MOTION FOR SUMMARY RELIEF DENIED: April 12, 1994 GSBCA 12472 UTAH LP GAS, INC., Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. Mark C. McLachlan of Perkins, Schwobe & McLachlan, Salt Lake City, UT, counsel for Appellant. Michele M. Feher, Office of Regional Counsel, General Services Administration, San Francisco, CA, counsel for Respondent. Before Board Judges PARKER, WILLIAMS, and DeGRAFF. WILLIAMS, Board Judge. On June 22, 1993, appellant Utah LP Gas (ULPG) appealed the contracting officer's final decision denying a request for an upward price adjustment under contract number GS-10F-7986A in the amount of $2,833.17. This matter comes before the Board on respondent General Services Administration's (GSA's) motion for summary relief. GSA contends that it is entitled to judgment as a matter of law because the only issue in this case is one of contract interpretation and no price adjustment was warranted. Because the Board finds that there are disputed issues of fact material to the resolution of this controversy, the motion is denied. Background Appellant's Contract On August 13, 1992, appellant ULPG was awarded a contract under Federal Supply Schedule (FSS) Contract GS-10F-7986A for delivery of propane gas in Nevada (line item 324) and Utah (line item 470).[foot #] 1 Appeal File, Exhibit 1 at 1. The contract period was November 1, 1992, through May 31, 1994. Id. This was a firm fixed price requirements contract, with an Economic Price Adjustment (EPA) clause. Id. at 2. The EPA clause provided: (a) The unit price(s) of all items which are purchased under this contract are subject to price adjustment, upward or downward, by the percent increase or decrease in the index code 1321-231 for Propane, as quoted in the table 5 of the Producer Price Index[[foot #] 2] by the U.S. Department of Labor (DOL), Bureau of Labor Statistics; which is issued monthly. If the Index(es) cited in the contract consistently and substantially fail to reflect market conditions, the Contracting Officer may amend the contract to substitute a more appropriate index. (b) The initial (unadjusted) index(es) published for the month of JUNE 1992, shall be used as the base for determining price adjustments. The contract price(s) shall be increased or decreased by the percent increase or decrease of the initial unadjusted index(es), provided that no price adjustment shall be made unless such index increase or decrease is four (4) percent or greater. Whenever a price adjustment is made pursuant to this clause, the index which was used for computing the adjustment shall become the new base index for determining further adjustments. Any price adjustments made as a result of this clause, will be limited to the initial (unadjusted) monthly index for the industry or product code used in the adjustment. Indexes adjusted by DOL after the initial publication will not be considered. (c) All price adjustments, upward and downward, will be initiated by the Government in accordance with the conditions outlined above. The industry and/or product ----------- FOOTNOTE BEGINS --------- [foot #] 1 This FSS contract was for supply of propane gas nationwide and included 523 different delivery destinations in 48 States. Appeal File, Exhibit 1 at 1. [foot #] 2 The Producer Price Index (PPI) is published by the Bureau of Labor Statistics of the United States Department of Labor. The PPI contains price indexes for nearly 500 mining and manufacturing industries, including over 3,200 commodity price indexes organized by type of product and end use. The PPI represents average changes in selling prices received by domestic producers for their output. Appellant's Response to First Request for Production of Documents. ----------- FOOTNOTE ENDS ----------- codes cited in this clause will be reviewed each month immediately after new index figures are released by DOL. Price adjustments will be considered after the first thirty (30) days of the contract period and prior to the last sixty (60) days of the contract period. . . . Appeal File, Exhibit 1 at 150 (emphasis added). Propane Prices ULPG's bid of $0.41 per gallon, for delivery to Hill Air Force Base in Utah (Item 470)[foot #] 3 was based on the $0.26 per gallon price of propane as of June 5, 1992, indicated in the BPN Weekly Propane Newsletter[foot #] 4 (BPN newsletter) for Salt Lake City. Complaint at 2; Appellant's Memorandum in Opposition to Respondent's Motion for Summary Relief at 3; Appeal File, Exhibit 7. According to appellant, its $0.41 per gallon bid would have yielded a $0.15 profit margin over its $0.26 purchase price, which appellant claims is customary in the industry. Complaint at 2. Below is a chart showing the delivery dates relevant here, and comparing the contract price, the PPI figure for each month of delivery, the percentage of variation in the PPI, and the propane prices in Salt Lake City as reflected in the BPN ----------- FOOTNOTE BEGINS --------- [foot #] 3 This appeal appears to encompass only propane delivery to Hill Air Force Base in Utah. The claim calculation references only $0.41 per gallon contract price and not the $0.495 per gallon for propane delivery to Owyhee US Public Health Service in Nevada. Complaint at 2; Appellant's Memorandum in Opposition to Respondent's Motion for Summary Relief at 4. [foot #] 4 The BPN Propane Newsletter is published by Butane-Propane News in Arcadia, California. Appeal File, Exhibit 7. It contains news relating to the propane gas industry as well as price updates in four price lists published weekly in the BPN newsletter. These are: Principal U.S. Postings, which ________________________ lists twenty-three producers and their prices for propane in several U.S. locations; Spot Prices for Natural Gas Liquids, ______________________________________ listing spot prices for propane and other products in several U.S. locations; Canadian Producer Postings, listing seven ____________________________ producers and their prices in different locations; and Prices for __________ Other Basing Points, which lists propane prices per producer, in ___________________ different U.S. locations. Appellant relies on the propane price quoted by AMOCO for Salt Lake City, Utah, in the Prices for Other ________________ Basing Points list, to calculate the adjustment claimed in this _____________ appeal. Complaint at 2; Appellant's Memorandum in Opposition to Respondent's Motion for Summary Relief at 4-5; Appeal File, Exhibit 7; Appellant's Supplemental Index of Exhibits. ----------- FOOTNOTE ENDS ----------- newsletter. The chart also illustrates whether the percentage variation in the PPI was sufficient (4% or more) to trigger the adjustment provision established in paragraph (b) of the EPA clause. Date of Contract PPI % Variation BPN Price Delivery Price Index in PPI Price Adj.? 06/05/92 .41 62.3 (Base Month) .26 - Oct.1992 .41 66.7 +7.06% N/A Yes 11/04/92 .41 66.8 +0.15% .38 No 11/16/92 .41 66.8 +0.15% .38 No 11/19/92 .41 66.8 +0.15% .38 No 12/01/92 .41 67.3 +0.90% .38 No 12/10/92 .4389 67.3 +0.90% .38 No 12/14/92 .4389 67.3 +0.90% .38 No 12/22/92 .4389 67.3 +0.90% .42 No 12/22/92 .4389 67.3 +0.90% .42 No 01/05/93 .4389 65.2 -2.25% .46 No 01/07/93 .4389 65.2 -2.25% .49 No 01/14/93 .4389 65.2 -2.25% .49 No 01/15/93 .4389 65.2 -2.25% .49 No Complaint at 2 (delivery dates); Appeal File, Exhibits 1 and 4 (contract price); Appeal File, Exhibit 3 (PPI and PPI % variation); Complaint, Exhibit "A" (BPN price, June 1992); Appellant's Supplemental Index of Exhibits (BPN prices 11/16/92 through 01/15/93); Appeal File, Exhibits 3 and 4 (adjustments in contract price). As demonstrated above, propane prices started rising once the contract was awarded. In accordance with paragraph (c) of the EPA clause, the administrative contracting officer (ACO) checked the PPI index monthly to determine whether the contract price had to be adjusted. Appeal File, Exhibit 1 at 150; Appeal File, Exhibits 3, 6, 10, 12, 13, 14. On December 12, 1992, the contract price was adjusted from $0.41 per gallon to $0.4389 per gallon, to reflect an increase of 7.06% in the October PPI (66.7), over the June PPI (62.3), the base index. The price increase became effective on December 10, 1992. Appeal File, Exhibit 4. On January 14, 1993, a manager of ULPG called the ACO and advised her that the EPA did not cover his cost, which was currently $0.50 per gallon, and that he intended to repudiate the contract. Appeal File, Exhibit 5. The ACO requested ULPG's manager to confirm that in writing and to submit a letter to the procuring contracting officer stating that the "PPI is not adequate in calculating EPA." Id. On February 12, 1993, ULPG through counsel requested a contracting officer's decision on its claim for an upward price adjustment in the amount of $2,833.17.[foot #] 5 Appeal File, Exhibit 7. Appellant argued that the Producer Price Index consistently and substantially failed to reflect the true market conditions, and that a more appropriate index would be the BPN Weekly Propane Newsletter. Id. On March 3, 1993, the contracting officer wrote to GSA's appropriate commodity branch seeking guidance in the application of the EPA clause, citing ULPG's claim. In this memorandum, the contracting officer stated: We have received notification from several of these Contractors that the PPI does 'consistently and substantially fail to reflect market conditions.' In each of these requests, the Contractors request the EPA be calculated based upon indexes from the "Weekly Propane Newsletter," in lieu of the PPI. The Contractors have asserted that the newsletter is more reflective of true market conditions. Appeal File, Exhibit 8. The contracting officer also stated that he had attempted to make a determination as to ULPG's claim using a letter, attached to his memorandum, written by GSA to another contractor in response to a similar request. Letter dated February 18, 1993, from Margaret F. Lien, Contracting Officer, Chemicals and Special Programs Branch, Paints and Chemicals Commodity Center, to Bellman Propane (Bellman) of Randolph, KS.[foot #] 6 The contracting officer found that the ----------- FOOTNOTE BEGINS --------- [foot #] 5 Appellant's claim of $2,833.17 appears to represent the difference between the contract price and a price calculated by adding $0.15 to the AMOCO propane price for Salt Lake City between November 1992 and January 1993 as published in the BPN newsletter. Appeal File, Exhibit 7. Appellant has not demonstrated why this would be the proper amount of its recovery; the EPA clause does not guarantee a $0.15 per gallon profit. [foot #] 6 Bellman requested that GSA use the Propane Terminals Price Watch, published monthly, to calculate EPA price adjustments. GSA's response to Bellman stated: The index(es) referred to in the [EPA] clause pertain only to the Producer Price Index, not to other publications . . . . The wholesale prices you show in your letter are reflective of a specific region. The EPA clause in your contract addresses market conditions on an industry-wide basis. We also reviewed the Department of Energy Winter Fuels Report. It shows a slightly higher figure than the PPI for the period of October 1992 to December 21, 1992 with an average 6% increase. (continued...) ----------- FOOTNOTE ENDS ----------- letter did not answer several questions which needed to be addressed to resolve ULPG's request. The contracting officer's memorandum posed those questions as follows: 1. The figures released by the Department of Labor (DOL) may be monthly, but how current is the information? 2. Why is the EPA based on a nation wide industry basis rather than on a regional basis which may be more specific and accurate? 3. What criterion is used to evaluate the Index(es) as to whether or not it reflects market conditions? What would be the prerequisite criterion to determine that an index(es) consistently and substantially fail (sic) to reflect market conditions? 4. What would be considered a more appropriate index(es) should a substitution be made? Appeal File, Exhibit 8. The Director of the Procurement Division replied to the contracting officer's memorandum on March 11, 1993, Appeal File, Exhibit 9, and answered each of the above questions as follows: 1. [T]he Department of Labor sends forms to the producers of gases each month who in turn send back their price quotes, this causes a 30 day lag. 2. We have contracts with 63 companies for approximately 500 different locations throughout the U.S. Some companies bid on several different locations from coast to coast. The contractor[s] may buy their propane from different suppliers based on best price including companies located in Canada. As you can see in the BPN's Weekly Propane Newsletter, there are numerous prices per location under "Prices for Other Basing Points." It would be impossible for us to keep track of price changes and adjust them monthly on a regional basis. ----------- FOOTNOTE BEGINS --------- [foot #] 6 (...continued) Accordingly, we feel that the PPI deals accurately with the industry-wide price fluctuations and that the PPI accurately shows the market conditions of the propane industry. Appeal File, Exhibit 8. ----------- FOOTNOTE ENDS ----------- 3. In addition to the PPI we look at publications such as The Department of Energy's "Winter Fuel[s] Report". The PPI and Winter Fuels Report, which reflect industry-wide price fluctuations are considered to show a truer picture of the marketplace. The PPI is published monthly, year-round, while the Winter Fuels Report is published only from October through the 2nd week in April. BPN's Weekly Propane Newsletter dated 1/18/93 clearly states several times that prices have been "rising and falling", and "the market has been like a roller coaster." This is an industry-generated publication that reflects weekly and regional prices. Propane suppliers know that propane prices fluctuate -rising in the colder months, and dropping with warmer weather. The suppliers are also aware that prices vary dependent upon the geographical location(s). A prudent bidder considers all costs and anticipate[s] cost increases when preparing a bid price on a fixed price contract with EPA. The EPA provides for upward and downward revision of the stated contract price upon the occurrence of specified contingencies, such as an industry-wide price fluctuation. The fixed price contract . . . is not intended to be used as a cost plus fixed fee provision. In addition to referring Utah LP Gas, Inc. to your office, only two other contractors have written expressing concern over the use of the PPI. Since we have contracts with 63 companies, and have only received three written complaints and a few telephone inquiries we do not feel this justifies using a different publication and eliminating the PPI. 4. The "index" referred to in the [EPA] clause pertains only to the Producer Price Index, and not other publications. The PPI index we are using in accordance with the EPA clause is 1321-231 (Natural Gas Liquids - Propane) and is specific to propane. We feel after looking at the other publications available to us that the PPI is the most appropriate method for price adjustments. We have been using this clause for the past three years, and feel that the clause is very clear in its intent. Also this is a fixed price contract and not a cost plus fixed fee contract. Appeal File, Exhibit 9. On March 31, 1993, the contracting officer denied ULPG's request for price adjustment, stating: GSA reviews the PPI monthly for upward or downward changes to determine the need to adjust the contract price pursuant to the EPA clause. Pursuant to the aforementioned clause, the PPI must have a change of at least plus or minus 4% or more. Between November 10, 1992, to this date, PPI has not increased or decreased 4% or more. Therefore, a change in the price to be paid your client was not warranted as provided by our contract with your client. In your letter you state that your client, Utah LP Gas, Inc., is entitled to an adjustment in accordance with the portion of the Clause I-FSS-396-D which states: The unit price(s) of all items which are purchased under this contract are subject to price adjustment, upward or downward by the percent increase or decrease in the index code 132[1]-231 for Propane, as quoted in the table 5 of the Producer Price Indexes by the U.S. Department of Labor (DOL), Bureau of Labor Statistics; which is issued monthly. If the Index(es) cited in the contract consistently and substantially fail to reflect market conditions, the Contracting Officer may amend the contract to substitute a more appropriate index. The index cited in the clause refers only to the Producer's Price Index, not any other publications. The PPI that GSA utilizes is 1321-231 (Natural Gas Liquids-Propane), which is specific to propane. In response to inquiries from several propane Contractors, GSA has reviewed all the indexes under 1321. Under the general index of 1321, there was only a 03.8% increase for the period of October through December, 1992. Index 1321-231 showed an increase of only 0.90% for the same period. These increases were less than the required 4% to initiate a price increase. Other indexes reviewed by GSA include the Natural Gas Liquids (plant condensate, ethane, natural gasoline, butane, gas mixtures, other natural gas liquids). However, these indexes are not . . . applicable to propane, nor does the contract provide for their use. In addition, the PPI referenced in the EPA Clause is reflective of market conditions on a nation-wide basis for the industry, not on a regional basis. The Clause was intentionally written in this manner to enable all vendors to obtain the propane from any economically available source nation-wide, rather than restricting purchase to a regional source. The EPA provides for upward and downward revision of the stated contract price upon the occurrence of specified contingencies, such as industry-wide price fluctuation. The fixed price contract with an EPA is used to protect both the Contractor and the Government against significant fluctuations, and is not intended to be used as a cost plus fixed fee provision. . . . . Therefore, you and your client have not demonstrated that the index cited in Clause I-FSS-396-D of this contract fails to reflect market conditions. Accordingly, Clause I-FSS-396-D remains unchanged and in full effect. Appeal File, Exhibit 11. In this appeal appellant contends that its actual cost of propane rose 88% during the period of June 1992-January 1993, but the PPI rose only 4.65%. Letter from Appellant to the Board dated March 22, 1994. During some deliveries, appellant's cost for propane exceeded what it was paid by respondent. Appeal File, Exhibit 7. Discussion It is well established that summary relief will only be granted where there is no genuine issue of material fact in dispute, and the movant is entitled to judgment as a matter of law. Armco, Inc. v. Cyclops Corp., 791 F.2d 147, 149 (Fed Cir. 1986); Creech v. General Services Administration, GSBCA 11726, 93-3 BCA 25,952 at 129,067. Appellant claims that under the EPA clause of the contract, the contracting officer should have substituted a different index for the PPI. That clause reads in pertinent part: "If the [PPI] consistently and substantially fails to reflect market conditions, the Contracting Officer may amend the contract to substitute a more appropriate index." Appeal File, Exhibit 1 at 150. Whether the Producer Price Index consistently and substantially failed to reflect market conditions is a disputed factual issue. Respondent alleges that the PPI did not fail to reflect market conditions during the period in question.[foot #] 7 Appellant claims that because its ----------- FOOTNOTE BEGINS --------- [foot #] 7 Respondent did not submit any declarations or affidavits in support of its motion for summary relief. ----------- FOOTNOTE ENDS ----------- actual cost of propane rose 88% between June 1992-January 1993, and the PPI rose only 4.65%, the PPI does not adequately reflect the fluctuation in propane prices. Moreover, there is insufficient evidence establishing what the pertinent "market conditions" referenced in the contract were. In sum, there remain genuine issues of material fact as to what the pertinent market conditions were and whether the PPI "consistently and substantially failed to reflect [such] market conditions." Summary relief is thus not appropriate at this juncture. Decision Respondent's motion for summary relief is DENIED. ______________________________ MARY ELLEN COSTER WILLIAMS Board Judge We concur: ____________________________ ____________________________ ROBERT W. PARKER MARTHA H. DeGRAFF Board Judge Board Judge