Federal Construction Contracting Blog : Federal Construction Contracting Law Firm : Cohen Seglias Pallas Greenhall & Furman PC : Construction Law, Dredging and Claims

An Armed Services Board case, ADT Construction Group, Inc., involves an appeal from a contracting officer's final decision denying a claim for $826,725.16 and a 278-day time extension. The contractor had filed a claim for pre-construction delays arising out of a contract for the design and construction of a munitions maintenance facility at Nellis Air Force Base, Nevada. Although the contract in question was ultimately terminated for default and appealed to the Board (ASBCA No. 55358), the termination appeal was suspended pending the outcome of the appeal on the underlying delay claim. The Board obviously concluded that the merits of the underlying delay claim could have an effect on the merits of the termination for default.

Although the Board found that some of the delay was the fault and responsibility of the Government, we were particularly interested in the Board's conclusion about the contractor's right to pursue "fast track." After drafting the solicitation the government learned that the Department of Defense Explosives Safety Board ("DDESB") required 100% design of the entire project before it would review the plans. Thus, the drafters sought to modify the solicitation to remove all references to fast track as an option. The Board found that they "failed miserably at that task" and several references to fast track as an option remained in the solicitation when it was issued. ADT stated in its proposal that it would use the fast track method for design and construction.

The Board concluded that to the extent the contract was ambiguous in that regard, the contractor repeatedly gave notice when it said it wanted to do fast track and the government repeatedly ignored that notice. The evidence shows that the government never intended to allow fast track, and indeed its actions supported that intention, yet it failed to communicate those intentions to ADT. The government's utter silence when the contractor repeatedly raised the issue of fast track squarely put the burden on the government to respond during the design phase - and it did not. Therefore, the Board found that the contractor had a contract right to pursue fast track.

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In a recent decision issued on July 6, 2007, Appeals of FFR-Bauelemente + Bausanierung GmbH, ASBCA Nos. 52152, 54563, 54808, 54809, 55017, the Armed Services Board of Contract Appeals held that the government had shown that the Contracting Officer was “justifiably insecure about the contract’s timely completion” and that a termination for default was justified.  The CO and COR (Contracting Officer’s Representative) believed, based on experience with other Corps of Engineers barracks renovations, that nine months was needed for a contractor to perform the barracks renovation work.  After 113 days of the 290 day revised performance period (or almost 40% of the period) expired with little or no work accomplished by FFR (i.e., clearly less than 5% of contract work completed), the CO terminated FFR’s contract for default.  While over 40% of the original performance period had passed, FFR had not yet obtained necessary approvals to commence the initial item of renovation work under the contract, the performance of asbestos abatement. The lack of activity by FFR with respect to the contract obviously made the CO insecure about FFR’s timely completion of the barracks renovation work. 

The contractor appeared to be having difficulty procuring a subcontractor to perform asbestos abatement work, failed to meet numerous contract progress milestones (timely submission of a BLG, mobilization within 15 days of issuance of NTP, and timely submission of its asbestos training certificates and other contract submittals), and apparently did not possess a contract performance history with respect to the barracks renovation that instilled confidence in the Contracting Officer.  These facts constituted further tangible, direct evidence that the CO was “justifiably insecure about the contract’s timely completion.”  Thus, the Board concluded that the government has met its prima facie burden of proving it was justified in terminating FFR’s contract for default.

A default termination is a drastic sanction, which should be imposed and sustained only on “good grounds and on solid evidence.” E.g., Lisbon Contractors, Inc. v. United States, 828 F.2d 759, 765 (Fed. Cir. 1987).  Government contract provisions authorizing termination of a contract for default are a species of “forfeiture” and are to be strictly construed.  Forfeitures are not favored, and one who asserts that there has been a forfeiture is held to the letter of its authority.

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A recent decision by the Court of Federal Claims, AAB Joint Venture v. United States, (January 26, 2007), illustrates some of the subtleties of the Contract Disputes Act of 1978.  The contractor was awarded a design-build contract for a military storage complex.  The government provided a geotechnical report in the solicitation for the contractor’s use in preparing its proposal and subsequent design.  The contractor discovered, during construction, that the actual subsurface conditions differed materially from those represented in the government’s geotechnical report. Specifically, the report stated that the material was “limy dolomite rock, mostly massive and hard.”  However, the contractor discovered that there was less hard rock and more expansive, clayey material.  The latter material adversely affected the contractor’s plan to use shorter piles and spread footings for the building foundations.

The contractor submitted a certified claim to the contracting officer for the impact of the differing site conditions on the length of piles required for the perimeter of the structures, contending that the softer material required longer pile lengths.  When the government failed to issue a contracting officer’s decision, the contractor appealed to the Court of Federal Claims on the basis of a deemed denial of its claim. 

In its complaint, the contractor included a claim for the removal of unsuitable subsurface material in the footprint of the structures and requested a $412,000 equitable adjustment. The government objected to that part of the claim, arguing that the claim had not been presented to the contracting officer and, consequently, had not been certified. The government sought dismissal of the unsuitable material claim because the Court lacks jurisdiction to hear a claim that has not been presented to the contracting officer and certified. Continue Reading...

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A recently reported decision by the Armed Services Board of Contract Appeals underscores the necessity for bidders to review pre-bid data listed in the solicitation. In Mass Construction Group, Inc., ASBCA No. 55440, the contractor pursued a claim for a differing site condition, alleging that it had encountered a Type II condition, namely “unanticipated” groundwater flooding into its footing excavations.

The ASBCA, in denying the contractor’s appeal, made the following findings of fact:

1)  The solicitation advised bidders that subsurface data was available for review at a specified location. (the government’s contracting office).

2)  The subsurface data disclosed a groundwater table that existed between three and one half and six feet of the surface elevation.

3) The contractor did not review any of the subsurface data before submitting its bid and did not attend the pre-bid site visit.

4) The site conditions encountered by the contractor were quite similar to those disclosed in the subsurface drilling logs that the contractor neglected to review.

The ASBCA, therefore, found that the contractor had not established that it had encountered unanticipated site conditions. Significantly, the Board stated that the failure to review the subsurface data at the scheduled pre-bid site visit,” put Mass at risk of any unexpected subsurface conditions which it encountered.” 

The message in this decision is unmistakable: If the government’s solicitation advises potential bidders of subsurface data that is available for inspection, bidders must review this data or be willing to risk the potentially serious consequences of failing to do so.

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In the most recent edition of Defense AT&L, a magazine published by the Defense Acquisition University, author Wayne Turk discusses the skills that a competent project manager needs to possess in the 21st Century.  In addition to people, financial and scheduling skills, Turk emphasizes seven attributes of a good project manager - patience, wisdom, sense of humor, flexibility, creativity, understanding of the law of unintended consequences, and subject matter expertise.  While Turk points out that there is no substitute for practical experience, he also provides sources of information and training for neophyte, as well as experienced, managers.  Reading this article, as well as Turk's earlier “Ten Rules for Success as a Manager,” Defense AT&L, July-August 2004, provides useful information to prospective federal construction contractors about what agency source selection officials may look for when they review the qualifications of management personnel in connection with proposals on negotiated procurements.

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The U.S. Army Corps of Engineers awarded an $88 million contract for the construction of a fifty-three mile road around a tropical island in the North Pacific. During contract performance, the contractor submitted a certified claim contending that the contract clause, "Time Extensions for Unusually Severe Weather," was defective, resulting in a gross misrepresentation of the number of adverse weather days that could be anticipated during performance of the work.  The contractor also contended that reliance on the defective specification led to an increase in the cost to perform the work. The certified claim included costs incurred up to the date of the claim submission and costs estimated to be incurred in the future.

The United States Court of Federal Claims found that $50 million of the contractor's certified claim of $63.4 million was clearly fraudulent. During the trial, witnesses, including the corporate officer who certified the claim, testified that the $50 million claim "was a means to get the Government's attention, and to show the Government what would happen if it did not approve the new compaction method that plaintiff wanted."  The Court stated that this part of the certified claim was not submitted in good faith, and was not for an amount which the Plaintiff honestly believed it was entitled. Daewoo Engineering and Construction Co., LTD. v. U.S., No. 02-1914C, October 13, 2006.  Accordingly, the projected additional costs based on estimates, and not yet incurred, were found to be fraudulent.

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The Armed Services Board of Contract Appeals recently reiterated the requirements a contractor must meet in order to recover unabsorbed home office overhead using the Eichleay Formula.  In Kato Corporation, ASBCA No. 51462, the Board held that a contractor must establish three elements to successfully maintain a claim for recovery of its home office costs as a result of a delay:

1) There must be a government-caused delay of an indefinite duration that delays completion of the entire project and there must be no concurrent contractor caused delay;

2) The original contract performance time must be extended by the delay, or the contractor must prove that it was going to finish early and was prevented from doing so by a government-caused delay; and

3) The contractor must show that it was required to remain on standby, ready to resume work, once the delay had ceased. 

In Kato, the contractor failed to prove that the government delayed the completion of the work. Although the contractor presented evidence that the government issued three change orders that delayed completion of specific portions of the work, it did not prove a causal link between those changes and a delay to the critical path, thus failing to demonstrate that the overall project had been delayed. The ASBCA further found that the work had not been suspended for an indefinite period of time because Kato had continuously performed some work at the site during the claimed delay period. Since Kato had been performing work, the Board also concluded that it could not prove that it was on “standby” during the purported delay. 

This decision points out the critical importance of proving that a government-caused delay occurred that it actually delayed completion of the overall project. 

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Although a contractor encountered subsurface conditions in a dredging project that it may not have anticipated, it was unable to prove that the hard material was a differing site condition.   The contractor’s claim was that it had encountered a Type I differing site condition. The Armed Services Board of Contract Appeals denied the claim, stating that the contractor had not proven that the actual conditions differed materially from those indicated in the solicitation. The ASBCA reiterated the four elements of proof that a contractor must meet in order to prevail on a Type I differing site conditions claim, as follows:

1) The conditions in the contract must have differed materially from those encountered.

2) The actual conditions must not have been reasonably foreseeable based upon all of the information available to the contractor at bid time.

3) The contractor must have reasonably relied upon its interpretation of the contract and the contract related documents. (In this case there were additional boring logs referenced in the solicitation that were available upon request).

4) The contractor must have been damaged by the actual, materially different, conditions.

In denying the contractor’s claim for a differing site condition, the ASBCA held that “a contractor has a duty to review information that is made available for inspection.” The Board of Contract Appeals determined that had the bidder reviewed the referenced boring logs in conjunction with those appended to the solicitation, the site conditions encountered would have been reasonably foreseeable. The ASBCA found that the actual conditions, including rock, cemented sand, and other hard materials were reasonably foreseeable based upon the borings in the solicitation and the additional borings referenced in the solicitation as being available upon request.  See Appeal of Bean Stuyvesant L.L.C.

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