K-Con Bldg. Sys. Inc. v. United States
| Decision Date | 19 August 2011 |
| Docket Number | No. 05-1054C,05-1054C |
| Parties | K-CON BUILDING SYSTEMS, INC., Plaintiff, v. THE UNITED STATES, Defendant. |
| Court | United States Courts of Appeals. United States Court of Appeals (District of Columbia) |
Motion for Summary Judgment; Contract to Design and Build Prefabricated Building; Enforceability of Liquidated Damages Clause; Challenge to Components of the Liquidated Damages Rate; Personnel Costs; Constructive Suspension of Work; Excusable Delay; Critical Path; Notice of Changes; Existence of Changes
William A. Scott, Charleston, SC, for plaintiff.
Daniel B. Volk, United States Department of Justice, Washington, DC, for defendant.
Plaintiff K-Con Building Systems, Inc. filed three suits in this court concerning its contracts with the United States Coast Guard ("Coast Guard") for the design and construction of prefabricated metal buildings in Elizabeth City, North Carolina, St. Petersburg, Florida, and Port Huron, Michigan. The three suits share many similarities, but there are meaningful differences that require the court to address each suit separately. The court previously ruled on plaintiff's motion for partial summary judgment in the Elizabeth City suit. In this case, which concerns the building in Port Huron, plaintiff moves for summary judgment on three issues: whether the liquidated damages rate specified in the contract constitutes an unenforceable penalty; whether remission of some liquidated damages is appropriate; and whether it is entitled to a change order. For the reasons set forth below, the court denies plaintiff's motion.
In April 2001, the United States General Services Administration ("GSA") awarded plaintiff a Federal Supply Schedule contract for Prefabricated Structures and Outdoor Smoking Shelters.1 Pl.'s App. 1-9. Subsequently, in the fall of 2003, the Coast Guard solicited proposalsfor the design and construction of a prefabricated structure to serve as a cutter support team building in Port Huron. Id. at 11-13, 82.
As set forth in the Scope of Services section of the request for proposals ("RFP"), the Coast Guard contemplated that the successful contractor would design the building based on the contract requirements, submit the design to the Coast Guard in three phases (a "50% design," a "90% design," and a "100% design"), and, upon the Coast Guard's approval of the 50% design, begin construction. Id. at 85. The 50% design was due twenty-one days after contract award, and the Coast Guard had five days within which to provide the contractor with its comments. Id. The 90% design was due fourteen days after the contractor received the Coast Guard's comments on the 50% design, and the Coast Guard again had five days within which to provide the contractor with its comments. Id. The 100% design was due seven days after the contractor received the Coast Guard's comments on the 90% design. Id. The contractor was required to submit a proposed schedule reflecting these deadlines within fifteen days of commencing work on the project, and the design and construction of the building were to be completed no more than 300 days after contract award. Id. at 20.
The Scope of Services section also contained the requirements for the design and construction of the building. Id. at 82-90. In the General Requirements subsection, the Coast Guard indicated that the building was to be "approximately 3276 gross square feet and [was] envisioned to be 36 feet by 91 feet," the building's shop bays were to have "a minimum clear height of ten (10) feet," and the contractor was to "[p]rovide code compliant structural, electrical, fire alarm, fire suppression, telecommunications, [heating, ventilation, and air conditioning ("HVAC"),] and plumbing" systems. Id. at 82. The Coast Guard supplied three drawings as "general conceptual layouts" for the contractor's reference. Id.
The Coast Guard then identified more specific requirements in the Design Requirements subsection. Several of these design requirements are of particular importance in the resolution of the pending motion. First, in paragraph 2, the Coast Guard stated that the building was to provide "full and complete functionality in accordance with current standards for modern, IT compatible, shop and office facilities." Id. at 83. Second, in paragraph 2.1, the Coast Guard required that the contractor comply with specified building codes: Id. Next, in paragraph 2.3, the Coast Guard directed the contractor to provide a "two ton electric monorail hoist . . . ." Id. In paragraph 2.5,the Coast Guard mandated that the contractor provide a heating system that would maintain the temperature in the entire building between sixty-eight and seventy-two degrees Fahrenheit during the heating season and an air conditioning system that would maintain the temperature in the building, with the exception of the shops and mechanical spaces, between seventy-four and seventy-eight degrees Fahrenheit during the cooling season. Id. at 83-84. Finally, in paragraph 2.7.2, the Coast Guard indicated that "[a] small telecommunications equipment room of 8' x 7'" would meet its needs and that the contractor was to "[p]rovide a dedicated climate control" for that room. Id. at 85.
Plaintiff initially responded to the solicitation on December 8, 2003. Id. at 116. The Coast Guard reviewed plaintiff's proposal and identified three concerns, including the fact that it "need[ed] climate control in the Telecommunications room as per the specifications." Def.'s App. 23. The contracting officer, Cathy Broussard, presented these concerns to plaintiff in an electronic-mail message and advised: "We . . . want to make sure you understand that you are responsible for the design/build process and must comply with our specification and drawings." Id. A handwritten note on the printed message indicated that the three issues identified by the Coast Guard were "the only areas that need[ed] to be clarified-everything else complie[d with the] specifications]." Id.
In response to the Coast Guard's concerns, plaintiff's sales manager, Skip Reitmeier, supplied Ms. Broussard with some additional information. With respect to the telecommunications room, he stated:
We had not included specific climate control for the Comm room in our pricing (again, in an effort to reduce cost). However, our HVAC contractor recommends that the easiest and most cost effective way to accomplish it would be to install a Mitsubishi "mini-split system" specifically designed for computer and communications rooms. This system would include a remote 2 ton condensing unit, electric heating element, and would be thermostatically controlled.
Id. at 24. He explained that plaintiff was "confident" that it had "incorporated all of the performance requirements of the specifications" and that it had "endeavored to address" any "gray areas" by providing "qualifications" to its proposal. Id.
Plaintiff submitted a revised proposal to the Coast Guard on January 13, 2004. Pl.'s App. 116. In its proposal, plaintiff indicated that it would perform the work as described, with the drawings and specifications provided by the Coast Guard serving only as guidelines. Id. Several aspects of plaintiff's proposal are relevant to the pending motion. First, plaintiff proposed a building footprint of thirty-six feet by ninety-one feet, an eave height of twelve feet, and the installation of two "8' x 8' insulated sectional overhead doors . . . ." Id. at 117-18. With regard to the building's HVAC system, plaintiff proposed "two 60,000 BTU Trane 90% efficient splitsystem gas furnaces installed in the mechanical room" to heat and cool the building. Id. at 118. Finally, plaintiff indicated that the telecommunications room would also be heated and cooled with this system, and would not have a dedicated climate control. Id. Plaintiff stated, however, that its proposed HVAC system was "subject to change upon final engineering design and requirements." Id. at 119.
The Coast Guard accepted plaintiff's offer and placed an order under plaintiff's GSA contract for the solicited building. Id. at 11. When Mr. Reitmeier returned the executed copy of the contract to the Coast Guard, he attached a letter dated January 19, 2004, id. at 123, reiterating plaintiff's position that its proposal would take precedence over the Scope of Services section in the solicitation:
As per our various conversations and e-mails regarding the above referenced solicitation and award, this writing will confirm that K-Con's pricing is predicated upon utilizing the Specifications and drawings provided by the Coast Guard as a performance guideline and that the clarifications outlined in our revised proposal dated 13 January 2004 define the Scope of Work to be undertaken by K-Con. In the event of a discrepancy between the specifications and the proposed Scope of Work, the proposed Scope of Work will take precedence unless negotiated otherwise between K-Con and the Contracting Officer.
Id. at 122. Ms. Broussard executed the contract on behalf of the Coast Guard on January 20, 2004, the award effective date. Id. at 11. The initial value of the contract was $582,641 and the initial completion date was November 20, 2004. Id. Although the contract was modified on five occasions, resulting in a final value of $529,271.47, the project completion date was never extended. Id. at 91-95.
Along with the standard clauses for changes and suspension of work, plaintiff's contract with the Coast Guard contained a standard liquidated damages clause. Id. at 30, 38. The clause provided for...
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