CBCA 7145

DENIED: February 9, 2023 CBCA 7145 TEAM SYSTEMS INTERNATIONAL, LLC, Appellant, v. DEPARTMENT OF HOMELAND SECURITY, Respondent. James Y. Boland of Venable LLP, Tysons, VA; Christopher G. Griesedieck and Lindsay M. Reed of Venable LLP, Washington, DC; and David W. Carickoff of Archer & Greiner, P.C., Wilmington, DE, counsel for Appellant. Rafael Lara, Jr., Jeffrey D. Webb, Sarah Jaward, and Matthew Lane, Office of Chief Counsel, Federal Emergency Management Agency, Department of Homeland Security, Washington, DC, counsel for Respondent. Before Board Judges BEARDSLEY (Chair), DRUMMOND, and SHERIDAN. SHERIDAN, Board Judge. The Department of Homeland Security, Federal Emergency Management Agency (FEMA) awarded Team Systems International, LLC (TSI) a contract to provide bottled drinking water. When FEMA decreased the quantity of water bottles ordered by approximately sixty-seven million liters, TSI sought $13,504,320 in restocking fees. The parties seek a decision on the record pursuant to Rule 19 (48 CFR 6101.19 (2021)). CBCA 7145 2 Background We have previously summarized many of the relevant facts. See Team Systems International, LLC v. Department of Homeland Security, CBCA 7145, 22-1 BCA ¶ 38,045, at 184,754. We repeat facts below only as necessary to explain the basis for our decision. On September 5, 2017, FEMA awarded contract number HFSE70-17-D-0021 (contract) to TSI for the provision of bottled drinking water. Contract line item number (CLIN) 0005, the subject of the instant dispute, states: “Restocking fee – The initial ordered quantity either decreases or the order is cancelled. The fee covers the costs of restocking decreased or cancelled order to the Contractor.” The unit price for CLIN 0005 was $0.20 per liter. On September 29, 2017, FEMA awarded TSI firm-fixed-price task order HFSE70-17-J-0273 (task order) for the delivery of 80,000,640 liters of bottled drinking water to Puerto Rico, totaling $117,566,730. On November 6, 2017, FEMA issued bilateral modification P0001 (Modification 1), decreasing the quantity of bottled drinking water from 80,000,640 liters to 12,479,040 liters, a reduction of 67,521,600 liters. Three years later, on October 20, 2020, TSI submitted an invoice to FEMA seeking $13,504,192 in restocking fees under CLIN 0005 due to the 67,521,600 liter reduction. FEMA rejected the invoice. On November 20, 2020, TSI submitted a certified claim to the contracting officer stating that TSI was entitled to a restocking fee of $.20 per liter for the 67,521,600 liter reduction, totaling $13,504,320. The contracting officer issued a final decision rejecting TSI’s argument that it was entitled to $13,504,320. TSI appealed to the Board, where both parties filed motions for summary judgment. The Board denied both motions, finding that there were genuine issues of material fact “as to whether TSI suffered actual harm when FEMA reduced the task order quantity.” See Team Systems International, LLC, 22-1 BCA at 184,757. The Board concluded that TSI was not entitled to recover restocking fees unless TSI could “prove that the fees were actually incurred.” Id. Of importance here are two of TSI’s responses to FEMA’s request for admissions, wherein TSI admits that it has neither paid any restocking fees nor actually restocked any of the bottled water. Specifically, TSI stated that “TSI has not made any ‘restocking fee’ payments to any subcontractors yet” and admitted that “TSI did not physically restock any bottles of water as a result of Modification 1.” CBCA 7145 3 Discussion TSI urges the Board to look to extrinsic evidence to interpret CLIN 0005 as not requiring the incursion of costs as a trigger. TSI argues that industry custom prohibits TSI from physically restocking bottled water due to health and safety regulations. Therefore, it would be unreasonable to require TSI to physically restock bottled water before receiving a restocking fee. TSI argues that a prior contractual arrangement between FEMA and TSI sheds light on the parties’ intent as to and mutual understanding of CLIN 0005. FEMA had previously contracted with TSI to provide bottled drinking water. When FEMA decreased the initially ordered quantity of water, TSI sent an invoice for a restocking fee, and FEMA paid the fee without requiring proof of the costs TSI incurred as a result of the decrease.