United States Court of Appeals for the Federal Circuit
2006-5093
ACE CONSTRUCTORS, INC.,
Plaintiff-Appellee,
v.
UNITED STATES,
Defendant-Appellant.
W. Robert Vezina, III, Vezina, Lawrence & Piscitelli, P.A., of Tallahassee, Florida,
argued for plaintiff-appellee.
Timothy P.McIlmail, Trial Attorney, Commercial Litigation Branch, Civil Division,
United States Department of Justice, of Washington, DC, argued for defendant-
appellant. With him on the brief were Peter D. Keisler, Assistant Attorney General,
David M. Cohen, Director, and Donald E. Kinner, Assistant Director. Of counsel was
Lloyd Rex Crosswhite, Office of Counsel, United States Army Corps of Engineers, of
Fort Worth, Texas.
Appealed from: United States Court of Federal Claims
Judge Charles F. Lettow
United States Court of Appeals for the Federal Circuit
2006-5093
ACE CONSTRUCTORS, INC.,
Plaintiff-Appellee,
v.
UNITED STATES,
Defendant-Appellant.
__________________________
DECIDED: September 19, 2007
__________________________
Before MICHEL, Chief Judge, NEWMAN and DYK, Circuit Judges.
NEWMAN, Circuit Judge.
ACE Constructors, Inc. entered into a contract with the United States Army Corps of
Engineers to build a structure designated the Ammo Hot-Load Facility, at Biggs Army
Airfield at Fort Bliss in El Paso, Texas. Several disputes arose and, after a five-day trial,
the Court of Federal Claims decided several issues in favor of ACE, awarded an equitable
adjustment to ACE in the amount of $1,383,009 with statutory interest, and ordered the
return of liquidated delay damages in the amount of $246,130. 1 On this appeal by the
United States, we affirm the judgment of the Court of Federal Claims.
BACKGROUND
The facts are fully set forth in the trial court's opinion. In brief, the project included
construction of a loading area for cargo planes, various roadways, buildings, a storage pad,
a loading apron, and a taxiway for airplanes. The site contained hills and other terrain that
needed to be excavated, leveled, and filled. The bid solicitation materials included
architectural drawings and engineering specifications prepared for the government by the
engineering firm of Crawford, Murphy & Tilly, Inc., which plans were incorporated into the
contract. The Court of Federal Claims found, and the government does not dispute, that
certain drawings and specifications were incomplete and defective.
During performance ACE encountered numerous difficulties. ACE was required by
the Corps of Engineers or by the actual conditions encountered to alter its construction
procedures, and experienced significant additional costs. There were various contract
modifications, delays, and changes to ACE's roster of subcontractors. The project was
ultimately completed to the government's satisfaction, and ACE filed several claims for its
additional costs based on the unforeseen conditions and defective specifications. The
contracting officer granted some of ACE's claims and denied others. ACE appealed to the
Court of Federal Claims, as provided by the Contract Disputes Act, 41 U.S.C. '605. That
court provided additional relief. The government argues that ACE is not entitled to any
1 Ace Constructors, Inc., v. United States, 70 Fed. Cl. 253 (2006).
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additional recovery, and requests reversal of all of the relief granted by the Court of Federal
Claims.
Standard of Review
Decisions of the Court of Federal Claims receive plenary review as to issues of law,
and the court's factual findings are reviewed for clear error. E.g., Adams v. United States,
350 F.3d 1216, 1221 (Fed. Cir. 2003). The issues herein relate to contract interpretation,
the role of the defective specifications, and the foreseeability of the problems encountered.
In general the same contract law is applied when the government is party to a contract as
applies to contracts between private parties. See Mobil Oil Exploration & Producing
Southeast, Inc. v. United States, 530 U.S. 604, 607-08 (2000) ("'When the United States
enters into contract relations, its rights and duties therein are governed generally by the law
applicable to contracts between private individuals.'") (quoting United States v. Winstar
Corp., 518 U.S. 839, 895 (1996)).
I
THE PROFILOGRAPH CLAIM
The contract set forth two methods of measuring the smoothness of the concrete
paving, viz. straightedge testing and profilograph testing, the latter being the more
expensive method. ACE testified to its belief that the use of profilographic testing was
optional under the contract, and therefore that it used the straightedge method in
calculating its bid. However, during contract performance the Corps required profilographic
testing, which ACE performed under protest, until the Corps eventually agreed with ACE
that the straightedge method was better suited to this project. The Court of Federal Claims
2006-5093 3
awarded ACE its additional costs arising from use of the profilographic test method. The
government presented three arguments as to why these costs should not be awarded: first,
that the Court of Federal Claims lacked jurisdiction to review the contracting officer's
decision of this issue; second, that the contract required profilographic testing; and third,
that ACE had not shown that it based its bid on straightedge testing. The government
renews these arguments on this appeal.
A
With respect to jurisdiction of this issue, the government argues that ACE did not
exhaust its administrative remedies before the contracting officer, and thus could not
proceed in the Court of Federal Claims. The Contract Disputes Act, 41 U.S.C. '605(a),
requires that the contractor must have submitted the claim to a contracting officer, and that
the contracting officer issued a final decision concerning that claim. See, e.g., England v.
Swanson Group, Inc., 353 F.3d 1375, 1379 (Fed. Cir. 2004); Bath Iron Works Corp. v.
United States, 20 F.3d 1567, 1578 (Fed. Cir. 1994). The government argues that the claim
as presented to the Court of Federal Claims was not identical to that before the contracting
officer.
In Scott Timber Co. v. United States, 333 F.3d 1358 (Fed. Cir. 2003) this court
explained that the same claim must be presented to the Court of Federal Claims as was
decided by the contracting officer, but that this standard "does not require rigid adherence
to the exact language or structure of the original administrative CDA claim [when] they arise
from the same operative facts, claim essentially the same relief, and merely assert differing
legal theories for that recovery." Id. at 1365. The Court of Federal Claims found, and we
agree, that the claims before the contracting officer and the court did not differ significantly,
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for the claim concerning the use of profilograph testing was presented to the contracting
officer based on the same contract provisions, the same requirements made by the Army
Corps of Engineers, the same costs, the same requested relief, and the same legal
theories. This claim was properly before the court.
B
As to the question of what the contract required, the Court of Federal Claims
analyzed this issue in terms of "constructive change"; that is, whether the Army
constructively altered the contract, either expressly or implicitly, by requiring performance at
variance with that set forth in the contract. In contract interpretation, the plain meaning of
the contract's text controls unless it is apparent that some other meaning was intended and
mutually understood. See Banknote Corp. of America, Inc. v. United States, 365 F.3d
1345, 1353 (Fed. Cir. 2004) (in interpreting a solicitation, "[it] is ambiguous only if its
language is susceptible to more than one reasonable interpretation. . . . If the provisions of
the solicitation are clear and unambiguous, they must be given their plain and ordinary
meaning.")
Some portions of the contract treat profilographic testing as optional, and other
portions can be read as making this test obligatory. The contract specification with respect
to test method is either ambiguous or, when read as the government initially insisted,
defective. The contract refers to various testing procedures at various points in the
document, including both straightedge and profilographic testing. Contract &1.3.7 states:
The Contractor shall use one of the following methods to test and evaluate
surface smoothness of the pavement . . . . The profilograph method shall be
used for all longitudinal and transverse testing, except where the runs would
be less than 60 m in length and at the end where the straightedge shall be
used.
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&1.3.7.1(b) discusses the concrete's smoothness requirements and states:
Profilographic testing: The finished surfaces of the pavements shall have no
abrupt change of 3 mm or more, . . . when tested with an approved
California-type profilograph . . . .
&1.11.9 states:
The Contractor shall furnish and maintain at the job site, in good condition,
one 4 m straightedge for each paving train for testing the hardened portland
cement concrete surfaces . . . .
&1.11.10 provides:
The Contractor may furnish a 7.6 m profilograph for testing the finished
pavement surface . . . .
The government argued that these provisions show that the contract unambiguously
required profilographic testing. The government acknowledged that this specification, if
viewed as mandatory, was defective, because the straightedge method was better suited to
the required measurements, and during performance the Corps authorized use of the
straightedge method alone. At the trial Mr. Herrin, the Army's project manager who drafted
the relevant portions of the Solicitation, acknowledged the distinction between "shall" and
"may." He testified that profilographic testing was not suitable for this project, and that the
"requirement" was eventually dropped in favor of straightedge testing. In construing the
meaning of "shall" in &1.11.9 and "may" in &1.11.10, the Court of Federal Claims explained
the need to "honor[] the distinction" between "may" and "shall" in a contract, and concluded
that profilographic testing was permissive under the contract.
The Court of Federal Claims found that ACE reasonably concluded that
profilographic testing was not required by the contract, and that the Army's insistence on
this requirement, until it was found to be inappropriate, warranted compensation for the
2006-5093 6
additional costs incurred. We need not reach the question of whether the contract was
ambiguous, because we conclude that the contractor is entitled to recover on the defective
specification ground.
C
The government argues that even if the specification were defective, ACE has not
shown that it was misled by a defective specification, for contract &1.3.7 provided that "[t]he
Contractor shall use one of the following methods [profilograph or straightedge] to test . . .
surface smoothness of the pavement." The government refers to the testimony of ACE's
president, Mr. Fulkerson:
This test was not specified in the contract documents. It gave the contractor
the option of using this test or using a straight edge. We opted to use the
straight edge, and we were told we had to use the profilograph. So that, we
believe, is an additional cost . . . there was not [any cost in our bid for a
profilograph].
The government argued at trial, and in its brief on this appeal, that ACE recognized the
possibility of being required to use the profilograph, and therefore that the specification was
not defective. At oral argument of this appeal the government pressed the theory that the
specifications were indeed defective with respect to the profilograph testing requirement,
but that ACE did not assert and prove that it relied on the defective specification. However,
ACE's claim to the contracting officer stated that "[t]he third defect was the requirement
included in Specification Section 02753 Part 1.3.7 that profilograph testing [] be used." The
specifications were read by the government as requiring profilograph testing and they were
acknowledged as defective, for during performance the government, seeing its error,
changed to straightedge testing.
2006-5093 7
The Court of Federal Claims found that ACE acted reasonably in basing its bid on
the less expensive straight-edge testing technique. The government conceded that the
specification was defective, and required ACE to use the defective method for a period of
time. The court treated the requirement for profilographic testing as a compensable
constructive change in a defective specification, and held that ACE was entitled to recover
the additional cost thereof. Reversible error has not been shown in that ruling.
The government does not dispute quantum. The ruling as to this issue is affirmed.
II
THE CONCRETE PAVING CLAIM
On appeal the government again argues that the Court of Federal Claims did not
have jurisdiction to entertain this claim, and that ACE did not rely on the permissive or
defective specification in its bid.
A
As to jurisdiction, the government argues that the claim as raised in the Court of
Federal Claims differs from the claim as raised with the contracting officer. The Court of
Federal Claims found that the claims were the same, arising from the same operative facts
and raising the same issues and arguments. In its written claim to the contracting officer,
ACE incorporated the paving subcontractor's (Cambro Construction Company) claim:
[The specifications] required that the Contractor use rigid 3-meter steel forms
to form the concrete, but the contours resulting from the specified grade
elevation points could not be used constructed within the specified tolerances
from rigid 3-meter forms. Cambro submits that the tolerances specified in the
Contract cannot, as a matter of mathematical certainty, be maintained with
rigid 3-meter steel forms.
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A letter from ACE President Fulkerson to the Corps of Engineers (Aug. 6, 2003) recites this
defect in the specification and the alterations needed in the performance of the contract.
The government argues that the claim did not discuss how rigid-form paving in general was
not suitable to the project; this argument is belied by the claim itself. The Court of Federal
Claims did not err in finding that the jurisdictional requirements as to this claim were met.
B
At the trial it was explained that there are several types of concrete paving
techniques, including rigid or fixed-form paving and slip-form paving. Fixed-form paving
entails pouring wet concrete into pre-set metal or wooden forms, whereas slip-form paving
relies on temporary forms and relatively dry concrete. Slip-form paving is the more
complex and more expensive method. Again, the primary question underlying this issue is
which paving technique was required by the contract. The joint Stipulation of Facts
presented to the Court of Federal Claims stated that: "Section 02753 of the contract
Technical Provisions allowed the placement of concrete pavement using either fixed form
paving (& 3.5.5) or slip form paving (& 3.5.6)." ACE states that although the less expensive
fixed-form paving was authorized in the contract, and was the basis of ACE's bid, it was
required to use the more expensive slip-form paving. The court found that the fact that the
Corps designed the project for a slip-form paver while simultaneously approving the project
for a fixed-form paver constituted a defective design specification, and awarded ACE the
additional costs incurred.
The government argues that the trial court erred in awarding the additional costs of
using slip-form paving. The question focused on whether ACE should reasonably have
known at the time of the bid that the specification's requirement to use three-meter rigid
2006-5093 9
forms was defective in light of the grade and contour conditions of the site. The
government contends that ACE should have known that the fixed-form paving technique
was inappropriate for the job, and unreasonably relied on the defective contract
specification '02753 &3.5.5 in its bid. This specification states:
Fixed Form Paving
Paving equipment for fixed-form paving and the operation thereof shall
conform to the requirements of paragraph EQUIPMENT, all requirements
specified above under paragraph PAVING and as specified herein.
The subsequent subparagraphs describe the guidelines for fixed-form paving, including the
types of materials, necessary procedures, etc.
It is not disputed that the plans provided by the government and incorporated into
the contract were incomplete and defective. The government's position is that since its
specifications were defective, ACE should not have relied on them. The Court of Federal
Claims rejected this theory, and applied precedent that "[w]hen the government provides a
contractor with defective specifications, the government is deemed to have breached the
implied warranty that satisfactory contract performance will result from adherence to the
specifications, and the contractor is entitled to recover all of the costs proximately flowing
from the breach." Essex Electro Eng'rs, Inc. v. Danzig, 224 F.3d 1283, 1289 (Fed. Cir.
2000) (citing United States v. Spearin, 248 U.S. 132, 136 (1918)).
Concerning the omissions in the specification and the contract's defects, the
government's Project Engineer testified that the three-meter forms would not work with the
pavement design and that the project was not designed for rigid forms. The trial court
"accept[ed] that an engineer or experienced surveyor could have interpolated the panel
points . . . to derive a vertical curve or constantly changing gradient, [however,] a contractor
2006-5093 10
that is making a bid on a project typically is not expected to make such calculations." The
court found that ACE's reliance on the specifications in making its bid was reasonable, and
that the Corps "may not avoid liability for its own omissions and errors."
Impracticability of performance is "treated as a type of constructive change to the
contract; because a commercially impracticable contract imposes substantial unforeseen
costs on the contractor, the contractor is entitled to an equitable adjustment." Raytheon
Co. v. White, 305 F.3d 1354, 1367 (Fed. Cir. 2002) (quoting Restatement (Second) of
Contracts '261 cmt. d (1981)). No error has been shown in the trial court's analysis, or in
its finding that ACE reasonably relied on the government's defective specification,
experienced additional costs due to the paving technique, and is entitled to compensation
therefor.
III
THE DIFFERING SITE CONDITION EARTHWORK CLAIM
The Court of Federal Claims found that ACE encountered a Type I differing site
condition in that "[r]ather than being a balanced project as indicated by the cut-and-fill
schematics, the site required approximately 129,000 additional cubic yards of soil." A
"balanced project" is one where the amount of dirt excavated from a site is roughly
equivalent to what is needed for fill-ins and to meet embankment requirements. The
government does not dispute that this discrepancy was the result of a defective
specification, and that 129,000 additional cubic yards of fill were required.
The trial court found that these conditions were reasonably unforeseeable by ACE,
and awarded ACE a total of $501,012.49, calculated as $462,745.76 for direct costs on the
differing site condition and additional costs due to the constructive acceleration. The
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government does not now contest its liability, but disputes the quantum of compensation,
arguing that despite the defective specifications provided by the government, there was
evidence that ACE "knew better" concerning the conditions of the site. On appeal the
government contends that ACE should have foreseen this error in the specifications, and
bid accordingly. However, the record shows that before ACE bid on this project it retained
an expert consultant, Dirt-Tek, Inc., who analyzed the project based on the plans provided
by the Corps and concluded, based on these plans, that the project would be relatively
balanced, in that an approximately equal amount of dirt would be excavated as needed for
fill. On the totality of the evidence, the trial court found that ACE acted reasonably in
concluding that it would not need a significant amount of additional fill, and calculated its bid
accordingly.
The government also argues that the court should have taken into account that ACE
expected to achieve savings through excess fill or a "balanced project" -- although it turned
out to have been seriously unbalanced -- and that the government should be credited with
ACE's expected albeit unrealized savings. This argument was not presented to the
contracting officer, was not discussed in the decision of the Court of Federal Claims, and is
devoid of merit. Reversal is appropriate only when we are "left with the definite and firm
conviction that a mistake has been committed." United States v. U. S. Gypsum Co., 333
U.S. 364, 395 (1948). This burden has not been met.
The amount of fill used, and the costs incurred, are not disputed. The recovery for
this claim is affirmed. Other aspects of the judgment of the Court of Federal Claims were
not appealed, and remain in effect.
AFFIRMED
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