Granite-Groves v. Washington Metropolitan Area Transit Authority, GRANITE-GROVES

• Decision Date: 22 April 1988
• Docket Number: GRANITE-GROVES,No. 87-7148,87-7148
• Citation: 845 F.2d 330
• Parties: , 34 Cont.Cas.Fed. (CCH) P 75,485 , et al. v. WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY, Appellant.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 330

845 F.2d 330

269 U.S.App.D.C. 273, 34 Cont.Cas.Fed. (CCH) P 75,485

GRANITE-GROVES, et al. v. WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY, Appellant.

No. 87-7148.

United States Court of Appeals District of Columbia Circuit.

Argued Feb. 26, 1988.

Decided April 22, 1988.

Gerard J. Stief, with whom Sara E. Lister, Robert L. Polk, Thomas B. Dorrier and William B. Bircher, Washington, D.C., were on the brief, for appellant.

Darrell P. McCrory, with whom G. Robert Hale was on the brief for appellees.

Before WALD, Chief Judge, SILBERMAN and BUCKLEY, Circuit Judges.

Opinion for the Court filed by Chief Judge WALD.

WALD, Chief Judge.

This appeal arises out of a contract between appellant Washington Metropolitan Area Transit Authority (WMATA) and appellee Granite-Groves ¹ (Contractor) for the construction of a part of the Washington, D.C. subway system. During performance of the contract, Granite-Groves asserted two claims for additional compensation, to wit: (1) claim No. 4251 for additional tunneling costs that were allegedly incurred because the subsurface conditions encountered by the contractor differed materially from those indicated in the pre-bid documents; and (2) claim No. 4045 for additional realignment costs which, according to Granite-Groves, were necessary because of improper tunneling restrictions imposed by WMATA. In March 1978 and March 1979, WMATA's Contracting Officer denied both claims in their entirety. Since then, this case has been appealed to, and heard by, the United States Army Corps of Engineers Board of Contract Appeals (Board or BCA); WMATA's General Manager; the United States District Court for the District of Columbia; and now this Court of Appeals.

In claim No. 4251 we, like the district court, uphold the Board's factual determination that during construction of the tunnels Granite-Groves encountered continual sand and water intrusion problems, most of which occurred in two sections of the project: between Stations 176 + 75 and 175 + 25 (Problem Site 1) and between Stations 180 + 00 and 178 + 50 (Problem Site 2). We differ with the district court, however, concluding as a matter of law that Granite-Groves should have foreseen from plain indications in the contract documents the unfavorable mining conditions it encountered at Problem Site 1; but that Granite-Groves is entitled to an equitable adjustment of the contract price because the tunneling conditions it encountered at Problem Site 2 were materially different from those indicated in the contract documents. Because we lack the data needed to determine the precise amount of additional compensation due the contractor, we remand claim No. 4251 for WMATA's General Manager to do so.

In claim No. 4045, the parties do not dispute that Granite-Groves is entitled to an award of $390,000 for additional realignment work done; and that Granite-Groves is entitled to statutory interest on the award, because WMATA's Contracting Officer delayed unreasonably in processing the claim. See D.C.Code § 15-109. The only issue on appeal concerns the appropriate period for the payment of interest. We agree with the district court that under General Ry. Signal Co. v. Washington Metrop. Area Transit Auth., 527 F.Supp. 359 (D.D.C.1979), aff'd, 664 F.2d 296 (D.C.Cir.1980), cert. denied, 452 U.S. 915, 101 S.Ct. 3049, 69 L.Ed.2d 418 (1981), a contractor who has been subjected to unreasonable delay is entitled to recover interest for the full period from the completion of the additional work until the time of final payment. We therefore affirm the district court on claim No. 4045.

BACKGROUND

On or about September 13, 1973, pursuant to public competitive bidding, the appellee Granite-Groves entered into a written contract with WMATA, the appellant, for the construction of a portion of the Washington, D.C. subway system. The project (commonly known as Section D008) included the mining and construction of 5,265 linear feet of tunnel at a depth of approximately 40-55 feet below ground surface. The contract documents called for two tunnels, one inbound and one outbound, running from the vicinity of G and 15th Streets, S.E. to C and 19th Streets, S.E. See Joint Appendix (J.A.) at 19; Appellant's Brief at 27.

During the mining of the tunnels, Granite-Groves asserted two major claims for equitable adjustment of the contract price. ENG BCA No. 4045 was a claim under the "Changes" article of the contract ² in the approximate sum of $423,000 for the cost of realigning a part of the inbound tunnel. Granite-Groves alleged that the realignment was necessitated by improper tunneling restrictions imposed upon the contractor by WMATA. The other claim (ENG BCA No. 4251) arose out of the "Differing Site Conditions" clause of the contract ³; Granite-Groves sought approximately $1,500,000 for the cost of the additional tunneling work allegedly required because Granite-Groves encountered substantial amounts of sand and water instead of the dry clay indicated in the contract documents. See J.A. at 19.

Under the "Disputes" clause in the parties' contract, WMATA's Contracting Officer makes the initial decision on a contract claim. See id. at 38-39. A party to the contract may appeal this decision to WMATA's Board of Directors, which, by formal resolution, has designated the Board of Contract Appeals to conduct evidentiary hearings and issue advisory opinions and has appointed WMATA's General Manager to review these opinions and decide the appeals. See George Hyman Constr. Co. v. Washington Metrop. Area Transit Auth., 816 F.2d 753, 755 (D.C.Cir.1987). In this case, Granite-Groves submitted its contract claims in September 1975. See J.A. at 32. WMATA's Contracting Officer considered the claims and, over two years later, denied them in their entirety. Granite-Groves entered a timely appeal, and hearings on the claims were conducted by the BCA during 1980. On November 16 1984, the Board denied the contractor's differing site conditions claim (No. 4251) but found that it was entitled to recover on its realignment claim (No. 4045). On the latter claim, the BCA also found that because the Contracting Officer's final decision had been unreasonably delayed the contractor was entitled to statutory interest of 6% on the award to run from October 30, 1975, the day Granite-Groves completed the additional realignment work, until the claim was paid. See Appellee's Brief at 2-5.

WMATA's General Manager adopted the Board's recommendation that claim No. 4251 be denied in its entirety. The General Manager also adopted the Board's recommended award in claim No. 4045 except for the portion granting interest for the full period until the time the claim was paid; the General Manager decided instead that the contractor should recover interest on the award only for the period from September 1, 1976, the date Granite-Groves requested that the interest commence, through March 28, 1978, the day the Contracting Officer issued his final decision. Granite-Groves sought judicial review of the General Manager's decision. Cross-motions for summary judgment were filed by the parties after the record before the Board had been submitted to the district court. On June 17, 1987, the district court issued a memorandum opinion and judgment reversing the General Manager and holding that the contractor was entitled to summary judgment on both issues presented for review. Specifically, the district court found that on claim No. 4251 Granite-Groves encountered differing site conditions and thus was entitled to an equitable adjustment of the price of the contract; and that Granite-Groves was entitled to interest on claim No. 4045 for the entire period until the claim was paid (as had been decided by the Board). This appeal followed.

DISCUSSION

I. THE DIFFERING SITE CONDITIONS CLAIM

A. Standard of Review

Under the Disputes clause, which essentially incorporates the standard of review set forth in the Wunderlich Act, "[t]he decision of [WMATA's] Board of Directors or its duly authorized representative ... shall be final and conclusive unless determined by a court of competent jurisdiction to have been fraudulent, or capricious, or arbitrary, or so grossly erroneous as necessarily to imply bad faith, or is not supported by substantial evidence." J.A. at 39; see also 41 U.S.C. § 321 (1987). The Disputes clause, in accordance with the Act, goes on to state that "Nothing in this contract ... shall be construed as making final the decisions of the Board of Directors or its representatives on a question of law." J.A. at 39 (emphasis added); see also 41 U.S.C. § 322.

Success on a changed conditions claim turns on the contractor's ability to demonstrate that the conditions it encountered during performance differed materially from those "indicated" in the contract documents. See P.J. Maffei Bldg. Wrecking Corp. v. United States, 732 F.2d 913, 916 (Fed.Cir.1984). The Board's determination as to the conditions that were actually encountered during the performance of the contract is purely factual in nature and therefore is entitled to finality where supported by substantial evidence and not otherwise arbitrary. Arundel Corp. v. United States, 515 F.2d 1116, 1123, 207 Ct.Cl. 84 (1975); Dale Ingram, Inc. v. United States, 475 F.2d 1177, 1184, 201 Ct.Cl. 56 (1973); Foster Constr. C.A. & William Bros. Co. v. United States, 435 F.2d 873, 878, 193 Ct.Cl. 587 (1970). In this case, there is no dispute over the actual conditions encountered; the parties agree that Granite-Groves experienced sand and water intrusion problems during tunneling. See J.A. at 19, 25. The only question here is whether materially different subsurface conditions were indicated in the contract between Granite-Groves and the WMATA. Determination of the claimed contract indications is a matter involving analysis and interpretation of the contract documents, and thus presents a question of law for the court to decide independently of the decision...