DELHUR INDUSTRIES, INC. v. U.S. No. 08-541C.
DELHUR INDUSTRIES, INC., Plaintiff, v. THE UNITED STATES, Defendant.
United States Court of Federal Claims.
December 9, 2010.
William G. Fig, Sussman Shank LLP, Portland, Oregon, for Plaintiff.
Lauren A. Weeman, with whom were David Hibey, Trial Attorney, Tony West, Assistant Attorney General, Jeanne E. Davidson, Director, and Donald E. Kinner, Assistant Director, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, D.C., for Defendant.
OPINION AND ORDER
THOMAS C. WHEELER, Judge.
This case involves performance disputes stemming from a road construction contract between Plaintiff Delhur Industries, Inc. ("Delhur") and the United States Department of Transportation, Federal Highway Administration ("FHWA"). Delhur is an experienced construction contractor based in the state of Washington. The project at issue is located in the Lincoln National Forest near Alamogordo, New Mexico. Although the stretch of road to be constructed was only 12.359 km long (7.68 miles), the road was in mountainous terrain and required extensive rock excavation. The contract called for Delhur to build fill areas, construct stabilizing walls, install drainage systems, and place aggregate base and asphalt pavement for a two-lane highway. The contract price at award on December 2, 2003 was $10,158,250. Delhur performed the project during 2004 and 2005. Delhur had planned to complete the project in one construction season, approximately one year earlier than required, but it did not achieve this plan.
Delhur alleges that it incurred significant additional costs in performing the contract due to errors in the FHWA's plans and specifications. Specifically, Delhur claims to have excavated and disposed of far more material than indicated in the contract bid documents. Delhur further asserts that it performed other extra work caused by the FHWA for excess surveying costs, hand-scaling slope embankments, topsoil hauling, and installing a temporary guardrail. Delhur has included amounts for field and home office overhead in its claim due to alleged government delay. Delhur also states that the FHWA improperly assessed liquidated damages.
On December 4, 2006, Delhur submitted a certified claim under the Contract Disputes Act ("CDA") to the contracting officer, requesting an equitable adjustment of $2,115,524 for fourteen claim items, and return of liquidated damages. On July 31, 2007, the contracting officer issued a final decision awarding Delhur $38,285, but denying the remainder of the claim. Delhur timely filed a complaint in this Court on July 25, 2008 seeking de novo review of the contracting officer's final decision. The Court has jurisdiction under the CDA, 41 U.S.C. § 609(a) (2006), and the Tucker Act, 28 U.S.C. § 1491(a) (2006).
Defendant opposes Delhur's claims based essentially on a failure of proof. Defendant contends that Delhur neglected to review contract documents describing subsurface conditions and the expected excavation prior to bidding, and failed to provide notice of alleged differing site conditions. Defendant argues that Delhur excavated much more rock than required on the project, and thus should look to itself as the principal cause of any excess excavation. Defendant also asserts that Delhur did not develop a reasonable construction schedule for performing its work, did not plan its work efficiently, and failed to begin critical activities on time. Defendant points to an absence of documents or testimony supporting any of Delhur's claims, and states that Delhur cannot show government causation or the reasonable certainty of any damages.
The Court conducted a five-day trial in Portland, Oregon during May 17-21, 2010 and heard all issues of liability and damages. The parties submitted extensive stipulations of fact in advance of trial, which the Court found quite useful. At trial, Delhur reduced its claim to $1,875,758, adjusting or abandoning certain items previously submitted to the contracting officer. The parties filed post-trial briefs on August 20, 2010, and reply briefs on September 16, 2010. The Court heard closing arguments in Washington, D.C. on October 4, 2010.
In brief summary, the Court concludes that Delhur is not entitled to any recovery on its claims. At trial and in its briefs, Delhur presented high-level conclusory allegations unsupported by any concrete facts. For the excess excavation claim, Delhur did not demonstrate that it reasonably relied on all the contract documents when formulating its bid. The only evidence of Delhur's bid preparation work consists of fifteen pages of cryptic handwritten notes that were not adequately explained at trial. Further, Delhur did not provide the Court with sufficient evidence to show that its damages were caused by errors in the plans or government direction, and not by Delhur's own mistakes. For claims unrelated to excess excavation, Delhur did not furnish sufficient evidence of causation or damages. While alleging breach of good faith and government directed constructive changes, Delhur's case is short on facts supporting its position. Delhur did not present any evidence of its actual costs to perform changed work, and the estimates it provided do not pass muster. The Court cannot say with any certainty that the FHWA caused any of Delhur's increased costs.
Similarly, Delhur is not entitled to recover any field or home office overhead costs because the evidence does not show that the FHWA was solely responsible for any project delay. Delhur did not even present a project schedule analysis to assess which party may have caused delay. Mainly, the evidence shows that Delhur adopted an ambitious and largely unrealistic construction schedule, and it quickly fell behind for reasons of its own making. While the FHWA did not perform perfectly in managing the project, the Court finds that Delhur failed to satisfy its burden of proof as to either liability or damages.
Finally, the Court concludes that Delhur is not entitled to reimbursement of $45,000 in liquidated damages. Delhur has not provided evidence to show that any of its project delays were excusable.
Contract Bidding and Award
On September 2, 2003, the FHWA issued Invitation for Bids No. NM PFH 45-1(5) (the "Solicitation") requesting bids for the construction of a 12.359 kilometer road in Lincoln National Forest, New Mexico. (Stip. ¶ 14.)
The FHWA provided prospective bidders with a set of plans, drawings, and specifications for use on the project. (Stip. ¶ 15.) The FHWA also notified bidders that all work must be performed in accordance with the Federal Acquisition Regulation ("FAR"), the Standard Specifications for Construction of Roads and Bridges on Federal Highway Projects ("Standard Specifications" or "FP 96"), Special Contract Requirements ("SCR"), the bid schedule, and the provided plans.
The contract called for the Sacramento River Road to be built between station 0+158 in the south and station 12+520 in the north, using metric measurements. (Stip. ¶ 17.) The contractor was required to perform excavation, build fills, construct mechanically stabilized earth ("MSE") walls,
Prior to issuing the Solicitation, the FHWA's Geotechnical Group performed a slope stability analysis of the north end of the project and recommended the use of soil nail walls to enhance stability. (DeMarco, Tr. 825, 1086-87.) The FHWA also had three geotechnical reports prepared in connection with the project: (1) a January 23, 2001 Phase II Geotechnical Study Report by Kumar and Associates, Inc. (the "2001 Kumar Report"); (2) a February 27, 2000 Phase II Geotechnical Study Report by Kumar and Associates, Inc. (the "2000 Kumar Report"); and (3) an August 1997 New Mexico PFH 45-I, Sunspot Road, Preliminary Investigation and Report (the "Folkman Report"). (Stip. ¶ 19.) The FHWA identified all three geotechnical reports on page A-3 of the Solicitation, Offer and Award packet as data available for review by bidders. (Stip. ¶ 19; JX 8 at 13.) The FHWA also included this notice on sheet D-6 of the project's plans. (Stip. ¶ 19; JX 5 at 78.) Delhur's Chief Executive Officer, Sam Hurworth, who was involved in approving Delhur's bid before it was submitted, did not review these geotechnical reports during the bidding process. (S. Hurworth, Tr. 362.) Delhur's Executive Vice President and Project Manager, Rick Hurworth, also stated that he did not review any of the geotechnical reports while preparing Delhur's bid. (R. Hurworth, Tr. 548.) The record does not indicate whether any Delhur representative reviewed these reports.
The FHWA's bid opening date was October 15, 2003. (Stip. ¶ 21.) The FHWA requested bids for a unit price variable quantity type contract, with estimated quantities provided in the Solicitation for each of 110 contract pay items where applicable. (Stip. ¶ 21; JX 8 at 16-24.) The FHWA received six qualifying bids for the project with Delhur deemed the lowest bidder. (Stip. ¶ 21.) Delhur's bid of $9,560,706 was approximately 22 percent below the Government's estimate of $12,319,344. The next lowest bid was $11,562,113,
In preparing its bid for the Sacramento River Road project, Delhur had representatives from its offices in Port Angeles, Washington and Hermiston, Oregon separately estimate the costs of contract performance. (S. Hurworth, Tr. 55, 214.) Sam Hurworth, along with Rick Hurworth and Tim Holth, President of Delhur, compared and reconciled the separate estimates in arriving at Delhur's final bid price. (S. Hurworth, Tr. 55-56.) Before submitting its bid, Delhur reviewed the costs on another FHWA project known as "Flowery Trail" that it was performing in the state of Washington.
In its bid estimate, Delhur based the excavation and wall costs, in part, on a visual inspection of the project. (Stip. ¶ 25.) For excavation, Delhur also relied upon its production rates from the Flowery Trail project.
Delhur bid the Sacramento River Road project based on having a nearby quarry to use as a source of borrow material. (R. Hurworth, Tr. 550.) Delhur intended to obtain select granular backfill
After reviewing Delhur's bid, the FHWA informed Delhur that four of its bid items were much lower than the Government's estimate, and asked Delhur to verify its bid. (Stip. ¶¶ 23, 24.) Specifically, the FHWA notified Delhur in an October 23, 2003 letter that Delhur had "significantly" underbid the FHWA's estimate in the following schedule items: (1) contractor testing ($50,000 lower); (2) Class 2-Class 6 riprap ($150,000 lower); (3) MSE wall construction ($390,000 lower); and (4) pipe culverts ($124,000 lower). (JX 10.) The next day, Delhur verified the prices in its bid but requested a bid correction of $597,544 to include a New Mexico gross receipts tax, which it had inadvertently omitted. (Stip. ¶ 24; JX 11.)
On December 2, 2003, the FHWA awarded Contract No. DTF68-04-00001 to Delhur in the amount of $10,158,250, an adjusted price including the requested increase for the New Mexico gross receipts tax. (Stip. ¶ 27; JX 15.) Even at this adjusted price, Delhur's price still was well below the Government estimate and the second lowest bid. Richard Gillette was the FHWA's lead engineer on the Sacramento River Road project and the Contracting Officer's Technical Representative ("COTR"). (Stip. ¶ 21.) Pursuant to Standard Specification 104.01, Mr. Gillette had "authority to decide on acceptability of work, progress of work, suspension of work, interpretation of the contract, and acceptable fulfillment of the contract." (JX 1 at 36.) Nate Thompson was one of the FHWA's on-site inspectors. (Stip. ¶ 21.)
Delhur's Contract Performance
Delhur submitted a Preliminary Schedule to the FHWA on December 12, 2003, confirming that Delhur intended to complete the Sacramento River Road project by September 11, 2004. (JX 14.) During a preconstruction meeting on December 16, 2003, Delhur announced that John Doyle would be its Project Manager but would be on the project on a limited basis, Bill Hamilton would be the Project Superintendent, and Mike Willard would be the Project Engineer. (JX 17 at 2.) At this meeting, the FHWA issued a notice to proceed, establishing a contract completion date of August 30, 2005, which was nearly one year later than the planned contract completion date shown in Delhur's Preliminary Schedule. (Stip. ¶ 28.) The FHWA estimated that the project would require two construction seasons to complete because of the difficulty of the work and the winter weather at the altitude of the work site. (Gillette, Tr. 1181-82.) Following the preconstruction meeting, Mr. Gillette met with Delhur's Rick Hurworth to discuss the FHWA's concerns with Delhur's Preliminary Schedule. In the FHWA's view, Delhur's proposed schedule was virtually unachievable. Mr. Gillette explained that the proposed schedule lacked a critical path, spaced activities too close together in an overlapping manner, and anticipated unrealistic production rates. (Gillette, Tr. 1183.)
In addition, Delhur had to perform the project work in a prescribed sequence. For example, a certain amount of roadway excavation had to be completed before soil nail walls could be constructed. Only after both of these tasks had largely been completed could Delhur begin construction of the MSE walls. (Gillette, Tr. 1179; DX 123.) The limited stockpile and staging areas on the site also made scheduling the work more difficult. (Gillette, Tr. 1179-80.) Despite potential scheduling issues, on January 21, 2004, Delhur submitted a Revised Preliminary Schedule, projecting an earlier completion date of August 21, 2004. (Stip. ¶ 30; JX 24.) This schedule became known as Delhur's As-Planned Schedule. (Stip. ¶ 30.)
The As-Planned Schedule projected roadway excavation beginning on March 8, 2004. (Stip. ¶ 30; JX 24.) The schedule allowed 51 work days,
In a prophetic letter dated March 16, 2004, the FHWA notified Delhur that "we have serious reservations about your proposed construction progress schedule. We feel that your progress schedule is based on overly optimistic assumptions and we feel that the timelines shown in the schedule will be difficult if not impossible to achieve." (JX 29.) Specifically, the FHWA was concerned that, considering the steep terrain and narrow construction corridor, Delhur's production rates were highly aggressive for key activities such as culverts, roadway excavation, and MSE walls; that the schedule did not predict the actual critical path for the project but that key activities were stacked as tightly as possible; that the schedule did not show the amount of float for key activities; that there were errors in scheduling logic with regard to the installation of culvert pipes; that the production rate for culverts would be difficult to achieve because of traffic in the area; that the production rate of 565 square feet per day for MSE wall construction was highly optimistic; and that the schedule did not contain enough detail to determine if there were conflicts between proposed grading operations, MSE wall construction, culvert installation, and other activities.
Delhur did not perform the contract as described in the As-Planned Schedule. Delhur did not start processing aggregate base until May 17, 2004, more than three months after the planned start date of February 16, 2004. (JX 57.) Delhur spent 85 days processing aggregate base, which was double the amount of time planned for this activity.
The COTR, Mr. Gillette, suspended the soil nail work on April 26, 2004. (DX 24.) The FHWA noticed deficiencies in the soil nail wall operations, including a failure to provide adequate centralizers, failure to verify that the holes were clean prior to installing grout, failure to repair damaged encapsulation on the soil nails, failure to provide a method to verify the thickness of shotcrete layers, failure to cure the shotcrete, and failure to provide proper equipment for performing verification testing.
During the course of the project, Delhur changed at least two of its key personnel. Mr. Doyle, Delhur's Project Manager, left the project after one month, and Rick Hurworth replaced him. (R. Hurworth, Tr. 561-62.) Mr. Hamilton, the first project superintendent, was replaced by Don Schneider. (R. Hurworth, Tr. 562-63.)
Delhur also had problems with the finishing activities of the project, and in particular, placing the aggregate base. Delhur did not correctly monitor the quantity of the base it was placing. (Gillette, Tr. 1251.) Delhur dumped the base material at a fixed rate, meaning that it was laying base material as if the road was a constant width. (Gillette, Tr. 1251; JX 17 at 15.) However, the road was not a constant width, but was wider at the road curves to give vehicles more room to negotiate the curves. (Gillette, Tr. 1251.) Mr. Gillette offered Mr. Hamilton an aggregate base spreadsheet so that Delhur could monitor the placement of aggregate base much more accurately. (Gillette, Tr. 1251; JX 17 at 15.) Mr. Hamilton declined the spreadsheet.
Ultimately, the project did not take one construction season as stated in Delhur's As-Planned Schedule.
Delhur's Certified Claim
By letter dated December 4, 2006, Delhur submitted a certified CDA claim to the contracting officer, requesting an equitable adjustment of $2,115,524. (Stip. ¶ 36; JX 88.) In particular, as set forth in the chart below, Delhur asserted that it incurred additional costs in fourteen discrete areas, and was entitled to the return of liquidated damages:
On July 25, 2008, Delhur timely filed suit in this Court seeking $1,981,669 in damages for its fourteen claim items and return of liquidated damages. (Stip. ¶ 39.) By letter dated March 30, 2010, Plaintiff's counsel confirmed that Delhur would no longer pursue the following three claims: (1) "Rejection of 11,200 m3 of Granular Backfill"; (2) "Request for Maintenance Relief"; and, (3) "Effect of Limited Access on Wall Construction." (Stip. ¶ 40.) As a result, when the parties filed their joint stipulation of facts on April 30, 2010, Delhur sought damages of $1,875,758. (Stip. ¶ 41.) Following trial, Delhur again reduced its damages claim, and now seeks $1,813,723.
Standards for Decision
To prove entitlement to an equitable adjustment, Delhur must show "`liability, causation, and injury, and it must prove that the government somehow delayed, accelerated, augmented, or complicated the work, and thereby caused [it] to incur specific additional costs, and that those costs were reasonable, allowable, and allocable to the contract.'"
"Once the contractor has proved the government's liability for the costs of added or changed contract work, the actual costs incurred by the contractor will provide the measure of the equitable adjustment to the contract price, if those incurred costs are reasonable."
The contracting officer's determination that Delhur was entitled to an award of $38,285 does not affect this Court's analysis. The findings of fact in the contracting officer's final decision are not binding on this Court and are not entitled to any deference.
Delhur began excavation on the Sacramento River Road project on or about January 29, 2004. (Stip. ¶ 29.) On February 5, 2004, Delhur set up a screening plant at station 12+100 of the project to screen the blasted or excavated material into specific sizes. (Stip. ¶ 46.)
Many contract provisions applied to Delhur's excavation work, including SCR 204.06(a) which required, in part, that the contractor "conserve suitable material for manufacturing (including crushing) select granular backfill and special rock backfill material from the roadway excavation." (JX 9 at 53.) Delhur believed that SCR 204.06(a) was not applicable to its work because the contract required it to furnish all backfill from a borrow source such as the Circle Cross Ranch quarry. (S. Hurworth, Tr. 85, 397; R. Hurworth, Tr. 550-51.) Therefore, Delhur bid the project based upon importing select granular backfill, not conserving roadway excavation in order to produce the necessary backfill. (S. Hurworth, Tr. 397-98; R. Hurworth, Tr. 550-51.) Delhur used the Circle Cross Ranch quarry to obtain and crush rock for materials on the project. (Stip. ¶ 47.) The parties disagree on the exact volume of backfill imported. Delhur claims it imported 32,970 cubic meters, while the FHWA asserts that Delhur imported 46,679 cubic meters of backfill material. (Stip. ¶ 58.) Project records apparently are inconclusive.
The contract plans and specifications required that select granular backfill be used to fill the MSE walls. (Stip. ¶ 49.) The Grading Summary in the plans failed to include approximately 9,700 cubic meters of select granular, or wall, backfill located below the original surface. (Gillette, Tr. 1129; JX 5 at 15.) Plan sheet B5, however, which provides a summary of quantities for the project, includes the 9,700 cubic meters of backfill not shown on the Grading Summary. (Gillette, Tr. 1129; JX 5 at 8.) Plan sheet B5 also lists the location of the ten MSE walls to be built, and the quantity of select granular backfill required for each wall. (JX 5 at 8.) SCR 255.08 provides that payment for construction of the MSE walls would be made by square meter of wall face, and other components of the wall were to be subsidiary to that number. (S. Hurworth, Tr. 91-92; Gillette, Tr. 1129; JX 9 at 69.)
The parties agree that "excess excavation," defined as excavation quantities beyond those shown on the plans, was generated on the project. (Stip. ¶¶ 34, 35.) By April 2004, Delhur believed that there would likely be excess excavation material on the north end of the project. (Stip. ¶ 48.)
On April 24, 2004, after its discovery that there may be excess excavation on the project, Delhur moved its Caterpiller 385 mass excavator to the south end of the project. (Stip. ¶ 51.) In early May 2004, Delhur began using some of the screened materials from the screening plant at station 12+100 in the MSE walls. (Stip. ¶ 49.) Delhur used approximately 7,129 compacted cubic meters of materials from the screening plant in the MSE walls.
On June 29, 2004, Delhur notified the FHWA in writing that there would be excess excavation on the project. (Stip. ¶ 52.) This was Delhur's first written notice to the FHWA that there would be waste material on the project.
The FHWA did not provide a waste site for excess material. (Stip. ¶ 63.) On July 19, 2004, Delhur reached an agreement with the Circle Cross Ranch to place excess material on its property and Delhur began hauling material to that location. (Stip. ¶ 55.) Delhur hauled approximately 2,011 loads of excavation material to the Circle Cross Ranch. (Stip. ¶ 56.) Delhur paid $36,041 to the Circle Cross Ranch to dispose of excavation material at the ranch, $10,500 to a seeding subcontractor, and applied overhead of five percent for a total of $48,868. (Stip. ¶ 64.) The FHWA did not compensate Delhur for any of the costs of securing a waste site.
The FHWA paid Delhur at the contract unit price of $5.95 per cubic meter for excavating 276,451 cubic meters of material. (Stip. ¶ 57.) The cost of handling the excavation from MSE walls is included in Delhur's claim for the extra cost of excavation. (Stip. ¶ 61.)
Delhur seeks $1,048,910 in additional costs related to excess excavation, comprised of $886,238 for handling and hauling the excess excavation, $25,858 for additional blasting work to construct the MSE walls, and $136,814 in profit and overhead for these activities.
Essentially, Delhur's excess excavation claim is based upon five alleged errors in the contract plans. (Pl.'s Post-Trial Br. 8-21.) These five errors are: (1) Page B-12 of the plans represented that the expected swell on the north end of the project would be 4.2 percent; (2) the plans indicated that the MSE walls would only require 9,717 compacted cubic meters of excavation; (3) Page B-12 indicated that the project would require an import of approximately 11,467 cubic meters of borrow material; (4) excavation on the north end could be embanked within 1,000 meters of where it was excavated; and (5) there were inaccuracies regarding the amount of slope excavation.
The Expected Swell Factor
The Grading Summary for the project estimated an overall swell of approximately 4.2 percent on the north end, from station 9+600 to the end of the project. (Stip. ¶ 44;
The 2001 Kumar Report found that it was "reasonable" to apply "a swell factor of 36%" to the limestone rock material on the project site. (JX 3 at 30.) Not all of the rock mass on the project, however, was comprised of intact hard limestone. (DeMarco, Tr. 849.) A portion of the materials on the project consisted of decomposed limestone and clay-like, silty materials, both of which are shrinkable materials.
Delhur alleges that, because of the swell misrepresentation, the plans understated the volume of excavated material that Delhur would encounter on the project. Delhur estimates that the swell was 36 percent, which caused it to handle and haul an additional 36,000 cubic meters of excavated material. (Pl.'s Post-Trial Br. 9-10.)
Although Delhur provides three different legal theories for its excess excavation claim, under case law from the Federal Circuit, the swell claim should be analyzed as a differing site conditions claim
Four elements must be shown for both differing site conditions and misrepresentation claims.
In assessing the first element, whether a contractor reviewing the contract would read the plans as making an affirmative representation on the swell, the analysis is not limited to any specific provision but rather is based upon how a reasonable contractor would interpret the contract as whole.
A contractor has a duty to review information referred to and made available for inspection in the contract documents.
The second element Delhur must prove is that the actual site conditions were not reasonably foreseeable to the contractor.
In its post-trial response brief, Delhur argues that it did not receive the geotechnical reports until after it was awarded the contract, and therefore could not have read the reports prior to bidding on the project. (Pl.'s Post-Trial Resp. Br. 5.) The testimony cited in the post-trial response brief does not actually support this assertion. In this testimony, Mr. Hurworth stated that he did not ask for all three geotechnical reports until January 6, 2004. (S. Hurworth, Tr. 99.) However, it does not follow that no one else at Delhur received the geotechnical reports. Furthermore, Mr. Hurworth also testified on cross-examination that a person from his office ordered the geotechnical reports, although the testimony is unclear regarding how many of the reports were ordered and how many were received. (S. Hurworth, Tr. 364-65.) Defendant entered an exhibit into evidence, a letter from the FHWA's Lori K. Rivera to Delhur's Chris Steinman indicating that Ms. Rivera sent the three geotechnical reports. (DX 81 at 10.) The letter in evidence is not the actual cover letter to the three geotechnical reports, but a later letter that refers to Ms. Rivera having sent the reports.
Incorrect Excavation of MSE Walls
The Grading Summary for the project showed that 9,717 CCM of excavation would be required to construct the back slopes for all ten MSE walls. (Gillette, Tr. 1130-31; JX 5 at 15.) Mr. Gillette agreed at trial that there was a discrepancy in the Grading Summary regarding the amount of excavation of about 4,600 cubic meters. (Gillette, Tr. 1131.) In the contracting officer's final decision, the contracting officer agreed that there was an error in the wall excavation quantity of 4,627 meters and awarded Delhur $34,474 for the additional excavation. (JX 91 at 12.)
In its post-trial brief, Delhur alleges that the total excavation of the MSE walls was 25,500 cubic meters, 15,783 cubic meters greater than shown in the plans. (Pl.'s Post-Trial Br. 3-4, 11-12.) Delhur seeks compensation for additional costs resulting from the excess excavation.
As with the swell analysis above, the Court will analyze the claim under the differing site conditions/misrepresentation standard set forth in
A reasonable contractor would have read the plans as representing only 9,717 CCM in wall excavation since sheet B-12 clearly indicated that there would be only 9,717 CCM of excavation necessary for the MSE walls. (JX 5 at 15.) There are no provisions in the contract documents that would have indicated anything other than 9,717 CCM was required for the MSE walls. Delhur meets the second prong because the additional excavation was not foreseeable to Delhur.
As discussed above, Delhur cannot satisfy the third requirement of a differing site conditions claim because the Court is not persuaded that Delhur relied on the representation of MSE wall excavation on sheet B-12 in preparing its bid. While Sam Hurworth asserts that he relied on sheet B-12 in preparing the bid, (S. Hurworth, Tr. 63-64, 70-71), Delhur's bid documents are indecipherable and therefore do not show which pages of the plan, if any, Delhur relied on. (JX 7.)
Delhur also cannot prove the fourth element, causation. Delhur argues that it suffered damages because it had to haul the extra excavation from the MSE walls a distance of 5.6 miles. (S. Hurworth, Tr. 131.) Besides this general statement, Delhur provides no further evidence of the extent of its damages. It claims that the MSE walls produced a total of 25,500 cubic meters of excess excavation. The basis for this 25,500 excess excavation figure is unclear from the record. Mr. Hurworth testified that the estimate was based on a survey by its engineering firm,
Defendant argues that Delhur cannot prove causation because the excess excavation was a result of Delhur's own over-excavating of the MSE walls. (Def.'s Post-Trial Br. 43-44.) Defendant states that the total as-built MSE wall excavation was 27,277 cubic meters, and that Delhur over-excavated the MSE walls by 8,218 cubic meters.
The Court questions the data used for Defendant's calculations. The source of Defendant's calculation for the 27,277 cubic meters in MSE wall excavation is unclear. While Defendant demonstrated that Delhur over-excavated the slopes, (Gillette, Tr. 1235-37), Defendant did not provide the Court with any indication of how much material resulted from over-excavation of the cut slopes. Similarly, the Court does not find Defendant's estimate that Delhur imported 33,000 cubic meters into the project particularly reliable. Mr. Gillette testified that he relied on the quantities recorded in the combined haul records to calculate this amount. (Gillette, Tr. 1155.) The Court determined at trial that the combined haul records were based on a number of faulty assumptions and estimates, were inherently unreliable, and therefore could not be admitted into evidence. (Tr. 1225-27.)
Furthermore, the Court finds that Defendant's own presentation at trial demonstrated that Delhur had to excavate more material for the MSE walls than it expected. First, Mr. Gillette admitted at trial that Delhur had to excavate approximately 4,600 cubic meters of additional material. (Gillette, Tr. 1131.) Second, Mr. Gillette testified about Defendant's Exhibit 87, an exhibit meant to show the manner in which Delhur over-excavated the MSE walls. (Gillette, Tr. 1142-43.) This exhibit shows that, as designed by the FHWA, the wall excavation quantity is 17,280 BCM. (DX 87.) This amount seems to be larger than 9,717 CCM shown in the plans. However, because DX 87 measures excavation in BCM and sheet B-12 measures excavation in CCM, the extent of the additional excavation is unclear.
Nevertheless, the burden of proof remains with Plaintiff. The Court finds that Delhur has not proven any damages that were the result of the error in the plans. The Court cannot find that the additional excavation caused Delhur to incur damages. The Court simply cannot determine what the effect of the possible additional excavation would have been on Delhur's costs if Delhur had followed SCR 204.06(a), and had imported no material or less material onto to the project. Thus, Delhur cannot show that its damages related to handling and hauling the excess excavation were the result of an error in the plans and not the result of Delhur's own mistakes.
Delhur has insisted throughout these proceedings that it did not need to comply with SCR 204.06(a) because that clause was not applicable to projects requiring the use of imported material.
The parties estimate that Delhur generated between 23,145 and 26,127 BCM from the excavation of the cut slopes behind (or uphill from) the roadway prism when comparing the as-built to the as-planned drawings. (Stip. ¶ 34b.) There were instances in which the FHWA ordered Delhur to round the cut slopes and in those instances, the wall was remeasured and the FHWA paid Delhur for the extra work. (Gillette, Tr. 1237.)
Delhur alleges that the FHWA is responsible for the additional 26,127 BCM of excavation from the cut slopes. Delhur argues that it should recover under either of two legal theories. First, Delhur alleges that there was a design defect in the plans, namely that the plans showed an excavation ratio of 1.25 vertical to 1 horizontal. (Pl.'s Post-Trial Br. 18.) Second, Delhur alleges that it excavated additional material because the FHWA directed it to do so. (Pl.'s Post-Trial Br. 18 n8.)
Delhur asserts that the plans represented the majority of the slopes on the project to be excavated at a 1.25 vertical to 1 horizontal ratio (or ¾ horizontal to 1 vertical), which turned out to be incorrect. (Pl.'s Post-Trial Brief 18.) However, none of the cited pages of the plans actually show a slope of 1.25 vertical to 1 horizontal. Delhur cites Sam Hurworth's testimony, page 84, and the contract plans, page 78, for this proposition. (S. Hurworth, Tr. 84; JX 5 at 78.) Both this testimony and the page from the plans refer to the MSE walls, not to the cut slopes.
Delhur also contends that the additional slope excavation was a constructive change directed by the FHWA. Defendant agrees that there were instances in which the FHWA ordered Delhur to round the slopes but says that in all those cases, the wall was re-measured and Delhur was paid. (Gillette, Tr. 1237.) Defendant asserts that the excess excavation is the result of Delhur over-excavating the slopes. (Gillette, Tr. 1234-37.) Although the parties stipulated to an estimated range of excavation from the cut slopes, neither Delhur nor Defendant presented any data to show the extent of excavation. Thus, the Court has no evidence on the extent to which the FHWA may have directed Delhur to excavate the slopes, or the extent to which Delhur in fact over-excavated the slopes.
A constructive change arises when the Government, without more, "expressly or impliedly orders the contractor to perform work that is not specified in the contract documents."
The FHWA believed that rounding the slopes was a change in the contract. Mr. Gillette testified that when the FHWA ordered Delhur to round the slopes, it compensated Delhur for the work. (Gillette, Tr. 1237.) The issue, then, is not whether rounding the slopes was a change in the contract, but whether the FHWA paid Delhur for this work, and if so, whether the payment was sufficient. Delhur has provided no evidence for the Court to make a determination in Delhur's favor.
Delhur's argument is limited to statements in the post-trial brief demonstrating that the FHWA told Delhur to round the slopes, (Pl.'s Post-Trial Br. 19-20), and testimony by Sam Hurworth that the orders amounted to 26,127 BCM of extra excavation. (S. Hurworth, Tr. 138.) These two broad assertions are insufficient for the Court to determine that Delhur was not paid for the slope rounding. The contractor cannot merely rely on the general, unsubstantiated pronouncements that the various acts of the Government caused the increased costs.
Plans Indicated an Import of Materials and Excavation on the North End Could Be Embanked within 1,000 Meters.
These final two plan errors alleged by Delhur are not actually separate errors but merely a result of the fact that the project had more excavation than expected. Therefore, these alleged errors do not need to be analyzed separately.
Specifically, the plans do not state explicitly that the project would be a borrow job. Instead, Delhur extrapolated the information from plan sheet B-12, which showed an import of 11,467 cubic meters. (JX 5 at 15.) This is not an independent error in the plans but a result of the other alleged errors in the plans.
Furthermore, the indication that the material could be embanked within 1,000 meters also is not a separate error. Delhur does not argue that the plans incorrectly represented the area of embankment, rather it argues that because of the excess excavation the material could not be embanked as shown on the plans.
Inspection of the Subgrade
The FHWA's inspector, Nate Thompson, examined Delhur's aggregate base and assessed its compliance with the contract. (Stip. ¶ 73.) A "blue top" is a device used in checking the grade and is a stake set to within +/- ten millimeters of the design grade. The "blue top" provides a visual reference point which helps the equipment operators finish the aggregate base surface to the correct line and grade. (Stip. ¶ 72.) Using the "blue top" method, surveyors have plus or minus ten millimeters to set the grade to the finishing stake. The allowable finishing tolerance thus is twenty millimeters. (Gillette, Tr. 1244.) An inspector must constantly check the level, as there is no such thing as a perfect level. (Gillette, Tr. 1244-45.) Mr. Thompson regularly checked his level. (Gillette, Tr. 1246; DX 127.)
In its post-trial brief, Delhur made two allegations concerning Mr. Thompson's inspection of the subgrade. Delhur says that Mr. Thompson's method for checking the grade only allowed for a tolerance of ten millimeters, when in fact he should have allowed for a tolerance of twenty millimeters. (Pl.'s Post-Trial Br. 30.) Delhur also alleges that Mr. Thompson used a faulty level that was off by a little more than half a tolerance. (Pl.'s Post-Trial Br. 31; S. Hurworth, Tr. 181.) Delhur asserts that Mr Thompson's method of checking the grade breached the implied covenant of good faith and fair dealing during the performance of the project. (Pl.'s Post-Trial Br. 29-31.) Delhur assessed the increased costs allegedly caused by Mr. Thompson's inspection methods by comparing its finishing costs for this project with the Flowery Trail project. Delhur seeks $133,856 in damages for additional surveying work on this project. (Pl.'s Post-Trial Br. 30-31.)
Delhur was unable to show that Mr. Thompson behaved unreasonably in using the incorrect level. Defendant demonstrated at trial that there is no such thing as a perfect level and that Mr. Thompson consistently checked his level. (Gillette, Tr. 1244-46.) For Sam Hurworth's allegation that Mr. Thompson used a level off by over half a tolerance, (S. Hurworth, Tr. 181), the Government demonstrated that the level was only three millimeters from Delhur's level. (Gillette, Tr. 1248-49.) Since Mr. Thompson was regularly checking to make sure that his level was accurate, the fact that there were occasions in which the level may have been off is insufficient to find a breach of the duty to cooperate.
The evidence on the issue of Mr. Thompson using the incorrect tolerance is less clear. Delhur presented one document suggesting that Mr. Thompson would not use the "blue tops" in his grade inspection. (JX 23 at 2047) (Mr. Thompson's diary in which he says "Billy asked me if I would go check blue tops with him from 2+940 up station so that they would know that blue tops are correct before they start cutting to grade. I told him No, that's his job, but I'd check grade when it's ready to be accepted.") There is also some evidence that the FHWA acknowledged a mistake in the measurement of the tolerance, specifically that the specifications could be read to allow for a tolerance of twenty millimeters. (JX 91 at 16.) Delhur, however, did not present any evidence on the extent of this problem. Sam Hurworth testified that Mr. Thompson consistently refused to measure the grade correctly. (S. Hurworth, Tr. 180-81.) However, Sam Hurworth was not present during the grade inspection. (S. Hurworth, Tr. 450.) The Court does not have sufficient evidence to know the extent to which Mr. Thompson may have used the incorrect tolerance in measuring the grade. It is, therefore, difficult for the Court to determine whether Mr. Thompson behaved unreasonably.
In assessing this claim, the Court finds that Delhur has failed to satisfy its burden of proof. Sporadic and anecdotal notations that Mr. Thompson may have caused Delhur to incur additional surveying and grading costs will not suffice. To receive an equitable adjustment, a contractor must show causation.
Scaling of Slopes With Pry Bars
Delhur began excavation blasting in early February 2004. (Stip. ¶ 83.) Delhur had a choice of blasting methods to achieve the desired outcome on the slopes, the two most common methods being control blasting and production blasting. (Gillette, Tr. 1232.) "Control blasting" involves the use of closely spaced drill holes and reduced blast energy in each hole so that the blast damage is not as great.
In a May 11, 2004 letter, Mr. Gillette notified Delhur that its hand scalers had been using rakes to remove loose rocks from rock cuts and that, while this method was effective for removing loose rocks, it was not effective for removing many of the fractured or wedged rocks. (S. Hurworth, Tr. 171-72; JX 88 at 213.) Mr. Gillette explained that these rocks present a safety hazard because they tend to work free due to erosion of soil filled joints and freeze/thaw cycles. (JX 88 at 213.) Mr. Gillette recommended using a scale bar to pry the rocks out of their bedding.
In a February 9, 2005 letter, Delhur notified Mr. Gillette that it claimed compensation for the manlift and labor required to pry embedded rocks loose from the slope, which Delhur argued were contrary to the project specifications. (JX 63.) The FHWA denied the request by letter on November 8, 2005. (JX 86.)
Delhur alleges that the FHWA changed the scope of work by requiring Delhur to hand pry imbedded rocks from the slope face. (Pl.'s Post-Trial Br. 31-32.) It seeks $86,429 in increased costs for performing the hand scaling. (Pl.'s Post-Trial Br. 7.) Sam Hurworth testified that, when Delhur bid the project, he believed that SCR 204.13, the section on sloping, shaping and finishing the roadway, indicated that the slopes were to be left in "roughened fashion and were not supposed to be smooth or slick." (S. Hurworth, Tr. 90-91.) This type of slope finish would be achieved with a backhoe, not by hand. (S. Hurworth, Tr. 91.)
As discussed above, to prove a constructive change, the contractor must show both that it performed work in addition to or different from that required under the contract, and that the work performed was ordered by the Government, either by express or implied direction, or by Government fault.
SCR 204.13, the relevant section of the contract specifications, states:
(JX 9 at 54.) This section requires both that the slope be left in a roughened fashion and that rocks be scaled to remove unstable material. Delhur argues that production blasting was the only blasting method it could use to achieve the rough surface required by SCR 204.13. Mr. Hurworth states that, since a machine was used to achieve the rough surface, it made no sense for Delhur to return to the slopes and pry rocks loose by hand. (S. Hurworth, Tr. 170-71.) Delhur's contention is that, because it could meet the FHWA's specification of a rough surface by using a machine, requiring Delhur to pry rocks by hand is a change in the contract. However, this theory is not supported by the contract documents. If Delhur was planning to use production blasting, it also had to refer to the specification on production blasting, Standard Specification 205.08. This section states that the contractor may have to scale by hand.
(JX 1 at 139.) Thus, once Delhur decided to use production blasting, it should have been aware that it may have to scale by hand. The plain language of Standard Specification 205.08 states that in production blasting, hand scaling may be necessary to remove loose or hanging rocks. Hand scaling was plainly within the scope of the contract.
From the beginning of the project until just before the winter suspension in 2004, public traffic traveled on the existing roadway in the area of station 9+580 to 12+100. (Stip. ¶ 89.) In the winter of 2004, Delhur determined that the existing roadway had become too narrow and unsafe for travel due to debris and drain water falling from above. (S. Hurworth, Tr. 176-77.) Delhur decided that traffic had to be moved to the road being built by Delhur and from late 2004 until completion of the project, public traffic was carried on the new road. (Stip. ¶ 89; S. Hurworth, Tr. 177.) A temporary guardrail was required during construction to assure public safety if Delhur wanted to route traffic onto the new alignment. (Stip. ¶ 105.)
Delhur installed a guardrail from station 9+580 to 12+020 prior to paving. (Stip. ¶ 90.) When it installed the guardrail, Delhur temporarily placed the blockouts on the backside of the guardrail post and attached the rail to the front of the post to facilitate paving operations.
The FHWA did not direct Delhur to divert traffic onto the new road alignment in late 2004. (Stip. ¶ 91.) The FHWA also did not direct Delhur to place the guardrail blocks on the back of the posts.
Delhur argues that it is entitled to $23,419 in increased costs for installing and removing the temporary guard rail. (Pl.'s Post-Trial Br. 33; S. Hurworth, Tr. 177-79.) Delhur alleges that the FHWA's denial of Delhur's request to proceed with the installation of a temporary guardrail as a pay item was a breach of contract and a breach of the duty of good faith and fair dealing. (Pl.'s Post-Trial Br. 32.)
The Court also might evaluate this claim as a constructive change, but none of Delhur's theories are supportable. Delhur has not identified any contract provision that the FHWA may have breached, and it has not shown that the FHWA ever directed Delhur to divert traffic or to construct a temporary guardrail. Although the diversion of traffic for safety reasons and the erection of a guardrail may have been sound ideas, contract procedures are in place to manage such issues in an orderly way. A contractor is not permitted to implement its own ideas without first obtaining the Government's concurrence, and then charge the Government for the increased costs. In effect, Delhur volunteered the diversion of traffic costs, and it may not recover those costs from the Government.
Delhur began placing topsoil on the project on approximately June 8, 2004. (Stip. ¶ 78.) Standard Specifications subsection 109.02(b)(2) of the contract provides in part:
(JX 1 at 66.) Delhur hauled conserved topsoil in 350C Payhauler trucks with "Rock" or "Heavy Rock" body service types. (Stip. ¶ 77.) The trucks had no tailgates.
After filing its certified claim under the CDA, but before trial, Delhur determined that the appropriate level of compensation was at 26.18 cubic meters per truck. (Stip. ¶ 81.) Delhur's arrived at 26.18 cubic meters by going to a pit with topsoil and throwing topsoil into the truck as Delhur would have done on the Sacramento River Road job. (S. Hurthworth, Tr. 165.) Delhur undertook this exercise one year before trial on a different project with different topsoil. (S. Hurworth, Tr. 470.) There is no data confirming the 26.18 cubic meters measurement per load during this project.
Delhur seeks an additional $74,517 for hauling topsoil based on a volume of 26.18 cubic meters per truck. (Pl.'s Post-Trial Br. 34.) The Court finds that Delhur did not meet its burden of proof for demonstrating that each truck carries a load of 26.18 cubic meters. A test conducted years after the completion of the project using different topsoil is insufficient to demonstrate the amount of material that the trucks could carry. Furthermore, even if the trucks could carry 26.18 cubic meters, Delhur did not provide any contemporaneous evidence to show that the trucks actually carried 26.18 cubic meters during the project. The only project-based evidence provided to the Court shows that the trucks carried approximately 19 cubic meters, and that the FHWA paid Delhur for those volumes. Thus, the Court finds that Delhur again has not met its burden of proof, and the topsoil hauling claim must be denied.
As discussed above, Delhur's As-Planned Schedule indicated that the project would be completed on August 21, 2004 (Stip. ¶ 30), but the project was not accepted by the FHWA until October 5, 2005. (Stip. ¶ 32.) Delhur seeks to recover overhead for the nineteen-week delay between June 19, 2004 and October 31, 2004 that it attributes to the excess excavation. (Pl.'s Post-Trial Br. 35; S. Hurworth, Tr. 145.) Delhur claims that this nineteen-week period delayed subsequent phases of the project. (S. Hurworth, Tr. 144.) Delhur seeks the recovery of $156,009 in home office overhead and $111,507 in field office overhead.
The Court already has ruled that Delhur failed to satisfy its burden of proof and cannot recover under any of its excess excavation theories. The recovery of home office and field office overhead is intended to compensate a contractor for delays in contract performance caused by the Government. The theory for this recovery is that the contractor plans for the expenditure of resources on a project based upon the expected duration of the project, and if a project extends for a longer duration than planned, a greater level of resources must be devoted to the project. When the delay is the responsibility of the Government, it is appropriate for the contractor to recover the increased expenditure of overhead resources caused by the delay.
Here, the Court has no basis to conclude that the FHWA was solely responsible for any performance delays. Delhur did not present any contract schedule analysis during its case in chief to establish that there was any government-caused delay.
Defendant's expert, Mr. Francis Brennan, did prepare a time impact analysis comparing Delhur's As-Planned Schedule with an As-Built Schedule that he constructed. (DX 105.) Performing this comparative analysis enabled Mr. Brennan to see how the work progressed and to determine who was responsible for the delays. (Brennan, Tr. 1403.) Mr. Brennan concluded that Delhur's planned schedule was too compacted at the front end, and that the project could not be completed in one year. (Brennan, Tr. 1409.) Mr. Brennan created an As-Built Schedule for the project based upon daily records from both Delhur and the FHWA. (Brennan, Tr. 1409-12; DX 105 at 87-88.) Mr. Brennan concluded that there were 409 calendar days of delay between Delhur's date of "early completion," August 21, 2004, and the date of actual project completion, October 4, 2005. (DX 105 at 4.) However, the actual project completion date was only 35 days late when measured against the August 30, 2005 contract completion date.
Mr. Brennan determined that there were five controlling delays on the project accounting for the 409 calendar days of delay. (Brennan, Tr. 1413-14; DX 105 at 22-39.) The five controlling delays may be summarized as follows:
Of the 35 calendar days of delay in completing the project, Mr. Brennan found that Delhur was responsible for these delays, and that they were not excusable. The other delays ate up "float" in Delhur's planned schedule. (Brennan, Tr. 1434.) Mr. Brennan did not find any concurrent delay on the project. (Brennan, Tr. 1435.)
Based upon Mr. Brennan's analysis, and Delhur's failure to present any contrary analysis, the Court concludes that Delhur's claim for home office and field office overhead must be denied.
Section 108.04 of the Standard Specifications provides that liquidated damages "in the amount specified in Table 108-1 will be assessed for each day beyond the time allowed to complete the contract until substantial completion of the work." (JX 1 at 62.) Further, twenty percent of liquidated damages "will be assessed for each day beyond the time allowed to complete the contract beginning with the day after substantial completion and ending with the date of final completion and acceptance."
The contract completion date was August 30, 2005. (Stip. ¶ 28.) The FHWA accepted the project as complete on October 5, 2005. (Stip. ¶ 32.) By letter dated October 11, 2005, the FHWA notified Delhur that liquidated damages would be assessed from August 31, 2005 until the project was substantially complete on September 23, 2005, and that twenty percent of the daily rate would be assessed from September 24, 2005 through September 28, 2005. (JX 84.) The amount calculated by the FHWA and withheld from Delhur was $45,000.
Delhur claims that the project would have been substantially complete before the completion date if not for the excessive excavation caused by the FHWA's errors in the plans and specifications. (S. Hurworth, Tr. 142-45.) Delhur alleges that, because this delay was caused by the FHWA, the assessment of liquidated damages was improper. (Pl.'s Post-Trial Br. 34-35.) Delhur seeks reimbursement of the $45,000 in liquidated damages. (Stip. ¶ 36.)
The Court finds that Delhur is not entitled to reimbursement of liquidated damages because it has not met its burden of proving that the delays were excusable. "As a general rule, a party asserting that liquidated damages were improperly assessed bears the burden of showing the extent of the excusable delay to which it is entitled."
Based on the foregoing, the Court finds that Delhur is not entitled to any damages on its contract claims against the Government. The clerk shall dismiss Plaintiff's complaint with prejudice, and enter judgment in favor of Defendant. No costs.
IT IS SO ORDERED.
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