Granite Const. Co. v. U.S.
| Decision Date | 01 April 1992 |
| Docket Number | No. 91-5107,91-5107 |
| Citation | 962 F.2d 998 |
| Parties | 37 Cont.Cas.Fed. (CCH) P 76,290 GRANITE CONSTRUCTION COMPANY, Plaintiff-Appellant, v. The UNITED STATES, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Federal Circuit |
Adrian L. Bastianelli, III, Dempsey, Bastianelli, Brown & Touhey, Chartered, Washington, D.C., argued, for plaintiff-appellant. With him on the brief, was Lisa A. Federici, of counsel.
Scott E. Ray, Atty., Commercial Litigation Branch, Dept. of Justice, Washington, D.C., argued, for defendant-appellee. With him on the brief, were Stuart E. Gerson, Asst. Atty. Gen., David M. Cohen, Director and Thomas W. Petersen, Asst. Director. Also on the brief, was Gary A. Moore, Office of Counsel, U.S. Army Corps of Engineers, Mobile, Ala., of counsel.
Before NEWMAN, Circuit Judge, COWEN, Senior Circuit Judge, and LOURIE, Circuit Judge.
In this Wunderlich Act case, Granite Construction Company (Granite) appeals from the decision of the United States Claims Court, 22 Cl.Ct. 831, which affirmed the decision of the Corps of Engineers Board of Contract Appeals (Board), ENG BCA No. 4496, 89-1 B.C.A. (CCH) p 21,447, 1988 WL 143116. The Board denied Granite's claim for recovery of costs incurred in the removal and replacement of waterstop in a lock and dam construction project. For the reasons to be set forth, we reverse and remand.
On October 26, 1976, Granite entered into a $36,263,924 contract with the U.S. Army Corps of Engineers (Corps) for the construction of a lock and dam near Aberdeen, Mississippi. 1 The dam and lock walls consist of a series of concrete monoliths that are 60 feet high, 42 feet long, and 30 feet wide. The contract required Granite to embed polyvinylchloride (PVC) waterstop in the vertical joints between each monolith in order to prevent water leakage.
After approximately 10 percent of the waterstop was permanently embedded in the monoliths, the Corps tested the waterstop, determined that it did not meet the contract requirements, and required Granite to remove and replace virtually all of the installed waterstop.
After removing and replacing the waterstop, Granite sued its suppliers Alpha Extruders (Alpha), Vimco Concrete Accessories (Vimco), Saf-T-Grip Specialties (STG), and Stafford in a United States district court and recovered $400,000 from Vimco and Stafford by settlement. In addition, Granite obtained a default judgment against Saf-T-Grip and Alpha for $894,750. Granite assigned its rights against the latter two suppliers to insurers, and agreed to pursue a claim against the Corps. Granite also agreed to furnish one-half of any recovery to Vimco and Stafford or their insurers.
Granite filed a $3.8 million claim with the contracting officer. On appeal, the Board conducted a trial on liability in May of 1983. On December 19, 1988, the Board issued a split decision denying Granite's claim in its entirety. 2 The Board majority determined that the contract required Granite to inspect and test the waterstop to ensure that it met contract specifications. The Board further determined that the government had a right to insist upon strict compliance with the contract specifications and to require the complete removal of the embedded STG waterstop. One judge concurred and dissented in part, concluding that Granite was entitled to delay damages for the Corps' failure to periodically test the waterstop. The dissenting judge also found that the Corps arbitrarily and capriciously failed to evaluate the adequacy of the waterstop for the Aberdeen project.
Pursuant to the Wunderlich Act, 41 U.S.C. §§ 321-22 (1978), Granite sought judicial review of the Board's decision with the United States Claims Court. Upon review of the Board's decision in accordance with the standards provided in the Wunderlich Act, the Claims Court agreed with the Board and granted the government's motion for summary judgment.
Because Granite entered into the Aberdeen lock and dam contract prior to the effective date of the Contract Disputes Act of 1978 (CDA), 41 U.S.C. § 601 et seq. (1988), and did not elect CDA coverage, the disputes provisions of the Wunderlich Act govern this appeal. Essex Electro Eng'rs, Inc. v. United States, 702 F.2d 998, 1002-03 (Fed.Cir.1983). The Wunderlich Act provides:
§ 321. Limitation on pleading contract provisions relating to finality; standards of review No provision of any contract entered into by the United States, relating to the finality or conclusiveness of any decision of the head of any department or agency or his duly authorized representative or board in a dispute involving a question arising under such contract, shall be pleaded in any suit now filed or to be filed as limited judicial review of any such decision to cases where fraud by such official or his said representative or board is alleged: Provided, however, That any decision shall be final and conclusive unless the same is fradulent [sic] or capricious or arbitrary or so grossly erroneous as necessarily to imply bad faith, or is not supported by substantial evidence.
§ 322. Contract provisions making decisions final on questions of law
No Government contract shall contain a provision making final on a question of law the decision of any administrative official, representative, or board.
Board decisions under the Wunderlich Act are subject to two stages of appellate review, first by the Claims Court and then by this court. The Claims Court reviews the legal conclusions of the board de novo and factual findings under the substantial evidence test. Although Granite appeals from the decision of the Claims Court, we essentially review the underlying decision of the board under the same standards applied by that court. Cf. Matsushita Electric Indus. Co. v. United States, 929 F.2d 1577, 1578 (Fed.Cir.1991); American Permac, Inc. v. United States, 831 F.2d 269, 273 (Fed.Cir.1987), cert. dismissed, 485 U.S. 901, 108 S.Ct. 1067, 99 L.Ed.2d 229 (1988); See also Vista Scientific Corp. v. United States, 808 F.2d 50, 52 (Fed.Cir.1986).
The Waterstop Testing Issue
The first issue presented is whether the government is liable for the failure to periodically test the waterstop. Granite argues that the Corps was required under the inspection provisions of the contract to perform a specified number of tests on the waterstop to determine whether the material complied with the specifications. Granite contends that the government's failure to test the waterstop before it was permanently embedded in the structure caused the contractor to incur costs exceeding $3.8 million. Had the government conducted periodic testing of the waterstop in a timely fashion, Granite argues, the nonconforming waterstop would have been discovered prior to installation and remedied by Granite at a much lower cost.
The provisions of the contract pertaining to the inspection and testing of the waterstop are set forth in the decisions of the Board and the Claims Court, to which the reader is referred for a complete statement of these terms. It will suffice for our purpose to paraphrase the pertinent sections of the specifications.
Paragraph 14.3.3 of the technical specifications, entitled "Testing," provided that the contractor should submit samples of the waterstop to the Corps, but that all testing of the waterstops would be performed by and at the expense of the government, which had the right to reject any sample which failed to meet the requirements of CRD-C 572-74. This contract provision, in turn, contained detailed requirements for testing samples of the finished waterstop, including tensile strength, ultimate elongation, low temperature brittleness, stiffness in flexure, and accelerated extraction, and stated that the waterstop may be rejected if it failed to meet any of the requirements of the specification. Paragraph 14.3.3.1 specified that each sample to be tested by the government should be at least 12 inches long and taken from every 200 feet of waterstop supplied by Granite.
General Provision clause GP-10(d) stated that all inspection and tests by the government should be performed in a manner that would not unnecessarily delay the work. Clause GP-32 required Granite to maintain a general inspection system to assure compliance with the specifications.
Under the heading of Special Provisions, clause SP-38 required the contractor to maintain an effective quality control system in accordance with GP-32 and to perform inspection and testing of all items of work, including the work of subcontractors, to monitor compliance with the specifications and drawings. This clause of the contract also provided: "[w]here the technical provisions of the contract provide for Government quality control or assurance by inspections or testing, it shall not relieve the contractor from the responsibility of doing such testing or inspection as is necessary to assure himself or the Government that the specifications are being met." Thus, the contract contained a technical provision which held the Corps responsible for testing the waterstop and a special provision which stated that the technical provision did not relieve Granite from its duty to supply waterstop which met the contract specifications.
On March 4, 1977, Granite ordered 7,100 linear feet of PVC waterstop from Vimco. Vimco purchased the waterstop from STG, which obtained the material from Alpha. The Corps requested four samples of waterstop for testing by the Waterway Experiment Station. On July 18, 1977, the Corps informed Granite that the samples met the requirements of CRD-C 572-74. Subsequently, STG requested permission to supply a different color waterstop. After Granite transmitted this request, the Corps became concerned and sought assurance that the material to be shipped was the same as the original samples. On September 16, 1977, STG certified that the waterstop...
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