Tuesday, July 24, 2012


Judge Owen Wilson of the Armed Services Board of Contract Appeals (ASBCA) has just issued an opinion in which he sustains the contractor's appeal because the government decided to "read out" portions of the contract.  This, he says, is "not legally defensible."

The case involved a Corps of Engineers contract for interior design services issued on a sole source basis to a small disadvantaged business.  The contractor appealed the governments claim for overcharges for employee hours worked but for which the contractor did not pay its employees (these were uncompensated overtime hours).

Judge Wilson said that based on the contract read as a whole, the government's interpretation lacked merit.  The government argued that the payments clause referred to costs which meant the contractor could only be paid for wages actually paid.  There was no question that the labor was performed and that the employees were paid their regular salaries.

Most importantly, the judge said the payments clause did not specifically prohibit the contractor from collecting its hourly rates for work performed by salaried employees even though they performed uncompensated overtime.  The Board said the salary agreements with contractor employees were irrelevant to the dispute over contract language interpretation.

In his opinion, Judge Owen said the rules of contract interpretation are well established.  He began with the plain language of the contract, giving reasonable meaning to all parts of the contract.  Based on a reading of the contract as a whole, the contract is clear, he said.  Firm fixed price rates were established.  They were to be paid.  The labor was performed and payment was due.  Do not read the requirement to pay out of the contract.  Appeal sustained.

bill@spriggslawgroup.com         www.spriggslawgroup.com

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