Willamette Crushing Co. v. State By and Through Dept. of Transp., 1

• Decision Date: 28 January 1997
• Docket Number: CA-CV,No. 1,1
• Citation: 932 P.2d 1350,188 Ariz. 79
• Parties: , 235 Ariz. Adv. Rep. 3 WILLAMETTE CRUSHING COMPANY, dba Wildish Southwest Construction Company, an Oregon corporation, Plaintiff-Appellant, v. The STATE of Arizona, By and Through the DEPARTMENT OF TRANSPORTATION; Daniel, Mann, Johnson & Mendenhall, a California corporation; and Jack E. Leisch and Associates, Defendants-Appellees. 95-0491.
• Court: Arizona Court of Appeals

Page 1350

932 P.2d 1350

188 Ariz. 79, 235 Ariz. Adv. Rep. 3

WILLAMETTE CRUSHING COMPANY, dba Wildish Southwest Construction Company, an Oregon corporation, Plaintiff-Appellant, v. The STATE of Arizona, By and Through the DEPARTMENT OF TRANSPORTATION; Daniel, Mann, Johnson & Mendenhall, a California corporation; and Jack E. Leisch and Associates, Defendants-Appellees.

No. 1 CA-CV 95-0491.

Court of Appeals of Arizona Division 1, Department D.

Jan. 28, 1997.

Reconsideration Denied March 12, 1997.

[188 Ariz. 80] Hershner, Hunter, Moulton, Andrews & Neill by William R. Turnbow, Eugene, OR, and Lewis and Roca, L.L.P. by David J. Cantelme and John P. Frank, Phoenix, for Plaintiff-Appellant.

Grant Woods, Attorney General by Joe Acosta, Jr. and Diane M. Miller, Assistant Attorneys General, Phoenix, for Defendant-Appellee.

Horne, Kaplan & Bistrow, P.C. by Thomas C. Horne and Martha B. Kaplan, Phoenix, for Defendant-Appellee Daniel, Mann, Johnson and Mendenhall.

Hanson, Bridgett, Marcus, Vlahos & Rudy by Howard W. Ashcraft, Jr., San Francisco, CA, and Jennings, Strouss & Salmon, P.L.C. by Michael Flood, Phoenix, for Defendant-Appellee Jack E. Leisch and Associates.

OPINION

NOYES, Acting Presiding Judge.

Appellant Wildish made the low bid on an Arizona highway construction project which was to be completed within 360 working days and was to be staged according to a specified Traffic Control Pattern ("TCP"). After being awarded the contract, Wildish decided that it could not meet the due date using the State's TCP. Wildish asked for more time and the State refused. Wildish asked to use its own TCP and the State agreed. Using its own TCP, Wildish met the due date--with a cost overrun it now seeks to recover from the State and the engineers who drafted the State's TCP.

Wildish argues that the contract due date was a warranty by the State that a contractor could meet the due date using the State's TCP. Wildish also argues that the State's TCP was defective because no contractor could use it and meet the due date. The defendants argue that the State's TCP was not defective and that any due-date warranty was by Wildish because a contractor's bid is a warranty by the contractor that it can meet the due date if awarded the contract. The trial court granted summary judgment to defendants and we affirm. To do otherwise on the undisputed material facts presented would erroneously suggest that the law might imply a warranty of profitability in public contracts.

I.

In April 1990 the Arizona Department of Transportation ("the State") invited bids on a project to expand "the Broadway Curve," a three-mile section of Interstate 10 in the Phoenix-Tempe area. The contract contained a TCP which specified the stages of construction and was intended to permit maximum traffic flow while ensuring the safety of motorists and construction workers. The contract specified completion of the project in 360 working days. Section 108.08 of the contract provided that "the contractor's plea that insufficient time was specified is not a valid reason for extension of time."

Wildish had nine and a half weeks to study the bid package. After one of its employees spent four weeks preparing its bid, Wildish submitted a bid of $22.1 million. This bid was $2.6 to $3.1 million lower than the State's cost estimate ($24.7 million) and the bids of all Arizona-based competitors: FNF Construction, Inc. ($24.8 million), The Tanner Companies ($25 million), and Pulice Construction ($25.2 million). There were also bids from two out-of-state companies: one was $15,000 higher than the Wildish bid and the other was $3.8 million higher.

After being awarded the contract, Wildish performed a critical path method ("CPM") analysis, which organizes and schedules a complex project such as this one. A CPM analysis is time-consuming and expensive and is not normally done prior to bidding on a contract. Based on its CPM analysis Wildish calculated it would need 542 working days to complete the project using the State's TCP. Wildish asked for an extension of the due date and the State refused, but the State did approve a TCP devised by Wildish.

Using its own TCP, Wildish completed the project in 357 days, but at a cost which exceeded its bid by $2.9 million. Wildish blamed the cost overrun on inefficiencies inherent in the TCP it had to devise in order to meet the due date. Wildish filed a claim with the State for the cost overrun and the claim was rejected. Wildish filed this lawsuit and the defendants were granted summary judgment. Wildish appealed. We have jurisdiction pursuant to A.R.S. sections 12-2101(B) (1994) and 12-120.21(A)(1) (1992).

II.

Summary judgment is appropriate when there are no genuine issues of material fact. Orme School v. Reeves, 166 Ariz. 301, 310, 802 P.2d 1000, 1009 (1990). If the undisputed facts are such that no reasonable jury could grant relief, summary judgment is warranted. See id. Contract interpretation is a question of law which we review de novo. Arizona Biltmore Estates Assoc. v. Tezak, 177 Ariz. 447, 448, 868 P.2d 1030, 1031 (App.1993).

This appeal involves a public contract and issues on which there are no Arizona cases. For guidance, we look to the federal court of claims and the federal boards of contract appeals, for those specialty courts have expertise with public contracts. New Pueblo Constructors, Inc. v. State, 144 Ariz. 95, 101, 696 P.2d 185, 191 (1985).

III.

The contract entitles Wildish to a price adjustment if the State expressly or impliedly ordered modifications which "significantly changed the character of the work." Wildish argues that the State impliedly ordered modification of the TCP when it refused to extend the due date to enable Wildish to complete the contract using the State's TCP.

Change provisions compensate contractors for burdens not contemplated by the contract. Wunderlich Contracting Co. v. United States, 173 Ct.Cl. 180, 351 F.2d 956, 965-66 (1965). To qualify for adjustment under a change provision, a contractor must prove, first, that "any increased costs arose from conditions differing materially from those indicated in the bid documents;" and, second, that the changes "were reasonably unforeseeable in the light of all the information available to the contractor." Sterling Millwrights, Inc. v. United States, 26 Cl.Ct. 49, 72 (1992).

Wildish claims that the State's TCP had a hidden defect because only after being awarded the contract and performing its CPM did Wildish discover that it could not meet the due date using the State's TCP. Wildish's opening brief advises that, "Wildish calculated its bid assuming that the State's [TCP sequences] were appropriate for the job and, if followed, would allow the work to be completed within the time allowed." We conclude that the contractor bears the risk of basing a bid on such assumptions.

Wildish relies on a line of cases beginning with United States v. Spearin, 248 U.S. 132, 136, 39 S.Ct. 59, 61, 63 L.Ed. 166 (1918), which hold that, when the government specifies how the work is to be done, it impliedly warrants that adherence to the specifications will result in "satisfactory completion of the work." John McShain, Inc. v. United States, 188 Ct.Cl. 830, 412 F.2d 1281, 1283 (1969); see also Chaney Bldg. Co. v. City of Tucson, 148 Ariz. 571, 574, 716 P.2d 28, 31 (1986).

The Spearin rule applies to design specifications only; it does not apply to performance specifications. Haehn Management Co. v. United States, 15 Cl.Ct. 50, 56 (1988). Design specifications precisely detail the manner in which the work is to be done. J.L. Simmons Co. v. United States, 188 Ct.Cl. 684, 412 F.2d 1360, 1362 (1969). Performance specifications set forth an objective and allow the contractor to determine how to achieve it. Haehn, 15 Cl.Ct. at 56. The only warranty implied in design specifications is that "the product shown can be made in the manner shown." Natus Corp. v. United States, 178 Ct.Cl. 1, 371 F.2d 450, 455 (1967). This warranty is implied only in design specifications which are inflexible. See J.L. Simmons, 412 F.2d at 1362; see also Haehn, 15 Cl.Ct. at 56 ("These [design] specifications permit no deviations.").

For three reasons, Wildish cannot possibly prove that the State's TCP was a breach of the warranty implied in design specifications: First, although Wildish complained about the time it would take using the State's TCP, it is undisputed that Wildish could have constructed the project using the State's TCP. Second, it is undisputed that Wildish was permitted to deviate from the State's TCP and use its own. Third, the Spearin rule requires something akin to a hidden physical defect in the design specifications. The State's TCP had no such defect.

In Spearin, the contractor was to build a dry dock "in accordance with plans and specifications which had been prepared by the government." 248 U.S. at 133, 39 S.Ct. at 60. The specifications showed a 7-foot-diameter sewer line, but they failed to show that the line was obstructed by an interior 5-foot-high dam. Id. at 134, 39 S.Ct. at 60. The hidden dam was discovered after the sewer backed up and flooded the jobsite. Each party claimed that the other should pay to correct the sewer-line problem. Id. at 135, 39 S.Ct. at 60-61. The Supreme Court assigned responsibility to the government, whose design specifications erroneously showed that the sewer line was adequate:

The general rules of law applicable to these facts are well settled. Where one agrees to do, for a fixed sum, a thing possible to be performed, he will not be excused or become entitled to additional compensation, because unforeseen difficulties are encountered.... But if the contractor is bound to build according to plans and specifications prepared by the owner, the contractor will not be responsible for the consequences of defects in the plans and specifications.... [T]he contractor should be relieved, if he was misled by erroneous...