Melvin Wilner, D/B/A Wilner Construction Company v. The United States , 994 F.2d 783 ( 1993 )

BENNETT, Senior Circuit Judge.

The United States (government) appeals from a decision¹ of the United States Claims Court (Claims Court)². The Claims Court (1) altered the contracting officer’s calculations to increase the quantum of delay damages awarded to Melvin Wilner, d/b/a Wilner Construction Company (Wilner), by $26,-271.49 plus interest, (2) denied a claim for further delay compensation asserted by Wil-ner, and (3) rejected the government’s claims for repayment of $133,094.79 in delay compensation already paid to Wilner. We affirm.

BACKGROUND

Wilner was engaged by the government to construct an Operational Trainer Facility at Camp Pendleton, California, pursuant to Contract No. N62474-83-C-2280. The undertaking experienced delays which postponed the project’s completion by 447 days. Wilner then filed a claim with the Navy’s contracting officer, William Lindstrom, to recover the additional costs resulting from the project’s delays.

Wilner’s claim was principally directed to delay costs arising from: 1) the duct revision work; 2) the open web joist (OWJ) revision work; and 3) the smoke detector work.³ Wilner alleged that the delay had been caused by the government. Contracting Officer Lindstrom awarded Wilner compensation based upon 260 days of delay.

On review before the Claims Court, Wilner presented evidence relating to the critical path of the project. However, the court determined that the evidence presented by Wilner was inadequate to establish the project’s critical path. The court also heard the testimony of Contracting Officer Lindstrom who was called as a witness by the government.

The Claims Court found, based only on the evidence presented by Wilner, that: 1) the compensable critical path delay attributable to the Navy and arising from the duct revision work totaled only 91 days; and 2) the compensable critical path delay resulting from the OWJ and smoke detector revision work was unascertainable.

The court made clear throughout its decision that the best evidence to establish the government’s responsibility for delay beyond 91 days would be a critical path analysis.⁴ While no such analysis was ever presented, the court perceived more compensable delay than what Wilner had been able to establish. Accordingly, the court then went on to consider the next best available evidence presented at trial in an effort to ascertain the actual amount of delay.

First, the court considered the contracting officer’s decision to issue unilateral modifications. The contracting officer had issued unilateral contract modifications granting Wilner extensions of time. Wilner argued that these modifications constituted an admission by the contracting officer that the delays were the fault of the government.⁵ However, the Claims Court disagreed and gave no evidentiary weight to the contracting officer’s decision to issue unilateral modifications. The court next considered the trial testimony of the contracting officer.

Contracting Officer Lindstrom, who was called as a witness by the government, testified as to the factual basis or foundation behind his final decision. Specifically, Mr. Lindstrom testified that his final decision was based in part upon the results of a technical review performed by the Navy’s Engineering Construction Division as well as the opinions of a Navy “technical analyst, his consultant, and counsel who conducted a legal review of the technical analysis” each of whom thought compensation was due.⁶ Mr. Lindstrom also testified that he was convinced, after weighing the arguments of both parties equally, that 260 days of compensable delay had occurred.

Upon consideration, the Claims Court rejected Wilner’s claim for added delay compensation but altered the contracting officer’s delay calculations slightly to increase the quantum of delay damages already awarded, based upon 259, rather than 260 days of delay, by $26,271.49. The Claims Court also denied the government’s claim for reimbursement of the delay compensation already paid to Wilner. In so ruling, the court rejected the government’s contention that recovery was precluded by Wilner’s inadequate critical path analysis.

The government moved post-trial for leave to amend its answer and asserted another claim seeking repayment of $133,094.79 in delay-based compensation received by Wil-ner. However, the court held that it did not have jurisdiction to hear that claim. The government now appeals alleging that the Claims Court failed to make a proper de novo review of the contracting officer’s decision.

OPINION

I.

Where both parties to a contract contribute to delay, neither can recover damages, unless there is in the proof a clear apportionment of the delay and the expense attributable to each party. Blinderman Constr. Co. v. United States, 695 F.2d 552, 559 (Fed.Cir.1982) (quoting Coath & Goss, Inc. v. United States, 101 Ct.Cl. 702, 714-15 (1944)). Thus, there can be no recovery by a contractor where the government’s delay is concurrent or intertwined with other delays. Commerce Int’l Co. v. United States, 167 Ct.Cl. 529, 338 F.2d 81, 90 (1964); Marshall v. United States, 143 Ct.Cl. 51, 164 F.Supp. 221, 224 (1958). The determination of delay causation is a question of fact. J.D. Hedin Constr. Co. v. United States, 171 Ct.Cl. 70, 347 F.2d 235, 245 (1965).

In the present case, the Claims Court found that the best evidence for establishing delay causation would be a critical path analysis. However, such an analysis was not introduced at trial. Accordingly, the Claims Court relied on the testimony of the contracting officer as the next best evidence available to establish delay causation. The government suggests that the contracting officer’s testimony is inadmissible hearsay because it refers to: 1) the opinions of subordinates; and 2) a technical report which was not entered into evidence. The government is incorrect.

Under Rule 801(c) of the Federal Rules of Evidence, a statement is not hearsay if it is not “offered in evidence for the truth of the matter asserted.” Here, the contracting officer’s testimony is not hearsay because it was not offered to establish that the opinions or the technical report were accurate. Rather, the testimony was offered to explain the basis or foundation behind the contracting officer’s decision.⁷ See M. Graham, Federal Practice and Procedure: Evidence § 6705 (interim ed. 1992); cf. United States v. Blandina, 895 F.2d 293, 300-01 (7th Cir.1989) (holding that statements offered to show that the listener conducted an adequate investigation are not hearsay). Also, even if the statements were hearsay, under Rule 103(a)(1) of the Federal Rules of Evidence, the government would be estopped from raising the issue on appeal since it was not timely raised at trial.

II.

A contracting officer’s findings of fact are “not binding in any subsequent proceeding.” 41 U.S.C. § 605(a) (1988). The contracting officer merely provides an effective, nonjudicial first step in the dispute resolution process.⁸ Accordingly, the Claims Court reviews contracting officer decisions de novo. Assurance Co. v. United States, 813 F.2d 1202, 1206 (Fed.Cir.1987) (“[W]here an appeal is taken to a board or court, the contracting officer’s award is not to be treated as if it were the unappealed determination of a lower tribunal which is owed special deference or acceptance on appeal.”).

However, contracting officer testimony is not without value. It constitutes evidence which may be considered and weighed by a reviewing tribunal in the same way as any other piece of evidence. J.D. Hedin Constr., 347 F.2d at 245; Lathan Co. v. United States, 20 Cl.Ct. 122, 125 (1990). See also Elmore Moving & Storage, Inc. v. United States, 845 F.2d 1001, 1003 (Fed.Cir.1988); Edward R. Marden Corp. v. United States, 803 F.2d 701, 704 (Fed.Cir.1986); CACI, Inc. v. United States, 719 F.2d 1567, 1579 (Fed.Cir.1983); Hoel-Steffen Constr. Co. v. United States, 231 Ct.Cl. 128, 684 F.2d 843, 847 (Fed.Cir.1982); Churchill Chem. Corp. v. United States, 221 Ct.Cl. 284, 602 F.2d 358, 365 n. 8 (Fed.Cir.1979).

Here, the Claims Court could not ascertain, based upon the information presented by Wilner, whether the government was responsible for all of the alleged delay. The Claims Court determined that the evidence presented by the contractor, taken alone, entitled Wilner to only 91 days of compensatory delay. Accordingly, the court then considered the contracting officer’s trial testimony to determine what weight, if any, it should be given as evidence of causation for the disputed periods of delay.

There is nothing in the Contract Disputes. Act or the rules of evidence to prohibit the consideration of a contracting officer’s testimony when ruling on liability or quantum. The court, in its role as fact finder, gave the contracting officer’s testimony weight, not deference. Accordingly, the court did conduct a de novo review of the contracting officer’s findings of fact when it found that Wilner was entitled to 259 days of compensa-ble delay.

Mr. Lindstrom testified that he relied “primarily” on the “technical review” performed by the Engineering Construction Division, and that he relied on his consultants. Mr. Lindstrom also testified that he had no specific recollection at trial of the documents he reviewed in making his decision several years earlier. See supra notes 6, 7. However, these considerations would seem to go more toward the proper weight that Mr. Lind-strom’s testimony should be given rather than to whether the court below conducted a proper de novo review as required under 41 U.S.C. § 609(a)(3). Reliance on technical reports prepared by specialists, and the expert opinions of consultants, are not unusual in government. See 48 C.F.R. § 1.602-2(e) (1992).

A similar case to that presented here is the aforementioned Assurance Company v. United States. In Assurance, the Federal Circuit was asked to review a decision of the Armed Services Board of Contract Appeals (board) relating to whether the board could reduce two damage awards made by the contracting officer. 813 F.2d at 1206. As in the present case, the government called the contracting officer as a witness. However, the contracting officer’s testimony in Assurance cast doubt upon his own final decision. Based upon that testimony, the board rejected one of the contracting officer’s damage awards and reduced the amount of the other. Id. at 1205.

On appeal, the Federal Circuit determined “from the face of the Disputes Act that a contract appeals board can, with respect to a contracting officer’s decision that has been appealed to it, reduce as well as increase the award made by that contracting officer.” Id. at 1206. The court then affirmed the board’s decision. Id. at 1207. In doing so, the court noted that, as to the first award, the board’s decision was supported by substantial evidence since the contracting officer’s testimony had discredited his earlier decision, id. at 1206, and as for the second award, the board’s decision was likewise supported by substantial evidence since the contracting officer testified that he had “overstated” that' award. Id.

The present case differs only slightly from Assurance. As in Assurance, the trial court considered the statement of the presiding contracting officer who testified as to the reasoning behind his decision. However, in the present case, the contracting officer’s’ testimony confirmed rather than discredited the contracting officer’s award.

III.

Finally, the United States Court of Claims, to whose precedent we are bound, South Corp. v. United States, 690 F.2d 1368 (Fed.Cir.1982) (in banc), has distinguished contracting officer decisions which are adverse to the contractor from those which are favorable. See John Cibinic, Jr. & Ralph C. Nash, Jr., Administration of Government Contracts 1001-02 (2d ed. 1986).

A contracting officer’s findings of fact and conclusions of law which are adverse to the contractor have not been entitled to a presumption of validity, see Southwest Welding & Mfg. Co. v. United States, 188 Ct.Cl. 925, 413 F.2d 1167, 1184-85 (1969); L. Rosenman Corp. v. United States, 182 Ct.Cl. 586, 390 F.2d 711, 712 n. 2 (1968), whereas decisions favorable to the contractor have been held to constitute an “evidentiary admission” of liability. Dean Constr. Co. v. United States, 188 Ct.Cl. 62, 411 F.2d 1238, 1245 (1969); Robert E. Lee & Co. v. United States, 164 Ct.Cl. 365, 370 (1964); Vulcan Rail & Constr. Co. v. United States, 158 Ct.Cl. 234, 241 (1962); George A. Fuller Co. v. United States, 108 Ct.Cl. 70, 94, 69 F.Supp. 409 (1947); J.D. Hedin Constr., 347 F.2d at 245.

The justification for this distinction is that a decision of a contracting officer which is favorable to the contractor can be viewed as a government admission against interest.⁹ As the court explained almost 50 years ago in Irwin & Leighton v. United States, 101 Ct.Cl. 455, 475 (1944):

It is true that we are not bound by the findings of the contracting officer in a claim for damages due to delay, but there is a strong presumption that the delay was not less than that found. The contracting officer, or his representative, had day to day contact with the work and was in the best position of anyone, except the contractor, to know the extent of the delay. He is supposed to weigh the facts with an even hand before rendering his decision; but it cannot be overlooked that he is the defendant’s selection and its own employee. He is not apt to err on the side of the contractor and against his employer, whose interests he is employed to guard and protect. Unless the clear weight of the evidence shows the delay was less than that found by him, we think defendant is bound by his finding. (Citation omitted.)

It is arguable that this reasoning, which originated long before the enactment of the Contract Disputes Act, does not apply to Claims Court suits. Nevertheless, we adhere to the belief that a contracting officer decision which is favorable to a contractor can logically be considered an evidentiary admission by the government — and that this position does not run afoul of the requirement under 41 U.S.C. § 609(a)(3) that contracting officer decisions be reviewed de novo.¹⁰

Here, the contracting officer’s decision, which established 260 rather than 91 days of delay, was favorable to the contractor. Accordingly, that decision constitutes a strong evidentiary admission, subject to rebuttal, of the extent of the government’s liability.¹¹

CONCLUSION

The Claims Court did conduct a proper de novo review of the contracting officer’s decision. That decision was properly considered by the Claims Court as evidence tending to prove compensable delay, and the government failed to overcome that finding. Accordingly, the decision of the Claims Court is

AFFIRMED.

1 . Wilner v. United. States, 26 Cl.Ct. 260 (1992).

2 . The Federal Courts Administration Act of 1992, Pub.L. No. 102-572, § 902(a), 106 Stat. 4506, 4516, changed the name of the United States Claims Court to the United States Court of Federal Claims.

3 .’ Compensation was also requested for weather related delays; however, the government does not challenge that portion of the Claims Court’s decision.

4 . As to the duct work, the Claims Court stated: "Without a critical path analysis, the court cannot exclude the possibility that the contractor caused concurrent delay on the project.” Regarding the OWJ revision work, the court stated: “The absence of a critical path analysis prevents the court from discerning whether the OWJ design defect may have been discovered earlier, but for a delay of the contractor.... The evidence relating to the OWJ revision work is insufficient for this court to attribute critical path delay to the Navy.” Finally, with regard to the smoke detector work, the court likewise stated: "The absence of a critical path analysis for the project prevents the court from determining that critical path delay, attributable to the Navy, occurred with respect to the smoke detector work.”

5 . The grant of an extension of time by a contracting officer may carry with it the administrative admission that the delays resulted through no fault of the contractor. J.D. Hedin Constr. Co. v. United States, 347 F.2d 235, 245 (Ct.Cl.1965).

6 . At trial, the court asked Mr. Lindstrom whether he had any independent evaluation of the project's critical path. In his response, Mr. Lind-strom explained that he had made his own evaluation, but that this case required him to rely on the expertise of his subordinates:

Now, I did not go back into this whole thing and examine everything in detail. I believe it's quite obvious from the document that I relied very heavily upon the content of the conclusions of the Analyst that I was using. One of the reasons being that there was a part of this claim that spoke to how much Mr. Wilner was worth per year, per hour, per day. And I felt that I had absolutely no expertise in that particular area at all, and therefore I tended to stay away from this part of the — of the analysis and relied upon my Consultants.

The documents referred to by Mr. Lindstrom were before the Claims Court, although apparently not entered into evidence by the government, which had called Mr. Lindstrom as a witness. There is no suggestion that these government-generated documents were otherwise in the possession of the contractor.

7 . Contracting Officer Lindstrom was called to testify at trial by the government. During direct examination, he was asked:

Government — Q: "What exactly did you review in formulating your final decision in descriptive terms?"

Lindstrom — A: "All right. This review — The final review took place immediately prior to the issuance of the decision, what dates I have no recollection and I have no direct recollection of the specific time, what I was looking at much. I can respond by looking at the document itself and draw conclusions from its content as to what I looked at. Basically I primarily relied on the content of a technical review that I had had performed for me by [the] Engineering Construction Division.”

(Emphasis added.)

8 . See, e.g., H.R.Rep. No. 1556, 95th Cong., 2d Sess., at 6 (1978); 124 Cong.Rec. H10725 (daily ed. Sept. 26, 1978).

9 . The Court of Claims has described government admissions against interest as "pieces of evidence in favor of the contractor, to be weighed along with the other evidence” but which, when contradicted by other more direct, convincing evidence, are of "little weight”. Winston Bros. v. United States, 131 Ct.Cl. 245, 259, 130 F.Supp. 374 (1955).

10 . Concerns that Part III of this decision will encourage litigation by contractors would constitute mere speculation since there is no evidence that the pre-CDA cases cited in support of our position were ever the cause of increased contractor litigation. See 4 Report of the Commission on Government Procurement Law, (1973).

Furthermore, as we have stated, an evidentiary admission would exist only with regard to decisions which are favorable to a contractor. Litigation is not free, and the charges arising from costs and attorney fees can be considerable. Thus, a contractor may not be quick to incur the expense of litigation to appeal a favorable decision, especially since (1) such litigation would place the amount already awarded by the contracting officer at risk, and (2) the contracting officer's decision would not tend to establish entitlement to compensation beyond that which was already awarded.

11 .The dissent states that "[t]he majority rests its affirmance upon the proposition that 'a contracting officer decision which is favorable to a contractor can logically be considered an evidentiary admission by the government.' ” (Emphasis added.) This assertion puts too much emphasis on the final portion of our opinion and overlooks the second section of the decision.