HCS, Inc.
ASBCA No. 60533
| A.S.B.C.A. | Sep 20, 2016Background
- Navy issued a firm-fixed-price RFQ for repair of an 8" water main ("up to 60 ft" replacement) and a 4" isolation valve at NAS Corpus Christi; HCS submitted a $40,975 bid and won the contract.
- Site visit and contract language required selective excavation to expose leaking sections and replacement "as necessary"; FAR clauses for Differing Site Conditions and Changes were incorporated.
- Contractor (HCS subcontractor Quality Contracting) excavated ~10' of the 8" main, discovered the active leak was in a 4" branch that intersected the 8" main at a tee, and excavated the 4" line to locate the leak.
- The Navy COR directed the contractor to cap the 4" branch (added work) instead of allowing removal/replacement of the tee on the 8" main (work the contractor had planned and material for). The COR also directed an additional water-quality test.
- After completion, the CO issued a unilateral deductive modification removing all 8" pipe replacement work and reduced the contract price by ~$21,082 (to $19,892.87), relying on a COR R.S. Means estimate; HCS appealed to the ASBCA seeking the original contract price plus adjustments for extra work.
Issues
| Issue | HCS's Argument | Navy's Argument | Held |
|---|---|---|---|
| Whether the Government may unilaterally delete performed work and reprice a firm-fixed-price contract after completion | HCS: No; government cannot convert fixed-price contract into cost basis after performance; contractor is entitled to contract price unless gov't proves savings | Navy: Yes; CO unilaterally deleted 8" work after discovering differing condition and may reduce price by the cost savings (using COR/Means estimate) | Held for HCS: gov't failed to prove savings; cannot reprice completed work without showing net cost savings to contractor |
| Proper measure of credit for deleted work | HCS: Credit limited to actual net savings and must be supported by evidence; contractor provided credits/receipts for materials and labor | Navy: Used COR Means estimate instead of contractor records, asserting appellant failed to provide cost documentation | Held: Government bears burden to prove amount of savings; Navy did not rebut contractor's unchallenged evidence of credits and extra costs |
| Whether the contractor performed all original contract work | HCS: Performed all required work except replacement of the 8" tee portion after COR directed otherwise; performed added items (cap & water test) | Navy: Argues the contract required replacement/excavation of "up to 60 ft" and thus deletion justified | Held: Contract required selective replacement "as necessary"; HCS performed required work except the discrete 8" replacement the COR directed not to perform |
| Entitlement to adjustment for extra work (capping 4" and water test) | HCS: Entitled to reimbursement for extra work; provided amounts for cap, labor, and water test | Navy: Demanded receipts but did not challenge reasonableness at trial; relied on Means estimate instead | Held: HCS entitled to the unchallenged extra amounts; net result is HCS recovers contract price plus $282 net upward adjustment |
Key Cases Cited
- Nager Elec. Co. v. United States, 442 F.2d 936 (Ct. Cl. 1971) (government bears burden to prove amount of cost savings from deleted work)
- Bruce Constr. Corp. v. United States, 324 F.2d 516 (Ct. Cl. 1963) (equitable adjustment must relate to the altered position of the contractor caused by the modification)
Outcome: Appeal sustained. ASBCA awarded HCS $41,257 total (original contract $40,975 plus $282 net extra), less payments already received, plus CDA interest from date of claim.