P.J. DICK INCORPORATED, Appellant,
v.
Anthony J. PRINCIPI, Secretary of Veterans Affairs, Appellee.
Anthony J. Principi, Secretary of Veterans Affairs, Appellant,
v.
P.J. Dick Incorporated, Appellee.
No. 02-1290.
No. 02-1401.
United States Court of Appeals, Federal Circuit.
April 7, 2003.
COPYRIGHT MATERIAL OMITTED COPYRIGHT MATERIAL OMITTED William E. Dorris, Kilpatrick Stockton LLP, of Atlanta, GA, argued for appellant P.J. Dick Incorporated.
John E. Kosloske, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, Department of Justice, of Washington, DC, argued for appellee Secretary of Veterans Affairs. With him on the brief were Robert D. McCallum, Jr., Assistant Attorney General; and David M. Cohen, Director.
Before NEWMAN, MICHEL, and BRYSON, Circuit Judges.
MICHEL, Circuit Judge.
P.J. Dick Inc. ("PJD") and the Secretary of Veterans Affairs ("Secretary") each appeal different aspects of the September 27, 2001, decision of the Department of Veterans Affairs Board of Contract Appeals ("Board") awarding $1,918,262 in damages to PJD for contract delays that were the fault of the government. P.J. Dick, Inc., VABCA Nos. 5597, et al., 2001-2 B.C.A. (CCH) ¶ 31,647,
* These appeals are related to a fixed-cost contract between the Department of Veterans Affairs ("DVA") and PJD to construct the Clinical Addition to the DVA Medical Center in Ann Arbor, Michigan. Under the contract, PJD was due to complete the work by January 12, 1998. During the contract the government issued over 400 orders changing the contract and causing various delays to different aspects of the project. These modifications increased the contract price by over five percent and caused the DVA to grant 107 days of additional contract performance time. In accepting the additional days to complete the contract, PJD reserved its right to seek additional impact and suspension costs. PJD completed the contract on September 29, 1998, 260 days after the original contract completion date and 153 days after the revised date.
PJD presented to the government contracting officer ("CO") claims for additional relief as a result of the delays to the contract. All of the claims were denied by the CO or were deemed denied by the CO's failure to timely issue a decision. PJD timely appealed the CO's denials to the Board, filing five delay appeals, an appeal for its contract balance, and an appeal for certain labor inefficiencies incurred by its electrical subcontractor. In essence, PJD claimed it was entitled to a time extension for all 260 days of delayed performance and sought field and home office overhead damages for most of these delays.
The Board reached several conclusions that are relevant to this appeal.1 The Board granted PJD a time extension for 260 days and initially concluded that only sixty days were due under the contract's Suspension of Work ("SOW") clause, but upon PJD's motion for reconsideration, revised that number upward to sixty-five days. The Board granted PJD field overhead for the days damages are due under the SOW clause, but determined that PJD was not entitled to damages for unabsorbed home office overhead (Eichleay damages) because: (1) the stipulation between the parties only addressed quantum and therefore did not remove the contractor's burden to prove entitlement to Eichleay damages, and (2) PJD had not shown it was on stand by — one of several prerequisites for entitlement to Eichleay damages. A large portion of the extension (201 days) granted by the Board resulted from PJD's claim for delays due to the "combined directives." The "combined directives" were six separate contract change orders issued by the DVA over a ten-month period, all relating to installation of certain equipment in the Clinical Addition. Importantly for this appeal, the Board analyzed the effect of each of the changes as of the date of the earliest change, which gave PJD a larger delay than it would have received were the effects of the change orders analyzed separately on the dates the DVA issued them.
The Secretary and PJD each appeal different aspects of the Board's decision. The Secretary appeals the Board's conclusion granting 201 days of extension for the "combined directives" delay. The dispute on this question is whether the language of the contract requires the Board to analyze the effect of each change separately. PJD appeals the Board's denial of its claims for recovery of home office overhead. The primary issues here are whether the parties' stipulation entitled PJD to recovery of home office overhead and, if not, whether PJD had shown the DVA placed it on standby. Both appeals were timely filed and we have jurisdiction pursuant to 28 U.S.C. § 1295(a)(10).
II
Although we review the Board's interpretation of a contract de novo, the Board's interpretation "is accorded careful consideration due to the board's considerable experience in construing government contracts." Wickham Contracting Co. v. Fischer,
We conclude that the language of the contract required the Board to analyze the changes of the "combined directives" separately utilizing the most recent monthly update of the "computer-produced calendar-dated schedule." The express language of the contract establishes that the "current" schedule "will be" the basis for determining the extent of the delay. By using "will" the contract indicates that this is the sole method of calculating the delay. The Board circumvented this language by crediting litigation arguments that the six unrelated changes issued over ten months had a unitary effect, making the "time period in question" the date the DVA issued the first change order. This was error because the language of the contract requires the use of the "current" computer schedule as the basis for making such a determination. In other words, regardless of what the testimony showed, under the contract, the only way of determining the effect of the changes was to analyze each of them using the current computer schedule. Thus, if the changes did have a unitary effect, it had to be demonstrated by the computer model, not the testimony PJD presented.
We therefore reverse the Board's determination that the "combined directives" should all be analyzed utilizing the October 1995 schedule update — the update most current as of November 1995 — and remand for a damages analysis in accordance with this opinion.2 On remand the Board should determine whether PJD's delay claims that it found were not controlling because of the "combined directive" delay (the underground conduit and the radiology and cardiology claims) become controlling as a result of any reduction in the "combined directive" delay and analyze them accordingly.
III
A Board's interpretation of the tests for proving entitlement to Eichleay damages presents a question of law that we review de novo. West v. All State Boiler, Inc.,
The Board concluded that PJD was not entitled to Eichleay damages because it failed to prove that it was placed on standby. More specifically, the Board found that PJD was not placed on standby because "PJD was able to progress other parts of the work during the time periods it alleges it was suspended." PJD challenges the Board's conclusion on both legal and factual grounds. First, PJD argues the Board committed legal error because, it asserts, a contractor is automatically on standby any time there is a government-caused delay of an uncertain duration extending the performance of the contract, at the end of which the contractor can be required to immediately resume work. Thus, PJD argues, the Board's determinations that its direct billings remained substantial during the several suspension periods and that it accelerated the work on the contract are irrelevant. Second, PJD argues that substantial evidence does not support the Board's findings that its direct billings "show[ed] no appreciable diminution during the alleged suspension periods" and that it accelerated performance of the contract. We address each argument in turn.
In evaluating PJD's legal argument, we find it useful to clarify our case law delineating the standby requirement. A review of the pertinent case law shows that the standby inquiry is multifaceted. In making that inquiry, the court should first determine whether the CO has issued a written order that suspends all the work on the contract for an uncertain duration and requires the contractor to remain ready to resume work immediately or on short notice. See Interstate,
First, the contractor must show that the government-caused delay was not only substantial but was of an indefinite duration. See id. at 1058. For example, where the government suspends all work on the contract, but tells the contractor work will begin again on a date certain, the contractor cannot be on standby. See Melka,
Second, the contractor must show that during that delay it was required to be ready to resume work on the contract, at full speed as well as immediately. See id. Our case law has not elaborated on this requirement, but it is clear that once the suspension period is over, the contractor must be required to be ready to "resume full work immediately." E.g., id. at 1375; All State Boiler,
Third, the contractor must show effective suspension of much, if not all, of the work on the contract. Cf. Melka,
In addition to being implicit in our early cases, our later decisions explicitly state that such a suspension or delay of the work on the contract is a prerequisite to a finding that the government placed the contractor on standby. Melka,
In short, a court evaluating a contractor's claim for Eichleay damages should ask the following questions: (1) was there a government-caused delay that was not concurrent with another delay caused by some other source; (2) did the contractor demonstrate that it incurred additional overhead (i.e., was the original time frame for completion extended or did the contractor satisfy the Interstate three-part test); (3) did the government CO issue a suspension or other order expressly putting the contractor on standby; (4) if not, can the contractor prove there was a delay of indefinite duration during which it could not bill substantial amounts of work on the contract and at the end of which it was required to be able to return to work on the contract at full speed and immediately; (5) can the government satisfy its burden of production showing that it was not impractical for the contractor to take on replacement work (i.e., a new contract) and thereby mitigate its damages; and (6) if the government meets its burden of production, can the contractor satisfy its burden of persuasion that it was impractical for it to obtain sufficient replacement work. Only where the above exacting requirements can be satisfied will a contractor be entitled to Eichleay damages.
Turning to PJD's specific legal argument, our review of the law makes clear that the Board applied the correct legal standard for standby. Our case law clearly requires that the contractor must show a suspension, whether formal or functional, of all or most of the work on the contract. Melka,
As to PJD's factual arguments, those too must fail. The Board found that "[t]he evidence before us shows conclusively that PJD was able to progress other parts of the work during the time periods it alleges it was suspended." Although PJD argues the evidence shows its direct billings were greatly diminished during the delays, substantial evidence supports the Board's finding. The evidence, at worst, shows that in one of these delay periods PJD billed 53% less than it had the month before. There is, however, no evidence whatsoever that PJD's direct billings were less than they would have been absent the suspensions — that is the controlling test. A comparison of pre- and intradelay billings or intra- and postdelay billings is not the test. Regardless, PJD's direct billings during the delay periods can hardly be characterized as "minor." See Altmayer,
In sum, we hold that because the Board applied the proper legal test and because substantial evidence supports the Board's finding that PJD performed work on the contract during the delays, the Board correctly found that PJD failed to prove it was on standby.
IV
The interpretation of the parties' stipulation, like any contract, is a question of law which we review de novo. See Kearns v. Chrysler Corp.,
[F]or any days of delay for which it is determined that [PJD] is entitled to compensation under the Suspension of Work Clause in this appeal, [PJD's] recovery shall be calculated by multiplying that number of days by the following daily rates without the need for future proof of costs or damages [going on to include daily rates for field and home office overhead].
The Board, however, concluded that the stipulation related solely to quantum and thus PJD was still required to demonstrate entitlement to Eichleay damages. PJD argues that the stipulation only requires it to show entitlement to damages under the Suspension of Work contract clause. We agree with PJD's interpretation.
We conclude that the stipulation did obviate the need for PJD to separately prove facts demonstrating entitlement to Eichleay damages beyond showing its right to recover for delays compensable under the SOW clause. The language of the stipulation establishes a single condition precedent to PJD's receipt of the enumerated damages: entitlement to damages under the SOW clause. Entitlement to recovery under the SOW clause requires proof entirely different, and less demanding, than that required to show entitlement to Eichleay damages. Compare P.J. Dick, Inc.,
In addition, there are two indications in the record that the parties originally intended the stipulation to be interpreted in just such a manner. This is relevant as "the parties' contemporaneous construction of an agreement, before it has become the subject of a dispute, is entitled to great weight in its interpretation." Blinderman Constr. Co., Inc. v. United States,
The Secretary's arguments to the contrary do not dissuade us from our conclusion. Despite what its then-lawyer stated, the Secretary now argues that the "Stipulation on Quantum" relates only to Eichleay quantum and not to Eichleay entitlement. This argument, however, overlooks the express language of the stipulation and its establishment of a single condition precedent to recovery of all of the stipulated damages, including home office overhead. To read the stipulation any other way would require us to insert language requiring that in addition to showing entitlement to damages under the SOW clause, to recover home office overhead the contractor must also prove it satisfied the separate prerequisites to Eichleay damages.
In sum, we conclude that as a result of the clear terms of the stipulation, PJD needed only to prove entitlement to damages under the SOW clause to establish entitlement to all types of damages, including unabsorbed home office overhead. The Board found this condition met when it concluded that PJD had satisfied the four-part test for entitlement under the SOW clause for three of the government-caused delays. On remand the Board should, in accordance with the parties' stipulation, calculate the amount of home office overhead to which PJD is entitled for delays compensable under the SOW clause.
V
In conclusion, we hold: (1) that the express terms of the contract precluded the Board from analyzing the effect of all of the "combined directives" utilizing the computer schedule update current as of the date the DVA issued the first of those six change orders; rather, it must use the computer schedule current as of the date the DVA issued each change order; (2) that the Board correctly found that PJD did not prove it was on standby, but that PJD is nonetheless entitled to recovery of home office overhead damages because the parties' stipulation, as we construe it, removed the need for PJD to separately prove entitlement to home office overhead damages. We therefore reverse the Board's construction of the parties' stipulation, affirm the Board's determination that PJD was not on standby, and vacate the Board's analysis of the extent of the "combined directives" delay. On remand, the Board should: (1) determine the proper length of the "combined directives" delay by analyzing the effect of each of the six change orders separately using the computer schedule update that is current as of the time the DVA issued each change order and using the agreed-upon methodology (perhaps merely by looking at evidence already in the record); (2) determine whether PJD's other delay claims (the underground conduit and the radiology and cardiology claims) become controlling as a result of any reduction in the "combined directive" delay and, if so, analyze them accordingly; and (3) in accordance with the parties' stipulation, calculate the amount of home office overhead PJD is entitled to for government-caused delays compensable under the SOW clause and award that amount to PJD.
AFFIRMED-IN-PART, REVERSED-IN-PART, VACATED-IN-PART, AND REMANDED.
COSTS
No costs.
Notes:
Notes
For a more detailed account of the facts and PJD's various claims, we direct the reader to the Board's initial opinion,P.J. Dick, Inc., VABCA Nos. 5597, 2001-2 B.C.A. (CCH) ¶ 31,647,
On remand, it appears that there may be sufficient testimony in the record to allow the Board to determine the proper extent of the delay without taking new evidence
Our case law allows recovery where there has been a suspension of work on the contract but no delay to completion of the contract where, in addition to all of the other prerequisites to Eichleay damages, a contractor shows from the outset of the contract it: "(1) intended to complete the contract early; (2) had the capability to do so; and (3) actually would have completed early, but for the government's actions."Interstate,
This court has previously discussed the requirement in great detail and we direct the reader to that discussion for more guidanceAll State Boiler,
In this case, the Board had denied Eichleay damages on the theory that a subcontractor could not recover such damages where the contract was performed on time. On appeal, the government argued only in support of that proposition and did not argue that the subcontractor's "proofs of entitlement" were deficient in "any regard."Mitchell,
PJD billed $1,460,993 in the month prior to the delay, $687,464 during the delay, and $1,035,792 the month after the delay
Our holding that substantial evidence supports the Board's finding that PJD did do substantial work on the contract during the delay periods renders PJD's other arguments irrelevant
The government conceded at oral argument that its lawyer appearing before the Board had the authority to enter into a stipulation concerning entitlement and amount of Eichleay damages and thus does not challenge the stipulation on that ground. Oral Argument, March 3, 2003
Mech-Con,