DENIED:
November 12, 2009
CBCA
775
R.C.
PROFESSIONAL SERVICES, INC.,
Appellant,
v.
DEPARTMENT OF
HOMELAND SECURITY,
Respondent.
Richard Cora,
President of R.C. Professional Services, Inc., Gurabo, Puerto Rico, appearing
for Appellant.
Wilbert Jones,
Office of Procurement Law, United States Coast Guard, Department of Homeland
Security, Washington, DC, counsel for Respondent.
Before Board Judges DANIELS
(Chairman), HYATT, and VERGILIO.
VERGILIO, Board Judge.
On May 29,
2007, the Board received a notice of appeal from R.C. Professional Services,
Inc. (contractor) regarding its contract with the United States Coast Guard of
the Department of Homeland Security (Government). The contractor was to rehabilitate
(selectively demolish and reconstruct) a building. The Government conducted an inspection after
the contractor had requested a final inspection. The Government determined that various items
did not comply with specification requirements and that the contractor had not
provided warranties required under the contract. Items were not remedied in response to a cure
notice or to a show cause directive.
With work remaining incomplete, the contracting officer issued a
termination for default of the contractor=s right to proceed under the contract. With its timely-filed appeal, 41 U.S.C. '' 601-613 (2006), the
contractor here disputes the validity of the default determination.
The Government
has filed a motion for summary relief; the contractor has responded in
opposition. The Government maintains
that uncontested facts demonstrate the propriety of the termination for
default. The Government points to
various items of work that the contractor furnished that do not conform to
requirements of the contract and the contractor=s failure to provide warranties
regarding aspects of the roofing system.
The contractor contends, not that it provided items and assurances in
accordance with the contract as signed, but that it acted in accordance with
approved shop drawings, and provided approved materials that the Government has
accepted. The contractor asserts that it
was not obligated to provide the work and assurances now required by the
Government unless it received an appropriate change order, affording it
additional time and money. Having
fulfilled its view of the contract requirements, and having not received such a
change order, the contractor concludes that it was not in default. The contractor also opines that the
determination to default was excessive, not well supported, improperly
motivated, and intended to retaliate against the contractor.
The Board makes
factual findings as permitted in resolving a motion for summary relief. The contract establishes the requirements and
obligations of the parties. As specified
in contract provisions, the Government=s approval of shop drawings and intermediate inspections
does not lessen the contractor=s duty to provide compliant materials and services. In its submittals, the contractor did not
indicate that materials or products would deviate from any contract term. The Government was entitled to obtain
performance consistent with the contract.
When the contractor did not satisfy its obligations (refusing to perform
without a change order), the contractor was in default. The Government acted within its rights under
the contract in terminating for default the contractor=s ability to continue with
performance. Accordingly, the Board
grants the Government=s motion for summary relief and
denies the appeal of the contractor which challenges the termination for
default.
Findings
of Fact
1.
On August 10, 2005, the Government awarded
contract HSCG82-05-C-3WCA54. For a fixed price (with some fixed
unit-pricing), this contractor agreed to selectively demolish and reconstruct a
building at a United States Coast Guard Station in San Juan, Puerto Rico. The contractor agreed to perform the work
required in strict accordance with the terms of the solicitation. Exhibit 4 at 1, 4, 5 (& 17), 8 (all exhibits are in
the appeal file, unless specifically noted).
2.
As specified in a submittal/shop drawings provision:
The
Contracting Officer will indicate his/her approval or disapproval of the
submittals/shop drawings and if not approved as submitted shall indicate
reasons thereof. Any work done prior to
such approval shall be at the Contractor=s
risk. Approval by the Contacting Officer
shall not relieve the Contractor from responsibility for any errors or
omissions in such drawings, nor from the responsibility for complying with the
requirements of this contract.
Exhibit
4 at 17 (& G.1).
3.
A contract clause deals with the contractor
submittal/Government review procedures, particularly noting in the second
paragraph the limited nature of drawing approval by the contracting officer:
The
Contractor shall submit to the Contracting Officer for approval five (5) copies
of all shop drawings as called for under the various headings of the contract
specifications. These drawings shall be
complete and detailed. If approv[ed] by
the Contracting Officer, each copy of the drawings will be identified as having
received such approval by being stamped and dated. The Contractor shall make any corrections
required by the Contracting Officer. If
the Contractor considers any corrections indicated on the drawings as
constituting a change to the contract drawings or specifications, notice as
required under the clause entitled AChanges@ will be given to the Contracting
Officer. . . .
The
approval of the drawings by the Contracting Officer shall not be construed as a
complete check, but will indicated [sic] only that the general method of
construction and detailing is satisfactory.
Approval of such drawings will not relieve the Contractor of the
responsibility for any error which may exist as the Contractor shall be
responsible for the dimensions and design of adequate connections, details, and
satisfactory construction of all work.
Exhibit
4 at 43 (Attachment J.7).
4.
The Inspection and Acceptance section of the
contract contains an Inspection of Construction (AUG 1996) clause, Federal Acquisition
Regulation (FAR) 52.246-12, 48 CFR 52.246-12 (2005):
(b) The Contractor shall maintain an adequate
inspection system and perform such inspections as will ensure that the work
performed under the contract conforms to contract requirements. The Contractor shall maintain complete
inspection records and make them available to the Government. All work shall be conducted under the general
direction of the Contracting Officer and is subject to Government inspection
and test at all places and at all reasonable times before acceptance to ensure
strict compliance with the terms of the contract.
(c) Government inspections and tests are for
the sole benefit of the Government and do not --
(1) Relieve the Contractor of responsibility
for providing adequate quality control measures;
(2) Relieve the Contractor of responsibility
for damage to or loss of the material before acceptance;
(3) Constitute or imply acceptance; or
(4) Affect the continuing rights of the
Government after acceptance of the completed work under paragraph (i) below.
(d) The presence or absence of a Government
inspector does not relieve the Contractor from any contract requirement, nor is
the inspector authorized to change any term or condition of the specification
without the Contracting Officer=s written authorization.
. . . .
(f) The Contractor shall, without charge,
replace or correct work found by the Government not to conform to contract
requirements, unless in the public interest the Government consents to accept
the work with an appropriate adjustment in contract price. The Contractor shall promptly segregate and
remove rejected material from the premises.
(g) If the Contractor does not promptly replace
or correct rejected work, the Government may (1) by contract or otherwise,
replace or correct the work and charge the cost to the Contractor or (2)
terminate for default the Contractor=s right to proceed.
(h) If, before acceptance of the entire work,
the Government decides to examine already completed work by removing it or
tearing it out, the Contractor, on request, shall promptly furnish all
necessary facilities, labor, and material.
If the work is found to be defective or non conforming in any material
respect due to the fault of the Contractor or its subcontractors, the
Contractor shall defray the expenses of the examination and of satisfactory
reconstruction. However, if the work is
found to meet contract requirements, the Contracting Officer shall make an
equitable adjustment for the additional services involved in the examination
and reconstruction including, if completion of the work was thereby delayed, an
extension of time.
(i) Unless otherwise specified in the
contract, the Government shall accept, as promptly as practicable after
completion and inspection, all work required by the contract or that portion of
the work the Contracting Officer determined can be accepted separately. Acceptance shall be final and conclusive
except for latent defects, fraud, gross mistakes amounting to fraud, or the
Government=s rights under any warranty or
guarantee.
Exhibit 4 at 13-14 (& E.1).
5.
The contract contains the Payments under Fixed-Price
Construction Contracts (SEP 2002) clause, FAR 52.232-5, a paragraph of which
states:
(f) Title,
liability and reservation of rights. All
material and work covered by progress payments made shall, at the time of
payment, become the sole property of the Government, but this shall not be
construed as --
(1) Relieving
the Contractor from the sole responsibility for all material and work upon
which payments have been made or the restoration of any damaged work; or
(2) Waiving
the right of the Government to require the fulfillment of all of the terms of
the contract.
Exhibit
4 at 17-19 (& G.3).
6.
The contract=s
Disputes (JUL 2002), Alternate
I (DEC 1991) clause, FAR 52.233-1, specifies:
(i) The Contractor shall proceed diligently
with performance of this contract, pending final resolution of any request for
relief, claim, appeal, or action arising under or relating to the contract, and
comply with any decision of the Contracting Officer.
Exhibit 4 at 25 (& I.1).
7.
The contract contains a Default (Fixed Price
Construction) (APR 1984) clause, FAR 52.249-10.
The clause states:
(a) If
the contractor refuses or fails to prosecute the work or any separable part,
with the diligence that will insure its completion within the time specified in
this contract including any extension, or fails to complete the work within
this time, the Government may, by written notice to the Contractor, terminate
the right to proceed with the work (or the separable part of the work) that has
been delayed. In this event, the
Government may take possession of and use any materials, appliances, and plant
on the work site necessary for completing the work. The Contractor and its sureties shall be
liable for any damage to the Government resulting from the Contractor=s refusal or failure to complete the
work within the specified time, whether or not the Contractor=s right to proceed with the work is
terminated. This liability includes any
increased costs incurred by the Government in completing the work.
(b) The
Contractor=s right
to proceed shall not be terminated nor the Contractor charged with damages
under the clause, if--
(1) The
delay in completing the work arises from unforeseeable causes beyond the
control and without the fault or negligence of the Contractor. . . . ; and
(2) The
Contractor, within 10 days from the beginning of any delay (unless extended by
the Contracting Officer), notifies the Contracting Officer in writing of the
causes of the delay. . . .
Exhibit
4 at 26 (& I.1).
8.
The contract contains specifications and drawings detailing
requirements and standards that products and work are to satisfy, including the
requirement for the contractor to provide a warranty regarding material and
labor of some products and their installation.
The particulars of the requirements, detailed in the contract, Exhibits
5, 6, are not of specific importance to this decision. During the course of performance, the
contractor submitted shop drawings and material approval request forms,
ultimately approved by the contracting officer, sometimes with intermediate
disapprovals and various comments. In
its submittals, the contractor did not indicate that materials or products would
deviate from any contract term, or that it did not intend to comply with the
requirements of the contract, or request a change order relating to the
particular items. E.g., Exhibit
635.
9.
The
contractor requested a final inspection for September 27, 2006. By letter dated October 2, 2006, the
contracting officer issued a cure notice to the contractor. The notice specifies: ACompleted means all submittals,
cleanup and final inspection are to have been accomplished.@
Further, the notice states that an inspection was performed, but that it
cannot be called a Afinal inspection@ because the inspection revealed
work that is not acceptable (i.e., not done in accordance with specifications)
and work that is not complete. The
notice identifies various items of work that the contracting officer has
concluded do not comply with contract specifications. The notice indicates that work is to be
corrected without charge to the Government.
Exhibit 419.
10.
The
contractor responded, indirectly and directly addressing the cure notice. The contractor and record do not suggest,
much less demonstrate as factually plausible, that the contractor installed, in
accordance with contract requirements, various items identified in the cure
notice, of importance here: the roofing system, windows, flooring, doors, and
door hardware. Rather, the contractor
urges repeatedly that the items were installed in accordance with its
Government-approved shop drawings and accepted by the Government during the
course of performance as demonstrated by the progress payments made by the
Government to the contractor. Exhibits
428, 439, 442 at 4, 448; Contractor=s Response at 2-6, Exhibit 2.
11.
In unilateral modification 18, with an effective date
of December 7, 2006, the contracting officer states that the contract delivery
date has lapsed.
To
date, you have not satisfactorily completed the contract as required by its
terms. This is to advise you that the
Government is re-establishing the date for delivery of the final construction
project to 12 January 2007. At that
time, if you have not satisfactorily completed performance of the contract as
required by its terms, the Government may pursue its right under the Default
clause in the contract.
Exhibit
4 at 91.
12.
By letter dated December 11, 2006, to the
contracting officer, counsel
for the contractor expressed concerns, particularly with references to alleged
communications between the contracting officer and surety, and stated that it
was impossible for the contractor to meet the new terms and demands. That letter and an email message, dated
January 11, 2007, from the contractor to the contracting officer, express
concerns about payment. Exhibits 578,
593. However, the only unpaid invoice
referenced by the contractor in its submissions is one dated November 28, 2006,
seeking payment for 100% of the contract work (all work other than asbestos
abatement, a line item identified within the contract price). Contractor=s Response, Exhibit 3. In resolving the motion for summary relief,
it is assumed that the Government received the invoice. By January 12, the contractor had not
completed performance. Exhibit 594.
13.
A company (not this contractor) provided the
contracting officer a detailed cost estimate for the completion and/or
correction of the omitted and non-conforming items as identified by the
Government. The date of the estimate is
January 22, 2007. With the inclusion of
previously unpriced items, in a submission dated January 23, 2007, the cost for
such work is approximately $130,000.
Exhibits 607, 608. This amount
exceeds the remaining payment the contractor sought under the contract for
completion (as described in Finding of
Fact 12).
14.
By issuance dated January 24, 2007, the contracting
officer provided the contractor with a show cause notice. The notice informs the contractor that the
Government is considering terminating the contract under the provisions for
default, because the contractor has failed to perform the contract within the time
required and has failed to cure the conditions, as described in the cure
notice, endangering performance. The
show cause notice identifies the items that the contractor has failed to
perform in accordance with the terms of the contract. Exhibit 611.
15.
In a response, dated February 1, 2007, the contractor
states that the work identified in the show cause notice was completed,
inspected, and approved several months earlier.
The response states that correction of the identified items would
require a change order to pay for additional work and materials. The response does not provide warranties for
the installed roof system, although such warranties are required by the
contract. Exhibit 619. On February 5, 2007, the contracting officer
provided the contractor with comments regarding its response. The comments address specifically the items
not conforming to contract requirements, after a general statement:
A walk through of the facility will
show that the items are not completed or acceptable. This has not changed since September. I would also like to remind everyone that a
final inspection was never conducted as the discrepancy list was too large and
the facility was not ready. We have not
taken final acceptance nor beneficial occupany of anything in the
facility. A ACure Notice@ was sent 2 October 2006, due to
the inspection of 9/26/06. Nothing has
changed, not even after having the meeting you requested with SBA [the Small
Business Administration] in November.
Exhibit 621. The record provides no reasonable basis to
dispute the inspection-based, documented conclusions regarding the items
identified as not complying with contract requirements.
16.
By
decision dated February 26, 2007, the contracting officer terminated for
default the contractor=s right to proceed under the
contract. The decision explains that the
acts constituting the default are the contractor=s refusal and failure to perform
construction services within the time required by the contract and in
accordance with the contract specifications.
The decision notes that the Government issued a cure notice on October
2, 2006, and a show cause notice on January 24, 2007, identifying
non-conformities which the contractor has refused to correct. Exhibit 2.
17.
On May 23, 2007, the contractor filed the underlying
notice of appeal of the contracting officer=s
notice of termination for default.
Exhibit 1.
Discussion
The contractor
maintains that the termination for default was improper. It asserts that work was performed in
accordance with Government-approved submittals, and inspected and accepted by
the Government, such that performance under the contract was complete and
change orders required for additional work.
The contractor states that the default was excessive because the
contracting officer could have selected other means to obtain a completed
building. Further, the contractor
alleges that any non-performance regarding the roof is excused because its
difficulties with its roofing contractor constitute matters beyond its control
and explain its inability to provide the Government-requested warranties. The contractor seeks various forms of relief
arising from what it concludes was an improper determination of the contracting
officer to terminate for default.
The Government
moves for summary relief. It states that
undisputed facts demonstrate the validity of the termination for default of the
contractor=s right to proceed under the
contract. In support, the Government focuses
upon the incomplete performance, the contractor=s failure to satisfy various
requirements of the contract (non-compliant products and a lack of warranties
for the roofing system), and the contractor=s responses to the cure notice and order to show cause,
particularly the refusal to complete performance without a change order.
With a motion
for summary relief, the moving party bears the burden of establishing the
absence of any genuine issue of material fact; all significant doubt over
factual issues must be resolved in favor of the party opposing summary
relief. At the summary relief stage, the
Board may not make determinations about the credibility of potential witnesses
or the weight of the evidence. Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). However, Athe party opposing summary judgment must show an
evidentiary conflict on the record; mere denials or conclusory statements are
not sufficient.@
Mingus Constructors, Inc. v. United States, 812 F.2d 1387,
1390-91 (Fed. Cir. 1987) (citations omitted).
To preclude the entry of summary relief, the non-movant must make a
showing sufficient to establish the existence of every element essential to the
case, and on which the non-movant has the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S.
317, 322-23 (1986). If a motion is made
and supported as required in Federal Rule of Civil Procedure 56(a), the adverse
party may not rest upon the mere allegations or denial in its pleadings, but
must set forth specific facts showing there is a genuine issue for trial. Fed. R. Civ. P. 56(e); Celotex, 477
U.S. at 324.
The contractor
installed items that do not conform to the requirements of the contract, and
provided a roofing system without the warranties required by the contract. Findings 10, 15. The contract requires the contractor to
proceed with performance pending resolution of any dispute. Finding 6.
Failure to prosecute work subjected the contractor to a termination for
default of its ability to proceed with performance. Findings 4 (& g), 5, 7. The Government has demonstrated that the
default determination was in accordance with the contract=s provisions.
In raising
defenses to the default determination, the contractor reveals a
misinterpretation of its duties and obligations under the contract, and fails
to appreciate the limited nature of the approvals of submittals and interim
inspections and interim acceptances by the Government.
The contract
dictates the requirements for products and services to be provided. In the course of performance, the contractor
provided submittals which do not identify any deviation from the contract terms
and specifications. Approval of a
submission by a contracting officer does not diminish the contractor=s obligation to ultimately provide
contract-compliant products and services within the time and for the price
established in the contract. Findings 2
(AApproval by the Contacting Officer
shall not relieve the Contractor from responsibility for any errors or
omissions in such drawings, nor from the responsibility for complying with the
requirements of this contract.@), 3 (AThe approval of the drawings by the Contracting Officer
shall not be construed as a complete check . . . . Approval of
such drawings will not relieve the Contractor of the responsibility for any
error which may exist.@).
Similarly, regarding inspections, the contract directs that the
contractor is to perform inspections to ensure that work conforms to contract
requirements. Government inspections are
conducted solely for the benefit of the Government, and do not constitute or
imply acceptance. Moreover, the
contractor shall, without charge, Areplace or correct work found by the Government not to
conform to contract requirements,@ unless the Government consents to accept the work. Finding 4 (&& b, c, f). As demonstrated by the contractor=s request for a final inspection
and the Government=s response, Findings 9, 15, the
Government=s interim inspections do not
constitute final acceptance of the work in question. Progress payments do not
indicate final acceptance of work, or relieve the contractor from complying
with requirements of the contract.
Finding 5.
The Government=s approval of submittals and shop
drawings, interim inspections, and progress payments do not constitute the
Government=s acceptance of non-compliant work
or serve to diminish the contractor=s obligation to complete performance under the terms of the
contract. When the contractor installed
non-compliant items under these circumstances, it was not entitled to a change
order and additional money and time to provide compliant products. At the time of the default, the contractor
both had failed to satisfy contract provisions and had indicated that it could
not complete the project without additional money and time. The contracting officer acted reasonably,
within the terms and conditions of the contract, in issuing the termination for
default.
Although not
raised in response to the cure notice or order to show cause, the contractor
suggests that the Government=s lack of payments improperly prevented the contractor from
performing. The Government withheld less
money than was projected as required to complete work in accordance with the
contract=s requirements. Finding 13.
The contractor has not established a credible factual issue or a legal
basis for the Board to potentially conclude that the contractor=s failure to perform was caused by
an improper withholding of payments due.
In seeking to
invalidate the default, the contractor asserts that the Government adversely
impacted the project by its failure to cooperate and its proclivity to
intervene in matters involving a subcontractor.
The allegations do not offer a supportable defense to the termination for
default because the contractor did not comply with terms and conditions of the
contract, and refused to complete performance without a change order. The contractor has not alleged facts material
to the actual default, given that a contractor is liable for the unexcused
defaults of its subcontractors. General
Injectables & Vaccines, Inc. v. Gates, 527 F.3d 1375, 1377 (Fed. Cir.
2008). That is, the contractor=s failure to timely provide
compliant performance did not arise from unforeseeable causes beyond the
control and without the fault or negligence of the contractor, as would be
required to avoid the termination, Finding 7.
The contractor has not provided a factual basis to look further into the
contracting officer=s election to issue the termination
for default of the contractor=s right to proceed with performance.
Given the
conclusion upholding the termination for default, the Board need not address
the contractor=s requests for relief.
Decision
The Board GRANTS
the Government=s motion for summary relief and DENIES
this appeal.
____________________________
JOSEPH A.
VERGILIO
Board Judge
We concur:
____________________________ ____________________________
STEPHEN M. DANIELS CATHERINE B.
HYATT
Board Judge Board Judge
