Underwater Eng'g Servs., Inc. v. Util. Bd. of Key W., 3D14–2011.

• Decision Date: 11 May 2016
• Docket Number: No. 3D14–2011.,3D14–2011.
• Parties: UNDERWATER ENGINEERING SERVICES, INC., etc., Appellant, v. UTILITY BOARD OF the CITY OF KEY WEST, Appellee.
• Court: Florida District Court of Appeals

194 So.3d 437

UNDERWATER ENGINEERING SERVICES, INC., etc., Appellant,

v.UTILITY BOARD OF the CITY OF KEY WEST, Appellee.

No. 3D14–2011.

District Court of Appeal of Florida, Third District.

May 11, 2016.

Rehearing Denied July 6, 2016.

Palmer Law Group and Andrew J. Palmer, Fort Lauderdale; Burlington and Rockenbach, Philip M. Burlington and Adam J. Richardson, West Palm Beach, for appellant.

Robert C. Tilghman and Nathan Eden, for appellee.

Before EMAS, LOGUE and SCALES, JJ.

EMAS

, J.

Appellant/Plaintiff, Underwater Engineering Services, Inc. (“Underwater”), appeals from a final judgment, entered after a nonjury trial, in favor of Appellee Utility Board of the City of Key West (“the Utility Board”) on Underwater's breach of contract claim, as well as the Utility Board's counterclaim. We hold that there is competent substantial evidence in the record to support the trial court's determination in favor of the Utility Board on Underwater's breach of contract claim and affirm that portion of the final judgment. We further hold that the trial court erred in entering judgment in favor of the Utility Board on its counterclaim, as the evidence establishes that Underwater was not provided the contractually-required notice and opportunity to cure the alleged defects before the Utility Board hired a different contractor to correct and repair Underwater's work. We therefore reverse that portion of the final judgment and remand for entry of final judgment in favor of Underwater on the Utility Board's counterclaim.

FACTS AND BACKGROUND

This action arises from a construction contract (“the Contract”) between Underwater and the Utility Board. The Utility Board hires contractors as needed to inspect over-the-water concrete and steel poles, and to perform necessary maintenance and repairs. The inspections may reveal issues affecting or compromising the structural integrity of the poles; they may require the pouring of a concrete collar around the base of the pole for additional support, or the application of a particular coating to areas needing repair or to areas where a prior coating application may have deteriorated.

In May 2004, the Utility Board issued a call for bids on a project entitled “Repair Over the Water Transmission Pole Foundations.” The project involved, among other things, structural concrete repairs, coating repair and new coating placement. Specifically, the successful bidder was to repair approximately fifty-seven concrete pole structures supporting electric transmission lines running from Key West to the Seven Mile Bridge. Pursuant to the bid schedule, the Contract was a unit-price contract—the bid price was not a lump sum, but was instead broken down into subparts for each item of work or material to be used—and the bidders proposed a price per unit. Following the bidding process, Underwater was awarded the Contract, which was executed in October of 2004, and a Notice to Proceed was issued in January 2005. The final contract price (based on the unit prices bid by Underwater) was $767,585.50.

The Contract contained the following relevant provisions:

Pursuant to “Section 01010–Summary of Work”:

1.8 Construction Sequence

A. Prior to commencement of Work, complete a detailed Pre–Construction Inspection of all structures. This inspection shall identify repairs on each structure....

B. Required Observation and Review

1. Notify the Resident Engineering Representative 24 hours prior to completing the following work: ...

d) Completion of surface preparation and prior to application of any coatings, sealers, or miscellaneous patching material in accordance with the applicable sections.

Pursuant to “Section 01019: Contract Considerations”:

1.4 Change Procedures ...

C. The Contractor may propose changes by submitting a Request for Change Order to the Engineer, describing the proposed change and its full effect on the Work. Include a statement describing the reason for the change and the effect on the Contract Price and Construction Time with full documentation. Document any requested substitutions in accordance with Section 01600.

D. Unit Price Change Order: For pre-determined unit prices and quantities, the Change Order will be executed on a fixed unit price basis. Changes in Contract Price or Construction Time will be computed as specified for Time and Material Change Order.

E. Engineer may issue a directive signed by the Owner, instructing the Contractor to proceed with a change in the Work for subsequent inclusion in a Change Order. Document will describe changes in the work and designate method of determining any change in Contract Price or Construction Time. Promptly execute the change....

1.5 Measurement and Payment—Unit Prices....

C. Estimated Quantities: Quantities and measurements indicated in the Unit Price Bid are scheduled for bidding purposes only. Actual quantities and measurements supplied or placed in the Work shall determine payment.

E. Defect Assessment: The Work, or portions of the Work, not conforming to specified requirements, shall be replaced by the Contractor at Contractor's expense.

Pursuant to “Section 01025: Measurement and Payment”:

1.5 DEFECT ASSESSMENT

A. Replace the Work, or portions of the Work, not conforming to specified requirements.

B. If, at the request of the Contractor and in the opinion of the Engineer, it is not Practical to remove and replace the Work, the Engineer will direct one of the following remedies:

1. The defective Work may remain, but the Unit Price will be adjusted to a new price as agreed to by the Owner and Engineer.

2. The defective Work will be partially repaired to the instructions of the Engineer, and the Unit Price will be adjusted to a new price.

C. The authority of the Engineer to assess the defect and identify payment adjustment is final.

Ed Giesler was the project engineer and Underwater's primary contact with the Utility Board. Tom Fettig was Underwater's project manager. Pursuant to the Contract, the preconstruction inspection of the Seven Mile Bridge area occurred on June 22 and 23, 2005. The inspection was conducted by the Utility Board's resident engineering representative, Anchor Structural, represented by Wayne Fey and Mark Demarest.

Underwater's Claim: Breach of Contract (Coating Work)

Underwater's primary claim against the Utility Board concerns an item designated as “MIS4” and described as “Concrete Coating Repair.” In the blank bid schedule, the Utility Board estimated the quantity of MIS4 units to be 200 square feet. Underwater's bid stated it would perform MIS4 at a unit price of $110, so the total price of the concrete coating repair (based on the estimated 200 square feet x $110/square feet) was $22,000.

On June 23, 2005, a consultant on the project sent an email to Giesler and Dale Finigan, also with the Utility Board, explaining he was trying to get the Utility Board a revised estimate. The consultant indicated that based on the inspections performed on June 22, 2005, they had a “rough handle on the amount that the units will change on the upper portion of the project.” In response to a question from the consultant, Finigan advised he was okay with building a contingency amount into the numbers, but noted it should be “a reasonable amount.” Though the emails contained no dollar amounts or quantities, no one from the Utility Board followed up or requested clarification or additional specificity.

The final Preconstruction Inspection Report for the fifty-seven poles in the Seven Mile Bridge area was sent by Underwater to the Utility Board on June 29, 2005. In the cover letter, Fettig wrote: “Please review this submittal as soon as possible. We are planning on starting the work and procuring the material needed to complete this work this week.” The report details the repair work, including the MIS4 coating work on fifty-seven poles, but it contains no numbers or costs, either estimated or actual. Though Underwater's CEO testified that calculating the amount of coating to be applied to the poles is a matter of “basic math,” the detailed formula he provided at trial was contained nowhere in the Preconstruction Inspection Report, and the parties disagree as to who was responsible for making these calculations.

At some point during July 2005, Fettig, Underwater's project manager and the person responsible for making this project profitable for Underwater, prepared two spreadsheets. These spreadsheets compared the revenue anticipated by the project as originally estimated and agreed to by the Utility Board with the revenue it could realize if the coating was increased from 200 square feet to 5,006 square feet. Using the original estimate for coating, Underwater faced a loss of approximately $168,891.71. However, by increasing the amount of coating from 200 square feet to 5,006 square feet, Fettig's spreadsheet showed Underwater's revenue on the project would increase by $528,660.00 and yield a profit of $433,579.29. Though Fettig and other members of Underwater thought it prudent to advise the Utility Board of this significant change in the total footage and resulting increase in cost, Dean Reynolds, Underwater's branch manager, told Fettig not to do so. Even though Fettig testified that he personally believed this overrun should have been revealed to the Utility Board, he also indicated that this overrun did not technically require a change order because the parties were operating under a unit-price contract. The differential in the cost did not relate to the unit price of the coating (which remained the same), but instead related to the total square footage of the poles to be coated. Fey, on the other hand, as president of Anchor Structural, testified that an increase in the amount of coating, which consequently increased the contract price by more than $500,000.00 would “absolutely” and “without a doubt” require a change order.¹ However, no change order was ever submitted to the Utility Board, nor was any authorization sought from the Utility Board before Underwater proceeded...