Plain meaning in complex contracts, a case study
Iron Bow Technologies v. Agile Defense Inc. (Fairfax Cir. Ct. Feb. 6, 2020)
The US Air Force hires Agile Defense Inc. to update computer software on military bases around the world. Agile, in turn, hires subcontractors to perform the work, including Iron Bow Technologies. Among other things, the Agile–Iron Bow subcontract provides:
Section 1.6. Total Anticipated Value: The Minimum Value of this Subcontract is the value of the initial number of units identified in Subcontractor’s estimated Work Share in Exhibits C & D [it’s undisputed that this equals $11,140,356]. However, the Maximum Value Agile may issue under this Agreement is estimated to be . . . $11,140,356. This amount does not include travel costs which are TBD and cost reimbursable. This amount represents the estimated value based upon anticipated work and Subcontractor’s proposal and is not a guarantee of any work. Subcontractor shall not be reimbursed in excess of this amount unless the Total Ceiling Value is modified in writing by Agile's Contract/Subcontract Administrator. The Subcontractor shall notify Agile at least (30) days in advance if it anticipates that the work performed under this Agreement shall reach the Total Ceiling Value
Section 1.8. Rates: Agile has no obligation to compensate Subcontractor for any amount exceeding the funded value, unless this Subcontract is modified in writing by the Parties. Exhibit B reflects the FFP [short for "firm fixed price"] Unit Rates for the current period of performance.
Section 2.2. Invoices: Subcontractor will invoice Agile by CLIN [short for "contract line item number"] . . . . CLINs 0013, 0014, and 0015 invoiced on monthly basis. CLINs 0002 through 0012 invoiced upon subtask completion in accordance with the Final Deployment Inventory per MAJCOM as specified in the PWS and Exhibit D. Agile shall pay the Subcontractor invoices no later than five (5) business days after Agile's receipt of the related Client payment made to Agile under the Prime Contract for each specific CLIN.
Does the subcontract obligate Agile to pay Iron Bow $11,140,356 (that is, the "Minimum Value") for its performance under the agreement? Fairfax Circuit Court: No.
As the Virginia Supreme Court explains, "There is a temptation, regrettably natural to the adjudicative task, to allow complex draftsmanship to discourage the search for the plain meaning of words used in technical agreements. But complexity should not be confused with convolution, and agreements are not ambiguous simply because they deal with a technical subject that may be considered complex to the uninformed lay person.”
Here, the Fairfax Circuit Court concludes, the contract is complex. But its meaning is plain. Section 1.6 provides an “estimated value based upon anticipated work” and “not a guarantee of any work.” Sections 1.8 and 2.2, in turn, establish that invoicing and payment is based on units actually completed. Thus, Iron Bow is entitled to a fixed fee per unit completed under the contract, not a flat fee for the entire contract.