# GRANTED IN PART: April 20, 2007

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## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

GRANTED IN PART: April 20, 2007

CBCA 118

FLATHEAD CONTRACTORS, LLC,
Appellant,
v.
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.

2

CBCA 118

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
1.
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.
2.
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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4.
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.
5.
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.
6.
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.
7.
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).
8.
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.
9.
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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28

$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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Acbca%3A1be454a0a110966d. Public record. Not legal advice.