are also brought up with
representative data to observe that reasonable data
appear on them.
• The unit testing no matter how comprehensive would
not have identified the majority of the defects
identified in QA. Many of the defects that caused the
numerous hand offs to QA were related to screen field
layout which is not a critical problem but for
automated testing it stops the test from further
execution. These defects can not be discovered during
unit testing. They are discovered during the
functionality testing.

(Supp. R4, tab 68) The PMO later reported that:

During the Conversion Phase, AEon conveyed that they were
streamlining their testing. The streamlining consisted
primarily of reducing the amount of unit testing
performed .... l 211 [I]t appears that AEon did not meet the
objectives defined in their [STP] and [PQAP] as indicated in
their certification prior to GT &E. Although the PMO does
not have insight into all causes of AEon's non-performance, it
is our position that AEon did not perform the level of care in
their testing that is required by industry standards and best
practices. The PMO believes that the reduced level of care
was the primary cause for the lack of quality in their delivered
product. The PMO also, believes that by de-scoping their
testing requirements and not fully ascertaining the
functionality of the As-Is system, AEon did not fulfill their
obligation of ensuring that the rehosted system had I 00%
functionality of the As-Is system.

21
See finding 46; tr. 4/846-47.

49
(Supp. R4, tab 106 at 11) We find AEON's position that, instead of unit testing, all it
could perform in a conversion project such as the one now at issue was "limited
[reasonableness] tests" to be contrary to the weight of the record before us. AEON's
position is contrary to its own proposal with regard to testing (finding 7), is contrary to
the contract requirements (finding 16), is contrary to AEON's own PMP
(findings 11, 55), and ignores the significant fact that, in this particular conversion
project, AEON was provided with a full copy of the As-Is MOCAS, including production
data, that comprised a comprehensive performance specification to which AEON was to
design and build the Rehosted MOCAS and against which it could test and compare every
aspect of the Rehosted MOCAS (see finding 12).

48. AEON reported that it had successfully completed the conversion process for
the on-line and batch programs on 18 November 2005. By 16 December 2005 or soon
thereafter the Contract Transfer and SDW interface conversions were also reported as
complete and the entire conversion process was reported to be completed by 11 October
2006. (Supp. R4, tab 106 at 10; app. supp. R4, tab 172 at 5) AEON's testing of the
conversion effort took nearly two years (see finding 41 ). The PMO later reported:

Due to AEon minimizing issues and continually reassuring
the Government that the project was going as planned, the
Government does not have insight into what may have caused
these defects. We do not know how successful the TMGi tool
was at converting the code; how many problems were brought
about by the requirement for manual conversion; if AEon' s
testing method was insufficient or a combination of these
factors lead to the problems found during GT &E.

(Supp. R4, tab 106 at 10)

49. Modification No. (Mod. No.) P00006, dated 9 January 2006, modified the
delivery date for the Rehosted MOCAS (CLIN 0001) to 4 May 2006 and subdivided
payment events 6 and 7 into 6A, 6B, 7A and 7B with specific tasks under CLIN 0001
identified to each subdivision as follows:

The MOCAS Rehost Project contract defines eight (8)
Milestones with their related Performance-based Payments.
Beginning with Milestone 6 the contract payments are revised
to relate to Payment Events that are Performance-based, each
of which includes evidence to support completion of these
Performance-Based Payments as shown in the following
table ....

50
No. 6A- Code Conversion Event- Evidence for payment per
60% Applications Converted. contract: "Conversion
completion identified by the
Estimated Payment successful completion of unit
Request date l / 16/06 testing and moving all code to
,,
the QA/Test environment. ..

... Updated Program
Management Plan due
1115/06 ....
No. 6B- Functionality Testing Evidence for payment per
40% Event revision to contract[:] "Level
I & Level II Functionality
Estimated Payment Testing complete and
Request date 3/31/06 Documentation Deliverables
with various publication dates
between January 03 and
March 31, 2006. Refer to
Extended MOCAS Rehost
Project Plan (WBS):
• Level I & Level II
Functionality Testing complete
0
All automated test
scripts completed
0
All database and file
compares completed ....
No. 7A- User Acceptance Event Evidence for payment per
50% revision to contract: "User
Estimated Payment Acceptance event identified by
Request date 5/4/06 moving software from QA/Test
environment to User
Acceptance environment for
start of User Acceptance
Testing ... and Documentation
deliverables with dates as listed
below."
• User Acceptance includes:
° Functional
configuration Audit
0
Operational User
Acceptance Test
Environment

51
 0
Training conducted for
computer operations,
application programmers and
technical support personnel. ...
No. 7B User Acceptance Event Evidence for payment per
[50%] Complete revision to contract: "User
Acceptance event completion
Estimated Payment identified by the expiration of
Request date 8/4/06 the contractually defined
90-day UAT period within
which the following items are
delivered:
• A complete set of
documentation as outlined in
Section C 14 of the SOW
• Fully tested and debugged
MOCAS system ....
No. 8 Production Complete Evidence for payment per
Event contract: "Completion of the
delivery and acceptance of
Estimated Payment CLINOO 1 in the Production
,,
Request Date 12/1/06 environment ...
• Acceptance of CLINOO 1 in
the Production environment
and completion of all tasks
in the SOW including:
0
MOCAS Rehosted
System installed in the
Production Environment
0
A complete set of final
documentation as
outlined in Section C 14
ofthe SOW
0
Delivery of the MOCAS
Rehosted System and
Migration Programs
0
The sequential
migration of the three
AS-IS MOCAS
databases to the new
MOCAS Production
System

52
 0
Signed off Production
System
0
Updated Milestone
Payment Event Delivery
Report ....

(R4, tab 3 at 848, 856-60) Mod. No. P00006 included a mutual release stating that both
parties "acknowledge full and final settlement for all past conditions leading to and
culminating with the release of this contract modification" (R4, tab 3 at 850).

50. Mod. No. P00005, also dated 9 January 2006, accepted AEON's ECP-1,
increased the contract price by $70,633.00 and further extended the contract completion
date to 9 June 2006 (R4, tab 3 at 839; see also supp. R4, tab 106 at 9).

51. AEON subcontractor CSC employee Krajnak (finding 42) testified that, at
some point in the project, AEON had not paid CSC for seven months of work (see finding
62). As a result, seven CSC employees including Krajnak were notified by CSC that they
were free to take employment elsewhere. Krajnak was approached by AEON to become
an AEON employee; after considering it over the weekend, on 21 May 2006, Krajnak
declined AEON's offer. (Tr. 4/861-66) Instead, he accepted employment with DCMA in
support of the MOCAS project (supp. R4, tab 77).

6. WBS 6, DOCUMENTATION

52. WBS 6 correlated to Payment Event 7 A, the required tasks for which included
"User Acceptance event identified by moving software from QA/Test environment to
User Acceptance environment for start of User Acceptance Testing ... and
Documentation" (findings 21, 49). AEON's 29 December 2006 MOCAS Rehost Project
Plan showed that WBS 6 was started on 13 September 2004 and the documentation for
the Rehosted MOCAS was reported to be 99% complete as of the date of the report
(app. supp. R4, tab 172 at 5).

53. On 19 September 2005 CO Gladski notified AEON by letter that: "Aeon is
also hereby notified that ... milestone payment 6 will be delayed as milestone payment
6 remains contingent on the delivery of all documentation" (R4, tab 16). Milestone
payment 6 was later subdivided and reconfigured numerous times (findings 49, 54, 63,
65, 70).

53
 7. WBS 7, AEON'S QA/TEST; DELIVERY OF DOCUMENTATION
AND REHOSTED MOCAS FOR GT&E; POST-GT&E DELIVERY COMPLETION

54. WBS 7 correlated to Payment Event 7. AEON's 29 December 2006 MOCAS
Rehost Project Plan showed that WBS 7 was started on 19 July 2004 (the official start of
the entire project) and was completed on 20 October 2006, a period of 32 months
(R4, tab 106 at 1; app. supp. R4, tab 172 at 5). Because of the complexity and length of
time required to complete all of these tasks, Payment Event 7 was later subdivided into
7Al, 7A2, 7A3 and 7B (findings 49, 70). Payment Event 7Al required the completion of
AEON's QA/Test (except what was specified for completion in Payment Event 7A2
below), delivery of the Rehosted MOCAS for GT &E and delivery of all documentation
except that specified to be delivered under Payment Events 7A2 and 7A3 (R4, tab 3 at
921-22). Payment Event 7A2 required delivery of the Software Design Description
(SDD) documentation and Completion of AEON's Level II Functionality Testing for
Contract Transfers, LUW 16 (R4, tab 3 at 923). Payment Event 7A3 required delivery of
remaining documentation (id.). Payment Event 7B required that, by the end of the
180-day GT&E government testing period (finding 18), AEON had migrated all three
MOCAS databases (i.e. MOCs) into production and had delivered a ''[f]ully tested and
debugged MOCAS system" with complete updated documentation (R4, tab 3 at 924;
tr. 3/411, 417).

a. AEON'S QA/TEST

55. AEON's PMP included the following section pertaining to testing:

2.9 Test and Evaluation Management
To provide comprehensive testing and deliver high quality
results, testing has been grouped into [the] following ten
major categories:

• Unit Testing - The objective of unit testing is to
ensure that each program is fully tested by the
conversion team prior to handoffto the test team.

• Functional Testing- The objective of the functional
testing is to ensure that the rehosted MOCAS System
with the converted databases on the new hardware
environment has 100% of the functionality (screen
emulation, screen layout, order of fields, edits, error
messages, help button, reports, and interfaces) of the
current MOCAS System including the online, batch
and the database.

54
• Technical System Testing- The objective of
technical testing is to ensure that the rehosted MOCAS
System is in 100% compliance with the relevant
MOCAS technical and architectural characteristics,
internal control, etc.

• Performance Testing- The objective of performance
testing is to ensure that the rehosted system will have
the same or improved system response time, batch
windows, capacity for ongoing operations,
performance under high transaction volumes and other
performance characteristics as compared to the current
MOCAS System. Further, users who access the system
from various locations worldwide can continue to do
the same with the rehosted system, with the same or
improved performance[.]

• Security Testing- The objective of the security
testing is to ensure that the rehosted system will have
the same security accreditation as the current MOCAS
System which is Certification and Accreditation
Level 2, in accordance with DoDI 5200.40, DoD
Information Technology Security and Accreditation
Process and DoDD 5200.28, Security Requirement for
Automated Information.

• Conversionffrial Migration Testing - The objective
of trial migration testing is to test the conversion of the
three "as-is" MOCAS databases to the one "target"
database test environment to ensure that all the data is
converted, the conversion processes are optimized and
will take place well within the prescribed conversion
time frame.

• Regression Testing - The objective of regression
testing is to provide fast, automated and high quality
means of re-testing the software after corrections have
been applied to software problem fixes. Regression
files are created from test cases and used for final
functionality verification.

55
 • Integration/End-to-End Testing - The objective of
integration/end-to-end testing is to ensure that the
rehosted MOCAS System with the converted databases
on the new hardware environment correctly integrates
all MOCAS System components to perform an
end-to-end system transaction in exactly the same
manner as the current MOCAS System. Specifically,
the new system can perform a business transaction
from its inception on the rehosted MOCAS System
through the internal and external interfaces and provide
the same results as obtained with the current MOCAS
system.

The test plans will be initially executed against the baseline
system. The test plans will then be re-executed in the QA
target region. The baseline results will be compared to the
target results, corrections made and tests re-executed as
appropriate. Refer to the Software Test Plan for the details
associated with all the testing to be performed. The fully
tested target chunk will then be moved to the staging
environment. The Repository is updated with test completion
and staging activity completion dates. A final reconciliation
of the Repository and the actual components by chunk take
place to reconfirm that all life cycle activities have taken
place.

AEON is sensitive to the Government's performance
expectations that were defined in the MOCAS Rehost As-Is
Documentation, MOCAS Rehost As-Is Attachments. When
we are ready to execute performance testing, we will create a
"production-like" environment with the same priority level as
production. We will run tests against the baseline
environment, rerun the same tests against the target
environment, compare the results, make adjustments and
rerun as appropriate until the same or better performance is
received in the target environment.

(R4, tab 25 at 1191-92)

56
 56. Unit testing is "fundamental" (tr. 7/1202) and "is the most intense testing
performed" (tr. 5/902).

[E]ach individual program is tested by itself, and then it gets
further integrated into kind of a group of programs that will
perform their function, which is integration testing. And then
that rolls up to even greater as the whole, the system
testing .... and then user acceptance testing.

(Tr. 4/662)

57. The record reflects that, by 8 June 2005, AEON management had made "a
change in direction to skip unit testing" and that some of AEON's employees were
"questioning [AEON's] intent to deliver a functional system" (supp. R4, tabs 55, 56).
AEON's lead programmer, CSC subcontract employee Krajnak (findings 42, 46), testified
that:

[AEON' s] initial direction with the unit testing was that the
programmers were allowed to use normal processes to work
through the code, and to basically bring it up to the state
where it should be given over to the testers for testing.

[To skip unit testing] was a change in direction and the
staff was pretty upset about it, and that they were then told
that they could no longer look at the logic of the old
programs.

That they had to just take the programs and get them
compiled cleanly, and send them over the fence to the testing
unit, basically bypassing what I would expect the normal unit
testing by the programmers [to be].

In my understanding [normal unit testing] would be
when the program has been looked at and run through some
preliminary test scenarios so that the programmer knows that
this program is going to fulfill the function that it was written
for, and that it will initiate and not end, and do the correct
database points.

57
 It is not an in-depth program that is going to test all the
functionality, but it is basically a check on the critical nature
of the program so that it is close enough so that it can be sent
for rigorous testing by the testers.

That was our instruction, [that the unit testing was not
going to be done], not at the time to effectively unit test the
programs, and like I stated earlier, we were told to just get the
programs compiled cleanly out of the back end of the
translator, and to make sure that they could be started without
ending, and then give those over to the testing team for
quality testing.

You take the old program, and you run that through a
test, where you look at the screen from the database calls, and
you see what behavior it exhibits, and you test that versus
what the new program does, and you compare the results, and
you expect it to behave the same way.

It is also involved with something called system
testing, which is the integration of individual programs, and
that is a later phase, that all the programs interact with each
other correctly so that the whole application works properly.

[Unit testing] is on a program by program basis ....
[Quality testing is a] more functional test. ... [Integration
testing] is where you take large units of programs and you
verify that they will all play well together.

I don't know for sure [why unit testing was skipped],
but it appeared that the schedule was in jeopardy, and that this
was a way to get us back on schedule with the work plan that
would say that we had so many programs done by X-amount
of time ....

58
 ... AEON was under contract to convert the MOCAS
system. There is a work schedule put out, and by we, I meant
the programming staff was instructed to convert so many
programs per week to get this done to meet the schedule.

And we were behind schedule, and my understanding
is that this was an attempt to get them back on schedule, but
in doing so, you are going to lose the quality of the programs,
and it is going to take more testing time in the QA area.

So you might meet the numbers, in terms of getting the
correct number of programs compiled, and over to the test
team, but it lessens the likelihood that the programs will pass
testing .

... [I]t needs to pass both the functional and the
integration testing. So I was suggesting that because this was
rushed, what that basically did is that it made more pressure
on the test team, and in my estimation, more risk to the whole
project .

...What we were asked to do was sidestepping the
normal process.

It was a hurried up approach, and I felt that it had great
risk, and that is why I was so outspoken about it.

(Tr. 4/845-50, 853, 855-56; see also R4, tab 38 at 1268-71; finding 46) COR Hecker
testified:

I believe at some point, and it might have been trying
to save some time in testing, [AEON] abandoned the formal
sense of unit testing, and after the code was converted, instead
of having unit testing, I think they sent it straight to their
quality assurance group for testing.

59
 .. .I think early on that their test plan called for unit
testing, and I believe they followed it. They did the unit
testing, but later on either they felt it wasn't necessary through
their experience, or they decided that they didn't need it.

... Unit testing is normally done by a programmer,
and ... at some point, they decided to not have the programmer
do the unit testing, and send the program straight over to the
[quality assurance] test team to test.

They did more of what I would call an integrated test
or almost a system test. More of a functional test.... They
were testing a group of programs at that point, like a contract
input function, or an input of a DD-250, and the inputting
process of a DD-250, a shipping and acceptance document.

It is at a higher level than a unit test in the program.
They are testing an integrated product at that point.

(Tr. 4/662-64) CM/SEI's Foreman, the only witness offered by AEON at the hearing,
(findings 94, 110, 122), testified that a common factor to "troubled programs" is a
decision by the developer to "make up ... time" by failing to perform unit testing
(tr. 7/1202).

Because if you skip unit testing, what you end up doing
is that you are going to be doing integration testing at the next
level. Well, if I don't know that the small pieces work, how
am I going to have any traceability or tracking to where the
errors may be if I am testing at a larger component level ... ?

So now I have jammed together a bunch of modules
and units, and I am testing against those, and I am getting
errors and crazy things going on, et cetera, et cetera, that may
actually affect other parts of the system.

Where ... do I figure out where in that composite do I
have the problem[?]

(Tr. 7/1248-49)

60
 58. On 23 June 2005, Krajnak included the following in his weekly status report
internal to AEON:

Issues/Problems/Concerns (include suggested resolution -- if
known)

* Dysfunctional management team. Employees have lost
faith that the project will be completed on time and are
starting to look for other employment. The resolution is
install a new onsite manager that the client and employees
trust. ...
* Lack of communication among team members. Have
weekly staff meetings were [sic] issues are discussed.
* The PSR should stop presenting falsehoods and show
the project as at risk (yellow). We will not be able to deliver
working programs and documentation by 12/31/05.
Resolution is to delay UAT for 3 months.

(Supp. R4, tab 57; tr. 4/850-52, 874-76)

59. On 15 July 2005 Krajnak sent an email to the AEON test team supervisor:

I am seeing many defects for the online QA testing that have
to do with programs not properly transferring to each other.
Many of these should be caught and fixed before being sent
up for QA testing. This is caused by the lack of integration
testing between the programs created by different
programmers. Each programmer tests only his program and
does not test the flow to all the other programs in the group.

This is a waste of the QA testers time and prevents any real
logic testing (since the program abends [see n.29] before
doing anything productive). It is simple to solve if we would
be allowed to do integration testing.

I suggest that someone (maybe the team leader) do integration
testing between all the programs in a group before sending the
programs to QA for testing. How do we get Shirin to allow
this?

(Supp. R4, tab 59) At the hearing he testified that:

61
 The purpose of this document was basically to report
what I saw in terms of the on-line programs for failing and
going over to the QA side. As I indicated here, I thought that
many of these things should have been caught prior to sending
these programs over to be tested.

And what we are basically seeing is what I am calling
or what I stated as chum, is that we would prematurely send
programs over to the testing team. They would send them
through their automated scripts. They would fail.

They would then come back to the programming staff
with defects, and then the programming team would then have
to fix those defects one at a time, and send them back over the
fence to the testing team.

What I thought should have happened, and what my
experience shows me, is that if you spend more time up front
with making sure that you have quality code, and that you are
doing a robust unit testing prior to giving it over to, to do the
more functional tests, that these errors would not be
occurring, and that you would get results better.

(Tr. 4/856-57; see also findings 46, 47)

60. On 24 February 2006 AEON reported being 100% complete with Level I
testing of five modules. On 3 March 2006, in accordance with FAR 52.246-4, Inspection
of Services, the government exercised its right to inspect and test the services required by
the contract to be performed by AEON. On 10 March 2006 CO Gladski notified AEON
that the government's inspection had "involved a simple testing of the commonly used
functions in [one] module" and raised concerns about the adequacy of AEON's testing.
CO Gladski listed 8 specific examples of "problems" identified during the government's
inspection and:

As a result of our small sample, we are very concerned as to
the adequacy of Aeon's Testing and Quality Assurance
programs to detect these anomalies. Further, deepening the
concern was the [government] testers were unable to perform
even the most rudimentary business functions of entering an
invoice, entering a disbursement, or editing a contract
payment notice.

62
 Based on the unsatisfactory Government findings during this
review, Aeon is requested to provide access to, and submit for
Government review all modules as they are identified as being
100% complete with Level 1 or Level 2 testing. The authority
for this request is found in section nine of the Statement Of
Work and FAR 52-246.4(c) [sic]. In addition, due to the
concerns raised by this review as to the adequacy of Aeon's
Testing and Quality assurance programs and the status of
testing being reported, Aeon is hereby notified that
acceptance of the services associated with achieving the
events tied to milestone payment [6B] may be delayed while
the Government performs inspection of the converted
software modules as outlined by FAR 52-246.4 [sic] and
section four of the SOW. Toward this end, the Government is
willing to consider any changes you have made or
alternatively, any changes you plan to make to your Testing
and Quality Assurance programs to prevent reoccurrence of
problems with the adequacy of testing in the future, so as to
shorten the time it would take the Government to complete
this task.

(R4, tab 20)

61. After reporting to the government that it was 100% complete with functional
testing, AEON advised in a 17 March 2006 email that:

AEON has successfully performed thousands of tests on the
rehosted MOCAS program code meaning that a lot of the
system operates as expected... . We do not deny that the
rehosted system is not yet fully tested and that there are many
bugs to be discovered and fixed. This is business as usual in a
systems project especially one of this nature when the
underlying technologies are so vastly different from the
legacy environment.

(Supp. R4, tab 74) The government responded:

Government testing at this stage is to independently verify
what is being reported as having been completed by Aeon.
We are not performing 100% structured testing of any items,
we are performing ad-hoc testing of the logical units of work

63
 Aeon reports as being 100% complete with functional testing.
The Government does not want this testing to be a 'life-long
proposition' and if Aeon knows that the functionality
associated with these modules is not fully tested, than [sic]
they should not be reported as being 100% complete.

(Supp. R4, tab 74) In particular, the government inspection testing:

[W]as just ad hoc testing and broad based just to get a feel.
[The tester, John,l2 2l] wasn't testing any one particular
function, one particular process. He was just trying to get a
feel that ... these systems are out there, and the input screens
are out there. The stuff is starting to work .

. . .He would just say that I am having problems, or often times
he would say I am having lots of problems, and I would say
just make sure that you are reporting them to AEON so they
can fix them.

(Tr. 4/671-75, see also tr. 5/934-35, 941-47)

62. In the spring of2006 DFAS requested a DCAA audit to determine AEON's
financial well-being after it was reported that AEON had missed a payroll and had not
paid its subcontractors (see finding 51 ). The resulting audit found no evidence that
AEON was financially unable to complete the MOCAS Rehost project. (Supp. R4,
tab 106 at 21)

63. Mod. No. P00007 dated 5 May 2006 further subdivided Payment Event 6B,
determined to be "highly complex and lengthy in terms of time to complete," into 6B-l,
6B-2 and 6B-3 to permit faster payments to AEON during the performance of tasks
associated with Payment Event 6B (R4, tab 3 at 861-76). In the process of approving the
subdivision of Payment Event 6B the PMO commented that the subdivision was
requested due to "possible government caused delays" resulting in delayed payments and
financial difficulty for AEON (id. at 869). The modification made reference to ongoing
negotiations of an REA (finding 64) and included "[b]y signing this modification, the
Contractor does not waive any claims that arose after 08 January 2006" (id. at 861 ).

22
John Sharer was a DFAS functional systems analyst with 29 years experience with the
MOCAS system (tr. 5/937-39).

64
 64. On 14 April 2006 AEON submitted a Request for Equitable Adjustment and
Schedule Extension Proposal (REA). Thereafter AEON submitted several revisions to
the REA which were audited by DCAA (R4, tab 22; supp. R4, tab 106 at 13-14). On
23 May 2006 AEON submitted a final revised REA seeking compensation in time
(9 weeks) and dollars ($978,3 86) for various alleged government-caused delays to the
critical path of its performance under the contract in the period from 9 January 2006
through 17 March 2006 and to provide additional time in the QA/Test Phase schedule. 23
The cost reimbursement sought was for:

• Added calendar work time to make up for the AEON
team's lost productivity associated with work on the
project's critical path tasks. The lost productivity is
directly attributable to the ( 1) instability of the
mainframe development and testing environments
(including loss of environment due to erroneous lay
down of data), (2) downtime related to the upgrading
of PC workstations under the Desktop Management
Initiative (DMI), and (3) unavailability of the
TestDirector software, the AEON testing tool, during
the above timeframe, and

• Additional time needed to address the increasing level
of program code complexity.

(R4, tab 21at1063, see also R4, tab 21at1082) The requested costs of$978,386 were
broken down as $620,093 for "Environmental Instability," $291,808 for "Increased Code
Complexity" and $66,485 for "Other Costs" (R4, tab 21 at 1064). The requested
nine-week schedule extension of the QA/Test Phase was:

• To accomplish the work that was delayed due to the
impact of the mainframe availability/usability, DMI
upgrade problems, unavailability of test management
system (TestDirector), and changes in the support
levels due to revised security policies and procedures,
and

23
The DCAA audit notes that there was another subsequent REA submission dated
12 June 2006 that sought the increased amount of $992,378 (R4, tab 22 at 1103),
but it is not in the record before us.

65
 • For expanded QA/Test and defect management
activities due to higher than planned complexity of the
MOCAS System program code.

• To complete the technical documentation work that is
dependent on the completion of the QA/Test Phase
activities.

(R4, tab 21at1063, see also R4, tab 21at1067-79, 1083-97) The parties reached a
negotiated agreement on 8 August 2006 (R4, tab 24; tr. 1/93) which was memorialized in
Mod. No. P00012 (finding 67).

65. Mod. No. P00009, dated 12 June 2006, further amended the subdivision of
Payment Event 6B from three subdivisions to four subdivisions (6B-l through 6B-4) (R4,
tab 3 at 880-92). The record shows that AEON was paid for Payment Event 6A on
9 January 2006, Payment Event 6Bl on 28 April 2006, Payment Event 6B2 on 15 June
2006 and Payment Event 6B3 on 8 September 2006 (app. supp. R4, tab 172 at 8).

66. Mod. No. POOO 10, dated 20 June 2006, extended the contract completion date
to allow time for an audit and negotiation of AEON's REA (finding 64) (R4, tab 3 at
892-96, tab 78). On 5 July 2006 Mod. No. POOOl l (R4, tab 3 at 897-01) obligated funds
in the amount of $300,000.00:

[A]s partial equitable adjustment under FAR 52.242-17 for
what the Government considers to be a 3 .5-week Government
delay of work involving certain "Environmental Instabilities"
as asserted in [AEON's REA], as revised May 23, 2006. This
[amount] is granted solely with respect to elements of
"Environmental Instabilities" delay assertions in the revised
REA for the period of January 9 through March 17, 2006.
This partial equitable adjustment represents a good faith
action on the part of [DF AS] that provides cash flow to
[AEON] to meet immediate expenses. The Government does
not concede that entitlement to adjustment exists for the
"Complexity Factor" elements of the REA, or for all of the
"Environmental Instabilities" sub-elements set forth in the
REA. Final equitable adjustment cannot be made until the
Principal [CO] receives the requested DCAA audit report of
the REA proposal. Fact finding and negotiation of the REA
proposal between the Government and [AEON] will occur
after receipt of the DCAA audit report.

66
(R4, tab 3 at 899; see also supp. R4, tab 106 at 13-14, 18)

67. Mod. No. P00012, dated 18 August 2006, reflected the parties' negotiated
settlement of AEON's 14 April 2006 REA (finding 64). Specifically:

4. An $825,000.00 negotiated settlement of the REA was
reached on August 08, 2006. That settlement,
implemented herein, adjusts compensation and schedule
for Government-caused delays and Environmental
Instabilities and disruptions from January 9, 2006 to
March 17, 2006. That settlement includes additional
monetary compensation that the Government will
provide in consideration of AEON's release of the
Government from further equitable adjustments and
claims under the contract based on the "complexity" of
the as-is MOCAS code, with the exception that AEON
has not released the Government from rights to equitable
adjustment or additional compensation involving
changes and/or additions to the as-is MOCAS code
which occur or may have occurred after March 17, 2006,
that increase code complexity.

5. In considering the REA, the Government found that
AEON's REA and subsequent REA negotiations did not
establish entitlement for the MOCAS code complexity
contentions set forth in the REA. However, the
Government offered to provide, and AEON accepted,
additional monetary compensation in exchange for the
limited release described above.

6. This negotiated settlement includes other costs including
travel, software, and Facility cost of capital from
January 9, 2006 to March 17, 2006.

7. This negotiated settlement includes adjustment of the
delivery of the following CLIN dates to September 10,
2006:
a. CLIN 0001 AA
b. CLIN 0004

8. In good faith, DFAS, agreed to make a partial payment
on this REA to help alleviate AEON's financial issues.

67
 DFAS obligated $300,000.00 in POOOl 1 [finding 66]
toward a partial equitable adjustment of this REA. Thus,
DFAS has already paid $300,000 of the $825,000
leaving a balance of $525,000.00 to be paid. This
contract action obligates the remaining $525,000.00 for a
total settlement obligation of $825,000.00.

(R4, tab 3 at 903-05) The breakdown of the negotiated amount was recorded as:

Cate2orv Proposed Cost Ne2otiated Cost
Environmental Instabilities $620,093 $604,590
Code Complexity $291,808 $187,589
Other Direct Costs
Travel $16,595 $17,358
Software Licenses $31,729 $10,768
Cost of Money $31,390 $4,695

Total Cost $99 l ,6 l 5L24 l $825,000

(R4, tab 24 at 1151) The modification included the following release language:

CONTRACTOR"S [sic] STATEMENT OF RELEASE:
In consideration for the modifications agreed to herein as
complete equitable adjustment for AEON's REA, submitted
on April 14, 2006, revised on May 23, 2006 and updated on
June 12, 2006, and in consideration for additional
compensation for that qualified code complexity release from
AEON's provided for under paragraph 4 above, AEON
hereby releases the Government from any and all liability
under this contract for further equitable adjustment:

a. Attributable to such facts and circumstances giving rise
to the REA; and

b. Any and all claims or equitable adjustments under the
contract based on the "complexity" of the as-is
MOCAS code, with the exception that AEON has not
released the Government from rights to equitable
adjustment or additional compensation for any changes

24
The document does not explain the $763 difference between this proposed amount and
the proposed amount of $992,3 78 stated earlier in the same document (see R4,
tab 24 at 43).

68
 and/or additions to the as-is MOCAS code that
increase its complexity which occur or may have
occurred after March 17, 2006.

(R4, tab 3 at 904; see also R4, tab 24; tr. 2/259-64)

68. In mid-August 2006, AEON started Interface Testing:

Interface Testing validates that data is passed correctly
between two systems and can be processed accurately. As a
term of the contract, it was acknowledged by the Government
that the contractor would require Government assistance in
performing these tests. Although an AEon responsibility, the
PMO coordinated testing with AEon and the support
organizations for other DFAS systems. Because of the
Government involvement, this testing stage provided the
Government the first chance to see how AEon was
progressing in obtaining I 00% functionality of the As-Is
system.

Interface Testing started in mid-August of 2006, at that time,
less than a month before GT &E was scheduled to begin.
Scheduled to last only four days, AEon was not able to
run/complete a batch cycle for ten days, compared to an eight
hour window used for production [in the as-is system]. A
batch cycle was critical for creating the data files to be passed
to the interfacing systems. AEon's delay was due to
numerous program problems and JCL errors, which should
not have occurred if the system was fully functioning. The
length of time required and the number of problems
encountered was an indication to the Government that AEon
had not previously run a complete cycle, a critical test for
Integration Testing. This indication raised significant concern
by the Government, due to the point of time within the
project. With less than a month before the scheduled GT &E,
the Government anticipated that AEon would have had a
more mature system and, at a minimum, would have been able
to run a [batch] cycle. However, showing good faith, the
Government permitted AEon to complete their testing and
reserved judgment until after GT&E commenced.

69
 Unfortunately, it was not until GT &E commenced that it was
realized that AEon had bypassed several jobs that had
abnormally terminated, rather than fixing the problems and
successfully run the jobs. Instead, the Government entered
into GT&E assuming cycles were capable of running to
completion without manual intervention. Once GT &E began
and the TS0[ 25 l took responsibility for running the cycles, the
extent of the problems with the batch cycle was discovered.

(Supp. R4, tab 106 at 19-20)

69. Mod. No. P00013 dated 11 September 2006 extended the delivery date for
subCLIN 000 lAA to 25 September 2006 in exchange for consideration from AEON (R4,
tab 3 at 908-11; supp. R4, tab 106 at 19).

70. Mod. No. P00014 further subdivided the CLIN 0001 tasks to be completed by
AEON to successfully qualify for each payment event after 20 October 2006 (R4, tab 3 at
912-25; tr. 3/394-96). The modification revised the "Event Based Payment Schedule for
Payment Events 6B4 and 7A" which were described as "highly complex and lengthy in
terms of time to complete" (id. at 914-15). Event 6B4 and Event 7A were removed and
replaced with Events 7A-l, 7A-2 and 7A-3 (R4, tab 3 at 921-23). The change "aligns
progress of contract deliverable performance and related payment event dates with actual
work progress thereby assuring the Government of Contractor's continued viability"
(R4, tab 3 at 915).

71. On 22 September 2006, just days before the amended contractual delivery date
of25 September 2006 for subCLIN OOOlAA (finding 69), AEON submitted its "Final"
Project Management Plan (PMP) (finding 11; R4, tab 25) The PMP stated:

1.4 System Functionality and Scope
The rehosted MOCAS System will have all of the
functionality, produce the same output and will look, feel and
respond to the users exactly as it does today. Therefore the
users will not recognize that the system has been touched. In
addition, all interfaces will provide the same data in the same
format. No obsolete programs or dead code will be removed
without the express written permission of the [COR] ....

The scope of the effort also includes the development of all
technical, project and user documentation as defined in

25
Technical Services Office (finding 79).

70
 Section C, Descriptions and Specifications, item 14,
Documentation. The repair services of the rehosted MOCAS
System are an optional scope item beginning with installation
of the rehosted MOCAS System on the production platform
and continuing for one year thereafter. DFAS intends to
make a decision on this optional scope item at a later date.

(R4, tab 25 at 1159)

72. In a 22 September 2006 letter CO Gladski expressed concern about AEON's
performance of the contract and requested "reasonable assurances" that AEON would be
able to complete the contract. In particular, CO Gladski expressed concern about "the
quality and completeness of your QA test and automated test scripts." (R4, tab 26;
tr. 1/93-94) AEON responded in a letter dated 26 September 2006:

We are at the end of the project. The QA/test is 99%
complete. With very few exceptions - all other tasks are
complete. Therefore, we were very confused and
disappointed by your letter. We have consistently taken every
step to assure DF AS that AEON is fully capable of and
committed to completing the MOCAS Rehost project.

While this project continues to be more complex than
originally expected, we feel confident that we will complete
the project with the highest quality possible for a project with
its unique attributes.

1. Schedule Issue - Start of GT &E schedule changed
from 9/25/06 to 10/2/06

[AEON explained that the requested one-week extension
to the delivery date for subCLIN 0001 AA was due to
DFAS/DCMA's recent provision of long-requested
information on 8/31/06, 916106, 9112106]

2. Technical Performance Issues

We are not aware of any technical performance issues. To

71
 the best of our knowledge the technical performance of the
project has been successfully presented and accepted. The
performance under the Rehost is substantially faster than
under the current technical environment. If there are other
specific concerns, please let us know and we will respond
accordingly.

3. Quality and completeness of QA tests and automated
scripts as evidenced by inspection results

AEON is totally committed to producing the highest
quality MOCAS Rehost product. As you know, MOCAS
was a very difficult and complex system to convert due to
its age (evolved over more than 40 years), lack of
standards and consistency, use of multiple coding
techniques for coding the same functions in the same
program and lack of documentation to provide
explanations. For such a system:

- It is highly unrealistic to expect that a subject matter
expert or a knowledgeable system user perform tests
on a major system prior to or during the user testing
(GT &E) and finds no defects. The purpose of the user
acceptance testing is to test the system from a user
perspective and correct any defects prior to moving the
system into production. The amount of defects
discovered during the user acceptance testing is
directly proportional to the level of customer
involvement throughout the project. The systems with
more customer participation will yield less defects
during the user acceptance testing than those with little
or no customer participation.

The consequence of DFAS and DCMA not actively
participating in the project for a system that has no
documentation and has gone through 40 years of
changes of content as well as ownership is the
possibility of discovering more defects during the
GT &E. We explicitly identified this fact as a risk for
this project in our proposal. Risk# 10 in our Risk

72
 Management section highlighted "The stated lack of
government involvement throughout the project life
cycle" as a "High" probability risk with "High"
impacts on "Cost, Schedule and Performance".
While we implemented the proposed mitigation plan of
management and peer review and hired several team
members with MOCAS experience, these actions, as
stated in the risk management plan, did not fully
eliminate the risk and its impact. Further, we have
worked diligently and have asked to receive and
execute user test scripts in order to minimize this
impact.

A subject matter expert can test a complex system,
even an operational system, and can identify defects.
This is evidenced by the fact that we were able to
identify 19 defects in the current MOCAS system
which has been in production for over 40 years.
Therefore, the quality of AEON's performance can not
be based solely on the lack of defects during
Government inspection.

The quality indicator should be based on the severity of
the defect as well as how quickly the defect can be
corrected during the inspection and GT &E. The
defects that were discovered by the TSO team during
the inspection process were not numerous and were
fixed and resolved immediately. The larger number of
defects discovered by the TSO was associated with
early testing support that we had requested from TSO
and not during inspection testing.

In conclusion, AEON is fully capable and committed to
complete the MOCAS Rehost project with high quality.
When we started the project our conversion team was not
familiar and experienced in the MOCAS code.

Through diligence and hard work the team is now very
knowledgeable and experienced and can resolve any problem
quickly. We also believe that our team has become even more

73
 knowledgeable in the Rehost system than most TSO
members.

(R4, tab 27)

73. On 27 September 2006 and 2-13 October 2006, the government performed
inspection (see finding 16) in the form of some testing of various areas of the MOCAS
rehosted system (R4, tab 38 at 1270-71; tr. 3/432-33, 573).

74. As of 5 October 2006 AEON and the government had agreed to start GT&E
on 13 October 2006. However, by email dated 11 October 2006, COR Hecker proposed
to delay the start of GT&E until 30 October 2006 due to difficulty in assembling the
government test team and also proposed for AEON's consideration further changes in the
payment milestones. By reply email the same day, AEON responded:

The proposed GT&E schedule is unacceptable to AEON for
the following reasons:

1. The Government has been conducting inspection testing
which is very similar to GT &E rather than a high level
inspection. We believe there has been sufficient testing and
retesting done to assess the start of GT&E. Three DCMA
testers and two resources from DF AS have been involved in
inspection testing and validation.

2. Per our conversation of Thursday, 10/5/06, we agreed on a
plan to start GT&E preparation on Wednesday, 10/11/06 with
a GT&E start date of 10/13/06. The following steps were
agreed upon:

o AEON would fix all defects by 10/9/06
o Client would input their data on Tuesday,
10/10/06
o AEON would run a cycle with client input on
Tuesday night, 10/10106
o Client would verify the results, 10/ 11 /06
o If there were no show stoppers found, GT&E
prep would start on Wednesday, 10/11/06

74
 3. We were told in the TIPT[261 meeting today that the client
did not find any show stoppers that would preclude us from
going to GT&E and in fact a key client was very excited
about the results of the testing. During today's IPR
John Sharer also stated that there were no show stoppers for
the start of GT&E.

4. All identified defects with the exception of a few lower
priority defects have been fixed. We have demonstrated that
we can very quickly resolve any problems encountered.

5. It is commonly understood that defects will be identified
during GT &E due [to] the depth of operational knowledge of
the client testers. Therefore extending inspection to continue
the testing process will not eliminate GT &E test defects.

6. We believe that AEON has met its obligation and has
supported the inspection process required prior to the start of
GT&E (start date of 10/13/06). Since this is a fixed price
contract any further testing prior to GT &Eis an unnecessary
hardship on AEON that we cannot accept. If the client wishes
to pay for the extension of the start of GT &E to October 30th
we would be more than happy to discuss it.

Carl [Hecker]: We are totally committed to this project as
evidenced by all personal and business risks that we have
gladly accepted in order to have a successful project.
However, any delays in the start of GT&E and major changes
to our payment schedule are unacceptable to AEON because
they would have severe impacts to the company.

(App. supp. R4, tab 151)

75. On 12 October 2006 AEON submitted a second REA ("REA2") in which it
sought compensation in the amount of $629,550 for government-caused delays to its
performance of contract work from 18 March 2006 through 2 October 2006 (app. supp.
R4, tab 152 at 1, 4-5). After multiple revisions, the 15 February 2007 version ofREA2

26
Test Integrated Product Team (gov't br. at 36).

75
sought $548,866 (app. supp. R4, tab 189 at 6-7). The record shows that AEON was paid
for Payment Event 7A1 on 20 October 2006 (app. supp. R4, tab 172 at 8).

76. On 20 October 2006 an internal AEON email announced: "Team: All the
reports are in balance. All the client defects have been fixed. We are going forward with
GT&E!!" (App. supp. R4, tab 155 at 2)

b. GT&E

77. On 23 October 2006 AEON delivered the Rehosted MOCAS database for
GT&E (R4, tabs 30, 34, 38), having certified in its 20 October 2006 MOCAS Rehost
System Quality Report that to the best of its knowledge the MOCAS system was ready to
perform the functions of the As-Is MOCAS (supp. R4, tab 106 at 19, 22, 27). The
government approved AEON's report of delivery for GT &E and on 1 December 2006
released to AEON performance-based payments for Payment Event 7A2 (app. supp. R4,
tab 172 at 8).

78. GT&E commenced on 24 October 2006. It was the government's expectation
that the product delivered for testing should be "99.9 percent capable of performing the
function of the as-is MOCAS, and look like the as-is MOCAS, and do everything that the
as-is MOCAS was doing" with only a small amount of test failures that would require
"minor tweaks" (tr. 1/87, 98, 102-03, 109).

I would say that we expected the system to be delivered with
minor cosmetic changes that were needed to be made,
whether the screens were not operating properly, or the
wording was incorrect.

We did not look for what I would call critical errors or
we would not expect critical errors or defects when they
delivered the system to us ....

(Tr. 3/418; see also tr. 3/607, 4/804)

79. Specifically, the DFAS Government Test and Evaluation Plan identified the
following details of the DF AS' GT &E effort:

SECTION 1 - GENERAL

I. I Test Objective

76
The Defense Finance and Accounting Service (DF AS)
Commercial Pay Business Line (CPBL), Chief Information
Office (CIO), Central Design Agency-Technical Services
Office (TSO), Defense Contract Management Agency
(DCMA) Central Design Agency/Technical Information
Center (DTIC), Defense Information Systems Agency (DISA)
OGDEN and the Contractor (AEON LLC) will jointly
coordinate and support a Government Test and Evaluation
(GT&E) of the Mechanization of Contract Administration
Services (MOCAS) Re-host (DB2 environment) System.
Parallel testing will consist of testing all online and batch
processes as well as the interfaces functionality developed
within the Mechanization of Contract Administration Systems
(MOCAS) Re-host (DB2) system environment (MUJ) and
MOCAS (SUPRA) production system environment (MUB).
Testing will be conducted during the period of 11 Sept06
through 30Nov06.

1.2 Purpose of the Test

This document identifies and defines the requirements that
will be tested in parallel systems during the GT&E. And will
determine ifthe MOCAS Rehost (DB2) System (MUJ)
provides the same level of interface capabilities, functionality
and processes that exist in the current production MOCAS
(SUPRA) system (MUB). To include validating AEON
provided user's manual. Numerous online, batch and
interface transactions will be processed through each Logical
Partitioning (LPAR). And through comparative analysis
performed by the test cadre, a validation of each screen and
data field and data field requirement will be performed to
ensure the online, batch and interface transactions are
mirrored, with results documented to reflect demonstrated
functionality or lack thereof. Specifically, this Government
Test & Evaluation Plan:

• Confirm MOCAS Rehost (MUJ) system consists of
the same screen layouts, interface(s), online input,
online input validation and batch functionality as the
current MOCAS (MUB) production environment.
• Confirm Entitlement Automation System (EAS)
interface functionality

77
 • Confirm Contract Reconciliation System/Standard
Contract Reconciliation Tool (CRS) interface
functionality
• Confirm Electronic Document Management (EDM)
system interface functionality
• Confirm Payment Prevalidation Module (PPVM)
system interface functionality
• Confirm [SDW] system interface functionality
• Confirm Wide Area Workflow - Receipt &
Acceptance (WA WF-RA) system interface
functionality

1.2.1 Assumptions

The MOCAS Rehost DB2 (MUJ) will provide the same
screen layouts, interface capabilities, online input, batch
functionality and processes that exist in the current production
MOCAS (SUPRA) system. And will perform validations
consistent with the current MOCAS production environment
which supports online and batch processes.

The outbound file transmissions to include all
system-generated reports will provide the same format and
data from the MOCAS Rehost DB2 (MUJ) system as in the
current production MOCAS SUPRA (MUB) system. All
DF AS reports will be viewed utilizing the Online Report
Viewer (OLRV).

4.3 Test Evaluation

a. All test conditions must process 100°/o as
predicted for the GT &E to be accepted and
certified. Any test conditions not processing as
predicted must be identified and successful
resolution agreed to jointly by the contractor and
test cadre (if applicable). Test conditions results
for which agreement is in dispute will be
forwarded to the technical representatives for
analysis and resolution. Each MOCAS Rehost

78
 region will be tested independently and for its
interdependencies.

4.3.1 Test Conclusion

a. The test will conclude when 100°/o of all valid
test conditions are adequately tested and found
acceptable and outstanding problems are
verified as fixed and retested. This will result in
a recommendation for either a
certification/non-certification.

b. Parallel testing of a single MOCAS region vs. all
three (3) will result in a recommendation for
certification that must stipulate the following
caveat: Certification of the MOCAS Rehost DB2
environment resident on the (MUJ) LPAR was
accomplished utilizing only one parallel MOCAS
region for comparison, thus ensures operability of
each region and not their interoperability.

c. Based on successful completion of test
conditions/scenarios and outstanding problems,
MOCAS Rehost, [PMO] will coordinate with the
Designated Approving Authority (DAA),
Information Assurance Officer (IAO) and DF AS
Chief Information Officer (CIO) to discuss
whether or not any outstanding problem(s)
discovered during testing will have an adverse
affect/impact ('showstopper') on DFAS and/or
DCMA business processes.

(Supp. R4, tab 61 at A009710, A009721) (Emphasis added) The DCMA Government
Test and Evaluation Plan was essentially identical and was developed by DCMA test lead
Turner (supp. R4, tab 67; tr. 4/795-00, 802-04). With respect to Problem
Identification/Resolution, the DF AS and DCMA Test and Evaluation Plans specified the
following categories of problems:

79
 Category DFAS (4.2.2) DCMA (4.2.3.1)

A Critical/Fix Immediately Must be corrected before test can
proceed.

B Major/Fix before Test Completion Must be corrected before end oftest.

c Fix before Deployment Must be corrected before deployment.

D New Requirement(s)/Requires an New Requirement( s)/Requires an
Automated Work Request (A WR) Automated Work Request (AWR)
/Contract Assessment Form (CAF) Because it significantly changes
-Because it significantly changes the management requirement.
the management requirement

E Real World Production problems Real World Production problems

F User Defined User Defined

G No Impact to MOCAS/Rehost [not used]

H Reserved [not used]

(Supp. R4, tab 61 at A009720, tab 67 at A009693; tr. 3/536-37, 553-56, 5/954, 1025)
With respect to Category E, Real World Production problems:

[The government] recognized that there are some problems in
the [As-Is] MOCAS system today [and] the system is still able
to function, but they are there, and they are cosmetic.

So if they are there in the system now, they would still
be in the system when we converted it.

(Tr. 3/450, see also tr. 5/954-55; finding 72 [19 defects found in As-Is MOCAS])

80. GT&E was performed by 33 government testers, all with decades of
experience with the existing As-Is MOCAS (tr. 3/582-84, 604-05, 4/752-54, 828-29,
5/937, 956-63, 982-84, 5/1017-102, 1021, 1038; supp. R4, tab 61 at A009722 (lists
44 names for DFAS), tab 67 at A009695-96 (lists 15 names for DCMA)).

80
 We had people from each of the different areas. We
had DB2 people there and they were represented, and we had
people there that put in invoices every day, and they were
represented, and they had people from contract input there,
and they were represented, and entitlement, Tier 2. There
were individuals from each area that were involved.

From each area, there was probably two to three
people, and you have to realize that the data was phased, and
so each day you would bring in different people. They
wouldn't all be there at one time.

(Tr. 3/435-36)

81. In the first several weeks of GT &E the government testers encountered
numerous failures of critical, basic and necessary functions of the Rehosted MOCAS to
perform like the As-Is MOCAS (tr. 1/87, 3/584-08, 5/899-00; supp. R4, tabs 95, 123).
DF AS test lead Thompson testified that:

In October of 2006 we started, and it was a very trying time, I
had our testers in the lab and we were ready to go, but the
product itself for a simple task as far as the users logging in
and going to a library which holds how you process data, they
would get [database] errors. [271 They would try to do simple
tasks such as input an invoice and update the database and
they would get errors, and it got to a point where it got quite
frustrating because simple tasks that have to be done daily
were unable to be completed. So I believe we were in it for
maybe two to three weeks before we stopped the initial
GT&E.

Just to name a few very critical [functions], unable to
input invoices and update MOCAS, we would receive
[database] errors. Whenever a shipment would come in a

27
Ms. Thompson used the phrase "Oracle errors" in her direct testimony, which she
changed on cross-examination to "database errors" as the more correct terminology
(tr. 5/1058-59).

81
 DD-250 would have to be input into MOCAS, and there were
major problems with, it's called a basic PF3 summary edit [in]
the system, and for whatever reason it would say that it
already existed and it wouldn't allow the person to add that
particular document or any document, and this posed a lot of
problems. And also with our electronic feeds the majority of
our invoices come in electronically, and whenever these
would come in they would not update MOCAS correctly, so
the general ledger would show that our obligation receipts
were never correct, and that is critical in our world.

(Tr. 5/1023-24) Thompson further testified that, in her 10 years of testing software, she
had never encountered a product so not ready for testing (tr. 511031-32).
Kathleen Schreiber, a DCMA tester with 29Yi years experience with MOCAS and whose
regular job involved testing software for DCMA, testified:

Q ... [D]id the rehosted MOCAS system have the
same 100 percent functionality as the as-is MOCAS system?

A ... No. We couldn't get the contracts in, and we
couldn't move them through their lifecycle, and we couldn't
process transactions against them.

We couldn't close them and we couldn't reopen them,
and we couldn't get those transactions to our [S]hared [D]ata
[W]arehouse successfully, repeatedly, consistently.

Q In your opinion was the rehosted MOCAS
system ready for testing, Government test and evaluation?

A In my opinion, no.

Q Why?

A Well, I do test software all the time. . . . When
you go to test an application, you don't expect it to be error
free. You expect to find things. That's your job.

But you don't expect to find anything major where you
can't do your normal basic functionality. You don't expect to
find just about everywhere you tum that something doesn't
work.

82
 Q ... What type of problems did you basically
think you would encounter when you started testing?

A Well, like some cosmetic stuff. Maybe some
weird error messages on the screen, but I certainly expected
that it would have been tested and proven that you could get
contracts in, and MODS in, and shipments in, and things like
that, and cycles run.

Q How important was it to run your monthly and
nightly batch cycles?

A Oh, it was extremely important because the only
way we get in electronic documents like contract MODS,
shipments, and invoices, is through a batch cycle ....

(Tr. 3/606-07) The DCMA testers summarized the initial GT&E period as:

[U]nsuccessful attempts to complete a monthly cycle along
with continued system problems such as inability to Summary
Edit contract/modification input, numerous SQL system
errors, erroneous rejection of the EDI 850's and 860's
transactions, problems with automatic CAR section
movement, DD Form 250 processing and SDW not being
100% completed ....

(Supp. R4, tab 113)

[It] happened quite frequently, that we would get a problem
back and fixed by AEON, and then we would retest it.

And then you would go on to do your next piece on
that particular document that you were working on, and ... ,
hey, this is broken. This was just working days ago. So it
was kind of like unstable, and so you could not rely on it
consistently to act the same.

(Tr. 3/597, accord tr. 5/1025-26)

83
 The Government personnel went in and started testing.
We started writing up about problems, and we provided
screen prints, and we gave them to AEON. The first cycle
took a lot [of] time for them to run. They had problems with
the cycles and programs.

We got through the second cycle, and then I think it
was the third cycle where they came to us and said that they
were stuck on a program, and they couldn't get it fixed until
maybe 4 or 5 days before they could get it fixed.

And at that time that's when the testers were getting
upset, and that's when I met with [CO Gladski] at the time,
and said that it looks like we are having problems, and a lot of
defects in their stuff.

That's when we met, and the final recommendation
really, and we met as a group and came to the consensus that
we thought it was best to stop GT&E because we couldn't
seem to get past the work stoppage, and the program, and
continuing to fix things. We couldn't run cycles and we
couldn't do any [testing] work.

Well, the program that they had, they had a whole lot
of difficulty fixing it, and if I am not mistaken, it was the cash
management program that they were stuck with.

And they were having trouble getting it to work, to run
in a cycle, and so until they repaired that program, we were
unable to continue on because we were just at a work
stoppage.

So that was a critical program ....

(Tr. 3/437-38)

84
 It was our recommendation based on the number of
defects received, and the difficulty that they had with
repairing the critical programs that they had to go back and do
more testing, more unit testing, or whatever they needed to do
to deliver so that it didn't have as many defects as when they
first delivered it.

I think it was something like 200. I am not sure of the
exact number, but there were quite a few defects .

... [W]e were having trouble getting through the
different cycles, and the input that was being entered, we
couldn't get through most of the screens.

There were several issues, and that was not a fully
functional system. We needed a system that would work at
that point, and it was broke at that point, and we could not
completely enter contracts.

(Tr. 3/439-40)

82. On 2 November 2006 the government suspended GT&E (supp. R4, tab 106 at
28). From the time of the suspension until 18 December 2006, DFAS testers went back to
their regular jobs and DCMA testers maintained contact with AEON to clarify or explain
200 trouble reports submitted prior to the suspension (supp. R4, tabs 113, 123; tr. 3/457,
tr. 4/750, 759, 791-92, 813-16, 5/948-49, 1022-23, 1033).

83. At a meeting on 8 November 2006 (R4, tab 28), it became apparent that the
parties were in basic disagreement as to the level of functionality required to be present in
the Rehosted MOCAS delivered for GT &E. It was AEON's position that the 90-day
GT &E period was user acceptance testing in order "to resolve defects" (tr. 3/532). The
government insisted that the contract required that the Rehosted MOCAS have 100%
functionality when it was delivered for GT &E.

Under CLIN-1 that represented the whole MOCAS program,
the rehost. When everything worked correctly, then that
CLIN-1 would have been delivered. We had no partial
delivery of anything under CLIN-1, and our expectation[] was
100 percent functionality when the system was operating.

85
(Tr. 1/113)

It may have defects, but a defect should not impact the
functionality of the system, and in this case the defects did
impact the functionality of the system .... But we weren't
talking about bugs. We were talking about major defects that
did not allow the functionality of the system to be proven
out. ...

(Tr. 2/317-18)
We expected AEON to deliver a fully functional
system, and that is totally different than a defect free system.

To deliver a system where we can input invoices, input
shipments, and that means being able to get from - if it takes
you five screens, and you have to go from A, B, C, D, and E
to completely put in the shipment, we expect to get through
all of that.

We don't expect that minor defects with the system,
whether like if wording on the screen wordings were
incorrect, or anything, we still expected it to be fully
functional. Those are the types of defects that we expected to
see.

(Tr. 3/441-42)

84. On 15 November 2006 the government formally rejected the Rehosted
MOCAS delivered by AEON and suspended GT&E:

The memorandum, however, gave AEon the opportunity to
deliver a product that performed basic system functionalities,
to include Summary Edit, complete daily/monthly cycles,
accurate Automatic Payment of Invoices (API) process,
Invoice History updates, full Contingent Liability Record
(CLR), accurate financial/invoice updates, etc.

(Supp. R4, tab 106 at 28; tr. 1/104-06, 2/312-14, 3/539; see also R4, tabs 28, 30-31,
38-40, 49)

86
 85. In a 29 November 2006 letter, counsel for AEON notified DFAS
CO Gomolak28 that AEON considered the government's position to be contrary to
contract requirements, arguing that the purpose of GT &E was identification and
correction of defects which, he argued, anticipated that the Rehosted MOCAS was not
expected to have 100% of the functionality of the As-Is MOCAS at the time it was
delivered. Counsel further asserted that the government had no right to suspend GT &E
and that the suspension of GT &E was an "attempt[] to revoke its prior acceptance of the
MOCAS system." (R4, tab 29)

86. On 28 December 2006, CO Gomolak took issue with AEON counsel's letter
in two separate letters to AEON. In the first letter, with the referenced subject of
"Government Test & Evaluation Issues," CO Gomolak stated:

On November 15, 2006, AEon was notified that due to
deficiencies in the "Rehosted" MOCAS database delivered to
the Government, that the Government was rejecting
CLIN 0001 and suspending [GT&E]. The letter further stated
that until such time as the deficiencies were corrected and the
Rehost application meets the 100% "as-is" functionality
requirement specified in the contract [SOW], GT &E would
remain in a suspended status. Furthermore, we acknowledge
receipt of the November 29, 2006 letter written by [AEON's
counsel] disputing the Government's right to reject
CLIN 0001 and to suspend GT&E ....

However, from reading [counsel's] letter it is evident
the parties have a difference of opinion as to what AEON is
required to deliver under CLIN 0001. It is AEon' s opinion
that the Government should accept a program that can not
perform the most basic transactions the old MOCAS system
performs and to use the entire GT &E period detailing to
AEON what is broken so that those items can be fixed. The
Government does not share the same view of AEON's
responsibilities under the Contract.

The Government's position concerning the CLIN 0001
delivery is this: the product AEon delivers is required to

28
At the time of his testimony Normand G. Gomolak, Jr., had been a warranted CO with
DF AS since August 2006 and had many years of prior corporate and military
contracting experience since 1986 (tr. 2/306-09). He first worked on the MOCAS
Rehost contract in spring 2006 as CO Gladski's contract specialist (tr. 2/310).

87
comply with the SOW. We have been inspecting the product
under our right to inspect as set forth in the inspection clause
and we have determined that the product as it currently exists
does not comply with the SOW. Specifically, errors have
been discovered that reveal your product does not comply
with SOW§ 6 (system development), or§ 7 (functionality)
etc. It is our position that your obligations undertaken with
CLIN 0001 of this Contract are to deliver to DF AS a rehosted
MOCAS and migration programs, both with full
documentation that can perform exactly like the old MOCAS
system. Until such time as your product meets the standards
set forth in the contract, you will not have completed your
obligations under CLIN 0001 and consequently, the
Government will not move into the GT &E phase.

On December 7, 2006, members ofDFAS, DCMA and
the DF AS Rehost PMO met to discuss the Rehost application
and to determine if, in their opinion, the product currently
meets all SOW requirements. Their conclusion is that your
product fails to meet specifications required in the Contract.
At the request of the PMO, the team has identified the
following violations of SOW § 7 functionality requirements
and these requirements must be present before CLIN 0001
will be accepted for recommencement of GT &E.

[l] Closed Contract Data Base (CCDB)- There are problems
with all aspects ofthe CCDB (e.g., viewing contracts in the
CCDB, moving closed contracts into the CCDB, re-opening
contracts from the CCDB, etc.).

[2] REOPENs - Reopening contracts both on-line and from
the CCDB is not functioning properly.

[3] Program UNAA71 - Contract control data changes (e.g.
PIIN I SPIIN changes, CAO org code changes) are not
working properly.

[4] Reports - There are many problems applicable to reports
such as ( 1) data not appearing, reports not being produced
when requested, data appearing the [sic] in wrong format I
order etc. These problems are most prevalent in the UYF A04

88
& UYFDO 1 programs, but the problems are widespread
across the database.

[5] Section moves - Contracts are not moving properly after
month-end cycles are run (e.g., contracts are not moving from
CAR Section 5 to Section 8).

[6] DD 250 processing- Not all DD Form 250 actions can be
accomplished (such as Quantity corrections without errors).
The major DD250 processes impacted are:
• The Shipment Weight is not updating properly
• Information entered is being incorrectly displayed on
the screen after it has been input.
• SQL errors are displaying after summary edits

While the above issues are the most prevalent, the entire
DD250 process is suspect.

[7] Fall back (YCD4)- This module is not working properly
as it does not allow rejected EDI I MILSCAP documents to be
processed.

[8] Progress Payments - Files are not reflecting correct
amounts (e.g., cumulative progress payments paid) and
consequently affect the ability to pay and appropriately
monitor them. Both the payment and tracking side of the
process must be working.

[9] EDI Contracts (850s)- Transactions are not correctly
updated. Incoming data is not populating (i.e., the effective
date of the contract and date of signature). Other contract
corrections cannot be made until date fields are manually
inserted. Error Code "252 - FIC-Appropriation Unmatched"
is wrong for a number of the contracts because the data is on
the APRs.

[10] ACO Mod Module - interface, Openlink is not working
properly as it does not consistently extract all ACRNs for a
given PIIN I SPIIN. During the interface test, this problem
appeared to be corrected. However, this same problem
occurred during the Quality Review period.

89
 [11] Shared Data Warehouse -All changes made in MOCAS
(i.e. additions, deletes, changes) should be received in the
proper order so that SDW data is current and correct. There
have been numerous issues with data transfer rates,
sequencing (i.e., incorrect sorting) and database records or
tables not coming across with SDW.

[12] JCL/Cycles - GT&E Q/A has only executed three cycles
- Monthly, Daily and 1st Daily; although the "baseline" cycle,
the Daily, is one of the three. To date, no cycle has run
uninterrupted from beginning to end without experiencing
ABENDS[ 291 requiring program mods, data manipulation, JCL
and/or control cards' changes. Additionally, there are
multiple "flavors" (i.e., slightly different variations) of the
Daily cycle that will need to be tested. These cycles are
dependent upon the work day or calendar day of the month-
2nd13r Critical/Fix Immediately
191 Category B >Major/Fix before Test Completion
14 Category C > Fix Before Deployment
1 Category D >New Requirement
1 Category E > Problem Exist in Production

116
 At GT &E conclusion, the government continued to experience
inconsistent test results. For example, there were still problems with
contract close-out.. .. There were also problems with the internal
transfer .... An external transfer of contracts was not conducted,
since only one database was used for GT &E.

The Mocas Rehost interface to SDW never achieved a successful
level of accuracy or dependability. DCMA staff assisted AEon on
numerous occasions throughout the testing. However, at GT &E
closure, a number of transactions continued to fail the SDW
commitment process. The numbers and types of transactional errors
varied over the course of GT &E, but full success was never
accomplished.

The load process which synchronizes the SDW database with
[MOCAS] continued to have errors through the last week of GT &E
testing. There were findings of erroneous and corrupted data and
incomplete data relationships within SDW. At no time did testers
conclude the SDW was in complete synchronization with the Rehost
Mocas database.

There were only two attempts made to run QAMIS Monthly cycles.
Abends in the QA MIS area occurred in multiple cycles. A fix was
eventually promoted for cycles to successfully process, but the
DCMA Team was not able to sufficiently test QA-MIS.

During GT&E, there were 36 cycle abends and 9 canceled cycles due
to program/JCL problems. The DF AS-TSO office processed nightly
cycles and confirmed with respect to cycle abends that problems
were not due to data used for testing.

Based on the number of outstanding critical system problems,
inconsistent processing results, and continued challenges in
completing nightly cycles, DCMA does not certify nor recommend
deployment ofMOCASR MUJ MOC G to production.

(Supp. R4, tab 113; tr. 4/835-36)

107. On 4 May 2007 AEON responded to the show cause notice. It's first stated
response was that there was no valid basis for termination for default. It further argued in

117
the alternative that, even if grounds for default existed, "they are individually and
collectively attributable to causes beyond the control and without the fault or negligence
of AEon, and therefore excusable" under FAR 52.249-8(c). (R4, tab 44)

108. Sometime after 4 May 2007 the PMO replied to AEON's response to the
show cause notice:

It is the government's position that AEon delivered a rehosted
MOCAS system with significant discrepancies between the
functionality of the rehosted MOCAS and the as-is MOCAS.
Additionally, AEon was unable to increase the maturity level
of the system significantly enough during the five and a half
month time period following the initial delivery, to
demonstrate that they have sufficient competency to complete
the rehost effort. The GT &E results and a final inspection of
the system found numerous and severe discrepancies that
warrant the Government's rejection of the delivered system.
It is also the Government's position that AEon did not meet
earlier Milestone objectives under the contract to include:

~ Ascertain the functionality of the current, as-is
MOCAS
~ Ensure that the rehosted MOCAS has 100% of the
functionality of the as-is MOCAS system
~ Perform testing to include unit testing and integration.
~ Perform Project Management
~ Higher Level of Quality Assurance as defined by the
ISO 9001 standard.

Based on the GT&E results, AEon did not ensure that the
rehosted MOCAS had 100% of the functionality of the as-is
MOCAS system. Several processes did not function as they
do on the as-is system. Therefore, it can be concluded that
they did not adequately perform testing. AEon has admitted
in several pieces of correspondence and during the In Process
Reviews (IPR) that they limited their unit testing to ensuring
that the program could run, not if it would function correctly.
They also admitted that they performed only representative

118
 testing[ 361 during their integration testing. As a result, they
missed the opportunity to test the system as a single product.
They also did not perform in accordance with industry
standards (e.g. ISO 9001) and best practices. In other words,
they did not perform complete unit testing or integration as
defined by industry standards and best practices to ensure all
program changes were fully tested.

Although AEon failed to perform the tasks prior to GT&E
and could not cure the system problems during GT &E, it is
more important to note that they do not indicate that they have
insight into the magnitude of defects in the system; what
might have caused them (e.g. conversion process); and, most
importantly, what it would take to resolve them. To date,
AEon has not presented a "Get Well" Plan that could be used
to move the project forward. A Get Well Plan would identify
the method in which AEon could move toward achieving the
100% functionality and provide a means for measuring and
monitoring their progress.

Instead they assert that it is the Government's responsibility to
perform the required testing and identify the defects in the
system. They also assert that it is the Government's
responsibility to assist in analyzing the defects. Based on
their correspondence and actions during GT &E, they see their
responsibility as fixing the defects identified by the
Government. Therefore, they have indicated that they do not
have ownership of achieving objectives of the contract.

Finally, it is the Government's position that AEon does not
have the capability to achieve the contract requirements
within a reasonable time frame. With the combination of the
number and severity of discrepancies between the rehosted
MOCAS and as-is MOCAS, and AEon's lack of method for
obtaining the MOCAS Rehost contract's objectives, the
Government has no other option but to terminate the contract.

36
"Representative testing" was described by government tester Malthaner as "tak[ing] a
handful of data and process[ ing] it through the system [so] you would not
necessarily have a full range of what the [actual] data may be" (tr. 5/903).

119
(R4, tab 45 at 2-3; tr. 5/901-07; see also supp. R4, tab 106)

109. A CM/SEI Kick-off meeting was held on 9 May 2007 with representatives of
CM/SEI and DFAS PMO (app. supp. R4, tab 234; tr. 7/1166-67). Mr. John Foreman, a
chief engineer at CM/SEI, was tasked with forming a team to perform the ITA
(tr. 7/1153-54, 1157-58; app. supp. R4, tab 258 at 32). On 11May2007 the MOCAS
Rehost ITA Weekly Status stated:

9 May- SEI ITA Kick-off meeting held. SEI presented an
[ITA] brief followed by DFAS PMO presenting a MOCAS
Rehost Program historical background brief. In the afternoon,
DF AS CP Operations provided SEI team with a system
demonstration followed by an open discussion between SEI,
CP Ops, TSO, DCMA, and PMO, including functional and
technical staff involved in the GT&E.

SEI presented 3 concerns:
** DFAS PMO's attempt to limit scope to technical code
audit may lead to expectations gap.
** Lack of access to AEon personnel may lead to
incomplete/skewed evaluation.
** SEI' s use of an automated code analysis tool may not be
sufficient and SEI may require additional technical resources.

PMO and TSO both expressed concern that SEI was still
indicating the intention to review/evaluate
information/evidence that was not necessary (in our opinion)
for the desired technical assessment (i.e. review of the
Contract/Mods to determine if AEon met the terms of the
Contract, review of the Congressional inquiries, etc.) SEI did
respond that their output would provide DF AS with enough
technical detail as requested to be able to make an informed
program decision.

(App. supp. R4, tab 234 at 1-2) On 10 May 2007 the following guidance was provided by
DF AS TSO relative to information to be provided to CM/SEI for use in its performance
of the ITA:

Below is guidance when providing SEI with documentation,
artifacts, or resources for their ITA. If asked to provide
something not covered in one of the lists, please let me know

120
 or send it through me or [COR Thrower]. Thank you for your
help and assistance.

Documentation/Artifact/Resource allowed list:

* All AEon SLCM document deliverables
* All AEon IPRIPSR reports and supplemental notes
* All (3) TSO code review evaluation reports
* Access to DF AS/DCMA functional/technical staff
* AEon RFP proposal
* Statement of Work
*Access to/copy of PM O's TDR tracking database
*Access to/copy of CP Ops' Test Logs database
*Access to/copy ofDCMA's Test Logs database
* Access to SUPRA/MANTIS DB MS/code
* Access to DB2/CICS/COBOL RDBMS/code

Documentation/Artifact/Resource not allowed list: (until
justification provided or appropriately sanitized)

*All REA related documents/emails
*All Congressional inquiry related documents/emails
*All Cure/Show Cause related documents/emails
* Access to current AEon management staff
* Access to current AEon technical staff
* Access to former AEon staff: Mike Krajnak, Jim Conerly
*Access to former AEon staff: Phil Cramer, Scott Love,
Aaron Martin
* Access to AEon' s Test Director database
* Original Contract and Contract Mods
*Access to AEon's Source Safe project repository
* Permission to contact: TMGi, NP Gen, CSC

(App. supp. R4, tab 234 at 3) (Emphasis added) With respect to CM/SEl's concerns
quoted above, CM/SEl's Foreman testified that:

When we do an independent technical assessment ... we
were trying to be an honest broker, which means that we try to
look at as many facets of an issue as we possibly can, because
that is the charter of SEI and FFRDC, not to be biased one
way or the other, and to tell as much truth as we can possibly
find.

121
 The concern that was being raised here was that
nothing other than -- well, one conversation that we had with
folks was them trying to understand that we would be broad
and to look at issues beyond just the technical code quality
into how would the project move ahead, and continue, and
those kinds of things.

And then there was times where DF AS seemed that
they only wanted to have us look and work on a code audit.
Well, if you want the truth as to the quality of the code, you
also have to look at how it was developed, and how the teams
work together, and how the government was managing it, and
a bunch of other things, especially if you are going to ask the
question what do I do with this ....

[T]here was some attempt to restrict access to talking
to AEON folks, and when we do an ITA, we typically will try
to talk with the government folks, as well as the development
contractor, because you have to get a total picture of what is
gomg on.

[The restriction on access to individuals and
documents] is probably where we started to have some [of]
our own concerns about this particular [ITA].

(Tr. 7/1168-70)

110. On 22-24 May 2007 CM/SEI conducted 21 staff interviews and began
artifact (i.e. documentation, database design, source code, etc.) review and analysis
(app. supp. R4, tabs 240, 258 at 2; tr. 7/1179-80, 1236-39).

Interviews were conducted with AP Operations and DCMA
testers, TSO and DCMA technical personnel, PMO and AEon
personnel. SEI was provided with requested artifacts, to
include copies of the MOCAS As-Is and AEon's rehosted
code. Their plan is to perform artifact and code review and

122
 analysis over the next several weeks with a proposed report
date of30 June 2007.

(App. supp. R4, tab 255) Neither CO Gladski nor CO Gomolak were interviewed nor
otherwise contacted by CM/SEI in the course of its performance of the ITA (app. supp.
R4, tab 242; tr. 2/303-04, 326-27, 711171).

111. On 25 May 2007 the government issued unilateral Mod. No. P00015, a stop
work order for 90 days under FAR 52.242-15 (R4, tab 3 at 926-29, tab 46). The attached
letter stated:

As indicated in our May 22, 2007, telephone
conversation, a stop-work order is a contractual mechanism
for addressing interim contractor status prior to a termination
decision.

In that same conversation, I extended an opportunity to
AEon for DF AS to consider additional matters prior to
making a termination decision.

Given the different positions concerning the reasons
for the failure to successfully complete the MoCAS Rehost
project, before making a final termination decision DF AS is
willing to meet with AEon to explore whether an outcome is
possible that avoids a protracted dispute between the parties.

(R4, tab 3 at 926-27, tab 46; tr. 1/139, 2/197-99) On 29 May 2007 AEON acknowledged
receipt of the stop work order and "accept[ ed the] offer to host a meeting to discuss the
different positions of the parties regarding the status of contract performance and the
Government's termination considerations" (R4, tab 47). The only evidence in the record
on this subject indicates that the meeting was convened but was not attended by AEON;
instead an individual characterized as a lobbyist came to the meeting in AEON's place
(tr. 2/180-81).

112. The MOCAS Rehost SEI ITA Weekly Status reported that from 11-15 June
2007:

123
 [AEON President and CEO] S.Javid contacted SEI and
offered to meet with SEI (also offered D.Overby and
J.Conerly). After her meeting, she requested to know the
nature of SEI's tasking. SEI concurred with the PMO's
direction that she has no right or need to this information and
is not to provide any information. They will comply.

(App. supp. R4, tab 255) CM/SEI's Foreman testified that whether or not the contents of
an ITA are shared with a contractor is entirely the decision of the agency who engaged
CM/SEI's services.

When we do an [ITA] the out-brief goes to the sponsor. It
does not go to the contractor or anybody else that is involved.
It only goes to the sponsor because they are the ones that paid
for it.

.. .I think that everybody kind of knows that the rules
are that we are not going to show the out-brief to the
contractor, unless the sponsor asks for the contractor to be
there.

(Tr. 7/1173-74)

113. On 18 June 2007 the PMO determined that AEON's responses to the
government's concerns were inadequate, that AEON had demonstrated its inability to
deliver the contractually-required Rehosted MOCAS and recommended to the CO that the
contract be terminated for default (tr. 5/1104-07; R4, tab 48).

114. On 16 July 2007 CM/SEI presented its ITA (dated 28 June 2007) in the form
of a slide briefing to DFAS (app. supp. R4, tabs 258, 264; tr. 7/1156, 1175-76, 1210). 37
The record contains notes (author not identified) of the briefing and states that
representatives from "MOCAS Rehost PMO, DF AS Contracting, DF AS General Council
[sic], DFAS Operations, TSO, and DCMA were in attendance" (app. supp. R4, tab 264).
CO Gomolak was in attendance at the briefing (tr. 2/327-29, 353). CO Gladski testified
he was not aware of, nor present for, the briefing by CM/SEI (tr. 1/143, 2/168-76;
app. supp. R4, tab 272). However, the record establishes that CO Gladski was aware of
the existence of the CM/SEI briefing no later than 19 July 2007 when he requested a

37
Mr. Foreman testified that a few days before this briefing CM/SEI did an out-brief
"for an executive committee" ofDFAS in Washington, DC (tr. 7/1176, 1208-09).

124
"soft" copy; he was informed by COR Hecker at that time that the PMO did not have one
and that the PMO had "rejected the content" of the briefing and had asked CM/SEI to
redo the briefing without the programmatic, as opposed to the technical, findings
(app. supp. R4, tabs 272, 283). According to the PMO:

The goal of the [Rehost] program was to simply get MOCAS
on a platform that was maintainable, THEN, enhancements
could be incrementally introduced by [the government
workforce] [see finding 2]. Judgments on why DoD chose
this path [were] not within the scope of our SOW [with
CM/SEI].

(App. supp. R4, tab 283 at 3) CM/SEI declined to amend its briefing as it considered
both technical and programmatic findings inherent in its ITA process (app. supp. R4,
tab 283; tr. 7/1220-22, 1232-34). In its ITA, CM/SEI assumed that DFAS would continue
the MOCAS rehost project "in some form" (app. supp. R4, tab 258 at 6-7, 21-28, 31),
however, from our review of CM/SEI's findings and recommendations it is apparent that
CM/SEI believed that the approach to the project going forward should be significantly
different from the approach taken in the existing contract. In particular, CM/SEI stated
repeatedly that it believed the government should "follow a risk-managed modernization
approach to upgrade MOCAS," that included significant involvement by the government
throughout the process, rather than the incremental re-host approach taken in the existing
contract (app. supp. R4, tab 258 at 30, tab 264 at 1). In CM/SEI's opinion the hands-off
approach taken by the government created a lack of collaboration/cooperation in the
creation of the Rehosted MOCAS and, because of this position taken by CM/SEI, it stated
that the government contributed to the "current ... mess" (app. supp. R4, tab 258 at 30;
tr. 7/1205-06, 1211-15). We find that CM/SEI's technical findings and recommendations
regarding whether the Rehosted MOCAS delivered by AEON met contract requirements
is relevant. However, we find that CM/SEI's recommended programmatic collaborative
approach was very different from the rehost contract and fixed-price, hands-off approach
the government had specifically decided to take in the existing contract and the approach
that AEON specifically proposed to accept based on what it presented as its experience
with exactly the work and terms contained in the contract as awarded (findings 7-8). We
therefore find that CM/SEI's recommendations of a different approach going forward are
irrelevant to our determination of whether AEON was in default of the terms of the
contract it executed and which is now at issue.

115. CM/SEI found in its summary that neither the As-Is MOCAS (referred to as
the "Legacy System") nor AEON's Rehosted MOCAS were "ready to move into the 21 51
century" (app. supp. R4, tab 258 at 30). The summary included the following chart
showing how the As-Is MOCAS compared to AEON's Rehosted MOCAS and how both

125
systems compared to the average of 70 systems previously tested by CM/SEI using its
SQAI tool:

~,....

am8ir~
... 11 . . . .
A'llAlllt .............. ............
hdilr
cm·•q 65..5'1. M.O'I. 24..0%

.......,
lld!paldl!ID!

~
71lA'lo
l:l.3'ti
..7..5'1.
13.,5,;,

33.0'I.
7.0'll.
G.S'lt
...O'll.
12.0'll.
51!1FD1!5Qiplil BIE!515 65..7'1. 16,5,; 27.0'll.
Jmlliily Caflol 53.3' 20.,5,; X.O'll.
Ol!5i!Pt Sinpli;il)' 95..n. '2.5,; SZ.O"A.
_ . , Allillllllll
llllilllilillillliliil/ 6!l1'1o 225,; 32..0"A.
E'l'lllWilDilily 72.4'1. 16.,5,; 35.0'll.
POdillililr 71.5'1. 16,5,; 35.5%
Dl!!ScliplH mess ~ 16.5'1. ,~

(App. supp. R4, tab 258 at 31; tr. 7/1204-05) The summary further stated in response to
the government's specific requests when engaging CM/SEI (finding 94):

Determine whether the MOCAS re-host project is salvageable
and maintainable

• Portions of the re-host project may be
salvageable but this is not recommended

• The re-host project is not maintainable

Determine if the MOCAS re-host project code is adequately
functional and usable

• The current re-host configuration renders it
unusable due to the differences between the
legacy (hierarchical) database and the new
relational database

• This renders the re-host system non-functional
in its present form

126
 Identify areas of the system that may need re-work

• Re-host code naming conventions, data element
usage, displays, error handling, and return code
errors require Government intervention to
resolve issues in system

• A new Integrated Product Team (IPT) should be
created

Determine resources appropriate for completing the MOCAS
re-host project and the difficulties that may be encountered

• Depends on the modernization approach used
and available human and financial resources

• Resources should include IPT members, such as
stakeholders, government and developer
contractors

• Improved program office insight and oversight

Estimate how long it will take to complete the MOCAS
re-host project

• Dependent on the Program Office following
recommended technical approach

• Rough estimates show between 24 and 36
months to achieve a transitioned, operational
system

• Create a Program Objective Memorandum
(DoD PPBS) for out-year funding and
continuing modernization

(App. supp. R4, tab 258 at 29-30; tr. 7/1241-44) Project Manager Castrillo testified:

127
 [I]t was mainly a tutorial how it could have been done better .

... [W]e were looking at where do we go from here
more so than where had we been, and it didn't really give us
any, you know, where do we go from here .... To me it was
unfortunately just a bunch of interviews and somebody's
opinion as to how things could have been done differently.

I don't think it added much value, I mean it didn't
really add any value .

.. .I didn't ask for a program management review, I
asked for a technical review.

(Tr. 511108-10, 1114, 1120-21) The record contains notes from the CM/SEI briefing,
apparently authored by unidentified government personnel, stating:

~ Key observations made by SEI:
• Rehost was not built on a mirror image of Production,
limiting AEon' s capability to perform integration
testing. The PMO commented on the fact that AEon
had control over the configuration of the development
environment and could have created the appropriate
environment.
• AEon did not due [sic] an adequate job of code testing
and integration testing at the code level (i.e. between
programs).
• AEon' s test scripts were inadequate.
• Testing was schedule driven and not event completion
driven.
• There was a lack of exit criteria for each phase. DF AS
noted that the contract was event driven and that AEon
defined the exit criteria. For each Milestone, AEon
certified that they had completed all tasks required.
This included a certification that the system was ready

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 to enter into GT &E. The Government could not
validate AEon's certification until they went into
GT&E.
• AEon did not utilize the As-Is to get to know the
system and fully build an automated test.

---. [CM/SEI's] Recommendation
• [CM/SEI] recommends that Rehost be scrapped
and the project restarted from scratch.
• Outdated Documentation was sited [sic] as a
Programmatic Issue. Documentation should have been
done first and reviewed to ensure it met the
Stakeholders needs. If done in this sequence the
project may have been more successful. [CM/SEI]
recommends that if the project is redone, Legacy
Documentation should be created first. Data flow,
functional flow diagrams would be used to ensure it is
recreated on Rehost system. The PMO commented
that AEon indicated that this information could have
been extracted using their conversion tool.
• [CM/SEI] commented that Increment 2 of their
approach would give you more bang for the buck. The
[first] increment would rehost on a new platform, with
some improvements (e.g. normalization) made.
• SMEs need to be involved in developing the automated
testing.

---. [CM/SEI] indicated that it was possible to continue with
the current Rehost code. However, it would require an
extensive evaluation and they could not comment on how
long it would take.

(App. supp. R4, tab 264) (Received in evidence without objection).

Although the information provided in the slides is interesting,
it does not show a true assessment of our options. Instead of
indicating why we should not continue (i.e. risks), they simply
indicate that we should start over.

129
(App. supp. R4, tab 275) We find CM/SEI's recommended different approach going
forward to be of little help in our consideration of whether the Rehosted MOCAS
delivered by AEON met the terms of the contract it executed (app. supp. R4, tab 258,
see also app. supp. R4, tab 264).

D. Termination for Default and Appeal

116. On 7 August 2007 CO Gladski prepared a Determination & Finding (D&F)
in which he reduced to writing his analysis of FAR 49.402-3(f) factors and his ultimate
decision to terminate the contract for default (supp. R4, tab 120; tr. 11140-42, 2/292-99).
CO Gladski testified he did not consider anything from CM/SEI in reaching his decision
to terminate the contract because he never received a report from them 38 and the stop
work order was going to expire on 23 August 2007 (tr. 11143, 21166-83; findings 111,
114).

117. On 9 August 2007 CO Gladski issued Mod. No. POOO 16 which terminated
the contract for default under FAR 52.249-8, DEFAULT (FIXED-PRICE SUPPLY AND
SERVICE) (R4, tab 3 at 930-35, tab 49; tr. 1140-41, 143-45, 2/164-65).

The contract's amended delivery schedule ... required
completion of performance through payment event 6 by
September 25, 2006, to be followed by a 90-day User
Acceptance I [GT &E] period .

... DFAS has paid AEon in full the contract's liquidated
performance based payment amounts that AEon would be
entitled to for acceptable performance by and through
payment event 6 code conversion, documentation and
functionality testing events. However, the software converted
by AEon failed to pass User Acceptance I GT&E during
payment event 7, and AEon failed to adequately correct or
cure all of the deficiencies identified in the DF AS Cure
Notice. Those failures lead to this default termination ....

38
We note that the last information CO Gladski had, according to the record before us,
was that the PMO had rejected the content of the 28 June 2007 CM/SEI report and
requested an amended briefing with just the technical findings and
recommendations (finding 114).

130
 Default termination is justified and appropriate because the
rehosted MOCAS failed payment event 7 GT&E user
acceptance testing due to clear lack of requisite functionality
in critical areas. Under this fixed priced contract, the
Government is not required to authorize or fund continued
performance under payment event 7, nor is it appropriate to
authorize initiation of payment event 8 performance.
Performance-based payments through payment event 6 have
been liquidated.

I conclude that the performance failure was not beyond the
control or without AEon's fault or negligence. Default under
event 7 is the determinative issue. AEon has received
liquidated payments for performance through payment
event 6 ....

After thoughtful consideration of all of the pertinent facts in
conjunction with FAR 49.402-3(f), I, the undersigned
Contracting Officer, hereby find and determine that AEon has
failed to complete the requirements of the MOCAS Rehost
contract within the time required by the terms of the contract,
failed to successfully cure some items identified in my Cure
Notice, and that AEon failed to deliver a Rehosted MOCAS
database with the requisite functionality of the MOCAS
"as-is" database as prescribed by the SOW.

(R4, tab 49, iii! 2, 3, 9-11; tr. 2/184-86) At the time of the termination for default by
CO Gladski, the government had approved AEON's performance-based progress
payments in the amount of$12,905,117.22 39 (R4, tab 49; tr. 1/153-54; finding 21).
CO Gladski further testified that the performance-based progress payment
events/milestones were not subCLINs of CLIN 00001 and that, upon AEON's failure to
deliver the contractually required CLIN 00001, the previously liquidated progress
payments became unliquidated:

If the contractor failed to deliver, then any of those
previous items that I had liquidated, after obtaining legal
counsel on this, determined that it didn't matter.

39
The parties do not dispute the amount paid to AEON under the contract.

131
 That I would be entitled to recover that if the
contractor failed to deliver the full system because I was
accepting the CLIN on a whole, and not on a piece basis.

(Tr. 11146, 154-56) As of the close of the record before us there had been no
reprocurement of the MOCAS Rehost project and the existing As-Is MOCAS was still in
use (tr. 2/232-33, 310, 4/687).

118. In a letter dated 13 August 2007 AEON filed its notice of appeal from the
termination for default which was docketed as ASBCA No. 56142 (R4, tab 50).

119. On 9 November 2007, three months after the termination for default,
CO Gladski issued a second final decision in which he stated:

2. The contract provided for performance-based payments
under "Performance-Based Payments," FAR 52.232-32 (FEB
2002). In the event of default, the contractor is obligated to
repay payments that were not liquidated based on conforming
delivery item performance. Under this contract, all
performance based payments were made on a whole contract
basis. FAR 52.232-32( d).

3. DFAS has not been delivered a workable rehosted
MOCAS System that contains the same functionality of the
present MOCAS System. I have determined that, AEon did
not successfully complete contract work defined by
CLIN 0001 for which they received payments identified in
events #I through #7 as delineated in contract
HQ0423-04-C-0003. There has been no acceptance of
CLIN 0001. Therefore, demand is hereby made upon The
AEon Group, LLC, to pay DFAS the sum of$12,905,l 17.22
which represents all payments made to date by DF AS for
contract HQ0423-04-C-0003.

(Supp. R4, tab 122; tr. 11146-47)

120. In a letter dated 15 November 2007 AEON filed its notice of appeal from the
government's demand for repayment of alleged unliquidated performance payments
which was docketed as ASBCA No. 56251.

121. On 5 March 2009 AEON submitted its REA No. 3 in which it sought
compensation in the amount of $1,531,701 for government-caused delays to its

132
performance of contract work from 29 September 2006 through 25 May 2007 (app. supp.
R4, tab 285). There is no indication in the record that the government provided any sort
of response to REA No. 3 and it is not before us in these appeals.

122. During the government's case-in-chief, counsel for appellant promised that
the testimony of various witnesses would be offered in its own case-in-chief to rebut
certain of the government's evidence. However, appellant offered no testimony from any
individual involved in the preparation of AEON's proposal or AEON's performance of
the contract (tr. 6/1139). The single witness offered by AEON in its case-in-chief was
CM/SEI's Foreman, the head of the CM/SEI ITA team involved after all performance by
AEON had stopped and who had no first-hand knowledge of anything that took place
during the actual performance of the MOCAS Rehost contract (tr. 7/1254; findings 94,
109).

DECISION

AEON appeals from the government's termination of its contract for default,
asking us to hold that the termination was not justified and to convert it to a termination
for the convenience of the government (ASBCA No. 56142). AEON further requests
that, even if we uphold the termination for default, we find the government is not entitled
to the return of performance-based payments made to AEON in the amount of
$12,905,117.23 (ASBCA No. 56251).

I. ASBCA No. 56142-Termination for Default

A termination for default is a type of forfeiture and is strictly construed. Lisbon
Contractors, Inc. v. United States, 828 F.2d 759, 764 (Fed. Cir. 1987). The government
bears the burden of proving that its termination of AEON's contract was justified under
the terms of the contract. Ensil International Corp., ASBCA Nos. 57297, 57445, 12-1
BCA if 34,942 at 171,800. If the government has met its burden, the contractor has the
burden of going forward to prove any allegations that its default was due to causes
beyond its control or without its fault or negligence. ADT Construction Group, Inc.,
ASBCA No. 55358, 13 BCA if 35,307 at 173,309.

A. Grounds for Termination for Default

The Default clause of the contract, FAR 52.249-8, FIXED-PRICE SUPPLY AND
SERVICE (APR 1984), establishes the possible grounds for a termination for default which
include failure to deliver by the contractual due date and failure to make progress so as to
endanger timely performance (finding 25). In the 9 August 2007 termination for default,
CO Gladski articulated the following reasons' for the termination:

133
 After thoughtful consideration of all of the pertinent facts in
conjunction with FAR 49.402-3(f), I, the undersigned
Contracting Officer, hereby find and determine that AEon has
failed to complete the requirements of the MOCAS Rehost
contract within the time required by the terms of the contract,
failed to successfully cure some items identified in my Cure
Notice, and that AEon failed to deliver a Rehosted MOCAS
database with the requisite functionality of the MOCAS
"as-is" database as prescribed by the SOW.

(Finding 117) In a second final decision dated 9 November 2007, CO Gladski restated
his determination that AEON had failed to deliver a contractually-compliant Rehosted
MOCAS by the contract delivery date and further demanded that AEON return
$12,905, 117 .22 in what he determined to be unliquidated performance-based payments
(finding 119).

AEON argues that the government has failed to meet its burden of proof as to the
grounds for the termination for default which were articulated in the CO's final decisions
and, further, that we cannot consider grounds other than those specifically articulated in
the final decisions (app. br. at 5, 49-53). We find AEON's argument that we may not
consider the government's allegedly later-articulated basis of failure to make progress to
be unavailing for two reasons. First, while the CO's final decisions do not specifically
use the term "failure to make progress," they do specifically cite FAR 52.249-8 as the
authority under which the termination was made. That clause includes both failure to
meet the contract's delivery date and failure to make progress so as to endanger timely
performance. Further, the CO's final decision terminating the contract for default
specifically articulated that a basis for the default was AEON's failure to "successfully
cure some items identified in my [22 March 2007] Cure Notice" (findings 95, 117). A
Cure Notice is only required to be issued prior to a termination for failure to make
progress. FAR 52.249-6(a)(2). It is not required prior to a termination for failure to make
timely delivery. Further, the express language of the Cure Notice states:

If, at the end of the GT &E period, AEon still has failed to
deliver a code which meets the functionality requirements
contained in the SOW, the Government will have "failure to
deliver" as an additional ground for termination for default.

(Finding 95) (Emphasis added) Clearly, the Cure Notice put AEON on notice that the
government was considering two bases for termination for default: failure to make
progress and failure to deliver by the contractual delivery date.

134
 Second, even if the government had not articulated two bases for default
termination, it is well-established that an unarticulated basis that is supported by the
totality of the circumstances existing at the time of the termination is valid.

Our decisions have consistently approved default
terminations where the contracting officer's ground for
termination was not sustainable if there was another existing
ground for a default termination, regardless of whether that
ground was known to the contracting officer at the time of the
termination. See, e.g., Kelso v. Kirk Bros. Mech. Contractors,
Inc., 16 F.3d 1173, 1175 (Fed. Cir. 1994) ("This court
sustains a default termination if justified by the circumstances
at the time of termination, regardless of whether the
Government originally removed the contractor for another
reason."); Joseph Morton Co. v. United States, 757 F.2d 1273,
1277 (Fed. Cir. 1985); Pots Unlimited, Ltd. v. United States,
220 Ct.Cl. 405, 600 F.2d 790, 793 (1979) ("[I]t is settled law
that a party can justify a termination if there existed at the
time an adequate cause, even ifthen unknown."). Thus, the
subjective knowledge of the contracting officer .. .is irrelevant,
and the government is not required to establish that the
contracting officer conducted the analysis necessary to sustain
a default under the alternative theory.

Empire Energy Management Systems, Inc. v. Roche, 362 F.3d 1343, 1357 (Fed. Cir.
2004 ). We will therefore consider the totality of the circumstances existing at the time of
the termination in reaching our determination of whether the termination of the MOCAS
Rehost contract for default was justified.

The express contract terms unambiguously require that delivery of CLIN 0001,
Rehost MOCAS System, began when AEON presented the Rehosted MOCAS system to
the government for 90 days of GT&E functionality testing and that delivery was not
complete until the end of the second 90-day GT&E period in which the Rehosted
MOCAS was put into production and passed the government's production testing.
Thereafter, the government had 30 days to accept or reject the Rehosted MOCAS that had
been delivered (findings 17, 18). 40 The contract also expressly provided that: "At any
time prior to final acceptance, any discrepancy between the functionality of the rehosted
MOCAS and the as-is MOCAS, or any other failure to meet the requirements of this
solicitation, may be a basis for rejection" (finding 18) (emphasis added). The parties

°CLIN 0003, Repairs, was never exercised (finding 10) so any time allotted to it in the
4

contract is irrelevant to the matters before us.

135
disagree as to the level of completion of the Rehosted MOCAS that was required to be
delivered at the beginning of GT &E and what was to take place thereafter.

The government takes the position that, while it expected minor issues of a
"cosmetic" (finding 78) nature to arise during GT &E functionality testing, AEON was
required to deliver for GT&E the Rehosted MOCAS, fully tested and certified by AEON
as fully compliant with the contract requirement of 100% functionality, i.e. that the
Rehosted MOCAS delivered for GT&E was to perform exactly like the existing As-Is
MOCAS (findings 2, 14-15, 55, 71, 86). The record reflects that, at the time it delivered
the Rehosted MOCAS for GT&E, AEON certified it to be a Rehosted MOCAS fully
compliant with the contract requirements (findings 77, 89, 93, 115). The government
contends that, contrary to AEON's certification, the Rehosted MOCAS delivered for
GT &E did not perform exactly like the As-Is MOCAS as defined in the contract
(finding 14).

AEON disagrees with the government as to what was required by the contract to
be delivered for GT&E. First, despite its written words of certification to compliance
with the contract definition of 100% functionality, AEON seized upon its own
non-contractual definition of 100% functionality, its counsel even claiming the contract
did not define functionality (finding 87). By its own non-contractual definition, AEON
argues that the Rehosted MOCAS delivered by AEON for GT&E was 100% functional
because the system contained every function category. AEON posits that the presence of
a function is all that is required, arguing that there could not be defects in a function if the
function did not exist in the system, and that whether a function actually worked is
irrelevant (findings 85, 87). The government in its brief analogized AEON's definition of
"100% functionality" as follows:

[By AEON's definition], the system did not have to
"function" at all. All the parts just had to be present. So, for
instance, if the Government had been purchasing an
automobile instead of a rehosted MOCAS, it would have
"100% functionality" if all of its parts were present, engine,
drive train, frame and body, even if it could not start or drive.
If a test were performed and indicated the pistons were there
but could not be made to go up and down, in accordance with
Appellant's arguments, the automobile would still have
"100% functionality."

(Gov't hr. at 90)

In direct contrast to appellant's arguments in this regard, the contract includes, as
did the Solicitation before it, a lengthy definition of the functionality the Rehosted

136
MOCAS was to possess in order to meet contractual requirements. The contractual
definition clearly expresses that the Rehosted MOCAS was to perform exactly like the
As-Is MOCAS in every way possible and we have so found. (Finding 14) Further, the
record contains ample evidence that AEON understood that this was the definition of
functionality to which it was required to perform (findings 7-8, 55, 71). We find AEON's
arguments in this appeal to the contrary unpersuasive and reject them.

AEON next argues that, regardless of the definition of functionality, it is
unreasonable to find that it was required to deliver a Rehosted MOCAS with 100%
functionality at the beginning of GT &E (app. br. at 57-59). It is clear to us from the
record that GT&E was a final inspection by the governrnent of the Rehosted MOCAS to
assure that it met contract requirements by functioning exactly like the As-Is MOCAS
before the system was rolled out and put into production for world-wide use by DF AS,
DCMA and other governrnent agencies (see, e.g., findings 4, 5, 18, 79, 100, 101, 106). It
follows logically that the Rehosted MOCAS delivered at the beginning of GT &E was to
be AEON's final product which was certified by it to fully meet contract requirements.
Further supporting the interpretation that the delivered Rehosted MOCAS was to perform
at 100% functionality compared to the As-Is MOCAS is the contractual requirement that
the final documentation for the Rehosted MOCAS was also to be submitted at the
beginning ofGT&E (findings 2, 4, 10, 14, 15, 18, 19, 49, 52-55, 71). AEON's arguments
that the contract required it to deliver a less-than-100%-functional Rehosted MOCAS
would redefine GT &E to nothing more than a testing/QC exercise prior to AEON's
completion of the contract requirements. Pre-GT&E testing and QC were specific
contract requirements to be completed by AEON, not the governrnent, and they were to
have been completed by AEON prior to delivery of the Rehosted MOCAS. (Id.)
Submission of defective items to the governrnent for acceptance as a method of a
contractor quality control program is not an acceptable practice. Skip Kirchdorfer, Inc.,
ASBCA Nos. 32637, 35074, 91-1 BCA ~ 23,380 at 117,314, ajf'd, 944 F.2d 912
(Fed. Cir.) (table), cert. denied, 502 U.S. 1033 (1992).

On the basis of the foregoing, we hold that the Rehosted MOCAS delivered for
GT&E was required by the express contract terms to be fully tested and certified by
AEON to meet contract requirements, including the contract requirement for
100% functionality such that the Rehosted MOCAS delivered for GT &E by AEON was
to perform exactly like the As-Is MOCAS, no better and no worse.

AEON delivered the Rehosted MOCAS to the government for GT&E twice: once
in October 2006; and, again in January 2007. On 22 September 2006, just before its
initial delivery of the Rehosted MOCAS for GT&E, AEON's "final" PMP stated
AEON's understanding and intent that the Rehosted MOCAS:

137
 [W]ill have all the functionality, produce the same output and
will look, feel and respond to the users exactly as it does
today. Therefore the users will not recognize that the system
has been touched. In addition, all interfaces will provide the
same data in the same format.

(Finding 71) (Emphasis added) On 23 October 2006 AEON delivered the Rehosted
MOCAS to the government for GT &E functionality testing and certified that the
Rehosted MOCAS met contract requirements (finding 77). As had been made known
since before contract award, the As-Is MOCAS was used as the benchmark against which
the Rehosted MOCAS was tested (finding 6). After just nine (9) days ofGT&E
functionality testing, it was apparent to the government testers, individuals from DF AS
and DCMA with many years of As-Is MOCAS experience (finding 80), that the Rehosted
MOCAS delivered by AEON did not perform like the As-Is MOCAS and GT&E was
suspended (findings 81, 82).

AEON argues that the government had no right to suspend GT &E. The
government argues that AEON was in technical default of the contract and that it would
have been justified in terminating the contract for default at that time (gov't br. at 92-93).
As we have already held, the failure of the Rehosted MOCAS to perform exactly like the
As-Is MOCAS was a failure to meet contract requirements and the contract's express
terms provided for rejection of the Rehosted MOCAS at any time between delivery and
final acceptance that it was determined it did not meet contract requirements (finding 18).

Nevertheless, the government gave AEON the opportunity to continue work on the
Rehosted MOCAS to make it perform exactly like the As-Is MOCAS. On 19 January
2007 AEON again delivered the Rehosted MOCAS to the government for GT &E
functionality testing and again certified that it met contract requirements (finding 89).
The government proceeded to continue performance of GT &E, however, the government
testers again experienced numerous failures of the Rehosted MOCAS to perform even
basic functions like the As-Is MOCAS. At the conclusion of the full 90-day GT&E
functional testing period, the government had only been able to test approximately 46% of
one database (identified as the least complex of the three databases (MOCs) contained in
the Rehosted MOCAS delivered by AEON (finding 100)) and was never able to perform
a full end-to-end test of the system (findings 89-90, 93, 95, 97-102). On this basis, we
find unpersuasive AEON' s argument that the number of defects identified at the end of
the GT&E period was evidence of the functionality of the entire Rehosted MOCAS
(app. br. at 59-65). CO Gladski issued the 25 April 2007 Show Cause Notice advising
AEON that it had "failed to perform ... within the time prescribed" and that, as of 11 April
2007, the end of the 90-day GT&E functionality testing period, the Rehosted MOCAS
database "still does not perform significant basic system functionalities" (finding 104).
The independent evaluation of the Rehosted MOCAS performed by CM/SEI after the

138
Show Cause Notice confirmed that the delivered Rehosted MOCAS was not functional,
was not maintainable and was "unusable" (finding 115).

AEON also argues that CO Gladski's decision to terminate the contract was
arbitrary and capricious because he did not specifically consider the CM/SEI report
(findings 114-16; app. br. at 4-5). As we stated above, in reaching our decision as to the
propriety of the termination for default we consider the totality of the circumstances
existing at the time of the termination, whether the CO had subjective knowledge of them
or not. In this regard:

[W]e are less concerned about the label of the contracting
officer's action so long as, in fulfilling his duty, the
contracting officer exercised reasoned judgment and did not
act arbitrarily ....

"[A] court's review of a default justification does not turn on
the contracting officer's subjective beliefs, but rather requires
an objective inquiry." McDonnell Douglas XII, 323 F.3d at
1016. In this regard, the facts in the record are sufficient for
the court, in a de novo review, to sustain the default
termination. See Joseph Morton Co. v. United States, 757
F.2d 1273, 1277 (Fed. Cir. 1985) ("It is settled law that a
party can justify a termination if there existed at the time an
adequate cause, even ifthen unknown.").

McDonnell Douglas Corp. v. United States, 567 F.3d 1340, 1354-55 (Fed. Cir. 2009).
The record before us amply supports the government's decision to terminate the contract
on the ground that AEON failed to deliver a Rehosted MOCAS that met contract
requirements and we find no evidence to support appellant's allegation that the decision
was arbitrary and capricious.

On the basis of the foregoing we find that AEON's failure to deliver for GT&E a
Rehosted MOCAS that met contract requirements to perform 100% of the functionality of
the As-Is MOCAS constituted a failure to make timely delivery under the contract and we
find that the termination of the contract for default was justified on this basis.
DayDanyon Corporation, ASBCA No. 57611 et al., 14-1BCAiJ35,507
(no contract-compliant delivery by the due date is primafacie evidence of default). We,
therefore, need not reach the additional basis of termination for default for failure to make
progress such that timely completion was put out of AEON's reach.

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 B. AEON allegations that the default was without its fault or negligence

Having held that AEON was in default, we now tum to arguments made by AEON
in support of its allegation that its default was excused because it was without AEON's
fault or negligence (app. br. at 65; FAR 52.249-8(c)). Appellant has the burden of
proving that its default was actually caused by its alleged excuses. Beekman
Industries, Inc., ASBCA No. 30280, 87-3 BCA ~ 20,118.

1. Defective Specifications

AEON argues that it conducted "adequate," "robust and time-consuming testing"
and that there is no evidence that it did otherwise. Yet, it also claims the opposite: that it
was unable to do adequate testing due to defective specifications. (App. br. at 53-55,
66-69 41 ) The record does not support appellant's allegations on either count.

The government expressed its concerns that the failure of the Rehosted MOCAS to
perform exactly like the As-Is MOCAS was apparently due to inadequate
contractually-required testing on AEON's part (findings 47, 81, 93, 108; gov't br. at
65-68). We understand the government's argument to be that, had AEON actually done
the testing it claims to have done, AEON should have discovered the same problems
during its QA/Test that the government discovered during GT&E; problems that AEON
then should have corrected before delivering the Rehosted MOCAS for GT&E and
certifying that it met the contract requirement of 100% functionality. We note that
nowhere in the record before us does AEON claim, much less actually demonstrate, that
the problems discovered by the government during GT &E did not occur when AEON
performed its own tests. We must conclude then that, for the depth and breadth of
problems encountered in GT &E to have occurred as demonstrated in the record before us,
AEON either did not adequately test the Rehosted MOCAS before delivering it or it
tested it, experienced problems and, desperate for payment (discussed further below),
certified and delivered it for GT &E anyway.

Further, contrary to its argument in this appeal (app. br. at 56), the
contemporaneous record shows that when AEON made the internal decision to no longer
perform unit testing in June 2005, all indications are that it did so to make up for the
extended time taken to convert the code after the TMGi tool failed to perform as
anticipated (findings 46, 47, 57, 59). It did not notify the government at that time that it
was no longer doing the unit testing which was required by the contract (findings 16, 21,
41, 49, 56) and included by AEON in its own PMP (finding 55). Only later, after
requesting an extension of time within which to complete its contractually-required

41
We note that AEON's arguments in this portion of its brief contain relatively sparse
supporting citations to the record.

140
QA/Test and responding to the government's query as to the reason for the extension, did
AEON take its current position that unit testing was impossible without detailed design
specs (app. br. at 55). We find this to be in direct contrast to AEON's own demonstrated
understanding on 9 November 2005 when it stated in writing to the government that:

For conversion projects such as MOCAS Rehost there usually
are no business or systems requirements and no design or
program specifications. Further, the programs are partially or
fully converted using a tool.

(Supp. R4, tab 68 at 2) (Emphasis added) Even though AEON expressed its
understanding in writing that it was not usual to have design or program specifications in
a project such as this one, in the case of the Rehosted MOCAS contract, AEON was
provided with a copy of the full As-Is MOCAS, including the full production data
existing at the point in time the copy was made, as well as a discovery period so AEON
could determine the specific functionality of the As-Is MOCAS in order to replicate it in
the Rehosted MOCAS. The specification information AEON now claims was missing
was exactly the information that AEON proposed, and the contract required and paid
AEON, to discern in the discovery period of the contract (findings 6, 12, 21, 31-35, 108).

We have considered the following: (1) AEON's own expressed understanding in
projects such as this that the specifications it now claims were missing were not usually
provided, nor apparently were they needed where a conversion tool was used like AEON
proposed to and did use here; (2) that AEON was provided with a full copy of the As-Is
MOCAS and given time and compensation to fully explore it (findings 3, 10, 12, 14); and,
(3) that both AEON (for its QA/Test (findings 16, 55)) and the government (for GT&E
(finding 6)) intended to use the As-Is MOCAS as the "benchmark" against which the
Rehosted MOCAS would be tested. We find no support for AEON' s argument that
performing the contractually-required testing was impossible due to defective
specifications.

2. Superior Knowledge

AEON argues that the government possessed two categories of information
essential to AEON's performance of the contract work that it did not provide to AEON:
documentation in the form of detailed existing specifications; and, the government's test
plans (app. br. at 69-70). In order to prevail on a claim of superior knowledge AEON
must prove the following elements:

( 1) [It undertook] to perform without vital knowledge of a
fact that affects performance costs or duration, (2) the
government was aware [it] had no knowledge of and had no

141
 reason to obtain such information, (3) any contract
specification supplied misled [it] or did not put it on notice to
inquire, and (4) the government failed to provide the relevant
information.

CAE USA, Inc., ASBCA No. 58006, 13 BCA ii 35,323 at 173,390.

With respect to the first category of alleged superior knowledge (documentation in
the form of detailed existing specifications), AEON cites to the testimony of John Sharer
that he had been "creating design specification changes on a regular basis for 25 years,"
from which AEON implies that the government possessed detailed specifications for the
As-Is MOCAS and knowingly withheld such specifications as part of the documentation
of the As-Is MOCAS misleading AEON as to their existence (app. br. at 69). AEON's
argument fails to mention, however, that immediately after the testimony it cited,
Mr. Sharer continued upon cross-examination by AEON counsel:

Q And you have an understanding then that the
detailed specification for MOCAS are current?

A No, the paperwork is not current, the paperwork
for MOCAS is not current. The system is basically over 40
years old, and during that time a lot of the changes that were
made and everything, the paperwork on them were lost.

Q Right, you understand that DF AS does the best
job it can to update its baseline specification, correct?

A As we make changes we try to baseline what
changes we are making, but no, as I am right now we do not
have a good set of baseline documentation for the whole
MOCAS system.

(Tr. 5/984) Mr. Sharer's testimony is consistent with the record evidence of repeated
representations made by the government in the solicitation, contract and during contract
performance that the existing documentation for the As-Is MOCAS was incomplete
(findings 1, 5, 12, 14, 15), that all documentation in the government's possession was
provided to AEON (finding 12), and that AEON understood these conditions and based
its proposal upon them (findings 7-8). The fact of incomplete/poor existing
documentation was why the government provided, at significant expense, a full
production copy of the As-Is MOCAS to AEON (finding 3), paid AEON to perform
significant discovery of the As-Is MOCAS (findings 10, 12), and paid AEON to provide
documentation for the Rehosted MOCAS (findings 10, 19). We find ample support in the

142
record that AEON was aware at the time of its proposal that the existing documentation
of the As-Is MOCAS was not something that could be relied upon (findings 7-8). In
Bruce E. Zoeller, ASBCA No. 56578, 13 BCA i! 35,353 at 173,521-22, we held that,
where the contractor was aware of the risk when it entered into the contract and where it
has "failed to show evidence that the contract specifications misled [it] or did not put [it]
on notice to inquire, as required by the superior knowledge doctrine," the contractor will
not have met its burden of proof. Likewise, we find here that AEON has not met its
burden of proof with respect to the first category of alleged superior knowledge.

The second category of superior knowledge alleged by AEON is that the
government withheld its GT &E test plans from AEON. Neither the solicitation nor the
contract stated that the test plans would be provided to AEON (finding 20). In fact,
AEON was specifically on notice that the government's test plans would not be provided
(findings 2, 6). Rather, the contract required AEON to perform its own QA/Test and to
develop its own test plan and test scripts (finding 16). AEON proposed to do so with the
knowledge that the government's test plans would not be provided (findings 7-8). We
therefore find that the government's test plans were not vital knowledge necessary to
AEON's performance of the contract work and, therefore, AEON has not met its burden
of proof with respect to the second category of alleged superior knowledge.

3. Lack of Good Faith and Fair Dealing

Both parties to a contract have a duty of good faith and fair dealing that neither
will conduct themselves in a way that will hinder or delay the contractual performance of
the other and failure to fulfill that duty constitutes a breach of contract. Metcalf
Construction Co. v. United States, 742 F.3d 984, 991 (Fed. Cir. 2014). However, the
implied duty may not "expand a party's contractual duties beyond those in the express
contract or create duties inconsistent with the contract's provisions." Id.

AEON alleges that the government failed to meet its duty of good faith and fair
dealing in several respects: (1) the government did not provide subject matter experts
(SMEs) to assist AEON; (2) the government's suspension ofGT&E resulted in financial
hardship for AEON; (3) DCMA was not involved in the contract until GT&E; (4) the
government allegedly "reneged on its agreement to restart GT&E" as quickly as AEON
wanted; (5) the government "violated" its GT &E test plans by not meeting with AEON
regularly during GT&E; ( 6) the government failed to provide to AEON an alleged list of
"what works" in the Rehosted MOCAS; and, (7) the CM/SEI report found that the lack of
a collaborative approach by the government had contributed to AEON' s failure to deliver
a contractually-compliant Rehosted MOCAS (app. br. at 70-76).

Allegations (1) and (3)-AEON's post-hearing brief opens with counsel's
accusation that the government "[p]reyed on the inexperience and un-sophistication of

143
a small business performing its first federal Government contract" (app. br. at 1).
However, in its proposal AEON held itself out as very experienced in exactly the kind of
work sought to be performed under this contract and listed 11 previous contracts, six in
detail, including several performed for DFAS (finding 7). Later in contract performance,
AEON stated that its employees/subcontractors had more depth of understanding of the
MOCAS system than DFAS' own TSO (finding 72). Nevertheless, AEON now
complains that the government breached its duty of good faith and fair dealing by not
providing AEON with SMEs, especially DCMA SMEs, during contract performance.
The record shows, however, that AEON and all other prospective bidders were put on
notice that they would not have SMEs available to assist in performance of the contract
(finding 6) and neither the solicitation nor the contract contain any representation
otherwise. AEON's proposal demonstrated its understanding of this fact, analyzed the
risk and included "several million dollars" in its proposal to cover this and other risks it
had identified. AEON's proposal also specifically stated that it believed it had made
staffing decisions that further minimized this risk. (Finding 8)

Allegations (2) and (4}-AEON claims that the government's suspension of
GT &E created financial hardship for it. The first instance of financial difficulty reflected
in the record is in the spring of 2006 when AEON missed a payroll and was not paying its
subcontractors (finding 62). This was approximately six months before GT&E was
started in October 2006 and certainly before GT &E was suspended in November 2006.
The weight of the record indicates that AEON's financial troubles originated when its
TMGi conversion tool proved to not perform as planned, which impacted AEON's
scheduled performance and delayed conversion of the code and unit testing which had a
domino effect on later performance milestones and payment events which followed
conversion (findings 30, 43, 57). AEON proposed the eight performance-based payment
events to provide it with a payment of 12.5% of the contract price for CLIN 0001 (or
$1,856, 164.50) approximately once every quarter throughout the original two-year
performance period. AEON was originally scheduled to complete Payment Event 6
(code conversion and unit testing) and receive payment at the end of the 5th quarter of
performance (approximately July 2005). (Finding 21) However, the record shows that,
because of the TMGi issues and related delays, the tasks associated with Payment Event 6
took almost two years and were not reported complete until 11 October 2006 (findings 30,
41-49, 59). The government was not responsible for the TMGi issues and the first time
AEON notified the government that AEON's schedule was slipping was in October 2005
(finding 45). The delays associated with the code conversion and any unit testing
performed (or not performed) caused AEON to be unable to report completion of
Payment Event 6. Without completion of the Milestone/Payment Event, AEON could not
seek payment for an extended period of time, during which employees and subcontractors
were not paid (findings 51, 58, 62), a situation which prompted the government several
times to agree to allow the Milestone/Payment Events to be further subdivided in order to
get funding to AEON (findings 49, 63, 65, 70). AEON first delivered the Rehosted

144
MOCAS to the government for GT&E functionality testing in October 2006, certified that
the Rehosted MOCAS met contract requirements and requested payment for Payment
Event 7A2 (finding 77). However, after just nine (9) days of GT&E functionality testing,
the government testers determined that the Rehosted MOCAS delivered by AEON had so
many significant problems that GT&E was suspended (findings 77, 81-84 ). Nevertheless,
the government gave AEON time to correct the deficiencies in the Rehosted MOCAS and
re-certify and re-deliver it when AEON determined it to be ready for GT &E to
recommence (findings 84). Upon AEON's notification of readiness in January 2007, we
find that the government took a reasonable amount of time to gather the government
testers to continue GT&E (findings 88-89). While the record shows that the government
took responsibility for 3Yz weeks of delay prior to GT &E (finding 66), the vast majority
of the many months of delay described above were attributable to AEON, not the
government.

Allegation (5}-AEON's arguments in this regard appear to us to take the position
that the GT&E process was somehow an extension of the contract's QA/Test phase to be
performed by AEON. In this context, AEON argues that the government should have
worked with AEON as a testing partner during GT&E, keeping AEON in constant
communication as to the tests run and the results on a daily basis. We disagree. AEON's
obligation under the QA/Test phase of the contract was to fully test the Rehosted
MOCAS against the As-Is MOCAS to make sure the Rehosted MOCAS functioned just
like the As-Is MOCAS. This phase was to be completed prior to AEON certifying that
the Rehosted MOCAS met the contract requirement of 100% functionality and delivering
the Rehosted MOCAS to the government for GT&E functionality testing by experienced
government users ofthe As-Is MOCAS. (Finding 16) GT&E was to be performed solely
by the government (finding 18) and we find that any testing done by the government
under GT&E was in the nature of a final inspection and was for the government's benefit,
not AEON's. Therefore, whether the government followed or did not follow its test plans
to the letter, the government had no contractual obligation or duty to AEON in that
regard. AEON had no contractual role in the GT&E process except to the extent the
government elected to make it aware of any results. We find no contractual obligation on
the part of the government to permit AEON to attempt correction during the GT&E
period of deficiencies discovered in GT&E. To the extent the government did so, we
consider it to be reasonable attempts on the government's part to mitigate the impact of
AEON's failure to provide a Rehosted MOCAS that performed exactly like the As-Is
MOCAS.

Allegation (6}-The record does not contain the "what works" document
referenced by AEON. The first mention of the possible existence of such a document was
at the hearing and there was no indication at, prior to or since the hearing that AEON
requested such a document in discovery or moved to compel the production of such a
document, if it even existed. The record contains ample evidence of significant portions

145
of the Rehosted MOCAS that did not work, resulting in a failure of the Rehosted
MOCAS to meet the contractual requirement that it perform exactly like the As-Is
MOCAS. Because the contractually-required 100% functionality was not achieved, it is
immaterial whether 5% or 50% or some other unidentified percentage less than 100% of
it did work.

Allegation (7)-We previously found that CM/SEI's programmatic
recommendations as to type of contract and conduct of contract administration were
inconsistent with the contract now before us and, therefore, irrelevant to our consideration
of the rights and obligations of the parties under the contract executed by AEON
(finding 114). The government has broad discretion in determining what type of contract
will best promote its interests. American Tel. and Tel. Co. v. United States, 307 F .3d
1374, 1379 (Fed. Cir. 2002). Here the government determined that a firm-fixed-price
contract would best suit its goals for the Rehosted MOCAS. AEON submitted a
firm-fixed-price proposal to perform the solicited work. One of the hallmarks of a
firm-fixed-price contract is that the government is not to interfere with a contractor's
performance of the contract work, particularly where there are performance specifications
(see findings 3, 47) because the method of performance is a factor in cost incurrence
which is at the contractor's risk, not the government's:

[I]n a cost-reimbursement contract, the Government retains
the right to minimize its risk by supervising closely the
contractor's performance. By performing the ... contract on a
fixed-price basis, [the contractor] avoided the costs of more
intrusive government supervision. These tradeoffs between
Government oversight and contractor autonomy are
fundamental to any agreement on price or contract type.
Moreover, unlike money, these bargained for rights are not
reallocable after performance ....

...The proper time ... to have raised the issues ... was at
the time of contract [formation], when effective remedy was
available.

American Tel. and Tel., 307 F.3d at 1381. As the Court stated in American Tel. and Tel.,
we are "not inclined to change the rules and the scoring after the game has been played."
Id.

146
 On the basis of the foregoing, we find that AEON has failed to meet its burden of
proving that its default of the contract is excused by any of its seven (7) allegations of a
lack of good faith and fair dealing by the government.

4. Alleged Failure to Upload Fixes

AEON argues that it had corrected every defect identified by the government in
GT &E, but the government failed or refused to upload the corrections to the Rehosted
MOCAS (app. br. at 76-77). The government counters that it was AEON's responsibility
to upload any corrections (gov't br. at 42) and that all corrections were loaded and tested
for several weeks after the end of the contractual GT&E period which resulted in even
more deficiencies (finding 99; gov't reply br. at 26-28). Regardless of who was
responsible for uploading corrections near the end of the GT&E period, the weight of the
evidence demonstrates that any corrections made were in response to deficiencies
identified by the government in GT&E. Since the government was only able to test
approximately 46% of the one least complex database of the three databases in the
Rehosted MOCAS, we find that any corrections late in the GT&E period would not have
changed the fact that the majority of the Rehosted MOCAS had not been able to be tested
in GT&E. We further find that there is no basis in the record before us to believe that the
untested majority of the Rehosted MOCAS would have somehow miraculously sailed
through GT&E without problems.

C. Summary

On the basis of the foregoing, we find that the government was justified in
terminating the contract for default for the failure of AEON to deliver a Rehosted
MOCAS that met contract requirements and that AEON has failed to meet its burden of
proving that its default was excused.

IL ASBCA No. 56251-DF AS Demand for Alleged Unliquidated Performance-Based
Payments

In a second final decision dated 9 November 2007, three months after the
termination for default, CO Gladski demanded repayment by AEON of all
performance-based payments paid to it under the contract in the amount of
$12,905,117.22:

2. The contract provided for performance-based payments
under "Performance-Based Payment," FAR 52.232-32 (FEB
2002). In the event of default, the contractor is obligated to
repay payments that were not liquidated based on conforming
delivery item performance. Under this contract, all

147
 performance based payments were made on a whole contract
basis. FAR 52.232-32(d).

3. DF AS has not been delivered a workable rehosted
MOCAS System that contains the same functionality of the
present MOCAS System. I have determined that, AEon did
not successfully complete contract work defined by
CLIN 0001 for which they received payments identified in
events # 1 through #7 as delineated in contract
HQ0423-04-C-0003. There has been no acceptance of
CLIN 0001. Therefore, demand is hereby made upon the
AEon Group, LLC, to pay DFAS the sum of $12,905,117.22
which represents all payments made to date by DF AS for
contract HQ0423-04-C-0003.

(Finding 119) AEON appeals from the government's demand for the return of all
performance-based payments made under the contract. The government has the burden of
proving its claim for repayment of alleged unliquidated performance-based payments.
Commissioning Solutions Global, LLC, ASBCA Nos. 57429, 57494, 13 BCA ii 35,355 at
173,527.

When a contract is terminated for default, FAR 49.402-2(a) provides that: "the
Government is not liable for the contractor's costs on undelivered work and is entitled to
the repayment of advance and progress payments, if any, applicable to that work." The
Rehosted MOCAS contract provided for advance payments in the form of
performance-based payments as proposed by AEON (finding 21). Further,
performance-based payments are the preferred method of contract financing. They are
"contract financing payments that are not payment for accepted items," and are "fully
recoverable, in the same manner as progress payments, in the event of default"
(finding 23). FAR 52.232-320) provides that "[b]ecause performance-based payments
represent the accomplishment of milestones and not the achievement of CLINs, the
Government may demand that the Contractor •repay to the Government the amount of
unliquidated-performance[-]based payments"' (app. br. at 78). What the parties dispute is
whether the performance-based payments made to AEON were liquidated or
unliquidated.

It is the government's position that none of the performance-based payments made
to AEON were liquidated because all performance-based payments were made to AEON
on a whole contract basis given that CLIN 0001, the Rehosted MOCAS, was the single
priced deliverable in the contract (gov't br. at 22-23, 31, 101-07). AEON argues that the
performance-based payments made to it were made on a deliverable item basis and were
liquidated when paid (app. br. at 80).

148
 The FAR defines deliverable items for the purpose of performance-based
payments as:

Financing payments to be made on a deliverable item basis
are applicable to a specific individual deliverable item. (A
deliverable item for these purposes is a separate item with a
distinct unit price. Thus, a contract line item for 10 airplanes,
with a unit price of $1,000,000 each, has 10 deliverable
items-the separate planes. A contract line item for 1 lot of
10 airplanes, with a lot price of $10,000,000 has only one
deliverable item-the lot.)

(Finding 23) The MOCAS Rehost contract contained one deliverable, CLIN 0001, with
one price. There was no contractual basis for delivery or acceptance of something less
than the complete CLIN 0001 (finding 10). Further, the performance-based payments
were based on the total contract price for CLIN 0001 which accounted for all but $50,000
(for a non-deliverable CLIN for government-ordered travel) of the $14,849,316.00
contract price. They did not include payment for any tasks other than those identified
with CLIN 0001. (Finding 21) Nevertheless, AEON argues that the enumerated tasks
associated with the Milestones/Payment Events (see findings 21, 49) were separate
deliverables, and therefore the payments were made on a deliverable item basis
(app. br. at 77-84). We cannot agree as there was no contractual delivery date, nor
contract price associated with the various Milestones/Payment Events. On the basis of
the foregoing, we find that the performance-based payments were made on a whole
contract basis.

The contract provided that if the performance-based payments were made on a
whole contract basis, liquidation was to be by either predesignated liquidation amounts or
a liquidation percentage (finding 22). It is undisputed that the contract contained no
liquidation schedule (finding 21 ), nor do we find any mention of liquidation anywhere in
the solicitation, AEON's proposal or the contract and its modifications. The government
argues that no liquidation schedule was required because there was only one deliverable,
one delivery date and one item to be accepted or rejected, so there was no basis for
liquidation prior to the government's acceptance of CLIN 0001. (Gov't reply br. at
38-42) AEON argues that, in the absence of a liquidation schedule, we must find that, as
each performance-based payment was made, there was a commensurate amount of
liquidation (app. br. at 79-80). The contract, however, provided in FAR 52.232-32(c)(3)
that: "[t]he approval by the [CO] of a request for performance-based payment does not
constitute an acceptance by the Government and does not excuse the Contractor from
performance of obligations under this contract" (finding 22). Given the absence of
something in the contract to demonstrate a meeting of the minds of the parties on the

149
subject of sequenced liquidation as argued by AEON, we find that the only reasonable
interpretation is that the payments would not be liquidated until the one deliverable was
accepted by the government.

AEON also points out that, in the first CO's final decision terminating the contract
for default, CO Gladski stated multiple times that the payments made under the contract
were liquidated; but, in the second final decision demanding the return of the payments,
CO Gladski specifically stated they were not liquidated. Given the inconsistency, AEON
argues that the government should be bound by the first final decision. It is
well-established that our findings and determinations are de nova. England v. Sherman R.
Smoot Corp., 388 F.3d 844 (Fed. Cir. 2004); Wilner v. United States, 24 F.3d 1397, 1402
(Fed. Cir. 1994) (en bane); Assurance Co. v. United States, 813 F.2d 1202, 1206
(Fed. Cir. 1987). We reject AEON's argument that, presented with the CO's inconsistent
determinations of liquidation, that it may pick and choose the one determination it likes.

We are also not persuaded by AEON's final argument that the government is not
entitled to the return of performance-based payments made to AEON prior to 9 January
2006 because the release language contained in Mod. No. P00006 closed the door on any
claims by either party based on events that occurred prior to that date (app. br. at 83). We
have found that the liquidation or non-liquidation of the performance-based payments
was dependent upon whether or not the government accepted CLIN 0001. Under the
contract, acceptance could not take place prior to the performance of 180 days of GT &E
(finding 18), which could not have occurred prior to 90 days after the 10 April 2007 end
of the 90-day GT&E functional testing period (findings 18, 89, 99), or 21July2007.
However, the Rehosted MOCAS, CLIN 0001, delivered by AEON for GT&E failed to
pass the 90 days of GT&E functionality testing and there was no acceptance of
CLIN 0001. We find that the earliest possible date the government knew it was not going
to accept CLIN 0001, and the performance-based payments were unliquidated, was
10 April 2007. This was the event upon which the government's claim of repayment of
performance-based payments was based and it did not occur prior to 9 January 2006.
Therefore, the release language in Mod. No. P00006 is irrelevant to the government's
claim in ASBCA No. 56251.

On the basis of the foregoing we find that the performance-based payments made
to AEON during contract performance were made on a whole contract basis and would be
liquidated only upon acceptance of CLIN 0001 by the government. As AEON' s delivery
of a Rehosted MOCAS, CLIN 0001, was rejected by the government and there was no
acceptance, the government was entitled to demand repayment from AEON of
unliquidated performance-based payments in the amount of $12,905, 117 .22.

150
 CONCLUSION

AEON's appeal from the termination for default is denied (ASBCA No. 56142).
AEON's appeal from the government's demand for repayment ofunliquidated
performance-based payments in the amount of $12,905,117.22 is also denied (ASBCA
No. 56251).

Dated: 6 August 2014

Adminis ative Judge
Armed ervices Board
of Contract Appeals

I concur I concur

&MARK~N. ~ ·--~-~ f:f~ -\. . . .JR.Jrf~+ -+- -/1-
STEMP~LE~R~ ____ . . +- --...
__
MONROE E. FREEMAN,
Administrative Judge Administrative Judge
Acting Chairman Acting Vice Chairman
Armed Services Board Armed Services Board
of Contract Appeals of Contract Appeals

I certify that the foregoing is a true copy of the Opinion and Decision of the Armed
Services Board of Contract Appeals in ASBCA Nos. 56142, 56251, Appeals of AEON
Group, LLC, rendered in conformance with the Board's Charter.

Dated:

JEFFREY D. GARDIN
Recorder, Armed Services
Board of Contract Appeals

151