District of Columbia v. District of Columbia Contract Appeals Board

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DISTRICT OF COLUMBIA COURT OF APPEALS
No. 19-AA-241
DISTRICT OF COLUMBIA, PETITIONER,
v.
DISTRICT OF COLUMBIA CONTRACT APPEALS BOARD, RESPONDENT,
and
FORT MYER CONSTRUCTION CORPORATION, INTERVENOR.
On Petition for Review of a Decision of the
District of Columbia Contract Appeals Board
(CAB-1454)
(Argued December 9, 2020 Decided November 18, 2021)
James C. McKay, Jr., Senior Assistant Attorney General, with whom Karl A.
Racine, Attorney General for the District of Columbia, Loren L. AliKhan, Solicitor
General, and Carl J. Schifferle, Acting Deputy Solicitor General, were on the brief,
for petitioner.
Mark D. Poindexter filed a statement in lieu of brief for respondent.
Hanna Lee Blake, with whom Joseph A. Figueroa was on the brief, for
intervenor.
Before BLACKBURNE-RIGSBY, Chief Judge, and GLICKMAN, and
THOMPSON, * Associate Judges.
*
Judge Thompson was an Associate Judge of the court at the time of
argument. Although her term expired on September 4, 2021, she will continue to
(continued…)
2
THOMPSON, Associate Judge: In this matter, the District of Columbia (the
“District”) has petitioned for review of a November 20, 2018, decision of the
District of Columbia Contract Appeals Board (the “CAB” or the “Board”). In its
decision, the CAB ruled that prime contractor Fort Myer Construction Corporation
(“Fort Myer”), on behalf of its subcontractor Metro Paving Corporation (“Metro
Paving”), is entitled to damages of $251,237, plus interest, as an equitable
adjustment for “increased labor costs incurred by Metro Paving when the District
changed the contract’s original wage payment requirements throughout the option
year terms” of a contract between the District and Fort Myer. We affirm the
CAB’s decision because it is supported by substantial evidence and because the
District has not shown that it is unreasonable or contrary to law.
(…continued)
serve as an Associate Judge until her successor is confirmed. See D.C. Code § 11-
1502 (2012 Repl.). She was qualified and appointed on October 4, 2021, to
perform judicial duties as a Senior Judge and will begin her service as a Senior
Judge on a date to be determined after her successor is appointed and qualifies.
I.
The following facts, found by the CAB, are undisputed except as noted. In
April 2006, Fort Myer and the District of Columbia Department of Transportation
(“DCDOT”) entered into a one-year, fixed-price contract (the “prime contract”) for
services related to the resurfacing of roadways in the District. 1 DCDOT reserved
the right to extend the prime contract for up to four option years. The project was
federally funded, and the contract therefore included provisions requiring that all
workers be paid at least minimum wages in accordance with the Davis-Bacon Act. 2
The contract solicitation specified that the Paving and Incidental Grading wage and
fringe benefit rates contained in Department of Labor (“DOL”) General Wage Rate
Decision No. DC2003001, Modification No. 35 (February 3, 2006) (“Wage
Decision No. 1”) applied to the contract. Before the CAB, the parties stipulated
that “[e]ach modification to the Prime Contract that extended the performance time
1
Specifically, the contract work involved repairing and replacing curbs,
gutters, sidewalks, and driveway entrances; construction of wheelchair/bicycle
ramps; furnishing sewer-water manhole frames and basin tops; providing steel
plating over the roadway repairs; and other incidental work.
2
See 40 U.S.C. § 3141 et seq.
4
for another option year incorporated a new General Wage Decision containing
increased wage rates applicable to the Project for the relevant option year.”
Fort Myer entered into a subcontract with Metro Paving to perform the
concrete-related work on the project. 3 The CAB found that Metro Paving utilized
the pay rates set forth in Wage Decision No. 1 to prepare the labor component of
its pricing for the base year and for all four option years under its subcontract and
that the successful bid Fort Myer submitted to the District incorporated the pricing
it obtained from Metro Paving. Fort Myer’s total prices for the base year and each
option year were based upon estimated quantities and unit prices for the items of
work detailed in the contract solicitation.
The District of Columbia Standard Contract Provisions for Use with
Specifications for District of Columbia Government Construction Projects 1973
(the “Standard Contract Provisions”) were included in Fort Myer’s prime contract.
Article 3 of the Standard Contract Provisions specified that the Contracting Officer
could make changes to the contract’s requirements through the issuance of written
3
The concrete-related work included trench excavation and backfilling,
graveling, rebuilding and replacing standard basins, adjusting and converting fire
hydrants, and resetting and adjusting stone curbs.
5
change orders and that, in the event that changes increased the costs of
performance to the contractor, the contractor would be eligible to receive a price
adjustment, including reimbursement of its additional costs related to subcontractor
work. 4 Metro Paving’s subcontract required it to comply with all changes the
District made to Fort Myer’s prime contract.
The prime contract concluded at the end of Option Year 4 on May 10, 2011.
On May 24, 2011, Fort Myer submitted a letter and a subsequent certified claim to
the DCDOT Contracting Officer on behalf of Metro Paving, requesting an
equitable adjustment. Specifically, Fort Myer sought $286,324.41 for increased
labor costs incurred by Metro Paving after the District issued change orders that
incorporated new DOL Wage Decisions into the contract. Fort Myer asserted that
the Wage Decisions required the payment of higher wages and benefits and thus
caused Metro Paving’s labor costs (for power equipment operators, cement
masons, laborers, and truck drivers) to increase beyond what it anticipated when it
submitted its bid.
4
Specifically, Article 3.C states in pertinent part that “[i]f any change under
this Article causes an increase or decrease in the Contractor’s cost of, or the time
required for, the performance of any part of this work under the Contract, . . . an
equitable adjustment shall be made[.]”
6
After a lengthy delay during which the Contracting Officer failed to issue a
final written decision on Fort Myer’s claim, Fort Myer appealed the deemed denial
of its claim to the CAB. The CAB conducted a three-day hearing on the merits.
After a stipulation between the parties, what remained before the CAB was Fort
Myer’s claim to recover increased labor costs incurred by Metro Paving in the
amount of $276,361.37. At the hearing, Metro Paving’s Vice President, Stephen
Fye, testified about the labor cost increases incurred by Metro Paving during
Option Years 1-4. For each year, he identified the specific labor categories for
which wages were increased pursuant to the option-year Wage Decisions (Wage
Decision Nos. 2, 3, 4, and 5) that were the subjects of the District’s change orders,
and he showed the difference between the hourly wages and fringe benefits
originally required by the contract and the increased hourly wages and fringe
benefits required under the revised option-year wage requirements. He also
explained his calculation of the cumulative total of the wage differentials for each
labor category throughout the option periods. Of particular note, Mr. Fye testified
that in developing Metro Paving’s bid prices for the option years, he included in
Metro Paving’s escalated option-year prices amounts to account for anticipated
increases in fuel and material costs, but did not include any contingency to account
for potential labor increases in the option years above the pay rates specified in
Wage Decision No. 1. Metro Paving’s President, Mitchell Otero, testified about
7
the “labor burden rate” calculation which he formulated to determine Metro
Paving’s indirect costs for the option years (to account for labor-related costs
including Social Security, Medicare, federal and state employment taxes, general
liability and workers’ compensation insurance).
In its opinion resolving Fort Myer’s claim, the CAB found “no merit” in the
District’s arguments that Metro Paving “bore the risk that it could perform the
contract at the prices it proposed to Fort Myer in pursuit of the underlying
contract” and that Metro Paving’s “failure to anticipate that there would be
increases in the contract’s wage requirements during the option years in preparing
its pricing [was] not a basis to grant it relief.” The CAB noted that the contract’s
changes clause provided that Fort Myer “would be entitled to a price adjustment
including costs related to its subcontractor’s performance” “in the event that the
District changed the contract’s requirements and increased the cost of
performance.” The CAB cited the Contracting Officer’s acknowledgment in his
testimony that Metro Paving “in fact, incurred increased labor costs as a result of
paying higher wages to its workers in complying with the new, and consecutive,
wage determination decisions that the District applied to the contract by
amendment during each of the four option year periods” and emphasized the
Contracting Officer’s testimony that “he would have granted [Fort Myer’s] claim if
8
[Fort Myer had] sufficiently demonstrated that Metro Paving’s labor costs
increased beyond what it anticipated for each option year.” 5 The CAB found that
this testimony “directly undermine[d]” the District’s argument that the nature of
the contract as a fixed-price contract precluded any adjustment.
The CAB rejected the District’s argument that the evidence “‘lacked
sufficient documentation’ to demonstrate how the labor component of Metro
Paving’s unit prices w[as] impacted by the option year wage determinations.” The
CAB observed that the Contracting Officer “was unable to articulate to the Board
the nature of the additional cost detail that [Fort Myer] was supposedly required to
provide to further substantiate its claim for increased labor costs due to the
modified wage determinations” and was “unable to refer the Board to any
provision of the contract or District agency standards or protocols by which he was
supposedly judging the sufficiency of the cost information” Fort Myer provided to
support its request for a price adjustment. The CAB also highlighted the
5
The CAB quoted the following hearing testimony:
Board: Theoretically speaking, had the contractor done a
detailed analysis which showed…that their labor costs by
virtue of the change to the wage determination had
increased beyond what they had proposed for that option
year, then would you have found entitlement?”
Contracting Officer: Yes.
9
Contracting Officer’s concession “that there [is] no ‘exact science’ used to analyze
a contractor’s unit prices to determine whether there was an overall impact to its
originally proposed labor costs as the result of revised wage determinations made
applicable to the contract by the District.” The CAB found that Fort Myer
“provided a preponderance of evidence to demonstrate the extent of the additional
labor costs incurred by Metro Paving,” based in part on the detailed testimony by
Metro Paving’s Vice-President, which relied on certified payroll records. The
CAB stated that it reviewed and “verified the accuracy[] and adequacy of [Metro
Paving’s] calculation of the ongoing and cumulative impact of the wage increases”
and noted that the District had not rebutted the accuracy of Metro Paving’s figures.
Additionally, the CAB rejected the District’s reliance on Federal Acquisition
Regulation (“FAR”) § 22.404-12(c)(1) (48 C.F.R. § 22.404-12(c)(1)), which
references “preclu[sion of] a price adjustment due to the incorporation of new
wage determinations during option years of a fixed-price contract where the
contractor bid separate prices for each option period.” Citing 48 C.F.R. § 1.101(2018), the CAB reasoned that “the requirements of the FAR do not apply to this
procurement” because “[t]he FAR establishes policies and procedures governing
procurements conducted by federal executive agencies, and not the District of
Columbia government.”
10
The CAB accepted Fort Myer’s claim in the amount of $251,237.62. The
CAB concluded that Fort Myer and Metro Paving had failed to substantiate their
claim for an additional 10% in overhead, but ruled that they were entitled to
recover profit on increased labor costs, plus interest.
The District now argues that the CAB erred in awarding that adjustment, on
several primary grounds. First, the District contends that under the Standard
Specifications included in the bid solicitation, Metro Paving was required to
include labor costs in its pricing for each option year, and argues that its failure to
do so was not a basis for an equitable adjustment when Davis-Bacon wages
increased, as Metro Paving could have anticipated based on past experience and
collective bargaining agreements. The District also asserts that the DOL wage
decisions applicable to the option years were not the types of changes that fall
within the scope of the contract’s Changes clause and equitable adjustment
provision. Further, the District asserts that awarding an equitable adjustment is
inconsistent with the FAR principle that if a contractor was provided “the
opportunity to bid or propose separate prices for each option period,” “[t]he
contracting officer must not further adjust the contract price as a result of the
11
incorporation of a new or revised wage determination at the exercise of each option
to extend the term of the contract.”
Finally, the District argues that the CAB erred in awarding an equitable
adjustment because Fort Myer did not meet its burden of demonstrating that Metro
Paving was injured as a result of the DOL Wage Decisions. The District highlights
that with the option-year price escalations, the total increase in Metro Paving’s
prices over the option years was $468,511.78, while the labor cost increases it
claimed for the same period totaled only $179,961.79. The District argues that
Metro Paving could not meet its burden of proving entitlement to an equitable
adjustment without showing that the increased labor costs increased its costs of
performing “over and above the escalated prices that it received each option year.”
II.
The scope of our review of the Contract Appeals Board’s decisions is well-
established. “We review decisions of the Contract Appeals Board deferentially.”
Belcon Inc. v. District of Columbia Water & Sewer Auth., 826 A. 2d 380, 384
(D.C. 2003). “We give great deference to the CAB’s factual findings[,]” Rustler
12
Constr., Inc. v. District of Columbia, 211 A.3d 187, 192 (D.C. 2019), which “‘shall
be final and conclusive and shall not be set aside unless the decision is fraudulent,
arbitrary, capricious, or so grossly erroneous as to necessarily imply bad faith, or if
the decision is not supported by substantial evidence,’” Belcon, 826 A.2d at 384(quoting D.C. Code § 2-309.07 (2001)). “Evidence is substantial when ‘a
reasonable mind might accept [it] as adequate to support a conclusion.’” Id.(quoting Epstein, Becker & Green v. District of Columbia Dep’t of Emp. Servs.,
812 A.2d 901, 903 (D.C. 2002)); District of Columbia v. Heman Ward, Inc., 261
A.2d 836, 839 (D.C. 1970) (“To determine whether the Board’s findings were
supported by substantial evidence, we must look to the entire record, or those parts
to which the parties refer us, and ascertain whether such findings could be fairly
and reasonably made.”).
“Our review of the [Board’s] legal ruling[s] is de novo, for ‘it is
emphatically the province and duty of the judicial department to say what the law
is.’” Belcon, 826 A.2d at 384 (citing Harris v. District of Columbia Off. of
Worker’s Comp., 660 A.2d 404, 407 (D.C. 1995)). But “[t]he Board has expertise
in contract appeals, and ‘legal interpretations by tribunals having expertise are
helpful even if not compelling.’” Belcon, 826 A.2d at 384 (quoting District of
Columbia v. Organization for Env’t Growth, Inc., 700 A.2d 185, 198 (D.C. 1997));
13
see also District of Columbia v. C.J. Langenfelder & Son, Inc., 558 A.2d 1155,
1160 (D.C. 1989) (stating that the CAB’s cases “supply authoritative construction
of the equitable adjustment provisions of the District’s contracts”). We “accord
‘great weight’ to the Board’s construction of a government contract, so long as that
construction is not unreasonable.” Belcon, 826 A.2d at 384 (Dano Res. Recovery,
Inc. v. District of Columbia, 620 A.2d 1346, 1352 (D.C. 1993)). On questions of
law, we look as well to “decisions of the United States Court of Appeals for the
Federal Circuit, the former United States Court of Claims and its successors, and
the various federal boards of contract appeals, ‘all of which have particular
expertise in this area.’” Organization for Env’t Growth, 700 A.2d at 198 (citations
omitted).
III.
We begin our analysis with the District’s contention that Metro Paving was
required to include labor costs in its pricing for each option year and that its failure
to do so means that no equitable adjustment was warranted. The District
emphasizes the contracting officer’s testimony that labor costs were to be included
in the unit prices bid for the contract. There is no dispute, however, that Metro
14
Paving’s unit prices included a (base-year) labor cost component; the issue is
whether Metro Paving was required to include in its unit prices for each option
year an allowance for labor costs as inflated by then as-yet unissued DOL Wage
Decisions for the option years. The contract, including the Standard
Specifications, said nothing about that, and we are unable to conclude that it was
arbitrary or unreasonable for the CAB not to read the contract as requiring that
those increased labor costs be anticipated and reflected in the unit prices that were
bid. To the contrary, the CAB reasonably relied on the Supreme Court’s
cautionary note against practices that would encourage contractors to
“submit inflated bids to take into account the possibility that [because of Davis-
Bacon wage determinations] they would have to pay wages higher than those set
forth in the specifications.” Univs. Rsch. Ass’n, Inc. v. Coutu, 450 U.S. 754, 783
(1981). Moreover, the CAB relied on the fact that the District’s contract
modification for Option Years 1 and 2 contained language stating that Fort Myer
“may” be entitled to an equitable adjustment — language that is inconsistent with
the District’s litigating position that no additional reimbursement could be
available for the option years given that Metro Paving had the opportunity to
estimate, and to incorporate in its pricing, an allowance for the anticipated impact
of additional DOL wage decisions applicable to the option years.
15
The District also argues that its incorporation of the then-current DOL
minimum wage decisions for each option year “did not change [Metro Paving’s]
obligations under the contract” and thus was not a change of the type described in
Article 3.A of the Standard Contract provisions (a “change in work”) that justified
an equitable adjustment under Article 3. However, Article 3.A.2 provides non-
exclusive examples of “changes in the work,” and a change in the minimum wage
rate that must be paid to specified categories of workers who perform the work can
reasonably be considered a change in the manner of performance of the contract
work or other change in the work that justifies an equitable adjustment. That
reading harmonizes Article 3.A with Article 3.C, which states that “an equitable
adjustment shall be made” for “any change under this Article [that] causes an
increase or decrease in the Contractor’s cost of . . . the performance of any part of
this work under the Contract.” 6 In addition, this court has observed that equitable
adjustments “are appropriate . . . when new obligations are substituted for pre-
existing obligations.” Org. for Envt’l Growth, 700 A.2d at 203. It is reasonable to
regard a requirement to pay the minimum wages under a new wage decision rather
than the rates payable under the prior wage decision as a new obligation that can
6
We also note that section 9 of the prime contract provides that if issuance
of the contract award letter is delayed, “all intervening modifications (or new wage
decision) are applicable” and “[t]he contractor will be reimbursed this added labor
cost.” Thus, section 9, too, evinces an intent to treat new wage decisions as
grounds for reimbursing a contractor’s additional labor costs.
16
support an equitable adjustment. Further, as support for its interpretation of the
contract’s standard Changes clause, the CAB relied on two Davis-Bacon Act cases,
W.G. Yates & Sons Constr. Co. v. Gen. Servs. Admin., CBCA No. 1495, 11-1 BCA
¶ 34,638, 2010 WL 5904458 (Dec. 21, 2010) (“[W]hen the contracting officer
directs a specified change in contract terms and this change causes an increase . . .
in the cost of . . . performance of contract work, the contracting officer shall make
an equitable adjustment to the contract price.”), and Geronimo Serv. Co., ASBCA
No. 14686, 70-2 ¶ 8540, 1970 ASBCA LEXIS 274 (Oct. 26, 1970) (holding that
the contractor was entitled to an equitable adjustment of contract price pursuant to
contract’s changes clause where government’s issuance of a change order to
exercise an option year included modification to contract’s applicable wage
determination). 7 Given all the foregoing, we cannot say that the CAB’s
interpretation of the Changes clause was unreasonable: that “in the event that the
District changed the contract’s requirements and increased the cost of performance,
7
See also In re C & H Reforesters, Inc., 1988 AGBCA LEXIS 27, *14-15
(Dep’t Agric. B.C.A. Aug. 16, 1988) (acknowledging that there is secondary
authority “to the effect that since wages are not part of the work under the contract,
it is questionable whether an order increasing wages is within the bounds of the
[c]hanges clause” (citing J. Cibinic, Jr. and R. Nash, II FEDERAL PROCUREMENT
LAW, note 4 at 1222 (1980)), but collecting cases providing authority for use of the
changes clause to adjust the contract price when changes in wage determinations
made applicable to a contractor’s performance increase the cost of that
performance).
17
[Fort Myer] would be entitled to a price adjustment including costs related to its
subcontractor’s performance.” 8
In asserting that the CAB award decision is inconsistent with FAR § 22.404-
12 (48 CFR § 22.404-12), the District relies on this court’s case law recognizing
that “[w]ith few exceptions, District contracting practice parallels federal
government contract law.” Organization for Envt’l Growth, 700 A.2d at 198(quoting Dano Res. Recovery, 620 A.2d at 1351). But the problem with the
District’s reliance on the principle articulated in FAR § 22.404-12 is that it
overlooks a part of what 48 CFR Part 22 prescribes. As the Armed Services Board
of Contract Appeals recognized recently, FAR 22.407(e) specifies that a contract
clause is to be inserted into a contract to effect the “no adjustment” method. See
Appeal of Gulf Pac. Contr., LLC, 2021 ASBCA LEXIS 203, *10-11 (A.S.B.C.A.
Sept. 16, 2021); see also 48 C.F.R. § 22.407(e) (requiring a federal contracting
officer to “[i]nsert the clause at 52.222-30 . . . if the contract is expected to be . . .
[a] fixed price contract . . . that will contain option provisions by which the
8
And while it is true, as the District argues, that the required wage changes
were DOL-initiated and not independent decisions of the District, the parties
stipulated that the District incorporated the DOL Wage Decisions in written change
orders, a practice that the CAB could reasonably regard as bringing the Wage
Decisions within the scope of the Changes clause.
18
contracting officer may extend the term of the contract, and the contracting officer
determines the most appropriate contract price adjustment method is the method at
22.404-12(c)(1)”); 48 C.F.R. § 52.222-30 (setting forth the contract clause whose
insertion effectuates the provisions of FAR § 22.404-12(c)(1)). Here, as Fort Myer
emphasizes, the District did not insert such a clause into the prime contract. In
addition, FAR § 22.404-12 specifies that the “no-adjustment” method generally is
used in contracts with options to extend the term “that are not expected to exceed a
total of 3 years.” 48 CFR 22.404-12(c)(1). While that does not appear to be a
rigid rule, it is another reason why we conclude that FAR § 22.404-12 cannot fairly
be read into the contract in issue here 9 and did not put Fort Myer or Metro Paving
on notice that the option-year payments could not be adjusted in the event of DOL
wage decisions superseding Wage Decision No.1. We conclude that the CAB did
not err in rejecting the District’s argument premised on FAR § 22.404-12.
Finally, we turn to the District’s argument that it was error for the CAB to
award an equitable adjustment because Fort Myer did not demonstrate that Metro
9
See W.G. Yates, 2010 WL 5904458, (rejecting federal agency’s argument
that FAR § 22.404 should be read into the contract by operation of law; reasoning
that “only a mandatory contract clause that expresses a significant or deeply
ingrained strand of public procurement policy is considered to be included in a
contract by operation of law”) (citing, inter alia, S.J. Amoroso Constr. Co. v.
United States, 12 F.3d 1072, 1075 (Fed. Cir. 1993)).
19
Paving was injured as a result of the DOL Wage Decisions. The District implies
that Metro Paving could not have been injured if the amounts the District paid
based on Metro Paving’s option-year increases exceeded the additional labor costs
Metro Paving incurred because of the DOL Wage Decisions. The District’s
argument is inconsistent with the Federal Circuit’s guidance concerning what must
be shown to warrant an equitable adjustment, and the District therefore has not
shown that the CAB erred in rejecting the argument.
The Federal Circuit’s decision in Dalco Elecs. Corp. v. Dalton, No. 93-1486,
1994 U.S. App. LEXIS 16698 (Fed. Cir. 1994), is instructive. In that case, the
Federal Circuit partially reversed a decision of the Armed Services Board of
Contract Appeals in a case brought by Cherokee Electronics Corporation (the
former name of Dalco). The pertinent facts are set out in Appeal of Cherokee
Elecs. Corp., 93-1 B.C.A. (CCH) P25,522, 127165 (A.S.B.C.A. Oct. 5, 1992),
rev’d in relevant part sub. nom. Dalco Elecs. Corp. v. Dalton, 1994 U.S. App.
LEXIS 16698. The federal contract contained a number of unit prices that
reflected allowances for direct labor, based upon wage rates set forth in the
contractor’s successful bid. Id. at 127161. The contractor negotiated labor rates
with its employees and paid them at rates that were lower than the wage rates
reflected in its proposal, but the federal agency paid the contractor at the higher
20
wage rates contained in the proposal. Id. at 127161-62. A clause in the contract
recognized that DOL might determine that the contract was subject to the Service
Contract Act and to the minimum wages required under that Act. Id. at 127162.
The contractor warranted that its prices did not include any allowance for that
contingency to cover increased costs, but the parties agreed that if DOL so
determined, the contractor would pay the required wages. Id. After DOL made the
anticipated determination, the contractor sought an equitable adjustment in an
amount representing the difference between the wages and benefits the contractor
had paid to its employees and the wages and benefits to which DOL found that
they were entitled under the Service Contract Act. Id. at 127164. The contracting
officer declined to pay that portion of the equitable-adjustment claim representing
the difference between the billed contractual labor rates that were reflected in the
contractor’s proposal and in the contract award, and the amounts the contractor had
actually paid to its employees. Id. The contracting officer took the position that
the contractor’s election to pay actual wages that were less than the amounts the
government was paying the contractor for every unit should not entitle the
contractor “to duplicate payment of this amount” and thus “enable the contractor to
retain a profit margin much larger than that proposed and agreed to by the
government.” Id. at 127165. The Armed Services Board of Contract Appeals
agreed with the contracting officer. Id. at 127165-67.
21
The Federal Circuit rejected the Armed Services Board of Contract Appeals
position that the contract “barr[ed] recovery of . . . costs representing the difference
between the estimated rates used in pricing the procurement and the lower wages
Dalco eventually paid its workers.” Dalco, 1994 U.S. App. LEXIS 16698, *7.
The Federal Circuit held that “[t]he contractor was entitled to the full measure of
increased direct costs it incurred as a result of the incorporation of [Service
Contract Act] provisions, including the difference between the estimated rates used
in preparation of the proposal and the lower rates actually paid to [the contractor’s]
employees.” Id. at *9-10. In short, the Federal Circuit rejected the argument that,
to qualify for an equitable adjustment, the contractor was obligated to show the
type of injury (i.e., contract unit prices that were insufficient to cover the labor cost
increases resulting from increases in the federally mandated minimum wages) the
District argues was required here. Accord, Geronimo Serv. Co., 1970 ASBCA
LEXIS 274, *19 (“[A]ppellant became entitled to an equitable adjustment [simply]
by virtue of the Government’s exercise of its option and the change made in the
applicable wage determination[.]”). 10
10
As for the District’s argument that “granting an equitable adjustment
would run a considerable risk of giving [Metro Paving] a double payment for the
same work,” the CAB found as a factual matter that Metro Paving did not include
in its prices an allowance for increased Davis-Bacon costs. We defer to that
(continued…)
22
In the instant case, the CAB reached a conclusion analogous to those in
Dalco and Geronimo Serv. Co. Accordingly, although the District’s argument has
appeal, the CAB’s decision is not “arbitrary, capricious, or so grossly erroneous as
to necessarily imply bad faith,” and thus we must sustain it. Belcon, 826 A.2d at
384.
IV.
For all the foregoing reasons, the decision of the Contract Appeals Board is
Affirmed.
(…continued)
finding, as it is supported by substantial evidence and is not clearly erroneous. As
described above, Mr. Fye testified that “he did not include any contingency in the
original prices that Metro Paving bid for the project to account for potential labor
increases in the option years above the pay rates set forth in Wage Decision No. 1”
and that “Metro Paving only escalated its option year pricing in its original bid to
Fort Myer to account for anticipated increases to its fuel and material costs based
upon the fact that it expected its fuel and material costs to increase annually based
upon feedback from its suppliers.”
As the CAB observed, the contract’s Change clause “did not require that a
contractor provide a breakdown of its unit prices to support its request for payment
of increased . . . costs arising from a[ny type of] District-ordered contract change.”
The record also contains no evidence that the District required from bidders an
accounting of what costs, allowance for profit, etc. were reflected in the unit prices
to which the District agreed. Given those facts, the District’s argument — that the
lack of documentation about what cost savings Metro Paving may have realized
precludes an equitable adjustment — is not persuasive.