THIS OPINION WAS INITIALLY ISSUED UNDER PROTECTIVE ORDER AND IS BEING RELEASED TO THE PUBLIC IN ITS ENTIRETY ON MARCH 3, 1995 _____________________________________________________ REQUEST FOR ENTRY OF JUDGMENT DENIED: July 23, 1992 _____________________________________________________ GSBCA 10396 HERITAGE REPORTING CORPORATION, Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. Marc F. Efron and Stephanie B. N. Renzi of Crowell & Moring, Washington, DC, appearing for Appellant. John E. Cornell, Seth Binstock, and Edmund W. Chapman, Office of General Counsel, General Services Administration, Washington, DC, appearing for Respondent. Before Board Judges LaBELLA, PARKER, and WILLIAMS. WILLIAMS, Board Judge. This matter comes before the Board on the parties' joint request that the Board adopt their stipulation, enter judgment for appellant in the amount of $7,254,525.60, and adopt the parties' allocation of liability among some seventy nonparty federal agencies. The General Services Administration (GSA) has specified, and appellant has agreed, that the offer of award will not be binding unless the Board adopts the allocation of liability. We decline to do so, finding allocation to affect nonparties and to be a nonjusticiable intragovernmental matter. Background On November 15, 1989, Heritage Reporting Corporation (Heritage) filed an appeal with the Board claiming that GSA breached a Federal Supply Schedule contract for court reporting services by knowingly allowing mandatory user agencies to procure these services from sources outside the contract. On March 31, 1992, pursuant to Rule 28(a), the parties filed a stipulation of settlement for entry of judgment for appellant in the amount of $7,254,525.60 to be paid from the Permanent Indefinite Judgment Fund, and sought dismissal of this appeal. The stipulation stated in part: 1. That, GSA and the Appellant agree to the dismissal of Docket No. 10396 with prejudice, subject to reinstatement only if the payment described in 5, infra, is not made; and 2. The documents produced during discovery to Appellant prove that divers agencies violated the terms of the contract by ordering professional verbatim reporting and transcription services through contracts other than the federal supply schedule contracts; and 3. The extent of the breach of the contract [footnote omitted] is set forth in 5 below; and 4. Although GSA did not breach the contract by ordering transcripts through contracts other than the federal supply schedule contracts, GSA recognizes its supervisory responsibility for this contract and to facilitate settlement contributes to this settlement in the amount of $1,580,036, due to the delay in publishing and distributing the catalog for this schedule contract. 5. The government shall agree to pay from the Permanent Indefinite Judgment Fund to the Appellant's assignee a total of $7,254,525.60. To the extent that the various agencies listed below were responsible for causing the breach of this contract, they shall be deemed to be an agency whose appropriations were used for the contract as set forth in 41 U.S.C. 612(c). The allocation of this amount is set forth as follows: a. The Department of the Treasury, Procurement Services Division . . . $1,365.49 . . . . b. The Department of the Treasury, Financial Management Service . . . $1,759.96 . . . . c. The Department of the Treasury, Federal Law Enforcement Training Center . . . $1,170.42 . . . . d. The Department of the Treasury, Internal Revenue Service . . . $38,214.09 . . . . e. The Department of the Treasury, US Customs Service . . . $4,397.73 . . . . f. The Department of the Treasury, US Secret Service . . . $3,582.77 . . . . g. The Department of the Treasury, Bureau of Alcohol, Tobacco & Firearms . . . $1,146.57 . . . . h. The Department of the Treasury, Bureau of Engraving and Printing . . . $4,035.77 . . . . i. The Department of the Treasury, Director of the Mint . . . $546.19 . . . . j. The Department of the Treasury, Bureau of the Public Debt . . . $604.72 . . . . k. The Department of the Treasury, Comptroller of the Currency . . . $11,097.28 . . . . l. The Nuclear Regulatory Commission . . . $13,583.33 . . . . m. The U.S. International Trade Commission . . . $76,051.05 . . . . n. The U.S. Commission on Civil Rights . . . $7,120.03 . . . o. The U.S. Information Agency . . . $1,985.37 . . . . p. The Department of Housing and Urban Development . . . $20,969.96 . . . . q. The State Department . . . $14,901.13 . . . . r. The Executive Office of the President . . . $8,756.45 . . . . s. The National Archives Record Administration . . . $518.02 . . . . t. The National Foundation for the Arts & Humanities . . . $6,859.94 . . . . u. The National Mediation Board . . . $10,509.90 . . . . v. The Pennsylvania Avenue Development Corporation . . . $1,452.18 . . . . w. The Pension Benefit Guarantee Corporation . . . $14,289.92 . . . . x. The Securities and Exchange Commission . . . $910,230.59 . . . . y. The Tennessee Valley Authority . . . $23,050.70 . . . . z. The Small Business Administration, including its ten regional offices . . . $1,322.14 . . . . aa. The Environmental Protection Agency . . . $45,893.32 . . . . ab. The Interstate Commerce Commission . . . $3,214.31 . . . . ac. The Federal Communications Commission . . . $92,081.42 . . . . ad. The Department of Transportation . . . $17,627.77 . . . . ae. The Department of Transportation, National Highway Traffic & Safety Administration . . . $1,109.73 . . . . af. The Department of Transportation, United States Coast Guard . . . $41,935.58 . . . . ag. The Department of Transportation, Federal Highway Administration . . . $3,890.55 . . . . ah. The Department of Veterans Affairs . . . $137,248.65 . . . . ai. The Occupational Safety and Health Review Commission . . . $60,900.66 . . . . aj. The Office of Personnel Management . . . $377.13 . . . ak. The Office of Special Counsel . . . $14,489.32 . . . . al. The Administrative Conference of the United States . . . $2,759.15 . . . . am. The Administrative Conference on Intergovernmental Relations . . . $489.84 . . . . an. The Federal Emergency Management Agency . . . $1,170.42 . . . . ao. The Federal Maritime Commission . . . $10,438.38 . . . ap. The Department of Labor . . . $268,153.21 . . . . aq. The National Capital Planning Commission . . . $5,086.98 . . . . ar. The National Credit Union Administration . . . $203.74 . . . . as. The National Transportation Safety Board . . . $163,693.56 . . . . at. The Department of Energy . . . $35,617.50 . . . . au. The Federal Energy Regulatory Commission . . . $285,360.50 . . . . av. The Department of Health and Human Services . . . $120,284.12 . . . . aw. The Department of Interior, Bureau of Reclamation and OAS . . . $14,465.48 . . . . ax. The Department of Interior, Bureau of Indian Affairs . . . $6,649.70 . . . . ay. The Department of Interior, Bureau of Land Management . . . $5,912.77 . . . . az. The Department of Interior, Office of Surface Mining . . . $346.79 . . . . ba. The Department of Interior, Bureau of Mines . . . $346.79 . . . . bb. The Department of Interior, Minerals Management Service . . . $20,363.08 . . . . bc. The Department of Interior, Fish and Wildlife Service . . . $2,767.82 . . . . bd. The Department of Interior, Geological Survey Office . . . $457.33 . . . . be. The Department of Interior, National Park Service . . . $11,793.03 . . . . bf. The Department of Justice . . . $2,681,287.95 . . . . bg. The International Development Cooperation Agency . . . $4,451.92 . . . . bh. The Merit Systems Protection Board . . . $37,696.07 . . . . bi. NASA . . . $14,415.63 . . . . bj. The Federal Mine Safety & Health Review Commission . . . $12,831.23 . . . . bk. The Federal Reserve . . . $12,540.79 . . . . bl. The Federal Retirement Thrift Investment Board . . . $3,838.53 . . . . bm. The Federal Trade Commission . . . $141,572.69 . . . . bn. The Commodity Future Trading Commission . . . $80,229.87 . . . . bo. The Consumer Product Safety Commission . . . $216.74 . . . . bp. The U.S. Department of Agriculture . . . $12,389.07 . . . . bq. The U.S. Department of Commerce . . . $45,431.66 . . . . br. The U.S. Department of Education . . . $21,548.66 . . . . bs. The Federal Aviation Administration . . . $51,387.78 . . . . By letter dated April 14, 1992, the Department of Justice (DOJ) complained to the Board that, by their stipulation of settlement, the parties were asking the Board to adopt the allocation of damages among nonparty federal agencies; DOJ expressly objected to its allocation, asserting that the Board lacked a reasonable basis for making any allocation. Letter from DOJ to the Board dated April 14, 1992. On April 16, 1992, the Board convened a telephonic conference; counsel for the parties, as well as counsel for DOJ participated in the conference. Conference Memorandum, April 16, 1992. During the conference, the Board explained that in order to obtain payment from the permanent indefinite judgment fund, appellant had to receive a Board award and the conditions set forth in Board Rule 36 had to be met. Id. Upon questioning on this issue by the Board, counsel for respondent stated that it was asking the Board to "bless" the allocation of damages among the nonparty agencies. Id. Appellant filed its Certificate of Finality with the Board on April 21, 1992. On the same day, GSA submitted Respondent's Memorandum Regarding Form and Content of Offer of Award under Board Rule 36(e) (Memorandum). Attached to the Memorandum was a draft offer of award and stipulation of settlement. The offer of award varied from the stipulation of settlement dated March 31, 1992, by adding the following: 1. That, GSA and the Appellant agree to the dismissal of Docket No. 10396 with prejudice, subject to reinstatement only if the Board declines to adopt this stipulation by decision or if the payment described in 5, infra, is not made; and 13. The parties to this offer of award will not seek reconsideration of, or relief from, the Board's decision; and 14. The parties to this offer will not appeal the Board's decision. Offer of Award dated April 21, 1992. In the memorandum, GSA argued that the purpose of Rule 36 is to assure that appellants are not forced to litigate unnecessarily in order to insure payment from the permanent indefinite judgment fund, and that the Board not only could adopt the allocation of settlement liability, but by its rules, had to adopt the stipulation.[foot #] 1 GSA acknowledged, however, that the Board could hold that the allocation of liability among user agencies was nonjusticiable, and simply enter judgment for Heritage in the amount of $7,254,525.60, citing United States v. Julie Research Laboratories, Inc., 881 F.2d 1067 (Fed. Cir. 1989). On April 22, 1992, the Board held a conference to discuss the allocation issue. Conference Memorandum, April 22, 1992.[foot #] 2 Counsel for DOJ presented a lengthy oral argument stating that the Board should not adopt the settlement, or in the alternative that it should clarify that it ----------- FOOTNOTE BEGINS --------- [foot #] 1 By letter to the Board, dated April 30, 1992, appellant conveyed its similar belief that Rule 36(e) mandates Board approval of negotiated settlements. Letter to Board from Appellant dated April 30, 1992. [foot #] 2 Upon a request by the Government, the Board agreed to treat the stipulation of settlement as protected material until the Board acts upon it. Conference Memorandum, April 22, 1992. The Board denied appellant's request to designate the amount of the settlement as protected material. Id. ___ ----------- FOOTNOTE ENDS ----------- was not adopting the allocation portion of the settlement. Id.[foot #] 3 DOJ argued that the proposed settlement is unreasonable because: (1) in the case of two agencies, Department of Labor and Securities and Exchange Commission, the alleged loss of business resulted from diverting orders from Heritage's schedule contract to Heritage's individual contracts; (2) DOJ rationally assumed that Grand Jury work and judicial depositions were not included in Heritage's schedule contract, making the $2,681,287.95 (36% of the settlement) allocated to DOJ, unfair; (3) the settlement improperly included damages for sales of transcripts to the public; and (4) GSA has simply accepted without verifying the page count underlying the settlement. Letter from DOJ to the Board dated April 28, 1992, at 4-8. DOJ further argued that: (1) lost profits of over $7 million was excessive and that such profits should only be allowed if there is a wrongful act on the part of the agency. Id. at 8-9; and (2) the Government's right to terminate cut off liability for anticipated profits. Id. at 10-11. Finally, DOJ reiterated its view that it would be inappropriate for the Board to allocate liability among the user agencies, and urged the Board to allow other affected agencies to respond to the proposed settlement. Id. at 16. On May 1, 1992, GSA submitted a memorandum on DOJ's objections to the proposed settlement in which GSA changed its position and argued that the allocation of liability is justiciable -- claiming that the allocation affects the rights of GSA by limiting the extent of its liability and affects Heritage's rights because without a Board adoption of the allocation, GSA would not agree to the settlement. In the memorandum, GSA informed the Board that it had added the following language to the Offer of Award: [t]he allocation of damages contained in paragraphs 5a through 5bs above effects [sic] the rights of the parties to this settlement. In the event that the General Services Administration Board of Contract Appeals does not adopt this offer of award in its totality, including the allocation contained in paragraphs 5a through 5bs, this offer of award shall not be binding upon the government. Respondent's Memorandum Regarding Department of Justice's Objections to Proposed Settlement at 4. According to GSA, the language was added to the Offer of Award in an effort "to resolve any uncertainty on [the] point" of justiciability. Id. Appellant, by letter dated May 5, 1992, advised the Board that because GSA had insisted on conditioning the settlement on the ----------- FOOTNOTE BEGINS --------- [foot #] 3 The Board directed DOJ to submit its argument in writing, and by letter dated April 28, 1992, DOJ did so. ----------- FOOTNOTE ENDS ----------- Board's adoption of the allocation, it too was requesting this, so that settlement could be achieved. Heritage asked that the Board recognize GSA's total responsibility for awarding and administering Federal Supply Schedule contracts, including acknowledging breaches of those contracts by individual user agencies, and adopt the entire Offer of Award, as revised. Letter to the Board from Heritage dated May 5, 1992. On May 8, 1992, an executed Offer of Award was received by the Board. The Offer of Award contained the provision that, in essence, GSA's offer of award was contingent upon the Board's adopting the allocation of liability among nonparty federal agencies. On June 2, 1992, a settlement conference was held on the record at the Board.[foot #] 4 Discussion The parties argue that Rule 36(e) of the Board's Rules of Procedure mandates that the Board adopt the stipulation of settlement proffered by the parties, including GSA's and Heritage's allocation of liability among user agencies. Transcript at 43. We disagree, noting that the Board has construed Rule 36(e) as being permissive. Rule 36(e) permits the Board to adopt the parties' stipulation of settlement, by decision, and it provides that such decisions are adjudications of the appeals on their merits. See, e.g., PJR Construction Corp., GSBCA 6062, et al., 85-1 BCA 17,752 (1984). J.S. Alberici Contracting Co. Inc., GSBCA 10428, et al., slip op. at 2 (June 8, 1992). Nor would it be appropriate for this Board to"adopt" provisions of a proposed settlement which could affect the rights of nonparties in an intragovernmental dispute not before us. Counsel for GSA candidly admitted that GSA wanted the Board to adopt the allocation, so that the General Accounting Office (GAO) would have some "guidance" regarding the amount each user agency should be required to reimburse the Permanent Indefinite Judgment Fund.[foot #] 5 The parties are thus attempting to force the Board to "adopt" a stipulation which does not merely adjudicate the rights of the two parties before it, but which allocates monetary damages among some seventy federal agencies, none of whom participated in this litigation. The Board has no basis for adopting this allocation either in fact or law. Although GSA has ----------- FOOTNOTE BEGINS --------- [foot #] 4 References to "Transcript" reflect that conference. [foot #] 5 Counsel for respondent stated: "Ultimately, the bookkeeping arrangement will be left to GAO, but GAO needs some sort of guidance." Transcript at 6. ----------- FOOTNOTE ENDS ----------- admitted these agencies breached Heritage's schedule contract, they have not been impleaded or represented by counsel in this appeal and, as far as we know, are, with the exception of DOJ, unaware of the stipulation.[foot #] 6 Transcript at 23-24. The parties point to various regulations which give GSA the authority over all issues which cannot be resolved between contractors and agencies ordering from Federal Supply Schedules. Transcript at 11-15; Section 101-26.403-4 of the Federal Property Management Regulations, 41 CFR 101-26.403-4 (1991); FAR 8.405-7 and 38.205. These regulations do empower GSA's schedule contracting officer to settle unresolved disputes between ordering offices -- i.e., user agencies -- and contractors. See also Digital Equipment Corp., GSBCA 9618, et al., 90-2 BCA 22,808 at 114,542 (1990) ("GSA has broad power to negotiate these schedule contracts and exercises general supervisory power over them."). The fact that GSA's contracting officer could have determined the amount of each ordering agency's breach of a schedule contract does not mean that this Board must "bless" a similar determination by GSA and the contractor, where the allocation issue is not in dispute and the Board has not adjudicated the matter and has not heard the positions of the ordering agencies. Further, our "adopting" the allocation is not necessary to effectuate settlement of the dispute between GSA and Heritage or to effectuate payment from the judgment fund. GSA has sought to make it necessary so that GSA will not be forced to reimburse the judgment fund in the full amount of the settlement. Viewed as such, GSA is trying to force the Board to decide a nonjusticiable intragovernmental matter. In Douglass Industries, Inc., GSBCA 9630, 90-2 BCA 22,676, the Board considered an appeal by a contractor from a GSA contracting officer's denial of a claim for payment from a user agency under a supply schedule contract. In granting the appeal, the Board expressly "emphasized" that the question whether GSA or the ordering agency must pay was irrelevant to the decision, because such a question is an intragovernmental matter and not pertinent to the appeal. Id. at 113,910. Similarly, in S & W Tire Services, Inc., GSBCA 6376, 82-2 BCA 16,048, the Board held: [i]f the Government is in breach of its contract, and if the "cognizant" board of contract appeals so holds, who ultimately foots the bill is a matter between the agencies who are pointing fingers at each other, not for the Board. Under Section 13 of the Contract Disputes Act, 41 U.S.C. 612, the contractor can get paid from the appropriated funds set aside specifically ----------- FOOTNOTE BEGINS --------- [foot #] 6 DOJ learned of the settlement when it was directed to cease efforts to comply with a Board subpoena. ----------- FOOTNOTE ENDS ----------- for that purpose, and the agencies can then do battle over which must reimburse the fund under subsection (c) of that section. Id. at 79,615 (emphasis added); see also United States v. Julie Research Laboratories, Inc., 881 F.2d 1067, 1068 (Fed. Cir. 1989). Decision The parties reserved their right to deem the Offer of Award nonbinding if the Board were to decline to adopt the allocation of liability among nonparty agencies. The Board declines to adopt the allocation. The parties are free to settle this appeal and may do so on such terms as are reasonable. The Board, within the limits of its authority to adjudicate disputes brought before it, will enter a reasonable agreed-upon judgment at the request of the parties which does not require the Board to adopt an allocation of liability among nonparties and not in dispute. Absent such a request, the Board will convene a telephonic conference on August 3, 1992, at 10:00 a.m. to schedule further proceedings and set this matter for hearing. Appellant may resume discovery immediately. ____________________________ MARY ELLEN COSTER WILLIAMS Board Judge We concur: ____________________________ ____________________________ VINCENT A. LaBELLA[foot #] 7 R O B E R T W . PARKER Board Judge Board Judge ----------- FOOTNOTE BEGINS --------- [foot #] 7 Board Judge LaBella, who was on the panel in this case and signed the identical decision now issued in unredacted form, died on April 11, 1994.