ASBCA Denies Claim Premised on a Reading of the Film “The Magnificent Seven”; Appeals of GSC Construction, Inc. ASBCA Nos. 59402, 59601

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Claim challenging a termination for default and seeking delay damages is denied. The contractor claimed that it was entitled to an extension of the contract and to delay costs. The board, however, found that the contractor was responsible—due to, among other things, its misreading of the contract and its botched design plans—for the delay. The contractor also asserted a bad faith claim based on its interpretation of the film “The Magnificent Seven.” The agency referred to seven contracts, including the contractor’s, that were behind schedule as The Magnificent Seven. The contractor believed this reference demonstrated the agency’s animus because most of the Magnificent Seven died in the movie. But the board found this was a sardonic jape, not evidence of bad faith.

GSC Construction, Inc. had a task order with the Army Corps of Engineers to design and build warehouses and associated bulk storage buildings. The contract required GSC to finish the project by February 3, 2014. GSC, however, fell behind schedule. Shortly before the project deadline, the Corps issued a show cause notice. In response to the notice, GSC avowed that it could finish the project by June 2014. The Corps stated that it was not waiving the completion date but also that it would not terminate the contract cause if GSC could finish the project by June.

But by the end of April 2014, GSC had not made sufficient progress on the project. The Corps issued another show cause notice. GSC complained that it was the victim of delays beyond its control. GSC promised that it would finish the project by August 2014. The Corps, however, was sick of waiting; it terminated the contract for default.

GSC appealed the termination to the ASBCA, alleging that as a result of various delays, it was entitled to a time extension on the contract. GSC also submitted claims seeking over $300,000 in delay damages. The claims were deemed denied. GSC appealed its damages claims to the ASBCA. The board consolidated the termination and damages appeals and then held a 10-day hearing.

GSC argued that it was entitled to a time extension and delays costs for having to remove unsuitable soil from the worksite. The board, however found that the contract assigned responsibility for the removal of the soil to GSC. The contract stated that GSC was responsible for any site preparation required to accommodate its choice of foundation. If GSC had chosen a pier and supported grade beam foundation, it could have left the soil in place. But GSC chose to install a waffle mat slab, which required it to remove the existing soil and replace it with select fill.

GSC also sought delay damages for its design of metal framing for the structures. When the Corps issued the task order to GSC, DoD’s 2007 building standard were in effect. But in 2012, DoD updated the standards. The Corps said that GSC could use the 2007 standards for the metal framing of the building. GSC’s structural engineer, however, used the 2012 standards. The Corps reviewed GSC’s drawings under the 2012 standards and rejected them several times. While engineering portions of complied with the 2012 standards, other portions of the drawings sill only complied with the 2007 standards. GSC argued that the Corps was responsible for the delay because if it had reviewed the drawings under the 2007 standard, they would have been approved sooner.

The board was not persuaded by GSC’s argument. This was a design-build contract, meaning that the Corps paid GSC for the design. The contract stated that GSC would be responsible for the quality and technical accuracy of the designs. This meant that GSC officials were responsible for coordinating the design work and ensuring that all shop drawing were consistent. GSC was not entitled to an extension for the rejected designs.

GSC also contended that the contracting officer waived the February 2014 when it stated that GSC could finish the project by June 2014. The waiver doctrine protects a contractor who is lead to believe that time is no longer of the essence when it is allowed to continue with substantial performance past a due date.

The board, however, found that the contracting officer had not waived the completion date. The contracting officer had agreed to allow GSC to finish the project in June 2014, but he had explicitly told GSC that he was not waiving the completion date. The board found that it was reasonable for the contracting officer to give GSC the additional four months but to also caution that it was not waiving the completion date. There was nothing unusual with this situation.

GSC further alleged that the Corps breach the duty. of good faith and fair dealing. Part of this claim was premised on GSC’s reading of the movie “The Magnificent Seven.” In 2014, after reviewing a number of construction projects, the Corps identified seven projects—which included GSC’s—that were behind schedule. One of the Corps’ engineers dubbed these delayed contracts The Magnificent Seven. GSC believed that this name had significance because many of the Magnificent Seven in the film died.[1] By being included in this group, GSC thought that the Corps was unfairly targeting its contract for termination.

The board, however, did not see anything nefarious. Use of the name was likely an attempt at dry, sardonic humor. There was no evidence that use anyone at the Corps had any animus toward the contractors performing the seven behind-schedule contracts, nor that they took any inappropriate action against these contractors.

One of the judges on the board issued a lengthy concurring opinion, which offered an in-depth exploration of the causes of GSC’s delay. The concurring judge ultimately concluded that the delay was caused by GSC’s subcontractors. Because GSC was responsible for its subcontractors, it was not entitled to any recovery.

GCS is represented by Karl Dix, Jr., Lochlin B. Samples, and Douglas L. Tabeling of Smith, Currie, Hancock LLP. The government is represented by Michael P. Goodman, Stephanie R. Darr, Lauren M. Williams, and Keith J. Klein of the Army Corps of Engineers.

[1] “The Magnificent Seven” is based on Akira Kurosawa’s 1954 film “The Seven Samurai,” which also kicks ass. If you’re an aspiring cinema snob, you should see both films.

ASBCA-GSC Construction