Civilian Board of Contract Appeals Decision Highlights Importance of Consistent Project Records

In AMEC Foster Wheeler Environmental & Infrastructure, Inc., CBCA 5168, 6298 (November 13, 2019), the Civilian Board of Contract Appeals rejected in large part a federal contractor’s claims due to inconsistencies between the project records and the position that the contractor asserted in its appeal. In AMEC, the contractor sought damages in excess of $15 million from the National Park Service on a project involving the repair and restoration of Alcatraz prison.

The original task order was in the amount of about $4 million and, after a six day hearing, the Board held that it could not “trace responsibility to the Park Service for any of the costs or most of the time that Amec claims. Crucially, we see no basis to hold the agency liable for the difficulty that Amec’s original subcontractor had in meeting the project requirements, and no evidence that the agency caused Amec to terminate the subcontract for default, as Amec alleges.”

The Board further held with that piece of Amec’s damages excluded, “it becomes impracticable on this record to estimate what the project probably would have cost or how long it probably would have taken absent those problems.” Consequently, despite an admitted change to the scope of work and the Board’s acknowledgement that the change caused some measurable delay, the Board held that Amec did not prove that it incurred costs specifically to perform the modified work exceeding what Amec was paid for that work in the modification price.

The Board ultimately ordered the agency to remit $130,000 of the $511,000 in liquidated damages that the agency had assessed against Amec. The Board spent a significant portion of its decision pointing out that Amec:

• (a) Documented non-performance of its subcontractor Spectrum Services Group, Inc. (SSG) up to the point Amec terminated SSG; and
• (b) Consistently confirmed to the agency that SSG was the cause of problems experienced on the project.

The Board thereafter observed that Amec was unable to provide project records or testimony documenting what costs the replacement contractor incurred that were allocable to the changed work as opposed to the base contract work. Absent such evidence, the Board stated it had no basis to assess what a reasonable allocation of cost would be.

Appeal Blames Park Service for Subcontractor’s Termination

In its appeal, Amec alleged that the agency was responsible for Amec’s termination of SSG, asserting (a) the agency “placed an enormous amount of pressure on Amec to termination SSG”, and (b) “the severe underfunding and refusal to grant any additional time to perform [modification 1] contributed to the termination of SSG.”

• With respect to the first argument, the Board held the strongest evidence against faulting the agency for the termination was “the dog that didn’t bark,” i.e. the lack of any project documentation from Amec regarding agency “pressure.”
• With respect to the second argument, the Board referenced Amec’s communications advising SSG that it had not provided sufficient information to receive an extension of the period of performance due to the changed work.

As to the allegation of severe underfunding, the Board again pointed to the lack of any project documentation from Amec to the agency raising this issue.

The Board noted: “We find Amec responsible for the problems for which Amec blamed SSG during the project, leading up to and including the termination for default. This conclusion, in turn, gravely undermines the evidence that Amec cites is seeking additional time and money for performing modification 1 and alleged constructive changes.”

Contractors Failed to Establish Actual Delay Costs

The Board then turned to analyzing the delay claims by Amec, noting that both experts estimated the time impact by comparing the actual, as-built duration of the modified work with the planned duration of the unmodified work. The Board found this approach is only a minor variation on the disfavored “total time” methodology using “the difference in time between the planned completion date and the actual completion date.”

The Board determined that Amec proved 13 days of excusable delay and 117 days of compensable delay, which reflected a portion of the time between when the change was discovered and when Amec could proceed with the work. However, the Board also found that Amec was responsible for a portion of the delay due to its slow turnaround of pricing proposals and a delay in proceeding with the changed work.

• Despite finding 117 days of compensable delay, the Board did not award Amec any delay costs because Amec did not establish its actual costs. The Board held that Amec’s use of a derived daily rate based upon the labor rates in the task order, as opposed to actual costs, was insufficient. The Board stated “we must see evidence of general conditions costs to award them.”

The Board likewise refused to award Amec’s subcontractors their extended general conditions costs, noting “[w]e might be able to run the numbers to reconstruct a weighted daily rate for 117 days of compensable delay, but given the thinness of the support for SSG’s general conditions costs and the unexplained wide variance in the reported costs over time, we would essentially be speculating about the proper rate. We will not do so.”

The Board rejected other SSG management cost overruns due to the lack of proof as to how the cost overruns tied to the days of delay. In sum, the Board held that Amec was entitled to recover some liquidated damages costs but no delay costs.

Board Finds Amec Responsible for Delays in Modified Work

In analyzing Amec’s claim for delay arising out of performing the changed work, the Board noted the “fatal weakness” was that it found Amec responsible for all of the events that Amec says delayed the modified work. The Board supported its conclusion with the communications between Amec and SSG concerning SSG’s nonperformance.

• The Board concluded that “[l]acking a reliable time projection at the outset, and considering all of the contractor-caused disruption we describe above, we cannot estimate a reasonable extension by more than mere speculation” for the time to perform the changed work.

With respect to the claims for additional compensation for the cost of performing modification 1, the Board stated at the outset that Amec could not recover any costs attributable to SSG’s performance problems or to SSG’s departure and its replacement by Western Waterproofing, Inc. (Western). The Board stated the question that needed to be answered was what the modified work reasonably should have cost Amec using its original subcontractor. The Board held that Amec did not demonstrate that amount.

• The Board pointed out that the cost records of the actual work performed did not segregate between base contract and changed work, and in some instances the cost records did not distinguish between pre-change and post-change costs.

Finally, in addressing several inefficiency claims, the Board reiterated that the agency was not responsible for Amec’s added costs of completing the project with Western. For other inefficiency claim components, the Board pointed out the lack of project documentation or testimony supporting the amounts claimed.

Document Your Costs and Delineate Changed Work

In summary, this was a decision driven by the project records and the lack thereof.

The focus of documentation during the project was on subcontractor non-performance. In contrast, there was a paucity of documentation about agency non-performance. This imbalance created a difficult basis on which the contractor could build a significant claim against the agency.

Furthermore, the cost records did not provide an adequate basis to allocate costs to changed work versus base contract work, which undermined any effort on the part of the contractor to establish the actual cost of performing the changed work.

The teaching points arising out of this decision are (a) during the course of project performance, the contractor needs to document and communicate all project issues even when the contractor would prefer to maintain a smooth working relationship with the owner, and (b) the project cost records need to delineate between base contract and changed work to enable the contractor to recover for the actual cost of performing changed work.