APPELLANT’S MOTION FOR SUMMARY RELIEF GRANTED IN PART;

APPELLANT’S MOTION FOR SUMMARY RELIEF GRANTED IN PART;

RESPONDENT’S MOTION FOR SUMMARY RELIEF DENIED: April 19, 2013

CBCA 2862

TURNER CONSTRUCTION COMPANY,

Appellant,

v.

SMITHSONIAN INSTITUTION,

Respondent.

Douglas L. Patin and Jeremiah S. Regan of Bradley Arant Boult Cummings LLP,

Washington, DC, counsel for Appellant.

Peter M. D’Ambrosio and Todd M. Conley of Womble Carlyle Sandridge & Rice,

LLP, Washington, DC, counsel for Respondent.

Before Board Judges SOMERS, McCANN, and KULLBERG.

SOMERS, Board Judge.

More than a decade ago, the Smithsonian Institution (SI or the Smithsonian) sought

to modernize and expand the National Museum of American History. In order to achieve

that goal, the Smithsonian contracted with Turner Construction Company (Turner) to

provide of various design and construction services in a long-term, multiple-phase project

entitled “Public Space Renewal Project at the National Museum of American History.” The

project involves two contracts, amended by several modifications.

CBCA 2862

2

The issue before us in this case involves the final contract price. The Smithsonian

contends that the parties agreed on a total price, established by contract modification, which

was a not-to-exceed price beyond which Turner may not recover the costs of construction.

The contracting officer rejected Turner’s claim for an equitable adjustment on the basis that

it would exceed the final price. Conversely, Turner asserts that SI failed to negotiate a final

fixed-price contract, thus breaching the contract requirements.

Turner and the Smithsonian filed an extensive joint statement of undisputed facts, as

well as separate statements of undisputed facts, statements of genuine issues, and crossmotions for summary relief.1 For the reasons set forth below, we grant Turner’s motion for

summary relief in part and deny the Smithsonian’s motion for summary relief.

Background

The Skidmore, Owings and Merrill Contract

On May 20, 2002, SI awarded a contract to Skidmore, Owings & Merrill LLP

(SOM). The request for proposals which led to the contract informed prospective

contractors that the Smithsonian was “seeking proposals from experienced architectengineering firms to lead a design/build team for the National Museum of American History

Public Space Renewal Project.” The design and construction services were divided into

seven separate phases. The first phase was the “Concept Phase,” and the contract identified

a total firm-fixed price of $250,000 for that initial work. The contract also identified six

additional construction/design phases as options.

Section A.1 of the SOM contract also includes the following description of the

“Contract Documents”:

1

In addition, Turner filed a motion to strike Exhibit 40 from the joint appeal

file. Exhibit 40 consists of excerpts from Turner’s Request for Equitable Adjustment

(REA). Turner contends that it prepared the document for settlement purposes and that the

document is inadmissible pursuant to Federal Rules of Evidence 408. The Smithsonian

objects, arguing that the document is not privileged, or, alternatively, that Turner waived the

privilege by relying upon the document in its certified claim and its complaint. Although

we did not find the document necessary to reach our resolution, the fact that the document

forms the underpinning of Turner’s certified claim means that Turner cannot assert the

privilege without bringing into question the validity of its certified claim. We deny the

motion to strike.

CBCA 2862

3

A.1. The Contract Documents. The Contract consists of the Smithsonian

Institution Document, including the Schedule and the following documents

that are included either in full text or by reference, with full force and effect

as if attached to the Contract.

***

A.1.6. Smithsonian Institution Construction Contract Clauses (Fixed Price),

OCON Form 6 (June 2001).

***

A.1.7. Smithsonian Institution Architect-Engineer Contract Clauses (Fixed

Price), OCON Form 8 (June 2001).

The Smithsonian Institution Construction Contract Clauses (Fixed Price), OCON

Form 6 (June 2001) include standard Federal Acquisition Regulation (FAR) fixed price

contract clauses, including FAR 52.232-5, Payments Under Fixed-Price Construction

Contracts (May 1997). Similarly, Smithsonian Institution Architect-Engineer Contract

Clauses (Fixed Price), OCON Form 8 (June 2001) include a variety of standard FAR fixed

price contract clauses, including FAR 52.232-10, Payments under Fixed Price ArchitectEngineer Contracts (Aug. 1987) and FAR 52.243-1, Changes, Fixed Price, Alternate III

(Apr. 1984).

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. On February 12,

2004, SI executed Modification 0003, which spelled out that agreement. The modification

bound Turner to the contract provisions.

The Turner Contract

On September 29, 2005, the Smithsonian Institution awarded Turner contract

number F0536CW10520, entitled “Revitalize National Museum of American History

(NMAH), Behring Center, Public Space Renewal, Package II-B,” with a contract price of

$10,645,174.26.12. The contract identified this amount as a “not-to-exceed price” for the

following services performed “under this work order contract: (1) A/E Design $4,109,719.16; (2) Long lead item requisitioning - NTE $ 6,000,000.00; (3) Soft Demolition

NTE $ 535,454.96.”

CBCA 2862

4

The contract contained the following provision concerning contract disputes:

CLAIMS: “Claims”, as used in this clause, means a written demand or written

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

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

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

claim arising under the contract, unlike a claim relating to that contract, is a

claim that can be resolved under a contract clause that provides for the relief

sought by the claimant.

Modification 0001

On July 17, 2006, the parties executed Modification 0001 to “include amended

specifications and additional requirements.” It further stated that “[t]he total funding and

amount for [certain design requirements], not including funding previously provided in the

original contract, is a [sic] not-to-exceed (NTE) $4,688,156.19.” The modification also

stated that “$16,000,000.00 in funds is awarded for future construction work.” The

modification concluded that the total pricing amount of the contract “is increased by NTE

$20,688,156.19 from $10,645,174.26 to NTE $31,333,330.45.”2

Completion of 95% Construction Documents

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

a series of meetings with SI in October 2006, Turner presented its 95% construction

documents pricing to SI on November 17, 2006. SI reviewed this document and returned

it to Turner with comments, and Turner resubmitted the document to SI on November 21,

2006.

On December 4, 2006, Lloyd McGill of SI sent the following e-mail message to Bill

Wright of Turner:

2

Most of the bilateral modifications contain a statement entitled “Contractor’s

Statement of Release.” Although such a statement could be construed to release SI from all

claims arising from the various modifications, the fact that the parties continued to negotiate

indicates that the releases held no meaning for the parties. Community Heating & Plumbing

Co. v. Kelso, 987 F.2d 1575 (Fed. Cir. 1993); Walsh/Davis Joint Venture v. General

Services Administration, CBCA 1460, 11-2 BCA ¶ 34,799. In any event, we conclude that

the releases do not present an issue here, noting that the parties did not address the potential

relevance of release statements in any of their submissions to the Board.

CBCA 2862

5

This correspondence is to provide notice to proceed (NTP) with additional

construction services for the Public Space Renewal Project (PSRP) under

Contract F0536CW10520 at the Behring Center, National Museum of

American History. Funds in the amount of $22,405,909.04 are being provided

for continued construction activities. A formal modification will be issued to

definitize activities.

The next day, the contracting officer, Dorothy Leffler, sent the following e-mail message to

Bill Wright:

This correspondence is to provide notice to proceed (NTP) with additional

construction services for the Star Spangled Banner Shell Construction under

contract F0536CW10520 at the National Museum of American History,

Behring Center. Funds in the amount of $4,725,818.00 are being provided for

continued construction activities. A formal modification will be issued to

definitize these activities.

Modification 0007

On December 27, 2006, the parties executed Modification 0007. The modification

stated, in part:

A.1. This modification is issued to provide additional undefinitized funding

for construction of the Public Space Renewal and the Star Spangled Banner

Projects (PSRP/SSB).

A.1.1. This is a funding action only [sic] is not intended to represent a total

firm fixed amount obligation on the part of the Contractor.[3]

A.2. Once construction activities are definitized, funding will represent a firm

fixed price contract amount.

A.3. The Contractor shall perform construction services in accordance with

the 95% drawing documents issued by the Architect/Engineer, dated

September 10, 2006.

3

The parties dispute the impact and meaning of the modification language, and

it is not clear to us what is meant by a “firm fixed amount obligation on the part of the

Contractor.”

CBCA 2862

6

....

C. The total contract funding and amount is increased by $27,504,031.04.00

[sic] from, $32,284,727.20 to $59,788,758.24 (NOTE: The total funding and

amount includes funds provided for design services. Once pricing for

construction services is finalized, design funds will be referenced only).

The parties agree that because 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.

Modification 0008

On January 19, 2007, Turner submitted its revised cost proposal for the 95%

construction documents, proposing a total price of $60,755,350 -- i.e., $51,823,836 for

construction, $8,814,609 for design, and $116,905 for early packages construction

administration cost. Based upon this price, there was a $966,591.76 shortfall in the total

construction price set forth in Modification 0007.

On February 22, 2007, SI unilaterally executed Modification 0008, which increased

the total contract funding and amount by $966,592, to a total price of $60,755,350.24, the

price proposed in Turner’s January 19, 2007, 95% construction documents submission.

Modification 0008 stated, among other things:

A.1. This modification is issued to provide additional funding for

construction for the Public Space Renewal and Star Spangled Banner Projects

(PSRP/SSB).

A.1.1. This is a funding action only.

Modifications 0009 through 0015

Between March 26, 2007 and July 31, 2007, the parties executed Modifications 0009

through 0015.4 These modifications increased the total contract funding amount from

$60,755,350.24 to $69,485,734.24. Turner invoiced SI for its work through the submission

of progress payment applications, and SI paid Turner accordingly.

4

Modification 0012 was a unilateral modification issued by SI. Both parties

executed the other modifications.

CBCA 2862

7

Modification 0016

In an undated letter sent on July 19, 2007, Ms. Leffler, the contracting officer,

indicated her concern that certain amendments developed by SOM “have major implications,

which if not acted upon, will seriously jeopardize the projected completion and scheduled

opening of July 4, 2008.” She directed Turner to evaluate these changes and explained that

she had authorized $1.5 million to be set aside to be used to modify the contract once the

potential changes had been evaluated and the Smithsonian reached “a fair and reasonable

conclusion as to its ownership.”

Turner responded in a letter dated August 21, 2007, that it believed:

[W]e are currently working under a contract that is undefinitized relative to

cost and this has been confirmed in Modification #7 and has been reconfirmed

in Modification #16. The path to definitizing the cost and pricing for the

contract is somewhat complicated and the path forward after the definitization

(as to what constitutes a change) will also require some discussion. We will

continue to advance the project within the available funding and will continue

to notify SI when we believe additional funding is required.

On September 10 and 11, 2007, the parties executed Modification 0016, which

established a substantial completion date of June 20, 2008. It stated, in pertinent part:

B. With regard to the contract price, Modification 0007 stated, “This is a

funding action only and is not intended to represent a total firm fixed price

amount obligation on the part of the Contractor,” therefore leaving a large

portion of the contract amount undefinitized.

B.1. Subsequent to Modification 0007, Modifications 0008 and 0012 have

been issued to provide additional undefinitized funding; however,

Modifications, other than those cited, represent a firm-fixed price commitment

on the part of the Contractor for performing the work that has been definitized

or described in associated changes; however, it is agreed that the construction

activities for total funds available on the contract have not been completely

definitized.

B.2 Both parties agree that it is in the best interest of the project to definitize

the project as early as is possible so that our project teams have clarity on this

matter. As such, both parties agree to expend reasonable efforts to negotiate

a definitized contract amount which shall incorporate all work up to a date

CBCA 2862

8

selected mutually by the parties. Both parties shall endeavor to conclude such

negotiations by August 30, 2007 [sic].

Prior to signing Modification 0016, Mr. Jahrling of Turner wrote to Lloyd McGill of SI on

September 9, 2007, stating, in part:

I have reviewed the document and in general the document accomplishes the

two missions we both wanted to do. First, it establishes the substantial

completion date as June 20, 2008. It has the POP [period of performance] at

June 20th as well, but acknowledges that the work will continue past this date

. . .I believe that later you will have to adjust the POP to allow the work to

continue past this date. On the funding and pricing side, the situation is

complex to be sure, but the wording you have included is close enough for

now. As discussed and agreed to earlier, while there have been a bunch of

“lump sum” changes agreed to, we are not accounting for these changes on an

individual basis. They are lump sum components assumed to be the pieces of

the project that we have agreed upon and will not be allowed to change in

pricing as we work on definitizing the entire contract in the coming weeks.

Unless you have any disagreement, I will sign this modification and forward

it to you.

Mr. McGill wrote back on September 10, 2007, saying that “[e]veryone is in agreement with

your statements. Let’s move on.” As noted above, both parties signed the modification.

Addenda 1-4 to the 95% Construction Documents

Although the parties had planned to conclude construction-work scope and cost

negotiations for Addenda 1-4 by the August 30, 2007, target date, this did not happen. As

of September 11, 2007, the parties were negotiating the work scope and price of Addenda 1

and 2 to Revision 7 to the 95% construction documents. Also, the parties continued to

negotiate the work scope and price of Addenda 3 and 4.

In a letter dated September 19, 2007, the contracting officer, Dorothy Leffler, stated,

in pertinent part:

This is to confirm Smithsonian Institution (SI) request of 9/11/07 to Turner

Construction Company (TCCo) to provide a list of possible options to reduce

the project overall cost.

CBCA 2862

9

SI’s review of the recent addendum proposals and TCCo’s allowances, which

have cost impacts on the project budget has revealed that the present value of

the project exceeds the design-build price of $55,959,054. This figure does

not include the design cost of the design-build price.

Per Contract F-0536CW10520 Part XII - Construction Cost

Limitation/Revisions (C), SI hereby directs TCCo to provide a “shopping list”

of options to reduce the scope of work for the PSRP II project. TCCo is to

provide costs associated with each line item. It is understood that some of the

items listed could be deferred and installed at a later date. The schedule for

the installation is to be determined.

SI requests TCCo to provide a firm fixed price for the following TCCo

outstanding allowances including, but not limited to: Design contingency,

Demolition of walls within ‘Field to Factory’, CWAS system, Hazmat

Abatement, Removal and replacement of ceilings, Patch fire rated partitions,

and submit the list of suggestions to correct scope to be within the designbuild price by Tuesday, 9/25/07. It is the intent of SI to select the acceptable

options by Tuesday 10/2/07 and request TCCo to revise the project documents

accordingly.

The parties agree that, prior to that date, SI had never communicated to Turner that there was

a “design-build price of $55,959,054.” SI did not explain how the $55,959,054 was

calculated. It appears, however, that the contracting officer believes that $55,959,054 is the

maximum contract price, which is inconsistent with earlier statements.

In response, Mr. Jahrling sent Ms. Leffler an e-mail message on September 20, 2007,

stating, in part:

1.

You note a number of $55,959,054 as a design build price which

appears as the target to reach for the value engineering exercise. I

would like to clarify that this is so, since almost a year ago, the 95%

estimate was $58,036,962 and a number of items have been added

since including asbestos, etc. So to clarify, we are to attempt to reach

the 55.9 number INCLUDING all of the other added changes, etc.?

2.

The discussions for Addendums #1 through 4 are apparently going to

be held on Tuesday as well...this will be good so that we will all know

what we are up against...could be $6-10 million.

CBCA 2862

10

After much discussion and e-mail messages back and forth about what to do, Mr. Jahrling

wrote in a letter dated October 18, 2007, that:

With that January 19th letter, we asked two important questions that were

never answered by SI:

1.

What are the steps to get a modification issued and steps to get a firm

fixed price contract in place?

2.

Do you want another copy of the Turner proposal which would include

all of the qualifications and assumptions?

It is clear in all of the correspondence and all actions that SI has never

officially dealt with the 95% estimate in anything but a piecemeal approach

and the project today continues undefinitized relative to cost. In one of our

recent meetings you asked the question out loud “What is the baseline (cost)?”

and I replied that there is none...that remains true today, and until your request

in one of the following meetings for us to issue a proposal to definitize the

costs, there has been no action toward definitization since the 95% estimate

was delivered in January 2007.

DEFINITIZING THE CONTRACT

Based on all correspondence and all actions, the contract between Turner and

SI remains undefinitized relative to cost. As work is proceeding, we maintain

that we are currently working on a Cost-Type basis for all elements of the

work that are not definitized and will continue to do so until the contract is

definitized between the parties.

Modification #7 issued in December of 2006, contemporaneous with the

ongoing pricing work described above clearly states that “This is a funding

action only and is not intended to represent a total firm fixed amount

obligation on the part of the Contractor.” Clearly SI understood that there was

no fixed amount (contract undefinitized relative to cost) at that time, and no

actions have been taken since (excepting your recent request for a proposal to

definitize) to fix the costs.

Modification #16 issued in September 2007 again reiterated that a “large

portion of the contract amount is undefinitized.”

CBCA 2862

11

In a series of e-mail messages dated October 19, 2007, to October 21, 2007, the

parties continued discussing pricing for Addenda 1-4. In an October 19, 2007, e-mail

message, SI stated, in part:

The revised pricing for Addendums were just received from TCCo last week

and are not to be linked to the delivery of the recovery schedule that was

requested by letter over a month ago. SI’s review of the Addendums shows

that additional costs have been added with no or little qualifications. TCCo

seems not to understand that the Not To Exceed price has been exceeded and

TCCo correcting unjustified labor rates is not an invitation to correct apparent

bid errors. These changes in the bid will only prolong the SI review.

In response, Turner stated in an October 21, 2007 e-mail message:

I understand your frustration, but I hope you can understand mine. I think

everyone is clear that there was some confusion relative to the way the

contract is coming together, but by now we should have gotten to the point

where all understand that we should not be expected to fund millions of

dollars in changes out of our pocket when we had never included them

(actually specifically excluded them). The team’s inability to come to closure

on this is causing a great deal of strife within the entire team.

Relative to proceeding with certain parts of the project, my understanding is

that we have a limited release to proceed with Amendments 1 and 2 not to

exceed $1,500,000 but it is also my understanding that we have not been

allowed to bill for this work. It is also my understanding that we have not

been released to go forward with Amendments 3 and 4. Closure on these

issues is critical to forward progress.

SI’s Derek Ross replied on October 22, 2007:

Of the $1.5M you have approx $815K that is in the contract that you could bill

against and after reviewing the corrected documents for Add #3 and #4 we are

processing those modifications. You did receive NTP for Add #4 back in

August. I understand you have released the gear for Add #3 that pricing

includes acceleration cost.

By e-mail message dated October 23, 2007, to Mr. Ross, Mr. Jahrling submitted a

Financial Status Report dated September 25, 2007, showing total funding for the contract

CBCA 2862

12

through Modification 0018 to be $69,696,353. This communication showed the total

estimated costs to be $82,706,320 – a shortfall of $13,009,967. The letter also states, in part:

The “Contingencies to Complete” section I had Bill put in to show what

additional costs one might expect to spend to completion on this project.

Clearly how these costs are tracked will depend upon whether we reach an

agreement on a definitized contract amount which may include all design and

construction contingencies or whether we continue along the current path. In

a complicated renovation project such as this, there must be some recognition

that additional cost events will occur. Between us, we need to clearly identify

for the team who is responsible for what in a general sense so that they can

work better together rather than battling over every cost event.

On the Allowances, I know that SI would like to definitize the allowances, but

we cannot support definitizing the Hazardous Material Allowance and we

probably have not seen the end of the Remove and Replace existing ceilings

to remain.

On October 28, 2007, Mr. Jahrling sent to Mr. Ross a revised financial status report.

At page 2 of the report, under “Total Additional Funding Required (Total Estimated Cost

Less Total Funding Received thru Mod 15),” it showed a shortfall of $9,558,018 from the

projected cost of $79,254,371. SI provided its comments to Turner by transmittal dated

November 9, 2007.

On March 11, 2008, Turner met with Robert Fraga, the newly assigned contracting

officer, and his staff, to review the contract and attempt to amicably resolve the parties’

disagreements over contract pricing. The contracting officer asked Turner to put its position

in writing and stated that he would issue a determination on what the contract required.

By letter dated March 27, 2008, Turner explained its position to SI. Referring to

Modifications 0007 and 0016, Turner stated:

[The] Smithsonian clearly understood that a definitized contract amount was

to be negotiated. This has not happened yet.

To date, only $14,707,748 in scope has been definitized. Turner and the

Smithsonian must still negotiate and definitize the balance.

On April 7, 2008, Mr. Fraga issued his determination on the contract requirements.

He concluded that the contract was a fast track, design-build contract with incremental

CBCA 2862

13

funding. While Mr. Fraga acknowledged that providing additional funding to the project

without allocating funds to specific work activities might be administratively confusing,

those actions did not relieve Turner from constructing the project for the not-to-exceed

amount identified in Modification 0001. Mr. Fraga also stated that “the failure to reach a

negotiated settlement at 95% documents was primarily due to [Turner’s] failure to deliver

a timely and complete set of documents and the Smithsonian’s unwillingness to accept

[Turner’s] Assumptions and Clarification associated with the 95% package. Nevertheless,

construction work has continued in the absence of the negotiated settlement.” Mr. Fraga

directed the parties to negotiate a firm fixed price agreement that took into account differing

site conditions, scope increases, owner generated changes, and extended overhead due to

owner delays.

On April 15, 2008, Mr. Fraga amended his previous letter. In response to comments

apparently raised at a meeting held on April 7, 2008, he clarified:

[Turner’s] representatives disagree with my interpretation that the contract is

a “not to exceed, guaranteed maximum price type contract.” It is true that the

terms “not to exceed” or “guaranteed maximum price” are not found in the

contract but this is clearly the intent of the contract and it is supported by the

contract language and its implementation.

The pricing of the construction portion of this contract can only be one of

three options: fixed price, not to exceed guaranteed maximum price, or cost

reimbursable. This is clearly not a fixed price contract.

....

The scope of the work for the project was defined by a number of documents

early in project development, including OFEO’s [Office of Facilities

Engineering and Operations’] statement of work provided to SOM and the

original and revised 35% documents. These documents established the scope

of work and were the basis for Modification #1. Consistent with a not to

exceed guaranteed maximum price contract, the scope of work continued to

be refined through further design development in the 65%, 95%, and finally

the 100% submissions. Scope reductions were made through negotiations to

keep the project within budget.

Mr. Fraga concluded by confirming that his earlier determination remained unchanged. As

a result of contract modifications issued unilaterally by SI, the contract amount increased

CBCA 2862

14

from $69,485,734.48 to $75,030,697.77. Ultimately, Turner substantially completed the

project on October 31, 2008, and the museum opened to the public in November 2008.

On May 24, 2011, Turner submitted a certified claim for $14,527,695. Contracting

officer Dorothy Leffler denied the claim in its entirety on June 5, 2012. First, she reviewed

the contracts and associated documents, concluding:

I find that the plain language in the contracts and associated documents clearly

demonstrates that these design/build contracts were Fixed Price in nature, with

the Fixed Price for the construction work to be negotiated after Turner

prepared its 95% CD Estimate.

The contracting officer explained the Smithsonian’s process of incrementally funding the

contract, stating:

SI’s funding for the Project work was provided, in large measure, by a single

private donor. Because the private donor provided the Project funding

incrementally throughout the Project, SI had to also incrementally fund the

contracts with SOM and Turner in order to avoid incurring obligations in

excess of its available funding. As a consequence, SI incrementally

definitized the fixed prices for various elements of the contract work, and also

used fixed “not-to-exceed” (“NTE”) prices to avoid incurring obligations in

excess of the funds available at any given time.

SI used modifications to increase the fixed-price contract amount as necessary. The

contracting officer determined that this process did not change the fixed-price nature of the

contract.

The disputes clause of the contract states that the decision of the contracting officer

is final and conclusive unless within thirty days from the date of receipt of the decision,

Turner mails or otherwise furnishes the contracting officer a written appeal addressed to the

Secretary of the Smithsonian Institution. A memorandum of understanding provides that

the United States Civilian Board of Contract Appeals will act as the Secretary’s duly

authorized representative for the determination of any administrative appeal from the

decision. Accordingly, upon receipt of the contracting officer’s final decision, Turner

appealed the decision to the Board.

CBCA 2862

15

Discussion

The parties conceive of the issue on appeal quite differently. Turner argues that SI

failed to definitize the contract and negotiate a firm fixed price as contemplated by the

contract. Specifically, when Turner submitted its 95% proposal in accordance with the

contract, it contends that the parties never definitized the contract value. While the parties

had reached agreement on fixed prices for a portion of the work, the vast majority of the

construction work remained “undefinitized” with no agreement on the total lump sum price.

Turner contends that SI added work, deleted work, and changed previously designed work.

Turner believes that it is entitled to receive a reasonable price for the work which remained

undefinitized under the contract. In sum, Turner says, the plain language of

Modifications 0007 and 0016, combined with the parties’ contemporaneous conduct,

demonstrate that the parties intended to reach a firm fixed price.

By contrast, the Smithsonian insists that it accepted Turner’s fixed price proposal

when it issued Modification 0008 and set the contract price. Thereafter, the parties’

conduct, including Turner’s applications for payment, change requests, and request for

equitable adjustment, were all consistent with a fixed price agreement. SI contends that

Turner’s remedy is under the contract’s “equitable adjustments” and “disputes” clauses.

This dispute requires us to determine whether the parties agreed on a price for the

construction work in accordance with the contract’s terms. If the parties did not so agree,

then we must determine the consequences, if any, of the parties’ failure to negotiate a

contract price.

Applicable Legal Standards

Summary relief is appropriate when there is no genuine issue of material fact and the

moving party is entitled to judgment as a matter of law. Anderson v. Liberty Lobby, Inc.,

477 U.S. 242, 247 (1986). Only disputes over facts that might affect the outcome of the case

under governing law will properly preclude the entry of summary judgment. Id. at 248.

“When, as here, both parties have moved for summary relief, each party’s motion must be

evaluated on its own merits and all reasonable inferences must be resolved against the party

whose motion is under consideration.” Charleston Marine Containers, Inc. v. General

Services Administration, CBCA 1834, 10-2 BCA ¶ 34,551, at 170,398 (citations omitted).

The issue raised by both parties involves interpreting the meaning of contract terms

in the context of the original contract and the contract modifications. Contract interpretation

is a legal question that is often amenable to summary disposition. JAVIS Automation &

Engineering, Inc. v. Department of the Interior, CBCA 938, 09-2 BCA ¶ 34,309, at 169,478,

CBCA 2862

16

citing Varilease Technology Group, Inc. v. United States, 289 F.3d 795, 798

(Fed. Cir. 2002). “When interpreting the language of a contract, we must give reasonable

meaning to all parts of the agreement and not render any portion meaningless, or interpret

any provision so as to create a conflict with other provisions of the contract.” Arcadis U.S.,

Inc. v. Department of the Interior, CBCA 918, 08-1 BCA ¶ 33,807, at 167,353 (citations

omitted). The determination of a contract type is also a matter of law, and the tribunal is

not bound by the label attached to it by the parties. JAVIS, citing Maintenance Engineers

v. United States, 749 F.2d 724, 726 n.3 (Fed. Cir. 1984).

Analysis

In this case, we are called upon to determine, based upon the language of the contract

and the modifications to the contract, whether the parties agreed upon a fixed contract price.

We find that they did not.

First, we note that the contract provided that the Construction Work Phase would be

negotiated at the completion of the “95% Construction Documents.” It is undisputed that

upon Turner’s completion of the 95% construction documents phase, negotiations on the

Construction Work Phase had begun, but the parties had not yet “definitized” the total

contractual amount for the construction services contemplated by the contract. This is

confirmed by Modification 0016, where the parties agreed to “expend reasonable efforts to

negotiate a definitized contract amount” by August 30, 2007.

Indeed, the evidence shows that the parties continued to negotiate to reach a final

contract price, first focusing on the work scope and price for Addenda 1 and 2 to Revision 7

of the 95% construction documents, and later turning to the work scope and price of

Addenda 3 and 4. The contracting officer asked Turner to provide options for reducing the

overall project cost. Over the course of months, the correspondence reveals the parties’

efforts to try to definitize the scope and costs of the contract, as well as the extent to which

they continued to disagree about contract price.

In our view, it is clear that the parties failed to agree on a “definitized contract

amount,” as least as to certain portions of the contract. They never came to a meeting of the

minds on the final contract price. Indeed, the parties agree that “SI and Turner did not

conclude construction work scope and cost negotiations . . . by the August 30, 2007 target

date.” Joint Statement of Uncontested Facts ¶ 45.

What is the significance of this fact? Turner urges that the Smithsonian’s failure to

definitize a final price for construction services constitutes a breach of the contract. We

disagree. The contract requires only that the parties “negotiate a definitized contract

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amount.” This provision does not obligate the Smithsonian to accept a proposed definitized

contract amount – it mandates merely that the parties try to come to agreement. Because “[a]

contract term which allows for future negotiation ‘impliedly places an obligation on the

parties to negotiate in good faith,’” the Smithsonian could only breach its obligation under

this provision if it failed to act in good faith. See, e.g., Gardiner, Kamya & Associates v.

Jackson, 369 F.3d 1318, 1322 (Fed. Cir. 2004) (citations omitted). Nothing in the record

suggests that the Smithsonian failed to make a good faith effort to negotiate a contract price.

Accordingly, we deny Turner’s motion for summary relief to the extent that it asks for a

determination that the Smithsonian’s actions constituted a breach to the contract.

The fact that the Smithsonian did not breach its contractual obligation to negotiate

a contract price, however, does not mean that Turner is without recourse to recoup the

amount it seeks. The parties agree that their original intent was to negotiate a firm fixed

price and scope of the construction work once Turner submitted the 95% construction

documents to the Smithsonian. On this point, the Smithsonian argues that the final contract

price was established through Modification 0008. SI also contends that the subsequent

contract modifications, which increased the contract price from $69,485,734 to $75,009,526,

support its argument that the contract was a firm fixed-price contract. However, SI also

acknowledges that “because the parties were not able to agree on a price adjustment for

Addenda 1 through 4 work,” SI unilaterally issued modifications to compensate Turner for

additional work.

Whether or not the contract could be characterized as a firm fixed-price contract is

beside the point. Turner could not have been clearer in its actions and correspondence

throughout the process that it believed that the parties had not agreed on a price. Based upon

an examination of the record, we find that the parties’ actions subsequent to the issuance of

Modification 0008, and, in particular, the terms agreed to in Modification 0016, illustrate

that the parties never reached final agreement on the contract amount. Indeed, the record

makes plain that the parties never reached agreement on a maximum ceiling price for the

project. While the plan may have been to negotiate a firm fixed-price contract, the parties

never accomplished that task.

SI claims that in order for Turner to be entitled to be paid reasonable construction

costs, we must determine that the contract is actually a cost reimbursement contract rather

than a fixed-price contract. This is not correct. If the contract is a fixed-price contract, and

the parties had actually reached agreement to a fixed price, Turner could still submit a claim

for an equitable adjustment under the terms of the contract’s disputes provision. The fact

that the contract has a maximum ceiling price does not preclude SI from considering a

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properly submitted claim that seeks an equitable adjustment to the contract. Consideration

of a claim for equitable adjustment, which is permitted under the contract, does not in and

of itself change the contract from a fixed-price contract to a cost-reimbursement contract.5

SI asserts that the decision in Arcadis is instructive. It contends that the Board in

Arcadis considered not only the language of the modifications, but also the parties’ conduct,

to determine that the Government’s liability was limited to the contract price. A review of

the facts of Arcadis, however, shows that the modifications in that case specifically

referenced the contract price using “not-to-exceed” language. Only Modification 0001 in

the contract at issue here contained “not-to-exceed” language to set a funding limitation for

a contract amount. None of the subsequent modifications, including Modifications 0007,

0008, and 0016, uses any language that conveys a “not-to-exceed” ceiling price. To the

contrary, none of the modifications after Modification 0001 identifies a firm fixed price as

the maximum contract price. The relevant modifications, specifically Modifications 0007

and 0008, state that “[o]nce construction activities are definitized, funding will represent a

firm fixed price contract amount.” This statement is not the same as a statement clearly

setting forth a “not-to-exceed” funding limitation.

5

In any event, even a cost-reimbursement contract has a maximum price.

FAR Subpart 16.3, entitled Cost Reimbursement Contracts, states:

Cost-reimbursement types of contracts provide for payment of allowable

incurred costs, to the extent prescribed in the contract. These contracts

establish an estimate of total cost for the purpose of obligating funds and

establishing a ceiling that the contractor may not exceed (except at its own

risk) without the approval of the contracting officer.

Like a firm fixed-price contract, a ceiling price caps the amount of costs that can be claimed

by the contractor absent a claim for equitable adjustment.

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Decision

For the reasons set forth above, we GRANT Turner’s motion for summary relief IN

PART, concluding that Turner is entitled to be paid a reasonable amount for the work it

performed on the project. We DENY the Smithsonian’s cross-motion for summary relief.

___________________________

JERI KAYLENE SOMERS

Board Judge

We concur:

__________________________

R. ANTHONY MCCANN

Board Judge

____________________________

H. CHUCK KULLBERG

Board Judge