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CBCA 2862 GRANTED IN PART; CBCA 4085, 4802 GRANTED: April 14, 2017

CBCA 2862, 4085, 4802

TURNER CONSTRUCTION COMPANY,

Appellant,

SMITHSONIAN INSTITUTION,

Respondent.

Douglas L. Patin and Michael S. Koplan of Bradley Arant Boult Cummings LLP,

Washington, DC, counsel for Appellant.

Scott D. Cessar of Eckert Seamans Cherin & Mellott, LLC, Pittsburgh, PA, counsel

for Subcontractor March-Westin Company.

Lawrence M. Prosen and Christian F. Henel of Kilpatrick Townsend & Stockton,

LLP, Washington, DC, counsel for Subcontractors Welch and Rushe, Inc. and M.C. Dean,

Inc.

Roger C. Jones of Huddles Jones Sorteberg & Dachille, P.C., Columbia, MD, counsel

for Subcontractors Stromberg Metal Works, Inc. and Apro Enterprises, Inc.

Robert Windus of Moore & Lee, LLP, McLean, VA, counsel for Subcontractor C.J.

Coakley Co., Inc.

CBCA 2862, 4085, 4802

Craig A. Holman and Kara L. Daniels of Arnold & Porter Kaye Scholer LLP,

Washington, DC, counsel for Respondent.

Before Board Judges KULLBERG, SULLIVAN, and CHADWICK.1

SULLIVAN, Board Judge.

Appellant, Turner Construction Company (Turner), filed three appeals from

contracting officer decisions issued by respondent, the Smithsonian Institution (Smithsonian

or SI), concerning matters arising on its contract to provide design and construction services

in a long-term, multiple-phase project entitled “Public Space Renewal Project at the National

Museum of American History.” Turner Construction Co. v. Smithsonian Institution, CBCA

2862, 13 BCA ¶ 35,290, at 173,252; see Turner Construction Co. v. Smithsonian Institution,

CBCA 2862 et al., 15-1 BCA ¶ 36,139, at 176,388.

Turner’s first appeal (docketed as CBCA 2862) was of the contracting officer’s

decision denying its claim for approximately $14 million, which included Turner’s claim for

general conditions costs of approximately $7 million and subcontractor claims for delay and

disruption costs of approximately $7 million. In an initial ruling, the Board held that the

parties had failed to agree upon a firm fixed price for the base contract work to be performed

by Turner and that Turner was entitled to be paid a reasonable price for that work. Turner

Construction, 13 BCA at 173,260.

Following that initial ruling, Smithsonian conducted an audit of all the costs incurred

by Turner on the project. Based solely upon the results of that audit, the contracting officer

issued a second decision, finding that Turner had been overpaid by approximately $40

million. To effect repayment, the contracting officer denied Turner’s claim in its entirety and

asserted a claim for an additional $24.5 million paid to Turner on the contract. Turner also

appealed that decision to the Board, docketed as CBCA 4085.

Turner filed a second claim in 2015, seeking costs of approximately $440,000 that it

incurred to install a second steam generator in the museum. The contracting officer denied

Turner’s claim, and Turner appealed, docketed as CBCA 4802. The second and third appeals

were consolidated with the first appeal when they were filed.

When the first appeal was filed, a panel composed of Judges Somers, McCann,

and Kullberg was assigned to hear these appeals. The matter was transferred to Judge

Sullivan on December 17, 2014. Upon the retirement of Judge McCann, Judge Walters was

assigned to the panel. Upon the retirement of Judge Walters, Judge Chadwick was assigned

to the panel.

CBCA 2862, 4085, 4802

The contract between Turner and Smithsonian, by its terms, is not subject to the

Contract Disputes Act (CDA). 41 U.S.C.§§ 7101-7109 (2012). Exhibit 1_F at 320.2

Instead, the Disputes clause of the contract provides that a contractor may appeal a

contracting officer’s decision to the Secretary of the Smithsonian Institution. Id. at 321. By

memorandum of agreement between Smithsonian and the Board, dated June 5, 2012, the

Board agreed to hear and decide the appeals arising from this contract. Turner Construction,

13 BCA at 173,258.

The Board conducted a hearing in November 2015. The Board heard testimony from

thirty witnesses over fourteen days. The parties submitted approximately 4000 exhibits as

part of the appeal file and voluminous post-hearing briefing.

The Board’s role in this matter is to find a reasonable price for the construction

services that Turner provided in the renovation of the American History Museum. We are

tasked with this assignment because, despite Smithsonian’s promises both in the original

contract and during contract performance, Smithsonian never negotiated a firm fixed price

for much of the work Turner performed. Smithsonian has a renovated museum, and the

Board is deciding herein what additional sums are owed to Turner for that building. The

difficulty in this case was principally of Smithsonian’s own making. If Smithsonian had

agreed to a firm fixed price for the construction, Turner would have been bound to that price,

subject to adjustment for changes and other increases. Having failed to execute the bargain

prior to the provision of services, Smithsonian cannot reap the benefits of a bargain it wishes

it had struck.

Smithsonian’s arguments are rooted in its continued belief that the parties agreed upon

a price, which the Board should adjust or not adjust based upon the provisions of the

contract, most notably the Equitable Adjustment clause. Because the parties did not agree

upon a price for the base contract work, as we held in our earlier decision, see 13 BCA at

173,259-60, the Board’s effort is not controlled by those provisions. Moreover, while the

Board does not find that Smithsonian breached the contract by failing to negotiate a price,

that failure leaves Smithsonian without many of the safeguards and defenses that would have

been available to it under a firm fixed-price agreement.

The Board finds that Turner and its subcontractors incurred costs to address problems

for which Smithsonian is responsible—hazardous waste abatement, mechanical, electrical

and plumbing (MEP) interferences, and continuing design changes. On this record, Turner

may recover based upon a quantum meruit theory. Turner’s subcontractors used more

conventional methods to attempt to prove their disruption claims arising from these same

All exhibits are found in the appeal file.

CBCA 2862, 4085, 4802

issues, and some succeeded. However, none of Turner’s subcontractors proved their claims

for extended overhead flowing from contract delays.

Regarding Smithsonian’s claim for overpayment based upon its audit of Turner’s

project costs, the Board finds that Smithsonian has not met its burden. While the audit

exposed areas that merited further investigation, Smithsonian did not undertake those

necessary steps. Instead, it simply demanded repayment and has failed to establish a proper

basis for that demand.

We decide that Turner is owed an additional $3,149,638 over what it has been paid

to date for the renovation of the museum. Turner may also recover $2,803,430 on behalf of

its subcontractors. Pursuant to the contract, Turner may also recover interest on these

amounts, calculated from the dates of its claims to the Smithsonian.

Findings of Fact

Contract Terms and Timeline

Scope of Work/Existing Conditions

In May 2002, Smithsonian awarded a contract to “lead a design/build team for the

National Museum of American History Public Space Renewal Project.” Exhibit 1_A.3 The

design and construction services were divided into seven separate phases. The first phase

was the “concept phase,” to be performed for a fixed price of $250,000. Exhibit 1 at 2. The

contract listed six additional construction/design phases as options, for which the “[t]erms

and conditions, prices, schedule and other relevant matters will be negotiated.” Exhibit 1_A

at 21.

In September 2005, Smithsonian awarded Turner a follow-on contract to “Revitalize

National Museum of American History (NMAH), Behring Center, Public Space Renewal,

Package II-B,” to “[p]rovid[e] design services to revise 35% design development package,

construction phase documents at 65%, 95%, and 100% construction documents supporting

the central core infrastructure system of the building,” as well as soft demolition supporting

The contract was originally awarded to the architectural firm Skidmore,

Owings & Merrill LLP (SOM), but in early 2004, the parties agreed that the contract with

SOM would be novated and that Turner would assume the responsibilities under the SOM-SI

contract. Exhibit 2_C at 6. Turner agreed to be “bound by and will perform in accordance

with the requirements contained in” the SOM contract. Id. at 7.

CBCA 2862, 4085, 4802

the central core infrastructure system. Exhibit 5 at 1; Transcript at 752-53.4 Smithsonian

agreed to pay Turner a “not-to-exceed [NTE] price” of $10,645,174.12, for

(1) architect/engineer (A/E) design – $4,109,719.16, (2) long lead item requisitioning – NTE

$6,000,000, and (3) soft demolition – NTE $535,454.96. Exhibit 5 at 1, 4.

The contract described the requirements to provide design documents at various stages

of the design. It required “[t]he 95% construction documents [to be] complete and biddable

in every aspect. Only very minor changes should be required after review.” Exhibit 1_H at

395. The contract contained two broad clauses regarding Turner’s responsibility for the

design. The first made Turner responsible for accuracy and quality of its design and required

Turner to “correct or revise any errors or deficiencies in its designs, drawings, specifications

. . . without additional compensation.” Exhibit 5 at 6. The second clause made Turner

responsible for preparing change order documents at no expense to Smithsonian, if the

changes resulted from deficiencies in the Turner design, even if a deficiency was due to

incomplete information about existing conditions. Exhibits 1_H at 391, 5_A at 14.

There was also a requirement that sole-source items not be specified in the design

absent approval of the contracting officer’s technical representative (COTR). Exhibit 1_H

at 421. This clause is in a section of the contract that pertains to submission of construction

documents by the architect/engineer. Id. at 419 (titled “CONTENT of 95% Construction

Documents Submission”).

The scope of work noted the age of the building and work that had been performed

previously:

Since its opening in 1964, [the museum] has undergone many changes

reflecting the evolving needs for the display of objects, the trend toward more

thematic and story-driven exhibits, larger public gathering areas, the

modernization of public facilities, and upgrades to the infrastructure.

However, with any highly visited public facility, the needs of our visitors, staff

and collections are constantly changing, as are building codes and building

technologies.

Seeking to emphasize the design-build nature of the project, Smithsonian

contends that this second contract was a work order under the first contract. Smithsonian

Proposed Findings of Fact (PFF) ¶ 119. Turner asserts that it held two contracts with

Smithsonian, but does not disavow its obligations and responsibilities under the original

contract. Because this disputed issue does not figure into our analysis, we simply describe

the contractual requirements as flowing from a single contract.

CBCA 2862, 4085, 4802

Exhibit 1_A at 33. The contract directed the A/E to contact the Smithsonian’s archivist to

obtain access to the existing drawings for the building. Id. at 37. The contract advised that

the existing drawings would be found on various media and “[t]he accuracy of these

drawings in documenting the existing conditions cannot be guaranteed.” Id.

The contract required Turner to conduct a survey of the existing conditions in the

museum:

The Architect Engineer Design Team shall perform all pre-design, existing

conditions surveys, programming, conceptual design, schematic design, design

development, construction documents, construction, construction management,

and all other design and engineering services as necessary to complete the

NMAH-BC Public Space Renewal Project that is described in the basic scope

of work and unpriced options.

Exhibit 1_C at 56-57; Exhibit 1_H at 393. Smithsonian agreed to provide access to the data

files it had to assist the A/E in “determining the existing conditions” but warned that “[f]iles

are not warranted to show present existing conditions at the site.” Exhibit 1_H at 408

(Clause 4.6, Existing Conditions and SI Data Files). Smithsonian’s Deputy Director of the

Office of Planning, Design and Construction (OPDC) testified that the purpose of this

warning was to “invite [contractors] . . . to make sure that they take whatever opportunities

they can to develop a better understanding of what the building is and how it operates.”

Transcript at 3645.

The contract also required Turner to abate hazardous materials found in the building,

including asbestos and lead paint, during construction in accordance with applicable laws and

regulations. Exhibit 1_H at 403.

Contract Clauses at Issue in Smithsonian’s Audit

The contract contained Smithsonian’s own Equitable Adjustment clause (SI 252.24371) that supplemented the first Changes clause, Federal Acquisition Regulation (FAR)

52.243-4. Exhibit 1_F at 270. The Equitable Adjustment clause permitted the COTR to

request itemized proposals for change work. Itemized proposals would include an “estimate

of the time required to perform the change” and “itemize[] with unit quantity and unit costs

segregated by labor and materials for the various components of the change.” Id. The clause

also required the submission of daily time and material tickets for any change work that the

contracting officer elected to have performed on a time and materials basis. Id. at 274.

CBCA 2862, 4085, 4802

The Equitable Adjustment clause limited overhead and profit recoverable by the

contractor or a subcontractor to 21% for work performed by its own forces and 10% for work

performed by other subcontractors. Ex. 1_F at 274. The clause further required Turner and

its subcontractors to include in overhead “unless specified by [Smithsonian] [amounts] for

project management; insurance, except workers compensation and general liability, field and

office supervisors, engineers and their assistants, watchmen, use of small tools, incidental

job burdens and general home office expenses.” Id. at 275. The clause permitted Turner to

include in the direct costs of a change the costs of any foreman labor. Id. at 270-71.

Finally, this clause limited the types of costs that could be sought in change order

proposals:

The Contractor shall not be entitled to any amount for indirect costs, damages

or expenses of any nature, including, but not limited to, so-called impact costs,

labor inefficiency, wage material or other escalations beyond the prices upon

which the proposal is based and which are identified pursuant to this Clause,

and which the Contractor, its Subcontractors or Suppliers may incur as a result

of delays, interference, suspensions, changes in sequence or the like, from

whatever cause, whether reasonable or unreasonable, foreseeable or

unforeseeable, or avoidable or unavoidable, arising from the performance of

any and all changes in the Work performed pursuant to this Clause. It is

understood and agreed that the Contractor’s sole and exclusive remedy in such

event shall be recovery of his costs and specified markups for overhead, profit

and/or commission as set forth in this Clause and an extension of the Contract

Time, but only in accordance with the provisions of the Contract Documents.

Exhibit 1_F at 275.

The Audit clause required Turner to “maintain books, records and accounts of all costs

in accordance with generally accepted accounting principles and practices” and permitted

Smithsonian to conduct an audit in specified circumstances, including:

In the event of a disagreement between the Contractor and the SI over the

amount due the Contractor under the terms of this contract;

To check or substantiate any amounts invoiced or paid which are required to

reflect the costs of the Contract, or the Contractor’s efficiency or effectiveness

under this contract or in connection with extras, changes, claims, additions,

back-charges, or other, as may be provided for in this contract;

CBCA 2862, 4085, 4802

Exhibit 1_F at 286. The clause further permitted Smithsonian to audit Turner’s records

despite payments previously made for performance:

The S.I. will make all payments required of it under this Contract subject to

audit, under circumstances stated above, which audit may be performed at the

S.I.’s option, either during the Contract time period or during the above record

retention time period. Regardless of authorization, approval or acceptance,

signatures or letters which were given by the S.I. and are part of the S.I’s

control systems or are requested by the Contractor, the payment made under

this Contract shall not constitute a waiver or the S.I.’s right to audit, nor shall

payments constitute a waiver or agreement by the S.I. that it accepts as correct

the billings, invoices or other charges on which the payments are based. If the

S.I.’s audit produces a claim against the Contractor, the S.I. may pursue all its

legal remedies even though it has made all or part of the payments required by

the Contract.

Id. at 286-87. The Audit clause provided for reimbursement of amounts overpaid: “If such

audit discloses an overpayment, the Contractor shall have the obligation to reimburse the S.I.

for the amount of the overpayment.” Id. at 287.

The contract also contained a flowdown clause requiring that subcontractors be bound

by its terms and assume all of the same obligations that Turner had toward Smithsonian.

Exhibit 1_F at 156.

The contract did not require that Turner certify that it had paid its subcontractors prior

to seeking payment from Smithsonian. Instead, Turner had to certify that “[p]ayments to

subcontractors have been made from previous payments received under the contract, and

timely payments will be made from the proceeds of the payments” requested. Exhibit 1_F

at 294 (FAR 52.232-5, Payments Under Fixed-Price Construction Contracts).

The contract required that Turner obtain insurance and bonds for the work. Exhibit

1_F at 171-75. It required Smithsonian to pay bond premiums upon proof of payment of

these costs by Turner. Id. at 295.

Finally, the Disputes clause provided for the payment of simple interest on claims, at

a rate fixed by the Secretary of the Treasury, running from the date the contracting officer

received the claim. Exhibit 1_F at 321. We construe this interest calculation to be the same

as the one required by the CDA, 41 U.S.C. § 7109.

CBCA 2862, 4085, 4802

Contract Modifications

Modification 7

The fixed price for the construction phase was to be negotiated at the completion of

the 95% construction documents. Exhibit 6 at 22; Turner Construction Co., 13 BCA at

173,258. On September 16, 2006, Turner completed its 95% construction documents,

Exhibit 9 at 11-24, and on October 30, 2006, Turner submitted its 95% pricing proposal.

Transcript at 780. Turner attached to its price proposal a document titled, “Assumptions &

Clarifications,” which identified what items or issues were included or excluded from

Turner’s price proposal. Id. at 789-90; Exhibit 9 at 3-9. With these assumptions and

clarifications, Turner provided several important caveats regarding its pricing of the

construction work:

General

....

During the construction period despite Turner’s best effort, it cannot

guarantee that the conditioned space of the building can be maintained at 50%

humidity and 70 degrees F. We have not included any supplementary HVAC

[heating, ventilation, and air conditioning] or Humidity equipment to try to

maintain these environmental conditions.

....

16.

Turner has not included any cost for unforeseen conditions.

....

24.

The design and the budget are both based on existing condition

inspections and as-built documents provided by The Owner and included here

as the attached list. [See Exhibit 9 at 10.] Neither SOM or Turner were able

to verify all existing conditions in the field as they were limited to visual

inspections only. Inspections requiring demolition to observe were permitted

by [t]he Smithsonian only in areas that were not open to the public, had no

artifacts or exhibits in place and were not operational. All verification

inspections that were completed are reflected on the 95% drawings issued

September 15th, 2006.

CBCA 2862, 4085, 4802

25.

Turner has included only the work shown on the 95% Construction

Documents as identified on the attached document list dated October 5, 2006.

....

31.

Turner’s design team has based the [Public Space Renewal Package]

design on existing building drawings provided by Smithsonian.

....

Hazardous Materials

This proposal includes a $80,000 [a]llowance for [a]batement of

hazardous materials noted in the project specific abatement survey.

Demolition

....

Turner excludes the cost of demolition of any systems, piping,

ductwork, wiring, fixtures equipment etc. not shown on the contract

documents.

....

Mechanical / Plumbing

....

Turner excludes the cost to relocate any of the existing MEP systems

unless shown on the contract documents.

....

This proposal includes a HVAC system designed to the loads provided

by [t]he [o]wner to SOM/[Turner’s A/E for mechanical systems].

Exhibit 9 at 3-5, 7. The as-built drawings, referenced above, included the original drawings

for the construction of the museum (prepared by architects McKim, Mead, and White) as

CBCA 2862, 4085, 4802

well as other drawings from previous projects at the museum. Exhibit 9 at 10. The drawings

bear dates from 1959 until 1996, although most of the drawings are not dated. Id.

In December 2006, the parties executed modification 7, which provided additional

funding for the construction of the Public Space Renewal and Star-Spangled Banner (SSB)

projects. Exhibit 7_G. The modification noted that it was “a funding action only [and] is not

intended to represent a total firm fixed amount obligation on the part of the Contractor.” Id.

at 137. Smithsonian directed Turner to undertake construction services in accordance with

the 95% construction documents, dated September 16, 2006, and stated that “[o]nce

construction activities [are] definitized, funding will represent a firm fixed contract amount.”

Id. at 138. The parties further agreed that, “[w]ith the exception of the changes made herein,

all terms and conditions of [the contract] remain in effect.” Id. “[B]ecause Turner and SI

were in the process of negotiating the 95% construction documents price as of December 27,

2006, Modification 0007 did not establish a fixed construction price.” Turner Construction

Co., 13 BCA at 173,254.

The Board previously found that the parties never agreed upon a fixed price for the

construction phase of the project. Turner Construction Co., 13 BCA at 178,259. After a

thorough review of the record and the briefing, we see no basis to disturb that finding.5 The

significant amount of testimony that both parties elicited regarding whether they agreed on

Turner’s assumptions and clarifications does not matter in the Board’s analysis. What does

matter is that Turner’s price proposal for the base contract work was conditioned upon these

assumptions, and the parties never agreed on the price of the base work.

Modifications 8 through 32

Smithsonian issued a total of thirty-two contract modifications, each of which added

funding, up to a final contract funding of $75,030,697.77. Exhibits 7_H through 7_FF.

Some of the modifications funded specific elements of construction phase work. See, e.g.,

Exhibit 7_J (modification 10, dated May 4, 2007, accessibility shell, SSB work, design and

engineering of the abstract flag and Lemelson Center). Other modifications included change

order work, including abatement of hazardous materials. See, e.g., Exhibit 7_K

(modification 11, dated May 4, 2007, repair of sprinkler system and abatement work). Still

other modifications funded design changes, referred to as addenda, made after submission

of the 95% drawings. Exhibit 7_U (modification 21, dated November 16, 2007).

Although the parties did not agree upon a final contract price for the base

contract work, Turner invoiced Smithsonian based on the detailed schedule of values in the

November 21, 2006, price proposal and its revised counterpart in the January 19, 2007, cost

proposal, which is more general in its cost breakouts. Transcript at 825-28.

CBCA 2862, 4085, 4802

Substantial Completion Date–Modifications 16 and 26

Smithsonian issued two modifications to the contract related to the date for substantial

completion. In September 2007, the parties executed modification 16, which established a

substantial completion date of June 20, 2008. Exhibit 7_P. However, the parties also

“mutually agreed and understood that some work will likely extend past the substantial

completion date.” Id. at 599. The parties further agreed that the modification was a funding

action only and that a large portion of the contract price was undefinitized. Id. The parties

listed modifications that contained work for which a price had not been definitized. Id. at

600.

Shortly after the initial substantial completion date was set, the parties exchanged

correspondence about the possibility of extending it. Smithsonian was willing to extend the

date, but wanted either an agreement that all the delays were concurrent and, therefore, at no

cost to Smithsonian, or an analysis showing that the delays were Smithsonian’s

responsibility. Exhibit 862. Turner responded with an explanation of the nature of the delays

it believed it had experienced. Exhibit 933 at 4. Turner estimated that the cost of these

delays could be between $3 and $5 million. Id. at 1. To this document, Turner attached a

schedule analysis. Id.

The back-and-forth on schedule and cost continued throughout the spring of 2008.

Respondent’s PFF ¶ 396. On July 8, 2008, Smithsonian unilaterally issued modification 26,

which moved the substantial completion date back to October 31, 2008, and deemed thirtyfive days of delay to be compensable. Exhibit 7_Z. The determination of thirty-five days

of compensable delay was based upon an analysis of Turner’s schedule by Hill International.

Respondent’s PFF ¶ 400. Based upon this determination, Smithsonian unilaterally made an

equitable adjustment in the amount of $1,420,837, for “differing site conditions, extended

overhead delays and other factors.” Exhibit 7_Z at 1640.

Turner presented no evidence that it requested a further schedule extension past

October 31, 2008. The superintendent of Welch & Rushe, Inc., Turner’s mechanical and

plumbing subcontractor, testified that everyone was working hard to permit President George

W. Bush to open the SSB exhibit in November, before he left office. Transcript at 2679.

The former contracting officer testified that time extensions of the project cost Smithsonian

money, both for contract management by Smithsonian personnel and because the museum

shops, which bring in substantial revenue, remained closed. Id. at 3818. Turner substantially

completed the project on October 31, 2008. Turner Construction, 13 BCA at 173,258.

CBCA 2862, 4085, 4802

II.

Contract Performance Issues

Turner, its subcontractors, and Smithsonian all presented evidence regarding

performance issues that arose during the project. According to Turner and its subcontractors,

Smithsonian is responsible for issues that underlie their claims for delay and disruption:

hazardous material abatement, MEP interferences, and continuing design changes.

Smithsonian disputes that it is responsible for these issues and argues that Turner is

responsible for poor subcontractor performance and design issues that increased its

performance costs.

Hazardous Material Abatement

Turner and its subcontractors discovered extensive quantities of two hazardous

materials that required abatement during the project: asbestos and lead paint. In September

2006, MACTEC, Turner’s hazardous waste consultant, provided Turner a survey of

hazardous material in the building, which reported the presence of these two materials (four

locations for asbestos and three locations for lead paint). Exhibit 332 at 5-11. MACTEC

also advised Turner that there was probably additional hazardous material hidden from view.

Exhibits 332 at 7; Transcript at 717-18.

Turner subcontracted with APRO Enterprises, Inc. (APRO) for demolition services.6

Exhibit 3067 at 19-28. After demolition began in October 2006, APRO encountered asbestos

behind existing walls and above existing ceilings. Transcript at 3381. In December 2006,

because APRO was already mobilized for demolition work, Turner subcontracted with

APRO for hazardous material abatement. Id. at 550-51. APRO’s contract was for a fixed

price of $77,200, a contract amount based on the MACTEC survey and Turner and APRO’s

inspection of the quantities of hazardous material at the specific locations identified by

MACTEC. Id. at 3381-83; Exhibit 3167 at 12-37. Turner and APRO anticipated that

additional hazardous material would be found and stated in the subcontract that “the total

scope is therefore unknown.” Exhibit 3167 at 35.

In May 2007, Turner subcontracted with Air Services for hazardous material

abatement work. Exhibit 509; Transcript at 719-20. Turner needed to augment APRO’s

abatement work because APRO could not keep up with either the demolition or abatement

schedule. Transcript at 720.

Exhibit 350.

Turner also subcontracted with Basic Services, another demolition firm.

CBCA 2862, 4085, 4802

Smithsonian’s resident engineer and COTR testified at the hearing that the scope and

effort of the abatement work on the project was not difficult and that the abatement problems

were caused by APRO. Transcript at 3942, 4163. These opinions are contradicted by the

record. During the course of the project, APRO encountered asbestos-containing material

in forty areas of the museum and lead-based paint in twenty areas. Id. at 3388-89. All of this

material had to be abated in a very time-consuming process.7 The work could last for a

couple of days or weeks, depending on the size of the area and the quantities of hazardous

material. Id. at 3405-11.

When hazardous material was discovered, all other work in the area would cease and,

if it was asbestos, a containment area would be set up, effectively shutting down those areas

of the project until the abatement was complete. Transcript at 1110, 3405-11. For example,

the project manager for March Westin Company, Inc., Turner’s structural steel subcontractor,

testified about discovering lead paint on the steel beams where his company was supposed

to weld new beams. Id. at 1979; Exhibit 3766.8 Similarly, Welch & Rushe’s project

manager testified about discovering black mastic (tape covering pipes that contains asbestos)

on duct work and piping that needed to be moved. Transcript at 2385-87. As a result of

these stoppages, subcontractor crews repeatedly were required to stop and find other areas

of the project to work on until the abatement areas were released. See, e.g., id. at 2427.

On November 15, 2007, Air Services stopped performing the abatement work,

blaming Smithsonian’s purported slow approval and payment process, including

Smithsonian’s reduction of payments for abatement costs after the abatement work had been

completed. Transcript at 1762-63. On December 12, 2007, Turner subcontracted with

When APRO or another subcontractor found hazardous material (lead paint,

asbestos, and black mastic), a technician would have to confirm that the material was

hazardous and submit an abatement plan to Turner for approval. For asbestos, the area would

be sealed off to all of the subcontractor personnel while the remediation was undertaken.

Often efforts required scaffolding to be set up so that remediation personnel could reach the

area. For lead paint, a chemical paint stripper was applied and then the paint was scrapped

off by hand. After the work was completed, a technician would reinspect the area to confirm

the hazardous material was abated. Transcript at 3407-08. APRO could then demobilize all

abatement equipment and continue demolition work. Id. at 3410.

March Westin’s project manager testified that March Westin did not know

about the presence of lead paint on the concrete-encased steel beams when it bid the project.

Transcript at 1976. The MACTEC survey does not mention lead paint on steel beams,

Exhibit 332, and Smithsonian does not identify any evidence to the contrary. Respondent’s

PFF ¶¶ 1486-87.

CBCA 2862, 4085, 4802

Diversified Environmental to replace Air Services. Exhibit 896. According to Zafar

Farooqi, Turner’s schedule and delay expert, the abatement work in the mechanical shafts

resumed on December 20, 2007. Exhibit 5045 at 18.

The abatement work continued from the beginning of the project through 2007.

Transcript at 233, 1110-11. Turner and its subcontractors performed more than $1 million

in abatement work. Id. at 869, 3723-24. Smithsonian contracting personnel recognized at

the time that the extent of hazardous material abatement required on the contract was “an

unforeseen condition.” Id. at 4718-19; Exhibits 4826, 5355 at 4.

Mechanical, Electrical, and Plumbing Interferences

Existing Conditions Survey

Turner and its subcontractors had to address numerous MEP interferences. According

to the report of the survey of existing conditions, dated July 15, 2004, the Turner team both

reviewed the existing drawings and conducted a field survey of the building. Exhibit 320 at

4. During the field survey, the Turner team verified the room layout for the basement and

fourth and fifth floors and “visually confirmed” the plans for the public areas of the museum,

where possible. Id. However, because the museum was still open to the public, the survey

team was limited to visual and other non-invasive inspection activities, meaning the team

could not open walls or ceilings. Transcript at 755-56. If the systems or wiring were located

above a hard ceiling, the team would not have seen those systems during this survey. Id. at

1224. In the survey report, the team noted that further design work would have to be

undertaken when system components above unaccessible ceilings were confirmed:

The emphases for our field survey were the clear dimensions for the public

space areas in the museum and material finishes. Any systems components

located above inaccessible ceilings or otherwise not readily accessible were

not visually confirmed. As a result, all drawings shall be field verified before

performing design work in any given area.

Exhibit 320 at 4.

Effect of MEP Interferences Upon Coordination Drawings

After construction began, Turner discovered many MEP interferences that slowed the

progress of construction when the interference had to be addressed before coordination

drawings could be finalized. The interferences involved piping, conduits, wiring, and other

systems. While Smithsonian points to its correspondence with Turner in which it states that

CBCA 2862, 4085, 4802

identified MEP interferences were visible in the basement or the mechanical rooms,

Respondent’s PFF ¶ 1049, Turner’s subcontractors described discovering MEP interferences

when the hard ceilings, often more than one, were removed. E.g., Transcript at 2395, 2890.

Several witnesses described “a rat’s nest of wires” that would fall from the ceiling when

exposed. Id. at 2434-36, 3299-303; Exhibit 4876 at 51-52.9

Once the interferences were discovered, subcontractors were required to investigate

and decide how to remove, relocate, or establish temporary service for the systems. Welch

& Rushe required several additional experienced crew members to conduct this investigation

work. Transcript at 2409-10. In investigating the systems, subcontractors often traced the

piping or wires to outside the designated construction area, resulting in further delays as

subcontractor personnel had to wait for a Smithsonian escort into the still-occupied portions

of the museum. Id. at 2395-98, 3299, 3303. Discovery of these interferences and the effort

needed to address them caused delays in the preparation of the coordination drawings. Id.

at 2436-37. Welch & Rushe was assigned the lead responsibility for the coordination

drawings, Exhibit 3050 at 103, but M.C. Dean, Inc., Turner’s subcontractor for the

installation of electrical, security, fire alarm, and telecommunications systems, and Turner’s

fire sprinkler subcontractor also contributed to these drawings. Transcript at 2430.

Agreement on MEP Interferences

Some of these interferences were depicted on the existing building drawings, but

many were not. Transcript at 1731. To address the costs and delays arising from these

interferences, senior management at Smithsonian and Turner agreed in December 2007 that

Smithsonian would pay for interferences not shown on the existing building drawings, and

Turner would absorb the cost of those that were depicted. Id.; Exhibit 117 at 2.10 Turner

tracked the MEP interferences it discovered on a field log that was provided to Smithsonian

This case proved the adage “a picture is worth a thousand words.” The Board

was shown pictures of the MEP interferences during the testimony of several witnesses, and

these pictures uniformly showed a mess of wires, ductwork, and piping in areas after ceilings

had been removed. E.g., Exhibit 4735.

The COTR initially rejected Turner’s request for additional compensation to

address these interferences based upon the mechanical, electrical, plumbing, and structural

general notes in SOM drawings. See, e.g., Exhibits 107, 3403; Transcript at 4077-80. The

drawing notes provided that the work by subcontractors was to be coordinated with other

trades “at no additional cost to the owner.” Exhibit 107. However, these notes do not

address the existence of MEP interferences that were not shown on existing drawings and

were not visible prior to demolition.

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on a bi-weekly basis. Transcript at 1731-34; Exhibit 4780. According to the log, Turner

found approximately 200 MEP interferences from January 2007 through January 2008, only

fifty-one of which were depicted on the existing drawings. Exhibits 4780, 5057 (updated

version of Exhibit 4780).11

During the hearing, Smithsonian’s Deputy Director of OPDC testified that

Smithsonian’s position was that if interferences could be discovered by review of the existing

drawings (McKim, Mead documents, as well as others), the 2004 existing conditions survey,

interviews Turner could have and should have had with Smithsonian personnel, or soft

demolition prior to the full demolition, then Turner should bear the cost of the MEP

interferences. Transcript at 3689. Smithsonian highlights MEP interferences that were

shown on existing drawings, but these interferences either were noted before the agreement

between senior management, see, e.g., Exhibit 885, or are captured on the log prepared by

Turner. Respondent’s PFF ¶ 377 (noting fifty-four instances in which the MEP interference

is noted on the existing drawings).

Addenda to Construction Documents

Turner issued a series of addenda to the 95% construction documents that, in part,

included further design changes requested by Smithsonian. The parties’ negotiations

regarding the scope and price for these addenda continued through September 2007. Turner

Construction Co., 13 BCA at 173,255.

Turner issued addendum 1 on January 17, 2007. Exhibit 358. Addendum 1

incorporated Smithsonian’s comments on its review of the 100% drawings.12 Turner issued

addendum 2 on April 13, 2007, and issued a revised version on July 18, 2007. Exhibit 617

Mr. Farooqi testified as to his analysis of this log, but that analysis took place

after his deposition in this matter at the request of Turner’s counsel. Smithsonian objected

to Mr. Farooqi’s testimony regarding his review of this log on this basis. The Board has not

considered Mr. Farooqi’s testimony about this log, but is able to discern what the log says

on its face about whether the MEP interferences could be determined from the existing

drawings.

It is unclear from the record whether the 100% construction documents and

addendum 1 were submitted concurrently, or were substantively distinguishable from each

other. Compare Appellant’s PFF ¶ 93 (Addendum 1 “included final dimensional

configurations, coordination with the SSB dimensions, and incorporated 100% review

comments”) with Respondent’s PFF ¶ 236 (Addendum 1 “contained revisions to complete

the Contract Scope of Work from the 95% to the 100% Construction Documents”).

CBCA 2862, 4085, 4802

at 3, 33. Addendum 2 incorporated final drawings for a fire suppression system for the SSB

chamber, fire zone changes, and mechanical specifications. Transcript at 829-30. The

contracting officer directed Turner to proceed with addenda 1 and 2 on July 19, 2007.

Exhibit 18.

Turner issued addendum 3 on June 27, 2007. Addendum 3 incorporated revisions to

electrical and mechanical systems to implement Smithsonian’s request to upgrade switch

gear. Exhibits 7_S at 4, 617 at 44-45; Transcript at 830. Smithsonian directed Turner to

proceed with addendum 3 on July 24, 2007. Exhibit 7_S at 2.

Turner issued addendum 4 on July 11, 2007. Addendum 4 revised the design for the

accessibility office, revised the door into the SSB chamber, and added signage. Exhibit 617

at 46-48; Transcript at 830. Smithsonian directed Turner to proceed with addendum 4 on

November 16, 2007. Exhibit 7_S at 2.

On August 1, 2007, Turner directed its subcontractors to implement the work in

addenda 1 and 2 and to prepare shop drawings and submittals based upon addenda 1 through

4. Exhibit 651.

Turner issued addendum 5 on August 29, 2007. Addendum 5 incorporated the SSB

exhibit package. Exhibit 617 at 49-50; Transcript at 831. The Board is unable to determine

from the record when the notice to proceed was issued for this addendum.

Turner and its subcontractors testified that the continuing design changes delayed

development of the coordination drawings. Transcript at 93-94. As Welch & Rushe’s

program manager explained, even if an addendum did not require work by a particular trade,

that trade was still required to review the new work presented by the addenda and the plans

of the other trades to make sure that the work could still all be coordinated. Id. at 2433.

Based solely upon an email message from SOM, Smithsonian asserts that addenda 1

and 2 were necessary to address incomplete construction documents. Exhibit 821.

Smithsonian also notes that Turner delayed the submission of its price proposals for these

addenda, which delayed the final design changes. Respondent’s PFF ¶¶ 245-57. The Board

finds that Smithsonian often directed Turner to proceed with addenda before it issued

funding modifications.

CBCA 2862, 4085, 4802

Subcontractor Performance Issues

Smithsonian contends that several problems in the performance of APRO led to the

delays and increased costs of performance experienced by Turner and its subcontractors.

Smithsonian highlights five instances in which APRO broke sprinkler system supply lines.

Exhibit 560 at 1. Although Smithsonian established that the instances occurred, Smithsonian

did not identify periods of time in which these incidents delayed the project. One of Turner’s

project managers testified that the sprinkler incidents did not affect the preparation of the

coordination drawings, which was the critical path activity at the time. Transcript at 1244;

Exhibit 5045 at 11. Turner backcharged the costs of these broken sprinkler lines to APRO,

so the direct costs of these broken supply lines are not in the costs sought by Turner. See,

e.g., Exhibit 59 at 31.

Smithsonian also points to the difficulty APRO experienced in demolishing the

concrete within the beam pockets of the structural steel. Exhibit 501. Both Turner and

APRO acknowledge that APRO experienced this difficulty, Exhibit 439; Transcript at 344243, but assert that it arose because APRO could only use hand tools for this effort to limit the

vibration, which could harm exhibits and artifacts in the museum.13 Exhibit 3055 at 50.

APRO withdrew its claim for the additional time it spent demolishing the beam pockets.

Transcript at 3442-43.

Finally, Smithsonian highlights Turner’s complaints about APRO’s lack of adequate

staffing and progress on its contracts as evidence of the difficulties APRO experienced. On

July 24, 2007, Turner issued a cure notice to APRO regarding its progress on its demolition

contract, Exhibit 82, but it did not terminate APRO’s subcontract. The Board credits the

testimony of APRO’s president that APRO experienced difficulty meeting schedules on its

demolition contract because of the unexpected volume of abatement required. Transcript at

3424.

Design and Management Issues

Smithsonian highlights several issues related to the design that it contends are

Turner’s responsibility pursuant to the design-build contract. The first issue was the slow

Smithsonian chose to leave exhibits and artifacts in the museum during the

renovation. Because of concerns about vibration, sensors were placed throughout the

museum, including one on a statue of George Washington. When the vibration caused by

demolition activities became too great, the sensor would send a signal to the cell phone of

Turner’s superintendent. The superintendent regularly received calls from George

Washington during the course of the project. Transcript at 1101-02.

CBCA 2862, 4085, 4802

processing of requests for information (RFIs) by SOM, which became part of Turner’s team.

Smithsonian points to complaints by Turner subcontractors M.C. Dean and Welch & Rushe

about these slow responses. Respondent’s PFF ¶¶ 1031-37. Smithsonian also highlights an

email message that Turner’s program manager sent internally about the need for additional

manpower commitments by SOM to address the issues that arose because of “their

incomplete design.” Exhibit 951. When asked about this statement, the project manager

explained that some of the issues arose because of incomplete drawings but others arose

because there were “conflicts with the existing building. And there’s a lots of elements out

there that never showed up on any of the drawings that we had access to at the time.”

Transcript at 907-08.

Smithsonian also points to several items that were the subject of change orders as the

result of what Smithsonian describes as design errors and omissions. Respondent’s PFF

¶¶ 311-22. Turner’s program manager explained that, based upon his experience with

museum renovation, it is not unusual to see errors in drawings prepared by architects.

Transcript at 1242. Further, Turner included contingencies in its pricing to correct such

errors. Id. at 1243. Smithsonian’s Deputy Director of OPDC, when asked what Turner’s

obligations were as the designer on the design-build contract, stated: “To design the project.

To give us a project that met the scope of work, the intent and deliver a fully functional,

usable space.” Id. at 3640.

Finally, Smithsonian offers several findings about Turner’s management of the

project, highlighting correspondence regarding performance failures of individuals employed

by Turner. Respondent’s PFF ¶¶ 292-99. While Smithsonian asked Turner personnel about

the performance of these individuals, Smithsonian did not elicit any testimony or provide

other evidence that these performance issues were responsible for the delays or disruption

experienced on the project.

III.

Performance Problems Led to Disruption and Delay

Testimony About Disruption

Turner and each of the subcontractors presented testimony about the disruptive effects

of these issues to their planned performance.

Turner’s superintendent testified about the continuing abatement and MEP

interferences that he saw when he started on the project in August 2007. Transcript at 1060,

1097. In an effort to put the project back on track, he took “an aggressive approach on

schedule.” Id. at 1076. He also released a greater number of areas for subcontractors to

work on and worked to stack subcontractors. Id. at 1073, 1076. These efforts caused a

CBCA 2862, 4085, 4802

decrease in subcontractors’ productivity and an increase in Turner’s general conditions costs,

as Turner was required to supervise more work. Id. at 1076, 1098.

Welch & Rushe experienced delays and labor inefficiencies as the result of numerous

areas becoming inaccessible due to abatement work and additional work required as a result

of the addenda and MEP interferences that had to be investigated. Transcript at 2434-44,

2673-88. Welch & Rushe also had to spend time investigating pipes and cables that were not

on the existing building drawings and were often abandoned. Id. at 2410. Welch & Rushe

had to develop a plan to address the interferences, which had to be approved by Smithsonian,

prior to installation of the new pipes. Id. at 2401-03. The difficulties were compounded by

Smithsonian escorts showing up late or without keys to areas to be investigated. Exhibit

4974. Welch & Rushe brought in additional crew members to investigate and plan around

these interferences. Transcript at 2410. Welch & Rushe repeatedly had to start and stop its

work on the coordination drawings and the installation of piping for the plumbing and

electrical systems because of these problems. Id. at 2443-45, 2682. Welch & Rushe’s

superintendent testified that “sometimes you couldn’t put two full lengths of pipe together.”

Id. at 2682. As a result of these problems, Welch & Rushe’s plan for working on the project

was disrupted. Id. at 2683.

Welch & Rushe witnesses also testified to delays caused by inoperable freight

elevators and security requirements. There were two freight elevators on the project, which

had to be operated by Smithsonian personnel and were often broken. Transcript at 2408,

2678. Welch & Rushe also experienced delays in gaining access to the work site in the

morning when Smithsonian guards were late arriving to check identification. Id. at 2405.

Three of Welch & Rushe’s subcontractors also testified as to the disruption

experienced on the project. Stromberg Metal Works, Inc. (Stromberg) was Welch & Rushe’s

HVAC duct installer. Both Stromberg’s senior project manager and executive vice president

testified in support of Stromberg’s claim and described the interferences as “sprinkler piping,

electrical conduits and communication cabling.” Transcript at 2888; Exhibit 4876 at 6-7.

Stromberg’s project manager testified that these interferences were not indicated on the

building drawings and could not have been known until the ceilings were demolished.

Transcript at 2889-90. Once these ceilings were demolished, “utilities started falling out of

the air.” Id. at 2890. Because of these interferences, Stromberg could not install the HVAC

lines in the efficient manner it planned. Id. at 2870-71. Instead, Stromberg would install

lines where possible and then return to connect the lines to larger lines when they were

installed. Id. at 2885, 2892, 2946; Exhibit 4876 at 9, 12 (pictures of piecemeal installation

of ductwork).

CBCA 2862, 4085, 4802

Southern Insulation, Inc. (Southern), Welch & Rushe’s subcontractor for piping and

ductwork insulation, experienced lost productivity because it could not work in the sequence

it had planned. Instead, Southern was required to insulate piecemeal as piping and ductwork

were installed in a patchwork pattern all over the project. Transcript at 3128-29. Similarly,

Siemens Industry, Inc. (Siemens), Welch & Rushe’s subcontractor for the installation of

automation controls for the mechanical and security systems in the building, could not work

in accordance with its original plan because it had to wait until other trades had finished their

work. Id. at 3225-26. Siemens often had to return several times to finish a single task. Id.

at 3231-32.

M.C. Dean, Turner’s electrical subcontractor, experienced delays and loss of

productivity as the result of unforeseen hazardous materials, differing site conditions, and

MEP interferences. Transcript at 3291-92. Whenever M.C. Dean encountered unexpected

wiring, it would have to investigate what the wiring was for and where it went. Id. at 330304. These investigations often required it to enter the parts of the museum that Smithsonian

still occupied, which further delayed efforts as M.C. Dean waited for an escort into the space.

Id. at 3302. M.C. Dean was also required to bring in additional crews to install temporary

wiring to enable systems to continue to operate while they were reconfigured. Id. at 3341.

M.C. Dean’s work was complicated by these conditions so that it could not proceed in the

sequence that M.C. Dean anticipated. Id. at 3298, 3303.

March Westin was to install structural steel on all five floors of the museum and

planned to work from the top floor to the ground floor. Transcript at 1963-64. March

Westin experienced delays and labor inefficiencies when it repeatedly encountered hazardous

material that had to be abated or MEP interferences that had to be relocated before it could

perform its work. Id. at 1975-90. As a result of these conditions, March Westin was

required to perform work out of sequence or in a “hopscotch” manner. Id. at 2017. March

Westin’s employees were forced to move around the building seeking areas in which they

could proceed with their efforts. Id. at 2020-21. This method of proceeding added

performance time and increased its labor costs. Id. March Westin also experienced

acceleration and trade stacking as Turner pushed everyone to complete the project. Id. at

2018-19. March Westin increased its crews from the planned number of two to four to finish

the work. Id. at 2019-20.

APRO discovered material that required abatement in every area in which it was

assigned demolition work, which, in turn, caused inefficiency in its demolition work.

Transcript at 3410. APRO would mobilize for demolition in an area, only to be required to

demobilize for abatement, and could only work in a “small piecemeal fashion,” out of

sequence and moving from one area to another. Id. at 3410-11, 3424-25. APRO could not

use the building electrical shafts as trash chutes, as it had planned, because of the presence

CBCA 2862, 4085, 4802

of hazardous materials. Id. at 3379. Instead, APRO had to use the two elevators, which were

used by all contractor personnel, at a greater cost of labor and time. Id. at 3425; Exhibit 41

at 900.

C.J. Coakley Company, Inc. (Coakley) was Turner’s subcontractor to finish the

interior spaces, installing drywall and acoustical ceilings. Coakley’s work was affected by

all of the problems experienced by the other subcontractors simply by the nature of its work.

As Coakley’s vice president testified, Coakley had to wait for the demolition to be completed

before it could begin marking lines and installing framing. It then had to await the rough-ins

by the other trades before it could beginning hanging drywall. Transcript at 3478. The

process was similar for the ceiling work: Coakley installed the framing and then returned to

install the ceilings after the other trades had finished their work. Id. at 3479.

Turner’s Delay Analysis

In support of the delay and disruption claims, Turner presented a delay analysis

prepared by its expert, Mr. Farooqi. Mr. Farooqi identified 133 days of critical path delay,

equal to the period of time between the initial substantial completion date, June 20, 2008, and

the actual substantial completion date, October 31, 2008. Transcript at 218-19. During this

period, the critical path activities were the erection of structural steel, preparation of

coordination drawings, abatement activities, and relocation of steam lines. Exhibit 5045;

Transcript at 228-65. Earlier hazardous waste abatement, MEP interferences, and design

changes caused these delays.14 Transcript at 228, 240, 243, 338, 340.

Smithsonian provided its own delay analysis performed by Daniel Stewart of Hill

International. For the most part, Mr. Stewart identified the same activities on the critical path

and the same causes of delay. Mr. Stewart agreed that the structural steel work was on the

critical path and found a compensable delay of twenty-six days due to hazardous material

abatement. Similarly, Mr. Stewart agreed that the coordination drawings were on the critical

path during the same period. Exhibit 4747 at 10-12. Mr. Stewart disagreed with Mr.

Farooqi’s assessment that Smithsonian was responsible for these delays. Transcript at 4423.

Mr. Farooqi did not testify or offer any opinion as to any specific periods of delay

experienced by Turner’s subcontractors. Similarly, none of the subcontractors’ witnesses

Mr. Farooqi also acknowledged that there was a concurrent delay in the beam

pocket demolition work performed by APRO, a predecessor activity for installation of the

structural steel, and he could not separate the two causes of delay. Transcript at 395-96.

CBCA 2862, 4085, 4802

testified as to specific periods of delay tied to Mr. Farooqi’s analysis.15 Because of this gap

in proof, the Board does not need to decide whether Turner proved that it experienced critical

path delay for the entire period identified by Mr. Farooqi.

IV.

Turner’s Claims

Turner’s 2011 Claim for General Conditions Costs16

Nature of Turner’s claim

Turner incurred $12 million in general conditions costs in performance of the project,

of which approximately $10 million was for construction activities. Transcript at 1682.

Patrick McGeehin, Turner’s damages expert, and his firm reviewed Turner’s general

conditions and removed costs that were unallowable based upon guidance in the FAR. Id.

at 1390. Smithsonian’s auditor, Jeffrey DuVal of the Kenrich Group, LLC, agreed that

Turner incurred these general conditions costs. Id. at 4979; Exhibit 236 at 37 n.69.

Turner seeks these costs as part of the reasonable price for the renovation of the

museum. Turner’s general conditions costs, often referred to as field overhead costs, were

the direct costs of Turner’s supervision in the field and include the costs of the project

manager, field superintendent, and others assigned to staff the project. Transcript at 1389.

These sorts of costs, which may have increased due to delays and difficulties experienced on

the project, are incurred on any construction project. Having failed to obtain a firm fixed

price for the contract effort, Turner seeks all of the general conditions costs incurred to

perform the undefinitized contract work. Id. at 1805.

Smithsonian contends that Turner should not recover any additional general conditions

amounts, in part because evidence in the record demonstrates that the project experienced

problems with safety issues and poor management by Turner. Respondent’s PFF ¶¶ 292-304.

While the evidence cited in these proposed findings demonstrates that Turner had

management difficulties, Smithsonian offered neither documentary evidence nor testimony

Timothy Calvey, March Westin’s claim expert, in response to Mr. Stewart’s

report, testified that March Westin’s activities were on the critical path identified by Mr.

Farooqi, but he did not testify as to a specific period of delay in March Westin’s activities.

Transcript at 2244-45.

Exhibit 41.

Turner hand-delivered its claim to the contracting officer on May 24, 2011.

CBCA 2862, 4085, 4802

that these difficulties were unusual for a project of this complexity. Smithsonian also did not

isolate the cost of these management difficulties.

Smithsonian also challenges Turner’s entitlement based upon problems with

subcontractor performance, such as the sprinkler leaks caused by APRO. However, as

previously noted, the direct costs of these leaks are not in the claim. Transcript at 1744;

Exhibit 59. We find that any general conditions costs that might have been associated with

this problem were minimal.

Finally, Smithsonian asserts that Turner’s claim includes “massive overtime amounts

caused by Turner management decisions or subcontractor poor performance,” but cites only

one instance of Turner directing a subcontractor to work overtime. Respondent’s PFF ¶ 420.

Turner directed the overtime work Smithsonian highlights at no cost to Turner or

Smithsonian. Id. The subcontractors’ claims include other instances of overtime, but the

Board has not included those costs in what the subcontractors or Turner may recover.

Compilation of Turner’s Claim for General Conditions

Turner’s second project manager assembled Turner’s claim.17 He compiled from

Turner’s accounting system all of the direct costs that Turner incurred on the project, which

were tracked using different project codes, for both design and construction efforts.

Transcript at 1666, 1671. The direct costs of construction totaled approximately $57 million.

Exhibit 257 at 2-3.18 Within the construction effort, the project manager identified all work

that was performed for a definitized price based upon the language of contract modifications.

Transcript at 1684, 1694. Using pay applications and other accounting records, he identified

the costs incurred to perform the modifications. Id. at 1702, 1705. The project manager

collected the remainder of the direct costs as “undefinitized costs,” which totaled $45.4

million. Id. at 1715-16; Exhibit 257 at 3. Turner never defined the terms definitized or

undefinitized. The Board understands that, in seeking to identify “undefinitized work,” it

is seeking to identify the cost of the work for which there was no definitized price.

Turner employed two construction managers on the project. The first manager

was brought in at the beginning and focused upon the design aspects of the project. The

second manager was brought to the project in November 2007 and managed the project

through the claim period and the installation of the second steam generator. Transcript at

1657.

Exhibit 257 is Turner’s revised claim calculation, after adjustments were made

to correct for errors identified in the audit. Transcript at 1682-83.

CBCA 2862, 4085, 4802

The project manager determined the ratio of priced to unpriced direct construction

work ($12.5 million (22%) to $45.4 million (78%)). Transcript at 1393, 1670. Applying

these percentages to the total construction costs, he divided the general conditions costs

incurred based upon these percentages and determined that Turner incurred almost $8 million

in general conditions costs associated with the direct costs of the unpriced work. Exhibit 257

at 3. The project manager added the general conditions costs and the direct costs of

construction together and applied a percentage for fee (3%). Id. He also added amounts for

insurance and bond costs that included actual costs and projected costs determined on a

percentage basis to derive a total cost of unpriced construction of $56.6 million. Id.; Exhibit

41 at 2; Transcript at 1679.19 He subtracted from this figure the $49.6 million that Turner

had been paid and determined that Turner was owed an additional $7 million. Transcript at

1668; Exhibit 257 at 1.

Turner’s cost expert, Mr. McGeehin, determined that, of the $10 million in general

conditions costs incurred for the construction effort, Turner was paid approximately $6

million, leaving $4,133,521 unrecovered. Transcript at 1442; Exhibit 3607 at 77.20

Mr. DuVal, Smithsonian’s auditor, criticized the project manager’s calculation as

unreliable. Exhibit 236 at 9-10. Because Turner’s accounting system did not track

contemporaneously the costs of priced versus unpriced work, the determination of what work

was unpriced was based upon the project manager’s analysis after the work was complete.

Transcript at 4790, 4795.21 Mr. DuVal reviewed Turner accounting records that identified

Turner identified the percentages for insurance (1.06%), and bond (1.624%)

but did not identify the incurred amounts. Exhibits 41 at 2, 257 at 3.

Mr. McGeehin also calculated a daily rate for Turner’s general conditions and

then spread those costs, based upon that daily rate, across the periods of delay. Transcript

at 1397-98; Exhibit 3607 at 27-28. While Turner did not quantify its direct cost claims as

delay claims, Mr. McGeehin performed this alternative analysis in case the Board determined

that there were periods of delay that were not compensable. Transcript at 1397-98.

Smithsonian incorrectly asserts that this analysis shows that Turner incurred the bulk of its

general conditions costs after the date of substantial completion. Respondent’s Brief at 47.

It does not appear that Mr. McGeehin actually analyzed when the general conditions costs

were incurred; he only calculated the general conditions costs across a time period based

upon a calculated daily rate. Transcript at 1398.

Mr. DuVal’s criticism was also a pretense to audit all of Turner’s costs incurred

on the contract. Because these costs were not tracked in the accounting system, Mr. DuVal

determined that he should audit the entirety of Turner’s incurred costs. Exhibit 236 at 6.

CBCA 2862, 4085, 4802

several of the costs the project manager identified as associated with unpriced work as being

associated with priced work. Id. at 4791. Because Turner allocates its general conditions

costs based upon the ratio of the costs of unpriced verus priced work, Mr. DuVal explained

that a larger percentage of costs in the latter category would reduce Turner’s claim. Id. at

4794, 4965. Despite these criticisms, after auditing the entirety of Turner’s incurred costs,

Mr. DuVal did not identify costs that were incorrectly allocated to either priced or unpriced

work. Exhibit 236.

Smithsonian, in its post-hearing brief, points to two purported errors in Turner’s

compilation of costs. Respondent’s Brief at 34-35. Smithsonian asserts that some of the

costs for the SSB exhibit were incorrectly allocated to the unpriced effort. Respondent’s PFF

¶¶ 592-93. However, the program manager’s analysis is supported by the underlying

modifications. Exhibits 7_H, 7_J. Smithsonian also claims that the program manager’s

analysis does not comport with internal Turner budget documents. Respondent’s PFF ¶ 599.

However, as the program manager and others testified, the documents cited by Smithsonian

are project budget documents, not accounting records. See, e.g., Transcript at 1807.

From the $10 million in construction general conditions costs, Mr. DuVal removed

all of the costs attributable to supervision, engineering, and estimating because he said they

were not allowable under the Equitable Adjustment clause. Transcript at 4958. The resulting

amount was roughly $5 million, which Turner has been paid. Id. at 4961.

Mr. DuVal also observed that this $5 million in general conditions costs represented

a greater percentage of overhead recovery than Turner had agreed to for change work.

Transcript at 4959. When applied to the approximately $66 million in direct construction

costs, $5 million is 7.6%. Id. Mr. DuVal noted that Turner agreed to charge only 4% for

general conditions on change work. Transcript at 4959. Finally, Mr. DuVal opined that

Turner had agreed to receive general conditions costs as a percentage of direct costs. With

its claim, he maintained, it was seeking actual costs. Id. at 4962-65. Finally, Mr. DuVal

noted that the costs in the claim for general liability insurance and bond, which total

$355,187, appeared to be estimates, as he was not shown any evidence that these costs were

incurred. Id. at 4956.

Analysis of Undefinitized Direct Costs Underlying Turner’s

General Conditions Claim

To aid in the presentation of evidence, Turner’s program manager prepared a pie chart

that allocated the $45.4 million in costs of unpriced construction work into three categories:

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base contract work ($34.4 million), change work approved by Smithsonian ($3.9 million),

and pending/approximate change work ($7 million). Appellant’s Demonstrative Exhibit 24.

The program manager also prepared summaries of the direct costs that totaled these amounts.

Exhibits 5341, 5342, 5343.22

Base contract work

The first category includes the costs of the base subcontracts Turner issued for the

construction effort. Transcript at 1718; Exhibit 5342. The program manager divided the

subcontracts based upon priced versus unpriced work under the base contract. Exhibit 5342.

Smithsonian challenges Turner’s inclusion of several of the costs within the pool of

unpriced work. Respondent’s PFF ¶¶ 605-07. First, the compilation includes an SOM

subcontract for $3.347 million, which is identified elsewhere as a fixed-price design contract.

Id. ¶ 605; Exhibit 257 at 2. To adjust for this error, the Board reduces the total direct costs

for construction from $58 to $54.6 million. Smithsonian identifies three other contract

amounts (totaling $377,415) that it says are not part of the unpriced construction effort.

These are contracts with TriPyramid ($367,480), Siemens ($3135), and Seneca Balancing

($6800). Smithsonian also challenges the inclusion of costs for a subcontractor that was

terminated for default ($79,700) and the costs of the follow-on subcontractor ($118,700).

Respondent’s PFF ¶ 609. In addition, Smithsonian identifies $115,900 in allowances that

Turner never reconciled. Id. ¶ 610. The Board is unable to determine from the record

whether these costs are properly included in the tally of unpriced construction work. If these

contracts and their corresponding costs are removed ($691,715), the amount of unpriced base

contract work is reduced to $33.7 million.23 This amount is 62% of Turner’s total direct

construction costs.

The Board admitted these summaries over Smithsonian’s objection because

Smithsonian had sought the same information in discovery and the summaries assist the

Board in its determination of a reasonable price. Transcript at 1785. Because the Board uses

this evidence to reduce Turner’s claim and has made adjustments based upon the errors

identified by Smithsonian, the Board discerns no prejudice to Smithsonian from admitting

the summaries. Fed. R. Evid. 103.

Smithsonian challenges other amounts included in the chart, but the Board

accepts Turner’s explanation in response to these challenges. Respondent’s PFF ¶¶ 605-10.

CBCA 2862, 4085, 4802

Approved change work

The next group of costs that Turner associates with unpriced construction work is the

direct costs of the change work approved by Smithsonian. Exhibit 5341. This work is

included in the unpriced work because it was covered by unilateral modifications. Transcript

at 1910. Although these change orders were not issued through bilateral modifications, the

prices for the changes were negotiated between Turner and Smithsonian. Id. at 1659-60. For

each of these pieces of change work, the record includes Smithsonian’s request for a proposal

and Turner’s proposals from its subcontractors, to which Turner added general conditions

costs and fees. See, e.g., Exhibit 7_X at 1156-57. The program manager removed the

general conditions and fee amounts when he tallied the cost of the change work. Compare

Exhibit 7_X at 1161 with Exhibit 5341 at 5 (only subcontractor proposed cost included);

Transcript at 1723, 1796-98.

Pending change work

The final group of costs that Turner associates with unpriced work consists of

additional work that was undertaken but either not presented to Smithsonian as a change

request or rejected by Smithsonian, prior to the submission of Turner’s 2011 claim.

Transcript at 1723-24. Turner included the costs of this “pending change work” in its claim

because they were incurred in performance of the project and include costs for inspections

and testing, MEP interferences, overtime, design development, ceiling work, and additional

scope. Id. at 1727; Exhibit 5343. Turner’s project manager testified that these amounts do

not include the $6 million in subcontractor claims, Transcript at 1730, but the Board can

match some of the subcontractors’ claims for additional work to figures listed in this

summary. Exhibit 5343. No one explained why the bulk of these additional costs was not

presented as change order requests to Smithsonian.

Turner did not submit all of the proposed change orders that underlie these requests

for the record, although it did present this documentation to Smithsonian in support of its

claim. Transcript at 1724; Respondent’s PFF ¶ 625. Examining change orders in the record,

the Board found discrepancies. For example, Turner submitted a change order request for

subcontractor overtime (COR 223), but the amount of the request does not match the amount

in Turner’s compilation. Compare Exhibit 3532 at 3 with Exhibit 5343 at 4.

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Turner’s 2015 Claim for Second Steam Generator24

As part of its scope of work, Turner was required to upgrade the mechanical system

for the renovated portion of the museum. Exhibit 5_E at 209. This system was required to

maintain humidity levels at 50%, plus or minus 5% during the heating season. Appellant’s

PFF ¶ 457; Respondent’s PFF ¶¶ 928-29.25 In the 95% drawings, and the specifications that

accompanied them, Turner proposed to install a system that would meet this requirement.

Respondent’s PFF ¶ 930. This system included only one steam generator to service four air

handling units that were installed as part of the renovation. Transcript at 3979-80.

Smithsonian asserts that Turner’s proposed system was definitized with the submission of

these drawings. Respondent’s PPF ¶ 933.

The parties agree that the HVAC system did not maintain the required humidity levels

beginning with the first heating season after substantial completion. Transcript at 1736-37.

To determine why, the parties agreed that Turner would hire AECOM to conduct an

investigation. Id. at 1737.

The AECOM engineer responsible for investigating the problem testified that,

although the steam generator installed by Turner had sufficient capacity to meet the humidity

requirements, it did not have a “safety factor built in for unforeseen conditions.” Transcript

at 994. Such a condition would be the steam provided to the museum by the General

Services Administration (GSA) steam plant. According to the engineer, the GSA steam

“does not have the best reputation as far as being reliable. The pressure can fluctuate. The

condition of the steam itself being clean or dirty can inhibit the steam generator’s ability to

produce steam at its rated capacity.” Id. The inconsistency of the GSA steam coupled with

several other factors in the equipment design and layout kept the HVAC system from

maintaining the required humidity levels. Id. at 998-99. The AECOM engineer testified

further that Smithsonian had made modifications to the control systems and had chosen to

override the system to try to get the system to perform as required; however, he also

acknowledged that AECOM was able to get a baseline measurement with the system

operating as intended. Id. at 1000. Finally, AECOM’s report noted that exterior doors

should not be propped open, but the AECOM engineer acknowledged that AECOM’s testing

occurred before the museum opened to the public in the morning. Id. at 1035. AECOM

The contracting officer received Turner’s claim on May 6, 2015. Exhibit 309.

The contract also required Turner to warrant and guarantee that “mechanical

[] equipment shall be fit and fully useable for its intended and specified purpose and shall

operate satisfactorily with ordinary care.” Exhibit 1_F at 211 (Clause 72(a)(5)).

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recommended several changes to the existing system to address the problems, but did not

recommend the installation of a second steam generator. Exhibit 309 at 21.

After the issuance of AECOM’s report, believing that none of the recommended fixes

would address the issue, Smithsonian directed Turner to install the second steam generator.

Transcript at 1742. Smithsonian noted in its direction to proceed that Turner was responsible

for all of the costs of the work because the contract was a design-build contract and “Turner

is entirely responsible for the success of its own design and installation.” Exhibit 302.

Smithsonian accepted the second steam generator after the system was shown to meet the

required humidity levels in November 2014. Respondent’s PFF ¶¶ 951-52.

Turner submitted a claim in the amount of $438,668. Exhibit 309 at 4. That amount

includes the $400,000 in direct costs paid to Welch & Rushe and markups for commission,

insurance, and bonding. Id. at 4, 140. Turner did not include costs for any design work

associated with the additional installation. Id. at 4. Smithsonian offered no evidence that

Turner’s actual cost to install the second steam generator was unreasonable or in excess of

what Turner would have incurred if it had installed a second steam generator originally. See

generally Respondent’s PFF ¶¶ 926-62.

Turner also seeks $424,698 for an “unpaid approved contract balance.” Appellant’s

Response Brief at 51; Appellant’s PFF ¶ 456. Smithsonian’s proposed findings are silent as

to whether this amount is owed to Turner. Respondent’s Response to Appellant’s PFF ¶ 456;

Respondent’s PFF ¶ 581. We expect that any outstanding balance due and owing will be

paid.

Subcontractor Claims for Labor Inefficiency, Extended Overhead, and Change Work

Change Order Releases

Smithsonian asserts that the subcontractors’ claims have been released through the

execution of change orders or lien releases during performance of the contract.26 APRO,

Coakley, and March Westin signed change orders with Turner that added or deducted

individual items of work from their respective subcontracts. Exhibits 59, 76, 103. With the

exception of the change orders for the payment of overtime to Coakley discussed below,

none of these change orders appear to address claims for delay or disruption caused by MEP

The contracting officer did not mention these releases in either of her decisions

rejecting the subcontractors’ claims, Exhibits 42, 237, but Smithsonian did assert the

affirmative defense of release in its answer to Turner’s complaint in the second appeal, filed

October 24, 2014.

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interferences or hazardous material abatement. All of the change orders contain the

following release:

Through acceptance of this Change Order, this Subcontractor acknowledges

that it has reviewed the progress of the Work related to this Project and the

potential time impact of the added [or deleted] work on the progress of the

project in the future. As a result, this Change Order includes compensation to

the Subcontractor for any and all effects, delays, inefficiencies or similar

demands associated with this Project and the Subcontractor recognizes that

there is no basis for any such claim in the future.

See, e.g., Exhibit 103 at 1.

Lien Releases

Language of the Lien Releases

Coakley, Welch & Rushe, M.C. Dean, and March Westin executed documents titled,

“Affidavit, Partial Waiver of Lien and Release,” in exchange for progress payments on the

project. Exhibits 394, 395, 3197, 3711. These affidavits all contain the following language:

The undersigned has received payment in full for all deliveries of material to

and/or for all work performed in connection with the construction of the

project through the date of the [Turner] Application for payment No. [xx] for

the period ending [date] and hereby represents and warrants that there are

no outstanding claims by the Company in connection with the project through

the date of Application for Payment No. [xx] except for any retention, pending

modifications and changes, or disputed claims for extra work as stated herein:

In consideration of the above-mentioned payment in full, the undersigned does

hereby waive, release and quit claim in favor of the development manager,

owner of the project, each and every party acquiring title to and/or making a

loan on the project, the title company or companies examining and/or insuring

title to the project, any surety or guarantor, the general contractor, Turner

Construction Company and other party having an interest in the project and

any and all of their successors and assigns (hereinafter collectively referred to

as the “Released Entities”), all rights that presently exist or hereafter may

accrue to the undersigned to assert a lien upon the land and improvements

comprising the project by virtue of any law regarding the rights of a contractor,

subcontractor, laborer, supplier, or materialman to assert a lien or claim against

CBCA 2862, 4085, 4802

the project for deliveries of material to and/or work performed in connection

with the construction of the project through the date of Application for

Payment No. [xx], except for those items listed under No. 1 above.

....

The undersigned does hereby forever release, waive, and discharge the

Released Entities from any and all causes of action, suits, debts, accounts,

damages, encumbrances, judgments, claims and demands whatsoever, in law

or equity or otherwise, and whether known or unknown and whether presently

ascertainable or not, which the undersigned and/or its successors and/or its

assignees ever had, now have, or ever will have against the Release Entities,

by reason of delivery of material and/or performance of work relating to

the project through Application for Payment No. [XX], except for those

items listed under No. 1 above.

See, e.g., Exhibit 395 at 2. Turner’s contract with Smithsonian required that Turner obtain

lien releases prior to requesting progress payments from Smithsonian. Exhibit 1_F at 297-98.

Evidence of Continuing Consideration of Claims

Welsh & Rushe noted on several of the lien releases that it had attached a change

order reconciliation log. See, e.g., Exhibit 395 at 2. Welsh & Rushe also notified Turner of

the effect the problems with MEP interferences and hazardous material abatement were

having on its work on the project. See, e.g., Exhibit 4930.

M.C. Dean did not note any reservations on the lien releases, Exhibit 3197, but did

note that it reserved its rights on change orders that it executed. See, e.g., Exhibit 128. M.C.

Dean also notified Turner of the effect that the problems with MEP interferences and

unanswered requests for information were having on its work on the project. See, e.g.,

Exhibit 882.

March Westin noted its reservation of its delay claim in its September 1, 2009, lien

release, Exhibit 3711 at 1, and noted in correspondence with Turner its claim for extended

general conditions costs due to delays. See, e.g., Exhibit 909 at 2.

Coakley did not note any reservations, Exhibit 394, but contemporaneously notified

Turner of its inability to make progress due to “hold ups and coordination issues.” Exhibit

711.

CBCA 2862, 4085, 4802

Elements of Individual Subcontractor Claims

Turner presented pass-though claims for five of its subcontractors. The subcontractors

assert three different types of claims: lost labor efficiency due to disruption, extended

overhead due to delay, and uncompensated change work. March Westin also seeks extended

home office overhead costs and retainage.

Welch & Rushe

Welch & Rushe seeks $1,672,432.71: $815,675 for labor inefficiency costs,

$123,245.71 for extended overhead costs, and $733,512 for pending change work. Exhibit

41 at 679.

Labor inefficiency costs. Because the disruptive impacts were constant and pervasive,

Welch & Rushe could not identify a portion of its work that was not affected by these factors

for the purposes of performing a measured mile analysis. Transcript at 2441-42. Welch &

Rushe’s expert, Paul Stynchcomb, testified that, because Welch & Rushe worked with

different materials and different sizes of pipes, identifying a “measured mile” analysis would

have been difficult. Id. at 3008.

Instead, Welch & Rushe relied on the Mechanical Contractors Association of

America, Inc. (MCAA) factors to quantify its labor inefficiency claim. Mr. Stynchcomb

recommended, and Welsh & Rushe applied, four MCAA factors: reassignment of manpower,

concurrent operation, dilution of supervision, and site access. Exhibit 41 at 672; Transcript

at 2568-69. Welch & Rushe’s superintendent explained how each of these factors was

appropriate, given the difficulties that Welch & Rushe experienced on the project. Transcript

at 2687-703. Based upon the severity of these factors, Welch & Rushe calculated a 42% loss

of productivity on a portion of its total labor costs. Id. at 2568-69.

Welch & Rushe made several adjustments to its labor hours prior to the application

of the MCAA factors. First, Welch & Rushe bid the project with a MCAA labor factor of

0.65, which it uses for all of its Washington, D.C., area projects. Transcript at 2560-61;

Exhibit 41 at 669, 676. Despite this fact, Welch & Rushe adjusted its labor factor up to 1.0,

which increased its labor estimate from 8832 hours to 15,791 hours—a difference of 6959

hours, for which Welch & Rushe does not claim inefficiency costs. Transcript at 2560-65;

Exhibit 41 at 670. Second, Welch & Rushe tallied its actual labor hours based on certified

payroll records and excluded supervision costs. Transcript at 2569-70; Exhibit 41 at 772815. It reduced its actual labor hours by 25% to account for any inefficiencies Welch &

Rushe may have caused. Based upon these adjustments, its labor hours were reduced from

46,542 to 34,907. Transcript at 2569; Exhibit 41 at 672-73.

CBCA 2862, 4085, 4802

Welch & Rushe multiplied the 42% loss factor by the adjusted actual labor hours and

then subtracted the efficient hours from the resulting amount to derive a total of 10,325

inefficient hours. Exhibit 41 at 673. Welch & Rushe multiplied this figure by its

contractually agreed upon unit rate for journeyman laborers of $79 per hour, resulting in a

claim for $815,675. Transcript at 3090; Exhibit 5059 at 174.

Smithsonian criticizes Welch & Rushe’s choice of MCAA factors, asserting that the

problems that Welch & Rushe experienced were tied to the resolution of requests for

information (RFI), without determining who was responsible for the delays. Transcript at

3050-51. However, Mr. Stynchcomb testified that Welch & Rushe identified the relevant

MCAA factors based upon a myriad of issues, including “addressing the RFIs, the absence

of work spaces, and the movement of job crews, which could also be affected by the elevator,

by security, and by other issues beyond just RFIs … [and] unforeseen issues.” Id. at 3051-52.

Smithsonian asserts further that, by applying a factor for site access, Welch & Rushe seeks

to recover for site access restraints that Welch & Rushe was aware of at the time of bidding.

The site access constraints, however, went beyond what was expected based upon the

solicitation’s warning of “normal site access requirements.” Id. at 2405-06, 2702.

Smithsonian contends that recovery on the claim would result in a windfall to Welch

& Rushe because evidence in the record suggests that Welch & Rushe’s estimate for the

project was 34,314 labor hours but there were 25,677 labor hours in the original bid. Exhibit

1451. However, the hours set forth in Exhibit 1451 match the hours in Welch & Rushe’s

claim for total hours expended on the project. Compare Exhibit 1451 at 2 with Exhibit 41

at 771. Smithsonian also proffers Welch & Rushe’s October 19, 2009, request for equitable

adjustment (REA) that asserts that Welch & Rushe’s bid was based upon 18,340 hours, but

Welch & Rushe explains that the reference in the REA was to all hours, not only craft hours,

as in its 2011 claim. Compare Exhibit 1441 at 7 with Exhibit 41 at 677. Smithsonian notes

that Welch & Rushe did not provide proof of its bid estimate, instead relying upon the

testimony of its superintendent and director of operations that Welch & Rushe’s bid applied

an MCAA factor of 0.65, which was adjusted upward. Exhibit 1451; Transcript at 2623-24.

The Board credits this testimony of the Welch & Rushe witnesses regarding the company’s

standard practice for contracts in the Washington, D.C., area. Transcript at 2561.

Smithsonian correctly notes that Welch & Rushe did not remove hours for approved

or pending change work from its labor hour total. Respondent’s PFF ¶ 1342; Exhibit 41 at

677. Although Welch & Rushe reduced its total labor hours by 25% prior to calculating the

number of inefficient hours to account for inefficient hours that may have been Welch &

Rushe’s responsibility, this reduction does not address whether Welch & Rushe has been paid

already for some of these inefficient hours. If the hours attributable to approved and pending

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change orders are removed (12,605), the total labor hours drops to 33,937.27 Applying the

42% inefficiency factor, the inefficient hours are 7528.28. When this number is multiplied

by the hourly rate of $79, Welch & Rushe’s claim for loss of productivity is reduced to

$594,734.

Extended overhead costs. Welch & Rushe calculated a daily overhead rate of

$1987.09 for supervision and job site costs. Exhibit 41 at 816. It multiplied this rate by 205

days, the number of days between Welch & Rushe’s subcontract completion date and its

actual completion date. From the resulting figure, Welch & Rushe removed the overhead

costs sought on approved and pending change orders, resulting in a claim of $123,245.71.

Exhibit 41 at 816.

Pending changes. Welch & Rushe seeks $733,512 for seventy-two unpaid change

orders. Exhibit 5094 at 12-15 (list of change orders). Copies of most, but not all, of these

change orders appear to be in the record. Welch & Rushe’s director of operations testified

that the amounts presented were negotiated by Welch & Rushe and Turner. Transcript at

2604. The director was asked about three specific items of change work. Id. at 2593-2607.

For two changes, he could not provide details about why the work was necessary. Exhibits

744, 919. He recalled the details regarding the third change, but did not explain why the

change was Smithsonian’s responsibility. Exhibit 1404; Transcript at 2595-98. Instead, the

director of operations only testified that “[w]e were having a lot of problems with steam on

the project, and one of the biggest things was the humidity level in that building and how the

humidifiers were operating.” Transcript at 2595.28 The proposed change orders themselves

do not provide sufficient detail for the Board to determine why the work was undertaken, and

Welch & Rushe provided no further explanation in post-hearing briefing.

The Board finds that many of the change orders include invoices or quotes from

Welch & Rushe’s subcontractors, Stromberg, Southern Insulation, and Siemens. See, e.g.,

Exhibits 805 at 3, 983 at 3. It also appears that Stromberg seeks recovery of the same

amounts in its change orders. Compare Exhibits 471 at 3 with 4890 at 66. Welch & Rushe

provided no method by which the Board can deduct the amounts sought by Stromberg to

ensure that there is no double recovery. Siemens has calculated its claim as a total cost claim

Total labor hours expended (46,542) - labor hours for approved and pending

change orders (9088 + 3517) = labor hours subject to productivity factors (33,937).

Based upon this testimony, the Board could surmise that this change work was

undertaken to address the humidity levels in the museum, work that is also the subject of

Turner’s 2015 claim to the contracting officer. The Board is unwilling to do so without a

better explanation from Welch & Rushe or Turner.

CBCA 2862, 4085, 4802

and the Board has no way to determine whether these pending change order costs are

included in Siemens’s total cost claim. Southern Insulation, on the other hand, removed the

costs of both its approved change orders and its pending change work from its claim.

Exhibit 41 at 722.

Welch & Rushe also passed through the claims of its three subcontractors, Stromberg,

Southern Insulation and Siemens.

Stromberg

Stromberg seeks $1,318,348.79: $1,011,243.58 for labor inefficiency costs, $71,702

for extended overhead costs, and $235,425 for unpaid changes. Exhibit 5334; Transcript at

2817.

Labor inefficiency costs. Stromberg performed a measured mile analysis to support

its labor inefficiency claim. For its measured mile, Stromberg used its work in level two

south, an area not affected by unknown MEP interferences. Transcript at 2898, 2929. In this

area, Stromberg installed 9500 pounds of HVAC ductwork trunk lines and branch lines in

an efficient manner. Exhibit 4879. Stromberg determined it took 807 labor hours, excluding

supervision, to install this ductwork, based on its detailed job cost report. Exhibit 4878 at

94-98; Transcript at 2930-31. Stromberg computed the field labor production rate in this area

to be 11.77 pounds per labor hour. Transcript at 2931.

During the project, Stromberg installed a total of 228,212 pounds of ductwork, from

which it deducted ductwork installed pursuant to both approved and unapproved change

orders (25,882 pounds) and ductwork it installed in the section used as the measured mile in

level two south (9500 pounds), which left a total of 192,830 pounds. Transcript at 2919,

2927-29; Exhibit 41 at 718. Based upon its field labor production rate, Stromberg calculated

that it should have spent 16,380 hours to install the ductwork on the project. Transcript at

2938. Instead, Stromberg spent a total of 34,985 hours (excluding level two south) to

complete its work on the project. Id. at 2939. Stromberg claims the difference, 18,605

hours, as the measure of its labor inefficiency. Id.

Stromberg multiplied this hours figure by its average burdened hourly field labor rate

of $43.61 to derive a labor inefficiency cost of $811,364.05. Transcript at 2941; Exhibit 41

at 719.29 To this figure, Stromberg added 18.7% overhead and 5% profit, to arrive at a total

claim of $1,011,243.58. Transcript at 2944-45.

719.

In Stromberg’s claim, two digits are transposed ($811,346.56). Exhibit 41 at

CBCA 2862, 4085, 4802

Smithsonian asserts that Stromberg chose as its baseline “non-contiguous sections of

work.” Respondent’s PFF ¶ 1361. This assertion is not supported by the testimony cited.

Transcript at 2929, 2962, 3074-75. Moreover, the fact that the baseline was not all of level

two does not affect the quality of the baseline. As Stromberg’s executive vice president

testified, Stromberg could not use all of level two because there were too many interferences

in some places. Id. at 2961, 3074-75.

Extended overhead costs. Stromberg calculates a delay of 109 work days between its

planned substantial completion date and the date it substantially completed its work.

Transcript at 2951-52; Exhibit 5334 at 4. Stromberg calculated a daily rate $813.13 for its

general conditions costs, but inexplicably converted this rate to a “workday” rate, even

though the components of its daily rate already reflected work day charges. Exhibit 41 at

719; Exhibit 5334 at 4. After multiplying Stromberg’s daily rate times 109 days and

subtracting the overhead costs on change orders ($52,380.55), Stromberg’s claim for

extended overhead is $36,250.62. Exhibit 5334 at 4.

Pending changes. Stromberg also seeks to recover for unpaid changes totaling

$235,425. Exhibit 5334. Three of these change orders are for overtime premium pay

incurred by Stromberg between July and October 2008, in a total amount of $106,641.

Transcript at 2825. Stromberg incurred these costs after Smithsonian established the new

substantial completion date of October 31, 2008. Transcript at 2823; Exhibit 7_Z.

Stromberg’s senior project manager testified, “To help with all the delays in the project that

were taking place . . . the only way we could even hope to achieve the October 31st date was

to start working on our work forces, ten hour days, six to seven days a week.” Transcript at

2823.

Smithsonian asserts that Turner directed Stromberg to work overtime because

Stromberg had not completed its work. Respondent’s PFF ¶ 762 (citing Exhibit 1284 at 54).

Turner noted in this direction, issued on August 29, 2008, that Stromberg could work the

overtime under protest and track its hours for submission as a change. Id.

Stromberg’s senior project manager testified in detail about ten other unpaid change

orders, explaining that the additional work was needed either because of changed

requirements or for issues that were not known until the ceilings were removed. Transcript

at 2832-62; Exhibit 5334. For example, one change was necessary to provide additional air

supply to the SSB chamber after it was discovered that the unique fire suppression system

chosen by Smithsonian was generating too much heat. Transcript at 2854-55. With regard

to the remaining changes, totaling approximately $30,000, the senior project manager

explained that they all arose from issues or items that were not indicated on the 95%

drawings. Id. at 2863. Stromberg included in the record its change order proposals for all

CBCA 2862, 4085, 4802

of this work, Exhibit 4890 at 66-122, and the senior project manager testified as to the

pricing of these proposals. Transcript at 2836-37. The change orders include overhead of

10% and profit of 5%. Exhibit 4890 at 66-122. The total cost of the change work excluding

the overtime costs is $128,784.

Smithsonian’s only response to Stromberg’s evidence is that Stromberg, like all of

Turner’s subcontractors, has failed to prove that the work is a proper charge under the

contract and that the amounts sought are reasonable and allowable. Respondent’s PFF ¶ 725.

Southern Insulation

Southern seeks $218,489 for costs incurred due to lost productivity. Exhibit 41 at

722; Transcript at 3122-23.

Southern used the modified total cost method because of the nature of its productivity

losses and its work being all over the museum. Transcript at 3133. There was not a segment

of work upon which Southern could have determined a measured mile. Id. at 3134.

Southern’s actual costs totaled $692,082. It reduced this amount to $490,697 after removing

amounts for errors in labor burdens, budgeted costs for approved change orders and pending

change orders. Exhibit 41 at 722; Transcript at 3134-40. Southern’s president testified as

to how Southern developed its original bid estimate of $299,958 and determined that it had

underestimated the cost of scissor lifts by $16,505 when it bid the job. Transcript at 313539. 30 Southern subtracted this revised bid estimate ($316,463) from its reduced actual costs

to derive $174,234, the difference in its total costs. To this figure, it applied an overhead

percentage rate of 14% and 10% profit to derive a total claim of $218,489. Id. at 3141-42.

While Southern’s president testified as to Southern’s extensive experience on government

projects and museums, id. at 3123-24, he did not testify as to any analysis that was performed

to determine that the additional costs incurred were caused solely by issues for which

Smithsonian was responsible. Id. at 3122-66.

Smithsonian asserts that Southern’s bid estimate does not provide information

regarding its hourly rate, but this contention is refuted by both the testimony cited and the bid

estimate itself. Exhibit 41 at 725, 732; Transcript at 3145-46. Smithsonian also asserts that

Southern’s markups for overhead and profit contravene the terms of Welch & Rushe’s

contract with Turner. Respondent’s PFF ¶ 1392. However, the cited provision addresses

markups for change orders, but not base contract work. Exhibit 3050 at 59.

Southern planned upon using scaffolding to perform its work. Transcript at

3140. As the president of Southern and other witnesses explained, it was impossible to use

scaffolding on the job because of the pervasive hazardous material abatement. Id.

CBCA 2862, 4085, 4802

Siemens

Siemens seeks $203,161.60 in costs it incurred on the project due to delays,

unforeseen conditions, and lost productivity. Transcript at 3226-27; Exhibit 41 at 734.

Siemens calculated its claim by the total cost method. Transcript at 3229-30. Siemens

calculated the difference between its actual and planned hours for the project for its three

different skills. Id. at 3230-31. Siemens then removed hours for previously settled changes.

Id. at 3231. There is no indication that Siemens removed the hours that may be included in

the pending Welch & Rushe changes. Siemens then multiplied those hours by its burdened

labor hour rate for a total of $116,477.46. Exhibit 41 at 735. Siemens then added labor costs

of $11,509.34 from its subcontractor, Metropolitan Electric, and applied its audited corporate

overhead rate of 44.32% and profit of 10% to derive its claim of $203,181.60. Exhibit 41

at 735; Transcript at 3234, 3437.

Siemens’s operations manager, the only witness to testify in support of Siemens’s

claim, could not testify as to any details about the reasonableness of Siemens’s bid because

he did not prepare it and had not reviewed it in preparation for his testimony. Transcript at

3226, 3244. The operations manager also provided no information regarding the costs

included in Metropolitan’s claim, other than to note he had removed costs paid through

approved changes. Id. at 3236.

M.C. Dean

M.C. Dean seeks $1,374,658: $808,572 for lost productivity, $433,474 for extended

overhead, and $132,612 for pending changes. Exhibit 41 at 823-27; Transcript at 3336-45.

Loss of productivity. M.C. Dean seeks the costs attributable to its loss of productivity

and acceleration during the last thirteen weeks of the project when M.C. Dean saw the effects

of the disruptions in the coordination work in the percentages of total hours worked and

overtime hours incurred, as compared to the remainder of the project. Transcript at 3337-38.

M.C. Dean incurred costs for 35,783 hours during this thirteen-week period. Exhibit 41 at

823. Looking at industry manuals for calculating productivity losses, M.C. Dean determined

that its productivity loss was 34%. Transcript at 3339. M.C. Dean multiplied the number

of hours worked during the last thirteen weeks of the project by that percentage to determine

that its lost productivity resulted in 12,166 additional hours. It multiplied this figure by its

average hourly rate of $44.07, to derive a lost productivity cost of $536,165.32. Id. at 3340;

Exhibit 41 at 823. To this figure, M.C. Dean applied 15% markup for supervision

($80,424.80) and added its overtime premium costs for the period of $191,982.84, resulting

in a total claim for $808,572.95. Exhibit 41 at 823.

CBCA 2862, 4085, 4802

Smithsonian asserts that M.C. Dean’s claims for loss of productivity and premium

overtime are “overlapping.” Respondent’s PFF ¶ 1582. M.C. Dean explains that the claims

are not overlapping because M.C. Dean seeks only the overtime premium for those hours.

Appellant’s Response to Respondent’s PFF ¶ 1582. Smithsonian also contends that M.C.

Dean failed to explain sufficiently its 34% lost productivity factor based upon curves found

in industry publications. Respondent’s PFF ¶ 1583. As discussed below, we adopt

Smithsonian’s objections regarding this lack of proper support.

Extended overhead costs. M.C. Dean also seeks the costs of extended general

conditions for a period of delay of 154 days, the difference between M.C. Dean’s actual

completion and its planned completion dates. Exhibit 41 at 822. M.C. Dean determined that

its daily general conditions rate was $2814.77, for the field office, indirect labor, field labor,

and equipment it required on-site. Id. It, therefore, seeks $433,474, for extended overhead.

Pending changes. M.C. Dean also seeks the costs of three items of change work. The

first change was attributable to the “inefficient and poor performance” of a contractor that

Smithsonian required for the security system. M.C. Dean PFF ¶ 16. M.C. Dean seeks

$37,668 for the labor and materials costs associated with these inefficiencies, but provided

no explanation as to how this amount was calculated and no supporting documentation.

Exhibit 41 at 823; Transcript at 3343-44.

The second change was to “program the controls for the Creston light projection

system that illuminates the SSB exhibit.” M.C. Dean PFF ¶ 17 (citing Exhibit 1279). The

Board does not find support for the $8416 that M.C. Dean seeks for this item. Exhibit 1279

includes a Smithsonian memorandum approving the cost for controls for the SSB projectors

in the amount of $2811 and M.C. Dean’s quote for the work in the amount of $2562.59.

Exhibit 1279 at 2, 9.

The third change was for the “purchase and installation of a new public address

system to integrate with the new fire alarm and audio visual system.” M.C. Dean PFF ¶ 17

(citing Exhibit 1197). The cited document describes the requirement to install new speakers

and includes M.C. Dean’s claimed amount for the work, $86,528. Exhibit 1197 at 1, 6. M.C.

Dean’s group manager described the system as the “existing public address system” and

stated his belief that the change order request came from Smithsonian. Transcript at 3330.

Smithsonian contends that the work was within the original scope of the project, which

required, in part, that “the existing fire alarm speaker system [remain] operational” and that

CBCA 2862, 4085, 4802

it properly denied the change request on this basis. Respondent’s PFF ¶ 768 (citing Exhibit

1180 at 4).31

March Westin

March Westin seeks $1,539,142.71: $909,346.86 for inefficiency, $364,457.41 for

extended overhead, $155,100.44 for extended home office overhead, $82,007 for outstanding

change orders, and $28,231 for earned retainage. Exhibits 41 at 831, 840-48, 3702 at 136,

3714.

Labor inefficiency costs. Mr. Calvey performed a measured mile analysis to calculate

March Westin’s labor inefficiency claim. As the baseline, Mr. Calvey used March Westin’s

work prior to September 17, 2007, because its labor productivity was “less impacted” during

this period. Transcript at 2228; Exhibit 5217 at 19. By comparing pay applications for the

measured mile to those for the remainder of the project, Mr. Calvey calculated that March

Westin accumulated 12,616 inefficient labor hours. Transcript at 2230. Mr. Calvey

calculated an average burdened hourly field labor rate of $72.08, which includes 10%

overhead and 5% profit. Id. at 2233-34; Exhibit 3675. He multiplied the hourly rate by the

additional labor hours to determine March Westin’s labor inefficiency costs. Transcript at

2232. The Board calculates this amount to be $909,361.28 (12,616 x $72.08).

Smithsonian criticizes Mr. Calvey’s selection of the measured mile, asserting that

March Westin had not begun steel installation work by September 2007. Respondent’s PFF

¶ 1515. Mr. Calvey testified that he isolated the erection field labor in performing his

analysis. Transcript at 2224-28. March Westin’s project manager also testified that March

Westin did perform erection work prior to September 17, 2007, although the bulk of the work

was after that point. Id. at 2148. Smithsonian also questions why Mr. Calvey calculated a

labor rate different from the contractual rate of $47.49. Respondent’s PFF ¶ 1508. However,

the latter rate appears to be for a laborer, not an iron worker. Exhibit 45 at 46. As Mr.

Calvey testified, the labor rate was an average of rates paid by March Westin and its

subcontractors. Exhibit 3675.

Extended general conditions costs. Although March Westin estimated that it would

require 164 days to complete its work, it required 460 days, a difference of 296 days.

Transcript at 1989. March Westin provided its daily reports and testimony about examples

of delays it experienced. Transcript at 1998-2000; Exhibit 3719 at 14, 17. Mr. Calvey also

prepared an analysis of the periods of delay on each floor, but explained that the work was

This change order request with the amount sought by Turner is on the list of

“pending change orders.” Exhibit 5343 at 8.

CBCA 2862, 4085, 4802

“intermittent and non-sequential, inefficient and required multiple mobilizations.” Exhibit

5217 at 13.

Mr. Calvey calculated field supervision costs by determining the average supervision

manhours by day (5.3) and multiplying by the number of days of delay (296) to determine

that March Westin expended an additional 1571 supervision manhours. Exhibit 5217 at 22.32

He multiplied this number of manhours by the supervisor’s hourly rate to derive a total added

salary cost of $108,251.95. Transcript at 2236. Similarly, Mr. Calvey calculated an average

per day for field costs ($168.19) and multiplied this figure by the number of days of delay

(296) to determine that March Westin incurred an additional $49,784 in field expenses. To

this figure, Mr. Calvey applied 10% profit to derive a total of $54,763.02. Transcript at

2237. He used the same method to determine the additional cost of equipment and

scaffolding of $201,442.44. Id. at 2238; Exhibit 5217 at 23.

Extended home office overhead. Mr. Calvey also calculated an extended home office

cost attributable to the additional days of work on the contract. However, March Westin’s

project manager testified that March Westin had other contracts during the pendency of the

Smithsonian project, so many that it had to use subcontract labor to finish the museum

project. Transcript at 1985-86.

Outstanding changes. March Westin also seeks payment on four pending changes.

These change orders were included in the claim passed through to Smithsonian. Exhibit 41

at 849-96. March Westin’s project manager explained that the change work was required as

the result of design changes or to provide additional structural reinforcement. Transcript at

2042-49. Based upon the Board’s review of this supporting documentation, Exhibit 3714,

it appears that March Westin seeks only the direct costs of these changes. Id.

Smithsonian challenges the claim as to two of these change orders, suggesting that

both were the result of design failures by Turner. The first, Smithsonian asserts, was the

result of a “design coordination error.” Respondent’s PFF ¶ 771. Although the issue was

the subject of an RFI, the Board finds no support for the contention that the change was the

result of a coordination error. Exhibits 1156, 1157. Instead, the additional work was needed

reroute the ductwork through the structural steel. Transcript at 2047. The second change

was necessary after Turner’s structural engineer determined the need for additional

reinforcement in the SSB chamber in response to an RFI. Respondent’s PFF ¶ 772. Nothing

in the documentation indicates that the work was necessary as the result of a design failure.

This calculation appears to contain an error (296*5.3=1569).

CBCA 2862, 4085, 4802

Retainage. March Westin also seeks the earned retainage withheld by Turner. Exhibit

41 at 831; Exhibit 3702 at 136; Transcript at 2063. Mr. Quick testified that the amount is

already reflected in Turner’s costs, so it was removed from the tally of the subcontractors’

claims. Transcript at 1673. Smithsonian offered no evidence that this amount was paid or

is not owed to March Westin.

APRO

APRO seeks $651,272: $465,825 for labor inefficiency and $185,447 for extended

overhead. Exhibit 41 at 899-08.

Labor inefficiency costs. To calculate its inefficiency claim, APRO used a measured

mile analysis. Exhibit 41 at 901-08. APRO used the month of October 2006 as its measured

mile because it worked efficiently performing demolition during this month before it first

found hazardous material in November 2006. Transcript at 3427-28. During October 2006,

APRO expended 856 labor hours to dispose of twelve dumpster loads of debris. Id. at 3428.

APRO calculated that its production rate was seventy-one labor hours per dumpster load,

which closely tracked its estimate of sixty-nine hours per dumpster load. Id.

APRO filled a total of 440 dumpster loads of debris during the project, but adjusted

this figure to 375 loads to remove change order work and the disputed beam pocket work.

Exhibit 41 at 908; Transcript at 3429. APRO multiplied 375 dumpster loads by its average

production rate of seventy-one hours to determine that it should have spent a total of 26,625

labor hours in performing the demolition work. Transcript at 3430.

APRO expended 58,720 labor hours for the demolition work during the period of

labor inefficiency, but adjusted this amount down to 50,318, again to remove hours related

to the disputed beam pocket work and change work. Transcript at 3429. APRO also

subtracted 856 labor hours in October and 1660 labor hours as a reasonable estimate of

inefficient labor hours for which APRO may have been responsible. Id. at 3431. Finally,

APRO subtracted the hours it should have spent performing the work (26,625) to derive a

total of 21,177 inefficient labor hours. Id. at 3432. APRO multiplied the total inefficient

labor hours by $19.05, an average burdened labor rate for demolition labor, then added 10%

overhead and 5% profit. Id. at 3432-33; Exhibit 41 at 901.33

Smithsonian challenges APRO’s selection of October 2006 as its measured mile

because APRO has not established that the work during the first month of demolition was

the same as work done later. Respondent’s PFF ¶ 1245. APRO’s president acknowledged

APRO’s calculation contains an error: 21,177 * $19.05=$403,421.85.

CBCA 2862, 4085, 4802

that the demolition activities on each floor had different scopes of work and different

manpower requirements. Transcript at 3450-51.

Extended overhead costs. APRO also seeks delay costs for the additional 6.75 months

it spent on the project beyond its planned completion date of April 2007. Exhibit 41 at 901.

During this period, APRO incurred additional costs for project supervision, additional

equipment rental costs, and additional scaffolding rental costs. Id. at 901, 903; Transcript

at 3435. APRO withdrew its claim for the disputed beam pocket work that included the same

types of costs (supervision and equipment costs). Exhibit 41 at 911-12; Transcript at 344243. The Board cannot tell whether APRO adjusted its delay claim to remove time

attributable to the beam pocket work.

Coakley

Coakley seeks $468,204: $120,811 for labor inefficiency and $347,393 for change

work. Exhibit 41 at 940; Exhibit 252 at 46-52.

Labor inefficiency costs. Coakley seeks to recover the labor inefficiency costs it

incurred at the end of the project when it was directed to work overtime beginning in

September 2008. Transcript at 3496, 3515-16. Coakley was paid the direct costs of its

overtime in change orders signed by Coakley beginning at the end of October 2008 through

the beginning of 2009. Transcript at 3538; Exhibit 76 at 29-31, 43-55. Each of these change

orders contained a release that stated:

Through acceptance of this change order, the Subcontractor acknowledges that

it has reviewed the progress of the Work related to this Project and the

potential impact of the added work on the progress of the project in the future.

As a result, this Change Order includes compensation to the Subcontractor for

any and all effects, delays, inefficiencies or similar demands associated with

this project and the Subcontractor recognizes that there is no basis for any such

claim in the future.

Id. at 29. Coakley’s vice president testified that Coakley did not intend to release its claims

for labor inefficiency when it signed these change orders and that Coakley “continued to

interact” with Turner regarding its claim after the project was completed. Transcript at 3517,

3529.

Coakley’s labor inefficiency claim involves only its activities on the first and second

floors of the project—those activities that were most affected by the loss of productivity.

Transcript at 3510; Exhibit 41 at 940. Coakley used a total cost method to quantify its labor

CBCA 2862, 4085, 4802

inefficiency claim, stating that it could not use a different method given the pervasive impact

of the overtime on its efficiency.34 Exhibit 41 at 936-40; Transcript at 3506-08, 3518.

Coakley’s vice president testified that Coakley’s cost estimate was reasonable because its

hours for the fourth and fifth floors, where it had fewer problems, matched its estimate.

Transcript at 3466-68, 3508; Exhibit 41 at 941.

Coakley calculated the total labor costs for certain activities on the first and second

floors and subtracted its estimated labor costs from that figure to arrive at its claim for

$79,719. Exhibit 41 at 940; Transcript at 3512. Coakley applied its rates for labor burden,

fringe costs, overhead, and profit to derive a total claim of $120,811. Exhibit 41 at 940;

Transcript at 3512. Coakley’s vice president testified that Coakley was not responsible for

any of the labor inefficiency costs it claims, Transcript at 3516, but acknowledged that

Coakley had not looked into what created the need to accelerate at the end of the project. Id.

at 3539.

Pending changes. Coakley also seeks $347,393 for 130 pending change orders (PCO)

listed in Turner’s indicated outcome report (IOR). Transcript at 3522; Exhibit 252 at 46-52.

Coakley’s vice president testified about only two of these orders, 273.1 and 876. Exhibits

682, 1532. Unlike the other subcontractors, who included the pending change orders in their

claim amounts, Coakley did not include these amounts in its claim to Turner.35

Smithsonian asserts that Coakley has not established that these costs are

Smithsonian’s responsibility. With regard to PCO 876, Smithsonian notes that Turner’s IOR

report indicates that some costs will be backcharges to SOM. With regard to PCO 273.1,

Smithsonian notes that Turner included an estimate of $145,000 for this work in its 95%

price proposal, and only $20,000 had been spent at that time. Exhibit 682 at 3. Smithsonian

Turner apparently adjusted the subcontractor claim amounts to remove amounts

paid through change orders or owed through retention. Exhibit 257 at 4. However, the

amount of Coakley’s claim did not change. The Board cannot tell whether no adjustment

was made because Coakley had already made the adjustments. In addition, Coakley’s vice

president testified that Coakley used a measured mile analysis to quantify its claim, but his

testimony about the claim and appellant’s brief describe a claim based upon the total cost

method. Transcript at 3512; Appellant’s Brief at 65.

PCO 273.1 and 876 are on Turner’s list of pending change work. Exhibit 5343.

Turner’s claim to the contracting officer includes an amount for “subcontractor pending

changes” in the amount of $1,495,233, but Turner never explained what amounts are

included in this figure. Exhibit 41 at 656.

CBCA 2862, 4085, 4802

asserts that this budget amount should have been sufficient for the work. Respondent’s PFF

¶ 748. Coakley and Turner provide no factual response.

VI.

Smithsonian’s Counterclaim for Overpayment

Audit Report and Contracting Officer’s Decision

Following the Board’s April 2013 decision, Smithsonian’s counsel retained Mr.

DuVal to independently review and audit certain contractual costs related to Turner’s claims.

Exhibit 236 at 3. Prior to conducting his audit, Mr. DuVal reviewed the contract and

Turner’s 2011 claim, and then met with various Smithsonian personnel to walk the site and

review the general scope of the project. Transcript at 4786-88.

The Board heard conflicting testimony regarding whether Mr. DuVal met with

knowledgeable Smithsonian personnel. Smithsonian’s COTR testified that he never met Mr.

DuVal or his staff, Transcript at 4317, while Mr. DuVal testified that he met with the COTR

prior to issuing his report and during the presentation of it. Id. at 4986. Regardless of

whether the COTR and Mr. DuVal met, Mr. DuVal never had substantive discussions with

any Smithsonian personnel concerning the technical aspects of his report. Id. at 4980-81,

5002-04, 5071-72, 5079. Instead, he relied solely upon the documents provided to him by

Turner and Smithsonian. Id. at 4787-88, 4879, 4887-88, 4892. Prior to issuing his report,

Mr. DuVal met with Dorothy Leffler, the contracting officer, in a meeting that she testified

took “probably at least two hours.” Id. at 4639-40, 4670. Mr. DuVal issued his report on

June 2, 2014.36 Exhibit 236.

Finding that Turner had not contemporaneously tracked its costs as priced and

unpriced work, Mr. DuVal deemed all costs to be for unpriced work and examined all of the

costs Turner expended on the project. Exhibit 236 at 6. Based upon his review, Mr. DuVal

“questioned $40,480,621 of costs that are not adequately supported in accordance with

Turner’s contract with [Smithsonian] or with the FAR.” Id. at 4. Mr. DuVal disclaimed any

responsibility for determining the allowability of such costs, instead characterizing his role

as to question costs to permit Smithsonian to make determinations regarding allowability.

Transcript at 5070-71.

On July 28, 2014, Ms. Leffler issued a two-page final decision, in which she again

denied Turner’s 2011 claim for $14,094,978 and sought repayment of $24,517,558 for

Mr. DuVal issued a second report in May 2015. Exhibit 4738. We discuss Mr.

DuVal’s opinions set forth in the 2014 report because it was the basis for the contracting

officer’s claim for repayment.

CBCA 2862, 4085, 4802

alleged overpayments, “based on Turner’s noncompliance with the Contract terms and other

improper billings.” Exhibit 237. Neither Smithsonian nor its auditors discussed the audit

findings with Turner prior to this final decision.37 Id. at 1422-25. In her decision, Ms.

Leffler noted that she “agree[d] with the entire $40,480,621, questioned by the Smithsonian’s

auditors,” and listed the same categories of costs questioned by Mr. DuVal. Exhibits 236,

237; Transcript at 4648-49. Ms. Leffler attached Mr. DuVal’s June 2014 report to her final

decision. Prior to issuing the July 2014 final decision, Ms. Leffler did not discuss the audit

report with the former contracting officer, the COTR, or the Deputy Director of OPDC.

Transcript at 4662-63.

Ms. Leffler understood that, as the contracting officer, she ultimately bore the

responsibility to decide the claims. Transcript at 4647-48. However, she seemed unaware

of the elements of the audit findings and their relation to the amount Turner spent on the

project. For example, Ms. Leffler did not know that, as a result of the deduction of costs of

“sole-source” contracts, Turner would not be paid for any of the effort to manufacture and

install the abstract flag art installation or abate the hazardous material found throughout the

building. Id. at 4664-68. When these points were brought out during testimony, Ms. Leffler

simply stated that she relied upon Mr. DuVal’s findings and stood by the results of the audit.

Id. at 4691-93. Based upon her testimony, it appears that Ms. Leffler adopted Mr. DuVal’s

report wholesale without further investigation or evaluation of his findings and failed to

exercise her independent judgment. See id. at 4665-93.

Bases for Repayment Claim

Because Mr. DuVal’s analysis is the basis for Smithsonian’s claim for repayment, the

Board analyzes the grounds for Mr. DuVal’s findings. Smithsonian’s claims for repayment

can be grouped into six categories.

Sole-Source Subcontract Costs

Mr. DuVal identified two categories of sole-source subcontracts the costs of which

Smithsonian sought repayment in their entirety: (1) costs paid on fifteen sole-source

subcontracts totaling $4,879,121, and (2) costs of twenty-five subcontracts totaling

$1,947,186, for which the information provided by Turner did not indicate whether the

contracts had been competitively bid. Exhibit 236 at 17-18. In its post-hearing briefing,

Mr. McGeehin, Turner’s cost expert, and Turner’s program manager met with

Kenrich personnel prior to the June 2014 report, but the purpose of the meeting was to

request documents, not to substantively discuss Mr. DuVal’s findings. Transcript at 1598-99.

CBCA 2862, 4085, 4802

Smithsonian appears to have collapsed these two categories into one and altered its basis for

seeking repayment of these costs.

Mr. DuVal questioned all of the sole source subcontracts because Turner could not

produce documentation to establish the reasonableness of the costs incurred. Transcript at

4940, 4946. Because these subcontracts were not competitively bid, Mr. DuVal was not

“sure if the amounts are reasonable or not.” Id. at 4940. Mr. DuVal did not ask Turner about

the reasonableness of the pricing during the audit. Id. at 4998. Instead, he asked Turner to

confirm that the subcontracts were sole source. Id. Similarly, Mr. DuVal did not ask the

contracting officer’s technical representative or any of Smithsonian’s engineering staff

whether the costs were reasonable. Id. at 5003. He explained that it was not relevant to his

audit what work was performed pursuant to these subcontracts. Id. at 5000.

During the audit, Turner produced its corporate purchasing manual, which provides

that goods and services shall be procured through competition whenever possible. Exhibit

1476 at 7. The manual acknowledges, however, that there are situations in which

competition cannot be obtained, such as for “proprietary items, trades that lack more than one

qualified source, situations where one source is uniquely qualified to provide the goods or

services, and instances where there is not enough time to seek and evaluate more than one

proposal.” Id. In these instances, Turner’s policy requires that the group vice president must

approve purchases of $2000 or more. Id.

Turner’s purchasing manager and superintendent testified that Turner’s corporate

acquisition policies and practices were followed. Turner’s purchasing department, Turner’s

primary liaison to the subcontracting community, awarded the subcontracts for the major

buys and allowed field personnel to award second-tier subcontracts. Transcript at 494-95.

The purchasing department generated award memoranda and subcontractor approval

requests, which Mr. DuVal audited, to keep the field personnel abreast of what the

purchasing department purchased. Transcript at 496-97. Field personnel did not generate

award memoranda because they did not need to notify themselves of their purchases.

Transcript at 501. When there was not documentation in the file regarding the sole-source

subcontracts, Turner’s vice president of operations approved the acquisitions on-site, as

required by Turner’s purchasing manual. Id. at 1750-51. Turner also used the collective

experience of its senior managers, engineers, and, at times, estimating department to assess

the reasonableness of field purchase proposals. Id. at 1753.

Turner awarded the sole-source subcontracts because the work required was minimal,

Turner was operating under a time constraint, or Turner found that only one vendor could

provide the service. Transcript at 1751-52. For example, Turner awarded a sole-source

subcontract to King Architectural for signs. Id. at 693; Exhibit 745. According to the award

CBCA 2862, 4085, 4802

memorandum, the contractor was recommended by Turner’s signage designer and there were

no other bidders for the work. Exhibit 745. Similarly, Turner awarded a subcontract for

$20,000 to Worcester Eisenbrandt, S.A., on a sole-source basis for temporary exterior walls

so Smithsonian could move current exhibits out of the construction zone. Transcript at 857;

Exhibit 3065. This contract was let at the request and with the approval of Smithsonian to

meet the tight deadlines for construction. Transcript at 857. Turner awarded a sole-source

subcontract to Lord & Company, Inc. (Lord) for relocation of a radio antenna, because Lord

installed the antenna originally, Smithsonian recommended Lord, and Turner determined that

the price Lord offered was reasonable. Id. at 1765; Exhibit 3157. Turner procured several

items, such as door mats and landscaping, on a sole-source basis because there was no time

for a full procurement right before the museum reopened; these purchases were approved by

Turner’s vice president. Transcript at 1756, 1760.

Several of the sole-source contracts questioned by Mr. DuVal were for items

requested by Smithsonian. The abstract flag, a signature piece of artwork installed in the

museum during the renovation, was designed by the Secretary of the Smithsonian, Lawrence

Small, the director of the Museum of American History, Dr. Brent Glass, SOM, and Turner.

Transcript at 837. The structure itself was made of a “very special-grade of high-grade

structural stainless steel” that was created “to mimic a flag that’s waving in the breeze.” Id.

at 838. Turner subcontracted with one firm because it made the metal pieces that moved to

create the flag waving effect that Secretary Small and Dr. Glass approved. Id. at 840. Turner

subcontracted with another firm to assist SOM with the design of the abstract flag because

of its expertise with “high-strength stainless steel structural shapes.” Id. at 838. Turner also

chose both these firms because “[n]obody else could do the work.” Id. at 841. Turner

subcontracted with a third firm on a sole-source basis to assemble, weld, and install the

artwork at its place in the museum when it found no local bidders willing to take on the risk

of the project. Id. at 841. All three sole-source subcontracts were within the budget set for

the abstract flag. Id. at 844.

Similar facts surround Turner’s decision to sole-source the contract for the installation

of a barrisol ceiling, which is made of a unique product that diffuses light shining through

from above. There were existing barrisol ceilings in the museum, and Smithsonian required

that this particular ceiling be reinstalled in a section of the renovated area. The manufacturer

of the barrisol ceiling requires that it be installed by licensed vendors. Turner issued a solesource subcontract for the installation of the ceiling to the licensed vendor it had used on a

previous project at the museum. Id. at 554-55. Smithsonian mentioned none of these facts

CBCA 2862, 4085, 4802

relating to the abstract flag or the barrisol ceiling in the July 2014 final decision. Exhibit

237.38

Mr. DuVal highlighted Turner’s subcontract with its own subsidiary, Turner Logistics,

which competitively procured long-lead items such as air handling units and generators.

Transcript at 566, 4947. Mr. DuVal found nothing in the procurement files produced that

indicated Turner evaluated the reasonableness of costs of the items it procured through

Turner Logistics. Id. at 4948.

Turner Logistics has relationships with manufacturers from which it can purchase

equipment in bulk and receive preferential pricing and scheduling. Transcript at 564-65.

Turner Logistics also has subject matter expertise in mechanical and electrical equipment,

its primary areas of focus. Id.

Smithsonian objects that both Turner Logistics and Turner unreasonably marked up

their work for overhead and profit. Although the prices for the items Turner Logistics

purchased were definitized in a modification early in the project, and Smithsonian was aware

of the arrangement, Exhibits 236 at 17, 5121, Smithsonian asserts that, if Turner had

purchased the equipment directly from the vendors and applied the agreed-upon 6% overhead

and profit markups, it would have paid $1,234,900, rather than the $1,741,603 that Turner

charged through Turner Logistics. Respondent’s Brief at 105. Smithsonian’s challenge is

not to the reasonableness of the price that Turner Logistics paid, but to the burdens that

Turner placed upon that price. It appears that Mr. McGeehin, in his review of the claim, may

have removed the duplicative profit and overhead. Transcript at 1567, 4801. To the extent

Smithsonian’s challenge is one of reasonableness, Smithsonian assumes that Turner would

have been able to obtain the same price as Turner Logistics, an assumption not supported by

the record. Transcript at 1567.

Time and Materials (T&M) Subcontracts

Mr. DuVal questioned $979,225 in costs incurred on T&M subcontracts because

Turner did not maintain sufficient records. Exhibit 236 at 28-29. Mr. DuVal explained that

he sought to do an invoice hour reconciliation, which reconciles the hours sought on a

request for payment against “supporting documentation.” Transcript at 4902. Mr. DuVal

did not know whether Turner had reconciled and verified the T&M tickets

contemporaneously. Id. at 5088. If Turner did so, Mr. DuVal said, he wanted to review the

In its post-hearing brief, after hearing the testimony of Turner’s witnesses,

Smithsonian properly withdrew its claim for repayment of the amounts paid on sole-source

subcontracts for the abstract flag and barrisol ceilings. Respondent’s Brief at 103.

CBCA 2862, 4085, 4802

records of the reconciliation. Id. Absent records of a contemporaneous reconciliation, Mr.

DuVal insisted that it was necessary for him to perform a reconciliation “[b]ecause I don’t

know what they did to sign off on the ticket.” Id. at 5089. Neither Mr. DuVal nor

Smithsonian identified a requirement in the FAR or Turner’s contract that this reconciliation

be performed.

Turner contemporaneously reviewed and verified the accuracy of the T&M tickets.

During the project, the subcontractors that worked on time and materials subcontracts would

submit time and material tickets to Turner’s superintendent and his staff for review around

the time the work was performed. Transcript at 1051-52, 1129-30. This review involved

verifying that the tickets accurately reflected the time worked and work performed. Id. at

1125, 1661. The subcontractors would not be paid until Turner personnel reviewed the

tickets. Id. at 1096. Mr. McGeehin, Turner’s expert, testified that in forty years of

experience, he has “never heard of anybody tak[ing] the position that if you didn’t do a labor

hour reconciliation of T&M tickets, then those costs are unreasonable.” Id. at 1461-62. Mr.

DuVal acknowledged that he understood the phrase “generally accepted accounting

principles and practices” as used in the Audit clause to require Turner to maintain its cost

records as firms in the construction industry do. Id. at 4782-83.

Change Order Costs

Smithsonian’s largest claim for repayment involves change order costs. Mr. DuVal

questioned more than $18 million in change order costs because Turner did not produce “the

required documentation for the majority of subcontractors.” Exhibit 236 at 31.39 Mr. DuVal

understood that Turner had hired these contractors to perform the change order work on a

time and materials basis, but he was unable to verify the costs of this work because (1)

Turner had no daily tickets for some of the work, (2) the daily tickets that were provided had

no names of individuals performing the work or descriptions of the work performed, or (3)

the daily tickets did not have sufficient information to allow Mr. DuVal to reconcile the

amounts to the change order or potential change order. Id. Because he was unable to audit

these costs, Mr. DuVal found that Turner failed to establish their reasonableness.40

At the hearing, in response to a question by the Board, Mr. DuVal said he did

not not question any costs on this basis. Transcript at 4854-55. Contrary to Mr. DuVal’s

testimony, it appears that the failure to provide documentation was his basis for questioning

the costs.

In attempting to connect the need for T&M tickets and reasonableness, Mr.

DuVal explained that one determines reasonableness by looking at actual costs. Transcript

at 5025. However, Mr. DuVal never explained how the actual cost helps to explain

CBCA 2862, 4085, 4802

Mr. DuVal also relied upon the provision of the Equitable Adjustment clause that

required Turner to provide to the COTR daily T&M tickets for work that the contracting

officer elects to have performed on a time and materials basis. Although Smithsonian did

not identify any work that the contracting officer elected to have performed on a T&M basis,

Mr. DuVal believed that Turner and its subcontractors were bound by this provision through

operation of the flowdown clause of the contract and relied upon this clause as a further basis

to question the change costs.

Mr. DuVal also noted that the contract contained limitations upon the incurrence of

overtime and that the change order documentation that he reviewed indicated charges for

overtime. Exhibit 236 at 29. However, Mr. DuVal did not identify a dollar amount either

in testimony or in his report that was challenged on this basis. Without this information, the

Board is unable to consider this aspect of Smithsonian’s claim.

In its post-hearing briefing, Smithsonian contends that Turner approved proposed

changes without obtaining the required itemization of subcontractor costs. Respondent’s

Brief at 99; Respondent’s PFF ¶¶ 689-95. Smithsonian did not raise this argument until its

proposed findings of fact and elicited no testimony on either direct or cross-examination

concerning this argument. The Board does not find that the evidence cited in support of

these proposed findings supports Smithsonian’s contention. In fact, detailed estimates were

provided by Turner’s subcontractors. See, e.g., Exhibit 100 (cited in Respondent’s PFF

¶ 691).

Mr. DuVal questioned the costs of change work even though the changes were all

fixed price. Transcript at 5030-31. During the project, Turner started some of the change

work on a time and materials basis and then negotiated a lump-sum settlement either during

or after the work was complete. Id. at 1146, 1588, 1659-61, 4919. Turner’s superintendent

again testified that he followed Turner policy and reviewed each T&M ticket when it was

submitted to verify that the tickets reflected the work actually performed. Id. at 1125-26.

Once a lump sum was negotiated for a change, Turner disposed of the T&M tickets to ensure

that there was no confusion as to the basis for the costs. Id. at 1148.

Mr. DuVal did not ask the contracting officers or the COTR whether they expected

Turner to maintain T&M tickets for fixed-price change work. Transcript at 5035. On crossexamination, Mr. DuVal distinguished between work performed before and after a firm fixed

price was negotiated, explaining that he would not seek T&M tickets for work performed

after the price was agreed upon by the parties. Id. at 5030. However, it does not appear that

reasonableness or how the time and materials tickets provide the information to be evaluated

pursuant to FAR 31.201-3.

CBCA 2862, 4085, 4802

Mr. DuVal attempted to determine the amounts to which this distinction would apply. Id. at

5025, 5031-32. Mr. McGeehin testified that the records that Mr. DuVal sought were not

records that would be generated for a fixed-price contract or that Turner would request from

its subcontractors. Id. at 1408.

Personnel from Smithsonian and Smithsonian’s contract administration consultant

contemporaneously reviewed, negotiated, and approved change order costs and found them

to be reasonable, prior to paying Turner. Transcript at 3761-62, 3843-44, 4256-58; see, e.g.,

Exhibits 4770. Mr. DuVal did not analyze which change orders were approved by

Smithsonian or discuss the approvals with Smithsonian personnel. Transcript at 5038-39.

As Mr. DuVal explained, he was “hired to do an independent audit and I don’t know what

they reviewed or didn’t.” Id. at 5039-40. Moreover, Mr. DuVal asserted that he was in a

better position than the Smithsonian COTR to evaluate the documentation, or lack of

documentation, underlying the agreed price, from an accounting perspective regardless of

any analysis that Smithsonian contracting personnel may have performed. Id. at 5041.

Mr. DuVal also questioned $107,426 that Turner paid subcontractors in excess of the

subcontract values. Exhibit 236 at 31-32; Respondent’s PFF ¶ 854. Mr. DuVal explained

that Turner overpaid the subcontractors because “Turner would issue a back charge . . . and

[the subcontractors] did not.” Transcript at 4938. However, Mr. DuVal failed to account for

credits in subsequent change orders between the subcontractors and Turner. Id. at 5066-69;

Exhibits 3232 at 177-78, 285, 287; 3607 at 66-67. The amounts in the subcontract subledger,

which is the basis of Turner’s claim, accurately reflect the subcontract values, amounts

invoiced, and amounts paid. Exhibit 3028 at 98.

In a footnote, Mr. DuVal noted that he did not observe that Turner had reconciled

amounts for “contractual allowances of hours,” but he did not include a dollar amount

associated with this comment. Exhibit 236 at 31 n. 50. At hearing, Mr. DuVal expanded

upon this comment, explaining that he had not seen documentation tracking allowances or

crediting amounts back for allowances not used. Transcript at 4918-19. Turner’s project

manager explained that the superintendent would review tickets against allowances and hours

would be reconciled upon close-out of the contract. Exhibit 3248 at 3; Transcript at 1790.

Unapplied Back Charges, Design Issues, and Interference Issues

Not Credited, and Unauthorized Cost Increases

Mr. DuVal identified another $679,547 consisting of what he thought were unapplied

back charges, design issues, and interference costs that should have been credited to

Smithsonian. Exhibit 236 at 25-26, 28. Mr. DuVal’s primary source for identifying these

charges was a report provided by Turner called the indicated outcome report (IOR).

CBCA 2862, 4085, 4802

Transcript at 4885. In this report and other documentation, Mr. DuVal found listed among

the charges notations indicating that a charge or cost was a potential backcharge to the

subcontractor. Id. at 4878. Mr. DuVal used this same report and other documentation to

compile a list of design issues. Exhibit 236 at 25-26; Transcript at 4887; see, e.g., Exhibits

76 at 5-10, 551 at 9, 13. Mr. DuVal did not make an independent technical determination

as to whether these costs were appropriate back charges or attributable to design issues.

Instead, he chose to rely solely upon the notations found on the documents. Transcript at

4879, 4887. Mr. DuVal assumed that all costs that he found labeled possible back charges

or design issues should be treated as credits to Smithsonian. Id. at 4889.

Turner’s project manager explained that the IOR document upon which Mr. DuVal

relied to identify backcharges was not an accounting record or a final determination of what

backcharges were owed. Instead, Turner examined the backcharges that it was unable to

recover from subcontractors and removed a total of $143,000 in such backcharges from its

claim. Transcript at 1911-12.

For the category of costs Mr. DuVal identified as “interference issues not credited,”

he questioned, in change orders, costs labeled “steel interference or interference in any

fashion.” Transcript at 4891-92; Exhibit 236 at 28. Mr. DuVal said the costs should be

disallowed based on correspondence between Smithsonian and Turner stating that

Smithsonian would not be responsible for some costs associated with the interferences.

Transcript at 4893-95; Exhibits 601 at 9-10, 117 at 2. Again, Mr. DuVal did not review

drawings or confer with Smithsonian personnel prior to determining that interference costs

were the responsibility of one party or another. Transcript at 4892, 4895-96.

Mr. DuVal also questioned $169,332 of what he thought were unauthorized cost

increases, based solely upon his review of requests for information submitted to the design

team during construction. Exhibits 236 at 26-27, 3718 at 172-73, 1080 at 3. For this

category, Mr. DuVal relied entirely on the documents without further analysis of the

allowability of the costs. Transcript at 4897.

Change Order Costs Questioned Under the Equitable Adjustment

Clause

Mr. DuVal questioned another $894,921 on the ground that the limits on overhead and

profit in the Equitable Adjustment clause were “not consistently followed” by Turner and its

subcontractors in change order proposals. Exhibit 236 at 20; Transcript at 4866. Mr. DuVal

identified fifty-three subcontractor proposals that allegedly exceeded or contravened these

limitations. Exhibit 236 at 22. Smithsonian notes that Turner removed some, but not all, of

these potentially unallowable costs from its change order proposals. See, e.g., Exhibit 3432

CBCA 2862, 4085, 4802

at 6-9. Mr. DuVal did not recall whether he reviewed the change order requests submitted

by Turner “to determine whether the COTR approved the supervision and miscellaneous

expenses.” Transcript at 5074. Mr. DuVal did not discuss with Smithsonian contracting

personnel their review and approval of change order proposals, or whether they had approved

working supervision as a direct cost on change orders. Id. at 5039, 5072. Instead, he

assumed that Smithsonian contracting personnel reviewed the proposed change orders and

determined whether they had previously approved this direct cost. Id. at 5078-79.

In post-hearing briefing, Smithsonian listed several examples of subcontractors’

change order proposals that violated these limits. Respondent’s PFF ¶¶ 683-87. Smithsonian

reviewed and approved some, but not all, of these proposals. See, e.g., Exhibit 3437.

However, the Board cannot tie any of these examples to amounts identified by Mr. DuVal

in his report. Mr. DuVal testified about one of these seven change order proposals,

Transcript at 4866-68 (discussing Exhibit 89, change order proposal from Welch & Rushe),

but the Board does not see a corresponding entry for that proposal on the table in his report.

Costs in Excess of Payment

Mr. DuVal also questioned $908,873 in costs that Turner identified in its ledger as

remaining to be paid. Transcript at 4936. Turner’s project manager and Mr. McGeehin

explained that these amounts are due to subcontractors and others. Transcript at 1789-90,

1456-57. Mr. McGeehin further explained that, under an accrual accounting system, which

Turner uses, the obligation to pay these amounts remains. Transcript at 1456-57; see also

Exhibit 250.41

Discussion

Overview

This case is, to our knowledge, unique. We must decide, among other novel issues,

what Smithsonian should pay Turner for the substantial portion of the renovation project that

the parties expected to include in the fixed price prior to completion, but never did. Broadly

speaking, the parties assert four types of claims: (1) Turner’s claim for the costs of the

second steam generator; (2) Turner’s claim for additional general conditions costs; (3) claims

passed through by Turner for extra work and inefficiencies encountered by its subcontractors

(which are Turner claims for our purposes); and (4) Smithsonian’s claim for repayment based

Mr. DuVal also questioned $355,187 in general liability insurance and bond

costs. Exhibits 236 at 37. These costs are part of Turner’s affirmative claim discussed

above.

CBCA 2862, 4085, 4802

on allegedly unsupported and unallowable costs. Except for the burden of proof with regard

to reasonableness discussed below, each party bears the burden of proof on its own claims.

See Essex Electro Engineers, Inc. v. Danzig, 224 F.3d 1283, 1295 (Fed. Cir. 2000) (Turner

and its subcontractors “must establish the extent of the delay, [Turner’s] harm resulting from

the delay, and the causal link between the [Smithsonian’s] wrongful acts and the delay”);

Sauer Inc. v. Danzig, 224 F.3d 1340, 1348 (Fed. Cir. 2000) (delay and disruption claims are

different, and Turner and its subcontractors need not prove excusable delay to recover on

their disruption claims); Thermalon Industries, Ltd. v. United States, 51 Fed. Cl. 464, 472

(2002) (Smithsonian must establish that the amounts for which it seeks repayment exceed the

amounts permitted by statute, FAR clause, or contract); see also Roberts v. United States, 357

F.2d 938, 943 (Ct. Cl. 1966).

Turner seeks recovery of its two direct claims on the basis of quantum meruit, i.e.,

“what it has earned.” Quantum meruit (or quantum valebant for goods) is the standard

measure of recovery when a contract lacks a definite price term, either because the price was

knowingly left open, e.g., Cities Service Gas Co. v. United States, 500 F.2d 448, 457 (Ct. Cl.

1974); Pacific Maritime Association v. United States, 108 F. Supp. 603, 607 (Ct. Cl. 1952);

see also U.C.C. § 2-305 (2002) (price is “reasonable price at the time for delivery”), or the

written contract was void ab initio, but was performed in accordance with a valid meeting

of the minds, creating an implied-in-fact contract. See Clark v. United States, 95 U.S. 539,

542 (1877); United States v. Amdahl Corp., 786 F.2d 387, 395 (Fed. Cir. 1986); cf. Beta

Systems, Inc. v. United States, 838 F.2d 1179, 1185-86 (Fed. Cir. 1988) (directing Armed

Services Board of Contract Appeals on remand to void and “reform” a price clause to make

it fair if the board found the clause unlawful).

Smithsonian objects, arguing that quantum meruit is awarded only to redress illegality

or when a contract is found to be implied-in-law. Although there is a suggestion in the

Board’s precedent that quantum meruit is a measure of recovery associated with implied-inlaw contracts, over which the Board lacks jurisdiction, Guilltone Properties, Inc., HUDBCA

02-C-103-C4, 06-1 BCA ¶ 33,249, at 164,787, subsequent Federal Circuit decisions clearly

state that quantum meruit is a proper remedy for an implied-in-fact contract. International

Data Products Corp. v. United States, 492 F.3d 1317, 1325 (Fed. Cir. 2007) (citing United

Pacific Insurance Co. v. United States, 464 F.3d 1325, 1329-30 (Fed. Cir. 2006)). Here, we

have a contract that was performed partly for a fixed price and partly for no definite price.

Regardless of whether we describe it as an implied-in-fact contract or an express contract

with a missing price term, our task is to definitize the undefinitized portion of the price after

the fact.

Moreover, the label “quantum meruit” does not tell us exactly how to calculate that

value. Ordinarily, “value determined on a quantum meruit basis . . . is not based on costs nor

CBCA 2862, 4085, 4802

a reasonable return on investment of the seller, but on the reasonable value in the

marketplace.” Cities Service, 500 F.2d at 457 (emphasis omitted). That is impossible here,

as there is no marketplace for complex design-build renovations of active, fifty-year-old

museums. The Court in Yosemite Park v. United States, 582 F.2d 552 (Ct. Cl. 1978), in

awarding quantum meruit under a park concession contract, held that “the value of services

rendered” should include the concessionaire’s labor direct costs, “a reasonable return on

money invested in the equipment,” and profit. Id. at 561. Other courts have used similar

measures under non-government construction contracts. Continental Casualty Co. v.

Schaefer, 173 F.2d 5, 8 (9th Cir. 1949) (“[t]he reasonable value of the work and materials

furnished plus overhead and profit.”); Sea Byte, Inc. v. Hudson Marine Management

Services, Inc., 565 F.3d 1293, 1303 (11th Cir. 2009); Aniero Concrete Co. v. Aetna Casualty

and Insurance Co., No. 94 Civ. 9111(CSH), 2002 WL 31410641, at *1 (S.D.N.Y. Oct. 25,

2002). We adopt this approach. The reasonable value of the unpriced work under this

contract consists of Turner’s reasonable direct and indirect costs of meeting the unpriced

contract requirements, plus reasonable markups. We address below what “reasonable”

means in this context.

Under this approach, we are not equitably adjusting the contract price. We are

finalizing the price of the base contract work. Consequently, we are not bound, as

Smithsonian argues, either by the types or amounts of costs recoverable under the Equitable

Adjustment clause, or by Turner’s agreement to limit its general conditions and fee on

changes to 6%. Smithsonian’s argument that the quantum meruit approach amounts to a

“total cost claim” is likewise misplaced. Total cost is a disfavored means of proving an

equitable adjustment or breach damages. See Propellex Corp. v. Brownlee, 342 F.3d 1335,

1339 (Fed. Cir. 2003). It “assumes all costs over what was bid and paid are due to the

claimed changes.” Moshe Safdie & Associates, Inc. v. General Services Administration,

CBCA 1849, et al., 14-1 BCA ¶ 35,564, at 174,300. Turner’s direct claims relate to base

work, not to changed work, and do not rest on a breach theory. Nor will we refer to the

difference between Turner’s costs for the unpriced work and any “bid” by Turner for that part

of the project. We must examine Turner’s costs, but Turner has no total cost claim.

Smithsonian argues that Turner’s quantum meruit theory constitutes a “new claim”

that Turner failed to raise in its claim or complaint. To the contrary, Turner has consistently

claimed the costs it reasonably expended on this project. At most, Turner’s embrace of the

quantum meruit label at the hearing “asserts a new legal theory for the recovery originally

sought,” and is not a new claim. Ketchikan Indian Community v. Department of Heath &

Human Services, CBCA 1053-ISDA, et al., 13 BCA ¶ 35,436, at 173,808-09 (citing Scott

Timber Co. v. United States, 333 F.3d 1358, 1365 (Fed. Cir. 2003)). We also reject

Smithsonian’s objection that Turner’s calculation of reasonable costs incorporates the

assumptions and clarifications that Turner set forth in its 95% proposal, and thus effectively

CBCA 2862, 4085, 4802

shifts to Smithsonian risks that Turner had assumed under the design-build contract. We

emphasize again: had Smithsonian either accepted or rejected Turner’s assumptions and

clarifications and negotiated a fixed price covering the remaining contract work, the Board

would be left to enforce the contract as written. Smithsonian asks us, instead, to ignore

Turner’s assumptions and clarifications, as well as the absence of a definitized price, but to

enforce the contract’s original allocation of risks. This could leave Turner with all of the

risks and no remedy, which we cannot accept, particularly given the significance of the risks

of unforeseen and hazardous conditions that the assumptions and clarifications were intended

to address, and the balance of equities between the parties. Smithsonian accepted unpriced

renovation work. It must accept a method of pricing that work. Ultimately, we award Turner

the reasonable costs of both the second steam generator and general conditions.

The pass-through claims and Smithsonian’s claim require a more conventional

approach, and we address them essentially as we would claims in any construction dispute.

If we found any merit in Smithsonian’s excess payment claim, we would likewise need to

subtract Smithsonian’s recovery from Turner’s cost pool, but, as we explain, we do not.

II.

Turner May Recover a Reasonable Price Under Quantum Meruit

Turner May Recover the Costs of the Second Steam Generator

We start with the steam generator claim because it is the most straightforward. Turner

seeks the costs of installing the second steam generator, under the quantum meruit theory,

as part of the reasonable costs of meeting the contract requirements. Smithsonian argues that

Turner’s work on the mechanical systems, including the first steam generator, was definitized

with the submission and acceptance of the 95% drawings and specifications, and that the

need for the second generator arose from a design error for which Turner was responsible.

Respondent’s Brief at 89 (citing Smithsonian PPF ¶¶ 123, 169).42

It is true that the system Turner originally designed and installed did not meet the

performance requirements for humidity levels. The actions attributable to

Smithsonian—doors being left open and attempts to override the controls—did not cause this

Smithsonian also asserts that the warranty provision of the contract makes

Turner responsible for these costs. Smithsonian Brief at 86 (citing Respondent’s PFF ¶ 169).

The warranty provision requires Turner to warranty the performance of the systems and

equipment it installed, but is not applicable here. As the AECOM engineer testified, the first

steam generator was performing as it should have; it just was not adequate to meet the

humidity requirements.

CBCA 2862, 4085, 4802

failure. Moreover, as the AECOM engineer testified, Turner should have known the quality

of the GSA steam and factored it into its design.

However, this simply means that two steam generators, rather than one, as Turner

anticipated, were required to satisfy the performance specification with respect to humidity.

See P.R. Burke Corp. v. United States, 277 F.3d 1346, 1357 (Fed. Cir. 2002) (emphasizing

distinction between design and performance specifications). Smithsonian ultimately accepted

a working steam system with two generators and must pay a reasonable price for it, based on

cost. Smithsonian offered no evidence that either the price of the second steam generator or

Turner’s markups are unreasonable. Turner may recover $438,668, which includes the direct

costs of Welch & Rushe’s effort plus reasonable profit, insurance costs, and bond costs.

Turner may also recover interest, calculated in accordance with the Disputes clause.

Turner May Recover Some General Conditions Costs

Turner’s quantum meruit claim for general conditions costs is more involved.

“‘General conditions costs’ are expenses for project managers, supervisors, and clerical

assistants; temporary offices and utilities and supplies for those offices; and other

miscellaneous expenses necessary for on-site management of a construction project.” AMEC

Construction Management, Inc. v. General Services Administration, GSBCA 16233, 06-2

BCA ¶ 33,410, at 165,648. Turner directly provided all of these services here.

As explained above, Turner and its subcontractors incurred approximately $57 million

in direct construction costs, of which approximately $45.4 million was for work that was

never priced in a bilateral modification to the contract. Turner incurred about $10 million

in general conditions costs for the construction effort. Based upon the ratio of the costs of

the unpriced work to the total construction costs, Turner calculated that it incurred

approximately $7.1 million in general conditions costs performing unpriced work. Adding

to this figure the direct costs of unpriced construction work, Turner determined that it and

its subcontractors incurred costs totaling $56.6 million on the unpriced effort. After

subtracting the $49.6 million that it was paid, Turner is left with a claim of $7 million in

general conditions costs.

The Board accepts Turner’s approach of calculating reasonable general conditions

costs in line with the percentage of unpriced work on the project. While Mr. DuVal called

this approach unreliable when undertaken after contract performance, Turner was forced to

develop its cost-based claim only after Smithsonian failed to negotiate a fixed price. Turner

could not have known when it set up its accounting system for the fixed-price contract that

it would need to segregate the costs of unpriced work to support a reasonable price.

CBCA 2862, 4085, 4802

However, we see two other problems with Turner’s calculation. One, Turner includes

in its pool of unpriced work both change work and pending change work. Neither of these

amounts should be included, because they are not part of the base contract work we are trying

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