Appeal of the agency’s denial of a claim seeking additional costs due to differing project site conditions is denied, where the agency’s pre-award disclosures, the contract, and the prime contractor’s proposal acknowledged the possibility that subsurface groundwater could be encountered, and therefore the plaintiffs should have been prepared for this eventuality. The court also found no evidence the agency abused its discretion to inspect and approve drilled shafts, finding the inspections were a contractual requirement, and that the government was not responsible for delays caused by the subcontractor’s decision to move drills away from the work site prior to the inspections.
The U.S. Army Corps of Engineers sought a contractor to build a facility for the Defense Logistics Agency. A final geotechnical report included as an amendment to the solicitation showed a fault line that runs through the Defense Distribution Depot Susquehanna, Pennsylvania (DDSP), a large military facility where the DLA building would be located. The subsurface on one side of the fault line was comprised of siltstone or claystone; the subsurface on the other side, i.e., where the Project site was located, was comprised of a limestone that was described as a massive bedrock that was very hard and pinnacled.
The report also stated that concrete drilled piers extending into the limestone were required to support the DLA building. Therefore, the amended solicitation required the contractor to install special deep foundations for drilled piers ranging from thirty to seventy-two inches in diameter. The report also documented prior rock corings that would require additional excavation or grouting, as observed and determined by a qualified geotechnical engineer. Engineers also were required for other inspections and approvals on an ongoing basis, given the nature of the site conditions. The report also provided that the contractor would need to take measures to prevent infiltration of groundwater and prevent caving of the sides of the excavation. The report also included estimated tip elevations, i.e., the depth to which the shafts would be drilled, and excavation quantities for each diameter of drilled pier, and clarified that these estimated elevations were not final.
USACE awarded the contract to Walsh Construction. Walsh subcontracted shaft work to Goettle Inc. Walsh entered into a subcontract with Ammero Construction Services LLC to install 272 drilled piers. Ammero subcontracted that work to Goettle Inc.
In January 2013, Walsh conducted rock coring to enable USACE to set preliminary tip elevations. To set the TORS elevations, the agency reviewed the rock core logs prepared for each of the 272 pier locations, photographs of the rock cores, and the driller’s log that was prepared contemporaneously with the rock coring. As determining TORS elevation is an iterative process, in some cases the agency raised the elevation and in other locations decided it must be lowered.
On February 13, 2013, Goettle began drilling, but experienced significant problems in drilling five of the shafts at the project site. For example, the subcontractor encountered fractured rock and caving, so it had to backfill the hole to stabilize excavation and allow for further work. In other locations, Goettle encountered groundwater significant enough to prevent work in those areas from proceeding. In another location, the shaft was approved for concrete pouring, but the reinforcing steel cage collapsed and was damaged beyond repair, causing a delay until a replacement could be delivered. In addition, approximately 90 drilled piers did not experience caving and water issues, but failed inspection. In some instances, the third-party inspector and the government inspector agreed that a shaft failed the inspection, but on other occasions the two inspectors disagreed.
On November 30, 2015, Walsh submitted a request for equitable adjustment on behalf of Goettle for additional work at drilled shafts due to differing site conditions and disruption of work flow due to unnecessary inspections, seeking $8,763,119. The REA incorporated Goettle’s earlier requests for a change order. The contracting officer denied the REA, finding that the site conditions were not materially different from those presented in the contract. The CO also concluded that the site inspections referenced in Goettle’s REA were a contract requirement.
Walsh later filed a complain in the Court of Federal Claims alleging that the inspections resulted in government-caused delay and additional costs of $2,897,367. A second count alleged that USACE breached the duty of good faith and fair dealing by subjecting Goettle to a myriad of unnecessary and abusive additional equipment, tooling, and labor costs, with damages in the amount of $2,897,367. Count three alleged a differing site condition claim concerning the various shafts, seeking damages in the amount of $631,247.
In its count alleging the government breached the contract and violated the duty of good faith and fair dealing, Walsh argued USACE abused the inspection process to save money. The plaintiffs explained that the contract did not include a inspection unit price for each time the agency miscalculated the pier elevations and forced Goettle to remobilize and redrill, but instead provided for a unit price for liner feet drilled. Thus, according to the plaintiffs, to save money on the total linear feet to be drilled, the agency set elevations they knew were likely not deep enough and then used the inspection procedure to correct the errors in its own calculations. The plaintiffs estimated the agency provided inaccurate instructions for as many as 30 percent of the shafts to be drilled.
As a result, the plaintiffs complained they were unjustifiably forced to demobilize and remobilize 471 more times on this Project than was contemplated by the contract, which substantially increased their costs. In addition, they alleged that following the post-award rock coring, the agency reduced the bid quantities by 38 percent, which saved the Corps a grossly disproportionate amount of money compared to the substantial increase in cost borne by Goettle. The plaintiffs also alleged the agency directed Goettle to use a more time-intensive method for cleaning a drilled shaft, also increasing its costs. These counts alleged the agency interfered with Goettle’s ability to complete its work in the sequence as planned, in an orderly manner, and without multiple movements of its drill rigs through the project site.”
In response, the government argued that Walsh’s expectation that the initial pier elevations were final and would require no additional drilling was unreasonable, because Walsh’s expectations were based on a prior job with completely different geology. In addition, the government argued that Walsh failed to establish that USACE acted to save money; improperly set tip elevations; conducted inspections unreasonably; or otherwise interfered with Goettle’s performance. Moreover, the government argued the agency’s actions, including the shaft inspections, were not only permitted, but required, by the contract.
In support, the government noted that Walsh’s proposal reflected that it understood the risk of failed shaft inspections and that additional drilling could be required. Further, the drilled pier specification in the contract required that the rock socket be placed in competent rock and was clear that additional drilling could be required. Further, the government argued the agency paid Walsh for all additional drilling and excavation that was performed because it paid per linear foot excavated. While Goettle was paid unit prices, it was Walsh that set the terms of the subcontract agreement, and therefore it cannot claim the price was inadequate after the fact.
The government also explained it was reasonable for the agency to require Goettle incrementally to excavate additional depths, instead of adding a ‘contingency’ of one or two additional feet when setting rock socket evaluations. The government explained that over-drilling creates a risk that a rock socket would be placed in unsound rock or that drilling would uncover underground openings or water sources. Finally, the government argued the plaintiffs had not shown how the requirement to hand clean the shafts was unreasonable.
The court agreed that the plaintiff’s expectations were not reasonable, finding that the solicitation itself stated that the estimated tip elevations and rock socket lengths would not be finalized until pier inspection was approved in the field during construction. The court also found the allegation that the agency misused the inspection process to save money completely unsupported. The court found the agency credibly explained why and how it set the drill depths, noting that the nature of the geographic area precluded a contractor for assuming that all the elevations would be the same level.
The court also found the plaintiffs did not establish that the agency was responsible for the costs incurred by the unanticipated moving of drilling equipment. Goettle explained that the failed inspections tied up drill rigs because they had to be moved back to the site of the failed inspection for further digging, as well as the casing in the shaft, which could not be moved until the hole was complete. In other words, Goettle complained that if a hold failed inspection, it was prevented from using a drill in the next planned site. However, the court noted that it was Goettle’s decision to move the drilling equipment prior to the inspections.
The court also found the plaintiffs failed to demonstrate that the government’s requirement for hand cleaning the drilled sites was a contractual change. According to the court, the real problem is that Geottle failed to anticipate this type of cleaning, based on its experience at another job site. The court noted that even at this other job site, the agency required downhole inspections, and therefore the plaintiffs could have reasonably expected these inspections would be required on this project as well.
Accordingly, the court dismissed counts one and two.
In count three, the plaintiffs argued that the subsurface or latent physical conditions at the project site different materially from those indicated in the contract. According to Walsh, the geotechnical report provided a distinct representation of the materials Goettle was expected to drill. Further, USACE performed post-award additional subsurface analysis providing more information. Therefore, the plaintiffs argued that the government represented that the subsurface conditions did not include water sources as encountered by Goettle. According to the complaint, the substantial water seepage caused Goettle to materially alter its work plan for this area. Instead of drilling down to the TORS elevation and installing the temporary casing, Goettle was forced to drill two feet at a time and perpetually backfill the hole with lean fill or concrete to stabilize the loose rock slabs and allow for further advancement, requiring additional labor, time, and costs.
In response, the government argued that the final geotechnical report indicated the presence of groundwater at 35 feet and noted that the nature of the site geology made it difficult to predict local groundwater conditions. Further, the government noted that documents prepared by the plaintiffs during excavation showed that the difficulties with the shafts in this area were due to shaft collapses caused by subsurface voids in the rock.
The government also argued that the contract stated a preference for completing piers in dry conditions by requiring the contactor to attempt dewatering. Further, the agency could not determine whether dewatering was possible without first requiring the contractor to make the attempt. The agency also noted that enforcing a contractual requirement to dewater shafts is not a physical condition and, in any event, the agency made no representation that it would not enforce it.
The court noted that the final geotechnical report stated that it was difficult to predict local groundwater conditions, but suggested that zones of water could be encountered as shallow depths. The report also identified subsurface weathering, fractures, and air-filled voids. Because of this physical condition, the contract the contractor to use protective casings to securely protect the rock socket against cave-ins, displacement, and from seepage of groundwater or storm water. The contract also specified that the contractor must first attempt to dewater a drilled pier before seeking approval to complete the pier using another method.
Accordingly, the court found that the contract adequately warned the plaintiffs they could encounter subsurface water conditions. The contract did not affirmatively represent that the site conditions would be completely free from cave-ins or flowing water. While the final geotechnical report said that water was not anticipated, it also cautioned that the presence of groundwater was difficult to predict. Therefore, the court held that a reasonable contractor could not view the contract documents, as a whole, as making any representation about the presence of subsurface water at the project site.
The court also concluded the actual site conditions were reasonably foreseeable to the contractor, based on the contract documents and other available information at the time the contract was signed. Prior to bidding on the subcontract, Goettle received the final geotechnical report warning that voids and groundwater could be expected. Walsh’s proposal also anticipated this problem. The contract specified the contractor was required to attempt dewatering a drilled pier, as needed. Based on these documents, the actual site conditions should have been reasonably foreseeable to Goettle. Further, the government’s expert testified that water seepage is common in the type of geographic conditions at the site.
Because the actual conditions were consistent with the information provided pre-award, by the contract, and by the prime contractor’s own proposal, the court rejected the plaintiffs’ allegation of differing site conditions.
The plaintiffs are represented by Richard David Kalson of Benesch Friedlander, Coplan & Aronoff LLP. The government is represented by Igor Helman, Department of Justice, Civil Division.
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