Ford Contracting, Inc. v. Kentucky Transportation Cabinet, 429 S.W.3d 397

Background

KY Transportation Cabinet awarded Ford Contracting a fixed-price bridge-replacement contract ($294,000) in March 2006; the contract incorporated KY standard specs and required a written notice to commence.
After public opposition about a 13-mile detour, the Cabinet put the Project on indefinite hold (May 9, 2006) while considering a temporary diversion bridge; Ford prepared estimates for the diversion and incurred preparatory costs and ordered materials.
The Cabinet cancelled Ford’s contract for convenience in June 2006 and later offered Ford minimal reimbursement; Ford sought administrative relief claiming $518,993.55 (later $553,100.60) in damages including idle equipment, lost profit, direct/indirect costs, and purchased materials.
An ALJ found the Cabinet improperly terminated for convenience and awarded $52,001.26 (just and equitable standard); the Cabinet rejected the improper-termination finding but reduced the award; circuit court reversed and remanded; on remand a Secretary’s Designee concluded termination was justified and affirmed the ALJ’s damages award; circuit court later reversed the termination ruling (which stood) but affirmed damages; Ford appealed.
Appellate court affirms in part, reverses in part, and remands: holds federal cost principles are not mandatory for this fixed-price breach remedy; finds idle-equipment and certain direct/indirect/labor damages were improperly denied and remands for further findings and awards on those categories; affirms denial of prejudgment interest and validity/timeliness of 2010 Final Order.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether 48 C.F.R. Part 31 (federal cost principles) are mandatory under KRS 45A.215 for damages calculation	Federal cost principles must be applied mandatorily to calculate damages	They are guidelines and not mandatory for fixed-price contracts; statutory text limits mandatory application to cost-reimbursement contexts	Not mandatory here; federal principles may be used as appropriate but are not required for this fixed-price breach remedy
Recoverability of idle-equipment (delay) damages	Idle-equipment costs caused by Cabinet’s hold are recoverable as separate compensable damages	Award of lost profits already compensates contractor; idle-equipment not separately recoverable	Idle-equipment damages are recoverable for owner-caused delay; remanded to determine reasonable amount for period May 9–June 10, 2006, with guidance on proof, measurement, and a 50% wear-and-tear reduction
Sufficiency of evidence for ALJ’s reductions of direct/indirect/labor costs	Ford’s submitted proofs support recovery for these categories	Cabinet’s accounting expert undermined Ford’s figures; ALJ credibility findings justified reductions	Court finds ALJ’s token award ($2,517) for these categories unsupported by substantial evidence; remands for Cabinet to award amounts consistent with record and credibility findings
Entitlement to prejudgment interest	Claim is liquidated; prejudgment interest should be awarded as of breach	Damages were unliquidated; prejudgment interest discretionary and equities do not favor Ford	Damages were unliquidated; denial of prejudgment interest was within ALJ’s discretion and is affirmed

Key Cases Cited

RAM Engineering & Construction, Inc. v. University of Louisville, 127 S.W.3d 579 (Ky. 2003) (good-faith duty limits termination discretion)
Hogan v. Long, 922 S.W.2d 368 (Ky. 1995) (measure of contract damages: position as if contract performed)
3D Enterprises Contracting Corp. v. Louisville & Jefferson County Metro. Sewer Dist., 174 S.W.3d 440 (Ky. 2005) (prejudgment interest: liquidated vs. unliquidated claims)
Nucor Corp. v. General Elec. Co., 812 S.W.2d 136 (Ky. 1991) (definition and examples of liquidated claims)
White Oak Corp. v. Department of Transportation, 585 A.2d 1199 (Conn. 1991) (discussing recoverability and measurement of idle-equipment damages)