B-171914, DEC 1, 1971

B-171914, DEC 1, 1971

CONTRACTS - CHANGED CONDITIONS - ADDITIONAL COMPENSATION SOUGHT DECISION DENYING CLAIM BY CREST CONSTRUCTION CORPORATION FOR ADDITIONAL COMPENSATION INCIDENT TO ALLEGEDLY NEW REQUIREMENTS UNDER A CONTRACT WITH THE CORPS OF ENGINEERS, NORFOLK DISTRICT, FOR CONSTRUCTION OF A BUILDING AT FORT LEE, VA. THE COMP. GEN. DOES NOT BELIEVE THAT THE WUNDERLICH ACT REQUIRES THAT GAO CONSIDER NEW EVIDENCE, WHICH THOUGH CONTAINED IN THE RECORD IN CONNECTION WITH THE ARMED SERVICE BOARD OF CONTRACT APPEAL'S DENIAL OF CLAIMANT'S MOTION FOR RECONSIDERATION, WAS PROPERLY DISREGARDED BY THE BOARD. THEREFORE, GAO WILL ONLY DECIDE WHETHER THE BOARD'S LEGAL CONCLUSIONS ARE CORRECT. WHERE THE CONTRACTOR STOCKPILED MATERIAL IN AREAS WHERE HE SHOULD KNOW THAT OTHER WORK MUST BE PERFORMED, THE REQUIRED REHANDLING TO A SPOIL SITE WITHIN A REASONABLE DISTANCE FROM THE DESIGNATED "LIMIT OF THE CONTRACT" DOES NOT CONSTITUTE COMPENSABLE WORK. FINALLY, THE GOVERNMENT WAS UNDER NO LEGAL DUTY TO DESIGNATE A SPOIL SITE BEFORE THE CONTRACT WAS AWARDED, AND IF SUCH WAS A DEFICIENCY, IT SHOULD HAVE BEEN RAISED NO LATER THAN WHEN IT WAS DISCOVERED THAT THE AMOUNT OF MATERIAL WAS TOO GREAT TO BE DISPOSED OF IN THE CONSTRUCTION AREA AND BEFORE THE SIGNIFICANT STOCKPILE, WHICH WOULD OBVIOUSLY HAVE TO BE MOVED, HAD BEEN ACCUMULATED.

TO CREST CONSTRUCTION CORP:

WE REFER TO A LETTER DATED FEBRUARY 11, 1971, FROM YOUR GENERAL MANAGER AND SUPPLEMENTAL CORRESPONDENCE, REQUESTING OUR OFFICE TO CONSIDER YOUR CLAIM UNDER CONTRACT NO. DACA 65-68-C-0154, AWARDED BY THE NORFOLK DISTRICT, CORPS OF ENGINEERS, WHICH WAS THE SUBJECT OF AN APPEAL BEFORE THE ARMED SERVICES BOARD OF CONTRACT APPEALS (ASBCA), NO. 14406.

THE SUBJECT CONTRACT WAS AWARDED ON OCTOBER 24, 1967, FOR THE CONSTRUCTION OF THE ACADEMIC BUILDING AT THE UNITED STATES ARMY LOGISTICS MANAGEMENT CENTER, FORT LEE, VIRGINIA FOR A LUMP-SUM PRICE OF $3,582,652.75. GENERALLY, WORK CONSISTED OF CONSTRUCTION OF A NEW BUILDING APPROXIMATELY IN THE CENTER OF A RECTANGULAR AREA DELINEATED IN THE SITE PLAN INCLUDED WITH THE BID DOCUMENTS. THIS CONSTRUCTION AREA, WHICH ALSO INCLUDES SPACE FOR GRASSED AREAS, PARKING, WALKS AND ROADWAYS IS SET OFF IN THE SITE PLAN BY AN SOLID LINE CAPTIONED "LIMIT OF CONTRACT". A NOTE ON THE SITE PLAN PROVIDES THAT THE CONTRACT AREA CONSISTS OF (1) THE AREA SHOWN WITHIN THE CONTRACT LINES AND (2) ALL MISCELLANEOUS AREAS RELATED TO OUTSIDE UTILITIES, MANHOLES, HEADWALLS, ETC.

CORE BORINGS WERE TAKEN IN THE AREAS TO BE EXCAVATED AND THE INFORMATION WAS MADE AVAILABLE TO BIDDERS. THE TWO TEST BORING LOGS PERTAINING TO THE AREA INVOLVED IN THIS CLAIM INDICATED THAT MATERIAL CLASSIFIED AS CH (SILT AND CLAY) WAS PRESENT IN HIGH CONCENTRATIONS.

PERTINENT TO THIS CLAIM ARE THE FOLLOWING SECTIONS OF THE CONTRACT TECHNICAL SPECIFICATION PERTAINING TO EXCAVATION, FILLING AND BACKFILLING:

"2-02 DEFINITIONS:

B. UNSATISFACTORY MATERIALS INCLUDE MATERIALS CLASSIFIED IN MILITARY STANDARD MIL-STD-619 AS PT, OH, MH, CH, AND MATERIALS OF ANY CLASSIFICATION THAT ARE DETERMINED BY THE CONTRACTING OFFICER AS TOO WET FOR PROVIDING A STABLE SUBGRADE OR STABLE FOUNDATION FOR STRUCTURES AND UTILITY SYSTEMS.

"2-05 EXCAVATION:

F. EXCAVATED MATERIALS: SATISFACTORY EXCAVATED MATERIAL REQUIRED FOR FILL OR BACKFILL SHALL BE PLACED IN THE PROPER SECTION OF THE PERMANENT WORK REQUIRED UNDER THIS SECTION OR SHALL BE SEPARATELY STOCKPILED IF IT CANNOT BE READILY PLACED. SATISFACTORY EXCAVATED MATERIAL IN EXCESS OF THAT REQUIRED FOR THE WORK UNDER THIS SECTION SHALL BE MADE AVAILABLE FOR USE ON OTHER PORTIONS OF THE PERMANENT SITE WORK REQUIRED FOR THE CONTRACT PROJECT. SATISFACTORY MATERIAL IN EXCESS OF THAT REQUIRED FOR THE PERMANENT WORK AND UNSATISFACTORY MATERIAL SHALL BE DISPOSED OF IN DESIGNATED SPOIL AREAS. STOCKPILES AND WASTED MATERIALS SHALL BE PLACED, GRADED, AND SHAPED FOR PROPER DRAINAGE."

THE SUBJECT EXCAVATION WORK WAS PERFORMED BY FERRELL BROTHERS, INCORPORATED (FERRELL), AS SUBCONTRACTOR, DURING FEBRUARY AND MARCH OF 1968. BY LETTER DATED FEBRUARY 23, 1968, FERRELL INFORMED YOUR FIRM THAT UNSUITABLE MATERIAL WAS BEING EXCAVATED AND REQUESTED DISPOSITION INSTRUCTIONS. YOUR FIRM PROVIDED THE GOVERNMENT WITH WRITTEN NOTIFICATION OF THIS CONDITION BY LETTER DATED APRIL 26, 1968. AN EXTENDED EXCHANGE OF CORRESPONDENCE BETWEEN YOUR FIRM AND THE GOVERNMENT FOLLOWED, RESULTING IN THE REMOVAL, DURING JULY 1969, OF THE UNSUITABLE MATERIAL TO A GOVERNMENT DESIGNATED SPOIL AREA OUTSIDE THE DESIGNATED "LIMIT OF CONTRACT."

YOUR FIRM CLAIMED THAT THE REMOVAL OF THE EXCESS MATERIAL TO THE SPOIL AREA CONSTITUTED A CHANGE IN THE CONTRACT REQUIREMENTS ENTITLING IT TO ADDITIONAL COMPENSATION. THIS CLAIM WAS DENIED IN TOTO BY THE CONTRACTING OFFICER IN A FINAL DECISION ISSUED JULY 18, 1969. THE CLAIM WAS THEN PURSUED BEFORE THE ASBCA, WHICH DENIED IT BY A DECISION ISSUED JUNE 17, 1970.

THE BASIS FOR YOUR APPEAL BEFORE THE ASBCA WAS THAT SINCE THE GOVERNMENT HAD NEGLECTED TO DESIGNATE A SPOIL AREA AT THE TIME OF BIDDING, YOU WERE NOT CONTRACTUALLY OBLIGATED TO REMOVE THE MATERIAL TO A SPOIL AREA LOCATED OUTSIDE THE CONTRACT LIMIT LINE. IN DENYING YOUR CLAIM THE ASBCA HELD THAT THE FAILURE TO DESIGNATE A SPOIL AREA AT THE TIME OF CONTRACT AWARD DID NOT RELIEVE YOUR FIRM OF THE OBLIGATION TO REMOVE EXCESS MATERIAL. ADDITION, THE ASBCA HELD THAT THE DESIGNATION OF A SPOIL AREA APPROXIMATELY TWO MILES FROM THE CONTRACT LIMIT LINES WAS NOT UNREASONABLE AND DID NOT CONSTITUTE A VIOLATION OF THE CONTRACT TERMS ENTITLING YOUR FIRM TO ADDITIONAL COMPENSATION. IMPLICIT IN THE CONCLUSION IS THE DETERMINATION THAT WHERE NO SPOIL AREA WAS DESIGNATED IN THE CONTRACT, THE CONTRACTING OFFICER HAD A RIGHT TO DESIGNATE ONE LATER, NOT NECESSARILY WITHIN THE CONTRACT LIMIT, WITHOUT ADDITIONAL OBLIGATION TO THE GOVERNMENT, SO LONG AS THE SITE SELECTED WAS REASONABLE. THE ASBCA ALSO HELD THAT THE CORE BORINGS INDICATED THE PRESENCE OF HIGH CONCENTRATION OF UNSUITABLE MATERIAL AND THEREFORE YOUR FIRM MET NO UNEXPECTED CONDITION WHEN IT ENCOUNTERED THE UNSUITABLE MATERIAL.

A MOTION FOR RECONSIDERATION WAS FILED ON JULY 20, 1970, OFFERING NEW EVIDENCE AND BASED ON THE FOLLOWING CONTENTIONS: (1) THE BOARD FAILED TO TAKE INTO CONSIDERATION INDUSTRY CUSTOM IN REGARD TO THE DESIGNATION OF SPOIL AREAS, (2) THE BOARD INCORRECTLY INTERPRETED THE "CONTRACT LIMIT" PROVISION, (3) DUE EFFECT WAS NOT GIVEN TO THE PARTIES' CONSTRUCTION OF THE CONTRACT, (4) THE BOARD OVERLOOKED THE FACT THAT THE BORINGS DID NOT INDICATE THE QUANTITY OF UNSATISFACTORY MATERIAL ENCOUNTERED BY THE CONTRACTOR AND FINALLY (5) THE GOVERNMENT NOW FOLLOWS THE PRACTICE OF DESIGNATING SPOIL AREAS AT THE TIME OF CONTRACTING IF THERE IS ANY POSSIBILITY THAT IT WILL BE LOCATED OUTSIDE THE CONTRACT LIMITS, THEREBY ACKNOWLEDGING THAT THE INITIAL DECISION IS ERRONEOUS. BY DECISION DATED DECEMBER 16, 1970, THE BOARD DENIED YOUR MOTION FOR RECONSIDERATION AND REAFFIRMED ITS DECISION. IN SO DECIDING, THE BOARD HELD THAT NO COMPELLING REASON EXISTED TO REOPEN THE RECORD SINCE THE NEW EVIDENCE OFFERED COULD HAVE BEEN PRESENTED AT THE ORIGINAL HEARING.

YOUR CORRESPONDENCE EVIDENCES A RATHER BROAD BASED ATTACK UPON THE VALIDITY OF THE BOARD'S DECISION. YOUR CONTENTIONS MAY BE DIVIDED INTO TWO GENERAL AREAS. YOUR FIRST PRONG OF ATTACK IS MADE UP OF CONTENTIONS TO THE EFFECT THAT THE ORIGINAL DECISION IS BASED UPON ERRONEOUS CONCLUSIONS OF LAW AND THAT CERTAIN OF THE BOARD'S FINDINGS OF FACT ARE NOT BASED UPON SUBSTANTIAL EVIDENCE. SECONDLY, YOU ASSERT THAT YOUR CLAIM BASED UPON AN ALLEGED CHANGED SITE CONDITION WAS IMPROPERLY TREATED BY THE BOARD IN ITS ORIGINAL DECISION AND ERRONEOUSLY DISMISSED PURSUANT TO THE DENIAL OF YOUR MOTION FOR RECONSIDERATION.

OUR REVIEW OF THE SUBJECT BOARD DECISION IS LIMITED BY THE WUNDERLICH ACT, 41 U.S.C. 321, 322 WHICH PROVIDES THAT AN ADMINISTRATIVE DECISION (HERE, ASBCA NO. 14406), UNDER THE STANDARD DISPUTES CLAUSE ON A QUESTION OF FACT IS FINAL AND CONCLUSIVE UNLESS IT IS SHOWN TO BE FRAUDULENT OR CAPRICIOUS OR ARBITRARY OR SO GROSSLY ERRONEOUS AS NECESSARILY TO IMPLY BAD FAITH, OR IS NOT SUPPORTED BY SUBSTANTIAL EVIDENCE. SUCH DECISIONS ARE NOT FINAL ON QUESTIONS OF LAW. IT SHOULD ALSO BE NOTED THAT IN UNITED STATES V CARLO BIANCHI AND COMPANY, INCORPORATED, 373 U.S. 709 (1963), THE UNITED STATES SUPREME COURT HELD THAT, APART FROM QUESTIONS OF FRAUD, THE REVIEW OF A DEPARTMENTAL DECISION ON A QUESTION OF FACT ARISING UNDER A DISPUTES CLAUSE MUST, UNDER THE WUNDERLICH ACT (SUPRA), BE CONFINED TO CONSIDERATION OF THE RECORD BEFORE THE BOARD, AND THAT THE REVIEWING COURT MAY NOT RECEIVE NEW EVIDENCE ON SUCH QUESTIONS.

WE SHALL FIRST DEAL WITH YOUR ALLEGATION THAT A CHANGED CONDITION EXISTED DUE TO THE FACT THAT WHILE APPROXIMATELY 20,000 CUBIC YARDS OF UNSUITABLE MATERIAL WAS ENCOUNTERED ONLY ABOUT ONE QUARTER OF THAT AMOUNT COULD HAVE BEEN ANTICIPATED FROM THE BORING LOGS FURNISHED BY THE GOVERNMENT. SUPPORT OF THIS CONTENTION YOU HAVE SUBMITTED TWO ESTIMATES OF THE QUANTITIES OF UNSUITABLE MATERIAL PREPARED BY CONSULTING ENGINEERS FROM THE DATA PROVIDED IN THE BID PACKAGE. THIS CHANGED CONDITION ISSUE WAS NOT SPECIFICALLY ARGUED BEFORE THE BOARD IN CONNECTION WITH ITS INITIAL DECISION. HOWEVER, THE BOARD DID FIND THAT THE "CORE BORINGS CLEARLY SHOWED HIGH AND VERY HIGH CONCENTRATIONS OF CH MATERIAL TO BE PRESENT IN THE EXCAVATION AREA AND THIS WAS PRECISELY THE UNSATISFACTORY MATERIAL ENCOUNTERED BY APPELLANT. APPELLANT MET NO CONDITION THAT WAS UNEXPECTED OR WAS OTHER THAN AS REPRESENTED." IN YOUR MOTION FOR RECONSIDERATION THE ISSUE OF A CHANGED CONDITION WAS SPECIFICALLY URGED BEFORE THE BOARD. THE BOARD DECLINED TO HEAR YOUR NEW EVIDENCE IN SUPPORT OF THIS ISSUE. YOU NOW SEEK TO ASSERT THIS SAME ISSUE AND OFFER EVIDENCE IN SUPPORT THEREOF FOR OUR CONSIDERATION.

WE DO NOT BELIEVE THAT THE BOARD'S ORIGINAL RULING IN REGARD TO THE CONCENTRATION OF UNSUITABLE MATERIAL EXCAVATED CAN HELD TO BE A RULING ON THE ISSUE OF A CHANGED SITE CONDITION. IT IS CLEAR FROM THE RECORD THAT THIS CLAIM WAS NOT THE SUBJECT OF THE CONTRACTING OFFICER'S FINAL DECISION NOR WAS IT URGED BEFORE THE BOARD IN THE INITIAL HEARING. WHILE IT IS TRUE THAT THE BOARD SAW FIT TO RULE UPON A CLOSELY RELATED ISSUE, THAT OF THE QUANTITY OF MATERIAL EXCAVATED, WE DO NOT BELIEVE THIS FINDING PUT FORTH SOLELY IN TERMS OF QUANTITY CONSTITUTES A RULING ON THE CHANGED CONDITION ISSUE. INDEED, AS YOUR MOTION FOR RECONSIDERATION CLEARLY ILLUSTRATES THE ISSUE WAS NEITHER URGED NOR ADJUDICATED IN THE INITIAL DECISION. IN ADDITION, THE BOARD IN DENYING YOUR MOTION FOR RECONSIDERATION, HELD THAT NO COMPELLING REASON EXISTED TO REOPEN THE CASE TO CONSIDER YOUR NEW ARGUMENT. IN SUCH INSTANCES THE DISCRETION OF THE BOARD IS EXTREMELY BROAD AND THEIR ACTION IN REJECTING SUCH A MOTION WILL NOT BE DISTURBED BY A REVIEWING ACTIVITY UNLESS IT CAN BE CLEARLY SHOWN THAT THE BOARD'S ACTION WAS ARBITRARY AND CAPRICIOUS. SEE PACIFIC CONTACT LABORATORIES, INCORPORATED V SOLEX LABORATORIES, INCORPORATED, 209 F. 2D 529, 534 (1963), CERT. DENIED 348 U.S. 816 (1954). IT IS CLEAR THAT THE CAREFULLY CONSIDERED ACTION ON THIS MOTION COMES WITHIN THE LIMITS OF ACCEPTABILITY UNDER THE ABOVE CITED TEST. WE DO NOT BELIEVE THAT THE WUNDERLICH ACT (SUPRA) REQUIRES THAT THIS OFFICE CONSIDER NEW EVIDENCE, WHICH THOUGH CONTAINED IN THE RECORD BEFORE US IN CONNECTION WITH THE BOARD'S DENIAL OF YOUR MOTION FOR RECONSIDERATION, WAS PROPERLY DISREGARDED BY THE BOARD. MARY TANKERSLEY V UNITED STATES, 179 CT. CL. 294, 299 (1967).

WE HAVE CAREFULLY REVIEWED THE COMPLETE RECORD WHICH WAS BEFORE THE BOARD IN THE CONTEXT OF YOUR PRESENT CONTENTIONS. IT IS OUR CONCLUSION THAT ALL OF THE BOARD'S FINDINGS OF FACT IN ITS INITIAL DECISION ARE SUPPORTED BY SUCH RELEVANT EVIDENCE IN THE RECORD AS A REASONABLE MIND MIGHT ACCEPT AS ADEQUATE TO SUPPORT A CONCLUSION. SEE EDISON COMPANY V NATIONAL LABOR RELATION BOARD, 305 U.S. 197, 229 (1938). ACCORDINGLY, WE MUST CONSIDER THE BOARD'S FINDINGS OF FACT AS FINAL.

BOARD FINDINGS ON QUESTION OF LAW ARE NOT BINDING ON THIS OFFICE AND MATTERS OF CONTRACT INTERPRETATIONS ARE GENERALLY CONSIDERED QUESTION OF LAW. SEE KAISER INDUSTRIES CORPORATION V UNITED STATES, 169 CT. CL. 310, 330-31 (1965). THEREFORE, WE MUST DECIDE WHETHER THE BOARD'S LEGAL CONCLUSIONS IN REGARD TO THE REQUIREMENTS OF THE CONTRACT ARE CORRECT.

THE MAIN THRUST OF YOUR CONTENTION THAT THE SUBJECT DECISION IS LEGALLY INSUFFICIENT IS GROUNDED ON THE ALLEGATION THAT THE BOARD'S OPINION WAS BASED UPON CASES WHICH ARE INAPPLICABLE TO THE INSTANT SITUATION. REGARD TO THE BOARD'S UTILIZATION OF BLAKE CONSTRUCTION COMPANY, INCORPORATED, GSBCA NO. 2199, WE FIND THAT ALTHOUGH ITS FACTUAL SETTING DOES VARY FROM THAT IN THE INSTANT CASE, ITS USE BY THE BOARD WAS NOT IMPROPER IN THAT IT WAS NOT CITED AS AUTHORITY FOR A PROPOSITION OF LAW, BUT RATHER AS AN ILLUSTRATION OF A SITUATION WHERE OFF-SITE ACTIVITIES MAY BE CONTRACTUALLY REQUIRED. YOU ALSO CONTEND THAT THE BOARD HAS INCORRECTLY CITED N. FIORITO COMPANY, INCORPORATED, ASBCA NO. 9348 AND N. FIORITO COMPANY, INCORPORATED V UNITED STATES, 180 CT. CL. 281 (1967). FIND THAT THE BOARD'S DECISION IN FIORITO DOES PROVIDE SUPPORT FOR THE PROPOSITION THAT THE REQUIRED REHANDLING OF STOCKPILED MATERIAL PLACED IN AREAS WHERE THE CONTRACTOR SHOULD KNOW THAT OTHER WORK MUST BE PERFORMED, DOES NOT CONSTITUTE COMPENSABLE EXTRA WORK. HOWEVER, THE BOARD'S CITATION OF THE COURT OF CLAIMS OPINION IN FIORITO MAY NOT HAVE BEEN ENTIRELY RELEVANT.

NOTWITHSTANDING FACTUAL DISTINCTIONS BETWEEN THE INSTANT CASE AND THOSE CITED IN THE BOARD'S OPINION WE CONCLUDE THAT THE BOARD'S ANALYSIS OF THE CONTRACT PROVISIONS IS LEGALLY CORRECT. WE AGREE WITH THE BOARD'S LEGAL CONCLUSION THAT THE CONTRACT CLEARLY CONTEMPLATED DISPOSAL OF EXCESS MATERIALS IN A DESIGNATED SPOIL AREA. WE FURTHER AGREE THAT, IN THE ABSENCE OF SPACE WITHIN THE CONTRACTUAL LIMITS, THE TERMS OF THE CONTRACT CLEARLY GAVE THE GOVERNMENT DISCRETION TO DESIGNATE SUCH AN AREA LIMITED ONLY BY THE DOCTRINE OF REASONABLENESS. WE ALSO CONCLUDE THAT CONSIDERING ALL THE FACTS AND CIRCUMSTANCES BEFORE THE BOARD IN THE CASE THAT THE AREA SO DESIGNATED WAS WITHIN A REASONABLE DISTANCE OF THE SITE. FINALLY, WE CONCLUDE THAT THE GOVERNMENT WAS UNDER NO LEGAL OBLIGATION TO DESIGNATE A SPOIL SITE BEFORE THE CONTRACT WAS AWARDED. THE PROPER TIME FOR SUCH AN OBJECTION TO THE SPECIFICATION IS BEFORE THE CONTRACT IS AWARDED. CERTAINLY, IF FAILURE TO DESIGNATE A SITE IS A DEFICIENCY THE POINT SHOULD HAVE BEEN RAISED NO LATER THAN WHEN IT WAS DISCOVERED THAT THE AMOUNT OF SATISFACTORY MATERIAL WAS TOO GREAT TO BE DISPOSED OF IN THE CONSTRUCTION AREA AND BEFORE THE SIGNIFICANT STOCKPILE, WHICH WOULD OBVIOUSLY HAVE TO BE MOVED, HAD BEEN ACCUMULATED. ON THE BASIS OF THE RECORD, WE CANNOT CONCLUDE THAT THE SUBJECT DECISION IS EITHER ARBITRARY OR CAPRICIOUS OR ERRONEOUS AS A MATTER OF LAW.

THEREFORE, YOUR CLAIM MUST BE DENIED.