CONSTRUCTION CLAIMS
Volume II — Legal Decisions
Beyley Construction Group v. Department of Veterans Affairs.......................... 1
Bonneville Associates v.United States............................................................... 29
Bonneville Associates v. General Services Administration .............................. 39
Bonneville Associates v. Barram ....................................................................... 51
Bruce Construction v. United States ................................................................. 63
Burchick Construction v. United States............................................................ 69
Capital Electric v. United States ....................................................................... 83
Clark Construction ............................................................................................ 91
Edge Construction v.United States ................................................................. 143
Eichleay Corporation ....................................................................................... 165
Global Construction v. Department of Veterans Affairs................................. 179
Haselrig Construction ...................................................................................... 191
Jordan & Nobles Construction ........................................................................ 199
Metric Constructors v. National Aeronautics and Space Administration ..... 259
P.J. Dick v. Principi ......................................................................................... 269
Program and Construction Management Group v. General Services
Administration ................................................................................................. 281
Reflectone v. Dalton ......................................................................................... 299
Ron Anderson Construction v. Department of Veterans Affairs .................... 317
S & M Management v. United States ............................................................. 323
S.N. Nielsen v. United States .......................................................................... 347
Singleton Enterprises-GMT Mechanical v. Department of Veterans Affairs 361
Stuyvesant Dredging........................................................................................ 377
Walser v. United States ................................................................................... 391
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Construction Claims
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Beyley Construction Group
v.
Department of Veterans Affairs
07-2 BCA ¶33639
GRANTED IN PART: July 23, 2007
Eileen M. Rivera-Amador of Nevares & Sánchez-Alvarez, PSC, San Juan, PR,
counsel for Appellant. Kenneth B. MacKenzie, Charlma J. Quarles, and Phillipa L. Anderson, Office of the General Counsel, Department of Veterans Affairs, Washington, DC, counsel for Respondent.
Before Board Judges Parker, Sheridan, and Walters.
SHERIDAN, Board Judge.
These appeals arise out of a contract between the Department of Veterans
Affairs (VA) and Beyley Construction Group Corporation (BCG) for development of burial areas at the Puerto Rico National Cemetery in Bayamón,
Puerto Rico. An issue arose during the contract when BCG attempted soil excavation on the project and encountered rock. Following BCG’s assertion of a
differing site condition, the VA issued a unilateral change order deleting the
excavation at issue and reducing the contract amount. BCG then submitted a
claim seeking a contract interpretation on the differing site condition and asserting that the deletion of the excavation work constituted a change to the
remaining contract, because there would be insufficient fill on site to complete that work. BCG averred that “[p]resently this claim does not involve a
monetary amount.” The contracting officer issued a final decision disagreeing
with BCG’s conclusion that it had encountered a differing site condition,
denying the claim, and directing BCG to continue working to complete the
contract requirements. BCG’s appeal from the contracting officer’s final decision was received and docketed by the Department of Veterans Affairs Board
of Contract Appeals (VA Board) as VABCA 7266 on October 20, 2004.
As the contract work progressed and the parties became aware of the actual
costs associated with the dispute, BCG sought award of its costs via the litigation. Questions regarding whether the VA Board had jurisdiction to decide
the monetary claim were raised by the presiding judge in this matter, both
prior to and during the hearing. Attempting to address the jurisdictional issues, BCG, on March 9, 2006, submitted a claim to the contracting officer,
raising the same operative facts and issues as it had in VABCA 7266, and al-
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leging that the VA’s subsequent directions constituted a “cardinal change” to
the contract, causing it to incur $483,001.32 in extra costs.
Following the hearing, the VA Board was, pursuant to statute, consolidated
into the Civilian Board of Contract Appeals on January 6, 2007. Pub. L. No.
109-163, §847, 119 Stat. 3136 (2006). VABCA 7266 was re-docketed as CBCA
5.
In subsequent conferences, the presiding judge indicated that the Civilian
Board did not have jurisdiction to issue a monetary award in CBCA 5. On
May 18, 2007, BCG appealed the contracting officer’s failure to issue a timely
decision on the March 9, 2006, claim and the matter was docketed as CBCA
763. The VA entered a general denial of BCG’s complaint in CBCA 763 and
the parties waived further appeal file submissions, discovery, hearing, and
briefs. Upon joint motion by the parties, CBCA 5 and 763 were consolidated
for purposes of processing and decision.
The record before the Board consists of the pleadings; the appeal file, exhibits
1 through 15, and the appellant’s appeal file supplement, exhibits 501
through 535 (all appeal file submissions are cited as Appeal File, Exhibit #);
appellant’s hearing exhibits 1 through 4 (Appellant’s Exhibit #); respondent’s
hearing exhibits 1 through 3 (Respondent’s Exhibit #); the Board’s hearing
exhibits 1 and 2 (Board Exhibit #); and the three-volume transcript of the
hearing in this matter. We also considered in writing this decision appellant’s
main brief (Appellant’s Brief), respondent’s reply brief (Respondent’s Reply),
and appellant’s rebuttal brief (Appellant’s Rebuttal).
Findings of Fact
On June 3, 2003, the VA issued solicitation number 871-011-03 seeking bids
on a project for “Burial Area Development” at the Puerto Rico National Cemetery in Bayamón, Puerto Rico. Based on the contract documents, specifications, and drawings, construction services were required that included,
among other things, general construction, rock removal and earthwork, excavation and grading, drainage, new roads, road repairs, landscaping, and
grassing — essentially preparing the areas in issue to be suitable for burials.
Appeal File, Exhibit 4.
Pertinent to this dispute, the burial area at issue contained two large limestone hills, commonly and scientifically referred to in Puerto Rico as
“mogotes.” The contract documents required that the more easterly mogote be
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excavated, backfilled with suitable material, and graded for burial sites. Appeal File, Exhibits 4, 14, 15. A mogote is described as “a steep-sided hill of
limestone generally surrounded by nearly flat alleviated plains .... Originally
used in Cuba in referring to residual hills of folded limestone ... but now used
internationally for karst residual hills in the Tropics.” Respondent’s Exhibit 2
at 3 (citing W.H. Monroe, A Glossary of Karst Terminology, U.S. Geological
Survey, Walter-Supply Paper 1899 at K26 (1970)). Karst is defined as “a terrain, generally underlain by limestone in which the topography is chiefly
formed by the dissolving of rock and which is commonly characterized by
Karren [limestone that has eroded into features or patterns], closed depressions, subterranean drainage, and caves.” Id. Mogotes are the more resistant
parts of the limestone that have not dissolved into sinkhole plains. Transcript
at 265.
On June 20, 2003, a pre-bid conference was conducted and attended by,
among others, Mr. Victor Jurado, BCG’s vice president, and Mr. Manuel Fernández, from CMA Architects & Engineers, LLP, the consulting firm the VA
retained to design this project. A site visit was conducted at the end of the
conference and memorialized by minutes, which were incorporated into the
bid documents as addendum 1. Appeal File, Exhibit 14, add. 1. Addendum 1
also includes a geotechnical study and report, performed and prepared by GeoCim Geotechnical Engineering Consultants (GeoCim) in December 1998.
The GeoCim report described the site in which the National Cemetery was
located as:
part of a relatively flat plain that is surrounded by densely
vegetated, relatively steep-sided residual limestone hills
(mogotes) and ridges. The plain surface has a gentle north to
northeasterly slope. The National Cemetery occupies most of
the plain. A northeast trending limestone ridge occupies the
east margin of the property. Two mogote hills are located along
the north-central property boundary, and a single mogote occurs at the southwest property corner.
Appeal File, Exhibit 14, add. 1. The GeoCim report was generated several
years earlier to assess the subsoil conditions in parts of the cemetery in anticipation of a large surface and subsurface drainage system project, which was
being performed at the cemetery during the same period as this contract. Sixteen subsurface exploratory borings had been made for the report, but none of
the borings was in the mogote area that became the subject of this dispute.
Id.
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Two additional pre-bid addenda were also made part of the contract documents in response to bidders’ questions. Appeal File, Exhibits 2, 3. The following questions were asked by bidders and answered by the VA:
14. QUESTION: The geotechnical investigation show [sic] the
boring results in the east street but [does] not show geotechnical investigation in earth movement areas. [Does t]his area
have rock?
RESPONSE: Materials classified as rock can be found on
earth movement area.
15. QUESTION: The material obtained of [sic] the cut in the
earth movement is good to use in fill areas?
RESPONSE: Please refer to Section 02200 Paragraph 3.3
(Filling and Backfilling).
Appeal File, Exhibit 3.
Mr. Jurado worked on BCG’s bid estimate for the project with Mr. Nelson
Coimbre, BCG’s estimator. Both went on the June 20, 2003, pre-bid site visit.
Mr. Coimbre estimated the volume of the cutting (excavation) and earth
movement work, concluding that the project area contained 165,000 cubic
yards of material that needed to be cut and used as fill or waste. The 165,000
cubic yards was the amount of earth movement necessary for the whole project, not just the mogote. BCG based its estimate on the total earthwork and
did not break out how much earthwork was required to remove the mogote.
Transcript at 70-72, 122-24. Mr. Coimbre estimated that 67,300 cubic yards
of fill would be needed to complete the entire project and that there would be
98,644 cubic yards of fill left over that BCG would “cut to waste” and stockpile in the cemetery, as directed by the VA. Transcript at 70-71.
Mr. Jurado did the calculations and pricing for the bid estimate and, after
award, BCG’s cost breakdown for payment purposes. Appeal File, Exhibit
518; Transcript at 57-58, 70-71, 123. He estimated a unit price of $3.92 per
cubic yard to excavate material for fill and $3.70 per cubic yard to excavate
material for waste. Appeal File, Exhibit 518. During the pre-bid site visit, because of the dense foliage, rocks, and boulders in the earthwork area, he noticed that it was difficult seeing the area, so he asked Mr. Fernández, “[Are]
there going to be any rocks here[?]” Transcript at 59. Mr. Jurado testified
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that Mr. Fernández answered, “No, don’t concern yourself with any rocks because obviously the material when you extract it, you are going to come
across some rocks.” Id.
Mr. Jurado planned on using the mogote as BCG’s primary source of usable
fill, but recollects that while preparing the bid estimate, he concluded that,
based on the volume calculation for the whole project, even if the mogote contained rock, there would be more than enough suitable material in the
mogote to provide the necessary usable fill to complete the project. Transcript
at 59, 72, 83. Mr. Jurado stated that he expected there to be rock in the
mogote and that the specifications provided information about what BCG
should expect in terms of the measurement and compensation for removing
rock. Id. at 115, 126. He did not plan on importing any borrow fill onto the
project site, and, in fact, was more concerned about where the 98,644 cubic
yards of fill that was to be cut to waste was to be stockpiled on the cemetery
premises. Id. at 121.
Contract V786C-647 was awarded to BCG.1 The contract contained the Federal Acquisition Regulation (FAR) and VA Acquisition Regulation (VAAR)
clauses that were either mandated or suggested for inclusion in construction
contracts. A partial listing includes: Disputes (FAR 52.202-1 (OCT 1995)),
Changes (FAR 52.246-4 (AUG 1987)), Changes — Supplement (for changes
costing $500,000 or less) (VAAR 852.236.88(b) (JUN 1987)), Site Investigation and Conditions Affecting the Work (FAR 52.236-3 (APR 1984)), Site Visit
(Construction) (FAR 52.236-27 (FEB 1995)), and Differing Site Conditions
(FAR 52.236-2 (APR 1984)). Appeal File, Exhibit 14.
Specification Section 02200, EARTHWORK, described the earthwork requirements under the contract, including the excavation, fill, and backfill of
materials, and is of particular pertinence to this dispute. Appeal File, Exhibit
14, §§ 02200-1 to -8. The specifications listed the materials that were unsuitable for use as fill as: “topsoil; construction materials and materials
subject to decomposition; clods of clay and stones larger than 75 mm
(3 inches); organic material, including silts, which are unstable; and
inorganic materials, including silts, too wet to be stable.” Id. § 022001.2A.1 (emphasis added).
1
The record does not contain documentation showing the precise date of contract award.
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The contract indicated that both common excavation and rock excavation
were anticipated in the project:
1.4 CLASSIFICATION OF EXCAVATION
A. Common Excavation: Removal and disposal of pavements
and other man-made obstructions visible on surface; utilities,
and other items including underground structures indicated to
be demolished and removed; together with any type of
earth materials not classified as rock excavation.
B. Rock Excavation:
....
2. Open Excavation: Removal and disposal of solid, homogenous, interlocking crystalline material firmly cemented,
laminated, or foliated masses or conglomerate deposits
that cannot be dislodged and excavated with a track
type loader rated at not less than 150 kW [kilowatt] (200
hp [horsepower]) with a minimum breakout force of 210
kN [kilonewton] (47,300 lb.); or a single tooth tractor/ripper rated at a minimum 120 kN (26,900 lb.) penetration force and 200kN (45,025 lb.) pry-out force.
3. Other types of materials classified as rock are boulders, and
underground structures not indicated to be demolished and
removed; each of ... ( 1/2 cubic yard) or more in volume.
4. Removal of rocks as specified on drawing L-7 is part of the
contract and no separate payment will be made.
Appeal File, Exhibit 14, §02200-1.4B (emphasis added).
BCG was required to excavate the mogote to conform to the contour lines in
the contract drawings that showed the shape and elevation of the project burial area. Appeal File, Exhibit 14, §02200. The excavation at the top of the
mogote was classified as “open excavation.” Transcript at 88.
Contract drawing L-7 showed the burial area at the west side and foot of the
mogote containing several piles of rocks ranging in size from one to twentythree feet in diameter. The contract required those rocks, which totaled 2996
in number on the drawings, to be removed from the cemetery. Appeal File,
Exhibit 14, §02200-1.4B.4 and drawing L-7. The contract specified the measurement and payment for additional rocks excavated from the project by
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providing “[n]o separate payment shall be made for rock excavation quantities shown [on drawing L-7]. Contract price and time will be adjusted for
overruns or underruns in accordance with Articles, Differing Site Conditions,
Changes and Changes Supplement of the General Conditions as applicable.”
Id. §02200-1.5B. BCG sought and was granted an equitable adjustment pursuant to this specification when it encountered more than the 2996 rocks tallied on drawing L-7. Id. Exhibits 502, 504, 505.
For site preparation, the contract required that the earthwork operations area be cleared. No visible rocks, roots, or branches over one inch in diameter
were to be left on the surface. The topsoil from the earthwork operations area
was required to be stripped and stockpiled as directed by the VA senior resident engineer (SRE). Appeal File, Exhibit 14, §02200-3.1A-F. The contract
drawings showed the areas to be excavated, including the mogote. Id., drawings. The contractor was required to remove sub-grade material determined
by the SRE to be unsuitable and replace it with acceptable material. When
unsuitable material was encountered and removed, the “[c]ontract price and
time [was to] be adjusted for overruns and under-runs in accordance with Articles, Differing Site Conditions, Changes, and Changes — Supplement of the
General Conditions as applicable.” Id. §02200-1.5B. Blasting was not permitted on the site. Id. §02200-3.2C. For fill and backfill, the contract generally
instructed, “Use excavated material and borrow [materials brought on-site
from an off-site source], as applicable. Borrow will be supplied at no additional cost to Government. Do not use unsuitable excavated materials.”
Id. §02200-3.3A (emphasis added). Section 02200, EARTHWORK, PART 2 —
PRODUCTS, also specified as materials “Fills (Burial Areas): Existing stockpiled fill material at the cemetery premises and supplement with like material as necessary as approved by the [SRE].” Appeal File, Exhibit 14, §022002.1.B; Exhibit 2, add. 2, ¶4.
Mr. Jos€ Hernández was designated the SRE and contracting officer’s technical representative (COTR) assigned to the project. Transcript at 329. Mr.
Hernández has a degree in mechanical engineering and over twenty years of
practical experience in earth movement. At the outset of this contract he had
no experience with excavating a mogote or any training in soil mechanics or
geology. Id. at 335-38. BCG’s principals, Mr. Manuel Beyley and Mr. Jurado,
on the other hand, had extensive earth movement experience. Mr. Beyley has
a bachelor’s degree in civil engineering and was a project manager for fifteen
years and then a construction officer at Rexco Construction Company. He was
mainly involved in highway projects, which included bridges, but also worked
on residential development projects. He supervised large scale highway sys-
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tem projects that involved earth movement. Id. at 8-10. Mr. Beyley, together
with Mr. Jurado, formed BCG, with Mr. Beyley as the company’s president
and Mr. Jurado its vice-president. Id. at 8. Mr. Jurado has an associate’s degree in civil engineering with a major in land surveying and highway construction. He also has extensive experience as a heavy equipment operator,
operating cranes with front shovel systems, bulldozers, and scrapers. Id. at
49. He had been a superintendent of field operations at Rexco Construction
Company until leaving to form BCG with Mr. Beyley. Id. at 54. Both Messrs.
Beyley and Jurado are familiar with mogotes.
As testified to by Mr. Jurado, BCG began the earthwork associated with removing the mogote by removing the boulders that were located on the west
side and foot of the mogote so that a road could be opened up to bring the
heavy machinery to the top of the mogote. Transcript at 63-70. Mr. Jurado
believes that the rocks and boulders around the mogote were extracted from
prior excavations of the mogote and put aside, but left on the site. Id. at 120.
The rocks were so dense that BCG had difficulty gaining access to the
mogote. Id. at 63. Mr. Jurado stated he had expected to be able to “come up
with the ripper and rip the top part [of the mogote] according to the contract
specifications.” Id. at 62. The specifications depicted the mechanical parameters of the equipment BCG was required to use, and stated that the contractor should expect to extract the material with a single tooth tractor ripper
rated at a minimum of 120 kN. If the contractor was unable to perform the
excavation with equipment meeting those parameters, then the excavation
would be characterized as rock excavation, and the contractor would be entitled to receive extra compensation for its removal. Id. at 126. The equipment
with which BCG attempted to “rip” the top of the mogote was a “D9R machine” [a Caterpillar D9R heavy bulldozer with rear ripper] that had a 375
horsepower motor and more torque than the category of machine set forth in
the specifications, and a “penetration power [that was] double” what was
called for by the specifications. Id. at 88-89.
After BCG gained access to the top part of the mogote, in early April 2004, it
cleared the ground cover and started the work with the ripper to begin the
excavation. The ripper was unable to penetrate the top of the mogote. At that
point BCG asked the VA personnel to come to the site and witness the conditions it had encountered. Transcript at 75. Also around that time, upon urging by the VA, BCG took a sample of material from the lower slope of the
mogote and sent it to Corporación Geotec (Geotec), a subsoil exploration and
materials laboratory BCG retained for testing excavated material for its suitability as fill. Id. at 62, 105. Other than the borings that served as the bases
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for the GeoCim report, and these samples tested by Geotec, there is no indication in the record that additional borings or soil studies were performed to
assess the condition of the material at the top the mogote or throughout the
interior of the mogote. Id. at 91.
On April 6, 2004, BCG wrote to Mr. Hernández, notifying the VA that BCG
had encountered a differing site condition and that “during the commencement of the cut to fill in the mogote area we have found that the excavation
can’t be done as it is in our contract, because the material to be excavated is
rock material.” Mr. Hernández was initially charged with making the decision on whether the materials in the mogote were a differing site condition.
Transcript at 336. He responded on April 15, 2004, that he was denying the
alleged differing site condition because addendum 1 containing the GeoCim
report had indicated that the area in issue had residual limestone hills
(mogotes) and limestone ridges, and addendum 3 stated that “materials classified as rock can be found on earth movement area.” Appeal File, Exhibit 6.
Mr. Jurado does not remember BCG receiving a copy of this letter. Transcript
at 77. At a weekly progress meeting conducted on April 21, 2004, BCG indicated that it needed a decision on the mogote issue because excavating the
mogote was on the critical path. Appeal File, Exhibit 7.
On April 29, 2004, the contracting officer, Gregory Hanks, issued a unilateral
change order (COCO), COCO-1, to modify the contract work. Appeal File, Exhibit 7. Among other things, COCO-1 instructed BCG to:
A. Delete all work associated with the excavation and removal
of the escarpment (mogote) indicated on contract drawing L-21
at burial sections P and Q, as indicated on attached sketch
COCO-1 dated April 28, 2004. Establish a 2% grade to the face
of the escarpment as shown on the fore referenced sketch.
Id. COCO-1 also provided that “[t]he total value of this contract is decreased
from an amount of $2,760,000 to a new total value of $2,470,000 with zero
additional days added to the contract completion date. This represents a
$290,000 decrease in contract amount with no change in the completion date.” Id.
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VA Project Manager Richard Kollar noted in a memorandum to the record
the considerations that formed the bases of the VA’s decision to delete the
work associated with removing the mogote:
A. The contractor advised the resident engineer of a perceived
differing site condition associated with the limestone escarpment, locally know as a mogote. The contractor indicated that
the material, although well defined by the Geotechnical report
as a mogote and indicated on the drawings, was not clearly defined as rock.
B. Although it is apparent to the Government that the material
is clearly addressed as rock in the documents its removal to a
new grade would not provide suitable burial sites in Section P
and Q in that the graves themselves would require rock excavation on a site by site basis. This situation has the potential
for being too inefficient and costly.
C. The area along the escarpment has, however, the potential
to become the site of [a] future columbarium wall.
D. As a claims avoidance measure, but, moreover, as an increase in cemetery efficiency and use, it is deemed prudent to
delete the work of removing the escarpment and appurtenant
items.
E. To avoid delays and inefficiencies to the contractor, it is considered prudent to unilaterally direct the deletion while the
contractor prepares the proposal for same.
F. A budget estimate for the work has been deemed to result in
a credit of $290,000.
Appeal File, Exhibit 7.
By letter dated May 26, 2004, BCG indicated that the excavation or “cut to
fill” phase of the work was at a standstill because it had no suitable material
to use as fill on the project. Appeal File, Exhibit 513. Mr. Hernández responded that the VA was not stopping the work and that the issue of bringing
fill onto the project from off-site, in other words “importing borrow,” had already been discussed at several weekly meetings. He directed BCG to section
02200-3.3 of the earthwork specification that required “[f]or fill and backfill
use excavated materials and borrow, as applicable. Borrow will be supplied at
no additional cost to Government. Do not use unsuitable excavated materi10
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als.” Mr. Hernández indicated that if BCG disagreed with the VA’s position
that BCG was responsible for providing suitable fill from borrow at no cost to
the Government, BCG should request a contracting officer’s final decision. He
stressed, however, that if no suitable excavated materials could be used as
fill, BCG needed to provide borrow material as per the specifications. Appeal
File, Exhibit 513.
BCG submitted a claim on June 14, 2004, seeking an interpretation of the
contract, stating that “[p]resently this claim does not involve a monetary
amount.” BCG asserted:
At the pre-bid meeting, BCG’s representative inquired as to the
composition of this [mogote], inasmuch as the soil study made
no mention of the [mogote] or its geological composition. BCG
and the other bidders were instructed to assume that there was
no rock in the [mogote]. Thus, the material composing this
[mogote] was to have been used by BCG in performing its fill
operations elsewhere in the project.
Upon commencing its excavation of the [mogote], BCG discovered that the [mogote] not only contained rock, but that the
[mogote] was mostly composed of rock. Thereby rendering it
wholly unsuitable for its intended use — fill material. It is
BCG’s understanding that this is a differing site condition.
BCG so advised the VA, and the VA’s response was to delete
the excavation and removal of the [mogote], indicated on drawing L-21 at the burial sections P and Q. To that end, the VA issued deductive COCO-1 [change order] on April 29, 2004.
While this deductive [change order] certainly takes care of the
excavation issue at the [mogote], it does not resolve another
fundamental issue: the fill material.
....
[W]ith the differing site condition that has been established by
BCG and partially resolved by COCO-1, BCG is faced with the
reality that there is no usable fill material at the project. This
scenario constitutes a cardinal change to the project, inasmuch
as BCG had a reasonable expectation of not having to bring
any borrow material whatsoever to the Project, but with the
uselessness of the [mogote] (and the corresponding deletion
from the scope of work of the contract), BCG will have to bring
substantial borrow to the project.
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Appeal File, Exhibit 8. BCG went on to argue that the VA’s position, that section 02200.3.3.A required BCG to supply borrow at no additional cost to the
VA, was interpreting the specification in a “vacuum without taking the reality of the project into account” and that, but for the differing site condition and
the corresponding deletion of the mogote work, there would be no need for
borrow to be brought on site. Id. BCG asked the contracting officer to render
a decision within sixty days because the lack of fill was impacting activities
on the critical path and BCG might have to stop work at the project until the
situation was resolved. Id.
After the mogote work was deleted from the contract, BCG hired Geotec to
provide a professional, more precise survey of the mogote’s volume. Licensed
surveyor Angel Noel Colón-Guzmán conducted the survey and, on June 22,
2004, reported that BCG would have needed to move approximately 76,387
cubic yards of material to eliminate the mogote, with a total of 108,000 cubic
yards of earth movement and excavation needed for the entire project. He also estimated that BCG would need a total of 71,197 cubic yards of fill for the
project. Transcript at 202-04; Board Exhibits 1, 2.
The contracting officer disagreed with BCG’s interpretation and denied its
claim on August 3, 2004, directing BCG to continue the work. As reason for
his final decision, the contracting officer pointed to the minutes of the pre-bid
meeting and stated that the minutes advised the offerors to expect rock in the
mogote. Appeal File, Exhibit 9.
On October 13, 2004, BCG provided the VA what it considered more appropriate figures for the work associated with the deducted mogote. The attachment to this letter, which was dated October 11, 2004, showed a value of
$342,429.58 for the deleted work and a value of $1,339,155.20 for the fill that
would need to be brought on site as a result of the mogote earthwork being
eliminated. BCG asserted that the balance due it as a result of the deductive
change order was $1,049,125.62. Appeal File, Exhibit 524. BCG’s timely appeal from the contracting officer’s final decision was docketed on October 20,
2004, as VABCA 7266.
At the hearing, both Messrs. Beyley and Jurado, who have worked extensively on mogotes, acknowledged that one cannot really tell from looking at a
mogote whether or not it will be composed of soft materials and easy to remove, hard materials and difficult to remove, or a combination of both. Mr.
Beyley, who had only “general knowledge” of the project but had extracted
material from mogotes and was particularly experienced in highway con-
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struction, testified that in some instances where scarce and low vegetation is
observed, one could anticipate a “rocky mogote,” and where lush vegetation
and tall trees are seen, one would expect that the mogote was made up of
looser material. Transcript at 16-17. He noted, however, that “many times
[we] were surprised, because where we thought that [the mogote] was going
to be soft, it happened to be very hard and where we thought that it would be
very hard it turned out to be soft.” Id. at 12-13. He opined that one could not
tell the degree of hardness of a mogote with any certainty strictly from a visual inspection and that borings and a sub-surface study were needed to determine what was underneath the surface of a mogote. Id. at 12-14.
Based on his experience in working with mogotes, Mr. Jurado indicated that
there are two ways to tell how hard a mogote will be to excavate: (1) by observing the denseness of the vegetation present and (2) by taking boring
samples. Transcript at 68-69. Upon further questioning, Mr. Jurado acknowledged, “[S]ome [mogotes] happen to be solid hard from top to bottom, but that
is not what we generally find in the mogotes here in Puerto Rico. In fact ... I
am led to believe that the boulders that were already there at the site were
extracted from the excavations that were made from the site, from the top of
the mogote and then were later put [to] the side because here in Puerto Rico
no project is allowed to contain fill of granulation greater than six or eight
inches.” Id. at 119-20. Mr. Jurado speculated that perhaps if a hydraulic
hammer had been used to get through the top of the mogote, usable fill might
have been found under the top crust. Id. at 104. He also speculated that perhaps if BCG had dug deeper into the core of the mogote, suitable material
might have been found. Id. at 105-08.
Mr. Jurado testified that “in every project you are going to come across some
rocks but that is manageable and we assume that we would be able to use all
of the material in the project.” Transcript at 70. Later in his testimony Mr.
Jurado stated that for fill, a contractor needs a variety of materials of different sizes or granulations:
[I]t doesn’t mean that you are going to fill using only rock. I
mean, you need fine material also but remember that the
mogote is made up of different grades of material. It goes all
the way from dirt to rock, boulders of different granul[ations]
or ... a formation of rock that is too hard [and] will not break
down to the granulation desired. However, as a contractor, you
expect that ... when you make an excavation of a mogote, you
[will] obtain a material that is 60 to 70 percent suitable for fill.
Almost all of the mogotes yield that.
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....
In other words as a contractor in my experience, I could not
pretend a hundred percent of the material excavated for the
mogote was going to be suitable for fill but in my experience I
could reasonably expect that seventy percent of the material
extracted would be suitable for fill.
Id. at 119-21.
Upon being asked what classification of fill would need to be brought into the
burial areas “in the absence of a classification being specified,” Mr. Jurado
responded:
Well, if the classification is not specified, then you can infer
that you can use any material from sludge up to soft material
for fill, but the stockpiles that were located in the project site ...
were not suitable for fill where burials were to be made because
it was full of garbage, full of trash and rock, stones, debris and
that is the reason why it had to be moved outside of the project
area, within the cemetery premises but outside of the project
area and [the VA] paid for it.
Transcript at 97.
BCG called as its consulting witness Mr. Carlos Ortiz, who, since 1978, has
been the president of Corporación Geotec, the subsoil exploration and materials laboratory that BCG originally hired to do the soils testing from the
mogote’s lower slope. Appellant’s Exhibit 2; Transcript at 163. Mr. Ortiz has
a master’s degree in civil engineering and several years of experience as a
soils engineer. He has served as a consultant in several cases in Puerto Rico.
Appellant’s Exhibit 3. In his January 16, 2006, report, based upon a review of
pertinent contract documents, Mr. Ortiz writes:
These documents instruct the contractor to move earth at the
project site, cutting from some areas and filling in other areas.
The specifications state the rock could be found and that it
would be a differing site condition.
This is the case at [the] site, where a mogote or haystack hill
was attempted to be cut by the contractor. This resulted in rock
being found near the surface.
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Mogotes, or haystack hills, are outcropping of limerock sticking
out of the nearby sinkhole plains. Limerock may be soft, earth
or leached, or it may be hard, [recrystallized] limestone depending on its past history. In the San Juan-Bayamón area the
limerock is mostly of the soft, earthy variety, with a surface
layer of recrystallized limestone. The contractor should have
assumed this.
....
If rock crushers are used, all of the haystack hill can be used as
fill, no matter how much rock it contains.
In my expert opinion the contractor should have expected some
rock to be present. In any event, he could reasonably count on
the total cut volume of the haystack hill as usable fill.
Appellant’s Exhibit 1.
Mr. Ortiz also determined that special methods, either hydraulic hammering
or blasting, would be necessary for excavation of this mogote. Transcript 17374, 192-93. He opined that as a soils engineer, when he sees a mogote that is
densely vegetated, the mogote is probably soft limestone “because the roots of
the trees can take ahold of it and that requires soil-like material.” Id. at 178.
However, he also testified that in the absence of a soil study, boring, or subsoil exploration, one cannot tell whether a mogote will be hard or soft by
merely looking at it:
[M]ogotes have the appearance of solid limestone, all of them.
They are steep sided or vertical sided, they are rocky. They look
rocky but once you take a bulldozer to them you find out that
they are not so rocky after all. Once you get through the hardened crust, the inside [is] soft material.
Id. at 185-86.
Noting that hard limestone could be found with the soft limestone, with boulders and “more continuous recrystallized limestone,” Mr. Ortiz opined that
there were a few recrystallized mogotes in the Bayamón area, but most of the
mogotes there are of soft material. When asked to give his opinion on whether BCG acted reasonably in expecting to use the mogote as fill material, Mr.
Ortiz testified:
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[B]ased on experience in the Bayamón area, you would probably find mogotes that were amenable to ripping using a large
bulldozer. That was our experience with PR [Puerto Rico
Route] 22 less than a kilometer away. I think that the contractor should have considered that some boulders appeared and
that these boulders would have to be hammered down to size to
be used as fill. Otherwise, the mogote itself, it should be ripped
with a large bulldozer.
Transcript at 180-81.
Mr. Ortiz testified that most mogotes have a crust of from zero to twenty feet,
and that contractors normally bulldoze the mogote, discard the oversize boulders, and use the softer material after they break the material down. Transcript at 195. Mr. Ortiz opined that limestone, properly broken down, makes
an excellent fill material. Id.
BCG also called as a witness Mr. Manuel Fernández from CMA Architects &
Engineers, the firm the VA retained to provide design drawings and technical
specifications for the project. Transcript at 211-12. To design the project, Mr.
Fernández used the VA master specifications and tailored them to this project. Id. Mr. Fernández’ recollection of many of the issues relating to this project was very sketchy. While he remembered receiving some questions from
bidders through the VA, and answering those questions, he did not remember
being asked a question by Mr. Jurado about the makeup of the mogote during
the pre-bid site survey. Id. at 238. He believed that the mogote at issue could
be used as a source for fill material for the burial area. Id. at 221-22. He also
expected that rock excavation would need to be performed in removing the
mogote. Id. at 228-30. Mr. Fernández acknowledged that the contract was
silent as to a fill classification for the burial areas and merely provided that
the fill materials for the burial areas were to be drawn from existing stockpiled fill material at the cemetery. Id. at 221-23.
The VA called as its consultant witness Dr. James Joyce, a Professor of Geology at the University of Puerto Rico, Mayagüez, who has a doctorate degree
in geology and a master’s degree in structural geology. Since 1991, Dr. Joyce
has worked as a private consultant conducting subsurface and surface geological analyses of construction sites in Puerto Rico and the Virgin Islands. He
has provided preconstruction geologic surveys, inspections, evaluations, consultations, analyses, reports, and papers for consulting engineers, legal firms,
municipalities, and homeowners on various projects. Respondent’s Exhibits 2,
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3. Dr. Joyce readily admitted that he had not worked construction and had
never supervised the excavation of a mogote. Transcript at 274-75. He
acknowledged that as a doctor of geology he did not view mogotes in the same
way as a civil engineer might view them. Id. at 296-98. For the VA in this appeal, he prepared an undated report titled “‘Mogote’ Hills and ‘Escarpments’
at the Puerto Rico National Cemetery — A Geologic Perspective” (the “Joyce
Report”). Respondent’s Exhibit 2. To prepare the report, Dr. Joyce reviewed
the specifications, the addenda to the contract, the drawings, the GeoCim
soils report, a later GeoCim report on the limestone ridge landslide, COCO-1,
and the original BCG claim. Transcript at 302. He also visited the site. Id. at
261.
According to the Joyce Report, the mogotes in the area of the cemetery are
composed of three “Tertiary[-age] limestone formations,” the Cibao, the
Aguada, and the Aymamón:
The Cibao Formation upper member is described as “chalk, soft
limestone, and very pale-orange sandy clay.” The Aguada
Limestone Formation is described as “alternating thick beds of
indurated [hardened] very pale orange to pink fine calcarenite
and grayish orange to very pale orange clayey and chalky limestone.” The Aymamón Limestone [Formation] is described as
“white to very pale orange ... massive to very thick bedded very
pure fossiliferous limestone; generally indurated by secondary
cementation into finely crystalline rather dense limestone.”
Respondent’s Exhibit 2 at 1-2 (citations omitted).
Dr. Joyce observed that, according to the geological map:
The contour patterns of the [mogote at issue] are clearly not
natural and indicate the hill had been previously cut. It would
be logical to assume that the rocks and boulders around the
[mogote] were the material excavated from the [mogote] cuts
and hence the [mogote] must be composed of rock.
....
The rock composition of the [mogote] would have been reasonably ascertainable even with a simple site inspection or tour....
The rock composition of the [mogotes] surrounding the National Cemetery is obvious even to a casual observer.
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Weathered rock exposures are observed in the center and right
side of the mogote hill and would have been visible during the
pre-bid conference tour.
....
In fact, even a casual drive around the cemetery or the adjacent commercial areas would obviate [sic] that all the hills in
the area are composed of rocks. Certainly experienced contractors would recognize that all local projects on these [mogotes]
required rock excavation. Therefore, the BCG contention that
the discovery of the rock composition of the escarpment or
mogote hill upon initial excavation was a surprise and represents differing site conditions is neither tenable nor reasonable.
Respondent’s Exhibit 2 at 8-12.
Based on his review of the contract documents and the site, Dr. Joyce reached
the following conclusions:
1. The National Cemetery is characterized by a relatively low
flat plain underlain by clayey soils and surrounded by mogote
hills and ridges composed of limestone rock. The geologic conditions are typical of the Mogote Karst terrains that characterize
north-central Puerto Rico from Arecibo through Bayamón.
2. The clayey composition of the interior low plains and limestone rock composition of the surrounding ridges and mogote
hills are clearly documented in the geotechnical soil investigation and drawing plans included in the contract documents.
3. Sufficient information is included in the drawing plans to infer a rock composition of the mogote hill in Section P-Q independent of the soil investigation.
4. No evidence has been found in the reviewed contract documentation to support the contention that BCG was informed
there was no rock in the “escarpment” — mogote in Section PQ.
5. Limestone rock is exposed in all of the mogotes, hills and
ridges surrounding [the] cemetery and in extensive rock cuts
behind neighboring commercial areas.
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6. Based on existing contract documentation, site inspection
and previous construction projects in the Bayamón area an experienced construction contractor should have expected to find
limestone rock in the mogote — “escarpment.”
7. Further, the experienced contractor should have expected
that grading of the mogote hill as stipulated in the contract
would require rock excavation and that most of the excavated
material would not be suitable to use as fill.
Respondent’s Exhibit 2 at 11-12.
Dr. Joyce elaborated during his testimony:
[M]ogotes are a form of rock. Whether or not [a mogote] is rock
that requires blasting is not something that is ... completely
predictable just by calling it a mogote. What ... we know is that
it is made out of limestone. It includes some hard rock. It may
include completely hard rock. It really depends a lot on the
mogote but in general, mogotes form on the harder, more resistant limestone formations.
Transcript at 266-67. He also stated:
There are two parts of mogotes. M[uch] of the outside of limestone can become what is called case hardened and you can
have crusts on them but [also] they can be composed internally
of harder limestone layers.
Id. at 272. When asked to address the particular mogote in issue, Dr. Joyce
opined:
The overall appearance ... of the rock cuts would make it appear that the rock was hard, very hard. The cuts are quite vertical and ... the boulders apparently were hard enough that
the[y] ... require[d] breaking for their removal.
So, essentially ... if someone had asked me to look at this
[mogote] and say ... do you think this is going to be hard rock ...
I would say yes. I couldn’t actually tell them if I thought they
needed to blast it, but certainly expect that, yes, there is going
to be good hard crystalline limestone.
....
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Basically every site I looked at had very steep cliffs. Some places actually exposed rock. There was rock exposure sticking out
of the mogote, not the new part that has been excavated, but
actually off to the sides, and so it seems logical to me that you,
you should expect there to be hard rock and the mogote, as I
would expect as well as mogotes in general, it is possibly very
hard rock.
The other question to be answered was whether the material
could be used for fill or not and as there [were] no specifications
for the fill, that is a very difficult one to answer. Limestone is
used a lot for fills. It is all different kinds of fills and it depends
on the specifications. Obviously if you have a hard rock layer,
you can crush it and break it down to the size specification you
actually need so that is quite possible.
My decision that the material should have been known to be
unsuitable was largely based on the Beyley claim that the rock
that they found when they cut into the mogote was unsuitable.
...
[T]hey should have expected rock to be there and specifically as
you are looking at the design, look[ing] at the design plans, the
way that the mogote has been cut, the boulders that are around
it, certainly would tell you that hard rock was there and if hard
rock was not suitable for them as fill, then they should have
realized that also and not have assumed that they could have
cut the mogote and gotten all of the fill that they needed.
Id. at 268-71.
Dr Joyce acknowledged that “not all of [the mogote] is equally hard ... that is
for sure, and clearly, we see borrow formation and in some parts ... [that is]
not very hard.” Transcript at 304. He opined, however, that:
Soil-like and rock-like are very difficult terms.... There is not a
single mogote [that] is made out of soil. It may be made out of
weathered rock that is softened, but by looking at a mogote, I
can usually tell whether or not there is a hard layer in there,
yes. It is usually easy to pick out the variations and the
strength of the limestone layers if it is made out of layers or if
it is massive.
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....
You can barely excavate. Most of the material requires machinery to excavate. I mean, even a hard soil is hard to get out
with hand tools so the mogotes all require machinery to excavate. You are not going to send a team out with a pick and
shovel.... They are all [rock] cuts, let’s put it that way. They are
not soil cuts. They are rock cuts.
Id. at 277-78, 304.
Regarding the northeast trending ridge, Dr. Joyce noted that while it did not
fit the full definition of a mogote, because it was an elongated ridge instead of
a cone-shaped hill, the ridge base contained “pretty much the same” geologic
formation as the mogote. “At the base is the upper Cibao formation followed
by the Aguada which makes up a large part of the ridge where it is steepest,
and then on the top there is a section of Aymamón.” Transcript at 298.
BCG had occasion to excavate other areas in the project including a pond, a
canal, and the slopes of the northeast trending line when the SRE directed
BCG to use those areas as a source of fill. Transcript at 97-98, 129. According
to Mr. Jurado, on the slopes of the northeast trending line BCG “cut material
from there but it wasn’t suitable for fill because it was full of rocks, full of
muck.” Id. at 97-98. In those areas that were excavated apart from the
mogote, BCG extracted 7000 cubic yards of suitable material that it used and
27,000 cubic yards of unsuitable material that it deposited in an area within
the cemetery as designated by the VA. Id. at 129. Based on the total 34,000
cubic yards of material excavated from the area, only 20% was suitable fill
material.
On March 9, 2006, in likely response to the questions raised about jurisdiction, BCG submitted a certified claim to the contracting officer asserting that
the deletion of the mogote work constituted a cardinal change to the contract.
BCG averred that the loss of the mogote work caused a shortfall in suitable
on-site fill materials, and that the VA’s position required it to import 31,693
cubic yards of borrow material onto the project site at $15.24 per cubic yard.
BCG claimed it was therefore entitled to an equitable adjustment to the contract in the amount of $483,001.32. Appeal File, Exhibit 535. At the hearing
BCG indicated it no longer disputed the amount the VA deducted from the
contract for the deletion of the mogote excavation, and that it considered the
amount deducted to correspond with the unit prices in its cost breakdown for
the work that was deleted. Transcript at 203. On March 15, 2006, during the
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hearing held in VABCA 7266, the parties stipulated that BCG imported
31,693 cubic yards of fill into the project at a unit price of $15.24 per cubic
yard, for a total cost of $483,001.32. Id. at 160-61. Still in dispute, however,
was whether BCG was entitled to be compensated for the fill it was required
to bring outside the cemetery to complete the project.
As previously mentioned, the VA Board was consolidated into the Civilian
Board of Contract Appeals on January 6, 2007, and VABCA 7266 was redocketed as CBCA 5. On May 18, 2007, BCG’s appeal from the contracting
officer’s failure to issue a timely decision on the March 9, 2006, monetary
claim was received by the Civilian Board and docketed as CBCA 763. CBCA 5
and 763 were consolidated for purposes of processing and decision. The Government entered a general denial in CBCA 763 and the parties waived futher
submissions in the appeals.
Positions of the Parties
BCG argues the VA’s decision to delete the mogote excavation deprived BCG
of a valuable source of fill material it needed for the burial areas. As a result
of the VA’s action in taking the deductive change, BCG proffers it was required to import 31,693 cubic yards of borrow fill onto the project that it
would not otherwise have had to import, at a unit price of $15.24 per cubic
yard. BCG avers it incurred $483,001.32 in costs to import the borrow fill and
is entitled to be compensated for the $483,001.32, plus interest as provided
under the Contract Disputes Act.
The VA avers that BCG was not required to perform any additional work because of the alleged condition, so it should not receive any compensation for
its claim. The VA posits that BCG failed to prove that it had a contractual
right to expect that it would be able to use the excavated materials from the
mogote as usable fill, and that the contract specifically states that for fill and
backfill, the contractor was to “use excavated material and borrow, as applicable,” so “borrow [was to] be supplied at no additional cost to Government.”
Discussion
BCG frames its argument for recovery as a differing site condition, and the
VA has defended the appeal on that basis. However, it is clear from the facts
of this case that when the VA issued its April 29, 2004, deductive change order, deleting the mogote excavation from the contract, the VA at the same
time constructively changed BCG’s planned method and manner of perform-
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ing the earthwork required by the contract. As a constructive change, BCG’s
entitlement falls more appropriately under the contract’s Changes clause.
While we will discuss why certain conditions BCG encountered were differing
site conditions under the terms of this contract, we decide this appeal on the
basis that the VA constructively changed this contract, entitling BCG to additional compensation.
The contract required BCG to perform earthwork to prepare the specified
project area for burial sites. Part of the earthwork area, the subject of this
dispute, contained a limestone hill, commonly and scientifically called a
mogote. BCG was required to excavate the mogote to conform to the contour
lines in the contract drawings that showed the shape and elevation of the
project burial area. Pursuant to contract, BCG was then instructed to fill,
compact, and grade the area with “suitable” or “usable” fill to create burial
sites as per the drawings and specifications.
For fill and backfill, the contract generally instructed the contractor to “use
excavated material and borrow [material brought in from off-site].... Borrow
will be supplied at no additional cost to Government.” What constituted “usable” or “suitable” fill material for the burial areas was not precisely described
in the contract. The drafters elected instead to instruct bidders to use
“[e]xisting stockpiled fill material at the cemetery premises and supplement
with like material as necessary as approved by the SRE.” Unsuitable fill materials included “topsoil; construction materials and materials subject to decomposition; clods of clay and stones larger than 75mm (3 inches); organic
material, including silts, which are unstable; and inorganic materials, including silts, too wet to be stable.” While Mr. Jurado posited that in the absence
of a classification being specified for usable fill, “you can infer that you can
use any material from sludge up to soft material for fill,” it does not appear
from the facts before us that during contract performance there were any
questions or disputes between the parties as to what material constituted usable fill.
Mogotes are composed of limestone of varying degrees of hardness. Some can
only be removed by blasting and/or a jackhammer, while others can be removed, at least in small amounts, by a pick and shovel. The mogote in issue
was viewed as a source of fill for the project. As is clearly allowed, and actually contemplated by the contract’s terms, BCG planned on using material excavated from the mogote for the fill needed on the project.
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The plan was to excavate the limestone material in the mogote and turn it
into suitable fill by the bulldozing and crushing methods articulated by
Messrs. Jurado and Ortiz. This was the practice with a number of mogotes in
this area of Puerto Rico. The plan was reasonable, provided the material was
suitable or could be made suitable as fill. According to BCG’s bid estimate,
there was more than enough material available on site to provide the usable
fill required for the burial areas. In fact, the contractor anticipated it would
have excess materials from excavation that would need to be stockpiled
somewhere else on the cemetery premises, which it referred to as “cut [excavate] to waste.” To obtain the fill needed for the burial areas, BCG planned
on excavating material from the mogote with the ripper, eliminate the unsuitable materials, and roll over the remaining material with a bulldozer until it was broken down to a size that was suitable for fill. Material too large to
be crushed would be rolled by the bulldozer to the side and removed. Even
the VA’s consulting engineer indicated that he expected the contractor to use
the mogote as fill.
Problems were encountered early in the contract when BCG went to the top
of the mogote and attempted to begin excavation. It came upon material that
it was unable to excavate using its bulldozer ripper. The fact that this mogote
contained hard rock material did not come as a particular surprise to anyone
on this project, although BCG’s owners initially took the position they did not
expect to find rock in the mogote. All the witnesses ultimately agreed that
mogotes can be of varying degrees of hardness, with the limestone ranging
from soft, chalky material to material that is so hard it can only be penetrated with a jackhammer or by blasting. All involved in this contract conceded
that the only truly reliable way of telling the limestone composition inside a
mogote and its degree of hardness was through soil borings or sub-surface
studies. The consensus of the witnesses was that mogotes generally were a
good source of fill, but one could not reliably know how hard the limestone
inside a mogote would be until it was opened up and excavated.
When BCG came upon the hard material at the top of the mogote, which it
was unable to excavate using equipment that exceeded the break-and pry-out
force requirements specified in the contract, it immediately notified the VA it
had encountered unsuitable rock material and a differing site condition. Under the terms of the contract, when the contractor encountered and removed
unsuitable material and rock, that was unable to be excavated using machinery meeting the break-and pry-out force parameters set forth in the specifications, the contractor was entitled to have the contract price and time adjusted
pursuant the contract’s Differing Site Conditions and Changes clauses. BCG
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encountered this material, ergo, BCG would have been entitled to have the
contract price and time adjusted for the removal of unsuitable rock material
meeting the aforementioned characteristics.
While the facts of this case do not fit squarely within the traditional analyses
used with the Differing Site Conditions clause, we have concluded that, indeed, BCG encountered a differing site condition when it was unable to excavate the materials at the top of the mogote using the equipment specified in
the contract. It came upon a differing site condition because the very terms of
the contract instructed it to treat those conditions it encountered as a differing site condition. This is not to say the entire mogote should have or would
have been characterized as a differing site condition. Because work was
stopped at the top of the mogote we do not know what hardness of material
was inside the mogote, or whether it could have been excavated using the
specified equipment. Further, the answer to that issue is not relevant to the
decision we must make because the mogote excavation work was stopped and
removed from the contract.
After BCG notified the VA, claiming it had encountered a differing site condition, the VA, without much discussion with BCG, issued a unilateral change
order deleting the mogote earthwork from the contract and reducing the contract amount by $290,000. As the work continued, and finding itself needing
a source of suitable fill for the project, BCG approached the VA. The VA told
BCG to obtain fill from areas inside the cemetery, including a pond, a canal,
and on the slopes of the northeast trending line. A total of 34,000 cubic yards
of material was excavated from those areas. Of that, 7000 cubic yards were
suitable fill material and 27,000 cubic yards were unsuitable material. The
on-site sources provided by the VA yielded only 20% usable fill per cubic yard
excavated.
As work progressed and on-site sources of suitable fill were depleted, the VA
took the position the contract called for BCG to use excavated materials and
borrow for fill, and that the borrow was to be supplied at no additional cost to
the Government. Upon hearing that the VA expected BCG to pay for the borrow it needed to complete the project, BCG countered, asserting that when
the VA deleted the mogote excavation, it deprived BCG of its planned source
of usable fill, and BCG should be compensated for bringing borrow fill onto
the project pursuant to the contract’s Differing Site Conditions clause.
We agree that the VA’s action, deleting the mogote earthwork, deprived BCG
of the source of fill it planned to use on the project. However, because BCG
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never excavated the mogote, the contract’s Differing Site Conditions clause
has little to do with BCG’s recovery. What actually happened here is that, by
deleting the mogote earthwork, the VA constructively changed the manner
which BCG planned to obtain usable fill for the entire project. Where a contract permits a manner or method of performance, changing or forbidding
such manner or method is a constructive change under the Changes clause.
Gil-Brown Constructors, Inc., DOT CAB 67-21, 69-2 BCA ¶7804 (Government’s refusal to grant an extension of the minimum borrow pit area, where
the specifications provided for the staking of additional areas necessary to
supply the required material as the work progressed, restricted the contractor’s performance and caused a constructive change in the method of performing the work under the contract); Lincoln Construction Co., IBCA 438-5-64,
65-2 BCA ¶5234 (contractor entitled to an equitable adjustment for a constructive change where the Government withdrew a substantial portion of a
borrow area that it had staked off for use by the contractor prior to award);
see also Jerry Dodds, ASBCA 51682, 02-1 BCA ¶31,844; Clauss Construction,
ASBCA 51707, 02-1 BCA ¶31.678; Walashek Industrial & Marine, Inc.
ASBCA 52166, 01-1 BCA ¶31,385.
Constructively changing BCG’s planned manner of performance by deleting
the material in the mogote that could be used for fill increased the costs associated with the earthwork, because importing off-site borrow was more costly
than obtaining material from the mogote and processing it into usable fill.
The evidence presented leads the Board to conclude that, but for the elimination of the mogote excavation, BCG likely would have obtained at least some
suitable fill from the mogote. No compelling evidence was provided by the VA
to convince us that because the contract required that “borrow was to be provided at no cost to the VA” BCG was unreasonable in anticipating it would
obtain some amount of usable fill from this mogote. By the same token, a reasonably prudent contractor should have expected to encounter rocks based on
a viewing of the site, particularly seeing the piles of unsuitable rock material
that had been collected at the base of the mogote from prior excavations. A
contractor experienced in “taking down” mogotes, as BCG purported to be,
should also have expected to encounter some of the rock it encountered at the
top of the mogote. The contract informed bidders that they would be excavating a mogote, and, as such, a prudent contractor experienced in excavating
mogotes in the Bayamón area should have expected that it would encounter
varying quantities of either or both hard and softer limestone materials. That
being said, we have grappled mightily with the question of how much usable
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fill BCG should have reasonably expected, or actually might have gotten from
this mogote had it been excavated.
We are not convinced that 100% of this mogote could have been converted into usable fill, as opined by BCG’s consultant, Mr. Ortiz. Mr. Jurado testified
that, in every mogote project, a contractor expects to “come across some rocks
but that is manageable and [he] assumed that BCG would be able to use all
of the material in the project.” Later in his testimony, however, he testified
that a contractor excavating a mogote would expect to obtain a material that
is 60 to 70% suitable for fill. To us, even those numbers seem idealized. To
process the limestone into suitable fill, a contractor would roll over the material several times with a bulldozer or use jaw crushers to crush the limestone
down to a useable size. It is clear to us that using this mogote for suitable fill
would likely require extensive amounts of bulldozing, crushing, and processing. Other than its bid sheets showing an estimated unit price of $3.92
per cubic yard to excavate material for usable fill and $3.70 per cubic yard to
excavate material for waste, BCG failed to address in the record what it
would have cost to do the bulldozing, crushing, and processing needed to turn
the harder limestone deposits in this mogote into usable fill.
BCG’s expectations were not those of a prudent contractor. Its belief that 100,
70, or 60% of the material in the mogote was usable fill failed to reasonably
address the unpredictability of a mogote’s hardness, the presence of extensive
unsuitable rock material on the site, and the lack of soil borings. BCG was
able to extract from the other on-site sources only 20% usable fill per cubic
yard excavated. While these sources — a pond, a canal, and the slopes of the
eastern trending limestone ridge — are not a perfect comparison for the adjacent mogote, according to the VA’s consultant, the ridge contained the same
geologic formation as the mogote. Mr. Jurado testified that the materials excavated from the slopes of the northeast trending line were full of rocks and
muck. We believe these nearby on-site materials provide an appropriate
benchmark, and, indeed, the only evidence of the proportion of suitable fill
BCG likely would have obtained from the mogote had the excavation work
not been deleted.
The most reliable estimate we have for the mogote’s volume is from the licensed surveyor, Mr. Colón-Guzmán, who estimated the mogote as containing
76,387 cubic yards of material. Mr. Colón-Guzmán also estimated BCG would
need 71,197 cubic yards of fill for the project. Ultimately, BCG used a total of
38,693 cubic yards of fill on the project, 7000 cubic yards of which it was able
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to obtain from sources in the cemetery and 31,693 cubic yards of which it
brought onto the project from off-site as borrow.
Applying the yield of 20% usable fill per cubic yard to the 76,387 cubic yards
volume of the mogote, we find the VA’s deductive change effectively deprived
BCG of 15,277 cubic yards of usable fill. The parties have stipulated that the
borrow fill that was brought onto the project cost $15.24 per cubic yard.
Decision
These appeals are GRANTED IN PART. BCG is entitled to be compensated
for 15,277 cubic yards of borrow fill at a cost of $15.24 per cubic yard for a total of $232,821.48. In addition, pursuant to the Contract Disputes Act, 41
USC §611, BCG is entitled to interest on this amount from the date on which
the contracting officer received its monetary claim, March 9, 2006, until the
date of payment.
Patricia J. Sheridan, Board Judge
We Concur:
Robert W. Parker, Board Judge
Richard C. Walters, Board Judge
28
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Bonneville Associates
v.
United States
43 F.3d 649
December 19, 1994
Martin E. Seneca, Jr., Reston, VA, argued, for plaintiffs-appellants. Lisa B.
Donis, Atty., Dept. of Justice, Washington, DC, argued, for defendantappellee. With her on the brief were Frank W. Hunger, Asst. Atty. Gen., David M. Cohen, Director, and Bryant G. Snee, Asst. Director. Kent B. Scott and
Jeffery R. Price, of Walstad & Babcock, Salt Lake City, UT, were on the brief,
for third party-defendant/appellee.
Before Newman, Lourie, and Clevenger, Circuit Judges.
Lourie, Circuit Judge.
Bonneville Associates, John N. Owens, and Machan Hampshire Properties,
Ltd. (collectively “Bonneville”) appeal from the judgment of the United States
Court of Federal Claims1 dismissing Bonneville’s complaint without prejudice
for lack of subject matter jurisdiction. Bonneville Assocs. v. United States, 30
Fed.Cl. 85 (1993). We affirm.
Background
On September 30, 1987, the government, acting through the General Services
Administration, contracted with Bonneville to purchase an office building in
Las Vegas, Nevada for $9,908,452. The agreement required Bonneville to
make extensive repairs and alterations to render the building suitable for
government use2. To ensure completion of the repair and alteration work, the
contract provided that $1,708,452 of the contract price would be withheld and
paid to Bonneville as the work progressed.
1
Effective October 29, 1992, the Claims Court was renamed the “United States Court of
Federal Claims.” Federal Courts Administration Act of 1992, Pub.L. No. 102-572, §902(a),
106 Stat. 4506, 4516 (1992).
2
Paragraphs 8-10 of the contract define three categories of such repairs and alterations,
namely, “tenant build-out,” “agency specials,” and “retrofit items.” For simplicity, these
contract provisions will be collectively referred to as “the repair and alteration work.”
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After title was conveyed to the government, disputes arose concerning the
building’s structural integrity and its heating, ventilation, and air conditioning units (“HVAC system”). On August 21, 1991, the contracting officer
(“CO”) issued a final decision demanding payment from Bonneville of
$5,195,069 to cover the cost of correcting the structural defects3 and improving the HVAC system’s cooling capacity. Damages assessed for the alleged
structural defects were based on the contract’s warranty clause; damages for
the deficient HVAC system were based on contract provisions relating to the
repair and alteration work.
Bonneville filed a notice of appeal with the General Services Administration
Board of Contract Appeals on November 19, 1991. The board docketed the
appeal on November 26, 1991. On January 8, 1992, Bonneville moved to
withdraw its appeal to the board. The board dismissed the appeal without
prejudice on January 17, 1992. Bonneville filed a complaint in the Court of
Federal Claims on January 13, 1992, demanding $500,000 in withheld repair
funds and $5,000,000 in unspecified damages. The government moved to
dismiss Bonneville’s complaint for lack of subject matter jurisdiction, arguing
that under the judicially-created “Election Doctrine,” Bonneville’s prior appeal to the board was a binding choice of forum that deprived the Court of
Federal Claims of jurisdiction. In response, Bonneville argued that the primary purpose of the contract was the government’s procurement of real property, excluded from the board’s jurisdiction under the Contract Disputes Act
of 1978 (“CDA”).4 See 41 USC §602(a)(1) (Supp. V 1993) (CDA does not apply
to contracts for the “procurement of ... real property”). Bonneville argued
that, because the board lacked jurisdiction over its appeal, the Election Doctrine did not apply. See National Neighbors, Inc. v. United States, 839 F.2d
1539, 1542 (Fed.Cir. 1988) (“[A] contractor’s choice to pursue an appeal in a
forum lacking jurisdiction is not a binding election.”).
The Court of Federal Claims determined that the contract was a dualpurpose agreement for both the purchase and repair of real property, and
that the contract provisions relating to the procurement of the building were
distinct from those concerning Bonneville’s obligation to repair and alter the
property. Bonneville, 30 Fed.Cl. at 88 (“[T]he repair clauses of the contract
are sufficiently distinct so as not to involve the sale clauses of the contract.”).
3
The final decision cited the need to strengthen the building’s floor load capacity to meet
Uniform Building Code standards and level the floors to correct excessive floor deflections.
4
Pub.L. No. 95-563, 92 Stat. 2383, codified as amended at 41 USC §§601-613 (1988 & Supp.
V 1993).
30
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The court also found that the dispute between Bonneville and the government involved only the repair and alteration, not the sale, of the building. Id.
at 88. The court noted that the contract’s disputes clause made disputes concerning the promised repair work subject to the CDA. Id. Relying in part on
our holding in Forman v. United States, 767 F.2d 875, 879 (Fed.Cir. 1985)
(board has jurisdiction over dual-purpose contract for the construction and
lease of real property), the court held that the board had jurisdiction over
Bonneville’s appeal. See 41 USC §602(a)(3) (CDA applies to contracts for the
“procurement of construction, alteration, repair or maintenance of real property”). Bonneville, 30 Fed.Cl. at 87-89. The court therefore concluded that,
because the board had jurisdiction over Bonneville’s appeal, the Election Doctrine required dismissal of the case without prejudice for lack of subject matter jurisdiction. Id. at 89-90. Bonneville now appeals.
Discussion
Whether the Court of Federal Claims had jurisdiction in a CDA case is a
question of law, which we review de novo. Sharman Co. v. United States, 2
F.3d 1564, 1568 (Fed.Cir. 1993); Transamerica Ins. Corp. v. United States,
973 F.2d 1572, 1576 (Fed.Cir. 1992).
Section 8(d) of the CDA provides that the boards of contract appeals “shall
have jurisdiction to decide any appeal from a decision of a contracting officer
... relative to a contract.” 41 USC §607(d) (Supp. V 1993). Section 3 of the
CDA limits the applicability of the statute, and thus the board’s jurisdiction,
to certain types of contracts:
§602 Applicability of law
(a) Executive agency contracts
Unless otherwise specifically provided herein, this chapter applies to any express or implied contract ... entered into by an
executive agency for —
(1) the procurement of property, other than real property in
being;
(2) the procurement of services;
(3) the procurement of construction, alteration, repair or
maintenance of real property; or,
(4) the disposal of personal property.
41 USC §602(a) (Supp. V 1993).
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Bonneville argues that the board lacked subject matter jurisdiction over its
appeal and thus that Bonneville’s filing of a notice of appeal with the board
was not a binding election. Specifically, Bonneville points out that §602(a)(1)
excludes contracts for the “procurement of ... real property” from the CDA.
The primary purpose of the contract, Bonneville argues, was to convey real
property to the government. Bonneville further contends that the dispute between the parties concerned the government’s procurement of the building,
not the building’s repair and alteration, because the CO’s final decision relied
in part on the contract’s warranty clause5. Bonneville asserts that the warranty is inextricably linked to the sale of the building and thus the contract is
excluded from the CDA under §602(a)(1). As further support, Bonneville
points out that paragraph 24 of the contract, which provides that disputes
concerning Bonneville’s obligation to perform the repair and alteration work
shall be subject to the CDA,6 does not state that disputes concerning the warranty of structural integrity are to be governed by the CDA. According to
Bonneville, the parties recognized that warranty claims would be part and
parcel of the sale of the building and could not be made subject to the CDA.
The government, on the other hand, contends that Bonneville’s filing of a notice of appeal with the board was a binding election depriving the Court of
Federal Claims of jurisdiction. The government characterizes the contract as
a dual-purpose agreement for the purchase of a building and the performance
of repair and alteration work. The government asserts that all disputed items
raised in the CO’s final decision concerned Bonneville’s duty, under the warranty of structural integrity and other contract provisions, to repair and alter
5
Paragraph 25 of the contract, entitled “WARRANTY OF SPECIFICATION AND
STRUCTURAL INTEGRITY,” provides, in relevant part:
The seller further certifies and guarantees the structural integrity of the
building to be purchased by the government hereunder, and agrees ... to
correct any patent or latent defects in the structural integrity of the
building discovered by the government or its agents. The government reserves the right to hold back a portion of the purchase price ... if the seller fails to completely repair or otherwise correct any defect in structural
integrity prior to closing. If the government determines that a structural
defect may interfere with its intended use of the property purchased
hereunder, the government shall also be entitled to consequential damages arising from said defect. Warranties under this paragraph shall be
for five (5) years form closing on the purchase of the building.
6
32
Paragraph 24, entitled DISPUTES FOR TENANT BUILD-OUT OR CHANGES, provides,
in relevant part, “Any dispute arising from the work contemplated by Paragraphs 8, 9, and
11 hereof shall be governed by the Contract Disputes Act of 1978.”
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the building. Section 602(a)(3), the government points out, makes contracts
for the procurement of “repair” and “alteration” of real property subject to the
CDA. The government notes that, consistent with §602(a)(3), the contract
provides that any dispute involving the specified repair and alteration work
would be governed by the CDA. The government reasons that, because the
dispute only concerned Bonneville’s duty to repair and alter the building,
§602(a)(3) gave the board jurisdiction over Bonneville’s appeal and thus
Bonneville’s appeal to the board was a binding choice of forum. We agree with
the government.
The CDA provides alternative forums for challenging a CO’s final decision: a
contractor may file an appeal with the appropriate board of contract appeals,
41 USC §606 (1988), or appeal directly to the Court of Federal Claims, 41
USC §609(a)(1) (Supp. V 1993). Courts have consistently interpreted the CDA
as providing the contractor with an either-or choice of forum. See National
Neighbors, 839 F.2d at 1542; Santa Fe Eng’rs, Inc. v. United States, 677 F.2d
876, 878, 230 Ct.Cl. 512 (1982). Thus, once a contractor makes a binding election to appeal the CO’s final decision to a board of contract appeals or to the
Court of Federal Claims, the contractor can no longer pursue its claim in the
other forum. National Neighbors, 839 F.2d at 1542. The contractor’s choice of
forum is an important strategic decision, given the fundamental differences
between the two forums. See generally John Cibinic, Jr. & Ralph C. Nash,
Jr., Administration of Government Contracts 1003 (2d ed. 1986) (discussing
the varying formality of proceedings, availability of accelerated procedures,
etc.).
The Election Doctrine does not apply, however, if the forum originally selected lacked subject matter jurisdiction over the appeal. National Neighbors,
839 F.2d at 1542. In such case, no true choice of forum is available to the contractor and the Election Doctrine does not apply. Id.; Olsberg Excavating Co.
v. United States, 3 Cl.Ct. 249, 252 (1983). For example, because the board
lacks jurisdiction over an untimely appeal, the Election Doctrine would not
invalidate a contractor’s subsequent filing of an appeal in the Court of Federal Claims. National Neighbors, 839 F.2d at 1542.
The pivotal question here is whether the board possessed jurisdiction over
Bonneville’s initially filed appeal. To answer this question, we must examine
the language of §602(a). See Consumer Prod. Safety Comm’n v. GTE Sylvania, Inc., 447 U.S. 102, 108, 100 S.Ct. 2051, 2056, 64 L.Ed.2d 766 (1980) (language of statute governs absent clearly expressed legislative intent to the
contrary); Coastal Corp. v. United States, 713 F.2d 728, 730 (Fed.Cir. 1983)
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(stating that §602(a) is unambiguous). Under the plain terms of §602(a), the
board has jurisdiction over contracts for the procurement of repair and alteration of real property, but lacks jurisdiction over contracts for the procurement of real property. A “procurement” is an acquisition by purchase, lease,
or barter, of property or services for the direct benefit or use of the federal
government. New Era Constr. v. United States, 890 F.2d 1152, 1157 (Fed.Cir.
1989) (quoting Mayer, 84-2 BCA (CCH) ¶17,494, 1984 WL 13451 (HUD BCA
1984)). The terms “real property,” “repair,” and “alteration” have commonly
understood meanings that are not disputed.
Under the agreement in question, the government purchased an office building and received the fee simple title to the property. The contract conveyed a
pre-existing real property interest to the government and did not create a
new property interest7. Thus, the contract was, in part, one for the “procurement of ... real property” within the meaning of §602(a)(1). Apart from the
government’s procurement of the property, however, another important purpose of the agreement was the repair and alteration of the building to render
it suitable for government use. We therefore conclude, as did the Court of
Federal Claims, that the contract was both for the procurement and repair/alteration of real property.8
If one considers the nature of the contract, sections 602(a)(1) and 602(a)(3)
both potentially apply. In view of the conflict posed by this dual-purpose contract, it is necessary to examine the nature of the dispute between the parties
to resolve the jurisdictional issue. Bonneville does not question this analytical
approach. Rather, the gravamen of Bonneville’s argument is that, because
7
In Forman, we held that the CDA’s exclusion of contracts for the “procurement of ... real
property” applies only to the acquisition of pre-existing interests and does not apply to
contracts that create a new property interest, such as a leasehold, at the time of contracting. Forman, 767 F.2d at 879.
8
The legislative history of §602(a) does not change our analysis. As we noted in Forman,
767 F.2d at 878:
The legislative history of the Disputes Act contains little illuminating
Congress’ intended meaning of the phrase “real property in being.” The
committee reports are silent. We are directed to the debate on the floor of
the House of Representatives, in which Congressman Kindness remarked: “The procedures and remedies set down in the bill are applicable
to all express or implied contracts entered into by the United States for
(1) the procurement of property (other than real property in being which
is governed by the laws of eminent domain).” 124 Cong. Rec. 31,645
(1978). This morsel is not a sufficient explanation of the statute’s purpose
or meaning for it to be highly persuasive in this case.
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the CO’s final decision relied in part on the contract’s warranty clause, the
actual dispute between the parties concerned the procurement, not the repair
and alteration, of the conveyed building.
We disagree. The warranty provision required Bonneville to repair any structural defects discovered by the government for a period of five years after the
date of closing on the purchase of the building. The CO’s final decision assessed damages, under the warranty clause and other contract provisions,
based on Bonneville’s failure to repair and alter the building as promised.
Thus, the real dispute here concerned the extent of Bonneville’s duty to repair and alter the building, not the government’s procurement of the building. It did not involve such matters as title to the property, the consideration
received for it, or other aspects of the conveyance, which would more clearly
be disputes over the procurement of real property. Because the dispute between the parties only concerned Bonneville’s duty to repair and alter the
building, §602(a)(3) conferred jurisdiction on the board to hear Bonneville’s
appeal.
Bonneville asserts that Paragraph 24 limits the applicability of the CDA to
Paragraphs 8, 9, and 11. However, the fact that the contract expressly stipulated in Paragraph 24 that any dispute arising out of the work under Paragraphs 8, 9, and 11 would be governed by the CDA is not inconsistent with a
conclusion that other disputes arising under the contract are also determined
by statute to be subject to the CDA. Moreover, the fact that the CDA is expressly referenced in the contract underlines the conclusion that the contract
is in part governed by the CDA.
Even assuming, arguendo, that the government’s warranty claim were inseparable from the procurement of the building, this does not mean that the
board lacked jurisdiction over Bonneville’s appeal. The contract was still not
only for the procurement of the building, but also for its repair and alteration.
In Forman, we held that a dual-purpose agreement for the construction and
lease of a building was governed by the CDA.9 Forman, 767 F.2d at 879. Our
holding was partly based on the fact that “the lease was part of a larger
agreement,” namely a building construction contract, “over which the Board
plainly does have jurisdiction.” Id. We recognized that it would be incongruous for the board to have jurisdiction to construe one part of the contract, but
not the other. Id.
9
The Formans agrees to build a postal facility in Hollywood, Florida; in exchange, the Postal Service agreed to enter into a long-term lease of the facility. Forman, 767 F.2d at 877.
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We think a similar result follows here. The agreement to convey the building
to the government was part of a larger agreement in which Bonneville promised to repair and alter the building to render it suitable for government use.
The CO’s final decision assessed damages not only for alleged structural defects, but also for Bonneville’s failure to improve the HVAC system’s cooling
capacity. Bonneville’s promise to modify the HVAC system and perform other
repair and alteration work made the contract, in substantial part, one for the
“procurement of ... alteration [and] repair” of real property, within the board’s
jurisdiction under §602(a)(3). It would be inconsistent with the remedial purpose of the CDA for the board to have jurisdiction over the government’s
claim stemming from Bonneville’s promise to modify the HVAC system but
not over that based on the warranty clause. We doubt that Congress intended
such a piecemeal adjudication of these closely related disputes. Thus, even
assuming the government’s warranty claim was, in a sense, inseparable from
its procurement of the building, we hold that the board had jurisdiction over
the entire appeal. Accord Korman Corp., 82-2 BCA (CCH) ¶16,044, 1982 WL
7783 (HUD BCA 1982) (contract for the sale and repair of real property held
to be within the CDA).
The Election Doctrine requires not only that the elected forum possess subject matter jurisdiction over the appeal, but also that the contractor’s choice
of forum be “informed, knowing and voluntary.” Mark Smith Constr. Co. v.
United States, 10 Cl.Ct. 540, 544 (1986) (quoting Prime Constr. Co. v. United
States, 231 Ct.Cl. 782 (1982)). The Court of Federal Claims found that
Bonneville’s election was informed, knowing, and voluntary because Bonneville was advised of its appeal rights under the CDA. Bonneville, 30 Fed.Cl.
at 90. On appeal to this court, Bonneville does not challenge this finding.
Thus, we need not reach this issue.
We have considered Bonneville’s other arguments and find them not persuasive.
Conclusion
The board had jurisdiction over Bonneville’s appeal because the dispute between the parties concerned Bonneville’s alleged breach of its duty under the
warranty clause and other contract provisions to repair and alter the conveyed building. The government’s procurement of the building was not in
dispute. Even assuming the government’s warranty claim was inseparable
from its procurement of the building, the board had jurisdiction over the en-
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tire appeal. Accordingly, the Court of Federal Claims properly applied the
Election Doctrine to dismiss Bonneville’s action without prejudice for lack of
subject matter jurisdiction. The decision of the Court of Federal Claims is affirmed.
AFFIRMED.
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Bonneville Associates
v.
General Services Administration
96-1 BCA 28122
Dismissed for Lack of Jurisdiction: December 22, 1995
Martin E. Seneca, Jr., Reston, VA, counsel for Appellant. Kevin S. Anderson,
Office of General Counsel, General Services Administration, Washington, DC,
counsel for Respondent.
Before Board Judges Daniels (Chairman), Neill, and Hyatt.
Hyatt, Board Judge.
This appeal challenges a contracting officer’s decision demanding payment of
$5,195,069 in connection with a contract under which Bonneville Associates,
Limited Partnership sold a building to the General Services Administration
(GSA) and agreed to perform certain repairs and alterations to the building.
The underlying dispute between the parties arises from an alleged breach by
Bonneville of the purchase agreement’s warranty of structural integrity and
from the failure to perform repairs as required. GSA has filed a motion to
dismiss Bonneville’s appeal for lack of jurisdiction. For the reasons stated below, we grant the motion.
Background
On September 30, 1987, Bonneville and GSA entered into a contract under
which GSA purchased an office building in Las Vegas, Nevada, from Bonneville. The contract obligated Bonneville to make substantial repairs and alterations to the building to render it suitable for government use. Controversies concerning the repairs and alterations arose between the parties after
the government took title to the building. For the most part, these disputes
focused on the floor load capacity of the building and the operation of the
heating, ventilation, and air conditioning (HVAC) units. See Bonneville Associates v. United States, 43 F.3d 649 651 (Fed.Cir. 1994).
After four years of unsuccessful settlement negotiations, the GSA contracting
officer issued a decision, on August 21, 1991, demanding $5,195,069 from
Bonneville for the cost of correcting the structural defects and remedying the
deficiencies in the HVAC units. That decision notified Bonneville of its right
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to appeal either to the General Services Administration Board of Contract
Appeals within ninety days, or to the United States Claims Court (now the
United States Court of Federal Claims) within twelve months. Appeal File,
Exhibit 42.
On November 19, 1991, ninety days after receipt of the contracting officer’s
decision, Bonneville filed a timely notice of appeal at the Board. Bonneville
then filed a motion to withdraw its appeal on January 8, 1992. Respondent
did not oppose the motion and on January 17, 1992, the Board, pursuant to
its Rule 28(a)(1), providing for the voluntary dismissal of pending actions,
dismissed the appeal without prejudice.
Bonneville filed a complaint, challenging the same decision of the contracting
officer, in the United States Claims Court on January 13, 1992. The government moved to dismiss Bonneville’s complaint for lack of subject matter jurisdiction, arguing that under the judicially-created “election doctrine”
Bonneville’s prior appeal to the Board was a binding choice of forum that deprived the court of jurisdiction. Bonneville countered that the primary purpose of the contract was the government’s procurement of real property and,
therefore, that the transaction was excluded from the Board’s jurisdiction
under the Contract Disputes Act of 1978 (“CDA”).1 See 41 USC §602(a)(1)
(Supp. V 1993) (contracts for the “procurement of ... real property” are exempt
from the CDA). Bonneville argued that, because the Board lacked jurisdiction, the election doctrine did not apply.
On November 22, 1993, the Court of Federal Claims determined that the
Board did have subject matter jurisdiction over Bonneville’s claim because
the dispute arose under the repair clause of the dual purpose contract, which
was governed by the CDA. Bonneville Associates v. United States, 30 Fed. Cl.
85, 88 (1993) (citing Forman v. United States, 767 F.2d 875, 879 (Fed.Cir.
1985) (board of contract appeals has jurisdiction over dual-purpose contract
for the construction and lease of real property)). The court thus concluded
that the election doctrine required dismissal of the case without prejudice for
lack of subject matter jurisdiction. 30 Fed. Cl. at 87-89.
Bonneville appealed this decision to the United States Court of Appeals for
the Federal Circuit on December 19, 1994, the Court of Appeals affirmed the
lower court’s decision, holding that the Board did have jurisdiction over
1
40
Pub.L. No. 95-563, 92 Stat. 2383, codified as amended at 41 USC §§601-613 (1988 & Supp.
V 1993).
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Bonneville’s appeal and that the Court of Federal Claims had correctly applied the election doctrine to dismiss Bonneville’s action for lack of subject
matter jurisdiction. Bonneville Associates v. United States, 43 F.3d 649
(Fed.Cir. 1994).2
Following the issuance of the Federal Circuit’s decision, Bonneville, on December 29, 1994, sought to reinstate its appeal at the Board pursuant to Rule
28(a)(2). At the time Bonneville’s appeal was dismissed in 1992, this provision stated that a case dismissed without prejudice, and not reinstated within
three years or a shorter-prescribed period from the date of the dismissal,
would be deemed dismissed with prejudice at the conclusion of the applicable
period. 48 CFR 6101.28(a)(2)(1991).
Discussion
GSA has moved to dismiss Bonneville’s “reinstated” appeal as time-barred
under the CDA’s ninety-day time limit for bringing an appeal to the Board. It
is GSA’s contention that the Board’s Rule 28, governing voluntary dismissals
of cases, cannot be construed to permit Bonneville to pursue its appeal at this
point in time. Rather, GSA maintains, the Board’s order dated January 17,
1992, dismissing Bonneville’s appeal without prejudice, operated in much the
same manner as a dismissal under Federal Rule of Civil Procedure (FRCP)
41(a)3, which places the parties in the same position as if the action had never been brought. As such, GSA argues that the use of Rule 28(a)(2) to reinstate this appeal contravenes the ninety-day appeal period established under
the CDA4. In support of its position, GSA cites Inslaw Inc., DOTBCA 1609 et.
al., 92-1 BCA ¶24,550, at 122,501-02, which, in dicta, suggested the possible
invalidity of a similar Department of Transportation Board of Contract Appeals rule which, like the GSBCA rule relied upon by appellant, provided that
actions dismissed without prejudice may be reinstated within three years. In
sum, GSA asserts that Bonneville’s December 29, 1994 filing is effectively a
new appeal and is thus untimely under the CDA.
2
Bonneville states that the Court of Federal Claims, during oral arguments, asked the government whether the Board would retain jurisdiction to hear the appeal should the court
dismiss the case. The government’s response was noncommittal. According to Bonneville,
a similar inquiry was made by the Court of Appeals. Regardless, the interest expressed by
these courts in the context of oral arguments does not confer jurisdiction upon the Board.
3
FRCP 41(a) provides: [text of rule omitted]
4
The Contract Disputes Act, at 41 USC §605(b), provides: [text of CDA omitted]
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In response to the government’s motion to dismiss, Bonneville maintains that
a dismissal without prejudice pursuant to Rule 28(a)(2) does not have the
same effect as a voluntary dismissal under the FRCP 41(a). Bonneville asserts that, in this case, the dismissal without prejudice is analogous to a suspension of proceedings and that the Board retains jurisdiction until a specific
time has elapsed at which time the dismissal converts to a dismissal with
prejudice. Therefore, Bonneville argues, its second filing on December 29,
1994 related back to the date of the first filing and should not be deemed untimely under the CDA.
The arguments of the parties are best understood in light of the historical development of these procedural rules. Before 1985, the GSBCA Rules of Procedure regarding dismissals without prejudice (then Rule 30) provided that a
judge could dismiss an appeal without prejudice where it appeared that a
case would be in suspense status for an inordinate length of time. 41 CFR 5A60.101 (1975) (Rule 30). Often, such dismissals were granted to accommodate
parties’ settlement efforts. Because the circumstances requiring this prolonged suspense status could sometimes take years to resolve, the Rule also
provided for up to three years during which an appeal could be reinstated5.
The term “dismissal without prejudice” was not intended to be used in the
same manner as the term is often used under FRCP 41(a) — Voluntary Dismissal — treating the action “as if it had never been brought.” Humphreys v.
United States, 272 F.2d 411, 412 (9th Cir. 1959). Rather, it was intended that
the case would be “reinstated” to the same procedural posture as if the dismissal had never occurred6. See, e.g., University Research Corp., GSBCA
9079, 88-2 BCA ¶20,718, at 104,684 (although the Board declined to reinstate
appeal when appellant filed motion for reinstatement after the expiration of
three years from the date of the dismissal without prejudice, its prior order
had stated: “Pending settlement, all proceedings in the appeals have been
suspended. In these circumstances, it is appropriate to dismiss these appeals
but to allow reinstatement if settlement should not be effected.” University
Research Corp., GSBCA 6279-ED, 1983 WL 13196); Dawson Construction
Co., GSBCA 5550, 1981 WL 7475 (Sept. 30, 1981) (dismissing appeal without
prejudice subject to reinstatement within ninety days should the parties’ settlement agreement not be consummated).
5
From 1975 to 1984, the Board’s then Rule 30, Dismissal Without Prejudice, provided:
[Footnote in case incomplete]
6
Black’s Law Dictionary states that “to reinstate a case” means “[t]o place again in same
position as before dismissal.” Black’s Law Dictionary 1287 (6th ed. 1990) (citing United
States v. Green, 197 F.2d 19, 22 (9th Cir 1939)).
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In 1985, the GSBCA Rules of Procedure were amended. Former Rule 30 was
divided into two rules, renumbered as Rule 27(c) — Dismissal in Lieu of Stay
or Suspension, and Rule 28(a) — Voluntary Dismissal. 48 CFR 6101.27,
6101.28 (1985). Rule 28(a) under the 1985 Rules was worded to closely resemble FRCP 41(a) — Voluntary Dismissals. See International Business Machines Corp., GSBCA 8834-P, 1987 WL 40647 (Feb. 12, 1987) (acknowledging
that Rule 28(a)(2) is based upon FRCP 41).
The 1985 versions of GSBCA Rules 27(c) and 28(a) provide in pertinent part:
6101.27 (Rule 27)
....
(c) Dismissal in lieu of stay or suspension. When circumstances
beyond the control of the Board prevent the continuation of
proceedings in a case, the Board may in lieu of issuing an order
suspending proceedings, dismiss the case without prejudice to
reinstatement. Such a dismissal may require reinstatement by
a date certain or within a certain period of time after the occurrence of a specified event. If the order of dismissal does not
otherwise provide, it will be subject to the provisions of
6101.28(a) [Rule 28].
6101.28 (Rule 28)
(a) Voluntary dismissal. (1) Upon motion of the appellant or by
stipulation of the parties, a case may be dismissed by the
Board. Unless otherwise stated in the appellant’s motion or in
the stipulation, the dismissal is without prejudice, except that
such dismissal operates as an adjudication upon the merits
when requested by an appellant whose case based on or including the same claim has previously been dismissed by the
Board. (2) When a case has been dismissed without prejudice
and has not been reinstated by the Board upon application of
any party within three years of the date of dismissal, or within
such shorter period as the Board may prescribe, the case shall
be deemed to have been dismissed with prejudice as of the expiration of the applicable period.
48 CFR 6101.27, 6101.28 (1985)7 .
7
In 1994, the Board amended Rule 28 — Dismissals — to its present form.
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Unlike previous versions of the Rules, the 1985 and subsequent revisions
contemplate dismissals not only when the Board wishes to remove the case
from suspense status or to accommodate settlement negotiations or unusual
extenuating circumstances, but also when the appellant no longer intends to
pursue the action at the Board. The latter is the common understanding of a
“voluntary dismissal without prejudice” as used in FRCP 41.
Bonneville argues that, in this instance, the dismissal without prejudice was
not analogous to FRCP 41(a), but is analogous to a suspension of proceedings
because the order contemplated the reinstatement of the appeal. This contention is unconvincing. The order itself merely dismissed the appeal — it was
silent as to reinstatement. Bonneville requested that its appeal be dismissed
in order that it might file the identical suit in the United States Claims Court
(Court of Federal Claims). Bonneville then proceeded to argue in the Court of
Federal Claims and at the Court of Appeals for the Federal Circuit, in opposition to the government’s motion to dismiss, that this Board did not have jurisdiction over its appeal in the first instance. Bonneville Associates v. United
States, 30 Fed. Cl. 85 (1993) and Bonneville Associates v. United States, 43
F.3d 649 (Fed.Cir. 1994). At the time Bonneville moved to withdraw the appeal, issue had not yet been joined. As a practical matter, there were no proceedings to be stayed. Thus, Bonneville’s request to dismiss its appeal without prejudice had the same effect as a dismissal without prejudice under Rule
41(a) of the Federal Rules of Civil Procedure — to remove the appeal from the
Board completely.
Where the term “dismissal without prejudice” is being used in the same
manner as it is used in FRCP 41(a) — Voluntary Dismissals, it is appropriate
to consider cases construing FRCP 41(a) to determine the effect of such dismissals. See Computer Dynamics, Inc., GSBCA 10288-P (10209-P), 90-1 BCA
¶22,328, at 112,222, 1989 BPD ¶294 (“[R]ule [28(a)(2) ] has much in common
with Rule 41(a) of the Federal Rules of Civil Procedure — rules to which we
look for guidance in interpreting our own rules.”). As stated in Computer Dynamics: “Under F.R.C.P. 41(a), ‘[a] voluntary dismissal without prejudice
leaves the situation as if the action had never been filed. After a dismissal
the action is no longer pending in the court find no further proceedings in the
action are proper.’ ” Id., citing Long v. Board of Pardons and Paroles of Texas,
725 F.2d 306, 307 (5th Cir. 1984). Accord Curtis v. United Transportation Union, 648 F. 2d 492, 495 (8th Cir. 1981) (“Rule 54(b) does not provide an exception ... to the rule that the entry of a voluntary dismissal without prejudice
leaves the action as if the suit had never been brought for purposes of the
statute of limitations.”); Bomer v. Ribicoff, 304 F.2d 427, 428 (6th Cir. 1962)
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(an action dismissed without prejudice leaves the situation as if the suit had
never been brought); Humphreys v. United States, 272 F.2d 411, 412 (9th Cir.
1959 (“suit dismissed without prejudice pursuant to Rule 41(a)(2) leaves the
situation the same as if the suit had never been brought”.).
Bomer v. Ribicoff, 304 F.2d 427 (6th Cir. 1962), involving an appellant’s attempt to refile an appeal which was dismissed without prejudice after the expiration of a statutory time limit, is particularly on point. In Bomer, the appellant had timely filed an action in United States District Court seeking
review of a Hearing Examiner’s denial of appellant’s claim for increased benefits under the Social Security Act. Several months later, the Bomer appellant filed a motion to dismiss the complaint without prejudice. Nearly a year
later, the appellant filed the same action for administrative review of the
Hearing Examiner’s ruling in the same district court. The government moved
to dismiss the action, arguing that the appellant failed to commence the action within the sixty day period after notice of the final decision of August 4,
1959, as required by 42 USC §405. Id. at 428. Invoking the general rule that
“[a]n action dismissed without prejudice leaves the situation the same as if
the suit had never been brought,” the court agreed that the action had to be
dismissed. The court explained that where the right of action sought to be
enforced is one created by statute and is limited by the provisions of the statute as to the time within which the right must be asserted, such conditions
operate as a condition of liability rather than as a period of limitation and
there can be no recovery unless the condition precedent is fulfilled. Id. at 429.
As a result, the court held that “not having filed the present action to review
the adverse administrative ruling within the sixty days provided by statute,
the right provided by statute ceased to exist, and the present action was
properly dismissed.” Id.
Like the appellant in Bomer, Bonneville here attempts to refile an appeal
which was dismissed without prejudice after the expiration of a statutory
time limit our appellate authority has made clear that the ninety-day statutory filing period provided in the CDA is jurisdictional and, like the sixty-day
limit in Bomer, must be strictly construed. See Cosmic Construction Co. v.
United States, 697 F.2d 1389, 1390 (Fed.Cir. 1982) (Armed Services Board of
Contract Appeals lacked jurisdiction to waive the ninety-day period provided
for in 41 USC §606). Additionally, it is well settled that “ ‘[a]n authority conferred upon a court to make rules of procedure for the exercise of its jurisdiction is not an authority to enlarge its jurisdiction.’ ” Widdoss v. Secretary of
the Department of Health and Human Services, 989 F.2d 1170, 1177 (Fed.Cir.
1993), cert. denied, 114 S.Ct. 381, (citing United States v. Sherwood, 312 U.S.
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584, 589-90 (1941)). Thus, a court or board “cannot, by rule or order, create
exceptions to or otherwise waive or extend a limitations period established by
statute. The terms of the Sovereign’s consent to suit have long been considered jurisdictional.” White Buffalo Construction, Inc. v. United States, 28 Fed.
Cl. 145, 146 (1992). Therefore, the Board is not at liberty to construe Rule
28(a)(2) In such a way as to toll, extend, or waive the time period established
by the CDA in which to appeal the decision of the contracting officer.
Accordingly, because Bonneville voluntarily caused its appeal to be dismissed
without prejudice in order to pursue the appeal in another forum, Bonneville
is placed in the same position as if the first appeal had never been filed. The
second filing does not relate back to the date of the first filing. Moreover, as
the second complaint filed on December 29, 1994 is a “new appeal” filed after
the expiration of the CDA ninety-day time limit, it is untimely. We lack jurisdiction to hear this appeal.
Decision
For the reasons stated, respondent’s motion to dismiss is GRANTED.
Appellant’s appeal is DISMISSED WITHOUT PREJUDICE for lack of jurisdiction.
Catherine B. Hyatt, Board Judge
I concur:
Edwin B. Neill, Board Judge
DANIELS, Board Judge, dissenting.
It must have been a decision like this one that caused Dickens’s Mr. Bumble
to say, “If the law supposes that, the law is a ass.” C. Dickens, Oliver Twist at
520 (1943 Dodd, Mead & Co. ed.).
The majority finds that the Board lacks jurisdiction to hear this case on the
basis of a very limited set of facts. According to my colleagues, all we need to
know to resolve this motion is the following: on August 21, 1991, a GSA contracting officer issued a decision asserting a claim under a contract between
GSA and Bonneville. The decision informed Bonneville that review by an impartial adjudicator could be had if the contractor filed an appeal with this
Board within ninety days or brought a direct action in the United States
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Claims Court within twelve months. Bonneville timely appealed the decision
to the Board on November 19, 1991. The contractor moved to withdraw this
case shortly thereafter, and on January 17, 1992, the Board dismissed the
case without prejudice. Nearly three years later, on December 29, 1994,
Bonneville moved to reinstate the appeal.
The majority holds that the controlling principle in this case is that “a voluntary dismissal without prejudice leaves the situation as if the action had never been filed. After a dismissal the action is no longer pending in the court.”
Computer Dynamics, Inc., GSBCA 10288-P (10209-P), 90-1 BCA ¶22,328, at
112,222, 1989 BPD ¶294, at 3 (citing Long v. Pardons & Paroles of Texas, 725
F.2d 306, 307 (5th Cir. 1984)). The filing of the motion for reinstatement was
consequently, according to the majority, in effect the filing of the appeal for
the first time. Because the Contract Disputes Act authorizes a contractor to
appeal a contracting officer’s decision to a board of contract appeals only if
the appeal is filed within ninety days of the contractor’s receipt of the decision, 41 USC §606 (1988), and the ninety-day filing period is jurisdictional
and must be strictly construed, Cosmic Construction Co. v. United States, 697
F.2d 1389, 1390 (Fed.Cir. 1982), my colleagues conclude that this case was
filed much too late for us to consider it.
This position is built on a legal fiction — that Bonneville never brought this
case to us before it filed its motion for reinstatement. Such fictions are supposed to be founded in equity, and are wrongful if they work loss or injury to
anyone. Louisville & Nashville R. Co. v. Public Service Comm’n of Tennessee,
389 F.2d 247, 250 n. 1 (citing 3 William Blackstone, Commentaries 1553
(W.C. Jones ed.)); Black’s Law Dictionary at 561 (5th ed. 1979) (“fictio legis
inique operatur alicui damnum vel injuriam”). Legal fictions “are a clumsy
device appropriate only to periods of growth in a partially developed political
organization of society in which legislation on any large scale is not possible.... In a sense they were devised to conceal the substance when the substance was not regarded as of legal consequence.” R. Pound, 3 Jurisprudence,
465-66 (1949) (cited in Louisville & Nashville R. Co., 389 F.2d at 250 n.1).
A legal fiction should consequently not be applied mechanically. Costello v.
Immigration & Naturalization Service, 376 U.S. 120, 130 (1934). Rather than
following a fiction, a tribunal should “bring [its] analytical. framework into
conformity with practical realities.” Hughes v. Oklahoma, 441 U.S. 322, 335
(1979). In particular, a fiction “cannot be indulged [where] it is negated by
the facts.” Parsons v. Smith, 359 U.S. 215 (1959); see also Faretta v. California, 422 U.S. 806, 821 (1975).
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The majority mentions, but does not recognize the importance of, some facts
which are fundamental to this case. I set them out here.
Bonneville moved the Board on January 8, 1992, to have its appeal dismissed
without prejudice. We granted the motion pursuant to Board Rule 28(a). Our
order did not prescribe a period of time within which the case could be reinstated. At the time, Rule 28(a) provided:
When a case has been dismissed without prejudice and has not
been reinstated by the Board upon application of any party
within three years of the date of dismissal, or within such
shorter period as the Board may prescribe, the case shall be
deemed to have been dismissed with prejudice as of the expiration of the applicable period.
48 CFR 6101.28(a)(2) (1991).
On January 13, 1992 — even before the Board dismissed the case which had
been pending here — Bonneville filed such in the Claims Court, appealing
the same contracting officer decision. This date was well within the twelve
months statute gave Bonneville for filing at the Claims Court. The contractor
was concerned that the Board had never had jurisdiction over its challenge to
the decision, since the Board’s authority derives from the Contract Disputes
Act of 1978 find contracts for the “procurement of ... real property” are exempt from that Act. See 41 USC §602(a)(1) (1988).
On November 22, 1993, the Court of Federal Claims1 determined that because the contract involved repairs and improvements to real property, and
the dispute implicated only those matters, the Board had jurisdiction over the
appeal filed with us. Bonneville Associates v. United States, 30 Fed. Cl. 85, 88
(1993) (citing Forman v. United States, 767 F.2d 875, 879 (Fed.Cir. 1985)
(boards of contract appeals have jurisdiction over contracts with dual purpose
of construction and lease of real property), 41 USC §602(a)(3) (Contract Disputes Act applies to contracts for the “procurement of construction, alteration, repair or maintenance of real property”)). Under the “election doctrine,”
Bonneville’s appeal to the Board was a binding choice of forum that deprived
1
48
The United States Claims Court was renamed the Court of Federal Claims, effective October 29, 1992. Federal Courts Administration Act of 1992, Pub. L. No. 102-572, §902(a), 106
Stat. 4506, 4516 (1992).
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the court of jurisdiction. The court consequently dismissed the suit Bonneville had brought to it. 30 Fed. Cl. at 89-90.
Bonneville persisted in its belief that the Board never had jurisdiction over
the case it had filed here. It appealed the decision of the Court of Federal
Claims to the Court of Appeals for the Federal Circuit. On December 19,
1994, the Court of Appeals affirmed, expressly finding that the contract was,
“in substantial part, one for the ‘procurement of ... alteration [and] repair, of
real property,” and thus “within the board’s jurisdiction under §602(a)(3).”
Bonneville Associates v. United States, 43 F.3d 649, 655 (Fed.Cir. 1994).
Bonneville’s motion for reinstatement was filed ten days after the Court of
Appeals handed down its decision. As this history shows, Bonneville has now
been told by both the Court of Federal Claims (the Claims Court’s current
name) and the Court of Appeals, that the Claims Court had no jurisdiction to
hear the case because an appeal had previously been filed at this Board
which had the power to hear it. If these two courts had been willing to accept
the legal fiction that our dismissal without prejudice left Bonneville’s appeal
as if it had never been made, they would have had to hold that the Claims
Court bad jurisdiction over the suit filed there, since that filing would have
been the first and only election of forum by the contractor.
Applying the fiction puts Bonneville in a Catch-22 situation: The two courts
say the Claims Court had no jurisdiction to get to the merits of the case because the contractor filed here first, but my colleagues say the Board has no
jurisdiction because Bonneville effectively never filed here until recently.
Thus, the contractor will have no opportunity for review of the merits of the
contracting officer’s decision, even though it filed with both the Claims Court
and the Board within the time limits set out in statute and noted in the decision. The substance of the fiction thus becomes of ultimate consequence, and
application of it would cause irreparable injure to the appellant by preventing
that party from having the merits of its case heard. A more reasonable solution to this predicament would be to resolve the situation by taking into account the facts that (a) Bonneville did file its notice of appeal with us in a
timely fashion and (b) at all relevant times, the contractor has been attempting to litigate its claim before a proper forum.
There are two alternative ways to do this.
The first is to take the dismissal on its own terms. A dismissal without prejudice which contemplates further proceedings does not terminate the litiga-
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tion. Peters v. Welsh Development Agency, 920 F.2d 438 (7th Cir. 1990). “In
determining finality a court’s analysis must focus on the underlying effect of
a dismissal.” Sigalas v. Lido Maritime Inc., 776 F.2d 1512, 1516 (11th Cir.
1985). Bonneville clearly asked in 1992 that its appeal to this Board be dismissed so that it could proceed in a forum which had jurisdiction over the
case. Bonneville never sat on its rights; indeed, it filed in the Claims Court
(which it believed to be such a forum) even before the case here was dismissed. In finding that Bonneville elected to have the Board hear this case,
the courts expressly found that we have jurisdiction to consider it. Our giving
effect to the terms of the dismissal order and exercising that jurisdiction will
achieve an equitable finality to the litigation. This result is consistent with
what the Eleventh Circuit said in Sigalas: Where a plaintiff is sent to another forum and later forward to return to the original forum, that party should
“be heard even if the statute of limitations has already tolled in the original
court.” 776 F.2d at 1516.
Even if this reasoning is thought to founder on the ninety-day statute of limitations for appealing a contracting officer’s decision to a board of contract appeals, we could deny the government’s motion to dismiss on a different
ground. Where a tribunal desists from hearing a case in order to permit a
similar case to proceed in another tribunal, a stay of proceedings, not a dismissal, is the appropriate procedural mechanism to employ. Rosser v. Chrysler Corp., 864 F.2d 1299, 1308 (7th Cir. 1989) (a dismissal based on abstention of a Federal court so that a state court might hear the case was deemed
an abuse of discretion; the case was remanded to the district court, with instructions to enter a stay). A stay avoids any problems which time bars might
create; it permits the case to be heard on the merits in the first tribunal if
that proves necessary. Id. If our earlier dismissal of this case poses an insuperable problem to hearing it, we could convert the dismissal to a stay, nunc
pro tunc, and then lift that stay so that the case might now be heard. Board
of Education of Valley View Community Unit School District No. 365U v.
Bosworth, 713 F.2d 1316, 1322 (7th Cir. 1983); Evans Transportation Co. v.
Scullin Steel Co., 693 F.2d 715, 717-18 (7th Cir. 1982).
Stephen M. Daniels, Board Judge
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Bonneville Associates
v.
Barram
165 F.3d 1360
January 20, 1999
James J. Tansey, of Washington, DC, argued for appellants. Sharon Y. Eubanks, Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, argued for appellee. On the brief were
Frank W. Hunger, Assistant Attorney General, David M. Cohen, Director,
and John K. Lapiana, Attorney. Of counsel on the brief was Kevin S. Anderson, Assistant General Counsel, Real Property Division, General Services
Administration, of Washington, DC.
Before Bryson, Circuit Judge, Friedman, Senior Circuit Judge, and
Gajarsa, Circuit Judge.
Friedman, Senior Circuit Judge.
This appeal challenges the General Services Administration Board of Contract Appeals’ (Board’s) dismissal of the appellants’ appeal from a contracting
officer’s decision. The appellants previously had withdrawn their appeal to
the Board to pursue their appeal to the United States Claims Court; the
Board dismissed that appeal without prejudice. The United States Claims
Court held that it lacked jurisdiction because the appellants’ filing of their
appeal with the Board constituted an election of remedies. After this court
affirmed that ruling, the appellants attempted to reinstitute their appeal to
the Board, which dismissed it as untimely because not filed within the 90-day
limitations period under the Contract Disputes Act. We affirm.
I.
The facts are undisputed. The appellant Bonneville Associates, Limited Partnership (the other appellant, Machan Hampshire Properties, Ltd., was one of
Bonneville’s general partners, but now has no role in this case) sold an office
building to the General Services Administration and agreed to make substantial repairs and alterations to the structure. Disputes arose over whether
Bonneville properly had made those repairs and alterations. After four years
of negotiations, the contracting officer on August 21, 1991 issued a written
decision seeking $5.195 million from Bonneville for the cost of correcting the
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deficiencies. The contracting officer’s letter informed Bonneville that it could
appeal to the Board within 90 days of receiving the decision or “instead” could
bring suit in the United States Claims Court within one year of such receipt.
On November 19, 1991, 90 days after receipt of the decision, Bonneville filed
a notice of appeal with the Board. On January 8, 1992, before anything further had been filed, Bonneville “withdr[e]w” its notice of appeal, stating that
it “will pursue its appeal in the U.S. Claims Court.” It did not request that
the termination of its appeal be without prejudice. The Board dismissed the
appeal. Its order stated that “appellant filed a motion to withdraw the appeal
filed at this Board so that it may pursue an appeal in the United States
Claims Court instead,” and that “[a]ccordingly, this appeal is DISMISSED
WITHOUT PREJUDICE. Rule 28(a)(1).”
In January 1992, shortly before the Board dismissed the appeal, Bonneville
filed suit in the United States Claims Court (now the Court of Federal Claims
and hereinafter referred to as such) challenging the contracting officer’s decision. On the government’s motion the Court of Federal Claims dismissed this
suit for lack of jurisdiction, holding that the filing of the appeal to the Board
constituted an election of remedies that barred Bonneville from subsequently
invoking the court’s jurisdiction. Bonneville Assocs. v. United States, 30 Fed.
Cl. 85, 88 (1993).
This court affirmed. Bonneville Assocs. v. United States, 43 F.3d 649 (1994).
The court pointed out that for the election-of-remedies doctrine to apply the
Board must have had jurisdiction over Bonneville’s appeal, which it stated
was “[t]he pivotal question here.” Id. at 653. Bonneville contended that the
Board had no jurisdiction because the Contract Disputes Act excluded from
Board jurisdiction contracts for “the procurement of ... real property in being.”
41 USC §602(a)(1) (1994). The government pointed to section 602(a)(3), which
gives the Board jurisdiction over contracts for “the procurement of ... alteration [or] repairs ... of real property.” The court concluded that “the contract
was both for the procurement and repair/alteration of real property.” Bonneville, 43 F.3d at 654. The court held: “The board had jurisdiction over Bonneville’s appeal because the dispute between the parties concerned Bonneville’s
alleged breach of its duty under the warranty clause and other contract provisions to repair and alter the conveyed building [and therefore] the Court of
Federal Claims properly applied the Election Doctrine to dismiss Bonneville’s
action without prejudice for lack of subject matter jurisdiction.” Id. at 655.
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Ten days after that decision, Bonneville sought to reinstate its appeal to the
Board pursuant to Rule 28(a)(2) of the Board’s rules. When Bonneville dismissed its appeal in 1992, that provision (discussed below) stated that the
dismissal of an appeal without prejudice would be deemed to have been dismissed with prejudice if the appeal was not reinstated within three years or
any shorter period the Board had prescribed. Bonneville contended that it
was entitled to reinstate its appeal because it sought to do so within three
years of the dismissal.
A divided Board disagreed. The Board applied the same principle that the
federal courts had applied in construing the similar provision governing voluntary dismissals without prejudice in Federal Rule of Civil Procedure 41(a),
namely, that an appeal so dismissed “leaves the situation as if the suit had
never been brought.” Noting that the 90-day period for appealing was jurisdictional, the Board concluded:
Accordingly, because Bonneville voluntarily caused its appeal
to be dismissed without prejudice in order to pursue the appeal
in another forum, Bonneville is placed in the same position as
if the first appeal had never been filed. The second filing does
not relate back to the date of the first filing. Moreover, as the
second complaint filed on December 29, 1994 is a “new appeal”
filed after the expiration of the CDA ninety-day time limit, it is
untimely. We lack jurisdiction to hear this appeal.
Chairman Daniels, dissenting, stated that the Board’s position was “built on
a legal fiction — that Bonneville never brought this case to us before it filed
its motion for reinstatement.” Chairman Daniels suggested that “[a] more
reasonable solution to this predicament would be to resolve the situation by
taking into account the facts that (a) Bonneville did file its notice of appeal
with us in a timely fashion and (b) at all relevant times, the contractor has
been attempting to litigate its claim before a proper forum.” He stated that
this could be accomplished either by viewing the prior dismissal without
prejudice as one “which contemplate[d] further proceedings [and therefore]
does not terminate the litigation,” or by “convert[ing] the dismissal to a stay,
nunc pro tunc, and then lift[ing] that stay so that the case might now be
heard.”
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II.
A.
When Bonneville dismissed its appeal in 1992, three provisions of the Board’s
rules dealt with dismissal without prejudice. Rule 28(a), captioned “Voluntary Dismissal,” provided:
(1) Upon motion of the appellant or by stipulation of the parties, a case may be dismissed by the Board. Unless otherwise
stated in the appellant’s motion or in the stipulation, the dismissal is without prejudice, except that such dismissal operates
as an adjudication upon the merits when requested by an appellant whose case based on or including the same claim has
previously been dismissed by the Board.
(2) When a case has been dismissed without prejudice and has
not been reinstated by the Board upon application of any party
within three years of the date of dismissal, or within such
shorter period as the Board may prescribe, the case shall be
deemed to have been dismissed with prejudice as of the expiration of the applicable period.
48 CFR §6101.28(a) (1991).
Rule 27(b) stated that “[t]he Board may suspend proceedings in a case for
good cause,” and that the suspension order “will prescribe the duration of the
suspension or the conditions on which it will expire.” 48 CFR §6101.27(b).
Rule 27(c), captioned “Dismissal in lieu of stay or suspension,” stated:
When circumstances beyond the control of the Board prevent
the continuation of proceedings in a case, the Board may, in
lieu of issuing an order suspending proceedings, dismiss the
case without prejudice to reinstatement. Such a dismissal may
require reinstatement by a date certain or within a certain period of time after the occurrence of a specified event. If the order of dismissal does not otherwise provide, it will be subject to
the provisions of 6101.28(a) [Rule 28].
48 CFR §6101.27(c) (1991).
The Board’s Rules thus distinguished between two types of dismissals without prejudice. The first, which Rule 28(a)(1) governed, was a voluntary dismissal by the appellant (or on stipulation of the parties). The second, which
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Rule 27(c) covered, dealt with the case where the Board ordinarily would suspend proceedings, but circumstances beyond its control prevented their continuation. Presumably, this provision was designed to cover situations where
the suspension was likely to continue for a lengthy but indefinite time, such
as the conduct of settlement negotiations or the completion of some other proceeding.
Bonneville’s voluntary dismissal of its appeal in 1992 was within the first
category. Nothing in the dismissal even suggested, much less indicated, that
Bonneville might seek reinstatement of its appeal dependent upon the outcome of its Court of Federal Claims suit. The intention to file such a suit was
the sole explanation Bonneville gave for dismissing its appeal. Since Bonneville had filed its appeal on the last day for doing so, the Board reasonably
could have viewed the dismissal as indicating that the notice of appeal had
been protective, and that upon further consideration Bonneville had decided
to litigate its case in court rather than before the Board.
The Board accordingly properly treated Bonneville’s voluntary dismissal of
its appeal as governed by Rule 28(a)(1).
B.
Bonneville contends that since its voluntary dismissal of its appeal was without prejudice under Rule 28(a)(1), Rule 28(a)(2) entitled it to reinstate its appeal at any time within three years of the dismissal, and that since it met
that time limit, the Board erred in refusing to reinstate the appeal. Bonneville reads too much into the language of Rule 28(a)(2).
Rule 28(a)(2) provided only that if an appeal had not been reinstated within
three years (or within a shorter time the Board fixed), the previous dismissal
without prejudice would become with prejudice. The provision related to the
time and circumstances under which a without prejudice dismissal became
one with prejudice. Although it recognized that appeals might be reinstated,
it did not specify or indicate the circumstances under which that could be
done, except to provide a time frame for such action. Resort, therefore, must
be had elsewhere to determine the effect of the voluntary dismissal of Bonneville’s appeal without prejudice upon its subsequent endeavor to reinstitute
that appeal.
In deciding that question, the Board looked to the treatment of the same issue by the federal courts under the similar provision of Federal Rule of Civil
Procedure 41(a), which states that an action may be dismissed by the plain-
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tiff without court order “by filing notice of dismissal” before the adverse party
files an answer or moves for summary judgment, and that unless the notice
provides otherwise “the dismissal is without prejudice.” The rule in the federal courts is that “[t]he effect of a voluntary dismissal without prejudice pursuant to Rule 41(a) ‘is to render the proceedings a nullity and leave the parties as if the action had never been brought.’ ” Williams v. Clarke, 82 F.3d
270, 273 (8th Cir. 1996) (quoting Smith v. Dowden, 47 F.3d 940, 943 (8th Cir.
1995) and applying Rule 41(a) in the Habeas Corpus context). See, e.g., Beck
v. Caterpillar, Inc., 50 F.3d 405, 407 (7th Cir. 1995) (“While [plaintiff’s] first
lawsuit was filed within the limitations period, that suit was voluntarily dismissed pursuant to [Rule] 41(a), and is treated as if it had never been filed.”).
We give considerable deference to the Board’s interpretation of its operating
rules and procedures and “that interpretation ordinarily will be accepted ‘unless it is plainly erroneous or inconsistent with the regulation.’ ” Data General v. Johnson, 78 F.3d 1556, 1561 (Fed.Cir. 1996) (giving deference to agency’s interpretation of its 10-day protest filing deadline). We cannot say that
the Board’s decision to treat Bonneville’s simple dismissal without prejudice
the same way the federal courts would have treated it was plainly erroneous.
Nor can we say that this decision was inconsistent with its rules — Rule 27(c)
deals with dismissals in lieu of suspension, not simple dismissals like Bonneville’s, and Rule 28(a)(2), as shown above, merely places an outer limit on the
time within which a litigant may seek to reinstate an appeal that was dismissed without prejudice. The Board has substantial discretion to determine
whether to reinstate an appeal voluntarily dismissed without prejudice and it
did not abuse that discretion here in denying reinstatement.
Although Bonneville criticizes the Board’s rule as a legal fiction (as did the
dissenting opinion of the Board), we think this conclusion is unfounded. The
rule merely states the consequence of a voluntary dismissal without prejudice, namely, that the appellant cannot thereafter resurrect the appeal after
the statute of limitations on the cause of action has run. Here, Bonneville’s
attempt to reinstate its appeal almost three years after the 90-day period for
filing the appeal had run was untimely, and the Board properly refused to
permit reinstatement of the appeal because of lack of jurisdiction to entertain
it.
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III.
A.
Bonneville contends that even if the Board correctly concluded that the attempted resurrection of its appeal was untimely, we should permit the appeal
by equitably tolling the 90-day limitations period in the Contract Disputes
Act. It relies primarily upon Irwin v. Department of Veterans Affairs, 498 U.S.
89, 111 S.Ct. 453, 112 L.Ed.2d 435 (1990). In Irwin, the Court held that “the
rule of equitable tolling [is] applicable to suits against the Government, in the
same way that it is applicable to private suits,” and ruled that “the same rebuttable presumption of equitable tolling applicable to suits against private
defendants should also apply to suits against the United States. Congress, of
course, may provide otherwise if it wishes to do so.” Id. at 95-96, 111 S.Ct.
453. The Court, however, declined to apply equitable tolling to save Irwin’s
case.
Irwin filed a civil rights suit against the government 44 days after his attorney’s office had received a “right-to-sue” letter from the Equal Employment
Opportunity Commission, which was 14 days beyond the statutory 30-day
limitation for filing such suit. Irwin stated that the notice had reached the
attorney’s office when the attorney was out of the country, and that the delay
in filing should be excused for that reason because the suit was filed within
30 days of Irwin’s personal receipt of notice. The Court declined to find equitable tolling because “the principles of equitable tolling described above do
not extend to what is at best a garden variety claim of excusable neglect.” Id.
at 96, 111 S.Ct. 453.
B.
This court has not decided whether equitable tolling applies to the time limitations in the Contract Disputes Act for challenging a contracting officer’s
decision. See Wood-Ivey Sys. Corp. v. United States, 4 F.3d 961, 964 n. 4
(Fed.Cir. 1993); Bath Iron Works Corp. v. United States, 20 F.3d 1567, 1572
n. 2 (Fed.Cir. 1994). We find it unnecessary to decide that issue here, however, for even if the doctrine applies, equitable tolling of the 90-day time limitation is unwarranted.
Equitable tolling of statutes of limitations has been “allowed ... in situations
where the claimant has actively pursued his judicial remedies by filing a defective pleading during the statutory period, or where the complainant has
been induced or tricked by his adversary’s misconduct into allowing the filing
deadline to pass. We have generally been much less forgiving in receiving late
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filings where the claimant failed to exercise due diligence in preserving his
legal rights.” Irwin, 498 U.S. at 96, 111 S.Ct. 453. See also Bowden v. United
States, 106 F.3d 433, 438 (D.C.Cir. 1997) (“courts have excused parties, particularly those acting pro se, who make diligent but technically defective efforts to act within a limitations period.... Like other courts, we have excused
parties who were misled about the running of a limitations period, whether
by an adversary’s actions ... by a government official’s advice upon which they
reasonably relied ... or by inaccurate or ineffective notice from a government
agency required to provide notice of the limitations period.”) (citations omitted); Wolin v. Smith Barney, Inc., 83 F.3d 847, 852 (7th Cir. 1996) (“Equitable
tolling is invoked when the prospective plaintiff simply does not have and
cannot with due diligence obtain information essential to bringing a suit.”).
What happened here falls far short of the situations in which equitable tolling has been applied. This is not a case of a litigant who with due diligence
endeavors to meet the statutory time deadline, but fails to do so because of
some minor technical or inadvertent mistake. Here, to the contrary, Bonneville originally timely (but just) filed its notice of appeal with the Board. Six
weeks later, however, Bonneville, represented by counsel, voluntarily and
unconditionally withdrew its appeal to pursue a judicial remedy. It did not
state that it elected the latter course because of uncertainty over the Board’s
jurisdiction, and did not request the Board to stay its proceedings until the
jurisdictional issue was resolved. Nor did it indicate that if the Court of Federal Claims suit ultimately were dismissed, it would seek to reinstate its appeal to the Board or that it believed that, if the court suit were dismissed,
Rule 28(a)(2) entitled it to reinstate its appeal within three years of its dismissal. There is no claim that any government official advised Bonneville to
follow the course it chose. What the record suggests is that Bonneville dismissed its suit because it had decided that it wished to pursue the alternative
remedy of litigation in court rather than before the Board.
Two and one-half years later, after this court had affirmed the Court of Federal Claims’ dismissal of Bonneville’s action as barred by election of remedies,
Bonneville attempted to reinstate its appeal to the Board. The Board declined
to permit it to do so, ruling that the voluntary dismissal without prejudice
had terminated the earlier litigation, and that Bonneville was attempting to
file a new suit on which the statute of limitations had long since run. Bonneville’s basic position — that it mistakenly voluntarily dismissed its appeal
rather than seeking a stay of the Board proceedings on the erroneous assumption that it had the right to reinstate the appeal at any time within
three years — is comparable to the “garden variety claim of excusable ne-
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glect” that the Court in Irwin held was insufficient to justify equitable tolling.
Bonneville has not established a basis for equitable tolling.
The present case thus is unlike Bailey v. West, 160 F.3d 1360 (Fed.Cir. 1998),
in which this court en banc recently held that equitable tolling is available to
avoid time limitations in the statutory provisions governing veterans benefits. We ruled that Bailey had sufficiently alleged a claim for equitable tolling
based on what he had been told by government officials: “Given the particular
relationship between veterans and the government, Bailey was misled by the
conduct of his adversary into allowing the filing deadline to pass. Id. at 1365.
Although there is no suggestion of misconduct, such as tricking Bailey into
missing the 120 day filing deadline, we nevertheless conclude that a veteran’s
inducement by an adversary’s conduct is akin to grounds sufficient to toll a
limitations period in a private suit.” The court, however, did not hold that the
limitations period should be equitably tolled in Bailey’s case, but merely remanded the case to the Court of Veterans Appeals to determine that question, and indicated no view on the applicability of the doctrine to the different
statutory provision in this case. Id. at 1368.
Conclusion
The order of the Board refusing to reinstate Bonneville’s appeal is
AFFIRMED.
Gajasa, Circuit Judge, concurring.
While I agree with the outcome of this case, I write separately to address two
issues: first, the majority opinion’s discussion of equitable tolling with respect
to the Contract Disputes Act (CDA), 41 USC §601 et seq. (1994), in light of
our recent in banc opinion in Bailey v. West, 160 F.3d 1360 (Fed.Cir. 1998) (in
banc), and, second, what I perceive to be an incomplete analysis of the
Board’s rules in effect at the time and their relationship to the jurisdiction
conferred on the Board by the CDA.
Equitable Tolling
The majority’s Part III discussion of equitable tolling of the CDA in light of
Irwin v. Department of Veterans Affairs, 498 U.S. 89, 111 S.Ct. 453, 112
L.Ed.2d 435 (1990), distinguishes our recent in banc decision in Bailey on the
basis that Bailey involved the paternalistic statutory provisions governing
veterans benefits, in contrast to the statute of limitations provision of the
CDA at issue here.
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The majority opinion states that “[t]his court has not decided whether equitable tolling applies to the time limitations in the Contract Disputes Act for
challenging a contracting officer’s decision. We find it unnecessary to decide
that issue, here, however, for even if the doctrine applies, equitable tolling of
the 90-day time limitation is unwarranted.” Slip op. at 1365 (internal citations omitted). The opinion then goes on to discuss equitable tolling under
Irwin as if the presumption applied to the CDA, holding that Bonneville’s
situation is nothing more than a “garden variety claim of excusable neglect”
and is thus “insufficient to justify equitable tolling.” Slip op. at 1366 (citing
Irwin, 498 U.S. at 96, 111 S.Ct. 453).
However, any discussion by the majority of Irwin and the applicability of equitable tolling to the CDA must be viewed as dicta. Although that issue was
squarely presented to us, the majority opinion does not hold that the presumption in favor of equitable tolling outlined in Irwin and refined by us in
Bailey does not apply to the CDA1. That issue remains to be decided in the
future. In addition, the majority opinion’s basis for distinguishing Bailey, i.e.,
a paternalistic veterans scheme, should not be read to imply that any statutory scheme not involving veterans is precluded from the possibility of equitable tolling. That the discussion of Irwin in Bailey was in the context of veterans does not diminish the precedential and controlling nature of the in
banc court’s discussion. Thus, I do not criticize the majority’s ultimate conclusion as to equitable tolling given the particular facts of this case. Rather, I
write separately to emphasize what has not been decided, namely, whether
the presumption of equitable tolling announced by the Supreme Court in Irwin, as refined by the in banc court in Bailey, applies to the CDA.
Board’s Rules and the CDA
In Part II, the majority opinion correctly determined that Bonneville’s dismissal without prejudice pursuant to Rule 28(a)(1) prevented it from reopening its appeal with the Board pursuant to the three-year reinstatement provision of Rule 28(a)(2). The majority states that Rule 28(a)(2) “merely places
an outer limit on the time within which a litigant may seek to reinstate an
appeal that was dismissed without prejudice.” Slip op. at 1364-65. In addition, the majority states that a dismissal without prejudice pursuant to Rule
27(c) “cover[s] situations where the suspension was likely to continue for a
1
60
I note in passing that as a “timing for review” provision, the CDA statute of limitations
provision at issue here would be precluded from any application of equitable tolling under
the view espoused by Judge Bryson in his dissent in Bailey.
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lengthy but indefinite time, such as the conduct of settlement negotiations.”
Slip op. at 1364. In concluding that Bonneville cannot resort to Rule 28(a)(2)
to reinstate its appeal with the Board, the majority opinion relies on the deference we give to the Board’s interpretation of its own rules and procedures.
While I do not dispute that point, I am troubled by the lack of discussion of
the necessary corollary to that proposition, namely, the Board’s inability to
construe its own rules pursuant to the CDA to enlarge its own jurisdiction.
This issue was addressed in the Board’s opinion and in the parties’ briefs to
this court on appeal.
We have stated repeatedly that “waiver of sovereign immunity by the United
States is jurisdictional.” RHI Holdings, Inc. v. United States, 142 F.3d 1459,
1461 (Fed.Cir. 1998) (citing United States v. Sherwood, 312 U.S. 584, 589-90,
61 S.Ct. 767, 85 L.Ed. 1058 (1941)). A sovereign’s consent to be sued pursuant
to the CDA must be strictly construed. See Cosmic Constr. Co. v. United
States, 697 F.2d 1389, 1390 (Fed.Cir. 1982) (citing Soriano v. United States,
352 U.S. 270, 77 S.Ct. 269, 1 L.Ed.2d 306 (1957)). However, “authority conferred upon a court to make rules of procedure for the exercise of its jurisdiction is not an authority to enlarge its jurisdiction.” Widdoss v. Secretary of the
Dep’t of Health and Human Servs., 989 F.2d 1170, 1177 (Fed.Cir. 1993) (quoting Sherwood, 312 U.S. at 589-90, 61 S.Ct. 767). Given this clear line of precedent, I do not understand why the majority preferred to rely only on the deference we give the Board in interpreting its own rules to support its holding,
without taking the next step, i.e., that the Board cannot construe the statute
of limitations provision of the CDA (41 USC §606) to enlarge its jurisdiction,
as that would impermissibly violate principles of sovereign immunity.
Additionally, I do not understand the majority opinion’s lack of discussion of
Rule 27(c)’s explicit reference to “reinstatement” and its directive that dismissals pursuant to this rule are “subject to the provisions of [Rule 28(a)],”
and the corresponding lack of a similar reference and directive in Rule
28(a)(1). While it is true that the dismissal in this case was granted pursuant
to Rule 28(a)(1) and not Rule 27(c), the marked difference in language of the
two rules is certainly relevant to the present case and reinforces our ultimate
conclusion of not permitting reinstatement after dismissal pursuant to Rule
28(a)(1).
For the reasons stated above, I cannot join the majority opinion and must
concur only in the judgment.
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Bruce Construction
v.
United States
324 F.2d 516, 163 Ct.Cl. 97
November 15, 1963
George S. Flint, New York City, for plaintiffs. Hugh Fulton and Fulton, Walter & Duncombe, New York City, were on the briefs. Lawrence S. Smith,
Washington, D.C., with whom was John W. Douglas, Asst. Atty. Gen., for defendant.
Before Jones, Chief Judge, and Whitaker, Laramore, Durfee and
Davis, Judges.
Durfee, Judge.
This case involves a claim for equitable adjustment for the alleged “additional
value” of building block that was used in construction of buildings on the Air
Force Base at Homestead, Florida.
The principal issue before us is whether plaintiffs have suffered damages as a
result of defendant’s rejection of a building block and the consequent requirement that plaintiffs substitute a different block, where the price paid for
the two different blocks was the same.
Plaintiffs entered into a contract, DA 08-123-ENG-1595, with the Corps of
Engineers on September 15, 1954. The contract involved construction of 18
airmen’s dormitories, five mess halls and three bachelor officers’ quarters.
The total contract price was $4,867,605.30.
The buildings were to be constructed of concrete building block with exposed
surfaces “of a fine texture generally produced in the Florida area which is
suitable for painting as distinguished from ‘coarse textured block’ produced
for the purpose of receiving stucco or plaster ....” (Paragraph 5-02(c) Materials).
Plaintiffs placed an order for suitable block with a supplier. Subsequently, on
or about January of 1955 the contracting officer rejected the concrete block
submitted by plaintiffs, and required the use of a “sand block.” Plaintiffs
then requested additional compensation in the amount of $312,016.60 to de-
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fray alleged additional costs. The matter was processed and Modifications
Nos. 45 and 46, dated May 13, 1957, and April 4, 1958, respectively, were issued. These Modifications allowed plaintiffs $125,624.39 to compensate them
for the cost of additional labor required in handling and placing the block,
and for handling and hauling the rejected block. Plaintiffs’ claim of
$42,415.98 for the alleged additional value of the sand block over and above
the value of the originally specified block was denied by the contracting officer and, ultimately, by the Armed Services Board of Contract Appeals.
Though the price which plaintiffs actually paid for the “sand block” was the
same as they would have paid for the original block selected, they contend
that the fair market value of the sand block was greater than the purchase
price. Essentially then, plaintiffs argue that defendant should not benefit
from the bargain price plaintiffs secured from their supplier, but should pay
for the actual value of the sand block received by defendant, not merely its
actual cost.
Though there is substantial controversy as to the market value of the sand
block as of the time of the transaction between plaintiffs and their supplier,
for purposes of defendant’s motion for partial summary judgment, we are
called upon only to decide the narrow question whether “cost” or “fair market
value” controls in the award of an equitable adjustment.
Equitable adjustments in this context are simply corrective measures utilized
to keep a contractor whole when the Government modifies a contract. Since
the purpose underlying such adjustments is to safeguard the contractor
against increased costs engendered by the modification, it appears patent
that the measure of damages cannot be the value received by the Government, but must be more closely related to and contingent upon the altered
position in which the contractor finds himself by reason of the modification.
We held this view in the early case of McFerran v. United States, 39 Ct.Cl.
441 (1904). The contract there involved construction of structures at Fort
Ethan Allen. The specifications called for the use of cut stone. The quartermaster in charge required that claimant furnish marble. Judge Weldon,
speaking for the court in disallowing the claim, stated (39 Ct.Cl. ¶451):
... The contract was performed in the country of the marble
quarries, and as a result of that situation marble becomes a
common material in the trimmings of houses. The findings on
that point say that it is not shown that the cost of the marble
used by the claimant by the direction of the quartermaster was
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in excess of the cost of good sound stone of best quality and
even color. No allowance is made for this item.
Clearly, in that case the holding of the court was based on cost and not on fair
market value. The instant case falls squarely under, and is controlled by,
McFerran, supra.
The Armed Services Board of Contract Appeals, in its consideration of plaintiffs’ case, assumed plaintiffs’ statement of law, but held against them on a
finding of fact that the price plaintiffs had paid for the stone was actually its
fair market value. But fair market value is not the measure of damages in
this case. This is not to say that in all cases, historical cost is to be the gauge.
The more proper measure would seem to be a “reasonable cost.” The concept
of “reasonable cost” is not new. Indeed, it has been defined in the following
manner:
A cost is reasonable if, in its nature or amount, it does not exceed that which would be incurred by an ordinary prudent person in the conduct of competitive business. (ASPR 15–201.3
(1960))
Use of the “reasonable cost” measure does not constitute “an objective and
universal procedure, involving the determination of the reasonable value (or
reasonable cost of any contractor similarly situated) of the work involved1;”
but determination of reasonable cost requires, in and of itself, an objective
test. The particular situation in which a contractor found himself at the time
the cost was incurred, Appeal of Wyman-Gordon Co., ASBCA 5100 (1959) and
the exercise of the contractor’s business judgment, Appeal of Walsh Construction Co., ASBCA 4014 (1957), are but two of the elements that may be examined before ascertaining whether or not a cost was “reasonable.”
But the standard of reasonable cost “must be viewed in the light of a particular contractor’s costs ...”2, and not the universal, objective determination of
what the cost would have been to other contractors at large.
1
Spector, Confusion in the Concept of the Equitable Adjustments in Government Contracts,
22 Fed.B.J. 5 at 6 (1962).
2
McBride, Confusion in the Concept of Equitable Adjustments in Government Contracts: A
Reply, 22 Fed.B.J. 235 at 240.
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To say that “reasonable cost” rather than “historical cost” should be the
measure does not depart from the test applied in the past, for the two terms
are often synonymous. And where there is an alleged disparity between “historical” and “reasonable” costs, the historical costs are presumed reasonable.
Since the presumption is that a contractor’s claimed cost is reasonable, the
Government must carry the very heavy burden of showing that the claimed
cost was of such a nature that it should not have been expended, or that the
contractors’ costs were more than were justified in the particular circumstance.3
Applying the “reasonable cost” test to plaintiffs’ hypothetical situation of a
contractor purchasing blocks in New York State and paying haulage to Florida4, would probably result in a disallowance of the haulage costs since the
Government could probably overcome the presumption of reasonableness.
Conversely, where a claimant contract actually paid a price and then sought
to recover on the grounds that the price actually paid did not constitute a
reasonable cost, the burden would then be upon claimant to overcome the
presumption of reasonableness. This is essentially the position plaintiffs
found themselves in both here and before the ASBCA. Plaintiffs did not introduce sufficient or substantial evidence to overcome the presumption that
the price paid by them did reflect a reasonable cost of the materials. Indeed,
the only evidence introduced was offered to prove the fair market value, and
not to prove the reasonableness of the cost.
Though considerable uncertainty seems to exist as to what test has been applied in the past,5 we think that this court and other courts dealing with the
question have applied the reasonable cost test either implicitly or explicitly.
For example, the Supreme Court, in United States v. Callahan Walker Const.
Co., 317 U.S. 56 ¶61, 63 S.Ct. 113, 115, 87 L.Ed. 49 (1942), a case involving
an equitable adjustment for additional work performed, pointed out that, “An
‘equitable adjustment’ ... involved merely the ascertainment of the cost of
digging, moving, and placing earth, and the addition to that cost of a reasonable and customary allowance for profit ....” Though the Supreme Court was
3
Supra, note 2 at 240.
4
Plaintiffs’ brief, ¶4.
5
I.e., footnotes 1 and 2 supra. See also Ginsburg, The Measure of Equitable Adjustments for
Change Orders Under Fixed-Price Contracts. Mil.L.Rev. (DA Pam 27-100-14 Oct. 61) p.
123.
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dealing only with the question of administrative remedies provided in the
contract, there is no question but that the decision points to application of a
‘reasonable cost’ test in determining damages.
No doubt some of the uncertainty in this area is due to the fact that in some
cases historical or actual cost, reasonable cost and fair market value are the
same, while in others, reasonable cost may be the same as either fair market
value or historical or actual cost, and in still others, reasonable cost may be
neither fair market value nor historical or actual cost.
As plaintiffs themselves point out at ¶6 of their brief:
...the test of either a downward or upward equitable adjustment should not be actual costs or actual bids, but what the
reasonable cost would be in each instance. In the ordinary case,
this frequently accords with actual cost. But where it does not,
this court has refused to accept actual cost to the contractor as
determinative.
To support this statement, plaintiffs cite F. H. McGraw and Co. v. United
States, 130 F.Supp. 394, 131 Ct.Cl. 501 (1955), and Oliver-Finnie Co. v. United States, 150 Ct.Cl. 189, 279 F.2d 498 (1960). From this statement, however,
plaintiffs jump to the assumption that reasonable cost is in identity with fair
market value. But here plaintiffs err. The two terms are not synonymous. Indeed, in the very cases cited by plaintiffs above, the court held that the determination of damages using a basis of actual cost was necessary “... where
there is nothing in the record to show that plaintiff’s bid was too low, and
where it has not been proved that plaintiff’s costs were unreasonable, or that
plaintiff was itself responsible for any increased costs ....” Oliver-Finnie Co.,
supra, 150 Ct.Cl. at 200, 279 F.2d at 506. As we said above, there is a presumption that actual costs paid are reasonable. That presumption must be
overcome by whichever party alleges its unreasonableness.
Plaintiffs here have not been able to overcome the presumption that their actual costs were reasonable, hence they may not recover. From the record, it is
clear that the only evidence plaintiffs introduced tended to prove the fair
market value of the blocks some eighteen months after the transaction. We
are here not required to say that evidence of fair market value subsequent to
a transaction is sufficient to prove fair market value at the time of transaction. We do say, however, that evidence of the fair market value of an item
some eighteen months after a transaction involving the item does not rebut
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the presumption that the cost of the item was reasonable at the time of the
transaction.
Defendant’s motion for partial summary judgment is granted, and plaintiff’s
cross motion is denied. That portion of the petition involving plaintiffs’ claim
for $42,415.98 for “additional value” of building block, as set forth in the First
Count of the petition is, accordingly, dismissed.
Laramore, Judge (concurring in the result).
I concur for the reason that the only evidence of value at the time was the invoice showing the price plaintiff paid for the blocks. In the absence of any
other evidence of value at the time of the purchase, I would adopt the invoice
price as the proper measure of value.
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Burchick Construction
v.
United States
83 Fed.Cl. 12
Aug. 6, 2008.
D. Matthew Jameson, III, Babst, Calland, Clements, and Zomnir, PC, Pittsburgh, PA, for the plaintiff. Devin A. Wolak, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, Commercial Litigation Branch, Washington, D.C., for the defendant. With him were
Gregory G. Katsas, Acting Assistant Attorney General, Jeanne E. Davidson,
Director, and Reginald T. Blades, Jr., Assistant Director, Commercial Litigation Branch.
Opinion
Horn, J.
Findings of Fact
The United States Department of Veterans Affairs (VA) issued a solicitation
for Phase I work at the Cemetery of the Alleghenies in Bridgeville, Pennsylvania on March 15, 2006. Plaintiff, Burchick Construction Company, Inc.,
submitted a bid in response to the solicitation and, according to the parties’
joint stipulation of facts, “[o]n July 17, 2006, the VA accepted Burchick’s offer
and on or about July 28, 2006, Burchick was awarded Contract, No. VA786AC-0021.” The solicitation, which was incorporated into the contract, estimated
that 100 cubic yards of rock would be removed from the construction site. The
two terms of the solicitation which are at the center of the dispute dictate the
method of adjusting the contract price should any excess rock need to be removed. The parties have stated the issue of law in this case as:
Whether contract no. VA786A-C-0021 (the “Contract”) requires
defendant, the United States, to pay plaintiff, Burchick Construction Company, Inc. (“Burchick”), $45 per cubic yard for all
extra “rock removal” performed upon the project, or whether
the Contract entitles Burchick to an equitable adjustment of
the contract price for rock removal performed in excess of the
100 cubic yard estimate provided by the Government in the solicitation.
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The solicitation provisions in question will be referred to as “Term I” and
“Term II.” The words of Term I are located following an apparent worksheet
with blanks for the contractor to fill in dollar amounts. Term I is included on
the worksheet as a direction and requirement to the contractor, as follows:
As outlined [sic] Section 02200 1.6 the Contractor must provide
a price for rock removal so that if quantities vary from the base
amount [100 cubic yards], a basis for future adjustments has
been established. The total cost requested below must be included in Base Bid Item No. 1[.]
Immediately below this language in Term I is a line for the contractor to fill
in the unit cost and total cost for rock removal for the 100 cubic yards estimated in the solicitation, which appears as follows:
Rock Removal
Estimated
Quantity
100 CY
Cost per CY
Total Cost
$ ______
$ ______
Apparently, “Base Bid Item No. 1” included the estimated 100 CY (cubic
yards) of rock removal. Term I required the contractor to break out its price
for the rock removal from “Base Bid Item No. I” and to list it as the “total
cost” for the estimated 100 cubic yards of rock to be removed along with the
unit price per cubic yard of rock removal. In response to this requirement,
plaintiff stated in its proposal that it would charge $45.00 per cubic yard of
rock removal.
Term II, Section 02200, Part 1.6, subpart B is cited to in Term I above and
falls under the heading “MEASUREMENT AND PAYMENT FOR ROCK
EXCAVATION.” Term II states:
Payment: No separate payment shall be made for rock excavation quantities shown. Contract price and time will be adjusted
for overruns or underruns in accordance with Articles,
DIFFERING SITE CONDITIONS, CHANGES and CHANGES
— SUPPLEMENT of the GENERAL CONDITIONS as applicable.
(emphasis in original). The “Articles” referred to in Term II immediately
above are Federal Acquisition Regulation (FAR) clauses, FAR 52.236-2 (“Differing Site Conditions”), FAR 52.243-4 (“Changes”), and Veterans Affairs Acquisition Regulation (VAAR) 852.236-88 (“Contract Changes — Supple-
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ment”), which were incorporated into the contract. The construction contract
variation in quantity clause, at 48 CFR §52.211-18, “Variation in Estimated
Quantity (Apr 1984),” was not incorporated into the contract (see 48 CFR
§11.702 (2007)).
While excavating the site, plaintiff removed thousands of cubic yards of rock
in excess of the 100 cubic yard estimate. During performance, the government issued two Central Office Change Orders (COCO) to adjust the contract
price for a differing site condition to reflect the additional rock removed. The
first, COCO A, addresses the removal of “yellow/orange material” not previously identified, and instructs plaintiff to “provide a detailed cost proposal for
this additional work ... in order to negotiate a supplemental agreement for
this change order.” COCO A specified that any price adjustment was not to
exceed $150,000.00. The second, COCO B, deals with the removal of gray
“Claystone material” and states that “the matter of contract price and time
will be subject to equitable adjustment....” The government allocated up to
$212,796.00 for this second adjustment. Plaintiff has not billed any of its
work to the two change orders.
Plaintiff has consistently asserted that the contract requires excess rock removal to be paid at $45.00 per cubic yard. The VA has consistently maintained that pursuant to the contract, additional compensation to plaintiff for
rock removal in excess of 100 cubic yards should be determined as an equitable adjustment to the contract price.
Plaintiff sent claims to the VA requesting compensation in addition to that
authorized by COCO A and COCO B. On August 3, 2007, the contracting officer responded to plaintiffs claim stating, “The VA disagrees that the contractor is entitled to $45 per Cubic Yard (45/CY) for all volumes of rock in excess of the 100 CY.” The contracting officer then outlined the VA’s reasoning
for its decision, indicating that the parties should negotiate to determine an
equitable price that is “closer in line with costs incurred” for the excess rock
removal. The contracting officer also indicated that this was not a contracting
officer’s final decision because she needed more information “in order to make
an informed decision.” Plaintiff, however, considered the contracting officer’s
letter as a final decision and subsequently filed a complaint in this court.
The parties have filed cross-motions for partial summary judgment. Plaintiff
claims that “[i]t is undisputed that the Contract provides for payment of $45
per cubic yard of additional Rock Excavation.” Defendant, on the other hand,
claims that the “plain language” of the contract dictates that any additional
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price adjustment to account for excess rock excavation be made by equitable
determination.
Discussion
Rule 56 of the Rules of the United States Court of Federal Claims (RCFC)
provides that summary judgment “shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together
with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of
law.” RCFC 56(c); see also Fed.R.Civ.P. 56(c) (which is similar both in language and effect); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106
S.Ct. 2505, 91 L.Ed.2d 202 (1986); Adickes v. S.H. Kress & Co., 398 U.S. 144,
157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); Moden v. United States, 404 F.3d
1335, 1342 (Fed.Cir.), reh’g and reh’g en banc denied (Fed.Cir. 2005); Am. Pelagic Fishing Co. v. United States, 379 F.3d 1363, 1370-71 (Fed.Cir. 2004),
cert. denied, 545 U.S. 1139, 125 S.Ct. 2963, 162 L.Ed.2d 887 (2005); Monon
Corp. v. Stoughton Trailers, Inc., 239 F.3d 1253, 1257 (Fed.Cir. 2001); Avenal
v. United States, 100 F.3d 933, 936 (Fed.Cir. 1996), reh’g denied (Fed.Cir.
1997); Creppel v. United States, 41 F.3d 627, 630-31 (Fed.Cir. 1994); AtwoodLeisman v. United States, 72 Fed.Cl. 142, 147 (2006). A fact is material if it
will make a difference in the result of a case under the governing law. Irrelevant or unnecessary factual disputes do not preclude the entry of summary
judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. at 247-48, 106 S.Ct.
2505; see also Monon Corp. v. Stoughton Trailers, Inc., 239 F.3d at 1257; Curtis v. United States, 144 Ct.Cl. 194, 199, 168 F.Supp. 213, 216 (1958), cert.
denied, 361 U.S. 843, 80 S.Ct. 94, 4 L.Ed.2d 81 (1959), reh’g denied, 361 U.S.
941, 80 S.Ct. 375, 4 L.Ed.2d 361 (1960).
When reaching a summary judgment determination, the judge’s function is
not to weigh the evidence and determine the truth of the case presented, but
to determine whether there is a genuine issue for trial. Anderson v. Liberty
Lobby, Inc., 477 U.S. at 249, 106 S.Ct. 2505; see, e.g., Ford Motor Co. v. United States, 157 F.3d 849, 854 (Fed.Cir. 1998) (“Due to the nature of the proceeding, courts do not make findings of fact on summary judgment.”); Johnson v. United States, 49 Fed.Cl. 648, 651 (2001), aff’d, 52 Fed.Appx. 507
(Fed.Cir. 2002), published at 317 F.3d 1331 (Fed.Cir. 2003); Becho, Inc. v.
United States, 47 Fed.Cl. 595, 599 (2000). The judge must determine whether
the evidence presents a disagreement sufficient to require submission to fact
finding, or whether the issues presented are so one-sided that one party must
prevail as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. at 250-
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52, 106 S.Ct. 2505; Jay v. Sec’y of Dep’t of Health and Human Servs., 998
F.2d 979, 982 (Fed.Cir.), reh’g denied and en banc suggestion declined
(Fed.Cir. 1993). When the record could not lead a rational trier of fact to find
for the nonmoving party, there is no genuine issue for trial, and the motion
must be granted. See, e.g., Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Rothe Dev. Corp. v.
United States Dep’t of Defense, 262 F.3d 1306, 1316 (Fed.Cir. 2001); Hall v.
Aqua Queen Mfg., Inc., 93 F.3d 1548, 1553 n. 3 (Fed.Cir. 1996). In such a
case, there is no need for the parties to undertake the time and expense of a
trial, and the moving party should prevail without further proceedings.
Summary judgment
saves the expense and time of a full trial when it is unnecessary. When the material facts are adequately developed in the
motion papers, a full trial is useless. “Useless” in this context
means that more evidence than is already available in connection with the motion for summary judgment could not reasonably be expected to change the result.
Dehne v. United States, 23 Cl.Ct. 606, 614-15 (1991) (citing Pure Gold, Inc. v.
Syntex, Inc., 739 F.2d 624, 626 (Fed.Cir. 1984)), vacated on other grounds,
970 F.2d 890 (Fed.Cir. 1992); see also U.S. Steel Corp. v. Vasco Metals Corp.,
55 C.C.P.A. 1141, 394 F.2d 1009, 1011 (1968).
Summary judgment, however, will not be granted if “the dispute about a material fact is ‘genuine,’ that is, if the evidence is such that a reasonable [trier
of fact] could return a verdict for the nonmoving party.” Anderson v. Liberty
Lobby, Inc., 477 U.S. at 248, 106 S.Ct. 2505; Eli Lilly & Co. v. Barr Labs.,
Inc., 251 F.3d 955, 971 (Fed.Cir.), reh’g and reh’g en banc denied (Fed.Cir.
2001), cert. denied, 534 U.S. 1109, 122 S.Ct. 913, 151 L.Ed.2d 879 (2002);
Gen. Elec. Co. v. Nintendo Co., 179 F.3d 1350, 1353 (Fed.Cir. 1999). In other
words, if the nonmoving party produces sufficient evidence to raise a question
as to the outcome of the case, then the motion for summary judgment should
be denied. Any doubt over factual issues must be resolved in favor of the party opposing summary judgment, to whom the benefit of all presumptions and
inferences runs. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.
at 587-88, 106 S.Ct. 1348; Dethmers Mfg. Co. v. Automatic Equip. Mfg. Co.,
272 F.3d 1365, 1369 (Fed.Cir. 2001), reh’g and reh’g en banc denied, 293 F.3d
1364 (Fed.Cir. 2002), cert. denied, 539 U.S. 957, 123 S.Ct. 2637, 156 L.Ed.2d
655 (2003); Monon Corp. v. Stoughton Trailers, Inc., 239 F.3d at 1257; Wanlass v. Fedders Corp., 145 F.3d 1461, 1463 (Fed.Cir.), reh’g denied and en
banc suggestion declined (Fed.Cir.1998); see also Am. Pelagic Co. v. United
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States, 379 F.3d at 1371 (citing Helifix, Ltd. v. Blok-Lok, Ltd., 208 F.3d 1339,
1345-46 (Fed.Cir. 2000)).
The initial burden on the party moving for summary judgment to produce evidence showing the absence of a genuine issue of material fact may be discharged if the moving party can demonstrate that there is an absence of evidence to support the nonmoving party’s case. Celotex Corp. v. Catrett, 477
U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); see also Riley & Ephriam Constr. Co. v. United States, 408 F.3d 1369, 1371 (Fed.Cir. 2005); Crown
Operations Int’l Ltd. v. Solutia Inc., 289 F.3d 1367, 1377 (Fed.Cir.), reh’g denied (Fed.Cir. 2002); Trilogy Commc’ns, Inc. v. Times Fiber Commc’ns, Inc.,
109 F.3d 739, 741 (Fed.Cir.) (quoting Conroy v. Reebok Int’l, Ltd., 14 F.3d
1570, 1575 (Fed.Cir. 1994)), reh’g denied and en banc suggestion declined
(Fed.Cir. 1997); Lockwood v. Am. Airlines, Inc., 107 F.3d 1565, 1569 (Fed.Cir.
1997). If the moving party makes such a showing, the burden shifts to the
nonmoving party to demonstrate that a genuine dispute regarding a material
*16 fact exists by presenting evidence which establishes the existence of an
element essential to its case upon which it bears the burden of proof. See Celotex Corp. v. Catrett, 477 U.S. at 322, 106 S.Ct. 2548; Am. Airlines, Inc. v.
United States, 204 F.3d 1103, 1108 (Fed.Cir. 2000); see also Long Island Sav.
Bank, FSB v. United States, 503 F.3d 1234, 1244 (Fed.Cir. 2007), petition for
cert. filed (Mar. 27, 2008) (No. 07-1234); Schoell v. Regal Marine Indus., Inc.,
247 F.3d 1202, 1207 (Fed.Cir. 2001). However, “a non-movant is required to
provide opposing evidence under Rule 56(e) only if the moving party has provided evidence sufficient, if unopposed, to prevail as a matter of law.” Saab
Cars USA, Inc. v. United States, 434 F.3d 1359, 1369 (Fed.Cir. 2006).
Even if both parties argue in favor of summary judgment and allege an absence of genuine issues of material fact, however, the court is not relieved of
its responsibility to determine the appropriateness of summary disposition in
a particular case. Prineville Sawmill Co. v. United States, 859 F.2d 905, 911
(Fed.Cir. 1988) (citing Mingus Constructors, Inc. v. United States, 812 F.2d
1387, 1391 (Fed.Cir. 1987)); see also Chevron USA, Inc. v. Cayetano, 224 F.3d
1030, 1037 n. 5 (9th Cir. 2000), cert. denied, 532 U.S. 942, 121 S.Ct. 1403, 149
L.Ed.2d 346 (2001); St. Christopher Assocs., L.P. v. United States, 75 Fed.Cl.
1, 8 (2006), aff’d, 511 F.3d 1376 (Fed.Cir. 2008). “[S]imply because both parties moved for summary judgment, it does not follow that summary judgment
should be granted one or the other.” LewRon Television, Inc. v. D.H. Overmyer Leasing Co., 401 F.2d 689, 692 (4th Cir. 1968), cert. denied, 393 U.S.
1083, 89 S.Ct. 866, 21 L.Ed.2d 776 (1969); see also B.F. Goodrich Co. v. U.S.
Filter Corp., 245 F.3d 587, 593 (6th Cir. 2001); Massey v. Del Labs., Inc., 118
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F.3d 1568, 1573 (Fed.Cir. 1997). Cross-motions are no more than a claim by
each party that it alone is entitled to summary judgment. The making of such
inherently contradictory claims, however, does not establish that if one is rejected the other necessarily is justified. B.F. Goodrich Co. v. United States
Filter Corp., 245 F.3d at 593; Atl. Richfield Co. v. Farm Credit Bank of Wichita, 226 F.3d 1138, 1148 (10th Cir. 2000); Allstate Ins. Co. v. Occidental Int’l,
Inc., 140 F.3d 1, 2 (1st Cir. 1998); Reading & Bates Corp. v. United States, 40
Fed.Cl. 737, 748 (1998). The court must evaluate each party’s motion on its
own merits, taking care to draw all reasonable inferences against the party
whose motion is under consideration or otherwise stated in favor of the nonmoving party. DeMarini Sports, Inc. v. Worth, Inc., 239 F.3d 1314, 1322
(Fed.Cir. 2001); see also Gart v. Logitech, Inc., 254 F.3d 1334, 1338-39
(Fed.Cir.), reh’g and reh’g en banc denied (Fed.Cir. 2001), cert. denied, 534
U.S. 1114, 122 S.Ct. 921, 151 L.Ed.2d 886 (2002); Telenor Satellite Servs. v.
United States, 71 Fed.Cl. 114, 119 (2006).
In the present case, the parties agree on all material facts, but disagree on
the meaning of the relevant contract language. Contract interpretation is a
question of law, which poses an appropriate question for summary judgment
resolution. See H.B. Mac, Inc. v. United States, 153 F.3d 1338, 1345 (Fed.Cir.
1998) (stating that matters of contract interpretation are questions of law);
Dalton v. Cessna Aircraft Co., 98 F.3d 1298, 1305 (Fed.Cir.), reh’g denied and
en banc suggestion declined (Fed.Cir. 1996); C.W. Over & Sons, Inc. v. United
States, 54 Fed.Cl. 514, 520 (2002).
“It has been a fundamental precept of common law that the intention of the
parties to a contract control[s] its interpretation.” Beta Sys., Inc. v. United
States, 838 F.2d 1179, 1185 (Fed.Cir. 1988) (quoting Firestone Tire & Rubber
Co. v. United States, 195 Ct.Cl. 21, 444 F.2d 547, 551 (1971)); Alvin, Ltd. v.
United States Postal Service, 816 F.2d 1562, 1565 (Fed.Cir. 1987) (“In the
case of contracts, the avowed purpose and primary function of the court is the
ascertainment of the intent of the parties.”); see also Flexfab, LLC v. United
States, 424 F.3d 1254, 1262 (Fed.Cir. 2005) (“[I]ntent is determined by looking to the contract and, if necessary, other objective evidence. In the absence
of clear guidance from the contract language, the requisite intent on the part
of the government can be inferred from the actions of the contracting officer....”). When the terms of a contract are clear and unambiguous, there is
no need to resort to extrinsic evidence for its interpretation. See Barron
Bancshares, Inc. v. United States, 366 F.3d 1360, 1375 (Fed.Cir. 2004) (“If the
terms of a contract are clear and unambiguous, they must be given their
plain meaning — extrinsic evidence is inadmissible to interpret them.”); Sea-
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Land Serv., Inc. v. United States, 213 Ct.Cl. 555, 567, 553 F.2d 651, 658
(1977), cert. denied, 434 U.S. 1012, 98 S.Ct. 724, 54 L.Ed.2d 755 (1978); see
also King v. Dep’t of Navy, 130 F.3d 1031, 1033 (Fed.Cir. 1997) (“If ambiguity
is found, or if ambiguity has arisen during performance of the agreement, the
judicial role is to implement the intent of the parties at the time the agreement was made.”). However, because an ambiguous or uncertain writing
sometimes can only be understood upon consideration of the surrounding circumstances, extrinsic evidence will be allowed to interpret an ambiguous
clause. See Cruz-Martinez v. Dep’t of Homeland Sec., 410 F.3d 1366, 1371
(Fed.Cir. 2005) (“[M]eaning can almost never be plain except in a context.”
(quoting Restatement (Second) of Contracts §212, cmt. b (1981))); Barron
Bancshares, Inc. v. United States, 366 F.3d at 1375 (holding that extrinsic
evidence is permissible to interpret an ambiguous contract); Sylvania Elec.
Prods., Inc. v. United States, 198 Ct.Cl. 106, 126, 458 F.2d 994, 1005 (1972);
Commonwealth Edison Co. v. United States, 56 Fed.Cl. 652, 662 (2003).
There is a limit, however, to the authority given to extrinsic evidence. For example, extrinsic evidence must be used to interpret an agreement in a manner that gives meaning to all its provisions. See McAbee Constr., Inc. v. United States, 97 F.3d 1431, 1434 (Fed.Cir.), reh’g denied and en banc suggestion
declined (Fed.Cir. 1996). Extrinsic evidence also “may not be used ‘to justify
reading a term into an agreement that is not found there.’ “ Warren v. Office
of Pers. Mgmt., 407 F.3d 1309, 1314 (Fed.Cir. 2005) (quoting Fox v. Office of
Pers. Mgmt., 100 F.3d 141, 145 (Fed.Cir. 1996)); see also McAbee Constr., Inc.
v. United States, 97 F.3d at 1434 (“[E]xtrinsic evidence ... should not be used
to introduce an ambiguity where none exists.”) (quoting Interwest Constr. v.
Brown, 29 F.3d 611, 614 (1994)); see also David Nassif Assocs. v. United
States, 214 Ct.Cl. 407, 423, 557 F.2d 249, 258 (1977) (“[T]he task of supplying
a missing, but essential, term (for an agreement otherwise sufficiently specific to be enforceable) is the function of the court.”).
To determine the intent of the parties in the case, the court first looks to the
language of the solicitation, included in the contract. Jowett, Inc. v. United
States, 234 F.3d 1365, 1368 (Fed.Cir. 2000). The United States Court of Appeals for the Federal Circuit has stated that: “The principles governing interpretation of Government contracts apply with equal force to the interpretation of solicitations issued by the Government for such contracts.” Banknote
Corp. of Am., Inc. v. United States, 365 F.3d at 1353 n. 4 (Fed.Cir. 2004) (citing Grumman Data Sys. Corp. v. Dalton, 88 F.3d 990, 997-98 (Fed.Cir. 1996)
(interpreting a solicitation using contract interpretation rules)). Regarding
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contract interpretation, the United States Court of Appeals for the Federal
Circuit stated in Jowett, Inc. v. United States that:
In interpreting a contract, “[w]e begin with the plain language.” “We give the words of the agreement their ordinary
meaning unless the parties mutually intended and agreed to an
alternative meaning.” In addition, “we must interpret the contract in a manner that gives meaning to all of its provisions
and makes sense.”
Jowett, Inc. v. United States, 234 F.3d at 1368 (citations omitted); see also
Gardiner, Kamya & Assocs. v. Jackson, 467 F.3d 1348, 1353 (Fed.Cir. 2006)
(citations omitted); Medlin Constr. Group, Ltd. v. Harvey, 449 F.3d 1195,
1200 (Fed.Cir. 2006) (reviewing the contract as a whole to determine the
meaning of relevant provisions); Hunt Constr. Group, Inc. v. United States,
281 F.3d 1369, 1372 (Fed.Cir. 2002) (“We begin with the plain language when
interpreting a contract.... The contract must be considered as a whole and interpreted to effectuate its spirit and purpose, giving reasonable meaning to
all parts.”) (citations omitted); Giove v. Dep’t of Transp., 230 F.3d 1333, 134041 (Fed.Cir. 2000) (“In addition, we must interpret the contract in a manner
that gives meaning to all of its provisions and makes sense. Further,*18
business contracts must be construed with business sense, as they naturally
would be understood by intelligent men of affairs.”) (citations omitted); Foley
Co. v. United States, 11 F.3d 1032, 1034 (Fed.Cir. 1993) (finding that contract
interpretation starts with analysis of the language of the written agreement);
Gould, Inc. v. United States, 935 F.2d 1271, 1274 (Fed.Cir. 1991) (clarifying
that a preferable interpretation of a contract is one that gives meaning to all
parts of the contract rather than one that leaves a portion of the contract
“useless, inexplicable, void, or superfluous”); Hol-Gar Mfg. Corp. v. United
States, 169 Ct.Cl. 384, 388, 351 F.2d 972, 975 (1965) (The language of the
“contract must be given that meaning that would be derived from the contract by a reasonably intelligent person acquainted with the contemporaneous circumstances.”); Enron Fed. Solutions, Inc. v. United States, 80 Fed.Cl.
382, 393 (2008) (“[C]ontext defines a contract and the issues deriving thereof.”).
The court, therefore, first must ascertain whether the language at issue was
ambiguous. See NVT Tech., Inc. v. United States, 54 Fed.Cl. 330, 335 (2002)
(finding that the threshold question is whether the solicitation is ambiguous),
aff’d, 370 F.3d 1153 (Fed.Cir. 2004). The United States Court of Appeals for
the Federal Circuit has stated that “[t]o show an ambiguity [in contract language,] it is not enough that the parties differ in their respective interpreta-
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tions of a contract term.” NVT Tech., Inc. v. United States, 370 F.3d 1153,
1159 (Fed.Cir. 2004). In order to demonstrate ambiguity, the interpretations
offered by both parties must fall within a “zone of reasonableness.” Id. (quoting Metric Constructors, Inc. v. NASA, 169 F.3d 747, 751 (Fed.Cir. 1999)); see
also Ace Constructors, Inc. v. United States, 499 F.3d 1357, 1361 (Fed.Cir.
2007) (“[I]n interpreting a solicitation, ‘[it] is ambiguous only if its language
is susceptible to more than one reasonable interpretation.... If the provisions
of the solicitation are clear and unambiguous, they must be given their plain
and ordinary meaning.” (quoting Banknote Corp. of Am., Inc. v. United States,
365 F.3d at 1353)). The Federal Circuit also has indicated that “a proper
technique of contract interpretation is for the court to place itself in the shoes
of a reasonable and prudent contractor and decide how such a contractor
would act in interpreting the contract.” H.B. Mac, Inc. v. United States, 153
F.3d at 1345.
In the motions currently before the court, the parties dispute the impact of
Terms I and II, quoted above, in order to determine how plaintiff should be
compensated for additional rock removal. After careful consideration of the
words of Terms I and II, the court concludes that both Terms I and II, when
read individually or when read together, contain ambiguous language making summary judgment inappropriate in resolving the dispute between the
parties.
Plaintiff asserts that when the issue is cost per cubic yard of rock removal,
the contract, through Term I, “provides a mechanism for determining compensation,” and that the FAR and VAAR clauses incorporated in Term II are
applicable to circumstances not otherwise addressed in the contract. In making this argument, plaintiff argues that Term I specifically addresses the
“quantity variation issue” and establishes a fixed price of $45.00 for each cubic yard of rock removed, including any cubic yards removed in excess of the
estimated 100 cubic yards. Plaintiff further argues that Term II and the FAR
and VAAR clauses incorporated therein are not relevant to the situation because the contract “specifically addresses the quantity variation issue.” Plaintiff argues that the final two words of Term II, “as applicable,” “implicitly
acknowledge[ ] that there are circumstances where the Differing Site Conditions FAR, Changes FAR, and the Changes — Supplement VAAR are not applicable with respect to Rock Excavation.” Defendant disagrees and argues
that when Terms I and II are read together, the contract price for rock removal above 100 cubic yards must be adjusted by way of an equitable adjustment pursuant to the FAR and VAAR clauses.
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Term I required the contractor to identify and fill in blanks on the offer sheet
for its price per cubic yard for removal of the estimated 100 cubic yards of
rock as part of its offer to be incorporated into the contract so that, as stated
on the offer sheet, “if quantities vary from the base amount a basis for future
adjustments has been established.” The phrase “a basis for future adjustments has been established” can be interpreted several ways. The use of the
past tense in the term “has been established” suggests finality. Therefore, interpreting the term “basis” as indicating that the price offered by the contractor will be the unit price for excess rock removal is one reasonable interpretation. Term I provides only one line with a “$” sign in which the contractor can
place a “Cost Per CY ($) ____.” There is not a separate line to fill in cost per
cubic yard for quantities above the estimated 100 cubic yards.
Another possible interpretation is that the word “basis” establishes a starting
point for negotiations to determine the price for any excess rock removed,
which would be negotiated in accordance with the FAR and VAAR clauses
incorporated in Term II. Term I refers to Term II, which fits under the heading “MEASUREMENT AND PAYMENT FOR ROCK EXCAVATION.” Term
II states: “Contract price and time will be adjusted for overruns or underruns
in accordance with Articles, DIFFERING SITE CONDITIONS, CHANGES
and CHANGES-SUPPLEMENT of the GENERAL CONDITIONS as applicable.” Compensation for contract modifications covering excess quantities often
are accomplished through an equitable adjustment negotiated between the
contracting officer and the contractor when these clauses are incorporated
into the contract.
Term II, however, specifically states that the contract price and time adjustments will be made in accordance with the FAR and VAAR clauses “as applicable.” Assuming, for the sake of argument, that $45.00 per cubic yard was
intended to be a fixed price for any rock removal performed by the contractor,
the FAR and VAAR clauses, including Differing Site Conditions and Changes,
would be used only to negotiate quantity of additional or reduced rock removal and issues other than price. Term II, therefore, also is not clear in that the
parties could have reached different, legitimate conclusions from the language of Term II, with the government expecting to negotiate all aspects of
equitable compensation for overruns or underruns, but the contractor expecting to be compensated at a fixed price of $45.00 per cubic yard as established
in the proposal, which was accepted by the government.
In the instant case, the court has found the words of Terms I and II in the
contract ambiguous and subject to more than one reasonable interpretation.
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As stated by the United States Supreme Court, “as between two reasonable
and practical constructions of an ambiguous contractual provision ... the provision should be construed less favorably to that party which selected the
contractual language.” United States v. Seckinger, 397 U.S. 203, 216, 90 S.Ct.
880, 25 L.Ed.2d 224, reh’g denied, 397 U.S. 1031, 90 S.Ct. 1255, 25 L.Ed.2d
546 (1970). This doctrine of contra proferentem “pushes the drafters toward
improving contractual forms[,] and it saves contractors from hidden traps not
of their own making.” Fry Commc’ns, Inc. v. United States, 22 Cl.Ct. 497, 503
(1991) (quoting Sturm v. United States, 190 Ct.Cl. 691, 697, 421 F.2d 723, 727
(1970) (alteration in Fry)).
The United States Court of Appeals for the Federal Circuit has similarly
stated:
When a dispute arises as to the interpretation of a contract and
the contractor’s interpretation is reasonable, we apply the rule
of contra proferentem, which requires that ambiguous or unclear terms that are subject to more than one reasonable interpretation be construed against the party who drafted the document.
Turner Constr. Co. v. United States, 367 F.3d 1319, 1321 (Fed.Cir. 2004) (citing United States v. Turner Constr. Co., 819 F.2d 283, 286 (Fed.Cir. 1987));
see also Gardiner, Kamya & Assocs. v. Jackson, 467 F.3d at 1352; HPI/GSA3C, LLC v. Perry, 364 F.3d 1327, 1334 (Fed.Cir. 2004).
In order to decide how to apply the doctrine of contra proferentem, after a
court finds contract terms to be ambiguous and “susceptible to more than one
reasonable interpretation,” the court must first determine whether the ambiguity is latent or patent. E.L. Hamm & Assocs., Inc. v. England, 379 F.3d
1334, 1342 (Fed.Cir. 2004) (“If an ambiguity exists, the next question is
whether that ambiguity is patent.”); NVT Tech., Inc. v. United States, 370
F.3d 1153, 1162 (Fed.Cir. 2004); Metric Constructors, Inc. v. NASA, 169 F.3d
at 751. “A patent ambiguity is one that is ‘obvious, gross, [or] glaring, so that
plaintiff contractor had a duty to inquire about it at the start.’ “ NVT Tech.,
Inc. v. United States, 370 F.3d at 1162 (quoting H & M Moving, Inc. v. United
States, 204 Ct.Cl. 696, 499 F.2d 660, 671 (1974)). “If an ambiguity is obvious
[patent] and a bidder fails to inquire with regard to the provision, his interpretation will fail.” Id. (citing Triax Pac., Inc. v. West, 130 F.3d 1469, 1475
(Fed.Cir. 1997)). “A contractor may not recover for a patent ambiguity.” E.L.
Hamm & Assocs., Inc. v. England, 379 F.3d at 1342. “The doctrine of patent
ambiguity is an exception to the general rule of contra proferentem, which the
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courts use to construe ambiguities against the drafter.” E.L. Hamm & Assocs., Inc. v. England, 379 F.3d at 1342 (citing Metric Constructors, Inc. v.
NASA, 169 F.3d at 751 (emphasis in original)).
If, on the other hand, the ambiguity is latent or not obvious, the general rule
of contra proferentem controls. See HPI/GSA-3C, LLC v. Perry, 364 F.3d at
1334. The doctrine of contra proferentum places the risk of latent ambiguity,
lack of clarity, or absence of proper warning on the drafting party. However,
it is “a ‘rule of last resort’ that ‘is applied only where there is a genuine ambiguity and where, after examining the entire contract, the relation of the parties and the circumstances under which they executed the contract, the ambiguity remains unresolved.” Gardiner, Kamya & Assocs. v. Jackson, 467
F.3d at 1352 (quoting Lewis v. United States, No. 34-78, 29 CCF ¶82,470, at
*7, 1982 WL 36718, at *7 (Ct.Cl. July 16, 1982)) (decision adopted as the
judgment of the United States Court of Claims at 231 Ct.Cl. 799, 800 (1982)).
In the case currently before the court, the government drafted the solicitation
Terms I and II at issue. All the contractor did was fill in the blanks of cost
per cubic yard and total cost. As discussed above, Terms I and II are subject
to multiple reasonable interpretations. The contractor reasonably could have
understood the solicitation Terms I and II, when read separately and together, to project a $45.00 cost per cubic yard, not only for the 100 cubic yard base
quantity, but also as the cost per cubic yard in the event of quantity overruns.
Likewise, defendant’s interpretation of the contract terms is a plausible approach in the context of government contracting. After reviewing the record,
the court concludes that the ambiguity was not patent and obvious. The contractor should not be barred from possible recovery. Given the multiple, possible, reasonable interpretations of the contract terms, partial summary
judgment is denied. The next step is to examine “the relation of the parties
and the circumstances under which they executed the contract,” id., to resolve the ambiguity.
Conclusion
For the foregoing reasons, the cross-motions for partial summary judgment
are denied. A status conference will be scheduled by separate order, after the
parties have had an opportunity to consult with each other, to address how to
proceed in this case.
It is so ordered.
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Capital Electric
v.
United States
729 F.2d 743
February 7, 1984
Thomas J. Wingfield, Atlanta, Ga., argued, for appellant. With him on brief
was Herbert H. Gray, III, Atlanta, Ga. Mark D. Friedman, Washington, D.C.,
argued, for appellee. With him on brief were J. Paul McGrath, Asst. Atty.
Gen., David M. Cohen, Director and Thomas W. Petersen, Washington, D.C.;
Timothy Sullivan, Deputy Dist. Counsel, Baltimore Dist. Corps. of Engineers,
Dept. of the Army, of counsel. James A. Pemberton, Jr., and Christopher M.
McNulty, Washington, D.C., were on brief, for amicus curiae, Associated
General Contractors of America. Ira J. Smotherman, Jr. and Clifford F. Altekruse, Atlanta, Ga., were on brief, for amicus curiae, American Subcontractors Ass’n.
Before Friedman and Miller, Circuit Judges, and Re, Judge*.
Jack R. Miller, Circuit Judge.
This appeal essentially involves the question of whether, as a matter of law,
Capital Electric Company (“Capital”) was entitled, under the suspension of
work clause of its contract with the government, to recover damages for extended overhead and to calculate those damages according to the so-called
Eichleay formula (Eichleay Corp., ASBCA No. 5183, 60-2 BCA ¶2688 (1960),
aff’d on recon., 61-1 BCA ¶2894).1 It was stipulated that there were 303 days
of compensable delay due to the fault of the government. The General Services Board of Contract Appeals (“board”) held that Capital was not so entitled. We affirm in part, reverse in part, and remand.
The dispute arises from a contract awarded Capital on October 12, 1976, to
furnish and install mechanical, electrical, and plumbing work for the construction of the Federal Building and U.S. Courthouse in Fort Lauderdale,
*
The Honorable Edward D. Re, Chief Judge, United States Court of International Trade,
sitting by designation.
1
We use the word “essentially” because Capital alternatively claims damages according to a
“modified” Eichleay formula; also, its subcontractors’ damages have been computed according to a “modified” Eichleay formula. These will be discussed infra.
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Florida. Capital performed the electrical portion of the contract and subcontracted the remainder of the work to the Poole and Kent Company, which, in
turn, further subcontracted work to United Sheet Metal Co., Firepak, Inc.,
Johns-Manville Sales Corp., and Honeywell, Inc.
Capital’s contract was one of a series of prime contracts for the Fort Lauderdale project awarded under the phased design and construction technique.
Phased construction contemplates the overlapping of design and construction
tasks as well as sequential or concurrent scheduling of segments of the work.
The government awarded, inter alia, separate prime contracts for structural
concrete and interior finishes.
As a result of the structural concrete contractor’s slow and erratic progress,
the work of Capital and its subcontractors was unreasonably delayed and
disrupted. Capital’s work was also delayed and disrupted due to the government’s failure to act upon submittals for the electrical panels, main switchboard, and emergency generator while the government contemplated a contract change that was never issued.
The Board
Notwithstanding the government’s admission that the Eichleay formula has
been the prevailing method adopted by the contract appeals boards, the
board, which had approved use of the Eichleay formula in Dawson Construction Co., GSBCA No. 4956, 79-2 BCA ¶13,989, at 68,635 (1979), for the structural concrete phase of the same Fort Lauderdale project at issue here2, ex2
The Board said:
We cannot agree with the government’s contention that our decision in Dawson was just an example of acceptance as a matter of administrative convenience of the concept of recovery of extended home office overhead during periods of delay. We said in Dawson that the concept of recovery of extended
home office overhead during periods of delay had its origin in Fred R. Comb
Co. v. United States, 103 Ct.C1. 174, 183 (1945), and that the Eichleay formula was simply an appropriate method for calculating extended home office
overhead. Dawson, 79-2 BCA at 68,635. Comb was not a departure from existing law on recovery of breach damages due to performance delay. It was
preceded by Brand Investment Co. v. United States, 102 Ct.Cl. 40, 44, 58
F.Supp. 749, 751 (1944) and Coath & Goss, Inc. v. United States, 101 Ct.Cl.
702, 710 (1944). There are other, older cases but further citation would not be
helpful. In distinguishing Coath & Goss which involved a performance extension and granting recovery of extended home office overhead for a period of
performance suspension, Comb may be read as authority for the proposition
that recovery of extended home office overhead may be permitted where it is,
in effect, wasted as a result of a performance suspension. To that extent, we
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pressly overruled its determination in Dawson. It recognized that the Corps
of Engineers Board of Contract Appeals “continues to permit recovery of extended home office overhead,” citing Excavation Construction, Inc., ENG BCA
No. 3858, 82-1 BCA ¶15,770, at 78,068 (1982). However, it observed that recently the Armed Services Board of Contract Appeals had indicated that it
will not permit recovery of extended home office overhead for periods of performance delay, suspension, or extensions of the contract work, citing Savoy
Construction Co., 80-1 BCA ¶14,392, at 70,970 (subsequently affirmed by the
Claims Court, 2 Cl.Ct. 338 (1983), decided simultaneously with this case on
appeal to this court).
The board said that it would not accept the concept of compensable extended
overhead, as opposed to underabsorbed overhead3, and that the Eichleay formula is not a proper method of calculating underabsorbed overhead. It opined
that the premise of Eichleay is that if the performance period were extended,
overhead costs must have increased ipso facto, and noted that the auditor reported that use of the Eichleay formula could result in a computation of contract damages even in the absence of evidence that a contractor’s work forces
were idled, or placed in a position where they could not be redeployed or other
work substituted. Thus, the government argues that an automatic application of the Eichleay formula allows a contractor to escape the burden of proof
faced by all claimants, namely: establishing the fact of injury.
do agree with the government that Dawson might be distinguished as involving a performance suspension rather than a performance extension, as it the
case here.
But we do not think that such a distinction is meaningful ...
The principle of recovery announced in Comb was, in fact, expanded in Eichleay, and there applied to a period of performance extension rather than performance suspension. Eichleay, 60-2 BCA at 13,567. There are many other
cases....
3
It explained that these are separate and distinct concepts; that underabsorbed overhead is
particularly involved in manufacturing cost accounting; that extended overhead is a concept unique to construction contracting; that it has, as its premise, that extending the performance period will increase overhead costs and is calculated by “a daily rate method.”
On the other hand, it explained that underabsorbed overhead occurs when direct costs are
diminished as a result of delay; that the contract’s share of overhead is diminished, while
the overhead share of all other contract work is increased; and that underabsorbed overhead is calculated by determining an allocation rate differential. Thus, it calculated allowable home office overhead by multiplying the direct costs attributable to the delay period
by 9.2 percent, which the auditor estimated was the normal rate of allocation of home office overhead of the contractor.
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Discussion
Although these points have some degree of validity, we are not persuaded
that they correctly reflect the concept of the Eichleay formula, at least as far
as Capital is concerned. In this case, compensable delay was stipulated before
the board. Moreover, Capital introduced unrebutted evidence that it could not
have taken on any large construction jobs during the various delay periods
due to the uncertainty of the delays and (except after the original contract
period, when a major portion of the project had been completed and accepted)
due to the limitation on its bonding capacity.4 Thus, Capital has not actually
used an ipso facto approach. Indeed, as stated in Eichleay, 61-1 BCA ¶2894 at
15,117: “The mere showing of these facts5 is sufficient to transfer to the government the burden of going forward with proof that Appellant suffered no
loss or should have suffered no loss.” Amicus American Subcontractors Association states: “When the evidence adequately proves the existence of damages owing to a delay in work on the project, the extent of those damages need
not be quantified to a mathematical certainty,” citing Story Parchment Co. v.
Paterson Parchment Paper Co., 282 U.S. 555, 51 S.Ct. 248, 75 L.Ed.2d 544
(1931).
Although the board recognized that calculation of contract damages is difficult and admitted that the method it used is an approximation, it faults the
Eichleay formula for not being precise. Amicus Associated General Contractors of America points to a basic flaw in the method of calculation applied by
the board (note 3, supra) in a case where no work is being performed during a
suspension, for example, and application of a percentage overhead charge
4
In Excavation Construction, Inc., supra, the Engineer Board of Contract Appeals found
that there was extensive evidence to establish the disruptive effect of the delay on the contractor’s operations and quoted from Brand Investment Co. v. United States, 102 Ct.C1, 40,
58 F.Supp, 749 (1944), that “[i]n order to recover, the plaintiff must show, at the minimum, that the delay somehow affected plaintiff’s operations so that it was not practical to
undertake the performance of other work even had it been available.” The Engineer Board
added that “[i]t is not necessary that [the contractors] show futile attempts to obtain other
work which somehow could have been substituted for this major project...”
5
“The suspensions occurred at various times and in connection with various features of the
contract work.... One item of work would be suspended, then another and so on through an
extended series of suspensions. The partial suspensions were lifted at innumerable, varying intervals over a prolonged period of time with the issuance of the numerous modifications providing for changes in the contracts. Under these circumstances it would not have
been prudent or practical for appellant either to risk the layoff of Home Office personnel or
facilities, or, on the other hand, to absorb personnel and facilities so made idle by taking
on new commitments.”
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(e.g., 9.2) to the direct costs of work performed (zero) would produce zero for
overhead that nonetheless continues on6. Capital lists examples of such overhead: weekly payrolls, Davis-Bacon reports, checks, W-2s, 941s and other required tax forms, cost records, review submittals from subcontractors, weekly
and monthly progress reports to the government, and “the myriad similar
tasks which are as critical as the on-site work but which can more easily be
performed at a central location.” Amicus American Subcontractors Association adds: salaries, dues, and subscriptions, auto and travel, telephone, and
photocopying.
Capital argues that the Comb decision remains binding precedent with regard to government contracts, citing Luria Brothers & Co. v. United States,
177 Ct.Cl. 676, 369 F.2d 701, 709-10 (1966) and J.H. Hedin Construction Co.
v. United States, 347 F.2d 235, 259 (Ct.Cl. 1965). It asserts that the board
had “no authority to disregard the binding precedents established by the
Court of Claims.” However, in fairness it should be said that if the board believed these precedents were wrongly decided, it was not improper for the
board to act accordingly. At the same time, it must be recognized that, as
held by the Court of Appeals for the Federal Circuit, sitting en banc, South
Corporation v. United States, 690 F.2d 1368 (1982), these Court of Claims
precedents are binding precedent and can only be overruled by the Federal
Circuit sitting en banc.7
As far as this panel is concerned, we do not believe these precedents should
be overruled. They are of such long standing and have been followed in so
many decisions of the various boards of contract appeals that such action
should more properly be taken by the Congress. Nor are we persuaded that
this would be an appropriate case for breaking precedent.
Conclusion
Capital has proposed that its damages be calculated according to a modified
Eichleay formula or, alternatively, according to the Eichleay formula as follows:
6
Although this is obviously a “worst case” example, it demonstrates that the government’s
method of calculating damages can lead to absurd results.
7
The government’s motion for initial hearing of this case en banc was denied by the court.
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Modified Eichleay Formula
Original Contract Price
total billings for original contract period
x contract billings for extended period
x
fixed overhead
for original
contract period
=
fixed overhead
allocable to
contract
Fixed overhead allocation to contract
= daily contract overhead
original days of performance
Daily contract overhead × days delay = amount recovered
Eichleay Formula
Contract billings
total billings for allocable contract period
x
total overhead for
contract period
=
overhead
Allocable overhead
= daily contract overhead
days of performance
Daily contract overhead × days delay = amount re cov erable
Under the modified Eichleay formula, daily contract overhead would be
$446.52; whereas under the Eichleay formula, daily contract overhead would
be $311. We are satisfied that the record does not support use of the modified
Eichleay formula instead of the Eichleay formula and that Capital’s damages
should, therefore, be calculated according to the latter.
Poole and Kent have used an “Eichleay-type formula,” as have its subcontractors. The slight difference between damages calculated according to the Eichleay formula ($150.99 daily contract rate) and the “close variation” (board’s
words) of the Eichleay formula ($155.81 daily contract rate) used by Poole
and Kent appears to be appropriate to its circumstances, as do the variations
used by Poole and Kent’s subcontractors, Firepak, United Sheet Metal, and
Johns-Manville. Honeywell’s claim for extended office overhead does not appear to be justified ($2,850 said to have been “eyeballed”).
In view of the foregoing, we affirm the board as to Honeywell and in all other
respects reverse the board and remand for further proceedings consistent
with this opinion.
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Affirmed in Part; Reversed in Part; and Remanded.
Friedman, Circuit Judge, concurring
Although I agree with the court that the appellant is entitled to recover, the
analysis through which I reach that conclusion differs somewhat from that of
the court.
For almost 40 years the Court of Claims consistently has held that the delay
damages a government contractor may recover include extended home office
overhead incurred during the period of delay. The leading case is Fred R.
Comb Co. v. United States, 103 Ct.Cl. 174 (1945), which the court subsequently followed and approved a number of times. E.g., Luria Brothers & Co.
v. United States, 177 Ct.Cl. 676, 369 F.2d 701, 709-10 (1966); J.D. Hedin
Construction Co. v. United States, 347 F.2d 235, 259 (Ct.Cl. 1965). Similarly,
the various boards of contract appeals repeatedly allowed the recovery of this
element of delay damages.
The government now asks us to jettison this settled line of authority on the
ground that all of those cases were wrongly decided. It argues that since the
delay in performance ordinarily does not increase the total amount of office
overhead the contractor incurs in connection with the particular contract, but
merely spreads it over a longer period, allowing the contractor to recover for
such overhead for the period of delay would result in compensating the contractor for losses it did not actually incur. According to the government, the
only situations in which a contractor may recover for such extended office
overhead is where the delay in performance: (1) requires the contractor to
hire additional personnel or incur other additional expenses; or (2) prevents
the contractor from taking on other work it would have been able to assume
had there not been the delay.
Although superficially plausible, the government’s argument does not withstand more penetrating analysis based upon the theory on which extended
office overhead is allowed as an element of delay damages. By definition this
type of overhead cannot be directly attributed to the performance of a particular contract, yet it is an essential part of the contractor’s total cost of doing
business. Some basis, therefore, must be found for allocating this total overhead among the various contracts in connection with which it is incurred.
A contractor’s estimate of its costs necessarily includes its overhead costs,
which it calculates on the basis of the time required to perform the contract.
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Where performance of a contract has been delayed, the overhead expenses of
performing that contract continue for the additional time. A portion of the
total overhead for that additional period accordingly is allocable as a cost of
performing that contract.
As the Court of Claims explained in Combs,
It would not be expected that a contractor would enlarge his
main office staff and facilities at a time when one of his jobs
was merely marking time. But unless his office was understaffed before the suspension, it too would, pro tanto, mark
time during the suspension, unless the useful work which it
would have been doing in regard to this job, if the job had not
been suspended, had been replaced by extra work made necessary by the suspension. So the fact that no extra help was hired
seems both natural and immaterial. If some employees had
been laid off, that would have been material, since it would
have enabled the contractor to pay the full staff which he would
need during the extra time that the work was in process, because of the delay, with the money he had saved by laying off
employees during the period of suspension.
But it is, ordinarily, not practicable to lay off main office employees during a short and indefinite period of delay such as
occurred here. So the contractor, instead of saving the salary of
that proportion of his main office staff which is attributable to
this contract, is obliged, in effect, to waste it, and to spend a
similar amount at the end of the contract for the extra time
made necessary by the delay. This waste is caused by the
breach of contract, and it ought to be paid for by the party
guilty of the breach.
103 Ct.Cl. at 183-84.
In other words, a portion of the overhead incurred during the entire period of
performance must be charged against the revenue received during that period as a cost of performing the contract. The Court of Claims decisions, as well
as the Eichleay formula used to calculate the amount of such extended office
overhead, are based upon and reflect these economic realities of the construction business. I think those decisions are correct, and I see no reason for the
panel (which is bound by those decisions) to invite the full court to reconsider
them en banc.
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Clark Construction
00-1 BCA ¶30,870
April 5, 2000
Appearances: Axel Bolvig, Til, Esq., Bradley, Arant, Rose & White, LLP,
Birmingham, Alabama, for the Appellant, Clark Construction Company,
Herman M. Braude, Esq., Stuart H. Sakwa, Esq., and Robert Windus, Esq.
Braude and Margulies, P.C., Washington, D.C. for the real party in interest,
The Poole and Kent Company. Kenneth B. MacKenzie, Esq., Trial Attorney;
Charlma J. Quarles, Esq., Deputy Assistant General Counsel; and Pnillipa L.
Anderson, Esq., Assistant General Counsel, Washington, D.C., for the Department of Veterans Affairs.
Opinion by Administrative Judge Krempasky
This is a sponsored appeal by the named Appellant, Clark Construction
Group, Inc. (Clark), on behalf of its subcontractor. The Poole and Kent Company (PKC), the real party in interest. PKC appeals the Respondent, Department of Veterans Affairs (VA or Government) deemed denial of PKC’s
$1,228,500 claim for inefficiency and additional engineering effort on Contract No. V101BC-0036 (Contract) for the construction of a new General Medical, Surgical, Intermediate Care and Psychiatric Hospital in West Palm
Beach, Florida (VAMC West Palm).
PKC, the principal plumbing/mechanical subcontractor on the project, seeks
recovery of the costs of its labor inefficiency and those of its principal subcontractor. United Sheet Metal Company (USM) allegedly caused by the VA.
PKC also seeks an equitable adjustment for the alleged, VA-caused additional efforts expended by both PKC and USM to produce coordination drawings
for the project. During the course of the litigation of this appeal, PKC has
amended the amount of its claims upward to a total of $1,935,092. Of this
amount, $1,351,367 is attributed to PKC and $583,725 to USM.
The Record before the Board consists of the Pleadings; an Appeal File (cited
as “R4, tab ___”) consisting of 28,079 exhibits; 53 exhibits introduced into evidence at the hearing by PKC, cited as “Exh. A-___”); 5 exhibits introduced
into evidence at the hearing by the VA, cited as “Exh. G-___”; a joint exhibit
stipulating facts, cited as (“Exh. J-___”) consisting of the parties’ 14 page
JOINT COMPREHENSIVE PREHEARING STATEMENT OF FACTS and
PARAGRAPHS 1, 2, 3, and 18 of the VA’s FACTS To BE PROVED; the seria-
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tim MAIN, RESPONSE, and REPLY BRIEFS (cited as MAIN, RSPSE, or
RPLY at ___); and, the 7 volume transcript of the hearing in this matter, held
in Washington, DC (cited as “Tr. [vol. #]:__”).
Findings of Fact
General
Glossary
This appeal involves the complete installation of complex plumbing and mechanical systems in a large, new hospital building and certain terms will repeatedly appear. These terms and their definitions follow.
COCO: A “COCO” is a Central Office Change Order. Any unilateral change to
the Contract with a value in excess of the cost established or extending the
Contract completion by more than the number of days designated by the Contracting Officer (CO) as qualifying for issuance as a Field Change Order was
required to be issued by the CO as a COCO. (R4, tab 500)
COSA: A “COSA” is a Central Office Supplemental Agreement. Any bilateral
modification of the Contract with a value in excess of a value established or
extending the Contract completion by more than a certain number of days
designated by the CO as qualifying for issuance as a Field Supplemental
Agreement was required to be negotiated and executed by the CO and Clark
as a COSA. (R4, tab 500)
Coordination Drawings: Drawings prepared by Clark and its subcontractors
prior to commencement of work showing the specific layout of the work of
various trades to be installed at VAMC West Palm. The purpose of coordination drawings is to insure that the installation of mechanical, electrical, and
other work is coordinated and can be properly accomplished within the affected areas. Coordination drawing preparation begins with the background
drawings on which the installations by the various trades are overlain. USM,
being the installer of the largest sized installations was responsible for the
background drawings and initial detailing of its heating, ventilating and air
conditioning (HVAC) installation. (R4, tab 500; Tr. vol. I: 66-70, 112)
FCO: An “FCO” is a Field Change Order. A Field Change Order is a unilateral Contract change with a value up to an amount set by the CO or extending the Contract completion date for a certain number of days as established
by the CO. FCOs were authorized to be executed by the VA on-site project
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management staff under the authority delegated to them by the CO. (R4, tab
500)
FSA: An “FSA” is a Field Supplemental Agreement. A Field Supplemental
Agreement is a bilateral Contract modification negotiated by the VA on-site
project management staff under the authority delegated to them by the CO.
An FSA was limited to the same monetary amount and Contract extension
times as those for FCOs. (R4, tab 500)
Interstitial Space: The interstitial space is an eight to nine foot space above
each operational or occupied floor of the building. The top of the interstitial
space is the floor slab (or roof) above. The bottom of the interstitial space is a
corrugated metal deck with lightweight concrete poured on top. There is no
interstitial deck in the Mechanical Equipment Rooms (MER). The interstitial
space is divided into seven zones as follows:
S-1 is the floor slab above the interstitial space.
S-2 goes from the bottom of the floor slab to the bottom of the structural
beam, a total of 25 inches. The S-2 zone is where the large cast iron waste
drainpipes were located for collection purposes.
S-3 is where the main piping and ductwork run north-south out of the
mechanical rooms. These runs were known as “boulevards.” The waste
drains run into this zone from the S-2 zone for distribution purposes.
S-4 is where piping and ductwork mains run out from the boulevards in
an east-west direction. These runs were known as “avenues.”
S-5 is where piping and ductwork branches, as well as electrical conduit
were run out to the ceiling of a particular room. The S-5 zone ran from the
top of the interstitial deck to 16” above.
S-6 is the interstitial deck itself.
S-7 is the space between the bottom of the interstitial deck and the ceiling
grid. S-7 contains the plumbing, ductwork drops to ceiling grills, medical
gas, electrical and sprinkler run-outs to rooms below.
(Exh. A-41; Tr. vol. I: 46-59, 80-81; Tr. vol. IV: 635-647)
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Request for Information (RFI): An RFI is the procedure by which Clark notified the VA of questions and problems concerning the VAMC West Palm
drawings and specifications and tracked the resolution of those problems and
questions. Subcontractors, such as PKC, would submit RFIs to Clark who
would either resolve the question or forward it to the VA, identifying it for
tracking purposes as agreed between Clark and the VA. An RFI described the
problem and sought instruction in the form of additional information, clarification or approval of proposed solutions to problems identified by Clark and
its subcontractors. Upon the VA’s receipt of an RFI, it would either be answered by the VA site engineering staff or forwarded to the VA’s ArchitectEngineer (A/E) for response. During the course of the project, Clark developed a system of identifying “critical” RFIs by the color of the folder in which
they were forwarded. The VA agreed to give priority to responding to these
“critical” RFIs. (Tr. vol. III: 548-49; Tr. vol. VI: 947-49)
Background
On August 20, 1990, the VA issued Invitation for Bids (IFB) No. 8829-AE soliciting bids for construction of a new 400 bed hospital and parking structure
in West Palm Beach, Florida (VAMC West Palm). The IFB was amended five
times with Amendment No. 5 to the IFB establishing a bid opening date of
November 19, 1990. (R4, tabs 500-06)
Clark was the apparent low bidder at bid opening and on January 28, 1991,
the VA awarded the $105,978,000 Contract to Clark (then known as the
George Hyman Construction Company) for construction of the new 400 bed
hospital and parking structure in West Palm Beach, Florida. The VA issued
the Notice to Proceed on February 27, 1991, establishing the Contract completion date as August 10, 1994, 1,260 days after the Notice to Proceed. The
George Hyman Construction Company subsequently changed its name to the
Clark Construction Group, a fact memorialized in a “Novation Agreement”
executed by the parties in July 1996 and a unilateral, “Administrative
Change” to the Contract issued by the VA Contracting Officer (CO). (Exhs. Jl, G-5)
Clark and PKC executed two subcontract agreements for the VAMC West
Palm project on January 28, 1991. The scope of the subcontracts included labor, material, and equipment for the installation of domestic water piping,
HVAC systems, heating piping, sanitary/drain/waste/vent piping, medical gas
piping, and piping below the slab of the building. PKC’s responsibility included installation of underground/underslab piping up to five feet outside the
building line where PKC would connect to utilities installed by other Clark
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subcontractors. The two subcontracts totaled $19,500,000; one subcontract in
the amount of $13.741 million was for material and equipment and the other
was $5.759 million for labor. Clark and PKC split the subcontracts because
Clark required PKC to bond only the subcontract for labor. PKC subcontracted the HVAC work (primarily the installation of ducts) to USM. (Exhs. A-34,
J-1; Tr. vol. I: 40-44)
PKC submitted the second low mechanical subcontractor quote to Clark for
the VAMC West Palm project; PKC’s quote was approximately $300,000
higher than the low quote and less than $500,000 lower than the third low
quote. The other proposers were both large mechanical subcontractors experienced in complex mechanical installations such as those found in hospital
construction. PKC is one of the largest mechanical subcontractors in the
United States and has extensive experience in installing mechanical systems
in new hospitals. USM has also successfully installed HVAC work in a number of new, large hospitals. Both PKC and USM have worked with Clark and
each other on numerous projects similar in size and complexity as the VAMC
West Palm project. However, neither PKC nor USM (nor their project management personnel) had experience with installations in interstitial spaces.
(Exh. A-19; Tr. vol. I: 37-38, 55, 81; Tr. vol. II: 412-13; Tr. vol. V: 835, 887)
The VAMC West Palm structure consists of three connected wings running
approximately 810 feet west to east denoted “West”, “Center”, and “East”
Wings, and an “Energy Center” structure adjacent, and connected, to the
West Wing. VAMC West Palm is situated on the site of a former golf course
where, as is typical of that part of Florida, the land is low-lying and
“swampy.” The Energy Center was a single level, slab on-grade structure designed to house the main cooling and heating equipment, electrical switchgear, and other major components of the HVAC and piping systems. The
West Wing consists of an at-grade “basement,” four floors and a penthouse.
The Center Wing has an at-grade basement, nine floors, and a tenth floor
penthouse. The East Wing also has an at-grade basement, nine floors and a
tenth floor penthouse. (Exh. J-1)
VAMC West Palm is a cast-in-place concrete structure with pre-cast concrete
joists utilized on the floors. The exterior is composed of pre-cast concrete panels that included the window system. There are multiple roof elevations; the
roof system consists of lightweight, insulating concrete covered by a single ply
roof membrane. (Exh. J-1)
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The VAMC West Palm design incorporated an interstitial space between
floors. The interstitial space holds the majority of piping, electrical, and
ductwork servicing the hospital. The design intent of the interstitial spaces
was to provide a readily accessible space to install and maintain utilities
serving the hospital. (R4, tab 19,536; Exh. J-1; Tr. vol. I: 44, 46; Tr. vol. II:
412-13)
The Contract includes the standard Federal Acquisition Regulation (“FAR”),
48 C.F.R. Chapter 1, and Department of Veterans Affairs Acquisition Regulation (“VAAR”), 48 C.F.R. Chapter 8, clauses usually found in VA construction
contracts, including the following clauses relevant to these appeals:
96

COMMENCEMENT, PROSECUTION, AND COMPLETION OF
WORK, FAR 52.212-3 (APR 1984)

CHANGES, FAR 52.243-4 (APR 1984)

CHANGES — SUPPLEMENT, VAAR 852.236-88(a) (JUN 1987)

CHANGES — SUPPLEMENT, VAAR 852.236-88(b) (JUN 1987)

DISPUTES (ALTERNATE I), FAR 52.233-1 (APR 1984)

INSPECTION OF CONSTRUCTION, FAR 52.246-12 (JUL 1986)

INSPECTION OF CONSTRUCTION, VAAR 852.236-74 (APR 1984)

SCHEDULES FOR CONSTRUCTION CONTRACTS, FAR 52.236-15
(APR 1984)

SCHEDULE OF WORK PROGRESS, VAAR 852.236-84 (NOV 1984)

SPECIAL NOTES, VAAR 852.236-91 (JAN 1988)

SPECIFICATIONS AND DRAWINGS FOR CONSTRUCTION, FAR
52.236-21 (APR 1984)

SPECIFICATIONS AND DRAWINGS FOR CONSTRUCTION, VAAR
852.236-71 (APR 1984)

SUBCONTRACTS AND WORK COORDINATION, VAAR 852.236-80
and 852.236-80 (APR 1984)
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
SUSPENSION OF WORK, FAR 52.212-12 (APR 1984)

SUPERINTENDENCE BY THE CONTRACTOR, FAR 52.236-6 (APR
1984)
(R4, tab 500)
Contract Performance
Planned Construction Sequence and Methodology
Clark originally planned to construct VAMC West Palm using a “horizontal”
construction sequence. The planned sequence involved first constructing the
piles, pile caps and foundation of the hospital. Clark planned to erect the
structure by moving horizontally from west to east. Thus, instead of completing the construction of a hospital wing from the basement to the top floor before moving on to complete another wing, Clark intended to complete the
structure of each floor of all three wings before constructing the next floor.
For example, the third floor of the west wing would be constructed; the construction forces would then proceed to build the third floor of the center wing
and immediately move on to the third floor of the East Wing. Clark planned
to support this construction sequencing with three tower cranes deployed
from west to east. The Contract did not specify any particular construction
sequence. A critical path method (CPM) progress schedule was required by
the Contract for the project. A fully developed CPM employing horizontal
construction scheduling logic was never approved by the VA. However, Clark
developed an “interim” schedule that reflected scheduling logic using a horizontal construction sequence. (R4, tabs 500-06; Exh. J-1; Tr. vol. I: 100-01; Tr.
vol. II: 324-25, 410-11)
Informed by Clark of its planned construction sequencing, PKC bid and
planned its activities in the main hospital building assuming a horizontal
construction sequence. The Energy Center was essentially a separate project
with regard to PKC’s responsibilities. (Exh. J-1; Tr. vol. I: 36, 39)
PKC planned on utilizing five continuous six man crews, including a foreman
to perform its work. One crew’s primary responsibility would be to work independently to complete installations in the Energy Center. In the main hospital structure, PKC installations were planned to follow the USM installation of main duct runs. A PKC crew would follow the USM main duct crew
and install trapeze pipe hangers from the structural floor above and “stock”
(or place in) the hangers cast iron and copper pipe. It was intended that this
work would be accomplished before installation of the interstitial deck. An-
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other crew would install vertical cast iron piping. The third crew in the main
hospital structure would rough-in cast iron wall installations and a fourth
crew would install the copper wall rough-in work and copper pipe mains. The
majority of both PKC and USM installations are on the bottom five floors.
(Tr. vol. I: 36, 49, 71-2, 86, Tr. vol. II: 410-421, 433, Tr. vol. III: 439, 450, 539,
Tr. vol. IV: 643-44)
Once the pipe hangers were installed and stocked with pipe in the bottom five
floors, where the bulk of PKC’s work was to be performed, the first two crews
would turn to making copper and cast iron connection work within the interstitial spaces. The third crew would accomplish cast iron wall rough-in and
the fourth crew would do the same for copper pipe. (Tr. vol. II: 413)
PKC anticipated using a 33 man labor force, including non-working foremen
for approximately a two-year period commencing in the early fall of 1991
through the late fall of 1993. PKC anticipated gradually increasing the size of
its labor force to the 33 man level, beginning with the on-site installation
work in the spring of 1991, until the fall of that year. The PKC labor force
would then be gradually reduced starting in the late fall of 1993 through August of 1994. During its anticipated peak period of work (September 91December 93), using the 33 man workforce, PKC expected to expend approximately 6,000 man- hours per month. USM planned on using a 12 person onsite workforce plus supervision and non-working foremen during its approximately 24 month peak performance period (January 92-January 94). (R4,
tabs 28,012, 28,021; Tr. vol. I: 49-53, 96-98; Tr. vol. II: 413, 421)
In performing their work, both PKC and USM planned to use rolling manlifts
during the installation of the piping and ductwork prior to placement of interstitial decks. PKC planned to utilize the cranes employed by Clark to hoist
the manlifts to each floor. (Tr. vol. I: 76-77, 89-90)
As part of its planned method of construction, PKC intended to prefabricate a
substantial portion of the piping and pre-assemble fixture assemblies in its
Miami shop and a prefabrication shop located in the former golf course club
house on-site. In addition, PKC arranged with its piping and fittings suppliers to “bag and tag” the materials delivered to the site. “Bagging and tagging”
materials consists of placing all necessary fittings and other materials required for a particular location in one box. PKC planned that a production
crew would pick up a box when it was going to the designated location and
that the box would contain the necessary materials to complete the work in
the box. The contents of each box and the sequential delivery schedule for fit-
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tings as ordered by PKC was predicated on the horizontal construction
schedule. (Exh. J- 1; Tr. vol. I: 48-50; 59-60; Tr. vol. II: 411-413, 427, 450; Tr.
vol. III: 450)
USM also planned to accomplish horizontal installation because 60 to 70 percent of its work was on the lower five floors. USM planned to order the main
trunk lines for each area in the sequence in the initial horizontal sequence
schedule. As the trunk lines were delivered, USM expected to install the
trunk lines up high in the interstitial space in order to get them out of the
way. The trunk lines were to be installed prior to installation of the interstitial deck, and prior to other trades installing their work. Trunk line installation would be accomplished utilizing man-lifts staged to each floor by the
Clark site cranes. (Tr. vol. I: 86, 112-14)
USM intended to return after the trunk line installation to install branch
lines connecting to the Variable Air Volume (VAV) boxes. These branch lines
were located in lower interstitial zones and would be installed after completion of the interstitial deck since its workers could stand on the deck rather
than working off of ladders. (Tr. vol. I: 114-116)
USM bid assuming that it would pre-fabricate all of the rectangular sheet
metal and purchase pre-cut spiral round pipe. The spiral round pipe had a
two month ordering lead time in order to ensure it was on site when needed.
(Tr. vol. I: 86-7)
Stop Pump Orders
Since the water table was only three to five feet below grade, extensive dewatering of the site was necessary for construction of the foundations and installation of underslab and site utilities, Clark was responsible for de- watering the site and planned to use a “sock” de-watering system throughout the
building site. This de-watering system would have provided a clean, dry and
stable project site. (Tr. vol. I: 54; Tr. vol. II: 275-80)
In early-spring 1991, the VA approved Clark’s proposed de-watering system.
Installation of the first stage of this system took place in late-April and earlyMay 1991. A “sock” de-watering system is an underground system comprised
of pliable rolls of plastic pipe, with perforations, which are installed in
trenches using a machine which excavates the soil down to a maximum depth
of 16 feet, installs the pipe and then fills the trench. The plastic pipe is covered in a fabric to prevent soil from clogging the pipe, but allows water to
pass into the pipe. The pipe is attached to a pump and water is sucked out of
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the ground, thus lowering the ground water level to that of the pipe. The dewatering system approved by the VA was capable of dewatering the entire
site, approximately 35 million gallons of water per day. (Exh. J-1; Tr. vol. II:
274- 81)
On May 29, 1991, the South Florida Water Management District (SFWMD)
issued a “Stop Pump” Order because the VA had not obtained the permits
necessary to pump the volume of water generated by Clark’s de-watering activities. The permits were required because of the proximity of VAMC West
Palm to a landfill and industrial area and the potential for the migration of
contamination because of the volume of water being pumped. At the time of
the Stop Pump Order, foundation work for the Energy Center and West Wing
was complete. Work on the deep foundations in the Center and East Wings,
although restricted, continued during the duration of the Stop Pump Order.
In some cases, Clark accomplished installation of the Center and East Wing
foundation piles using limited, spot de-watering. PKC was able to accomplish
limited installation of its underslab, underground pipe where de-watering
was not necessary for installation for the duration of the Stop Pump Order.
Installation of site utilities such as storm drainage by other Clark subcontractors was also impossible in the face of the Stop Pump Order. SFWMD
conditionally lifted this Stop Pump Order on August 15, 1991, requiring extensive revisions to the de-watering system employed and severe limitations
on the amount of water that could be pumped on a daily basis before dewatering was resumed. (Exh. J-1; Tr. vol. II: 284-85; Tr. vol. VI: 963-66)
The revised de-watering system was complete on October 2, 1991 and Clark
was able to reinitiate de-watering activities on that date. The limited dewatering permitted after the lifting of the May 1991 Stop Pump Order allowed completion of the foundations for the Central and West Wings of
VAMC West Palm by early- December 1991. However, because of the pumping limitations, PKC was prevented from installing underground utilities
concurrent with the foundation work. This, in turn, did not allow construction
of slabs in the Energy Center, and the Center and West Wings. Consequently,
PKC, having ordered Energy Center equipment for delivery in the first quarter of 1992, was forced to install the equipment on pads or to store it on site
in mucky areas until it could be installed. (Exh. J-1; Tr. vol. II: 284-87, 293;
Tr. vol. III: 445-49; 518, 19, 544; Tr. vol. IV: 655)
Pursuant to SFWMD mandated testing and monitoring, arsenic contamination of the groundwater at the site was discovered and, as a consequence,
SFWMD issued a second Stop Pump Order on December 4, 1991. The second
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Stop Pump Order was not lifted until September 24, 1992 after Clark’s further extensive revision of the de-watering system. Site de-watering resumed
on October 26, 1992. Completion of site storm drains and connection of rain
leaders to the storm drain system was impossible until the second Stop Pump
Order was lifted. After the rescission of the Second Stop Pump Order, storm
drain installation resumed in the third week of November 1992 when a required holding basin was constructed. (Exh. J-1, Tr. vol. II: 294-96) While the
Second Stop Pump Order was pending, connection of rain leaders in the Energy Center and West Wing to the roof drains and connection of me leaders to
the storm drainage or de-watering system was precluded. Rain leaders already installed had to be plugged to insure water would not enter the storm
drains. (Exh. J-1; Tr. vol. II: 295- 96, 309-10; Tr. vol. III: 452)
Clark was never able to operate the installed sock de-watering system; during the releases of the Stop Pump Orders Clark was able to perform limited
de- watering utilizing either an open pump system or a limited, well point dewatering system. SFWMD required revisions eventually resulted in Clark
installing a “well point” system of less capacity than the sock system used in
combination with weirs and holding basins for the site. A well point system is
a series of 25-foot long perforated steel rods driven into the ground every two
feet. The rods come up out of the ground and attach to a large header pipe
lying on the ground. The header pipe is connected to a pump and water is extracted from the ground by means of MIS system. (Exh. J-1; Tr. vol. II: 28595)
Construction Resequencing
As a consequence of the First Stop Pump Order, Clark re-sequenced the job
from the planned horizontal to vertical construction. Consequently, Clark
commenced vertical construction of the West Tower where the foundation
was complete while concurrently, on a limited basis, continuing East and
Center Wing foundation work. The Interim Critical Path Method (CPM)
schedule required by the Contract, still under development at the time the
first Stop Pump Order was issued, was abandoned. The actual, CPM schedule
approved by the VA incorporated the revised construction sequencing. In accordance with the Contract requirements for CPM preparation, this initial
CPM reflecting vertical construction did not reflect actual construction times
related to the first fifteen months of construction. (R4, tabs 299, 500; Exh. J1; Tr. vol. II: 282, 284-85, 321-23)
Clark decided to resequence the construction shortly after the First Stop
Pump Order. However, PKC was neither consulted about Clark’s decision to
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change the construction sequence nor did PKC provide any input into the development of the “vertical” schedule, Clark did not inform PKC of the change
to the construction sequence until October 1991. (Tr. vol. I: 73; Tr. vol. II:
284, 344-47; Tr. vol. III: 475; Tr. vol. V: 835-858)
Clark originally planned to install the prefabricated metal stairs for the
building as each floor went up. Clark did not adjust the delivery and installation schedules for the stairs when it went to vertical sequencing. Consequently, PKC and USM experienced substantial difficulty in moving men and materials between floors because they were required to use unstable site
constructed wooden “ladders” to move from floor to floor instead of having
stairs available. Stairs were installed in the West Tower between mid-May
1992 and mid-January 1993, in the Center Tower between late-June 1992
and mid-December 1993 and in the East Tower between early-November
1992 and late- November 1993. Clark also did not increase the number of
man and material lifts when it went to vertical construction sequencing. This
resulted in all trades, including PKC and USM, experiencing substantial delays in moving its men and materials to work sites on the various floors. (R4,
tabs 1429, 27,506, 27,507; Tr. vol. III: 483-85, 523-24; Tr. vol. VI: 956-57,
1080)
PKC’s “bag and tag” material delivery arrangements were not revised upon
being informed that the construction sequence was changed from horizontal
to vertical. Consequently, to accommodate the vertical sequencing, the containers of materials delivered had to be broken down and material for each
day’s work located and separated by PKC’s crews. This resulted in PKC having difficulty providing materials to its crew necessary to support continual
production and required additional personnel to support material breakout
and conveyance of materials to me production crews. (Tr. vol. II: 427; Tr. vol.
III: 451, 456-57)
The plan for prefabricating pipe and pipe assemblies was essentially abandoned with me sequence change because a prerequisite of the prefabrication
process was completed coordination drawings detailing the exact pipe lengths
and configuration. PKC also lost the use of the old clubhouse as a prefabrication shop for later installations as a result of the sequence change when
Clark demolished it as required. PKC had to piece together its pipe on site; in
particular, the sequence change prevented the prefabrication of large diameter heavy pipe in the Energy Center. (Tr. vol. II: 435; Tr. vol. IV: 662, 737-38)
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From the spring of 1991 to February 1992, PKC and USM were performing
without a plan or schedule, which resulted in substantial confusion of the
PKC workforce and friction between PKC project management and its field
forces. As a consequence, a PKC project manager characterized the PKC labor budget for the job as “going to hell” in 1992. Throughout construction of
the project, PKC did not perform or plan its work based on a schedule. Mr.
Conn, then PKC’s Project Superintendent and later hired by the VA, characterized the manner in which PKC’s work proceeded thusly:
And it just kind of — you know, look out the window and see
where they was going type of thing, because we could never get
a schedule out of them. So we kind of followed Hyman [Clark]
wherever they went.
(Tr. vol. III: 453, 455, 475; Tr. vol. IV: 658-59; Tr. vol. VI: 1067-68)
Roof Installation
The Contract specified a roofing system comprised of a lightweight insulating
concrete roof deck covered by a polyvinyl chloride (PVC) single ply membrane
that was to be fully adhered to the roof deck. The specifications also required
that the installed roof membrane comply with the Factory Mutual (FM) I-90
Windstorm and Underwriter’s Laboratory (UL) Class A Fire Hazard classifications. The specified roof membrane was required to have a felt backing and
was to be adhered to the roof deck with glue. (R4, tab 570; Exh. J- 1; Tr. vol.
II: 300-01; Tr. vol. IV: 627)
Clark made its initial submittal of a “Geoflex” roof membrane system on October 21, 1991; the VA rejected this submittal on December 17, 1991 because
the membrane material submitted was poly isobutylene, not PVC. Clark’s
next submittal for a “Cooley” PVC roof membrane system on January 24,
1992 was also rejected on March 31, 1992. This second submittal was rejected
for multiple reasons, including the failure to comply with FM I-90, improper
thickness of the PVC, and the use of asphalt as the membrane adhesive instead of glue. Various aspects of the “Cooley” roof system were rejected between April and September 1992. The “Cooley” roof system submittal saga
culminated with the VA’s rejection of the system on September 24, 1992. The
VA rejection was based on several aspects of the “Cooley” roof system not being in compliance with Contract specifications. Clark then proposed use of a
“Sarnifil” membrane roofing system in the latter part of September 1992; the
VA approved this submittal at the end of September 1992. Clark’s roofing
subcontractor began roofing installation on October 27, 1992 after the lifting
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of the second Stop Pump Order and connection of roof leaders to storm
drains. (R4, tab 1598; Exhs. A-51; J-1; Tr. vol. VI: 921-28)
FM rescinded its I-90 Windstorm classification of all single ply roof membranes in July 1991; thus, no roof system as specified in the Contract could
comply with the Contract requirements at the time of Contract award. The
FM redssion of the I-90 rating was based on FM adding a hail damage requirement to the standard, a standard a single ply roof membrane could not
meet. The primary VA concern in specifying FM I-90 compliance was resistance to wind lift. At a meeting in June 1992, the VA informed Clark that
it would accept evidence that a roofing system complied with FM I-90 on or
before June 1991 as compliance with the specification, essentially waiving
the hail damage resistance requirement Clark never presented evidence of
the “Cooley” roof system’s pre- June 1991 FM I-90 compliance. (R4, tab 1598;
Exhs. J-1; A-51; Tr. vol. II: 300- 03, 308-09; 368; Tr. vol. IV: 621, 624-26)
Mr. Daniel F. Wilkins, P.E., of the firm Donnel and Wilkins, in an August 28,
1998, report furnished Clark in relation to other appeals relating to the Contract, concluded that the VA roofing specification was a “proprietary” specification that only the Samifil roof system could meet. His conclusion was based
on the fact that only the Samifil fleece backed membrane over lightweight
concrete system had an FM I-90 certification prior to June 91. (R4, tab
28,023)
The lightweight insulating concrete and roof membrane comprising the roof
system could not be installed until roof drains were operational. The roof
drains, plugged during the pendency of the Second Stop Pump Order, could
not be unplugged until the drains could be connected to an operational storm
drainage system. (R4, tab 28,029; Tr. vol. II: 295-96, 343-44, 309-10, 452; Tr.
vol. VI: 994-96)
Roof installation was not on the critical path in the approved CPM schedule
submitted by Clark. The approved project CPM establishes the following
schedule for roof installation:
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Roof
Energy Center
2nd Flr.West(S)
2nd Flr. West(N)
4th Flr. West
Penthouse West
2nd Flr. Center
Basement East
1st Flr. East
2nd Flr. East
3rd Flr. East
9th Flr. East
9th Flr. Center
Penthouse Center
Early Start
3/17/92
3/11/92
4/13/92
4/21/92
5/19/92
10/22/92
10/30/92
11/3/92
11/10/92
12/4/92
8/31/93
9/17/93
10/5/93
Early Finish
4/6/92
3/12/92
4/20/92
4/18/92
5/22/92
10/23/92
11/2/92
11/9/92
12/3/92
12/7/92
9/16/93
10/4/93
10/6/93
Late Start
2/17/94
3/15/94
3/23/94
3/31/94
4/28/94
5/20/94
5/31/94
6/2/94
6/9/94
6/30/94
7/5/94
7/21/94
8/8/94
Late Finish
3/16/94
3/16/94
3/30/94
4/27/94
5/3/94
5/23/94
6/1/94
6/8/94
6/29/94
7/1/94
7/20/94
8/5/94
8/9/94
(R4 tabs 299, 1439; Exh. G-5)
Similarly, installation of storm drains was not on the critical path of the approved schedule as reflected below.
Storm Drains
Area 1
Area 2
Area 3
Area 4
Area 5
Area 6
Area 7
Ramp
Early Start
12/23/91
1/3/92
1/14/92
1/23/92
2/6/92
2/20/92
3/12/92
3/26/92
Early Finish
1/12/92
1/13/92
1/22/92
2/5/92
2/19/92
3/11/92
3/25/92
4/4/92
Late Start
4/28/94
5/9/94
5/18/94
5/27/94
6/3/94
6/27/94
7/19/94
8/2/94
Late Finish
4/28/94
5/17/94
5/26/94
6/10/94
6/24/94
7/18/94
8/11/94
8/9/94
(R4 tabs 299, 1439)
Clark completed installation of the Energy Center roof in late-1992. The West
Tower and lower roofs of the Center Tower were completed in the first quarter of 1993; the second quarter of 1993 saw completion of the lower roofs of
the East Tower. The East Tower high roof was completed in the third quarter
of 1993; the Center Tower roofing was completed by the end of 1993. (Exh. J1)
Wet Conditions
PKC planned to install the cast iron riser piping for the roof drain systems as
the three towers were erected. These risers, pipe of 12” diameter or larger,
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when connected to an operable site storm sewer system, could have been utilized as a temporary method of draining the decks as the building went up.
The temporary drainage could be effected by installing temporary hub drains
on the storm risers penetrating a slab on the slab bottom in order to permit
water on a slab to be channeled to the hub drains as the building went up.
This channeling would be accomplished by placing sand bag “dikes” on a slab
and using labor to “squeegee” water between the dikes to the temporary hub
drains. PKC, by the testimony of Mr. Spors, PKC’s project manager, asserts
that it planned to utilize the risers as temporary deck drains in this manner.
However, there is nothing else in the Record supporting Mr. Spors/ assertion
nor is there evidence mat such temporary drainage was ever proposed during
performance. In addition, the risers penetrated the slabs through sleeves constructed into the concrete deck. These sleeves protruded above the slab; the
protruding sleeve would result in a residue of water left on the deck even if
temporary hub drains were employed. (Exhs. A-40, A-50; Tr. vol. I: 61-62, vol.
II: 296-99, 419, 428, 508-12, Tr. vol. III: 507-17, Tr. vol. VI: 938-48, 1070; Tr.
vol. VII: 1202-18)
While the Stop Pump Orders were in effect, storm risers in the building could
not be made operational because either the site storm drains could not be installed or, if installed, the rain leaders could not be connected to them. This
lack of operability of the storm risers meant that, once the building was
topped out, there was no place to drain the water. If storm drains, including
the storm risers in the building and the underground storm lines, are operational, water can be channeled off the roof deck into storm drains even if the
roofing membrane system is not installed. If the water can not be directed off
the floor and roof decks and into the storm drains, water stays on site contributing to muddy site conditions and water dripping through the building.
(Tr. vol. II: 295-6; Tr. vol. VI: 1097)
For a substantial part of the year, West Palm Beach experiences neartropical conditions resulting in substantial, almost daily rain. Winter months
generally include rainy periods but the other months exhibit tropical conditions with rain to be expected nearly every day. Rainwater dripped onto the
workers through cracks in the slabs and through penetrations built into the
slabs for various utilities. As water dripped down from above, it would eventually pool in the depressed slabs located in the basement of all three towers
of VAMC West Palm. The standing water on the depressed slabs caused PKC
labor to have to take care with its power cords to keep them out of the water
and, at times, prevented layout work. (R4, tabs 27,538, 27,541; Tr. vol. I: 61,
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108-109; Tr. vol. II: 428-29,432; Tr. vol. III: 507-23, 529-38; Tr. vol. IV: 67376)
The inability to de-water the site persisted until the Second Stop Pump Order
was lifted. This inability to de-water meant that site conditions outside the
building were mucky during a substantial part of PKC’s and USM’s work.
These conditions caused both USM and PKC logistical problems. PKC could
not stop deliveries of equipment for the Energy Center air handler units,
boilers and chillers, and fuel tanks. However, PKC was prevented from installing underground piping, tanks and mechanical equipment, or erecting
the cooling tower in and around the Energy Center as planned. As a result,
material and equipment had to be stored on site, and later moved a second
time to the place of installation, which resulted in a double handling of material. This material and equipment had to be stocked on-site in a mucky area.
(Tr. vol. III: 445-49, 518-19, 544; Tr. vol. IV: 655)
USM was forced to bring a separate four-wheel drive vehicle on site because
the mucky ground prevented trailers from getting close enough to the building for hoisting of the main trunk lines. USM’s planned performance method
was to bring prefabricated ductwork directly to the building for immediate
lift to the installation location in the building. This circumstance lasted for
over a year until the site de-watering and storm drain systems were completed. Forced to store its materials, USM had to store it on blocks because there
was standing water in the building. USM was required under their union
agreement to employ union sheet metal workers for material handling, i.e.,
unloading trucks and moving materials into place. (Tr. vol. I:107-109, 191193)
Due to problems with other Clark subcontractors, there were delays in installation of exterior concrete panels and windows and in making the building
watertight. This also contributed to wet conditions in the building. PKC regularly complained to Clark because of water dripping in the building. A method routinely employed by contractors to reduce the impact of water dripping
from slabs above is to temporarily seal penetrations on the deck above with
mastic and plywood. Though PKC proposed such temporary sealing measures
to Clark, neither Clark nor PKC ever undertook to implement these or other
measures to mitigate water intrusion. Mechanical contractors normally expect to work in wet conditions since the majority of their work usually is accomplished prior to a building being made watertight. Mr. Spors of PKC testified that, while PKC anticipated working in a “minimal” amount of water, it
expected 75% of its work to be accomplished with the roof installed and the
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roof drains operational. (R4, tab 72; Tr. vol. V: 886-909; Tr. vol. VI: 936, 106870, 1095- 97; Tr. vol. VII: 1213-15)
Coordination Drawings, Construction Sequence and RFIs
Clark was obligated under the Contract to coordinate the work of its subcontractors. This coordination included the production of “coordination drawings”
in which the various construction trades detail the exact location and configuration of their various installations. Because its installations are generally
the largest and least flexible, PKC had the responsibility to first detail the
coordination drawings. In early 1991, PKC, USM and Clark agreed upon a
coordination drawing schedule to complete coordinated drawings for the duct
work and piping on a floor-by-floor, west to east, horizontal basis starting at
the Energy Center. This schedule, as is usual, anticipated that the coordination drawings would be prepared in the same sequence as planned for construction and would result in the coordination drawings being completed prior to work beginning in any part of the building. Coordination drawings for
each floor and each interstitial space were required. PKC and USM intended
to complete their drawings by USM preparing background drawings locating
its ductwork. The next step would be for PKC, utilizing the background drawings, to locate its piping work on each of the interstitial floors and the mechanical rooms. PKC would also be able to check for conflicts between its piping and USM’s ductwork. Thereafter, the coordination drawings would be
provided to Clark’s other subcontractors for them to locate the installation of
their work. The coordination drawings, in addition to being required by the
Contract, were critical to the efficient progress of the project. (Exh. A-35; Tr.
vol. I: 46-47, 66-7, 100-02; Tr. vol. II: 415-16, 422 324; Tr. vol. III: 450; Tr. vol.
IV: 631, 633-34; Tr. vol. V: 855-57)
USM planned on a six to seven month effort for coordination drawings; PKC
anticipated a six to eight month effort. It was planned that the PKC and
USM coordination drawing effort would be accomplished beginning in March
1991 and ending by January 1992. USM’s coordination drawing effort required 18 months; PKC needed almost 24 months to complete its effort. PKC
expected that its coordinated drawing effort would be completed prior to any
actual duct or pipe installations taking place. Fully completed and approved
coordinated drawings were necessary because USM planned to have the spiral duct sections to be used in the project shop cut to length. USM’s spiral
duct supplier had a 6-8 week lead time requirement for the custom cut spiral
duct. (Exh. J-1; Tr. vol. I: 87, 98-100; Tr. vol. II: 264; Tr. vol. IV: 661-64, 671,
766-7, 808)
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The construction sequencing drove the sequence of coordination drawing
preparation because PKC and USM had to design openings in floor slabs for
its installations and needed complete interstitial space drawings prior to the
slab or interstitial deck being poured, m addition, PKC needed the equipment
to be installed so that measurements for prefabricated pipe in the energy center could be taken. (Tr. vol. I: 100-103; Tr. vol. II: 414, 419)
Clark initiated a total of 3,019 RFIs (612 per year) during the course of the
project. It would be reasonable to expect around 1,000 RFIs per year on a project of the size and complexity of the VAMC West Palm project. RFIs related
to the scope of PKC’s work were designated as mechanical (M) or plumbing
(P) RFIs. RFIs related to Contract changes carried a (X) designation. There
were 330 M, 386 P and 34 X (a total of 750) RFIs relating to PKC’s and
USM’s work during the project. Most of the PKC related RPIs were generated
during the course of the USM and PKC primary coordination drawing effort
in 1991 and 1992. (Exhs. A-42, J-1; Tr. vol. I: 98; Tr. vol. II: 255)
There is no Contract provision wherein the VA represents any specific length
of time it would take to respond to an RFI. Mr. MacClugage, the PKC Project
Manager, asserts that representatives of Clark told him that the VA had
committed to respond to RFIs within 14 days. Consequently, PKC represents
that anytime an RFI response exceeded 14 days, the response time is excessive. The VA responded to 26% of M and P RFIs within the time requested in
the RFI. The VA’s failure to respond to most M and P RFIs within 14 days
forms the basis of PKC’s general characterization of the VA’s RFI response
time as excessive. (Exhs. A-38, A-42, J-1; Tr. vol. IV: 664-65)
Generally, there were no personnel from the VA’s architect-engineer (A/E) on
site. The VA forwarded most RFIs on the project to the A/E for resolution. In
contemporaneous correspondence and evaluation, the VA characterized the
A/E’s RFI response time and me quality of the responses to RFIs as “inadequate” and rated the A/E’s performance during the construction period as
poor. (R4, tabs: 28,027, 28,069, 28,071, 28,075; Tr. vol. IV: 742)
In 1991 and 1992, USM encountered various conflicts in the drawings between sheet metal duct work shown and the architectural and structural features of the building or manufacturers’ requirements. These conflicts, particularly conflicts between drawing locations of equipment and components to
be placed in ducts and locations specified by the equipment manufacturers,
which became the subject of various RFIs, prevented USM from completing
its coordination drawings until late-1992 when the RFIs were resolved. There
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were 138 USM initiated RFIs, a number that USM’s Project Manager does
not believe was excessive for a project the size of VAMC West Palm. (Exhs. Al-18, A-37, A-38, J-1; Tr. Vol. I: 104, 121, 180-83, 168-69; 227-28; Tr. vol. II:
238-41; Tr. vol. III: 582-86)
The change of construction sequence and the VA’s inability to respond quickly to RFIs affected PKC/USM coordination drawing preparation. When the
construction sequence changed from horizontal to vertical, USM was forced to
redirect the background and coordination drawing effort that it had already
begun. It could not complete those drawings because its RFIs, particularly
the duct component RFIs, were not being answered. As a consequence, PKC
was forced to prepare its coordination drawings independent of USM because
USM had to catch up on the background coordination drawings. To accomplish this, PKC engaged the services of an outside drafting company to do its
coordination drawings, including adding the background ductwork. (Exhs. A37; A-38; Tr. vol. I: 121, 156; Tr. vol. II: 238-40, 257-64, 438; Tr. vol. III: 45868, 526, 547-50, Tr. vol. IV: 663-67, 806)
In addition to the duct component spacing problems, there were several other
specification and drawing conflicts that impacted USM coordination drawing
efforts. There was insufficient space (height) provided in the acoustical ceiling plenum to make necessary offsets required to accomplish coordination.
The grills for the HVAC reflected in the contract ceiling plans were not coordinated with the location of the variable air volume (VAV) boxes in the interstitial spaces. Ductwork shown on mechanical drawings could not be installed
in the general locations designated due to interference with precast beams
and joists. The location of fume hoods for laboratory and kitchen appliances
conflicted with the architectural locations of the equipment shown on the architectural plans for kitchen and wet labs. (R4, tab 28,066; Tr. vol. I: 161-63,
196-98, 200-05, 220-21)
PKC’s coordination drawing effort was similarly impacted by the identification of various conflicts between architectural, structural and mechanical
drawings. PKC initiated 612 RFIs. PKC identifies 122 of these RFIs as impacting its work or coordination drawing efforts. 67 of the 122 “impacting”
RFIs resulted in 40 Contract change orders. The “impacting” RFIs were identified by Mr. MacClugage by his preparation of spreadsheets based on his review of the Contract RFI file. On the spreadsheets, Mr. MacClugage noted
the identity of the RFI, his assessment of the response time to the RFI and
whether the time was excessive, his conclusions regarding the working crew
or coordination drawing effort affected or disrupted, the area affected and
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whether an FCO resulted from the RFI. From his spreadsheets, Mr. MacClugage prepared a summary identifying the RFIs that impacted productivity. This summary identifies some major issues relating to the delayed RFI
responses affecting coordination drawing preparation. The Contract mechanical drawings showed piping locations which were not coordinated with the
structural drawings and resulted in numerous RFIs that occurred from the
fall of 1991 through 1992. The more than two month average RFI response
time to resolve these issues disrupted the coordinated piping drawing effort
throughout the lower four floors of the West, Central, and East Towers. Because of conflicts between the mechanical and the architectural design, the
locations of the cast iron risers interfered with various architectural features
and disrupted PKC’s coordinated drawing efforts. (R4, tabs 28,067, 28,063;
Exh. A-42; Tr. vol. II: 327-31, 437-40, 452- 446; Tr. vol. III: 547-88; Tr. vol. IV:
661-707, 744-57, 761-77)
Average RFI response times for significant PKC initiated inquiries were:
Issue
Structural Dimension Conflicts
Storm Riser Conflicts
Fixtures With No Utility Services Identified
Telecar Conflicts
Medical Gas System Conflicts
Drain Conflicts
Pipe/Ductwork/Conveyor System
Spatial Conflicts
Special Area/Systems Conflicts
Pipe Riser Wall Dimension Conflicts
Days
38
71
76
235
63
67
112
61
55
USM estimated that the average response time for RFIs it initiated was 4550 days. (Exhs. A-37, A-42; Tr. vol. IV: 728-29, 741, 760, 773)
The Government’s expert, Ms. Sisk, acknowledged that Mr. MacClugages’
spreadsheets accurately reflected the RFIs on the project, the response times,
and the areas, systems or work tile RFIs may have affected. Ms. Sisk also
acknowledged that delayed RFI responses could cause impact to labor
productivity and coordination drawing preparation. (Tr. vol. VII: 1152, 1194)
Clark, at various times during the project, complained of PKC’s and USM’s
dilatory or inaccurate coordination drawing efforts, particularly because PKC
was holding up the work of Clark’s electrical subcontractor. These problems
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occurred early in the effort as PKC was transitioning to the vertical sequence
after Clark informed it of the change, Clark’s failure to adhere to the vertical
sequence CPM also affected the continuity of the PKC/USM coordination
drawing effort because of the need to have the drawings completed before
starting work. (R4, tabs 27,522, 27,529, 27,531, 27,549; Tr. vol. III: 433, 455,
475, 593-600; Tr. vol. IV: 658-59; Tr. vol. VI: 1075-68)
RFIs and Work Disruptions
PKC asserts that 260 of 750 RFIs initiated relating to PKC’s and USM’s work
adversely impacted labor efficiency. 138 of the RFIs impacted USM and 122
impacted PKC. The impact, as characterized by Mr. MacClugage and Mr.
Tammaro in their testimony, encompassed by these RFIs is summarized in
this section. (Exhs. A-37, A-38, A-42; Tr. vol. I: 122-24; 147-54; Tr. vol. III:
679-87)
The Contract specified open louvers in the mechanical rooms. The open louvers resulted in rain intruding into the mechanical rooms. This circumstance
was corrected by change order to USM in 1995. The open louvers affected
USM labor productivity during its installation of the ductwork in the mechanical rooms in 1992-1994 because USM was forced to use battery powered
tools rather than directly connected cords to perform the installations because of standing water. (Tr. vol. I: 224-27)
Design conflicts in wall locations and dimensions disrupted USM and PKC
installations causing inefficiency in coordinating the work and installation.
Numerous piping sleeves and piping, chair carriers, and other plumbing
components would not fit into the wall partitions and wall chases depicted on
the Contract drawings. Where partition walls were in corridors, adjacent to
bathrooms, or adjacent to case work, labs, operating rooms, and locations
where room dimensions were critical, the piping and plumbing components
had to be relocated. Wall relocation was not permitted without the VA’s approval. Many of the walls could not be relocated because of code requirements, such as those in the bathrooms, requiring strict specification compliance. The corridor walls also could not be moved because the hallways were
required to have a minimum width of eight feet. Where there was an ability
to change the dimensions of the partitions, the partitions would be furred out
to accommodate the piping and/or sleeve by the drywall subcontractor. Where
the wall could be moved (room to room), the wall relocations also necessarily
required the relocation of ceiling air devices from the locations shown on the
approved coordination drawings or reflected ceiling plans. For instance, with
respect to me installation of linear diffusers in the operating room, the VA
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did not provide a response to USM’s RFI, but only noted that they anticipated
conflicts. As a result, and because the location of room walls was being determined in the field, USM had to coordinate installation of the diffusers in
the field requiring, in some instances, the layout of the ceiling grid pattern on
the floor first in order to determine where USM could install its difusers. In
some cases, USM would have to install additional fittings or flexible connections to connect ducts to diffusers. A similar problem with diffuser locations
resulted from the conflicts surrounding the medical gas installation. Problems with wall location and dimensions continually required the direct attention of USM and PKC supervision to coordinate the work with the other
trades and the VA in the field and reduced PKC’s and USM’s crew supervision. These problems occurred mostly on the basement through fifth floor levels. Amendment Two to the IFB modified Paragraph 3.1 of Specification Section 09100, “Non-Load Bearing Framing System,” to include the following
subparagraph:
C. Contractor to thoroughly coordinate the sizes of pipe, insulation,
conduit, etc. with available wall thicknesses and increase wall
thicknesses, as needed, at no additional cost to the Government.
(R4, tabs 69, 500-05; Exhs. A-l-A-18, A-37-A-38, A-42, J-1; Tr. vol. I: 107- 225;
Tr. vol. II: 327-31, 437-39; Tr. vol. IV: 644-46, 688-707, 744-58)
Submitted and approved HVAC components did not fit into the mechanical
equipment rooms (MER) if they were installed in accordance with the manufacturer’s recommended spacing. Three RFIs, affecting 90% of the MERs, relating to the component spacing issues, were not resolved for over a year.
USM had to separately calculate the location for every component and obtain
the A/E’s approval of the locations in each mechanical room without being
able to prepare coordinated drawings. The component spacing issues directly
affected on-going work in three MERs. Component spacing questions were
resolved prior to initiation of work in other MERs. (Exhs. A-l - A-18; Tr. vol. I:
166-69, 180-83, 188-89; Tr. vol. III: 582-86; Tr. vol. IV: 647; Tr. vol. VI: 104348)
Fume hood redesign in the kitchen and wet labs in the basement and the first
floor of the West Tower and in the basement area of the Central Tower and
the late issuance of corrective RFIs or changes resulted in hood installation
being performed in a piecemeal fashion well after when they were planned to
be installed. (Tr. vol. I: 196-98; Tr. vol. III: 554-61)
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Installation of duct work and piping work was disrupted by changes, revisions, and omissions in the mechanical work shown for the Canteen and other food service areas on the first floor of the West Tower. The uncertainties
related to the installations in the Canteen continued through 1992 and 1993
until the VA finalized the Canteen design. (Tr. vol. I: 172-80, 189-90; Tr. vol.
III: 556-61, 565-66)
Late RFI responses, in some cases, required PKC to return to an interstitial
space after the majority of installations in the space had been installed. Work
in the now much more crowded interstitial spaces was substantially more difficult and less efficient. (Tr. vol. III: 560)
Contract design conflicts between the mechanical and the architectural design resulted in cast iron risers interfering with various architectural features. These conflicts disrupted PKC’s piping installation because of tardy
response to RFIs seeking the VA’s directions regarding resolution of the conflicts. In many cases, PKC had to relocate crews to other tasks and work areas pending receipt of RFI responses. (Exh. A-42; Tr. vol. II: 326-31, 435-40,
452-63; Tr. vol. III: 547-49, Tr. vol. IV: 678-73, 688-96)
As shown in the Contract, the medical gas system did not comply with applicable codes and conflicts existed on the Drawings between the medical gas
system and architectural elements. The resulting RFIs and changes were not
resolved until 1993, well after medical gas piping would ordinarily have been
installed. Consequently, the medical gas piping had to be installed in a
piecemeal manner. When resolution of the medical gas issues were finalized,
PKC had roughed-in approximately half of the medical gas installation.
Therefore, PKC had to re-work the medical gas system. Additional problems
arising out of the medical gas changes were caused by the A/E’s modification
drawings being on 8 1/2 × 11 sheets of paper, which created the need for additional coordination and installation effort. (R4, tab 27,884; Exh. A-42; Tr. vol.
III: 554-56, 586-88, 596-98; Tr. vol. IV: 707-17; Tr. vol. VI: 1073-74)
The VA frequently changed the Government-furnished equipment to be installed by PKC from that specified in the Contract. This equipment included:
radiology/x-ray equipment, laboratory equipment, sterilizers, scrubbers, hydrotherapy tubs, kitchen equipment and hoods, operating room equipment
and other specialized items. These changes, and RFIs clarifying the changes,
occurred throughout 1992, 1993 and 1994 and affected PKC’s effort in the areas where this equipment was located, basement through fourth floor in the
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West, Central, and East Towers. (Exh. A-37-38, A-42; Tr. vol. I: 172-73; Tr.
vol. III: 477-74, 563-65, 566-76, 550-88; Tr. vol. IV: 650-76, 715-16, 768-70)
Dental lab gas and vacuum systems conflicts engendered RPIs and prevented
PKC from roughing-in the service boxes to serve the dental clinic in normal
sequence until the RFIs were resolved. PKC had to return to dental clinic
clinic areas to complete installation when the VA determined the location of
the dental service boxes. Also, every kitchen equipment item on the first floor
of the West Tower and the Basement of the Central tower had an RFI associated with it and none of the equipment could be installed according to the
Contract drawings. In the Canteen area on the first floor of the West Wing,
kitchen equipment was changed several times. A year after the work in the
Canteen area was completed, PKC and USM had to return from the fifth floor
of the East Wing to implement changes. (R4, tabs: 28,034, 28,052; Tr. vol. III:
556-76, 576-78; Tr. vol. IV: 761-70; Tr. vol. VI: 1051-53, 1072)
PKC’s work in Hydrotherapy Rooms was disrupted by VA changes. Hydrotherapy tub rooms were located on lower floors and then two rooms per ward
on the upper floors. After three rooms had been finished on lower floor West,
VA totally changed the rooms requiring PKC to return to the rooms and move
all rough-in work and drains after ceramic tile was in place. (Tr. vol. III: 577582)
In many rooms of the Wet Laboratory areas in basement and first floor of the
West Tower, PKC had to omit rough-in work, resulting in PKC’s installations
“hop-scotching” through the areas. PKC would install work in one room, but
not the adjacent room. Later, PKC had to come back into the area to install
work in the omitted rooms. (Tr. vol. III: 554-56; Tr. vol. IV: 652-53, 707-09,
770)
Storm drain risers in the West tower had conflicts with closets, showers and
other architectural features. Until the conflicts were resolved, PKC could not
install the riser on that floor, or on any of the floors above. (Tr. vol. IV: 72829)
There were approximately 20 ice machines in the hospital, one at each nurse
station. The Contract design omitted domestic water service, waste piping
and electrical service. By the time the VA issued a change order to have PKC
add domestic water and waste piping, the areas in the West Tower and on the
lower floors had already been roughed-in. This required PKC to pull a crew
from another area to rough-in the ice machine piping. (Tr. vol. IV: 738-40)
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Telecars ran through the interstitial space along a track. The telecar system
was not shown on the mechanical drawings. The system was intended for
transfer of specimens and materials throughout the hospital. Clearance within the interstitial space was required to accommodate the track, the car, the
tray that sat on top of the car and a clear space above the tray to a height sufficient for the specimen jars. In several instances, the telecar system conflicted with pipe installations in the interstitial space. (Exh. A-42, Tr. vol. IV:
757-60)
Drains specified for the roofs and patios, as well as for air handler units in
the mechanical rooms were not proper. The VA delayed in responding to
PKC/s inquiry regarding the drains, resulting in PKC ordering the proper
drains unassembled or “bagged and tagged.” This required PKC to expend
labor to assemble and install the drains. There was a conflict in place regarding steam trap assemblies. The Contract drawings for the Energy Center detailed a particular steam trap; the drawings for the rest of the HVAC system
did not detail the steam traps. In response to PKC’s RFI seeking information
on the non-Energy Center steam traps, the VA directed PKC to install all
steam traps as detailed on the Energy Center drawings. PKC received an equitable adjustment for the extra cost of material and labor to install the
steam traps. PKC was not paid for the costs of assembling the drains in the
field as opposed to assembling the drains in its on-site prefabrication shop.
By the time the VA provided its response to the RFI, the on-site prefabrication shop had been torn down. (R4, tab 28,050; Tr. vol. III: 467; Tr. vol. IV:
717-21, 732-38)
During the coordination drawing process, PKC submitted numerous RFIs
where piping shown on the contract drawings could not be installed due to
structural obstructions (pre-cast beams and joists). This was particularly a
problem on the lower floors of West, Central, and East Towers. PKC could
make minor adjustments to pipe location in the interstitial spaces if the piping remained in the designated zone. If piping had to be moved from an interstitial zone, VA approval was required. In several instances, PKC could not
easily relocate the pipe, even with the VA’s approval, because it was a gravity
drain system. In order to maintain gravity flow, PKC had to lower the main
as well as the branch piping. VA responses when notified of these conflicts
sometimes took months, requiring PKC crews to skip the affected areas and
move to other places, only to have to return to the areas to complete the piping systems. Amendment One to the IFB modified the end of Paragraph 3.1
of Specification Section 15840, “Ductwork and Accessories” to include the fol-
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lowing language: “Provide offsets as required to avoid conflicts.” (R4, tabs 69,
500-05, 27,518; Exh. A-42; Tr. vol. II: 452-57; Tr. vol. III: 528; Tr. vol. IV: 63132, 688-707)
The identity of boiler and incinerator exhaust piping was transposed in various sections of the Contract drawings. The two pipes were different size and
boiler exhaust piping was relatively lightweight while incinerator exhaust
was relatively heavy; thus, the location of each pipe was important because
the method of supporting the piping as it went up through the building differed for each type of exhaust. The VA did not definitively respond to what
was tabbed as the “boiler breaching” RFI for approximately two years. Although the sections of drawings transposed the labeling of the exhaust pipe,
the size could be discerned and the right location could have been discerned
from the drawings. The pipe installation was performed without problem after some required changes relating to stairwell and chase construction were
resolved. (R4, tab 27,555; Tr. vol. III: 351-53, 591-92, 600-01; Tr . vol. VI: 94951, 1032-34)
PKC compared the actual count of cast iron fittings installed in the interstitial spaces of the first floor of the Center Tower and seventh floor of the East
Tower to the number of fittings shown on the Contract Drawings for those
locations. Extrapolating from this analysis, PKC estimates that it installed
39% more “change of direction” cast iron pipe fittings than shown on the Contract drawings throughout VAMC West Palm. (R4, tab 28,012; Exh. A-36; Tr.
vol. IV: 771-81)
PKC’s work force at the site averaged approximately fifty during 1992 and
1993. (R4, tab 28,012; Tr. vol. IV: 658)
Mr. MacClugage testified that PKC would normally expect to complete its
installation in two “passes” through an area, the first pass was the rough-in
phase and would include 95% of the required work and the second pass would
be a finish phase. According to Mr. MacClugage, PKC was able to complete
only two thirds of the work in its initial pass through an area at VAMC West
Palm and that three to four additional passes were required to finish an area
because of the RFI and change problems. (Tr. vol. IV: 671, 702, 768-70; Tr.
vol. V: 862)
Contract Administration
Included in each executed Supplemental Agreement (COSA or FSA) modifying the Contract, was the following language:
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F. This supplemental agreement constitutes full and complete
compensation due the contractor for all costs, direct and indirect,
resulting from the modification set forth herein with exception of
the Reservation set forth below:
Exception
We, The George Hyman Construction Company, General Contractor, expressly reserve the right to claim for disallowed processing costs and compensation, time or both arising from the
impact of this change, alone or in combination with other changes, on unchanged work, or in other changes.
The above reservation shall serve only to preserve the Contractors right to submit claims as specified. It shall not be construed
to constitute evidence of an agreement between the Contractor
and the Government as to the meaning of “impact” or the allowability of any claims, nor shall it be considered in any manner to
constitute a waiver of the limitations on overhead, profit, and/or
fee otherwise applicable to the Contractor and subcontractors at
any time through the provisions of this Contract.
(R4, tab 495)
The purpose of this language was to reserve Clark’s claims for constructive
changes and impacts from labor disruption and inefficiencies. (Tr. vol. I: 232;
Tr. vol. II: 333-36; Tr. vol. IV: 736-37)
The VA refused to pay equitable adjustments for additional coordination
drawing efforts, alleging that any disruption and piecemeal performance of
coordination drawings fell within Clark’s “contractor coordination” responsibilities. Similarly, the VA rejected most requests for equitable adjustments
for the labor and material costs of rerouting USM and PKC installations
around structural members and other disruption labor costs for the same
reason. (Tr. vol. I: 180-83; Tr. vol. IV: 735-37)
Except for COSA I-K (Acceleration of Plumbing Fixtures and Trim Out for
Early Occupancy of West Tower Office Space in late 1993 and early 1994) and
COSA I-L (Acceleration of Plumbing Fixtures, Trim Out and Balancing for
East Tower Early Occupancy in late 1994 and early 1995), no change order
compensated PKC or USM for disruption, inefficiency or impact costs to the
base contract work for the effects of any change. The VA and PKC met to dis118
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cuss change order pricing methodology in early 1992. In the meeting, it was
agreed that PKC would use the Mechanical Contractors Association of America (MCAA) Bulletin 58 as the estimating manual to establish the unit labor
for the extra work. USM utilized a different estimating guide in pricing extra
work and its prices were based solely on the per pound installation costs of its
additional work. The VA stated that PKC would only be paid for the cost of
the changed work itself, and that impact costs would not be paid. As a result,
Clark included a reservation of rights in every bilateral change order. (Exh.
J-1; Tr. vol. I: 83, 85; Tr. vol. IV: 735-37)
PKC used MCAA Bulletin No. 58 to estimate the effects and impact of the
acceleration that was part of COSAs I-K and I-L. The MCAA factors were the
basis of the negotiated amounts for labor productivity losses for fixture installation, trim out, and balancing mechanical activities in the areas accelerated for COSAs I- K and I-L. (Exh. J-1; Tr. vol. I: 174-76, 232; Tr. vol. IV: 73537)
The VA has not questioned the overall quality or efficiency of PKC’s and
USM’s performance. PKC and USM performed in a competent and reasonable
manner and complaints of the quality, timeliness of their work or the skill of
their workforces were minimal. (Tr. vol. V: 887)
Included as part of claims submitted by Clark to the VA totaling $10,027,812
in November 1995 and May 1996 and denied by the VA, were PKC’s and
USM’s claims for equitable adjustment totaling $916,958. The Board, in
Clark Construction Group, Inc., VABCA Nos. 5673 et. al., 99-1 BCA ¶30,128,
held that PKC (including USM) claims for labor inefficiency were included in
Clark’s November 1995 and May 1996 claims. At the request of the parties,
the Board, on November 4, 1998, redocketed the appeals relating to the Contract. The instant appeal (VABCA-5674), denoted as “Poole & Kent Inefficiency”, was one of those redocketed appeals. All the appeals relating to the
Contract, save this appeal, were ultimately settled by the parties, Clark further definitized the PKC/USM inefficiency claim in the amount of $1,764,000
in July 1998. (R4, tabs 27,965- 97)
Quantum
Introduction
The PKC claim for labor inefficiency is based on analyses prepared by Mr.
MacClugage, PKC’s project manager who arrived on site in January 1992 and
PKC’s expert, Mr. Stynchcomb, of the causes and quantity of the labor hour
overrun on the project and the PKC’s and USM’s excess costs of preparing the
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project coordination drawings. Mr. Stynchcomb utilizes information developed or provided by Mr. MacClugage, PKC’s project manager for PKC’s
claims and Mr. Tammaro, USM’s senior project manager for USM’s claims in
his analyses to arrive at the amounts attributable to the VA caused labor
productivity losses.
Mr. Stynchcomb utilizes three separate methodologies: Measured Mile Analysis; MCAA Method; and. Modified Total Cost Analysis to arrive at the
amounts for which the VA is allegedly liable. Mr. MacClugage performed
Measured Mile and MCAA analyses to arrive at his determination of PKC’s
productivity losses. The VA’s experts, Ms. Sisk and Mr. Lowe contest Mr.
Stynchcomb’s assessments. These Findings of Fact pertaining to quantum
will deal with the specific issues and elements relevant to a quantum determination.
PKC Bid
PKC’s proposal to Clark was 1.5% more than the low proposal and 2.5% less
than the third low proposal. Based on the fact that the other two proposers
were two of the largest and most experienced (other than PKC) mechanical
contractors on the East Coast, his personal knowledge of one of the other
proposers bidding procedures and techniques and the fact that PKC did not
experience an overrun of its estimate for materials, Mr. Stynchcomb determined that the PKC bid to Clark, including amounts included for the work of
USM, was reasonable. The VA has not contested the reasonableness of PKC’s
bid. (Exh. A-19; Tr. vol. I:39; Tr. vol. IV: 886-87)
Labor Rates
At the hearing the parties stipulated to the following hourly labor rates:
PKC Productive Labor
PKC Foreman
USM Mechanic
USM Foreman
$19.47
23.09
25.78
32.65
(Tr. vol. IV: 810-13)
PKC incurred foreman labor at a rate of 17% of craft labor in the VAMC West
Palm project; therefore, PKC’s composite hourly labor rate for the project is
$20.08. USM’s composite hourly labor rate is $26.46 based on a rate of supervision to craft labor of 10%. (R4, tab 20,814)
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Incurred Labor
PKC expended a total of 286,632 hours of direct labor, including change orders and supervision, to complete its work. PKC estimates its change order
labor hour total as 19,850, a figure uncontested by the VA. Thus, PKC expended 266,782 labor hours to complete base Contract work at VAMC West
Palm. Originally estimating that 181,974 labor hours would be required, PKC
expended 84,808 labor hours more than anticipated to complete its base Contract work. PKC estimated mat it would incur 91,000 hours of labor in the
period of July 1991 to November 1992, the period during which exterior site
conditions were affected by the Stop Pump Orders. (R4, tab 28,012,28,014;
Exhs. A-43, J-l; Tr. vol. IV: 696-798, 802-6)
USM estimated that a total of 53,004 labor hours would be required for the
work at VAMC West Palm. USM expended a total of 69,053 labor hours for
the project. Of that total, 3,233 hours were incurred for change order work.
This results in USM overrunning its base Contract labor hour bid estimate by
12,816 labor hours. This results in a combined PKC/USM labor hour overrun
of 97,624 labor hours for completion of base Contract work at VAMC West
Palm. (R4, tabs 265, 28,015-16, 28,018, 28,021; Tr. vol. I:142; Tr. vol. II: 265)
Measured Mile Analysis
A measured mile analysis compares work performed in one period not impacted by events causing a loss of productivity with the same or comparable
work performed in another period that was impacted by productivity affecting events. PKC’s measured mile analysis was accomplished by the collaboration of Mr. MacClugage and Mr. Stynchcomb. The analysis applies only to the
PKC portion of the claim. Mr. MacClugage, under the direction of Mr. Stychcomb, evaluated the original contract drawings and PKC’s labor reports to
establish the lineal feet of different piping installed and the man-hours necessary for the installation (i.e. the productivity rate). The actual lineal feet of
piping was determined by PKC personnel doing detailed take-offs from the
Contract drawings and providing that information to Mr. MacClugage. The
analysis compares productivity rates for installation of four piping systems
(domestic water, interstitial heating hot water, medical gas and cast iron
drain, waste and vent) on the first floor with the installation productivity
rates for sixth or seventh floors of the main hospital structure. The productivity rates are expressed in the number of feet of the various piping installed
per man-day. PKC also compared the underground piping work for the hospital with the underground work for the nursing home which was adjacent to
VAMC West Palm. Clark was awarded a separate contract for construction of
the nursing home in 1993 and PKC was also the mechanical subcontractor for
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that project. The underslab utility work for the nursing home was similar to
(although less complicated or extensive than) the work on VAMC West Palm.
The nursing home underslab work was performed according to plan since site
de-watering problems had been resolved by the time the construction took
place and the nursing home site was at a substantially higher elevation than
the VAMC West Palm site. The first, sixth and seventh floors were chosen
because installations on the first floor were accomplished in a period allegedly substantially affected by water and RFIs while the sixth and seventh floor
installations were relatively unaffected by water or RFIs. The underground
piping analysis compared productivity rates for installation of such work at
VAMC West Palm with rates for installation of underground piping in the
nursing home built adjacent to VAMC West Palm, a project separate from
VAMC West Palm. This comparison was made because the nursing home underground piping installation was not impacted by de-watering problems and
the nursing home was immediately adjacent to the main hospital building.
Overall, however, there was no unimpacted area or time on the project to establish a baseline for the measured mile analysis; therefore, PKC used a lesser-impacted area (sixth and seventh floors) as the baseline. (R4, tab 28,012;
Exh. J-l: Tr. vol. IV: 781-785, 791-94; Tr. vol. V:835-86, 869-71; Tr. vol. VII:
1104-05, 1162)
PKC selected the first and seventh floors for its measured mile analysis because, in Mr. MacClugage’s assessment, the first floor is representative of the
relatively heavily impacted basement through fifth floor portion of the project
and the seventh floor is representative of the relatively unimpacted sixth
through ninth floor portion. For one piping system analyzed (heating hot water), Mr. MacClugage compared the first and sixth floors because he found
that PKC had improperly coded its seventh floor work which prevented him
from determining the number of manhours actually expended to install the
heating hot water system on that floor. Mr. MacClugage also “adjusted” the
first floor actual man-day per lineal foot rates. The adjustment was made because the installations on the first floor involved more and larger pipe and
fittings and the adjustment was necessary, in Mr. MacClugage’s view, for accurate comparison of productivity rates between the floors. The record contains neither Mr. MacClugage’s adjustment methodology or calculations. Mr.
MacClugage determined a percentage inefficiency factor for the first floor installations dividing the difference of the lineal feet/man-day productivity rate
between the first and sixth or seventh floor by the sixth or seventh floor
productivity rate. The underslab utility inefficiency factor was determined by
applying the same methodology as that used for arriving at the inefficiency
factor in the main hospital and comparing main hospital underground
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productivity rates to the rates for the Nursing Home Rate. Adjustments to
the nursing home productivity rate were made in reaching the underground
piping inefficiency factor. Mr. MacClugage’s analysis yields the following results:
System
Domestic Water
Interstitial Heating
Hot Water
Medical Gas
Cast Iron
Underground Piping
Inefficiency Factor
28%
53%
27%
20%
25%
(R4, tab 28,012; Tr. vol. IV:783,792, Tr. vol. V: 836-37,860-61)
Mr. Stynchcomb utilized the MacClugage analysis to extrapolate an overall
estimated productivity loss of 44,500 manhours for VAMC West Palm. The
manner in which he arrived at this figure is best explained by his testimony:
Q When you did the measured mile analysis, did you do it for how
many systems, approximately how many systems?
A We did it for the storm sanitary waste and vent system, medical
gas, domestic water and heating hot water and the underground systems.
Q And what was your conclusions utilizing the measured mile analysis between the very bad versus, I guess, the bad?
A The bad, yeah, ifs the very bad versus the bad, not the very bad
versus the plan or the reasonable estimate. That overall if you look
at the overall systems, it would appear that Poole and Kent lost
about a third. My opinion would be that they lost a third of their
productivity between the worst areas and the less impacted areas.
As a general number that I think is a fair and reasonable approximation of the loss.
Q Knowing that you’re an exact person, which drives me nuts, okay?
What was the exact —
A Thirty-two percent, Mr. Braude. Not 33 percent.
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Q All right. When you did the initial measured mile analysis in your
expert report, you only did it with regard to certain systems, correct?
A That’s right.
Q What systems, if any, should you have included in addition that
you certainly learned of during the hearing?
A Well, in my measured mile I took system by system so I could
compare the exact system on the lower floor with the exact system
on the upper floor. There were other systems that suffered significant losses. And the only reason why I did not include those in my
first analysis, was because they were not broken out by floor. And
those were the significant hours and the hangers, material handling,
the water PRV stations and other areas where Poole and Kent suffered labor losses but were not divided by floor. And so I didn’t exclude those intentionally, I simply looked at an indicator to try to get
an indicator of Poole and Kent’s overall loss.
Q If you take into consideration the hangers and the material handling and these other miscellaneous systems that the evidence, at
least Poole and Kent’s and United’s evidence say was impacted.
With regard to Poole and Kent’s labor, what would you conclude?
A If you include those other systems, which were part of the loss,
you’d get to about 44,500 hours.
Q And how would you do that?
A You’d simply add in the hours for the floor areas. You simply take
the labor report hours by the categories of those systems, which were
not included in my analysis to get to the 32 percent, the one-third,
into the total hour number which would increase the hours of loss
and you would move to, as I said, approximately 44,500 to 45,000
hours of loss.
Mr. Stynchcomb concluded that the systems and the floors included in Mr.
MacClugage’s Measured Mile Analysis presents a “representative slice” of
VAMC West Palm and that it is valid to apply the analysis to ascertain an
overall project loss of productivity. At PKC’s combined hourly labor rate of
$20.08, PKC values its productivity loss derived by use of the measured mile
analysis at approximately $893,560 plus applicable mark-ups. (R4, tab
20,812; Tr. vol. V: 871, 876-78)
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Ms. Sisk, the Government’s expert took exception to the validity of PKC’s
measured mile analysis on the basis that the lower floor (and nursing home)
work could not be compared to the upper floor (and main hospital underground pipe) work for the purpose of a measured mile analysis. She opined
that the attempt to reconcile this difference by use of “adjustments” was contrary to recognized measured mile analysis methodology and that the use of
adjustments, in and of themselves, indicated the inappropriateness of the use
of a measured mile approach to determine loss of productivity rates in this
instance. Ms. Sisk indicated that there was no “unimpacted” period or area of
the project that would permit the establishment of a measured mile baseline
for comparison, a circumstance in which Mr. Stynchcomb concurs. Ms. Sisk
also pointed out that Mr. MacClugage’s use of average estimated productivity
rates for a particular piping system where there were wide differences indicated for various parts of each floor would not provide an accurate result because of the variance in planned productivity rates for the same work. Finally, Ms. Sisk found that the acknowledged coding errors brought into question
the validity of the analysis since accurate reporting by PKC of the actual expended labor hours was essential for a valid report. (R4, tab 28,012; Tr. vol.
V: 878-89; Tr. vol. VII: 1153-63)
MCAA Analysis
Mr. MacClugage, with some direction and supervision by Mr. Stynchcomb,
performed an analysis intended to quantify the number of craft labor hours of
productivity loss using productivity factors published by the Mechanical Contractors Association of America. (MCAA). Mr. MacClugage used his personal
knowledge of job site conditions obtained as PKC’s project manager. Specifically, he applied three of the productivity factors listed in Section PD-2,
“Productivity” of the 1994 MCAA manual entitled “Change Orders — Overtime — Productivity” (MCAA Manual) for the years 1992-94 in an attempt to
determine the number of hours of its productivity loss in those years. Mr.
MacClugage used me years 1992-94 because those are the years, in his view,
PKC labor productivity was primarily affected by VA caused factors. Mr.
Stynchcomb reviewed Mr. MacClugage’s analysis and performed his own
MCAA analysis to quantify PKC’s number of hours of lost productivity. Mr
Stynchcomb performed a similar analysis for USM’s productivity losses. (R4,
tabs 28,012-13; Exh. A-45, Tr. vol. IV: 629, 785, 813-14; Tr. vol. V: 878-80)
Mr. John R. Gentille, MCAA Executive Vice President, states that the
productivity factors contained in the MCAA Manual were developed by
MCAA’s Management Methods Committee but are not based on any empirical study determining the specific factors or the percentages of loss associated
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with the individual factors. Mr. Gentille stated that these factors are intended to be used in conjunction with the experience of the particular contractor
seeking to use them because percentage of increased costs could well vary
from contractor to contractor, crew to crew and job to job. The MCAA factors
are widely used in the industry for estimating and productivity valuation
purposes. In assessing productivity loss, the MCAA factors are generally used
as a guideline as interpreted by experienced project personnel familiar with
the specific circumstances of a particular job and contractor. (R4, tabs
27,964,20813; Tr. vol. V: 881-82)
The MCAA Manual identifies sixteen productivity factors and includes a narrative description of each factor. For each factor, the Manual assigns a percentage productivity loss for three condition categories (minor, average, severe). PKC applied three of the productivity factors: Morale and Attitude;
Reassignment of Manpower; and. Dilution of Supervision in developing the
number of manhours of lost productivity it experienced. The Manual’s description and loss percentages for those factors are: Condition and Percentage
Factor
Morale and Attitude: excessive hazard,
competition for overtime, over-inspection, multiple contract changes and rework, disruption
of labor rhythm and scheduling, poor site conditions, etc.
Reassignment of Manpower: Loss occurs
with move-on, move-off men because of unexpected changes, excessive changes, or demand
made to expedite or reschedule completion of
certain work phases, preparation not possible
for orderly change.
Dilution of Supervision: Applies to both
basic contract and proposed change. Supervision must be diverted to (a) analyze and plan
change, (b) stop and replan affected work, (c)
take off, order and expedite material and
equipment, (d) incorporate change into schedule, (e) instruct foremen and journeyman, (f)
supervise work in progress, and (g) revise
punch lists, testing, and start-up requirements.
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Minor Average
5%
15%
Severe
30%
5%
10%
15%
10%
15%
25%
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(R4, tab 28,012-13; Exh. A-45; Tr. vol. IV: 814-21)
The MCAA Manual states, in the Section PD 2 prologue:
We have all been aware of a need for discussion of the adverse effects on labor productivity resulting from causes beyond the direct control of the mechanical contractor.
A study of these productivity factors may be helpful in preparing
original estimates and change orders. In fact, introduction of a
given factor or job condition producing a degree of effect on
productivity may well trigger a change order.
The individual items and titles proposed, cover a description of
conditions without necessarily including each detailed condition
that may be involved. The values are a percentage to add on to
labor costs for change orders and/or original contract hours.
These factors listed are intended to serve as a reference only. Individual cases could prove to be too high or too low. The factors
should be tested by your own experience and modified accordingly in your own use of them, since percentages of increased costs
due to the factors listed may vary from contractor to contractor,
crew to crew and job to job.
(R4, tab 20,813)
Mr. MacClugage, utilizing PKC’s certified payrolls and weekly cost records,
calculated PKC labor expenditures by month and year for the 1992 through
1994 period. Mr. MacClugage also estimated the number of labor hours attributable to change order work for each year and subtracted the change order labor amounts from the total incurred labor amount to arrive at the base
contract amount. The base contract amount is the number of labor hours
PKC incurred to perform the unchanged Contract work. The base contract
labor hours so computed by Mr. MacClugage are:
Year
1992
1993
1994
Number of Labor Hours
92,838
75,234
56,474
(Exh. A-45; Tr. vol. IV: 815-16)
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Mr. MacClugage assigned an MCAA “Average” effect on labor efficiency of
15% on PKC’s workforce morale and attitude for 1992. In Mr. MacClugage’s
judgment, the wet conditions at the site, and the constant crew relocations
and material availability problems occasioned by the RFI problems and construction sequence caused low crew morale and attitude problems. Similarly,
Mr. MacClugage assigned an “Average” 10% effect on efficiency due to Reassignment of Manpower due primarily to piecemeal work caused by having to
wait for RFI answers. Finally, Mr. MacClugage assigned a “Minor” effect of
10% resulting from the dilution of PKC supervision in 1992. The dilution of
supervision resulted from the time PKC supervision had to devote to coordination drawing preparation, the fact that crews being supervised were on
multiple floors, and the logistics problems resulting from the construction sequence change. Overall, Mr. MacClugage, applying the MCAA factors, finds
an impact of 35% on PKC labor during 1992. Dividing the 92,838 hours PKC
incurred to complete base contract work by 1.35 and subtracting the 68,769
thus derived from 92,838, Mr. MacClugage determined that 24,069 of those
hours were unproductive due to VA caused inefficiency. (Exh. A-45; Tr. vol.
IV: 816-20, 822-23)
The manner in which Mr. MacClugage calculated the MCAA loss of productivity was determined by Mr. Stynchcomb who explains the calculation thusly:
Q With the factors, themselves?
A The factors, themselves don’t change, it is the correct application
of the factors in both a prospect[ive] and a retroactive analysis of
productivity loss.
Q If I can, briefly, could you just tell us quickly how you do it prospectively and how you do it retroactively —
A Well, the factors —
Q — just for the record.
A Right. The factors were originally designed to be applied prospectively against estimated hours; however, there are many cases
where that’s simply not applicable. For instance, in actual cases,
many jobs are delayed and also suffer a loss of productivity as is the
case with this job. It’s impossible to spread the estimated hours over
the total duration of the project because you simply run out of the
original duration in many cases. It also can inaccurately forecast the
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impacts of delays. What I have found in looking at a lot of cases that
have been submitted, claims have been submitted, is the contractor
also, in my opinion, incorrectly multiplies the MCAA factors times
the actual hours expended. Well, those actual hours already include
the loss or productivity. In my opinion, that’s double dipping. I explain in the new draft manual of why that’s wrong and how to correctly apply the percentages to account for productive hours and
subtracting those productive hours from the total actually, you come
up with a much more reasonable, and, frankly, a conservative estimate of loss.
Q And how do you do that, just quickly?
A Well, rather than multiplying the aggregate percentages times the
total loss of actual hours, you divide the actual hours by one point of
the percentage, that equates to the productive hours. In other words,
at a 25 percent loss how many hours would have been productive
given a certain actual hour number? Then you come up with a productive hour total. You subtract that from the actual hours and that
equates to your loss or productivity. That was actually pointed out in
the Trauner report evaluating our report as being an error which we
did not commit and Trauner was certainly aware of the opportunity
to commit that error in doing an MCAA analysis.
Q But if you — if, like 1K, if you do it prospectively, you would just
take your estimated hours and multiply it by a —
A Will you look at 1K and 1L? The MCAA factors were applied prospectively to evaluate the impacts of those two changes to the production of Poole & Kent. Those factors were used in the negotiation,
as I understand it, were used in the negotiation of those two.
Q But I’m asking for the appropriate formula.
A In the case of a prospected formula you would simply apply the
factors to the estimated hours, which is what was done.
Q So it’s estimated times the factor?
A Right.
For 1993, Mr. MacClugage applied the same three MCAA productivity factors. He applied the same percentage effect he used for 1992 for the MCAA
Reassignment of Manpower and Dilution of Supervision productivity factors.
However, he reduced the effect of the Morale and Attitude productivity factor
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to a “Minor” impact of 5% due to the fact that the coordination drawing problems affecting PKC’s labor were essentially over by 1993. Thus, Mr. MacClugage determined that PKC experienced an overall impact on its productivity of 25% in 1993. This translates to 15,047 unproductive hours in that year.
Mr. MacClugage reduced the total MCAA inefficiency percentage to 15% for
1994, eliminating the Morale and Attitude factor and reducing the Reassignment of Manpower productivity factors to a “Minor” impact of 5%. Morale
was no longer an inefficiency factor because, by 1994, VAMC West Palm was
dry and the only thing affecting manpower reassignment were the continuing
RPI problems. The Dilution of Supervision factor was maintained at 10% over
all three years because of the vertical construction sequencing. Mr. MacClugage calculated that 7,366 of the 56,474 labor hours PKC incurred to perform base contract work in 1994 were unproductive. Thus, based on his
MCAA analysis, Mr. MacClugage estimates that PKC lost 46,482 labor hours
in constructing VAMC West Palm due to VA caused inefficiency. At the
$20.08 composite hourly labor rate, Mr. MacClugage’s analysis places PKC’s
inefficiency losses, calculated using the MCAA factors, at $937,375. (Exh. A45; Tr. vol. IV: 821-24)
Mr. Stynchcomb’s MCAA analysis for PKC identified two of the MCAA
Productivity factors. Reassignment of Manpower (10%) and Dilution of Supervision (15%) as affecting PKC’s work for the entire construction period.
Mr. Stynchcomb based his analysis on a review of the project files and discussions with Mr. MacClugage. Thus, using the PKC total of 266,782 hours of
labor to perform base Contract work, the total number of hours of PKC unproductive labor hours attributed to the VA by Mr. Stynchcomb using his
MCAA analysis was 53,356 resulting in a monetary claim of $1,071,388. Mr.
Stynchcomb indicated, however, that Mr. MacClugage’s analysis may be
more accurate since it was based on Mr. MacClugage’s experience on the job
and knowledge of actual conditions. (R4, tabs 20,812-13; Tr. vol. V: 879-80)
Mr. Stynchcomb, reviewing USM project records and interviewing USM project personnel, performed an MCAA analysis of USM labor productivity. Mr.
Stychcomb calculated the base Contract work labor incurred by USM by
month from January 1992 through December 1994. He then assigned MCAA
productivity factors to each month. The two MCAA factors utilized by Mr.
Stynchcomb were: Condition and Percentage
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Factor
Concurrent Operations: Stacking of this
contractor’s own force. Effect of adding operation to already planned sequence of operations. Unless gradual and controlled implementation of additional operations made,
factor will apply to all remaining and proposed contract hours.
Errors and Omissions: Increases in errors
and omissions because changes usually performed on crash basis, out of sequence or
cause dilution of supervision or other negative factors.
Minor
5%
Average
15%
Severe
25%
1%
3%
6%
From January 1992 through December 1993, Mr. Stynchcomb ascribed a percentage factor of 10% for Concurrent Operations for each month; thereafter,
he ascribed no impact on USM’s productivity due to Concurrent Operations.
Except for the period January-June 1992, Mr. Stynchcomb ascribed the Errors and Omissions impact as “severe”; the impact for January 1992 was “minor and February-June 1992, “average.” Making the appropriate calculations
for each month, Mr. Stynchcomb arrived at a total number of unproductive
hours for USM at 7,065. At the USM composite labor rate of $26.46, the value
of USM’s asserted lost productivity would be $186,940.In his written report,
however, Mr. Stynchcomb estimated 7,400 hours of lost productivity for USM
based on an MCAA analysis. (R4, tabs 28,012-13, 28,015-17, 28,021-22; Exhs.
A-37, 38)
Performing yet another MCAA analysis in its Brief, PKC finds a productivity
loss of 11,149 man-hours for USM stating:
In order to quantify United Sheet Metal’s loss of productivity, the
MCAA analysis performed by Mr. MacClugage for Poole and Kent
can be equally applied to United Sheet Metal. Although Mr. Tammaro did not perform a MCAA analysis in the same manner as Mr.
MacClugage, Mr. Tammaro testified that United Sheet Metal encountered the same problems as Poole and Kent in 1992. Thus, the
MCAA factors for reassignment of manpower at a 10% average loss
factor, morale and attitude at a 15% average loss factor, and dilution of supervision at a 10% minor loss factor should be applied to
United Sheet Metal’s actual man-hours to measure the loss of
productivity encountered by United Sheet Metal. In addition to the
factors used by Mr. MacClugage for Poole and Kent, a loss of
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garding the problems with material handling, requires the application of a 10% minor loss factor.
The total MCAA loss of labor factors employed for United Sheet
Metal in 1992 is 45%. Thus, applying that factor to USM’s field labor for 1992 of 28,365 man-hours results in a loss of labor productivity attributable to the Government of 8,803 man-hours in 1992.
Mr. Tammaro testified that the loss of productivity was not as severe for 1993
and 1994. Because the site utilities were installed throughout 1993, the site
conditions gradually improved, thus reducing the impact on United Sheet
Metal’s material handling costs. In addition, United Sheet Metal’s problems
regarding certain of the RFI’s were minimized. However, the VA began issuing change orders to finally resolve these RFI’s, thus affecting United Sheet
Metal’s productivity on its base contract work. Thus, for 1993, a 5% minor
loss factor for reassignment of manpower and a 6% loss factor for errors and
omissions is required. The total MCAA loss of labor factors employed for
United Sheet Metal in 1993 is 11%. Thus, applying that factor to USM’s field
labor for 1993 of 20380 man-hours results in a loss of labor productivity attributable to the Government of 1852 man-hours in 1993.
Mr. Tammaro testified that the bulk of USM’s inefficiencies occurred in 1992
and 1993. Thus a 5% minor loss factor for reassignment of manpower applied
to USM’s field labor for 1994 of 10375 man-hours results in a loss of labor
productivity attributable to the Government of 494 man-hours in 1994.
Thus based upon an application of the MCAA loss of productivity factors to
United Sheet Metal’s field labor for the years 1992-1994, United Sheet Metal
lost 11,149 man-hours due to VA causes.
This analysis leads to quantification of USM’s lost productivity in the amount
of $295,003. (MAIN at 107-09)
Mr. Lowe, the VA’s expert, questioned the utility of the MCAA Manual for
quantifying the loss of productivity retrospectively. He based his opinion on
the ambiguity of the MCAA factors and the ambiguous instructions in the
MCAA Manual as to how the factors are to be applied. Mr. Lowe has previously indicated, however, that use of MCAA factors for quantifying loss of efficiency claims may be appropriate if a proper measured mile analysis is not
possible. (R4, tab 28,026; Tr. vol. Vm: 1107-11)
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Modified Total Cost
Mr. Stynchcomb also performed a “modified total cost” analysis for the purpose of establishing the amount of PKC’s and USM’s lost productivity attributable to the VA. In his analysis, Mr. Stynchcomb reviewed the reasonableness of PKC’s bid, PKC’s and USM’s record keeping, the quality of PKC’s
and USM’s performance including the reasonableness of the labor costs incurred, and the impact of the various circumstances affecting productivity
during the course of the project. This review included the project records, interviews of PKC and USM personnel, testimony of VA personnel and witnesses in deposition and other discovery material submitted by the VA and
the testimony in the instant hearing. (R4, tab 28,012; Tr. vol. V: 886-88)
Mr. Stynchcomb opined that PKC’s bid was reasonable based on PKC’s and
USM’s status as large mechanical and HVAC subcontractors and the fact
that PKC’s bid was within 3% of the other proposers on the project. Drawing
on his experience both as an employee of a large mechanical contractor
charged with productivity analysis and as a consultant on productivity, Mr.
Stynchcomb concludes that PKC’s and USM’s record keeping on the project
relating to labor productivity was better than the industry standard and that
there is no practical way to create or maintain records to track labor productivity by a specific cause. Mr. Stynchcomb found PKC’s and USM’s performance and actual incurred labor hours to be reasonable, a conclusion based
in large part on the VA’s consistent expression of its satisfaction with PKC’s
performance throughout the project. Mr. Stynchcomb evaluated the circumstances affecting labor productivity during the project and estimated that one
third of the PKC/USM labor overrun was due to the actions of Clark and other non-VA caused factors. The non-VA factors affecting productivity considered by Mr. Stynchcomb in making his allocation were: 1) Clark’s failure to
create a project schedule with proper logic and to use the schedule for progression of the job; 2) Late window and exterior wall installation and “dryingin” of the building; 3) Late layout and coordination by Clark and its subcontractors; 4) Late installation of stairs by Clark; and, 5) Clark’s late roofing
submittal and installation. Although he did not quantify how he arrived at
his percentages, Mr. Stynchcomb assesses that PKC is entitled to recover for
66% of its 84,808 man-hours of labor overrun (55,973 man-hours) and USM,
using the same allocation, is entitled to recover for 8,439 of its total 12,786
man-hour overrun. Using the composite labor rates, PKC would thus be entitled to $1,123,938 for its unproductive labor and USM would be entitled to
$223,296. (R4, tab 28,012, Exh. A-43; Tr. vol. V: 882-909)
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USM Trucking Costs
The costs incurred by USM for the additional labor required for the loading
and unloading and additional handling of its prefabricated duct because of
the wet site conditions are not included as part of the inefficiency claims.
Those additional costs, not challenged by the VA are $10,000. (MAIN at
103,107)
Coordination Drawings
PKC planned to utilize two or three “in-house” draftsmen to prepare its coordination drawings. Estimating that 400 such drawings would be required at
an average cost of $200 per drawing, PKC anticipated the cost of its coordination drawing effort would be $80,000, a reasonable estimation. However, PKC
expended $201,625 for the services of an outside drafting company retained
between November 20, 1991 and April 29, 1992 that it determined was required to keep the coordination drawing effort on track when the construction
sequencing changed. Since most Contract changes were initiated subsequent
to April 29, 1992, the claimed additional costs are not related to coordination
drawing preparation related to Contract changes. Thus, PKC expenditures
for base Contract coordination drawing preparation were $121,625 in excess
of those anticipated. PKC claims 5% mark-ups for itself and Clark, making
the total coordination drawing claim as follows:
Excess Coordination Drawing Costs:
PKC Mark-up @ 5%:
Subtotal
Clark Mark-up @ 5%
Total
$121,625.00
6,081.25
127,706.25
6.385.31
134,091.56
(R4, tab 28,024; Exh. A-44; Tr. vol. I: 47, 51, 67-68; Tr. vol. IV: 806-10)
USM estimated it would cost approximately $99,000 to produce its coordinated drawings. In addition, USM received additional compensation related to
Contract changes for drawing preparation in the amount of $18,210. However, USM incurred total costs of $269,045 for the production of base Contract
coordinated drawings, resulting in a difference of $151,835. The total USM
coordination drawing claim is:
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Excess Coordination Drawing Costs: $151,835.00
USM Overhead @ 20%:
24,325.00
Subtotal
176,150.00
USM Profit @ 10%
17,615.00
USM Price
193,765.00
PKC Mark-up @ 5%
9,688.25
Subtotal
203,453.25
Clark Mark-up @ 5%
10,172.66
Total
213,625.91
(R4, tab 20816; Tr. vol. I: 81-2, 86-7; Tr. vol. II: 263-64)
The VA refused to reimburse any additional costs for base Contract coordination drawing effort. The VA asserted that it was not liable for any additional
coordination drawing effort because the effort fell within the scope of Clark’s
“contractor coordination” responsibilities. (Tr. vol. I: 180)
PKC Claim
As presented in its Brief, PKC requests an equitable adjustment of the Contract in the amount of $1,935,092. This claim amount represents PKC’s suggested “jury verdict” arrived at by averaging the labor overruns attributable
to VA developed by Mr. Stynchcomb and Mr. MacClugage using the three different methodologies to which are added additional coordination drawing
costs and various standard mark-ups. The claim is broken down as follows:
United Sheet Metal:
USM Loss of Productivity:
USM Additional Trucking Costs:
USM Additional Coordination Effort:
Subtotal
USM Overhead @ 20%:
Subtotal
USM Markup (R) 5%:
Subtotal
P&K Markup @ 5%:
Subtotal
Clark Markup @ 5%:
Subtotal
Poole & Kent:
P&K Loss of Productivity:
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$258,368
10,000
151,835
420,203
84,041
504,244
25,212
529,456
26,473
555,929
27,796
583,725
$1,094,581
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P&K Additional Coordination Effort:
121,625
Subtotal
1,226,206
P&K Markup @ 5%:
60,810
Subtotal
1,287,016
Clark markup @ 5%:
64,351
Subtotal
1,351,367
TOTAL EQUITABLE ADJUSTMENT
REQUEST:
$1,935,092
(MAIN at pp. 133-35)
Discussion
Once again, we address Government liability and the extent of that liability
for asserted labor inefficiencies identified when a Contractor finds its labor
expenditure to be in excess of the amount of labor it anticipated that it would
expend. Claims of labor inefficiency are recognized to be both difficult to
prove as to entitlement and even more difficult to quantify; the claims we
confront here are no exception. The parties ably and efficiently presented
their positions in both the hearing and the briefs; however, their presentation
has not lessened the difficulty of our task.
We have had recent occasion to discuss claims for inefficiency or impact
claims in detail in Centex Bateson Construction Company, Inc. We stated
there:
Impact costs are additional costs occurring as a result of the loss
of productivity; loss of productivity is also termed inefficiency.
Thus, impact costs are simply increased labor costs that stem
from the disruption to labor productivity resulting from a change
in working conditions caused by a contract change. Productivity
is inversely proportional to the man-hours necessary to produce a
given unit of product. As is self-evident, if productivity declines,
the number of man-hours of labor to produce a given task will increase. If the number of man-hours increases, labor costs obviously increase.
Thus, our inquiry will focus on the evidence to determine whether the VA’s
actions (or inaction) changed the working conditions such that PKC’s labor
productivity was adversely impacted. Centex Bateson Construction Company,
Inc., VABCA Nos. 4613, et. at, 99-1 BCA ¶30,153, 149,257.
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Contentions of the Parties
PKC contends that three circumstances, for which the VA is responsible, adversely impacted the productivity of its labor constructing VAMC West Palm
and caused, at least in part, PKC’s (and USM’s) overrun of its planned labor
expenditure by 97,594 man-hours. First, PKC asserts that the change in construction sequence caused by the Stop Pump Orders resulted in its labor being less productive and required PKC’s and USM’s excessive expenditures for
preparation of coordination drawings. Second, PKC contends that the site
was excessively wet, both outside and inside the building, because of the Stop
Pump Orders and the VA’s improper proprietary roof specification contributed to the inside water intrusion that severely impacted labor productivity.
Finally, PKC avers that the VA’s endemic failure to timely respond to RFIs
adversely impacted both PKC’s and USM’s coordination drawing effort and
the labor productivity of its installations, causing an increase in their labor
coordination drawing costs. PKC provides various detailed quantum analyses
and methodologies in support of its request for a judgment of $1,935,092.
The Government responds that any adverse impacts on labor inefficiency experienced by PKC or USM due to the site conditions were caused by Clark,
not the VA. in addition, the Government posits that PKC has failed to prove
that its labor productivity was adversely impacted by any of the causes for
which the VA is allegedly responsible and that PKC and USM bear some of
the responsibility for the coordination drawing overruns. Finally, the VA asks
us to infer that neither PKC nor USM believe that their inefficiency claims
have much substance because they delayed in asserting the inefficiency
claims until well after they had asserted other, much smaller claims.
Entitlement
General
PKC asserts that the VA has liability, because of actions it took or failed to
take, for the lower than planned labor productivity it experienced during the
construction of VAMC West Palm. The fact that proving the amount of
productivity losses is recognized as being notoriously difficult does not abrogate PKC’s fundamental responsibility to prove by a preponderance of the
evidence that a Government action caused its labor to be less efficient than
planned and the extent of that impact. Centex Bateson Construction Company, Inc., VABCA Nos. 4613, et. al., 99-1 BCA ¶20,153; Dawson Construction
Company, Inc., VABCA Nos. 3306-08, 3309-10, 93-3 BCA ¶26,177, affd sub
now, Dawson Construction Company v. Brown, 34 F.3d 1080 (Fed.Cir. 1994);
Triple “A” South, ASBCA No. 46866, 94-3 BCA ¶27,194; Bechtel National,
Inc., NASA BCA No. 1186-7, 90-1 BCA ¶22,549.
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The combined overrun of PKC’s and USM’s bid labor man-hours on basic
Contract work is 97,524. This figure represents an approximate overrun of
bid labor hours of 42%, an extraordinary amount. As early as late 1991, a few
months after its work began, PKC was aware that its labor budget was “going
to hell.” PKC primarily relies on the testimony of the PKC and USM project
managers (Mr. MacClugage and Mr. Spors for PKC, Mr. Tammaro for USM)
and its expert, Mr. Stynchcomb, to prove that a large portion of this overrun
is due to VA-caused labor productivity losses. We consider the testimony of
the project managers to be candid and forthright. However, PKC made little,
if any, effort as we would ordinarily expect, to cite us to contemporaneous
project records in support of the testimony. The Record in this appeal is one
of the largest ever submitted to this Board. It contains all daily reports by the
Government and Clark and its subcontractors, all CPM updates, voluminous
correspondence, and all payment requests. Given this voluminous body of evidence, the parties were reminded of the importance of directing the Board’s
attention to the specific evidence that they believed supported their respective positions. The parties were instructed that it was their responsibility to
provide proposed findings of all relevant facts specifically citing supporting
Appeal File or Trial exhibits. PKC asserts here that the VA is liable for the
loss of labor productivity resulting from it having to work in conditions where
there was excessive water in the building and from the VA’s failure to timely
respond to RFIs. Given the labor overrun that PKC knew had begun very early in the project, we find it difficult to believe that the contemporaneous documentation contained in the Record would not provide relevant evidence
supporting both the fact that an impact on productivity occurred and the extent of that impact. Therefore, in this circumstance, we make the inference
that the contemporaneous project records do not support PKC’s position. Centex Bateson, 99-1 BCA ¶30,153; Adams Construction Company, VABCA No.
4669, 97-1 BCA ¶28801; Fire Security Systems, Inc., VABCA Nos. 2107 et. al.,
91-2 BCA ¶23743; Michael R. Finke, Claims for Construction Productivity
Losses, 26 Public Contract L.J. 325-28 (1997).
Mr. Stynchcomb testified that PKC’s record keeping, primarily its tracking of
labor and material being expended, was better than that of most large mechanical subcontractors. Mr. Stynchcomb also opined that it was not practical
to maintain records to track labor productivity by a specific cause. PKC here
claims that it and USM are owed over $1.5 million for the portion of the almost 50% overrun in labor allocated to VA liability. PKC knew very early in
the project that its labor costs were greatly exceeding estimates, that the entire planned construction sequence changed and that the site was wet. In the
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face of the alleged, pervasive, VA-caused inefficiency, we reject the notion
that PKC, a self-described large, experienced and sophisticated mechanical
contractor could not track or document the severe effects on its labor efficiency as they occurred. As is discussed below, the adverse impact on the productivity of PKC’s and USM’s labor stemming from the two conditions for which
the VA is liable, the change in construction sequence and wet exterior site
conditions, is clear from the Record. In those circumstances, common sense
tells us the causation is proven by the VA’s liability. However, proof of the
impact of the Contract changes and RFIs for which PKC claims requires PKC
to prove the VA’s liability for changes and RFI loss of labor productivity. VA
liability for changes is established by fact of the change to the Contract. The
liability for tardy RFI responses is established by showing that the late responses somehow reflect the VA’s failure to fulfill a Contract obligation. PKC
also has to prove both that the changes and late RFI responses caused changes to working conditions beyond the parameters of the conditions the parties
could reasonably anticipate and that the changes and late RFI responses
lowered the productivity of its labor. The after-the-fact, conclusory assessments of the project managers or the opinion of its experts are not sufficient
substitutes for PKC’s underlying obligation to contemporaneously document
the severe adverse impact on labor efficiency it now claims resulted from the
changes and RFIs. Centex Bateson, 99-1 BCA ¶30,153; Fru-Con Construction
Corporation, 43 Fed.Cl. 306 (1999); Triple “A” South, 94-3 BCA ¶27,194,
135,529-30; Michael R. Finke, Claims for Construction Productivity Losses, 26
Public Contract LJ. 326- 28 (1997).
We note that, because of the nature of Clark’s reservation of impact claims,
PKC makes no differentiation in its inefficiency claims between direct and
cumulative impact. To the extent that it includes loss of labor productivity
caused by the combined effect of the change of sequence, wet conditions and
late RFI responses in addition to the alleged direct efficiency losses, PKC has
not met me test we established in Centex Bateson to show that the combination of me alleged conditions cumulatively impacted the work and reduced
labor efficiency. Centex Bateson, 99-1 BCA ¶30,153, 149,258-59.
We draw no inference from the timing of the presentation of the PKC and
USM inefficiency claims. We have previously ruled that the inefficiency
claims were properly made and that they are properly before this Board.
Clark Construction Group, Inc., VABCA Nos. 5673 et. al., 99-1 BCA ¶30,128.
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Our analysis will first explore the productivity of PKC’s and USM’s installation labor. We will separately deal with the claim for the additional costs of
preparing the coordination drawings.
Change in Construction Sequence
There is no doubt, and the Government does not contest, that Clark’s only
reasonable response to the Stop Pump Orders was to change to a vertical
construction sequence. PKC and USM clearly planned to realize the production efficiencies offered by being able to install long lengths of pipe and duct
along the 270 yard length of VAMC West Palm. The change to vertical construction precluded PKC and USM from those efficiencies. The vertical construction, as simple common sense would indicate and as the evidence shows,
presented more difficult material handling, crew supervision and work area
access problems. These problems translate to lower labor productivity. Thus,
we find that PKC has met what we have characterized as the “fundamental
triad of proof” to entitle it to recovery for the change in construction sequence. PKC has sufficiently proven that the VA fundamentally changed the
conditions under which it expected to perform the work. This change of working conditions caused less productivity and the loss of labor efficiency. However, Clark failed to inform PKC of the sequence change for more than three
months; this delay prevented PKC from accommodating or mitigating the effect of the sequence change. Therefore, some of PKC’s and USM’s productivity
losses must be attributed to Clark. Centex Bateson, 99-1 BCA ¶30,153,
149,258.
PKC also asserts that the construction sequence change caused it to lose the
material handling efficiencies it expected by use of the “bag and tag” method
of material ordering and handling. We accept that PKC planned to order its
materials such that they would be packaged and delivered to the site in accordance with the planned horizontal sequence. The change to a vertical sequence resulted in the PKC forces having to open material pallets that, for
example, contained fittings and other material for the Second Floor of the
East Tower in order to obtain fittings for the Fourth Floor of the West Tower.
This effort to find suitable materials to support the vertical construction impacted the efficiency of PKC’s crews since time spent in accumulating materials detracted from production time.
However, the change to vertical construction took place well before the major
part of PKC’s work began. Apparently, PKC took no actions to adjust its material delivery or packaging schedules to mitigate the disruption resulting
from its crews having to “scavenge” for materials. Of course, the fact Clark
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did not seek nor did PKC attempt any input or apparent influence on the development of tine vertical construction CPM schedule provides some explanation for PKC’s failure to adjust its material deliveries. Also providing some
reason for PKC’s material handling difficulties, the Record shows that Clark
did not progress the job according to the schedule and PKC was reduced to
looking out the window to see where Clark was working in order to assign its
forces. Thus, PKC has failed to adequately prove that the change in working
conditions resulting from the sequence change was the sole cause of its material handling inefficiencies.
The change in construction sequencing had an immediate effect on USM’s
and PKC’s planned prefabrication of large amounts of pipe and duct. We are
satisfied from the evidence in the record that PKC and USM were prevented
from their planned shop prefabrication of pipe, pipefittings and ductwork because of the Stop Pump Orders. This led to piece-by-piece fabrication that requires more labor effort than installing prefabricated pipe and duct assemblies. In addition, major equipment and material items for the Energy Center
were long lead items, which PKC and USM had to order before the change of
sequence. With the change of sequence, much of this equipment and material
had to be double handled and stored on the site after its delivery. Such a circumstance is obviously less efficient than deliveries packaged and coordinated with a horizontal construction schedule. Consequently, PKC and USM are
entitled to the costs they can prove of the inefficiencies resulting from the
VA-caused inability to utilize prefabrication and for the additional handling
of long lead items.
PKC presents three alternative methodologies to quantify the amount of lost
labor productivity and asks us to utilize a “jury verdict” approach to calculate
an award. Presenting a picture of a pullulating, water logged horde of aimlessly milling laborers and pencil poised draftsmen all anxiously awaiting VA
direction through the RFIs, PKC at the hearing and in its BRIEFS clearly
contemplate recovery for all impact, both direct and cumulative. PKC approaches the three analyses it offers using total incurred labor hours or costs
at the starting point. Thus to some degree, each of the three methodologies is
a variant on a total cost/total entitlement claim. Since we have found that
PKC has not proven entitlement to all the asserted causes of inefficiency,
PKC's quantum presentation is of diminished utility. Consequently, it is unnecessary for us to discuss the validity, reasonableness and accuracy of PKC’s
quantum computations in detail. Indeed, PKC's request that we employ a “jury verdict” method to arrive at a quantum amount is a tacit acknowledge-
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ment of the deficiencies contained in each of the three methodologies advanced.
Quantification of loss of efficiency or impact claims is a particularly vexing
and complex problem. We have recognized that maintaining cost records
identifying and separating inefficiency costs to be both impractical and essentially impossible. Therefore, we have found percentage estimates of loss of
efficiency to be an appropriate method to quantify such losses and that is how
we will calculate the amount of equitable adjustment due PKC here. Centex
Bateson, 99-1 BCA ¶30,153; Fire Security Systems, Inc., VABCA No. 3086, 912 BCA ¶23,743.
We will utilize the productivity factors from the MCAA Manual as the best
method to arrive at me percentage estimates of PKC's and USM's undeniable
productivity losses. We find no other basis in the record on which we could
better calculate the amount of PKC's productivity losses in this appeal and,
as we previously recognized in Fire Security, the MCAA productivity factors
are a reasonable starting point to estimate efficiency losses. Despite the inherent subjectivity of the MCCA factors, the Record here demonstrates that
the MCAA factors are a widely used industry standard method of accounting
for the impact of inefficiency on mechanical work. We will utilize the MCAA
Manual's direction and descriptions of the percentage inefficiency factor to be
applied to me inefficiency element for which entitlement has been proven. As
contemplated by the MCAA Manual, we will use our reasonable judgment of
how the factors apply to this Contract and the two contractors. Fire Security
Systems, Inc., 91-2 BCA ¶23,743; Stroh Corporation, GSBCA No. 11029, 96-1
BCA ¶28,265.
We have clear evidence of PKC's entitlement to an equitable adjustment. In
light of this and the recognition of the impossibility of the precise quantification of impact or inefficiency costs, our determination of quantum for labor
productivity losses in this appeal by making estimates based on the MCAA
factors will properly be in the nature of a jury verdict. Valley Forge Flag Co.,
Inc., VABCA Nos. 4667, 5103, 97-2 BCA ¶29,246; Consultores Profesionales
De Ingenieria, S.A., ENGBCA No. PCC-78-R, 97-2 BCA ¶29,011; Dawco Construction v. United States, 930 F.2d 872 (Fed.Cir. 1991), overruled on other
grounds; Reflectone, Inc. v. Dalton, 60 F.3d 1572 (Fed.Cir. 1995).
(Remainder of the case omitted)
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Edge Construction
v.
United States
95 Fed.Cl. 407
Oct. 29, 2010.
John K. Grylls, Grosse Pointe Farms, MI, for Plaintiff; Alber Crafton, Troy,
MI, of counsel. Lauren S. Moore, Commercial Litigation Branch, Civil Division, Department of Justice, Washington, D.C., for Defendant, with whom
were Tony West, Assistant Attorney General, Jeanne E. Davison, Director,
and Donald E. Kinner, Assistant Director.
Opinion and Order
Damich, Judge.
This government construction contract case is before the court on the Government’s motion for summary judgment pursuant to Rule 56 of the Rules of
the United States Court of Federal Claims (“RCFC”). Edge Construction
Company (“Edge” or “the Plaintiff”) alleges that the Government breached its
contract by denying Edge’s claims for additional costs and extensions of time
and improperly terminated the contract for default. The Government contends that the Contracting Officer properly denied Edge’s claims and was justified in terminating the contract for default.
Edge seeks recovery on eight counts for the Government’s breach of contract
for refusing to issue change orders and denying its claims for: (1) relocation of
a well (Count I); (2) additional catch basin and six-inch storm pipe (Count II);
(3) additional catch basins and ten-inch storm pipe (Count III); (4) pipe insulation (Count IV); (5) borrow pit (Count V); (6) unseasonable weather/acceleration (Count VI); (7) lost productivity due to unseasonable weather
(Count VII); and (8) lost productivity resulting from rain, freezing conditions,
and mud (Count VIII).
With regard to the Government’s termination for default, Edge sets forth two
additional counts: (1) conversion of termination for default into termination
for convenience (Count IX); and (2) wrongful termination damages including
amounts expended by Edge’s surety (Count X).
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The Government’s motion is granted in part and denied in part. The Court
denies summary judgment on Counts I, II, and IV because Edge established
genuine issues of material fact as to the costs for the additional work. The
Court grants summary judgment for the Government on Counts III and V
because the alleged additional work was within the scope of the contract.
With regard to Edge’s claims for equitable adjustments for lost productivity
due to “unseasonable weather,” summary judgment is granted on these
counts (Counts VII and VIII) because as a matter of law Edge is not entitled
to equitable adjustments for lost productivity attributable to unusually severe weather conditions. Summary judgment is denied on Count VI (project
acceleration) because a genuine issue of material fact remains regarding the
existence of “unseasonable weather,” and the Government does not show that
it is entitled to judgment as a matter of law.
Finally, the Court denies summary judgment on the Government’s termination for default (Counts IX and X) because of a genuine issue as to the contract completion date, which is an essential fact in considering termination
for default.
I. Background
On September 1, 2004, the Department of Veterans Affairs, National Cemetery Administration (“the Government”), awarded Contract No. V786C-108
8A (“the Contract”) to Edge, for the construction of the Great Lakes National
Cemetery in Michigan in the amount of $8,691,000.00. Pl.’s Second Am.
Compl. ¶¶4-5; Def.’s Mot. Summ. J. (“Def.’s Mot.”) 3. The Contract contained
clauses from Federal Acquisition Regulations (“FAR”) for “Disputes” (FAR
52.233-1), “Default” (FAR 52.249-10), and “Changes” (FAR 52.243-4). Def.’s
Mot. 3.
On September 20, 2004, Edge contracted with Ferguson Enterprise, Inc.
(“FEI”) as a subcontractor to perform work, including, but not limited to,
“earthwork, utilities, site clearing, asphalt and striping.” Pl.’s Resp. in Opp’n
Def.’s Mot. Summ. J. (“Pl.’s Resp.”) 1; Erdman Aff. Ex. A.
In accordance with the Notice to Proceed (NTP) issued on September 21,
2004, the Government required Edge to complete the Early Turnover Area
(“ETA”) within 230 calendar days of the NTP (by May 16, 2005), and the
overall contract within 620 days of the NTP (by June 14, 2006). Def.’s Mot. 3;
Pl.’s Resp. 1.
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Between January 20, 2005 and March 16, 2005, the parties held five project
meetings. Def.’s Mot, 3-5. In January and February, the Government requested schedules of project activities and values and expressed concerns regarding the level of manpower and equipment on site. Id. at 3-4. On February
16, 2005, Edge cited poor weather conditions impacting its ability to perform
many activities. Id. at 4. In response to the Government’s request that Edge
explain why it could not meet the contract ETA completion date, Edge explained, by letter dated March 11, 2005, that “November and December had
been one of the worse winters in the past 20 years in [the] area.” Def.’s Mot.
5; Def.’s App. 42. Edge explained that the rain, freezing conditions, and mud
affected site conditions and the ability of its subcontractors to operate the
equipment under those conditions. Def.’s App. 42-43. Edge projected that it
would complete the ETA by July 16, 2005, two months after the contractual
timeframe. Id. at 43. Edge communicated the same at the project meeting
held on March 16, 2005. Def.’s Mot. 5.
The Government expressed its concerns that Edge would not complete the
ETA by August 16, 2005, and that it believed that Edge contributed to its delay beyond simply incurring extreme weather conditions. Id. 6. Nonetheless,
on April 19, 2005, the Government “granted Edge an additional 63 days to
complete the ETA” to compensate for “weather-related delays that Edge experienced from September 21, 2004 until May 1, 2005. The additional days
were given at no cost to the Government.” Id. at 7; Def.’s App. 59-61. The revised completion date for the ETA was set at July 18,2005. Def.’s Mot. 7;
Def.’s App. 59-61. The Government, via a change order of April 19, 2005, also
indicated that the overall project completion date remained unchanged at
June 14, 2006. Def.’s App. 59-61.
On June 30, 2005, Edge submitted a request to the Contracting Officer to issue a change order for additional costs of $623,795.00 related to the extension
of time for weather-related delays. Def.’s App. 81-84; see also Def.’s Mot. 8
(noting that the “request for extension of time costs” was uncertified).
During the course of the project, in addition to weather-related conditions,
Edge incurred additional work related to changes in the project plan directed
by the Government for (1) the relocation of a well and (2) an additional catch
basin and six-inch pipe. Pl.’s Resp. 1. The Government issued change orders
and granted equity adjustments to Edge based on estimates of the Government’s architect/engineer. Def.’s Mot. 14, 17; Def.’s App 236-38; 162-63. Edge
also requested, although the Government refused to issue, additional change
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orders for these two items because the amounts the Government granted
were less than the amounts Edge claimed it was entitled to for the work. See
Def.’s Mot. 14, 17. In addition, Edge requested that the Contracting Officer
issue change orders for (1) two additional catch basins and a ten-inch pipe;
(2) the insulation of a pipe; and (3) borrow pit operations. Pl.’s Second Am.
Compl. ¶¶20, 25, 30. The Government denied Edge’s request to issue these
three change orders. Id. at ¶¶21, 26, 31.
Between May 13, 2005 and July 18, 2005, the Government issued over ten
Deficient Omission Letters (DOLs). Def.’s Mot. 7-9. According to the Government, the deficiencies included “cracks and gouges in the crypts, lack of concrete footers, installation of foundation walls below the required elevation,
improper bedding, unacceptable repair work for footer walls, incorrect curbing, among other things.” Def.’s Reply to Pl.’s Opp’n to Def.’s Mot. for Summ
J. (“Def.’s Reply”) 17. On July 27, 2005, the Government issued a “Show
Cause Notice” to Edge:
You are notified that the Government considers that your lack
of progress as indicated above is a condition that is endangering performance of the contract. The Government ... is considering what action is in the best interest of the Government, including considering terminating the contract for default in
accordance with FAR 52.249-10 Default (Fixed-Price Construction) (Apr 1984). Pending a final decision in this matter, it will
be necessary to determine whether your failure to perform
arose from causes beyond your control and without fault or
negligence on your part.
Def.’s App. 93-94.
On August 8, 2005, Edge responded via fax to the Government’s Show Cause
Notice and indicated the status of DOLs and that it expected to complete the
ETA by August 24, 2005. Def.’s App. 96-99. As of August 11, 2005, according
to the Government, at least half of the DOLs remained unresolved. Def.’s
Mot. 10. The Government issued additional DOLs on August 18, 2005. Id. at
10-11.
On September 9, 2005, in light of “the repeated deficiencies in quality of
work, schedule slippages, poor coordination for the work in the ETA, and poor
quality of the minimal amount of work performed in the area outside the
ETA,” the Government “terminated the contract for default, with the exception of the completed ETA work.” Def.’s Mot. 11 (quoting Def.’s App. 111). The
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Government indicated that these problems were “endangering performance”
and gave the Government “no confidence that Edge would complete the remainder of the Contract in accordance with the specifications and by the established completion date.” Id.
According to the Government, by September 15, 2005, Edge substantially
completed the ETA work. Def.’s Mot. 11 n. 2.
Edge responded to the Government’s notice of termination for default by letter dated September 23, 2005. Id. at 11; Def.’s App. 122-35. Edge contested
many of the Government’s assertions in its notice for termination (e.g., “concerted efforts on the part of the VA to assist Edge,” the number of open Deficiency Omission List (DOL) items) and raised issues as to the performance of
the Government that hindered Edge’s ability to perform (e.g., design defects,
communications issues). See generally Def.’s App. 122-35.
Edge filed its initial complaint with this court in September 2006. In February 2008, the Government filed a motion to dismiss for lack of subject matter
jurisdiction on the grounds that Edge had not filed and certified its claims
with the Contracting Officer pursuant to 41 USC §605(c)(1). The Government
subsequently withdrew its motion to dismiss to allow Edge to file those
claims administratively. In May 2008, Edge filed an amended complaint, narrowing its action to that of seeking to convert the Government’s termination
for default to a termination for convenience instead.
In September 2008, Edge submitted nine claims to the Contracting Officer,
seeking equitable adjustments for eight claims for breach of contract and
damages for one claim for improper termination for default. See Def.’s App.
137-39 (undated), 142-50, 155-61, 164-71, 180-87, 188-92, 208-223. On December 12, 2008, the Contracting Officer denied all of Edge’s claims. Def.’s
App. 230-34.
Edge filed a second amended complaint in February 2009, asserting eight
claims of breach of contract and one claim for wrongful termination as well as
seeking conversion of the termination for default to termination for convenience. The Government filed its instant motion for summary judgment on
January 29, 2010, and briefing concluded on July 20, 2010.
Edge alleges that the Government’s actions constitute breach of contract and
wrongful termination. Edge seeks recovery for the Government’s breach of
contract for refusing to issue change orders and denying its claims on the fol-
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lowing 8 counts: (1) Count I — well relocation ($98,252.35); (2) Count II —
additional catch basin and six-inch storm pipe ($22,386.28); (3) Count III —
additional catch basins and ten-inch storm pipe ($16,289.90); (4) Count IV —
pipe insulation ($27,879.18); (5) Count V — borrow pit ($446,494.30); (6)
Count VI — unseasonable weather/acceleration ($424,508.20); (7) Count VII
— lost productivity due to unseasonable weather ($242,098.45); and (8) Count
VIII — lost productivity resulting from rain, freezing conditions and mud
($329,467.60). Pl.’s Second Am. Compl. ¶¶11, 16, 21, 26, 31, 36, 41, 46. Edge
also seeks recovery for wrongful termination: (1) Count IX — conversion of
termination for default into termination for convenience and (2) Count X —
wrongful termination damages including amounts expended by Edge’s surety
($6,938,286.00). Id. at ¶¶57, 59.
II. Standard of Review
A motion for summary judgment will be granted if “there is no genuine issue
as to any material fact and ... the movant is entitled to judgment as a matter
of law.” RCFC 56(c)(1); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct.
2548, 91 L.Ed.2d 365 (1986). When considering a summary judgment motion,
the court’s proper role is not to “weigh the evidence and determine the truth
of the matter,” but rather “to determine whether there is a genuine issue for
trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91
L.Ed.2d 202 (1986). A fact is “material” if it “might affect the outcome of the
suit;” a dispute is genuine if the evidence is such that a reasonable trier of
fact could find for the nonmoving party. Id. at 248, 106 S.Ct. 2505. The party
moving for summary judgment may prevail by demonstrating the absence of
any genuine issues of material fact or by showing the absence of evidence to
support the nonmoving party’s case. Celotex, 477 U.S. at 322-23, 106 S.Ct.
2548. If the moving party makes such a showing, the burden shifts to the
nonmoving party to demonstrate that there is a genuine issue of material
fact. Id. at 324, 106 S.Ct. 2548. Any inferences that may be drawn from the
underlying facts “must be viewed in the light most favorable to the party opposing the motion.” United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct.
993, 8 L.Ed.2d 176 (1962). Similarly, “[i]n cases in which there is doubt as to
the existence of a genuine issue of material fact, that doubt must be resolved
in favor of the nonmovant.” Cooper v. Ford Motor Co., 748 F.2d 677, 679
(Fed.Cir. 1984).
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III. Discussion
The Court will analyze the Government’s motion for summary judgment in
the context of the counts in Edge’s second amended complaint. The Court will
first discuss Edge’s claim for the Government’s alleged breach of contract
(Counts I–VIII) and then its claim for wrongful termination for default
(Counts IX and X).
A. Breach of Contract
Edge alleges that the Government breached the contract by refusing to provide equitable adjustments in costs and time for performance for eight separate items. For three items, the relocation of the well (Count I), an additional
catch basin and six-inch pipe (Count II), and insulation of a pipe (Count IV),
the Government asserts that Edge failed to justify that it incurred increased
costs and that it is entitled to additional days, and therefore, the contracting
officer properly denied Edge’s claims. Def.’s Mot. 14-16, 16-18, 18-20. The
Government avers that the catch basins with a ten-inch pipe (Count HI) and
the borrow pit (Count V) were in the scope of the contract, and that, therefore, no equitable adjustment was warranted. Def.’s Mot. 18, 20-22. Edge also
claims breach of contract because the Government refused to issue change
orders and denied its claims for project acceleration (Count VI) and lost
productivity (Counts VII and VIII), all related to unseasonable weather conditions. Pl.’s Second Am. Compl. ¶¶38, 43, 49. The Government contends that
Edge did not experience unusually severe weather, above and beyond what
was accounted for by the 63-day extension Edge received, and even if it had,
Edge would not be entitled to compensation for lost productivity. Def.’s Reply
15.
The Court finds that the parties’ arguments raise three legal issues: (1)
whether Edge has provided a reasonable basis for equitable adjustments
(Count I, II, and IV); (2) whether the alleged additional work was within the
scope of the contract (Counts III and V); and (3) whether Edge is entitled to
compensation for unusually severe weather (Counts VI, VII and VIII).
1. Reasonable Basis for Equitable Adjustments (Counts I, II, and IV)
Contract changes and equitable adjustments are governed by FAR 52.243-4
(“Changes”) (2007) which permits the government to make changes to the
general scope of the contract via oral or written change orders, and gives the
contractor the right to an equitable adjustment in costs and time required for
performance. FAR 52.243-4(a)-(d). For any changes pursuant to FAR 52.2434, the contractor bears the burden of establishing its costs to justify an equi-
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table adjustment Daly Construction, Inc. v. Garrett, 5 F.3d 520, 522
(Fed.Cir.1993). An actual cost approach, as distinguished from a total cost
approach, is preferred. Wunderlich Contracting Co. v. United States, 173
Ct.Cl. 180, 351 F.2d 956, 964-65 (1965). Under the total cost approach, the
contractor simply provides evidence of the total cost of completing the contract and compares that to the pre-bid estimates to compute damages without
showing an “approximate extent” to which additional costs were attributable
to the actions by the government. Id. Instead, to establish actual costs, a contractor should provide an approximate allocation of the time and costs associated with the change orders, separate from costs that would have been incurred as part of the contract. See id. at 966. The contractor “need not prove
his damages with absolute certainty or mathematical exactitude. It is sufficient if he furnishes the court with a reasonable basis for computation, even
though the result is only approximate.” Id. at 968 (citations omitted); see also
Daly Constr., 5 F.3d at 522 (affirming Board’s denial of compensation because
plaintiff failed to establish some “reasonable method for computing the requested compensation”).
The Court finds that genuine issues of material fact remain as to whether
Edge has provided a reasonable basis for equitable adjustments for Counts I,
II and IV, precluding summary judgment.
a. Relocation of the Well (Count I)
The parties agree that the relocation of a well was not within the scope of the
contract for the construction of the cemetery and therefore that Edge or its
subcontractor (FEI) was required to perform additional work consistent with
the Government’s change order. See Def.’s Mot. 14; Pl.’s Resp. 13. The Government granted an equitable adjustment, but Edge argues that it is entitled
to a higher amount. See Def.’s Mot. 14.
On February 14, 2005, Def.’s App. 238, the Government was directed by Oakland County to relocate “the well for domestic water supply ... to a minimum
of 800 feet from the fuel tanks,” compared to the 130 feet in the Government’s
original plans, Pl.’s Resp. 13. Edge performed the work associated with the
relocation of the well “approximately” between May 13, 2005 and May 18,
2005, and between July 15, 2005 and July 30, 2005. Id. The Government issued the change order on July 11, 2005 and compensated Edge $20,184.75 for
the additional work for the relocation of the well as determined by the Government’s architect/engineer. See Def.’s App. 230, 236-38. Edge subsequently
requested $98,252.35 for costs and fees and three additional days for completion of the work and overall project. Def.’s App. 142-43.
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The Government argues that Edge failed to provide actual cost data to substantiate additional compensation. Def.’s Mot. 14. According to the Government, Edge failed to provide time sheets, material receipts, equipment invoices, and material specifications so that the Government could determine
actual costs and assess whether Edge was claiming the total costs for the installation of the well, or only the incremental costs associated with the relocation of the well. Def.’s Reply. 4 As a result, “the contracting officer compensated Edge for the amount that the VA’s architect/engineer estimated for this
work” and denied Edge’s claim for a higher amount. Def.’s Mot. 14.
Edge contends that it provided the Government with a contract impact summary of the “additional labor, equipment and materials attributable to the
well relocation.” Pl.’s Resp. 14; Stapleton Aff. Ex. I. Edge explained that the
total cost impact was based on FEI’s daily reports for the days that the subcontractor worked on the relocation of the well. Pl.’s Resp. 14.
Under the Wunderlich standard, the contractor need only provide a reasonable approximate computation of the damages and demonstrate, with reasonable certainty, that those damages arose from changes ordered or directed by
the Government. See Wunderlich, 351 F.2d at 968-69. Considering the parties’ arguments and the record, genuine issues of material fact remain as to
whether Edge’s claimed damages were a reasonable approximation of the actual cost of the relocation of the well. Therefore, summary judgment in favor
of the Government for the relocation of the well is not appropriate.
b. Additional Catch Basin and Six-inch Storm Pipe (Count II)
As with the relocation of the well, the parties agree that the additional catch
basin and six-inch storm pipe constituted work outside the scope of the contract. See Def.’s Mot. 16-17; Pl.’s Resp. 15. Again, the issue is whether Edge is
entitled to a higher equitable adjustment than the amount granted by the
Government. See Def.’s Mot. 16-18.
The Government issued a change order on July 11, 2005 and paid Edge
$4,230.00 for this work based on the Government’s estimate. Def.’s Mot. 17;
Def.’s App. 162-63. Edge subsequently requested $22,386.28 for costs and fees
and one additional day for performance. Def.’s Mot. 17; Def.’s App. 155-161;
Pl.’s Second Am. Compl. ¶16; Pl.’s Resp. 16.
The Government argues that Edge failed to provide actual cost data-payroll
records, purchase orders, receipts or invoices-to substantiate additional costs.
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Def.’s Mot. 17; Def.’s Reply 6-7. In addition, Edge did not provide “an explanation of exactly what work was accomplished on each day by each individual.” Def.’s Reply 6-7.
Edge argues that it provided the Contracting Officer a “Contract Impact
Summary of the additional labor, equipment and materials attributable to
the additional catch basin and PVC pipe.” Pl.’s Resp. 15; Stapleton Aff. Ex. O.
Edge explained that the cost estimates on the summary reports were derived
from “the daily reports on the days that work was performed on the additional catch basin and PVC pipe.” Pl.’s Resp. 16. In further support of its argument that it provided actual cost data, Edge emphasizes that the additional
material was provided by the subcontractor (priced at prevailing prices), and
that “the individual laborers and equipment [on the daily reports] are specifically identified in the quotations by name and by type.” Pl.’s Resp. 16.
The Government, however, in its reply brief, argues that “simply show[ing]
the hours worked by five individuals on two days ... and claim[ing] an amount
of money for all of the hours worked by each of those individuals on those
days,” is not sufficient to substantiate actual costs. Def.’s Reply 7. Furthermore, according to the Government, the individuals and equipment listed on
the daily reports were assigned and used on other tasks “for a significant portion of the hours being claimed.” Def.’s Reply 7-8. The Government also noted
a discrepancy between the type of bulldozer equipment used on a particular
day (according to the daily report) and the type of equipment for which Edge
based its claim for equipment losses. Def.’s Reply 8.
Although the Government’s arguments concerning discrepancies in Edge’s
reports may have merit, these are factual issues that cannot be resolved on
summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106
S.Ct. 2505, 91 L.Ed.2d 202 (1986) (when considering a summary judgment
motion, the court’s proper role is not to “weigh the evidence and determine
the truth of the matter,” but rather “to determine whether there is a genuine
issue for trial.”). The Court finds that there are genuine issues of material
fact as to the actual costs incurred by Edge and whether Edge has provided a
“basis for reasonable approximation of such increased costs.” See Wunderlich,
351 F.2d at 969. Thus, summary judgment is not appropriate for Edge’s claim
for damages related to the additional catch basin and six-inch pipe.
c. Insulation on 100 Feet of Pipe (Count IV)
With regard to the insulation of 100 feet of pipe (Count IV), the Government
did not issue a change order for this work. The Government initially argued
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in its motion that the need for the insulation of the pipe stemmed from Edge’s
own actions and decision. See Def.’s Mot. 19. Edge contends that the insulation of the pipe was not in the plans and that the Government directed Edge
to perform this work; therefore, Edge is entitled to an equitable adjustment.
See Pl.’s Resp. 17-19. The Government, however, in its reply brief, does not
address the issue of whether the insulation of the pipe was in the plans nor
does it deny that it directed the insulation of the pipe. See generally Def.’s
Reply 8-10. Thus, the Court concludes that, for purposes of this summary
judgment order, the Government concedes that it ordered the pipe insulation,
and that the Government’s order is a change pursuant to FAR 52.243-4. The
only remaining issue, then, is whether Edge provided a reasonable approximation for the additional costs and time for the pipe insulation. See Def.’s
Reply 8-10.
Similar to its arguments concerning Counts I and II, the Government contends that Edge “cannot demonstrate that it incurred increased costs as a result of the insulation of the pipe.” Def.’s Reply 9. The Government cites
Edge’s failure to provide time sheets, receipts and a “job cost ledger or a copy
of the company books showing the actual costs incurred on the project.” Id.
Edge’s argument is consistent with its prior arguments in that it contends
that it provided a contract impact summary based on daily cost reports showing the labor, equipment, and materials for those days in which FEI performed the installation of the pipe insulation. See Pl.’s Resp. 18.
The Court concludes for the insulation of the pipe (Count IV), as it did for
Count I and Count II, that considering the parties’ arguments and the record,
genuine issues of material fact remain as to whether Edge’s claimed damages
were a reasonable approximation of the actual cost of the installation of the
pipe insulation. Therefore, summary judgment in favor of the Government for
the pipe insulation is not appropriate.
2. Scope of Contract Issues (Counts III and V)
In general, the issue with regard to (1) the two additional catch basins and a
ten-inch pipe (Count III) and (2) the borrow pit operations (Count V), is
whether the work was within the scope of the contract. Whether work is within the scope of the contract is primarily a matter of contract interpretation,
and thus a question of law for the court to decide. See H.B. Mac, Inc. v. United States, 153 F.3d 1338, 1345 (Fed.Cir.1998) (“Determining whether a contract contained indications of a particular site condition ‘is a matter of contract interpretation and thus presents a question of law.’ “) (quoting P.J.
Maffei Bldg. Wrecking Corp. v. United States, 732 F.2d 913, 916
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(Fed.Cir.1984)). The Court agrees with the Government that the alleged additional work in Counts III and V was within the scope of the contract and
that summary judgment on these counts in favor of the Government is warranted.
a. Additional Catch Basins and Ten-inch Storm Pipe (Count III)
Edge submitted a claim to the contracting officer on September 20, 2008 for
“two additional catch basins and a ten-inch storm pipe, seeking $16,289 and
one additional day of contract time.” Def.’s Mot. 18. On December 12, 2008,
the Contracting Officer denied Edge’s claim because the two additional basins and piping were identified as part of a solicitation amendment, dated
July 13, 2004, and thereby incorporated into the contract awarded on September 1, 2004. Id.; Def.’s App. 230-34; see also Def.’s App. 178-79.
Edge did not respond in its brief to the Government’s assertion that the work
related to the two additional catch basins and ten-inch pipe was included in
the scope of the contract. Therefore, the Court finds that Edge has conceded
that the work associated with these items is within the scope of the contract.
Edge has failed to raise a genuine issue of material fact and summary judgment in favor of the Government for the catch basins and ten-inch pipe is
warranted.
b. Borrow Pit (Count V)
Edge submitted a claim to the Contracting Officer, dated September 20, 2008,
seeking an equitable adjustment of $446,494.30 for costs and an additional 45
project days for conducting borrow pit operations.1 Def.’s Mot. 20; Def.’s App.
188-92. The Government denied this claim on December 12, 2008 on the
ground that the contract specifications provided notice to the Contractor that
it would be responsible for any fill and related borrow operations. Def.’s Mot.
20-22; Def.’s App. 230-34.
In addition to arguing that this work was within the scope of the contract-a
question of law-Edge also contends that it relied on certain representations
made by the Government outside the contract documents that led Edge to
conclude that it would not be necessary to include borrow pit operations in its
bid. See Pl.’s Resp. 7. The Court concludes that the possibility of borrow pit
operations was clearly part of the contract specifications, Edge did not rely on
1
Borrow, as defined in the earthwork specifications of the contract, is “satisfactory soil imported from off-site to use as fill or backfill.” Def.’s App. 194, Section 02200 (“Earthwork”),
Part 1.2(N)
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representations by the Government in preparing its bid, and a reasonable
contractor would not have excluded the borrow pit from its bid.
(1) Interpretation of the Scope of the Contract
The Government argues that the earthwork specifications of the contract
(section 02200 Part 3.1) provided that borrow operations, including the cost of
transporting any fill required, and the fill itself, may be required. See Def.’s
Mot. 20-22. Accordingly, bidders should have included costs in their bids. See
id. at 20. Edge merely alleges, without further discussion, that “the plans and
specifications gave no indication that a borrow pit would be necessary,” Pl.’s
Resp. 3, and that neither Edge nor FEI could have anticipated the need for a
borrow pit. Id. at 6.
Where the parties disagree as to the scope of the contract, the court must ascertain the scope based upon the meaning of the terms of the contract. Under
rules of contract interpretation, if the language is unambiguous, the court
must apply the plain meaning of the contract. Ace Constructors, Inc. v. United
States, 499 F.3d 1357, 1361 (Fed.Cir.2007). In addition, the “proper technique
of contract interpretation is for the court to place itself into the shoes of a
reasonable and prudent contractor and decide how such a contractor would
act in interpreting the contract documents.” Int’l Tech. Corp. v. Winter, 523
F.3d 1341, 1350 (Fed.Cir. 2008) (quoting H.B. Mac v. United States, 153 F.3d
1338, 1345 (Fed.Cir. 1998)).
The Court finds the contract unambiguous and that a reasonable and prudent contractor would have recognized the possibility of a borrow pit. The
earthwork specifications require that the contractor provide for “all equipment, materials, labor, tools, and techniques” for filling and backfilling “with
native or imported materials.” Def.’s App. 193, Part 1.1(3). With respect to
site preparation, based on the contour lines and grades established, the contract specified that the “Contractor will be responsible for any additional ...
fill required to ensure that the site is graded to conform to elevations indicated on plans.” Def.’s App. 199, Part 3.1(E). The contract also provided that
borrow, which is imported soil required for filling or backfilling, Def.’s App.
194, Part 1.2(N), “shall be supplied at no additional cost to the Government.”
Def.’s App. 202, Part 3.4(A).
Based on the language of the Contract, contractors are responsible for all labor and materials for filling and backfilling, including any borrow pit operations that may be required. Because the borrow pit was included in the scope
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of the contract, Edge is not entitled to an equitable adjustment, and summary
judgment in favor of the Government is warranted.
(2) Reliance on Government’s Representations
Edge, instead of focusing on the language of the contract, emphasizes that its
claim for additional costs and days associated with borrow pit operations is
based on its reliance on representations by the Government. See Pl.’s Resp. 7.
Edge claims that in determining the scope and costs of its bid, it and its subcontractor relied on statements by the Government at a “pre-bid” meeting in
September of 2004. Id. According to Edge, the Government representative
“stated that the site was balanced, meaning that there would be no need to
import or export soil, other than topsoil.” Id.
The Government explains that the meeting referred to by Edge as a “pre-bid
meeting” was held on September 21, 2004, which was after the bid submission date. See Def.’s Reply 11. The meeting was not a “pre-bid” meeting, but
rather a “pre-construction” conference that occurred “two months after Edge
submitted its bid on July 20, 2004, and three weeks after contract award on
September 1, 2004.” Def.’s Reply 11. In addition, the meeting occurred after
FEI submitted its bid to Edge on September 20, 2004. See Def.’s Reply 11-12;
Erdman Aff. Ex. A. Based on the record, Edge cannot dispute that the meeting, upon which Edge claims to have relied in preparing its bid, occurred after it submitted its bid. Thus, Edge’s argument that it and FEI relied on representations made by the Government in submitting their respective bids has
no merit.
3. Claims Based on Unusually Severe Weather Conditions (Counts VI, VII and VIII)
Edge seeks relief for (1) “additional costs associated with acceleration due to
unseasonable weather” (Count VI); (2) “costs associated with lost productivity
due to unseasonable weather conditions” (Count VII); and (3) “costs associated with lost productivity resulting from rain, freezing conditions and mud”
(Count VIII). Pl.’s Second Am. Compl. ¶¶34-48. Edge claims that it experienced unusually severe weather during the course of the project, contributing
to delays in its performance. See Pl.’s Resp. 20-22. On April 19, 2005, the
Government granted a 63-day extension for the period September 21, 2004
through May 1, 2005, but at no cost to the Government. Def.’s Mot. 7; Def.’s
App. 59-61. On June 30, 2005, Edge requested that the Contracting Officer
issue a change order for $623,795.00 for the additional costs associated with
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the severe weather it experienced. Def.’s App. 81-84. In September 2008,2
Edge ultimately filed its claims with the Contacting Officer for additional extensions of time and costs for the severe weather conditions. When the Government refused to issue change orders and denied Edge’s claims for additional days and costs for unusually severe weather, Edge filed suit in this
Court for breach of contract. Pl.’s Second Am. Compl. ¶¶34-48.
The Government argues that Edge cannot demonstrate from the data it provided, either with the claim it submitted to the Contracting Officer or in response to the Government’s motion for summary judgment, that it experienced unusually severe weather, except for the months of December 2004 and
January 2005. See Def.’s Mot. 22; Def.’s Reply 15. For that time period, the
Government contends that it granted Edge an extension of time for weather
delays.3 Def.’s Reply 15. Edge disputes the Government’s conclusion that
Edge did not experience additional delays for unusually severe weather conditions. Pl.’s Resp. 22. In addition, for weather-related delays, the Government argues that it is not obligated to provide compensation for lost productivity or other damages. See Def.’s Mot. 22-23; Def.’s Reply 15.
a. Compensable Delays: Lost Productivity (Counts VII and VIII)
The Court does not have to decide whether there was an excusable delay due
to unusually severe weather in order to address what seems to be the Government’s contention that, as a matter of law, excusable delays for unusually
severe weather are not compensable in money. See Def.’s Mot. 23.
Federal regulations provide for extensions of time for excusable delays (e.g.,
unusually severe weather), but do not provide for equitable adjustments for
such delays. See generally FAR 52.249-10; see also Fraser Constr. Co. v. United States, 57 Fed.Cl. 56, 59 n. 2 (2003). Equitable adjustments are governed
and limited by the changes clause, whereby a contractor is entitled to an equitable adjustment only for those changes ordered or directed by the Contracting Officer pursuant to the changes clause.4 See FAR 52.143-3(a)-(d). As
a result, contractors are not entitled to compensation for excusable delays not
caused by the government. See, e.g., Sauer Inc. v. Danzig, 224 F.3d 1340,
2
See supra section I, discussing the timeline of Edge’s complaints filed with this Court and
its claims filed with the Contracting Officer.
3
The Government granted a 63-day extension for weather-related delays for the period
from September 21, 2004 until May 1, 2005. Def.’s Reply 15.
4
Changes pursuant to FAR 52.243-4 include direction by the Contracting Officer for project
acceleration. FAR 52.243-4 (a)(4). Project acceleration is discussed infra section III.A.3(c).
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1348 (Fed.Cir. 2000) (requiring that the contractor “demonstrate[ ] a government-imposed delay, i.e., a compensable delay” to recover damages); cf. Luria
Bros. & Co., Inc. v. United States, 177 Ct.Cl. 676, 369 F.2d 701, 714 (1966)
(recognizing that the contractor may recover costs when loss of productivity
results from the government’s actions). Thus, because the delays Edge experienced from unusually severe weather conditions were not caused by the
Government, Edge is not entitled to an equitable adjustment for lost productivity due to severe conditions. Since Edge does not have a valid claim for lost
productivity damages due to unusually severe weather, summary judgment
in favor of the Government is appropriate.
b. Extension of Time for Unusually Severe Weather
In addition to lost productivity damages, Edge requested an increase in time
for project completion of 237 days due to severe weather conditions. Pl.’s
Resp. 25. The Contracting Officer denied Edge’s request because the data
presented by Edge “indicates that it experienced completely normal and average weather conditions for the project location.” Def. Mot. 23-24. Edge vigorously argues otherwise and has provided sufficient evidence to at least establish a factual dispute for resolution at trial.
In determining whether a contractor is entitled to an extension of time for
weather-related delays, the contractor must provide evidence of unusually
severe conditions. Broome Constr. Inc. v. United States, 203 Ct.Cl. 521, 492
F.2d 829, 835 (1974). In Broome Construction, the court declared that
“[u]nusually severe weather must be construed to mean adverse weather
which at the time of year in which it occurred is unusual for the place in
which it occurred.” Id. Thus, unusually severe weather is determined based
on a comparison of the conditions experienced by the contractor and the
weather conditions of prior years. Cape Ann Granite Co. v. United States, 100
Ct.Cl. 53, 71-72 (1943). Unusually severe conditions, however, are “not established simply because weather charts may indicate that on a certain day the
precipitation is greater than on some other days in some other year, since
variance in weather patterns is to be expected.” Broome, 492 F.2d at 835.
The Government argues that “Edge cannot demonstrate that it experienced
anything other than typical weather in Flint, Michigan, during its performance of the contract work.” Def.’s Mot. 24. The Government states that the
weather data that Edge provided in its justification for its claim submitted to
the contracting officer “shows that the average temperature for Flint Michigan, during September 2004, when the notice to proceed was issued, was 64.2
degrees fahrenheit,” Id. From annual data of prior years, the Government
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concludes that “[t]his is similar to other average temperatures” for the same
months in the previous four years. Def. Mot. 24.
Edge contends that a report of the National Oceanic and Atmospheric Administration (“NOAA”) shows that the 2004 to 2005 winter was anything but
normal. Pl. Resp. 22-23; Pl.’s Ex. AA. In addition, the average temperatures
are misleading in that they fail to account for the “extreme swings in highs
and lows for each month,” and therefore, do not reflect the adverse effect on
the work conditions. See Pl. Resp. 23. Edge asserts that it “has provided information that establishes not only that unusually severe weather conditions
were encountered, but [that it] has also maintained diligent records regarding the days and extent of the severe weather.” Pl. Resp. 21-22.
The Government notes in its reply brief that Edge, in its response, submitted
for the first time “official weather data showing that it experienced an extreme fluctuation of temperatures during December 2004 and January 2005.”
Def. Reply 14. The Government reiterates that on May 31, 2005, the Contracting Officer granted a 63-day extension for weather related delays, and
thus, Edge is not entitled to additional days. Def. Reply 15.
The weather data is sufficiently equivocal such that the Court cannot resolve
on summary judgment whether Edge is entitled to an extension of project
time for weather-related delays.
c. Compensable Delays: Project Acceleration (Count VI)
Edge also alleges that it is entitled to compensation for “additional costs associated with acceleration due to unseasonable weather” (Count VI). Pl.’s Second Am. Compl. ¶35. Acceleration-actual or constructive-is a basis upon
which a contractor might be able to recover damages for unusually extreme
weather. See FAR 52.243-4 (a)(4); Fraser Constr. v. United States, 384 F.3d
1354, 1360-61 (Fed.Cir. 2004). For constructive acceleration, the contractor
must prove an excusable delay, that an extension was requested and denied,
the government insisted on completion within a timeframe that did not allow
for the extension, and as a result, the contractor incurred additional costs. Id.
at 1361.
The Government appears to respond to Edge’s claim for damages for project
acceleration only as part of its argument under the heading of “Loss of Production Due to Unseasonable Weather.” See Def.’s Mot. 22-24. Therefore, the
Court is warranted in concluding that the Government does not dispute that
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unseasonable weather, if proved, can be a legitimate basis for sustaining a
claim founded on constructive acceleration.
As just discussed, genuine issues of material fact remain as to whether Edge
was entitled to additional days for unusually severe weather conditions. Because this disputed issue is a factor in determining project acceleration damages (i.e., whether delays were excusable), summary judgment in favor of the
Government is inappropriate on Edge’s claim for acceleration due to unseasonable weather.
B. Wrongful Termination for Default
The Government terminated the contract with Edge for default on September
9, 2005, pursuant to FAR 52.249-10, based on Edge’s performance on the contract and the Government’s lack of confidence that Edge would complete the
remainder of the project by the completion date. Def.’s Mot. 11; Def.’s App.
111-20. Edge alleges that the Government’s termination for default was improper and requests that the Court declare that the termination be considered one for convenience. Pl.’s Second Am. Compl. ¶57. Edge also seeks damages of $6,938,286.00 related to the wrongful termination for amounts
expended by its surety. Id. at ¶¶58-61. The Government avers, based on the
totality of the circumstances, that when the Contracting Officer terminated
the contract for default, the agency “reasonably believed that Edge could not
perform the remaining contract work according to the contract plans and
specifications within the contract completion date.” Def.’s Mot. 32. The Court
finds that a genuine issue of material fact remains as to the Government’s
termination for default, precluding summary judgment.
The Contract incorporated FAR 52.249-10, the default clause, which gives the
Government the right to terminate a contract for default if the contractor “refuses or fails to prosecute the work or any separable part, with the diligence
that will insure its completion within the time specified in [the] contract including any extension, or fails to complete the work within this time.” FAR
52.249-10(a). The decision to terminate for default is within the discretion of
the contracting officer’s business judgment. Engineered Maint. Servs., Inc. v.
United States, 55 Fed.Cl. 637, 641 (2003) (citing Florida v. United States, 33
Fed.Cl. 188, 196 (1995)). The contracting officer, however, must not make the
decision to terminate for default in an “arbitrary and capricious” manner.
Darwin Constr. Co. v. United States, 811 F.2d 593, 596 (Fed.Cir. 1987). The
government bears the burden of proof as to whether the termination for default was justified. Lisbon Contractors, Inc. v. United States, 828 F.2d 759,
765 (Fed.Cir. 1987).
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The government, however, may not terminate a contractor’s right to proceed
under the default clause if “[t]he delay in completing the work arises from
unforeseeable causes beyond the control and without the fault or negligence
of the Contractor.” FAR 52.249-10(b)(1). Unforeseeable causes include “unusually severe weather.” FAR 52.249-10(b)(1)(x). The contractor must notify
the contracting officer of the causes of the delay, and the contracting officer
will then determine if an extension of time is warranted. FAR 52.24910(b)(2). Although the contracting officer’s decision as to an extension of time
is “final and conclusive on the parties, ... [it is] subject to appeal under the
Disputes clause.” Id.
Whether a default termination was proper is a question of law based on several underlying factual inquiries. McDonnell Douglas Corp. v. United States,
567 F.3d 1340, 1347, 1348 (Fed.Cir. 2009) (“A default termination, even
though ultimately a question of law, is a fact-sensitive inquiry.”). For the
government to prove that a termination for default for failure to make progress was justified, it must demonstrate that the contracting officer reasonably believed that “there was no reasonable likelihood that the contractor
could perform the entire contract effort within the time remaining for contract performance.’” Id. at 1346 (quoting McDonnell Douglas Corp. v. United
States, 323 F.3d 1006, 1017 (Fed.Cir. 2003)); Danzig v. AEC Corp., 224 F.3d
1333, 1336-37 (Fed.Cir. 2000). Thus, the factual inquiries include, inter alia,
the actual performance required by the contract, the contract completion
date, the work required to complete the contract, and the amount of time to
complete such work. See McDonnell Douglas, 323 F.3d at 1016-17. If there is
a genuine issue of dispute about these factual inquiries, as to affect the outcome of the court’s determination of whether the government was justified in
its default termination, then summary judgment would not be appropriate.
Additionally, a court’s review of a termination for default must be based on
the totality of the circumstances and “tangible, direct evidence reflecting the
impairment of timely completion.” Id. at 1016. The Government presents
compelling arguments on several fronts in an effort to convince the Court
that the Contracting Officer had a reasonable belief that there was no reasonable likelihood that Edge could perform the entire contract within the
time for completion of the contract. See Def.’s Mot. 27-31. The completion
date of the contract, however, could have been affected by the additional days
that Edge has claimed for unusually severe weather, if Edge is entitled to
those days. As the Court has already determined, there remains a genuine
dispute about the existence of unusually severe weather. Furthermore, the
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Government did not address Edge’s statement that, although the Government granted Edge a 63-day extension of the ETA, it did not extend the completion date of the contract accordingly. Def.’s Mot. 30; Pl.’s Resp. 27 n. 4. In
considering its decision to terminate the contract for default, the Government
assessed whether there was any reasonable likelihood as to whether Edge
could complete the remaining work by the original overall completion date.
Def.’s Mot. 28. Edge contests the completion date because it was entitled to
“an extension of time for completion of the ETA and the overall Project.” Pl.’s
Resp. 3.
The Court must first resolve the factual dispute as to the amount of time remaining for performance before it can determine whether the Contracting
Officer had a reasonable belief that there was no reasonable likelihood of
completion within the time remaining. See McDonnell Douglas, 323 F.3d at
1017. Thus, a genuine issue of material fact remains, and the Government is
not entitled to summary judgment on Edge’s claim that the termination for
default was improper.
IV. Conclusion
The Government’s motion for summary judgment on Edge’s ten counts is
GRANTED in part and DENIED in part:
Counts I, II, and IV (breach of contract for undisputed additional work)summary judgment is DENIED because genuine issues of material fact remain as to the actual costs for additional work performed under the contract.
Counts III and V (breach of contract for alleged additional work)-summary
judgment is GRANTED because the alleged additional work was within the
scope of the contract.
Counts VI (breach of contract for project acceleration for unseasonable
weather)-Summary judgment is DENIED because genuine issue of material
fact as to “unseasonable weather,” and the Government failed to establish
that it was entitled to judgment as a matter of law.
Counts VII and VIII (breach of contract for lost productivity resulting from
unseasonable weather)-summary judgment is GRANTED because Edge is
not entitled to equitable adjustments for lost productivity for unusually severe weather.
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Counts IX and X (wrongful termination for default)-summary judgment
DENIED because a genuine issue of material fact remains as to the completion date of the project for purposes of assessing whether the Government
was justified in its default termination.
The parties shall file a Joint Status Report on or before December 3, 2010,
addressing how they propose to proceed and a schedule for such proceedings.
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Eichleay Corporation
60-2 BCA ¶2688
July 29, 1960
Appearances for the Government: Lt. Col. Burton K. Philips, JAGC, Chief
Trial Attorney; Lt. Col. Kerlin J. Bragdon, JAGC, Trial Attorney; Lawrence
A. Layton, Esq., Associate Trial Attorney; U.S. Army Engineer District,
Pittsburgh. Appearances for the Appellant: Thorp, Reed & Armstrong, James
B. Hecht and Kenneth G. Jackson, Esqs., Of Counsel
Opinon by Colonel MacLeod
This is an appeal from three decisions of the contracting officer determining
the amount of equitable adjustments due to the contractor under the Suspension of Work provisions of the above contracts. All costs allowed by the contracting officer have been settled and paid except for $100.00 on each contract
to keep them open for the purposes of this appeal, and for the amount of
Home Office Expense allocable to the delays. The parties agree as to the
amounts of the basic figures, but disagree as to the method by which this
item should be computed. The amounts in dispute are as follows:
Col. 1: Adjusted
Corps. OH Claim
after Dec of C.O.
Contract 750
Eichleay (Prime)
Quaker (sub)
Allegheny (sub)
$31,768
4,988
15,314
$52,070
Eichleay also claims 15% of total of subcontractors” claims
A $58,626
Contract 752
Eichleay (Prime)
$30,115
Quaker (sub)
4,394
Daniels (sub)
5,531
$40,040
Eichleay also claims 15% of total of Subcontractors” claims
B $45,301
© Management Concepts Incorporated
Col. 2: C.O.
Dec. on
Corp. OH
Col. 3: Col. 1 minus
Col. 2 Amt involved
in appeals
$6,364
5,896
2,797
$15,057
6,556
$25,404
minus 908
12,517
$37,013
6,556
A $15,057
A $43,569
$6,015
6,631
1,846
$14,492
5,261
$24,100
minus 2,237
3,685
$25,548
5,261
B $14,492
B $30,809
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Col. 1: Adjusted
Corps. OH Claim
after Dec of C.O.
Contract 758
Eichleay (Prime)
Allegheny (sub)
$32,683
13,879
$46,562
Eichleay also claims 15% of the total of
subcontractor’s claim
C $49,493
TOTAL — A+B+C
$153,420
Col. 2: C.O.
Dec. on
Corp. OH
Col. 3: Col. 1 minus
Col. 2 Amt involved
in appeals
$3,574
3,022
$6,596
2,931
$29,109
10,857
$39,966
2,931
C $6,596
$36,145
C $42,897
$117,275
The contracts are each for the construction of a NIKE site in the vicinity of
Pittsburgh, Pennsylvania. They have similar terms, including General Provisions No. 3, “Changes,” 4, “Changed Conditions,” and 6, “Disputes.” The appeal is before us as the duly authorized representative of the Secretary of the
Army under the terms of the last provision. Paragraph GC- 11 of the specifications of each contract, entitled “Suspension of Work” provides as follows:
GC-11. SUSPENSION OF WORK: The Contracting Officer
may order the Contractor to suspend all or any part of the work
for such period of time as may be determined by him to be necessary or desirable for the convenience of the Government. Unless such suspension unreasonably delays the progress of the
work and causes additional expense or loss to the Contractor,
no increase in contract price will be allowed. In the case of suspension of all or any part of the work for an unreasonable
length of time causing additional expense or loss, not due to the
fault or negligence of the Contractor, the Contracting Officer
shall make an equitable adjustment in the contract price and
modify the contract accordingly. An equitable extension of time
for the completion of the work in the event of any such suspension will be allowed the Contractor; provided however, that the
suspension was not due to the fault or negligence of the Contractor. Provided, further, that no suspension will be ordered or
adjustments made under this paragraph for delays arising as
the result of changes ordered or as the result of changed conditions encountered under the respective clauses relating to
Changes and Changed Conditions or as the result of any delays
for which an extension of time may be granted under the delays
— damages clause of this contract.
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For the sake of brevity we will refer to the individual contracts by their serial
numbers only. Contract No. 750, the first one, was executed on 2 July 1954
for an original consideration of $494,617.91 (estimated), and was to have
been completed within 210 days after receipt of notice to commence work. It
was amended by 55 modifications, adding $139,773.57 to the estimated price.
With additions due to unit increases and the amounts heretofore allowed by
the contracting officer on account of suspension of work, the Government has
paid out a total of $738,316 on this contract. It was actually completed on 1
December 1955, in 505 days. Since the parties have used 504 days in their
computations we will do the same.
Contract No. 752 was executed on 8 July 1954 for an original consideration of
$483,415.92 (estimated), and was to have been completed within 210 days
after receipt of notice to commence work. It was amended by 61 modifications, adding $134,510.06 to the estimated price. With additions due to unit
increases and the amounts heretofore allowed by the contracting officer on
account of suspension of work, the Government has paid out a total of
$709,747 on this contract. It was completed on 15 October 1955, in 456 days.
Contract No. 758 was executed on 19 July 1954 for an original consideration
of $547,803.35 (estimated), and was to have been completed within 210 days
after receipt of notice to commence work. It was amended by 58 modifications, adding $166,049.74 to the estimated price. With additions due to unit
increases and the amounts heretofore allowed by the contracting officer on
account of suspension of work, the Government has paid out a total of
$796,066 on this contract. It was completed on 1 December 1955, in 486 days.
Since the parties have used 485 days in their computations, we will do the
same.
The increased costs of the extra work required by the changes to the contracts have been provided for in the above change orders and accepted by appellant. The costs here in issue are those arising solely from the delays of the
Government over and above a reasonable period of time in issuing the change
orders, as provided by GC-11, “Suspension of Work,” set forth above. After
correspondence and a series of conferences, the parties agreed on direct costs
but were unable to agree on the amount of home office expense, or overhead
costs, to be allocated to the delay periods of these contracts. The contracting
officer’s findings and determinations, with respect to each contract, allowed
the following, including overhead:
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Contract
750
752
758
Allowed
$60,777.00
57,167.00
34,035.00
$151,979.00
Overhead Included
$15,057.00
14,492.00
6,596.00
$36,145.00
Unreasonable Delay
194 days
167 days
177 days
After the contracting officer’s decisions appellant accepted the determination
of the periods of unreasonable delay, as well as the direct costs, and took
timely appeals to the Engineer Claims and Appeals Board as to the overhead
costs only. That Board, in its opinion, C. & A Nos. 1427, 1428, and 1429, affirmed the actions of the contracting officer. A timely appeal was taken to
this Board. The amounts in controversy, adjusted to the direct costs and delay periods by agreement, are as set forth at the beginning of this opinion.
The differences are due to the methods of computation used by the parties.
There is no disagreement as to the amounts involved in the computations.
Appellant computes its claimed amount by determining a daily overhead dollar amount and multiplying it by the agreed number of days of delay. This
computation is made by the following formula:
1. Contract billings/Total billings for contract period × Total overhead for
contract period = Overhead allocable to the contract.
2. Allocable overhead/Days of performance = Daily contract overhead
3. Daily contract overhead × No. days delay = Amount claimed.
The claims of the subcontractors are computed in the same manner. The
computation of the total claim is therefore as follows:
Contract No. 750
1. $684,433.78/$10,961,044.03 = 6.25% × $1,320,455.12 = $82,528.45
2. $82,528.45/504 = $163.75
3. $163.75 × 194 = $31,767.50 main office overhead during suspension
Quaker Engineering & Supply Co., excavation subcontractor
1. $93,496.36/$569,990.42 = 16.4% × $79,019.82 = $12,959.25
2. $12,959.25/504 = $25.71
3. $25.71 × 194 = $4,988.00 — Quaker main office overhead
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Allegheny Electric Co., electrical subcontractor
1. $80,315.29/$381,294.69 = 21.1% × $188,562.84 = $39,786.76
2. $39,786.76/504 = $78.94
3. $78.94 × 194 = $15,314 — Allegheny main office overhead
To this is added 15% of the subcontractors’ total claim.
Contract No. 752
1. $656,439.96/$9,960,371.62 = 6.59% × $1,247,808.82 = $82,230.60
2. $82,230.60/456 = $180.33
3. $180.33 × 167 = $30,115.11 — Main office overhead
Quaker Engineering & Supply Co., excavation subcontractor
1. $95,047.55/$569,990.42 = 16.7% × $71,836.20 = $11,996.65
2. $11,996.65/456 = $26.31
3. $26.31 × 167 = $4,394 — Quaker main office overhead.
Daniels Electric Equipment Co., electrical subcontractor
1. $84,573.00/$264,326.85 = 32% × $51,900.96 = $16,608.31
2. $16,608.31/456 = $36.42
3. $36.42 × 152 = $5,536 — Daniels main office overhead.*
To this is added 15% of the subcontractors’ total claim.
Contract No. 758
1. $766,690.91/$10,567,199.50 = 7.26% × $1,233,563.65 = $89,556.72
2. $89,556.72/485 = $184.65
3. $184.65 × 177 = $32,683.05
Allegheny Electric Co., electrical subcontractor
1. $79,285.64/$381,037.81 = 20.8% × $182,848.81 = $38,032.33
2. $38,032.33/485 = $78.41
3. $78.41 × 177 = $13,879
To this is added 15% of the subcontractor’s total claim.
The Government bases its computations upon the ratio of the direct excess
costs allowed on the suspension claim to all of the contractor’s direct costs for
*
The amount of $5,531 is stated in the contracting officer’s letter of 13 November 1957, to
which appellant has agreed. It will accordingly be used.
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the year 1955, which is considered representative of the period under the
claimed suspension of work. The amount allowed is obtained by application of
this ratio to appellant’s corporate overhead for 1955. The computations are as
follows:
Contract No. 750
1. Contractor’s direct costs on suspension claim
2. Subcontractors’ total costs (including overhead) on suspension claim
3. Total of Contractor’s excess direct costs (1 + 2)
$22,313
32,100
$54,413
4. Contractor’s direct costs of all contracts for calendar year
$7,374,449
1955
5. Subcontractors’ total excess (direct) costs:
Contract No. DA-18-020-Eng-750
$32,100
Contract No. DA-18-020-Eng-752
3,617
Contract No. DA-18-020-Eng-758
8,686
74,403
6. Contractor’s total direct costs (4 + 5)
$7,448,852
7. Percent of total excess direct costs on suspension claim to
.73%
total direct costs (3/6)
8. Corporate overhead for calendar year 1955
$871,756
$6,364
9. Corporate overhead allocable to excess direct costs (7 × 8)
Quaker Engineering and Supply Company, excavation subcontractor
1. Direct costs on suspension claim
$18,169
2. Total direct costs for 1955
$192,076
3. 1/2
9.46%
4. Corporate overhead for 1955
$62,325
$5,896
5. Overhead allocable to excess direct costs (3 × 4)
Allegheny Electric Company, electrical subcontractor
1. Direct costs on suspension claim
2. Total direct costs — year ended 31 August 1955
3. 1/2
4. Corporate overhead — year ended 31 August 1955
5. Overhead allocable to excess direct costs (3 × 4)
170
$5,238
$199,949
2.62%
$106,767
$2,797
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Contract No. 752
1. Contractor’s direct costs on suspension claim
$17,535
2. Subcontractors’ total costs (including overhead) on suspen$33,617
sion claim
3. Total of Contractor’s excess direct costs (1 + 2)
$51,152
4. Contractor’s direct costs of all contracts for calendar year
$7,374,449
1955
5. Subcontractors’ total excess (direct) costs:
Contract No. DA-18-020-Eng-750
$32,100
Contract No. DA-18-020-Eng-752
33,617
Contract No. DA-18-020-Eng-758
8,686
$74,403
6. Contractor’s total direct costs (4 + 5)
$7,448,852
7. Percent of total excess direct costs on suspension claim to
.69%
total direct costs (3/6)
8. Corporate overhead for calendar year 1955
$871,756
$6,015
9. Corporate overhead allocable to excess direct costs (7 × 8)
Quaker Engineering and Supply Company, excavation subcontractor
1. Direct costs in suspension claim
$20,428
2. Total direct costs for 1955
$192,076
3. 1/2
10.64%
4. Company overhead for 1955
$62,325
$6,631
5. Overhead allocable to excess direct costs (3 × 4)
Daniels Electric Equipment Co., electrical subcontractor
1. Direct costs on suspension claim
2. Total direct costs for 1955
3. 1/2
4. Company overhead for 1955
5. Overhead allocable to excess direct costs (3 × 4)
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$4,712
$154,477
3.05%
$60,533
$1,846
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Contract No. 758
1. Contractor’s direct costs on suspension claim
$21,775
2. Subcontractor’s total costs (including overhead) on suspen8,686
sion claim
3. Total of Contractor’s excess direct costs (1 + 2)
$30,461
4. Contractor’s direct costs of all contracts for calendar year
$7,374,449
1955
5. Subcontractor’s total excess costs:
Contract No. DA-18-020-Eng-750
$32,100
Contract No. DA-18-020-Eng-752
33,617
Contract No. DA-18-020-Eng-758
8,686
$74,403
6. Contractor’s total direct costs (4 + 5)
$7,448,852
7. Percent of total excess direct costs on suspension claim to
.41%
total direct costs (3/6)
8. Corporate overhead for calendar year 1955
$871,756
$3,574
9. Corporate overhead allocable to excess direct costs (7 × 8)
Allegheny Electric Company, electrical subcontractor
1. Direct costs on suspension claim
2. Total direct costs for year ended 31 August 1955
3. 1/2
4. Corporate overhead — year ended 31 August 1955
5. Overhead allocable to excess direct costs (3 × 4)
$5,664
$199,949
2.83%
$106,767
$3,022
The problem out of which this dispute arises is how to allocate home office
expenses incurred during a period of suspension of work. These expenses continue during temporary or partial suspensions, and it was in this case not
practical for the contractor to undertake the performance of other work which
might absorb them. There is no exact method to determine the amount of
such expenses to be allocated to any particular contract or part of a contract.
It has been held a number of times that it is not necessary to prove a specific
amount, but only to determine a fair allocation for the purpose of compensating a contractor for delay by the Government. Fred R. Comb Co. v. United
States, 103 C. Cls. 174, 184 (1945); B.W. Construction Co. v. United States,
104 C. Cls. 608, 643-644 (1945), cert. den. 327 U. S. 785; Irwin & Leighton v.
United States, 101 C. Cls., 455, 481 (1944); Brand Investment Co. v. United
States, 102 C. Cls. 40, 58 Fed. Supp. 749 (1944), cert. den. 324 U. S. 850.
Appellant has based its claim on an allocation of the total recorded main office expense to the contract in the ratio of contract billings to total billings for
the period of performance. The resulting determination of a contract alloca-
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tion is divided into a daily rate, which is multiplied by the number of days of
delay to arrive at the amount of the claim. This method of computation relies
primarily on the duration of the suspension as the criterion for allocating the
contract expenses of the main office. The same formula has been used by the
Court of Claims in Fred R. Combs Co. v. United States, 103 C. Cls. 174, 181,
183-184 (1945); Houston Ready-Cut House Co. v. United States, (C. Cls. 1951)
96 Fed. Supp. 629, 119 C. Cls. 120, 172-173, 192-193 (1951). In other cases
the daily rate and total for the delay period have been determined after allocation of contract overhead according to monthly gross, B.W. Construction Co.
v. United States, 104 C. Cls. 608, 643-644 (1945), cert. den. 327 U. S. 785, or
cost of work, Irwin & Leighton v. United States, 106 C.Cls. 398, 431, 457, 65
Fed. Supp. 794, 800 (1946); Anthony P. Miller, Inc. v. United States, 111 C.
Cls. 252, 321-322, 329-330, 337, 77 Fed. Supp. 209 (1948); S.C. Sachs v. United States, 104 C.Cls. 372, 379-383, 386, 394, 63 Fed. Supp. 59 (1945); James
Stewart & Co., Inc. v. United States, 105 C. Cls. 284, 321, 330, 63 Fed. Supp.
653 (1946); Henry Ericsson Co. v. United States, 104 C. Cls. 397, 414-415,
423, 427-428, 62 Fed. Supp. 312 (1945).
The Government challenges appellant’s computations generally on the
grounds that, first, no increase in the overhead rate has been proven to have
been incurred during the suspension periods, and, second, the allocation does
not accurately reflect the facts. In considering these matters it must be borne
in mind that overhead costs, including the main office expenses involved in
this case, cannot ordinarily be charged to a particular contract. They represent the cost of general facilities and administration necessary to the performance of all contracts. It is therefore necessary to allocate them to specific
contracts on some fair basis of proration. While the overhead rate did not increase during the performance of these contracts, it is not questioned that the
main office expense continued during the periods of suspension. The Government has recognized that fact in making any allocation of it to these contracts. The cases cited hold, as the Government suggests, that it is not required that specific direct amounts be shown to have arisen from the specific
contracts. It has, however, been sufficiently demonstrated by the mere fact of
prolongation of the time of performance, and the continuation of main office
expenses, that more of such expenses were incurred during the period of performance than would have been except for the suspension, Fred R. Combs,
Co. v. United States, supra, at pp. 183-184; Henry Ericsson v. United States,
supra, at pp. 414-415, 423, 427-428. The principal question is, how much of
the excess must be properly allocated to these contracts.
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The Government has raised a number of objections to the appellant’s method
of allocation. We shall consider them individually.
1. Appellant has been inconsistent in the method of computation of its claim
at various stages of the negotiations before the contracting officer’s findings
and determinations. It does not appear, however, that there is any dispute as
to the basic figures upon which the computations are based. We need only
decide what constitutes a fair and realistic allocation of the main office expenses.
2. The suspension applied to only about 50 per cent of the work, and direct
costs were continuously incurred on unaffected work. To the extent that
overhead expenses were incurred which were applicable to the partial suspension, appellant is entitled to recover them. It is appropriate, in this connection, to use the entire contract as a measure of the entire overhead allocable to the contract.
3. The greatest impact of main office expenses is felt in the early stages of
performance. No data has been submitted to demonstrate the nature of the
influence of this factor in the present situation. It is noted that the method
here adopted is the one approved by the Court of Claims in the above-cited
cases.
4. Main office contribution to these contracts is less than to appellant’s commercial work because of the high percentage of subcontracting, and the fact
that most of the work done by the prime contractor was labor. We fail to see
how this factor is of sufficient significance to materially affect the applicability of the method of allocation approved by the Court of Claims to the facts of
this case.
5. The procurement of additional work by way of unit increases and change
orders involved no expense or effort to appellant. It is not shown that this affects the amount of home office expense allocable to idle time.
The Government supports its computations on the basis that it is the normal
accounting practice in construction contracts to apply the company overhead
factor to direct costs. It suggests that the excess overhead in the period of
suspension, when there were little or no direct costs, should be the difference
between actual overhead computed on that basis and overhead that would
have been incurred had there been no suspension, and the direct costs had
been incurred when they should have been. The formula suggested on this
basis, however, does no more than redistribute the direct costs actually in-
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curred, without taking into account those additional indirect costs which are
incurred during and because of the suspension periods. The Government’s
theory stresses the conventional percentage relationships between overhead
and direct costs, and between the Government contract work and commercial
work. On the other hand, the very nature of this claim is such that these relationships must of necessity be distorted because of the relatively small direct
costs incurred during and as a result of the period of delay.
In accordance with these considerations, we conclude that appellant’s method
of computation offers a realistic method of allocation of continuing home office expenses, which has been approved in cases similar to this one. In accepting the formula, however, we find necessary some modifications of the
amounts to which it is applied. In the first place, the company overhead determined by appellant for the period of performance includes certain amounts
which are not properly chargeable to these contracts. The first of these is office expense of a sales office maintained in California, amounting to $27,125
for 1954 and $35,530 for 1955, or a total of $62,655 for the two years during
which the contracts were performed. The second is $9,918.81 salaries paid to
three administrative officials during this time. These officials were assigned
exclusively to the contracts, and their salaries have been included as direct
charges.
In addition to these amounts, appellant claims 15 per cent overhead on all
additional allowances to subcontractors. The Government contends, and we
agree, that this would be a duplication of the amounts already computed by
appellant. The claim is determined by the allocation of a portion of all main
office expense incurred by appellant. That is a determinable amount, and the
addition to it of a percentage of any expenses would be the addition of overhead not actually incurred.
With these modifications, the amount of main office expense to which appellant is entitled is computed as follows:
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Contract No. 750
A. Prime contractor
1.Allocable company overhead
$1,320,455.12
Less:
California office expense
$62,655.00
Salaries allowed direct
9,918.81
$72,573.81
Adjusted company overhead
$1,247,881.31
2. 6.25% × $1,247,881.31 = $77,992.58 — Contract overhead
3. $77,992.58/504 = $154.75 — Daily rate
4. $154.75 × 194 = $30,021.50
B. Quaker — excavation subcontractor
C. Allegheny — electrical subcontractor
Total on Contract No. 750
$4,988.00 supra
$15,314.00 supra
$50,323.50
Contract No. 752
A. Prime contractor
1. Allocable company overhead
$1,247,808.82
Less:
California office expense
$62,655.00
Direct salaries
9,918.81
$72,573.81
Adjusted company overhead
$1,175,235.01
2. 6.59% × $1,175,235 = $77,447.98 — Contract overhead
3. $77,447.98/456 = $169.84 — Daily rate
4. $169.84 × 167 = $28,363.28
B. Quaker — excavation subcontractor
C. Daniels — electrical subcontractor
Total on Contract No. 752
176
$4,394.00 supra
$5,531.00 supra
$38,288.28
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Contract No. 758
A. Prime contractor
1. Allocable company overhead
$1,233,563.65
Less:
California office expense
$62,655.00
Direct salaries
9,918.81
$72,573.81
Adjusted company overhead
$1,160,989.84
2. 7.26% × $1,160,989.84 = $84,287.86 — Contract overhead
3. $84,287.86/485 = $173.79 — Daily rate
4. $173.79 × 177 = $30,760.83
B. Allegheny — electrical subcontractor
Total on Contract No. 758
$13,879.00 supra
$44,639.83
The amounts herein found to be due to the appellant, and the amounts allowed by the contracting officer are summarized as follows:
Contract No.
750
752
758
Totals
Contracting Officer
$15,057
14,492
6,596
$36,145
ASBCA
$50,323.50
38,288.28
44,639.83
$133,251.61
Difference
$35,266.50
23,796.28
38,043.83
$97,106.61
The appeal is accordingly sustained in the amounts of $35,266.50 for Contract No. 750, $23,796.28 for Contract No. 752, and $38,043.83 for Contract
No. 758.
John W. MacLeod, Colonel, JAGC, Member of Division No. 4, Army Contracts
Appeals Panel
We concur
Joseph A. Avery, Acting Chairman of the Army Contract Appeals Panel and
Member of Division No. 4
Willard Winter, Member of Division No. 4, Army Contract Appeals Panel
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Global Construction
v.
Department of Veterans Affairs
10-1 BCA ¶34363
DENIED: January 28, 2010
Cynthia S. Emerson of Emerson Law Firm P.C., Eureka Springs, AR; and
Joree G. Brownlow, Cordova, TN, counsel for Appellant. Deborah K. Morrell
and Harold W. Askins, Office of Regional Counsel, Department of Veterans
Affairs, Decatur, GA, counsel for Respondent.
Before Board Judges Somers, Goodman, and Steel
SOMERS, Board Judge.
Appellant, Global Construction, Inc. (Global) has challenged a contracting
officer’s decision to terminate for default a contract for construction work at
the Department of Veterans Affairs Medical Center, located in Augusta,
Georgia. We find that the Government has sustained its burden to justify the
termination and deny the appeal.
Findings of Fact
On September 16, 2004, the Department of Veterans Affairs (VA or the Government) awarded a contract to Global. The contract required Global to provide all labor, materials, equipment, and supervision for the demolition and
reconstruction of the Spinal Cord Injury Unit in the downtown division of the
Augusta VA Medical Center, Augusta, Georgia. Appeal File, Exhibit 1.1 The
specifications included the building of a courtyard with a greenhouse, the
construction of a cystoscopy suite comprised of three lead-lined rooms, and
the installation of litter baths with corresponding plumbing features to be
used for the specialized treatment of spinal cord injury patients. Exhibit 3
(Contract Specifications).
The original contract contained three construction phases. The contracting
officer issued a notice to proceed on October 18, 2004. Exhibit 2. The contract
required that all work be completed within 660 days from receipt of the notice
to proceed, or, in other words, no later than August 29, 2006. Id. Phase 1 was
1
All exhibits are found in the appeal file, unless otherwise noted.
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completed in June 2005. Phase 2 began on June 13, 2005. Starting on July
11, 2006, during Phase 2, the parties met on a bi-weekly basis to inspect the
progress of the construction and to address issues as the project progressed.
Over the course of the contract, the parties extended the time for contract
performance through the issuance of bilateral contract modifications. See,
e.g., Exhibit 110, Supplemental Agreement No. 2 and Time Extension No. 1
at 3. Even with these extensions, however, subcontractor coordination issues
and turnover of contractor management, combined with Global’s apparent
misunderstanding of certain contract requirements, caused repeated delays
to the project.2
Thus, in October 2006, Global submitted a revised schedule changing the anticipated completion date of Phase 2 from the beginning of November to the
end of December 2006. The schedule did not address Phase 3 of the project.
On November 22, 2006, the contracting officer noted that, based upon the
current pace of construction, it did not appear that Global could complete
Phase 2 on time. The contracting officer suggested that Global review the
current schedule and initiate action to ensure completion or submit a revised
schedule. Exhibit 162.
On December 19, 2006, when it became apparent that Global would not complete Phase 2 in accordance with its schedule, the contracting officer asked
Global to submit a revised schedule, stating as follows:
Please resubmit a revised timeline reflecting a realistic attainable completion date. In addition you must address the additional time required for completion and request time extensions
with consideration. Even though this job is behind schedule, it
is our hope that the current hurdles can be rectified and this
contract completed in a timely manner.
Exhibit 163.
Global submitted a revised schedule on January 17, 2007. In addition, Global
requested a sixty-day time extension, citing problems with subcontractors,
management inefficiency, and lack of sufficient construction personnel. The
2
Multiple job superintendents had been assigned to the project, apparently delaying the
project and ultimately resulting in a sixty-day time extension to the contract at the request of the contractor. Exhibit 110 at 33. The last contract modification extended the contract completion date to May 15, 2007. Exhibit 110 at 54-55.
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contracting officer rejected that request, stating that Global would need to
make an offer of consideration before the contracting officer could justify an
extension of time on those grounds. Exhibit 164.
When Global did not resubmit the revised schedule, the contracting officer
stated in a letter dated February 8, 2007:
This job is behind schedule and you are currently in a technical
default status. In accordance with Specification Section 01001,
52.236-15, Schedules for Construction Contracts (APR 1984)
and as previously stated in our January 4, 2007 letter, you are
directed to submit a revised timeline reflecting [an] attainable
completion date for the entire project, as well as the completion
date for the Phase 2 portion. The Phase 2 completion date is
essential to our planning the relocation of staff from the Phase
3 area to the Phase 2 area. In addition, you must address the
additional time required for completion and request required
time extensions with consideration acceptable to the government.
Exhibit 165 (emphasis omitted). Global submitted a revised schedule on
March 13, 2007, with a proposed completion date of October 1, 2007. The
Government found multiple errors in the schedule, and, in light of continuing
performance issues, the Government contemplated terminating the contractor at that time. It rejected the revised schedule. Exhibit 166 at 25.
Global resubmitted its revised schedule on April 3, 2007, indicating that
Phase 2 would be complete by June 15, 2007. Again, Global did not include
Phase 3 in its schedule. In April 2007, Carl Lanier, Vice President of Global,
took over as job superintendent. On April 24, 2007, Mr. Lanier requested that
the bi-weekly meetings be changed to weekly meetings.
At a meeting on April 25, 2007, Mr. Lanier advised the Government that
Global was approximately one week behind the schedule it had just submitted. Exhibit 167 at 26. By letter dated May 29, 2007, the Government requested that Global submit another revised schedule. Exhibit 168 at 16.
On June 15, 2007, Global submitted a new schedule, which the Government
rejected because it failed to address all phases of the project. By e-mail message dated June 22, 2007, Global assured the contracting officer that the
“scheduled completion [date] of July 31 remains the same for all phases of
work except the entrance front, handrails, and automatic doors,” which could
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be delayed due to supplier delay. Exhibit 169 at 29. The Government responded that the supply submittals had been approved back in July 2005 and
November 2006, and noted that the potential problems identified by Global
did not provide adequate justification for any delays and further delays would
impact payments to Global. Id. On June 30, 2007, the Government presented
Global with a “pre-punch” list, identifying pages of items needing correction
prior to final inspection.
Over the course of the next few months, the parties met regularly, and the
Government provided Global with lists of items that needed correction or had
been rejected outright and sought revised schedules. In August 2007, using
input provided by Global, the Government prepared a schedule identifying
the Phase 2 completion date of October 8, 2007, and scheduling Phase 3 to
begin on October 19, 2007. Global concurred with the schedule by e-mail message dated August 10, 2007. Exhibit 171 at 5-6. Again, however, it soon became apparent that Global could not meet the new completion date, so, by
letter dated August 24, 2007, the contracting officer requested that Global
submit another revised schedule.
During the September 19, 2007, meeting, Mr. Lanier requested that the Government consider dropping Phase 3 from the contract. The Government requested that Global submit this request in writing to the contracting officer.
Exhibit 172 at 8. Global did not do so.
On November 13, 2007, when Global failed to submit a revised schedule despite numerous requests, the Government issued a show cause notice. The
notice stated, in part, as follows:
Since you have failed to perform Contract No. V247C0348(a)
within the time required by its terms, or cure the conditions
endangering performance under Contract No. V247C0348(a) as
described to you on numerous occasions, the Government is
considering terminating the contract under the provisions for
default of this contract.
Exhibit 174. The notice also detailed performance issues that included “failure to meet identified milestones” and “many items requiring correction” that
had gone unresolved despite identification in the field reports. Id. The notice
stated that the current modified completion date based upon the contract
modifications granting extensions of time was May 15, 2007. Id.; see also Exhibit 110 at 54-55.
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The Government conducted a pre-final inspection on November 28, 2007, and
confirmed that Global had failed to fix many problems that had been previously identified during the course of contract performance. At a meeting held
on December 12, 2007, the Government asked that Global provide a final
date for completion of Phase 2 no later than December 21, 2007. On December 19, 2007, Global submitted a schedule with a completion date for Phase 2
of February 15, 2008. The Government rejected the date and told Global that
Phase 2 must be completed no later than January 16, 2008. Exhibit 175 at
15.
On January 11, 2008, the contracting officer sent a letter to Global to advise
it that the revised and final completion date for Phase 2 of the project would
be January 30, 2008, and that any remaining punch list items from an inspection scheduled for that date must be completed by February 6, 2008. Exhibit 205. Phase 3 of the contract was deleted by modification on January 18,
2008. Exhibit 178. The Government conducted a final inspection on January
31, 2008, and issued a sixteen-page report identifying over 300 discrepancies,
many of which had been identified during earlier inspections. Exhibit 203.
The Government issued a cure notice on February 7, 2008. Exhibit 177; Trial
Exhibit 3. Global requested a re-inspection, which occurred on February 15,
2008. On February 26, 2008, the Government terminated the contract for default.
Among the contract clauses included in the contract that are relevant to this
appeal is Federal Acquisition Regulation (FAR) 52.236-15, which requires the
contractor to submit a schedule to the contracting officer within five days after work is commenced on the project, showing the order in which the contractor proposes to perform the work and the dates on which the contractor
contemplates starting and completing the work. The contract specifically required the schedule to be presented in the form of a progress chart indicating
the percentage of work scheduled for completion by any given date during the
period and authorized the contracting officer to withhold approval of progress
payments until the contractor submitted the required schedule. Exhibit 3,
Specifications, at 01001-77. The Veterans Administration Acquisition Regulation 852.236-84, also included in the contract, specified that the contractor
must revise the progress schedule when individual or cumulative time extensions of fifteen calendar days were granted for any reason. Id. at 01001-101.
FAR 52.232-5, also included in the contract, states that (a revised construction schedule shall be submitted with each request for progress payment.(
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Paragraph (e) of this clause permits the contracting officer to retain a maximum of 10% of the amount of the payment if satisfactory progress has not
been made. Exhibit 3, Specifications, at IN-11.
The contract included the FAR’s standard clause for default termination of a
fixed price construction contract. In pertinent part, this clause provides:
If the contractor refuses or fails to prosecute the work or any
separable part, with the diligence that will insure its completion within the time specified in this contract including any extension, or fails to complete the work within this time, the Government may, by written notice to the Contractor, terminate
the right to proceed with the work (or separable part of the
work) that has been delayed.
FAR 52.249-10 (a); Exhibit 1.
At a hearing held in this matter on March 24-28, 2009, in Atlanta, Georgia,
the parties presented fact and expert witnesses. After the hearing, the parties submitted posthearing briefs over the next few months.
Discussion
Termination for Default
The Government terminated its contract with Global under the provision of
the Default clause that allows termination if the contractor’s failure to make
progress endangers performance. A termination for default for failure to
prosecute the work requires “a reasonable belief on the part of the contracting officer that there was ‘no reasonable likelihood that the [contractor] could
perform the entire contract effort within the time remaining for contract performance.’ “ Lisbon Contractors, Inc. v. United States, 828 F.2d 759, 765
(Fed.Cir. 1987) (quoting RFI Shield-Rooms, ASBCA 17374, et al., 77-2 BCA
¶12,714, at 61,735). A termination for failure to make progress usually occurs
where the contractor has fallen so far behind schedule that timely completion
becomes unlikely. Hannon Electric Co. v. United States, 31 Fed. Cl. 135, 143
(1994), aff(d, 52 F.3d 343 (Fed.Cir. 1995) (table). The Government is not required to prove that it was impossible for the contractor to complete performance on time. Lisbon Contractors, 828 F.2d at 765. Rather, a termination
for default will be upheld where “a demonstrated lack of diligence indicates
that [the Government] could not be assured of timely completion.” Id. (citations omitted).
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The initial burden of proving that there are good grounds and solid evidence
to support the termination action falls to the VA, which must establish that
its decision to terminate for default Global(s right to perform was justified in
light of the circumstances as they existed at the time the decision was made.
Lisbon Contractors, 828 F.2d at 765; Ranco Construction, Inc. v. General Services Administration, GSBCA 11923, 94-2 BCA ¶26,678, at 132,702. The Government can meet its burden by showing that the contractor failed to perform
in accordance with the contract terms and that timely performance was beyond its reach. See, e.g., Lisbon Contractors; Florida Engineered Construction
Products Corp. v. United States, 41 Fed. Cl. 534, 538-39 (1998); American
Sheet Metal Corp. v. General Services Administration, GSBCA 14066, et al.,
99-1 BCA ¶30,329. In determining whether to terminate a contractor for default, the contracting officer may consider, among other things, the contractor(s failure to meet its own representations concerning the progress of the
work, e.g., Guenther Systems, Inc., ASBCA 14032, 72-1 BCA ¶9443, at 43,869,
and the contractor(s performance history, e.g., Decker & Co. v. West, 76 F.3d
1573, 1581 (Fed.Cir. 1996).
In this case, the Government established that following the issuance of the
notice to proceed on October 18, 2004, the contract obligated Global to submit
a schedule for approval and to proceed with the work so as to complete the
construction within 660 days (later extended through contract modifications).
Global failed to submit revised schedules on a timely basis and did not, in response to the cure notice, provide reasonable assurances that it would perform the work remaining within the time frame required by the contract. The
Court of Appeals for the Federal Circuit has stated in this regard:
When the government has reasonable grounds to believe that
the contractor may not be able to perform the contract on a
timely basis, the government may issue a cure notice as a precursor to a possible termination of the contract for default.
When the government justifiably issues a cure notice, the contractor has an obligation to take steps to demonstrate or give
assurances that progress is being made toward a timely completion of the contract, or to explain that the reasons for any
prospective delay in completion of the contract are not the responsibility of the contractor.
Danzig v. AEC Corp., 224 F.3d 1333, 1337 (Fed.Cir. 2000) (citations omitted).
Here, in response to the cure notice, appellant did nothing to assure the Government that it would perform by the contract completion date. In light of
these circumstances, the contracting officer justifiably concluded that there
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was no reasonable likelihood that Global could or would perform the contract
work within the time allotted under the contract. Thus, after establishing a
final completion date, which Global failed to meet, the contracting officer had
adequate justification for terminating the contract for default. Based on this
indisputable evidence, the Government met its burden to establish a prima
facie case supporting the termination decision. McDonnell Douglas Corp. v.
United States, 323 F.3d 1006, 1013-15 (Fed.Cir. 2003); Lisbon Contractors,
828 F.2d at 765; see also NECCO, Inc. v. General Services Administration,
GSBCA 16354, 05-1 BCA ¶32,902.
Excuses for Nonperformance
Once the Government has established its prima facie case supporting the
termination decision, the burden shifts to the contractor to establish the excusability of its nonperformance. See, e.g., DCX, Inc. v. Perry, 79 F.3d 132,
134 (Fed.Cir. 1996); Lisbon Contractors, 828 F.2d at 764. Appellant asserts
first that the Government waived the contract completion date. Alternatively,
appellant contends that its delayed performance is attributable to the Government(s failure to respond to questions, improper directives, and ambiguity
in the contract.
First, Global asserts that the Government waived the contract completion
date. As Global noted in its posthearing brief, if a completion date is waived
by the contracting officer, “the government can establish a new contract completion date, which will serve as a basis for default termination, either
through a bilateral agreement with the contractor or by unilateral decision.”
Appellant’s Posthearing Brief at 47 (citing McDonnell Douglas Corp., 323
F.3d at 1019). If the Government opts to act unilaterally, the new date that it
sets must be “both reasonable and specific from the standpoint of the performance capabilities of the contractor at the time the notice is given.” Id. The
reasonableness of the action turns on what the Government (knew or should
have known( at the time it imposed the new schedule. Id.
As noted above, the Government set forth a new completion date after
months of delay and after multiple attempts to obtain a realistic revised construction schedule from Global. In opposing the validity of the termination for
default, Global contends that only four critical areas of work remained at the
time of termination, and the Government’s “inability to finalize designs, testing outside the scope of the contract and unwillingness to accept work performed in accordance with flawed specifications” delayed the completion of
the contract. Appellant’s Posthearing Brief at 67-68. It contends that even
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with the four items identified, Global could have completed the job within one
week, if respondent had provided appropriate specifications. Id. at 68.
At the hearing, however, Global failed to present any credible evidence showing that the contract contained flawed specifications. Rather, it became apparent during the course of the hearing that Global did not understand contract specifications governing substantial portions of the work, and its
confusion created at least some of the delays. For example, Global contended
that the contract did not require the cystoscopy rooms to contain radiation
shielding with lead-lined walls, nor did it call for testing of the lead shielding.
Appellant’s Posthearing Brief at 32-35. Global representatives testified that
it interpreted certain shadings on the drawings for the cystoscopy room to
indicate that no work should be performed in the area. Transcript at 65, 72
(testimony of appellant(s expert witness Timothy Fitzgerald). This interpretation is inconsistent with the drawings and specifications of the contract,
which required the contractor to remove the concrete slabs in one of the cystoscopy rooms and to replace them with a five-inch thick slab and line the
walls with lead. See Transcript at 483 (testimony of Roger Templeton (the
contracting officer(s technical representative)); Trial Exhibits 6, 7. Among the
100 requests for information (RFIs) submitted by Global, none of the RFIs
addressed the cystoscopy room. Transcript at 500.
Second, appellant states that multiple constructive changes resulted in excusable delays in contract performance. Under the Excusable Delay clause,
the contractor has the burden of proving that the delay was excusable under
the terms of the default provision of the contract. FAR 52.249-10(b); Sauer
Inc. v. Danzig, 224 F.3d 1340, 1345 (Fed.Cir. 2000). A termination for default
may be converted to a termination for convenience of the Government where
the contractor can establish that the delay in completion of the work arises
from unforeseeable causes beyond the control and without the fault or negligence of the contractor. FAR 52.249-10(b); Sauer Inc., 224 F.3d at 1345.
In addition, it is well settled that:
When a contractor is seeking extensions of contract time, for
changes and excusable delay, which will relieve it from the
consequences of having failed to complete the work within the
time allowed for performance, it has the burden of establishing
by a preponderance of the evidence not only the existence of an
excusable cause of delay but also the extent to which completion of the contract work as a whole was delayed thereby.
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Santa Fe, Inc., VABCA 1943, et al., 84-2 BCA ¶17,341, at 86,410. Thus, the
contractor must demonstrate that the excusable event caused a delay to the
overall completion of the contract, i.e., that the delay affected activities on the
critical path. Sauer Inc., 224 F.3d at 1345. The contractor must also establish
the extent to which completion of the work was delayed by this excusable
cause. Robert P. Jones Co., AGBCA 391, 76-1 BCA ¶11,824, at 56,457.
Here, as noted previously, the parties extended the time period of performance multiple times through the issuance of bilateral contract modifications. The thirty-seven contract modifications contained time extensions
ranging from periods of one day up to sixty days. At the hearing, appellant(s
evidence focused upon the fact that it had expended considerable efforts in its
attempts to complete the contract; nonetheless, even after receiving multiple
extensions of time, significant work remained to be completed at the time of
contract termination.
Appellant contends that the multiple changes to the contract caused inefficiencies and other problems, which should serve to excuse its delayed performance. However, this argument fails to acknowledge the fact that each of the
bilateral contract modifications contained the following release language:
This modification represents a complete equitable adjustment
for all costs, direct and indirect, associated with the work and
time agreed to herein, including but not limited to, all costs incurred to extended overhead, supervision, disruption or suspension of work, labor, inefficiencies, and this change(s impact
on unchanged work.
See, e.g., Exhibit 110, Supplemental Agreement No. 2 and Time Extension
No. 1, at 3. Therefore, to the extent that the Government issued change orders resulting in contract modifications, these modifications contained time
extensions to cover the extra time needed as a result of the changes. By signing the bilateral modifications, the contractor expressly released the Government from any potential impact on its unchanged work resulting from the
contract changes.
Ultimately, the contract modifications only extended the contract performance period to May 15, 2007. When, over the next few months, appellant
failed to submit a reasonable project schedule for the completion of the work,
the contracting officer properly acted to unilaterally reestablish a contract
completion date, issue a show cause notice, issue a cure notice, and, finally,
terminate the contract for default. Appellant has failed to present sufficient
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evidence to meet its burden of establishing by a preponderance of the evidence that an excusable event delayed contract performance.
We conclude that, based upon the evidence presented, the Government established that the contracting officer had a reasonable belief that Global could
not perform the entire contract effort within the time remaining for contract
performance. Global(s evidence did not meet the standard required for rebutting the Government(s evidence. Accordingly, we find that the contracting
officer acted appropriately when she terminated the contract for default.
Decision
The appeal is DENIED.
Jeri Kaylene Somers, Board Judge
We Concur:
Allan H. Goodman, Board Judge
Candida S. Steel, Board Judge
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Haselrig Construction
00-1 BCA ¶674
December 2, 1999
Appearance for Appellant: Toby N. Byrd, Esq., 4000 Mitchellville Road, Suite
A-404, Bowie, MD 20716-3138. Appearance for Respondent: Karren Dickson
Vance, Esq., Mid-Atlantic Office, United States Postal Service, 400 Virginia
Avenue, SW, Suite 650, Washington, DC 20024-2730.
Opinion of the Board
Appellant, Haselrig Construction Co., Inc. has appealed the decision of the
contracting officer to terminate for default a new construction lease (NCL)
agreement entered into between Appellant and Respondent, the United
States Postal Service. A hearing was held in Arlington, Virginia.
Findings of Fact
1. On April 19, 1996, Appellant and Respondent entered into a new construction lease agreement in which Appellant agreed to purchase a site controlled
by Respondent1 in La Plata, Maryland, to construct a post office on that site
and then lease it to Respondent for an annual rent of $199,293 (Stipulation
Nos. (Stip.) 1, 2; Appeal File Tabs (AF) 3, 4).
2. Bernard J. Young and Associates prepared the drawings and specifications
for the project under a separate contract with Respondent and this design
package was included in the solicitation to all bidders (Stip. 8; AF 8b).
3. In accordance with the NCL, Appellant agreed to construct the post office
in accordance with the drawings and specifications furnished by Respondent.
In addition, Appellant agreed to investigate the site selected by Respondent
and be responsible for unknown subsurface and latent physical conditions of
an unusual nature differing materially from those ordinarily encountered.
(Stip. 3, 4; AF 3, 4, 8a). Any design change required to correct such subsurface conditions required the approval of the contracting officer or contracting
officer’s representative (COR) (Transcript page (Tr.) Vol. I 37, 168).
1
Respondent had previously obtained an assignable option to purchase the site (Stipulation
No. 1).
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4. Addendum 3 to the NCL required Appellant to hire a geotechnical engineer, licensed by the State of Maryland, to perform a subsurface geotechnical
investigation at the site, including soil borings, and to provide a report of the
subsurface conditions, including recommendations for backfill material, compaction requirements, and building foundation placement (Stip. 5).
5. The NCL also required Appellant to employ the services of an architectengineer, who was licensed to practice in the State of Maryland, to complete,
as necessary, the specifications and drawings for the construction of the post
office in accordance with the requirements of the NCL and to adapt the design of the building to meet applicable local, state and national code requirements (Stip. 6, 7; AF 4, 8a).
6. Section 6 of the Construction Rider to the NCL, TERMINATION FOR
DEFAULT — DAMAGES FOR DELAY — TIME EXTENSIONS, provided, in
part:
a. If the contractor refuses or fails to acquire the site, if applicable, or to prosecute the work with such diligence as will insure its completion within the time specified in this contract, or
any extension thereof, or fails to complete said work within
such time, the Postal Service may, by written notice to the contractor, terminate his right to proceed with the work....
b. The contractor’s right to proceed shall not be so terminated
nor the contractor charged with resulting damage if:
(1) The delay in completion of the work arises from unforeseeable causes beyond the control and without the fault or negligence of the contractor, including but not restricted to acts of
God, acts of the public enemy, acts of Government in either its
sovereign or contractual capacity, acts of another contractor in
the performance of a contract with the Postal Service, fires,
floods, epidemics, quarantine restrictions, strikes, freight embargoes, unusually severe weather, or delays of subcontractors
or suppliers arising from unforeseeable causes beyond the control and without the fault or negligence of both the contractor
and such subcontractors or suppliers. (AF 8a)
7. The construction rider to the NCL required site work to be completed within 60 days after receipt by the contractor of the notice to proceed, and completion of building construction 120 days thereafter, for a total construction time
of 180 days (Stip. 11).
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8. Appellant’s geotechnical engineer conducted an investigation and submitted a report on November 25, 1996, that indicated the soils at the site were
marginal and recommended that the building be constructed on conventional,
shallow, embedded, spread footing foundations that were, in turn, supported
on a mat of controlled, compacted, structural fill (Stip. 16; Supplemental Appeal File tab (SAF) 18).
9. Because of Appellant’s difficulty obtaining financing and bonding, notice to
proceed was never issued, and Appellant’s contract with Respondent was
terminated for default for failure to make progress on February 13, 1997 (AF
21, 22, 24, 31).
10. On April 2, 1997, Respondent and Appellant agreed to reinstate the contract under the identical terms and conditions of the defaulted contract. The
schedule under the reinstated contract thus called for site work to be completed within 60 days after receipt of notice to proceed and completion of the
building 120 days thereafter. (Stip. 11, 17; AF 20).
11. By letter dated April 15, 1997, Respondent issued the notice to proceed
under the reinstated contract (Stip. 18). In the same letter, Respondent informed Appellant that its project manager for this project was Byron Ruth
and that Mr. Ruth would also act as the contracting officer’s representative
(COR). As COR, Mr. Ruth had the authority to issue change orders on the
project, provided that the change order did not involve a change in unit price,
quantity, quality or time. The COR was responsible for bringing to the attention of the contracting officer those problems on the project that required the
authority of the contracting officer to resolve. (Tr. Vol. I 17, 111; AF 19).
12. A pre-construction meeting attended by representatives of both Appellant
and Respondent was held on April 15, 1997. At the meeting, the contracting
officer informed Appellant that the Postal Service was in the process of redesigning the building to meet new Postal Service requirements and would issue the redesign to Appellant on May 21, 1997 (Tr. Vol. I 28-32; SAF 17).
13. During the pre-construction meeting, the contracting officer proposed a
new construction schedule. The proposed schedule was based on Appellant
receiving the redesigned construction documents on May 21, 1997, and allowed Appellant until August 13, 1997 to complete site work and until January 28, 1998 to complete construction of the building. Respondent requested
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that Appellant prepare and submit a bar chart type of construction schedule
reflecting these new completion dates (Tr. Vol. I 28-32; Stip. 19-21; SAF 17).
14. Appellant and Respondent met again on April 23, 1997, to discuss the
November 25, 1996 geotechnical report’s findings and recommendations (see
Finding of Fact No. (FOF) 8). The contracting officer informed Appellant at
this meeting that the Postal Service would be responsible for any increased
costs incurred by Appellant as a result of the Postal Service redesign of the
building but that Appellant was responsible for any costs resulting from unanticipated subsurface conditions. (Stip. 22; SAF 15).
15. Respondent completed the redesign of the project on May 27, 1997, and
sent one copy of the redesign to Appellant on that date (Stip. 23; SAF 7, 14).
16. The NCL was never formally modified to reflect the requirement to construct the building in accordance with this redesign (Tr. Vol. I 194).
17. The redesign of the building affected 90% of the building trades and
caused Appellant to seek new bids from its subcontractors and suppliers (Tr.
Vol. II 94, 95).
18. The redesign also required that Appellant apply for new building permits
from the city of La Plata, Maryland2. Appellant applied to the city of La Plata
for new building permits on June 7, 1997, and received preliminary approval
three days later. (Tr. Vol. I 75, 76, Vol. II 98, 99-102; Appellant’s Exhibit No.
(AE) 36).
19. Appellant developed a construction schedule based on the redesigned project and, on June 10, 1997, transmitted the schedule to Respondent. The
schedule was prepared in “bar chart” format and indicated that site work
would commence on June 1, 1997, and continue through November 1997,
with completion of the entire project on February 28, 1998. Other than requesting a more legible copy of the schedule, Respondent never commented
on the adequacy of the schedule itself. (Tr. Vol. I 227, Vol. II 109-111; AE 26).
20. The redesign of the project prepared by Respondent included the foundation recommendations contained in the November 1996 geotechnical report.
However, Respondent’s architectural and engineering consultant (A&E) re2
Appellant was instructed by the city of La Plata not to proceed with any work until the
city reviewed the redesigned drawings and reissued the building permits (Tr. Vol. II 105).
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mained concerned about the building’s foundation since the northern end of
the redesigned building was sited where very loose and soft conditions were
previously identified. (Tr. Vol. II 117, 118; SAF 10).
21. On July 10, 1997, the parties, including Respondent’s A&E and COR, and
Appellant’s geotechnical consultant, met to discuss the foundation issues.
Possible revisions to the foundation design were discussed and the need for
additional borings was addressed. It was agreed at this meeting that Appellant’s geotechnical consultant would provide new foundation design recommendations. The COR instructed Appellant not to excavate the foundation
until the geotechnical consultant provided the new design recommendations.
Subsequent to the meeting, two additional borings were drilled. (AF 15; AE
22; SAF 7, 11).
22. Appellant orally communicated with Respondent’s COR during this time
period concerning possible changes to the foundation design, and in this regard, the COR scheduled a meeting for July 24, 1997, to further discuss the
foundation redesign. However, the COR canceled that meeting and rescheduled it for the first week in August. Nevertheless, and without explanation,
the COR failed to show up for the rescheduled meeting. (Tr. Vol. II 126, 127).
23. Appellant’s geotechnical consultant prepared new foundation design recommendations on July 30, 1997 and transmitted them to the COR, Respondent’s A&E, as well as to Appellant. Based on subsequent discussions with Respondent’s A&E, these design recommendations were further modified and
retransmitted to the same parties on August 12, 1997 (SAF 9, 10).
24. By certified letter dated August 14, 1997 (received by Appellant on August 18, 1997), the contracting officer advised Appellant that she was concerned about the lack of progress on the job and requested that Appellant
submit justifiable reasons for the failure to make progress or face the possibility of the contract being terminated for default (Stip. 26; AF 17).
25. In a letter to the COR, dated August 21, 1997, Appellant proposed certain
foundation design changes which included possibly having to move the location of the loading dock, and requested the COR’s approval to proceed with
the changes. Appellant further requested that the COR act as soon as possible to avoid further delay to the project (Tr. Vol. II 63, 64; AE 29). Appellant
also sent a copy of this letter to the contracting officer (Tr. Vol. I 118).
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26. Neither the contracting officer nor the COR ever responded to Appellant’s
letter of August 21, 1997, and the COR never returned calls from Appellant
concerning whether he had approved the proposed foundation design changes
(Tr. Vol. II 131).
27. If the contracting officer or COR had responded with an approval of Appellant’s design change request at this time, Appellant could have met the
schedule it had proposed on June 10, 1997 (Tr. Vol. II 132, 133).
28. Appellant responded to the contracting officer’s letter of August 14, 1997,
in a letter dated August 22, 1997, and explained that the redesign of the project created delays since Appellant was required to obtain new building permits as well as obtain new bids from its subcontractors and suppliers (see
Findings 17, 18). Appellant further explained that both Respondent’s A&E
and the COR had agreed at the July 10, 1997 meeting to take additional soil
borings and have Appellant’s geotechnical consultant provide new recommendations for the foundation design. Finally, Appellant reminded Respondent that the COR had directed Appellant during the July 10 meeting that no
further site excavation should be accomplished until Appellant’s geotechnical
consultant submitted the results of the borings and the recommended foundation redesign to Respondent’s A&E for their analysis (See Finding No. 21).
(Stip. 27; AF 15; SAF 7).
29. Appellant followed up its letter of August 21, 1997, with a second letter to
the COR on September 5, 1997, again asking for his swift action to review
Appellant’s proposed foundation related design changes so that work on the
project could proceed (SAF 6).
30. By final decision dated September 20, 1997, the contracting officer advised Appellant that she was holding Appellant in default of its contract3 (AF
14). Appellant timely appealed the final decision (AF 10).
31. At the time of the final decision, Appellant had cleared the site and graded to sub-elevation for the building pad and parking lots. Footers were ready
to be poured for the building’s south wall but further work on the site could
not be accomplished without approval from the COR or contracting officer of
3
Although this final decision does not specifically state that Appellant’s contract is “terminated” for default, it is evident from subsequent correspondence between the parties that
they treated it as such (AF 11, 12, 13).
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the proposed foundation design changes for the north wall. (Tr. Vol. II 115117, 135-143).
32. By accelerating its construction efforts, Appellant could have met the
January 28, 1998 project completion date established by Respondent at the
pre- construction meeting (see Finding 13) if Appellant’s proposed foundation
design changes had been approved by the contracting officer or COR on September 20, 1997 (the date of termination) (Tr. Vol. II 146- 150).
Decision
Respondent argues that the decision to terminate the contract for default was
justified by Appellant’s failure to make progress. In this regard, Respondent
argues that, at the April 15, 1997 meeting of the parties, the contracting officer established August 13, 1997, as a milestone for completion of site work
(Finding of Fact No. (FOF) 13), and that Appellant failed to meet this milestone. Respondent further argues that its redesign of the project after this
meeting did not warrant a time extension beyond that already granted by the
contracting officer. Finally, Respondent denies that it delayed in responding
to Appellant’s request for approval of a proposed foundation design change.
Appellant argues that Respondent failed to show it was behind schedule or
that it could not have completed the project on time. Appellant further argues
that Respondent was on notice of subsurface latent conditions that justified a
time extension to the contract’s schedule.
To support a decision to terminate a contract for default for failure to make
progress, Respondent must demonstrate that there was no reasonable likelihood that the contractor could complete the project within the time remaining
for performance. Lisbon Contractors, Inc. v. United States, 828 F.2d 759, 762
(Fed.Cir. 1987). Respondent failed to meet this burden.
Appellant may have been behind schedule in constructing the La Plata Post
Office. However, the evidence establishes that, as of the date of termination,
Appellant could have accelerated its efforts and finished the project by January 28, 1998, the date allowed by the contracting officer for completion at the
April 15, 1997 pre-construction meeting (FOF 31, 32).
Moreover, to the extent Appellant was experiencing difficulty in meeting the
August 13, 1997 site work completion date, or the final completion date, Respondent’s failure to cooperate with Appellant in resolving the latent subsur-
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face design problem that Respondent’s own A&E identified contributed to
these delays.
At the direction of the COR, Appellant stopped excavation work on the foundation on July 10, 1997, pending approval by Respondent of the geotechnical
consultant’s preparation of new design recommendations (FOF 21). The
foundation redesign was initially transmitted to the COR on August 12, 1997
(FOF 23). Although Appellant repeatedly attempted to get a response from
Respondent to these proposed foundation design changes, neither the contracting officer nor the COR discussed the changes with Appellant or gave
approval to the recommendations (FOF 25-29). Although the contract placed
the responsibility on Appellant for latent subsurface conditions, it also required that Appellant seek the approval of the contracting officer or contracting officer’s representative before changing the project’s design to address an
unexpected subsurface condition (FOF 2). Lacking a timely response (or, indeed, any response) to proposed foundation design changes, it is understandable that Appellant had not completed all the site work by August 13, 1997
(FOF 31). Thus, to the extent this date represents an enforceable contract
milestone, Appellant’s failure to meet the date was excusable.
In these circumstances, Respondent cannot rely on Appellant’s failure to
make progress to support its decision to terminate the contract for default
since, as late as September 20, 1997, Appellant could have met the project
completion date by accelerating the construction schedule, if only Respondent
had responded to Appellant’s request for design change approval (FOF 32).
Accordingly, Respondent’s decision to terminate the contract for default was a
breach of contract and the appeal is sustained.
William K. Mahn
Administrative Judge
Board Member
I concur:
James A. Cohen
Administrative Judge
Chairman
David I. Brochstein
Administrative Judge
Vice Chairman
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Jordan & Nobles Construction
91-1 BCA ¶23,659
December 31, 1990
Appearance for Appellant, Jordan & Nobles Construction Co.: Jonathan D.
Schwartz, Jr., Esq., Studdard, Melby, Schwartz, Parrish & Maxfield, Third
Floor, Franklin Plaza, 415 North Mesa, El Paso, TX 79901. Appearance for
Respondent, General Services Administration: Gerald L. Schrader, Esq., Real
Property Division, Office of General Counsel, General Services Administration, 18th and F Streets, N.W., Washington, DC 20405.
Opinion by Administrative Judge Borwick
These are a series of appeals for compensable delay and excusable delay and
change order costs arising out of the construction of the Federal Building, El
Paso, Texas. The appeals cover nineteen dockets, sixteen of which concern
entitlement to costs for compensable and excusable delay during the course of
construction. Three dockets, submitted on the record, concern appellant’s request for change orders on work, directed by respondent, that respondent
considered within the scope of the original contract. We conducted a ten-day
hearing in El Paso, Texas, commencing on November 27, 1989. We closed the
record on June 28, 1990, after submission of post hearing and reply briefs.
Only entitlement is in issue.
An opinion is written using the same logical progression with which one (we
trust) builds a building. We have structured our findings to provide an overview of the project and its personnel, appellant’s as-planned schedule, the asbuilt schedule, and the critical path.
Both parties used the critical path method to prove their delay case, and we
were presented with the conflicting testimony of the parties” experts as to
what the critical path was. We have determined that the critical path for this
project was through the mechanical system, and that delays to the critical
path were the responsibility of appellant. We thus conclude that appellant is
not entitled to compensable delay costs, because respondent’s delay (of which
there was some) was concurrent with appellant’s delay. However, for the delay to project completion for which we conclude there is concurrent cause (i.e.,
the responsibility of both respondent and appellant), appellant is entitled to
remission of liquidated damages.
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We consider each docket, not in the numerical order it was filed with the
Board, but in an order roughly corresponding to the chronological significance
of the events presented in the actual construction of the building.1 Thus, we
first consider GSBCA No. 9245, the shop drawing submittal claim. We conclude that appellant has failed to show a nexus between delay to the project
and any delay by respondent in returning shop drawings. We find that much
of the significant shop drawing delay was due to the mechanical subcontractor’s tardiness in submitting necessary drawings or resubmittals of drawings.
The building is covered with about one million bricks. It should come as no
surprise, therefore, that bricks played a large part in these appeals. The
docket known as the “brick claim” is GSBCA No. 9928 and comprises several
elements. Appellant claims that respondent, against appellant’s will, relaxed
the brick requirements, forcing appellant to accept from the brick manufacturer inferior and out of specification brick, which was placed on the building
and then removed by the direction of the respondent. This has become known
as the “brick culling” claim. Appellant alleges that the delay was caused by
respondent. We agree and grant this aspect of the appeal. There was a constructive change and delay by authorized representatives of respondent. Appellant obtains its direct cost for the change and remission of liquidated
damages.
Appellant also maintains that it was required to cut exterior and atrium
bricks due to defective drawings, conflicting specifications, and a denial of
appellant’s contractual right to draw the concrete frame in by 1/2”. We conclude that appellant has proven its case as to the cutting of the atrium bricks.
Respondent’s drawings of the columns and the dimensions of the brick veneer
did not match with the brick specifications. The result was that the mason
had to make heroic efforts to meet the dimensions by splitting brick to be
placed on the atrium column. This caused delay and a suspension of work.
Appellant is entitled to its direct costs of the suspension and remission of liquidated damages for the delay. Appellant alleges that it faced the same problem at the corners of the building. The mason did have to cut brick on the exterior, but that was due to appellant’s out-of-plumb concrete pour, not to
1
Appeal Files and supplemental appeal files were submitted in this case by docket number
and we have cited the docket number for each appeal file (and supplement) in this format:
“Appeal File, No. XXXX, Exhibit —”. The two volumes of contract specifications in the record are not tied specifically to an appeal file, thus we use the term “contract specifications”
to identify them. The remainder of the documents are identified as exhibits.
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conflicting specifications or an alleged denial of the right to build the concrete
frame in by 1/2”.
We next consider GSBCA Nos. 8349, 8350, and 8352, which involve three
change orders on the roof. Appellant stopped work on the roof, awaiting direction from respondent on how to affect the changes. Appellant seeks extended period costs, but we conclude that appellant could have completed the
roof, and then worked on the changes, rather than stop work. Appellant
failed to mitigate damages. Also, there were other areas of the roof on which
appellant could work. We deny those appeals.
The next docket, GSBCA No. 8457, is a major delay claim arising from the
change order in tenant layout plans on the third floor which affected the
placement of demountable partitions. Appellant alleges that respondent unduly delayed in negotiating this change. However, respondent and appellant
agreed on a bilateral change order for this work, which included both money
and time. We resolve a disputed factual issue as to whether there was an oral
side agreement between the contracting officer and the appellant’s project
manager that appellant would obtain more time on other change order work.
We conclude that there was no such side agreement and that the bi-lateral
change order is the conclusive expression of the parties’ agreement as to the
amount of money and time due for this change. Thus, we conclude, this claim
is barred by the doctrine of accord and satisfaction, and the appeal is denied.
GSBCA No. 8576 is a claim for late release of base-bid work on the fourth
through the seventh floors. Under the contract, base-bid work was to be performed in accordance with the direction of the contracting officer. The direction of the contracting officer as to base-bid work was intermingled with
change requests for tenant layout plans. Appellant and respondent fruitlessly
negotiated for some months on both money and time for this change. When
the parties could not come to agreement, respondent directed appellant to
proceed with base-bid work. Appellant maintains that it could not proceed
with base bid work until it negotiated the change orders for the tenant layout
plans or received direction to proceed on base bid work alone. We agree with
appellant in this regard. We conclude that the delay in releasing the fourth
through the seventh floors was the fault of respondent, and that delay resulted in labor inefficiencies and stacking of trades in installing demountable
partitions and power poles. We grant this appeal in part. Appellant is entitled to its direct costs and remission of liquidated damages.
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Twelve dockets remain. Of these, nine are miscellaneous delay and changes
claims, which for the most part we deny. We grant the appeals in part as to
some of the dockets because the contracting officer erroneously understated
appellant’s direct costs for the changes. The last three dockets are claims for
equitable adjustments for work which appellant maintains was outside the
scope of the original contract and which appellant maintains should have
been the subject of change orders. Respondent denies that the work was outside the scope of the contract. We agree with appellant as to two of the
claims, GSBCA No. 8650 (tamper switches) and GSBCA No. 8868 (vinyl tile
and stair landings), and grant these appeals in their entirety.
Findings of Fact
Genesis of the Project
1. The project arose out of the need for approximately 132,600 net usable
square feet of space to house federal agencies in the El Paso, Texas area, including the Internal Revenue Service (IRS), Bureau of Alcohol, Tobacco and
Firearms (BATF), the El Paso Intelligence Center (EPIC), and the Immigration and Naturalization Service (INS). Appellant’s Supplemental Appeal File,
No. 8576, Exhibit 4. It was estimated that EPIC would occupy about 24,000
square feet of space, with the IRS and INS being the second and third largest
tenants. Deposition of Mr. Robert Horton, Respondent’s In-House Architect
(Appellant’s Exhibit 1), Deposition Exhibit 2. In 1981, the architecture firm of
Garland & Hilles was selected from six competitors to design the building.
Transcript, Vol. 5 at 11; Horton Deposition at 12. The Congressional budget
limitation was $16,000,000. The Government estimate for construction of the
building was $14,397,808. Appellant’s Supplemental Appeal File, No. 8576,
Exhibit 11.
Exterior Design of the Building and Garage
2. The structure is a seven-storied federal building and adjacent parking garage of reinforced concrete with brick veneer on all exterior walls and on many
of the interior surfaces of the building. Appellant’s Exhibits 42-44; Transcript, Vol. 1 at 26. About one million bricks are used on and in the building
and garage. Transcript, Vol. 3 at 205. The Federal Building is 227’ 8” wide
and 122’ long including the brick veneer; without the brick veneer, the concrete frame of the Federal Building is 227’ wide and 121’4” long. Appellant’s
Exhibit 69; Transcript, Vol. 7 at 139. The Federal Building is a rectangle
formed by eight vertical columns, 28 feet wide, rising the height of the building, joined at each of the corners of the rectangle. Respondent’s Exhibit 9,
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Contract Architectural Drawing 4-1 (North Elevation), Structural Drawing 76 (Federal Building Seventh Floor Framing Plan); Appellant’s Exhibits 41-42.
3. At front of the Federal Building (North Elevation), the vertical columns are
spanned by a window wall rising to a point below the fifth floor. Above the
window wall, the corner columns are spanned by three exterior beams which
bisect the fifth, sixth and seventh floor planes formed by concrete joists and
by a fourth exterior beam, the top of which forms the line of the roof. The
lower half of each beam hangs below the poured concrete joist and the upper
half rests above the poured concrete joist. Three horizontal exterior window
walls alternate between the four beams above the fifth, sixth and seventh
floors. The exterior beams return to the window walls at an angle 45 degrees
from the perpendicular. Appellant’s Exhibit 42; Respondent’s Exhibit 9, Contract Architectural Drawing 4-1 (North Elevation), Contract Structural
Drawing 7-31.
4. The design concept is reproduced at the sides of the building (East and
West Elevation). Respondent’s Exhibit 9, Contract Architectural Drawings 42, 4-4 (East and West Elevation respectively). At the back of the Federal
Building (south elevation), there is a large middle vertical column which
backs up the service area (including the elevators and toilet rooms) of the
building. Respondent’s Exhibit 9, Contract Structural Drawing 7-6 (Federal
Building Seventh Floor Framing Plan); Appellant’s Exhibit 43; Transcript,
Vol. 1 at 192.
5. The brick panels for the vertical corners and the middle column at the
south elevation were put in place. The bottom half of the horizontal exterior
beams at the fifth, sixth, and seventh floors and the roof line were cast and
bricked off-site, and then hung with cranes in between the vertical columns.
The top half of the brick panels were put in place, with the 45 degree angle
return being a pre-cast element. The soffits of these beams were pre-cast.
Transcript, Vol. 1 at 186, 190-93, Vol. 4 at 8-10; Respondent’s Exhibit 9, Contract Structural Drawings 7-17, 7-30, 7-31. Most of the brick for the garage
was put in place. Transcript, Vol. 1 at 191.
6. There were two bricked penthouses on the roof, one for the elevators and
one for stairs to enable maintenance personnel to have access to equipment
placed on the roof. Transcript, Vol. 1 at 194. The roof covering the office portion of the building and garage is flat. Three skylights cover the atrium portion of the building. See findings 7, 8 (discussion of atrium design). Behind
the three skylights sit two penthouses, which face the garage and cover the
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elevator and equipment/maintenance rooms. Respondent’s Exhibit 9, Contract Architectural Drawings 4-6, 4-7.
Interior Design of the Building and Garage
7. The interior design of the building features a vestibule, lobby, and atrium/center court arrangement rising from the ground to the roof, with offices
and surrounding corridors facing the atrium from the second to the seventh
floors. In back of the atrium lies the elevator lobby. Respondent’s Exhibit 9,
Contract Architectural Drawing 3-15, 4-6; Appellant’s Exhibit 44. The roof of
the atrium is formed by three truncated pyramidal shaped skylights. On the
interior, the skylights rest on prefabricated brick panels, placed at 45 degrees
to the perpendicular, which are in turn joined to vertical brick panels attached to concrete joists. Respondent’s Exhibit 9, Contract Architectural
Drawings 4-6, 4-7, Contract Structural Drawing 7-22. Concrete forms support
the skylights at the surface of the roof. Respondent’s Exhibit 12, Photograph
of September 3, 1985; Transcript, Vol. 3 at 258.
8. The atrium is a rectangle formed by four columns at the corners, with two
additional columns in the middle of the long dimensional lines of the rectangle. Respondent’s Exhibit 9, Contract Architectural Drawing 3-4. At each
floor level other than the first, pre-fabricated brick beams, three feet in
height, span the columns with in place masonry sitting on top of the pre- fabricated panels. Transcript, Vol. 4 at 10. The columns around the atrium run
the height of the building and are also covered with brick veneer. Appellant’s
Exhibit 44; Respondent’s Exhibit 9, Contract Architectural Drawing 5-13.
Pre-Award Activities
9. On May 25, 1983, respondent issued the invitation for bids, with a bid
opening date of June 23, 1983. That date was later moved to June 28. Appeal
File, No. 8349, Exhibit 3; Appellant’s Supplemental Appeal File, No. 8576,
Exhibit 3. Eleven bids were received, ranging from $13,694,009 to appellant’s
low bid of $11,130,000. Appellant’s Supplemental Appeal File, No. 8576, Exhibit 5. As the low bid was 22.7% below the government estimate, appellant
was requested to verify its bid, which it did. Appellant’s Supplemental Appeal
File, No. 8576, Exhibits 7, 11.2 On October 11, 1983, the contracting officer
recommended that appellant receive the award, and the appellant’s bid was
2
The respondent’s contract estimator asked contractors why bids were so much lower than
the government estimate. One contractor stated, in colorful language, that as the project
was the first multi-million dollar project in the El Paso area in three years, “everybody’s so
hungry they were eating each other’s legs off getting to it.” Transcript, Vol. 5 at 192.
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accepted by the Government that day. Appeal File, No. 8349, Exhibit 5; Appellant’s Supplemental Appeal File, No. 8576, Exhibit 11.
Basic Contract Terms
10. The contract’s scope of work and completion date provided:
1.1 The work to be done hereunder includes the furnishing of
all labor, materials, equipment, and installation of all work
requisite for demolition of existing paving and subsurface
structures, construction of new office building and parking
structure and all other items mentioned in body of specification
all as shown on Drawings Nos. 0-1, 1-1, 2-1 thru 2-5, 3-1 thru
3-19, 4-11, thru 4-8 [sic], 5-1 thru 5-18, 17-1 thru 17-4, 71-thru
7-37, 9-OS-1, 9-HVAC-1 thru 9-HVAC-17, 9-P-1 thru 9-P-16, 9PHAVC-1, 9-E-1 thru 9-E-32, as hereinafter specified and as
may be directed.
Contract Specifications, General Requirements, ¶¶1.1, 2.1, at 0110-1. The
contract completion date was 720 days after receipt of the notice to proceed.
Appeal File, No. 8350, Exhibit 3.
11. The General Provisions of the contract contained, among others, the following standard clauses:
3. Changes
(a) The Contracting Officer may, at any time, without notice to
the sureties, by written order designated or indicated to be a
change order, make any change in the work within the general
scope of the contract, including, but not limited to changes:
(1) In the specifications (including drawings and design);
(2) In the method or manner of performance of the work;
(3) In the government furnished facilities, equipment, materials, services or site; or
(4) Directing acceleration in the performance of the work.
(b) Any other written order or an oral order (which terms as
used in this paragraph (b) shall include direction, instruction,
interpretation or determination) from the Contracting Officer
which causes any such change, shall be treated as a change order under this clause, provided that the Contractor gives the
Contracting Officer written notice stating the date, circum-
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stances and source of the order and that the Contractor regards
the order as a change order.
....
(d) If any change under this clause causes an increase or decrease in the Contractor’s cost of, or the time required for, the
performance of any part of the work under this contract,
whether or not changed by any order, an equitable adjustment
shall be made and the contract modified in writing accordingly.
4. Differing Site Conditions
(a) The Contractor shall promptly, and before such conditions
are disturbed, notify the Contracting Officer in writing of: (1)
Subsurface or latent physical conditions at the site differing
materially from those indicated in this contract or (2) unknown
physical conditions at the site, of an unusual nature, differing
materially from those ordinarily encountered and generally
recognized as inhering in work of the character provided for in
this contract. The Contracting Officer shall promptly investigate the conditions, and if he finds that such conditions do materially so differ and cause an increase or decrease in the Contractor’s cost of, or the time required for, performance of any
part of the work under this contract, whether or not changed as
a result of such conditions, an equitable adjustment shall be
made and the contract modified in writing accordingly.
....
16. Use and Possession Prior to Completion
The Government shall have the right to take possession of or
use any completed part of the work. Prior to such possession or
use, the Contracting Officer shall furnish the Contractor an
itemized list of work remaining to be performed or corrected on
such portions of the project as are to be possessed or used by
the Government, provided that failure to list any item or work
shall not relieve the Contractor of responsibility for compliance
with the terms of the contract. Such possession or use shall not
be deemed as acceptance of any work under the contract. While
the Government has such possession or use, the Contractor,
notwithstanding the provisions of the clause entitled “Permits
and Responsibilities,” shall be relieved of the responsibility for
the loss or damage to the work resulting from the Govern-
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ment’s possession or use. If such prior possession or use by the
Government delays the progress of the work or causes additional expense to the Contractor, an equitable adjustment in
the contract price or the time of completion will be made and
the contract shall be modified in writing accordingly.
17. Suspension of Work
(a) The Contracting Officer may order the Contractor in writing
to suspend, delay, or interrupt all or any part of the work for
such period of time as he may determine to be appropriate for
the convenience of the Government.
(b) If the performance of all or any part of the work is, for an
unreasonable period of time, suspended, delayed, or interrupted by an act of the Contracting Officer in the administration of
this contract, or by his failure to act within the time specified
in this contract (or if no time is specified, within a reasonable
time), an adjustment shall be made for any increase in the cost
of performance of this contract (excluding profit) necessarily
caused by such unreasonable suspension, delay, or interruption
and the contract modified in writing accordingly. However, no
adjustment shall be made under this clause for any suspension,
delay, or interruption to the extent (1) that performance would
have been so suspended, delayed, or interrupted by any other
cause, including the fault or negligence of the Contractor or (2)
for which an equitable adjustment is provided for or excluded
under any other provision of this contract.
Contract Specifications, General Provisions, at 1, 3, 4.
12. The Supplement to the General Conditions provided in pertinent part:
DISPUTES:
....
(i) Except as the parties may otherwise agree, pending final
resolution of a claim by a contractor arising under the contract,
the contractor shall proceed diligently with the performance of
the contract in accordance with the contracting officer’s decision.
Modification to SF 23-A, Contract Specifications ¶6.
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13. The contract’s General Conditions, Section 00100, provided in pertinent
part:
2. AUTHORITIES AND LIMITATIONS
2.1 All work shall be performed under the general direction of
the Contracting Officer, who alone shall have the power to find
the Government and to exercise the rights, responsibilities, authorities and functions vested in him by the contract documents, except that he shall have the right to designate authorized representatives to act for him. Whenever any provision in
the contract specifies an individual ... or organization, whether
Governmental or private, to perform any act on behalf of or in
the interests of the Government, that individual or organization shall be deemed to be the Contracting Officer’s authorized
representative under this contract but only to the extent so
specified. The Contracting Officer may, at any time during the
performance of this contract, vest in any such authorized representatives additional power and authority to act for him or
designate additional representatives, specifying the extent of
their authority to act for him; a copy of each document vesting
additional authority in an authorized representative or designating an additional authorized representative shall be furnished to the Contractor.
2.2 The Contractor shall perform the contract in accordance
with any order ... issued by an authorized representative in accordance with this authority to act for the Contracting Officer;
but the Contractor assumes all the risk and consequences of
performing the contract in accordance with any order ... of anyone not authorized to issue such order.
....
10. CONSTRUCTION PROGRESS CHART
10.1 Within 30 days after receipt of notice to proceed, the Contractor shall prepare and submit to the Contracting Officer for
approval, six copies of a practicable progress chart. The chart
shall show the principal categories of work corresponding with
those used in the breakdown on which progress payments are
based; the order in which the Contractor proposes to carry on
the work, the date on which he will start each of the categories
of work, and the contemplated dates for completing the same....
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10.2 If in the opinion of the Contracting Officer work actually
in place falls behind that schedule, the Contractor shall take
such action as necessary to improve his progress. In addition,
the Contracting Officer may require the Contractor to submit a
revised chart demonstrating his program and proposed plan to
make up lag in scheduled progress and to insure completion of
work within the contract time.
....
16. STANDARD REFERENCES
....
16.1.1 Wherever reference is made to Standard Specifications
of the Public Buildings Service, Interim Federal Specifications,
Interim Amendments to Federal Specifications, Interim Federal Standards, or Interim Amendments to Federal Standards,
the Contractor shall comply with the requirements set out in
the issue or edition identified in this contract except as modified or as otherwise provided in the specifications of this contract.
Contract Specifications, General Conditions, at 1-3.
Post Award Activities
14. On October 17, 1983, respondent issued its notice to proceed, which was
received by appellant on October 19. As contract completion was 720 days after appellant’s receipt of the notice to proceed, finding 10, the completion date
was October 8, 1985. Appeal File, No. 8350, Exhibits 7, 8.
Respondent’s Personnel on Project
15. The contracting officer was Mr. Robert Bandy, who served as contracting
officer from contract award until October of 1986, when he was replaced by
Ms. Linda Moore. Transcript, Vol. 6 at 27. When Mr. Bandy was contracting
officer for this project, he was also contracting officer for twenty other projects which included four or five large projects. Id. at 103. Given his heavy
workload, he relied on his subordinates to make the day-to-day decisions on
the project. Id.
16. The contracting officer’s representative (COR) was Mr. Barkley Parten.
Appellant’s Supplemental Appeal File, No. 8576, Exhibit 10. Respondent’s onsite representative was Mr. Robert Ross. The contracting officer allowed Mr.
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Ross to act independently in performing his duties. Transcript, Vol. 6 at 100.
According to the contracting officer, the on-site representative had the authority to interpret the contract and direct contract work according to his interpretation. If the on-site representative were wrong, the work would be processed as a contract change. Id. at 60. He also had the authority to inspect
materials supplied under the contract and to determine whether the supplies
met specifications. Id. at 58. Mr. Ross died in December of 1987. Id. at 20-21.
Respondent’s chief contract estimator and change order negotiator was Mr.
Milton Weikel. Transcript, Vol. 5 at 193. Respondent’s architect, Garland &
Hilles, provided four inspectors for the architectural, mechanical, electrical,
and structural phases of the project. The inspectors were under the supervision of respondent’s on-site representative. Id. at 31-32. The inspectors were
to assist the on-site representative in insuring compliance with contract specifications. Id. at 36.
Appellant’s Personnel
17. Appellant’s project manager was Mr. James F. McCann. Transcript, Vol.
1 at 26-28. Appellant’s general superintendent was Mr. Carl R. “Woody”
Clarke. Id. at 8. A concrete superintendent, Mr. Ernest Popovich, reported to
Mr. Clarke. There were two engineers, one a field engineer and one an office
engineer, and a secretary. Id. at 31. Appellant estimated that of its bid price
of $11,130,000, it would perform $3,566,581 and that $7,563,419 worth of
work would be performed by subcontractors. Appellant’s Supplemental Appeal File, No. 8576, Exhibit 8. With its own forces, appellant placed and finished the concrete vertical forms, column forms, walls, all concrete forms in
the parking garage, carpentry work, doors, hardware, and finish items. Transcript, Vol. 1 at 32. Appellant’s major subcontractors were George Harbison,
Inc., masonry; Webber, Inc., drilled piers; Ron Kinning, Inc., mechanical;
CHR/Newbery, Inc., electrical; Ike Monty, Inc., drywall, partitions, painting,
and acoustical ceilings; Courtesy Carpet, Inc., carpets. Id. at 30.
Appellant’s Initial As-Planned Schedule
18. As called for by the contract, finding 13, appellant submitted a timely,
and ambitious, progress schedule. Appellant’s Supplemental Appeal File, No.
8576, Exhibit 13; Respondent’s Exhibit 8 (As Planned Schedule Showing Critical Tasks). Appellant’s plan was to complete excavation by November 29,
1983, then to pour the footings and slab on grade for the Federal Building between December 14, 1983, and January 24, 1984. The structure and concrete
for the Federal Building would be poured between January 4, 1984, and June
26, 1984. Ductwork (critical air distribution) was to begin on February 8,
1984, and to be complete by September 18, 1984, eighty-four days after the
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finish of the structure and concrete. Heating and cooling equipment were also
to have been installed by September 18, 1984. The roof and exterior masonry
of the Federal Building were to have been in place by August 21, 1984, and
the concrete structure for the parking garage was to have been complete by
that day. Plaster and drywall were to have been complete by December 11,
1984, with installation of demountable partitions and carpet starting the next
day and lasting until April 30, 1985. Respondent’s Exhibit 8 (As Planned
Schedule Showing Critical Tasks; Combined Schedule Showing Critical As
Planned and As Built Tasks). According to this schedule, the Federal Building was to have been enclosed by October of 1984.
19. Here are the major tasks of the as-planned schedule, early start, early
finish, and duration for completion of the project:
Task
Early Start Early Finish
Clearing & Excavation
Concrete & Rebar
Drilled Piers
Footings & SOG (Fed Bldg)3
Precast Masonry (Offsite)
Rough Pipe & Fittings
Structure & Concrete
Duct Work
Interior CMU4
Heating & Cooling
Mechanical Controls
Fixtures & Trim
Demountable Partitions
Final Punch & Checkout
19Oct83
9Nov83
16Nov83
14Dec83
14Dec8
14Dec83
4Jan84
8Feb84
2Feb84
30May84
30May84
27June84
12Dec84
15May85
29Nov83
16Oct84
10Jan84
24Jan84
31May84
21Aug84
26June84
18Sep84
21Aug84
18Sep84
2Apr85
2Apr85
30Apr85
25June85
Duration
(Days)
42
343
56
42
140
252
175
224
182
112
308
280
140
42
Appellant’s Supplemental Appeal File, No. 8576, Exhibit 13; Respondent’s
Exhibit 8 (As Planned Schedule Showing Critical Tasks; Combined Schedule
Showing Critical As Planned and As Built Tasks).
3
SOG is the acronym for slabs on grade
4
CMU is the acronym for concrete masonry unit
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As Built Schedule
20. As noted above, the original contract completion date for the project was
October 8, 1985. Finding 14. As of April 30, 1986, the COR reported on the
inspection report the issuance of thirty-seven change orders, with a cumulative value of $518,980.47 and a revised contract completion date (as a result
of extension of time through change orders) of January 18, 1986, an extension
of 102 days. Appeal File, No. 8576, Exhibit 72. The Government declared the
project substantially complete on April 11, 1986, 185 days after the original
contract completion date and 102 days after the revised completion date. Appeal File, No. 8349, Exhibit 10. Clearing and excavation began on October 19,
1983, and ended on December 11, 1983. Drilled piers began on December 12,
1983, and ended on February 24, 1983. Footings and slabs on grades began
on January 18, 1984, and ended on March 20, 1984. Structure and concrete
for the Federal Building began on January 27, 1984, and ended on August 11,
1984. Respondent’s Exhibit 8, As Built CPM Schedule.
21. In the meantime, mechanical ductwork was severely delayed. The period
for installing ductwork ran from June 15, 1984, until substantial completion
of April 11, 1986. Respondent’s Exhibit 8, As Built CPM Schedule. The delay
was due to the performance of appellant’s mechanical subcontractor. We describe below the mechanical subcontractor’s late submittals. See findings 32,
33.
22. The mechanical subcontractor could not institute proper quality control,
which hindered the project. On August 10, 1984, the mechanical contractor’s
own Vice President wrote, in colorful language, expressing his concern over
poor quality control by his company over the installation of ductwork. He
stated that he was “appalled” at the quality of the sheet-metal fabrication,
that the project’s first floor was twenty-percent behind schedule, and that the
ductwork that was installed had holes in it, improper installation, split sheet
metal, and poorly built dampers. He ended up by stating that the company’s
credibility was “shot.” Respondent’s Supplemental Appeal File, No. 9245, Exhibit 11. As of September 12, 1984, appellant was complaining to Kinning
about unrectified duct quality. Respondent’s Supplemental Appeal File, No.
9245, Exhibit 13.
23. On October 23, 1984, appellant complained to Kinning about delays to the
seventh floor because of its inability to timely submit underfloor insulation
drawings. Respondent’s Supplemental Appeal File, No. 9245, Exhibit 14.
Such quality control complaints extended until January of 1985. Id., Exhibit
15. In mid-December of 1984, a second-tier subcontractor on the mechanical
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system, Johnson Controls, Inc., the installer of the temperature control system, walked off the job because they were not paid by Kinning. They returned
on January 22, 1985. Johnson Controls was to walk off the job two more
times: from February 28 to March 19, 1985, and June 18 to August 30, 1985.
Id., Exhibits 16, 40; Respondent’s Exhibit 8, As Built CPM Schedule.
24. On January 31, 1985, appellant wrote Kinning that its performance was
unsatisfactory and was delaying appellant’s work and the work of other
trades. Respondent’s Supplemental Appeal File No. 9245, Exhibit 17. There
were continuing problems with Kinning’s progress. The correspondence indicates various types of delay, from poor quality control to lack of payment of
suppliers. Respondent’s Supplemental Appeal File, No. 9245, Exhibits 17-51.
As of February 19, 1986, Kinning had not completed its work on the first
three floors of the Federal Building. Id., Exhibit 52.
25. The chillers for the building were installed on or about April 1, 1986. It
was not until April 8, 1986, that Kinning itself believed that all of the mechanical equipment was installed and ready for start-up. Respondent’s Exhibit 3B, Report Number 49. On April 11, the COR reported that work had progressed enough on the air-conditioning chillers so that the building could be
occupied in present condition if needed, and that the project could be declared
substantially complete on April 11. Respondent’s Supplemental Appeal File,
No. 9245, Exhibit 54.
26. The in place brick erection for the Federal Building began on September
17, 1984, and was complete on September 11, 1985. Roofing and skylights
started on July 30, 1985, and ended on October 1, 1985. Respondent’s Exhibit
8, As Built CPM Schedule. The dry-in (i.e., enclosure to allow the start of interior work) of the building was in October of 1985, one year past the scheduled dry-in. Respondent’s Exhibit 13; Transcript, Vol. 1 at 126-27. Installation of demountable partitions started on October 31, 1985, and ended on
April 3, 1986. The fire sprinkler system was started on June 4, 1984, and
completed on April 2, 1986. Respondent’s Exhibit 8, As Built CPM Schedule.
27. There is a dispute of fact concerning the critical path for this project. Appellant’s expert’s analysis is that the critical path runs through the drilled
piers, concrete, atrium brick, exterior brick, precast masonry, atrium, main
roof, and partition installation. Appellant’s Exhibit 35, Board 1; Transcript,
Vol. 4 at 150-68. Respondent’s critical path analysis starts, as does appellant’s, with the clearing and excavation, drilled piers, and structural concrete.
It then shifts, however, to the mechanical work, i.e., mechanical controls,
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with a parallel critical path for critical air distribution, through the hookup of
the chillers to substantial completion. All other delays are deemed not critical. Respondent’s Exhibit 8, As Built CPM Schedule; Transcript, Vol. 8 at 7683.
28. We have found that the mechanical subcontractor had major problems
completing in a timely fashion his tasks, particularly the ductwork, thus delaying the project. Findings 21-25. The critical nature of the mechanical work
was confirmed by the testimony of appellant’s project manager, who acknowledged that installation of the suspended ceiling controlled installation of demountable partitions. Findings 79, 80. The logical progression of construction
is to install ductwork and other above-ceiling mechanical equipment before
installation of the suspended ceiling. Appellant’s as-planned schedule showed
the acoustical suspension grid following after ductwork, finding 20, and appellant intended that its subcontractors follow this progression. Respondent’s
Supplemental Appeal File No. 9245, Exhibit 51. Completion of the interior
mechanical work did not depend on the completion of the interior finish work.
Transcript, vol. 8 at 96-98. The temperature controls did not depend on the
installation of demountable partitions because the controls were to be placed
on the columns. Transcript, Vol. 8 at 105. The building could not be occupied
without functioning mechanical systems, and in this case, the chillers were
not able to be hooked up until just before substantial completion. Finding 25.
Further, the record establishes that as of the end of February 1986, base bid
work and other work was fairly complete, and that mechanical was the major
work that had to be performed prior to occupancy. Finding 102. We find that
the critical path for this project runs through the mechanical portion of the
project. We conclude that the analysis of respondent’s expert more accurately
reflects the way this building was actually built.
GSBCA No. 9245-Shop Drawing Submittal Claim: Relevant Contract
Provisions
29. The contract’s General Conditions, Section 00100, provided in pertinent
part:
Shop Drawings, Coordination Drawings and Schedules
19.7 Unless otherwise provided in this contract, or otherwise
directed by the Contracting Officer, shop drawings, coordination drawings and schedules shall be submitted to the Contracting Officer...sufficiently in advance of construction requirements to permit no less than 10 working days for checking
and appropriate action.
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Contract Specifications, Section 00100, General Conditions, at 4. The Contract’s Mechanical General Requirements, Section 15010, provides in pertinent part:
2. SUBMITTALS
2.1 Manufacturer’s Data: With 60 days after award of contract
and before executing any work, six copies of information in the
completely marked and coordinated package sufficient to assure full contract compliance with the contract requirements
shall be submitted to the Contracting Officer for approval.
Piecemeal submittal of data is not acceptable. Information
shall be submitted for all material and equipment the Contractor proposes to furnish for accomplishment of the contract
work....
2.2 Shop Drawings: Within 60 days after award of contract, six
copies of consolidated shop drawings in one complete package
shall be submitted to the Contracting Officer for approval. The
drawings shall ... include plans, elevations, and sections of
equipment and control spaces identifying and indicating proposed location, layout, and arrangement of items of equipment,
control panels, accessories, piping, ductwork, and any other
items that must be shown to assure a coordinated installation.... Piecemeal submittal of drawings or marked-up contract
drawings or copies are not acceptable.
Contract Specifications, Mechanical, General Requirements, Section 15010,
at 15010-1.
30. Appellant based its construction schedule on an assumption that the respondent would approve submittals within ten working days. Transcript, Vol.
1 at 61. At the pre-construction meeting on November 29, 1983, appellant’s
project manager was told that respondent’s architect would be reviewing appellant’s submittals, then forwarding those submittals to respondent for final
approval. Appellant was warned to act expeditiously in tendering submittals
for approval, because there might be delay. Appellant’s Supplemental Appeal
File, No. 9245, Exhibit 1. At the meeting, the COR explained that the architectural submittals would be submitted to, and reviewed by, the respondent’s
architect in El Paso. The mechanical would have to be submitted to the architect, and then sent to Dallas, Texas for subsequent review by Blum Consulting Engineers (Blum), the architect’s mechanical/electrical consultant, and
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then sent back to El Paso through Dallas. The COR made it clear that the
approval process for all submittals would take more than ten days. Transcript, Vol. 7 at 214-15. When appellant’s project manager requested an informal approval system, for rebar in particular, the request was rejected. Respondent’s officials stressed the need to obtain approval by its officials, but
stated that there were ways to route necessary documents to an authorized
official. Appellant’s Supplemental Appeal File, No. 9245, Exhibit 2.
31. On April 25, 1984, the contracting officer expressed respondent’s dissatisfaction with the six to seven week average approval time of mechanical and
electrical submittals caused by Blum’s delay in reviewing drawings. The contracting officer stated that Blum’s delay was hindering respondent’s final approval, which was causing appellant pricing problems with its suppliers. Appeal File, No. 9245, Exhibit 52.
32. The contract called for mechanical submittals to be provided by December
11, 1983 — sixty days after contract award. Findings 9, 29. On December 8,
1983, appellant had submitted mechanical underfloor drawings from Kinning, which respondent rejected in January 1984 as inadequate.5 Mechanical
underfloor drawings show piping to be placed under the slab-on-grade, and
approved mechanical underfloor drawings are required before the slab-ongrade can be poured. Transcript, Vol. 1 at 145. As of April 23, 1984, Kinning
still had not provided the re-submittal, Respondent’s Supplemental Appeal
File, No. 9245, Exhibit 5, but respondent had provided verbal approval to
pour the slab-on-grade. Transcript, Vol. 1 at 147.
33. The mechanical piping was due to start on December 14, 1983, and last
for 252 days, until August 21, 1984. Finding 18. However, as of May 22, 1984,
appellant was complaining to Ron Kinning that it lacked from Kinning submittals for, among other items, the boiler combustion control system, microprocessor building control system, and water heater vent system, as well as
resubmittals for as build underfloor ducts and drain vent and soil risers. Respondent’s Supplemental Appeal File, No. 9245, Exhibit 7. As of June 29, appellant complained to Kinning that it lacked from Kinning the seventh floor
mechanical equipment room layout drawings to submit to respondent. As of
September 12, the seventh floor layout submittals were not forthcoming. Id.,
Exhibits 9, 13. Appellant was complaining to Ron Kinning about lack of submittals (for underfloor insulation) as late as October 25, 1984. Id., Exhibit 14.
5
Appellant does not contest respondent’s act of rejecting the drawings.
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34. By letter of December 7, 1984, appellant’s project manager, citing paragraph 19.7 of the contract’s General Conditions, stated that respondent’s
“failure to check and take the appropriate action in 10 days” had delayed appellant and would result in a request for time extension and extended period
costs. Appeal File, No. 9245, Exhibit 54. On October 7, 1985, appellant’s project manager advised that the demountable partition and carpet work on the
second floor west had been delayed due to lack of shop drawing approval. Id.,
No. 9245, Exhibit 56. On September 8, 1986, appellant’s project manager
filed an equitable adjustment claim of $205,913 and an increase of contract
time of ninety days. Id., Exhibit 57.
35. By letter of March 26, 1987, the COR denied responsibility, stating that
the principal cause of delay was appellant’s failure to close-in the building to
enable the scheduled start of interior finish work. The COR noted that even
when the structure was enclosed, “some of appellant’s submittals had still not
been sent to the A/E for his review and approval.” Appeal File, No. 9245, Exhibit 59. The COR’s denial was incorporated by reference in the contracting
officer’s decision of September 11, 1987, denying appellant’s claim. Id., Exhibit 61.
36. Appellant’s delay expert attributed nine days of non-concurrent delays to
respondent’s late return of shop drawings but admitted that he could not tie
the late return of submittals to late delivery of equipment on the site. Transcript, Vol. 4 at 189-92. The delay expert testified that the delay was “illusive.” Id.
GSBCA No. 9928 — The Brick Claim: Relevant Contract Specifications
37. Contract Section 03010, “Forms for Concrete,” provides in pertinent part:
PART 1 — GENERAL
....
1.3 QUALITY ASSURANCE
1.3.1 Codes and Standards: Comply with provisions of following
codes, specifications and standards, except where more stringent requirements are shown or specified. The latest editions of
the following specifications and recommended practices govern
work in this section and constitute minimum requirements.
1.3.2 American Concrete Institute:
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....
1.3.2.3 ACI 301 “Specifications for Structural Concrete for
Buildings”.
...
1.3.9. Building Research Advisory Board (National Academy of
Sciences):
1.3.9.1 Dimensional Tolerances for Cast-in-Place Concrete.
Contract Specifications, Section 03010, at 13010-1, 2.
38. Contract Section 04050, “Unit Masonry, General,” provides in pertinent
part:
PART 3 — EXECUTION
....
3.2 INSTALLATION, GENERAL
....
3.2.6.1 Variation from Plumb: For vertical lines and surfaces of
columns, walls and arises do not exceed 1/4” in 10’, or 3/8” in a
story height to exceed 20’, nor 1/2” in 40’ or more....
....
3.2.6.5 Variation in Mortar Joint Thickness: Do not exceed bed
joint thickness indicated by more than plus or minus 1/8”, with
a maximum thickness limited to 1/2”. Do not exceed head joint
thickness indicated by more than plus or minus 1/8”.
....
3.4. MORTAR BEDDING AND JOINTING
...
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3.4.3. Maintain joint widths shown, except for minor variations
required to maintain bond alignment. If not shown, lay walls
with 3/8” joints.
Contract Specifications, Section 04050, at 04050-10, 11.
39. Contract Section 04210, “Brick”, provides in pertinent part:
BRICK
....
1.3.1 Obtain brick from one manufacturer, of uniform texture
and color (or uniform blend in the variation thereof).
....
PART 2 — PRODUCTS
2.1 GENERAL
2.1.1 Size: Unless otherwise indicated, provide bricks manufactured to the following actual dimensions:
2.1.1.1 Standard Modular: 2 1/4” x 3 5/8” x 7 5/8”
....
2.2.1 General: Where solid bricks are indicated, provide units
complying with standard referenced [sic] and requirements for
classification, grades, types, compressive strength, application,
and other qualities indicated.
2.2.2 Facing Brick: ASTM C 216, except as otherwise indicated.
2.2.2 Grade SW.
2.2.2.2 Brick shall meet requirements for type FBX, except type
FBS requirements shall apply for color and texture.
....
2.2.2.5 Texture and Color: Match Contracting Officer’s sample.
All exposed faces and ends shall meet color and texture requirements.
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2.2.2.5.1 Contracting Officer’s samples are brick as manufactured by El Paso Brick Company in their color no. 8321 —
Flash Common, with 20% of the units called out to eliminate
the lighter colors. Texture for exposed surfaces is smooth.
Contract Specifications, Section 04210, at 04210-1, -2. The ACI301-72 Specifications for Structural Concrete for Buildings, at Table 4.3.1, Tolerances for
Formed Surfaces, provides a 1” allowable maximum variation “for the entire
length” from plumb in the lines and surfaces of columns, piers, and walls.
Paragraph 4.3.4 of the specification provides that permissible variations from
plumb and designated building lines for “portions” of buildings more than 100
feet above ground shall be as specified in contract documents. Respondent’s
Supplemental Appeal File, No. 9928, Exhibit 4.
40. Section 1/730 of Contract Structural Drawing 7-30 showed a typical prefabricated brick panel below slab. The section showed a 4” dimension between
the exterior vertical plane of the brick and the exterior vertical plane of the
concrete slab. The Section had two notes at the brick line “ARCH BLDG
LINE(HOLD),” and “4” MIN MAY BE INCREASED TO 4 1/2” FOR
INCREASED TOLERANCES.” The first note (“hold”) referred to the exterior
vertical plane of the brick. That line was to be permanent and could not be
moved outward. Thus, for increased tolerance, the specifications allowed the
appellant to move the concrete line 1/2” inward. Transcript, Vol. 5 at 63-68.
Denial of the Right to Decrease Concrete One-Half Inch
41. In late January or early February of 1984, appellant was pouring the first
floor slab and first floor columns. Transcript, Vol. 1 at 172, Vol. 4 at 194. Appellant’s masonry subcontractor, through its President, Mr. Harbison, suggested to appellant’s project manager that appellant increase the tolerance
between the brick and the concrete by exercising its contractual right to reduce the dimensions of the concrete structure by 1/2”. Transcript, Vol. 3 at
194. On February 28, appellant’s precast concrete “T” supplier, Featherlite,
Corp., noted that with existing tolerances, there might be clearance problems
with double tees. Featherlite requested appellant to obtain another half inch
clearance for the concrete structure. Appeal File, No. 9928, Exhibit 52.
42. On February 29, appellant’s project manager wrote respondent that:
A note on section 1/7-30 states we may increase the brick veneer dimension at the structural slab edges to 4 1/2”, but must
maintain the overall outside to outside building dimension. We
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intend to do this on the Federal building, which will result in
columns and slab edges where there is brick veneer being set in
by 1/2” on all sides. We need to do the same thing at the four
walls of the garage in order to install the brick veneer.... Your
early review and advice regarding this matter, so that we can
proceed with column line 6 walls is requested.
Appeal File, No. 9928, Exhibit 53.
43. There is a dispute of fact as to whether respondent’s on-site representative, Mr. Ross, finding 16, orally denied appellant permission to bring in the
concrete building line by 1/2”. Appellant’s project manager testified that Mr.
Ross verbally denied appellant permission to move the concrete frame of the
Federal Building in by 1/2”, but granted permission to reduce the dimension
of the garage frame by that amount. Transcript, Vol. 1 at 178, 243. This account is confirmed by Mr. Harbison, who, having heard third-hand of Mr.
Ross’s denial, and, concerned about the tight tolerances for the brick-concrete
interface, confronted Mr. Ross. Mr. Ross confirmed to Mr. Harbison his verbal
denial of permission for the Federal Building. Transcript, Vol. 3 at 194-95.
Neither the contracting officer nor the COR recalls such a denial, and the
COR maintained that if Mr. Ross did orally deny permission, it would have
been beyond his authority. These Government witnesses don’t deny that Mr.
Ross denied permission, they simply do not recall any such conversation.
Transcript, Vol. 6 at 94-95, Vol. 7 at 203-04. We find that respondent’s on-site
representative orally denied appellant’s project manager permission to reduce the dimension of the concrete structure of the Federal Building by 1/2”
for increased tolerance.
44. Appellant’s project manager did not protest Mr. Ross’s denial because he
did not know that the concrete would cause the problems that later developed. Transcript, Vol. 1 at 181. Acting on the verbal directives, appellant proceeded to construct the Federal Building frame without the additional 1/2”
tolerance. Transcript, Vol. 1 at 248. On April 23, 1984, appellant did receive
written permission from respondent to construct the garage frame 1/2” inward on all sides from the theoretical 4” brick line. The letter did not mention
the dimensions of the concrete form for the Federal Building. Appeal File, No.
9928, Exhibit 54. By that time, appellant had already poured the first floor
slab of the Federal Building; thus, it was too late to inquire further about reducing the dimensions of the concrete structure of the Federal Building.
Transcript, Vol. 1 at 248.
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Brick Culling
45. The concrete frame of the Federal Building was poured between January
and August of 1984. Respondent’s Exhibit 8, Combined Schedule, Federal
Building and Parking Facility. Appellant’s project manager recalls the pour
being complete on August 11, 1984. Transcript, Vol. 1 at 207. Appellant’s
plan was to mount brick to the concrete frame after completion of the concrete pours. Appellant could not mount brick on lower portions of the frame
and simultaneously pour the upper portions of the frame, because shoring
necessary for the pours would have hindered installation of the brick on lower
levels. Transcript, Vol. 1 at 206-07.6
46. Appellant’s mason, Mr. Harbison, started receiving brick from the brick
manufacturer, El Paso Brick Company, in May 1984. Transcript, Vol. 3 at
148. Many of the bricks received from El Paso Brick Co. did not, in the mason’s view, conform to contract specifications for either dimension or color. Id.
at 149-50. By August, the mason was rejecting 20-25% of the brick received
from the manufacturer. Id. at 151. El Paso Brick Co. employees had complained to respondent’s inspectors that the mason was being overly critical on
brick delivered to the mason’s yard, and respondent’s inspectors requested a
meeting, which took place on September 5, 1984. Id. at 152- 54. The meeting
was attended by respondent’s on-site representative, Mr. Ross, one of his assistants, respondent’s architect, Mr. Hilles, and appellant’s employees. Id. at
155.
47. At the meeting, Mr. Hilles complained that the mason was being overly
critical about the quality of the brick. In response, Mr. Harbison assembled a
3’ x 3’ panel from brick straight from the delivery pallet. Mr. Hilles stated
that the appearance of the panel was satisfactory, and told the mason to stop
rejecting brick. This was also the view of GSA’s on-site representative, Mr.
Ross. Transcript, Vol. 3 at 155-59. Mr. Harbison recollects the architect using
more colorful language, which will not be quoted here, but suffice to say that
Mr. Harbison’s recollection was precise as to the absolute nature of the instruction, that is, that Mr. Harbison was instructed to quit culling brick. Id.
at 159.
6
Appellant’s as-planned schedule shows the structure and concrete for the Federal Building
to be erected between early January 1984 and late June 1984. The as-planned schedule
shows the installation of in-place brick taking place between May of 1984, and late August
of 1984. See Respondent’s Exhibit 8, combined As-Planned and As-built Schedule. Thus,
some concurrence, late in the concrete pours, was possible.
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48. At the hearing on the merits, the architect admits that respondent’s onsite representative ratified the architect’s view: “So, in general ... the requirements on the contractor were eased there. Not by me, but by ... the Government, by Bob Ross ... which [who] permitted him to use the brick that he
was getting, within limits.” Transcript, Vol. 5 at 42. There is a dispute of fact
as to whether the instructions were to completely cease the brick culling or
simply not to cull as much brick. Based upon precise testimony of appellant’s
witnesses, we find that the architect instructed the mason to cease culling
brick, and that those instructions were ratified by the respondent’s on-site
representative, Mr. Ross. The issuance of those instructions was within Mr.
Ross’s authority, as he was respondent’s official for determining whether material met contract specifications. Finding 16. We find that these instructions
had the effect of relaxation of the brick specifications.
49. After the meeting, Mr. Harbison gave instructions to his bricklayers to
cull only those bricks that were ridiculously defective. Transcript, Vol. 3 at
262.
50. On or about mid-September 1984, the mason started his brickwork, the
Federal Building’s penthouses, which are described in finding 6. Following
the instructions previously given by the Government, findings 47, 48, the mason did not assiduously cull brick, and consequently was worried about the
eventual appearance of the penthouse. Transcript, Vol. 3 at 171. Brickwork
was completed on the penthouses on or about September 21, and respondent’s
inspector, Mr. Coates, noticed that the brick placed on the penthouse was efflorescing and was, in some measure, out of tolerance.7 All agreed that while
that brick might be acceptable for the penthouse, it would be unsatisfactory
for the corners, and that greater quality control by the brick manufacturer
was needed. At a subsequent meeting, the brick manufacturer agreed to cull
the bricks off his line to an acceptable level. Appellant’s Supplemental Appeal
File, No. 9928, Exhibit 19.
Out of Plumb Concrete Floor
51. In early October, after appellant had completed the concrete pour and
stripped away the form-work, the mason dropped plumb lines to prepare for
the laying of brick. He found that the concrete frame was out of plumb, three
inches wider at the top than at the bottom. The northeast corner was out of
7
Efflorescence is the leaching of lime from bricks causing discoloration on the surface. Efflorescence can be removed by brushing, or, in difficult cases, by high pressure cleaning.
Transcript, Vol. 1, at 185; Vol 5, at 47.
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plumb by more than 1 1/2”, and the remaining corners were out of plumb by
more than 1”. Transcript, Vol. 1 at 205-06, Vol. 3 at 173, 190-93, 267, Vol. 5 at
75, 131. Appellant used an engineer who lacked the necessary surveying experience to ensure that the concrete forms were properly placed to ensure a
concrete frame poured in plumb. Transcript, Vol. 3 at 249, Vol. 4 at 6-7, 1819, Vol. 5 at 57-59, 129, Vol. 7, at 247. The interior columns were also out of
alignment. Respondent’s Supplemental Appeal File, No. 9928, Exhibit 7;
Transcript, Vol. 3 at 217, 235, 241-43, 253-54, Vol. 4 at 6-7, 10, 15, 18-19, Vol.
5 at 54.
Removal of Bricks at the Vertical Corners of the Building
52. The first week in October 1984, the mason began laying brick at the vertical corners starting at the street level. After the brick was lain up to a height
of approximately four feet, respondent’s architectural inspector noted irregularities when the sun reflected off the vertical surface. Further inspection by
respondent’s on-site representative and the architectural inspector confirmed
the irregularity, which was due to the brick not meeting tolerance specifications. Transcript, Vol. 1 at 200, Vol. 3 at 182; Appellant’s Exhibits 34A-34O
(photographs of the bricks at corners).
53. A round of meetings then ensued between the respondent, appellant, and
the mason. It was decided to send the bricks for testing. Appellant’s Supplemental Appeal File, No. 9928, Exhibit 24. On October 22, the laboratory reported that the brick did not meet tolerances required by the specifications.
Four out of ten sample bricks exceeded warpage allowances and six of ten
bricks exceeded end dimension specifications. Appellant’s Supplemental Appeal File, No. 9928, Exhibit 25. On October 23, respondent, through its onsite representative, issued a defects and omissions list directing appellant to
remove the bricks that had been placed on the corners, which resulted in the
removal of 982 square feet of brick. Appellant’s Supplemental Appeal File,
No. 9928, Exhibit 26, 29. El Paso Brick paid the mason for the direct labor
and material cost of removing and reinstalling the brick. Transcript, Vol. 3 at
182-83. It took until November 15 to obtain brick from El Paso Brick that met
the specifications. Transcript, Vol. 1 at 222. Appellant’s mason testified to a
delay of fifteen days, as did appellant’s delay expert, due to the respondent’s
issuance of, and appellant’s compliance with, the deficiency order, but the
mason testified that the delay extended into January of 1985 because of problems El Paso Brick was having in producing brick that met the specifications.
Transcript, Vol. 3 at 189-91; Appellant’s Exhibit 35.
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Cutting of Exterior Brick
54. If one subtracts the length of the building with brick from the length of
the building without brick, the difference is 8”. Thus, the distance of the exterior plane of the concrete from the exterior plane of the brick at each of the
corners will be 4” (for a total dimensional difference of 8”). The same calculation holds for the width. Finding 2. As the brick was specified at 3 5/8” wide,
the tolerance between the exterior plane of the concrete and the interior
plane of the brick is 3/8”. The out-of-plumb concrete pour, finding 51, meant
that the exterior edge of the concrete would not be within the 3/8” specified
tolerance for the distance between the interior face of the brick and the exterior face of the concrete. Because of the direction on the contract drawings to
hold the building line, finding 40, that tolerance could only be increased by
either moving the building line in or shaving the brick. After the pour, the
option of moving the building line in was not open to appellant without tearing out the concrete and starting over. Thus to meet the specifications, the
mason was forced to cut exterior brick. Transcript, Vol. 3 at 212-14.
Cutting of Atrium Brick
55. The concrete atrium column dimensions, without brick, were 2’8”: 1’4”.
The dimensions with brick were 3’4” x 2’. Respondent’s Exhibit 9, Contract
Structural Drawing 7-15. This amounted to a difference of 4” at each corner.
Appellant’s project manager testified that the concrete column was too wide
to hold brick of the size specified with the specified head joints of 3/8”. Transcript, Vol. 1 at 225-26. This is a slight mis-statement of the problem. The
problem arose because the specification for the column width (2”) at detail A
was defective. The drawing showed for the course at the ends of the column
three bricks placed lengthwise and two head joints.8 As the bricks were specified to be 7 5/8” long, finding 39, and the head joints were specified to be 3/8”,
the sum of those dimensions is 23 5/8”, not the 2” listed on the drawing.
Transcript, Vol. 3 at 214; Respondent’s Exhibit 9, Contract Structural Drawing 7-15, Detail A. The specifications allowed head joints to be expanded by a
maximum of 1/8”. Finding 38. Expansion of the two head joints by the allowable amount would have left a shortfall of 1/8” at the ends of the column.
Transcript, Vol. 7 at 148.
56. What of the width through the middle of the column? The detail shows
the concrete column 16” wide, plus the bricks placed lengthwise on the column. Each brick is specified to be 3 3/5’” wide. The mortar is specified to be
8
A course is a horizontal section of masonry. A head joint is a masonry joint formed between two stones in the same course.
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3/8”. Finding 38. The sum of the width through the columns is 3 5/8” (width of
brick) + 3/8” (width of mortar) + 16” (width of column) + 3/8” (width of mortar) + 3 5/8” (width of brick): i.e., 24”. Thus, the width between the two exterior planes of the brick placed along the length of the column was 3/8” wider
than the width of the bricks at the end of the column. Appeal File, No. 9928,
Exhibit 58. It was therefore necessary to make the width through the middle
consistent with the width at the end, which required the splitting and shaving of eight out of the fourteen bricks surrounding a column. Transcript, Vol.
1 at 227-29, Vol. 3 at 224; Appeal File, No. 9928, Exhibit 58.
57. The alternate course provided for two bricks placed along their length,
placed on their ends, with three head joints. The sum of the dimensions of
bricks so placed, plus the head joints, is also 23 5/8” (Brick dimensions total
22 1/2”, head joints total 1 1/8”, and the sum of those is 23 5/8”). However, expansion of the three head joints by the allowable 1/8” would have allowed for
running the brick plus head joints to the 24” dimension. See Detail “B” Respondent’s Exhibit 9, Contract Structural Drawing 7-15. Rather than expand
the head joints to enlarge the dimension to 2”, the mason cut and split bricks
on the alternate course, because expanding the head joints would have ruined
the aesthetics gained by consistent head joints and consistent brick dimensions on the alternative courses. Transcript, Vol. 3, at 219, 263.
58. The problem was complicated by the fact that the concrete atrium columns were out of plumb by an inch, in the same way that the frame was out
of plumb, which meant more shaping and splitting of each brick than otherwise would have been necessary to fit the frame. Transcript, Vol. 3 at 21819.9 However, the principal problem was the defective specifications. Transcript, Vol. 3 at 220. Appellant requested permission to add another half
brick to the course at the head of the column to make up for the defect in the
plans and the out-of-plumb column. Respondent denied permission. Transcript, Vol. 1 at 226-28, Vol. 3 at 217. In all, the mason had to cut a minimum
of 22,832 brick for the eight atrium columns. Appeal File, No. 9928, Exhibit
57.
59. On November 30, 1988, appellant filed a claim for delay relating to brick,
on behalf of itself and the mason. Appellant claimed fifteen days of delay
from October 23 through November 6, 1984, for the work shutdown and re9
Appellant requested permission from respondent to add another half-brick to the course to
accommodate both the shortfall in the dimension and the out-of- plumb column. That request was denied. Transcript, Vol. 1 at 228, Vol. 3 at 217.
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placement of brick at the corners, seven days of delay from November 7
through November 19, 1984, due to alleged indecision as to the quality of the
brick, and seventy-nine days of delay due to the necessity of cutting and splitting brick at both the corners and the atrium. Appeal File, No. 9928, Exhibit
57. Appellant claimed a total of $320,208 for costs, including $19,602 for
equipment costs for the delays between October 23 and November 19,
$70,389 for the equipment costs for the seventy-nine days of delay, job site
labor costs of $139,800, and home office overhead of $61,307. On January 29,
1989, the contracting officer denied the claim in its entirely, for the reasons
that there were no conflicts in specifications, no relaxation of requirements,
and the splitting of brick was due to poor concrete pours. Appeal File, No.
9928, Exhibit 58.
GSBCA No. 8349 — Cooling Tower Bracing
60. The contract called for a cooling tower. Contract Specifications, Section
15900, at 15900-1. Appellant installed the cooling tower on a steel structure
that was sitting on the concrete deck. Transcript, Vol. 2 at 33- 34. In May of
1985, respondent became concerned about the stability of the tower and studied the matter, which took from May until September. Transcript, Vol. 2 at
35-36. Roofing work started on August 23, 1985. Appellant’s Exhibit 35,
Board 1. On July 31, 1985, work on the cooling tower was stopped pending
approval of isolators and support beams. Appellant’s Supplemental Appeal
File, No. 8349, Exhibit 10. On August 14, respondent advised its architect
that the cooling tower had been erected in accordance with specifications and
requested a proposed contract change that respondent could issue to the contractor to improve the stability of the tower. Id., Exhibit 14. On September 5,
the contracting officer directed appellant to proceed with installation of the
diagonal angle bracing and requested a detailed proposal by September 24.
Appeal File, No. 8349, Exhibit 37. Appellant proposed to do the work for
$3,662 and an increase of contract time of four days. Id., Exhibit 38.
61. On September 13, the COR sent modification request 33 to appellant. Appeal File, No. 8349, Exhibit 40. However, appellant stopped work on the roof
“pending resolution of this cooling tower support matter.” Transcript, Vol. 2
at 39. At the time of the work stoppage, according to appellant, the roofer had
finished the west one-third of the roof, the north-central section, and the
north central one-third, and was ready to proceed on the south central onethird. The cooling tower was in the south central one third. Transcript, Vol. 2
at 41. Appellant’s decision to stop work was made unilaterally by appellant’s
project manager, without the approval of the respondent. Id. Respondent’s
change order negotiator had a heated negotiation with appellant’s project
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manager over the cost and the unilateral decision to stop work. The negotiator urged appellant to continue with the roofing work, and protect the roof
while effecting the change. Transcript, Vol. 7 at 12.
62. On October 2, appellant sent another proposal, offering to do the work for
$13,332 and an increase of contract time of seven days. Appeal File, No. 8349,
Exhibit 42.
63. Appellant claims thirty days total delay for the issuance of this change
order combined with others, but claims only seven to eliminate concurrent
delays. Transcript, Vol. 2 at 44. Appellant claims that the delay prevented
the dry-in of the building.
64. However, it is apparent that appellant’s roofer was able to work on other
areas of the roof. Appellant’s daily logs show appellant’s roofing subcontractor with eleven people working on the east portion as of September 16; five on
the east portion and performing copper flashing on the north on September
17; eleven on the east and south central portions on September 23; thirteen
on the south, east and south-central portions on September 24; nine people
on September 25; nine on September 27; ten on October 3; and six on October
4 through 7, flashing the roof. Respondent’s Exhibit 1C, Reports Numbered
571-72, 577-79, 581, 586-87, 589. Appellant’s project manager admitted that
the roof could have been protected during the performance of the change order by placing plywood and insulation over the roof. Transcript, Vol. 2 at 50.
65. On December 9, 1985, the contracting officer issued a unilateral change
order to perform the work for $5,271 and no additional time. That amount
reflected what would have been the direct cost for performing the change order had appellant protected the roof and proceeded with the change order.
The contracting officer denied additional time because, in the respondent’s
view, at that time the project was delayed by the exterior masonry’s late
start, which was caused by the out-of-plumb concrete pours. Appeal File, No.
8349, Exhibit 45.
GSBCA No. 8350 — Chiller Pad
66. On or about December 24, 1984, respondent’s Design and Construction
Division (D&C) learned that the Drug Enforcement Administration had decided that EPIC would not move into the Federal Building. D&C called upon
the Real Estate Division for new tenant assignment layouts so that the project would not be delayed. Appellant’s Supplemental Appeal File, No. 8576,
Exhibit 40. At a coordination meeting of January 21, 1985, it was decided to
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move the FBI into the building in place of EPIC. Id, Exhibit 46. This decision
meant redesign of the mechanical system, including a new chiller on the roof.
Id., Exhibit 46. On August 29, 1985, the contracting officer directed appellant
to proceed with installation of a roof top slab to support a future air-cooled
chiller, at a price to be determined later, but not to exceed $2,400. Appellant’s
Supplemental Appeal File, No. 8350, Exhibit 2. Respondent then notified appellant that a chiller would weigh between 6,000 and 8,000 pounds and not to
proceed to install the pad until receipt of further instructions. Id., Exhibit 4.
67. On September 4, the structural consultant to respondent’s architect submitted the proposed design for a chiller slab, a copy of which was sent to appellant. Appellant’s Supplemental Appeal File, No. 8350, Exhibit 5. On September 18, respondent issued a directive to proceed with the change at a cost
not to exceed $9,594. Appeal File, No. 8350, Exhibits 39, 41.10 On October 2,
appellant proposed to do the work for $14,195. Again, as with the cooling
tower bracing, appellant sought to include delay time for stopping work on
the roof. Respondent’s contract negotiator thought it would be sufficient to
complete the roof, and then place the pad. Transcript, Vol. 7 at 16.
68. On December 9, respondent notified appellant that it was unilaterally
processing the change order for $9,594, which included appellant’s direct
costs, but did not include extended period costs. Appeal File, No. 8350, Exhibit 44; Transcript, Vol. 7 at 17.
GSBCA No. 8352 — FBI Roof Pad
69. The FBI occupies the seventh floor space originally assigned to EPIC. Appellant’s Supplemental Appeal File, No. 8576, Exhibit 46. On September 16,
1985, respondent issued a request for a change order proposal (change order
10
On first inspection, this change looks like a bi-laterally executed change order; it has the
signature of appellant’s Vice President under the bold print on the form stating that “the
undersigned contractor agrees to perform any or all of the above changes for the amount
indicated.” It also has the signature of the contracting officer and the amount proposed by
the Government — $9,594. Yet, the contractor proposed to perform the work for $14,195,
and the form is properly designated as a “unilateral change order,” i.e., a change order
whose price has been unilaterally established by the Government and with which the contractor disagreed. Why the discrepancy? At the hearing it was revealed that for change order number 30 (GSBCA No. 8352, finding 69), the contracting officer took appellant’s
signed proposal, changed the amount to reflect the Government amount, deleted the appellant’s request for time, and processed that document as a unilateral change order.
Transcript, Vol. 2 at 83. Apparently, that technique was used on this change order. While
the respondent’s attempt was to save paperwork to expedite the negotiation process, this
practice has the capacity to mislead.
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30) for construction of a reinforced concrete pad on the roof, to support a prefabricated building, and walkway protection boards for a walkway to the new
chiller pad. Appeal File, No. 8352, Exhibit 37. The pad would take up about
two percent of the area of the roof. Transcript, Vol. 2 at 80. Appellant proposed to perform the work for $13,481 and a time extension of four days. Appellant’s Supplemental Appeal File, No. 8352, Exhibit 1. Again, appellant’s
cost was based on stoppage of work on the roof. Respondent’s cost was based
on the direct cost of performing the change and cutting through the roof.
Transcript, Vol. 2 at 80, Vol. 7 at 25.
GSBCA No. 8457 — Demountable Partition Change Order Delay — Third
Floor Occupancy Changes
70. The contract specification for demountable partitions provided in pertinent part:
DEMOUNTABLE GYPSUM PANEL PARTITION SCHEDULE
Panels: Provide 13,260 lin. ft. of solid panels in addition to solid
panels and glazed panels indicated in walls shown on floor
plans. Installation or storage shall be as noted below.
Frames: Provide fully prepared frames for 660 doors in addition to doors shown in walls indicated on floor plans. Installation or storage shall be as noted below.
Installation: Panels: 11,935 lin. ft. — location and arrangement
as directed by Contracting Officer.
Frames: 594 frames — Location as directed by Contracting Officer.
Furnished and stored (for future installation by Government:
Panels: 1,325 lin. ft.
Frames: 66 frames.
Contract Specifications, Section 10616, at 10616-6. The purpose of this specification was to finish the building as is done in the commercial world: finish
the base building, and then install partitions as later directed. Transcript,
Vol. 2 at 93-94, Vol. 5 at 13.
71. Preliminary layout drawings for all floors were furnished to appellant in
April or May of 1985, but appellant did not feel it could start on the work un-
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til receipt of final layout drawings. Transcript, Vol. 2 at 98, Vol. 3 at 38-39.
Finalized layout drawings for the first (ground) and second floors were provided to appellant in April of 1985. Transcript, Vol. 2 at 99. Between April
and July, appellant and respondent negotiated the price and time. Transcript, Vol. 2 at 104. These negotiations resulted in bi-lateral change orders
18 and 19, wherein the contract time was extended by fourteen days for each
change order, and appellant was paid $85,000 for change order 18 and
$98,000 for change order 19. Appeal File, No. 8350, Exhibits 26, 29. The notices to proceed on these change orders were issued on July 3 and 9, 1985,
after the change orders had been negotiated. Transcript, Vol. 2 at 104. Each
change order contained the following language:
A 14 day increase in the time for performance of the contract
will be allowed for this modification. The equitable adjustment
in this modification also includes all direct, indirect, and cumulative impact and delay costs, if any, incurred in performing
the changed and unchanged contract work affected by this
modification.
Appeal File, No. 8350, Exhibits 26, 29.
72. Appellant’s project manager testified that the time provided in these bilaterally executed change orders does not really reflect the actual impact
costs caused by the change. He testified that the time reflects an arbitrary
allocation of time among change orders to reflect the total amount of delay of
release of the tenant layout finishes on the first through the seventh floor:
We allocated, in conjunction with Bobby Bandy of GSA, the
contracting officer, we allocated to the overall delay caused by
the late issue of the tenant finish drawings on floors one
through seven, we allocated only 14 days for the first floor and
14 days to the second floor. We allocated 30 days to the third
floor based upon getting a notice to proceed by August 5th, and
then on each succeeding floor we allocated 30 to 45 days, whatever was necessary to complete the work.
Transcript, Vol. 2 at 113. Earlier, the project manager testified that he negotiated the first three floors as a package. Id. at 102. This alleged agreement
was not memorialized in writing, according to appellant’s project manager,
because he trusted the contracting officer and dealt with him verbally on
many occasions during the administration of the contract. Id. at 126.
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73. The contracting officer’s testimony is different. He testified:
[W]e negotiated each change to stand on its own which would
mean price and time would be agreed on at that time for that
change. So, although I can’t remember the specific discussion, I
would say that would have been my understanding that when
we left this negotiation, that this price and this time was
agreed on for this change and it stood on its own merits.
Transcript, Vol. 6 at 66. Respondent’s change order negotiator denies any
such agreement. Transcript, Vol. 5 at 199-200, Vol. 6 at 200.
74. On June 7, the contracting officer forwarded to appellant a modification
request for readying the third floor for occupancy, which work was beyond
that specified in the base bid. Appeal File, No. 8457, Exhibit 52. The modification involved erection of partitions to create nine offices, associated equipment, a transaction room with bullet-proof glass, and placement of doors and
locksets. Id., Exhibits 53, 54. On July 15, appellant submitted a proposal to
perform the work for $180,714 and an additional thirty days of contract time.
Id., Exhibit 54. Appellant’s project manager testified that the proposal for
thirty days extension of time did not reflect the actual time it would take to
perform the work covered by the change request, and that the actual time
would have been ninety days. He stated that the thirty days reflected the
agreed-upon allocation formula, finding 72, fully expecting to make up the
time on changes to the fourth through the seventh floors. Transcript, Vol. 2 at
113-15.
75. In its proposal, appellant stated that it would need a directive to proceed
by August 5, 1985, in order to complete the work within the contract time
plus thirty days. Appeal File, No. 8457, Exhibit 54.
76. There ensued several months of negotiation concerning this change, including oversight by another GSA organization called the Office of Program
Control (OPCO), which would not allow negotiation on extended overhead
until all direct costs had been negotiated. Transcript, Vol. 5 at 196. On September 6, appellant submitted a breakdown of the costs justifying his estimate, and stating that a notice to proceed was necessary in order not to delay
the work further and generate a request for a longer time extension. Appeal
File, No. 8457, Exhibit 56. The Government’s analysis resulted in a negotiation goal of $134,820. Id., Exhibit 57. On October 4, the parties conducted a
final negotiation session and agreed to a price of $147,500, which was comprised of $112,931 in direct costs, $24,109 for overhead and extended cost,
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and $8,969 for profit. Id., Exhibit 58. On October 11, appellant’s project manager, “confirming our negotiations,” sent his proposal to respondent for
$147,500 and thirty days of increase in contract time. It contained the following language: “The equitable adjustment in this modification also includes all
direct, indirect, and cumulative impact and delay costs, if any, incurred in
performing the changed and unchanged contract work affected by this modification.” Id., Exhibit 59. The change order was signed, mailed and sent to
appellant on October 15 and received October 18. Id., Exhibit 61; Transcript,
Vol. 2 at 121.
77. On March 14, 1986, appellant submitted a claim for $190,025, representing increased period costs, and seventy-four days of increased contract time.
The request for increased contract time was based on respondent’s “delay” in
issuing a notice to proceed from August 5 until October 18, 1985. Transcript,
Vol. 2 at 122-23. Appellant’s project manager submitted the claim because
appellant did not receive any additional time on any other late changes. Id.
On March 19, the contracting officer denied the claim, stating that change
order 26 was a bi-laterally negotiated and binding change order. Appeal File,
No. 8457, Exhibit 61.
78. There is a dispute of fact as to whether the contracting officer entered into
a side agreement with appellant’s project manager concerning allocation of
time among a group of change orders such that the time frames agreed to in
each change order would not reflect the actual contract extension needed by
the change. Such an agreement is not reflected in any contemporaneous document reflecting the change order negotiations, is dependent solely on the
oral testimony of the appellant’s project manager, and is denied by Government officials. It is improbable that experienced officials of respondent would
agree to such an unusual procedure, which is incapable of being audited or
monitored. This is particularly the case when the change order negotiations
on this project were subject to oversight by a separate GSA entity, the Office
of Program Control. Finding 76. We find as fact that respondent’s officials did
not enter into the side agreement.
GSBCA 8576 — Delays in Negotiation for Change Orders for the Fourth
through Seventh Floors
79. Section 10616 of the contract provided that partitions were to be installed
after floor coverings and suspended ceilings were installed. Appellant was
required to coordinate partition work with work of other trades affected by
partition installation. Contract Specifications, Section 10610, ¶3.1.1, at
10616-4.
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80. The location of base contract work was to be furnished on tenant layout
drawings, to be provided later. Transcript, Vol. 2 at 93, Vol. 5 at 13, Respondent’s Exhibit 9, Note to Contract Architectural Drawing 5-15. Partition work
could begin only after carpet was installed. Carpet could be put down only
after the roof was installed, and the building was “in the dry.” Transcript,
Vol. 2 at 45-47. The building was in the dry in October of 1985. Finding 26. In
addition, the partition work could not begin until the ceiling grid system was
installed, and installation of the ceiling grid system was dependent on completion of plumbing and electrical work, which was finished on October 31,
1985. Transcript, Vol. 2 at 211, Vol. 4 at 38, 40-41.
81. On November 4, November 29, and December 2, 1985, respondent provided final tenant drawings for installation the base work demountable partitions, together with request for change order proposals for additional work
over and above the base work on the fourth, sixth, and seventh floor. Appeal
File, No. 8576, Exhibits 52, 54, 55. The typical modification request states:
Provide labor, materials and equipment to prepare the fourth
floor space for occupancy. Work is to be in accordance with the
following attachments:
[Here is listed drawings and exhibits which form the basis for
the modification requests]
Id., Exhibit 52. Thus, specifications for base contract work were mingled with
specifications for changed work.
82. Substantial effort was called for by the request for modifications. For example, additional work on the seventh floor called for appellant to provide a
bullet resistant reception counter and view window with bullet resistant
glass. Appeal File, No. 8576, Exhibit 54. Thus, while appellant might be able
to install partitions in certain locations, it could not install partitions in all
locations. Id.; Transcript, Vol. 2 at 161. Appellant waited for respondent’s direction to proceed with installation of demountable partitions, Transcript,
Vol. 2 at 165-70, and acted reasonably in doing so.
83. On December 19, 1985, appellant responded to respondent’s modification
request of November 4 for the fourth floor room, proposing to perform the
work for an adjustment of $411,603 plus an increase of contract time of ninety days. Appellant stated that an agreement must be reached by January 17,
1986, or the proposal was void. Given the scope of the modifications, the time
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spent by contractor in formulating its proposal was reasonable. Appeal File,
No. 8576, Exhibit 56.
84. When respondent’s change order negotiator visited the site in December
of 1985, he expected to see a complete building except for the tenant occupancy changes. He saw a building in which base-bid work was still being performed, and concluded that the had wrongfully allowed appellant about
$25,000 in extended period costs for the third floor change order, when appellant was not finished with the base bid work. Transcript, Vol. 5 at 201-03,
217. Appellant’s estimate for proceeding with the work was twice the estimate of respondent’s change order negotiator. Id. at 216. Consequently, the
negotiator recommended to his superiors that further negotiations would be
fruitless, and that respondent complete the tenant occupancy changes by
separate contract. Id. at 217.
85. By letter of January 8, the contracting officer cancelled the modification
requests for the fourth, fifth, sixth, and seventh floors. Appeal File, No. 8570,
Exhibit 57. On January 1, 1986, the contracting officer directed appellant to
proceed with base bid work for the carpets on all floors, and base bid work for
the partitions, doors, and hardware on the fourth floor. Id., Exhibits 58, 59.
On January 21, the contracting officer directed appellant to proceed with the
base bid work on the fifth floor, and on January 23 directed appellant to proceed with base bid work on the sixth and seventh floors. Id., Exhibits 61, 62.
There is no explanation from respondent why it waited from January 1, when
it ordered the fourth floor base-bid work to proceed, to January 21 to 23,
when it ordered the fifth, sixth, and seventh floor base-bid work to proceed.
86. Nothing in the requests directs the appellant to proceed immediately with
installation of partitions on those floors. Appeal File, No. 8576, Exhibits 51,
54, 55. We have found as fact that appellant’s waiting for direction on the
partition was reasonable. Findings 81-83. Respondent’s change order negotiator admits that respondent could have issued a directive to proceed with the
base bid work in November and that it was a mistake not to have issued that
directive. Transcript, Vol. 6 at 265. Respondent’s failure to issue a directive to
proceed in November caused a suspension of work on the fourth through the
seventh floors from November 4, 1985, the day the fourth floor request for
proposal was issued, until January 20, 1986, the first day of the week in
which the last release was issued to proceed with the base bid work for the
sixth and seventh floors. Appeal File, No. 8576, Exhibit 187, Sub- Exhibit B.
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87. Ike Monty Painting & Drywall, Inc.’s. (Monty’s) plan was to proceed floor
by floor from the second through the seventh, allowing thirty-days per floor
and then to return to the first floor. Transcript, Vol. 4 at 35; Appellant’s Supplemental Appeal File, No. 8576, Exhibit 187, Sub-Exhibit B. The first possible date Monty could have installed partitions was on October 31, 1985, after
completion of plumbing and electrical. Transcript, Vol. 4 at 41. Demountable
partition work started on or about November 1 and continued until December
21 on the first and second floor, and then fell to zero until base bid work for
the remaining floors on January 14 began. Transcript, Vol. 4 at 41- 42; Appellant’s Supplemental Appeal File, No. 8576, Exhibit 187, Sub- Exhibit B. Simultaneous release of the floors caused labor inefficiencies and acceleration
costs. Between January 20 and March 1, Monty was forced to work on at
least two floors simultaneously, when it had intended to work floor by floor.
Appellant’s Supplemental Appeal File, No. 8576, Exhibit 187, Sub- Exhibit B;
Transcript, Vol. 4 at 45.
88. Appellant also waited until the directive to proceed to install carpets,
light fixtures, sprinkler heads, and power poles. Transcript, Vol. 2 at 168-69.
However, appellant could have installed carpets and equipment and fixtures,
between the drop ceiling and slab above, that did not depend on the placement of the partitions. The ceiling grid was placed on five foot modules, with
partition locations lining up at the exterior window munions. Contract Specifications, Section 09510, ¶2.2.1.1, at 09510-3. Thus the lighting fixtures, air
conditioning vents, and sprinklers could have been placed using the window
mullions as a point of reference, avoiding interference with the partitions.
Transcript, Vol. 5 at 85-92, Vol. 6, at 166-68, 177-78.
89. Appellant’s project manager admitted he could have placed carpet on the
bare concrete floor and then taken out that portion later designated on final
partition layout drawings as areas where vinyl floor tile was to be placed.
Transcript, Vol. 2 at 240-44. Appellant thus could have placed all of the wiring for the lighting and the piping for the sprinkler system under the ceiling
grid before the exact partition locations were known. It would have taken minor adjustment to place the sprinkler heads and the lighting diffusers in the
ceiling after installation of the partitions. Transcript, Vol. 5 at 85-87.
90. Appellant’s electrical subcontractor, CHR/Newbery, suffered disruption in
labor inefficiency for its inability to timely place power poles in the offices until respondent released the base-bid work and the partitions had been placed
in accordance with the base bid work. Appellant’s Supplemental Appeal File,
No. 8576, Exhibit 187.
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91. In letters dated March 14, 1986, appellant claimed that late release of the
directive for installation of the carpet entitled appellant to a contract time
extension of 120 days and contract adjustment of $154,685. Appeal File, No.
8576, Exhibits 65-68. Late release of the fourth floor partitions, appellant
maintained, entitled appellant to a contract adjustment of $294,165 and a
contract time extension of 120 days. Late release of the fifth floor partitions
entitled appellant to the same adjustment and time extension as the fourth
floor. Finally, late release of the sixth and seventh floors entitled appellant to
a contract adjustment of $438,911 and increased contract time of 180 days.
92. By decision of April 18, 1986, the contracting officer denied the claim, deciding that the “telegraphic directives were issued with ample time to complete the work and did not delay the rest of the base-bid work.” The contracting officer decided that:
the delay in your work caused by your being eleven months late
in placing the building in the dry is the cause of your alleged
extended period cost and cannot be attributed to any alleged
delay which might have been caused by the Government’s actions in issuing the directives.
Appeal File, No. 8576, Exhibit 70.
GSBCA No. 8826 — Electrical and Partition Work on First Floor
93. On September 30, 1985, the contracting officer requested a change order
proposal for installation of partition and electrical work on the ground floor.
Appeal File, No. 8826, Exhibit 53. On October 23, appellant’s project manager
wrote to the contracting officer and noted that one of the instructions was to
extend the partition to the slab above; appellant assumed that respondent
meant an insulated sheetrock partition, not a demountable partition. Id., Exhibit 54.
94. Upon lack of response from respondent, on November 8 appellant submitted its proposal for $81,397 and an increase of contract time of 15 days. Appeal File, No. 8826, Exhibit 55. The estimate for the direct costs included
drywall work at $18,959, electrical work at $39,539, carpet at $1,673, and
glass and glazing at $1,383, for a total of $61,695 in direct costs. Appellant
also sought overhead of $3,092 and extended period costs of $11,415. Id., Exhibit 55.
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95. The contracting officer and change order negotiator were unhappy with
the expense of the electrical work, so they eliminated that work from the
scope of the change request and changed the partition to a demountable partition. Transcript, Vol. 7 at 97. In February of 1986, appellant furnished a
revised estimate of $14,902 for the revised work, but kept its extended period
costs of $15,585, for a total change order proposal of $33,924. Appeal File, No.
8826, Exhibit 58. On February 10, the contracting officer directed appellant
to proceed with the revised changed work at a price not yet determined. The
contracting officer revised item I, replacing a glass door with a standard door,
as the glass door would take six to ten weeks for delivery. Id., Exhibits 60-62.
96. On October 31, 1986, the contracting officer processed a unilateral change
order establishing what he considered a fair and reasonable price of
$9,236.64 for performing the changed work, which was 61.9% of appellant’s
estimated cost of $14,902. Appeal File, No. 8826, Exhibit 64. The basis for the
estimate of $9,236.64 is not explained in the record. We find that appellant’s
estimates for the direct costs of the changed work ($14,902) is supported by
quotes from suppliers and are reasonable estimates for the cost of the
changed work.
GSBCA No. 8575 — Change Order to Exhaust Fan, Third Floor Holding Cell
97. Respondent had a poorly designed exhaust fan for the third floor holding
cell, and on the advice of the mechanical subcontractor issued a request for a
change order proposal to redesign it. The purpose of the proposal, dated October 15, 1985, was to design a fan that would push air from the third floor
holding cells and would operate in conjunction with an exhaust fan on the
seventh floor, which created negative pressure in the ducts leading from the
bathrooms. A sink was also proposed. Transcript, Vol. 7 at 48; Appeal File,
No. 8575, Exhibit 52.
98. On December 4, 1985, appellant proposed a contract adjustment of
$13,064 and an extension of contract time of three days. Appellant stated
that the three day time extension proposal was only good until December 16,
1985. Appellant’s Supplemental Appeal File, No. 8575, Exhibit 5.
99. Later, the sink was deleted. On January 23, 1986, appellant proposed to
perform the work for $29,359 and an extension of contract time of fifteen
days. Appellant stated that the time and amount were based on receipt of additional time extensions and extended period costs on other directives. Included in this proposal was seven days of contract extension time for Monty
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to account for delay in plastering the ceiling occasioned by the change. Appeal
File, No. 8575, Exhibit 54.
100. On January 23, 1986, the contracting officer directed appellant to perform the work at a price not to exceed $29,359 and an extension of time not to
exceed fifteen days. Appeal File, No. 8575, Exhibit 55.
101. On April 24, 1986, the contracting officer processed a unilateral change
order for $11,809 and denied appellant additional time on its contract, although it recognized the validity of Monty’s request for extension of seven
days. Appeal File, No. 8575, Exhibit 59. The subcontractor’s prices to perform
the work totals $13,507.24. If one adds ten percent profit, the total reasonable price for this change is $14,857.96.
GSBCA 8647 — Deductive Change Order for Partitions and Doors
102. The base contract required installation of 13,260 linear feet of solid panels and 11,935 linear feet of demountable partitions to be installed at the direction of the contracting officer. Finding 70. At the end of February 1986,
respondent’s contract negotiator considered base-bid work and most change
order tasks as complete, save for the mechanical portion of the job. Transcript, Vol. 7 at 84-86. This is confirmed by examination of respondent’s combined as built schedule, which shows work to be done, although most of it was
mechanical, such as conduit, ductwork, and chillers. There was other work to
be done, as well — installation of hollow and metal access doors, phone wiring, and electrical fixtures, along with damp-proofing and sealing. Respondent’s Exhibit 8, Combined As Planned and As Built Schedule. On March 19,
1986, the contracting officer issued a request for change order proposal for a
contract deduction to retroactively deduct from the contract price the cost of
solid panels, partitions, and doors that were not installed. Appeal File, No.
8647, Exhibit 52.
103. The contracting officer had paid for all items that the appellant did install as base bid work as shown on the tenant layout drawings. Transcript,
Vol. 7 at 70-73. The deduction, of $98,584, was based on actual contract invoices. Id.
104. On May 13, 1986, appellant filed a claim for a contract adjustment of
$202,809 and an extension of time of ninety days. Appeal File, No. 8647, Exhibit 54. On July 22, the contracting officer denied the claim. Id., Exhibit 55.
At the hearing, appellant’s contract manager explained the basis for the
claim by stating that the claim of $202,809 was extended overhead for all of
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the delays alleged by appellant to be respondent’s responsibility arising from
the modifications and late directives of January through April of 1986. The
claim does not pertain to the appropriate amount to implement this deductive
change order. Transcript, Vol. 3 at 43-45.
GSBCA No. 8351 — Installation of Doors and Partitions to First Floor
Computer Room
105. On or about August 13, 1985, the contracting officer sent a request for
proposal to appellant seeking to install 95 linear feet of partitions in access
flooring in rooms on the ground floors and to install doors. Appeal File, No.
8351, Exhibit 36. On September 19, appellant wrote respondent and complained about a conduit and a receptacle that would hinder the operation of
the double door in the planned opening. Appellant stated that it could not
proceed with the estimate until advice was received. Appellant’s Supplemental Appeal File, No. 8351, Exhibit 3.
106. On September 30, respondent clarified an electrical interface problem by
instructing appellant to abandon the conduit and remove the wire run each
way from the duplex receptacle and then delete the receptacle and install a
blank cover on a duplex outlet. Appellant’s Supplemental Appeal File, No.
8351, Exhibit 4. Upon receipt of those instructions, appellant came back with
a proposal to perform the work for $11,455 and seven days of extra contract
time. The direct cost to perform this work was $4,164. Appeal File, No. 8351,
Exhibit 39. Appellant’s project manager admitted that it would not have taken an increase in crew size to complete the work and that the installation of
the door took about three days. Transcript, Vol. 3 at 7.
107. On December 9, 1985, the contracting officer rendered a unilateral decision, timely appealed, in which he determined that no additional time was
justified because of other delays and processed the change at $5,538. Appeal
File, No. 8351, Exhibit 42. The work covered by this change was deleted by
the change order at issue in GSBCA No. 8757. Transcript, Vol. 3 at 7-8.
GSBCA No. 8353 — Telephone Work in Fourth Floor Telephone Room
108. The purpose of this change order was to move conduits for telephone circuits from the west telephone closet on the fourth floor to the new telephone
room on that floor and for installation of plywood on the wall for telephone
wire boards. Transcript, Vol. 7 at 31; Appeal File, No. 8353, Exhibit 38. On
November 10, 1985, appellant proposed $22,577 and a contract time extension of ten days. The estimate of the value of the electrical subcontractor’s
work was $12,682, which included the electrical subcontractor’s extended pe-
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riod costs. The subcontractor’s total material and labor costs amounted to
about $7,457. Appeal File, No. 8353, Exhibit 40. On December 19, 1985, respondent issued a unilateral change order granting appellant $6,306.47 in
direct costs, but no extended period costs or time. Respondent’s estimate of
labor was $2,638.18, while the electrical subcontractor’s estimate of labor was
$3,179.74. There is no explanation of the difference between the respondent’s
estimate of labor costs and appellant’s subcontractor’s estimate of labor costs.
Respondent denied extended costs.
GSBCA No. 8757 — Raised Access Flooring on Ground and Second Floor
109. The contract specified a computer room on the seventh floor for the use
of EPIC. With EPIC no longer moving into the building, the necessity for the
computer room, and raised access flooring to accommodate computer cables,
ceased. Appeal File, No. 8757, Exhibit 62. The original specification called for
5,300 square feet of flooring with access ramps. Id.
110. On May 21, 1985, respondent notified appellant that it would issue a
modification to delete the raised access flooring from the seventh floor and
install 2,100 square feet of the flooring on the ground floor and a smaller
computer room on the second floor. Appeal File, No. 8757, Exhibit 59. On August 15, after several rounds of correspondence, the contracting officer issued
a modification request to remove the access floor from the seventh floor and
install 2,000 square feet of the flooring on the ground floor rooms and 515
square feet of flooring on a second floor room. Id. GSBCA no. 8757, Exhibit
66.
111. Tate Access Flooring of Dallas, the subcontractor for this work, provided
appellant a quote ($42,666) that was 97.2% of its original base bid for the
seventh floor. Appeal File, No. 8757, Exhibit 68. Appellant proposed to perform the work at no increase in price. Id., Exhibit 70. Respondent’s change
order negotiator thought that proposal unreasonable, as half the material
was deleted, and he expected a deduction. Transcript, Vol. 7 at 36-37.11 On
November 8, with the permission of appellant, respondent’s change order negotiator negotiated a significant reduction (about $8,000) in Tate’s price for
11
Tate put in its quote a charge of $8,235 for storage of carpet at its warehouse in New Jersey, allegedly stored since June of 1984 while awaiting tenant layout drawings. Appeal
File, No. 8757, Exhibit 68. The change order negotiator refused to pay a stored materials
charge unless he received an invoice from the carpet manufacturer. Transcript, Vol. 7 at
41. He offered to pay for the carpet and to use it on other floors if delivered with an invoice
to El Paso. Appeal File, No. 8757, Exhibit 59. Respondent never received the carpet, and
the change order negotiator suspects that the carpet never existed.
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the changed work. Appeal File, No. 8757, Exhibit 73. However, on December
31, appellant added a request of eighty-four calendar days and extended duration cost to the proposal. Id., Exhibit 74.
112. Disgusted by the endless and seemingly fruitless negotiation about this
change, the contracting officer issued a modification deleting the raised access flooring, Appeal File, No. 8757, Exhibit 76, which resulted in appellant’s
stop work order to Tate. Appellant’s Supplemental Appeal File, No. 8757,
Exhibit 2. On July 24, appellant proposed a deductive change order of $1,453.
On August 22, the contracting officer issued a unilateral change order deduction of $51,453. Appeal File, No. 8757, Exhibit 79.
GSBCA No. 8584 — Amendment to Ceiling Suspension System in Room 119
113. The contracting officer issued a telegraphic instruction to proceed with a
modification to change the ceiling suspension system in room 119 to 2 1/2” 14
gauge metal studs at 16” center. Appeal File, No. 8584, Exhibit 54. Respondent proposed to give no contract time for the performance of this work. Id.,
Exhibit 56. Appellant quoted $1,358 for the direct costs. Appellant stated in
the letter accompanying the proposal: “We have not received any change orders with concurrent time, so must request same on this change.” Id., Exhibit
58. Appellant thus added $32,828 of extended period costs to the charge,
which, plus overhead, profit, and bond, came to $36,403.
114. At the hearing, appellant’s project manager testified that in his view the
time was warranted because the change, because it was in the access area for
subcontractors, would delay the subcontractors in the performance of their
work. However, the project manager also admitted that substituting the materials would have only taken two or three days, and that the work without
the change would have caused some disruption to which appellant would
have had to adapt in any case. Transcript, Vol. 2 at 252-55. The proposal for
extended period costs was far out of proportion to the scope of the change. We
find that appellant’s reason for the proposal of $32,828 for extended period
costs was not anticipated disruption caused by the change but was for the
reason stated in its letter accompanying the proposal: appellant was seeking
to recover through this proposal extended period costs that it had been denied
in others.
115. On April 24, 1986, respondent processed a unilateral change order for
$1,422 and denied appellant an extension of contract time. Appeal File, No.
8584, Exhibit 60.
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GSBCA No. 8649 — Installation of Door in Fourth Floor Room
116. On January 31, 1986, respondent issued a change order proposal request
for a glass door, aluminum frame, rough bucks, and ceiling rack trim to cover
rough areas where partitions ended in open areas. Appeal File, No. 8649, Exhibit 52. On February 6, appellant wrote respondent that a glass door would
take eight to ten weeks for delivery. Id., Exhibit 53.
117. On March 3, 1986, appellant, noting a lack of response from respondent,
stated that if it wanted a glass door, with sidelights, it would costs respondent $110,579 and an increase in contract time of eighty-four days. If respondent wanted just the other work in the modification (aluminum frame, rough
bucks, and ceiling track trim), it would cost $21,005 and fourteen days in contract time. Appeal File, No. 8649, Exhibit 54. Appellant’s drywall subcontractor’s (Monty’s) cost for the work was $4,211. Transcript, Vol. 7, at 90. Respondent’s estimate was $5,324 for the wood doors and other work. Appeal
File, No. 8649, Exhibit 55.
118. On June 30, 1986, respondent denied appellant’s request for a contract
extension, stating that the work that had been done was “concurrent with
base bid work,” i.e. mechanical work. Appeal File, No. 8649, Exhibits 58, 60;
Transcript, Vol. 7 at 91. Respondent processed the modification for $4,768.
GSBCA No. 9119 — Installation of Door Frames on Sixth Floor
119. This proposed change order was for the installation of door frames on
the sixth floor. Appellant proposed $20,633 for the performance of this work,
and a contract extension time of fifteen days. The cost of appellant’s subcontractor (Monty) for the performance of this work was $2,980. Appeal File, No.
9119, Exhibit 56; Transcript, Vol. 7 at 104. On March 25, 1987, the COR cancelled the modification because the request for extended period costs and contract time was unwarranted. Appeal File, No. 9119, Exhibit 58. Appellant
reminded respondent that the work had already been done, pursuant to the
verbal request of respondent’s change order negotiator. Id., Exhibit 59.
120. On June 23, 1987, respondent issued a unilateral change order, for
$3,219, and denied extended contract time with extended period costs as unjustified. Appeal File No. 9119, Exhibit 60.
GSBCA No. 8648 — Recessed Lighting-Ceiling Interface
121. Contract Electrical Drawing 9-31, at detail E9-H31, showed “K” and “K1” recessed lighting flush with the tiles of the acoustical suspended ceiling.
Respondent’s Exhibit 9, Contract Electrical Drawing 9-31.
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The Contract Section 09510, “Acoustical ceilings,” provided in pertinent part:
PART 2 — PRODUCTS
....
Ceiling Suspension Materials
2.1.2.1 .... Coordinate with other work supported by or penetrating through ceilings, including light fixtures....
....
PART 3 — EXECUTION
....
3.3 INSTALLATION
....
3.3.7 Coordinate installation for proper mechanical and electrical connections, as specified in Divisions 15 and 16. Verify installation of light fixtures ... for proper integration into [a] finished system.
Contract Specifications, Section 09510, at 09510-3, -6.
122. The contract also provided:
The exact mounting of lighting fixtures shall be approved on
the job before installation is commenced and, where applicable,
after coordinating with the type, style, and pattern of the ceiling being installed.
Contract Specifications, Section 16510, at 16510-4.
123. After installation of the lights was commenced, it was noted that there
was light leakage between the fixtures and the ceiling. This was brought to
the attention of the installers, but installation proceeded without correcting
the problem. Appeal File, No. 8648, Exhibit 56.
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124. On April 4, 1986, the contracting officer issued a defect and omissions
report (D&O) noting that “K” type light showed between the fixture and the
concealed grid ceiling tile. Appeal File, No. 8648, Exhibit 52. Appellant’s electrical subcontractor told appellant:
[W]e submitted the “K” fixture with the only ceiling trim made
for that fixture. GSA approved our submittal and we provided
the fixture as submitted. It is not our responsibility to ensure
that light will not filter out around the fixture.
The electrical subcontractor demanded an equitable adjustment to correct the
defect. Appeal File, No. 8648, Exhibit 53.
125. On May 2, 1986, the COR stated that the installation did not meet drawing requirements because the fixture housing was short of extending to the
ceiling line by about 1/2” to 3/4” and extended only about 1/8” into the ceiling
opening cut. The COR requested appellant to provide, without equitable adjustment as part of the existing contract, the close fit required by the drawing, by either re-cutting the acoustical ceiling tile and re-installing the fixtures for a closer fit or by providing glued-down gaskets or heat-resistant
caulking on the upper surface of the trim ring. Appeal File, No. 8648, Exhibit
54.
126. Appellant replied that even if the ceiling tile were re-cut to a closer fit,
there would still be light leakage, as the fixture trim would not fit perfectly
against the rough-texture of the tile. Appellant requested a change order or a
final decision of the contracting officer. Appeal File, No. 8448, Exhibit 55. On
July 3, 1986, the contracting officer issued his decision denying a contract
change and directing appellant to correct the light filter problem.
GSBCA No. 8650 — Tamper Switches in Fire Control Room
127. The Contract provides in pertinent part:
SECTION 15510 — FIRE PROTECTION
....
10. WATERFLOW ALARM AND VALVE SUPERVISORY
SYSTEM: The waterflow alarm system, control valve supervisory system, OS&Y valve supervisory contact units ... detectors
and all conduit and wiring connected thereto, are included in
the “FIRE ALARM SYSTEM” section of this specification.
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....
SECTION 16723 — FIRE ALARM SYSTEM
....
6. SYSTEM OPERATION:
....
6.5 Actuation of any supervisory device (such as tamper switch
...) shall automatically initiate the following functions:
a. Transmit a supervisory signal to a central station service
transmitter. No more than one signal is necessary for the entire building.
b. Sound an audible supervisory signal at the control panel.
c. Indicate the location of the device by zone on the control panel.
....
8. MATERIALS:
....
8.2.1 Tamper Switch: Each sprinkler system control valve and
each standpipe system riser shall be equipped with a tamper
switch listed by Underwriters Laboratories for the particular
location and type of valve supervised. The switch shall initiate
a supervisory signal upon a maximum of two complete turns of
a valve wheel or closure of ten percent, whichever is less.
Contract Specifications, Section 15510, at 15510-3, Section 16723, at 167235, -7.
128. By letter of April 4, 1986, appellant confirmed a conversation with the
COR informing the COR that contract drawings did not indicate to which
zone the tamper switches were to be connected. Appellant requested advice.
Appellant’s Supplemental Appeal File, No. 8650, Exhibit 52.
129. On April 21, the COR advised to which zone the tamper switches should
be connected. Appeal File, No. 8650, Exhibit 53. On May 14, appellant, on
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behalf of the electrical subcontractor, replied that the mechanical subcontractor had installed eleven tamper switches, seven in the fire pump room, and
one each in the elevator penthouse, stairwell numbers 4 and 5 (ground floor),
and the janitor closets. Appellant stated that the fire alarm control panel was
at maximum capacity, with no conduits installed to handle the additional devices, and that it was not appellant’s responsibility to hook up the tamper devices. Id., Exhibit 55.
130. After issuance of a D&O, and appellant’s subsequent refusal to hook up
the eleven tamper switches without additional compensation, the contracting
officer issued his decision directing installation of the tamper switches at the
OS&Y valves, on the grounds that installation was covered by the specifications and that it was appellant’s responsibility to coordinate the work of subcontractors. Appeal File No. 8650, Exhibit 58.
131. Each sprinkler system control valve and each standpipe system riser
had to be equipped with a tamper switch. Finding 127.
GSBCA No. 8868 — Vinyl Flooring At Stair Landings
132. Respondent issued a D & O requiring appellant to install vinyl flooring
at stair landings at stairs 1, 2, and 3. Appeal File, No. 8868, Exhibit 56. However, the applicable contract drawings only require vinyl on the stair treads
and risers. Respondent’s Exhibit 9, Contract Architectural Drawing 5-1
(Room Finish Schedule, Note 7). The COR directed appellant to place vinyl
flooring at the landings. Appeal File, No. 8868, Exhibit 59. Appellant requested a contracting officer’s decision, which was issued on October 31,
1986. Id., Exhibit 60.
Discussion
GSBCA No. 9245
Appellant argues that respondent was obligated, by paragraph 19.7 of the
contract’s General Conditions, to approve shop drawings within ten days,
and, alternatively, that at the pre-construction meeting its project superintendent and the respondent reached an understanding that the Government
would approve shop drawings within ten days and that its late approval of
shop drawings delayed the progress of the job. Appellant argues that respondent’s late return of shop drawings delayed the progress of the job.
The record does not support appellant’s version of the facts, and the contract
does not mean what appellant says it means. The shop drawings submittal
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clause of this contract provided that the contractor was to submit shop drawings to the contracting officer to permit “no less than ten working days for
checking and appropriate action.” Finding 29. This means that the contractor
shall coordinate its shop drawing submittals such that the contracting officer
has at least ten days for review “and appropriate action.” The clause places
obligations on the contractor, not on respondent. Cf. Coastal States Petrochemical Co. v. United States, 214 Ct.Cl. 520, 536, 559 F.2d 1, 8-9 (1977)
(supply clause of indefinite quantities contract places obligations on contractor, not Government, thus furnishes no basis for claim of adjustment). The
clause does not mean, as appellant would have us hold, that the contracting
officer has no more than ten days to review and approve (or take other appropriate action on) shop drawings. It would be an act of folly for the Government to so constrain itself in administering major construction contracts,
when review and resubmittal of shop drawings is often necessary to ensure
contractor’s compliance with requirements.
The record does not support the argument that appellant and respondent entered into a contemporaneous agreement at the preconstruction meeting that
the respondent would review and approve all shop drawings within ten days.
See Appellant’s Post-Hearing Brief at 131. To the contrary, at the preconstruction meeting the approval process was discussed with the COR expressly
advising appellant’s project manager that the review process would take
more than ten days, as the shop drawings would have to be reviewed by the
architect, or by the architect’s engineering consultant. Finding 30.
The record reflects that the architect’s consulting engineer was slow in reviewing mechanical and electrical submittals. Finding 31. We require, however, a demonstration that delayed approval caused actual delay to the completion of the project. Utley-James, Inc., GSBCA No. 5370, 85-1 BCA ¶17,816,
at 89,104. Appellant has not made the showing. To the contrary, the record
establishes that respondent made efforts to avoid delay by approving job progress in the absence of approved submittals. Even though the mechanical
subcontractor was late in resubmitting mechanical underfloor drawings, respondent gave permission to pour the slab on grade without approved submittals for the mechanical underfloor system. Finding 32. Delay was caused
by the mechanical subcontractor’s tardiness in providing both shop drawings
and the resubmittals required. Findings 32, 33. The appeal of this claim is
denied.
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GSBCA No. 9928 — The Brick Claim
This claim has a number of aspects. First, it involves the authority of respondent’s on-site representative. In this case, respondent’s on-site representative, according to the contracting officer, had the authority to inspect
supplies and determine whether supplies met contract specifications, and to
interpret the contract and direct work according to his interpretation. Finding 16. This authority is involved in the brick culling claim.
The brick culling claim arises because of the stringent specifications for the
dimension and color of the brick, finding 39, and the mason’s diligence in culling brick that did not meet the specifications. The mason’s diligence resulted
in a substantial rejection rate--about 25% of the delivered brick-- which drew
objections (voiced to respondent) from the brick manufacturer. Finding 46.
Upon hearing those complaints, respondent’s on-site representative (and the
respondent’s contract architect) went to the mason’s yard and complained
about the overly stringent rejection of brick. Finding 47. In response, the mason assembled a sample panel of unculled brick, which the architect and onsite representative found acceptable. The architect, in instructions ratified by
the on-site representative, gave explicit instructions to stop culling brick.
Findings 47, 48.
The on-site representative’s instructions resulted in the mason placing defective brick on both the penthouses and the corners of the building. Finding 50.
The brick on the penthouse was accepted, as it was out-of-sight on the roof.
When it was placed on the corners of the building, however, the unsightly
pattern could not be overlooked. The defective brick caused an undesirable
basket weave appearance, finding 52, which respondent would not tolerate.
Finding 53. The on-site representative issued a defect and omissions report
directing appellant to remove and replace the brick on the corners of the
building. This resulted in fifteen days of delay to appellant, as well as incurred costs. Finding 53.
Respondent argues that the on-site representative lacked the authority to
make a change to the contract. The authority of officials subordinate to the
contracting officer is derived from the facts of each case, based on the words
of the contract and the conduct of the parties during the contract administration. Stephenson Assoc., Inc., GSBCA Nos. 6573, 6815, 86-3 BCA ¶19,017, at
96, 325-26. Here, by the admission of the contracting officer, the on-site representative had the authority to determine whether supplies met contract
requirements and to direct appellant’s work under the contract. “When the
contracting officer licenses technical personnel, such as engineers or inspec-
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tors, to give guidance or instructions about specification problems to contractors, the Government is liable for the consequences of the guidance given.”
Tasker Industries, Inc., DOT CAB No. 71-22, 75-2, BCA ¶11,372, at 54,139.
Respondent further argues that the Inspections and Acceptance clause makes
it clear that there is no duty on the Government to inspect, and that under
that clause it is always the responsibility of a contractor to make sure that
supplies conform to specifications. Respondent’s Posthearing Brief at 79. Respondent is correct, Holt Roofing, Inc., GSBCA No. 8270, slip op. at 16 (Sept.
28, 1990), but the principal simply is inapplicable. Here, respondent’s on-site
representative hindered appellant’s inspection by issuing instructions not to
cull the brick. Respondent has not referred us to a case in which the Inspections and Acceptance clause shields the Government from the consequences
of improvident instructions directed to a contractor by an official authorized
to issue the instructions.
In directing the mason to stop culling brick, the on-site representative effected a constructive change to the brick specifications which resulted in defective brick being placed on the penthouse and the corners of the building. Respondent is liable for the costs of the constructive change, including the cost
of undoing it. Gricoski Detective Agency, GSBCA Nos. 8901(7823), 8922(7824),
8923(7825), 8924(7826), 8925(7827), 8926(7828), 90-3 BCA ¶23,131, at
116,142. Appellant is entitled to its direct costs for the brick culling, minus, of
course, any expenses the brick manufacturer has already paid the masonry
subcontractor. See Finding 53. Appellant is not entitled to a double recovery
of the same costs, one from the Government and one from the brick manufacturer.
Appellant, moreover, is not entitled to the extended period costs it seeks arising from the delay. The Suspension of Work clause for this contract provides
that “no adjustment shall be made under this clause for any suspension, delay, or interruption to the extent (1) that performance would have been so
suspended, delayed, or interrupted by any other cause, including the fault or
negligence of the Contractor.” Finding 10. We have found that the critical delay to the completion of this project was the mechanical systems, and that
responsibility for delay to those systems must rest with appellant. Findings
27, 28. Appellant is entitled, however, to remission of liquidated damages for
the delay period. Utley-James, Inc., 85-1 BCA at 89,104.
Appellant also seeks equitable adjustment for the mason’s cutting of the exterior brick. The distance between the exterior plane of the concrete and the
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interior plane of the brick was 3/8”. Finding 54. The mason had to cut exterior brick because (1) the exterior concrete frame was out of plumb from 1 to 1
1/2”, and (2) the contract specifications required appellant to hold the brick
line of the building at the specified vertical plane. Findings 40, 51. None of
this was the fault of the respondent.
Appellant argues that there was, in fact, a conflict between specifications.
Appellant states that the concrete tolerance was 1”, and if appellant had been
allowed that tolerance for the concrete, rather than held to the 3/8” tolerance
for the brick/concrete interface, the mason would not have had to cut the
brick. Even if we assume a 1” tolerance for the concrete, finding 38, it would
not allow the concrete to be poured out of plumb by 1” because of the direction
to “hold” the brick line. That direction meant that the tolerance could only be
exercised inwards, not outwards. As respondent notes, the 1” tolerance is
found in ACI 301, which applies “except where more stringent requirements
are shown or specified.” Finding 37. Both the direction on the drawing to
“hold” the line and the 3/8” tolerance are more stringent standards. We must
read contracts as a whole, giving every provision significance. Julius Goldman’s Egg City v. United States, 697 F.2d 1051, 1057 (Fed.Cir.1983). The tolerance of 1” thus does not control.
Appellant further argues that it was wrongfully denied its contractual right
to draw the concrete frame of the building in by 1/2”, and if it had been
granted that right the mason would not have had to cut exterior brick. The
right to draw the frame in a half inch is in paragraph 3.2.6.1 of Section 04050
of the contract. Finding 38. Both the mason and the precast concrete T supplier advised appellant’s project manager to take advantage of the 1/2” tolerance and to move the frame in by that measure. Finding 41. Respondent’s onsite representative denied appellant that right, finding 43; however, appellant has not shown that if that right had been exercised the problem would
have been avoided. With the frame moved in 1/2”, the 3/8” tolerance would
have increased to 7/8”, and the concrete was out of plumb by 1 to 1 1/2”. This
part of the appeal for this docket is therefore denied.
Appellant was also forced to cut brick at the eight columns around the atrium. This was due to defective drawing detail which, for the head of the column, did not coordinate the specified dimensions of the (1) column, (2) surrounding brick, and (3) column plus brick. When the dimensions of (1) and (2)
were added the sum was 3/8” greater than the specified dimension of (3). This
discrepancy compelled the mason to cut brick on the long sides of the column
back by 3/8” to meet the short dimension. Findings 55, 56. We have found as
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fact that the concrete pour was not the cause of the problem, finding 58, and
that the respondent denied appellant reasonable alternative methods for curing the difficulty, such as adding a half brick to the end of the column to increase the short dimension. Finding 58. Furthermore, adding an additional
course to the head joints would have ruined the aesthetics. Finding 57.
When the government orders that a structure be built and in doing so prescribes the specifications and dimensions, it implicitly warrants that if the
specifications are complied with, satisfactory performance will result; moreover, if the contractor is delayed or incurs increased costs for defective design,
the Government is liable for the delay costs and direct costs attributable to
the defect. United States v. Spearin, 248 U.S. 132, 135 (1918); Gevyn Construction Corp. v. United States, 24 CCF ¶81,946, at 87,413 (Ct.Cl. Trial Division), adapted by order 219 Ct.Cl. 677 (1979); R.M. Hollingshead Corp. v.
United States, 124 Ct.Cl. 681, 683-84, 111 F.Supp. 285, 286 (1953). Respondent is relieved from the consequences of its mistake when the defect is so
glaring or obvious that knowledge should be imputed to the contractor.
Townsco Contracting Co., ASBCA No. 28104, 83-2 BCA ¶16,755, at 83,393.
Respondent pleads here that the defect was indeed “patent.”
We do not agree. Appellant had one month to bid this job, finding 9, and to
perceive the defect it would have had to unerringly hone in on one detail of
many in the extensive contract drawings and discern that the detail was in
conflict with the brick specifications. It was not reasonable to expect that of
appellant, particularly given the amount of time to bid. Hull-Hazard, Inc.,
ASBCA No. 34645, 90-3 BCA ¶23,173, at 116,307; J.W. Bateson Co., VACAB
No. 712, 68-1 BCA ¶7055, at 32,620 (six week bidding period insufficient to
enable contractor to perceive conflict in document). The appeal is granted as
to appellant’s cost of cutting brick at the atrium.
GSBCA Nos. 8349, 8350, 8352
These changes relate to change order work on the roof, i.e., the cooling tower
bracing, chiller pad, and FBI roof pad. At issue is not the direct cost of the
changes but whether appellant is entitled to the costs of delay. Appellant argues that the changes were sufficiently broad in scope such that it was required to stop work on the roof while performing the changed work, and it is
therefore entitled to delay costs for suspension of work on the roof.
We disagree. Appellant stopped work on the cooling tower bracing change until the modification was resolved, a unilateral act which was challenged by
respondent’s change order negotiator. Finding 61. There is no proof that ap-
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pellant could not have worked on other areas of the roof. Indeed, the record
shows that appellant could have worked on the east or portions of the south
central areas not affected by the cooling tower change. Finding 64. Furthermore, appellant’s project manager admitted that appellant could have proceeded to install the roof where the cooling tower bracing was to go, and to
protect the roof while installing the cooling tower bracing over it. Finding 64.
Appellant was required to mitigate damages in performing changed work,
that is, to perform the change in such a way as to minimize expense to itself
and the Government. Beach Building Corp., ASBCA No. 311693, 88-1 BCA
¶20,348, at 102,905. It is also required under the supplement to the Disputes
clause to proceed diligently with the performance of the changed work. Finding 12; Holt Roofing Co., GSBCA No. 8270, slip op. at 17 (Sept. 20, 1990). Appellant could have completed the south-central part of the roof, and then incorporated the cost of cutting through the roof as part of its change order
proposal. This would have been a less costly technique, for both appellant and
respondent, than stopping work and incurring delay costs to the entire project, which costs were running about $1,000 per day. Appellant neither proceeded diligently nor mitigated its damages, and it is thus not entitled to its
delay claims for the cooling tower bracing.
Our conclusion is the same as to the remaining dockets involving changes on
the roof, the chiller pad, and FBI pad. The record establishes that appellant
could have installed those changes over the completed roof, thus mitigating
the Government’s damages, rather than delaying work on the roof.
GSBCA No. 8457
This claim involves a bi-lateral change order signed by both parties for demountable partition changes on the third floor. Negotiations between the
parties took place between July of 1985 and October of 1985, with appellant
and the contracting officer signing the negotiated change order. The parties
agreed to a total contract extension of thirty days and $147,500 for the
change, with the language that “[t]he equitable adjustment in this modification also includes all direct, indirect, and cumulative impact and delay costs,
if any, incurred in performing the changed and unchanged contract work affected by this modification.” Finding 76.
Language similar to that quoted above has been held to bar further claims for
delay, unless the claim is specifically reserved. “Where a change order is accepted without protest, it is considered a final agreement as to the equitable
adjustment and time extension stated therein and a bar to any further claim
by the contractor.” Pittman Construction Co., GSBCA Nos. 4897, 4923, 81-1
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BCA ¶14,487, at 73,299 (quoting William Passalacqua Builders, Inc., GSBCA
No. 4205, 77-1 BCA ¶12,406), aff’d on reconsideration, 81-1 BCA ¶15,111,
aff’d 2 Cl.Ct. 211 (1983); Hull-Hazard, Inc., 90-3 BCA ¶23,173; Preston-Brady
Co., VABCA Nos. 1892, 1991, 2555, 87-1 BCA ¶19,649, at 99,491, aff’d, 865
F.2d 269 (Fed.Cir.1988).
The negotiation for this change order came on the heel of negotiations for
change orders 18 and 19, which addressed tenant changes to the first and second floors and which contained the same language. Findings 71, 72. In this
case, both respondent’s contract negotiator and appellant’s project manager
state that the time extensions for all of the change orders included cumulative impact time. Findings 73, 72. Where the parties differ is in whether the
amount of time granted by those bi-lateral change orders was intended to be
the conclusive expression of their understanding.
Appellant maintains that the change orders were intended to reflect only an
allocation of time between all floors, with appellant entitled to additional
time on changes to the fourth through seventh floors. When negotiations on
changes for the fourth through the seventh floors were unsuccessful, an essential element of the agreement fell through, entitling appellant to additional time for the bi-lateral change orders. This agreement, appellant maintains,
was in an unwritten oral understanding with the contracting officer. That is
the trouble with the theory. It is disputed by the contracting officer, and
there is no written contemporaneous record of such an agreement, save the
project manager’s rather self-serving summary to appellant’s principal. Such
side agreements allocating time are not the way the respondent conducts its
construction projects, findings 73, 78, and without hard proof we will not conclude that such an agreement existed. We have found as fact that there was
no side oral agreement to allocate impact costs among change orders. Finding
78. This appeal is denied.
GSBCA No. 8576
The basis for this claim is the delay in coming to a decision about concluding
negotiations and proceeding with base bid work, rather than proceeding with
change orders. An unreasonable delay in recision of a change request can be
the basis for a constructive suspension. William Passalacqua Builders Inc.,
77-1 BCA at 60,091. Here, we have found just such a delay. Respondent defends this appeal by arguing that appellant could have started on base bid
work immediately, without waiting for negotiation of change order work. We
have found this to be the case with those aspects of work not dependent upon
installation of demountable partitions: carpet, electrical work above the drop
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ceiling, lighting fixtures, air-conditioning vents, and sprinkler system. Finding 88. Appellant is not entitled to adjustment for those items.
Appellant is entitled to adjustment for respondent’s delay in tardy recision of
the change order request for the fourth through the seventh floors. The base
bid work for installation of the demountable partitions was inextricably intertwined with the changes contemplated by the change request, findings 81,
82, and appellant acted reasonably in deferring installation of the partitions
until respondent’s direction to proceed on (or recision of) the change order requests. Finding 85. We have thus concluded that respondent delayed appellant from November 4, the time the tenant layout plans were usable, until
January 20, the first day of the week of the issuance of the last release. Finding 86. We give appellant the benefit of the later delay period, rather than
January 1, when the fourth floor was released, because respondent has not
justified the delay for that month. Finding 85.
The consequences of this delay were the stacking of trades and labor inefficiencies in Monty’s installing of demountable partitions on the fourth through
the seventh floors and delays to CHR/Newbery’s installation of the power
poles on the demountable partitions. Findings 87, 90. Appellant is not entitled to impact costs, because the demountable partition delay was not on the
critical path; it is, however, entitled to remission of any liquidated damages
equal to the period of the delay, for the reasons explained in our discussion of
appellant’s brick claim, GSBCA No. 9928.
GSBCA Nos. 8826, 8575
Appellant’s claim of additional contract time for these changes is unjustified
and reflects appellant’s attempts to use every opportunity to claim extended
period costs. See Finding 99. However, we have found the contracting officer’s
grant of direct costs to be unreasonably low, findings 95, 96, 101, and grant
the appeals as to the reasonableness of direct costs.
GSBCA Nos. 8647, 8351, 8353, 8757, 8584, 8649, and 9119
These appeals are for extended period costs. We deny them for the same reason we deny extended period costs in GSBCA Nos. 8826 and 8575. In GSBCA
No. 8647, for example, appellant seeks a contract extension time of ninety
days, and costs of $202,809, for a deductive change order. Appellant’s project
manager stated that the claim represented extended period costs, not granted, for other changed work. Finding 104. There is simply no discernable relationship between the change and the claim of extended period costs. The
same is true of the other claims. Finding 108 (extended period costs of twenty
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days for telephone work in fourth floor telephone room); findings 113, 114
($32,828 extended period costs claimed for modification to change ceiling suspension studs in first floor room); finding 117 (fourteen days claimed for
change of aluminum frame and rough bucks around door on fourth floor);
Finding 119 (fifteen days claimed for installation of door frames). These appeals are denied.
GSBCA No. 8648
This appeal, presented on the record pursuant to Rule 11, is from a decision
denying a change order request for appellant’s cost of creating a close fit between recessed lights and the drop ceiling panels. The lack of such a fit
caused light leakage. We deny the appeal, as the requirement of flush mounting of recessed lighting was part of the original contract. The drawings
showed flush mounting, finding 121, and appellant was required to coordinate all trades to provide a finished system, including “coordinating the type,
style and pattern of the ceiling being installed.” Findings 122, 123. Furthermore, appellant’s installers of the recessed light failed to consult on installation as required by the contract after they were advised at the beginning of
the installation that there was light leakage. Findings 122, 123. This appeal
is denied, as the work was within the scope of the original contract.
GSBCA No. 8650
This appeal, also submitted on the record pursuant to Rule 11, concerns respondent’s directive to install eleven tamper control switches not shown on
drawings. Respondent maintains that hookup of the tamper switches was a
contract requirement. We disagree. It is not in dispute that the eleven
switches were extras, i.e. not shown on the drawings. Respondent argues that
wiring every tamper switch into the monitoring system was a contract requirement. We agree, finding 127, but that simply begs the question of how
many tamper switches appellant was required to install and wire under the
original contract. Appellant is entitled to its costs of installing and wiring the
tamper switches not shown on the drawings, as the extras were outside the
scope of the contract. We grant this appeal.
GSBCA No. 8868
This appeal concerns placing of vinyl flooring at the landing of stairs. Respondent says that the drawing makes it a contract requirement, but the
drawing specifies vinyl on the treads and risers, not the landing. Finding 132.
The contracting officer directed appellant to perform work outside of the
scope of the contract, and this appeal is therefore granted.
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Decision
The appeals in GSBCA Nos. 8349, 8350, 8351, 8352, 8353, 8457, 8584, 8647,
8648, 8649, 8757, 9119, and 9245 are DENIED. The appeals in GSBCA Nos.
9928, 8576, 8826 and 8575 are GRANTED IN PART. The appeals in GSBCA
Nos. 8650 and 8868 are GRANTED.
Anthony S. Borwick, Administrative Judge
We concur:
Leonard J. Suchanek, Chief Administrative Judge
Vincent A. LaBella, Administrative Judge
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Metric Constructors
v.
National Aeronautics and Space Administration
169 F.3d 747
March 3, 1999
Eric M. Drattell, McDermott, Will & Emery, of Washington, DC, argued for
appellant. F. Jefferson Hughes, Trial Attorney, Commercial Litigation
Branch, Civil Division, U.S. Department of Justice, of Washington, DC, argued for appellee. With him on the brief were David M. Cohen, Director and
Sharon Y. Eubanks, Deputy Director.
Before Rich, Plager, and Rader, Circuit Judges.
Rader, Circuit Judge.
The National Aeronautics and Space Administration (NASA) awarded a
$56,215,000 contract to Metric Constructors, Inc. (Metric) for construction of
the Space Station Processing Facility (SSPF) at the Kennedy Space Center in
Florida. On December 10, 1993, NASA issued a contract modification deleting
a contract requirement to install new light bulbs before project completion.
NASA deducted $132,570 from the contract for the deleted work. When Metric appealed, the Armed Services Board of Contract Appeals (Board) upheld
this deduction. See ASBCA No. 48852 (Nov. 21, 1997). Because the Board
erred in construing the contract to require replacement of all lamps before
project completion rather than replacement of only burned out, broken, or
defective lamps, this court reverses.
I.
NASA awarded the contract to construct the SSPF on February 15, 1991. The
SSPF, completed in June 1994, consists of approximately 500,000 square feet
and contains offices, computer and communications facilities, clean rooms,
bays for processing space station payloads, and a parking lot. Approximately
13,000 light bulbs (referred to as “lamps” in the industry) light these areas.
In March 1991, Metric entered into a subcontract with Meisner Electric, Inc.
(Meisner) to perform the electrical work described in the specifications of the
contract. At issue are three sections of those specifications relating to the installation of lamps.
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Section 16511, entitled “Fluorescent Fixtures,” required:
3.1 Installation
....
A fixture shall be installed at each outlet indicated on the
drawings, and lamps of the proper type and wattage shall be
installed in each fixture.
New lamps shall be installed immediately prior to completion
of the project, unless directed by the designated NASA representative.
Section 16517, entitled “High Intensity Discharge Lighting,” required:
3.1 Installation
....
A fixture shall be installed at each outlet indicated, and lamps
of the proper type, voltage, and wattage shall be installed in
each fixture.
New lamps shall be installed immediately prior to completion
of the project, or earlier if construction conditions dictate.
Section 16531, entitled “Parking Lot and Roadway Lighting,” required:
3.2 Installation
....
New lamps shall be installed immediately prior to completion
of the project unless construction conditions indicate otherwise.
Metric and Meisner interpret these sections to require replacement of only
defective, burned out, or broken lamps immediately before project completion.
NASA contends that they require replacement of all lamps, known as
“relamping” in the industry, before project completion.
The parties discovered their divergent views when NASA performed a
“walkdown” of the project on September 20, 1993. Under the terms of the contract, NASA planned to take possession of several rooms in the facility in Oc-
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tober 1993, known as early completion date (CD) rooms. NASA conducted the
walkdown to identify items requiring completion before delivery of the CD
rooms. The resulting NASA punchlist identified relamping as a requirement.
The relamping requirement appeared on subsequent punchlists of September
27 and October 4, 1993.
In response to the punchlists, Meisner sent a letter to NASA on October 19
noting NASA’s request for relamping, but maintaining that “[r]emoval and
replacement of florescent [sic] lamps in fixtures that have been installed for
CD is wasteful and not required. The fixtures have just recently been installed and the lamps are fine.” In response to Meisner’s letter, the contracting officer issued Modification 1345 on December 10, unilaterally deleting
“the contract requirement to install new lamps prior to completion of the project ... as set forth in specification Sections 16511,3.1, 16517,3.1, and
16531,3.1.”
After several months of unsuccessful negotiations about the amount of credit
due NASA for deleting the relamping requirement, Metric and Meisner informed NASA that they did not interpret the original contract to require
relamping. Accordingly they suggested that Modification 1345 cost nothing.
After more negotiation, the contracting officer, on October 4, 1994, issued
Modification 1476 unilaterally reducing the contract price by $132,570 for the
work deleted by Modification 1345.
Metric then submitted a claim to the contracting officer seeking recovery of
the credit taken by NASA. When the contracting officer issued no decision,
Metric appealed to the Board asserting its competing interpretation of the
contract and, in the alternative, alleging numerous deficiencies in NASA’s
calculation of the $132,570 credit. In particular, Metric produced evidence
showing that trade practice and custom, as well as the conduct of both parties, supported its interpretation. The Board accorded this evidence no weight
“in light of the clear words” of the contract. According to the Board, the contract unambiguously required relamping the facility.
Aside from the purportedly clear language of the contract, the Board relied on
two other grounds in support of its decision. First, it concluded that Metric’s
interpretation of the specifications to require replacement of only defective,
burned out, or broken lamps would render those specifications meaningless
in light of the warranty provision in the contract. The warranty provision
(Section 16003,2.7) required Metric to “[l]eave entire electrical system in
proper working order.” The Board reasoned that this provision would already
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require the replacement of broken lamps before project completion. Second,
the Board placed “great weight” on the six-month period from October 1993 to
April 1994 during which the parties negotiated the amount of the credit due
NASA for the work deleted by Modification 1345. The Board found it significant that Meisner did not assert that NASA was due no money until the negotiations between the parties failed.
Metric appeals the Board’s decision. Metric relies, as it did before the Board,
on evidence that trade practice and custom in the industry show that it was
only to replace broken or defective lamps prior to project completion, not
relamp the facility, and that the conduct of the parties shows that both parties acted in conformity with this interpretation of the contract.
As to trade usage and custom, Metric points out, and the Board found, that
the term “relamping” is commonly used in the electrical industry to mean the
total replacement of lamps at a particular facility. The Board also found that
it is uncommon for specifications for new construction to require relamping.
Evidence showing that neither Meisner’s project manager nor its president
had ever seen a requirement to relamp a newly constructed facility in fortyfive years of combined experience underlies that finding. The Board further
found that, during construction of the SSPF, Meisner received an unrelated
subcontract to perform electrical work on the Kennedy Space Center Transportation Canister Facility. That contract contained a specification identical
to Section 16511 of the SSPF contract, but NASA did not require Meisner to
relamp the facility, nor did it issue a contract modification deleting a relamping requirement from that contract. Instead, Meisner replaced only broken or
burned out lamps before project completion.
Metric also points this court to other findings of the Board supporting the
reasonableness of its interpretation. Metric notes, for example, that Meisner’s
bid for the electrical work included labor to install only one set of lamps.
Moreover, when Meisner presented the specifications to four prospective
lamp suppliers for competitive bids, none submitted bids for a second set of
lamps.
Metric contends that NASA’s conduct, too, supports its interpretation of the
contract. NASA selected Jacobs Engineering Group, Inc. to prepare the contract specifications and an estimate of the costs of constructing the SSPF. Jacobs’ estimate did not include relamping the facility. In addition, NASA issued numerous unilateral change orders during the project affecting the
number of lamps, but at no time sought a credit for a second set of lamps or
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required Metric to price a second set of lamps. Finally, the contract required
Metric to prepare and maintain a detailed schedule of performance activities
based on the critical path method (CPM). The CPM schedule did not include
relamping as an activity. NASA reviewed and approved Metric’s CPM schedule. NASA responds that these were “mere oversights.”
Finally, Metric points out that the vast majority of lamps for this project
(nearly 12,000 of about 13,000) had a life of six years and eight months. The
Board found that most of the lamp installation occurred during the summer
of 1993. Metric delivered more than half of the facility in June and October
1993, and ultimately completed the project the following summer. Based on
this sequence of events, Metric points to the absurdity and waste of relamping recently installed, long-lived lamps.
For its part, NASA relies primarily on the language of the contract itself,
which it contends unambiguously requires relamping. NASA also relies on
the additional grounds identified by the Board, namely, that Metric’s interpretation of the specifications would render them meaningless in view of the
warranty provision, and that Metric participated in negotiations with NASA
for six months before definitively taking the position that the original contract did not require relamping.
II.
This court reviews contract interpretation without deference. See Grumman
Data Sys. Corp. v. Dalton, 88 F.3d 990, 997 (Fed.Cir. 1996). This court will
accept any underlying findings of the Board, however, unless they are
“fraudulent, or arbitrary, or capricious, or so grossly erroneous as to necessarily imply bad faith, or ... not supported by substantial evidence.” 41 USC
§609(b) (1994).
III.
When a contract is susceptible to more than one reasonable interpretation, it
contains an ambiguity. See Hills Materials Co. v. Rice, 982 F.2d 514, 516
(Fed.Cir. 1992). To show an ambiguity it is not enough that the parties differ
in their respective interpretations of a contract term. See Community Heating
& Plumbing Co. v. Kelso, 987 F.2d 1575, 1578 (Fed.Cir. 1993). Rather, both
interpretations must fall within a “zone of reasonableness.” See WPC Enters.,
Inc. v. United States, 323 F.2d 874, 876 (Ct. Cl. 1964). If this court interprets
the contract and detects an ambiguity, it next determines whether that am-
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biguity is patent. See Newsome v. United States, 676 F.2d 647, 649-50 (Ct. Cl.
1982). The doctrine of patent ambiguity is an exception to the general rule of
contra proferentem which construes an ambiguity against the drafter, here,
NASA. See id.; Sturm v. United States, 421 F.2d 723 (Ct. Cl. 1970). An ambiguity is patent if “so glaring as to raise a duty to inquire[.]” Newsome, 676
F.2d at 650. If an ambiguity is not patent but latent, this court enforces the
general rule. See Fort Vancouver Plywood Co. v. United States, 860 F.2d 409,
414 (Fed.Cir. 1988).
This case squarely presents the recurring issue of the role of evidence of trade
practice and custom in contract interpretation. The case law identifies two
seemingly divergent roles for such evidence. One line of cases holds that this
court may consult evidence of trade practice and custom to discern the meaning of an ambiguous contract provision, but not to contradict or override an
unambiguous contract provision. In R. B. Wright Construction Co. v. United
States, 919 F.2d 1569 (Fed.Cir. 1990), for example, the contract required the
contractor to apply three coats of paint to specified surfaces. The contractor
applied three coats of paint to previously unpainted surfaces and, in accordance with industry practice, applied only two coats of paint to previously
painted surfaces. This court interpreted the contract to unambiguously require three coats of paint on all surfaces, regardless of industry practice:
“Neither a contractor’s belief nor contrary customary practice ... can make an
unambiguous contract provision ambiguous, or justify a departure from its
terms.” Id. at 1572; see also WRB Corp. v. United States, 183 Ct. Cl. 409
(1968) (finding that a trade practice of using masonite doors on paint-grade
cabinets does not overcome an unambiguous contract provision requiring
wood doors on paint-grade cabinets); George Hyman Constr. Co. v. United
States, 564 F.2d 939, 945 (Ct. Cl. 1977) (“A trade practice cannot prevail over
unambiguous provisions of a contract....”).
The second line of cases holds that this court may consult evidence of trade
practice and custom to show that “language which appears on its face to be
perfectly clear and unambiguous has, in fact, a meaning different from its
ordinary meaning.” Gholson, Byars, and Holmes Constr. Co. v. United States,
351 F.2d 987, 999 (Ct. Cl. 1965). In Gholson, this court’s predecessor considered the meaning of a contract term requiring “painting of all previously
painted or varnished surfaces.” The contractor contended that a baked enamel surface, although admittedly a “previously painted surface,” was not regarded as such in the industry. The Board declined to consider the evidence
of trade practice because the contract language was clear on its face. On appeal, the United States Court of Claims reversed: “[T]he principle is now es-
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tablished in this court (and almost every other court) that in order that the
intention of the parties may prevail, the language of a contract is to be given
effect according to its trade meaning notwithstanding that in its ordinary
meaning it is unambiguous.” Id.; see also W.G. Cornell Co. v. United States,
376 F.2d 299, 311 (Ct. Cl. 1967) (finding legal error where the Board failed to
consider trade practice and custom because of its holding that the contract
was unambiguous).
These two lines of cases, however, only seem to diverge. In practice, they are
both consistent with contract interpretation doctrines and practices. The
United States Court of Federal Claims recognized those unifying principles in
Western States Construction Co. v. United States, 26 Cl. Ct. 818 (1992). In
that case, the trial court considered the meaning of a contract term requiring
wrapping of underground “metallic pipe” with protective tape. The contractor
introduced evidence showing that, in the industry, “cast iron soil pipe,” although technically “metallic pipe,” was not wrapped with protective tape. The
Court of Federal Claims, aptly reconciling the two seemingly conflicting lines
of cases of this court and its predecessor, consulted trade practice and custom
to determine whether wrapping of cast iron soil pipe was consistent with the
contract and thus whether an ambiguity arose at all. See id. at 826. This
Western States analysis correctly applies the law of contract interpretation.
This court adheres to the principle that “the language of a contract must be
given that meaning that would be derived from the contract by a reasonably
intelligent person acquainted with the contemporaneous circumstances.” HolGar Mfg. Corp. v. United States, 351 F.2d 972, 975 (Ct. Cl. 1965). Thus, to
interpret disputed contract terms, “the context and intention [of the contracting parties] are more meaningful than the dictionary definition.” Rice v. United States, 428 F.2d 1311, 1314 (Ct. Cl. 1970); see also Western States, 26 Cl.
Ct. at 825; Corman v. United States, 26 Cl. Ct. 1011, 1015 (1992). Trade practice and custom illuminate the context for the parties’ contract negotiations
and agreements. Before an interpreting court can conclusively declare a contract ambiguous or unambiguous, it must consult the context in which the
parties exchanged promises. Excluding evidence of trade practice and custom
because the contract terms are “unambiguous” on their face ignores the reality of the context in which the parties contracted. That context may well reveal that the terms of the contract are not, and never were, clear on their
face. On the other hand, that context may well reveal that contract terms are,
and have consistently been, unambiguous.
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Thus, evidence of trade practice and custom plays an important role in contract interpretation. Before arriving at a legal reading of a contract provision,
a court must consider the context and intentions of the parties. That context
may or may not disclose ambiguities. In any event, evidence of trade practice
and custom is part of the initial assessment of contract meaning. It illuminates the contemporaneous circumstances of the time of contracting, giving
life to the intentions of the parties. It helps pinpoint the bargain the parties
struck and the reasonableness of their subsequent interpretations of that
bargain.
This role for evidence of trade usage, however, does not mean that a court
should always accept evidence of trade practice and custom in interpreting
the terms of a contract. A contracting party cannot, for example, invoke trade
practice and custom to create an ambiguity where a contract was not reasonably susceptible of differing interpretations at the time of contracting. Trade
practice evidence is not an avenue for a party to avoid its contractual obligations by later invoking a conflicting trade practice. R. B. Wright and similarly
decided cases stand for this important proposition of contract interpretation
law.
Instead, a court should accept evidence of trade practice only where a party
makes a showing that it relied reasonably on a competing interpretation of
the words when it entered into the contract. Without such a showing, evidence that some practitioners customarily accomplish tasks differently from
the manner called for by the contract will not overcome the clear language of
the contract. This requirement helps ensure that the evidence of trade practice and custom truly reflects the intent of the contracting party, and avoids
according undue weight to that party’s purely post hoc explanations of its
conduct.
The Gholson rule and these principles of contract interpretation find general
support in authoritative legal commentaries. The commentaries agree that
courts should use evidence of trade practice and custom not only to determine
the meaning of an ambiguous provision, but to determine whether a contract
provision is ambiguous in the first instance. See, e.g., Restatement (Second) of
Contracts §220 cmt. d (1981) (“[U]sage relevant to interpretation is treated as
part of the context of an agreement in determining whether there is ambiguity or contradiction....”); 3 Arthur L. Corbin, Corbin on Contracts §555 at 23239 (1960) (“Seldom should the court hold that the written words exclude evidence of the custom, since even what are often called “plain” meanings are
shown to be incorrect when all the circumstances of the transaction are
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known; and usages and customs are a part of those circumstances by which
the meaning of words is to be judged.”); 5 Samuel Williston, Williston on Contracts §648 at 6-7 (3d ed. 1961) (“Usage is an ordinary means of proving the
local or technical meaning of language, and even language which is normally
clear and unambiguous may be shown by usage to bear, under the circumstances of the case, a meaning different from its normal sense.”).
Of course, even when accepted, evidence of trade practice and custom does
not trump other canons of contract interpretation, but rather cooperates with
them. Courts prefer, for example, an interpretation of a contract that gives
effect to all its terms and leaves no provision meaningless. See United States
v. Johnson Controls, Inc., 713 F.2d 1541, 1555 (Fed.Cir. 1983). Thus, a court
should consider whether adopting the interpretation advanced by the party
relying on trade practice and custom would deprive the specification at issue
of all meaning, or if there is a more limited sense in which the requirement
still applies. Where canons of contract interpretation point to different interpretations, resolution of the conflict is necessarily left to the facts of the particular case.
Armed with these principles, this court examines anew whether the contract
specifications at issue here are ambiguous, and finds that they are. Metric
introduced sufficient evidence of trade practice and custom, and reasonable
reliance on that trade practice and custom, to show that the specifications are
susceptible to two different reasonable interpretations. The evidence shows
that the electrical industry commonly uses the term “relamping” to mean the
total replacement of lamps at a particular facility. Not only does that term
not appear in the contract, relamping is rarely performed in connection with
a newly constructed facility. This evidence is buttressed by NASA’s interpretation of the Canister facility contract which contained identical language to
Section 16511 of the SSPF contract, but which neither party interpreted as
requiring relamping. Metric’s reliance on its interpretation is reflected in its
bid, which included labor to install only one set of lamps and the cost of only
one set of lamps.
In contrast to the Board and NASA, this court does not believe that adopting
Metric’s construction of the contract to require replacement of only broken
and defective lamps before project completion deprives those specifications of
all meaning in view of the contract’s warranty provision. The warranty provision only required Metric to leave the “electrical system” in proper working
order. It did not hold Metric accountable for everything plugged into the electrical system, such as lamps, in addition to the electrical system itself. In
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other words, properly interpreted, the warranty provision only required Metric to leave the electrical infrastructure in proper working order. Thus, that
provision did not render Metric’s interpretation of the specifications at issue
meaningless, but rather left them with a more limited sense in which they
still applied. That is, the contract required replacement of defective, burned
out, or broken lamps immediately before project completion.
This court also does not consider the Board’s alternative ground — the sixmonth period of negotiations between the parties — to show that Metric’s
claim interpretation is unreasonable. Many factors influence negotiations,
not the least of which is the desire to avoid costly litigation. In light of this
fact and the substantial other evidence discussed above, this single factor
cannot support the conclusion that the meaning NASA and the Board ascribe
to the contract is the only reasonable one. Therefore, this court detects an
ambiguity in the contract.
Finally, this court does not perceive the ambiguity as “so glaring as to raise a
duty to inquire[.]” Newsome, 676 F.2d at 650. Because this contract contains
a latent ambiguity, this court construes that ambiguity against the drafter,
NASA. Accordingly, this court reverses the decision of the Board on contract
interpretation, rendering moot the issue of the quantum of NASA’s equitable
adjustment.
Costs
Each party shall bear its own costs.
Reversed.
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P.J. Dick
v.
Principi
324 F.3d 1364
April 7, 2003
William E. Dorris, Kilpatrick Stockton LLP, of Atlanta, Georgia, argued for
appellant P.J. Dick Incorporated. John E. Kosloske, Senior Trial Counsel,
Commercial Litigation Branch, Civil Division, Department of Justice, of
Washington, DC, argued for appellee Secretary of Veterans Affairs. With him
on the brief were Robert D. McCallum, Jr., Assistant Attorney General; and
David M. Cohen, Director.
Before Newman, Michel, and Bryson, Circuit Judges.
Michel, Circuit Judge.
P.J. Dick Inc. (“PJD”) and the Secretary of Veterans Affairs (“Secretary”)
each appeal different aspects of the September 27, 2001, decision of the Department of Veterans Affairs Board of Contract Appeals (“Board”) awarding
$1,918,262 in damages to PJD for contract delays that were the fault of the
government. P.J. Dick, Inc., VABCA Nos. 5597, et al., 2001-2 BCA (CCH)
¶31,647, 2001 VA BCA Lexis 12 (VABCA Sept. 27, 2001). For reasons of judicial convenience the two separately filed appeals were consolidated into a
single proceeding before this court, with the Secretary’s appeal treated as the
cross-appeal for purposes of briefing and argument. PJD appeals the Board’s
denial of its claims for unabsorbed home office overhead damages. The Secretary appeals the Board’s conclusion that six separate contract changes (the
“combined directives”) should be treated as occurring on the same date in calculating the extent of the resulting delay to contract completion. Although we
affirm the Board’s conclusion that PJD was not on standby, we reverse the
Board’s denial of PJD’s claim for unabsorbed home office overhead because
the Board erred in its interpretation of the parties’ stipulation. Because the
Board also erred in analyzing six separate changes to the contract (occurring
over ten months) as a single change effective on the date of the first change,
we vacate the Board’s determination of the number of days of delay due to
those changes. We therefore vacate the Board’s damages calculations and
remand for recalculation in accordance with this opinion.
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I
These appeals are related to a fixed-cost contract between the Department of
Veterans Affairs (“DVA”) and PJD to construct the Clinical Addition to the
DVA Medical Center in Ann Arbor, Michigan. Under the contract, PJD was
due to complete the work by January 12, 1998. During the contract the government issued over 400 orders changing the contract and causing various
delays to different aspects of the project. These modifications increased the
contract price by over five percent and caused the DVA to grant 107 days of
additional contract performance time. In accepting the additional days to
complete the contract, PJD reserved its right to seek additional impact and
suspension costs. PJD completed the contract on September 29, 1998, 260
days after the original contract completion date and 153 days after the revised date.
PJD presented to the government contracting officer (“CO”) claims for additional relief as a result of the delays to the contract. All of the claims were
denied by the CO or were deemed denied by the CO’s failure to timely issue a
decision. PJD timely appealed the CO’s denials to the Board, filing five delay
appeals, an appeal for its contract balance, and an appeal for certain labor
inefficiencies incurred by its electrical subcontractor. In essence, PJD claimed
it was entitled to a time extension for all 260 days of delayed performance
and sought field and home office overhead damages for most of these delays.
The Board reached several conclusions that are relevant to this appeal. The
Board granted PJD a time extension for 260 days and initially concluded that
only sixty days were due under the contract’s Suspension of Work (“SOW”)
clause, but upon PJD’s motion for reconsideration, revised that number upward to sixty-five days. The Board granted PJD field overhead for the days
damages are due under the SOW clause, but determined that PJD was not
entitled to damages for unabsorbed home office overhead (Eichleay damages)
because: (1) the stipulation between the parties only addressed quantum and
therefore did not remove the contractor’s burden to prove entitlement to Eichleay damages, and (2) PJD had not shown it was on stand by — one of several
prerequisites for entitlement to Eichleay damages. A large portion of the extension (201 days) granted by the Board resulted from PJD’s claim for delays
due to the “combined directives.” The “combined directives” were six separate
contract change orders issued by the DVA over a ten-month period, all relating to installation of certain equipment in the Clinical Addition. Importantly
for this appeal, the Board analyzed the effect of each of the changes as of the
date of the earliest change, which gave PJD a larger delay than it would have
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received were the effects of the change orders analyzed separately on the
dates the DVA issued them.
The Secretary and PJD each appeal different aspects of the Board’s decision.
The Secretary appeals the Board’s conclusion granting 201 days of extension
for the “combined directives” delay. The dispute on this question is whether
the language of the contract requires the Board to analyze the effect of each
change separately. PJD appeals the Board’s denial of its claims for recovery
of home office overhead. The primary issues here are whether the parties’
stipulation entitled PJD to recovery of home office overhead and, if not,
whether PJD had shown the DVA placed it on standby. Both appeals were
timely filed and we have jurisdiction pursuant to 28 USC §1295(a)(10).
II
Although we review the Board’s interpretation of a contract de novo, the
Board’s interpretation “is accorded careful consideration due to the board’s
considerable experience in construing government contracts.” Wickham Contracting Co. v. Fischer, 12 F.3d 1574, 1577 (Fed.Cir. 1994) (citation omitted).
The relevant provision of the contract reads: “The Contracting Officer’s determination as to the total number of days of contract extension will be based
upon the current computer-produced calendar-dated schedule for the time period in question and all other relevant information.” Specification
§01311.1.13(A) (emphases added). The Secretary agrees with the Board’s conclusion that the “time period in question” is “the date an action or activity occurred on which a time extension is based.” The Secretary argues only that
the Board erred in its subsequent determination that the “time period in
question” for all six of the changes included in the “combined directives” was
November 1995 — the date the DVA issued the first of those change orders.
We agree.
We conclude that the language of the contract required the Board to analyze
the changes of the “combined directives” separately utilizing the most recent
monthly update of the “computer-produced calendar-dated schedule.” The express language of the contract establishes that the “current” schedule “will
be” the basis for determining the extent of the delay. By using “will” the contract indicates that this is the sole method of calculating the delay. The
Board circumvented this language by crediting litigation arguments that the
six unrelated changes issued over ten months had a unitary effect, making
the “time period in question” the date the DVA issued the first change order.
This was error because the language of the contract requires the use of the
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“current” computer schedule as the basis for making such a determination. In
other words, regardless of what the testimony showed, under the contract,
the only way of determining the effect of the changes was to analyze each of
them using the current computer schedule. Thus, if the changes did have a
unitary effect, it had to be demonstrated by the computer model, not the testimony PJD presented.
We therefore reverse the Board’s determination that the “combined directives” should all be analyzed utilizing the October 1995 schedule update —
the update most current as of November 1995 — and remand for a damages
analysis in accordance with this opinion. On remand the Board should determine whether PJD’s delay claims that it found were not controlling because of the “combined directive” delay (the underground conduit and the radiology and cardiology claims) become controlling as a result of any reduction
in the “combined directive” delay and analyze them accordingly.
III
A Board’s interpretation of the tests for proving entitlement to Eichleay damages presents a question of law that we review de novo. West v. All State Boiler, Inc., 146 F.3d 1368, 1372 (Fed.Cir. 1998). A Board’s “decisions with respect to the underlying facts related to those legal tests shall be upheld
unless we conclude they are not supported by substantial evidence.” Id.; see
also 41 USC §609(b) (2000). The Eichleay formula is used to calculate the
amount of unabsorbed home office overhead a contractor can recover when
the government suspends or delays work on a contract for an indefinite period. Melka Marine, Inc. v. United States, 187 F.3d 1370, 1375 (Fed.Cir. 1999)
(citing Eichleay Corp., ASBCA No. 5183, 60-2 BCA (CCH) ¶2688 (ASCBA
1960)). To show entitlement to these Eichleay damages, the contractor must
first prove there was a government-caused delay to contract performance (as
originally planned) that was not concurrent with a delay caused by the contractor or some other reason. Sauer Inc. v. Danzig, 224 F.3d 1340, 1347-48
(Fed.Cir. 2000). The contractor must also show that the original time for performance of the contract was thereby extended, or that he finished the contract on time or early but nonetheless incurred additional, unabsorbed overhead expenses because he had planned to finish even sooner. Interstate Gen.
Gov’t Contractors, Inc. v. West, 12 F.3d 1053, 1058-59 (Fed.Cir. 1993). Once
the contractor has proven the above elements, it must then prove that it was
required to remain on standby during that delay. Id. If the contractor proves
these three elements it has made a prima facie case of entitlement and a burden of production shifts to the government to show that it was not impracti-
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cal for the contractor to take on replacement work and thereby mitigate its
damages. Melka, 187 F.3d at 1376. If the government meets its burden of
production, however, the contractor bears the burden of persuasion that it
was impractical for it to obtain sufficient replacement work. Id.
The Board concluded that PJD was not entitled to Eichleay damages because
it failed to prove that it was placed on standby. More specifically, the Board
found that PJD was not placed on standby because “PJD was able to progress
other parts of the work during the time periods it alleges it was suspended.”
PJD challenges the Board’s conclusion on both legal and factual grounds.
First, PJD argues the Board committed legal error because, it asserts, a contractor is automatically on standby any time there is a government-caused
delay of an uncertain duration extending the performance of the contract, at
the end of which the contractor can be required to immediately resume work.
Thus, PJD argues, the Board’s determinations that its direct billings remained substantial during the several suspension periods and that it accelerated the work on the contract are irrelevant. Second, PJD argues that substantial evidence does not support the Board’s findings that its direct billings
“show[ed] no appreciable diminution during the alleged suspension periods”
and that it accelerated performance of the contract. We address each argument in turn.
In evaluating PJD’s legal argument, we find it useful to clarify our case law
delineating the standby requirement. A review of the pertinent case law
shows that the standby inquiry is multifaceted. In making that inquiry, the
court should first determine whether the CO has issued a written order that
suspends all the work on the contract for an uncertain duration and requires
the contractor to remain ready to resume work immediately or on short notice. See Interstate, 12 F.3d at 1055, 1057 n.4. In such a case, the contractor
need not offer further proof of standby. In the cases where the CO does not
issue such a written order, the contractor must then prove standby by indirect evidence. See id. To do so, the contractor must show three things.
First, the contractor must show that the government-caused delay was not
only substantial but was of an indefinite duration. See id. at 1058. For example, where the government suspends all work on the contract, but tells the
contractor work will begin again on a date certain, the contractor cannot be
on standby. See Melka, 187 F.3d at 1376.
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Second, the contractor must show that during that delay it was required to be
ready to resume work on the contract, at full speed as well as immediately.
See id. Our case law has not elaborated on this requirement, but it is clear
that once the suspension period is over, the contractor must be required to be
ready to “resume full work immediately.” E.g., id. at 1375; All State Boiler,
146 F.3d at 1373. Thus, where the government gives the contractor a reasonable amount of time to remobilize its work force once the suspension is lifted,
the contractor cannot be on standby. Mech-Con Corp. v. West, 61 F.3d 883,
887 (Fed.Cir. 1995) (holding the contractor could not be on standby where the
government gave the contractor three months to remobilize its work force on
site). Presumably, the same result would follow if the government required
immediate resumption of the work, but only with a reduced work force and
allowed the contractor to gradually increase its work force over some reasonable amount of time. See, e.g., Melka, 187 F.3d at 1375. In addition, satisfaction of this element of standby clearly requires something more than an uncertain delay as this is a separate requirement of the case law; the
implication is that the contractor must be required to keep at least some of its
workers and necessary equipment at the site, even if idle, ready to resume
work on the contract (i.e., doing nothing or working on something elsewhere
that allows them to get back to the contract site on short notice). See, e.g.,
Sergent Mech. Sys. v. United States, 54 Fed. Cl. 47, 49-50 (Fed. Cl. 2002).
Third, the contractor must show effective suspension of much, if not all, of the
work on the contract. Cf. Melka, 187 F.3d at 1375. Our early decisions do contain some statements that arguably support the notion that suspension of the
work and idleness are not prerequisites to a determination that the contractor is on standby. E.g., Altmayer v. Johnson, 79 F.3d 1129, 1134 (Fed.Cir.
1996) (“There is no requirement that a contract be suspended before a contractor is entitled to recover under Eichleay.”); Interstate, 12 F.3d at 1057 n.4
(“Although idleness of workers is evidence that a contractor is on standby,
i.e., performance has been suspended, it is neither conclusive nor required.”).
At no time, however, has this court held that a contractor has been placed on
standby merely because a government-caused delay of uncertain duration occurred, at the end of which the contractor must be ready to resume work.
Altmayer, oft cited for that proposition, held no such thing. Altmayer merely
held that a contractor’s performance of “minor tasks” during a suspension
does not prevent it from recovering Eichleay damages. Altmayer, 79 F.3d at
1134. Nor does Interstate’s statement that idleness is not a prerequisite to
standby support the idea that a contractor can be deemed on standby where
there is no delay or suspension of the work. 12 F.3d at 1057 n.4. A closer
reading of Interstate indicates that its reference to “idleness” simply means
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the workers need not be “physically standing by idly.” Id. at 1057 n.5 (referencing a quote in a previous opinion and stating “these two phrases [“stand
by idly and suspend its work”] clearly refer to standing by in the sense that
no work is being performed on the contract, not that there must be workers
physically standing by idly”); see also id. at 1057 n.4 (“If the test were whether the contractor’s work force assigned to the contract in issue was standing
by, the contractor would be penalized for, and thus deterred from, mitigating
its damages for direct costs by reassigning its employees to other jobs or laying them off during the period of delay.”). Indeed, every case where this court
has held a contractor to be placed on standby has involved a complete suspension or delay of all the work or at most continued performance of only insubstantial work on the contract. See, e.g., E.R. Mitchell Constr. Co. v. Danzig, 175 F.3d 1369, 1372, 1374 (Fed.Cir. 1999) (holding subcontractor was
entitled to Eichleay damages where it performed “some work” on the contract, but where most “work could not proceed until the faults [causing the
suspension] were cured”); All State Boiler, Inc., 146 F.3d at 1370, 1373 (holding contractor was entitled to Eichleay damages where the government suspended all work on the contract); Satellite Elec. Co. v. Dalton, 105 F.3d 1418,
1421 (Fed.Cir. 1997) (holding contractor was on standby where all the work
on the contract was stopped, but denying recovery of Eichleay damages for
other reasons); Altmayer, 79 F.3d at 1134; Mech-Con, 61 F.3d at 887 (holding
contractor was entitled to Eichleay damages where work on the contract was
completely suspended); see also Interstate, 12 F.3d at 1058 (noting that the
record “could support” a conclusion that a contractor was on standby where
all work on the contract was suspended).
In addition to being implicit in our early cases, our later decisions explicitly
state that such a suspension or delay of the work on the contract is a prerequisite to a finding that the government placed the contractor on standby.
Melka, 187 F.3d at 1375-76; see also Interstate, 12 F.3d at 1057 (discussing
standby as requiring “suspension of work on the contract”). In Melka, we held
that a contractor was not on standby where it “was working on the contract
and the government had not suspended all contract work.” 187 F.3d at 1375.
There, the government stopped work on one type of work, but, by resequencing the work under the contract, the contractor was able to perform substantial work on another type of work with comparable direct cost billings. Id. at
1375-76. Subsequent decisions by the Court of Federal Claims and the Contract Boards also followed this view of the law. E.g., Pete Vicari, Gen. Contractor, Inc. v. United States, 53 Fed. Cl. 357, 368-70 (Fed. Cl. 2002); Carousel
Dev., Inc., ASBCA No. 50719, 2001-1 BCA (CCH) ¶31,262, 2001 ASBCA Lexis
9, at *56-57 (ASBCA Jan. 23, 2001) (concluding contractor was not on
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standby where it continued to perform substantial amounts of work on the
contract — here “approximately one quarter of the entire scope of the contract work”). So too does a major treatise on government contracts. John Cibinic, Jr. & Ralph C. Nash, Jr., Administration of Government Contracts 737
(3d ed. 1995) (“The standby test precludes a contractor from receiving extended or unabsorbed overhead unless there has been some period when the
work was significantly slowed or stopped.”). Thus, even though it is the typical scenario, formal suspension is not an absolute prerequisite. Contract performance also could be stopped or significantly slowed by government inaction, such as failure to vacate spaces in which the contract was to be
performed.
In short, a court evaluating a contractor’s claim for Eichleay damages should
ask the following questions: (1) was there a government-caused delay that
was not concurrent with another delay caused by some other source; (2) did
the contractor demonstrate that it incurred additional overhead (i.e., was the
original time frame for completion extended or did the contractor satisfy the
Interstate three-part test); (3) did the government CO issue a suspension or
other order expressly putting the contractor on standby; (4) if not, can the
contractor prove there was a delay of indefinite duration during which it
could not bill substantial amounts of work on the contract and at the end of
which it was required to be able to return to work on the contract at full
speed and immediately; (5) can the government satisfy its burden of production showing that it was not impractical for the contractor to take on replacement work (i.e., a new contract) and thereby mitigate its damages; and
(6) if the government meets its burden of production, can the contractor satisfy its burden of persuasion that it was impractical for it to obtain sufficient
replacement work. Only where the above exacting requirements can be satisfied will a contractor be entitled to Eichleay damages.
Turning to PJD’s specific legal argument, our review of the law makes clear
that the Board applied the correct legal standard for standby. Our case law
clearly requires that the contractor must show a suspension, whether formal
or functional, of all or most of the work on the contract. Melka, 187 F.3d at
1375-76. Consequently, PJD’s legal argument must fail.
As to PJD’s factual arguments, those too must fail. The Board found that
“[t]he evidence before us shows conclusively that PJD was able to progress
other parts of the work during the time periods it alleges it was suspended.”
Although PJD argues the evidence shows its direct billings were greatly diminished during the delays, substantial evidence supports the Board’s find-
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ing. The evidence, at worst, shows that in one of these delay periods PJD
billed 53% less than it had the month before. There is, however, no evidence
whatsoever that PJD’s direct billings were less than they would have been
absent the suspensions — that is the controlling test. A comparison of preand intra-delay billings or intra- and post-delay billings is not the test. Regardless, PJD’s direct billings during the delay periods can hardly be characterized as “minor.” See Altmayer, 79 F.3d at 1134. At worst, PJD’s direct
billings during one of the periods of suspension were 47% of what they were
in prior months; thus, PJD continued to perform substantial amounts of work
on the contract during the suspension periods. On these facts, which are supported by substantial evidence, we must affirm the Board’s conclusion that
PJD was not on standby.
In sum, we hold that because the Board applied the proper legal test and because substantial evidence supports the Board’s finding that PJD performed
work on the contract during the delays, the Board correctly found that PJD
failed to prove it was on standby.
IV
The interpretation of the parties’ stipulation, like any contract, is a question
of law which we review de novo. See Kearns v. Chrysler Corp., 32 F.3d 1541,
1545 (Fed.Cir. 1994) (reviewing a district court’s interpretation of a litigation
stipulation de novo because it was essentially a contract); see also Wickham,
12 F.3d at 1577. The relevant language of the parties’ “Stipulation on Quantum” reads:
[F]or any days of delay for which it is determined that [PJD] is
entitled to compensation under the Suspension of Work Clause
in this appeal, [PJD’s] recovery shall be calculated by multiplying that number of days by the following daily rates without
the need for future proof of costs or damages [going on to include daily rates for field and home office overhead].
The Board, however, concluded that the stipulation related solely to quantum
and thus PJD was still required to demonstrate entitlement to Eichleay damages. PJD argues that the stipulation only requires it to show entitlement to
damages under the Suspension of Work contract clause. We agree with PJD’s
interpretation.
We conclude that the stipulation did obviate the need for PJD to separately
prove facts demonstrating entitlement to Eichleay damages beyond showing
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its right to recover for delays compensable under the SOW clause. The language of the stipulation establishes a single condition precedent to PJD’s receipt of the enumerated damages: entitlement to damages under the SOW
clause. Entitlement to recovery under the SOW clause requires proof entirely
different, and less demanding, than that required to show entitlement to
Eichleay damages. Compare P.J. Dick, Inc., 2001 VA BCA LEXIS 12, at *120
(“PJD must provide proof meeting a four-part test to establish its entitlement
to recover an equitable adjustment under the suspension of work clause.
First, there must be a delay of unreasonable length extending the Contract
completion time. Second, the delay must have been proximately caused by
the VA’s action or inaction. Third, the delay resulted in some injury and
fourth, there is no delay concurrent with the suspension that is the fault of
PJD.”), with All State Boiler, 146 F.3d at 1373 (“We have adopted two prerequisites to application of the Eichleay formula to recover unabsorbed overhead ... (1) that the contractor be on standby and (2) that the contractor be
unable to take on other work.” (internal quotation marks omitted)). Establishing a right to recover under the SOW clause — and, thus, to the stipulated damages including home office overhead — therefore requires no separate
proof of entitlement to Eichleay damages (as is required in the normal case).
In addition, there are two indications in the record that the parties originally
intended the stipulation to be interpreted in just such a manner. This is relevant as “the parties’ contemporaneous construction of an agreement, before it
has become the subject of a dispute, is entitled to great weight in its interpretation.” Blinderman Constr. Co., Inc. v. United States, 695 F.2d 552, 558
(Fed.Cir. 1982). First, although the Eichleay case law explicitly places the
burden to prove standby on the contractor, before the Board PJD “provided
neither evidence nor allegation that it was on standby.” Given its clear burden of proof, it is unlikely that PJD would have chosen not to submit any evidence whatsoever showing it was on standby unless it believed the stipulation relieved it of that burden. Second, in its post-hearing briefing (drafted by
the signer of the stipulation), the DVA presented the following: “Based on the
foregoing, Respondent is entitled to compensation for 11 calendar days of delay under the Suspension of Work Clause. Based on the stipulated quantum,
[PJD] is entitled to the following daily rates [going on to recite the stipulated
daily rates for both field and home office overhead].” It is apparent that, absent a gross mistake, the drafter of the post-hearing brief, like PJD, understood that under the stipulation the contractor had only to prove entitlement
to damages under the less exacting tests of the SOW clause.
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The Secretary’s arguments to the contrary do not dissuade us from our conclusion. Despite what its then-lawyer stated, the Secretary now argues that
the “Stipulation on Quantum” relates only to Eichleay quantum and not to
Eichleay entitlement. This argument, however, overlooks the express language of the stipulation and its establishment of a single condition precedent
to recovery of all of the stipulated damages, including home office overhead.
To read the stipulation any other way would require us to insert language
requiring that in addition to showing entitlement to damages under the SOW
clause, to recover home office overhead the contractor must also prove it satisfied the separate prerequisites to Eichleay damages.
In sum, we conclude that as a result of the clear terms of the stipulation, PJD
needed only to prove entitlement to damages under the SOW clause to establish entitlement to all types of damages, including unabsorbed home office
overhead. The Board found this condition met when it concluded that PJD
had satisfied the four-part test for entitlement under the SOW clause for
three of the government-caused delays. On remand the Board should, in accordance with the parties’ stipulation, calculate the amount of home office
overhead to which PJD is entitled for delays compensable under the SOW
clause.
V
In conclusion, we hold: (1) that the express terms of the contract precluded
the Board from analyzing the effect of all of the “combined directives” utilizing the computer schedule update current as of the date the DVA issued the
first of those six change orders; rather, it must use the computer schedule
current as of the date the DVA issued each change order; (2) that the Board
correctly found that PJD did not prove it was on standby, but that PJD is
nonetheless entitled to recovery of home office overhead damages because the
parties’ stipulation, as we construe it, removed the need for PJD to separately
prove entitlement to home office overhead damages. We therefore reverse the
Board’s construction of the parties’ stipulation, affirm the Board’s determination that PJD was not on standby, and vacate the Board’s analysis of the extent of the “combined directives” delay. On remand, the Board should: (1) determine the proper length of the “combined directives” delay by analyzing the
effect of each of the six change orders separately using the computer schedule
update that is current as of the time the DVA issued each change order and
using the agreed-upon methodology (perhaps merely by looking at evidence
already in the record); (2) determine whether PJD’s other delay claims (the
underground conduit and the radiology and cardiology claims) become con-
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trolling as a result of any reduction in the “combined directive” delay and, if
so, analyze them accordingly; and (3) in accordance with the parties’ stipulation, calculate the amount of home office overhead PJD is entitled to for government-caused delays compensable under the SOW clause and award that
amount to PJD.
Affirmed-In-Part, Reversed-In-Part, Vacated-In-Part, And Remanded.
Costs
No costs.
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Program and Construction Management Group
v.
General Services Administration
99-2 BCA ¶30,579
September 30, 1999
Leonard A. White and Julia A. Novina, Bethesda, MD, counsel for Appellant.
Joseph McCann, Office of General Counsel, General Services Administration,
Washington, DC, counsel for Respondent.
Before Board Judges Parker, Neill, and Goodman.
Neill, Board Judge.
In this case, appellant, Program And Construction Management Group, Inc.
(PCMG), seeks to be compensated for various time extensions allegedly called
for by the General Services Administration (GSA) under a contract it entered
into with PCMG for the upgrade of the fire safety system in three buildings
occupied by the Department of State. For the reasons set out below, we deny
the appeal.
Findings of Fact
The Solicitation and Preaward Negotiations
1. In early 1994, GSA issued Solicitation No. GS-1 1P-94-MKC-0034 (the solicitation) for miscellaneous fire safety repairs at the Department of State
building complex at 2430 E Street, N.W., Washington, D.C. Appeal File, Exhibit 1.
2. The solicitation required that the contractor start work within one calendar day after receiving the notice to proceed, proceed diligently, and complete
the entire work no later than 252 calendar days after receipt of the notice to
proceed. The time stated for completion included final cleanup of the premises. Appeal File, Exhibit 1 at 151.
3. The solicitation contemplated award of the contract to the Small Business
Administration (SBA) for subsequent award to PCMG as a small business
subcontractor under section 8(a) of the Small Business Act. Appeal File, Exhibit 3 at 8.
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4. The contracting officer testified that during the negotiations with PCMG
prior to award, the Government’s cost estimator advised PCMG representatives that he believed the contract could be performed within 180 days rather
than 252 as stated in the solicitation. The contracting officer further testified
that it was, therefore, agreed that negotiations would be based on a contract
completion date of 180 rather than 252 days. Negotiations did in fact proceed
on that basis. Transcript, Vol. 11 at 64-65, 117-18.
5. Appellant’s president and vice president both testified that the contract
was in fact negotiated on the basis of a 180-day contract completion period.
Transcript, Vol. I at 29-30, 164. Both, however, contend that they had little
choice in the matter. The president stated that this reduction in the performance period was “imposed on us.” In his opinion, the reduction in the length
of the performance period was made in order to reduce the overall cost of
PCMG’s proposal. He did not personally believe that the project could be
completed in that period of time. Id. at 29-30. PCMG’s vice president was of
the same opinion and testified that he advised the Government’s cost estimator that the 180-day period was unrealistic and predicted that this would become apparent as work progressed. He too testified that PCMG had no choice
in the matter. He states that he feared that if PCMG refused to negotiate on
the basis of 180 days, the job would be lost. Id. at 164-65. PCMG’s proposal
was, therefore, revised to reflect the shorter performance period. Id. at 30.
6. PCMG’s initial proposal was priced at $733,771. The best and final offer,
following audit of the initial proposal and negotiations, was for $532,454. Appeal File, Exhibits 5, 40.
7. By letter dated October 3, 1994, the contracting officer advised SBA that
PCMG’s best and final offer of $532,454 was accepted. The letter was accompanied by signed copies of the contract between GSA and SBA and the 8(a)
contract, i.e. subcontract, between SBA and PCMG (standard form 1442). The
contracting officer requested SBA to return two fully executed copies of each
contract. Attached to this letter, as found in the record, is a separate sheet
with approval signatures. A note at the bottom of this page states that contract completion will be within 180 calendar days from date of receipt of the
notice to proceed. Appeal File, Exhibits 5-6.
8. The SBA contracting officer signed both contracts on November 11, 1994.
Both state that the contractor shall begin performance within one calendar
day and complete it within 252 calendar days after receiving notice to proceed. The performance period is said to be “mandatory” and not “negotiable.”
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Both contracts provide that they are to be administered and paid by GSA.
Appeal File, Exhibit 5.
9. The GSA contracting officer issued to PCMG the notice to proceed on December 8, 1994. The notice states: “The contract provides that all work shall
be completed within 180 calendar days after date of receipt of notice to proceed.” On the same date, PCMG’s president acknowledged receipt of the notice by signing the same. Appeal File, Exhibit 7.
10. By certified letter dated December 12, 1994, the contracting officer advised PCMG that the notice to proceed was effective as of December 9, 1994;
that the contract completion time was 180 days after receipt of the notice to
proceed; and that the contract completion date was, therefore, June 7, 1995.
Appeal File, Exhibit 8.
11. The agenda for a preconstruction conference scheduled for December 19,
1994, likewise states that the contract performance time is 180 days. It sets
the contract completion date at June, 7, 1995, but notes that there are no liquidated damages. Appeal File, Exhibit 15.
Contract Modification AS-01
12. During the months of December 1994 and January and February 1995,
PCMG submitted a total of fifty-two requests for information (RFIs). Appeal
File, Exhibits 49, 50, 53, 56, 57, 59, 65, 67. The issues raised by these RFIs
eventually led to the first formal change order under PCMG’s contract, namely, contract modification AS-0 1. The net amount agreed upon for this modification represented a total of $6304 in reduced costs, i.e., credits for deductive
changes, and $15,385 in direct costs for additive changes. After markup for
overhead, general and administrative costs (G&A), profit, and bond, the net
total increase in contract price came to $14,688. Modification AS-01 also extended the contract performance period by thirty days, thus changing the
contract completion date from June 7, 1995, to July 7, 1995. Appeal File, Exhibits 9, 10, 74.
13. A final provision in the text of modification AS-01 reads:
Settlement of this change includes all costs, direct, indirect,
impact and delay associated with this change order.
Appeal File, Exhibit 10. The modification was signed by PCMG’s president on
April 19, 1995 and by the contracting officer on May 3, 1995. Id.
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Contract Modification AS-02
14. By letter dated August 7, 1995, the contracting officer advised PCMG that
her notice to proceed issued on December 8, 1994, and her certified letter of
December 12, 1994 (Findings 9-10) regarding the notice were in error. She
explained that, in accordance with the solicitation provisions, the contract
completion time should have read 252 calendar days after the receipt of notice to proceed. Accordingly, the contracting officer provided PCMG with a
revised completion date of August 18, 1995, based upon a contract completion
time of 252 rather than 180 days. Appeal File, Exhibits 10, 97.
15. On August 11, 1995, the contracting officer issued unilateral contract
modification AS-02. This was a unilateral modification which referred to the
contracting officer’s recent letter of August 7 regarding the contract completion time and the completion date. The modification, however, noted that the
contract completion date of August 18 given in the letter of August 7 was incorrect because it did not take into account the thirty-day extension provided
for in AS-0 1. The revised contract completion date, according to modification
AS-02, therefore, was said to be September 17, 1995.
16. The contracting officer testified that this change in the contract completion date came about once it was discovered that the solicitation actually provided for a contract performance time of 252 days. On learning this, she directed her staff to look into the question of whether the 180-day estimate for
completion time, which had served as the basis for negotiations, was in fact
in error. The conclusion reached was that it was an error and the contract
completion time should be 252 days. Transcript, Vol. II at 118-19. At trial,
the following exchange took place between counsel for appellant and the contracting officer:
Q. But isn’t it true ... that the contract duration is an integral
part of the contract, as much as the scope of work; isn’t that a
fact?
A. Yes, that is true. And later we realized that we needed to
compensate the contractor for the additional 72 days, and thus
a change order and negotiations took place.
Id. at 66.
17. The GSA construction engineer assigned to the PCMG contract (hereinafter the construction engineer) testified that shortly after AS-02 was issued,
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extending the contract performance period for an additional seventy-two
days, PCMG officials advised him that they believed the contractor was entitled to compensation for this change. He states that he invited them to submit a proposal for his review. Transcript, Vol. 11 at 133.
18. At a conference with PCMG representatives on November 17, 1995, GSA
offered the contractor $10,800 as compensation for the seventy-two days added to the contract completion period. PCMG rejected the offer, but shortly
thereafter, on November 21, 1995, submitted its own proposal for compensation in the amount of $27,748. This included $16,777 in direct labor costs and
burden for the project manager, the estimator, and the field superintendent
during the seventy-two-day period. The proposal also sought reimbursement
of various other on-site or field overhead costs incurred during the same period, such as telephone costs, gasoline costs, rental costs for a storage trailer, a
pick-up truck, and an auto used by the office/project manager and engineer.
These other costs came to a total of$1867. The total of all the listed costs,
$18,644, was marked-up to $27,748 through the addition of overhead (20%),
G&A (10%), profit (10%), and bond fee (2.5%). In making this proposal,
PCMG also suggested an alternative approach for calculating compensation
for the additional seventy-two days. It suggested dividing the general condition costs (i.e., burden, overhead, G&A, profit, and bond fee) of the original
contract by the 180-day contract period to arrive at a daily cost which could
then be multiplied by seventy-two. Respondent’s Trial Exhibit 6; Transcript,
Vol. 11 at 136.
19. The GSA construction engineer testified that during the next year there
were occasional meetings between GSA and PCMG representatives to resolve
various pending matters including the question of compensation of PCMG for
the seventy-two-day extension. Transcript, Vol. 11 at 175-82. This latter
problem was, in the words of the engineer, “a major obstacle.” Id. at 177.
PCMG was reluctant to agree to compensation based on the seventy-two-day
extension without some similar compensation for the thirty-day extension
provided for in AS-01. Id. at 178. PCMG’s vice president does not recollect
any meetings with GSA on this issue prior to the fall of 1996. Id., Vol. III at
100.
20. In the fall of 1996, GSA made a counterproposal to PCMG’s proposal of
$27,748. By letter dated November 20, 1996, the GSA construction engineer
wrote to PCMG:
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A determination has been made that additional compensation
is required in this matter [of the seventy-two-day extension].
GSA has determined that compensation should be made to
PCMG on extended office overhead with the appropriate
markup in the amount of $21,634 along with 72 calendar days
added to your contract duration.
Appeal File, Exhibit 113. The letter also referred to PCMG’s request to renegotiate AS-01 for additional extended overhead. The request was denied on
the ground that overhead, G&A, and profit for the additional work was included in the $14,680 already agreed on and signed by all parties on April 11,
1995. Id.
21. GSA’s counterproposal of compensation for the seventy-two-day extension
followed the same basic format of PCMG’S original proposal of November 21,
1995 (Finding 18). The counterproposal was prepared by GSA’s construction
engineer. He testified that he reviewed the certified payrolls used by PCMG
to construct its labor costs and eliminated all overtime included in the original proposal. This led to a reduction of the claim for labor and burden from
$16,777 to $13,611. As to the other costs claimed, after discussing them in
detail with PCMG’s vice president, he disallowed the cost claimed for the office/project manager, allowed the costs of the rented trailer, and reduced the
Claim for the pick-up truck, gasoline, and telephone. With regard to the telephone, he noted that PCMG never had a field office on site. For a considerable period of time, the superintendent had continued to use the Government
phone in the construction engineer’s office until he was expressly requested
to make other arrangements. The final markup on the allowed costs for overhead, G&A, profit, and bond were the same as those used by PCMG in its
original proposal of a year earlier. Appeal File, Exhibit 33; Transcript, Vol. 11
at 147-50.
22. The GSA construction engineer testified that, before advising PCMG in
writing of his counterproposal, he discussed it in a telephone conversation
with PCMG’s vice president. This PCMG representative’s reaction to the
counterproposal was not unfavorable, but he indicated to the construction engineer that the company’s acceptance of the proposed sum would be contingent upon agreement to similar compensation for the thirty days added to the
contract under AS-0 1. Transcript, Vol. II at 151.
23. In his testimony, PCMG’s vice president confirmed this account of the
construction engineer and further explained that so long as GSA refused to
discuss compensation for the thirty days added to the contract under AS-0 1,
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PCMG was not prepared to respond to the Government’s counterproposal for
compensation for the seventy-two days added to the contract by AS-02. Transcript, Vol. I at 171-72.
Contract Modification AS-03
24. On June 26, 1995, GSA received from appellant a proposal for additional
compensation for a variety of items and changes. The ensuing negotiations
would eventually lead to another contract modification, AS-03. The Government’s record of change order negotiations for this modification indicates that
this first proposal from PCMG was for $21,378. This proposal was rejected.
During the month of July, PCMG submitted two revisions of its proposal and
met with GSA representatives to negotiate. Negotiations continued into the
months of August and September. On September 19, 1995, PCMG submitted
a third revised proposal. This proposal was for $12,223. On September 22, the
parties met again for negotiation. At that time, the Government offered a final figure of $9000. This figure included the usual markup for overhead and
G&A. Appeal File, Exhibits 104-105. On September 27, PCMG’s president
advised GSA’s construction engineer that the $9000 figure was acceptable.
Appeal File, Exhibit 104. He confirmed this in a letter dated September 27,
1995. The letter states:
[W]e are accepting the change order no. 3 in the amount of
$9,000.00. By the virtue of this change order we are requesting
4 weeks time extension from the date of approval of this change
order.
Id., Exhibit 13 at 4 (unnumbered).
25. In drafting the text of AS-03, GSA gave PCMG considerably more than
the four weeks requested in the letter of September 27. The draft modification, when issued to PCMG for signature, provided for sixty-two rather than
twenty- eight calendar days. Appeal File, Exhibit 109. It is not entirely clear
how this occurred. The Government’s original record of change order negotiations for AS-03 was written and signed by the GSA construction engineer and
is dated October 31, 1995. Appeal File, Exhibit 104; Transcript, Vol. I at 32.
It recommended a time extension of twenty-eight calendar days. This was
said to be based, in part, on the fact that three of the eight changes required
additional time and, in part, on delays already encountered by the contractor
in attempting to work in highly secure locations. The State Department had
required that work in these areas be done outside normal working hours or
on weekends. In at least two instances the contractor had been denied access
even on weekends. Appeal File, Exhibit 104.
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26. This same record of change order negotiations has a number of handwritten modifications and additions. The GSA construction engineer, the author
of the original report, testified that, in his opinion, these changes were made
by the contracting officer’s representative (COR) prior to approving the document on November 9, 1995. Transcript, Vol. 11 at 36. The changes in the
text dealing with the time extension are particularly significant. The recommendation for a time extension is changed from twenty-eight days to sixtytwo days. This is said to be based upon a need for twenty-eight days to accomplish three of the eight changes called for in the change order. The additional thirty-four days are said to be required in view of the delays in completing work at the highly secure locations. Appeal File, Exhibit 104.
27. PCMG’s vice president testified that in early November 1995, a draft of
modification AS-03 was sent to the contractor for signature. The modification
increased the contract price by $9000, extended the contract for an additional
sixty-two days, and advanced the contract completion date to November 17,
1995. This, according to the appellant’s vice president, was the first notice his
company received that the Government planned to extend the contract by an
additional sixty-two days. Appeal File, Exhibit 109, Transcript; Vol. III at 8283, 92, 95.
28. The recollection of the GSA construction engineer regarding the origin of
the sixty-two-day extension is different from that of PCMG’s vice president.
The engineer testified that in early November, after agreement had been
reached on the $9000 figure for AS-03,’he called PCMG representatives in to
see if it would be possible to negotiate a final settlement on AS-03. He stated
that he was not pleased with the contractor’s progress over the past three
months and felt that PCMG was procrastinating. Because the contract lacked
a liquidated damages clause, he considered it important to establish a date on
which the contract could be deemed substantially complete. He further testified that the State Department, as the building tenant, was complaining that
the project was not yet complete. Accordingly, he stated that, at this session,
a calendar was brought out for the purpose of selecting a date for substantial
completion of the contract. This witness testified that the contractor’s representatives replied that they only had a “few items to complete.” In addition,
he recognized that some of the work called for under AS-03 had already been
performed prior to this finalization session. It is the testimony of this witness
that it was agreed that November 17 would be designated as the contract
completion date and that the previously established contract completion date
would, therefore, be extended by sixty-two days. This same witness also testi-
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fied that, at this same meeting, he was given assurance by PCMG’s president
and vice president that they would “not come back on the government for
these extra days.” Transcript, Vol. 11 at 156-68.
29. The GSA contract administrator for the PCMG project testified that he
had a similar recollection of this meeting with the contractor in November
1995. He recalled the parties consulting a calendar for purposes of determining a date for substantial contract performance. He understood the agreement between the construction engineer and PCMG’s representatives, however, as being simply that no additional time would be sought by the
contractor beyond the date agreed upon for substantial completion of performance. Transcript, Vol. III at 128-38.
30. It is not precisely clear from the record when the draft of AS-03 was presented to PCMG for signature. As noted, PCMG’s vice president recollects
that it was presented in early November 1995, prior to the revised contract
completion date of November 17. Transcript, Vol. III at 83. What is clear,
however, is that the PCMG was not disposed to sign the modification.
PCMG’s vice president testified that the $9000 previously agreed upon represented only the direct costs and markups associated with the changes called
for in AS-03. This figure did not, in his opinion, include costs associated with
the sixty-two day extension of the period of contract performance provided for
in the draft modification. For this reason, the draft was put aside unsigned.
Id. at 90-95.
PCMG’s Claim
31. PCMG’s vice president testified that efforts made during November 1995
to recover overhead costs associated with the extensions of the contract under
AS- 02 (seventy-two days) and the proposed AS-03 (sixty-two days) met with
no success. The matter, in his opinion, remained in “limbo” for approximately
a year. Transcript, Vol. III at 98.
32. As already noted, in the fall of 1996, GSA made a counterproposal to
PCMG’s proposal of a year before regarding compensation for the seventy-two
day extension under modification AS-02. Finding 20. PCMG’s vice president
testified that, as a business matter, the company was prepared to accept the
counterproposal of $21,634, even though it was considerably less than the
company’s original proposal of $27,748. Acceptance, however, was linked to
the condition that GSA pay similar compensation for the thirty-day extension
provided for in AS-0 1. Transcript, Vol. I at 212-13. GSA rejected the request.
Appeal File, Exhibit 113.
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33. Completion of the appellant’s contract did in fact languish beyond November 17, 1995. A construction progress report for November 15, 1995 states
that the project was ninety-six percent complete. A report for October 1996
shows the project as only ninety-eight percent complete. Appeal File, Exhibit
118. The company’s vice president testified that, in view of the various delays
encountered, he had considered bringing a delay claim, but by late 1996,
PCMG concluded that it would not pursue any delay claim. The company’s
vice president testified that he informed GSA representatives of this decision
but is uncertain to whom he spoke on this matter. He believes it may have
been the GSA construction engineer. Transcript, Vol. III at 106-07.
34. By letter dated December 16, 1996, however, appellant submitted to the
contracting officer a certified claim for $149,331 for compensation for contract
extensions. The claim consists of four basic parts: First is a claim for
$104,304 for overhead and G&A as compensation for time extensions totaling
164 days, namely, thirty days for AS-01, seventy-two days for AS-02, and sixty- two days for AS-03. This part of the claim is based on a per diem rate of
$636. To calculate the per diem rate, the claimant divided the sum of the
overhead and G&A on its best and final offer by 180, i.e., the number of days
in which the parties assumed the contract would be completed. The second
part of PCMG’s formal claim is for on-site or field overhead costs such as
those sought in PCMG’s proposal of November 21, 1995, regarding compensation for the seventy-two day extension, namely, the site superintendent’s salary and burden and the costs associated with motor vehicles, gasoline, and
telephone. In this claim of December 16, 1996, however, these costs are
sought for a period of 164 days rather than 72. A third portion of PCMG’s
claim seeks the $9000 previously agreed upon for inclusion in AS-03. The
fourth and final portion of the claim involves various credit adjustments to
which the claimant recognizes the Government is entitled. Appeal File, Exhibit 119.
35. The contracting officer failed to issue a decision on PCMG’s claim of December 16, 1996. By letter dated April 9, 1997, PCMG filed with the Board an
appeal from a deemed denial. After some initial delay, pleadings in the case
were filed and the parties began pretrial discovery. Shortly thereafter, it was
discovered that the contracting officer’s files which had been forwarded to
counsel’s office were lost during the course of a move by counsel’s office. Some
time was lost as Government counsel attempted to reconstruct files from alternative sources. In May 1998, representatives of the parties met twice with
the contracting officer to discuss the issues in the case. The meetings pro-
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duced no results. Following the meetings, counsel for the Government advised the Board that the contracting officer was now at work on a decision
regarding PCMG’s claim.
36. On June 12, 1998, the contracting officer issued not one but three separate decisions. Two of the decisions purport to deny PCMG’s claim for
$149,331, but none of them deals with the claim in its entirety. One decision
discusses the issue of the contractor’s compensation as a result of the seventy-two day extension provided for in AS-02. The decision concludes that the
Government’s counter offer of $21,634 is fair and reasonable. A second decision concerns modification AS-03 and concludes that the contractor is entitled
to no more than the $9000 previously proposed by GSA. A third decision concerns a modification issued by GSA after PCMG submitted its claim of December 16, 1996. This is modification AS-04. The contracting officer notes
that this modification was issued in February 1997 and concerns agreement
reached on certain-changes which are not involved in the contractor’s claim
for $149,331. Because of the pending disputes regarding modifications AS-0
1, AS-02, and AS-03, PCMG had declined to sign modification AS-04. Appeal
File, Exhibit 115.
37. Attached to each of the three decisions issued by the contracting officer on
June 12, 1998, was a signed unilateral contract modification which memorialized the contracting officer’s position as outlined in each respective decision.
These modifications were subsequently withdrawn in favor of bilateral modifications executed by the parties with the consent of the Board. One bilateral
modification dealt with the compensation of PCMG for the seventy-two- day
extension. It provided for payment of $21,634 but recognized PCMG’s right to
press for additional compensation in this appeal. The second bilateral modification provided for the sixty-two day extension of the contract and payment
of $9000 to the contractor as previously proposed for modification AS- 03.
This modification likewise recognized PCMG’s right to press for additional
compensation. The third modification signed by the parties is that which established certain credits which the parties previously agreed were due to
GSA. It is not part of this case. Appeal File, Exhibit 116.
38. As this case has progressed, appellant has modified its original claim. The
daily rate formula of $636 originally used to calculate compensation for the
time involved in the extensions totaling 164 days, is now applied by appellant
to only the seventy-two-day extension occasioned by modification AS- 02. For
the time involved in the remaining ninety-two days, PCMG seeks only to recover unabsorbed home office overhead. In testifying on this revision of the
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claim, appellant’s vice president explained that he used the Eichleay1 formula
to calculate a daily rate not because he had an Eichleay-type claim for Government imposed delay but simply because he found this type of calculation
to be a fair method for determining the allocation of unabsorbed overhead.
Transcript, Vol. I at 224. PCMG’s claim, as amended, now amounts to
$107,357. Appellant’s Trial Exhibits 3, 3a; Transcript, Vol. I at 198-205; Vol.
11 at 44- 49.
Discussion
We turn first to the major portion of appellant’s claim, namely, the request to
be compensated for the time extensions totaling 164 days. As revised, this
includes a claim for unabsorbed home office overhead for a total of 92 days
and both home office and field overhead for 72 days. For several reasons we
find the claim without merit.
Our fundamental problem with the claim is the use of a constructive daily
rate as opposed to a fixed percentage markup of direct costs incurred. For the
thirty days provided for in modification AS-01 and for the sixty-two days proposed for modification AS-03, appellant has used a daily rate based upon the
methodology used to compensate contractors for Government delay under the
Eichleay formula. Finding 38. For the seventy-two day extension authorized
under the original unilateral AS-02, PCMG’s daily rate is based upon the total of field overhead and G&A, as shown in its best and final offer, divided by
180, namely, the number of days the parties assumed would be required to
perform the contract. Findings 34, 38.
The use of a daily rate to compensate a contractor for unabsorbed overhead
for pure contract extensions was discussed at some length by our appellate
authority in C.B.C. Enterprises, Inc. v. United States, 978 F.2d 669 (Fed.Cir.
1992). In that decision, C.B.C. argued that a contractor is entitled to use the
Eichleay daily rate formula to recover extended home office overhead for delays, suspensions or extensions of contract performance caused by the Government. The Court of Appeals for the Federal Circuit, however, concluded
that the Eichleay formula could not be used for pure extensions. It explained
that use of an estimated daily rate to compute extended home office overhead
1
The Eichleay formula was devised by the Armed Services Board of Contract Appeals to
calculate reimbursable home office overhead costs in the event of suspension of work on a
contract. Eichleay Corp., ASBCA 5183, 60-2 BCA ¶2688, affd on reconsideration, 61-1 BCA
¶2894.
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is an extraordinary remedy specifically limited to contracts affected by Government-caused suspensions, disruptions, and delays of work. In such situations the use of a fixed percentage formula to compensate for home office
overhead is rendered inadequate or “absurd”, since the flow of revenue from
direct costs — a percentage of which goes towards recovery of home office
overhead — is simply cut off or substantially reduced. Id. at 671, 675.
In C.B.C., the Court concluded it was inappropriate to use the Eichleay formula to calculate home office overhead for contract extensions because adequate compensation for overhead expenses may usually be calculated more
precisely using the fixed percentage formula. Given the explanation supporting the Court’s conclusion, we find appellant’s attempts in this case to estimate and recover home office overhead and (in the case of the seventy-two
day extension) indirect contract costs using an Eichleay-type or other daily
rate formula instead of a fixed percentage formula impermissible. It is clear
from this and related decisions, that there is an obvious preference for the
use of a fixed percentage formula, or at least some variation of it, to provide
for overhead in contract modifications. A claimant attempting to convince a
court or board to abandon this type of approach in favor of a daily rate formula faces a formidable burden. In this case, appellant has failed to meet this
burden.
In their posthearing brief, counsel for appellant argue that the fixed percentage formula is not sufficient because it applies only to changed work and not
to the unchanged work. Accordingly, in the event of contract extension, the
home office overhead relating to the unchanged work is diluted, and the benefit of the bargain originally agreed to is inevitably altered. PCMG’s Posthearing Brief at 22-29. Appellant’s case for the use of a daily rate formula might
be stronger if it could prove the correctness of its major premise, namely, that
the fixed percentage formula applies only to changed work. In this case it has
failed to do so. Furthermore, we have serious doubt as to whether such a distinction is even viable in the context of home office overhead which, by its
very nature, is composed solely of costs never attributable to or caused by any
one contract. Indeed, as our appellate authority has also observed, ‘[a] claim
to ‘directly attributable’ home office overhead is a non sequitur.” Wickman
Contracting Co. v. Fisher, 12 F.3d 1574, 1578 (Fed.Cir. 1994).
In each of the extensions involved in this appeal, the parties, have used (as in
modification AS-01) or discussed using (as in modifications AS-02 and AS-03)
the fixed percentage formula to compensate appellant for home office overhead and contract overhead. Findings 12, 18, 21, 24. Appellant has failed to
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convince us that this preferred. method of compensating the contractor is inadequate for the purpose. We, therefore, decline to grant relief using either of
the daily rate formulas proposed.
Our other reasons for rejecting appellant’s claim of compensation for the time
involved in the three contract extensions involved in this case are best discussed in the context of each modification. The claim relating to the thirty
days added to the contract performance period by modification AS-01 likewise
fails for the reason that a contract modification providing for the additional
thirty days was signed by both parties and contained express language which
precluded appellant from claiming anything more than what was agree upon
in the signed modification. Finding 13; see Twigg Corporation v. General Services Administration, GSBCA 13901, 98-1 BCA ¶29,569, at 146,587; Centennial Leasing v. General Services Administration, GSBCA 11451,93-1 BCA
¶25,350, at 126,266 (1992); Jorndan & Nobles Construction Co., GSBCA 8349,
et al. 91-1 BCA ¶23,659, at 118,514 (1990). We cannot fault GSA for refusing
to reopen negotiations regarding AS-01. Finding 20.
Counsel argue that PCMG signed the modification in reliance on an apparent
misrepresentation by the GSA change order negotiator that compensation for
the additional days was not within the scope of the change order. PCMG’s
Posthearing Brief at 20-22. Just what precisely transpired between PCMG
representatives and this Government negotiator is not entirely clear. The negotiator was not called to testify. Nevertheless, the company representatives
are experienced businessmen and whatever the assurances of the negotiator
may have been, agreement to sign modification AS-0 1 with the express settlement language it contained clearly involved a significant risk which should
have been obvious to any reasonable business person. Appellant cannot now
expect to avoid the consequences of having freely taken that risk.
PCMG took a similar risk when it agreed, against its better judgment, to negotiate with the Government based upon a performance period of 180 days
rather than 252. While both the company president and vice president contend that they had little choice in the matter, the fact stands that they did
ultimately submit an offer based upon a 180-day performance period. That
offer was accepted. The evidence regarding the duration of PCMG’s contract
is in conflict. The parties conducted themselves for a considerable period of
time as if it was 180 days. Findings 7, 9, 10, 11. Nevertheless, the solicitation
and contract both state that it is 252 days. Findings. 2, 8. For purposes of deciding this case, we see no need to address the issue. Appellant would not
qualify for compensation in either situation. If the contract was for 180 days
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and appellant agreed to complete the work in that period, then it could hardly claim compensation for being given extra time for performance beyond that
date. On the other hand, if the contract was for 252 days, appellant could
hardly present a claim for performance of the final seventy-two days of its
contract performance period. Perhaps, on the basis of mutual mistake, the
contract could have been reformed. Nevertheless, the testimony of PCMG’s
witnesses suggests that they at least did not labor under the mistaken assumption that the contract could in reality be performed in 180 days. Finding
5. Fortunately for PCMG, the Government in this case did not insist upon
compliance with the original agreement but rather agreed to extend the contract and to provide a reasonable compensation to PCMG for the extension.
In addition to seeking compensation for the time involved in the three extensions.of the contract performance period, PCMG’s claim also includes a claim
for certain direct costs associated with field overhead. Appellant seeks to recover for a total of 164 days, the site superintendent’s salary, the rental costs
for a storage trailer and pick-up truck, and the costs of gasoline and telephone service. Finding 34. We are unconvinced that appellant is entitled to
compensation for any of these costs beyond what it has already received.
So far as concerns these costs as they relate to the thirty-day extension provided for in modification AS-01, PCMG has already been given a markup for
field overhead on the amount agreed to covering the many changes involved.
In the absence of any persuasive argument that use of this fixed percentage
formula was inadequate, we conclude that the adjustment for field overhead
provided the contractor with all that it could expect under the contract. Furthermore, as already noted, in signing the contract with the settlement language it contained, appellant has relinquished any right it might have had to
seek additional compensation.
The situation with PCMG’s field overhead claim for the seventy-two day extension is of course slightly different. In its first proposal for compensation,
PCMG compiled a list of field or on-site overhead costs it considered to be associated with the seventy-two day extension and submitted them as direct
costs together with the usual markups. It also suggested, as an alternative
approach to compensation, the use of a daily rate formula. Finding 18. So far
as format was concerned, the approach actually used by PCMG to present its
claim, rather than the suggested alternative, was the correct format. A contractor who wishes reimbursement for a cost directly attributable to a contract must submit it as a direct cost. Wickman Contracting Co. v. Fisher, 12
F.3d at 1578-79. The GSA construction engineer followed the format of
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PCMG’s proposal in making his counteroffer of $21,634. The explanations
given by him at trial for his various reductions in the claim appear to us to
have been reasonable and remained essentially unrebutted. As noted, this
amount included markups for home office and field overhead which were the
same as those used by PCMG in its original proposal for compensation submitted a year earlier. Finding 21.
Through a bilateral modification signed by the parties subsequent to the
docketing of this case, GSA has paid appellant the $21,634 offered by the
construction engineer. PCMG has agreed to accept this amount but, in doing
so, reserved the right to press for more in this appeal. Finding 37. Given the
record before us, we are not convinced that PCMG is entitled to any more
compensation than that which the Government proposed in its counteroffer
and has since paid pursuant to the recently-signed bilateral modification.
What of appellant’s claim for field overhead expenses for the remaining extension of sixty-two days proposed in modification AS-03? PCMG would have
us believe that this extension was totally of the Government’s making and in
no way represented an agreement between the parties. The testimony of the
GSA construction engineer and contract administrator is in conflict with that
of PCMG’s vice president. Findings 27-29. Counsel for PCMG suggest that
perhaps the recollection of the construction engineer relates rather to the assurances given by PCMG that it would not pursue a delay claim than to the
duration of the sixty-two day extension. PCMG’s Posthearing Brief at 32
n.12. This explanation might serve to resolve at least some of the apparent
conflict in the testimony of these witnesses. In cases such as this, however,
where present recollections are in conflict, we find it useful to turn to contemporaneous documentary evidence. The original draft signed at the end of
October and the final version of the Government’s record of change order negotiations signed by the COR on November 9, 1995, give no indication of
PCMG involvement in the determination of how long this third extension
should be. The final version of the record states that twenty-eight of the sixty-two days were to permit the contractor to complete the changes called for
in the modification. The remaining thirty-four days were said to be required
in view of delays encountered in completing work at highly secure locations.
Findings 25-26. We accept this explanation as the most reliable.
Appellant has repeatedly assured us that its claim is not one for Governmentimposed delay, but rather, simply a claim for unpaid, compensable time extensions issued by GSA. Transcript, Vol. I at 212; PCMG’s Posthearing Brief
at 2, 22-23, 36-37. The final version of the Government’s record of change or-
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der negotiations states that thirty-four days of the sixty-two-day extension
were required as a result of delays. Since appellant has expressly advised
that it is not seeking delay damages, any award of field overhead for this period of delay would obviously be inappropriate.
As for the remaining twenty-eight days that are said to have been required in
order to complete the changes called for in the modification, we can find no
justification for allowing more than what the draft modification stated. The
parties reached agreement on the direct costs associated with the changes
called for in AS-03. That price included the usual markups for field overhead
using the fixed percentage formula. Findings 24, 30. As stated with regard to
modification AS-01, in the absence of any persuasive argument that use of
this fixed percentage formula was inadequate, we conclude that the markup
for overhead provided the contractor with all that it could expect under the
contract.
The amount in question, $9000, has since been paid to PCMG pursuant to a
bilateral modification signed by the parties. Finding 37. Appellant has failed
to convince us that it is entitled to any compensation for field overhead relating to the changes in question beyond that which has already been agreed to
and paid.
In short, we can find no basis for awarding appellant any G&A or field overhead beyond that which has already been offered and paid by GSA in conjunction with the three extensions of the contract performance period.
Request for Sanctions
Appellant asks that we impose sanctions on counsel for respondent based on
his failure to provide relevant and material documents to appellant prior to
hearing. In making the request, appellant does not accuse counsel of bad
faith. Neither is there any claim of prejudice resulting from respondent’s incomplete discovery request. Nevertheless, as a sanction for counsel’s conduct,
we are asked to give little or no weight to documents used by respondent in
rebuttal of appellant’s evidence.
In his defense, counsel for respondent reminds us that the production of documents in response to requests from counsel for appellant was particularly
difficult due to the accidental loss of the official contract file during the course
of a move in the office of counsel. The Board agrees with counsel for appellant
that, if the Government’s management of discovery responses had been more
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efficient, not only counsel for appellant but also the Board itself would have
encountered considerably less frustration. Nevertheless, since this inefficiency was, at least in part, due to an accidental loss of files and since counsel for
appellant assures us that there has been no resulting prejudice, we deny the
request for sanctions.
Decision
This appeal is DENIED.
Edwin B. Neill, Board Judge
We Concur:
Robert W. Parker, Board Judge
Allan H. Goodman, Board Judge
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Reflectone
v.
Dalton
60 F.3d 1572
July 26, 1995
Opinion for the court filed by Circuit Judge Michel. Concurring
opinion filed by Circuit Judge Nies.
Michel, Circuit Judge.
Reflectone, Inc. (Reflectone) appeals from the decision of the Armed Services
Board of Contract Appeals (Board) dismissing Reflectone’s appeal for lack of
subject matter jurisdiction. Reflectone, Inc., ASBCA No. 43081, 93-1 BCA
¶25,512, 1992 WL 302847 (1992). The Board held that Reflectone had not
submitted a “claim” within the meaning of the Contract Disputes Act of 1978
(CDA), 41 USC §§601-13 (1988 & Supp. V 1993), as interpreted in the Federal Acquisition Regulation (FAR), because a dispute over the amount of money
Reflectone asserted it was owed did not predate Reflectone’s June 1, 1990 Request for Equitable Adjustment (REA), the purported claim. Board jurisdiction is grounded in the CDA which authorizes Board review only of a contracting officer’s final decision on a “claim.” The CDA, however, does not
define “claim.” Because we conclude that FAR 33.201 (1988), which alone defines “claim” for purposes of the CDA, does not require a pre-existing dispute
as to either amount or liability when, as here, a contractor submits a nonroutine “written demand ... seeking, as a matter of right, the payment of
money in a sum certain,” FAR 33.201, we hold that Reflectone’s REA was a
CDA “claim” and, therefore, the Board has jurisdiction. Accordingly, we reverse the dismissal and remand for adjudication of Reflectone’s appeal from
the contracting officer’s decision on its merits.
Background
On April 15, 1988, Reflectone entered into a $4,573,559 fixed price contract
with the Naval Training Systems Center in Orlando, Florida, requiring Reflectone to update helicopter weapon system trainers. The contract called for
delivery of the first trainer on February 15, 1989, with the other three trainers to follow at three-month intervals. In a letter dated December 14, 1988,
Reflectone advised the contracting officer (CO) that delivery of certain
equipment was being delayed by late, unavailable or defective government-
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furnished property. In response, the Navy denied responsibility for the delay
and issued a cure notice warning Reflectone that unless the condition endangering timely delivery of the equipment was eliminated within thirty days,
the Navy might terminate the contract for default.
On January 17, 1989, Reflectone again wrote the CO that the delays were the
fault of the government and requested an extension of the contract delivery
schedule. Subsequently, the Navy modified two of the original four delivery
dates but reserved its right to seek additional compensation for delay. After
Reflectone advised the Navy that it would be unable to meet even the extended delivery dates due to faulty government-furnished property, the CO indicated on May 5, 1989, that Reflectone was delinquent on the contract and
that the Navy would seek compensation for the delay. Between May 1989 and
April 1990, the contract delivery schedule was modified at least three more
times and each time the Navy reserved the right to make a claim against Reflectone for delay. In response, Reflectone continued to inform the Navy that
it considered the government to have caused all delays and that it would
claim relief once the full economic impact of the delay was known. On June 1,
1990, Reflectone submitted an REA to the CO demanding $266,840 for costs
related to government-caused delay with respect to twenty-one enumerated
items. Reflectone’s President and CEO certified the REA and requested a decision from the CO. In the initial review of the REA, completed on January
15, 1991, the CO denied sixteen of the twenty-one items in their entirety, estimated entitlement in the remaining five items at $17,662, and advised Reflectone that a counterclaim and set-off, exceeding the amount requested by
Reflectone, was being prepared1. On March 19, 1991, the CO rendered a final
decision indicating that the government’s position remained the same and
advising Reflectone of its right to appeal to the Board. Reflectone appealed
the CO’s final decision to the Board, which held that the REA was not a
“claim” within the meaning of the Contract Disputes Act and, therefore, it did
not have jurisdiction over the appeal. The Board relied on language from
Dawco Constr., Inc. v. United States, 930 F.2d 872, 878 (Fed.Cir. 1991), stating, “A contractor and the government contracting agency must already be in
dispute over the amount requested.” Dawco also states “The [CDA] and its
implementing regulation require that a ‘claim’ arise from a request for payment that is ‘in dispute.’ ” Id. The Board interpreted Dawco as holding that
no demand for payment could be a claim unless the amount of the payment
had been put in dispute. The Board reasoned that because Reflectone first
1
The CO forwarded a counterclaim to Reflectone for late and deficient contractor performance totaling $657,388 on November 8, 1991.
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requested a specific amount from the government in the REA, no dispute over
the amount existed prior to the REA and, therefore, the REA could not be a
claim according to its interpretation of Dawco. The Board explained:
[W]e need not determine whether these issues [presented in
the REA] had previously been submitted to the contracting officer and were in dispute. Dawco requires that the parties be in
dispute over the amount requested. Clearly in the appeal before us, [Reflectone] had not quantified the impact of the delays
on itself and communicated it to the government prior to the 1
June 1990 REA. The failure of [Reflectone] to request any
amount (and therefore a dispute could not exist over it) prior to
its REA, renders [Reflectone’s] 1 June 1990 REA incapable of
being considered a claim under the CDA in accordance with the
holding of Dawco.
93-1 BCA ¶25,512 at 127,056.
On appeal to this court, a divided, three-judge panel affirmed the Board’s
dismissal decision, accepting its interpretation of Dawco and its rationale, in
an opinion dated September 1, 1994, now vacated. Reflectone, Inc. v. Kelso, 34
F.3d 1031 (Fed.Cir.) (withdrawn from bound volume), vacated, 34 F.3d 1039
(Fed.Cir. 1994). Due to the exceptional public importance of the issue of first
impression presented by this case concerning the proper definition of a CDA
“claim,” we granted Reflectone’s Suggestion for Rehearing In Banc.
Fed.Cir.R. 35. We have jurisdiction pursuant to 28 USC §1295(a)(10) (1988)
and Section 8 of the Contract Disputes Act, 41 USC §607(g)(1) (1988).
Standard of Review
The CDA dictates the standards this court applies in reviewing decisions of
agency contract appeal boards. 41 USC §609(b) (1988). A determination of
CDA jurisdiction and interpretation of applicable procurement regulations
present questions of law which we review de novo. Santa Fe Eng’rs, Inc. v.
Garrett, 991 F.2d 1579, 1581 (Fed.Cir. 1993).
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Analysis
I
A. FAR 33.201 Does Not Require That A Payment Demanded In A NonRoutine Submission Be In Dispute Before The Submission To A Contracting
Officer Can Be A “Claim”
Under the CDA, a final decision by a CO on a “claim” is a prerequisite for
Board jurisdiction. Sharman Co. v. United States, 2 F.3d 1564, 1568-69
(Fed.Cir. 1993) (reviewing jurisdictional scheme of CDA). Because the CDA
itself does not define the term “claim2,” we must assess whether a particular
demand for payment constitutes a claim, based on the FAR implementing the
CDA, the language of the contract in dispute, and the facts of the case. Garrett v. General Elec. Co., 987 F.2d 747, 749 (Fed.Cir. 1993)3. The FAR defines
“claim” as:
[1] A written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of
money in a sum certain, the adjustment or interpretation of
contract terms, or other relief arising under or relating to the
contract....
[2] A voucher, invoice, or other routine request for payment
that is not in dispute when submitted is not a claim.
[3] The submission may be converted to a claim, by written notice to the contracting officer as provided in 33.206(a), if it is
disputed either as to liability or amount or is not acted upon in
a reasonable time.
FAR (48 CFR §) 33.201. The issue is whether sentence [2] adds a requirement
to those stated in sentence [1] that applies to all submissions.
The government and the Board would require that before Reflectone’s REA
can qualify as a claim, it be preceded by a dispute over entitlement to and the
2
The CDA, 41 USC §605(a) (1988) states in relevant part:
All claims by a contractor against the government relating to a contract shall
be in writing and shall be submitted to the contracting officer for a decision.
All claims by the government against a contractor relating to a contract shall
be the subject of a decision by the contracting officer.
3
In this appeal, however, there are not unusual facts that would affect our decision. Nor is
there a contract clause that controls. Thus, the FAR determines whether Reflectone submitted a “claim” to the CO.
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amount of a demand for payment. According to the government, this requirement is mandated by the language of FAR 33.201. In order to explore
whether a CDA “claim” requires a dispute which pre-dates the submission to
the CO, we requested that the following question be addressed by the in banc
briefs.4
Did Dawco Constr., Inc. v. United States, 930 F.2d 872 (Fed.Cir. 1991),
properly conclude that a Contract Disputes Act (CDA) “claim” as defined in
FAR 33.201 requires a pre-existing dispute between a contractor and the government when the claim is in the form of a “written assertion ... seeking, as a
matter of right, the payment of money in a sum certain” or other contract relief per the first sentence of the FAR definition, or does that requirement only
apply when the claim initially is in the form of a “routine request for payment”?
We answer the first half of this question in the negative and the second half
in the affirmative. We hold that sentence [1] of FAR 33.201 sets forth the only
three requirements of a non-routine “claim” for money: that it be (1) a written
demand, (2) seeking, as a matter of right, (3) the payment of money in a sum
certain. That sentence simply does not require that entitlement to the
amount asserted in the claim or the amount itself already be in dispute when
the document is submitted. The subsequent sentence does not add another
requirement to a non-routine submission.
FAR 33.201 does not mention a dispute until the fourth sentence, sentence
[2], which provides, “[a] voucher, invoice, or other routine request for payment that is not in dispute when submitted is not a claim.” Routine requests
for payment, too, are “written demand[s] ... seeking, as a matter of right,
payment of money in a sum certain” and, therefore, appear to fall within the
definition of claim recited in sentence [1] of FAR 33.2015. However, the FAR
explicitly excludes from the definition of “claim” those “routine request[s] for
payment” that are not in dispute when submitted to the CO6.
4
We also requested that the in banc briefs address two additional, related questions. See
infra notes 15 and 16.
5
We need not resolve whether the author of the regulation intended to distinguish between
a “written demand” and a “routine request.”
6
The distinction excluding routine requests for payment from the definition of “claim” relieves COs from the requirement of issuing a CDA final decision on each and every voucher that the government is obligated to pay under the express terms of the contract during
its ordinary progression, including “progress payments.” The process for converting such
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Nevertheless, nothing in the definition suggests that other written demands
seeking payment of a sum certain as a matter of right, i.e., those demands
that are not “routine request[s] for payment,” also must be already in dispute
to constitute a “claim.” Moreover, that the regulation specifically excludes only undisputed routine requests for payment from the category of written demands for payment that satisfy the definition of “claim” implies that all other
written demands seeking payment as a matter of right are “claims,” whether
already in dispute or not. The inclusion of only one exception to the definition
of “claim” — undisputed, routine requests — implies the exclusion of any others. See United States v. Koonce, 991 F.2d 693, 698 (11th Cir.1993) (applying
canon of statutory construction inclusio unius est exclusio alterius).
Our holding today that the FAR requires a “claim” to be a written demand
seeking a sum certain (or other contract relief) as a matter of right, but not
necessarily in dispute, is consistent with the ordinary meaning of the term
“claim”: “a demand for something due or believed to be due.” Webster’s Ninth
New Collegiate Dictionary 244 (1990). That the demand is made as a matter
of right constitutes the essential characteristic of a “claim” according to both
the FAR and the dictionary definitions. See Essex Electro Eng’rs, Inc. v. United States, 960 F.2d 1576, 1580-81 (Fed.Cir.) (“[T]he dictionary definition of
‘claim’ supports the reasonableness of the requirement that the money be
sought as a matter of right.”), cert. denied, — U.S. —, 113 S.Ct. 408, 121
L.Ed.2d 333 (1992). Nothing in the common definition of “claim,” however,
requires a pre-existing dispute before a demand as a matter of right can be a
claim. Indeed, everything suggests the contrary. Moreover, as Reflectone
points out, it is illogical to require a dispute before a demand for payment
rightfully due can be a “claim” because to have a dispute the contractor first
must make a demand as a matter of right, i.e., a claim, that is then refused.
Furthermore, neither the CDA, its legislative history, nor the FAR, nor its
history, suggests that a dispute must pre-date the contractor’s submission of
the claim to the CO when the claim is in the form of a non-routine demand as
of right.
The government argues, nevertheless, that a close reading of the regulation
demonstrates that a “claim” always requires a pre-existing dispute. The government’s analysis begins correctly by acknowledging that sentence [1] of the
FAR, defining “claim” as “a written demand ... seeking, as a matter of right,
routine requests, if disputes, into claims assures that only those submissions that need final decisions will require them.
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the payment of money in a sum certain” appears to include vouchers, invoices
and other routine requests for payment. According to the government, because the regulation later makes clear that the drafters intended to exclude
routine requests for payment from the definition of “claim” unless they are in
dispute, the question becomes one of distinguishing between non-routine
written demands seeking the payment of a sum certain as a matter of right
and “routine request[s] for payment.” The government next asserts, incorrectly, that it is the existence of a dispute which distinguishes a non-routine
“claim” from a routine request for payment and, therefore, every “claim” must
involve a pre-existing dispute.
The government’s interpretation of the FAR must fail, as a matter of logic,
because it recognizes only two categories of potential claims, undisputed routine requests for payment, which do not satisfy the definition, and disputed
non-routine written demands seeking payment as a matter of right, which do.
This interpretation ignores a third category, undisputed, non-routine written
demands seeking payment as a matter of right. Under the literal language of
the FAR, however, the critical distinction in identifying a “claim” is not between undisputed and disputed submissions, but between routine and nonroutine submissions. To read the dispute requirement of sentence [2] of FAR
33.201 as applying to all submissions for payment, as the government suggests, one would have to construe every demand for payment as a matter of
right as a “routine request for payment.” However, this is clearly not so. For
instance, an REA is anything but a “routine request for payment.” It is a
remedy payable only when unforeseen or unintended circumstances, such as
government modification of the contract, differing site conditions, defective or
late-delivered government property or issuance of a stop work order, cause an
increase in contract performance costs. Pacific Architects and Eng’rs Inc. v.
United States, 491 F.2d 734, 739, 203 Ct.Cl. 499 (1974). A demand for compensation for unforeseen or unintended circumstances cannot be characterized as “routine.” The Supreme Court has confirmed the non-routine nature
of an REA by equating it with assertion of a breach of contract. Crown Coat
Front Co. v. United States, 386 U.S. 503, 511, 87 S.Ct. 1177, 1181, 18 L.Ed.2d
256 (1967) (“With respect to claims arising under the typical government contract, the contractor has agreed in effect to convert what otherwise might be
claims for breach of contract into claims for equitable adjustment.”). Thus, an
REA provides an example of a written demand for payment as a matter of
right which is not “a routine request for payment” and, therefore, it satisfies
the FAR definition of “claim” whether or not the government’s liability for or
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the amount of the REA was already disputed before submission of the REA to
the CO.7
A routine request for payment, on the other hand, is made under the contract, not outside it. For example, a voucher or invoice is submitted for work
done or equipment delivered by the contractor in accordance with the expected or scheduled progression of contract performance. Similarly, progress
payments are made by the government when the contractor completes predetermined stages of the contract. An REA can hardly be compared to an invoice, voucher or progress payment.
Thus, we hold that FAR 33.201 does not require that “a written demand ...
seeking, as a matter of right, the payment of money in a sum certain” must
already be in dispute when submitted to the CO to satisfy the definition of
“claim,” except where that demand or request is a “voucher, invoice or other
routine request for payment.” This interpretation, based on the plain language of the FAR, examines and reconciles the text of the entire regulation,
not simply isolated sentences. See Beecham v. United States, — U.S. —, —,
114 S.Ct. 1669, 1671, 128 L.Ed.2d 383 (1994) (“The plain meaning that we
seek to discern is the plain meaning of the whole statute, not of isolated sentences.”). FAR 33.201, viewed as a whole, establishes a framework in which
written demands seeking a sum certain as a matter of right are CDA “claims”
with the only exception of “routine request[s] for payment” which may be
converted to claims by the existence of a dispute and compliance with other
requirements of conversion in FAR 33.206(a)8. Routine requests are a subset
of all written demands for payment. Special requirements apply to the subset, but not to the rest of the set.
Reflectone’s REA is clearly “a written demand or written assertion by one of
the contracting parties seeking, as a matter of right, the payment of money in
a sum certain.” Reflectone, a contracting party, submitted a written document to the CO demanding the payment of $266,840 which it asserted the
7
We do not hold, however, that every non-routine submission constitutes a “claim” under
the FAR. Those submissions which do not seek payment as a matter of right are not
claims, a definition which excludes, for example, cost proposals for work the government
later decides it would like performed. See Essex Electro Eng’rs, 960 F.2d at 1581-82 (excluding cost proposals and inspection reports from the FAR definition of a CDA “claim.”
8
We do not comment on those conversion requirements or any other requirements, that like
certification, a contractor may have to satisfy to submit a CDA “claim” the CO has jurisdiction to decide.
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government owed for delaying performance of the contract by furnishing defective goods. The submission was certified and requested a CO decision.
Consequently, Reflectone’s REA satisfies all the requirements listed for a
CDA “claim” according to the plain language of the first sentence of FAR
33.201. The REA is not a “routine request for payment” and, therefore, the
fourth sentence of the FAR definition does not apply here to require, inter
alia, a pre-existing dispute as to either liability or amount. Because we conclude that Reflectone’s REA is a “claim” according to the FAR, we further
conclude that the Board has jurisdiction to review the CO’s denial of Reflectone’s REA.
B. Dawco’s Holding Is Overruled
The Board and the government relied on language in Dawco to support the
conclusion that a dispute as to amount is required before any demand for
payment can be a CDA “claim.” In that case, the Navy awarded Dawco Construction, Inc. (Dawco) a contract for landscaping work at a Naval housing
project. The Navy then suspended work on the project, issued a Change Order Request and requested that Dawco submit a cost proposal for completing
the Navy’s suggested modifications. Dawco’s subcontractor responded by proposing new costs in a May 21, 1984 letter which the Navy rejected. Dawco,
930 F.2d at 874. We held that the May 21, 1984 letter was merely a cost proposal9 and not a “claim” as defined by FAR 33.201 because it was not a “ ‘request for payment in dispute’ as contemplated by the Act and explicitly required by the regulation and [Dawco’s] contract.” Id. at 878. The court
explained the origin of the dispute requirement:
Clearly, the FAR mandates that, inter alia, a claim must seek
payment of a sum certain as to which a dispute exists at the
time of submission. Similarly, the contract’s disputes clause,
containing the standard language mandated by the Defense
Acquisition Regulations states that a “request for payment that
is not in dispute when submitted is not a claim for purposes of
the Act.” The language is not ambiguous and means what it
says: A contractor and the government contracting agency
must already be in dispute over the amount requested. Unilateral cost proposals or correspondence suggesting disagreement
during negotiations, while they may ultimately lead to a dis9
The cost proposal could not have been a claim within the meaning of FAR 33.201 because
a cost proposal, but its nature as a negotiating position for unpriced work not yet done, is
not ordinarily “a written demand, ... seeking, as a matter of right, the payment of money
in a sum certain ....” See Essex Electro Eng’rs, 960 F.2d at 1581-82.
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pute, do not, for purposes of the Act, satisfy the clear requirement that the request be in dispute. Mayfair Construction Co.
v. United States, 841 F.2d 1576, 1577 (Fed.Cir.), cert. denied,
488 U.S. 980, 109 S.Ct. 528, 102 L.Ed.2d 560 (1988) (“It is beyond cavil that under this clause, no claim exists unless it involves a dispute.”).
Id.
Although Dawco first held that the requirement that a “claim” be in dispute
was explicit in that particular contract’s disputes clause, the opinion also
grounded that requirement in the language of the FAR. Id. (“The Act and its
implementing regulation require a ‘claim’ arise from a request for payment
that is ‘in dispute.’ ”). To the extent that Dawco and its progeny10 have been
read to also hold that, based on FAR 33.201, a “claim” (other than a routine
request for payment) must already be in dispute when submitted to the CO,
they are hereby overruled. See Texas Am. Oil Corp. v. Department of Energy,
44 F.3d 1557, 1561 (Fed.Cir. 1995) (prior panel decisions on an issue are controlling until overruled in banc).
An examination of Mayfair, mistakenly cited in Dawco, further supports our
overruling the second holding of Dawco and instead holding today that the
FAR 33.201 definition of “claim” does not require a pre-existing dispute unless the submission is a “routine request for payment.” The Mayfair court interpreted and applied an interim regulation drafted by the Office of Federal
Procurement Policy (OFPP)11 defining “claim” as:
10
Four of our cases followed Dawco by requiring that a CDA “claim” be in dispute when
submitted to the CO: Bill Strong Enters., Inc. v. Shannon, 49 F.3d 1541, 1544-45 (Fed.Cir.
1995); Sharman Co., 2 F.3d at 1571 (holding government letter to contractor seeking repayment of progress payments did not assert a government claim, in part because amount
specified was not yet in dispute); Santa Fe Eng’rs, 991 F.2d at 1582 (holding contractor’s
cost proposal was not in dispute and, therefore, not a CDA “claim” while parties continued
negotiations); Heyl & Patterson, Inc. v. O’Keefe, 986 F.2d 480, 485 (Fed.Cir. 1993) (holding
contractor submissions were not CDA claims where they suggested contractor and government were not in dispute but were still negotiating and where contractor had not requested a final decision).
Other cases only acknowledged Dawco’s pre-existing dispute requirement but did not address whether the contractor’s submission at issue satisfied that requirement:
Transamerica Ins. Corp. v. United States, 973 F.2d 1572, 1579 (Fed.Cir. 1992) (acknowledging a claim must be in dispute when submitted without citing Dawco); and Essex Electro Eng’rs, 960 F.2d at 1582.
11
Congress delegated to OFPP the responsibility of implementing overall procurement policy
for executive agencies in the Office of Federal Procurement Policy Act, 41 USC §401 et seq.
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(1) a written request submitted to the contracting officer;
(2) for payment of money, adjustment of contract terms, or other relief;
(3) which is in dispute or remains unresolved after a reasonable
time for its review and disposition by the government; and
(4) for which a contracting officer’s decision is demanded.
Mayfair, 841 F.2d at 1577 (quoting 44 Fed.Reg. 12,524 (1979)). The statement
in Mayfair, mistakenly quoted in Dawco, that “[i]t is beyond cavil that under
this clause, no claim exists unless it involves a dispute,” was based on this
interim regulatory language incorporated into the contract’s disputes clause
explicitly requiring that a claim be in dispute when submitted. Mayfair did
not concern the current FAR definition of “claim” which was promulgated after the interim definition quoted above and, therefore, Mayfair provides no
support for requiring a pre-existing dispute in any case involving contracts
resulting from solicitations issued after June 1, 198012. Id. at 1578 (rejecting
Mayfair’s argument that revised regulation not requiring a dispute applied in
that case because revised regulation applied only to contracts resulting from
solicitations issued on or after June 1, 1980). Reflectone’s contract resulted
from a solicitation issued after that date. It had no such disputes clause in it.
Moreover, it does not appear that the drafters of FAR 33.201 intended it to
include a comprehensive pre-existing dispute requirement. First, the 1979
interim regulatory definition of “claim” at issue in Mayfair was ultimately
replaced with the current definition at issue here. If OFPP intended the current regulation to require that a non-routine payment demand be in dispute
when submitted in order to be a “claim,” the agency could have easily written
the regulation to incorporate such a requirement, as had been done in the
past. Indeed, it could have retained the above quoted language of paragraph
3 of the old, interim regulation. It did not do so. Rather, it adopted a single
(1988 & Supp. V 1993). In Essex Electro Engineers, we held that the OFPP does have authority to issue regulations implementing the CDA, and that authority is broad enough to
encompass regulations defining “claim.” 960 F.2d at 1580.
12
Several commentators have criticized Dawco for misreading FAR 33.201 and erroneously
relying on Mayfair. E.g., Val S. McWhorter & Carl T. Hahn, Disputing the Meaning of a
Claim: The Fallout from Dawco Construction, 23 Pub.Cont.L.J. 451, 456 n. 3, 457 (1994).
Other articles critical of Dawco’s rationale for requiring a pre-existing dispute include:
Donald P. Arnavas, To Claim or Not to Claim, 8 Nash & Cibinic Rep. 63 (1994); Ralph C.
Nash, Jr., The Contract Disputes Act: No Claim, No Jurisdiction, 5 Nash & Cibinic Rep.
¶66 (1991); and Neil H. O’Donnell, A Process Gone Awry: The Increasing Procedural Requirements for Government Contracts Disputes, 58 Fed.Cont.Rep. (BNA) 18 (1992).
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exclusion from what would otherwise be a “claim,” for routine requests, and
even then limited the exception to those routine requests not in dispute at the
time of submission. Cf. Trayco, Inc. v. United States, 994 F.2d 832, 836
(Fed.Cir. 1993) (if Congress had intended a particular meaning, it would have
explicitly said so).
Secondly, a formal response by the OFPP’s chief officer clearly indicated that
the OFPP, when it drafted the current FAR language, did not view that language as always requiring a dispute, and furthermore, did not view a dispute
requirement as a proper implementation of the CDA. During the process of
revising the definition, Donald E. Sowle, Administrator of the OFPP, responded to a suggestion by the DAR (Defense Acquisition Regulation) Council
that the revised version explicitly incorporate a dispute requirement by stating: “The proposed DAR coverage does not properly implement the Contract
Disputes Act. The Act does not require that a claim be ‘disputed by the other
party,’ nor does it require that a claim be submitted under the Disputes
clause.” 1981-1983 New Developments, Gov’t Cont.Rep. (CCH) ¶2,682 (Jan.
28, 1983).
C. The Effect Of Dawco’s Holding That The FAR Always Requires A Dispute
Is Contrary To The Goals Of The CDA
The Dawco dispute requirement has proven to be inimical to at least two
goals of the CDA: providing for the efficient and fair resolution of contract
claims. See Report of the Senate Governmental Affairs Committee and the
Senate Judiciary Committee on the Contract Disputes Act of 1978, S.Rep. No.
1118, 95th Cong., 2d Sess. 4 (1978), reprinted in 1978 U.S.C.C.A.N. 5235,
5238.
Even where the parties proceed in a shared belief that they are in dispute,
and the CO issues a final decision on a contractor’s claim, as happened here,
the issue of whether the payment demand was actually in dispute when the
purported claim was submitted can be raised anytime, before the Board or
the Court of Federal Claims or on appeal to us. Since the court’s ruling in
Dawco in 1991, nearly two hundred Board, Court of Federal Claims, and
Federal Circuit decisions have addressed whether a particular contractor’s
demand for payment was “in dispute” before it filed its claim, according to
Donald P. Arnavas, To Claim or Not to Claim, 8 Nash & Cibinic Rep. P 63
(1994). According to one Armed Services Board of Contract Appeals Judge,
one-half of all cases considered by the agency boards that concerned Dawco’s
dispute requirement resulted in dismissal for lack of jurisdiction. Half of All
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Dawco Cases at Agency Boards Result in Dismissal, 61 Fed.Cont.Rep. (BNA)
18 (1994).
These judicial inquiries into whether a dispute pre-dated a submission are at
best an inefficient use of limited resources, given that before the Board or
court reaches this question there will necessarily have been a final CO’s decision denying the contractor’s submission or at least a deemed denial based on
the CO’s failure to respond. Moreover, in each case, the government continues to dispute the claim, because otherwise it would have settled the matter
and no appeal would be necessary. Because a dispute clearly exists at the
time an appeal is dismissed for lack of a dispute pre-dating submission of the
demand for payment to the CO, after dismissal the contractor need only resubmit the identical demand to the CO. The resubmitted demand would now
indisputedly satisfy the pre-existing dispute requirement and, therefore, be a
CDA claim. The process of final decision and appeal would begin all over
again, but at great cost to the parties, the boards and the courts, and often
with no benefit because the disputed issues on the merits have already been
well defined by the course of litigation. Clearly, this repetitive and needlessly
drawn-out process can hardly be said to promote the “efficient” resolution of
claims13. Nor is it “fair.” Requiring contractors to submit the identical claim
twice, as the government would have them do, is a waste of the contractor’s
time and money. The taxpayers’ money is likewise wasted when the agency
boards or the Court of Federal Claims must hear the same case on two different occasions. Nor has the government shown how this process is not seriously inefficient, unfair and wasteful.
The government argues, however, that the dispute requirement is a proper
judicial interpretation of a separate goal of the CDA: settlement of disputes
at the administrative level, short of litigation. As explained in the Report of
the Senate Governmental Affairs Committee and the Senate Judiciary Committee, “[t]he act’s provisions help to induce resolution of more contract disputes by negotiation prior to litigation....” S.Rep. No. 1118, 95th Cong., 2d
Sess. 1 (1978), reprinted in 1978 U.S.C.C.A.N. 5235, 523514.
13
To avoid needless and wasteful procedural litigation, the American Bar Association Section of Public Contract Law has called for the elimination of Dawco’s “dispute” requirement through amendment of the FAR. ABA Section Renews Plea for Regulatory Fix to
Dawco “in Dispute” Requirement, 60 Fed.Cont.Rep. (BNA) 9 (1993).
14
This policy is also articulated in FAR 33.204:
The government’s policy is to try to resolve all contractual issues in controversy
by mutual agreement at the contracting officer’s level. Reasonable efforts
should be made to resolve controversies prior to the submission of a claim.
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The government contends that the dispute requirement gives the CO more
opportunity to request any additional information that the CO may need once
a demand for payment has been submitted without creating a claim which
necessitates a final decision. Once a contractor’s submission is deemed a
“claim,” it triggers the CO’s statutory duty to respond, within sixty days for
claims under $100,000 and within a reasonable time for claims over that
amount. 41 USCA §605(c) (West Supp. 1995). At oral argument, the government maintained that a CO would have insufficient time in which to request
additional information and evaluate a claim once the statutory time frame for
issuing a final decision was triggered. According to the government, the dispute requirement provides two advantages under its view of the statutory
scheme. First, because the dispute requirement allows the CO to avoid creation of a CDA claim while requesting information, he will always have sufficient time to get and evaluate a fully documented claim. Secondly, by preventing contractors from withholding information in order to bypass
negotiations and by allowing the CO a means of gathering sufficient information to evaluate the claim, the dispute requirement promotes negotiation
and settlement. The fact that a dispute requirement may be more convenient
for the government does not allow us to read such a requirement into the
CDA or the FAR where the plain language simply does not express it. If the
dispute requirement is of vital importance to the government’s negotiating
position with contractors, the government’s only option is to seek to change
the FAR.
Furthermore, the government’s rationale for requiring a dispute rings false,
for the CO can always request more information even if a non-routine written
demand for payment as a matter of right, whether or not disputed, were considered a claim when submitted. The contractor’s submission of a claim does
not prevent this, but simply starts the running of the clock within which a
CO must issue a final decision. For claims over $100,000, the absence of a
dispute requirement should have very little impact on the CO. He would be
quite “reasonable” in requesting additional information and delaying decision
pending response to his request and, therefore, still be within the statutory
time frame. For claims under $100,000, if the contractor has not proven entitlement to the claimed sum, as is its burden, the CO may have no choice but
to deny the claim. See Servidone Constr. Corp. v. United States, 931 F.2d 860,
861 (Fed.Cir. 1991) (“To receive an equitable adjustment from the government, a contractor must show three necessary elements — liability, causation, and resultant injury.”). Alternatively, the CO may request more information and agree with the contractor to allow more time for final decision.
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FAR 33.211(c) (requiring final decision on claims under $50,000 within sixty
days only when requested by contractor; otherwise decision must be rendered
within a “reasonable time”); S.Rep. No. 1118, 95th Cong., 2d Sess. 21 (1978),
reprinted in 1978 USCCAN 5235, 5255 (sixty-day period for final decision
may be extended by written agreement between both parties).
But, the comprehensive dispute requirement the government advocates
would allow it to continually, indeed endlessly, seek information and prolong
negotiations without issuing an appealable decision merely by refusing to
acknowledge a dispute, thereby probably delaying rather than accelerating
any possible settlement. See Saco Defense, Inc., ASBCA Nos. 44792, 45171,
93-3 BCA ¶26,029 at 129,387, 1993 WL 130175 (illustrating CO’s refusal to
act on contractor’s submission). The government may have little incentive to
settle until the contractor’s submission becomes a claim and starts the clock
for issuing a decision and, if the contractor ultimately prevails, for the accrual of interest. 41 USC §611 (1988) (“Interest on amounts found due contractors on claims shall be paid to the contractor from the date the contracting
officer receives the claim....”). A dispute requirement that allows the government to unilaterally designate when a submission becomes a “claim” disrupts
the balance of power between the government and contractors that the CDA
sought to establish. S.Rep. No. 1118, 95th Cong., 2d Sess. 1 (1978), reprinted
in 1978 USCCAN 5235, 5235 (“The [CDA] provides a fair, balanced, and comprehensive statutory system of legal and administrative remedies in resolving government contract claims.”). The purpose of awarding interest to contractors from the submission date of a successful claim is to compensate them
for a legitimate cost incurred when required by the government to perform
the additional work of a changed contract. Id. at 32, 1978 USCCAN at 5266.
Allowing the government to unilaterally determine a claim’s submission date
would vitiate this purpose.
Moreover, the Dawco dispute requirement can actually stifle a contractor’s
incentive to negotiate to settlement rather than pursue litigation, contrary to
the goals of the CDA. Decisions following Dawco have held that until negotiations between the parties have reached an “impasse,” no dispute exists, and,
therefore, a submission to the CO pending review cannot be a “claim.” Santa
Fe Eng’rs, 991 F.2d at 1582 (holding contractor’s cost proposal for proposed
change order was not in dispute and, therefore, not a CDA “claim” while parties continued negotiations). As the Federal Circuit Bar Association argues in
its amicus brief, contractors are therefore motivated to by-pass or cut short
negotiations in an effort to create a dispute so they may proceed with their
legal remedies. Indeed, one commentator counsels contractors to avoid asking
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the government to further consider negotiating a claim after the claim has
been submitted for fear of not meeting the “impasse” requirement. Victor J.
Zupa, When is a Claim Not a Claim?, 22 Pub.Cont.L.J. 654, 667 (1993). Judge
Bennett warned against just this effect of the dispute requirement in Mayfair
where he stated:
Maintenance of a predispute posture should be encouraged, not
penalized. Requiring a dispute before interest can accrue pushes the parties that much closer to litigation and only serves to
encourage “creation” of a dispute in order to permit the payment of interest.
841 F.2d at 1582 (Bennett, J., dissenting). See Alan C. Brown, The New Time
Limits on Contract Claims Under the Federal Acquisition Streamlining Act of
1994, 63 Fed.Cont.Rep. (BNA) 31, 39 (1995) (maintaining dispute requirement is inconsistent with Congress’ intent to encourage settlement).
Finally, as we previously noted, “[t]here is no necessary inconsistency between the existence of a valid CDA claim and an expressed desire to continue
to mutually work toward a claim’s resolution.” Transamerica Ins. Corp. v.
United States, 973 F.2d 1572, 1579 (Fed.Cir. 1992). The parties are not prevented or discouraged from settling their differences because the first written
demand for payment as a matter of right that is not merely a routine request
for payment is recognized and treated as a CDA “claim.” If anything, such a
rule promotes settlement by preventing procrastination.
II.
Because we hold that a “claim” under FAR 33.201, and hence under the CDA,
does not ordinarily require a pre-existing dispute, the second question on
which we requested in banc briefing, whether that pre-existing “dispute
[must] also be as to amount, or is denial of liability sufficient,” is prudentially
moot and we need not and do not address it.15
Similarly, because we hold that Reflectone’s REA is a claim as defined in the
FAR, we do not address whether failure to satisfy that definition creates a
15
The second question posed reads: “if a ‘claim’ requires a pre-existing dispute, and the
claim seeks, ‘as a matter of right, the payment of money in a sum certain,” must that dispute also be as to amount, or is denial of liability sufficient?”
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jurisdictional defect since we are not required to answer that question to dispose of this appeal.16
Moreover, we neither decide nor comment on the issue of whether any other
FAR requirement, such as the one for certification discussed in United States
v. Grumman Aerospace Corp., 927 F.2d 575 (Fed.Cir.), cert. denied, 502 U.S.
919, 112 S.Ct. 330, 116 L.Ed.2d 270 (1991), is jurisdictional as it is not presented by this case. See Keene Corp. v. United States, — U.S. —, —, 113 S.Ct.
2035, 2044-45, 124 L.Ed.2d 118 (1993). Nor do we intimate any view on how
an in banc court might decide such questions if properly presented. In any
event, such questions might not be amenable to a simple “yes” or “no” answer.
The effect, purpose and statutory basis for each individual regulatory requirement might have to be examined before determining whether it is jurisdictional.
Conclusion
We hold that properly construed for its plain meaning, the language of FAR
33.201 does not require that a payment demand contained in a purported
CDA claim be in dispute before being submitted for decision to the CO unless
that demand is a “voucher, invoice or other routine request for payment.” To
the extent that Dawco and cases relying on Dawco can be read to suggest
otherwise, they are overruled. We further hold that Reflectone’s REA satisfies
the definition of “claim,” and, therefore, we reverse the Board’s dismissal for
lack of jurisdiction and remand this case to the Board for further proceedings
on Reflectone’s appeal consistent with this opinion17.
REVERSED AND REMANDED
16
The third question posed reads:
Does a contractor’s failure to comply with a provision of the Contract Disputes
Act (CDA) or the FAR, relating to submission of a claim to the contracting officer, deprive a reviewing forum of subject matter jurisdiction over a challenge
to the contracting officer’s decision on the claim, or does noncompliance merely
raise the defense that the contractor has failed to state a claim under the CDA
upon which relief may be granted?
17
We, of course, take no position on whether there is any merit to Reflectone’s appeal.
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Ron Anderson Construction
v.
Department of Veterans Affairs
10-2 BCA ¶34485
Motion to Dismiss for Lack of Jurisdiction Denied: June 23, 2010
William G. Beck and Michele A. Munson of Woods, Fuller, Shultz & Smith
P.C., Sioux Falls, SD, counsel for Appellant. Lindsay C. Roop, Office of Regional Counsel, Department of Veterans Affairs, Minneapolis, MN, counsel
for Respondent.
Before Board Judges Somers, Borwick, and Sheridan.
SOMERS, Board Judge.
The Department of Veterans Affairs (VA or the Government) entered into a
contract with Ron Anderson Construction, Inc. (contractor or appellant) to
remodel a wing at the VA Black Hills Health Care System in Hot Springs,
South Dakota. During the course of contract performance, the contracting officer made changes to the contract, or the appellant determined that constructive changes had occurred. The parties would discuss these changes, and
the contractor would proceed after receiving verbal approval from the contracting officer. After completing the work, the appellant would submit a
change order indicating the additional charges for the changes. The VA would
either pay the entire amount, dispute portions of the charges, or deny payment entirely.
The contract included the following VA Supplemental Changes clause:
VAAR 852.236-88 Contract Changes — Supplement (JUL
2002)
(b) Paragraphs (b)(1) through (b)(11) apply to proposed contract
changes costing $500,000 or less:1
(1) When requested by the contracting officer, the contractor shall submit proposals for changes in work to the resident engineer. Proposals, to be submitted as expeditiously
1
None of these appeals involve proposed contract changes involving costs exceeding
$500,000.
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as possible but within 30 calendar days after receipt of the
request, shall be in legible form, original and two copies,
with an itemized breakdown that will include materials,
quantities, unit prices, labor costs separated into trades),
construction equipment, etc. (Labor costs are to be identified with specific material placed or operation performed.)
The contractor must obtain and furnish with a proposal an
itemized breakdown as described above, signed by each
subcontractor participating in the change regardless of tier.
When certified cost or pricing data or information other
than cost or pricing data are required under FAR [Federal
Acquisition Regulation] 15.403, the data shall be submitted
in accordance with FAR 15.403-5. No itemized breakdown
will be required for proposals amounting to less than
$1,000.
(2) When the necessity to proceed with a change does not allow sufficient time to negotiate a modification or because of
failure to reach an agreement, the contracting officer may
issue a change order instructing the contractor to proceed
on the basis of a tentative price based on the best estimate
available at the time, with the firm price to be determined
later. Furthermore, when the change order is issued, the
contractor shall submit within 30 calendar days, a proposal
that includes the information required by paragraph (b)(1)
for the cost of the changes of work.
3) The contracting officer will consider issuing a settlement
by determination to the contract if the contractor’s proposal
required by paragraphs (b)(1) or (b)(2) of this clause is not
received within 30 calendar days, or if agreement has not
been reached.
Respondent’s Motion to Dismiss, Attachment 2.2
Thus, as noted by the VA, many of the appeals involve what are called settlements by determination, which are contemplated by the above-cited clause.
When the parties could not agree on the amount that the Government should
pay for the proposed change within a reasonable period of time, the contracting officer would unilaterally change the contract through a contract modification. Most of the contract modifications included the following language:
2
The VA has provided limited excerpts of the contract in this case. No appeal files have yet
been submitted.
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This is the final decision of the Contracting Officer. You may
appeal this decision to the agency board of contract appeals and
provide a copy to the Contracting Officer from whose decision
this appeal is taken. The notice shall indicate that an appeal is
intended, reference this decision, and identify the contract by
number.
See Attachments to the Notices of Appeal for CBCA 1884, 1901, 1902, 1903,
1904, 1905, 1907, 1908, 1911, 1912, 1913, 1914, 1915, 1916, and 1917. In
some of the settlements by determination, the VA provided that the Government would take no further action regarding the contractor’s change orders.
The remaining three appeals, CBCA 1906, 1909, and 1910, all involve circumstances in which the contractor submitted a cost proposal for changed
work, the VA did not pay for the alleged changes, and the contracting officer
did not issue a final decision. In these cases, the contractor demanded payment for the alleged changes. If the contracting officer did not pay upon request, the contractor submitted additional information and continued to demand payment. After months had passed without payment, the contractor
requested final decisions. When the contracting officer failed to act, the appellant appealed the contracting officer’s failure to act as a deemed denial of its
claim.
The VA has moved to dismiss the appeals for lack of jurisdiction, alleging
that the appellant never submitted a claim in any of the appeals. See Respondent’s Motion to Dismiss at 2 (citing 48 CFR 2.101). The Government
asserts that the cost proposals submitted by the contractor do not constitute
claims sufficient to meet the requirements of the Contract Disputes Act of
1978 (CDA), 41 USC §605(a) (2006), because they are submitted pursuant to
a provision in the contract which calls for the proposals to be resolved by settlements by determination.
The appellant disagrees, and states in an affidavit that it submitted cost proposals demanding payment for unforeseen or unintended changes, in addition
to being in response to change orders issued by the contracting officer. After
submitting these cost proposals, the appellant provided additional information at the VA’s request, while continuing to demand payment. Appellant’s
Brief in Response and Opposition to Respondent’s Motion to Dismiss, Exhibit
1. The appellant contends that the fact that many of the unilateral contract
modifications provided contract appeal rights served as a further indication
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that the Government considered the proposals to be claims and the unilateral
modifications to be final decisions.
Discussion
Under the CDA, all claims by a contractor against the Government relating
to a contract shall be in writing and shall be submitted to the contracting officer for a decision. 41 USC §605(a). The CDA does not define a claim. The
Federal Acquisition Regulation, however, defines a claim as “a written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of a sum certain, the adjustment or interpretation of
contract terms, or other relief arising or relating to the contract.” 48 CFR
2.101 (2009). The Court of Appeals for the Federal Circuit uses this definition
in determining whether a communication is a claim. M. Maropakis Carpentry, Inc. v. United States, No. 2009-5024, 2010 WL 2403337, at *3
(Fed.Cir. June 17, 2010) (citing Reflectone, Inc. v. Dalton, 60 F.3d 1572
(Fed.Cir. 1995) (en banc)).
Whether a communication is deemed a claim sufficient to invoke the Board’s
jurisdiction depends on an evaluation of the relevant contract language, the
facts of the case, and the regulations implementing the CDA. See Reflectone;
EBS/PPG Contracting v. Department of Justice, CBCA 1295, 09-2 BCA &
34,208; Guardian Environmental Services, Inc. v. Environmental Protection
Agency, CBCA 994, 08-2 BCA ¶33,938. The intent of the communication governs, and we must use a common sense analysis to determine whether the
contractor communicated its desire for a contracting officer’s decision. Id.
There is no requirement that a dispute exists at the time of submission of a
non-routine request for it to be considered a claim. Reflectone, 60 F.3d at
1576-78. Nor is there any “requirement in the Disputes Act that a claim
‘must be submitted in any particular form or use any particular wording.’ “
Contract Cleaning Maintenance, Inc. v. United States, 811 F.2d 586, 592
(Fed.Cir. 1987).
Appellant bears the burden of establishing subject matter jurisdiction by a
preponderance of the evidence. McNutt v. General Motors Acceptance Corp.,
298 U.S. 178, 189 (1936); Reynolds v. Army and Air Force Exchange Service,
846 F.2d 746, 748 (Fed.Cir. 1988); 801 Market Street Holdings, L.P. v. General Services Administration, CBCA 425, 08-1 BCA ¶33,853. In assessing
whether the Board has subject matter jurisdiction, the allegations of the
complaint should be construed favorably to the pleader. Scheuer v. Rhodes,
416 U.S. 232, 236 (1974); United Pacific Insurance Co. v. United States, 464
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F.3d 1325, 1327-28 (Fed.Cir. 2006); accord Hamlet v. United States, 873 F.2d
1414, 1416 (Fed.Cir. 1989); CACI, INC.-FEDERAL v. General Services Administration, GSBCA 15588, 02-1 BCA ¶31,712, at 156,635 (2001). When a
motion to dismiss for lack of subject matter jurisdiction challenges the truth
of alleged jurisdictional facts, the Board may consider relevant evidence beyond the pleadings to resolve disputed facts. Cedars-Sinai Medical Center v.
Watkins, 11 F.3d 1573, 1583-84 (Fed.Cir. 1993); B&M Cillessen Construction
Co. v. Department of Health and Human Services, CBCA 931, 08-1 BCA
¶33,753 (2007); Innovative (PBX) Telephone Services, Inc. v. Department of
Veterans Affairs, CBCA 12, et al., 07-2 BCA ¶33,685
The VA asserts that it has not received a specific demand seeking payment as
a matter of right. It argues that the submission of proposals required under
the contract cannot constitute claims as “[i]t is well settled that price proposals submitted by either party in the ordinary course of contract administration are not CDA claims,” citing Interstate Contractors, Inc., VABCA
3404, 92-1 BCA ¶24,480 (1991). Pointing to the change orders, the appellant
notes that the proposals contain the statement “[w]e hereby propose to furnish the materials and perform the labor necessary for the completion of ....”
Respondent’s Motion to Dismiss at 3 (referencing change order 14 of CBCA
1906). The respondent contends that the appellant did not assert payment as
a matter of right or demand a contracting officer’s decision in any of the proposals. As to the unilateral change orders in the form of settlements by determinations, the fact that the contracting officer included final appeal language did not create a final decision.
Contrary to the Government’s assessment, the request for a final decision
need not be affirmative, but can be implied by the text of the submission. See,
e.g., EBS/PPG Contracting, 09-2 BCA at 169,111. “As long as the basic requirements of the CDA are met, and the contracting officer knows the bases
for the claims and the final amounts sought, the ‘request for a final decision
may be inferred from the circumstances of the case.’ “ Id. (quoting Mega Construction Co. v. United States, 29 Fed. Cl. 396, 443 (1993)).
Based on a review of the limited record before us, we note that language expressly requesting a contracting officer’s final decision does not appear in any
of the cost proposals or correspondence between the parties relating to the
change orders and cost proposals. However, the Board also looks to whether
the appellant’s submissions and the circumstances surrounding them imply a
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desire for a contracting officer’s final decision.3 EBS/PPG Contracting, 09-2
BCA at 169,111; Guardian Environmental Services, Inc., 08-2 BCA at
167,946. Here, looking at the actions of the parties and the totality of the circumstances before us, we find that in each appeal, the contractor submitted a
cost proposal which contained “a written demand, seeking, as a matter of
right, the payment of money in a sum certain,” to the contracting officer, thus
fulfilling the requirements for the submission of a claim. See Reflectone, 60
F.3d at 1575. The circumstances and correspondence surrounding the submission of each cost proposal support this conclusion.
Decision
VA’s motion to dismiss these appeals for lack of jurisdiction is DENIED. The
presiding judge will convene a telephonic conference with counsel to discuss
further proceedings in these cases.
Jeri Kaylene Somers, Board Judge
We Concur:
Anthony S. Borwick, Board Judge
Patrician J. Sheridan, Board Judge
3
The VA cites Interstate Contractors, Inc. and Winding Specialists Co., ASBCA 37765, 89-2
BCA ¶21,737 in support of its contention that the cost proposals cannot be considered
claims because they do not expressly seek a final decision or assert a payment as a matter
of right. These cases, however, predate the guidance set forth in Reflectone. While it is true
that the issuance of a settlement by determination@ does not serve to convey jurisdiction
upon the Board in the absence of a valid claim or dispute, under Reflectone, the facts surrounding the issuance of a settlement by determination@ may give rise to a CDA claim,
entitling the claimant to appeal rights.
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S & M Management
v.
United States
82 Fed.Cl. 240
June 16, 2008.
Edmund C. Grainger, III, White Plains, NY, for plaintiff. Sean B. McNamara,
United States Department of Justice, Washington, DC, for defendant.
Opinion and Order
Sweeney, Judge.
Before the court in the above-captioned case is Defendant’s Motion for Partial
Summary Judgment. Defendant seeks a ruling from the court that the plaintiff contractor was required to address all of the disputed items on the postconstruction punchlist. Plaintiff responds that it completed all of the work
required by the contract and that all of its work was approved by government
representatives. The court concludes that plaintiff has failed to comply with
the contract with respect to most of the disputed items, but that genuine issues of material fact remain on two of the issues. Accordingly, for the reasons
set forth below, the court grants in part and denies in part defendant’s motion.
I. Background
A. Factual History1
Plaintiff S & M Management Incorporated is a Pennsylvania corporation located in Milford, Pennsylvania. Compl. ¶1. In September 1999, plaintiff entered into a construction contract with the United States Department of Veterans Affairs (“VA”) to replace the lateral steam lines at the Castle Point
Campus of the Veterans Affairs Hudson Valley Healthcare System. Id. ¶4;
App. 4, 353. The VA issued a Notice to Proceed on November 9, 1999, which,
among other things, notified plaintiff that Mr. Michael Shaughnessy had
been designated as the contracting officer’s technical representative pursuant
1
The facts are derived from the complaint (“Compl.”), the exhibits attached to the complaint
(“Compl.Ex.”), and the appendix submitted with defendant’s motion for partial summary
judgment (App.”).
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to the contract. App. 355-56. The VA included a copy of the delegation of authority with the Notice to Proceed. Id. at 356.
On October 17, 2001, after construction had concluded, the VA conducted a
final inspection. Id. at 357; Compl. Ex. A at 4. Subsequently, in a December
5, 2001 letter, the contracting officer notified plaintiff that “[t]he completed
construction was found to be in accordance with the contract drawings and
specifications except for the items listed on the enclosed punchlist.” App. 357.
The contracting officer noted that work on the punchlist items had to be completed within thirty days and that the VA would withhold a detainment fee
“from future progress payments to cover the cost of payrolls, daily logs and
punchlist items.” Id. Plaintiff responded to the contracting officer’s letter on
December 13, 2001. Id. at 361-63; Compl. Ex. A at 1, 4. After noting that it
had addressed most of the punchlist items prior to its receipt of the December
5, 2001 letter, plaintiff identified several issues implicated by the punchlist
and noted that it was willing to undertake the associated work as a change.
App. 361-63. The contracting officer responded to plaintiff’s letter on February 14, 2002. Id. at 373-75. After specifically addressing each of plaintiff’s
contentions and identifying the relevant contract provisions, the contracting
officer asserted that plaintiff still had not “accomplished the majority of the
items on the original punchlist,” and that if it did not address the items within the next fifteen days, the VA would complete the punchlist items, with
plaintiff being responsible for any costs over the allocated amount. Id. Plaintiff, in turn, responded to the contracting officer’s letter on February 21,
2002, addressing the VA’s positions point by point, and demanding payment
pursuant to the contracts payment provision. Compl. Ex. A. After reviewing
the contents of plaintiff’s letter, the VA’s Chief of Planning and Design, Joseph DiLossi, prepared a memorandum for the contracting officer — dated
February 25, 2002 — commenting on plaintiff’s assertions. App. 383-84.
After some time had passed, plaintiff sent the contracting officer a letter,
dated August 5, 2002, “asserting its rights to make a written demand” for
payment in full pursuant to the contract. Compl. Ex. B. The contracting officer responded to plaintiff’s letter on February 25, 2003, requesting that
plaintiff “submit a copy of its claim.”2 Compl. Ex. C. In a March 24, 2003 letter, plaintiff indicated that it had already submitted its claim and provided
the contracting officer with another copy of its February 21, 2002 letter.
2
The contracting officer’s letter was dated February 25, 2002, but it clearly was in response
to plaintiff’s August 5, 2002 letter. Consequently, the February 25, 2002 date is an error.
The court will assume that the correct date is February 25, 2003.
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Compl. Ex. D. The issues constituting plaintiff’s claim, as discussed in the
letters and memorandum, are described below.
1. Compensators in Manholes 18A, 18B, 18E, 25, and 25B, and Building #1
The punchlist identified missing compensators in five manholes-Manholes
18A, 18B, 18E, 25B, and 25-and in Building #1.3 App. 359-60. Plaintiff asserted in its December 13, 2001 letter that the “missing compensators ... were
not part of the contracted for work,” explaining that the contract required only the replacement of previously existing compensators, and not the installation of compensators where “there had been none in the past.” Id. at 361; accord id. at 363. According to plaintiff, its contract interpretation “was
confirmed with Michael Shaughnessey during the administration of the project.”4 Id. at 361; see also id. at 363 (averring that the work in Building #1
“had previously been inspected and approved”). In his February 14, 2002 response, the contracting officer noted that drawings showed compensators in
the five manholes, that plaintiff was required to “install all required appurtenances to make the system function,” that “the entire steam line that these
items [we]re attached to was designed to be replaced,” and, thus, plaintiff was
required to install the compensators. Id. at 373; accord id. at 374.
Plaintiff contested the contracting officer’s contract interpretation in its February 21, 2002 letter, asserting that it was unable to find any contract provision requiring it to “install all required appurtenances to make the system
function” and alleging that “[t]he responsibility to ensure the system functions [was] that of the design engineer....” Compl. Ex. A at 1; accord id. at 4.
In support of its position, plaintiff first referred to the “General Intention”
paragraph in the contract, which provided for “the removal of existing steam
lines, connections, hangers, etc., ... and the replacement with new steam
lines, connections, hangers, etc....” Id. at 2; accord id. at 4. Plaintiff also indicated that a legend on the drawings indicated: “Manhole configurations may
not be precise, and are intended to depict the general arrangement of piping,
valves, connections, etc. On-site inspection of each manhole is recommended
to determine locations & conditions of steam system elements.” Id. at 2; accord id. at 4. In light of these provisions, plaintiff interpreted the contract to
require only the replacement of existing compensators, a position with which,
according to plaintiff, Mr. Shaughnessy concurred. Id. at 2; accord id. at 4.
3
A compensator is a type of expansion joint. See App. 290-92, 361, 509.
4
It appears that the correct spelling of the technical representative’s last name is “Shaughnessy.” See App. 356, 530.
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In his February 25, 2002 memorandum, Mr. DiLossi reiterated the VA’s position that plaintiff was required to install the compensators. App. 383. Expanding on the contracting officer’s previous assertions to plaintiff, Mr.
DiLossi indicated that (1) “[t]he drawings show compensators in these locations”; (2) the contract “states that the contractor has to install all required
appurtenances”; (3) “[a] compensator is an appurtenance” as defined in the
contract; and (4) “the entire steam line that these items are attached to was
designated to be replaced.” Id. In addition, Mr. DiLossi disagreed with plaintiff’s assertion that plaintiff was not responsible for ensuring that the system
functioned, stating that the contract provided that plaintiff was “responsible
for all drawings and calculations from a professional engineer hired by”
plaintiff. Id. Finally, Mr. DiLossi questioned plaintiff’s assertion that Mr.
Shaughnessy approved its work, recommending that the contracting officer
obtain proof of such approval from plaintiff. Id.
2. Valve in Manhole 25
The punchlist also indicated that a valve was missing in Manhole 25. Id. at
359. Plaintiff contended that it was not required to replace the valve on the
main trunk line in Manhole 25, asserting that the contract did not provide for
any work on the main trunk line because the line had been replaced at an
earlier date. Id. at 362. Plaintiff also asserted that the connection that it
made to the existing valve was done “with the consent of the prior contracting
officer and his approval of the work performed in authorizing payment.” Id.
The contracting officer responded that plaintiff was required to install the
missing valve in Manhole 25 because the valve was on the drawings and it
was on the steam line that plaintiff replaced. Id. at 373. Plaintiff replied that
the contract merely required it to connect its work to the existing work in a
“neat and workmanlike manner” and that the plans showed an existing valve
in the existing main trunk line. Compl. Ex. A at 2. Plaintiff added that its
connection to the existing valve was inspected and approved by Mr. Shaughnessy. Id. In his memorandum, Mr. DiLossi reasserted the VA’s prior position
and then questioned why plaintiff “terminated[d] the piping outside the
manhole instead of inside the manhole,” a choice Mr. DiLossi characterized
as “not done in a workmanship like manner.” App. 383.
3. Pipe Insulation
Next, the punchlist indicated that plaintiff needed to “[i]nstall outdoor jacketing over all insulation” in the pipe trenches and manholes pursuant to the
contract specifications. Id. at 359. Plaintiff asserted that it did not need to
install “outdoor jacketing” over the pipe insulation in the trenches and manholes because the “aluminum-jacketed” insulation it used was in compliance
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with the contract specifications. Id. at 362. Specifically, plaintiff explained
that according to the manufacturer’s specifications, additional “PVC jacketing” was not required because the insulation was not exposed to the weather.
Id. at 362-63. According to plaintiff, Mr. Shaughnessy approved plaintiff’s
choice of insulation “when he approved payment for its installation and use.”
Id. at 363. The contracting officer responded that the specifications clearly
stated which locations were to be classified as indoor and outdoor, and that
both the trenches and the manholes were outdoor locations. Id. at 373-74.
Further, the contracting officer noted that the manufacturer’s description of
the insulation used by plaintiff did not indicate that the insulation was “aluminum-jacketed,” only that it had “[a]n optional factory applied jacket,”
which “is a white Kraft paper bonded to aluminum foil and reinforced with
glass fibers.” Id. at 373 (internal quotation marks omitted).
In reply, plaintiff countered that the contract did not define or classify locations as indoor or outdoor. Compl. Ex. A at 3. Thus, plaintiff maintained that
it complied with the contract’s insulation requirements by installing insulation in both locations with a jacket of “white Kraft paper bonded to aluminum
foil, fiberglass reinforced, [and] pressure sensitive adhesive closure.” Id. (internal quotation marks omitted). The VA’s position did not waver, however,
as Mr. DiLossi reiterated in his memorandum that the VA’s specifications
clearly described indoor and outdoor locations, and that both the trenches
and manholes were outdoor locations. App. 384.
4. Manholes 18B and 18E
Another punchlist requirement was the reinstallation of Manholes 18B and
18E because they were “not in ground.” Id. at 360. Plaintiff asserted it had
properly installed the manholes, explaining:
During the installation of the manholes, because of a joint between the two four-foot sections, with the approval of Michael
Shaughnessey, the manholes were set to an approved depth so
as to allow for the openings for the piping to be cut in the lower
half of each manhole, thereby avoiding potential leaking problems.
Id. at 362. Plaintiff further asserted that “[c]ut sheets of the manholes were
provided and approved on July 17, 2000,” and that Mr. Shaughnessy inspected and approved its work. Id. In his response letter, the contracting officer
disagreed that plaintiff had properly installed the manholes. Id. at 373.
Plaintiff maintained its position in its reply letter, asserting that the contract
“makes no reference to the depth of installation.” Compl. Ex. A at 3. Plaintiff
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noted that the drawings showed that “the piping and sleeves” were “approximately two (2) feet from the interior floor of the manholes,” and thus plaintiff
set the depth of manholes, with the “specific consent” of Mr. Shaughnessy, “to
allow for installation in that manner.” Id. Plaintiff further averred that “[t]he
manholes installed were specifically approved for use as a deviation from the
cast-in-place requirement” of the contract. Id. In his memorandum, Mr.
DiLossi rejected plaintiff’s explanation that the potential for leaks justified
plaintiff’s installation, indicating that the contract “clearly state[d] that there
should be a vapor barrier all around the manhole to ensure that there is no
leaking.” App. 383-84.
5. Damaged Compensator in Manhole 18C
The final disputed item included on the punchlist was the replacement of a
damaged compensator in Manhole 18C. Id. at 360. Plaintiff asserted that it
had already repaired the damaged compensator, noting that it had referred
the scratch on the compensator to the manufacturer and had repaired it pursuant to the manufacturer’s instructions.5 Id. at 363. The contracting officer
responded that plaintiff damaged the compensator during installation and
was therefore required to install a new, undamaged compensator. Id. at 374.
Plaintiff replied that its repair of the compensator pursuant to the manufacturer’s instructions meant that the compensator was no longer damaged and
need not be replaced. Compl. Ex. A at 3. Mr. DiLossi rejected this explanation
in his memorandum, alleging that plaintiff damaged the compensator and
thus did not install the compensator in a “workmanship like manner” as required by the contract. App. 384.
B. Procedural History
Because the VA did not render a decision on plaintiff’s claim, plaintiff filed a
complaint in this court on March 1, 2006, seeking the return of retained contract payments in an amount “in excess of $78,000.” Compl. ¶¶5, 8-9. At the
parties’ request, see Joint Prelim. Status Report 3, the court stayed discovery
pending a ruling on defendant’s instant motion, which seeks “an order that
conclusively establishes for the purpose of further proceedings in this case
that the contract required [plaintiff] to complete the disputed deficiency list
items.”6 Mot. 1. The case was transferred to the undersigned on October 23,
5
In its letter, plaintiff referred to another manhole, but a review of the punchlist indicates
that plaintiff was referring to Manhole 18C.
6
Defendant does not contest the court’s jurisdiction, and both parties contend that plaintiff’s complaint is timely because it was filed within six years of the contracting officer’s
deemed denial of plaintiff’s claim. Def.’s Mot. Partial Summ. J. (“Mot.”) 2; Pl.’s Opp’n Def.’s
Mot. Partial Summ. J. (“Opp’n”) 2. The court agrees that the complaint was timely filed.
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2007. After reviewing the parties’ briefs, the court requested supplemental
briefing concerning the scope of authority of Mr. Shaughnessy and other VA
personnel. Briefing concluded on March 5, 2008. The court deems oral argument unnecessary.
II. Discussion
A. Legal Standard for Summary Judgment
Defendant moves for summary judgment pursuant to Rule 56 of the Rules of
the United States Court of Federal Claims (“RCFC”). Summary judgment is
appropriate when there is no genuine issue of material fact and the moving
party is entitled to a judgment as a matter of law. RCFC 56(c); Celotex Corp.
v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A fact is
material if it “might affect the outcome of the suit under the governing law.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d
202 (1986). An issue is genuine if it “may reasonably be resolved in favor of
either party.” Id. at 250, 106 S.Ct. 2505.
The moving party bears the initial burden of demonstrating the absence of
any genuine issue of material fact. Celotex Corp., 477 U.S. at 323, 106 S.Ct.
2548. The moving party may discharge its burden by “pointing out ... that
there is an absence of evidence to support the nonmoving party’s case.” Id. at
325, 106 S.Ct. 2548. The moving party is not required to support its application with affidavits, but instead may rely solely on the pleadings, depositions,
answers to interrogatories, and admissions. Id. at 324, 106 S.Ct. 2548. The
nonmoving party then bears the burden of showing that there are genuine
issues of material fact for trial. Id. The nonmoving party must go beyond the
pleadings and support its opposition with affidavits or with depositions, answers to interrogatories, and admissions. Id.
The court must view the inferences to be drawn from the underlying facts in
the light most favorable to the nonmoving party. Matsushita Elec. Ind. Co. v.
Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
However, the parties have misstated the relevant limitations period. According to the
United States Court of Appeals for the Federal Circuit, “[o]nce a contractor elects to proceed under the Disputes Act, the six-year statute of limitations in 28 U.S.C. §2501 is not
applicable.” Pathman Constr. Co. v. United States, 817 F.2d 1573, 1580 (Fed.Cir. 1987).
Because plaintiff filed its complaint pursuant to the “deemed denial” provision of the Contract Disputes Act of 1978 (“CDA”), Pub.L. No. 95-563, 92 Stat. 2383 (codified as amended
at 41 USC §§601-613 (2000)), see Compl. ¶8, it has elected to proceed under the CDA and is
not bound by the six-year limitations period in 28 USC §2501.
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Entry of summary judgment is mandated, “after adequate time for discovery,” against a party who fails to establish “an element essential to that party’s case, and on which that party will bear the burden of proof at trial.” Celotex Corp., 477 U.S. at 322, 106 S.Ct. 2548.
B. Delegation of Authority
One theme running through plaintiff’s letters to the contracting officer and
its filings in this court is plaintiff’s insistence that any deviations from the
contract were approved, via inspection, payment, or otherwise, by Mr.
Shaughnessy or another VA representative other than the contracting officer.
Because plaintiff raises this defense for almost every purported deficiency,
the court finds it appropriate to address plaintiff’s contention at the outset.
“Contracting officers have authority to enter into, administer, or terminate
contracts and make related determinations and findings.” 48 CFR §1.602-1
(1998). Encompassed within such authority is the power to “execute contract
modifications on behalf of the Government.” Id. §43.102; accord Flexfab,
L.L.C. v. United States, 424 F.3d 1254, 1260-61 (Fed.Cir. 2005) (“[T]he contracting officer also has the additional authority to modify contracts.”). In the
instant case, the contracting officer’s authority to modify the contract was
expressly embodied in the contract’s “Changes” clause. See App. 78. Also encompassed within the contracting officer’s general authority is the power to
“delegate some of [his or her] authority to certain designated representatives,
who act on behalf of the government during contract administration.” Winter
v. Cath-dr/Balti Joint Venture, 497 F.3d 1339, 1344 (Fed.Cir. 2007). The contracting officer’s authority to delegate in the instant case was contained in at
least two contract provisions. First, the contract’s “Representatives of Contracting Officers” clause provided for the designation of a technical representative:
The contracting officer reserves the right to designate representatives to act for him/her in furnishing technical guidance
and advice or generally supervise the work to be performed under this contract. Such designation will be in writing and will
define the scope and limitation of the designee’s authority. A
copy of the designation shall be furnished to the contractor.
App. 98. The contract also permitted the designation of a resident engineer in
the “Government Supervision” clause:
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(a) The work will be under the direction of the VA contracting
officer, who may designate another VA employee to act as resident engineer at the construction site.
(b) Except as provided below, the resident engineer’s directions
will not conflict with or change any contract requirements.
(c) Within the limits of any specific authority delegated by the
contracting officer, the resident engineer may, by written direction, make changes in the work. The contractor shall be advised of the extent of such authority prior to execution of any
work under the contract.
Id. at 88.
To modify a contract, a contracting officer or his or her delegate must possess
actual authority to bind the government. Winter, 497 F.3d at 1344. “Such actual authority may be express or implied from the authority granted to that
agent.” Id. “Authority to bind the government may be implied when it is an
integral part of the duties assigned to the particular government employee.”
Id. at 1346. However, authority cannot be implied in contravention of express
contract language. Id. The contractor bears the responsibility of verifying an
individual’s “authority and the limits of that authority.” Harbert/Lummus
Agrifuels Projects v. United States, 142 F.3d 1429, 1432 (Fed.Cir. 1998). Indeed, “[a]nyone entering into an agreement with the Government takes the
risk of accurately ascertaining the authority of the agents who purport to act
for the Government, and this risk remains with the contractor even when the
Government agents themselves may have been unaware of the limitations on
their authority.” Trauma Serv. Group v. United States, 104 F.3d 1321, 1325
(Fed.Cir. 1997). If someone without actual authority to bind the government
purports to modify the contract, the government may still be bound by such
modification if the modification is ratified by an individual with (1) actual authority and (2) actual or constructive knowledge of the unauthorized act. Winter, 497 F.3d at 1347; Harbert/Lummus Agrifuels Projects, 142 F.3d at 1433.
As noted above, the contracting officer designated Mr. Shaughnessy as a
technical representative.7 The designation in this case indicated that Mr.
Shaughnessy was authorized to (1) monitor plaintiff’s performance to assure
7
Mr. Shaughnessy was not, as asserted by plaintiff in its supplemental brief, the contracting officer. See Pl.’s Supplemental Br. Opp’n Def.’s Mot. Partial Summ. J. (“Pl.’s Supp’l
Br.”) 2.
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compliance with the contract’s technical requirements; (2) review and approve reports, drawings, and other items requiring approval; (3) assure that
changes were not made until the contracting officer issued written authorization; (4) recommend changes to the contracting officer; (5) furnish technical
advice relating to approvals of subcontracts, overtime, travel, and other similar items; (6) visit the work site to monitor the contractor’s performance; and
(7) advise the contracting officer, at the conclusion of the contract, concerning
the technical acceptability of the goods and services provided by plaintiff and
the status of government-furnished property. App. 530-31. However, according to the designation, Mr. Shaughnessy was not authorized to (1) make
changes to the contract; (2) require extras; (3) extend the date for contract
completion; or (4) terminate the contract. Id. at 531.
Despite the clear delineation of Mr. Shaughnessy’s authority included in the
designation, plaintiff advances several reasons why the court should look beyond the designation for additional sources of Mr. Shaughnessy’s authority,
including that (1) the November 9, 1999 delegation memorandum could be
modified orally; (2) an individual without the express actual authority of the
United States can modify the terms of a government contract; (3) the inspection and approval of work performed by a contractor by the contracting officer’s technical representative or other agency personnel constitutes ratification of modifications to a government contract; and (4) progress payments
constitute the ratification of modifications to a government contract. See
Opp’n passim. In its supplemental brief, plaintiff relies principally on the decision of United States Court of Federal Claims (“Court of Federal Claims”) in
Miller Elevator Co. v. United States, 30 Fed.Cl. 662 (1994). See Pl.’s Supp’l
Br. passim.
Miller Elevator Co. concerned a contract for the maintenance of fourteen elevators in a federal office building in St. Louis, Missouri. 30 Fed.Cl. at 666.
One year into the three-year contract, the government informed the plaintiff
contractor that it intended to renovate the building. Id. As a result of mobilization, demolition, and renovation activities, plaintiff performed maintenance
and major repairs that were outside the scope of the contract. Id. at 666-67,
671-73. Plaintiff performed this extra work with the oral consent of the building’s Assistant Field Officer Manager, who, as the delegate of the contracting
officer’s representative, had been delegated all of the authority of the contracting officer except “for the specific contract exclusion for modifications....”
Id. at 691-92. Plaintiff sought an equitable adjustment for the additional
costs it incurred in performing the extra work, but the contracting officer refused to make payment. Id. at 673. Before the Court of Federal Claims, de-
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fendant contended that plaintiff had neither “secure[d] prior written approval
for the additional work in question,” Id. at 685, nor “secured adequate authorization from the contracting officer for the extra repairs and additional
maintenance,” Id. at 690.
Initially, the court concluded that because the Assistant Field Office Manager
“had repeatedly granted oral authorization for extra work under the instant
contract as well as prior elevator maintenance contracts,” the government
waived the requirement for written authorization and was therefore estopped
from “escaping liability for the constructive changes to the ... contract.” Id. at
689-90. The next issue before the court was whether the Assistant Field Office Manager, “despite the specific contract exclusion, maintained the authority to approve additional work outside of the scope of the contract.” Id. at 692.
The court first noted that the Assistant Field Office Manager had contracting
authority to obligate the government for sums less than $2,000. Id. at 692-93.
The court then emphasized that the Assistant Field Office Manager
obviously understood the unique circumstances faced by [plaintiff] in maintaining the elevator systems at the ... building and
strived to cooperate with [plaintiff] in contending with the difficult building conditions. In the performance of these duties,
however, [the Assistant Field Office Manager] gave reason for
the belief that he maintained authority to approve modifications to the terms of the ... contract.
Id. at 693; accord Id. at 695 (remarking on “the unique circumstances of this
case”). Thus, the court concluded that the Assistant Field Office Manager, as
“a Government representative with contracting authority ..., through implied
authority, realize[d] the authority to modify the terms of [the] contract.” Id.
at 694 (citing Branch Banking & Trust Co. v. United States, 120 Ct.Cl. 72, 98
F.Supp. 757, 766 (1951)); see also Id. (concluding that the Assistant Field Office Manager “performed the functions of an informally (impliedly) designated
contracting officer”). In short, the court held that plaintiff “present[ed] persuasive evidence of implied authority for all the work required by the [government].” Id. at 692.
The court finds an application of Miller Elevator Co. to the instant case to be
problematic for at least three reasons. First, the cases are factually distinct.
In Miller Elevator Co., the government requested that plaintiff perform work
beyond the scope of its contract. However, here, the government is merely
seeking plaintiff’s compliance with the existing terms of the contract. Second,
unlike in the present case, the contract at issue in Miller Elevator Co. was
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but one in a series of contracts between plaintiff and the government for elevator maintenance. Thus, the waiver and estoppel arguments applied by the
court in Miller Elevator Co. have no place in the instant case where there is
no similar course of dealing. Third, the bases on which the court found implied authority in Miller Elevator Co. are not present in the instant case.
While the Assistant Field Office Manager in Miller Elevator Co. had contracting authority, there is no indication here that Mr. Shaughnessy or any other
VA representative, other than the contracting officer, had contracting authority. Moreover, the court’s finding of implied authority in Miller Elevator Co.
was dependent on the “unique circumstances” presented by performing elevator maintenance during unexpected mobilization, demolition, and renovation
activities, a situation not present here. Thus, the court finds Miller Elevator
Co. inapposite.
Plaintiff’s authority-related contentions lack merit for other reasons. First,
plaintiff’s argument that the terms of Mr. Shaughnessy’s November 9, 1999
delegation memorandum could be modified orally, Opp’n 18, is groundless.
The contract’s “Representatives of Contracting Officers” clause clearly required any delegations of authority to be in writing. In addition, plaintiff provides no legal support for the proposition that such delegations can be modified orally. Further, plaintiff provides no evidence that the contracting officer
orally modified the delegation memorandum. Accordingly, the court concludes
that oral modification of delegation memoranda was not permitted by the
contract.
Plaintiff next argues that because Mr. Shaughnessy or another VA representative other than the contracting officer “inspected,” “approved,” “accepted,” or “repeatedly accepted” its work, Id. at 14-18, “there was clearly an understanding between Plaintiff and Shaughnessy and/or any other
representative that accepted the work performed, that such representative
was authorized to accept this work,” Id. at 18. In other words, plaintiff argues
that Mr. Shaughnessy and other VA representatives had implied authority to
bind the government. See Pl.’s Supp’l Br. 5-6 (arguing that “the defendant’s
representatives had implied authority to approve all of the work performed
by the plaintiff including any work deemed to be outside the contract”). However, plaintiff’s invocation of implied authority is defeated by the express
terms of the contract. See Winter, 497 F.3d at 1346. The contract expressly
limited the authority to make changes to the contract to the contracting officer. App. 78. Thus, Mr. Shaughnessy or other VA representatives, to the extent that they approved or accepted work that amounted to a contract modification, lacked the implied authority to do so. Furthermore, to the extent that
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plaintiff argues that the inspection and approval of its work by Mr. Shaughnessy or another VA representative other than the contracting officer
amounts to the VA’s ratification of that work, see Pl.’s Supp’l Br. 6-7, plaintiff’s argument must fail because plaintiff has not shown that Mr. Shaughnessy or another VA representative had any authority-actual or implied-to
bind the government. See Winter, 497 F.3d at 1347; Harbert/Lummus
Agrifuels Projects, 142 F.3d at 1433. Moreover, because the contract explicitly
stated that government inspections did not “[c]onstitute or imply acceptance,”
App. 79, that government acceptance was not conclusive in the event that the
contractor breached a warranty or guarantee, Id. at 80, and that plaintiff
warranted that its work “conformed to the contract requirements,” Id., any
approvals in contravention of the contract requirements were invalid.
Plaintiff lastly argues that the VA’s progress payments constituted ratification of its work. Opp’n 18. However, the contract’s “Payments Under FixedPrice Construction Contracts” clause prohibited progress payments from
“[r]elieving the Contractor from the sole responsibility for all material and
work upon which payments have been made or the restoration of any damaged work” or serving as a waiver of “the right of the Government to require
the fulfillment of all of the terms of the contract.” App. 57-58. Thus, plaintiff’s
argument, which runs contrary to the express terms of the contract, is unavailing.
As one final comment, to the extent that plaintiff argues that any other VA
representative other than the contracting officer authorized modifications to
the contract, plaintiff’s argument must fail. Plaintiff has not provided any
evidence that the contracting officer delegated any authority, in writing, to
anyone other than Mr. Shaughnessy. With that said, the court proceeds to
the individual issues raised by plaintiff.
C. Contract Interpretation
In the instant motion, defendant requests that the court determine whether
the issues raised by plaintiff are governed by existing *250 contract provisions, labeling the court’s inquiry as “a matter of contract interpretation.”
Mot. 1. “Contract interpretation is a question of law generally amenable to
summary judgment.” Varilease Tech. Group, Inc. v. United States, 289 F.3d
795, 798 (Fed.Cir. 2002). In interpreting a contract, the court begins by examining its language. TEG-Paradigm Envtl., Inc. v. United States, 465 F.3d
1329, 1338 (Fed.Cir. 2006). The court considers the contract as a whole and
interprets it “so as to harmonize and give reasonable meaning to all of its
parts.” NVT Techs., Inc. v. United States, 370 F.3d 1153, 1159 (Fed.Cir.
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2004). “An interpretation that gives meaning to all parts of the contract is to
be preferred over one that leaves a portion of the contract useless, inexplicable, void, or superfluous.” Id. “When the contract’s language is unambiguous
it must be given its ‘plain and ordinary’ meaning and the court may not look
to extrinsic evidence to interpret its provisions.” TEG-Paradigm Envtl., Inc.,
465 F.3d at 1338.
However, the contract contains an ambiguity when it “is susceptible to more
than one reasonable interpretation,” and those interpretations “fall within a
‘zone of reasonableness.’ “ Metric Constructors, Inc. v. NASA, 169 F.3d 747,
751 (Fed.Cir. 1999) (quoting WPC Enters., Inc. v. United States, 163 Ct.Cl. 1,
323 F.2d 874, 876 (1963)). If the contract contains an ambiguity, the court
must determine whether that ambiguity is patent. Id. An ambiguity is patent
if it is so “obvious, gross, [or] glaring” that it creates a duty to inquire. NVT
Techs., Inc., 370 F.3d at 1162 (quoting H & M Moving, Inc. v. United States,
204 Ct.Cl. 696, 499 F.2d 660, 671 (1974)). Thus, if a party fails to inquire
about the ambiguous provision, that party’s “interpretation will fail.” Id. If
the ambiguity is not patent and a party shows that it relied upon the ambiguity, then the court applies the general rule that the ambiguity will be construed against the drafter of the contract. Id.
1. Compensators in Manholes 18A, 18B, 18E, 25, and 25B
Defendant argues that the contract required plaintiff to install all of the compensators depicted on the contract drawings. Mot. 14-15. Specifically, defendant contends that the contract specifications explicitly require the installation of “expansion devices.” Id. at 14 (quoting App. 282). However, because
the contract specifications did not detail the specific number or location of required compensators, defendant asserts that plaintiff was required to conform to the contract drawings, which did depict compensators in all five
manholes. Id. at 14-15 (citing App. 505-06 (contract drawings), 509 (explanation of the contract drawings)). In support of its view that the contract drawings control, defendant relies upon the contract’s “like effect” clause, Id.,
which provides: “Anything mentioned in the specifications and not shown on
the drawings, or shown on the drawings and not mentioned in the specifications, shall be of like effect as if shown or mentioned in both. In case of difference between drawings and specifications, the specifications shall govern,”
App. 76.
Plaintiff disagrees with defendant’s interpretation of the contract. First, citing the contract’s “General Intention” provision, plaintiff argues that “the
Contract required only the removal and replacement of steam lines and con-
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nectors-not the installation of new compensators.” Opp’n 12 (citing App. 100).
Plaintiff further argues that certain disclaimer language on the contract
drawings demonstrates the drawings’ imprecision. Id. at 13 (citing App. 50506). Thus, according to plaintiff, the contract drawings are in conflict with the
contract specifications. Id.; cf. Id. at 14 (“In this case, there is no patent discrepancy [between the contract specifications and the contract drawings],
since the Specifications clearly required only the removal and replacement of
steam lines and connectors as opposed to the installation of new compensators.”). Because of this perceived conflict, plaintiff relies on the last sentence
of the “like effect” clause, which gives the contract specifications precedence
when the contract specifications and contract drawings are in conflict. Id. at
13-14. Thus, because plaintiff does not read the contract specifications to require the installation of compensators, it argues that it was not required to
install the compensators. Id. at 14.
Plaintiff’s interpretation of the contract lacks merit on several fronts. As a
preliminary matter, the contract specifications clearly contemplated the installation of compensators. The contract’s “Scope of Work” section indicated
that once plaintiff removed all of the old “steam lines, hangers, connections
and appurtenances,” it was to then install, among other things, new piping,
“hangers, connections, [and] other required appurtenances....” App. 99; accord
Id. at 100. These installation requirements were reiterated in the contract’s
“General Intention” provision: “The Contractor shall completely prepare the
site for building operations, ... including ... the removal of existing steam
lines, connections, hangers, etc., ... and the replacement with new steam
lines, connections, hangers, etc., as depicted on the Contract drawings and
described in the Contract specifications.” Id. at 100. Although neither of these
contract provisions refer specifically to “compensators” or “expansion joints,”
the use of such equipment falls within the general category of “appurtenances.” Because the contract does not expressly define “appurtenances” and
because the parties did not indicate that “appurtenance” carries a special
meaning in the context of steam pipe system removal and installation, the
court refers to the word’s ordinary meaning: “[s]omething added to a more
important thing; an appendage.” The American Heritage College Dictionary
70 (4th ed.2004). In addition to the pipes, hangers, and connections mentioned in the “Scope of Work” section and “General Intention” provision, the
contract describes a number of steam pipe system components, such as expansion joints and compensators, App. 290-92, ball joints, Id. at 292, valves,
Id. at 293-95, steam traps, Id. at 294, strainers, Id. at 294-95, drip pan elbows, Id. at 295, pressure gauges, Id., thermometers, Id. at 296, pipe anchors, Id. at 298, and insulation, Id. at 298-99. All of these components, being
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added or appended to the steam pipe system, are “appurtenances.” Thus, the
plain language of the contract contemplated the installation of compensators.
Furthermore, the contract specifications and contract drawings unequivocally
required plaintiff to install compensators in the five manholes. First, reading
the “General Intention” provision together with the “Scope of Work” section,
the court finds that plaintiff’s definition of “replace” is unduly restrictive. The
contract’s “General Intention” provision required plaintiff to remove “existing
steam lines, connections, hangers, etc.” and replace them “with new steam
lines, connections, hangers, etc., as depicted on the Contract drawings and
described in the Contract specifications.” Id. at 100. And, the “Scope of Work”
section required plaintiff to remove the old “steam lines, hangers, connections
and appurtenances” and install new piping, “hangers, connections, [and] other required appurtenances....” Id. at 99. Thus, plaintiff was required to remove the old steam pipes, connections, hangers, and appurtenances, and then
“replace” or “install” new steam pipes, connections, hangers, and-as indicated
by the use of the phrase “other required appurtenances” and the abbreviation
“etc.”-anything else that was required by the contract drawings and the contract specifications. Accordingly, the use of “replace” in one contract provision
does not mean, as plaintiff contends, an exchange of identical objects ( e.g.,
one pipe out, one pipe in), but instead refers to the exchange of one object for
one or more substitute objects. See, e.g., The American Heritage College Dictionary, supra, at 1179 (defining “replace” as “[t]o take or fill the place of” or
“[t]o be or provide a substitute for”). In other words, reading the contract as a
whole, “replace” here is akin to “install.”
Additionally, plaintiff’s interpretation of the disclaimer language on the contract drawings is belied by its plain terms. The disclaimer provides: “Manhole
configurations may not be precise, and are intended to depict the general arrangement of piping, valves, connections, etc. On-site inspection of each
manhole is recommended to determine locations & conditions of steam system elements.” App. 505-06. This disclaimer clearly alerts the contractor to
possible variations in the configuration, arrangement, location, and condition
of the steam system elements. It does not, however, indicate that any of those
steam system elements might be incorrectly included on the contract drawings.
Thus, there is no conflict between the contract drawings and the contract
specifications. The contract specifications required the installation of appurtenances depicted on the contract drawings, and the contract drawings contained depictions of compensators in the five manholes. Applying the “like
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effect” clause, the court concludes that the contract, plainly and clearly, required plaintiff to install compensators in the five manholes.
Despite the plain language of the contract, plaintiff raises an additional argument to support its failure to install compensators in the five manholes:
plaintiff contends that “Mr. Shaughnessy agreed with [its] interpretation that
no compensators were required where none existed.” Opp’n 14. However, as
noted above, the contract prohibits Mr. Shaughnessy from deviating from the
contract requirements. In sum, the court finds that plaintiff has not raised a
genuine issue of material fact concerning the contract’s requirement of the
installation of compensators in Manholes 18A, 18B, 18E, 25, and 25B.
2. Compensator in Building #1
Defendant concedes that a compensator is not depicted in the Building #1
drawings. Mot. 15. However, citing the contract’s definition of “system” and
the declaration of Jud F. Lancto, a Supervisory General Engineer with the
VA,8 defendant contends:
[A] compensator in this location was required to complete the
pipe system properly, a contract requirement. The compensator
was required because a sufficient length of pipe had traversed
the trench running to Building 1 to require a compensator.
[Plaintiff]’s failure to install a compensator in this location
caused the pipe to pull at its anchor and nearly rupture, which
could allow steam to escape and create a safety hazard.
Id. (citations omitted). Even though defendant fails to cite any contract provision to support its statement that “[t]he compensator was required because a
sufficient length of pipe had traversed the trench running to Building 1 to
require a compensator,” plaintiff does not directly contest it. Instead, plaintiff
again relies on the language of the contract’s “General Intention” provision,
the disclaimer language on the contract drawings, the purported applicability
of the second sentence of the contract’s “like effect” clause, and the opinion of
Mr. Shaughnessy for the proposition that the contract did not require the installation of compensators where none previously existed. Opp’n 12-14. The
8
Mr. Lancto’s declaration is unclear as to the precise position he holds. Mr. Lancto states: “I
am the Chief, Planning and Design Section (Projects Section), for the New York/New Jersey VISN 3, Hudson Valley Health Care System, Department of Veterans Affairs, in
Montrose, New York.” Decl. Jud F. Lancto (“Lancto Decl.”) ¶1. It is unclear to the court
whether Mr. Lancto is the Chief of the Planning and Design Section for the entire New
York/New Jersey Veterans Integrated Service Network or for just the Hudson Valley
Health Care System.
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court again rejects these arguments. Thus, because plaintiff has not refuted
defendant’s contention that the contract specifications required the installation of a compensator in Building #1, the court concludes that plaintiff has
not raised a genuine issue of material fact.
3. Valve in Manhole 25
Defendant next argues that the contract required plaintiff to install a valve
in Manhole 25 as depicted on the contract drawings. Mot. 18-19. A main
trunk line ran through Manhole 25, to which two steam lines were attached
with a valve. Id. at 7; Opp’n 5; App. 505. The contract required plaintiff to
replace the two steam lines. See App. 505 (containing the contract drawing
depicting the new pipes). There is no dispute that plaintiff, instead of running the new steam lines into Manhole 25 and replacing the connecting valve,
terminated the new steam lines, and connected the new steam lines to the
existing steam lines, outside of Manhole 25. Mot. 7, 19; Opp’n 5-6, 15. Defendant contends that plaintiff’s failure to run new steam lines into Manhole
25 was contrary to the contract drawings, that plaintiff did not connect the
new steam lines to the existing work in the “workmanlike manner” required
by the contract specifications, and that the contract specifications required
the replacement of the valve because it was connected to the new steam lines.
Mot. 19.
Plaintiff defends its interpretation of the work required by the contract, arguing: “The main trunk line was previously replaced, and neither the Specifications[ ] nor the drawings require any replacement work on the main trunk
line. Plaintiff was simply required to hook into the existing equipment on the
main trunk line and was not required to perform any replacement work.”
Opp’n 15. Plaintiff’s reading of the contract drawings is untenable.
The contract drawings clearly depict new steam lines entering Manhole 25,
see App. 505, and plaintiff does not dispute that it was required to replace the
steam lines. The contract drawings also clearly depict a valve on one of the
new steam lines. See Id. Plaintiff cites no contract provision that prohibited it
from doing any work in Manhole 25. Thus, plaintiff was required to install
the steam lines and valve in Manhole 25.
Despite the clarity of the contract drawings, plaintiff contends that “Mr.
Shaughnessy and/or Mr. Rod[ ] agreed with Plaintiff’s interpretation of the
Contract, as such representative inspected and approved the work per-
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formed.”9 Opp’n 15. The court reiterates that the contract prohibits Mr.
Shaughnessy from deviating from the contract requirements. Further, plaintiff has not provided any evidence that Mr. Rod had any authority to modify
the contract. Specifically, plaintiff has not identified the position held by Mr.
Rod or provided evidence that the contracting officer delegated any authority
to Mr. Rod. Thus, the court must conclude that Mr. Rod lacked the authority
to modify the contract.
In sum, plaintiff has failed to raise a genuine issue of material fact concerning the installation of the valve in Manhole 25.
4. Pipe Insulation
Defendant contends next that plaintiff did not install the correct type of insulation on the pipes located in the trenches and the manholes. Mot. 21. The
contract contains several provisions concerning insulation, two of which are
relevant here. First, in the “Insulation” subsection of the contract’s “Distribution and Transmission Systems (Steam)” section, the contract provided:
B. Steam, condensate, and drip return piping ... shall be insulated as follows:
1. Piping in concrete trenches with removable covers shall be
insulated with calcium silicate pipe insulation, glass cloth or
aluminum jacket.
2. Piping in concrete manholes shall be insulated with calcium
silicate pipe insulation, glass cloth or aluminum jacket.
3. Exposed piping in walk-through tunnels shall be insulated
with fiberglass insulation, all purpose jacket.
App. 304. Second, in the “Insulation Materials” subsection of the contract’s
“Distribution and Transmission Systems (Steam)” section, the contract described the different types of required insulation jackets:
E. Jackets for Insulation Exposed to Weather: Minimum 0.016inch thick aluminum with locking longitudinal joints....
9
Plaintiff asserts that Douglas Rod is a representative of the VA. Opp’n 3, 6, 15. Defendant
refers to Mr. Rod as an “employee” of the VA. Def.’s Reply Pl.’s Opp’n Def.’s Mot. Partial
Summ. J. (“Reply”) 8. There is no evidence of Mr. Rod’s official position in the record before
the court.
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F. All-Purpose Jackets: Fed. Spec. HH-B-100, Type 1. White
kraft bonded to aluminum foil, fiberglass reinforced, pressure
sensitive adhesive closure.
G. Glass Cloth Jacket: Minimum 7.8 ounces per square yard,
300 PSI bursting strength, weathertight for outside service.
Id. at 299. Defendant contends that plaintiff “installed an ‘all-purpose jacket’
in the trenches and manholes, [and] not ‘calcium silicate pipe insulation’ with
a ‘glass cloth or aluminum jacket’ as required by the specifications.” Mot. 21.
Defendant further asserts that the insulation plaintiff used was “inappropriate for trenches and manholes, which are potentially exposed to the elements.” Id.
Plaintiff takes issue with defendant’s distinction between insulation suitable
for outdoor use ( i.e., for use in locations that may be exposed to the elements)
and insulation suitable for indoor use. Opp’n 17. Although inartfully argued,
plaintiff contends that the *254 contract does not explicitly require that the
insulation used in manholes and trenches be covered by the jackets described
under the heading “Jackets for Insulation Exposed to Weather.” Id. Instead,
plaintiff asserts that the jacketing it used-”white Kraft paper bonded to aluminum foil, fiberglass reinforce[d], pressure sensitive adhesive closure”-met
the contract requirements for use in manholes and trenches. Id. The court
disagrees.
The contract, in the above-quoted “Insulation” subsection, clearly distinguishes between “glass cloth or aluminum jacket[s],” which are to be used in
manholes and trenches, and “all purpose jackets,” which are to be used in
walk-through tunnels. App. 304. Similarly, the “Insulation Materials” subsection of contract defines three different types of insulation jackets: “Jackets for
Insulation Exposed to Weather,” “All-Purpose Jackets,” and “Glass Cloth
Jacket[s].” By process of elimination, it is clear that the “aluminum jacket[s]”
approved for use in manholes and trenches fall within the “Jackets for Insulation Exposed to Weather” category.
Thus, the sole question facing the court is whether the insulation used by
plaintiff in the trenches and manholes can be characterized as “calcium silicate pipe insulation, glass cloth or aluminum jacket.” Because the insulation
described by plaintiff clearly belongs in the contract’s “All-Purpose Jackets”
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category,10 see Id. at 299 (“All-Purpose Jackets: White kraft bonded to aluminum foil, fiberglass reinforced, pressure sensitive adhesive closure.”), the
court concludes that it cannot be so characterized.
Finally, plaintiff again argues that Mr. Shaughnessy’s approval of the insulation is sufficient to override these clear contract provisions. Opp’n 17. And,
once again, the court must reject plaintiff’s argument because Mr. Shaughnessy lacked the authority to modify the contract. Thus, in sum, plaintiff has
not raised a genuine issue of material fact regarding its use of insulation.
5. Manholes 18B and 18E
Next, defendant contends that plaintiff improperly installed two new manholes: Manhole 18B and Manhole 18E. Mot. 19. Defendant first asserts that
plaintiff failed to install a waterproof membrane around the manholes as required by the contract Id. at 20 (citing App. 288). Second, defendant argues
that plaintiff should have, in the absence of an express contract requirement,
followed the common trade practice of installing the manholes with the tops
of the manholes flush with the ground. Id. (citing Lancto Decl. ¶14). Defendant contends that reference to trade practice is appropriate when the contract
might otherwise be read as ambiguous. Id. (citing Metric Constructors, Inc.,
169 F.3d at 752). Finally, defendant argues that even if an ambiguity exists
in the contract, the contract’s silence as to the depth to which the manholes
were to be installed amounts to a patent ambiguity about which plaintiff was
required to inquire. Id. (citing Beacon Constr. Co. of Mass. v. United States,
161 Ct.Cl. 1, 314 F.2d 501, 502-04 (1963)).
Responding to defendant’s first argument, plaintiff contends that the cut
sheets, which were approved by Mr. Rod, depicted manholes that would be
installed at a specified depth so as to avoid leaking problems, therefore foreclosing the need to use “the waterproof membranes that Defendant argues
were required....” Opp’n 16. Further, plaintiff asserts that “the manholes
were ultimately inspected and approved by Mr. Shaughnessy” pursuant to
his delegated authority to review and approve “progress reports, technical
reports, drawings and other items required for approval.” Id.
10
Plaintiff has apparently abandoned the argument it raised before the contracting officer
that the insulation it used was properly characterized as aluminum-jacketed. See App. 362
(indicating that the insulation manufacturer’s specifications described the insulation as
“aluminum-jacketed”). But see Id. at 373 (containing the contracting officer’s rebuttal that
the insulation manufacturer described the insulation jacket not as “aluminum-jacketed,”
but as “[a]n optional factory applied jacket [that] is a white Kraft paper bonded to aluminum foil and reinforced with glass fibers”).
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First, the contract unequivocally requires plaintiff to use a waterproof membrane. See App. 288 (“Place waterproof membrane between*255 mud slab and
bottom concrete slab, and continue up sides to top of side walls.”); Id. at 33538 (containing the contract section on “Modified Bituminous Sheet Waterproofing”). There are no listed exceptions based upon the depth of manhole
installation. Furthermore, as already mentioned, plaintiff has not provided
any evidence that Mr. Rod had any authority to modify the contract, and Mr.
Shaughnessy, while he had certain approval authority, could not approve
work that would amount to a contract modification. Accordingly, plaintiff has
not raised a genuine issue of material fact concerning the installation of a
waterproof membrane.
In response to defendant’s second argument, plaintiff contends that because
the contract was silent as to the depth at which the manholes should be installed, and because it denies that it installed the manholes at an improper
depth, it has raised a genuine issue of material fact. Opp’n 16. Specifically,
plaintiff labels defendant’s argument that “trade practice renders the contract unambiguous” as “patently absurd.” Id. (quoting Mot. 20). Furthermore,
plaintiff reiterates that Mr. Rod approved the cut sheets and that Mr.
Shaughnessy approved the manhole installation. Id. at 16-17.
The court first addresses its responsibilities when faced with a missing contract term. “When the matter in dispute is not expressly provided for in the
contract, it is necessary to determine whether the contractor’s interpretation
of the contract requirements was reasonable.” C. Sanchez & Son, Inc. v. United States, 6 F.3d 1539, 1543 (Fed.Cir. 1993); see also Id. at 1544 (noting that
the court’s sole inquiry is the contractor’s interpretation of the contract).
Here, because the contract was silent on the issue, plaintiff interpreted the
contract to allow it to install the manholes at any appropriate depth. Opp’n
16. In support of its interpretation, plaintiff provides: (1) the sworn statement
of its president, Mr. Salvatore Sciascia, that “[t]he manholes were indeed installed properly,” Decl. Salvatore Sciascia (“Sciascia Decl.”) ¶9; (2) evidence of
Mr. Rod’s approval of the cut sheets, Sciascia Decl. Ex. A; and (3) allegations
that Mr. Shaughnessy approved the installation of the manholes, Opp’n 17.
Defendant counters plaintiff’s interpretation of the contract via the sworn
statement of Mr. Lancto that “[i]t is typical trade practice to install manholes
to be flush with the ground.” Lancto Decl. ¶14. Neither party provided any
further evidence regarding the existence or scope of a trade practice for the
installation of manholes.
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The court gives no weight to the approvals of Mr. Rod and Mr. Shaughnessy,
for reasons stated in prior sections of this opinion. Further, the court is not
prepared to accept defendant’s evidence of trade practice absent further development of the record. Thus, left with examining the plain language of the
contract, which does not indicate the depth at which plaintiff was to install
the manholes, the court cannot say that plaintiff’s interpretation of the contract is unreasonable.11 Accordingly, plaintiff has raised a genuine issue of
material fact with respect to the installation depth of Manholes 18B and 18E.
6. Damaged Compensator in Manhole 18C
Finally, defendant contends that plaintiff was required, by the terms of the
contract, to replace the compensator in Manhole 18C that was damaged during installation. Mot. 17. Specifically, defendant asserts that plaintiff “gouged
the compensator when grinding pipe in a manhole, compromising the compensator’s structural integrity.” Id. at 18 (citing Lancto Decl. ¶11). Defendant
also contends that despite plaintiff’s claim “that it repaired the compensator
‘in accordance with the manufacturer’s recommendation,’ “ Id. (quoting App.
380), plaintiff “did not repair the compensator, which was permanently damaged and required replacing,” Id. (citing Lancto Decl. ¶11). According*256 to
defendant, plaintiff’s failure to replace the compensator violated the following
contract provisions: (1) the “Warranty of Construction” clause, in which “the
Contractor warrants ... that work performed under this contract ... is free of
any defect in equipment, material, or design furnished, or workmanship performed” and that “[t]he contractor shall remedy at the Contractor’s expense ...
any defect,” Id. at 80; (2) the “Guaranty” clause, in which “[t]he contractor ...
guarantees that when installed all materials and equipment will be free from
defects and will remain so for a period of at least one year from the date of
acceptance,” Id. at 87; and (3) the “Restoration” clause, which requires the
contractor “to deliver the work complete and undamaged,” Id. at 111.
Plaintiff denies defendant’s allegation that it damaged the compensator in
Manhole 18C “in its entirety.” Opp’n 14 (citing Sciascia Decl. ¶4). Accordingly,
plaintiff contends that this issue is not ripe for summary judgment. Id. De11
Defendant’s suggestion that the contract’s silence as to the installation depth of the manholes creates a patent ambiguity about which plaintiff was required to inquire is unavailing. In the case cited by defendant, Beacon Construction Co. of Massachusetts, the parties’
dispute concerned whether the contract required plaintiff to install weather-stripping
around certain windows. 314 F.2d at 502-03. However, the contract was not silent as to
whether weatherstripping was required, but instead contained language that could have
been interpreted either way. Id. Thus, Beacon Construction Co. of Massachusetts is distinguishable from the instant case.
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fendant responds that “Mr. Sciascia’s conclusory statement does not create a
genuine issue of fact,” noting that it “offered a detailed statement from supervisory VA engineer Jud Lancto that [plaintiff] gouged the compensator
when it was grinding pipe in the manhole.” Reply 5. Defendant also noted
that its motion cited plaintiff’s explanation that it repaired the compensator
per the manufacturer’s recommendation. Id. Furthermore, defendant raised
the contents of another letter from plaintiff, in which plaintiff asserted that it
had referred the scratch on the compensator to the manufacturer and had
repaired it pursuant to the manufacturer’s instructions. Id.
The court finds that the record supports the findings that the compensator in
Manhole 18C sustained a scratch or a gouge and that plaintiff attempted to
repair the scratch or gouge pursuant to the manufacturer’s recommendations.
However, the contract language cited by defendant does not expressly prevent plaintiff from using a “repaired” product. The court is not prepared to
determine, based on the record presently before it, whether the repairs performed by plaintiff were sufficient to bring the compensator into contract
compliance. Although Mr. Sciascia’s sworn statement lacks specificity, the
fact that plaintiff contends that it adequately repaired the compensator to
bring it within contract compliance is sufficient to defeat summary judgment.
Accordingly, the court finds that there is a genuine issue of material fact concerning whether the repairs attempted by plaintiff cured any defect that
would violate the “Warranty of Construction,” “Guaranty,” or “Restoration”
clauses.
III. Conclusion
The contract required plaintiff to install (1) compensators in Manholes 18A,
18B, 18E, 25, and 25B, and Building #1; (2) a valve in Manhole 25; (3) waterproof membranes around Manholes 18B and 18E; and glass cloth or aluminum-jacketed insulation in the manholes and trenches. However, plaintiff
has raised genuine issues of material fact concerning the installation depth of
Manholes 18B and 18E and the sufficiency of the repairs done to the compensator in Manhole 18C. Thus, the court GRANTS IN PART and DENIES IN
PART defendant’s motion for summary judgment. By no later than Friday,
July 11, 2008, the parties shall file a joint status report suggesting further
proceedings in this case.
It is so ordered.
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S.N. Nielsen
v.
United States
141 Ct.Cl. 793
March 5, 1958
On the Proofs
Mr. O. R. McGuire for the plaintiff. Mr. Ivy Lee Buchanan was on the briefs.
Mr. William A. Stern, II, with whom was Mr. Assistant Attorney General
George Cochran Doug, for the defendant.
Madden, Judge, delivered the opinion of the court:
On June 29, 1951, the plaintiff made a contract with the United States for
construction work at O’Hare Field near Chicago, Illinois. The government
had invited separate bids on three items of work, and the plaintiff was the
successful bidder on two of the items. One was for the construction of the socalled readiness Building. That item is not involved in this suit. The other
item was for the construction of the “outside utilities” for the Readiness
Building and for the Alert Hangar. The construction of the Alert Hangar itself was awarded to another contractor. The “outside utilities” part of the
plaintiff’s contract is the one out of which this suit arises.
In submitting its bid of $152,000 and making its contract for the outside utilities work, the plaintiff was misled by a bid submitted to it by a subcontractor
for the electrical part of the outside utilities work, which subcontractor had
been misled by a bid submitted to it by a sub-subcontractor. The subsubcontractor’s mistake was that it estimated only for labor and included
nothing for materials.
The plaintiff’s bid and the circumstances did not indicate any mistake. The
next highest bid was only $155,234. This may have been because of the same
mistake by the same would-be sub-subcontractor. If so, the government’s representatives had no knowledge of it. The plaintiff says that its suit is not
based upon the mistake in its bid and does not seek reformation of its contract.
One part of the plaintiff’s outside utilities electrical work under its contract
was the installation of electrical facilities between the Alert Hangar and
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manhole No. 2, a distance of about 3,500 feet. The plaintiff was to install new
underground ducts for the entire distance, and place electric cables in the
ducts. The value of this work, based upon what it would have cost the plaintiff to do it, plus overhead and profit, would have been $60,690.
The contract contained the usual article authorizing the contracting officer to
make changes within the scope of the contract and providing for an equitable
adjustment of the contract price if changes were made. It also contained the
usual article prescribing the procedure to be followed in case of a dispute.
These contract provisions are quoted in finding 4.
On July 6, 1951, just a few days after the contract was signed, the contracting officer advised the plaintiff of a proposed change eliminating the underground ducts in the work described above, and providing that, for a part of
the distance, the electrical cables would merely be buried in the ground, and
for the rest of the distance they would be strung on poles above ground. Since
the substituted construction would be less expensive than the underground
duct construction, the contracting officer requested the plaintiff to submit a
credit proposal for the labor and materials involved in the change. On July 26
the contracting officer issued a formal change order, which the plaintiff accepted by endorsement. That document stated that an equitable adjustment
reducing the contract price would be determined at a later date. The plaintiff
performed the work in accordance with the change order. The cost of this part
of the work as changed was estimated to be $19,180, and the plaintiff does
not contest the correctness of that figure. That left a difference of $41,510 between the value of the work as originally contracted for and the value of the
work as changed.
In August 1951, the plaintiff proposed to credit the government with $18,000
for the change. In its proposal it called attention to the error in the subcontractor’s bid. The government’s representatives, apparently thinking that the
plaintiff was asking for consideration on account of the mistake in its bid, rejected the plaintiff’s proposal and said that the relief sought by the plaintiff
could not be obtained from anyone short of the Comptroller General, and that
if the plaintiff desired to submit the question to that office, that could be done
through the contracting officer’s office.
The plaintiff was then and is still of the opinion that it was not entitled to
relief because of its unilateral mistake in the making of the contract. It did
not, therefore, submit the question to the Comptroller General. The government’s representatives in all their discussions with the plaintiff maintained
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the position that the equitable adjustment should be based upon the difference in cost between the work as originally contracted for and the work as
changed. They had, before they first notified the plaintiff of the proposed
change, made estimates of the two sets of costs, showing the difference of
$41,510. However, they continued to negotiate with the plaintiff, in the hope
that a procedure under the disputes article could be avoided. No agreement
having been reached, the contracting officer, on June 20, 1952, made his formal determination of the equitable adjustment. He fixed it at $41,510, and
the payment to the plaintiff for its contract work was reduced by that
amount.
In October 1952, the contracting officer issued his findings. The plaintiff appealed through the proper channels, ultimately to the Secretary of the Army.
The Secretary’s representative, the Armed Services Board of Contract Appeals, on October 1, 1954, affirmed the decision of the contracting officer. The
plaintiff says that its action was arbitrary.
The plaintiff points to its losses under the outside utilities electrical portions
of its contract. However, its losses would have been the same if the change
order had not been issued, since it finds no fault with the contracting officer’s
figures as to the costs as they would have been without the change order and
the costs as they were under the change order. The plaintiff suggests that the
change order was not permissible under the contract. If that were true it
would be immaterial since, as appears above, the change order did not increase the plaintiff’s losses. In any event, the change was “within the scope of
the contract” and was accepted by the plaintiff. The only dispute was in regard to the amount of the equitable adjustment.
The plaintiff says that, of the mistakenly small amount of $34,800 which it
estimated for all of the outside electrical work in making its bid, only
$22,564.32 was properly applicable to the line from the Alert Hangar to manhole No. 2. It says that the $19,180 actual cost of the changed work should
have been subtracted from the $22,564.32, and only the difference of
$3,384.32 should have been deducted from the plaintiff’s contract price. We
think the $22,564.32 figure is of no significance. It is only an allocation of a
proportionate part of a larger sum which was itself grossly inadequate because of the mistake in the bid. The plaintiff’s attempt to use it is only another way of seeking reformation of the contract on account of its unilateral mistake in making the contract. As we have seen, the plaintiff disclaims, rightly
we suppose, any entitlement to a direct reformation of the contract on account of the mistake. We think it is not entitled to use its mistaken estimated
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figures, which have no relation to actual costs, in determining the equitable
adjustment.
The plaintiff’s petition will be dismissed.
It is so ordered.
Laramore, Judge; Littleton, Judge; and Jones, Chief Judge, concur.
Whitaker, Judge, took no part in the consideration and decision of
this case.
Findings of Fact
The court, having considered the evidence, the report of Commissioner Paul
H. McMurray, the briefs and arguments of counsel, makes findings of fact as
follows:
1. Plaintiff, an Illinois corporation having its principal place of business in
the City of Chicago, has sued to recover the sum of $41,510, which the defendant determined to be an equitable reduction in the amount originally
provided in plaintiff’s contract for work to be done at O’Hare Field, Illinois.
The reduction in cost was based upon changes made with respect to the outside electrical installations.
2. On June 29, 1951, plaintiff and the defendant, (acting through the Corps of
Engineers, United States Army), entered into contract DA-11-032-Eng-684
for the construction of the so-called Readiness Building, and for the installation of outside utilities for that building and the Alert Hangar, at O’Hare
Field, Illinois, for the sum of $361,000. Four bids were submitted for three
items of construction, consisting of (1) construction of the Readiness Building
complete with utilities, (2) construction of the Alert Hanger complete with
utilities, and (3) outside utilities for both of these buildings. Building utilities
were to extend five feet beyond the building walls and outside utilities were
to be installed beyond the five foot point. These bids were as follows:
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Name of bidder
S.N. Nielsen Co.
Welso Construction Co.
Midland Constructors
Michael J. MeDermott &
Co., and Standard Paving
Co.
Defendant’s Estimate
Item 1
$209,000
216,862
215,000
418,000
Item 2
$405,000
375,041
395,000
279,000
158,775
373,889
Item 3
$152,000
155,234
215,000
(Items 1
and 3
combined)
187,600
Total
$766,000
747,137
823,000
797,000
720,264
The defendant’s estimate was prepared by Deleuw, Cather & Company, of
Chicago, Architect Engineers, who were employed under contract by the
United States Corps of Engineers.
Items 1 and 3 were awarded to plaintiff in the amount of $361,000, and item
2 was awarded to the Welso Construction Company under a separate contract.
3. The contract provided that work should be commenced within 15 calendar
days after the receipt of notice to proceed and be completed for beneficial occupancy by January 15, 1952, with final completion by May 15, 1952. The
contract work, including changes required by the defendant, was satisfactorily completed and there is no dispute in respect to any delay in performance.
The contract price was increased in the amount of $19,157.32 by change order 2 to 11 inclusive and reduced by the sum of $41,510 under change order
No. 1. The plaintiff has been paid the net balance of $338,647.32. Approximately 85 percent of all work was subcontracted and the plaintiff’s total cost
of performance was $366,771.41.
4. The contract provided in part as follows:
3. Changes and Extras — The contracting officer may at any
time, in writing, and without notice to the sureties, order extras or make changes in the drawings and/or specifications of
this contract providing such extras or changes are within the
general scope thereof. If any such extra or change causes an increase or decrease in the amount due under this contract, or in
the time required for its performance, an equitable adjustment
shall be made and the contract shall be modified in writing accordingly. Any claim of the contractor for adjustment under
this clause must be asserted in writing within 30 days from the
date of receipt by the contractor of the notification of extra or
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change: Provided, however, That the contracting officer, if he
decides that the facts justify such action, may receive, and act
upon any such claim asserted at any time prior to the date of
final settlement of the contract. If the parties fail to agree upon
the adjustment to be made the dispute shall be determined as
provided in clause 6 hereof. But nothing provided in this clause
shall excuse the contractor from proceeding with the prosecution of the work as changed.
***
6. Disputes — Except as otherwise specifically provided in this
contract, all disputes concerning questions of fact which may
arise under this contract and which are not disposed of by mutual agreement, shall be decided by the contracting officer, who
shall reduce his decision to writing and send by registered
mail, return receipt requested, a copy thereof to the contractor
at his address shown herein. Within 30 days from the receipt
thereof, the contractor may appeal in writing to the chief of engineers, whose written decision thereon, or that of his designated representative or representatives, shall be final and conclusive upon the parties hereto unless, within 30 days after
receipt thereof by the contractor, he appeals in writing to the
secretary of the army, which appeal shall operate to vacate said
decision of the chief of engineers. If the dispute is determined
by the secretary of the army, his written decision, or that of his
designated representative or representatives, shall be final and
conclusive upon the parties hereto. The chief of engineers or
the secretary of the army may designate an individual, or individuals, other than the contracting officer, or a board, as his
authorized representative to determine appeals under this article. In any proceeding under the provisions of this article, the
contractor shall be afforded an opportunity to be heard and offer evidence in support of his appeal. * * *
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A summary computation of performance, as prepared by Johnson, Atwater &
Co., is as follows:
Cost of performance:
Subcontractors
Less: Backcharges
Labor
Material
Warehouse charges:
Labor
Material, lumber, etc
Equip. & Truck rental
Tools & supplies
Gen. Exp. — taxes, ins
Fuel
Less: Gas tax refund
Total job cost
G & A Exp. — allocated on basis of all job costs
Receipts:
Contract price
Add: Change orders 2 to 11 incl
Less: Change order No. 1
NET LOSS ON PERFORMANCE
$303,278.74
2,426.36
$300,852.38
21,572.04
9,339.21
642.24
5,194.49
7,495.22
1,863.21
15,195.16
7,434.04
1,627.77
53.40
1,574.37
355,967.20
10,804.21
$366,771.41
361,000.00
19,157.32
380,157.32
41,510.00
338,647.32
28,124.09
5. Under the original specifications and contract drawing 71-03-44 the performance of outside utilities called for the installation of electric facilities between the Readiness Building and the Boiler House, and from manhole no. 12
at the Alert Hangar to manhole no. 2, a distance of approximately 3500 feet.
The electric cable between the Readiness Building and the Boiler House was
to be installed in part through existing underground ducts and in part
through a new 4-inch steel conduit, whereas the cable between the Alert
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Hangar and manhole no. 2 called for the installation of new underground
ducts for the entire line.
By Revision A of drawing 71-03-44, approved June 25, 1951, the underground
ducts for the line between the Alert Hangar and manhole no. 2 were eliminated and in lieu thereof a direct burial cable line was provided for approximately 2,000 feet from the Hangar area where clearances were critical, and
an additional overhead pole line of approximately 1,700 feet was provided
where no hazard to flying operations would result. There was no change in
the cable line between the Readiness Building and the Boiler House. Defendant prepared an estimate of the cost for the installation of the underground
duct line originally specified from the Alert Hangar to manhole 2, dated July
6, 1951, in the amount of $60,690, which included overhead of 10% and profit
of $5,369, amounting to 10% of costs other than payroll insurance. Defendant
also prepared an estimate of the cost of such work, as changed under Revision A, including allowances of 10% for overhead and 10% for profit, in the
total sum of $19,180, resulting in an indicated saving to defendant of
$41,510.
The defendant’s original estimate made by DeLeuw, Cather & Company, for
this work as called for before the change order was issued, was $73,176.
6. By letter of July 6, 1951, defendant submitted ten prints of drawing 71-0344 containing Revision A, substituting the burial cable and overhead pole line
for the underground duct and cable system between the Alert Hangar and
manhole no. 2, and requested that plaintiff submit a credit proposal for the
labor and materials involved in the change.
On July 26, 1951, the contracting officer issued Change Order No. 1, part I,
which reads in part as follows:
Delete the underground ducts and primary cable for the alert
hangar and substitute an overhead electric distribution line
and direct burial cable in accordance with Drawing No. 71-0344, sheets 1 and 2 of 2 sheets, Revision A, dated 25 July 1951,
which are hereby made a part of the contract drawings1.
An equitable adjustment in price which will result in a decrease in Item No. 2 of the Unit Price Schedule and in the total
1
Revision A of drawing 71-03-44 is dated June 25, 1951.
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contract amount, due to the changes ordered herein will be determined at a later date, and a supplemental change order,
Part II to this change order, will be issued. The ten-day period
within which the contractor may protest will begin upon receipt
by the contractor of Part II of this change order2.
The plaintiff accepted the foregoing change order by appropriate endorsement
thereon.
7. The plaintiff’s bid estimate included $46,500 for all electrical work under
its contract, but no detail of estimates was furnished with the bid submitted.
It provided $11,700 for all electrical installations in the Readiness Building
under bid item No. 1, and $34,800 for all outside electrical installations under
item 3 of the bid schedule. The plaintiff’s bid was based upon a proposal of
Owl Electric Company, of Chicago, Illinois, and a subcontract was entered
into with that company, dated July 3, 1951, for the installation of all electrical work required under plaintiff’s contract for $45,500.00.
The Owl Electric Company subsequently advised plaintiff that it had relied
upon a bid of the A. A. Electric Company for the installation of substantially
all of the outside electrical work but such company had withdrawn its bid and
declined to accept the work because the bid was based upon labor only and
did not include any estimate for material. Thereafter, when change order No.
1 was issued, the plaintiff relieved Owl Electric Company of its obligation
under its contract covering the outside electrical installations, and entered
into a separate contract with Owl Electric Company for the inside electrical
installations in the Readiness Building only at the price of $11,500.
The plaintiff did not attempt to hold Owl Electric Company responsible upon
its original contract because of the change in the work ordered by the government and because Owl Electric Company was not financially able to bear
the cost of the materials required for the outside electrical installations.
When the contract was amended by Change Order No. 1, it became necessary
for the plaintiff to secure an electrical subcontractor who had a contract with
a Pole Line Electrical Union to perform the pole line construction work because no other Union of Electrical Workers was permitted to perform such
pole line construction.
2
Item 3 of the bid schedule became item 2 of plaintiff’s contract schedule, and the decrease
in the amount resulting from the change had already been computed by the district engineer’s office at $41,510 by July 6, 1951 or earlier.
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The plaintiff sought to subcontract the outside electrical work to the next
highest bidder, Welso Construction Company, which bidder also declined because it said that it had made an error in its bid.
Thereafter the plaintiff negotiated with the Contracting and Material Company of Evanston, Illinois, for the performance of all outside electrical work,
as revised by the government under Change Order No. 1 for the price of
$63,680, and a subcontract was executed by them dated October 29, 1951.
8. The contracting officer received no breakdown of the bids for the several
items upon which bids were submitted, and the difference in the total amount
of bids received were not so great as to indicate error.
The inadequacy of plaintiff’s bid for the outside electrical work was first
brought to the attention of the defendant about July 6, 1951, after the proposed change in this work was sent to the plaintiff. On or about August 1,
1951 defendant was informally advised by plaintiff that its original bid was
based upon an erroneous electrical subcontract price of $34,800.
Welso Construction Company told the plaintiff that its item 3 bid was also
based upon an erroneous quotation for the outside electrical work.
9. On August 6, 1951, the plaintiff submitted, by letter, a proposal to the district engineer for a credit allowance of $12,600 to the government for the
change in the installation of outside electrical work. The letter stated that the
proposed adjustment was based upon plaintiff’s figures for the work and requested consultation with government representatives for the purpose of arriving at an equitable adjustment under Change Order No. 1.
A meeting was held on or about August 23, 1951, for such purpose and at
that time plaintiff submitted a letter proposal for a credit allowance of
$18,000, with the explanation that the outside electrical work had been subcontracted at $34,000 but that the subcontractor would be unable to perform
its contract because of an error in its bid.
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The plaintiff’s proposal of $18,000 credit allowance for the change was rejected by the district engineer’s legal branch, by letter of November 2, 1951, reading in part as follows:
We have been unable to secure favorable action on the submittal just made covering your case and same was returned without approval. This office has been advised that the relief requested could not be granted by any one short of the
Comptroller General. Should you desire to seek relief from that
office, a revised submittal through this office should be made
on that basis, i. e., request equitable relief of the General Accounting Office.
The plaintiff did not seek relief through the Comptroller General, and does
not now seek relief because of an error in its bid, but claims that an equitable
adjustment for the change in the work performed should be based upon its
contract and its bid allocations for the changed work.
10. The defendant had prepared cost estimates upon the original outside electrical work and revision of the work under Change Order No. 1 prior to July
6, 1951, when the proposal was first sent to plaintiff. In the negotiations
thereafter the defendant’s representatives always contended that an equitable adjustment should be based upon the difference in cost of the work originally specified and the cost of the work as revised under Change Order No. 1,
but they continued negotiations and delayed making the final determination
because they desired to arrive at an agreed settlement, if possible, and thus
avoid a protest by the plaintiff.
The plaintiff’s representative was advised by Mr. Nusbaum, Chief, Construction Division, to make the plaintiff’s best offer and he would do all he could to
obtain a settlement. The plaintiff believed that an equitable adjustment could
be agreed upon through a negotiated settlement.
On June 20, 1952, when the work had been substantially completed, the contracting officer issued Part II of Change Order No. 1, wherein the amount determined as an equitable adjustment was a reduction of item 2 of plaintiff’s
contract price schedule, and of the entire contract amount, in the sum of
$41,510.
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The plaintiff rejected this determination of the contracting officer, by endorsement thereon, which reads as follows:
REJECTION OF MODIFICATION
The foregoing modification of said contract is NOT accepted
and hereby is rejected for good and sufficient reasons, including
but not restricted to the following: (1) It does not represent an
“equitable adjustment” in the contract price in accordance with
the terms of the contract. (2) The proposed deduction of
$41,510.00 by reason of the changes ordered in Change Order
No. 1 is not based on the contract price but is based on the government’s estimate of the cost of performance of the work
which estimate was prepared prior to the date of the said contract and constitutes no part of the contract price of performance of the work prior to the change order. (3) The proposed
deduction of $41,510.00 in the contract price overall is largely
in excess of the total amount included in the contract price for
the performance of all of the work required by the particular
specifications in which the change was made by Change Order
No. 1 as to which notice was duly given before this proposed adjustment order dated June 20, 1952, was issued. (4) This proposed change order was not issued in the uncontrolled and independent discretion of the contracting officer but has been
issued pursuant to instructions and directions of higher military authority and which instructions and directions are erroneous and inequitable both in law and fact. (5) By Change Order No. 1 the character and scope of the contract work was so
greatly changed as to deprive the contractor of its legal rights
to recover damages from its electrical subcontractor for refusal
to perform. (6) The proposed deduction is so grossly erroneous,
arbitrary, and capricious as to imply bad faith.
11. On October 14, 1952, the contracting officer issued findings of fact and his
determination that an equitable adjustment for the revision of the outside
electrical work under Part II of Change Order No. 1, was a reduction of
$41,510 in the original amount of plaintiff’s contract.
The plaintiff timely appealed from the determination of the contracting officer, and was afforded a hearing before a three-member Corps of Engineers
Claims and Appeals Board, Department of the Army, on April 2, 1953. On
November 12, 1953, this Board issued its decision which, by a majority of two
to one affirmed the determination of the contracting officer.
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Thereafter plaintiff appealed to the Secretary of the Army and this appeal
was denied by the Armed Services Board of Contract Appeals October 1,
1954. Twelve members of the Board voted to affirm the action of the contracting officer and the prior decision, and four members dissented without preparing any written dissenting opinions.
12. The government’s estimate prepared by DeLeuw, Cather, & Company for
the original work under item 2 of plaintiff’s contract (item 3 of the bid schedule) was $187,600, and included $113,814 for the installation of all outside
electrical work, of which $40,638 was estimated for such installations from
the Readiness Building to the Boiler House, which was not changed, and
$73,176 was estimated for electrical installations between the Alert Hangar
and manhole No. 2, which was modified by Change Order No. 1.
The plaintiff’s bid analysis for item 2 of its contract was $152,000, and included $34,800 for all outside electrical work. In the plaintiff’s bid analysis,
no allocation of this $34,800 was made as between the area outside the Readiness Building and the area outside the Alert Hangar.
Part II of Change Order No. 1, and the determination of the contracting officer, resulted in a reduction of $41,510.00 in the plaintiff’s contract price.
This reduction was the difference in the value of the electrical work originally
specified and as modified for installation between the Alert Hangar and
manhole No. 2. It was arrived at on the basis of estimates prepared by the
District Engineer’s office under date of July 6, 1951, as follows:
Original basis As modified
Labor
$16,275
$4,626.00
Materials
32,537
10,820.53
Direct costs
48,812
15,446.53
Overhead allowance at 10%
4,881
1,544.65
Profit allowance at 10%
5,369
1,699.12
Payroll insurance and taxes
1,628
489.70
Total compared
60,690
19,180.00
13. The plaintiff does not contest the government’s estimates as the fair and
reasonable value of the original work deleted and the work as modified under
Change Order No. 1.
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Conclusion of Law
Upon the foregoing findings of fact, which are made a part of the judgment
herein, the court concludes as a matter of law that the plaintiff is not entitled
to recover, and the petition is therefore dismissed.
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Singleton Enterprises-GMT Mechanical
v.
Department of Veterans Affairs
CBCA 1966*
March 17, 2011
Wayne Singleton, Joint Venture Partner of Singleton Enterprises-GMT Mechanical, Luthersville, GA, appearing for Appellant. Lisa M. Clark, Office of
the Regional Counsel, Department of Veterans Affairs, Brecksville, OH,
counsel for Respondent.
Before Board Judges Borwick and Pollack.
Pollack, Board Judge.
This appeal arises out of contract no. VA541-C-0089, between Singleton Enterprises-GMT Mechanical, a Joint Venture (JV or appellant), and the Department of Veterans Affairs (VA) for replacement of approximately 36,000
square feet of polyisobutylene (PIB) roof on the second floor of a building at
the VA Medical Center, Wade Park, Ohio, along with new underlying insulation, associated masonry, carpentry, and other items. Supplemental Appeal
File , Exhibit 1; Transcript at 83, 117, 119. This case centers on contract provisions dealing with the placement of new insulation on the roof deck (using
asphalt), and how that related to the contract’s requirement for a twenty-year
manufacturer warranty on the PIB roof being installed.
A hearing on this appeal was held on November 9, 2010, in Cleveland, Ohio.
Each party provided testimony from various witnesses. Appellant, however,
provided only one affirmative witness, Mr. Wayne Singleton, and thus when
testimony of appellant is referenced below, it refers to his testimony. The VA
appeal file was divided into sections; however, it was not otherwise tabbed or
numbered. Appellant provided a tabbed supplemental appeal file, which included most of the documents in the VA file. Because the supplemental appeal file has been numbered, we use it as the primary citation source in this
decision. Additionally, the parties provided limited documents at the hearing.
The Board here issues a two-judge decision, as appellant elected the Board’s
accelerated procedure. Rule 53 (48 CFR 6101.53 (2010)).
*
Note yet published.
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Facts
The contract called for appellant to place layers of insulation on the roof deck
and to attach to that insulation a new PIB roof (PIB membrane). The roofing
membrane was to be attached to the insulation by means of specified proprietary adhesives manufactured by Republic Powdered Metals, Inc. (RPM). Supplemental Appeal File, Exhibit 1; Appeal File, sec. 4. While not stated in the
specifications, the testimony of various VA witnesses makes it clear that the
VA wrote the PIB roofing specification for this contract around RPM’s PIB
product. Supplemental Appeal File, Exhibit 1; Transcript at 9, 119, 225, 246,
327. There was no evidence, however, that the insulation provisions of the
contract were written around any particular manufacturer’s product.
Appellant submitted a bid of $777,020. The VA opened bids on September 28,
2007, and awarded the contract on October 12, 2007. The contract initially
called for five months to complete from the date of award. That was later
changed at the time of notice to proceed (NTP) to 180 days. Supplemental
Appeal File, Exhibit 1, 3; Transcript at 42.
Section 07220, Roof and Deck Insulation (eight pages) set out the requirements for providing and installing new insulation on the project. It clearly
addressed using asphalt for adhering insulation to the existing concrete roof
deck. It detailed the type (grade) of asphalt to be used, as well as included
details such as heating temperatures and coverage rates for application of the
material. Nothing in the section made reference to the use of adhesive as the
means for adhering insulation to the roof and deck. Supplemental Appeal
File, Exhibit 20.
Section 07531, Elastomeric Sheet Roofing Polyisobutylene Tear Off And Replacement, which ran eighteen pages and contained parts of two separate
roofing specifications, addressed the tearing off of the existing roof and replacement with a new PIB membrane which was to be attached to the new
insulation by means of RPM adhesives. Portions of section 07531 were confusing and could only be explained as a mistake. Appeal File, sec. 4; Transcript at 206-08, 231. For example, as set out below, the roofing specification
had two warranty paragraphs, rather than one. While there were differences
in the two warranty specifications, each called for a twenty-year warranty
and thus the duplication does not materially affect our analysis in this appeal. The following provisions from section 07531 are relevant to the claim.
We list the warranty provisions in the order they appeared in the specification.
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1.10 WARRANTY
A. Provide manufacturers standard twenty (20) year warranty
covering materials and labor. Must be 100 mil. Polyisobutylene
membrane adhered with GEOTAC or GEOBOND Adhesive.
1.6 WARRANTY
Roofing work subject to the terms of the Article “Warranty of
Construction” of Section, General Conditions, except extend the
warranty period to twenty years.
3.03 ROOF INSULATION.
A. Apply insulation neatly fitted to penetrations, projections,
and nailers. Install tapered or feathered insulation around roof
drains in such a way as to provide proper slope (maximum 3:
12 pitch) for drainage.
B. Adhere insulation with Manufacturers Insulation Adhesive,
or mechanically fasten per manufacturers recommendations.
Paragraph 3.03, above, although in the roofing specification, addressed the
placement of insulation. It was clear from the testimony of various VA witnesses that the VA wanted insulation attached by adhesive (as set out in
Paragraph 3.03) and the VA had not meant to include asphalt as either the
preferred method or an option. Transcript at 183-93, 222, 327. However,
nothing in the specifications conveyed that intention or even suggested that
asphalt could not be used. The VA’s best explanation as to how the two methods were to be treated was from Mr. Edward Hazel, current chief of construction at the VAMC. He described asphalt and adhesive as alternatives and also said that while asphalt was provided in the specification, the Government
did not intend or imply that appellant had to use asphalt. Transcript at 117,
120, 180-81.
There is no dispute between the parties as to appellant’s responsibility for
providing a twenty-year roof warranty. However, as addressed below, the
central dispute in this case turns on how the use of asphalt meshed with appellant’s ability to secure that warranty.
Although the VA did not name a roof membrane supplier, the VA wrote the
PIB roofing specification around use of the RPM PIB roof. The VA did specify
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the RPM adhesive in section 07531. Further, although RPM was not specified
as the sole source for the roof membrane, the VA wanted that product on this
project. As noted by Mr. Brian Rice, the contracting officer’s technical representative (COTR), had a contractor on this project come in with a different
roof (non-RPM), the VA would have probably disapproved it. Transcript at
225, 246, 327. The VA had used RPM roofs at this facility for ten to fifteen
years and had approximately fourteen roofing areas with the RPM PIB roofing product. Supplemental Appeal File, Exhibit 10-11; Transcript at 222-23.
Mr. Rice explained the VA had a policy at the facility to standardize, so it
would not have to deal with ten different roofing companies or ten different
processes. Transcript at 327.
The VA held a pre-bid conference. Appellant did not attend; however, Gire
Roofing Construction (Gire), the firm appellant used for the roofing work, attended, as did another potential subcontractor, Warren Roofing & Insulation
Co. (Warren). Warren was a local contractor with prior experience at the site.
Gire was from Illinois, and there was no evidence it had previously worked on
the facility. Supplemental Appeal File, Exhibit 10-12; Transcript at 196. Mr.
Nick Carrozza, a VA engineer, and Mr. Rice represented the VA. Supplemental Appeal File, Exhibit 22; Transcript at 94-95, 254, 323-26. Neither VA
official, however, addressed specifics as to roofing at the meeting. Instead,
that was handled by Tom Dornbrook, sales representative for RPM. On roofing matters, it appeared that the VA had essentially turned its program over
to Mr. Dornbrook. In a 2008 memo, where the VA was seeking some advice on
this claim from the Corps of Engineers, Mr. Hazel referred the recipient to
Mr. Dornbrook for details and described Mr. Dornbrook as “the VA’s main
contact for the roofing materials system in use for the entire hospital.” Supplemental Appeal File, Exhibit 34. Under questioning from the VA counsel,
Mr. Dornbrook confirmed that on this project, he assisted as a consultant to
the VA. Transcript at 236.
Mr. Dornbrook testified as to what he said at the pre-bid conference. He confirmed that his presentation essentially focused on the RPM product and its
requirements. He did not address the use of asphalt during the meeting, and
stated that at the time of the pre-bid conference, he was in fact unaware that
the VA even had provided an asphalt specification in its contract. He
acknowledged he did not say anything involving the operation of the RPM
warranty and use of asphalt, nor did he say that the use of asphalt would
void the warranty. At the close of the meeting he provided the attendees with
an RPM material sheet. The sheet was not later distributed by the VA to other potential bidders. Transcript at 236, 245, 255-56, 262, 265-66.
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Appellant received three to four bids on roofing, including bids from Gire and
Warren. Gire provided a single price, based on seating the insulation in asphalt. Transcript at 11-12. Warren provided two prices. The first was a primary price of $645,000 (based on providing adhesive to attach insulation).
The second specified a $50,000 deduct to the first price if asphalt was used.
Warren appended the following note to its bid: “For Asphalt as the insulation
adhesive, DEDUCT: $50,000. Asphalt is specified as the insulation adhesive
but in (sic) not compatible with warranty requirements.” Supplemental Appeal File, Exhibit 9.
Warren’s bid was based on using the RPM roof, and its comments as to the
warranty referred to that product. Supplemental Appeal File, Exhibit 9. After
appellant received Warren’s bid, it attempted to contact the VA for clarification, but was unsuccessful. It then proceeded to provide its bid, relying on its
understanding that the specifications clearly provided for the use of asphalt
and relying upon Gire’s pricing, which was based on asphalt. Transcript at
12, 42, 333. Because appellant had utilized RPM’s price for the roof membrane, appellant planned on using the RPM roof on top of the new insulation.
While RPM was local, there were other manufacturers that could furnish a
PIB roof. Insulation was not being provided by RPM. Transcript at 17, 26.
The firm, quoting asphalt to appellant, verbally agreed to keep its price firm
for ninety days from bid. Supplemental Appeal File, Exhibit 12; Transcript at
18-19, 45.
When asked to explain how it reconciled bidding with the note in Warren’s
bid as to the warranty, appellant stated it relied on the fact that the specifications called for the use of asphalt and further that it saw nothing in the
specifications that led it to believe that RPM would not accept asphalt for attaching insulation, or that asphalt would void an RPM warranty. Essentially,
appellant was stating that because the specifications were explicit as to the
suitability of asphalt, there was no reason to assume a connection between
how the insulation was being connected and the roofing membrane warranty.
At the time of bid, appellant believed that the warranty could be issued. Appellant also pointed out that Warren’s letter related solely to RPM and that
Gire’s bid contained no similar qualification or concern as to the use of asphalt. Supplemental Appeal File, Exhibit 24; Transcript at 331-37.
After award, appellant proceeded with gathering information for submittals
from RPM. During that process, appellant was advised, either directly by Mr.
Dornbrook or through Gire, that RPM would not provide a twenty-year war-
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ranty unless insulation was laid with adhesive. Appellant testified that this
was the first it knew of the problem; however, as noted above, Warren had
warned of a possible problem in its bid. Transcript at 13-14.
Based on what it had learned from RPM as to the warranty, appellant provided a letter, dated November 27, 2007, to the VA along with an asphalt
submission. The letter advised the VA that RPM had said that the use of asphalt was not compatible with the RPM warranty and appellant would have
to use adhesive. Appellant advised that adhesive would be more costly. Supplemental Appeal File, Exhibit 21; Transcript at 14.
The VA did not respond, so on December 28, 2007, appellant sent a letter
seeking a decision on the submittal. Appeal File, sec. 3. At this time, appellant was in contact with Mr. Dornbrook as to the roofing materials. From
those contacts and conversations it became obvious to appellant that it was
going to have to use adhesive for the insulation and do that regardless of
whether the Government issued a formal change order or not. Appellant testified that after several discussions with Mr. Dornbrook, it was evident that
the PIB roof was to be supplied using RPM materials and Mr. Dornbrook
“was calling the shots.” Appellant characterized the use of RPM for the roofing material as essentially cast in concrete. With that in mind, appellant,
even without a change order, took steps to secure adhesive so as to protect
the price. Accordingly, Gire ordered 200 pails of insulation adhesive from
Dornbrook Marketing LTD on January 11, 2008. Notice to proceed (NTP) was
finally issued by the VA on January 14, 2008. Supplemental Appeal File, Exhibit 13; Transcript at 15, 18, 55, 276.
The COTR explained the VA’s failure to respond, saying that the VA could
not reject a submittal until there was a NTP. Transcript at 100. The VA,
however, did begin an internal analysis. In his January 4, 2008, memo to engineering, the contracting officer (CO) stated, “The specifications called for
asphalt as the adhesive for insulation, but the manufacturer may not honor
the warranty using asphalt, according to the contractor.” Supplemental Appeal File, Exhibit 5; Transcript at 14, 42.
On February 12, 2008, the VA rejected appellant’s submittal and provided
under Remarks, “Revise and resubmit in accordance with design bulletin No.
1.” Three days later, the VA issued Bulletin No. 1, which provided: “The adhesive to be used to secure the roofing insulation shall be RPM Insulation
Primer and RPM Insulation Adhesive as manufactured by Republic Metals,
Inc. Asphalt shall not be used to secure insulation to the roof deck.” Supple-
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mental Appeal File, Exhibit 23. Mr. Hazel described the bulletin as a clarification and not a contract modification. He said it addressed an ambiguity in
the specifications. Transcript at 181-82. Pursuant to the direction, appellant
provided a new submittal noting that the use of adhesive was based on the
Government’s direction. Supplemental Appeal File, Exhibit 24.
On March 13, 2008, the VA asked appellant for a proposal to delete a segment of construction services in the southwest corner of the roofing project.
This is relevant to the claim, in that it reduced the square footage to be replaced. After negotiation, the parties agreed that appellant would provide a
credit for the deleted work. The VA has asserted that the claim must be adjusted for the reduced area. Appellant has contended otherwise, pointing out
that in the modification, appellant gave the VA a credit based on the use of
adhesive instead of asphalt as planned. Supplemental Appeal File, Exhibit
28-32; Transcript at 103. Appellant in this claim seeks to recoup the difference between what it provided in the credit for adhesive and what that credit
would have been if it had been based on asphalt.
On April 22, 2008, appellant submitted what it designated as its claim and
change order proposal, seeking $56,004 for changing the originally specified
asphalt to RPM insulation adhesive. The claim included a breakdown for
subcontractor costs (Gire) of $47,774. The remainder of the claim sought
markups for the prime of 7.5% for overhead, 7.5% for profit, and 1.44% for
bond. The subcontractor costs were broken down as follows:
Delete Asphalt
14 Ton @$500 ($7,000)
Delete Asphalt Labor
14 Ton @ $ 90 ( 1,260)
5-Gallon Pails Adhesive
200 EA @$216
43,200
Labor for Pails of Adhesive 200 EA @$ 32
6,400
41,340
7.5% overhead
3,101
44,441
1.5%(sic) profit
3,333
Total
47,774
The 1.5% for subcontractor profit was intended to be 7.5%. Supplemental Appeal File, Exhibit 6.
Although not provided to the VA in April 2008, appellant provided at the
hearing a further breakdown from Gire, dated April 25, 2008. It includes
comparative labor prices for asphalt and adhesive and shows 1344.75 man-
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hours @ $46.55 per manhour for a total of $62,598 for installing insulation
with adhesive; and 1207.25 manhours @ $46.55 per manhour for a total of
$56,198 for installing insulation with asphalt. Supplemental Appeal File, Exhibits 12, 29; Transcript at 58-59, 103, 106-07.
On May 7, 2008, Mr. Rice authored an estimate comparing the costs for using
asphalt versus adhesive based on 844.70 squares of roof insulation (versus
899 squares used by appellant). His estimate provided no breakdown as to
labor or material, but rather set out an estimated combined cost of $56.67 per
square for labor and material for laying insulation in asphalt, and $43.22 per
square for laying it with adhesive. He concluded the VA was entitled to a net
credit of $11,905.92. Supplemental Appeal File, Exhibit 36; Transcript at 6566. The numbers he used in the estimate were figures he secured from Mr.
Dornbrook, who in turn had secured the information from contractors he had
contacted. Supplemental Appeal File, Exhibit 36-37; Transcript at 87-88.
There was no background information as to what information was provided to
the sources, and Mr. Rice under questioning stated that he did not have any
work papers with him. It appeared he had not reviewed any work papers prior to the hearing. Transcript at 207-08. At some point, the VA tweaked its
numbers and in a June 12, 2009, memo increased the cost of the asphalt work
to $57.87 per square. The change was never addressed nor explained. Supplemental Appeal File, Exhibit 41.
On May 27, 2008, the VA and appellant spoke by telephone regarding appellant’s costs, with VA advising that it needed more justification for appellant’s
numbers. Transcript at 296. On the same date, appellant wrote two letters to
the contracting officer (CO). The first, referencing the earlier conversation as
to costs, addressed seven cost issues. Among those were explanations as to
how appellant arrived at square footage, appellant’s labor cost differences,
and how appellant arrived at the asphalt credit. In the letter, appellant stated that by that point, asphalt cost was approaching $700 a ton, as compared
to the $484 a ton it had bid. Supplemental Appeal File, Exhibit 17. In the second letter, appellant stated the following, “Unless directed otherwise in writing from the Contracting Officer, we are going to proceed with changing the
application material from asphalt to adhesive and consider it to be a constructive change order coming from the Contracting Officer.” Supplemental
Appeal File at 18. As of May 27, work had not yet begun on the roof. Roofing
commenced some time in June or July.
The VA provided no response to either of the two letters. It did continue to
review the claim, focusing on pricing and still contending that using adhesive
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was cheaper. On November 6, 2008, Mr. David Sabel, chief of engineering,
provided a memorandum to the acting CO. The memo affirmed confidence in
Mr. Rice’s estimate, stating that it had been provided to the VA from the roofing supplier (RPM), and further addressing alleged flaws in appellant’s cost
breakdown. Mr. Sabel claimed (1) appellant used the wrong size for the roof
(896 squares versus 844 squares), (2) used too low a cost per ton ($487) for
asphalt, since it based its figure on a September 2007 date (before asphalt
increases in the summer of 2008), and (3) asserted that appellant failed to
include costs such as transport, maintenance, and delivery of hot asphalt to
the roof in its comparison of costs. In his memo, Mr. Sabel provided no dollar
figure for any of the purported omitted items; he similarly provided no figures
at trial. Finally, the memo said engineering had confirmed its costing
through a contact person with the Corps of Engineers (who got her information through a subconsultant) and that the Corps concluded that there
should be little difference in price between the two processes, with any cost
increase for adhesive being be offset by reduced labor costs in placing adhesive in lieu of asphalt. Supplemental Appeal File, Exhibit 39.
On February 1, 2009, appellant asked for a final CO decision. Again it received no reply. On June 12, 2009, Mr. Sabel authored another internal
memorandum that in general tracked the prior one. Supplemental Appeal
File, Exhibit 41. Still having received no reply, appellant filed its appeal with
the Board on a deemed denial basis. Transcript at 32-33. In order to resolve
this dispute we must determine (1) whether a twenty-year PIB roof was
available from a manufacturer other than RPM and (2) whether a twentyyear warranty could be secured if insulation was placed in asphalt. Mr.
Dornbrook said he knew of at least two RPM competitors that could have bid
the project to provide the roof membrane. He additionally confirmed that in
some instances RPM had allowed use of asphalt and honored warranties with
asphalt. Transcript at 247-52. Mr. Sabel testified that he understood that
RPM installed material with asphalt and he further acknowledged that the
use of asphalt was an accepted method in certain situations. Transcript at
224. He also confirmed that there were “a few manufacturers that provided” a
PIB system. He also testified that he assumed that there was another manufacturer that could have provided the roof with a warranty, stating, “My assumption is that if it’s a method that’s accepted, that there is a warranty
available to install appropriately.” Transcript at 225-27. Finally, he testified
that it was his understanding that if a contractor installed insulation with
asphalt, and installed the appropriate security devices around it, “that would
have a warranty to it.” Transcript at 224-25.
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As noted earlier, Mr. Rice’s estimate provided that the combined labor and
material costs for adhesive should be $43.22 per square. When that figure is
multiplied by 844 squares, claimed by the VA, the result is $36,477.68. Adhesive comes in five gallon pails, which on this project cost $216 a pail. Each
square requires a gallon of adhesive. Accordingly, using the VA number of
844 squares, one would need 169 pails. When 169 pails are multiplied by the
cost per pail, the total comes to $36,504 for material only. If we use what was
purchased on the project (200 pails), the number increases to $43,200. In
each instance, the cost of materials alone exceeds Mr. Rice’s price for materials as well as labor. Multiplying the VA cost of $56.67 a square for asphalt by
844 squares, the result is $47,830 for both labor and material to lay insulation in asphalt. Even if we were to assume the cost of asphalt at $1000 a ton
(a number we do not find valid, but use for ease of calculation), the difference
(between $47,830 less $14,000 (for 14 tons)) would leave $33,830 for labor
costs to place insulation in asphalt. Obviously, the comparisons make no
sense. Mr. Rice’s calculation (once one accounts for material) yields no labor
costs for adhesive, but labor of $33,830 for asphalt. Additionally, since the VA
provided no breakdown for Mr. Rice’s numbers, his estimate is impossible to
analyze. Finally, Gire’s labor breakdown shows total labor costs of $56,000 for
asphalt and $62,500 for adhesive. Supplemental Appeal File, Exhibit 12, 3637.
At the hearing, appellant provided further confirmation as to its costs. It
could not provide a written quote for asphalt on this job, because it had proceeded on a verbal quote. It did, however, provide an August 2007 pricing
proposal on another project, where prices ranged from $415 to $450 a ton.
Supplemental Appeal File, Exhibit 7; Transcript at 45. Appellant also provided an excerpt from R.S. Means Building Construction Cost Data (65th ed.
2007) (Means). The excerpt showed comparative costs for using asphalt and
adhesive with roofing (it had no insulation listing). The comparisons showed
labor of $44.50 per square for adhesive, versus $33 for asphalt, an approximate 35% difference. Supplemental Appeal File, Exhibit 42; Transcript at
211-14. That compares to an 11% difference in Gire’s labor estimate. Supplemental Appeal File, Exhibit 12; Transcript at 211-12. Finally, and a further
buttress to appellant’s labor claim, Mr. Sabel in his testimony referred to
Means” several times as a valid industry source. Transcript at 206-08. His
attempts to backtrack on that were unconvincing.
As a final point, one of the VA bases for claiming that the credit for asphalt
material was understated by appellant, is that the appellant should have
used the prices in effect for the summer of 2008 and further (particularly of
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concern to Mr. Hazel), that the appellant was not comparing like periods,
since appellant was using a September 2007 date for asphalt and an April
2008 date for adhesive. Transcript at 139-40, 145-46. The record shows, however, that adhesive at $216 a pail was ordered in early January 2008, and the
September 2007 price (while quoted at that time) was firm until late December. Thus, appellant compared prices for similar time frames. Supplemental
Appeal File, Exhibit 13; Transcript at 18-19.
After the hearing, each party filed a brief. The VA brief consisted of two pages and listed four conclusory positions with two record cites and no legal
analysis. The VA points were that appellant’s claim was overstated, that appellant knew at bid time that adhesive was required, that appellant failed to
properly seek clarification, and finally, that appellant did not follow proper
procedures in submitting its claim. As an aid to the Board in assessing the
procedural defense, the VA provided, as one of its record cites, pages 31 to 78
of the contract.
Discussion
When all is said and done, this case turns on the fact that in February 2008,
the VA changed appellant’s method of performance by first rejecting appellant’s submittal calling for the use of asphalt to secure insulation to the existing roof; and then coupled that with issuing what the VA called a design bulletin. That design bulletin required appellant to use an RPM adhesive
product to secure insulation to the roof, instead of asphalt, as appellant had
bid.
The contract clearly specified that asphalt could be used to attach new insulation to the existing roof deck. In fact, asphalt was the only material mentioned in the section of the contract specifically addressing insulation. While
we recognize that the contract’s PIB roofing specification also contained limited provisions that addressed using adhesive to attach insulation to the roof
deck, that limited treatment, at best, permitted an alternative means of performance to the asphalt. The roofing provision’s limited inclusion of directions
for use of adhesive (to attach insulation) in no way negated appellant’s right
to set its insulation in asphalt, as set forth in the insulation specification.
There was no patent ambiguity in the contract created by the two performance methods. The methods could be harmonized. Accordingly, in forbidding appellant from using asphalt and in directing it to use adhesive, the VA
imposed a method of performance that appellant was not contractually required to provide.
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However, to resolve this dispute, we need to address additional facts. In addition to identifying means of adhering the insulation to the roof deck, the contract also required that the contractor provide the VA with a twenty-year
manufacturer’s warranty for the PIB roof it would install on top of the insulation. At least on this particular contract, RPM (the manufacturer around
whose products the VA wrote the roofing specifications) would not provide a
twenty-year warranty with its roofing product, unless adhesive was used to
secure the insulation below (which RPM was not providing). It would not provide the warranty if insulation was set in an asphalt base. That was the case,
even though the VA did not appear to know at the time it prepared the specifications, or at the time of contract award, that RPM would impose such a
condition on its warranty.
In pricing this project, the record shows that appellant anticipated using asphalt for securing the insulation and anticipated using the PIB roofing membrane as manufactured by RPM. RPM had been providing roofs at the facility, and that fact was highlighted at the prebid conference, well established on
the facility, and a logical choice for contractors to bid. It was implicit that the
VA wanted and was familiar with an RPM roof, and logical that VA specifications would reflect that familiarity and not conflict with RPM requirements.
Additionally, we find that despite the fact that RPM was not specified as a
sole source, it was highly likely that it’s the only roofing product the VA
would have accepted for this project. Further, while the VA included asphalt
as a means of attaching insulation, the VA clearly did not want that product
and likely would never have allowed it. That said, the VA not only included,
but also highlighted asphalt in its specifications as the means for setting insulation.
Mr. Singleton testified that by the time appellant provided its asphalt submittal to the VA, it had learned from RPM that RPM was not willing to provide a twenty-year warranty, absent the use of its adhesive. Appellant had
also concluded from conversations that the VA was going to require the use of
the RPM roof. Given those circumstances, appellant appended a letter to its
asphalt submittal, advising the VA of a potential RPM warranty problem. In
the letter, appellant did not contest its obligation to provide the specified
warranty, nor did it give up its intention to use asphalt. Instead, the letter
was advising the VA of a potential problem.
The VA did not respond to the submittal until February 12, 2008, when it returned the submittal and marked asphalt as rejected. The VA followed that
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with the design bulletin, which explicitly provided appellant could not use
asphalt to secure the insulation and directed appellant to use a specific RPM
adhesive product in order to adhere the insulation.
Once the VA received the asphalt submission in November 2007, it could
have entered into a dialogue with appellant as to possible solutions. Alternatively, it could have simply sent the submittal back to appellant with a note
specifying its concerns as to the warranty and the use of asphalt, and directed appellant to advise the VA as to how (with using asphalt) appellant
intended to provide the warranty. Had appellant been unable to provide assurance as to the warranty, then the VA may have had a basis to issue a direction. However, the VA first was obligated to give appellant an opportunity
to meet the contract specifications. The VA action, in issuing the bulletin and
directing how appellant was to perform, took matters out of appellant’s
hands. Once the VA issued the bulletin, setting out directions, appellant no
longer had control of its performance. It no longer had the opportunity to
pursue the option of finding its own way of complying with the contract. The
VA action in denying appellant that opportunity constituted a change. Moreover, thereafter, appellant made its disagreement with the VA position clear,
but the VA did nothing to change its position.
In finding the VA action to be a change, we are mindful of the argument that
appellant had a duty to inquire because of the “note” in the Warren letter.
However, it is critical to our decision that Warren’s statement as to a possible
conflict only involved one potential supplier, RPM. That is particularly significant, because testimony of government witnesses has led us to conclude that
there were likely other manufacturers who could have provided a conforming
PIB roof and it was likely that those manufacturers would have been willing
to provide a warranty that would not have been voided due to setting insulation in asphalt.
The fact that appellant’s bid had contemplated using the RPM roof does not
change our view. A contractor is not obligated to stay with its intended bid, if
after bidding it learns that due to mistake, improvident analysis, or changed
conditions it needs to move to an alternate (but contract compliant) means of
performance in order to comply with the contract. As long as the contractor
performs in compliance with the specifications, it has the right to proceed as
it finds best, even where that varies from how it bid. That is particularly the
case where, as here, appellant appeared to have other options.
In Shirley Construction Corp., ASBCA 46670, 94-2 BCA ¶26,868, at 133,690,
the Armed Services Board of Contract Appeals addressed the relationship
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between a claimed conflict and a contractor’s right to perform. There, the
Government asserted that there was a conflict between the contractor’s reading of the specifications and a clear specification requirement as to a required
wind resistance warranty. Specifically, the Government claimed that the contract required a warranty that covered damage from sustained winds up to
seventy-five miles an hour, and such a warranty was only available from the
manufacturer specified in the contract if the contractor employed a combined
system of roof application. The Government contended that appellant’s reading, which was otherwise reasonable, did not result in the needed combined
system, and therefore, the appellant’s reading created a patent conflict with
the warranty. In addressing the matter, the board said the following:
We cannot conclude the requirement of the 75 mph warranty
created an obvious conflict. Indeed we believe the 75 mph warranty was a clear and unambiguous contract requirement the
successful bidder was obligated to supply under any interpretation of the installation specifications. Whether it was attainable under appellant’s interpretation from a manufacturer other
than JPS is not discernable from this record. However, respondent’s directions to appellant effectively precluded appellant from pursuing its own interpretation and attempting to
provide a 75 mile per hour sustained wind warranty. In this
regard, we note respondent’s directions to appellant were focused on the method with the warranty to be complied with “in
addition” as part of the combined system installation required
under respondent’s interpretation.
In Shirley, the board ruled in favor of the appellant, even though it could not
discern from the record whether the appellant would have been able to secure
the disputed warranty and thereby proceed as it planned.
In summary, while we recognize that on the disputed contract, appellant initially intended to use the RPM roof, and that the combination of that roof and
the use of asphalt was incompatible (at least on this facility), the fact remains
that the contract permitted appellant to pursue finding an alternate roofing
manufacturer (even contrary to how it bid). Had it had that option, it is likely
that it could have provided asphalt and otherwise fully complied with the
contract. We find the VA’s actions in directing the use of adhesive, instead of
asphalt, to be a change.
Appellant has claimed $56,004.76. In reviewing the evidence on quantum, the
primary disputes involve the comparative costs of adhesive versus asphalt
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and the comparative labor costs for placing the insulation with one product
versus the other. On both material and labor, we find appellant’s evidence to
be significantly more convincing. The bulk of appellant’s claim is the material
cost differential between the $43,200 paid for adhesive versus the $7000 expected to have been expended for asphalt. As to the cost of adhesive, there
was no real dispute that it cost $216 per pail. While the VA challenges appellant’s pricing of asphalt, the VA provides no credible evidence of a substitute
number. In fact, the only credible contemporaneous information as to the
price of asphalt was provided by appellant. It showed the cost in late December to be approximately $475 and in May to be as high as $700. In evaluating
this claim, we accept the price for asphalt of $500 a ton, as claimed by appellant. We find that price is in line with the firm price it had up until the end of
December 2007 and further find that given an October award, that firm price
should have held. Finally, the adhesive price used in the claim is the early
January 2008 price and therefore, by using a late December date for asphalt
pricing, we are using comparable time frames. As to labor, we find the VA
evidence as to labor costs to be second hand, on its face unreasonable, and the
VA estimate based on it to be incapable of logical analysis. In contrast, appellant’s numbers for adhesive and asphalt, particularly in comparison to each
other, appear generally reasonable. Additionally, appellant provided sufficient data to allow a critical analysis of its labor costs.
As to the VA’s contention that because of the modification deleting part of the
roof, we must reduce appellant’s claim, we again find in favor of appellant.
While some roofing was deleted, the fact is that in pricing the deletion, appellant gave the VA a credit based on laying the insulation with adhesive. Now
that we have found that the requirement for adhesive was a change, appellant is entitled to recoup the difference between the credit it gave the VA for
adhesive and the credit it would have given if it had been priced on the basis
of using asphalt.
Finally, we find that interest should start on April 22, 2008, the date on
which appellant first identified the dispute as a claim.
Decision
Based on the foregoing, we GRANT the appeal in the amount of $56,004 plus
interest under the Contract Disputes Act, 41 USC §7109 (as amended by Pub.
L. No. 111-350, 124 Stat. 3677, 3825-26 (2011).
Howard A. Pollack, Board Judge
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I concur:
Anthony S. Borwick, Board Judge
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Stuyvesant Dredging
89-3 BCA 22,222
September 11, 1989
Appearances for Appellant: Marc J. Fink, Esq., David F. Smith, Esq., Dow,
Lohnes & Albertson, Washington, D.C. Appearances for Respondent: Frank
Carr, Esq., Chief Trial Attorney, Washington, D.C.; Gill Bass, Esq., Government Trial Attorney, New York, New York; Sharon W. Conklin, Esq., Government Trial Attorney, Norfolk, Virginia.
Opinion by Administrative Judge Jockisch
This is a timely appeal from a contracting officer’s final decision denying appellant’s request for an equitable adjustment based upon encountering an
alleged changed condition while dredging in the Rappahannock Shoal Channel under Contract No. DACW65-87-C-0038. A hearing of approximately one
week was held, and briefing of the appeal was completed in August, 1989.
This appeal is processed pursuant to the Contract Disputes Act of 1978, 41
USC Section 601, et seq.
Findings of Fact
1. On March 3, 1987, Contract No. DACW65-87-C-0038, New Work Dredging, Rappahannock Shoal Channel, Baltimore Harbor and Channels, Chesapeake Bay, Virginia, was awarded to Stuyvesant Dredging Co., in the estimated amount of $4,963,924. (R. 4, Tab 2). Notice to proceed was
acknowledged by the contractor on March 23, 1987, which established June
25, 1988, as the original completion date. (R. 4, Tab 2).
2. The following contract clauses are pertinent to this appeal:
a. General Provisions:
(1) G.P. 44, Disputes;
(2) G.P. 46, Differing Site Conditions;
(3) G.P. 50, Permits and Responsibilities;
(4) G.P. 59, Changes;
b. Special Provisions:
(1) Special Clause, SC-4, Physical Data,
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d. Conditions of dredging areas: The drawings show the condition of the channel at the time of the most recent survey, however, the depths will be verified by surveys made immediately
before dredging. The contractor may encounter obstructions on
the channel bottom during dredging operations, see paragraph
3.2 and 3.3 of the technical specifications. There are no structures or utility lines known to cross the contract area.
(2) Special Clause, SC-23, Insurance.
c. Technical Specifications:
(1) 3.2 Obstruction Identification: The contractor during dredging operation, may encounter obstructions on the channel bottom which may include but [sic] be limited to channel buoys,
concrete block anchors with chain, and similar materials. A
side scan sonar survey of the dredging area was performed by
the Norfolk District, Corps of Engineers during October and
November 1985. The results of this survey are shown on the
contract drawings. The contractor shall view the location and
description of these results as being interpretations of this survey and may not accurately represent actual conditions.
(2) 3.3 Obstruction Removal: If the contractor, during dredging
operations, encounters an obstruction he shall physically mark
the site and notify the dredge inspector. The contractor shall
make a reasonable attempt, as determined by the contracting
officer, to remove it from the water and transport it to the
Craney Island Landfill, Portsmouth, Virginia or a contractor
furnished disposal area approved by the contracting officer,
whichever is more economical. If Craney Island is used, the
contractor shall comply with the regulations governing its use.
These regulations are available from the Operations and
Maintenance Branch, Norfolk District, Corps of Engineers. The
extra handling cost shall be negotiated with the contracting officer. If removal cannot be completed as above, the obstruction
will be considered within the purview of Contract Clause —
DIFFERING SITE CONDITIONS.
(3) 3.4 Additional Information: Additional geophysical information is available for review by interested bidders in the
Dredging Management Branch, Norfolk District, Corps of Engineers. This Information consists of a report entitled: Balti-
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more Harbor and Channels 50 Ft. Project Geophysical Foundation Exploration Report, dated February 17, 1978.
d. Contract Drawings:
(1) Contract Drawing No. H-50-10-12 (1-4) — Rappahannock
Shoal Channel-Plans for new work dredging-Survey of June
and July 1986.
(2) Contract Drawing No. H-50-10-12 (5) — Rappahannock
Shoal Channel-Plans for new work dredging-Subsurface Exploration.
(3) Rappahannock Shoal Channel — Plans for new work dredging-Rappahannock Shoal deep disposal area (alternate)-Survey
of October 1984.
None of these drawings portrays any information dealing with debris, shells,
armament, or obstructions to be encountered in the dredging area. Basically,
they contain boring data for the new work dredging.
Bid Preparation
3. Upon receiving the invitation for bid documents in January, 1987, Mr. Ian
Andersen, president of Stuyvesant Dredging, coordinated the preparation of
its bid. (Tr. 283, 284). The bid was based upon using the dredge Stuyvesant,
which was a state-of-the-art, high-technology vessel. It was the largest hopper-dredge in the United States. (Tr. 284). Mr. Andersen considered the work
under this invitation to be straight forward, uncomplicated, and easy dredging for a ship of the Stuyvesant’s capabilities. (Tr. 289). He anticipated encountering debris and rubbish. (Tr. 291). His estimate was based on completing the contract work in 12 weeks, rather than the 440 days for completion
provided in the bidding documents. (Tr. 292).
4. When preparing the bid, Mr. Andersen knew that the project was for new
work dredging, as the bid documents indicated the work to consist of widening and deepening a smaller existing channel. (Tr. 295). From navigation
charts he consulted prior to bid, he was informed that the dredging was to
take place in an area which had been in the past and was presently utilized
as a firing range by the Navy. (Tr. 305). Prior to bid, the appellant knew of
the likelihood of dredging armament. (R. 4, Tab 15).
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Contract Dredging
5. After award of the contract, the contractor began dredging with the hopper-dredge, Stuyvesant, on March 12, 1987. (Tr. 22, 79). This hopper-dredge
utilized a drag arm which acted as a huge vacuum cleaner to suck up the material to be removed. (Tr. 18). The material went to the pump-room where an
impeller, enclosed in a pump case housing, moved the material into various
lines which emptied into the hoppers. Then, the material was removed from
the hoppers and placed in the disposal area. The vacuum opening of the drag
arm was approximately 17 inches square. The shape of the pump-case housing was that of an oblong, hollow metal container of approximately 12 feet in
height and 36 inches in width. It was made of a four inch thick, heavy, brittle
metal. (Tr. 47, 104; Appellant’s Exh. 11). The pump-case housing would be
periodically replaced as being worn. (Tr. 105). The enclosed impeller was
made of a ductile metal, which was not as brittle as the casing. (Tr. 218). The
impeller was worn but not damaged. (Tr. 70).
6. Before dredging, the captain of the Stuyvesant reviewed the navigation
charts and determined that the dredging would be in a military firing range
area. (Tr. 278). Though he had never dredged in the Rappahannock shoals
area before, he had dredged in military waters previously without incident,
even though having dredged up small armaments. He was not concerned
about dredging in the area of the firing range. (Tr. 250). As he stated in a
published article after the incident,
Whenever you’re around a military port, there’s a danger of
picking up ordnance. We’ve pulled it up before, but it never
went off. (R.4, Tab 14).
7. The dredging went as expected by the contractor when it bid the job. As
stated by Mr. Andersen, “Everything went as foreseen otherwise.” The otherwise applies to the incident of May 28, 1987, which will be detailed later.
(Tr. 304). During the period prior to May 28, 1987, the Stuyvesant dredged or
encountered various items, such as tires, airplane parts, a steel roller, sinkers, anchors, crab traps (even in the middle of designated danger areas), an
old steel buoy, anchor chains, and other assorted debris and trash. (Tr. 55,
56, 94, 95, 98, 99, 361). All who testified at the hearing indicated that there
was no limit to the type of trash and debris likely to be found in new work
dredging. (Tr. 271, 331, 367). The appellant never gave a notice of a differing
site condition to the government because of any of these encounters.
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8. Before May 28, 1987, the contractor dredged projectiles and ordnance,
during this job. On March 13, 1987, a piece of ordnance was dredged and disposed of. (Tr. 78). On March 16, 1987, the crew removed a five inch projectile.
(Tr. 78, 92, 258). Though the captain and crew knew of the dredging of ordnance, no notice of a differing site condition was given the contracting officer.
(Tr. 276). On April 8, 1987, an explosion in the delivery line resulted in moving the dredge to the dump site to perform repairs. (Tr. 81, 82, 258). The
shutdown for repairs lasted approximately 19 hours. (Tr. 81). On April 10,
1987, another severe bang was heard which caused two cracks in the pipe
which required repair. (Tr. 260). On May 8, 1987, another 5 shell was
dredged. (Tr. 92). No notice of a differing site condition was given by appellant to respondent after these incidents. (Tr. 87). The incidents were considered by the dredge master as “nothing unusual.” (Tr. 79). Mr. Andersen was
aware that ordnance was being picked up by the dredge, but he did not inform the contracting officer. (Tr. 304).
9. The contractor never considered putting a screen on the drag head after
these incidents, as dredging efficiency would be impaired significantly. (Tr.
101, 102, 141, 322).
Damage to Pump Casing
10. On May 28, 1987, at 4:00 a.m., a sharp explosion occurred on board the
dredge Stuyvesant. The dredge-master, in charge of the bridge at that time,
checked the gauges, which appeared normal and turned the pumps, which
had been running at 140 RPMs, to idle. (Tr. 21, 61). He ordered the drag arm
to be raised from the bottom and went to the pump-room. (Tr. 22). The pumproom is unmanned and operated from the bridge. (Tr. 114).
11. Though getting to the pump-room within a minute, he found significant
flooding of the pump-room. Approximately eight feet of water, which was still
rising, was encountered. (Tr. 23). He had the dredged material jettisoned, the
pumps shut down, and the flushing line valves closed. (Tr. 25, 40, 41, 151).
He had pumps brought in to pump out the pump-room and had the vessel
moved to shallow ground as a precaution. (Tr. 128, 149). The pump-room was
not pumped successfully until a private marine contractor provided additional pumping capacity. (Tr. 128).
12. He did not sound a general alarm, as he did not consider the ship in real
danger of sinking. (Tr. 149). Some other members of the crew were awakened
by the explosion. He noted that, there had been previous bangs and jolts,
though none were of this magnitude. (Tr. 24).
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Investigation of Incident
13. After the situation was under control and after the water was removed
from the pump-room, the contractor and Coast Guard, which had responded
to the incident report, found four or five cracks in the pump shell casing. (Tr.
42, 48). The cracks were approximately 3/4 wide and were found at various
places on the shell casing. (Tr. 44). The large bolts holding the shell casing
together were stretched not sheared. (Tr. 57).
14. Within two to three hours of the accident, the Coast Guard had an investigator on the Stuyvesant. (Tr. 329). His testimony confirmed his findings
stated in the official report. He noted that, from statements given by the
crew, the contractor had been encountering periodically, small ordnance and
shudders and bangs while dredging. (Tr. 332). He found no evidence of exploded ordnance in the damaged area, through he found pieces of ordnance in
the spoil area. (Tr. 337). All who investigated asserted that the definitive
cause of the accident may not be determined with 100% finality, as the dredging master had dumped the dredged material for safety reasons at the time of
the incident. (Tr. 151). No one indicates this was other than a prudent action
taken at that time, under the then-existing circumstances.
15. The Coast Guard investigator did find in the cracked pump casing a compressed gas cylinder bottle, ripped in pieces, which he officially concluded had
ruptured and exploded inside the pump shell casing. (Tr. 338). He classified
the cylinder bottle in his report as debris. (Tr. 338). He noted the area being
dredged was marked on the navigation charts as being a danger area. (Tr.
342). His testimony concluded that there was an explosion, that the cylinder
was the cause of the explosion, and that the conclusions in his initial report
were still his position. (Tr. 340).
16. Appellant’s expert, though concurring that no one could be 100% certain,
essentially supported the Coast Guard’s conclusion. He noted the peeling
back or unwrapping of the 51 inch long, nine inch diameter, and 1/4 thick gas
cylinder, and he concluded that this only could be caused by a great amount
of internal force. (Tr. 190). He asserted that the pattern of the rupture was
violent. (Tr. 200). As pieces broken from the cylinder were found in the pump
casing, he concluded that the rupture must have taken place inside the casing, as it would be unlikely to dredge the pieces of an already ruptured gas
cylinder, at the same time and place. (Tr. 201).
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17. Appellant’s expert concluded that a violent explosion occurred and that
the cylinder was the cause. (Tr. 202-216). He based much of his determination on the appearance of the unwrapping of the cylinder bottle, on the random cracking, not localized, of the pump shell casing, on the stretching rather
than the shearing of the bolts, and on the calculated potential explosive capacity of the gas cylinder. (Tr. 202-216). He noted that the energy released by
the gas cylinder was “somewhere less than one pound TNT equivalence” and
that “military explosives” are extremely effective against brittle material. (Tr.
212, 218).
18. In explaining why the impeller was not damaged if such a violent explosion had occurred inside the pump, the consultant stated that the impeller
was not made of the same material as the brittle casing material, that the
casing was not a closed vessel which could relieve pressure on the impeller,
and that the dynamics of explosion in water can bring about a pass through
effect. (Tr. 218, 226-229).
19. During the hearing, the government asserted that the damage was caused
by the jamming of the cylinder between the impeller and the casing, rather
than an explosion. (Tr. 11). However, the government’s evidence was, at best,
lacking on this point, and this position has been abandoned in the brief.
20. By the testimony of all parties, the dredging of a gas cylinder from the
ocean floor is not as common an occurrence as implied by the contracting officer’s decision (R.4, Tab 2; Tr. 248, etc.); but, the finding of almost anything
in new work dredging is not unusual. (See previous findings).
21. In an article entitled Live Explosives Put Vessels at Risk, published on
February 28, 1988, in the Virginia Pilot newspaper, the captain of the Stuyvesant and the president of Stuyvesant Dredging Company were quoted as
indicating that they had dredged up live ordnance and that fragments of the
exploded ordnance had been recovered. (R.4, Tab 14).
Positions of Parties
The positions of both parties shifted from the time of filing pleadings and the
Rule 4 papers and the beginning of the hearing of this appeal. At hearing,
appellant no longer asserted an ordnance explosion and denied a gas cylinder
explosion. Its position became that the gas cylinder exploded causing the
damage to the pump-shell casing and that the encountering of the gas cylinder was either a type I or II differing site condition.
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At hearing, respondent no longer asserted that an explosion occurred caused
by a gas cylinder, but rather that no explosion occurred and the damage was
caused by the impeller jamming the cylinder against the housing of the
pump. In its brief, respondent abandons this position and concurs that the
gas cylinder explosion ruptured the pump housing. Respondent contends the
dredging of the gas cylinder and its explosion in the pump was not a differing
site condition under the contract clause.
Decision
Similar to the assertions of both appellant and respondent, this Board cannot
conclude, with 100% certainty, what happened in the pump room of the Stuyvesant on the morning of May 28, 1987. However, the Board finds the preponderance of the evidence to be that a gas cylinder was dredged from the
floor of the Bay and was exploded in the pump room. The random cracking of
pump casing, the stretching of the bolts, the unwrapping of the gas cylinder,
and the finding of the cylinder and some pieces of the same cylinder in the
pump housing are strong indications of the cylinder’s exploding and damaging the pump casing.
The Coast Guard investigation immediately after the incident concluded the
gas cylinder exploded and caused the damage in the pump room. The explosive expert concluded, from all available information, that the gas cylinder
was capable of causing and did cause the damage, when it exploded. The government’s position at the hearing of no explosion is not supported by the evidence. Further, the failure to find any evidence of exploded ordnance in the
pump room virtually rules out an ordnance explosion.
Therefore, from the physical evidence presented and based upon the opinions
of the technical and investigatory experts, the Board finds that the compressed gas cylinder exploded and caused the damage in the pump room.
Having found as above, the Board must consider the more difficult question
of whether the incident of May 28, 1987, is compensable under the differing
site conditions clause of the contract. The appellant posits that the encountering of a compressed gas cylinder that exploded and caused severe damage
qualifies as either a Type I or Type II differing site condition.
In general, appellant urges that the encountering of an object which causes
damage to the contractor’s physical property is justification for an equitable
adjustment under the differing site conditions clause of the contract. In this,
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appellant, we believe, either misconstrues or overstates the intent and applicability of the differing site conditions clause. Appellant’s position would
ask us to construe the differing site conditions clause so as to eliminate any
business risk to a contractor. Essentially, it would have us convert a fixedpriced contract into a cost contract. This goes beyond the intended scope of
the clause and the way the clause has been interpreted in the past by boards
and courts. The cases cited by appellant are not persuasive in that they are
not analogous to the factual situation in this appeal.
For the contractor to prevail under the differing site conditions clause, it
must demonstrate that the condition encountered could not have been anticipated from a reasonable reading of the contract documents, from a reasonable site investigation, or after consideration of the character of the contract
work and of conditions which normally inhere therein, all as viewed from the
standpoint of a reasonable, experienced, and knowledgeable contractor. Fort
Sill Association v. United States, 183 Ct.Cl. 301 (1068); Perini Corp. v. United
States, 180 Ct.Cl. 768, 381 F.2d 403 (1967); Merritt-Chapman & Scott Corp.
v. United States, 174 Ct.Cl. 250, 315 F.2d 622 (1966). Appellant bore the burden of proving by a preponderance of the evidence the validity of its claim.
Techno Engineering and Contracting Ltd., ASBCA No. 32938, 88-1 BCA
¶20,351. This the appellant did not do.
Upon reviewing the appellant’s claim of a type I differing site condition based
upon encountering a latent physical condition which differed materially from
that indicated in the contract, the contract provisions and indications are of
paramount importance.
The appellant was informed by the contract documents that the project was
for new work dredging, that the contractor might encounter major obstructions such as channel buoys, concrete block anchors with chain, and similar
materials; that the location was the Rappahannock Shoal area; and that the
material to be dredged was of a certain type. The appellant was not directly
told in the contract that the dredging was in a military firing range area;
however, a site investigation and a review of navigation charts, which is
normal bidding practice and which was performed in this case, revealed the
military nature of the area and the firing range in which the dredging was to
be performed. Significantly, the contract was silent as to the type of debris or
trash likely to be encountered in dredging the new area.
The contractor’s reliance on clause 3.2 of the technical provisions as support
for its type I claim is misplaced. The clause lists major obstructions to be en-
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countered and does not attempt to enumerate every item possible to be found
in a new work dredging project. Testimony of the appellant’s own witnesses
defeats the notion that listing every conceivable item was possible. The uniform testimony was that one expects most anything when dredging in new
areas. They noted various unique items, such as airplane parts, etc., dredged
on this job. No notice that these various items constituted a type I differing
site condition was ever given to the contracting officer by the contractor. Other than the fact of the cylinder’s exploding, the cylinder was no different from
any of these other items, which the appellant never noted as a type I differing
site condition.
The contemporaneous actions of the parties evidencing their interpretation of
the contract, prior to a dispute are to be given great if not controlling weight.
Occupacia Corporation, ENG BCA No. 5382, 88-2 BCA ¶20820; Coastal Dry
Dock & Repair Corp., ASBCA No. 31894, 87-1 BCA ¶19618; Thomason Industries, ENG BCA Nos. 4993, 5011, ¶5012; 88-1 BCA ¶20345; Kuk Dong Construction Co., ENG BCA 5069, 87-1 BCA ¶19,574. In this case, appellant gave
no notification of encountering a differing site condition prior to the explosion, even after dredging a plethora of items including a number of pieces of
ordnance and even after suffering significant explosions requiring major repairs. Thus, the Board concludes the appellant did not contemporaneously
consider that the contract clauses, which listed certain major obstacles, were
intended to be considered as a total listing of items to be encountered while
dredging the project area. Nor did appellant consider more specifically that
the dredging of ordnance constituted a differing site condition. Potentially,
the ordnance dredged was capable of causing even more serious explosions
than that caused by the gas cylinder.
In addition, reliance on the contract terms by the appellant must be demonstrated to establish entitlement to recover for a differing site condition. See
e.g., Guy F. Atkinson Co., ENG BCA No. 4693, 87-3 BCA ¶19,971; Dico Corporation, ENG BCA No. 4945, 87-1 BCA ¶19462; Raimonde Drilling Corp., ENG
BCA No. 5107, 86-3 BCA ¶19,282; Alaska Contractors, Inc. v. United States,
193 Ct.Cl. 850 (1971). In this case, the appellant has not demonstrated that it
relied, much less reasonably relied, on contractual indications (or the absence
thereof) that potentially highly explosive debris would not be encountered. Cf.
Spruce Construction Co., ASBCA No. 30679, 86-3 BCA ¶19,106; Peter Kiewit
Sons/J.F. Shea Co., (Joint Venture), ENG BCA No. 5086, 86-2 BCA ¶18,992.
When a contract is totally silent as to a particular condition, there can be no
type I differing site condition. Tricon Triangle Contractors, ENG BCA No.
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5113, 88-1 BCA ¶20317; Donovan Construction Co., ASBCA No. 6439, 63 BCA
¶3753; S.T.G. Construction v. United States, 157 Ct.Cl. 409 (1962). This contract does not attempt an exhaustive listing of items to be found and dredged.
In fact, this would be impractical, if not impossible, particularly given the nature of the new work dredging work required. As the evidence clearly supports, it is well understood in the dredging industry that virtually anything
may be dredged in new work dredging. This is even the more so in this case
because appellant was dredging an area known to be littered with potentially
explosive armament.
Since the obstruction clause listed only major obstructions and not all types
of debris to be found in new work dredging, since the appellant expected and
encountered all sorts of unusual items without giving notice of a differing site
condition, and since the contract was silent as to what debris and trash might
be encountered, the appellant has not met its burden of proving that the exploding cylinder constituted encountering a type I differing site condition.
J.D. Abrams, ENG BCA No. 4332, 89-1 BCA ¶21,379; Dawson Construction
Company, Inc., VABCA Nos. 2000, 2016, 86-3 BCA ¶19,322.
Turning to the type II differing site condition, an unknown and unusual
physical condition at the site differing materially from those ordinarily encountered and generally recognized as inherent in the work such as that required by the contract, a comparison of the appellant’s reasonable general
expectations and of the appellant’s actual conditions encountered is required.
When asserting a type II, differing site condition claim, the appellant has a
relatively heavy burden of proving the encountering of conditions “of an unusual nature, differing materially from those ordinarily encountered and generally recognized as inhering in work of [this] character.” Kent Nowlin Construction, Inc., ENG BCA No. 4681, 87-3 BCA ¶20147; Zinger Construction
Co., ASBCA No. 28788, 87-3 BCA ¶20196; Charles T. Parker v. United States,
433 F.2d 771 (1970). To prevail, the Appellant’s evidence must demonstrate
what is normally to be expected and what was encountered was materially
different from the norm. Guy F. Atkinson, ENG BCA No. 4693, 87-3 BCA
¶19,971. Though appellant urges that it encountered a totally unforeseen situation, the testimony during the hearing and the actions taken by the contractor during the time of contract performance contradict this position.
As emphasized above, the contractor knew it was dredging in a military firing zone, it was performing new work dredging, and it was going to encounter
a wide and possibly dangerous variety of debris and trash.
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The appellant prior to bid and the appellant’s captain prior to commencing
dredging operations reviewed the contract plans and navigation charts. Appellant knew it was performing new work dredging in a military firing zone.
A reasonably experienced contractor, which appellant certainly was, would
know the likelihood of dredging unusual items and ordnance. In fact, the testimony of appellant’s witnesses thoroughly supports this knowledge. The
witnesses testified that, when performing new work dredging, they had encountered most everything, and when working in military zones, they had
dredged various pieces of armament. In an interview, shortly after the incident, the captain commented that it was not unusual to dredge live shells in
military ports. (Finding No. 6).
Further, the contemporaneous actions of the appellant, prior to May 28, 1987,
support the conclusion that appellant did not encounter an unknown or unusual condition. Though having dredged armament, steel roll bars, crab traps,
anchors, etc. and though having shudders, bangs and explosions, which required significant downtime and repair, the appellant gave no notice of encountering type II, differing site condition or took any action to stop dredging
or to protect its dredging facilities from the ordnance. The only difference
with respect to the gas cylinder was that the location and extent of damage
resulting from the explosion was greater than previously experienced. The
gas cylinder, if it had not exploded (or had caused less severe damage when it
exploded), would not have been unique or different from many other items
dredged or expected to be dredged in a new work dredging area project in a
heavily traveled area and known military zone.
On the facts presented, in particular, the contemporaneous actions and
statements of the appellant, and the reasonable expectations of an experienced dredger on a new work dredging project in a known military zone, the
appellant has not met its burden of demonstrating the existence of a type II
differing site condition. The appellant knew and assumed the risks of new
work dredging and of dredging in a military port area. The possibility that
one of the explosions caused more extensive damage than appellant might
have anticipated did not shift the risk of loss to the government. Neither encountering the gas cylinder nor its explosion constituted a Type II condition
in the circumstances here.
Though the appellant posits the theory that the respondent had special
knowledge which it did not share with the bidders of this project, the evidence generated during the hearing belies that position. The appellant knew
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everything the respondent knew about the area to be dredged. Both the preparer of the bid and the dredge master testified to knowing the area and the
potential problems of new work dredging in a military zone. There is nothing
in the record to demonstrate superior knowledge of the government withheld
from the contractor.
Respondent has raised the issue of appellant’s insurance indicating the damage to the equipment to be a normal business risk, since appellant was compensated by its insurance company for the damage to the equipment. Though
this issue has ramifications which concern the Board, it is not reached in this
appeal as the Board has found no differing site condition upon which compensation could be based.
During the hearing and in the briefs, appellant and respondent argued vigorously as to whether a one time incident, as the explosion of the gas cylinder
in the present case, ever can fall within the differing site conditions clause. A
review of the cases cited by appellant as supporting the one incident differing
site condition shows them not persuasive. A review of the cases cited by respondent to support no one incident differing site condition shows them also
not conclusive. Even the case cited by respondent as “being on all fours” was
a seven to six decision, with neither the majority nor dissenting decision being very elucidating. Case American Construction Co., ASBCA 274, 4 CCF 60,
944 (1950). As the Board has found no differing site condition in this appeal,
we leave for legal theorists and for future classroom speculation the question
as to whether there ever could be a one incident differing site condition situation.
Conclusion
For the reasons stated above, appellant’s appeal is DENIED.
Wesley C. Jockisch, Administrative Judge.
We concur
Richard C. Solibakke
Robert T. Peacock
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Walser
v.
United States
23 Cl.Ct. 591
August 2, 1991
John W. Kelly, III, Selma, Ala., for plaintiff. Lisa B. Donis, Washington, D.C.,
with whom was Asst. Atty. Gen. Stuart M. Gerson, for defendant.
Margolis, Judge.
This government contracts case is before the court on the defendant’s motion
for summary judgment. The plaintiff contracted with the government to clear
debris from a stretch of land alongside a river in West Virginia. During the
course of performance, the plaintiff claims that it encountered differing site
conditions, including varying water levels in the river, a state ban on burning
tires, and beavers and people cutting down trees. The plaintiff alleges that
these differing site conditions caused it to perform extra work and incur additional costs, and seeks an equitable adjustment in the contract price. The defendant argues that none of the conditions justify an equitable adjustment for
differing site conditions. After careful consideration, and after hearing oral
argument, this court grants the defendant’s motion for summary judgment.
Facts
On September 30, 1986, the plaintiff, Jack Walser d/b/a Jack Walser Construction Company (“Walser”), entered into a contract with the Soil Conservation Service (“SCS”) of the United States Department of Agriculture to remove debris on a section of the Cheat River in West Virginia. The contract
price was $120,432, and the contract was to be completed within 64 days after the notice to proceed. Walser began work on the contract site on October
15, 1986, and completed the work in 65 days. The work was timely after a
one-day extension. The results were accepted by the SCS on December 18,
1986.
Walser filed a claim with the contracting officer on January 5, 1987, seeking
an equitable adjustment to the contract price. The claim was denied by the
contracting officer on January 15, 1987. Walser then filed suit in the United
States Claims Court, but that suit was dismissed without prejudice for failure to submit a properly certified claim to the contracting officer. On Septem-
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ber 5, 1989, Walser resubmitted a certified claim to the contracting officer,
which was denied on September 19, 1989.
In this court, Walser claims that it is entitled to an equitable adjustment of
the contract price under paragraph H-4 of the contract due to differing site
conditions. Walser asserts five differing site conditions as grounds for its equitable adjustment claim: (1) the water level of the river fell between the day
the site was shown for purposes of bidding and the first day of work on the
site, leaving considerably more debris to be cleared than was visible at the job
showing; (2) a state ban on the practice of using tires to keep the debris pile
burning was enforced, making it more difficult to eliminate some of the
waste; (3) excessive rainfall in November and December 1986, washing additional debris into the construction area which Walser removed; (4) beavers
cut down trees, leaving additional debris which Walser cleaned up; and (5)
unauthorized people entered the job site and cut down trees for firewood,
leaving additional debris which Walser cleared.
As a result of these conditions, Walser claims that the contract was completed in 65 days, rather than the projected time of 20 days. Walser seeks an equitable adjustment of $124,853.13, plus interest, which it contends represents
the amount of extra work that was required due to the differing site conditions.
Discussion
The contract provides that there are two types of differing site conditions
which could lead to equitable adjustments:
(1) subsurface or latent physical conditions at the site which
differ materially from those indicated in this contract, or (2)
unknown physical conditions at the site, of an unusual nature,
which differ materially from those ordinarily encountered and
generally recognized as inhering in work of the contractor provided for in the contract.
Contract ¶H-4 (FAR 52.236-2) Differing Site Conditions. In a Type I case, the
issue concerns whether the site condition differs from a representation made
about the site in the contract itself. See, e.g., Servidone Construction Corp. v.
United States, 19 Cl.Ct. 346, 360 (1990), aff’d, 931 F.2d 860 (Fed.Cir. 1991);
Dawco Construction, Inc. v. United States, 18 Cl.Ct. 682, 687 (1989), aff’d in
part and rev’d in part on other grounds, 930 F.2d 872 (Fed.Cir. 1991). In our
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case, the contract contained no representations concerning the conditions at
issue.1 Therefore, our case is a Type II case.
Walser must prove that the physical conditions on the site were unknown
and unusual. See Charles T. Parker Construction Co. v. United States, 193
Ct.Cl. 320, 333, 433 F.2d 771, 778 (1970). In a differing site condition case, “a
Government construction contractor seeking to establish a “category two”
changed condition is confronted with a relatively heavy burden of proof.” Id.
In proving its case, Walser must show that it did not know about the physical
condition, that it could not have anticipated the condition from inspection or
general experience, and that the condition varied from the norm in similar
contracting work. Lathan Company, Inc. v. United States, 20 Cl.Ct. 122, 128
(1990) (citing cases). This court will analyze the five alleged differing site
conditions to determine whether an equitable adjustment to the contract is
warranted.
Water Level
Walser argues that the water level of the river fell between the day the site
was shown for purposes of bidding and the first day of work on the site, leaving considerably more debris to be cleared than was visible at the job showing. Walser contends that this situation represents a different site condition
warranting an equitable adjustment. Walser also asserts that the level of the
Cheat River at the time of the job showing in comparison to the water level at
the time when contract work began is a genuine issue of material fact in dispute precluding summary judgment. In this connection, Walser contends that
it is not reasonable to expect that Walser should have anticipated a reduction
in the water level and should have anticipated the nature and extent of the
additional debris to be removed.
The contract mandates that it is the responsibility of the contractor to take
actions to ascertain “the uncertainties of weather, river stages, tides, or similar physical conditions at the site,” and also that the “failure of the Contractor to take the[se] actions ... will not relieve the Contractor from responsibility for estimating properly the difficulty and cost of successfully performing
the work, or for proceeding to successfully perform the work without addi1
Walser argues that a Type I analysis may be used when the only representation to the
contractor took place on a visit to the site. However, case law makes clear that “[a] contractor will not be awarded an equitable adjustment for a differing site conditions claim
unless the contract indicated specifically what the conditions were that one might expect.”
Dawco Construction, 18 Cl.Ct. at 688; see P.J. Maffei Building Wrecking Corp. v. United
States, 732 F.2d 913, 916 (Fed.Cir. 1984).
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tional expense to the Government.” Contract ¶H-1 (FAR 52.236-3) Site Investigation and Conditions Affecting the Work. To prove its case, Walser must
show that it encountered a situation materially different from the “known” or
the “usual.” See Charles T. Parker, 193 Ct.Cl. at 333, 433 F.2d at 778. Even
assuming that the water level changed from the time of the job showing to
the initiation of work, the government presents unrefuted evidence2 that the
river flow conditions during October through December 1986 were within a
“normal” range and that there were no occurrences of high or low water levels. Under the contract, Walser had a duty to take into consideration the uncertainties of river stages and other physical conditions in formulating its
bid. This duty encompassed taking into account normal changes in the water
level and river flow. Given this duty, in estimating the contract price Walser
should have anticipated usual reductions in the water level and the resulting
additional debris to be removed. As a matter of law, this court rejects Walser’s water level argument as a ground for an equitable adjustment to the
contract price.
Tire Burning
Walser asserts that whether Walser encountered differing site conditions because it was prohibited from burning tires is a genuine issue of material fact.
Walser claims that other contractors performing similar work were permitted
to burn tires to assist in the disposal of debris. Walser argues that it is not
reasonable to expect that Walser should have known or anticipated that it
would be prevented from burning tires for the purpose of keeping debris
burning.
The court rejects Walser’s tire burning argument. An equitable adjustment
cannot be supported by this argument because the ban on burning tires was
not a changed physical condition as required by the differing site conditions
clause. See, e.g., Erickson-Shaver Contracting Corp. v. United States, 9 Cl.Ct.
302, 304 (1985) (“[A]n equitable adjustment will be granted where the contractor encounters unusual physical conditions differing materially from
those ordinarily encountered and generally recognized as inhering in the
work of the character provided for in the contract.” (emphasis added)). Furthermore, the contract states:
2
This evidence is in the form of an affidavit, attached to the government’s memorandum in
support of its motion for summary judgment, by John S. Weller, Area Engineer for the
Phillipi Area Officer of the Soil Conservation Service in West Virginia. Walser presents no
evidence to refute the affidavit.
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The Contractor shall, without additional expense to the Government, be responsible for obtaining necessary licenses and
permits, and for complying with any Federal, State, and municipal laws, *595 codes, and regulations applicable to the performance of the work.
Contract ¶13 (FAR 52.236-7) Permits and Responsibilities (emphasis added).
The contract also states that “[c]onstruction operations shall be carried out in
such a manner that erosion and air and water pollution are minimized. State
and local laws concerning pollution shall be complied with.” Contract ¶401(4)
Erosion and Pollution Control. The burning of tires was prohibited by West
Virginia state law. As a matter of law, an equitable adjustment is not available to Walser on the ground that it was prohibited from burning tires to assist with the disposal of debris because compliance with state environmental
laws was Walser’s responsibility under the contract.
Rainfall
Walser argues that whether excessive rainfall during the months of November and December 1986 caused the Cheat River to rise approximately nine
feet, causing additional debris to be deposited on the job site, is a genuine issue of material fact in dispute. This argument is similar to the water level
argument, except that Walser now argues that the rising of the river in November and December 1986, rather than the receding of the river earlier in
time, left additional debris which Walser removed.
Even assuming that the river rose during November and December due to
rainfall, the government submits an affidavit stating that the river flow conditions during October through December of 1986 were within a “normal”
range and that there were no occurrences of unusually high or low water levels. Walser presents no evidence to refute the government’s affidavit. Under
the contract, Walser had a duty to take into consideration the uncertainties
of weather, river stages and similar physical conditions in formulating its bid.
Contract ¶H-1(a) (FAR 52.236-3) Site Investigation and Conditions Affecting
the Work. This duty encompassed taking into account normal changes in the
weather, water level and river flow. Furthermore, case law indicates that the
differing site conditions clause generally does not cover weather conditions,
which are deemed to be acts of God, when neither party assumed the risk for
acts of God. See Spirit Leveling Contractors v. United States, 19 Cl.Ct. 84, 9596 (1989); Turnkey Enterprises, Inc. v. United States, 220 Ct.Cl. 179, 187-88,
597 F.2d 750, 754-55 (1979); Arundel Corp. v. United States, 103 Ct.Cl. 688,
711-12, cert. denied, 326 U.S. 752, 66 S.Ct. 90, 90 L.Ed. 451 (1945). Regarding
the height of the river, as the Court of Claims pointed out, “[t]he flow of the
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river and rainfall are so intertwined as to make it impossible to separate the
river conditions from the weather” and that weather “is not a risk which is
shifted to defendant via the changed conditions clause.” Turnkey Enterprises,
220 Ct.Cl. at 187, 597 F.2d at 754. Walser should have anticipated usual
changes in the water level and the resulting additional debris to be removed
in estimating the contract price. As a matter of law, the court rejects Walser’s
rainfall argument as a ground for an equitable adjustment to the contract
price.
Beavers
Walser asserts that whether beavers cut down trees, leaving additional debris to be cleared from the site after the contractor began work, is a genuine
issue of material fact in dispute. Assuming that beavers cut down trees and
left additional debris which Walser cleared, the question is whether Walser
could not have anticipated this condition from inspection or general experience, and whether the condition varied from the norm in similar contracting
work. See Lathan Company, 20 Cl.Ct. at 128. Walser’s counsel at oral argument admitted that beavers are indigenous to areas bounding rivers in West
Virginia. It is generally known that beavers cut down trees and build dams in
rivers and streams within areas populated by beavers. Therefore, the condition encountered by Walser was not unusual, should have been anticipated,
and should have been considered as part of Walser’s duty to ascertain factors
“generally recognized as inhering in work of the character provided for in the
contract.” See Central Florida Construction Co., IBCA No. 246, 61-1 BCA
¶2,903, at 15,163 (1961) (denying an equitable adjustment in a case where
mosquito infestation prevented work by a second shift because mosquitos are
indigenous to the Florida Everglades where the contract was performed, and
therefore mosquito infestation was neither unusual nor unanticipated); see
also Arizona Fence Company, Inc., IBCA No. 1144-3-77, 78-1 BCA 13,004
(1978) (denying equitable adjustment for site conditions that included damage to contractor supplies by wild animals).3
3
The conclusion that Walser is not entitled to an equitable adjustment is supported by the
government’s proposed finding of fact that Walser was informed that it would not be responsible for clearing any beaver-damage debris. Walser asserts in its statement of genuine issues that this fact is controverted. However, Walser points to no facts, affidavits, or
other evidence refuting the government’s allegation. Therefore, this court adopts the government’s proposed finding of fact that Walser was not obligated to clean up beaverrelated damage and holds that Walser is not entitled to an equitable adjustment for work
that Walser was not required to perform.
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People
Walser maintains that whether unauthorized people entered the job site and
cut down trees, leaving additional debris, is a genuine issue of material fact
in dispute. Assuming that unauthorized people entered the job site and cut
down trees, leaving additional debris that Walser cleared, the question again
is whether Walser could not have anticipated this condition from inspection
or general experience, and whether the condition varied from the norm in
similar contracting work. See Lathan Company, 20 Cl.Ct. at 128. A contractor
should know that at a job site of this type people will enter the property and
cut down trees for firewood and leave debris. This finding was especially true
at this job site which adjoins a roadway. Under the contract, Walser was required to take into account the “nature and location of the work” as well as
investigate and “satisf[y] itself as to the general and local conditions which
can affect the work or its costs.” Contract ¶H-1(a) (FAR 52.236-3) Site Investigation and Conditions Affecting the Work. The condition encountered by
Walser was not unusual, should have been anticipated, and should have been
considered as part of Walser’s duty to ascertain factors “generally recognized
as inhering in work of the character provided for in the contract.”
Conclusion
Based on the foregoing, this court concludes that none of the conditions encountered by the plaintiff in performing the contract justify an equitable adjustment to the contract price. Accordingly, this court grants the defendant’s
motion for summary judgment. The Clerk is directed to dismiss the plaintiff’s
complaint. Each party will bear its own costs.
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