ENGINEERING MGT. SERVICES, INC. v. Maryland State Highway Administration

Decision Date11 June 2003
Docket NumberNo. 71,71
Citation375 Md. 211,825 A.2d 966
CourtMaryland Court of Appeals
PartiesENGINEERING MANAGEMENT SERVICES, INC. v. MARYLAND STATE HIGHWAY ADMINISTRATION.

Philip M. Andrews (Jean E. Lewis, Kramon & Graham, P.A., on brief), Baltimore, for petitioner.

William A. Kahn, Asst. Atty. Gen. (J. Joseph Curran, Jr., Atty. Gen., Laurie A. Lyte, Asst. Atty. Gen., on brief), Baltimore, for respondent.

Argued before BELL, C.J. ELDRIDGE, RAKER, WILNER, CATHELL, HARRELL and BATTAGLIA, JJ.

HARRELL, J.

I.

State procurement contracts are subject to an exclusive, statutorily-prescribed procedure for resolving disputes. The procedure consists of four parts.1 First, the dispute must be submitted to the agency procurement officer for attempted resolution.2 Second, the agency head may approve, disapprove, or modify the procurement officer's decision.3 Third, the decision of the agency head may be appealed to the Maryland State Board of Contract Appeals ("MSBCA").4 Fourth, the MSBCA's decision is subject to judicial review under the contested case provisions of the Maryland Administrative Procedure Act.5

The present case, being the fruit of the foregoing dispute resolution process, arises from a dispute between Engineering Management Services, Inc. ("EMS") and the Maryland State Highway Administration ("SHA") over a contract for the removal of lead paint and the repainting of five bridges in Baltimore and Howard Counties. The dispute revolved around EMS's claim for additional funds to comply with changes in the Federal Occupational Safety and Health Administration ("OSHA") regulations relating to lead exposure of abatement workers which had not been taken into account expressly during the bid and award process. For purposes of EMS's appeal to the MSBCA, the "final decision of the unit"6 denying EMS's claims occurred on 28 June 1999. EMS timely appealed that final decision to the MSBCA on 27 July 1999.

The SHA filed a "Motion for Summary Disposition," asserting that EMS's notice of claim was untimely. The MSBCA held a hearing at which EMS and SHA presented their respective positions concerning summary disposition. The MSBCA granted SHA's motion on 9 February 2000, and dismissed EMS's appeal, construing against EMS the 30-day "notice [to the procuring unit] of claim" provision of COMAR 21.10.04.02(A) & (C)7 as an absolute condition precedent to the MSBCA's jurisdiction to review the final decision of the procuring unit. EMS timely petitioned the Circuit Court for Baltimore City for judicial review of the dismissal.

The Circuit Court reversed the Board's decision and remanded the case, ordering the MSBCA to conduct a hearing on the merits of EMS's claim. The SHA appealed to the Court of Special Appeals. In what ultimately became a reported decision, the Court of Special Appeals reversed the Circuit Court's judgment. Maryland State Highway Administration v. Engineering Management Services, Inc., 147 Md.App. 132, 807 A.2d 1131 (2002). EMS filed a petition for a writ of certiorari in this Court which we granted. Engineering v. State Highway, 371 Md. 264, 808 A.2d 808 (2002). In so doing, however, we added a third question to the two presented in EMS's petition.

II.

The three questions for review are:

"1. Did the Board err in construing the 30-day `notice of claim' provision of COMAR 21.10.04.02 as an absolute condition precedent to the Board's jurisdiction to review the final decision of a procuring unit?

"2. Did the Board, using an unwritten `summary disposition' procedure, err in dismissing EMS's appeal based on an allegedly untimely "notice of claim" to the SHA's procurement office, where the undisputed record evidence established that the SHA had actual notice of the facts and circumstances giving rise to EMS's claim, the SHA's denial of EMS's claim was not based on lack of timely notice, EMS's affidavit regarding timeliness was unrebutted, and there is no record evidence of any prejudice to the SHA by timeliness of the notice EMS provided? "3. Whether, in a contested case involving a claim against a government entity, Maryland Code (1984, 1999 Repl.Vol.), Section 10-210(6) of the State Government Article, authorizes an agency to reject the claim by summary disposition."

III.

In March 1993, the SHA issued invitations for bids for the removal of lead-based paint and the repainting of five bridges over I-95 in Baltimore and Howard Counties. The Contract Special Provisions required compliance with the U.S. Environmental Protection Agency ("EPA") National Ambient Air Quality Standards. The relevant extant standard, embodied in 40 C.F.R. Part 50, included a general permissible exposure limit for workers of 150 micrograms of particulate matter per cubic meter. Contract General Provision GP-7.01 required the contractor to "comply with all Federal, State, and local laws, regulations and ordinances applicable to its activities and obligations under this contract." General Provision GP-7.05 additionally subjected the contractor to 29 C.F.R. § 1926, containing federal OSHA regulations, "as revised from time to time."

By letter dated 13 April 1993, the SHA notified EMS that, at bid opening, EMS was the apparent lowest competitive bidder. The SHA issued a Notice of Award to EMS on 21 May 1993. During the time between the bid opening and the Notice of Award, OSHA added a new subsection to 29 C.F.R. § 1926. The new regulations, 29 C.F.R. § 1926.62, were published in the Federal Register on 4 May 1993, with an effective date of 3 June 1993. "Lead Exposure in Construction," 58 Fed.Reg. 26,627 (4 May 1993). The pertinent new regulation imposed a maximum permissible exposure limit for lead inhalation, applicable to construction workers, of 50 micrograms per cubic meter and required protections such as protective clothing and equipment and special hygiene facilities and practices not previously mandated by other regulations.8

On 26 July 1993, SHA issued a Notice to Proceed to EMS. EMS began performance of the Contract on 30 September 1993. The record indicates that EMS began experiencing difficulties with equipment it had procured to perform the contract, resulting in some impatience on the SHA's part. In a letter dated 12 January 1994, EMS attempted to explain its difficulties with the equipment in terms of attempting to meet the EPA requirements, and requested an extension of time to complete the work. On 28 March 1994, the Maryland Occupational Safety and Health Unit (MOSH) of the Division of Labor and Industry adopted for state regulatory purposes the more protective federal OSHA standard in 29 C.F.R. § 1926.62.9 On 22 April 1994, EMS inquired of the SHA which standard—EPA's 150 micrograms per cubic meter or OSHA's 50 micrograms per cubic meter—applied to the contract. Five days later, on 27 April 1994, SHA advised EMS that the more stringent provision of the "new" OSHA regulations governed.

EMS notified SHA on 2 May 1994 that it was temporarily halting work while it awaited results of tests to evaluate compliance with the new OSHA standards. On 6 March 1995, EMS asked SHA for a 180-day extension due to the impact on productivity of compliance with the OSHA regulations. EMS followed on 13 June 1995 with a written explanation of a claim for additional compensation of $1,244,564.00 to complete work on all five bridges.10 This amount was reduced eventually to the additional cost of the three bridges on which EMS had completed work to that time. On 11 February 1997, SHA instructed EMS not to complete the remaining work on the contract. SHA and EMS terminated the contract as to the remaining two bridges on 20 November 1997, entering into a mutual termination agreement which read in pertinent part as follows:

SHA and EMS agree to mutually terminate this contract based upon the following conditions:
EMS agrees that the claim and extensions for the amount of $764,036.00 dated February 26, 1997 (currently at Chief Engineer's level) is EMS' final claim on this contract. It is understood that EMS does not waive any rights of appeal of this claim. It is the intent of the parties to delete the remainder of the work under the contract without cost or claim to either party.
SHA agrees not to pursue termination for default. In accordance with normal project close out, SHA will pay EMS any and all retention due.
It is understood that SHA has not agreed to make any payments under said claim before the Chief Engineer, but will consider the claim submitted. This is a mutual termination and release of claims with the exception of those mentioned above. The signatures below indicate confirmation of this agreement. (emphasis added)

The SHA procurement officer denied EMS's claims for additional compensation on 28 June 1999. No mention was made in the decision of the procurement officer regarding the timeliness (or not) of EMS's notice of claim for the $764,036.00.

After EMS appealed to the MSBCA, the SHA moved for summary disposition of EMS's claim, arguing, for the first time,11 that EMS's notice of claim to the SHA was untimely under COMAR 21.10.04.02, requiring that a contractor "shall file a written notice of a claim ... with the appropriate procurement officer within thirty days after the basis for the claim is known or should have been known, whichever is earlier."12 According to the SHA, the first notice of claim by EMS to the SHA's procurement officer was a letter dated 13 June 1995; however, timely notice was due by the end of October 1993, according to its calculation.13 In response, EMS asserted that three of its letters to the SHA during contract performance—dated 12 January 1994, 6 March 1995, and 13 June 1995—each served to put the SHA on timely written notice of its claim that EMS required more time and money to perform the contract.

The MSBCA, after observing that it had been recognizing, considering, and granting motions for summary disposition for seventeen years, based on an unwritten summary disposition...

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