CBCA 7319

DENIED: March 28, 2023 CBCA 7319 SAGE ACQUISITIONS LLC, Appellant, v. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, Respondent. Michael R. Rizzo, Kevin J. Slattum, and Aaron S. Ralph of Pillsbury Winthrop Shaw Pittman LLP, Los Angeles, CA, counsel for Appellant. Blythe I. Rodgers, Jose A. Montalvo-Rodriguez, Julie A. Holvik, Justin D. Haselden, and Julie K. Cannatti, Office of General Counsel, Department of Housing and Urban Development, Washington, DC, counsel for Respondent. Before Board Judges LESTER, SHERIDAN, and CHADWICK. SHERIDAN, Board Judge. Appellant, Sage Acquisitions LLC (Sage), seeks costs from the Department of Housing and Urban Development (HUD or agency) for HUD’s termination for convenience of three contracts as well as an alleged breach of a related bridge contract awarded during the pendency of a bid protest. The parties elected, pursuant to Board Rule 19 (48 CFR 6101.19 (2021)), to have this matter decided on a record submission without a hearing. Before addressing entitlement, we find that, because Sage’s termination settlement proposal ripened into a claim before Sage filed this appeal and the certified claim is stated in a sum certain, we possess jurisdiction to entertain this appeal. With regard to Sage’s CBCA 7319 2 entitlement to termination settlement expenses, the Asset Management (AM) contracts at issue in this appeal are indefinite-delivery, indefinite-quantity (IDIQ) contracts for which the Government is only liable for the guaranteed minimum. Once that guaranteed minimum was met, Sage was not eligible to receive termination for convenience costs. With regard to Sage’s requests for equitable adjustments, negligent estimates are not a basis for liability once the guaranteed minimum is met. We cannot find that HUD had superior knowledge about inventory that it declined to share with Sage, and, regardless, superior knowledge is irrelevant as long as the guaranteed minimum was met. Additionally, Sage has not demonstrated that HUD’s actions towards Sage were not conducted in good faith, nor can Sage prove that there was a mutual mistake of fact fatal to the parties’ agreement. Further, HUD properly exercised option year two in accordance with the terms of the contract and the direction of the Court of Federal Claims (COFC). Finally, although a bridge contract that HUD awarded Sage during the pendency of a bid protest was a requirements contract, the alleged diversion of inventory by HUD to its other disposition programs was not a breach of that bridge contract because Sage knew about the evolving policy decisions of HUD when it negotiated and entered into the contract, and HUD fulfilled the contract’s requirement. As such, Sage is not entitled to termination for convenience costs nor any additional costs sought in its September 28, 2021, claim and this subsequent appeal. Background HUD’s Various Programs/Strategies to Dispose of Defaulted Properties The Federal Housing Administration (FHA), an organizational unit within HUD, administers the single-family mortgage insurance program. FHA insures approved lenders against the risk of loss on loans that they finance for the purchase, and in some instances rehabilitation, of single-family homes. Generally, FHA properties are single-family foreclosed properties for which HUD has paid an insurance claim, and the titles have been conveyed to HUD. When a lender files a claim for insurance benefits with FHA and conveys the property to HUD, the property enters one of HUD’s disposition programs. In the event of a default on an FHA-insured loan, the lender acquires title to the property by foreclosure, a deed-in-lieu of foreclosure, or other acquisition method. HUD uses several different programs to dispose of defaulted properties. These programs can be divided into two categories: Real Estate Owned (REO) sales programs and REO alternative programs. The AM contracts at issue fall into the REO sales category. REO alternative programs include third-party sales (or claims without conveyance of title (CWCOT)), note sales (under the distressed asset stabilization program (DASP)), and pre-foreclosure sales (or short sales). CBCA 7319 3 The utilization and outcome of the REO alternative programs is discussed in detail in FHA’s Annual Report to Congress Regarding the Financial Status of the Mutual Mortgage Insurance (MMI) Fund.