ASBCA 60907

ARMED SERVICES BOARD OF CONTRACT APPEALS Appeal of-- ) ) K2 Solutions, Inc. ) ASBCA No. 60907 ) Under Contract No. M67854-1l-C-3015 ) APPEARANCES FOR THE APPELLANT: Paul W. Bowen, Esq. K&L Gates LLP Seattle, WA Amy M. Conant, Esq. K&L Gates LLP Washington, DC APPEARANCES FOR THE GOVERNMENT: Ronald J. Borro, Esq. Navy Chief Trial Attorney Matthew S. Hawkins, Esq. Stephanie Cates-Harman, Esq. Trial Attorneys OPINION BY ADMINISTRATIVE JUDGE SWEET ON THE GOVERNMENT'S MOTION TO DISMISS AND/OR STRIKE This is an appeal of a contracting officer's denial of a claim by K2 Solutions, Inc. (K2), alleging that the government breached a contract, and the duty of good faith and fair dealing, by reducing a contract's scope of work. The government has moved to dismiss portions of the complaint-namely counts two, three, and six-for failure to state a claim. 1 The motion is granted as to counts two and three, and denied as to count six. STATEMENT OF FACTS (SOF) FOR PURPOSES OF THE MOTION2 1. On 29 September 2011, the government awarded K2 Contract No. M67854-l l-C-3015, which was a contract to provide improvised explosive device detector dogs and related services (comp I. irir 4-5). 1 The complaint does not number the counts. The government assigns such numbers in its motion to dismiss. For ease of reference, we adopt the government's numbering convention. 2 For purposes of this motion only, we accept the allegations in the complaint as true.  2. The contract was for one base year, and two option years (comp I. ~ 8). Option year one, if exercised, would commence on 29 September 2012 (id.). 3. K2 alleges that the government failed to exercise delivery of the full quantity of dogs and services during the base year (com pl. ~~ 25-34 ). 4. On 22 June 2012, the government sent K2 a notice of intent to exercise option year one (compl. ~ 37, ex. J). The notice contemplated a reduction in the requirements from the original contract (id.). 5. On 31July2012, the government sent K2 Modification No. POOOlO (Mod. 10) (comp I. ~ 39). Mod. 10 "was a unilateral Modification purporting to exercise Option Year 1 on terms different than those agreed to by the parties in the Contract" (id.). In particular, Mod. 10 "reduced requirements, changed terms within certain [contract line item numbers (CLINs)], and issued new SubCLINs for reduced amounts" (compl. ~ 40, see also ex. K). 6. K2 continued to perform subsequent to the issuance of Mod. 10 (compl. ~ 45). 7. K2 alleges that, even relative to the reduced quantities ordered in Mod. 10, the government decreased the amount of work (compl. ~ 50). In particular, K2 alleges that the government only paid 63 percent of the original amount awarded in the contract for option year one, and 86 percent of the amount as reduced by Mod. 10 (compl. ~ 51). 8. K2 submitted a certified claim to the contracting officer (CO) on 22 April 2016 (compl. ~ 58). The CO denied that claim (id.~ 78). 3 9. This timely appeal followed. 10. Count one of the complaint alleges that the government breached the contract by failing to exercise delivery of all the ordered goods and services during the base year (compl. ~~ 80-93 ). 11. Count two alleges that the government breached the contract by using the exercise of the first option year to reduce the scope of work (compl. ~~ 95, 100-01). In particular, count two alleges that the government "attempt[ed] to unilaterally exercise only parts of the Option Year One CLINs by exercising Option Year 1 and then immediately deleting portions of the work" (compl. ~ 99). 12. Count three alleges that the government improperly exercised option year one, in violation of the contract, by decreasing the amount of work without providing K2 the opportunity to renegotiate the option (compl. ~~ 104-05, 107-08). 3 The certified claim asserted the same claims raised in the complaint (comp I., ex. T). 2  13. Count four alleges that the government breached Mod. 10 by refusing to allow for the delivery of all the services ordered under Mod. 10 (comp I. ~ 115). 14.