United States District Court, E.D. Virginia, Alexandria Division
MEMORANDUM OF DECISION AND ORDER
government procurement, diversity case arises out of a
subcontract (the “Subcontract”) between
Plaintiff/Counterclaim Defendant Technology and Supply
Management, LLC (“TaSM”) and
Defendant/Counterclaimant Johnson Controls Building
Automation Systems, LLC (“JCBAS”). Under the
Subcontract, JCBAS was to provide the materials necessary to
assemble onsite at Camp Buehring, Kuwait, energy efficient
shelters that TaSM was obligated to deliver under its prime
contract with the Army. TaSM terminated the Subcontract for
default on December 3, 2014 and filed this action on March
18, 2016 against JCBAS and its affiliates, Johnson Controls
Federal Systems, Inc. (“JCFS”) and Johnson
Controls, Inc. (“JCI”) (collectively,
“Johnson” or “Defendants”).
TaSM's claims against Defendants are (1) breach of the
Subcontract against JCBAS (Count I), (2) breach of warranty
against JCBAS (Count II), (3) tortious interference with
business expectancy against JCBAS, JCFS, and JCI (Count III),
and (4) fraud against JCBAS, JCFS, and JCI (Count
JCBAS asserts a Counterclaim against TaSM for (1) breach of
the Subcontract (Count I), and (2) breach of the implied
covenant of good faith and fair dealing (Count II). The case
was tried without a jury on January 10-12 and 17-18, 2017,
with closing arguments on February 1, 2017.
on the Court's assessment of the evidence presented, the
Court finds (1) in favor of JCBAS on Counts I and II of the
Complaint; and (2) in favor of JCBAS, JCFS, and JCI on Counts
III and V of the Complaint. As to the Counterclaim, the Court
finds (1) in favor of JCBAS on Count I of the Counterclaim
for breach of the Subcontract and awards damages in the
amount of $6, 599, 223; and (2) in favor of TaSM on Count II
of the Counterclaim for breach of the implied covenant of
good faith and fair dealing. Based on these findings, the
Court will enter judgment in favor of JCBAS and against TaSM
in the amount of $6, 599, 223. In support of this verdict,
the Court issues the following findings of fact and
conclusions of law pursuant to Federal Rule of Civil
OF FACT AND CONCLUSIONS OF LAW
Findings of Fact
on all the evidence presented at trial, including the
Court's assessment of the credibility of witnesses and
the weight to be given each piece of evidence, the Court
finds as follows:
is a Virginia limited liability company owned by Joseph
Lopez, Stephen Loftus, William Jonas, and Marina Burgstahler,
who also serves as TaSM's Chief Operating Officer. None
of TaSM's members are citizens of Delaware, Maryland, or
JCBAS is a Delaware limited liability company. JCBAS'
sole member is JCFS, a Delaware corporation with its
principal place of business in Gaithersburg, Maryland. Both
JCBAS and JCFS are wholly owned subsidiaries of JCI, a
Wisconsin corporation with its principal place of business in
or about October 12, 2012, the U.S. Department of the Army
(the “Army”) issued Request for Proposals No.
W15QKN-12-R-0070 (the “RFP”), seeking goods and
services in support of the Army's Kuwait Energy
Efficiency Project (“KEEP”). The objective of the
RFP was to procure energy-efficient, rigid-walled,
relocatable shelters for Camp Buehring, Kuwait (“KEEP
RFP was issued as a small business “set-aside, ”
to be awarded only to a company that qualified as a small
business under federal regulations.
Johnson had worked with two other companies, Insolutions and
Premium Steel, to develop a modular energy efficient
structure (“MEES”) that could be used by the
United States Military in projects like KEEP; and after the
release of the RFP, JCBAS proposed to TaSM that TaSM submit a
bid as the prime contractor, with JCBAS as its subcontractor.
TaSM agreed to this proposal; and TaSM submitted a response
to the RFP that included a technical volume drafted by JCBAS
with some revisions by TaSM.
or about September 27, 2013, the Army selected TaSM as the
prime contractor and awarded TaSM Contract No. W15QKN-D-0113
(the “Prime Contract”), a Firm-Fixed-Price
Indefinite-Delivery/Indefinite-Quantity Agreement with a
minimum guaranteed value of $10 million, a total ceiling
value of $29, 429, 017, and a two-year period of
Prime Contract provided that the Army would procure one- and
two-story KEEP shelters and related services through delivery
orders to the extent of the Army's need during the period
of performance. The Army placed Delivery Order 0001 under the
Prime Contract when it issued the Prime Contract.
Under Delivery Order 0001, TaSM was obligated to deliver to
the Army at Camp Buehring, Kuwait, 72 two-story, fully
assembled KEEP shelters for a total cost of $14, 880, 593.52.
Six of the two-story KEEP shelters were to be
“ganged” together to make a single building (a
“KEEP building”); and Delivery Order 0001
therefore consisted of twelve KEEP buildings.
February 17, 2014, after the Army authorized TaSM to resume
work under the Prime Contract,  the Army and TaSM entered into
Modification 01 to Delivery Order 0001, which established a
delivery and progress-payment schedule. Under this schedule,
TaSM's assembly and the Army's acceptance of the KEEP
buildings in Kuwait was to be completed on a rolling basis
starting on September 4, 2014, with the first six KEEP
buildings assembled and accepted by October 27, 2014 and all
twelve KEEP buildings assembled and accepted by December 15,
Army's progress payments to TaSM under the Prime Contract
were based on TaSM's satisfying certain milestones. Based
on those milestones, the Army's first payment of $561,
825 (3.78% of Delivery Order 0001) was scheduled to occur
upon ATEC inspection and certification on May 26, 2014. The
next payment of $948, 366 (6.37% of Delivery Order 0001) was
scheduled to occur upon arrival of the material for the first
six two-story KEEP shelters to the port in Norfolk, Virginia,
on June 2, 2014. Thereafter, payments of roughly submitted a
revised proposal on June 13, 2013 (with a revised technical
volume again drafted by JCBAS with some revisions by TaSM).
Delivery Order 0001 were scheduled to occur as certain
materials for the two-story KEEP shelters arrived at the
Norfolk port, with the last of these materials scheduled to
arrive at the port by August 18, 2014, at which time the Army
was scheduled to have paid TaSM approximately 77% of Delivery
Order 0001, or approximately $11, 500, 000. The Army was then
scheduled to pay TaSM approximately $280, 000 (1.89% of
Delivery Order 0001) upon completion and acceptance of each
KEEP building in Kuwait. Thus, the payment scheduled
contemplated that TaSM would receive full payment of the
Prime Contract Delivery Order 0001 price, $14, 880, 593.52,
by December 15, 2014, the date by which the Army was
scheduled to accept the last KEEP building.
February 11, 2014, TaSM and JCBAS entered into a
Subcontract Agreement, Subcontract No. W15KQN-13-JCBAS-1013
(the “Subcontract”), with an effective date of
February 7, 2014, under which JCBAS was to perform certain
work required by the Prime Contract. Briefly summarized,
JCBAS was responsible for manufacturing the two-story KEEP
shelters, packing their components into shipping containers,
tendering delivery of the containers to TaSM at JCBAS'
facility in Dublin, Virginia, and training TaSM personnel in
Virginia and Kuwait on assembling the two-story KEEP
shelters. TaSM was responsible for shipping the containers
from Dublin, Virginia, to Camp Buehring, Kuwait, and
assembling the two-story KEEP shelters onsite at Camp
Buehring. TaSM, as the prime contractor, was also the point
of contact with the Army for KEEP.
with the Prime Contract, the Subcontract itself did not
direct that any specific goods or services be provided.
Rather, TaSM was required to issue delivery orders to JCBAS
for specific work.
Reflecting the scope of Prime Contract Delivery Order 0001,
TaSM issued Subcontract Delivery Order 1 (“DO1”)
for 72 two-story KEEP shelters, with a firm-fixed price of
$174, 000 each, for a total DO1 price of $12, 528, 000.
Although DO1 had an effective date of March 28, 2014, JCBAS
did not execute DO1 until April 30, 2014, and TaSM did not
execute DO1 until May 23, 2014, approximately three weeks
later. However, JCBAS and TaSM began performing under the
Subcontract and DO1 before their respective executions of
included a Statement of Work (the “SOW”), which
incorporated the June 5, 2013 KEEP Performance Work Statement
(the “PWS”). It also incorporated the June 12,
2013 Technical Proposal submitted to the Army (the
“Technical Proposal”) as well as the responses to
the Army's Evaluation Notices that followed. These
documents included more detailed Subcontract requirements.
For example, the SOW provided that JCBAS would provide in its
shipment the tools required to assemble the shelters
(although as TaSM recognized in April 2014, “material
handling equipment” was TaSM's responsibility). The
Technical Proposal provided that a two-story KEEP shelter
could be assembled in three days by a four-person
installation team consisting of three low-level workers and
one more experienced worker; and that TaSM would have at
least three of these installation teams (and potentially up
to 10 teams under an expedited schedule), two supervisors
onsite to unload the equipment, stage the assembly site, and
manage the installation teams, and a “site lead”
to oversee the project.
incorporated a payment schedule based on milestones that
corresponded to that in the Prime Contract. Thus, when the
Army paid a certain percentage of Prime Contract Delivery
Order 0001's value for a particular milestone, TaSM was
to pay JCBAS the same percentage of Subcontract DO1's
value. Under the Subcontract, JCBAS was to invoice TaSM based
on the dates set for those milestones (viz., ATEC
inspection; delivery of shelter materials to the port in
Norfolk, Virginia; and post-assembly-and-inspection
acceptance by the Army in Kuwait). TaSM's payments to
JCBAS under Subcontract were to be made five to seven
business days after the Army paid TaSM under the Prime
Relevant portions of the Subcontract are listed in Appendix A
to this Memorandum of Decision and Order and include,
inter alia, provisions on “Warranty, ”
“Inspection/Acceptance, ” “Acceptance
criteria, ” “Packaging, ”
“Termination, ” “Documentation and Manuals,
” and “Training support.”
Neopor is the brand name for the insulating material,
expanded polystyrene (“EPS”), manufactured by
BASF. Styropor is a generic EPS that is similar to Neopor.
The Prime Contract does not specifically require that Neopor
be used instead of Styropor. However, the Technical Proposal,
incorporated into the Subcontract through DO1's SOW,
specifically identifies Neopor as the material to be used in
“wall, floor and roof . . . panels” of the
Initially, in mid-2013 when JCBAS drafted the Technical
Proposal and its pricing proposal to TaSM, JCBAS intended to
use Neopor in all the panels of the KEEP shelters and priced
its services to TaSM based on this assumption. At this time,
the price proposal of Premium Steel, the subcontractor which
manufactured the panels for JCBAS, was also based on the use
of Neopor in all the panels.
Around late 2013 or early 2014, JCBAS learned that, due to a
possible supply shortage, the amount of Neopor necessary for
production of the panels under the Subcontract and DO1 might
not be available; and JCBAS instructed Premium Steel to
calculate its final pricing for the panels based on the use
of Styropor, without amending its proposal to TaSM.
February 14, 2014, JCBAS requested that TaSM approve the use
of Styropor instead of Neopor in the panels, citing the lack
of material availability and potential production delays by
using Neopor. TaSM, in turn, made that substitution request
to the Army on March 4, 2014, but withdrew it on March 12
after TaSM concluded that Neopor performed better than
Styropor and that the necessary quantities of Neopor were
available. However, by March 31, 2014, TaSM recognized that
there was a supply shortage of Neopor that would likely delay
production of the panels and requested that the Army delay
the ATEC inspection for that reason.
Notwithstanding the lack of any approvals to use Styropor
instead of Neopor, JCBAS decided around mid-March 2014 to use
Neopor only in the exterior panels and Styropor in the
interior wall panels. In late March, JCBAS paid Premium Steel
the additional $31, 050 that it cost to use Neopor instead of
Styropor in all the exterior wall, floor, and roof panels
(but not the interior panels).
July 2014, at the latest, TaSM had learned that Styropor had
been used to manufacture the interior wall panels; and TaSM
and JCBAS renewed their request to the Army to use Styropor
(this time only in the interior panels). The Army accepted
this substitution on July 28, 2014, without requiring any
form of compensation or consideration in return.
working relationship between TaSM and JCBAS quickly hit rough
waters. On April 30, 2014, the same day that JCBAS signed DO1
and approximately three weeks before TaSM signed DO1, TaSM
issued the first cure notice to JCBAS (the “First Cure
Notice”). The First Cure Notice stated that JCBAS had
not timely provided requested data and had missed meetings
with TaSM and the Army. Even though it had not yet signed
DO1, which was required to secure work under the Subcontract,
TaSM advised JCBAS that it would terminate JCBAS for default
if JCBAS did not remedy the conditions within seven days.
May 5, 2014, JCBAS responded to the First Cure Notice. In its
response, JCBAS informed TaSM that it would assign an
additional person to the project, Charlie Carter, to ensure
adequate attendance at meetings and timely communications.
TaSM found JCBAS' response acceptable; and on May 19,
2014, TaSM canceled the First Cure Notice.
part of the SOW, JCBAS was required to produce and assemble
in Dublin, Virginia, for inspection by the Army Test and
Evaluation Command (“ATEC”), three “ganged
together” two-story KEEP shelters (i.e., half
of one of the six-shelter KEEP buildings) (the “ATEC
building”). After the Army's initial inspection,
JCBAS was to make all corrections required to receive ATEC
certification. The ATEC building was to remain in Dublin,
Virginia, for training purposes after certification,
eventually to be disassembled and sent to Kuwait for
reassembly as one half of the twelfth and final KEEP building
ATEC inspection was initially scheduled for May 15, 2014. Due
to JCBAS' inability to secure certain materials to
manufacture the shelters, that inspection was first delayed
until May 22, 2014, and then postponed again to June 3, 2014.
In the three weeks leading up to the June 3, 2014 inspection,
JCBAS and its subcontractor Premium Steel assembled the
ATEC building at JCBAS' facility in Dublin, Virginia.
Several TaSM personnel were onsite in Dublin, Virginia,
during the assembly of the ATEC building, including Donnie
Munro, who was present for the entire three-week assembly
process, and Eddie Perez who was present during portions of
the assembly. As part of the assembly, panel skins were
attached to the panels containing both Neopor, which
presented as a gray color, and Styropor, which presented as a
white color. TaSM personnel present observed panels with both
Neopor and Styropor before the skins were attached.
Although the ATEC building was not completely assembled, the
Army inspected the building on June 3, 2014 and then sent
TaSM its preliminary findings, which contained a number of
issues that needed to be addressed. TaSM forwarded those
issues to JCBAS on June 16, 2014; and on June 17, 2014, JCBAS
responded to TaSM with a plan to address the Army's
October 1, 2014, the Army sent TaSM the final ATEC inspection
report, dated September 25, 2014, which concluded that the
shelters passed the inspection, although the report noted
that “this Safety Confirmation is based on the
assertion that Soldiers will not setup, maintain, or teardown
the KEEP MEES.” Def. Ex. 151. TaSM sent JCBAS this
report on October 29, 2014.
Following the ATEC Inspection
June 25, 2014 (rather than June 2, 2014, as projected under
the Prime Contract), JCBAS delivered to TaSM in Dublin,
Virginia, the first containers of two-story KEEP shelter
materials, which TaSM then shipped to Kuwait by way of the
port in Norfolk, Virginia.
containers that JCBAS delivered to TaSM for shipment deviated
from the packaging requirements outlined in the Subcontract
and otherwise presented problems for TaSM. Specifically,
because of delays in the supply of “skins” for
the shelter panels, JCBAS did not package a single two-story
KEEP shelter into two containers. The early shipments also
contained packing lists that did not plainly describe the
contents of the containers. The materials in JCBAS' early
shipments also were not palletized, or were insufficiently
palletized, and were not sufficiently secured for the sea
voyage to Kuwait, which caused damage to some components. As
a result, TaSM had to spend more time in Kuwait than would
have otherwise been required for unloading, identifying, and
sorting the materials that arrived in the containers. For
example, some support beams had to be unloaded by hand, and
TaSM employees had to reconcile multiple packing lists to
determine the type and quantity of components in each
shipment. JCBAS and TaSM eventually developed a matching
system that helped streamline the identification and tracking
of container contents in later shipments; and JCBAS corrected
the palletizing issues.
July 16, 2014, TaSM issued to JCBAS a notice of costs and
damages and, the following day, a second cure notice (the
“Second Cure Notice”). Both documents outlined
how TaSM considered JCBAS out of compliance with the
Subcontract, including JCBAS' use of Styropor in the
interior walls; delays and deviation from the shipment
schedule; not shipping KEEP building three in a single
shipment; not providing detailed shipping documents; not
providing all of the tools necessary to assemble the
two-story KEEP shelters; not allowing a TaSM quality control
representative onsite at JCBAS' facility; and not
completing the ATEC building for inspection. The Second Cure
Notice demanded that JCBAS remedy the deficiencies within
seven days, allow TaSM to place a quality assurance employee
at the Virginia facility, and compensate TaSM for the costs
incurred as a result of the asserted contractual breaches.
Around July 24, 2014, the parties met in-person to discuss a
resolution of the issues identified in the Second Cure
Notice. They subsequently disputed whether an oral agreement
was reached at that meeting for the purpose of lifting the
Second Cure Notice; but on July 25, 2014, TaSM, through its
general counsel, emailed JCBAS a proposed written agreement
with terms and conditions for lifting the Second Cure Notice.
That proposed written agreement states, inter alia:
3. Johnson shall provide all tools required for the assembly
of the buildings. Johnson shall provide sufficient tool [sic]
for the installation teams to erect the buildings. . . .
7. Costs incurred by TaSM due to the delays of Johnson shall
be borne by Johnson. This includes:
a. Costs due to only shipping 5 days per week instead of the
agreed upon 6 days per week. This cost is $51, 140.00.
b. Costs due to TaSM having to cancel shipments after the
shipment had been scheduled and received extremely late or no
notice that the shipments weren't ready. This cost is $5,
c. Costs of having to provide tools if #3 is not agreed to.
This cost is $56, 918.68.
d. Costs of having to replace the interior panels made with
Styropor if the government will not accept the Styropor
panels. If the government requires compensation in exchange
for accepting the Styropor panels, Johnson will be required
to reimburse the costs thereof.
Pl. Ex. 184.
JCBAS did not respond specifically to this proposed agreement
but did dispute that JCBAS had breached the Subcontract as
claimed in the Second Cure Notice. In turn, on August 1,
2014, TaSM notified JCBAS that the cure period had expired;
that because JCBAS failed to comply with the requirements of
the Second Cure Notice, it would not be lifted; and that the
Subcontract was subject to termination at any time. On August
8, 2014, JCBAS again disputed that it had breached the
Although TaSM never officially lifted the Second Cure Notice,
the parties continued to work together to deliver and
assemble the shelters. For approximately three weeks in late
August and early September 2014, JCBAS and Premium Steel
representatives went to Camp Buehring, Kuwait, to train TaSM
and its labor force on how to assemble the KEEP buildings. In
addition to three TaSM employees (Eddie Perez, Donnie Munro,
and Carlos Viera), about a dozen technically unskilled
Kuwaiti nationals hired by TaSM (known as “TCNs”)
also received training. By the time the training was
completed, approximately 75% of the first KEEP building
(consisting of six two-story KEEP shelters) had been
early September 2014, JCBAS had delivered to TaSM 92
containers with substantially all of the required materials
for 36 two-story KEEP shelters as well as some additional
materials for the final 36 shelters.
Following the training, disputes continued between TaSM and
JCBAS concerning the length, quality, and thoroughness of
training, including specifically the adequacy of the training
with respect to the installation of certain aspects of the
roofs, doors, electrical equipment, and fire alarm systems.
During its assembly of the first 36 two-story KEEP shelters,
TaSM experienced assembly difficulties in the following
a. Unloading, sorting, and tracking the materials from the
b. Assembling the two-story KEEP shelters with unskilled
laborers with minimal hand tools; and the lack of all tools
required to assemble the shelters in the shipments.
c. Properly connecting the panels to the support beams
(referred to as trusses or I-beams), which TaSM contended
were cut to incorrect lengths, but which JCBAS contended were
actually cut to correct lengths, given that the shelters were
designed with certain spaces between panels, as reflected in
updated drawings JCBAS provided to TaSM in September 2014.
d. Sealing the exterior seams between certain panels, which
were to be covered with a metal bracket and then covered with
VentureClad tape, and the interior seams, which were to be
covered with adhesive t-astragals. Eventually, due to the
heat in Kuwait, some of these metal brackets covering the
exterior seams buckled, pulling away from the shelter and
unpeeling the tape used to seal the seam. Similarly, some of
the t-astragals used to seal the interior seams in the
shelters were adversely affected by the Kuwaiti environment
and would not attach to the interior side of the panels. TaSM
found inadequate the JCBAS-provided procedures and/or
products to fix these sealing issues.
e. Addressing the effects of oxidized floor panels, which had
severe discoloration but no structural issues.
f. Installing the electrical equipment because of, among
other issues, wire lengths.
September 10, 2014, following JCBAS and Premium Steel's
training trip, TaSM sent JCBAS a stop work order that
directed JCBAS to cease work on the project, citing various
alleged performance deficiencies and technical problems with
the shelters (the “Stop Work Order”). The Stop
Work Order also informed JCBAS that it would not receive any
payments while work was stopped. Questioning why TaSM had
failed to raise these issues sooner, JCBAS disputed
TaSM's ability to issue such an order and to withhold
payment on that basis. JCBAS also provided responses to each
of the technical deficiencies raised in the Stop Work Order.
an effort to resolve the issues raised in the Stop Work
Order, the parties exchanged correspondence and, with Premium
Steel representatives, participated in conference calls. But
these efforts did not resolve all of the issues. In two
letters sent September 24, 2014, TaSM gave JCBAS until
September 30, 2014 to provide certain written assurances,
without which TaSM would terminate the Subcontract.
October 7, 2014, following another response from JCBAS, TaSM
informed JCBAS that the Stop Work Order remained in place.
October 15, 2014, TaSM sent JCBAS a letter provisionally
lifting the Stop Work Order on two conditions: (1) that JCBAS
correct, fix, or replace all problems under the Subcontract
within forty-five days of October 16, 2014; and (2) that
JCBAS ensure that a representative of its subcontractor
Premium Steel be onsite in Kuwait at all times until the
two-story KEEP shelters were fully completed and accepted by
October 16, 2014, JCBAS committed to correcting, fixing, or
replacing the problems with the two-story KEEP shelters to
the satisfaction of TaSM and the Army within forty-five days.
It also advised TaSM that representatives from JCBAS and
Premium Steel would be “available for immediate return
to the [Kuwait]” to ensure these fixes, although
Premium Steel would not be “available for continuous
representation in Kuwait in support of this project.”
Pl. Ex. 251. In addition to JCBAS' formal response, on
October 16, 2014, JCBAS' Charlie Carter emailed TaSM to
explain that Juan Lozano, JCBAS' fire alarm system
expert, was available to return to Kuwait immediately, and
that Premium Steel's Danny Feazell would return as soon
as his prior travel and work schedule allowed. He also
advised TaSM that he would travel back to Kuwait the first
week of November.
Following JCBAS' response, TaSM reassessed how to proceed
in order to complete the shelters. Rather than working with
JCBAS as TaSM had outlined in its October 15, 2014 letter to
JCBAS provisionally lifting the Stop Work Order, TaSM,
through its Chief Operating Officer, Marina Burgstahler,
informed the Army in an October 19, 2014 email that TaSM
planned to instruct JCBAS to ship all the remaining materials
under the Subcontract and DO1, but thereafter TaSM would fix
and assemble the shelters in Kuwait without JCBAS'
Following through on this action plan, on October 20, 2014,
TaSM sent JCBAS another letter (dated October 17, 2014) that
(1) officially lifted the Stop Work Order; (2) directed JCBAS
to “package and prepare for shipment all of the
materials for all of the structures remaining on the
subcontract” and replacement parts; (3) informed JCBAS
that “[i]f TaSM requires JCBAS's assistance in
Kuwait, TaSM shall notify JCBAS in writing two (2) weeks
prior to JCBAS being required in Kuwait”; and (4)
directed JCBAS to “provide the information, regarding
the units ready to ship, no later than 4:00 PM Wednesday,
October 22, 2014.” Pl. Ex. 255.
JCBAS responded by letter on the same day, October 20, 2014,
agreeing to deliver the remaining items. Separately on
October 20, 2014, Charlie Carter, ostensibly not realizing
that TaSM had changed course, emailed TaSM and the Army
regarding the upcoming arrival dates to Kuwait for Juan
Lozano (October 28), and him and Danny Feazell (November 4).
The next day, October 21, 2014, Marina Burghstahler advised
Carter that no JCBAS or Premium Steel employee except Juan
Lozano was authorized to be onsite in Kuwait. She reiterated
that TaSM would notify JCBAS two weeks in advance if TaSM
required anyone else from JCBAS onsite in Kuwait and that
TaSM “will resolve all issues associated with the
structure from this point forward.” Def. Ex. 193.
October 27, 2014, TaSM directed JCBAS to have all remaining
materials to be delivered under the Subcontract and DO1 ready
for pickup in Dublin, Virginia, no later than November 21,
2014. JCBAS confirmed it would do so.
JCBAS proceeded as TaSM requested; and by November 25, 2014,
TaSM had picked up 51 more containers from JCBAS' Dublin,
Virginia, facility after lifting the Stop Work Order,
bringing the total number of containers that JCBAS delivered
to TaSM under the Subcontract and DO1 to 143. These 51
containers included all materials that JCBAS was to provide
under the Subcontract and DO1. Contrary to TaSM's claim,
JCBAS did not fail to tender deliver of these containers by
the agreed-upon date of November 21, 2014.
December 1, 2014, the final containers with JCBAS materials
left the port in Norfolk on a ship bound for Kuwait.
next day, December 2, 2014, with the last of the two-story
KEEP shelters on their way to Kuwait by sea, TaSM informed
the Army that TaSM intended to terminate JCBAS and use its
other subcontractor, IQ, LLC,  to complete the second 36
two-story KEEP shelters under the Subcontract and DO1.
letter dated and sent December 3, 2014, TaSM terminated the
Subcontract for default effective immediately and purported
to reject, sight unseen, the 51 containers that JCBAS had
just delivered as TaSM directed. In particular, the letter
stated: “All containers of building parts that are
currently in transit or that are sitting in Kuwait will be
returned by TaSM to the JCBAS offices. JCBAS will be liable
for paying the costs that TaSM incurs in returning these to
JCBAS.” Pl. Ex. 310.
51 containers arrived in Kuwait; but notwithstanding its
stated intention in its termination notice to return those
containers, TaSM did not return the 51 containers or any of
the materials that had previously arrived in Kuwait. Rather,
while the final containers were still in shipment in December
2014, TaSM had decided to use from these last JCBAS shipments
at least the stairs, stair extensions, fire escapes, fire
alarm systems, and paint. TaSM later decided to use the HVACs
and electrical equipment from these shipments as well.
Ultimately, TaSM in fact used tens of thousands of parts from
the shipments that contained the materials for the second 36
two-story KEEP shelters. TaSM also used parts from these
shipments from JCBAS for the single-story KEEP
shelters that it was providing at Camp Buehring under the
Prime Contract through its other subcontractor, IQ, LLC.
After TaSM's selective use of the materials from the
shipments that JCBAS had delivered, including the last 51
containers, there were insufficient materials remaining to
assemble a single two-story KEEP shelter.
TaSM has not identified any defects or nonconformities with
respect to the shipments of materials for the second 36
two-story KEEP shelters; and as of the date on which TaSM
terminated the Subcontract, December 3, 2014, JCBAS had
delivered all materials ordered under the Subcontract and
of December 4, 2014, the day after termination, TaSM
determined that: (1) JCBAS had delivered all the materials
due under the Subcontract; (2) TaSM had completed assembly of
three KEEP buildings, although they had not been inspected or
accepted by the Army; and (3) TaSM's total cost through
November 2014 in assembling those KEEP buildings was $491,
388, consisting of direct labor costs of $228, 110, travel
costs of $87, 781, and other direct costs of $175, 497, some
which TaSM believed were attributable to JCBAS'
approximately March 13, 2015, TaSM had substantially
completed the first six KEEP buildings but could not test the
fire alarm systems because the Army had not yet connected
communication lines to Pad 9 at Camp Buehring, the location
of the two-story KEEP shelters. Those communication lines
were eventually established.
June 13, 2015, the Army accepted, without any qualification
or reservation as to any deficiencies, the first six KEEP
buildings that were assembled by TaSM with the materials
provided by JCBAS.
Army's acceptance of the first six KEEP buildings was
delayed because of the Army's delay in establishing power
and communication lines to Pad 9.
Following the Army's acceptance of the first six KEEP
buildings, TaSM had no further maintenance or other
obligations with respect to those structures, other than
under the applicable warranties.
and Payments Under the Prime Contract and the
August 6, 2014, JCBAS invoiced TaSM for the first milestone
(ATEC inspection and certification). Throughout August 2014,
JCBAS invoiced TaSM for the shipped two-story KEEP shelters
based on the milestone payments set forth in the Prime
Contract and Subcontract. By August 29, 2017, JCBAS had
submitted seven invoices to TaSM, totaling $5, 928, 777,
consisting of milestone payments for the ATEC inspection and
for the delivery of 34 two-story KEEP shelters. On October 6,
2014, JCBAS issued another invoice for $931, 474 to TaSM for
the delivery of another seven two-story KEEP shelters,
bringing to $6, 860, 251 the total amount JCBAS had invoiced
September 9, 2014, the Army paid TaSM $2, 616, 554 for the
first three milestones under Prime Contract Delivery Order
0001-the ATEC inspection and delivery of 13 two-story KEEP
shelters to the port in Norfolk, Virginia. The following day,
September 10, 2014 (the same day TaSM issued the Stop Work
Order to JCBAS), the Army paid TaSM another $2, 212, 785 for
two more milestones (the delivery of 14 more two-story KEEP
shelters). By September 30, 2014, the Army had paid TaSM a
total of $7, 042, 123 ...