Walsh Construction Company

In the United States Court of Federal Claims
No. 16-845
Filed: May 31, 2017
****************************************
* Contract Disputes Act (“CDA”),
WALSH CONSTRUCTION CO., et. al, * 41 U.S.C. §§ 7101–7109;
* Federal Acquisition Regulation
Plaintiffs, * (“FAR”), 48 C.F.R. §§ 52.223-1,
* 52.243-5;
v. * Rules Of the United States Court of
* Federal Claims (“RCFC”) 12(b)(1),
THE UNITED STATES, * 15(a)(2);
* Tucker Act Jurisdiction, 28 U.S.C. §
Defendant. * 1491.
*
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Richard David Kalson, Benesch Friedlander, Coplan & Aronoff LLP, Counsel for Plaintiffs.
Igor Helman, United States Department of Justice, Civil Division, Washington, D.C., Counsel for
the Government.
MEMORANDUM OPINION DENYING THE GOVERNMENT’S MOTION TO DISMISS
COUNTS I AND II OF THE AMENDED COMPLAINT AND STAYING THE CASE
FOR THREE MONTHS TO AFFORD THE CONTRACTING OFFICER THE
OPPORTUNITY TO CONSIDER THE MERITS OF COUNT II
BRADEN, Chief Judge.
I. FACTUAL BACKGROUND.1
On August 17, 2012, the United States Army Corps of Engineers (the “Army Corps”)
awarded Contract No. W912DR-12-C-011 (the “Contract”) to Walsh Construction Company
(“Walsh”), to build a Defense Logistics Agency (“DLA”) facility in New Cumberland,
Pennsylvania (the “Project”). Gov’t App’x at A3–30 (8/17/12 Contract). The August 17, 2012
Contract required Walsh to construct a number of “drilled piers,” i.e., concrete-filled columns
drilled into the ground and used to support a building’s foundation. Gov’t App’x at A5–A21.
On November 26, 2012, Walsh entered into a subcontract with Ammero Construction
Services, LLC (“Ammero”), under which Ammero was to furnish and install 272 drilled piers.
1
The relevant facts are derived from: the February 13, 2017 Amended Complaint
(“Amend. Compl.”), and Exhibits (“Compl. Exs. A–D”); and the Government’s Appendix (“Gov’t
App’x” at A1–A73), submitted with the Government’s February 13, 2017 Motion To Dismiss In
Part Or, In The Alternative, To Merge Counts (“Gov’t Mot.”).
Compl. Ex. A (11/26/12 Ammero Subcontract). On December 4, 2012, Ammero subcontracted
that work to Richard Goettle, Inc. (“Goettle”). Compl. Ex. B (12/4/12 Goettle Subcontract).
Goettle was required to drill shafts into the ground down to a certain depth, or “tip elevation.”
Amend. Compl. ¶¶ 9–10. The “tip elevations,” however, were not calculated by the Army Corps
until after the award of the August 17, 2012 Contract. Amend. Compl. ¶¶ 9–12. The Army Corps
also inspected the “tip elevation” of each newly drilled shaft, to ensure it met the contract
specifications prior to the installation of the drilled piers. Amend. Compl. ¶ 13.
Goettle drilled shafts down to the tip elevation, as specified by the Army Corps, and then
moved its drilling equipment to the next shaft. Amend. Compl. ¶ 15. But, during inspection, the
Army Corps began to recalculate and set new tip elevations, i.e., “revised tip elevations.” Amend.
Compl. ¶ 15. This required Goettle to move its drilling equipment back to previously drilled shafts
in order to re-drill the shafts to the Army Corps’ new tip elevations. Amend. Compl. ¶ 15. The
Army Corps continued to conduct additional re-inspections, requiring Goettle to continue to make
additional equipment moves. Amend. Compl. ¶ 15. In fact, the Army Corps’ inspections and re-
inspections forced Goettle to make 471 additional moves to and from the drill shafts, resulting in
significant additional costs. Amend. Compl. ¶ 27. In order to adhere to the Project schedule,
Goettle was required to acquire additional drilling equipment and personnel. Amend. Compl. ¶
28.
In addition, Goettle encountered obstructions during the drilling of five of the required
shafts, i.e., shaft numbers L-2, L-3, L-4, N.8-3, and N.8-4 (collectively referred to as the “Five
Problem Shafts”). Amend. Compl. ¶¶ 35–38. During the drilling of the Five Problem Shafts,
Goettle encountered large slabs of rock, weathered rock, voids, open fractures, and open joints that
caused the shafts to collapse. Amend. Compl. ¶ 37.
On November 30, 2015, Walsh, acting on behalf of Goettle, submitted a Request For
Equitable Adjustment (“REA”) for the “additional work at drilled shafts due to differing site
conditions and disruption of work flow due to unnecessary inspections,” and requested costs in the
amount of $8,763,119.00 Gov’t App’x at A45. The November 30, 2015 REA incorporated two
documents Goettle provided Walsh: Goettle’s July 30, 2014 Request for Change Order (“RCO”),
in the amount of $7,047,220.00, and Goettle’s revised March 19, 2015 RCO, in the amount of
$7,100,112.00. Compl. Ex. C. (7/30/14 RCO); see also Gov’t App’x at A47 (3/19/15 Revised
RCO).2
Together, the November 30, 2015 REA, and RCOs incorporated therein, provided two
bases for an equitable adjustment. First, Walsh requested an equitable adjustment for the “Five
Problems Shaft Issue,” that presented a “differing site condition” under Federal Acquisition
2
The only material difference between the July 30, 2014 RCO and the March 19, 2015
RCO was the amount requested.
2
Regulation (“FAR”) 52.243-5.3 Gov’t App’x at A54–A60. Next, Walsh requested an equitable
adjustment for the “Downhole Inspection Issue,” i.e., reimbursement for additional work
undertaken by Goettle as a result of the Army Corps’ inspections and re-inspections of the drill
shafts. Gov’t App’x at A60–A62. Walsh described the “Downhole Inspection Issue” as a differing
site condition. Gov’t App’x at A60.
On April 18, 2016, an Army Corps Contracting Officer (the “CO”) issued a final decision
that denied the November 30, 2015 REA in its entirety. Compl. Ex. D at 31. With respect to the
Five Problem Shafts, the CO found that the conditions encountered were not materially different
from those stated in the August 17, 2012 Contract. Compl. Ex. D. at 36–41. With respect to the
Downhole Inspection claim, the CO found that the Army Corps’ inspection program was a contract
requirement and therefore could not be considered a differing site condition under FAR 52.243-5.
Compl. Ex. D at 49–50. In addition, the CO found that the Downhole Inspection claim failed
because the August 17, 2012 Contract included an “Inspection of Construction” clause, providing
that all work was “subject to Government inspection . . . to ensure strict compliance with the terms
of the contract.” Compl. Ex. D at 50.
3
FAR 52.243-5 provides:
(a) The Contracting Officer may, in writing, order changes in the drawings and
specifications within the general scope of the contract.
(b) The Contractor shall promptly notify the Contracting Officer, in writing, of
subsurface or latent physical conditions differing materially from those indicated
in this contract or unknown unusual physical conditions at the site before
proceeding with the work.
(c) If changes under paragraph (a) or conditions under paragraph (b) increase or
decrease the cost of, or time required for performing the work, the Contracting
Officer shall make an equitable adjustment (see paragraph (d)) upon submittal of a
proposal for adjustment (hereafter referred to as proposal) by the Contractor before
final payment under the contract.
(d) The Contracting Officer shall not make an equitable adjustment under
paragraph (b) unless—
(1) The Contractor has submitted and the Contracting Officer has received
the required written notice; or
(2) The Contracting Officer waives the requirement for the written notice.
(e) Failure to agree to any adjustment shall be a dispute under the Disputes clause.
48 C.F.R. § 52.243-5.
3
II. PROCEDURAL HISTORY.
On July 19, 2016, Walsh, acting on behalf of Ammero and Goettle (“Plaintiffs”), filed a
Complaint in the United States Court of Federal Claims. Compl. ¶ 1. The July 19, 2016 Complaint
alleged three counts: Count One alleged that the “Downhole Inspection Issue” resulted in
Government-caused delay and “additional costs” in the amount of $6,415,974.00; Count Two
alleged that the Army Corps breached the duty of good faith and fair dealing by “subjecting Goettle
to a myriad of unnecessary and abusive additional equipment, tooling and labor costs,” for which
damages in the amount of $6,415,974.00 were owed; and Count Three alleged a differing site
conditions claim related to the “Five Problems Shafts,” for which damages in the amount of
$631,247.00 were owed. Compl. ¶¶ 21–41.
On October 19, 2016, the Government filed an Answer. ECF No. 6. On December 12,
2016, the parties submitted a Joint Preliminary Status Report. ECF No. 7. On December 20, 2016,
the court convened a telephone status conference. On January 12, 2017, the parties submitted a
Joint Proposed Trial Schedule and on January 13, 2017, the court entered a Scheduling Order.
ECF Nos. 8–9.
On February 13, 2017, Plaintiffs filed an Amended Complaint, wherein Plaintiffs restated
all three counts, but revised the damages sought under Counts One and Two, so that $2,897,367.00
was due for each Count. Amend. Compl. ¶¶ 29, 33.4 On that same day, the Government filed a
Motion To Dismiss In Part, Or In The Alternative, To Merge Counts, wherein the Government
argued that the court should dismiss Counts One and Two of the February 13, 2017 Amended
Complaint for lack of subject matter jurisdiction or, in the alternative, merge Counts One and
Three, because those Counts alleged the same entitlement to compensation. Gov’t Mot. at 1.
On February 27, 2017, Plaintiffs filed a Response (“Pl. Resp.”). On March 17, 2017, the
Government filed a Reply (“Gov’t Reply”), together with a Supplemental Appendix (“Gov’t Supp.
App’x”).
III. DISCUSSION.
A. Jurisdiction.
The United States Court of Federal Claims has jurisdiction, under the Tucker Act, to
adjudicate any claim that arises under the Contract Disputes Act (“CDA”), 41 U.S.C. §§ 7101–
7109, and has been submitted to a CO for a final decision. See 28 U.S.C. § 1491(a)(2)( “The Court
of Federal Claims shall have jurisdiction to render judgment upon any claim by or against, or
dispute with, a contractor arising under section 7104(b)(1) of title 41 . . . on which a decision of
the contracting officer has been issued[.]”); see also 41 U.S.C. § 7104(b)(1)( (“[I]n lieu of
appealing the decision of a [CO] . . . to an agency board, a contractor may bring an action directly
on the claim in the United States Court of Federal Claims.”).
4
The July 19, 2016 Complaint and the February 13, 2017 Amended Complaint otherwise
are identical.
4
A claim “arises under” the CDA if it is based on,
any express or implied contract . . . made by an executive agency for— (1) the
procurement of services, other than real property in being; (2) the procurement of
services; (3) the procurement of construction, alteration, repair, or maintenance of
real property; or (4) the disposal of personal property.
41 U.S.C. 7102(a).
The term “claim” is defined “as a written demand or written assertion by one of the
contracting parties seeking, as a matter of right, the payment of money in a sum certain, the
adjustment or interpretation of contract terms, or other relief arising under or relating to this
contract.” 48 C.F.R. § 52.233–1. Although a CDA claim need not be submitted in any particular
form or use any particular wording, it must contain “a clear and unequivocal statement that gives
the contracting officer adequate notice of the basis and amount of the claim.” Contract Cleaning
Maint., Inc. v. United States, 811 F.2d 586, 592 (Fed. Cir. 1987). The CDA also requires that the
claim indicate to the CO that the contractor is requesting a “final” decision. James M. Ellet Const.
Co. v. United States, 93 F.3d 1537, 1543 (Fed. Cir. 1996).
In this case, the February 13, 2017 Amended Complaint includes three CDA counts: Count
One alleges a claim for “additional costs” related to the delay caused by the Downhole Inspection
Issue; Count Two alleges that the Army Corps breached the duty of good faith and fair dealing;
and Count Three alleges a differing site condition based upon the Five Problem Shafts. Amend.
Compl. ¶¶ 1, 21–41. The Government counters that Counts One and Two were not submitted to
the CO for a final decision, and moves to dismiss those Counts, pursuant to Rule of the United
States Court of Federal Claims (“RCFC”) 12(b)(1). Gov’t Mot. at 11, 15.
B. Standard of Review For A Motion To Dismiss, Pursuant To RCFC 12(b)(1).
A challenge to the United States Court of Federal Claims’ “general power to adjudicate in
specific areas of substantive law . . . is properly raised by a [RCFC] 12(b)(1) motion.”
Palmer v. United States, 168 F.3d 1310, 1313 (Fed. Cir. 1999); see also RCFC 12(b)(1) (allowing
a party to assert, by motion, “lack of subject-matter jurisdiction”). When considering whether to
dismiss an action for lack of subject matter jurisdiction, the court is “obligated to assume all factual
allegations [of the complaint] to be true and to draw all reasonable inferences in plaintiff’s favor.”
Henke v. United States, 60 F.3d 795, 797 (Fed. Cir. 1995). The plaintiff bears the burden of
establishing jurisdiction by the preponderance of the evidence. Reynolds v. Army & Air Force
Exch. Serv., 846 F.2d 746, 748 (Fed. Cir. 1988).
C. The Government’s February 13, 2017 Motion To Dismiss, In Part, Or, In
The Alternative, To Merge Counts One And Three.
1. The Government’s Argument.
The Government argues that Count Two should be dismissed, pursuant to RCFC 12(b)(1),
because Plaintiffs did not present a breach of the duty of good faith and fair dealing claim to the
CO. Gov’t Mot. at 11. The “only claim that was presented to the [CO] was a claim for an equitable
5
adjustment due to differing site conditions.” Gov’t Mot. at 11. A differing site condition claim is
legally distinct from a claim that the Government breached the duty of good faith and fair dealing,
as each claim involves different “elements of proof, determinations of law, potential defenses
and/or counterclaims, and underlying policy rationales.” Gov’t Mot. at 12 (quoting Renda Marine,
Inc. v. United States, 71 Fed. Cl. 378, 392 (2006)).
A differing site condition claim is specific to building and construction contracts, and
requires the contractor to establish, by a preponderance of the evidence, that the condition(s) set
forth in the contract materially differ from the subsurface or latent physical conditions at the site.
See Randa/Madison Joint Venture III v. Dahlberg, 239 F.3d 1264, 1274 (Fed. Cir. 2001) (“In order
to establish entitlement to an equitable adjustment by reason of a . . . differing site condition . . .
the contractor must prove, by a preponderance of the evidence, that the conditions indicated in the
contract differ materially from those it encounters during performance.”). By contrast, to establish
a claim for breach of the implied duty of good faith and fair dealing, the contractor must establish
that the Government acted in a way “specifically designed to reappropriate the benefits the other
party expected to obtain from the transaction, thereby abrogating the [G]overnment’s obligation
under the contract.” See Precision Pine & Timber, Inc. v. United States, 596 F.3d 817, 828 (Fed.
Cir. 2010)).
In this case, Plaintiffs presented the Downhole Inspection claim to the CO as a differing
site conditions claim. Gov’t App’x at A60 (11/30/15 REA stating that a “Type I Differing site
condition exists as concerns generally . . . the majority of the remainder of the shafts on the
Project”). Plaintiffs, however, did not present the Downhole Inspection claim as a breach of the
duty of good faith and fair dealing. Gov’t Mot. at 13. As such, Count Two should be dismissed,
because Plaintiffs did not submit a “clear and unequivocal claim” that the Government breached
the duty of good faith and fair dealing. Gov’t Mot. at 14.
In addition, Count One, i.e., the claim for “additional costs” resulting from the “Downhole
Inspection Issue,” should be dismissed, because it appears to present an alternate legal theory for
the breach of the duty of good faith and fair dealing claim alleged by Count Two. Gov’t Mot. at
15. In the alternative, to the extent that Count One is a differing site condition claim, it should be
merged with Count Three of the February 13, 2017 Amended Complaint. Gov’t Mot. at 16 (citing
Spain v. Brown & Williamson Tobacco Corp., 230 F.3d 1300, 1310 (11th Cir. 2000) (holding that
two claims should be merged when they are “based on the same underlying allegations and
theory”)).
2. Plaintiffs’ Response.
Plaintiffs respond that Count One of the February 13, 2017 Amended Complaint is “based
on the same claim previously presented to and denied by” the CO, i.e., the Downhole Inspection
claim. Pl. Resp. at 10–11. The Downhole Inspection claim was “not” a differing site condition
claim, but was based on the Army Corps’ “unreasonable application of the Contract-mandated
inspection program.” Pl. Resp. at 11 (emphasis added). The November 30, 2015 REA
distinguished the Five Problem Shafts claim from the Downhole Inspection claim and the CO
analyzed the two claims separately. Pl. Resp. at 6–9, 11–13. As such, Count One is legally distinct
from Count Three and was presented to the CO. Therefore, it should not be dismissed for lack of
subject matter jurisdiction, nor should it be merged with Count Three. Pl. Resp. at 13.
6
In addition, the good faith and fair dealing claim alleged by Count Two was presented to
the CO, because the operative facts underlying that claim were alleged in the November 30, 2015
REA. Pl. Resp. at 15. A claim is not required “to be submitted in any particular form or use any
particular wording.” Kansas City Power & Light Co., 124 Fed. Cl. 620, 623 (2016). In addition,
the contractor need not use the exact terminology of a breach of the covenant of good faith and
fair dealing in the claim that is presented to the CO for the United States Court of Federal Claims
to have jurisdiction to adjudicate it. See Scott Timber Co. v. United States, 333 F.3d 1358, 1365–
66 (Fed. Cir. 2003) (holding that the United States Court of Federal Claims had jurisdiction over
a good faith and fair dealing claim when the contractor “gave the CO clear notice of a purported
breach of contract”); see also E. & E. Enters. Global, Inc. v. United States, 120 Fed. Cl. 165, 174–
75 (2015) (same). The November 30, 2015 REA alleged that: (1) the Army Corps set the initial,
and inaccurate, tip elevations; (2) a “great majority” of the revised tip elevations were inaccurate
and had to be revised again; (3) therefore, Goettle was forced to move its equipment on multiple
occasions, as a result of the inaccurate tip elevations; and (4) these actions by the Army Corps cost
Plaintiffs a “substantial amount” of money, but the Government compensated Plaintiffs only for
“the lineal feet drilled at the rock drilling unit price which amounted to only a very small fraction
of [the] costs so incurred.” Pl. Resp. at 15–16. Since these facts are likewise alleged in Count
Two of the Amended Complaint, Plaintiffs have met their burden to present the claim for a final
decision by the CO, prior to alleging that claim in the United States Court of Federal Claims. Pl.
Resp. at 17.
3. The Government’s Reply.
The Government replies that “the only claim . . . submitted to the [CO] was [the] equitable
adjustment claim stemming from different site conditions allegedly encountered at the project site
in New Cumberland, Pennsylvania.” Gov’t Reply at 1. Plaintiffs did not present a claim for the
breach of the implied duty of good faith and fair dealing, because the RCOs included in the
November 30, 2015 REA specifically described the Downhole Inspection claim as a differing site
condition:
A type I Differing site condition exists as concerns generally to the majority of the
remainder of the shafts on the Project. The severity and type of materials
encountered in these shafts, and critically, the [Corps’] approach to addressing the
conditions encountered in the shafts, were not revealed by the [Corps’] extensive
investigation . . . or otherwise indicated by the Contract Documents.
Pl. Compl. Ex. C. at 11; see also Gov’t App’x at A60 (same).
The remainder of the November 30, 2015 REA asserts damages incurred as a result of
“differing site conditions.” Gov’t Reply at 6. The November 30, 2015 REA, however, does not
allege a breach of contract generally, nor does it allege a breach of the implied contractual
obligation to act in good faith and engage in fair dealing. Gov’t Reply at 6. As a result, Plaintiffs
failed to provide the CO notice of the alleged breach or an opportunity to address it. Gov’t Reply
at 6 (citing Simulation Tech., LLC, 103 Fed. Cl. 105, 110 (2012) (“When the administrative claim
focuses on one theory of relief and does not allege facts sufficient to satisfy any of the elements of
the theory of relief asserted on appeal, it is unlikely that the appeal has arisen from the same
operative facts.”)).
7
Although the November 30, 2015 REA stated that Plaintiffs assumed a certain drilling
schedule, that was modified as a result of the Army Corps’ inspection requirements, “those
statements are insufficient to put the agency on notice of [Plaintiffs’] assertion that the [Army]
Corps somehow abrogated its contract obligations,” because the legal theory underlying a breach
of the implied duty of good faith and fair dealing is not the same as a differing site conditions
claim. Gov’t Reply at 7–11. As such, Count Two should be dismissed for lack of subject matter
jurisdiction.
Finally, with respect to Count One, the Government argues that the court should reject
Plaintiffs’ attempt to “recast” a differing site condition claim as “a change in project work
condition claim,” because the November 30, 2015 REA alleged that the Army Corps’ additional
inspections resulted from the rock at the site being of a “lesser quality.” Gov’t Reply at 12 (quoting
Compl. Ex. C. at 12). In addition, although the November 30, 2015 REA alleged more than $7
million in additional costs as a result of “differing site conditions,” the February 17, 2017 Amended
Complaint alleges “additional costs” separately from “differing site conditions” costs. Gov’t
Reply at 13. Moreover, although the United States Court of Federal Claims has recognized
“additional costs” claims for Government-incurred delay, those claims require an evidentiary
showing different from that required by a differing site conditions claim. Gov’t Reply at 13 (citing
George Sollitt Constr. Co. v. United States, 64 Fed. Cl. 229, 240 (2005) (determining that a
contractor’s delay claim must show “that the [G]overnment’s actions affected activities on the
critical path of the contractor’s performance of the contract”)). As a result, Count One should
either be dismissed or otherwise merged with Count Three.
4. The Court’s Resolution.
a. Regarding Count One.
Count One of the February 13, 2017 Amended Complaint alleges a claim for “additional
costs” resulting from the delay caused by the Downhole Inspections, that the Government argues
should be dismissed, because it was not first presented to the CO for a final decision. Gov’t Mot.
at 16. Plaintiffs respond that this claim was presented to the CO for a final decision, because the
CO was presented with the underlying “operative facts.” Pl. Resp. at 11–13.
A claim for payment under the CDA must be presented to the CO for a final decision. See
41 U.S.C. § 7103(a)(1). After the CO issues that decision, a contractor may file an action on that
claim in the United States Court of Federal Claims. See 41 U.S.C. § 7104(b)(1). “This standard,
however, does not require rigid adherence to the exact language or structure of the original
administrative CDA claim.” Scott Timber Co., 333 F.3d at 1365. As such, the United States Court
of Federal Claims may adjudicate a claim if it arises from the “same operative facts” and requests
“essentially the same relief,” as a claim presented to the CO, even if the complaint at issue alleges
a “slightly different legal theory.” Id. Indeed, “[a]ll that is required is that the contractor submit
in writing to the [CO] a clear and unequivocal statement that gives the [CO] adequate notice of the
basis and amount of that claim.” Contract Cleaning, 811 F.2d at 592.
In this case, the November 30, 2015 REA presented to the CO contained two different
factual bases for an equitable adjustment: the Five Problem Shafts claim; and the Downhole
Inspection claim. Compl. Ex. C. at 1; see also Gov’t App’x at A45 (explaining that the REA was
8
filed for “additional work at drilled shafts due to differing site conditions and disruption of work
flow due to unnecessary inspections” (emphasis added)). Both of these claims, however, were
presented as a “differing site condition,” but each claim arose from separate facts. Compare
Compl. Ex. C at 5–10 (facts underlying the Five Problems Shafts claim) with Compl. Ex. C at 11–
15 (facts underlying the Downhole Inspection claim).5
In the CO’s April 18, 2016 final decision, the Five Problem Shafts claim and the Downhole
Inspection claim were decided separately. Compare Compl. Ex. D at 35–48 (deciding the Five
Problem Shafts claim) with Compl. Ex. D at 49–53 (deciding the Downhole Inspection claim).
With respect to the latter, the CO found that the “crux of the ‘Downhole Inspection Argument’
appears to be that ‘instead of a single inspection, or even an occasional re-inspection, [Plaintiffs
were] forced to undergo a program whereby many multiple downhole inspections were required
on a single shaft.’” Compl. Ex. D at 49. Therefore, the CO found that this claim could not properly
be brought as a differing site conditions claim, because, “[i]n reality, this issue apparently relates
to difficulties Goettle allegedly encountered in attempting to deal with the Contract-mandated
inspection program.” Compl. Ex. D. at 49. But, although the claim was brought under an
“inapplicable clause,” i.e., the differing site conditions clause required by FAR 52.243-5, the CO
found this claim to be “without merit anyway,” because the August 17, 2012 Contract
specifications provided for the required inspections. Compl. Ex. D at 50–52.
As such, Count One of the February 13, 2017 Amended Complaint alleges the same
“operative facts” that were considered by the CO, when the April 18, 2016 final decision was
issued, i.e., Plaintiffs allege that they suffered delay and incurred additional costs, because of the
Army Corps’ inspections and re-inspections of the drilled pier shafts. Compl. ¶¶ 21–29. The
difference is that the February 13, 2017 Amended Complaint alleges an “additional costs” claim
based upon Government-caused delay, instead of a “differing site conditions” claim. But, in the
April 18, 2016 final decision, the CO found that the differing site conditions clause was
“inapplicable” to the substance of the Downhole Inspection claim, and denied it based on the CO’s
interpretation of the contract specifications regarding inspection. The November 30, 2015 REA,
however, provided the CO with “clear notice” that Plaintiffs claimed “additional costs” as a result
of the delay caused by the Army Corps’ inspections, but the CO rejected that claim. See Scott
Timber Co., 333 F.3d 1365–66 (determining that United States Court of Federal Claims had
jurisdiction to adjudicate claim when the CO was given “clear notice” of a breach of contract
claim). The court has determined that it has jurisdiction to adjudicate the “additional costs” claim
alleged by Count One of the February 13, 2017 Amended Complaint, because it was previously
presented to and denied by the CO. See 28 U.S.C. § 1491(a)(2).
In the alternative, the Government argues that Count One should be merged with Count
Three, i.e., the Five Problem Shafts differing site condition claim, because both claims were
presented as a result of differing site conditions in the November 30, 2015 REA. Gov’t Mot. at
5
The November 30, 2015 REA did not separate the costs incurred as a result of the Five
Problem Shafts and Downhole Inspection claims. Instead, Plaintiffs claimed reimbursement for
“total production costs,” including all of the equipment moving costs related to additional
inspections, as well as “those costs related directly to the extreme measures Goettle was forced to
take at the 5 Problem Shafts.” Compl. Ex. C. at 22.
9
16. But, these Counts are based on different operative facts and seek different relief. Compare
Amend. Compl. ¶ 29 (requesting “additional costs” in the amount of $2,897,367.00) with Amend.
Compl. ¶ 41 (requesting $604,957.00 for a differing site condition). Therefore, the court has also
determined not to merge these two counts.
b. Regarding Count Two.
Count Two of the February 13, 2017 Amended Complaint alleges that the Army Corps
breached the duty of good faith and fair dealing, by engaging in “arbitrary, capricious and self-
serving conduct” and conducting multiple inspections and re-inspections of the drilled pier shafts.
Amend. Compl. ¶ 31. The Government argues that this Count should be dismissed for lack of
subject matter jurisdiction, because it was never presented to the CO for a final decision. Gov’t
Mot. at 11.
As a matter of law, the United States Court of Appeals for the Federal Circuit has held that
a CDA claim in the United States Court of Federal Claims need not follow the “exact language or
structure” of the administrative claim presented to the CO. See Scott Timber Co., 333 F.3d at
1365–66. The claim presented to the CO, however, must provide the CO with “clear notice” of
the basis for the relief. Id. For this reason, in Reliance Insurance Company v. United States, 931
F.2d 863 (Fed. Cir. 1991), our appellate court held that the United States Court of Federal Claims
did not have jurisdiction to adjudicate a contractor’s claim that the Government had breached the
duty of good faith and fair dealing, when the contractor “only submitted to the [CO] claims for
equitable adjustment to the contract.” Id. at 866. In this case, as in Reliance, Plaintiffs allege a
breach of the duty of good faith and fair dealing, when the only claims submitted to the CO were
for an equitable adjustment to the contract. Plaintiffs argue, however, that they presented all of
the operative facts to the CO, so that a final decision could have been issued on Plaintiffs’ breach
of duty of good faith and fair dealing claim. Pl. Resp. at 16.
The duty of good faith and fair dealing is implied in all contracts with the federal
government, and requires parties “not to act so as to destroy the reasonable expectations of the
other party regarding the fruits of the contract.” See Metcalf Const. Co. v. United States, 742 F.3d
984, 990–91 (Fed. Cir. 2014). The Government breaches this contractual obligation when it
eliminates or rescinds contractual benefits “through action that is specifically designed to
reappropriate the benefits and thereby abrogate the [G]overnment’s obligations under the
contract.” Bell/Heery v. United States, 739 F.3d 1324, 1335 (Fed. Cir. 2014).
In this case, the November 30, 2015 REA did not include the operative facts underlying a
breach of the duty of good faith and fair dealing, i.e., it did not allege that the Government acted
to abrogate its obligations under the Contract nor did it allege that the Government breached the
Contract. Gov’t App’x at A45 (11/30/15 REA “for additional work at drilled shafts due to differing
site conditions and disruption of work flow due to unnecessary inspections”). Instead, the
November 30, 2015 REA asserted only that: (1) Goettle assumed that only one inspection would
be conducted per shaft; (2) instead, the Army Corps performed multiple inspections; and (3) this
resulted in additional costs. Compl. Ex. C at 12-13; see also Gov’t App’x at A61–62 (same).
These operative facts were not sufficient to alert the CO of the possibility of a claim for breach of
the duty of good faith and fair dealing.
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Therefore, in contrast to the additional costs/delay claim alleged by Count One, the CO did
not have notice of the operative facts underlying the breach claim alleged by Count Two, nor was
the CO granted an opportunity to review this claim. Therefore, the court has determined that it
does not have jurisdiction to adjudicate Count Two of the February 13, 2017 Complaint. See 28
U.S.C. § 1491(a)(2).
The court, however, has also determined that it would be inequitable to dismiss Count Two,
particularly when Counts One and Three were properly submitted to the CO and there is no reason
why Plaintiffs should not be able to present the claim underlying Count Two to the CO for a final
decision.6 Instead, the better course is to provide Plaintiffs the time necessary to present their
claim for a breach of the duty of good faith and fair dealing to the CO for a final decision. As
such, the court has determined that it will stay this case for three months, to allow Plaintiffs an
opportunity to present a claim for a breach of the duty of good faith and fair dealing to the CO for
a final decision, pursuant to CDA, and to allow the CO to consider that claim. See 41 U.S.C. §
7103(a)(1). If Plaintiffs are dissatisfied with the CO’s decision, they may file an Amended
Complaint to include a properly submitted breach of duty of good faith and fair dealing claim. See
RCFC 15(a)(2) (“[A] party may amend its pleading . . . with . . . the court’s leave.”).
c. Regarding Count Three.
Count Three of the February 13, 2017 Amended Complaint alleges that Plaintiffs incurred
additional costs as a result of a differing site condition at the Five Problem Shafts. Amend. Compl.
¶¶ 34–41.7 This claim was submitted to and, denied by, the CO. Compl. Ex. C at 4–10 (11/30/15
REA); see also Compl. Ex. D at 35–48 (4/18/16 final decision). As such, the court has determined
that it has jurisdiction to adjudicate Count Three of the February 13, 2017 Amended Complaint.
See 28 U.S.C. § 1491(a)(2).
6
The CDA provides that “[e]ach claim by a contractor against the Federal Government
relating to a contract . . . shall be submitted within 6 years after the accrual of the claim.” 41
U.S.C. § 7103(a)(4)(A). In this case, the Army Corps awarded the contract to Walsh on August
17, 2012, i.e., less than six years ago. Gov’t App’x at A4. Any claim for breach of the duty of
good faith and fair dealing would have accrued after that date. See Ariadne Fin. Servs. Pty.
Ltd. v. United States, 133 F.3d 874, 878 (Fed. Cir. 1998) (“[A contractor’s] breach of contract
claim accrue[s] when [the contractor] should have known that it had been damaged by the
[G]overment’s breach.”). As such, any breach claim presented to the CO would be timely for
purposes of the CDA.
7
The Government does not contest the court’s jurisdiction with respect to Count Three.
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IV. CONCLUSION.
For these reasons, the court denies the Government’s February 13, 2017 Motion To
Dismiss In Part, Or, In The Alternative, To Merge Counts, pursuant to RCFC 12(b)(1). In addition,
this case is stayed until August 31, 2017, to provide Plaintiffs an opportunity to present their claim
for a breach of the duty of good faith and fair dealing to a United States Army Corps of Engineers
Contracting Officer for a final decision.
IT IS SO ORDERED.
s/ Susan G. Braden
SUSAN G. BRADEN
Chief Judge
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