At the time the contract was formed, the Coast Guard was not bound by the Federal Acquisition Rules, which set out the general parameters for using liquidated damages clauses, nor was it bound by any rules specifying how to determine the amount of damages due. There were no settled policy for assessing liquidated damages, and the Contracting Officer used a method that had been around since about 1997.
The project was late in commencing and the claimant encountered further delays due to steelwork shortages, and needed additional time in which to co-ordinate the connection of government-owned equipment, some of which was different from the equipment listed in the contract specifications. The claimant maintained that this last problem had delayed its M&E designs. The Coast Guard’s design project manager criticised the claimant’s mis-management of the project. The project’s new Contracting Officer, then informed the claimant that there were issues with its design which needed to be addressed; despite this the claimant was permitted to proceed with the construction after accepting plaintiff’s structural foundation drawings on 6 July 2004. There were further delays which resulted in the claimant’s contract being terminated, and alternative contractor was appointed to complete the works.
The claimant sought to convert the default termination into a termination for the government’s convenience and the remission of retained liquidated damages. It also counterclaimed damages, alleging that $10,220 had been withheld from payments as liquidated damages. The claimant applied for summary judgment solely on the issue of liquidated damages, arguing that the rate of liquidated damages specified in its contract constituted an unenforceable penalty, and, alternatively, that it was entitled to a remission of liquidated damages due to excusable delay. The claimant complained that the liquidated damages levied had been a penalty. There were also issues about whether the delays had been excusable and beyond the claimant’s control.
Federal procurement law provides that the government cannot assess damages against a contractor for a failure to timely complete work under a contract if “[t]he delay in completing the work arises from unforeseeable causes”; for example, acts by the government. Delays by subcontractors and suppliers are deemed to be beyond the control of the contractor.
To result in an excusable delay, “the unforeseeable cause must delay the overall contract completion; i.e., it must affect the critical path of performance. The claimant argued that it was entitled to a finding of excusable delay the delays for which it was responsible were concurrent with delays attributable to the Coast Guard and that these concurrent delays could not be apportioned between the two parties. The claimant alleged that that the Coast Guard’s specifications relating to the hydraulic test lab had been defective, which had delayed it.
There was no question that “[w]hen the Government provides a contractor with design specifications, such that the contractor is bound by contract to build according to the specifications,” a contractor that fully complies with the specifications is “not responsible for the consequences of defects in the specified design.” (White v. Edsall Constr. Co., 296 F.3d 1081, 1084-85 (Fed. Cir. 2002).
Because neither party had addressed whether the specifications at issue were design specifications or performance specifications, the court could not determine whether the Coast Guard had caused a delay as a result of the purported defects. In any event, even if the court were willing to conclude that the Coast Guard’s specifications were design specifications, there was conflicting evidence as to whether they had been defective.
Even if the claimant had been able to establish that the Coast Guard caused a delay because of defective specifications, it would still be required to prove that the Coast Guard delayed “the overall contract completion; i.e., . . . affect[ed] the critical path of performance.” The claimant had argued that a critical path analysis was unnecessary because the facts indisputably showed that it was entitled to a finding of excusable delay. Because claimant had not offered proof on an essential element of its claim of excusable delay in its motion for partial summary judgment, its application would be dismissed.
K-Con Building Systems, Inc. v the United States; 24 January 2011
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