________________________ DENIED: November 1, 1995 ________________________ GSBCA 13204-SBA POLICY, PLANNING & EVALUATION, INC., Appellant, v. SMALL BUSINESS ADMINISTRATION, Respondent. Barbara A. Duncombe of Vorys, Sater, Seymour and Pease, Washington, DC, counsel for Appellant. Audrey H. Liebross, Office of General Law, Small Business Administration, Washington, DC, counsel for Respondent. Before Board Judges BORWICK and VERGILIO. VERGILIO, Board Judge. On February 23, 1995, the Board received the underlying appeal from Policy, Planning & Evaluation, Inc. involving a contract with the respondent, the Small Business Administration. In seeking to recover $42,576 (plus interest), Policy Planning has elected to proceed under the Board's accelerated procedure. Rule 14 (Jan. 3, 1994). Policy Planning maintains that it is entitled to the requested recovery because its indirect cost rates increased during its performance of the underlying contract and that the contract permits it to recoup the additional amounts. The agency contends that its denial of the requested payment is in keeping with the Limitation of Cost clause. The agency has already reimbursed Policy Planning in an amount in excess of the contract ceiling. Although the contract provides for the parties to execute a written understanding setting forth the final indirect cost rates for each fiscal year, it also states that such an understanding "shall not change any monetary ceiling, contract obligation, or specific cost allowance or disallowance provided for in this contract." Moreover, a special provision of the contract specifies the maximum amount for which the Government will be liable under the contract. To require reimbursement in this circumstance would give no meaning to these express contractual provisions. Further, during and subsequent to the affected periods of performance, Policy Planning signed modifications which expressly recognized the unaffected ceiling price of the contract and the maximum obligation of the Government. Accordingly, the Board denies the appeal. Findings of Fact[foot #] 1 1. With an effective date of February 25, 1985, the agency awarded to Policy Planning the contract underlying this dispute. The contract obligates Policy Planning to perform tasks (e.g., research, review, and comment) related to specified areas (leaking underground storage tanks and small quantity generators). Exhibit 1, Contract.[foot #] 2 As awarded, the contract was for one base year with two single option years. Id. at 3 ( F). 2. As awarded, the cost-plus-fixed-fee contract had an estimated cost of $35,689 and a fixed-fee of $3,034. The contract provides that the "total contract consideration is not to exceed $38,723," with payment to be made upon completion of each task assignment in accordance with the contractor's invoices, subject to the approval of the contracting officer and contracting officer's technical representative. Exhibit 1, Contract at 1, 3 ( G(a), (b)). 3. A "special provision" of the contract, captioned "Limitation of Government Liability," dictates: The maximum of amount for which the Government shall be liable under this contract is $38,723.00 which covers base year funding only. Funding for Option Years 1 and ----------- FOOTNOTE BEGINS --------- [foot #] 1 Despite the direction of the court in RMI, Inc. v. United States, 800 F.2d 246, 248 (Fed. Cir. __________________________ 1986), requiring the Armed Services Board of Contract Appeals to conduct a hearing to adduce expert testimony in a case involving payment under the Limitation of Cost clause after those parties had elected to submit their case on the record and after the record had closed, each party here elected to submit its case on the record. A party has either met its burden of proof or not. The Board resolves this case based upon the existing record. The language of the contract largely dictates the result; there is no need to make specific findings of fact regarding when notice may have been provided by Policy Planning as to its altered indirect cost rates or what are the appropriate final rates. [foot #] 2 All cited exhibits are in the appeal file. ----------- FOOTNOTE ENDS ----------- 2 will be provided pending availability of funding for those years and the Government exercising its option to renew. Exhibit 1, Contract at 7 ( H-8). 4. Another special provision, dealing with options, states: The total duration of this contract, including the exercise of any options under this clause, shall not exceed 36 (months). Any extensions will be subject to the availability of funding on a fiscal year basis as follows: Option Year 1 $13,911 Option Year 2 $14,935 Exhibit 1, Contract at 11 ( H-15(c)). 5. The contract incorporates by reference provisions of the Federal Acquisition Regulation (FAR), including a clause captioned "Allowable Cost and Payment," which reads in part: (d) Final indirect cost rates. (1) Final annual indirect cost rates and the appropriate bases shall be established in accordance with Subpart 42.7 of the Federal Acquisition Regulation (FAR) in effect for the period covered by the indirect cost rate proposal. (2) The Contractor shall, within 90 days after the expiration of each of its fiscal years, or by a later date approved by the Contracting Officer, submit to the cognizant Contracting Officer responsible for negotiating its final indirect cost rates and, if required by agency procedures, to the cognizant audit activity proposed final indirect cost rates for that period and supporting cost data specifying the contract and/or subcontract to which the rates apply. The proposed rates shall be based on the Contractor's actual cost experience for that period. The appropriate Government representative and Contractor shall establish the final indirect cost rates as promptly as practical after receipt of the Contractor's proposal. (3) The Contractor and the appropriate Government representative shall execute a written understanding setting forth the final indirect cost rates. The understanding shall specify (i) the agreed upon final annual indirect cost rates, (ii) the bases to which the rates apply, (iii) the periods for which the rates apply, (iv) any specific indirect cost items treated as direct costs in the settlement, and (v) the affected contract and/or subcontract, identifying any with advance agreements or special terms and the applicable rates. The understanding shall not change any monetary ceiling, contract obligation, or specific cost allowance or disallowance provided for in this contract. The understanding is incorporated into this contract upon execution. (4) Failure by the parties to agree on a final annual indirect cost rate shall be a dispute within the meaning of the Disputes clause. Exhibit 1, Contract at 19 ( I-1.13, FAR 52.216-7) (emphasis added). 6. The contract contains a Limitation of Cost clause, which states in part: (a) The parties estimate that performance of this contract, exclusive of any fee, will not cost the Government more than (1) the estimated cost specified in the Schedule . . . . The Contractor agrees to use its best efforts to perform the work specified in the Schedule and all obligations under this contract within the estimated cost . . . . (b) The Contractor shall notify the Contracting Officer in writing whenever it has reason to believe that-- (1) The costs the Contractor expects to incur under this contract in the next 60 days, when added to all costs previously incurred, will exceed 75 percent of the estimated cost specified in the Schedule; or (2) The total cost for the performance of this contract, exclusive of any fee, will be either greater or substantially less than had been previously estimated. (c) As part of the notification, the Contractor shall provide the Contracting Officer a revised estimate of the total cost of performing this contract. (d) Except as required by other provisions of this contract, specifically citing and stated to be an exception to this clause-- (1) The Government is not obligated to reimburse the Contractor for costs incurred in excess of (i) the estimated cost specified in the Schedule or . . .; and (2) The Contractor is not obligated to continue performance under this contract (including actions under the Termination clause of this contract) or otherwise incur costs in excess of the estimated cost specified in the Schedule, until the Contracting Officer (i) notifies the Contractor in writing that the estimated cost has been increased and (ii) provides a revised estimated total cost of performing this contract. . . . (e) No notice, communication, or representation in any form other than that specified in subparagraph (d)(2) above, or from any person other than the Contracting Officer, shall affect this contract's estimated cost to the Government. In the absence of the specified notice, the Government is not obligated to reimburse the Contractor for any costs in excess of the estimated cost . . . whether those excess costs were incurred during the course of the contract or as a result of termination. Exhibit 1, Contract at 19 ( I.32, FAR 52.232-20). 7. With an effective date of October 1, 1985, a contract modification changed "the provisional fringe benefit rate shown in contractor's cost proposal from 25% to 30%." The modification does not otherwise alter the contract; that is, it does not alter the cost limitation provisions or ceiling amounts. Exhibit 4. 8. With an effective date of February 26, 1986, by mutual contract modification, the agency exercised the option to extend the term of the contract for the period February 25, 1986, through February 24, 1987, increased the estimated labor to be utilized, and added $32,164 and $2,734 to the estimated cost and fixed fee, respectively. Exhibit 5. The modification also changes the Limitation of Government Liability clause ( H-8), Finding 3, to read: "The maximum amount for which the Government shall be liable under this contract is $73,621.00." Exhibit 5 at 2 ( 2). The modification also specifies: "As a result of this modification, the total obligated contract amount is increased by $34,898.00, from $38,723.00 to $73,621.00." Id. ( 4). 9. With an effective date of February 17, 1987, by mutual contract modification, the agency exercised the option to extend the term of the contract for the period February 25, 1987, through February 24, 1988. Exhibit 6 at 1 ( 1). Among various items, the modification changes the Limitation of Government Liability clause, Findings 3 and 8, to read: The maximum amount for which the Government shall be liable under this contact is $104,068.00, which includes Base Year, Option Years 1 and 2. Exhibit 6 at 3 ( 6). The modification also specifies that "the total obligated contract amount is increased by $30,477.00 from $73,621.00 to $104,068.00." Id. ( 7). 10. With an effective date of June 8, 1987, a mutual contract modification increases the estimated hours by three blocks of 250 hours; the modification states that, per block, this represents an estimated cost of $14,464.33 and fixed fee of $1,343.67 for a total of $15,808 per block. Exhibit 8 at 1 ( 1, 2). The modification also changes the Limitation of Government Liability clause, Findings 3, 8-9, to read: The maximum amount for which the Government shall be liable under this contact is $151,142, which includes the base year and Option Years 1 and 2. Id. at 2 ( 3). The modification also specifies that "the total obligated contract amount is increased by $47,424, from $104,068 to $151,142.00." Id. ( 4). 11. With an effective date of November 9, 1987, a mutual contract modification provides funding for option year two for two additional blocks of 250 hours, and increases the agency's obligation by $31,616 to $18,108 ($168,237 in estimated cost and $14,871 in fixed fee). Exhibit 9. The modification amends the Limitation of Government Liability clause, Findings 3, 8-10, to read: "The maximum amount for which the Government shall be liable under this contract is $183,108.00, which includes the base year, Option Years 1 and 2." Exhibit 9 at 2 ( 3). Further, the modification states: "As a result of this modification, the total obligated contract amount is increased by $31,616.00, from $151,492 to $183,108.00." Id. ( 4). 12. With an effective date of February 2, 1988, a bilateral contract modification extends the term of the contract for the period February 24, 1988, through September 30, 1988, "at no additional cost to the Government." Exhibit 10. With an effective date of September 9, 1988, a bilateral contract modification extends the term of the contract for the period September 30, 1988, through November 11, 1988, "at no additional cost to the Government." Exhibit 11. With an effective date of November 30, 1988, a bilateral contract modification extends the term of the contract for the period December 1, 1988, through June 30, 1989, "at no additional cost to the Government." Exhibit 12. The modifications do not otherwise alter the terms or conditions of the contract. Exhibits 10, 11, 12. 13. With an effective date of July 24, 1989, a bilateral modification extends the period of performance for completion of the work to December 31, 1989: "The purpose of this modification is to extend the period of performance of this contract by six months at no additional cost to the Government." The modification further states that the "maximum amount for which the Government shall be liable under this contract remains $183,108.00, as delineated in [Exhibit 9, Finding 11], and shall not be increased as a result of this modification." Exhibit 13. The modification does not alter the Limitation of Government Liability clause, Findings 3, 8-11. Id. 14. Summing the vouchers signed by the project managers of the agency and Policy Planning reveals that the agency has reimbursed Policy Planning $183,756.86; of this amount $14,389.50 represents charges for fixed fees. Only with the final payment, in September 1989, did the agency exceed the ceiling limitation. Exhibits 24-57, 59. The agency does not seek to recover any of the excess amount; Policy Planning does not maintain that the final payment, which caused the total to exceed the limitation, entitles it to any adjustment for the earlier period of performance. 15. Policy Planning submitted a claim to the contracting officer seeking reimbursement for final indirect cost rates, at rates approved by the Defense Contract Audit Agency and utilized by other agencies. Exhibits 14-19. The agency has denied the claimed reimbursement. Exhibit 68. The final rates, which result in a request for $42,576 (plus interest), represent rates affected by terminations for convenience of other contracts Policy Planning had with the Government. Under those contracts, Policy Planning entered into settlement agreements with the agencies unconditionally waiving any claim against the Government by reason of such terminations. Exhibits 70, 79a. Discussion Policy Planning seeks reimbursement for altered indirect cost rates applied to its labor over the period of performance. It maintains that its final indirect cost rates were altered because of terminations for convenience of other Government contracts during the period of performance of the underlying contract. It further contends that it provided the agency with notice of the anticipated rate changes in a timely manner, and that the Defense Contract Audit Agency has approved the final rates which other agencies have utilized in reimbursing Policy Planning under other contracts subject to a Limitation of Cost clause. The agency maintains that the contract does not obligate the Government to pay any of the requested amount. The terms of the contract, as signed and modified, do not support the claim of Policy Planning. The Limitation of Government Liability clause specifies the maximum amount of the Government's liability. Stating that the "Government is not obligated to reimburse the Contractor for costs incurred in excess of (i) the estimated cost specified in the Schedule" except "as required by other provisions of this contract, specifically citing and stated to be an exception," the Limitation of Cost clause does not guarantee a contractor any amount in excess of the contract-estimated cost, even if a contractor put the agency on notice of potentially exceeding the estimate. Finding 6. The allowable cost and payment clause, which provides for the establishment of final indirect cost rates, by its very terms, does not alter the liability of the Government: "The understanding [as to final indirect cost rates] shall not change any monetary ceiling, contract obligation, or specific cost allowance or disallowance provided for in this contract." Finding 5. Accordingly, by its terms the allowable cost and payment clause is not an exception to the Limitation of Cost clause, Finding 6 ( d). The contract specifies the maximum amount for which the Government may be liable under the contract. Policy Planning has already received in excess of that amount. Finding 14. To require the agency to reimburse Policy Planning in any additional amount would shift to the Government risks which the contract expressly places on the contractor. Decision The Board DENIES the appeal. ________________________ JOSEPH A. VERGILIO Board Judge I concur: ____________________________ ANTHONY S. BORWICK Board Judge