388 F.3d 844 (Fed. Cir. 2004), 03-1461, England v. Sherman R. Smoot Corp.

Docket Nº:03-1461.
Citation:388 F.3d 844
Party Name:Gordon R. ENGLAND, Secretary of the Navy, Appellant, v. The SHERMAN R. SMOOT CORP., Appellee.
Case Date:November 03, 2004
Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit

Page 844

388 F.3d 844 (Fed. Cir. 2004)

Gordon R. ENGLAND, Secretary of the Navy, Appellant,

v.

The SHERMAN R. SMOOT CORP., Appellee.

No. 03-1461.

United States Court of Appeals, Federal Circuit

November 3, 2004

Page 845

Richard S. Ewing, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for appellant. With him on the brief were Peter D. Keisler, Assistant Attorney General; David M. Cohen, Director; and Donald E. Kinner, Assistant Director. Of counsel on the brief was Robert C. Ashpole, Attorney, Office of the General Counsel, Navy Litigation, Washington Navy Yard, of Washington, DC.

Christopher L. Grant, of Washington, DC, argued for appellee.

Before LOURIE, SCHALL, and DYK, Circuit Judges.

SCHALL, Circuit Judge.

This case arises under the Contract Disputes Act of 1978 (codified at 41 U.S.C. §§ 601-613 (2000)) ("CDA"). Gordon R. England, Secretary of the Navy ("Navy" or "government"), appeals the decision of the Armed Services Board of Contract Appeals ("ASBCA" or "Board") awarding The Sherman R. Smoot Corporation ("Smoot") compensation for a fifty-one-day delay in the completion of Contract No. N62477-94-C-0028 between Smoot and the Navy (the "contract"). In re Sherman R. Smoot Corp., ASBCA No. 53115, 2003-1 B.C.A. (CCH) ¶ 32,198, 2003 WL 715267 (Feb. 25, 2003). The government contends that the Board erred (i) in ruling that Smoot's claim was not barred by the doctrine of accord and satisfaction, and (ii) in applying a rebuttable presumption that the Navy caused the fifty-one days of delay, based upon the contracting officer's decision to grant Smoot an extension of time for completion of the contract. We agree with the Board that Smoot's claim was not barred by accord and satisfaction. However, we

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conclude that the Board erred in its use of a rebuttable presumption based upon the contracting officer's extension of the contract completion date. Accordingly, we vacate the Board's decision and remand the case to the Board for consideration of Smoot's claim without the use of a rebuttable presumption based upon the contracting officer's decision to extend the contract completion date.

BACKGROUND

I.

On May 3, 1996, the Navy awarded Smoot the contract, at the firm fixed price of $19,073,139, for renovation and construction work at the Washington Navy Yard. The contract included the standard fixed-price construction contract terms and conditions required by the Federal Acquisition Regulations ("FARs"). See 48 C.F.R. § 52 (1996). The required completion date for the project was March 9, 1998. Smoot, 2003-1 B.C.A. (CCH) ¶ 32,198 at 159,153-54 (Findings of Fact ("FF") 1, 2, 3).

In letters dated November 20, 1996 and February 6, 1997, Smoot notified Lieutenant Commander ("LCDR") Andrew Trotta, Navy Project Engineer, of design and construction changes that Smoot said would cumulatively delay the completion of the project by fifty-one days to April 29, 1998. On August 8, 1997, Smoot submitted to contracting officer ("CO") John Denton a claim designated "PCO # 172 (Equitable Adjustment for Time Extension)" ("PCO 172"). In the claim, Smoot sought to recover extended overhead costs in the amount of $448,115 for fifty-three calendar days of delay, based upon a uniform daily rate of $8,455. 1 PCO 172 was based on the cumulative effect of the delays referenced in Smoot's November 20, 1996 and February 6, 1997 letters. In a letter dated August 11, LCDR Trotta stated, "the construction schedule recently submitted is approved with a completion date of 29 April, 1998 .... This time is fully compensable, and upon approval for the related costs associated with this time, a modification will be issued. This has been discussed and approved by the [contracting officer]." CO Denton wrote Smoot on October 6, 1997, (i) stating that only twenty-one of the fifty-three days of the delay were the fault of the Navy and therefore compensable, but (ii) agreeing to issue a contract modification for a time extension to April 29, 1998. 2 Smoot, 2003-1 B.C.A. (CCH) ¶ 32,198 at 159,153-54.

Bilateral Modifications A00055, A00056, and A00121, issued in May and October

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1997, provided equitable adjustments in the contract price for the four changes that PCO 172 identified as having caused the fifty-one day delay. Each modification contained the following accord and satisfaction provision:

Acceptance of this modification by the contractor constitutes an accord and satisfaction and represents payment in full for both time and money and for any and all costs, impact effect, and for delays and disruptions arising out of, or incidental to, the work as herein revised.

In November 1997, CO Denton sent to Smoot proposed bilateral Modification A00135 as a "complete equitable adjustment" for a "51 day time extension," which Smoot returned to CO Denton unsigned in a November 12 letter. In that letter, Smoot responded, "Our agreement ... is as stated in our November 12, 1997 letter ... which is a fully compensable time extension, and therefore we do not accept your bilateral modification with the contract price unchanged." That same day, Smoot sent a letter to Commander James Cowell, then Resident Officer in Charge of Construction, expressing its confusion at the differing positions taken by (i) LCDR Trotta in his August 11, 1997 letter; (ii) CO Denton in his October 6, 1997 letter; (iii) Trotta in an oral statement on October 7, 1997, that CO Denton's letter would be rescinded; and (iv) proposed bilateral Modification A00135. On November 20, 1997, Smoot certified PCO 172 as a claim for compensation, and on November 25, 1997, it amended PCO 172 to assert a claim in the amount of $535,126. Smoot, 03-1 B.C.A. (CCH) ¶ 32,198 at 159,154-55.

On March 4, 1998, the Navy issued unilateral Modification A00135, which extended the contract completion date by fifty-one days based upon PCO 172, and by seven days for another delay to May 6, 1998. Six days later, on March 10, 1998, the Navy issued unilateral Modification A00177, which increased the total contract price by $80,000. Smoot amended PCO 172 in February 1999 to claim $462,931 ($406,608 for the fifty-one-day delay at a daily rate of $7,973 plus $56,323 for "lump sum costs"). On January 19, 2000, CO Denton issued unilateral Modification A00230. This modification, according to the Board, was issued not as a final decision of the contracting officer, but "to unilaterally definitize Modification A00177 and to reflect an increase in the total contract value in the amount of $203,776," which was paid to Smoot. Smoot, 2003-1 B.C.A. (CCH) ¶ 32,198 at 159,155-56.

On August 1, 2000, Smoot amended PCO 172 so as to make the final amount of its claim $179,155; this amount was net of the $283,776 already paid by the Navy. At the same time, Smoot requested a final decision from the contracting officer. When no final decision was forthcoming, on October 31, 2000, Smoot appealed to the ASBCA pursuant to 41 U.S.C. §§ 605(c) (5), 607, from a "deemed denial" of PCO 172. Id. at 159,156. 3

II.

Before the Board, Smoot argued that LCDR Trotta had agreed that all fifty-one days of delay were compensable, that CO Denton subsequently recognized that at least some of those fifty-one days were

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compensable by paying Smoot $283,776, and that the issuance of unilateral Modifications A00177 and A00230 years after the modifications containing the accord and satisfaction provisions (bilateral Modifications A00055, A00056, A00121) proved that CO Denton did not regard those accord and satisfaction provisions as effective. In response, the Navy asserted that the accord and satisfaction provisions in bilateral Modifications A00055, A00056, and A00121 did bar Smoot's claim in PCO 172, and that, in any event, Smoot had failed to present the requisite evidence to justify recovery. Id. at 159,156.

Following a hearing, the Board first concluded that the Navy was not contractually bound by LCDR Trotta's August 11, 1997, letter. The Board based its conclusion on the fact that Trotta's letter made it clear that he was not a contracting officer, as well as on the fact that CO Denton denied that he had approved full compensation for the extension in Trotta's letter and told Smoot not to take any directions from Trotta without his (CO Denton's) signature. Id. at 159,156 (FF 6).

Second, the Board rejected the Navy's accord and satisfaction defense. The Board relied on the principle that when the government and a contractor continue to consider a contractor's claim after the contractor has signed a release, their conduct demonstrates that they did not consider the release to constitute an accord and satisfaction of the claim. Under such circumstances, the Board stated, the release is not a bar to prosecution of the claim. Id. at 159,156-57 (citing John T. Jones Constr. Co., ASBCA Nos. 48303, 48593, 1998-2 B.C.A. (CCH) ¶ 29,892 at 147,975, 1997 WL 707107 (Nov. 10, 1997) (citing Winn-Senter Constr. Co. v. United States, 110 Ct.Cl. 34, 75 F.Supp. 255, 260 (1948))). Thus, the Board concluded that Modifications A00055, A00056, and A00121 did not bar Smoot's claim embodied in PCO 172.

Finally, the Board concluded that the Navy was responsible for the fifty-one-day delay. The Board invoked a rebuttable presumption found in its caselaw, the so-called " McMullan presumption." See Robert McMullan & Son, Inc., ASBCA No. 19023, 1976-1 B.C.A. (CCH) ¶ 11,728 at 55,903, 1976 WL 2340 (Jan. 22, 1976). According to the Board, because Modification A00135, which extended the contract completion date by fifty-one days, was issued by the Navy "after all the material facts of the delays had taken place and after deliberate consideration," a rebuttable presumption was raised that the Navy was responsible for the delay. Smoot, 2003-1 B.C.A. (CCH) ¶ 32,198 at 159,157 (citing Thomas J. Papathomas, ASBCA Nos. 49,512,...

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