Late Notice Does Not Preclude a SCA Price Adjustment, but Feeble Proof Will Bar the Claim
“Extraordinary claims require extraordinary evidence.”
― Carl Sagan
In Stobil Enterprise v Department of Veteran’s Affairs, CBCA 5698, Sept. 10, 2019, the Civilian Board of Contract Appeals (“CBCA”) interpreted the evidentiary requirement to maintain an appeal to seek a price adjustment for increased labor costs under a Federal Acquisition Regulation (“FAR”) clause.
Here the contractor, Stobil Enterprises (“Stobil”), was providing dietary and housekeeping services at a Veteran Affairs facility in San Antonio. The contract incorporated FAR 52.222-41 and FAR 52.222-43 requiring Stobil to comply with the SCA and allowing for price adjustments for labor increases on account of the SCA and FLSA. After the Department of Labor (“DOL”) found that Stobil had not paid the SCA prevailing wage, fringe benefits, or overtime to its employees, the DOL asked the VA to withhold monies due to Stobil under the contract until they paid their workers back wages. Stobil submitted invoices for defunct equipment and food loss due to that equipment.
The invoices for the defunct equipment and food loss were accepted in part by the VA. They instituted a contract modification that included a release of liability for the VA on similar claims, but the modification reserved Stobil’s right to pursue a price adjustment for increased labor costs. After the DOL investigation, Stobil submitted timecards to support their request for a contract modification resulting from the DOL investigation. The VA determined it owed $21,856.37 for the increased costs of labor even though the DOL determined that Stobil owed $99,780.90 in back wages. What is interesting is that the language of this modification included a release from liability but again reserved Stobil’s right to pursue an adjustment for back wages. After Stobil contacted the contracting officer and submitted a claim for the rest of the money, the VA officer denied Stobil’s claims because Stobil was not due more than the money already given $21,856.37 and that other claims made by Stobil, for administrative costs, harm and damage, and interest were unwarranted. Stobil appealed.
Stobil sued for a considerable sum of money totaling over 2 million dollars. In its damages estimate it included the wage claim, administrative costs, harm due to this appeal and dispute, as well as interest. The Board determined it did not have jurisdiction over an ancillary challenge to a Performance Evaluation because Stobil did not formally request a performance evaluation nor was that request formally denied by the contracting officer. So, the Board moved on to the summary judgment motions submitted by Stobil and the VA. First the Board considered the claim for a price adjustment on account of damaged equipment. They looked at the clear language of the first release included in the contract modification relating to the defunct equipment and food loss. The release did not reserve any rights related to equipment, supplies, or administrative costs so the Board ruled in favor of the VA.
However, when the VA made the same argument regarding the price adjustments for the wage determinations, the Board sided with Stobil finding the language was equally clear that Stobil had reserved their right to pursue future adjustments due to increased labor costs. Another issue at the heart of this appeal was that Stobil had not given the VA the correct amount of notice that the DOL had increased the wages and fringe benefits after a new wage determination. But the Board cited Air Masters Corp. v. General Services Administration, GSBCA 16327, 04-2BCA ¶32,688, at 161,746 and determined that late notice does not preclude a claim unless it actually prejudices the agency. The agency must show that the untimeliness prejudiced them, or the untimeliness does not forfeit the contractor’s rights.
Ultimately, having dispensed with the threshold requirements, the Board found that Stobil provided too little evidence to back up its claims that they are owed the remainder of the $99,780.90. Stobil’s evidence was a matrix of expected hours worked to evidence how much their costs would increase under the new wage determination. However, the adjustment could only be valid for the contractor’s actual costs. After ample opportunity to submit more information to the VA and to the Board they found the record too scant to grant Stobil’s motion for summary judgement.
Finally, Stobil made an argument that their data and matrix used the same strategy that the DOL used to calculate back wages; projected hours. The Board dispenses with this argument concluding that even this claim had no evidentiary support.
At the end of the day it seems that Stobil provided the absolute minimum amount of information to the record and the Board found that the facts advanced by Stobil were conclusory. An affidavit from the owner of Stobil claiming that the VA erred in its calculation is not a valid evidentiary basis for this appeal. Stobil relied on the VA’s contracting officer’s testimony but even that did not advance their claim.
The evidentiary standard in this case set a very low bar, that Stobil merely needed to advance evidence of actual hours worked to get past this summary judgment phase. And despite the manner in which the DOL made their calculations, a price adjustment needs to be based on the contractor’s actual costs, not suspected costs.