Capital Elec. Co. v. U.S.
| Decision Date | 07 February 1984 |
| Docket Number | No. 83-965,83-965 |
| Parties | 31 Cont.Cas.Fed. (CCH) 72,119 CAPITAL ELECTRIC COMPANY, Appellant, v. The UNITED STATES, Appellee. |
| Court | U.S. Court of Appeals — Federal Circuit |
Thomas J. Wingfield, Atlanta, Ga., argued, for appellant. With him on brief was Herbert H. Gray, III, Atlanta, Ga.
Mark D. Friedman, Washington, D.C., argued, for appellee. With him on brief were J. Paul McGrath, Asst. Atty. Gen., David M. Cohen, Director and Thomas W. Petersen, Washington, D.C.; Timothy Sullivan, Deputy Dist. Counsel, Baltimore Dist. Corps. of Engineers, Dept. of the Army, of counsel.
James A. Pemberton, Jr., and Christopher M. McNulty, Washington, D.C., were on brief, for amicus curiae, Associated General Contractors of America.
Ira J. Smotherman, Jr. and Clifford F. Altekruse, Atlanta, Ga., were on brief, for amicus curiae, American Subcontractors Ass'n.
Before FRIEDMAN and MILLER, Circuit Judges, and RE, Judge. *
This appeal essentially involves the question of whether, as a matter of law, Capital Electric Company ("Capital") was entitled, under the suspension of work clause of its contract with the Government, to recover damages for extended overhead and to calculate those damages according to the so-called Eichleay formula (Eichleay Corp., ASBCA No. 5183, 60-2 BCA p 2688 (1960), aff'd on recon., 61-1 BCA p 2894). 1 It was stipulated that there were 303 days of compensable delay due to the fault of the Government. The General Services Board of Contract Appeals ("board") held that Capital was not so entitled. We affirm in part, reverse in part, and remand.
The dispute arises from a contract awarded Capital on October 12, 1976, to furnish and install mechanical, electrical, and plumbing work for the construction of the Federal Building and U.S. Courthouse in Fort Lauderdale, Florida. Capital performed the electrical portion of the contract and subcontracted the remainder of the work to the Poole and Kent Company, which, in turn, further subcontracted work to United Sheet Metal Co., Firepak, Inc., Johns-Manville Sales Corp., and Honeywell, Inc.
Capital's contract was one of a series of prime contracts for the Fort Lauderdale project awarded under the phased design and construction technique. Phased construction contemplates the overlapping of design and construction tasks as well as sequential or concurrent scheduling of segments of the work. The Government awarded, inter alia, separate prime contracts for structural concrete and interior finishes.
As a result of the structural concrete contractor's slow and erratic progress, the work of Capital and its subcontractors was unreasonably delayed and disrupted. Capital's work was also delayed and disrupted due to the Government's failure to act upon submittals for the electrical panels, main switchboard, and emergency generator while the Government contemplated a contract change that was never issued.
Notwithstanding the Government's admission that the Eichleay formula has been the prevailing method adopted by the contract appeals boards, the board, which had approved use of the Eichleay formula in Dawson Construction Co., GSBCA No. 4956, 79-2 BCA p 13,989, at 68,635 (1979), for the structural concrete phase of the same Fort Lauderdale project at issue The board said that it would not accept the concept of compensable extended overhead, as opposed to underabsorbed overhead, 3 and that the Eichleay formula is not a proper method of calculating underabsorbed overhead. It opined that the premise of Eichleay is that if the performance period were extended, overhead costs must have increased ipso facto, and noted that the auditor reported that use of the Eichleay formula could result in a computation of contract damages even in the absence of evidence that a contractor's work forces were idled, or placed in a position where they could not be redeployed or other work substituted. Thus, the Government argues that an automatic application of the Eichleay formula allows a contractor to escape the burden of proof faced by all claimants, namely: establishing the fact of injury.
here, 2 expressly overruled its determination in Dawson. It recognized that the Corps of Engineers Board of Contract Appeals "continues to permit recovery of extended home office overhead," citing Excavation Construction, Inc., ENG BCA No. 3858, 82-1 BCA p 15,770, at 78,068 (1982). However, it observed that recently the Armed Services Board of Contract Appeals had indicated that it will not permit recovery of extended home office overhead for periods of performance delay, suspension, or extensions of the contract work, citing Savoy Construction Co., 80-1 BCA p 14,392, at 70,970 (subsequently affirmed by the Claims Court, 2 Cl.Ct. 338 (1983), decided simultaneously with this case on appeal to this court)
DISCUSSION
Although these points have some degree of validity, we are not persuaded that they correctly reflect the concept of the Eichleay formula, at least as far as Capital is concerned. In this case, compensable delay was stipulated before the board. Moreover, Capital introduced unrebutted evidence that it could not have taken on any large construction jobs during the various delay periods due to the uncertainty of the delays and (except after the original contract Although the board recognized that calculation of contract damages is difficult and admitted that the method it used is an approximation, it faults the Eichleay formula for not being precise. Amicus Associated General Contractors of America points to a basic flaw in the method of calculation applied by the board (note 3, supra ) in a case where no work is being performed during a suspension, for example, and application of a percentage overhead charge (e.g. 9.2) to the direct costs of work performed (zero) would produce zero for overhead that nonetheless continues on. 6 Capital lists examples of such overhead: weekly payrolls, Davis-Bacon reports, checks, W-2's, 941's and other required tax forms, cost records, review submittals from subcontractors, weekly and monthly progress reports to the Government, and "the myriad similar tasks which are as critical as the on-site work but which can more easily be performed at a central location." Amicus American Subcontractors Association adds: salaries, dues and subscriptions, auto and travel, telephone, and photocopying.
period, when a major portion of the project had been completed and accepted) due to the limitation on its bonding capacity. 4 Thus, Capital has not actually used an ipso facto approach. Indeed, as stated in Eichleay, 61-1 BCA p 2894 at 15,117: "The mere showing of these facts 5 is sufficient to transfer to the Government the burden of going forward with proof that Appellant suffered no loss or should have suffered no loss." Amicus American Subcontractors Association states: "When the evidence adequately proves the existence of damages owing to a delay in work on the project, the extent of those damages need not be quantified to a mathematical certainty," citing Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 51 S.Ct. 248, 75 L.Ed.2d 544 (1931)
Capital argues that the Comb decision remains binding precedent with regard to Government contracts, citing Luria Brothers & Co. v. United States, 177 Ct.Cl. 676, 369 F.2d 701, 709-10 (1966) and J.H. Hedin Construction Co. v. United States, 347 F.2d 235, 259 (Ct.Cl.1965). It asserts that the board had "no authority to disregard the binding precedents established by the Court of Claims." However, in fairness it should be said that if the board believed these precedents were wrongly decided, it was not improper for the board to act accordingly. At the same time, it must be recognized that, as held by the Court of Appeals for the Federal Circuit, sitting en banc, South Corporation v. United States, 690 F.2d 1368 (1982), these Court of Claims precedents are binding precedent and can only be overruled by the Federal Circuit sitting en banc. 7
As far as this panel is concerned, we do not believe these precedents should be
overruled. They are of such long standing and have been followed in so many decisions of the various boards of contract appeals that such action should more properly be taken by the Congress. Nor are we persuaded that this would be an appropriate case for breaking precedent.
CONCLUSION
Capital has proposed that its damages be calculated according to a modified Eichleay formula or, alternatively, according to the Eichleay formula as follows:
Modified Eichleay Formula
-------------------------
Original Contract Price fixed overhead for fixed overhead
-----------------------
total billings for x original contract = allocable to
original contract period contract
period k contract
billings for extended
period
Fixed overhead allocable to contract = daily contract overhead
------------------------------------
original days of performance
Daily contract overhead x days delay = amount recoverable
Eichleay Formula
----------------
Contract billings
-----------------------
total billings for x total overhead = overhead allocable
contract period for contract to the contract
period
Allocable overhead = daily contract overhead
-----------------------
days of performance
Daily contract overhead x days delay = amount recoverable
Under the modified Eichleay formula, daily contract overhead would be $446.52; whereas under the Eichleay formula, daily contract overhead would be $311. We are satisfied that the record...
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