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Law Mathematics and Technology Inc. v. United States

December 12, 1985


Appealed from: Armed Services Board of Contract Appeals.

Rich, Smith, and Newman, Circuit Judges.


RICH, Circuit Judge.

This appeal is from the October 29, 1984, final decision of the Armed Services Board of Contract Appeals (board), No. 29714, 85-1 BCA (CCH) para. 17,765 (ASBCA1984), denying appellant Law Mathematics and Technology, Inc. (LMT) additional funding for a contract involving research on air-launched and anti-ship missile defense for the Navy. We affirm.


LMT is a research and development consulting firm. The president and principal corporate officer of LMT is George Curtis Sponsler, III, Ph.D, a lawyer recently admitted to the bar and a former employee of the Navy. Dr. Sponsler operates the consulting business from his personal residence in Bethesda, Maryland, and is also acting as LMT's counsel. He states in his reply brief that in the period here involved the contract at bar "was LMT's only source of revenue."

In 1982 LMT submitted an unsolicited research proposal to the Office of Naval Research (ONR) for a four-phase research project to identify anti-ship missile defense requirements. Phase I covered "defense of a single ship against air-launched missiles," and listed a total cost of $99,607 to be paid to LMT and a subcontractor.

The Navy handles such research proposals by assigning them to a "scientific officer," who reviews the proposal and then determines whether to recommend or deny funding for the proposal. The scientific officer who reviewed LMT's proposal for the ONR, Dr. Thomas Varley, indicated to LMT that the Navy was interested in certain portions of the proposal. At Varley's suggestion, LMT submitted an amended proposal in December, 1982, which emphasized Phase I of the original proposal. In July, 1983, Varley again expressed interest in the proposal, but explained to Sponsler that the Navy lacked sufficient funds at that time to pay the entire $99,607. Varley then asked Sponsler how much it would cost the Navy to have LMT work on Phase I for the remainder of the 1983 fiscal year ("FY 83," until September 30, 1983). Sponsler replied that $50,000 would be adequate, and Varley prepared and submitted a procurement request for $50,000 toward completion of Phase I.

As a result of the scientific officer's request, the Navy approved the expenditure of $50,000 towards the performance of Phase I of the LMT proposal and turned the matter over to one of its contracting officers, David van Metre, to negotiate a contract. During negotiations van Metre informed Sponsler that the Navy was not interested in Phases II-IV, and that because only $50,000 had been allotted to performance of Phase I, the proposed contract would include a "Limitation of Funds" clause. Van Metre also informed Sponsler that LMT could begin work at its own risk, and LMT commenced working on the project on July 18, 1983. The contract was formally executed on September 12, 1983.

The first page of the contract noted that $50,000 had been allotted by the Navy for LMT's work. The Limitation of Funds clause provided, inter alia, that "the Contractor agrees to perform or have performed work on this contract up to the point at which the total amount paid and payable by the Government pursuant to the terms of the contract approximates but does not exceed the total amount allotted to the contract." In addition, the contract included an "Explanation of Limitation of Funds" which provided:

It is hereby understood and agreed that the Estimated Cost of the performance of this contract is $95,075.00, the Fixed Fee is $4,532.00, and the Total Estimated Cost & Fixed Fee is $99,607.00. The amount presently available for payment and allotted to this contract is an Estimated Cost of $47,710.00, a Fixed Fee of $2,290.00, and a Total Estimated Cost & Fixed Fee of $50,000.00. It is estimated that the amount allotted of $50,000.00 will cover the period 18 July 1983 through 30 September 1983.

If additional allotments were not made to the contract, the rights of the parties were to be governed by subsection (d) of the Limitation of Funds clause:

(d) Except as required by other provisions of this contract specifically citing and stated to be an exception from this clause, the Government shall not be obligated to reimburse the Contractor for costs incurred in excess of the total amount from time to time allotted to the contract, and the Contractor shall not be obligated to continue performance under the contract . . . or otherwise to incur costs in excess of the amount allotted to the contract . . . .

At the time of signing the contract, Sponsler was aware that only $50,000 of appropriated 1983 funds had been allotted for performance of the contract, and no promises or assurances of any kind were expressly or impliedly made to LMT by any representative of the Navy that Congress would appropriate or that the Navy would allot fiscal year 1984 ("FY 84") funds to cover LMT's efforts beyond the $50,000 amount in the contract. Nevertheless, near the end of August, 1983, scientific officer Varley prepared an additional procurement request from FY 84 funds for $49,608, the final portion of the estimated cost of Phase I, to be added to the original contract ...

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