Sage Acquisitions LLC v. Secretary of Housing and Urban Development

United States Court of Appeals
for the Federal Circuit
______________________
SAGE ACQUISITIONS LLC,
Appellant
v.
SECRETARY OF HOUSING AND URBAN
DEVELOPMENT,
Appellee
______________________
2023-1907
______________________
Appeal from the Civilian Board of Contract Appeals in
No. 7319, Administrative Judge Kyle E. Chadwick,
Administrative Judge Harold D. Lester, Jr., Administrative
Judge Patricia J. Sheridan.
______________________
Decided: October 18, 2024
______________________
MICHAEL ROBERT RIZZO, Pillsbury Winthrop Shaw
Pittman LLP, Los Angeles, CA, argued for appellant. Also
represented by DINESH CHRISTOPHER DHARMADASA, AARON
RALPH.
JESSICA R. TOPLIN, Commercial Litigation Branch,
Civil Division, United States Department of Justice,
Washington, DC, argued for appellee. Also represented by
BRIAN M. BOYNTON, WILLIAM JAMES GRIMALDI, PATRICIA M.
MCCARTHY.
Case: 23-1907 Document: 34 Page: 1 Filed: 10/18/2024

-- 1 of 19 --

SAGE ACQUISITIONS LLC v. HUD 2
______________________
Before DYK, CHEN, and CUNNINGHAM, Circuit Judges.
DYK, Circuit Judge.
This case involves contracts between the appellant,
Sage Acquisitions LLC (“Sage”), and the United States
Department of Housing and Urban Development (“HUD”)
for management and marketing services. These services
were to be provided in connection with properties that had
been foreclosed and were subsequently in possession of
HUD as part of its Real Estate Owned (“REO”) disposition
program. Sage is an asset management contractor that
was awarded three of these contracts (the “REO
Contracts”). Sage filed certified claims with the HUD
contracting officer for settlement costs from the
termination for convenience of the REO Contracts,
equitable adjustments based on the reduction in scope of
properties assigned to the REO Contracts, and damages for
scope reduction. Sage also sought damages for HUD’s
alleged breach of: (1) a contractual option provision of the
three REO Contracts and (2) a related bridge contract
(“Bridge Contract”), covering performance for a period after
the REO Contracts were terminated. The Civilian Board
of Contract Appeals (“Board”) denied relief. We affirm.
BACKGROUND
I
HUD has adopted a single-family mortgage insurance
program, which insures approved lenders against the risk
of loss on loans for purchases of single-family homes. HUD
administers the program through the Federal Housing
Administration, which is an organizational unit within the
agency. In the typical case, if a debtor of a HUD-insured
loan defaults, the property becomes part of HUD’s REO
portfolio. The property is foreclosed on by the lender and
conveyed to HUD, and the lender files a claim for insurance
Case: 23-1907 Document: 34 Page: 2 Filed: 10/18/2024

-- 2 of 19 --

SAGE ACQUISITIONS LLC v. HUD 3
benefits with HUD. HUD then contracts with asset
managers like Sage to manage and market the properties
for sale.
HUD also uses alternatives to the REO disposition
program that do not involve HUD’s acquisition of the
properties. Under the Claims Without Conveyance of Title
procedure, the lender bids for properties at the foreclosure
sale. If the lender is the successful bidder, it may retain
the properties and file for insurance benefits or convey the
properties to HUD and file for benefits. If a third party is
the successful bidder, the lender in certain circumstances
can file a claim for insurance benefits. Under the
Distressed Asset Stabilization Plan, the insured amount is
paid to the lender, notes securing the loans and
accompanying liens are transferred to HUD and sold
through a competitive bidding process by HUD; foreclosure
of the properties is delayed. In some cases, properties can
also be sold by homeowners prior to foreclosure through a
short sale procedure, with the sale proceeds going to the
lender and HUD paying the lender the difference between
the sale proceeds and the insured amount.
These alternative approaches do not require asset
management contractors. Because these programs save
costs and streamline the disposition process, HUD recently
increased its use of them. As of 2012, these alternatives
comprised about 15–20% of total dispositions. HUD has
continued to manage its disposition of its property
inventories through a combination of the REO disposition
program and REO alternatives.
II
In July 2014, HUD issued a solicitation for REO
management and marketing services in twelve distinct
geographical areas across the United States. The
solicitation indicated that HUD intended to award a single
contract in each geographical area as a performance-based,
Case: 23-1907 Document: 34 Page: 3 Filed: 10/18/2024

-- 3 of 19 --

SAGE ACQUISITIONS LLC v. HUD 4
single-award indefinite-delivery, indefinite-quantity
(“IDIQ”) contract pursuant to Federal Acquisition
Regulation (“FAR”) 16.504 and included a listing of each
contract region with a corresponding guaranteed minimum
of $1,000,000. The solicitation expressly stated that “[t]he
minimum guarantee shall serve as full consideration for
the Government’s liability under this contract.” J.A. 259.
Additionally, during its Q&A in the solicitation process,
HUD clarified that it “makes no representation to future
volumes or averages.” J.A. 630. HUD awarded the three
REO Contracts to Sage on September 25, 2015, for three
areas in Denver, Philadelphia, and Atlanta.
Each REO Contract was identified as an IDIQ contract
and contained standard clauses associated with IDIQ
contracts, including FAR 52.216-22, HUD Acquisition
Regulation (“HUDAR”) 2452.216-76, and a guaranteed
minimum order of $1,000,000. See J.A. 657, 777, 785–86.1
1 The contractual provisions stated:
52.216-22 INDEFINITE QUANTITY (OCT 1995)
This is an indefinite quantity contract for the
supplies or services specified, and effective for the
period stated, in the Schedule. The quantities of
supplies and services specified in the Schedule are
estimates only and are not purchased by this
contract. . . . The government will order at least
the quantity of supplies or services designated in
the Schedule as the “minimum.”
HUDAR 2452.216-76, Minimum and Maximum
Quantities and Amounts for Order (Dec. 2012) The
minimum quantity and/or amount to be ordered
under this contract shall not be less than the
minimum quantity and/or amount shown in the
table below. The maximum quantity and/or
Case: 23-1907 Document: 34 Page: 4 Filed: 10/18/2024

-- 4 of 19 --

SAGE ACQUISITIONS LLC v. HUD 5
Section H.2 of each contract clarified that the minimum
guarantee of $1,000,000 would serve as full consideration
under the contract and limit the government’s liability. See
J.A. 747–48 (“The minimum guarantee shall serve as full
consideration for the Government’s liability under this
contract, and the Government will be under no obligation
to conduct further ordering of services . . . .”).
Each contract had a base period of less than one year
and provided that the contract “may be extended” for four
12-month option periods, J.A. 738–39, with written task
orders to be issued on a “yearly basis.” J.A. 663. As a
condition of the REO Contracts, the awardee was obligated
to incur significant costs during the start-up and ramp-up
phases of the contracts, including establishing physical
infrastructure, retaining staff, and obtaining subcontract
support, among other requirements. See J.A. 729–34.
Immediately after the REO Contracts were awarded to
Sage, several unsuccessful offerors filed bid protests with
the Court of Federal Claims (“Claims Court”), contending
that HUD’s discussions with the offerors were insufficient
under the terms of the solicitation and relevant
regulations. See Q Integrated Cos. v. United States, 126
Fed. Cl. 124, 127 (2016). On April 20, 2016, the Claims
Court agreed and enjoined Sage’s performance at the end
of Option Period 1. See id. at 146, 148. Thereafter, the
Claims Court permitted the REO Contracts to remain in
effect six months into Option Period 2. See Q Integrated
Cos. v. United States, 131 Fed. Cl. 125, 134 (2017).
Consequently, HUD exercised Option Period 2 for the REO
amount to be ordered under this contract shall not
exceed the maximum quantity and/or amount
shown in the table below.
J.A. 777, 785–86.
Case: 23-1907 Document: 34 Page: 5 Filed: 10/18/2024

-- 5 of 19 --

SAGE ACQUISITIONS LLC v. HUD 6
Contracts and issued six-month task orders under these
contracts on May 31, 2017. On November 30, 2017, HUD
also awarded the Bridge Contract to Sage, to be performed
after the last order periods under the REO Contracts
ended. Unlike the REO Contracts, the Bridge Contract
explicitly stated that it was a requirements contract.
In January 2018, HUD terminated the three REO
Contracts for convenience. In January 2019, Sage
submitted claims to the HUD contracting officer. As to the
original REO Contracts, Sage contended that they were
requirements contracts, not IDIQ contracts, so it was
entitled to recover termination costs. Sage pointed out that
although the contracts each included a guaranteed
minimum, they also indicated estimated prices far in
excess of $1,000,000. See J.A. 662 (estimating a contract
value of $7,562,406.50 during the base period). These
estimates were based on historical sales data, and Sage
alleged that it experienced considerably lower inventory
numbers once it began performance of the REO Contracts.
See Appellant’s Br. 27; J.A. 2893.
Sage claimed that HUD had constructively changed
the REO Contracts by diverting inventory from the REO
disposition program to REO alternatives, causing
inventories to fall far below the estimated quantities
contemplated by the contracts. Sage alternatively claimed
that HUD was liable for defective specifications or
negligent estimates, failure to disclose superior knowledge,
breach of the covenant of good faith and fair dealing, or
mutual mistake of fact between the parties. The parties do
not dispute that HUD met the guaranteed minimum set
forth in the REO Contracts. Nor in general do the parties
dispute that if the REO Contracts were IDIQ contracts,
Sage could not recover either termination for convenience
costs or equitable adjustments after HUD met its
guaranteed minimums.
Case: 23-1907 Document: 34 Page: 6 Filed: 10/18/2024

-- 6 of 19 --

SAGE ACQUISITIONS LLC v. HUD 7
Sage also argued that HUD improperly exercised
Option Period 2 of the REO Contracts by issuing a six-
month task order, and that HUD breached the Bridge
Contract by diverting inventory to REO alternative
dispositions. In January 2022, the HUD contracting officer
denied Sage’s claims, concluding that the REO Contracts
were IDIQ contracts; that HUD had satisfied the minimum
guarantee of $1,000,000 for each contract; and that HUD
had not violated either the options provisions of the REO
Contracts or the Bridge Contract.
Sage appealed to the Board. The Board, like the HUD
contracting officer, denied each of Sage’s claims, holding
that the REO Contracts were IDIQ contracts and that Sage
was not eligible to receive termination for convenience
costs, equitable adjustments, or recover for breach once the
guaranteed minimums had been met; that the REO
Contracts did not require HUD to issue one-year task
orders; and that HUD had no further obligations under the
Bridge Contract because Sage knew about HUD’s evolving
policy positions on the use of REO alternatives when it
negotiated and entered into the Bridge Contract. See Sage
Acquisitions LLC v. Dep’t of Hous. & Urban Dev., CBCA
7319, 23-1 BCA ¶ 38,315 at 186,056–59.
This timely appeal followed. We have jurisdiction
pursuant to 28 U.S.C. § 1295(a)(10).
DISCUSSION
This court reviews questions of law, including
interpretations of contracts, de novo. Rockies Express
Pipeline LLC v. Salazar, 730 F.3d 1330, 1335–36 (Fed. Cir.
2013). The determination of contract type is a question of
law, “not controlled by a label in the contract.” Maint.
Eng’rs v. United States, 749 F.2d 724, 726 n.3 (Fed. Cir.
1984). We will set aside findings of fact by the Board if they
are arbitrary, capricious, or unsupported by substantial
Case: 23-1907 Document: 34 Page: 7 Filed: 10/18/2024

-- 7 of 19 --

SAGE ACQUISITIONS LLC v. HUD 8
evidence. 41 U.S.C. § 7107(b)(2); see also Tip Top Constr.
Inc. v. Donahoe, 695 F.3d 1276, 1281 (Fed. Cir. 2012).
I
Sage first contends that it is entitled to recover because
the Board erred in characterizing the REO Contracts as
IDIQ contracts rather than requirements contracts. Sage
contends that even though the contracts were identified as
IDIQ contracts, provided guaranteed minimums, and did
not include clauses required for requirements contracts
such as FAR 52.216-21 and HUDAR 2452.216-77, they
were in substance requirements contracts because HUD
was obligated to provide all REO work to Sage for the
geographic areas covered by the contracts. Sage urges that
the plain language of Sections 6.2.1.1 and 6.2.1.2 conferred
such exclusivity. Sections 6.2.1.1 and 6.2.1.2 stated that
“all” acquisitions in the contracts’ respective geographic
areas were covered by the contracts. See J.A. 733.
A
When interpreting a contract, “[o]ur analysis begins
with the language of the written agreement.” Premier Off.
Complex of Parma, LLC v. United States, 916 F.3d 1006,
1011 (Fed. Cir. 2019) (citing NVT Techs., Inc. v. United
States, 370 F.3d 1153, 1159 (Fed. Cir. 2004)); see also C.
Sanchez & Son, Inc. v. United States, 6 F.3d 1539, 1543
(Fed. Cir. 1993) (“A contract is read in accordance with its
express terms and the plain meaning thereof.”). “We must
interpret [a contract] as a whole and ‘in a manner which
gives reasonable meaning to all its parts and avoids conflict
or surplusage of its provisions.’” United Int’l Investigative
Servs. v. United States, 109 F.3d 734, 737 (Fed. Cir. 1997)
(quoting Granite Constr. Co. v. United States, 962 F.2d 998,
1003 (Fed. Cir. 1992)).
Our cases have contemplated that indefinite-delivery
supply contracts must fit into one of three possible types:
Case: 23-1907 Document: 34 Page: 8 Filed: 10/18/2024

-- 8 of 19 --

SAGE ACQUISITIONS LLC v. HUD 9
“those for a definite quantity, those for [IDIQ contracts,]
and those for requirements.” Ace-Fed. Reps., Inc. v.
Barram, 226 F.3d 1329, 1331 (Fed. Cir. 2000) (quoting
Torncello v. United States, 681 F.2d 756, 761–62 (Ct. Cl.
1982) (en banc)); see also FAR 16.501-2(a). While contracts
must fit into one of these three types, “[a] contract is not
unenforceable merely because it does not fit neatly into a
recognized category.” Ace-Fed. Reps., 226 F.3d at 1332.
Both IDIQ contracts and requirements contracts
provide the government with flexibility in scheduling
deliveries and ordering services on an as-needed basis. The
touchstone of a requirements contract is exclusivity—the
government must obligate itself to purchase all its needs
from the contractor. See Modern Sys. Tech. Corp. v. United
States, 979 F.2d 200, 205 (Fed. Cir. 1992) (“[A]n essential
element of a requirements contract is the promise by the
buyer to purchase the subject matter of the contract
exclusively from the seller.”). This court has explained that
the conferral of exclusivity must be clear from the face of
the contract, and the mere inclusion of “terms that suggest
exclusivity” is not enough to create a requirements
contract. Coyle’s Pest Control, Inc. v. Cuomo, 154 F.3d
1302, 1305–06 (Fed. Cir. 1998). A requirements contract
may also provide a minimum quantity that the government
may order under each individual order. See FAR
16.503(a)(2).
In contrast, the touchstone of an IDIQ contract is a
guaranteed minimum that when fulfilled fully discharges
the government’s liability. In other words, IDIQ contracts
limit the government’s obligation to the minimum quantity
specified in the contract. See FAR 16.504(a)(1); see also
Travel Ctr. v. Barram, 236 F.3d 1316, 1319 (Fed. Cir. 2001).
B
The REO Contracts stated on their face that they were
IDIQ contracts. Section B.1 in each contract, entitled
Case: 23-1907 Document: 34 Page: 9 Filed: 10/18/2024

-- 9 of 19 --

SAGE ACQUISITIONS LLC v. HUD 10
“CONTRACT DEFINITION – INDEFINITE
DELIVERY/INDEFINITE QUANTITY,” stated that “[t]his
is a performance-based, single award Indefinite Delivery
Indefinite Quantity contract as defined in [FAR
16.504]. . . . The contract minimum and maximum
quantities available for order are specified in HUDAR
2452.216-76.” J.A. 657. The contracts stated that “[t]he
minimum guarantee shall serve as full consideration for
the Government’s liability under this contract[.]” J.A. 747.
The language of the REO Contracts unequivocally made
clear that the parties entered into IDIQ agreements. See
Varilease Tech. Grp., Inc. v. United States, 289 F.3d 795,
799 (Fed. Cir. 2002) (explaining that a contractor has “no
reasonable basis” to believe that it has entered into a
requirements contract when the “language of the contract
clearly sets forth the essentials of an [IDIQ] contract”).
Sage responds that the REO Contracts cannot be IDIQ
contracts because of Sections 6.2.1.1 and 6.2.1.2, which
Sage argues conferred exclusivity that would be
inconsistent with IDIQ contracts:
6.2.1.1 31st[ ]Day – On the thirty-first (31st)
calendar day after the effective date of the contract
or at the end of the startup period if extended by
the [contracting officer] beyond the 30th day, the
Contractor shall begin performance of marketing
and sales services for all new acquisitions in
accordance with this [performance work
statement].
. . . .
6.2.1.2 61st Day – Assignment of Unsold Inventory
– On the sixty-first (61st) calendar day after the
effective date of the contract, the Contractor shall
be assigned, via P260 all unsold inventory in its
awarded geographic area.
Case: 23-1907 Document: 34 Page: 10 Filed: 10/18/2024

-- 10 of 19 --

SAGE ACQUISITIONS LLC v. HUD 11
J.A. 733 (emphasis added).
According to Sage, the use of the word “all” in these
provisions conferred exclusivity to Sage and created
requirements contracts, notwithstanding the IDIQ labels
the parties had given to the contracts. Sage further
contends that any ambiguity with respect to exclusivity in
Section 6.2 should be resolved in its favor, pointing out that
the solicitation stated that “the government intends to
award a single contract in each of the geographical areas
rather than multiple awards in each area[,]” J.A. 180, and
that, in its Q&A in the solicitation process, HUD described
Section 6.2.1.2 as follows:
[Q.] Section 6.2.1.2-61st day: Paragraph one says
unsold inventory will be assigned in a random yet
equal share in the awarded geographic area;
however, Section 1.4 on page 14 says there is only
one contractor per geographic area. Please clarify.
A. If there is only one contractor per area, then the
one contractor will receive all properties for the
area provided. Section 6.2.1.2 has been revised
accordingly.2
J.A. 607. Neither party disputes that Sage was the only
awardee for the areas that were the subject of the REO
Contracts. HUD nonetheless responds that neither Section
6.2.1.1 nor Section 6.2.1.2 required that Sage receive all
new REO acquisitions.
2 Section 6.2.1.2 originally provided that each
contractor would be assigned “a random yet equal share of
unsold inventory in its awarded geographic area.” J.A. 244.
This section was amended to state that the contractor
would be assigned “all unsold inventory in its awarded
geographic area.” J.A. 733.
Case: 23-1907 Document: 34 Page: 11 Filed: 10/18/2024

-- 11 of 19 --

SAGE ACQUISITIONS LLC v. HUD 12
Our predecessor court in Mason v. United States, 615
F.2d 1343 (Ct. Cl. 1980), confronted a similar argument
from a governmental contractor and concluded that the
contracts were IDIQ contracts. In Mason, the contracts at
issue stated they were construction-type contracts for a
one-year period in fixed geographical areas, with the
“minimum quantity of work . . . required . . . [to] not total
less than five thousand dollars.” Id. at 1344–45. The
contractor in Mason argued that its contracts were
nonetheless requirements contracts because of a provision
stating that labor and equipment “will be furnished and
installed by a single contractor at the unit price
established.” Id. at 1345. The court explained that this
provision merely described the nature of the planned work,
laying out “what the contractor’s capabilities shall be and
where he may be required to perform his services[—]not
what the Government is obligated to order.” Id. at 1346.
The court further noted that interpreting the contracts as
requirements contracts on the basis of this language would
render the guaranteed minimum provisions superfluous
and would conflict with the provisions in the “Nashville
Contracts” explicitly reserving the right to contract with
other contractors. Id. at 1348, 1350; see also Coyle’s Pest
Control, 154 F.3d at 1306 (holding that a contract requiring
the contractor “to furnish all labor, service, equipment,
transportation, materials and supplies to provide . . .
services on assigned properties” could not be a
requirements contract because it did not require HUD to
assign all such properties to the contractor).
Similarly, Sections 6.2.1.1 and 6.2.1.2 here simply
described the government’s plans for the manner in which
the work would be performed. In Mason the two Nashville
Contracts stated that any award under the contracts would
“not prohibit or restrict the Government from having any
work items performed by Government employees or by
Case: 23-1907 Document: 34 Page: 12 Filed: 10/18/2024

-- 12 of 19 --

SAGE ACQUISITIONS LLC v. HUD 13
others,” indicating that the contracts were not
requirements contracts. 615 F.2d at 1345.
Similarly, here, Sage’s interpretation of Sections 6.2.1.1
and 6.2.1.2 would also render inoperable Section H.2’s
reservation of the right for the government to work with
other contractors. Section H.2 unequivocally entitled HUD
to reduce Sage’s work and award contracts to additional
contractors for a particular area:
After meeting the guaranteed contract
minimum . . . the Government reserves the right to
non-competitively increase or reduce the
geographic service area of this contract . . . . Under
such circumstances, the Government could either
invite one or more contractors to assume
responsibility for the performance of increased
geographic scope activities in accordance with the
terms and conditions of a then existing contract for
similar services in another area, or the
Government could elect to allow two or more
contractors for similar services to submit contract
modification proposals . . . .
J.A. 747–48.
Section H.2, in permitting HUD to unilaterally reduce
the scope of Sage’s geographical region to zero and to utilize
other contractors, was similar to the Nashville Contracts
in Mason. In fact, counsel for Sage at one point at oral
argument conceded that the provision permitted HUD to
award contracts to additional contractors.3 This ability to
3 “Q. If they exercised the option in H.2, they could
have brought in another contractor to perform in the same
geographic area? A. Yes, sir.” Oral Arg. at 2:01–2:09.
While counsel attempted to retract this concession in
rebuttal, id. at 25:24–40 (“I made a misstatement to you
Case: 23-1907 Document: 34 Page: 13 Filed: 10/18/2024

-- 13 of 19 --

SAGE ACQUISITIONS LLC v. HUD 14
engage other contractors is fatal to Sage’s characterization
of the REO Contracts as requirements contracts. As this
court has explained, a requirements contract cannot be
formed without a promise by the government to purchase
all of its needs from the awardee. See, e.g., Coyle’s Pest
Control, 154 F.3d at 1305 (“[A] requirements contract
necessarily obligates the Government to purchase
exclusively from a single source.”); Modern Sys. Tech.
Corp., 979 F.2d at 205 (“A requirements contract is formed
when the seller has the exclusive right and legal obligation
to fill all of the buyer’s needs for the goods or services
described in the contract.”). HUD could not bind itself to
purchase all services from Sage while simultaneously
reserving the right to employ other contractors. See, e.g.,
Franklin Co. v. United States, 381 F.2d 416, 419 (Ct. Cl.
1967) (explaining that a contract that permitted the
government to order the same services from multiple
contractors could not be a requirements contract as the
government cannot “bind itself twice for the same work”).
Sage nevertheless urges that even if Section H.2
permitted HUD to contract with other contractors, HUD
did not exercise this option and thus the REO Contracts—
as they existed at the time of termination—were
requirements contracts. This argument again misses the
mark. The problem for Sage is that, by retaining the
government’s right to work with other contractors, the
REO Contracts on their face are incompatible with
exclusivity.
earlier, so however you want to characterize it, H.2 does not
add a second contractor to an area.”), we are persuaded
that the initial admission was correct under the REO
Contracts.
Case: 23-1907 Document: 34 Page: 14 Filed: 10/18/2024

-- 14 of 19 --

SAGE ACQUISITIONS LLC v. HUD 15
II
Sage next contends that the Board erred in holding
that HUD’s issuance of a six-month task order for Option
Period 2 was proper. Section F.2 of the REO Contracts,
entitled “PERIOD OF PERFORMANCE,” provided that
the government could exercise its option to extend the
terms of the contracts for four consecutive twelve-month
option periods. J.A. 738–39. Section B.6 of the REO
Contracts, entitled “ORDERING,” stated that “Written
Task Orders for [the contracts] will be issued on a yearly
basis.” J.A. 663. According to Sage, Section B.6 of the REO
Contracts required HUD to issue 12-month task orders,
rather than merely issuing task orders once per yearly
option period. In support of this argument, Sage notes that
in government contracts, the term “will” is used to indicate
an obligation. See 85 Fed. Reg. 53,755, 53,756 (Aug. 31,
2020) (“To indicate an obligation for the Government to act,
the term ‘will’ is used.”).
We cannot agree that the government was obligated to
issue task orders of one year. Nothing in Section B.6 nor
any other provision of the REO Contracts imposed an
affirmative obligation on HUD to issue work orders of a 12-
month duration. Rather, the most natural reading of the
language in the provision is simply that task orders were
to be issued once per year. See Yearly, WEBSTER’S THIRD
INTERNATIONAL DICTIONARY (2002) (“reckoned by the year;
occurring, appearing, or being made, done, or acted upon
every year or once a year; annual”). Thus, to the extent
that the government was obligated to issue task orders, its
obligation was discharged by issuing a task order once per
year. We decline Sage’s invitation to overlook the plain and
ordinary meaning of contract terms to impose an
affirmative obligation on one of the parties when such an
obligation is not readily apparent from the face of the
contract.
Case: 23-1907 Document: 34 Page: 15 Filed: 10/18/2024

-- 15 of 19 --

SAGE ACQUISITIONS LLC v. HUD 16
In any case, even if Sage were correct in its contention
that Section B.6 obligated HUD to issue 12-month orders
in connection with each option period, it cannot recover
under the REO Contracts because HUD ordered the
guaranteed minimum associated with each contract.
Because the REO Contracts were IDIQ contracts, HUD
fully discharged its contractual obligations when it ordered
the guaranteed minimums, and Sage is thus not entitled to
any damages. See Varilease Tech. Grp., 289 F.3d at 799–
801 (explaining that the government’s only obligation
under an IDIQ contract is to satisfy the guaranteed
minimum).
III
Finally, Sage argues that the Board erred in holding
that HUD’s diversion of inventory through its REO
alternatives did not breach the Bridge Contract Sage’s only
support for this contention is that “[t]he Bridge Contract
does not address any exclusions for types or classes of
inventory or types of transactions . . . from the
requirements that Sage would fill.” Appellant’s Br. 60.
While Sage concedes that HUD assigned all properties that
were part of the REO disposition program during the
Bridge Contract’s period of performance to Sage, it
contends that HUD’s use of alternatives to the REO
disposition of properties decreased the total number of
properties covered by the contract.
Unlike an IDIQ contract, as noted earlier, a
requirements contract requires the government to “fill all
its actual requirements for specified supplies or services
during the contract period by purchasing from the
awardee.” Medart, Inc. v. Austin, 967 F.2d 579, 581 (Fed.
Cir. 1992). As we have explained, “where the government
enters into a requirements contract . . . but does not use
the contractor to satisfy those requirements and instead
diverts business away from the contractor, the contractor
Case: 23-1907 Document: 34 Page: 16 Filed: 10/18/2024

-- 16 of 19 --

SAGE ACQUISITIONS LLC v. HUD 17
is entitled to recover lost profits on the diverted business[.]”
Hi-Shear Tech. Corp. v. United States, 356 F.3d 1372, 1379
(Fed. Cir. 2004). Under the superior knowledge doctrine,
there is an implied duty for the government “to disclose to
a contractor otherwise unavailable information regarding
some novel matter affecting the contract that is vital to its
performance.” Giesler v. United States, 232 F.3d 864, 876
(Fed. Cir. 2000).
Section B.2 of the Bridge Contract, entitled
“SERVICES,” plainly stated that the awardee would serve
as the asset manager contractor in accordance with the
Performance Work Statement. And Section 1.1 of the
Performance Work Statement, entitled
“INTRODUCTION,” disclosed that HUD was “seeking
contractor support to provide asset management services
for HUD’s [REO] properties.” J.A. 73. There was no
indication in either the Bridge Contract or the Performance
Work Statement that Sage would be entitled to services
associated with the disposition of properties other than
those that formed part of the REO portfolio in the relevant
geographical regions. And the parties do not dispute that
HUD assigned all properties covered by the REO program
to Sage during the Bridge Contract’s period of performance.
Thus, HUD plainly discharged its obligation under the
terms of the contract.
However, Sage argues that HUD was not permitted to
divert properties to REO alternatives. This court has
previously explained that in the requirements context, a
contractor that alleges that the buyer breached the
contract by reducing its requirements has the burden of
proving that the buyer acted in bad faith, holding that “[i]n
the absence of such a showing, the buyer will be presumed
to have varied its requirements for valid business reasons,
i.e., to have acted in good faith, and will not be liable for
the change in requirements.” Tech. Assistance Int’l, Inc. v.
United States, 150 F.3d 1369, 1373 (Fed. Cir. 1998); see also
Case: 23-1907 Document: 34 Page: 17 Filed: 10/18/2024

-- 17 of 19 --

SAGE ACQUISITIONS LLC v. HUD 18
Medart, 967 F.2d at 581 (explaining that although “actual
purchases vary[ing] significantly from government
estimates does not ordinarily give rise to liability on the
part of the government . . . the government must act in
good faith and use reasonable care in computing its
estimated needs”). Here, there is no indication that HUD
diverted inventory from its REO disposition program in
order to avoid its obligations under the Bridge Contract,
nor has Sage alleged as much. On the contrary, the
government has explained that its use of REO alternatives
was grounded in the legitimate business purpose of cutting
costs associated with foreclosures.
Sage fares no better to the extent that it seeks to invoke
the superior knowledge doctrine as an equitable basis for
recovery on the Bridge Contract. As we have explained,
this doctrine applies if “‘the government was aware the
contractor had no knowledge of and had no reason to obtain
such information [and] any contract specification supplied
misled the contractor or did not put it on notice to inquire.’”
Scott Timber Co. v. United States, 692 F.3d 1365, 1373
(Fed. Cir. 2012) (quoting Hercules Inc. v. United States, 24
F.3d 188, 196 (Fed. Cir. 1994)). Here, the Board considered
the record before it and concluded that “Sage was well
aware of these [alternative] programs and HUD’s use of
them before it entered the bridge contract on November 30,
2017.” Sage, CBCA 7319, 23-1 BCA ¶ 38,315 at 186,059.
Since HUD’s strategy to increase its use of REO
alternatives was knowledge readily obtainable by Sage,
HUD was under no obligation to volunteer further
information. Giesler, 232 F.3d at 877; H.N. Bailey &
Assocs. v. United States, 449 F.2d 376, 383 (Ct. Cl. 1971)
(“[T]he Government is under no duty to volunteer
information in its files if the contractor can reasonably be
expected to seek and obtain the facts elsewhere . . . .”).
Case: 23-1907 Document: 34 Page: 18 Filed: 10/18/2024

-- 18 of 19 --

SAGE ACQUISITIONS LLC v. HUD 19
CONCLUSION
For the foregoing reasons, the judgment of the Board is
affirmed.
AFFIRMED
Case: 23-1907 Document: 34 Page: 19 Filed: 10/18/2024

-- 19 of 19 --