General Ry. Signal Co. v. Washington Metropolitan Area Transit Authority

• Decision Date: 12 May 1989
• Citation: 875 F.2d 320
• Parties: GENERAL RAILWAY SIGNAL CO., v. WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY, Appellant. GENERAL RAILWAY SIGNAL CO., Appellant, v. WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 320

875 F.2d 320

277 U.S.App.D.C. 287

GENERAL RAILWAY SIGNAL CO., v. WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY, Appellant.

GENERAL RAILWAY SIGNAL CO., Appellant, v. WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY.

United States Court of Appeals, District of Columbia Circuit.

Argued April 29, 1986.

Decided May 12, 1989.

Thomas B. Dorrier, for appellant in No. 85-5753 and cross-appellee in No. 85-5768. Sara E. Lister, Robert L. Polk and Robert J. Sciaroni, Washington, D.C., were on the brief, for appellant in No. 85-5753 and cross-appellee in No. 85-5768.

Paul L. Waldron, with whom Michael L. Thomas, Alexandria, Va., was on the brief, for appellee in No. 85-5753 and cross-appellant in No. 85-5768.

Richard J. Webber, Washington, D.C., was on the brief, for amicus curiae, George Hyman Const. Co., in Nos. 85-5753 and 85-5768, urging that Washington Metropolitan Area Transit Authority has no immunity from payment of prejudgment interest on its contractual obligations.

Before ROBINSON and STARR, Circuit Judges, and McGOWAN, ^* Senior Circuit Judge.

Opinion Per Curiam.

PER CURIAM:

This case involves a contract dispute between the General Railway Signal Company ("GRS" or "General Railway") and the Washington Metropolitan Area Transit Authority ("WMATA" or "the Authority"). The dispute concerns what amount should be deducted as an equitable adjustment for the elimination of part of certain work that General Railway contracted to perform on WMATA's subway system. Reviewing decisions by the General Manager of WMATA that responded to recommendations by the Army Corps of Engineers Board of Contract Appeals, the District Court entered judgment in favor of General Railway for $975,952 as principal and for $65,455.63 in interest. On appeals by both parties, we affirm the District Court's award of principal and interest as well as its decision as to the date from which such interest is to be calculated.

I

Although contractual relations between General Railway and WMATA date back over 16 years, the facts pertinent to the resolution of this controversy can be briefly stated.

In September 1971, the parties executed a lump-sum contract in the amount of $42,074,675.30. Of particular relevance to this case, GRS undertook to install wayside equipment for the automatic train control system and cables to connect that equipment to the train control room. The contract as originally executed called for GRS to excavate trenches alongside the train tracks for burial of the cable and to refill the trenches following installation.

In preparing to bid on the subway project, General Railway entered into a subcontract with L.K. Comstock to perform much of the work, including the "trenching" work just described. The original subcontract between General Railway and Comstock provided for a lump-sum price of $34,491,410. Only after executing the subcontract did GRS seek, and Comstock provide, a breakdown of the lump-sum price into separate figures for various components of the work. The items into which Comstock allocated the lump sum accorded with line item figures WMATA required to be specified in the bids for the prime contract. GRS then incorporated these line item figures into the bid it subsequently submitted to WMATA. The prices for the three phases of the subway project listed in the unit price schedule of GRS' bid totalled $1,336,500 for the trenching work. ¹

Before the trenching work began, however, WMATA decided to have the cables installed in aboveground ductbanks rather than in underground trenches. WMATA's change of mind eliminated the need to have GRS, through its subcontractor, carry out this portion of its original contract. At the same time, it triggered the operation of the "Changes" clause of the prime contract. That clause provides in pertinent part as follows:

If any change ... causes an increase or decrease in the Contractor's cost of ... the performance of any part of the work under this contract an equitable adjustment shall be made and the contract modified in writing accordingly.

WMATA-GRS Contract Sec. 1.3(d), Record Excerpts ("R.E.") at 47.

The parties thereafter failed to agree on the amount properly credited to WMATA by virtue of the deleted work, thereby triggering the dispute resolution provision of the prime contract. See id. Sec. 1.6, R.E. at 48-49. That clause designates WMATA's Board of Directors or its designated representative as the arbiter of contract disputes that cannot be resolved between the parties. Id. Sec. 1.6(a). WMATA's Procurement Regulations, in turn, designate the General Manager of WMATA as the Board's representative for these purposes. WMATA Brief at 3. In addition, the Board by resolution has authorized the Board of Contract Appeals of the Army Corps of Engineers to hear such disputes initially and propose resolutions to the General Manager. See id.

The dispute before the Board of Contract Appeals centered on whether the $1.3 million figure allocated to trenching work by GRS in its bid to WMATA (and subsequently included in the unit price schedule of the prime contract) accurately reflected the reasonable costs of performing that work (were it in fact to be performed). WMATA took the position that the three line-item totals for trenching work did approximate costs and therefore provided an appropriate basis for calculating an equitable adjustment. GRS, in contrast, argued that the line item figures for trenching were merely arbitrary allocations and that the actual costs of the deleted work were much lower. To support this assertion, General Railway pointed to estimates obtained by WMATA itself fixing the cost of trenching at about half the line item total.

The Board of Contract Appeals nonetheless decided that the line item figures supplied in GRS's bid (and thereafter in the contract's unit price schedule) were presumptively reasonable and that GRS "ha[d] not carried the burden of proving that the bid prices [were] not a reasonable price for the deduction." General Railway Signal Co., ENG BCA No. 3970, at 14 (Dec. 30, 1983) [hereinafter Initial Board Decision ], R.E. at 1, 14. In addition to this amount, the Board concluded, an additional five percent should be added to reflect GRS's reasonable profit on the deleted work. It therefore recommended that as an equitable adjustment WMATA be credited a total of $1,403,325 for the eliminated trenchwork. Id. at 15, R.E. at 15. The General Manager of WMATA approved and adopted this decision. Final Decision of General Manager, General Railway Signal Co., WMATA Contract No. 1Z2011 ENG BCA No. 3970 (Apr. 7, 1984), R.E. at 20.

On review of the General Manager's decision, the District Court reversed. It rejected the Board of Contract Appeals' reliance on the bid price of $1.3 million. In the court's view, that figure was "simply an allocation required by WMATA for administrative purposes from successful bidders under lump-sum contracts." General Railway Signal Co. v. WMATA, 598 F.Supp. 595, 597 (D.D.C.1984) [hereinafter Initial District Court Opinion ]. The contract price did not necessarily reflect the true costs of the deleted trenching work. Accordingly, the court granted GRS's motion for summary judgment and remanded to the Board of Contract Appeals to determine "a reasonable cost estimate" for the work. Id. at 598 (emphasis omitted). In addition, the court directed the Board to calculate interest on that amount "as provided by law." Id. at 597. WMATA's immediate appeal of the court's decision was dismissed as premature. General Railway Signal Co. v. WMATA, No. 84-5900 (D.C.Cir. order dated Mar. 27, 1985).

On remand, the Board of Contract Appeals examined in detail various estimates of cost advanced by the parties. WMATA clung to the contention that the line item price in the unit price schedule accurately reflected cost. The Board rejected this argument, however; it decided that the most accurate basis for calculating reasonable cost was an estimate from WMATA's own expert, Bechtel Corp. Bechtel had supplied WMATA with an estimate during the period immediately after elimination of the trenching work in the protracted period when WMATA and GRS were attempting to negotiate a settlement on their own. General Railway Co., ENG BCA No. 3970, at 10 (Mar. 29, 1985) [hereinafter Board Decision on Remand ], R.E. at 28, 36. The Board made an adjustment to Bechtel's estimate to take into account: (1) inclusion in the estimate of costs of trenching that were unnecessarily redundant; (2) inclusion in the estimate of costs attributable to a degree of soil compaction that exceeded what was appropriate or, presumably, contemplated by the parties; and (3) a mark up of 9.73%, proposed by both parties to reflect the contemplated profits of GRS and its subcontractor. Id. at 6, 10, R.E. at 33, 36. As a result of these calculations, the Board arrived at a credit due WMATA of $360,548. Under this determination, GRS was entitled to the amount of $975,952, which represented the difference between $1,336,500 (the amount withheld from GRS) and $360,548, the amount fixed by the Board as an equitable adjustment. See General Railway Signal Co. v. WMATA, 625 F.Supp. 22, 23 n. 2 (D.D.C.1985) [hereinafter District Court Opinion After Remand ]. The Board declined to reach the issue of the interest properly awarded on this amount, however, because "WMATA's liability for interest in connection with equitable adjustments is now pending ... in several cases." Board Decision on Remand at 11, R.E. at 37.

The General Manager of WMATA refused to adopt the Board's recommendation. Instead, the General Manager reaffirmed her previous approval of the Board's first decision, which had adopted the line item figures for trenching as the proper equitable adjustment. Final Decision of General Manager, General Railway Signal Co., WMATA Contract No. 1Z2011, ENG BCA No. 3970 (Apr. 5, 1985), R.E. at 39. GRS moved the District Court for judgment in its favor in...