ARMED SERVICES BOARD OF CONTRACT APPEALS
Appeal of -- )
)
Joe Phillips ) ASBCA No. 57280
)
Under Contract No. DAKFlO-Ol-D-0015 )
APPEARANCES FOR THE APPELLANT: G. Scott Walters, Esq.
Thrasher Liss & Smith, LLC
Atlanta, GA
Thomas J. Kelleher, Jr., Esq.
Garrett E. Miller, Esq.
Smith, Currie & Hancock LLP
Atlanta, GA
Jeffrey L. Arnold, Esq.
Andrew S. Johnson, Esq.
Arnold, Stafford & Randolph
Hinesville, GA
APPEARANCES FOR THE GOVERNMENT: Raymond M. Saunders, Esq.
Army Chief Trial Attorney
LTC Eugene Y. Kim, JA
MAJ Samuel E. Gregory, JA
Trial Attorneys
OPINION BY ADMINISTRATIVE JUDGE SCOTT
ON APPELLANT'S MOTION FOR RECONSIDERATION
Appellant Joe Phillips (Phillips) filed a timely motion for reconsideration from part
of our decision in Joe Phillips, ASBCA No. 57280, 13 BCA ii 35,263, which sustained
appellant's appeal, to the extent of $160,612.47, from the contracting officer's (CO's)
denial of its $642,442 claim for the government's breach of appellant's firm fixed-price
requirements contract to provide rental and servicing of portable chemical latrines (PCL)
and portable handwash stations (PHWS) at Fort Stewart, Georgia, and surrounding areas.
The government had conceded entitlement, leaving only quantum to be resolved. 1
A motion for reconsideration must be based upon newly discovered evidence,
allege mistakes in the Board's fact findings, or allege legal error. A motion for
1
Judge Eunice W. Thomas, who participated in the Board's decision, has retired.
reconsideration that restates arguments previously raised and considered by the Board
will be denied. Kellogg Brown & Root Services, Inc., ASBCA Nos. 57530, 58161,
13 BCA ~ 35,379 at 173,599. Reconsideration is not granted without compelling reason,
which the movant has the burden to establish. ADT Construction Group, Inc., ASBCA
No. 55358, 14-1BCA~35,508; Troy Eagle Group, ASBCA No. 56447, 13 BCA
~ 35,313. Appellant specifies four of the Board's fact findings that it claims were
mistaken and contends that the Board committed legal error in its alleged acceptance of
the government's computation of PCL and PHWS costs, and in its assessment of
subcontractor costs, that affected the 79.5% profit appellant asserted it would have
expected had the government not breached its requirements contract. The government
disagrees and opposes reconsideration.
FINDINGS OF FACT AT ISSUE
(1) Finding 76
Our finding 76 stated:
Again, the parties' evidence conflicts to the point that
we are unable to make a precise finding. We find appellant's
assumption that Mr. Phillips would have incurred no
additional PCL and PHWS acquisition costs had he received
the FOB [Forward Operating Base] work to be unreasonable.
In the nature of a jury verdict, we find that additional PCL
and PHWS costs would have been one-half of the
government's $149,374.85 estimate (finding 75), or
$74,687.43.
Joe Phillips, 13 BCA ~ 35,263 at 173,097.
Appellant contends that:
In Finding 76 the Board incorrectly overstates the estimated
PCL and PHWS costs Phillips would incur to meet the
additional PCL and PHWS requirements, where the evidence
clearly shows that Phillips could have temporarily rented
these units for much less than the cost that the government
and the Board speculated it would cost Phillips ....
(App. mot. at 2)
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Our finding 76 was preceded by several relevant findings. They include the
referenced finding 75, where we noted that appellant's accountant and claim consultant,
Mr. Stafford, had not included any additional PCL or PHWS acquisition costs in his
analysis of Mr. Phillips' costs had he performed the diverted contract work, and findings
70 and 72, where we noted that, despite the claims of the contractor, Mr. Phillips, and the
individual we found to be his subcontractor, Mr. Freeman, that they "probably" could
have borrowed the required PCL and PHWSs for free, and Mr. Phillips' testimony that he
otherwise could have rented them at $25 per month, plus $6 transportation costs,
appellant did not call any of the alleged providers to testify. Appellant also did not
provide documentary evidence to support its alternative $25 cost contentions.
Mr. Phillips' and Mr. Freeman's unsupported testimony, as interested parties, was not
persuasive. Joe Phillips, 13 BCA if 35,263 at 173,096-97.
Moreover, contrary to appellant's suggestion, we did not rely upon the
government's evidence. We noted in finding 75 that Ms. Thomas, one of the
government's analysts, had used internet research to determine PCL costs but, because
those costs were higher than what appellant had charged the government under its
requirements contract, she had used the lower contract pricing. Using a jury verdict, in
finding 76, we accepted only one-half of the PCL and PHWS cost amount asserted by the
government. Joe Phillips, 13 BCA if 35,263 at 173,096-97. Appellant has not shown that
we were mistaken in our finding 76.
(2) Finding 77
Our finding 77 stated:
As we found above, for 2006, 2007 and 2008
Mr. Phillips reported receipts of $595,858, $719,758 and
$209,380, respectively, on Schedule C of his federal income
tax returns. He included subcontract expenses of $224,764,
$293,260 and $88,461, respectively. Fuel, supply and repair
and maintenance expenses were listed separately on his
returns, but not labor. Mr. Phillips' subcontractor,
Mr. Freeman, was responsible for the labor portion of
Contract No. 0015 and he paid the labor expenses as noted.
We infer that a portion of the subcontractor expenses on
Mr. Phillips' returns was attributable to labor expenses for
which he reimbursed Mr. Freeman and other contract
work-related expenses incurred by Mr. Freeman as reflected
on Mr. Freeman's returns. We infer that the remainder of
each subcontract expenses payment was Mr. Freeman's share
of the profit Mr. Phillips had agreed to split with him. The
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labor and other expenses included on Mr. Freeman's 2006 tax
return were $89,847, leaving a balance of $134,917
($224,764-$89,847) as the profit component of Mr. Phillips'
subcontract expense payment to Mr. Freeman during 2006.
The labor and other expenses included on Mr. Freeman's
2007 tax return were $100,750, leaving a balance of$192,510
($293,260-$100,750) as the profit component of Mr. Phillips'
subcontract expense payment to Mr. Freeman during 2007.
The labor and other expenses included on Mr. Freeman's
2008 tax return were $30,646, leaving a balance of $57,815
($88,461.,$30,646) as the profit component of Mr. Phillips'
subcontract expense payment to Mr. Freeman during 2008.
(See findings 26-28) The total profit Mr. Phillips paid to
Mr. Freeman during 2006-08 was $385,242
($134,917+$192,510+$57,815). This represents 25.26% of
the total $1,524,996 ($595,858+$719,758+$209,380) in
revenue for 2006-08. Thus, we find that, of his revenues of
$533,779.09 on the diverted contract work (finding 45),
Mr. Phillips would have had to pay $134,832.60 ($533,779.09
x .2526) to Mr. Freeman as his share of profits. Mr. Phillips'
additional subcontract expenses for labor and other costs, had
he received the diverted FOB contract work, are accounted
for elsewhere in our findings.
Joe Phillips, 13 BCA il 35,263 at 173,097 (footnote omitted).
Appellant contends that, in finding 77, the Board overstated Mr. Phillips'
estimated subcontractor costs to Mr. Freeman and because "the Board chose to treat
Freeman as a subcontract expense, this estimated expense should have been considered as
a cost to Phillips." Appellant adds that, for purposes of determining cost, the Board
"calculated Freeman's contribution to the diverted requirements as a percentage of
revenue" and that this alleged inconsistent treatment overstated Mr. Phillips' estimated
costs. (App. mot. at 2) Appellant's complaint is unclear because, not only does it
acknowledge that "evidence in the record supports a finding that Freeman was a
subcontractor" (app. mot. at 15) but, as the government notes in its opposition to
appellant's motion (gov't opp'n at 9), and as reflected in finding 77, the Board in fact
treated the stated subcontracting costs as costs to the prime contractor, Mr. Phillips.
Contrary to appellant's further exposition of its argument (app. mot. at 16), and
using the 2006 tax year as an example, total subcontract expenses to Mr. Phillips were
$224,764. Ofthis, $89,847 was composed oflabor and other expenses, and $134,917
was the profit payment Mr. Phillips owed to Mr. Freeman. The effect of the Board's
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calculation was that Messrs. Phillips and Freeman split the contract profit, which is what
they said they did. Appellant has not shown that we were mistaken in our finding 77.
(3) Finding 82
Our total expenses summary finding 82 stated:
In summary, contrary to Mr. Phillips' $158,833.74 cost
estimate, we find that, had he performed the diverted FOB
work, in addition to his Contract No. 0015 work, he would
have incurred additional costs of more than $373,166.62
(labor, more than $53,732+fuel, more than $24,865.86+PCL
supplies, $17 ,303 .36+equipment repair and maintenance, at
least $5,625+credit card discount, $16,013.38+truck costs,
$15,640.9l+PCL and PHWS acquisition, $74,687.43+profit
share of subcontract expense, $ l 34,832.60+G&A, $30,466.08
($342,700.54 total of other expenses x 8.89%)[)]. (Findings
47,53,55,57,61,62,66, 76, 77,81)
Joe Phillips, 13 BCA it 35,263 at 173,098.
Appellant contends that in finding 82 the Board "multiplies its errors by again
overstating estimated total expenses and then applying the overstated 8.89% G&A
markup to the overstated amount resulting in an additional incorrect markup on the
overstated portion of the estimated expenses" (app. mot. at 3). However, appellant later
states that "Phillips does not dispute the Board's determination of estimated G&A
expenses at 8.89% of all so-called direct expenses" (app. mot. at 17). In any event,
appellant has not shown that we were mistaken in our finding 82.
(4) Finding 87 2
Our finding 87 states:
The government's preferred method of applying
Mr. Phillips' 26.75% average historical profit rate for
2006-08 to the $533,779.09 in anticipated gross revenues on
the FOB contracts (finding 45) yields a profit of $142,785.91.
When we follow appellant's method of computing profit,
which is also the government's alternative method, we arrive
2
Appellant mistakenly cites again to finding 82 but its discussion pertains to finding 87
(app. mot. at 3, it B.).
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at profit of $160,612.47 ($533,779.09 less $373,166.62 in
estimated costs (finding 82)). This equates to a profit rate of
30.09% ($160,612.47/$533,779.09). Because we are
persuaded that the diverted FOB contract work would have
been somewhat more profitable for Mr. Phillips than his
PCL/PHWS work on average (see findings 48, 85), we find
that he has supported a profit award of $160,612.47.
Joe Phillips, 13 BCA ~ 35,263 at 173,099.
Appellant contends that the profit amount cited in finding 87 should be revised due
to the Board's alleged overstated cost calculations, and that appellant's claimed 79.5%
profit, regarding work that was not performed, was not unreasonable. Appellant has not
shown that we were mistaken in our finding 87.
Appellant proceeds to present cost and profit calculations that differ from those it
presented at the hearing, now advocating that Mr. Phillips is entitled to profit at 56.56%
of anticipated revenues, for a total of$301,935.60 (app. mot. at 18-20), rather than the
79.5% profit he originally claimed (which we computed based upon a percentage of
revenue, as the parties had done; computed on a percentage of expense basis, it was
386.9% profit). Joe Phillips, 13 BCA ~ 35,263 at 173,099 (finding 83), 173, 101. This is
appellant's belated attempt to reduce its unreasonable and unsupported profit claim to an
amount that remains extraordinary and is not a ground for reconsideration.
Appellant contends that the Board committed legal error in allegedly relying upon
evidence from the government, rather than from appellant, and thus violated a precept
that any risk of uncertainty in calculating expectancy damages is assumed by the party
whose wrongful conduct caused the damage. That is, the entity that breached a contract
should not be permitted to benefit from its own wrong by insisting upon proof that, by
reason of its breach, is unattainable. (App. mot. at 7) (Citations omitted) Here, the ability
to present evidence corroborating its "no cost" or $25 monthly cost contentions, for
example, was fully within appellant's control. The government's breach of its
requirements contract did not affect appellant's ability to present probative evidence,
which it failed to do.
Appellant notes that the Board employed a jury verdict in part in some of its
findings and appears critical of this and what it describes as the Board's "speculation."
However, in its post-hearing brief appellant itself advanced the jury verdict method as
proper for the Board to use to determine Phillips' damages when the damage evidence
was uncertain (app. hr. at 46). The cases to which appellant cites that are critical of
alleged unsupported speculation by tribunals in determining breach damages, Tip Top
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Construction, Inc. v. Donahoe, 695 F.3d 1276 (Fed. Cir. 2012), and SUFI Network
Services, Inc. v. United States, 108 Fed. Cl. 287 (2012), are not apt here.
We have reviewed all of appellant's allegations, whether or not we have
mentioned them, and find no factual or legal errors in our prior opinion.
DECISION
We deny appellant's motion for reconsideration.
Dated: 21 April 2014
ministrative Judge
Armed Services Board
of Contract Appeals
I concur
A ~~.
~
Administrative Judge
Acting Chairman
Armed Services Board
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 No. 57280, Appeal of Joe Phillips,
rendered in conformance with the Board's Charter.
Dated:
JEFFREY D. GARDIN
Recorder, Armed Services
Board of Contract Appeals
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