THE COMMONWEALTH OF MASSACHUSETTS EXECUTIVE OFFICE OF TRANSPORTATION (
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Min
ROMNEY
GOVERNOR
KE-RRY·HEALE¥
LIEUTENANT GOVERNOR
JOHN COGLIANO
SECRETARY
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To:
Through:
From:
Secretary John Cogliano, EOT
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Commissioner Luisa Paiewonsky, MHD
Stephen H. Clark, Administrative Law JUdgev~
Date:
May 25, 2006
Re:
Report and Recommendation
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I am pleased to submit for your consideration and approval the attached report
and recommendation.
The three pending appeals of the Todesca Equipment Co., Inc.
(Todesca) arising from Department contracts #89123, #91078
and #92056 should be dismissed for the same reason: Todesca
failed to timely state "valid written reasons" why the
Department's f"mal estimate was not correct within six months
of receipt of the respective f"mal estimates.
Subsection 9.05 of the Standard Provisions of the
Department's contract provides that, unless a contractor me
within six months after receipt of a f"mal estimate "valid
written reasons" why the f"mal estimate is not correct, the f"mal
estimate is deemed "acceptable to the contractor...." Todesca
did not me a "valid written reason" for not accepting the f"mal
estimate in any of the three above contracts.
Accordingly, Todesca's appeals to this office should be
dismissed.
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(617) 973-7000 • TELEFAX: (617) 523-6454 • TOO: (617) 973-7306 • WNIN.MASS.GOv/EOT
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INTRODUCTION
The Todesca Equipment Co., Inc. (Todesca) filed appeals challenging the
Department’s final estimates in three separate contracts (MHD Nos. 89123, 91078 and
92056) on January 8, 2001. Each final estimate showed that Todesca owed the
Department money. Two final estimates were sent to Todesca in 1995; one in 1997.
At the pre-hearing conference held on February 23, 2006 the Department moved
to dismiss all the appeals on the ground that Todesca had not properly challenged the
final estimates within the time permitted by Subsection 9.05 of the Standard
Specifications. I asked that both the Department and Todesca file written argument on
whether the appeals should be dismissed, which the parties did.
I conclude that all three appeals should be dismissed. Subsection 9.05 of the
Standard Provisions sets forth the procedure that contractor’s must follow in order to
challenge a final estimate. That subsection required that Todesca “file a valid … written
reason(s) for not accepting the final estimate” “within six months from the date the final
estimate is forwarded to the Contractor.” Todesca failed to make any such written
statement setting forth any valid reason to disturb the final estimate within the time
permitted for any of the three contracts listed above. Under Subsection 9.05 the
Department’s final estimate is “considered acceptable to the contractor” should it fail to
file such timely written reasons. In addition, Todesca’s failure to pursue the
administrative remedy the contract gave it constituted a waiver of its rights to challenge
the final estimates. Accordingly, Todesca’s three instant appeals seeking adjudication of
purported final estimate disputes should be dismissed.
BACKGROUND Contract #89123
Todesca completed work on contract #89123 in 1989. On March 3, 1995 the
Department sent Todesca a final estimate which showed that Todesca owed the
Department $14,230. On March 22, 1995 Todesca wrote the Department that it “did not
agree” with the final estimate. It stated no reason for its disagreement; however, it asked
for a meeting “to discuss and review” the project. Two years then passed. On February
24, 1997 the Department forwarded a copy of the final estimate to Todesca; again
Todesca wrote on February 26, 1997 that “[w]e are not in agreement with the amounts of
these final estimates,” but provided no statement to explain to the Department why it did
not accept the final estimate. Two more years passed. On March 8, 1999 the
Department’s general counsel wrote Todesca that “failure to respond and reimburse” the
Department the money it owed “may affect your firm’s pre-qualification status.”
Todesca did not respond. On December 14, 1999 the Department sent another copy of
the original final estimate. Todesca failed to respond.
On January 2, 2001 the Department sent a fifth notice again supplying a copy of
the final estimate. On January 8, 2001 Todesca responded by filing an appeal in the
office of the administrative law judge, stating “after reviewing this final estimate we are
disputing the figures….” On February 28, 2001 Todesca filed a statement of claim
stating “Final quantities agreed with Res. Engr.” A hearing on the appeal was scheduled
for June 8, 2004. On the day of the hearing Todesca’s representative appeared and stated
that he was not prepared to proceed. The hearing was suspended and Todesca was
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ordered to file by July 15, 2004 a statement of claim that detailed the dispute. Todesca
then filed an amended statement of claim five months later, on December 9, 2004.
Contract #91078
Todesca completed work on contract #91078 in 1992. On May 18, 1994 the
Department sent Todesca a final estimate which showed that Todesca owed the
Department $19,612.77. On July 12, 1994 Todesca wrote the Department that it “did not
agree” with the final estimate. No reason for its disagreement was stated but Todesca
asked for a meeting. On September 1, 1994 the Department issued a memorandum to the
finals engineer and wrote a letter to Todesca asking it to meet with the Department’s
representative to resolve any disputed quantities. The record does not disclose whether a
meeting was ever scheduled or held.
On March 3, 1995 the Department sent a duplicate of the original final estimate,
to which Todesca responded by on March 22, 1995 “we do not agree with the final
quantities.” Two years then passed. On February 24, 1997 the Department again
forwarded a copy of the original final estimate to Todesca. Todesca responded on
February 26, 1997, stating “[w]e are not in agreement with the amounts of these final
estimates.” The letter stated no reason why Todesca did not accept the final estimate.
Two more years passed. On March 8, 1999 the Department’s general counsel wrote
Todesca that “failure to respond and reimburse” the Department the money it owed “may
affect your firm’s pre-qualification status.” Todesca did not respond. On December 14,
1999 the Department sent another copy of the final estimate. Todesca did nothing.
On January 2, 2001 the Department sent a fifth notice with a copy of the final
estimate. On January 8, 2001 Todesca filed an appeal in the office of the administrative
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law judge, stating “after reviewing this final estimate we are disputing the figures….” On
February 28, 2001 Todesca filed a statement of claim stating “Final quantities agreed
with Res. Engr.” A hearing was duly scheduled for June 8, 2004. On the day of the
hearing Todesca’s representative appeared and stated that he was not prepared to
proceed. The hearing was suspended and Todesca was ordered to file by July 15, 2004 a
statement of claim that set forth in detail its reasons for challenging the final estimate.
Five months later, on December 9, 2004, Todesca filed an amended statement of claim.
Contract #92056
Todesca completed its work on the contract in 1995. On February 24, 1997 the
Department sent a final estimate to Todesca showing that it owed the Department
$6,759.55. On February 26, 1997 Todesca wrote the Department that “[w]e are not in
agreement with the amounts of these final estimates.” Todesca provided no explanation
or basis for its disagreement.
On March 8, 1999 the Department’s general counsel wrote Todesca that “failure
to respond and reimburse” the Department the money it owed “may affect your firm’s
pre-qualification status.” On March 16, 1999 the Department forwarded a duplicate of
the final estimate. Todesca did not respond to either the general counsel’s letter or the
notice of the final estimate.
On January 2, 2001 the Department sent a third copy of the original final estimate.
On January 8, 2001 Todesca responded by filing an appeal in the office of the
administrative law judge, stating “after reviewing this final estimate we are disputing the
figures….” On February 28, 2001 Todesca filed a statement of claim stating “Final
quantities agreed with Res. Engr.” The matter was set down for a hearing on June 8,
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2004. At the hearing Todesca’s representative stated that he was not prepared to proceed.
The hearing was suspended and Todesca was ordered to file by July 15, 2004 a statement
of claim that detailed the dispute. An amended statement of claim was filed five months
later, on December 9, 2004.
DISCUSSION
Subsection 9.05 of the Standard Specifications provides
All prior partial estimates and payments shall be subject to correction in
the final estimate and payment. If within six months from the date of the
final estimate is forwarded to the contractor, the Contractor has not filed a
valid (as determined by the Engineer) written reason(s) for not accepting
the final estimate, the final estimate will be considered acceptable to the
contractor and payment of the final estimate made.
Subsection 9.05 permitted Todesca to “file a valid … written reason(s) for not
accepting the final estimate” “within six months from the date the final estimate is
forwarded to the Contractor.” The record shows that with respect to each of the above
contracts Todesca never timely provided the Department with any “written reason for not
accepting the final estimate” when it first received the final estimate.
With respect to #89123 and #91078 Todesca responded to the final estimate dated
March 3, 1995 by a letter dated March 22, 1995 in which it stated “after review we do not
agree with the final quantities.” With respect to #92056 Todesca responded to the final
estimate dated February 24, 1997 by a letter dated February 26, 1997 in which it stated
“[w]e are not in agreement with the amounts of these final estimates.” In none of the
letters did Todesca offer any statement of the reasons it “was not in agreement” with the
final estimates.
Even when Todesca filed its appeals in this office in 2001 it failed to explicate the
nature of its final estimate disputes with the Department. To describe the nature of its
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appeals on the statements of claim required by this office, Todesca replied in each case:
“Final quantities agreed with Res. Engr.” The first time Todesca explained the substance
of its disagreement with the final estimates was on December 2, 2004, when it filed
amended statements of claim for each of the three appeals.
The Contract provides a mechanism for a contractor to bring to the Department’s
attention the substance of its dispute with the Department’s final estimate. To activate
the mechanism set forth in Subsection 9.05 requires an affirmative act by the contractor,
that is, a statement made within six months that specifies a “valid … written reason” for
not accepting the final estimate. At a minimum a written reason would inform the
Department of what it disputes within the Department’s final estimate. Only a statement
with some particularity would provide a meaningful opportunity for the Department to
address the contractor’s complaint and address it through administrative action.
Failure to supply a valid written reason within the time permitted has a specific
consequence under Subsection 9.05: the acceptance of the Department’s estimate. Here,
Todesca affirmatively refused to avail itself of the administrative remedy the contracts
provided. Such failures had the contractual consequence in each case that Todesca was
deemed to have accepted the Department’s final estimate. In addition, the failures to
follow the contracts’ administrative procedure that gave Todesca a remedy to correct an
erroneous final estimate result in a clear waiver of all Todesca’s rights to challenge the
Department’s final estimates. See Glynn v. Gloucester, 9 Mass. App. Ct. 454, 461 (1980)
(contractor’s failure to follow the remedies set forth in the contract precludes all relief).
Todesca’s statement that “it did not agree” with the Department’s final estimate
was not a “written reason” to challenge the substance of a final estimate. Even if filing a
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statement of disagreement were considered a “reason” in the most general sense, it was
not a “valid … written reason” to challenge any adjustment the Department was by
contract permitted to make on the final estimate. See J.F. White Contracting Co. v.
Massachusetts Bay Transportation Authority, 40 Mass. App. Ct. 937, 938-39 (1996)
(rescript) (contractor not permitted to merely assert that it relied on earlier estimates
where government had authority under the contract to adjust final quantities). By the
time the Department prepares the final estimate and sends it to the contractor, it is
obvious that the last chance to notify the Department of matters in dispute has come. See
G.L. c.30, s.39G (legislative time limits for final payments).
Todesca raises four arguments why the appeal to this office should be allowed to
proceed, although none mentions the applicability of Subsection 9.05.
(1) Anticipated Department Non-Cooperation:
Todesca states that it
“reasonably expected” that the Department engineers would refuse to meet to
discuss the final estimate. That contention does not relieve Todesca of its
contractual obligations to provide the Department with the underlying reasons for
refusing to accept a final estimate in the first instance. There is no evidence that
the Department refused to meet with Todesca.
(2) Superseding Notices:
Todesca contends that each of the multiple notices it
received effectively “restarted” the six month time within which it could respond.
Since the last notice was received on January 2, 2001, Todesca claims it provided
a written “reason” “within six months” by filing a statement of claim in this office
on February 28, 2001. The fact that the Department sent duplicate notices does
not excuse Todesca’s failure to file its reasons of disagreement. Todesca did not
do so either after receipt of the initial notice or at any time until 2001. Then it
stated its reasons for disagreement was “Final quantities agreed with Res. Engr.”
That statement is not a valid reason to dispute the final estimate. See J.F. White
Contracting Co. v. Massachusetts Bay Transportation Authority, 40 Mass. App.
Ct. at 937.
(3) Statute of Limitations: Todesca states that the Department contends the
appeals should be dismissed because Todesca “failed to prosecute its claim in a
reasonable amount of time.” It asserts that the Department, not Todesca, “had
control of the time of the proceedings in this matter” and therefore can not “cite
the passage of time as a reason for dismissal.” Under Subsection 9.05 Todesca,
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not the Department, was obligated to set forth valid reasons for not accepting the
final estimate. The Department did nothing to prevent Todesca from making the
required statement. It was Todesca’s failures and not any action of the
Department that rendered it impossible for the Department to learn the substance
of Todesca’s dispute until 2004. 1
(4) Prejudice: Todesca claims that it is prejudiced by the unavailability of MHD
personnel due to “the simple existence of delays in the adjudication of its appeal,
attributable at least in part to MHD itself….” It is not the adjudication of
Todesca’s appeal that is the source of delay here—it is the failure of Todesca to
set forth any “valid … written reasons” within the time permitted. Todesca’s
failure meant that witnesses that could have explained Department actions taken
in 1995 or 1997 are unavailable due to retirement or death. It is the Department
that is prejudiced, not Todesca.
CONCLUSION
I conclude that Todesca’s failure to do what the contract required in Subsection
9.05 requires dismissal of each of the above captioned appeals. Under the Contract
Todesca’s failure to act requires it to accept the Department’s final estimate. Because
Todesca did not avail itself of the remedy the contract provided to dispute a final
estimate, it is now precluded from pursuing an appeal to this office. See Glynn v.
Gloucester, 9 Mass. App. Ct. 454 (1980).
Respectfully submitted,
Stephen H. Clark
Administrative Law Judge
Dated: May 25, 2006
1
It is not necessary to decide whether the Department’s argument that the three year statute of limitations
had run is correct. See Campanella & Cardi Construction Co. v. Commonwealth, 351 Mass. 184, 187
(1966) (cause of action for contractor to bring a petition to dispute a final estimate accrues not later than the
dates of the disputed semi-final or final estimate).
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