Free Motion to Dismiss - Rule 12(b)(1) - District Court of Federal Claims - federal

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No. 07-211C (Judge Hodges) IN THE UNITED STATES COURT OF FEDERAL CLAIMS ______________________________________________________________________________ AMERICAN RED BALL INTERNATIONAL, INC., et al., Plaintiffs v. THE UNITED STATES, Defendant. ______________________________________________________________________________ DEFENDANT'S MOTION TO DISMISS AND APPENDIX ______________________________________________________________________________ PETER D. KEISLER Assistant Attorney General JEANNE E. DAVIDSON Director TODD M. HUGHES Deputy Director OF COUNSEL: MAJ PATRICK L. GARY Litigation Attorney U.S. Army Litigation Division

DEVIN A. WOLAK Trial Attorney Commercial Litigation Branch Civil Division Department of Justice 1100 L St., N.W. Attn: Classification Unit 8th Floor Washington, D.C. 20530 Tel. (202) 616-0170 Fax. (202) 514-8624 Attorneys for Defendant

July 13, 2007

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TABLE OF CONTENTS TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii ISSUES PRESENTED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 STATEMENT OF THE CASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 I. II. Nature Of The Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Statement Of Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 I. The Plaintiffs Do Not Seek Money Damages Presently Due And Owing, And Therefore The Court Lacks Jurisdiction Over The Plaintiffs' Complaint . . . . . . . . . . . . . . . . . . . . . 5 The 1993 Exception Agreement Is Not A Contract, And The Court Should Dismiss For Failure To State A Claim Upon Which Relief Can Be Granted . . . . . . . . . . . . . . . . . . . . 7 A. B. The 1993 Exception Agreement Is Not A Contract . . . . . . . . . . . . . . . . . . 7 The Government Properly Invoked The Termination Clause In The 1993 Exception Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

II.

III.

The 1993 Exception Agreement Is Not A CDA Contract And Therefore Plaintiffs' Citation To The CDA As A Basis For Jurisdiction Is Improper; However, To The Extent The 1993 Exception Agreement Is A CDA Contract, The Court Lacks Jurisdiction Over The Plaintiffs' Claim Because They Have Not Presented It To The Contracting Officer 10

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

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TABLE OF AUTHORITIES CASES Alder Terrace, Inc. v. United States, 161 F.3d 1372 (Fed. Cir. 1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Bell Atlantic Corp. v. Twombly, --- U.S. ---, 127 S. Ct. 1955 (May 21, 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Coastal Corp. v. United States, 713 F.2d 728 (Fed. Cir. 1983) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Conley v. Gibson, 355 U.S. 41 (1957) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-8 Esch v. United States, 49 Fed. Cl. 631 (2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Gates v. United States, 33 Fed. Cl. 9 (1995) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Hamlet v. United States, 873 F.2d 1414 (Fed. Cir. 1989) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Massachusetts Bay Transp. Auth. v. United States, 21 Cl. Ct. 252 (1990) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 McNutt v. General Motors Acceptance Corp., 298 U.S. 178 (1936) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Modern Sys.Technology Corp. v. United States, 24 Cl. Ct. 360 (1991) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 9 Moyer v.United States, 190 F.3d 1314 (Fed. Cir. 1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Nat'l Air Traffic Controllers Ass'n v. United States, 160 F.3d 714 (Fed. Cir. 1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Nevin v. United States, 43 Fed. Cl. 151 (1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Pennsylvania Dep't of Public Welfare v. United States, -ii-

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48 Fed. Cl. 785 (2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Reynolds v. Army & Air Force Exch. Serv., 846 F.2d 746 (Fed. Cir. 1988) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Rider v. United States, 7 Cl. Ct. 770 (1985) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Rig Masters, Inc. v. United States, 42 Fed. Cl. 369 (1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Sanders v. United States, 252 F.3d 1329 (Fed. Cir. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Scheuer v. Rhodes, 416 U.S. 232 (1974) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Sharman Co. v. United States, 24 Cl. Ct. 763 (1991) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Trauma Serv. Group, Ltd. V. United States, 33 Fed. Cl. 426 (1995) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 United Pac. Ins. Co. v. United States, 464 F.3d 1325 (Fed. Cir. 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 United States v. King, 395 U.S. 1 (1969) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 United States v. Mitchell, 445 U.S. 535 (1980) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 United States v. Mitchell, 463 U.S. 206 (1983) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 United States v. Sherwood, 312 U.S. 584 (1941) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 United States v. Testan, 424 U.S. 392 (1976) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Vanalco, Inc. v. United States, 48 Fed. Cl. 68 (2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

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Woll v. United States, 45 Fed. Cl. 475, 478 (1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Worthington v. United States, 168 F.3d 24 (Fed. Cir. 1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 YRT Servs. Corp v. United States, 28 Fed. Cl. 366 (1993) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

STATUTES AND RULES 28 U.S.C. § 1491 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 41 U.S.C. § 602 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 41 U.S.C. §605 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 41 U.S.C. § 609 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 RCFC 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS AMERICAN RED BALL INTERNATIONAL, INC. et al., Plaintiffs, v. THE UNITED STATES, Defendant. ) ) ) ) ) ) ) ) ) )

No. 07-211C (Judge Hodges)

DEFENDANT'S MOTION TO DISMISS AND APPENDIX Pursuant to the Rule of the Court of Federal Claims ("RCFC") 12(b)(1) and 12(b)(6), the United States respectfully requests that the Court dismiss the plaintiff's complaint for lack of subject matter jurisdiction, or, in the alternative, for failure to state a claim. ISSUES PRESENTED (1) Whether the Court lacks jurisdiction to entertain the plaintiffs' claim because the

plaintiffs' claim does not seek money damages presently due and owing. (2) Whether the plaintiffs have failed to state a claim upon which relief may be

granted because the alleged contract is not an enforceable contract. (3) Whether the plaintiffs have failed to state a claim upon which relief may be

granted because the Government properly invoked the termination clause in the 1993 exception agreement. (4) Whether the plaintiffs have failed to state a claim upon which relief may be

granted because their allegation of the Contract Disputes Act as a jurisdictional basis is incorrect because the Contract Disputes Act does not apply to the 1993 exception agreement.

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(5)

Whether, assuming the Contract Disputes Act does apply to this action, the Court

lacks jurisdiction because the plaintiffs have not presented their claim to a contracting officer for a final decision. STATEMENT OF THE CASE I. Nature Of The Case The plaintiffs allege the Government's anticipatory breach of a December 30, 1993 agreement (the "1993 exception agreement") that granted the plaintiffs a special exception to the Military Traffic Management Command's ("MTMC")1 Common Financial Ownership and Administrative Control ("CFAC") regulation, which prohibits commonly owned companies from competing as separate Transportation Service Providers ("TSP") in the Department of Defense International Through Government Bill Of Lading ("ITGBL") Personal Property Program. The plaintiffs gave no consideration for this special exception, and the Government has not received anything for granting it; the parties did not agree upon a specific duration for the special exception, except to expressly afford the Government a unilateral termination right; and the plaintiffs do not and cannot seek damages for the alleged breach of the 1993 exception agreement. Nevertheless, the plaintiffs now seek a declaration from this Court essentially stating that the 1993 exception agreement granted them a perpetual exemption from the CFAC regulation, and an injunction compelling the SDDC to refrain from exercising its termination rights.

The MTMC no longer exists; its successor is the Surface Deployment and Distribution Command ("SDDC"); when using either abbreviation in this motion, we are referring to the same legal entity. -2-

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II.

Statement Of Facts Each of the plaintiffs in this case, American Red Ball International, Inc. ("Red Ball"),

American Vanpac Carriers, Inc. ("Vanpac"), and Echo Forwarders, Inc. ("Echo"), are moving companies which have been, for many years, independently participating as TSPs in the Department of Defense ("DOD") Personal Property Program ("PPP"). The PPP, which was formerly administered by the MTMC and is now administered by the SDDC, facilitates the shipment of the household goods, unaccompanied baggage, privately owned vehicles and mobile homes of United States military service members (and their families) when they receive orders to change duty stations. See A 1-31 (SDDC Pamphlet 55-4). To qualify as a TSP, moving companies must meet a number of criteria, including but not limited to establishing a PowerTrack account with US Bank for the electronic payment, and electronically registering in the Central Contractor Registration database. A 4-15. TSPs declaring Common Financial and Administrative Control ("CFAC") (meaning that another company has "the power, actual as well as legal, to influence the management, direction or functioning of a business organization"), are not permitted to compete in the same rate channel2 in the same code of service3 in the International Program. A 13-14, A 28. The plaintiffs were separate legal entities until 1993, when the owner of Vanpac and Echo, Mr. William Bottoms, fell ill and was forced to sell his businesses. Cmplt. ¶ 13. Red Ball was the only company interested in purchasing Vanpac and Echo, and agreed to do so upon the

A "rate channel" is the PPP's designation of origin-to-destination moving routes, such as State A to State B, or Country A to Country B, etc. A "code of service" is the PPP's term for the method of delivery, such as van, boat, airplane, etc. -33

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condition that the sale would not cause the CFAC regulation to prohibit Vanpac and Echo from filing their moving rates in the same rate channels and codes of service as Red Ball. See Cmplt. ¶ 14. The plaintiffs therefore negotiated an exception to the CFAC prohibition based upon the fact that, despite the corporate relationship, all three companies essentially operated independently and could effectively compete against each other with their rate submissions. Cmplt. ¶ 15; Agreement at ¶ 5(a)-(h). The 1993 exception agreement also contained a termination clause, which states: Should matters come to the attention of MTMC which warrant a change in its position, MTMC reserves the right, upon due notice to the parties of the second part, unilaterally to terminate this agreement. Cmplt. Attach. 1 at 4 (¶ 6(b) of the 1993 exception agreement). In 2002, the SDDC began the implementation of its "Families First" program for shipment of service members' personal property. See A 32-37 (Families First Pamphlet). The Families First program is an initiative to improve the quality of life of U. S. service members and their families. A 33. Families First will significantly change the way SDDC procures and manages household good shipments. Under the current program, SDDC awards shipments essentially on a low cost basis. Under the Families First program, SDDC will award shipments based on a best-value approach, based on a TSP's performance and rates, which is determined by weighing several factors, including customer satisfaction, price and claims-handling. A 36. Performance is determined primarily from Customer Satisfaction Surveys. A 35-36. The Families First program also requires the mandatory use of an electronic system for billing, payment, and customer-satisfaction input. A 35. The SDDC anticipates Families First start-up some time in late fall 2007. -4-

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On October 26, 2006, Vanpac wrote to the SDDC asking whether it would continue to honor the 1993 exception agreement in light of the proposed Families First Business Rule continuing the prohibition on CF ACs filing rates for the same channel of service and code of service for international shipments. Pl. Cmplt. ¶ 17; Cmplt. Attach. 2. The SDDC responded on November 30, 2006, stating that it had "decided to invoke paragraph 6.b. of the 1993 agreement to terminate the agreement concurrent with Families First implementation. Thus, your exemption will expire with the start up of Families First." Id. The plaintiffs filed the present lawsuit on March 30, 2007, and now seek either a declaration of its rights under the 1993 exception agreement, an injunction compelling the defendant to refrain from terminating the 1993 exception agreement, or both. ARGUMENT I. The Plaintiffs Do Not Seek Money Damages Presently Due And Owing, And Therefore The Court Lacks Jurisdiction Over The Plaintiffs' Complaint The Tucker Act, 28 U.S.C. § 1491(a)(1), grants this Court jurisdiction to entertain monetary claims founded upon the Takings Clause of the United States Constitution, statutes, regulations, or contracts. See United States v. Mitchell, 463 U.S. 206, 215-18 (1983). It is wellsettled that the Tucker Act is a limited waiver of the United States' sovereign immunity. See United States v. Mitchell, 445 U.S. 535, 538 (1980); United States v. Testan, 424 U.S. 392, 399 (1976). Any statute creating a waiver of sovereign immunity must be strictly construed. See United States v. Sherwood, 312 U.S. 584, 590 (1941). The plaintiff bears the burden of establishing that this Court possesses jurisdiction to entertain the complaint. See McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189-90 (1936); Sanders v. United States, 252 F.3d 1329, 1333 (Fed. Cir. 2001); Alder Terrace, Inc. v. -5-

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United States, 161 F.3d 1372, 1376-77 (Fed. Cir. 1998). Upon a motion to dismiss, the Court should view the allegations of the complaint in the light most favorable to the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974); Reynolds v. Army & Air Force Exch. Serv., 846 F.2d 746, 747 (Fed. Cir. 1988); Hamlet v. United States, 873 F.2d 1414, 1416 (Fed. Cir. 1989). If necessary to resolve the jurisdictional issues, the Court may also examine relevant evidence beyond the pleadings. Moyer v.United States, 190 F.3d 1314, 1318 (Fed. Cir. 1999). Where, as here, the plaintiff asserts that such right is established by contract, the Court's jurisdiction attaches when the plaintiff alleges, among other things, that it entered into an express or implied contract with the United States, and that the contract mandates that plaintiff is entitled to recover money damages from the United States. See Worthington v. United States, 168 F.3d 24, 26 (Fed. Cir. 1999). A plaintiff seeking to invoke the Court's jurisdiction must present a claim for "actual, presently due money damages from the United States." United States v. King, 395 U.S. 1, 3 (1969). This Court lacks jurisdiction over the plaintiffs' complaint because it does not make a claim for money damages, presently due or otherwise. Rather, the plaintiffs asks the Court to find that defendant will breach the agreement and request a remand to SDDC with instructions to abide by the Agreement. See Cmplt. at 9, Claim For Relief. This is a request for a declaratory judgment or an injunction, neither of which this Court is empowered to grant. See King, 395 U.S. at 5 ("In the absence of an express grant of jurisdiction from Congress, we decline to assume that the Court of Claims has been given the authority to issue declaratory judgments."); Nat'l Air Traffic Controllers Ass'n v. United States, 160 F.3d 714, 716 (Fed. Cir. 1998) ("there is no provision giving the Court of Federal Claims jurisdiction to grant equitable relief when it is

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unrelated to a claim for monetary relief pending before the court"); Vanalco, Inc. v. United States, 48 Fed. Cl. 68, 74 (2000) (the Court of Federal Claims "does not have general equitable jurisdiction over contracts"); Rig Masters, Inc. v. United States, 42 Fed. Cl. 369, 372 (1998) ("it is well established that this court does not have jurisdiction over claims for specific performance"); Massachusetts Bay Transp. Auth. v. United States, 21 Cl. Ct. 252, 262 (1990) (this Court generally lacks authority to grant requests for declaratory judgments). Esch v. United States, 49 Fed. Cl. 631, 634 (2001) ("An enforcement claim is not a claim for money damages.") (citing Gates v. United States, 33 Fed. Cl. 9, 12 (1995) (holding in an action for specific performance that "[t]he Court of Federal Claims cannot order the United States to perform")). Accordingly, the Court should dismiss the plaintiffs' complaint for a lack of jurisdiction. II. The 1993 Exception Agreement Is Not A Contract, And The Court Should Dismiss For Failure To State A Claim Upon Which Relief Can Be Granted A. The 1993 Exception Agreement Is Not A Contract

In reviewing a motion to dismiss for failure to state a claim made pursuant to RCFC 12(b)(6), this Court "must assume all well-pled factual allegations are true and indulge in all reasonable inferences in favor of the nonmovant." United Pac. Ins. Co. v. United States, 464 F.3d 1325, 1327-28 (Fed. Cir. 2006) (citations omitted). The Court may dismiss the complaint only if the plaintiff cannot prove a set of facts that are consistent with the allegations in the compliant and would entitle the plaintiff to relief. See Bell Atlantic Corp. v. Twombly, --- U.S. --, 127 S. Ct. 1955, 1969 (May 21, 2007) (abrogating the "no set of facts" rule from Conley v. Gibson, 355 U.S. 41, 45-46 (1957), and stating, "once a claim has been stated adequately, it may be supported by showing any set of facts consistent with the allegations in the complaint.").

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Despite the plaintiffs' allegation that their action is brought pursuant to a contract with the SDDC, the instrument attached at Exhibit 1 to the complaint is not a contract. "[T]o establish a contract under the Tucker Act, a claimant must prove four elements: (1) lack of ambiguity in offer and acceptance; (2) mutuality of intent to contract; (3) sufficient conduct by a government representative having actual authority to bind the government in contract; and (4) consideration." Pennsylvania Dep't of Public Welfare v. United States, 48 Fed. Cl. 785, 787-788 (2001) (citing Nevin v. United States, 43 Fed. Cl. 151 (1999)). "In order for a contract to be formed, the parties must possess contractual intent and their agreement must be sufficiently definite to be enforced." Modern Sys.Technology Corp. v. United States, 24 Cl. Ct. 360 (1991). The 1993 exception agreement is neither definite nor binding, and no real consideration was exchanged between the parties. When the plaintiffs became corporate relations in 1993, they sought assurances from the MTMC that the purchasee companies would be permitted to continue their participation in the International Program despite the fact they were going to be wholly owned by one of their International Program competitors. Based upon the unique facts and circumstances presented by the companies' situation, the MTMC elected to grant them this special exception. No money was exchanged, and the Government received no tangible benefit. The Government simply granted the plaintiffs' an exception to a rule that would otherwise prohibit them from participating in the International Program because of the corporate structure they chose. The 1993 exception agreement is also not binding. To be binding, a contract generally must be "sufficiently definite to permit determination of breach and remedies." Modern Sys.Technology Corp., 24 Cl. Ct. at 361. Here, the 1993 special exception only allows the

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plaintiffs to file their rates when they would otherwise not be able to do so; it does not guarantee that they will be awarded any contracts to move service members and their families. Moreover, the 1993 exception agreement does not contain any provisions that address remedies for breach. In Trauma Serv. Group, Ltd. V. United States, 33 Fed. Cl. 426 (1995), aff'd, 104 F.3d 1321 (Fed. Cir. 1997), the Court held that CHAMPUS Memoranda of Understanding ("MOU") were unenforceable agreements because they did not set forth any remedy for breach, did not demonstrate definitely the Government's intent to be bound, and contained no method for determining a breach. Like the MOU in Trauma Serv. Group, the 1993 exception agreement in his case provides no remedy for breach, nor does it demonstrate the Government's intent to be bound. Finally, the paragraph 6(b) of the 1993 exception agreement, the termination provision, demonstrates that the Government did not intend to allow this special exception in perpetuity. The termination provision permits the Government to unilaterally terminate the exception upon "matters com[ing] to the attention of the [SDDC] which warrant a change in position" and "due notice" to the plaintiffs. "Whenever one of the parties can terminate without consequence, an enforceable contract does not exist." Woll v. United States, 45 Fed. Cl. 475, 478 (1999). Because the SDDC could unilaterally terminate the agreement, no contract exists and the plaintiffs complaint should be dismissed. B. The Government Properly Invoked The Termination Clause In The 1993 Exception Agreement

The plaintiffs also fail to state a claim upon which relief can be granted because they have already received all that they are due under the 1993 exception agreement. The termination provision permits the Government to unilaterally terminate the exception upon "matters -9-

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com[ing] to the attention of the [SDDC] which warrant a change in position" and "due notice" to the plaintiffs. Cmplt. Attach. 1 at ¶ 6(b). The SDDC identified the "matter" warranting its change in position as the implementation of the Families First initiative. The SDDC also provided the plaintiffs with "due notice." The 1993 exception agreement does not specify any time period that would constitute "due notice," but the Government submits that, where a plaintiff has received notice of the termination of an agreement and files a compliant for anticipatory breach four months after receiving such notice, it has received all the notice it is due under the terms of the agreement. Because the Government properly invoked the termination provision in the 1993 exception agreement, the plaintiffs' complaint should be dismissed for failure to state a claim upon which relief can be granted. III. The 1993 Exception Agreement Is Not A CDA Contract And Therefore Plaintiffs' Citation To The CDA As A Basis For Jurisdiction Is Improper; However, To The Extent The 1993 Exception Agreement Is A CDA Contract, The Court Lacks Jurisdiction Over The Plaintiffs' Claim Because They Have Not Presented It To The Contracting Officer The plaintiffs cite 41 U.S.C. § 609(a)(1) as the statute granting the Court jurisdiction over its claim. That statute states, in pertinent part, "in lieu of appealing the decision of the contracting officer under section 605 of this title to an agency board, a contractor may bring an action directly on the claim in the United States Court of Federal Claims . . . ." 41 U.S.C. § 609(a)(1). The Contract Disputes Act ("CDA") applies only to an express or implied contract for the procurement of property, services or construction. 41 U.S.C. § 602(a)(2). A procurement contract is a contract in which the Government bargains for, pays for, and receives goods and services. See Coastal Corp. v. United States, 713 F.2d 728, 730 (Fed. Cir. 1983); see also YRT Servs. Corp v. United States, 28 Fed. Cl. 366, 392 n.23 (1993) (distinguishing concession -10-

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contracts from CDA contracts). 41 U.S.C. § 602(a) limits the applicability of the Contract Disputes Act to contracts falling into the following categories: (1) the procurement of property, other than real property in being; (2) the procurement of services; (3) the procurement of construction, alteration, repair or maintenance of real property; or, (4) the disposal of personal property. 41 U.S.C. § 602(a). The contract alleged by the plaintiffs does not fall into any of these categories. If anything, the 1993 exception agreement is (to the extent it is a contract) a contract where the Government provides services to the plaintiffs, and not vice versa. The CDA does not apply to such a contract. See, e.g., Rider v. United States, 7 Cl. Ct. 770, 774-775 (1985). Assuming, arguendo, that the CDA does apply to the 1993 exception agreement, the plaintiffs have not presented their claim for a contracting officer's final decision. Their failure to do this divests this Court of jurisdiction to entertain their claim. See Sharman Co. v. United States, 24 Cl. Ct. 763, 766 (1991) ("Specifically, the Contract Disputes Act requires that the claim sued on . . . be one that was `submitted to the contracting officer for a decision.' 41 U.S.C. §605(a). Absent submission of a claim to the contracting officer for a decision, the court cannot hear the claim.").

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CONCLUSION For these reasons, we respectfully request the Court to dismiss the plaintiffs' complaint. Respectfully submitted, PETER D. KEISLER Assistant Attorney General JEANNE E. DAVIDSON Director /s/ Todd M. Hughes TODD M. HUGHES Deputy Director OF COUNSEL: MAJ PATRICK L. GARY Litigation Attorney U.S. Army Litigation Division /s/ Devin A. Wolak DEVIN A. WOLAK Trial Attorney Commercial Litigation Branch Civil Division Department of Justice 1100 L St., N.W. Attn: Classification Unit 8th Floor Washington, D.C. 20530 Tel. (202) 616-0170 Fax. (202) 514-8624 Attorneys for Defendant

July 13, 2007

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CERTIFICATE OF FILING I hereby certify that on July 13, 2007, a copy of the Defendant's Motion To Dismiss And Appendix was filed electronically. I understand that notice of this filing will be sent to all parties by operation of the Court's electronic filing system. Parties may access this filing through the Court's system.

/s/ Devin A. Wolak Devin A. Wolak

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AMERICAN RED BALL INT'L, INC., et al., v. UNITED STATES No. 07-211C APPENDIX TO MOTION TO DISMISS

DOCUMENT

PAGE NUMBER

SDDC Pamphlet 55-4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A 1 Families First Pamphlet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A 32

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How to do Business in the Department of Defense Personal Property Program
January 6, 2006

SDDC Pam 55-4
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Table of Contents 1.0 Introduction 3 2.0 Qualification Requirements 4 2.1 Mandatory ....................................................................................................................4 2.1.1 Standard Carrier Alpha Code (SCAC) 4 2.1.2 PowerTrack 4 2.1.3 Central Contractor Registration (CCR) 5 2.1.4 Electronic Transportation Acquisition Registration 5 2.1.5 Digital Identity Certificate Requirement. 6 2.1.6 Qualification Timeline 6 2.1.7 Submission Requirements for Web Forms and Faxed Documents 7 Submitted Documentation: 2.1.8 Changes in Required Administrative TSP Information 7 2.1.9 Certificate of Cargo Liability Insurance 8 2.1.10 Performance Bonds 8 2.1.11 Changes in Insurance/Bond Notification 9 2.1.12 SDDC Decisions 9 2.1.13 TSP Appeals 10 2.2 Qualification Requirements for New Entrants .......................................................11 2.2.1 Financial Data/Statements/Ratios 11 2.2.2 Certificate of Cargo Liability Insurance 13 2.2.3 Performance Bonds 13 2.2.4 Electronic Tender of Service Signature Sheet Requirement (ETOSSS) 13 2.2.5 Certificate of Responsibility 14 2.2.6 Company Experience Requirements 14 2.2.7 Federal and State Regulatory Compliance 15 2.2.8 Certificate of Independent Pricing 15 2.3 Additional Market Requirements ............................................................................15 2.4 Removal of Market Approval ...................................................................................17 4.0 Definitions 28 5.0 Recommended Publications and Hot Links 31 6.0 Contact Information Error! Bookmark not defined.

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1.0 Introduction Currently approved Transportation Service Providers (TSPs) and New Entrants, welcome. This pamphlet is intended to give you guidance on what you must do to demonstrate your qualifications to do business in the domestic and international personal property programs. The pamphlet addresses Qualification Requirements (Section I), TSP Application Submission Instructions (Section II), and also addresses Definitions (Section III). Section I addresses the mandatory requirements, qualification requirements for NEW Entrants, additional market approval. New Entrants and expanded market approval will only be considered during an open season. New entrants are classified as both new TSPs requesting initial approval and TSPs requesting re-qualification after prior approval has been revoked. All forms must be successfully submitted through PPQWEB before the TSP's request for approval will be reviewed and processed. Open seasons will be announced via our Military Surface Deployment and Distribution Command (SDDC), Alexandria, Virginia homepage (www.sddc.army.mil). This document does not apply to the Non-Temporary Storage program, the Direct Procurement Method program, or the Privately Owned Vehicle program. This document does not apply to packing Agents. All qualification documentation being submitted by or on the behalf of the President/CEO will be as if the President/CEO are verifying, agreeing to, signing and submitting all qualification documents that are required. All qualification forms, as outlined below, must be submitted via PPQWEB in accordance with the required timeframes established. A TSP's qualification file that is not maintained and/or being kept up to date/edited by or on behalf of the TSP, will be grounds for revocation of DOD approval in the Personal Property Program. The DoD Personal Property Program has four components: a. Domestic Personal Property Program ­ Interstate and Intrastate shipments within CONUS b. International Personal Property Program ­ Shipments to/from CONUS/OCONUS as well as shipments between OCONUS destinations c. Mobile Home Personal Property Program ­ Movement of mobile homes within CONUS using One-Time-Only rates d. Boat Personal Property Program ­ Movement of boats within CONUS using One-Time-Only rates TSPs wanting to participate in any of these programs must be approved by SDDC before filing rates. Qualification involves, among other things, satisfying the Tender
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of Service (TOS), International and Domestic Rate Solicitations, PowerTrack agreement and certifications, as applicable. Be aware that the cost of financial statements, performance bonds, certificates of cargo liability insurance, and other approval documentation is at a cost of the TSP and is considered as being a part of the cost of doing business with the Government. We recommend that all participants read the TOS, which is located in Appendix B of the Defense Transportation Regulation (DTR) Part IV, DOD 4500.9R. Please see Section 5.0 of this document for a link to the TOS. The TOS is the basic document that specifies the terms and conditions of participation in the program. The TOS provides details concerning qualification procedures, mutual agreements and understandings, service and performance requirements and certifications. SDDC reserves discretion to exercise judgment in deciding approval authorizing TSPs to offer transportation services in support of the program, but does not guarantee award of shipments; traffic distribution is based on the procedures outlined in the DTR Chapter 402. Currently approved TSPs have no entitlement to remain in the program. To remain in the program, currently approved TSPs must maintain all required documents and certifications in a current status in accordance with this pamphlet. Once qualified, a TSP's approval to participate in the program is valid unless the TSP fails to maintain other program requirements, e.g., those identified in the TOS, the international solicitation or domestic solicitation or this qualification pamphlet. Participation in the Department of Defense Personal Property Program: SDDC reserves the right to revoke any TSP's approval at our sole discretion. 2.0 Qualification Requirements 2.1 Mandatory 2.1.1 Standard Carrier Alpha Code (SCAC) TSPs must obtain and maintain its unique valid four-digit alpha code from the National Motor Freight Traffic Association (NMFTA), 2200 Mill Road, Alexandria, Virginia 22314, (703) 838-1831. Each TSP doing business as a motor carrier, freight forwarder or broker, must have its own SCAC. The SCAC is required on all correspondence to the government for identification purposes. NMFTA charges an annual fee to maintain SCACs. Failure to maintain a valid SCAC at all times will result in removal from the program. 2.1.2 PowerTrack All TSPs wishing to perform transportation related services for the DOD must have and maintain a trading partner agreement with US Bank and be PowerTrack certified for the electronic payment of commercial transportation services prior to applying for approval. Powertrack is the payment and transaction system for all DOD TSP's handling personal property. Failure to execute and maintain this agreement and certification will result in approval being denied for New Entrants or removal from the program for existing TSPs.
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US Bank/Power Track Help Desk can be reached at 866-561-6930 (Domestic) and 0-800-101-5396 (International). The email address is [email protected] and the subject should show "HHG". These numbers are available 24/7. Additional information on PowerTrack is available at www.usbank.com/powertrack. 2.1.3 Central Contractor Registration (CCR) All TSPs doing business with DOD must be registered in the CCR database. Consideration of TSPs for future participation in SDDC procurements of transportation and transportation services, future solicitations, awards, and payments will be based on CCR registration. TSPs register only once, but must update information annually. TSPs should register directly via the Internet at www.ccr.gov. CCR customer service is available through the CCR Customer Service Center at (888) 227-2423 or (888) 352-9333, option # 3. 2.1.4 Electronic Transportation Acquisition Registration a. Authentication General All TSP and/or TSP Representative information submitted on-line will require authentication using SDDC's Electronic Transportation Acquisition (ETA) system. TSPs seeking qualification approval, as well as currently approved TSPs editing/submitting information to maintain approval, will need an ETA account. Refer to Section 3.0 on User Management for details on registering for an ETA account. The following roles are available for selection: -- Transportation Service Provider (TSP) -- TSP Representative/Business Partner/Agent - Insurance Representative (Insurance Company) - Bond Representative (Surety Company) - Financial Representative (CPA [Certified Public Accountant]) b. Trusted Agents The Trusted Agent serves as the single point of contact for the ETA Administrator in the processing of password requests. The Trusted Agent is an individual within the transportation provider's company who has the confidence of the president and other company officers and who can easily be contacted by the ETA Administrator. The ETA Administrator will contact the appropriate Trusted Agent for access approval. Each company will designate their Trusted Agent(s) on their respective Electronic Tender of Service Signature Sheet (ETOSSS). In the Trusted Agent data field, which is located in the Key Personnel section of the ETOSSS, enter the Trusted Agent's first name, last name, telephone number and e-mail address in the appropriate data fields. The ETA Administrator will only contact the alternate Trusted Agent, if designated, when the primary cannot be reached or fails to respond.

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2.1.5 Digital Identity Certificate Requirement. The implementation date for digital certificate is currently on hold. DoD will require that all users of DoD systems use digital certificates to access those DoD systems. Commercial users (TSP, TSP's Bond Representative for the Performance Bond, Insurance Representative for the Cargo and Liability Insurance, and Financial Representative for the submission of financials) must obtain a digital certificate from one of the External Certificate Authority vendors at a cost. At a minimum you must purchase the "identity" certificate. Some of the vendors offer "encryption" certificates for use with E-mail but that is not required for use with ETA. Commercial users will not be able to access any of the DoD systems without the Digital Certificate. Be aware that each ETA user-ID may have only one unique certificate associated with it. You will be directed how to link your certificate to your ETA user-ID (i.e. TSP) on the ETA home page. SDDC recommends companies purchase and begin to use the new digital capability before it becomes mandatory. Questions referring to Electronic Transportation Acquisition (ETA) should be directed ETA to administrator by clicking on Contact ETA email address at https://eta.sddc.army.mil. The most up to date information on Digital Certificate requirements is also available at this site. The qualification process requires TSPs, their Bond Representative, Insurance Representative, and Financial Representative, to use a digital identity certificate from one of these three vendors: a. Operational Research Consultants (ORC), http://eca.orc.com/ b. Digital Signature Trust (DST), http://www.digsigtrust.com/federal/DoD.html c. Verisign, http://www.verisign.com/enterprise/government/ieca-DoD.html These three companies are the only ones currently approved to provide this capability to the DoD. A digital identity certificate is the digital equivalent of an ID card. For DoD military, civilians and authorized contractors, digital identity certificates will be located on a Common Access Card (CAC). For commercial users, it will be a file that resides on your PC. When you access a SDDC system, the system will check your PC for a digital identity certificate. If you have one, it will verify the user information and allow you to access the system(s) for which you have been approved. Using digital identity certificates provides a tighter security environment than user identifications and passwords. 2.1.6 Qualification Timeline TSPs seeking initial qualification as well as previously qualified TSPs seeking qualification in new markets must submit the required forms within the timeframe specified in the announcement during open season. Upon SDDC's review of each submission, TSPs not meeting the qualification requirements will have seven calendar days from the date of notification from SDDC to correct deficiencies during the open season period, (which may come by telephone or
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email). After the seven-day correction period has passed, the corrected documentation will not be considered and the TSP will not gain approval. However, SDDC may consider extenuating or mitigating circumstances showing that the TSP was not responsible for failing to meet the deadline. SDDC reserves the right to revoke your approval at our sole discretion. TSPs not approved may re-apply during an open enrollment. 2.1.7 Submission Requirements for Web Forms and Faxed Documents

Web Forms include data captured in PPQWEB for population of any/all TSP Qualifications forms/documents. To document compliance with the above qualification requirements, TSPs seeking approval must submit the following forms and documents electronically within the time frame specified during the open application period. The following forms must be submitted via the web: a. Electronic Tender of Service Signature Sheet (ETOSSS) submitted by the TSP b. Certificate of Cargo Liability Insurance submitted by the TSP's Insurance Representative c. Performance Bond (for Domestic Interstate and/or International) submitted by the TSP's Bond Representative d. Certificate of Independent Pricing (CIP) submitted by the TSP e. Financial Data/Statements (Audited or Reviewed Financial Data/Statements) submitted by the TSP's independent Financial Representative or CPA f. Certificate of Responsibility (COR) submitted by the TSP Faxed Submitted Documents: Electronically submitted documents must be submitted to SDDC Alexandria, VA at (703) 428-3321. Hard copy documents received via the mail and facsimiles not received at (703) 428-3321 will not be accepted. a. Proof of State Regulatory Compliance - the only operating authority acceptable to meet this requirement is State Permit or Articles of Incorporation (for Intrastate Program). Maritime Commission certificates and permits will not be accepted. b. Key Personnel Resumes or References (Only upon SDDC's request) c. Proof of Company Experience (Only upon SDDC's request) 2.1.8 Changes in Required Administrative TSP Information All DoD approved TSPs are required to notify SDDC within 45 calendar days of a change of ownership, a change of corporate name, or change of key personnel. a. Change of Ownership: When a company changes ownership, a Novation agreement must be submitted electronically to SDDC at (703) 428-3321. Approval will be based on a review of the sales agreement and evidence to show that the new TSP complies with all qualification requirements. The new asset owner (transferee) must assume all obligations of the
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transferor. In addition, the seller/transferor (i.e. former owner) guarantees the performance of the contract or bill of lading by signing the Seller/Transferor Certification. The Novation Agreement is located at 2.4. of this book. b. Change of Name: When a company changes its name, they must submit electronically a change of name notification to SDDC at (703) 428-3321. c. Change of SCAC: If your company obtains a new SCAC, the new SCAC will not be entered into the database or recognized, until all documents required to be submitted via PPQWEB under the new SCAC, and The Novation and a copy of the Sales Agreement are electronically submitted to (703) 428-3321 and are approved. d. Change of Key Personnel: When a company changes key personnel they must submit an updated ETOSSS web form to include the Trusted Agent(s). If the certifying official leaves the company or that position, new certificates of Independent Pricing and Responsibility must be certified and submitted by or on behalf of the higher ranking of the new president or Chief Executive Officer. All other administrative changes need to be provided, as they occur. Failure to update forms/certifications or have your industry partners update forms as changes occur will likely result in your DoD approval being revoked. 2.1.9 Certificate of Cargo Liability Insurance For Domestic and International programs, the minimum cargo liability insurance coverage per shipment is $ 22,500. The aggregate amount is $150,000. The Certificate of Cargo Liability Insurance form located on SDDC's website, must be submitted by the TSP's insurance representative. No other forms will be accepted. The certificates of cargo liability must be executed by an insurer with a rating of "A-" or better in the Best Key Rating Guide (Section 5.0). For Mobile Home/Boat program, the cargo liability insurance coverage minimum amount per shipment is $ 40,000. The Certificate of Cargo Liability Insurance form is located on SDDC's website and must be submitted by your insurance representative. No other form will be accepted. 2.1.10 Performance Bonds Performance Bonds are required in both the international and domestic interstate programs. The bond requirement does not apply to domestic intrastate TSPs. For the international program the bond requirement is a minimum of $100,000 or 2.5% of previous-year international DOD revenue, whichever is greater. International TSPs must have their surety company representative submit a "continuous until cancelled" bond. SDDC will review the international bond amount annually.

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For the domestic interstate program the bond requirement is a minimum of $50,000 or 2.5% of previous-year DOD domestic interstate revenue, whichever is greater. Domestic interstate TSPs currently participating in the program must have their surety company representative submit a "continuous until cancelled" bond. SDDC will review domestic bonds annually. When SDDC determines that either the international or domestic bond needs to be increased, the TSP will be notified and provided 30 days to submit a new bond via PPQWEB reflecting the updated amount. Performance bonds (Domestic and International, whichever is applicable) must be continuous with no lapse in coverage. If a lapse in coverage occurs, DOD TSP approval will be revoked. 2.1.11 Changes in Insurance/Bond Notification The Certificate of Cargo Liability /Mobile Home/Boat Insurance and the Performance Bond forms contain a statement that the insurance/surety companies will give a 30day notice of any changes, expiration, or cancellations of the policies. The insurance/surety company must submit the notices of cancellation electronically at (703) 428-3321. The 30-day notice period begins from the date the notification is actually received by SDDC. 2.1.12 SDDC Decisions SDDC's decisions are guided by what SDDC, in its sole discretion, perceives to be in the best interests of the government, in general, and the best interests of soldiers and civilian users of the DoD Personal Property Program, in particular, at that time. There are no standards for what constitutes the DoD Personal Property Program's best interests; it is what SDDC determines the Program's best interests to be. SDDC reserves the right to exercise its discretion in all decisions made regarding the DoD Personal Property Program. Thus, for example, SDDC could deny entrance or continuation in the program notwithstanding a TSP (or prospective TSP) satisfying the financial ratio test; conversely, SDDC could grant entrance or continuation in the program to a TSP (or prospective TSP) notwithstanding its inability to satisfy a financial ratio test. Because SDDC's decisions are based on circumstances particular to the TSP or potential TSP and may also be a function of the DoD Personal Property Program's best interests at a particular time, contentions of disparate treatment (i.e., some TSPs treated differently than other TSPs) will not be a valid challenge to SDDC decisions; in a way, all SDDC decisions are disparate because the decisions are based on the particular circumstances involving the TSP and SDDC's perception of the DoD Personal Property Program's best interests.

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2.1.13 TSP Appeals TSPs or potential TSPs may appeal SDDC decisions denying entrance or not accepting updated qualification documentation for the DoD Personal Property Program. All appeals must state the specific reasons why the appellant believes that SDDC erred in deciding to fail to include or maintain the TSP in the DoD Personal Property Program. SDDC will not consider appeals that lack specificity or merely seek to have SDDC reconsider its decision. All appeals must: a. be submitted in hard-copy; (an attachment to an email will be acceptable to meet this requirement). b. be double-spaced: c. be mailed to: HQ, Military Surface Deployment and Distribution Command Hoffman Building II Chief, Personal Property Division, SDPP-P 200 Stovall Street Alexandria, Virginia 22332-5000 d. include five copies (if mailed); e. be signed by the TSP's president or chief executive officer, whomever is more senior; even if the TSP emails the documentation as an attachment to an email; f. include the entire filing submitted to SDDC as part of the request that SDDC denied; and g. set forth in detail all factual and legal bases for the appeal. SDDC is Not Responsible For, and Shall Not Interfere In, Commercial Dealings of TSPs, their Subcontractors and Vendors. TSPs and their subcontractors and vendors are responsible for conducting their own due diligence when contracting commercially for the performance of bills of lading. SDDC's review and enrolling of program participants is solely for the government's benefit; it does not constitute any representation by SDDC to the transportation industry or to the general public of the creditworthiness or integrity of entities enrolled in the program. TSPs, subcontractors and vendors are expected to resolve their commercial problems and disputes independently of SDDC, presumably through measures available to entities involved in commercial contracting (e.g., mediation, arbitration, recourse to the judicial system, collection agencies). SDDC will not interfere in the commercial contractual relationships of TSPs, their vendors and subcontractors, nor will SDDC offer actual or de facto dispute resolution, mediation or bill collection services.

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2.2 Qualification Requirements for New Entrants 2.2.1 Financial Data/Statements/Ratios SDDC expects the TSPs to meet specific requirements at the time of application and maintain acceptable ratios while participating in the DoD program. New entrants must have their independent TSP Financial Representative (e.g. CPA) submit their most current financial data that has been audited or reviewed. a. Annual Financial Data/Statement Requirements Approved TSPs must have their independent Financial Representative provide data from audited or reviewed financial statements to SDDC annually. Publicly held firms may have their CFO submit the required financial data based on annual reports reviewed by the firm's independent auditor and submitted to the SEC. These TSP's must meet and maintain a quick ratio of 1 to 1 or greater and a positive debt to equity ratio of 4 to1 or less. Data will be submitted via the web using the Financial Statement web form. Financial statements must be prepared according to generally accepted accounting principles using the accrual basis of accounting. Annual financial statements must be submitted within 150-calendar days of year-end, normally defined as December 31st. If a company closes its books on a fiscal year basis (other than December 31st), then financial statements should be submitted within 150-calendar days of that date. Companies desiring to change their report dates must coordinate this with SDDC's Internal Review Office at (703) 428-3205. Requests to change reporting periods must be received not later than 90 days before the intended start of changed reporting period. SDDC will approve or reject the requested change not later than 30 days prior to the start of the change period. b. Failure to Submit Documents or Maintain Acceptable Ratios If SDDC does not receive the annual financial statements within the 150-calendar day time frame, the TSP's DoD approval may be revoked at SDDC's sole discretion. No pro forma statements will be accepted in lieu of actual financial statements. Additionally, SDDC reserves the right to obtain services from an independent third party source to conduct financial risk analysis of the TSP's financial submissions. This analysis will compare the TSP with appropriate industry norms. This information may be used to assist in the determination of financial risk to the government. If any DoD approved TSP falls below the minimum financial requirement, their DoD TSP approval may be revoked at SDDC's sole discretion. TSPs are responsible to assure that any financial data submitted to SDDC's web page has been reviewed and submitted by an independent Certified Public Accountant (individual or firm). If SDDC determines that data submitted was from other than an independent Certified Public Accountant, or the CFO for publicly held firms, SDDC may at SDDC's sole discretion immediately cease doing business with the associated TSP. c. General SDDC wants to see the health of the TSP applying to enter or continue participating in the DoD Personal Property Program. TSPs must submit financial data that documents the business operations of the single TSP
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seeking to qualify or to continue to do business with the DOD. SDDC will not accept combined or consolidated reports where there is no separation from one TSP to another. However, SDDC will accept a combined or consolidated financial statement if there is only one TSP subsidiary within that corporation. In other words, SDDC wants to see the health of the individual TSPs. Letters of guarantee from a parent company will not be accepted. Each individual TSP, must separately report SCAC code, and must comply with required ratio minimums as detailed below. TSPs must have their independent Certified Public Accountant or CFO provide data from independently audited or reviewed financial statements. Data will be submitted annually via the web using the Financial Statement web form. SDDC retains the right to request a hard copy of the TSP's full financial statements. If a hard copy of the financial statement is requested by SDDC, the TSP may submit one document containing several companies separate financial information, as long as the financial information is reported in each individual company's name and reflects that company's account information. These requested statements must include all referenced footnotes and the audit or review report. Because these reports are already completed and on file with the TSP, SDDC expects any request for a report to be provided to the requesting official within 5 workdays. TSPs not responding within this time period may be removed from the program. Each TSP must meet and maintain the required minimum ratios, as detailed below.

d. Definition of Accounting Terms and Ratios. The following definitions apply to the filing of financial data and statements. TSPs should consult their accountant to answer questions on definitions or how to best present financial data. e. Quick Ratio (1 to 1 or Greater) Cash plus trade receivables divided by current liabilities. SDDC recognizes the industry's uniqueness in that many transportation-related costs are incurred and paid by the TSP after the military shipment is picked-up from the member and before delivery or placement in Storage in Transit. This lag time causes a mismatch between revenues and expenses. If the expenses are included in the financial statements and identified separately as prepaid transportation expenses or unbilled receivables, SDDC will consider them in the Quick Ratio analysis. SDDC does not recognize amounts due from stockholders, affiliated companies or related parties as current assets for the purpose of computing the quick ratio. Accordingly SDDC will compute the quick ratio by adding cash, cash equivalents, and trade receivables to determine quick assets and dividing by current liabilities. Since amounts due from stockholders, related parties, and affiliates are excluded from this computation, similar amounts payable to these classes of accounts will be subtracted from current liabilities before computing the quick ratio.
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f. Debt to Equity Ratio (4 to 1 or Less) Total liabilities divided by the Company's equity. A negative debt ratio is unacceptable. 2.2.2 Certificate of Cargo Liability Insurance SDDC expects the TSPs to meet specific requirements at the time of application and maintain acceptable insurance coverage while participating in the DoD program. New entrants must have their insurance representative submit their insurance. 2.2.3 Performance Bonds SDDC expects the TSPs to meet specific requirements at the time of application and maintain acceptable performance coverage while participating in the DoD program. New entrants must have their bond representative submit their performance bond. 2.2.4 Electronic Tender of Service Signature Sheet Requirement (ETOSSS) The company's President must certify that: the information in the ETOSSS application is true and correct; and the company agrees to provide service as set forth in the TOS and applicable Domestic and/or International Solicitations. The ETOSSS includes important ownership information. It also contains: a checklist that the TSP meets all minimum qualification requirements; an International and/or Domestic CFAC certification; the type of service the TSP will be performing (Interstate/Intrastate, Mobile Home, Tow-a-way Boat, Commercial Boat, International HHG and/or UB); the Standard Carrier Alpha Code; the Basic Federal/State Permit Number, TSP type (Freight Forwarder, Motor Carrier, Broker); Employer's IRS identification number; TSP's name; physical and mailing address, fax numbers, telephone numbers, email address; shareholder/partner information; officials authorized to submit electronic forms; Key Personnel; Small Business Certification; and the President's Certification Statement. Each TSP must identify and maintain a company telephone number, a toll free number, a company facsimile number, and a company e-mail address. Individual Shareholder(s) or Partner(s) Information is addressed in the ETOSSS. Enter the names of all shareholders involved in the company and their respective percentage of shares OR enter the names of all partners and their respective out standing capital stock/partnership interest in the company (e.g. the information contained in the SEC 10K, Part I, Item 4 Supplementary Item). For the publicly held companies, report information on executive officers of the company and on the security ownership of certain beneficial owners and management (e.g., the information contained or referenced in the SEC 10K, Part III, Item 12). a. Common Financial and/or Administrative Control (CFAC) is addressed in the ETOSSS. CFAC means the power, actual as well as legal, to influence the management, direction or functioning of a business organization. CFAC must
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be declared in accordance with the TOS. Except as provided in paragraph B of the CIP, pricing by CFAC companies must be arrived at with complete independence without discussion with other companies. TSPs declaring CFAC cannot compete in the same rate channel in the same code of service in the International Program. Domestic TSPs must declare CFAC on the ETOSSS. While there is no restriction in the domestic program on TSPs participating in the same lane of traffic or same code of service, they must declare CFAC. A TSP failing to disclose CFAC may be removed from the program for a period of up to two years and may be prosecuted for filing a false official statement in violation of 18 USC 1001. b. Key Personnel: TSPs must list each company official, CEO, CFO, President, Vice President, Treasurer, Secretary, Operations Manager, Dispatcher, Director and Trusted Agent(s). TSPs must continually have two (2) key personnel involved in the management of the company (excluding the Treasurer and Secretary)