DENIED: February 10, 2016

DENIED: February 10, 2016

CBCA 4614

MAGWOOD SERVICES, INC.,

Appellant,

v.

DEPARTMENT OF HEALTH AND HUMAN SERVICES,

Respondent.

Heyward Manigault, President of Magwood Services, Inc., Campbell Hall, NY,

appearing for Appellant.

Lucy G. Mac Gabhann, Office of the General Counsel, Department of Health and

Human Services, Baltimore, MD, counsel for Respondent.

Before Board Judges DRUMMOND, SHERIDAN, and SULLIVAN.

SULLIVAN, Board Judge.

Appellant, Magwood Services, Inc. (Magwood), appeals two decisions of the

contracting officer for respondent, Department of Health and Human Services (HHS),

denying claims for delay and contract funds improperly withheld. Magwood alleges that

the contracting officer’s determination regarding the sprinkler testing requirements

unreasonably delayed its performance of the contract and that the contracting officer

improperly withheld re-inspection costs from its final payment of the contract. The

parties submitted the case for decision on the record, pursuant to Rule 19. 48 CFR

6101.19 (2014). For the reasons that follow, the Board denies the appeal.

CBCA 4614

2

Statement of Facts

The Contract and its Relevant Terms

On December 31, 2013, HHS awarded a contract to Magwood for the renovation

of an existing warehouse at the Hopi Health Care Center on the Hopi Reservation.

Exhibit 1 at 1-2.1 Magwood was to perform the construction activities set forth in the

design drawings that accompanied the contract. Id. at 13. The amount of the contract

was $129,000 and the term of performance was ninety days from the date the notice to

proceed was issued. Id. at 2.

The construction drawings contained general notes regarding the fire protection

system. Exhibit 2 at 14.2 Pursuant to these notes, the contractor was required to “modify

the existing wet-pipe fire sprinkler system in all areas of remodeling as indicated in the

drawings, provide and install all items, including those of a minor nature, necessary to

complete the installation and to provide approved fire protection throughout the

remodeled area.” Id. The notes also required that “all work shall be installed in

accordance with all codes, laws, rules and regulations of all national, state, county and

local authorities having jurisdiction over the premises. This shall include but not be

limited to the fire department having jurisdiction, and the carrier of the building

insurance.” Id. The contractor was required to “secure and pay for all permits,

inspections and certificates required by the foregoing authorities.” Id.

The drawings also set forth the specifications for the air conditioning system.

According to the scope of work for the contract, Magwood was required to install “a split

air conditioning system in one of the areas of the building with an interior ceiling

mounted fan coil unit and an exterior condensing unit on a concrete pad and to

reconfigure the existing fan unit and louvers to provide ventilation to the other portion

of the building.” Exhibit 1 at 13. The project data contained on the drawings advised

that the drawings had to be coordinated with the mechanical and electrical requirements:

5.

[Heating, ventilation, and air conditioning (HVAC)] and electrical

equipment shown on architectural drawings is for general reference only.

1

2

All exhibits are found in the appeal file, unless otherwise noted.

The construction drawings are part of the contract and were provided by the

agency as part of exhibit 1 in the appeal file. The agency also provided a larger, legible

version of the drawings as exhibit 2.

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3

Coordinate equipment and location with mechanical and electrical

drawings.

Exhibit 2 at 2. The drawings for the HVAC system similarly advised that the locations

on the drawings were only approximate and required that any changes were to be noted

on the final as-built drawings submitted at the end of the project:

1.02 HVAC drawings are diagrammatic and intended to show the

approximate location of ductwork, outlets, equipment and piping.

Dimensions given in figures on the plans shall take precedence over scaled

dimensions and all dimensions, whether given in figures or scaled, shall be

field verified. No ductwork shall be fabricated until duct clearances are

field verified.

....

3.09 Make note of any changes made in layout and incorporate in

“record” drawings submitted to the architect at completion of the project.

Id. at 15.

With regard to inspections, Magwood was required to “make arrangements for

inspections and perform tests required for HVAC work.” Exhibit 2 at 15. The notes

contained the requirements for “testing, adjusting and balancing” the HVAC system and

required that the system be “balanced to approximate [cubic feet per minute (CFM)] . . .

and to satisfaction of the owner.” Id. The performance specification for the HVAC unit

was 1600 CFM. Id. The list of submittals for the contract included “[r]esults of required

tests per the sheet specifications.” Id. at 14.

The contract incorporated by reference a Suspension of Work clause, which

provides the remedy should the Government unreasonably delay the performance of the

work:

If performance of all or any part of the work is, for an unreasonable period

of time, suspended, delayed, or interrupted (1) by an act of the Contracting

Officer in the administration of this contract, or (2) by the Contracting

Officer’s failure to act within the time specified in this contract (or within

a reasonable time if not specified), an adjustment shall be made for any

increase in the cost of performance of this contract (excluding profit)

necessarily caused by the unreasonable suspension, delay, or interruption,

CBCA 4614

4

and the contract modified in writing accordingly. However, no adjustment

shall be made under this clause for any suspension, delay, or interruption

to the extent that performance would have been so suspended, delayed, or

interrupted by any other cause, including the fault or negligence of the

Contractor . . . .

Exhibit 1 at 9 (48 CFR 52.242-14(b) (FAR 52.242-14(b))). The contract also

incorporated by reference an Inspection of Construction clause, which provides in

relevant part that the contractor was to provide inspections as required by the contracting

officer:

The Contractor shall promptly furnish, at no increase in contract price, all

facilities, labor, and material reasonably needed for performing such safe

and convenient inspections and tests as may be required by the Contracting

Officer. The Government may charge to the Contractor any additional cost

of inspection or test when work is not ready at the time specified by the

Contractor for inspection or test, or when prior rejection makes

reinspection or retest necessary. The Government shall perform all

inspections and tests in a manner that will not unnecessarily delay the work.

Special, full size, and performance tests shall be performed as described in

the contract.

Id. (FAR 52.246-12(e)).

Although not referenced in the contract3, Magwood also relies upon the Changes

clause, which provides the remedies should the Government change any of the

requirements of the work in a manner that causes an increase or decrease in the

contractor’s costs:

If any change under this clause causes an increase or decrease in the

Contractor’s cost of, or the time required for, the performance of any part

3

The contract does not appear to contain a changes clause, although FAR

43.205(d) requires the insertion of such a clause for fixed-price construction contracts. The

Board reads into the contract the standard Changes clause found at FAR 52.243-4. Rockies

Express Pipeline LLC v. Salazar, 730 F.3d 1330, 1338 (Fed. Cir. 2013) (citing G.L.

Christian & Associates v. United States, 312 F.2d 418, 426-27 (Ct. Cl. 1963)) (“if the parties

to a government contract neglect to include a clause in the contract that is otherwise

required by regulation . . . , courts will read the clause into the contract as a matter of law”).

CBCA 4614

5

of the work under this contract, whether or not changed by any such order,

the Contracting Officer shall make an equitable adjustment and modify the

contract in writing. However, except for an adjustment based on defective

specifications, no adjustment for any change under paragraph (b) of this

clause shall be made for any costs incurred more than 20 days before the

Contractor gives written notice as required.

FAR 52.243-4(d).

Contract Performance

The contracting officer issued the notice to proceed on February 10, 2014. Exhibit

4. Magwood submitted a project schedule in which it forecast that the project duration

would be sixty-four days. Exhibit 7. In this schedule, Magwood indicated that it would

begin demolition on March 3, 2014, and projected final clean-up would conclude on

April 21, 2014, and the “closeout document” would be completed on April 29, 2014.

There were no separate dates for testing listed on the initial schedule. Id. Magwood

notified the contracting officer’s technical representative (COTR) on March 3, 2014, that

its start date had to be postponed by a week because it had not received the materials

from its suppliers. Exhibit 9.

The parties executed four modifications to the contract, the last of which extended

the completion date for the contract to August 12, 2014. Exhibits 17, 19, 32, 38. Prior

to signing modification 004, the contracting staff asked Magwood to submit a revised

project schedule. Exhibit 37. After Magwood missed the completion date of August 12,

2014, Magwood submitted a schedule that showed the items left to be completed in five

workdays and projected that performance would be complete on September 8, 2014.

Exhibit 48. The remaining activities included “HVAC certification” and “sprinkler

certification,” which were to be completed on the same day, September 4, 2014. Id. at

3.

The appeal file contains a series of contractor’s daily reports for the period

August 30 through September 8, 2014. Exhibits 51-59. According to these reports, on

September 3, 2014, Magwood “got HVAC certification (will send as soon as we get hard

copy).” Exhibit 55. On September 8, 2014, Magwood was still “waiting on sprinkler

certification to come.” Exhibit 59.

By email message dated September 9, 2014, Magwood forwarded the HVAC

certification to the COTR and noted that it was “still waiting for the sprinkler

certification to come in.” Exhibit 60. The COTR responded that the HVAC report

CBCA 4614

6

looked “satisfactory from an installation standpoint” but that Magwood needed to submit

a test and balance report as required by sheet M2.1, item 3.01 of the construction

drawings. Id.

By email message dated September 25, 2014, Magwood informed the COTR that

the tests for the HVAC and sprinkler systems were scheduled for Tuesday, October 7,

2014. Exhibit 66. By email message dated October 6, 2014, Magwood requested a copy

of the sprinkler drawings for the existing system from the COTR. Exhibit 67 at 2. The

COTR responded the same day that he could not find the drawings and would ask the

facility for them. There is no further mention of the need for the sprinkler drawings until

Magwood sent another email message on October 31, 2014, in which Magwood states

that its sprinkler inspection company would provide a proposal the following week.

Exhibit 68 at 1. This email message follows several exchanges in which Magwood

simply reports that it is awaiting the report from the sprinkler company. Id. at 2-4.

By letter dated November 5, 2014, in response to the contracting officer’s

statement that he planned to assess liquidated damages, Magwood reported that it was

still awaiting a proposal to accomplish the testing:

[W]e are waiting to receive the sprinkler proposal from CINTAS for the

total cost of re-engineering the sprinkler system. This is the only way that

the system can be properly tested and certified. As stated above, the

government will need to issue a formal modification including the added

cost for Magwood Services to have this work completed.

Exhibit 69 at 2. This letter prompted several written and telephonic exchanges between

the parties regarding what would be necessary to test the sprinkler system. Exhibits 75,

78, 81, 83. By letter dated November 21, 2014, the contracting officer declined the work

Magwood proposed to perform to provide the testing of the system and stated that “[n]o

further work on the sprinkler system will be required.” Exhibit 86.

By email message dated December 9, 2014, the contracting officer advised that

“with the exception of the [test and balance (TAB)] reports, the punch list items are

completed. As soon as these [TAB] reports are provided and a release of claims is

signed, I will approve the remaining payment amount.” Exhibit 95.

Magwood did not provide the HVAC certification for the project until January 14,

2015. Exhibit 98. The certification consisted of a TAB report prepared by Omega Test

& Balance LLC, for a test performed on October 7, 2014. Id. at 7. In the narrative

summary, Omega reported that the HVAC unit, when “set on the highest speed setting,”

CBCA 4614

7

was “providing 55% of the specified design CFM.” Id. at 4. The test report listed the

total CFM to be 880. Id. at 7-8. Magwood also submitted a receipt for work performed

on January 8, 2015 by Boyer Heating & Cooling. Id. at 9. According to the receipt, the

technician, after finding that the ducts were not installed properly, spent four hours onsite to connect the leads to the ductwork. Id.

The contracting officer acknowledged receipt of the TAB report by email

message, dated January 23, 2015, but noted that Magwood’s submission was missing

“some important information.” Exhibit 102. In particular, the contracting officer found

that the report indicated that the system was receiving only half the flow listed and

wanted to know whether that problem was corrected. Id. On January 26, 2015,

Magwood responded that the “test and balance was completed as requested. The system

flow was corrected.” Exhibit 103.

By email message dated February 2, 2015, Magwood inquired as to the status of

final payment on the contract. Exhibit 104. The contracting officer responded that the

agency was awaiting the submission of an acceptable TAB report “that clearly

demonstrates that the corrective measures . . . were successful.” Id. The contracting

officer asked that Magwood submit this report by February 13, 2015. Id. On February

4, 2015, Magwood stated that it was “beyond our scope to provide yet another TAB

report to address specific questions you have. The TAB report provided showed the

system is operational with no deficiencies reported.” Exhibit 105.

The parties continued to exchange correspondence as to whether another TAB

report was required by the contract or as a result of the first report. On February 11,

2015, the contracting officer informed Magwood that he had arranged for another TAB

test to be performed and that the agency would deduct the cost of that report, estimated

to be $2000, from the final balance on the contract. Exhibit 109. In response to this

notice, Magwood stated that it had complied with the requirements of the Inspection

clause and that the only problem at the time of the original test was that the ducts were

not permanently secured, a problem that Magwood subsequently had fixed. Exhibit 110.

In response, the contracting officer stated that Magwood had not provided a new TAB

report after the noted problems were corrected. Exhibit 111.

Magwood’s Claims

By letter dated January 15, 2015, Magwood filed its first claim with the

contracting officer, seeking an equitable adjustment for seventy-seven days of delay

arising from the agency’s failure to provide the drawings for the existing sprinkler fire

CBCA 4614

8

protection system. Exhibit 100 at 4-5. Magwood sought approximately $28,000 in delay

costs. Id. at 5.4

On February 17, 2015, Magwood submitted its second claim seeking payment of

the final contract balance. Exhibit 112. By letter dated March 6, 2015, the contracting

officer denied Magwood’s claim for the remaining contract balance. Exhibit 113. The

contracting officer withheld $2000 from the final payment as the cost that the agency

incurred for a second report. Id. at 3. The contracting officer also provided a copy of

the second TAB report from Omega, from testing performed on February 19, 2015.

Exhibit 114. In the narrative summary, Omega reported on the work that its technician

had performed on the system:

All cooling/heating coils are clean and free of leaks at this time. We have

installed new 10" collars, new flex and dampers to increase airflow to AC1. Previously this system had 6" duct runs connected to 12" registers; we

capped all existing 6" collars on main duct and installed 10" collars in more

efficient locations. Supply ductwork is not insulated. We did seal many

existing locations where duct joints were not sealed with [d]uct [m]astic.

Id. at 3. Omega included a drawing that showed the new duct collars and their

placement. Id. at 7. As a result of these changes, Omega reported that the unit was

providing eighty percent of the design airflow. Id. The test report listed the total CFM

to be 1280. Id. at 5-6. Omega invoiced the agency $2000 for this work, consisting of

$1600 for the second TAB report and $400 to “repair and seal the existing ductwork.”

Exhibit 129.

On March 19, 2015, Magwood filed its appeal. Exhibit 117.5

4

In its claim, Magwood asserted that the delay began on September 3, 2015,

when its sprinkler test subcontractor notified the COTR that it needed the sprinkler drawings

to be able to perform the tests. The record on appeal does not contain correspondence about

this issue bearing this date.

5

Magwood appealed the contracting officer’s decision on its second claim

(seeking final contract payment) and asserted that its first claim (seeking delay costs) was

deemed denied. Id. The agency filed a motion to dismiss, alleging that Magwood had not

submitted a claim for delay. After Magwood provided copies of both claims in response to

a Board order, the agency withdrew its motion to dismiss. The contracting officer

subsequently denied Magwood’s claim for delay, finding that Magwood had other

outstanding work during the period of alleged delay. Exhibit 123 at 6.

CBCA 4614

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Discussion

I.

Failure to provide prompt determination on sprinkler testing requirements was not

sole cause of performance delay

In its submission to the Board, Magwood seeks costs for forty-seven days of delay.

Appellant’s Brief at 11. The alleged delay began on October 6, 2014, when Magwood

requested the drawings for the existing sprinkler system prior to testing, and ended on

November 21, 2014, when the contracting officer stated that the Government would not

require the proposed testing and that it considered work on the sprinkler system complete.

Id. Magwood seeks the costs of travel, project administration, office administration,

labor and the inspection and service fees of two subcontractors regarding the fire

protection system. Magwood also seeks overhead on all of these costs and the costs of

insurance for eighty-five days. These costs total $36,499. Id. at 16; Exhibit 121.

Magwood invokes the Suspension of Work clause and the Changes clause as the

basis for its claim. Because Magwood’s claim arises from the contracting officer’s

enforcement of the original testing requirement, rather than the imposition of a new

requirement, the Suspension of Work clause rather than the Changes clause provides the

framework for the resolution of Magwood’s claim. Triax-Pacific v. Stone, 958 F.2d 351,

354 (Fed. Cir. 1992).

The Suspension of Work clause permits a contractor to recover costs incurred as

the result of unreasonable delays in performance of the contract. Triax-Pacific, 958 F.2d

at 354. Such delays can include actions or inactions by the contracting officer in

administration of the contract. Tidewater Contractors, Inc. v. Department of

Transportation, CBCA 50, 07-1 BCA ¶ 33,525, at 166,103 (failure to issue timely notice

to proceed). However, for recovery to be possible, the delays caused by the contracting

officer must be the “sole proximate cause” for the costs incurred. Triax-Pacific, 958 F2d.

at 354 (citing Merritt-Chapman & Scott Corp. v. United States, 528 F.2d 1392, 1397 (Ct.

Cl. 1976)). If there are other reasons that performance of the contract was delayed or the

costs were incurred, the contractor cannot recover the costs. FAR 52.212-12 (“no

adjustment shall be made under this clause for any suspension, delay, or interruption to

the extent that performance would have been so suspended, delayed, or interrupted by any

other cause, including the fault or negligence of the Contractor”). The contractor bears

the burden to establish that the Government was solely responsible for the alleged delays.

Tidewater Contractors, 07-1 BCA at 166,103.

Magwood cannot establish that the inability to test the sprinkler system was the

sole cause of its delays in finishing the work on the contract. Even after the contracting

CBCA 4614

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officer, on November 21, 2014, released Magwood from the obligation to test the

sprinkler system, Magwood still could not finish contract performance until it submitted

the TAB report for the HVAC system. In fact, in the revised schedule Magwood

submitted in September 2014, both of these tests were listed as items necessary to

complete contract performance and both were to occur on the same day. These were the

only two remaining items, other than contract close-out activities. Magwood has not

alleged that the two testing requirements were linked or in any way dependent upon each

other. The Board finds no reference in the exchanges between the parties suggesting that

the HVAC system was being held up by the inability to test the sprinkler system.

Moreover, according to the TAB report Magwood submitted, testing of the HVAC system

did occur as scheduled on October 7, 2015. Why Magwood failed to obtain the further

work on the HVAC system until January 2015 and then submit the TAB report remains

unexplained.

Magwood disputes the contracting officer’s finding that it had other outstanding

work, asserting that the “remaining work on the punch list could not be completed until

the sprinkler system testing issue was resolved.” Appellant’s Brief at 16. Magwood’s

assertion is not supported by the record. Even after Magwood completed the rest of the

punch list items on December 9, 2014, the contracting officer was still awaiting the TAB

report for the HVAC system. If, as Magwood alleges, the Government’s delay in

deciding this issue was the only cause of delay and it delayed the remaining clean-up

work, the record would show that Magwood completed the contract shortly after

receiving the contracting officer’s direction that no further testing would be required on

November 21, 2014. Instead, contract performance continued into January 2015, when

Magwood finally submitted the TAB report for the HVAC system. Putting aside for the

moment Magwood’s dispute with the further testing requirements, according to

Magwood, the contract was at an end when it submitted the TAB report and the invoice

from its subcontractor showing that the additional work on the system had been

completed. The Board finds that the failure to submit the results of the HVAC TAB test

is a concurrent delay and defeats Magwood’s contention that the Government’s inaction

on its request for the sprinkler drawings was the sole source of its delay in finishing work

on the contract.

II.

The contracting officer properly withheld additional inspection costs

Magwood also appeals the contracting officer’s decision to withhold $2000 from

the final payment on the contract as costs incurred by the Government to obtain a new

TAB report. Magwood asserts that it fulfilled its contractual obligations by obtaining the

first TAB report and providing documentation that the deficiencies identified in the first

report were corrected. Appellant’s Brief at 17-19. Magwood also asserts that the

contractor redesigned the HVAC system, which was not work that Magwood would have

CBCA 4614

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been permitted to do by the contract. Id. at 20-21. As evidence of this improper

redesign, Magwood points to the statements from Omega that it had replaced the six-inch

ducts installed by Magwood with ten-inch collars. Id. at 21.

Magwood correctly notes that the disposition of its claim is governed by the

Inspection of Construction clause in the contract. Pursuant to that clause, the contractor

is required to perform inspections “as may be required by the Contracting Officer.” FAR

52.246-12(e). Moreover, the contractor may be charged the costs of a re-test if “prior

rejection makes reinspection or retest necessary.” Id.; GEM Engineering Co. v.

Department of Commerce, GSBCA 12826-COM, 94-3 BCA ¶ 27,152, at 135,320

(contractor required to pay costs of travel for second inspection). The clause further

requires that the contractor bear the costs to correct work that does not meet contract

requirements. FAR 52.246-12(f). The Government bears the burden to establish that the

retest was necessary and its costs. See GEM Engineering Co., 94-3 BCA at 135,320

(after Government makes out a prima facie case, burden switches to contractor).

The agency has met its burden to show that the contracting officer’s insistence on

a new test was reasonable and permitted by the clause. The original test showed that the

system was only providing fifty-five percent of the designed airflow. Magwood, itself,

expended additional dollars to have a contractor attach the ducts to address this issue.

The contracting officer properly required a second test to determine whether these

subsequent repairs had improved the airflow, because the contract required Magwood to

perform the tests to show that the system met the airflow requirements to the satisfaction

of the contracting officer.

Magwood is incorrect in its assertion that only one TAB report was contractually

required. As noted, the contract required Magwood to provide a TAB report that showed

that the system met the airflow requirements and satisfied the contracting officer. The

initial report showed that the system was delivering only fifty-five percent of the required

airflow and Magwood had taken steps to address this issue. Although Magwood asserted

that it addressed the deficiencies identified in the first TAB report, the contracting officer

was permitted to require a second TAB report to assess whether this work was sufficient.

Magwood is also incorrect in its assertion that Omega performed work to redesign

the system that was not permitted by the contract. Magwood asserts that the contract

documents identified where the HVAC ducts were to be placed and the size of the ducts.

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Appellant’s Brief at 21; Appellant’s Supplemental Brief at 1.6 The work that Omega did

to revise the layout and install larger ducts, Magwood insists, was not permitted by the

contract and Magwood should not be required to pay for those efforts. As support,

Magwood cites to the electrical drawing in the contract which indicated ducts of 24"x6".

Exhibit 2 at 14. The contracting officer states that the contract did not require specific

placement or types of ducts and left it to the contractor to decide the best method to fulfill

the requirements of the contract. Declaration of Contracting Officer (Nov. 23, 2015)

¶¶ 7-9.

To resolve this issue, the Board examines the terms of the contract to determine

what the contract required for the installation of ducts. Magwood asks the Board to find

that the requirements for the size and placement of ducts were design specifications, from

which Magwood had “no discretion to deviate.” Blake Construction Co. v. United States,

987 F.2d 743, 745 (Fed. Cir. 1993) (citing J.L. Simmons Co. v. United States, 412 F.2d

1360, 1362 (Ct.Cl. 1969)). The agency asserts that the requirements for the HVAC

system and its parts were performance specifications, wherein the contract sets forth a

“standard to be achieved, and the successful bidder is expected to exercise his ingenuity

in achieving that objective or standard of performance, selecting the means and assuming

a corresponding responsibility for that selection.” Id.

The Board finds that the requirements for the HVAC system were performance

requirements and the indications on the drawings for duct location and size were not

design requirements. The HVAC system to be installed had to meet the requirement of

1600 CFM.7 The notes on the drawings indicated that the locations for the HVAC

equipment was approximate and could be changed. Magwood does not assert that the

changes Omega made were unnecessary or did not bring the system closer to performing

the system requirements. Pursuant to the Inspection of Construction clause, Magwood

is responsible for any costs that are necessary to correct work found not to meet

requirements. Therefore, the contracting officer properly withheld the additional $2000

from Magwood’s final payment on the contract to pay for this work.

6

Magwood asserted, in its initial brief, that it was required to use six-inch ducts,

but did not identify where in the contract that requirement was stated. The Board asked the

parties for supplemental briefing to address this issue and provide support.

7

The HVAC system as completed and tested only delivers the total of 1280

CFM, which still is deficient contractually.

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Decision

The appeal is DENIED.

____________________________

MARIAN E. SULLIVAN

Board Judge

We concur:

____________________________

JEROME M. DRUMMOND

Board Judge

____________________________

PATRICIA J. SHERIDAN

Board Judge