Appeals of the agency’s denial of requests for equitable adjustment are denied in part and granted in part, where the contract did require the appellant to construct a backup evaporation pond to handle wastewater from a water treatment plant, so the contract was not constructively changed when the agency required the contractor to provide for one. However, the board found the agency did constructively change the contract when it required the contractor to follow certain specifications for the evaporation pond, because the contract provided the contractor the discretion to set those specifications provided they were sound and supported. The board also held the agency constructively changed the contract when it rejected the contractor’s first proposal for an electrical generator, finding that the solicitation’s concept drawings created an implied warranty that adherence to the drawings would result in satisfactory contract performance

CDM Constructors Inc. a decision of the U.S. Army Corps of Engineers contracting officer denying its requests for equitable adjustments under its contract to design and construct a water treatment plant. CDM argued compensable delay, constructive change, and defective specifications.

In its first claim, CDM sought an equitable adjustment and delay damages, arguing that USACE constructively changed the contract by compelling it to include one backup evaporation pond, to use a three million gallon per day (mgd) average daily flow (ADF), and to use a 0.8 pan evaporation coefficient only if the maximum water depth was three feet or less. USACE argued the contract required those design elements. In two additional claims, CDM sought an equitable adjustment under the Changes clause because the contract contained defective specifications regarding a standby electrical generator.

First, the board considered CDM’s claim regarding the requirement for a backup evaporation pond, which are used to contain and eliminate the liquid component of wastewater from the treatment plant. First, the board found that the contract did require CDM to construct a standby EP that was operationally ready for duty, but not yet deployed unless or until needed for an emergency.

However, the board agreed with CDM that the agency constructively changed the contract when it required CDM to use a 3.0 million gallon per day average daily flow. While the design drawings were based on that output, the contract did not require CDM to use that ADF, nor any specific ADF. Rather, the solicitation stated it would be up to the contractor to determine sizing. Further, the board noted that the contract required CDM to use an ADF in the range of 2.0 to 2.5 mgd to measure actual daily demand, so it was reasonable for CDM to conclude that it could use an ADF in that range.

In contrast, USACE argued that CDM changed the ADF from the 3.0 mgd that CDM had proposed in its 65 percent and 100 percent designs to the 2.25 mgd that CDM proposed in its revised 100 percent design. However, the board found that argument beside the point, explaining that CDM’s proposed ADFs were not contract documents. Thus, the relevant change was when the Corps required CDM to use a 3.0 mgd ADF that was not called for by the contract documents, not when CDM changed the ADF from an earlier design. Absent a contract requirement or an approved design to the contrary, CDM was free to select an ADF, so long as it was sound and supported, which was the case here.

The board also concluded the agency constructively changed the contract when it required CDM to use a 0.8 evaporation coefficient only if the maximum water depth was three feet or less. As with the ADF levels, the board found the contract documents did not require CDM to use any particular evaporation coefficient for any particular water depth, and therefore the agency constructively changed the contract when it set a specific requirement. Similarly, the board rejected USACE’s argument that CDM had changed the evaporation coefficient from its initial design. Further, the board noted the agency—not CDM—had proposed that change from the initial proposal.

The Corps also argues that CDM failed to provide adequate notice, but the board disagreed. While CDM’s May 22, 2013 notice of change focused upon the standby EP and ADF issues, it stated that the government did not accept its evaporation rate design factors. According to the board, that provided adequate notice that CDM considered the evaporation coefficient relative to the water depth requirement to be a constructive change that CDM did not voluntarily perform.

Next, the board considered CDM’s REA under the Changes clause. CDM argued the contract required it to follow specifications regarding a standby electrical generator. However, the agency rejected CDM’s first design proposal, so CDM argued the specifications had to be defective. In response, the agency argued that CDM was not required to follow those drawings. However, the board rejected that argument, first noting that the contract documents required the contractor to use the drawings to price its proposal.

The agency also argued that it was unreasonable for CDM to follow the concept drawings, because they were preempted by information in an appendix to the solicitation, which was given precedence by the contract’s order of precedence clause. However, the board found that under this clause, appendix A took priority over the concept drawings only if there were an inconsistency. Because there was no inconsistency, the clause did not apply. Further, the board noted that USACE did not cite appendix A when it rejected the initial design. The board also noted that the design ultimately approved by the agency violated appendix A.

The agency’s argument that the electrical service requirements trumped the concept drawings failed for identical reasons. The board found no conflict between the ESRs and the drawings, and noted that Southern California Edison sometimes waived the ESR’s provisions. Further, appendix A did not require compliance with the ESR the agency argued CDM should have followed.

Because the concept drawings were not trumped by inconsistent requirements in other areas of the solicitation, the board held they created an implied warranty that adherence to the drawings would result in satisfactory contract performance, which the corps breached.

CDM Constructors Inc. is represented by Bret S. Wacker, Jeffrey M. Gallant, and Emily J. Baldwin of Clark Hill PLC. The government is represented by Michael P. Goodman, Engineer Chief Trial Attorney, and by John F. Bazan, Gilbert H. Chong, and Brian M. Choe, Engineer Trial Attorneys.