GRANTED IN PART: April 20, 2007

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CBCA 118

FLATHEAD CONTRACTORS, LLC,

Appellant,

DEPARTMENT OF AGRICULTURE,

Respondent.

Mark Mann, Project Manager, Flathead Contractors, LLC, Muskogee, OK, appearing

for Appellant.

Mary E. Sajna, Office of the General Counsel, Department of Agriculture, Portland,

OR, counsel for Respondent.

Before Board Judges VERGILIO, POLLACK, and STEEL.

Opinion for the Board Judge POLLACK. Board Judge VERGILIO dissents in part.

POLLACK, Board Judge.

This appeal arises out of Contract No. 50-04R3-4-0002, Touchet Paving/Road 64,

between Flathead Contractors, LLC (Flathead or appellant) of Muskogee, Oklahoma, and the

Department of Agriculture, Forest Service (FS or Government), Umatilla National Forest,

Walla Walla Ranger District, Walla Walla County, Washington. Appellant’s claim is for

adjustment in the number and unit price for additional stone in the rock retaining wall (a

Designed Quantity (DQ) item), for an adjustment in the Grading A material (also a DQ item),

and for payment for crushed shoulder rock used on the project.

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By decision dated January 25, 2005, the contracting officer (CO) denied appellant’s

claims for $57,673. Appeal File at 226. The contractor timely appealed. In its complaint,

appellant now seeks $52,804. The Department of Agriculture Board of Contract Appeals

(AGBCA) docketed the claims for retaining wall rock (also referred to as special rock) and

the claim for Grading A material as AGBCA 2005-130-1 and the claim for shoulder rock as

AGBCA 2005-131-1. The first two claims involve an interpretation of the DQ clause. The

third claim involves a dispute over contract language regarding ownership of crushed rock

not used for the purpose intended, in that instance, over who owned rock crushed by

appellant which was used by the FS for the road shoulders. The appeals have been

redocketed as CBCA 118. In an earlier ruling, the AGBCA denied the Government’s motion

for summary judgment. Flathead Contractors, LLC, AGBCA 2005-130-1, et al., 06-1 BCA

¶ 33,174.

The Board has jurisdiction over the timely-filed appeal pursuant to the Contract

Disputes Act, 41 U.S.C.A. §§ 601-613 (2006).

Findings of Fact

The contract for $2,190,549.17 was awarded to appellant on June 24, 2004, on

the basis of a technical proposal and price. It called for reconstruction of 7.23 miles of

double-lane road on Forest Road 6400 to the Touchet Corral trailhead/snowpark. It also

included the exercised option of reconstructing approximately one-half mile of Forest Road

64-650. Appeal File at 2-5, 96. Approximately one-half mile of the road called for appellant

to place retaining rock and Grading A material along the side of the roadway. That

represented about 6% of the project’s length. Appeal File at 609, 614. Notice to Proceed

(NTP) was issued on July 6, 2004. The project was essentially finished on or about October

18 or 19, 2004. Appeal File at 262; Appellant’s Supplemental Appeal File (SAF) at 14.

Marianne Klinger was the CO at the time the contract was awarded and she stayed in that

role until approximately September 14, 2004. Soon thereafter, Carl Culham took over as CO.

The contractor was not notified of the change until October 1, 2004. Joseph Acosta was the

contracting officer’s representative (COR) at the project for the FS. Appeal File at 149-50,

201. Mark Mann ran the project for Flathead, and David Freeman was President of Freeman

Construction, the subcontractor which performed the rock wall work. Transcript at 103, 610.

All five testified at the hearing.

Most of the contract work was priced as unit items. Several unit items were

set out as DQs, among which was item 252(01), titled Special Rock Embankment, Retaining

Wall, which called for a DQ of 872 cubic yards (cys). Flathead priced the rock at $91 per

cy. Appeal File at 2-5. The FS has acknowledged that there was an overrun in the retaining

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wall rock, and the FS, in fact, paid for that portion of the overrun quantity that exceeded

115% of the DQ. The CO determined that the payment made was justified under clause

106.4(a)(2) of the contract, on the basis that the overrun was due to an error in the FS original

design. The FS limited appellant’s compensation to the portion of the overrun that exceeded

115% of the DQ, asserting that the plain language of the clause authorized the CO to pay for

only the number of units which exceeded 115% of the DQ. As to units between the specified

DQ and 115% of that quantity, any difference was considered the contractor’s responsibility

and an item that should have been considered as risk in the contractor’s proposal.

Additionally, the CO determined that reimbursement was limited to payment at the contract

unit price, a matter contested by appellant. The parties have agreed that appellant placed

1538 cys for the retaining wall. That figure was reached by calculation, and although some

other numbers have been mentioned, the 1538 cys is the agreed figure. In recognizing

responsibility, the FS paid the contractor at the contract unit price for 1407 cys (the DQ of

872 cys plus an additional 535 cys as the overrun). The quantity does not include 131 cys,

the bridge amount, which is the quantity between 100 and 115% for which appellant has a

claim. Appeal File at 145, 223-28; Transcript at 506.

3. In the claim involving Grading A material, proposal item 304(10)A, Crushed

Aggregate, Type Sub-Base, Grading A (Grade A rock), the FS used a DQ of 8287 cys, which

covered all Grading A rock to be used on the project. Most of the Grading A was to be used

as road base rock, with considerably less to be used at the retaining wall. Mr. Culham

admitted in both his final decision and at the hearing that the quantity behind the wall may

have been omitted by the FS from the DQ set out in the contract. While it appears that the

road base quantity remained about what was expected, there was a definite increase in the

Grading A needed at the retaining wall. The FS does not dispute that there was an increase;

however, it found that any increase was less than 15% of the total DQ for Grading A (8287

cys), and as such the Grading A overrun at the wall had already been compensated fully

under (a)(2) of the DQ clause. The clause is set out below at Finding 5. Appeal File at 226;

Transcript at 474, 551, 559-60. Appellant did attempt to parse the DQ for Grading A into

two items, one for the road use and the other for use at the wall. The contract, however, has

but a single item. In addition to the Grading A included in the DQ, the FS added by

modification approximately 900 cys of Grading A material, which it identified as a change.

The Grading A was used in conjunction with geogrid, which was added for stability. While

there was considerable testimony at the hearing regarding the geogrid and the Grading A

material used with it, the geogrid operation has little to do with the issues in this claim. That

is because the cost of Grading A used with geogrid was compensated through modification.

Also, the FS added payment for a separate 92 cys of Grading A, in a modification which was

associated with a problem in the crown of the road. Appeal File at 141-44; Transcript at 475.

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As to the third disputed item, shoulder rock, it was evident to the FS at the

outset of the project that the FS had inadvertently omitted a line item for shoulder rock. To

remedy that, the parties entered into Modification 2, under which the FS agreed to provide

shoulder rock to appellant from a stockpile of FS material located on-site and to compensate

appellant for the costs of placement and hauling of that material at $8.15 per cy. The parties

did not contemplate at that time using material processed by appellant for shoulder rock.

They expected that the on-site material would be used, and if additional material was needed,

it would be secured by the FS and the FS would let appellant know the source. Appeal File

at 141-44, 163, 167-68.

Specification Section 106.4, titled Methods of Measurement, sets out the

requirements as to adjustment of DQ items. It provides:

One of the following methods of measurement for determining final payment

is DESIGNATED IN THE SCHEDULE OF ITEMS for each PAY ITEM.

(a) Designed Quantity (DQ). These quantities denote the final number of

units to be paid for under the terms of the contract. They are based upon the

original design data available prior to advertising the project. Original design

data include the preliminary survey information, design assumptions,

calculations, drawings, and the presentation in the contract. Changes in the

number of units DESIGNATED IN THE SCHEDULE OF ITEMS may be

authorized under any of the following conditions.

(1) Changes in the work authorized by the CO.

(2) A determination by the CO that errors exist in the original design that

cause a PAY ITEM quantity to change by 15 percent or more.

(3) A written request submitted to the CO showing evidence of errors in the

original design that cause the quantity of a PAY ITEM to change by 15% or

more. The evidence must be verifiable and consist of calculations, drawings,

or other data that show how the designated quantity is in error.

Appeal File at 282.

The standard Changes clause, Federal Acquisition Regulation (FAR) 52.243-4

(Appeal File at 17), was incorporated by reference and contained standard language as to 30

and 20-day notifications. In early documents, appellant referenced the Variation in Estimated

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Quantity (VEQ) clause; however, it later dropped its reliance on that clause. Appeal File at

159.

Under Section C, DESCRIPTION/SPECIFICATIONS/STATEMENT OF

WORK, the contract incorporated at C-3 the provisions of Agriculture Acquisition

Regulation (AGAR) 452.236-78, Forest Service Standard Specification for Construction of

Roads and Bridges (NOV 1996). Appeal File at 5. The following language from that clause

is at issue as to the shoulder rock:

105.05 Rights in & Use of Materials Found or Produced on the Work

(a) With the written approval of the CO, suitable stone, gravel, sand and other

material found in the excavation can be used on the project. Payment will be

made both for the excavation of such materials at the corresponding contract

unit price and for pay items for which the excavated material is used. Replace,

without additional compensation, sufficient suitable materials to complete the

portion of the work that was originally contemplated to be constructed with

such material.

(b) Materials produced or processed from Government lands in excess of the

quantities required for performance of this contract are the property of the

government. The government is not liable to make reimbursement for the cost

of producing these materials.

Appeal File at 283 (emphasis added).

Sheet 6 of the drawings had two separate depictions, each of which was noted

not to scale. The sheet showed how the wall was to be constructed, including details as to

the placement, dimensions, and composition of the rock wall and of the Grading A material

to be placed next to the retaining wall rocks. The top depiction is titled RETAINING WALL

& WIDE DITCH TYPICAL and the lower is titled RETAINING WALL & SNOWMOBILE

TRAIL TYPICAL. The depictions covered the area from station 350+10 to station 378+07.

Each shows similar depictions on the left-hand side. At the Wide Ditch, the drawing shows

compacted Grading A next to the existing roadway. To the left of that, it shows the retaining

wall rock. The Grading A is shown as 2 feet wide and the retaining rock as 2 feet to 3 feet

wide. In addition, this portion of the drawing shows 2 rocks at the retaining wall, one on top

of the other. The top rock is dimensioned at 2.5 to 3 feet in height. The lower rock, which

is shown at a similar size, does not have specific dimensions next to it. At the snowmobile

trail depiction, the FS shows on the left-hand side what looks like 3 feet of fill. It is,

however, not labeled. The FS shows next to that 2 to 3 feet of Grading A rock and next to

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that 2 to 3 feet of retaining wall rock. It again shows 2 rocks with the top rock dimensioned

at 2.5 to 3 feet. On the left-hand side of each depiction is the wording Existing Ground Line

and to the right of each is a triangle that shows the height at 6 feet and shows a width of 1

foot. Both drawings are labeled as “Typical.” Appeal File at 614. Mr. Culham was

questioned as to the above-noted triangle, it being described in the exchange as a ramp. He

agreed that it was an indicator of what the Government contemplated the height of the wall

to be. When asked if that was because it was on a typical profile, he answered that it was

the expected height, then noted that the height could have been less. Transcript at 32-33.

During the hearing, the FS made reference to several other drawings which

showed profiles and which evidently were used in the design process. None of these

drawings were provided to proposers prior to award and none of the proposers requested such

drawings. Transcript at 320-28.

10.

For purposes of organization and readability, the remaining factual findings

will first address the retaining rock and the Grade A material dispute and then separately

address the facts pertaining to the shoulder rock dispute. Thereafter, the findings address

correspondence after the work appears to have been completed. Significant events and

correspondence occurred concurrently and letters often addressed all three issues.

Nevertheless, a better picture of the dispute can be drawn by first addressing the matters

separately.

Rock Wall And Grade A

11.

The contract called for a retaining wall and Grading A material to run along

the side of the road from the road surface downward to the bottom of the side slope.

Cosmetically the retaining wall rock was to look uniform running along the surface level of

the road. The height of the wall (number of rocks) was determined by the lay of the land.

The lower the land at the bottom of the side slope, the more rock wall would be needed at

that location. Transcript at 36-38.

12.

Mr. Terry Warhol, Mr. Acosta’s direct supervisor, testified as to how the FS

came up with the DQ for the retaining wall and as to the FS’s original design assumptions.

He said the FS had conducted topographic surveys for estimating purposes, then created a

typical wall profile or cross-section and based the DQ on that. Transcript at 235-38. When

asked about specifics, such as the design calculations for the rock wall, however, he deferred

to Ms. Johnson of his office or Mr. Acosta, both of whom he said had more details.

Transcript at 267. Mr. Acosta, in his testimony, provided more specifics. He said the DQ

was arrived at as the FS took cross-sections from the survey. He said those documents were

in an exhibit (what he was referring to were drawings referenced in Finding 9, above, that

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were not provided to proposers). He said the FS scaled the vertical wall on the left side of

the cross-sections and that told the FS the height it would estimate. He continued that if the

vertical height was 2 feet or less the FS did not require a rock wall. Where the wall was 3

feet or higher, the FS required the wall. The FS then identified the stations and calculated

the DQ. When specifically questioned by the presiding judge, Mr. Acosta said that he

recollected that in the FS design, none of the vertical walls (walls to have retaining rock)

exceeded 6 feet and that was reflected in the cross-sections taken by the FS. He confirmed

that the FS did not expect the walls to exceed 6 feet and the calculation reflected those

anticipated conditions. He was then asked whether there was an error in calculating the DQ

using the parameters chosen by the FS. He said there was no error in the calculation.

Transcript at 302-08.

13.

Testimony from Mr. Acosta confirms that neither he nor the FS expected the

walls to exceed 6 feet and that the drawings provided to proposers conformed with that. Mr.

Acosta did expect the height of the wall to vary below 6 feet, but did not know at the time

of design, the extent to which it would vary. When asked specifically about what was

reflected in Sheet 6, he agreed after describing the dimensions of the rock shown on the

drawing that he understood that the height of the wall could go from 3 to 6 feet. When asked

if the 3 to 6 feet was going to be the variation in the height of the wall, he again said

“correct.” When asked the same question, albeit somewhat differently, he again

acknowledged that he would read the 2.5 to 3 feet dimension next to the top rock to indicate

the size of the individual rocks. He did, however, note that the bottom rock did not have a

specific dimension, as the FS was keying it so it could be a little higher or taller. Transcript

at 297-303. In its brief at page 2, the FS acknowledged that the typical detail describes a wall

that ranges from one to 6 feet in height. That fact was also acknowledged by the original

CO, Ms. Klinger, who agreed that nothing on the drawing showed the wall being larger than

6 feet. Transcript at 228. There is no indication on the drawing of the wall, designed by the

FS, that it would be any higher than that. Appeal File at 614.

14.

Where the height of the retaining wall reached and exceeded 8 feet, structural

considerations came into play. To deal with that, the FS added the geogrid, which it tied into

the rock wall and into the Grading A rock at various levels. Along with the geogrid, the FS

increased the width of the Grading A from 2 to 10 feet in specified locations. The parties

referred to the method used as a “burrito wrap.” As noted previously, the geogrid and

Grading A associated with it were dealt with and paid through Modification 1. Thus they are

not part of the claim. This claim involves the areas where the wall exceeded 6 feet and no

geogrid was used. Appeal File at 141; Transcript at 344-46.

15.

Appellant was low proposer on the project. Freeman proposed the rock wall

and Grading A as a subcontractor to Flathead. At the time of the proposal, Freeman

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understood that the stone wall would be 6 feet tall at its highest. Transcript at 109. When

Freeman estimated, it did not figure the rock was going to be 8 feet high, but expected it to

be limited to 6 feet. Transcript at 123-24.

16.

On July 2, 2004, the parties held a pre-work conference. Appeal File at 149.

Issues almost immediately arose regarding rock wall height. Concerns were reflected in

letters of July 6, 2004, and July 21, 2004. As of July 21, Freeman was already hauling in

rock. Appeal File at 171; Supplemental Appeal File at 2-3.

17.

Because the drawings required 2 feet of Grading A to be placed next to

retaining rock, increases in the height of the retaining rock resulted in a corresponding

increase in Grading A. The FS appreciates that relationship. However, it disagrees with

appellant as to the amount of Grading A that was actually used by appellant at the wall (the

FS contending that excavated rock from on-site was substituted for Grading A in some

locations). This contention as to use of other material was first raised at the hearing and had

not previously been an issue. The FS also disagrees with appellant as to whether the overrun

(even at the quantity claimed by appellant) qualified as exceeding 15% of the DQ and as to

whether the increase was due to a change and not a design error, the later concluded by the

FS. Up until the hearing, the CO appeared to agree that appellant had placed a total of 1230

cys of Grading A at the wall. Several numbers were used by the parties during the dispute

and at the hearing. The consensus number appears to be 1230, and that will be generally

referred to and will be used in our calculations. Moreover, the 1230 cys was in fact reflected

in the CO decision as well as in Respondent’s Exhibit 2. Appeal File at 226; Transcript at

474-85.

18.

At the hearing, appellant provided a quantity for how much Grading A material

it placed at the wall. It used a formula, based on the retaining wall quantity. Appellant took

1552 cys of retaining rock (this differed from another number used of 1538 cys) and divided

the 1552 cys by 2.5 feet, the width of the rock wall. That gave appellant a surface area of

620.8 yards. Appellant then took the thickness of the Grading A rock, which was shown as

2 feet in width, and multiplied the calculated surface area of 620.8 yards by 2 (feet) to get

1241.6 cys. As Mr. Mann explained, this was an estimate, and he opined that it was very

conservative. He estimated that it was likely that more material had been used. The above

number of 1241.6 cys was later converted to 1231 cys and then 1230, which is the number

generally used by the parties and the quantity we use to represent the amount of material

(albeit not necessarily all Grading A) placed next to the wall. Transcript at 654-59.

19.

Initially the parties focused the dispute on how the overruns related to section

(a)(2) of the DQ clause, the portion requiring that payment would be made only if the

overrun exceeded 15% of the DQ. As such, appellant, in initially pursuing its claim, was

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essentially reacting to the FS acknowledgment of a design error. In various letters to the FS

during the dispute, appellant attempted to establish that it met the 15% threshold for Grading

A material that position being based on comparing the quantity of Grading A material placed

at the wall with the amount initially estimated as needed for the wall. The Grading A line

item which was over 8000 cys, however, included not just wall but also the road base. Given

the fact that the DQ in the contract for Grading A was over 8000 cys, we will not here go

through the various arguments and testimony from appellant attempting to meet the 15%

threshold for Grading A. Transcript at 677-78. Put simply, given the contractually stated DQ

for Grading A material, there is no calculation under which appellant can show a 15%

overrun of that stated DQ. Appellant’s attempt to parse the Grading A, into Grading A for

the road and Grading A for the wall, has no contractual or legal basis of support. There was

a single Grading A item. We do note, however, as will be evident in our discussion, that

qualification for the 15% is not critical to resolution of the Grading A matter, as the DQ

clause also allows compensation due to change and we have concluded that the change in the

height of the wall triggers that provision and not the error provision relied upon by the FS.

20.

As noted above, at the hearing, the FS, for the first time, raised the argument

that a significant portion of the 1230 cys of material placed at the wall was from rock

excavated on-site and not Grading A. Mr. Culham asserted that 685 cys of non-Grading A

material needed to be deducted from 1222 cys (another variation of the 1230). He identified

that as a fill from the excavation that had been placed in lieu of Grading A. He opined that

appellant placed only 537 cys of Grading A at the wall, and not the overrun of 475 to 500 cys

that he said appellant was claiming. Respondent’s Exhibit 2; Transcript at 484-85.

21.

The FS paid appellant for 9187 cys of Grading A on this contract. The 9187

is composed of the 8287 cys that was set out in the contract as the DQ, plus the additional

900 cys associated with the geogrid change. Respondent’s Exhibit 2; Transcript at 478-88,

495-96. There was no specific evidence presented as to how much of the 8287 cys was used

at the wall and how much on the roadway, although the vast amount of Grading A material

was used for road base. To help put the number into perspective, appellant calculated that

the original wall would have required 698 cys. Transcript at 758-60. No one from the FS

provided an alternative to that number. It is also noteworthy that Mr. Culham wrote in a

letter in January 2005 that in arriving at the 8287 cys set out in the proposed schedule, he

believed the FS had failed to include any of the Grade A for the wall. Appeal File at 226;

Transcript at 558.

22.

To support its contention, the FS presented a spreadsheet analysis of the

Grading A item prepared by Mr. Culham. Respondent’s Exhibit 2. Mr. Culham derived his

analysis by using the superintendent daily job reports. The FS asserted that during

performance of the contract, appellant performed some excavation where it had to take out

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a corner of the road alignment. Mr. Culham called it a hillside. Respondent’s Exhibit 3;

Transcript at 479. In lieu of removing that material from the site, the COR agreed that the

material could be used behind the retaining wall, as if it were Grading A. According to Mr.

Culham, various job logs (Appeal File at 342, 347-48, 353) show the placement and quantity

of excavation material used. For example, Appeal File at 342 said, “placed 40 yards of

excavation and one load of A behind the special rock wall.” Appeal File at 347 says, “placed

about 15 yards of special rock wall. We used five loads of rock excavation for fill behind

rock wall.” Appeal File at 348 says, “load and place 14 loads of rock excavation in the snow

park area behind the special rock wall.” Appeal File at 353 says, “we hauled 12 dump loads

of excavation to backfill the hole to grade.” Unlike the others, this log does not reference the

retaining wall, although it was included. Mr. Culham then totaled the above logs and came

up with 43 loads of the excavated material. Using trucks with a hauling capacity of 20 cys

per load, he and the COR came up with 15 cys per load. Those 43 loads, plus the 40 cys

from Appeal File at 342, total 685 cys, which Mr. Culham said was equivalent to over half

of the quantity of material used at the wall, based on a neat 2-foot wide section. We note,

however, that the quantities in the Appeal File at 342, 347-48, and 353 total 32 loads plus an

additional 40 cys, or approximately 34 loads, not 43 loads. Further, in addition to the math

error, we find nothing in the Appeal File at 353 which puts the material discussed at the

retaining wall. Accordingly, the 12 loads in Appeal File at 353 do not appear to be tied to

the wall and are deducted from the FS calculation. Therefore, our total shows that appellant

used 22 loads of on-site excavated material at the wall, with the remainder, Grading A.

23.

Although the FS established that appellant did not solely use Grading A at the

wall, it was only under questioning by the presiding judge that Mr. Culham acknowledged

that although Government material was used in lieu of some of the Grading A, appellant still

had to haul and place that added material. Mr. Culham tried to minimize that effort. He

testified that by using FS pit material, appellant had a shorter haul. He said that for some

portions of the material, there may have been no haul. He then said that he personally did

not know details about the matter, but Mr. Acosta did. Transcript at 498-99. Mr. Acosta,

however, never provided any testimony to clarify the matter. Similarly, appellant did not

further address this issue. The unit price proposed and paid for Grading A, including the

material, was $16.67 per cy. The unit price for crushing Grading A material was $4.85 a ton.

When the 1.35 conversion (used to convert tons to cys) is applied, the converted cost comes

to $6.54 per cy. The remainder of the unit price covered placement and hauling costs. We

recognize that the $16.67 figure was based on the material coming from the crushing site.

Respondent’s Exhibit 2; Transcript at 478-86, 495-98, 573-74.

24.

Mr. Acosta confirmed that the contractor used some excavated material at the

wall in lieu of using Grading A. He confirmed that the material came from the same area as

noted by Mr. Culham. Mr. Acosta said that once appellant found good rock there, appellant

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asked if it could place some of that rock, instead of the crushed rock, behind the wall. Mr.

Acosta agreed. While Mr. Acosta confirmed the use of some rock from on-site in lieu of

Grading A, he provided no estimate of amount. Transcript at 296.

25.

Mr. Mann acknowledged that some on-site rock was used in lieu of the Grading

A. He, however, challenged the amount claimed by Mr. Culham. He raised the point that

there was nothing in the notes (referring to logs) that indicated that appellant had placed the

on-site material in a 2-foot neat line. He also asked Mr. Culham whether the rock from on

site could have been used next to the Grading A as fill, and Mr. Culham replied that he

presumed that when the logs said appellant placed rock behind the rock wall, that meant in

the neat lines. When asked how he could conclude from the notes that some of the material

was not used to displace fill, rather than displacing Grading A, Mr. Culham referenced a

conversation with Mr. Acosta, apparently in preparing for trial. He said that Mr. Acosta

stated that one excavation area was blasted and Mr. Acosta reported that he authorized use

of rock from that area in place of Grading A and not as fill anywhere else. Mr. Culham based

his judgment on that. Transcript at 570-71. The term “fill” was used loosely by the parties

throughout the hearing, and it is not evident at times if it is referring to the Grading A as fill

or fill as a separate item.

26.

As noted earlier, the focus of the parties initially centered on the application

of the error in design portion of the DQ clause, section (a)(2). That focus is reflected in the

summary judgment motion filed by the FS and in the January 3, 2006, ruling of the AGBCA

on that motion. Flathead Contractors, LLC, AGBCA 2005-130-1, et al., 06-1 BCA ¶ 33,174.

Section (a)(2) of the DQ clause was the focus of the decision because, at the outset, the FS

identified that portion of the DQ clause as the controlling issue and appellant evidently

thought it could qualify under the 15% limitation for both the retaining rock and Grading A.

Thus, in the motion, the parties focused on section (a)(2). As the claim proceeded at the

AGBCA, however, the matter moved to the full meaning and operation of the clause, and

more specifically to whether the issues in dispute fall under the change provision, (a)(1), as

opposed to the error in design provision, (a)(2). Section (a)(2) triggers the 15% use, while

the change provision, (a)(1), does not contain a 15% limitation. Mr. Mann addressed

appellant’s position on whether the overrun was the result of a change rather than a design

error. He considered the change to be having to construct the wall higher than the typical

height of no more than 6 feet, the height represented on the typical detail. Appeal File at

614; Transcript at 674-79.

27.

Mr. Culham explained the FS reading of the DQ clause and why he believed

that the overrun qualified as a design error and not a change. He cited the failure to identify

the elevations as the design error and explained that designation on the basis that the wall that

was built was the wall that was called for in the contract. He said that he could find no

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instance where the design of the placement of the stones as shown on the drawings as typical

was changed. He said, “We asked for a rock wall to be a certain height and certain length,

and I find nothing in the country [sic] where somebody ordered it to be different than that.”

Transcript at 80. Mr Acosta differentiated between changes occurring on the alignment and

grade of the road, and what happened as to the rock wall. He said that to the extent there was

a design error, it would have been failing to identify the grades properly. Transcript at 438.

Later, when asked where there was an error versus a design change, he said it was an error

in the FS design of the road, stating that the way the FS had the profile and alignment laid,

the project was not “fitting in good” with the actual ground conditions, as they were

surveyed. Transcript at 308. The presiding judge then asked, “Why isn’t that a change in the

design?” Mr. Acosta’s answer can at best be described as confusing. Later Mr. Acosta tried

to differentiate changes and error, by examples, essentially asserting that the wall did not

involve change because the wall always remained the same as to the FS intent. He

differentiated that from the FS changes as to excavation, saying that those had to be made

or the FS could not construct the road. The testimony from Mr. Acosta seemed to conclude

that since the contract always called for the rock to be at the height of the road, the fact that

the rock got higher because it had to be started at a lower point meant that no change

occurred. Transcript at 308-13.

28.

At the hearing, there was testimony from both parties as to the significance of

the depiction of the retaining wall and Grading A as typical on sheet 6. Mr. Warhol testified

that “typical” was not intended to represent a particular point on the wall. Transcript at 235

36. Mr. Acosta said that the drawing described a typical wall and that the FS expected that

the height would vary. He said he did not know how much it would vary until he saw the

road staked. Transcript at 298. He said none of the FS cross-sections used for the design

exceeded 6 feet. Transcript at 307. Ms. Klinger was asked by the presiding judge if the

typical dimension showed 6 feet as the maximum, and if the wall was constructed at 8 feet,

why that was not a change. She answered that because “it is typical does not mean that it is

always going to be 6 feet, sometimes it would be 8 feet and sometimes 4.” Transcript at

227-28.

29.

The FS raised an issue as to how appellant had prepared its proposal. Mr.

Mann acknowledged that he did most of his estimating on the fly and did not visit the site

prior to submitting the proposal. He did note that prior to submitting the proposal, he talked

to Mr. Freeman and to another gentleman, each of whom visited the project prior to the

proposal. Transcript at 735-36. The FS asserted in its brief that appellant knew during the

solicitation period that it could not estimate the height of the wall with any kind of precision.

In response to that, Mr. Mann testified that the FS showed “typical” for the wall and that was

all he could rely on. Transcript at 751. The FS through its inspector, Ms. Marilyn Johnson,

made the point that if appellant had scaled the cross-sections, it could have discovered that

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the wall would be higher than 6 feet in various locations. Transcript at 317. She also

acknowledged, however, that no proposer made a request for cross-sections. Moreover, it

was clear that the cross-sections being identified by the FS and referred to by Ms. Johnson

were not included as part of the solicitation documents and appellant did not get material of

that nature until after award. Transcript at 325-28. Additionally, it is worth noting here, as

Mr. Culham pointed out, that the FS uses a DQ item to put everyone on notice that the item

is calculated and not measured. Appeal File at 439-40; Transcript at 604. Moreover, the

thrust of the clause is to pay, if the quantity overruns because of a change or a miscalculation

within the planned and calculated parameters of the project. This is not a claim based on a

differing site condition or involving that type of clause.

30.

Mr. Freeman testified as to additional costs Freeman incurred, due to having

to place rock higher than planned. The costs were reflected in the claim for adjusting the unit

price on the rock placement. He acknowledged that he was not on the job each day, but

noted that he had a foreman on the project and “had good tabs with the working

superintendent there.” From time to time he was at the site and did observe construction of

part of the wall. He said that once the wall height exceeded 6 feet, it affected how his

company could place the rock and required extra time and extra equipment. He explained

that two courses of rock could stand on their own without need of support from Grading A,

but as rock got higher and he had to place more than two rocks (the drawing showed rocks

ranging from 2.5 to 3 feet in height) he had to use Grading A for support during the rock

placement operation. In general, he had planned to lay a significant run of stone and then

come back to backfill as a separate operation. He had not planned for placing Grading A as

support, as the placing of the retaining rock went along. The change in sequence caused

Freeman often to lay the stone and then backfill a much smaller segment than planned, which

in turn caused Freeman to proceed much slower. He testified that his company could not

work in the long runs anticipated and had to place Grading A as a separate operation from

the placing of rock. More specifically, he said, for the area that was only going to be two

rocks high, he did not figure on backfilling until everything else was brought into play.

Because of the need to do both the retaining wall rocks and Grading A at the same time, Mr.

Freeman asserted that his company was delayed. In addition he said that it caused him to

have to hold some equipment longer than originally planned. Among the items was a rental

excavator. Transcript at 106, 111-12, 123-25, 170-78, 189.

31.

Mr. Freeman acknowledged that the per unit cost of the rock itself was not

affected because of the change in the height of the wall. He said that he had costed his

placement by the whole total and thus could not segregate his costs for individual locations.

Transcript at 166-67. Because he did not segregate costs, he acknowledged that he could not

calculate a measured mile. Transcript at 110-11. Freeman did provide details of overall

costs. Appeal File at 375-424. Appeal File at 376 is a summary sheet of Freeman’s claimed

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costs for the retaining wall overrun. Mr. Freeman was asked at the hearing to attempt to

quantify the increase by means of comparison of effort. He first said that because of the

change in sequence and putting Grading A behind the retaining wall, as he went along, it

would have taken Freeman twice as long to do a 100-foot segment. Later, in response to a

similar question, he stated that he would estimate that it took 50% longer to get the placement

done than it would have if appellant had performed by placing and hauling as a common

operation, the manner he said it had contemplated in pricing the proposal. Transcript at 182

85.

32.

The FS disputed the dollar impact claimed by appellant. The FS spent

considerable time on the issue of whether appellant’s proposal number was reasonable and

reflected all costs. The FS claimed appellant’s proposed price was too low and did not

include everything. If the FS was correct, then too low a proposed price would skew any

comparison of actual versus proposal costs in favor of appellant. As part of this discussion,

the parties spent considerable time arguing over cost details such as how and where appellant

included excise tax in pricing. Generally, most of this evidence cluttered rather than cleared

up the record. We chose not to go into a full review of the considerable testimony on many

of these cost aspects, nor do we need to make that analysis in order to arrive at a reasonably

accurate number. That is because the record provides a reasonably accurate approach to

arriving at cost, which would not materially change, even if we resolved the cost details in

favor of the FS and found the proposed price was too low.

33.

The above said, we make the following observations. In general, the

challenges made by the FS to Freeman’s proposal do not significantly call into question the

reasonableness of the proposal or of the costs expended. Regarding the FS argument that

Freeman’s cost increases were caused by using an outside contractor for placement work, in

lieu of using one of Freeman’s own personnel, Mr. Freeman testified otherwise. The FS

claimed that Freeman paid the subcontractor $90 per hour as compared to Freeman’s

estimated cost (in its proposal) of $57.50 per hour for placement. Contrary to that charge,

the evidence showed that in making the choice to use an outside operator, Freeman lowered

and did not increase its costs. Mr. Freeman testified that in his proposal, the machine alone

was $87 an hour to rent. He continued that when he added to that labor and burden, the cost

was going to be well over $100 an hour. He said that the $100 an hour did not even take into

account the fact that by hiring an experienced operator, Freeman was also avoiding a learning

curve. Transcript at 781.

34.

As to the FS contention that Freeman did not change his sequence of work, we

note that the FS claimed support on the basis of logs that were kept by appellant and found

in the Appeal File at 328-54. While the FS cited these logs, it did not point the Board to

specific provisions or comments in the logs which support or establish the FS position.

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Moreover, the logs do not specify particular locations, do not generally describe the height

of the wall being worked, and do not address the relationship between the placing of reported

rock and Grading A on any given day. The logs simply do not contradict Mr. Freeman’s

testimony. In addition, Mr. Mann testified as to how the logs were prepared. He said that

Ron Wilson, who prepared the logs, was generally very accurate when keeping track of

important entries such as pay items, but assessing how accurate he was on other matters was

difficult. Mr. Mann continued that things are estimated on logs and what might appear to

someone to be a precise quantity for a certain activity or phase may not tell the whole story.

Transcript at 737. Moreover, Mr. Acosta was at the site for most of the rock work and

placement of Grading A. Mr. Acosta did not challenge Mr. Freeman’s contention that the

sequence was changed, nor did Mr. Acosta challenge the method of performance described

by Freeman. If Freeman had not proceeded in the manner Mr. Freeman described, we would

have expected to hear that from Mr. Acosta.

35.

The FS provided at the hearing Respondent’s Exhibit 3, which was a document

of calculations regarding costs claimed and expended by appellant on the retaining wall

operations. Using Respondent’s Exhibit 3, the FS in its opening brief at page 14 provided

the following. It said that before markup, Freeman had an estimated unit cost of $74.61 per

unit (the $82 it proposed to Flathead used that number, plus markups) and had actual costs

of $79.97, a difference of $5.36 per cy. Of that difference, the FS says that Freeman mis

estimated material and delivery costs and that resulted in Freeman having to incur an

additional actual cost of $2.14 per cy for costs not reflected in the proposal. The FS

subtracted the $2.14 from $5.36 and said that left an additional increase in costs, at least

partially attributable to the overrun, of $3.22 per cy. The FS also calculated that Freeman’s

markup in its proposal on its work was 6.5% for overhead and profit. The FS then concluded

that even if Freeman had incurred more costs than it proposed, Freeman would be due no

more than $3.54 per qualified cy. It is not clear from the brief where the FS secured the

figure of $79.97, or how it arrived at its calculations, although the FS cited to Transcript at

513-16 and the exhibit was discussed in the Transcript at 507-30.

36.

According to Mr. Freeman, the proposal amount before markup was $74.61,

and the actual cost before markup was $84.29. Transcript at 132. Mr. Freeman said the

difference in cost between what Freeman proposed and the actual cost was in the equipment,

the operators, and the labor to put in the added material. Transcript at 132-33. Freeman

testified that excise tax was included in Freeman’s overhead and that is how Mr. Freeman’s

computer program worked. Transcript at 164. As to the FS claim that Freeman was

inefficient in its placing and hauling operations, we note the evidence is otherwise. When

Mr. Acosta was asked about his observations of the work, he said Flathead had a good

contractor or subcontractor who knew what he was doing and had a good system and routine

that did not waste a lot of time. Transcript at 295. Finally, the fact that the project, like all

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projects, had some hitches does not translate into deductions of recovery. There was no

evidence that difficulties were either unusual or excessive. Mr. Freeman testified that when

he writes a proposal he includes 15% to 18% for overhead. He, however, provided no

historical documents to show that. On further questioning he stated that in estimating he

hardly ever estimates below 10% for overhead. Transcript at 787. Near the close of the

hearing the FS had Mr. Freeman review some pricing numbers as to the rock wall item. It

had him review anticipated costs and tax and then calculated overhead using the difference.

Those numbers indicated that he had used a rate of 6.5% for overhead in pricing the rock

wall item. Transcript at 787-90.

37.

In addition to the comparisons of proposed and actual costs, the FS provided

the Board with an alternative calculation in its brief. In this calculation, which again referred

to Respondent’s Exhibit 3, the FS focused on Freeman’s placement costs. Mr. Freeman had

testified that the additional material caused his placement costs (labor and material) to

increase by about 50%. Transcript at 182-85. The FS said that Freeman’s original estimate

for labor and equipment to build the wall was $7.09 per linear foot. The FS arrived at that

by taking $18,860, which was the hauling and placement costs that Freeman priced to

Flathead, and divided that number by 2660 feet, the length of the wall. The FS says that a

50% increase in costs to built the wall would result in a new number of $10.63 a linear foot

($7.09 x 1.5) or a maximum increase of $3.54 per linear foot, attributable to the increased

labor/equipment effort for that portion of the wall exceeding 6 feet. The FS then added to

that what the agency again claimed was Freeman’s 6.5% allowable markup, and concluded

that the maximum adjustment was $3.77 a linear foot. The FS then stated that the

representation of the as-built rock wall, liberally interpreted, represents approximately 2352

linear feet of wall having heights over 6 feet. The FS then calculated the adjustment (calling

it Freeman’s best case scenario) as $8867.04.

38.

In its briefing, the FS challenged whether Freeman was entitled to any payment

from Flathead, relying on the contention that because there was no specific clause in the

subcontract between Flathead and Freeman as to adjustments for DQs, Flathead had no

obligation to pay Freeman and thus the FS had no liability. Alternatively, the FS in its

opening brief, at pages 12-13, pointed to a clause in Freeman’s contract that referenced using

the VEQ clause for adjustment of unit priced items. Appeal File at 306. The FS reasoned

that to the extent Freeman could be paid, it had to be under that clause and therefore,

notwithstanding the DQ clause, Freeman could only be paid if it and Flathead could show

that the cost increases claimed by Freeman were due solely to the overrun.

39.

Mr. Freeman testified as to his understanding of the claim and contract

relationship with Flathead. He noted that his expectation here was based on what he

characterized as typical between a prime and subcontractor, basing that also on his

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experience. He testified that it was his experience that the subcontractor is compensated

based on what the owner pays the prime contractor for the claim item. He noted that

contracts between subcontractors and primes do not always specifically spell that out. He

stated that he expected that if Flathead obtained a unit increase, then Freeman’s unit price

would be adjusted to whatever quantity was paid for by the FS. It is evident from his

testimony that if payment were to be made by the FS under the VEQ clause, then he would

have been bound to whatever Flathead received. Conversely, where the variation clause was

not operational, such as here, he would recover under whatever contract clause covered

Flathead. Transcript at 118-19. During questioning by Mr. Mann, Mr Freeman was directed

to paragraph 17 and appendix A of the subcontract, which incorporated various requirements

from the prime contract into the subcontract. Appeal File at 304-05. Under Mr. Mann’s

questioning, Mr. Freeman confirmed that he was referring to those documents when he said

he was getting paid under the terms and conditions of the prime contract, with the exception

of anything that may differ in his contract. Transcript at 136-37. Mr. Mann testified that if

he received additional compensation from the FS for the added costs due to the height

change, Flathead would pay it to Freeman. Transcript at 704.

Shoulder Rock

40.

The FS acknowledged at the outset of the project that it had omitted a line item

for shoulder rock. To remedy it, the FS agreed to provide appellant with processed rock from

an on-site Government stockpile. The material in the stockpile, described as scalpings, was

to be used for the shoulder. The FS agreed to pay appellant for the hauling and placement of

furnished material at an hourly rate, with the placement price to be negotiated. Soon after

award, the parties made preliminary estimates as to both the amount of material to be placed

and the amount of material they expected to have available at the on-site pile. At the time

of the modifications, the parties did not discuss nor did they anticipate using Grading C

material for the shoulder. Appeal File at 163; Transcript at 150, 211, 282-84, 384-86. The

hauling and placement of the material was subcontracted to Tidewater, the firm that also did

the paving. Transcript at 617-18.

41.

During the hearing appellant quantified the amount of material in the stockpile

as 2500 cys. Appellant did that based on Mr. Mann’s measurements. Mr. Mann stated that

in July he paced the pile off and measured the height. He said that the task was something

he did in his line of work as a surveyor. In describing the 2500 cy figure, he said it was a

little bit on the high side. Transcript at 620, 623. Mr. Culham contended that the pile held

3500 cys, not 2500. He did not rely on a visual estimate or on actual measurement to arrive

at his number. Rather, he contended that the preliminary estimate in the modification should

be taken as a firm amount as to what was in the pile. His expressed rationale was that since

the first modification for hauling and placement showed 3500 cys that was the amount in the

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pile. Transcript at 629-30. That conclusion ignores testimony from Mr. Mann and Mr.

Acosta that the amount shown in the first modification was based on rough estimates.

Moreover, the FS ultimately increased the amount of material needed from 3500 to 5300 cys,

showing that the estimates were not viewed as firm. In addition, in a memorandum of

December 13, 2004, Mr. Culham described the FS pile as insufficient in quantity and of

marginal quality. Appeal File at 213, 234; Transcript at 362-63. The parties agree that

appellant placed a total of 5300 cys of rock for the shoulder and the material it used was

Grading C material that had been produced by appellant’s crushing subcontractor, DeAtley.

Transcript at 639. The FS has paid appellant for the hauling and placement of the 5300 cys

placed, and thus, the dispute before us focuses solely on the value of the material placed.

42.

On or about the date of NTP, Mr. Mann and Mr. Acosta discussed the

possibility that the FS might not have enough material in the identified pile to meet the needs

for shoulder rock. They discussed what would happen if there was not enough. Mr. Acosta

testified that he pointed out to appellant that normally on an asphalt project, there is some

reject material that has been used for shoulder rock and that he would want to try to use that

first. He then acknowledged that on this project, he was not sure that any reject would be

available, as he did not know the process as to reject material that appellant was going to use.

In fact, he said that Mr. Mann pointed out that it was possible that the process that the crusher

used for the asphalt might not yield any leftover reject material. According to Mr. Acosta,

at that point, he said, “if we determine that we need more material, we’ll make an agreement

and crush more. If we run out from our existing pile and we never agree on having you crush

anything, then it’s going to be at our expense. We’re going to have to haul it from Dayton

and we’re going to pay for it, the Forest Service.” Transcript at 284-85, 387-88.

43.

On or about July 13, the FS presented appellant with a draft modification

addressing the addition of the shoulder rock. Appeal File at 177. Thereafter, the FS

provided appellant with Modification 2, which added a new line item, item 304(14), which

the FS identified as Government-furnished aggregate. The modification estimated the

amount of rock needed at 3500 cys and called for it to come from the on-site pile. The FS

agreed to pay the contractor $8.15 per cy for the hauling and placement of the material.

Because the material was to be Government-furnished, there was no need for appellant to

estimate the cost of processing the material. Prior to the FS entering into Modification 2, the

FS prepared a “Justification,” dated August 9, 2004. As part of that justification it noted that

the shoulder rock was omitted from the schedule of items and also stated that the rock was

needed for safety purposes. The modification was dated effective September 14. Later, by

Modification 3, the FS increased the amount of shoulder rock by an additional 1800 cys.

This brought the total to 5300 cys, again with the FS solely paying for hauling and

placement. Appellant declined to sign an accord and satisfaction included with that

modification. Appeal File at 142-46, 163, 179, 195-97, 205-06, 284.

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44.

The initial plan to use the FS on-site pile for shoulder rock did not come to

pass. Instead, at the time appellant was ready to proceed with placing material,

representatives of appellant raised questions as to the suitability of the on-site material for

the intended use. Both Jack Bolman, who ran this part of the operation for Tidewater

Construction, and Ronald Borello, who worked for Mr. Bolman, asserted that the pile was

not usable. Transcript at 148-50. Both Mr. Borello and Mr. Bolman described the material

in the pile as mud. Transcript at 150. The FS in contrast argued the material was suitable for

use. It based that contention on the statement by Mr. Acosta that based on his observations

from afar and his later sticking a shovel into the top of the pile, it was his opinion that the

pile was suitable. He said the existing pile was crushed rock and not what Mr. Borella had

described as reject. He acknowledged that he never asked appellant to use the pile, once the

Grading C was being used. Transcript at 791-92. It is of note that the pile remained on the

site after this project. Despite it being available, the FS provided nothing more than the

above statement of Mr. Acosta to support its position. No other witnesses examined the site

or provided a corroborating opinion. Transcript at 150-52, 358. While we address the

quality of the existing pit, we note that the quality issue has no ultimate bearing on the dollar

claim or our decision. That is because, even though appellant has continued to contend that

the pile was unsuitable for use, appellant has structured its claim so that the FS is given credit

for the material in the on-site pile (2500 cys). Thus, appellant seeks compensation for 2800

cys of material, the difference between the estimated amount in the pile of 2500 cys and the

5300 cys placed.

45.

The parties disagree as to what happened at the time of placement and

particularly as to when the FS was notified or became aware that appellant was going to use

Grading C in lieu of the on-site pile. Mr. Acosta stated that he was not on the site every day

but was there often. When he arrived at the site on October 11, appellant was already

engaged in placing Grading C as shoulder rock. He said that he was surprised. He said that

appellant had proceeded without approval from him and without his prior knowledge. He

then explained that it was his intent to first exhaust the government pile. He also said that

in a conversation held at that time, where appellant’s representative said that the material was

too wet, Mr. Acosta told appellant’s representative that appellant should have tried the

designated pile first. Nevertheless, because appellant was already placing its third truckload

of Grading C, and because Mr. Acosta figured the Grading C material belonged to the FS (as

excess property), Mr. Acosta decided to let appellant continue with placing the Grading C

and not use the on-site pile. Transcript at 286-88. A note to the file from the CO dated

December 13, 2004, Appeal File at 213, paints a somewhat different picture. There the CO

noted that the existing pile contained less material than needed and was of minimal quality.

The CO went on to say that based on the above, the Government agreed to use the surplus

material used in crushing operations for asphalt work to be used for shoulder rock. The

reference to asphalt work is confusing, given that Grading C material and not asphalt

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crushing material was used. Significant in the above, however, is the acknowledgment by

the FS that the material in the pile was of minimal quality, which differs from the picture

presented by Mr. Acosta, that the material would have been fine. Transcript at 362-65. Also,

when Mr. Acosta was testifying as to the above note of the CO, he said that the note was

referring to asphalt rock and not the rock placed. It is unexplained why the note would

indicate approval or an expectation of using asphalt rock as a substitute, when in fact, at the

time the note was written in December 2004, Grading C and only Grading C had been placed.

The testimony of Mr. Acosta confused the existing pile, the crushed Grading C rock, and

some unidentified and not yet crushed asphalt rock anticipated by the FS. Moreover, as to

this anticipated crushed asphalt, Mr. Acosta acknowledged that he really did not know if it

would have even been created, since it depended on the process used in crushing. Transcript

at 373-87.

46.

Witnesses for appellant explained matters differently. Mr. Bolman of

Tidewater testified that he first had Ron Borello look at the existing pile and then he himself

looked at it. He said it was “scalpings,” or “ mud.” Mr. Bolman said that he then talked to

Mr. Acosta and the decision was made to use the base rock (Grading C) instead of the

scalpings because of the mud in the scalpings. He said that when he and Mr. Acosta talked,

they were on the grade, and Mr. Acosta went up and looked at the pile. Mr. Bolman said that

he did not know if Mr. Acosta looked at it before he had. Mr. Bolman said he did know that

he and Mr. Borello looked at it and decided that they should do something because the

material was not suitable for shoulder rock. He said they or he talked to Mr. Acosta, and as

far as he knew, Mr. Acosta made the final decision to use base rock instead of the scalpings.

To the best of his recollection, everyone was in agreement. Transcript at 151-52. On further

questioning by the FS, he reiterated that the decision not to use the scalpings was made

before appellant began to lay the Grading C. He stated, “the decision was made before we

started laying shoulder rock to use the grading c or the base rock, whatever you want to call

it.” When asked who made the decision, Mr. Bolman said it was Mr. Acosta. He said they

discussed it and Mr. Acosta gave the “ok” to use it. Transcript at 154.

47.

Notwithstanding the above, the record is clear that neither then, nor in

subsequent conversations during the placement, did Mr. Mann or any representative of

appellant indicate or say to Mr. Acosta or to any FS official that appellant was looking to get

paid for the crushing costs of the Grading C that was being placed. The first time that Mr.

Acosta knew appellant wanted to get paid for crushing was after the rock had been placed.

According to Mr. Acosta, the FS did not know until approximately November 17, 2004

(when appellant first made its demand), that appellant was seeking that additional payment.

Appeal File at 204-05, 284; Transcript at 291-93. In summary, Mr. Acosta was aware either

prior to or after several loads that appellant was placing Grading C in lieu of what was

specified in the modification. He took no steps to stop that operation. His actions were

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based on his understanding that there was no cost impact to the FS in using the Grading C.

He testified that from both his prior experience and his experience with the specification as

to ownership, he thought the material was owned by the Government, and therefore there was

no need to contest it when Mr. Borella used it. He did acknowledge that in viewing the

material as excess, the situation here was unique because of the quantity involved. Transcript

at 352-57.

48.

Mr. Culham was aware through conversations with Mr. Acosta that appellant

was placing the Grading C. He had replaced Ms. Klinger as the CO and was made aware by

Mr. Acosta of the hauling and placement change. Mr. Culham, like Mr. Acosta, also

believed that using the Grading C would not result in any additional costs to the FS. He too

viewed the material as excess to the production. Transcript at 350-51, 627.

49.

As part of its defense, the FS has taken the position that had it been given

notice as to appellant’s intention to seek compensation for the crushing costs of the Grading

C material used, it could have used other material on-site at no cost or secured material from

off-site at a considerable savings. The FS also has asserted that it could have used less

shoulder rock material than what was used and could have made the shoulder narrower,

thereby cutting down the cost. As to the size of the shoulder and the amount of material

needed, Mr. Acosta acknowledged that the shoulder rock estimate could vary considerably,

just depending on the lay of the land and the road. He called the estimate (the amount of

rock estimated as needed for the shoulder) “a shot in the dark.” Transcript at 391. Mr.

Acosta stated that he figured appellant was going to place a one-half to one foot shoulder.

He then noted, however, that because of the lay of the road and the ability to make the

shoulders a little bit wider, the width was increased, which required more quantity.

Transcript at 390. In other testimony, Mr. Acosta used a different width. At one point he

testified that what appellant had placed was more than the one to two feet that would have

been sufficient. He further noted that because of the agreed yardage per truck, the FS did not

concern itself with specifics as to width and let the material be as it was placed. He provided

no quantity difference, but did say that the difference between what was placed and what was

needed would have been significant. He also acknowledged, however, that the amount

placed did create a safety advantage. Appeal File at 197; Transcript at 390-91, 798.

50.

Mr. Culham acknowledged that the FS knew as time went by that the FS would

need more material. He also testified that the typical solution would have been to use reject

material, citing as a basis the testimony of Mr. Acosta. Transcript at 631. However, while

Mr. Acosta spoke of possibly using reject material from the asphalt crushing operation, it was

not until almost the close of the hearing when, on recall by the presiding judge, Mr. Acosta

stated that he recollected a reject pit on the site of 1000 to 1500 cys. He said it was near or

just before the pit. He testified that he did not ask appellant to use it. Transcript at 792-93.

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We note that the FS showed no photos or other evidence of this claimed material. Further,

since it was not used (if it indeed was there) then it should have still been at the site and

logically the FS would have produced a photograph or some evidence of its existence. In

addition, even if 1000 to 1500 cys of reject had at one time been available on site, the

testimony of Mr. Acosta indicated that all or at least some of it had been used. In relation to

the 1000 to 1500 cys referred to above, he said that the material was used a little bit for

bedding on the culverts and “around.” Finally, even if there were 1000 cys (quality

unknown), that would bring the total of potentially available material to 3500 cys (the 2500

cys in the pit and the alleged extra scalpings). Under that scenario the FS would still have

had to make up the difference between that sum and the 5300 cys placed. Any difference

would have required the use of imported, off-site material. Transcript at 623-24, 792.

Finally we note that when he was asked, Mr. Culham could not say how much material was

in the alleged available pile. One would expect he would have had some idea, given his

claim that appellant’s quantity should be lowered as a result. Transcript at 632.

51.

In contrast to the vagueness of Mr. Acosta, Mr. Mann testified that there was

no reject material of the nature referenced by Mr. Acosta and Mr. Culham. Mr. Mann stated

that he specifically asked the crushing subcontractor, DeAtley, and Jack Bolman as to the

presence of any material, and as Mr. Mann remembered, he was told that they had knocked

down whatever pile was there to level an area, shortly after crushing. Mr. Mann also testified

that he was at the site several times and did not remember seeing any pile of scalpings. It is

not clear as to the specific time he is referring to, as he also testified that he did recollect

DeAtley making scalp from the asphalt rock, but described it as a some small quantity of

scalp. In that same vein, he was asked whether he would have remembered if there was a

significant pile on site. He confirmed that he likely would have remembered it. In addition,

he remembered discussing the possibility of using some scalp and the thought was that the

FS should pay for that. He then said that he and Mr. Acosta had agreed that if there was

some scalp available, they could use it, and it would be “a buck or two a yard” in cost. This

appears to be referring to scalp that might be left over from the asphalt rock, not excess from

Grading C. Transcript at 633-36.

52.

There is no dispute over the fact that at the time of the crushing, the crushing

subcontractor, DeAtley, was not intending to use any of the Grading C it had created for

shoulder rock, nor is there any disagreement that DeAtley completed the crushing of Grading

C and then demobilized the crusher on August 24, leaving crushed material in place. At the

time DeAtley demobilized, the remaining crushed Grading C material was not expected to

be needed for the road base for which it was created. According to DeAtley’s revised quote

to appellant of May 21, 2004, and not including mobilization, DeAtley showed a unit price

of $4.85 per ton for the crushing of base Grading C. Appeal File at 300.

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53.

The FS raised issues as to the value of the crushed portion of the operation,

given DeAtley’s total production and what appellant paid DeAtley on the contract. The

contract between the FS and appellant called for appellant to provide 38,995 tons of Grading

C. DeAtley priced crushing of Grading C at $188,980.25. That does not include

mobilization, priced separately at $25,000. In Respondent’s Exhibit 2, Mr. Culham

apportioned 47% or $11,750 as the mobilization applicable to the Grading C crushing.

DeAtley actually produced 41,935 tons of Grading C, rather than 38,995 tons needed to meet

the DQ in the contract. The FS payment to appellant was based on the contract amount of

38,995 tons. Appeal File at 3. The FS thus contended that if one was attempting to calculate

the unit costs for crushing each unit of the Grading C, then at best that should be calculated

by taking $188,980 and dividing it by the amount produced, 41,935 tons, and not 38,995 tons,

the amount contracted for. Respondent’s Exhibit 2; Appeal File at 293, 310; Transcript at

463, 469-73. In responding to the FS position, Mr. Mann explained that he has worked in

the past with DeAtley and when pricing with DeAtley (and while it was not expressly shown

on this quote), DeAtley figures an additional quantity, usually on a percentage basis, that Mr.

Mann described as floor loss. Mr. Mann continued that one knows from proposals with

DeAtley that DeAtley was going to crush extra quantities and that was taken into

consideration in the proposed pricing. He said that was the case with this contract. Thus,

appellant was paying DeAtley for the contract quantity plus the floor loss. Transcript at 622

623, 696-98, 700.

54.

Appellant testified as to what it would have cost had Flathead or the FS had to

secure material from other than an on-site source, as an alternative to the use of Grading C.

Mr. Mann stated that he would have had to supply the material from the town of Dayton. He

said that would have entailed at least another hour for a round trip haul. At the time,

appellant was paying about $75 an hour for a truck. Transcript at 624-25. Mr. Acosta said

that he could not put a cost on purchasing of suitable material for use from Dayton. He did

say that hauling from Dayton was probably a double haul from what it would have been from

on-site. Transcript at 370-72.

55.

Continuing with the costing, Mr. Mann testified that appellant was using 20

cys as the capacity of each truck. If one divides $75 by 20, that yields $3.75 per cubic yard

for hauling cost alone. Transcript at 640-41. According to Mr. Mann, had Flathead bought

crushed rock at Dayton, that would have cost $6.55 for rock per cy and $3.75 for haul.

Transcript at 644. He did not specify what type of rock he was pricing at $6.55. According

to Mr. Acosta, Dayton was about 17 miles away from the work site, and if rock from Dayton

had been used, the FS would have had to negotiate a price as to material and haul. Mr.

Acosta had no estimate for the cost of the material nor did he know what may have been

available. Transcript at 370. Turning to using substitute material, the cost would have

depended on what was available. Counsel for the FS attempted to shed some additional light

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on the costing and referenced a facsimile, Appeal File at 197, which says that shoulder rock

is usually reject material from crushing asphalt and has a very low cost. Mr. Mann pointed

out that, using as a basis Oregon Department of Transportation (ODOT) contracts, generally

reject rock is not expensive. Transcript at 369-72, 718-21.

56.

Mr. Mann acknowledged that if he was successful as to the claim for Grading

C, he would not pay any awarded money to DeAtley. He stated that he believed that the

material belonged to Flathead and that Flathead had taken floor loss into consideration when

the job was costed. He did agree that in coming up with a unit price, it would be reasonable

to use a different total quantity than the 38,995 tons he had priced to establish the unit price.

He noted that although he thought the divisor should be different from the proposal, he did

not agree to the 41,000 claimed by the FS, but rather thought the number should be more in

the neighborhood of 7 to 8% over the contract quantity. Transcript at 700-03.

Correspondence After Completion of the Work

57.

In an e-mail message from Mr. Mann to the COR, dated November 10, 2004,

Mr. Mann stated that after reviewing final costs, he knew that Freeman had more costs

associated with the wall, than Flathead had been able to pay, pointing out that not only had

the quantity overrun, but so too had Freeman’s unit costs. Supplemental Appeal File at 39.

58.

On November 17, Mr. Mann again wrote to the COR as to the retaining wall

and again pointed out that the overrun in the retaining wall quantity had caused Freeman to

incur a significant cost impact and that he had discussed this with Ms. Klinger at the time

they were negotiating the cost reduction on the excavation and culvert items. Mr. Mann said

that after reviewing Flathead’s subcontractor’s final costs, Flathead was requesting a $15/cy

increase for the unit price on the overrun quantity. He said the increase covered Flathead’s

subcontractor’s cost overrun on the additional quantity and did not include additional mark

up on the prime contract. Appeal File at 206-07.

59.

Mr. Mann then addressed the shoulder rock. He reviewed his intention to have

used the Government-furnished material, which he said he had estimated at 2500 cys. He

continued that he understood that due to wet conditions of the material, a decision was made

to use the remaining stockpile of Grading C. He said that he recognized that this was done

for the benefit of both the Government and the contractor, and accordingly, he believed it

was reasonable to recognize that appellant could have used the Government-furnished

material up to the quantity available. He then asserted that he believed appellant should

recover the material cost on the quantity that exceeded the Government furnished aggregate.

He asked for compensation of $6.95/cy in the hauling vehicle for the costs of producing

Grading C. Appeal File at 206-07.

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60.

The COR responded by letter of November 24, 2004. He first addressed the

retaining wall and said that since the item was a designed quantity, Section 106.04 of the FS

specifications only provides for increases in quantities not in price. He also stated that

because there was no change in the type of work, only an increase in materials above 15%

is allowed, the contract price remains the same. He pointed out that the total quantity he

calculated was 1538 cys, which subtracted 13 cys from his quantities, since the Road 700

junction was not shown. Therefore, he allowed an adjustment of 536 cys, at $91/cy. Appeal

File at 208-09.

61.

In addition, the COR addressed the shoulder rock:

Since the work for base and surface had been completed, including item

304(10)C, when the shoulder rock work began, it made sense to use the

remaining stockpile grading C first, otherwise the material would just remain

as overproduced material in a stockpile as Forest Service property per section

105.05 of the Forest Service specifications. However, there was an overrun

in the actual quantities therefore the adjustment is for an additional 1,800 cubic

yards at $8.15/cy for a total of $14,670.

Appeal File at 208-09.

62.

Flathead wrote back by letter of November 29, 2004. Mr. Mann said he

thought the variation in quantities clause applied to the retaining wall rock. He said that the

increase in the quantity had a significant cost impact on Flathead’s subcontractor and pointed

out that one impact was the additional quantity of Grading A required to perform this work,

which was not paid under the DQ for that item. He continued that there were also other

contributing cost impacts associated with the additional time necessary to complete this

work, such as overtime costs associated with the excavation and other work that could not

be completed until the wall was constructed, but was necessary to complete the work on

schedule. He then concluded, “Clearly I believe there is an equitable adjustment due our

subcontractor, over and above the increased quantity that we do agree on.” Appeal File at

210-11.

63.

Mr. Mann then addressed the shoulder rock. He reiterated that all agreed it was

most reasonable to use the remaining Grading C for shoulder rock and again, he believed this

was done for the convenience of both the Government and the contractor. He stated that the

material was much cleaner than the existing government stockpile of aggregate, which was

wet and muddy due to extensive rains. He said the change order modification for shoulder

rock was for hauling and placing Government-furnished material and continued,

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I believe we can both recognize that there was not sufficient quantity of

government furnished material stockpiled on site, regardless as to whether it

was used as shoulder rock or not. In your letter, you refer to Spec Sec 105.05

and note that the unused material would otherwise remain the property of the

FS. I believe you are referring specifically to section 105.05(b) which reads

as follows:

(b) Materials produced or processed from Government lands in

excess of the quantities required for performance of this contract

are the property of the Government. The Government is not

obligated to make reimbursement for the cost of producing these

materials.

Appeal File at 210-11.

64.

He then said,

While I would agree that any unused material would remain the property of the

Government and therefore not subject to reimbursement, this refers to

materials produced in excess of the quantities required for performance of this

contract. Clearly the entire quantity of shoulder rock came from the materials

we produced for this contract and used for the performance of this contract.

However, a portion of this work could have been performed using the existing

Government stockpile and I believe it is reasonable to recognize that quantity

as Government furnished. The Government received the benefit of the

additional materials we produced for this contract and I believe it is clearly the

intent of the Specifications that the contractor should be reimbursed for the

cost of producing this material.

Appeal File at 210-11.

65.

The COR e-mailed appellant on December 1, in response, and stated that he

had discussed the earlier letter with the CO and they agreed that the parties should discuss

the issues. Appeal File at 212; Supplemental Appeal File at 41.

66.

Thereafter, Mr. Culham prepared a memo to the file dated December 13, 2004,

where he addressed both the retaining rock and shoulder rock claims. In that memo he

addressed Mr. Mann’s contention that the previous CO, Ms. Klinger, had indicated a

different approach for overage and price changes. Responding to that, Mr. Culham stated

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that he was the CO of record and therefore would make the call on the matter. Appeal File

at 213-14.

67.

In the same memo, Mr. Culham made a number of points as to the shoulder

rock claim. He stated that the original item (evidently referring to Modification 1) called for

placement of Government-furnished material and thus the modification price was limited

solely to placement costs, with no cost for materials. He acknowledged that the government

source was found to contain less than the needed material and was of minimal quality, noting

that based on those facts, the Government agreed that surplus material used in crushing

operations for the asphalt work would be used for the shoulder rock. Mr. Culham then

explained that as the rock was surplus to the crushing operation, it was the Government’s

property pursuant to the specification for crushing. He said that Mr. Mann’s interpretation

of the specification was that as the rock was used in the work, the contractor should be paid

for it. Mr. Culham then said that pursuant to discussions, he had agreed that if all issues

related to the contract were agreed to be satisfied, then the following adjustments would be

made under the variation in quantity clause. The FS would pay for 3260 cys at the contract

price of $8.15 and 2040 cys at $15.10 ($8.15 plus $6.95 for crushing). He concluded that if

that could not be agreed to, he would disallow adjustment for both items (shoulder rock and

retaining wall) and let Flathead pursue the claims process. Appeal File at 214.

68.

On December 17, Flathead rejected the FS settlement offer. Appeal File at

217. Thereafter, the FS finalized Modification 3 as to those items for which there was

agreement. Flathead, when it returned Modification 3, deleted the accord and satisfaction

language on the modification, because of its concerns that the additional items might be

found to be included in the modification. Appeal File at 253, 255. Modification 3 was dated

effective December 15, and signed by the contractor and Government on December 17, 2004.

Appeal File at 144, 204-05; Supplemental Appeal File at 36.

69.

By letter of January 4, 2005, Flathead asked the CO for a final decision.

Appeal File at 217-19. In quantifying the matter, Flathead said that the retaining wall rock

exceeded the DQ by 176% and the actual quantity came to 1538 cys, of which the FS agreed

to pay only the amount over 115%, and that at the unit price contained in the contract. Mr.

Mann said that with the FS paying for the quantity over 115%, the difference was an

additional 131 cys, which at $91/cy totaled $11,921. Appellant said it was requesting an

additional equitable adjustment for its subcontractor for the quantity over 115%, using the

VEQ clause. Appellant also asked for a separate increase in aggregate base Grading A.

Appellant then addressed another item and said, on behalf of its subcontractor, it was

requesting an adjustment for the increased costs relating to the variation in quantity above

115% of the design quantity. Appellant was doing that under the VEQ clause and claiming

$10,674. Appellant then quantified the claim for Grading A, seeking payment for 427 cy at

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$16.67 cy, or $7118, and similarly quantified its shoulder rock claim using $8.56/cy, which

multiplied by 2800 cys totals $23,968. Appeal File at 218-19.

70.

On January 13, Mr. Mann wrote again, saying that he had researched board of

contract appeals decisions and discovered that some of his conclusions were not consistent

with decisions and amendments. He abandoned the variation in quantities argument and

cited a board case, J&D Services of Northern Minnesota, Inc., AGBCA 98-126-1, 99-2 BCA

¶ 30,478, for the proposition that recovery was not limited to that over 15%. He further

stated that J&D did not support the FS-claimed non-increase in dollars. He asserted that the

actual cost was the right adjustment number and said his subcontractor’s actual cost was

more than $91. He said the increase should apply to the entire quantity of overrun of 666

cys, of which 535 cys had been paid at the original unit price. He adjusted the subcontractor

claim for impacts relating to overtime and equipment standby due to increase in wall quantity

and additional time to complete the work. He then set out his calculations. Appeal File at

220-22.

71.

On January 25, 2005, the CO issued his final decision. He acknowledged the

contractor’s reliance on J&D, but noted that he believed the board had missed an important

“clarification” regarding contractor reliance. The CO asserted that there are two bases for

reliance, not just one when it comes to a DQ item. He said that when reading the quantity

together with the requirement in Section 106.04, it was his view that when appellant entered

into the contract to provide Special Rock, appellant had agreed to provide up to 114.9% of

the DQ for payment of 100% of the stated DQ of 872 cys, as provided in Section 106.4. He

continued that the contractor in formulating a price strategy is left on his or her own to take

the 115% proviso into consideration or not, when pricing a contract. Appeal File at 224. He

then denied the claim for impact on other work as to 304(10)A, citing Big Sky Contractors,

Inc., AGBCA 1999-190-2 (decided under the board’s expedited procedure and thus not

precedential). He said that a review of contract performance showed that an authorized

change did not occur to item 304(10)A and he calculated the overrun at 14.8%. He

essentially repeated the position he had taken throughout his time as CO in regard to the

shoulder rock claim. Appeal File at 223.

72.

On February 1, 2005, appellant responded to the CO decision. The first item

it addressed was 304(10)A. As to that item, appellant essentially agreed that if the item was

under 115% (as noted above, the CO thought it was 14.8%), then it would not be payable.

However, appellant then described an added quantity, which it considered bumped the

overrun to over 115%. Appellant then turned to the shoulder rock issue and stated the facts

set out by the CO did not represent actual discussions that took place during negotiations of

the change order to place the shoulder rock. He attributed the error to the CO’s late

involvement on the project. He first pointed out that the Chase Mountain Pit was identified

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as a government source for rock production, but was not a “designated source,” meaning its

use was not a contract requirement. He said that he had been told by the COR that the

proposed item for shoulder rock had been inadvertently left out of the proposed schedule and

the parties would need to negotiate a price for that work. Appellant pointed out that at that

time the parties needed to come up with a quantity so appellant could include the aggregate

in the final crushing production. At that time the COR said the estimate was 2500 cys and

then showed appellant a stockpile of material that had been left from a prior job. The COR

informed him that this stockpile would be designated as the Government-furnished material

for shoulder rock. Appeal File at 239-41.

73.

Appellant continued that at the time Mr. Mann paced off the stockpile, he

informed the COR that he did not think the stockpile contained 2500 cys and further that he

was not sure that 2500 cys would be sufficient to complete the rock shoulder work. He said

that he also discussed using some of the crusher reject, if it would later be acceptable during

rock production. Appellant then stated that Mr. Mann and the COR agreed that the quantity

would reasonably be around 3500 cys and at the time, it was too early to know if that amount

would be sufficient. Appellant then stated, “Still we recognized that the existing stockpile

would likely not be sufficient and I mentioned that the crusher reject may be an option, but

that I expected the government should pay a reasonable price for the material. We agreed

to this option and I was also aware that the government had additional aggregate material

near the project.” Appellant then went on to say that due to the uncertainty of the quantity

required and the difficulty of in-place measurement, appellant submitted a written proposal

to haul and place the Government-furnished shoulder rock. Appellant said that Modification

2 was for 3500 cys, which would eventually be less than the final quantity needed, which was

approximately 5300 cys. Appellant said that no modification had addressed the 1800

additional cys, although the quantity was agreed to. Appeal File at 239-41.

74.

Appellant then addressed some statements the CO made as to the crushing

operation, taking exception to the CO’s statement that appellant had agreed that ownership

of the material (the surplus crushed rock) was acknowledged to be that of the Government,

pursuant to § 105.05 of the contract. Appellant said that it did not acknowledge that at the

time, since there was no determination that surplus material existed until the work specifying

the material was completed. He also emphasized that the wording “required for performance

of the contract” was key, noting that when it was eventually determined that there was excess

aggregate, that excess aggregate was used for performance of the contract. Additionally,

appellant clarified that the position was not new, as appellant’s position had always been that

costs for crushing rock should be allowed, in the event that rock used from Flathead’s

production was used for extra work, including shoulder rock or other items of work requiring

aggregate. Appellant further stated that where surplus rock was used on other changedirected work, full payment for Grading C was made and authorized by modification. The

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payment for furnishing the material in place, included the cost of production. Appeal File

at 239-41.

75.

Finally Mr. Mann said that he was unaware, despite the CO’s statement to the

contrary, that it was never the intent of the Government to have shoulder rock crushed for

the work. He said that perhaps at the time the modification was negotiated and at a point

where the FS anticipated sufficient rock could be produced, that might have been the case.

He then noted, “but that does not assume the contractor would not get paid for production,

if needed.” He then closed by addressing other issues such as the method and economies of

rock crushing and how the crushing process works and how material was paid for on this

contract. Appeal File at 241.

76.

By letter of February 5, 2005, appellant revised its cost claim. Appeal File at

252-54. Appellant said it had initially included in the claim $9018 on behalf of Freeman for

impacts. Mr. Mann continued that after reviewing that with Mr. Freeman, Mr. Freeman had

indicated that additional costs were actually related to the retaining wall and not other work.

(Retaining wall here is both special rock and Grading A.) Consequently, Freeman or

appellant was increasing the costs for the retaining wall and deleting the $9018 for impacts

relating to other work. Appellant then provided a series of numbers in which were included

changes to its earlier shoulder rock number. On this calculation, it used a unit price of

$9.15/cy and multiplied that figure by 2800 cys to come to $25,620. Appeal File at 252-53.

77.

Thereafter, several other communications were exchanged, but they generally

add nothing to our consideration of the appeal. In a February 7, 2005 letter, appellant laid

out its costs and claim, which totaled $52,804. Appeal File at 243-44, 247, 249, 252-53. On

February 7, 2005, appellant filed its appeal.

78.

On May 19, 2005, the FS filed a motion for summary judgment with the

Department of Agriculture Board of Contract Appeals. There the FS asserted that appellant

was not entitled to the bridge amount for the retaining rock, not entitled to compensation for

the Grading A, not entitled to adjust the unit price for an increased DQ item, and not entitled

to any payment for shoulder rock since the FS owned the Grading C material. As to the

overrun items, the motion focused solely on that part of the DQ clause which allowed

compensation due to an error in the original design that caused the quantity to change by 15%

or more. The board issued a ruling on January 18, 2006. In that ruling the board denied the

FS motion. In denying the motion, the board was not required to decide if compensation

should have been made under the change provision of the DQ clause, rather than the error

in design provision. In a majority opinion, the board concluded (assuming in that opinion

that the issue was interpretation and application of the error in design provision and

application of the 15% provision) that once appellant showed that the overrun in the retaining

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wall exceeded 15%, then it would be entitled to compensation for the entire overrun,

including the bridge amount. Additionally, the board found that the clause allowed appellant

to adjust the unit price, depending upon proof of an increase. As to the Grading A, the board

ruled that there were issues that needed to be resolved as to the amount of Grading A placed

at the wall and whether appellant established that it met the 15% threshold. As to the

shoulder rock, the board found that the record needed more development.

79.

In arguing its case, the FS has raised the issue of the Severin doctrine (Severin

v. United States, 99 Ct. Cl. 435 (1943), as to both the rock claims involving Freeman and the

shoulder rock. Mr. Freeman testified that Flathead is only responsible to pay Freeman what

the Government pays to Flathead. Mr. Freeman said that he expected to get paid if the claim

was successful. Transcript at 115, 164-65. Mr. Mann said he would pay Freeman, if the FS

paid Flathead. Transcript at 703-04. In arguing Severin, the FS focused on Freeman’s

contract and focused on the fact that Freeman’s contract has a provision that Freeman is to be

paid at the unit price for items subject to additions and deductions based on actual quantities

installed, as provided in the table subject to the VEQ clause of the prime contract. The line

items specified are placing and hauling costs. Appeal File at 301-06. According to the FS

briefing, once there is an increase in quantities, such as here, the VEQ clause in Freeman’s

contract would kick in. As such, the FS reasons that regardless of what the prime contract

between Flathead and the FS says, the subcontractor is limited by what its contract with

Flathead specified. The FS then argues that to recover under the VEQ clause, Freeman would

have to show that any increase in costs was solely due to the variation. Mr. Freeman pointed

out that his contract does not specifically spell out how and when additional payment is due

from Flathead, but it was his understanding that if Flathead obtained an increase, then

Freeman’s contract would be adjusted. The amount would be determined by what the owner

paid the contractor. Transcript at 119, 164. Mr. Mann pointed out, through Mr. Freeman, that

Appeal File at 305 under Paragraph 17 said that the documents “attached hereto and made part

of the agreement” were incorporated into the Freeman contract. Mr. Mann then stated that

Freeman would be paid under the terms and conditions of the prime contract, with the

exception of anything that may differ. Transcript at 136-37, 704.

Discussion

Severin Doctrine

The FS claims that payment should not be made because this case falls within the

Severin doctrine. It says that the costs, if any, were incurred by Freeman and Freeman had

no pass-through clause in its contract with Flathead. Accordingly, the FS reasons that it has

no liability to Flathead. The FS recognizes the general rule as to subcontractor damages,

citing Precision Pine & Timber, Inc. v. United States, 63 Fed. Cl. 122 (2004), that if a prime

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is liable to a subcontractor for damages sustained by the subcontractor, the prime can bring

action for the subcontractor’s damages. However, the FS says that there is no obligation when

there is a conditional liability. Put another way, the FS position is that absent a binding legal

obligation, there is no liability. The FS says there are no cases that extend the concept of

“conditional liability” beyond a contract to a feeling of obligation on the part of the prime,

with the terms and amount to be left to the discretion of the prime, possibly through

negotiation.

The FS position is misplaced. It runs counter to established law, as set out by the court

in Metric Constructors, Inc. v. United States, 314 F.3d 578, 581 (Fed. Cir. 2002). There the

court held that a contractor that is liable for damages sustained by its subcontractor may bring

a pass-through claim unless the Government proves that a subcontractor has released the

prime. There is no evidence of release here. Recently, the Department of Transportation

Board of Contract Appeals in TAS Group v. Department. of Justice, DOTBCA 4535, 06-2

BCA ¶ 33,441, reiterated the standard that the burden is on the Government to show that the

prime has no responsibility to the subcontractor. As that board stated, “A prime contractor

is precluded from maintaining a suit on behalf of its subcontractor only when a contract clause

or release completely exonerates the prime contractor from liability to its subcontractor.” Id.

at 165,763 (citing J.L. Simmons Co. v. United States, 304 F.2d 886, 888-89 (Ct. Cl. 1962)).

A case cited as authority by the FS, Perry-McCall Construction, Inc. v. United States, 46 Fed.

Cl. 664, 671 (2000), similarly cited to the principle set out in Simmons.

Additionally, counter to the FS contention otherwise, the contract between Freeman

and appellant indicates that Flathead will be liable to Freeman. The Appeal File at 305 sets

out the terms between Mann and Freeman and incorporates a number of clauses by reference,

excluding only those specifically mentioned or contradicted. Freeman understood that it

would get paid under the terms and conditions of the prime contract with the exception of

anything that may differ in this contract. Appellant clearly viewed itself as obligated to

Freeman and stated that it intended to pay Freeman.

Clause and Detail

Before we address the meaning of the DQ clause, we first reference the Agriculture

Board of Contract Appeals ruling of January 18, 2006, denying the FS motion for summary

judgment. There, the board addressed a motion where the FS asserted that appellant was (1)

not entitled to be compensated for 131 cys of retaining rock, the bridge amount of the

retaining rock overrun; (2) not entitled to compensation for the additional Grading A material

used at the rock wall; and (3) not entitled to adjust the unit price for an increased DQ item.

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The FS had earlier agreed and paid appellant for the overrun in the rock wall that

exceeded 115% of the DQ. In the majority opinion on the motion for summary judgment, the

board concluded that the Government had not demonstrated that the contract precluded relief

for the bridge amount of 131 cys of retaining rock overrun (because of design errors).

Additionally, the majority concluded that the unit price could be adjusted, depending upon

proof of an increase. As to the Grading A, the majority ruled that there were issues that

needed to be resolved regarding the amount of Grading A placed at the wall and regarding

whether appellant established that it met the 115% threshold. In issuing the ruling, the

majority addressed the issues presented by the FS in the motion. The FS motion focused on

the meaning and application of section (a)(2) of the DQ clause, that portion that dealt with

compensation for a design error. As will be evident below, we find here that the adjustment

due appellant should be under (a)(1) of the clause, the section that addresses increases due to

changes. Our reliance in this decision on (a)(1) rather than (a)(2) is important, because

entitlement under (a)(1) does not require appellant to establish that the overrun exceeded

115% of the DQ. In our ruling on summary judgment, the 15% overrun in the retaining wall

rock was a given. The majority had not been able to come to a similar conclusion on that

matter as to the Grading A material, noting that the record needed additional development.

Our reliance on (a)(1) here makes the issues involving 115% moot.

The record clearly establishes that the increase in Grading A was directly linked to

increases in the retaining wall. Whenever the retaining wall height increased, so too did the

amount of Grading A material used next to it. Therefore, to the extent that we conclude that

the overrun in the retaining wall was due to a change and not design error, the same will apply

to the increase in Grading A material.

Appellant asserts that the increase in the retaining wall rock and Grading A material

was due to a change, in that the wall that appellant was required to build was higher than the

wall called for and detailed in the contract and higher than the wall size used to come up with

the designed quantity. The FS asserts that the increase was not due to a change, but rather due

to an error in the original design under (a)(2) of the DQ clause. As noted above, following

the conclusion that (a)(2) controlled, the FS paid appellant for the overrun in the retaining

wall that exceeded 115%. The FS, however, did not pay for any overrun in Grading A

material, asserting that the quantity for Grading A did not exceed 115% of the DQ, and

therefore, no compensation was authorized.

The DQ clause in the contract provides:

One of the following methods of measurement for determining final payment

is DESIGNATED IN THE SCHEDULE OF ITEMS for each PAY ITEM.

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(a) Designed Quantity (DQ). These quantities denote the final number of units

to be paid for under the terms of the contract. They are based upon the original

design data available prior to advertising the project. Original design data

include the preliminary survey information, design assumptions, calculations,

drawings, and the presentation in the contract. Changes in the number of units

DESIGNATED IN THE SCHEDULE OF ITEMS may be authorized under any

of the following conditions.

(1)

Changes in the work authorized by the CO.

(2)

A determination by the CO that errors exist in the original

design that cause a PAY ITEM quantity to change by 15 percent

or more.

(3)

A written request submitted to the CO showing evidence

of errors in the original design that cause the quantity of a PAY

ITEM to change by 15% or more. The evidence must be

verifiable and consist of calculations, drawings, or other data that

show how the designated quantity is in error.

There is no dispute that there were overruns as to both the retaining wall rock and

Grading A material used at the wall. The issue before us is which portion of the DQ clause

is applicable.

The retaining wall constructed by appellant, and that represented on Sheet 6 of the

drawings, showed a wall that would vary in size. The wall that was represented, however,

was understood by both appellant and some FS officials, such as Mr. Acosta, to show a

maximum height of 6 feet. The wall appellant had to construct on this contract exceeded that

height at many locations, thereby increasing the amount of retaining wall and Grade A

material required. The FS does not disagree that the wall that was built exceeded 6 feet in

height at a number of locations. In defending the appeal, however, the FS contends that the

drawing did not limit the height of the wall and, alternatively, even if the contract documents

did represent a 6 foot maximum, the presence of the overrun in material was due to a design

error in how the FS came up with the designated quantities for both the retaining wall and

Grading A material and not due to a change in the work.

We start with what the contract documents depicted. Sheet 6 of the drawings sets out

what is required and how the wall and the Grading A material supporting the wall are to be

placed. The drawing is labeled “typical” for the construction at both the snow park and the

ditch. The details set out the parameters and specific dimensions for various elements of

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construction, including the maximum height of the wall, thickness of the Grading A material,

thickness and configuration of the retaining wall rock, and other elements.

There is a triangle shown on the left side of each detail. The triangle shows two

dimensions, 1 foot and 6 feet. The longer leg of the triangle is shown vertically and points

downward toward several dotted lines marked “existing ground line.” The shorter leg of the

triangle is horizontal and is located at the top of the triangle, forming a right angle with the

longer leg. The triangle is set to the left of the retaining wall and Grading A fill. To the right

of the triangle are depictions of the retaining wall rock. In both details, the drawing shows

that the retaining wall is to be constructed of two large rocks. In each instance, the top rock

is dimensioned at 2.5 to 3 feet in height and 2 to 3 feet in width. The drawing does not

dimension the bottom rock. However, on each detail, the lower rock is shown to be

essentially the same size as the rock above it. Each drawing also depicts a portion of the

bottom rock at below the existing ground line. The rock at the ditch shows the rock being 0.5

feet into the ground, and the rock for the snowmobile trail is shown as one foot below existing

ground. That being said, however, taking the two rocks together, each detail still shows the

two rocks being no higher than a combined 6 feet, at its highest.

The triangle symbol and the rocks are not depicted at the same scale. Rather, each

symbol (the triangle and rocks) are given specific dimensions. In addition, the detail shows

that Grading A is to be 2 feet in width and the same height as the adjacent rocks. The detail

further provides dimensions for the width of the road and sets a slope dimension from the road

to the top of Grading A.

Both parties agree that the rock wall was going to vary in height and appellant would

not place a rock wall in areas where the wall would not exceed 2 feet.

Appellant and its subcontractor understood the details to show that the wall would not

exceed 6 feet in height at any point. Because Grading A was required next to the rock wall,

any increase in the rock wall caused a companion increase in Grading A. If appellant was

reasonable in expecting the rock wall not to exceed 6 feet, then it was entitled to the same

expectation as to Grading A.

The FS does not dispute that there are references on the typical details indicating a 6

foot dimension. However, the FS through several witnesses has argued that the 6 foot

dimensions and indications as to the size and number of rocks did not really mean 6 feet. The

FS asserts that such depictions and dimensions are not controlling, but simply guidance. In

that regard, Ms. Klinger testified that “typical” could mean 8 or 10 feet, not just the 6 feet

shown. Mr. Warhol contended that the detail only covered a particular location and was not

applicable to other areas. He said that the detail would have allowed a contractor to use as

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many rocks as the contractor wanted within the space depicted, saying a contractor could have

used three or four rocks instead of two, even though only two were shown.

Moreover, if we take to its logical end the above FS description of the drawing details

as providing only guidance, then appellant would have been free to use narrower rock and

would have been free to set in a narrower course of Grading A. Following the FS logic,

appellant could have used 4 or 5 rocks in a 6 foot area, instead of the two. It could have

varied the size of rocks and not had to use the large rocks depicted. If “typical” was limited,

then appellant could have chosen to make the wall one foot in width and not the two feet

depicted. If “typical” was limited, then appellant could have placed one foot of Grading A

rather than two at each location. If the dimensions had no real teeth, then why would rock

have been dimensioned at a range of 2.5 feet to 3 feet, and why would the contractor have

been given leeway in terms of width? We are quite certain that if appellant had attempted to

limit the rock wall width to one foot or the Grading A fill to one foot, the FS would have

found that unacceptable and attempted to enforce the detail. Had the FS so acted, we would

have enforced the detail in favor of the FS.

We recognize that the parties understood that the height of the wall could vary and

appellant has clearly stated that it knew that at times the wall would be only a few feet high.

We also recognize that in that instance, there would not be two 3-foot rocks. However, such

a logical conclusion does not change the fact that the drawing details provided a template,

indicating a maximum height of 6 feet, and the contractor was entitled to follow it. To adopt

the reading and application now put forward by the FS would make the details essentially

meaningless and superfluous and would be contrary to how drawings are read. Therefore, as

we see it, it was reasonable for appellant to read the overall details on Sheet 6 to indicate that

the wall would not exceed 6 feet. That was supported not only by the dimension on the

triangle, but also by the height of the depicted rocks.

Particularly important to our decision is the testimony of Mr. Acosta and an

acknowledgment in the FS briefing as to what the drawing depicted. Mr. Acosta was the FS

official who appeared most knowledgeable as to the design and expectation of the FS at the

time of design. While some of his testimony appeared contradictory, confusing, and strained,

he was clear on the fact that he understood the contract documents to show that the wall was

not to be greater than 6 feet. When asked specifically about what was reflected in Sheet 6,

he agreed after describing the dimensions of the rock shown on the drawing that he

understood that the height of the wall could go from 3 to 6 feet. When asked if the 3 to 6 feet

was going to be the variation in the height of the wall, he replied, “correct.” When asked the

same question, albeit somewhat differently, he again acknowledged that he would read the 2.5

to 3 feet dimension next to the top rock to indicate the size of the individual rocks. He did,

however, note that the bottom rock did not have a specific dimension, as the FS was keying

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it so it could be a little higher or taller. In its opening brief at page 2, the FS states, as to the

typical wall profile or cross-section, “The ‘typical’ describes a wall that ranges from one to

six feet in height from the road surface down to the ground.” In addition, the original CO,

Ms. Klinger, agreed at one point that nothing on the drawing showed the wall being larger

than 6 feet. In the face of the FS’s own reading, there is no basis to conclude that appellant

was not reasonable in understanding that the wall it would be required to provide would be

limited to 6 feet. The wall appellant constructed was considerably higher.

This situation is a classic change in the work. The contract called for a 6 foot or lower

wall and the contractor had to construct a much higher wall. The DQ provides for

adjustments due to a change in the work. That section does not include a 115% limitation.

It is the appropriate section to be applied in this case. As Mr. Acosta acknowledged, the FS

did not make a calculation error in coming up with the DQ. The DQ used by the FS reflected

the height limitation expected and designed by the FS.

The FS testimony and attempt to interpret the details is in conflict with common

construction practice and how contractors and the Government read and apply details. In

George Hyman Construction Co., ASBCA 28504, et. seq., 88-2 BCA ¶ 20,613, the board

addressed the use of typical details. There it said, “As used in architectural engineering

drawings, such term signifies an intention that the depicted matter be followed at all locations

in the drawing where the identical conditions exist without need of reference thereto.” See

also Eddie’s Construction, Inc., ASBCA 22116, 78-1 BCA ¶ 12,938 (1977); T.L.T.

Construction Corp., ASBCA 33215, 87-1 BCA ¶ 19,467 (1986), which also supports the

general applicability of a typical detail. The testimony of the FS witnesses attempting to

negate the detail are simply not persuasive and moreover show a lack of understanding of the

construction drawing process.

In deciding as we do, we are mindful of the FS arguments that it was an error in the

original design that caused the pay item to increase and that the increase was not due to a

change in the design. The FS claims that it is not a change, because the FS called for a wall

and a wall was constructed, albeit higher than 6 feet. The FS claims that in order for there to

be a change, the contractor has to show new elements of work, such as the addition of geogrid

or putting the wall in a new location. The FS position has no basis or logic. In fact, in

looking at the geogrid modification, which the FS describes as a change, the situation and

basic facts are generally parallel to the increase in height here. The point is that a change in

height (particularly of the significance here) is a change in the work. We frankly have

difficulty understanding how the FS can argue otherwise. This was not a minimal change.

Given our conclusion that the overrun is attributable to a change, we need not go into

a further analysis of the operation of the relationship of (a)(1) and (a)(2) of the clause. We

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do point out, however that as a general matter, in order for there to be an issue as to a design

quantity error, the work actually required by the FS has to be the same as it describes in the

original plans and specifications. The dispute has to be over whether in calculating or arriving

at a quantity for a particular application, the FS somehow erred in arriving at the proper total.

It is not appropriate to use the error in design in instances where the work performed is a

different size or configuration than what had been originally designed and which design had

served as the basis upon which the DQ was calculated. As the AGBCA said in a non

precedential decision, Big Sky Contractors, AGBCA 1999-190-2, (Jan. 18, 2006), those

portions of the DQ clause which deal with the 15% variation generally deal with a wrong

formula, measurements, or mathematical calculation. The FS has not shown us that such an

error occurred here. Here, the quantity increased because the contractor had to build a higher

wall than that represented in the contract and used by the FS to calculate the DQ.

As explained by Mr. Culham, the FS uses a DQ item to put everyone on notice that the

item is calculated and not measured. The DQ reflects the quantity based on the design used,

in this case a wall not to exceed 6 feet in height. Once the Government provides an estimated

quantity through a vehicle such as the VEQ clause or DQ clause, a contractor is entitled to

rely on the stated quantity. That is because by including such clauses, the Government agrees

to pay the contractor for any overrun (here with the DQ, having to first meet a threshold, if

a design error). Clauses such as those noted above do not contemplate or require a contractor

to verify the government quantity at the time of proposal as a precondition to securing

payment for an overrun.

Wall and Grade Quantities

Appellant placed a total of 1538 cys of retaining wall rock. The quantity was reached

by calculation and not precise measurement. The figure is composed of the 872 cys set out

in the proposed schedule, 535 cys paid by the FS for as the quantity over 15%, and 131 cys

(the bridge quantity) not paid by the FS on the basis that the first 15% overrun was at the

contractor’s risk.

There is no similar agreement between the parties as to the quantity of the additional

Grading A material that appellant placed at the wall. While various numbers have been used

in addressing the Grading A material, we find that 1231 cys is a fair representation of the total

placed between the road and the retaining wall (this does not include the 900 cys of Grading

A material already compensated in the geogrid change). The FS, however, challenges

whether the 1231 cys claimed by appellant is all Grading A material, or instead, also includes

rock which was excavated from other portions of the road construction and which the FS

permitted appellant to substitute for Grading A in some locations. The FS contends that of

the total of 1231 cys claimed by appellant, appellant only placed 537 cys of Grading A at the

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wall, with the remaining 685 cys being rock fill from excavation. Appellant disagrees with

the FS numbers, but does acknowledge that some excavation material was used at the wall

instead of Grading A. Appellant, however, does not provide a quantity, nor does its claim

provide a deduction for that substitution. With that in mind, we note that appellant, before

any deduction, claims it is entitled to be compensated for an additional 533 cys of Grading A

material. Appellant explained that it arrived at that figure by deducting 698 cys, the amount

it expected (based on contract documents) to place at the wall, from the 1231 cys actually

placed. To come to an accurate figure for purposes of quantum, we need to adjust the 533 cys

to reflect substituted rock from on-site.

The FS claims that of the total of 1231 cys placed at the wall, appellant placed 685 cys

of rock in lieu of Grading A. It supports its number by relying on several job logs, identified

in Respondent’s Exhibit 2, which it says reference the placement of fill at the side of the wall.

The FS is correct to a point. Based on the logs and testimony, we find that at some locations,

appellant used excavated rock in lieu of Grading A. Additionally, while appellant raised some

questions as to how certain the FS could be that excavated rock reflected on the logs was not

otherwise used for fill (and not for use at the retaining wall), appellant provided no hard

evidence to challenge the FS. Accordingly, we find on balance that Mr. Culham’s

conclusions as to the logs are generally supported and more likely than not to be correct.

However, we note that his total in Respondent’s Exhibit 2 needs to be adjusted. The 12 loads

that Mr. Culham references in the Appeal File at 353 does not reference the wall. As such,

the log does not adequately support that deduction. Accordingly, those 12 loads are not

included, thereby reducing the FS figure by 180 cys. (The FS and appellant agree that each

load is 15 cys.) Further, we find that Mr. Culham made a mathematical error. The correct

quantity should be 32 loads and an additional 40 cys, not the 43 cys contended. That number,

however, needs to be further reduced, since it includes the 12 loads shown, Appeal File at

353, loads that are not tied into the Grading A wall. Using the correct quantity and deducting

the 12 loads identified on Appeal File at 353, the proper adjustment is 300 additional cys (20

additional loads) plus 40 cys for a total of 340 cys of on-site material used in lieu of Grading

A. Using that deduction, we thus find that of the 1231 cys of material placed at the wall, 891

cys was Grading A material and the remainder was rock excavated from on site. Since

appellant has acknowledged that it expected to use 698 cys of Grading A at the wall (based

on contract documents), the overrun breaks down to 193 cys of additional Grading A and 340

additional cys of rock excavation from on-site. Appellant is entitled to be compensated for

the costs associated with the overrun for both the Grading A and on-site material. However,

the unit price only applies to the 193 cys of additional Grading A and we must arrive at a

separate adjustment price for the costs associated with the overrun cured by the use of on-site

material. We do that because the unit price included material costs and since some of the

overrun was dealt with by Government-furnished material, the material cost portion must be

removed. The costing is discussed in a separate section of this opinion.

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Quantum For Retaining Rock and Grading A

In addressing quantum, we start with the retaining rock. The FS has paid appellant at

its unit price for the entire retaining rock overrun less the bridge quantity of 131 cubic yards.

For different reasons than set out in our decision on summary judgment, we find here that

appellant is entitled to the bridge amount, basing entitlement on (a)(2) of the DQ clause and

not (a)(1) as addressed in the decision on summary judgment. Under (a)(2), the matter of

percentage overrun is no longer a factor. Accordingly, appellant is entitled to be compensated

for the 131cys, identified as the bridge quantity. For purposes of this decision, we calculate

that at the contract unit price of $91/cy, resulting in a dollar figure of $11,921. We deal with

the issue of adjustment in the unit price in our discussion below.

To determine quantum, we have reviewed the testimony of the parties. We find Mr.

Freeman’s explanation credible that Freeman incurred added costs in placing and hauling the

retaining wall rock because of the need to support the higher rock wall and change the placing

sequence. We note that the FS did present limited evidence on logs which indicated that some

placement of the retaining rock was performed without having to support it; however, the

information provided was simply too sketchy to draw the conclusion sought by the FS. We

are comfortable that in general Freeman changed its sequence and could not proceed as

planned, because of having to place higher rock. Moreover, we are not surprised that there

would be some variations in appellant’s placement and performance and that there would be

some instances where appellant would not have been impacted at a specific location.

Additionally, logs by practice are a shorthand or snapshot and generally are not intended to

fully explain activities. While the FS relied on logs to attempt to contradict Mr. Freeman, we

note that the FS did not present contradictory testimony from someone such as Mr. Acosta,

who would have been on site and observed the work. Had the FS presented testimony from

him challenging Mr. Freeman’s description of the impacts, we may have been more

convinced. We also note that when Mr. Acosta described appellant’s performance, and

particularly that of Freeman, he did so in highly positive terms. More specifically, Mr. Acosta

noted that to him, it was clear that the contractor knew what the contractor was doing.

Balancing the evidence, we find that there was a change in how appellant had to perform and

that affected appellant’s cost.

In addressing appellant’s claims that the change in height and resulting change in

sequence affected its unit price, the FS raises several defenses. The FS asserts that Freeman

underestimated its costs and encountered operational inefficiencies during performance that

were unrelated to the added rock and caused it to incur additional costs. The FS also says that

if an adjustment is warranted, the adjustment should be done on a basis similar to that used

with the VEQ clause, specifically -- any increase should be dependent on appellant showing

the overrun not only was more costly to place, but also that the increase in costs was due

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solely to the fact of the overrun. As to the VEQ matter, the standard used for adjustment is

based upon specific language in that clause. Both Flathead and Freeman understood their

contract obligations to follow the prime contract. Had this been a VEQ matter, which it is not,

then Freeman would have been bound by that clause. The claim here is under the DQ clause.

As to the contention by the FS that Freeman underestimated its costs in its proposal,

we find that we need not go through an analysis of the proposed pricing. This is not a case

where we are going to measure the adjustment by comparing actual costs to what Freeman

proposed. In that type of instance, an under-proposal would be significant, as it would create

a lower floor for measuring added costs. As will be clearer below, we chose a different route.

In fact, to the extent appellant may have under-proposed, that would actually work to the FS

benefit on the calculation we adopt.

As to any claims of inefficiency, Mr. Acosta appeared to disprove them, describing the

contractor's competence in highly positive terms. Moreover, we do not expect construction

to run like a Swiss watch and there will almost always be some inefficiencies, equipment

problems, and the like. The FS has not shown us here that there were unreasonable or

inordinate inefficiencies that should reduce any recovery.

We now turn to establishing an adjustment. We find, based on the descriptions by Mr.

Freeman, that the unit costs did increase because of the change in Freeman’s operations

caused by dealing with a higher wall. We, however, are also faced with the fact, as

acknowledged by Mr. Freeman, that Freeman did not segregate costs. Freeman cannot

provide us a measured mile nor can Freeman guarantee that other costs, not associated with

the height increase, are not included in its total costs of performance. With that in mind, we

find that any attempt to compare proposal and actual costs would include too many

uncertainties. We thus have a situation where we find that added costs were incurred;

however, we have no certain measure of those costs. We do believe that while not perfect,

one of the alternative approaches set out by the FS can be used to arrive at a fair and

reasonably accurate number.

We adopt the calculation framework provided by the FS in Respondent’s Exhibit 3 .

There the FS calculated the contractor’s anticipated per foot placement costs and then applied

to that the inefficiency factor of 50%, which had been testified to by Mr. Freeman. We

recognize that in presenting its calculation, the FS did not and does not concede that the 50%

used by Mr. Freeman was correct. In fact, the FS argued that it was unsupported. The FS,

however, provided no alternative estimate, nor did it provide convincing evidence to challenge

Mr. Freeman’s estimate as to the impact of the additional material on Freeman’s unit costs.

Additionally, we note that since the FS position is that the Freeman proposal was too low,

using a percentage adjustment against anticipated costs serves in favor of the FS. If Freeman

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priced its costs too low, then applying a percentage to such costs reduces Freeman’s recovery

to some degree. That said, while Freeman estimated impact, Freeman did not provide hard

data to support that percentage. While we are confident that the additional material resulted

in a change of method and added costs, we are not comfortable with accepting the claimed

50% impact at face value, given the lack of corroboration. Therefore, based on our

understanding of the added work and taking into account Mr. Freeman’s own estimate of 50%

more cost, we find that a 33% factor would be more appropriate.

We now turn to arriving at an adjustment. In calculating the per foot costs, the FS

concluded that Freeman’s original estimate for labor and equipment to build the wall was

$7.09 per linear foot. The FS arrived at that by taking $18,859, which was the total cost for

the activity, and dividing it by 2660 linear feet, the linear footage estimated by the FS. When

the Board applies our factor of a 33% increase in equipment and labor to build the wall, we

come up with a new number of $9.42 a linear foot ($7.09 x 1.33) attributable to the increased

labor/equipment effort for that portion of the wall exceeding 6 feet. That is an increase of

$2.34 per linear foot. When we multiply that figure by 2352 linear feet, which the FS

characterized as a liberal quantity for the length of wall over 6 feet, that yields $5503.68 as

the amount of compensation.

Before addressing overhead and profit, we make one other adjustment. We find that

the evidence, through some of the job logs, shows that Freeman was not impacted at every

location where the wall exceeded 6 feet. While the logs do not translate into a hard and fast

number, we conclude that to use 2660 linear feet as a measure would pay Freeman for more

than that to which it is entitled. As we noted earlier, Freeman used no measured mile or kept

daily costs; accordingly, our adjustment here needs to be based on an estimate. We find that

Freeman’s total increase should be reduced by 20% to account for segments of the higher

wall, where it was not impacted. Our calculation is thus as follows. Freeman’s costs before

overhead and profit are $2.34 a linear foot. When we multiply that by 2128 linear feet, which

reflects a reduction of 20% to the 2660 linear feet identified by the FS, the total compensation

before overhead and profit comes to $4979.52. We recognize that in using the above

calculation, we are not directly recalculating the unit price for the retaining rock. To do that,

we would have to convert the linear feet into cubic yards and then do our calculation. The

total adjustment due appellant, however, would be the same and, accordingly, we do not see

the need to make a mathematical calculation that would come to the same result.

We then add overhead and profit to the above number. We apply a different markup

for overhead and profit then used by the FS. We were not convinced by the evidence that the

6.5% markup identified by the FS is mandated for extra work. The added costs here were due

to a change in the work and as such a contractor is not bound to the markups used in its

proposal. We find here that the appropriate markups should be the general industry standard

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of 10% overhead and 10% profit for Freeman and a 10% markup on Freeman’s number for

Flathead. As to the FS arguments that Flathead should not receive any markup, we find those

contrary to standard practice and not supported by the contract. With markups, appellant’s

total is $6627.74.

In addition to arriving at added cost for the retaining rock, we need to arrive at the

proper adjustment for the Grading A material. Appellant has sought compensation at the unit

price it proposed. The FS has not provided us with an alternative figure for the unit price.

Moreover, the FS paid the contract unit price for the added Grading A material in the geogrid

modification. While that is not conclusive, it does indicate that at least at one point, the FS

considered the unit price to be a reasonable figure. Based on the above, we find that appellant

is entitled to an adjustment at the unit price for 26 cys, which is the amount of Grading A

actually used that exceeded the anticipated Grading A of 698 cys. As to the additional

material placed at the rock wall in lieu of Grading A, we need to make a separate calculation.

While Freeman did not have material costs, it still had to haul and place this added material.

For that reason, we cannot use the unit price, for to use it would result in an overpayment.

In its brief, the FS stated that the material costs for Grading A were $4.85 per ton. It

then applied to that a conversion rate of 1.35 to come up with a cubic yard price for Grading

A material of $6.54 per cy. If we deduct $6.54 from the unit price of $16.67, we are left with

$10.13 a cy. That appears to be the fair figure for the work involved in having to haul and

place the material. We are mindful that the FS tangentially raised the point that the hauling

costs for the excavated material might have been less than that needed for material from a

commercial source. However, other than making the statement, the FS provided no

supporting evidence or an alternative cost. Accordingly, appellant is entitled to 26 cys at

$16.67 and 505 cys at $10.13. The total for both is $5549.07. Since the above costing uses

the unit price as a base and the unit price already includes markups, we make no further

markup adjustment.

Shoulder Rock Claim

The parties agree to the basic facts surrounding the furnishing of the Grading C rock

for the shoulder. Shoulder rock was needed to level the roadway shoulders next to the new

paved surface being placed under the contract. The FS omitted a line item for shoulder rock

in the initial solicitation. To provide for that, the FS added by Modification 2 a new line item,

Item 304(14), identified as Government-furnished aggregate. The parties initially estimated

that 3500 cys of material would be needed.

The FS agreed to provide the material from an on-site pile and to pay the contractor

$8.15 per cy for the hauling and placement of the material. Because the material was to be

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Government-furnished, there was no need for appellant to price the processing of the material.

Later, by Modification 3, the FS increased the quantity of shoulder rock placement by an

additional 1800 cys, to a total of 5300 cys. Appellant declined to sign an accord and

satisfaction included with that modification.

The record shows that there was no discussion or expectation at the times of the

modifications involving appellant using Grading C material for shoulder rock. Grading C was

generally a better quality than needed and a lower grade of rock or rejects would have worked

for the purpose, had such been available. Flathead’s subcontractor did not crush the Grading

C rock in expectation of use as shoulder rock. Rather, the subcontractor crushed it for use on

the roadway. During operations, appellant’s subcontractor produced more Grading C than

was needed for the road, and when the subcontractor closed down its operations a significant

amount of Grading C rock remained at the crushing site. At that time, however, contract

work, not involving Grading C, was still underway and being performed. But for appellant

using the Grading C rock on the shoulder, the Grading C would have in all likelihood

remained unused and on the job-site at the close of the contract. Additionally, if the material

had been left, then under the contract clause in issue, the material would have been excess and

would have belonged to the FS.

There were some early discussions between Mr. Mann and Mr. Acosta as to whether

the FS might need more rock than the 3500 cys initially identified. In that regard, Mr. Acosta

had conveyed that if more material was needed, the FS would be responsible for securing it,

possibly from the nearby town of Dayton. There were also some discussions between Mr.

Mann and Mr. Acosta as to appellant possibly crushing other type of rock (reject) and being

paid for it, but appellant had indicated doubts as to whether the crushing would create reject

material and Mr. Acosta was clearly not relying upon it.

At the hearing, the FS alleged that additional sources of material would have been

available on site to supplement the identified on-site pile, and therefore, appellant should not

be compensated for the use of Grading C, since appellant’s actions deprived the FS of the

ability to use that material. However, the FS did not provide any convincing evidence to

support the contention that there were other sources. Furthermore, the FS did not identify

alternative sources during the initial discussions between the parties or at any other time

during performance of the shoulder rock placement. To the extent the FS presented any

evidence of alternative sources that may have been available, that evidence related to a

claimed additional pile identified by Mr. Acosta. He contended that it had been created by

another crusher during the job and he said that the pile had 1000 to 1500 cys of material.

However, his evidence as to the pile was contradicted by Mr. Mann, who testified as to

conversations he had with his subcontractor, who advised him that no piles were available.

Moreover, as to the pile identified by Mr. Acosta, he provided no information as to quality

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or whether it could have even been used. Finally, and we find important, if such pile existed,

then it would have been relatively easy for the FS to have provided a picture, some detail,

some corroboration and a measurement. That was not provided. Based on the testimony and

our weighing of credibility on this issue, we conclude that to the extent there may have been

a pile, it was no longer in existence at the time the Grading C was being placed at the

shoulder. We find Mr. Mann’s testimony convincing that while there may have been a reject

pile at one time, it was flattened by the contractor to level an area and was not available for

use in building shoulders. In summary, we find that there was no additional on-site alternative

available to either the FS or appellant. Therefore, if the Grading C had not been used in order

for the FS to create the shoulder, the FS would have had to secure material from off-site or

direct appellant to secure material and crush it on site. We also find that the shoulder was

necessary for safety reasons, although its size could have been adjusted.

At the hearing, and to some extent at the 11th hour, the FS claimed that the on-site pile

held 3500 cys and not the 2500 cys claimed by appellant. That difference is important, since

appellant has limited its claim to the amount of material used in excess of what was in the FS

on-site pile. If the FS was correct, then the 5300 cys placed would be reduced by 3500 cys

and not 2500. The FS, despite its contention that the pile held 3500 cys, has presented no

credible support for that number. In contrast, Mr. Mann has shown that he estimated the pile

at 2500 cys. Moreover, at the time of the hearing, the pile was still on site. If the FS wanted

to challenge the position of appellant that the pile was larger than credited by Mr. Mann, all

the FS had to do was measure the pile. It did not. Weighing the evidence, we find that the

existing pile had 2500 cys and therefore, the quantity at issue is the 5200 placed by appellant,

less 2500 cys.

Finally, as an aside, we note that the parties spent considerable time at the hearing

presenting evidence regarding the quality of the material in the existing pile. We need not

deal with that testimony here, since appellant is crediting the quantity in the on-site pile, as

if it was suitable for use. Thus, whether it was actually suitable or not is irrelevant for

purposes of calculating the amount of material in issue.

Having addressed the existing pile, we now turn to the issue of entitlement, which

centers on the meaning and operation of Clause 105.05, Rights in & Use of Materials Found

or Produced on the Work. It provides:

(a) With the written approval of the CO, suitable stone, gravel, sand or other

material found in the excavation can be used on the project. Payment will be

made both for the excavation of such materials at the corresponding contract

unit price and for pay items for which the excavated material is used. Replace,

without additional compensation, sufficient suitable materials to complete the

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portion of the work that was originally contemplated to be constructed with

such material.

(b) Materials produced or processed from Government lands in excess of the

quantities required for performance of this contract are the property of the

government. The government is not liable to make reimbursement for the cost

of producing these materials.

The FS reads the clause to provide that once the Grading C material was crushed by

Flathead’s subcontractor for the road base, any excess Grading C material that was crushed,

but not incorporated into the road base, belonged to the Government and was government

property. Implied in that assertion is that material could become the property of the FS, even

though the contract was still being performed. As understood by the FS, because the Grading

C material was produced for the roadway and not used for that purpose, the material was

excess and “was produced or processed from government lands in excess of quantities

required for performance of this contract.” If the FS reading of the clause is correct, then we

need go no further.

Appellant asserts that the wording “in excess of the quantities required for performance

of this contract” only gives the FS ownership of material that is left unincorporated into the

project at its close. Both parties agree that the Grading C material was incorporated for use

as shoulder rock. The fact that the Grading C would have belonged to the FS, had it not been

used and had it remained on the project once the work was completed, is not in our view

controlling, given the facts and the contract language. For here the fact is that the material

was used. The clause called for a condition precedent. In order to meet that condition, the

material had to be in excess of that required for performance of the contract. The Grading C

at issue in this dispute was not in excess of that required, as it was used on the contract to

create the shoulder. The clause does not define material on the basis of why it was produced.

Rather, the condition that must be met is that the material must be excess to what was required

for performance of this contract, and here the material in dispute was not excess. Were we

to apply the FS reading, then we must expand the meaning of the words and redefine

“required for performance of this contract” to mean for performance of “a work item

specified.” The wording does not say that. The wording is considerably broader.

In briefing, the FS argues that the language must be read using the doctrine of contra

proferentum and that under that doctrine, the FS reading prevails. First, to use contra

proferentum there must be more than one reasonable interpretation. Second, if there are

competing reasonable interpretations, then the non-drafter’s interpretation would normally

prevail, absent certain exceptions. Hills Material Co. v. Rice, 982 F.2d 514, 516 (Fed. Cir.

1992). Here, we find that the only reasonable interpretation is that of appellant. It is the only

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interpretation that does not read new words into the contract language. However, even if we

did not find it to be the only interpretation, then clearly the interpretation put forward by the

contractor would be a reasonable one.

In its response brief, the FS contends without factual predicate that appellant

understood the clause in the same manner as did the FS. The FS bases its contention on the

fact that appellant did not tell the FS, at the time it initially placed the Grading C rock, that

it was expecting to get paid for the crushing costs. The fact is that in all likelihood neither

appellant nor the FS paid any attention to clause 105.05 at the time appellant submitted its

proposal on the contract or at the time that the parties added the requirement for shoulder

rock. There is no evidence that appellant considered the clause at the time it was placing the

Grading C. In contrast, it is clear that once the Grading C was being placed, both Mr. Acosta

and Mr. Culham did consider the clause and read the clause to hold that the FS owned the

property. That is why the FS allowed appellant to continue with the Grading C. However,

the record is also clear that during that time there were no discussions as to the clause with

appellant, no indication that appellant was expecting that the clause would invest the FS with

ownership of the Grading C, but also, no demand from appellant to get paid.

This dispute is not controlled by the parties’ intent or understanding of the clause,

either at proposal or during placement. Appellant’s claim is not based on reliance. Rather the

dispute is about what the contract says as to material crushed by appellant and used on the

project for the benefit of the FS.

Normally, having determined that appellant’s reading is appropriate, we would stop

there. However, this appeal is complicated by the fact that although appellant provided the

material and that material had a value, there was never a meeting of the minds at the time of

placement as to payment or value. The record is clear that while the FS knew the work was

being performed, the FS did not expect to have to pay for the material, and more important,

appellant never took steps to put the FS on notice of its expectation that it was to be paid.

Proceeding without putting a party on notice can at times be fatal to a contractor’s

claim. However, that is not always the case. In assessing who takes the risk when actions are

taken without sufficient approval, the law has us look at matters such as whether a benefit has

been conferred by the contractor on the Government in the form of goods or services, which

the Government accepted. In considering that, courts look at a number of factors including

whether the Government needed the material or service provided (and thus would have

secured what was provided or similar services); whether it derived a benefit; and whether the

contractor was acting in good faith. While the Government does not have to pay for work that

it did not require or order, it cannot simply walk away where it has taken a role in the ordering

of the services and where it has retained the benefit. Whether labeled as quantum meruit or

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quantum valebant, retention of benefits can justify relief, even if there is a lack of authority.

See United States v. Amdahl Corp., 786 F.2d 387 (Fed. Cir. 1986); Health Practice

Enhancement Network, Inc., VABCA 5864, 01-1 BCA ¶ 31,383.

In Wayne Construction, Inc., AGBCA 83-122-3, et seq., 84-2 BCA ¶ 17,352, the board

dealt with a claim for unjust enrichment in a case where crushed rock was also the material

in dispute and where the language of the clause mirrored in many respects the clause in issue

here. Wayne, however, differed significantly from this case, because in Wayne there was no

contention that the Government put the material claimed as “excess” to use on the contract.

In fact, the FS evidence showed otherwise. Accordingly, the board found that there was no

unjust enrichment. In making its decision the board said, “While some aggregate remained,

there is no evidence that the Forest Service derived any use or benefit therefrom. Tangible

use or benefit by the Government is essential to support recovery under the theory of unjust

enrichment alleged by Appellant. Tellico Lumber, [AGBCA 80-149-3, 80-2 BCA ¶ 14,787].”

The clear implication from the board decision is that had the material been used for the FS,

the use would have been compensable.

The facts here show that the FS needed shoulder rock to be placed on the sides of the

road. The FS did not necessarily need Grading C, but it did need to create a shoulder for

safety reasons and needed some material to do that. The FS did have some leeway as to the

width of the shoulder. According to Mr. Acosta, the shoulder did not necessarily need to be

as wide as the one constructed on this project. He said that the shoulder could have been one

to one and one-half feet in width, but that it was put in wider. He, however, gives us no

specific dimension for the shoulder as placed. For purposes of this decision we will accept,

based on Mr. Acosta’s statements, that one and one half feet would have been adequate.

Based on the fact that Mr. Acosta said a wider shoulder was constructed and that the amount

of additional width was significant, we will find that the width as placed was 2 feet. We,

therefore, reduce the total of extra shoulder rock by 25%, so as to account for the possible FS

savings that were prevented by a lack of notice.

We now turn to determining an equitable adjustment. Appellant attempted to establish

the costs its subcontractor incurred to crush the rock. Appellant came up with a figure of

$9.15/ cy. The FS provided its own calculation of appellant’s number and it came to a unit

figure of $6.34. We, however, need not resolve the difference. As noted above, we have

concluded that the shoulder had to be placed. However, we have also concluded that by

failing to notify the FS of its intention to seek added costs, appellant essentially blocked the

FS from fully mitigating the impact of this situation. With that in mind, we believe the record

provides a better number than that provided by either party.

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We calculate compensation based on value, using as a basis what it would have likely

cost the FS to secure material had appellant notified it of its intended claim. In reaching our

conclusion we take into account the fact that appellant’s lack of notice made it impossible for

the FS to fully replicate what it would have done, had the FS had a choice at the time of the

substitution.

The shoulder was needed. However, according to Mr. Acosta, it could have been built

with lesser quality material and did not have to be as wide as it was constructed. There was,

however, no realistic alternative on-site to the Grading C. The only apparent alternative was

to secure material from somewhere off-site. In this case, we cannot know for certain what

type of material may have been available and from where. Because the uncertainty might

have been remedied had appellant provided the FS timely notice of its intention to seek

compensation for the Grading C, we give the FS the benefit of the doubt on what was most

likely available.

Giving the benefit of the doubt to the FS, we conclude that the FS may have been able

to find some sort of reject material in the range of $1.50/cy. We also find that the added

hauling costs would have been $3.75, (the hauling costs from Dayton, since no closer source

was identified.) Those cost elements total $5.25 a cy, which is less than the crushing costs

identified by either party. As to markup, we believe it is appropriate here to leave the markup

on the table. The fact is that appellant will be the beneficiary of the award for the Grading C.

There is no indication, that DeAtley is making any claim. To some degree, appellant is

securing a windfall, in that had the material not been used on the contract, appellant would

not have been entitled to compensation for what then would have been excess material. That,

however, is balanced by our understanding that some overage was calculated in DeAtley’s

price to appellant, and thus to some degree, appellant paid for the added material. The

alternative, of course, would be to deny payment. For us to do that, however, would not only

deprive appellant of the ability to recoup costs, but would also be providing the FS with free

material. It would also require us to read the clause more broadly than warranted.

We, therefore, find that appellant is entitled to be compensated at $5.25/cy for 2100

cys. We arrive at 2100 cys by taking 2800 cys (the difference between the 5300 cys placed and

the 2500 in the on-site pile) less 25%, which we attribute to placing a wider shoulder than

needed. Accordingly, appellant is entitled to $11,025 for the shoulder rock.

Decision

The appeal is GRANTED IN PART. Appellant is entitled to be compensated as

follows: for the bridge quantity of 131 cys, $11,921; for additional costs (adjustment to unit

price) due to the increase in the retaining wall height, $6627.74; for the additional Grading

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A and substituted material, $5549.07; and for the shoulder rock, $11,025. In addition,

appellant is entitled to Contract Disputes Act interest on those claims.

__________________________

HOWARD A. POLLACK

Board Judge

I concur:

__________________

CANDIDA S. STEEL

Board Judge

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VERGILIO, Board Judge, dissenting in part.

I concur with the decision of the majority to the extent that the claims are not barred

by the Severin doctrine and that the claim for the accurate designed quantity (without a fifteen

percent deduction) should be granted in the amount of $11,921, plus interest as prescribed in

statute, but dissent from the other aspects of the decision. I do not read the contract as

indicating the maximum height of the retaining wall. The retaining walls in question were

built according to the design in the contract. The claims do not involve changes, but

correctable assumption-based errors under the Methods of Measurement clause. Under the

clause, an error in a designed quantity shall be corrected to reflect the correct quantity when

the variation is at least fifteen percent of the stated designed quantity, and not corrected when

the error is less than fifteen percent of the stated designed quantity. The contractor has not

demonstrated that per unit costs increased to perform the work associated with the additional

quantity. For the remaining claim, the record demonstrates that the contractor has been

compensated to perform the work that created the aggregate as surplusage. The contractor

is not entitled to additional payment for transforming rock into the aggregate which belonged

to the Government.

Severin Doctrine

The Government has failed to demonstrate that the Severin doctrine bars pursuit of

these claims. Corrections for designed quantity errors under the Methods of Measurement

clause are not predicated upon increased or decreased contractor costs. Therefore, the Severin

doctrine does not affect pursuit of those aspects of the claims. In seeking equitable

adjustments to unit costs, the contractor does have to demonstrate its actual costs and

increases. As the majority explains, the Government has failed to meet its burden of

demonstrating that a subcontractor “executed an iron-clad release sufficient to trigger

application of the Severin doctrine.” Metric Constructors, Inc. v. United States, 314 F.3d 578,

584 (Fed. Cir. 2002).

The Contract (Error versus Change)

The contract requires the placement of retaining wall segments along the roadside.

Construction is to be in accordance with contract specifications, including the Forest Service

Specifications for Construction of Roads and Bridges (Nov. 1996), Appeal File at 5 (¶ C-3),

curiously not placed into the record by either party. The contract contains drawing details of

the “retaining wall & wide ditch typical” and the “retaining wall & snowmobile trail typical”:

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Appeal File at 614.

The contractor and majority conclude, based upon these depictions, that the retaining

walls will have a maximum height of six feet. I do not read these details (and would not read

them in isolation from the contract as a whole) to limit the height of a retaining wall to a

maximum of six feet. The contract drawings depict cross-sections of a “typical” retaining

wall. Typical in this context represents typical construction and does not explicitly or

implicitly identify a dimension as an absolute maximum or minimum. The contractor has

pointed to no aspect of the contract that indicates that the maximum height of the wall will

be six feet, or other basis that makes such a conclusion reasonable. The nature of the

construction and the use of the designed quantity basis for payment also supports the notion

that variances in construction were anticipated, particularly over the given terrain, such that

reading an absolute into the diagrams is not reasonable.

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The majority also imposes an inconsistent and inequitable reading by its determination

of what the typical drawings depict. The majority observes that the drawings reference a sixfoot retaining wall. However, if that is the typical retaining wall, both the majority and

contractor have failed to account for that typical height in making calculations of the designed

quantities. If the drawings indicate that a six-foot wall retaining wall was to be constructed

throughout the project, the contract line items must be adjusted under the Changes clause for

all retaining wall work at a height below six feet.

Further, the triangle, interpreted by the majority as relating to the retaining wall, depicts

the elevation variance in the existing ground line when measured below the sub-base on the

road and near the retaining wall. As depicted in the diagrams, the retaining wall is placed (1)

one-half foot below the existing ground line along the road with a ditch and one foot below

the existing ground line along the road with a snowmobile trail and (2) rises to the top of the

sub-base, which is three-quarters of a foot above the existing ground line at the road level.

Appeal File at 613-14. As depicted, a typical retaining wall could be 7.25 or 7.75 feet from

its base to its top, along the road with a ditch and with a snowmobile trail, respectively, with

6.75 feet visible above the existing ground line. Even if viewed as revealing a maximum

height for the wall, the depicted maximum height is greater than six feet. The majority fails

to factor into its calculations the true extent of the supposed change.

The varying height and length of the retaining wall should not have been unknown to

the contractor. The contract incorporates the Site Investigation and Conditions Affecting the

Work clause (APR 1984), 48 CFR 52.236-3 (1985), Appeal File at 16, under which:

The Contractor acknowledges that is has taken steps reasonably

necessary to ascertain the nature and location of the work, and that it has

investigated and satisfied itself as to the general and local conditions which can

affect the work or its costs . . . . The Contractor also acknowledges that it has

satisfied itself as to the character, quality, and quantity of surface and

subsurface materials or obstacles to be encountered insofar as this information

is reasonably ascertainable from an inspection of the site, including all

exploratory work done by the Government, as well as from the drawings and

specifications made a part of this contract. Any failure of the Contractor to take

the actions described and acknowledged in this paragraph will not relieve the

Contractor from responsibility for estimating properly the difficulty and cost of

successfully performing the work, or for proceeding to successfully perform the

work without additional expense to the Government.

Contract drawings 10 through 40 of 44 depict on a map with elevations of the

topography the placement of the road; the retaining wall is required because of elevation

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changes over the span of the road. Appeal File at 618-40. The exploratory work of the

Government resulted in depictions (dated June 21, 2003) of cross-sections of the road on the

terrain taken at various intervals. Appeal File at 602-08. The contractor has not demonstrated

that it was reasonable to conclude that the height of the retaining wall would never exceed six

feet, given the contract, the diagrams, and the existing site. As dictated in the clause above,

the contractor is deemed to have visited the site and reviewed the available diagrams in

assessing the work to be accomplished.

For the work in question, the contractor utilized retaining wall rocks and compacted

fill. The contractor built the retaining wall to fit the terrain; the contractor has not

demonstrated that it was required to deviate from any contract specification. Such a showing

would be difficult without placing in the record the actual specifications incorporated by

reference. The as-built detail (below) is not different from the typical diagrams, although the

height of the retaining wall varied from 2.5 to 9 feet tall and “two-block” construction was

not always utilized.

Appeal File at 653. The construction method of blocks of rock and compacted rock was used

in the construction. In contrast, work which required the use of a geogrid, a different

construction method, is depicted with a different as-built diagram and was treated as a change

within the scope of the contract. Appeal File at 653.

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From the contract and record, I conclude that for the portions of the retaining wall in

question, the contractor constructed the retaining wall as depicted in the contract and as it

should have anticipated. The method and manner of construction used did not constitute a

change under the contract.

Methods of Measurement Clause

The Methods of Measurement clause details the requirements to adjust the number of

units to be paid for under a designed quantity pay item. The provision states:

(a)

Designed Quantities (DQ). These quantities denote the final number

of units to be paid for under the terms of the contract. They are based upon the

original design data available prior to advertising the project. Original design

data include the preliminary survey information, design assumptions,

calculations, drawings, and the presentation in the contract. Changes in the

number of units DESIGNATED IN THE SCHEDULE OF ITEMS may be

authorized under any of the following conditions:

(1)

Changes in the work authorized by the CO [contracting

officer].

(2)

A determination by the CO that errors exist in the

original design that cause a PAY ITEM quantity to

change by 15 percent or more.

(3)

A written request submitted to the CO showing evidence

of errors in the original design that cause the quantity of

a PAY ITEM to change by 15 percent or more. The

evidence must be verifiable and consist of calculations,

drawings, or other data that show how the designed

quantity is in error.

Appeal File at 282. This method of measurement is distinct from other methods (e.g., staked

quantities, actual quantities, and lump sum). This is not a fixed unit price line item for an

indefinite quantity, despite the suggestion of the Government. The designed quantity, as

opposed to the actual quantity, method of measurement, indicates that the unit price is agreed

upon for the stated designed quantity plus or minus fifteen percent (but not inclusive) if the

variation is attributable to an identi

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