May 2, 2014


*Laurence Schor represented MSA in the appeal

By: Jerry Walz

GSA A&E contract for the design of a new federal courthouse in Springfield, Massachusetts. Appellant appeals the denial of its claims of $2,946,622.99 arguing that GSA changed the criteria, wrongfully required MSA to provide a redesign to meet the design contract’s target construction budget directed efforts on the post-construction contract services (PCCS) which exceeded the scope of the modification concerning such work. Appellant also appeals $5,275,880 as reimbursement for escalation costs which GSA asserts as a counterclaim for consequential damages due to appellant’s late delivery of the project. The contract contained by reference FAR clause 52.236-22, “Design Within Funding Limitations.” In an 103 page opinion by Judge Pollack the Board grants in-part appellant’s affirmative claims and also grants appellant’s claim on the GSA counterclaim.

The Board rejected the GSA auditors position that appellant’s claim for extra “overtime” hours worked by salaried employees should not be considered and that the Government is not obligated to pay for value received. Although finding no cases directly on point, citing Neal & Co. v. United States, 17 Cl. Ct. 511 (1989), and GaN Corp., ASBCA 57834, 12-2 BCA ¶ 35,103, the Board finds “that the basic principle that one pays for value received should apply here.”

The Board finds that a GSA’s addition of Blast Enhancement and LEED compliance were significant changes in the design specification. Appellant submitted its design claim based on its total cost. The opinion discusses the ramifications of a total cost claim in significant detail and notes “our ultimate calculation is based on the modified total cost claim basis. In order to prevail on the modified basis, a claimant needs to establish four elements: (1) the nature of particular losses makes it impossible or highly impractical to determine the damages with a reasonable degree of accuracy, (2) the bid or estimate was realistic, (3) actual costs were reasonable, and (4) the contractor was not responsible for the added expense.”

The Board sustains the appeal of GSA’s counterclaim for consequential damages. On this issue the opinion concludes

“that in order for GSA to recover, either on its counterclaim or set off, GSA must show that the escalation damages were the result of negligence, the remainder of our analysis is not particularly complicated. We earlier found that MSA was liable under the Design Limitations clause to redesign. We based our decision in large measure on failures as to the estimate provided to GSA and the fact that the evidence indicated to us that CCS had erred in not taking steps to better verify the difficulties and costs associated with the planned construction. Neither at the hearing nor in documents has GSA established that failures associated with the estimate rose to a level that would qualify as professional negligence. While testimony and documents identified some bad choices and omissions as to the bid bust, the errors were not identified as negligence. Moreover, MSA did present testimony through its witnesses, who were architects, contending that the CCS estimate process was adequate and in line with what was required. In contrast, GSA presented no rebuttal from any architect or engineer. MSA also cited to the GSA and Heery reviews of the estimate, which it claims confirmed that CCS performed properly. As addressed in the redesign claim, we found that MSA did not meet the beyond reasonable control test, and based that largely on our finding of error in the estimating process. Error, however, does not equal professional negligence. For the latter, GSA needed at a minimum to provide an expert whose testimony or documents charged and then established that MSA was professionally negligent in its preparation and delivery of the design, so as to be liable for the consequential delay damages claimed. We find GSA did not establish negligence and accordingly we deny GSA’s counterclaim and set off. Accordingly, we grant MSA’s appeal as to on this matter.”