Lisbon Contractors, Inc. v. U.S.
| Decision Date | 09 September 1987 |
| Docket Number | No. 86-1461,86-1461 |
| Parties | 34 Cont.Cas.Fed. (CCH) 75,358 LISBON CONTRACTORS, INC., Appellee, v. The UNITED STATES, Appellant. Appeal |
| Court | U.S. Court of Appeals — Federal Circuit |
Michael T. Paul, Commercial Litigation Branch, Dept. of Justice, Washington, D.C., argued for appellant. With him on brief, were Richard K. Willard, Asst. Atty. Gen., David M. Cohen, Director and Thomas W. Petersen, Asst. Director.
George E. Rahn, Jr., Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., argued for appellee.
Before NIES, BISSELL, and ARCHER, Circuit Judges.
The United States appeals from the judgment of the United States Claims Court, No. 288-81C, awarding $95,748.15 to Lisbon Contractors, Inc. as termination for convenience costs under a construction contract. The Claims Court held that the United States wrongfully terminated Lisbon for default thereby converting the termination to one for convenience of the government. We affirm-in-part, reverse-in-part, vacate-in-part, and remand for entry of a reduced damage award.
On August 8, 1979, Lisbon and the United States Soil Conservation Service (SCS) entered into Contract No. 50-3A75-9-35 for construction of a reinforced concrete flood control channel and a bridge. With extensions of time, the completion date was December 20, 1980. Work began in the fall of 1979 on the bridge portion of the contract. As is frequent in construction projects, Lisbon encountered difficulties. Lisbon's concrete subcontractor, Versatile Constructors, was a major source of Lisbon's problems. The government attributed that difficulty to poor supervision by Lisbon.
In the succeeding months the parties exchanged numerous letters discussing Lisbon's progress on the project. On several occasions the contracting officer's representative threatened to terminate Lisbon's right to proceed unless Lisbon took immediate action to correct specific problems. SCS was concerned about the following items: (1) Versatile Constructors' performance as the concrete subcontractor, (2) Anthony Rebimbas' performance as Lisbon's construction superintendent, (3) the quality of the concrete work, and (4) Lisbon's progress on the work. Typically Lisbon responded by taking some action to correct the problems, which did not fully satisfy SCS, whereupon negotiations would continue. In January, 1980, for example, the contracting officer required Lisbon to submit a revised construction schedule with information on additional work forces and equipment. Lisbon submitted a revised schedule with some details, but the contracting officer requested more.
To meet SCS's objections, Lisbon designated its vice president, Peter Campellone, as acting superintendent (with the government's approval) until it could find a replacement, and it terminated Versatile as the concrete subcontractor once the bridge was completed. 1 It remedied specific complaints on work item deficiencies identified by SCS. SCS inspected and paid for the work. On April 7, 1980, Lisbon requested a meeting between the contracting officer and Lisbon's president, Anthony Marques, to resolve the items still at issue, namely, the construction schedule and the superintendent issues. Also Lisbon had requested a change in the specifications to allow it to remove concrete forms more quickly (the "sleeper joint" issue).
The parties met on April 30, 1980. Lisbon renewed its request for a modification of the contracting officer's interpretation of the sleeper joint issue which would enable Lisbon to perform the work more efficiently and expeditiously. Mr. Marques became incensed because SCS never made the analysis it had promised with respect to the requested change. At the meeting, SCS adamantly refused to approve the change, and tempers flared. Following the heated altercation on this issue, during which Mr. Marques had indicated he needed the change to complete the work on time, the SCS representatives reiterated their displeasure with various aspects of Lisbon's performance. The SCS representatives then left the meeting to caucus because, per the contracting officer, everybody was going in different directions. After discussing the matter among themselves for approximately twenty minutes, they returned and the contracting officer announced that, in his opinion, Lisbon could not complete the job satisfactorily within the time limitations set in the contract, and he was terminating the contract for default. Mr. Marques promptly withdrew his "demand" for a change and offered to do everything necessary to complete the work on time, even at a loss, in accordance with the contract. The contracting officer refused to discuss Lisbon's further performance under the contract. Thus, the matter of the superintendent and the details of the revised schedule Lisbon had submitted, which did not depend on the proposed change, were never taken up. A telegram subsequently confirmed the termination. SCS rebid the contract and engaged a follow-on contractor to complete the project. The project was eventually completed on December 10, 1981. 2
The action of the contracting officer in terminating Lisbon for default was taken pursuant to General Provision 5 of the contract at issue here, which contains the following standard language:
If the Contractor refuses or fails to prosecute the work, or any separable part thereof, with such diligence as will insure its completion within the time specified in this contract, or any extension thereof, or fails to complete said work within such time, the Government may, by written notice to the Contractor, terminate his right to proceed with the work or such part of the work as to which there has been delay.
....
If, after notice of termination of the Contractor's right to proceed under the provisions of this clause, it is determined for any reason that the Contractor was not in default under the provisions of this clause, or that the delay was excusable under the provisions of this clause, the rights and obligations of the parties shall, if the contract contains a clause providing for termination for convenience of the Government, be the same as if the notice of termination had been issued pursuant to such clause.
The contract contains a standard termination for convenience clause.
On December 19, 1980, Lisbon submitted a certified claim to the contracting officer, asserting that the government's termination for default was not justified and claiming a right to certain costs under the termination for convenience clause of the contract. The contracting officer responded by referring to the default termination decision, thereby rejecting the claim, and Lisbon timely filed a direct access action in the Court of Claims 3 pursuant to the Contract Disputes Act (CDA), 41 U.S.C. Sec. 609(a) (1982). 4
Before the Claims Court, Lisbon reiterated its assertions that it was not in default, that the termination should be converted to a termination for convenience, and that, under the contract and applicable regulations, it was entitled to recover certain costs incidental to termination for convenience. 5 The government filed a counterclaim to collect its reprocurement costs of approximately $477,000, awarded by a subsequent contracting officer's decision. The Claims Court dismissed the government's claim and entered judgment in favor of Lisbon, but for a lesser amount than it had sought. Both parties appealed the Claims Court's judgment to this court. In the initial appeal, we vacated the judgment and remanded the case for restatement of the court's findings and legal conclusions. Lisbon Contractors, Inc. v. United States, 785 F.2d 323 (1985). On reviewing the initial order, we could not determine whether the court had invalidated the default termination because of a substantive or a procedural defect, and we requested additional findings with respect to the proof of Lisbon's losses.
In response to our remand, the Claims Court issued a new order explaining that its decision on default did not rest on procedural but on substantive grounds. The evidence did not establish to the court's satisfaction that Lisbon could not have completed the remaining work on time. It noted that none of the government's witnesses even addressed the issue of whether Lisbon would have completed the work on time. No formal study was made on the matter. There was no evidence that the contracting officer made an "informed decision," leading the Claims Court to conclude that the contract had not been terminated because of Lisbon's default. The court also explained its decision on the amount of the award in somewhat greater detail.
The United States has again appealed arguing that the Claims Court erred by: (1) placing a burden on the government, in establishing default, to prove more than that Lisbon was behind schedule at the time of termination, (2) finding that, when defaulted, Lisbon had a full-time superintendent and an acceptable revised construction schedule, (3) placing a burden on the government to disprove the items Lisbon claimed as termination for convenience costs, and (4) denying the government's reprocurement damage claim.
Our scope of review of Claims Court decisions is limited to the correction of errors of law and clearly erroneous findings of fact. Milmark Servs., Inc. v. United States, 731 F.2d 855, 857 (Fed.Cir.1984).
1. Did the trial court place too great a burden on the government in connection with proof of default?
2. Did the trial court erroneously find that, at the time the government terminated the contract, Lisbon had a full-time superintendent and an acceptable revised construction schedule?
3. Was the trial court clearly erroneous in finding Lisbon proved each of the items allowed as a termination cost?
This case raises for the first time before this court issues with respect to the burden of proof of default in a direct access...
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