Board of Contract Appeals General Services Administration Washington, D.C. 20405 ________________________________ GRANTED IN PART: August 18, 1999 _________________________________ GSBCA 14057 TRAVEL CENTRE, Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. Fred Morahan, President of Travel Centre, Danvers, MA, appearing for Appellant. Michael D. Tully and John E. Cornell, Office of General Counsel, General Services Administration, Washington, DC, counsel for Respondent. Before Board Judges DANIELS (Chairman),[foot #] 1 PARKER, and HYATT. PARKER, Board Judge. On November 26, 1997, the Board granted as to entitlement Travel Centre's claim that the General Services Administration (GSA) breached a contract under which Travel Centre was to provide travel management services to federal agencies in the New England area. The Board found that GSA breached the contract when it awarded the contract to Travel Centre knowing that the estimates of potential business upon which offerors had to base their proposals were vastly overstated. The Board also found that, given the circumstances under which the contract was awarded, GSA's decision to terminate the contract for the convenience of the Government was unreasonable. Travel Centre v. ----------- FOOTNOTE BEGINS --------- [foot #] 1 The panel originally designated for this case was Board Judges Parker, Hyatt and Vergilio. In November 1998, after the reconsideration decision was issued and the motion for full Board consideration was denied, Judge Vergilio resigned from the Board. Judge Daniels was selected at random to replace him as a panel member. ----------- FOOTNOTE ENDS ----------- 2 General Services Administration, GSBCA 14057, 98-1 BCA 29,536 (1997), reconsideration denied, 98-1 BCA 29,541, motion for full Board consideration denied, 98-2 BCA 29,849. We now turn to the quantum phase of the appeal. As discussed below, we find that Travel Centre has proved breach damages in the amount of $42,546.51. The Breach In April 1995, GSA solicited offers to establish and operate a travel management center for federal agencies located in the New England area. The solicitation contemplated an indefinite quantity, indefinite delivery type contract, with a minimum guaranteed revenue of $100. The contract would be for one year, with options for four additional years. The solicitation informed offerors that the winning contractor would serve as a preferred source for federal agencies requiring airline tickets, lodging, rental vehicles, and other travel services. The contractor would receive compensation in the form of commissions from the airlines and would rebate a percentage of those commissions to the Government. Offerors were required to base their proposals on estimates of expected business provided in the solicitation. Travel Centre, 98-1 BCA at 146,428. During the process of soliciting and evaluating offers for the new contract, GSA received several notices from the incumbent contractor, Dube Travel, informing GSA that its largest customer group, made up of various Department of Defense (DoD)-related agencies, had awarded its own travel services contract to another contractor and would no longer be using the GSA contract. Although the DoD-related business made up more than half of the expected business for the State of Maine, GSA never informed offerors of this important information -- information which directly contradicted the estimates of expected business contained in the solicitation upon which offerors had (at GSA s direction) based their proposals. GSA simply awarded a contract to Travel Centre for the states of Maine and New Hampshire. When expected business failed to materialize, Travel Centre experienced various financial and performance problems. GSA then terminated the contract for default, changing the termination to one for the convenience of the Government in April 1997. Travel Centre, 98-1 BCA at 146,428-29. Travel Centre appealed the termination, arguing that, by inducing Travel Centre to enter into a contract knowing that the estimate of the amount of business that could be expected was vastly overstated, GSA had breached the contract. The Board agreed with Travel Centre, holding that GSA withheld crucial information material to an offeror's decision whether to submit a proposal at all and, if so, how to structure it. By withholding this information from offerors, GSA exhibited the "bad faith" 3 necessary to sustain a finding of breach of contract. Travel Centre, 98-1 BCA at 146,431. The dissent would have the Board revisit its previous decision that Travel Centre breached the contract. As we read the opinion, it argues, like the previous two dissents, that because the contract was for an indefinite quantity and the guaranteed purchase was made, the Government may not be found to have exhibited bad faith or to have breached the contract even though it (1) provided estimates of expected business purportedly (but not actually) based upon a survey, (2) required offerors to base their proposals on those estimates, (3) promised offerors that the winning firm would be a preferred provider of the procured services, and (4) knew prior to award that this promise was false because the winner would not be able to provide any services to a major part of the Government.[foot #] 2 Couched in impressive-sounding legalese, and purporting to follow precedents from our appellate authority, the opinion stands for the following proposition regarding indefinite quantity contracts: Anyone who is dumb enough to rely on the Government s promises deserves what he gets. As discussed in detail in the original and reconsideration opinions, we do not believe that this is the law. There is no type of contract, including one for an indefinite quantity, in which the contractor assumes the risk that the Government has intentionally misled it.[foot #] 3 ----------- FOOTNOTE BEGINS --------- [foot #] 2 The dissent actually does quarrel with the Board s finding that GSA awarded a contract to Travel Centre knowing (or recklessly disregarding information that gave GSA every reason to know) that the estimate was vastly overstated[.] Travel Centre, 98-1 BCA at 146,431. The dissent characterizes ______________ GSA s actions as merely negligent, and even goes so far as to paint GSA as a hero for rescuing Travel Centre from its own misdeeds. This view of the facts is unsupported by the record. GSA has never denied that it knew that a separate contract had been entered into by DoD, or that it failed to inform offerors of this key fact. It offered no credible explanation of negligence, arguing only that its actions did not meet the legal standard for breach. Like the author of the dissenting opinion, GSA believes that a breach can only occur when the Government s actions result from a state of mind such as, What can I do today to make Travel Centre s life miserable? As we have previously stated, we think this misstates the law -- especially as to a situation like this one, where, when the agency acted, it had no way of knowing which firm would be injured by being awarded the contract. [foot #] 3 In recent years, indefinite quantity contracting has become an increasingly important method for the Government to obtain goods and services. According to the Federal Procurement Data System, the amount of money spent by the Government under (continued...) ----------- FOOTNOTE ENDS ----------- 4 Damages Travel Centre claimed damages totaling $638,788.37. These damages can be grouped into four general categories: (1) lost income; (2) costs in connection with performance of the contract; (3) additional costs incurred solely as a result of the breach; and (4) litigation and related expenses. The general rule in common law breach of contract cases is to award damages sufficient to place the injured party in as good a position as the one in which he or she would have been had the breaching party fully performed. Massachusetts Bay Transportation Authority v. United States, 129 F.3d 1226, 1232 (Fed. Cir. 1997); San Carlos Irrigation and Drainage District v. United States, 111 F.3d 1557 (Fed. Cir. 1997). The goal of compensation is not the mere restoration to a former position, as in tort, but the awarding of a sum which is the equivalent of performance of the bargain. Wells Fargo Bank v. United States, 33 Fed. Cl. 233 (1995), aff'd in part and rev'd in part on other grounds, 88 F.3d 1012 (Fed. Cir.), cert. denied, 117 S. Ct. 1245 (1996). In awarding compensation, the Board must assess gains prevented as well as losses suffered which would not have occurred had the contract been performed. Id. Moreover, where responsibility for damages is clear, it is not essential that the amount thereof be ascertainable with absolute exactness or mathematical precision. . . . However, these rules are limited by the proposition that contract law precludes recovery for speculative damages . . . . [R]emote and consequential damages are not recoverable in a common-law suit for breach of contract . . . especially . . . in suits against the United States for the recovery of common law damages . . . . San Carlos Irrigation, 111 F.3d at 1562 (citations omitted). Admittedly, applying these principles to the situation at hand is not a straightforward proposition. In order to place Travel Centre in as good a position as it would have been in had the bargain been fully performed, the first question we must answer is, "What exactly was the bargain that was not performed?" GSA argues that, notwithstanding any bad faith which may have been involved in the awarding of the contract, GSA did perform ----------- FOOTNOTE BEGINS --------- [foot #] 3 (...continued) indefinite quantity contracts between 1993 and 1998 increased almost twenty times faster than overall procurement spending. If companies bidding for these contracts are expected to build into their prices the risk that the Government will mislead them, the resulting costs will not be insignificant. ----------- FOOTNOTE ENDS ----------- 5 the contract according to its terms. The contract provided that, in return for rebating to GSA a portion of the commissions earned, Travel Centre was authorized to accept orders for travel services from various federal agencies. The contract was for an indefinite quantity, with a guarantee only that Travel Centre would receive a minimum of $100 in orders. GSA maintains that because Travel Centre received orders totaling more than $550,000, it received the benefit of its bargain and is entitled to no damages. As we discussed in the decision on entitlement, however, there was more to the bargain than that. The solicitation promised that the winning offeror would be a "preferred provider" of travel services for the listed agencies and required offerors to base their proposals on estimates of business provided in the solicitation. As we know, at the time GSA awarded the contract to Travel Centre, GSA knew that the winning offeror would not be a preferred source for various DoD-related agencies listed in the solicitation -- GSA had received information that DoD had awarded to another company a requirements contract for those services. Thus, to the extent that the "bargain" was that Travel Centre would be a preferred provider for these services, GSA failed to perform its part of the bargain. GSA also failed to perform the bargain which is inherent in every Government contract -- that, in return for a party's providing a binding offer in response to a solicitation, the Government will not intentionally provide inaccurate or misleading information upon which to base that offer. In fashioning relief for Travel Centre, the Board must take into account these aspects of the "bargain" which GSA failed to perform. There are two general approaches to calculating damages aimed at placing Travel Centre "in as good a position as [it] would have been had the breaching party fully performed." San Carlos Irrigation, 111 F.3d at 1563. The first, favored by GSA, is to assume that Travel Centre would not have submitted a proposal at all had GSA disclosed the true situation regarding potential business. Under this approach, the "bargain" would be, essentially, no bargain at all. Travel Centre would simply keep what it earned from performing the services it did perform. The Board would then attempt to figure out which of Travel Centre's incurred costs were reasonably related to the services performed and award to Travel Centre any excess costs caused solely by the breach. Although facially attractive, this method has several drawbacks. First, simply letting Travel Centre keep the commissions earned on work performed short-changes Travel Centre. It fails to provide Travel Centre with the benefit of its bargain to serve as a preferred provider of travel services to the entities listed in the solicitation, including the DoD-related 6 agencies. In addition, as to the commissions earned on work actually performed, there is no indication that, absent a contract, Travel Centre would have agreed to rebate to the Government a percentage of the commissions or, if it had, what that percentage rebate would have been. Attempting to ascertain a "correct" rebate percentage under these circumstances would be highly speculative. Finally, any calculation of Travel Centre's incurred costs that would relate only to the services actually performed would be similarly speculative. Travel Centre incurred these costs in anticipation of performing a one-year contract with four option years. The amount of potential business must certainly have affected the costs incurred. Many of the costs, such as those for opening a branch office in the area of performance, were specifically required by the contract and, in the absence of a contract, may not have been incurred at all. It would be sheer guesswork to attempt to allocate a fair percentage of the total incurred costs to performance of a non-contract which was never contemplated by the parties. The second method, although not perfect, hits closer to the mark because it includes a reasonable calculation of lost profits. If Travel Centre had (as promised) been a preferred provider to the agencies listed in the solicitation, it is very likely that Travel Centre would have received the DoD-related business.[foot #] 4 Except for the DoD-related business, contract orders for travel services essentially conformed with GSA's estimates. There is no reason to believe that, in the absence of the requirements contract that GSA failed to disclose to the offerors, the DoD-related business would not have followed the same pattern. Because the record includes the actual amount of business that the DoD-related agencies spent on travel services during the relevant period, it is possible to ----------- FOOTNOTE BEGINS --------- [foot #] 4 With regard to the dissent s argument that being a preferred source means nothing, we refer the author of that opinion to a recent article in The Government Contractor, FAC __________________________ 97-12 Prohibits Designation of Preferred Awardees Under Multiple Award Contracts, 41 Gov't Contractor 280 (1999). The article explains that the Federal Acquisition Regulation has recently been amended to prohibit agencies, when placing orders under multiple award schedule contracts, from allocating or designating in any way a preferred awardee. The action was necessary, according to the article, because a report of the Department of Defense Inspector General found that contracting officers were placing too many sole-source task orders with these preferred vendors, without considering price and to documenting order decisions. We doubt that the preferred firms on the multiple award schedule (which, like Travel Centre s contract, is not a requirements or other mandatory use vehicle) will consider the removal of their designations to be nothing. ----------- FOOTNOTE ENDS ----------- 7 predict with some degree of confidence what would have happened had the contract been performed according to its terms. The dissenting opinion argues that, because the contract was for an indefinite quantity, there simply is not, nor could there be, clear and direct proof that Travel Centre would have realized income based on the lost DoD sales. We agree that, in most cases, attempting to establish the amount of sales that a contractor would have realized under an indefinite quantity contract is too speculative to serve as a basis for an award of breach damages. Here, however, because of the unique nature of the contract, and the clear pattern of sales, the amount of income lost as a result of GSA's breach can be calculated with a fair degree of confidence, sufficient to justify an award of damages.[foot #] 5 Three factors lead us to believe that Travel Centre would likely have received the DoD business if the contract had been as advertised. First, although there were no guarantees, Travel Centre was to be a preferred source for the services. This is different from the situation in a normal indefinite quantity contract, and, unlike the dissent, we think being a preferred source increases the likelihood of obtaining the business for which one is a preferred source. See supra note 4. The second factor which leads us to believe that Travel Centre would likely have received the DoD business comes from the pattern of the sales for the rest of the contract -- except for the DoD business, the sales were substantially as advertised. Finally, we know exactly how much the DoD-related agencies spent on travel services during the relevant period, and we know that it all went to the same contractor. If Travel Centre had been a preferred provider for those services, there is no reason to believe (and nothing in the record that would indicate) that the business would not have gone to Travel Centre. Although it is true that some of the military agencies had the capability to perform services of this nature in-house or to obtain them from other entities independent of the Travel Centre contract, this is also ----------- FOOTNOTE BEGINS --------- [foot #] 5 Our job here is similar to a court s task in patent infringement cases of hypothetically reconstructing the market. In patent cases, similar to the measure of breach damages, the statutory measure of damages is the difference between [the patent owner s] pecuniary condition after the infringement, and what his condition would have been if the infringement had not occurred. Aro Mfg. Co. v. Convertible Top _______________________________ Replacement Co., 377 U.S. 476, 504 (1964) (plurality opinion) _______________ (quoting Yale Lock Mfg. Co. v. Sargent, 117 U.S. 536, 552 _________________________________ (1886)). This requires the court to hypothetically reconstruct the market to project economic results which did not occur. Grain Processing Corp. v. American Maize-Products Co., No. 98-081 ----------- FOOTNOTE BEGINS --------- (Fed. Cir. Aug. 4, 1999). ----------- FOOTNOTE ENDS ----------- 8 true for other agencies, and those other agencies gave their business to Travel Centre. There is no evidence that the DoD- related agencies would have acted differently from their civilian brethren. It seems to us more likely (less speculative) that, in the absence of a separate requirements contract, the DoD agencies would have ordered the services from the preferred provider. Under this method of calculating damages, Travel Centre is awarded the commissions that it would have earned had the contract been as advertised. In addition to giving Travel Centre the benefit of its bargain, this method makes the calculations easy. Since Travel Centre will receive the entire amount that it would have received had the contract been as advertised, the costs incurred during the contract year do not have to be arbitrarily allocated. The Board simply gives Travel Centre the benefit of its bargain on both sides of the equation -- the income side and the expenses side. The result is a reasonably accurate estimate of lost profits. Following the formula described above, we first calculate the income that Travel Centre lost as a result of GSA's breach. The relevant DoD entities ordered $665,226 worth of travel services from the requirements contract during the period of Travel Centre's contract. Respondent's Record Submission, Exhibits P, Q. If that contract had not existed, we assume that this business would have gone to Travel Centre. Applying Travel Centre's historical commission rate of eight percent, Appeal File, Exhibit 4 at 255, to this amount yields a total commission of $53,218.08. In accordance with the contract, Travel Centre would have rebated to GSA an amount equal to 1.98% of the total sales, or $13,171.47. Subtracting this amount from the total commission yields a net commission of $40,046.61. This is the amount that Travel Centre would have earned if it had been the preferred provider for the DoD entities, as provided in the contract. Since Travel Centre will be receiving the total amount of commissions that it expected to receive under the contract, it may not recover any of the costs that it expected to incur in performing the contract. The bargain made implicitly assumed that the contractor would incur these costs. Thus, the only thing left to do in calculating a total damage award is to go through Travel Centre's claimed costs and determine which of those costs represent "losses suffered which would not have occurred had the contract been performed." Wells Fargo, 33 Fed. Cl. at 241. In doing so, we are mindful that "contract law precludes the recovery of speculative damages." San Carlos Irrigation, 111 F.3d at 1562. Travel Centre's Claimed Costs Proposal preparation 9 Travel Centre claimed $7500 for "proposal preparation." In addition to lacking any documentation supporting the claimed amount, Travel Centre has not shown this to be a cost that would not have been incurred had the contract been performed. The cost of preparing a proposal is normally a routine cost which a contractor expects to recover during performance of the contract. Because we are awarding to Travel Centre all of the income that it could have expected under the contract, recovery of proposal preparation costs would be duplicative. Accounting fees Travel Centre incurred costs in the amount of $2500 for professional accounting services in connection with the preparation of a termination claim. Certainly, Travel Centre would not have incurred this cost if GSA had not unlawfully terminated the contract. Although GSA argues that these services, which were invoiced in January 1998, amounted to litigation support for appellant's breach claim and should therefore be included as part of a claim under the Equal Access to Justice Act,[foot #] 6 we are satisfied that preparation of a termination claim was appropriate, whether or not such an exercise proved useful in prosecuting appellant's breach claim. At the time the accounting services were rendered, sometime prior to January 1998, the contract had been terminated. Travel Centre was entitled to submit to GSA a termination claim, regardless of the status of its breach claim. Legal fees Travel Centre states that it incurred legal fees of $115,000 in connection with the prosecution of its breach claim. As GSA correctly points out, fees incurred in prosecuting a breach case against the United States are not recoverable as breach damages. Texas Instruments Inc. v. United States, 991 F.2d 760 (Fed. Cir. 1993); Kania v. United States, 650 F.2d 264 (Ct. Cl.), cert. denied, 454 U.S. 895 (1981). The appropriate vehicle for recovering such fees is an action pursuant to the Equal Access to Justice Act. Research and preparation ----------- FOOTNOTE BEGINS --------- [foot #] 6 The Equal Access to Justice Act (EAJA), 5 U.S.C. 504 (Supp. II 1996), entitles an eligible, prevailing party under an adjudication conducted by the Government to an award of attorney fees and expenses unless the Government's position in the litigation was substantially justified or special circumstances make an award unjust. Such actions are filed after the underlying adjudication has been completed. Rule 135(a), (b) (48 CFR 6101.35(a), (b) (1998)). ----------- FOOTNOTE ENDS ----------- 10 Travel Centre's claim "suggests 600 hours of effort" on behalf of Travel Centre's principals over a two and one-half year period for "research and preparation." No supporting records of any kind have been submitted as part of the record. To the extent that the claimed costs associated with these hours represent work under the contract, they are not recoverable. As explained above, because we would award Travel Centre all of the income which it could reasonably have expected under the contract, any costs which would have been incurred to perform the contract would not be recoverable. To the extent that these costs represent efforts in connection with this litigation, they, like the claimed legal fees, are recoverable only in a separate action under the Equal Access to Justice Act. Commissions lost on tickets that had to be re-booked with other travel agencies Travel Centre has not explained exactly what this element of the claim represents and has presented no evidence to support the claimed amount of $1800. Lost overrides from airlines Travel Centre alleges that it would have received $10,000 in override commissions from the airlines over the duration of the contract. Although Travel Centre has not explained what they are, we assume that override commissions are bonuses paid by airlines based upon the volume of ticket sales. If proven, such damages would appear to be allowable as breach damages; they would constitute foreseeable income lost to Travel Centre as a result of GSA's breach. Travel Centre, however, has not proved either the existence or the amount of such commissions. It has provided no evidence of what they are or how they are calculated, and admits that it is unable to document "what we would have gotten." We are unable to make an award of damages under such circumstances. Loss of future net income due to closure of business Travel Centre maintains that it was forced to close its business as a direct consequence of GSA's termination of the contract and claims as damages the value of the business itself, which Travel Centre alleges is $200,000. Travel Centre states that, upon award of the GSA contract, it abandoned all of its non-Government business to concentrate solely on obtaining Government business. Travel Centre expected to attain approximately $12,500,000 in sales from the GSA contract over a five-year period. Travel Centre's claim for the value of its business is simply too speculative to justify a damage award in these circumstances. As explained above, remote and consequential 11 damages are not recoverable in a common-law suit for breach of contract, especially against the United States. San Carlos Irrigation, 111 F.3d at 1563. In such cases, damages are limited to the natural and probable consequences of the breach and those which, in the light of the facts of which they had knowledge, were in the contemplation of the parties. Wells Fargo, 33 Fed. Cl. at 242. Several factors lead us to the conclusion that the claimed damages are remote and consequential. First, the contract at issue here was a one-year contract, not a five-year contract. Nevertheless, Travel Centre decided to risk everything by entering into five-year contracts for space and equipment. There is nothing in the record to suggest that Travel Centre's decision to abandon its commercial business and gamble everything on the chance that GSA would exercise all four options was known to GSA. Although it is true that the contract may have continued past the initial year, GSA did not, at the time of award, assume the risk that Travel Centre would go out of business if the options for additional years were not exercised. Certainly, it was not foreseeable that Travel Centre's lost income during the actual contract year would cause the demise of the entire company. It is hard to imagine now, and would have been impossible for GSA to have imagined at the time of award, that the loss of approximately $40,000 in commissions would drive Travel Centre out of business. Even if Travel Centre had proven, and it did not, that the losses incurred during the contract year caused the business to fail, in light of the facts known to GSA, such a result could not have been contemplated at the time the contract was entered into. Costs incurred in closing branch office Travel Centre's claim of $10,993 for the costs of opening and closing the branch office required by the contract may not be granted. Although Travel Centre has provided little detail as to these office-related expenses (for things such as supplies, training and advertising), it is clear that the expenses related to the production of income under the contract. Since we are awarding Travel Centre all of the income it could have expected under the contract, it may not recover any of the expenses it expected to incur to earn that income. That is the bargain we are enforcing. To the extent the office expenses relate to the option years, they may not be reimbursed because, as discussed above, the contract was for one year. Travel Centre's gamble that the options for future years would be exercised was not a risk borne by GSA. GSA cannot be held responsible for breaching contracts which never existed. 12 Unpaid officers and lost salaries These two items of cost, with little if anything in the way of support, represent money that the principals of Travel Centre would have paid themselves if the contract had been fully performed. As discussed in connection with the opening and closing of the branch office, to the extent these claimed costs apply to the actual contract year, they are part of the costs that Travel Centre bargained for when it contracted with GSA. Paying Travel Centre's anticipated income takes care of the claimed costs and enforces the bargain. To the extent Travel Centre's claimed costs cover the four option years, they must be disallowed for the reasons discussed above -- the contract was for one, not five, years. Idle facilities Travel Centre's claim of $6400 for idle facilities stems from the cost of renting appellant's home office in Danvers, Massachusetts during a four-month period after the termination in which Travel Centre conducted no business. This element of the claim is denied for the same reasons discussed in connection with the branch office. Lost profits Having successfully claimed all the income which could be expected under the contract, Travel Centre may not also receive its additional (and undocumented) claim for $25,788 in lost profits. Subcontractor costs In anticipation of five years of Government business under the contract, Travel Centre entered into a sixty-month lease for travel services-related computer hardware and software with one company, and a sixty-three-month lease for telephone-related services with another company. After its contract with GSA was terminated, Travel Centre alleges that it incurred termination costs for these contracts in the amounts of $110,000 and $7000, respectively. For the same reasons discussed in connection with a number of the other items, these costs are not reimbursable. Even assuming that the amounts had been sufficiently proven, which they have not, to the extent the claimed costs represent costs applicable to the contract year, they are simply costs which Travel Centre should have expected to recover through income generated under the contract. Since we are awarding Travel Centre that income, an award of the lease costs would be duplicative. Finally, to the extent the claimed costs are applicable to the four option years (and it appears that the majority of the costs are in this category), they are not recoverable because Travel Centre had no contract covering those 13 years. Travel Centre alone took the risk that the contract options would not be exercised. This was always a distinct possibility, regardless of GSA's actions in connection with the contract award. Decision For the reasons explained above, Travel Centre's claim is GRANTED IN PART. 14 Travel Centre is awarded breach damages in the amount of $42,546.51, plus interest in accordance with statute, 41 U.S.C. 611 (1994). _______________________ ROBERT W. PARKER Board Judge I concur: _____________________ STEPHEN M. DANIELS Board Judge HYATT, Board Judge, dissenting. I dissent from the majority's decision to award lost profits to appellant. First, in evaluating the basis for a quantum award, I have now concluded that the earlier entitlement decision was erroneous. Given the nature of the contract awarded, the Government's actions did not amount to a breach of any obligation to the contractor. Second, even if it could be concluded that the contract was somehow breached, the damages awarded by the majority do not reflect the natural and probable consequences of any breach that has been identified by the majority in this decision or previously. Background This appeal challenged a contracting officer's decision denying the claim of appellant, Travel Centre, for breach damages allegedly incurred as a result of certain events relating to the award and termination of contract number GS-11F-95-EPD-0092, for the provision of travel management services in the states of Maine and New Hampshire. The presiding judge bifurcated the appeal, issued an initial ruling on entitlement, and reserved for resolution at a later date the amount, if any, of quantum to which appellant might be entitled. In the entitlement phase, the Board found that respondent, the General Services Administration (GSA), had breached Travel Centre's contract to provide these travel management services and that its conversion of a termination for default of the contract to one for the convenience of the Government was unreasonable under the circumstances. Travel Centre v. General Services Administration, GSBCA 14057, 98-1 BCA 29,536 (1997), reconsideration denied, 15 98-1 BCA 29,541, motion for full Board consideration denied, 98-2 BCA 29,849. Following issuance of this decision, the parties conducted discovery on damages and have now briefed the issue of quantum to permit final resolution of this appeal. Both the matters of entitlement and quantum were submitted for decision on the written record. Rule 111. Under its contract, Travel Centre was to provide travel management services to the extent ordered by federal agencies in New Hampshire and Maine. A divided panel of the Board found that GSA made an award to Travel Centre knowing that the estimates of potential business that had been provided to prospective offerors were significantly overstated by reason of a competing award, of which GSA had been apprised, for a portion of the estimated services. The decision concluded that, by knowingly failing to convey this information to offerors, and, after award, by requiring Travel Centre to live up to the terms of the contract, GSA had exhibited the necessary "bad faith" to justify a finding that the Government had breached the contract such that it could not thereafter reasonably exercise the termination for convenience clause of the contract to limit its liability for breach damages. In arriving at this conclusion, the majority also expressly recognized that, under the circumstances of this case and given the type of contract awarded, it might not be possible for the appellant to recover more than it would under a termination for convenience settlement because of the inherent improbability that entitlement to anticipated business could be proven: Although GSA breached the contract, we agree with GSA that calculating the amount of damages may be problematic. Whether, and if so, to what extent, anticipated profits can be reasonably foreseeable on an indefinite quantity contract is an issue which will arise in the quantum phase of this appeal. Travel Centre, 98-1 BCA at 146,435 n.4. In breach of contract actions, the purpose of an award of damages is to place the non-breaching party in as good a position as it would have been in had the breach not occurred and the contract been fully performed, without charging the breaching party with damages it had no reason to foresee when the contract was entered into. See Massachusetts Bay Transportation Authority v. United States, 129 F.3d 1226, 1232 (Fed. Cir. 1997); San Carlos Irrigation and Drainage District v. United States, 111 F.3d 1557, 1563 (Fed. Cir. 1997); Wells Fargo Bank, N.A. v. United States, 88 F.3d 1012, 1021-22 (Fed. Cir.), cert. denied, 520 U.S. 1116 (1996); Northern Helex Co. v. United States, 524 F.2d 707, 713 (Ct. Cl. 1975), cert. denied, 428 U.S. 866 (1976). 16 Although the case is now before us for consideration of the damages to which the contractor may be entitled, quantum cannot be decided in a vacuum. To determine what monetary damages may properly be awarded as the natural and probable consequences of the Government's breach of a contractual obligation, the tribunal must look to the specific nature of the breach and determine in what way that breach resulted in foreseeable, compensable damages to the contractor in light of the reasonable expectations of the parties at the time of contract formation. Although I originally agreed with the presiding judge's entitlement decision,[foot #] 7 my endeavor to ascertain the proper measure of quantum has caused me to look closely at the record in this case and consequently to question the viability of the Board's interlocutory determination that the contractor was entitled to breach damages. After reviewing the underlying record pertaining to entitlement, the present record submissions of the parties, the pertinent facts and the applicable law, I conclude that the Board's initial decision that Travel Centre was entitled to breach damages was predicated on an erroneous factual and legal conclusion that GSA's pre-award conduct with respect to estimates provided in the solicitation, together with its conduct in post- award contract administration, amounted to bad faith. As explained below, a full examination of the terms of the solicitation and the underlying facts applicable to the preparation of, and failure to update, estimates of agency travel needs included in the solicitation demonstrates at most that the agency's conduct was negligent. In the context of an indefinite- delivery, indefinite-quantity (IDIQ) type contract, the Government's negligence in providing estimates to a contractor is not sufficient to justify a finding of breach. Nor does the record sustain a conclusion that GSA's post-award conduct in administering the contract was characterized by bad faith. GSA did not breach its obligations under this contract and, accordingly, given the opportunity, I would find that GSA's action in converting the termination for default to one for the convenience of the Government was proper.[foot #] 8 ----------- FOOTNOTE BEGINS --------- [foot #] 7 The original panel in this appeal consisted of Judges Parker, Hyatt, and Vergilio. Judge Vergilio dissented from the entitlement decision. [foot #] 8 I recognize that under law of the case principles the quantum case would ordinarily proceed assuming the correctness of the interlocutory entitlement decision. This case presents a unique circumstance in that the appropriate measure of breach damages is fundamentally linked to the nature of the breach. Having looked more carefully at the underlying premises of the entitlement decision, I believe it is plainly erroneous (continued...) ----------- FOOTNOTE ENDS ----------- 17 Since I now believe the underlying entitlement decision should be reversed, I do not undertake to consider whether the appellant has proven the amounts claimed with respect to quantum, other than to address the rationale of the majority in support of their award of lost profits. The Solicitation and Resulting Contract The contracts resulting from the subject request for proposal (RFP) were to be for the provision, at no cost to the Government, of travel management services for federal agencies located in the states of Maine, New Hampshire, and Vermont. The successful offeror was required, under the solicitation and resulting contract, to provide all personnel, equipment, materials, supervision, and other items or services necessary to perform the management and operation of a travel office servicing Government customers. Under the format of this contract, the successful contractor was to bear the entire cost of furnishing its services to the agency and would be compensated by means of commissions it received for booking Government travelers with airlines, hotels, and other providers of transportation and lodging. The RFP also required offerors to propose a rebate to the Government, representing a percentage of fees and commissions earned from booking official Government air travel. Appeal File, Exhibit 2.[foot #] 9 GSA issued solicitation number 3FBG-W-AO-N-5199 on April 21, 1995, attaching as cover pages a "notice concerning solicitation." Prominently featured in this notice, in bolded capital letters, was the following statement: INDEFINITE-DELIVERY, INDEFINITE-QUANTITY CONTRACT FOR THE ESTABLISHMENT AND OPERATION OF A TRAVEL MANAGEMENT CENTER FOR: (1) STATE OF MAINE, (2) STATE OF NEW HAMPSHIRE, AND (3) STATE OF VERMONT. The notice further stated that the contract was to be for approximately a one-year period, with four one-year option periods. The solicitation contemplated that one, two, or even three separate awards could result and cautioned that the award of a contract for one state's travel business could not be ----------- FOOTNOTE BEGINS --------- [foot #] 8 (...continued) and can no longer endorse its conclusions. See 1B James Wm. ___ Moore, Moore's Federal Practice 0.404[4-1], at II-9 (2d ed. _________________________ 1996). [foot #] 9 The termination of appellant's contract gave rise to three claims -- GSBCA 13784, 14056, and 14057. The appeal file was submitted in GSBCA 13784, which has since been dismissed, but is applicable to this claim as well. ----------- FOOTNOTE ENDS ----------- 18 conditioned on award for the other states. At the bottom of the first cover page, prospective offerors were expressly told that the contract format had been substantially revised since the issuance of the previous solicitation for travel management services: Offerors are cautioned to read all clauses and Section H thoroughly, as this is an indefinite-delivery, indefinite-quantity contract with guaranteed revenue minimum of $100. This differs significantly from a requirements contract. Appeal File, Exhibit 2 at cover page 1 (emphasis added). The Government's intention to award a "no-cost, indefinite-quantity, indefinite-delivery type contract with a guaranteed revenue minimum of $100" is repeated in Section A of the solicitation at pages 5 (identifying the type of contract) and 7. On page 8, the solicitation explicitly advised that: B-2 IMPACT OF NON-MANDATORY USE ON SALES ESTIMATES: Sales estimates, agency names, and any other information in Section H, is provided solely for informational purposes and does not represent any guaranty of sales. It is not known how many Federal agencies will choose to utilize this contract, and it is not known how much business this contract will generate for the contractor. Appeal File, Exhibit 2 at 8 (emphasis added). Section H contained estimates, based on fiscal year 1994 sales under the predecessor requirements contract, on which offerors were instructed to base their offers. The data included a total for the number of ticket sales and the annual dollar amount of revenue in each individual state, and a breakdown of ticket sales for each agency located in the state. Three places in Section H -- pages 30a (Maine), 36 (New Hampshire), and 41 (Vermont) -- repeated GSA's cautionary statement: The following table is for informational purposes only and it does not represent any guaranty of sales. It does not list all of the Federal agencies located in the state, and it does not reflect any commitments received by GSA from the Federal agencies (listed below or otherwise) to utilize any contract resulting from this solicitation. 19 As noted in the dissenting opinion in the entitlement decision, these estimates were, in places, internally inconsistent. Travel Centre apparently chose to believe that the higher levels of work would be obtained under the contract and did not undertake to inquire as to which estimated levels of historical orders were accurate. Travel Centre, 98-1 BCA at 146,433. Section H also required offerors to propose a rebate to the Government based on a percentage of total domestic air ticket sales. Travel Centre proposed a total rebate to the Government of 1.98% of domestic air ticket sales. Appeal File, Exhibits 4, 8. In Section I, following various standard FAR clauses generally included in federal contracts, was a provision (I-1) addressing the scope of the contract: (a) This contract provides for travel management services for Federal agency(ies) in the geographic location(s) outlined in Sections B and/or H. The resultant contract(s) is a preferred source for the agency(ies) located in the outlined geographic location(s) whenever an agency(ies) determine(s) a need for commercial travel management services. The scope of this contract includes delivery of travel management services to agencies/organizations listed as non- mandatory users in (c) below when added under the option to expand coverage clauses at section G(I)(C).[[foot #] 10] (b) A non-mandatory user may request services through the contracting officer. A Federal agency may utilize this contract only upon completion of an agreement with the General Services Administration (GSA) and a Memorandum of Understanding (MOU) between the using agency, GSA, and the contractor.[[foot #] 11] The ----------- FOOTNOTE BEGINS --------- [foot #] 10 Section G(I)(C) permits the Government to expand contract coverage to include agencies outside the specified geographic areas, subject to completion of a memorandum of understanding (MOU) and the agreement of the contractor. There is no (c) in paragraph I-1 above. Appeal File, Exhibit 2 at 27. [foot #] 11 Section G(I)(E) provides that the federal agencies seeking to utilize Travel Centre's services under this (continued...) ----------- FOOTNOTE ENDS ----------- 20 following agencies/organizations are non- mandatory users: (1) Any executive department or independent establishment in the executive branch, including any wholly owned Government corporation; (2) Any establishment in the legislative or judicial branch of the Government; (3) The Senate, House of Representatives, and the Architect of the Capitol and any activities under his direction; (4) United States Foreign Service; (5) Any commission, council, or other entity authorized to use GSA sources of supply and services which is a mandatory user under GSA's contracts for air/rail passenger transportation services. Appeal File, Exhibit 2 at 64-65. Section C of the solicitation, which sets forth the basic requirements of the contract -- i.e., the contractor's responsibilities -- placed significant performance obligations on the prospective contractor, including requirements that the contractor have at least one site located within the geographic area to be served, and within that site, an office with space dedicated exclusively to serving Government business, with full- time reservations personnel, a full-time project manager, and a full-time site manager dedicated exclusively to Government business. Appeal File, Exhibit 2 at 8-16. The "Breach" Prior to the award of the subject contract in October 1995, GSA's travel management services were procured under regional requirements contracts under which most federal agencies were mandatory users. The major exception was the Department of ----------- FOOTNOTE BEGINS --------- [foot #] 11 (...continued) contract are responsible for completing an MOU with Travel Centre setting forth rebate and billing/refund procedures that must be agreed to by both the contractor and by GSA. Such MOUs are required to be in place prior to the commencement of service. Appeal File, Exhibit 2 at 27. ----------- FOOTNOTE ENDS ----------- 21 Defense (DoD), which was a non-mandatory user of GSA's travel management services contracts. Appeal File, Exhibits 71, 100. The predecessor incumbent travel services contractor for the state of Maine was Dube Travel Agency & Tours. Appeal File, Exhibit 54.[foot #] 12 The DoD entities located in Maine, New Hampshire, and Vermont whose travel projections were included in the subject RFP are also part of a larger geographic area comprising "Defense Travel Region Four (DTR-4)," or "Area 4." Appeal File, Exhibit 66. Sometime in 1994, in connection with a then-pending GSA RFP for travel management services, the Army's Military Traffic Management Command (MTMC) informally notified GSA that certain travel requirements of the Maine Air and Army National Guard (MEANG) would be covered by an upcoming MTMC procurement. The pending GSA RFP was amended to delete the MEANG requirements for Augusta.[foot #] 13 Subsequently, this RFP was canceled without an award of a contract. Stipulation 3. Prior to the award of the Travel Centre contract, MTMC awarded a large travel service contract to Carlson Wagonlit Travel. The MTMC award, and its geographic coverage of Area 4, was reported in a trade magazine. Appellant was aware of this award based on coverage in trade magazines, but did not realize that it included the National Guard locations as well as Army units in Maine. Appeal File, Exhibit 66 at 25-28. Under the predecessor contract, Dube Travel routinely submitted a monthly narrative to the GSA travel management office. Dube Travel's report for November 1994, which was received by GSA in mid-December, mentioned MTMC's award of a contract to Carlson Travel, and states that Carlson was "due to take over the Army National Guard account [in Maine] in February 1995." This information was repeated in Dube Travel's December 1994 and January 1995 monthly narratives. In its August 1995 monthly narrative, Dube informed GSA that it was no longer servicing the Maine MEANG and Army locations because of the MTMC contract. Appeal File, Exhibits 55-57, 59. GSA did not, prior ----------- FOOTNOTE BEGINS --------- [foot #] 12 Under legislation passed in 1994, Congress mandated a funding change for GSA's travel management center program. Appropriated funds would no longer be used to defray the costs of managing Government-wide travel programs -- instead, such programs were to be industrially funded. In conjunction with this legislation, GSA ceased to be a mandatory source of travel management services for civilian agencies. Appeal File, Exhibit 100. [foot #] 13 There were MEANG units located in Portland, Bangor, and South Portland, as well as in Augusta, included in Section H of the 1994 RFP. ----------- FOOTNOTE ENDS ----------- 22 to the award of the contract to Travel Centre, have a copy of the MTMC contract, nor was it familiar with the terms and conditions of that contract. The only information provided directly to GSA by MTMC was that the Augusta Maine National Guard unit would be using the MTMC contract. This information was communicated in a telephone call placed by MTMC to GSA's travel management specialist. Appeal File, Exhibit 69. It does not appear from the record that GSA had any information concerning the nature or duration of the MTMC contract. The historic data and estimates contained in Section H were compiled and updated based on the results of written surveys conducted with respect to the canceled 1994 procurement and a telephone survey conducted by GSA's traffic management specialist during February and March of 1995. Appeal File, Exhibit 72. Although the specialist, in his deposition, thought that he called most, if not all, of these entities to update their traffic volume projections, he did not memorialize any of his conversations and did not recall many specifics of his conversations. He stated that he called to confirm travel sales projections and did not inquire as to whether the DoD agencies intended to make use of the GSA contract. Appeal File, Exhibit 67. Telephone records produced in discovery did not demonstrate that a large number of calls were made in the relevant time frame. Although GSA deleted the Augusta MEANG location from Section H, it failed to adjust the total sales data to eliminate ticket sales generated by MEANG Augusta and it did not take into account the reports from Dube Travel that the DoD entities in Maine appeared to be covered by the MTMC contract awarded to Carlson and, as of August 1995, that these units were phasing out their use of GSA's contract.[foot #] 14 Appeal File, Exhibits 2, 69, 73. Various arithmetic errors, which were apparent on the face of the solicitation, appeared in the historical data provided in Section H of the solicitation. Based on these errors, which included mistakes generated by the removal of MEANG Augusta from the tables in Section H, both the volume of tickets previously purchased in the state of Maine and the annual dollar amount for the state of Maine were significantly overstated. Appeal File, Exhibits 2, 73. Travel Centre never notified GSA personnel of any of the incorrect totals set forth in the solicitation for the state of Maine, however. Appeal File, Exhibit 68. In its proposal, Travel Centre, which at the time operated out of an office in Danvers, Massachusetts, proposed to open an ----------- FOOTNOTE BEGINS --------- [foot #] 14 GSA pointed out, however, that the quarterly report received from Dube in August contained quarterly totals. It was not possible to determine from these reports if or when DoD entities had completely stopped using GSA's contract. ----------- FOOTNOTE ENDS ----------- 23 office in Portsmouth, New Hampshire should it receive the contract. Travel Centre's president stated in his deposition that he had competed for Government travel management center contracts in the past but that this was the first time he had received an award. He also testified that he did not "give much thought to it," but that in his mind this procurement, even though identified as an "IDIQ" procurement, was no different than the prior solicitations for requirements contracts that he had competed under. Thus, he assumed he would receive a requirements contract. Appeal File, Exhibit 66 at 54-55. Travel Centre's initial proposal also improperly conditioned its offer upon the award of all three states under the contract. The contracting officer, concerned about receiving protests if an award was made to Travel Centre, reopened discussions and solicited new best and final offers (BAFOs) on October 10, 1995. Travel Centre submitted a second BAFO that same day, removing the restriction. Appeal File, Exhibits 4, 5, 8. Contract number GS-11F-96-EPD-0092 was awarded to Travel Centre on October 25, 1995, for the provision of travel management services in the states of Maine and New Hampshire. The contract for Vermont was awarded to another travel agency. Travel Centre's contract took effect as of December 1, 1995. Appeal File, Exhibit 4. During December 1995, there was a partial shutdown of the Federal Government. In addition, during the months of December 1995 and January 1996, the Northeast experienced unusually severe winter weather. Both of these factors contributed to a reduced level of travel during that time period, with concomitant reductions in income generated under the contract. Appeal File, Exhibit 13. Soon after receiving the contract, Travel Centre complained to the contracting officer that the level of business generated under the contract was insufficient for it to operate profitably. Appeal File, Exhibit 9. On several occasions, and as early as January 1996, the contracting officer offered a no-cost termination for convenience. She was not amenable to the contractor's proposal to close the New Hampshire office and perform the contract out of its Danvers, Massachusetts office, however. Appeal File, Exhibits 11, 27. Travel Centre rejected the no-cost termination for convenience offer and persisted in demanding reformation of its contract to permit it to operate out of Danvers and to receive compensation for the reduced volume of sales. Appeal File, Exhibits 10, 16, 23, 30. In describing the agency's post-award administration of the Travel Centre contract and its efforts to resolve the problems that ensued, the contract specialist stated the following: 24 In January 1996, I spoke with Fred Morahan of Travel Centre . . . concerning the non- participation of certain DoD entities in his contract. I pointed out the non-mandatory user clause and the fact that Section H of the solicitation clearly stated that the agencies had not committed to utilizing the contract. Further, that he had submitted an offer to an RFP awarded on an item-by-item basis; if he only won Item 2, State of New Hampshire, he would [still] have [had] to have opened a facility in [that] geographic location. After a discussion with legal counsel, I contacted Mr. Morahan and offered, that due to the low volume of usage of his contract, and the fact that GSA [was] still fighting two GAO protests, to terminate his contract for convenience at no cost to either party. Mr. Morahan refused. . . . GSA subsequently offered to terminate at no cost several times throughout the months from January 1996 through June 1996. . . . . As the senior contract specialist responsible for sixty-five TMC [Travel Management Center] contracts for almost ten years, I had never terminated one contract for default. My main concern was always to work to resolve performance issues before taking any measures to terminate a contract for default. It was and is my practice to work with both my customers and contractors with the utmost of integrity. I find it difficult to be accused of bad faith in this matter. GSA -- [the employees assigned to this procurement] -- worked in good faith: 1) we took corrective action to reopen discussions following our oversight not to point out Travel Centre's deficiency in its proposal; 2) we worked hard to defend our proper award against two GAO [General Accounting Office] protests; 3) we outlined to Travel Centre that [it] must perform all the terms and conditions of [its] contract; and 4) we offered as a measure of resolution to terminate [the] contract at no cost in the hopes of not having to terminate [the] contract for default and also so that [the contractor] would not incur any further 25 losses. While I firmly believe that Mr. Morahan is also a man of integrity, I also believe that he entered into a Government contract without knowing what all the terms and conditions meant. I see no winners in this situation. However, as an agent of the Government, I had to perform in the Government's best interests and uphold the terms and conditions of this IDIQ contract. Appeal File, Exhibit 71 at 4. In April 1996, Travel Centre closed its New Hampshire office. On June 21, 1996, the contracting officer issued a decision terminating the contract for default. Travel Centre appealed to the Board. Its appeal of the termination for default action was docketed as GSBCA 13784. Subsequently, the contracting officer issued decisions (1) demanding that Travel Centre pay rebates owed under the contract and (2) rejecting Travel Centre's certified claim for breach of contract damages. These decisions were appealed as well and docketed as GSBCA 14056 and 14057, respectively. After the institution of discovery in the appeals, GSA, recognizing that the estimates in Section H of the solicitation could have been prepared more diligently, and that an effort could have been made to inquire into the status of the DoD entities in Maine after the agency received the reports from Dube Travel, agreed that the situation presented extenuating circumstances that contributed to Travel Centre's abandonment of the contract. Accordingly, GSA converted the termination for default to one for the convenience of the Government and rescinded the contracting officer decision demanding payment of unpaid rebates. Thereafter, GSBCA 13784 and 14056 were dismissed. At the time Travel Centre decided to compete for the award of the subject contract, it was operating a commercial travel agency with an office in Danvers, Massachusetts. Appeal File, Exhibit 4. While operating out of the Danvers facility, Travel Centre reported net losses (negative profit) on its corporate income tax returns filed with the Internal Revenue Service for tax years 1989 through 1995. Respondent's Record Submission, Exhibit G. Beginning in tax year 1992, through tax year 1995, Travel Centre's financial statements and tax returns reflected steadily declining gross sales, from a high of $2,400,000 in 1992 to only $500,000 in total sales for 1995. Respondent's Record Submission, Exhibit I. After receiving the subject contract award, Travel Centre terminated most of its commercial business to concentrate on obtaining Government business under the GSA contract. Respondent's Record Submission, Exhibits D, I. 26 Travel Centre received a total of $555,320.26 in total ticket sales for the period from December 1, 1995 through June 25, 1996. Appeal File, Exhibits 13, 39; Respondent's Record Submission, Exhibit I at 19. Discussion As explained more fully below, the underlying record, upon detailed examination in conjunction with an examination of the appropriate measure of damages, simply does not adequately support the Board's earlier conclusion that the Government's failure to update its estimates to disclose the award of a separate contract for most or all of the DoD business in the state of Maine was characterized by or tantamount to bad faith, nor does the evidence support a finding that the agency's post- award conduct was so motivated. There is no proof that GSA had any deliberate intent to harm Travel Centre or the other offerors by nondisclosure of information available to it in the pre-award process, or that it intended to harm Travel Centre by converting the termination for default to one for the convenience of the Government. In the absence of bad faith, what remains is the conclusion that GSA was, at most, negligent with respect to updating estimates provided in the solicitation in light of subsequent information arguably available to it. To fashion a breach remedy for negligence the Board must find that the Government awarded a requirements contract to Travel Centre. Despite the presiding judge's heavy emphasis on language in the solicitation stating that the contractor or contractors would be "a preferred source," when that document is examined as a whole, with the reference to "preferred source" status viewed in context, it is clear that this language does not connote the exclusivity required to create a requirements contract. Given the IDIQ-type contract that was awarded, then, the consequence of any negligence in estimating and updating possible sales under the contract is immaterial. GSA's contract obligations were fully performed at the time of termination and damages in the form of lost income or anticipatory profits are, as a matter of law, not recoverable. In light of this, I conclude that the entitlement decision's nullification of GSA's action in terminating Travel Centre's contract for the convenience of the Government was in error. Appellant's claim for breach should have been denied. The Nature of the Contract The Government's obligation or duty to update estimates or information pertinent to the amount of business that may be anticipated under an indefinite-delivery contract vehicle depends on the nature of the contract actually entered into between the parties. Subpart 16.5 of the Federal Acquisition Regulation sets forth guidelines concerning the generic category of indefinite- delivery contracts, which includes both indefinite-quantity 27 contracts and requirements contracts. The distinguishing characteristic of an indefinite-delivery contract is that there is no guarantee as to the specific amount of orders or purchases that will be generated under the contract. Medart v. Austin, 967 F.2d 579 (Fed Cir. 1992). This is so for both types of indefinite-delivery contracts for which the Government customarily provides estimates to prospective bidders in the formation process. The Armed Services Board has provided an apt explanation of the differences between the two types of contracts: In a typical requirements contract the Government undertakes to procure from the contractor either all or a specifically- defined portion of its requirements for certain supplies or services that will develop during the contract period. The exact requirements are usually not known but the contractor has the right to receive whatever business was generated in the specified areas. Estimates of the expected amount of services or supplies to be required are furnished to guide the bidders in establishing their unit prices for the required services or supplies. Since the contractor assumes only the risk of fluctuating objective requirements, relief has been granted in cases of negligently- prepared Government estimates because they constituted misrepresentations on which the contractor relied to its detriment. Under an indefinite quantity option contract the contractor is guaranteed orders for the basic or minimum quantity. There is no promise or legal obligation on the part of the Government to satisfy its requirements for this type of services or supplies from the available options, and, if it so chooses, the Government could procure additional quantities of such supplies and services from other sources. . . . Thus the exercise of options [to buy services or supplies from the contractor] is not necessarily determined by the Government's actual requirements during the contract period. . . . The holder of [such a] contract is from the outset put on notice of the risk it would assume in relying on the maximum quantity estimate for pricing purposes. 28 Radionics, Inc., ASBCA 20796, 77-1 BCA 12,448, at 60,312 (emphasis added). Thus, one of the fundamental distinctions between the two types of contracts is the allocation of risk that the Government's estimates were negligently or improperly prepared. Under a requirements contract, the only promise made by the Government to the contractor is the guarantee that all business generated will be exclusively awarded to the successful contractor. In this context, the contractor may recover when the Government does not live up to its obligation to ensure the accuracy of its estimates based on all information reasonably available to it. This is because the prospective contractor's pricing is necessarily based on the probable amount of business that will be generated. The contractor takes the risk of substantial shortfalls or overages, but not that the estimates are improperly or carelessly overstated. Under an IDIQ contract, the contractor is guaranteed a certain amount of business and the Government's only obligation is to order the minimum quantity or dollar amount so guaranteed. As a practical matter, estimates of maximum business that might be generated would appear to be provided more to apprise would-be contractors of their potential maximum liability or obligation in performing under the contract than to serve as a basis to determine how much business might be generated. The accuracy of estimates is largely immaterial because the contractor cannot reasonably presume that the Government will bestow all or any portion of its additional business on the contractor. Thus, if the contractor prices the supplies or services offered under the solicitation in such a fashion that it will lose money if it does not receive the maximum sales potentially available under the estimated quantities, it does so at its own risk. The award of lost income or profits based on the Government's breach of its duty to provide accurate estimates of expected business under an indefinite quantity contract has thus been recognized to be appropriate only in the context of requirements contracts. In these cases, the Government will be liable for losses or lost income when a contractor shows that the Government's estimates were inadequately or negligently prepared, not in good faith, or grossly or unreasonably inadequate at the time the estimate was made. Medart. In addition, under a solicitation for a requirements contract, recovery may also be had when the Government fails to update or amend estimates based on historical data to reflect more current information that becomes available prior to award. Datalect Computer Services Ltd. v. United States, 40 Fed. Cl. 28 (1997); Contract Management, Inc., ASBCA 44885, 95-2 BCA 27,886. In contrast, under an IDIQ contract, while prospective contractors may similarly look to the estimates provided by the 29 Government in formulating their offers, the Government promises nothing more than that it will purchase the guaranteed minimum. If this promise is breached, the contractor may recover; otherwise, so long as the minimum purchases are made, the Government has no liability to the contractor. This is true even if the Government did not exercise due care in the preparation of estimates. E.g., Dot Systems, Inc. v. United States, 231 Ct. Cl. 765 (1982); DynCorp, ASBCA 38862, 91-2 BCA 24,044, aff'd, 972 F.2d 1353 (Fed. Cir. 1992) (table); C.F.S. Cargo, Inc., ASBCA 40694, 91-2 BCA 23,985 (1991); Crown Laundry & Dry Cleaners, ASBCA 39982, 90-3 BCA 22,993 (1990), aff'd, 935 F.2d 281 (Fed. Cir. 1991) (table). These cases have explicitly held that negligence in the preparation of estimates in this context is immaterial so long as the Government has fulfilled its obligation to order the guaranteed minimum. Although the cases recognize the possibility that some breach remedy might be available if faulty estimates are provided in "bad faith," in no case that I have found has a tribunal awarded lost profits based on a "diversion" theory under an IDIQ-type contract. This is so because the Government was always free to buy its needs from another source -- no matter how misleading or deficient the estimates might have been, the contractor could never have had a reasonable expectation that all or even most of the Government's needs beyond the minimum would necessarily be satisfied under this contract. Presumably, the reasonable, informed contractor will assess the profitability potential of the contract, and base a business decision to compete for the award, in light of the guaranteed amount of work and not on the estimates. This fundamental aspect of an IDIQ-type contract was well- explained in Dot Systems. The facts of Dot Systems are similar in many ways to those asserted in Travel Centre's appeal. There, the contractor, which had its offices in Virginia, entered into an indefinite quantity contract with the Environmental Protection Agency (EPA) at Research Triangle Park in North Carolina to provide the agency with overflow typing services. The contract guaranteed only $500 worth of work, but estimated that the first contract period (about forty-five days) sales would be closer to $11,000-$12,000 and that total sales under the three additional one year option periods could be about $400,000. The estimates were prepared using percentages of historical data and, when doubt existed, using higher, rather than lower, estimates of needs, consistent with setting a contract maximum. The EPA employee who derived the estimates did not take into account the agency's concurrent acquisition of a new, "high-powered" word processing system. As required under the contract, Dot Systems opened an office near EPA in North Carolina. The initial contract period was performed, and the Government exercised one of the three one-year option periods. When the estimated business failed to materialize (although the guaranteed minimum was met), the 30 contractor asked for permission to perform the work at its Virginia office; this request was denied because the contracting officer did not believe the contractual turn-around time could be met from that distance. Dot Systems sued for relief based on the faulty estimates. The Court of Claims rejected the notion that the Government had any liability under this contract: The key consideration here is the allocation of risk under the contract. . . . The general rule is clear: a contractor cannot sign a contract which allocates the risk to it and then . . . come to this court, having lost its gamble, and insist that the risk be placed on the Government. 231 Ct. Cl. at 768. The Court, noting various contract terms which made it clear that the Government could satisfy its needs from other sources,[foot #] 15 observed that the contractor could not have reasonably believed it had any right to expect that the estimated quantities would in fact be ordered. It stated: The present contract is not a requirements contract; it is an indefinite quantity contract. This distinction is crucial to an understanding of the parties' legitimate expectations and their responsibilities. The contractor here cannot expect the kind of accuracy in estimation that it can in a requirements or fixed price contract. By the same token, the Government cannot be held to the negligence standard for requirements contracts, enunciated in Womack v. United States, 182 Ct. Cl. 399, 412-13, 389 F.2d 793, 801 (1968). Id. at 769. Although the underlying entitlement opinion recognizes that the contract awarded to Travel Centre was characterized by GSA as an IDIQ contract, it also, particularly on reconsideration, heavily emphasizes Travel Centre's status under this contract as "the preferred source," implying that a more stringent duty of care may be imputed to the Government under the circumstances of this contract, or that the Government may have been required to ensure that all business be placed with Travel Centre, as would ----------- FOOTNOTE BEGINS --------- [foot #] 15 GSA established this point in the travel management services procurement by repeatedly cautioning that user agencies were not required to use this contract and that no sales beyond the minimum could be guaranteed. ----------- FOOTNOTE ENDS ----------- 31 be the case under a requirements contract vehicle. Given the contrast in the remedy available under these two categories of indefinite-delivery contracts, in order to determine what, if any, remedy is appropriately available to the contractor, we must first resolve any uncertainty as to the nature of the contract vehicle we are dealing with. This determination is a question of law, to be decided based on a review of the terms of the contract document. E.g., Maintenance Engineers, Inc. v. United States, 749 F.2d 724, 726 n.3 (Fed. Cir. 1984); Ace-Federal Reporters, Inc. v. General Services Administration, GSBCA 13298, et al., 99- 1 BCA 30,139, at 149,107 (1998), appeal docketed, No. 99-1258 (Fed. Cir. Mar. 2, 1999). A review of the relevant solicitation terms leads to the conclusion that regardless of what Travel Centre's subjective interpretation of the solicitation's provisions may have been, the solicitation cannot reasonably be construed as a requirements contract. On the first page of the notice of solicitation provided to prospective offerors, the Government unequivocally announced -- twice -- that this solicitation would lead to the award of an indefinite-delivery, indefinite-quantity contract and further cautioned that this type of contract is "different than a requirements contract." Certainly, the Government never promised that any, let alone virtually all, of the business described in Section H would be realized over and above the minimum guaranteed amount of $100 in orders. GSA also consistently emphasized that up to three awards could be made, potentially limiting business available to the successful offeror to only one or two states, rather than to all three. Although the solicitation lacked the requisite FAR clause customarily included in IDIQ contracts, it also contained no mandatory FAR clauses applicable to requirements contracts. The solicitation could not be clearer that no particular level of sales is warranted or guaranteed beyond the minimum. The estimates may suggest that significantly more sales than the minimum could be realized but given the qualifications throughout the solicitation, the prudent contractor would have been expected to understand that all of these sales might not be achieved in this contract. The real purpose of the estimates, and the instruction to offerors to base their proposals on the estimates, more reasonably would seem to have been to provide a common denominator for evaluation and to guide contractors as to how best to structure their offers to show that they were capable of handling the potential maximum, as well as the minimum, business that might materialize under the contract. The only conceivable basis under which this contract could be construed as a requirements contract is the statement, found in section I, on page 64 of this 116 page solicitation, that the awardee of one or more of the three potential contracts that could have been awarded under this solicitation would serve as a 32 "preferred source" for the agencies in the area; this, however, is not the equivalent of promising that the awardee would be the exclusive source for these areas or even that it would be the preferred source for travel services. That this language was not intended to alter the clearly manifested intention to assign the financial risks of fluctuating business under this contract to the contractor is especially evident when the context of the "preferred source" language is considered. It is juxtaposed with immediately subsequent statements that agencies in the area to be served are not mandatory users. The overall import of this solicitation is that virtually all of the financial risk falls on the offeror. The "preferred source" language, viewed in context and in light of the contract as a whole, cannot reasonably be construed to transform what otherwise most realistically conforms to an IDIQ contract into a requirements contract. Contracts should be interpreted in a manner that gives reasonable meaning to all parts of the agreement and does not render any portion meaningless or create a conflict with other provisions of the contract. Dalton v. Cessna Aircraft Co., 98 F.3d 1298, 1305 (Fed. Cir. 1996); Fortec Constructors v. United States, 760 F.2d 1288, 1292 (Fed. Cir. 1985); Grunley Construction Co. v. General Services Administration, 98-2 BCA 29,950, at 148,179, aff'd, No. 98-1583 (Fed Cir. May 7, 1999) (table); Rincon Center Associates v. General Services Administration, 96-1 BCA 28,126, at 140,409 (1995), aff'd, 108 F.3d 1393 (1997) (table). To the extent it may be argued that this was not an enforceable contract at the inception, because the guaranteed minimum revenue was unreasonably low, the consequence of this analysis is that the resulting arrangement becomes an enforceable contract only to the extent performed at the time of termination. Coyle's Pest Control v. Cuomo, 154 F.3d 1302, 1305-06 (Fed. Cir. 1998); Federal Electric Corp. v. United States, 486 F.2d 1377 (Ct. Cl. 1973), cert. denied, 419 U.S. 874 (1974); Tennessee Soap Co. v. United States, 126 F. Supp. 439 (Ct. Cl. 1954); Ace-Federal, 99- 1 BCA at 149,109. Under either interpretation, the contractor may not recover breach damages based on negligence in the preparation or updating of estimates provided in the solicitation. The Allegation of "Bad Faith" Given that the negligence standard applicable under requirements contracts does not give rise to a breach remedy under an IDIQ-type contract, Travel Centre could only recover breach damages if GSA's conduct in this matter could properly be regarded as meeting the legal standard for a showing of bad faith. Although the entitlement decision held that this was the case, neither the facts of record nor applicable legal precedent support this conclusion. The entitlement decision, in this respect, conflicts with precedent of the Federal Circuit and this Board. 33 It is well-established that the courts and boards will not lightly depart from the presumption that Government officials perform their duties in good faith to conclude that a particular Government action was taken in bad faith. T & M Distributors, Inc. v. United States, No. 98-5106 (Fed. Cir. July 26, 1999); Kalvar Corp. v. United States, 543 F.2d 1298, 1301-02 (Ct. Cl. 1976), cert. denied, 434 U.S. 830 (1977); Trans-Atlantic Industries, Inc., GSBCA 10803, 91-1 BCA 23,412 (1990). In order to overcome this presumption, a contractor must present "well-nigh irrefragable proof" of bad faith. Kalvar Corp., 543 F.2d at 1302; Knotts v. United States, 121 F. Supp. 651 (Ct. Cl. 1954). The burden to establish that Government action or inaction amounted to bad faith is exceedingly weighty -- so much so that "contractors have rarely succeeded in demonstrating the Government's bad faith." Krygoski Construction Co. v. United States, 94 F.3d 1537, 1541 (Fed. Cir. 1996), cert. denied, 520 U.S. 1210 (1997). Most tribunals, including this Board,[foot #] 16 have recognized that such a finding requires evidence of specific animus or malice toward the contractor. That is, "proof of 'bad faith' involves more than sloppy contract administration and requires showing some specific intent to injure the contractor or 'a showing of malice or conspiracy.'" Lopez Machine Works, Inc., ASBCA 45509, 97-1 BCA 28,622, at 142,910; accord Benju Corp., ASBCA 43648, et al, 97-2 BCA 29,274, at 145,657, aff'd, 178 F.3d 1312 (Fed. Cir. 1999) (table). The record does not contain evidence of this nature. As the Armed Services Board observed in DynCorp: Bad faith conduct by Government officials is a serious matter that goes beyond negligence in preparing estimates. An allegation of this nature is not to be derived from a general allegation that the estimates were not realistic or based upon the most current information available. 91-2 BCA at 120,350, quoted in Contract Management, Inc., ASBCA 44885, 95-2 BCA 27,886, at 139,108. Even if gross negligence in the preparation of estimates might fairly be construed as "bad faith" so as to justify a finding of breach, there is no evidence of record that supports a conclusion that "gross" negligence occurred in the context of this IDIQ-type contract. The record does not establish that GSA had knowledge of the extent and nature of the MTMC contract involving the National Guard and other Army units in Maine. The monthly narratives supplied by the incumbent contractor were sketchy at best. While a duty would exist to supply accurate and ----------- FOOTNOTE BEGINS --------- [foot #] 16 See Trans-Atlantic Industries, Inc., GSBCA ___ __________________________________ 10803, 91-1 BCA 23,412, at 117,458 (1990). ----------- FOOTNOTE ENDS ----------- 34 current estimates in connection with a requirements contract, no such duty is attendant here. Certainly, there is no showing that any GSA employees involved in this procurement displayed the requisite specific malice or animus toward appellant or had any intent to cause it harm.[foot #] 17 Although GSA's failure to pursue further information concerning the nature and effect of the competing MTMC award may have been an unfortunate oversight, it is not the type of conduct that a tribunal may permissibly hold to constitute bad faith. The requisite specific intent to injure the contractor is noticeably absent from the actual facts of record. GSA has stipulated that its failure to update the estimates was negligent. The entitlement decision glossed over the specific facts and stated an ultimate finding that GSA withheld this information from prospective contractors and then tried to avoid its obligations by improperly invoking the termination for convenience clause of the contract. 98-1 BCA at 146,431. A careful review of the record does not support this finding, which is erroneous not only as a matter of fact, but also as a matter of law. There is no evidence that the individual who received notice that DoD had awarded a separate contract that would appear to cover DoD's Maine installations had any deliberate desire to deceive the prospective offerors competing for an award of this contract. Given that GSA intended to award an IDIQ contract, the importance of updating the estimates with information received after issuance of the solicitation would not necessarily have been evident to contracting personnel since the contractor has no guarantee that the business will be forthcoming in any event. For similar reasons, the Board's conclusion that GSA's decision to convert the termination for default to one for the convenience of the Government was invalid under the rationale of Torncello v. United States, 681 F.2d 756 (Ct. Cl. 1982), was unfounded. As the Court explained in Salsbury Industries v. United States, 905 F.2d 1518, 1521 (Fed. Cir. 1990), cert. denied, 498 U.S. 1024 (1991): Torncello . . . stands for the unremarkable proposition that when the government contracts with a party knowing full well that it will not honor the contract, it cannot avoid a breach by ----------- FOOTNOTE BEGINS --------- [foot #] 17 This is admittedly a difficult showing to make. It has been recognized that even where the evidence shows that a contract official clearly does not like the contractor, and is "difficult, distrustful, and irascible," this can not, absent a showing of specific unreasonable acts, establish bad faith motivation on the part of a Government procurement official. See ___ Inslaw, Inc. v. United States, 40 Fed. Cl. 843, 859 (1998). _____________________________ ----------- FOOTNOTE ENDS ----------- 35 adverting to the convenience termination clause. In that case, the government entered into an exclusive requirements contract knowing that it could get the same services much cheaper from another outfit. When the contractor complained that the government was satisfying its requirements from the cheaper source and ordering nothing from it, in breach of the contract, the government said its actions amounted to a constructive termination for convenience. The court, not surprisingly, held that the government could not avoid the consequences of ignoring its promises to that contractor by hiding behind the convenience termination clause. If it could agree to buy services with no intention of doing so, the contract would fail for want of consideration. So the court enforced it as written. Torncello thus held that the Government is not free to resort to the termination for convenience article to avoid its obligations under an exclusive requirements contract where it knew prior to awarding the contract that certain services would not be ordered because of the cost. Torncello is not on point here -- this was not a requirements contract and the Government cannot be said to have had no intention to fulfill its obligation to produce the guaranteed minimum in revenues; in fact, it exceeded this obligation by a large measure. In the absence of a preexisting intention not to fulfill the terms of the contract, which did not occur here, the rationale of Torncello cannot apply to justify overturning the Government's exercise of its discretion to convert the default termination to one for the convenience of the Government. Moreover, GSA's omission to update its estimates is not the sole cause of appellant's predicament. GSA had no reason to predict that an offeror would fail to grasp its repeated, unambiguous statements that the business of the agencies listed in Section H was not guaranteed. This is particularly so given that the agency took considerable pains to alert prospective offerors to changes in the contracting format with emphatic statements to this effect in a cover notice. As a result of the legislation under which GSA ceased to be a mandatory source of travel management services for civilian agencies, the contract vehicle employed here of necessity differed significantly from prior contracts for travel management centers and GSA repeatedly cautioned offerors that this was the case. There were no longer any mandatory users of the travel management centers. Appellant's president simply did not realize that there was a significant difference between the proposed contract type and the prior contracts. Any possible belief on the part of Travel 36 Centre that a preferred source is the same as the exclusive source under a requirements contract was not reasonable under the circumstances and does not serve to impose breach of contract liability on the Government. Both parties to a contract are presumed to possess some degree of business acumen, see Firestone Tire & Rubber Co. v. United States, 444 F.2d 547, 551 (Ct. Cl. 1971), and contractors, no matter their size, experience, or location, are expected to understand the complexities and consequences of their undertakings. Tony Downs Foods Co. v. United States, 530 F.2d 367, 374 (Ct. Cl. 1976); International Verbatim Reporters v. United States, 9 Cl. Ct. 710, 720 (1986) (contractor failed to understand that Government was not obligated to order certain services); Karpak Data & Design, IBCA 2946, et al., 93-1 BCA 25,360, at 126,321 (1992). Travel Centre could have had no reasonable expectation that all of the agencies listed in Section H would choose to use its services, and the difficulties it experienced when only a portion of the potential business materialized were at least in part attributable to its own unilateral mistake in business judgment. This said, I cannot see that the Board's interlocutory finding that GSA improperly converted the termination for default to one for the convenience of the Government can be sustained. Far from resorting to the termination for convenience clause to avoid its obligations to the contractor, the Government, to its credit, exercised its discretion to convert the termination for default to one for convenience presumably in recognition of inadequacies in the estimation process. With the benefit of hindsight, Travel Centre might well have fared substantially better had it pursued this alternative. In essence, GSA threw a life preserver to Travel Centre -- Travel Centre pushed it away; unfortunately, it is now apparent that the Board, in the entitlement decision, made matters worse by deflating the preserver. The Majority's Award The majority would award $40,046.51[foot #] 18 in net commissions on the DoD business that was realized under the MTMC contract awarded to Carlson, reasoning that this amount represents what Travel Centre "would have earned if it had been the preferred provider for the DOD entities, as provided in the contract." Aside from the fact that this proposed resolution of ----------- FOOTNOTE BEGINS --------- [foot #] 18 The majority also awards the amount of $2500 in accounting fees paid for the preparation of a termination claim. This type of expense would properly be included in the recovery under a convenience-termination settlement but should not be awarded as breach damages. In a breach proceeding, these are litigation support expenses, recoverable, if at all, under an Equal Access to Justice Act claim. ----------- FOOTNOTE ENDS ----------- 37 Travel Centre's breach claim ignores the concerns that were expressed in footnote four of the entitlement opinion, it also overlooks the tenuous nature of an award of lost income breach damages in the context of an IDIQ-type contract. The only basis on which such an award could be justified would be if Travel Centre's contract were found to be a requirements contract, a conclusion which is untenable in light of the terms of the solicitation and resulting contract. There is no basis to infer that appellant would, or probably would, have received the Defense Department business on which the majority premises its award of "lost income" or anticipatory profits. On the contrary, the record clearly establishes that Travel Centre could not have garnered this business, given the fact that DoD chose to award its own contract, which it had every right to do. The presumption that the loss of this business should serve as the basis for an award of damages bears no logical nexus to any breach that may have been stated to have occurred in the entitlement decision.[foot #] 19 That decision did ----------- FOOTNOTE BEGINS --------- [foot #] 19 In retrospect, the entitlement decision is less than clear as to what events and conduct on the part of GSA constituted the breach, contributing to the difficulty of fashioning an appropriate breach remedy. The decision states: Travel Centre contends that GSA breached the contract for travel services because GSA knew or should have known at the time of award that the estimates provided by GSA . . . were vastly overstated. We agree. Travel Centre, 98-1 BCA 29,536, at 146,429. In the same vein, _____________ the decision further states: As discussed below, we think that GSA did breach the contract -- GSA's actions in connection with the award of the contract demonstrated bad faith. Id. at 146,430. Later in the discussion, the decision notes ___ that: By inducing Travel Centre to base its proposal on quantities that GSA knew or should have known were overstated, GSA breached its duty to deal with Travel Centre fairly and in good faith. Id. at 146,431. These statements suggest that the breach may ___ have occurred prior to actual award and as a result of the award itself. If this is the breach, however, the Board lacks jurisdiction to remedy it. Such a suit properly belongs in the United States Court of Federal Claims. (continued...) ----------- FOOTNOTE ENDS ----------- 38 not find that GSA breached a requirements contract by impermissibly allowing DoD to divert its travel business to another contractor. Notwithstanding the recharacterization of the breach as stemming from GSA's failure to make good on its "promise" that Travel Centre would be a preferred provider of these services, it is not the fact of the competing award that constitutes the breach here. There was never any guarantee that DoD's or any other federal agency's business would go to Travel Centre. In fact, even under prior mandatory contracts, DoD was a non-mandatory participant. The contract awarded by DoD to another travel agency was always a possibility in the context of either the prior contracts or this IDIQ contract. There was always the chance that the business would not materialize or would not be given to Travel Centre, and this risk was inherent in the nature of the contract vehicle. In any event, the breach found in the underlying entitlement opinion was not clearly premised on the fact that this business was wrongfully diverted from Travel Centre, but rather on the finding that GSA employees knew or should have realized that this business was unavailable and failed to act on this information such that prospective offerors would be informed of the ----------- FOOTNOTE BEGINS --------- [foot #] 19 (...continued) At the same time, however, the decision states: Given the current state of the law, . . . we must determine whether GSA's termination for convenience of Travel Centre's contract as a result of a severely deficient estimate was in bad faith or constituted an abuse of discretion. Id. at 146,430. The implication of this statement appears to be ___ that the bad faith underlying the alleged breach was in the actual effort to terminate the contract for convenience. This same notion, that the breach actually occurred in the attempted termination for convenience, is repeated in the Board's decision denying GSA's request for reconsideration. The Board observed that in its earlier decision: the Board held that GSA breached Travel Centre's contract to provide travel services when it improperly terminated the contract for the convenience of the Government. Travel Centre, 98-1 BCA 29,541, at 146,442. To the extent the _____________ breach is a result of GSA's "bad faith" efforts to terminate the contract, I have already addressed the deficiencies inherent in this analysis. ----------- FOOTNOTE ENDS ----------- 39 diminished pool of available business. This prevented the offerors from making appropriate decisions about whether to submit an offer and how to price such an offer. To construe Travel Centre's "preferred source" status as anything other than, at most, a recognition that a convenient vehicle would be in place for the agencies to use, or perhaps even a representation that GSA would not award a competing contract, impermissibly converts a contract that is clearly intended to be an IDIQ-type contract to a requirements contract. Although this is precisely what the majority in effect does, nothing in the record or in the language of the contract warrants this result. Nor is this a foreseeable consequence of the complained of conduct. There is not, nor could there be, "clear and direct proof" that, but for the Government's breach, Travel Centre would have realized this income under this contract. See John Reiner & Co. v. United States, 325 F.2d 438 (Ct. Cl. 1963), cert. denied, 377 U.S. 931 (1964). The loss of profits or income from these orders is simply not the result of GSA's breach. The award of such damages effectively constitutes a windfall to Travel Centre, which did not provide the services and was not contractually entitled to the business. Awarding these profits is not an appropriate means of restoring Travel Centre to the position it would have been in but for the breach. The majority's suggestion that the Board should award the "lost income" from the DoD orders to appellant is tantamount to proposing a grant of punitive damages -- an action this tribunal has no authority to take. _________________________________ CATHERINE B. HYATT Board Judge