Nelson, Inc.

ARMED SERVICES BOARD OF CONTRACT APPEALS
Appeals of -- )
)
Nelson, Inc. ) ASBCA Nos. 57201, 58166
)
Under Contract No. W912EQ-09-C-0025 )
APPEARANCES FOR THE APPELLANT: Joree G. Brownlow, Esq.
Cordova, TN
Dedrick Brittenum, Jr., Esq.
Brittenum Bruce PLLC
Memphis TN
APPEARANCES FOR THE GOVERNMENT: Thomas H. Gourlay, Jr., Esq.
Engineer Chief Trial Attorney
Ann M. Bruck, Esq.
Suzanne Mitchem, Esq.
Engineer Trial Attorneys
U.S. Army Engineer District, Memphis
OPINION BY ADMINISTRATIVE JUDGE PEACOCK
These appeals involve the termination for default of the referenced contract for
construction of stone dike extensions and other work at four sites on the Mississippi
River. ASBCA No. 57201 is an appeal from the final decision terminating the contract.
The Board conducted a nine-day hearing 1 in ASBCA No. 57201 regarding the propriety
of the termination. We sustain the appeal. ASBCA No. 58166 involves a termination for
convenience settlement proposal claim and appeal which we dismiss as premature.
FINDINGS OF FACT
1. On 31 July 2009, the U.S. Army Corps of Engineers (Corps or government)
awarded the captioned contract to Nelson, Inc. (Nelson or appellant), for $9,241,900, for
"Stone Dike Construction at Various Locations in the Mississippi River" (R4, tab 3 at 48,
tab 14 at 369). In general, the contract provided for construction of stone dikes and other
features at four Mississippi River sites, known as "Loosahatchie," "Robinson Crusoe,"
"Friars Point," and '"Cow Island" (R4, tab 3 at 41 ). The Loosahatchie work was located
at Mississippi River Mile 738.7R AHP in Shelby County, Tennessee; the adjacent
Robinson Crusoe work was located at Mississippi River Miles 738.7R AHP to 737.8R
1
The hearing was conducted by Administrative Judge Terrence S. Hartman.
AHP in Shelby County, Tennessee; the Friars Point work was located at Mississippi
River Miles 653.0L AHP to 652.7L AHP in Coahoma County, Mississippi; and the Cow
Island work was located at Mississippi River Miles 715.2R AHP to 714.6R AHP, in
Crittenden County, Arkansas (id.).
2. Following bid opening on 16 June 2009, the Corps conducted a pre-award
survey to evaluate Nelson's capability to perform. Based on the results of that survey,
the Corps concluded that appellant was non-responsible. (R4, tab 9 at 358) On 2 July
2009, the matter of appellant's responsibility was submitted to the U.S. Small Business
Administration (SBA) where Nelson filed for a Certificate of Competency (COC) (R4,
tabs 9, 10). On 22 July 2009, the SBA issued a COC (R4, tabs, 12, 13).
3. The Friars Point work and the Cow Island work were depicted on a separate set
of contract drawings; the Loosahatchie and Robinson Crusoe work was depicted on one
set of contract drawings (R4, tab 5 at 314-18 (Friars Point), at 320-25 (Loosahatchie &
Robinson Crusoe), at 326-30 (Cow Island)). The adjacent Loosahatchie and Robinson
Crusoe work were located approximately 1.5 miles upstream of Memphis, Tennessee.
The contract included separate pricing for each activity related to each of the four sites
(consisting of, but not at each site, mobilization/demobilization, graded stone, excavation,
riprap paving, and standby time), which together totaled to the $9 ,241,900 lump sum
amount for the entire contract. (R4, tab 3 at 48, 50-54) The Loosahatchie activities
totaled $590,500; the Robinson Crusoe activities, $542,700; the Friars Point activities,
$4,520,600; and the Cow Island activities, $3,578,100 (id.). To complete the work at all
four locations required the placement of a total estimated quantity of 494,300 tons of
stone (R4, tab 3 at 43-45).
4. Part 1.1.1 of the Summary of Work provided the following "Project
Description" of the work (R4, tab 3 at 202):
FRIARS POINT CHEVRON CONTRACT: The work
consists of furnishing all plant, labor and materials for
constructing Friars Point Chevron Nos. 1 - 3 by placing
Graded Stone A and Graded Stone Caswell as incidental
related work.
LOOSAHATCHIE DIKE CONTRACT: The work
consists of furnishing all plant, labor and materials for
extending Loosahatchie Bar Dike No. 4 by placing Graded
Stone C, and constructing Loosahatchie Bar Chevron No. 1
and Roundpoint Nos. 1 and 2 by placing Graded Stone C
as well as incidental related work. No Riprap Paving will
be placed.
2
ROBINSON CRUSOE DIKE CONTRACT: The work
consists of furnishing all plant, labor and materials for
extending Robinson Crusoe Dike Nos. 3, 4, and 5, and
notching Robinson Crusoe Dike No. 5 as well as incidental
related work. No riprap Paving will be placed.
COW ISLAND BENDWAY WEIR CONTRACT: The
work consists of furnishing all plans, labor, and materials
by constructing Cow Island Bendway Weir Nos. 1-6 by
placing Graded Stone A as well as incidental related work.
Riprap Paving will be placed on the bank at each weir
location. [Emphasis added]
5. The contract included Federal Acquisition Regulation (FAR) clause 52.211-10,
COMMENCEMENT, PROSECUTION, AND COMPLETION OF WORK (APR 1984), which
provides (with revisions to accommodate the contract):
The Contractor shall be required to (a) commence work
under this contract within 10 calendar days after the date
the Contractor receives the notice to proceed, (b) prosecute
the work diligently, and (c) complete the entire work ready
for use not later than 75 calendar days for Friars Point
project, 20 calendar days for Loosahatchie project, 20
calendar days for Robinson Crusoe project, and
50 calendar days for Cow Island project after the date of
receipt by him of notice to proceed. A separate Notice to
Proceed will be issued for each location as specified in the
Bid Schedule. [Underlining added]
(R4, tab 3 at 68)
6. The following pertinent "'CONSTRUCTION PROCEDURES" were set forth in
section 35 31 25.00 11 of the specifications (R4, tab 3 at 267-69, 271-72):
PART 1 GENERAL
1.2 SCOPE
... The work shall be completed as expeditiously as
possible even though river conditions may become
increasingly severe as the construction progresses. The
work requires steady and uninterrupted progress to
3
minimize loss of stone during construction. The
Contractor shall diligently prosecute the work and
provide the necessary equipment, a skilled and
experienced crew, and a regular and well-balanced
supply of stone to ensure uniform and continuous
progress once construction of a chevron/dike/bendway
weir has been started ....
1.3 RIVER STAGE LIMITATIONS
1.3 .1 River Stage Limitations for Dikes and Chevrons
Unless otherwise authorized by the Contracting Officer,
subaqueous placement of stone will not be permitted
when the river stage is more than 10 feet above the top
elevation of that portion of the dike/chevron. Also,
unless otherwise authorized or directed by the
Contracting Officer, the top of the final lift of stone
shall be placed in the dry whenever the dike/chevron is
higher than +I 0 L WRP [2]and/or the crown width is 6
feet or more. Work will not be required on any
dike/chevron when river stages are below 0 L WRP.
Work will also not be required on a particular
dike/chevron if a 6 foot continuous channel does not
exist from the navigation channel to some work point
on the dike/chevron where work is required.
1.3.2 River Stage Limitations for Bendway Weirs
Unless otherwise authorized by the Contracting Officer,
subaqueous placement of stone will not be permitted on
any weir when the river stages are above + 20 L WRP.
Work will also not be required on any weir if a 6-foot
continuous channel does not exist from the navigation
channel to some work point on the weir where work is
required.
2
L WRP stands for low water reference plane which is a tool used on the Mississippi
River to establish navigation depths tied to certain gages on the river. All
relevant work performed on this contract was tied to the Memphis gage. To
determine L WRP using stage data at the Memphis gage a "correction factor" of
-7 .2 is used, i.e. + 7 .2 is added to the Memphis gage reading to convert stage
data to its corresponding L WRP. (Tr. 1/42-48)
4
1.5 ALIGNMENT CONTROL PLAN FOR CHEVRONS
(FRIARS POINT AND LOOSAHATCHIE BAR)
Unless otherwise authorized or approved by the
Contracting Officer, construction of the chevrons shall
have an additional requirement for control of stone
placement. The contractor shall submit a Chevron
Alignment Control Plan to the Contracting Officer for
approval prior to placement of any stone. The plan
shall outline required horizontal and vertical control,
the procedure, and equipment that will be used by the
contractor for alignment control during the construction
of the chevrons ....
1.8 PROSECUTION OF WORK
After work has been started on a chevron/dike/bendway
weir, the Contractor shall not suspend work until a lift
of stone of full base width has been placed for the full
length of the chevron/dike/bendway weir, or remove
any equipment from this location, which in the opinion
of the Contracting Officer, is required for orderly
progress of the work. This prohibition will not apply
during any period when work is suspended due to river
stages, weather, or other conditions outside the control
of the Contractor.
1.9 ORDER OF WORK
The work shall be carried on in accordance with the
(schedule) required by paragraph (a) of the Contract
Clause "SCHEDULES FOR CONSTRUCTION
CONTRACTS (APR 1984)" located in Section 00700.
( 1) Unless otherwise approved or directed by the
Contracting Officer, the order of work shall be to
begin construction at the landward limit of the
proposed chevron/dike/bendway weir and procede
[sic] riverward to the riverward limit of the proposed
chevron/dike/bendway weir. Construction shall begin
5
with the most downstream/chevron/dike/bendway
weir and procede [sic] with the next
chevron/dike/bendway weir ....
(2) Concurrent construction will be permitted
provided that sufficient equipment and stone supplies
are available and it does not slow construction
priority of the dikes/chevrons/weirs as listed in the
"ORDER OF WORK," paragraph 1.9 (1 ), unless
otherwise directed by the Contracting Officer ....
3.2 LOOSAHATCHIE BAR DIKE NO. 4, ROBINSON
CRUSOE DIKE NOS. 3, 4, AND 5, CHEVRON NO. 1,
AND ROUNDPOINT NOS. 1 AND 2
Unless otherwise authorized or directed by the
Contracting Officer, construction of the contract dikes,
chevron, roundpoints, and environmental notches shall
be performed in accordance with the following
procedures:
3 .2 .1 Extending Dike
Prior to stone placement, a survey will be taken along
the centerline of the existing dike for the riverward 300
feet of the dike as well as for the proposed extension.
The survey shall consist of cross sections taken on
50-foot intervals extending 150 feet upstream and 150
feet downstream of the proposed dike extension. These
sections may demonstrate the need for adjusting the
stone placement to maximize use of the stone. If this
survey does not reflect what has been given on the
plans as the centerline profile for the proposed dike
extension, the Contracting Officer and River
Engineering must be immediately notified prior to any
stone being placed.
(1) The stone for extending the dike shall be placed
in lifts, each proceeding riverward from the
landward limit of construction. Approximately 10
tons of stone per linear foot of dike shall first be
placed for the entire length of the dike extension.
6
The stone shall be placed along the downstream toe
of the full section except where it must be
distributed within the base of the full section to
prevent exceeding the specified thickness. The dike
shall then be completed to full grade and section by
placement of stone in horizontal layers of about
5-foot thickness. Each layer shall be carried the full
length of the dike and low areas and gaps shall be
brought up to the desired elevation before
proceeding with the next lift ....
3.2.2 Constructing Chevron
Prior to stone placement, a survey will be taken along
the centerline of the proposed chevron. Each survey
shall consist of a centerline profile being taken
beginning 200 feet downstream of the landward leg of
the chevron proceeding riverward along the proposed
alignment to 200 feet downstream of the riverward leg
of the proposed chevron ....
( 1) Construction of the chevron shall start at the
center of the chevron, proceed to the riverward leg at
the downstream limit of the chevron, and then
proceed from the center to the landward leg at the
downstream limit of the chevron. Unless otherwise
authorized or directed by the Contracting Officer, the
chevron shall be constructed in lifts. The base shall
be placed in a lift of approximately 10 tons of stone
per linear foot of chevron, or required quantity if less
than 10 tons, for the full length of the chevron.
(2) The chevron shall then be completed to full
grade and section, proceeding riverward from the
center as specified above and then landward from
the center, by placement of stone in the underwater
portion of the chevron in approximately uniform
horizontal layers of about 5-foot thickness and full
width. Each lift shall be brought to the desired
elevation before proceeding with the next lift.
7
7. Section 01 45 04.00 11, Contractor Quality Control, section 3.10 of the contract
provided:
NOTIFICATION OF NONCOMPLIANCE
The Contracting Officer will notify the Contractor of any
detected noncompliance with the foregoing requirements. The
Contractor shall take immediate corrective action after receipt
of such notice. Such notice, when delivered to the Contractor
at the work site, shall be deemed sufficient for the purpose of
notification. If the Contractor fails or refuses to comply
promptly, the Contracting Officer may issue an order
stopping all or part of the work until satisfactory corrective
action has been taken. No part of the time lost due to such
stop orders shall be made the subject of claim for extension of
time or for excess costs or damages by the Contractor.
(R4, tab 3 at 249)
8. The contract included FAR 52.246-12, INSPECTION OF CONSTRUCTION (AUG
1996), which provides:
(f) The Contractor shall, without charge, replace or correct
work found by the Government not to conform to contract
requirements, unless in the public interest the Government
consents to accept the work with an appropriate adjustment
in contract price. The Contractor shall promptly segregate
and remove rejected material from the premises.
(g) If the Contractor does not promptly replace or correct
rejected work, the Government may ( 1) by contract or
otherwise, replace or correct the work and charge the cost
to the Contractor or (2) terminate for default the
Contractor's right to proceed.
(R4, tab 3 at 132)
9. The contract included FAR 52.249-10, DEFAULT (FIXED-PRICE
CONSTRUCTION) (APR 1984), which provides in the contract:
(a) If the Contractor refuses or fails to prosecute the
work or any separable part, with the diligence that will
insure its completion within the time specified in this
contract including any extension, or fails to complete the
8
work within this time, the Government may, by written
notice to the Contractor, terminate the right to proceed
with the work (or the separable part of the work) that has
been delayed. [Emphasis added]
( c) If, after termination of the Contractor's right to
proceed, it is determined that the Contractor was not in
default, or that the delay was excusable, the rights and
obligations of the parties will be the same as if the
termination had been issued for the convenience of the
Government.
(R4, tab 3 at 142-43) The contract also included FAR clause 52.249-3, TERMINATION
FOR CONVENIENCE OF THE GOVERNMENT (DISMANTLING, DEMOLITION, OR REMOVAL
OF IMPROVEMENTS) (MAY 2004), which provides at paragraph (e) that "[a]fter
termination, the Contractor shall submit a final termination settlement proposal to the
Contracting Officer in the form and with the certification prescribed by the
Contracting Officer."
10. FAR 52.236-4, PHYSICAL DATA (APR 1984), stated in part (R4, tab 3 at 123):
d. Additional Data. Pertinent data of different local
gages on the Mississippi River is indicated in the following
tabulation:
Gage Readings Zero of Gage Record
Gage Mile (1962) Ft. NAVD88 Low LWRP* Bankfull
Memphis, TN 734.4 184.03 -10.7 -7.2 34
(Weather Bureau Gage)
*Low Water Reference Plane (2007)
11. The Loosahatchie work consisted of ( 1) constructing, in the Mississippi River
channel itself, an extension to Loosahatchie Dike No. 4; and (2) constructing, in the
"Loosahatchie Chute" located on the other side of the Loosahatchie Bar from the
Mississippi River (that is, the chute between the Loosahatchie Bar and Robinson Crusoe
Island), a stone "Loosahatchie Bar Chevron" and two stone "Loosahatchie Bar
RoundPoints" to the chevron (R4, tab 5 at 321-25; gov't hr. at 10,iJ 9; app. br. at 7, ii 18).
The contract estimated that the Loosahatchie work would require the placement of 32,250
tons of stone (R4, tab 3 at 44).
9
12. The Robinson Crusoe work consisted of (I) constructing, in the Mississippi
River channel, extensions to Robinson Crusoe Dike No. 3, Robinson Crusoe Dike No. 4,
and the Mississippi River channel portion of Robinson Crusoe Dike No. 5; and
(2) excavating, in the Loosahatchie Chute, a navigable "notch" in the chute portion of
Robinson Crusoe Dike No. 5 (R4, tab 5 at 321-25; gov't br. at 10, ii 10; app. br. at 12,
ii 48). The contract estimated that the Robinson Crusoe work would require the placement
of 27 ,400 tons of stone (R4, tab 3 at 44 ).
13. Although the Corps never issued notices to proceed with the Friars Point work
or the Cow Island work (tr. 4/227; gov't br. at 10, ii 8), and Nelson never performed any
of that work (see tr. 11162), the contract estimated that 243,950 tons of stone would need
to be placed to complete the Friars Point work, and that 190,700 tons of stone would need
to be placed to complete the Cow Island work (R4, tab 3 at 43, 45).
14. Contract section 00800, Special Contract Requirements, contained the
following provision at paragraph 1.2.2 (R4, tab 3 at 175):
For the purpose of final acceptance, the work is divided into
sections; namely, each chevron/dike/weir. Each
chevron/dike/weir shall constitute a divisible part of the
work. Final acceptance of each part will be made
immediately after all work on each part has been completed
in accordance with the requirements of this contract.
15. The contract as awarded on 31 July 2009 contained Drawing Nos. 9A and IOA,
dated April 2009, for the Loosahatchie and Robinson Crusoe Mississippi River channel
dike extensions, including depictions of the ground profiles as of March 2009 (R4, tab 5 at
322-23). In August 2009, the Corps issued Drawing Nos. 9B and lOB, regarding the dike
extensions; according to Note Nos. 0001 to the drawings, the drawings "[a]dded control
diagrams and adjusted profiles" (id. at 342, 343). In September 2009, the Corps issued
Drawing Nos. 9C and lOC, regarding the dike extensions; according to Note Nos. 0002 to
the drawings, the drawings "[a]djusted profiles and changed crown widths based on
changed site conditions" (id. at 353, 355). Drawing Nos. 9C and lOC expanded the dike
extension crown widths to 30 feet: from 14 feet for Robinson Crusoe Dike Nos. 3 and 4,
and from 20 feet for Loosahatchie Dike No. 4 and Robinson Crusoe Dike No. 5 (R4, tab 5
at 342-43, 353, 355). The Corps issued Drawing Nos. 9C and lOC to account for
sedimentation at the work site that Nelson had discovered upon surveying the site
(tr. 2/33-36). The modified profile of the extension to Loosahatchie Dike No. 4 in
Drawing No. 9C depicted a new "hump" not depicted in Drawing No. 9B; that is, an
additional profile of existing ground (as of 22 September 2009) rising above a portion of
the profile of the stone to be placed (R4, tab 5 at 353).
10
I
16. Nelson received the notice to proceed (NTP) with the Loosahatchie work on
1October2009 despite the lack of a Corps solution regarding the presence of the "hump"
(R4, tab 34 at 800).
17. On 7 October 2009, the Corps emailed Drawing Nos. 9D and lOD, regarding
the Loosahatchie and Robinson Crusoe dike extensions (app. supp. R4, tab 140 at
3342-44). The email explained that the drawing had "the corrected layout distances," that
the Corps would "provide a full set by modification in the near future," and that "[t]hese
should be used until such time" (id.). The email also explained that a "hard copy has
been delivered to the site" (id.).
18. On 13 October 2009, the Corps again provided to Nelson Drawing Nos. 9D
and 1OD regarding the dike extensions, along with an unsigned bilateral contract
Modification No. P00004 (Mod. 4) (app. supp. R4, tab 141 at 3356-61). Both the
modification and its cover letter stated that the modification "serve[ d] to replace existing
contract drawings with revised contract drawings," and that "[t]he ground profiles, dike
lengths and azimuths are adjusted to reflect the latest river conditions" (id. at 3356-57).
Drawing Nos. 9D and lOD moved the "starting locations" of the dike extensions; that is,
the point from which the extensions from the existing dikes would begin (see tr. 2/36-42).
The Loosahatchie Dike No. 4 extension moved 85 feet toward the existing dike, resulting
in a "total movement" of 1Yi feet of the starting point of the extension (tr. 2/41-44). Like
the cover letter and the modification, Note Nos. 0003 (dated 6 October 2009) to the
drawings also stated that the drawings "[a]djusted profile, dike lengths & azimuths based
on latest river conditions" (R4, tab 5 at 3360-61).
19. The versions of Drawing Nos. 9D provided to Nelson on 7 October 2009 and
13 October 2009 are not identical (app. supp. R4, tab 140 at 3343, tab 141 at 3360). The
profile of the hump in the two drawings is different, and a note to the Loosahatchie Dike
No. 4 profile found in the 13 October 2009 version but not in the 7 October 2009 version
states:
MINIMUM THICKNESS OF STONE IS 4 FEET.
AREAS WHERE THE EXISTING GROUND IS ABOVE
EL 154.9' SHALL BE ALLOWED TO SCOUR PRIOR
TO STONE PLACEMENT.
(Id.)
20. There were no express changes to specification provisions regarding
procedures for constructing the dike extension affected by the 13 October 2009 version of
Drawing No. 9D. The Corps indicated that it intended by the above note (at times
referred to herein as the "scour solution") that Nelson would begin work at:
11
[T]he landward limit and proceed[] riverward [b ]ut at the
point in time when [Nelson] reached areas where the
existing ground had filled in above the design elevation of
the structure, [Nelson] would have to place the stone to
that point and then allow the river bed to scour that out
below the design elevation to at least a four foot thickness
[s]o that [Nelson] could then place a four foot thick
minimum thickness of stone in that structure.
(Tr. 2/46-47)
21. During the period 2-13 October 2009, Nelson mobilized and worked on
equipment issues, but placed no stone while it was awaiting resolution of the "hump" issue
and experiencing low water stages that precluded floating its equipment and constructing
structures in the chute (R4, tab 79 at 1022-33; app. combined R4, tab 3 at 27).
22. Also on 13 October 2009, the authorized representative of the contracting
officer (COR) issued a letter to Nelson expressing concern with Nelson's progress, and
requesting that Nelson submit "a work plan and a revised acceptable schedule to
demonstrate how you will complete this work within the contractual period of
performance given your progress thus far" (R4, tab 38 at 856).
23. On 14 October 2009, the Corps advised Nelson that rising water conditions in
the river did not allow rock to be dropped at Loosahatchie Dike No. 4, and directed
Nelson, on the same day, to move its equipment to the chute (R4, tab 79 at 1034).
24. Nelson primarily controlled when the NTPs for the other sites would be issued
depending, inter alia, on river conditions, Nelson's equipment and crews, and scheduling
needs (R4, tab 24). The parties agreed to issue the NTP for the Robinson Crusoe work on
15 October 2009 permitting appellant to maximize the work available in the chute (R4, tab
40 at 858). Also on 15 October 2009, Nelson placed its first stone of the contract work at
Loosahatchie Roundpoint No. 1 in the chute (R4, tab 79 at 1035).
25. During the period 15-18 October 2009, Nelson excavated stone at the
Robinson Crusoe notch (R4, tab 80 at 1178, 1181, 1183, 1185).
26. Between 16-18 October 2009, Nelson continued to work on the Roundpoints
in the chute, completing Roundpoint No. 1 and placing approximately 731 tons of the
approximately 881 tons of stone required for Round Point No. 2 (R4, tab 79 at 1036-38,
tab 80 at 1185).
27. On 25-28 October 2009, Nelson placed stone on the Loosahatchie dike
extension even though the river stages in the channel were below +20 L WRP on only two
of the four days (R4, tab 79 at 1045-46, tab 80 at 1194, 1196, 1198).
12
28. On 28 October 2009, Nelson signed Mod. 4, bearing an effective date of
9 October 2009, regarding drawing revisions 9D and lOD and the "scour solution" for the
"hump." The contracting officer (CO) signed the modification on 2 November 2009.
(App. supp. R4, tab 141 at 3356-61) The modification contained a general release with
no reservation of rights by Nelson to file a claim for an equitable adjustment related to
the drawing revision. In explaining the reason no time extension or monetary adjustment
was included, the COR concluded that, since no additional stone was required, the change
did not affect Nelson's critical path (tr. 2/324; R4, tab 41).
29. On 29 October 2009, Nelson placed its first stone for the chevron (R4, tab 80
at 1202); the Corps provided its written approval of Nelson's chevron alignment plan on
30 October 2009 (app. supp. R4, tab 27 at 533). On 30 October 2009, Nelson placed no
stone, because, Nelson decided, weather conditions were unfavorable (R4, tab 79 at 1054).
30. On 29 October 2009 through 2 November 2009, Nelson placed stone for
the chevron (R4, tab 79 at 1052, 1055-63, tab 80 at 1209).
31. The COR, by letter dated October 27, reiterated the 26 October 2009
completion date calculation including four days of high river stages deemed excusable
delay by the Corps. The COR reiterated that he was concerned with Nelson's quality
control as well as Nelson's progress. The COR stated that a considerable amount of
stone had been placed out of grade and section. (R4, tab 46)
32. During a meeting with Nelson on 2 November 2009, the Corps expressed
concerns with Nelson's work such as "[n]ot a lot of rock in river," "[w]hat is going in is
not in section," and"[ s]tone in dike extension in channel is out of section 30-40 feet"
(R4, tab 48 at 869). Nelson indicated that it would hire additional survey crews and
placement crews. The COR also stated that Nelson's quality control was lacking. Nelson
claimed that the stone was only 5% out of section, and that the '"C" stone was moving,
and that the heavier "A" stone should be utilized for the Loosahatchie. The Corps and
Nelson agreed that Nelson would have until the next day 3 November 2009 to submit a
plan for further perfoml:ance. The CO advised Nelson that failure to submit an
acceptable plan would result in the issuance of a show cause letter and that Nelson would
have 10 days from the day of receipt to show cause why the contract should not be
terminated for default. (R4, tab 4 7 at 868)
33. Nelson, by letter dated 3 November 2009, requested clarification regarding
the interpretation of the river stage limitation for the extensions to Loosahatchie Dike
No. 4, and the Robinson Crusoe Dikes (R4, tab 50).
34. On 3 and 4 November 2009, Nelson placed stone for the chevron (R4, tab 80
at 1217, 1220).
13
35. On 5 November 2009, the Corps directed Nelson to stop work until further
notice, because of high water (R4, tab 79 at 1065).
36. Also on 5 November 2009, the COR notified Nelson that section 35 31 25.00 11,
paragraph 1.3 .1, did not relate to the low water extensions to the dikes. The letter stated that
the limitations related to those features of work (Loosahatchie and Robinson Crusoe) were
set forth in paragraph 1.3 .2, and that provision permitted stone placement below a +20
LWRP (12.8 on the Memphis gage). (R4, tab 51)
37. On 6 November 2009, CO Priscilla Sweeney, by telephone, also orally
ordered Nelson to stop work, for perceived performance deficiencies (R4, tab 53 at
877 (reference b ); tr. 6/155-56).
38. On 9 November 2009, CO Sweeney issued a written "Stop-Work Order"
(SWO) that referenced the Notification of Noncompliance clause, directing that Nelson
"stop all work pursuant to the above reference[ d] contract," and identifying areas of
specific, alleged contract noncompliance, including with respect to the construction
aspects of the Loosahatchie work (R4, tab 53 at 877-78). The order identified specific
examples, including:
Loosahatchie Dike and Chevron Construction. The Dike
extension & Chevron are not being constructed as directed
in the specifications; the entire length of the Chevron is to
be based in at 10 tons/ft, then constructed in uniform
horizontal layers of about 5' thickness and full width. Each
lift is to be brought to the desired elevation before
proceeding to the next lift. This is outlined in Section 35 31
25.00 11 paragraph 3.2.2. of the contract. Survey indicates
that stone has been placed outside of the design section on
both Loosahatchie Dike No. 4 and Chevron No. 1. Rock
placement ofLoosahatchie Dike No. 4 has been placed
3 5 to 40 feet downstream of the designed centerline, with
peak sections above the given tolerance that will become a
hazard to navigation during low river stages.
(R4, tab 53 at 877)
39. The SWO further stated:
Execution. Thus far Nelson. Inc. has not demonstrated the
ability to execute the work in the manner prescribed in the
specifications. The work requires steady and uninterrupted
progress to minimize loss of stone during construction.
Each dike extension, Chevron and weir is to be based in at
14
10 ton/If, then constructed in uniform horizontal layers of
about 5 ft thickness for full width, the gaps and low areas
are to be brought up to the desired elevation before
proceeding with the next lift. Nelson has not complied
with the above requirement. The work Nelson has
executed outside the navigation channel (specifically the
Chevron) is not acceptable and the work executed inside
the navigation channel (Loosahatchie Dike No. 4
extension) poses a hazard to navigation during low river
stages. Nelson's cross-sections for Loosahatchie Dike
No. 4 extension that shmv the stone is not only
downstream of the design centerline but also shows the
peaked sections.
(R4, tab 53 at 878) The order did not identify any noncompliant Robinson Crusoe work.
40. The SWO stated that "this stop-work order will remain in effect until immediate
corrective actions are approved," and that "[n]o further work shall be performed until such
time as to the approval of corrective action" (R4, tab 53 at 877).
41. The SWO also informed Nelson that a plan that Nelson had submitted on
3 November 2009 "has been deemed insufficient as it did not demonstrate any ability to
perform this work with personnel...that has experience in dike/chevron construction built
with river currents the same or similar to the Mississippi River" (R4, tab 53 at 878).
42. Also on 9 November 2009, CO Sweeney issued a notice to Nelson ordering it
to show cause why the contract should not be terminated, including for "failure to execute
[the Loosahatchie] work within the performance period" (R4, tab 53 at 875-76).
43. On 12 November, Nelson claimed that it considered the COR's interpretation of
the river limitation placement for the extensions to the Loosahatchie and Robinson Crusoe
dikes a change order. Nelson also claimed it would seek an "equitable adjustment to
accommodate increased costs for procuring additional 'C' stone as necessary to meet
contract requirements and offset the volume that has and/or may drift out of sector [section]
during placement in the main channel under the 'new' maximum allowable river stage."
44. On 16 November 2009, the COR, by letter responded in part:
According to the contract records to date, there has been no
indication of defective specifications or any
misunderstanding among your staff in the field or on the
part of the Government's representative as to workable
river stages for these sites. You held a preparatory to
begin this work on October 5, 2009 and only now have you
15
issued a letter to the Government claiming defective
specifications as ofNovember 12, 2009. Serial letter
C-0014 clarified questions concerning your letter H-0004
river stage limitations. Therefore, I do not consider it to be
a change to this contract. ...
... The failure of your company to properly plan,
prosecute, and control the placement of "C" stone as
prescribed in the plans and specifications have ultimately
lead to this outcome. Therefore, your request for an
equitable adjustment under Section 00700 52.243-4,
paragraph (e) is denied.
(R4, tab 61)
45. Nelson submitted its response to the CO's show cause notice by letter dated
17 November 2009 (R4, tab 63). Nelson alleged that several circumstances had arisen
that "will" influence how completion of the remainder of the Loosahatchie features will
proceed. Nelson maintained that the +20 L WRP stone placement limitation for the dikes
represented an unauthorized change by the COR, and that such a change would require
dropping stone in much deeper water. Nelson requested "that the contract performance
period be suspended; until such time that river conditions allow us to access and resume
work on Loosahatchie Dike #4 in accordance with the applicable contract documents."
Nelson presented to the Corps a proposal for the resumption of work, with additions to its
"equipment and manpower onsite," including a foreman with significant stone placement
experience. (Id. at 918, 922) (Emphasis added)
46. At a 2 December 2009 meeting, appellant described the measures it would take
to expedite the work including more experienced personnel and subcontractors. There is
some evidence that "the Corps" orally gave Nelson permission to resume work, but only
to "correct work" that the Corps had determined needed correction. The scope and author
of the oral authorization are not clear. Nor was the alleged authorization followed up or
confirmed in writing by either CO. (Tr. 7/152-53; R4, tab 66 at 928, tab 67 at 930) There
is no persuasive evidence that the Corps officially and formally retracted the requirement
in the notification of non-compliance and SWO that appellant was to present and obtain
approval of a corrective action plan. The Corps required that no later than 9 December
2009 Nelson was "to present a detailed plan on the entire job, & that the Corps will have
1 week to review and make a decision on whether or not to terminate for default." (R4,
tab 66 at 928)
47. At the meeting, appellant again alleged that the Corps interpretation regarding
the +20 L WRP placement limitation for the underwater extension to Loosahatchie Dike
No. 4, was an unauthorized change to the contract. The COR noted that if Nelson's
interpretation was that it had to wait until the river elevation was 10 feet or less (above
16
the top of the underwater dike extension) before placement could begin, then the structure
would never be built, since that elevation condition would be lower than the record low at
the Memphis gage. The COR noted that the +20 L WRP placement was not an issue
during the preconstruction conference on 10 September 2009, nor was it an issue during
the preparatory phase discussion in October. (Id.; tr. 11120; R4, tab 93)
48. On 8 December 2009, Nelson submitted to the Corps a "Revised Work
Plan" (R4, tab 67 at 929). Nelson estimated that it would take two days to perform
corrective Loosahatchie work (not including surveys), and conceded that at least some
of that work required remediation because of Nelson's performance (id. at 930-31).
49. Nelson estimated that it would take an additional 10 days otherwise to
complete the Loosahatchie and Robinson Crusoe work, once the suspension of work
was lifted: 3 days to complete the Loosahatchie work in the chute, and 7 days to
complete the Loosahatchie and Robinson Crusoe work in the river (R4, tab 67 at 931,
934, 940). Finally, Nelson anticipated that it could place 4,800 tons of stone per day,
and that it could complete the Cow Island work in 50 days, and the Friars Point work
in 75 days (id. at 936, 938), the same periods provided in the contract (R4, tab 3 at 68).
50. The oral partial lifting of the SWO, was discussed in the 8 December 2009
letter to CO Sweeney from Nelson with the following preamble:
Remedial Repair Construction Operations. Based on the
November 6, 2009 verbal stop work order and per the Corps
of Engineers written Stop Work Order dated November 9,
2009 along with high river stages, Nelson could not perform
remedial operations. Based on the work authorized by
Ms. Todd in our December 2, 2009 meeting, Nelson has
mobilized its 800 Volvo excavator to take immediate
corrective action subject to appropriate river stages ....
(R4, tab 67 at 930-31)
51. On 11December2009, the Corps informed Nelson that it would respond to
the revised work plan by 15 December 2009 (R4, tab 68 at 961, 965). In the letter, CO
Sweeney made no mention of appellant's performance of remedial work and noted that
the "initial corrective action plan submitted by Nelson was lacking in detail and
unacceptable" and further noted that [the 8 December 2009 corrective action plan] "was
currently under technical review" (R4, tab 68 at 964-65). No Corps response was
provided until 8 January 2010 (R4, tab 71)
52. On 23 December 2009, the Corps' area engineer specifically informed both
COs Sweeney and Todd, in the same email, that "Nelson has intentions to remobilize
next week to begin repair" (R4, tab 70).
17
53. On 8 January 2010, the Corps rejected Nelson's revised work plan, finding
that the plan lacked "experienced personnel capable of performing work on the
Mississippi River" (R4, tab 71 at 974). The record is unclear when Nelson was notified
that its revised work plan had been rejected.
54. Pertinent river stage data for the period 13 October through 6 November 2009
when the SWO was orally issued indicates that the river stage in the channel fell below +20
L WRP on only three days from 24-26 October 2009. Between 6 November 2009 and the
8 January 2010 date of the government's rejection of Nelson's response to the show cause
notice, the river stage in the channel fell below +20 LWRP for only nine days (from
30 November through 8 December 2009). Between 13 October 2009 through the date of
termination on 5 February 2010, the river stages ranged above 22.8 L WRP into the mid to
upper 30s for most of that period. On only 26 days during that approximately 108-day
period did river stages sporadically drop below 20.4 and it was not until 30 November
2009 that the river stages were consistently below 20.4 for more than a four day stretch.
There were also a number of days prior to issuance of the SWOwhere the stages did not
permit work on structures in the chute. (App. combined R4, tab 3 at 27-29)
55. On 9 January 2010, Nelson resumed work at the chevron (R4, tab 79 at 1133,
tab 80 at 1296). There is no indication in the daily reports that Nelson performed any
on-site work at any location after 9 January 2010 (R4, tab 79 at 1135-50, tab 80
at 1298-1315). Nelson's quality control report for 9 January 2010 records that due to
"river conditions" and other issues, Nelson "is waiting until the river gage falls below the
recommended depth by [the Corps] so Nelson Inc. can get back on the river to continue
the repair process and restart the contract" (R4, tab 79 at 1133) (emphasis added).
Specifically, the quality control report records that Nelson performed work on a mound in
the chute, but does not record any work performed on the mound in the main channel that
Nelson identified in its 2 December 2009 letter (id.; R4, tab 67 at 931 ). In addition, the
quality control report records that "[ s]urvey as builts are to be taken to determine the
amount and where the rock is now located" (R4, tab 79 at 1133).
56. On 7 January 2010, the ACO/COR issued a draft Modification No. P00006
(Mod. 6) granting appellant a nine-day time extension for the Robinson Crusoe site "for
high channel stages occurring during the period October 16, 2009 through November 12,
2009" extending the site's completion date to 13 November (R4, tab 70A). However, the
Memphis gage data indicates that river stages exceeded +20 L WRP on all except three
days during that period (app. combined R4, tab 3 at 27-28).
57. On 13 January 2010, Nelson wrote to the Corps that Nelson had "leveled out
the improperly placed lifts of stone" at the chevron, but that "[b]ecause the [water level]
continues to fall, we were not able to perform our as-built progress survey from the
water" (R4, tab 74 at 979). Nelson wrote that it would "complete this work within a
week of suitable dry conditions along the feature" (id.). Nelson also explained that:
18
As referenced in our revised Work Plan submitted on
December 8, 2009, DIMCO surveyed the vicinity
downstream of the Loosahatchie Dike No. 4 .... These
confirmed the presence of stone 35' to 40' downstream of
the proposed center line at Station 4+50. The survey also
showed that sedimentation on the proposed feature that
was previously identified in pre-construction surveys has
continued to occur and enlarge downstream to the vicinity
of this out-of-sector stone. Nelson Incorporated remains
prepared to knock down the stone as indicated in our
revise[ d] Work Plan but requests that the Corps of
Engineers confirm that this is the appropriate action given
the ongoing sedimentation. [Emphasis added]
(Id.) There is no record of the Corps responding to Nelson's request for such
confirmation and providing directions regarding the ongoing "hump" issue. To the very
limited extent Nelson may have attempted to perform corrective work without formal
authorization, it was concerned whether the SWO took precedence over the contract
provision requiring prompt correction under threat of termination (R4, tab 31 at 378-79).
58. On 22 January 2010, Nelson again wrote to the Corps requesting the lifting
of the SWO (R4, tab 75 at 983).
59. On 20 January 2010, the CO requested the necessary reviews required by
Corps procedures preparatory to terminating the contract for default in cases where a
COC has been issued by the SBA. On 1 February 2010, CO Todd's termination for
default determination was approved. (R4, tab 76 at 994-96)
60. On 9 February 2010, CO Todd terminated the contract for default, for "failure
to perform the required work in a timely and acceptable manner" (R4, tab 77 at 997-98).
Among CO Todd's findings were that (1) "Nelson has failed to perform according to the
approved schedule," (2) the Loosahatchie work was "5% complete and had a completion
date of October 25, 2009," and (3) the Robinson Crusoe work was "2% complete and had
a completion date of November 8, 2009" (id.).
61. On 14 April 2010, Nelson timely appealed the 9 February 2010 termination.
The appeal was docketed ASBCA No. 57201.
19
DECISION
The contract included FAR 52.249-10, DEFAULT (FIXED-PRICE CONSTRUCTION)
(APR 1984), which provides, in part, as follows:
(a) If the Contractor refuses or fails to prosecute the
work or any separable part, with the diligence that will
insure its completion within the time specified in this
contract including any extension, or fails to complete the
work within this time, the Government may, by written
notice to the Contractor, terminate the right to proceed
with the work (or the separable part of the work) that has
been delayed. [Emphasis added]
The government has the burden of proving that the termination for default was
justified. Lisbon Contractors, Inc. v. United States, 828 F.2d 759, 764 (Fed. Cir. 1987).
Discount Co. v. United States, 554 F.2d 435, 441, cert. denied, 434 U.S. 938 (1977),
interprets the clause to require the government to demonstrate a "lack of diligence such
that the government [cannot] be assured of timely completion" (emphasis added). In
Lisbon Contractors, 828 F.2d at 765, the Federal Circuit construed the clause to require "a
reasonable belief on the part of the contracting officer that there was 'no reasonable
likelihood that the [contractor] could perform the entire contract effort within the time
remaining for contract performance"' (emphasis added); see also RF! Shield-Rooms,
ASBCA Nos. 17374, 17991, 77-2 BCA ii 12,714 at 61,732.
We conclude that the Friars Point, Cow Island and the combined Loosahatchie and
Robinson Crusoe sites were "separable" parts of the contract for purposes of applying the
Default clause and determining the propriety of the termination. Applying the above
criteria, we further decide that the termination was improper as to all of the sites.
I. Severability
A. General Conclusions
The contract's termination for default clause only allowed the Corps to terminate
"the right to proceed with the work (or the separable part of the work) that has been
delayed." Where a contract is separable (sometimes also referred to as severable, or
divisible) and a contractor is delinquent only as to a separable part of the contract work, it
is improper for the contracting officer to terminate for default the entire contract.
Overhead Electric Co., ASBCA No. 25656, 85-2 BCA ii 18,026 at 90,471-72; see
Technocratica, ASBCA No. 44134 et al., 94-2 BCA ii 26,606 at 132,370; see also Bulova
Technologies Ordnance Systems LLC, ASBCA No. 57406, 14-1BCAii35,521 at
174,098-99, aff'd on recon.,14-1 BCA ii 35,802 (and cases cited) (supply contract); see
20
generally CIBINIC, NASH & NAGLE, ADMINISTRATION OF GOVERNMENT CONTRACTS at
904-06 (4th ed.). In this case, the discrete, "separable" nature of the work required at the
sites generally is emphasized by the fact that separate NTPs and performance periods
were prescribed for each site. The pricing structure and schedule reinforce the
"separable" nature of the sites as does the "Project Description" of each site as a separate
"contract." Each of the four site locations was priced separately and "[e ]ach
chevron/dike/weir" was expressly deemed "divisible" and could be accepted and paid for
separately immediately following its completion at any of the sites (R4, tab 3 at 175).
Commencement of work at each site was not dependent on, or related to, completion of
the work at the other locations. Work at each of the locations did not involve sequential
or incremental and interdependent progression of construction, e.g., of one building or
levee at one contiguous site.
We also consider that, on the unusual facts of this case, the Loosahatchie and
Robinson Crusoe portions of the work together should properly be considered one
discrete, "separable" part of the contract for purposes of the Default clause. The
Loosahatchie and Robinson Crusoe work were adjacent to each other and closely-related
in that both required construction in the chute between the bar and the island and closely
proximate dike extensions in the river. The "Construction Procedures" portion of the
specifications at if 3.2 and pertinent drawing grouped the Loosahatchie and Robinson
Crusoe together for purposes of describing and accomplishing the work at both sites. As
the overall contract was administered and performed, work at the sites became linked and
intertwined. NTPs for the Loosahatchie and Robinson Crusoe overlapped and were
issued only 15 days apart to permit Nelson to begin excavation of the notch in the chute
given the high stages in the river channel. Nelson could plan to perform the adjacent
Robinson Crusoe excavation work relatively seamlessly without extensive movement of
its barges, equipment and crews as conditions in the chute and channel permitted. The
NTPs evidence the parties' contemporaneous decision to treat the Loosahatchie and
Robinson Crusoe together as a divisible part of the contract for practical reasons.
Accordingly, we consider that the Loosahatchie and Robinson Crusoe work were so
closely connected that they jointly should be treated as a separable part of the work. 3
On the other hand, the Cow Island (in Arkansas) and Friars Point (in Mississippi)
locations were approximately 23 and 85 miles distant, respectively from the Loosahatchie
and Robinson Crusoe site (in Tennessee). The work at each of former sites was covered
by separate drawings and specification provisions. Issuance of separate NTPs were
contemplated, with each of the latter, separately-priced sites requiring performance of
substantially greater stone placement work. In short, there were separate NTPs,
performance periods, site locations (each identified as a "contract"), pricing, and
3 Although we consider it more accurate to treat Loosahatchie and Robinson Crusoe
together jointly as one site for the reasons stated, the multiple bases for our
conclusion that the termination for default was improper would apply equally if
we were to analyze the propriety of the default for each site separately.
21
independent, self-contained work at each site as described in separate specifications and
drawings.
Because parts of the contract were separable, the Default clause only authorized
termination of appellant's right to proceed in the present case to the extent Nelson
failed diligently to prosecute the inexcusably-delayed, separable parts of the work. See
FAR 52.249-lO(a); Overhead Electric, 85-2 BCA ir 18,026 at 90,472; see also Murphy
v. United States, 164 Ct. Cl. 332, 334, 337 (1964).
B. Distinguishing Issues Relating to the Computation of Performance Period
and "'Forfeiture"
Our corollary conclusion is that the times for completion at each of the
locations were discrete. In this regard we disagree with the concurring opinion that
appellant had 165 days to complete all four locations from the date of issuance of the
first NTP for Loosahatchie. The NTP structure afforded the parties flexibility to
accommodate scheduling issues, disruptions and river stages and conditions at the
locations of work at each separate "contract" site. Moreover, there were no
restrictions on the issuance of the NTPs. Theoretically the NTPs could have been
issued concurrently, consecutively, or with overlap (as in the case of the Robinson
Crusoe NTP which was issued during the performance period for the work at
Loosahatchie ).
The details of computing the periods of performance for each site are one factor,
albeit a highly significant one, relevant to the broader issue of whether the sites were
severable. However, those details are unusual, if not unique, and central to determination
of the propriety of the termination. Read reasonably as a whole, we agree that the contract
granted appellant a total of 165 days to complete the work at all four sites. We further
consider that, where issued NTPs overlapped as in the case of Loosahatchie and Robinson
Crusoe, appellant was entitled to the full allotted time granted to complete the structures
for each site, plus any appropriate time extensions. We consider that it was not intended
that the contract would deprive appellant of the full performance period at each site if
NTPs were issued concurrently or overlapped. We also consider that the general intent of
the contract was to issue the NTPs consecutively after consultation and cooperation
between the parties and consideration of river stages and site availability/access issues.
The overlap occurred here to permit the contractor to make the most productive use of its
time in the chute as possible given adverse conditions in the channel. Accordingly, in the
case of overlapping NTPs and their purpose in this case, appellant was entitled to 40 days
to complete all work at Loosahatchie and Robinson Crusoe no later than 26 days after
15 October 2009, plus appropriate time extensions. In other words, the time remaining for
completion of the Loosahatchie work (6 days) and the time afforded for completion of the
Robinson Crusoe work (20 days) was 16 November 2009, including the four day weather
extension granted in Modification No. P00005 (Mod. 5), plus any additional appropriate
time extensions as discussed below. The Corps further concedes that the Robinson Crusoe
22
work was excusably delayed by nine days as a result of high river stages, extending the
completion date for the combined site to 25 November 2009. 4 Because appellant
commenced excavation of the notch at Robinson Crusoe during the Loosahatchie
performance period, it would be improper in our view to conclude that the time for
completion of the structures at the latter site should not be extended. Instead we compute
the completion date in the same manner as ifthe NTP had been issued consecutively. To
that extent, we agree with the concurring opinion that Nelson was entitled to "165 days" in
total to complete all work at all sites. However, we part company with that opinion on the
details and mechanics of calculating commencement and completion date(s) for the
discrete sites individually.
As emphasized above, it is essential to examine and assess the nature of, and
rationale for, the default in the context of the time for performance. Cf Technocratica,
94-2 BCA ~ 26,606 at 132,670. Fundamentally, we disagree with the concurring
opinion's proposed methodology for computing a total performance period and
evaluating the propriety of the default based on that period. The concurring opinion
"backs into" its conclusion that we need not address severability. In doing so it
postulates a faulty analytical framework. The principle distinctive and unique feature of
this contract and appeal is that the separable portions of the contract have their own
mandated performance period commencing with issuance of the NTP for the discrete
sites.
The concurring opinion agrees that the applicable legal standards for resolving this
dispute relate to an alleged failure to make progress and that resolution of these appeals
requires that we first determine the completion date(s) for the project. The concurring
opinion considers that Nelson had a single, 165-day period to complete all work under
the contract ostensibly from the time of Nelson's receipt of the Loosahatchie NTP plus
any time extensions for excusable delays, regardless of whether NTPs had been issued for
the other sites. In essence it adds the performance periods for all four sites. Because, in
the view of the concurring judge, the contract was terminated long before expiration of
any reasonable date for completion using its 165-day criterion, the concurring opinion
concludes that the default was improper for all sites. According to that opinion there is
no need to focus our inquiry on the progress of the work, details of performance or
excusability of the delays at Loosahatchie/Robinson Crusoe.
We believe that view, inter alia, oversimplifies, misreads and misapplies the time
periods for completion of the work at each site. For all reasons discussed above, we
4
We cannot determine the precise days for which the nine-day time extensions for
high river stages were granted and whether they overlap with the four days
previously granted for Loosahatchie. Because we consider that the time
extensions failed to fully consider the high river stages as discussed later herein,
it is not necessary to precisely determine the days conceded by the
government's 9 January 2010 draft modification.
23
disagree that appellant had a single, 165-day period from the Loosahatchie NTP to
complete all work. We consider that the concurring opinion misinterprets the NTP
provisions, completion dates and fails to scrupulously apply other contract terms and
their intent. It sets up incorrect criteria for evaluating the propriety of the termination.
Therefore, that opinion's resulting conclusion that we need not address severability is
founded on untenable premises. The unique manner in which this contract was structured
requires a narrower, individualized approach to assessing the validity of the termination
at each site. The fact that ultimately no "forfeiture" occurs follows and flows from our
assessment that the default termination of each site was improper. The dissent also
follows a similar approach in concluding that only the Loosahatchie/Robinson Crusoe
site was in default while severing Cow Island and Friars Points as separable parts of the
contract to prevent "forfeiture."
II. Propriety of the Terminations
Because we consider the sites to be severable, the propriety of their termination
requires discrete analysis.·
Friars Point and Cow Island
The termination of the Friars Point and Cow Island sites was improper. No
separate NTP was issued for either of those discrete sites. Consequently, the time for
performance of the work at those sites never commenced and there was no completion
date or "delay" in performance at either site. Without a start and completion date, there is
no yardstick to measure whether Nelson failed to diligently prosecute the work at those
separable sites.
Loosahatchie and Robinson Crusoe
The Corps termination decision failed to consider the separable nature of the sites,
miscalculated the time for completion of the work at Loosahatchie and Robinson Crusoe
and failed to grant time extensions due appellant. It is difficult to determine whether the
basis for the termination was for failure to timely complete or failure to diligently
prosecute the work so as to ensure its timely completion. The CO final decision considers
that the performance period "expired" on 26 October 2009 (for Loosahatchie) after
addition of the four days in Mod. 5 for high river stages. Many of the contentions in the
government briefs also focus on a failure to timely complete analysis. As noted above, the
more accurate time for completion was 25 November 2009 given the overlapping NTPs
and without consideration of additional time extensions due appellant as discussed below.
Thus, the propriety of the termination is dependent on whether Nelson inexcusably failed
to diligently prosecute the work at the Loosahatchie and Robinson Crusoe site. The Corps
misperception of the proper due dates for completion of the Loosahatchie and Robinson
Crusoe sites contributed to its misanalysis of whether Nelson had a reasonable chance to
timely complete that separable portion of the work. Moreover, the issuance of the SWO on
24
6 November 2006 prior to the completion date requires that we analyze whether the
termination was justified for failure to diligently prosecute the work since the SWO was
never effectively lifted and precluded any further progress after that date. Accordingly, we
apply the Lisbon test noted above and analyze whether there was no "reasonable
likelihood" that appellant could timely complete the Loosahatchie and Robinson Crusoe.
We consider that the default termination was precipitate and unjustified applying that
standard. There are several reasons that collectively, as well as individually, compel that
conclusion.
First, Nelson was entitled to additional time extensions as a result of adverse river
stages. Nelson was effectively deprived as a result of the adverse stages of working
access to structures in the river where the majority of stone was to be placed. Low water
conditions permitting work in the chute were also unpredictable and often concurrent
with high stages in the channel. The government also failed to consistently administer
the contract and grant appropriate time extensions even applying the Corps' own
unreasonable interpretation of river stage limitations on the stone placement work.
Equally unreasonable and inconsistent were government criticisms of appellant's failure
to perform corrective work in adverse river stage conditions.
Second, appellant was entitled to additional time extensions as a result of the
"hump" issue. The Corps took longer than the entire original performance period for the
Loosahatchie site to develop and provide appellant with a solution. The Corps also failed
to establish that it was practicable or even possible to start or perform the Loosahatchie
dike extension work in the river channel in the manner prescribed by the specifications
without that solution. Moreover, the Corps' "scour solution" for the "hump" was
ineffectual for four months through the date of termination making it impossible to
complete the Loosahatchie dike extension absent an alternative solution.
Third, the parties' discussions regarding any plan for any "corrective work" that
may have been permitted by the SWO were subsumed within the broader discussion of
appellant's proposals in response to the "show cause" letter that was issued on the same
date as the written SWO. Moreover, the Corps never definitively or timely responded in
writing to appellant's proposals until 8 January 2010. Nor in our view did the
government ever clearly and effectively lift the SWO giving Nelson unambiguous
guidance as to the scope of any corrective actions authorized much less permitting
appellant to prosecute the work. At no time was either a specific corrective action plan or
a general overall plan to correct deficiencies formally approved. To the very limited
extent Nelson may have attempted to perform corrective work without formal
authorization, it was concerned whether the SWO took precedence over the contract
provision requiring prompt correction under threat of termination. Finally, given the
continuing adverse river stages prevalent throughout the pre-termination period, the
feasibility of performing even corrective work was highly questionable at best.
25
In reaching these conclusions and in determining that the termination was
improper, we have fully and carefully considered the evidence relating to appellant's
equipment, quality control, and stone placement problems. We do not consider Nelson's
problems and deficiencies in its performance outweigh the other factors mentioned above
and detailed below. Those factors justify our conclusion that there was a reasonable
chance that appellant could have timely completed the Loosahatchie and Robinson Crusoe
structures, particularly if Nelson's offers to augment its crews and equipment had been
seriously considered and accepted by the government. For the numerous reasons
discussed below we also reject the Corps' estimates of stone placement rates. Given the
totality of the circumstances and countervailing factors detailed herein, the termination
was improper.
A. The Impact of High River Stages on Prosecution of the Work
Critical and overarching factors in this case are that river stages did not permit
performance of substantial, sustained and orderly work, in particular on the dikes in the
channel at both sites. The Corps position focuses primarily on alleged inadequacies of
the work in the chute. Although that work was significant, the bulk of the project at
Loosahatchie and Robinson Crusoe involved construction of dike extensions in the river
channel.
The government refers to a project critical path without offering any persuasive,
viable, common sense analysis of the short performance period and delaying events
impacting completion of the Loosahatchie and Robinson Crusoe structures. The fact that
Nelson could perform some work in the chute, does not dictate a conclusion that time
extensions were not appropriate for days that Nelson could not work in the channel. At
some point, the critical path ran through the majority of the work in the river not the
minority of the work in the chute. Essentially, Nelson did not have effective working
access to the portion of the site where the majority of the work was to be performed. In
addition, it was deprived of the opportunity to work simultaneously in both locations to
expedite completion. Moreover, the Corps does not dispute that low water stages
prevented work in the chute during the period 2 October 2009 through 13 October 2009,
making the extension ofLoosahatchie Dike No. 4 the only work available to Nelson
during that period.
Regardless of issues with work performed in the chute, an enforceable completion
date was never established that also fully considered the continuing "hump" issue and
river stages. The river stage chart indicates that appellant was entitled to major time
extensions. It could not work in the river and place stone for the critical dike extensions at
the Loosahatchie and Robinson Crusoe sites in the manner contemplated and required by
the specifications. Evaluation of whether Nelson had a reasonable chance of completing
the entirety of the work at Loosahatchie and Robinson Crusoe required analysis not just of
performance in the chute but time extensions due appellant as a consequence of the
inability to work in the river. Compounding the government's misperception of the time
26
for completion was its failure to timely grant time extensions and its insistence that Nelson
complete the work even though river stages exceeded +20 L WRP as detailed below.
1. The Parties' Unreasonable Interpretations of the Stone Placement
Limitations
The parties' have differing interpretations of the restrictions on stone placement in
the river set forth in Parts 1.3 .1 and 1.3 .2 of the "Construction Procedures" section of the
specifications. The interpretations of those paragraphs by both parties are unreasonable.
The government alleges that part 1.3 .2 governs whether the river stages permitted
stone placement. That paragraph is entitled "River Stage Limitations for Bendway Weirs"
and provides in pertinent part that "subaqueous placement of stone will not be permitted on
any weir when the river stages are above +20 L WRP." The patent problem with this
interpretation is that the "dike" extensions for Loosahatchie and Robinson Crusoe were not
labeled "weirs." Parts 1.3 .1 and 1.3 .2 clearly distinguished between the two with part 1.3 .1
entitled "River Stage Limitations for Dikes and Chevrons." The government's contention
essentially ignores that obvious dichotomy and contradistinction and contradicts the plain
meaning of the juxtaposed terms. Although Bendway Weirs were discussed in connection
with the Friars Point and Cow Island work, the Loosahatchie and Robinson Crusoe
structures in the channel were denominated and discussed as "dike" extensions. The
government contends that appellant should have known, based substantially on their shape,
that the "dikes" were in fact "weirs." More to the point, the government drafters of the
specifications should have made clear that no distinction was intended.
Appellant interprets the more cryptic and latently ambiguous provisions of
part 1.3 .1 equally unreasonably. Its interpretation that -10 L WRP was the maximum
placement level fails to recognize that the -10 L WRP level is 6.5 feet below the all-time
low water level on the Mississippi River as measured at the Memphis gage. Although
part 1.3 .1 does address the dike extensions in the river, we agree with the government
that appellant's interpretation results in the untenable conclusion that the dike work could
only be performed when river stages were below the lowest historical stage on record.
Appellant has failed to provide a reasonable interpretation that takes into consideration
historical stages of the river.
Neither party has posited any alternative reasonable interpretation of part 1.3.1.
We need not focus further on that issue in the context of evaluating the propriety of the
termination given the government's failure to consistently apply its own +20 L WRP
interpretation, as detailed below. Moreover and at the very least, the depth limitations on
stone placement were confusing. Depth limitations were dependent on not only the river
stages but the height of the structure. In that regard, part 1.3 .1 prohibited "subaqueous
placement of stone ... when the river stage is more than 10 feet above the top elevation of
that portion of the dike/chevron," unless authorized. It is unclear whether the prohibition
applied to the height of the work in progress or the completed structure. In light of these
27
ambiguities and the general complexity of marshaling the daily factors at play influencing
and limiting stone placement, we consider that Nelson was reasonably confused. As a
minimum, the terms warranted government clarification and guidance if not a directed
change to the contract requiring placement in the channel at stages below + 20 LWRP in
accordance with the Corps interpretation. Irrespective of whether Nelson had a
reasonable interpretation of pertinent contractual provisions relating to the interplay of
channel and chute conditions and prosecution of the work, it raised a reasonable question.
Under the circumstances, it was improper to terminate appellant without first clarifying
the matter and providing appellant an appropriate time extension from the government
that fully recognized the conditions exceeding +20 L WRP prevalent throughout the pre-
termination period. Until such action was taken, we consider that appellant did not have
working access to the entire site during most of the performance period of this contract.
Even if it could have placed stone on a few days, any placement operation could not be
conducted in the manner required by the specifications. The government should have
considered these factors, responded constructively to appellant's questions and
considered the reasonableness of the inquiries. Even if Nelson was not correct in its
interpretation, neither was the government
2. Inconsistent Corps Determination of the Excusability of Delays
Associated with High River Stages
The government not only interpreted the limitations on stone placement in the
channel unreasonably it also failed to consistently apply that interpretation in
administering the contract and evaluating the excusability of delays. If the government's
interpretation had been uniformly applied, appellant would have been entitled to
extensive time extensions as a result of the prevalent high river stages because it was
effectively deprived of working access to the considerable majority of the work at the
Loosahatchie and Robinson Crusoe site.
Mod. 5 only granted time extensions for the four-day period 19 through 22 October
2015. River stage data from the pertinent Memphis gage for the period 13 October
through 6 November 2009 when the SWO was issued indicates that the river stage in the
channel fell below +20 L WRP on only three days 24-26 October 2009. Between
6 November 2009 and the 8 January 2010 date of the government's rejection of Nelson's
response to the show cause notice, the river stage in the channel fell below +20 L WRP for
only nine days (from 30 November through 8 December 2009). Yet there is no indication
that the Corps considered the extent of the high river stages in evaluating Nelson's
progress, much less did it grant appropriate time extensions associated with river stages.
The high stages also impacted the sequencing of appellant's work. The Corps even
expressly directed appellant to move to the chute on 14 October 2015. Considering the
predominance of the high river stages after 13 October 2009 and unpredictable,
fluctuating conditions in the chute, moving back and forth from the chute to the channel
was more costly, time consuming and generally impracticable.
28
The granting of time extensions in Mod. 5 for high river stages support a
conclusion that the Corps recognized + 20 L WRP as the critical dividing line for
placement in the river. Nelson also resequenced its work and moved to the chute on
14 October 2009 at the Corps' direction due to high water stages (above + 20 L WRP) in
the river. The Corps conceded that appellant was entitled to time extensions for four days
from 19 thru 22 October 2019 when the river stages ranged from 20.4 to 22.8 L WRP.
However, it inexplicably failed to consider or grant time extensions for the overwhelming
majority of days between 13 October 2009 through the date of termination on 5 February
2010 when the river stages ranged above 22.8 L WRP into the mid to upper 30s for most of
that period. On only 26 days during that approximately 108-day period did river stages
sporadically drop below 20.4 and it was not until 30 November 2009 that the stages were
consistently below 20.4 for more than a four-day stretch. The only period where the river
was significantly below the +20 L WRP yardstick was 1 October through 12 October 2009
while appellant was mobilizing and awaiting direction from the Corps regarding the
"hump" issue. Notably, water levels during that period were also too low to float its
plant/equipment into the chute even if Nelson had elected to commence work there first.
The government asserts that appellant never timely broached the issue until the
early November exchanges of correspondence. At best, even if Nelson had raised the
issue, it would have received the same answer from the government premised on its
unreasonable interpretation. Moreover, given the short duration of performance of this
contract, we do not consider that the issue was untimely raised.
B. The "Hump"
Determination of a precise revised completion date for the Loosahatchie and
Robinson Crusoe work is difficult at best and not essential to resolving the propriety of the
termination. There has been no attempt by the government to address the daily river stage
data and the "hump" issue that was never resolved due to the failure of government's "scour
solution" through the date of termination. No matter how diligently appellant prosecuted the
work, it could not complete the Loosahatchie dike extension as matters stood through the
time of termination.
In addition, as awarded the specifications and drawings were deficient in the sense
that the "hump" within the design template made it impossible to execute the stone
placement plan. The specification's methodology for orderly, "continuous," "steady and
uninterrupted" placing of stone in lifts from the land to the river could not be achieved. We
agree with the Corps that some adjustments to structure designs based on current
sedimentation conditions were contemplated. In addition, it may be as the Corps asserts, that
the "hump" issue might have been resolved relatively easily. Nevertheless, appellant's work
on the dike was disrupted and delayed until the drawings were finally redesigned and a
"solution" for the "hump" provided.
29
The Corps knew about the defects as of 22 September 2009 but issued the NTP
without first resolving them. No effective Corps solution was provided to appellant until
13 October 2009, 12 days following issuance of the NTP for a site with a 20-day
performance period. Regardless of any concurrent delays attributable to Nelson in
mobilizing and setting up equipment, the government concurrently caused the delay in
commencing work through 13 October 2009. Appellant did not have all needed
information to fully plan and prosecute its work. Until the final and corrected version of
the drawings were received by Nelson on 13 October 2009, appellant was not apprised as
to how the government intended to solve the "hump" issue in the channel.
The Corps also does not dispute that low water stages prevented work in the chute
during the period 2 October 2009 through 13 October 2009. Thus as of 13 October 2009,
appellant could not work on any of the structures at the Loosahatchie site whether in the
channel or the chute. Despite this de facto lack of working access, the Corps notified
Nelson on 13 October 2009 of its unsatisfactory progress in prosecuting the work.
For unclear reasons, Nelson executed Mod. 4 without reservation of rights
regarding a time extension. Absent the ostensible release of rights, appellant was
unquestionably entitled to a time extension as a result of the "hump," resultant design
revisions and inability to work in either the chute or the channel. Because the
modification was ambiguous and incomplete and because work in the channel in
compliance with the specifications was unfeasible until a redesign was finalized in the
version of Drawing 9D given to appellant on 13 October 2009, we consider that the
modification did not foreclose a time extension. 5 First, there were two versions of the
drawing. The first version of 7 October failed to set forth the "scour solution," while the
13 October version incorporated that solution. The Corps did not assign an "E"
designation to the latter version despite the revision. Mod. 4 did not specify which
version of the drawing was covered. Moreover, the effective date of Mod. 4 was
9 October 2009. On that date, the only extant version of the drawing known to Nelson
was the emailed 7 October 2009 revision without the "scour solution." Not only is the
modification ambiguous as to which version of Drawing 9D it expressly referenced, it
was incomplete in not identifying and modifying critical specification procedures
governing stone placement on the dike extension. The note simply stated that Nelson
was to allow the river to scour areas above elevation 154.9' "prior to stone placement."
Reasonably construed, appellant was not permitted to place stone prior to scour. At best,
the "scour solution" was incompletely and ambiguously implemented regardless of what
5 We also note that the government briefs do not discuss the consequences of
appellant's execution of the modification. Instead, the Corps simply contends
that, since no change in the stone quantity resulted from the revised drawings,
Nelson was not entitled to an equitable adjustment. This specious argument
does not address appellant's more basic contention that it could not work on the
Loosahatchie dike extension until the drawings were revised and the "scour
solution" provided.
30
the Corps intended. The drawing revision and modification do not clearly address how
Nelson was to commence performance in the channel or comply with the numerous
contractual stone placement restrictions and procedures without a comprehensive final
redesign and a solution for the "hump." Steady, continuous, sequential construction for
the length of the extension from the land to the river was not possible absent that proof.
In light of these ambiguities, we do not consider that appellant released possible rights to
a time extension.
Nor has the Corps shown how appellant was to ultimately complete the
Loosahatchie dike extension when the river failed to timely "scour." The government
fails to establish as part of its burden of proof that placement of rock in the river in
accordance with the specifications was possible given the continuing presence of the
"hump." Nelson could not perform in accordance with the unmodified specifications,
much less complete the structure. The "hump" (as well as the high river stages) made
that impossible. Again, Nelson was deprived of effective and full working access to the
entire site.
C. The SWO and Corrective Work
The Corps emphasizes Nelson's failure to complete corrective work between the
SWO issuance on 6 November 2009 and the termination. Of course, the SWO, as a
minimum, precluded further new work. That SWO was never lifted effectively even with
respect to so called "corrective work." On the one hand, the government contends that
appellant never corrected its work. On the other, the government insists that appellant's
plans for correcting the work were deficient and not approvable.
There are several problems with the Corps contentions regarding this work. First,
the broader issue for decision in these appeals is whether the termination for default was
proper. We have fully considered Nelson's noncompliant work and the extent of
corrective work in reaching our decision. All factors considered the termination was not
sufficiently justified for reasons noted herein.
In addition, the government issued its "show cause" letter on the same date it
issued the SWO of9 November 2009. Thereafter, the evidence warrants the conclusion
that the broader focus of the discussions between the parties had shifted as a practical
matter to whether Nelson should be terminated. As viewed by the government, the scope
of "correction" of defective work involved more than simply addressing the narrow issue
of out-of-section or improperly placed stone. It more broadly encompassed all issues
associated with perceived inadequacies with appellant's quality control procedures and
lack of capability generally, i.e., the same issues that drove the termination decision. In
fact, the government argues that Nelson's responses to the government's requests failed
to consider how it would address potential issues with the performance of the Cow Island
and Friars Point sites for which NTPs had yet to be issued. Under these circumstances
and given the broad scope of the government's requirements for "approval" of appellant's
31
plans, it is disingenuous for the government to emphasize alleged delays in simply
correcting the noncompliant placement of stone.
Also, the SWO itself required "approval of the corrective action" plan and there
was never any written CO approval that could be viewed as unambiguously authorizing
corrective work. The SWO was never clearly and effectively lifted even for the
performance of corrective work. At best, the extent of any oblique oral government
authorization of corrective action by a second CO at the 2 December 2009 meeting was
short-lived. It was superseded nine days later by CO Sweeney's letter of 11 December
2009. To the extent that the Corps may have authorized some correction, remedial work
generally could not permissibly, much less efficiently, be performed given prevalent
adverse stage conditions through the date of termination.
We also do not consider that the government's rejection of appellant's offers to
bring additional and more experienced subcontractors and mobilize additional equipment
and crews was reasonable. A considerable portion of the time that the government claims
was available for corrective work paralleled sporadic, unresolved discussions over the
"show cause" proposals and ancillary corrective action plans. The evidence supports the
conclusion that the government did not fairly, objectively and timely evaluate Nelson's
offers. It failed to respond substantively in writing until formally rejecting appellant's
offers on 8 January 2010. Because the broader context of the post-SWO discussions was
whether to terminate, it is understandable that appellant did not fully augment its
workforce pending definitive guidance and resolution of that issue.
Finally, there is no reliable estimate of how long the corrective work would have
required. Given the minor overall amount of stone placed on the Loosahatchie dike and
chevron, the record does not justify a conclusion that considerable time would have been
required to correct the noncompliant work if Nelson's proposals to hire additional crews
and equipment had been approved and the SWO lifted.
D. Equipment and Quality Control Issues
The government emphasizes the extensive quality control and equipment problems
appellant experienced. We have fully and carefully considered this evidence even if not
exhaustively detailing it in our findings. However, given all factors in this case,
appellant's problems were insufficient to justify the termination. Evidence of "equipment
issues" were often concurrent with periods when Nelson could not work because of
river/chute conditions or was awaiting final revised drawings 9D and lOD from the Corps
through 13 October 2009. To a degree, such issues also reflect normal downtime and/or
early-learning curve, set-up and initial operating issues with the equipment that have not
been shown to be unusual in our view. In addition, the fact that appellant was able to
place the Roundpoints expeditiously and in compliance with contractual requirements
provides some evidence of its competence. As noted above, the Corps unreasonably
ignored or discounted appellant's promises to augment its equipment and crews in several
32
meetings and exchanges between the parties. All factors considered, the termination
decision was imprudent and not justified.
We also note that the construction Default clause (unlike the corresponding
supply/service clauses) does not expressly authorize termination for material breach of
other contract provisions, such as the quality control clauses. The pivotal issues focus on
the actual non-compliances with the specifications and contract and their impact on the
propriety of the termination not the adequacy or violations of Nelson's quality control
manual per se.
E. Estimated Stone Placement Rate
The Corps relies heavily on estimation of a daily placement rates for the stone to
assess whether appellant could have completed on time. The estimated rates are highly
problematic. The placement of stone in a "steady and uninterrupted manner," so as to
ensure "continuous progress" once construction of a dike or chevron "has been started"
in accordance with the "CONSTRUCTION PROCEDURES" section of the
specifications was not possible in the river, if not in the chute, for the vast majority of
the contract period as detailed above. The "hump" exacerbated the problem of orderly
placing stone in compliance with the specifications. The SWO on 6 November 2009,
effectively further precluded a more judicious assessment of Nelson's ability to timely
complete if river conditions improved. There are also factual issues concerning the
precise amount of stone placed by Nelson that we do not consider it necessary to address
because of the general unreliability of the government's estimated rates for more basic
reasons.
We also do not consider that the amount of stone placement work performed
constituted a sufficient "sample size" to prudently evaluate appellant's progress or
production rate for Loosahatchie and Robinson Crusoe, much less the total potential work
at all sites. This is particularly true in view of the evident, extensive confusion regarding
the meaning of the specifications and compliance therewith to the extent they were clear
regarding placement limitations and procedures, as well as other considerations discussed
above. Nor do such estimates serve as a sound basis for imposing the drastic sanction of
termination.
Furthermore, once appellant mobilized to begin the Loosahatchie dike extension
first, it was forced to move to less adverse conditions in the chute as a consequence of the
unfavorable stages in the channel. This move to the chute evidences not only that the
work was resequenced by Nelson but also that it did not have complete working access to
the Loosahatchie and Robinson Crusoe site, including the river location of the majority of
the work. It also indicates that appellant lost time resequencing its work in moving from
the river to the chute.
33
The river stages, resequencing, the "hump," normal "learning," and lack of
working access, make it particularly difficult to develop a reliable estimated rate for
placement of the remaining stone. The stone placement rate also assumes that appellant
would not supplement its on-site equipment with additional equipment, more
experienced crews and/or subcontract portions of the work once river conditions
permitted sustained work on the dikes. The Corps never timely responded to Nelson's
proposals to augment its crews and equipment until they were rejected for all practical
purposes on 8 January 2010.
Nelson was also unfairly pressured by the government to perform the work
because of perceived lack of progress at these sites despite the presence of excusable
causes of delay, including high river stages in the channel and frequently low river
conditions in the chute. For example, on 13 October 2009, the Corps expressed concerns
about lack of progress at Loosahatchie even though the Corps had not developed a
solution to the "hump" issue and finalized the necessary drawing revisions and even
though water levels in the chute were too low to permit work on that portion of the site.
Nelson placed considerable stone in adverse river stage conditions in response to the
Corps directions to expedite progress.
CONCLUSION
We conclude that the termination for default of the captioned contract was
improper. 6 Accordingly, ASBCA No. 57201 is sustained. ASBCA No. 58166 is dismissed
as premature without prejudice to appellant's right to submit a timely termination for
convenience settlement proposal to the contracting officer.
Dated: 15 December 2015
Administrative Judge
Armed Services Board
of Contract Appeals
(Signatures continued)
6
Because we sustain the appeal for the reasons stated, we do not reach appellant's
allegations regarding government "bad faith" and racial bias in administering and
terminating the contract. Nor need we address Nelson's other contentions
challenging the propriety of the termination, including facts and inferences to be
drawn regarding the reprocurement contract.
34
I concur I concur
c_~ ~, ,r :
,/I I .. ! /~- ... / : . .,.-l.,.
( /~ E~~~"ir~ A. -TUNKS
Administrative Judge Administrative Judge
Acting Chairman Armed Services Board
Armed Services Board of Contract Appeals
of Contract Appeals
I concur I concur in part and dissent in part
(see separate opinion) (see separate opinion)
--- 1~
TERRENCE S. HARTMAN
Administrative Judge
CILMAIL
Administrati Judge
Acting Vice Chairman Armed Services Board
Armed Services Board of Contract Appeals
of Contract Appeals
35
OPINION BY ADMINISTRATIVE JUDGE HARTMAN CONCURRING
I write separately only to state that I deem discussion in our majority opinion of
"severance" of the parties' contract into parts simply to be "dicta." Our holding that
the default termination here was improper does not require us to address the issue of
contract "severance."
In this appeal, the Corps terminated for default Nelson's "165-day" contract to
build various underwater stone structures by dropping stone from specially equipped
vessels into the Mississippi River. It argued at trial that its termination was "proper"
because Nelson failed to "deliver" the Loosahatchie-area work (consisting primarily of
a dike extension and chevron) within 20 days. As our majority opinion ably notes, for
a number of reasons, the Corps did not satisfy its burden of proving the existence of a
"default." Those reasons included that there was a contract "specification" requiring
the dike extension be built in layers from the start of the extension to completion point,
which the Corps did not waive even though the specification could not be adhered to
by any contractor due to existence of a "sediment hump" in the extension's path. In
sum, the dike extension work the Corps utilized as its basis for terminating Nelson's
entire "165-day" contract was never completed, but deleted from the Corps'
re-procurement contract because the sediment hump barring Nelson's work
completion never scoured, remaining in the path of the dike extension.
Neither the Corps nor Nelson argued in this appeal that the parties' "165-day"
contract should be severed into various parts. Thus, no testimony or other evidence
was directly presented by the parties regarding their intent to allow or not allow
severance of the contract into pieces. Severance of the parties' 165-day contract into
parts was raised sua sponte (without any briefing) by the dissent in an attempt to
sustain Corps termination of Nelson's contract, in whole or in part, for "default."
Also, the Corps never argued at trial that it could have terminated Nelson's
contract for default based upon a "failure to make progress" by Nelson with respect to
the 165-day contract and, therefore, did not present evidence showing its CO was
justifiably insecure that the entire (or some part of the) contract could not be timely
completed. A "failure to make progress" on the parties' contract was raised by the
dissent sua sponte (without briefing) in an attempt to sustain the Corps' default
termination.
Because the Corps did not find a remedy for the large sediment hump in the
path of the Loosahatchie dike extension precluding Nelson's completion of the dike
extension due to no fault of Nelson's, it simply was not possible for Nelson (or any
contractor) to complete "all" specified contract work within the 165 days set forth in
the contract. See Dynalectron Corp. (Pacific Div.) v. United States, 518 F.2d 594 (Ct.
Cl. 1975) (defective drawings or specifications precluding completion of the contract
36
work by scheduled dates are a bar to default termination); DCX, Inc., ASBCA
Nos. 37669, 37670, 92-3 BCA ~ 25,125. We therefore need not engage in an analysis
of whether the Corps CO could reasonably have believed on the date of default
termination (months after CO issuance of a stop all work order) that there was no
reasonable likelihood that Nelson could timely complete all contract work. The CO
had been advised by Nelson that the sediment hump had grown larger (instead of
scouring as the Corps hoped) and thus the CO knew that no contractor could complete
the Loosahatchie dike extension, as currently specified, on date of default termination.
Moreover - whether the parties' contract is severable or not - the record in this
appeal does not show the CO could reasonably have believed there was "no reasonable
likelihood" Nelson could have performed the entire effort within the time remaining if
the Corps altered the specification precluding dike extension completion or otherwise
resolved the issue of the large sediment hump. The Corps acknowledged here that
there was a "learning curve" with respect to dropping stone into a fast flowing river to
extend an existing stone dike in layers. There is no testimony in the record, however,
discussing or analyzing the "learning curve" that would allow us to conclude (after
only about two weeks of work by Nelson on the contract) that Nelson could not timely
complete the remaining work in the 21 or more weeks provided for completion of that
work. See, e.g., Haselrig Constr. Co., PSBCA No. 4148, 00-1 BCA ~ 30,674 (even if
contractor was behind schedule, it still could have accelerated its performance and
timely completed the work, especially in view of government failure to cooperate in
resolving latent subsurface design problem); Kleen-Rite Corp., ASBCA No. 23690,
79-2 BCA ~ 14,024 at 68,899 (Board may base decision on theory different than
parties only if necessary facts are adequately developed in record).
Our precedent requires that, in analyzing a default based on a failure to make
progress, we determine whether the CO could reasonably believe the rate of contract
progress will not insure work completion within the period specified in "the contract."
McDonnell Douglas Corp. v. United States, 323 F.3d 1006, 1016-17 (Fed. Cir. 2003);
Lisbon Contractors, Inc. v. United States, 828 F.2d 759, 765-66 (Fed. Cir. 1987).
Neither party to this appeal asserts otherwise. While this Board has on rare occasion
"severed" a contract sua sponte into parts after establishment of a "default," to the best
of my knowledge, we took such action to avoid the drastic sanction of a "total"
forfeiture when a problem existed only with respect to a severable part of the contract.
E.g., R.E. Lee Electric Co., ASBCA Nos. 6195, 6447, 61-1BCA~3002; accord
Murphy v. United States, 164 Ct. Cl. 332, 341 (1964); Spartan Aircraft Co. v. United
States, 120 Ct. Cl. 327, 345-47 (1951). The Board's sua sponte severance here is not
taken based upon a specific assertion of partial default or after the establishment of a
"default" to avoid a contractor "forfeiture in total" but potentially to sustain a
"forfeiture" (on a theory advanced by the Board). While we hold ultimately there is no
default on any severed contract "part" and thus no "forfeiture" by Nelson, if the dicta
in our majority opinion "severing" the contract is construed as allowing a CO or Board
judge to sua sponte sever a contract into parts to analyze if a CO could reasonably
37
believe that a contractor's rate of progress does not insure the completion of one or
more work parts within "the time a CO or we set" for completion of the severed parts
of work, we could be viewed as authorizing a deviation from the well-established
review standard for an asserted failure to make progress. There is no reason for us to
depart from that standard here, and statements made by us should not be construed as
an authorization for doing so.
In sum, the Corps failed to satisfy its burden of proving the default it asserted -
failure to timely complete the Loosahatchie work - and there is no reason for us to sua
sponte sever the parties' 165-day contract into parts in an attempt to possibly conclude
some default existed and thereby sustain a contractor forfeiture in whole or in part. See
Empire Energy Mgmt. Sys., Inc. v. Roche, 362 F.3d 1343, 1357 (Fed. Cir. 2004) (delivery
of first aircraft was interim milestone, not ultimate performance requirement); RICHARD J.
BEDNAR, HERMAN M. BRAUDE, JOHN CIBINIC, JR., GILBERT J. GINSBURG, J. RICHARD
MARGULIES, RALPH C. NASH, JR., DOUGLAS L. PA TIN, & ANDREW W. STEPHENSON,
CONSTRUCTION CONTRACTING 837-843 (1991) (all defaults (irrespective of magnitude of
failure) will not allow a party to unilaterally terminate a contract).
Administrative Judge
Acting Vice Chairman
Armed Services Board
of Contract Appeals
38
OPINION BY ADMINISTRATIVE JUDGE MCILMAIL
CONCURRING IN PART AND DISSENTING IN PART
With respect to ASBCA No. 57201, I concur in part, and respectfully dissent in
part. I agree that the contract is separable, and that the government should not have
terminated the Friars Point work and the Cow Island work for default. The
government never issued notices to proceed with the Friars Point work or the Cow
Island work; therefore, those parts were not delayed. Accordingly, I concur with
converting the termination of the Friars Point work and the Cow Island work to a
termination for the convenience of the government.
However, I would deny the appeal with respect to the Loosahatchie work and
the Robinson Crusoe work. First, I disagree that the Loosahatchie work and the
Robinson Crusoe work are not separable from each other. Each was subject to its own
notice to proceed and its own completion date. Each was priced separately, and could
have been awarded and performed, not only separately (indeed they were performed
separately, in that performance of neither depended upon performance of the other),
but sequentially. That the Loosahatchie site and the Robinson Crusoe sites were closer
to each other than they were to the Friars Point work and the Cow Island work changes
none of that, nor does the inclusion of the Loosahatchie Dike No. 4 profile and the
Robinson Crusoe Dike No. 3 profile (two entirely separate drawings) on the same page
(app. supp. R4, tab 141 at 3360). Finally, upon the issuance (at Nelson's request) of
the notice to proceed with the Robinson Crusoe work, the Loosahatchie work and the
Robinson Crusoe work were performed and administered more or less concurrently,
but that does not mean that they became one, inseparable '"part of the work."
Second, when the contracting officer terminated the contract for default on
9 February 2010, it was reasonable to conclude that Nelson would be unable to
complete the Loosahatchie work and Robinson Crusoe work on time. Here I disagree
that the Loosahatchie performance period and the Robinson Crusoe performance
period ever combined: Nelson had 20 days from receipt of the Loosahatchie notice to
proceed to complete the Loosahatchie work (that is, until 21 October 2009), and
20 days from receipt of the Robinson Crusoe notice to proceed to complete the
Robinson Crusoe work (that is, until 4 November 2009). The government delayed
Nelson's Loosahatchie work from 2-13 October 2009 by the issuance of the final
Drawing 9D not until 13 October 2009, and Nelson did not receive the Robinson
Crusoe notice to proceed until 15 October 2009. Nelson performed or could have
performed Loosahatchie work on at least 15 days between 13 October 2009 and
5 November 2009 (14-18 October 2009, 25-29 October 2009, and 31October2009
through 4 November 2009), and performed or could have performed Robinson Crusoe
work on at least 13 days between 15 October 2009 and 5 November 2009
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(16-18 October 2009, 25-29 October 2009, and 31October2009 through 4 November
2009). 7 Therefore, when the Corps stopped work on 5 November 2009, Nelson had no
more than 5 days left to complete the Loosahatchie work, and no more than 7 days left
to complete the Robinson Crusoe work.
By 5 November 2009, when the Corps stopped work, Nelson had placed
14,581 tons of stone, at an average daily rate of 1,041.5 tons per day, all for the
Loosahatchie work, leaving no more than 5 days to place the other 17 ,669 tons of the
contract-estimated 32,250 tons of stone required for that work, and no more than
7 days left to complete the 27 ,400 tons of stone estimated for the Robinson Crusoe
work. (In other words, assuming the Loosahatchie work and the Robinson Crusoe
work consisted entirely of placing stone (that is, no mobilization, survey, or notch
excavation), Nelson had accomplished no more than 45% of the Loosahatchie work
(14,581 of 32,350 tons) with at least 75% of the contract time having elapsed (15 of
20 days) and none of the Robinson Crusoe work (zero of27,400 tons) with at least
65% of the contract time having elapsed (7 of 20 days). To place 17 ,669 tons of
Loosahatchie stone in 5 days, Nelson would have to have placed an average of
3,533 .8 tons per day, well more than its average daily rate of only 1,041.5 tons, and
more than its highest daily rate of 2,535 tons. To place 27,400 tons of Robinson
Crusoe stone in 7 days, Nelson would have to have placed an average of 3,914 tons per
day, also more than its average daily rate. Viewed differently, at its average daily rate
of 1,041.5 tons of stone per day, Nelson would have needed at least 17 more days to
complete the Loosahatchie work, and at least 26 more days to complete the Robinson
Crusoe work. Even at its highest daily rate of2,535 tons of stone per day, Nelson
would have needed at least 7 more days to complete the Loosahatchie work, and at
least 11 more days to complete the Robinson Crusoe work.
Even viewed from the perspective of an "extended completion date," it was
reasonable to conclude on 9 February 2010, that Nelson would be unable to complete
the Loosahatchie and Robinson Crusoe work on time. If the contracting officer had
lifted the stop work order in its entirety on 9 February 2010, and assuming that Nelson
had already mobilized to the work sites, Nelson would have had only until 14 February
2010 (5 days after 9 February 2010) to complete the Loosahatchie work and only until
16 February 2010 (7 days) to complete the Robinson Crusoe work, but would have
7 This accepts (1) the Corps' concession that 19-22 October 2009 were excusable delay
days (gov't br. at 32); (2) as Nelson contends (app. br. at appended table), water
levels precluded Nelson from working on 23-24 October 2009, during which,
water levels aside, Nelson experienced problems with its equipment; and (3)
Nelson's determination that weather prevented it from working on 30 October
2009. The Robinson Crusoe calculation does not count mobilization to the chute
on 14 October 2009, because Nelson received the notice to proceed with the
Robinson Crusoe work on 15 October 2009, the next day.
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needed at least through 16 February 2010 (7 days after 9 February 2010) and most
likely through 26 February 2009 ( 17 days), to complete the Loosahatchie work, and at
least through 20 February 2010 (11 days after 9 February 2010) and most likely
7 March 2010 (26 days), to complete the Robinson Crusoe work. For all these
reasons, it was reasonable to conclude on 9 February 2010, that Nelson would be
unable to complete Loosahatchie or Robinson Crusoe work on time. Cf Empire
Energy Management Systems, Inc. v. Roche, 362 F.3d 1343, 1357-58 (Fed. Cir. 2004)
(affirming denial of appeal from termination of contract for default for failure to make
progress where contractor was 154 days from contract completion with only 106 days
to complete on time). Accordingly, the government's termination of the Loosahatchie
work and the Robinson Crusoe work was justified.
Nelson contends that ( 1) 20 days were not enough to complete either the
Loosahatchie work or the Robinson Crusoe work, (2) the follow-on contractor took
178 days to complete both the Loosahatchie and Robinson Crusoe work, (3) and that
the hump at Loosahatchie Dike No. 4 "never scoured out," so that "no days should
have been charged to Loosahatchie while the dike had to scour" (app. reply br. at 23).
None of those excuses Nelson's lack of progress. With respect to the first two, on
8 December 2009, Nelson told the Corps that it planned to place 4,800 tons of stone
per day. That statement means that at that rate, it would have taken Nelson only
6 days to place the 27 ,400 tons of stone for the Robinson Crusoe work, and only
7 days to place the 32,250 tons of stone for the Loosahatchie work, which means that
the Loosahatchie work and the Robinson Crusoe work could have been performed
within the 20 days allotted in the contract for each of those items of work. As for the
hump, the issue is not whether had it continued to perform, Nelson would have been
entitled to a time extension to wait for the hump to scour, or to a contract change to
address the lack of scour, but whether on 9 February 2010, it was reasonable to
conclude that Nelson, given its progress, would be unable to complete the
Loosahatchie work and the Robinson Crusoe work within the days remaining in their
respective contract completion periods even ifthere had never been any hump.
Citing Technocratica, ASBCA No. 44134 et al., 94-2 BCA ii 26,606, Nelson
contends that ''the [contracting officer], prior to termination, should have analyzed
progress problems against a specified completion date and adjusted to account for any
Corps-caused delays" (app. reply br. at 22). In converting a default termination to one
for convenience in Technocratica, the Board stated that "[t]he Government must
analyze progress problems against a specified completion date," and that "[w]e have
nothing of record in writing .. .to support the Government's contention that appellant's
performance or progress was considered against any specific 'extended' completion
date." 94-2 BCA ii 26,606 at 132,370. However, the United States Court of Appeals
for the Federal Circuit has explained that our inquiry is an objective one, requiring us
to consider whether the contracting officer's decision to terminate for failure to make
progress was reasonable given the events that occurred before the termination decision
was made. Empire Energy, 362 F.3d at 1357-58. The ultimate question is whether it
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was reasonable to conclude that the contractor would be unable to complete the work
on time. See id. at 1357. Reviewing de nova the totality of the circumstances, see
AEON Group, LLC, ASBCA Nos. 56142, 56251, 14-1BCA,35,692 at 174,760,
when the contracting officer terminated the contract for default on 9 February 2010, it
was reasonable to conclude that Nelson would be unable to complete the Loosahatchie
work and the Robinson Crusoe work on time.
With respect to ASBCA No. 58166, I respectfully dissent, and would simply set
a schedule for further proceedings.
Administ ative Judge
Armed Services Board
of Contract Appeals
I certify that the foregoing is a true copy of the Opinion and Decision of the
Armed Services Board of Contract Appeals in ASBCA Nos. 57201, 58166, Appeals of
Nelson, Inc., rendered in conformance with the Board's Charter.
Dated:
JEFFREY D. GARDIN
Recorder, Armed Services
Board of Contract Appeals
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