Nova group/tutor-saliba v. United States , 125 Fed. Cl. 469 ( 2016 )

In the United States Court of Federal Claims
No. 15-885C
(Filed: March 16, 2016)
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* Rule 12(b)(6); Motion to
NOVA GROUP/TUTOR-SALIBA, A Joint * Dismiss; Constructive Change;
Venture, *
Timely Written Notice; FAR
*
Plaintiff, * 52.243-4; Actual Notice;
* Extenuating Circumstances
v. * Excusing Timely Written
* Notice.
THE UNITED STATES, *
*
Defendant. *
*
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Gerald Scott Walters and Steven L. Reed, Smith Currie & Hancock, LLP, 2700 Marquis
One Tower, 245 Peachtree Center Avenue, NE, Atlanta, GA 30303, for Plaintiff.
Benjamin C. Mizer, Robert E. Kirschman, Jr., Steven J. Gillingham, and Adam E. Lyons,
United States Department of Justice, Civil Division, Commercial Litigation Branch, P.O. Box
480, Ben Franklin Station, Washington, D.C. 20044, for Defendant.
______________________________________________________________________
OPINION AND ORDER
______________________________________________________________________
WILLIAMS, Judge.
This Contract Disputes Act case comes before the Court on Defendant’s motion to
dismiss for failure to state a claim upon which relief can be granted. Plaintiff, a joint venture,
entered into a contract with the Naval Facilities Engineering Command (“NAVFAC”), a
component of the United States Navy, to design and build a pier at the Puget Sound Navy
Shipyard in Bremerton, Washington. Plaintiff alleges two constructive changes and seeks
$1,881,900, plus interest.
Defendant argues that Plaintiff’s claim is barred because Plaintiff failed to give written
notice of its constructive change claim within 20 days as required by FAR 52.243-4. Because
Plaintiff has plausibly alleged that the Government had actual knowledge of the facts giving rise
to its changes claim, Defendant’s motion to dismiss is denied.
Background
On May 2, 2008, NAVFAC awarded Contract No. N44255-08-C-6000 to Plaintiff Nova
Group/Tutor-Saliva (“NTS”). Compl. 1. The contract encompassed the design and construction
of a new ship repair wharf (“Pier B”) at the Puget Sound Navy Shipyard in Bremerton,
Washington. NTS was required to complete work within 1,345 calendar days, and the contract
included a liquidated damages clause imposing $35,475 per day for delay past the contract
deadline. Id. at ¶¶ 8, 10.
The contract granted NTS and its subcontractors discretion in choosing the method of
analyzing forces upon the pier’s piles. Id. at ¶ 20. The “Designer of Record” for NTS, KPFF
Consulting (“KPFF”), selected the American Concrete Institute Building Code Requirement for
Structural Concrete, 2005 version (“ACI 318-05”) and chose to analyze and confirm global
stability using ACI 318-05, Section 10.13.6(a). NTS transmitted four design submittals to
NAVFAC at various phases, and NAVFAC in turn provided NTS with 382 design review
comments. Id. at ¶¶ 23-24. None of NAVFAC’s 382 design review comments addressed the
global stability of Pier B’s piles or the NTS designer’s choice of determining global stability
using ACI 318-05, Section 10.13.6(a). Id. at ¶ 25. NAVFAC approved the last of NTS’s Pier B
design submissions on November 12, 2009, including the structural design of Pier B. Id. at ¶ 26.
More than five months after the last design was approved, NAVFAC’s construction
manager, in a March 8, 2010 letter, questioned NTS’s design compliance with the contract,
stating:
Based on the attached BergerABAM correspondence dated 12 February 2010, the
Navy has concerns that the final approved design, relying heavily upon a SAP
2000 model with respect to the performance design loads, may not be in
conformance with the RFP when considering global stability and the observed out
of tolerance piles.
Id. at ¶ 41, Ex. 2.
The cited memorandum from the Government engineer, BergerABAM, questioned
KPFF’s chosen analytics method, stating in pertinent part:
ISSUES RELATED TO EFFECTIVE LENGTH FACTORS
There are three related issues that became the focus of our review of the use of
effective length factors for Pier B.
***
3. The design approach did not include a check for overall stability of Pier B for
load combinations based on the RFP provisions. Use of provisions from the 2005
Building Code Requirements for Structural Concrete by the American Concrete
Institute (ACI 318-05) is a design requirement for Pier B and addresses stability.
Reference to ACI 318-05 as a design requirement is found in the basis of design
by KPFF.
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***
KPFF maintains the evaluation of ACI 318-05 Section 10.13.6a demonstrates the
pier satisfies sidesway buckling under gravity load condition. However, this
particular provision is based on results from an analytical model, which is
susceptible to the accuracy of the input properties of geometry and structural
characteristics of the physical system. Consequently, BergerABAM contends
Chapter 10.13.6c is the more appropriate provision because the geometric
properties can be verified, are more apparent, and are directly related to Euler
buckling (global instability.) With this evaluation, it appears to satisfy properties
generally associated with good engineering practice only under favorable
conditions of structural properties.
Id. at Ex. 2.
NAVFAC in its March 8th letter did not direct NTS to stop construction on the Pier. Id.
at Ex. 2. However, on the same day, NTS stopped operations and began re-evaluating the
Government-approved design. Id. at ¶¶ 44-45. NTS claims that if it had continued construction
and the Government’s concerns had proven valid, “then NTS could have faced extensive
additional corrective construction work.” Id. at Ex. 1; Pl.’s Resp. 5. NTS argued that “no
reasonably prudent contractor would continue with critical construction in the face of such a
notice from the Navy.” Compl. Ex. 1. NTS alleges that the Government “knew that NTS had
stopped performing critical Pier B construction work” during this re-analysis of the Government-
approved design. Id. at ¶ 46. Between March 8 and May 27, 2010, NTS and KPFF participated
in meetings with the Government and “furnished detailed reports substantiating NTS’s original
design.” Id. at ¶ 45.
During this period of reanalysis, KPFF hired an independent third-party designer to
evaluate the initial Government-approved design. The designer, Ben C. Gerwick, Inc.,
concluded both that the design satisfied the requirements of the RFP and that ACI 318-05
Section 10.13.6(a) was an appropriate design method. Id. at ¶ 49.
On May 27, 2010, the Government sent NTS a letter containing a second BergerABAM
memorandum concluding that the design of Pier B “adequately addressed global stability issues”
and finding that it was “technically sufficient” to only consider ACI 318-05, Section 10.13.6(a)
and not Section 10.13.6(c). Id. at ¶ 56. NTS resumed work the same day. Id. at ¶ 61.
NTS claims a constructive change based on NAVFAC’s decision to question the global
stability of Pier B design, due to Government misinterpretation of the Contract Documents - - an
“incorrect assumption that NTS had relied on the wrong ACI standard in its global stability
calculations.” Id. at ¶ 58. NTS further claims misinterpretation of the Contract Documents
through NAVFAC’s “decision to require NTS to re-evaluate the Pier B pile design based on the
unfounded concern that NTS (through KPFF) had not initially evaluated or designed for global
stability in accordance with the correct ACI standard.” Id. at ¶ 98.
After May 27, 2010, NTS attempted to mitigate construction delays, impacts, and
inefficiencies by accelerating the remaining Pier B construction work, adding manpower and
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equipment and providing for “significant levels of overtime.” Id. at ¶¶ 63-64. NTS not only
alleged that the Government was notified of this acceleration and overtime, but also that the
Government “observed” and “approved” both. Id. at ¶ 64. In a July 21, 2010 letter, the
Contracting Officer expressed concern about the construction schedule and reminded NTS of its
contractual time obligations. Id. at ¶ 71. NTS alleges that due to decreased efficiency and the
resulting constructive acceleration necessitated by the work stoppage, NTS and its subcontractors
incurred increased costs to meet the project deadline. Id. at ¶¶ 66-70.
NTS’s first written notification to the Contracting Officer of REA No. 14 was by letter
dated September 3, 2010, stating in pertinent part:
REA # 14. GLOBAL STABILITY ISSUES, PIER B
The Government issued Serial No. 0106, dated March 8, 2010 advising of Berger
ABAM’s concerns that the final approved design may not be in conformance with
the RFP. The Government requested that [KPFF] provide analytical models for
both CLE [contingency-level earthquake] liquefied and non-liquefied conditions.
In addition, detailed example calculations for battered piles were requested. The
concern that the design was not in conformance with the RFP required all work on
Pier B to be stopped until these issues were resolved. This delay impacted all Pier
B work for several months and has required NTS to accelerate the falsework
operation to mitigate the delay to the construction schedule.
Id. at Ex. 3. This September 3, 2010 letter did not fully quantify costs incurred since accelerated
work was ongoing. Id. at ¶ 76. The Contracting Officer expressed concern about the timeliness
of construction in a letter dated November 12, 2010. Id. at ¶ 77.
By letter dated April 1, 2011, NTS submitted quantification of its REA and stated that
these costs would not have been incurred “had NTS been able to progress the work according to
its baseline plan.” Id. at Ex. 4. Almost two years later, on February 5, 2013, the Contracting
Officer replied that the Government did not stop NTS’ work from March 8, 2010 to May 27,
2010. Id. at ¶ 82. NTS requested a Contracting Officer’s Final Decision on REA No. 14 on June
25, 2014. Id. at ¶ 84. On September 4, 2014, the Contracting Officer issued a Final Decision,
denying the constructive change claim and stating that NTS had failed to provide written notice
“before implementing the stated changes to accelerate the work . . . until 11 months after the
costs were incurred,” in violation of FAR 52.243-4’s 20-day notice requirement. Id. at Ex. 1.
Discussion
Plaintiff claims that Defendant constructively changed its contract by questioning its
design compliance with the RFP during a critical phase of construction, resulting in a work
stoppage followed by accelerated construction to meet the contract deadline. Defendant moves
to dismiss this action for failure to state a claim upon which relief can be granted, arguing that
this constructive change claim is precluded by NTS’ failure to give timely written notice of the
claim as required by FAR 52.243-4.
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Legal Standard
Pursuant to Rule 8(a)(2), a pleading must contain a “short and plain statement of the
claim showing that the pleader is entitled to relief.” RCFC 8(a)(2); see Ashcroft v. Iqbal, 556
U.S. 662, 677-78 (2009) (construing Rule 8 of the Federal Rules of Civil Procedure, which is
identical to RCFC 8). The Government, as movant, must establish that the facts asserted by, and
construed in favor of, the pleader, do not entitle the pleader to a legal remedy. Lindsay v. United
States, 295 F.3d 1252, 1257 (Fed. Cir. 2002); E&E Enters. Glob., Inc. v. United States, 120 Fed.
Cl. 165, 171 (2015).
It is well settled that a complaint should be not be dismissed under RCFC 12(b)(6) when
a complaint contains facts sufficient to “state a claim to relief that is plausible on its face.” Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. This plausibility
standard requires more than a “sheer possibility” that the defendant has violated the law. Id.
Under the constructive change doctrine, the Government is liable for additional work
caused by a constructive change to the contract. See Aydin Corp. v. Widnall, 61 F.3d 1571,
1577 (Fed. Cir. 1995) (“Where it requires a constructive change in a contract, the Government
must fairly compensate the contractor for the costs of the change”). For a claim to succeed under
the theory of constructive change, a plaintiff “must show (1) that it performed work beyond the
contract requirements, and (2) that the additional work was ordered, expressly or impliedly, by
the government.” Bell/Heery v. United States, 739 F.3d 1324, 1335 (Fed. Cir. 2014) (citing The
Redland Co. v. United States, 97 Fed. Cl. 736, 755–56 (2011)).
Lack of Timely Written Notice Does Not Warrant Dismissal of Plaintiff’s Claim
NTS alleges that under FAR 52.243-4, the Government’s March 8, 2010 letter
constructively changed the contract by halting Pier B work for over two months while NTS re-
evaluated the design and thereafter expedited work to meet the contract deadline. FAR 52.243-4
states in pertinent part:
If any change under this clause causes an increase or decrease in the Contractor’s
cost of, or the time required for, the performance of any part of the work under
this contract, whether or not changed by any such order, the Contracting Officer
shall make an equitable adjustment and modify the contract in writing. However .
. . no adjustment for any change under paragraph (b) of this clause shall be made
for any costs incurred more than 20 days before the Contractor gives written
notice as required.
48 C.F.R. § 52.243-4(d) (2007). According to the Contracting Officer’s final decision, written
notice “allows the Government to clarify and/or reverse any incorrect or misunderstood direction
and allows the Government the ability to execute the correct contractual processes and mitigate
cost and/or impacts.” Compl. Ex. 1. Timely written notice differentiates requests the contractor
views as outside the scope of the contract from those that are incorporated into the contract. See
Singer Co. Librascope Div. v. United States, 568 F.2d 695, 711 (Ct. Cl. 1977). In so
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differentiating, the Government can account for “what amounts it might be on the hook for, so
that it will not be surprised by money claims later.” K-Con Bldg. Sys., Inc. v. United States, 778
F.3d 1000, 1010 (Fed. Cir. 2015).
NTS’ failure to provide formal written notice of its increased costs within 20 days as
required by FAR 52.243-4 does not require dismissal of Plaintiff’s complaint. Plaintiff plausibly
alleged that the Government had actual knowledge of the work stoppage and ensuing
acceleration giving rise to the constructive change claims. NTS alleges that the Government
knew “that NTS had stopped performing critical Pier B construction work” during the design re-
analysis by the Government’s engineer. Compl. ¶ 46. Between March 8 and May 27, 2010, the
period of work stoppage, NTS and its designer of record, KPFF, participated in meetings with
the Government and furnished detailed reports and correspondence substantiating NTS’ original
design. Id. at ¶ 45. NTS expressly alleged that the Government observed and approved the
acceleration and added manpower, equipment, and overtime. Id. at ¶ 64. Specifically, Plaintiff
alleged that after May 27, 2010, NTS attempted to “mitigate construction delays, impacts, and
inefficiencies” by accelerating the remaining Pier B construction work, adding manpower and
equipment, and providing for “significant levels of overtime, of which the government was
notified, of which the government observed, and of which the government approved.” Id. at ¶¶
63-64.
Defendant argues that the decision by the United States Court of Appeals for the Federal
Circuit in K-Con is dispositive and requires this Court to dismiss the complaint. In that case, the
Coast Guard awarded K-Con a construction contract, which included a liquidated damages
clause, for a “cutter support team building.” During construction, the Coast Guard requested that
the building’s eave height be increased by four inches and other changes based upon its review
of K-Con’s design submissions. K-Con “repeatedly expressed its intent to incorporate the Coast
Guard’s requests as though they were consistent with the terms of the contract,” in effect
acquiescing to these Government requests. K-Con failed to provide adequate written notice until
two years after the changes were allegedly ordered. K-Con, 778 F.3d at 1010. The Court
determined that failure to give timely written notice required dismissal of K-Con’s constructive
change claim, reasoning that a request for remuneration two years later far exceeded the 20-day
written notice period and prevented the Government from making an educated choice about how
to handle the request for a compensable change at the time when alternative options were still
available. Id. at 1010-11.
K-Con is readily distinguishable from the situation here. Unlike the plaintiff in K-Con,
NTS did not acquiesce in the Government engineer’s design interpretation that allegedly required
a work stoppage and subsequent acceleration. Instead, Plaintiff’s designer of record hired a
third-party designer who concluded that KPFF’s chosen ACI design method was appropriate.
Ultimately, the Government proceeded with Plaintiff’s originally submitted design which it had
approved months earlier.
Importantly, Plaintiff’s allegation that the Government knew about both the work
stoppage and acceleration falls within an exception to the 20-day notice requirement adopted by
the Federal Circuit in K-Con. Specifically, the K-Con Court expressly recognized that
extenuating circumstances such as the Government’s actual or imputed notice of circumstances
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giving rise to the claim “have weighed against strict enforcement of the time limit” imposed by
FAR 52.243-4. 778 F.3d at 1010. As the Federal Circuit explained:
Sometimes, extenuating circumstances have weighed against strict enforcement of
the time limit. See generally Powers Regulator Co., GSBCA No. 4668, 80–2
BCA ¶ 14,463 (Apr. 30, 1980) (reviewing how the time limit has been enforced
by boards of contract appeals and enumerating exceptions to its strict
enforcement); see also Hoel–Steffen Const. Co. v. United States, 197 Ct. Cl. 561,
456 F.2d 760 (1972) (noting that a “severe and narrow application of the notice
requirements [of the suspension clause in the then-extant Federal Procurement
Regulations] . . . would be out of tune with the language and purpose of the notice
provisions, as well as with this court’s wholesome concern that notice provisions
in contract-adjustment clauses not be applied too technically and illiberally where
the Government is quite aware of the operative facts”).
Id. (alterations in original).
This case falls squarely within the exception to strict enforcement of the 20-day notice
requirement where the Contracting Officer is on notice of the circumstances giving rise to the
claim. NTS alleged that the Contracting Officer had actual knowledge of the facts leading to the
constructive change. It was the Government that issued the March 8, 2010 letter raising design
issues five months after the Government had approved NTS’ design. Plaintiff responded by
hiring a third-party designer to conduct an investigation, who ultimately affirmed Plaintiff’s
original design. Plaintiff plausibly alleged that at all times during this re-analysis, the
Government knew that NTS had stopped performing critical Pier B construction work and that
the Government observed and approved the significant extra work during acceleration. See
Calfon Constr. Inc. v. United States, 18 Cl. Ct. 426, 438-39 (1989), aff’d, 923 F.2d 872 (Fed.
Cir. 1990) (stating “[i]f the contracting officials have knowledge of the facts or problems that
form the basis of a claim and are able to perform necessary fact-finding and decision-making, the
Government is not prejudiced by the contractor’s failure to submit a precise claim at the time a
constructive change occurs”).
In short, Plaintiff alleged facts plausibly indicating that the Government was quite aware
of the purported constructive changes that were occurring at Pier B. Indeed, it would have been
strange for the Government not to have known of a work stoppage for over two months followed
by acceleration prompted by the Government’s warnings about schedule slippage. As such, the
lack of timely written notice does not warrant dismissal of this action.
Conclusion
Defendant’s motion to dismiss is DENIED. The Court will convene a telephonic status
conference on April 12, 2016, at 2:00 p.m. E.D.T. to schedule further proceedings in this
matter. The Court will initiate the call.
s/Mary Ellen Coster Williams
MARY ELLEN COSTER WILLIAMS
Judge
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