DENIED: October 7, 1992 GSBCA 9371 SMC INFORMATION SYSTEMS, INC., Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. Gerson B. Kramer, Chevy Chase, MD, and Phyllis B. Kramer of SMC Information Systems, Greenbelt, MD, counsel for Appellant. Stuart I. Young and Wendy Nevett Bazil, Office of General Counsel, General Services Administration, Washington, DC, counsel for Respondent. Before Board Judges LaBELLA, Acting Chief Judge, HENDLEY, and DANIELS. HENDLEY, Board Judge. In 1982, appellant, SMC Information Systems (SMC), entered into a master agreement with respondent, the General Services Administration (GSA), under which appellant was obligated for one year to complete "task orders" for user agencies. Appellant seeks $510,250.62 in delay damages allegedly incurred during performance of an Air Force task order. For the reasons stated below, we deny the appeal. Findings of Fact 1. On June 24, 1982, SMC and GSA entered into a "master agreement," Contract No. GS-00C-60081. This contract required appellant to provide automatic data processing technical services from June 25, 1982, until June 24, 1983, within a forty mile radius of the District of Columbia. Appeal File, Exhibit 1 at 24. 2. The "Changes" clause in the master agreement allowed respondent to initiate changes in the definition of services and the place of performance. It also required the contractor to assert any claim for adjustment "within 30 days from the date of receipt by Contractor of the notification of change." Appeal File, Exhibit 1 at 9. The contractor was to provide detailed price and cost data within thirty days of submitting the claim or after completing 50% of the contract work. Appeal File, Exhibit 1 at 15. If the cost data was not yet available, the contractor was to explain why within that deadline. Id. Finally, the clause gave the contracting officer discretion to receive and act upon any claims asserted prior to final payment under the contract. Appeal File, Exhibit 1 at 9. 3. The master agreement's "limitation on cost" clause provided that the total value of any change order could not exceed 20% of the original task order price. Appeal File, Exhibit 1 at 28A. Any change order which would cost more than 20% of the task order price would be considered a new requirement. Id. 4. The "Disputes" clause in the master agreement stated that a "claim" was a "written demand or assertion by one of the parties, seeking as a legal right, the payment of money, adjustment or interpretation of contract terms, or other relief, arising under or relating to this contract." Appeal File, Exhibit 1 at 10. 5. Under the master agreement, the Government initiated a project by issuing a task request. SMC then would submit proposed technical solutions, staffing plans, and projected costs, which the parties would use to negotiate a final task order. Appeal File, Exhibit 1 at 28, 28A. 6. On May 24, 1984, the Air Force sent appellant a request for proposals to procure both software and the integration of data residing in tapes throughout the Defense Department into a database called BUFS, or "Bases and Units Fact Sheets." The BUFS contractor was to design this software, code the data, test the software's ability to manipulate the data, then load data. Appeal File Supplement, Exhibit 1 at 1. The BUFS database would reside in both secure and nonsecure sectors of a Honeywell computer at the Pentagon. Id. The new system would enhance a prototype, which required extensive manual data entry and could not be updated rapidly. Id. The Air Force also expected the contractor to correct database errors and inconsistencies. Id. 7. The Air Force expected to use the new BUFS software and database to update fact sheets automatically. Appeal File Supplement, Exhibit 1 at 1. The sheets were to contain complete information about Air Force bases for use by the Joint Chiefs of Staff. Id. The statement of work (SOW) required appellant to complete the BUFS project within twenty-eight weeks. Id. at 7. The Air Force divided that time into eight milestones, which included reviewing the old prototype system, designing a new one, testing it, and finally, implementing the new one and training Government personnel to use it. Id. at 2-5. Appellant reviewed the proposal and timely submitted a large notebook constituting its Technical and Business proposal. Id., Exhibit 2. 8. GSA awarded appellant the BUFS task order, using GSA Form 300, on July 3, 1984, for a price of $145,150.20. Appeal File Supplement, Exhibit 3. The Task Order incorporated the Air Force's Statement of Work (SOW), although it allowed appellant to complete the project within 34, instead of 28, weeks after award. Id. at 3. 9. The contract required the Air Force to provide certain data for appellant to incorporate into the BUFS database, which included: a. Dollars spent in each Congressional district b. Military construction (MILCON) c. Geographic location (GEOLOC) d. Real Property e. Joint Data Systems Support Center/Joint Data Automated Air Facilities Information File (JDSSC/AAFIF) f. Population and geodetic coordinate data (JRAD) Appeal File Supplement, Exhibit 223 at 2. 10. After appellant found significant flaws in the prototype BUFS program documentation requiring editing, appellant sent a proposed modification to respondent on September 19, 1984. Appeal File Supplement, Exhibits 7-10. Respondent issued an RFP to procure a documentation update on November 5, 1984, id., Exhibits 26, 29, and accepted appellant's proposal on December 10, 1984, by issuing amendments one and two using GSA Form 300. The modification added approximately $11,877.56 to the contract price, id., Exhibit 37, for a total price of $157,027.76, id., Exhibit 39. The modification also extended the completion date to May 3, 1985. Appeal File, Exhibit 11. Only the GSA contracting officer and an Air Force official signed the amendment, id., but appellant received a copy promptly thereafter. 11. Citing difficulties in gaining access to secure terminals in the Pentagon and inadequacies in the Government- supplied data tapes, appellant by letter dated April 5, 1985, requested a time extension from May 3 to August 20, 1985. Appeal File Supplement, Exhibit 58. Appellant, however, did not request added funds. Id.; Transcript at 137-40. Respondent then issued a third unilateral amendment extending the completion date to August 20, 1985, "at no additional cost to the Government or the Contractor," with all other task order terms and conditions to remain unchanged. Appeal File Supplement, Exhibit 68. 12. After appellant failed to deliver Milestone 6A on schedule, the Air Force sent appellant a "cure notice" on July 10, 1985, seeking written assurance that appellant would complete all of its work by August 20, 1985. Appeal File Supplement, Exhibit 80. By letter dated July 24, 1985, appellant said that it was "unable to assure you of a 20 August 1985 final completion date" because it was waiting for the Air Force to provide data formats for Milestone 6. Id., Exhibit 81. Three weeks later, by letter dated August 13, 1985, appellant requested an extension of time, from August 20 to October 15, 1985, without mentioning extra compensation. Id., Exhibit 84. On August 28, 1985, respondent unilaterally extended the task deadline to October 15, 1985, at no cost to the Government with "[a]ll other terms & conditions remain[ing] unchanged." Id., Exhibit 86. 13. On September 6, 1985, appellant requested a "no cost extension" of the completion date from October 15 to November 8, 1985, to conduct a full systems test and training cycle. Appeal File Supplement, Exhibit 89. On September 16, 1985, GSA issued a fifth modification extending the completion date as requested, "at no Cost to the Government," but added that "[n]o additional Extensions will be issued under this Task Order." Id., Exhibit 96. 14. To permit remodelling of offices, the Air Force moved appellant from the Pentagon to a site in downtown Washington, D.C., on October 15, 1985. Appeal File Supplement, Exhibit 98. Since appellant and other users could work on the secure "System H" machinery only inside a special vault in the Pentagon, the move further delayed appellant's progress. Transcript at 58-64, 102-03. 15. On November 5, 1985, appellant cited a "variety of unavoidable circumstances," including the move from the Pentagon to a downtown office building, in requesting a time extension through January 3, 1986. Appeal File Supplement, Exhibit 99. On November 25, 1985, GSA issued a sixth unilateral modification, "to extend the completion date to January 3, 1986 at no cost to the Government." Id., Exhibit 101. Neither appellant nor respondent discussed extra compensation for appellant. Transcript at 138. Appellant could not return to the Pentagon until April 1986. Complaint, 12 (Feb. 26, 1988). 16. Again citing lack of workspace and trouble accessing the secure System H, appellant, by letter dated December 20, 1985, requested another time extension. Appeal File Supplement, Exhibit 106. GSA issued a seventh amendment on January 6, 1986, using GSA Form 300 "to extend the completion date from January 3, 1986 to February 28, 1986 at no cost to the Government." Id., Exhibit 108. 17. In a cure notice dated January 8, 1986, respondent asked appellant to explain, within ten days, what measures it would take to cure its continued delinquencies. Appeal File, Exhibit 33. The letter added that: Any written commitments by the contractor within the scope of this contract shall be binding upon the Contractor. Failure of the Contractor to fulfill any such commitment shall render the contractor liable for damages due to the Government under the terms of this contract. A written commitment by the Contractor shall be limited to the proposals(s) submitted by the Contractor, and to specific written amendment(s) . . . . Id. 18. By letter dated January 15, 1986, the appellant affirmed its intent to complete the project. Appeal File Supplement, Exhibit 111. Appellant admitted that it had "continued to experience loss of staff due to loss of the master contract," but noted that: Despite these obstacles, we have continued to progress on this project which has involved no additional cost to the Government. I feel that this is strong evidence of SMC's continued corporate commitment to complete this task as soon as possible in a professional manner. Id. (emphasis added). 19. In a progress report dated February 5, 1986, appellant said that it expected to make its formal final deliverables by February 28, 1986. Appeal File Supplement, Exhibit 117. However, appellant began referring to progress at this point as "warranty work," and continued reporting that lack of secure system access and data formatting errors had delayed its progress. Id., Exhibits 121, 135, 158, 220. 20. In appellant's status report, dated August 20, 1986, appellant stated that, after receiving improved GEOLOC tapes from the Air Force, it was able to run the "preprocessor and update programs" of Cluster 9/11, to demonstrate that both worked, but added that: [T]he Government held us up so many times on these tapes (as noted in several status reports over the past several months), we had to perform excessive analysis and programming to complete this cluster, so far beyond the scope of the contract. Appeal File Supplement, Exhibit 190 at 2. 21. By November 28, 1986, appellant had submitted all contract deliverables, including a final test analysis report showing that all but the military construction data file was loaded and worked. Appeal File Supplement, Exhibits 192-97. However, an Air Force branch officer testified that when he tried to use BUFS, he would "log onto the system, take the user's manual and try to step through the process as a normal user would do and nothing I would attempt would give me any type of desired results." Transcript at 621. He added that the Air Force finally accepted BUFS "just to get it over with. . . . It was going on for a year and a half late or so." Id. at 622. 22. Mr. Ross Greenleaf supervised the BUFS project on appellant's behalf from March 1985 through completion. He admitted at the hearing that he never asked the Air Force or GSA for extra compensation in connection with the time extensions until appellant had completed the project. However, he testified that he believed that: Cost is a bilateral issue. I am telling you a cost. You are telling me it is not going to cost. And, I assume, at that point, we are going to do a claim and see who wins. Transcript at 441. At the hearing, respondent's counsel asked him why appellant did not request additional compensation in connection with modifications four through six. Mr. Greenleaf testified that: At that point, we are beginning to get indications that GSA's considering default on the task order. It was my opinion that if we raised the cost issue at that point in time, we probably would have received a termination for default. That was something I chose to avoid. Transcript at 442. 23. An Air Force official likewise testified that appellant only requested "no-cost time extensions:" When we would have our meetings to discuss the status of the project itself, and it would be brought up at the meetings, usually by Mr. Greenleaf, when he took over . . . . And he said that he wanted to - he said, each time, it would be at no cost to the government because they did not want to default on the contract. And, you know, the Government would not have paid. We would have terminated if we knew it was going to cost us more money. Transcript at 484-85. 24. On December 4, 1986, appellant submitted a letter to the GSA contracting officer which read as follows: This letter will serve as notice of SMC's intent to submit a claim for additional costs incurred in the completion of work under the above-referenced Task Order, as a result of Government-caused delays, failure of the Government to furnish contractually required information and documentation, as well as facilities, and the Government's misrepresentation concerning the required work. SMC is currently assessing the cost impact of these factors, and will, when all of our information is collated, submit a formal claim for your decision. In the interim, we are submitting our invoice for payment of the contract price for the remaining deliverables which have been completed and accepted by the Government, pending the submission of our claim to the Government for additional costs incurred as the result of Government action and inaction on this Task Order. Appeal File Supplement, Exhibit 210 (emphasis added). 25. On December 4, 1986, appellant submitted its last invoice for $7,775.10, Appeal File Supplement, Exhibit 227 at 2, and Mr. Greenleaf testified that "it was almost a guarantee" that appellant received payment for the "remaining deliverables" sixty to ninety days thereafter. Transcript at 144-45. On August 27, 1987, appellant submitted a certified claim for $510,250.62, Appeal File Supplement, Exhibit 212, which the contracting officer denied it on October 29, 1987, on the grounds that it violated the 20% "limitation on costs" clause, Appeal File, Exhibit 39. Appellant filed a timely appeal with the Board on January 12, 1988. Id., Exhibit 40. Discussion What we have before us is a case in which the appellant requested a series of extensions in the contract completion date, which the Government granted. Over time, appellant somehow became convinced that these extensions expanded the scope of the contract work for which appellant would be entitled to compensation under the Changes Clause. While the time extensions were couched in terms of unilateral contract modifications, such changes did not constitute actual changes to the contract work that could have increased the appellant's costs. Each time, appellant did not seek compensation because none would have been appropriate. In addition, in each requested extension, the appellant stated that the extension was sought "at no additional cost to the Government." But now, appellant seeks to recover $510,250.62 in additional costs. Both parties have briefed the case as one where appellant's compliance with "Changes" clause procedures is at issue. They have addressed issues such as whether appellant could file a $500,000 claim arising out of a $150,000 contract without running afoul of the Limitation on Costs clause, or whether appellant violated the final payment rule by cashing its final invoice check before filing a claim for a sum certain with the Government. After review, we find that the record does not show that the Government ever asked appellant to do more than the original contract required, i.e., provide additional consideration (more work) in exchange for the Government's consideration (more money). The appellant has shown only that it incurred significantly greater costs in performing the work than it had envisioned, but we find that these costs were not the result of the respondent's directions. They were solely the result of appellant's inability to perform the contract for the agreed-upon price. Thus, we conclude that the case is actually one where the parties have, unwittingly, entered into a "commercially impossible" contract, i.e., one that simply could not be performed within the economic ambit of the contract. We are convinced that neither party was aware or understood, at the time they entered into the contract, that it was "impossible" to perform the required task within the economic ambit of the contract, i.e., for anything like the price agreed upon. Eventually the appellant just gave up any further attempt to complete the task, and respondent, although well aware that the software did not meet the contract requirements, did not terminate the contract for default, perhaps tacitly acknowledging that the task could not be completed for any cost commensurate with the result. In deciding whether appellant is entitled to relief on a "commercial impossibility" theory, we note, as did Judge Collins in Natus Corp. v. United States, 178 Ct.Cl. 1, 9, 371 F.2d 450, 456 (1967), that: "'impossibility' in its modern context has become a coat of many colors." Although Natus involved a contract to produce steel aircraft landing mats, we find its rationale instructive. There the Government, trying to purchase aircraft landing mats, described the desired product without dictating a production method. The contractor, by switching to seemingly more efficient mass production methods, promised to produce more mats at half the price charged by the prototype contractors. When this new method failed, the contractor requested more funds for its efforts on a "commercial impossibility" theory. The Court denied relief on the grounds that the contractor took a calculated business risk, "the unfortunate consequence of which it must now bear alone." Id. at 12, 371 F.2d at 457. In so deciding, the Court found significant the fact that the contract was for a firm, fixed price, and that the Government, by sharing the results of its prototype research with the contractor, did not possess "superior knowledge." Id. Here, similarly, the Government shared its documentation concerning the BUFS prototype with the appellant; the parties entered into a firm-fixed-price agreement; and the appellant chose its own "production" methods without Government interference or supervision. Thus, we find that appellant is not entitled to relief under a commercial impossibility standard. In Natus, the Court also considered whether the contractor could recover under the "mutual mistake" theory set forth in National Presto Industries, Inc. v. United States, 167 Ct.Cl. 749, 338 F.2d 99 (1964), cert. denied, 380 U.S. 962 (1965). We conclude that at bottom, "impossibility" is a sub-set of the longstanding common-law doctrine of mutual mistake; every contract that meets the standard of commercial impossibility was entered into by parties who mistakenly underestimated costs. In National Presto, the Government sought to create stand-by facilities that could produce artillery shells using a new method that would waste little steel in the smoothing process. Id. at 761, 338 F.2d at 107. The Government agreed to furnish the contractor all necessary capital equipment but refused to furnish any smoothing devices, even though the contractor thought that some smoothing would be necessary. Id. at 757, 338 F.2d at 104. The contractor acceded to the Government's position by taking the cost of this device out of the actual contract. The contracting officer promised to provide such a device if necessary. Id. In fact, once mass production of the shells began, the contractor had to smooth the shells using its own equipment at considerable cost. The Court found that a mutual mistake had occurred and awarded the contractor half of its total extra costs. The Court found it significant that: "this was a new and joint enterprise in which neither party had any real experience or background." Id. at 764, 338 F.2d at 109. The Court also found that the Government had accrued significant benefit by observing the contractor's trials and errors. Id. at 768, 338 F.2d at 111. Finally, the Court found that the Government's promise to furnish all equipment changed this nominally fixed-price contract into a cost-reimbursement variety, which shifted some of the risk of overruns to the Government. Id. Nonetheless, the Court granted only half of the contractor's increased costs on the grounds that the Government would have been willing to bear only part of the actual testing expenses had it known of the process problems at the outset. Id. at 767, 338 F.2d at 110. We have noted that here, the BUFS software that appellant produced did not afford the Government a benefit, since it did not work. In contrast, in National Presto, the Government at the end of the contract's life had both shells and greater knowledge of the production process. However, in the instant contract, while the Government was willing to spend a relatively small sum of money to obtain some material useful for briefing the Joint Chiefs of Staff, there was no need for the Government to learn about the exigencies of computer programming and coding of BUFS, as contrasted with its unique need for knowledge of advanced techniques for the production of artillery shells. Thus, we find the crucial National Presto element of benefit to the Government missing, and we will not reform the contract on the basis of mutual mistake. We note that this conclusion is consistent with our holding in Bromley Contracting Co., GSBCA 6826, 7068, 85-1 BCA 17,812 (1984), aff'd, Bromley Contracting Co. v. United States, 794 F.2d 669 (Fed. Cir. 1986). There, the contractor and the Government had, albeit for different reasons, seriously miscalculated the total cost of performing a roofing contract. The mutuality of the mistake went solely to the resultant error in calculating the total cost, rather than to any mistake in what was to be performed, as occurred in National Presto. We held that a mutual mistake in what constituted a viable contract price could not be reformed, letting the chips fall where they may. Finally, in this case there is not even a hint of defective Government specifications. There are no design specifications involved. In fact, there are no defective specifications alleged or involved, design or otherwise. Hence, there can be no question of the Government breaching any implied warranty that if the specifications are followed, a satisfactory result can be obtained, as in Hol-Gar Mfg. Corp. v. United States, 175 Ct.Cl. 518, 360 F.2d 634 (1966). In Hol-Gar, the contractor was to produce a fixed number of light, small, and durable electrical generators. After the contractor admitted that it could not produce them, the parties relaxed the size and weight specifications. The Court awarded the contractor all costs incurred while trying to comply with the infeasible specifications. Id. at 527, 360 F.2d at 639. As in Hol-Gar, the appellant here suffered many problems in trying to produce the end-product described in the specifications -a program that would integrate existing information about military bases which Defense Department personnel could easily update. However, appellant, unlike the contractor in Hol-Gar, did not bring the problem to the respondent, even when respondent sent cure notices inviting just such a revelation. Instead, appellant misled respondent by continuing to attempt to produce an acceptable software solution without once even hinting, much less contending, that any portion of the cost of doing so should be borne by the respondent. Appellant compounded its error by telling respondent, each time it requested extensions in the delivery date, that these time changes were to be without cost to the Government. Faced with a contract that is commercially impossible to perform, a contractor cannot continue performance at Government expense because doing so deprives the Government of its right to end performance at once and avoid incurring further expense. Ling-Temco-Vought, Inc. v. United States, 201 Ct.Cl. 135, 475 F.2d 630 (1973). In Ling-Temco-Vought, the Government sought to purchase a device to install on ships that would indicate enemy ship movements on a large screen. As here, the Government granted time extensions and equitable adjustments at first; later, however, it rejected the equitable adjustment requests, even though one official suggested that the contractor might be able to parlay its efforts into a lucrative private-sector contract. After the contractor self-funded further research, the Government awarded the contract to another firm. The Court denied the contractor's claim for the value of its uncompensated services, finding that the firm knowingly stopped asking for equitable adjustments after a point to avoid a termination for default. As in Ling-Temco-Vought, it is clear that had the appellant here informed respondent that it was unable to perform the contract without claiming additional costs, the task order would have been promptly terminated. The contractor's obligation to inform the Government of difficulties being encountered by the contractor is diminished only when the Government possesses "superior knowledge" relating to latent difficulties in producing the product. Helene Curtis Industries, Inc. v. United States, 160 Ct. Cl. 473, 312 F.2d 774 (1963). In Helene Curtis, the Government provided bidders with specifications for a food disinfectant that did not disclose that the product would have to be very finely ground. Id. at 443, 312 F.2d at 778. The Court held that the Government's failure to share this superior knowledge entitled the contractor to a significant equitable adjustment. Id. at 445, 312 F.2d at 779. The Court denied appellant's claims for extra labor costs incurred on a later contract to produce this product, finding that at that point the appellant's knowledge was equal to, or greater than, the Government's. Id. Here, as in the second Helene Curtis holding, at the time of the agreement, appellant's knowledge of the difficulties it might encounter in collecting and collating the data to make the BUFS program work was surely equal to, if not greater than, the Government's. Unlike the situation in Helene Curtis, here the respondent had not sponsored research to learn how best to produce the BUFS fact sheets and then refused to share this knowledge with appellant. Instead, the Air Force revealed in the solicitation that the bidder would be improving a prototype and would need to pull up data from secure and nonsecure sectors of the mainframe Honeywell computer residing at the Pentagon. Since "superior knowledge" cannot be shown, appellant has attempted to obtain relief using the master agreement's "Changes" clause. But the "Changes" procedure requires the appellant both to show the Government that it was being required to perform work beyond the scope of the contract and to tell the Government approximately how much that work would cost. We find it telling that early in performance, appellant followed the "Changes" clause procedure by submitting a change order in which it sought a time extension together with a price increase. But later, for the alleged changes herein involved, appellant requested nothing more than time extensions, without requesting extra compensation. As a result of the appellant's course of dealing with the respondent in regard to its real difficulties performing the task, we find that the respondent was completely misled as to the true situation, i.e., that the appellant found itself unable to perform the task for anything like the agreed upon price. Had the appellant brought the true situation to the attention of the respondent, the huge additional costs borne by the appellant could well have been obviated. Thus, we deny this appeal. Decision For the reasons stated above, this appeal is DENIED. ____________________________ JAMES W. HENDLEY Board Judge We concur: __________________________ _____________________________ VINCENT A. LaBELLA STEPHEN M. DANIELS Acting Chief Board Judge Board Judge