The U.S. Armed Services Board of Contract Appeals recently addressed whether a contractor is entitled to the recovery of monetary damages arising from a negative CPAR rating issued by the government. The Board's decision in Sungwoo E&C Co., LTD, ASBCA 61144, serves as a reminder of the necessary standard that a contractor must meet to recover such damages.
The Sungwoo Case
In Sungwoo E&C Co., Ltd., a contractor ("Sungwoo") was awarded three task orders by the U.S. Department of the Army (the "Government") under an indefinite delivery/indefinite quantity ("IDIQ") Multiple Award Task Order Contract ("MATOC") for general construction services at military bases throughout the Republic of Korea ("ROK"). In particular, the task orders at issue were for repairs to buildings located on Camp Stanley, Camp Casey, and Camp Red Cloud in the ROK.
The overarching MATOC contained a base year, as well as multiple options years to be exercised at the Government's discretion. The MATOC was implemented via a logistics cost sharing program between the ROK and the U.S. Government. The program included specific requirements that all equipment and supplies acquired with ROK funds were to be manufactured in the ROK. Each of the task orders included a statement of work and completed design, requiring that Sungwoo supply the listed materials and necessary labor to perform the respective repairs.
During Sungwoo's performance on the various task orders, Sungwoo was delayed throughout performance of its construction activities generally, as well as in its submission of contractually required materials submittals. Sungwoo attributed the construction performance delays to the Korean lunar holiday, which had otherwise limited the number of available working days. Sungwoo also asserted that the materials submittal delays were caused by the cost-sharing program requirements that Sungwoo utilize local materials, and Sungwoo's inability to identify and procure local materials for use on the task orders. Due to the delays, Sungwoo failed to complete performance by the completion dates included in the task orders.
Following Sungwoo's completion of the various task orders, the Government issued Contractor Performance Assessment Ratings ("CPARs") for Sungwoo's performance. For each of the task orders, Sungwoo received "marginal" ratings for project management, material submittal procedures, and communication. Sungwoo also received an "unsatisfactory" rating for project scheduling. In each instance, the Government's comments explicitly referenced the delays to completion of the respective task orders, Sungwoo's failure to timely provide materials submittals, and its failure to meet administrative deadlines. The Government's evaluation also noted that Sungwoo's failure to identify local materials for use, among other things, delayed Sungwoo's performance and extended the respective completion dates under the task orders.
The Government later issued a CPAR related to Sungwoo's performance of the base year of the MATOC, as well. The base year evaluation largely mirrored the ratings for each of the task orders. Thereafter the Government excluded Sungwoo from receiving the option extension under the MATOC because of Sungwoo's unsatisfactory performance.
Sungwoo submitted a Certified Claim to the Government's Contracting Officer disputing the CPARs evaluation, as well as the Government's decision to exclude Sungwoo from award of option years under the MATOC. Sungwoo's claim asserted that the contractor had suffered monetary losses due to the Government's improper rating. Sungwoo sought a revision of the CPAR assigned to Sungwoo's performance, as well an award of monetary damages allegedly incurred by Sungwoo as a result of the rating, and the Government's failure to exercise the MATOC's option years. The CO denied the claim and Sungwoo appealed the decision to the U.S. Armed Services Board of Contract Appeals (the "Board").
Appeal to the ASBCA
On appeal, the Board found for the Government. The Board noted that while it could not direct the Government to revise a negative CPAR, its jurisdictional authority allowed for the Board to remand a CPAR to the Contracting Officer to follow applicable regulations so as to provide the contractor with "a fair and accurate performance evaluation." In order to do as much, however, the Board noted that a contractor must show more than mere disagreement with the rating provided by the Government. Rather, the contractor must establish bad faith, abuse of discretion, or a clear factual error on the part of the Government that resulted in the disputed rating. Moreover, the Board noted under such circumstances "Sungwoo might be entitled to monetary damages, were we also to determine that because of the government's inaccurate or unfair CPARs, Sungwoo was not awarded option year extensions of its contracts."
Under the circumstances, however, the Board determined that the "overwhelming record of evidence" established that Sungwoo's performance on the referenced task orders was riddled with self-inflicted delays, as well as unsatisfactory and marginal performance in various performance areas, including scheduling, project management, and submission of necessary submittals. As a result, Sungwoo had failed to establish that the negative performance ratings were the result of anything other than Sungwoo's own poor performance. Thus, Sungwoo failed to meet the burden of proof required to establish entitlement for the recovery of damages.
Takeaway
While the contractor in Sungwoo failed to establish entitlement to recovery of damages arising from a negative CPAR, the Board continues to reinforce the potential for contractor recovery of such damages under particular circumstances. Specifically, an award of monetary damages must result from a CPAR that is arbitrary and capricious, an abuse of discretion, an act of bad faith, or the result of a clear error of fact. As such, the bar for a contractor's recovery remains difficult to meet. It is imperative that federal contractors adequately documents project performance so as to establish an evidentiary record that overcomes any potential negative CPAR evaluation provided by the Government and maintains a pathway for recovery of damages should a contractor suffer resulting financial harm.
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