[00:00:02] Speaker 04:
The United States Court of Appeals for the Federal Circuit is now open and in session.

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God save the United States and its honorable court.

[00:00:12] Speaker 01:
Good morning.

[00:00:12] Speaker 01:
The first case for argument this morning is 191420 LaBolla-Watts Constructors versus Secretary of the Army.

[00:00:23] Speaker 01:
Is it Mr. Brody?

[00:00:24] Speaker 01:
Was your name pronounced correctly?

[00:00:27] Speaker 01:
Brody.

[00:00:28] Speaker 01:
Brody.

[00:00:29] Speaker 01:
OK.

[00:00:29] Speaker 01:
Why don't you have you begin, sir.

[00:00:33] Speaker 00:
Yes.

[00:00:34] Speaker 00:
Good morning, Your Honors.

[00:00:36] Speaker 00:
May it please the court.

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This case is about being blindsided by the government's stipulation that only quantum was involved in the case.

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The government's brief stipulated

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We are here only for quantum.

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The pre-hearing brief stated only quantum was an issue, and the board literally said only quantum was an issue.

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Instead, the board knocked out the costs that were incurred

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by appellant before the board in performing the installation of MC cable that was allowed by the original specifications in concealed areas in October and September of 2012.

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The final decision by the contracting officer acknowledged that that was a change in the specifications in that it allowed the installation of NC cables in the overhead

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hung ceiling areas, acoustical tile areas, and under the floor areas, even though those tiles could be removed by

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somebody climbing up there and removing the tiles or picking up the floor panels.

[00:02:51] Speaker 01:
Can I just, sir, sorry to interrupt, but I just want to get some clarification, because to a certain extent on this point, it seemed to me that maybe the parties were arguing sort of past each other.

[00:03:02] Speaker 01:
The question you're raising here, does this have to do with expenses incurred

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like just in the month of September 2012 and maybe part of October 2012 when you were proceeding in installing the MC cable before the final word came down.

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Is that what is in dispute here?

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That's one of the three major items, Your Honor.

[00:03:32] Speaker 01:
Well, is that the item?

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But in terms of your quantum argument,

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Is that what your quantum argument is about?

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No.

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Not exactly.

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It's part of it.

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It is one, installing the MC cable in September and October before we got a decision from the contracting officer representative on October 17.

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But then it's removing.

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all the NC cable that was installed, which is number two.

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But most importantly... Well, let me ask you about that.

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Before you move on, before you move off of that point, in terms of the issue of removing what was already installed, is that what was already installed, was that

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just what was installed in the September and October period, or did that involve stuff that was empty cable that was installed prior to that?

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No, it was just in September and October, Your Honor, 2012.

[00:04:48] Speaker 03:
This is Judge Toronto.

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Can I ask you a question?

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When did the government in the board first assert

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What I know that they, that it eventually asserted that it was unreasonable and a violation of the duty to mitigate damages

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to do the installation of the MC cable that is now at issue and that those costs, the installation and then the removal, are not awardable as a matter of the quantum piece of the case because of the mitigation and reasonableness requirements

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as to that applied to that side of the case and therefore that's independent of the stipulation about the change of construction.

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I know that I think the board, the government did say that in a brief to the board that's in the appendix, but when did it first say that?

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It never said.

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and never said it, you're on it, during the entire hearing.

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I thought I was remembering seeing in the joint appendix, and I'm sorry, I don't have the page numbers, an explicit section of its brief that says this is not recoverable because once

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Non-contracting officer core representatives said, you really, really need to put the rigid stuff up there, not the flexible stuff.

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It was unreasonable to proceed.

[00:06:52] Speaker 00:
That didn't happen, Your Honor, until the final decision.

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Not the final decision, but if you look at Appendix 1301, the October 17, 2012 letter,

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from the contracting officer, RS Cleary, the contracting officer's representative.

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At that time, they hereby directed the contracting officer technical representative, directed LaBolla Watts to proceed with the installation of EMT for the entire electoral distribution

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system above the ceiling and below the floors, all right, at that time.

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And that's, and basically, Your Honor, that's, if you look at the final decision, which is found on Appendix 1081, the actual contracting officer states

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that until serial letter 0008, which is the October 17th letter.

[00:08:12] Speaker 03:
Can I just interrupt you?

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So I guess what I'm particularly thinking of is appendix pages 3385 to 3388, which is in the paragraph in the government's red brief at page 14.

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And those pages, I think, are a government brief to the board.

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that says that discuss appellants failure to mitigate damages as a reason not to award amounts for the installation of the flexible cable in the ceiling or amounts for the removal of that.

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This was the post-hearing brief.

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This is after the hearing.

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All right.

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And, Your Honor,

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I clerked for Judge Whitaker back, let's say, a half a century ago, but Judge Whitaker and J.A.

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Ross versus United States, 115 Fed Sup 187, back in 1953, stated that

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When you have a dispute where the inspector raises this issue, you have to go to the contracting officer to get his decision to make the change.

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And without registering a protest and getting the decision from the contracting officer, which we didn't get until October 17,

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You basically are doing it as a volunteer, especially when it's a defective specification.

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And that's the problem.

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We tried the case without knowing that the government was ever raising this issue when they specifically came back and stated that only quantum

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wasn't involved and therefore we put in the cost of putting in the NC cable that we had to rip out and the additional cost of putting in the electrical metal tubing that costs three or four times as much, especially when you're having all the duct work and everything else in the way.

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which, you know, happened throughout the last part of 2012 and the early part of 2013.

[00:11:09] Speaker 00:
That's where, you know, Lobola Watts and Warch got killed because this was critical work that you had to enclose all the mechanical, electrical, ductwork in the ceiling.

[00:11:25] Speaker 02:
Council, can Judge O'Malley ask a question, please?

[00:11:28] Speaker 02:
Council?

[00:11:30] Speaker 00:
Yes.

[00:11:31] Speaker 02:
All right.

[00:11:32] Speaker 02:
My question to you is, when you were working on this and you were initially told by government representatives, and I understand it was not the contracting officer, but you were initially told not to install MC cable, were there timing requirements under the contract that required you to start installing the wire when you did?

[00:11:54] Speaker 02:
Would there have been penalties had you not

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met certain timing requirements with respect to the project?

[00:12:02] Speaker 00:
Yes, Your Honor, exactly.

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The work was supposed to go in September and October.

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You had to install the mechanical electrical systems, the lighting system, the power system, the distribution systems in the ceilings, you know, at the same time as the duct work and everything else so that you can enclose the ceilings

[00:12:27] Speaker 00:
And November of 2012, which was dead on the critical path, if you waited until October 17th, you know, the whole project would have been delayed by three months.

[00:12:44] Speaker 02:
And is that in the contract?

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Can you point where in the contract that those timing requirements appear?

[00:12:52] Speaker 00:
Yes, Your Honor, it's in the scheduling requirements.

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And under the scheduling clause of the contract, the government approved the schedule back in, I believe it was October of 2011, which showed that all the work in the ceilings had to be put in as a critical item

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of by November of 2011, otherwise the project would be delayed.

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So if you waited until you got this notice on October 17th saying, you know, we're not going to approve any work that's not an EMT for the electrical distribution, the lighting system, the security system, et cetera, the single-phase systems,

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And the ceiling, you know, you would be dead in the water.

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It would have been a lot bigger claim, you know, awaiting for the three months between September, October, and starting it all over in November.

[00:14:14] Speaker 02:
I understand your argument about

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acting as a volunteer if you were to move forward, what else could you have done at that point to mitigate other than put in the request for clarification?

[00:14:33] Speaker 00:
Nothing except we went and we asked for clarification on RFI in September.

[00:14:42] Speaker 00:
What came back was the architect engineer or the

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A Corps of Engineers designer came back and said, no, we want you to utilize only in the walls, not in the ceilings, not in the floors, all right?

[00:15:07] Speaker 00:
Because it's accessible.

[00:15:10] Speaker 00:
Well, anything's accessible.

[00:15:11] Speaker 00:
If you had a jackhammer, you can even knock out, you know, the walls, all right?

[00:15:16] Speaker 00:
If you take down the ceiling, though, you pick up the floors.

[00:15:22] Speaker 00:
And then they came back, and both LeBola Watts, the prime contractor, and the subcontractor came back saying, that's all wrong, OK?

[00:15:32] Speaker 00:
We did this job as putting in cable, MC cable, flexible cable, not EMT, all right?

[00:15:42] Speaker 00:
And we wanted decisions from the contractor, offices.

[00:15:46] Speaker 00:
We didn't get that until October 17th, which is Appendix 1301 that also is cited by the final decision in 1081.

[00:16:00] Speaker 00:
It's letter C0008, dated October 17th, 2012.

[00:16:07] Speaker 00:
As soon as we got that letter, we started saying, OK, we're going to rip everything out and start again.

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And meanwhile, the duck man and everybody else was putting in everything.

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And so it was terrible now to put in EMT for the rest of 2012 and the early part of 2013.

[00:16:34] Speaker 00:
That's where, you know, the million dollars came from on March.

[00:16:41] Speaker 00:
I'd like to save some time for rebuttal, Your Honor.

[00:16:44] Speaker 00:
Yes.

[00:16:44] Speaker 01:
Please let's hear from the other side and when we serve the remains of your time for eight adults and it's your vote.

[00:16:51] Speaker 04:
May it please the court.

[00:16:53] Speaker 04:
LeBola Watts was not blindsided.

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The government had made clear going back to before this board litigation even began in the contracting officer's final decision, for example, starting at appendix 1081, the government had made clear that it did not agree

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that these costs of having this wasteful effort of installing the MC cable against the government's wishes, that the government did not believe that those were recoverable, and that continued to be the government's position all throughout.

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Whether you put the mitigation theory to it or any other theory, reasonableness, causation, the point the government

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has always made is that while it would agree that the contract initially wasn't clear enough, perhaps, that the government during the performance of the contract was at all times totally clear that they believed that the rigid EMT was required and that's all that they would accept in these spaces.

[00:17:59] Speaker 02:
It was found, Council, it was found to be a material change in the contract, correct?

[00:18:05] Speaker 04:
that the contract yes the contracting officer did agree right that but but if you look at that contracting officer's final decision for example on appendix ten eighty you see the contracting officer explaining that there was ambiguity in the contract so the issue wasn't there was any ambiguity in in the court's instructions during performance of the contract the court never said oh well we have to tell you it is true is it not that counsel is correct that if one proceeds

[00:18:34] Speaker 02:
uh... upon the direction of of those on-site or those uh... or the architect for instance but without the approval of the contracting officer that they're proceeding at risk if it turns out that the contract doesn't really require the more expensive work to be done isn't that right they become a volunteer tell me whether that's the law or not

[00:19:01] Speaker 04:
It's not that simple as yes or no because it depends on what the contractor does.

[00:19:05] Speaker 04:
So if the contractor puts the government on notice, I disagree with your interpretation of the contracting officer on notice.

[00:19:12] Speaker 04:
I disagree with the interpretation of the contract that you're enforcing.

[00:19:16] Speaker 04:
This will be a change to the contract which will result in additional costs.

[00:19:19] Speaker 04:
The contractor then is not at risk because if the contractor ultimately proceeds, the contractor has protected itself by

[00:19:27] Speaker 04:
putting the government on notice, that it views it as a change, and then it would proceed in accordance with the... So what case says that?

[00:19:36] Speaker 02:
Because I have seen it many times say the opposite.

[00:19:41] Speaker 02:
In other words, that even if you put those on site on notice, that you don't think that's what the contract requires, if you proceed, you're still just going to be treated as a volunteer.

[00:19:53] Speaker 04:
Well, Your Honor, I would look to the cases, and I'm sorry, I don't have a specific one that's coming to mind, but I would look to the cases that address how the changes clause operates and the obligation to put the government on notice, and that if you do that, you then can, under the changes clause, recover the additional compensation.

[00:20:14] Speaker 04:
I think the same cases, I would believe, the same cases that address these constructive changes

[00:20:22] Speaker 04:
would show that as long as you put the government on notice as required by the changes clause, that if you ultimately do then show that there was a constructive change, which the contracting officer... All right, so you can't cite me to any case.

[00:20:37] Speaker 04:
I'm not sure of a specific case at this time.

[00:20:40] Speaker 04:
You're right, Your Honor.

[00:20:44] Speaker 01:
Okay.

[00:20:45] Speaker 01:
Go ahead.

[00:20:45] Speaker 01:
Let me just add in.

[00:20:46] Speaker 01:
This is Judge Crost.

[00:20:48] Speaker 01:
Just following up on what my point was,

[00:20:51] Speaker 01:
I mean, we see numerous cases in which the government comes in and it's on the other side of these cases.

[00:20:57] Speaker 01:
And it says, no, no, no, no, the contractor, the person shouldn't have been doing this because it's only the contracting officer that has the authority to change or fix something.

[00:21:10] Speaker 01:
And here, that person didn't step into this until the weeks following

[00:21:16] Speaker 01:
the September 12 conversation, right?

[00:21:19] Speaker 01:
September 2012 conversation, right?

[00:21:22] Speaker 01:
When was the contracting officer's first entree into this discussion?

[00:21:27] Speaker 04:
Actually, Your Honor, I believe it was over a year later, and the reason it was over a year later was because LeBola Watts didn't go to the contracting officer for a final decision until January of 2014.

[00:21:40] Speaker 04:
And so this was something that happened, came up in

[00:21:42] Speaker 04:
in September of 2012.

[00:21:44] Speaker 04:
And so LeBola Watts could have, if it had wanted to, go right then to the contracting officer and demand a resolution of what the contract required or whether the contract needed to be changed.

[00:21:57] Speaker 04:
But it didn't elect to do that.

[00:22:00] Speaker 04:
Instead, it elected to resolve the issue, not in a very good way, but resolve the issue with the resident engineer's office.

[00:22:11] Speaker 04:
which admittedly is not the contracting officer.

[00:22:13] Speaker 04:
But ultimately, it's the same personnel within that resident engineer's office that LeBola Watts ultimately decided to follow their direction without going to the contracting officer until 2014.

[00:22:27] Speaker 03:
Can I just ask a point of clarification?

[00:22:30] Speaker 03:
This October 17th letter that is signed on behalf of the contracting October 17th, 2012,

[00:22:37] Speaker 03:
letter that is signed on behalf of the contracting officer's representative.

[00:22:45] Speaker 03:
Is that consistent with what you just said about a whole year later?

[00:22:49] Speaker 04:
Yes.

[00:22:52] Speaker 04:
My understanding is that the October letter was signed, I believe it was by the resident engineer.

[00:22:58] Speaker 03:
The title, underneath the signatory's name, it says contracting officer's representative.

[00:23:07] Speaker 04:
Right.

[00:23:07] Speaker 04:
And so the contracting officer's representative is a different official than the contracting officer.

[00:23:13] Speaker 04:
The contracting officer's representative is given a limited, delegated, limited authority, but not the authority to change the contract.

[00:23:19] Speaker 04:
And so the contracting officer's representative will sometimes be, it could be a government construction manager, as I say, somebody in the, what's often called the resident engineer's office, which would be an engineering office at the facility.

[00:23:35] Speaker 04:
And so this is not the contracting officer and doesn't, the contracting officer's representative is a distinct person from the contracting officer.

[00:23:44] Speaker 01:
Okay.

[00:23:46] Speaker 01:
What about the period from September 2012 till they got the final response that Judge Toronto was just referring to?

[00:23:54] Speaker 01:
During that period, didn't LeBowl-Watts act perfectly reasonably?

[00:24:01] Speaker 01:
by seeking when the government suggested there was a different issue, an issue here by seeking a definitive dispositive response, given what the contract otherwise required?

[00:24:11] Speaker 04:
The part that was unreasonable, your honor, was not seeking that the act of seeking a definitive response.

[00:24:19] Speaker 04:
That was perfectly reasonable.

[00:24:20] Speaker 04:
The part that was unreasonable and the board properly rejected compensation on was the decision to go ahead in contravention

[00:24:28] Speaker 04:
of what the course position all along was.

[00:24:31] Speaker 04:
The Ebola watch was on notice by September 4th before any of this cabling was installed.

[00:24:38] Speaker 02:
Were there scheduling deadlines in the contract?

[00:24:42] Speaker 04:
So there are scheduling deadlines in the contract, but again, there are a number of ways to handle this.

[00:24:48] Speaker 04:
And so if the Ebola watch feels that this must be resolved before they can proceed,

[00:24:55] Speaker 04:
One way a contractor can handle this is by telling the contracting officer right then and there, not a year or two later, but telling the contracting officer right then and there, I'm being directed to do this.

[00:25:06] Speaker 04:
I don't believe that's what my contract says.

[00:25:08] Speaker 04:
I can't proceed until you change the contract if this is what you want, and I believe this will delay the project if a resolution doesn't happen immediately.

[00:25:17] Speaker 02:
And if they didn't meet the deadlines, then they would have penalties, right?

[00:25:21] Speaker 04:
Unless they could demonstrate that there was excusable delay while waiting for resolution of this issue from the contracting officer.

[00:25:28] Speaker 04:
But that's not the course.

[00:25:29] Speaker 02:
Right.

[00:25:29] Speaker 02:
And the burden would be on them.

[00:25:32] Speaker 04:
To demonstrate an excusable delay, it would.

[00:25:35] Speaker 04:
But that's not the course LeBola Watts took.

[00:25:38] Speaker 04:
The problem the board rightly found here was that LeBola Watts didn't go to the contracting officer.

[00:25:44] Speaker 04:
It ultimately accepted initially the resolution of the

[00:25:49] Speaker 04:
from the resident engineer's office and decided to seek its additional costs, which is something it could do.

[00:25:54] Speaker 04:
But what it couldn't do was disregard that instruction initially and go through this wasteful effort of installing something that all along the Corps was saying they wouldn't accept.

[00:26:06] Speaker 04:
When it comes to the stipulations, LeBola-Watz argues at length that stipulations are binding, but it doesn't show that the board rejected any of the party's stipulations.

[00:26:16] Speaker 04:
The parties didn't stipulate that La Bola Watts was entitled to recover any particular amount or any particular element of its cost claim.

[00:26:25] Speaker 04:
Indeed, that was the dispute, that the government didn't believe that much of La Bola Watts' claim costs were properly recoverable, even if it was a constructive change.

[00:26:37] Speaker 04:
The argument that La Bola Watts makes, second,

[00:26:40] Speaker 04:
that the board erred in concluding that the contract had been changed, that's contrary to the agreement of the parties that this should be treated as a constructive change.

[00:26:53] Speaker 04:
And that's the manner in which the board resolved the case by agreement of the parties.

[00:27:00] Speaker 04:
There's simply no basis to disturb the board's conclusion or its ruling in this case.

[00:27:07] Speaker 04:
And for these reasons and those expressed in all brief on the board's opinion, we respectfully request that the board affirm, I'm sorry, that the court affirm the board's ruling.

[00:27:20] Speaker 01:
Any further questions by the judges?

[00:27:23] Speaker 01:
Okay, thank you.

[00:27:30] Speaker 00:
Your Honor, may I have a couple minutes to rebuttal?

[00:27:35] Speaker 00:
Yes, sir.

[00:27:37] Speaker 00:
If you look at the final decision of the contracting officer, which is 13 pages, the 13 pages never raises this issue, all right?

[00:27:53] Speaker 00:
And in fact, you know, states on the page that I did state on 1081,

[00:28:06] Speaker 00:
that serial letter 008 gave clear direct instruction to the LeBolo watch to install the EMT above the ACT, okay?

[00:28:20] Speaker 00:
And these areas will prohibit.

[00:28:24] Speaker 00:
It was a defective design.

[00:28:26] Speaker 00:
We had that problem at Fort Meade on a number of cases that,

[00:28:34] Speaker 00:
You know, they think it's highly secured, okay, and they don't want somebody punching up the ceilings or taking up, you know, the floors.

[00:28:45] Speaker 00:
The floors were five feet deep.

[00:28:48] Speaker 00:
It was lots of mechanical electrical.

[00:28:51] Speaker 00:
But that's not what the spec said.

[00:28:54] Speaker 00:
And it was an agenda that came out that specifically said, we're not doing an FPA.

[00:29:01] Speaker 00:
We're going to allow you to utilize

[00:29:04] Speaker 00:
single-phase MC cable, and that's substantially cheaper to install.

[00:29:16] Speaker 00:
Now, one of the things is if in fact the contracting office in his final decision, the real contracting office, not the technical rep, but you know,

[00:29:29] Speaker 00:
He kind of ratified what the technical rep said and he says that was definitive, all right, on October 17th.

[00:29:40] Speaker 00:
That's when we stopped putting it in and we started ripping it out and changing to EMT for the next six months.

[00:29:53] Speaker 00:
The only thing that the contracting officer raised is instead of your actual cost, you know, our independent government estimate based upon means said this is what it should cost to install EMT instead of NC cable.

[00:30:17] Speaker 00:
So that should be 500 or 600,000 dollars.

[00:30:20] Speaker 00:
But, you know, why did the government just stipulate quantum if it believes that, you know, this was a big issue?

[00:30:30] Speaker 00:
Because this killed it.

[00:30:32] Speaker 00:
This is two-thirds our claim.

[00:30:34] Speaker 00:
That was knocked out.

[00:30:36] Speaker 02:
Council, before you sit down, can I ask you about the $123,000 equitable adjustment?

[00:30:43] Speaker 00:
Yes, Your Honor, that's very important, okay?

[00:30:48] Speaker 00:
What we did was put together the actual cost.

[00:30:51] Speaker 00:
And I teach this at GW, or at least I taught it for 20 years.

[00:30:56] Speaker 00:
And we still cite DA Ross and our last textbooks.

[00:31:04] Speaker 00:
When we put together the actual cost, we noted that, in fact, progress payments were made

[00:31:14] Speaker 00:
towards this distribution, even though the inspector said, no, you got to put it in EEM tape.

[00:31:22] Speaker 00:
They approved progress payments in September and October that amounted to paying for some of the hangers, paying for some of the equipment,

[00:31:34] Speaker 00:
and paying for the superintendents and everything else, that's worth $123,000.

[00:31:40] Speaker 00:
So that was a double dip.

[00:31:42] Speaker 00:
That's why we knocked off the $123,000.

[00:31:47] Speaker 00:
But that was in the excess amount.

[00:31:53] Speaker 00:
Remember, the government allowed the means book, okay?

[00:31:59] Speaker 00:
You know, it had nothing to do with the actual cost.

[00:32:02] Speaker 00:
But we put in the actual cost, the invoices for the materials, the time records for the labor that was involved, and everything else.

[00:32:13] Speaker 00:
And that's how we put it in is the actual cost according to, you know, the cost and pricing data that we had.

[00:32:21] Speaker 00:
You can't take anything off of Fort Meade, all right?

[00:32:26] Speaker 00:
But didn't you, did council, didn't you admit that you shouldn't have put those in?

[00:32:31] Speaker 00:
In the initial claim, yes, because we missed or at least the contract and missed that we got paid progress payments that, you know, allowed us some supervision, some of the hard lift equipment, some of the gasoline, and some of the labor that was expended in September and October.

[00:32:59] Speaker 00:
So that's why we knocked that out.

[00:33:01] Speaker 00:
in the extra, the additional claim between the half a million dollars and I'm rounding it off to the million dollars.

[00:33:13] Speaker 02:
Judge O'Malley, did you get your question answered?

[00:33:16] Speaker 02:
Yes, I think so.

[00:33:18] Speaker 01:
Okay.

[00:33:19] Speaker 01:
All right.

[00:33:19] Speaker 01:
We thank you.

[00:33:20] Speaker 01:
Time has expired.

[00:33:22] Speaker 01:
We thank both sides and the case is submitted.

[00:33:25] Speaker 01:
Thank you.

[00:33:26] Speaker 00:
Thank you, Your Honor.