100 Fed. Cl. 8
Fed. Cl.2011Background
- Plaintiff K-Con Building Systems, Inc. contracted with the Coast Guard for Port Huron, Michigan project under a GSA schedule-based award.
- The contract required phased design submissions (50%, 90%, 100%) and total completion within 300 days of award.
- Coast Guard design specs included climate control, electrical, HVAC, and telecom room requirements, with drawings provided as guidelines.
- The contract contained a liquidated damages clause of $589 per day for delay, calculated using Coast Guard overhead and travel/admin costs.
- Coast Guard initially approved 50% design in June 2004 and later withheld retainage, communicating ongoing schedule concerns and potential changes.
- Contrary to expectations, substantial design revisions and Coast Guard comments followed, some of which were argued by K-Con to constitute changes beyond the Scope of Services.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of liquidated damages rate as a reasonable forecast | Rate bears no reasonable relation to probable damages | Rate reasonable and enforceable given anticipated overheads | Enforceable; not a penalty |
| Remission of liquidated damages due to constructive suspension | Coast Guard constructively suspended work delaying performance | No suspension sufficient to remit liquidated damages | Delay not proven on the critical path; remission denied for now |
| Excusable delay and remission of damages | Coast Guard delays on changes excuse delay | No proof delay on critical path; need trial | Insufficient proof on critical path; remission denied at this stage |
| Whether Coast Guard comments constituted changes triggering changes clause | Comments imposed extrinsic requirements altering contract | Comments were reminders to comply with current standards | Genuine issues of material fact on notice and whether comments are changes |
| Notice requirements for changes under the Changes clause | Coast Guard's conduct and notices implied changes | Notice requirements not clearly satisfied | Genuine issues of material fact; unresolved. |
Key Cases Cited
- Priebe & Sons, Inc. v. United States, 332 U.S. 407 (U.S. 1947) (liquidated damages judged as of contract formation; reasonable forecast required)
- Jennie-O Foods, Inc. v. United States, 580 F.2d 400 (Ct.Cl. 1978) (usefulness of liquidated damages when damages uncertain)
- DJ Mfg. Corp. v. United States, 86 F.3d 1130 (Fed.Cir. 1996) (bears burden to show liquidated damages are not a penalty; reasonableness standard)
- Bethlehem Steel Co. v. United States, 205 U.S. 105 (1907) (enforce liquidated damages without proof of actual damages; reasonableness at formation)
- P & D Contractors, Inc. v. United States, 25 Cl.Ct. 237 (Cl.Ct. 1992) (reasonableness determined at contract formation; timing of challenge discussed)