May 16, 2002
Appeal of
VERMAAS CONSTRUCTION
LEASE AGREEMENT
PSBCA No. 4582
APPEARANCE FOR APPELLANT:
J. L. Spray, Esq.
APPEARANCE FOR RESPONDENT:
Rozann M. Heininger, Esq.
OPINION OF THE BOARD
Appellant, VerMaas Construction,[1] has appealed the decision of the contracting officer denying its claim for $28,776.00 of extra costs and a 59-day time extension allegedly resulting from defective plans and specifications in a new construction lease agreement entered into between Appellant and Respondent, United States Postal Service. A hearing was held in Kansas City, Missouri.[2] Only entitlement is at issue in this proceeding (Tr. 4).[3]
FINDINGS OF FACT
1. On or about March 19, 1999, Respondent issued a solicitation seeking offers to enter into a lease under which the lessor would purchase a Postal Service controlled site in Lewellen, Nebraska, construct a facility on the site, and lease the facility to the Postal Service. The proposed lease included a Construction Rider that required the lessor to construct the facility in accordance with a project manual (Small Standard Building Designs), including certain specifications and designated construction drawings, all of which were part of the solicitation. (AF 1, 2).
2. Prior to soliciting offers, Respondent arranged to have Maxim Technologies, Inc. (“Maxim”), conduct a geotechnical exploration of the site. Soil borings and fieldwork were conducted in 1997, and a report was completed in January 1998. The report was available for review by prospective offerors. (Stip. 1, 12; AF 1, 2, 8).
3. In the geotechnical report, Maxim described the soil conditions in the first eight feet below the surface as "very loose to soft" and not adequate for proper support of the building. Maxim recommended certain characteristics for the foundations and suggested a method of installing those foundations and the associated footings. (AF 8).
4. Paragraph 12 of the Construction Rider provided:
"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." (Stip. 2; AF 1).
5. Paragraph 22, DESIGN AND APPROVAL REQUIREMENTS, of the Construction Rider specified, in pertinent part, that Appellant had to employ, at its own expense, the services of an architect-engineer to prepare for the approval of the Postal Service complete specifications and working drawings for the construction of the facility in accordance with all requirements of the lease agreement (Stip. 3; AF 1).
6. Specification Section 01115, paragraph 1.4C, stated
"Contract Documents: The Contract Documents furnished with the solicitation documents are complete, detailed drawings and specifications which are sufficient for the construction of the building. However, the footings and foundations are designed for 1,500 pounds per square foot bearing pressure. The Lessor shall determine the subsurface conditions and if soil bearing capacity is less than 1,500 pounds per square foot, he shall redesign accordingly. Any such redesign shall be accomplished by a licensed Architect/Engineer and shall be submitted to the Contracting Officer for approval." (AF 2) (Emphasis in the original).
7. Specification Section 01115, paragraph 1.9C, required the lessor to furnish services of geotechnical engineers and other consultants when it determined that such services were necessary. Selection of the consultants was to be by mutual agreement. (AF 2).
8. Specification Section 02300, paragraph 1.6, informed the lessor that soil and subsurface investigations had been conducted at the site by an independent testing laboratory and that a report had been prepared. The provision stated that a copy of the report was available upon request from the contracting officer. (AF 2).
9. Section 02300, paragraph 2.1E, Soil Stabilization Materials, required the lessor to retain the services of a soils engineer and stated that Appellant was responsible for stabilization of existing on-site soils. (Stip. 8; Tr. 322, 323; AF 2).
10. Drawing S1.1, the foundation plan, provided that the foundation footings were generally to be 2 feet in width. The drawing contained a structural design note informing the lessor that it was responsible for confirming the existing soil characteristics, including the bearing capacity of the existing and all imported soils. This note also specifically advised that the geotechnical report showed evidence of unsuitable on-site soils and that the lessor was responsible for insuring that all footings were placed on soil with a minimum bearing capacity of 2,000 pounds per square foot. Unsuitable soils were to be overexcavated and replaced with suitable fill material. (Stip. 9; Tr. 317-321; AF 3).
11. Appellant's representatives did not visit the site prior to submitting an offer. In addition, they did not review the contract specifications, but limited their review of contract documents to the contract drawings. Appellant also did not request a copy of, or review, the geotechnical report prior to submitting an offer. (Tr. 119, 128, 129, 131, 135-139, 227-229).
12. Appellant was the successful offeror and entered into the lease on May 20, 1999. Notice to proceed with construction was given on July 20, 1999. On August 17, 1999, Appellant notified Respondent that it had encountered wet and unsuitable soils. On the same date, Appellant first requested and was sent a copy of the Maxim geotechnical report. (AF 17, 48, 49; Stip. 21-23; Tr. 172-174).
13. Appellant then hired Maxim to verify the existing soil conditions and to provide a recommendation to achieve the contractually specified soil bearing capacity in order to construct the facility at the elevation specified in the drawings (Stip. 24; Tr. 16-20, 77-79, 177).
14. In a September 2, 1999 letter to Appellant, Maxim recommended that Appellant excavate beneath the footings to a depth of eight or nine feet, followed by the placement of structural fill to form a suitable base for the footings. Because of the need to slope the sides of the excavation outward, the excavation recommended by Maxim would likely have extended to the side far enough to have encroached on the adjacent property. (Stip. 24; Tr. 30-41, 53, 54, 179; AF 45; RExh b).
15. By letter dated September 7, 1999, Appellant complained that the Postal Service design of the building was inconsistent with conditions specified in Maxim's geotechnical report. Appellant alleged that the Postal Service was responsible for the cost of making corrections and requested an additional $28,200 and a 45-day time extension in order to implement the recommendations provided by Maxim in its September 2, 1999 letter. (Stip. 25; AF 45).
16. By letter dated September 21, 1999, the contracting officer rejected Appellant's request, noting that Paragraph 12, Site, of the Construction Rider made the lessor responsible for site conditions and that the contract documents, as well as the geotechnical report, provided Appellant with sufficient information to alert Appellant to the possibility of encountering unsuitable soil at the site. The contracting officer noted that if Appellant chose to implement Maxim's September 2, 1999 recommendations, it might have to secure a temporary easement from the adjacent land owner. The contracting officer also stated that Appellant could propose other solutions to the site problem if it desired to do so. (Stip. 27; AF 40).
17. Appellant decided against following Maxim's recommendations because of the costs involved and because of the need for the easement. Instead, Appellant hired an architect who recommended using footings that were three feet wide, instead of the two-foot width specified in the drawings, to compensate for the unsuitable soils. In addition, the architect recommended raising the level of the building by 6 inches. On or about October 5, 1999, Appellant forwarded this recommendation to the Postal Service project manager who, in turn, recommended that Appellant also hire a soils engineer to provide a recommendation. The project manager neither approved nor disapproved the recommendation. (Tr. 189-194, 198, 214-217; AF 39).
18. Thereafter, Appellant hired Geotechnical Services, Inc., to provide recommendations regarding the soil problem. That firm recommended that Appellant stabilize the soil by mixing fly ash into a one-foot layer immediately beneath the footings. (AF 34; Tr. 195-198).
19. By October 25, 1999, Appellant had completed the footings and formed the foundation walls. Appellant elected to use three-foot wide footings and raise the building elevation approximately six inches, as recommended by the architect. Appellant also elected to incorporate fly ash into the soil, as recommended by Geotechnical Services, Inc. (Stip. 28; Tr. 93-97, 123, 197-198, 206; AF 29, 35, 36).
20. By letter dated October 27, 1999, Appellant provided formal notification to Respondent's project manager that it had consulted the architect and Geotechnical Services, Inc. Appellant described their recommendations and requested approval to raise the elevation by 6 inches, increase the width of the footings from two to three feet, and to stabilize the soil using fly ash. The record contains no explicit approval by Respondent of the proposed change. However, the contracting officer certified that the building, as constructed by Appellant, was ready to be occupied as of May 3, 2000, the date adopted as the beginning of the lease term. (AF 17, 18, 32).
21. On April 24, 2000, Appellant submitted a claim for a 59-day time extension, as well as $28,776 in additional costs Appellant allegedly incurred as the result of encountering unsuitable soils at the site (Stip. 31; AF 22).
22. By final decision dated June 20, 2000, the contracting officer concluded that Appellant was responsible for soil conditions at the site and denied Appellant’s April 24 claim in its entirety (AF 11). Appellant filed a timely appeal.
DECISION
In this appeal, Appellant seeks to recover excess costs allegedly incurred in connection with construction of the footings and foundations for the Lewellen, Nebraska Post Office, which Appellant built and leased to Respondent. Appellant also seeks a time extension because of delays in executing the same part of the construction.
Appellant makes two basic arguments. First, Appellant argues that Respondent breached the implied warranty that if the building was constructed in accordance with the plans and specifications, a satisfactory result would occur, citing United States v. Spearin, 248 U.S. 132 (1918). Appellant argues that it was obligated to construct the building in strict conformity with the plans and specifications in the contract, but that compliance with the plans and specifications was not just burdensome and difficult, but was "altogether impossible" because of the soil conditions. Appellant argues that it is entitled to recover the costs it incurred in altering the defective design in order to complete the building.
Second, Appellant contends that it is entitled to relief because Respondent failed to "cooperate with, or give instructions to, Appellant after the problem was identified." In connection with this argument, Appellant contends that Respondent's personnel refused to cooperate with Appellant or to approve or comment on a proposed resolution of the problem. In addition, Appellant argues that Respondent possessed superior knowledge in the form of the geotechnical report and was obligated to have included the report as part of the solicitation in order to alert offerors to the potential site problems.
Respondent argues that no implied warranty existed with respect to the portion of the design at issue here because the contract allowed Appellant discretion to deviate from the plans and specifications in order to deal with unsatisfactory site conditions. Respondent also argues that Appellant has failed to prove that compliance with the specifications was objectively impossible. Finally, Respondent argues that Appellant has failed to show the lack of cooperation that it has alleged.
Appellant's impossibility argument seems to be that while it was required to construct the building, and in particular the footings and foundations, strictly as shown in the plans – i.e., with two-foot wide footings – the two-foot wide footings could not support the building under the existing soil conditions. However, the specifications obligated Appellant to "redesign" if the soil bearing capacity turned out to be less than the 1,500 pounds per square foot assumed in the basic design (Finding 6).[4] Further, the specifications made Appellant responsible for stabilizing the existing on-site soil (Finding 9). In addition, the plans specifically advised Appellant that the geotechnical report showed evidence of "unsuitable" on-site soil, and made Appellant responsible for excavating the unsuitable soil and replacing it with suitable fill (Finding 10). Finally, the specifications made Appellant responsible for engaging necessary engineers or other consultants if it determined that such services were necessary (Finding 7).
In constructing the building, Appellant engaged an architect who redesigned the footings to be compatible with the soft soil, and hired a soils engineering firm which recommended stabilizing the soil by mixing fly ash into the layer immediately below the footings. Appellant adopted both recommendations in constructing the building. These actions were consistent with Appellant's specific obligations under the specifications, and with the language of paragraph 12 of the Construction Rider making Appellant generally responsible for site conditions. Therefore, contrary to its contention, Appellant was able to construct the building in accordance with the requirements of the contract, and its impossibility argument is rejected.
In connection with its failure-to-cooperate argument, Appellant contends that Respondent breached its duty to cooperate in two areas. First, with regard to the period prior to award, Appellant contends that by not physically including the geotechnical report as part of the solicitation package, Respondent violated its duty to disclose "superior knowledge" in its possession. In order to prevail on this preaward superior knowledge argument, Appellant must demonstrate that Respondent did not disclose vital information in its possession concerning the site, that the information was not "otherwise reasonably available" to Appellant and that Appellant was not put "on notice to inquire" by the contract specifications. Thomas J. Young, Jr., PSBCA No. 3885, 3983, 98-2 BCA ¶ 29,772 at 147,530 and cases cited therein.
The geotechnical report in question was available to bidders on request from the contracting officer, and bidders were notified of that availability in the specifications (Finding 8). In addition, the notes on the plans regarding unsuitable soil (Finding 10) referred specifically to the geotechnical report and its contents. Thus, bidders were informed of the existence of the report and were provided the means to obtain it, thereby making the report reasonably available. Id. Therefore, Appellant may not recover under this superior knowledge argument.
Appellant's other failure-to-cooperate argument relates to the period of time after Appellant discovered the unsuitable soil conditions at the site. First, Appellant argues that Respondent should be held liable for failing to disclose information in its possession when Appellant was attempting to resolve the problems that it encountered at the site. However, Appellant has not identified any information that Respondent possessed but did not reveal to Appellant. Once Appellant discovered the problem with the soil at the site and requested the geotechnical report,[5] Respondent promptly provided it (Finding 12). The record does not show that Respondent's personnel knew of solutions to the site problem that they failed to make known to Appellant.
Second, Appellant refers to an internal email in which Respondent's architect commented to its project manager concerning Appellant's October 27, 1999 request for approval of the site and footing changes (see Finding 20). In the email, the architect indicated that he did not object to the proposal, but believed that it was inappropriate for Respondent to issue a change order approving the changes, since Appellant was responsible for making the changes under the contract. Appellant characterizes this email as evidence that Respondent refused to cooperate and was "persistently unresponsive" in connection with Appellant's proposed solutions to the problem.
As we have found, Respondent took no action on Appellant's formal request for approval of its proposal to solve the footings problem, although Respondent was obligated to do so under the contract. However, we note that Appellant had already performed the work in the manner recommended by its architect and soils engineer before ever seeking formal approval. Further, there is no indication that, to the extent there may have been informal conversations regarding the proposed solutions, Respondent's personnel ever interposed any objections to Appellant proceeding as it planned, interfered with Appellant's plans, or withheld any information, or that the lack of formal approval delayed Appellant's progress. Thus, although Respondent did not approve the proposed changes, Appellant has failed to show that Respondent's failure had any practical effect on Appellant's performance.
Accordingly, the appeal is denied.
David I. Brochstein
Administrative Judge
Vice Chairman
I concur:
James A. Cohen
Administrative Judge
Chairman
I concur:
Norman D. Menegat
Administrative Judge
Board Member
[1] The lease involved in this appeal was entered into between the Postal Service and "John D. VerMaas and/or Janice K. VerMaas." These individuals, however, do business as VerMaas Construction.
[2] Administrative Judge William K. Mahn presided over the hearing by videoconference from Arlington, Virginia. Judge Mahn has since retired from the Board.
[3] "Tr." refers to the hearing transcript; "AF" refers to documents in the appeal file; "Stip." refers to the prehearing stipulation filed by the parties; "RExh." refers to Respondent's hearing exhibits; and "AExh." refers to Appellant's hearing exhibits.
[4] We recognize what appears to be an inconsistency in the contract requirements in that the specifications required Appellant to "redesign" if the bearing strength of the soil under the footings was below 1,500 pounds per square foot (Finding 6), but the drawing notes required Appellant to place footings on soil with a minimum bearing capacity of 2,000 pounds per square foot (Finding 10). Appellant has not argued that the inconsistency existed or that it had any effect on Appellant's performance under the contract. Accordingly, we do not address it further.
[5] Which, as noted above, it could have had prior to submitting an offer.