December 10, 1999
Appeal of
UNARCO MATERIAL HANDLING
Under Contract No. 335660-96-B-0028
PSBCA No. 4100
APPEARANCE FOR APPELLANT:
William J. Spriggs, Esq.
APPEARANCE FOR RESPONDENT:
Thomas J. Marshall, Esq.
Appellant, Unarco Material Handling, has filed a timely appeal of the final decision of the contracting officer on six claim items concerning a contract between Appellant and Respondent, United States Postal Service. The parties have elected to submit their case on the record pursuant to 39 C.F.R. §955.12. Only entitlement is at issue.
The six claims at issue in this appeal are -- (a) a mistake in bid claim covering the cost of obtaining a mechanical permit; (b) a claim for profit on delay costs already allowed by the contracting officer; (c) a claim for the cost of an alleged constructive acceleration of contract performance; (d) a claim for Prompt Payment Act interest because of alleged Postal Service delays in processing Appellant’s invoices; (e) a claim for profit on attorney and consultant fees incurred in preparing and negotiating the equitable adjustment request which preceded the claim giving rise to this appeal; and, (f) a Postal Service claim for work allegedly not performed by Appellant.
Contract Award
1. On September 28, 1995, Respondent awarded a contract to Appellant to provide and install an integrated materials storage and distribution system[1] inside a new Postal Service Material Distribution Center which was then being built in South River, New Jersey (Appeal File Tab (AF) 2-2).
2. As awarded, the contract price was $1,735,990, and the contract specified that installation was to be completed by March 15, 1996[2]. In accordance with Section C, Delivery/Performance, of the contract, the Postal Service could delay commencement of installation by up to 30 calendar days at no additional cost to the Postal Service, provided that the contractor received written notice of the delay from the contracting officer 30 calendar days before the scheduled installation date or within 7 calendar days after award, whichever was later. Installation delays beyond 30 calendar days had to be mutually agreed to by the contractor and the Postal Service. (AF 2-2).
3. The contract incorporated by reference clause B-2, “Changes,” which provided, in part, that the contracting officer could order changes within the general scope of the contract, including changing the delivery or performance schedule. If any such change affected the cost of performance or delivery schedule, the contract would be modified to effect an equitable adjustment. Also incorporated by reference was clause B-30 “Permits and Responsibilities,” which placed the responsibility for obtaining and paying for permits on the contractor. (AF 2-2).
4. The contract also incorporated by reference clause B-16, “Suspensions and Delays.” This clause provided, in part, that if performance of all or part of the work under the contract was suspended, delayed, or interrupted by an order or act of the contracting officer, an adjustment would be made for any increase in the cost of performance of the contract caused by the delay (AF 2-2).
5. Section C.4, “Warranty of Services,” of the contract, provided, inter alia, that the contractor warranted that all services performed under the contract would be, at the time of acceptance, free from defects and in conformance with the requirements of the contract. If, after inspection and acceptance, and within thirty days of discovering a warranted defect, the contracting officer notified the contractor of defects, the contractor agreed to correct or replace the defective work at no cost to Respondent. If the contractor failed or refused to correct the defective work after receiving written notice of the defects, the clause authorized the contracting officer to correct the work and charge the contractor with the cost of correction. (AF 2-2).
6. Section C.5, “Liquidated Damages,” provided for liquidated damages in the amount of $3,400 per day for each day of delay in completing the contract (AF 2-2).
7. In a meeting held on September 25, 1995, the Postal Service requested Appellant to provide further clarification of its bid. In response, by letter dated September 28, 1995 (sent by facsimile that same date), Appellant informed Respondent that its offered price included the cost of obtaining building permits for the electrical work, but did not include costs associated with obtaining permits for mechanical installation. Appellant stated that it was not aware of a requirement for mechanical installation permits in the South River, New Jersey area[3] (AF 2-1).
8. By letter dated January 10, 1996, Appellant informed Respondent that it had become aware of the necessity to obtain building permits for mechanical installation and that it was proceeding to obtain and pay for the required permits. Appellant stated that it considered Respondent liable to reimburse Appellant for the cost of these permits. (AF 2-5).
9. On January 11, 1996, Respondent notified Appellant that, because of delays in the construction of the Material Distribution Center, the start date for installation was delayed until March 11, 1996, with the completion date extended to May 10, 1996, 60 days thereafter. By unilateral Modification No. M03, dated February 20, 1996, the contract was modified to reflect this delay. (AF 2-4; Trosky Declaration and Exhibit 2, thereto).
10. By letter dated March 14, 1996, Appellant informed Respondent that it would require a three-week extension to the 60-day period for contract performance because of delays incurred to that date (AF 2-5).
11. Respondent further delayed the project start date on March 13, 1996, because of union problems encountered by the contractor Respondent had engaged to build the facility. By unilateral Modification No. M05 to the contract, dated March 20, 1996, the Postal Service suspended work, effective March 13, 1996. This modification estimated that work would be allowed to proceed on April 15, 1996. (Trosky Declaration and Exhibit 3, thereto).
12. By letter dated March 22, 1996, in reference to Modification No. M05, Appellant requested at least 72 hours notice prior to being expected to return to the job site, noting that its rack installation subcontractor would need this additional notice. Appellant also noted that the modification failed to address Appellant’s previous request for a three-week extension in the time allowed for installation. Appellant did not sign Modification No. M05. (AF 2-4; Trosky Declaration).
13. Respondent subsequently reissued Modification No. M05 unilaterally on April 22, 1996, notifying Appellant that it could commence installation on April 29, 1996, and that Appellant must complete the contract within 60 days thereafter (Declaration of John A. Trosky, Exhibit 6).
14. By letter dated April 25, 1996, Appellant informed the contracting officer that it was unable to begin installation on April 29, 1996, because the subcontractor responsible for installation had scheduled other work. Appellant requested additional time to complete the contract due to the Postal Service changing the schedule. (AF 2-4).
15. Respondent responded by letter dated April 26, 1996, informing Appellant that the Postal Service continued to expect Appellant to start installation on April 29, 1996, and to complete installation within 60 days. In the event Appellant failed to do so, Respondent stated that it would be “constrained to persue [sic] all of the remedies available to it under the contract.” (AF 2-4).
16. By letter dated May 30, 1996, the contracting officer informed Appellant that she would not extend the contract’s completion date to July 28, 1996 (as was requested by Appellant in a meeting held on May 29, 1996) and that if Appellant failed to complete work by June 28, 1996, liquidated damages would be assessed for each day thereafter (AF 2-4).
17. Appellant accelerated performance during the month of June by adding personnel and working overtime and weekends in an effort to meet the June 28 completion date established by Respondent (AF 2-5, 2-6).
18. On June 28, 1996, Respondent inspected the work for acceptance and developed a punch list of incomplete work (AF 2-6).
19. By letter dated July 1, 1996, Appellant informed Respondent that the Postal Service had taken beneficial use of the work and, with the exception of the incomplete items of work noted on the punch list, Appellant considered the project to be complete (AF 2-6).
20. By letter dated July 11, 1996, Respondent informed Appellant that, until it completed the punch list items, Respondent did not consider the project to be complete. The letter noted that many of the anchor bolts and nuts for the system were not properly tightened. Respondent further stated that if Appellant did not complete the punch list, the Postal Service may terminate the contract for default. (AF 2-6).
21. At a July 24, 1996, meeting to discuss punch list items, Appellant was asked to provide a schedule to complete the work and, specifically, to identify when the anchor bolts would be tightened. Appellant stated that it would provide a schedule by July 26, 1996, for tightening the anchor bolts and completing other punch list items. (AF 2-6).
22. By letter dated July 26, 1996, Respondent notified Appellant that its proposed punch list completion date of August 16, 1996 was unacceptable. This letter also stated that, as the contract completion date of June 28, 1996, was past due, the Postal Service would exercise contract remedies, to include imposition of liquidated damages and termination for default. (AF 2-6).
23. By letter dated July 29, 1996, sent by facsimile, Appellant submitted a revised schedule for completing tightening of the anchor bolts by August 3, 1996. The schedule divided the project into five areas (identified on a drawing accompanying the schedule as areas A-E). Areas A and B were proposed to be completed by August 1. Appellant commenced tightening the bolts in accordance with its proposed schedule (AF 2-6); Affidavit of Tommy Jackson).
24. However, by letter dated July 29, 1996, the contracting officer rejected Appellant’s latest proposed schedule for tightening anchor bolts and informed Appellant that the Postal Service would hire a contractor to tighten the anchor bolts in areas A and B by close of business on August 1, 1996. Because Respondent would be performing part of the work, the contracting officer directed that Appellant tighten the remaining anchor bolts by August 1. (AF 2-6).
25. By letter dated July 31, 1996, Appellant informed Respondent that it considered the Postal Service’s action to hire another contractor to tighten bolts to be an interference with its contract performance and a breach of the Postal Service’s duty not to hinder Appellant’s performance. Appellant further stated that having an outside contractor perform contract work voided any warranties Appellant would have provided on the pallet rack portion of the system being installed by Appellant under the contract. (AF 2-6).
26. Respondent paid a third-party contractor $2,892.96 to tighten anchor bolts left untightened by Appellant (Trosky Declaration).
27. Appellant completed punch list items on the pallet rack portion of the system on August 2, 1996, and completed the punch list on the conveyor portion of the system on October 11, 1996 (Trosky Declaration).
Contract Invoicing
28. Clause F.2, “Invoices”, (Clause B-20) (June 1988), required that each invoice submitted under the contract contain:
1. The contractor’s name and address;
2. The contract number;
3. Any applicable task or delivery order number;
4. A description of the supplies or services and the dates delivered or performed;
5. The point of shipment or delivery;
6. Any applicable unit prices and extensions;
7. Shipping and payment terms; and
8. Any additional information required by the contract. (AF 2-2).
29. In accordance with Clause F.3, “Payment Due Date”, payments under the contract were due 30 days after receipt of a proper invoice, or the date the contract deliverables were accepted by the Postal Service, whichever was later (AF 2-2).
30. On March 18, 1996, Appellant submitted Invoice No. 12326, in the amount of $491,818. This invoice did not contain product descriptions or quantities. (Trosky Declaration and Exhibit 12 thereto).
31. Respondent informed Appellant that the March 18 invoice was incomplete, and on May 15, 1996, Appellant submitted a revised invoice. This invoice was found to be satisfactory to Respondent and payment was made on June 14, 1996. (Trosky Declaration and Exhibit 16 thereto).
32. On June 28, 1996, Appellant submitted Invoice No. 14632, in the amount of $1,008,501, which lacked a description of the supplies or services and the dates of delivery (AF 3-2; Trosky Declaration and Exhibit 17 thereto).
33. Appellant was advised of the deficiencies in the invoice during the week of July 8, 1996, and by letter dated July 16, 1996. Specifically, Appellant was requested to identify the items being billed for and the corresponding dollar amounts, so that Respondent could withhold payment for components of the project Respondent had not yet accepted. (AF 3-2; Trosky Declaration).
34. Appellant submitted a corrected invoice on August 16, 1996 (Trosky Declaration and Exhibit 19 thereto).
35. With the exception of 20 percent withheld representing the incomplete conveyor portion of the invoice, Respondent processed and paid Appellant for Invoice No. 14632 on September 6, 1996 (Trosky Declaration and Exhibits 20 and 21 thereto).
36. On November 1, 1996, after acceptance of the conveyor portion of the system on October 11, 1996 (see Finding of Fact (FOF) No. 27), Respondent paid Appellant the previously withheld 20 percent portion of Invoice No. 14632 (Trosky Declaration and Exhibits 22 and 23 thereto).
37. On May 16, 1997, Appellant submitted a claim under the Contract Disputes Act in the amount of $91,726. This claim included $13,303, representing attorney fees (including Appellant’s G&A and profit thereon) incurred in preparing for and assisting in negotiations of a request for an equitable adjustment filed in July 1996, and $9,896, representing fees to a subcontractor in connection with negotiating the request for equitable adjustment, G&A and profit. (AF 4-4).
38. By final decision dated July 16, 1997, the contracting officer granted portions of Appellant’s claim, but denied others. The final decision conceded entitlement to payment of attorney fees and subcontractor consultant fees incurred by Appellant in preparing and negotiating its request for an equitable adjustment, but denied payment of profit to Appellant on those same costs. (AF 4-4). Appellant appealed the partial denial of its claim.
Appellant argues that the contracting officer knew or should have known that it failed to include in its bid the cost of obtaining building permits for mechanical installation since it notified the contracting officer concerning this on the date of award. Based on this notice, Appellant argues that the contracting officer should have asked Appellant to verify its bid and that, therefore, the contract price should be reformed to include the cost of obtaining these permits.
Respondent argues that the contract’s Permits and Responsibilities clause places responsibility on Appellant to obtain and pay for all necessary permits and licenses. Respondent further argues that it was unaware, prior to contract award, of any requirement for a mechanical permit (FOF 7).
We find no merit in Appellant’s argument that the contracting officer should have known Appellant had made a mistake in not including in its bid the costs of obtaining mechanical installation permits. The contract placed the responsibility to obtain and pay for all necessary permits on Appellant (FOF 3), and there is no basis for reforming the contract to correct Appellant’s mistaken omission of those costs.
A contract can be reformed to increase the price because of a mistake in bid only if evidence is clear and convincing the contractor made a clerical or arithmetical type of mistake or a misreading of the specifications and that the contracting officer knew or should have known of the mistake. See United States v. Hamilton Enterprises, Inc., 711 F.2d 1038, 1046 (Fed. Cir. 1983); see also Brindley Construction Co., Inc., PSBCA No. 2236, 89-1 BCA ¶ 21,296. Appellant’s claim fails this standard.
Appellant has not alleged that its failure to include in its bid the costs associated with obtaining building permits for mechanical installation was the result of a clerical or arithmetical error or misreading of the specifications. Instead, Appellant made an error in judgment when it assumed a mechanical permit was not required and did not include its cost in its bid. Moreover, there is no evidence that the contracting officer was aware, prior to contract award, of Appellant’s error in judgment.[4] (FOF 7). In such circumstances, Appellant’s “conscious gamble” that mechanical installation permits were not required is not compensable. Liebherr Crane Corporation v. United States, 810 F.2d 1153, 1157 (Fed. Cir. 1987). Accordingly, this claim is denied.
Under this claim item, Respondent has acknowledged full responsibility for the delays occasioned by its directions to Appellant in contract Modification Nos. M03 and M05 to delay contract performance. However, Appellant seeks to recover profit on the costs it incurred as a result of those delays. Appellant premises this claim on its argument that the delays should have been compensated under the contract’s Changes clause instead of under the contract’s Suspensions and Delays clause.
Respondent argues that increased costs associated with Modification Nos. M03 and M05 should be treated under the contract’s Suspensions and Delays clause which, it argues, does not allow recovery of profit on the increased costs a contractor incurs because of a suspension of work.
We need not decide whether Appellant is entitled to recover its delay costs under the contract’s Changes or Suspensions and Delays clause since Appellant is entitled to recover profit under either clause.
Under the contract’s Suspensions and Delays clause, Appellant is entitled to an “adjustment” in contract price for any increase in the cost of performance caused by the delay (FOF 3). Although prior versions of this clause specifically excluded the recovery of profit as a component of the price adjustment (and this Board so held), (see e.g., H.A. Kaufman Co., PSBCA No. 2616, 90-3 BCA ¶ 23,213; A.S. McGaughan Co., Inc., PSBCA No. 2074, 90-1 BCA ¶ 22,411; Fruehauf Corporation, PSBCA No. 479, 73-1 BCA ¶ 9897), the Suspensions and Delays clause included in Appellant’s contract does not specifically exclude the recovery of profit.
Profit has generally been included when providing for an “equitable adjustment” under a government contract. See United States v. Callahan Walker Const. Co., 317 US 56 (1942); General Builders Supply Co. v. United States, 409 F.2d 246, 249 (Ct. Cl. 1969); Yamas Const. Co., ASBCA No. 27366, 86-3 BCA ¶ 19,090. Those cases cited by Respondent in which profit was not allowed were cases in which the contract language expressly excluded profit from any adjustment. Thus, absent a specific exclusion on the recovery of profit, there is no basis for denying profit as part of the price adjustment Appellant is entitled to receive as a result of the delays incurred at the inception of contract performance. See BEI Defense Systems Co., ASBCA No. 46399, 95-1 BCA ¶ 27,328.
Appellant argues that Respondent constructively accelerated the contract by unilaterally imposing a new start date (April 29, 1996) and, at the same time, insisting on completion within 60 days (by June 28, 1996). Respondent argues that Appellant “effectively agreed” to begin contract performance on April 29, 1996, and that, therefore, Respondent’s insistence on completion by June 28, 1996, was not a constructive acceleration of the contract.
Constructive acceleration of contract performance occurs where a contractor has a right to a time extension but is nevertheless ordered to adhere to the original schedule. See Allen L. Bender, Inc., PSBCA Nos. 2322, 2324, 2325, 2476, 91-2 BCA ¶ 23,828; Corbetta Construction Co. of Illinois, Inc., PSBCA No. 299, 77-2 BCA ¶ 12,699. Such a circumstance is present in this case.
At the time of contract award in September 1995, the parties contemplated commencing performance on January 15, 1996, and completing performance within 60 days (FOF 2). However, Appellant was not permitted to commence performance on January 15, 1996, because of delays Respondent encountered in having the Material Distribution Center constructed (FOF 9). Although delays beyond 30 days in commencement of performance required the mutual agreement of the Postal Service and Appellant (FOF 2), Respondent unilaterally issued Modification No. M05 on April 22, 1996, directing Appellant to commence performance on April 29, 1996, and complete performance within 60 days (FOF 13).
Under the contract, Respondent had no authority to unilaterally impose a start date after the 30-day period allowed by Section C., Delivery/Performance (FOF 2, 13). Appellant complained and requested additional time to complete performance because its subcontractor had scheduled other work (FOF 14). Nevertheless, Respondent denied Appellant’s requests for a time extension and threatened Appellant with the imposition of liquidated damages if it failed to complete installation by June 28, 1996 (FOF 15,16).[5]
It is clear from the record that Appellant attempted to meet the June 28 deadline established by Respondent by adding personnel and working weekends and overtime (FOF 17). Appellant, in fact, submitted the work for inspection and acceptance on that date (FOF 18). Accordingly, any costs it incurred in accelerating its efforts to meet Respondent’s unilaterally established completion date are properly recoverable in this appeal.
Appellant argues that it is entitled to receive interest in accordance with the Prompt Payment Act, 31 U.S.C. §3901 et seq., because of Respondent’s failure to timely make payment on two invoices (Invoice No. 12326, initially submitted on March 18, 1996, and Invoice No. 14632, initially submitted on June 28, 1996). Respondent counters that Appellant failed to submit the invoices in accordance with contract requirements and that, once Appellant made the necessary corrections on the invoices, timely payment was made by Respondent.
In accordance with Clause F.3 of the contract and the provisions of the Prompt Payment Act, 39 U.S.C. §3902(a), Respondent’s obligation to pay interest on an invoice would arise only if payment was not made within 30 days after receipt of a proper invoice. Clause F.2, Invoices, contained a detailed list of the contents of a proper invoice. These requirements included furnishing product descriptions, quantities and dates of delivery, all of which were lacking in Appellant’s initial submission of the invoices in question. (FOF 27, 29, 31). More importantly, the invoices in question lacked sufficient detail to enable the Postal Service to withhold payment for components of the project, which it had not yet accepted. (FOF 31, 33). As such, the invoices contained material deficiencies.
Once Appellant made the necessary corrections on the invoices, Respondent made payment within 30 days of the resubmission by Appellant of the corrected invoices (FOF 30, 33-35). Accordingly, this claim is denied.
Respondent reimbursed Appellant for attorney fees and consultant costs incurred in preparing and negotiating its adjustment request but did not include any payment to Appellant for profit on those costs (FOF 38). It is Respondent’s position that a contractor is not entitled to recover profit on his costs on claims based on the contract’s Suspensions and Delays clause. (See “Profit on Delay Costs,” above). Accordingly, Respondent argues that Appellant is not entitled to profit on its costs to prepare and negotiate the request for equitable adjustment since a portion of that request is based on the contract’s Suspensions and Delays clause. Appellant argues that it is entitled to recover profit on allowed administrative costs incurred in preparing and negotiating an equitable adjustment request, irrespective of the underlying claims that form the basis of the equitable adjustment request.
Administrative costs, including attorney fees, incurred in preparing and negotiating a request for equitable adjustment are recoverable as a part of the equitable adjustment granted. See Bill Strong Enterprises, Inc. v. United States, 49 F.3d 1541, 1549 (Fed. Cir. 1995). Profit is a consideration when determining an equitable adjustment, as it is in any other cost based pricing action, unless profit is expressly excluded by some pertinent contract provision. BellSouth Communications System, Inc., ASBCA No. 45955, 94-3 BCA ¶ 27231. Moreover, we have already found that profit may be recovered as part of an adjustment under the Suspensions and Delays clause included in Appellant’s contract (see “Profit on Delay Costs” discussion, supra). Respondent has not shown any basis to disallow Appellant’s recovery of profit on administrative costs that have already been granted by the contracting officer. See Yamas Construction Co., ASBCA No. 27366, 86-3 BCA ¶ 19,090. Accordingly, Appellant is entitled to recover profit on the administrative costs it incurred in preparing and negotiating the request for a price adjustment.
Respondent argues that it was forced to hire a replacement contractor to tighten the anchor bolts because of Appellant’s failure to timely do so itself. Appellant acknowledges that the bolts needed tightening, but argues that it was ready, willing and able to do so, and had notified Respondent of that fact, when Respondent unilaterally brought in a replacement contractor.
There is no evidence that Appellant refused to correct the deficiency. In fact, in a letter dated July 29, 1996, Appellant submitted a schedule to Respondent to complete tightening the anchor bolts by August 3, 1996 (FOF 23). Rather than allow Appellant to complete the work, Respondent immediately rejected Appellant’s request to complete the work and hired a third-party contractor to tighten the bolts in areas A and B when Appellant proposed to do that same work on the same day (FOF 24, 26).
Respondent offered no explanation as to why it was necessary to complete the bolt-tightening task by August 1, 1996, (vice August 3). In these circumstances, Respondent’s actions must be considered to be a deductive change of this aspect of contract work and Appellant may not be charged with Respondent’s costs to obtain a replacement contractor to tighten the anchor bolts. However, Respondent is entitled to a credit representing Appellant’s saved costs, if any, resulting from the Postal Service performing this portion of the contract. See Eugene Iovine, Inc., PSBCA No. 2867, 92-2 BCA ¶ 25,013.
Appellant is entitled to recover profit on delay costs already paid by Respondent as a consequence of the delays imposed by Respondent in commencing contract performance. Appellant is also entitled to recover the costs it incurred when it accelerated contract performance in an attempt to meet the June 28, 1996 completion date unilaterally imposed by Respondent. Finally, Appellant is entitled to recover profit on the administrative costs it incurred in preparing and negotiating the request for equitable adjustment, which preceded this appeal.
Appellant may not recover the costs incurred in obtaining a mechanical permit, nor it is entitled to Prompt Payment Act interest on Invoice Nos. 12326 and 14632.
Finally, Respondent is not entitled to assess against Appellant the costs it incurred in hiring a replacement contractor to tighten the anchor bolts, but is entitled to a credit representing Appellant’s saved costs, if any, from not tightening the anchor bolts in areas A and B.
The appeal is sustained to the extent indicated and is otherwise denied.
William K. Mahn
Administrative Judge
Board Member
I concur:
James A. Cohen
Administrative Judge
Chairman
I concur:
David I. Brochstein
Administrative Judge
Vice Chairman
[1] The system included pallet racks and a conveyor system.
[2] At a pre-proposal conference, all of the bidders, including Appellant, were informed that installation was expected to be accomplished in 60 days and that January 15, 1996, was the contemplated start date. (Declaration of John A. Trosky).
[3] Respondent also was not aware, prior to contract award, that a mechanical permit was required for the job (Trosky Declaration).
[4] No evidence was presented showing that Respondent had received Appellant’s September 28, 1995 “faxed” letter prior to award of contract.
[5] Notwithstanding Respondent’s assertion that Appellant “effectively agreed” to commence performance on April 29, there is no evidence of this “agreement” occurring.