Public Contract Law Journal

Drone Cruise Enterprises, Inc. v. United States Air Force - Brief for the Appellee

by Bryan Medema & Rachel Van Maasdam

Rachel Van Maasdam is a 2018 graduate of the LL.M program at The George Washington University and an active-duty Judge Advocate in the United States Air Force, currently serving as the Chief of the Contract Law Field Support Center at Andrews Air Force Base. Bryan Medema is a 3L at The George Washington University Law School. Any views expressed herein are the authors’ own and do not represent the views of their respective past or present employers.

Table of Authorities

Federal Cases

Armour of America v. United States, 96 Fed. Cl. 726 (2010)
Associated Traders, Inc v. United States, 144 Ct. Cl. 744, 751 (1959)
Astro-Space Labs., Inc v. United States, 470 F.2d 1003 (Ct. Cl. 1972)
Cascade Pac. Int’l v. United States, 773 F.2d 287 (Fed. Cir. 1985) passim
Churchill Chem. Corp. v. United States, 602 F.2d 358 (Ct. Cl. 1979)
Composite Laminates v. United States, 27 Fed. Cl. 310, 326 (1992)
Consol. Airborne Sys., Inc. v. United States, 172 Ct. Cl. 588 (1965)
Darwin Const. Co. v. United States, 811 F.2d 593 (Fed. Cir. 1987)
DeVito v. United States, 188 Ct. Cl. 979, 413 F.2d 1147 (1969)
Fairfield Sci. Corp. v. United States, 222 Ct. Cl. 167 (1979)
Lassiter v. United States, 60 Fed. Cl. 265, 270 (2004)
McDonnell Douglas Corp. v. United States, 35 Fed. Cl. 358, 368 (1996)
Mega Constr. Co. v. United States, 29 Fed. Cl. 396, 484 (1993)
Roxco Ltd. v. United States, 60 Fed. Cl. 39 (2004)
Schlesinger v. United States, 182 Ct. Cl. 571, 581 (1968)
Seaboard Lumber Co. v. United States, 48 Fed. Cl. 814, 819 (2001)
United States v. Axman, 234 U.S. 36 (1914)
Whitlock Corp. v. United States, 159 F. Supp. 602 (Ct. Cl. 1958)

Board Decisions

Fulford Mfg. Co. v. United States, ASBCA No. 2143, et al., 1955 WL 808 (May 20, 1955) passim
Lafayette Coal Co., ASBCA No. 32174, 89-3 BCA 21,963
Marmac Indus., Inc., ASBCA No. 12158, 72-1 BCA P9249

Statutes & Regulations

28 U.S.C. § 1491(a)(2)
28 U.S.C. § 1295(a)(3)
FAR 49.402-2(a), 48 C.F.R. 49.402-2
FAR 49.402-3, 48 C.F.R. 49.402-3 passim
FAR 49.402-6, 48 C.F.R. 49.402-6
FAR 52.249-8, 48 C.F.R. 52.249-8 passim

IN THE UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT

DRONE CRUISE ENTERPRISE, INC.,
Appellant
v.

UNITED STATES AIR FORCE
Appellee

APPEAL FROM THE COURT OF FEDERAL CLAIMS IN NO. 18-1184C
BRIEF FOR THE APPELLEE

STATEMENT OF RELATED CASES

We know of no other appeal in or from this action that previously was before this Court or another appellate court under the same or similar title, and we know of no appeals before this Court that may directly affect or be affected by the decision in this appeal.

STATEMENT OF JURISDICTION

The Court of Federal Claims (COFC) had jurisdiction under 28 U.S.C. § 1491(a)(2) (2012). The court entered final judgment on January 31, 2018. The Government filed its notice of appeal on February 1, 2018, as did cross appellants Drone Cruise Enterprise, Inc. (DCE). This Court properly has jurisdiction under 28 U.S.C. § 1295(a)(3) (2012).

STATEMENT OF THE ISSUES

1.   Termination for Default: Whether the COFC properly found the termination for default entered against DCE by the United States Air Force (“Government”) was proper and not an abuse of discretion by the Con- tracting Officer (CO).

2.   Excess Reprocurement Costs: Whether COFC properly found the Government was not entitled to excess reprocurement costs as a result of alleged lack of mitigation on the part of the Government.

STATEMENT OF THE CASE

The Air Force terminated its contract with DCE for default on August 6, 2014. Order at 9. DCE did not appeal the termination at that time or at any subsequent time prior to this appeal; DCE now brings both an appeal for the termination for default and the assessment of reprocurement costs. After a hearing conducted in January 2018, COFC ruled in part for the Government, finding the termination for default proper, but that reprocurement costs were not owed. DCE timely appealed to this Court. Id. at 1.

SUMMARY OF THE ARGUMENT

The COFC erred when it found the Government’s decision to terminate DCE’s contract for default was within the scope of review. COFC incorrectly applied the Fulford doctrine because, in both Fulford and similar cases, the relevant issue was the lack of monetary interest at the point of termination. Fulford Mfg. Co. v. United States, ASBCA No. 2143, et al., 1955 WL 808, at 15.  Here, however, the Government’s decision to terminate the contract cost DCE either slightly less or significantly more than the amount in controversy sought for reprocurement, as described further below.

Alternatively, COFC correctly sustained the default termination. In deciding to terminate DCE’s contract, Administrative Contracting Office (ACO) Hammaker considered the relevant criteria for termination as outlined in FAR 49.402-3 and followed all necessary procedural steps. Order at 9. Further, while ACO Hammaker received direction to terminate the contract, he nonetheless acted with the requisite diligence and selected the method of termination (i.e., default), demonstrating the necessary independence for a termination for default determination to stand.

COFC incorrectly found the Government was not entitled to excess costs of reprocurement. COFC determined that the Government failed to mitigate its damages and unreasonably delayed in reprocuring the drone services DCE provided prior to defaulting on its contract. Id. at 23 – 24. DCE’s contention that the Government failed to take the necessary steps in reprocuring services is, at a minimum, without legal or factual basis to uphold COFC’s decision.

The Government took all appropriate and timely steps to reprocure drone services in an efficient, cost-effective, and appropriate manner. In doing so, the Government did make changes to the requirements, as legally allowed, id. at 21, 23, and precluded award to DCE on the basis of unsatisfactory past performance, as legally allowed. Id. at 26 – 27. The resulting reprocurement contract was significantly more expensive than the contract with DCE, resulting in the actual additional expenses incurred and now sought by the Government.

The Government experienced personnel turnover mid-reprocurement, which accounts for the passage of time. During that turnover, the Government consistently worked on reprocuring new services, which undermines any argument that the delay was unreasonable. Moreover, DCE suffered no prejudice as a result of any perceived unreasonable delay as evidenced by the fact that they submitted a bid on the reprocurement contract at a price that was exactly the same as the bid on their initial contract.

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