Sauer Incorporated

ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of -- )
)
Sauer Incorporated ) ASBCA No. 62395
)
Under Contract No. W91278-07-D-0030 )

APPEARANCE FOR THE APPELLANT: Gina P. Grimsley, Esq.
Counsel

APPEARANCES FOR THE GOVERNMENT: Michael P. Goodman, Esq.
Engineer Chief Trial Attorney
Laura J. Arnett, Esq.
Engineer Trial Attorney
U.S. Army District, Savannah

OPINION BY ADMINISTRATIVE JUDGE STINSON
ON THE PARTIES’ CROSS-MOTIONS FOR SUMMARY JUDGMENT

Appellant Sauer Inc., (Sauer), appeals a contracting officer’s denial of its
September 6, 2019, claim, in the amount of $144,780, seeking remission of liquidated
damages (R4, tab 2.01). We have jurisdiction pursuant to the Contract Disputes Act of
1978 (CDA), 41 U.S.C. §§ 7101-7109. The parties submitted cross-motions for summary
judgment, response and reply briefs, and exhibits, to be considered in deciding this
appeal. 1 For the reasons stated below, the government’s motion for summary judgment is
denied and appellant’s cross-motion for summary judgment is granted-in-part.

1 We refer to the parties’ motions and briefs as follows: “gov’t mot. ___” refers to the
government’s motion for summary judgment; “app. cross-mot. ___” refers to
appellant’s memorandum in opposition to respondent’s motion for summary
judgment and appellant’s cross-motion summary judgment; “gov’t resp. ___”
refers to the government’s response to appellant’s statement of undisputed
material facts and opposition to appellant’s cross-motion for summary judgment;
“gov’t reply ___” refers to the government’s reply in support of its motion for
summary judgment; and “app. reply ___” refers to appellant’s reply in support of
its cross-motion for summary judgment.
 STATEMENT OF FACTS (SOF) FOR THE PURPOSES OF THE
PARTIES’ CROSS-MOTIONS FOR SUMMARY JUDGMENT

Unless otherwise noted, the following facts are undisputed or uncontroverted.

1. On August 18, 2006, the U.S. Army Engineer District, Mobile, issued
Solicitation No. W91278-06-R-0105, contemplating the award of a Multiple Award Task
Order Contract (MATOC), a regional geographic multiple awards indefinite delivery type
contract in support of military construction in the South Atlantic Division (R4, tab 3.01
at 0004). In 2007, the government awarded Sauer MATOC No. W91278-07-D-0030.2

2. On January 12, 2011, the government issued a Request for Proposal (RFP),
pursuant to the MATOC, for design and construction of the 82nd Airborne Division
Headquarters, in Fort Bragg, North Carolina, Project Number 44968 (the Project) (R4,
tab 3.02 at 0002). The RFP stated that “[t]he scope of work for this Design Build project
includes construction and design of a standard design command and control headquarters
building” (R4, tab 3.02 at 0003).

3. The RFP scope of work identified a “primary facility,” which included
“command headquarters, a joint operations center, a sensitive compartmented
information facility (SCIF), conference rooms, classroom space, equipment storage,
general storage, mechanical and communications rooms, installation of intrusion
detection system (IDS) and connection to energy monitoring and control system
(EMCS)” (id.).

4. The RFP scope of work also identified “supporting facilities,” which included,
“water and sewer service, electric service, paving and walks, fire protection and alarm
systems, exterior lighting, storm drainage, erosion control measures, asbestos removal &
lead-based paint remediation as part of demolition, information systems, parking and site
improvements” (id.).

5. Section 3.1.1 of the Task Order Statement of Work provided, in part, “[t]he
preferred Command and Control Facility (C2F) is a multi-story stand-alone facility
organized around the central core consisting of stairs, elevators, men’s and women’s
restrooms, telecommunication rooms and other support spaces such as break rooms,

2 In response to the Board’s request for a copy of the MATOC, the government submitted
a copy of the solicitation that resulted in its award (R4, tab 3.01). In the
accompanying March 27, 2020 letter, entitled Respondent’s Corrected Rule 4
Submission, the government informed the Board that it “is unable to locate a
viable copy of the award document. However, the Government does not anticipate
a dispute about Appellant’s status as a member of the MATOC pool since it was
awarded numerous task orders against the MATOC.”

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storage, recycle rooms, etc., as depicted in the preferred functional layout included with
this RFP” (R4, tab 3.02 at 0035).

6. Section 6.17.1 of the Task Order Statement of Work provided, in part, “[t]he
Government will identify buildings and other existing features to be demolished in the
site plans, as applicable to the project” (R4, tab 3.02 at 0180).

7. The RFP included a liquidated damages provision based upon the Federal
Acquisition Regulation (FAR), which stated, “[i]n accordance with FAR Clause
52.211-12, Liquidated Damages-Construction, liquidated damages in the amount of
$4,365.81 per day shall be assessed if the Contractor fails to complete the work within
the time specified in this task order” (R4, tab 3.02 at 0007). The RFP set a duration
date of 540 days after receipt of the notice to proceed (id.).

8. By letter dated February 7, 2011, the government issued RFP Revision No. 02,
which included the following:

A. CONTRACT CHANGES: The phasing requirement for
this project is as follows:

1. Phase I: Construction of new Headquarters (540 days)

2. Phase II: Installation of furniture and move into new
building (60 days)

3. Phase III: Demolition of existing building and completion
of parking lot areas (100 days)

4. The overall construction duration for this project has
changed from 540 calendar days to 700 calendar days. The
paragraph below has been revised to reflect contract duration
to 700 calendar days.

a. In accordance with FAR Clause 52.211-10,
Commencement, Prosecution, and Completion of Work,
the Contractor shall commence work within 5 calendar
days after receipt of notice to proceed, shall prosecute
the work diligently and shall complete all work ordered
under this task order within the time proposed by the
offeror, but not to exceed the maximum allowed
700 calendar days after receipt of notice to proceed.

(R4, tab 3.03 at 0001-0002)

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 9. On March 1, 2011, Sauer submitted a proposal in response to the RFP (R4,
tab 3.04 at 0002). Sauer’s proposal included the same liquidated damages provision set
forth in the RFP (R4, tab 3.02 at 0007, tab 3.04 at 0006; SOF ¶ 7).

10. By letter dated March 28, 2011, the government informed Sauer that its offer
was in the competitive range. The government opened discussions for the purpose of
allowing clarifications and submission of a revised cost proposal (R4, tab 3.05).

11. By letter dated April 15, 2011, Sauer submitted its revised proposal (R4,
tab 3.07). Sauer’s revised proposal included the same liquidated damages provision as
set forth in, and required by, the RFP, and as contained in Sauer’s initial proposal (R4,
tab 3.02 at 0007, tab 3.04 at 0006, tab 3.07 at 0003; SOF ¶¶ 7, 9).

12. On June 13, 2011, the government awarded Sauer MATOC Task Order CV02
(the Task Order) (R4, tab 3.08). The Task Order contained a scope of work nearly
identical to the one specified in the RFP (R4, tab 3.02 at 0003, tab 3.08 at 0005; SOF ¶¶
3-4).

13. The Task Order contained three Contract Line Item Numbers (CLINs) (R4,
tabs 3.02 at 0006, 3.08 at 0002-0003). The three CLINs were not specifically tied to each
of the Task Order’s three phases. CLIN 0001 covered the “[d]esign and related services
for the complete design of the 82nd Airborne Division Headquarters and supporting
facilities,” for a unit price of $2,341,000) (R4, tab 3.08 at 0002). CLIN 0002 covered
“[c]onstruction of site work and utilities complete to the five foot line of the building and
including the antenna tower, temporary parking and all required building demolition,” for
a unit price of $4,911,000 (id.). CLIN 0003 covered “[c]onstruction of Division HQ
Building Complete to the five foot line,” for a unit price of $26,456,000 (R4, tab 3.08
at 0003).

14. The Task Order specified liquidated damages of $4,365.81 per day (R4,
tab 3.08 at 0006). The daily liquidated damages rate applied to completion of the project,
and was not tied to the contractor’s completion of the three separate Project phases
identified in RFP Revision No. 02. (R4, tab 3.03 at 0001-0002, tab 3.08)

15. On July 11, 2011, the government issued the notice to proceed, setting a Task
Order completion date of June 10, 2013, based upon a performance period of 700 days
(R4, tab 2.02 at 0003; gov’t mot., ex. A).

16. Phase I - construction of the 82nd Airborne Division Headquarters building -
was completed on July 17, 2013 (R4, tab 2.02 at 0004, tab 4.01; gov’t mot. at 4 (gov’t
Statement of Undisputed Material Fact ¶ 13, stating “[o]n 17 July 2013, Sauer completed
Phase I, and USACE accepted the 82nd Airborne Division Headquarters building”)). The
government executed a Transfer and Acceptance of DoD Real Property DD Form 1354

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stating “[t]his is a partial turnover for the facility,” and noting the warranty for the
headquarters building was July 17, 2013, to July 17, 2014 (R4, tab 8.01 at 0004-0005).
On July 18, 2013, the USACE acknowledged it “turned over the 82nd DIV HQ facility to
DPW 3 Real Property on Wednesday, July 17, 2013” and likewise transferred interior
keys for the building to DPW (R4, tab 4.02).4

17. Phase II - installation of furniture and building move in - was completed on
September 15, 2013 (gov’t mot. at 5 (gov’t Statement of Undisputed Material Fact ¶ 18,
stating “[o]n 15 September 2013, Phase II involving furniture installation and move into
the new facility from the existing facility was complete”)).

18. The Task Order completion date was extended a total of 160 calendar days via
eight modifications (R4, tabs 5.01, 5.16 at 0002). Modification No. R00034 contained
the final time extension, establishing a Task Order performance period of 860 days (R4,
tab 5.16 at 0002), and a revised Project completion date of November 17, 2013 (R4,
tab 2.02 at 0003).

19. By letter dated November 15, 2013, the government notified Sauer that

In accordance with our records, your contract completion
date is November 17, 2013. As of the 18th of November and
in accordance with the provision of our contract and FAR
52.211 - 12 “LIQUIDATED DAMAGES-
CONSTRUCTION”, you will be assessed liquidated damages
in the sum of $4,365.81 for each calendar day of the delay
until the project is completed or accepted.

(R4, tab 4.03)

20. According to the government, Phase III - demolition of existing building and
completion of a parking lot – was completed on December 20, 2013 (gov’t mot. at 5
(gov’t Statement of Undisputed Material Facts ¶ 22)). According to appellant, “the

3 DPW refers to Director of Public Works (R4, tab 4.01 at 0002).
4 The MATOC contains FAR 52.236-11, USE AND POSSESSION PRIOR TO
COMPLETION (APR 1984), which provides that the government may take
possession of any completed or partially completed portion of the work, but that
such “possession or use shall not be deemed an acceptance of any work under the
contract” (R4, tab 3.01 at 0205). The government does not assert or address this
clause as a basis for the government’s taking possession of property pursuant to
Phase I of the Task Order. Appellant mistakenly argues in its brief that “there was
no contract clause specifically stating that possession and use does not constitute
acceptance” (app. cross-mot. at 14).

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government conditionally accepted the parking lot on December 20, 2013” (app.
Statement of Genuine Issues of Material Fact at 5 (app. resp. to gov’t Statement of
Undisputed Material Facts ¶ 22)). A material issue of fact exists regarding the amount of
Phase III work left to be performed, or that was performed, from November 17, 2013, to
December 20, 2013 (see gov’t Statement of Undisputed Material Facts ¶¶ 19-21, and app.
resp. ¶¶ 19-21). Both parties provide their own characterization of the work being
performed based upon citation to Quality Control Reports prepared by appellant during
the course of Task Order performance (id. (citing R4, tab 6.01)).

21. On January 28, 2014, via Pay Estimate No. 29, the government informed
appellant that it was assessing liquidated damages for the period starting November 17,
2013, through December 20, 2013, for a total of 33 days, in the amount of $144,071.73
(R4, tab 7.06 at 0002).

22. Appellant states that 98.7 percent of the total construction-related costs were
placed in Phase I, construction of the new headquarters building (app. Statement of
Undisputed Material Facts No. 3 (citing R4, tabs 3.03, 3.07; app. mot. at ex. 1)).
Although the government “denies” this allegation, it does not state why appellant’s
determination is incorrect. Rather, the government “notes that the costs associated with
the respective schedule activities were assigned by Sauer in its schedule, not determined
by the Government” (gov’t resp. to app. Statement of undisputed Material Facts No. 3).

23. Appellant states that 1.3 percent of the total construction-related costs were
placed in Phase II and Phase III, representing 1.17 percent of the total Task Order price
(app. Statement of Undisputed Material Facts No. 4 (citing R4, tab 3.03; app. cross-mot.
at ex. 1)). Although the government “denies” this allegation, it does not state why
appellant’s determination is incorrect. Rather, the government “notes that the costs
associated with the respective schedule activities were assigned by Sauer in its schedule,
not determined by the Government” (see gov’t resp. to app. Statement of Undisputed
Material Facts No. 3).

24. By letter dated September 6, 2019, Sauer submitted a certified claim to the
government challenging the government’s assessment of liquidated damages and
requesting a final decision from the contracting officer (R4, tab 2.01). Appellant’s claim
asserted that “[t]he government improperly assessed liquidated damages after Sauer
achieved substantial completion and beneficial occupancy” (R4, tab 2.01 at 0004).

25. By letter dated November 20, 2019, the contracting officer issued a final
decision denying Sauer’s claim (R4, tab 2.02). The contracting officer did not address
appellant’s argument that assessment of liquidated damages after substantial completion
of the Project was inappropriate. Rather, the contracting officer assessed liquidated
damages “[i]n accordance with FAR 52.211-12” based upon appellant’s “failure to
complete the work within the contract duration” (R4, tab 2.02 at 7).

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 26. Sauer filed its notice of appeal on February 13, 2020.

DECISION

I. Standard of Review

“Summary judgment is appropriate if there is no genuine issue as to any material
fact and the moving party is entitled to judgment as a matter of law.” First Commerce
Corp. v. United States, 335 F.3d 1373, 1379 (Fed. Cir. 2007). “The moving party bears
the burden of establishing the absence of any genuine issue of material fact and all
significant doubt over factual issues must be resolved in favor of the party opposing
summary judgment.” Mingus Constructors v. United States, 812 F.2d 1387, 1390 (Fed.
Cir. 1987).

A party challenging a motion for summary judgment “must set forth specific facts
showing that there is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 248 (1986). It does not matter that the parties have cross-moved for summary
judgment, both claiming that there exists no material issue of fact. Osborne Constr. Co.,
ASBCA No. 55030, 09-1 BCA ¶ 34,083 at 168,513 (“[e]ach cross-motion is evaluated
separately on its merits, and all reasonable inferences are drawn in favor of the defending
party; the Board is not bound to ‘grant judgment as a matter of law for one side or the
other’” (quoting Mingus Constructors, 812 F.2d at 1391).

II. Appellant’s Challenge to Assessment of Liquidated Damages is a Government
Claim

Appellant seeks remission of liquidated damages, which is a government claim for
which “the Government bears the initial burden of proving that the contractor failed to
meet the contract completion date and that the period of time for which it assessed
liquidated damages is correct.” KEMRON Envtl. Servs. Corp., ASBCA No. 51536, 00-1
BCA ¶ 30,664 at 151,399. “Once the government has overcome the initial burden, it is
incumbent upon appellant to show either that the government incorrectly assessed the
damages under the contract, or that appellant's failure to comply with the terms of the
contract was excusable.” Chem-Care Co., ASBCA No. 53614, 06-2 BCA ¶ 33,427
at 165,726.5

5 The Task Order states that liquidated damages “shall be assessed if the Contractor fails
to complete the work within the time specified in this task order” (SOF ¶¶ 7, 9,
11). FAR Clause 52.211-12, Liquidated Damages-Construction, includes terms
that are somewhat broader (SOF ¶¶ 7, 19). Specifically, it provides that “[i]f the
Contractor fails to complete the work within the time specified in the contract, the
Contractor shall pay liquidated damages to the Government . . . for each calendar

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 It is well established that “after the date of substantial completion or performance,
it is improper to assess liquidated damages.” Gassman Corp., ASBCA Nos. 44975,
44976, 00-1 BCA ¶ 30,720 at 151,742 (citations omitted). In its motion, the government
states that “[t]his case turns on the question of when a project with three phases . . .
achieved substantial completion” (gov’t mot. at 1). The government acknowledges that
“[l]iquidated damages are not properly assessed on a construction contract after the date
the project is substantially completed” (gov’t mot. at 8). Although Sauer’s certified claim
raised the issue of substantial completion, the contracting officer’s final decision did not
address it (SOF ¶¶ 24-25).

Establishing the date of substantial completion is part of the government’s prima
facie case, as it bears both on the issue of whether the contractor failed to meet the
contract completion date and whether the period of time for which the government
assessed liquidated damages is correct. See Whitesell-Green, Inc., ASBCA No. 53938
et al., 06-2 BCA ¶ 33,323 at 165,257 (noting that in discussing whether the government
had met its burden “the parties do not dispute the scheduled completion date, the date of
substantial completion (beneficial occupancy), and the computation of the amount of
liquidated damages”); Insulation Specialties, Inc., ASBCA No. 52090, 03-2 BCA
¶ 32,361 at 160,101 (government established a prima facie case where “[t]he parties
agree that the extended contract completion date, through all contract modifications, was
30 December 1995; and, that the date of substantial completion was 30 November
1996”). If the government assessed liquidated damages beyond the date of substantial
completion, the government has not met its burden of establishing that the period of time
for which it assessed liquidated damages is correct.

III. Task Order Completion vs. Substantial Completion

The parties agree that the Task Order completion date was November 17, 2013
(SOF ¶ 18). Appellant argues, however, that the Project was substantially complete on
July 17, 2013, when the government obtained beneficial occupancy of the headquarters
building, or, alternatively, no later than November 17, 2013, when the government first
assessed liquidated damages (app. cross-mot. at 2).

“Whether a contract has been substantially completed is a question of fact and a
project is considered substantially completed when it is capable of being used for its
intended purpose.” Maruf Sharif Constr. Co., ASBCA No. 61802, 19-1 BCA ¶ 37,239
at 181,276. In making this determination, we focus “upon the specific provisions in the
contract that define the parties' expectations regarding the owner's reasonable use of the

day of delay until the work is completed or accepted.” 48 C.F.R. § 52.211-12
(emphasis supplied). The government’s November 15, 2013, notification letter
includes language contained in the regulation, notifying appellant that liquidated
damages will be assessed “until the project is completed or accepted” (SOF ¶ 19).

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facility.” Id. We also focus “upon the character and extent of the contractor’s partial
failure, i.e., the relative importance of that failure to the party affected by it.” Gassman
Corp., 00-1 BCA ¶ 30,720 at 151,742, citing Thoen v. United States, 765 F.2d 1110,
1115 (Fed. Cir. 1985). “‘[S]ubstantial completion’ and ‘beneficial occupancy’ are used
interchangeably, and signify whether the government can continue to hold liquidated
damages.” Strand Hunt Constr., Inc., ASBCA No. 55905, 13-1 BCA ¶ 35,287
at 173,188. The “interim usage which occurs prior to the completion of a contract is
known as beneficial occupancy.” Id.

“A finding of substantial completion is only proper where a promisee has
obtained, for all intents and purposes, all the benefits it reasonably anticipated receiving
under the contract.” Kinetic Builder’s Inc. v. Peters, 226 F.3d 1307, 1315-16 (Fed. Cir.
2000). “[T]he doctrine should not be carried to the point where the non-defaulting party
is compelled to accept a measure of performance fundamentally less than had been
bargained for.” Franklin E. Penny Co. v. United States, 207 Ct. Cl. 842, 857-858, 524
F.2d 668, 677 (1975).

IV. Substantial Completion of Phase I and Phase II

As originally drafted, the RFP included a 540-day performance period, with no
demarcation of Project phases (SOF ¶ 7). The advent of phased construction was a
revision to the RFP, which added three phases and three corresponding completion dates,
and increased the performance period to 700 days. Under this revised approach, the
Project was divided into phases with distinctly-different work items of various sizes and
apparent import. (SOF ¶ 8)

The first phase of the Project included work that consumed the vast majority of
time and money, i.e., design and construction of the new headquarters building, the
Project’s “primary facility” (SOF ¶¶ 3, 8, 22). The second and third phases of the Project
included distinctly less work in terms of time and money (SOF ¶¶ 8, 23). The second
phase included furniture installation in the new headquarters building, along with the
government’s move into the building, while the third phase included demolition of the
old headquarters building and construction of a parking area (SOF ¶ 8). Pursuant to the
Task Order statement of work, Phase III included work on “supporting facilities,” i.e.,
“paving and walks” and “parking and site improvements” (SOF ¶ 4).

To the extent RFP Revision No. 02 made no change to the liquidated damages rate
in the RFP, i.e., not adding a specific liquidated damages rate for each phase, the dividing
of the Task Order into three phases appears to be an artificial edifice, having maintained
the single liquidated damages rate set forth in the original RFP (SOF ¶¶ 8, 11). RFP
Revision No. 02 likewise did not modify the Task Order CLINs structure, so that the
three CLINs corresponded specifically to each of the Task Order’s three phases (SOF
¶ 13). Instead, the unit price for design and construction of the headquarters building

9
encompassed both CLIN 0001 (design of headquarters and supporting facilities -
$2,341,000) and CLIN 0003 (construction of headquarters building - $26,456,000) (SOF
¶ 13). CLIN 0002 - $4,911,000 – set the unit price of site work and utilities construction
outside the headquarters building, and included “temporary parking and all required
building demolition” (id.).

The government does not dispute that appellant delivered to the government, and
the government accepted, Phase I of the Project, four months prior to the completion
date, and appellant delivered to the government, and the government accepted, Phase II
of the Project, two months prior to the completion date (SOF ¶¶ 16- 17). Yet, the
government argues that “the Project was not substantially complete until Phases II and
III were completed in December 2013” and that appellant’s argument “completely
ignores Phases II and III of the contract” (gov’t mot. at 7-8). As we already have found,
and as the government admits in its Statement of Undisputed Material Fact, Phase II was
completed and accepted by the government on September 15, 2013 – two months prior
to the November 17, 2013 completion date (SOF ¶ 17). Accordingly, completion of
Phase III appears to be the only allegedly long pole left in what was by November 17,
2013, a considerably much smaller tent.

In support of its argument regarding the import of phased construction in the
context of substantial completion, the government cites the Corps of Engineers Board of
Contract Appeals’ decision in Formal Mgmt. Sys., Inc., ENG BCA No. PCC-145, 99-1
BCA ¶ 30,137. The government labels Formal Management as “[t]he seminal case 6 that
addresses whether a phased construction project can be substantially complete prior to
completion of the final phase” (gov’t resp. at 10; gov’t reply at 12).7 Quoting Formal
Mgmt. Sys., Inc., 99-1 BCA ¶ 30,137 at 149,081, the government states that the decision
stands for the proposition that a contractor “has not substantially completed the work
where it fails to perform timely a particular aspect of contract work that the parties single
out in their agreement and expressly make important to contract performance because of
the potential impact on the owner’s reasonable use of its facility or on the performance of
other owner contracts” (gov’t resp. at 10; gov’t reply at 13). We agree with the
government that Formal Management stands for the proposition as quoted, but disagree
that the decision supports a finding in its favor.

6 As for the seminal nature of the decision, we note that a search of Formal Management
indicates that the decision has been cited by this Board once, namely, in Gassman
Corp., 00-1 BCA ¶ 30,720 at 151,742, for the proposition that the “agreement to
liquidated damages clause anticipated potential impact on performance.” Our
search revealed no citation of the decision by any other board or court.
7 Contrary to the government’s assertion, the project in Formal Management was not a

“phased construction project,” rather, as the government later notes, Formal
Management “involved phases 1-9 for cleaning the Tug/Miter Gates of the
Panama Canal” (gov’t reply at 12).

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 In Formal Management, the contractor failed to complete Phase 10 of the
contract, the contract’s final phase, which required cite cleanup and demobilization. The
contractor challenged assessment of liquidated damages for Phase 10, alleging that
Phase 9 constituted the primary purpose of the contract, and therefore, having timely-
completed that phase of the contract, the contractor had substantially completed the
contract. The Engineer Board rejected the contractor’s argument that it had substantially
completed the work, noting that the contract singled out Phase 10, which expressly was
made important because of the impact non completion of that phase would have on the
government’s use of the project or on the performance of follow-on contracts. Formal
Mgmt. Sys., Inc., 99-1 BCA ¶ 30,137 at 149,081.

The government argues that the parties here likewise “singled out” the importance
of Phase III, quoting a portion of the Formal Management decision which states “[b]y
dividing the contract into ten (10) phases, the parties intended to give each phase an
equivalent, substantive status as a contract action for determining when Formal completed
each contract phase and when it finally completed the contract” (gov’t resp. at 11; gov’t
reply at 13, quoting Formal Mgmt. Sys., Inc., 99-1 BCA ¶ 30,137 at 149,081). Unlike the
Task Order here, however, the contract in Formal Management assigned a specific
liquidated damages rate to Phase 10, which would apply in the event Phase 10 was not
timely-completed. Indeed, the contract only assigned liquidated damages to Phase 9 and
Phase 10, and not to the first eight phases, specifically, $5,000 per day for Phase 9 and
$75 for Phase 10. Id. at 149,077.

As for the import and impact of the contractor’s failure to timely complete Phase
10 demobilization, the Engineer Board noted that the contractor had failed to remove its
equipment from the site, that the contractor “stored its equipment in an area where the
Commission intended to commence construction of a warehouse,” and that the
government “had other contracts to be performed in the area that were potentially subject
to adverse impacts by Formal’s failure to complete the contract’s Phase 10
demobilization.” Id. at 149,081. In contrast, the record here suggests no follow-on work
to be performed that was impacted while Sauer completed Phase III.

The Engineer Board rejected the contractor’s substantial completion argument as it
“would necessarily require us inappropriately to read out of the contract the parties’ clear
agreement to a liquidated damages provision regarding the Phase 10 work,” noting that
“[u]nder Formal’s interpretation, the Phase 10 liquidated damages provision would never
apply, since Phase 9 had to be completed before Phase 10.” Id. at 149,082. The Engineer
Board therefore “read the parties’ agreement to liquidated damage provisions for Phase 9
and for Phase 10 as reflecting their clear intent that substantial completion encompassed
full performance of both Phase 9 and Phase 10.” Id. That simply is not the situation
presented in this appeal. The Task Order here did not assign a specific liquidated damage
rate to Phase III, nor did it indicate in any way that completion of Phase III impacted the

11
government’s beneficial use of the project, or reflected the parties “clear intent that
substantial completion encompassed full performance” of Phase III (id. at 149,082).
Indeed, the Task Order indicates that Phase III work, included “supporting” activities
such as “parking and site improvements,” as opposed to construction of the new
headquarters, which the government labeled “primary” (SOF ¶ 4).

The government relies also on our decision in Gassman for the proposition “that a
phased project requires completion of all phases to achieve substantial completion”
(gov’t reply at 11). The government’s reliance upon that appeal is likewise misplaced.
Gassman concerned a contractor’s failure to complete Phase 7 of the contract, which
required it to remove a hoisting crane and vacate a staging area prior to another
contractor mobilizing on the site for follow-on work. Gassman Corp., 00-1 BCA
¶ 30,720 at 151,728. Indeed, the government here, perhaps unintentionally, seems to
recognize this important distinction between the facts in Gassman and the facts in this
appeal, stating, “the facility was not substantially complete until it was available for its
‘intended use’ i.e. available for performance of the follow-on contract. Thus, the project
achieved substantial completion when the contractor removed the crane and vacated the
staging area completing phase 7” (gov’t reply at 11). As noted above, the record here
indicates no follow-on work waiting to be performed by another contractor at the site, or
that the Project was not “available for its ‘intended use’” because the parking lot was not
complete until December 20, 2013.

The government asserts that, “[b]y parsing the contract into separate distinct
phases, the parties agreed that each phase would have functionally equivalent
importance regarding performance” (gov’t resp. at 12). We disagree. Simply parsing a
contract into phases, without more, does not establish the functional equivalence or
importance of each phase. The record here contains no evidence supporting a finding
that completion of Phase III was functionally equivalent to completion of Phase I or, for
that matter, Phase II.

As alleged evidentiary support of its argument as to the import of Phase III
completion, the government states that certain “provisions of the contract defined the
parties’ expectations,” namely, the fact that the Task Order work was divided into three
phases, each phase had a specific duration, with an overall Project duration of 700 days,
and imposition of liquidated damages in the amount of $4,365.81 per day in the event the
contractor failed to complete the work at the end of the Project’s 700-day duration (gov’t
mot. at 9).

The government’s argument is based, not upon evidence demonstrating the
purpose of the Task Order, or an analysis of the cost of performance, or the percentage of
work performed, but rather upon the artifice that strict compliance to the completion of
all three phases of construction was essential, and all three phases shared equally in
significance to completion of the Project. As we already have held, the fact that the Task

12
Order was parsed into phases does not, without more, establish the functional equivalence
or importance of each phase. Other than its bare allegation that the existence of a phased
contract establishes the singular import of each phase, the government offers no evidence
that strict compliance to completion of all three phases truly was “essential.” The Task
Order provisions cited by the government do not speak to the parties’ expectations
regarding the owner’s reasonable use of the facility, or whether the Project was capable
of adequately serving its intended purpose at the time the government claimed the right to
assess liquidated damages.

In an attempt to bolster the importance of the Phase III work, the government
cites “contemporaneous project records” in which appellant “consistently acknowledged
throughout the Project that all three phases of the project were required to be complete
within the Project duration of 700 days and that the Project would be complete upon
completion of Phase III” (gov’t mot. at 10-11).8 The government points to appellant’s
Quality Control Reports, which, according to the government, indicate that “in
November 2013, Sauer was performing demolition of the old facility where the new
parking lot was to be located” (gov’t mot. at 11). However, the fact that appellant
acknowledged Project phasing and duration, and that it was performing work in
November 2013, does not establish appellant’s, or the government’s, expectation
regarding the owner’s reasonable use of the facility or that the work performed in
November 2013 was essential to the government’s beneficial occupancy of the Project.

The government also argues that “[w]hen Sauer completed Phase I and turned over
the Headquarters building on 17 July 2013, the Government executed a Transfer and
Acceptance of DoD Real Property DD Form 1354 which noted in block no. 4 that it was
‘Partial #2’” (gov’t resp. at 7). According to the government, the DD Form “listed
construction deficiencies including commissioning of the CRAC units and installation
and startup of Power Monitoring and management system in TER, NOC, and G2” (id.)
(citing R4, tab 8.01). However, the government does not explain how these
“deficiencies” impacted in any way the government’s beneficial occupancy of the
Project. Nor does the government explain their import, having formally accepted Phase I
in July 2013, and having moved into the new headquarters building two months later
(SOF ¶ 8). The government’s argument also conflicts with its admission contained in its
Statement of Undisputed Material Fact that Phase I and Phase II were “complete” as of
July 17, 2013, and September 15, 2013, respectively (SOF ¶¶ 17-18).

8 Appellant does not dispute that the Task Order was divided into three phases, with
different durations for each phase, an overall Project completion duration of 700
days, and imposition of liquidated damages based upon overall Project duration
(see app. resp. to gov’t Statement of Undisputed Material Facts Nos. 3-4, as set
forth in app. Statement of Genuine Issues of Material Fact).

13
 Appellant is entitled to a grant of summary judgment on the issue of substantial
completion only if the government “fails to reference . . . sufficient evidence showing
that a reasonable fact finder could decide the ‘substantial completion’ question in” the
government’s favor. J.W. Creech, Inc., ASBCA No. 45317, 94-1 BCA ¶ 26,459
at 131,661 (“[b]ased upon an examination of the evidence presented by the Navy and a
drawing of all inferences in favor of the Navy, the nonmovant, as required when
evaluating a summary judgment motion, a reasonable fact finder could possibly decide
the question of ‘substantial completion’ in favor of the Navy”, citing Anderson, 477 U.S.
at 248–50 (additional citations omitted)). For the reasons stated above, we find that the
government has failed to reference sufficient evidence demonstrating that a reasonable
fact finder could decide in favor of the government on the issue of substantial completion
of Phases I and II. As we discuss below, however, we are unable to make this same
determination, in the context of summary judgment, regarding substantial completion of
Phase III.

V. Factual Dispute as to Substantial Completion of Phase III

The government asserts that demolition of the former headquarters building, and
paving the former site for a parking lot, was part of the benefit of its bargain (gov’t mot.
at 8, 12). According to the government, “Phase III could not be performed until Phases I
and II were completed,” and “[a]t the completion of Phase I, the Government had not
received all of the benefits for which it contracted - demolition of the prior facility and
construction of parking lot areas to serve the new clinic” (gov’t mot. at 13). The
government notes that “Phase III required Sauer to demolish the 35,514-square-foot
existing headquarters building and pave parking lots” (gov’t resp. at 8). The government
concludes that it “should not be compelled to accept a measure of performance
fundamentally less than that for which it bargained” (gov’t mot. at 13).9

Appellant alleges that other parking areas were available, including an “East
Parking Lot” and a temporary parking facilities constructed during Phase I (app.
cross-mot. at 14, n.4, app. reply at 5 n.6), although appellant’s allegation includes no
record citation in support. Regardless, appellant’s allegation alone does not refute the
government’s argument as to the necessity of the unfinished lot. Although we find that
Phase I and Phase II were substantially complete, there remains the issue of Phase III
substantial completion, i.e., whether demolition of the prior facility and construction of
parking areas was an essential part of the Project, and whether appellant’s not yet

9 The government argues that “Phases II and III represented approximately 23% or 160
days of the 700-day contract duration” and that “[t]he 60 days added for Phase II
were critical to allow the customer to vacate the old building and move into the
new building so Sauer could demolish the old building” (gov’t resp. at 7-8).
However, as we already have found, Phase II also was completed in
September 2013 – two months before the Task Order completion date.

14
completing that final task was “fundamentally less than had been bargained for.”
Franklin E. Penny Co., 207 Ct. Cl. at 857-858, 524 F.2d at 677.

The parties also disagree as to the amount of work appellant performed on
Phase III after November 17, 2013, up until December 20, 2013, as well as whether and
when that work constituted substantial completion of Phase III (SOF ¶ 20; app. reply at 8;
gov’t resp. at 9). Both parties offer a different version of facts regarding the work being
performed, based upon their respective characterizations of information contained in
appellant’s Quality Control Reports (SOF ¶ 20 (citing R4, tab 601)). The divergent
positions taken by the parties as to the status of work accomplished and performed on
Phase III after November 17, 2013, evidences the existence of disputed issues of material
fact. Dunyami Karakoc, ASBCA No. 58304, 14-1 BCA ¶ 35,780 at 175,035 (“[a]
material fact is one that might affect the outcome of a case”) (citation omitted). 10

In considering the parties’ summary judgment motions, our function is not “to
weigh the evidence and determine the truth of the matter but to determine whether there
is a genuine issue for trial.” Anderson, 477 U.S. at 249. Resolution of the status of
Phase III work is not possible at this point in the proceedings as it presents a triable issue.
Alderman Bldg. Co., Inc., ASBCA No. 58082, 15-1 BCA ¶ 35,841 at 175,272 (on
summary judgment, “[o]ur task is not to resolve factual disputes, but to ascertain whether
material disputes of fact-triable issues-are present.” (quoting Conner Bros. Constr. Co.,
ASBCA No. 54109, 04-2 BCA ¶ 32,784 at 162,143, aff’d, Conner Bros. Constr. Co. v.
Geren, 550 F.3d 1368 (Fed. Cir. 2008))). Accordingly, as to the issue of substantial
completion of the Project vis-a-vis Phase III, we are constrained at this point in the
litigation from making a determination whether it occurred on December 20, 2013, or at
some point prior to that date.

VI. Apportionment of Liquidated Damage

In its reply brief, the government “acknowledges that it did not set different rates
for each phase of the Project,” and “that the [P]roject had one completion date that was
extended when time extensions were granted by modification” (gov’t reply at 4). In Dick

10 In its reply brief, the government argues that the Board “can review Sauer’s QCRs
[Quality Control Reports], elicit the pertinent facts (uncharacterized or colored by
either party), and conclude that Sauer was performing Phase III of the project until
20 December 2013” (gov’t reply at 3). However, in its response brief, with regard
to whether the Project was substantially complete as of November 17, 2013, the
government recognizes that the parties “disagree as to the characterization and
significance of the facts and application of the law to these facts” (gov’t resp. at
9). Weighing of evidence to decide disputed issues of material facts regarding the
status of Phase III from November 17, 2013, to December 20, 2013, is not proper
in the context of cross-motions for summary judgment.

15
Pacific Constr. Co., ASBCA No. 57675 et al., 16-1 BCA ¶ 36,196, we considered the
issue of whether the government should have apportioned its liquidated damages where a
contractor sought remission of liquidated damages on a Project that was divided into
three different deliverable items, but specified only one liquidated damages daily rate. In
that appeal, the government took beneficial occupancy in three different phases prior to
contract completion, and “the project was accepted ‘incrementally.’” Id. at 176,627. Yet
the government “used a single substantial completion date for the entire project to
calculate liquidated damages,” and “never considered reducing the liquidated damages
based on the incremental acceptance of the work.” Id. In that appeal, we raised sua
sponte the issue of whether the government should have apportioned liquidated damages,
and calculated apportioned amounts. Id. at 176,640.

In finding for the contractor, we held that the “daily rate bears no reasonable
relation to the probable loss that would be incurred by the government after” substantial
completion of the first two contract items, and that “allowing the daily rate of $2,298 to
run after the Rev B Infield and Strat Ramp are substantially complete results in a penalty
of $1287 ($843 + $444) per day assessed against DPC.” Id. at 176,641. Accordingly, we
rejected as unenforceable the government’s assessment of the full amount of daily
liquidated damages after substantial completion of the first two items, and remanded the
appeal to the parties to decide quantum. Id.

The same reasoning applies to this appeal. Although the issue of substantial
completion is a question of fact, the record establishes beyond cavil that at the very least
appellant substantially completed Phases I and II, given that the government admits
Phases I and II were complete as of July 17, 2013, and September 15, 2013, respectively
(SOF ¶¶ 16-17).11 The government’s assessment of the full amount of daily liquidated
damages after substantial completion and acceptance of the first two phases is
unenforceable.

According to the government, were appellant to prevail, “it would render
meaningless the phasing requirements of the contract and the Statement of Compliance
signed by Sauer and would force the Government to accept a measure of performance that
is fundamentally less than that for which it bargained” (gov’t mot. at 2). The government
could have included different liquidated damage rates for each of the three phases. For
example, in Pete Vicari Gen. Contractor, Inc., ASBCA No. 54982, 06-1 BCA ¶ 33,136
at 164,211, the contract included a liquidated damages clause, FAR 52.211-12,

11 The government did not assess liquidated damages for late completion of Phases I and
II, nor did the Task Order give the government the right to assess liquidated
damages in the event the completion dates of 540, 60, and 100 days for each of the
three phases respectively was not met. Indeed, the Task Order only provided for
assessment of liquidated damages “if the Contractor fails to complete the work
within the time specified in this task order.” (SOF ¶ 7)

16
LIQUIDATED DAMAGES-CONSTRUCTION (APR 1984) - ALTERNATE I
(APR 1984), which provided for different liquidated damage daily rates for three different
phases of work. The contractor argued that liquidated damages could only be assessed
based upon an overall delay in contract completion, and not for untimely completion of
individual phases. We rejected the contractor’s challenge, finding that the contract “stated
that the work was to be performed in three successive phases” with specific days of
duration for each phase, and specified different liquidated damages “rates for each phase
and not a single rate for the entire contract.” Id. at 164,211-212.12

The government cites American Int’l Contractors, Inc., ASBCA Nos. 60948,
61166, 18-1 BCA ¶ 37,061, as an example of when the government did not include
separate liquidated damages rates for each phase of a contract, even though the FAR
provides a contracting officer “the authority to revise the liquidated damages clause to
provide for different rates for separate parts of the work” (gov’t reply at 15).
Specifically, FAR 11.503(b) provides “[i]f the contract specifies more than one
completion date for separate parts or stages of the work, revise paragraph (a) of the clause
[FAR 52.211–12, LIQUIDATED DAMAGES—CONSTRUCTION] to state the amount
of liquidated damages for delay of each separate part or stage of the work.” 48 C.F.R.
§ 11.503(b).

The government’s reliance upon American Int’l Contractors is misplaced, as the
Board there did not reach the issue of whether the contracting officer should have
exercised the authority set forth in FAR 11.503(b) and should have included different
liquidated damages rates for each contract phase. The appeal concerned whether the
government properly could rely upon FAR 52.211-13, Time Extensions, to justify its
imposition of liquidated damages where FAR 11.503(c) instructs that the clause may be
used if FAR 52.211-12 has been revised to provide for separate liquidated damages for
each part or stage of the work. American Int’l Contractors, 18-1 BCA ¶ 37,061
at 180,411. The Board held that although “FAR 11.503(c) requires the insertion of
FAR 52.211-13 when the liquidated damages clause has been revised to reflect different
liquidated damages amounts for the various stages of the work, it does not prohibit its use
in other circumstances.” Id.

Thus, the Board did not address the issue of whether the government should have
included a different liquidated damages rate for each phase of the contract. As for the
application and import of FAR 11.503(b) in this appeal, however, the plain wording of
that provision suggests that when the government issued RFP Revision No. 02 to provide
for phased construction with corresponding completion dates, the government should

12 We also rejected the contractor’s challenge to the reasonableness of one of the rates,
finding that the appellant “offered no evidence that it was the Phase B rate that
was an unreasonable estimate of the damages that might be suffered by the
government as a result of delayed completion of the buildings.” Id. at 164,212.

17
have revised paragraph (a) of FAR 52.211-12 “to state the amount of liquidated damages
for delay of each separate part or stage of the work.” The fact that the government did
not follow FAR 11.503(b) here is yet an additional argument in favor of a finding that
apportionment of the liquidated damages rate is appropriate in this appeal.

We note that the record here does not establish whether the government took
beneficial occupancy of any portion of Phase III work prior to December 20, 2013.
Assuming the record establishes that Phase III was not substantially complete as of
November 17, 2013, the government is entitled to some measure of apportioned
liquidated damages from that date, until appellant’s substantial completion of Phase III,
but no later than December 20, 2013. Appellant is entitled to a reduction of liquidated
damages, apportioned, based upon its completion of Phases I and II.

VII. Reasonableness of the Liquidated Damages Rate

Appellant alleges the existence of disputed material issues of fact, specifically
“whether the overall rate of $4,365.81/day was reasonable and enforceable as it relates to
the completion of Phase III of the project” (app. cross-mot. at 15). Appellant suggests
that it “has not yet had the opportunity to engage in discovery regarding USACE’s
liquidated damages rate, but anticipates being able to demonstrate that USACE’s forecast
of having the same damages rate for phase I . . . and phase III . . . is excessive and not
supportable” (Id. at 17). In its reply brief, appellant suggests that discovery is necessary
to determine “the factors and circumstances deemed relevant by USACE in calculating
the rate used for the entire project, whether USACE followed internal guidelines for
establishing a liquidated damages rate, whether the selected guidelines were appropriate
for use on the subject Contract, and whether USACE correctly followed such guidelines
in calculating a liquidated damages rate for the Project” (app. reply at 4 n.5).

The government responds, stating that the Board lacks jurisdiction to consider the
reasonableness of its liquidated damages rate, including “who calculated the rate or how
it was derived,” because it was not first the subject of a claim submitted by appellant or a
contracting officer’s final decision (gov’t reply at 7-8). The government also argues that
this issue is barred by the statute of limitations because six years now have passed since
November 15, 2013, when the government notified appellant that it would be assessing
liquidated damages for every day after the Task Order completion date of November 17,
2013 (id. at 8).13 Appellant replies that the issue of reasonableness properly is before us,
stating that appellant “challenged the entire assessment of liquidated damages in its
request for Contracting Officer’s Final Decision and Appeal” and that “[t]his is not a
materially different claim which has not been raised, but instead a part of the
government’s liquidated damages assessment that was challenged” (app. reply at 4 n.5).

13 Six years likewise have passed since January 28, 2014, when the government informed
appellant of the amount of assessed liquidated damages (SOF ¶ 21).

18
 As noted above, assessment of liquidated damages is a government claim. For a
government claim, the decision of the contracting officer “generally defines not only
the scope of that claim but circumscribes the parameters of the appeal as well.”
AeroVironment, Inc., ASBCA Nos. 58598, 58599, 16-1 BCA 36,337 at 177,177-178.
In the context of a government claim, the final decision limits the scope of what the
government may assert and what relief it may seek. The question presented here,
however, is assuming the government has established its prima facie case, whether a
contractor may assert as a defense to the government claim evidence that the liquidated
damages amount asserted by the government was unreasonable. KEMRON Envtl.
Servs. Corp., 00-1 BCA ¶ 30,664 at 151,399 (once government established prima facie
case that liquidated damages are warranted burden shifts to the contractor “to establish
a valid defense”).

In Honeywell, Inc., ASBCA No. 47103, 95-2 BCA ¶ 27,835 at 138,792, the
appellant was permitted to challenge the government’s interpretation of a Cost
Accounting Standard (CAS) provision and its application to eleven of appellant’s
business closing segments, even though the final decision on the government’s claim
covered only one segment. Appellant alleged that the government, in computing its CAS
adjustments of appellant’s previously-determined pension costs, had “adopted
inconsistent positions on different segment closings” and that conclusions reached in
various DCAA audit reports were “logically and legally irreconcilable.”

We found that, if what appellant alleged was true, it “would affect the merits of
the Government's claim and call into question the Government's interpretation and
application of the relevant CAS provisions.” Id. We held, therefore, that although the
contracting officer’s decision did not support a finding of jurisdiction over pension cost
issues related to the closing of other segments not addressed in the decision, the
appellant’s challenge to the government’s interpretation and application of the CAS
provision as to all eleven segments could be “litigated as an affirmative defense, without
any need to expand the scope of the appeal,” and that appellant would be “afforded an
opportunity to amend its pleading to assert any defenses it may have to the Government's
claim.” Id.

Our analysis in Honeywell, Inc., finds appropriate application to the facts here.
Appellant has the right to assert what is, in essence, an affirmative defense to the
government’s assessment of liquidated damages. Regardless of the discovery appellant
claims is necessary as to the reasonableness of government’s determination of the
liquidated damages rate pre-award, or the government’s jurisdictional argument as to that
determination, appellant here also challenges the reasonableness of the government’s
decision not to apportion that rate, even though appellant had completed Phases I and II
(app. cross-mot. at 15). On the issue of apportionment of liquidated damages, we have
found for appellant. Our decision on the parties’ cross-motions for summary judgment

19
turns not on the reasonableness of the liquidated damages rate as established by the
government pre-award (nor are we able to decide that factual dispute on summary
judgment), but, rather, on the government’s failure to apportion its liquidated damages at
the time it assessed those damages.

The government correctly states that appellant’s complaint does not address the
reasonableness of the government’s liquidated damages rate (gov’t reply at 8). Board
Rule 6(d) provides for amendment of pleadings “upon conditions fair to both parties” and
that “[i]f evidence is objected to at a hearing on the ground that it is not within the issues
raised by the pleadings, it may be admitted within the proper scope of the appeal,
provided however, that the objecting party may be granted an opportunity to meet such
evidence.” Given our decision here, appellant must decide what additional steps, if any,
are necessary to properly tee up its affirmative defense for resolution in this appeal.

CONCLUSION

For the reasons stated above, the government’s motion for summary judgment is
denied. Appellant’s cross-motion for summary judgment is granted-in-part on the issue
of appellant’s challenge to the government’s assessment of liquidated damages and its
failure to apportion liquidated damages based upon appellant’s substantial completion of
Phases I and II of the Task Order. Appellant’s motion is denied-in-part due to the
remaining factual issues regarding substantial completion of Phase III and proper
apportionment of the liquidated damages rate.

Dated: April 16, 2021

DAVID B. STINSON
Administrative Judge
Armed Services Board
of Contract Appeals

(Signatures continued)

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 I concur I concur

RICHARD SHACKLEFORD OWEN C. WILSON
Administrative Judge Administrative Judge
Acting Chairman 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 No. 62395, Appeal of Sauer
Incorporated, rendered in conformance with the Board’s Charter.

Dated: April 16, 2021

PAULLA K. GATES-LEWIS
Recorder, Armed Services
Board of Contract Appeals

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