U.S. v. Turner Const. Co.

Decision Date03 September 1987
Docket NumberNo. 86-1175,86-1175
Citation827 F.2d 1554
Parties34 Cont.Cas.Fed. (CCH) 75,355 UNITED STATES, Appellant, v. TURNER CONSTRUCTION COMPANY, Appellee.
CourtU.S. Court of Appeals — Federal Circuit

Elizabeth Woodruff, Commercial Litigation Branch, Dept. of Justice, Washington, D.C., argued for appellant. With her on the brief were Richard K. Willard, Asst. Atty. Gen., David M. Cohen, Director and Thomas W. Petersen, Asst. Director. Also on the brief was Sherman D. Johnson, Office of the General Counsel, Region IV, Dept. of Health and Human Services, Atlanta, Ga., of counsel.

E.D. Gaskins, Jr., Adams, McCullough & Beard, Raleigh, N.C., argued for appellee. With him on the brief was Charles C. Meeker.

Before DAVIS, Circuit Judge, BENNETT, Senior Circuit Judge, and ARCHER, Circuit Judge.

BENNETT, Senior Circuit Judge.

The government appeals from a final decision of the Armed Services Board of Contract Appeals (ASBCA or board) in Turner Construction Co., ASBCA No. 25714, 86-1 BCA p 18,532 (Oct. 29, 1985), which determined that a certified claim sufficient to confer jurisdiction on the board had been submitted by Turner Construction Company (Turner) and which reinstated the board's prior decision on the merits in Johnson Controls, Inc., ASBCA No. 25714, 82-1 BCA p 15,779 (May 5, 1982), an appeal which had been brought by one of Turner's subcontractors. The prior board decision on the merits had been vacated by this court in United States v. Johnson Controls, Inc., 713 F.2d 1541 (Fed.Cir.1983), a prior appeal involving the same claim, following our holding that the board did not have jurisdiction over a direct appeal by a subcontractor. In this appeal, we hold that the board properly assumed jurisdiction of Turner's appeal and affirm the board's granting of an equitable adjustment to Turner.

BACKGROUND

As noted above, this is the second trip to this court for the claim involved in the present dispute. The background facts involved in the present appeal are essentially the same as those outlined in our prior opinion and will only be summarized here. On May 24, 1977, the Department of Health, Education, and Welfare (now the Department of Health and Human Services (HHS)) entered into a contract with Turner for services in connection with the construction of a 7-story permanent laboratory facility for the National Institute of Environmental Health Sciences in Research Triangle Park, North Carolina. The contract, No. 141-77-0006, was entitled "Construction Manager Agreement, Construction Manager Services with Guaranteed Maximum Price" and had a guaranteed maximum price of $65,394,000. Turner entered into approximately 74 subcontracts for construction work on the laboratory facility. One of the subcontracts was executed between Turner and Johnson Controls, Inc. (Johnson) for the supply and construction of a centralized control center (CCC) for temperature control of the facility as well as a centralized control for research data acquisition, analysis, and display.

The specifications detailing the CCC were based on a Honeywell system design which required backup redundant hardware to minimize the risk of equipment failure. Prior to bidding, the government indicated in a letter to Johnson that "[t]he specifications are intended to be of the performance type and in no way proprietary." Therefore, Johnson submitted a technical proposal that utilized a sophisticated software-based package which was not based on the Honeywell design, a hardware-oriented system. Turner and HHS determined that Johnson's proposal met the contract specifications and the Johnson proposal was accepted on September 27, 1977, for a subcontract price of $3,421,275. The government approved the award by Turner of the subcontract to Johnson.

In June and July of 1978 Johnson made submittals for the CCC, based upon its technical proposal, which showed four computers. Turner rejected these submittals because, among other reasons, "redundant hardware is not being supplied as specified." Johnson asserted that the redundancy requirement in the bid package was satisfied by its more sophisticated software package without the need for redundant hardware and that redundant hardware was not contemplated by its proposal. In fact, Johnson's technical proposal listed redundant hardware as an option. Nevertheless, Turner and HHS required Johnson to install an additional three computers as redundant hardware and Johnson reserved its right to file a claim for an equitable adjustment in the amount of $221,150.

On May 16, 1980, Johnson certified its claim for $221,150, pursuant to the requirements of the Contract Disputes Act (CDA), 41 U.S.C. Sec. 605(c)(1). On May 19, 1980 Since the claimant [Johnson] is the real party in interest and is the only one who can logically and realistically certify the claim, Turner hereby submits this certification in satisfaction of the requirements of the Act. Since Turner is not the real party in interest, Turner must accept and rely on the certification at face value. In addition, Turner is not aware of any reason which suggests that Johnson has knowingly or intentionally failed to comply with the requirements of the Act or is acting in bad faith.

Turner forwarded Johnson's claim to the contracting officer for a decision. As to certification of the claim, Turner stated the following:

On June 9, 1980, the contracting officer notified Turner that its purported certification did not meet the statutory requirements and that the claim would not be considered unless Turner properly certified it.

Under the terms of the prime contract, in its role as construction manager, Turner was required "[w]henever any claim [arose] under or out of any contract awarded in furtherance of [the] project [to] diligently render all assistance which the Government may require, including the furnishing of reports with supporting information necessary to resolve the dispute or defend against the claim, participation in meetings or negotiations with the claimant or its representatives, appearance before the Board of Contract Appeals or court of law, and other assistance as may be appropriate." On July 2, 1980, in accordance with its contractual obligation, Turner submitted a report to the contracting officer on the merits of Johnson's claim recommending its rejection on the grounds that what Johnson was identifying as extra costs beyond contract requirements was within the specified scope of the work. Nevertheless, on August 13, 1980, Turner submitted a certification of the Johnson claim utilizing the exact statutory language contained in 41 U.S.C. Sec. 605(c)(1).

On October 10, 1980, the contracting officer informed Turner that he would be unable to reach a decision on the claim within the 60-day period prescribed by 41 U.S.C. Sec. 605(c)(2) because of the unresolved conflict between Turner's July 2, 1980 recommendation to reject Johnson's claim and Turner's subsequent certification of the same claim on August 13. In a letter also dated October 10, 1980, Turner withdrew its recommendation to reject Johnson's claim, stating that making legal conclusions was beyond its scope of expertise and responsibility and that it was limiting its role to providing a factual and technical report. On November 21, 1980, the contracting officer informed Turner that notwithstanding its disclaimer of its recommendation to reject Johnson's claim, its factual and technical report remained contrary to its statutory certification.

On January 13, 1981, Johnson appealed directly to the ASBCA, noting the failure of the contracting officer to issue a decision on its claim. The board rejected a government motion to dismiss for lack of board jurisdiction on the basis of an invalid certification by Turner, finding that privity of contract existed between Johnson and the government and that Johnson had validly certified the claim as the subcontractor. 82-1 BCA at 78,143. On the merits, the board found that the software-based system without redundant hardware proposed by Johnson met the performance specifications and had been accepted by the government and that Johnson therefore was entitled to an equitable adjustment for its supply of the redundant hardware. Id. at 78,144.

On appeal to this court, we determined that the ASBCA did not properly have jurisdiction over a direct appeal brought against the government by the subcontractor Johnson because (1) the subcontractor was not a "contractor" as that term was defined in the Contract Disputes Act, (2) there was no privity of contract between the subcontractor and the government arising from the contract or the doctrine of agency, and (3) a direct appeal was not authorized by either the prime contract or Following our decision in Johnson Controls, Johnson moved that the board reinstate its judgment on the merits because Turner had both certified the claim and filed a notice of appeal following the failure of the contracting officer to render a decision within a reasonable time. The government opposed the motion, arguing that the Turner certification was improper and that the claim must be resubmitted to the contracting officer and recertified. The board, relying on its decision in Turner Construction Co. for and on behalf of Industrotech Constructors, Inc., ASBCA No. 25447, 84-1 BCA p 16,996 (Nov. 25, 1983), upheld Turner's certification. 1

                subcontract involved in the suit.   Johnson Controls, 713 F.2d at 1548-57.  In light of the finding that the board erred in assuming jurisdiction over the subcontractor's appeal, this court declined to reach any other issues raised by the appeal and vacated the board's decision on the merits.  We expressly did not rule on or offer comment on the adequacy of Turner's certification since the ASBCA had treated Johnson's claim as a direct subcontractor appeal and did not rely on Turner's certification to establish its jurisdiction.   Id. at 1545 n. 2 & 1557
                

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