K-Con Building Systems, Inc. v. United States

In the United States Court of Federal Claims

No. 05-914C

(Filed: April 18, 2017)

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K-CON BUILDING SYSTEMS, INC., * Trial; Contract to Design and Build

* Prefabricated Metal Building; RCFC 15;

Plaintiff, * Futility of Supplemental Complaint;

* Contract Disputes Act of 1978; Remission

v. * of Liquidated Damages; Counterclaim

* for Liquidated Damages; Contractual

THE UNITED STATES, * Notice Requirement; Abandoned Claim;

* Excusable Delay; Critical Path;

Defendant. * Affirmative Defenses

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William A. Scott, Charleston, SC, for plaintiff.

Daniel B. Volk, United States Department of Justice, Washington, DC, for defendant.

OPINION AND ORDER

SWEENEY, Judge

Plaintiff K-Con Building Systems, Inc. contracted with the United States Coast Guard

(“Coast Guard”) to design and construct a prefabricated metal building in Elizabeth City, North

Carolina. Because plaintiff did not complete construction by the contract completion date, the

Coast Guard assessed liquidated damages and, eventually, terminated the contract for default.

Plaintiff filed suit challenging the default termination and the liquidated damages assessment,

and defendant filed a counterclaim to recover the liquidated damages still owed by plaintiff.

After the court held a trial, the parties attempted–unsuccessfully–to reach a settlement. Plaintiff

then filed a motion seeking to resolve certain issues raised during the settlement discussions.

The court ruled on that motion, dismissing plaintiff’s challenge to the default termination for lack

of jurisdiction. The parties thereafter submitted posttrial briefs, and plaintiff filed a motion for

leave to amend its complaint. As set forth below, the court denies plaintiff’s motion for leave to

amend its complaint, and concludes that defendant is entitled to recover liquidated damages in

the amount of $199,611.

I. FACTS

This section contains the court’s findings of fact as required by Rule 52(a)(1) of the Rules

of the United States Court of Federal Claims (“RCFC”).1

A. The Contracts

1. The Federal Supply Schedule Contract

Plaintiff is a “design-build general contractor” headquartered in Charleston, South

Carolina whose business is focused on the federal government. Tr. 86 (Reitmeier); accord Tr.

1268-69 (Combs). Specifically, plaintiff has fulfilled over 4000 delivery orders for the federal

government throughout the United States and its territories. Id. at 1268, 1271 (Combs); see also

id. at 3643 (Kiernan) (indicating that plaintiff has “had over 3000 delivery orders from the

federal government and over 400 of those have been specifically for pre-engineered metal

buildings”).

In April 2001, the United States General Services Administration (“GSA”) awarded

plaintiff a Federal Supply Schedule contract for Prefabricated Structures and Outdoor Smoking

Shelters. Jt. Stip. ¶ 1; JX 2. That contract contained a number of clauses from the Federal

Acquisition Regulation (“FAR”), including FAR 52.212-4, Contract Terms and

Conditions–Commercial Items (May 1999).2 JX 2.9; Pl.’s App. SJ0001-90. Several paragraphs

from that clause are relevant here. First, paragraph (d) provided:

Disputes. This contract is subject to the Contract Disputes Act of 1978, as

amended . . . . Failure of the parties to this contract to reach agreement on any

request for equitable adjustment, claim, appeal or action arising under or relating

1

The court derives these facts from the parties’ Joint Stipulation of Facts (“Jt. Stip.”), the

transcript of testimony elicited at trial (“Tr.”), the exhibits admitted into evidence during trial

(“PX,” “DX,” or “JX”), and, as explained below, see infra note 2, plaintiff’s appendix to its

posttrial motion to dismiss (“Pl.’s App.”). Citations to the trial transcript will be to the page

number of the transcript and the last name of the testifying witness.

2

The trial record contains a portion of the Federal Supply Schedule contract, and only

includes the first eight paragraphs of FAR 52.212-4. Plaintiff submitted the entire Federal

Supply Schedule contract with its posttrial motion to dismiss, described in more detail below.

The court included quotations from the remaining paragraphs of FAR 52.212-4 in its February

26, 2014 Opinion and Order. See K-Con Bldg. Sys., Inc. v. United States, 114 Fed. Cl. 722, 729-

30 (2014). Neither party disputes the contents of these paragraphs or the applicability of these

paragraphs to this case. Id. at 730. Accordingly, the court treats those paragraphs as if they were

included in the trial record, and cites plaintiff’s appendix to its posttrial motion to dismiss as the

source of those paragraphs.

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to this contract shall be a dispute to be resolved in accordance with the clause of

FAR 52.233-1, Disputes, which is incorporated herein by reference.

JX 2.9. Second, paragraph (f) provided:

Excusable delays. The Contractor shall be liable for default unless

nonperformance is caused by an occurrence beyond the reasonable control of the

Contractor and without its fault or negligence such as, acts of God or the public

enemy, acts of the Government in either its sovereign or contractual capacity,

fires, floods, epidemics, quarantine restrictions, strikes, unusually severe weather,

and delays of common carriers. The Contractor shall notify the Contracting

Officer in writing as soon as it is reasonably possible after the commencement of

any excusable delay, setting forth the full particulars in connection therewith, shall

remedy such occurrence with all reasonable dispatch, and shall promptly give

written notice to the Contracting Officer of the cessation of such occurrence.

Id. Third, paragraph (m) provided:

Termination for cause. The Government may terminate this contract, or any part

hereof, for cause in the event of any default by the Contractor, or if the Contractor

fails to comply with any contract terms and conditions, or fails to provide the

Government, upon request, with adequate assurances of future performance. In

the event of termination for cause, the Government shall not be liable to the

Contractor for any amount for supplies or services not accepted, and the

Contractor shall be liable to the Government for any and all rights and remedies

provided by law. If it is determined that the Government improperly terminated

this contract for default, such termination shall be deemed a termination for

convenience.

Pl.’s App. SJ0014. Finally, paragraph (t) incorporated by reference Federal Supply Schedule

contract clause I-FSS-249-B, Default (May 2000), id., which provided:3

In addition to any other clause contained herein related to termination, the

following is applicable to orders placed under Federal Supply Schedule contracts.

Any ordering office may, with respect to any one or more orders placed by it

under the contract, exercise the same right of termination, acceptance of inferior

3

Plaintiff provided the full text this provision in its posttrial motion to dismiss. Mot. to

Dismiss 8 (quoting BearingPoint, Inc. v. United States, 77 Fed. Cl. 189, 192 (2007)). The court

reproduced this text in its February 26, 2014 Opinion and Order, K-Con Bldg. Sys., Inc., 114

Fed. Cl. at 730, and as noted above, see supra note 2, neither party disputes the contents of this

provision or the applicability of this provision to this case.

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articles or services, and assessment of excess costs as might the Contracting

Officer, except that when failure to deliver articles or services is alleged by the

Contractor to be excusable, the determination of whether the failure is excusable

shall be made only by the Contracting Officer of the General Services

Administration, to whom such allegation shall be referred by the ordering office

and from whose determination appeal may be taken as provided in the clause of

this contract entitled “Disputes.”

2. The Coast Guard’s Solicitation

On September 2, 2003, the Coast Guard, through its Facilities, Design, and Construction

Center (Atlantic) (“FDCC LANT”),4 solicited proposals under the Federal Supply Schedule for

Prefabricated Structures and Outdoor Smoking Shelters for the design and construction of a

prefabricated metal building to house an Aviation Repair and Supply Center (“AR&SC”)

component repair shop at the Coast Guard Support Center in Elizabeth City, North Carolina. Jt.

Stip. ¶¶ 3-4, 10; JX 1.1; JX 2.1; JX 20.3; see also Tr. 2454 (Schmitt) (explaining that the

AR&SC is a command that maintains and repairs aircraft). Specifically, the Coast Guard sought

a 4700-square-foot building to house a hydraulic test lab, a workshop, office space, and storage

space. Jt. Stip. ¶¶ 4-5. The contractor was to design the building based on the drawings and

specifications included in the request for proposals (“RFP”). JX 1.3, .10-.11, .140; accord JX

1.47 (“[Specification] Section 01158, ‘GSA Procurement Design/Build Criteria,’ and Drawings

contain abbreviated minimum facility requirements.”), .48 (“The design and design data

indicated on the drawings are the minimum requirements, i.e., baseline drawing requirements, to

be used by the Contractor to develop the project design. The Contractor shall add to,

supplement, and complete these drawings to fully comply with this GSA Procurement . . . .”).

The contractor would then use that design to construct the building. JX 1.79. Additionally, the

contractor was required to “[d]isconnect, dismantle if necessary, remove, relocate, reinstall,

connect, and test” certain government-furnished equipment. JX 1.40; accord JX 1.58 (listing

“existing and/or new equipment” that the Coast Guard intended to install in the new building,

and providing that the contractor was required to “coordinate the design and provide support[]

and utilities for” that equipment). Among the government-furnished equipment were three

pieces of hydraulic test equipment–an HPTS-1000 with a 25-horsepower motor, an HA-60VM

with a 40-horsepower motor, and an HS-25 with a 75-horsepower motor. JX 1.58; accord JX

1.15. The motor for each piece of equipment was separate from the equipment’s hydraulic

testing system, and in the case of the HS-25, the motor was mounted to the equipment’s exterior.

Tr. 2813-17 (Fedei). The government-furnished equipment also included a chiller. JX 1.58;

accord JX 1.15. The chiller was connected to each of the three pieces of hydraulic test

equipment by a pair of pipes, one that supplied chilled water to collect the heat generated inside

of the equipment and another that returned the heated water to the chiller to be rechilled. PX

332.18-.19, .22; Tr. 201-02 (Ramsey), 2813, 2815, 3075-76 (Fedei); accord id. at 501-03

4

The FDCC LANT was located in Norfolk, Virginia. JX 1.1.

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(Tempel) (explaining that the chiller removed heat that was generated in the equipment,

preventing the heat from being rejected into the room).

In rendering design services, the contractor was required to provide the Coast Guard with

civil, site, geotechnical, landscaping, architectural, structural, fire protection, plumbing,

mechanical, electrical, and telecommunications designs, as well as with all “specified”

calculations pertinent to the designs. JX 1.49-.74, .78; see also Tr. 229 (Ramsey) (admitting that

the contract required plaintiff to submit mechanical calculations with its design). Of particular

importance in this case is the mechanical design, in other words, the design for the building’s

heating, ventilation, and air conditioning (“HVAC”) system. The pertinent specification

provided:

1.13.2 System Description

The HVAC systems shall be designed to accommodate all building operations.

Use of Carrier Air-conditioning Mfg. equipment is desired to match equipment

currently being installed throughout AR&SC to minimize training and repair

parts.

....

1.13.3 HVAC Systems

The HVAC systems shall be designed to meet the following design conditions:

Space Winter (FDB) Summer (FDB/FWB[)]

Outside 19 93/78

Inside 70 76/50%RH (typical)*

*Spaces shall not exceed 60% RH during any occupied hours at full or partial

load.

(F = Degrees Fahrenheit)

(FDB = Degrees Fahrenheit Dry Bulb)

(FWB = Degrees Fahrenheit Wet Bulb)

(FDP = Degrees Fahrenheit Dew Point)

(RH = Relative Humidity)

1.13.4 System Description

1.13.4.1 Heating and air conditioning shall be provided by split system heat pump

air conditioners. Ductless split system air conditioners with electric resistance

heat or heat pumps may be provided for isolated spaces where appropriate. . . .

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Provide air conditioning in all normally occupied spaces including offices,

telecommunications rooms, test labs, work shops, corridors and toilets. . . .

....

1.13.9 Existing hydraulic test equipment chiller: Disconnect chiller from existing

equipment (HA-60, HPTS-1000, and HS-25) in Hangar 75 Annex, relocate chiller

to new location, and run new distribution piping to the relocated equipment

(HA-60, HPTS-1000, and HS-25), as shown on sheet A102. Use piping materials,

insulation, and connections equivalent to the existing.

JX 1.64-.66; accord JX 1.15 (indicating, on sheet A102, that the contractor was to “provide

insulated chilled water piping between relocated chiller . . . & hydraulic test consoles HA-60,

HPTS-1000, & HS-25” and “match valving & connections that exist[] in Shop 241 in Hangar

75”); see also Tr. 497-99 (Tempel) (noting that the design parameters for the HVAC system were

located in paragraphs 1.13.3 and 1.13.4.1 of the specification).

Proposals were due by September 17, 2003. JX 1.1.

3. Plaintiff’s Proposal

On August 28, 2003, prior to issuing its RFP, the Coast Guard conducted a prebid

meeting at the Coast Guard Support Center in Elizabeth City. JX 5.1; Tr. 102-04 (Reitmeier).

Attending the meeting were a number of Coast Guard employees, plaintiff’s sales manager

George Reitmeier, and representatives of another prospective offeror. JX 5.1; accord Tr. 102

(Reitmeier). The Coast Guard presented “Conceptual Design Site and Floor Plans” and

answered questions. JX 5.1; accord Tr. 103 (Reitmeier). Thereafter, the “attendees walked . . .

the proposed building site” and “toured existing Shop 241.” JX 5.1; accord Tr. 103 (Reitmeier).

During the tour of Shop 241, the attendees were told that some of the equipment in that room

would be relocated to the new building. Tr. 103, 140 (Reitmeier); see also JX 1.15 (reflecting

that the existing government-furnished equipment was located in Shop 241).

In preparing its proposal, plaintiff solicited quotations from other contractors to provide

and install the HVAC system. See, e.g., JX 14; JX 510; see also Tr. 120 (Reitmeier) (noting that

another company would actually design the HVAC system). At least one contractor, Ward &

Son, Inc., investigated the government-furnished equipment that would be placed in the building,

the number and size of the rooms in the building, the location of the air handlers, and how the

building would be insulated. JX 14.1-.2; Tr. 120 (Reitmeier); Tr. 504-05 (Tempel). During that

investigation, Ward & Son, Inc. “was told that the shop never operates but one test station at [a]

time and the duration is no longer than four hours.” JX 14.9. Based on the information it

gathered, Ward & Son, Inc., calculated thermal loads, JX 14.3-.8, and then proposed an HVAC

system with two heat pumps and two air handlers, JX 14.9. One heat pump and air handler unit

would be used solely for the hydraulic test lab, and the other heat pump and air handler unit

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would be used for the entire building and would “keep [the] ‘hydraulic test room’ within the

design specifications when test equipment [was] not being used.” Id.; see also JX 15 (reflecting

that Ward & Son, Inc. proposed using a 7.5-ton unit for the hydraulic test lab and a 10-ton unit

for the entire building). On September 16, 2003, Ward & Son, Inc. provided plaintiff with a

quotation of $50,557 to install the proposed HVAC system, JX 14.9, and plaintiff used that

amount in preparing its cost estimate, JX 18.4; Tr. 118 (Reitmeier).

4. The Coast Guard’s Contract With Plaintiff

Plaintiff responded to the solicitation and, on September 23, 2003, the Coast Guard

placed an order under plaintiff’s Federal Supply Schedule contract for the solicited building. Jt.

Stip. ¶¶ 21-22. The initial value of the order was $513,520 and the initial completion date was

June 17, 2004. Id. ¶ 22. Ultimately, through bilateral contract modifications, the value of the

order was increased to $551,155.35 and the completion date was extended to November 9, 2004.5

See JX 3.1-.10. From plaintiff’s perspective, its contract with the Coast Guard was typical of its

contracts with the federal government, both in type and amount. Tr. 1270, 1279 (Combs).

Plaintiff’s contract with the Coast Guard included and incorporated by reference a

number of provisions relevant to the issues in this case. For example, the contract included FAR

52.211-12, Liquidated Damages - Construction (September 2000), which provided:

(a) If the Contractor fails to complete the work within the time specified

in the contract, the Contractor shall pay liquidated damages to the Government in

the amount of $551.00 for each calendar day of delay until the work is completed

or accepted.

(b) If the Government terminates the Contractor’s right to proceed,

liquidated damages will continue to accrue until the work is completed. These

liquidated damages are in addition to excess costs of repurchase under the

Termination clause.

JX 1.30. In addition, the contract incorporated by reference four other relevant FAR provisions.

One is FAR 52.233-1, Disputes (December 1998), which provided:

(a) This contract is subject to the Contract Disputes Act of 1978, as

amended . . . .

5

Specifically, a January 13, 2004 modification resulted in a contract price increase to

$516,571.46, JX 3.1-.2; an April 15, 2004 modification resulted in a contract price increase to

$549,602.46 and a time extension to October 21, 2004, JX 3.3-.4; an August 20, 2004

modification resulted in a time extension to October 26, 2004, JX 3.6-.7; a September 9, 2004

modification resulted in a contract price increase to $551,155.35, JX 3.7-.8; and a November 10,

2004 modification resulted in a time extension to November 9, 2004, JX 3.9-.10.

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(b) Except as provided in the Act, all disputes arising under or relating to

this contract shall be resolved under this clause.

(c) “Claim,” as used in this clause, means a written demand or written

assertion by one of the contracting parties seeking, as a matter of right, the

payment of money in a sum certain, the adjustment or interpretation of contract

terms, or other relief arising under or relating to this contract. . . .

(d)(1) A claim by the Contractor shall be made in writing and, unless

otherwise stated in this contract, submitted within 6 years after accrual of the

claim to the Contracting Officer for a written decision. A claim by the

Government against the Contractor shall be subject to a written decision by the

Contracting Officer.

FAR 52.233-1, cited in JX 1.37. The second is FAR 52.243-4, Changes (August 1987), which

provided:

(a) The Contracting Officer may, at any time, . . . by written order

designated or indicated to be a change order, make changes in the work within the

general scope of the contract . . . .

(b) Any other written or oral order (which, as used in this paragraph (b),

includes direction, instruction, interpretation, or determination) from the

Contracting Officer that causes a change shall be treated as a change order under

this clause; Provided, that the Contractor gives the Contracting Officer written

notice stating–

(1) The date, circumstances, and source of the order; and

(2) That the Contractor regards the order as a change order.

....

(d) 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, except for an adjustment based on defective specifications, 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.

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FAR 52.243-4, cited in JX 1.38. The third is FAR 52.249-2, Termination for Convenience of the

Government (Fixed Price) (September 1996), which provided:

The Government may terminate performance of work under this contract in whole

or, from time to time, in part if the Contracting Officer determines that a

termination is in the Government’s interest. The Contracting Officer shall

terminate by delivering to the Contractor a Notice of Termination specifying the

extent of termination and the effective date.

FAR 52.249-2(a), cited in JX 1.38. And, the final relevant FAR provision incorporated into the

contract by reference is FAR 52.249-10, Default (Fixed-Price Construction) (April 1984), which

provided:

(a) If the Contractor refuses or fails to prosecute the work or any separable

part, with the diligence that will insure its completion within the time specified in

this contract including any extension, or fails to complete the work within this

time, the Government may, by written notice to the Contractor, terminate the right

to proceed with the work (or the separable part of the work) that has been delayed.

In this event, the Government may take over the work and complete it by contract

or otherwise . . . . The Contractor and its sureties shall be liable for any damage to

the Government resulting from the Contractor’s refusal or failure to complete the

work within the specified time, whether or not the Contractor’s right to proceed

with the work is terminated. This liability includes any increased costs incurred

by the Government in completing the work.

(b) The Contractor’s right to proceed shall not be terminated nor the

Contractor charged with damages under this clause, if–

(1) The delay in completing the work arises from unforeseeable

causes beyond the control and without the fault or negligence of the

Contractor. Examples of such causes include [acts of the Government in

either its sovereign or contractual capacity, or unusually severe weather,]

and

(2) The Contractor, within 10 days from the beginning of any

delay (unless extended by the Contracting Officer), notifies the

Contracting Officer in writing of the causes of delay. The Contracting

Officer shall ascertain the facts and the extent of delay. If, in the judgment

of the Contracting Officer, the findings of fact warrant such action, the

time for completing the work shall be extended. The findings of the

Contracting Officer shall be final and conclusive on the parties, but subject

to appeal under the Disputes clause.

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(c) If, after termination of the Contractor’s right to proceed, it is

determined that the Contractor was not in default, or that the delay was excusable,

the rights and obligations of the parties will be the same as if the termination had

been issued for the convenience of the Government.

(d) The rights and remedies of the Government in this clause are in

addition to any other rights and remedies provided by law or under this contract.

FAR 52.249-10, cited in JX 1.38.

Pursuant to other contract provisions, plaintiff was to commence work within fourteen

days of contract award; meet with the Coast Guard for a postaward kickoff meeting within

fourteen to twenty-eight days of contract award, but prior to the commencement of work;6 submit

a “practicable schedule” either within fifteen days of the commencement of work or another time

period designated by the Coast Guard’s contracting officer; and complete work no more than 262

days after contract award. JX 1.24, .74. In addition, plaintiff was to submit the design to the

Coast Guard in two phases–a “100% design” and a “final design”; the Coast Guard would have

twenty-one days to provide comments on the 100% design and fourteen days to provide

comments on the final design. Jt. Stip. ¶ 14; see also JX 1.80 (containing specification section

01160, paragraph 2.2.3, which provided: “The Contracting Officer’s review team shall review

each design submittal and provide comments regarding the submitted documents.”). Within

fourteen days of receiving the Coast Guard’s comments, plaintiff was to confer with the Coast

Guard via telephone to “resolve design review comments and design issues.” JX 1.79. Plaintiff

was required to “acceptably address all comments on the design submittals and subsequently

correct the submittals for review.” JX 1.80; accord id. (containing specification section 01160,

paragraph 2.2.4, which provided: “When a design submittal is considered unacceptable to the

Contracting Officer’s review team, the Contractor shall be so advised and required to provide a

resubmittal for that particular design phase.”).

If plaintiff “determine[d] that some portion of the drawings, specifications, or other

contract documents require[d] clarification or interpretation,” it could submit a request for

information (“RFI”) to the Coast Guard. JX 1.105. The Coast Guard was required to respond to

the RFI within ten days unless it “determine[d] that a longer period of time [was] necessary to

provide an adequate response”; in such circumstances, the Coast Guard was obligated, within ten

days of receiving the request, to “notify [plaintiff] of the anticipated response time.” JX 1.106.

If the Coast Guard’s response constituted a change to the contract requirements, the Coast Guard

would “issue either a no-cost field Adjustment or formal modification under the Changes clause

of the contract.” Id. If the Coast Guard failed to take such action, and plaintiff believed that the

response would “cause a change to the requirements of the contract documents,” plaintiff was

6

The requirements for the commencement of work and the postaward kickoff meeting

cannot be reconciled; however, the discrepancy has no relevance to the remaining issues in this

case.

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required to “give written notice to the Contracting Officer stating that [it] consider[ed] the

response to be a change order. Failure to give such written notice immediately . . . waive[d

plaintiff’s] right to seek additional time or cost under the Changes clause of the contract.” Id.

Plaintiff could not begin construction until the final design was approved by the Coast

Guard. JX 1.79.

B. Contract Performance

Work on the project did not begin within the time anticipated in the contract; indeed, the

postaward kickoff meeting was not held until December 4, 2003. Jt. Stip. ¶ 23. Among the

Coast Guard employees who attended the meeting were Lt. Harry Mautte from the Coast Guard

Support Center, Kent Goodwin from the AR&SC, and several individuals from the FDCC

LANT, including the contracting specialist, the construction project manager/contracting

officer’s technical representative, the design project manager, and a mechanical engineer. JX

35.1. Attending the meeting for plaintiff were plaintiff’s project manager, Greg Herald, and

representatives from two subcontractors. Id. None of plaintiff’s designers attended the meeting.

Id.; Tr. 2426 (Schmitt); see also Tr. 3107 (Broussard) (explaining that contractors generally bring

their designers to postaward kickoff meetings).

During the meeting, Mr. Herald advised the Coast Guard of plaintiff’s intent to submit the

100% design on January 10, 2004. Jt. Stip. ¶ 23. In addition, the Coast Guard informed plaintiff

that it was willing to allow plaintiff to “fast track” the construction of the building “by accepting

the foundation’s design ahead of the design for the rest of the building”; plaintiff responded that

this was its preferred course of action. Id.; accord id. ¶ 29; see also Tr. 2429-35 (Schmitt)

(explaining that construction could begin once plaintiff had prepared an architectural floor plan, a

structural design, a site plan, and a foundation plan), 2696 (explaining that the Coast Guard’s

fast-tracking suggestion was made in response to plaintiff’s representation that it would be

submitting a 100% design). At the conclusion of the meeting, at least some of the

attendees–including the Coast Guard’s mechanical engineer, John Fedei–walked the building

site. JX 35.1-.2; Tr. 2786 (Fedei); see also Tr. 2799, 2816 (Fedei) (indicating that he also walked

through the existing building containing the government-furnished equipment).

Mr. Herald provided the Coast Guard with a tentative project schedule on December 11,

2003. JX 38. Thereafter, on January 6, 2004, Mr. Herald submitted an RFI to the Coast Guard

concerning a number of issues that needed to be addressed before plaintiff could finish designing

the HVAC system in the hydraulic test lab. Jt. Stip. ¶ 24; JX 42. In particular, Mr. Herald

requested specification sheets (also known as “cut sheets”) for each piece of equipment to be

installed in the hydraulic test lab, as well as information regarding the heat transference from the

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equipment and the equipment’s normal operating parameters.7 Jt. Stip. ¶ 24; JX 42. The

contracting officer’s technical representative responded the following day:

Specifications for the government furnished and installed equipment should be

obtained by field investigation by K-CON and/or [its] designers . . . .8 Some

information (including operating parameters) may be obtained from AR&SC

(Kent Goodwin) or [Coast Guard Support Center] Facilities Staff (Lt. Harry

Mautte). In any case, K-CON is responsible for all necessary services to develop

the design.

JX 44.2 (footnote added). Mr. Herald replied, later that day, that he recognized plaintiff’s

“responsibility to investigate[ ]and develop[] the design” and that he would try and contact the

suggested individuals for the information it needed. Id. Mr. Herald also received another

response to its RFI from the Coast Guard that day, this time from Michael Schmitt, the Coast

Guard’s design project manager. JX 43; JX 44.1. Mr. Schmitt wrote:

The RFP documents indicate what equipment is being government

furnished and installed. . . . Obviously, operating times and durations must be

obtained from the user (AR&SC).

Even though K-CON had nothing to do with the design of the existing

shop, at the pre-bid conference, we walked through the shop . . . and discussed

and viewed the equipment to be moved to the new building. We attempted to

provide as much information in the RFP regarding existing equipment as possible

for bidding purposes, however, we anticipated that fieldwork on K-CON’s part

would be required to complete the design.

JX 44.1; see also JX 5 (describing what occurred during the August 28, 2003 prebid conference

and indicating that a representative from plaintiff was in attendance).

7

The terms “heat transference” and “heat load” are used throughout the trial record; both

refer to the same concept–the amount of generated heat.

8

There was conflicting testimony elicited during trial regarding whether the heat

transference information requested by plaintiff could be obtained during a site visit. Compare Tr.

242 (Ramsey) (suggesting that in the absence of documentation, the only way to ascertain how

much heat the equipment generated was to measure the heat generation while the equipment was

being operated), and Tr. 5661-62, 2718 (Schmitt) (remarking that heat information–such as the

size of the motors on the government-furnished equipment and how the equipment was being

cooled–could be ascertained from a site visit), with Tr. 522 (Tempel) (asserting that heat loads

could not be obtained from a site visit).

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Mr. Herald provided the information he had obtained from the Coast Guard to the

subcontractor that plaintiff hired to design the HVAC system, Epic Engineering, Inc. (“Epic”).9

JX 47; see also Tr. 510 (Tempel) (reflecting that Mr. Herald’s RFI had originated from Epic). In

minutes from a January 8, 2004 project conference, Mr. Herald noted that “all of Epic[’]s

questions [had] been answered” and that the “[d]esign should be ready by” January 25, 2004. JX

47.

Notwithstanding Mr. Herald’s understanding, Epic needed additional information to

complete the HVAC system design. JX 57; accord Tr. 606 (Tempel) (disagreeing that all of

Epic’s questions had been answered). Thus, on January 22, 2004, Mr. Herald sent a list of

questions to the Coast Guard to obtain that information. JX 57.1-.2. Mr. Schmitt responded the

following day, initially noting that the “questions [were] very similar in nature to those asked in

[the] RFI . . . .” JX 57.1. He indicated that many of the questions–those that concerned

“specifications/cut sheets”–could be answered by either examining the existing equipment that

would be relocated to the new building (in other words, by performing a field investigation) or by

requesting literature and data from Mr. Goodwin, and that another question could be answered by

reviewing sheet A102. Id.

Eventually, on February 3, 2004, one of Epic’s principals, Aaron C. Tempel, a

mechanical engineer, Tr. 480 (Tempel), sent an electronic-mail message to Mr. Goodwin

requesting “cut sheets/specifications” and other information regarding the government-furnished

equipment, but not information regarding the equipment’s operating times and durations. Id. at

845-46; JX 70. Mr. Goodwin responded, on February 20, 2004, with some of the requested

information, but noted that “[n]o cut sheets [were] available to [his] knowledge.” JX 70.1.

Based on this information, along with the information he had obtained from the contract

specifications and Mr. Herald, Mr. Tempel made some assumptions and prepared a preliminary

mechanical design that provided for two units, a 10-ton unit and a 5- or 7.5-ton unit. Tr. 516-20

(Tempel); accord id. at 650-52 (affirming that the preliminary mechanical drawings did not

reflect a 100% design).

In the meantime, on February 12, 2004, plaintiff provided the Coast Guard with a revised

project schedule. JX 71. In a February 23, 2004 letter, one of the three Coast Guard contracting

officers involved with this contract, Marion E. Hundley,10 advised plaintiff that the schedule was

9

Plaintiff also engaged Epic to design the building’s electrical, plumbing, and fire alarm

systems. JX 47; JX 126.1; see also Tr. 483 (Tempel) (reflecting that Epic does “all” of plaintiff’s

“mechanical, electrical, plumbing, and fire alarm design for just about every building [it does]

where there’s not already an engineer[] of record on board”). There is no evidence in the trial

record indicating that Mr. Herald contacted Mr. Goodwin or Lt. Mautte prior to providing Epic

with the information he obtained from the Coast Guard.

10

The contracting officer identified in the contract was Cathy Broussard. JX 1.26. In

December 2003, Ms. Broussard was promoted to be the chief of contracts at the FDCC LANT.

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“disapproved” for various reasons, including the fact that several items were missing. Id. Ms.

Hundley further noted that plaintiff had not yet submitted its 100% design despite indicating in

its original schedule that it would do so by January 13, 2004. Id. She requested that plaintiff

submit another revised schedule by March 4, 2004. Id.

Plaintiff sent its first set of design documents–architectural, HVAC, plumbing, electrical,

fire alarm, site, and structural drawings–to the Coast Guard on February 23, 2004, for review and

comment. JX 72; JX 701. On February 25, 2004, the Coast Guard’s project manager, Steven

Allen, discussed the submission–which the Coast Guard received the previous day–with

plaintiff’s new project manager, Luther Ramsey,11 over the telephone. JX 75.1. Later that day,

Mr. Allen followed up the telephone conversation with an electronic-mail message in which he

provided Mr. Ramsey with “a partial list of concerns about the design submittal.” JX 75. For

example, with respect to the HVAC drawings, Mr. Allen noted that plaintiff did not include any

calculations or supporting data for the HVAC system and that the HVAC floor plan was

“unusual” and “vastly incomplete.” JX 75.1; see also Tr. 529-30 (Tempel) (explaining that only

preliminary HVAC calculations could be performed in the absence of heat transference

information and that the floor plan “was as complete as it could possibly be based on the very

limited and inconclusive information that [Mr. Tempel and plaintiff] had received”). Mr. Allen

explained that the Coast Guard did not “feel that [the] submittal met the intent of the RFP

documents” and that as a result, it “consider[ed the] submittal incomplete.” JX 75.1; see also JX

77 (containing Mr. Schmitt’s statement that “the design was close to being finished”); Tr. 224

(Ramsey) (acknowledging that the design submittal was incomplete). He suggested that plaintiff

have its designers contact the relevant Coast Guard reviewers “to avoid [the Coast Guard] having

to reject another submittal.” JX 75.1; see also JX 79 (indicating that the Coast Guard reviewers

had not been contacted by plaintiff’s designers as of March 4, 2004); Tr. 843-44 (Tempel)

(indicating that Mr. Tempel did not contact Mr. Fedei until July 2004), 2790-91 (Fedei) (noting

that Mr. Fedei did not receive a telephone call in response to the Coast Guard’s suggestion to

plaintiff). Finally, Mr. Allen indicated that the Coast Guard was willing to assist plaintiff in

avoiding “potential schedule slippages” by allowing plaintiff to “submit the foundation/structural

Tr. 3088-89 (Broussard). As a result of the promotion, Ms. Broussard became Ms. Hundley’s

supervisor. Id. at 3094. A third contracting officer, Victoria W. Worrell, filled the position

vacated by Ms. Broussard. Id. Ms. Broussard remained involved in the Coast Guard’s contract

with plaintiff so that she could train the other contracting officers regarding Federal Supply

Schedule contracts. Id. at 3092-93.

11

Plaintiff fired its original project manager, Mr. Herald. JX 112.1; JX 113; Tr. 1385-86

(Combs). The evidence in the trial record reflects that Mr. Herald was responsible for some of

the early delays in the project. See, e.g., JX 103 (“The original [project manager] is who caused

the start-up of this project to fall on its face. . . . They are struggling under problems that their

original [project manager] caused.”); JX 112.1 (“K-CON’s first [project manager] mismanaged

the project and got it off on the wrong foot. . . . K-CON’s original [project manager], who was

fired for lack of performance, clearly mismanaged the project by [its] own admission.”).

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design in advance to allow that portion of the construction contract to proceed in advance of the

interior building design.” JX 75.2; accord JX 79 (reiterating, in a March 4, 2004 electronic-mail

message, the offer to allow plaintiff to “‘fast-track’ building foundation work”); JX 86.1

(reiterating, in a March 16, 2004 electronic-mail message, the offer to allow plaintiff to “‘fast-

track’ building foundation work”).

Mr. Ramsey prepared a new project schedule on February 29, 2004, and submitted it to

the Coast Guard. JX 532; Tr. 213, 215, 223 (Ramsey). Then, on March 3, 2004, Mr. Ramsey

traveled to Elizabeth City and viewed the equipment that the Coast Guard wanted installed in the

new building. Tr. 187, 191-93, 198-200 (Ramsey). He observed that “two of the units . . . were

still connected,” but that “[t]he rest were unconnected and pushed away in corners [with] no

evidence of how they were installed.” Id. at 191. He further found that much of the equipment

was “very old, very antiquated.” Id. at 187; accord id. at 192. He was advised by Mr. Goodwin,

who took him to view the equipment, id. at 210, that the Coast Guard did not have “any

catalog[s], cut sheets, or any kind of maintenance manuals” for the equipment, id. at 192; accord

id. at 210, 235, 264; see also id. at 271 (indicating that Mr. Ramsey did not recall whether he

asked Mr. Goodwin for the equipment’s operating schedules). Mr. Ramsey forwarded the

information that he gathered during his site visit to Epic. Id. at 210.

That same day, plaintiff sent a letter to the Coast Guard requesting an extension of the

contract completion date by 105 days–until September 30, 2004–explaining that its performance

had been delayed for several reasons, including:

• The [Coast Guard] contract[] requirements differ materially from the standard

GSA guidelines Design-Build requirements. In complying with your

engineering package we have discovered that full design is really what you are

requiring. This requires more time. Example: In design build we can

traditionally start some site and foundation work at the same time that final

building design calculations are being proofed. Currently we have to hire

surveyors[] and soil engineers to do pre-design work before the construction

design can be started, then designs cannot be completed until the building

structur[e] is designed. It is a case of having all the answers in hand before a

task can be viewed completed.

• Requests for information on owner furnished equipment have been

incomplete. We are currently scheduling a trip back to obtain this

information. This has caused mechanical and electrical design to be

incomplete.

JX 78.1. The Coast Guard responded to this letter the next day via electronic mail, JX 79, and

followed up with a letter on March 23, 2004, JX 91. In that letter, the Coast Guard indicated that

plaintiff’s request for additional time was not sufficiently justified. JX 91.1. The Coast Guard

also reiterated that the 100% design that plaintiff submitted on February 23, 2004, was

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incomplete, referring plaintiff to an enclosed list of comments, JX 91–the same comments that

the Coast Guard sent to plaintiff on February 25, 2004, compare JX 75.1 (comments of February

25, 2004), with JX 91.2 (comments of March 23, 2004).

Throughout March 2004, plaintiff and Epic continued to gather information from the

Coast Guard that they needed to design the building’s HVAC system. See, e.g., JX 90; JX 92;

JX 94. In addition, on March 18, 2004, Mr. Tempel calculated thermal loads for the hydraulic

test lab and determined that the room required a 7.5-ton unit. JX 89; Tr. 527 (Tempel); see also

Tr. 807-08 (Tempel) (noting that the calculations were “improper” and “erroneous” because Mr.

Tempel lacked the heat load information for the equipment to be placed in the hydraulic test lab).

At the end of the month, plaintiff issued subcontracts to the contractors who had provided

quotations and assisted in the design. JX 95. One of those contractors was Ward & Son, Inc.,

who had provided a quotation for the design and installation of the HVAC system. JX 109.1. In

an April 1, 2004 letter, Jack Ward of Ward & Son, Inc. expressed concern regarding the effects

that the delay in receiving the subcontract and the increased scope of work described in the

subcontract would have on Ward & Son, Inc.’s ability to perform at the price it quoted almost

seven months earlier. JX 109.1-.3; see also JX 142 (indicating, in a May 25, 2004 revised

quotation, that Ward & Son, Inc. could install the HVAC system for $74,405). Of particular

note, Mr. Ward advised:

I was told that your mechanical engineer would redraw and check over my design

and calculated loads. I was surprised when I received no new drawings and am

being asked to sign off on drawing[s] and loads that I gave you as part of your

subcontract [sic]. Does this mean that what I gave you is approved by your

[mechanical engineer]? Or am I going to get a surprise with radical changes in the

future? . . . In February, I spoke with Aaron Tempel, your project design

[mechanical engineer], and I got the feeling from him that because of the existing

water chiller that I may have over calculated the added cooling load when their

test equipment is operating. At that time we talked about the fact that [the HVAC

system for the hydraulic test lab] did not need to be a heat pump and could be a

cooling only system. Whatever became of these two subject[s] of conversation?

JX 109.2; cf. JX 511 (reflecting that plaintiff cancelled its subcontract with Ward & Son, Inc. on

July 27, 2005 due to the increased quotation).

Meanwhile, on March 31, 2004, plaintiff sent another letter to the Coast Guard to request

an extension of the contract completion date by 105 days. JX 98. It enumerated several reasons

for the delays it was encountering; in addition to the reasons set forth in its March 3, 2004 letter,

plaintiff contended that the delays were attributable to the following issues:

• Design required more site investigation than originally estimated. Initially K

Con, Inc tried to implement the design process with utilizing owner provided

information and/or through a series of RFI type emails. This proved to be

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unsatisfactory. Our design budget was based on this approach and was value

passed on to the owner in the bid price.

• Visiting and reviewing existing systems has not clarified, but to the contrary

has shown there exists inoperable equipment, undersized systems and in

general “not standard installations” that we may have to mimic.

• There was additional equipment not known at bid time that had to be reviewed

and questioned as to status.

JX 98.2. In a memorandum dated April 1, 2004, Mr. Allen recommended to the contracting

office that the contract completion date be extended by 105 days: forty-four days for the delay in

conducting the postaward kickoff meeting, thirty-five days related to steel shortages, and twenty-

six days to account for the additional time required to “coordinate/resolve [the] connection of

Government relocated equipment.” JX 102.

Also on March 31, 2004, Mr. Schmitt advised Mr. Allen via electronic mail that he

noticed that plaintiff’s initial architectural and structural drawings reflected a building that was

smaller than specified in the drawings included with the RFP; it was almost two feet shorter in

both length and width. JX 101.2; see also JX 1.14 (containing the relevant RFP drawing). Mr.

Allen forwarded Mr. Schmitt’s observations to Mr. Ramsey on April 1, 2004, who responded

that plaintiff’s design conformed with the contract specifications setting forth the building

dimensions and square footage. JX 101.1-.2; see also JX 1.53 (containing the relevant

specification section). That same day, in an internal Coast Guard electronic-mail message, Mr.

Schmitt wrote:

Our RFP drawings clearly indicate a building that is 76'-11" x 61'-11", with

structural frame dimensions (centerlines) of 75'-0" x 60'-0" (which is what I

intended by the dimensions listed in the specifications). This is a clear

discrepancy, but one that should have been brought to our attention. The

Contractor’s designers used our [computer-aided design d]rawings to develop

their drawings. In order for them to develop their drawings, they had to

consciously reduce the building 1'-11" in each direction. Since this was a

conscious effort on their part, they should have brought it to our attention. They

did not.

JX 101.1; accord Tr. 2714-18, 2772-75 (Schmitt).

On April 5, 2004, plaintiff sent a third letter to the Coast Guard requesting an extension

of the contract completion date. JX 106. In this letter, plaintiff requested an extension of 126

days: forty-five days for the delay in conducting the postaward kickoff meeting, sixty days

related to steel shortages, and twenty-one days to accommodate redesigning the building to add

approximately two feet to the building’s length and width. Id.; Tr. 249, 252-53 (Ramsey)

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(asserting that plaintiff’s request did not relate to the HVAC system or the hydraulic test lab); see

also Tr. 2722-24 (Schmitt) (acknowledging that changing the buildings’ dimensions would

require changing all of the drawings and the redoing the structural calculations). Four days later,

Mr. Allen submitted to the contracting office a “request for proposal” to extend the contract

completion date by 126 days: forty-five days for the delay in conducting the postaward kickoff

meeting, thirty-five days related to steel shortages, twenty-five days related to “[c]oordination

issues in Dec-Feb timeframe,” and twenty-one days to accommodate redesigning the building to

add approximately two feet to the building’s length and width. JX 530.4-.5. The parties

ultimately executed a bilateral contract modification, effective April 15, 2004, that extended the

contract completion date by 126 days to October 21, 2004, without indicating the reason or

reasons for the extension.12 JX 3.3-.4; accord Tr. 3176 (Broussard). By executing the

modification, plaintiff released the Coast Guard “from any and all liability under [the] contract

for further equitable adjustments attributable to such facts or circumstances giving rise to the

proposal for adjustment, including all claims for impacts, delays, and disruptions.” JX 3.4.

While plaintiff and the Coast Guard were negotiating the contract modification, Mr.

Tempel, on or around April 1, 2004, sent plaintiff preliminary mechanical drawings and a

document setting forth the information that he needed to finalize those drawings. JX 100; JX

703. The drawings reflected, as proposed previously, the use of a 10-ton unit to condition the

entire building and a 7.5-ton unit to provide supplemental conditioning for the hydraulic test lab.

JX 703.13; Tr. 533 (Tempel); accord id. at 809 (explaining that the April 1, 2004 design was

basically the same as the preliminary design, just more detailed). The requested information

included “component nameplate data” and “[c]omponent connection requirements” for various

pieces of government-furnished equipment, including the equipment to be placed in the hydraulic

test lab. JX 100.2. Mr. Tempel recognized that the nameplate data and connection requirements

would need to be obtained during a site visit. Id.

The Coast Guard received another 100% design submittal from plaintiff on April 5, 2004.

JX 113; JX 115.1. Four days later, before completing its review, the Coast Guard sent plaintiff

via electronic mail some “initial comments that need[ed] to be addressed sooner rather than later”

because some of the drawings did not conform to the contract specifications. JX 115.1. For

example, Mr. Fedei questioned whether the hydraulic test lab was receiving “excess cooling”

given the amount of heat being removed by the chilled water system. Id.; JX 119.53. In

addition, plaintiff did not provide any “HVAC calculations” with its submission. JX 115.1; see

also Tr. 2794-95 (Fedei) (indicating that there “was very little change” between this mechanical

design and the previously submitted design, and specifically noting that plaintiff had not made

any corrections or answered any of the Coast Guard’s concerns). And, the Coast Guard noted

that the ceiling clearances in the hydraulic test lab would not accommodate the ducts proposed by

plaintiff. JX 115.1; JX 119.53.

12

According to Mr. Ramsey, who negotiated the contract modification on plaintiff’s

behalf, the modification did not include an extension of time related to the HVAC system design

issues. Tr. 471 (Ramsey).

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Shortly thereafter, on April 13, 2004, the Coast Guard provided plaintiff with a complete

set of marked-up drawings. JX 119. The Coast Guard’s reviewers placed their names and

telephone numbers on the drawings that they reviewed. JX 119.21, .32, .39, .51. The mechanical

drawings, which were prepared by Epic, were marked up by Mr. Fedei. JX 119.51-.55; Tr. 827

(Tempel), 2797-98 (Fedei). In the letter accompanying the marked-up drawings, Ms. Hundley

noted that the “comments [did] not constitute a change to [the] contract.” JX 119.1. She further

requested that plaintiff submit a revised project schedule reflecting the newly extended contract

completion date. Id. That same date, Mr. Ramsey forwarded the Coast Guard’s initial comments

to plaintiff’s designers, including Mr. Tempel. JX 120.1. Then, on April 19, 2004, Mr. Ramsey

provided Mr. Tempel with Mr. Fedei’s contact information. JX 125.1. Mr. Tempel did not

immediately contact Mr. Fedei. See Tr. 843-44 (Tempel) (indicating that Mr. Tempel did not

contact Mr. Fedei until July 2004), 2822 (Fedei) (same).

After additional prompting, JX 133.1, plaintiff sent the Coast Guard a revised project

schedule on May 5, 2004, JX 135; JX 136. The Coast Guard deemed the schedule to be

incomplete, and relayed this fact to plaintiff during a May 6, 2004 telephone conference. JX

133.1; JX 139. After the conference call, another of the three contracting officers involved with

this contract, Cathy Broussard, sent plaintiff a letter warning that plaintiff’s “failure to submit a

proper progress schedule and failure to perform any work on site was endangering the

performance of [the] contract,” and that plaintiff had ten days in which to cure the deficiencies.

JX 139. Plaintiff responded to the cure letter on May 16, 2004, describing its progress in various

aspects of the project. JX 141. It explained that it was “refining [its] construction schedule with

suppliers and subcontractors” and would submit the schedule on May 20, 2004. JX 141.2; see

also JX 751 (containing a project schedule prepared by plaintiff on May 19, 2004, that projected

that the design would be complete by June 23, 2004, and that all work would be complete by

October 21, 2004). It further indicated that it had completed the layout of the building and was

“coordinating” with the Coast Guard regarding the “the location of existing utilities.” JX 141.2.

In addition, plaintiff asserted that it planned “to start site work and installation of the building

pad” on May 18, 2004, and that, “[o]nce the [f]oundation design [was] revised and approved,” it

was prepared to install the foundation. Id. But see Jt. Stip. ¶ 36 (reflecting that plaintiff did not

install the building pad until August 19, 2004). Finally, it stated that it was “inspecting the

existing equipment to be relocated . . . and . . . holding on site discussions with the base

personnel to evaluate the impact of the[] planned move[].” JX 141.2.

On June 2, 2004, Mr. Tempel sent an electronic-mail message to Mr. Ramsey and Mr.

Schmitt requesting additional information to complete the HVAC system design in light of the

Coast Guard’s April 9, 2004 initial comments. JX 144.1; see also Tr. 837-39 (Tempel)

(explaining that he discussed the Coast Guard’s comments with plaintiff before sending the

electronic-mail message). In particular, Mr. Tempel requested “detailed cut sheets” of the

equipment that would be placed in the hydraulic test lab so that he could “determine the

equipment’s temperature tolerances and the actual heat gain to the space.” JX 144.1. He noted

that once he obtained this information, he could “address the ductwork sizes and location[s],”

and in the absence of such information, he made certain assumptions regarding the government-

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furnished equipment. Id. Among Mr. Tempel’s assumptions were that “[o]nly one piece of

equipment [would] operate at one time,” that the 75-horsepower motor would produce a

specified amount of heat, and that “[t]he chilled water system [would] compensate for” some of

the heat generated by the equipment. Id. Mr. Schmitt responded to Mr. Tempel on June 7, 2004,

by forwarding a copy of the electronic-mail message that had been sent to Mr. Herald in response

to similar questions several months earlier. JX 147.1; see also JX 57 (containing the forwarded

electronic-mail message, which was dated January 23, 2004); JX 70.1 (reflecting that Mr.

Tempel had already been advised, on February 20, 2004, that no cut sheets were available for the

government-furnished equipment); Tr. 192 (Ramsey) (reflecting that Mr. Ramsey had already

been advised, on March 3, 2004, that no cut sheets were available for the government-furnished

equipment).

In the meantime, on June 3, 2004, Mr. Tempel sent revised drawings to Mr. Ramsey, but

noted that further revisions might be necessary if his assumptions regarding the hydraulic test lab

equipment were incorrect. JX 145; JX 704; JX 705; see also Tr. 540-41 (Tempel) (indicating

that there were no “significant changes” between the revised mechanical drawings and those Mr.

Tempel prepared on April 1, 2004). The following day, plaintiff resubmitted its 100% design

drawings–including architectural, HVAC, plumbing, electrical, fire alarm, site, and structural

drawings–to the Coast Guard. JX 146. The Coast Guard received the drawings on June 7, 2004.

Id.; JX 148.1. Mr. Fedei reviewed the mechanical drawings and expressed his concerns to Mr.

Schmitt and Mr. Allen regarding (1) some of the assumptions made by Mr. Tempel and (2) the

evidence suggesting that a site visit to assess the existing equipment was not conducted. JX

150.1. In particular, Mr. Fedei indicated that Mr. Tempel incorrectly assumed that the 75-

horsepower motor was operating at full capacity and efficiency for long periods of time, and that

the chilled water system compensated for some of the heat generated by the motor. Id.; Tr. 3037-

38 (Fedei).

As reflected in internal electronic-mail messages sent on June 9, 2004, the Coast Guard

determined that plaintiff’s most recent 100% design submittal was deficient and, therefore,

unreviewable. JX 151; JX 152. The drawings were not easily readable, JX 148.1, plaintiff did

not submit a foundation plan or foundation calculations, JX 151, and there were a number of

issues with the HVAC system design, JX 152.1. With respect to the latter problem, Mr. Fedei

noted:

From a mechanical standpoint it would appear that the HVAC treatment is

deficient, as can be discerned from my e-mail of yesterday, but without

calculations it is unsure of the extent. The calculations were apparently not

officially required by the spec[ifications]. The area of greatest concern is the

Hydraulic test room, which, after looking at the engineer’s provided assumptions,

I feel may be significantly mistreated. In addition, none of my previous comments

were addressed at this submittal. With the exception of [three items,] there was

little, if anything, done to any other mechanical sheets since the last submittal.

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Id. The Coast Guard advised plaintiff via electronic mail that it needed “readable prints and a

correct foundation plan.” JX 151.

Plaintiff submitted another set of 100% design drawings to the Coast Guard on June 10,

2004, consisting of the previously omitted foundation plan and more legible copies of the other

drawings. JX 156. Mr. Schmitt instructed the Coast Guard reviewers to ascertain whether the

drawings were sufficiently complete to allow for a review and, if so, to review the drawings for

“‘compliance with’” the RFP. Id. Mr. Schmitt collected the reviewers’ comments and forwarded

them to Mr. Allen. JX 157. He advised:

The mechanical design has some significant comments that will require resolution

and at least one maybe two more resubmittals will be required before the

documents are useable for construction. Please recommend in your letter of

transmittal that K-CON’s mechanical engineers contact John Fedei via telephone

before they proceed to correct their design.

Id.

The Coast Guard forwarded its comments and a set of marked-up drawings to plaintiff on

June 18, 2004. JX 158. With respect to the mechanical design, the comments mirrored those

made by Mr. Fedei in his internal communications–that some of the assumptions that formed the

basis of the design might not be correct, that it appeared that the designers did not conduct the

recommended site visit, that the HVAC treatment was deficient, and that the hydraulic test lab

appeared to be mistreated. JX 158.4-.5. In the letter accompanying the comments, Ms. Hundley

heeded Mr. Schmitt’s recommendation and informed plaintiff: “The mechanical design has

some significant comments that will require resolution. Re-submittal of the mechanical design

will be required before the documents are useable for construction. Please ensure your

mechanical engineer contacts [Mr. Fedei] before re-submitting the mechanical design.” JX

158.1. Ms. Hundley also advised plaintiff that it could “proceed with the metal building and

foundation construction” and then “[i]ncorporat[e] and correct[] the architectural, mechanical,

and electrical drawings . . . while foundation construction is occurring.” Id.; see also JX 164

(clarifying, in a June 23, 2004 electronic-mail message, the June 18, 2004 letter to reflect that

plaintiff could proceed with construction unless it took exception to the review comments and

that the foundation drawings were required to “be sealed and signed by the designer of record”);

cf. Tr. 221-22 (Ramsey) (explaining that “[n]one of the items beyond the mechanical rough-in

could be installed until [plaintiff] had a mechanical design” and that the electrical, plumbing, and

fire alarm systems could not be completed until the mechanical system was designed), 489-92

(Tempel) (remarking that the mechanical system has to be designed before the electrical system,

and that the mechanical design could affect the architectural and structural designs). Plaintiff

forwarded the Coast Guard’s letter and comments to Epic on June 21, 2004. JX 159; see also JX

159.8-.13 (containing Mr. Tempel’s notes regarding the Coast Guard’s comments).

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Work on the job site began on June 29, 2004, when plaintiff’s site work subcontractor

laid out the building and began excavation. JX 4.36; JX 168.1; see also JX 169 (reflecting that

the work had commenced before the submission of signed and sealed foundation drawings and

that therefore, the work was being done at plaintiff’s own risk). In typical metal building

construction projects, once excavation is completed, the foundation and slab are poured, the

building’s structural steel is erected, and the wall and roof panels are installed. JX 532; Tr. 967-

69 (Parker), 1274-75 (Combs), 2436-37 (Schmitt). Then, the windows and doors are installed (or

the openings covered) to make the building weather-tight. Tr. 223 (Ramsey), 968-70 (Parker).

At this point, contractors can begin work on the interior of the building. Tr. 967-70 (Parker);

accord JX 532; Tr. 223 (Ramsey). Generally, the HVAC system is installed first due to the large

size of the equipment and the ductwork. Tr. 492 (Tempel), 968-69 (Parker). After the

mechanical, electrical, plumbing, and fire alarm systems are roughed in, the walls can be

completed. JX 532; Tr. 1658-59 (Combs). The ceilings are completed after the aforementioned

systems are fully installed. JX 532; accord Tr. 968-69 (Parker). Finally, when the interior is

complete, the contractor demobilizes. JX 532.

Plaintiff “submitted sealed structural foundation drawings to the Coast Guard” on July 6,

2004. Jt. Stip. ¶ 34. On July 12, 2004, the Coast Guard accepted those drawings and allowed

plaintiff to “proceed with construction.” JX 175.

One day later, plaintiff submitted an RFI to the Coast Guard based on correspondence

from Mr. Tempel. JX 179. Mr. Tempel had written:

I have spoken with the Coast Guard’s mechanical engineer John Fedei to

discuss dealing with the heat loads generated from the hydraulic test equipment.

Based on this conversation there are two options that are acceptable to the Coast

Guard:

1. Exhaust the air utilizing hoods and fans to remove heat, and provide a

conditioning unit to condition the make up air. This option could

potentially cost a considerable amount more to install and to operate. It is

also out of your original scope of work.

2. Provide an air conditioning system that is approximately 30% larger

than the one serving the existing equipment layout. This system must also

be sized to account for any differences in the new vers[u]s existing

building envelope. This will only partially condition the space, but will

satisfy Mr. Fedei.

During conversations while conducting the research it has been brought to

my attention that the hydraulic test equipment generates a considerable amount of

mist within the room. This hydraulic mist may be both an environmental and an

explosive hazard and may require special design conditions for both the

-22-

mechanical and electrical systems. It is imperative that this issue be resolved

prior to completing the design of the mechanical system, and may require

revisions to the electrical system as well.

JX 178.2; JX 179.3; see also Tr. 545-46 (Tempel) (noting that the first option was a different

system that would require different equipment and that the second option was what had already

been designed). In light of Mr. Tempel’s comments, plaintiff requested, in its RFI, direction on

how to deal with the potentially hazardous conditions in its design. JX 179.2. Further, in the

electronic-mail message containing the RFI, plaintiff noted that “[t]he expanding HVAC

requirements [were] impacting [its] design and construction budgets.” JX 179.1. It therefore

requested a contract modification once the Coast Guard “decided which issues it wishe[d] to

address and which to ignore.” Id.

Upon reviewing the RFI, Mr. Fedei took exception to Mr. Tempel’s letter, writing the

following in a July 13, 2004 electronic-mail message to Mr. Allen:

First, [the relevant contract specification] indicates that K-CON is to provide

HVAC to the facilities, and while it indicates the types of equipment that the user

would like to see being used, [it] does not in any manner dictate how the spaces

are to be treated. It states that HVAC is to be provided in accordance with

[specified] mechanical codes. [Mr. Tempel’s telephone call] yesterday was

predicated on his requesting assistance in trying to resolve how to specifically

treat the Hydraulic Test room (since he did not do a site visit). We discussed what

knowledge he had of the equipment, how he calculated his loads, and some of the

possibilities of obtaining a reasonable treatment of the spaces since he had no real

feel for any heat output, etc. of the existing hydraulic equipment, etc. . . . At no

time did I ever indicate that [the two options in his letter] were the only options

acceptable . . . . I was trying to help him resolve a situation which he was not

prepared to handle, but was not directing how it was to be done. The [relevant

contract specification] clearly gives him the latitude to do it [with] other means, as

long as it meets [the specified industry] standards.

JX 180. Ultimately, a conference call was scheduled for July 20, 2004, for plaintiff and the

Coast Guard to discuss the RFI. JX 181.2; JX 183.

The conference call occurred as scheduled, after which plaintiff sent an electronic-mail

message to the Coast Guard containing its summary of the participants’ discussion. JX 186. It

described the conversation regarding the heat load of the hydraulic test equipment as follows:

During our phone conference we discussed the design of the HVAC

system for room 106. It is known our current and originally proposed and

budgeted design will not work efficiently within this room. Additional

calculations were conducted on room 106 due to the amount of heat generated by

-23-

the 75hp motor and 25hp motor. After conducting those calculations our

mechanical engineering group submitted two options that may be acceptable to

the Coast Guard. As it was discussed both of those options are not inclusive of

K-Con’s original budgeted design nor our proposal based on the RFP documents

received by the [Coast Guard]. It was discussed that K-Con needs an accurate

operating schedule to correctly design the HVAC tonnage for room 106. We were

told a more accurate schedule would be provided by Monday the 26th of next

week. Once this information is received we will reevaluate the design and submit

for final approval and/or a cost or no cost [change order].

We also discussed the amount of hydraulic fluid that is being improperly

released from the existing equipment and creating a fine mist that is currently

choking the existing HVAC system. This information was provided to our

mechanical engineer by on site personnel/operators. K-Con is requesting that the

existing test equipment is repaired prior to the install of the new equipment or a

letter is received from contracting releasing K-Con and the HVAC manufacturer

from any warranty claims to the hydraulic mist within room 106.

Id.; see also JX 178.2 (containing Mr. Tempel’s handwritten note that the Coast Guard advised

plaintiff during the conference call that it would not be required to make any adjustments related

to the hydraulic mist); JX 188 (containing another participant’s notes regarding the size of the

HVAC system). But see JX 44.1-.2 (reflecting that the Coast Guard advised plaintiff on January

7, 2004, to contact the AR&SC to obtain the government-furnished equipment’s normal

operating parameters). Plaintiff also noted in its electronic-mail message that it had sent its

100% design package to the Coast Guard earlier that day. JX 186; accord JX 191 (indicating that

plaintiff sent the Coast Guard civil, architectural, structural, electrical, HVAC, plumbing, and fire

alarm drawings, along with a fire sprinkler layout and plans for the prefabricated metal building);

see also Tr. 869-70, 872 (Tempel) (indicating that the mechanical design was essentially the

same as the prior mechanical designs), 872-75 (representing that at this point in time, Mr.

Tempel did not believe that obtaining the operating schedule of the equipment to be placed in the

hydraulic test lab would affect the design because (1) the Coast Guard had expressed its

willingness to accept a heat pump and air handler unit that was 30% or 50% larger than the

existing unit, and (2) everyone “understood that the conditions in the RFP couldn’t be met”).

After the conference call, Mr. Schmitt gathered the information related to the operating

schedule of the equipment in the hydraulic test lab from Mr. Goodwin at the AR&SC. JX 189;

JX 202. Mr. Schmitt explained to Mr. Goodwin that plaintiff “[had] been making some wrong

assumptions and gathered some erroneous (we think) information regarding the hydraulic test lab

equipment operating times.” JX 189.1. Mr. Goodwin provided the requested information two

days later.13 JX 202.1-.2. In addition to noting the equipment’s operating frequency and

13

Upon receiving the collected information, Mr. Schmitt remarked to Mr. Goodwin:

“[I]t looks as though we will be having a problem trying to cool this room with reasonably sized

-24-

duration, Mr. Goodwin indicated that “[t]he HTS-25 [sic] and the HPTS-1000 run at the same

time, about twice a month, @ a 2 hour duration.” JX 202.2.

The Coast Guard also reviewed plaintiff’s most recent 100% design package–received on

July 14 and July 21, 2004–and prepared a list of comments. JX 205.2-.5. Relevant to the

hydraulic test lab’s HVAC system, it noted:

• “Basically a repeat of the same concern that the HVAC coverage of the

Hydraulic test lab needs to be re-assessed to determine more accurate heat

dissipation loads and means of efficiently treating the area of concern.”

• “Need a return line to AHU-2 from the hydraulic test room. Due to heat, and

possibly some slight odor build up in the room, would also recommend that

the test room be under a slight negative pressure to help maintain comfort

odors in the surrounding areas.”

• “Any hydraulic misting occurring within the test room is a result of equipment

problems (leaking hose or fittings, etc.) which is a maintenance problem that

[the AR&SC] needs to address. It is not an item of concern for the designer as

it is not a normal condition that should be occurring during the test

operations.”

JX 205.3. The Coast Guard forwarded its comments to plaintiff on July 23, 2004. JX 205.1. In

the letter accompanying the comments, the third contracting officer involved with the contract,

Victoria W. Worrell, noted that the Coast Guard had completed its review of plaintiff’s 100%

design “with the exception of the HVAC system.” Id. She further stated:

The HVAC system has some outstanding issues related to the hydraulic

test lab that require resolution, and re-submittal of the mechanical design will be

required before the documents are useable for construction. We feel that the

resolution of these issues is ultimately K-CON’s responsibility, but we want to

assist in every way we can to resolve the “real” design requirements. Therefore,

our mechanical reviewer, Mr. John Fedei, has contacted the building user to

request information regarding the operating parameters of the various pieces of

test equipment. We expect that a meeting at the site or, at the very minimum, a

conference call will be required to resolve these issues.

Id.; see also Tr. 2829 (Fedei) (remarking, with respect to the importance of a site visit, that “[i]t

would have been beneficial for [everyone] to take a look at the equipment and discuss the

equipment.” JX 202.1. However, Mr. Fedei disagreed, testifying during trial that he could

design an HVAC system for the hydraulic test lab that used reasonable sized equipment. Tr.

3045-46 (Fedei).

-25-

parameters . . . and work out [the] differences or . . . come up with a consensus [regarding] a

pragmatic approach to the design of this project” and that it “would have given [Mr. Tempel] an

opportunity to see the equipment firsthand . . . so he could see why his assumption was

incorrect”). Then, after emphasizing that the Coast Guard’s comments were not to be considered

changes to the contract, Ms. Worrell indicated that once plaintiff had incorporated the Coast

Guard’s comments and submitted its final design, it could “proceed with all work other than that

related to the HVAC system,” and that once the design requirements of the HVAC system were

resolved, the mechanical drawings could be incorporated into the final design. JX 205.1; accord

Tr. 2738-40 (Schmitt) (indicating that plaintiff was permitted to do everything but install the

HVAC system and that if there were any problems as a result allowing plaintiff to proceed in this

manner, the Coast Guard would bear responsibility); see also Tr. 1320 (Combs) (noting that

“things related to the HVAC system could be electrical, . . . architectural, [or] structural even”).

On July 28, 2004, Mr. Schmitt forwarded the information that he received from Mr.

Goodwin regarding the operating schedule of the equipment in the hydraulic test lab to plaintiff’s

new project manager, Butch Clayton.14 JX 212. The following day, Mr. Clayton forwarded the

information to Mr. Tempel, JX 260.1, and plaintiff and the Coast Guard agreed to conduct a

conference call–to also include Mr. Tempel–on July 30, 2004, to discuss the HVAC system

design, JX 212.1. The conference call was apparently rescheduled for August 2, 2004, JX 217.3,

but on that date, Mr. Allen advised plaintiff that the Coast Guard would “need to defer [the]

phone call . . . until another date, perhaps after the proposed mod[ification] is forwarded,” JX

217.2. The proposed modification referenced by Mr. Allen related to the Coast Guard’s decision

to “‘build-out’ as much of the undeveloped space in the new [building] as [it could] within” its

budget. JX 153.1. Indeed, on August 3, 2004, the Coast Guard requested that plaintiff

“[p]rovide design and construction documents to expand building first floor build-out, add on

elevator and add rooms on second floor . . . .” JX 219.1; accord JX 220; see also Tr. 2632

(Schmitt) (characterizing the proposed modification as requiring “considerable interior work”

that included “HVAC work”). Plaintiff submitted its proposal to the Coast Guard on September

8, 2004. JX 244.2. The Coast Guard decided not to accept it, JX 244; JX 245; JX 246, and so

informed plaintiff by telephone on September 9, 2004, JX 248. After the telephone call,

plaintiff’s president, Patrick Kiernan, sent an electronic-mail message to the Coast Guard

reflecting plaintiff’s ongoing frustration:

I may add (as I have verbally and in writing previously), we have 50 or so projects

going nationwide. Most of our projects are running quite smoothly with a

partnership mentality among government-customer, K-Con and sub/suppliers.

When a customer in that scenario asks for an RFP, the design/builder (and/or

sub/suppliers) doesn’t have to spend extra hours and days making sure they cover

or exclude in writing all the ‘snares’. Unfortunately, our short relationship with

[the Coast Guard] involving [projects in Elizabeth City, St. Petersburg, Florida,

and Port Huron, Michigan] has proven to be not only painful, but a far cry from

14

Mr. Clayton replaced Mr. Ramsey on July 21, 2004. Tr. 268, 272, 431 (Ramsey).

-26-

profitable. Since we and our sub/suppliers are “for profit” organizations in a free

enterprise system, this relationship has been less than “win-win”, therefore, a

failure to date.

Id.; accord JX 93.1 (containing the following March 18, 2004 meeting agenda note by Mr. Allen:

“Apparently, level of design greater than KCon ‘used to’”); JX 315.1 (including the following

complaint from Mr. Clayton in an October 13, 2004 electronic-mail message: “[W]e are trying

to work with you but the email below is an excellent example of a government caused delay. If

[the Coast Guard] would stop causing these types of delays and allow this project to be built as

originally proposed ‘Design/Build’ the process would be much smoother. You reference

spec[ification] sections within your contract that are clearly pertaining to a bid/spec/build project

and not a design build project.”); Tr. 1271-72 (Combs) (stating that plaintiff’s experience with

contracting with the federal government has been “greatly successful,” that plaintiff has had “just

great relationships all over the country,” and that plaintiff had only been assessed liquidated

damages on four projects–the three Coast Guard projects and a project for the United States

Navy); see also JX 369.1 (containing a November 30, 2004 remark from plaintiff that “[t]his is

once again evidence of the [Coast Guard’s] unjust[] tactics to only enrich themselves at the cost

of others”); JX 374 (containing an electronic-mail exchange between plaintiff and the Coast

Guard from November and December 2004 reflecting plaintiff’s displeasure with how it was

being treated by the Coast Guard and the Coast Guard’s dissatisfaction with plaintiff’s

performance).

Meanwhile, plaintiff “installed the main floor concrete slab . . . on August 19, 2004,” Jt.

Stip. ¶ 36, and began to erect the building’s steel structure on August 24, 2004, JX 4.92; JX 742.

A bilateral contract modification, effective September 9, 2004, increased the contract price, for

the final time, to $551,155.35. JX 3.7-.8.

As of September 10, 2004, the issues with the hydraulic test lab’s HVAC system had not

been resolved.15 JX 253.1. As a result, Mr. Schmitt advised Mr. Allen that the Coast Guard

15

Most of the evidence in the trial record suggests that the delay related to the proposed

contract modification. For example, in a September 10, 2004 electronic-mail message, Mr.

Schmitt speculated that plaintiff was “waiting to see what happened with the build-out

mod[ification] before [it] attempted to finish the design.” JX 253.1. In another electronic-mail

message on that same date, Mr. Fedei noted that the proposed contract modification would

include funding for a field visit by plaintiff’s mechanical engineer, and that “[a]pparently

everyone [had] been waiting to see what was going to transpire with that proposal.” Id. And,

Eric Combs, plaintiff’s chief operating officer, testified that the proposed contract modification

would have affected many of the drawings and that it would not be a good idea to continue

certain work when the customer “was asking you to price in another whole direction.” Tr. 1322-

23 (Combs). However, Mr. Fedei testified that while the proposed contract modification might

have affected the drawings, the HVAC system for the hydraulic test lab “was a stand-alone

system and could have been corrected or looked at further at this stage without stopping the

-27-

needed to “arrange a conference call” to consult with plaintiff regarding the operating schedule of

the hydraulic test equipment and how to best condition the hydraulic test lab because without this

information, plaintiff could not “finalize” its design. Id. Subsequently, in a September 13, 2004

electronic-mail message regarding setting up the conference call, Mr. Clayton included a

comment regarding the HVAC system: “The amount of tonnage currently designed is based on

the [request for quotations]. Any additional tonnage or change in design . . . may result in

additional cost and time which will require [a request for quotations] from contracting.” JX

259.1. Later that same day, Mr. Clayton sent an electronic-mail message to Mr. Tempel

requesting that Mr. Tempel review the equipment operating information previously supplied by

the Coast Guard on July 28, 2004, verify his design, and provide “confirming loads” by the end

of the week. JX 260.1.

Also on September 13, 2004, plaintiff sent the Coast Guard another set of 100% design

drawings, JX 255, which the Coast Guard received on September 16, 2004, JX 268.1. Coast

Guard personnel exchanged several electronic-mail messages regarding these drawings. JX 268;

JX 271. Mr. Schmitt noted that “from an HVAC standpoint, the documents [did] not address[]

previous concerns and comments.” JX 268.1; see also Tr. 883-84 (Tempel) (indicating that Mr.

Tempel had not provided plaintiff with new drawings for this submittal). And, Mr. Fedei wrote:

The Mechanical 100% submittal is REJECTED. I know that there are questions

concerning the HVAC loading in the hydraulic room for which we are waiting the

calculations . . . to help address our concerns, but none of the other issues that

have been addressed in past reviews have been addressed on the 100% drawings

to date. I am not accepting any of the mechanical[] drawing efforts at this point.

There are potential code violations, and notes of none [sic] responsibility, proper

damper locations, etc. that need to be addressed.

JX 271.2.

Mr. Tempel responded to Mr. Clayton’s request on September 20, 2004. JX 276. In his

letter, he described his previous conversation with Mr. Fedei and the two options that were

purportedly acceptable to the Coast Guard: (1) “exhausting the air utilizing hoods and fans” and

(2) “[p]rovid[ing] an air conditioning system that [was] approximately 30% larger than the one

serving the existing equipment layout.” JX 276.2. Mr. Tempel then wrote:

We have been instructed to design utilizing the parameters defined by the

scope of work, which require us to design around split system heat pumps. The

current design meets these parameters and complies with design option 2. The

design process.” Id. at 3048-49 (Fedei); see also id. at 3131 (Broussard) (testifying that an RFP

“does not stop work . . . on the contract . . . because nobody at the time this RFP is issued knows

whether or not we’re actually going to do something”).

-28-

unit capacity we specified is actually 50% larger than the one serving the existing

equipment layout, which coincides with a commercially available unit size.

I have recalculated the air conditioning loads to incorporate the most

recent comments . . . .

....

There is still a question regarding the operating schedule. Please verify

that only one piece of equipment operates at a time, never two or more.16

The worst-case design heat load remains equipment HS-25 with the 75

horsepower electric motor.17 It does not appear that the space can be sub-cooled

enough to account for the heat generated by this piece of equipment. We are

aware that a 5-ton cooling capacity unit services the existing hydraulic test room,

and there are no serious operational problems. However, the building occupant

complained that during operation the area gets hot. Installing a 7.5-ton unit will

provide more conditioning to the new space than is presently installed in the

existing space, but will not satisfy the calculated heat load generated by the

equipment. Our calculations indicate that a 20-ton unit would be needed to fully

condition the space. However, as a practical matter we feel that a 7.5-ton unit will

be acceptable since it provides 50% more cooling capacity than the existing

facility has and since the building envelope’s heat gain is insignificant. This 7.5-

ton unit will not provide comfort conditioning when the equipment operates, but

maintaining comfortable conditions in the space may not be the best practical

solution.

JX 276.2-.3 (footnotes added); see also Tr. 554-55, 557-58 (Tempel) (explaining that the

calculations supporting the use of a 20-ton unit were based on (1) the worst-case scenario for the

amount of heat that would be rejected into the room by the 75-horsepower motor and (2) the

assumption that the chiller would not “compensate for any of the heat that was rejected”), 2839-

40 (Fedei) (remarking that providing a 7.5-ton unit where a 20-ton unit is needed to adequately

condition the space would result in “sky high” temperatures and “a lot of heat stress on the

16

The basis for this request is unclear; in the information that Mr. Clayton forwarded to

Mr. Tempel, the Coast Guard indicated that two pieces of equipment–the HPTS-1000 and the

HS-25–were operated simultaneously, twice per month for two hours at a time. JX 276.5; see

also Tr. 887 (Tempel) (indicating that Mr. Tempel was unsure why he made this request after

receiving the information).

17

The Coast Guard indicated that this piece of equipment was operated “5 hours a day,

two consecutive days, twice a month.” JX 275.5.

-29-

personnel working in” the space), 3077 (stating that it was incorrect to use the tonnage of the unit

in the existing hydraulic test lab as a baseline because there was no way to know whether the

existing unit was properly sized when it was installed). Plaintiff forwarded Mr. Tempel’s

calculations to the Coast Guard the following day. JX 277.

Coast Guard personnel reviewed the information and calculations provided by Mr.

Tempel to determine how to proceed with respect to the HVAC system for the hydraulic test lab.

JX 282.1; JX 289; JX 292. Mr. Fedei provided his recommendation to his colleagues in an

attachment to a September 27, 2004 electronic-mail message:

The recommendation . . . would be to install two 5-ton units with one unit to

handle the initial loading and the second to come on as needed to supplement. It

is also recommended that, since this is still much less cooling than calculations

show is needed and that the equipment is essentially cooled by their own chilled

water system, the distribution of the air should be concentrated in the areas of

operator needs (center of the test lab) and be dissipated via high velocity down

throw or slot diffusers to provide, in effect, evaporative cooling for the operators.

[In essence a spot cooling system utilizing conditioned, in lieu of non-

conditioned, air.] Return/exhaust should be from over the backside of the

equipment. Pre-cooling could still help most scenarios and can be determined by

the users as to when best utilized.

JX 289.3 (brackets in original). In response to Mr. Fedei’s message, Mr. Schmitt asked whether

making such a recommendation would constitute taking responsibility for the design and whether

the Coast Guard would be responsible for paying for the second unit. JX 289.1. He further

commented: “I would, as I am sure you would, love for us to put this issue to rest, and maybe the

best way to do that is to ‘tell them’ what we will accept (want).” Id. Then, in a September 28,

2004 electronic-mail message, Mr. Schmitt suggested to Mr. Fedei that the Coast Guard allow

plaintiff the option to install a 7.5 ton unit. JX 292.

In the meantime, on September 20, 2004, plaintiff sent an updated project schedule to the

Coast Guard indicating a completion date of December 8, 2004, forty-three days beyond the then-

contract completion date of October 26, 2004. JX 272.1, .6. Ms. Broussard noted the

discrepancy in a September 22, 2004 letter, but stated that it was in the Coast Guard’s best

interest to forbear from terminating the contract for default. JX 280. She further advised

plaintiff that the Coast Guard intended to “assess[] liquidated damages in the amount of $551.00

per day, for every day beyond October 26, 2004 until all work is complete and beneficial

occupancy has occurred.” Id.

On September 30, 2004, the Coast Guard sent plaintiff its review comments on the 100%

design submittal it received on September 16, 2004. JX 295. In the letter accompanying the

comments, Ms. Hundley wrote:

-30-

We do not find the proposed mechanical system for the Test Lab

acceptable. Attached is a recommendation of how to provide proper space

conditioning in the Hydraulic Lab.18 In addition, attached are our previous and

new review comments, plus marked-up drawings. Please return the review

comments by noting action taken on the comments. Please resubmit a corrected

design.

We do not consider the review comments to constitute a change to our

contract.

JX 295.3 (footnote added). In the attached document, the Coast Guard noted that “[a]fter many

discussions and submittals concerning the subject lab, its operations, and equipment heat loads,

there [was] still an impasse as to a reasonable, effective, energy efficient way of treating the lab.”

JX 295.4. It therefore provided:

In an effort to preclude any further delays and to provide an effective, energy

conscious system for the laboratory and its occupants[, the Coast Guard] requests

the following design efforts and installation be accomplished:

• Provide an exhaust system routed from the top of the motor directly to the

weather enshrouding the area above the motor as effectively as possible. In

addition, provide a matching unconditioned supply system routed directly

from the weather to the vicinity of the bottom of the motor. Provide

motorized dampers to secure the ventilation systems when this piece of

equipment is not being utilized with a disconnect switch labeled and mounted

near the controls of this equipment.

• Provide either two split system heat pumps (initial estimate to be 5 ton units

each) or a 7.5 ton split system to condition the lab, allowing for approximately

20% radiation and inefficiency in the ventilation system around the motor. If

two units are used they shall be staged so that the second heat pump comes on

only when the first unit is unable to satisfy the loads.

18

Although Ms. Hundley characterized the contents of the attached document as a

“recommendation,” JX 295.3, the Coast Guard, in the attached document, provided that it was

“request[ing]” that plaintiff “accomplish[]” the specified “design efforts and installation,” JX

295.4. During trial, there was conflicting testimony regarding whether the Coast Guard

presented plaintiff with a recommendation or a directive. Compare Tr. 3160, 3162 (Broussard)

(indicating that the Coast Guard made a recommendation), with id. at 959 (Tempel) (indicating

that Mr. Tempel considered the Coast Guard’s proposal to be a “requirement” or “direction”

rather than a “recommendation”), and id. at 1329 (Combs) (“It looks like they’re laying out some

directives . . . for treating the hydraulic lab design. . . . [T]hey were telling us how to design the

HVAC system.”).

-31-

• Air distribution is to be provided in the middle core of the lab where the

occupants are expected to be working during operations. The distribution

shall be installed utilizing fairly high velocity diffusers (such as slot diffusers

or registers) that will concentrate the throw down in the vicinity of the workers

(not on the equipment per se) with the return ducts over the backside of the

equipment so as to draw the warmer air away from the occupants and back to

the coil(s).

• Controls shall allow pre-cooling of the space prior to equipment operation at

the discretion of the occupants.

Id.; cf. Tr. 561-63, 565-66 (Tempel) (indicating that the Coast Guard’s suggested design did not

comply with the requirements set forth in the contract specifications).

Mr. Clayton forwarded the Coast Guard’s comments and recommendation to Mr. Tempel,

and Mr. Tempel responded to Mr. Clayton on October 5, 2004. JX 298. Mr. Tempel advised

Mr. Clayton that Epic would design the HVAC system as plaintiff directed. JX 298.1. He

further indicated, in response to the second bulleted point of the Coast Guard’s recommendation,

that Epic’s preference was to use two five-ton units and that it had previously recommended such

an approach, but was “instructed to design to scope of work.” JX 298.2. According to Mr.

Tempel, adopting the Coast Guard’s recommended approach would take two to four weeks, Tr.

893-94, 959 (Tempel), and the proposed system would not be Underwriters Laboratories-

approved, id. at 559, 856.

Plaintiff eventually decided to design the HVAC system recommended by the Coast

Guard. JX 329. On October 18, 2004, Mr. Clayton advised the Coast Guard that a new

mechanical design was “underway” and would be delivered in four days. JX 327.1. However,

he did not request a new design from Mr. Tempel until the following day. JX 329.1.

Specifically, he requested that Mr. Tempel design an HVAC system for the hydraulic test lab that

used two units, “[m]ost likely one being a 7 1/2 ton and the other a 5 ton,” and stated that

plaintiff would pass the increased cost on to the Coast Guard. Id.; see also JX 302 (indicating

that Mr. Clayton advised the Coast Guard on October 6, 2004, that he would “submit the costs

for the mechanical system upgrades to [the Coast Guard] by October 8, 2004”).

Plaintiff did not provide a new mechanical design to the Coast Guard within the four days

it promised. Indeed, on October 28, 2004, Mr. Tempel sent the following electronic-mail

message to Mr. Clayton:

We are designing the HVAC system serving the hydraulic test lab utilizing

one 5 ton split system heat pump[] and one 5 ton air conditioner. We are

proceeding with the design utilizing linear slot diffusers as directed by the

government. This will direct the air downward toward the occupants, however,

-32-

air will also be directed over the equipment too. There is no way to avoid this. It

is imperative that the government be aware that the air within the hydraulic test

lab will be extremely drafty and may cause undesirable conditions. Please let me

know if you have any questions.

JX 342.2. Mr. Clayton forwarded this message to the Coast Guard, JX 342, and Mr. Fedei

provided the following response:

The whole idea of “spot cooling” is to put high velocity air in localities

where the personnel are working, and it would not be effective cooling if it did not

appear drafty. Naturally some of the air will disperse over the equipment, and that

is acceptable. This e-mail does not address what the mechanical [engineer]

intends to do to remove the heat from the 75-HP motor, and without the removal

of this heat by separate venting, the 5 ton unit will not be effective in cooling the

space or the occupants.

JX 342.1. Mr. Tempel completed the new mechanical drawings on November 16, 2004. JX

707.14-.19. The design reflected in these drawings was not significantly changed thereafter. Tr.

907 (Tempel).

While continuing to work on the new HVAC system design, plaintiff, on October 15,

2004, sent the Coast Guard an updated project schedule that indicated a revised contract

completion date of December 20, 2004. JX 321; JX 324. Approximately one month later, on

November 17, 2004, plaintiff began to install the building’s wall panels and insulation. JX

4.207; JX 742. However, plaintiff’s progress on the project continued to be hampered by a

number of issues; in a November 18, 2004 letter to plaintiff, Ms. Broussard wrote:

You have . . . failed to submit the final design documents as required by [the

relevant contract specification]. You are reminded that any mechanical, electrical,

and architectural work that is completed prior to an approved design will be at

your own risk. Also you[r] recent daily reports have shown little or no

construction activity. Liquidated damages of $511.00 [sic] a day beyond the

current contract completion date of October 26, 2004 will continue to be

[assessed] until Government acceptance of the completed project.

JX 354; accord JX 373.1 (noting that plaintiff had not submitted the final design by November

30, 2004, and reiterating the consequences of proceeding with construction in the absence of a

final design and of working beyond the contract completion date). Indeed, that same day, the

Coast Guard notified plaintiff that it had received plaintiff’s invoice for the period ending

October 31, 2004, that it was authorized to make a progress payment to plaintiff, and that it was

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withholding liquidated damages in the amount of $2555 from that payment for the five days of

work performed beyond the October 25, 2004 contract completion date.19 JX 719.2, .4.

Ms. Broussard sent plaintiff another letter on December 1, 2004, in which she advised

that plaintiff’s failure to submit its final design “[might] be considered a material [breach] of the

contract” and that the Coast Guard “[might] choose to Terminate for Default.” JX 377.2; see

also JX 383.1 (indicating, in an internal electronic-mail message dated December 7, 2004, that

the Coast Guard planned to discuss its options for terminating its contract with plaintiff for

default). Ms. Broussard forwarded a copy of this letter to the contracting officer for plaintiff’s

Federal Supply Schedule contract that same day. JX 377.1; JX 720; see also JX 720.1-.2

(reflecting that on January 6, 2005, the GSA contracting officer referred Ms. Broussard to the

then-current FAR subpart 8.4, Federal Supply Schedules, for guidance, and specifically quoted

FAR 8.406-4, Termination for Cause, and FAR 8.406-6, Disputes20); JX 720.1 (indicating that

19

According to handwritten notations on the invoice, the amount of withheld liquidated

damages was calculated by multiplying five days by $511. JX 719.4. It is unclear why the Coast

Guard used a liquidated damages rate of $511 per day when the contract provided for a liquidated

damages rate of $551 per day. See JX 1.30.

20

The GSA contracting officer did not refer Ms. Broussard to the relevant portions of

plaintiff’s Federal Supply Schedule contract. See JX 720. Moreover, the version of FAR subpart

8.4 referenced by the GSA contracting officer was not in effect when plaintiff executed its

Federal Supply Schedule contract in April 2001 or when the Coast Guard placed an order under

plaintiff’s Federal Supply Schedule contract in September 2003. Indeed, at the time that plaintiff

entered into the two contracts, FAR subpart 8.4 did not contain sections 8.406-4 or 8.406-6;

those provisions were added when FAR subpart 8.4 was revised in July 2004. Rather, the

relevant sections in effect when plaintiff contracted with the GSA and the Coast Guard were

FAR 8.405-5, Termination for Default, and FAR 8.405-7, Disputes. The former section

provided:

(1) An ordering office may terminate any one or more orders for default

in accordance with Part 49, Termination of Contracts. The schedule contracting

office shall be notified of all cases where an ordering office has declared a

Federal Supply Schedule contractor in default or fraud is suspected.

(2) Should the contractor claim that the failure was excusable, the

ordering office shall promptly refer the matter to the schedule contracting office.

In the absence of a decision by the schedule contracting office (or by the head of

the schedule contracting agency, on appeal) excusing the failure, the ordering

office may charge the contractor with excess costs resulting from repurchase.

FAR 8.405-5(a) (Mar. 4, 1999). And, the latter section provided–depending on which version

was applicable–either that “[t]he ordering office shall refer all unresolved disputes under orders

-34-

Ms. Broussard forwarded prior correspondence, and would forward future correspondence,

related to the Coast Guard’s issues with plaintiff to the GSA contracting officer).

The Coast Guard received another set of 100% design documents, including an updated

mechanical design, from plaintiff on December 2, 2004, JX 359; JX 387.5; JX 707; in plaintiff’s

November 22, 2004 transmittal letter, Mr. Clayton represented that the mechanical design was

“not inclusive of [plaintiff’s] proposal” and, if the design was accepted, plaintiff would provide

the Coast Guard with its cost, JX 359. Mr. Fedei reviewed the mechanical design and then

forwarded his comments to Mr. Schmitt and Mr. Allen on December 8, 2004. JX 387. He

indicated that most of his “major comments deal[t] with the hood systems” and that his

comments might change if Mr. Allen determined during a site visit that the proposed design

would work. JX 387.1. Mr. Schmitt also reviewed the mechanical design and provided

comments. JX 391.1. He noted that he had discussed plaintiff’s request for “additional

compensation for hoods and exhausting of the lab equipment motors” with Mr. Fedei, and that

Mr. Fedei opined that such compensation was not warranted because “[b]y removing the heat

given off by the motors, [plaintiff was] able to reduce the HVAC equipment sizes,” making it “a

‘wash’ or even a cost savings.” Id. The Coast Guard’s “preliminary review comments” were

forwarded to plaintiff via electronic mail on December 9, 2004. JX 388.1. These comments

included some required changes to the mechanical drawings. JX 385.5-.7.

That same day, after a progress meeting, JX 389, Ms. Broussard sent plaintiff a show

cause letter,21 noting that plaintiff “failed to provide the final design documents within a time

frame that would allow [it] to complete . . . construction [of the] Component Repair Shop . . . by

the contract completion date” and “failed to provide adequate manpower to complete the

construction by the completion date . . . .” JX 390. Consequently, Ms. Broussard stated, the

Coast Guard was considering terminating the contract for default. Id. She advised plaintiff that

it had ten days “to present, in writing, any facts bearing on” whether its “failure to perform arose

out of causes beyond [its] control and without fault or negligence on [its] part.” Id. Plaintiff

received the show cause letter on December 15, 2004, and responded on December 22, 2004. JX

402.1. It asserted, as it had in the past, that the Coast Guard contract requirements differed

materially from the standard GSA design-build requirements. Id. Specifically, it stated:

to the schedule contracting office for action under the Disputes clause of the contract,” FAR

8.405-7 (Mar. 4, 1999), or that “the ordering office contracting officer” could issue final

decisions on disputes or refer disputes to the “schedule contracting officer,” FAR 8.405-7(a)

(July 29, 2002).

21

A “show cause [letter] is normally considered a little more severe than a cure letter.”

Tr. 3135 (Broussard); accord id. (“Cure notices are used more frequently . . . to . . . get the

contractor’s attention whereas a show cause letter really is viewed as . . . severe, things are really

not very good.”). It “is typically looked at as a step prior to actually executing a termination for

default . . . .” Id.

-35-

Proposal Phase

This project was originally proposed using standard GSA Design/Build

guidelines and requirements. All information provided within our proposal was

based on information obtained within the RFP . . . .

Design Phase

The [Coast Guard] contract requirements differ materially from the

standard GSA Design-Build requirements and guidelines. In complying with your

engineering package we discovered that full design is really what you were

requiring. This required more time. . . . Design also required more site

investigation than originally estimated. Initially K-Con, Inc tried to implement

the design process with utilizing owner provided information and / or through a

series of RFI type emails. This proved to be unsatisfactory. Our design budget

was based on this approach and was value passed on to the owner in the bid price.

Visiting and reviewing existing systems did not clarify our concern, but to the

contrary showed there were existing inoperable equipment, undersized systems

and in general “not standard installations” that we were and are asked to mimic.

During our visits it was brought to our attention there was additional equipment

not known at bid time that had to be reviewed and questioned as to status.

Requests for this information on owner furnished equipment was incomplete.

This caused mechanical and electrical designs to be delayed in addition the

existing equipment is of the type and age that has no documentation. This forced

us to submit new [RFIs and] create new designs which as a whole created

confusion and frustration not only with [the Coast Guard] but with K-Con as well.

Construction Phase

The delays which have occurred within the construction phase are due to

various reasons. Many of those reasons are beyond the control of K-Con.

Obviously one of the reasons was due to design delays and problems which

resulted in construction delays. Working with [the Coast Guard] we were able to

overcome some issues but others were reoccurring due to lack of communication

or just not being able to communicate and come to a mutual agreement that would

benefit everyone involved. . . . K-Con is completely aware of the delays which

have occurred and it is our full intent to complete this project within an agreed

upon duration. In doing so it is critical that all parties involve[d] come to a

mutual agreement to discuss all issues openly with our end user in mind. As

stated above K-Con has a good working relationship with the US Coast Guard and

it is our goal to maintain that relationship.

-36-

JX 402.1-.2. Plaintiff also represented that its subcontractors would resume work on January 3,

2005. JX 402.2.

Plaintiff’s response to the show cause letter was not well received by the Coast Guard.

For example, in internal electronic-mail messages dated January 3, 2005, Mr. Allen stated that

plaintiff “still [did not] address when [it] intend[ed] to complete or provide [the] design,” and the

Coast Guard’s project execution team leader wrote:

• All the delays and problems with this contractor originated with [its] failure to

adhere to the contract requirements specifically as [they] relate[] to the

Design-Build process. K-Con has a distorted vision of the process which does

not conform in any way, shape, or form to the construction industry standards

for design-build contracts.

....

• K-Con would like all to believe (1) that there was miscommunication along

the way (which caused the delays) and (2) that they have a good working

relationship with the Coast Guard. These two could not be any further from

the truth.

JX 405.1. Thus, that same day, Mr. Allen advised plaintiff that the Coast Guard considered the

response “inadequate” and requested “a reasonable schedule of project completion.” JX 406.

Plaintiff responded “that it would provide a revised schedule by January 6, 2005,” and that it was

its “full intent to complete all remaining work as quickly as possible for the benefit of [the] end

user.” Id.; accord Jt. Stip. ¶ 42.

Meanwhile, on December 23, 2004, the Coast Guard notified plaintiff that it had received

plaintiff’s invoice for work performed through November 30, 2004, that it was authorized to

make a progress payment to plaintiff, and that it was withholding liquidated damages in the

amount of $7665 from that payment for the work performed beyond the contract completion

date.22 JX 403.1, .3.

22

Although the Coast Guard had not yet executed the contract modification that extended

the contract completion date from October 26, 2004, to November 9, 2004, see JX 3.9-.10, it

calculated the liquidated damages to be withheld as if it had executed the modification, JX 403.3.

According to handwritten notations on the invoice, the Coast Guard determined that plaintiff

should be assessed liquidated damages for twenty days in November 2004 (although performance

was actually overdue for twenty-one days–November 10, 2004, through and including November

30, 2004), and then credited for the five days of liquidated damages that it had previously

assessed for October 2004. Id. The Coast Guard therefore calculated the liquidated damages to

be withheld by multiplying fifteen days by $511. Id. It is unclear why the Coast Guard used a

liquidated damages rate of $511 per day when the contract provided for a liquidated damages rate

-37-

Plaintiff’s subcontractors resumed work in January 2005. JX 4.266-.272. On January 2,

2005, the Coast Guard executed a bilateral contract modification, effective November 10, 2004,

that extended the contract completion date, for a final time, to November 9, 2004. JX 3.9-.10.

Three days later, plaintiff submitted a revised project schedule to the Coast Guard that reflected

an anticipated completion date of April 26, 2005. Jt. Stip. ¶ 43. Then, on January 12, 2005,

plaintiff and the Coast Guard held a progress meeting. JX 417. During the meeting, Mr. Clayton

represented that plaintiff would submit another set of drawings to the Coast Guard by January 21,

2005, and would endeavor to “closely monitor” the schedule. JX 417.4. That same day, the

Coast Guard sent plaintiff another forbearance letter indicating that liquidated damages would

continue to be assessed at the rate of $551 per day “until all work [was] complete and beneficial

occupancy . . . occurred.” JX 415.1.

Plaintiff finished installing the wall panels and insulation on January 12, 2005. JX 424.1.

Five days later, it began preparations for installing the roof, JX 4.281, and started the electrical,

mechanical, and plumbing rough-ins, JX 424.2. However, despite Mr. Clayton’s representation,

plaintiff did not submit a revised set of drawings to the Coast Guard by January 21, 2005. JX

421; JX 422. In a January 24, 2005 electronic-mail message, Mr. Clayton explained to Mr. Allen

that the drawings that plaintiff received from its architect were not complete, that it wanted to

ensure that the drawings the Coast Guard received were “‘perfect’ in comparison” to prior

submissions, and that the Coast Guard “‘should’” receive the drawings by January 28, 2005. JX

421. But see JX 433.1 (indicating that the delay was caused by three mechanical, electrical, and

plumbing “items that were not addressed,” and changing the anticipated delivery date to February

10, 2005); JX 437.2-.4 (reflecting that plaintiff did not send the Coast Guard’s December 8, 2005

comments to Mr. Tempel to incorporate into the design until February 8, 2005). Despite this

response, the Coast Guard sent a letter to plaintiff on January 26, 2005, expressing its concern

that the schedule was not being met, requesting a plan for getting “the project back on schedule”

and a revised schedule, and reminding plaintiff that liquidated damages were being assessed. JX

422.

On February 10, 2005, the Coast Guard notified plaintiff that it was rejecting the invoice

that it had received from plaintiff the previous day for work completed through January 31, 2005,

JX 438, explaining:

The Government began deducting liquidated damages from the contract price in

the amount of $511.00 a day starting November 10, 2004 and continuing through

January 31, 2005 (82 days).23 As a result, you have been assessed $41,902.00 as

of $551 per day. See JX 1.30.

23

The Coast Guard again misstated the daily liquidated damages rate; it was $551 and

not $511. See JX 1.30. The Coast Guard also miscalculated the number of days; there are

eighty-three days from and including November 10, 2004, to and including January 31, 2005.

-38-

damages for the delay in completing our contract. The amount of liquidated

damages withheld to date exceed[s] the total amount due.

JX 438.1 (footnote added).

In the meantime, on February 2, 2005, Ms. Hundley issued a second show cause letter to

plaintiff, remarking that plaintiff had “failed to,” among other things, “provide the final design

documents, complete the roof installation . . . in the timeframe noted on [its] progress schedule,”

and “provide adequate manpower to complete the work by the date shown on [its] latest progress

schedule,” JX 426, in other words, by April 26, 2005, Jt. Stip. ¶ 43. Consequently, Ms. Hundley

stated, the Coast Guard was considering terminating the contract for default. JX 426. She

advised plaintiff that it had ten days “to present, in writing, any facts bearing on” whether its

“failure to perform arose out of causes beyond [its] control and without fault or negligence on

[its] part.” Id.

Plaintiff responded to this show cause letter on February 7, 2005, JX 433, explaining why

it had been unable to install the roof and averring that it would deliver “90%” design documents

by February 10, 2005. JX 433.1; JX 435.1. The Coast Guard was dissatisfied with this response;

among its critiques were the following:

• Design: We have accepted in practice allowing contractor to “fast-track”

certain aspects of the design. The structural foundation and metal building

drawings are approved and we have cop[ies] of signed and sealed drawings

. . . . If contractor were to submit signed and sealed drawings for civil work

we would accept them also. To date we have received pre-final design

submittals for the other disciplines including civil. What we don’t have are

signed and sealed drawings. Dates of submission of the design drawings keep

slipping. I have little confidence his 10 Feb date will be met.

• Our contract was a design-build contract from inception. [The] requirement

was that the final drawings . . . be signed and sealed.

JX 443.4. The Coast Guard began “pursuing ‘termination for default’ proceedings against

KCON.” JX 443.2-.3; accord JX 439.1, .6; JX 440.1-.2.

As the Coast Guard suspected, plaintiff missed its self-imposed February 10, 2005

deadline and did not deliver the design documents–which were treated by the Coast Guard as the

“100%” design and not the final design–to the Coast Guard until February 18, 2005.24 JX 445.1.

24

This delay appears to have been caused, in part, by plaintiff’s failure to promptly

forward the Coast Guard’s December 8, 2005 comments to Mr. Tempel. When plaintiff finally

did so, on February 8, 2005, it requested that Mr. Tempel revise the mechanical, electrical, and

plumbing drawings in accordance with the Coast Guard’s comments in two days, if possible. JX

-39-

That same day, Ms. Hundley sent a letter to Coast Guard headquarters requesting approval to

terminate the Coast Guard’s contract with plaintiff for default. JX 444.1; see also JX 475

(containing a March 10, 2005 letter from Ms. Broussard to Coast Guard headquarters

supplementing the request).

While the request for contract termination was pending, Ms. Hundley, on February 25,

2005, forwarded to plaintiff the Coast Guard’s comments on the most recent mechanical design

submission. JX 450.1-.2. Three comments concerned the design of hydraulic test lab:

1. Room 106 (Hydraulic Lab): Contract requires the ceiling height to be 10 feet

above finished floor . . . . It is unacceptable that the proposed HVAC ducting

dimensions and related accessories such as insulation and duct hangers will not fit

above the ceiling. . . .

2. We also note that the 1500 lb rated hoist in room 106 is not noted or included

in the drawing set. Structural details are required to ensure that this weight can be

safely carried. Hoist supports will affect proposed routing of ducts noted in

paragraph 1.

....

7. Note 2 on Drawing M001, “Design Assumption” is not correct. You are

responsible for integrity of new piping, valves, installation and testing to ensure

that the existing Government furnished equipment operates correctly.

Id. Ms. Hundley reiterated that the Coast Guard’s comments were not changes to the contract.

JX 450.2. She also explained that aside from the identified comments, the Coast Guard “[took]

no exceptions to [the] proposed design” and, thus, plaintiff could proceed with the work,

provided that the comments were addressed and that signed and sealed drawings were provided

to the Coast Guard. Id.; see also Tr. 2627 (Schmitt) (explaining that this letter allowed plaintiff

to proceed with all work upon the submission of signed and sealed drawings). Plaintiff

forwarded the Coast Guard’s comments to Mr. Tempel upon receipt. JX 450.3-.5.

That same day–February 25, 2005–plaintiff sent the Coast Guard three letters seeking

time extensions and a fourth letter seeking a contract price increase. See JX 451; JX 452; JX

454; JX 455. In the first letter, plaintiff requested a noncompensable time extension of thirty

437.2. Mr. Tempel indicated that such a deadline was not possible due to Epic’s workload, and

stated that the earliest it could begin the work requested by plaintiff was February 15, 2005. JX

437.1. During trial, Mr. Tempel speculated that plaintiff may not have forwarded the Coast

Guard’s comments to him upon receipt because the “comments [were] pretty minimal” and could

“be handled in a set of as-built drawings, as is typically done in a design-build.” Tr. 912

(Tempel).

-40-

days due to the Coast Guard’s alleged improper review of its design drawings. JX 451.1.

Specifically, Mr. Clayton wrote:

This letter serves as our request for time extension due to [the Coast Guard]

improperly reviewing design drawings per [specification section 01160, paragraph

2.2.3]. On (5) different occasions K-Con Inc. submitted drawings for approval

which were returned neither approved, disapproved or approved as noted. We

received design comments that made “recommendations” not clearly stating

approved, disapproved and why[,] or approved as noted. [The Coast Guard]

contracted K-Con Inc. to develop the design based on the specifications provided

and submit for approval. It was not our intent to submit our drawings so that

personnel at [the Coast Guard] could make recommendations, not contract

required approvals, disapprovals or approvals as noted. It was only when I

directly asked Steve Allen to approve, approve as noted or disapprove with reason

per spec[ifications] did we finally get a proper review approved as noted with

comments.

Id.; see also Tr. 2679 (Schmitt) (stating that the Coast Guard could respond to a design in three

ways: “One is total approval, the [second] is approved as noted, and the [third] is rejection.”),

3168-69 (Broussard) (agreeing that the Coast Guard would approve or reject plaintiff’s design

depending on whether the design met the contract requirements, and that the Coast Guard could

approve plaintiff’s design with comments). In the second letter, plaintiff sought a

noncompensable time extension of thirty days to account for job site disturbances and its inability

to contract with local trades, both purportedly caused by comments made by the Coast Guard’s

inspector. JX 452. Then, in its third letter, plaintiff requested a noncompensable time extension

of twenty-seven days “due to rain, snow and/or temperatures below 40 degrees,” contending that

the precipitation in particular was “above average for the area.” JX 454. The fourth letter

provided, in its entirety: “This letter serves as our request for cost modification in the amount of

$50,325.00 for extended overhead due to delays outlined in our request for time extension letters

dated 25 February 2005.” JX 455.1. An exhibit attached to that letter contained a table breaking

out the components of the extended overhead that plaintiff was requesting for the eighty-seven

days of alleged delay, as follows:

Item Unit Quantity Unit Total

Type Cost

Project manager design and site Week 8 $2250.00 $18,000.00

visit

Vehicle Month 2.5 $937.50 $2343.75

Gas Month 0.5 $487.50 $243.75

Per diem Day 10 $100.00 $1000.00

-41-

Site superintendent Week 16 $1000.00 $16,000.00

Vehicle Month 2.5 $750.00 $1875.00

Gas Month 2.5 $390.00 $975.00

Per diem Day 87 $100.00 $8700.00

Contractor’s field office Month 2.5 $175.00 $437.50

Temporary toilet Month 2.5 $300.00 $750.00

Total $50,325.00

JX 455.2. Plaintiff did not submit any documentation to support the cost of each component. Id.

On March 8, 2005, Ms. Hundley denied the three time extension requests. See JX 470;

JX 472; JX 473. With respect to plaintiff’s request for a weather-related time extension, Ms.

Hundley explained that plaintiff “failed to submit relevant Daily Logs showing how work in

progress was impacted and how the identified controlling work was delayed by the unusually

severe weather,” information that was required by the contract. JX 473.1; see also JX 1.41

(containing the relevant contract specification, which provided: “The contractor may request an

excusable delay caused by unusually severe weather conditions by providing the contracting

officer written notice within 10 days of the delay. The notice shall: (1) identify, through relevant

Daily Logs, the work in progress that controls the overall completion of the contract; (2) indicate

how the identified controlling work was delayed by the unusually severe weather; and, (3)

provide the statistical weather data from the National Weather Service that indicates the weather

experienced at the construction site was unusually severe.”). Next, regarding plaintiff’s request

for a time extension related to the actions of the Coast Guard inspector, Ms. Hundley stated that

plaintiff failed to submit evidence substantiating its allegations. JX 472. Finally, with respect to

the request concerning the Coast Guard’s review of plaintiff’s design drawings, Ms. Hundley

explained:

As required by paragraph 2.2.3 Review Comments Resolution, section

01160 of the contract, the Government provided comments regarding the

submitted documents. In every case the Government responded within the

allotted time durations indicated in paragraph 2.2.2.1 Duration of Reviews,

section 01160. The Government is not obligated to note “approval or

disapproval” until the “final design” is submitted. In our reviews, we have the

right to make recommendations or suggestions on the design. That same

paragraph obligated you to respond within 14 calendar days after receipt of

comments on each design submittal to discuss by telephone and resolve design

review comments. You have continually failed to respond to our review

comments in the required time, especially regarding our concerns or

-42-

recommendations on the mechanical design. Your failure to address these issues

is not due to Government inaction.

Your progress schedule of January 5, 2005 indicated that the final design

would be submitted by January 21, 2005 and was actually received on February

18, 2005, which was 28 days late. The Government responded with our review

comments on February 25, 2005. Your failure to submit the design by your own

scheduled milestones was not due to Government inaction.

JX 470.1. A Coast Guard contracting officer never responded to plaintiff’s request for a contract

price adjustment.

Ms. Hundley sent plaintiff another letter the following day to express the Coast Guard’s

concern that plaintiff was not meeting the deadlines set forth in its January 5, 2005 project

schedule. JX 474.1. She attached to her letter “a current discrepancy list of known problems that

[had to be] corrected prior to building acceptance by the Government.” Id. The list contained

seven items: (1) construction of an incorrectly sized front entrance door opening, (2) inadequate

roof insulation, (3) exposing the interior of the unfinished building to the weather, (4) a missing

silt fence, (5) improperly tilted window sills, (6) lack of flashing for the roof of the electrical

room, and (7) a discrepancy with louver sizes. JX 474.2; see also Tr. 1309 (Combs) (stating that

he did not consider any of these problems to be “a major show stopper”).

Ultimately, on March 17, 2005, the Coast Guard sent a Notice of Termination for Default

to plaintiff and a copy of the notice to plaintiff’s surety, First Sealord Surety, Inc. (“First

Sealord”). JX 481.1-.4. In the notice, Ms. Hundley first described the various cure letters,

forbearance letters, and show cause letters that the Coast Guard had sent to plaintiff, and then

noted that as of the date of the notice, plaintiff had “failed to install the roofing and remove the

rejected insulation.” JX 481.1-.2; see also Tr. 1658 (Combs) (noting that upon contract

termination, two roof panels were not installed and the building was a “shell with no windows

and no doors, [with] some interior studs and some roughed-in plumbing”). She then wrote:

We have determined that it is no longer in the best interest of the Government to

forbear termination for default for your failure to complete within the established

completion date. . . . [Y]our performance in the forbearance period continually

fell well behind any completion schedule you had submitted. Your continued

failure to make progress has made it clear that it is no longer in the best interest of

the Government to forbear termination for default. In accordance with contract

clause FAR 52.249-10, Termination for Default (Fixed-Price Construction) (APR

1984), you are hereby notified that this contract is terminated for default for

failure to make progress and failure to prosecute the work with the diligence that

will insure its completion within the time specified in the contract including any

extensions. Therefore, your right to proceed with work under this contract is

terminated AS OF THIS DATE. The Government may cause the contract to be

-43-

completed by others in accordance with the above clause and you will be held

liable for any increased costs occasioned thereby. These costs will include

liquidated damages in the amount specified in the contract that will accrue from

the current contract completion date to actual completion of work. The

Government reserves all rights and remedies provided by law or under the

contract in addition to charging excess costs occasioned by completion of the

defaulted contract.

JX 481.3. In closing, Ms. Hundley indicated that the notice was “a final decision of the

Contracting Officer” and described plaintiff’s right to appeal the default termination to a board of

contract appeals or the United States Court of Federal Claims (“Court of Federal Claims”). Id.

Rather than immediately appealing, plaintiff sent the Coast Guard a letter on March 18,

2005, challenging the propriety of the default termination and requesting that the Coast Guard

rescind its notice. JX 484.3. In particular, citing FAR 52.249-10(b), which precludes the

termination of a contract for default if the contractor was not responsible for the delay in contract

performance, plaintiff enumerated several areas of contract performance–including the design

and construction of the HVAC system for the hydraulic test lab–where it encountered delays for

which it was not responsible, referring the Coast Guard to its previous correspondence describing

those delays. Id. Of particular note, plaintiff wrote:

2. We proposed this project as Design/Build but [the Coast Guard] forced K-Con

Inc. into a performance Bid/Spec Build Contract. Please reference letters dated 03

March 2004, 31 March 2004, 05 April 2004, 22 December 2004, 07 February

2005 and 25 February 2005.

3. Additional HVAC engineering and work[] for Hydraulic Test room

acknowledge[d] by [the Coast Guard] as additional to our scope of work. Please

reference RFI # 6 dated 13 July 2004 and email dated 20 July 2004 referencing

our RFI # 6 phone conference.

Id. In a March 21, 2005 letter, Ms. Broussard rejected plaintiff’s claims of excusable delay and

denied plaintiff’s request for the rescission of the default termination. JX 487. Then, on March

29, 2005, the Coast Guard notified plaintiff that it was rejecting the invoice that it had received

from plaintiff earlier in the month for work completed through February 28, 2005, JX 492,

explaining:

The Government began deducting liquidated damages from the contract price in

the amount of $511.00 [sic] a day starting November 10, 2004 and continuing

through February 28, 2005 (111 days). As a result, you have been assessed

$56,721.00 as damages for the delay in completing our contract. The amount of

liquidated damages withheld to date exceed[s] the total amount due.

-44-

JX 492.1. More specifically, according to handwritten notations on the invoice and its

attachment, the Coast Guard determined that plaintiff was due $305,034.39 through February 28,

2005, that it had already paid plaintiff $287,551.39, and that therefore the balance due to plaintiff

was $17,483.00. JX 492.2-.3; accord JX 3.11; JX 493.16. However, because the assessed

liquidated damages exceeded the amount due to plaintiff, the Coast Guard did not pay the

$17,483 balance to plaintiff. JX 492.1-.2.

C. Work by First Sealord

Meanwhile, on March 18, 2005, First Sealord advised the Coast Guard that it was

“considering taking over the project” and keeping plaintiff as its subcontractor. JX 485.1; accord

JX 726.1. Subsequently, on March 24, 2005, the Coast Guard conducted a meeting with First

Sealord’s project manager, Jim Payne, and several representatives from plaintiff to discuss what

work remained to be completed and what the Coast Guard required from First Sealord, such as a

new project schedule and an action plan. JX 489; JX 490.1-.2; JX 491; see also JX 489.2-.5

(containing the Coast Guard’s March 22, 2005 audit of the building’s condition and what work

remained to be completed).

The Coast Guard received a letter directly from plaintiff on March 29, 2005, containing

an action plan and a two-week forecast. JX 495.1. First Sealord then sent the Coast Guard an

action plan and a two-week forecast on April 22, 2005, which, given the file name, may have

been the same document prepared by plaintiff. JX 494.2. On April 28, 2005, Ms. Broussard sent

a letter to First Sealord responding to plaintiff’s submission and detailing the submission’s

deficiencies. JX 495.1-.2. In concluding the letter, Ms. Broussard wrote:

The Government believes several of the proposed solutions and/or

requests contained in K-Con’s plan continue to reflect K-Con’s inability to

provide adequate quality control over the project. Examples include a request for

the Government to identify non compliant work, requests for additional money to

complete requirements included in the original contract, plans to proceed with

work without adequate designs, etc. Based on the information provided in K-

Con’s letter, we continue to be very concerned that this project can be successfully

completed. We see no proposed improvement and/or change in the quality control

measures and management practices of K-Con.

Lastly, you are reminded that liquidated damages are continuing to accrue

from the 10 November 2004 [sic] completion date at a rate of $551.00 per day.

. . . [I]t is in everyone’s best interest to have this project completed as soon as

possible. Once the Take-Over Agreement has been executed, and the above items

have been submitted work may begin.

JX 495.1-.2; cf. JX 725 (indicating that Mr. Allen had an informal conversation with Mr. Payne

on May 5, 2005, expressing concern that enough time had not been allotted to finish the project).

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Plaintiff assigned a new superintendent, Tom Parker, to the project, and he began work on

the job site on May 23, 2005. JX 4.422-.423; accord Tr. 970 (Parker). On May 25, 2005, Ms.

Broussard sent another letter to First Sealord in which she noted that First Sealord’s “failure to

start work” was “prohibiting the customer from moving into a complete and useable facility.” JX

497. She “directed” First Sealord “to begin on site construction activities” by the following day

and stated that if First Sealord failed to do so, the Coast Guard would reprocure the contract. Id.

First Sealord did begin work as directed, but work did not proceed smoothly. For

example, there were issues with First Sealord’s correction and submission of the final design

documents. In a June 15, 2005 letter,25 Ms. Hundley advised First Sealord that it could omit

certain items associated with the hydraulic test lab from the mechanical and electrical drawings,

including two supply fans, two exhaust fans, and the chilled water line.26 JX 729.1. She then

noted that the Coast Guard “consider[ed] the overall design incomplete” but was “willing to

allow the work to continue with the understanding being that all such work [was] at [First

Sealord’s] own risk and [did] not imply acceptance of any deviance from the contract

documents.” JX 729.1-.2.

That same day, but before receiving Ms. Hundley’s letter, Mr. Payne sent Mr. Allen an

electronic-mail message indicating his understanding that there would be changes to the HVAC

system, such as the elimination of two supply fans, two exhaust fans, and the chilled water line,

but noting that until First Sealord received formal notification of the changes from the Coast

Guard, its designers would proceed with revising the drawings as if no changes were

forthcoming. JX 731.2. He further noted that “[t]he proposed changes could also affect the

overall HVAC design as the air quantities would change.” Id. The next day, Mr. Allen

confirmed the changes, and Mr. Payne accordingly indicated that First Sealord’s designers would

cease making certain changes to the design. JX 731.1. Mr. Payne reiterated that the Coast

Guard’s changes, particularly the omission of two supply and two exhaust fans, would “have an

impact [on] other components of the previously designed HVAC system.” Id. Mr. Allen

forwarded Mr. Payne’s message to Mr. Schmitt and Mr. Fedei. JX 733. Mr. Fedei responded

25

The letter was originally dated June 9, 2005. JX 728.1. However, the relevant Coast

Guard officials had not signed off on the letter until at least June 14, 2005. JX 728.2.

26

The Coast Guard may have directed these omissions to accommodate the placement of

different equipment in the hydraulic test lab. See JX 727. In a May 18, 2005 memorandum, Mr.

Allen indicated that the AR&SC had ordered a new HTS test stand that was “dimensionally

larger than the old test stand” and “require[d] greater heat dissipation and larger electrical

service.” JX 727.2; see also PX 260.1-.2 (reflecting that a Coast Guard employee had advised

Mr. Payne at the end of May 2005 that there might be “changes in the equipment in the Hydraulic

Test Room” and “that the two roof exhaust fans may be eliminated”). Consequently, he

recommended that “the requirement that KCON hook-up any equipment in the [hydraulic test

lab] be deleted” and that “KCON [be required] to terminate and valve-off chilled water piping

from the [hydraulic test lab] ac unit [sic] after it enters the [hydraulic test lab].” JX 727.2.

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that the HVAC system should not be redesigned, and expressed concern that the original designer

of the HVAC system–Epic–was “working on this again.” Id.

The Coast Guard received a set of drawings from First Sealord on June 20, 2005. JX

499.1; see also JX 708 (containing electrical, mechanical, fire alarm, and plumbing system

drawings from Epic dated June 16, 2005). Upon reviewing the drawings, the Coast Guard

determined that they were a reprint of a July 2004 submission, and did not include subsequently

approved changes. JX 499.1. Mr. Allen forwarded his concerns to Mr. Payne, id., who

indicated, in a June 23, 2005 electronic-mail message, that the drawings “were intended to be a

complete set that incorporated comments from” Ms. Hundley’s February 25, 2005 letter, JX

734.1. In a June 27, 2005 electronic-mail message, Mr. Allen advised Mr. Payne that First

Sealord should not “be concerned with the equipment or loads going into the Hydraulic Lab,”

that “[t]he HVAC equipment and ducting is to be installed as drawn (for the Feb 2005

[drawings], not July 2004),” and that First Sealord must “‘finish’ the drawings . . . .” Id. Mr.

Allen also noted that the Coast Guard was concerned that the daily reports reflected that “little or

no work [was] being performed” on the job site. Id.

During a July 5, 2005 meeting, First Sealord and the Coast Guard agreed to the following

schedule for proceeding:

1. New drawings (design) would be submitted on or about Friday July 8, 2005

2. [The Coast Guard] to review (approve) within 2 weeks

3. Construction schedule will be submitted after approval of design

4. Anticipate 60 to 90 days after design submittal – construction completion

JX 500.1. However, First Sealord did not meet the deadline for submitting new drawings; rather,

Mr. Clayton sent revised mechanical drawings to the Coast Guard on July 15, 2005, JX 738; see

also JX 709 (containing electrical and mechanical system drawings from Epic dated July 14,

2005); JX 710 (containing electrical system drawings from Epic dated July 15, 2005), and First

Sealord sent a complete set of drawings to the Coast Guard on July 19, 2005, JX 739.1.

The ongoing design and construction issues soured the Coast Guard on First Sealord’s

ability to complete the project. JX 500. In a July 19, 2005 letter to First Sealord, Ms. Hundley

wrote:

During the initial takeover meeting . . . of March 24, 2005, we discussed

several actions critical to completion of the project. They included completing the

final design, . . . correction of outstanding deficiencies and implementing a take-

over agreement.

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You did not start any work of any type until May 25, 2005, almost eight

weeks after the meeting. Your initial efforts . . . to partially install the passageway

between the new and existing buildings [suffered from defective workmanship].

Further you have failed to provide the final design documents as promised on

several occasions . . . . We have also noted during onsite inspections and review

of daily logs that adequate manpower has not been put in place to successfully

complete the building’s construction or correct the many deficiencies previously

noted in our construction audit. You have failed to provide a construction

schedule for us to monitor your progress. No take-over agreement has been

signed and agreed to as of this date.

....

As of the date of this letter, the complete final design has yet to be fully

submitted . . . and what we have partially received does not include agreed to

changes to the design. Our inspector has informed us that [certain work is being

done without approved final drawings]. These actions, taken in light of the

continuing history of poor quality control on this project by K Con, your take-over

contractor, are ill advised and poorly planned. As a result the Government has

lost confidence in your ability to properly manage this project and successfully

deliver a quality facility in a reasonable time.

We agreed with your proposal to use K-Con as the takeover contractor.

However, four months after the default (which should have been ample time to

complete the work) little meaningful progress has been made.

JX 500.1-.2; see also JX 498 (reflecting that the Coast Guard forwarded a signed takeover

agreement to First Sealord on June 13, 2005, for plaintiff’s execution). In light of these issues,

Ms. Hundley advised that she had “determined it [was] no longer in the Government[’]s best

interest to allow First Sealord Surety to continue work” and accordingly “directed” First Sealord

to “immediately cease all work and direct all contractors, employees and material men to vacate

the site.” JX 500.2. Ms. Hundley further stated that it was the Coast Guard’s intent to “re-

procure the remaining work,” charge “any excess costs” to plaintiff and First Sealord, and

continue to assess liquidated damages “until the project [was] substantially complete.” Id. At

this point in time, First Sealord had not completed the roof, JX 4.509, and pursuant to the project

schedule submitted by plaintiff on January 5, 2005, it would take an additional ninety-seven days,

until April 26, 2005, to complete the building once the roof was installed, Jt. Stip. ¶ 43; JX

415.1, .3.

First Sealord responded to Ms. Hundley’s letter on July 21, 2005.27 JX 739.1. Ms.

Hundley addressed First Sealord’s comments in an August 11, 2005 letter:

27

First Sealord’s letter is not a part of the trial record.

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Your submission of the latest version of the final drawings was late. Since

award of this contract in September 2003, we have received six separate “final”

submissions. . . . In each case, the drawings did not comply with the contract

terms. Critical details remained incomplete as of 5 July 2005, a full 21 months

after contract award. [W]e expected the drawings by Friday, July 8, 2005[, but

they] were not shipped until July 19, 2005.

....

HVAC: We provided definitive direction on deleting the exhaust fans.

These deletions requested by the Government did not materially affect the overall

mechanical design or HVAC duct sizing. We maintain that your mechanical

design could have been sufficiently completed without awaiting issuance of the

formal change. It is noted that your subcontractors started installation of circular

duct work although rectangular ducts have consistently been shown on your

submissions and no review comments were ever made altering this choice. As

you should be aware, such substitutions have a potential adverse affect on the

design and would have negated acceptance of your mechanical design. This

would have resulted in further delays and confusion at the job site had you

continued and would have been indicative of the continuing quality control

problems on this project. . . .

....

We questioned the proposed completion date of late September based on

this rate of progress observed to date.

Construction occurring without drawings: This situation continued to

occur. . . .

We had no confidence that a quality building could have been erected by

September 2005 for the reasons addressed above.

Concerning the letter of agreement regarding completion of this contract,

we note that you never signed this letter. In light of the repeated failures of this

project to progress, the continued missed milestones, the lack of quality control,

and the degree of rework constantly encountered, the Government had reasonable

cause and right to terminate and re-procure.

JX 739.2-.3.

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D. Reprocurement

After it directed First Sealord to stop work, the Coast Guard “solicited bids to complete

the construction” of the component repair shop. JX 501. The specifications included with the

solicitation “call[ed] for the complete removal of the metal roofing, metal wall sheets and all

associated insulation.” Id. In a September 7, 2005 letter, plaintiff advised the Coast Guard that it

was aware of the solicitation, and opined that the complete removal of the roof, walls, and

insulation was not required. Id. Plaintiff then stated that if the Coast Guard intended to hold

plaintiff and First Sealord liable for such work, it would like the opportunity to inspect the

condition of the building when the work was performed. Id. The Coast Guard rejected

plaintiff’s request in a September 13, 2005 letter. JX 502.

As noted above, at the time of the default termination, the Coast Guard had paid

$287,551.39 to plaintiff. JX 3.11. In two contract modifications, executed by the Coast Guard

on October 27, 2005, and October 28, 2005, the Coast Guard indicated its intent to use the

unpaid balance of the contract–$263,603.96–to fund the reprocurement of the project, and

reiterated that it reserved its right to claim any costs incurred in excess of the unpaid balance

from plaintiff. JX 3.11-.15. It also reiterated that it reserved its right to recover liquidated

damages, which would accrue until the building was substantially complete. JX 3.11, .14.

Had the Coast Guard decided to hire a contractor only to complete the work left

unfinished by plaintiff, it would have been able to get a contractor on site within thirty to forty-

five days, Tr. 3149 (Broussard), and the contractor would have been able to begin work within

fifteen to thirty days, id. at 3150. However, because the AR&SC’s requirements had changed, id.

at 3147-48, the Coast Guard decided to increase the scope of work of the reprocurement contract,

Jt. Stip. ¶ 45; cf. Tr. 3147-49 (Broussard) (explaining that because the new contractor would be

performing additional work, the Coast Guard decided not to charge plaintiff for reprocurement

costs), 3211-13 (indicating that the government-furnished equipment identified in the

reprocurement contract was the same as the government-furnished equipment identified in

plaintiff’s contract). This decision delayed the award of the reprocurement contract. See

generally Tr. 3147-49 (Broussard) (implying that a reprocurement contract would have been

awarded more quickly had the Coast Guard not increased the scope of work).

On November 7, 2005, the Coast Guard entered into an agreement with Viteri

Construction Management Incorporated (“Viteri”) to complete the building. JX 506. The initial

contract price was $721,431, and the initial completion date was March 19, 2006. JX 506.2.

Through bilateral contract modifications, the contract price was ultimately increased to

$824,610.28 JX 508. The Coast Guard determined that Viteri substantially completed the

28

The trial record lacks any evidence regarding whether the March 19, 2006 contract

completion date was extended. However, evidence submitted with plaintiff’s motion for partial

summary judgment on the issue of liquidated damages reflects that the fourth bilateral contract

modification executed by Viteri and the Coast Guard extended the contract completion date to

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building as of September 20, 2006. JX 507.1. The hydraulic test lab in the completed building

differed from what plaintiff had been asked to design; it contained all new equipment and

different ductwork. Tr. 1334-36 (Combs); see also JX 727.1-.2 (containing an internal

electronic-mail message dated May 18, 2005, in which the Coast Guard recommended a plan for

“building completion taking into account the impact of the new test equipment,” which was

“dimensionally larger than the old test stand, [and] require[d] greater heat dissipation and larger

electrical service”).

II. PROCEDURAL HISTORY

Plaintiff filed suit in this court on August 25, 2005, seeking to convert the default

termination into a termination for the government’s convenience and the remission of liquidated

damages. Defendant filed an answer, in which it asserted five affirmative defenses, and

counterclaim. In its counterclaim, defendant alleged that the Coast Guard had withheld

approximately $10,220 from payments to plaintiff as liquidated damages, and sought the balance

of liquidated damages as measured from the contract completion date to the date that the building

was completed, plus interest as provided by law. In its answer to the counterclaim, plaintiff

asserted three affirmative defenses: breach of contract; failure to mitigate damages; and waiver,

estoppel, and laches.

After plaintiff filed this suit, which was assigned to the undersigned, it filed three other

suits in this court in which it alleged that the Coast Guard breached contracts for the design and

construction of prefabricated metal buildings. See K-Con Bldg. Sys., Inc. v. United States, No.

05-981C (filed Sept. 12, 2005); K-Con Bldg. Sys., Inc. v. United States, No. 05-1054C (filed

Sept. 30, 2005); K-Con Bldg. Sys., Inc. v. United States, No. 06-865C (filed Dec. 18, 2006).

These other suits concerned buildings in St. Petersburg, Florida, Port Huron, Michigan, and

Honolulu, Hawaii. The St. Petersburg and Port Huron cases were eventually reassigned to the

undersigned. The Honolulu case remained with the originally assigned judge, and was settled by

the parties in July 2007.

Upon the close of discovery in this case, plaintiff moved for partial summary judgment on

the issue of liquidated damages, arguing first that the rate of liquidated damages specified in its

contract with the Coast Guard constituted an unenforceable penalty, and second, in the

alternative, that it was entitled to the remission of liquidated damages due to excusable delay.

The court denied plaintiff’s motion in a January 24, 2011 Opinion and Order, concluding that the

liquidated damages rate was not an unenforceable penalty, and that plaintiff had not established

an excusable delay that would lead to the remission of some or all of the assessed liquidated

damages. See K-Con Bldg. Sys., Inc., 97 Fed. Cl. at 41. Thus, in December 2011, the court held

a two-week trial. During its case-in-chief, plaintiff presented the testimony of Mr. Reitmeier,

August 26, 2006. See App. to Pl.’s Mot. for Partial Summ. J. 196, cited in K-Con Bldg. Sys, Inc.

v. United States, 97 Fed. Cl. 4, 48 (2011). Viteri and the Coast Guard executed five bilateral

contract modifications. JX 508.

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Mr. Ramsey, Mr. Tempel, Mr. Parker, Eric Combs (its chief operating officer), and two expert

witnesses–Stanley Yeskowski, an insulation expert, and Eric Unger, a scheduling expert.29

Defendant, during its case-in-chief, presented the testimony of Richard Anderson (the contracting

officer’s representative), Henry Ames (the FDCC LANT’s director of construction in 2004), Mr.

Schmitt, Mr. Fedei, Ms. Broussard, and two expert witnesses–Jeffrey Peters, an insulation expert,

and John McGrath, a scheduling expert.

This text is long and has been trimmed here. Open the source document for the complete record.