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Our next case is Siemens Government Technologies Inc.

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v. Secretary of the Navy, 22-2240.

[00:00:07] Speaker 01:
Okay, Councilor Bargatova.

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Did I pronounce that correctly?

[00:00:12] Speaker 00:
Yes, thank you.

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May it please the Court?

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Michael Bargatova on behalf of Siemens Government Technologies.

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This is an appeal over the U.S.

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Navy's procurement for energy conservation measures.

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in which the Navy refused to reimburse certain costs based on an erroneous contract interpretation.

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The key question here, Your Honors, is the scope of the project for the Navy's procurement.

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The Armed Services Board of Contract Appeals claimed that it had no jurisdiction over Seaman's claim because it incorrectly assumed that each of the six naval bases at issue here was a separate project.

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But the Navy itself always defined the project broadly as the overall Urafsoa project that covered all six naval bases across the Europe.

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And there's a history of doing that?

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I'm sorry?

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There's a history of that happening?

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Well, in this project, that is how the Navy defined the project.

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It established the project as the RAFSA project.

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That is the region that this is known by.

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It issued a single project number for this procurement.

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It consistently used that project number for this procurement.

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It issued a request for preliminary assessment under that project number.

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Does the master contract define the term project?

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It does not specifically define the term project.

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It uses the terms alternately project or ESPC project.

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But there is no specific definition for the word project.

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In the industry, what is a project?

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A single undertaking?

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Are we talking about six projects because there are six bases?

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Is each one a project?

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No, the project here is the procurement itself.

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Because in the context of the contract itself, if you look at the specific sections at issue in the contract,

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Section H.4.1, which is one of the three relevant contract provisions here, it states that an agency is liable for the development costs here if, quote, the project addressed by the preliminary assessment later becomes a task order award.

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So defining the project is critical.

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That task order didn't get the issue, though, for these two.

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A task order did get issued, Your Honor, for the URAFSO project.

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For the two that we're talking about?

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It did get issued for the project.

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It did get issued for the URAFSO project.

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Yes, Your Honor.

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Now, what you're saying, Your Honor, and what the Navy is arguing, is that it didn't authorize construction of

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of energy conservation measures at those two specific bases.

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But that's a separate issue.

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Or is that the key issue?

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I'm sorry, Your Honor?

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Is that the key issue of the case?

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No, Your Honor.

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This is about the investigation of energy conservation measures, which is an earlier step of the process.

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The task order is about specifically authorizing construction of eventual energy conservation measures.

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But they issued a task order at the end of the project under that same procurement number, the same project number.

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It covered three bases at which there were still viable energy conservation measures.

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It covered the entire swath of energy conservation measures that were still viable for the entire project.

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The fact that it didn't have, that there weren't still viable conservation measures at two of the bases at Camp Le Manier and Souda Bay isn't relevant in terms of the

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Award of the development costs because a task order was issued for the project itself again The project is that you were asked for project is it the same consistent project number same procurement number from start to finish here Yes, and the Navy asserts that that's the definition that that should that should be used and

[00:05:07] Speaker 00:
Couple points on that first of all that definition is specifically defined But it's not used in in section h point four point one you would expect that if that were a defined term That that defined term would be incorporated into age point four point one if that's what the if that's what the contract we're going for But that's not what it was going for there

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It is the term project, not task order project.

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And task order project... Why would it be unreasonable to look at other terms that have the word project in them if the word project by itself is not separately defined?

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Because task order project is specifically a subset of the ESPC project.

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So the term ESPC project is used throughout the IDIQ contract.

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And that is supposed to represent the entire procurement.

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It's, again, not a defined term, but it is used interchangeably with project.

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Task order project is specifically defined.

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And it is a subset, meaning just specifically the energy conservation measures.

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that were authorized for construction.

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And that is used specifically only for cost allocations in terms of tracking the construction costs later on.

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But that's not used for development costs.

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Well, what about if you look at Appendix 630, where it talks about project scope?

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Why doesn't the discussion of project scope, identified on Appendix 630, support up opposing counsel's argument?

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You're talking about C.1.1?

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Correct.

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Again, that is referring specifically to construction costs, which is a later phase of the development process.

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So again, the way this works is that a contractor is asked to investigate a broad range of energy conservation measures.

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And if at the end of the day, after all things are whittled down, if a task order is issued for the project,

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and and a certain number if any number are of conservation measures are authorized for construction then you get to claim all of the development costs.

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Let me attack it a different way.

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What is your best support for your interpretation of project that should be applied here?

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Well, so the Navy doesn't dispute here that the that

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The way ESPC projects work is that contractors such as Siemens can claim the development costs for energy conservation measures, the development costs even for conservation measures that are not authorized.

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So for example, at the three bases at which conservation measures have been authorized, at Rhoda, Sigonella, and Naples,

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The Navy is currently compensating Siemens for all of its development costs, for all of the energy conservation measures that it explored at those three bases, even if they weren't actually authorized for construction at the end of the day.

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See point 1.1 here on page 630.

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That just talks about the final construction costs, but that's not what's at issue here because the large majority of the energy conservation measures that Siemens explored didn't end up in construction.

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They weren't authorized.

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Do you have anything specific to point us to in the contract itself that would support up your proposed definition of project?

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Well, again, we point to a number of things in the

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in the overall IDIQ contract that talks about, again, it's not a defined term.

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But there is a difference between when they talk about project versus projects.

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Projects meaning different procurements, essentially.

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Can you point me to a page that would support what you want us to interpret project to mean in the contract?

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I will get that to you on break, Your Honor.

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Thank you.

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Would you say that, in this instance, you got paid for the work that you actually did?

[00:10:31] Speaker 00:
Siemens is getting paid for the work that it did at three of the naval bases, but it's not getting paid for any of the work that it did at Souda Bay and Camp Le Monnier, even though, again, it's part of the same overall project.

[00:10:46] Speaker 01:
But you didn't complete the work on all of those projects, right?

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Siemens did complete the work, which was the preliminary assessments there.

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The assessment and the preparation.

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But again, the way these work is you start with a large number of potential conservation measures.

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Only a small number of them actually get authorized in terms of final construction.

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The fact that only a small number gets authorized doesn't mean you can't claim the full development costs.

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And so Siemens did the work.

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But just the fact that only some of them were authorized is not the important issue here.

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I think your big problem here is H41.

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And how do you get out of that?

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Well, respectfully, Your Honor, I think H41 is what entitles Siemens.

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because it's the project addressed by the preliminary assessment.

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The project here, again, you have to look at the procurement here.

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The procurement here is the entire Urafswa region.

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There's a document that the

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the board relied on to say that these were six separate projects.

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You're into rebuttal time, and I don't want to take up.

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But explain once again why, if you have a single project number, isn't that a single task order?

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And you've got a task order for the projects that you did work on.

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The projects that you got paid for, you did the preparation and the analysis for those, correct?

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But you didn't for the other ones that you didn't get paid for?

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There was a single task order, yes, sir.

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And Siemens did get paid for those under, again, the single project number for this single project.

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I think your case boils down to this particular issue there that you just were discussing.

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And you may want to think about that for your rebuttal.

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Thank you, Your Honor.

[00:13:12] Speaker 01:
Attorney Speck.

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Yes, Your Honor.

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Good morning, Your Honors.

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Elizabeth Speck for the United States.

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This is a case about energy conservation projects where

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The norm in contracting is that the contractor does not get its development costs.

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In these energy savings performance contracts, it lets the contractor recover some cost if a task order for work at that site is actually awarded.

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Here, Siemens' argument is trying to move the point in time where the government has agreed to assume liability for those project development costs.

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The contract is set up so that there is a 20-year income stream

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where Siemens will be able to recover its costs if it actually generates energy savings to cover its various costs.

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But the contract is all set up that a contractor expects nothing upfront, and certainly a contractor cannot expect to get its preliminary assessment costs or its investment grade audit costs.

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But it is a form of partnership, isn't it, between private industry and the government?

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Yes, Your Honor.

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It is a partnership trying to get a viable project.

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At the end of the day, you're looking to get something from the contractors as well.

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Yes, Your Honor.

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This is a contract in which the government does not have to have an appropriation or upfront costs.

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Instead, it can get a project developed.

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It can rely on the expertise of these energy savings performance contractors to determine what would be a viable project

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that would generate the necessary energy savings to pay for that, again, here over what was a 20-year period?

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I think some of the complexity here starts with the initial master contract.

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And it calls for a project and it lists the different six or whatever bases that are going to be involved in this.

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Siemens goes out and conducts its preparation and analysis.

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You benefit from that.

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Right?

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You benefit from that preparation and the work that they did up front.

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Am I correct so far?

[00:15:23] Speaker 02:
Your Honor, I don't think here necessarily the Navy found a benefit.

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And I think that there are a number of situations under this contract where a contractor could incur these kinds of costs and have no expectation.

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Doesn't the record show that you recognize a benefit from Siemens' work on the other projects that it didn't get paid for?

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Yes, Your Honor, and that's in line with the contract.

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It concluded that there would be the energy savings.

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And so in accordance with the contract, it awarded the task order here that covers Rhoda, Sygenella, and Naples.

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And those are projects that were covered by an awarded task order.

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And those are ones in which the Navy was able to, those were ones in which on page 1259, when you look at

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The task order two costs, those were project development costs that the Navy included in the awarded task order.

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And the contract specifically says at H.4 that an agency would not be liable for the costs associated with the preliminary assessment unless the project assessed by the preliminary assessment becomes a task order award.

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Similarly, H.6.2 says that the agency would not be responsible for the investment grade audit costs.

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unless a task order is awarded or authorized by the agency contracting officer.

[00:16:40] Speaker 01:
So the way you apply those provisions in this case, is that consistent with practice in this sector?

[00:16:50] Speaker 02:
Yes, Your Honor.

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The contract establishes the fact that a contractor cannot expect to get any of its development costs unless there is actually

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a task order that covers that work.

[00:17:05] Speaker 01:
So that... Now we got to order the Rubber Mesa Road, right?

[00:17:10] Speaker 01:
Here there were two task orders.

[00:17:12] Speaker 02:
No, Your Honor, there was only one task order.

[00:17:15] Speaker 02:
And I wanted to address that point by opposing... But either way, there was a task order.

[00:17:18] Speaker 01:
So doesn't that kind of trigger the liability of the government for reimbursing the costs for the others?

[00:17:28] Speaker 02:
No, Your Honor, because the task order project only covered work at Rhoda, Ciginella, and Naples.

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And so the project development costs that the government agreed to include in their costs, which would ultimately be repaid out of energy savings, were just for those three sites.

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And I wanted to push back on the contractors

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on opposing counsel's assertion that the Navy always treated this as one project.

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The notices of attempt to award always said that the Navy intended to award up to five task orders.

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For example, on page 803, it stated the Navy would notify offerors when projects could commence if the projects are determined.

[00:18:14] Speaker 03:
In the contract, it's not defined.

[00:18:16] Speaker 02:
Your Honor, we would point the court to it.

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There is no project definition.

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There is the task order project definition that the court read to opposing counsel.

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We would also note that the task order itself is the obligating document.

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The court had also pointed out C.1.

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That was another provision that we cited to our brief.

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I think the overall structure of the contract, especially 658 to 672, the steps leading up to a task order award suggest that it would be

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that the focus is what was actually awarded and what work was done at those sites.

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So how would you, just to put a finer point on it, define project or how are you interpreting project in the contract here?

[00:19:00] Speaker 02:
Yes, Your Honor, we're interpreting project here to be the work where the task orders was awarded.

[00:19:05] Speaker 02:
So we didn't, the opposing counsel is correct that the agency doesn't get to the level of granularity, that it has to be every single

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energy conservation measure that was proposed at that site.

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But basically, the agency drew the line at what places where work was being performed.

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So here, Rota, Cigenella, and Naples.

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How do you respond to opposing counsel's argument that there's a single solicitation number regarding the six sites, which I think is part of their argument that it really should all be interpreted as one project?

[00:19:43] Speaker 02:
Yes, Your Honor, there was a single solicitation number that was given.

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But I think the Navy, throughout its correspondence, did, in fact, refer to it as separate projects.

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And again, I would point the court at 803 to the notice of intent to award.

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It stated that it would award up to five proposed task orders.

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It informed offerors that they were to perform audits and submit five final proposals summarizing the survey results.

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and that the Navy would notify offers if the projects could commence if the projects were determined to be beneficial to the Navy.

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I would also note that the agency at 805 to 806 of the Joint Appendix issued a separate task order RFP for Suda Bay.

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Suda Bay is at 805 to 806.

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885 to 886 was the task order RFP for Suda Bay.

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Djibouti or CLDJ.

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Also, I would note that the Navy talked about every Notice of Intent to Award 95 to 986 of the Joint Appendix, talked about up to five proposed task orders.

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It was in the Notice of Intent to Award in November of 2016 where it confirmed the option to contractually bundle Naval, Ciginella, and the Rhodocytes

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And it said the task order for these projects should reflect a single annual payment.

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So the Navy did ultimately agree to bundle those three.

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And they were allowed, again, in 1259, the costs that were submitted in the final task order, in the final proposal, were the development costs for the work at the three sites where work was performed.

[00:21:31] Speaker 02:
We'd also just wanted to clarify one point.

[00:21:33] Speaker 02:
We had talked about the fact that these are pre-award or development costs.

[00:21:39] Speaker 02:
And in their brief, Siemens suggested that they didn't know that these costs were not going to be reimbursed when the Navy issued the task order.

[00:21:48] Speaker 02:
And that is incorrect.

[00:21:49] Speaker 02:
They submitted, again, on page 1259, there are project development costs which were included in the task order, which do not include work

[00:22:01] Speaker 02:
Suda Bay and at Djibouti, so it was well known to the contractor that these would not be included.

[00:22:06] Speaker 02:
And there's also at 147 to 148 a declaration saying that those costs were not included in the final task order.

[00:22:17] Speaker 02:
If the court has no further questions, we respectfully request that the court sustain the board's decision.

[00:22:21] Speaker 01:
Thank you.

[00:22:29] Speaker 01:
We have three minutes.

[00:22:36] Speaker 00:
Thank you, Your Honor.

[00:22:37] Speaker 00:
The Council for the Government repeatedly stated that these are separate projects at the various sites, one for each naval base.

[00:22:48] Speaker 00:
And Judge Cunningham, going back to your question, and Judge Raina as well, if you look at Appendix 788, this is the request for preliminary assessment.

[00:22:58] Speaker 01:
What page?

[00:22:59] Speaker 00:
788.

[00:23:01] Speaker 00:
This is the single request for preliminary assessment.

[00:23:06] Speaker 00:
This is kind of what kicks off the project for the Navy and requests Siemens to conduct the preliminary assessment for the project itself.

[00:23:19] Speaker 00:
So 788 is the first page.

[00:23:23] Speaker 00:
789, it says section one

[00:23:30] Speaker 00:
on page 789, if you're there, it defines the project scope for this project, for this single procurement number.

[00:23:43] Speaker 01:
Okay, point me to the project scope.

[00:23:47] Speaker 00:
Yes, so it's down in the middle of the page, down

[00:23:52] Speaker 00:
Section 1, General Requirements Project Scope, page 789 of the Appendices.

[00:23:57] Speaker 00:
789.

[00:23:59] Speaker 00:
Yes.

[00:24:00] Speaker 00:
And it defines what the project scope is.

[00:24:03] Speaker 00:
This is the request for preliminary assessment.

[00:24:05] Speaker 00:
And then it lists Camp Le Manier.

[00:24:08] Speaker 00:
It lists Ciginella.

[00:24:09] Speaker 00:
It lists Rota.

[00:24:10] Speaker 00:
It lists Naples.

[00:24:11] Speaker 00:
It lists Suda Bay.

[00:24:13] Speaker 00:
This is what the Navy is defining as the project.

[00:24:17] Speaker 00:
This is the start of the project.

[00:24:22] Speaker 00:
The government council says that, well, we reserve the right to issue five separate task orders, but it didn't.

[00:24:31] Speaker 00:
It issued a single task order for this project under this procurement.

[00:24:37] Speaker 00:
This defines the project.

[00:24:39] Speaker 00:
And this is what Siemens was responding to.

[00:24:44] Speaker 00:
And this is the work that it did in response to this request for preliminary assessment.

[00:24:50] Speaker 00:
So this is what defines the project.

[00:24:53] Speaker 00:
So the board below erred in concluding that each of these were separate projects.

[00:25:00] Speaker 00:
One of the documents that it relied on in concluding that these were separate projects.

[00:25:05] Speaker 01:
So what happens if we agree with you?

[00:25:07] Speaker 01:
This goes back to the board?

[00:25:09] Speaker 00:
Yes, Your Honor.

[00:25:11] Speaker 00:
We ask that you conclude that the board has jurisdiction over this, because this is a separate project, that a task order was issued for the project, and that the board has jurisdiction over this.

[00:25:26] Speaker 03:
How do you respond to opposing counsel's point to H6.2, which is Appendix 666?

[00:25:39] Speaker 03:
And the statements about the agency will not be responsible for any costs incurred, such as the proposal preparation cost of a cost incurred at the death in the IGA, unless a TO is awarded or authorized by the agency CO.

[00:25:52] Speaker 00:
Well, a TO was awarded.

[00:25:54] Speaker 00:
A task order was awarded for the project.

[00:25:57] Speaker 00:
And again,

[00:25:59] Speaker 00:
One of the documents that the board relied on below is Siemens asked for some kind of reassurance from the Navy, because this was such a massive project.

[00:26:10] Speaker 00:
This is 12 to 15 times the size of most normal projects.

[00:26:15] Speaker 00:
So Siemens said it was an unprecedented region-wide six-site ESPC project.

[00:26:22] Speaker 00:
So Siemens asked for reassurance.

[00:26:24] Speaker 00:
And the Navy came back and said, if a TO is awarded, we'll give you your cost.

[00:26:28] Speaker 03:
Did you also find, because you said you were going to do it while you were sitting down, the specific page sites in the master contract itself that supported your proposed definition of project?

[00:26:39] Speaker 03:
Did you have those page sites for me?

[00:26:41] Speaker 00:
Again, the contract itself does not define, the IDIQ does not define, specifically define project.

[00:26:48] Speaker 00:
It continually refers throughout to ESPC project.

[00:26:52] Speaker 00:
which is what it means by the overall project.

[00:26:57] Speaker 00:
But it doesn't specifically define project itself.

[00:27:03] Speaker 00:
That's up to the agency to define project, and this is how the agency defines the project.

[00:27:08] Speaker 01:
Thank you, Your Honor.

[00:27:09] Speaker 01:
We thank you for your argument.

[00:27:10] Speaker 01:
We thank the parties for their argument.