Maruf Sharif Construction Company ( 2019 )

ARMED SERVICES BOARD OF CONTRACT APPEALS
Appeal of -- )
)
Maruf Sharif Construction Company ) ASBCA No. 61802
)
Under Contract No. N33191-14-D-1053 )
APPEARANCE FOR THE APPELLANT: Mr. Mohammad Asif Stanekzai
President
APPEARANCES FOR THE GOVERNMENT: Ronald J. Borro, Esq.
Navy Chief Trial Attorney
Rawn M. James, Jr., Esq.
Senior Trial Attorney
OPINION BY ADMINISTRATIVE JUDGE THRASHER
This appeal involves a contract for renovation of an entry control point (ECP) and
quarter deck of a building on a naval facility in Bahrain. The government found that
appellant finished the contract 131 days late and assessed liquidated damages (LDs) in the
amount of $26,200.00, later reduced by the contracting officer's (CO's) decision to
$17,000. Appellant elected to proceed under the Board's Small Claims (Expedited)
procedures, Board Rule 12.2. The Contract Disputes Act, 41 U.S.C. § 7106(b)(4)(5), as
implemented by Board Rule 12.2, provides that this decision shall have no precedential
value, and in the absence of fraud shall be final and conclusive and may not be appealed or
set aside. The parties have jointly agreed that the appeal shall be heard on the record, per
Board Rule 11.
SUMMARY FINDINGS OF FACT
1. On September 7, 2016, Naval Facilities Engineering Command, Europe, Africa,
Southwest Asia (the government) competitively awarded Maruf Sharif Construction
Company (MACEC), 1 Task Order No. 0010, under an indefinite-delivery/indefinite-quantity
(ID/IQ), design/build contract, No. N33 l 91-14-D-1053 for the renovation of the ECP and
quarter deck of Building 262, on NSA-1 Bahrain. The task order was a firm-fixed-price
contract in the amount of$286,750.00. (Compl. ,r,r 1-4)
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MACEC is located in Kabul, Afghanistan.
2. The contract's Statement of Work described the Project Objectives as:
Objective of the project is to ensure that personnel do not
access the building without a badge/proper authorization.
This project will create an ECP that meets security criteria
by locating cell phone storage outside of the existing quarter
deck area and creates defined entrance and exit system while
still allowing for emergency egress.
(R4, tab 4 at 54, 12)
3. The Request for Proposal (RFP) included Federal Acquisition Regulation
(FAR) clause 52.211-12, LIQUIDATED DAMAGES - CONSTRUCTION (SEP 2000). The
LDs amount stated in the RFP and included in the executed task order is $200.00 for
each calendar day until the work is completed or accepted. (R4, tab 4 at 9)
Late Completion, Government Assessment of LDs and Appellant's Response
4. The combined design and construction period totaled 276 calendar days from
task order award date with a contract completion date (CCD), as awarded, of June 10, 2017
(R4, tab 4 at 9). On August 9, 2017, the government issued a letter of concern stating
appellant had only completed 45% of the project by the CCD, the government would begin
assessing LDs from the day after CCD, June 11, 2017, and would begin withholding 10%
on progress payment invoices (R4, tab 8). Appellant responded by letter on August 19,
2017. The body of the letter alleged two instances of government-caused excusable delay.
Additionally the letter included six attachments, one of which was a Project Narrative
Report including a Detailed Schedule, dated August 18, 2017. This project narrative
asserted five instances of government-caused delays and stated the project was at 87. 76%
complete as of the date of the schedule. (R4, tab 15)
5. On December 11, 2017, the government forwarded a letter to MACEC stating:
A final inspection of the reference[ d] contract
work was conducted on October 19, 2017 .... [N]o
discrepancies remain to be corrected by your firm and no
punch list is required. Since there are no remaining
discrepancies that significantly impact the use of the facility,
the Government accepts the facility for beneficial occupancy
as of October 19, 2017.
(R4, tab 5)
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6. The government issued a notice of assessment of LDs to appellant on
January 5, 2018, for 131 calendar days in the amount of $200 per day in the amount of
$26,200.00 (R4, tab 2). Appellant responded on January 25, 2018, stating that the
government miscalculated the number of days by not including a period of 168 days of
government delay and asserted the LDs are a penalty because the government did not
incur any actual damages due to the delay. Like appellant's August 19, 2017 letter, this
letter also attached a Schedule Narrative Report dated January 25, 2018, that stated the
project was 100% complete and asserted seven instances of government-caused delay.
(R4, tab 3)
Appellant's Claim and Contracting Officer's Final Decision (COFD)
7. Appellant submitted a claim to the CO on March 3, 2018, requesting a final
decision. In response, the CO issued a final decision reducing the number of assessed
days to 85 in the amount of $17,000, the current amount in dispute, as a result of
miscalculation (131, actually 130-day delay) and recognizing 44 days of government-
caused delay associated with design review that delayed the Notice to Proceed (NIP),
establishing a new completion date of July 25, 2017. (R4, tab 1)
Affidavit Testimony
8. The only testimony submitted by the government is an affidavit by
Ms. Carmel Sanchez, who was a contract specialist on this task order during MACEC's
performance of the work. Ms. Sanchez's testimony is a detailed estimate of actual
government damages in the amount of $12,476.80 resulting from MACEC's inability to
complete the contract on time. This amount is based upon cost estimated for the period
between the original completion date (June 10, 2017), and the final inspection
government acceptance of the project (October 19, 2017), incurred as a result of
continuing contract administration. (R4, tab 11) Although it described ongoing
contract work, it is silent as to whether the project was being used for its intended
purpose at any time during the period in question.
9. Appellant submitted two affidavits from Mr. Victor Moller, MACEC's project
manager during performance of this contract. The first, dated October 15, 2018,
provided testimony that MACEC: (1) incurred 44 days of delay as a result of the
government's delay in issuing the NIP, stating:
The final design package was submitted on Jan 7, 2017.
The Request for proposal (RFP) mentioned that the Notice
to Proceed (NTP) will be issued 7 days after the receiving of
the final design. The NIP was only issued on Feb 26, 2017.
This is 44 days of delay caused by the government from the
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start of the project that impacted the contract completion
date (CCD).
(R4, tab 12 at 2); (2) incurred 12 days of excusable delay related to a signage issue,
stating:
I summitted [sic] RFl-003 "Signage" for government review
on Sep 7, 2017. After 81 days including 3 days for RFI
response mentioned in the request for proposal (RFP) and
several follow ups we received a response back from
Government on Nov 27, 2017 stating that the government
will provide the new signage and MACEC remain
responsible for the installation. We only received the
government furnished equipment on Dec 8, 2017. This
added an additional 12 days delay after the resolution
provided to RFI-003. These delays caused by the
government impacted the CCD of the project.
(Id.); and (3) that the contract was substantially completed for its intended
purpose on August 30, 2017, 2 stating:
The project objective was to ensure that un-authorized
personnel do not access the building without a badge/proper
authorization. This project objective and facility was
substantially completed on Aug 30, 2017 and in
use/occupied for its intended purposes-despite the fact that
some punch-list items remain uncompleted. Of particular
importance is the requirement that the facility could be
usable for the purpose intended by all parties. This project
created an entry control point (ECP) that meets the
RFP/SOW critical aspects by installing 330 new phone
storage boxes in the newly buil[t] quarter deck area and
creates defined entrance and exit system while still allowing
for emergency egress.
(Id.)
2 Mr. Moller's first affidavit identifies August 30, 2017, as the date the project was
substantially complete (finding 9), but his second affidavit identifies August 31,
2017 (finding 10). We find August 31, 2017, to be the correct date and the 30th
to be a mistake because the record indicates by September 11, 201 7, MACEC
considered the project to be substantially complete on August 31, 2017, and
communicated this to the government (finding 10).
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10. Mr. Moller's second affidavit, dated November 23, 2018, was in reply to the
government's submission of Ms. Sanchez's affidavit calculating the government's
actual damages (R4, tab 13). Mr. Moller again stated substantial completion occurred
on August 31, 2017. In support of this testimony, Mr. Moller referenced weekly
meeting minutes that documented that substantial completion occurred by August 31,
2017, stating, "The Government ignored the fact that this project was substantially
completed on Aug 31, 2017. This was documented in the weekly meeting minutes with
no comment from the government. This statement was made as the intent of the project
objective was met." (Id. at 2, ,i 2.b.) Mr. Moller's affidavit does not specifically
identify the particular meeting minutes but MACEC was requested to submit them.
MACEC's submittal included a cover letter emailed September 9, 2017, requesting a
project meeting with the government on September 11, 2017, stating, "This project is at
90% complete and we would like to share our plan to bring this project to a close'' (R4,
tab 16 at 1). A proposed agenda for the meeting was attached to the cover letter. The
meeting appears to have happened as proposed by the agenda because the attached
minutes of the meeting are signed by the attendees, including two government attendees,
the construction manager and engineering technician, but not the CO. (Id. at 2) The
meeting minutes included a discussion statement, "Current project status is substantially
completed as of 31 Aug 2017 in terms of the project objection [sic] description" (id. at
4). Additionally, Mr. Moller testified regarding his opinion that the specific statements
in Ms. Sanchez's affidavit regarding work hours performed by government staff are
factually incorrect (id. at 2-4).
DECISION
A liquidated damages (LDs) clause will be enforced unless the amount specified
is "so extravagant, or disproportionate to the amount of property loss, as to show that
compensation was not the object aimed at or as to imply fraud, mistake, circumvention
or oppression." DJ Mfg. Corp. v. United States, 86 F.3d 1130, 1133 (Fed. Cir. 1996)
(quoting Wise v. United States, 249 U.S. 361,365 (1919)). The test is objective and the
clause is valid if the stipulated amount is reasonable as of the time the agreement is
made. Id. at 113 7. MACEC bears the burden of proving the LDs clause is
unenforceable. Id. at 1134.
MACEC's primary argument is that the assessment of LDs is invalid because the
government suffered no real loss due to its late completion of the project (app. br. at 3,
,i 1). Although MACEC cites several decisions in support of this position, a reading of
those decisions and our precedent supports the opposite conclusion. We have long held
that, "[t]he fact that, in hindsight, actual damages from late or deficient performance or
completion are either higher or lower than the stipulated liquidated damages, or even
non-existent, does not invalidate the liquidated damages provisions so long as they were
reasonable when estimated." American Construction Co., ENG BCA No. 5728, 91-2
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BCA ,i 24,009 at 120,171 (and cases cited therein). The entire reason for the clause is to
agree upon a fixed rate in the event of a breach to relieve the government of proving it
suffered damages. DJ Mfg., 86 F.3d at 1134-35. Permitting MACEC to escape the
clause's application by showing no damages were suffered in this particular case would
undermine that purpose. Downing Electric, Inc., ASBCA No. 3 7851, 90-3 BCA
,i 23,001 at 115,504 (citing Priebe & Sons, Inc. v. United States, 332 U.S. 407, 411-12
( 194 7)) ("That no actual damages might have been suffered is not proof that the amount
was unreasonable.").
MACEC also alleges the Navy conducted no assessment or formula to determine
the amount of LDs as evidenced by the fact it incurred no actual damages as explained
in its March 3, 2018 claim. Hence, the LDs are punitive and a penalty in this case and
they are not a reasonable forecast of just compensation for harm caused by untimely
performance as contemplated in FAR l l.50l(b). Additionally, MACEC argues the
Navy failed to provide any definitive written record that the CO considered all the
factors required by FAR 11.50 I in determining the amount of LDs or the fact the Navy
would not be damaged by late performance ( compl. ,i 8). We reject these arguments.
There is no requirement that the LDs amount be tailored to the specific contract.
Likewise, as we have already stated, it is unnecessary to inquire into the process that the
CO followed in arriving at the amount: the test is objective and the clause is valid if the
stipulated amount is reasonable as of the time the agreement is made. DJ Mfg., 86 F.3d
at 1136-37.
MACEC has not met its burden here. On this record we cannot find that the
$200 a day figure bears no reasonable relation to the prospective delay damages the
government may have incurred and cannot find that it is a penalty.
Excusable Delay
MACEC seeks remission of the assessed LDs arguing that it is entitled to time
extensions for excusable delay (government-caused and/or concurrent delay). An
excusable delay is one due to causes that are unforeseeable, beyond the contractor's
control, and not resulting from its fault or negligence. Sauer Inc. v. Danzig, 224 F.3d
1340, 1345 (Fed. Cir. 2000). The delay must be to overall contract completion,
meaning "it must affect the critical path of performance." Id. If the failure is excusable,
then appellant would be entitled to time extensions and thus remission ofLDs. Having
found the LDs were reasonable and not a penalty, it is incumbent upon appellant to
show that its failure to timely complete the work was excusable. Chem-Care Co.,
ASBCA No. 53614, 06-2 BCA iJ 33,427 at 165,726.
,
MACEC asserts numerous alleged instances of excusable delay in its responses
to the government's assessment of LDs (findings 4, 6). However, the only evidence
submitted in the record of possible excusable delay are found in Mr. Moller's affidavit
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where he testifies that there was delay associated with delay in issuing the NTP and the
government's delay in supplying government-furnished equipment (GFE) related to
signage requirements (finding 9). As to the NTP delay, MACEC was granted that 44
calendar day remission of LDs by the CO in the COFD (finding 7). Thus, those days
are not included within the current assessment of LDs. Regarding the signage issue,
Mr. Moller testified that there were 90 days of excusable delay associated with this
issue. Mr. Moller submitted RFI-003 ''Signage" for government review on
September 7, 2017. The government was required to respond in 3 days but did not
respond until after 81 days, November 27, 2017, and when they did respond, changed
the contract by stating the government would provide new signage as GFE for MACEC
to install. Even then the government did not deliver the GFE until December 8, 2017,
another 12-day delay. (Finding 9) This may have been a government-caused delay to
final completion of the contract but the government did not consider completion of the
signage to prevent beneficial occupancy, which the government declared on October 19,
2017 (finding 5). We conclude, the evidence indicates the government did not include
the time period associated with this issue within its calculation of LDs; logically, if they
had, the LDs would have extended to December 8, 2017, or some time thereafter at
installation.
On this record, MACEC has failed to demonstrate entitlement to time extensions
so as to receive remission of LDs and accordingly, MACEC has not met its burden to
show its untimely completion was excusable.
Substantial Completion
MACEC argues in its brief that the project was substantially completed on
August 31, 2017, and ready to be occupied for its intended purpose ( app. br. at 4, , VI.
2). LDs may not be assessed past substantial completion. Dick Pacific Construction
Co., ASBCA No. 57675 et al., 16-1 BCA, 36,196 at 176,640. Whether a contract has
been substantially completed is a question of fact and a project is considered
substantially completed when it is capable of being used for its intended purpose.
This determination necessarily focuses upon the specific provisions in the contract that
define the parties' expectations regarding the owner's reasonable use of the facility.
A finding of substantial completion is only appropriate when the government has
obtained, for all intents and purposes, all the benefits reasonably anticipated under the
contract. Kinetic Builder's Inc. v. Peters, 226 F.3d 1307, 1315 (Fed. Cir. 2000).
The contract's Statement of Work described the Project Objectives as:
Objective of the project is to ensure that personnel do not
access the building without a badge/proper authorization.
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This project will create an ECP that meets security criteria
by locating cell phone storage outside of the existing quarter
deck area and creates defined entrance and exit system while
still allowing for emergency egress.
(Finding 2)
Mr. Moller testified in his October 15, 2018 affidavit that substantial completion
was met on August 30, 2017 because the "intent of the project objective was mef' and,
"[t ]his project objective and facility was substantially completed on Aug 30, 2017 and
in use/occupied for its iq.tended purposes-despite the fact that some punch-list items
remain uncompleted" (finding 9). He explained why he believed the project's objective
was met on that date, stating:
Of particular importance is the requirement that the facility
could be usable for the purpose intended by all parties. This
project created an entry control point (ECP) that meets the
RFP/SOW critical aspects by installing 330 new phone
storage boxes in the newly buil[t] quarter deck area and
creates defined entrance and exit system while still allowing
for emergency egress.
(Id.)
Mr. Moller also repeated his belief that the project was substantially complete on
August 31, 2017, in his reply affidavit and stated the government was told this in a
September 11, 2017 meeting but never responded (finding 10). A copy of the minutes
of that meeting support Mr. Moller' s testimony that MACEC considered the project
substantially complete on August 31, 2017.
We conclude MACEC has met its burden of proof establishing substantial
completion occurred by August 31, 2017. Thus the burden of proof shifts to the
government and the government has not presented any evidence, or even any
arguments, to rebut Mr. Moller's testimony that by August 31, 2017, the project was
substantially complete. The record includes the government's letter to MACEC, dated
December 11, 2017, stating the government considered the project ready for beneficial
occupancy on October 19, 2017, based upon a final inspection, the work was complete
and no significant discrepancies remained (finding 5). However, this does not rebut
Mr. Moller's testimony that by August 31, 2017, the project facility was "in
use/occupied for its intended purposes-despite the fact that some punch-list items
remain uncompleted" (finding 9). Likewise, Ms. Sanchez's testimony also does not
address this issue (finding 8). Given the fact that the government has not entered any
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evidence into the record to rebut Mr. Moller's testimony, we find that beneficial
occupancy occurred by August 31, 2017.
Therefore, based upon the new completion date of July 25, 2017, established in the
August 21, 2018 COFD ( finding 7), LDs would begin to run on July 26, 2017, till substantial
completion on August 31, 2017, totaling 36 calendar days. We conclude the government is
only entitled to assess 36 days of LDs in the amount of $7,200. Accordingly, appellant is
entitled to recover $9,800.
CONCLUSION
The appeal is denied in part and sustained in part, for the reasons stated above.
Dated: January 16, 2019
Armed Services Board
of Contract Appeals
I certify that the foregoing is a true copy of the Opinion and Decision of the
Armed Services Board of Contract Appeals in ASBCA No. 61802, Appeal of Maruf
Sharif Construction Company, rendered in conformance with the Board's Charter.
Dated:
JEFFREYD. GARDIN
Recorder, Armed Services
Board of Contract Appeals
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