No Second Bite at the Apple; ASBCA holds that Contractor Can’t Recover Under FAR 52.222-30 for Increase in Davis-Bacon Act Wages.

“When the light is green you go,

When the light is red you stop.

But what do you do,

When the light turns blue,

With orange and lavender spots.”

-Shel Silverstein, A Light in the Attic.

There is no denying that reading and evaluating Request for Proposals and Government solicitations can be a long and arduous task. Mistakes are often made, and some of them result in bid protests argued in front of the Government Accountability Office (“GAO”) every year or claims before the Boards of Contract Appeals (“BCAs”). Today we focus on the latter forums when contractors seek relief for their mistake after the government awards the contract to the contractor who misread or misunderstood the solicitation. This was the case in Appeal of Gulf Pacific Contracting, LLC, ASBCA No. 61434.

Gulf Pacific Contracting bid and was awarded a contract by the Air Force for exterior and interior painting. The Davis-Bacon Act (“DBA”) FAR clause was incorporated in the contract. This led the contractor to believe that they would receive a price adjustment for increased wages due to a new Wage Determination (“WD”) being incorporated at the beginning of each option year. Unfortunately, they hadn’t read our previous blog detailing the different DBA price adjustment clauses that find their way into contracts for construction. See here: https://www.awrcounsel.com/blog/2021/7/19/choices-choices-choices-the-cause-and-effect-of-the-different-davis-bacon-act-price-adjustment-clauses.

Instead of placing FAR 52.222-32 or FAR 52.222-31 which give price adjustment for increased labor costs as a result of a new WD, the Government incorporated FAR 52.222-30 which gives no price adjustment to the contractor. This means that the contractors have to estimate any expected labor cost increases in the option years and price it into their bid. Unfortunately, Gulf Pacific Contracting was not aware of this and bid with the expectation that they would receive a price adjustment. This also likely meant that their pricing was more competitive as a result. But, when they sought a price adjustment for increased costs in Option Year 1, it was rejected by the Contracting Officer.

Eventually, the dispute was escalated to the Armed Services Board of Appeals (“ASBCA”). The contractor didn’t argue that the Contracting Officer put the wrong clause in the contract, or that they deserved a price adjustment under FAR 52.222-30. Instead, they argued that Air Force should have notified them that they needed to price escalations in their bid if they were going to include FAR 52.222-30. They argued that it did not fit in the DBA framework because FAR 22.404-12(c)(1) states that “the contracting officer may provide the offerors the opportunity to bid or propose separate prices for each option period.” This, they argued, forces the contracting officer to provide notice to offerors that they would not receive a price adjustment and to bid accordingly. The court quickly dispensed with that argument noting that “may” and “must” are two different words and that “may provide” is discretionary language and does not force an obligation on the contracting officer.

Gulf Pacific also argued that the language of FAR 52.222-30 is ambiguous and could be interpreted to allow a price adjustment in conjunction with DFARS 252.243-7002(a). Gulf Pacific argued FAR 52.222-30 says that it allows for no adjustment “other than provided for elsewhere in this contract…” which, interpreted with DFARS 252.243-7002(a) which instructs contractors in filing Requests for Equitable Adjustments (“REA”) for “contract adjustment[s] for which the Contractor believes the Government is liable…” allows for a price adjustment in this scenario. But the ASBCA similarly dispensed with that argument because DFARS 252.243-7002(a) only instructs contractors on the procedure of submitting an REA rather than providing for an independent basis for an adjustment.

While the majority of the administrative judges agreed with this holding. Judge Clarke disagreed. He argued that the language in FAR 22.404-12 was mandatory language. First, he looks at the FAR 22.404-12(c) which states that:

The contracting officer must include in fixed-price contracts a clause that specifies one of the following methods, suitable to the interest of the Government, to provide an allowance for any increases or decreases in labor costs that result from the inclusion of the current wage determination at the exercise of an option to extend the term of the contract:

This is clearly a mandatory provision requiring the contracting officer to choose one of the other methods. Among them is the “none” method:

The contracting officer may provide the offerors the opportunity to bid or propose separate prices for each option period. The contracting officer must not further adjust the contract price as a result of the incorporation of a new or revised wage determination at the exercise of each option to extend the term of the contract.

FAR 22.404-12(c)(1). So, according to Judge Clark, the permissive language in FAR 22.404-12(c)(1) is permissive only because it is one of the choices allowed by FAR 22.404-12(c), but once chosen, binds the contractor. Judge Clark wrote that, by choosing FAR 52.222-30 the Air Force was required to provide the opportunity to bid or propose separate pricing for each option period. Additionally, FAR 52.222-30 does not satisfy the obligation in FAR 22.404-12(c)(1) to provide the offerors opportunity to propose or bid separate prices for each option period. So, he concludes that the CO needs to provide notice of this opportunity rather than letting the contractor figure it out on their own.

I am not sure if the majority makes the right decision here. Judge Clark’s dissent shows that there is no other result provided for in FAR 22.404-12(c), (c)(1). The regulation wouldn’t require the CO to choose a clause that ultimately doesn’t require anything. Then, if the contracting officer is required to provide an opportunity, it should not be left to the contractor to escalate pricing on their own. If that were the case the CO wouldn’t actually be providing anything. Unfortunately for the contractor, this is just the dissent.

The lesson in this is to carefully read RFPs and other solicitations. The Air Force and the ASBCA believe that the FAR clause was notice enough and this decision is further evidence that procurement agencies do not want to hand hold offerors through the bidding process. Therefore, it’s important to provide training on the Service Contract Act and Davis-Bacon Act to contracts teams so that they can better understand the obligations that they are signing up for.

For more information or to review the decision for yourself, visit https://www.asbca.mil/Decisions/2021/61434%20Gulf%20Pacific%20Contracting,%20LLC%209.16.21%20Decision.pdf

By Kirby Rousseau, Appeals, Davis-Bacon Act, Government Contracts, Wage & HourKirby RousseauOctober 20, 2021