Contractor Prevails on Entitlement Portion of Claim But Fails to Establish Quantum; Appeal of CDM Constructors Inc., ASBCA Nos. 62026, 62088, 62089

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Contractor’s quantum appeal is denied in part and granted in part. In a previous entitlement decision, the board found that the agency had constructively changed the contract. The contractor filed a second quantum appeal seeking the increased costs caused by the change. The board, however, found that the contractor had not met its burden in demonstrating costs of the change. To demonstrate increased costs, the contractor must show the difference between the reasonable cost of performing the work with and without the change. The contract claimed that its original design showed the costs of performing without the change. But the board found that design did not comply with the contract’s requirements and thus failed to demonstrate the costs without the change. The board did find that the contractor had demonstrated that it was entitled to $7,000 in increased general condition costs due to defective specifications.

CDM Constructors had a contract with the Army Corps of Engineers to design and build a water treatment plant as a military base in California. CDM filed a claim with the Corps alleging that the agency had constructively changed the contract and provided defective specification. The Corps denied the claim, and CDM appealed to the ASBCA.

The board found that the Corps had constructively changed the contract when it compelled CDM to size an evaporation pool using a certain average daily flow and evaporation coefficient. The board also found that the Corps provided defective specifications regarding a standby generator. The board returned the appeals to the parties for a determination of quantum.

The parties, however, were unable to resolve quantum, so CDM filed a quantum appeal. CDM sought an equitable adjustment for the costs of providing the evaporation pool with the changed daily flow and evaporation coefficient. The parties had agreed that CDM was entitled to a $318,000 equitable adjustment for defective generator specifications. But CDM still it claimed it was due an additional $7,300 for increased general condition costs caused by the defective specifications.

A contractor bears the burden of proving the amount by which a change increased its cost to perform. To meet that burden, the contractor must demonstrate the difference between the reasonable cost of performing the work with and without the change. CDM claimed that its initial design established the reasonable cost of performing with the changes because that design complied with all the contract’s requirements.

The board, however, found that CDM’s design did not actually comply with the contract’s requirements. The contract required CDM to build a standby evaporation pool. The standby pool would be used for two months while cleaning the other, in-service evaporation pools. But CDM’s purported standby evaporation pool was actually used to prevent operational overflows and thus could not be used as a standby pool. Because CDM’s plans did not include a standby pool, it did not comply with the contract’s requirements. And, because the design did not comply with the contract’s requirements, it failed to demonstrate the cost of performance without the constructive change. CDM thus failed to demonstrate a baseline for its increased costs and therefore the amount of it equitable adjustment could not be calculated.

The board did, however, find that CDM was entitled to the $7,300 in increased general conditions costs. General condition costs—management costs, temporary facilities costs, temporary utility costs—may increase due to an increase in a project’s scope of work. Here the increased costs were due to an increase in work that resulted from the defective specifications.

CDM is represented by Bret S. Wacker, Emily J. Baldwin, and Jeffrey M. Gallant of Clark Hill PLC. The government is represented by Michael P. Goodman, John F. Bazan, Gilbert H. Chong, and Brian M. Choc of the Army Corps of Engineers.

ASBCA - CDM Constructors