Celco Construction Corp. v. Town of Avon ( 2015 )

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13-P-1880 Appeals Court
CELCO CONSTRUCTION CORP. vs. TOWN OF AVON.
No. 13-P-1880.
Norfolk. October 8, 2014. - March 2, 2015.
Present: Green, Rubin, & Agnes, JJ.
Contract, Public works, Bidding for contract, Municipality,
Modification, Promissory estoppel. Public Works, Bidding
procedure, Extra work. Municipal Corporations, Contracts,
Estoppel.
Civil action commenced in the Superior Court Department on
October 22, 2010.
The case was heard by Patrick F. Brady, J., on a motion for
summary judgment.
Raymond S. Ewer for the plaintiff.
Doris R. MacKenzie Ehrens for the defendant.
GREEN, J. In its successful bid to perform work for the
defendant town of Avon (town) on a water main extension project,
the plaintiff, Celco Construction Corp. (Celco), assigned a unit
price of $0.01 as its charge to excavate each cubic yard of rock
from the project site. That price was substantially lower than
2
Celco's actual cost to remove each cubic yard of rock; Celco
constructed its bid based on its belief that the amount of rock
actually on site would be considerably less than the unverified
estimate indicated in the contract bid documents, so that its
low unit price would give it a competitive advantage when
compared to other bidders who assigned a unit price to rock
removal that more closely approximated the actual cost.1 When
the amount of rock turned out to exceed the estimate by more
than 1,500 cubic yards, Celco sought an "equitable adjustment"
in the contract price to recover its increased costs for rock
removal. See G. L. c. 30, § 39N. The town refused Celco's
request, Celco filed a complaint in the Superior Court, and a
judge of that court allowed the town's motion for summary
judgment. Celco appealed, and we now affirm the judgment.
Background. We summarize the undisputed facts appearing in
the summary judgment record relevant to Celco's claim of
entitlement to an equitable adjustment in the contract price.2
In 2008, the town solicited bids to perform work on a project
for the installation of water mains and associated
reconstruction of roadways disturbed during such installation.
1
To make up the difference between its bid price and its
cost to remove the amount of rock it estimated to be on the
site, Celco increased the unit prices it assigned to various
other components of the work.
2
We reserve additional facts relevant to Celco's claim of
promissory estoppel for our discussion of that issue.
3
Celco submitted a bid and was awarded the contract. Celco's bid
included unit prices for various elements of the work including,
as relevant to its claim for equitable adjustment, a specified
unit price of $0.01 per cubic yard for excavation and disposal
of rock from the project site.3 Next to the line item for that
element of the work, under the heading "Estimated Quantity," the
bid documents specified "1000* cu. yd." A legend at the bottom
of the page explained that the asterisk denoted an
"[i]ndeterminate quantity assumed for comparison of bids."4
Celco and the town entered into a contract for the work on April
6, 2009.
During its performance of the work, Celco discovered that
the quantity of rock requiring removal substantially exceeded
the 1,000 cubic yards estimated in the bid documents for
purposes of bid comparison. On August 11, 2009, Celco requested
an increase in its contract unit price for rock removal from
$0.01 to $220 per cubic yard. On November 16, 2009, describing
the additional rock as a "change in the conditions depicted by
3
Celco was not alone in submitting a "penny bid" for rock
removal; thirteen other bidders similarly submitted penny bids
for that line item. Several other bidders, however, submitted
bids that specified unit prices ranging from $40 to $125 per
cubic yard for rock excavation and removal. We note that
Celco's bid submission also assigned a $0.01 unit price to a
variety of other line items, none of which is the subject of
dispute between the parties.
4
Several other line items included the same denotation
regarding the specified estimate.
4
the plans and specifications," Celco again requested an increase
in the unit price, this time to $190 per cubic yard. On January
13, 2010, the town denied Celco's request for an adjustment to
the unit price. Eventually, Celco removed a total of 2,524
cubic yards of rock from the project site.
In support of its claim for an "equitable adjustment" to
the contract price, Celco asserts that its performance of the
work was made more difficult by the additional rock.
Specifically, Celco claimed that it lost "150 feet per day of
production," because average production in earth without rock
was 300 feet per day, compared to only 150 feet per day with
rock. However, Celco submitted no evidence suggesting that the
character of the rock discovered on site was different, or that
the actual unit cost to remove it was greater, by reason of the
increased amount or any other concealed condition.
Following the town's denial of its request for adjustment
to the contract price, Celco commenced an action in the Superior
Court. A judge of that court allowed the town's motion for
summary judgment, and this appeal followed.
Discussion. Under G. L. c. 30, § 39N, inserted by
St. 1972, c. 774, § 4, all public construction contracts such as
the one at issue in the present case must include a provision
allowing either party to request an equitable adjustment in the
contract price "[i]f, during the progress of the work, the
5
contractor or the awarding authority discovers that the actual
subsurface or latent physical conditions encountered at the site
differ substantially or materially from those shown on the plans
or indicated in the contract documents."
The purpose of the equitable adjustment provision is to
remove unknown risks from the competitive bidding process. The
contracting authority is thereby able to obtain bid prices
stripped of amounts incorporated by bidders to cover the risk,
and bidders are able to bid with the assurance that they will be
compensated for subsurface or latent site conditions that impose
greater costs than reflected in the bid documents. See Glynn v.
Gloucester, 9 Mass. App. Ct. 454, 461 n.9 (1980). According to
Celco, the presence of 2,524 cubic yards of rock on the project
site, when the project bid documents estimated only 1,000 cubic
yards, presents an appropriate occasion for an equitable
adjustment to compensate it for the increased costs it incurred
to remove the additional rock. We disagree.
As a threshold matter, we observe that the contract bid
documents did not specify that the site contained only 1,000
cubic yards of rock; instead, the bid documents expressly
disclaimed the accuracy of the stated amount, explaining that
the estimate appeared solely for the purpose of allowing
comparison of the submitted bids. As the motion judge observed,
6
the contract anticipated rock excavation and disclosed that the
amount of rock was "indeterminate."
More importantly, there is nothing in the summary judgment
record to suggest, and Celco does not contend, that the nature
of the rock itself, and the means and cost to remove it, differ
in any way from what was anticipated in the contract documents.
Particularly in a contract such as the one in the present case,
in which the contract price is comprised of the aggregate of
line items for various elements of the work, which in turn are
based on unit prices for the quantities involved in each line
item, no equitable adjustment is warranted by reason of a
variation in the estimated quantities, standing alone, as
compared to a deviation in the condition or character of the
physical condition. See Perini Corp. v. United States, 381 F.2d
403, 410-411 (1967). An equitable adjustment is required only
when the contractor encounters a material difference in the
"actual subsurface or latent physical conditions . . . at the
site . . . of such a nature as to cause an increase or decrease
in the cost . . . of the work." G. L. c. 30, § 39N, inserted by
St. 1972, c. 774, § 4. Had Celco in its bid assigned to rock
removal a unit price reasonably approximating its estimated cost
for such removal, instead of assigning the wholly artificial and
unrealistic value of one penny, it would be in no need of
adjustment to the contract price. Put another way, G. L. c. 30,
7
§ 39N, is designed to protect contractors from unknown and
unforeseen subsurface conditions, not from the consequences of
their decisions to bid a unit price for the performance of work
that is wholly unrelated to their anticipated cost to perform
the work. In such circumstances, it defies logic to invoke
"equity" as a basis for adjustment to the contract price.
Celco's additional claims of promissory estoppel and
quantum meruit require only brief discussion. Construed in the
light most favorable to Celco, the statements allegedly made by
the town's water superintendent John Tetreault to the effect
that "Celco should keep working on the project and this
additional [rock] issue would be dealt with once the total
quantity of [rock] excavated was known" were inadequate to give
rise to an obligation on the part of the town to compensate
Celco for rock removal at a rate greater than the unit price
specified in the contract. As a threshold matter, Celco has
offered no evidence to suggest that Tetreault had legal
authority to agree on behalf of the town to compensate Celco for
rock removal at a rate in excess of that provided in the
contract. Moreover, even if Tetreault personally held
contracting authority as a general matter, the contract at issue
in the present case was entered into pursuant to a statutorily
prescribed public bidding process, and "a party cannot evade the
statutory limitations on a municipality's contracting power by
8
rendering services and subsequently seeking recovery based on
alternative theories." Baltazar Contractors, Inc. v. Lunenburg,
65 Mass. App. Ct. 718, 724 (2006), quoting from Park Drive
Towing, Inc. v. Revere, 442 Mass. 80, 83 n.7 (2004).5
Judgment affirmed.
5
We need not consider whether Tetreault's statements were
sufficiently unambiguous to induce reasonable reliance, see
Rhode Island Hosp. Trust Natl. Bank v. Varadian, 419 Mass. 841,
848 (1995), or whether Celco's continued performance of its pre-
existing obligations under the contract might qualify as
detrimental reliance for purposes of promissory estoppel.