Appeal of the contracting officer’s denial of a claim for additional design work and changes in scope is denied in part, where some of the changes were reasonably encompassed within the task order’s scope of work and where some of the personnel costs were not justified; and granted in part, where the agency was responsible for a lengthy suspension of work and made significant changes to the project’s design specifications which resulted in additional A/E work.
The government’s counterclaim seeking the difference between the cost of equipment quoted in the appellant’s proposal and the actual amount spent by the contractor is denied, where the task order was issued as firm fixed-price and the contractor was entitled to derive the benefit of any cost savings it achieved. The board also found the government failed to substantiate its claim for unfinished or unacceptable work.
BCPeabody Construction Services Inc. appealed the Department of Veterans Affairs contacting officer’s denial of its claim asserting entitlement to suspension of work damages in the amount of $175,778, costs incurred for additional architectural and engineering (A/E) design services in the amount of $68,904, and extra and changed work totaling $73,864.26 under a firm fixed-price design-build task order. BCPeabody also appealed VA’s claims for $115,294.93 for unused equipment costs and $17,501.13 for re-procurement costs.
First, BCPeabody claimed $68,904 in costs for additional A/E design services required due to VA’s design changes. On or about July 9, 2012, BCPeabody received the notice to proceed, and was supposed to complete the design of two kitchen areas within sixty days. However, VA did not approve the design until May 10, 2013. Further, while the task order called for almost all the equipment to be replaced, BCPeabody was later directed to reuse between 30 and 40 percent of the existing equipment. Finally, it was discovered late in the design process that VA’s plans did not represent the actual operating heating, ventilation, and air conditioning system. The equipment changes and HVAC discovery required a major rework of the electrical and mechanical design.
In response, VA argued that the design changes were reasonable and within the scope of the task order. According to VA, design pricing is expected to take into account reasonable alterations and adjustments, all of which are inherent to the design process. CBCA agreed in principle, but noted that neither the government nor the A/E is entitled to make unlimited adjustments without expecting that some of them could result in a change in design costs.
CBCA held that significant changes to the equipment BCPeabody expected to use on the project and inaccuracies in the VA’s as-built HVAC plans, both identified late in the design process, caused BCPeabody to rework the design in a significant way. CBCA denied a portion of the claim it found to be reasonably encompassed by VA’s specifications, but found that the timing and extent of the other design changes entitled BCPeabody to an equitable adjustment in the amount of $32,000 for additional A/E services, plus $2900 for overhead and profit.
Next, BCPeabody claimed $13,282 in general conditions costs, $53,638.35 in personnel costs, and $49,516.20 in unabsorbed overhead costs, for a total of $116,436.55 resulting from a 179-day suspension period. Beginning on November 4, 2013, VA issued several suspensions of work that eventually totaled 179 days. During the suspension, BCPeabody shifted its tradesmen and foremen to other jobs, but the appellant explained that it did not shift its project leadership due to the potentially short duration of the suspension. The CO agreed that the costs claimed for BCPeabody’s project manager had merit, but found that the costs claimed for a second project manager were not fully justified, as this individual worked on other projects during the duration of the suspension of work. Similarly, BCPeabody claimed the full amount of a superintendent’s salary, because he was ready to return to work on VA’s project at a moment’s notice.
CBCA agreed that the lengthy suspension was unreasonable, finding that VA had sufficient time to arrange for the December 2013 renovation of the kitchen area, since the task order was awarded in June 2012. The board found that the general conditions costs in the amount of $13,282 are substantiated, but that most of the claimed personnel costs were not. CBCA declined entitlement to the costs for the superintendent because he was working elsewhere during the suspension. The board also found it unlikely that the second project manager worked more than 8 hours per week on the VA project, since he claimed he worked 40 hours elsewhere, in addition to 40 hours for VA. CBCA accepted the VA CO’s determination that the first project manager’s costs were supported.
The board also found that BCPeabody had not demonstrated entitlement to unabsorbed home office overhead costs of $49,516.20 for the 179-day suspension. While it was undisputed that VA caused the delay, BCPeabody was not required to wait on standby and was not required to resume work immediately. Based on the first suspension letter, the appellant was aware of the earliest date when it would be required to resume work. When a contractor knows with certainty that it cannot be called on to perform work before a certain date, there is no uncertain delay period and the contractor is not on standby, the board explained.
Next, BCPeabody claimed $73,864.26 in extra and changed work. VA did not dispute that it owed BCPeabody $50,625.16 of the $54,016.46 claimed for approved change orders. However, VA disputed BCPeabody’s claim for the cost of an additional floor drain in the amount of $3391.30. BCPeabody asserted that the superintendent and the contracting officer agreed that the VA would pay for two additional floor drains. However, CBCA found no document in the record attesting to this agreement and noted that BCPeabody’s subcontractor revised its quote at the VA’s request to include only one additional floor drain. Thus, CBCA granted BCPeabody’s claim for approved change orders in the amount of $50,625.16.
BCPeabody also asserted entitlement to $19,847.804 for five change orders denied by VA. VA argued that four of the changes were not the result of differing site conditions, but were reasonably encompassed by the scope of work of the contract. CBCA agreed. For example, though BCPeabody claimed that an outside system running off the kitchen electrical panel was an unforeseen and unusual differing site condition, the board found the task order required the contractor to maintain the existing electrical connections for the medical center to ensure uninterrupted service. While doing so was more costly than BCPeabody expected, the board found the work was encompassed by the task order. Further, the appellant did not give notice of the alleged differing site condition before it completed the work and incurred additional costs.
For the fifth unapproved change order, VA acknowledged that it approved an upgrade in the vinyl flooring, but argued that BCPeabody did not substantiate its costs. BCPeabody admitted that it did not have documentation to support the cost originally quoted for the tile, so the board used the jury verdict approach to arrive at a fair approximation of the damages. BCPeabody provided a more current quote for the high-end cost of hospital grade tile from a different supplier and used that number to calculate the difference in the original cost of the tile and the actual cost of the vinyl flooring. CBCA calculated a fair approximation of damages at $13,019.
In a counterclaim, VA sought $115,294.93–the difference in cost between the equipment listed in the task order as “probable at a minimum” and the actual equipment provided for the project by BCPeabody. However, CBCA noted that the contract at issue was a firm-fixed-price design-build task order, and therefore the government bore the risk that the actual cost of the equipment to be purchased would be less than quoted by BCPeabody. The board held that if BCPeabody completed the work using different equipment than anticipated in its bid, it is entitled to the benefit of its bargain.
VA also claimed reimbursement of costs incurred to complete unfinished or deficient work. On May 20, 2015, VA provided a final punch list to BCPeabody with approximately100 items. BCPeabody noted that many items on the list were not valid, were completed prior to receipt of the list, or were not included in the scope of work. Nonetheless, BCPeabody worked to complete the items on the punch list. In August 2015, BCPeabody identified six items on the list that were not complete but noted plans to complete those items. Before the board, BCPeabody stated that it never considered not doing the list and in fact its crew was turned away when it attempted to complete it. At the same time, BCPeabody indicated its availability to perform warranty work.
The board found that VA failed to prove entitlement to these costs. While VA provided BCPeabody with the punchlist and a letter identifying other unfinished or deficient work, it did not specifically identify the items that were on both the punchlist and the letter. According to the board, the fact that the government included items on a punch list does not establish the existence or extent of the alleged defects. The board held that VA had not proven that the work identified as unfinished or deficient failed to meet the task order specifications, was deficient prior to VA’s occupancy of the building, or was even in the scope of work. Further, even if such unfinished or deficient work were the fault of BCPeabody, the appellant was not given the opportunity to correct the work.
BCPeabody Construction Services Inc. is represented by Robert M. Carpenter, President/Chief Executive Officer. The government is represented by Harold W. Askins III, Office of Regional Counsel, Department of Veterans Affairs.
