State v. Osborne Constr. Co.
| Decision Date | 01 May 2020 |
| Docket Number | Supreme Court No. S-17048 |
| Parties | State of Alaska, DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES, Petitioner, v. OSBORNE CONSTRUCTION COMPANY, Respondent. |
| Court | Alaska Supreme Court |
Jeffrey P. Stark, Chief Assistant Attorney General, Anchorage, and Kevin G. Clarkson, Attorney General, Juneau, for Petitioner.
Michael E. Kreger and Sarah C. Gillstrom, Perkins Coie, LLP, Anchorage, for Respondent.
Before: Winfree, Stowers, Maassen, and Carney, Justices. [Bolger, Chief Justice, not participating.]
A state agency appeals a superior court decision reversing the agency's decision in an administrative appeal. The agency denied a contractor's claim for additional compensation because the claim was filed outside the filing period allowed by the contract. After applying our independent judgment to interpret the contract, we agree with the agency that the contractor failed to file its claim within the period allowed. We therefore reverse the superior court's decision and reinstate the agency's.
In August 2013 the Alaska Department of Transportation and Public Facilities (DOT) entered into a contract with Osborne Construction Company to upgrade the Aircraft Rescue and Fire Fighting building at the Fairbanks International Airport to withstand damage in the event of an earthquake. The contract listed a series of upgrades to be completed. In addition to renovations to the building, the contract required "soil structure improvements" to the building site.
The purpose of the soil structure improvements was to alleviate the risk of liquefaction.1 This was to be accomplished by compaction grouting, a process in which grout is injected into the ground at regularly spaced intervals to increase soil density.2 The contract provided specifications for the material to be used in the grouting process; Osborne was responsible for obtaining conforming materials.
The contract also established procedures for changes to the contract (Article 9), resolution of disagreements (Article 15), and requests for additional compensation or time (Article 15). Article 15 set out a series of deadlines by which the contractor had to notify DOT of any claim for additional compensation.
Osborne hired AVAR3 in October 2013 as a subcontractor to perform the compaction grouting work; DOT accepted AVAR as a subcontractor in November 2013. AVAR then prepared and submitted a compaction grouting proposal to Osborne in December; Osborne forwarded it to DOT in January 2014. In March Osborne submitted a revised plan to DOT, identifying 437 grout injection points, the material and equipment to be used, and the installer's qualifications. DOT accepted the proposal in late March.
AVAR began the grouting work on June 30, 2014, but encountered difficulties. The sand AVAR intended to use was no longer available from the local supplier identified in its bid, and AVAR proposed an alternative source of sand to Osborne. Osborne provided an analysis of the sand to DOT's engineers, Shannon & Wilson, and requested they approve its use. Shannon & Wilson recommended rejecting the sand as non-compliant with the contract terms. AVAR then located another alternative from an Anchorage-based source; Shannon & Wilson again recommended its rejection.
AVAR located and began to import sand from a new source in California in late July. But even after obtaining better quality sand, AVAR was delayed again by equipment issues. AVAR was finally able to begin compaction grouting with the imported sand in mid-August.
By September 7, 2014, AVAR had successfully completed 154 injection points in the exterior area surrounding the building. Grouting within the building's interior began the next day. AVAR immediately encountered issues with grouting inside the building, and hired a consulting firm, Langan Treadwell Rollo (Langan), to study the soil underneath the building and determine the source of the problem.
Langan prepared a report for AVAR and made several recommendations to alleviate the difficulty while still achieving the desired level of soil improvement. The Langan report attributed the difficulty of injection to nearby grouting injection points outside the building, which made the soil beneath the building more dense. AVAR provided the Langan report to Osborne on September 24.
The next day Osborne petitioned DOT for a modification of the grouting plans, attaching a copy of the Langan report. On October 9 DOT tentatively approved Osborne's request to increase the spacing between injection points, but withheld final approval until after Shannon & Wilson was able to observe and confirm that the modification was acceptable. DOT ultimately approved Osborne's request to increase the spacing between injection points but did not permit any other changes.
AVAR completed the injection grouting work the next day, on October 10. On October 13 Osborne transmitted to DOT a letter from AVAR, dated October 3 and addressed to Osborne, which was entitled "NOTICE OF CHANGE IN GROUND CONDITIONS." In the letter AVAR stated that it had incurred increased costs due to soil conditions inside the building that were "dramatically different" than conditions outside the building. The letter also promised to provide Osborne with an analysis of the additional costs and the results of bore studies analyzing the soil conditions.
On February 2, 2015, AVAR sent a letter with a claim for additional compensation to Osborne. The letter was addressed to both Osborne and DOT's Anchorage office. In the letter AVAR stated two bases for its claim for increased compensation: (1) differing site conditions and (2) a lack of locally available sand that met the contractual specifications.
On May 11, 2016, Osborne submitted a claim to DOT seeking additional compensation for the compaction grouting work, incorporating AVAR's February 2015 letter to Osborne. DOT notified Osborne on July 13 that its claim was not valid because it did not comply with certification requirements.4 DOT requested that Osborne remedy the certification issue and re-submit the claim, which Osborne did on September 20.
The DOT contracting officer issued a written decision on October 28, 2016, denying Osborne's May 11, 2016 claim for additional compensation. The contracting officer first explained that the claim did not comply with Article 15 of the contract. Article 15.1.5 states:
If the claim or dispute is not resolved by the DEPARTMENT, then the CONTRACTOR shall submit a written Claim to the Contracting Officer within 90 days after the CONTRACTOR becomes aware of the basis of the claim or should have known the basis of the claim, whichever is earlier.
The contracting officer concluded that Article 15.1.5 required Osborne to file a written claim with DOT within 90 days of becoming aware of the basis of the claim. The contracting officer also concluded that, under the contract, failure to file a claim within the specified time resulted in the waiver of a contractor's right to claim.
To determine whether Osborne filed its claim within the prescribed period, the contracting officer first calculated the latest date on which Osborne could have properly submitted its claim. The contracting officer found the latest date by which Osborne should have known the basis of the claim for additional compensation was the date of completion of the grouting work — October 10, 2014 — and that the claim should have been filed by January 8, 2015.
The contracting officer also considered two possible alternative dates. First the contracting officer posited that even if Osborne could argue that the date that AVAR submitted its claim to Osborne was the date upon which Osborne became aware of the basis for the claim, Osborne still failed to file its claim within the required period. Because AVAR submitted its claim to Osborne on February 2, 2015, Osborne would have been required to file its claim by May 6, 2015. Finally, the contracting officer calculated that even using the date of the project's substantial completion — March 24, 2015 — as the latest possible date that Osborne could argue it became aware of the basis of its claim, the deadline for a timely claim would have been June 22, 2015.
The contracting officer concluded that because Osborne's claim for additional compensation was initially submitted on May 11, 2016, and the corrected claim on September 20, 2016, "Osborne at best was just under a year late and at worst over a year and four months late in filing its claim." Because the contract required a contractor to "submit in writing a claim to the Contracting Officer within 90 days after the Contractor becomes aware of the basis of the claim or should have known the basis of the claim, whichever is earlier," the contracting officer found that Osborne had failed to file its claim within the contractual time period.
The contracting officer then turned to the requirements in the state procurement code, AS 36.30.005 - .995, for filing a contract claim.5 Noting that AS 36.30.620(a) requires a claim to be "filed within 90 days after the contractor becomes aware of the basis of the claim or should have known the basis of the claim, whichever is earlier," the contracting officer concluded Osborne "did not file its claim by the date required" by statute. After examining both Osborne's contract and the procurement code, and finding that Osborne's claim failed to meet the deadline established by either of them, the contracting officer ruled that Osborne's claim was barred by statute as well as by the contract.
Osborne appealed the contracting officer's decision to the DOT Commissioner. On December 16, 2016, the Commissioner "adopt[ed] the [contracting officer's decision] as the final administrative decision without a hearing."6 The Commissioner's decision discussed the requirements of submitting a claim for additional compensation and the untimeliness of both the notice of the claim and the claim itself....
To continue reading
Request your trial