Appeal of EDWARD L. BLEDSOE/RUNETTE G. BLEDSOE

November 20, 2003

Appeal of

EDWARD L. BLEDSOE

RUNETTE G. BLEDSOE

LEASE AGREEMENT

PSBCA No. 4933

APPEARANCE FOR APPELLANTS:

C. Bradford Sears, Jr., Esq.

APPEARANCE FOR RESPONDENT:

Patrice R. Dickey, Esq.

OPINION OF THE BOARD

Appellants, Edward L. and Runette G. Bledsoe, have appealed the contracting officer’s denial of their claim for increased construction costs under a lease-construction project.

At the parties’ election, the appeal is being decided on the record without an oral hearing. The parties submitted additional evidence, including declarations of witnesses, in support of their positions, but only Respondent submitted a brief. However, Appellants’ claim letter, Complaint and declarations explain their position. Entitlement only is at issue (Order dated March 4, 2003).

FINDINGS OF FACT

1. On June 6, 2000, Respondent issued a solicitation seeking offers to construct a post office in Moreland, Georgia, and lease it to the Postal Service for 20 years. The solicitation stated the minimum site size, the net interior building space required and the geographic boundaries of the preferred location, but Respondent did not identify any particular site. Those interested were to purchase Postal Service standard plans and specifications from a printer identified in the solicitation, and were to base their annual rental offers on constructing the post office at their own expense on a site owned or controlled by the offeror. (Appeal File, Tabs (“AF”) 10, 11).

2. On June 27, 2000, Appellants obtained a proposal from a construction contractor to build the post office for $345,000, and, by offer dated July 24, 2000, Appellants proposed to build the post office and lease it to Respondent for 20 years at an annual rental of $53,250. Appellants’ was the successful offer, and Respondent awarded them the contract on February 15, 2001. (AF 2 (p. 5), 9; Declaration of Edward L. Bledsoe, ¶2; Declaration of Runette G. Bledsoe, ¶2; Stipulation of Uncontested Facts (“Stip.”) 1, 2).

3. The Construction Rider to the contract included a Changes clause, which provided that Appellants were entitled to an equitable adjustment if Respondent changed the contract work in a way that increased Appellants’ cost of performing the contract (AF 9, Construction Rider, Clause 24, CHANGES (CONSTRUCTION) (JANUARY 1997)).

4. After award, Respondent engaged a firm to prepare conceptual drawings showing the building, parking lots, roads and landscaping layout on Appellants’ site. The firm prepared two alternative layouts: Conceptual Site Plans #1 and #2. Respondent selected the site layout in Plan #2, but Respondent’s representative erroneously gave Appellants Conceptual Site Plan #1 for their use in site-adapting the solicitation’s standard plans and preparing civil engineering drawings. (AF 2 (p. 2), 6 (p. 4)).

5. Appellants’ engineer completed site adaptation plans and engineering drawings based on Conceptual Site Plan #1. That Appellants had been given the wrong Conceptual Site Plan was not discovered until on or about June 20, 2001, when Appellants and their engineer met with Respondent’s representatives to deliver the completed site plan and engineering drawings. (AF 2 (p. 2); Stip. 4).

6. Respondent provided the correct plan, Conceptual Site Plan #2, to Appellants on July 17, 2001, and Appellants redesigned their site plan and engineering drawings (AF 6; Stip. 5). On October 29, 2001, Appellants submitted a claim for $13,290 for “additional charges and losses” they claimed to have incurred due to the redesign of the project. The claim did not include any amount for increased costs of construction. (AF 5; Stip. 6). There is no evidence that the parties entered into a formal modification or other bilateral agreement regarding the redesign costs, but by letter dated November 9, 2001, Respondent agreed to pay Appellants $9,040 for engineering and certain other costs associated with the redesign of the project. (AF 5; Stip. 7; Declaration of Bryan F. Pease, ¶4).

7. At a January 16, 2002 pre-construction meeting, Appellants advised Respondent’s officials that their construction contractor had increased his price from $345,000 to $363,000 due to the delay resulting from the site redesign requirement (Complaint ¶8; Answer ¶8; Declaration of Edward L. Bledsoe, ¶¶2, 5; Declaration of Runette G. Bledsoe, ¶¶2, 5).[1]

8. The contracting officer advised Appellants that Respondent had no additional money in its budget for the project and that it would not be able to request additional funds. He offered to cancel the project and pay certain of Appellants’ out-of-pocket costs if they wanted to withdraw. Appellants declined the contracting officer’s offer, assuring him that they could complete the project and stay within the $53,250 annual rental figure. Thereafter, the contracting officer issued the Notice to Proceed. (AF 4; Declaration of Bryan F. Pease, ¶4; Declaration of Grant D. Baker, ¶4; Declaration of D. Craig MacNaughton, ¶4; Declaration of Waymon J. Goddard, ¶¶3, 4; see Declaration of Edward L. Bledsoe, ¶3; Declaration of Runette G. Bledsoe, ¶3; Stip. 9, 10).

9. On January 16, 2002, after the Notice to Proceed was issued, Appellants and their construction contractor executed a contract for construction of the post office in the amount of $363,000 (Complaint Exhibit E; Stip. 8, 11).

10. Appellants completed construction of the post office, and Respondent took beneficial occupancy on October 3, 2002 (Declaration of D. Craig MacNaughton, ¶6; Declaration of Waymon J. Goddard, ¶6 and Exhibit B).

11. By letter to the contracting officer dated May 14, 2002, Appellants claimed reimbursement for the $18,000 difference between their contractor’s June 27, 2000 proposal (Finding 2) and their construction contract price of $363,000 (Finding 10), claiming that the increase in price was due to the delays caused by Respondent’s issuance of the wrong Conceptual Site Plan (AF 2 (p. 2); Stip. 12).

12. By final decision dated May 14, 2002, the contracting officer denied the claim (AF 1; Stip. 13), and Appellants filed this appeal (Stip. 14).

DECISION

Appellants claim that because of delays in the project, their cost to construct the post office increased, as evidenced by the difference between their construction contractor’s original proposal (Finding 2) and their final construction contract price (Finding 9). Appellants contend that the delay was caused by Respondent’s issuance of the wrong site plan for the project and that, therefore, Respondent must pay for the increased construction costs.

Respondent argues that because the contract for construction and lease of the Moreland Post Office does not contain a price escalation provision, Respondent is not required to pay for Appellants’ increased costs of construction. However, the contract’s Changes clause authorizes Appellants to recover for additional costs of performing that result from Respondent’s changing the requirements of the work (Finding 3). First specifying that Appellants design according to Conceptual Site Plan #1 and then requiring Appellants to design according to Conceptual Site Plan #2 (Findings 4-6) was plainly a change to the work required of Appellants. Accordingly, the Changes clause provides for Appellants to be compensated for their increased costs caused by the change.

Respondent argues that Appellants waived any claim for additional costs. At the January 16, 2002 pre-construction meeting, before the notice to proceed was issued and before the construction contract was signed, the contracting officer offered Appellants an opportunity to cancel the contract and receive certain out-of-pocket costs (Finding 8). By assuring the contracting officer that they could complete the project within the original rental rate, Appellants, according to Respondent, waived their right to claim additional construction costs.

At the time of the pre-construction meeting, both parties were obligated to perform the contract. The contract had no termination for convenience clause, and Respondent could not unilaterally refuse to issue the notice to proceed without breaching the contract. See Haselrig Constr. Co., PSBCA No. 4148, 2000-1 BCA ¶ 30,674; Tamp Corp., ASBCA No. 25692, 84-2 BCA ¶ 17,460. Thus, Respondent’s performance of its pre-existing duty under the contract could not have been consideration for an enforceable promise by Appellants to perform without an increase to their compensation. See Restatement (Second) of Contracts § 73 (1981); Aviation Contractor Employees, Inc. v. United States, 945 F.2d 1568, 1574 (Fed. Cir. 1991); Al Johnson Constr. Co., ENG BCA Nos. 4078 & 4818, 87-3 BCA ¶ 19,980 at 101,250. Therefore, any agreement by Appellants to waive their potential claim for increased construction costs was unenforceable for lack of consideration.

Also, Respondent argues that Appellants’ acceptance of payment for their redesign costs (Finding 6) constituted an accord and satisfaction regarding damages related to the site plan mistake. However, there was no evidence that a bilateral agreement was ever reached (Finding 6) or that Respondent’s payment of certain of Appellants’ redesign costs was intended to address all claims, including a potential construction cost increase claim, related to Respondent’s mistake. Accordingly, Appellants recovery is not precluded by a settlement.

Finally, Respondent argues that Appellants have failed to demonstrate that their increased construction costs were the result of Respondent’s delay. As the party seeking relief, it is Appellants’ burden to demonstrate by a preponderance of the evidence that they incurred construction costs in excess of those contemplated in their offer and that the increased construction costs were caused by Respondent’s delay of the project. See Granite Constr. Co., ENG BCA No. 5849, 93-1 BCA ¶ 25,450; Conquest Constr., Inc., PSBCA No. 2637, 90-2 BCA ¶ 22,702, citing Wunderlich Contracting Co. v. United States, 351 F.2d 956 (Ct. Cl. 1965). While the evidence in the record on this point left much to be desired, in their declarations Appellants stated that their construction contractor had increased his price due to the delay caused by the redesign. At the pre-construction meeting, they had orally advised the contracting officer of this circumstance (Finding 7), and shortly after the Notice to Proceed was issued, they advised Respondent’s representative that, according to their contractor, the increases were the result of increased material costs (Finding 7, n. 1). Respondent has not offered any evidence to contradict Appellants’. Accordingly, we find that at least some increased construction costs resulted from the delay caused by Respondent’s issuance of the wrong site plan.

Accordingly, Appellants are entitled to recover their increased costs of construction, to the extent they can show the increases are due solely to the delay caused by Respondent. This matter is remanded to the parties for negotiation of the increased costs for which Respondent is liable.

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] In February 2002, Appellants advised Respondent’s representative that, according to the contractor, the increase resulted from increases in his material costs (Declaration of Grant D. Baker, ¶6).