CBCA 3350, 3672 GRANTED IN PART;

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CBCA 4658, 4659 DENIED: September 19, 2017

CBCA 3350, 3672, 4658, 4659

YATES-DESBUILD JOINT VENTURE,

Appellant,

DEPARTMENT OF STATE,

Respondent.

Douglas L. Patin and Thomas Lynch of Bradley Arant Boult Cummings LLP,

Washington, DC, counsel for Appellant.

Thomas D. Dinackus, Office of the Legal Adviser, Buildings and Acquisitions,

Department of State, Rosslyn, VA, counsel for Respondent.

Before Board Judges SOMERS, HYATT, and LESTER.

LESTER, Board Judge.

When W.G. Yates & Sons Construction Company (Yates) teamed with Desbuild

Incorporated (Desbuild) in April 2005 for the express purpose of pursuing a contract for the

construction of a nine-building Department of State (DOS) consulate compound in Mumbai,

India, it seemed like an excellent match between two entities with different types of

construction expertise. Yates was, and still is, a construction contractor (headquartered in

Mississippi) with extensive experience in large and complex construction projects in the

United States. Desbuild, a construction contractor headquartered in Maryland that is headed

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by a native of India, had extensive experience with projects in India and elsewhere overseas,

including but not limited to DOS projects in India. In forming Yates-Desbuild Joint Venture

(YDJV),1 these two companies, which had never previously worked together, hoped that the

combination of Yates’ experience with large complex construction projects and Desbuild’s

ability to navigate the Indian skilled construction labor market and knowledge of qualified

local specialized subcontractors would prove successful. Several months later, in September

2005, DOS awarded YDJV the contract for the New Consulate Compound (NCC) project in

Mumbai.

Unfortunately, the NCC project, which was supposed to take twenty-eight months to

complete, ultimately stretched out to almost six years – three-and-a-half years more than

anticipated. YDJV believes that the extensive delays that it experienced on the project

resulted primarily from property tax disputes between the United States Government (USG)

and the Government of India (GoI), and YDJV blames DOS for not disclosing prior to award

DOS’s knowledge that the GoI, to gain leverage in a lawsuit filed by the City of New York

demanding that the GoI pay real property taxes in New York, might block construction

permits for the NCC project unless and until the USG paid its own outstanding NCC and

other property tax bills – tax bills that dated back to the 1970s. Ultimately, YDJV submitted

a certified claim to DOS seeking payment of $23,802,082.48 as compensation for delays,

while the DOS contracting officer assessed liquidated damages of $11,301,352 against YDJV

for 1192 days of delay beyond the contracted substantial completion date.

Based upon our review of the documentary evidence in these appeals, as well as

testimony presented at a thirteen-day hearing, we find DOS responsible for its failure to

notify YDJV, prior to award, of its well-grounded concerns that the GoI was very likely to

delay the issuance of construction permits to force a coordinated resolution of the City of

New York’s lawsuit and the tax dispute over the NCC property. We also find that there are

other excusable delays – including a change in GoI policy during the construction project that

forced YDJV temporarily to remove workers from India and to await issuance of new entry

visas for those workers – that are not YDJV’s fault and for which DOS cannot assess

liquidated damages.

Ultimately, though, despite the problems that the tax dispute and visa issues created,

responsibility for the bulk of the delays on this project rests with YDJV. It was simply

unable to merge the different types of expertise of its founding partners, Yates and Desbuild,

For purposes of our decision, “YDJV” refers to the joint venture team of Yates and

Desbuild. When referring to either of the individual companies themselves, we refer to

“Yates” or “Desbuild.”

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in a manner that allowed it to find and motivate local workers and subcontractors capable of

performing, and willing to perform in a timely manner, the level and quality of work that the

construction standards applicable to a DOS project require. While Desbuild had completed

several construction projects for DOS in India and elsewhere, none were of the magnitude

of the NCC project. Desbuild had never had to obtain construction permits from the GoI for

any of its past projects, and Desbuild did not recognize the challenges that it would face in

obtaining the level of skilled labor that it would need for a project of this size or the scope

of the permitting efforts that, even without the complications of the tax dispute, it would need

to undertake. Yates, in contrast, did not have any experience in performing either DOS

contracts or international construction work, and it did not recognize the extent of the

challenge that it would face in attempting to transfer its experiences in the United States to

a foreign country that typically applied different construction methods from those under

which Yates normally worked. Although YDJV suggests that the sheer size of its losses on

this project evidences DOS’s responsibility for significant portions of the delays at issue

here, the size of YDJV’s loss is irrelevant to the question of who caused, or is responsible

for, the delays. We find that YDJV’s inexperience in crucial aspects of a project of this size

in India accounts for the majority of the delay here.

Below, evaluating and applying the critical path method (CPM) analyses that the

parties presented at the hearing of these appeals, we assign responsibility for, quantify, and

allocate costs for this project’s delays after making factual findings about the scheduling and

sequence of contract work on this project.2

Findings of Fact

Planning and Solicitation for the Mumbai New Consulate Compound Project

The New Consulate Compound

On April 26, 2005, DOS issued solicitation no. SALMEC-04-R0013 (solicitation

R0013) for the design and construction of the NCC in Mumbai. Joint Stipulations of Fact

(JSF) ¶ 1. The NCC was to serve as a new and additional facility in Mumbai to process an

increasing number of applications from Indian citizens for United States visas. Transcript

(Tr.) Vol. 5 at 223-25. It was to be located in a planned commercial area of Mumbai known

as the Bandra Kurla Complex (BKC) and situated on land that the USG had leased two years

earlier (on September 30, 2003) for a ninety-nine-year term from the Mumbai Metropolitan

We include in an appendix a list of the acronyms that we use in this decision and

their definitions, as well as a list of the individuals and corporate entities that we mention.

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Regional Development Authority (MMRDA), the special planning authority with

responsibility for the BKC. JSF ¶¶ 18- 19; Appeal File, Exhibit 13328.3

The compound was to consist of a perimeter wall and nine major buildings: a new

office building (NOB), a general services office (GSO), a 1350-square-meter warehouse,

Marine security guard quarters (MSGQ), the Consul General residence (CG residence) (with

a 630-square-meter swimming pool and separate pool house), a 488-square-meter utility

building, and three separate Compound Access Control structures (a main compound access

control building (MCAC) through which employees would enter the compound, a consular

compound access control building (CCAC) through which visitors would enter the

compound, and a service compound access control building (SCAC)). JSF ¶ 20. Of those

nine buildings, the NOB was not only the largest, but also the most complex and significant

since, unlike any of the other buildings, it was to house a controlled access area (CAA) in

which classified information was to be processed and stored. JSF ¶ 20; Tr. Vol. 10 at 76-79.

The lease for the land into which DOS had entered with MMRDA in September 2003

stated that the USG “shall before commencing construction submit to the Chief, Town &

Country Planning Division of [MMRDA] for his approval” the plans for the project and that

“[n]o work shall be commenced . . . until the said plans, elevations, sections, specifications

and details shall have been so approved.” Exhibit 13327 at 11446; see JSF ¶ 19.

Pre-Solicitation Planning

In advance of the solicitation, DOS’s Office of Overseas Building Operations (OBO)

requested preparation of an initial planning survey (IPS). The IPS was an internal DOS

document and was not shared with offerors. JSF ¶ 2. This document, dated November 1,

2003, and prepared by DOS’s contractor, Kling Architects, id. ¶ 2, detailed, among other

things, the local procedures that the awarded contractor would be required to follow to obtain

necessary construction permits, as well as the role that MMRDA and another local authority,

All exhibits referenced in this decision are found in the appeal file, unless

otherwise noted. The Department has numbered the pages of the appeal file using a Bates

label which begins “DOS-MUM,” followed by an eight-digit number. For brevity’s sake, we

identify the page only by the one-to-six digit page number. For example, “Exhibit 1 at 1”

refers to the Bates page DOS-MUM 00000001, and “Exhibit 6 at 230” refers to Bates page

DOS-MUM 00000230. Our citation to specific exhibits or testimony should not be

interpreted as meaning that there is no other evidence in the record supporting a specific

factual finding or that have we have relied exclusively upon the cited evidence in making a

finding.

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the Municipal Corporation of Greater Mumbai (MCGM), would play in that process. Exhibit

1494 at 13073.

MMRDA and MCGM are two somewhat separate, though connected, authorities

within the local Mumbai government that are both involved in the issuance of building

permits. MMRDA is a local body within the State Government of Maharashtra that is

responsible for planning and coordinating development activities in the Mumbai

Metropolitan Region and is headed by a Metropolitan Commissioner, who, for the time

periods in this appeal up until August 2007, was Dr. T. Chandrashekhar and, after August

2007, was Mr. Ratnaker Gaikwad. Exhibit 22317. MCGM (or, as it is also known, the

Bombay Municipal Corporation)4 is a separate local body within the State Government of

Maharashtra that possesses authority (including taxing authority) over Greater Mumbai, a

geographical area that encompasses, but is broader than, the Mumbai Metropolitan Region.

MCGM is headed by a Municipal Commissioner, who, for the time periods relevant to this

appeal up until May 2007, was Mr. Johny Joseph5 and, from May 2007 onward, was Mr.

Jairaj Phatak. Exhibit 22277 at 55. Although MMRDA and MCGM were technically two

separate autonomous bodies, the commissioners for both entities were nominated by and

reported to the Chief Minister for the State Government of Maharashtra, and both entities

depend upon the Government of Maharashtra for a certain amount of their budgets. Id. at

45. Accordingly, the Chief Minister for the state had influence over both MMRDA and

MCGM. Id. at 44-45. Although the Chief Minister (a political position) oversaw the State

Government of Maharashtra, he was assisted by the Chief Secretary (a senior civil service

position). Separate and apart from these local and state bodies, the Ministry of External

Affairs (MEA), or “Foreign Ministry,” was a ministry within the national GoI responsible

for the conduct of India’s foreign relations.

The process that the OBO identified in the IPS for obtaining a building permit was as

follows: First, building plans were to be submitted by the project architect to MMRDA.

Exhibit 1494 at 13031. After approving the plans, MMRDA would issue a plinth

Because the city of Mumbai was previously known as Bombay, MCGM is also

known as the Bombay Municipal Corporation. For purposes of this decision, we refer to the

authority as MCGM.

In 2007, Mr. Joseph left his position as MCGM Commissioner and was appointed

Chief Secretary for the State Government of Maharashtra. As we will discuss later in this

decision, Mr. Joseph remained involved in the NCC tax and permitting issues, albeit upon

behalf of the state government rather than the local Mumbai government, after he became

Chief Secretary.

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commencement certificate (PCC) indicating MMRDA’s approval of construction up to, but

not beyond, the plinth level – that is, construction up to the level of a slab-on-grade platform.

Id. The plans would then be forwarded to MCGM’s Deputy Chief Engineer, who would

issue a conditional approval (called an intimation of disapproval (IOD)) subject to conditions

that the contractor would have to satisfy before a certificate authorizing further work (beyond

the plinth level) would be issued. Id. at 13031, 13230. Once those IOD conditions had been

satisfied and the contractor had finished the plinth, MMRDA and MCGM would conduct a

joint plinth inspection and identify any IOD conditions (including payment of property taxes)

that still needed to be satisfied. Id. at 13230. Upon compliance with the IOD requirements,

a further work commencement certificate (FWCC) would be granted by both MMRDA and

MCGM, which would permit the contractor to build a structure upon the plinth. Id. The

contractor would then construct the building and, following a detailed inspection and the

contractor’s compliance with any IOD conditions, MCGM would issue an occupancy

certificate. After water connections had been made, MCGM would issue a building

completion certificate. See Exhibit 1494 at 13230.

Also as part of the planning process, OBO in January 2005 prepared a project analysis

package (PAP). JSF ¶ 3; Exhibit 20535. OBO’s planning manager, Steven Rosenfeld, was

the primary author of this document, with assistance from Kling Architects. JSF ¶ 3; Exhibit

22027 at 34087. The PAP described the project’s scope, schedule, and budget. See Exhibit

20535. Much of the text or information contained in the PAP was to be included in the

request for proposal (RFP). Id. at 22874. Some items were designated to be “copied as is

into the RFP” (denoted with an asterisk as “RFP*”), while other information was flagged to

be “otherwise incorporated or considered to correctly construct the RFP” (denoted without

an asterisk as “RFP”). Id.

As part of the process of drafting the PAP, its authors approached MMRDA and

MCGM to obtain information about the permitting process as it would apply to the NCC.

During discussions, MMRDA and MCGM indicated that they wanted to assist in expediting

the NCC construction process. Exhibit 22027 at 34097. In that regard, they indicated that

they would issue separate permits for early foundations and subgrade work, as well as

authorizing “conditional approvals” of foundation work on “a piecemeal basis” to allow work

to start earlier than it normally would if the regular permitting process were to apply. Id. at

34097-98. In the construction industry, a foundation is something different from, and a

precursor to the laying of, the plinth. Tr. Vol. 6 at 288. Foundation work involves putting

vertical shafts into the ground and pouring concrete on top of them – basically, the

installation of piles and grade beams. Id. Before the plinth (or slab on grade) is poured,

other activities such as plumbing, water, mechanical, and electrical lines underlying it may

first have to be laid – activities that are not necessary merely for laying foundations. Id.

Accordingly, in representing that they intended to issue permits for early foundations and

CBCA 3350, 3672, 4658, 4659

subgrade work, MMRDA and MCGM were referring to a permit different from, and

preliminary to, the PCC that MMRDA typically issued as part of the normal permitting

process.

Section J.3 of the PAP, concerning local permitting requirements, accepted the

MMRDA and MCGM representations and was labeled “RFP,” signifying that the language

contained therein was being suggested for inclusion in the RFP. Exhibit 20535 at 22899.

The proposed RFP language that it provided was as follows:

OBO’s Planning Manager has coordinated with Post, [OBO’s Project

Execution Office (Construction and Commissioning Division)], and the Host

government to identify the specific documentation and processes required to

obtain permits. . . . The host government will accept a permit application for

site work and foundations, and a final submission defining site plan, building

massing, interior fire exiting, toilets, and elevators.

A local registered Architect or Licensed Surveyor must submit the plans for

approval to the MMRDA. Phased submissions will be entertained for site

development and foundations, but substantial interim drawing[s] must specify

the general extent of the project. Drawings showing fire stairs and exiting,

structural design, and life-safety issues are required. MMRDA approved plans

are forwarded to [MCGM], which is the final authority. Conditional approvals

will be issued to expedite foundation construction.

Id. Like the IPS, the PAP was an internal DOS document and was not shared with offerors.

JSF ¶ 3.

II.

Property Tax Disputes with the Government of India

The New York City Tax Dispute

During the Department’s planning for the NCC project, the USG and the GoI were

involved in two separate diplomatic disputes concerning reciprocal property tax obligations.

On April 2, 2003, the City of New York filed suit in the Manhattan State Supreme

Court seeking to recover approximately $4.9 million in unpaid real property taxes, plus $11.5

million in accrued interest, allegedly owed by the Permanent Mission of India to the United

Nations. Exhibit 20182. That suit was removed to the United States District Court for the

Southern District of New York pursuant to 28 U.S.C. § 1441(d) (2012). The complaint

alleged that the Indian Mission, which occupied diplomatic office and residential space in

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a GoI-owned building in Manhattan, had failed to pay property taxes to the City from March

1991 to January 2003. Id. The GoI contended that it was exempt from such taxes pursuant

to the Vienna Convention on Diplomatic Relations, Apr. 18, 1961, 23 U.S.T. 3227, and the

Vienna Convention on Consular Relations, Apr. 24, 1963, 21 U.S.T. 77 (collectively, the

Vienna Convention).6 The GoI wanted DOS’s assistance in resolving the New York City tax

dispute.

The Mumbai Property Tax Dispute

At the same time, there was an unresolved issue concerning whether the USG owed

property taxes on the NCC project site at BKC, as well as other USG properties in Mumbai.

Consistent with the GoI’s argument in its dispute with the City of New York, DOS took the

position that, under the Vienna Convention, the USG was exempt from property taxes on its

consulates. In an internal DOS e-mail message dated October 7, 2004, bearing the subject

line “Mumbai Property Tax Issues,” James Leaf, the Department’s management officer for

the U.S. Consulate General in Mumbai, summarized the issue as follows:

The [USG] owns two properties freehold in Mumbai[,] Lincoln House . . . ,

which contains the Consulate and Consul General’s Residence . . . [and]

Washington House, the Consulate apartment building. . . .

The site of the [NCC] project is located in the [BKC] . . . and was leased from

April 1, 2004. We prepaid the 99-year lease and have an option for renewal.

In addition, in April 1995, the [USG] purchased the American Center building

. . . , which houses Public Affairs, [Foreign Commercial Service], and has two

apartments, but leases the ground underneath from the municipal government,

[MCGM]. . . .

[MCGM] has been sending property tax bills for both Washington House and

Lincoln House requesting payment for taxes in arrears since the beginning of

the 1970 fiscal year (starting April 1, 1970) though the Consulate’s records

date back to only 1994. In addition, the government has been requesting the

payment of property taxes for the American Center back to the beginning of

This dispute would later be the subject of a case before the United States Supreme

Court titled Permanent Mission of India to the United Nations v. City of New York, 551 U.S.

193 (2007), which, after DOS intervened in the matter on remand, was subsequently resolved

in the GoI’s favor in City of New York v. Permanent Mission of India to the United States,

618 F.3d 172 (2d Cir. 2010), cert. denied, 564 U.S. 1046 (2011).

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the 1996 fiscal year (starting April 1, 1996). Some, but not all of the

components of the property tax have been waived by [MCGM]. . . .

The Consulate is also in receipt of a full tax bill for the [NCC site]. A letter

was sent from the Consulate to [MCGM] on September 14 requesting an

exemption from all taxes but a reply has not yet been received.

Exhibit 20558 at 298640 (emphasis added).

Responding from a location within the United States, the Tax and Customs Director

for the Office of Foreign Missions (OFM) within DOS discussed the interrelatedness of the

New York City tax dispute and the Mumbai property tax issues, the potential it had to affect

the NOB project, and the Department’s overall effort to address future similar disputes:

Thanks for the briefing, Jim. . . . It’s very complicated on this end too,

especially since in [New York (NY)] where the City has a restrictive view of

the Vienna Convention rights and doesn’t recognize full property tax benefits

for [United Nations] Missions (State Dept disagrees with their position but we

can’t get them to change it). I’m sure you know that India (along with

Mongolia) has sued NY on the issue and we’re waiting for the Fed[eral]

C[ourt] decision on the Foreign Sovereign Immunities [Act] issues involved.

I think it will be very important to try to address the [NCC] construction

project tax issue as distinct from the property tax quagmire. . . .

....

Frankly, Jim, there’s more at stake here than the $6 million foreign tax

exposure on the Mumbai NOB project. This is the first effort under [DOS’s]

new push for getting our tax relief rights under international law. We’re

including Kathmandu, Mumbai, and Suva on the first trip because the

3 situations are very different, are worth alot [sic] of money, and offer varying

degrees of the likelihood of success. One objective has been to force OBO

[and other DOS sections] to work cooperatively to get it done. . . . The second

objective is to get a couple successes on this trip so we can come back and

show that it’s possible and worth the effort. What we learn on this trip will

help us put together a template for the [Department] to follow on future capital

construction projects – the $100 million in foreign tax exposure is just the

start, and goes up as the building program intensifies in [2007] and beyond.

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Exhibit 20558 at 298639 (emphasis added).

In fact, back in 2003, the United States Embassy in New Delhi, India, had already

indicated its employees’ understanding of the reciprocal nature of its request for tax

exemptions and the GoI’s expectation of the same exceptions for its properties in the United

States. The Embassy had sent a diplomatic note to the GoI’s MEA on September 29, 2003,

requesting expeditious approval for DOS to proceed with the lease for the BKC land and

“ministry confirmation that the acquisition of the land and the land itself will be exempt from

the payment of all taxes, stamp duties, and other charges as provided for in Article 23 of the

Vienna Convention.” Exhibit 14169 at 161951. It expressly recognized the reciprocal nature

of tax exemptions that the GoI would expect for property that the GoI would acquire in the

United States:

The Embassy has been advised that the Government of India is planning to

acquire property in the United States for use as a Cultural Center, and will be

seeking similar assurance that the acquisition of the land and the land itself

will be exempt from payment of all taxes, stamp duties, and other charges

under the same provisions of Article 23 of the Vienna Convention on

Diplomatic Relations.

The Embassy anticipates that such reciprocal exemptions will be granted as

provided under the Vienna Convention on Diplomatic Relations. However,

the responsibility for processing requests for tax exemptions from Foreign

Missions in the United States is vested with the Property Section of the Office

of Foreign Missions (OFM) of the U.S. Department of State.

Id. at 161951-52.

Discussions between the USG and the GoI concerning the property tax issue

continued through the end of 2004. Mr. Leaf met with the then-MCGM Commissioner,

Johny Joseph, on or about October 19, 2004, to discuss an exemption from property tax bills

for the entire NOB project. Exhibit 20219. Mr. Leaf then met with a deputy secretary for

the State Government of Maharashtra on December 22, 2004, regarding tax treatment of the

United States Consulate and the NCC project and, as he indicated in an e-mail message to

the DOS OFM’s Tax and Customs Director and other DOS personnel the next day, “repeated

[the Department’s] request for an exemption from all applicable taxes from the State

Government, including all taxes currently levied by [MCGM].” Exhibit 20188 (emphasis

added). Yet, in a letter from S.G. Shinde, MCGM Assessor and Collector, dated January 28,

2005, titled “Exemption from Property Taxes,” Mr. Leaf was informed that, although foreign

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consulates are typically granted exemptions from some aspects of property taxes, certain

portions “are indispensable.” Exhibit 20219.

Negotiations continued into 2005. An internal DOS email message to Mr. Leaf dated

February 1, 2005, addressed the fact that, before construction of any structures above the

plinth level could occur, MCGM would have to issue a tax “no objection certificate” (NOC),

which, according to a MCGM representative, would occur only if DOS first agreed to pay

the outstanding property taxes for the land on which the NCC was to be constructed:

Following is submitted with regards to Property tax exemption issue related to

BKC land in Mumbai.

....

During multiple meetings with Mr. S.L. Lakeshri (Superintendent, [H/East]

ward of [MCGM], Assessor & Collector office) to gauge implication of non

payment of Property taxes at the time of excavation of [BKC] land. It was

learned that MMRDA is the Principle [sic] body to approve the proposed plan,

hence plan should be approved by MMRDA and a copy of proposed plan

should be submitted to [MCGM] for their information, however a “no

objection certificate (NOC)” certification has to be obtained from [MCGM]

stating that the property tax issue is under review and unsolved. This will

allow the post to complete the project, if [MCGM] does not give the NOC then

post can do construction only till basement level. Only the [MCGM]

Commissioner has powers to give a NOC and . . . also has powers to

reconsider the [amount of the tax].

....

Mr. Lakeshri stated that he will assist the Consulate in getting an approval as

[a] residential/Commercial bldg. only if Consulate assures to pay the property

taxes and the pending bills will be settled in reasonable time frame.

Exhibit 13363 at 23198 (emphasis added). Subsequently, during a March 2005 meeting, the

MCGM representative, Mr. Lakeshri, informed another DOS representative that “under no

circumstances [would it] be possible for [the] USG to get total exemption on property taxes.”

Id. at 23196.

Maintaining the position that the Vienna Convention exempted the USG from

payment of any taxes, DOS officials internally discussed the extent to which non-payment

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of the taxes could negatively affect the NCC project. Exhibit 13363 at 23194-95. In a

March 23, 2005, e-mail message to a DOS negotiator located at the U.S. Consulate General

in Mumbai, the deputy management officer for the United States Embassy in New Delhi,

Gail Cleveland, questioned whether non-payment of taxes by the USG would cause MCGM

to deny issuance of necessary building permits for the Mumbai NCC project:

It’s clear the municipality will keep trying – as you said they’d rather reduce

the [tax] rate and receive something. If we simply don’t pay . . . until this can

be worked via the MEA here, isn’t it likely that we’ll be denied the building

permits we need?

Id. at 23195. In response, the DOS negotiator indicated that he had met with an MMRDA

official to “gauge the consequences” of DOS refusing to pay any taxes and “go[ing] ahead

with the project.” Id. The negotiator explained that, under the local procedures, MMRDA

had limited authority to approve construction above the plinth level; that further construction

required the approval of the MCGM Commissioner; and that, in the event of “any dispute

OR disagreement on tax policy of [MCGM] OR of the host government, we need to [seek

a] NO OBJECTION CERTIFICATE (NOC) from the [MCGM] Commissioner to go ahead

with the project, as only the Commissioner is empowered to do so.” Id. Ms. Cleveland

forwarded the negotiator’s response to (among others) Mr. Rosenfeld, stating that “[t]he tax

issue described in the string of e-mails below has potential to delay the Mumbai N[C]C. We

continue to work the issue.” Id. at 23194.

On the evening of March 23, 2005, Mr. Rosenfeld apprised others at DOS of the

situation developing in Mumbai:

This just in. It appears the City of Mumbai has been trying to collect taxes

from the consulate since 1970 and, of course, the consulate has never paid.

The post received a tax bill on the first six months of ownership on the site for

$333,333±, which they have also ignored. Our position is that the city’s

position is in violation of the Vienna Convention, but they have not stopped

sending bills.

The permitting authorities – MMRDA and the [MCGM] – have been big

supporters of this project and are, I believe, independent of the city on this

development. Post has just shared this problem with us and while it is a risk,

I think it will be resolved or moot prior to any need to secure a building

permit. This issue never came up in any of our conversation[s] with the

MMRDA or the [MCGM]. They may have been being polite, but it was never

raised.

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Exhibit 13363 at 23193-94 (emphasis added).

Ms. Cleveland responded by e-mail message the next morning, stating that DOS “has

never paid the tax bills on the current consulate,” but that, “[o]n the new consulate” that was

to be constructed, DOS “did not just ignore the bill, but went to speak with the relevant

authorities who have lowered the bill, but refuse to acknowledge our exemption under the

Vienna Convention.” Exhibit 13363 at 23193. She indicated that MCGM “apparently will

lower it even further – they just want to get something out of us, which it would be a mistake

to pay” because of the precedent that it would set. Id. Mr. Rosenfeld responded that DOS’s

“only interest is that we get the building permit without a delay, . . . but you are right in not

paying.” Id.

On April 25, 2005, the day before the solicitation for the NCC was issued, the

Consulate General’s office in Mumbai sent a letter (signed by Mr. Leaf) to the Secretary and

Chief Protocol Officer for the State Government of Maharashtra in Mumbai, asking the

Government of Maharashtra to “exempt all USG properties from all taxes under provision

of Vienna Convention (Article 32).” Exhibit 14169 at 161941-42. Mr. Leaf sent another

letter, requesting a response to the first, on June 8, 2005. Exhibits 14169 at 161944, 22165

at 253412. No response was received.7

Then, on July 5, 2005, the Officer-in-Charge of the United States Embassy in New

Delhi met with, among others, the MEA Chief of Protocol to discuss various outstanding tax

issues associated with several properties and projects, including DOS’s request for tax relief

for the NCC. Exhibit 20535. The MEA protocol chief represented that, because of the

taxation problems at the GoI’s United Nations mission in New York, MEA “could not give

a favorable answer” to DOS’s request for tax relief for the NCC. Id. at 336601. Although

the Officer-in-Charge argued that it was inappropriate to link the NCC taxes to the New York

City tax dispute and that DOS, as part of the Federal Government, could not control the

actions of a city or state government, MEA indicated that it would not offer relief or

assistance on the NCC tax issues until and unless DOS acted to resolve the New York tax

dispute. Id. at 336602.

In fact, more than a year later, still with no response to those letters, the U.S.

Consulate General’s office in Mumbai sent another letter on September 12, 2006, seeking

a response. Exhibit 14169 at 161946.

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III.

Solicitation and Pre-Contract Matters

As discussed above, DOS issued solicitation R0013 for the design and construction

of the NCC on April 26, 2005. JSF ¶ 1. Before the solicitation was issued, Mr. Rosenfeld

did not amend the PAP to reflect any concerns about the potential effect of tax disputes on

the GoI’s issuance of permits, and OBO did not include any information in the solicitation

about those concerns.

YDJV, having formed as a joint venture entity in April 2005 for the express purpose

of pursuing DOS overseas projects and, in particular, the Mumbai NCC project, JSF ¶ 4,

submitted a proposal in response to the solicitation. In its proposal, YDJV acknowledged

that, if awarded the contract, it would be solely responsible for providing complete design

and construction services for the Mumbai NCC, including management, professional design

services, and construction necessary to meet the contract requirements within established

schedules. Exhibit 1531 at 173806. YDJV also represented that its team would prepare a

project execution schedule, a design submittal schedule, and a master summary schedule for

the project, each of which YDJV would maintain and update every month. Id. at 173812.

It also represented that it would compile and maintain an as-built project schedule to reflect

actual work performance, as well as numerous other schedules, all of which would be

prepared and maintained using P3 software from Primavera Corporation. Id.

From May 25 to 27, 2005, DOS held a pre-proposal conference for prospective

offerors in Mumbai. Exhibit 20319. Two representatives from Yates (Frank Mitchell and

Larry Harrington) and two representatives of Desbuild (Ananth Badrinath and Yogesh Hate),

attended that conference upon behalf of YDJV. As part of that conference, the YDJV

representatives met with MMRDA representatives, who discussed zoning, licensing, and

clearance requirements that might affect the winning bidder. Exhibit 1500. The MMRDA

representatives also explained the permitting process, including a requirement that a local

architect be involved in submitting the permit applications, but indicated that permits would

not be a problem on the project. Tr. Vol. 4 at 15; Exhibit 1500. The record does not indicate

whether, or to what extent, MMRDA said anything about whether it would grant conditional

approvals for foundation work prior to issuance of official foundation permits. YDJV also

met with MCGM representatives, who similarly discussed rules and regulations pertaining

to construction projects, water, and sewage. Exhibit 1500 at 176426. Neither OBO,

MMRDA, nor MCGM mentioned any tax or anticipated permit problems during the preproposal conference. Tr. Vol. 4 at 14-16.

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IV.

The Contract

On September 27, 2005, DOS awarded to YDJV contract no. SALMEC-05-C0039 for

the design and construction of the Mumbai NCC at a firm-fixed price of $86,881,576. JSF

¶ 15. The contract required completion of the project within twenty-eight months of the

issuance of the first of five limited notices to proceed (NTPs), the first one relating to design

work. Exhibit 1 at 1, 21, 31; JSF ¶ 15.

The contract price included all work necessary for the project, including “permits,”

as follows:

The Contract Price includes all labor, materials, equipment and services

necessary to accomplish the design and construction required by the Contract

Documents, including applicable customs duties, transportation to the site,

storage, premiums for insurance and bonds required by the Solicitation

Documents and/or the Contract Documents, permits, licenses and inspection

fees, and all other items called for by the contract or otherwise necessary for

performance of the contract.

Exhibit 1 at 14 (clause B.1.1). The contract indicated that “[n]o additional sums will be

payable on account of any escalation in the cost of materials, equipment or labor, or because

of the contractor’s failure to properly estimate or accurately predict the cost or difficulty of

achieving the results required by the contract.” Id. at 16 (clause B.3). Changes in the

contract price or time to perform were to “be made only due to changes made by the

Government in the work to be performed, or by delays caused by the Government.” Id. The

contract language expressly advised the contractor “that the [USG] has no agreements with

the Host Nation Government excluding any tax, including but not limited to Value Added

Tax,” id. at 14 (clause B.1.3), but did not disclose that there was an outstanding, and

unresolved, dispute about whether the USG owed property taxes relating to the project site.

JSF ¶ 16.

A clause titled “Permits and Licenses” (the P&L clause) in section C.1.6.1 of the

contract’s Statement of Work specified that it was YDJV’s responsibility to obtain all

necessary permits and licenses related to the project, but also incorporated information from

the PAP about MMRDA’s willingness to issue “conditional approvals” for foundation work,

prior to issuance of official foundation permits, to assist in expediting foundation

construction:

The Contractor is responsible for obtaining all permits (such as building,

utility, construction, occupancy), developing studies (such as Environmental

CBCA 3350, 3672, 4658, 4659

Impact Statement and Traffic Impact Study) and licenses required to execute

the work. The Contractor shall provide all drawings and other design

documents needed to obtain those permits and licenses for which they are

responsible, as well as official translations as required to execute those permit

actions. The host government will accept a permit application for site work

and foundations, and a final submission defining site plan, building massing,

interior fire exiting, toilets, and elevators. A local registered Architect or

Licensed Surveyor must submit the plans for approval to the [MMRDA].

Phased submissions will be entertained for site development and foundations,

but substantial interim drawings must specify the general extent of the project.

Drawings showing fire stairs and exiting, structural design and life-safety

issues are required. MMRDA approved plans are forwarded to the [MCGM],

which is the final authority. Conditional approvals will be issued to expedite

foundation construction.

Exhibit 2 at 100 (emphasis added). That clause also required the contractor to “submit a list

of drawings to the [contracting officer’s representative] for approval prior to releasing

drawings to local permitting and/or licensing agencies for any permits,” with an added

requirement (for security purposes) that all drawings be “labeled by generic terminology (e.g.

office, restroom, mechanical space).” Id.

Relatedly, the contract incorporated by reference the clause at Federal Acquisition

Regulation (FAR) 52.236-7, “Permits and Responsibilities (Nov 1991)” (the P&R clause).

Exhibit 1 at 85. That clause, in relevant part, further prescribed the contractor’s obligations

for obtaining required permits:

The Contractor shall, without additional expense to the Government, be

responsible for obtaining any necessary licenses and permits, and for

complying with any Federal, State, and municipal laws, codes, and regulations

applicable to the performance of the work. The Contractor shall also be

responsible for all damages to persons or property that occur as a result of the

Contractor’s fault or negligence. . . .

48 CFR 52.236-7 (2005).

The contract, through clause H.25, also provided that the Government could, in its

sole discretion, choose to undertake to provide additional services upon behalf of the

contractor – beyond those that the Government was contractually obligated to provide,

including but not necessarily limited to assistance in obtaining tax exemption licenses and

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permits – but that any such extra-contractual effort or assistance would not shift the

contractor’s obligations to the Government:

H.25 OTHER SERVICES NOT TO RELIEVE CONTRACTOR

In the interest of expediting the project, the Government may, in its sole

discretion, undertake to provide additional services for or on behalf of the

Contractor which are not required of the Government under this contract, such

as assisting the Contractor in obtaining customs clearances other than those for

which the Government is responsible, tax exemptions, licenses, permits and

approvals from local governmental authorities. However, the Government

shall be under no obligation to do so, and neither the provision nor the failure

to provide such services nor the manner in which such services are provided

shall relieve the Contractor of or excuse the Contractor from any of its

responsibilities under the contract.

Exhibit 1 at 61.

In addition, the contract included a clause that placed upon the contractor the burden

of complying with all laws, codes, and ordinances of the host country:

H.19 LAWS AND REGULATIONS

H.19.l The Contractor shall, without additional expense to the Government,

be responsible for complying with all laws, codes, ordinances, and regulations

applicable to the performance of the work, including those of the host country,

and with the lawful orders of any governmental authority having jurisdiction.

Host country authorities may not enter the construction site without the

permission of the Contracting Officer. Unless otherwise directed by the

Contracting Officer, the Contractor shall comply with the more stringent of the

requirements of such laws, regulations and orders and of the contract. In the

event of conflict among the contract and such laws, regulations and orders, the

Contractor shall promptly advise the Contracting Officer of the conflict and of

the Contractor’s proposed course of action for resolution by the Contracting

Officer.

Exhibit 1 at 59 (emphasis added).

Clause E.2 of the contract defined when “substantial completion” of the project would

be considered to have been reached:

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“Substantial Completion” means the stage in the progress of the work as

determined and certified by the Contracting Officer or Contracting Officer’s

Representative in writing to the Contractor, on which the work or a portion of

thereof designed by the Government is sufficiently complete and satisfactory,

in accordance with the requirements of the Contract Documents, that it may be

occupied or utilized for the purpose for which it is intended, and only minor

items such as touch-up, adjustments, and minor replacements or installations

remain to be completed or corrected which (1) do not interfere with the

intended occupancy or utilization of the work, and (2) can be completed or

corrected within the time period required for final completion.

Exhibit 1 at 21. It further defined the “Date of Substantial Completion” as the “date

determined by the Contracting Officer or Contracting Officer’s Representative of which

substantial completion of the work has been achieved,” with the added caveat that the

contractor, to achieve substantial completion, would have to “complet[e] certain general

construction work as identified in Section J, Attachment J.1.12, CONTRACTOR

ACCREDITATION WORKSHEET, at a minimum of thirty days prior to substantial

completion.” Id. (clause E.2.2.). That accreditation worksheet required approval of the

completed exterior physical security, interior physical security, telecommunications

operations facilities, shielded enclosures and parent rooms, roof-mounted communications

support equipment, emanations security, telecommunications cabling systems, non-secure

telephone systems, and electrical systems. Exhibit 17.

The contract also incorporated the “Liquidated Damages” clause at FAR 52.211-12

and granted DOS the right to impose liquidated damages of $9481 per day for

contractor-caused delays in completion of the project. Exhibit 1 at 31 (clause F.3). It further

provided that “[l]iquidated damages will be assessed from the completion date indicated in

the contract . . . to the date that substantial completion is actually achieved by the Contractor,

as determined by the Contracting Officer.” Id. at 35 (clause F.12). It further provided that,

given that the contract “consists of multiple phases, projects, or buildings, the liquidated

damages rate will be prorated on the ratio of the estimated price of each phase, project or

building to the Contract Price unless otherwise provided in the Contract Documents.” Id.

Nevertheless, the contract also provided that YDJV would “be allowed time, not money, for

excusable delays as defined in FAR 52.249-10, Default,” including but not limited to acts of

God, acts of the host country government in its sovereign capacity, fires, floods, and

unusually severe weather. Id. at 32 (clause F.9) (emphasis added).

The contract incorporated by reference the “Changes (Aug 1987)” clause at FAR

52.243-4, the “Changes and Changed Conditions (Apr 1984)” clause at FAR 52.243-5, and

the “Suspension of Work (Apr 1984)” clause at FAR 52.242-14. See Exhibit 1 at 91, 93. It

CBCA 3350, 3672, 4658, 4659

also contained a special “Equitable Adjustments” clause (clause H.31.1) indicating that

“[a]ny circumstances for which the contract provides an equitable adjustment, that causes a

change within the meaning of paragraph (a) of the ‘Changes’ clause shall be treated as a

change under that clause.” Id. at 63.

Performance

Period 1 (Contract Award through September 30, 2007): 362 Days of Delay

Initial Preparations

Having awarded the contract to YDJV on September 27, 2005, DOS issued the first

limited NTP on November 17, 2005, and the contract completion date was set for March 16,

2008. JSF ¶ 15; Exhibit 13378 at 173915.8

Under its original schedule, YDJV planned to submit 35% design drawings to DOS

(as required by its contract) no later than February 13, 2006, and to submit 100% design

drawings no later than June 26, 2006. Exhibit 31000-A at 349. YDJV viewed the

submission of the 35% drawings as a “precursor” to approaching the local GoI authorities

for any construction permits. Exhibit 13387.9 Further, under the original plan, YDJV

anticipated beginning to lay foundations on June 27, 2006, immediately after completing the

100% drawing design work. Exhibit 31000-A at 354. YDJV did not build into its baseline

schedule time for applying for or obtaining construction permits. Tr. Vol. 7 at 54.

YDJV did not submit the 35% drawings until March 10, 2006, Exhibit 10145, a delay

of twenty-five days under its “as planned” schedule, and it did not submit (and was not ready

to submit) any permit applications by that date. DOS promptly reviewed those applications.

DOS subsequently issued four more limited NTPs before issuing the final and full

NTP on June 12, 2006. Exhibit 13453; see Exhibits 13438, 13452.

Although the contract did not expressly require that permit applications be delayed

until submission of 35% drawings, Tr. Vol. 10 at 62-64, the GoI permit process required

submission of certain drawings as part of the permit application, essentially making drawing

and design review a precursor to permit application.

CBCA 3350, 3672, 4658, 4659

The PCC Authorizing Plinth Construction

While preparing its 35% drawings, YDJV began contemplating applying for

construction permits. In a meeting on March 20, 2006, YDJV asked its foundations

subcontractor, Shapoorji Pallonji & Co., Ltd. (Shapoorji), immediately to begin the permit

application process. Exhibit 13425. In a confirmation letter the next day, YDJV recognized

that permit application was “a time consuming and lengthy process which can adversely

impact the completion of the Project.” Id. at 352405. Accompanying YDJV’s letter was

another letter that YDJV had obtained from the U.S. Consulate General for use in the permit

application process, asking relevant authorities to process any permit applications that

Shapoorji submitted as expeditiously as possible. Id. at 352405-06.

Shapoorji hired a permit firm, Vartak & Sons Pvt. Ltd. (Vartak), to submit the YDJV

permit applications. Vartak submitted an application to MMRDA on May 11, 2006

(apparently, as a resubmission following earlier letters in April 2006), for a permit to erect

some temporary structures on the NCC site and to perform other site work, including

construction of a perimeter wall. Exhibits 13455, 13460. MMRDA, after Vartak paid

mandatory development fees that it had initially failed to include with its request, issued that

permit on June 26, 2006. Exhibits 13450, 13460. YDJV had already begun the temporary

structure erection and perimeter wall pile driving before it applied for the permit, Exhibits

900, 901, and all temporary structures were erected before the permit was actually issued.

Exhibit 902. Vartak did not seek permission to construct foundations in its April submissions

or May 11 application.

Vartak did not submit any further applications until August 1, 2006, at which point

it submitted two separate letters titled “The proposed new U.S. Consulate Complex,” one

addressed to MMRDA and one addressed to MCGM, attaching what it described as “detailed

building plans” of the “various permanent structures/buildings proposed” for the NCC and

requesting that MMRDA and MCGM “issue us at your earliest, your formal

sanction/approval to the proposed works as shown on the plans.” Exhibits 20664, 20665.

The letters did not expressly mention either foundations or plinths for the buildings, making

it unclear whether Vartak intended through these letters to obtain a PCC, which was required

under MMRDA and MCGM regulations before a FWCC could be issued, or full FWCCs for

the entire project.10 Regardless of any ambiguity in the letters, they plainly did not request

Although the parties have presented evidence about whether both MMRDA and

MCGM needed to issue PCCs to allow for plinth construction, YDJV completed its plinth

work before MCGM ever issued a PCC, and MCGM never took any action against YDJV

for having performed plinth work without an MCGM PCC. To the extent that YDJV was

CBCA 3350, 3672, 4658, 4659

a permit limited to foundations or something less than plinth construction, the phased

issuance of permits (except to the extent that Vartak was possibly seeking a PCC prior to

seeking a FWCC), or conditional approvals of foundation construction.

Despite the absence of a foundation permit or a PCC, YDJV began the process of pile

drilling (using augers, or hydraulically-operated piling drill machines) for the NOB

foundation on or about August 9, 2006, Exhibit 912, a delay from YDJV’s planned

commencement of pile installation at the NOB of June 27, 2006.11 At this point, creating the

footprint of the NOB was the critical item, on the critical path of performance, that needed

to proceed if YDJV was to complete the project in the time frame that it had anticipated. Tr.

Vol. 1 at 29, 85.

On September 22, 2006, MMRDA, unaware that YDJV was already beginning pile

work, responded to Vartak’s permit application, returning the submittal because, among other

noted deficiencies, Vartak had failed to attach the actual permit application (known as

Appendix X) to its submission. Exhibit 311. MMRDA also indicated that the application

was unaccompanied by any of the NOCs or certificates that are required for a PCC (including

those from the Mumbai electric, police, fire, airport, river protection, environmental, and

urban planning departments) and did not contain plans of all of the structures or of walkways,

canopies, projections, and porches. Id. Vartak took no action in response before resigning

from the project on November 9, 2006. Exhibit 312; see Exhibit 317 (YDJV acknowledging

that it had requested Vartak’s resignation because of “the inordinate length of time that had

transpired to submit the required permit documentation, and the incompleteness of the permit

application”).

seeking a PCC from MCGM, it is irrelevant to the circumstances of YDJV’s work on this

project.

YDJV has argued in its briefs that there was only negligible delay to its planned

late start date of June 27, 2006, for commencing pile installation because it began pile

installation at the warehouse (despite the absence of a foundations permit or a PCC) on July

1, 2006. The original plan, though, was to begin pile installation at the NOB, not the

warehouse, on June 27. The NOB was on the critical path at this point in time, and the

warehouse was not. For reasons that we will explain below, we reject YDJV’s argument that

work on a non-critical item, outside the context of its planned schedule, somehow negates

the delay to the critical NOB item. Further, even YDJV’s own scheduling expert has

attributed the delay in beginning NOB piling (from June 27 to August 9, 2006) as a critical

path delay. Tr. Vol. 7 at 50.

CBCA 3350, 3672, 4658, 4659

At about the same time, YDJV informed Shapoorji, its foundations subcontractor, that

Shapoorji would not receive any further subcontracts from YDJV for additional construction

work on the NCC project. Exhibit 13508. Shapoorji had assisted YDJV in preparing its

proposal for the project and had anticipated that it would serve as YDJV’s primary

subcontractor throughout contract performance. Nevertheless, YDJV informed Shapoorji

by letter dated September 22, 2006, that it found Shapoorji’s price for the remaining

construction work too high and was going with a lower-priced subcontractor, Larsen &

Toubro, Ltd. (L&T). YDJV also complained that it was dissatisfied with Shapoorji’s poor

management and staffing of the project for the work currently being done and that, although

it had been asking Shapoorji to hire an experienced project manager for the past five months,

Shapoorji had taken no action to do so. Id. at 352395. Nevertheless, YDJV directed

Shapoorji to continue its work to complete the perimeter wall and piling for the NOB, the

GSO, and the warehouse, as well as to obtain any remaining permits. Id. YDJV indicated

that, at that point in time, it expected the perimeter wall to be completed by October 5, 2006,

and piling work completed by October 15, 2006, id., deadlines that were not met.

As of September 29, 2006, YDJV was reporting a 76-day delay in the project schedule

and that it anticipated continuing slow progress until its new subcontractor, L&T, mobilized

on November 6, 2006. Exhibit 919, 923.

On or about November 16, 2006, Shapoorji hired a new firm, Design Cell, to replace

Vartak as its permit expediter, essentially restarting the entire permit application process

following Shapoorji’s finding (after visits to MMRDA and MCGM) that Vartak had

performed very minimal work. Exhibits 311, 313, 13570; Tr. Vol. 12 at 62.

On or about November 19, 2006, YDJV decided to impose a two-week “stand-down”

on work at the site to allow L&T “to gather workforce and machinery.” Exhibit 927.

Subsequently, MMRDA became aware that YDJV was performing NOB pile and

foundations work without a permit. In a meeting on November 28, 2006, during YDJV’s

“stand-down” period, the MMRDA Commissioner, Dr. T. Chandrashekhar, told

representatives of YDJV (Tom Milos, who was then serving as YDJV’s project manager),

Design Cell (Paritosh Parelkar), and OBO (Robert Browning, the OBO project director) that

the NOB work which YDJV was doing was illegal and verbally told YDJV to shut down its

construction operation until it had obtained a PCC. Exhibit 13582.12 Mr. Milos quickly

informed the owners of YDJV, Ananth Badrinath and William Yates (both of whom were

Dr. Chandrashekhar also informed the then-Consul General that there would be

“some serious problems” if YDJV did not stop work until it had a PCC. Tr. Vol. 9 at 29.

CBCA 3350, 3672, 4658, 4659

located in the United States), of the meeting and indicated that, even though MMRDA had

not issued a formal stop work order, he interpreted the absence of such a written order as a

means of “giving [YDJV] an out” because, if a formal stop work order were issued, “it would

be accompanied by fines” that likely would exceed $1.5 million and would have to be paid

by cashier’s check before any work on the project could resume. Id. Mr. Milos

recommended to Messrs. Yates and Badrinath that, even though the action could result in

claims from subcontractors, YDJV immediately stop all project work (other than some

compound perimeter wall backfilling unrelated to the NOB construction) until the PCC could

be obtained, a process that Design Cell had indicated should take approximately five weeks.

Id. YDJV management, including Jeff Cross (the YDJV employee in the United States who

had “overall responsibility for the project,” Tr. Vol. 6 at 184-85), rejected Mr. Milos’

recommendation, even after being told that Design Cell intended to walk away from the

project if YDJV violated the MMRDA Commissioner’s instruction and after a plea from

another YDJV on-site manager, Tom McKenney, regarding the ramifications to the USG

(including fines upon the USG in excess of $1 million) and to YDJV if YDJV did not stop

operations until obtaining the PCC. Exhibits 13586, 13587.

After learning that YDJV intended to continue performing piling and foundation work

despite the MMRDA Commissioner’s admonition, the DOS contracting officer, David

Vivian, issued a letter on November 29, 2006, directing YDJV to “bring [its] performance

in line with the contract and the regulations of the host Government” and, “[t]o that end, . . .

to stop all construction activities on the New Consulate Compound that violates [sic] the

contract and the local authority’s regulations.” Exhibit 315. In response to that letter, YDJV

stopped NOB piling and foundation work, and Mr. Badrinath indicated to the OBO

contracting officer and the OBO project manager that, “upon realizing the adverse impacts

of continued work in the field,” it had ceased piling and grade beam work pending receipt

of appropriate permits. Exhibits 316, 317; Tr. Vol. 4 at 30.13

Despite Mr. Badrinath’s representations, Jeff Cross of YDJV subsequently wrote

a letter to the DOS contracting officer on December 18, 2006, stating that, although YDJV

had stopped work in response to what he called the “stop work order,” YDJV retained its

right to seek compensation for the suspension of work. Exhibit 13607. Mr. Cross identified

YDJV’s understanding that MMRDA was supposed to issue phased permits or, at least,

conditional approvals to expedite foundation construction, and he represented that, by

submitting drawings through Vartak in June 2006 for a site work permit, YDJV had provided

MMRDA with the information that it needed to issue such permits and approvals. Id. Yet,

Vartak had not requested phased permits (except to the extent a PCC constitutes part of a

“phased permit” process), foundations permits, or conditional approvals in its submissions.

Further, YDJV was aware that issuance of foundations permits or conditional approvals for

CBCA 3350, 3672, 4658, 4659

Design Cell submitted Appendix X to MMRDA on or about December 15, 2006,

Exhibit 318, and submitted signed drawings on January 5, 2007. Exhibit 13615. On January

19, 2007, MMRDA returned the submittal to Design Cell, noting several deficiencies, the

most important being a floor-to-floor height issue that, if not modified, would cause the

project to exceed a square-meter limit imposed by the Mumbai Development Control

Regulations. Exhibit 324. Those regulations required that, if a building was to have a floorto-floor height of more than 4.2 meters, there had to be an environmental impact study

analyzing it (a requirement that did not exist for buildings with lesser floor-to-floor heights).

The OBO Standard Embassy Design, which was available to offerors during the bidding

process, required a certain amount of space between floors in DOS buildings to

accommodate various security and other equipment located in mechanical spaces between

the floors, Exhibit 28 at 1012, and the planned height of the NOB was sufficient to require

such a study. Although YDJV was contractually responsible for any necessary

environmental impact studies, Exhibit 2 at 100 (clause C.1.6.1), it had not arranged for such

a study to support the floor-to-floor height requirements of the NOB.

On February 15, 2007, YDJV representatives met with OBO’s David Louh, a senior

OBO employee who traveled from Washington to Mumbai, to discuss progress on the project

and the permit process. At that meeting, Mr. Louh directed YDJV to proceed with any work

that was legal prior to receipt of a PCC, including under-slab utilities, rebar, and formwork

preparation and fabrication. Exhibit 13819 at 209896; Tr. Vol. 1 at 68. Also at the February

15 meeting, Mr. Louh suggested that YDJV ask MMRDA for a “foundations only” permit,

Exhibit 13819 at 209895, something that YDJV had not previously done. Later that day,

YDJV met with Pravin Malkani, a director of Design Cell, and asked him formally to seek

a foundations permit from MMRDA. Exhibit 20413. In response, Mr. Malkani submitted

a letter to MMRDA, dated February 15, 2007, asking whether MMRDA might issue a

“‘Plinth Certificate’ i.e. A plinth commencement certificate” for the NCC to allow YDJV “to

undertake and complete all sub ground works such as foundation and allied services” before

MMRDA had approved the submitted building plans. Exhibit 20402. Although this letter

did not specifically ask for a “foundations only” permit, we interpret it as seeking conditional

approval to allow foundation work.

foundations was contingent upon submission of a proper request. See Deposition

Designation of Frank Mitchell, Vol. II, at 209 (acknowledging requirement to seek a

construction permit, but that “[f]oundations could be started,” following MMRDA approval,

“with the correct information”). On December 19, 2006, the DOS contracting officer

responded to Mr. Cross’s letter, stating that he “did not issue a Stop Work Order” and

indicating that he was simply trying to preclude the Government from being “fined for the

contractor’s violation of host nation laws and regulations.” Exhibit 321.

CBCA 3350, 3672, 4658, 4659

On February 16, 2007, YDJV, in response to Mr. Louh’s February 15 suggestion,

began installing underground utilities and performing backfill and rebar bending, despite the

fact that MMRDA had not issued a PCC. Design Cell submitted new drawings to MMRDA

on February 23, 2007, that resolved the height and environmental clearance issues. Exhibits

329, 13676.

On March 1, 2007, YDJV wrote a letter to Mr. Malkani asking him to submit a formal

written request to MMRDA seeking a foundations permit. Exhibit 20413. Mr. Malkani

responded by letter the next day, stating that, in Design Cell’s opinion, MMRDA regulations

did not provide for a “foundations only” permit and that, “if this needs to be followed up with

MMRDA[,] your clients can call on them and ask them directly in this regard.” Exhibit

20414. Mr. Malkani also testified that he contacted some MMRDA employees who told him

that there was no provision in law allowing for foundation work prior to approval of building

plans. Deposition Designation of Pravin Malkani, Vol. I, at 133-34.

Nevertheless, only four days later, on March 6, 2007, MMRDA verbally approved

Design Cell’s request to start foundations, Tr. Vol. 10 at 143-48, and YDJV began working

on structural concrete that day. There was some subsequent confusion regarding the scope

of the written permit that was subsequently issued – MMRDA first issued an “excavation

only” permit on March 8, Exhibits 13726, 13730, rather than a full foundation construction

permit or a PCC, after YDJV had paid the development fee necessary for such a permit,

Exhibit 942 – but that confusion did not cause further delay because YDJV, despite the

absence of a full PCC, directed its subcontractors to perform all piling and other work up to

the ground floor slab of the NOB. Exhibit 13726; Tr. Vol. 1 at 68, 126. YDJV placed its

first slab for the NOB on or about March 24, 2007. Tr. Vol. 1 at 69.

On March 31, 2007, as a result of a newspaper article discussing the United States’

repeated efforts to obtain tax exemptions under the Vienna Convention, YDJV first became

aware that there were unpaid taxes and a tax dispute involving the NCC property. Exhibit

13763; Tr. Vol. 4 at 32-33. YDJV immediately recognized that the dispute would likely

affect its permit process. Exhibit 13762.

MMRDA provided its formal written approval, through issuance of a PCC, on

April 12, 2007. Exhibit 20427. At the hearing of these appeals, YDJV presented evidence

about subsequent efforts of its permit expediter, Design Cell, to obtain a corresponding PCC

from MCGM, but the MCGM PCC was never issued. Tr. Vol. 1 at 113-21. To the extent

that Design Cell devoted time and energy to that effort, neither that failed effort nor the

absence of a MCGM PCC delayed the project because YDJV went ahead and performed all

of the plinth work at the NOB, and later at the other compound buildings, despite the absence

of a PCC from MCGM. Id. at 125, 126.

CBCA 3350, 3672, 4658, 4659

In the PCC that it issued on April 12, 2007, MMRDA stated that, before it would issue

a FWCC authorizing vertical construction of any of the NCC buildings, there first would

have to be a joint inspection of the plinth for each building by both MMRDA and MCGM.

Exhibit 20427. YDJV’s ability to schedule a plinth inspection was delayed because of the

slow performance of the new lower-priced subcontractor that YDJV had hired, L&T.

Tr. Vol. 1 at 126. The plinth for the NOB was not completed until June 29, 2007, Exhibit

13087 at 9796-97, and YDJV’s architect did not request the NOB plinth inspection until

July 18, 2007. Exhibit 14030. MMRDA and MCGM conducted the joint inspection of the

NOB plinth, as well as of the warehouse plinth, twelve days later (on July 30, 2007).

Exhibits 6520, 14040, 21175 at 25693; Tr. Vol. 4 at 150. The NOB and warehouse plinths

were the only two plinths that were ready for inspection at that time. The tax issue did not

affect the NOB or warehouse plinth inspections. Tr. Vol. 1 at 125, Vol. 8 at 6.

The FWCC Authorizing Vertical Construction Above the Plinth

MMRDA’s issuance of the PCC permitted YDJV to perform, legally, construction

work for all nine buildings in the NCC up to and including the plinth level. Exhibit 331; Tr.

Vol. 1 at 81-82; Tr. Vol. 10 at 154. Before YDJV would be able to build structures on and

above the plinth, it would need to obtain FWCCs from both MMRDA and MCGM. Several

actions would have to occur before either MMRDA or MCGM would issue a FWCC.

To obtain the MMRDA FWCC for any particular building, YDJV would first have

to obtain a joint plinth inspection, and approval, of the plinth for the building at issue by both

MMRDA and MCGM. Exhibit 13839. In addition, YDJV would have to provide MMRDA

with certain documents, including, but not limited to, an NOC from the Mumbai Police

Commissioner. Exhibit 331 at 7048; Tr. Vol. 1 at 136.

The MCGM would issue its own FWCC only after MMRDA had first issued its

FWCC. In addition, the applicant would have to satisfy several additional prerequisites,

including, among others, (1) submission of a NOC from the Civil Aviation department

approving the proposed height of the building, and (2) submission of a tax NOC from the tax

assessor’s office, an office that is a part of MCGM and reports to the head of MCGM.

Exhibits 8649 at 104364, 20439 at 22060, 22023 at 278.

On February 27, 2007, before the PCC was issued, YDJV provided OBO with copies

of the first of its mechanical drawings, which depicted a cooling system different from the

one that was required by the contract specifications. Exhibit 20406. The drawings also

identified specific rooms by function rather than in a generic manner, which, if submitted to

a foreign authority, would have violated OBO security requirements. Id. at 911547; Tr.

Vol. 1 at 268. In response to YDJV’s subsequent inquiry about the drawings, YDJV’s

CBCA 3350, 3672, 4658, 4659

subcontractor, Design Cell, indicated that the drawings were preliminary and that it would

update the drawings to be submitted to support of its FWCC permit application. Exhibits

20407, 20412. Design Cell also indicated that it would ensure that the drawings submitted

were more detailed than it had originally anticipated providing, as requested by OBO.

Exhibit 20407.

On August 2, 2007, Design Cell submitted a request to MMRDA for issuance of a

FWCC for the NOB, but indicated in its request that there was a “slight change in

dimensions” of entrance lobbies on the NOB’s first floor and that Design Cell would soon

be submitting revised drawings for that building to reflect that change. Exhibits 20448 at

267776, 21175 at 25693. It requested a FWCC from MCGM by letter dated August 7, 2007.

Exhibits 20448 at 267779, 21175 at 25693.

For whatever reason, YDJV did not apply for a FWCC for the warehouse when it

applied for the NOB FWCC, even though the joint plinth inspection by MMRDA and

MCGM on July 30, 2007, covered the plinths for both the NOB and the warehouse. Exhibits

14083, 21175 at 25693. Although OBO advised YDJV by letter dated August 17, 2007, that

it seemed important to obtain the FWCC for the warehouse, Exhibit 14083, YDJV took no

action at that time to do so.

YDJV’s permit expediter, Design Cell, did not request the police NOC until July 5,

2007, had to resubmit it at least once, and did not obtain it until August 22, 2007. Exhibits

340, 14056, 14068; Tr. Vol. 1 at 114-15. OBO acted reasonably in assisting YDJV in

obtaining the police NOC. See, e.g., Tr. Vol. 1 at 150. The tax issue did not affect issuance

of the police NOC. Tr. Vol. 8 at 6-7.

MMRDA subsequently issued its FWCC for the NOB on September 6, 2007, Exhibit

14126, and the MMRDA FWCC was forwarded to MCGM. On September 28, 2007, despite

the absence of a tax NOC, MCGM issued its FWCC for the NOB after YDJV satisfied the

On June 21, 2007, YDJV drafted, for OBO’s signature, a cover letter to the police

commissioner seeking the police NOC. Exhibit 335; Tr. Vol. 1 at 146. After some

deficiencies were corrected, Mr. Browning, OBO’s project director, signed and returned that

cover letter to YDJV on June 29, 2007, Exhibit 22205, and Design Cell submitted it to the

police commissioner on July 5, 2007. See Tr. Vol. 2 at 79.

CBCA 3350, 3672, 4658, 4659

various steps necessary for obtaining one. Exhibit 343.15 YDJV’s subcontractor started the

first vertical concrete pour for the NOB on October 3, 2007.

There were significant discussions involving MCGM, DOS, and/or the tax assessor’s

office during this period about whether the Government must pay property taxes on the NCC

land. On June 14, 2007, the OBO project manager, Mr. Browning, and YDJV’s Gene

Rivenbark attended a meeting at the tax assessor’s office at which Mr. Browning was handed

a letter (addressed to Design Cell) indicating that the tax NOC would not be issued until

“payment of following outstanding dues” – that is, the previously assessed property taxes.

Exhibit 13968; Tr. Vol. 10 at 160; see Exhibit 13972. At OBO’s request, the then-Consul

General (CG), Michael Owen, met with the newly appointed MCGM Commissioner, Mr.

Phatak, who assured him that the NCC project was a priority for the GoI, that MCGM

wanted to do all that it could to support the project, and that the property taxes would not be

an issue in granting permits. Tr. Vol. 9 at 85-87; Tr. Vol. 10 at 161. On June 25, 2007,

CG Owen reported to DOS headquarters that the MCGM Commissioner had assured him that

tax issues would not affect issuance of NCC building permits. Exhibit 13993 at 158206. The

MCGM Commissioner reaffirmed that commitment at various times, including during a

meeting on September 17, 2007. Exhibits 14142 at 272765, 14156 at 251401.16

To the extent that lower-level MCGM personnel raised the tax issue during

discussions with YDJV, its subcontractors, and/or DOS representatives (including at

meetings on August 17 and September 12, 2007), it had no ultimate impact upon MCGM’s

issuance of the FWCC,17 with one limited exception. Exhibit 22277 at 92. After MMRDA

Although MCGM’s FWCC for the NOB contained language appearing to limit the

scope of the NOB authorization, the FWCC actually authorized the entirety of the planned

NOB construction.

The only evidence suggesting otherwise is a July 2, 2007, cable from the American

Embassy in New Delhi to DOS officials in Washington, D.C., indicating, among a discussion

of numerous other matters, that “[b]uilding permits [for the NCC] are also being withheld,

delaying construction.” Exhibit 10034 at 221550. But there is nothing in the record to

support that statement, made by an individual located away from Mumbai who apparently

was not involved in the NCC project. We do not give credence to a document containing

hearsay that is contradicted by the other evidence in the record.

YDJV and its scheduling expert relied upon deposition testimony of a DOS

witness to establish that, during this time period, the MCGM Commissioner was stating that

no building permits would issue until taxes were paid. The witness testimony at trial, as well

as the documentary evidence, establish that the deposition testimony was in error.

CBCA 3350, 3672, 4658, 4659

issued its FWCC on September 6, 2007 (an action that had to await issuance of the police

NOC and that was not delayed by the tax dispute), MCGM did not swiftly issue its own

FWCC in response, even though it had previously indicated that it would expedite issuance

and should have taken only a couple of days for MCGM to issue its FWCC in response to

MMRDA’s action. Throughout this period, despite the MCGM Commissioner’s

representations to DOS, there were continued rumblings within MCGM about the tax issue

and about whether the FWCC should be issued without the USG’s agreement to pay the

taxes, even after the September 17, 2007, meeting with the MCGM Commissioner. An

MCGM employee, Mr. Ghade, told a YDJV representative on September 21, 2007, that he

would not issue the FWCC until the tax issue was resolved, despite what the MCGM

Commissioner had said on September 17. Exhibit 14158 at 156901. It was not uncommon

for lower-level MCGM employees, unaware of promises or commitments made by the

MCGM Commissioner, to make statements in conflict with the Commissioner’s until they

received more specific communication and direction from the Commissioner. Exhibit 22277

at 127. OBO and CG Owen subsequently intervened with the MCGM Commissioner to

ensure that the MCGM FWCC was, in fact, issued, but there was a tax-related delay between

September 8, 2007, the date by which MCGM should have issued its FWCC, and September

28, 2007, when MCGM finally issued its FWCC.

Summary of Delay Impact

Based upon YDJV’s original plan as set forth in its baseline schedule, YDJV had

planned to submit 35% design drawings to DOS, something that it viewed as a precursor to

its ability to apply for construction permits, no later than February 13, 2006, but it did not do

so until March 10, 2006. Despite having submitted those drawings, it did not at that time

apply for either a foundations permit or a PCC, waiting until August 1, 2006, to submit a

somewhat confusing permit request containing serious deficiencies that YDJV, through its

subcontractor, made no attempt to begin to correct until December 15, 2006.

YDJV had planned to start pilings at the NOB on June 27, 2006, but did not do so

until August 9, 2006, and did so without a permit. Having never requested a foundations

permit or conditional approvals, it had to cease work at a certain point after MMRDA

discovered that it was working without a permit. It made an inquiry about conditional

approval for foundation work on February 15, 2007; MMRDA verbally approved foundation

work on March 6, 2007; and MMRDA issued a permit on March 8, 2007, that YDJV

interpreted as allowing it to commence full plinth work. Subsequently, YDJV’s ability to

schedule a plinth inspection was delayed because of its subcontractor’s slow performance.

The plinth for the NOB was not completed until June 29, 2007, YDJV’s architect did not

request the NOB plinth inspection until July 18, 2007, and the joint NOB plinth inspection

CBCA 3350, 3672, 4658, 4659

was not conducted until July 30, 2007. Only at that point could YDJV request a FWCC for

the NOB.

YDJV had planned to begin its first vertical concrete pour for the NOB on

November 6, 2006, but did not do so until October 3, 2007, after it had obtained the required

NOB FWCCs from both MMRDA and MCGM. MMRDA issued its NOB FWCC on

September 6, 2007, after being presented with the necessary police NOC that was issued on

August 22, 2007. Although MCGM should have issued its own NOB FWCC within a couple

of days after the MMRDA FWCC was issued (given the promises of the MCGM

Commissioner that it would be expedited), MCGM did not issue its FWCC until

September 28, 2007, because of internal MCGM administrative delays resulting from the

USG’s tax dispute with the GoI.

There ultimately was a critical path delay totaling 362 days from the start of contract

performance to September 30, 2007. Twenty of those 362 days (from September 8 to 28,

2007) were the result of the tax dispute between the USG and the GoI. Two of those 362

days were caused by flooding in the Mumbai area in August 2006. Tr. Vol. 7 at 50-58, 59,

62-63.

Period 2 (September 30, 2007, to April 1, 2008): 12 Days of Delay

Critical Delays by YDJV’s Subcontractor

During this period of time, the critical work that was necessary for the performance

path to continue was the installation of vertical structural concrete at the NOB. YDJV’s

subcontractor, L&T, was tasked with performing that work, but failed to maintain the

schedule that YDJV had planned. There were forty-nine days of delay to the concrete

activities at the NOB, but, by starting NOB finish work earlier than originally scheduled,

YDJV recovered thirty-seven days of that delay. Ultimately, then, there were twelve days

of delay to the critical path of the project. These delays to the schedule that YDJV had

originally planned were unrelated to any tax issues, and responsibility for these days of delay

falls upon YDJV.

YDJV has asserted that, because of the prior delays in the NOB FWCC issuance (for

which it blames DOS), it “made no sense to maintain or ramp up a substantial [vertical

construction] workforce” before there was vertical construction work to be performed, so

L&T released much of its workforce for this project while awaiting the FWCC. Appellant’s

Post-Hearing Brief at 59. Nevertheless, L&T understood that, once it was ready to perform

the vertical work, it would need to use workers that had the proper security badges, and its

decision to release its workers required it completely to remobilize a workforce once the

CBCA 3350, 3672, 4658, 4659

FWCC was issued (including work required for the badging process). YDJV complained at

the time that L&T was showing no “sense of urgency” in scheduling, staffing, or performing

work. Exhibit 14177. No evidence was presented at the hearing in this matter showing that

YDJV or L&T had developed a reasonable advance work plan addressing labor and hiring

needs, and there is no evidence of a serious and coordinated effort to develop one during

contract performance. L&T did not begin the effort to remobilize, or to hire and obtain

badges for workers, until after the FWCC was issued. L&T’s failures in the remobilization

effort caused further delays.

L&T’s manpower levels, once the NOB FWCC was issued, were inadequate for the

work required. YDJV asserts that prior delays that it attributes to the Government pushed

L&T’s NOB vertical construction work into a period in which it was more difficult to find

and hire qualified labor than it would have been had there been no prior delays. It asserts that

the labor marketplace had changed since it submitted its bid because of, among other things,

a significant increase in the number of construction projects that were ongoing in Mumbai

at that time. Yet, as previously discussed, all but 22 days of delay in the earlier period were

caused by work deficiencies by YDJV or its subcontractors, rather than by DOS. Further,

the record does not establish that, in establishing its original labor estimates or hiring plans,

YDJV developed any kind of realistic analysis of the Mumbai labor market, and it presented

no viable evidence, beyond speculation, that the labor market was significantly different

during this period of time than it would have been when YDJV had originally planned on

constructing the NOB. Although YDJV was relying on the expertise of one of its joint

venture partners, Desbuild, to assist it in hiring the labor necessary to support the project,

Desbuild did not have prior experience in projects the size of the NCC, and it did not conduct

any studies or analysis about the level of skilled labor that it realistically should have

expected to find in the Mumbai labor market. We find that YDJV did not establish that

changes in the labor market affected or delayed its performance. Instead, any difficulties that

YDJV and/or its subcontractors had in hiring skilled labor during this period were the result

of YDJV’s faulty expectations about the state of the Mumbai skilled labor market.18

This finding is consistent with more generalized testimony that YDJV presented

about difficulties it had with subcontractors in Mumbai. Yates’ then-Senior Vice President

for Special Projects, Henry Dearman, testified that YDJV’s subcontractors would repeatedly

make promises to do something (such as a promise to meet a particular deadline or

completion date) that YDJV knew or would later find out the subcontractors could not keep,

but the subcontractors refused to admit that they would not be able to keep it – specifically,

the subcontractors did not want to be seen as unable to accomplish their assigned tasks, no

matter how difficult. Tr. Vol. 1 at 25-26. Mr. Dearman contrasted that situation with the

subcontractors with which he has dealt in the United States, which generally push back

CBCA 3350, 3672, 4658, 4659

Other Delays Involving Tax Issues

On October 1, 2007, the Consulate General’s office for DOS in Mumbai wrote to the

Chief Protocol Officer for the Government of Maharashtra, once again seeking his assistance

in obtaining tax exemptions for the BKC property and referencing the applicability of the

Vienna Convention to exempt the United States from such taxes. Exhibit 14169. It

referenced the fact that the local municipal authorities were requiring DOS to provide tax

clearance documents from the tax assessment department to obtain necessary building

permits, but that the tax assessment office “will not provide clearance documents until this

tax matter is resolved.” Id. It recognized the “potential operational delays” that would result

if the issue was not resolved swiftly. Id.

While L&T was working on vertical construction at the NOB, it was also laying

plinths for other NCC buildings, pursuant to the PCC that the MMRDA had issued for the

entire NCC project. On December 27, 2007, YDJV requested plinth inspections from the

MMRDA for two of the NCC buildings: the GSO and the CG residence. Exhibit 21175 at

25697; Tr. Vol. 4 at 151-52. Although YDJV initially anticipated fairly swift inspections and

approvals from MMRDA, a MMRDA representative verbally informed YDJV on or just

before January 4, 2008, that MMRDA would not be able to conduct the plinth inspections

because of “tax assessment issues” between the United States and the GoI. Exhibit 20280;

see Tr. Vol. 1 at 211. YDJV quickly reported that news to OBO, which began a series of

inquiries that resulted in the involvement of CG Owen.

On February 8, 2008, the United States District Court for the Southern District of New

York issued a decision in City of New York v. Permanent Mission of India to the United

Nations, 533 F. Supp. 2d 457 (S.D.N.Y. 2008), vacated, 618 F.3d 172 (2d Cir. 2010), finding

that the Vienna Convention only exempted from taxation the “residence of the head of the

mission” and that the City of New York could properly tax those portions of the GoI’s

buildings in New York in which GoI employees other than the GoI’s United Nations mission

head were residing. Four days later, on February 12, 2008, the MCGM Commissioner

informed CG Owen that there would be no more building permits issued for the NCC “until

the NY case was settled.” Exhibit 20103 at 158373. This was a change in the MCGM

Commissioner’s previously stated position, a change resulting from “instructions” that he had

received from MEA. Exhibit 22277 at 131-34. At that point in time, although there were

PCCs permitting the laying of the plinth for the various compound buildings, the only

building permit (or FWCC) that had been issued to allow for vertical construction was for

the NOB.

during the planning process if a proposed deadline is unrealistic or risky. Id.

CBCA 3350, 3672, 4658, 4659

Subsequently, during a meeting with CG Owen on February 14, 2008, the MCGM

Commissioner and Deputy Commissioner agreed to allow immediate issuance of a FWCC

for two more NCC buildings – the GSO and the warehouse – but they indicated that they

would issue stop work orders for those buildings if the United States had not resolved the tax

issue within sixty days. Exhibit 20103. The MCGM Commissioner indicated during that

meeting that, pursuant to instructions that he had received from a higher authority in the GoI,

MCGM could not issue any other FWCCs until the United States had paid the outstanding

taxes. Id. at 158373. Within DOS, there was a belief that “this newly ‘hardened’ position

by authorities in Mumbai [insisting that DOS pay taxes before FWCCs were issued] has been

precipitated by the New York court case.” Exhibit 20284.

Plinth inspections for the GSO (which was now viewed as tied to the warehouse,

which had previously been subject to a joint plinth inspection) and the CG residence were

performed on February 18, 2008. Exhibits 14334, 20287, 21175 at 25698.19 Nevertheless,

the MCGM engineers mentioned during the plinth inspections that the FWCCs for the GSO,

the warehouse, and the CG residence that MCGM expected to issue would be limited,

permitting construction only to the first floor of each building. Exhibits 14334, 20287,

20288. CG Owen immediately requested clarification and elimination of any such limitation

from the MCGM Commissioner. Exhibit 20287. The FWCC issuance process was not

helped by the fact that YDJV’s amended drawings submitted in support of the FWCC

application contained various errors, including an incorrect location for fuel tanks. Exhibit

22317 at tab 38. The FWCC for the GSO, the warehouse, and the CG residence had still not

been issued by the end of Period 2 (for reasons that will be discussed in the next section).

Notwithstanding that delay, none of these buildings was on the critical path of performance

at this point of the overall NCC project.

By at least mid-March 2008, DOS was making concerted efforts to work out a

bilateral agreement between the United States and the GoI to resolve both the New York tax

dispute and the NCC tax dispute. Exhibit 20290.

YDJV requested a plinth inspection of another outbuilding, the CCAC, but the

local authorities declined because the edge forms for the CCAC plinth were still in place,

meaning that the plinth was not finished. Exhibit 14334.

CBCA 3350, 3672, 4658, 4659

Period 3 (April 1, 2008, to November 1, 2009): 391 Days of Delay

Critical Delays by YDJV’s Subcontractor

During this period (from April 1, 2008, to November 1, 2009), NOB mechanical,

electrical, and plumbing (MEP) became the critical activity on the NCC project. Tr. Vol. 2

at 12. There were 391 days of delay in this 579-day period. Essentially, YDJV lost four days

of every six-day work week. In fact, during the seven-month period from April to November

2008, NOB MEP activities lost almost five months of time, and the contractor fell another

eight months behind over the course of the next eleven months.

As of April 1, 2008, air handling unit and ductwork installation at the first, second,

and third levels of the NOB was expected to drive the critical path of the project through

July 18, 2008 (with an expected duration of three-and-a-half months). That work actually

took seventeen months. As of August 30, 2008, YDJV anticipated that its MEP

subcontractor, Shine Electric Works Pvt. Ltd. (Shine), would complete the already-delayed

ductwork within two weeks – by September 13, 2008. It was not completed by that date. At

a meeting on November 11, 2008, YDJV began its efforts to demand that Shine increase its

MEP manpower levels. Shine complied by December 2008, meeting the increased

manpower levels that YDJV had requested, and it continued to increase manpower levels

over the next several months. Despite that fact, Shine did not complete the MEP work at the

NOB until August 27, 2009.

The cause of this delay was the poor performance of Shine, coupled with YDJV’s

overestimation of the available skilled labor market to perform in accordance with DOS

construction requirements. Shine failed to perform work for extended periods of time and

did not respond adequately (beyond making unsupported excuses for its failure to perform)

to YDJV’s repeated pleas for performance of the work. Further, the work that Shine

performed was not always performed correctly and had to be redone – in fact, from February

2009 through June 2009, Shine was devoting its time to fixing NOB second floor rough-in

work that it had previously done incorrectly. Tr. Vol. 2 at 12; Tr. Vol. 4 at 128-32; Exhibits

12872, 12873, 12869, 14641. YDJV eventually (in May 2009) supplemented Shine’s

workforce by bringing in workers from elsewhere (through another subcontractor, Microtech

M&E Pvt. Ltd. (Microtech)), Tr. Vol. 1 at 210, but it potentially could have reduced delays

by doing so at an earlier date.

Although YDJV attempted at the hearing of this matter to establish that demand for

skilled labor and for construction materials suddenly increased during this period because of

a massive number of new construction projects in the Mumbai area, and that this change in

the available labor market and the availability of building materials caused its delays, the

CBCA 3350, 3672, 4658, 4659

evidence does not support YDJV’s allegation. It seems clear, based upon the preponderance

of the evidence, that Shine did not have the experience to handle a job of the magnitude of

this project, that it had not adequately planned its work at the outset of the job, and that

Shine, for unexplained reasons of its own making, elected not to staff the project sufficiently

with workers of adequate skill.20 To the extent that Shine reported to YDJV during the

project that the skilled labor market had changed so that it suddenly could not find a

sufficient number of skilled workers, that report was an unsupported excuse to gain more

time, rather than a true indicator of the labor market. Tellingly, when YDJV eventually

brought in Microtech to supplement Shine’s work in May 2009, the skilled labor issues

largely abated. Exhibits 12866, 12867 at 340947; Tr. Vol. 2 at 63-67.

After completing above-ceiling ductwork on August 27, 2009, YDJV planned to test

the ductwork before installing above-ceiling fire sprinkler lines and above-ceiling electrical

conduit, work that could not be performed until after the ductwork installation was complete.

By November 1, 2009, the third-level NOB duct testing had still not been completed. Again,

although the reasons for this delay are somewhat unclear, there is no doubt that the fault for

this delay lies with YDJV’s subcontractor, Shine, which simply did not get the work done.

Concurrent Delays to the Outbuildings

Delays to the Warehouse and Non-MCAC Buildings

As indicated in the preceding section, the MCGM Commissioner and Deputy

Commissioner had informed CG Owen on February 12 and 14, 2008, that no FWCCs for any

additional buildings in the NCC – except for the GSO/warehouse buildings and the CG

residence – would be issued until the NCC tax issues were resolved.

On April 16, 2008, CG Owen learned from a conversation with a high-level MEA

representative that MEA had met with the Maharashtra Chief Minister about the tax and

construction permit issues the prior day and that the Chief Minister wanted to be helpful to

ensure that construction of the NCC could continue. Exhibit 22317 at tab 39. He notified

CG Owen that the Maharashtra Chief Secretary had been instructed to investigate the matter

immediately and that CG Owen should meet with the Chief Secretary expeditiously. Id.

Documentation in the record indicates that YDJV, during this delay period, was

blaming Shine for taking skilled workers hired for this project and transferring them to

another embassy project in Hyderabad, India. It is unnecessary for us to define the specific

reasons for Shine’s inability to complete its work in a timely manner, other than to find that

they are not the fault of DOS.

CBCA 3350, 3672, 4658, 4659

On April 19, 2008, CG Owen, along with two OBO representatives and two YDJV

employees, met with the Maharashtra Chief Secretary, Johny Joseph (who, until May 2007,

had been the MCGM Commissioner), as well as with representatives of MEA, MCGM, and

MMRDA.21 At the meeting, CG Owen urged the Chief Secretary to delink the NCC

construction permits from the property tax issues because of the importance of the NCC

project to both DOS and the City of Mumbai. At the conclusion of that meeting, the Chief

Secretary directed MCGM and MMRDA to change course and told them not to impede

construction of the NCC in any way, to conduct all necessary inspections and issue all

necessary certificates as expeditiously as possible, and to delink for the time being the

property tax issue from the construction work. He ordered that resolution of the property tax

issue should be pursued on a separate track from the construction authorizations for the time

being, although he indicated that, before MCGM would issue a final occupancy certificate

for the NCC, DOS would first have to resolve all property tax issues involving the NCC.

Exhibits 1001, 20295, 20298.22

On April 21, 2008, YDJV submitted revised final drawings to MMRDA for the

GSO/warehouse and the CG residence, as required to obtain FWCCs for those structures.

Exhibit 20296. Those revised drawings were to be forwarded to the MMRDA Commissioner

for expedited action on or about April 23, 2008. Exhibit 20297. Nevertheless, lower-level

employees within MMRDA and MCGM, unaware of the new direction that had been

announced at the April 19 meeting, did not expedite matters in the manner that should have

occurred. Exhibits 22277 at 151, 22317 at tab 43.

On April 23, 2008, pursuant to an agreement made at the April 19 meeting, MMRDA

and MCGM conducted a joint plinth inspection of the utility building, the CCAC, and the

MSGQ, at which time they discovered that the plinths for two of the buildings (CCAC and

the utility building) did not match the plans that YDJV had submitted for those buildings on

April 21, meaning that YDJV would have to submit revised drawings (delaying YDJV’s

ability to obtain FWCCs). Exhibits 1001, 20297.

This meeting followed a preliminary meeting on April 17, 2008, between CG

Owen and the Chief Secretary, after which CG Owen provided a list of the necessary permits

that YDJV needed to proceed with construction. Exhibits 22277 at 146-48, 22317 at tab 41.

Based upon the Chief Secretary’s directive, MCGM issued a formal written order

on May 2, 2008, directing that the property tax issues “should not be presently linked with

the issuance of the [FWCC] for the buildings in the layout on the [NCC] plot” and that

“MMRDA will issue the full [FWCC] for all th[e] structures in the layout,” but that the issue

“shall be resolved before grant of occupation for the buildings.” Exhibit 14393.

CBCA 3350, 3672, 4658, 4659

MCGM issued the FWCCs for the GSO, the warehouse, and the CG residence on

May 6, 2008, 78 days after the plinth inspections for those buildings. Exhibits 14411, 14417.

The FWCCs for the MSGQ, the CCAC, the utility building, and the SCAC were issued on

June 19, 2008. At this point in time, the only NCC building for which YDJV did not have

a FWCC was the MCAC, but YDJV had not yet finished the plinth for that building and,

therefore, was not yet ready for a joint MMRDA/MCGM plinth inspection, a prerequisite to

issuance of a FWCC.

These delays affected YDJV’s ability to use its warehouse as an on-site laydown and

storage facility to support the NOB construction, as it had originally planned to do. Tr. Vol.

4 at 33; Tr. Vol. 6 at 216.23 Because the warehouse was not available to it, YDJV rented an

off-site storage facility that, depending on traffic, took anywhere from forty minutes to two

hours to reach. Tr. Vol. 4 at 34, 57, 143, 145-46. YDJV could not have set up a sufficiently

secure temporary warehouse or storage facility on-site because it would have required a

permit, which the record makes clear MMRDA and MCGM were declining to issue. Id.

at 57.24 As a result, YDJV had to make regular trips to the off-site storage location to obtain

materials such as electrical conduit, wire, duct hangers, and other items necessary to support

NOB MEP work. Id. at 146; Tr. Vol. 7 at 139-40. Once the FWCC for the warehouse was

issued on May 6, 2008, YDJV began vertical construction. By September 29, 2008, the

warehouse was sufficiently complete to allow it to serve as a secure on-site storage facility.

Exhibit 13087.

Nevertheless, the delays that the absence of an on-site storage building created were

negligible. The main NOB MEP critical path activity from April to September 2008 was

HVAC duct installation, and duct material was not stored at the off-site storage facility.

We note that, despite testimony from YDJV about its original plans to finish the

warehouse early so that it could be used for secure on-site storage, YDJV’s actions during

the project did not always match that intent. As previously discussed, MMRDA and MCGM

conducted a joint inspection of the warehouse plinth on July 30, 2007, which was the last

step necessary for YDJV to request a FWCC for the warehouse. Yet, despite a complaint

from the OBO project manager in August 2007 questioning why YDJV had sought a FWCC

only for the NOB and not for the warehouse, YDJV delayed requesting a warehouse FWCC

until November 21, 2007.

There was a small secure storage area on-site, but it was exclusively for the use

of materials that were to go into the CAA. Tr. Vol. 4 at 144. YDJV could not place

non-CAA materials in the small secure storage area. Id.

CBCA 3350, 3672, 4658, 4659

Delays to the MCAC

As indicated above, when FWCCs were issued for the outbuildings in May and June

2008, YDJV had not yet finished the plinth for the MCAC. Accordingly, it was not ready

at that time for a joint plinth inspection, which was a prerequisite to the issuance by

MMRDA and MCGM of a FWCC.

On June 27, 2008, after FWCCs had been issued for all of the NCC outbuildings other

than the MCAC, MEA instructed the local authorities in Mumbai that “no further

construction clearances or occupancy certificate or utility connections be issued to the United

States Consulate in Mumbai without the concurrence of MEA.” Exhibits 1034, 20302.

Plainly, this direction was tied to the outstanding tax issues between the GoI and the United

States. On July 18, 2008, and again on October 13 and 21, 2008, MEA notified the Embassy

in New Delhi of its strong desire to enter into a bilateral agreement on reciprocal exemption

from property taxes at the earliest opportunity. Exhibit 22317 at 26245-47.

Despite the restriction on the issuance of new FWCCs, there was no direction to

rescind or limit previously issued FWCCs, and the local authorities did not do so. The only

direction given, and implemented, was that the local authorities not issue any new FWCCs.

Construction work on all NCC buildings other than the MCAC continued unabated, and

plinth work at the MCAC, which was covered by the previously issued PCC, continued as

well.

When MEA made its announcement restricting further FWCCs on June 27, 2008, the

MCAC was not ready for a FWCC. It was not until December 16, 2008, that the MCAC

plinth was complete, Exhibit 6491, and YDJV was not ready for the MCAC plinth inspection

until December 17, 2008. Exhibit 20116 at 212379. At that point, MMRDA and MCGM

declined to conduct the required joint plinth inspection.

Although the NOB MEP work was the critical path activity at this point in time and

remained so through and beyond November 1, 2009, work at the MCAC was very close to

the critical path and was, at times, concurrent with it during that period. Exhibit 22317 at

107749. High-level officials within DOS, cognizant of the impact of the GoI’s refusal to

grant the FWCC for the MCAC, Exhibits 20604, 20605, 20606, were taking affirmative and

active steps to try to resolve the outstanding tax issues and to have the GoI lift its FWCC

issuance restriction. For example, on January 20, 2009, Paul Folmsbee, who had replaced

CBCA 3350, 3672, 4658, 4659

Michael Owen as CG,25 met with various GoI officials, including the MCGM Commissioner,

to encourage issuance of the MCAC FWCC, but the MCGM Commissioner represented that

holding up the FWCCs was the only leverage that he had to get payment of the United States’

outstanding taxes. Exhibits 14557, 21972. On February 11, 2009, David Mulford, the

United States Ambassador to India, met with the GoI’s Foreign Secretary, Shivshankar

Menon, to encourage issuance of the remaining FWCC as well as occupancy certificates, but

it was clear from that meeting that the GoI was linking the City of New York tax case with

the tax issues involving the Mumbai NCC and would not assist unless there was some

corresponding assistance in the City of New York matter. Exhibit 20118 at 107740.

Despite repeated efforts by DOS, the head of MMRDA informed Mr. Browning and

CG Folmsbee at a meeting on June 18, 2009, that he had just received a letter from MEA

reaffirming that MMRDA must not issue any permits or offer any cooperation in the

construction of the Mumbai NCC until tax issues were resolved. Exhibit 22317 at 20402.

On June 23, 2009, at the direction of the Secretary of State, DOS issued Public Notice

6690, Designation and Determination Under the Foreign Missions Act, formally exempting

from local, state, and federal taxation any real property in the United States that a foreign

government owned and was using to house staff of permanent missions to the United

Nations:

I hereby designate exemption from real property taxes on property owned by

foreign governments and used to house staff of permanent missions to the

United Nations or the Organization of American States or of consular posts as

a benefit for purposes of the Foreign Missions Act. I further determine that

such exemption shall be provided to such foreign missions on such terms and

conditions as may be approved by the Office of Foreign Missions and that any

state or local laws to the contrary are hereby preempted. Prior inconsistent

guidance is hereby rescinded.

74 Fed. Reg. 31,788 (July 2, 2009); see Exhibit 14736.

By July 7, 2009, the MEA Chief of Protocol called the Charge d’Affaires at the United

States Embassy in New Delhi to represent that he was in the process of ordering issuance of

all permits and licensing for the NCC project. Exhibit 22317 at 199829.

CG Owen had departed his post in Mumbai for another position within the Foreign

Service on July 8, 2008, and was replaced by Mr. Folmsbee. Exhibit 22277 at 155.

CBCA 3350, 3672, 4658, 4659

On July 20, 2009, MMRDA and MCGM conducted the joint plinth inspection for the

MCAC, and the final FWCC for the MCAC was issued on August 12, 2009. Exhibits 14531,

14736. YDJV commenced vertical work on the MCAC on August 27, 2009.

Period 4 (November 1, 2009, to August 1, 2010): 205 Days of Delay

Visa Issues

From November 1, 2009, through August 1, 2010, the critical item that was affecting,

and stalling, other work on the project continued to be NOB MEP work and, specifically,

telecommunications work in the NOB.

On October 26, 2009, just before this period began, YDJV became aware of an

impending change in the GoI’s visa policy for foreign skilled workers, which the GoI had

publicly announced on August 30, 2009. Exhibits 21184, 21223. Under the GoI’s prior visa

policy, highly-skilled foreign workers entering India to perform work for a particular

corporate entity would receive a business visa, or a “B” visa, permitting them to work within

India for that corporation for a specified period of time. Apparently, a controversy, wholly

unrelated to the NCC project or to any of the parties here, arose in connection with the

issuance of “B” visas to thousands of unskilled and/or semi-skilled foreign workers from

another country who, according to the GoI, should not have been eligible for such visas and

were taking jobs from India’s available labor force. Tr. Vol. 3 at 41-42; Tr. Vol. 4 at 35. In

its August 30 announcement, the GoI stated that all skilled foreign workers would now have

to apply for an employment (or “E”) visa, rather than a “B” visa, and that the application

would have to be made while the skilled worker was in his or her home country. The notice

further stated that any such workers who currently held a “B” visa would, regardless of the

expiration date on the visa, have to depart India no later than September 30, 2009 (a deadline

that was subsequently extended to October 31, 2009), and return to their home countries to

apply for an “E” visa.

YDJV learned of the new policy when some of its American employees were

registering for their business visas with the Mumbai Foreigners Regional Registration Office

on October 26, 2009. That office informed those employees that, pursuant to a direction

from MEA, all foreign workers would have to depart India by October 31 and apply for new

“E” visas from their home countries. Exhibit 21223; Tr. Vol. 4 at 109-10. YDJV began to

make plans to return approximately thirty-nine American YDJV employees and several

employee dependents to the United States, but asked DOS to attempt to intervene with the

GoI to stop the threatened visa action. Exhibit 22122_A. DOS in good faith made such

efforts, to no avail. See Exhibit 22122.

CBCA 3350, 3672, 4658, 4659

Applying its new policy, the GoI officially revoked almost all “B” visas, including

those of YDJV’s foreign workers, effective October 31, 2009. Exhibit 21182. Accordingly,

all but two of YDJV’s American staff – approximately thirty-seven American employees –

left Mumbai and returned to the United States, Exhibit 1088 at 204989, and YDJV shut down

the CAA construction. Further, on November 23, 2009, the GoI announced a new quota

system under which the GoI would allow an employer to hire skilled foreign workers only

if the employer’s total foreign workforce did not exceed one percent of its total workforce.

Once this quota was reached, the employer supposedly would be unable to sponsor visas for

additional foreign workers. Exhibit 21244. In addition, the GoI imposed new restrictions

on the issuance of “E” visas that were not always consistently applied by different GoI

offices reviewing “E” visa applications. Exhibit 13087 at 9858.

By November 30, 2009, YDJV had received only five of the “E” visas that it needed.

Exhibit 1088. By December 11, 2009, twenty-seven “E” visas had been issued, although, as

of December 20, 2009, only twenty cleared Americans had returned to the site. Id.

Ultimately, of the thirty-seven workers who had to return home, twenty-three returned to the

Mumbai work site by December 28, 2009, and fourteen either resigned or were dismissed.

Exhibit 12721 at 404.

The departures essentially required YDJV to shut down its CAA conduit work during

this period. Tr. Vol. 3 at 25. That was because any employees entering the CAA area had

to have a security clearance, id. at 15, making it necessary for YDJV (and its

telecommunications subcontractor, American Systems) to use cleared American workers

(CAWs) for all CAA work. Id. at 32. The departures also affected non-CAA work on the

project because of the loss of key oversight, although YDJV was able to continue some work

with its on-site Indian workforce and the few Americans who were allowed to remain. Id.

at 25; Tr. Vol. 4 at 114; Exhibits 21223, 22122. Nevertheless, YDJV was able to restore its

project workforce to pre-departure levels by January 6, 2010. Tr. Vol. 3 at 26; Exhibit

21590.

American Systems had its own difficulties obtaining visas for its American

employees. American Systems had different responsibilities over CAA and non-CAA work.

For non-CAA work, American Systems was supposed to supervise system infrastructure

installation and cable pulls that local Indian employees of another subcontractor, Shine, were

performing; then to use its own American employees to terminate those cable pulls (that is,

to take the end of the wires in each junction box or panel, add the terminal unit onto the

wires, and connect the unit to the system); and to test the system. Tr. Vol. 3 at 47. For CAA

work, YDJV’s electrician employees would install the infrastructure, after which American

Systems would enter the space to pull the wires, terminate the pulls, and test the system. Id.

at 48. Under the original plan, American Systems was to have a supervisor on-site for the

CBCA 3350, 3672, 4658, 4659

non-CAA oversight work for approximately eight weeks before six American System

technical employees (over a ten-week period) would perform the remaining non-CAA work

and then perform the CAA installation, termination, and testing work. Id. at 48.

American Systems had planned to begin its telecom work on November 5, 2009, and

was in the process of preparing to bring American workers into India to perform that work

when the GoI changed its visa policy. Exhibit 13087 at 9863. American Systems was not

eligible to sponsor foreign employees for entry into India under an “E” visa because

American Systems was not registered as an Indian company, meaning that it would have to

obtain “B” visas (which did not require sponsorship by an Indian company). Although it had

one employee – a joint citizen of the United States and India – with a pre-existing “B” visa

not subject to the GoI’s recall, who was to oversee Shine’s non-CAA work beginning

November 5, Exhibit 15014, American Systems would need visas for its six additional

CAWs. Between November 30 and December 29, 2009, it submitted a total of only four “B”

visa applications, Exhibit 12721 at 464, two of which were quickly approved and two of

which, for reasons not specified in the record, were quickly rejected. No additional visa

requests were submitted to the GoI until March 12, 2010, and, except for a three-week period

in December 2009 when one of the two approved CAWs went to Mumbai until running out

of work and returning to the United States, the two approved CAWs did not go to Mumbai

until March 15, 2010, at which time the telecommunications wire pull work effectively

commenced. Exhibits 12721 at 464, 13056 at 237. American Systems never fully staffed

its anticipated crew of six telecom CAWs. Tr. Vol. 3 at 94.

Although American Systems was having problems with visas, YDJV’s technical

security services (TSS) subcontractor, AES International Corporation (AES), was not. The

AES TSS workers arrived on site in mid-December 2009, a delay from their intended arrival

date of November 5, 2009. Exhibits 14848, 14898, 14918, 14921. Eventually, YDJV

attempted to mitigate the difficulties that American Systems was having with visas by

seeking the assistance of AES, which told YDJV that it had three telecom technicians with

security clearances coming off another project for whom YDJV, if it hired them as YDJV

employees, could apply for “E” visas as CAWs using their diplomatic passports. Tr. Vol. 3

at 85, 89.

Materials Issues

In addition to its visa problems during this period (November 1, 2009, to July 31,

2010), YDJV was also having problems shipping and maintaining adequate materials. As

an example, certain TSS materials were to be on-site by November 5, 2009, for AES to use

in its TSS work, but the materials, including tens of thousands of feet of cable, did not arrive

until February 28, 2010. Exhibits 12721 at 410, 13087 at 9861. In December 2009, certain

CBCA 3350, 3672, 4658, 4659

secure telecom materials for the CAA were incorrectly labeled, requiring the secure

procurement process to begin all over again. Exhibit 12721 at 409. In April and May 2010,

there were repeated shortages of random materials that then had to be shipped from the

United States. Exhibit 12721 at 413.

On January 11, 2010, Mr. Badrinath, Desbuild’s president, visited the Mumbai site

and recognized that YDJV needed (at that point in time) at least eight more months to finish

the project. In his view, the “major set back [was] materials, at every front we have some

thing or the other missing.” Exhibit 14985. All materials for the project, with the exception

of some concrete products, were shipped by YDJV from the United States to the project site

in Mumbai. Tr. Vol. 4 at 54. When material was needed, YDJV’s subcontractor would have

to contact YDJV’s home office in Atlanta, which would then have to procure the materials

and air ship them to Mumbai. Id. at 56. Material sent by ocean freight would take two

months to arrive, so YDJV typically shipped by air freight, which generally would take about

ten days to arrive after an order was placed (with a few days added to that to deal with the

assessment and payment of customs duties). Id. at 55. Mr. Badrinath discovered that “[a]t

this stage we are air shipping skimmers for pool, ceramic tiles, stone anchor, caulking, carpet,

grout, fans. These are only few items I have listed. Work on these fronts are at standstill.”

Exhibit 14985. Mr. Badrinth stated, “I can tell you without materials we are in trouble.” Id.

Material shortages, which continued through this period, were generally the result of

waste, shipping errors, mistakes made by subcontractors that required work to be stripped out

and performed a second time, and a lack of a sufficient control system cataloging materials

on hand so that they could be easily located. Tr. Vol. 4 at 56-57, 152.

Shine’s Performance Delays

During this period, Shine was simply not keeping pace with the requirements for

completing its non-CAA telecom infrastructure installation work. Three weeks after one of

American Systems’ CAWs arrived to perform non-CAA work on December 8, 2009, that

CAW went back to the United States, mainly because Shine’s slow performance had left him

with nothing to do. Although materials issues may have affected Shine, its employees were

not performing at the pace necessary to support the project. Exhibit 12721 at 409.

Summary of Delay

During this period, YDJV was delayed by 205 days. YDJV lost fifty-nine days from

November 1, 2009, to January 6, 2010, because of visa issues surrounding the GoI’s direction

that CAWs leave the country and reapply for “E” visas. YDJV lost another 146 days

CBCA 3350, 3672, 4658, 4659

between January 6 and July 31, 2010, arising in part because of continuing visa difficulties,

but mainly because of YDJV subcontractor performance issues and materials shortages.

Period 5: August 1, 2010, to February 1, 2011: 162 Days of Delay

On August 1, 2010, the NOB telecom wiring was completed. At this point, YDJV

was projecting completion of the entire NCC by November 11, 2010 (103 calendar days

later). The critical work driving YDJV’s ability to complete the project by that deadline was

telecom/electrical wire pulls and panel terminations in the NOB, followed by telecom room

punchlist work.26 To meet the projected November 11 completion deadline, YDJV needed

to complete telecom/electrical wire pulls and panel terminations no later than August 16,

2010, and to complete telecom/electrical panel trimout by August 21, 2010. YDJV did not

complete this work as anticipated. Instead, the telecom panel terminations were not

completed until December 23, 2010, and the telecom panel trimout was not completed until

January 28, 2011, resulting in a delay to the critical path of 162 days. The fault for this delay

falls upon YDJV and its subcontractors, which were slowed by, among other things, disputes

about who was responsible for damaged materials and who was responsible for what work.

We cannot attribute any delay during this period to DOS.

YDJV believes that various issues in subcontractors’ ability to obtain visas created

delay during this period. We find no support for YDJV’s position. To the extent that there

were problems in getting subcontractor employees to travel to Mumbai, those problems were

primarily the result of disputes between the employee and its employer or disputes between

YDJV and its subcontractor. Further, in the matter of a visa for YDJV’s commissioning

authority, Brian Kolak of Nelson Engineering, who YDJV expected to conduct visual

inspections of equipment between March 23 and April 23, 2010, any delays in the visa

process did not affect the critical path of contract performance.

YDJV’s contemporaneous critical path plan shows the installation of NOB exterior

canopies, which would be followed by NOB exterior punchlist work, as somehow

(inexplicably) driving subsequent NOB interior punchlist work. In meetings at the time,

YDJV recognized that it needed to change its schedule logic because the critical path in its

contemporaneous schedule was incorrect. Canopy installation was not on the critical path.

CBCA 3350, 3672, 4658, 4659

Period 6 (February 1, 2011, to October 6, 2011): 167 Days of Delay

Delays in Accreditation

Accreditation is a process specific to OBO that required OBO’s inspection and

acceptance of the secured access areas within the NCC. Tr. Vol. 2 at 129-30. Under the

contract, YDJV could not be considered as having achieved “substantial completion” until,

at least thirty days prior to substantial completion, it had completed certain general

construction work identified in a “Contractor Accreditation Worksheet” that was included

as an attachment to the contract. The worksheet covered specific items relating to, among

other things, exterior and interior physical security, telecommunication operations facilities,

roof-mounted communications support equipment, emanations security, electrical systems,

and telephone lines. Exhibits 1 at 21 (clause E.2.2), 17.

Although not specifically laid out in the contract, the OBO accreditation process

typically begins with a pre-accreditation period where teams of subject area experts come to

the site to evaluate the work done in their areas of expertise. Tr. Vol. 2 at 130.

Subsequently, the actual accreditation team comes to the site to validate the work that has

been performed, particularly in the CAA. Id. at 131.

The start date for accreditation had continually been deferred – a scheduled date of

September 13, 2010, was changed to December 1, 2010, to January 17, 2011, and then to

February 18, 2011 – because the project work was not sufficiently complete to permit the

accreditation inspection. On January 24, 2011, OBO’s Mr. Browning sent an e-mail message

to Shane Deville of YDJV, requesting that YDJV complete and return an accompanying

accreditation checklist by January 27, 2011. Exhibit 15730. YDJV and OBO were planning

for pre-accreditation activities to begin on March 1, 2011, and for accreditation to begin on

March 15, 2011. Tr. Vol. 2 at 170-73. Yet again, though, YDJV was not ready for

accreditation, and the accreditation date was pushed to April 18, then May 9, and then June 8,

2011. Ultimately, the accreditation inspection did not begin until July 7, 2011.

YDJV blames the OBO project director, Mr. Browning, for postponing accreditation

unnecessarily and asserts that his actions ultimately delayed the project during this period.

Although it is true that Mr. Browning issued letters directing that accreditation be postponed,

he did so only when it was clear that YDJV was not ready for accreditation. His actions did

not delay the project, but merely recognized the obvious. It would have been irresponsible

for Mr. Browning to require DOS personnel to travel to Mumbai for accreditation only to

have them sit for weeks or even months as YDJV tried to ready itself for the inspection.

CBCA 3350, 3672, 4658, 4659

YDJV further complains that its subcontractor employees, who were necessary for the

work that would lead to accreditation, were delayed by problems in obtaining visas. The

record does not support YDJV’s assertion.

Nevertheless, during this period, members of OBO’s inspection team ultimately

experienced delays in obtaining their own visas to allow them to travel to India for the

inspections. See Exhibit 16378; Tr. Vol. 2 at 171-72. Without Mr. Merton Bunker and other

members of the inspection team, the accreditation process could not begin. Tr. Vol. 2 at

180-81. Although YDJV is responsible for being unable to complete work because of

problems in the performance of its subcontractors and for forcing delays in accreditation,

DOS is responsible for forty-two days of concurrent delay resulting from DOS’s problems

obtaining visas for its inspection team.

The first accreditation inspection, which began on July 7, concluded on July 22, 2011.

The inspection team’s report noted several deficiencies, including a lack of occupancy

sensors in every workstation in the secured CAA area of the NOB. On September 12, 2011,

YDJV reported that it had completed 94% of the punchlist work, and it anticipated full

completion by September 24, 2011. On October 2, 2011, the DOS accreditation inspection

team commenced its second accreditation inspection, which finished on October 6, 2011.

To achieve substantial completion under the contract, YDJV, pursuant to clause E.2.1

of the contract, had to obtain a certification from the contracting officer or his representative

that the project “is sufficiently complete and satisfactory . . . that it may be occupied or

utilized for the purpose for which it is intended.” Exhibit 1 at 21. In addition, under the P&L

clause, it was YDJV’s obligation to obtain an occupancy certificate at the end of

construction. Exhibit 2 at 100. After Design Cell submitted the necessary NOCs to

MMRDA in August and September 2011, MMRDA notified YDJV on October 4, 2011, that,

once appropriate fees were paid, it would issue the occupancy certificate. Exhibit 16161.

On October 5, 2011, YDJV paid the fees, and MMRDA issued the certificate. On October 6,

2011, the contracting officer declared that the project was substantially complete.

Ultimately, there were 167 days of delay during this period before substantial

completion was achieved.

L&T’s Termination and Court Order

On April 6, 2011, YDJV terminated L&T as its subcontractor. Tr. Vol. 3 at 148;

Exhibit 1161. Following termination, L&T instituted an action in the High Court of

Judicature at Bombay, and, in connection with that action, the court issued an order to YDJV

on April 21, 2011, directing YDJV to perform “no further work . . . at site” pending an

CBCA 3350, 3672, 4658, 4659

inspection by a court-appointed commissioner. Exhibit 13212; see Tr. Vol. 3 at 148-49.

Despite its broad language, YDJV understood that the stop work order covered only work

that was encompassed within L&T’s contract – essentially, outdoor sitework in the south

parking lot and landscaping work. Exhibits 1161, 1451 at 83093; Tr. Vol. 3 at 148-49.

Although YDJV asserts that, because L&T had previously performed drywall work in the

NOB and the outbuildings, “the [entire] job site was effectively shut down as a result of that

order,” Tr. Vol. 3 at 149, we can find no support for that assertion in contemporaneous

documentation associated with the project.

The court order halted progress on the sitework and other areas in which L&T had

worked until May 26, 2011, when the order was lifted, and the replacement subcontractor

remobilized and completed the remaining sitework by June 15, 2011. Although YDJV

believes that the court order excusably delayed it by forty-seven days, we cannot find that any

delays arising from the L&T stop work order affected the critical path.

VI.

YDJV’s and DOS’s Claims, and Proceedings Before the Board

On August 30, 2012, YDJV submitted a certified claim, titled “REA 0034,” to the

DOS contracting officer, alleging that DOS’s improper withholding of pre-award information

linking tax disputes with the GoI to the issuance of permits, DOS’s issuance of a “stop work”

order prior to the GoI’s issuance of a PCC, the GoI’s change in visa policy, a sudden boom

in construction projects in Mumbai, and other changes caused YDJV to incur substantial

costs that DOS should bear and/or created excusable delays that entitled YDJV to a

non-compensable time extension. In its claim, YDJV requested a compensable time

extension of 868 calendar days, an additional excusable non-compensable time extension of

316 calendar days, and an equitable adjustment in the amount of $23,802,082.48. On

February 21, 2013, the DOS contracting officer issued a decision denying that claim and

asserting a government claim for liquidated damages for 1192 days of delay. YDJV filed its

first notice of appeal with the Board on April 19, 2013, appealing the contracting officer’s

February 21 decision. The Board docketed that appeal as CBCA 3350.

The parties soon thereafter engaged in an extensive and document-intensive discovery

process. The appeal file in this matter consists of more than 17,000 documents, and each

party took numerous depositions.

On December 18, 2013, while discovery was continuing in CBCA 3350, the DOS

contracting officer issued another decision, this time asserting (in a single document) several

government direct cost claims against YDJV totaling $892,810.42. YDJV appealed that

decision to the Board on January 8, 2014, in an appeal docketed as CBCA 3672. At the

parties’ joint request, that appeal was consolidated with CBCA 3350.

CBCA 3350, 3672, 4658, 4659

In December 2014, YDJV submitted two additional claims to the DOS contracting

officer for decision. On or about December 14, 2014, it submitted a claim seeking payment

of $53,136 for costs incurred to install occupancy sensors and associated infrastructure in the

CAA of the NOB, which YDJV claimed was a change that DOS had directed YDJV to

perform. On or about December 19, 2014, YDJV submitted another claim, seeking

reimbursement in the amount of $123,612 for utility bills that it paid between August 30,

2011 (the date upon which, according to YDJV, the DOS contracting officer should have

found YDJV had reached substantial completion) and October 6, 2011 (the date upon which

the contracting officer actually found substantial completion). The DOS contracting officer

denied the claims in separate decisions dated February 18 and 20, 2015, and YDJV appealed

those decisions on April 1, 2015, which the Board docketed as CBCA 4658 and 4659. Upon

the parties’ joint motion, the Board consolidated the two new appeals with CBCA 3350 and

3672.

The Board conducted a three-and-a-half week hearing in the consolidated appeals

beginning June 15, 2015. At the hearing, the parties presented a total of sixteen fact

witnesses, submitted the deposition designations of several other witnesses, and presented

oral testimony of five expert witnesses. The expert witnesses included each party’s

scheduling expert, each of whom prepared a delay analysis in which he opined as to the

causes of delay on the project, responsibility for each delay, and the impact of each delay.

YDJV’s scheduling expert, who presented extensive testimony at the hearing about

his detailed schedule analysis of the project, was Charles Y. Choyce, Jr., who is currently the

managing director of the Berkeley Research Group, LLC. Mr. Choyce graduated from law

school in 1979 and subsequently went into private legal practice, during which time he

focused on construction and labor law. In 2000, Mr. Choyce left legal practice to join a

forensic schedule delay analysis firm, where he engaged in extensive training in hands-on

scheduling practices and prepared numerous baseline schedules, schedule updates, and

recovery schedules for major projects. He holds four professional certificates and is a

certified forensic consultant of the Association for the Advancement of Cost Engineering

(AACE). YDJV retained him in late 2008 to assist it in evaluating the project delays, and he

worked with YDJV extensively through the date of the hearing. The Board accepted Mr.

Choyce as an expert in construction scheduling and inefficiency claims.

DOS presented its own scheduling expert, Mark Boe, a founding shareholder (since

1996) in Capital Project Management, Inc. Mr. Boe holds a Bachelor of Science degree from

the United States Coast Guard Academy in Civil Engineering and a Master of Science degree

in Civil Engineering/Construction Management. He has over thirty-five years of experience

in planning, scheduling, design, engineering, construction, project controls, and claims

analysis, and he has worked for the past twenty-five years as a delay and disruption

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consultant and expert on a variety of project types. He holds several professional

memberships and is registered as a planning and scheduling professional with AACE. The

Board accepted Mr. Boe as an expert in critical path method scheduling and delay analysis

and labor of productivity claims.

Following the hearing of these appeals, the parties engaged in extensive briefing. The

appeals are now before the Board for decision.

Discussion

YDJV’s Delay Claim

YDJV seeks more than $23 million in damages for the delays to this project, while

DOS seeks more than $11 million in liquidated damages. Below, we first address the

standards that we will apply in evaluating both parties’ delay claims. We then discuss the

main causes of delay that the parties have raised and our allocation of responsibility for each

of those causes. We subsequently address how each of the causes of delay impacted the

critical path of performance in each period of performance and, for each period, define the

number of days of compensable, excusable, and unexcused delay. Finally, we address the

damages calculation for these delays.

Standards for Evaluating Delay Claims

The Use of Critical Path Analysis

In this appeal, YDJV claims that DOS is responsible for numerous delays that it

incurred while constructing the NCC in Mumbai, delays that it asserts caused it to complete

work on the project late and for which it should be compensated. DOS asserts that virtually

all delays on this project were YDJV’s responsibility and that it, in turn, is entitled to recover

liquidated damages for YDJV’s delay in completing the project.

To the extent that the Government causes delays to a contractor’s work under a

contract that increase the contractor’s performance costs, the contractor may seek

compensation for its damages. Mega Construction Co. v. United States, 29 Fed. Cl. 396, 423

(1993). Yet, the mere fact that there is some delay to some aspect of planned contract work

is not enough to establish that the contractor’s ultimate contract performance costs or time

increased.

CBCA 3350, 3672, 4658, 4659

In evaluating the effect of Government-caused delays on the contractor’s ultimate

performance time and cost, tribunals generally look to the critical path of contract

performance, a method of delay analysis that the Court of Claims explained as follows:

Essentially, the critical path method is an efficient way of organizing and

scheduling a complex project which consists of numerous interrelated separate

small projects. Each subproject is identified and classified as to the duration

and precedence of the work. (E.g., one could not carpet an area until the

flooring is down and the flooring cannot be completed until the underlying

electrical and telephone conduits are installed.) The data is then analyzed,

usually by computer, to determine the most efficient schedule for the entire

project. Many subprojects may be performed at any time within a given period

without any effect on the completion of the entire project. However, some

items of work are given no leeway and must be performed on schedule;

otherwise, the entire project will be delayed.

Haney v. United States, 676 F.2d 584, 595 (Ct. Cl. 1982). “Where the time frame for

performance of an activity, set by the earliest possible start time and the latest possible finish

time, establishes a time interval equal to the expected activity duration, the activity is termed

‘critical,’” and “[n]o discretion or flexibility exists in the scheduling of that activity.”

J. Richard Margulies, “Delays, Suspension of Work, and Acceleration,” in Construction

Contracting 617, 662 (1991). Items of work for which there is no timing leeway “are on the

‘critical path,’” and “[a] delay, or acceleration, of work along the critical path will affect the

entire project.” Haney, 676 F.2d at 595.

Specifically, then, “to prevail on its claims for the additional costs incurred because

of the late completion of a fixed-price government construction contract, ‘the contractor must

show that the government’s actions affected activities on the critical path.’” George Sollitt

Construction Co. v. United States, 64 Fed. Cl. 229, 240 (2005) (quoting Kinetic Builder’s

Inc. v. Peters, 226 F.3d 1307, 1317 (Fed. Cir. 2000)). Typically, “[i]f work on the critical

path [i]is delayed, then the eventual completion date of the project [i]s delayed.” Affiliated

Western, Inc. v. Department of Veterans Affairs, CBCA 4078, 17-1 BCA ¶ 36,808, at

179,401 (quoting Mega Construction, 29 Fed. Cl. at 425). Conversely, “[a] government

delay which affects only those activities not on the critical path does not delay the completion

of the project.” George Sollitt Construction, 64 Fed. Cl. at 240 (emphasis added). As a

result, “the determination of the critical path is crucial to the calculation of delay damages.”

Wilner v. United States, 24 F.3d 1397, 1399 n.5 (Fed. Cir. 1994) (en banc) (quoting G.M.

Shupe, Inc. v. United States, 5 Cl. Ct. 662, 728 (1984)).

CBCA 3350, 3672, 4658, 4659

To satisfy its burden, the contractor must establish what the critical path of the project

actually was and then “demonstrate how excusable delays, by affecting activities on the

contract’s ‘critical path,’ actually impacted the contractor’s ability to finish the contract on

time.” 1-A Construction & Fire, LLP v. Department of Agriculture, CBCA 2693, 15-1 BCA

¶ 35,913, at 175,557, appeal dismissed, No. 15-1623 (Fed. Cir. Jan. 28, 2016); see Mega

Construction, 29 Fed. Cl. at 425-26. This is done through “an analysis to show ‘the

interdependence of any one or more of the work items with any other work items’ as the

project progressed.” 1-A Construction, 15-1 BCA at 175,557 (quoting Mega Construction,

29 Fed. Cl. at 428); see PCL Construction Services, Inc. v. United States, 47 Fed. Cl. 745,

801-02 (2000) (“Part of understanding that an activity belongs on the critical path of a project

is also an understanding of how that activity affects the other activities.”), aff’d, 96 F. App’x

672 (Fed. Cir. 2004). “One established way to document delay is through the use of

[contemporaneous] Critical Path Method (CPM) schedules and an analysis of the effects, if

any, of government-caused events.” PCL Construction Services, 47 Fed. Cl. at 801. In fact,

in situations, as here, where the contractor utilized Primavera scheduling software to create

schedules throughout the life of the project, it would be folly to utilize some other method

of critical path analysis.

Because the critical path of construction can change as a project progresses, “activities

that were not on the original critical path subsequently may be added,” Sterling Millwrights,

Inc. v. United States, 26 Ct. Cl. 49, 75 (1992), and, to preclude post hoc rationalization and

speculation, it is important that the contemporaneous schedules that the contractor uses to

show critical path delay are updated throughout contract performance to reflect changes as

they happened. PCL Construction Services, 47 Fed. Cl. at 801; Norair Engineering Corp.,

ENG BCA 3804, et al., 90-1 BCA ¶ 22,327, at 112,205. “[A]ccurate, informed assessments

of the effect of delays upon critical path activities are possible only if up-to-date CPM

schedules are faithfully maintained throughout the course of construction.” Blinderman

Construction Co. v. United States, 39 Fed. Cl. 529, 585 (1997), aff’d, 178 F.3d 1307 (Fed.

Cir. 1998) (table).

Nevertheless, the existence of contemporaneous schedules does not permit a tribunal

to ignore, or fail to consider, logic errors in those schedules. A CPM schedule, even if

maintained contemporaneously with events occurring during contract performance, is only

as good as the logic and information upon which it is based. CPM “is not a ‘magic wand,’

and not every schedule presented will or should be automatically accepted merely because

CPM technique is employed.” Margulies, supra, at 664. “To be a reliable basis for

determining delay damages, a CPM schedule must reflect actual performance” and must

“‘comport with the events actually occurring on the job.’” J.R. Roberts Corp., DOT BCA

2499, 98-1 BCA¶ 29,680, at 147,009 (quoting Ballenger Corp., DOT CAB 72-32, et al., 84-1

BCA ¶ 16,973, at 84,524 (1983)). Tribunals may need to “inquire into the accuracy and

CBCA 3350, 3672, 4658, 4659

reliability of the data and logic underlying the CPM evaluation” in appropriate circumstances

and reject CPM analyses if “the logic was not credible or was ‘suspect.’” Margulies, supra,

at 664; see Dawson Construction Co., VABCA 3306, 93-3 BCA ¶ 26,177, at 130,314

(discounting CPM schedule because, in part, its “logic was not fully revised and updated to

reflect actual construction or what was, in fact, critical”), aff’d, 34 F.3d 1080 (Fed. Cir.

1994).

II.

The Effect of Concurrent Contractor Delays

Even if the contractor shows delay by the Government that affects the critical path,

the contractor must also establish that it was not concurrently responsible for delays. “Courts

will deny recovery where the delays [of the Government and the contractor] are concurrent

and the contractor has not established its delay apart from that attributable to the

government.” William F. Klingensmith, Inc. v. United States, 731 F.2d 805, 809 (Fed. Cir.

1984); see Coath & Goss, Inc. v. United States, 101 Ct. Cl. 702, 714-15 (1944) (“Where both

parties contribute to a delay neither can recover damage, unless there is in the proof a clear

apportionment of the delay and the expense attributable to each party.”). Nevertheless, any

contractor-caused delays must affect the critical path of contract performance to be

considered “concurrent” – contractor delays that, absent the Government-caused delay,

would have had no negative impact upon the ultimate contract completion date do not affect

the Government’s monetary liability. Blackhawk Heating & Plumbing Co., GSBCA 2432,

76-1 BCA ¶ 11,649, at 55,579 (1975). For the same reasons discussed above, “[b]ecause

concurrent delays which do not affect the critical path of contract work do not delay project

completion, an accurate critical path analysis is essential to the determination of whether

concurrent delays have caused delay damages related to the delayed completion of a complex

construction project.” George Sollitt Construction, 64 Fed. Cl. at 241.

III.

Excusable Delays and Liquidated Damages

In these appeals, not only has YDJV raised affirmative delay claims against the

Government, but also the Government has demanded liquidated damages arising out of what

DOS considers to be YDJV-caused delays in project completion.

In response to a challenge to a liquidated damages claim, the Government has “the

initial burden of going forward to show that the contract was not completed by the agreed

contract completion date and that liquidated damages were due and owing,” meaning that

“the period for which the assessment was made” was properly calculated. Central Ohio

Building, Inc., PSBCA 2742, 92-1 BCA ¶ 24,399, at 121,824. Once the Government satisfies

that initial burden, the contractor bears the burden of establishing that any delays on the

project were excusable and that, as a result, “it should be relieved of all or part of the

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assessment.” Id.; see Sauer Inc. v. Danzig, 224 F.3d 1340, 1347 (Fed. Cir. 2000) (“As a

general rule, a party asserting that liquidated damages were improperly assessed bears the

burden of showing the extent of the excusable delay to which it is entitled.”). Obviously, if

the contractor shows that a critical path delay was caused by the Government, the

Government cannot charge the contractor with financial responsibility for that delay.

However, in establishing excusable delay, the contractor may also point to causes outside the

Government’s control – causes of delay that would not entitle the contractor to financial

reimbursement or damages from the Government – but for which the contractor should not

be held financially responsible in the form of liquidated damages.

YDJV’s contract expressly provided that YDJV would “be allowed time, not money,

for excusable delays as defined in FAR 52.249-10, Default,” Exhibit 1 at 32 (clause F.9)

(emphasis added), which are defined in FAR 52.249-10(b)(1) as “unforeseeable causes

beyond the control and without the fault or negligence of the Contractor.” 48 CFR 52.24910(b)(1). The non-exhaustive list of excusable delays identified in FAR 52.249-10(b)(1), as

supplemented by clause F.9, includes acts of God, acts of a host country government in its

sovereign capacity, fires, floods, epidemics, strikes, and unusually severe weather. Id.

“Obviously, a contractor has no control over whether it rains, whether there is a flash flood,

or whether there are forest fires, and the Government cannot penalize a contractor . . . when

a delay is caused by such uncontrollable circumstances.” Asheville Jet Charter &

Management, Inc. v. Department of the Interior, CBCA 4079, 16-1 BCA ¶ 36,373, at

177,301.

Nevertheless, the mere fact that a delay is caused by a type of activity listed in the

contract as generally excusable does not give the contractor carte blanche to rely upon such

excuses. “The purpose of the proviso,” which is “to protect the contractor against the

unexpected, and its grammatical sense both militate against holding that the listed events are

always to be regarded as unforeseeable, no matter what the attendant circumstances are.”

United States v. Brooks-Callaway Co., 318 U.S. 120, 122-23 (1943). As the Supreme Court

has explained, “[a] quarantine, or freight embargo, may have been in effect for many years

as a permanent policy of the controlling government” and, if so, may not meet the definition

of a cause “unforeseeable” at the time of contract award, even if quarantines and freight

embargoes are listed in the contract as examples of possible excusable causes of delay. Id.

at 123.

Further, even if an unforeseeable cause of delay occurs, the contractor cannot sit back

and fail to take reasonable steps in response to it – once such an unforeseeable event occurs,

the contractor affected by it has an obligation to attempt to mitigate the resulting damage to

the extent that it can. Restatement (Second) of Contracts § 350 (1981); see Signal

Contracting, Inc., ASBCA 44963, 93-2 BCA ¶ 25,877, at 128,736 (contractor facing contract

CBCA 3350, 3672, 4658, 4659

delay “has a duty to mitigate [its] damages” to the extent that it reasonably can). If the

contractor fails to do so, it “may not recover those damages which could have been avoided

by reasonable precautionary action on its part.” Midwest Industrial Painting of Florida, Inc.

v. United States, 4 Cl. Ct. 124, 133 (1983).

To the extent that the contractor can show that excusable delay affected the critical

path of performance, the Government can recover liquidated damages only to the extent that

there were additional delays for which the contractor was responsible (beyond those that

were excusable) and that “there is in the proof a clear apportionment of the delay and the

expense attributable to each party.” Sauer, 224 F.3d at 1347; see Robinson v. United States,

261 U.S. 486, 488 (1923) (“Since the contractor agreed to pay at a specified rate for each

day’s delay not caused by the government, it was clearly the intention that it should pay for

some days’ delay at that rate, even if it were relieved from paying for other days, because of

the government’s action.”). For the same reasons that a CPM analysis is necessary to

determine whether and the extent to which a contractor is entitled to delay damages for

Government-caused delays, such an analysis is equally necessary to permit a tribunal to

assess when, and the extent to which, the Government is entitled to recover liquidated

damages for a contractor’s delays in performance. Fireman’s Fund Insurance Co. v. United

States, Nos. 93-441C, et al., 2001 WL 36415627, at *47-*48 (Fed. Cl. Aug. 1, 2001).

Specific Alleged Causes of Delay on this Project

YDJV’s Superior Knowledge Claim

General Standards

YDJV asserts that DOS is liable for breach of contract based upon the agency’s failure

to disclose its superior knowledge of the pre-existing tax disputes between the USG and the

GoI, which ultimately delayed the permitting process and further construction on the project.

DOS counters that the fixed-price, design-build nature of its contract placed substantial risks

on YDJV as the contractor. Under such a contract, DOS contends, the contractor’s

“commitment to a fixed-price strongly suggest[s] that it . . . assumed all the uncovered risks

inherent in its promised performance” and that, “by accepting responsibility for design, the

contractor . . . assumes the risks of any defects or deficiency in the design” and “must

determine the cause of,” and resolve, any problems as they arise. Respondent’s Post-Hearing

Brief at 2-3.

“The essence of a firm fixed-price contract is that the contractor, not the government,

assumes the risk of unexpected costs.” Lakeshore Engineering Services, Inc. v. United

States, 748 F.3d 1341, 1347 (Fed. Cir. 2014). Nevertheless, “under certain circumstances

CBCA 3350, 3672, 4658, 4659

the government owes a duty to disclose critical information to a contractor that is necessary

to prevent the contractor from unknowingly pursuing ‘a ruinous course of action.’” CAE

USA, Inc. v. Department of Homeland Security, CBCA 4776, 16-1 BCA ¶ 36,377, at 177,350

(quoting McDonnell Douglas Corp. v. United States, 182 F.3d 1319, 1329 (Fed. Cir. 1999)

(quoting Helene Curtis Industries, Inc. v. United States, 312 F.2d 774, 778 (Ct. Cl. 1963))).

If the Government violates its duty of disclosure, it alters the contractor’s assumption of the

risk of unexpected costs to the extent that the lack of information ultimately increases the

contractor’s costs:

Where the Government has made no misrepresentations, has no duty to

disclose information, and does not improperly interfere with performance, the

fixed-price contractor of course bears the burden of unanticipated increases in

cost; the Government can rightly rely on him to fulfill the agreement he chose

to make. In the same way, an end-product specification normally leaves it to

the contractor to perform as best he can, but that does not excuse the defendant

from liability if it breaches an independent duty to reveal data or if the

end-product specification embodies a material misrepresentation misleading

the contractor.

Helene Curtis Industries, 312 F.2d at 777-78 (citations omitted).

Nevertheless, “[t]he superior knowledge doctrine only applies ‘in limited

circumstances.’” CAE USA, Inc., 16-1 BCA at 177,351 (quoting GAF Corp. v. United States,

932 F.2d 947, 949 (Fed. Cir. 1991)). Generally, the superior knowledge doctrine affords

relief to a contractor only to the extent that the Government fails “to disclose to [the]

contractor otherwise unavailable information regarding some novel matter affecting the

contract that is vital to its performance.” Scott Timber Co. v. United States, 692 F.3d 1365,

1373 (Fed. Cir. 2012) (quoting Giesler v. United States, 232 F.3d 864, 876 (Fed. Cir. 2000)).

The Court of Appeals for the Federal Circuit has applied the following four factors in

evaluating whether the superior knowledge doctrine applies in a given situation:

The doctrine of superior knowledge is generally applied to situations where

(1) a contractor undertakes to perform without vital knowledge of a fact that

affects performance costs or duration, (2) the government was aware the

contractor had no knowledge of and had no reason to obtain such information,

(3) any contract specification supplied misled the contractor or did not put it

on notice to inquire, and (4) the government failed to provide the relevant

information.

CBCA 3350, 3672, 4658, 4659

Scott Timber, 692 F.3d at 1373 (quoting Hercules, Inc. v. United States, 24 F.3d 188, 196

(Fed. Cir. 1994), aff’d, 516 U.S. 417 (1996)).

It is clear that the doctrine does not require the Government to volunteer each and

every piece of information known to it. CAE USA, Inc., 16-1 BCA at 177,351. In fact, doing

so unnecessarily could deter or confuse bidders and reduce competition. See American Ship

Building Co. v. United States, 654 F.2d 75, 81 (Ct. Cl. 1981) (“In borderline situations, talk

that would discourage bidders from bidding must be eschewed; the need for the warning

must therefore be manifest.”). The superior knowledge doctrine only requires disclosure of

“the ‘vital’ and ‘essential’ information” that a contractor needs, as it develops its proposal

or bid, to understand the performance or cost risks that it would be undertaking if awarded

the contract in question. CAE USA, Inc., 16-1 BCA at 177,352; see ECOS Management

Criteria, Inc., VABCA 2058, 86-2 BCA ¶ 18,885, at 95,260 (a necessary element of superior

knowledge claim is that “the ‘special’ knowledge withheld was ‘vital to the successful

completion of the contract’” (quoting Piasecki Aircraft Corp. v. United States, 667 F.2d 50,

59 (Ct. Cl. 1981) (quoting H.N. Bailey & Associates v. United States, 449 F.2d 376, 382-83

(Ct. Cl. 1971))).

The existence of a duty of disclosure “depends upon a variety of factors, including the

ease of discovering the information from other sources.” Meredith Construction Co., DOT

CAB 1549, 85-1 BCA ¶ 17,896, at 89,618. “[T]he Government is under no duty to volunteer

information in its files if the contractor can reasonably be expected to seek and obtain the

facts elsewhere . . . .” H.N. Bailey, 449 F.2d at 383. If a situation is not one in which “a

Government agency withheld or concealed vital information which it alone had, and which

it knew that bidders did not have,” the superior knowledge doctrine does not apply.

T.F. Scholes, Inc. v. United States, 357 F.2d 963, 970 (Ct. Cl. 1966) (emphasis added); see

Scott Timber, 692 F.3d at 1373 (“the doctrine only applies if ‘the government was aware the

contractor had no knowledge of and had no reason to obtain such information’ and ‘any

contract specification supplied misled the contractor or did not put it on notice to inquire’”).

A contractor asserting that the Government withheld vital information bears the

burden of establishing by “specific evidence” each element of its superior knowledge claim.

GAF Corp., 932 F.2d at 979. This includes the burden of establishing that the undisclosed

information ultimately contributed to delays in, or increased costs of, its performance. Bay

Shipbuilding Co. v. Department of Homeland Security, CBCA 54, et al., 07-2 BCA ¶ 33,678,

at 166,742.

CBCA 3350, 3672, 4658, 4659

The NCC Tax Dispute

YDJV complains that DOS breached the contract by failing, prior to award, to disclose

that there were unpaid taxes on the NCC property, the nonpayment of which ultimately

delayed the GoI’s issuance of some building permits. “When analyzing a claim that the

Government breached its duty to disclose superior knowledge, the Board ‘must focus its

inquiry on the government’s knowledge at the time of contracting and its relationship to the

contractor’s lack of knowledge.’” Bay Shipbuilding, 07-2 BCA at 166,743 (quoting L.W.

Matteson, Inc. v. United States, 61 Fed. Cl. 296, 316 (2004)).

By the time that DOS awarded this contract to YDJV, the GoI had made clear to DOS

that it was planning to tie the issuance of NCC building permits to the United States’

resolution of outstanding tax issues. Some of the DOS officials at the United States Embassy

in New Delhi were concerned that the GoI was going to hold NCC building permits hostage

to get the tax issues resolved, and there was discussion within DOS about how to resolve the

issue, with the constant understanding that the United States, in reliance on the Vienna

Convention, would not pay the taxes. At the same time, the City of New York was pursuing

a lawsuit against the GoI, seeking payment of real estate taxes on a GoI compound housing

the GoI’s United Nations workers, and the GoI made clear that it wanted DOS’s assistance

in resolving that dispute. On several occasions between 2003 and the date of contract award

in 2005, the GoI had identified to DOS representatives the reciprocal nature of DOS’s

request for tax exemptions on United States properties in India and the GoI’s expectation of

the same exemptions for its properties in the United States. Although some individuals

within DOS believed that the GoI would not actually withhold permits or that the issue would

be resolved diplomatically before it could affect the NCC construction,27 those beliefs, with

the benefit of hindsight, were incorrect.

Had the situation been what it had been for many years preceding 2003, we would be

more forgiving of DOS’s non-disclosure about tax disputes. Since the 1970s, the local GoI

authorities had been sending tax bills to the United States for the NCC and other properties,

and DOS had routinely responded by referencing the Vienna Convention’s protection against

such taxes. Historically, the GoI authorities had never taken any action following DOS’s

responses, making non-payment seem a non-issue. See, e.g., Tr. Vol. 9 at 16-18, 22-23. To

satisfy its duty of disclosure, the Government need only provide “vital” information affecting

In 2004, DOS launched what it called the Diplomatic Tax Relief Initiative, which

was to assist in negotiations with foreign governments to obtain savings from foreign taxes.

Exhibits 1474, 1475. The creation of such a program did not eliminate the risk that the NCC

permits would be delayed for tax non-payment and did not justify non-disclosure of the risk.

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performance costs or duration, Scott Timber, 692 F.3d at 1373, and it seems unlikely that, had

the two governments’ historical dealings remained static, DOS would not have had any

reason to suspect that non-payment was an issue that could affect permit issuance. DOS has

no obligation to disclose information about its diplomatic relations with a foreign

government where there is no viable reason to suspect that the information will affect project

costs or duration.

Here, though, DOS had specific information, and specific concerns, about the

likelihood that the GoI was going to try to use payment of the outstanding tax bills (or DOS’s

assistance in resolving the City of New York’s lawsuit against the GoI for unpaid taxes) as

leverage for the issuance of building permits for the specific NCC project at issue here. It

was folly for DOS to withhold knowledge of that type of specific targeted collection effort

from offerors when, at the same time, it was placing on bidders the obligation to obtain those

building permits and burdening them with the risk that there would be delays in permit

issuance. In such circumstances, DOS had an affirmative obligation to warn YDJV of the

strong possibility that permits would be held hostage over the tax disputes. Its failure to

disclose that information, while simultaneously writing the contract in a manner that placed

upon YDJV the risks associated with the permits, breached its duty of disclosure.

DOS raises several arguments in response to YDJV’s superior knowledge claim:

First, DOS argues that “consular facilities are exempt from property taxes” and that,

pursuant to the Vienna Convention, there should not have been any question about the NCC’s

exemption status. Respondent’s Post-Hearing Brief at 36. Whether there should have been

a question about the NCC status is irrelevant here. The only issue is whether DOS knew that

the GoI was likely to stall issuance of NCC building permits as a means of getting action on

the GoI’s tax disputes. DOS knew, or should have known, that. DOS could not assign to

YDJV the risk that the GoI would refuse to issue or delay issuing NCC building permits

when, at the same time, it knew, but failed to disclose, that the GoI was likely to do so.

Second, DOS argues that its employees did not actually believe that the GoI would

follow through and interfere in the NCC permit process, meaning that DOS did not possess

information or have knowledge about possible NCC permit problems. We reject DOS’s

argument. Although some DOS employees may have believed that these issues would be

resolved through diplomacy before permits became an issue, that view was not universally

accepted within DOS. DOS made a judgment call in discounting specific information in its

possession that the GoI might interfere in the permit issuance process. When it failed to

disclose that information to offerors, DOS decided to take a risk that its judgment call was

correct. If it had been, and the GoI had continually issued permits without regard to the tax

disputes, DOS’s gamble would have paid off. DOS could not, however, make such a

CBCA 3350, 3672, 4658, 4659

judgment call while, at the same time, shifting to YDJV the risk that the judgment call was

wrong. When the agency failed to disclose the risk, the agency assumed financial

responsibility for that risk.

Third, DOS argues that the information at issue here was not solely in DOS’s

possession. News about the City of New York lawsuit, it asserts, was reported in various

newspapers, as well as in public filings in the United States district court in whic

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