July 9, 1997
Appeal of
HK SYSTEMS, INC.
Under Contract No. 059984-92-B-0025
PSBCA No. 3712
APPEARANCE FOR APPELLANT:
Stephen P. Murphy, Esq.
APPEARANCE FOR RESPONDENT:
Robert E. O’Connell, Esq.
OPINION OF THE BOARD
Appellant, HK Systems, Inc., installed a mechanized mail handling system in a Postal Service mail facility being constructed in Southern California. Before the Postal Service accepted the system, the area was struck by the January 1994 Northridge earthquake, and Appellant’s installed equipment was damaged. Appellant filed a claim for an extension of time to complete the project and, based on theories of superior knowledge and differing site conditions, for the cost to repair the equipment damaged in the earthquake. The contracting officer partially denied the request for a time extension and denied the claim for repair costs. This appeal followed.
A hearing was held, and the parties had an opportunity to file post-hearing briefs. Only entitlement is at issue.
FINDINGS OF FACT
1. In 1989, Respondent, United States Postal Service, decided to construct a new general mail facility and vehicle maintenance facility on a 65-acre parcel it intended to purchase in Santa Clarita, California[1] (Appeal File, Volume 7A, Tab 4 (“AF 7A-4"); AF 9A-13; Stipulation of Facts dated October 26, 1995, Stipulation (“Stip.”) 22).
2. The selected site was in an area of hills, ridges, steep slopes, and canyons, and the site included a prominent ridge, smaller connected ridges and a number of deep canyons. (Transcript, Page (“Tr.”) 160, 230; AF 7E‑42; Respondent’s Exhibit (“RX”) 1; Stip. 31, 36). The seller’s geotechnical engineering consultant, R.T. Frankian & Associates (“Frankian”), evaluated the site and, in reports of December 15, 1989, and February 2, 1990, recommended that a level site for the project be established by cutting the ridges on the site to an elevation of approximately 1090 feet above sea level, and using much of the material so removed to fill the canyon areas to the same elevation.[2] Steep retaining walls were eventually to be constructed along the north and east sides of the GMF where the building pad elevation was to be substantially higher (as much as 50 to 60 feet) than the adjacent ground. (Tr. 347; AF 7E-42). The Frankian reports recommended that the canyon fill and rough grading be compacted to at least 90% of maximum.[3] (Tr. 183, 250, 318; AF 7A-1, 7A-2, 7A-3, 7A-5, 7B-7, 8A-4; RX 1; Stip. 26, 27, 28).
3. Respondent purchased the site on December 28, 1989, and the purchase contract required the seller to perform the cutting, filling and rough grading necessary to create the level site for the facility and provided that a substantial portion of the purchase price would be withheld and paid as the seller accomplished the earthwork. The agreement required that the fill used to level the site would be compacted to 90% compaction. (AF 7A-6; Stip. 25).
4. There is no single industry standard regarding the degree of compaction required for deep fills in the area of the GMF project (Tr. 183, 306), and compaction requirements varied for other projects in the vicinity constructed with significant depths of fill. Respondent identified a number of projects in the area where deep fills were compacted to a minimum of 90% (Tr. 260-274), and Appellant pointed to a number of projects, including some by Respondent’s expert’s firm, where 95% fill compaction was recommended (Tr. 281, 328-332, 348-349; AX 13, 14). The GMF site would have had lower potential for settlement if the fill had been compacted to 95% (Tr. 186, 195-197, 211, 221-222, 228-229; AX 3, p. 5), but requiring 90% minimum compaction did not fail to meet the standards of the industry or professional standards of care applicable to such projects. Compaction to 90% was consistent with the requirements of the Los Angeles County building code, which applied to construction, including earthwork, in the area of the GMF. (Tr. 182-183, 185, 249-258, 280, 290, 296, 317-318; AF 7F-50, p. 5, AF 7F-51, p. 4, AF 7F-52, p. 16, AF 7F-54, AF 9E-3; RX 1; Stip. 27, 28; Finding 28, below; contra Tr. 186, 221).
5. During the course of the earthwork, material cut from the ridge areas above 1090 feet elevation exceeded six million cubic yards, three million cubic yards of which were used to fill the canyon portions of the site. Three million cubic yards of material were removed from the site. (Stip. 23). The fill was compacted to a minimum of 90% compaction.[4] (Tr. 174; AX 6; AF 7D, Tabs 11-13, 15-24, 28-30, 32, 34, AF 7E-48, AF 8A-3, AF 8A-4, AF 9C-1). The earthwork and rough grading were completed in May 1991 (AF 7D, Tabs 34-37).
6. The fill resulting from the seller’s earthwork and rough grading was “nonuniform”--that is, the fill varied in depth over the site, and in places, including at least one area under the GMF building pad, the fill was as much as 70 feet deep (Stip. 24, 30). The GMF building was located substantially on cut ridge, but fingers of filled canyons extended into the pad area in up to five locations, resulting in areas under the building pad where the deep canyon fills abutted natural slopes and the cut ridges. (Tr. 160; AF 7E-42; AX 1A, 1B; Stip. 23, 24). Construction over deep, nonuniform canyon fills was not unusual in the vicinity of the GMF site, as the area was hilly, and massive cutting of ridges and filling, similar to that at the GMF site, was an accepted way of obtaining a level building pad for construction (Tr. 143, 148, 260-274, 281, 328-332, 348-349; AX 13, 14).
7. Respondent engaged Geo/Resource Consultants, Inc., a geotechnical engineering firm, to evaluate the earthwork and rough grading that had been performed by the seller. After examining the site, the tests performed and reports prepared during the grading operation, and performing its own tests, Geo/Resource issued a report of its findings on September 16, 1991, certifying that the site was suitable for the planned building, subject to the report’s recommendations regarding design and construction of the building. (AF 7E-42)
8. Because the GMF building pad covered areas where the existing ridge was to be cut as well as areas that were to be filled to varying depths, the Frankian reports (Finding 2) had also recommended that the cut (ridge) areas in the building pad be overexcavated to five feet below finish grade and filled with properly compacted fill to provide a uniform base for the building and lessen the likelihood of damage to the building resulting from differential settlement. (AF 7A-5; 7B-7, 7C-7A; see AF 7E-45; AF 8A-2, p. 11; AX 3, p. 4). Geo/Resource’s review of the records relating to the rough grading disclosed that the overexcavated and recompacted fill in the GMF building pad overlying the cut surfaces was only 3-5 feet deep (at p. 8), and not the 5-foot overexcavation recommended in the Frankian reports (Tr. 174-177, 235; AF 9A-17; AX 7). Geo/Resource recommended that during the construction phase of the project, locations for building footings in cut areas be overexcavated and properly filled and compacted to the required depth to provide uniform bearing support (AF 7E-42 at p. 18).[5] Plate 2 of the Geo/Resource report depicted that there was substantial and nonuniform fill beneath at least part of the building pad. (AF 7E-42).
9. The GMF site was located in a seismically active area, which is an area where there is a greater than average likelihood of moderate earthquakes occurring (Tr. 157, 230, 331). Although there existed in the vicinity of the site a number of faults, at least four of which were characterized as active, there were no known faults within the boundaries of the site. (Tr. 230; Stip. 31, 36). The GMF site was known to be potentially subject to shaking and associated ground motions from earthquakes on nearby and distant faults. This potential is characteristic of all of Southern California, but the timing, location and magnitude of any earthquake could not be accurately predicted. (AF 8A-2, p. 39, 42).
10. The September 16, 1991 Geo/Resource report (Finding 7) noted that the site was in an area with a history of moderate to strong earthquakes, was in the vicinity of four active faults (AF 7E-42, pp. 8-11, Table 2, Figures 69, 70; Stip. 31), and that “there is a potential that the project site could be subjected to strong earthquake shaking during the life of the project.”[6] A table identifying active faults in the area reflected that in the event of the maximum credible earthquake on the San Gabriel Fault, approximately 2 miles away, the site could experience bedrock accelerations of up to .7g.[7] All the other possible earthquakes mentioned in the table would have produced accelerations of .4g or less. The report recommended that the GMF “be constructed to resist earthquake loads in accordance with current (or adopted) earthquake building code standards and should be designed for a zone 4 earthquake region according to Uniform Building Code.”[8] (AF 7E-42, p. 11; Stip. 31, 33-36).
11. On or about December 30, 1991, Respondent issued solicitation number 059984-91-A-0047 for the fabrication and installation of the fixed mechanization mail handling system at the GMF. The work included construction and installation of bulk mail conveyors, tray transport conveyors and other mechanized mail handling equipment and design and construction of the associated support structures and related components necessary to attach the system to the floor and roof structure of the building. (AF 1-1, Technical Requirements 17-8.3; General Requirements 3.1.3.2, 3.2.1, as amended, pp. 17-8-8 through 17-8-10; AF 1A-16; Stip. 3, 4, 5, 18).
12. Appellant’s representatives attended the pre-proposal conference held the morning of January 22, 1992, in Pasadena, at the offices of Respondent’s project architect/engineer firm, and they attended the scheduled site visit that afternoon. At the time of the site visit, the rough grading had been completed, and the site presented a level appearance, although the hilly terrain of the general area was apparent and the terrain sloped sharply downward at the northeast corner of the site where the GMF building was to be located. (Tr. 22; AF 1-1B, p. 2 of 28, last three pages; AF 7D, Tabs 34-36, 41; AF 7E-42, p. 3; AF 7E-45).
13. On January 29, 1992, Respondent issued Amendment No. 02 to the solicitation, which addressed both the solicitation for the general construction[9] of the GMF and the fixed mechanization installation. Among other things, the amendment addressed questions raised at the January 22 pre-proposal conference and site visit and bidder inquiries that followed the site visit (AF 1-1B, p. 1, 2). The amendment provided the following:
“1.16 VOLUME 1A, NEW CONSTRUCTION OWNED, GEOTECHNICAL INVESTIGATION -- POST GRADING, SEPTEMBER 1991
A. Add Geo/Resource Consultants, Inc., Plates 1 and 2 dated 9/12/91 missing from original bid document issue (1 print attached) showing boring locations and cross-sections at Van Nuys site transmitted as part of this Amendment.” (AF 1-1B)
Appellant received a copy of Amendment No. 02, but did not receive a copy of Plates 1 and 2 of the Geo/Resource Consultants’ report mentioned in section 1.16, above (Tr. 32-34, 58).
14. When reviewing Amendment No. 02 to the solicitation, Appellant’s representatives noticed but intentionally disregarded the reference in section 1.16 to a geotechnical investigation, assuming that such information was meant only for the general construction offerors and did not apply to the fixed mechanization project. Appellant’s proposal team did not consider information related to construction of the building to be relevant to preparation of their offer. (Tr. 34-35, 44-46).
15. Although Respondent knew of the mass cutting and filling, nonuniform fill, seismic activity for the area and proximity of faults (Findings 2, 3, 5, 6, 7, 8, 10), it did not include any of that information in the original solicitation for the fixed mechanization. Except for the reference to the September 1991 Geotechnical Investigation and Plates in solicitation Amendment No. 02 (Finding 13), Respondent did not otherwise provide that information to Appellant or indicate its availability at any time during the bidding phase of the project. (Tr. 23, 25, 27, 68, 75, 87-88; AX 2, p.2; AX 3, pp. 9-10; Stip. 10). Appellant was not aware before submitting its proposal that boundaries between the deep fill and cut areas traversed the building pad subsurface (Tr. 36-37).
16. Prior to award, Appellant had installed material handling systems at other locations in Southern California (Tr. 49-52; Stip. 16) and had performed other government and Postal Service projects around the country. On other projects for the Postal Service and for others, Appellant had never received or requested information about subsurface conditions at the site, and its representatives who testified at the hearing were not aware of whether Appellant had ever installed fixed mechanization systems in buildings constructed over fill (Tr. 21-22, 42, 47, 55). It was not Appellant’s standard practice ever to consider subsurface conditions at a site (Tr. 24), and it was Appellant’s practice not to review the building design or other documents pertaining to the building when the fixed mechanization system was to go in a new building, except as necessary to determine the points of attachment for its equipment (Tr. 44-46). Appellant did not consider information regarding subsurface conditions material or vital to preparation of its proposal for the GMF project or performance of its contract work (Finding 14; Tr. 21-22, 24, 34-35, 42, 44-47; Stip. 16).
17. On March 20, 1992, Respondent awarded the contract for construction of the facility to Hensel Phelps Construction Company and awarded Appellant contract 059984-92-B-0025 in the amount of $10,498,000 to develop and install the mail handling system at the GMF. A notice to proceed was issued the same day on both contracts. (AF 1-1, 1A-18, 8-2, 8-3; Stip. 18).
18. The Permits and Responsibilities clause of Appellant’s contract provided, in pertinent part:
“The contractor is responsible also for all materials delivered and work performed until completion and acceptance of the entire construction work, except for any completed unit of construction that may have been accepted.” (AF 1-1, Section G.10, PERMITS AND RESPONSIBILITIES (Clause 11-9) (October 1987)).
19. The Payment clause of the contract authorized progress payments and provided that material and work covered by progress payments became the sole property of the Postal Service. The Payment clause continued by pointing out that Respondent’s ownership of the work covered by progress payments, “does not (1) relieve the contractor of responsibility for all material and work for which payment has been made or for restoration of any damaged work.” (AF 1-1, Section F.2, PAYMENT (CONSTRUCTION) (Clause 11-10) (August 1988), subsection d).
20. In Section C.3, EXCUSABLE DELAYS, Appellant’s contract provided,
“. . . the contractor will not be in default by reason of any failure in performing this contract . . . if the failure arises out of causes beyond the control and without the fault or negligence of the contractor. Such causes may include, but are not restricted to, acts of God. . . .” (AF 1-1, Section C.3, EXCUSABLE DELAYS (Clause B- 19)(October 1987)).
21. Regarding differing site conditions, the contract provided:
“a. The contractor must promptly, and before the 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. Previously unknown physical conditions at the site of an unusual nature differing materially from those ordinarily encountered and generally recognized as inherent in work of the character required in this contract.
b. The contracting officer will promptly investigate the conditions. If they are found to differ materially from those indicated or anticipated and will 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), the contractor will be entitled to an equitable adjustment.” (AF 1-1, Section G.3, DIFFERING SITE CONDITIONS (Clause 11-2) (October 1987); Stip. 11).
22. The contract cautioned, “The Postal Service does not carry Builder’s Risk Insurance coverage. The contractor, at its own option and expense, may elect to provide this insurance for its work.” (AF 1-1, Section G.36, BUILDER’S RISK INSURANCE (Clause FB-263) (March 1989)). Amendment No. 02 to the solicitation (Finding 13) had clarified this point:
“1.8 Clause G.36 Builder’s Risk Insurance
The General Construction contractor and the Fixed Mechanization contractor will cover themselves separately and at their own option and expense for builder’s risk insurance.”
23. While the solicitation sets forth the operating requirements and many of the details for the mechanized mail handling system, design of the supports, anchors and bracing for the equipment was left to the mechanization contractor (Tr. 60; AF 1A-16, Section 1.0, p. 1-1). The contract’s Technical Requirements provided,
“C. Seismic Forces - All equipment supporting structure shall be designed and constructed to resist the stresses produced by seismic forces acting in any horizontal direction. All floor mounted supports, roof hangers, sway bracing and other anchors for the equipment shall resist lateral forces in accordance with state and local requirements for the area in which the facility is located.
Operating weight shall be taken as the weight of the equipment, its supports and any other loads including superimposed live load, which might reasonably be assumed to be imposed on the equipment under normal operating conditions. The Contractor is response [sic] for selection of appropriate values for each variable in all applicable formulas.” (AF 1, Mechanization Specifications 17-8, General Clarifications - December 27, 1991, page 17-8-35, modifying USPS Specification No. USPS-M-4000, Specification Standards for Mechanized Mail Processing Systems, September 1, 1987 (AF 1A-16); Stip. 13).
24. The state and local requirements for the area including the GMF site required design according to the standards applicable to seismic zone 4 (Stip. 14). Seismic zone 4 standards of the Uniform Building Code provided the fixed mechanization contractor with standards and information it would apply to the design of the supports, anchors and connections for the equipment (AX 4, p.3). Under the Uniform Building Code, designing to the seismic zone 4 standard is intended to protect the building’s occupants by allowing safe exit from the building during and after an earthquake imparting horizontal bedrock accelerations of up to .4g, and is not for the purpose of eliminating or minimizing damage to the building. (Tr. 198; AF 7F-50, p. 7; AX 3, p.11; AX 10; Stip. 14).
25. As of January 17, 1994, Appellant was making satisfactory progress toward completion of the project by the contractual completion date of April 25, 1994, although its work was not complete (Stip. 50, 51). It had designed and constructed the fixed mechanization according to the specifications and in compliance with the seismic zone 4 requirements (Tr. 28-29, 75; Stip. 15), and the system was installed and ready for testing. Testing was scheduled to begin on January 18, 1994. (Tr. 80; Second Stipulation of Facts 62).
26. On January 17, 1994, a moderate earthquake struck in the vicinity of the GMF, its epicenter about 10 miles from the GMF along a fault that was not one of the four active faults mentioned in the September 16, 1991 Geo/Resource report (Tr. 215-216; AF 7F-53, p. 1). The GMF site was subjected to very strong lateral ground shaking and horizontal bedrock accelerations on the order of .6g as well as significant vertical movement (Tr. 200-210, 232-233; AF 7F Tabs 49-51; AX 11, 12; Stip. 38, 39). Settlement of the deep fill (as much as 8 inches under one corner of the building) and lateral spreading and settlement of the nonuniform fill (see Finding 6) resulted in significant cracking of the GMF building slab, most noticeable where the deep fills transitioned to the cut areas (Tr. 159; AF 7F-49, 7F-50, 7F-53, 9B-6, 9B-7, 9E-8, 9E-14; Stip. 40-48). The depth and nonuniformity of the fill contributed to the settlement and lateral shaking of the GMF (Stip. 45, 46).
27. Much of Appellant’s mail handling equipment was pulled from its floor anchors, and supports were bent and twisted due to the motion of the building during the earthquake. (Tr. 81-84, 104, 109, 111, 119-120, 122; AF 9D-6 (Photographs 637 and following), 9E‑6, 9E-8; Stip. 47). Damage to the facility and to Appellant’s installed equipment would probably have been less if the fill under the building pad had been compacted to 95% (Tr. 195, 210, 229), but damage to the installed equipment would have occurred under the circumstances of a .6g horizontal bedrock acceleration even if the fill had been compacted to 95% (Tr. 221, 232-233). Any failure to meet the requirements for the 5-foot overexcavation of the cut portion in the pad area (Finding 8) had an insignificant contribution to the damage to the equipment (Tr. 182, 345).
28. After the earthquake, Respondent obtained from a number of geotechnical and engineering firms assessments of the damage to the facility and evaluations of the causes of the damage. A number of the reports mentioned the effect of the nonuniform fill and the failure of fill against native soil slopes as contributing factors, but none mentioned the failure to compact the fill to more than 90% as a failure to meet accepted standards of design for the project. (AF 7F-50, 7F-51, 7F-53, 7F-54, 7G-65, 9B-7).
29. Appellant completed its work, including repair of the earthquake damage, and Respondent accepted the mail handling system installation on August 22, 1994 (Stip. 58).
30. On July 21, 1994, Appellant submitted its certified claim for an equitable adjustment in the amount of $485,275 and an extension of time of 165 days due to the damage caused to its installation during the January 17, 1994 earthquake (AF 1‑13; Stip. 59).
31. By final decision dated September 15, 1994, the contracting officer denied the request for an equitable adjustment, but granted a time extension of 119 days for the period from April 25, 1994 (scheduled contract completion (Stip. 49)) to August 22, 1994 (beneficial occupancy date (Stip. 58)) (AF 1-14; Stip. 60). Appellant timely appealed that final decision (AF 1-15; Stip. 61).
DECISION
Appellant contends that Respondent had a duty to provide Appellant information Respondent possessed about what Appellant contends were the unusual subsurface conditions of the site and the possibility of an earthquake that would cause ground accelerations in excess of .4g. Appellant designed and installed the system, as directed in the specifications, to meet the seismic zone 4 standards and without knowledge of the deep, nonuniform fill under the building pad, and it contends that under the theories of superior knowledge and differing site conditions, it is entitled to recover the cost of repairing the earthquake damage.
Respondent argues that Appellant has failed to establish a right to recover under either the differing site conditions or superior knowledge theory. It urges that Amendment No. 02 to the solicitation put Appellant on notice that information regarding the subsurface and seismic conditions was available in the geotechnical investigation report and that Appellant acted unreasonably in ignoring that notice and failing to ascertain the subsurface and seismic conditions on its own. Furthermore, Respondent contends that the possibility of earthquakes in Southern California cannot be said to be a circumstance that was unknown to Appellant. For these reasons, Respondent contends that responsibility for the damage rests with Appellant.
Permits and Responsibilities Clause
Under the contract’s Permits and Responsibilities clause (Finding 18) as well as the Payments clause (Finding 19), Appellant remained responsible for its installed equipment until the equipment was accepted by Respondent.[10] If the work were damaged before acceptance, Appellant was obliged to restore it without compensation unless the damage was due to the fault or negligence of Respondent. See John McShain, Inc. v. United States, 179 Ct. Cl. 632, 375 F.2d 829 (1967); The Little Susitna Company, PSBCA No. 1576, 88-1 BCA ¶ 20,240; Entech Sales and Service, Inc., PSBCA No. 2061, 88-1 BCA ¶ 20,447; Toro Constr. Co., PSBCA No. 442, 79-1 BCA ¶ 13,685. Fault or negligence of Respondent, which may relieve Appellant of responsibility under the Permits and Responsibilities clause for damage to its work in progress, includes defective design of the building, see The Little Susitna Co., PSBCA No. 1576, 88-1 BCA ¶ 20,240; George Okano Electrical Contracting Corp., ASBCA No. 20978, 78-1 BCA ¶ 12,914, but it is Appellant’s burden to demonstrate that the damage was due to a design defect and not the result of an act of God, DeRalco, Inc., ASBCA No. 41063, 91-1 BCA ¶ 23,576.
Appellant has not addressed the impact of the Permits and Responsibilities clause in resolving this dispute, but it has urged that there were design defects that affected its work. First, it argues that obtaining only 90% compaction of the deep fill beneath the building pad constituted defective design. We disagree. The numerous geotechnical engineering firms that reviewed the project before and after the rough grading found 90% compaction sufficient, and 90% compaction of the fill met the requirements of Los Angeles County, the local permitting authority (Findings 2, 4, 6, 7, 28). None of the geotechnical experts engaged by Respondent after the earthquake to assess the reasons for the significant damage to the facility mentioned in their reports that the 90% compaction requirement was insufficient or constituted an inadequate design (Finding 28). If the fill had been compacted to 95%, as Appellant’s expert would have recommended, the earthquake would have caused less settlement of the deep fills, less damage to the building and less damage to Appellant’s mail handling system (Finding 27), and a number of projects in the area had required 95% compaction of deep fill (Finding 4). However, Appellant has not demonstrated that Respondent’s decision to require only 90% compaction of the fill constituted defective design or negligence on Respondent’s part (Findings 2, 4, 6). See Toro Constr. Co., PSBCA No. 442, 79-1 BCA ¶ 13,685.
Appellant also suggests that establishing a requirement that the fixed mechanization support system be designed by Appellant to meet the requirements of seismic zone 4 was a defective design in view of Respondent’s knowledge that an earthquake could occur during the life of the project that would impart horizontal bedrock accelerations in excess of the .4g contemplated in a seismic zone 4 design. This suggestion is rejected for a number of reasons. First, Respondent is not required to design for the worst possible circumstances that might occur during construction. See DeRalco, Inc., ASBCA No. 41063, 91-1 BCA ¶ 23,576; Praxis-Assurance Venture, ASBCA No. 24748, 81-1 BCA ¶ 15,028 at 74,357. Second, the facility was located in seismic zone 4, which is the highest zone, and the local code requirements were met by a design consistent with zone 4 (Finding 24). See Entech Sales and Service, Inc., PSBCA No. 2061, 88-1 BCA ¶ 20,447. Finally, the purpose of requiring design of the building and mechanization system to meet the requirements of seismic zone 4 is to assure the safety of the occupants of the building (Findings 10, 24). The requirements are not intended to protect the building and its systems from harm (Finding 24).
That the specifications required design for horizontal accelerations of up to .4g does not shift responsibility to Respondent for damage occurring during an earthquake imparting greater accelerations. Obviously, designing and building the mail handling system to the zone 4 standards were not enough to preserve the fixed mechanization system from harm during the earthquake. However, the issue for this appeal is upon which party does the contract place the risk that such damage would occur. The damage to Appellant’s equipment was caused by the earthquake, an act of God, and the contract’s Permits and Responsibilities clause puts the risk squarely and unequivocally on Appellant under the circumstances of this appeal. See DeRalco, Inc., ASBCA No. 41063, 91-1 BCA ¶ 23,576; Arntz Contracting Co., Beacon Constr. Co., K. A. Constr. Co., and Teaco, Inc., A Joint Venture, EBCA No. 187-12-81, 84-3 BCA ¶ 17,604 at 87,705; Toro Constr. Co., PSBCA No. 442, 79-1 BCA ¶ 13,685; Peter Kiewit Sons’ Co., ENG BCA No. 1424, 1959 ENG BCA LEXIS 125.
Appellant relies on Phillips Constr. Co. v. United States, 184 Ct. Cl. 249, 394 F.2d 834, 837 (1968), to persuade us that Respondent is liable because the damage to Appellant’s equipment did not result solely from the earthquake, but rather from the earthquake’s action on the unknown subsurface conditions at the GMF site. See Welch Constr. Co., PSBCA No. 217, 77-1 BCA ¶ 12,322 at 59,517. In Phillips, the Court found the government liable for damage to construction work that resulted not just from the abnormally heavy rains experienced at the site but from a combination of the rains and the site drainage system that was defectively designed by the Government. As discussed above, however, the cut-and-fill and rough grading design at the Santa Clarita GMF site was not defective, and Appellant has not shown that the work was defectively performed.[11] Therefore, Phillips is inapplicable. See Praxis-Assurance Venture, ASBCA No. 24748, 81-1 BCA ¶ 15,028.
Superior Knowledge
Appellant argues that Respondent’s failure to disclose its knowledge of the subsurface conditions and seismicity of the site shifts responsibility for the earthquake damage to Respondent. The specific information Appellant contends Respondent withheld is that (a) in some areas of the building pad, the depth of fill necessary to level the pad was as much as 70 feet; (b) the fill beneath the facility was nonuniform; (c) the fill was only compacted to 90%; (d) there was not a uniform 5-foot overexcavation beneath the building; (e) the potential level of horizontal ground motion for the site was greater than .4g; (f) bedrock acceleration up to .7g due to an earthquake could occur during the life of the facility; (g) seismic activity potential existed of an 8.3 magnitude earthquake striking the local area during the life of the facility; and (h) the site was in close proximity to four major faults. Appellant’s Brief, pp. 43, 61. Appellant contends that if it had known this information, it might have decided not to bid on the contract, might have bought earthquake insurance, might have sought to have Respondent accept the risk of loss for damage as soon as the equipment was delivered to the site and might have designed a stiffer support and anchor system.
To establish that Respondent had a duty to disclose this information, Appellant must show, inter alia, that the information was vital to Appellant’s performance, that the information was not otherwise reasonably available and that Respondent was aware that Appellant did not have the information. See Rounds Constr. Co., PSBCA No. 1366, 85-3 BCA ¶ 18,343 citing Helene Curtis Industries, Inc. v. United States, 160 Ct. Cl. 437, 312 F.2d 774 (1963); C. M. Moore Div., K.S.H., Inc., PSBCA No. 1131, 85-2 BCA ¶ 18,110 at 90,917, recon. denied 86-1 BCA ¶ 18,573 aff’d 818 F.2d 874 (1987).
The first four elements Appellant identified as superior knowledge ((a)-(d), above) relate to the massive cut and fill operation and earthwork at the site. However, Appellant has not demonstrated that that information was material to its preparation of its offer or its design and performance of the fixed mechanization work. Appellant had never shown any interest in such information in its past projects, was not aware whether it had ever installed its systems in buildings on fill, never troubled itself with the design of the building, and purposely disregarded elements of Amendment No. 02, including advice of the existence of a geotechnical report, that it determined applied to the general construction (Findings 14, 16). Therefore, Appellant has not shown that it would have relied on the information even if it had been supplied, see John R. Hollingsworth Co., ASBCA No. 44674, 96-2 BCA ¶ 28,604 at 142,806-07, or that its lack of the information adversely impacted its performance of the fixed mechanization work in accordance with the contract specifications, see Rounds Constr. Co., PSBCA No. 1366, 85-3 BCA ¶ 18,343.
The last four elements of alleged superior knowledge ((e)-(g), above) relate to the earthquake potential of the site and, although expressed in the technical terms used in the Geo/Resource report (Finding 10), boil down to stating the possibility that an earthquake might occur in the area at some time during the life of the facility. Earthquakes are unpredictable (Finding 9), and that one might occur during the life of the GMF or even during the more than two year span of Appellant’s contract should not have been surprising to Appellant. The possibility of an earthquake in Southern California cannot be said to be unknown to Appellant, as a contractor experienced in designing and installing material handling systems in Southern California (Finding 16). Even if Appellant truly was unaware of the possibility of earthquakes in Southern California, Respondent had no reason to know that it needed to pass this information to Appellant. See American Ship Building Co. v. United States, 228 Ct. Cl. 220, 225, 654 F.2d 75, 79 (1981); H. N. Bailey & Assoc. v. United States, 196 Ct. Cl. 156, 177-178, 449 F.2d 376, 382-383 (1971).
In view of the evidence to the contrary discussed above, we have given little credit to the testimony of Appellant’s witnesses at the hearing that they would have substantially altered their consideration of the solicitation if they had had the information from the Geo/Resource report in their possession. However, even if we were to accept Appellant’s arguments regarding its pre-offer need for the information, it would not prevail on its superior knowledge argument. If, as Appellant urges, it considered information regarding the subsurface and seismic circumstances of the site necessary to preparation of its proposal, it surely would not have purposely disregarded the advice in Amendment No. 02 to the solicitation that geotechnical information was available (Findings 13, 14). The report identified in solicitation Amendment No. 02 contained all of the information Appellant now insists was withheld from it, and that information was “otherwise reasonably available” to Appellant. See H. N. Bailey & Assoc. v. United States, 449 F.2d 376, 382-382 (Ct. Cl. 1971); Ashbach Constr. Co., PSBCA No. 2718, 91-2 BCA ¶ 23,787 aff’d 960 F.2d 155 (Fed. Cir. 1992).
Appellant has not demonstrated entitlement to recover under the superior knowledge doctrine.
Type I Differing Site Condition
Appellant contends it is entitled to recover the costs of repairing the damage to its equipment under the contract’s Differing Site Conditions clause, asserting that requiring that the mechanization system be designed to seismic zone 4 standards is a representation that horizontal bedrock accelerations at the site would not exceed .4g. It contends it relied on that representation in preparing its offer and its subsequent design. Appellant misapprehends the scope of the Differing Site Conditions clause, which, relevant to a Type I differing site condition, requires that there be an indication in the contract of “subsurface or latent physical conditions at the site” and that conditions at the site differ materially from those indicated (Finding 21). Requiring that the mail handling system be designed to seismic zone 4 standards does not fit within the scope of the Differing Site Conditions clause. First, as discussed above, requiring a contractor to design to a certain standard is not a representation that no condition beyond that standard will occur. See DeRalco, Inc., ASBCA No. 41063, 91-1 BCA ¶ 23,576. Second, the possibility of bedrock accelerations exceeding .4g over the life of the facility (even if it could be considered to be a representation) is not a subsurface or latent physical condition at the site (Finding 22). See Olympus Corp. v. United States, 98 F.3d 1314, 1318 (Fed. Cir. 1996); Thomas S. Rhoades and Steven L. Schluneger, ENG BCA Nos. 6025, 6062, 6097, 97-1 BCA ¶ 28,672 at 143,227; Gulf Constr. Group, Inc., ASBCA No. 45219, 95-1 BCA ¶ 27,502 recon. denied 95-2 BCA ¶ 27,649. Absent a representation of an unforseen, latent condition, there can be no Type I differing site condition. Pacific Alaska Contractors, Inc. v. United States, 193 Ct. Cl. 850, 863-864, 436 F.2d 461 (1971); United Contractors v. United States, 177 Ct. Cl. 151, 161, 368 F.2d 585, 595 (1966). Finally, as discussed above, accurate information regarding the risk of an earthquake imparting greater forces than .4g was in the geotechnical report (Findings 7-10), and Appellant was alerted to the existence of that report in Amendment No. 02 to the solicitation. A prudent contractor concerned about seismic risk would have inquired further regarding the report. See Ashbach Constr. Co., PSBCA No. 2718, 91-2 BCA ¶ 23,787 aff’d 960 F.2d 155 (Fed. Cir. 1992).
Appellant may not recover by casting its claim as a Type I differing site condition.
Type II Differing Site Condition
For its Type II differing site condition, Appellant offers as unusual and unexpected subsurface conditions which were not observable at the time of Appellant’s site inspection elements (a) through (h) discussed above under the superior knowledge theory. The Differing Site Conditions clause will not support Appellant’s interpretation. For a Type II differing site condition, Appellant must show that it encountered an unexpected and unusual physical condition at the site that differed materially from what would ordinarily be encountered and generally understood to obtain in this type of project (Finding 21).
The subsurface conditions of the site that resulted from the mass cutting and filling and nonuniform fill (elements (a)-(d), above) were physical conditions, but they have not been shown to be of an “unusual nature differing materially from those ordinarily encountered and generally recognized as inherent in work of the character required” in Appellant’s contract. Mass cut and filling was necessary and not unusual for construction in this hilly area (Findings 4, 6). That Appellant’s other projects around the country for Respondent might not have been so constructed is irrelevant, because it is the nature of the subsurface conditions to be expected in the area of the site that must be compared with those encountered at the GMF site. See Charles T. Parker Constr. Co. v. United States, 193 Ct. Cl. 320, 333-334, 433 F.2d 771, 778 (1970); Oconto Electric, Inc., ASBCA Nos. 40421, 40422, 93-3 BCA ¶ 26,162; Waldan General Contractors, Inc., DOT CAB No. 78-28, 79-1 BCA ¶ 13,686. Appellant has not shown that the subsurface conditions differed materially from what would be expected for construction in the area.
The seismic-related elements ((e)-(h)) are not physical conditions at the site within the meaning of the Differing Site Conditions clause (Finding 21), see Olympus Corp. v. United States, 98 F.3d 1314, 1318 (Fed. Cir. 1996), and are not of an unusual nature differing materially from conditions to be found at other sites in the area (Finding 9). Nor, as discussed above, are we persuaded that such knowledge was reasonably unknown to Appellant, not only because of the general public knowledge about the possibility of earthquakes in Southern California but also because the risks were spelled out in the geotechnical report identified in Amendment No. 02 to the solicitation. Furthermore, Appellant has not shown that such information was material to Appellant’s preparation of its offer or contemplation of the work.
Appellant has failed to show the existence of a Type II differing site condition.
Time Extension
Respondent granted Appellant a time extension of 119 days, which covered the period from the contract completion date before the earthquake, April 25, 1994, to the date of beneficial occupancy of the system, August 22, 1994 (Finding 31). Appellant had claimed entitlement to an extension of 165 days due to the earthquake, but in its claim and in this appeal it has presented no evidence regarding its calculation. Appellant did not address the duration of the time extension in its briefs. This claim for 46 days beyond the extension granted by Respondent is denied as abandoned and for failure of proof.
The appeal is denied.
Norman D. Menegat
Administrative Judge
Board Member
I concur:
James A. Cohen
Administrative Judge
Chairman
I concur:
David I. Brochstein
Administrative Judge
Vice Chairman
[1] The general mail facility (“GMF”) and the vehicle maintenance facility were to be constructed on the same site, which will be hereafter referred to as the GMF site.
[2] The bedrock material comprising the ridges was a soft rock formation of sandstone or silkstone that was satisfactory for use as fill after removal and proper working (Tr. 149).
[3] Compaction refers to the in-place dry density of the soil expressed as a percentage of the maximum dry density of the same material, as determined by laboratory compaction test procedures. (Tr. 169-170; AF 7E-42 at p. 17, note).
[4] Of the 306 compaction tests performed during the rough grading in the building pad area, only three showed compaction less than 90%, and most were higher. The average compaction was 92.1%. (Tr. 290-291; Appellant’s Exhibit (“AX”) 6; RX 1).
[5] There is no evidence of what earthwork and further compaction was performed during the course of construction, and it has not been shown whether the construction contractor complied with the Geo/Resource recommendations of overexcavation below the building footings and recompaction.
[6] The accuracy of the findings of the report regarding the earthquake risk and location of faults was confirmed by Appellant’s expert (Tr. 148, 157, 165, 230).
[7] The “g” stands for the force of gravity, and the figure is a measure of the intensity of the bedrock movement during an earthquake. The higher the number, the stronger the bedrock acceleration. (Tr. 141).
[8] The United States is divided into earthquake zones according to the likelihood of an earthquake of a given intensity occurring. There are only two areas in the lower 48 states that are identified as zone 4, the areas where the highest ground accelerations are likely to occur, and by far the largest area is Southern and Coastal California, extending into Nevada. Virtually all of the Southern California coastal area is in zone 4. (Tr. 198; AF 7F-50, p. 7; AX 3, p.11; AX 10; Stip. 14).
[9] Solicitation for construction of the GMF building was proceeding at the same time as the solicitation for the fixed mechanization (AF 1A-18, AF 8-3). The fixed mechanization work was to begin before the building was completed and was to be coordinated with the construction of the building itself.
[10] Furthermore, the contract made it clear that Respondent did not provide builder’s risk insurance for the work in progress and that Appellant would be required to do so if it intended to protect itself from the risk of damage that it might incur (Finding 22). See Entech Sales and Service, Inc., PSBCA No. 2061, 88-1 BCA ¶ 20,447.
[11] Questions were raised whether the seller had properly over excavated and filled the ridge areas under the building and footings. However, the Geo/Resource report recommended that similar requirements be included in the building construction contract, and there was no evidence submitted whether that was done. (Finding 8). In any event, even if the condition noted in the Geo/Resource report (overexcavation of three to five feet depth instead of to five feet as recommended in the Frankian reports) was not corrected during the construction phase, that condition would have had an inconsequential effect on the damage that occurred to the fixed mechanization during the earthquake (Finding 27).