Industrial Consultants, Inc. DBA W. Fortune & Company

ARMED SERVICES BOARD OF CONTRACT APPEALS
Appeals of -- )
)
Industrial Consultants, Inc. ) ASBCA Nos. 59622, 60491
DBA W. Fortune & Company )
)
Under Contract No. W912WJ-13-M-0223 )
APPEARANCE FOR THE APPELLANT: Mr. William Fortune
Owner
APPEARANCES FOR THE GOVERNMENT: Thomas H. Gourlay, Jr., Esq.
Engineer Chief Trial Attorney
Theresa A. Negron, Esq.
Engineer Trial Attorney
U.S. Army Engineer District,
New England
OPINION BY ADMINISTRATIVE JUDGE O'CONNELL
These appeals arise from a contract to upgrade heating, ventilation and air
conditioning equipment at a facility in New Hampshire. The government's termination of
the contract for default is at issue in ASBCA No. 59622, and appellant's money claim in
ASBCA No. 60491. The Board conducted a hearing in Boston, Massachusetts, on
16 November 2016, at which both parties were allowed to present witnesses and evidence.
The Board admitted into evidence the government Rule 4, tabs 1-67, supplemental R4,
tabs 68-91; and appellant supplemental Rule 4, tabs 1-22, as well as two additional
exhibits from appellant. As set forth in this opinion, we deny the appeals.
FINDINGS OF FACT
Contract Formation
1. This project was intended to upgrade the heating, ventilation and air
conditioning (HV AC) equipment at the Child Development Center at the Cold Regions
Research and Engineering Laboratory (CRREL) in Hanover, New Hampshire, whose
occupants were experiencing "thermal comfort" issues due to an undersized system. The
scope of work was limited by budget constraints but was to include replacement of the air
handling and condensing units, the variable air volume terminal units, and the existing
louvers, as well as ductwork modifications. (R4, tab 4 at 6, 18, tab 25 at 3; tr. 82)
2. The solicitation informed prospective bidders that the U.S. Army Corps of
Engineers (Corps) would conduct a prebid site visit which it "urged and expected"
prospective bidders to attend and that the contract would include FAR 52.236-2,
DIFFERING SITE CONDITIONS; and 52.236-3, SITE INVESTIGATION AND CONDITIONS
AFFECTING THE WORK (R4, tab 6 at 52, see tab 4 at 29). Despite this, appellant,
Industrial Consultants, Inc. (ICI), did not attend the site visit (R4, tab 8 at 3).
3. ICl's bid price of $175,020 (including three optional items) was low by a
considerable margin. The next low price of $237,402 was more than 35 percent
higher. (R4, tab 10)
4. Due to the budget constraints, the awarded contract did not include the
options (tr. 17). The parties entered into the contract effective 12 September 2013 at a
price of $144,680 (R4, tab 4 at 4 ).
5. The contract provided more than a year (to 15 September 2014) to complete
the work. This was due to work on the electrical system by another contractor that
would not be completed until 15 July 2014. Work on site could only be performed on
no more than four consecutive weekends after the 15 July 2014 completion of the
electrical work. (R4, tab 4 at 9-10)
6. One of the contract requirements that is of interest to this dispute is a
standard requirement that the contractor provide submittals to the contracting officer,
who had to approve them before work could start on site. These submittals included
an accident prevention plan and product data for the air handling unit and other
equipment. (R4, tab 4 at 14-17)
Contract Performance
7. ICI visited the site for the first time on 8 October 2013 (tr. 190-91; R4,
tab 17 at 2-4). ICI's president and owner, William Fortune, concluded after this visit
that the design provided by the government had significant problems (R4, tab 17 at
2-4). Mr. Fortune then began a campaign to redesign the work, which he refused to
drop no matter how many times the Corps told him to build as designed.
8. The contract required ICI to bring all submittals to the preconstruction
conference, which was held on 29 January 2014 (R4, tabs 22, 24 ), so that they could
be distributed to the participating reviewers (R4, tab 4 at 12), but it failed to bring
them to the conference (see R4, tab 26 at 2-3). (ICI had made a "preliminary"
submittal for the air handling unit on 27 January 2014 (R4, tab 21), but the contract
had no provision for submission or review of preliminary submittals.)
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9. ICl's concerns about the design ripened into the submission of a request for
information (RFl-1) on 11February2014 (supp. R4, tab 76). The Corps provided an
initial response on 28 February (R4, tab 25), and an amended response on 4 March 2014
(R4, tab 77). Selected comments from RFI-1 and the Corps response are as follows:
ICI - The kitchen exhaust hood duct is grossly
undersized ....
Corps - The kitchen exhaust system is not part of this
project.
ICI - There should be no air returns into the conditioned air
system in the kitchen to prevent odors and smoke from
entering other parts of the building.
Corps - The contractor shall follow the contract
documents.... [T]he existing kitchen hood manufacturer
has stated that the existing system is acceptable for the
amount of cooking performed in this kitchen.
ICI - There is no technical reason to replace these louvers.
Corps - The louvers [are to be] replaced because intake and
exhaust flows have increased and the existing louvers are
not designed to handle the increased flows. Louvers shall
be installed as designed.
10. The Corps project engineer, Patricia Devine, summarized the Corps'
response in an email transmitting the amended RFI response by stating that the
"long-and-short of it is to install the system as designed. Please send in your
submittals so we can begin our review and get this contract moving." (R4, tab 77 at 2)
11. The Corps still had not received the submittals on 10 March 2014, leading
the contracting officer to send ICI a cure letter listing all of the outstanding submittals.
The contracting officer stated that ICI's failure to provide the submittals was
endangering contract performance and that failure to cure the deficiencies within
10 days might result in termination of the contract for default. (R4, tab 26 at 2-3)
12. Mr. Fortune replied to the Corps' RFI-1 response with an email on
27 March 2014, in which he made a "Demand for higher authority and competent
engineering review." Among other things, Mr. Fortune accused the Corps of having
"copied the design of the failed HVAC system" and stated that ICI could not "be held
responsible for a failed design." (R4, tab 29 at 2-3)
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13. The contracting officer responded by letter dated 7 April 2014. In it she
informed Mr. Fortune that the work was "part of a minor rehabilitation of the existing
HVAC system." She stated that the design addressed the needs identified by the client
but the scope of work did not provide for a major redesign of the system. She stated
that the original cure notice was still in effect but extended the response date to 10
days from receipt of the 7 April letter. (R4, tab 30)
14. Thereafter, the Corps requested ICI participate in a conference call "to go
over options and try to determine how we can best proceed for everyone involved"
(R4, tab 31 ). As a result, the parties had two telephone conversations on 14 April
2014. After the first, Mr. Fortune sent an email in which he contended that
"satisfactory construction cannot be completed because the engineering department of
the Army Corps of Engineers has failed to design a system that will function
properly." (R4, tab 32 at 3) This appears to be based on his contention that the design
of the current system was faulty and that the Corps should have redesigned it because
"making it larger fails to correct the deficiencies and apparent design errors" (id.).
However, after a second conversation, the Corps documented Mr. Fortune's agreement
to proceed with the contract "per the scope of work" and to provide the submittals (R4,
tab 33). On 25 April 2014 the Corps requested ICI confirm it would perform the
contract as written, to which Mr. Fortune responded "You have bullied us into
compliance; we intend to complete the contract" (R4, tab 38).
15. ICI provided some of the submittals in April 2014. The precise date is not
clear and they may have been submitted on several different dates (see R4, tabs 34-37,
39-40). In a memorandum dated 27 May 2014, the Corps mechanical designer rejected
the submittals for the air handler, the variable air volume boxes, the diffusers, the duct
and insulation, and what the parties labeled "Trane: Using VAV Boxes" (R4, tab 42 at
2; tr. 82). The most controversial of these appears to be the air handler. In explaining
the air handler rejection, the engineer listed a combination of questions (for example,
"Does fan have Variable frequency drive?") and comments (observing that the contract
drawings require sensible cooling of259.5 MBH while the submittal showed only 190
MBH and concluding that "[t]his unit is undersized.") (R4, tab 42 at 2).
16. On 28 May 2014, the administrative contracting officer (ACO) rejected
ICI's accident prevention plan, stating that the plan did not follow the format required
by the contract, namely the Corps Safety Manual, EM 385-1-1, Appendix A, (R4,
tab 4 at 14-15), which the Corps had previously provided ICI (see R4, tab 23 at 4,
tab 39). Among other things, the ACO stated that "[m]any items have been omitted to
include the identification and documentation of qualifications of the Site Safety and
Health Officer; Safety Training; Safety Inspections; Accident Reporting
Requirements; and Emergency Response Plan." (R4, tab 44 at 2) ICI resubmitted the
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accident prevention plan on 16 June 2014 but the ACO rejected it again on 23 June
2014 for similar reasons (R4, tab 51 at 2).
17. With respect to the other submittals, ICI submitted a five-page document
that addressed some of the concerns listed by the Corps engineer on 27 May, which led
the Corps to approve the diffusers on 11 July 2014, but the engineer again rejected the
air handler, asking once more if the fan had a variable frequency drive, among other
things (R4, tab 53 at 4 ).
18. In an email to the Corps project engineer on 22 July 2014, Mr. Fortune asked
for permission to "allow us to make whatever changes that are necessary to the existing
system that will meet the tenants['] requirements" (R4, tab 57 at 3). Reacting to this in an
internal email, one Corps employee observed "He cannot seem to get over the idea that he
cannot propose a system rather than simply execute the contract as agreed" (id. at 2).
19. The Corps met with Mr. Fortune on 1 August 2014 in a last attempt to work
things out. The contracting officer sent a letter on 12 August 2014 that documented the
discussions at that meeting (R4, tab 62). With respect to the air handler and the variable
frequency drive (VFD), the Corps expressed concern that ICI had not submitted the VFD
and it, therefore, could not determine if they were compatible. (Mr. Fortune had informed
the Corps by email on 18 July 2014 that there would be a VFD (R4, tab 55 at 3).) The
Corps informed Mr. Fortune that this portion of the air handler would be approved once
ICI submitted the VFD and the Corps found it to be acceptable.
20. Based on Mr. Fortune's testimony at the hearing, it appears he did not want
to submit the VFD to the Corps until after it approved the air handler. He testified that
it "didn't register" with him until the 1 August meeting that the Corps was holding up
the air handler submittal because of the VFD. (Tr. 145-47) There is no provision in
the contract that allowed ICI to withhold the VFD submission until the Corps
approved the air handler unit (AHU).
21. In the 12 August letter, the contracting officer stated that the hot water coil
had been rejected by the Corps because it had to be compatible with the existing boiler
and that the coil was too large (R4, tab 62 at 4). The contracting officer stated that the
variable air volume boxes ICI had submitted could not meet the pressure drop
requirements and that ICI would have to submit a different product (id.).
22. The contracting officer also stated that there had been a lengthy discussion
about the return fan at the meeting. Mr. Fortune had suggested a value engineering
change that would use a smaller fan than shown in the contract and that he had not
included the larger fan in his bid. The Corps declined the proposed change and
instructed ICI to submit the return fan and install as required by the contract. (R4,
tab 62 at 4, tab 61 at 2)
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23. Five days after the meeting, Mr. Fortune sent the project engineer an email
in which he again challenged the design and effectively announced ICI's intent not to
perform the contract. He stated that due to the issues he had uncovered from the site
visit and review of the plans "we have spent any money that was in the contract for
overhead and some onsite labor." He further stated that "We contend that there is too
many ambiguities and your refusal to work together to resolve several design issues,
for the benefit of the customer and society in general, have made the execution of this
contract impossible." (R4, tab 61)
24. The contracting officer sent what she labeled a third cure notice on
26 August 2014 (the record does not contain a second cure notice). Among other
things, the contracting officer stated that if ICI did not provide the required submittals
within 10 days, this may result in termination of the contract for default. She stated that
the work must be "completed and installed as designed, per the contract requirements."
(R4, tab 64 at 2-3) Mr. Fortune responded with an email on 7 September 2014 in which
he requested that the Corps "turn this contract into a design build and allow us to make
the necessary changes to the system" (R4, tab 65 at 2).
25. As far as we can determine from the record and the testimony at the
hearing, ICI never performed any work on site (other than site review) and never
ordered the equipment (R4, tab 63 at 3; tr. 177-78). As for the required submittals, ICI
never submitted the VFD 1 (tr. 46, 48) or the return fan (tr. 47). The Corps rejected the
accident prevention plan (tr. 43), and the variable air volume units (tr. 43-47; R4,
tab 62 at 4 ). The Corps conditionally accepted part of the air handler pending
submission of the VFD, but, as we observed, ICI never submitted the VFD, and the
Corps rejected the hot water coil (tr. 46; R4, tab 62 at 3-4).
Termination
26. The contract included FAR 52.249-10, DEFAULT (FIXED-PRICE
CONSTRUCTION) (APR 1984) (R4, tab 4 at 29). On 17 September 2014 (two days after
the contract completion date), the contracting officer terminated the contract for
default. As reasons for the termination, the contracting officer cited: "your firm's lack
of response regarding USACE's request for required submittals, and to complete the
contract as written." (R4, tab 2 at 2) ICI appealed that decision on 11 October 2014,
which we docketed as ASBCA No. 59622.
1 The list of product submittals in the contract does not include the VFD (R4, tab 4 at 17).
However, the contract does list the "Variable Air Volume Units" as a required
submittal and drawing M-703 speaks of the VFD under the heading "VARIABLE
AIR VOLUME SYSTEM WITH RETURN FAN" (R4, tab 5 at 265).
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ICI's Money Claim
27. On 1December2015, ICI submitted a request for a contracting officer's
final decision in which it sought to have the termination converted to one for the
convenience of the government and for the government to pay ICI for costs incurred.
ICI contended that the government provided defective specifications, failed to
cooperate in approving submittals in a timely manner, breached the government's
implied warranty of design and violated international building codes. ICI stated that
"[t]his conduct caused inordinate delays and made it impossible for ICI to perform."
(Supp. R4, tab 71 at 2) ICI raised 11 delays or purported grounds for relief in this
claim. ICI addressed them to varying degrees during its presentation at the hearing.
We will address them in order of the depth of presentation, starting with the subject
receiving the most testimony, the feasibility of the design. (See tr. 158-69, 202-05)
Design Issues: Louvers/Return Fan/Kitchen Design
28. ICI presented the louvers, return fan, and kitchen design as three separate
issues in its claim (supp. R4, tab 71 at 25-27, 30-32). But during the hearing
Mr. Fortune's testimony suggested a linkage between the issues and as they all arise
from an allegedly defective design, we will discuss them together.
29. According to ICl's claim, the contract called for "increasing" the size of the
existing intake and exhaust louvers but when Mr. Fortune went to the site he found
that the dimensions of the existing louvers were the same size as the louvers to be
furnished under the contract. Mr. Fortune brought this to the attention of the Corps
and offered a credit, but it refused to change the contract. (Supp. R4, tab 71 at 25)
30. Even if ICl's description of the contract's louver requirements were
accurate, it is not clear how an insistence on following the contract in and of itself
would cause a delay. But it is not accurate; the contract indicated that the louver size
would not change:
The intake and exhaust louvers are to be replaced due to
increased airflows. The contractor shall provide louvers in
accordance with section 23 00 00 in Appendix A. The
louvers shall fit into the current wall openings in the
basement mechanical room.
(R4, tab 4 at 18) (Emphasis added)
31. The specification provided various requirements for the new louvers
including that they should be six-inches deep, made of an extruded aluminum alloy
and factory coated with a clear anodized finish (R4, tab 5 at 17). Thus, the contract
7
clearly indicates that the new louvers were to be of the same size as the existing
louvers (as Mr. Fortune found when he measured them) but that they were intended to
be an upgrade. The Corps explained to ICI in its response to RFI- I that the louvers
were to be replaced due to increased air flow (supp. R4, tab 77 at 5).
32. In the claim, ICI also contended that the IO-foot distance between the
louvers violated "international building codes" (supp. R4, tab 71 at 30). Although not
entirely clear, the spacing between the louvers ties into ICl's goal of eliminating the
return fan because it wanted to redesign the system to relieve the exhaust air in a
different part of the building, rather than through the exhaust louver, which would
allow the return fan to be eliminated (tr. 166; R4, tab 17 at 3; supp. R4, tab 7I at 30).
However, any credence we might give Mr. Fortune's opinion that the existing louver
spacing violated a building code was negated by ICI's own expert who testified that
they did not violate code (tr. 202-05).
33. ICI contends that the return fan was unnecessary and was not shown in the
basis for design (supp. R4, tab 7 I at 30). However, this fan is listed in numerous
places in the contract, including: as a product that required a submittal (R4, tab 4 at
17); in the statement of work under technical requirements (id. at I 8); and on drawings
M-102 (the basement floor plan where it is referred to as "RF-I") (R4, tab 5); and
M-60 I, which is the equipment schedule and details (id.).
34. Thus, ICI signed a contract that clearly required a return fan. The record
indicates that either it did not notice the return fan requirement or it gambled that the
Corps would agree to delete it (compare R4, tab 6I at 2 with tab 62 at 4-5). In support
of its contention that the return fan was unnecessary, ICI offers five pages of
handwritten calculations (app. supp. R4, tab I3 at 84-88). However, neither Mr. Fortune
nor any other witness explained these calculations and, we do not know what
conclusions we are supposed to draw from them. Further, ICI's expert did not opine that
the return fan was unnecessary.
35. In sum, we find that ICI has not proven that the Corps provided a defective
louver design due either to the size of the louvers or the distance between them. We
find that the contract required a return fan and that ICI failed to demonstrate that the
fan was unnecessary. We find that there is no evidence that the contracting officer
acted unreasonably in enforcing the contract as written. Accordingly, we find that ICI
has not proved that the Corps caused any delay related to the louvers or the return fan.
36. Finally, we observe that in testimony we found difficult to follow,
Mr. Fortune linked the louver issue to another separate ground for relief in the claim,
namely a contention that the Corps also delayed the project because the design "would
continue an existing defect that the kitchen was very hot and not being cooled," and
that this violated the international mechanical code (supp. R4, tab 7I at 26). However,
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Mr. Fortune undermined this contention at the hearing by stating "according to this
guy [ICI's expert] who just reviewed the plans somehow we got all mixed up here and
there were, there was more air in the kitchen than I originally thought" (tr. 162).
Mr. Fortune then appeared to abandon this ground for relief stating "the kitchen
problem was not that big ofa, may not have been a big of a problem" [sic] (id.). ICI's
expert later testified that the method of cooling the kitchen was not a code violation
(tr. 205). To the extent not abandoned, we find that ICI has not proven any design
defects related to the kitchen.
AHU Submittal
37. One of the central goals of the project was to replace the existing AHU
with a 21.6 ton unit 2 (R4, tab 4 at 18). ("Ton" in this sense refers to the number of
tons of 33-degree water that the unit can freeze in 24 hours (tr. 215-16).)
38. At the hearing, ICI offered testimony from Mr. Fortune and ICI's expert,
John Cass, concerning the Corps' rejection of the submitted AHU (tr. 130-41, 210-13).
The Board found some of this testimony to be unhelpful because it did not address
issues that are actually in dispute. Although not easy to follow, the crux of this
testimony seemed to be that ICI had submitted a 20.5 ton AHU, which was somewhat
larger than the 20-ton unit required by the contract (according to the testimony); this
difference was insignificant and should not have been a basis for rejection (tr. 130,
210). Unfortunately, this testimony is unmoored from the facts ofthe case. First, the
contract required a 21.6 ton AHU, not 20 tons as the testimony indicated. Second, and
more importantly, the Corps never rejected the AHU because it was the wrong number
of tons. (R4, tab 42 at 2, tab 53 at 4) Thus, the Board did not understand the purpose
of this testimony.
39. From a thorough review of the record, the Board has identified three issues
surrounding the submittals that delayed or prevented approval. First, as already stated,
ICI waited more than seven months into the contract term to submit the various
products (that is, those that it actually submitted). Second, with respect to the AHU,
ICI submitted information on a series of air handlers that came in various sizes. The
Corps found that the information submitted did not address the specifics of the project.
(Tr. 84-85, 101-03) ICI's expert acknowledged that the AHU submittal "confused"
the Corps engineer (tr. 212).
40. The questions/comments raised by the Corps engineer with respect to the
AHU do not appear to have been insurmountable (for example, "a. Does fan have
Variable frequency drive? b. The drive package selection was not designated therefore
could not verify characteristics associated with it."). (R4, tab 42 at 2) Generally, the
2 The record indicates that the existing unit may have been a 12-ton unit (R4, tab 63 at 3).
9
parties to a government contract are expected to proceed in good faith and in a
cooperative manner. Metcalf Constr. Co. v. United States, 742 F.3d 984, 991 (Fed.
Cir. 2014). The record indicates, however, that Mr. Fortune could not or would not
work through the submittal issues. Rather, when questioned, his modus operandi was
to become aggressive, often lashing out at Corps personnel rather than addressing the
issues (see R4, tab 29 (demanding "competent engineering review"), tab 32 at 3
(calling the contracting officer "unqualified" to state that the design met the needs of
CRREL ), id. at 4 (stating that the Corps engineering department "needs to be
investigated for fraud for paying people to do engineering work that they are not
doing. Their actions are giving the engineering profession a very bad reputation."),
tab 38 ("You have bullied us into compliance"), tab 55 at 2 ("At this point I see no
sense to meet with people who apparently are incapable of reading, comprehending or
understanding the issues that we have submitted thus far .... We are not in the business
of training or schooling entry-level technicians or less qualified people in the design
and construction of HVAC systems."); supp. R4, tab 68 at 25 ("Did you ever hear of
water freezing?"), tab 71at22 ("If the 'engineer' can't understand [that the submitted
heating coil meets contract requirements] there is no explanation that I can give that
will enable them to understand; they will have to go back to High School.")).
41. This is unfortunate because it is possible that the submitted AHU would
have worked. For example, the Corps questioned the submitted hot water coil because
it was much bigger than necessary (R4, tab 53 at 4, tab 62 at 4). The Corps was
concerned that the proposed coil would not be compatible with the existing boiler,
which was not being replaced (R4, tab 62 at 4; tr. 115). According to ICI's expert,
however, the larger coil would not have been a problem and might have benefited the
government in the future if it had replaced the boiler (tr. 206-09). We cannot locate
any place in the record, however, where ICI explained this to the contracting officer.
42. The contract incorporated FAR 52.233-1, DISPUTES (JUN 2008) 3 (R4, tab 4
at 30). This clause provides in relevant part that "[t]he Contractor shall proceed
diligently with performance of this contract, pending final resolution of any request for
relief, claim, appeal, or action arising under the contract, and comply with any
decision of the Contracting Officer." ICI did not submit any evidence that it could not
find a smaller coil that complied with the contract. And, as we have already found,
ICI failed to proceed with the work.
43. We find that ICI has not demonstrated that the Corps acted unreasonably in
rejecting the AHU and heating coil. The record indicates that the problems ICI
experienced were largely of its own making. ICI has not shown that equipment
3 The contract identified the clause as the June 2008 version of the clause, but most
likely meant the July 2002 clause, which was in effect at the time of award.
Regardless, the relevant language has not changed.
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complying with the specification was not available or even that it would have cost
more money than the proposed equipment.
Accident Prevention Plan
44. The contract barred ICI from performing work until it had submitted an
accident prevention plan and the Corps had approved it (R4, tab 4 at 15). At the
hearing, ICI did not address most of the ACO's grounds for rejecting the accident
prevention plan but made three contentions. First, it contended that the ACO erred by
stating that the plan failed to identify and document the qualifications of the site safety
and health officer, when, in ICI's view, the plan clearly conveyed that Mr. Fortune was
the person responsible. However, it would seem that ICI could have cleared up this
issue with a brief clarification if it had been of the mind to work with the Corps.
45. The second issue that ICI brought up at the hearing was that the Corps
required it to submit a safety plan for a crane, which, in Mr. Fortune's view must have
been because the Corps engineer did not know that a 20-ton air handler weighs far less
than 20 tons (tr. 173). However, we have reviewed the Corps' rejections oflCI's
accident prevention plan (R4, tabs 44, 51) and we do not see any evidence that the
Corps rejected the plan for this reason. We have examined the rest of the record and
do not see any evidence that supports ICI's contention.
46. Third, ICI contended that the ACO wrongly rejected the accident
prevention plan for failing to obtain a permit for working on live electrical panels
when ICI had no intention of working on live electrical panels (tr. 173). However, the
ACO's second rejection of the plan (the rejection in which this issue came up) does
not mention live electrical panels, rather it states: "The Activity Hazard Analysis
provided indicates that hot work will be performed but there is no mention of the
requirement for a Hot Work Permit and fire watch" (R4, tab 51at2). The activity
hazard analysis submitted by ICI listed work on refrigerant piping that would involve
the following "HAZARDS": "Knocking over acetylene tank. Leaky torch handle.
Burning fingers and hands. Charing [sic] painted surfaces." (R4, tab 47 at 3) ICI's
accident prevention plan similarly stated that a brazing torch would be used (R4,
tab 51 at 9). The Corps safety manual requires hot work permits when performing
work such as that proposed by ICI that has a tendency to generate heat, sparks or open
flames (supp. R4, tab 68 at 37-38).
47. During the hearing, ICI submitted an email dated 30 April 2014 marked as
appellant exhibit 2 in which the project engineer provided Mr. Fortune a blank copy of
an energized electrical work permit, which, she stated, "is required for hot electrical
work." Whatever confusion this may have caused, no contracting officer ever required
ICI to obtain a hot work permit for electrical work it was not actually performing. The
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ACO raised a hot work permit because ICI indicated that it was going to perform hot
work. ICI did not submit any evidence challenging this basis for a hot work permit.
48. ICI did not submit any evidence at the hearing concerning the ACO's other
reasons for rejecting ICl's accident prevention plan, including the lack of provisions
for safety training, safety inspections, accident reporting requirements, safety
meetings, and safety inspections (R4, tab 44 at 2). We consider them to be abandoned.
Bond Premium
49. ICI complains that the Corps unreasonably delayed in paying its bond
premium of about $5,800 (supp. R4, tab 71 at 32). ICI requested payment for the
premium sometime in the January-March 2014 time period- its invoice is unsigned
and undated (R4, tab 27). The Corps rejected the invoice (id.).
50. The contract incorporated FAR 52.232-5, PAYMENTS UNDER FIXED-PRICE
CONSTRUCTION CONTRACTS (SEP 2002). This clause requires an agency to reimburse
contractors for bond premiums "after the Contractor has furnished evidence of full
payment to the surety." FAR 52.232-5(g). ICI never submitted any evidence that it
paid the surety for the bond. Apparently, the contracting officer agreed to pay ICI for
the premium in June 2014, not because she concluded that it was entitled to payment
but because she was concerned that it was experiencing financial problems (tr. 22-23;
R4, tab 45).
51. We find that there is no evidence of government-caused delay due to
payment of a bond premium simply because there is no evidence that ICI ever met the
conditions for payment specified in the FAR.
Schedule Rejection/Schedule of Values
52. Mr. Fortune testified briefly on both of these issues at the hearing. Based
on the claim (albeit not the testimony at the hearing,) the basis for ICI's schedule
rejection claim is that the Corps refused to allow ICI to perform work in the fall of
2013 4 (see R4, tab 15, tab 71at23-25). However, as we have already found, the
contract barred ICI from performing work until the Corps approved the accident
prevention plan, which ICI did not submit until April 2014 (R4, tab 44) and the Corps
never approved. Thus, we conclude that the Corps did not delay the project by
rejecting the request to perform work in the fall of 2013.
4 Mr. Fortune mentioned the schedule rejection issue almost in passing at the hearing
(tr. 155) but failed to explain why this delayed the project or entitled ICI to money.
12
53. The Corps rejected the schedule of values when ICI first submitted it but
contends that subsequently it approved it when ICI removed a provision providing for
payment for mobilization (supp. R4, tab 68 at 35, tabs 84, 87). However, it is not clear
from these documents whether the Corps actually approved the schedule. But we see
no evidence that this delayed the project because ICI did not submit this schedule until
20 May 2014 (supp. R4, tab 84). By that point all of the issues concerning the late and
non-conforming submittals were in full bloom, and Mr. Fortune had been fighting with
the Corps over the design for seven months. These issues (and the failure to order the
equipment) caused the delays to the project, not this minor spat about the schedule of
values.
Duct Insulation/Duct Submittal
54. ICI contended in the claim that the Corps unreasonably delayed approval of
duct insulation and unreasonably denied the ductwork submittal (supp. R4, tab 71 at
32-33). At the hearing, ICI seemed to abandon these contentions (tr. 177). To the
extent not abandoned, we find there is a complete failure of proof.
55. The contracting officer denied the delay claim on 22 February 2016. ICI
filed ASBCA No. 60491on4 March 2016.
DECISION
FAR 52.249-IO(a) provides:
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 ....
The government bears the burden of demonstrating that ICI did not perform in
a timely manner and that it failed to gain approval of its submittals. DCX, Inc. v.
Perry, 79 F.3d 132, 134 (Fed. Cir. 1996). Failure to proceed with the work during a
dispute is a ground for termination for default. Preuss v. United States, 412 F.2d
1293, 1301-02 (Ct. Cl. 1969). In this appeal, it is undisputed that ICI failed to
complete the work on time, failed to proceed with the work after the Corps rejected its
proposed changes to the project, and failed to furnish some submittals and failed to
gain approval of other submittals. The government has made a prima facie case for
default termination; ICI must, therefore, prove that its nonperformance was excusable.
DCX, 79 F.3d at 134.
13
We have already rejected !Cl's contentions that the government delayed the
project. Rather, the record makes it clear that ICI delayed the project because it
disagreed with the government's design choices (see findings 7, 9-10, 12-14, 18,
22-23) and failed to provide timely or complete submittals (findings 8, 10-11, 15-17,
19-22, 25). The record strongly suggests that ICI has a basic misunderstanding as to
its role as a contractor on a government project. Despite !Cl's views to the contrary,
and as we now discuss, government contractors must perform the contracts they
execute and cannot require the government to rewrite the contract so that they can
build some other project they like better.
It is well settled that the government is entitled to enforce its contracts so that it
receives the work product provided for in the contract. JL. Malone & Assocs., Inc. v.
United States, 879 F.2d 841, 845 (Fed. Cir. 1989). The government enjoys considerable
leeway in determining what to specify. The Federal Circuit has held in the context of
selecting the performance of air conditioning equipment that the "government may
require performance both in excess of, or below, the standard normally accepted in a
trade." Interwest Constr. v. Brown, 29 F.3d 611, 615 (Fed. Cir. 1994) (quoting Ralph
Larsen & Son, Inc. v. United States, 17 Cl. Ct. 39, 46 (1989)).
A number of cases from the Federal Circuit and the Court of Claims
demonstrate that the contractor's role is to build the project for which it made a
binding promise, not some contract that, in hindsight, it believes is more appropriate
or makes more sense. For example, in JL. Malone & Assocs., 879 F.2d 841, an
agency awarded a contract to replace an outdated fire alarm system and to upgrade an
existing computer system. Instead, of upgrading the existing computer, the contractor
offered to replace it with a new computer. When the contracting officer declined, the
contractor proceeded with the work and submitted a claim. Id. at 844.
The Federal Circuit affirmed a Veterans Administration Board of Contract
Appeals decision denying the appeal. While the new computer would have been more
advanced than the existing computer, the Federal Circuit held that the agency had no
obligation to alter the basic design requirements. JL. Malone & Assocs., 879 F.2d at
846. The court of appeals agreed with the board that it would have been unfair to
other bidders to approve such a major change to the contract after the fact because
they would not have anticipated when they prepared their bids that the agency would
approve such a major change. Id. at 845.
Similarly, in Farwell Co. v. United States, 148 F. Supp. 947 (Ct. Cl. 1957), the
contract required either copper or brass pipe be supplied, but the contractor attempted
to use cheaper copper tubing, which it contended would give equally satisfactory
results. As the Court of Claims explained:
14
It is of no concern to plaintiff why the Government
specified brass or copper "pipe" instead of "tubing," and it
was not within plaintiff's province to substitute its
judgment for that of the Government by deciding that
tubing was satisfactory when pipe was specified. The
Government may have had many reasons for requiring
pipe instead of tubing, but in any event the specifications
called for pipe and the Government had a right to expect
that pipe would be used. In other words, why have a
contract if either party could change the terms thereof to
suit his particular whim.
Id. at 949. The Court of Claims also held that it would have been unfair to other
bidders to allow the plaintiff to substitute the tubing. Id. at 950. If the other bidders
had calculated their bids based on the use of pipe, the plaintiff would have had an
advantage over them. The use of specifications insures uniformity of bidding. Id.
During this project, ICI repeatedly informed the Corps of its opinion that the
design of the existing system was defective and that it was a mistake to keep that
design and add bigger equipment (findings 7, 9, 12, 14). The Corps considered ICI's
point of view but elected to continue with its design (findings 9, 13, 19, 21-22, 24).
At that point, ICI's only option was to build the project it had signed up to do.
Instead, it kept dragging its feet and virtually forced the contracting officer to
terminate the contract for default.
While there is evidence in the record that ICI underbid the job and did not
include all of the equipment in its bid (finding 34), during the hearing, ICI portrayed
itself as animated by safety concerns. We need not address whether there is a safety
exception to the rule that the contractor must build as designed. See Salisbury Special
Tool Co., ASBCA No. 37530, 89-2 BCA i! 21,838 at 109,873. The undisputed
evidence showed that the basic design had been in place for some time (findings 1,
13 ), and there was no evidence that the design caused any ill effects to the building
occupants. During the hearing, ICI's expert disagreed with its contention that the
design violated the building code (findings 32, 36), and there is no evidence that
increasing the size of the HVAC equipment would create safety problems. While ICI
continues to contend in its post-hearing brief that the specifications were defective,
there is an absence of supporting evidence. In sum, any safety concerns that ICI had
are unproven.
With respect to the submittals, there is no evidence that the contracting officer
or other Corps personnel acted unreasonably. As we have found, ICI furnished the
submittals months late, or not at all (findings 15, 25). Any such delays are entirely the
fault of ICI. The Corps rejected several of the product submittals but showed a
15
willingness to work through the issues that came up (findings 13-14, 17, 19). In
rejecting the submittals, the Corps made specific comments or asked specific questions
that ICI should have been able to address (finding 15) ifthe equipment complied with
the specifications. ICI failed to cooperate with the Corps and its attempts to work
through the submittal process were half-hearted and sporadic.
Finally, we also observe that IC I's failure to obtain approval of the accident
prevention plan made it impossible to perform any work on the project (finding 16).
The ACO provided a number of reasons for rejection of the plan, many of which ICI
failed to challenge at the hearing and which we found had been abandoned
(finding 48). We rejected ICI's other contentions concerning the accident prevention
plan (findings 44-47). The failure to obtain approval of the accident prevention plan
was a delay caused entirely by ICI that by itself prevented contract performance.
We have examined ICl's numerous contentions of government-caused delays
and have found them to be lacking. ICI is not entitled to have the termination for
default set aside, nor is it entitled to recover on its delay claim.
CONCLUSION
These appeals are denied.
Dated: 10 March 2017
1ll``c``tt1-(
Administrative Judge
Armed Services Board
of Contract Appeals
I concur
//'7~
//;/``- ~-ff-------------- --t-i--~-
~ / &;////' / .· ---'--``````````````-
/ MARK N. STEMP ER RICHARD SHACKLEFORD
Administrative Judge Administrative Judge
Acting Chairman Vice Chairman
Armed Services Board Armed Services Board
of Contract Appeals of Contract Appeals
16
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. 59622, 60491, Appeals of
Industrial Consultants, Inc. DBA W. Fortune & Company, rendered in conformance
with the Board's Charter.
Dated:
JEFFREY D. GARDIN
Recorder, Armed Services
Board of Contract Appeals
17