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Coyle's Pest Control Inc. v. Cuomo

August 24, 1998


Before Newman, Plager, and Rader, Circuit Judges.

The opinion of the court was delivered by: Rader, Circuit Judge.

Appealed from: Department of Housing and Urban Development Board of Contract Appeals

On summary judgment, the Department of Housing and Urban Development's Board of Contract Appeals (the Board) denied Coyle's Pest Control, Inc.'s (Coyle's) breach of contract claim for $1,525,170.74. See Coyle's Pest Control, Inc., HUD BCA No. 96-A-121-C10, 97-1 BCA ¶ 28,717 (Jan. 6, 1997). Because the Board correctly determined that the contract was invalid and unenforceable when interpreted as either a requirements or an indefinite quantity contract, this court affirms.


The Department of Housing and Urban Development (HUD), through the Small Business Administration, awarded Contract No. H06C94050400000 to Coyle for termite inspection and subterranean treatment of HUD-owned properties in thirty-four Texas counties. Section B.1 of the contract required Coyle "to furnish all labor, service, equipment, transportation, materials and supplies to provide subterranean termite control and related services on assigned properties owned by [HUD]." Clause C.2.D stated that properties would be "assigned on an as-needed basis." (emphasis added).

The contract, effective December 20, 1993, provided for a one-year term (the base year) as well as two one-year options. Section B.2 established a fixed price for inspection services and a two-tier, fixed price scheme for treatment services. This section set treatment prices at one of two levels depending on whether the range of properties assigned monthly was 0-170 or 171-240; the option years included modest increases for each of the two levels. The estimated value of the contract, including the base year and the two option years, was $1,930,000.

Section L.14 labeled the contract a "fixed unit rate-indefinite quantity contract." Nonetheless, the contract did not include two provisions typically present in indefinite quantity contracts: (1) a specified minimum number of properties to be assigned to Coyle; and (2) the indefinite quantity clause found in Federal Acquisition Regulation (FAR) 52.216-22 and then required by FAR 16.505(e). See 48 C.F.R §§ 52.216-22, 16.505(e) (1993). Also absent were two provisions generally associated with requirements contracts: (1) a clause requiring HUD to order all of its subterranean termite inspections and treatments from Coyle; and (2) the requirements clause found in FAR 52.216-21 (a mandatory feature of requirements contracts then under FAR 16.505(d)). See id §§ 52.216-21, 16.505(d).

In June 1995, during the first option year, HUD proposed Modification No. 4 to the contract. The proposed modification prevented Coyle from treating properties that HUD had already inspected and found free of termite infestation. Coyle rejected the modification. Thereafter, HUD informed Coyle that it would receive a "substantially lesser amount of properties" for termite services. At about the same time, in July 1995, HUD also altered its national policy for termite services and began to permit buyers of HUD properties to order their own termite inspections. Due to changes in the parties' relationship, ultimately, on September 25, 1995, they agreed to a revised version of Modification No. 4. As adopted, Modification No. 4 increased prices for both inspection and treatment services beyond that originally contemplated for the option years. More specifically, the parties changed the two-tiered pricing system for treatment services to a higher, single-rate system.

In sum, HUD assigned properties to Coyle from the beginning of the base year to slightly beyond the contract's first option year and paid to Coyle $694,228.04 for services during this period. On December 7, 1995, however, Coyle submitted a certified claim for $1,525,170.74-an amount equal to the difference between the estimated value of the contract ($1,930,000) and the amount HUD actually paid during the base year ($404,829.26). Coyle asserted that the contract was a firm fixed price agreement that entitled it to the estimated value of the contract. The contracting officer rejected Coyle's characterization of the contract and denied its claim. On appeal to the Board, Coyle asserted an alternative theory for recovery, that the contract was susceptible to interpretation as a valid and enforceable requirements contract. The Board rejected this characterization and denied Coyle's claim on January 6, 1997. Coyle appeals.


This court reviews the Board's decision under the standard set forth in the Contract Disputes Act, 41 U.S.C. § 609(b) (1994). Under that standard,

the decision of the agency board on any question of law shall not be final or conclusive, but the decision on any question of fact shall be final and conclusive and shall not be set aside unless the decision is fraudulent, or arbitrary, or capricious, or so grossly erroneous as to necessarily imply bad faith, or if such decision is not supported by substantial evidence.

Id. Because contract interpretation questions are questions of law, see Fortec Constructors v. United States, 760 F.2d 1288, 1291 (Fed. Cir. 1985), this court reviews those issues without deference to the trial forum; see 41 U.S.C. § 609(b); Aydin Corp. v. Widnall, 61 F.3d 1571, 1577 (Fed. Cir. 1995). Notwithstanding this lack of deference, the "Board's interpretation of a contract ...

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