CDM Constructors, Inc.

ARMED SERVICES BOARD OF CONTRACT APPEALS
Appeals of -- )
)
CDM Constructors, Inc. ) ASBCA Nos. 60454, 60455, 60669
)
Under Contract No. W912PL-12-C-0022 )
APPEARANCES FOR THE APPELLANT: Bret S. Wacker, Esq.
Jeffrey M. Gallant, Esq.
Emily J. Baldwin, Esq.
Clark Hill PLC
Detroit, MI
APPEARANCES FOR THE GOVERNMENT: Michael P. Goodman, Esq.
Engineer Chief Trial Attorney
John F. Bazan, Esq.
Gilbert H. Chong, Esq.
Brian M. Choe, Esq.
Engineer Trial Attorneys
U.S. Army Engineer District, Los Angeles
OPINION BY ADMINISTRATIVE JUDGE SWEET
Appellant CDM Constructors, Inc. (CDM) 1 appeals the decision of the
contracting officer (CO) denying its request for an equitable adjustment (REA), and the
deemed denial of an REA. All three appeals concern the design and construction of a
water treatment plant (WTP). 2
ASBCA No. 60454 addresses the WTP's evaporation ponds (EPs), alleging that
CDM is entitled to an equitable adjustment and delay damages. In particular, CDM
alleges that the Army Corps of Engineers (Corps) constructively changed the contract
by compelling it to include one backup EP, to use a three million gallon per day (mgd)
average daily flow (ADF), and to use a 0.8 pan evaporation coefficient only if the
maximum water depth was three feet or less. (App. br. at 44-53)3 The Corps argues
1
CDM Constructors, Inc. 's parent company was CDM Smith. CDM Smith was
responsible for design, and CDM Constructors, Inc. was responsible for
construction (tr. 1/38). We refer to CDM Constructors, Inc. and CDM Smith
collectively as "CDM."
2
This decision only addresses entitlement.
3
The ASBCA No. 60454 complaint also alleges that there was a cardinal change,
defective specifications, and breach of a covenant of good faith and fair dealing
I
that the contract required those design elements (gov't br. at 22-24 ). For the reasons
discussed below, the Corps is correct about the backup EP, but not the ADF,
evaporation coefficient, and water depth. Therefore, CDM is entitled to an equitable
adjustment for any increased costs incurred as a result of having to use the Corps'
ADF, evaporation coefficient, and water depth, but not as a result of having to provide
a backup EP.
ASBCA Nos. 60455 and 60669 address the standby generator (generator),
alleging that CDM is entitled to an equitable adjustment under the Changes clause
because the contract contained defective specifications. 4 In particular, CDM alleges that
the Corps improperly rejected its design, which followed concept drawings in the
contract. (App. br. at 53-58) The Corps responds that the contract did not require CDM
to follow the concept drawings, which, in any event, were trumped by conflicting
contract provisions. For the reasons discussed below, CDM is correct. Thus, CDM is
entitled to an equitable adjustment for any increased costs incurred as a result of the
defective specifications.
FINDINGS OF FACT
I. Facts Common to All Appeals
1. On May 24, 2012, the Corps issued Request for Proposal No. W912PL-12-R-0018
(0018 RFP), for the design and construction of a WTP at Fort Irwin, California (R4, tab 9;
tr. 1/43, 4/126).
2. Under the 0018 RFP, it was CDM's responsibility to "design and construct
the [WTP] as described in the Request For Proposal (RFP) Documents contained
herein" (R4, tab 9 at 1, 729). 5 The RFP documents:
(60454, compl. ,r,r 53-66). However, CDM abandoned those allegations by
failing to raise them in its post-hearing brief. United Launch Services, LLC,
ASBCA No. 56850 et al., 16-1 BCA ,r 36,483 at 177,765 (failure to address
allegations from pleadings in post-hearing brief equated to abandonment of the
issue).
4
The ASBCA Nos. 60455, 60669 complaint also alleges that there was a non-disclosure of
superior knowledge, mutual mistake, and breach of the covenant of good faith and
fai,r dealing (60455, 60669, compl. ,r,r 41-63). However, CDM abandoned those
allegations by failing to raise them in its post-hearing brief. United Launch, 16-1
BCA ,r 36,483 at 177,765.
5
Citations to the Rule 4 files are to the consecutively-numbered pages unless
otherwise indicated.
2
1
[D]escribe[] the design work that shall not be changed, and
shall be included in the construction documents. All
remaining design work shall be performed by the
Contractor based on the design criteria as required by the
RFP. No deviations from the criteria will be allowed
unless prior approval is obtained from the Contracting
Officer's Representative.
(Id. at 1, 731-32) In particular, "General Design Requirements are contained in
[section 01 10 10], with Specific Design Requirements .. .identified in" appendix A (id. at
1,729). Section O1 10 10 described "the requirements for appearance, function, materials,
and types of construction in sufficient detail to enable engineering and design to be
completed by the Contractor" (id. at 1,731). Appendix A "is intended to guide the
completion of the design by establishing existing conditions, and desired character,
appearance, and function of the new construction" (id. at 1,730). Thus, section 01 10 10
and appendix A "shall define the design and performance criteria" (id. at 1,732).
3. Appendix X contained for information only (FIO) concept drawings from
CH2M Hill Constructors, Inc. (CH2M Hill)6 and Southern California Edison (SCE)7
(R4, tab 9 at 1,731, 6,679, 7,113), and stated:
Information in appendices below [including appendix X]
that are noted for information only (FIO) represent studies,
analyses, and designs previously developed for this project.
This information is made available to the contractor for its
use without any warranty of usefulness or suitability of
purpose.... Drawings and designs included in FIO
appendices shall NOT be considered "Drawings of Record"
or "For Construction". As the designer of record, all design
requirements are the responsibility of the contractor.
(Id. at 1,730) Similarly, appendix A stated that:
The concept drawings of Appendix A and this
specification section indicate processes required by the
DD1391 as well [as] additional requirements. These
concept drawings indicate estimated relationships and
approximate sizes of individual components for the
treatment facility. Drawings have been provided for
6
CH2M Hill was the privatized water operator for Fort Irwin (tr. 1/47).
7
SCE was the electrical utility serving parts of Southern California, including Fort Irwin
(tr. 2/10).
3
information only (FIO) from a 2009 partial design by
CH2M HILL Constructors, Inc. of the process required
that was based on a Design/Build/Operate business
process. See Appendix X. The design and FIO drawings
provided do not meet the full requirements of this
solicitation. The actual sizing of the tanks, pumps, piping,
buildings, etc. shall be determined by the Contractor
during his design.
(R4, tab 10 at 9,773)
4. Section 01 10 10 stated that "[t]he drawings and details provided by SCE
shall be utilized for pricing of this effort" (R4, tab 9 at 1,785).
5. Section 01 10 10 also contained the following Order of Precedence clause:
Where the various elements of the RFP are in conflict, the
following priority shall be used to establish precedence,
unless specifically noted otherwise:
a. Appendices A - I and Technical Specifications, where
furnished.
b. Section 01 10 10 DESIGN REQUIREMENTS, GENERAL.
c. Drawings.
(R4, tab 9 at 1,732)
6. On August 8, 2012, the Corps awarded Contract No. W912PL-12-C-0022
(0022 contract) to CDM based upon the 0018 RFP (R4, tab 7).
7. The 0022 contract contained the Federal Acquisition Regulation (FAR)
52.243-4, CHANGES (JUN 2007), clause under which the Corps had to provide CDM
with an equitable adjustment if there was any written or oral direction, instruction,
interpretation, or determination from the CO that caused a change (R4, tab 7 at 696).
II. Facts Unique to the EvaporatiorJ Ponds Appeal (ASBCA No. 60./54)
A. Background
8. A WTP produces wastewater. Because of Fort Irwin's isolated location in
the desert, there were limited options available for the disposal of that wastewater.
(Tr. 4/127) However, due to that desert location, it was advantageous to remove the
liquid component of the wastewater through natural evaporation in EPs, and then to
haul the remaining solid waste to a landfill. Therefore, the Corps decided to use EPs
4
to deal with the wastewater at Fort ltwin. (App. supp. R4, tab 134 at 173; tr. 1/61-62,
86-87)
9. The sizing of the EPs must take account of the fact that the net evaporation
rate-i.e., the rate at which water evaporates from the EPs minus the rate at which
water enters the EPs as precipitation-must equal or exceed the rate at which
wastewater flows into the EPs (inflow) over time (tr. 1/92-93, 2/183, 204, 4/129-30).
10. The measurement of the EPs' likely evaporation rate starts with a
determination of the pan evaporation rate. The pan evaporation rate measures the rate at
which water in a standardized test pan evaporates. That rate accounts for climatic factors
at that particular location. However, different bodies of water will experience different
evaporation rates at the same climatic location based upon their size, depth, salinity, and
water temperature. To account for those characteristics, the pan evaporation rate is
multiplied by an evaporation coefficient. (R4, tab 4 at 32-33; tr. 1/89-91)
11. On the other side of the equation, two factors-the ADF and the recovery
rate-determine the likely inflow. The ADF is the likely average rate per day at which
water enters the WTP, which is determined by user demand. That ADF is multiplied
by the remainder of the recovery rate-which is the percentage of the water entering
the WTP that leaves the WTP as treated water-to determine the likely inflow rate.
(R4, tab 4 at 31; tr. 1/91-92)
12. EPs require very little maintenance (tr. 1/85). While EPs can leak, such leaks
are rare and usually only take a few days to repair. Moreover, it is highly unlikely that
the EPs will fail completely during the life of the WTP. (Tr. 2/184, 3/30-34) However,
if the EPs fail or cannot be used for an extended period of time, the result would be
catastrophic for the WTP and Fort IIWin. Because net evaporation must equal or exceed
inflows over time, the WTP would have to be shut-down in order to avoid an overflow if
the EPs did not adequately function over an extended period of time. That, in turn,
would require Fort IIWin to close. To compound the problem, it would be difficult for
the Corps to obtain funding for any major repairs. (Tr. 2/204, 4/129-30)
B. The Contract Documents
1. Evaporation Pond Sizing and a Standby Evaporation Pond
13. The contract documents required CDM to design and build EPs (R4, tab 9
at 2,107). "Actual plant configuration shall be determined by the Contractor" (id.
at 2,113).
14. However, the Corps provided concept design requirements. The contract
documents stated that
5
Table 8 provides the Government's conceptual design unit
requirements. The Government's concept may be
incomplete and the Contractor shall provide a complete
system. What is identified in Table 8 is the Government's
expected minimum unit operations necessary. The
Contractor shall meet the quantities in Table 8 as a
minimum but additional units, if required to meet the
criteria herein, shall be provided.
(R4, tab 9 at 2, 113) Table 8 indicated "NUMBER OF PONDS ... 2 + 1 STANDBY.''
It did not mention standby capacity. (Id. at 2, 116) 8
15. The contract documents also indicated that "[a] total of approximately 11 acres
is allowed for the evaporation ponds as shown in the current layout, without prior approval
from the [contracting officer representative (COR)]. Any requirement above this area will
require Government approval and likely revision to the Environmental Assessment (EA)
before design approval is granted." (R4, tab 9 at 2107)9 Obtaining a revision to an EA was
a bureaucratic hurdle that could delay the project (tr. 1/116, 4/139).
16. The CH2M Hill drawings showed three EPs covering a total area of 10.8 acres
(R4, tab 9 at 6,681, 6,688, 7,077-80, 9,602; app. supp. R4, tab 175).
17. Reviewing the CH2M Hill drawings in conjunction with Table 8-which was
derived from the CH2M Hill drawings-a reasonable contractor would have realized that
one of the three EPs shown in the CH2M Hill drawing was not to be used in day-to-day
operations. Table 8 showed an overall recovery rate of 99.6 or 99.7 percent. (App. supp.
R4, tab 101 at 8-9; tr. 4/116, 141)10 At that recovery rate, at most, only two of the three
8
The WTP also generates a sludge of lime, which is siphoned off, and pumped to lime
sludge lagoons. In the lagoons, the water evaporates from the sludge, and the
Corps hauls the solids to a landfill (tr. 1/137-38). Wastewater also is pumped
from the lime sludge lagoons to the EPs (tr. 3/92). Table 8 required 1 + 1
standby lagoon. It also required standby units for other items, such as cartridge
filters, electro dialysis reversal (EDR) membrane treatments, treated water pump
stations, lime softening contact clarifiers, lime softening filtrations, reverse
osmosis (RO) feed water storage and pump stations, RO cartridge filters, RO
systems, and concentrate equalization basins. (R4, tab 9 at 2,114-17)
9
The EA is state approval to build on a certain area of land (tr. 1/115, 2/175).
10
To achieve that recovery rate-which was very high (tr. 1/44)-the Corps
contemplated using several consecutive processes to extract usable water.
Table 8 delineated the recovery rate for each process. Table 8 shows that the
EDR provided a 92 percent recovery rate. Wastewater then went to RO stage 1,
which provided an additional 58.8 percent recovery rate. Wastewater then went
6
EPs shown on the CH2M Hill drawings would be needed to ensure that inflows equaled
net evaporation (supp. R4, tab 101 at 8-9; tr. 4/127, 170). 11
18. The 0018 RFP initially required two assessments to evaluate the actual
daily demand performance and the maximum daily demand performance. Reflecting
the 99.6 or 99.7 percent recovery rate, the 0018 RFP stated that
[T]he Contractor shall demonstrate that the design of the
WTP material/mass balance achieves a minimum of99.6%
recovery efficiency at 6.0 MGD at the given requirements
for raw water quality range and treated water quality
requirements. For the range of design flows (2.0 to 2.5
MGD annual average daily flow; 0.8 MGD minimum daily
flow; and 5.4 maximum daily flow), the WTP
material/mass balance design shall be designed to exceed a
minimum of99% recovery efficiency.
(R4, tab 9 at 2,082; tr. 4/178)
19. However, the problems arose in this case from the fact that the Corps
decided to reduce the recovery rate during the solicitation phase, as reflected in
Amendment 8 (tr. 4/159). Amendment 8 amended the above paragraph to read that:
[T]he Contractor shall demonstrate that the design of the
WTP material/mass balance achieves a minimum of 99-=6%
recovery efficiency at 6.0 MGD at the given requirements
for raw water quality range and treated water quality
requirements. For the raage of design flows (2.0 to 2.5
~4GD 8:BfH:lal aYerage daily flow; 0.8 ~4GD m-inimam daily
flo~;.r; and 5. 4 maximam daily flow), the '.VIP
to the RO stage 2, which provided an additional 39.5 percent recovery rate.
Wastewater then went to a mechanical evaporator, which provided an
additional 85 percent recovery rate. Taken together, that provided a recovery
rateofabout99.7percent. (Supp. R4, tab71 at2,114-16, tab 101 at8-9;
tr. 4/176, 181)
11
Dr. Beth Gross-CDM's EP expert-opined that the CH2M Hill drawings could not
be based upon a 99. 6 or 99. 7 percent recovery rate because, at that recovery
rate, only one of the three EPs would be needed to balance inflows and net
evaporation (app. supp. R4, tab 180 at 539, tab 187 at 579; tr. 3/18, 72-74).
However, that merely shows that CH2M Hill may have conservatively designed
the EPs with excess capacity.
7
materiatrmass ba:10.flee desigt1: sha:11 be desigt1:ed to exeeed a
miaimam of 99% reeo:very effieieaey.
(R4, tab 10 at 10,353) (Strikeout in original) On the one hand, reducing the recovery
rate benefitted contractors by reducing the risk and cost of designing such an efficient
WTP. On the other hand, reducing the recovery rate increased the amount of
wastewater flowing into the EPs. That meant that the contractor had to modify another
EP parameter-such as increasing the EP surface area-in order to maintain a balance
between inflows and net evaporation. (App. supp. R4, tab 153 at 236, tr. 1/44,
4/178-79, 211)
2. Average Daily Flow
20. The contract documents did not require CDM to use any particular ADF
(R4, tab 9).
21. The contract documents stated that the CH2M Hill drawings were based
upon a 3.0 mgd ADF. However, the contract documents stated that "[a]s designer's
collect data and develop the actual system, all numerical data used to support the
design shall be from the Contractor's inquiries and research." (R4, tab 9 at 2,107)
22. The contract documents stated that the current ADF was 2.44 mgd, and that
the ADF in 2010 was 2.26 mgd (R4, tab 9 at 1,727, 4,332). Dr. Beth Gross-CDM's
EP expert-opined that it was industry standard to use historic flow data to develop
the ADF (app. supp. R4, tab 180 at 540, tab 187 at 576; tr. 3/40, 43-44, 67-68). We
find this uncontested testimony credible.
23. As noted above, Amendment 8 eliminated one reference to the 2.0 to 2.5
mgd ADF. However, it continued to provide that, in measuring actual daily demand
performance, "the flowrates ranges include: Average flow in the range of 2.0 to 2.5
MGD for well production rates; minimum flows at 0.8 MGD[;] and maximum
flowrates near 5.4 MGD." (R4, tab 10 at 10,354)
3. Evaporation Coefficient and Water Depth
24. The contract documents did not require CDM to use any particular
evaporation coefficient for any particular water depth (tr. 4/192).
8
C. Performance
25. After award, CDM submitted several EP designs, including a 10 percent
design, a 65 percent design, and a 100 percent design (R4, tab 4 at 109). CDM used
the CH2M Hill drawings to create its EP design, assuming that none of the EPs were
backup EPs (tr. 2/168).
26. Dr. Gross opined that it was standard industry practice to construct WTPs
without a backup EP. Dr. Gross testified that she was unaware of any other WTPs that
have used a backup EP. (App. supp. R4, tab 180 at 537; tr. 3/25-26) However,
Dr. Gross conceded that she "could not find any reference in the technical literature to
a standby pond" (app. supp. R4, tab 180 at 541). Nor had she ever seen another
contract that has used the term standby EP (tr. 3/116). We find that this term as used
within the trade does not differ from the standard dictionary definition found in the
New Oxford American Dictionary, 1699 (3rd ed. 2010), discussed in greater detail
below.
27. The 65 percent and 100 percent designs used a 3.0 mgd ADF, a five-foot
maximum water depth, a three-foot average water depth, and a 0.8 evaporation
coefficient (R4, tab 4 at 109).
28. On March 6, 2013, CDM submitted a technical memorandum explaining its
design. Regarding the evaporation coefficient and water depth, the March 6, 2013
memorandum explained that
In general, a conservative factor of 0. 7 is typically used to
convert pan data to freshwater "lake" evaporation rates,
whereas greater coefficients are used for smaller, shallower
ponds. This coefficient generally ranges from 0. 7 to 0.95,
depending on the size of the pond or lake (see attached
[pages] from "Design Characteristics for Evaporation
Ponds in Wyoming"). For purposes of sizing the
evaporation ponds, a conservative pan evaporation
coefficient of 0.8 was applied by CDM Smith to account
for the smaller pond size, shallow depths (generally less
than 3 feet) and warm water temperatures (including
average discharge temperature to the EPs of 90 [degrees
Fahrenheit].
(R4, tab 47 at 14,891) The Design Characteristics for Evaporation Ponds in Wyoming
report referenced above indicated that a reasonable coefficient for EPs in semi-arid
conditions was 0.7 to 0.95, depending upon EP size (id. at 14,902). The March 6, 2013
9
memorandum proposed using a five-foot maximum water depth and a three-foot average
water depth (id. at 14,890-93).
29. The Corps rejected the 10 percent design, the 65 percent design, the
100 percent design, and the March 6, 2013 technical memorandum (supp. R4, tab 105
at 73; tr. 4/123, 133-34). In particular, the Corps rejected the evaporation coefficient.
Moreover, the Corps rejected the designs and memorandum because they lacked a
backup EP-meaning an EP that was operational, but not in use unless or until there was
an emergency. 12 (R4, tab 40; supp. R4, tab 105 at 73, tr. 1/112-13, 118, 2/194)
30. Converting one of the three EPs to a backup EP, while maintaining three
equally-sized EPs, would have required CDM to increase the surface area to 17.2
acres, which would have exceeded the EA (app. supp. R4, tab 175; tr. 1/113-15).
31. After several discussions, CDM submitted a revised 100 percent design in a
May 17, 2013 memorandum (R4, tab 37; tr. 1/117-21).
32. The May 17, 2013 memorandum proposed three EPs-with one being
rotated out of service every year-on 11 acres. To achieve those parameters, CDM
reduced the ADF from 3.0 mgd to 2.25 mgd. The justification the May 17, 2013
memorandum offered for using the 2.25 mgd ADF was that it was "mid '2.0 to 2.5
MGD' from Appendix A." (R4, tab 36 at 14,503-07; tr. 1/121-24) Dr. Gross opined
that it was reasonable for CDM to decrease the ADF from 3.0 mgd to 2.25 mgd
because of the multiple measures of conservativism that the Corps added to the
contract (app. supp. R4, tab 180 at 540, tab 187 at 576; tr. 3/40, 43-44, 67-68). The
proposed evaporation coefficient was 0.8. While the proposed maximum water depth
was five feet, the May 17, 2013 memorandum indicated that the water depth never
actually would exceed three feet (R4, tab 35 at 14,503-07).
33. The Corps responded to the May 17, 2013 memorandum in two letters
dated May 20, 2013, and May 22, 2013. Those letters questioned the lack of a standby
EP, the ADF, and the evaporation coefficient relative to the water depth. (R4, tabs 33,
35) Regarding the ADF in particular, the letters explained that:
12
CDM often refers to an operational, but not in use, EP as a "spare" EP (see, e.g.,
app. br. at 3). However, as CDM correctly recognizes, the term "spare" is
interchangeable with the term "backup" (id. at 31, 50; see also ROGET'S INT'L
THESAURUS, 822, 1222 (4th ed. 1977) (identifying both the term backup and
spare as being synonymous with the term substitute)). For ease of reference
and consistency, we use the term backup EP-instead of spare EP-to describe
the required EP that is operational, but not in use except in an emergency.
10
The contract states that the current average daily flow is
2.44 mgd and the average daily flow range of well
production is 2.0 to 2.5 mgd. This is based on historical
data for the Water Treatment Plant (WTP) and not listed as
the design capacity to support future demands. WTP
design manuals and regulatory permits .. .indicate that new
treatment systems be sized based on future demands.
(R4, tab 35 at 14,498-99) Regarding the evaporation coefficient and water depth in
particular, the letters explained that "[s]ince the 0.8 coefficient is assumed based on
shallow depths (generally less than 3 feet) being maintained [in the] ponds, and the
design actually reaches 5 foot depth without precipitating solids, it is questionable that
the 0.8 coefficient would still be appropriate" (R4, tab 33 at 14,494). Dr. Gross opined
that CDM's use of a 0.8 evaporation coefficient for EPs whose water depth generally
was less than three feet-but occasionally was up to five feet-was appropriate, and
that the Corps' directive that an evaporation coefficient of 0.8 could be used only for
water depths of three feet or less was not supported by technical data or scientific
evidence (app. supp. R4, tab 180 at 539; tr. 3/38-40). We find this testimony credible.
34. On May 22, 2013, CDM sent the Corps a notification of change. In the
notification of change, CDM stated that:
The essential issues center on the insistence by the
Government that the appropriate design parameters are:
3 MGD Average Daily Flow (ADF) and that the
Government's definition of "standby" does not allow for
use of the "standby" pond during routine maintenance and
cleaning of a pond. This is inconsistent with the accepted
engineering definition of 2 + I Standby. Also, the
Government is not accepting our evaporation rate design
factors that are based upon site specific data and literature
describing standard industry practices.
(R4, tab 34 at 14,496)
35. The Corps responded by letter dated May 29, 2013. The May 29, 2013
letter "constitutes formal direction" to meet three relevant design elements. First, the
Corp directed CDM to include one backup EP. Second, the Corps directed CDM to
use a 3 mgd ADF. Third, the Corps directed CMD to use:
Evaporation pond factors of 0.8 for pan evaporation
coefficient, if operated with smaller pond size and shallow
depth of 3' or less, and actual calculated salinity correction
11
factor (both as stated in 17 May Evaporation Ponds Design
Analysis memo). If design size or operation varies, please
vary factors as necessary.
(R4, tab 32 at 14,492)
36. CDM responded by submitting a final design package. CDM reduced the
surface area required for the EPs from 17.2 acres to 13.5 acres by revising its design to
contain 8 EPs that would be in day-to-day use and one backup EP. Doing so, CDM
was able to meet the Corps' ADF, evaporation coefficient, and water depth
requirements. (R4, tabs 172, l 75~ tr. 1/129-30) The 13.5 acres did not require an EA
amendment because CDM moved other equipment to keep the entire WTP within the
EA (tr. 1/133, 4/139-40). 13
37. The Corps accepted the final design package (tr. 1/136).
38. The ADF has decreased over the last five years. The year prior to the
hearing, the ADF was 1.7 mgd. (Tr. 1/142-43)
III. Facts Unique to the Generator Appeals (ASBCA Nos. 60455 and 60669)
A. The Southern California Edison Electrical Service Requirements
39. In 2006, SCE published the Electrical Service Requirements (ESR). The
ESR were "issued for the guidance and assistance of electrical contractors ... engaged in
the installation and design of electrical service wiring and service equipment." (R4,
tab 51 at 15,022) The ESR were guidelines with which SCE customers in Southern
California had to comply in order to receive services. However, SCE often waived the
ESR. (Tr. 2/64-65, 108-10, 4/32)
40. Paragraph 12 of the ESR stated that:
When a customer has a standby generator to supply all of
their load during an Edison system outage, the generator
13
In the final design, there were only two lime sludge lagoons, both of which were in
use. Antonia Ortiz-the Corps' technical design manager and an expert in
WTPs-testified that the Corps initially complained about both lagoons being
in use, but "that just kind of fell by the wayside." Because liquid waste can go
from the lagoons to the EP, the lagoons-unlike the EPs-are not a critical
component whose failure will cause the WTP and Fort Irwin to shut down.
CDM provided a backup unit for the other items for which Table 8 required a
standby unit. (Tr. 1/133, 4/152)
12 J
I
shall be connected to the load by a double-throw switch or
automatic relays and switches which will isolate the load
from the Edison system before the generator is connected
to the load. When the Edison service is re-energized, the
generator will then be isolated from the load before the
load is reconnected to the Edison system.
(R4, tab 51 at 15,023)
B. Contract Documents
41. The contract documents required a standby generator connected to the
normal site power by an automatic transfer switch (ATS) (R4, tab 9 at 2,161). The
generator connection design had to satisfy two potentially relevant requirements.
42. First, under appendix A, § 9.1.3, "[m]ultiple generators and transfer
switches will be required when physical distances exceed 200 feet to load"
(R4, tab 9 at 2,161).
43. Second, section 01 10 10 provided that "[a]ll work shall be designed
and constructed to meet all state and federal codes, standards and law" (R4, tab 9
at 1,732). Similarly, section 01 10 10 stated that "[t]he applicable building codes
and standards shall be used as the minimum criteria to develop the construction
documents for areas of work not specifically defined" (id.). Regarding the
electrical system in particular, appendix A stated that:
All electrical equipment shall be installed in accordance
with NFPA 70 (National Electrical Code), ANSI C2
(National Electrical Safety Code), California's Energy
Efficiency Standards for Residential and Nonresidential
Buildings Title 24, Part 6, of the California Code of
Regulations, all applicable UFC's, ETL's, TM's and other
DOD and national standards as applicable to the system
under consideration.
(Id. at 2,159)
44. The RFP initially contained the CH2M Hill drawings, but not the SCE
drawings (tr. 1/146-47). The CH2M Hill drawings showed a primary 12 kilovolt (kv)
network and a secondary 480 volt (v) network (tr. 1/160-61, 236, 2/22). According to the
CH2M Hill drawings, electricity would come into the WTP from an SCE substation on
the primary network during normal operations. After the electricity passed through an
ATS and traveled along the primary network, transformers would step the voltage down
13
I
to 480v, so that the electricity could travel on the secondary network to where it was
needed. If the A TS sensed that the power from SCE was interrupted, it would send a
signal to the 480v generator to start. The generator was connected to a transformer,
which increased the voltage to 12kv. The transformer then connected to the ATS,
through which the electricity would flow to the primary network. The A TS ensured that
electricity only came from one source at a time, and did not back feed from the generator
onto the SCE system. (R4, tabs 136, 145; tr. 1/147-50, 218)
45. There was a pre-bid request for information (RFI) regarding the CH2M Hill
drawings from another offeror besides CDM. The RFI indicated that appendix A of
the RFP "states 'Multiple generators and transfer switches will be required when
physical distance exceed 200 feet to load.' The initial concept drawings by CH2M
(90-E-501) indicate one generator which connected into the SCE distribution system.
Please confirm that Appendix A takes precedence over the CH2M design." The RFI
did not indicate that there was an actual conflict because it did not state that the
physical distance from the generator to the load on the CH2M Hill drawing exceeded
200 feet. The Corps' response did not acknowledge a conflict either. Rather, the
Corps merely responded, "[p]lease see Section 01 10 10 paragraph 2.8 Conflicts in
RFP Criteria for precedence required." (App. supp. R4, tab 148 at 220; tr. 2/54-55)
46. Nor may it be inferred from the Corps' response to the RFI that it read the
RFI as establishing that there was a conflict because, the same day that the Corps
responded to the RFI, it amended the RFP to add the SCE drawings, which were
substantially similar to the CH2M Hill drawings. By issuing drawings showing a
single generator using a single ATS and primary network to distribute electricity after
the RFI quoting appendix A,§ 9.1.3, the Corps demonstrated that it did not read the
RFI as establishing that such a design conflicted with appendix A, § 9.1.3. (App.
supp. R4, tab 152; tr. 1/146-47, 153-55, 2/16-19)
47. That conclusion was correct. The SCE drawings were consistent with
appendix A,§ 9.1.3 because the distance to the load was not an issue when using the
primary network (tr. 4/47-48). Moreover, while the SCE drawings only showed one
generator and one ATS, the distance from the generator to the A TS-which was the
load-was only about 100 feet (app. supp. R4, tab 152; tr. 1/153-56, 2/16-20, 89-90).
C. Pe,formance
48. After award, CDM submitted a 10 percent electrical design. The design
followed the concept drawings. In particular, the design-like the drawings-showed
one generator connected to the primary network by one ATS. (R4, tab 6 at 294; app.
supp. R4, tab 162; tr. 1/157-58, 2/95) However, the design did not contain any
distance measurements. In particular, it did not include any measurement of the
distance from the generator to the load (R4, tab 6 at 294; tr. 2/32, 4/54).
14
49. The fact that the concept drawings and 10 percent design showed the
generator connected to the primaiy network did not conflict with ESR 112 because the
drawings and the design showed the generator connected to the load with an A TS that
isolated the load from the SCE system before the generator was connected to the load
(tr. 1/227-28, 2/30, 71-72, 144, 146). 14 Indeed, it was reasonable to interpret the ESR
in light of the SCE drawings because the SCE drawings constituted SCE applying its
guidelines to this particular electrical system (tr. 1/232, 2/60, 127, 130).
50. Representatives from CDM, the Corps, and SCE attended a meeting to
discuss the 10 percent design. As the Corps subsequently documented, the SCE
representative indicated at the meeting that
The emergency generator will not be able to be installed as
originally shown. At the time of the original drawing years
ago it was not necessaiy to submit the information through
the generation group. Per SCE's new standards this
installation would have to be submitted to the generation
group and this type of installation will not be accepted.
The Corps did not mention ESR 1 12 or appendix A, § 9.1.3. (R4, tab 6 at 295)
51. In. response, CD M recommended using the secondaiy network to feed
electricity from the generator to two locations, each with an ATS. Using the
secondary network raised concerns about the distance to the load. (Tr. 4/47-48)
Moreover, the proposed design violated appendix A,§ 9.1.3 because one of the two
locations at which the secondaiy network would feed into the load was more than
200 feet from the generator. Nevertheless, the Corps approved the proposed design.
(App. supp. R4, tab 166 at 398; tr. 1/162-63, 218, 2/27-29, 4/51)
JV Procedural History
52. Abe Nejad-CDM's scheduling expert-prepared a time impact analysis on
Januaiy 27, 2014, which showed that the rejection of the EP caused a 51-day delay to the
WTP completion date (app. supp. R4, tab 178; tr. 3/144-45) However, Mr. Nejad conceded
that, if there was a Corps-caused delay and a CDM-caused delay in the EP design, then that
would constitute concurrent delay that would not be compensable (tr. 3/199, 4/10).
14
Derrick Collier-the Corps' electrical engineer for the project-testified that the
10 percent design violated ESR 1 12 because "you can't utilize the primaiy
distribution system and be isolated from it" (tr. 4/54). That testimony is
inconsistent with ESR 112, which acknowledged that the load can be isolated
from the SCE system by an ATS (R4, tab 51 at 15,023).
15
53. CDM subsequently submitted REAs regarding the EPs (R4, tabs 4, 29) and
the generator (R4, tab 6).
54. On July 22, 2015, CDM submitted a claim for changes in the EPs and the
generator design (R4, tab 3).
55. On May 6, 2016, the CO issued a final decision, rejecting the generator
claim (R4, tab 2). The CO did not issue a final decision on the EPs claim, and that
claim is deemed denied.
56. These appeals followed.
DECISION
CDM has the burden of proving that there was a constructive change or a
defective specification by a preponderance of the evidence. Amos & Andrews
Plumbing, Inc., ASBCA No. 29142, 86-2 BCA ,r 18,960 at 95,738 (citing Teledyne
McCormick-Selph v. United States, 588 F.2d 808 (Ct. Cl. 1978)). As discussed below,
it has satisfied that burden in part, and has not satisfied it in part.
I. Evaporation Ponds (ASBCA No. 60-15-1)
In particular concerning the EPs, CDM has met its burden of showing a
constructive change regarding the ADF, evaporation coefficient, and water depth, but
has not met its burden regarding the backup EP. In order to establish that there was a
constructive change, a contractor must show that: ( 1) an official compelled it to
perform work not required under the terms of the contract; (2) the official directing the
change had contractual authority to alter the contractor's duties unilaterally; (3) the
official enlarged the contractor's performance requirements; and (4) the added work
was not volunteered, but resulted from the official's direction. A/fair Dev. Co.,
ASBCA Nos. 53119, 53120, 05-2 BCA ,r 32,990 at 163,515. "Where as a result of the
Government's misinterpretation of contract provisions a contractor is required to
perform more or different work, or to higher standards, not called for under its terms,
the contractor is entitled to equitable adjustments pursuant to the Changes Article,
including extensions of time." Emerson-Sack-Warner Corp., ASBCA No. 6004, 61-2
BCA ,r 3248 at 16,827.
In determining what work a contract requires, "clear and unambiguous [contract
provisions] must be given their plain and ordinary meaning, and we may not resort to
extrinsic evidence to interpret them." Coast Fed Bank, FSB v. United States, 323 F.3d
1035, 1040 (Fed. Cir. 2003) (en bane) (citations omitted). "An ambiguity exists when
a contract is susceptible to more than one reasonable interpretation." E.L. Hamm
16
I
I
& Assocs., Inc. v. England, 379 F.3d 1334, 1341 (Fed. Cir. 2004). "To show an
ambiguity it is not enough that the parties differ in their respective interpretations of a
contract term. Rather, both interpretations must fall within a ·zone of
reasonableness."' NVT Techs., Inc. v. United States, 370 F.3d 1153, 1159 (Fed. Cir.
2004). As we have held:
Determining whether ... differing interpretations are
reasonable begins with an examination of the plain
language of the contract, construing the contract so as to
effectuate its spirit and purpose giving reasonable meaning
to all parts of the contract. In order to fall within the zone
of reasonableness, a party's interpretation must be
logically consistent with the contract and the parties'
objectively ascertainable intentions.
ECCI-C Metag, fl~ ASBCA No. 59031, 15-1 BCA ,r 36,145 at 176,418 (citations and
quotations omitted).
"[T]he language of a contract must be given that meaning that would be derived
from the contract by a reasonably intelligent person acquainted with the
contemporaneous circumstances." Hol-Gar Mfg. Corp. v. United States, 351 F.2d 972,
975 (Ct. Cl. 1965). Thus:
We must seek to put ourselves in the position of appellant
at the time he bid on the contract, i.e., we must seek the
meaning that would be attached to the language by a
reasonably intelligent bidder in the position of appellant,
who would be expected to have the technical and trade
knowledge of his industry and to know how to read and
interpret technical engineering specifications and perform
construction work in accordance with such specifications.
Adrian L. Roberson, db a Roberson Constn1ction Co., ASBCA No. 6248, 61-1 BCA
,r 2857 at 14,915.
"Trade practice and custom illuminate the context for the parties' contract
negotiations and agreements." Metric Constn,ctors, Inc. v. NASA, 169 F.3d 747, 752
(Fed. Cir. 1999). Before we can conclusively declare a contract ambiguous or
unambiguous, we must consult the context-including trade practice and custom-in
which the parties exchanged promises. However, a contracting party cannot invoke
trade practice and custom to create an ambiguity where a contract was not reasonably
susceptible to differing interpretations at the time of contracting. "Trade practice
17
evidence is not an avenue for a party to avoid its contractual obligations by later
invoking a conflicting trade practice." Id.
As discussed below, the contract unambiguously required a backup pond, but
did not require a particular ADF or evaporation coefficient for a particular water depth.
Thus, there was no constructive change regarding the backup EP, but there was a
constructive change regarding the ADF, evaporation coefficient, and water depth.
A. Backup Evaporation Pond
There was not a constructive change when the Corps compelled CDM to
provide a backup EP that was operational, but not in use except in an emergency
because the plain language of the contract documents required CDM to provide at least
one backup EP. Table 8 required at least one "STANDBY'' EP (finding 14). The
dictionary definition of the word "standby" is "readiness for duty or immediate
deployment. ... a person or thing ready to be deployed immediately, especially if needed
as a backup in an emergency." NEW OXFORD AM. DICTIONARY, 1699 (3rd ed. 2010).
Thus, by using the word standby to modify the word pond, Table 8 plainly required a
backup EP that was operationally ready for duty, but not yet deployed unless or until
needed for an emergency.
CDM correctly argues that context and the parties' intentions may be more
important than dictionary definitions in determining plain meaning (app. br. at 43);
Metric ConstnJctors, 169 F.3d at 752. However, the context in which the parties used
the term standby-namely the CH2M Hill drawings and Table S's recovery rates-
confirms that they intended the term standby to have its usual meaning as a backup.
The CH2M Hill drawings showed three EPs, covering a total area of 10.8 acres
(finding 16). When read in the context of the 99.6 or 99.7 percent recover rate
provided for in Table 8-which was based upon the CH2M Hill drawings-a
reasonably intelligent contractor would understand that at least one of the CH2M Hill
drawings' three EPs was a backup EP (finding 17).
As context, CDM points to the fact that three EPs capable of balancing inflows
and net evaporation would not fit within the 11 acres for which there was an EA if one
of the EPs was a backup EP (app. br. at 28-29; app. reply br. at 8-9). That argument
incorrectly assumes that the contract documents limited CDM to three EPs. While
Table 8 indicated that the number ofEPs was "2 + 1 STANDBY," the contract
documents also stated that "[w ]hat is identified in Table 8 is the Government's
expected minimum unit operations necessary .... [A]dditional units, if required to meet
the criteria herein, shall be provided." (Finding 14) Thus, nothing in the contract
documents prohibited CDM from including more than three EPs in its design. And
indeed, CDM ultimately was able to accommodate a backup EP within the EA by
18
using nine EPs (finding 36). As a result, the area available within the EA was
consistent with a backup EP.
Nor did the term standby have a customary meaning within the trade that differs
from the dictionary definition. On the contrary, CDM's EP expert testified that she
was unaware of any reference to the term standby EP in the technical literature or its
use in any other contracts. Rather, she opined that it was not standard industry
practice to construct EPs with a backup EP. (Finding 26) However, "evidence that
some practitioners customarily accomplish tasks differently from the manner called for
by the contract will not overcome the clear language of the contract." Metric
Constructors, 169 F.3d at 752. 15
CDM also argues that Table 8 merely required standby capacity in the EPs
(app. br. at 45). That reading of Table 8 does not fall within the zone of
reasonableness. Table 8 does not even mention capacity. Rather, the word standby
modifies the word pond. (Finding 14) Thus, by its plain language, Table 8 required
one standby EP; not any particular standby capacity.
CDM also relies upon the Environmental Protection Agency's (EPA's)
definition of the word standby as "the period of time that an impoundment is not
accepting uranium byproduct material or tailings but has not yet entered final closure''
(app. br. at 46; 40 C.F .R. § 61.251 (k) ). However, that definition is consistent with the
dictionary definition of the word standby, albeit applied to modify a period of time
instead of a physical structure (id.). The EPA definition indicates that the standby
period-i.e., the period of time that an impound is ready for duty, but not yet deployed
unless or until needed for an emergency-is when it is not accepting uranium
by-product or tailings but has not yet entered final closure under EPA regulations.
Because the word standby modifies a physical structure (i.e., an EP) instead of a
period of time here, the plain meaning of the contract documents required CDM to
provide a backup EP that was operationally ready for duty, but not yet deployed unless
or until needed for an emergency. Thus, there was no constructive change when the
Corps compelled CDM to provide a backup EP. 16
15
It is not our place to second-guess the soundness of the Corps' decision to require a
backup EP. Savantage Fin. Servs., Inc. v. United States, 595 F.3d 1282, 1286
(Fed. Cir. 2010). In any event, we note that, while the probability of an EP
failure might be low, the impact of any such failure likely would be
catastrophic, leading to the closure of Fort Irwin (finding 12).
16
CDM also points to the fact that it did not provide a backup lime sludge lagoon,
despite the fact that Table 8 called for a standby lagoon (app. br. at 50).
However, as the Corps explains, it objected to the lack of a backup lagoon, but
did not insist upon strict compliance with the contract requirements in that case
because, unlike the EPs, the lagoons were not a critical component whose
19
B. Average Daily Flow
There was a constructive change when the Corps compelled CDM to utilize a
3.0 mgd ADF. The contract documents stated that the CH2M Hill drawings were
based upon a 3.0 mgd ADF, but it did not require CDM to use that-or any
particular-ADF (finding 21). On the contrary, the contract documents stated that the
CH2M Hill drawings were FIO, and it was up to the contractor to determine sizing
(finding 3). Because the contract documents did not require the use of any particular
ADF, the Corps constructively changed the contract documents when it compelled
CDM to use a 3.0 mgd ADF. Indeed, because the contract documents required CDM
to use an ADF in the range of 2.0 to 2.5 mgd to measure actual daily demand, it was
reasonable for CDM to conclude that it could use an ADF within that range-namely a
2.25 mgd ADF (finding 23).
The Corps argues that CDM's constructive change claim regarding the ADF
must fail because it was CDM-not the Corps-that changed the ADF from the
3.0 mgd that CDM had proposed in its 65 percent and 100 percent designs to the
2.25 mgd that CDM proposed in its revised 100 percent design (gov't br. at 26; gov't
reply br. at 7). That is beside the point. A constructive change occurs when the
government compels a contractor to perform work not required under the terms of the
contract. Affair Dev., 05-2 BCA ,r 32,990 at 163,515. Thus, the relevant change was
when the Corps required CDM to use a 3.0 mgd ADF that was not called for by the
contract documents (findings 20, 35). It was not when CDM changed the ADF from
an earlier design. The earlier ADFs proposed by CDM were not contract
requirements. On the contrary, the Corps had rejected those earlier designs
(finding 29). Absent a contract requirement or an approved design to the contrary,
CDM was free to select an ADF, so long as it was sound and supported, which was the
case here. 17
failure likely would lead to the closure of Fort Irwin. Moreover, for all the
other design elements requiring a standby unit, CDM provided a backup unit.
(Finding 36) CDM argues that those elements are different from EPs because
they are mechanical and thus prone to failure (app. br. at 50). However,
nothing in the language of the contract documents evidences a mutual intent to
draw such a distinction.
17
The Corps does not-and could not-argue that the 2.25 mgd ADF was unsupported
or unsound. On the contrary, Dr. Gross testified that the 2.25 mgd ADF was
reasonable, and the evidence shows that the ADF actually has been lower than
2.25 mgd (findings 33, 38). Moreover, the contract documents contained
historical data showing that the ADF was below 3.0 mgd ADF. Dr. Gross
testified that historical data is an industry-accepted basis for determining ADF.
(Finding 22) Further, the contract documents themselves supported a 2.25 mgd
20
C. Evaporation Coefficient and the Water Depth
There also was a constructive change when the Corps compelled CDM to use a
0.8 evaporation coefficient only if the maximum water depth was three feet or less. 18
The contract documents did not require CDM to use any particular evaporation
coefficient for any particular water depth (finding 24). Therefore, the Corps
constructively changed the contract documents when it compelled CDM to use a 0.8
evaporation coefficient only if the maximum water depth was three feet or less. 19
As with the ADF, the Corps argues that it was CDM-not the Corps-that
changed the evaporation coefficient relative to the water depth from that proposed by
CDM in its March 6, 2013 memorandum (gov't br. at 32). That argument is even
weaker than the Corps' argument regarding the ADF. First, it suffers from the same
defect discussed above regarding the ADF. Namely, it fails to recognize that the
relevant change for purposes of establishing a constructive change was when the Corps
compelled CDM to perform work not required by the contract documents; not when
CDM purportedly changed the coefficient relative to the water depth from that CDM
proposed in the rejected March 6, 2013 memorandum.
ADF by requiring CDM to use an ADF in the range of 2.0 to 2.5 mgd to
measure actual daily demand (finding 23). That CDM had proposed a more
conservative 3.0 mgd ADF earlier does not establish that the subsequent
2.25 mgd ADF was unsound because the revised 100 percent design increased
conservativism elsewhere (findings 27, 32).
18
The Corps improperly seeks to segregate CDM's evaporation coefficient claim from
its water depth claim in an attempt to argue that CDM voluntarily used a 0.8
evaporation coefficient (gov't reply br. at 2-3, 8). The March 6, 2013
memorandum voluntarily proposed using a 0.8 evaporation coefficient for a
maximum water depth of five feet (finding 28). The Corps rejected that
proposal, directing CDM to use a 0.8 evaporation coefficient only if the
maximum water depth was three feet or less (findings 29, 33, 35). Thus, it was
not the evaporation coefficient alone that was compelled, but rather the
evaporation coefficient relative to the ·water depth.
19
The Corps does not-and could not-argue that the use of a 0.8 evaporation
coefficient for EPs with a maximum water depth of five feet was unsound or
unsupported. On the contrary, Dr. Gross testified that a 0.8 evaporation
coefficient for EPs with a maximum water depth of five feet was reasonable
(finding 33). Moreover, CDM supported its evaporation coefficient by citing
the Design Characteristics for Evaporation Ponds in Wyoming, which indicated
that a reasonable evaporation coefficient was in the range of 0. 7 and 0.95
(finding 28).
21
Moreover, the Corps' argument regarding the evaporation coefficient and water
depth is even weaker than its argument regarding the ADF because it was the Corps-
not CDM-that sought to change the evaporation coefficient relative to the water
depth from that proposed in CDM's rejected proposal. In the March 6, 2013
memorandum, CDM proposed using a 0.8 evaporation coefficient for EPs that had a
maximum water depth offive feet and a usual water depth of three feet or less
(finding 28). It was the Corps-not CDM-that changed that criteria by compelling
CDM to use a 0.8 evaporation coefficient only for EPs that had a maximum water
depth of three feet or less (findings 29, 33, 35). The Corps justified that requirement
by stating that, "[s]ince the 0.8 coefficient is assumed based on shallow depths
(generally less than 3 feet) being maintained [in the] ponds, and the design actually
reaches 5 foot depth without precipitating solids, it is questionable that the 0.8
coefficient would still be appropriate" (finding 33). However, in that statement, the
Corps improperly compared apples (i.e., the March 6, 2013 memorandum's proposed
five foot ma.ximum water depth) with oranges (i.e., the March 6, 2013 memorandum's
proposed three feet or less general or usual water depth) to call into question the
March 6, 2013 memorandum's evaporation coefficient by creating an illusory
inconsistency. Because the Corps was compelling CDM to use an evaporation
coefficient relative to the water depth that was not called for by the contract
documents-or even by CDM' s rejected March 6, 2013 design memorandum-there
was a constructive change.
The Corps also argues that CDM failed to provide adequate notice (gov't br. at
29-32). That is incorrect. While the May 22, 2013 notice of change focused upon the
standby EP and ADF issues, it stated, "[a]lso, the Government is not accepting our
evaporation rate design factors" (finding 34). That provided adequate notice that
CDM considered the evaporation coefficient relative to the water depth requirement to
be a constructive change that CDM did not voluntarily perform.
Similarly, the Corps' argument that CDM voluntarily changed the evaporation
coefficient relative to the water depth because the Corps merely provided feedback
instead of direction is incorrect (gov't reply br. at 18). After the notice of change, the
Corps issued the May 29, 2013 letter, which-by its own terms-"constitutes formal
direction" to use a 0.8 evaporation coefficient only for water depths of three feet or
less (finding 35) (emphasis added). Therefore, CDM did not voluntarily use a 0.8
coefficient only for water depths of three feet or less. 20
20
There was no compensable delay because there was concurrent contractor-caused
delay (i.e., failing to include a backup EP) that was intertwined with the
government-caused delays (i.e., changes to the ADF, coefficient, and water
depth requirements) (finding 52). Sauer, Inc. v. Danzig, 224 F.3d 1340, 1348
(Fed. Cir. 2000}; Celesco Indus., Inc., ASBCA No. 21928, 81-2 BCA ,r 15,260
at 75,556. Whether CDM will be able to segregate any increased costs it
22
11. The Standby Generator (ASBCA Nos. 60-1-55 and 60669)
CDM is entitled to an equitable adjustment under the Changes clause because
the Corps provided defective specifications regarding the generator. "When the
government provides a contractor with defective specifications, the government is
deemed to have breached the implied warranty that satisfactory contract performance
will result from adherence to the specifications." Alliance Gen. Contractors, LLC,
ASBCA No. 54979, 09-1 BCA ,r 34,030 at 168,327 (quoting Essex Electro
Engineering, Inc. v. Danzig, 224 F.3d 1283, 1289 (Fed. Cir. 2000)). Here, by
providing the concept drawings, the Corps warranted that satisfactory performance
would result from adherence to those drawings (findings 44, 46). The Corps breached
that warranty when it subsequently rejected a design that followed the concept
drawings (finding 50).
The Corps argues that the concept drawings were not specifications because the
contract documents did not require CDM to comply with those drawings (gov't br.
at 38). However, we rejected that argument in MA. Mortenson Company, ASBCA
No. 39978, 93-3 BCA ,r 26,189 at 130,367 (holding that concept drawings create a
warranty, even if the contract does not require a contractor to follow the drawings).
Indeed, the conclusion that the concept drawings created a warranty is even stronger
here than it was in Mortenson because, unlike in that case, the contract documents
required the contractor to use the drawings to price its proposal (finding 4). 21
The Corps also argues that it was unreasonable for CDM to follow the concept
drawings because appendix A, § 9 .1. 3 trumped the concept drawings under the Order
of Precedence clause (gov't br. at 36-37). Under the Order of Precedence clause,
appendix A took priority over the concept drawings only if there was an inconsistency
(finding 5). That clause is not applicable here because the concept drawings are
consistent with appendix A, § 9. 1. 3. Appendix A, § 9 .1. 3 stated that "[m]ultiple
generators and transfer switches will be required when physical distances exceed
incurred as a result of the ADF, evaporation coefficient, and water depth
changes from any increased costs it incurred as a result of its failure to include a
backup EP is an issue of damages that is not addressed in this opinion.
21
It is true that the contract documents indicated that the concept drawings were FIO,
and were made available to CDM for its use without any warranty of usefulness
or suitability of purpose (finding 3). However, "[g]overnmental disclaimers of
responsibility for the accuracy of specifications which it authors are viewed
with disdain by the courts." Edsall Constr. Co., ASBCA No. 51787, 01-2 BCA
,r 31,425 at 155,181 (quoting Bromley Contracting Co., ASBCA No. 14884 et
al., 72-1 BCA ,r 9252 at 42,902); see also Metcalf Constr. Co. v. United States,
742 F.3d 984, 995-96 (Fed. Cir. 2014).
23
200 feet to load" (finding 42). The concept drawings' use of a single generator and
ATS was consistent with appendix A, § 9.1.3 because the distance from the generator
to the load was less than 200 feet (finding 47). Moreover, the Corps' reliance upon
appendix A, § 9 .1. 3 is unavailing in light of the facts that the rejected 10 percent
design did not even show distances, the Corps did not cite appendix A, § 9.1.3 as a
basis for rejecting the 10 percent design, and the design the Corps ultimately approved
violated appendix A, § 9.1.3 because it only had one generator that was over 200 feet
from the load (findings 48, 50-51).
Similarly, the Corps argues that ESR ,r 12 trumped the concept drawings under
the Order of Precedence clause (gov't br. at 36-37). That argument is even weaker
than its argument regarding appendix A, § 9.1.3. First, it suffers from the same defect
discussed above regarding appendix A, § 9.1.3. Namely, the Order of Precedence
clause does not apply because ESR ,r 12 was consistent with the concept drawings.
The Corps is unclear precisely how it claims the concept drawings conflicted with
ESR ,r 12 (id.). To the extent that it is claiming that the concept drawings' use of a
single ATS or the primary network to distribute electricity was inconsistent with ESR
,r 12, that argument would fail because ESR ,r 12 did not require the use of multiple
ATSs or the secondary network. ESR ,r 12 provided that
When a customer has a standby generator to supply all of
their load during an Edison system outage, the generator
shall be connected to the load by a double-throw switch or
automatic relays and switches which will isolate the load
from the Edison system before the generator is connected
to the load. When the Edison service is re-energized, the
generator will then be isolated from the load before the
load is reconnected to the Edison system.
(Finding 40) (Emphasis added) That language expressly recognized that a single
double-throw switch was acceptable. Nor did that language prohibit CDM from
connecting the generator to the primary network. (Id.) Further, SCE sometimes
waived the ESR's provisions (finding 39). Therefore, the SCE drawings can be read
consistently with ESR ,r 12 as either the SCE applying ESR ,r 12 to this project, or
waiving any inconsistent provisions of ESR ,r 12 (finding 49). Indeed, in its
contemporaneous communications with CDM, the Corps did not cite ESR ,r 12 as the
basis for rejecting the 10 percent design (finding 50).
Moreover, even if ESR ,r 12 were inconsistent with the concept drawings, it
would not trump the concept drawings under the Order of Precedence clause. Under
the Order of Precedence clause, appendix A and section O1 10 10 took priority over the
concept drawings if there was a conflict (finding 5). However, unlike with appendix
A,§ 9.1.3, appendix A and section 01 10 10 did not require compliance with ESR
24
,r 12.Appendix A and section 01 10 10 required compliance with "all state and federal
codes, standards and law,'' "applicable building codes and standards," and "DOD and
national standards" (finding 43). Building codes are "[l]aws, ordinances, or
government regulations." BLACK'S LAW DICTIONARY, 195 (6TH ed. 1990). The ESR
was not a state or a federal code, standard or law; applicable law ordinance, or
government regulation; or a DoD standard because it was issued by a utility-not a
government. Nor was it a national standard because it only applied to SCE's
customers in Southern California. (Findings 3, 39) Further, the Corps does not even
attempt to define a "building standard," or show that the ESR was a building standard
(gov't br. at 37; gov't reply br. at 19-21). Therefore, appendix A and section 01 10 10
did not require compliance with ESR ,r 12.
The Corps finally argues that its response to the RFI put CDM on notice of the
Corps' belief that there was a conflict between the CH2M Hill drawings and
appendix A, § 9.1.3 (gov't br. at 2, 38). However, the Corps' response to that RFI did
not indicate a belief that there was a conflict. On the contrary, a reasonable contractor
could infer that the Corps believed that the electrical design shown in the CH2M Hill
drawings was consistent with appendix A, § 9.1.3 from the fact that the Corps
responded to the RFI-which purportedly established that the CH2M Hill electrical
design was inconsistent with appendix A, § 9.1.3-by amending the RFP to add the
SCE drawings, which showed an electrical design that was substantially similar to that
shown in the CH2M Hill drawings. (Findings 45-46) If the Corps had believed that
the RFI had established that such a design was inconsistent with appendix A, § 9.1.3, a
reasonable contractor could have expected that the Corps would have responded to the
RFI by amending the RFP to remove the inconsistent drawings and/or to add a
consistent drawing-instead of to add drawings that continued to show a purportedly
inconsistent design. Any subjective understanding of a conflict that was so unclearly
communicated is insufficient to establish an actual conflict. Because the concept
drawings were not trumped by inconsistent requirements in appendix A or
section O1 10 10, those drawings created an implied warranty that adherence to the
drawings would result in satisfactory contract performance, which the Corps breached.
CONCLUSION
On entitlement under ASBCA No. 60454, the appeal is sustained as to the
constructive change claim relative to the average daily flow, pan evaporation
coefficient, and water depth. Otherwise, the appeal in ASBCA No. 60454 is denied.
On entitlement under ASBCA Nos. 60455 and 60669, the appeals are sustained on the
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defective specification claim. Otherwise, the appeals in AS_BCA Nos. 60455 and
60669 are denied. Accordingly, the appeals are returned to the parties for a
determination of quantum consistent with this decision.
Dated: October 24, 2018
Administrative Judge
Armed Services Board
of Contract Appeals
I concur I concur
~HACKLEFORD OWEN C. WILSON
Administrative Judge Administrative Judge
Acting Chairman Vice Chairman
Armed Services Board Armed Services Board
of Contract Appeals 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. 60454, 60455, 60669, Appeals of
CDM Constructors, Inc., rendered in conformance with the Board's Charter.
Dated:
JEFFREY D. GARDIN
Recorder, Armed Services
Board of Contract Appeals
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