James Talcott Construction, Inc. v. United States ( 2019 )

United States Court of Federal Claims
No. 14-427 C
March 4, 2019
____________________________________
JAMES TALCOTT CONSTRUCTION
INC.,
Plaintiff,
v.
UNITED STATES OF AMERICA,
Defendant.
____________________________________
Steven D. Meachem, Esquire, Peel Brimley LLP, Seattle, WA, for plaintiff.
Mariana Terea Acevedo, Esquire, United States Department of Justice, Civil
Division, Washington, DC; Michael Duane Austin, Esquire, United States Department of
Justice, Civil Division, Washington, DC; and Ryan Michael Majerus, Esquire, United
States Department of Justice, Civil Division, Washington, DC, for defendant.
POST-TRIAL ORDER AND OPINION
Hodges, Senior Judge.
This case arises from a dispute between James Talcott Construction, Inc., and the
United States through the Department of Defense, Department of the Army, and the
United States Army Corps of Engineers.
The contract called for the construction of military family housing at Malmstrom
Air Force Base in Great Falls, Montana. Talcott alleges that it suffered damages because
the Government supplied an incomplete contract and a defective design, which led to the
performance of additional work.
We conducted a nine-day trial in Seattle, Washington, and made the following
relevant conclusions: (1) the contract contained performance specifications, not design
specifications; (2) Talcott knew, or should have known, that site conditions favored mold
growth; (3) the Government did not direct Talcott to perform work outside the contract
terms; and (4) Talcott is not entitled to costs associated with scheduling delays.
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BACKGROUND
Talcott Begins Construction
The Government sought to replace deteriorating housing for military families at
the Malmstrom Air Force Base in Great Falls, Montana. The Government awarded the
“Phase 7E” contract to Talcott in May 2010 and issued a “Notice to Proceed” effective
June 2010.
Phase 7E involved the construction of thirteen buildings, each with seventy units
constructed with pile and grade beam foundation systems, wood framed and shingled
roofs, one-car garages, fenced back yards, and concrete patios.1 The Government
expected completion of the project by March 3, 2012.
Talcott began construction by pouring concrete foundations. After the concrete set,
Talcott installed wooden floor joists and subfloor decking within the foundation area. The
design made it clear that these materials would be enclosed in a crawl space. A crawl
space is enclosed when sheathing is installed on the first floor. Sheathing is a board of
material, usually wood, used to construct floors, roofs, and walls. Talcott elected to use
untreated “Exposure 1” Opposed Strand Board for the first-floor sheathing and Opposed
Strand Board joists for crawl spaces framing; Exposure 1 requires the moisture content
level to be maintained below nineteen percent.
A building’s crawl space is typically ventilated by exterior vents and the air
circulation regulates temperature and humidity. An enclosed crawl space depends on a
mechanical system to maintain its temperature and humidity. It blows cool, dry air in the
enclosed area to prevent moisture buildup and frozen pipes.
The Government’s design also incorporated sloped grading surfaces to drain water
into sump basins and trench drains to divert water away from the foundation. To prevent
groundwater vapor from entering the crawl space, a twenty-milliliter thick plastic
polyethylene sheet covers the soil below the sheathing.
In this case, the concrete, wood, and soil remained exposed to snow and rain
before Talcott enclosed the subfloor with sheathing. Talcott did not install temporary
ground vapor barriers despite the presence of moisture on site.
Talcott Refuses Inspections of Building 620
An Air Force project manager visited the site for an inspection in November 2010.
The project was always subject to reasonable inspections to certify the quality of
1
Buildings 620-626, 628, 630-633, 635, and 637.
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construction. FAR 52.246-12 (Inspection of Construction). He discovered that anchor
bolts, which secure the finished structure to its foundation, installed out of alignment,
misplaced, or missing entirely in buildings 620, 621, and 622. Concerned about the poor
workmanship at such an early stage of the project, he called for an immediate inspection
by the lead project engineer at the base.
The lead project engineer and the project manager returned two weeks to evaluate
its quality. Their inspection confirmed that building 621 and building 622 did not comply
with the contract. An assessment of building 620 did not occur because sheathing covered
the subfloor structure. Talcott refused to cut access holes in the first-floor sheathing to
allow for an examination of the anchor bolts on November 15, December 1, and
December 29, 2010.
Talcott Discovers Mold
On January 5, 2011, workers discovered vast amounts of mold growth in building
620 after they cut access holes to install pipes in the crawl space. Talcott initiated
preliminary mold clean up procedures, resealed the crawl space, and formally notified the
Corps about the mold on January 6, 2011. The humidity measured more than eighty
percent. JX 100-4912, 4922; Tr. 825:3-12 (Albrecht).
The contract’s “Safety and Occupational Health” clause demands that mold
abatement be “overseen by a person experienced in mold behaviors and building design
and construction, such as an industrial hygienist” and that “post-remediation air sampling
shall be done in the immediate area and in any areas in the mold-spore or vegetative air-
pathway, to verify that the remediation has been done properly and to ensure that there is
no remaining hazard.” JX601-11594; Tr. 1157:17-25 (Henson). On January 26, 2011, the
Corps advised Talcott that a remediation plan must “include any applicable testing
required, that includes immediate measures to stop existing and future mold growth
within 7 days” of the letter’s receipt. DX 18.
Talcott hired CTA Construction and Environmental, LLC, to develop a mold
remediation plan. On February 10, 2011, CTA’s certified industrial hygienist presented
Talcott with a mold remediation plan after evaluating the crawl space in January and in
February. The plan included three recommendations that varied in price. For reasons
unknown, Talcott did not deliver CTA’s recommendations with the Corps until March 1,
2011.
Talcott Alleges Damages
Talcott completed the project on July 25, 2012, a total of 145 days after the
deadline. In October 2012, Talcott filed a Request for Equitable Adjustment claiming that
it incurred additional costs under the “changes clause” of the contract because: “(1) the
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contract disc provided by [the Government] to Talcott lacked Amendment 6; (2) design
flaws resulted in foundation mold problems; (3) a change in established inspection
standards; (4) civil and structural design ambiguity; [and] (5) performance of out-of-
scope work.”2 Talcott subsequently petitioned for a final decision from a Government
contracting officer in June 2013. The contracting officer denied the claim and determined
that it lacked merit.
Talcott filed a complaint against the Government in May 2014, which included
claims for breach of contract, breach of implied warranties, and breach of good faith and
fair dealing, and sought the following relief: (1) a court order entering judgment against
the Government for breach of contract and breach of implied warranties; (2) a court order
awarding Talcott damages in the amount proven at trial; (3) a court order directing the
Government to change Talcott’s performance evaluation from “unsatisfactory” to “above
average”; (4) attorneys’ fees and costs pursuant to the Equal Access to Justice Act, 28
U.S.C. § 2412 (2006); and (5) such other and further relief the court deems just and
equitable.
At trial, Talcott sought relief amounting to $975,156 in total damages, including:
(1) $330,285 for a 197-calendar day delay attributed to mold remediation and other
scheduling changes; (2) $295,176 in direct damages for mold remediation and
prevention;3 (3) $175,199 in labor costs to hire subcontractors to complete the project;
and (4) $174,455 in liquidated damages.
SUBJECT MATTER JURISDICTION
Pursuant to the Tucker Act, the United States Court of Federal Claims may
“render judgment upon any claim against the United States founded either upon the
Constitution, or any Act of Congress or any regulation of an executive department, or
upon any express or implied contract with the United States, or for liquidated or
unliquidated damages in cases not sounding in tort.” 28 U.S.C. § 1491(a) (2012).
The United States Court of Federal Claims has jurisdiction, under the Tucker Act,
to adjudicate any claim arising under the Contract Disputes Act, 41 U.S.C. §§ 7101–
7109. The Contract Disputes Act governs any claims based upon “any express or implied
contract . . . made by an executive agency for (1) the procurement of property, other than
real property in being; (2) the procurement of services; (3) the procurement of
2
Amendment 6 contained adjustments to the building foundation coordinates and
changed grading measurements in conformance with the new locations.
3
At trial, plaintiff’s counsel informed the court that $32,176 representing increased
quality control inspections was erroneously included in the direct damages claim of
$327,393. The amount above reflects the corrected claim.
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construction, alteration, repair, or maintenance of real property; or (4) the disposal of
personal property.” 41 U.S.C. § 7102(a).
The term “claim” is defined “as a written demand or written assertion by one of
the contracting parties seeking, as a matter of right, the payment of money in a sum
certain, the adjustment or interpretation of contract terms, or other relief arising under or
relating to this contract.” 48 C.F.R. § 52.233–1. A claim need not be in any particular
form or use any particular wording, but it must contain “a clear and unequivocal
statement that gives the contracting officer adequate notice of the basis and amount of the
claim.” Contract Cleaning Maint., Inc. v. United States, 811 F.2d 586, 592 (Fed. Cir.
1987). The claim must communicate to the contracting officer that the contractor is
requesting a final decision. James M. Ellett Constr. Co. v. United States, 93 F.3d 1537,
1543 (Fed. Cir. 1996).
A contractor may bring an action de novo in federal court “within 12 months from
the date of receipt of a contracting officer's decision.” 41 U.S.C. § 7104(b), but the
contractor must have first submitted a valid claim to its contracting officer and received
the contracting officer's final decision on that claim. M. Maropakis Carpentry, Inc. v.
United States, 609 F.3d 1323, 1327 (Fed. Cir. 2010).
PLAINTIFF’S CASE
Talcott raised the following issues in its post-trial brief:
1. Whether the Government breached the warranty of plans and specifications,
as well as whether the construction of the crawl spaces was a design
specification or a performance specification.
2. Whether the Government breached the contract by providing a deficient set
of plans and specifications, which led to the development of mold in the
crawl spaces;
3. Whether the Government breached the contract by failing to disclose its
superior knowledge relating to mold growth in the crawl spaces;
4. Whether Talcott was required to perform additional or changed work,
entitling Talcott to additional compensation and/or damages;
5. Whether Talcott is entitled to an adjustment to the contract and/or damages
for delays and costs associated with mold remediation.
The court addresses these matters below.
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I. Breach of the Warranty of Plans and Specifications
Plaintiff contends that the Government issued defective, conflicting, and
ambiguous design documents that did not represent the project accurately. Further, they
claim that the contract did not contain plan or procedure to prevent mold growth and that
the design failed to ventilate the crawl spaces adequately. Defendant claims that Talcott’s
poor construction methods caused mold to grow in the crawlspaces.
When the government includes detailed specifications in a contract, it impliedly
warrants that: (1) if the contractor follows those specifications, the resultant product will
not be defective or unsafe, and (2) if the resultant product proves defective or unsafe, the
contractor will not be liable for the consequences. United States v. Spearin, 248 U.S.132,
136–37 (1918). While there are two types of specifications, design and performance, only
a design specification creates an implied warranty.
Performance specifications “set forth an objective or standard to be achieved, and
the successful bidder is expected to exercise his ingenuity in achieving [it].” Blake
Constr., Co. v. United States, 987 F.2d 743, 745 (Fed. Cir.), cert. denied, 510 U.S. 963
(1993) (quoting J.L. Simmons Co. v. United States, 188 Ct. Cl. 684 (1969)). A design
specification “describe[s] in precise detail the materials to be employed and the manner
in which the work is to be performed” and there is “no discretion to deviate from the
specifications but is required to follow them as a road map.” Id. However, a contract can
provide some details and directions concerning the performance of work without
necessarily being deemed a design specification. PCL Constr. Services, Inc. v. United
States, 47 Fed. Cl. 745, 796 (2000).
In contrast, the Spearin doctrine does not apply to performance specifications; the
contractor is free to employ its own means and methods to achieve an end product that is
acceptable to the Government. Daewoo Eng'g & Const. Co. v. United States, 73 Fed. Cl.
547, 567 (2006), aff'd, 557 F.3d 1332 (Fed. Cir. 2009).
Accordingly, to identify whether a design or performance specification exists, we
look to the amount of discretion provided in the contract to choose means and methods
determines whether a specification is for design or performance. Blake Constr., 987 F.2d
at 746. Here, the contract stipulates that Talcott is responsible for the means, methods,
and sequence of construction:
The contract structural drawings and specification represent the finished
structure. They do not indicate the method of construction. The contractor
will provide all measures necessary to protect the structure during
construction. Such measures shall include, but not be limited to, bracing,
shoring for loads due to construction equipment . . . [N]or will the [Corps’]
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structural engineer be responsible for the contractor’s means, methods,
techniques, procedures, or sequences of construction.
DX 1118.
It is clear the contract includes performance requirements for the finished
structure, not design specifications. Talcott was free to employ its own means and
methods to complete an acceptable finished product. It is unreasonable for the court to
consider that the Government would find the housing units in compliance with substantial
mold growth in the crawl spaces, especially mold that covered floor joists, decking,
walls, grade beams, and even appearing grass-like in the soil. DX 2317-23452.
Thus, we find that the Government did not breach the warranty of plans and
specifications.
II. Breach of Contract
Plaintiff asserts that the Government breached the contract because it had superior
knowledge that mold growth would likely occur and intentionally or negligently failed to
disclose that knowledge; and the design documents failed to mention the risk of mold
growth.
A. Superior Knowledge
A superior knowledge claim is valid unless the plaintiff knew or should have
known that it would encounter that challenged condition. Conner Brothers Const. Co.,
Inc. v. United States, 65 Fed. Cl. 657, 688 (2005); McCormick Constr. Co., Inc. v. United
States, 18 Cl. Ct. 259, 266 (1989) (citations omitted), aff’d, 907 F.2d 159 (Fed. Cir.
1990). Talcott certainly knew of the damp conditions on site.
The contract stipulates that “the site project superintendent will be held
responsible for the quality of work on the job . . . [and] shall maintain a physical presence
at the site at all times except as otherwise acceptance to the contracting officer and shall
be responsible for all construction and construction-related activities at the site.” JX001-
320, Paragraph 3.1. Indeed, Jason Richerson, the superintendent for Talcott on the Phase
7E project, testified about managing manpower and subcontractors, coordinating
deliveries, and facilitating quality control on a daily basis:
Q: As a superintendent, you were required to know the conditions of the job
site where JTC was working; is that right?
A: That’s correct.
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Q: As superintendent, weren’t you responsible for providing information
about conditions at the site to JTC workers?
A: I am.
Q: How, if at all, would the first-floor assembly protect the crawl space
from moisture?
A: You’re not really getting a lot of moisture through from precipitation
events . . . basically OSB is comprised of wood chips and glue. I mean, it’s
a pretty solid member. You don’t really get a lot of moisture through it.
And it’s tied together with tongue-in-groove that’s glued together . . .
you’re not really getting a lot of moisture from up above . . .”
Q: Well, if the moisture wasn’t coming from above, do you know, was
there moisture coming from below?
A: Yeah, so on Malmstrom, there’s a lot of fatty clays that hold moisture.
It’s basically moist by nature.
Talcott was aware of mold growth while working as subcontractor in other phases
of construction. Mr. Richerson’s daily logs confirmed that workers encountered mold on
the foundations of a phase of construction headed by Garco Construction:
Q: And there here is a section that reads: ‘stoppages, delays, shortages,
losses’ is that right?
A: Yeah.
Q: I’m going to read it. It says, ‘Garco crane broke down most of the
morning. JTC foundation group redirected mold issues in 615 and 618.’
Did I read that correctly?
A: Mm-hmm.
Q: So given that this report contains that statement, you were aware that
there were mold issues in Building 615 and 618 at Phase 6; is that right?
A: Yeah, we . . . we run into . . . every now and then we had to get into the
crawl spaces. And we were directed by Garco that when we run into that,
just let them know. They’ll take care of it and let us back in.
Q: Had mold been found in other crawl spaces in Phase 6?
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A: I’m not sure I’d quantify.
Q: So you’re saying you don’t know how many crawl spaces?
A: Yeah, I’m sure – I’m sure we ran across it here and there.
Thus, we find that Talcott knew, or should have known, that damp site conditions
would inevitably lead to mold growth in the crawl spaces.
B. Geotechnical Report
In addition to their notice of conditions on site, the Government presented Talcott
with information regarding the soil composition in a geotechnical report. Talcott received
and reviewed a copy of the geotechnical report during the bidding process. A section
entitled “Groundwater” notes the following:
Our experience with groundwater conditions at Malmstrom AFB is that the
groundwater can be encountered confined in sandy zones or thin sand
seams within the relatively impervious clay soils. These groundwater
occurrences tend to be sporadic and discontinuous both laterally and
vertically.
A second type of groundwater occurrence typically observed is when sand
or sandier clay overlies the impervious fat clay and perched groundwater
conditions can develop in the spring or following heavy precipitation
events.
Even in the absence of this report, Talcott had an obligation under the contract to
investigate the site thoroughly and to learn about the local conditions. FAR 52.236-3.
Therefore, plaintiff cannot prove a claim of superior knowledge.
III. Damages for Additional Directed Work
Talcott claims that the Government directed the performance additional work
related to the mold cleanup. Defendant asserts that it simply notified Talcott that each
option in CTA’s mold abatement plan complied with the terms of the contract.
In this case, Talcott hired one industrial hygienist company and chose to proceed
with their recommendation unilaterally. Indeed, the record contains no evidence of the
Government selecting one method over another, nor expressing any preference. Plaintiff
did not establish a basis for their claim that it performed work beyond that which they
agreed upon within the contract.
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We are unpersuaded that a “final inspection” to certify compliance with the
expectations of the mold abatement clause is beyond the scope of the contract. It was
reasonable for the Government to notify Talcott of this condition given the poor
workmanship in almost every other aspect of the project. Indeed, witnesses testified about
water prevalent on site that even when Talcott tried to dry the area by “put[ting] in place
some of those temporary measures, like fans or dehumidifiers,” it was “too little too late
at that point.” Tr. 1163:21-25 (Henson); Tr. 829:14-23 (Albrecht); Tr. 544:22-545:1
(Talcott, acknowledging that only “after we saw the mold, we started ventilating, started
drying it out, started pumping water”); Tr. 550:2-4 (Talcott).
The Corps warned Talcott in a letter not to simply cover-up the mold, but to
follow CTA’s guidance to remove and remediate in accordance with the contraction prior
to installation of the vapor barrier: “[Talcott] shall continue to implement the
recommendations provided by CTA and have CTA perform final inspections prior to
installed the vapor barrier to ensure that the mold problem has been sufficiently
resolved.” DX 20. It also encouraged Talcott to alter its construction sequencing and
means and methods to avoid mold growth. direct result of installing the floor systems
with wet soil conditions present in the crawl spaces and Talcott’s failure to prevent the
mold growth from occurring. We agree with the Government’s claim that simple steps
could have been taken to adequately dry out the crawl spaces by installing temporary
ventilation and/or dehumidification, which would reduce the humidity level in the crawl
spaces and prevent mold growth. JX21-4662
We find that Talcott’s failure to perform in a skillful and workmanlike manner
resulted in housing units that did not comply with the expectation that construction must
remain free from any material defects. Here, pervasive mold in the crawl space is a
material defect that Talcott was obligated to resolve at their expense. Therefore, the costs
and delays associated with the mold remediation plan are squarely the responsibility of
Talcott.
IV. Other Damages
Talcott’s complaint seeks additional damages, alleging that: (1) excessive
inspections caused delays; (2) incomplete contracting materials caused grading and
drainage problems; (3) scheduling delays increased costs; and (4) delays increased costs
in the form of finding replacement subcontractors; and (5) liquidated damages.
A. Inspections
Talcott argues that the Government’s inspections were excessive and resulted in
numerous interruptions in. The Government reasonably conducted its quality assurance
inspections in conformance with Talcott’s expectations under the contract until August
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2011. Plaintiff asserts that the Government changed its inspection procedures assigning a
team of eight inspectors to the project that interfered with “Talcott’s ability to complete
its work in a timely and coordinated manner, stopped Talcott’s performance of work, and
caused extensive and unnecessary delays to completion of the work.” Talcott also alleges
that it hired quality control labor to compensate for the Government’s interferences with
their performance.
We find that any delay caused by the extra work is excusable and compensable
under the contract. The contract stipulated that construction would always be subject to
reasonable inspection to ensure the Government’s satisfaction with the quality of
construction. FAR 52.246-12 (Inspection of Construction). Plaintiff offered no evidence
showing that the inspections to be unwarranted or overzealous. Talcott consistently
demonstrated to the Government that it was in over its head and appeared willing to cut-
corners. The Government acted within the confines of the contract terms to assure that it
would receive the product as promised.
In sum, plaintiff’s claim that inspections occurred outside the terms of the contract
is without merit.
B. Drainage and Grading
Talcott claims that deficient, incomplete, and uncoordinated plans increased the
cost to complete the work because of drainage issues. Indeed, the original paperwork did
not contain Amendment 6, which noted the foundation placement for each building.
However, Talcott admitted that it knew of Amendment 6 prior to submitting their bid
proposal. Tr. 528:17-19 (Talcott), and that Amendment 6 was included in the solicitation
for bids that Talcott received prior to submitting a proposal for Phase 7E. DX2287, Nos.
43-44.
Talcott had a duty to check the contract materials, comparing drawings and
verifying figures, before proceeding with construction. JX 1-186 (Special Clause 12).
Their failure to meet this obligation led to foundation alignment issues: “Amendment 6
drawings had shirted the coordinates on the houses slightly” causing Talcott to “put in
almost all the foundations” in the wrong places. JX 92-4863; JX 9-4648.
Notably, the Government accepted its share of responsibility for the mistake,
despite contract clearly stating that liability rested with Talcott, and compensated Talcott
for the costs and the time impact of Amendment 6. JX 213; JX 486. Talcott was awarded
$30,939.83 for grading changes affected by the misplacement of the homes. Tr. 1128:11-
13 (Henson); Tr. 596:1-4, 676:15-17.
Accordingly, Talcott’s claim that it suffered damages and delays due to an
incomplete contract is without merit.
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C. Scheduling
Talcott claims that it is entitled to damages because the Government caused delays
to the project’s critical path. We disagree.
Talcott struggled throughout the project, but most notably when pouring concrete
and framing. This caused a significant delay to the critical path: “the project involved
frozen concrete on the grade beam supporting building 624 . . . [it] took several months to
resolve, drove building 624 onto the longest path, and led to a 145-day delay in
completion of the project.” Tr. 1747:8-22 (Boe).
Regardless, a contractor bears the burden of showing that project delays are
attributable to the Government. In general, proving an allegation of government-caused
delays without a means of showing the critical path is a steep prospect. See, e.g., Wilner
v. United States, 26 Cl. Ct. 260, 274 (1992) (“Without a critical path analysis, the court
[could] not exclude the possibility that the contractor caused concurrent delay on the
project.”) rev. on other grounds, Wilner v. United States, 24 F.3d 1397 (Fed. Cir. 1994).
We observe that Talcott did not perform a critical path analysis and that the record does
not support their allegation.
Consequently, Talcott is not entitled to damages for turning over the project after
the deadline.
D. Subcontractors
Talcott seeks recovery of labor costs incurred to hire a replacement subcontractor
to finish the project. They claim that delays in scheduling, caused by the Government,
drove a a subcontractor, Alpha Partners, to abandon the project.
Alpha Partners cited delays in project completion and scheduling difficulties in its
termination letter to Talcott. However, as we determined above, the Talcott is responsible
for the consequences of the delays in completion, including finding a replacement
subcontractor. As such, Talcott is not entitled to recover labor costs for the replacement
finishing subcontractor.
E. Liquidated Damages
Talcott claims that it is entitled to liquidated damages in the amount of $175,455.
However, because the project was completed 145 days late because of Talcott’s own
errors, this claim is without merit.
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CONCLUSION
For the reasons explained above, plaintiff failed to prove its claims at trial and is
not entitled to damages. Therefore, the Clerk of Court will enter judgment in favor of
defendant and DISMISS plaintiff’s complaint. No costs.
IT IS SO ORDERED.
s/Robert H. Hodges, Jr.
Robert H. Hodges, Jr.
Judge
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