Free Response to Motion [Dispositive] - District Court of Federal Claims - federal

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No. 01-639 (Judge Lettow) ______________________________________________________________________________ IN THE UNITED STATES COURT OF FEDERAL CLAIMS ______________________________________________________________________________ BANNUM, INC. Plaintiff, v. UNITED STATES, Defendant. ______________________________________________________________________________ PLAINTIFF'S RESPONSE TO DEFENDANT'S MOTION FOR SUMMARY JUDGMENT AND CROSS-MOTION FOR LEAVE TO FILE AMENDED COMPLAINT ______________________________________________________________________________

Dated: October 12, 2007 Respectfully submitted,

Joseph A. Camardo, Jr. Camardo Law Firm, P.C. Attorneys for Plaintiff 127 Genesee Street Auburn, New York 10321 Tel: (315) 252-3846 Fax: (315) 252-3508

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TABLE OF CONTENTS Table of Authorities...........................................................................................ii Summary.......................................................................................................1 I. ARGUMENT.........................................................................................1 A. B. Summary Judgment Standard..............................................................1 Count 6: Contract J200c-336 - Beaumont, Texas.........................................2 1. 2. Statement of Facts Relevant to Count 6.........................................2 Legal Argument ­ Count 6........................................................6 (i) (ii) (iii) The Government Withheld Superior Knowledge.....................7 The BOP Breached its Duty of Cooperation & Fair Dealing......11 Bannum is Entitled to Recover Costs for its Response to BOP's Cure Notice and for All Costs Attributable to its Litigation Regarding the Lease.........................................13

C.

Count 8: Contract J200c-397 ­ Montgomery, Alabama..............................14 1. 2. Statement of Facts Relevant to Count 8........................................15 Legal Argument ­ Count 8.......................................................21 (i) Bannum is Entitled to All Costs in Dealing with Transportation Issue.....................................................21 The BOP Acted in Bad Faith in Not Exercising the Option to Contract J200c-397..........................................25

(ii)

PLAINTIFF'S CROSS-MOTION FOR LEAVE TO FILE THIRD AMENDED COMPLAINT..........................................................28 Conclusion...................................................................................................30

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Table of Authorities Federal Cases Abcon Assoc. v, United States, 49 Fed.Cl. 678 (2001) American Shipbuilding Co. v. United States, 654 F.2d 75, 79, 228 Ct.Cl. 220 (1981) Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) Bill Strong Enterprises, Inc. v. Shannon, 49 F.3d 1541, 1550 (Fed. Cir. 1995) C. Sanchez & Son, Inc. v. United States, 6 F.3d 1539 (Fed.Cir 1993) Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) Centex Corp. v. United States, 395 F.3d 1283, 1304 (Fed.Cir. 2005) Chiuminatta Concrete Concepts, Inc. v. Cardinal Indus., Inc., 145 F.3d 1303, 1307 (Fed.Cir.1998) Citizens Federal Bank, FSB v. U.S., 52 Fed.Cl. 561, 562-563 (2002) Gasser Chair Co. v. Infanti Chair Mfg. Corp., 60 F.3d 770, 773 (Fed.Cir.1995) Helene Curtis Indus., Inc. v. United States, 160 Ct. Cl. 437, 312 F.2d 774 (1963) Helene Curtis Indus., Inc. v. United States, 169 Ct. Cl. 437, 444, 312 F.2d 774 (1963) Hi-Shear Technology Corp. v. United States, 53 Fed.Cl. 420 (2002) Info. Tech. & Applications Corp. v. United States, 316 F.3d 1312 (Fed.Cir.2003) 13

10

2

23

13

2

13

2

2

2

9, 10

11

27

27

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Jay v. Secretary, DHHS, 998 F.2d 979 (Fed.Cir.1993) Kalvar Corp. v. United States, 211 Ct.Cl. 192, 543 F2d. 1298, 1302 (1976) Lewis-Nicholson, Inc. v. United States, 213 Ct.Cl. 192, 550 F.2d 26, 32 (1977) Libertatia Associates, Inc. v. United States, 46 Fed.Cl. 702 (Fed.Cl.2000) Librach v. United States, 147 Ct.Cl. 605, 614 (1959) Northrop Grumman Corp., Military Aircraft Div. v. United States, 63 Fed.Cl. 12, 15-16 (2004) Orlosky Inc. v. United States, 68 Fed.Cl. 296 (2005) Peter Kiewet Sons' Co. v. United States, 138 Ct.Cl. 668 (1957) Petrochem Service, Inc. v. United States, 837 F.2d 1076, 1079 (1988) Reflectone, Inc. v. Dalton, 60 F.3d 1572, 1579 (Fed. Cir. 1991) (en banc) Federal Regulations FAR 31.202 FAR 31.205-33 FAR 31.205-33(a)(b) Other Authorities Agrinautics, ASBCA Nos. 21512, 21608, 21609, 1979 WL 41983 Allied Material & Equip. Co., ASBCA 17318, 75-1 BCA ¶ 11,150

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27

13

27

27

10

13

13 10

23

13, 24 23 23

14, 25

22

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C. H. Hyperbarics, Inc., ASBCA No. 49375, 04-1 BCA ¶32,568 Electronics Corporation of America, ASBCA No. 4770, 61-2 BCA ¶ 3134 George Hyman Construction Company, ENGBCA 4541, 85-1 BCA ¶17,847 Gladwynne Construction Co., ASBCA No. 47076, 95-1 BCA ¶27,297 Grumman Aerospace Corp., ASBCA No. 50090, 01-1 BCA ¶ 31,316, aff'd, 34 Fed. Appx. 710 (Fed. Cir. 2003) Lear Siegler, Inc., ASBCA 22235, 81-2 BCA ¶ 15,372 Peter Kiewit Sons' Company, ENGBCA No. 4742, 85-1 BCA ¶ 17,911 at 100,248

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14, 24

25

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14, 24

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS _____________________________________ BANNUM, INCORPORATED, Plaintiff, v. UNITED STATES, Defendant. ______________________________________ PLAINTIFF'S RESPONSE TO DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND CROSS-MOTION FOR LEAVE TO AMEND COMPLAINT Summary In accordance with the Court's Order issued following the July 13, 2007 status conference, defendant filed its motion for partial summary judgment on Counts 6 and 8 of the Second Amended Complaint. Pursuant to its Order, the Court limited defendant to a motion for summary judgment on only two counts in the second amended complaint. Plaintiff has incurred a tremendous amount of time and effort in wading through the documentation submitted by defendant in support of its motion, as well as in reviewing the mountains of documentation produced by the BOP during discovery, to ensure a full and complete record is before the Court. Unfortunately, in its motion, defendants have failed to provide the Court with key documentation generated by the BOP relating to each of the Counts. As argued herein, this information, along with the affidavits of David Lowry being filed herewith, clearly establishes issues of material fact which preclude summary judgment. I. ARGUMENT: A. Summary Judgment Standard: No.01-639C Judge Lettow

Summary judgment is appropriate when there are no genuine issues of material fact and 1

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the moving party is entitled to judgment as a matter of law. RCFC 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Jay v. Secretary, DHHS, 998 F.2d 979 (Fed.Cir.1993). The party moving for summary judgment bears the initial burden of demonstrating the absence of any genuine issue of material fact. Citizens Federal Bank, FSB v. U.S., 52 Fed.Cl. 561, 562-563 (2002). Summary judgment is appropriate against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, where that party will bear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The court must resolve any doubts about factual issues in favor of the non-moving party, Chiuminatta Concrete Concepts, Inc. v. Cardinal Indus., Inc., 145 F.3d 1303, 1307 (Fed.Cir.1998), and draw all reasonable inferences in its favor. See Gasser Chair Co. v. Infanti Chair Mfg. Corp., 60 F.3d 770, 773 (Fed.Cir.1995). B. Count 6: Contract J200c-336, Beaumont Texas:

Defendant has moved for partial summary judgment on Count 6 on the grounds that: (1) Bannum is not entitled to recover the cost of responding to a cure notice; (2) the Government did not withhold superior knowledge; and (3) the Government did not breach its duty to cooperate. In response, plaintiff alleges that partial summary judgment is not appropriate because, as presented below, defendant has failed to include pertinent documentation that raises material issues of fact. 1. Statement of Facts Relevant to Count 6

On July 17, 1997, Bannum entered into contract J200c-336 with the BOP to provide a community corrections center services in accordance with the stated specification. (PFUF 90). At the time of the award of the contract, Bannum had several contracts with the BOP for community correction centers, a number of which were located in the South Central Region.

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(PFUF 80). Simultaneously, Bannum was experiencing a multitude of contract disputes, many of which centered around the actions and inactions of Charles Ala (BOP Community Corrections Manager). (PFUF 81) In order to provide the necessary facility needed to perform the contract, Bannum negotiated and entered into a sublease agreement for a building located at 1310 Pennsylvania Avenue, Beaumont, Texas on or about February 5, 1997. The lessor on the lease was listed as Ken Webb, who was listed as an owner of the property. (PFUFs 82, 83, 86). John McCray, who was a business partner of Mr. Webb, (PFUF 84), was identified as an owner of the property, as specified on the application for amendment of the zoning ordinance. (PFUF 88). At all times during the leasehold, Bannum made rental payments as specified (PFUF 91), including payments made directly to Mr. McCray directed by a letter dated February 10, 1999. (PFUF 92). On November 7, 2000, Mr. Ala advised Ms. Mustain that, during the monitoring of Bannum, it was discovered that the City Council in Beaumont had approved a Catholic school for troubled youths, and that the school would be in the section of the building occupied by Bannum. Mr. Ala also represented that the City Council stated that it was agreed upon that Bannum would vacate the premises prior to the beginning of the school year 2001. Mr. Ala further stated that as of the date of the memorandum, Bannum had not notified the BOP of any future move. No mention is made of any attempts by the BOP to communicate this information to Bannum. (PFUF 93). The BOP never disclosed this information to Bannum (PFUF 94). On December 15, 2000, Bannum received a notice dated December 8, 2000, stating that "the owner has elected to execute his option to terminate your tenancy. (PFUF 95), despite the fact that no such option existed in the lease. (Response to PFUF 7).

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On December 18, 2000 Mr. Ala sent a memorandum to the BOP's Assistant Community Corrections Administrator recounting a conversation he had with Mr. McCray and his allegations that the property was improperly subleased to Bannum and therefore no lease existed. Mr. Ala further stated that he had contacted Cornell Corrections, who stated that they could accommodate Bannum's Beaumont residents if it became necessary. The December 18, 2000, memorandum also contained a handwritten note stating: "County Commissioner says unwritten agreement that if the schools goes in Bannum will have to vacate." (emphasis added) No mention was made of any attempts by the BOP to communicate with Bannum. (PFUFs 97-98). On December 19, 2000, the BOP Regional Administrator called Bannum and inquired about the purported eviction letter. At no time during the conversation did Ms. Mustain raise the issue of the school agreement. (PFUF100). On December 19, 2000, Benjamin Tousley, Community Corrections Manager issued a memorandum to the Contracting Officer recommending that a Cure Notice be issued to Bannum. No mention was made in the memo regarding the agreement that had been made to displace Bannum from the property to make room for the Milburn Academy. (PPUF 101). On December 19, 2000 Bannum's lease was reviewed by attorney Susan Oliver, who stated that the lease was valid, and that she would seek a restraining order. (PFUF 102). Bannum supplied a copy of Ms. Oliver's letter to the BOP. (PFUF 104). On December 20, 1999 David Lowry of Bannum had a telephone conversation with Andrea Johnson (Deputy Community Corrections Regional Administrator for BOP), during which Ms. Johnson stated that since Bannum was being evicted from the contract location, a Cure Notice would be issued the following week by the Contracting Office. At no time during the telephone conversation did Ms. Johnson impart any information to Bannum regarding the school agreement. (PFUF 103).

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On December 22, 2000, a Cure Notice was issued to Bannum by the BOP, citing to the eviction notice. No mention is made to the secret school agreement. (PFUF 105). On January 3, 2001, Bannum filed a response to the Cure Notice and a claim for equitable adjustment. The claim stated that Bannum had a valid lease and that the BOP improperly handled the lease matter by, failing to verify the validity of the eviction notice, failing to review the terms of the lease previously submitted, or failing to conduct meaningful discussions with Bannum before issuing the Cure Notice, which Bannum felt constituted a breach of the duties of cooperation and good faith and fair dealing. (PFUF 107). On January 12, 2001, the Contracting Officer sent a note to Ms. Mustain stating that Bannum has an injunction for the Beaumont facility, which was good until March 1, 2001. Therefore, there was nothing to cure at this time (PFUF 110). However, at no time did the BOP retract or rescind the Cure Notice. (PFUF 118). On January 29, 2001, the BOP denied Bannum's claim stating that it did not have adequate assurances that Bannum would be able to perform the contract services, and was in danger of defaulting on its contract. No mention was made with respect to the communications regarding the secret school agreement or that Bannum was advised accordingly. (PFUF 111). On March 29, 2001 Mr. Ala wrote a memorandum recounting a telecon he had with the Director of the Richard Milburn Academy, who stated that he thought Bannum was to be moved out of the facility prior to them occupying the building. At no time did the BOP impart to Bannum any information regarding the secret school agreement. (PFUF 113). Bannum expended significant cost and effort aggressively pursuing litigation to protect its rights under the lease through state and federal courts, including, but not limited to, being granted a restraining order and injunctions, which were extended a number of times. (PFUF

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106, PFUF108, PFUF109, PFUF 112, PFUF 115). At no time during these proceedings did Mr. McCray initiate any eviction proceedings. (PFUF 96). As a result of this litigation, Bannum was able to complete its contract and follow-on contracts with the BOP utilizing the same premises pursuant to a new lease agreement with Mr. McCray. (PFUF 116). At no time prior to the issuance of eviction notice or during the subsequent litigation, where Bannum incurred substantial litigation expenses, did the BOP notify Bannum of the secret school agreement. (PFUF 117). Bannum has incurred approximately, $115,836.64 as a result of the ongoing litigation resulting from the lease. (PFUF 120) The Defense Contract Audit Agency (DCAA) was requested by the DOJ to do an Audit of Bannum's Claims, but was directed not to audit Count 6. (PFUF 119). Even though the Auditor did not audit Count 6, he reviewed some of the legal bills that Bannum incurred, which described the nature of the legal costs expended. (PFUF 121, PFUF 122). 2. Legal Argument ­ Count 6

In Count Six of its amended complaint Bannum seeks to recover the alleged $4,500 in cost incurred in responding to the Cure Notice issued by BOP on the basis that the BOP violated the implied covenant of good faith and fair dealing in its handling with the lease issue after it had learned of the dispute directly from the Landlord instead of the Bannum. Specifically Bannum claimed that the "BOP's direct communication with the owner of the property, their failure to verify the accuracy of the information received, their failure to notify Bannum of their receipt of the communication and their failure to identify the person(s) and the nature of the communications conducted, constituted an improper and prejudicial withholding of Superior Knowledge and further constituted an breach of the BOP's contractual duty to cooperate with Bannum."

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(i) `

The Government Withheld Superior Knowledge:

Bannum alleges that the BOP withheld pertinent and prejudicial information which

constituted a breach of the BOP's contractual duty to cooperate with Bannum. Specifically, Bannum alleges that the BOP had conducted private conversations with the landlord and their agent, who imparted information that was improperly withheld from Bannum. As early as November 7, 2000, over one month before the eviction notice was given, the BOP had knowledge that the City of Beaumont had approved the institution of a school for troubled youths on the condition that Bannum would vacate the premises prior to the beginning of the school year 2001. (PFUF 93) Also, Mr. Ala in the November 7th memorandum, stated that Bannum had not notified the BOP of any future move. Therefore, having this information, Mr. Ala should have reasonably made the following conclusions: · If the school was to be in place by the beginning of the year, 2001, and if it was represented that Bannum would be out of the facility by that date some sort of eviction process would have to be commenced. · Given the fact that Bannum is an experienced contractor who knows the long term effort it takes to find a new location and bring it up to specifications, and given the fact that Bannum had not notified BOP of a possible move, the BOP should have known that Bannum had no knowledge of this agreement. · Since this information went directly to Bannum's ability to continue performance of the contract, it was material and prejudicial and the BOP had the obligation, at the bare minimum, to make inquiries of Bannum as to whether they knew this information and what plans had been made to

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continue performance. However, despite having this important and material information in its possession, the BOP improperly and intentionally failed to supply the information to Bannum. This withholding of pertinent and material information continued even after the issuance of the eviction notice. The BOP acknowledged that they had a copy of the eviction notice as early as December 18, 2000 and therefore had knowledge that the notice contained no reference to the agreement made regarding the school. In the Memorandum dated December 18, 2000, a handwritten note at the end of the memorandum, again refers to unwritten agreement with the County Commissioner that if the school goes in, Bannum will have to vacate. (PFUF 98). It was especially necessary for the BOP to impart this knowledge to Bannum at this juncture because it became obvious that the real reason for the eviction was not the lack of a proper sublease, but that the owners were attempting to fraudulently end the lease to accommodate the school. On December 19, 2000, Bannum was contacted by the BOP Regional Administrator, regarding the eviction notice, and again no mention was made of the school agreement despite the fact that Ms. Mustain had knowledge of it as early as November 7, 2000. Instead of imparting this vital information, the BOP issued a Cure Notice on December 22, 2000, demanding that Bannum provide a written plan of action and a copy of a valid lease. Again no mention was made of the school agreement. This failure to impart the information regarding the school agreement was in addition to the BOP's failure to give Bannum information regarding the identification and nature of the improper communications the BOP had with the property owner/agents, despite Bannum's numerous requests. It is important to note that the BOP owed no duty to either the property owner/agent to keep the communications confidential. However, the BOP had a contractual duty to disclose to Bannum all information that may have a

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material effect on its ability to perform. On January 3, 2001, Bannum filed a response to the Cure Notice, which included an REA for the costs in responding to the Cure Notice because of the Government's improper actions and lack of cooperation. At the time of its response, Bannum still had no knowledge of the school agreement. Immediately upon the receipt of the eviction notice, Bannum initiated lengthy and costly litigation in order to protect its leasehold rights, based upon the facts that they knew at the time, of which the BOP was kept apprised. Despite being supplied with a copy Bannum's initial pleadings, which do not mention the school agreement, the BOP failed to impart the information, despite its pertinence. The failure of the BOP to impart the material information regarding the school agreement to Bannum, deprived Bannum of knowledge of the actual, fraudulent reason behind the eviction, which would have resulted in Bannum presenting a measurably stronger case. Therefore, the BOP's failure to impart the important and material information was clearly prejudicial and constituted an interference of its performance and further constituted a breach of the BOP's duty to cooperate. Had the BOP at least made inquiries of Bannum regarding the school agreement when it initially discovered the information in November, 2000, Bannum could have been proactive in protecting its leasehold rights before the eviction was issued, and at the least, would have conceivably shortened, if not eliminated the need for the lengthy and costly litigation. It has long been established by the Courts that pursuant to its implied duty of good faith and fair dealing, the Government must disclose its superior knowledge to the contractor. In Helene Curtis Indus., Inc. v. United States, 160 Ct. Cl. 437, 312 F.2d 774 (1963), the Court held

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that the Government had a duty to share vital information with the contractor which it is aware the contractor does not have, and to not allow the contractor to flounder on its own without such information. "Although it is not a fiduciary toward its contractors, the Government ­ where the balance of knowledge is so clearly on its side ­ can no more betray a contractor into a ruinous course of action by silence than by the written or spoken word." Helene Curtis Indus., Inc. v. United States, 169 Ct. Cl. 437, 444, 312 F.2d 774 (1963). The disclosure of superior knowledge doctrine applies in situations where: (1) a contractor undertakes to perform without vital knowledge of a fact that affects performance costs or duration; (2) the government was aware the contractor had no knowledge of and had no reason to obtain such information; (3) any contract specification supplied misled the contractor, or did not put it on notice to inquire; and (4) the government failed to provide the relevant information. Northrop Grumman Corp., Military Aircraft Div. v. United States, 63 Fed.Cl. 12, 15-16 (2004), Petrochem Service, Inc. v. United States, 837 F.2d 1076, 1079 (1988), citing American Shipbuilding Co. v. United States, 654 F.2d 75, 79, 228 Ct.Cl. 220 (1981). As to whether the Government should have been aware of the contractor's ignorance, if the information is specific and the contractor likely would not be able to obtain the information, the Government will be assumed to have reason to know of the contractor's ignorance. Lear Siegler, Inc., ASBCA 22235, 81-2 BCA ¶ 15,372, recons. denied, 82-2 BCA ¶ 15,832. The Defendant in its Motion, alleges that the BOP did not withheld any information that was vital to Bannum's performance and that whatever information was imparted by the property owner or agent was already within Bannum's knowledge. This allegation is a clear

misrepresentation of the facts. As shown in the previously presented facts, as early as November 7, 2000, BOP personnel had knowledge of the actual reason why the property owners were

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attempting to evict Bannum, namely that they had made representations to the Beaumont City Council that Bannum would be out of the facility before the beginning of 2001, so that a school could be established on the same premises. Despite having this vital information regarding this fraud the owners intended on perpetrating on Bannum, the BOP kept silent, which deprived Bannum of asserting a fraud defense, which would have limited or eliminated the need for the cost and time-consuming litigation. It was also obvious that the BOP knew Bannum had no knowledge of the school agreement as evidenced by the fact that Mr. Ala stated that Bannum had not given any notice that it intended on relocating the facility. In conclusion, Bannum alleges that the BOP failed to disclose vital information that was material to Bannum's continued performance and further resulted in it being forced to expend a significant amount of effort and cost, for which it is entitled to be compensated. (ii) The BOP Breached its Duty of Cooperation and Fair Dealing:

Bannum alleges that the BOP breached its duty of fair dealing and cooperation and not to impede performance continuously from over a month before Bannum was issued the eviction notice through Bannum's lengthy and costly litigation it was forced to conduct to protest its leasehold rights. Specifically: a. The BOP failed to make any inquiries of the property owner/agent regarding the school agreement, despite its numerous communications. b. The BOP failed to discuss the school agreement with Bannum, despite indications that Bannum had no knowledge of the agreement. c. The BOP failed to make any inquiries of the property owner/agent regarding the specifics of the eviction notice despite knowing that the lease contained no language which allowed the owner to terminate the

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lease at its option, especially since the BOP knew that the real and fraudulent reason for the eviction was the school agreement. d. The BOP improperly issued the Cure Notice to Bannum despite knowing that there was no language in the lease which would allow the owner to terminate the tenancy and the real and fraudulent reason for the termination. e. The BOP failed to conduct any meaningful discussions with Bannum regarding its position on the issues or its intended action to preserve the leasehold. f. The BOP improperly failed to rescind the Cure Notice after the Bannum was granted an injunction, despite the BOP's acknowledgment that there was nothing to cure once the injunction was granted. g. Despite being requested by Bannum, the BOP failed to send personnel to Bannum's court hearing to testify as to the irreparable harm that would occur if the lease was terminated. As a result of the BOP's continual lack of cooperation and fair dealing and its withholding of vital superior knowledge, Bannum was forced to expend a significant amount of needless cost and effort fighting both the BOP to protect its contract and the property owners to protect its lease. This cost and effort could have been significantly reduced or eliminated if the BOP had met its contractual obligations to: cooperate with Bannum; afford it fair treatment; not to impede performance and disclose vital and material superior knowledge. Therefore, since the costs incurred by Bannum can be directly attributed to the BOP's breach of its contractual duties, they are fully compensable.

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Implied in every contract is the covenant of good faith and fair dealing. Centex Corp. v. United States, 395 F.3d 1283, 1304 (Fed.Cir. 2005). This covenant includes the duty to

cooperate and not hinder the contractor's performance. C. Sanchez & Son, Inc. v. United States, 6 F.3d 1539 (Fed.Cir 1993). "Not only must the Government refrain from hindering the

contractor's performance, it must do whatever is necessary to enable the contractor to perform." Lewis-Nicholson, Inc. v. United States, 213 Ct.Cl. 192, 550 F.2d 26, 32 (1977). A contractor is not required to prove bad faith on the part of the Government to show the breach of these duties, Abcon Assoc. v, United States, 49 Fed.Cl. 678 (2001), but only needs to show willful or negligent interference. Peter Kiewet Sons' Co. v. United States, 138 Ct.Cl. 668; Orlosky Inc. v. United States, 68 Fed.Cl. 296. The BOP did not enable Bannum to perform, or else it would have come to its aid, or at least be forthright about information it possessed. Bannum's performance of the contract. (iii) Bannum is Entitled to Recover Costs for its Response to BOP's Cure Notice and for all Costs Attributable to its Litigation Regarding the Lease: Instead, the BOP attempted to disable

The previous sections have clearly evidenced the BOP's withholding of superior knowledge and its continuous breach of its implied duty of cooperation and fair dealing. As a result, Bannum is entitled to have its contract equitably adjusted to cover all extra-contractual costs expended that resulted from the BOP's improper actions. First, Bannum alleged that the issuance of the Cure Notice was improper and was therefore entitled to be compensated for the costs in issuing its response. These costs went beyond normal contract administration, and constituted abnormal work effort beyond the scope of the contract. The FAR regulations allow for the direct charging of indirect costs to arrive at an equitable result. FAR 31.202 defines a "direct cost" as any cost that can be identified 13

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specifically with a particular final cost objective. Dave Lowry and other Bannum Personnel worked directly on the response to the Cure Notice, which constituted administrative work effort beyond the normal scope of work for the Beaumont contract. Bannum is not charging direct routine administrative or clerical activities that were part of his bid. Electronics Corporation of America, ASBCA No. 4770, 61-2 BCA ¶ 3134. There is nothing objectionable about charging a cost directly, provided it is properly allocable to the contract, and other costs of the same character are excluded from indirect pools charged to the contract in order to avoid `double screening,' or duplicate charging. Peter Kiewit Sons' Company, ENGBCA No. 4742, 85-1 BCA ¶ 17,911 at 100,248. In addition, when it is necessary to arrive at an equitable result reclassification from indirect-to-direct expenses may be appropriate. Agrinautics, ASBCA Nos. 21512, 21608, 21609, 79-2, BCA & 14,149. Secondly, after the claim was filed, and in order to protect its contract, Bannum was forced to incur a tremendous amount of additional administrative and legal costs which were directly related to the BOP's actions and inactions. At this time, Bannum is seeking to amend its complaint to include these additional costs in its cross-motion for leave to amend (see below). C. Count 8: Contract J200c-397- Montgomery, Alabama:

Defendant has moved for partial summary judgment on Count 8 on the following grounds: (1) defendant was not bound to exercise the option; (2) defendant did not act in bad faith; (3) Bannum has suffered no lost profits because it received more money under the replacement contract than it would have received under the option years; and (4) Bannum is not entitled to its costs of negotiating the transportation issue. In response, plaintiff states that the issuance of a partial summary judgment is not appropriate because, as presented below, Defendant failed to include pertinent documentation that raises material issues of fact.

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1.

Statement of Facts Relevant to Count 8

Bannum was awarded Contract No. J200c-181 on or about October 1, 1993 which called for Bannum to provide Community Corrections Center ("CCC") services for Federal offenders in the Montgomery, Alabama area. Pursuant to the terms of the contract, Bannum was to

commence performance on October 1, 1993 for a base period of two years ending September 30, 1995. The contract also contained three one year options, all of which were exercised by the BOP. (PFUF 123). Then, or about July 1, 1998, Bannum was awarded follow-on contract No. J200c-397 by the BOP. This Contract was awarded after several rounds of discussion during which there were no questions raised regarding the transportation requirement, except for BOP's C&D letter dated April 10, 1998, which Bannum responded to by attaching its April 16, 1998 letter addressing the same issue raised under the present contract. (PFUF 124). The Statement of Work required that "the facility shall be located within 1 mile of public transportation, or the contractors shall provide transportation for residents for employment or program participation activities at no cost to the residents." Bannum's facility was located in compliance with the contract requirement. (PFUF 125). Intermittently during Bannum's performance of both contracts, BOP raised an issue regarding Bannum's compliance of the transportation requirements under the contract. The BOP issued numerous monitoring reports and letters insisting that Bannum had to come up with a solution for the transportation needs of the inmates. (PFUF 126). Bannum spent considerable extra-contractual time, effort and cost responding to BOP's allegations, demonstrating that it met the transportation requirements of the contract. (PFUF 127). Despite the fact that the BOP admitted internally that Bannum met the contract requirements regarding transportation, it issued written reports against Bannum alleging

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deficiencies in this area. (PFUFs 128, 129, 130). After realizing that Bannum met the contract transportation requirements, the BOP required Bannum to submit a proposal in excess of the contract terms, which was submitted on September 8, 1999, and which requested a price increase of 5,000.00 per month. (PFUF 131). During approximately October of 1999, the BOP issued a "Request for Contract Action" citing a need for a modification on Bannum's contract for additional transportation services, and which further provided a cost estimate of $90,000, which was then slashed by 50% to $45,000 per year. (PFUF 130). The contracting officer sent Modification No. 3 to Bannum, which included compensation for the additional transportation services in the amount of $45,000 per year, which was the BOP's estimate included in its Request for Contract Action. (PFUF 132). However, on November 29, 1999, Bannum found out that the CCRA had never forwarded its September 8, 1999 pricing proposal to the contracting officer. Bannum then notified the contracting officer that there had been a mistake with Bannum believing that its proposal had been accepted and incorporated into the contract. Bannum then rescinded its agreement to the Modification. (PFUF 133). On January 4, 2000 the supervising contracting officer acknowledged the rescission of Modification 3 and requested another cost proposal from Bannum for additional transportation services. Additionally the supervising contracting officer stated that the BOP Montgomery office may decide not to exercise the option if Bannum did not satisfy its alleged transportation concerns. Bannum considered the contracting officer's statement an attempt to extort extra contractual performance from Bannum in exchange for the BOP exercising subsequent options under the contract. (PFUF 134). In response, Bannum submitted another formal cost proposal

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for the change in transportation requirement on January 7, 2000. (PFUF 1351). In January 2000, even though the BOP had directed Bannum to submit a proposal for additional transportation services, BOP personnel in the field office continued to raise the alleged concerns regarding the transportation issue and Bannum responded that the matter was presently being negotiated with the BOP. (PFUF 136). Despite this fact, the BOP continued to make findings against Bannum in monitoring reports. This forced Bannum to expend additional time and effort responding to the groundless allegations. (PFUF 137). Pursuant to further requests from the BOP, on March 24, 2000 Bannum submitted another cost proposal in the amount of $55,200 per year. During a meeting with the BOP regarding this cost proposal, the BOP advised Bannum that it had to provide transportation throughout the day, and strongly encouraged Bannum to purchased a van for that purpose. (PFUF 139). Bannum then contacted the BOP and sought further clarification as to whether or not it should provide for taxicab services or to provide vans. The BOP advised Bannum to submit its best offer, and would not provide Bannum with any additional information. (PFUF 139). On June 13, 2000, Bannum submitted a detailed proposal for use of a taxicab service, and private cars in unusual situations. The total cost proposed was $100,477 per year. Based upon an estimated inmate population of thirty, as used in the Government's subsequent estimate, Bannum's proposal equated to a revised manday rate of $59.63 ($50.45/day contract amount + $9.18/day proposed change) for the remaining option years. (PFUF 140). No further

negotiations were conducted between Bannum and the BOP with respect to the June cost proposal. (PFUF 141). On or about September 5, 2000, the BOP prepared a request for contract action ("RCA")

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and stated that Bannum and the BOP were unable to reach a mutual agreement to resolve the ongoing transportation issue and, therefore Option year 2 would not be exercised. Included in the RCA was an estimate of what the BOP expected a new contract to cost ($60 per manday), based upon a inmate population of 30 inmates for the base 2-year period, $61.80 per manday for Option Year 1, $63.65 per manday for Option Year 2, and $65.56 per manday for Option Year 3. However, the record is devoid of any comparison between the alleged mandate rate for the new contract and Bannum's transportation proposal, as evidenced by the fact that Bannum's June 13, 2000 cost proposal equates to a significantly lower price than the BOP's estimate. (PFUF 143). The BOP eventually awarded Bannum a contract for $60.45 per man day for the base period and all option years. This price was significantly less than the BOP's estimate. (PFUF 144). On October 11, 2000, the BOP issued its Performance Rating for Bannum's Montgomery program ("CEF"), which ranked Bannum "fair" in the contract compliance and business relations category and "poor" in the customer satisfaction category. (PFUF 145). Bannum had to spend a significant amount of time responding to this performance evaluation. On November 16, 2000, Bannum submitted a detailed rebuttal to what it considered to be the erroneous CEF. (PFUF 146). On November 29, 2000, Bannum received a copy of solicitation 200-0637-SE which was a request for proposals for a follow-on contract in Montgomery. When Bannum inquired as to the reason for this solicitation the BOP responded that unless the transportation issue was resolved, procurement was going back out on the street and that the BOP would further contact Bannum to discuss the transportation issue. (PFUF 147). On or about January 11, 2001

Bannum contacted the chief contracting officer and was advised again that unless it negotiated

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the transportation issue, a new contract would be issued. (PFUF 148). On January 24, 2001, Bannum submitted yet another cost proposal pursuant to a telephone conversation between Bannum representatives and BOP personnel and significantly reduced its cost proposal. The total proposed price was $87,035 per year. Based upon an estimated inmate population of 30, as used in the Government's estimate, Bannum's proposal would equate to a revised manday rate of $58.40 ($50.45/day contract amount + $7.95/day proposed change) for the remaining option years. (PFUF 149) On February 9, 2001 the Piliero Law Firm spent a great deal of time and expense contesting the CEF on Bannum's behalf, and appealed the February 21, 2001 full monitoring report. (PFUF 150). On or about March 2, 2001, Bannum filed a Protest of Solicitation No. 2000637-SE. (PFUF 151). The BOP eventually awarded Bannum a contract for $60.45 per man day for the base period and all option years (PFUF 144). This price was significantly less than the BOP estimate. On March 6, 2001 Bannum file a detailed Request for Equitable Adjustment ("REA"). The basis behind the REA was to contest the wrongful refusal by the BOP to exercise the option, and to recover all the time and expense in dealing with the transportation issue including the cost proposals requested by the BOP. (PFUF 152) The BOP did not negotiate the REA and, on April 9, 2001, the REA was converted into a certified claim for equitable adjustment in the amount of $339,411.57. (PFUF 153) The claim was revised during the audit from $339,412 to $371,918. This was a revision to ongoing costs. The claim amount included the lost overhead and profits for the wrongful refusal to exercise the option, proposal preparation expenses which included Bannum labor costs for the BOP requested proposals, associated expenses and fees, and travel expenses. (PFUF 154).

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While the DCAA auditor questioned the lost overhead and profits since Bannum would have replaced the income or revenue that it would have derived from the exercise of the options with the replacement contract, Bannum alleges that it was still wrongfully deprived of two years of performance. As indicated above, the BOP exercised all the option years on the replacement contract and Bannum was not successful in obtaining a follow-on contract. (PFUF 155) The auditor also reviewed Bannum's labor costs, but did not disclose the basis behind Bannum's request or the support that Bannum provided for these costs. The auditor discounted these costs on the basis that Bannum did not have timesheets. However, the auditor's working papers included a detailed affidavit from David Lowry explaining and detailing the basis behind Bannum's request, citing to the work effort expended by specific Bannum personnel and a detailed estimate of their time and the labor rates. (PFUF 156). The auditor then reviewed the expenses incurred by Bannum associated with the extra work discounting these expenses claiming that he could not tie them in to the Montgomery claim. However, the bills were provided to the auditor, all of which showed that the recipient was the BOP along with the date and time of the bill which could be matched to Bannum's correspondence. (PFUF 157). The auditor then looked at the Camardo and the Piliero Law Firm bills. The auditor alleged that these bills were for the Montgomery protest. However the vast majority of the Camardo bills were for the time and effort incurred in the protest of the defective transportation language and the detailed REA. The Piliero bills were for the time and effort incurred

contesting the improper CEF's. (PFUF 158). The auditor then reviewed the travel cost and alleged that Bannum did not support these charges by tying them into the Montgomery matter. However, in David Lowry's affidavit, he

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states that he traveled to meet with the BOP officials on several occasions to deal with the transportation issue. The government would have a record of these meetings which would support the claimed costs. (PFUF 159) 2. (i) Legal Argument ­ Count 8

Bannum is Entitled to All Costs Expended in Dealing with Transportation Issue:

Bannum has performed under three contracts to provide CCC services in the Montgomery, Alabama area since 1993. At issue in this proceeding is the 1998 Contract (No. J200c-397), which required that Bannum's facility to be within one mile of public transportation. At all times during performance, Bannum met this requirement. However, during performance of the contract, the BOP began to issue adverse findings in monitoring reports alleging that Bannum was not meeting the contract requirements regarding the transportation services, and that Bannum was required to come up with a solution for the alleged deficiencies. These findings were made despite the fact that the BOP in several internal communications acknowledged that Bannum did, in fact, meet the contract requirements. Forcing Bannum to expend the time and effort to respond to allegations of non-conformance, even though the BOP internally acknowledged that Bannum was, in fact, in compliance, strongly evidences BOP's breach of the duty to cooperate. More importantly, the BOP's actions evidence bad faith with an attempt to harm Bannum, or at the least, with a fraudulent attempt to extort additional services from Bannum at no charge to the BOP. However, once the BOP determined that Bannum was not going to be intimidated into performing additional services for free, and given that the BOP had acknowledged that Bannum was in compliance with the contract requirements, it began a process of negotiating with Bannum and directed it to submit cost proposals to provide additional transportation services in excess of the contract requirements. Additionally, Bannum was forced 21

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to expend time and expense attempting to reverse the improper negative score in the CEF, which, upon information and belief, was based on the transportation issue. In its REA, Bannum initially requested compensation for the extra-contractual costs expended by Bannum in dealing with all aspects of the transportation issues. In its motion for partial summary judgment, defendant does not question Bannum's entitlement to these costs, but merely alleges that Bannum could not support the claimed costs. Bannum is entitled to its costs of negotiating the transportation issue, since the BOP was admittedly responsible for these costs, and directed Bannum to submit cost proposals because of it. Furthermore, the BOP through its actions in an attempt to force Bannum to provide

transportation at no cost continuously wrote Bannum up in its various monitoring reports and CEFs, causing Bannum to spend extra time and effort rebutting the falsehoods. As such, Bannum is entitled to its costs incurred in seeking its equitable adjustment because of the BOP's actions, including estimated added administrative time, estimated added phone, travel, etc., and leasehold improvement and proposal preparation costs. Furthermore, Bannum is entitled to proposal preparation expenses. Bannum spent a considerable amount of time and effort in preparing the transportation proposals as requested by the BOP. This also included the time and effort in traveling and meeting with BOP officials. These costs were properly charged as direct costs because to treat the expenses as indirect costs would unfairly and inequitably burden other contracts. Allied Material & Equip. Co., ASBCA 17318, 75-1 BCA ¶ 11,150; See also, Interpretation No. A to Cost Accounting Standard 401, 41 Fed Reg. 24691 (1976) (recognizes costs of preparing proposal specifically required by a provision of an existing contract may be charged directly even though other proposal costs are charged indirect).

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Furthermore, after the costs proposals were submitted, Bannum filed a REA (PFUF 152). The costs of compiling the REA, including professional costs, is also an allowable cost. Pursuant to FAR 31.205-33(a)(b), the cost of "Professional Services" are allowable when they are acquired to "...obtain information, advice, opinions, alternatives, conclusions,

recommendations, training, or direct assistance, such as studies, analyses, evaluation, liaison with Government officials, or other forms of representation." In Bill Strong Enterprises, Inc. v. Shannon, 49 F.3d 1541, 1550 (Fed. Cir. 1995), the Federal Circuit provided the following guidance regarding recovery of legal fees incurred in the preparation of an REA: In classifying a particular cost as either a contract administration cost or a cost incidental to the prosecution of a claim, contracting officers, the Board, and courts should examine the objective reason why the contractor incurred the cost. If a contractor incurred the cost for the genuine purpose of materially furthering the negotiation process, such cost should normally be a contract administration cost allowable under FAR 31.205-33, even if negotiation eventually fails and a CDA claim is later submitted. On the other hand, if a contractor's underlying purpose for incurring a cost is to promote the prosecution of a CDA claim against the Government, then such cost is unallowable under FAR 31.205-33. Bill Strong Enterprises, Inc. v. Shannon, 49 F.3d 1541, 1550 (Fed. Cir. 1995), overruled in part on other grounds, Reflectone, Inc. v. Dalton, 60 F.3d 1572, 1579 (Fed. Cir. 1991) (en banc); See also, Grumman Aerospace Corp., ASBCA No. 50090, 01-1 BCA ¶ 31,316, aff'd, 34 Fed. Appx. 710 (Fed. Cir. 2003). Despite the auditor's and BOP's representations that Bannum did not support these costs, the record establishes otherwise. For example, David Lowry supplied a detailed affidavit to the auditor which laid out all of the extra costs incurred and a detailed explanation as to why the costs were incurred (See Exhibit 17, pgs. DCAA001741-001744). In addition, Bannum provided the following support to the auditor: 23

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·

Voluminous documents as listed in the auditor's working papers (se Exhibit 18, pg. DCAA001240);

· ·

Invoices (Exhibit 18, pgs. DCAA001250-001279); Travel Costs (Exhibit 18, pgs. DCAA 001241, 001243, 001326-001331, 001338-001339); and

·

Invoices for proposal preparation costs (Exhibit 18, pgs. DCAA001319001325).

Despite the BOP's representations, Bannum is allowed to estimate its costs as part of a request for equitable adjustment. See C. H. Hyperbarics, Inc., ASBCA No. 49375 et al., 04-1 BCA ¶ 32,568 (2003) (Board held where estimates have reasonable basis in fact, they constitute sufficient evidence to make a fair and reasonable approximation of the damages). Bannum is also entitled to its extra administrative expenses, even though they were originally classified as indirect expenses. The DCAA auditor is wrong as a matter of law. FAR 31.202 defines a "direct cost" as any cost that can be identified specifically with a particular final cost objective. Dave Lowry, John Rich, and other administrative personnel from Bannum worked directly on the Government-caused problems, i.e. transportation issue, and the Government reaped the benefits of this work effort. Bannum personnel are not charging for routine administrative or clerical activities that were part of its bid. Electronics Corporation of America, ASBCA No. 4770, 61-2 BCA & 3,134; see also Gladwynne Construction Co., ASBCA No. 47076, 95-1 BCA & 27,297 (testimony that a president spent one-half of his time in a contract delay was allowed as a direct charge). There is nothing objectionable about charging a cost directly, provided it is properly allocable to the contract, and other costs of the same character are excluded from indirect pools charged to the contract in order to avoid `double screening,' or duplicate charging. Peter Kiewit

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Sons' Company, ENGBCA No. 4742, 85-1 BCA & 17,911 at 100,248. In addition, when it is necessary to arrive at an equitable result re-classification from indirect-to-direct expenses may be appropriate. Agrinautics, ASBCA Nos. 21512, 21608, 21609, 79-2, BCA & 14,149; See also The George Hyman Construction Company, ENGBCA 4541, 85-1 BCA & 17,847. The intent is to make an equitable adjustment to the contractor. Defendant's gratuitous comments in its brief that Bannum is somehow committing fraud, in light of the above, especially in light of Bannum's ongoing contracts with the BOP, are outrageous, uncivil, if not downright unethical. As explained above, Bannum provided the auditor and the BOP with detailed support for all of its costs. (ii) The BOP Acted in Bad Faith in Not Exercising the Option to Contract J200c-397:

On or about July 1, 1998, the BOP awarded follow-on Contract No. J200c-397 to Bannum, which was for a base period of two years, with an additional three 1-year options (PFUF 123). The Statement of Work required that the Bannum facility was to be located within one mile of public transportation, which was fully complied with at all times during the contract. (PFUF 125). During the performance of this contract, as well as the preceding contract, the BOP, on numerous occasions issued monitoring reports alleging that Bannum had failed to meet the contract's transportation requirements (PFUF 126), despite internally acknowledging that Bannum was in compliance (PFUFs 128, 129, 130). The BOP clearly acted in bad faith by forcing Bannum to respond to allegations that it internally admitted were not true for the purpose of extorting additional services at no cost. Subsequently, when it recognized that it was not going to extort added work out of Bannum, the BOP began to request cost proposals to supply additional, extra-contractual transportation services. (PFUFs 131, 134, 138, 140). Bannum dutifully submitted four proposals 25

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which offered various services at varying costs. (PFUFs 131, 135, 138, 140). The BOP failed to negotiate the proposals, culminating in the BOP threatening that if Bannum did not satisfy the BOP's transportation concerns, or if they were unable to reach a mutual agreement, Option Year 2 would not be exercised. On or about September 5, 2000, the BOP prepared a Request for Contract Action ("RCA") stating that since an agreement could not be reached with Bannum, and that they considered Bannum's proposals to be unreasonable, Option Year 2 would not be exercised. The RCA included a Government estimate of the cost to provide the added transportation services under a new procurement. (PFUF 143). However, the BOP estimate was significantly higher than Bannum's previously supplied proposal of June 13, 2000 (PFUF 140), and even higher than Bannum's subsequently supplied proposal of January 24, 2001. (PFUF 149). Eventually,

Bannum was awarded the follow-on contract at a price significantly lower than the BOP's estimate. (PFUF 144). Therefore, the BOP's justification for not exercising Bannum's option years on the grounds that its proposals were unreasonable, is clearly an intentional misrepresentation of the facts. Bannum alleges that, based upon the BOP: (a) forcing Bannum to expend effort and cost responding to allegations of non-compliance, when it internally admitted that there was no noncompliance, (b) attempting to extort extra-contractual performance from Bannum at no cost, and (c) threatening Bannum that it would not exercise the option years unless Bannum lowered its proposal costs, the BOP exhibited continuous bad faith in its dealings with Bannum. Further, Bannum alleges that this continuous bad faith culminated in its improper refusal to exercise the option years, on the alleged false justification that Bannum's proposals were unreasonable, when in fact, the BOP's estimate was significantly higher. Therefore, Bannum alleges that the reason

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behind BOP's improper and bad faith failure to exercise the option years was the intent to harm Bannum for its refusal to "tow the line" and agree to provide extra-contractual services at no cost. While it has been held that that contract options bind the option giver and not the option holder, Hi-Shear Technology Corp. v. United States, 53 Fed.Cl. 420 (2002), a breach of contract action for the failure of the Government to exercise an option may be asserted upon the showing of bad faith. It is well established that government officials are presumed to act conscientiously and in good faith in the discharge of their duties. To overcome this presumption, a plaintiff must prove, by clear and strong evidence, specific acts of bad faith on the part of the Government, which must raise to the level of well nigh irrefragable proof. Info. Tech. & Applications Corp. v. United States, 316 F.3d 1312 (Fed.Cir.2003). However, in Libertatia Associates, Inc. v. United States, 46 Fed.Cl. 702 (Fed.Cl.2000), refused to adhere to this level of proof, stating: ...Applying the standard of `irrefragable proof' meaning `impossible to refute' would appear to insulate the government action from any review by courts ­ no matter how egregious. Such an absolute standard would not serve the interests of justice between the government and its citizens. The courts are certainly not called on to allow government actors to treat contractors with bad faith or a specific intent to injure in any case where the bad faith is not, in effect, admitted by the government. The court therefore considers whether the plaintiff in this case has shown `evidence of some specific intent to injure' plaintiff by the government or whether the government `was actuated by animus toward the plaintiff.' Libertatia, at 707, quoting Kalvar Corp. v. United States, 211 Ct.Cl. 192, 543 F2d. 1298, 1302 (1976) and Librach v. United States, 147 Ct.Cl. 605, 614 (1959). Bannum was awarded the 1993 contract and all options were exercised. Bannum was and then was awarded the follow-on contract (No. J200c-397), under which the BOP shorted it 27

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two years solely because of the transportation issue. Bannum was then awarded a 2001 followon contract with all options being exercised. This contract has recently expired, and Bannum was unsuccessful at getting another follow-on contract. Once the Bannum facility was established, all of the options were exercised with the exception of the two years relating to the transportation issue. As such, despite the BOP's arguments, Bannum was still shorted two years of contract revenues because of the BOP's bad faith. Bannum supported its damages during the DCAA audit, as recognized in the DCAA working papers (see Exhibit 17, pg. DCAA 001741; see also Exhibit 18, pg. DCAA 001240) Specifically, Bannum provided the government with the rationale of the 28% overhead and profit factor used by Bannum in the calculation. Thus Bannum did lose two years of contract

performance and therefore had two years of lost profit. PLAINTIFF'S CROSS-MOTION FOR LEAVE TO FILE THIRD AMENDED COMPLAINT Plaintiff by and through undersigned counsel, pursuant to Rule 15 of the Rules of the United States Court of Federal Claims, respectfully moves the Court for leave to file its Third Amended Complaint and states as follows: 1. On or about September 12, 2002, Plaintiff filed its Second Amended Complaint in

the instant action. 2. Pending now before the Court is a Defendant's Motion for Summary Judgment

seeking dismissal of Counts 6 ("Beaumont") & Count 8 ("Montgomery"), contending that it should have judgment as a matter of law. 3. Pursuant to Count 6, Bannum seeks its costs, time, and effort in dealing with a

false and misleading cure notice. Pursuant to Count 8, Bannum is seeking its time and effort in dealing with the BOP's attempts to leverage Bannum to correct the BOP caused transportation 28

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issue with threats of not exercising the options and then creating false justification to support the non-exercise of the options. 4. When the Second Amended Complaint was filed, the Beaumont and Montgomery

contracts had not been completed and the BOP's action and inaction were on-going. In addition, discovery has identified certain documentation divulging facts such as the "School Agreement" on Count 6. On Count 8, the BOP created documentation that the transportation issue was not Bannum's fault and then created false justification with respect to the non-exercise of the options. The additional documents augment and supplement the claim. Therefore, Bannum is requesting that it be allowed to amend its complaint based on these ongoing events as well as to revise the damage amounts. 5. There is no prejudice to the BOP with respect to the Beaumont claim because of

the BOP's secret internal documentation that was not divulged to Bannum. Bannum increased the amount requested with respect to Count 8 during the Audit. An Audit Report was issued showing the increased dollar amount. 6. In addition, since the filing of the Second Amended Complaint, the BOP

consented to a judgment with respect to Count 7. As such Bannum has reserved its rights to Equal Access to Justice Expenses ("EAJA"). Therefore, language has been added updating this portion of the Complaint. 7. This is not a major rewrite of the complaint, but a few paragraphs have been

added and the dollar amounts of the claims have been revised accordingly. The changes have been highlighted on the attached complaint (see Exhibit 19). 8. Leave to amend should be freely granted. Only minor revisions are being made to

the complaint. The BOP has had the information all along.

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WHEREFORE, Bannum prays that this Court allows Bannum amend its complaint pursuant to the above. CONCLUSION It is clear that Count 6 and Count 8 are rife with material factual disputes. The fact that the BOP did not disclose the secret school agreement is grounds, in and of itself, for this Court to deny defendant's motion with respect Count 6. With respect to Count 8, the BOP internally admitted that it was responsible for the transportation problem, but yet attempted to leverage Bannum by continuously blaming Bannum for this problem. The BOP then threatened Bannum that unless the transportation issues were resolved, it would not exercise the options. The BOP then created false justification supporting its non-exercise of the options. Even though Bannum was successful in obtaining a follow-on contract, it was still shorted two years of contract revenues. The BOP's own internal documentation is conflicting, and on this basis, defendant's motion with respect to Count 8 should be denied. Additionally, leave should be freely given where no prejudice will result. As such, plaintiff respectfully requests that the Court grant its cross-motion for leave to amend its complaint to reflect its increased costs. Dated: October 12, 2007 Respectfully submitted,

/s/ Joseph A. Camardo, Jr. Joseph A. Camardo, Jr. Camardo Law Firm, P. C. 127 Genesee Street Auburn, NY 13021 Tel: (315) 252-3846 Fax: (315) 252-3508 Attorneys for Plaintiff

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CERTIFICATE OF SERVICE I hereby certify that on this 12th day of October, 2007, a copy of Plaintiff's Response to Defendant's Motion for Partial Summary Judgment and Cross-Motion for Leave to Amend Complaint 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/ Joseph A. Camardo, Jr. Joseph A. Camardo, Jr.

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