CBCA 7351

DENIED: March 1, 2023 CBCA 7351 BRIGHTWOOD MANAGEMENT PARTNERS, Appellant, v. DEPARTMENT OF VETERANS AFFAIRS, Respondent. S. Sadiq Gill of Durrette, Arkema, Gerson & Gill P.C., Richmond, VA, counsel for Appellant. Krishon Gill-Edmond and Shawn Larson, Office of General Counsel, Department of Veterans Affairs, Washington, DC, counsel for Respondent. Before Board Judges GOODMAN, DRUMMOND, and SHERIDAN. SHERIDAN, Board Judge. After the first year of contract performance by Brightwood Management Partners, LLC (Brightwood), the Department of Veterans Affairs (VA) decided not to exercise the contract’s first option period. Brightwood timely submitted a certified claim for damages of $941,260.39. In its claim, Brightwood, alleging bad faith and a breach of the covenant of good faith and fair dealing, seeks to recover lost profits and unrecoverable overhead (such as accelerated equipment expenditures, labor costs necessary to meet the base year requirements, and capital financing) that it alleges were incurred when the VA declined to exercise the options. Following a hearing, we deny Brightwood’s appeal. CBCA 7351 2 Background On October 1, 2020, the VA awarded contract 36C78621D0021 to Brightwood. The contract was for grounds maintenance and internments at Hampton National Cemetery (the cemetery). The initial base term of the contract was one year. The contract also included Federal Acquisition Regulation clause 52.217-9, Option to Extend the Term of the Contract, which allows for up to four one-year option periods. 48 CFR 52.217-9 (2020). Brightwood began performance on the grounds of the cemetery in October 2020. Early in the contract, funding delays were experienced because of congressional budget issues and the fact that the VA was operating under a continuing resolution. Throughout this time, Brightwood continued to perform, even though payments from the VA were sometimes late. Also during this period, the cemetery was experiencing changes in leadership and went through a series of acting directors in the final months of 2020. Michael Faust became the permanent director of the cemetery on April 12, 2021. As the cemetery director, Mr. Faust worked alongside the contracting officer representatives, Paul Zagaruyka and James Jacobs, to administer the contract. Within days of becoming the director, Mr. Faust raised a series of negative observations relating to the care and aesthetics of the cemetery. Mr. Faust then did a walk-through of the grounds of the cemetery with Brightwood’s owner, Vernon Lee. During this walk-through, as well as in a series of follow-up communications from both Mr. Faust and Mr. Jacobs, Brightwood was notified of specific performance concerns involving maintenance of the cemetery grounds, including headstone cleaning, mowing, equipment storage, and improper burial setup. Messrs. Faust and Jacobs emphasized the importance of completing corrective action by Memorial Day 2021 because the cemetery would see a large influx of families and guests. When these concerns were not resolved, Messrs. Jacobs and Zagaruyka issued the first contract discrepancy report (CDR) on May 21, 2021. In the subsequent weeks, two additional CDRs were issued on May 24 and June 24, 2021, related to Brightwood’s performance issues at the cemetery. On July 28, 2021, Mr. Jacobs certified to Mr. Zagaruyka that Brightwood had not performed in a satisfactory manner and that the VA did not wish to exercise the contract’s first option. Brightwood was notified of this decision on July 29, 2021. Brightwood timely submitted a certified claim on September 15, 2021. In its claim, Brightwood asserted that the VA had acted in bad faith and breached the covenant of good faith and fair dealing by not exercising the option. Brightwood argued that it was denied its economic expectancy under the contract while also having to accelerate its costs to perform CBCA 7351 3 for the base year without the opportunity to amortize the costs over the option years. Brightwood asserted that its performance issues primarily stemmed from difficulty communicating and working with the VA. In its claim, Brightwood further contended that Mr. Faust did not want to continue working with it and was seeking a new contractor during Brightwood’s base period. Brightwood alleged that Mr.