On March 23, 2017, the Civilian Board of Contract Appeals (CBCA) granted summary judgment to the Department of Energy in a contract dispute with CB&I AREVA MOX Services, LLC (Mox Services) over the appropriate fee in a contract for mixed oxide fuel fabrication and reactor irradiation services with the National Nuclear Security Administration (NNSA).

The contract at issue was a cost-plus-fixed-fee contract originally awarded in 1999, which called for the design and planning of a domestic mixed oxide fuel fabrication facility. MOX’s contract also provided for three option phases for cold start-up, hot start-up and operations, and deactivation, respectively. The genesis of the dispute between MOX and NNSA can be traced to 2008, when NNSA indicated that it wanted to exercise the hot start up component of the second option phase early. As directed, MOX submitted a proposal for the hot start-up work, which the parties then negotiated over the next several years.

In 2011, while negotiations related to the partial second option were ongoing, the parties exercised a contract modification calling for a .25% increase in the fee rate for the first option phase, and the same modification also provided for an additional .25% increase upon the exercise of the partial second option phase covering the hot start-up. In 2013, NNSA informed MOX that it was assessing alternative plutonium strategies and that it would no longer continue negotiation of the hot start-up phase. In 2015, MOX requested that its fee be raised an additional .25% as called for under the 2011 modification because the delays were outside of its control. In 2016, MOX submitted a certified claim under the Contract Disputes Act, seeking payment of fees at the increased rate called for in the 2011 modification.

On cross motions for summary judgment, the CBCA sided with DOE holding that the government retains the unilateral right to exercise an option under a government contract. In this case, despite NNSA’s intent to exercise of the hot start-up portion of phase 2 and subsequent the parties’ prolonged negotiations related to it, that course of dealing was insufficient to establish that NNSA, in fact, exercised the second option. Because NNSA never exercised any part of the second option entitling MOX to the higher fee rate, the CBCA granted DOE’s motion and denied MOX’s appeal.

The case is CB&I AREVA MOX SERVICES, LLC, CBCA No. 5395 (Mar. 27, 2017) available here.