MOTION FOR SUMMARY RELIEF DENIED: June 7, 2007

MOTION FOR SUMMARY RELIEF DENIED: June 7, 2007

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FREEMAN CONTRACTING, INC.,

Appellant,

v.

DEPARTMENT OF AGRICULTURE,

Respondent.

Joseph A. Yazbeck, Jr., of Yazbeck, Cloran & Hanson, LLC, Portland, OR, counsel

for Appellant.

Michael E. Trow, Office of the General Counsel, Department of Agriculture,

Portland, OR, counsel for Respondent.

Before Board Judges GILMORE, BORWICK, and POLLACK.

POLLACK, Board Judge.

Background

The Forest Service (FS) and Freeman Contracting, Inc. (Freeman or appellant)

entered into a fixed price contract, contract no. 50-04N7-04-80, dated June 15, 2004. Under

the contract, appellant agreed to construct for $89,701 the Pinnacle Creek Fish PassagePlate Pipe Arch on the Tiller Ranger District of the Umpqua National Forest. Problems

were encountered on the project and as a result the contracting officer (CO), pursuant to a

unilateral modification and final decision, issued an equitable adjustment of $28,365.79 as

compensation for several items. The CO denied an additional $46,625.55 claimed by

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appellant, which included, among other items, claims for idle equipment, acceleration, and

markups on the hourly rates used by the CO to come up with the issued adjustments.

In the main, the work called for replacing an in-stream pipe culvert with a plate pipe

arch. The work was to be completed in two and one-half months. According to the FS, the

initial expectation was that the notice to proceed (NTP) would be issued on or about July 15,

2004, and the work would be completed by September 30, 2004. The contract contained

standard language, which noted that if the contractor did not receive the NTP by July 15,

then the completion date would be extended to reflect the actual date of notice. The contract

also contained special requirements relating to when various tasks could be performed. All

stream work was restricted to the period of July 15 to September 15. All other construction

was restricted to the period between July 15 and September 30. While the contract specified

the above time-frame limitation, normal work season for the area was July through October.

Work performed in October, however, was subject to restrictions due to heavy precipitation.

In its motion for summary relief, the FS points out that appellant responded to a

Request for Quotation question about appellant’s ability to accomplish the work within the

anticipated time frame. In that answer, appellant acknowledged that the work was time

sensitive. Appellant there said that even though its work window started in July, it thought

there was adequate time to do the project in August, and intended to start at that time. In a

subsequent work plan, appellant showed it would take it four weeks to do the work.

The NTP was issued on July 30, after a pre-work conference. The notice provided

that the contract time would begin to run on August 8. At the pre-work conference appellant

provided a schedule showing it would mobilize on August 9 and would complete work by

September 8. On August 5, appellant advised the FS that due to late pipe delivery, its

schedule would be moved back one week.

Appellant began work on August 20, 2004. It encountered unexpected bedrock on

September 2. By September 7, the matter had been discussed within the FS and appellant

was advised that the bedrock needed to be excavated to the designed elevation. Although

excavation was unclassified, the parties in this instance treated the encountering of bedrock

as a differing site condition.

According to the FS, appellant worked on bedrock and did so for thirteen calendar

days from September 9 to October 6, 2004 (a total of 73.5 hours). The FS accepted the 73.5

hours and allowed additional compensation on them for a laborer, an operator/foreman, a

fire trailer, and a foreman’s pick-up truck. The FS then used the FS Region 6 Estimating

Guide for Road Construction to establish the hourly rates. According to the FS, it believed

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that appellant was agreeing that such rates would constitute full hourly compensation and

that appellant understood that the rates were inclusive, in that they included overhead, profit,

and burden. Appellant has stated that it was unaware that the rates included overhead,

profit, and burden and believed that it would be allowed those markups on top of the rates.

The CO then issued a unilateral modification, effective March 29, 2005. This was

well after the work was completed. On the bedrock work, the CO allowed $17,419.79 on

appellant’s claimed entitlement of $34,854.28, as well as granting fourteen days of contract

time. The CO disallowed compensation for claimed costs associated with equipment which

appellant contended had to be idled during the bedrock excavation. In denying this item,

the FS asserts that the equipment was not required by FS to be on-site and that the only

equipment that had to be retained by appellant and was idle was fire equipment for which

the FS paid $13,300. In arriving at his figure, the CO disallowed appellant’s claims for

overhead, profit, and labor burden. The CO disallowed those items because the cost guide

rates that the CO applied against hours worked included profit, burden, and overhead. As

the CO saw it, to allow appellant to add a markup to those rates would have resulted in

appellant double dipping. Accordingly, the CO denied $3993.14 for those items.

Appellant said the equipment for which it was denied payment was idled due to the

bedrock work and that it could not move the equipment elsewhere due to uncertainty as to

how quickly the bedrock operation could be completed. In its motion, the FS claims that it

can only be held accountable for idle equipment if the equipment was idled due to

government fault. The FS denies fault. Appellant, in contrast, argues that once there is a

differing site condition, idle equipment is compensable, provided the idle condition was

necessary and reasonable under the circumstances. As to the labor rate issue, Freeman

claims it incurred substantially more cost than the hourly rate allowed. Freeman does not

appear to dispute that it was using the FS guide for hourly rates; however, it says that it did

not know that those rates included profit, overhead, and burden. Further, Freeman claims

its accounting records show significantly higher hourly costs than that used by the FS. The

FS payment was made through a unilateral modification. No evidence has been provided

to us which shows there was a meeting of the minds or an accord and satisfaction.

Part of appellant’s responsibility on the project involved de-watering. The FS

identifies several notations in the appeal file which it says display the FS’s concerns over

appellant’s operation of the de-watering activities. The FS blames the problems with

unsuitable material, in whole or in part, on a lack of proper de-watering by appellant. After

excavating the trench to grade, appellant placed bedding material on October 11, 2004.

According to the FS, due to appellant’s unseasonable performance (it claimed that appellant

had stretched work out to a less ideal weather season) and due to appellant’s failure to

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properly de-water the trench, otherwise suitable material became saturated, necessitating the

removal of that saturated material. The FS says that the removal work took substantially one

day, covering parts of October 12 and 13.

Pursuant to Work Order 5, appellant removed and hauled the unsuitable material and

replaced it with three-inch minus free-draining aggregate, obtained from a commercial

source off-site. Appellant sought $10,222.30 for this work, which it claims included standby

costs. Using the same cost guide as used for the bedrock, the CO issued a unilateral

modification effective March 29, 2005, and allowed $5177, as well as two calendar days

of contract time.

Without going into detail, appellant says the water problem was of such a nature that

it could not be fully controlled, despite appellant’s efforts. The fact that the FS paid

appellant for this work is certainly an indication that the FS did not consider the problem to

be the fault of appellant. That alone is sufficient to establish a disputed fact as to whether

appellant was culpable. Having identified a disputed issue as to entitlement, the remaining

dispute over this item centers on the cost. On this item, our analysis will require us to revisit

the issues surrounding the use of the estimating guide, albeit here, in the context of the

bedding material claim as opposed to bedrock.

On October 27, 2004, the FS had appellant import some special governmentfurnished backfill material to stabilize a wet area along the southern edge of the culvert. In

its motion for summary relief, the FS charges that the need for the material was again due

to appellant’s unseasonable work performance and failure to properly de-water the trench.

In addition, the parties disagree as to the cost of this work. The FS provides an explanation

as to the costs to perform the work; however, that explanation is difficult to follow. Given

what we have before us, we find that this matter will need to be better explained and

developed before we can attempt to resolve it. It is not necessary, however, for purposes of

this ruling for us to spend time attempting to reconcile and understand the conflicting

numbers. What is clear is that the FS paid less than that claimed by appellant and appellant

disputes the number.

On November 11, 2004, the FS issued Work Order 9, changing the location of the

source for government-furnished aggregate. This time the CO allowed $2891.94 (rounded

by the CO to $2892) against appellant’s claim of $4982.40. The parties again disagree as

to the actual cost.

Part of appellant’s claim for compensation is for acceleration. In its motion, the FS

asserts that appellant was provided adequate time for the work, but started late and dawdled

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away other days. The FS also asserts that appellant never told the FS that it was accelerating

and the FS never ordered appellant to accelerate. The FS also notes that appellant did not

raise this claim until after work was completed. Appellant asks for $14,334.64 for this item

and the FS denies it in full.

The claim also contains an item for hauling and excavating unsuitable material. In

summary, the contract called for 1338 cubic meters of excavation material to be hauled to

a disposal site incidental to Item 206A(02). According to the FS, instead of hauling

excavated material to the disposal site, appellant choose to stockpile it on-site in order to sort

for suitable backfill material, with waste material to be disposed of after sorting. The FS

charges that approximately 20% to 40 % of the excavated material was boulders, which

appellant chose to sort and use for rip rap. Appellant claims $5130.37 for this work.

Appellant claims that it should not have had to haul this material, but rather the material

should have been usable on the work site. Appellant claims the FS is responsible for the

unsuitable material; however, the basis for that claim is not clear.

Discussion

General Statement of Law

The FS has moved for summary relief. Summary relief is appropriate where 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 preclude the entry of

summary judgment.” Id. at 248. The moving party has the initial burden of informing the

court of the basis for its motion and identifying those portions of the pleadings, depositions,

affidavits, admissions, and answers to interrogatories, if any, which it believes demonstrate

the absence of a genuine issue of material fact. Celotex Corp. v. Cattrett, 477 U.S. 317, 323

(1986). The non-moving party is then required to point to “specific facts showing that there

is a genuine issue for trial.” Id. at 324. In considering summary relief, the court will not

make credibility determinations or weigh conflicting evidence. Anderson, 477 U.S. at 249.

“All reasonable inferences and presumptions are resolved in favor of the non-moving party.”

Id. at 255.

Differing Site Condition

We start with the differing site condition claim. The appellant has asserted that it

encountered bedrock instead of expected conditions. It is undisputed that after the bedrock

was encountered, the FS treated the bedrock as a differing site condition and paid appellant

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for the hours appellant expended. The FS paid based on the FS estimating guide. The FS

now appears to challenge the existence of a differing site condition. The fact the FS paid

for the bedrock operation and treated it as a differing site condition is sufficient, taking all

inferences in favor of appellant, for us to find that appellant encountered a differing site

condition. Therefore, for purposes of defending against summary relief, appellant has met

its burden. We need not address the details any further.

Standby Equipment Associated with Differing Site Condition

Appellant has claimed costs for equipment that it says was idled as a result of it

having to perform work on the bedrock. The dollar claim here, to the extent it is warranted,

arises out of the claimed differing site condition. Appellant says it was forced to leave

necessary equipment idle on the project and that it made every effort to mitigate costs by

only charging for equipment that was necessary to complete the contract work, once the

bedrock activities were completed. Appellant says it could not make further use of the

equipment during the bedrock operation, because appellant could not reasonably estimate

when the additional work would be completed and when the idle equipment would again be

needed for the base contract work. Appellant, thus, asserts that the equipment was not left

idle simply for appellant’s convenience.

The FS says otherwise. It asserts that the time for completing bedrock work was

easily computable and moreover appellant could have mitigated the costs for the idle

equipment. For purposes of the motion, however, the FS contentions simply set up disputed

facts over material matters. Accepting for now that a differing site condition existed, the

issue before us, as to idle equipment, centers on how reasonable appellant was in holding

the equipment. If appellant’s evidence stands up as to timing of the delay, a lack of

alternative uses for the equipment, and the need for the equipment for follow-on work, then

that, absent credible FS evidence undercutting it, could be sufficient for appellant to prevail.

Thus, appellant has provided enough evidence at this stage to defeat the FS motion. We

need go no further as to this portion of the motion, for to do so would be cumulative. The

FS motion, asking that we should find no entitlement to standby costs, is denied.

As to the law, we point out that a contractor can recover standby costs for equipment

that remains idle as a consequence of the contractor having to deal with the differing site

condition. Whether appellant recovers in this appeal will depend and turn on evidence such

as, but not limited to, what equipment was idle and under what conditions, whether it was

reasonable for appellant to hold the equipment, and whether costs could have been

mitigated.

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Equipment and Labor Rates Used for Calculation (Profit and Overhead)

It appears from the record before us that the parties agree as to the number of hours

of direct bedrock work associated with the differing site condition. Appellant asserts that

during negotiations for payment for that work, the CO informed appellant that the contract

required the use of the FS estimating guide rates for labor and equipment, and that appellant

used those rates to present its claim. Mr. Freeman, appellant’s president, said he was

unaware that the FS rates included amounts for labor burden, profit, and overhead and

considered the rates he submitted to be subject to additional markups. Appellant continues

that its labor costs, when including burden, overhead, and profit were well in excess of the

FS rates set out in the estimating guide.

Notwithstanding the above, the FS concludes that we should grant summary relief,

holding that Freeman cannot get anything more than the estimating guide rates. The FS

provides us no legal basis for that position. Furthermore, there is no claim of accord and

satisfaction or evidence supporting a meeting of the minds. In fact, the amount granted was

granted through a unilateral modification.

Unsuitable Bedding Material

As was the case with the bedrock, the FS issued a unilateral modification paying

appellant for unsuitable material. We find that the actions of the FS in paying the unilateral

modification establishes for purposes of summary relief a prima facie case that appellant

did not cause the problem and is entitled to compensation.

We now turn to the dispute over the amount of compensation here for the bedding

material claim. Appellant claims costs for idle equipment caused by delay during bedding

operation. It also claims costs associated with labor burden, overhead, and profit, which

the FS asserts were included in the payment already made, as derived from the estimating

guide. The issues of equipment delay and the effect of the estimating guide calculations

associated with the unsuitable material involve the same issues, which we earlier addressed

regarding bedrock. We concluded there that the matter was not ripe for summary relief.

That is also the case here.

Change in Backfill Requirements

The issue before us here is a dispute over the amount due. To the extent the FS

argues, as a defense, poor de-watering by appellant, appellant says otherwise, asserting that

it took all reasonable steps to handle the water. The quality of Freeman’s performance is

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therefore a disputed issue. What Freeman has provided to us is adequate for a tribunal to

find in Freeman’s favor. Accordingly, the FS cannot prevail on its motion as to this issue.

This is not a proceeding on the record. It was filed as a motion for summary relief,

and because of that, summary relief standards, and not on-the-record standards, set out the

test for relief. As to the remaining dispute on this item, we have before us a genuine

dispute over the costs incurred and whether appellant was reasonable in incurring those

costs. Appellant has asserted that its accounting records show its costs. The FS has not

claimed otherwise, but instead relies on its own estimates. What we have before us makes

summary relief unavailable here.

Change in Surface Aggregate

Freeman asked for $4982.40 for this work and was paid $2892. Freeman says it

submitted extra work reports which outlined the actual costs associated with Work Order

9, the work order involving this matter. Freeman’s president states in an affidavit that the

change in designated source substantially increased the haul time and required additional

mobilization of the loader. According to Freeman, the FS costs are estimates, whereas

Freeman has a record of actual costs. In the face of this evidence, the FS simply cannot

prevail as to this matter. It has provided us neither a factual or legal basis for its position.

Acceleration

The FS spends several pages of argument on the issue of acceleration. FS counsel

asserts that Freeman delayed commencing work on the project and further charges that

Freeman was behind schedule at the time the bedrock was encountered. Freeman, however,

asserts that it started work on August 17, 2004, in accordance with provisions of the

contract, and moreover asserts that changes as to bedrock and unsuitable material delayed

its ability to perform and complete as intended. It points out that it was running behind its

anticipated schedule because of excusable delays, including a need for flatter slopes at the

trenches, which required added excavation, and because of an error in the original design

quantity for the trench. Clearly the parties disagree as to why the job was late. Resolving

that matter will require additional evidence and require us to resolve disputed material

matters.

The FS also argues in its motion that to the extent Freeman accelerated, it did so as

a volunteer and without notice to the FS. However, Freeman says that it requested

extensions by means of extra work reports which it filed with the FS. It points out that it

set out the overtime in its work reports and believes this was adequate to put the FS on

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notice. In addition, Freeman also says that the FS extended the in-water work only once.

It further claims that work orders 3 and 5 were FS directives and indicated to appellant that

it was to accelerate. In those orders, the FS indicated that “every effort should be made to

complete the remaining work without unnecessary delay.”

Whether the assertions put forth by Freeman will ultimately sustain its claim for

acceleration cannot be determined at this point. The test is not whether we think Freeman

will ultimately prevail on this matter. Rather, we need to decide whether Freeman has

provided enough to us so that, if what it asserts is correct, we could find in its favor. In

considering a motion for summary relief, we cannot try issues of fact, i.e., weigh evidence

or judge credibility, but instead, only determine whether there are issues to be tried.

Anderson, 477 U.S. at 249. The time for weighing evidence comes later. Here, we look

at the evidence provided to us and see if it could sustain the claim. Freeman has met that

for purposes of defending against summary relief on the acceleration issue.

Removal of Unsuitable Excavation

Put simply, we do not follow from the FS motion the exact basis on which the

agency believes we should grant summary relief. It is not our role to puzzle out presented

arguments. Rather, based on what was presented, we conclude that the details of this

portion of the appeal need more development and explanation. That may involve having

parties testify or provide affidavits as to their understandings of the contract and specifically

why the matter is at issue. Based on what we have, however, we will not grant summary

relief.

Interest

The FS states that after receiving the CO’s unilateral modification effective

March 29, 2005 (but dated April 29, 2005), appellant by letter dated May 12, 2005 stated

that it “reserves the right to proceed with a claim for payment for the entire remaining

amount of its claim for differing site conditions and extra work.” Then, by letter dated

January 4, 2006, appellant requested a final decision from the CO on the matters set out in

its May 12 letter. The FS argues that because appellant did not specifically ask for a final

decision until January 4, 2006, that should be the earliest date for running of interest.

The FS is correct that the referenced May 12, 2005, letter does contain wording that

appellant “reserves the right to proceed with a claim for payment.” Had this wording been

all that the letter said, then we may have concluded that the letter itself was not an interesttriggering claim. Wording stating one reserves a right to proceed with a claim (depending

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on context and earlier correspondence) might well be not the same as a demand and

therefore not sufficient to trigger the running of interest under the Contract Disputes Act

of 1978, 41 U.S.C.A. §§ 601-613 (2006) (CDA or Act). However, appellant’s letter of

May 12 says significantly more than simply that appellant reserves the right to proceed with

a claim. The letter responds specifically to the unilateral modification and says:

This letter is in regard to your April 29, 2005 letter and payment invoice. I

appreciate that we will be getting partial payment for the extra work that was

performed last year. In signing your invoice and accepting partial payment

in the amount of $28,365.79, Freeman Contracting Inc. releases its claim only

in that amount. Freeman Contracting Inc. reserves the right to proceed with

a claim for payment for the entire remaining amount of its claim for differing

site conditions and extra work performed on the Forest Service project

Pinnacle Creek Fish Passage, plus interest, attorneys fees and costs. Freeman

Contracting Inc. does not intend to waive any claim regarding any work done

on the above-referenced contract.

The enclosed exhibit A; will show the outstanding principal and interest, less

the amount being paid. After applying your payment, as per Exhibit A, the

principal amount we will claim is $50,744.90. Additionally, we reserve the

right to seek attorney fees we have already incurred and will incur, plus

interest and any costs we incur.

In addition to the above, appellant had earlier filed a letter dated January 31, 2005.

In that letter, which responded to a proposed dollar figure from the FS regarding the extra

work, appellant stated that it disagreed with the FS’s intended compensation for the

differing site condition and other extra work. Appellant attached a breakdown totaling

$63,349.18 to that letter, a sum in excess of what had been offered by the FS.

Entitlement to interest on contract claims is set out in Section 12 of the CDA, 41

U.S.C. § 611. Under the Act, in order to receive interest, there must first be an underlying

claim for quantum. Nab-Lord Associates v. United States, 682 F.2d 940 (Ct. Cl. 1982).

Additionally, for the claim to qualify for interest, it has to be submitted to the contracting

officer. Fidelity Construction Co. v. United States, 700 F.2d 1379 (Fed. Cir. 1983).

The Act does not define the term “claim.” During the early years of the Act, the

absence of a definition for “claim” served as a basis for substantial litigation. However, the

term has now been adequately defined by court and board decisions, so that the parameters

are reasonably well set out and established. A routine voucher, invoice, or other similar

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request for payment is typically not considered a claim, absent circumstances identifying

it as a disputed item for which payment is being sought. In contrast, as set forth by the

court in James M. Ellett Construction Co. v. United States, 93 F.3d 1537, 1542-43 (Fed.

Cir. 1996), for a non-routine submission to be a claim, it must be a written demand or

assertion which seeks, as a matter of right, the payment of money in a sum certain. The

claim must further be submitted to the CO for decision.

It is that last element, submission to the CO for decision, which appears to be the

basis of the FS contention that interest cannot run on appellant’s claim until January 4,

2006, the date appellant specifically asked the CO to render a final decision. The FS ties

interest to such a specific request. Our analysis, shows that the FS view of the law is too

narrow and what constitutes a claim is much broader than that which the FS asks us to

accept in this appeal.

The court in Transamerica Insurance Corp. v. United States, 973 F.2d 1572, 1578

(Fed. Cir. 1992), made it clear that “magic words” were not necessary for a contractor’s

claim to qualify for the start of CDA interest. The Transamerica court spoke of applying

a common sense approach to whether a specific request qualified or did not for the start of

interest. As set out by the court in Contract Cleaning Maintenance, Inc. v. United States,

811 F.2d 586, 592 (Fed. Cir. 1987), “All that is required is that the contractor submit in

writing to the contracting officer a clear and unequivocal statement that gives the

contracting officer adequate notice of the basis and amount of the claim.” A request for a

contracting officer’s decision “can be implied from the context of the submission.” Heyl

& Patterson, Inc. v. O’Keefe, 986 F.2d 480, 483 (Fed. Cir. 1993). As the Armed Services

Board of Contract Appeals stated in Bared and Co., ASBCA 47628, 95-2 BCA ¶ 27,710:

In order to determine whether a contractor implicitly requested “a contracting

officer’s decision” we must look to the “totality of the circumstances.” J.M.T.

Machine Company, Inc., ASBCA No. 29739, 86-1 BCA ¶ 18,684 at 93,944,

recon.denied, 86-2 BCA ¶ 18,917, aff’d, 826 F.2d 1042 (Fed. Cir. 1987).

When we look at the FS motion in light of the above, we find that we cannot grant

the relief requested by the FS. For purposes of deciding whether to grant summary relief,

we find that giving all reasonably favorable inferences to appellant’s letters of January 31,

2005, and March 12, 2005, either or both could be read to constitute a claim qualifying for

interest.

We do note here that the law is clear that determination of the status of a submission

as a claim will often turn on extrinsic evidence and surrounding circumstances and actions.

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The record in this case has not been sufficiently developed to conclude what date is

appropriate nor whether there may even be earlier correspondence qualifying as interesttriggering claims.

Extra Unsuitable Excavation

This portion of the appeal turns on differences as to the meaning of the contract.

The FS says that appellant was obligated to haul off 1338 cubic yards of excavation

material to a disposal site, incidental to its work on Item 206A(02). According to appellant,

the contract indicated that it was to:

[u]tilize all suitable excavated materials as backfill or

embankment. . . . Dispose of all surplus material.

There is no question appellant hauled material. At issue is whether the material that

was hauled was hauled because it was unsuitable, and but for it being unsuitable, it would

not have been surplus. According to appellant, had the material been suitable, it would

have been used for backfill and thus not hauled to the disposal site. Appellant blames the

FS for the condition of the material. Appellant claims it is entitled to the reasonable cost

difference between using the excavated material and being required to haul it. We find that

this issue needs more factual development. Accordingly, we do not grant summary relief.

Decision

The MOTION of the FS FOR SUMMARY RELIEF is DENIED.

__________________________

HOWARD A. POLLACK

Board Judge

We concur:

___________________________

BERYL S. GILMORE

Board Judge

___________________________

ANTHONY S. BORWICK

Board Judge

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