Court of Federal Claims Recognizes Additional Potential Recovery Opportunities under Energy Savings Performance Contracts

Earlier this year, we highlighted a notable Court of Federal Claims (CFC) decision recognizing that an energy savings performance contract (ESPC) contractor may be able to recover proposal preparation costs under the CFC’s bid protest jurisdiction. Now, in Siemens Government Technologies, Inc. v. United States, another CFC decision has reaches a similar conclusion and goes even further — also highlighting the potential to recover under the Court’s Contract Disputes Act (CDA) jurisdiction.  

In this case, Siemens contracted with the Department of Energy (DOE) under an indefinite delivery, indefinite quantity (IDIQ) ESPC. The ESPC included a clause providing that the government was not responsible for proposal preparation costs unless the government awarded a task order or an authorized contracting officer specifically approved payment of proposal preparation costs.

In 2015, the U.S. Army Corp of Engineers (USACE) announced an ESPC project at Spangdahlem Air Force Base in Germany. Siemens pursued the project under its DOE ESPC and, over the course of three years, spent approximately $3 million in proposal preparation costs. USACE allegedly directed Siemens to prepare multiple conflicting energy audits, refused to provide relevant energy data, and refused to communicate with German officials about a treaty (ABG-75) that governed American military construction projects in Germany. Then, notwithstanding Siemens’ diligent efforts, USACE declined to award Siemens a task order because German officials refused to waive ABG-75 restrictions.

Siemens submitted certified CDA claims to DOE and USACE to recover its proposal preparation costs, and Siemens subsequently filed suit in the CFC after its claims were denied. Siemens pleaded three counts: (1) breach of contract under the CDA; (2) breach of an implied contract under the CFC’s bid protest jurisdiction; and (3) breach of FAR provisions requiring fair consideration of a bidder’s proposal (under the CFC’s bid protest jurisdiction). The government moved to dismiss all three counts.

The government first argued that the Federal Acquisition Streamlining Act (FASA) barred Counts 2 and 3 because the CFC lacks jurisdiction over protests in connection with the issuance or proposed issuance of a task order. The CFC rejected this argument, stating that not all protests that involve a task order are barred by FASA; rather, “Siemens would need to challenge the task order’s language or defendant’s decision not to award a task order” to fall under the FASA bar. The Court also noted that its prior Siemens decision (discussed here) was persuasive. Thus, FASA did not deprive the Court of jurisdiction.

Second, the government argued that Siemens’ Count 1 failed to state a claim because Siemens’ underlying ESPC vested the government with unilateral discretion regarding whether to pay proposal preparation costs. The Court rejected this argument, noting that even when a contractual provision vests the government with “essentially unfettered discretion” the government nevertheless cannot exercise that discretion in a manner that results in bad faith or arbitrary and capricious conduct. Here, the Court held that Siemens asserted a plausible claim that the contracting officer abused their discretion.

Finally, the government sought dismissal of Siemens’ argument that the government failed to fairly consider Siemens’ proposal, thereby breaching the implied duty to consider bids fairly and honestly (Count 3). The government argued that there could be no “implied” contract because Siemens’ express ESPC already addressed the topic of proposal preparation costs. However, the Court also rejected this argument. While acknowledging the general principle that an implied-in-fact contract cannot exist if an express contract already covers the same subject matter, the Court concluded that the ESPC only addressed the contracting officer’s authority to award bid preparation costs—it did not eliminate the government’s inherent duty to treat bids fairly and honestly.

Accordingly, the Court denied the government’s motion to dismiss, permitting the case to move beyond the pleadings stage into discovery.

Key Takeaways

This decision highlights the importance of pursuing alternative arguments when seeking a recovery opportunity.

1. As in the Siemens decision from earlier this year, this new decision highlights that the CFC’s bid protest jurisdiction may provide an avenue to recover proposal preparation costs under an ESPC, notwithstanding the CFC’s typically draconian FASA bar.
2. The CFC’s CDA jurisdiction may also provide a recovery opportunity. Even where a contract purportedly grants the government broad discretion, that discretion is not unlimited and may be overcome where the government acts in bad faith or abuses its discretion.