May 26, 1998
Appeals of
THOMAS J. YOUNG, JR.
Under Lease Agreement
PSBCA Nos. 3885 & 3983
APPEARANCE FOR APPELLANT:
R. Harper Heckman, Esq.
APPEARANCE FOR RESPONDENT:
William A. Campbell, Jr., Esq.
OPINION OF THE BOARD
Appellant, Thomas J. Young, Jr., was awarded a contract to purchase a site, construct a post office and lease it to Respondent, United States Postal Service. Appellant encountered buried debris when preparing the site and filed a claim with Respondent for the additional costs he incurred to remove the debris, contending that Respondent failed to disclose to bidders information that would have indicated the possible presence of subsurface debris. The contracting officer denied the claim, and Appellant appealed (PSBCA No. 3885). Appellant also appealed the contracting officer’s denial of his claim for delays experienced during construction which Appellant contends were caused by Respondent (PSBCA No. 3983).
Shortly before the hearing, the parties engaged in settlement discussions that Appellant contends resulted in settlement of all of the issues raised in these appeals. Appellant filed a Motion to Enforce Settlement Agreement that will be addressed in this Opinion.
The appeals were consolidated for the hearing held in Greensboro, North Carolina, and evidence was received on Appellant’s claims as well as on whether the parties had reached a settlement. The parties filed post-hearing briefs. Only entitlement is at issue (Transcript of Hearing, page (“Tr.”) 7).
FINDINGS OF FACT
1. On March 30, 1994, Respondent obtained an Assignable Option to Purchase a site it had selected in Kittrell, North Carolina to be used for the construction of a new post office (Tr. 144; Joint Stipulations of Undisputed Facts, Paragraphs (“Stip.”) 2, 3; Appeal File, Tab (“AF”) 1; Supplemental Appeal File, Tab (“SAF”) 5).[1]
2. On April 11, 1994, Respondent directed a contract architect to prepare plans for the new post office, to arrange for a perk (percolation) test to determine the suitability of the proposed location of the septic system, and to obtain soil borings on the site (Tr. 153-154, 162-164, 193; Stip. 4; AF 45). The architect contracted with a soils engineering firm to perform the borings and perk test (Tr. 155, 162-163, 189-190; Stip. 5).
3. The architect sent a preliminary soils report to Respondent on May 16, 1994, that contained a one-page Perk Test Summary, a two-page cover letter dated May 13, 1994, a one-page soil boring plot plan, boring logs showing the results of the two soil borings (B1 and B2) -- one taken at the southeast corner and one near the northeast corner of the building pad -- and of the two percolation borings (P1 and P2) that were taken on May 11 at the northern edge of the site within the proposed location of the septic field. The preliminary soils report also included a one-page, handwritten note concerning safe soil bearing capacity for the design of spread footings and a May 12 “Subsurface Profile Drawing No. 2,” summarizing in chart form the soil borings and percolation borings. (Tr. 23-24, 180-182; Stip. 7; AF 47, 48).
4. On or about May 18, 1994, the soils engineer submitted to the architect a comprehensive report of the results of the subsurface exploration of the property (the “Soils Testing Report”) (Tr. 177). The report was in the form of a letter addressed to Respondent in care of the architect. It described the site, stated the results of the subsurface exploration performed by the soils engineer, and gave the soils engineer’s recommendations regarding earthwork, building foundations and paving. (Stip. 8; AF 2B). In describing the site, the report noted,
“In addition, special attention should be directed to locating and removing any buried pipelines, septic tanks, drain fields or basement walls. Because this area was previously occupied by a house, there is the potential for grading operations to uncover old footings, septic tanks, or other hidden features in the subsurface. Generally, such features will require removal; however, details regarding their treatment must be determined on a case-by-case basis. Therefore, contract documents should include a contingency for the removal of subsurface features.” (Stip. 12; AF 2B, Page 5-6).
5. On May 23, 1994, the architect, without reading it, sent the Soils Testing Report to Respondent (Tr. 169-171, 175, 198; RX 2). Also without reading the report, Respondent’s project manager placed it in the project file (Tr. 198-199, 207, 208). Neither the architect nor Respondent’s officials were aware that there had been a house on the site (Tr. 171, 199, 202, 207, 211). If they had noticed the remark in the Soils Testing Report, they would have taken steps to notify potential bidders on the project that there had been a structure on the site (Tr. 178, 202).
6. On May 29, 1994, Respondent issued a solicitation seeking offers from persons interested in purchasing the site, constructing the post office to Respondent’s plans and specifications and leasing it back to Respondent for a basic term of 20 years. The solicitation package included a sample of the form of lease that Respondent would enter into with the successful offeror, a copy of the Assignable Option to Purchase, construction plans, a Project Manual and the U.S. Postal Service Facilities Department Construction Rider - NCL (August 1993 version), which described the construction requirements for the new post office. The Construction Rider obliged the successful offeror to accept an assignment of the Assignable Option to Purchase, to purchase the selected site at the price set forth in the Option ($15,000) and to construct the post office to the Postal Service plans and specifications. (Tr. 17-18, 145-149; Stip. 9; AF 3, 31; SAF 1, 3).
7. The Construction Rider addressed inspection of the site:
“12. SITE
Offerors must examine the site and be thoroughly acquainted with conditions thereon. The Lessor will be responsible for site conditions including but not limited to subsurface or latent physical conditions or unknown physical conditions of an unusual nature differing materially from those ordinarily encountered.” (SAF 3; see Tr. 20-21).
8. The Project Manual that was included in the solicitation contained the construction specifications, the preliminary soils report including the Perk Test Summary and accompanying documents (Finding 3) and a health department permit for the septic system (Tr. 167, 196; Stip. 10; AF 2C, 48). The Project Manual did not contain the full Soils Testing Report, nor was the full report contained elsewhere in the solicitation (Tr. 148; Stip. 11; AF 2C).
9. The table of contents for the Project Manual began on the page immediately following the Project Manual title page, and the following listings appeared at the beginning of the table of contents:
“SOILS TESTING REPORT PRELIMINARY SUMMARY
PERK TEST REPORT SUMMARY
Note: Full reports shall be available to bidders upon request.” (AF 2C; see Tr. 168, 179-180, 198).
10. Appellant obtained a copy of the complete solicitation package shortly after its May 29 issuance. Offers were due by June 25, 1994, which allowed Appellant approximately three weeks to prepare his bid. (Tr. 16-19, 23-25; AF 31; SAF 3, 4).
11. Before submitting an offer, Appellant visited the site (Tr. 20-22, 43, 46). The site had been cleared in the past, and there was no evidence that could have been discovered by a visual inspection that there had been a house on the site at one time or any particular indications that suggested there might be building debris below the surface (Tr. 20-22, 76, 151, 159-160, 171).
12. Appellant also reviewed the Project Manual and plans (Tr. 45, 48), but he did not request or obtain the full Soils Testing Report (Tr. 46, 159). The logs of the soil borings and the two percolation borings included in the Project Manual did not indicate the presence of subsurface debris (Tr. 25; AF 2B, 2C). However, as the borings reflected no more than the subsurface conditions at the locations where they were taken, the logs did not rule out subsurface debris at any other part of the site (Tr. 68, 173-174). Appellant was unaware that there had been a house on the site (Tr. 19, 24, 34).
13. Based on information Appellant received through telephone calls to local electrical, heating and air conditioning and paving contractors and his own experience, Appellant estimated the cost to build the building which he used in calculating his lease proposal (Tr. 26, 70-71). His calculation did not contain any factor or contingency for dealing with subsurface debris (Tr. 26-27, 70). On or about June 22, 1994, Appellant submitted a proposal, offering a rental rate of $11,249 per year for the base 20-year term (Tr. 26; AF 2A; Stip. 9, 13).
14. At least 17 others obtained copies of the solicitation (SAF 4). If anyone had asked for a copy of the Soils Testing Report a copy would have been provided, but no one asked (Tr. 158, 201-203).
15. On August 22, 1994, Respondent accepted Appellant’s offer, and the contracting officer executed the Lease (Tr. 158; Stip. 14; AF 2A, 3). Respondent assigned the Assignable Option to Purchase to Appellant and directed Appellant to purchase the site within 30 days after the August 22 notice (AF 3).
16. On October 6, 1994, Respondent issued notice to proceed to Appellant, establishing March 5, 1995, as the contract completion date (Tr. 27; Stip. 16; AF 18; SAF 6). Appellant and his proposed contractor went to the pre-construction meeting held by Respondent shortly after the notice to proceed was issued, and no mention was made of underground debris or that a house had been on the site at one time (Tr. 28; SAF 31H).
17. Appellant’s original contractor backed out of the project (Tr. 28-29, 50), delaying the start of construction by several weeks. Appellant eventually entered into a contract with Vance Construction (Tr. 29) on a cost-plus-fixed-fee basis (Tr. 74) to build the post office according to Respondent’s plans and specifications (Tr. 64-65). Vance Construction reviewed the plans and specifications but did not request or obtain a copy of the full Soils Testing Report (Tr. 115).
18. Vance began site clearing and earthwork on November 9, 1994 (Tr. 81; AF 16, 18, 25; SAF 8). In the course of preparing the site, Vance discovered buried debris, including the burned remains of a house. The debris was localized in the west quarter of the site from the southern edge of the property extending northward as far as the location of the intended building. Although the debris extended to just under the southwest corner of the intended building, no debris or other unsuitable material was found where any of the four borings were made. (Tr. 31, 50, 78, 82-85; Stip. 17; AF 4, 50; SAF 12, 13). The debris would have been unsuitable as a base for the building or parking lots, and, with Appellant’s approval (Tr. 31), Vance removed and replaced the unsuitable material and billed Appellant for the cost (Tr. 32, 85-88; AF 23, 25; SAF 12, 13).
19. After preliminary correspondence and discussions with Respondent regarding the unsuitable material, Appellant filed a written claim for compensation for the unanticipated costs (Tr. 58, 84-89, 120, 137; Stip. 18, 22; AF 4, 8, 26, 32, 50; SAF 14). On May 24, 1995, the contracting officer denied the claim (Tr. 58; AF 10, 33). Appellant filed a timely appeal, which was docketed as PSBCA No. 3885 (AF 39, 41).
20. During the course of the project, there were construction delays totaling five months. These were related to Appellant’s change in contractor, to the discovery of subsurface debris, to late delivery of Postal Service-supplied equipment and to the need to acquire additional land to relocate the planned septic system. (Tr. 78, 82, 86-87, 90-111, 122-126, 128-134; Stip. 19-21, 23, 25-33, 36; AF 5-7, 11, 22, 25, 27, 37, 52; SAF 10-13, 15-17, 20-23, 29). Respondent was responsible for one-half of the five-month delay (Stipulation at Tr. 139-141, 242).
21. In September 1995, Appellant submitted a formal claim for the costs he incurred due to the delays on the project (SAF 29, 30), and the contracting officer denied it on October 10, 1995 (AF 16). Appellant filed a timely appeal docketed as PSBCA No. 3983 (SAF 30).
22. On January 9, 1997, settlement discussions were held in a telephone conference between Appellant’s counsel, Respondent’s counsel and the real estate contracting officer (Tr. 224; Appellant’s Exhibit (“AX “) 1, ¶ 7; RX 3, ¶ 7). The contracting officer offered to settle the claims by paying Appellant $25,000 amortized over 10 years at an interest rate of 8% (Tr. 224, 229, 231; AX 1, ¶ 7; RX 3, ¶ 7). Appellant did not accept that proposal (Tr. 225, 236, 237; RX 3, ¶ 7). Rather, Appellant’s counsel responded that Appellant required that all or part of the settlement amount be paid up front on a lump-sum basis (Tr. 225, 237; AX 1, ¶ 7; RX 3, ¶ 7). The real estate contracting officer had authority to settle Appellant’s claims if the settlement amount were amortized over time, but not on a lump-sum basis, and Appellant was aware of this limitation (Tr. 228, 229, 231, 232, 234; AX 1, ¶¶ 6, 7; RX 3, ¶ 6). Accordingly, the contracting officer agreed to check with authorized Postal Service officials to see if a lump-sum payment could be made (Tr. 226, 233; AX 1, ¶ 7; RX 3, ¶ 7). On January 11, Respondent’s counsel advised Appellant’s counsel that the Postal Service would not agree to a lump sum payment and, further, would no longer stand by the amortized payment proposal discussed on January 9 (Tr. 235; AX 1, ¶¶ 9, 10, 11; RX 3, ¶¶ 10, 11).
DECISION
Subsurface Debris (PSBCA No. 3885)
Appellant argues that the information revealed in the Soils Testing Report that a house had been on the Kittrell Post Office site and that debris might remain beneath the surface was material information that should have been provided to prospective bidders. Appellant contends that this information was in Respondent’s sole possession before offers were due and that Respondent had a duty to provide it to Appellant. He argues that, based on the preliminary soils information in the Project Manual, he had no reason to suspect that there was further information relevant to preparation of his bid, and that his failure to obtain the Soils Testing Report was reasonable, given the short time allowed for bidding. According to Appellant, Respondent is liable for Appellant’s unexpected costs of removing the unsuitable soil and replacing it with fill because Respondent failed to disclose this “superior knowledge” regarding the site.
Respondent argues that the availability of the Soils Testing Report was revealed to Appellant and other bidders by references to it in the Project Manual table of contents and in drawing notes. According to Respondent, Appellant could have and should have obtained a copy of the full Soils Testing Report before submitting his offer. Respondent argues that his failure to do so now bars his recovery under the “superior knowledge” theory.
Among the elements Appellant must demonstrate in order to prevail under the superior knowledge theory are that Respondent did not disclose vital information in its possession regarding the prior use of the site to Appellant before he bid, that the information was not “otherwise reasonably available” to Appellant and that Appellant was not put “on notice to inquire” by the contract specifications. See American Shipbuilding v. United States, 228 Ct. Cl. 220, 225, 654 F.2d 75, 79 (1981); H.N. Bailey & Assoc. v. United States, 449 F.2d 376, 382-383 (Ct. Cl. 1971); HK Systems, Inc., PSBCA No. 3712, 97-2 BCA ¶ 29,079 at 144,761; Ashbach Constr. Co., PSBCA No. 2718, 91-2 BCA ¶ 23,787 aff’d 960 F.2d 155 (Fed. Cir. 1992)(Table).
There is no dispute that the information was vital. A prudent contractor preparing a lease proposal based on the cost to construct a post office on the site would want to know information that could suggest the existence of subsurface debris (Findings 4, 5, 12, 18).
However, Appellant has not demonstrated that the information was not available to him and that he was not at least on inquiry notice before he prepared his bid. The information Appellant contends Respondent had a duty to disclose was included in the Soils Testing Report (Finding 4), and the note at the beginning of the Project Manual table of contents put Appellant and all other potential offerors on notice that a Soils Testing Report existed that would be made available on request. Thus, although the Soils Testing Report was not physically included in the solicitation package, Appellant could have obtained a copy by asking (Findings 9, 14). Appellant suggests that the short time period allowed for submission of offers prevented him from obtaining and reviewing the Report, but he has not shown that there would have been any delay associated with obtaining the full Soils Testing Report if he had asked, and the information he contends was withheld was not so complex that a long period of analysis would have been necessary. See Hardwick Bros. Co., II v. United States, 36 Fed. Cl. 347, 387-388 (1996).[2]
Appellant also argues that the borings and preliminary soils information in the Project Manual misled or “lulled” him into thinking that there was no subsurface debris. The case of United States v. Atlantic Dredging Co., 253 U.S. 1, 11, 40 S.Ct. 423, 425, 64 L.Ed 735 (1920), provides the underpinnings for Appellant’s argument. However, in Atlantic Dredging, the solicitation for a dredging contract contained statements that borings had been made of the river bed and that the results of the borings were reflected on maps made available to bidders. The solicitation further stated that the contractor could expect to encounter mud and mud mixed with sand, but it failed to reveal that some of the borings had encountered harder material that would be more difficult to dredge. The Court determined that the government could not avoid responsibility by relying on the solicitation’s admonition that the bidders perform their own examination of the conditions because it had misrepresented the conditions and caused the contractor to assume it had sufficient, correct information on which to base its bid. The borings of the Kittrell Post Office site correctly reflected that there was no debris at the locations of the borings (Finding 18), and the boring reports were not misleading as to whether subsurface debris might be located elsewhere on the site (Finding 12). The boring logs made no representation that Appellant could reasonably rely on that localized, subsurface debris would not be found elsewhere on the site.
Because the Soils Testing Report containing the material information was identified in the solicitation and the means to obtain a copy explained, the information in the report was reasonably available to Appellant when he was preparing his proposal. For that reason, Appellant is not entitled to recover under the superior knowledge theory. See HK Systems, Inc., PSBCA No. 3712, 97-2 BCA ¶ 29,079 at 144,762; Ashbach Constr. Co., PSBCA No. 2718, 91-2 BCA ¶ 23,787 aff’d 960 F.2d 155 (Fed. Cir. 1992)(Table); McCloskey & Co., POD BCA No. 357, 70-1 BCA ¶ 8229; A.S. McGaughan Co. v. United States, 24 Cl. Ct. 659, 667 (1991) aff’d 980 F.2d 744 (Fed. Cir. 1992)(Table).
Construction Delays (PSBCA No. 3983)
Appellant claimed that construction of the Kittrell Post Office was delayed by the discovery of the subsurface debris, by Respondent’s failure to supply government furnished equipment on time and by the need to acquire additional land to locate the septic system and Respondent’s delay in authorizing the change in location. After some evidence of the delays had been presented at the hearing, the parties stipulated that the project had been delayed for five months and that Respondent was liable for one-half of Appellant's delay damages and no more (Tr. 39-141, 242). Evidence in the record supports the stipulated duration of the delay and the parties’ apportionment of responsibility (Findings 17, 20).
Motion to Enforce Settlement Agreement
Appellant argues that an agreement was reached between the parties to settle the disputes that gave rise to these appeals and that the Board should enforce it. However, although there were settlement discussions and an offer made by Respondent, Appellant has not shown that he accepted the offer. The real estate contracting officer offered Appellant (through Appellant’s counsel) $25,000 amortized over 10 years at 8% interest to settle Appellant’s claims (Finding 22). However, without stating whether Appellant was satisfied with the proposal or expressing a desire to keep that proposal open, Appellant's counsel asked that some or all of the payment be in a lump sum immediately, which was a counteroffer.[3]
A lump sum payment was beyond the authority of the real estate contracting officer, but he agreed that he would see if such payment could be authorized. It was not authorized, and by the time that was relayed to Appellant’s counsel on January 11, Respondent was no longer willing to stick by the original amortized offer. The record does not reflect when, if ever, Appellant or his counsel told Respondent that Appellant accepted the $25,000 amortized offer. However, even if he had done so on June 11, it would have been too late. Appellant’s counteroffer on January 9 rejected Respondent’s $25,000 amortized offer, and it was not necessary thereafter for Respondent to withdraw it formally. See Leadermar, Inc., ASBCA Nos. 40575, 42408, 92-2 BCA ¶ 24,919 at 124,249; Restatement (Second) of Contracts § 39 (1981). Respondent was not obliged to make the same offer again, and there is no settlement that the Board can enforce.
Conclusion
PSBCA No. 3885 is denied. In PSBCA No. 3983, Appellant is entitled to recover one-half of the damages he sustained because of the five-month project delay plus Contract Disputes Act interest, and the appeal is otherwise denied. The quantum of damages is remanded to the parties for negotiation.
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] By agreement of the parties, the appeal files submitted before the hearing were replaced at the hearing by two consolidated volumes identified as the Appeal File and the Supplemental Appeal File (Tr. 3). The record citations in this Opinion are to the two replacement files.
[2] Contrast the availability of the Soils Testing Report in this case with the availability of the vital information in the cases relied upon by Appellant. In North Slope Technical, Ltd., Inc. v. United States, 14 Cl. Ct. 242, 254 (1988), the court found application of the superior knowledge theory against the government was not barred by the contractor’s failure to obtain and review before bidding available information referred to in the solicitation because in that case 1) a request for the information would probably have been futile and 2) there was no showing that the information in the referenced materials had any bearing on the problem encountered by the contractor. In Hardeman - Monier - Hutcherson v. United States, 458 F.2d 1364, 1367, 1372 (Ct. Cl. 1972), the contractor requested the vital weather information referenced in the solicitation, but the agency refused to supply it. As discussed above, in this case if Appellant had asked for the Soils Testing Report, it would have been provided to him.
[3] The evidence suggests that Appellant's counsel may also have proposed a higher total figure and that Respondent assume responsibility for certain real estate taxes. We need not so find, however, since countering Respondent's amortized proposal with one calling for a lump sum payment was a counteroffer.