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Technology and Supply Management, LLC v. Johnson Controls Building Automation Systems, LLC

United States District Court, E.D. Virginia, Alexandria Division

July 28, 2017



         This 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 V).[1] 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.

         Based 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 Procedure 52(a).


         A. Findings of Fact

         Based 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:

         1. TaSM 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 Wisconsin.

         2. 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 Milwaukee, Wisconsin.

         3. On 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 shelters”).

         4. The 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.

         5. 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.

         6. On 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 performance.[2]

         7. The 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.

         8. 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.

         9. On February 17, 2014, after the Army authorized TaSM to resume work under the Prime Contract, [3] 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, 2014.

         10. The 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).

         7.5% of 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.

         The Subcontract

         11. On February 11, 2014, TaSM and JCBAS entered into a Firm-Fixed-Price Indefinite-Delivery/Indefinite-Quantity 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.

         12. As 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.

         13. 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 DO1.

         14. DO1 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.

         15. DO1 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 Contract.

         16. 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 / Styropor[4]

         17. 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 shelter.

         18. 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.

         19. 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.

         20. On 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.

         21. 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).

         22. By 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.

         First Cure Notice

         23. The 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.

         24. On 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.

         ATEC Building Inspection

         25. As 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 under DO1.

         26. The 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[5] assembled the ATEC building at JCBAS' facility in Dublin, Virginia.

         27. 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.

         28. 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 concerns.

         29. On 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.

         Performance Following the ATEC Inspection

         30. On 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.[6]

         31. The 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.

         32. On 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.

         33. 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, 000.00.
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.

         34. 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 Subcontract.

         35. 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 completed.

         36. By 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.

         37. 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.

         38. During its assembly of the first 36 two-story KEEP shelters, TaSM experienced assembly difficulties in the following respects:

a. Unloading, sorting, and tracking the materials from the containers.
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.

         39. On 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.

         40. In 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.

         41. On October 7, 2014, following another response from JCBAS, TaSM informed JCBAS that the Stop Work Order remained in place.

         42. On 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 the Army.

         43. On 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.

         44. 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' assistance.

         45. 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.

         46. 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.

         47. On 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.

         48. 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.[7] Contrary to TaSM's claim, JCBAS did not fail to tender deliver of these containers by the agreed-upon date of November 21, 2014.[8]

         49. On December 1, 2014, the final containers with JCBAS materials left the port in Norfolk on a ship bound for Kuwait. Id.

         50. The 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, [9] to complete the second 36 two-story KEEP shelters under the Subcontract and DO1.

         51. By 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.

         52. The 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.

         53. 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 DO1.

         54. As 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' deficiencies.

         55. By 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.[10] Those communication lines were eventually established.

         56. On 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.

         57. The 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.

         58. 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.

         Orders and Payments Under the Prime Contract and the Subcontract

         59. On 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 TaSM.

         60. On 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 ...

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