SLSCO, LTD., Plaintiff, v. THE UNITED STATES, Defendant.
No. 24-447
In the United States Court of Federal Claims
June 24, 2025
HADJI, Judge.
Nelson Kuan, Trial Attorney, Eric P. Bruskin, Assistant Director, Patricia M. McCarthy, Director, Commercial Litigation Branch, Brett A. Shumate, Acting Assistant Attorney General, Civil Division, United States Department of Justice, Washington, D.C., and J. Drew Piersa, Assistant District Counsel, Los Angeles District, United States Army Corps of Engineers, Los Angeles, California, for Defendant.
OPINION AND ORDER
HADJI, Judge.
Plaintiff SLSCO, Ltd. (SLS) brings this action against the United States under the Tucker Act,
BACKGROUND
Plaintiff was one of several construction contractors tasked by the Government to construct a border wall on the United States’ southern border in 2019 and 2020. Am. Compl. ¶ 2. On April 9, 2019, the United States Army Corps of Engineers (USACE) awarded Contract No. W912PP-19-C-0018 (the Contract) to SLS for “a design-build project consisting of approximately 46 miles of primary bollard fence replacement including gates, drainage, roads, power distribution, demolition and disposal in El Paso Sector, New Mexico.” Pl.‘s Ex. 1 at 1; see also Am. Compl. ¶¶ 36, 38. Work did not commence immediately due to ongoing environmental litigation. Am Compl. ¶ 36.
Several months later, in modification P00006, USACE again unilaterally modified the Contract to add an additional segment of border wall to the work requirements. Pl.‘s Ex. 1 at ¶ 2. The additional 2.4-mile segment covered “steep and rocky terrain,” differеnt in kind from the terrain previously involved in the Contract. Am. Compl. ¶ 40. Although Plaintiff assessed that additional days were necessary to complete the primary barrier and again raised scheduling concerns, USACE added no additional construction days to complete the extra 2.4 miles. Am. Compl. ¶¶ 41-43. Instead, USACE required that construction of the entire 48.4 miles of primary border barrier be completed no later than December 31, 2020. Am. Compl. ¶ 43. However, as part of the same action, USACE extended the overall contract completion date to the end of June 2021, giving Plaintiff additional time to complete the attributes (electrical, CCTV, fiber, and lighting). Am. Compl. ¶ 43. Again, Plaintiff did not assert any right to an adjustment in accordance with the Changes Clause of the Contract. See Pl.‘s Ex. at 7.
Plaintiff alleges that, in performing the Contract, it faced significant unexpected delays caused by events beyond its control, including severe weather, the COVID-19 pandemic, and Government-caused delays and requirements associated with blasting operations. Am. Compl. ¶¶ 44-57. Nonеtheless, Plaintiff completed the original 46-mile segment of border wall in mid-December 2020, as well as “nearly all of the 2.4-mile segment . . . except for approximately 2000 linear feet” located on a mountain peak. Am. Compl. ¶¶ 58-59. Plaintiff does not allege that, when the performance period closed, it notified USACE of any delays within 10 days as required by
On January 21 and 23, 2021, USACE formally suspended Plaintiff‘s performance on the Contract. Am. Compl. ¶ 27. On May 1, 2021, USACE terminated the Contract in its entirety for convenience. Am. Compl. ¶¶ 27, 60.
USACE issued the initial CPAR for the Contract on October 10, 2020 (the 2020 CPAR). Am. Compl. ¶ 62. USACE rated Plaintiff as “Marginal” for each evaluation factor. Am. Compl. ¶ 62. Plaintiff challenged the 2020 CPAR, with the Contracting Officer ultimately recognizing that the “Government failed to meet many of the requirements and guidelines in the FAR and CPARS guidance.” Am. Compl. ¶ 64. The Contracting Officer directed that the 2020 CPAR be vacated and that Plaintiff‘s performance be reassessed. Am. Compl. ¶ 64.
On September 7, 2022, Plaintiff submitted a claim pursuant to the CDA and
On March 23, 2023, the Contracting Officer issued a COFD granting in part and denying in part the Claim. Am. Compl. ¶ 15; see generally Pl.‘s Ex. 1. Specifically, the Contracting Officer concluded that Plaintiff‘s Schedule and Regulatory Compliance ratings warranted adjustments from “Marginal” to “Satisfactory.” Pl.‘s Ex. 1 at 6; see also Am. Compl. ¶ 124. However, the Contracting Officer affirmed Plaintiff‘s “Marginal” Quality and Management ratings. Am. Compl. ¶¶ 20, 124; Pl.‘s Ex. 1 at 6. The Contracting Officer deemed Plaintiff‘s arguments with respect to timeliness meritless. Am. Compl. ¶ 20; Pl.‘s Ex. 1 at 8.
On March 22, 2024, Plaintiff brought this suit under the Tuсker Act,
LEGAL STANDARDS
The Government moves to dismiss this suit pursuant to Rules 12(b)(1) and 12(b)(6) of the Rules of the Court of Federal Claims. Rule 12(b)(1) permits dismissal for lack of subject-matter jurisdiction.1 This Court‘s jurisdiction is dependent on an unequivocal waiver of sovereign immunity by the United States. United States v. Testan, 424 U.S. 392, 399 (1976). If the Court determines that it lacks subject-matter jurisdiction, it must dismiss the action. Rule 12(h)(3); see Steel Co. v. Citizens for a Better Env‘t, 523 U.S. 83, 94 (1998). The plaintiff bears the burden to demonstrate that jurisdiction is proper by a preponderance of the evidence. Reynolds v. Army & Air Force Exch. Serv., 846 F.2d 746, 748 (Fed. Cir. 1988). When considering a motion to dismiss under Rule 12(b)(1), “a court must accept as true all undisputed facts asserted in the plaintiff‘s complaint and draw all reasonable inferences in favor of the plaintiff.” Trusted Integration, Inc. v. United States, 659 F.3d 1159, 1163 (Fed. Cir. 2011).
DISCUSSION
Plaintiff alleges that USACE‘s actions were not only unlawful, arbitrary, capricious, and an abuse of discretion,3 but constitute a breach of the Contract, a breach of the covenant of good faith and fair dealing, and a breach of the implied duty to cooperate. Am. Compl. ¶ 15. The Government moves to dismiss Plaintiff‘s Amended Complaint for lack of standing (with respect to its procedural allegations) and failure to state a claim (with respect to its substantive allegations). See generally ECF 32.
I. Plaintiff Does Not Have Standing to Challenge Procedural Violations Relating to the Issuance of the 2021 CPAR
The Court begins by addrеssing the Government‘s standing argument. As relevant here, Plaintiff alleges that USACE failed to follow required procedures for issuing a CPAR assessment.4 See, e.g., Am. Compl. ¶ 130. Specifically, Plaintiff alleges that, in violation of
In Todd Construction, the Federal Circuit considered whether a contractor contesting an adverse performance evaluation had standing to challenge the Government‘s alleged failure to follow four procedural requirements, to include: (1) re-evaluating the interim “unsatisfactory” rating every three months; and (2) issuing a final evaluation within sixty days of project completion. Todd Constr., L.P. v. United States, 656 F.3d 1306, 1315 (Fed. Cir. 2011). There, the Federal Circuit recognized that in cases involving fundamental procedural rights, some courts of appeals have relaxed the causation standard when determining standing for procedural injuries, and deemed it “satisfied when following the correct procedures plausibly may have changed the result.” Id. (emphasis added).6 However, the Federal Circuit explained that, in cases where a plaintiff alleges “minor procedural violations,” it must “show that it was prejudiced by a significant error” to have standing. Id. Put another way, the plaintiff must show that “but for the error, it would have had a substantial chance” of redress. Id. (citing Labatt Food Serv., Inc. v. United States, 577 F.3d 1375, 1378 (Fed. Cir. 2009)). The Federal Circuit concluded that the procedural timing requirements raised by the plaintiff in that case “d[id] not fall into the category of fundamental procedural rights” and declined to apply the relaxed standard to such “minor procedural violations.” Id.
Here, Plaintiff alleges procedural violations that arе cut from the same cloth as those in Todd Construction. Specifically, Plaintiff alleges that the 2021 CPAR impermissibly covers a two-year period of performance and was “woefully late” with respect to both the 2020 and 2021 performance periods. Am. Compl. ¶¶ 82, 84; see also ECF 33 at 15. As in Todd Construction, the allegations here relate to timeliness; they concern the frequency of evaluations and the timing of issuance. 656 F.3d at 1310. Although Plaintiff attempts to distinguish Todd Construction by arguing that the procedural violations here “were neither minor nor inconsequential,” ECF 33 at 16, 23-24, Plaintiff ignores that two of the purported procedural errors in Todd Construction were remarkably similar to the ones alleged here. Compare Am. Compl. ¶ 77 (alleging failure to evaluate annually) with 656 F.3d at 1315 (alleging failure to re-evaluate the interim “unsatisfactory” rating every
Resisting this reasoning, Plaintiff effectively resorts to asking the Court to ignore binding precedent. ECF 33 at 25 (“To the extent the Federal Circuit in Todd Construction requires [allegations of prejudice], this is in error.“). The Court cannot ignore the precedent of a higher court. “[T]he Court of Federal Claims may not deviate from the precedent of the . . . Federal Circuit any more than the Federal Circuit can deviate from the precedent of the . . . Supreme Court.” Crowley v. United States, 398 F.3d 1329, 1335 (Fed. Cir. 2005). The Federal Circuit has held that, to establish standing in connection with a minor procedural violation, a plaintiff must allege prejudice. Todd Constr., 656 F.3d at 1315-16. The Court faithfully follows that precedent today, and thus turns to an analysis of Plaintiff‘s allegations of prejudice.
In its Amended Complaint, Plaintiff alleges four types of prejudice. See Am. Compl. ¶¶ 87-91. The leading one is that the delay in issuance “deprived SLS of the ability to address, and where necessary, improve, its performance in future reviеw periods.” Am. Compl. ¶ 88. Plaintiff maintains that, had the Government timely issued its performance evaluations, it “would have had an earlier opportunity to respond to the government‘s concerns and correct any perceived deficiencies.” Am. Compl. ¶ 88 (emphasis added).
Crucially, as in Todd Construction, Plaintiff does not allege in connection with this so-called prejudice that “the outcome of the performance evaluation[] would have been any different if the purported procedural errors had not occurred” or that “government compliance with its procedural standards would have changed its actions.” 656 F.3d at 1316. Instead, Plaintiff merely alleges it was deprived of an opportunity to take curative action, leaving it “no chance to correct or address purported performance issues.” See Am. Compl. ¶¶ 12, 88 (“SLS could either have disputed sooner, or corrected” the CPAR) (emphasis added). When faced with almost identical allegations of harm in Todd Construction, the Federal Circuit declined to find prejudice and concluded that the plaintiff lacked standing with respect to procedural violations. 656 F.3d at 1316 (“Although [the plaintiff] alleged it was not provided ‘an opportunity to cure any perceived deficiencies in
Skipping ahead, the third prejudice Plaintiff cites is more of the same. Specifically, Plaintiff alleges that “the [G]overnment‘s failure to timely issue the 2021 CPAR has hindered SLS‘s ability to protect its rights and reach a resolution on this issue faster.” Am. Compl. ¶ 90. Plaintiff maintains that such delay “made it more difficult both for SLS to get an accurate account of its performance during the relevant period, and for SLS to challenge the accuracy of the CPAR it did receive.” Id. ¶ 90. Like Plaintiff‘s first allegation of prejudice, this prejudice is based on lost opportunity. See id. ¶ 88 (lost ability to address performance), id. at ¶ 90 (lost ability to protect rights). But lost opportunity alone is not sufficient to establish prejudice, and Plaintiff has not alleged any plausible facts to indicate that, had required procedures been followed, it “would have taken curative action or that the performance evaluation would have been different.” Todd Constr., 656 F.3d at 1316. Instead, when presented with the opportunity to clarify its position, Plaintiff merely asserts that, “if the CPAR [had] been issued earlier, SLS might have been able to either alter its performance or bring a challenge more quickly . . . which might have altered the outcome of the COFD.” ECF 33 at 19 (emphasis added). These mere possibilities are not sufficient to establish prejudice. As discussed, the standard for minor procedural violations is not whether “following the correct procedures plausibly may have changed the result;” it is whether Plaintiff has shown actual prejudice. Todd Constr., 656 F.3d at 1315-16.
Plaintiff‘s second and fourth allegations of prejudice fare no better. First, Plaintiff alleges without explanation that, “by combining two review periods . . . USACE has artificially downgraded the 2021 CPAR, making it seem as if SLS has shown no improvement.” Am. Compl. ¶ 89. On its face, Plaintiff‘s allegation appears to allege that the outcome of its performance evaluation would have been different had the purported procedural error not occurred. However, the Government disputes this allegation, ECF 32 at 12, and Plaintiff offers no plausible facts to support its conclusory allegation. Nothing in the Amended Complaint explains why Plaintiff believes that a separate CPAR for the 2020-2021 performance period would have rated SLS‘s performance any higher than the previous period. Instead, Plaintiff simply complains that “SLS did not have the benefit of being put on notice of potential problems by the first CPAR it should have received,” Am. Compl. ¶ 89, a grievance born of lost opportunity, much like Plaintiff‘s first and third alleged harms.8
For the foregoing reasons, the Court finds that Plaintiff has not shown, as required, that it was prejudiced by a significant error. Todd Constr., 656 F.3d at 1315. Instead, Plaintiff‘s allegations related to prejudice are thin and conclusory to the extent they are made at all. Having failed to show prejudice, Plaintiff lacks standing to sue with respect to the procedural violations alleged here.
II. Plaintiff Fails to State a Claim for Relief
In contrast to the procedural allegations described in Part I, Plaintiff has standing to sue based on its substantive allegations, including that USACE: (1) breached the Contract (Count I); (2) acted unlawfully, arbitrarily, and capriciously in assigning an inaccurate and unfair performance evaluation (Count II); (3) breached the covenant of good faith and fair dealing (Count III); and (4) breached the duty to cooperate (Count IV).
A. Plaintiff‘s Breach of Contract Claim (Count I)
In Count I, Plaintiff argues that USACE‘s evaluation of its performance in the 2021 CPAR was substantively inaccurate,9 in violation of
To have a valid claim for breach of contract, Plaintiff bears the burden of showing: (A) a valid contract between the parties; (B) an obligation or duty arising out of the contract; (C) a breach of that duty; and (D) damages caused by the breach. Peanut Wagon,
It is undisputed that USACE and SLS entered into a valid contract. See ECF 30-1 at 2; Am. Compl. ¶ 36. As such, the Court‘s inquiry begins with the second element, whether the Government had an obligation or duty arising out of the Contract to provide a fair and accurate performance report to Plaintiff. Here, Plaintiff does not allege that the Contract contains any express reference to
Courts have recognized that the CPAR review process and its requirements outlined in
FAR 42.15 are incorporated into all government contracts, and benefit both the government and thе contractor. Thus, the government‘s failure here to comply with the requirements ofFAR 42.15 governing CPARs, as outlined above, constitutes a breach of the Contract.
Am. Compl. ¶ 132. See also ECF 33 at 39 (“By entering into the Contract, the government assumed an obligation and duty to conduct a performance review process that complies with
“Whether and to what extent material has been incorporated by reference into a host document is a question of law.” Cook Biotech, Inc. v. Acell, Inc., 460 F.3d 1365, 1376 (Fed. Cir. 2006). Here, Plaintiff has not cited—and the Court is unaware of—any case that stands for the proposition that
[The Fеderal Circuit] has been reluctant to find that statutory or regulatory provisions are incorporated into a contract with the government unless the contract explicitly provides for their incorporation. Smithson v. United States, 847 F.2d 791, 794 (Fed. Cir. 1988). In Smithson, the court warned that wholesale incorporation of regulations into a contract would allow the contracting party to “choose among a multitude of regulations as to which he could claim a contract breach—and thus ‘[a] wholly new ground of obligation would be summarily created by mere implication.‘” Id. (internal quotation omitted).
Likewise, the Court rejects Plaintiff‘s contention that
CDA jurisdiction exists when the claim has some relationship to the terms or performance of a government contract. A contractor‘s claim need not be based on the contract itself (or a regulation that can be read into the contract) as long as it relates to its performance under the contract.
656 F.3d at 1314 (internal quotation marks and citation omitted) (emphasis in original). The Federal Circuit went on to clarify that “[i]n holding that the Claims Court has jurisdiction under the CDA, we do not suggest that the performance evaluation regulation should be read into the contracts. Rather, the regulation applies of its own force and directly governs the parties’ performance under the contracts.” Id. at 1314 n.6.
Having found that
B. Plaintiff‘s Claim for an Unlawful, Arbitrary, and Capricious CPAR (Count II)
Count II alleges that USACE‘s evaluation of SLS‘s performance in the 2021 CPAR is unlawful under
The FAR mandates that agencies prepare past performance evaluations and submit such evaluations into CPARS, the Governmentwide evaluation reporting tool for all past performance reports.
should include a clear, non-technical description of the principal purpose of the contract or order. The evaluation should reflect how the contractor performed. The evaluation should include clear relevant information that accurately depicts the contractor‘s performance, and be based on objective facts supported by program and contract or order performance data. The evaluations should be tailored to the contract type, size, content, and complexity of the contractual requirements.
The FAR further provides that each assessment shall include an evaluation of the following factors: (1) technical (quality of product or service); (2) cost control; (3) schedule/timeliness; (4) management or business relations; and (5) small business subcоntracting.
As relevant here, the definition of a “Marginal” rating is as follows:
Performance does not meet some contractual requirements. The contractual performance of the element or sub-element being evaluated reflects a serious problem for which the contractor has not yet identified corrective actions. The contractor‘s proposed actions appear only marginally effective or were not fully implemented.
Before addressing the merits, the Court must first address the appropriate standard of review.10 The CDA provides that review of a contracting officer‘s decision subject to the Act must “proceed de novo in accordance with the rules of the appropriate court.”
In Todd Construction, the Federal Circuit recognized that, to state a claim for relief arising from the assignment of a performance evaluation, “[a plaintiff] must plead facts which give rise to a plausible inference that the government abused its discretion in awarding the negative performance ratings.” 656 F.3d at 1316. Although Plaintiff characterizes this statement as dicta and maintains the Federal Circuit “never directly addressed whether a deferential standard or the CDA‘s de novo standard applied,” ECF 33 at 45, the Court disagrees. The Federal Circuit‘s position in Todd Construction is clear and unequivocal; courts must review performance evaluations for an abuse of discretion. Todd Constr., 656 F.3d at 1316.
That is not to say that the Court disregards its obligation under the CDA to apply this substantive standard de novo, rather than through a deferential standard of review. The Federal Circuit has explained:
The plain language of the CDA . . . make[s] it clear that, in court litigation, a contractor is not entitled to the benefit of any presumption arising from the contrаcting officer‘s decision. De novo review precludes reliance upon the presumed correctness of the decision. Thus, once an action is brought following a contracting officer‘s decision, the parties start in court or before the board with a clean slate.
The CDA‘s de novo standard—rooted partly in the statute‘s command that “[s]pecific findings of fact are not required” to be made by the contracting officer, and “[i]f made, specific findings of fact are not binding in any subsequent proceeding,”
41 U.S.C. § 7103(e) —requires a determination by the [Court] on the evidentiary record developed in the proceeding. One aspect of that requirement is that the statute “demands an objective inquiry, not an evaluation of the contracting officer‘s subjective beliefs” when ascertaining whether the government has met its burden.
Dep‘t of Transp. v. Eagle Peak Rock & Paving, Inc., 69 F.4th 1367, 1375-76 (Fed. Cir. 2023).
In reconciling the CDA‘s de novo standard and the Federal Circuit‘s admonition to review performance ratings for an abuse of discretion, the Court finds Eagle Peak instructive. Plaintiff argues that Eagle Peak stands for the proposition that “a deferential ‘arbitrary and capricious’ or ‘abuse of discretion’ standard is simply not consistent with the CDA‘s commands.” ECF 33 at 46. The Court‘s reading of Eagle Peak is more nuanced. In Eagle Peak, the Federal Circuit found that the Board of Contract Appeals failed to separate its analysis of whether a contracting officer‘s decision to terminate a contract for default was pretextual (which required examination of the officer‘s reasoning) from the required de novo analysis of whether a termination for default was reasonable under contract standards. 69 F.4th at 1377-78. After discussing how a substantive “reasonableness” standard applied in failure-to-make progress cases, the Federal Circuit noted that the CDA requires an objective inquiry into whether the Government met its burden in establishing the contracting officer had a reasonable basis for terminating a contract for default. Id. at 1375-76. The Federal Circuit concluded that, in a CDA case, adjudication must proceed on the evidence and arguments made in the adjudicatory proceeding and, in that case, the “substantive contrаct standard doubly considers what is ‘reasonable’ . . . but the CDA tribunal must apply that substantive contract requirement de novo, not through one of the deferential standards of review.” See also id. at 1377 (emphasis added). Put differently, the Federal Circuit reviewed de novo whether the substantive standard was met. Id.
The Court discerns no reason the same logic would not apply in similar cases, especially as the Federal Circuit has previously recognized that, notwithstanding the CDA‘s requirement of de novo review, some deference may still be appropriate in a CDA case. See, e.g., Burnside-Ott Aviation Training Ctr. v. Dalton, 107 F.3d 854, 859-60 (Fed. Cir. 1997) (interpreting contract terms de novo in a CDA case to find that the Board of Contract Appeals may not reverse a contracting officer‘s affirmance of a discretionary decision “unless the discretion employed in making the decision is abused“). The Court
Accordingly, applying the binding precedent of Todd Construction, and considering it alongside consistent Federal Circuit cases, the Court reviews de novo whether Plaintiff met its burden in plausibly alleging that the Contracting Officer abused her discretion in assigning (and ultimately affirming) negative performance ratings.
3. Minimum Requirements for Performance Reviews
Turning to Plaintiff‘s substantive challenges concerning the content of its CPAR, a decision constitutes an abuse of discretion if it is found to be arbitrary and capricious. U.S. Fid. & Guar. Co. v. United States, 676 F.2d 622, 630 (Ct. Cl. 1982). “[A] showing that there was clearly no reasonable basis for the official action would be enough to demonstrate an abuse of discretion.”11 JKB Sols. and Servs., LLC v. United States, 170 Fed. Cl. 241, 256 (Fed. Cl. 2024) (citing Keco Indus., Inc. v. United States, 492 F.2d 1200, 1204-05 (Ct. Cl. 1974), abrogated on other grounds by Impresa Construzioni Geom. Domenico Garufi v. United States, 238 F.3d 1324, 1331-33 (Fed. Cir. 2001)).
Here, Plaintiff first alleges that the 2021 CPAR fails to meet the minimum requirements for performance reviews because it failed to evaluate Plaintiff‘s technical performance in constructing the border wall. Am. Compl. ¶¶ 92-99. Specifically, Plaintiff alleges:
the CPAR does not contain any discussion of the quality of the work that SLS had performed up until [the contract was terminated for convenience]—indeed, there is no discussion of whether the bollard fence or other structures meet contractual requirements (they do), nor of the quality of SLS‘s workmanship on these efforts.
Am. Compl. ¶ 95. In Plaintiff‘s view, such omission runs afoul of “the most fundamental requirement оf a performance review—assessing the actual performance of the contractor in accomplishing the purpose of the Contract.” Am. Compl. ¶ 93.
However, no language in the FAR expressly imposes such a requirement. As discussed, the FAR provides that an “evaluation should include a clear, non-technical description of the principal purpose of the contract or order” and “reflect how the contractor performed.”
Not only does the FAR‘s plain language not compel Plaintiff‘s interpretation, but Plaintiff‘s statements concerning the FAR requirements constitute legal conclusions, not facts. Though the Court indulges all reasonable inferences in favor of Plaintiff‘s factual allegations, Fishermen‘s Finest, 59 F.4th at 1274, Plaintiff‘s legal conclusions are not entitled to the assumption of truth. Iqbal, 556 U.S. at 679. Left only with Plaintiff‘s factual allegations, the Court discerns no basis to support “a plausible inference that the government abused its discretion” by declining to address in the detail wished for by Plaintiff—the quality of its work. Todd Constr., 656 F.3d at 1316.
4. Management Rating
Plaintiff next complains that its “Marginal” rating on “Management” incorrectly attributed issuеs with the project to a purported lack of effective project management. See Am. Compl. ¶ 100. Specifically, the 2021 CPAR reported that “[l]ack of adequate personnel, lack of design approvals and an acceptable schedule . . . greatly impacted SLSCOs ability to manage the project effectively.” ECF 10-1 at 4.
Here, Plaintiff alleges three bases for challenging its “Marginal” rating. In addition to arguing that the CPAR failed to assess Plaintiff‘s actual performance on the “principal purpose of the contract or order,” Am. Compl. ¶ 114, as discussed above, Plaintiff alleges that the “Marginal” rating ignores Government-caused and other excusable delays, to include USACE‘s unilateral addition of 2.4 miles to the project without an extension of time, unreasonable agency demands, and COVID-related and weather delays. See Am. Compl. ¶¶ 101-08. Plaintiff maintains that, because USACE upgraded Plaintiff‘s “Schedule” rating to “Satisfactory” following Plaintiff‘s initial challenge, so too must USACE upgrade Plaintiff‘s “Management” rating, for “a ‘Mаnagement’ rating based on schedule problems cannot stand” under such circumstances. Am. Compl. ¶ 100.
But Plaintiff conflates the Schedule evaluation with the Management evaluation. Per the FAR, “Schedule” and “Management” are two separate evaluation factors. See
Next, Plaintiff alleges that its “Marginal” Management rating ignores the Government‘s acceleration of construction for a one-day photo opportunity at the behest of the USACE Chief of Construction and Project Engineer, who allegedly agreed to set aside contracting requirements in order to meet a political construction milestone. See Am. Compl. ¶¶ 109-112. Plaintiff does not allege that these officials were authorized to waive contracting requirements. As such, given the long-settled authority that only contracting officers may modify a contract or issue a contract change, the Court finds this allegation wholly unsupported by the relevant legal authorities. See
As a general matter, Plaintiff simply has not plausibly pled any facts that entitle it to relief. To plausibly plead an arbitrary and capricious assignment of a “Marginal” rating, a contractor must plead facts demonstrating that its performance did in fact meet contract requirements, and that the contractor‘s actions were effective in resolving the identified problem(s). See
5. Quality Rating
Plaintiff next alleges that the “Marginal” rating it received for the Quality evaluation factor was improper for two reasons. First, Plaintiff alleges that the same problems with the CPAR that affected the Management rating similarly affected Plaintiff‘s Quality rating. Am. Compl. ¶ 117. For the same reasons discussed above, this argument fails.
Next, Plaintiff challenges its Quality rating due to its singular focus on quality control issues rather than the quality of the work Plaintiff was hired to perform. Am. Compl. ¶ 119. This claim similarly fails. First, as previously discussed, Plaintiff points to no actual requirement that the Government evaluate a contractor‘s performance on “the principal purpose of the contract or order” and “how the contractor performed” in meeting that purpose. See Am. Compl. ¶ 121.
Second, CPARS Guidance provides that, for construction contracts, “Quality reflects the contractor‘s management of the quality control program, as well as the quality of the work itself.” Guidance for the Contractor Performance Assessment Reporting System ¶ A3.27.4.1 (July 2024), Ex. C at 45, ECF 11-3. Assessing officials are thus directed to “[s]pecifically describe contractor‘s quality control system.” Id. Given this guidance, the Court finds that there was a reasonable basis for the Contracting Officer to base Plaintiff‘s Quality assessment on documentеd quality control issues, and did not abuse their discretion by deeming quality control “necessary to ensure an end product which complies with the contract requirements.” ECF 10-1 at 7. Moreover, the Court notes that, though the CPAR itself was silent as to the quality of Plaintiff‘s work, the COFD issued following Plaintiff‘s Claim explicitly noted deficiencies in quality (e.g., drainage gates welded shut, miles of ungrouted barrier) and tied those deficiencies directly to Plaintiff‘s lack of appropriate quality control personnel. See ECF 30-1 at 7 (“[W]ithout these proper quality control personnel, the quality of the project suffered.“). Plaintiff does not deny those deficiencies or allege that its performance actually met the quality and quality control requirements of the Contract, as required to contest a “Marginal” rating. See
Taken as a whole, nothing in Plaintiff‘s Complaint “give[s] rise to a plausible inference that the government abused its discretion in awarding thе negative performance ratings.” Todd Constr., 656 F.3d at 1316. At most, Plaintiff‘s arguments merely reflect a disagreement with USACE‘s discretionary judgment. Accordingly, Count II is dismissed.
The Court next turns to the question of whether “USACE breached the covenant of good faith and fair dealing by issuing a procedurally and substantively deficient CPAR that USACE knew failed to meet the requirements of the FAR and DoD Guidance.” Am. Compl. ¶ 141.
Every contract, including one with the federal government, imposes upon each party an implied duty of good faith and fair dealing in its performance and enforcement. Metcalf Constr. Co. v. United States, 742 F.3d 984, 990 (Fed. Cir. 2014) (quoting Restatement (Second) of Contracts § 205 (1981)). The covenant requires a party “not to interfere with the other party‘s performance and not to act so as to destroy the reasonable expectations of the other party regarding the fruits of the contract.” Centex Corp. v. United States, 395 F.3d 1283, 1304 (Fed. Cir. 2005); see also Restatement (Second) of Contracts § 205 (1981). “Although the implied duty of good faith and faith dealing attaches to every contract, what that duty entails depends in part on what that contract promises (or disclaims).” Precision Pine & Timber, Inc. v. United States, 596 F.3d 817, 830 (Fed. Cir. 2010).
To be sure, “a breach of the implied duty of good faith and fair dealing does not require a violation of an express provision in the contract.” Metcalf Constr., 742 F.3d at 994 (emphasis in original). However, “[t]he implied duty of good faith and fair dealing cannot expand a party‘s contractual duties beyond those in the express contract or create duties inconsistent with the contract‘s provisions.” Precision Pine & Timber, Inc. v. United States, 596 F.3d 817, 831 (Fed. Cir. 2010). In other words, “the duty of good faith must be connected to a duty clearly imposed by the contract itself.” 2 E. Allan Farnsworth, Farnsworth on Contracts § 7.17 at 358 (3d ed. 2004); see also Dobyns v. United States, 915 F.3d 733, 740-41 (Fed. Cir. 2019) (“Inferring an implied duty . . . without a tether to the contract terms, would fundamentally alter the balance of risks and benefits associated with the 2007 agreement and cannot be the basis of a claim for breach of the implied duty of good faith and fair dealing.“). This is because “while the implied duty exists because it is rarely possible to anticipate in contract language every possible action or omission by a party that undermines the bargain, the nature of that bargain is central to keeping the duty focused оn ‘honoring the reasonable expectations created by the autonomous expressions of the contracting parties.‘” Metcalf Constr., 742 F.3d at 991 (citation omitted).
Here, Plaintiff alleges it was deprived of the benefits of its bargain under the Contract, which included the right to a fair and accurate CPAR. Am. Compl. ¶ 142. However, Plaintiff makes no showing that the alleged breach was in some way connected to the bargain struck in the Contract. Instead, Plaintiff‘s alleged entitlement stems from
In reaching this conclusion, the Court notes that the facts desсribed in the Complaint bear no resemblance to the types of cases that are typical of a good faith and fair dealing case:
Cases in which the government has been found to violate the implied duty of good faith and fair dealing typically involve some variation on the old bait-and-switch. First, the government enters into a contract that awards a significant benefit in exchange for consideration. Then, the government eliminates or rescinds that contractual provision or benefit through a subsequent action directed at the existing contract . . . . the government may be liable for damages when the subsequent government action is specifically designed to reappropriate the benefits the other party expected to obtain from the transaction, thereby abrogating the government‘s obligations under the contract.
Precision Pine, 596 F.3d at 829 (finding no breach where government‘s actions were not “specifically targeted” and did not reappropriate any benefit guaranteed by the contracts). Here, there is no indicia of governmental bait-and switch or double crossing. Nor is there any indication that the Government sought to injure Plaintiff in some way. See White Buffalo Constr., Inc. v. United States, 546 F. App‘x 952, 956 (Fed. Cir. 2013). Instead, Plaintiff‘s claim arises from a disagreement over the content of the 2021 CPAR and whether it accurately reflects SLS‘s performance under the Contract. See Am. Compl. ¶¶ 142-43. However, the fact that USACE reached a different conclusion than SLS regarding SLS‘s performance and the contents of the CPAR does not, on its own, state a breach of the duty of good faith and fair dealing. See Dotcom Assocs. I, LLC v. United States, 112 Fed. Cl. 594, 600 (2013) (rejecting plaintiff‘s “failure-to-agree-with-plaintiff theory of breach of the implied covenant of good faith and fair dealing.“).
For the foregoing reasons, the Court finds that Plaintiff‘s Complaint simply does not “contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.‘” Ashcroft, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). Accordingly, Count III is dismissed.
D. Plaintiff‘s Claim for Breach of the Implied Duty to Cooperate (Count IV)
Plaintiff similarly alleges that USACE breached its implied duty to cooperate by issuing a CPAR that failed to аccurately reflect its performance. Am. Compl. ¶ 147. In Plaintiff‘s view, issuance of an inaccurate CPAR “hindered SLS‘s performance on the Contract and resulted in substantial long-term damage to SLS‘s ability to procure additional work on behalf of the federal government.” Am. Compl. ¶ 148.
CONCLUSION
For the foregoing reasons, the Government‘s Motion to Dismiss (ECF 32) is GRANTED. Plaintiff‘s Amended Complaint is DISMISSED in its entirety. The allegations regarding procedural violations are dismissed for lack of standing pursuant to Rule 12(b)(1), while the remaining contentions are dismissed for failure to state a claim upon which relief can be granted pursuant to Rule 12(b)(6). The Clerk is DIRECTED to enter judgment accordingly.
IT IS SO ORDERED.
PHILIP S. HADJI
Judge