UNITED STATES CLAIMS COURT
FRY COMMUNICATIONS, INC. --
INFOCONVERSION JOINT VENTURE,
Plaintiff,
v.
THE UNITED STATES,
Defendant
No. 174-89C
22 Cl. Ct. 497
Michael A. Dornbaum, Commack, New York, attorney of record for
plaintiff.
Hillary A. Stern, Washington, D. C., with whom was Assistant
Attorney General Stuart M. Gerson, for defendant.
Reginald W. Gibson, Judge.
Introduction
This case requires the court to decide -- whether the Government
Printing Office Board of Contract Appeals (GPOBCA) erred in
upholding the contracting officer's disallowance of certain claim
charges by plaintiff pursuant to a contract to revise United
States Army manuals. It is the liability issue which is before
the court on the parties' cross-motions for summary judgment. For
the reasons set forth below, we hold -- (i) that the GPOBCA
committed legal error in interpreting the contractual definition
of the word "transaction"; and (ii) that the court will stay a
ruling on the parties' cross-motions for summary judgment pending
a remand to the Board of Contract Appeals for certain findings of
fact.
Facts 1
On May 4, 1983, the Government Printing Office (GPO) instituted
formal two-step advertising for bids with respect to Purchase
Order 33846, Jacket 421-710, otherwise known as GPO program 400-S
(878-85-067). The objective of the program was to create and
maintain a system for the electronic storage and revision of
United States Army manuals. In step one of the process, offerors
were requested to provide technical proposals without pricing. In
step two, offerors with acceptable technical proposals submitted
price quotations for the various tasks outlined in the Invitation
for Bids (IFB), which was drafted by the GPO. Plaintiff, a joint
venture consisting of Fry Communications, Inc. and Infoconversion
(hereinafter Fry or plaintiff), submitted a satisfactory
technical proposal and received an IFB.
The IFB set forth a number of required contractor functions and
modifications, including but not limited to -- (i) data capture,
which involves keying current Army manuals into an electronic
data base; (ii) digitizing art work and other illustrations to
permit them to be read by the computer; (iii) photo composition,
a computer process by which the computer composes the page in
accordance with Army specifications; (iv) revision of the text,
referred to as "updating and editing;" and (v) traditional
printing.
The dispute at bar concerns the interpretation of the contractual
term "transaction." This is so because a "transaction" is an
activity warranting a contractual charge by plaintiff. More
importantly, its definition is determinative as to whether an
activity by plaintiff entitles it to one or two monetary
transaction charges. Relevant portions of the GPO-drafted IFB
provided as follows:
DEFINITIONS:
Character: A letter, number, graphic symbol, punctuation mark, or
word space.
* * *
Updating and Editing: Any deviation from the original copy made
at the direction of the ordering agency after initial keyboarding
[entry into the database], and may consist of:
(1) Change or Addition - A single move or addition of words. May
be a code, a word, a phrase, a sentence, a paragraph, or a block
of continuous reading matter inserted at one place.
(2) Deletion - An elimination at a single place.
* * *
Global Search Alteration: Altering a specific letter group (word
or words), figure group or code throughout a database via the use
of machine generated data manipulation capabilities.
* * *
Transaction: The act of making an update or edit in the data
base. It includes searching the data base for the location of the
alteration and the movement or deletion of existing data.
* * *
Measurement of and Payment for Updating and/or Editing:
* * *
(2) The charge for deleting or transposing type lines without
setting and inserting new material will be one "per transaction"
charge for each group, regardless of the number of lines in a
group. Proofs of any deleted matter must be submitted with the
voucher to obtain payment.
* * *
SCHEDULE OF PRICES
* * *
9. Updating and/or editing:
(a) Flat charge for making a deletion, a
change, or an addition . . . . per
transaction . . . . . . . . . . .$
(b) Adding characters to file from
manuscript, reprint copy, or proofs:
(1) Text . . . per 1,000 characters . . . $
(2) Tabular . . . per 1,000 characters . . .$
* * *
In submitting bids under step two, Fry and three other offerors
proffered unit prices on over 100 line items. The IFB provided
estimates on the anticipated number of units per year2 for each
line-item category. Under the general heading of --
"Updating/editing" were line items, inter alia, for "Flat
charge/transaction," for which Fry bid $ 3.06, and for "Adding
[text] characters to the file," for which Fry bid $ 4.59 per
1,000 characters. There is nothing in the record to indicate, and
it is not alleged therein, that Fry sought clarification from the
GPO prior to bidding in January 1984,3 as to the meaning of the
term "transaction." Fry was the lowest responsive, responsible
bidder, and was awarded the contract on February 9, 1984.4
After performing the initial data capture function of the
contract, Fry began the updating and editing process. When Fry
submitted payment vouchers to the GPO for performing the updating
and editing, it claimed two transaction charges wherever a
deletion of existing material and the addition of new material
were made at the same location in the text. The contracting
officer rejected the invoices, informing Fry that the search and
deletion portion of the operation was chargeable as one
transaction, and that the addition of new material without a
second search should be charged as adding characters to the file,
not as a second transaction. In view thereof, Fry appealed the
contracting officer's decision to the GPOBCA.
In a decision dated July 29, 1986, GPOBCA No. 9-85, the GPOBCA
granted the government's motion for summary judgment, ruling that
Fry was entitled to only one "per transaction" charge "when in
nearly simultaneous sequence it must make both a deletion and an
addition to the data base at precisely the same physical point in
the data base file." The GPOBCA's decision was explicitly based
on its construction of the IFB. After reviewing the contract
provisions set forth above, inter alia, the GPOBCA concluded that
the word "change," under the "Updating and Editing" portion of
the definition of a "transaction," was used in its ordinary
sense. Relying on selected definitions from the Random House
Unabridged Dictionary, the GPOBCA held that the word "change" had
"subsumed in its meaning the concomitant correlative concept of
'deletion' as a necessary process to its accomplishment," and,
therefore, a revision consisting of a deletion and an addition at
one place was just one "change," hence, one "transaction," and
hence, only one charge.
The GPOBCA's adverse decision was appealed by Fry to this court,
invoking jurisdiction under 28 U.S.C. � 1491(a)(1),5 and review
pursuant to the standards of the Wunderlich Act, 41 U.S.C. ��
321, 322.6 The parties agree on all of the material facts, and,
consequently, have filed cross-motions for summary judgment.
Positions of the Parties
Plaintiff
The fundamental position of plaintiff is that -- the decision of
the GPOBCA, interpreting and construing the contractual
definition of the term "transaction," is erroneous as a matter of
law and should be reversed by this court. Given the foregoing,
the parties have stipulated that the broad dispositive issue is
--
Whether the Government Printing Office Board of Contract Appeals
. . . properly interpreted certain language contained in a
contract between plaintiff and defendant known as Purchase Order
33846, Jacket 421-710 or GPO Program 400-S (878-85-067) . . .?
In its motion for summary judgment, plaintiff further refined its
position by averring three basic contentions --
(i) the Board erred as a matter of law when it refused to apply
definitional terms contained in the contract;
(ii) said contractual language is clear and unambiguous and must
be applied; and
(iii) alternatively, while assuming said definitional language to
be ambiguous, it is susceptible to mare than one reasonable
interpretation, thus latent, and the doctrine of contra
proferentem must be applied.
First, Fry argues in explicating its position that under the
clear and unambiguous language of the IFB, it is entitled to a
transaction charge when -- a deletion is made, and a second
transaction charge when an addition is simultaneously made at the
same location. Specifically, Fry relies on the broad contractual
definition of the word "transaction" as being "any deviation"
from the text, as well as on the more specific definition of
"update or edit," which explicitly includes an "addition" and a
"deletion" as acts constituting separate transactions.
Fry takes issue with the GPOBCA's interpretation of a chargeable
"transaction." For example, "change or addition" are singularly
contractually defined as a "single move or addition" of words,
while "deletion" is defined as an elimination. Notwithstanding
the explicit contractual definition of the word "change," supra,
the GPOBCA held that the word "change" "was used in its ordinary
sense and not in fact defined itself in the contract," thus, its
meaning, says the Board, comports with the dictionary definition
-- "replace with another." The court is urged, therefore, to
reject the GPOBCA's interpretation of the term "transaction"
inasmuch as it ignores the understanding of the parties that it
shall have a special meaning.
Alternatively, Fry argues that even assuming that the IFB was
ambiguous, it was latently so and the interpretation it advances
is reasonable under the circumstances. This is so, argues
plaintiff, because even after a search, it must perform two
separate operations when it deletes and adds material, even at
the same location. Finally, Fry avers that when it arrived at its
bid of $ 3.06 per transaction charge, it relied on the
aforementioned interpretation of the term "transaction," and
designed a system which would count a "transaction" for billing
purposes every time material was either deleted or added. Because
any ambiguity was latent, and not patent, says plaintiff, and
since its interpretation of the GPO's drafted IFB was reasonable,
upon which it relied, the court should apply the doctrine of
contra proferentem.
Defendant
While defendant argues that the IFB was clear and unambiguous, it
contends that Fry's interpretation of the contract provisions as
to what acts constitute a properly chargeable "transaction" is
incorrect. To support its interpretation of the IFB, defendant
relies on its reading of a portion of the contractual definition
of "transaction" -- as "including searching the data base for the
location of the alteration and the movement or deletion of
existing data." According to defendant, the essence of a
chargeable "transaction" is a revision of the data base, i.e., a
"change," performed in conjunction with a required search of the
text. Since a "change" is literally a replacement with another,
in the contractual context the parties meant that where an
"addition" is at the same location as a "deletion," a second
search is not required, thus a second transaction charge cannot
be justified for such an addition. In such circumstances, the
addition of new material at the same location as a deletion
should be charged, not as an additional "transaction," but
rather, as "adding characters to the file."
The government contends, therefore, that Fry's interpretation of
the IFB is unreasonable, because it renders the provision for
"adding characters to the file" meaningless. Further, the
government argues that the actual computer process for indicating
deletion of old material and addition of new material is
irrelevant to the meaning of the IFB. Finally, the government
argues that to the extent that the contract defines a
"transaction" as the "act of making an update or edit," and an
update and edit is further defined as a "change," the GPOBCA
nevertheless correctly held that in truth the word "change" was
not defined in the IFB, but rather was meant in its ordinary
sense.
Scope of the Court's Opinion
Against the foregoing background, the issues postured herein
require this court to decide -- whether the IFB, as drafted by
the GPO, was ambiguous. If so, was the ambiguity patent or
latent, and if the latter, did Fry actually and reasonably
interpret and rely on the IFB to allow two transaction charges
for a search of the text, deletion of existing material, and the
insertion of new material at the same location?
Discussion
I. Jurisdiction and Standard of Review7
Fry's contract with the GPO is not subject to the Contract
Disputes Act (CDA), 41 U.S.C. �� 601-613. This is so because the
CDA applies to contracts entered into by executive agencies, 41
U.S.C. � 602(a), whereas here the GPO is not such, but rather is
an agency of Congress. Tatelbaum v. United States, 749 F.2d 729
(Fed. Cir. 1984) (relying on International Graphics v. United
States, 4 Cl. Ct. 186, 197 (1983)). Nevertheless, the Claims
Court has jurisdiction over this case, inasmuch as plaintiff
seeks money damages for breach of an express contract with the
United States, under the Tucker Act, 28 U.S.C. � 1491(a)(1).8
This court will, therefore, review the GPOBCA's decision under
Wunderlich Act standards, 41 U.S.C. �� 321, 322.9
In a Wunderlich Act case, the court sits, in effect, as an
appellate tribunal, limiting its review to the record developed
before the agency. In such cases, the parties frame the operative
issues through motions for summary judgment. Titan Pacific
Constr. Corp. v. United States, 17 Cl. Ct. 630, 632 (1989), aff'd
mem., 899 F.2d 1227 (Fed. Cir. 1990). Here, the GPOBCA made no
findings of fact, inasmuch as the dispositive issue here is one
of contract interpretation. In such circumstance, the GPOBCA's
conclusions of law are not binding on this court, and the court
is free to resolve questions of contract interpretation de novo.
HRH Constr. Co. v. United States, 192 Ct. Cl. 912 (1970); 41
U.S.C. � 322. In this circuit, contract interpretation is clearly
a question of law and, as here, may be appropriately resolved by
a decision on summary judgment. P. J. Maffei Building Wrecking
Co. v. United States, 732 F.2d 913, 916 (Fed. Cir. 1984).
II. Applicable Law
We observe at the threshold that "in construing a contract, the
language of the instrument is given its ordinary and commonly
accepted meaning unless it is shown that the parties intended
otherwise." Hol-Gar Mfg. Corp. v. United States, 169 Ct. Cl. 384,
390 (1965) (emphasis added). "An interpretation that gives a
reasonable meaning to all parts of the contract will be preferred
to one that leaves portions of the contract meaningless." Fortec
Constructors v. United States, 760 F.2d 1288, 1292 (Fed. Cir.
1985). In interpreting contract terms, "the context and intention
(of the parties) are more meaningful than the dictionary
definition." Rice v. United States, 192 Ct. Ct. 903, 908 (1970).
Contractual language is ambiguous if it is "susceptible of two
different interpretations, each of which is found to be
consistent with the contract's language." Sun Shipbuilding &
Drydock Co. v. United States, 183 Ct. Cl. 358, 372 (1968)
(citation omitted). Differing reasonable interpretations, without
more, "are sufficient to convince [a court] that there was . . .
a latent ambiguity." Edward R. Marden Corp. v. United States, 803
F.2d 701, 705 (Fed. Cir. 1986). In the case of a latent
ambiguity, contra proferentem, infra, applies "subject to the
condition that the alternative interpretation tendered [by the
non-drafting party] is reasonable." William F. Klingensmith, Inc.
v. United States, 205 Ct. Cl. 651, 657 (1974). The doctrine of
contra proferentem properly "puts the risk of [latent] ambiguity,
lack of clarity, and absence of proper warning on the drafting
party which could have forestalled the controversy; it pushes the
drafters toward improving contractual forms[,] and it saves
contractors from hidden traps not of their own making." Sturm v.
United States, 190 Ct. Ct. 691, 697 (1970). Additionally, "where
a contractor seeks recovery based on his interpretation of an
ambiguous contract, he must show that he relied on this
interpretation in submitting his bid." Fruin-Colnon Corp. v.
United States, 912 F.2d 1426, 1430 (Fed. Cir. 1990) (quoting Lear
Siegler Management Services v. United States, 867 F.2d 600, 603
(Fed. Cir. 1989)). Finally, general contract law also provides
that in construing ambiguous contracts "the courts will look to
the construction the parties have given to the instrument by
their conduct before a controversy arises." Edward R. Marden
Corp., 803 F.2d at 705.
On the other hand, if an IFB is patently ambiguous, "the
contractor has a duty to inquire of the contracting officer the
true meaning of the contract before submitting a bid." Newsom v.
United States, 230 Ct. Cl. 301, 303 (1982) (footnote omitted). We
view this as an affirmative duty. It is also settled in this
court that an ambiguity is patent when there is "an obvious error
in drafting, a gross discrepancy, or an inadvertent but glaring
gap." WPC Enterprises, Inc. v. United States, 163 Ct. Cl. 1, 6
(1963). What constitutes a patent ambiguity "cannot be defined
generally, but [must be determined] on an ad hoc basis [by]
looking to what a reasonable man would find to be patent and
glaring." Max Drill, Inc. v. United States, 192 Ct. Cl. 608, 626
(1970) (citation omitted). In short, the patent ambiguity
doctrine is aimed at avoiding costly post-award litigation,
S.O.G. of Arkansas v. United States, 212 Ct. Cl. 125 (1976), as
well as protecting the integrity of the bidding process by
ensuring that all offerors bid on the same specifications.
Newsom, 230 Ct. Cl. at 303.
We find the Court of Claims' explication of the ambiguity
doctrine particularly apt:
Both plaintiff's and defendant's interpretations [of the
contract] lie within the zone of reasonableness; neither appears
to rest on an obvious error in drafting, a gross discrepancy, or
an inadvertent but glaring gap; the arguments, rather, are quite
closely in balance. It is precisely to this type of contract that
this court has applied the rule that if some substantive
provision of a government-drawn agreement is fairly susceptible
of a certain construction and the contractor actually and
reasonably so construes it, in the course of bidding or
performance, that is the interpretation which will be adopted --
unless the parties' intention is otherwise affirmatively
revealed. . . . This rule is fair both to the drafters and to
those who are required to accept or reject the contract as
proffered, without haggling. Although the potential contractor
may have some duty to inquire about a major patent discrepancy,
or obvious omission, or a drastic conflict in provisions . . .,
he is not normally required (absent a clear warning in the
contract) to seek clarification of any and all ambiguities,
doubts, or possible differences in interpretation. The
Government, as the author, has to shoulder the major task of
seeing that within the zone of reasonableness the words of the
agreement communicate the proper notions -- as well as the main
risk of a failure to carry that responsibility. WPC Enterprises
v. United States, 163 Ct. Cl. 1, 6 (1963) (citations omitted;
emphasis added).
III. Analysis
The parties agree on all of the material facts, and have filed
cross-motions for summary judgment. As previously noted, the
substantive question presented is one of contract interpretation,
a pure question of law. We begin our analysis with the
observation that there are several questions which we must
address, and they are --
(i) Was the GPOBCA's decision correct as a matter of law?
(ii) If not, was there an ambiguity in the IFB?
(iii) Was each party's interpretation of the IFB within the zone
of reasonableness?
(iv) If there was an ambiguity, was it patent, i.e., did it
contain obvious errors, gross discrepancies, or glaring gaps?
(v) If the ambiguity was not patent but was latent, did plaintiff
rely on its interpretation in preparing its bid?
Said issues will be addressed seriatim. For the reasons set forth
below, the GPOBCA's decision is reversed.
A. The decision below
While the conclusions of law rendered by an agency board of
contract appeals are not binding on this court, 41 U.S.C. � 322,
an agency's interpretation of a contract is nevertheless entitled
to careful consideration and should be accorded some deference.
Raytheon Co. v. United States, 2 Cl. Ct. 763, 767 (1983), aff'd,
730 F.2d 1470 (Fed. Cir. 1984). For several reasons, however, the
court must, after reflection, reject the GPOBCA's interpretation
of the IFB.
First, and as previously noted, contractual terms are to be given
their plain and ordinary meaning unless it is shown that the
parties intended otherwise. Hol-Gar Mfg., 169 Ct. Cl. at 390. Put
another way, context and intent of the parties are more important
than bland dictionary definitions. Rice, 192 Ct. Cl. at 908.
It is indisputable that the GPO in its effort to contractually
define the term "transaction" intended to depart from the
ordinary and general meaning of the word inasmuch as it defined
it as an "update and edit," which was further defined as a
"change or addition" and "deletion," which were further defined
as a single move or addition and an elimination, respectively. By
applying a dictionary definition to the word "change," and by
disregarding the plain contractual meaning thereof, when it is
evident beyond cavil that the parties intended it to have a
special meaning, is clear error by the Board. Context and intent
of the parties is paramount in interpreting the contractual term
"transaction," thus, we hold that to arbitrarily disregard
contractual definitions in favor of dictionary meanings in a
highly technical contract, as here, is fundamental error.
Second, even if we were to agree with the GPOBCA's conclusion
that the term "change" was not defined in the IFB, but was merely
employed to help define other contractual terms, the court could
not countenance the GPOBCA's disingenuous use of the dictionary.
It is patently obvious that the GPOBCA attached only those
dictionary definitions of the word "change" which were compatible
with its objective and ignored those definitions which failed to
explicate the interpretation that the GPOBCA preferred. Indeed,
the essence of the very first dictionary definition cited by the
GPOBCA is simply "to make . . . different." That definition
clearly does not suggest that "change" only connotes
"replacement" or "substitution." To define a "change" in the
dictionary sense of "to make . . . different" would obviously
contemplate a mere "deletion" of a portion of the data base.
Other definitions of "change" given short-shrift (or no
consideration at all) by the GPOBCA include "vary," "alter,"
"amend," "modify" and "deviate." None of these definitions
suggest that "change" is synonymous with "substitute" or
"replace." Only by selectively citing hospitable definitions and
synonyms could the GPOBCA conclude that "change" really means the
same thing as "substitute" or "replace with another," which from
the GPOBCA's perception encompasses both a "deletion" and an
"addition."
Third, the GPOBCA's conclusion that the word "change" was used in
its ordinary sense raises more questions than it answers. For
example, if the IFB used the term "change" in its ordinary sense,
it is puzzling that the GPO went to the trouble of contractually
defining "addition" and "deletion," since addition of new
material and elimination of existing material are changes in the
ordinary sense.
Accordingly, the GPOBCA's decision must be set aside as clear
legal error.
B. Whether the IFB was ambiguous
Contractual language is ambiguous if it will sustain different
reasonable interpretations. Edward R. Marden Corp., 803 F.2d at
705; Sun Shipbuilding, 183 Ct. Cl. at 372. The dispute at bar
stems from the proper interpretation of the contractual
definition of the word "transaction." That definition, of course,
is critical to defendant's monetary obligation because the
contract provides that plaintiff may charge the GPO for each
"transaction." For the reasons set forth below, the court
concludes that the IFB is ambiguous, as both the government and
Fry advance different reasonable interpretations.
It is important to keep in mind, at the outset, the framework in
which the ambiguity analysis must take place. The government
cannot prevail simply by showing that its interpretation of the
IFB is somehow "better" than Fry's interpretation; the crucial
issue in this connection is whether Fry's interpretation is
within the zone of reasonableness. See WPC Enterprises, 163 Ct.
Cl. at 6. An additional imperative is -- whether the parties
advance different reasonable interpretations simultaneously, for
if there is only one reasonable interpretation, it follows that
the IFB is unambiguous. Further, if the IFB was unambiguous,
there would be no need to inquire whether Fry relied on its
interpretation when preparing its bid. With this framework in
mind, the court will proceed to analyze the reasonableness of the
respective interpretations advanced by the parties. Only if both
interpretations are reasonable will the court be required to
address whether the ambiguity was patent, and whether Fry
actually relied on its interpretation in preparing its bid.
1. Defendant's interpretation
Defendant initially contends that the IFB is clear and
unambiguous, and that there is, therefore, only one reasonable
interpretation. Defendant interprets the IFB as follows: a
deletion and an addition made at the same location entitles the
contractor to just one transaction charge (for the search and
deletion), and the addition of material at the same location,
without a second search, must be charged as adding characters to
the file. To support its interpretation defendant relies on only
the portion of the IFB's definition of a "transaction" as
"including searching the data base for the location of the
alteration and the movement or deletion of existing data." Based
on this provision, defendant argues that the essence of a
transaction is an alteration performed after a search of the
text. Since a deletion and an addition at the same location
requires just one search, such an operation is only one
transaction. Consequently, the government contends that the
effect of adding material at the location of a deletion should
only entitle plaintiff to a charge for "adding characters to the
file" and not a charge for a second transaction.
In this context, defendant maintains that -- a search followed by
a deletion at a location in the data base fits the contractual
definition of a chargeable "transaction." It further maintains
that it is improper to charge a second "transaction" where there
is but one search preceding a deletion and an addition at the
same location. Stated differently, to be entitled to two
transaction charges, defendant's position is that where there is
a deletion and an addition to the data base, there must be a
separate search and a separate location for each activity.
Given the foregoing, the court cannot say that the government's
interpretation is outside the "zone of reasonableness." Even
though the government relies on only portions of the contractual
definitions, the inferences the government draws are rational and
consistent with contract language, Sun Shipbuilding, 183 Ct. Ct.
at 372, and do not rest on any obvious errors, gross
discrepancies, or glaring gaps. WPC Enterprises, 163 Ct. Ct. at
6.
Still, the court is compelled to note that if defendant's
explanation of the IFB is what the GPO intended, it was within
the power, and undoubtedly the obligation, of the GPO to make the
IFB clear to bidders. To this end, the drafters of the IFB could
have simply said -- "An alteration requiring only one search of
the text, where a deletion and an addition is made at the same
location, entitles the contractor to one transaction charge."
There is no contractual provision which explicitly states that an
indispensable element of a "transaction" is a search of the text,
as defendant implies, and this seems to be precisely the sort of
"hidden trap," the risk of which should fall on the drafter.
Sturm, 190 Ct. Ct. at 697; WPC Enterprises, 163 Ct. Ct. at 6.
Having drafted the IFB, the government is in no position to argue
that Fry should have adopted the "correct" interpretation; by
including a few extra words, the GPO could have made its
purported intention crystal clear.
2. Fry's interpretation
"Transaction" is defined as "the act of making an update or edit
in the data base." Updating and editing are defined as "any
deviation from the original copy . . . ." Examples of such (as
noted by the language "and may consist of") are a "change or
addition," and a "deletion." Under such a broad definition it is
reasonable to conclude that adding material -- clearly a
"deviation" -- is a separate transaction. The same conclusion
would obtain with respect to a "deletion." At first blush, then,
Fry's interpretation of a "transaction" also appears to be
reasonable.
Fry agrees with the government's assertion that a search of the
text and a corresponding "deletion," standing alone, is a
transaction. It parts company with the defendant when it
(plaintiff) argues that a corresponding "addition," without
another search, is also a separate transaction. In support of
this position, Fry argues that the IFB does not explicitly say
that a search must precede each deviation (i.e., a deletion and
an addition) at the same location in order to have multiple
transaction charges. Stated differently, the IFB does not say
that two transaction charges cannot be made where one search
precedes a deletion and an addition at the same location. Given
the foregoing, argues Fry, it was reasonable to believe that the
IFB permitted a charge for a deletion as one transaction, and a
charge for an addition as a second transaction, even though the
alterations were made in the same location.
Paragraph (2) of the Measurement of and Payment for Updating
and/or Editing, IFB at p. 6, lends support to Fry's reading of
the IFB. Under paragraph (2), one transaction charge is permitted
for "deleting or transposing type lines without setting and
inserting new material" (emphasis added). By negative inference,
it is reasonable to conclude that an additional transaction
charge is permitted when new material is inserted.
The full definition of "Updating and Editing," which further
defines the term "transaction," lends additional support to Fry's
interpretation. That definition states that an update or edit is:
Any deviation from the original copy made at the direction of the
ordering agency after initial keyboarding [entry into the
database], and may consist of:
(1) Change or Addition - A single move or addition of words. May
be a code, a word, a phrase, a sentence, a paragraph, or a block
of continuous reading matter inserted at one place.
(2) Deletion - An elimination at a single place.
From these apparently multiple definitions, Fry asserts that
there are just three fundamental ways to alter the data base.
First, existing material can be moved from one location to
another: this is clearly what is meant by "a single move" or a
"change." Second, existing material can be eliminated: this is
clearly what is meant by "a deletion." Third, new material can be
added: this is either "an addition" or "adding characters to the
file." When the material added consists of words, phrases,
sentences, or paragraphs, it is chargeable as an "addition"; when
the material added is a "letter, number, graphic symbol,
punctuation mark, or word space," it is chargeable as "adding
characters to the file." Thus, given the contractual definition
of updating and editing, which defines a chargeable
"transaction," it is reasonable to interpret the IFB as allowing
a transaction charge for an "addition" (following a "deletion")
whenever words, phrases, sentences, or paragraphs are added to
the text, irrespective of whether one or two searches are
involved.
Paragraph (9) of the Schedule of prices, IFB at p. 11, also
appears to support Fry's interpretation that there are three
kinds of alterations chargeable as transactions. That paragraph
provides that for updating and/or editing (a definition of a
"transaction") a flat charge for making a deletion, a change, or
an addition is computed "per transaction." It would, therefore,
be unreasonable to assume (as does the Board) that there is a
fourth kind of transaction called a "change," defined as
constituting both an addition and a deletion at one location,
because such an assumption is contrary to the express provisions
of the IFB, and it leaves no room in the Schedule of Prices for
"a single move." A reasonable interpretation of the contractual
definitions of a "transaction" is that a "change" is "a single
move [of existing material]"; an "addition" is "addition [of new
material]"; and "deletion" is "elimination [of existing
material]."
Such an approach, which accounts for all possible types of
alterations in the Schedule of Prices, is reasonable insofar as
it comports with two fundamental principles of contract
construction: (i) meaning and effect should be given to all parts
of a contract, Fortec Constructors, 760 F.2d at 1292; and (ii)
when there is a clear intention to depart from the ordinary
meaning of terms, the contractual definitions govern over
ordinary meaning. Rice, 192 Ct. Cl. at 908; Hol-Gar Mfg., 169 Ct.
Cl. at 390. Eliminating existing material from the text, adding
new material to the text, or moving existing material from one
location to another, are all certainly "changes" to the text in
the ordinary or literal sense, but such an interpretation as
proffered by the Board renders the contractual definitions of
"deletion" and "addition" meaningless, or at least unnecessary.
Furthermore, by including a section of definitions of contract
terms, the GPO manifested a clear intention to depart from the
ordinary meaning of terms in the IFB. Thus, it was reasonable far
Fry not to resort to a dictionary (as the GPOBCA did) to help it
interpret the IFB.
The government contends that Fry's interpretation is
unreasonable, because it renders meaningless the eight line items
for adding characters to the file, as well as the IFB's explicit
estimate of over 19,000,000 characters to be added to the file
annually. After all, argues the government, under Fry's approach,
addition of characters to the file is always charged as a
"transaction" (so long as the characters form words). Fry offers
no explanation of how, when it prepared its bid, it interpreted
the GPO's estimate of 19,000,000 characters added to the file
annually, nor does Fry, after performing the contract, offer any
guidance to the court as to what "adding characters to the file"
might mean. Simply put, Fry ignores a key point in the
government's argument.
Nevertheless, the court rejects defendant's argument for two
reasons. First, the government's argument relies on the unstated
premise that a party bidding on a government contract is charged
with knowing the principle of contract interpretation, i.e., that
an interpretation giving meaning and effect to all portions of an
instrument is preferred to an interpretation that leaves any
portion meaningless. Of course, the court should interpret
contracts with the aforementioned principle in mind, but the
operative inquiry here is simply whether the interpretation
advanced by Fry -- ostensibly staffed by laymen -- is reasonable.
Second, and in any event, Fry could reasonably have interpreted
the provisions for adding characters to the file at face value
and moved on. In other words, Fry reasonably assumed that where
the materials added were words, phrases, paragraphs, and the
like, it was chargeable as an addition (see definition of
"addition" under updating and editing), whereas when characters
added were simply numbers, letters, codes, spaces, and graphic
symbols, it was chargeable as adding characters.
To reiterate, the question is not whether the interpretation
advanced by the government is somehow better than Fry's
interpretation, but rather, whether Fry's interpretation was
within the zone of reasonableness. In light of the foregoing, we
hold that Fry's interpretation of the IFB as allowing two
transaction charges when a deletion and an addition are made at
the same location is within the zone of reasonableness. The court
has already determined that the government also advances a
reasonable interpretation. Therefore, we further hold that the
IFB was ambiguous. Edward R. Marden Corp., 803 F.2d at 705
(contract is ambiguous if there are different reasonable
interpretations). Under the doctrine of contra proferentem, Fry's
reasonable interpretation of the GPO-drafted IFB will be adopted,
so long as the IFB was not patently ambiguous, William F.
Klingensmith, 205 Ct. Cl. at 657, and provided further that Fry
relied on its interpretation in preparing its bid. Fruin-Colnon,
912 F.2d at 1430.10
C. Whether the ambiguity was patent
The IFB was patently ambiguous if it contained a gross
discrepancy, an obvious error in drafting, or a glaring gap. WPC
Enterprises, 163 Ct. Ct. at 6. Case law is clear that what
constitutes a patent ambiguity "cannot be defined generally, but
[must be determined] on an ad hoc basis of looking to what a
reasonable man would find to be patent and glaring." Max Drill,
Inc. v. United States, 192 Ct. Ct. 608, 626 (1970) (citation
omitted). Thus, the inquiry into -- whether an ambiguity is
patent is a search, through the eyes of a reasonable man, for
such discrepancies, errors, or gaps; if the court finds none, it
can only conclude that the ambiguity is not patent. On the other
hand, if the court concludes that the ambiguity is patent, then
its inquiry here is at an end, since the record is clear that Fry
failed to seek clarification of the IFB prior to bidding. Newsom,
230 Ct. Ct. at 303.
The court has painstakingly examined the IFB in an effort to find
any arguable gross discrepancies, obvious errors, or glaring
gaps. We are constrained to conclude that such examination
revealed only minor discrepancies and esoteric gaps, to the
extent that the court had to strain -- indeed, contrive -- to
identify them. We are thoroughly satisfied that none rise to the
level of an ambiguity so obvious and glaring that Fry should have
noticed and sought clarification. The contractor "is not normally
required (absent a clear warning in the contract) to seek
clarification of any and all ambiguities, doubts, or possible
differences in interpretation." WPC Enterprises, 163 Ct. Ct. at
6. We hold, therefore, that the ambiguities herein are not
patent, but are latent.
The only arguably patent ambiguity is whether "addition" is
included in a "transaction." The contractual definition states
that a transaction "includes searching the data base for the
location of the alteration and the movement or deletion of
existing data." Generally, if the expression of one thing in a
contract is the exclusion of another, Public Utility Dist. No. 1
of Ferry County v. United States, 20 Cl. Ct. 696 (1990), then
transaction, as defined, supra, appears at first blush not to
include an addition. However, notwithstanding the foregoing, a
transaction is also an "update or edit," which explicitly "may
consist of" a deletion, change, and/or addition. While a portion
(i.e., that part seeking to give an example) of the definition of
a "transaction" does not expressly contemplate an addition and
under another provision it does, we do not find this circumstance
to ipso facto render the IFB patently ambiguous. Such a treatment
here fails to create, in our opinion, gross discrepancies,
obvious errors, or glaring gaps. We so conclude because "when
there are two clauses in a contract which are in any respect
conflicting, the clause which is specially directed to particular
matter . . . controls over a clause which is general in its
terms, . . . although within its general terms the part may be
included." United Pacific Insurance Company v. United States, 204
Ct. Cl. 686, 694 (1974). Here, the definition of transaction,
which appears to exclude addition, is cast in general terms. The
general definition directs the reader to refer to the more
specific examples of "transactions" under the updating and
editing definition, and the specific examples there given include
deletion, change, and addition as "transactions." Therefore, the
specific definition, which includes addition, controls.
D. Whether Fry relied on its interpretation
Having concluded that Fry advances a reasonable interpretation of
the latently ambiguous IFB, there remains the matter of whether
Fry relied on its interpretation of the IFB in preparing its bid.
it is well-settled that "where a contractor seeks recovery based
on his interpretation of an ambiguous contract, he must show that
he relied on this interpretation in submitting his bid." Fruin-
Colnon Corp. v. United States, 912 F.2d at 1430 (quoting Lear-
Siegler Management Serv. v. United States, 867 F.2d at 603). This
rule is aimed at preventing contractors from recovering
additional compensation under a contract based on a mere
afterthought, i.e., based on an interpretation of the contract
not contemplated by the contractor at the bidding stage. Put
another way, the actual-reliance rule forces the contractor to
prove that it has actually been injured as the result of the
government's inclusion of a latently ambiguous provision in the
contract. if the contractor did not actually rely on its
interpretation when formulating its bid, it cannot later claim
that it will lose money if its post-bid interpretation is not
adopted.
Fry alleges in paragraph (9) of its complaint before this court,
as it did in paragraph (7) of its complaint before the GPOBCA,
that when its bid was prepared, it believed that it could charge
for two transactions following a search, when making a deletion
and an addition at the same location in the text. Additionally,
Fry accompanies its motion for summary judgment with the
affidavit of Mr. George Devine, the president of joint venturer
Infoconversion, wherein Mr. Devine also attests that when his
firm prepared its bid, it then believed that two transactions
could be charged when a deletion and an addition were made at the
same location. The government has neither admitted nor denied
Fry's allegations regarding the reliance issue, nor does the
government contest the statements in Mr. Devine's affidavit.
For purposes of the present case, however, Fry must show that
when it prepared its bid -- specifically, when it arrived at its
bid of $ 3.06 per transaction -- it believed that it could charge
for two transactions whenever a deletion and an addition were
made at the same location in the text. There is no testimony in
the record on this issue, nor are there any worksheets, notes, or
other materials in the record which might shed some light on how
Fry arrived at its $ 3.06 figure. The record developed thus far
on the reliance issue consists merely of allegations (which the
government neither admits nor denies) and self-serving statements
made after the dispute arose. See Edward R. Marden Corp., 803
F.2d at 705 (court will look to interpretation given to
instrument by parties before a cortroversy arises). Such
allegations and statements on this record are, therefore, not
sufficient to enable Fry to carry its burden of proof on the
reliance issue.
The GPOBCA did not make any factual findings on the reliance
issue, and indeed, made no factual findings at all, because it
concluded as a matter of law that Fry's interpretation of the IFB
was unreasonable, and thus granted the government's motion for
summary judgment. However, Fry explicitly argued before the
GPOBCA that when it prepared its bid, it reasonably and actually
interpreted the IFB to allow two transaction charges following a
single search when an addition and a deletion were made at the
same location. Clearly, then, since Fry raised the reliance issue
and was not permitted to adduce evidence thereon at the board of
contract appeals, it is entitled to an evidentiary hearing on the
reliance issue. This court cannot hold such an evidentiary
hearing, because in a Wunderlich Act case, a reviewing court is
strictly limited to the factual record developed before the
agency, and the reviewing court may not take evidence to
supplement the record. See United States v. Anthony Grace & Sons,
Inc., 384 U.S. 424, 432 (1966) (where agency board of contract
appeals does not make factual findings, Court of Claims in
Wunderlich Act review cannot make its own findings of fact; such
a case should be remanded to the board, since the task of
resolving factual issues is initially for the board, not the
Court of Claims, under standard government contract "disputes"
clause); accord, Titan Pacific, 17 Cl. Ct. at 632 n.4.
28 U.S.C. � 1491(a)(2) provides in pertinent part that "in any
case within its jurisdiction, the [Claims Court] shall have the
power to remand appropriate matters to any administrative or
executive body or official with such direction as it may deem
proper and just." Therefore, pursuant to RUSCC 60.1, this matter
is hereby remanded to the GPOBCA, for a period not to exceed six
months, for an evidentiary hearing on the sole factual issue of
-- whether Fry actually relied, at the time it prepared its bid,
on its present interpretation of the IFB, supra. The court has
ruled as a matter of law that: (i) the IFB was ambiguous; (ii)
the ambiguity was not patent but latent; and (iii) under the
doctrine of contra proferentem, Fry's interpretation will be
adopted so long as it establishes that it actually relied on
saidinterpretation when its bid was prepared.
Conclusion
The decision of the GPOBCA is, therefore, reversed wherein it
found that as a matter of law it is appropriate and proper to
apply the normal dictionary meaning to the word "change" when it
is clear beyond all doubt that the parties specifically intended
that said word be interpreted as agreed in the contract, Ruling
on the parties' cross-motions for summary judgment on the issue
of liability is stayed for a period of six months from the date
of this opinion, i.e., to and including August 5, 1991. This
matter is remanded to the GPOBCA for a fact-finding proceeding
consistent with this opinion.
IT IS SO ORDERED.
February 5, 1991, Filed
_______________
1 The court relies on the administrative record before the
GPOBCA and, in addition, adopts the parties' Stipulation of Facts
for the factual background.
2 The IFB contemplated a five-year contract term, assuming the
availability of funds.
3 The record does not reveal the precise date when Fry submitted
its bid.
However, the IFB was sent to offerors on January 9, 1984, and the
contract was awarded on February 9, 1984.
4 The three other bids for the "per transaction" line-item were
not close to Fry's bid of $ 3.06. For this same line-item, they
were $ 9.92, $ 0.50, and $ 0.50.
5 28 U.S.C. � 1491(a)(1) provides in relevant part:
The United States Claims Court shall have jurisdiction to render
judgment upon any claim against the United States founded . . .
upon any express or implied contract with the United States . . .
.
6 The Wunderlich Act, 41 U.S.C. �� 321, 322, provides:
� 321. No provision of any contract entered into by the United
States, relating to the finality or conclusiveness of any
decision of the head of any department or agency or his duty
authorized representative or board in a dispute involving a
question arising under such contract, shall be pleaded in any
suit now filed or to be filed as limiting judicial review of
any such decision to cases where fraud by such official or his
said representative or board is alleged: Provided, however,
That any such decision shall be final and conclusive unless
the same is fradulent [sic] or capricious or arbitrary or so
grossly erroneous as necessarily to imply bad faith, or is not
supported by substantial evidence.
� 322. No Government contract shall contain a provision making
final on a question of law the decision of any administrative
official, representative, or board.
7 The court is obliged to inquire whether it has jurisdiction,
even where the parties are silent on the issue. Hambsch v. United
States, 857 F.2d 763, 765 (Fed. Cir. 1988), cert. denied, 109
S.Ct. 1969 (1989).
8 See supra note 5.
9 See supra note 6.
10 Having concluded that both the government and Fry advance
reasonable interpretations of the IFB, the court rejects Fry's
primary position, namely, that the IFB was clear and unambiguous.