Tag Archives: delay

CARDINAL CHANGE EXAMINES THE ENTIRE, FACTUAL UNDERTAKING

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A recent matter with the Civilian Board of Contract Appeals discusses a cardinal change theory of liability.

A cardinal change “occurs when the government effects an alteration in the work so drastic that it effectively requires the contractor to perform duties materially different from those originally bargained for.” … A cardinal change can occur even when there is no change in the final product because “it is the entire undertaking of the contractor, rather than the product, to which we look.”

Boyd Atlanta Rhodes, LLC v. General Services Administration, CBCA 7753, 2025 WL 1202011 (CBCA 2025) (citations omitted).

In this matter, a lessor was pursuing additional compensation from the government (as lessee) due to delays (more than 400 days) in the government’s acceptance of its lease term. The lease provided that the contracting officer could, at any time, make direct changes to tenant improvements, etc., prior to the lease term commencing. There were more than 400 days of delay that resulted in the government’s delay in accepting the lease term. The lessor claimed the government was responsible for the delay and sought lost rental income under the argument of cardinal change.

The government moved to dismiss the cardinal change claim arguing that because the lease gave it the unrestricted ability at any time to make changes prior to the lease term commencing, this could never lead to a cardinal change because the government could essentially never breach the lease.  The Board found this argument unpersuasive, that being that the government had the unrestricted ability to make changes such that it had the unfettered right to eliminate a breach of the lease. For this reason, the Board denied the government’s motion to dismiss without determining whether the lessor was entitled to delay compensation (e.g., lost rent) based on the lessor’s cardinal change argument.

Think about the underlined language in the cardinal change quote above: “A cardinal change can occur even when there is no change in the final product because ‘it is the entire undertaking of the contractor, rather than the product, to which we look.’” In other words, the entire, factual undertaking of the contractor is examined to see whether the contractor’s undertaking is so drastic that it materially exceeds the changes clause in the contract (because the undertaking is materially different than what was bargained for in the contract).  See Boyd Atlanta Rhodes, supra. Hence, when arguing under cardinal change, you want to demonstrate: (1) the entire, factual undertaking; (2) the undertaking is drastic compared to the original undertaking; and (3) the drastic undertaking was materially different than what was bargained for.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

A CLAIM FOR CONSTRUCTIVE SUSPENSION DOES EXIST

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A claim for constructive suspension does exist:

“Constructive suspension occurs when work is stopped absent an express order by the contracting officer and the [G]overnment is found to be responsible for the work stoppage.”  “A constructive suspension will be found on the same elements and has the same effect and consequences as an actual suspension.”  To recover under the Suspension of Work clause, the contractor  needs to prove four elements: “(1) [the] contract performance was delayed; (2) the Government directly caused the delay; (3) the delay was for an unreasonable period of time; and (4) the delay injured the contractor in the form of additional expense or loss.”  “The Government’s actions [must be] the sole proximate cause for the contractor’s  additional loss, and the contractor  would not have been delayed for any other reason during that period.” 

Quality Trust, Inc. v. Department of the Interior, 2025 WL 1092348 (CBCA 2025) (internal citations omitted).

The four elements are a must. If you fail to prove any of them, the suspension claim FAILS, whether it’s an actual suspension claim or constructive suspension claim.

In Quality Trust, Inc., the contractor could not prove the second element – the government solely caused the delay – because the government was NOT the sole cause of the delay. This means the suspension claim was not compensable.

But, even if the suspension was the government’s fault, the contractor could not prove the third element—the delay was for an unreasonable amount of time. The word “unreasonable” does not refer to the government’s motivation or purpose in requesting the suspension. See Quality Trust, Inc., supra (citation omitted).  Rather, it refers only to the period of time being unreasonable. See id.  Here, the Civilian Board of Contract Appeals found the suspension to be reasonable thereby further killing the suspension claim.

If you are navigating an owner suspension, keep in mind these four elements that must be proven to substantiate the actual or constructive suspension claim.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

…MORE ON DELAY CLAIMS AND THE BURDEN OF PROOF SUBSTANTIATING DELAY

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How about some more on DELAY claims and the burden of proof substantiating delay.

Delay claims can no doubt be complex – factually and legally. They warrant expert opinions further bolstered by fact witness testimony from the folks that lived the details and issues. If you need assistance with a delay claim, make sure you have the right representation to best position the claim, the arguments, and the burden of proof to substantiate the claim. Otherwise, you’ll be navigating murky waters in dealing with issues and facts that rarely will be one-sided.

Claims relating to delay can be a driving item on construction projects with back-and-forth positions / arguments and differing expert opinions. From the contractor’s perspective, to recoup time and money, the delay needs to be excusable and compensable. Below is a snippet from the Court of Federal Claims explaining the contractor’s burden in proving an excusable, compensable delay:

“[N]ot all delays are excusable, and furthermore, not all excusable delays are compensable.” Compensable delay is delay where “the government [is] the sole proximate cause of the contractor’s additional loss, and the contractor would not have been delayed for any other reason during that period.”  Sequential delay is defined as delay “where one party and then the other cause different delays seriatim or intermittently.”  “If a period of delay can be attributed simultaneously to the actions of both the [g]overnment and the contractor, there are said to be concurrent delays, and the result is an excusable but not a compensable delay.”  Plaintiff “has the burden of establishing by a preponderance of the evidence” the existence of any excusable delay, compensable or otherwise

***

A compensable delay analysis requires the Court to look at each specific instance of excusable delay plaintiff is entitled to and determine if the government is “the sole proximate cause of [plaintiff]’s additional loss, and the contractor would not have been delayed for any other reason during that period.”  Consequently, the Court cannot decide whether plaintiff is entitled to any compensable delay until it decides if plaintiff is entitled to excusable delay.  Further, the government’s blanket assertion that any excusable delay caused by weather, logs, clay, or debris was concurrent with plaintiff’s delayed start, defective equipment, project planning, and personnel management is unavailing because it does not assess each specific instance of excusable delay to which plaintiff is entitled.  (“[I]n the event of concurrent delays, the contractor ‘can attempt to prove the portion of the delay attributable to the government[ ] that was separate and apart from the contractor’s delay.’ ”). The government correctly states, and plaintiff acknowledges, plaintiff “has the burden of establishing by a preponderance of the evidence” the existence of any excusable delay, compensable or otherwise. 

Marine Industrial Construction, LLC v. U.S., 158 Fed.Cl. 158, 207 (Fed.Cl. 2022) (internal citations omitted).

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

TIME IS MONEY ON CONSTRUCTION PROJECTS AND CATEGORIES OF DELAY

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As we know on construction projects, the adage “time is money” always applies. It applies to contractors just as much as owners.

If a project is delayed, a contractor incurs additional overhead costs known as general conditions and general requirements which are driven by time.  Similarly, an owner experiences its own delay damages driven by time which can be in the form of loss of use, increased or additional financing, and increased or additional consulting (architect/engineering) costs.

From an owner’s perspective, an owner’s damages are oftentimes captured in a negotiated liquidated damages clause designed to capture owner’s delay damages by liquidating the daily amount. A contractor typically would prefer liquidated damages versus the unknown and uncapped exposure of actual damages which could be astronomical depending on the project.  A contract could also include a stipulated daily rate for the contractor’s delay damages (general conditions and general requirements) which a contractor may or may not want to negotiate and include. Regardless, this all stems from the adage “time is money” which means what it says to all parties on a construction project.

Just because the project is delayed does not mean a party gets to recover delay damages. Only if it were that easy.  The delay still needs to be proven, particularly by the contractor, that would need to prove entitlement to its own delay damages and rebut any late completion argument by an owner looking to assess liquidated damages.

The below from the Court of Federal claims sheds light on the categories of delay on federal construction projects which, likewise, would have merit on all projects:

“The general rule is that ‘[w]here both parties contribute to the delay neither can recover damage[s], unless there is in the proof a clear apportionment of the delay and expense attributable to each party.” Courts will deny recovery where the delays are concurrent and the contractor has not established its delay apart from that attributable to the government.

 “Delays generally fall into one of three categories: (1) excusable and compensable; (2) excusable but not compensable; and (3) not excusable.” Judges of the United States Court of Federal Claims have stated that “[f]ederal regulations provide for extensions of time for excusable delays (e.g., unusually severe weather), but do not provide for equitable adjustments for such delays.” “Moreover, to result in an excusable delay, ‘the unforeseeable cause must delay the overall contract completion; i.e., it must affect the critical path of performance.’ ”

“When a contractor seeks an equitable adjustment for government-caused delay, ‘the contractor has the burden of proving the extent of the delay, that the delay was proximately caused by government action, and that the delay harmed the contractor.’ ” “The Government’s liability for delay-related damages is limited to those delays that it caused and that hew to the project’s critical path.” Determination of the critical path is necessary for determining compensable delay because “ ‘only construction work on the critical path ha[s] an impact upon the time in which the project [is]completed.’

LCC-MZT Team IV v. U.S., 155 Fed.Cl. 387, 457-458 (citation and internal citations omitted).

***

For a delay to qualify as excusable and compensable, the Government must have been ‘the sole proximate cause of the contractor’s additional loss, and the contractor [must] not have been delayed for any other reason during that period.’ This obligation thus includes the requirement that ‘there was no concurrent delay on the part of the contractor.’”

Id.  at 489 (citation  omitted).

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

THERE ARE CONSEQUENCES TO EXECUTED DOCUMENTS SUCH AS THE ACCORD AND SATISFACTION DEFENSE

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A federal government contractor in Jackson Construction Co., Inc. v. U.S., 62 Fed.Cl. 84 (Fed.Cl. 2024) sought delay damages against the government. It lost. The reason for the loss is a crucial reminder that documents parties sign ALWAYS matter. ALWAYS!!

In Jackson Construction Co., the contractor’s delay claim was premised on relocating a waterline. The contractor, however, received additional money for relocating the waterline, but no additional time, and this was memorialized in a modification to the contract (i.e., a change order). In executing the modification for the additional work, the contractor did NOT reserve rights for time or money. Indeed, the modification reflected that the monetary adjustment constitutes full compensation for the additional work including delay, namely:

The contract period of performance remains the same. It is further understood and agreed that this adjustment constitutes compensation in full on behalf of the contractor and his subcontractors and suppliers for all costs and markup directly or indirectly, including extended overhead, attributable to the change order, for all delays related thereto, and for performance of the change within the time frame stated.

Jackson Construction Co., supra, at 90.

The contractor made a few arguments to try to overcome the modification it agreed to.  All failed.

An “executed bilateral modification with a release provision usually constitutes an accord and satisfaction unless that release is either ambiguous or limited in scope.” Jackson Construction Co., supra, at 92.

An ‘accord’ is a contract under which both parties agree that one party will render additional or alternative performance in order to settle an existing claim made by the other party, and ‘satisfaction’ is the actual performance of the accord. The party asserting an accord and satisfaction defense must establish four elements: (1) proper subject matter; (2) competent parties; (3) a meeting of the minds; and (4) consideration.

Id. (internal citation omitted).

The contractor could reserve rights in a modification to avoid the accord and satisfaction defense. Without the reservation of rights, “the Court must focus on whether or not the parties’ objective manifestations of intent demonstrate that they reached a meeting of the minds with respect of additional claims.” Id. at 93.

Here, the contractor did not reserve its rights in the modification it executed. Thus, the contractor did not preserve its delay claim for the additional waterline relocation. To this point, there was no evidence that the contractor intended to reserve rights to assert a delay claim at the time it executed the modification.

While the contractor looked to avoid the accord and satisfaction defense by arguing the release in the modification was ambiguous and procured through government misrepresentation, the court was having none of this. There was no evidence of any misrepresentation or ambiguity.

The contractor further argued that it signed the modification due to economic duress.

A party asserting economic duress must show more than economic tension or financial harm. Jackson Construction Co., supra, at 95.  “A party asserting economic duress must prove that: (1) its acceptance of the other party’s terms was involuntary; (2) the circumstances permitted no alternative but to accept the terms; and (3) the acceptance resulted from the coercive acts of the other party.” Id.  The contractor could not prove any of those elements.

The key takeaway is that parties need to appreciate what they execute and that there are consequences to executing documents. The contractor could have reserved rights. It did not. As a result, the contractor had to rely on weak arguments that it had no evidence to support…all because of the consequences of the modification the contractor signed.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

TAKEAWAYS FROM SCHEDULE-BASED DISPUTE BETWEEN GENERAL CONTRACTOR AND SUBCONTRACTOR

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A recent opinion out of the Southern District of Florida, Berkley Insurance Co. v. Suffolk Construction Co., Case 1:19-cv-23059-KMW (S.D.Fla. July 22, 2024), provides valuable takeaways on schedule-based disputes between a general contractor and subcontractor on a high-rise project.

In a nutshell, the general contractor’s original project schedule was abandoned due to project delays and the project wasn’t being built by any updated project schedule. The subcontractor claimed the general contractor was mismanaging the schedule putting unreasonable manpower and supervision constraints on it, i.e., it was working inefficiently. A bench trial was conducted and the Court found in favor of the subcontractor’s arguments. The Court found the general contractor had unrelated delays and that work activities were no longer methodical but, simply, piecemeal demands. The Court also rejected any inadequate manpower arguments finding the subcontract did not place any manpower requirements on the subcontractor.

Below are the high level takeaways from these facts which are takeaways relative to any schedule-based dispute between a general contractor and subcontractor.

  1. The Word “Reasonably” in the Subcontract Means Something

The subcontract provided that that the subcontractor was required to comply with the project schedule as it was “reasonably” amended from time to time.  This makes sense because no construction schedule is written in stone. Any project schedule will be updated and amended based on the progress of the project. Nothing unusual about this concept.

However, the Court found that the word “reasonably” means the general contractor did NOT have unfettered discretion or control over the schedule because it had to act reasonably.  The general contractor’s ability to amend the schedule was limited to reasonable changes. Hence, any manpower obligation of the subcontractor was tied to reasonable amendments to the schedule and the subcontractor was not required to bear the brunt of endless workers beyond its planned workforce unless the general contractor’s schedule amendments were reasonable.  Moreover, given the general contractor’s failure to adhere to the subcontract’s requirement of confirming changes in writing with the signatures of both parties, the Court held the general contractor’s unilateral changes to the schedule were violations to the express terms of the subcontract regarding changes.

  1. No Damage for Delay Provisions are Not Absolute

The subcontract included a no damage for delay provision. While these provisions are enforceable in Florida, they do “not preclude recovery for delays resulting from a party’s fraud, concealment, or active interference with performance under the contract.” Berkley Insurance Co., supra (citation omitted). “This restriction comports with a contracting party’s implied promise not to hinder the other party’s ability to perform its contractual obligation.” See id.

Here, the Court held that the general contractor actively interfered with the subcontractor’s ability to complete its work by failing to prepare floors for the subcontractor to work sequentially; mismanaging other trades causing active damage to work already completed by the subcontractor; and misallocating building resources and personnel creating a chaotic and unstable situation.

  1. Notice Provisions

The general contractor argued that the subcontractor did not provide formal contractual notice of claims within ten days of them arising. The Court found this argument unpersuasive as the subcontractor preserved its claims through numerous emails to the general contractor regarding delay, damage, or other impacts to the subcontractor. Indeed, the subcontractor submitted potential change orders for loss of production and informed the general contractor that labor and supervision expenses were becoming untenable due to the out of sequence work.

  1. Recovering delay and Lost Productivity (Inefficiency Damages)

While the court allowed lost productivity damages from the subcontractor, it disallowed delay damages believing it would create a windfall to the subcontractor since courts view delay damages as a subset of lost productivity damages. See Berkley Insurance Co., supra, citing JH Kelly, LLC v. AECOM Tech. Servs., Inc., 605 F. Supp. 3d 1295, 1308 (N.D. Cal. 2022) (holding “damages for the delay and disruption” were among the “five categories of lost productivity damages” at issue).

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

FIVE ISSUES TO CONSIDER IN GOVERNMENT CONTRACTING (OR ANY CONTRACTING!)

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The appeal of Appeals of – Konecranes Nuclear Equipment & Services, LLC, ASBCA 62797, 2024 WL 2698011 (May 7, 2024) raises interesting, but important, issues that should be considered.  In this case, the government (in a supply contract) procured four portal cranes from the claimant.  After an initial test of one of the cranes failed, the government refused to accept delivery even after the issue was addressed by the claimant. The government did not accept the manner in which the claimant addressed the issue and would only accept cranes if the claimant employed “an unnecessary alternative solution [that] caused further delay and increased [claimant’s] costs.” On appeal, it was determined the government’s decision to delay delivery based on its demand for the alternative solution was not justified, i.e., constituted a breach of contract.  Below are five issues of consideration in government contracting, or, for that matter, any contracting.

Issue #1- Patently Ambiguous Specifications

The government argued that the specifications were patently ambiguous and because the claimant failed to inquire regarding the ambiguous specifications prior to performance, its interpretation of the ambiguous specifications should govern. The contractor countered that the specifications were unambiguous and it met the specifications.

“Contract interpretation begins with the language of the written agreement.” If unambiguous, the plain meaning of a contract controls. “A contract term is unambiguous if there is only one reasonable interpretation.” However, “[w]hen a contract is susceptible to more than one reasonable interpretation, it contains an ambiguity.” “‘To show an ambiguity it is not enough that the parties differ in their respective interpretations of a contract term,’ rather, both interpretations must be reasonable.”  To show a patent ambiguity, which we construe against the non-drafting party, the drafting party must show an ““obvious, gross, [or] glaring” ambiguity so substantial as to impose a “duty to inquire” before contract formation. 

Appeals of – Konecranes, supra (internal citations omitted).

Here, it was determined “there was no ambiguity, much less an obvious, gross, or sufficiently glaring ambiguity that would trigger [claimant’s] duty to inquire before contract formation.”  Id.

Issue #2 – Rejection of Work Based on Specifications

The government rejected the cranes for not complying with the specifications.

“When the Government rejects work as being not in compliance with its specifications, the Boards of Contract Appeals have held that the burden is upon the Government to demonstrate that fact.” We have explained this anomaly of the government bearing the burden for a contractor claim “as a variation of the implied warranty of specifications seen in impossibility and defective specifications cases and characterized it as the government ‘putting in issue the sufficiency of its own specifications.”’ In assessing these ““inspection and rejection cases,” we focus on whether the evidence demonstrates that a product fails “to meet contract requirements.”

Appeals of – Konecranes, supra (internal citations omitted).

Here, it was determined, “[r]egardless of which party bears the burden of proof, [claimant] proved by a preponderance of the evidence that the luffing drums [in the cranes] complied with the Contract’s specifications after changing the wire rope and should not have been found defective with the new rope.” Id.

Issue #3 – Delay

The claimant argued the government had no basis to reject delivery of a crane because it complied to the specifications after the claimant addressed the initial issue.  To this point, the claimant argued the government’s refusal to allow it to ship cranes unless it employed the unnecessary alternative solution resulted in delays.

“A contractor seeking to prove the government’s liability for a delay must establish the extent of the delay, the contractor’s harm resulting from the delay, and the causal link between the government’s wrongful acts and the delay.” As to causation, “a contractor has the burden of demonstrating that the specific delays were due to government-responsible causes, that the overall completion was delayed as a result, and that any government-cause[d] delays were not concurrent with delays within the contractor’s control.”

Appeals of – Konecranes, supra (internal citations omitted).

Here, it was determined the government’s refusal to accept delivery when the cranes met the specifications resulted in compensable delay.

Issue #4 – Implied Duty Not to Interfere

Yes, there is an implied duty of good faith and fair dealing that exists in government contracts:

In the absence of a contract provision allowing the government to unilaterally stop or delay a contractor’s performance, any government caused delay constitutes a breach of the government’s implied duty not to interfere with a contractor’s performance.The implied duty not to interfere derives from the implied duty of good faith and fair dealing, assuring that one party cannot destroy the other party’s reasonable expectations regarding the fruits of a contract. “An implied duty of good faith and fair dealing exists in government contracts and applies to the government just as it does to private parties.”

Any implied duty derives from the explicit terms of a government contract. Here, as we concluded above, the [government] unreasonably inspected [claimant’s] cranes pursuant to the inspection provisions of the Contract Terms and Conditions — Commercial Items clause and Contract’s specifications. The [government’s] unreasonable inspection and ensuing delays resulted in a breach of the implied duty not to interfere.

Appeals of – Konecranes, supra.

Issue # 5 – Christian Doctrine

This was a supply contract so it did not incorporate a provision that allowed the government to stop or suspend work where it was determined such provision did not need to be incorporated:

However, the Contract does not include a Stop-Work Order, Government Delay of Work, or Suspension of Work clause. Instead, because we cannot incorporate these clauses by operation of law in a commercial items contract, we find that the Navy breached its implied duty not to interfere by unreasonably inspecting the cranes. There can be no “constructive” suspension or stop-work order if there is no clause to base it on. It becomes a breach.

For our Board “to incorporate a clause into a contract under the Christian doctrine, it generally must find (1) that the clause is mandatory; and (2) that it expresses a significant or deeply ingrained strand of public procurement policy.” Here, the Suspension of Work, Government Delay of Work, and the Stop-Work Order clauses are not mandatory for commercial items contracts and, thus, we will not incorporate any of these clauses into the contract by operation of law.

In particular, the Contract does not incorporate a Suspension of Work, Government Delay of Work, or Stop-Work Order clause.  … Notably, the FAR implements the congressional requirement that commercial items contracts “shall, to the maximum extent practicable, include only those clauses” required by law or “consistent with customary commercial practice.” So, given the policy preference to limit the number of standard FAR contract clauses in a commercial items contract, we should not be surprised that there is no explicit suspension, delay, or stop-work provision to hang the parties’ “constructive” hat on.

Instead, we must assess whether any of these clauses is mandatory and must be incorporated by operation of law under the Christian doctrine. Only fixed-price construction or architect-engineer contracts, not commercial items contracts, require the Suspension of Work clause. The Government Delay of Work clause would permit similar suspension of work for a fixed-price supply contract. FAR However, the Government Delay of Work clause is “optional,” not required, for commercial supply contracts such as this one.

Appeals of – Konecranes, supra (internal citations omitted).

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

DELAYS AND SUSPENSION OF THE WORK UNDER FIXED PRICE GOVERNMENT CONTRACT

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Here is an interesting fact pattern and case decided by the Civilian Board of Contract Appeals dealing with (1) force majeure type events and epidemics (Covid-19); (2) suspension of the work; and (3) delays. These are three topics important to all contractors including federal contractors.

In Lusk Mechanical Contractors, Inc. v General Services Administration, 2024 WL 1953697, CBCA 7759 (CBCA 2024), a contractor entered into a fixed price contract with the government to repair, replace, and modernize site and building systems at a federal building. The contractor commenced work right before Covid-19.  When Covid-19 hit, the government issued the contractor a two-week suspension of work notice on March 27, 2020. The suspension of work allowed off-site administrative work to continue but suspended on-site physical work.  The government extended the suspension of work three more times. The contractor could resume work on the exterior on June 1, 2020, but was not permitted to resume work on the interior until July 20, 2020.  On the same date that the contractor was able to commence interior work, it submitted a modification for delay caused by the suspension – 64 days for the time period the entire site shutdown, and 51 days for the interior work shutdown.

The contracting officer responded stating that under FAR Clause (FAR 52.249.10) dealing with fixed priced contracts, epidemics (such as Covid-19) that impact the critical path will entitle the contractor to a no-cost extension of time and the government grants the contractor a 66-day extension of time. The contractor was also seeking compensation, so it then certified its claim seeking an equitable adjustment in its compensation based on FARS’ suspension of work clause – FAR 52.242-14.

First, because the contractor entered into a fixed price contract, it assumed the monetary risk of delays caused by Covid-19:

It is “well-established that ‘a contractor with a fixed price contract assumes the risk of unexpected costs not attributable to the Government.”’ Absent a special adjustment clause, this Board has held that an unforeseen pandemic does not shift the risk to the Government for any unexpected costs incurred under a firm, fixed-price contract. Here, there is no such adjustment clause in the contract. “FAR clause 52.249-10 explicitly addresses how acts of God, epidemics, and quarantine restrictions are to be treated. A contractor is entitled to additional time but not additional costs.” 

Lusk Mechanical Contractors, supra (internal citations omitted).

Second, regarding the suspension of work argument under FAR 52.242-14:

[A] contractor may recover an equitable adjustment from the Government if the contractor shows that ‘(1) contract performance was delayed; (2) the Government directly caused the delay; (3) the delay was for an unreasonable period of time; and (4) the delay injured the contractor in the form of additional expense or loss.”  [The contractor] has not established that [the government’s] successive suspensions were the sole cause of the delay or that the work was delayed for an unreasonable period of time.

[The government] suspended [the contractor’s] construction on the exterior and interior portions of the project from March 27 to June 1, 2020, for a total of sixty-six days. [The contractor] contends that [the government’s] suspension of work directives were the sole cause of the delay. We disagree. The executive orders issued by the Governor, at least in part, caused [the government] to suspend [the contractor’s] work.

A contractor may only recover under the Suspension of Work clause “when the Government’s actions are the sole proximate cause for the contractor’s additional loss, and the contractor would not have been delayed for any other reason during that period.”  The stay-at-home order issued by the Governor…in March 2020 equally interfered with [the contractor’s] performance of the work because there was no stay-at-home exemption for construction work that was not a “core life service” or maintained “the safety, sanitation, and essential operation to properties and other essential businesses.”

***

Even had [the government] been the sole cause of delay, the length of the suspension period was reasonable (based on Covid-19), precluding recovery by [the contractor].

Lusk Mechanical Contractors, supra (internal citations omitted).

Third, as it related to the additional delay to the interior work, that additional suspension also was not unreasonable. The contractor had been able to resume exterior work earlier, and its administrative work was never suspended. And, the contractor never proved that the suspension of work to the interior work impacted its critical path:

Because [the contractor] resumed work on the exterior portion of the project much earlier and the administrative work was never suspended, [the contractor] had to prove that the interior work was on the critical path of the project during the additional suspension period. [The contractor], however, has not established, or even asserted, that the interior work was on the critical path of the project. When establishing a Government-caused delay, the contractor bears the burden of proving that the delay affected the critical path of the project. “‘The reason that the determination of the critical path is crucial to the calculation of delay damages is that only construction work on the critical path  had an impact upon the time in which the project was completed.”’  Here, [the contractor] provides no proof that the interior work was on the project’s critical path. Therefore, [the contractor] is not eligible for delay damages for the suspension of the interior work through July 20, 2020.

Lusk Mechanical Contractors, supra (internal citations omitted).

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

THINK BEFORE YOU EXECUTE THAT RELEASE – THE LANGUAGE IN THE RELEASE MATTERS!

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If you execute a release in exchange for payment or other consideration, remember the language in the release means something.  THE RELEASE LANGUAGE MATTERS! And the meaning in the release may be way more than you intended so please make sure you truly digest and consider release language before executing.

This sentiment could not be truer than in the 2009 decision Bell BCI Company v. United States, 570 F.3d 1337 (Fed. Cir. 2009). In this case, a contractor entered into a modification (change order) with the government.  The modification included the following language:

increase the contract amount by $2,296,963 … as full and equitable adjustment for the remaining direct and indirect costs of the Floor 4 Fit-out (EWO 240–R1) and full and equitable adjustment for all delays resulting from any and all Government changes transmitted to the Contractor on or before August 31, 2000.

***

The modification agreed to herein is a fair and equitable adjustment for the Contractor’s direct and indirect costs. This modification provides full compensation for the changed work, including both Contract cost and Contract time. The Contractor hereby releases the Government from any and all liability under the Contract for further equitable adjustment attributable to the Modification.

Bell BCI, supra, at 1339.

The release language was also included in subsequent modifications.

Thereafter, the government issued 113 additional modifications to the contractor, and there were numerous unresolved extra work orders that were not turned into a modification. After the contractor completed the project, it submitted a request for equitable adjustment to the contracting officer.  The contracting officer denied the request for equitable adjustment and asserted liquidated damages against the contractor for delays to the project. The contractor filed a lawsuit against the government claiming inefficiencies and delays caused by the cumulative impact and disruption from all the modifications issued by the government. The trial court found in favor of the contractor.  The government appealed and the finding was much different. This is why.

Regardless of the cumulative impact claim, the contractor signed a modification that “‘provides full compensation for the changed work’” and that [the contractor] “‘hereby releases the Government from any and all liability under this Contract for further equitable adjustment attributable to the Modification.’”  Bell BCI, supra, at 1340.   Under the modification and release language, the appellate court held the issue was not whether the contractor sustained a cumulative impact, but whether the contractor released the government for the impact through the language in the executed modification.

The appellate court maintained that a release is interpreted no different than any other contract and parol evidence will be reviewed only in the event of an ambiguity.  Bell BCI, supra, at 1341. If there is no ambiguity, the plan language in the release will control. Id.

We hold that the language in paragraph 8 of Mod 93 is unambiguous, and the [trial] court clearly erred in holding that [the contractor] did not release its cumulative impact claims attributable to that modification. The language plainly states that [the contractor] released the government from any and all liability for equitable adjustments attributable to Mod 93. At best, there may be ambiguity as to which claims are “attributable to” a given modification, but we cannot glean any ambiguity about which types of claims are released-Mod 93 clearly, unambiguously releases the government from “any and all” liability. As the Supreme Court stated in United States v. William Cramp & Sons Ship & Engine Building Co., “[i]f parties intend to leave some things open and unsettled, their intent so to do should be made manifest.” 206 U.S. 118, 128, 42 Ct.Cl. 532, 27 S.Ct. 676, 51 L.Ed. 983 (1907). Further, the government’s payment of over $2,000,000 in Mod 93 constitutes adequate consideration for [the contractor’s] release.

In the absence of an ambiguity, we decline to examine the parties’ extrinsic evidence [i.e., parol evidence].

Bell BCI, supra, at 1341-42.

Is this the right ruling? Did the contractor intend to release cumulative impacts such that the ruling from the trial court, that entertained the evidence, should control? Unfortunately for the contractor, the intent did not matter to the appellate court because the plain language of the unambiguous release eliminated the need to hear parol evidence on intent.  Hence, the overarching takeaway – think before you execute that release!

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

SPECIFICATION CHALLENGE; EXCUSABLE DELAY; TYPE I DIFFERING SITE CONDITION; SUPERIOR KNOWLEDGE

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An Armed Services Board of Contract Appeals dispute, Appeal of L.S. Black-Loeffel Civil Constructors JV, ASBCA No. 62402, 2023 WL 5827241 (ASBCA 2023), involved which party bore liability for delay—the federal government or the prime contractor–based on various legal theories.  Without detailing the factual details, a number of interesting legal issues were raised in this dispute including (1) a defective specification challenge, (2) excusable delay, (3) Type I differing site condition, and (4) superior knowledge.  These legal issues are discussed below.

1. Specification Challenge (Defective Specifications)

The contractor claimed that the government’s specifications were defective in regard to a thermal control plan. The government countered that the specifications were not design specifications but performance specifications. The specifications were performance based because they did not tell the contractor how to achieve the performance-based criteria.

[A] defective specification cause of action only applies to defective design specifications; it does not apply to allegedly defective performance specifications.

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Performance specifications set forth an objective or standard to be achieved, and the successful bidder is expected to exercise his ingenuity in achieving that objective or standard of performance, selecting the means and assuming a corresponding responsibility for that selection. Design specifications, in contrast, describe in precise detail the materials to be employed and the manner in which the work is to be performed. The contractor has no discretion to deviate from the specifications, but is required to follow them as one would a road map.

The amount of discretion the specifications give to the contractor in execution of the contract is a question of contract interpretation, which is a matter of law for this Board to decide.

L.S. Black-Loeffel, supra (internal citations and quotations omitted).

2. Excusable Delay

The contractor claimed the government constantly rejected its thermal control plan without providing any reason other than it was incomplete and did not meet the specifications, and this caused an excusable delay to the project.

To establish entitlement to an extension based on excusable delay, a contractor must who that the delay resulted from unforeseeable causes beyond the control and without the fault or negligence of the Contractor, and the unforeseeable cause must delay the overall contract completion, i.e., it must affect the critical path of performance. Similarly, where both parties contribute to the delay, neither can recover damage, unless there is the proof of clear apportionment of the delay and the expensive attributable to each party.

L.S. Black-Loeffel, supra (internal citations and quotations omitted).

The Board found that the government reviewed the contractor’s thermal control plan within the timeframe in the contract. “The fact that [the contractor] needed multiple submittals speaks more to the incomplete nature of its submittals than it does to any delays on the part of the government.” L.S. Black-Loeffel, supra (“[I]n every instance, the government provided a facially reasonable basis for rejecting the submittal and [the contractor] has not presented a single piece of evidence challenging those bases.”).

3. Type I Differing Site Condition

The contractor further contended that historical water tables incorporated into the contract “bound the government regarding the water levels [the contractor] would encounter and that water levels it encountered constituted a Type I differing site condition.” L.S. Black-Loeffel, supra.

In order to establish a Type I differing site condition, a contractor must prove all four of the following elements: (1) that a reasonable contractor would interpret the contract documents as making a representation of the site conditions; (2) the actual site conditions were not reasonably foreseeable such that the contractor reasonably relied on the representations; (3) the contractor did in fact rely on the contract representation; and (4) the conditions differed materially from those represented and the contractor suffered damages as a result.

L.S. Black-Loeffel, supra.

The first element is based on the contract; it’s a matter of contract interpretation. Id.   However, here, the contract stated that the actual water levels may vary from those indicated in the historical hydrographs.  Id. (“The contract, and the hydrographs themselves, say nothing about the precise conditions the contract would encounter during performance.”). Thus, the Board found that the historical hydrographs of water tables did not constitute a representation of site conditions.  Id.

The second element includes reasonable foreseeability. Weather, regardless of severity, is not considered a differing site condition under the Federal Acquisition Regulations differing site conditions clause.  Id. (“[T]he differing site conditions clause applies only to conditions which existed at the time of contracting; weather conditions which occur during the contract period are not covered by the differing site conditions clause.”).  Here, the Board found that high water tables was a weather condition where the contractor was offered additional time, but not additional compensation. Id. (“A contractor usually is only entitled to additional time for unusually severe weather, but the government has no legal responsibility for the additional costs incurred.”).

4. Superior Knowledge

The contractor also claimed the government had superior knowledge of the design and construction of a component of the project and did not share it. “The doctrine of superior knowledge is based upon the premise that, where the government has knowledge of vital information that will affect a contractor’s performance, the government is obligated to share that information.” L.S. Black-Loeffel, supra.

“In order to recover a claim based on superior knowledge, the contractor must show: (1) the contractor undertook performance without vital knowledge of a fact that affects performance costs or duration; (2) the government was aware the contractor had no knowledge of the vital information and no reason to obtain such information; (3) the contract specification supplied misled the contractor or did not put it on notice to inquire; and (4) the government failed to provide relevant information.” Id.  This argument is “grounded in the government’s warranty of its contract specifications.” Id.

However, because the specifications were performance-based, the Board found this did not apply – “[b]ecause no warranty attaches to the government’s performance specifications, it has no duty to disclose superior knowledge.” Id.  Moreover, the government had no way of knowing the contractor had no knowledge of the purported vital information and no reason to obtain it to support a superior knowledge argument.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.