CBCA 7989

DENIED: December 3, 2024 CBCA 7989 MELWOOD HORTICULTURAL TRAINING CENTER, INC., Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. Meghan A. Douris and Zachary F. Jacobson of Seyfarth Shaw LLP, Seattle, WA, counsel for Appellant. Jay Bernstein and David C. Charin, Office of General Counsel, General Services Administration, Washington, DC, counsel for Respondent. Before Board Judges SHERIDAN, KULLBERG, and O’ROURKE. SHERIDAN, Board Judge. The appellant, Melwood Horticultural Training Center, Inc. (Melwood), appeals the denial of its claim on a contract with the General Services Administration (GSA) to provide custodial and related services at GSA’s headquarters building. Melwood challenges GSA’s requirement that its contracting officers utilize an actual cost method of calculating annual price adjustments for direct labor cost increases attributed to rising wages and employee benefits required by the Fair Labor Standards Act and the Service Contract Act in the final option year of its five-year custodial services contract. Melwood requests that it be awarded $50,102.13 in relief plus interest on its claim under the Contract Disputes Act, 41 U.S.C. §§ 7101–7109 (2018). For the following reasons, we deny Melwood’s claim. CBCA 7989 2 The appeal was submitted for decision on the written record pursuant to Rule 19 (48 CFR 6101.19 (2023)). Background The Contract In 2018, GSA issued a request for proposal (RFP) for a firm-fixed price contract for custodial and related services at GSA’s headquarters building. The RFP stated that the period of performance would be one base year plus four one-year options for a maximum contract period of five years. The RFP included the clause at Federal Acquisition Regulation (FAR) 52.222-43, Fair Labor Standards Act and Service Contract Act – Price Adjustment (Multiple Year and Option Contracts) (48 CFR 52.222-43 (2018)). This clause provides that “[t]he contract price, contract unit price labor rates, or fixed hourly labor rates will be adjusted to reflect the Contractor’s actual increase or decrease in applicable wages and fringe benefits” when the increase or decrease is caused by a Department of Labor wage determination, collective bargaining agreements, changes by operation of law, or an amendment to the Fair Labor Standards Act of 1938. Id. 52.222-43(d). Performance and Follow-On Years One Through Three Melwood submitted a timely proposal and was awarded the contract in 2019 “for performance of the base period.” Under Melwood’s contract with GSA, the number of direct labor hours for each position was listed in the contract. The contract also established that price adjustments for the option years would be established in accordance with “GSA/AbilityOne Strategic Alliance and FAR Clause [52.222-43].” After the base contract period, GSA and Melwood executed option years one through three following a similar practice. In each instance, Melwood proposed, and GSA accepted, a price increase pursuant to FAR 52.222-43 due to wage and fringe benefits increases under yearly collective bargaining agreements (CBAs) between Melwood and the local Public Service Employees Union. For these three option years, the price adjustment was calculated by applying these wage and fringe benefits increases to the number of direct labor hours listed in the contract. New Calculation Method for Follow-On Year Four In 2023, GSA’s Procurement Implementation Committee issued an internal policy memorandum updating GSA’s “prior method of executing adjustments for option periods based on updated wages in accordance with FAR Clause 52.222-43.” The policy memorandum required contracting officers to “use the hourly totals based on the prior year CBCA 7989 3 of the contract, verified through payroll records” to calculate the “actual increase or decrease” in costs the contractor incurred as a result of updated wage and fringe benefits. Melwood was informed of this new calculation method prior to the execution of Follow-On Year Four (FOY4) when the contracting officer directed Melwood to send payroll records in order to calculate the pricing adjustment. Due to Melwood’s delays in creating its FOY4 price adjustment proposal to comply with the new requirements, FOY4 was initially executed without a price adjustment, and any price adjustment was to be incorporated through a modification to the contract.