Pro-Built Construction Firm
ASBCA No. 59278
| A.S.B.C.A. | Jun 1, 2017Background
- The U.S. Army Corps of Engineers awarded Task Order No. 0009 (design-build police headquarters, firm‑fixed‑price) to Pro‑Built in July 2011; the contract required a notice to proceed (NTP) before site construction and certain submittals after NTP.
- Corps never issued the NTP; on 4 March 2012 it terminated the task order for the convenience of the government because of security concerns in Zabul Province.
- Pro‑Built submitted successive termination‑for‑convenience settlement proposals (initially ~ $1.1M); DCAA audited and questioned many claimed pre‑NTP costs as unallowable or unsupported; Corps offered $48,972 and issued a unilateral settlement determination for that amount.
- Pro‑Built appealed to the Armed Services Board of Contract Appeals, arguing pre‑NTP standby labor and certain subcontract costs were reasonable and compensable as preparations to perform; it also submitted an expert report and payroll/subcontract documentation.
- The Board found many pre‑NTP monthly payroll costs were preparations to perform and partially allowable, limited recoverable standby labor and subcontractor retention to three months (instead of the eight months claimed), allowed G&A (8.7%) and 10% profit (with no profit on subcontractor costs), and awarded Pro‑Built a net additional recovery of $289,736.47 plus CDA interest from the claim date.
Issues
| Issue | Plaintiff's Argument (Pro‑Built) | Defendant's Argument (Corps) | Held |
|---|---|---|---|
| Are pre‑NTP standby labor costs recoverable after a termination for convenience? | Standby monthly employment contracts were necessary and reasonable given Afghan labor markets and security; such preparation costs are compensable. | Unreasonable to incur costs before NTP (esp. design‑build where construction couldn’t start); such costs should be disallowed. | Recoverable to the extent they are reasonable preparations. Board allowed standby labor but limited duration. |
| For what period are pre‑NTP standby labor/subcontractor costs reasonable? | Entitled to full eight months of salaries and subcontract retention claimed (Aug 2011–Mar 2012). | None of the claimed pre‑NTP costs were reasonable; contractor should have reassigned or separated workers. | Reasonable retention limited to three months after award (plus a total recovery calculated for that period). |
| Are subcontractor retention costs (NTCC, security) and DBA insurance compensable? | Subcontractor teams had to be assembled to ensure availability; DBA insurance and subcontract direct labor are compensable. | Subcontract language and condition‑precedent arguments show subcontracts were not effective; costs unreasonable pre‑NTP. | Allowed subcontractor direct labor for three months (total $90,300) and DBA insurance already paid; rejected argument that subcontract was ineffective. |
| Are G&A, profit, and settlement preparation costs allowable? | Entitled to 8.7% G&A, 10% profit, and settlement/legal/accounting costs. | Corps did not meaningfully contest rates; argued against profit if contractor would have sustained loss. | Allowed 8.7% G&A and a 10% profit (but no profit on subcontractor costs); allowed $9,875 for settlement/legal costs. Corps failed to prove a likely loss. |
Key Cases Cited
- Meeks v. United States, 758 F.2d 661 (Fed. Cir. 1984) (contractor may recover reasonable standby labor incurred in preparation to perform where those costs were legitimately required to gear up for the contract)
- Kellogg Brown & Root Servs. v. United States, 728 F.3d 1348 (Fed. Cir. 2013) (reasonableness standard for costs is flexible and fact‑specific; business judgment matters in settlements)