December 14, 2001
Appeal of
CITY WINDOW & CONSTRUCTION COMPANY
Under Contract No. 362575-98-B-0398
PSBCA No. 4563
APPEARANCE FOR APPELLANT:
Johnson W. Gabhart, Esq.
APPEARANCE FOR RESPONDENT:
Earl L. Cotton, Sr., Esq.
OPINION OF THE BOARD
Appellant, City Window & Construction Company, has appealed a final decision of a contracting officer denying Appellant’s claim for $120,313.07 of alleged additional costs incurred by Appellant under its Indefinite Quantity Construction Contract with Respondent, United States Postal Service. A hearing was held in Charleston, West Virginia. Both entitlement and quantum are at issue.
1. Respondent awarded Indefinite Quantity Construction (IQC) Contract No. 362575-98-B-0398 to Appellant on July 21, 1998, for a term of two years. Under the contract Appellant agreed to perform work orders for construction and alteration of postal facilities in the Appalachian District in accordance with the terms of the contract, and for the unit prices in the contract, as multiplied by the 1.05 multiplier bid by Appellant. The maximum amount of any work order issued under the contract was limited to $250,000. (Transcript (Tr.) Vol. I, pp. 29-31; Appeal File Tab (AF) 1).
2. Clause C.9, Work Hours (Clause FB-202)(June 1988), of the contract provided that all work would be performed during normal work hours unless otherwise provided in the contract. Clause C.13, Proposals (Clause FB-250)(June 1988), provided that items of work accomplished outside of normal work hours (8:00 a.m. to 5:00 p.m., Monday to Friday) would be increased by a 25% premium. Clause C.14, Work Orders (Clause FB-251)(June 1988), provided, in pertinent part, that no work may be performed until a written work order, signed by the contracting officer, was received by the contractor. Clause G.20, Changes (Clause 11-26)(October 1987), provided that the contracting officer, by written order, may make changes in the work. The Changes clause also provided that any other written or oral order from the contracting officer that causes a change will be treated as a change order provided the Contractor gives the contracting officer written notice of the change. Finally the clause also states that, “[e]xcept as provided in this clause, no order, statement, or conduct of the Contracting Officer may be treated as a change under this clause or entitle the Contractor to an equitable adjustment.” (AF 1).
3. Prior to Appellant performing any work orders under this IQC contract, Respondent’s contracting officer informed Appellant that it would be compensated, after the fact, for additional work performed over and above the quantities indicated in the work order and that deductions would be taken for work that was not performed. The parties’ performance under each of the work orders awarded under this contract followed this practice. (Tr. Vol. I, p. 34, Vol. II, p. 15-25).
4. Appellant performed 31 work orders issued by Respondent under this IQC contract prior to being awarded the work order involved in this appeal. A practice developed between Appellant and Respondent in performing these 31 work orders in which oral directions for additional work were issued by Respondent’s employees, with the paperwork to reflect the oral instructions prepared at a later date. Respondent paid Appellant for all such additional work on these 31 prior work orders in amounts varying from $10,000 to $500,000. (Tr. Vol. I, pp. 37, 38, 43-45, 49, 142, 159, 160, Vol. II, pp. 25, 257-259, Vol. III, p. 169; Appellant’s Trial Exhibit No. (ATE) 15).
5. In three instances in these prior work orders, Respondent also issued partial work orders to Appellant, with the understanding that additional work necessary to complete the project, as designed, would be included in one or more subsequent work orders (Tr. Vol. I, pp. 41-43, 162, Vol. II, pp. 18, 19).
6. On July 7, 1999, Respondent issued Appellant a Request for Proposal for construction of a Postal Retail Store at the Huntington, West Virginia Processing and Distribution Center (P&DC). The project required the construction of an addition to the existing facility. (ATE 3, 9).
7. In response, Appellant submitted an initial proposal in the approximate amount of $275,000. This initial proposal was transmitted to Respondent’s contract architect, Mr. Michael Mace. Mr. Mace had previously estimated that the cost of the project would be $266,533. However, after Mr. Mace reviewed Appellant’s proposal, he returned it to Appellant with suggestions to eliminate certain work items and to reduce certain quantities in order to reduce the work order price to approximately $187,000. In so doing, Mr. Mace was aware that the “as awarded” work order would not contain all the work specified in the plans and specifications for the project. (Tr. Vol. I, pp. 57, 59, 163-166, Vol. II, pp. 32, 37, Vol. III, pp. 187-189, 209, 265; Appellant’s Supplemental Appeal File Tab (ASAF) 9; ATE 4).
8. Appellant revised the work order proposal in accordance with the suggestions made by Mr. Mace, and resubmitted it to Respondent on September 1, 1999, with a price of $186,756.47. On September 8, 1999, Respondent awarded Work Order No. 32 to Appellant, as revised and resubmitted by Appellant, for construction of the retail store. The work order indicated a start date of September 6, 1999, with 120 days for completion. (Tr. Vol. I, pp. 62, 63; Respondent’s Supplemental Appeal File Tab (RSAF) A; ASAF 8: ATE 8).
9. As awarded, the work order did not include all the work necessary to construct a complete and useable facility. For example, demolition of the storefront to the retail store and construction of a necessary temporary security wall were not included in the work order. Certain necessary ductwork and plumbing was also omitted from the “as awarded” work order. (Tr. Vol. I, pp. 59, 74, Vol. II, pp. 42, 220, Vol. III, pp. 50, 190-197).
10. Respondent never returned an executed copy of Work Order No. 32 to Appellant. Respondent did not issue a Notice to Proceed or a letter designating the contracting officer’s representative (COR), or conduct a pre-construction conference. However, on September 17, 1999, Appellant orally notified Respondent that it would mobilize on the job site on September 20, 1999, and did so. (Tr. Vol. I, pages 41, 66, 70, 71-73, 151; ASAF 10, 15; ATE 3).
11. A progress meeting was held on the job site on September 21, 1999, attended by Appellant’s and Respondent’s personnel, including the Huntington Postmaster and the plant manager at the P&DC. The meeting was run by Mr. Mace, Respondent’s contract architect, and was attended by Respondent’s newly assigned project manager and COR, Mr. Mike Petro. (Tr. Vol. I, pp. 72, 73, Vol. III, p. 282; ASAF 13).
12. At this first progress meeting, and at the direction of Mr. Mace, certain work items that had been deleted from the “as awarded” work order at the suggestion of Mr. Mace, were added back into the project. These items included the requirement to demolish the storefront as well as to construct a security wall. In addition, both the Huntington Postmaster and the plant manager, in the presence of both Mr. Mace and Mr. Petro, informed Appellant that work inside the existing lobby would have to be performed outside of Postal Service work hours. (Tr. Vol. I, pp. 74-78, Vol. II, pg. 163, 212; ASAF 13, 15).
13. On September 23, 1999, Appellant’s president telephoned Respondent’s contracting officer to discuss problems that had already arisen in performing the “as awarded” work order, since the project could not be completed if the scope of work was limited to the work items listed in that work order. In addition, Appellant had encountered what it considered a differing site condition on the second day of construction when it began removing a planter from the front of the facility and discovered an extensive concrete abutment. In this telephone conversation, the contracting officer told Appellant’s president that he should take his directions on this project from Mr. Mace. Mr. Mace later confirmed to Appellant’s personnel that he should be considered the contracting officer’s representative on this job. (Tr. Vol. I, pp. 86-88, 145, 176, 177, 193, Vol. II, pp. 46, 47, 51, 161).
14. In the same telephone conversation, the contracting officer orally approved Appellant undertaking the corrective work needed to address the differing site condition. The contracting officer also approved the changes necessary for removal of the storefront and construction of the security wall. (Tr. Vol. I, p. 87, Vol. II, pp. 161, 162, Vol. III, p. 269).
15. Thereafter, Appellant only performed changes to the work after receiving approval for the changes from Mr. Mace. Appellant documented the extra work, as the work was performed, in letters and memoranda transmitted to Mr. Mace, with copies to the COR, Mike Petro. In addition, Appellant transmitted proposed change orders for the additional work to Mr. Mace in November 1999 and January 2000. It was the practice of Mr. Petro to bring to the attention of the contracting officer any transmittal from Appellant that described extra work. Mr. Mace, for his part, forwarded a copy of all the transmittals he received from Appellant to the contracting officer. Respondent acquiesced in this method of communication. (Tr. Vol. I, p. 107, Vol. II, pp. 165, 183, 191, 198, 215, Vol. III, pp. 67-70, 141, 162, 230, 273-275; ASAF 11, 12, 15, 17-22; ATE 20).
16. Neither the contracting officer nor the COR responded to any of Appellant’s transmittals concerning extra work during Appellant’s construction of the project (Tr. Vol. I, p. 107, Vol. III, p. 132).
17. Appellant performed all the interior work in the existing building after normal Postal Service work hours and claimed a premium time payment (see Finding of Fact No. 12). However, Appellant did not pay its employees a premium for this “after hours” work. (Tr. Vol. I, pp. 77, 148, Vol. II, p. 163; AF 7).
18. Appellant completed the project on January 12, 2000. At the direction of Mr. Mace and with the acquiescence of the contracting officer (see Finding of Fact Nos. 13 and 15, above), Appellant performed the additional work necessary to construct a complete and useable facility, in addition to the work items listed in the original work order, at a cost of $119,736.01[1]. (Tr. Vol. II, pp. 58-157, 193, 194, Vol. III, pp. 161, 162, 198; Joint Stipulation and Exhibit A, thereto; ATE 14).
19. The cost of the project, including both the original work order price ($186,756.47), plus the additional costs Appellant incurred in performing additional work ($119,736.01), was a reasonable total amount for constructing the facility (when compared to other similar postal facilities constructed in West Virginia) (Tr. Vol. II, pp. 270, 274, 275; ATE 3).
20. By letter dated March 8, 2000, (that was transmitted to the contracting officer by facsimile on the same date), Appellant filed a certified claim with the contracting officer in the amount of $120,313.07 for additional work performed by Appellant in constructing the Huntington Postal Retail Store. By final decision dated May 3, 2000, the contracting officer denied the claim in its entirety. (AF 7, 9).
The single overriding issue in this appeal is whether Appellant was authorized by the contracting officer to perform the additional work at issue. Respondent does not argue that the work was not performed, or that performing the work was not necessary to construct a complete and useable facility. Respondent argues, however, that Appellant never received written authorization from the contracting officer before proceeding with the work, as required by the contract, and should, therefore, be barred from recovering. Appellant argues that Respondent’s conduct during the course of this project, as well as the course of dealing between the parties under 31 previous work orders under the contract, acted to waive the contract’s requirement that written authorization from the contracting officer was necessary before Appellant could proceed with additional or changed work under the work order.
We agree with Appellant. Throughout Appellant’s performance on 31 previous work orders under the same contract, a course of dealing was established between the parties in which Appellant was orally authorized to proceed with additional work, and was later allowed to submit a change order request and be fully compensated for the additional work (Finding of Fact No. (FOF) 4). In some instances, a partial work order was issued to Appellant with the understanding that additional work necessary to complete the project in accordance with the original design would be added to the project after award of the work order (FOF 5). Thus, Appellant reasonably complied when it was instructed by Respondent’s architect, Mr. Michael Mace, to delete from Appellant’s proposed work order numerous line items of work that were necessary to construct a complete Postal Retail Store at the Huntington, West Virginia P&DC, as depicted in the plans and specifications, and to have the work order awarded to it in that incomplete state (FOF 7-9).
Respondent’s actions under this subject work order followed this prior course of dealing between the parties. Appellant had no sooner begun the project when it was orally instructed by Respondent’s architect (in the presence of Respondent’s COR) to add back into the project the requirement to demolish the storefront and construct a security wall (FOF 12). Two days later, in a telephone conversation with Appellant’s president, the contracting officer orally authorized Appellant to proceed with work on a differing site condition encountered by Appellant and ratified Mr. Mace’s instruction to demolish the store front and construct the security wall. In this same conversation, the contracting officer instructed Appellant to take directions on the project from Mr. Mace. (FOF 13, 14).[2] As work progressed, Appellant documented in various memoranda the oral instructions received from Mr. Mace for additional work and transmitted copies of the memoranda to the COR (FOF 15). Neither the contracting officer nor the COR ever responded to, or acknowledged these transmittals (FOF 16). However, by virtue of their prior course of dealing, the contracting officer’s instructions to Appellant to take directions on this project from Mr. Mace and Respondent’s failure to take any contrary actions when notified of instances of extra work, Respondent waived the contract’s requirement that additional work must be authorized in advance by the contracting officer in writing (FOF 2). See Gresham & Co. v. United States, 470 F.2d 542, 554 (Ct. Cl. 1972) (a contract requirement will be deemed waived where one party “knowingly fails to exact its performance, over such an extended period, that the other side reasonably believes the requirement to be dead”); see also David Finley, PSBCA No. 3922, 98-2 BCA ¶ 29,989, recon. denied 00-1 BCA ¶ 30,595; Robert E. Davis, PSBCA No. 3400, 94-3 BCA ¶ 27,164. Moreover, the waived requirement for written authorization before proceeding with additional work may not be revived to the prejudice of Appellant after it has changed its position in reliance on the supposed waiver. Gresham & Co. v. United States, supra at 555.
Respondent has also disputed Appellant’s entitlement to any premium time payment arguing that Appellant did not incur any additional payroll costs as a result of the direction to perform certain interior work outside of normal Postal Service work hours (FOF 17). However, the contract specified that work items performed by Appellant outside of normal work hours would be increased by 25% (FOF 2). Nothing in this clause required that the contractor pay its employees the same 25% premium. Thus, Respondent is entitled to recover a 25% premium for all work performed outside of normal work hours.
Accordingly, Appellant is entitled to recover its reasonable costs incurred in performing the extra work it was directed to perform (including a 25% increase for work items performed outside of normal work hours), that was necessary to construct a complete and useable Postal Retail Store.
Appellant argues that it has adequately documented the extra work it performed on this project, as well as the costs to perform the extra work, and that the extra work was necessary to construct a complete and useable facility. Appellant further argues that Respondent did not offer any evidence to dispute the extra work claimed by Appellant, but instead, agreed to a stipulation that many of the items of extra work claimed by Appellant were, in fact, performed at the costs claimed.[3]
Appellant has demonstrated by a preponderance of evidence that it incurred $119,736.01 in extra costs (FOF 18). Moreover, the costs claimed for extra work were reasonable and necessary to construct a complete and useable facility (FOF 19).
Accordingly, the appeal is sustained to the extent indicated. Appellant is entitled to recover $119,736.01 in extra costs incurred, as a result of the additional work it performed in constructing the Huntington, West Virginia Postal Retail Store, plus Contract Disputes Act interest from the date the contracting officer received the claim.[4]
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] Appellant’s claim for $120,313.07 contained two arithmetical errors. Appellant claimed $27,270.68 in scheduled work items on Work Order No. 32.02, whereas the total of the scheduled items on Work Order No. 32.02, including the contract’s 1.05 multiplier, equals $26,743.58. In addition, Appellant failed to multiply the deleted scheduled work items ($999.25 on Work Order No. 32.03) by the contract’s 1.05 multiplier.
[2] In her testimony, the contracting officer denied stating that Appellant should take directions on the job from Mr. Mace (Tr. 239). However, based on Appellant’s subsequent actions in performing changed work only after receiving approval from Mr. Mace, as well as the fact that both the contracting officer and the COR were aware of this circumstance, but never interceded (see FOF 15 and 16), we conclude that Appellant’s understanding of its duties with regard to changed work was made in good faith and was reasonable. Appellant reasonably understood from the telephone conversation with the contracting officer and subsequent conduct of Postal Service personnel, as well as Mr. Mace, that changes directed by Mr. Mace would be approved by the contracting officer.
[3] Respondent argues with respect to quantum issues in this appeal that Appellant is not entitled to recover on a quantum meruit basis. However, since we have found that Appellant is entitled to recover under the contract, as administered by Respondent, for the extra work it performed (see Entitlement discussion, supra), there is no need to address this argument.