B-160082, FEB. 1, 1967

B-160082: Feb 1, 1967

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WAS NEGOTIATED WITH YOUR FIRM PURSUANT TO SECTION 302 (C) (4) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949. THE CONSTRUCTION COST OF THIS PROJECT WAS ESTIMATED AT $1.3 MILLION AND NEGOTIATIONS WITH YOUR FIRM WERE AUTHORIZED ON THIS BASIS. THIS FEE WAS BASED ON A CHARGE OF $1. CONSTRUCTION SUPERVISION WAS TO CONTINUE AT THE PREVIOUSLY AGREED UPON MONTHLY RATE. THIS FEE WAS BASED UPON YOUR COMPUTATION OF THE 440 MAN-HOURS NECESSARY TO ACCOMPLISH THE FIVE REVISIONS PLUS 33 1/3 PERCENT OF THE DIRECT MAN-HOUR CHARGES TO COVER OVERHEAD AND PROFIT. SUBMISSION OF THE FINAL WORKING DRAWINGS WAS DELAYED FROM NOVEMBER 30. AN APPROPRIATE SECTION REQUIRING SUCH TESTS WAS ADDED TO THE SPECIFICATIONS IN THE INVITATION FOR BIDS (IFB) FOR THE CONSTRUCTION PHASE OF THE PROJECT.

B-160082, FEB. 1, 1967

TO BARTON AND PRUITT AND ASSOCIATES:

WE FURTHER REFER TO YOUR LETTER OF SEPTEMBER 16, 1966, CONCERNING THE DIFFICULTIES ENCOUNTERED BY YOUR FIRM IN THE NEGOTIATION, ADMINISTRATION, AND PERFORMANCE OF CONTRACT NO. GS-02B-8175 (NEG) AS A RESULT OF COMPLIANCE WITH THE 6-PERCENT STATUTORY LIMITATION ON THE FEES IN ARCHITECT-ENGINEER (A-E) CONTRACTS.

THE SUBJECT CONTRACT, DATED JUNE 30, 1960, WAS NEGOTIATED WITH YOUR FIRM PURSUANT TO SECTION 302 (C) (4) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, AS AMENDED, 41 U.S.C. 252 (C) (4), BY THE GENERAL SERVICES ADMINISTRATION (GSA) FOR PROFESSIONAL A-E SERVICES NECESSARY FOR THE CONVERSION AND REMODELING OF THE MILITARY MEDICAL SUPPLY DEPOT, BROOKLYN, NEW YORK, TO PROVIDE OFFICE AND LABORATORY SPACE FOR THE FOOD AND DRUG ADMINISTRATION. THE CONSTRUCTION COST OF THIS PROJECT WAS ESTIMATED AT $1.3 MILLION AND NEGOTIATIONS WITH YOUR FIRM WERE AUTHORIZED ON THIS BASIS. DURING THE NEGOTIATIONS, YOU INITIALLY PROPOSED A LUMP-SUM FEE OF ABOUT $62,000 FOR THE DESIGN PHASE, BUT SUBSEQUENTLY YOU AGREED TO A FEE OF $55,000. YOU FURTHER AGREED TO A SEPARATE CONSTRUCTION SUPERVISION FEE OF $13,200 AFTER PROPOSING A FEE OF $14,400 FOR THIS SERVICE. THIS FEE WAS BASED ON A CHARGE OF $1,100 PER MONTH FOR A FULL- TIME ON SITE SUPERVISION DURING THE ANTICIPATED 12-MONTH CONSTRUCTION PERIOD. IN THE EVENT THE CONSTRUCTION PHASE EXTENDED BEYOND THE 12-MONTH PERIOD, CONSTRUCTION SUPERVISION WAS TO CONTINUE AT THE PREVIOUSLY AGREED UPON MONTHLY RATE.

DURING THE PERFORMANCE OF THE CONTRACT, GSA REQUESTED FIVE REVISIONS TO THE WORKING DRAWINGS AND SPECIFICATIONS WHICH INCREASED THE SCOPE OF YOUR DESIGN EFFORT. ON JULY 30, 1962, GSA AUTHORIZED THE PAYMENT OF AN ADDITIONAL FEE OF $4,747.60. THIS FEE WAS BASED UPON YOUR COMPUTATION OF THE 440 MAN-HOURS NECESSARY TO ACCOMPLISH THE FIVE REVISIONS PLUS 33 1/3 PERCENT OF THE DIRECT MAN-HOUR CHARGES TO COVER OVERHEAD AND PROFIT. AS A RESULT OF THESE REVISIONS, SUBMISSION OF THE FINAL WORKING DRAWINGS WAS DELAYED FROM NOVEMBER 30, 1960, UNTIL APRIL 29, 1961. IT ALSO APPEARS THAT IN MARCH OF 1961 YOU REQUESTED THAT STRUCTURAL DATA BE OBTAINED TO VERIFY THE COMPATIBILITY OF YOUR DESIGN WITH EXISTING LOAD CAPABILITIES. THE GSA CONCURRED IN THIS REQUEST AND BY PURCHASE ORDER, DATED APRIL 10, 1961, ENGAGED THE GULICK-HENDERSON LABORATORIES, INC. TO CONDUCT THE NECESSARY STRUCTURAL LOAD-BEARING TESTS FOR A FEE OF $750. HOWEVER, THE CORE DRILLING TESTS CONDUCTED ON MAY 1, 1961, PROVED INCONCLUSIVE AND, THEREFORE, AN APPROPRIATE SECTION REQUIRING SUCH TESTS WAS ADDED TO THE SPECIFICATIONS IN THE INVITATION FOR BIDS (IFB) FOR THE CONSTRUCTION PHASE OF THE PROJECT. THIS INVITATION WAS ISSUED ON MAY 12, 1961, AND PRIOR TO BID OPENING ON JUNE 13, 1961, YOUR FIRM PREPARED FIVE ADDENDA TO THE IFB. ELECTRONIC AND MISSILE FACILITIES, INC. SUBMITTED THE LOW BID OF $1,467,000 AND CONSTRUCTION CONTRACT NO. GS-02B-8868, DATED JUNE 30, 1961, WAS AWARDED TO THAT FIRM.

THIS PHASE OF THE PROJECT, DISCUSSED ABOVE, WAS CHARACTERIZED BY DISPUTES BETWEEN YOUR FIRM AND THE CONSTRUCTION CONTRACTOR AS TO THE ADEQUACY OF THE SHOP DRAWINGS WHICH YOU WERE REQUIRED TO CHECK AND APPROVE UNDER ARTICLE II (D) (3) OF THE CONTRACT. THE RECORD INDICATES THAT ELECTRONICS AND MISSILE FACILITIES, INC. IS NOW SUING THE UNITED STATES IN THE COURT OF CLAIMS (DOCKET NO. 180-66) FOR $576,216.50 FOR BREACH OF CONTRACT, ALLEGING DELAY BY THE GOVERNMENT IN THE PROCESSING OF SHOP DRAWINGS, AND ALSO ALLEGING THAT THE GOVERNMENT FURNISHED DEFECTIVE PLANS AND SPECIFICATIONS FOR ITS USE UNDER THE CONSTRUCTION CONTRACT. YOUR FIRM, ON THE OTHER HAND, HAS COMPLAINED OF THE AMOUNT OF TIME SPENT BY THE CONSTRUCTION CONTRACTOR IN RETURNING UNACCEPTABLE SHOP DRAWINGS AND THE ADDITIONAL EFFORT REQUIRED BY YOUR FIRM IN CHECKING RESUBMISSIONS. THE RECORD ALSO INDICATES THAT BY LETTER DATED JULY 29, 1965, YOUR FIRM FILED A CLAIM FOR $122,500 WITH THE GSA FOR SERVICES RENDERED BEYOND THE SCOPE OF THE CONTRACT REQUIREMENTS.

INITIALLY, YOU MAINTAIN THAT COMPLIANCE WITH THE 6-PERCENT STATUTORY FEE LIMITATION HAS LED TO A "TREMENDOUS FINANCIAL BURDEN AND EVENTUAL FINANCIAL LOSS.' MORE PARTICULARLY, YOU CONTEND THAT THE CONSTRUCTION COST ESTIMATE FOR THE PROJECT WAS UNREALISTIC IN TERMS OF ACTUAL PRACTICE.

THE FEE LIMITATION APPLICABLE HERE IS THAT CONTAINED IN SECTION 304 (B) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, AS AMENDED, 41 U.S.C. 254 (B). THAT SUBSECTION PROVIDES IN PART AS FOLLOWS:

"* * * A FEE INCLUSIVE OF THE CONTRACTOR'S COSTS AND NOT IN EXCESS OF 6 PERCENTUM OF THE ESTIMATED COST, EXCLUSIVE OF FEES, AS DETERMINED BY THE AGENCY HEAD AT THE TIME OF ENTERING INTO THE CONTRACT, OF THE PROJECT TO WHICH SUCH FEE IS APPLICABLE IS AUTHORIZED IN CONTRACTS FOR ARCHITECTURAL OR ENGINEERING SERVICES RELATING TO ANY PUBLIC WORKS OR UTILITY PROJECT).

IN OUR DECISION TO THE ADMINISTRATOR OF THE GENERAL SERVICES ADMINISTRATION, B-152306, DECEMBER 19, 1966, 46 COMP. GEN -, COPY ENCLOSED, WE EXAMINED THE ADMINISTRATIVE PRACTICE OF EXCLUDING THE COSTS OF CERTAIN A-E SERVICES FOR DETERMINATIONS OF COMPLIANCE WITH THE LIMITATION IN LIGHT OF THE LEGISLATIVE HISTORY OF SECTION 304 (B) AND CONCLUDED THAT:

"IN OUR OPINION, SECTION 304 (B) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT IS NOT LIMITED SOLELY TO THE COSTS OF PROFESSIONAL SERVICES INCURRED IN THAT SEGMENT OF THE CONTRACT REQUIRING THE PREPARATION OF DESIGNS, PLANS, ETC. RATHER, IT IMPOSES A LIMITATION ON THE TOTAL COMPENSATION PAYABLE FOR ALL SERVICES PERFORMED UNDER THE ARCHITECT-ENGINEER CONTRACT, REGARDLESS OF WHETHER THE COST OF THESE SERVICES REPRESENTS TRAVEL EXPENSES, CONSULTANT FEES, REPRODUCTION EXPENSES, SUPERVISION OF CONSTRUCTION, PRELIMINARY ENGINEERING EFFORT, OR THE LIKE. FURTHERMORE, IT IS QUITE CLEAR THAT THE EXPLICIT LANGUAGE OF THE STATUTORY LIMITATION REQUIRES THE INCLUSION OF ALL COSTS CATEGORIZED AS ENGINEERING SERVICES IN COMPUTING COMPLIANCE WITH THE FEE LIMITATION.

MOREOVER, APPLICATION OF THE FEE LIMITATION IS NOT LIMITED TO A PARTICULAR TYPE OF CONTRACT; ON THE CONTRARY, IT APPLIES REGARDLESS OF THE TYPE OF CONTRACT EMPLOYED. THUS, PAYMENT FOR ALL SERVICES RENDERED BY YOUR FIRM UNDER ITS LUMP-SUM CONTRACT COULD NOT, IN ANY EVENT, EXCEED 6- PERCENT OF THE ESTIMATED COST OF THE PROJECT.

THE "PROJECT" WAS IDENTIFIED IN ARTICLE I OF YOUR CONTRACT AS THE CONVERSION AND REMODELING OF THE MILITARY MEDICAL SUPPLY DEPOT, BROOKLYN, NEW YORK. THE ESTIMATED CONSTRUCTION COST OF THIS PROJECT WAS DETERMINED TO BE $1.3 MILLION. THE ADMINISTRATIVE REPORT INDICATES THAT DURING THE NEGOTIATIONS THE DESIGN CRITERIA WERE THOROUGHLY REVIEWED BY THE GOVERNMENT NEGOTIATORS WITH PARTICULAR EMPHASIS PLACED UPON THE CONSTRUCTION COST ESTIMATE. COGNIZANT OF THIS COST LIMITATION, YOUR FIRM SUBMITTED AN INITIAL PROPOSAL FOR THE DESIGN PHASE WHICH WAS WITHIN 6 PERCENT OF THE ESTIMATED COST OF CONSTRUCTION. WE NOTE THAT UNDER THE LONG-STANDING ADMINISTRATIVE PRACTICE OF EXCLUDING COSTS NOT RELATED TO THE PRODUCTION AND DELIVERY OF THE DESIGNS, PLANS, DRAWINGS, AND SPECIFICATIONS, THE FEE OF $55,000 WHICH YOU FINALLY ACCEPTED FOR THIS PHASE WOULD AMOUNT TO 4.2 PERCENT OF THE ESTIMATED CONSTRUCTION COST OF THE PROJECT. HOWEVER, AS WE HAVE INDICATED, THIS COST EXCLUSION PRACTICE IS IMPROPER AND, THEREFORE, YOUR CONSTRUCTION SUPERVISION FEE OF $13,200 SHOULD ALSO BE CONSIDERED IN DETERMINING COMPLIANCE WITH THE FEE LIMITATION. HERE, WE NOTE THAT YOUR FEE THUS COMPUTED AMOUNTED TO 5.25 PERCENT OF THE PROJECT COST ESTIMATE. UNDER ALL THE CIRCUMSTANCES, WE CANNOT CONCLUDE THAT AT THE TIME OF ENTERING INTO THE CONTRACT YOUR FIRM CONSIDERED THE COST ESTIMATE UNREALISTIC. WHILE IT MAY BE SAID THAT AN INFLEXIBLE PERCENTAGE LIMITATION ON FEES MAY BEAR NO NECESSARY OR DIRECT RELATIONSHIP TO THE A-E EFFORT ENTAILED IN A PARTICULAR PROJECT, YOUR ACCEPTANCE OF THE SUBJECT CONTRACT SUGGESTS THE ABILITY TO PERFORM THE REQUIRED WORK WITHIN THE STRICTURES OF THE FEE LIMITATION. MOREOVER, THE FACT THAT THE SUBSEQUENT CONSTRUCTION CONTRACT WAS AWARDED TO ELECTRONIC AND MISSILE FACILITIES, INC., AT A BID PRICE OF $1,467,000 DOES NOT SUPPORT THE PROPOSITION THAT THE ORIGINAL CONSTRUCTION COST ESTIMATE WAS UNREALISTIC SINCE IT APPEARS THAT THIS INCREASE IN THE CONSTRUCTION COST WAS ATTRIBUTABLE TO SUBSEQUENT CHANGES IN THE AGENCY'S PROJECT REQUIREMENTS AND ALSO TO THE COMPETITIVE FORCES INVOLVED IN THE ADVERTISEMENT FOR THE CONSTRUCTION WORK.

YOU NEXT DRAW ATTENTION TO DELAYS IN THE PROJECT OCCASIONED BY CHANGES IN THE SCOPE OF THE DESIGN AND THE INABILITY OF THE GOVERNMENT TO PROVIDE ADEQUATE STRUCTURAL DATA AND DRAWINGS OF THE EXISTING FACILITY UPON WHICH TO BASE THE STRUCTURAL DESIGN. IN REGARD TO THE FIVE REQUESTED REVISIONS TO THE DESIGN CRITERIA, WE RECOGNIZE THAT THE RESULTANT INCREASE IN THE COMPLEXITY OF THE CRITERIA CONTRIBUTED TO THE EXTENSION OF THE DESIGN PHASE FROM NOVEMBER 30, 1960, UNTIL APRIL 29, 1961. HOWEVER, TO THE EXTENT THAT THESE CHANGES INCREASED YOUR COSTS, YOU WERE PAID THE ADDITIONAL AMOUNT OF $4,747.60 WHICH YOU HAD REQUESTED. FURTHER, IT DOES NOT APPEAR FROM THE RECORD THAT ANY DELAY INCIDENT TO THE STRUCTURAL LOAD- BEARING TESTS CONDUCTED BY BULICK HENDERSON IMPOSED A FINANCIAL BURDEN ON YOUR FIRM. GSA PAID THIS FIRM DIRECTLY AND WHEN THE RESULTS OF THE TESTS PROVIDED INCONCLUSIVE A LOAD-TESTING SECTION WAS ADDED TO THE SPECIFICATIONS FOR THE CONSTRUCTION CONTRACT.

THEREFORE, IT APPEARS THAT ANY FINANCIAL BURDEN AND SUBSEQUENT LOSS THAT MAY HAVE BEEN SUFFERED BY YOUR FIRM WAS ATTRIBUTABLE TO FACTORS OTHER THAN THE STATUTORY FEE LIMITATION.

TURNING NEXT TO THE CONSTRUCTION PHASE OF THE PROJECT, YOU CONTEND THAT GSA HAS FAILED TO RECOGNIZE WORK THAT YOU HAVE PERFORMED OVER AND ABOVE THE CONTRACT REQUIREMENTS. THE ALLEGED EXTRA WORK APPARENTLY RESULTS FROM THE "HARDSHIPS" LISTED IN YOUR LETTER AS FOLLOWS:

"INCREASE IN COMPLEXITY OF SCOPE DUE TO THE ADDITION OF ADDITIVES REQUIRING 30 PERCENT MORE MAN-HOURS IN THE PREPARATION OF THE CONTRACT DOCUMENTS THAN WAS ORIGINALLY ESTIMATED.

"DUE TO THE CONTRACTOR'S INABILITY TO MEET HIS CONTRACTURAL OBLIGATIONS ON SHOP DRAWING PROCEDURE, SUCH AS, SHOP DRAWING CHECKING, SHOP DRAWING COORDINATION, ETC., ETC., THE BURDEN OF THE CONTRACTORS OBLIGATIONS WERE FORCED UPON THE ARCHITECT-ENGINEER.

"DUE TO THE CONTRACTORS INABILITY TO PROVIDE THE PROPER PERSONNEL FOR SUPERVISION OF CONSTRUCTION AND FIELD COORDINATION OF WORK OF HIS VARIOUS SUBCONTRACTORS, THIS HAS BURDENED THE ARCHITECT-ENGINEER WITH UNDUE ADDITIONAL MAN-HOURS OF TECHNICAL TIME WHICH WOULD NORMALLY BE AVOIDED, IF THERE WERE RESTRICTIONS PLACED UPON THE QUALIFICATIONS OF CONTRACTORS PERMITTED TO BID A HIGHLY COMPLEX FACILITY SUCH AS LABORATORIES, ETC., ETC.'

YOU MAINTAIN GENERALLY THAT THESE SERVICES WERE RENDERED IN ACCORDANCE WITH PARAGRAPHS (C) AND (D) OF THE "REVISIONS" CLAUSE CONTAINED IN ARTICLE VIII OF THE CONTRACT, WHICH PROVIDED AS FOLLOWS:

"/C) EXCEPT AS PROVIDED IN (A) AND (B) OF THIS ARTICLE VIII, THE GOVERNMENT WILL PAY AN ADDITIONAL FEE FOR MINOR CHANGES OR REVISIONS AS DETERMINED AND REQUIRED BY THE CONTRACTING OFFICER AFTER APPROVAL OF ANY MATERIAL SUBMITTED. SUCH ADDITIONAL FEE SHALL BE A LUMP-SUM AMOUNT TO BE AGREED UPON BY THE PARTIES.

"/D) THE CONTRACTING OFFICER MAY CHANGE THE BASIC REQUIREMENTS OF THE PROJECT. IF THIS ACTION REQUIRES MAJOR REVISIONS OR ABANDONMENT OF DRAWINGS OR OTHER DOCUMENTS, AN EQUITABLE ADJUSTMENT OF THE PERTINENT TERMS OF THE CONTRACT SHALL BE MADE BY MUTUAL AGREEMENT OF THE PARTIES HERETO, INCLUDING THE INCREASE OR DECREASE OF THE AMOUNT OF THE FIXED FEE SPECIFIED IN ARTICLE IV, AND THE CONTRACT SHALL BE MODIFIED IN WRITING ACCORDINGLY.'

ON THIS BASIS, YOUR FIRM HAS CLAIMED AN ADDITIONAL $122,500 REPRESENTING 12,250 MAN-HOURS AT $10 PER HOUR FOR EXTRA WORK. IN REGARD TO YOUR CLAIM, GSA HAS ADVISED THAT DETAILED SUPPORTING DATA ITEMIZING THE MAN-HOURS INVOLVED, THE WORK PERFORMED AND EVIDENCE OF AUTHORIZATION OR DIRECTION BY THE GOVERNMENT TO PERFORM SUCH WORK HAS BEEN REQUESTED FROM YOU BY LETTER DATED APRIL 22, 1966. UPON RECEIPT OF THIS INFORMATION, GSA HAS ADVISED OUR OFFICE THAT THEY WILL THEN BE ABLE TO CONSIDER THE MERITS OF YOUR CLAIM.

UNDER ALL THE CIRCUMSTANCES INVOLVED, WE FIND NO BASES TO QUESTION THE ADMINISTRATIVE ACTIONS TAKEN WITH RESPECT TO YOUR CONTRACT.