Keeping a Workforce on Standby Does Not Mean They Must Be Idle; RLS Construction Group, LLC v. Department of Veterans Affairs, CBCA 6349

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Government’s motion for summary judgment in contractor’s claims appeal is denied due to issues of material fact. The government claimed the contractor’s claims were barred by release language contained in various modifications. The board, however, could not discern whether the alleged additional costs were incurred within the scope of those modifications. The government also argued that the contractor was not entitled to home office overhead costs because it could not prove that its workforce had been on standby; rather, the government, contended, the contractor’s employees had a constant presence on the worksite throughout. But the board found that just because the workforce was not idle did not mean it was not on standby.

RLS Construction had a contract with the Department of Veterans Affairs to construct a new entrance to a medical center. Following completion of the contract, RLS submitted claims to the VA, alleging agency-caused delay and seeking reimbursement for additional supervisory costs, administrative costs, home office overhead, proposal preparation fees, and profits. The VA denied the claims. RLS appealed to the CBCA. The VA moved for summary judgment.

The VA first argued that RLS was not entitled supervisory costs for 138 additional days of performance because those costs were within the 535 day period performance and that RLS could not recover costs based on performance in less time. But the board found that the VA’s argument missed the mark. RLS’s claim was one for early completion, i.e, but for the agency’s delays, it could have finished the contract within 180 days. The board decided to wait for additional evidence before deciding whether RLS could recover on that claim.

The VA also argued that RLS’s was not entitled to certain additional costs because those costs were barred by release language in multiple contract modifications. The board noted that the releases would bar RLS from recovering any additional costs for work that was covered by the modifications. The problem was that the board could not discern whether the additional work was tied to the modifications or whether it was connected to other issues encountered during contract performance. While RLS would have to show at trial that the work fell outside the modifications, the board was unwilling to grant the VA summary judgment on this issue.

The VA further contended that RLS could not recover additional costs because they were incurred within the scope of a fixed-price contract. The board agreed with the VA in that if the costs were incurred as part of the original scope of work, the RLS could not recover. But again, the board noted that it could not discern from summary judgment record whether those costs had been incurred within the scope of the contract.

Next, the VA argued that RLS’s alleged costs were too speculative and were only an estimate. The board noted that RLS may recover costs based on estimates if there is no more reliable method for computing damages. While RLS bore a heavy burden to prove its costs, the board decided to give RLS the opportunity to demonstrate its costs at trial and thus denied the VA summary judgment on the “too speculative” argument.

The VA moved for summary judgment on RLS’s claim for home office overhead costs. To recover home office overhead a contractor must prove (1) a government-caused delay, (2) that extended the original time for performance of the contract, and (3) that the contractor was required to remain on standby during the delay. The VA claimed that RLS could not prove it was standby. Indeed, the VA noted that RLS’s workforce had been constantly present on the site, so they could not have been on standby.

The board, however noted that entitlement to home office overhead does not depend on whether RLS’s workforce was idled. Rather, it depends on whether there was a suspension or delay of indefinite duration. The board found issues of fact concerning the delay that precluded summary judgment.

The VA further challenged RLS’s claim for profit, asserting that profit was not allowed under the contract’s suspension of work clause. The board noted that while a contractor may not recover under the Suspension of Work clause, it may recover profit under a Changes clause. Here the board could not tell whether RLS’s claims arose under the Suspension of Work clause or the Changes clause. Until the board understood the basis of RLS’s claims, summary judgment was inappropriate.

Finally, the VA moved for summary judgment on the RLS’s claim for proposal preparation fees. The board noted that a contractor may recover legal fees in preparing proposals for negotiations relating to additional compensations. But those costs must be incurred in the pursuit of negotiation, not the prosecution of a claim against the government. The board could not tell whether RLS’s proposal costs related to negotiation or claim prosecution and thus declined to grant summary judgment on this issue.

RLS is represented by Joseph A. Camardo Jr. of Camardo Law Firm, P.C. The government is represented by Harold W. Askins III and Donald C. Mobly of the Department of Veterans Affairs.

CBCA - RLS Construction Group