CCI, Inc. v. McHugh ( 2015 )

NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
CCI, INC.,
Appellant
v.
JOHN MCHUGH, Secretary of the Army,
Appellee
______________________
2014-1470
______________________
Appeal from the Armed Services Board of Contract
Appeals in No. 57316, Administrative Judge Cheryl L.
Scott.
______________________
Decided: April 10, 2015
______________________
JAMES E. HOWARD, Davis Wright Tremaine LLP, Seat-
tle, WA, argued for appellant. Also represented by LISA M.
MARCHESE, TRAEGER MACHETANZ, JONATHAN A. DEMELLA.
JEFFREY A. REGNER, Commercial Litigation Branch,
Civil Division, United States Department of Justice,
Washington, DC, argued for appellee. Also represented by
JOYCE R. BRANDA, ROBERT E. KIRSCHMAN, JR., MARTIN F.
HOCKEY, JR.
______________________
2 CCI, INC. v. ARMY
Before NEWMAN, REYNA, and HUGHES, Circuit Judges.
HUGHES, Circuit Judge.
CCI appeals the Armed Services Board of Contract
Appeals’ denial of its Type I claim for equitable relief
under Differing Site Condition Clause FAR 52.236-2. The
Board concluded that CCI had not proven any of the four
elements necessary to establish a Type I equitable ad-
justment claim. Accordingly, to prevail on appeal, CCI
must show the Board erred on all four elements. Because
substantial evidence supports the Board’s decision on at
least two of these elements—whether the site conditions
were reasonably foreseeable to CCI and whether CCI
relied on the alleged site representations—we find that
CCI has not met this burden. Accordingly, we affirm.
I
On April 25, 2008, the Army issued a Request for
Proposals (RFP) to plan, design, and construct an L-
shaped pier and perform related work at Umm Qasr, the
only deep-water seaport in Iraq. The Army found that
Umm Qasr was “a critical link towards the import of life-
providing assistance being provided to the people of Iraq.”
J.A. 4859.
Attached to the RFP was a 2007 engineering report
from Andrea Engineering Tests Laboratory (the Andrea
Report). The Andrea Report describes a field investiga-
tion of an area including the Umm Qasr project site, and
included results obtained from disturbed samples 1, undis-
1 Disturbed samples have been altered in a way
that makes them unrepresentative of in-situ conditions.
They are frequently used to determine properties of the
soil that are not dependent on in-situ conditions, such as
soil grain size.
CCI, INC. v. ARMY 3
turbed samples 2, and a Standard Penetration Test 3
performed on three boreholes.
In the “Discussion of Results” section, the Andrea Re-
port includes several descriptions of the soil, such as:
• “The site subsoil consists mainly from two layers,
the first layer of very soft, soft to medium gray
sandy silty clay with amount of soluble salts and
organic matter overlaying on a layer of medium,
dense to very dense gray silty sand.” J.A. 4809.
• “[T]he site was within the ebb and tide zone of the
sea. The saturated soil condition below the water
table makes the problem of settlement significant
. . . .” Id.
• “The low bearing capacity of the soft clayey layer;
could lead to excessive settlement to go out of con-
trol.” J.A. 4810.
• “[The] samplers that extruded from shelby tubes of
the soft clayey layer . . . exudes between the fingers
when squeezed in the fist so this could described as
very soft to soft sandy clayey soil.” Id.
• “Investigation of the site area has produced evi-
dence of some kind of collapse due to the reaction
between fundamental compounds of the soil (sandy
2 Undisturbed samples contain conditions close
enough to the in-situ conditions to be used to approximate
in-situ structural properties.
3 A Standard Penetration Test is a common test
used to determine the geotechnical engineering properties
of soil. It involves driving a thick-walled hollow tube into
the soil with a 140-pound hammer and recording the blow
count—the number of blows to the hammer necessary to
increase the depth of the tube by a predetermined dis-
tance.
4 CCI, INC. v. ARMY
clayey layer) with organic matter, this collapse is
impact the settlement of shallow foundation about
(2 – 5) %.” J.A. 4810–11.
Appendix B of the Andrea Report includes soil de-
scriptors and the blow count data obtained from the
Standard Penetration Test. The parties agree that Ap-
pendix B of the Andrea Report contains inconsistent
information, because the soil descriptors indicate the soil
is very soft to soft, but the blow count data indicates the
soil is harder.
Another attachment to the RFP is a U.S. Agency for
International Development report entitled “Umm Qasr
Port Assessment” (the USAID Report). The USAID
Report was prepared as a “general assessment of func-
tions at the port and historical dredging operations at the
port.” J.A. 18354. It describes the history of dredging at
the site, the need for continuous dredging at the site, and
the locations of the dredged material disposal sites. The
report also includes the following site condition descrip-
tion:
The streams are alluvial and the channels are ap-
parently composed primarily of sand and silt. Clay
may be present, but no clay balls were seen in the
dredged material disposal areas. There is a thin
film of sun-cracked silt or clay at some of the final
settlement ponding areas. Boring information
shows the materials encountered in the original
“new” port excavation as silty sand with small fine
gravel and clay. Infill sediments since then may
be of a finer, more silty nature.
J.A. 4863.
After the RFP issued, CCI agreed to join two other
companies, PolyEarth Construction, International LLC
(PCI) and PND Engineers, Inc. (PND), in preparing a bid
proposal for the Umm Qasr project. PND and PCI were
CCI, INC. v. ARMY 5
responsible for the engineering and logistical aspects of
the proposal, and CCI was responsible for the financial
aspects of the proposal.
During the Umm Qasr bidding period, a number of
questions were submitted to, and subsequently answered
by, the Army. Two are relevant to this appeal:
Question 11: Soil investigation not enough we
need more point of locations.
Answer 11: The best soil investigation data avail-
able to the government is provided in Appendix-C
Geotechnical Investigation of the SOW. The con-
tractor should assume the data provided in Ap-
pendix C is representative of the project site.
Question 42: Geotechnical Conditions: Will the
government be providing any bidding assumptions
associated with the existing geotechnical condi-
tions? For bidding purposes, should the contrac-
tor assume the three borings provided are
representative of the entire site?
Answer 42: The contractor should assume the
three borings provided are representative of the
entire site for the purposes of developing a pro-
posal. However, additional geotechnical infor-
mation may be required during the design phase
of this project.
J.A. 4833; J.A. 4838.
In May 2008, CCI submitted an initial proposal for
the Umm Qasr project. In August 2008, CCI submitted a
revised proposal. On September 10, 2008, the Army
awarded CCI the contract for the Umm Qasr project. The
contract incorporated Differing Site Conditions Clause
FAR 52.236-2 and Site Investigations Affecting the Work
Clause FAR 52.236-3.
6 CCI, INC. v. ARMY
In 2009, CCI began construction on the Umm Qasr
project. CCI initially used land-based construction meth-
ods and encountered difficulties building a crane pad due
to the soil conditions at the project site. It ultimately
switched to marine-based construction to complete the
project.
In August 2009, CCI submitted a Type I request for
equitable adjustment to the Army, alleging that it in-
curred additional costs as a result of soil conditions that
were different than represented in the Andrea Report.
The Army denied CCI’s claim, and CCI appealed to the
Board. The Board also denied CCI’s claim. CCI appeals.
We have jurisdiction under 28 U.S.C. § 1295(a)(10).
II
To receive an equitable adjustment for a Type I differ-
ing site condition, a contractor must prove by a prepon-
derance of the evidence that: (1) “a reasonable contractor
reviewing the contract documents as a whole would
interpret them as making a representation about the site
conditions”; (2) “the actual site conditions were not rea-
sonably foreseeable to the contractor, with the infor-
mation available to the particular contractor outside the
contract documents”; (3) “the contractor in fact relied on
the contract representation”; and (4) “the conditions
differed materially from those represented, and the con-
tractor suffered damages as a result.” Int’l Tech. Corp. v.
Winter, 523 F.3d 1341, 1348–49 (2008). Whether a rea-
sonable contractor reading the contract documents as a
whole would interpret them as making a site-condition
representation is a legal question reviewed de novo. Id. at
1349. The other three elements are questions of fact
reviewed for substantial evidence. Id. “Substantial
evidence means such relevant evidence as a reasonable
mind might accept as adequate to support a conclusion.”
E.L. Hamm & Assocs., Inc. v. England, 379 F.3d 1334,
1338 (Fed. Cir. 2004).
CCI, INC. v. ARMY 7
The Board held that CCI did not prove any of these
four elements. Accordingly, to prevail on appeal, CCI
must show that the Board erred on each of these four
elements. See Int’l Tech. Corp., 523 F.3d 1348–49. Be-
cause CCI has failed to show that the record does not
provide substantial evidence to support the Board’s
findings that (1) the site conditions were reasonably
foreseeable to CCI or (2) CCI did not rely on the alleged
site condition representations, CCI has not met this
burden.
A
When determining whether site conditions were rea-
sonably foreseeable to the contractor, both the contract
and any other information available to the contractor are
considered. Id. at 1349. Under this standard, substantial
evidence supports the Board’s finding.
Specifically, the Andrea Report supports the finding
that the soil conditions actually encountered were reason-
ably foreseeable. It frequently describes the area as
having soil settlement issues and as containing soft to
very soft soils. See, e.g., J.A. 4809 (describing the first
layer of the site subsoil as “very soft, soft to medium gray
sandy silty clay”); id. (“The saturated soil condition below
the water table makes the problem of settlement signifi-
cant . . . .”); J.A. 4810 (“The low bearing capacity of the
soft clayey layer; could lead to excessive settlement to go
out of control.”); id. (“[The] samplers that extruded from
Shelby tubes of the soft clayey layer . . . exudes between
the fingers when squeezed in the fist so this could de-
scribed as very soft to soft sandy clayey soil.”); J.A. 4810–
11 (“Investigation of the site area has produced evidence
of some kind of collapse due to the reaction between
fundamental compounds of the soil (sandy clayey layer)
with organic matter . . . .”).
CCI asserts that because of the Army’s answer to
Question 42—that contractors “should assume the three
8 CCI, INC. v. ARMY
borings provided are representative of the entire site”—it
reasonably relied solely on the borehole data in Appendix
B of the Andrea Report. But even if this is correct, it does
not show a lack of substantial evidence because the soil
descriptors in Appendix B describe the soil near the
project site at the relevant depth as being “[v]ery soft to
soft gray to dark gray silty CLAY.” J.A. 4818–19.
CCI argues that because the blow count data in Ap-
pendix B of the Andrea Report indicates a harder soil, and
engineers view objective data, such as blow count data, as
more reliable than soil descriptors, the soil conditions it
encountered were not reasonably foreseeable.
The record shows that the inconsistencies in the An-
drea Report caused engineers to be skeptical of its relia-
bility. For example, the engineer CCI used to prepare its
proposal, Mr. Nottingham, admitted that the information
in Appendix B of the Andrea Report is “not consistent.”
J.A. 330. The Army’s expert, Mr. Apted, agreed and
testified that “it should have been clear that the Andrea
report was limited in extent and quality and there was a
risk of more difficult conditions” and that—given the
amount of other data indicating softer soil conditions—the
blow count data is “clearly an anomalous set of data[.]”
J.A. 17468–69. According to Mr. Apted, the Andrea
Report would have caused him to expect “very soft clay.”
J.A. 2904. Given this evidence, a reasonable mind could
conclude that the soil conditions were reasonably foresee-
able to CCI.
The USAID Report provides additional support for the
Board’s finding. It describes the need for continuous
dredging near the site and the locations of the dredged
material disposal sites. The Army’s expert, Mr. Apted,
testified that, given this report, “the risk of accumulation
of silt and clay disposal arising[] from dredging could have
reasonably be[en] foreseen as a significant risk.” J.A.
17469.
CCI, INC. v. ARMY 9
Moreover, CCI was already aware of the area’s dredg-
ing issues before it read the USAID Report. Mr. Nunn, a
civil and nuclear engineer and co-founder of PCI involved
in the Umm Qasr proposal and project, worked near the
project site before CCI submitted its proposal. He was
familiar with the area’s dredging issues and knew that a
dredging contractor was on site, that “[t]hey were spend-
ing millions of dollars dredging the naval port[,]” and that
“the other piers were already clogged with siltation.” J.A.
420.
In light of this evidence, we conclude that a reasona-
ble mind could agree with Mr. Apted that “the conditions
encountered could and should have been within the
reasonable contemplation of CCI.” J.A. 17469. According-
ly, we conclude that substantial evidence supports the
Board’s finding that the soil conditions were reasonably
foreseeable to CCI.
B
Substantial evidence also supports the Board’s finding
that CCI did not prove that it relied on the alleged mis-
representation. CCI admits that it viewed the Andrea
Report as containing inconsistent information and being
insufficient to determine whether the project could be
completed with land-based construction. This admission
makes it unlikely that CCI relied on the Andrea Report,
and provides support for the Board’s finding.
Additionally, we agree with the Board that the pro-
posal itself does not support CCI’s assertion that it relied
on the Andrea Report. Nothing in the proposal identifies
whether land or marine construction would be performed.
Although Mr. Nottingham testified that he relied on the
Andrea Report and that the cost estimate in the proposal
specifically factored in the cost of land-based construction,
this does not mean that the Board was required to accept
his testimony. The Board has “broad discretion in deter-
mining credibility because he saw the witness and heard
10 CCI, INC. v. ARMY
the testimony.” J.C. Equip. Corp. v. England, 360 F.3d
1311, 1315 (Fed. Cir. 2004) (internal quotation omitted).
Accordingly, “[t]he Board’s determinations of witness
credibility are virtually unreviewable.” Id. (internal
quotation omitted) (alteration in original). Moreover,
even if Mr. Nottingham’s cost estimate shows that CCI
assumed the project could be completed using land-based
construction, it does not show that the Andrea Report was
the basis for CCI’s assumption.
Additionally, the proposal actually provides support
for the Board’s finding that CCI did not rely on the An-
drea Report. As CCI concedes, the Andrea Report and the
proposal “depict different approximations of the depth at
which sand and silt would be encountered.” Appellant’s
Br. at 55. If CCI did in fact rely on the borehole log data
from the Andrea Report to predict harder soil conditions,
there is no plausible reason to believe it would not have
also used the Andrea Report’s approximations for what
depths sand and silt would be encountered.
In light of this evidence, we hold that a reasonable
mind could conclude that CCI did not rely on the Andrea
Report in preparing its proposal.
III
Because we conclude that substantial evidence sup-
ports the Board’s findings that (1) the site conditions were
reasonably foreseeable to CCI and (2) CCI did not rely on
the Andrea Report in preparing its proposal, we do not
need to reach the other two elements of CCI’s equitable
adjustment claim. Accordingly, we affirm the Board’s
conclusion that CCI is not entitled to a Type I equitable
adjustment.
AFFIRMED