[00:00:00] Speaker 00: 20-1582 Amec Foster Wheeler versus Secretary of the Interior, Ms. [00:00:06] Speaker 00: Pickett, whenever you're ready. [00:00:09] Speaker 01: May it please the court? [00:00:11] Speaker 01: Good morning. [00:00:12] Speaker 01: My name is Katie Pickett, and I'm here on behalf of Appellant Amec Foster Wheeler. [00:00:16] Speaker 01: As the court is aware, this case involves repairs to the historic Alcatraz Citadel, where the government issued a unilateral modification that greatly expanded the scope of work to include major structural repairs [00:00:30] Speaker 01: to the BNC cell blocks of the citadel. [00:00:33] Speaker 01: Although many issues were tried before the board, Amec presents four issues on appeal, and those are the issues I'd like to address, but I'm happy to focus on any particular issue that the court wishes. [00:00:44] Speaker 01: The first issue on appeal is the board's denial of Amec's general conditions costs for 117 days that the board found were compensable. [00:00:55] Speaker 01: We submit that this was legal error because the board erroneously rejected Amex experts methodology. [00:01:01] Speaker 01: We also submit that this is unsupported by substantial evidence because the government admitted Amex general conditions costs were at least approximately $1,500 a day. [00:01:11] Speaker 04: This is Judge Hughes. [00:01:19] Speaker 04: Do you agree that actual cost is preferable and you have to justify [00:01:25] Speaker 04: using something other than actual costs? [00:01:30] Speaker 01: I agree that the case law holds, generally speaking, that for an equitable adjustment, that actual costs are the preferred method. [00:01:38] Speaker 01: Here we submitted the actual labor hours, but we used the parties agreed to contractual rates, which were the fully loaded rates for those labor costs. [00:01:51] Speaker 04: Well, are those actual costs to you or are those something else? [00:02:00] Speaker 01: They are not the actual costs to us. [00:02:05] Speaker 04: So how is it legal error for the board to disregard your expert's testimony if they're not actual costs? [00:02:14] Speaker 01: I don't think any of the cases that the board cited or that the government cited [00:02:20] Speaker 01: hold that relying on the party's contractual rates for the general conditions costs is inappropriate. [00:02:30] Speaker 04: And in fact... Well, I thought you had agreed that the precedent generally required actual costs unless you had some kind of justification that you couldn't prove actual costs. [00:02:42] Speaker 04: And I didn't see anything in the records [00:02:44] Speaker 04: that suggested you couldn't prove actual cost or you didn't seem to argue you couldn't. [00:02:51] Speaker 04: So I'm just curious as to why you didn't just submit records to show what the actual cost were here instead of using these contractual labor rates. [00:03:04] Speaker 01: Your Honor, [00:03:06] Speaker 01: Amex thought that using the contractual labor rates was a fair method to determine what the general conditions costs were. [00:03:16] Speaker 01: And in the Willner case, decided by the claims court, the court there used the hourly rates provided for in the contract. [00:03:29] Speaker 01: And the court also noted there that when the contractors [00:03:33] Speaker 01: Methodology is generally sound, but there's a problem with the application of the methodology because some aspect of it is faulty. [00:03:41] Speaker 01: Disallowing recovery for the entire item is draconian, and that is what the board did here. [00:03:47] Speaker 01: It disallowed any recovery despite the fact that the government's expert told the board that... Well, I think you're pivoting to a second question. [00:03:58] Speaker 04: I was still trying to figure out whether you thought [00:04:03] Speaker 04: actual, you provided actual costs, and it doesn't seem like you did. [00:04:07] Speaker 04: And it doesn't seem like you tried to justify that this was the best method you could do. [00:04:13] Speaker 04: You just gave this method. [00:04:17] Speaker 04: So if you want to talk about the government's estimate, you can. [00:04:22] Speaker 04: You know, I agree it's dichronian not to give you any, any recovery. [00:04:28] Speaker 04: But if there's no proof of actual costs, then isn't that the results? [00:04:34] Speaker 01: No, Your Honor. [00:04:35] Speaker 01: I don't believe that that's the result. [00:04:36] Speaker 04: Well, what would the board do? [00:04:39] Speaker 04: Let's take hypothetically, we don't have the government's opinion out here. [00:04:44] Speaker 04: All we have is your expert opinion. [00:04:45] Speaker 04: And the board judge properly determines that your methodology is just impermissible. [00:04:53] Speaker 04: So he rejects it as unreliable. [00:04:56] Speaker 04: There is no proof. [00:04:57] Speaker 04: So what would he do to award you costs? [00:05:02] Speaker 01: What the board has done in the past in the Yates versus Desai Bill case was to award the liquidated damages rate as a fair rate. [00:05:13] Speaker 04: And in this case... Did you ask for that? [00:05:18] Speaker 04: No, Your Honor. [00:05:19] Speaker 04: Well, how can the board do that if you didn't ask for it? [00:05:24] Speaker 04: I don't believe... I want to get to the government's issue now. [00:05:30] Speaker 04: In your view, did you ask for the government's rate as an alternative? [00:05:40] Speaker 01: No, Your Honor, we did not. [00:05:43] Speaker 04: Okay. [00:05:44] Speaker 04: And I want to look a little bit more in detail at actually what the expert was doing there, because it's not clear to me, and maybe the government can answer this also, that the government's expert is saying what the actual costs are [00:06:00] Speaker 04: based on an actual cost methodology or just poking holes in your methodology and saying even under that, it would be reduced to the 1546 rate. [00:06:11] Speaker 04: Do you have an opinion as to what that government expert was doing? [00:06:15] Speaker 01: Yes, Your Honor. [00:06:16] Speaker 01: And I would direct or suggest that the court examine Appendix 15669, page 1468, [00:06:28] Speaker 01: lines three through 10 of the testimony, there the government's expert testified to the board, quote, the way I had done my calculations was exactly consistent of the judge's description of how it should be done, which was we determine the actual cost for people and apply the actual, you know, overhead rate. [00:06:51] Speaker 04: Well, so that's, I get that. [00:06:53] Speaker 04: This is what's confusing to me because I see that in the testimony. [00:06:57] Speaker 04: But then I look at the, if I can direct you to 14554, which is the government's expert report. [00:07:09] Speaker 01: Yes, Your Honor. [00:07:10] Speaker 04: And under 7.7, I think this is the government's expert report. [00:07:13] Speaker 04: Correct me if I'm wrong. [00:07:15] Speaker 04: It's AMEC extended general conditions and it's the government's response to that. [00:07:20] Speaker 04: And it notes that you seek it for 1968 days and then it has further, [00:07:27] Speaker 04: issues with that. [00:07:28] Speaker 04: And then at the end of that first paragraph, it says even adjusting for these estimated amounts, blah, blah, blah, it says an adjusted daily rate would be approximately $15.46. [00:07:39] Speaker 04: So in the report, it sounds like he's just adjusting your methodology, not going to actual cost. [00:07:47] Speaker 04: Am I missing something? [00:07:48] Speaker 04: Is there another government expert that actually relies on actual cost? [00:07:55] Speaker 01: No, Your Honor, and I mean, I agree with you that the report does not seem strictly consistent with how the government's expert testified to the board, but the fact remains that the government's expert told the board that it had applied the methodology that the board was seeking and that that was... Well, if there's conflicting evidence in terms of the expert report and the testimony, isn't it up to the... [00:08:23] Speaker 04: board to determine what kind of fact-finding they make upon this? [00:08:28] Speaker 04: I mean, if it was an admission, I have no doubt, if the expert report said, we did it the right way, we did it on actual costs and looked at their records, and it's 1546, and that touch of money was then repeated to the board, and the government said, yeah, they're entitled to 1546, that seems like an admission. [00:08:46] Speaker 04: But when we have two conflicting pieces of evidence, [00:08:50] Speaker 04: And we don't see any sense that the government has admitted that you're entitled to the 1546. [00:08:56] Speaker 04: How are we to substitute our fact finding for the board on this? [00:09:01] Speaker 01: Well, the government, I believe, did admit this was the appropriate rate. [00:09:09] Speaker 01: If the government's post trial or post hearing brief, Appendix 17726, the government states it [00:09:19] Speaker 01: It doesn't believe that AMEC is entitled to any days of compensable delay. [00:09:23] Speaker 01: However, to the extent the board disagrees and awards AMEC days of compensable delay, which it did, it awarded 117 days. [00:09:31] Speaker 01: The NPS believes the appropriate daily rate to be applied for general conditions is 1546. [00:09:36] Speaker 01: I mean, I would submit that that's an admission on the government's part that they owe at least 1546 if compensable days are awarded. [00:09:47] Speaker 01: and they were awarded, and nonetheless, the board awarded zero. [00:09:53] Speaker 04: What if that admission is based upon not actual cost? [00:10:00] Speaker 01: I mean, I still think that it sets the floor for how much AIMEC would be entitled to for general conditions. [00:10:09] Speaker 01: I mean, if the government says, if it's compensable, then here's how much is owed, [00:10:14] Speaker 01: then the government should be bound by that. [00:10:17] Speaker 01: I mean, both parties tried the case assuming, essentially, that that's the floor. [00:10:22] Speaker 01: And then to come up with zero, as I stated before, is a draconian result. [00:10:30] Speaker 01: So unless the court has any more questions on the first issue, I'd like to move to the second issue with the court's permission. [00:10:42] Speaker 01: For the second issue on appeal, the board awarded no time to perform Modification 1. [00:10:52] Speaker 01: What it awarded, those 117 days of Compensable Delay, that was the period running from when this major structural issue was discovered on site. [00:11:07] Speaker 01: up till the point when the board found that work could begin, but it awarded no days whatsoever to actually do the expanded scope of work. [00:11:18] Speaker 01: And the board found that the agency's expert's estimation of 90 days wasn't a weighty admission because the agency's expert said, well, those days aren't compensable. [00:11:31] Speaker 01: But the agency's expert said those 90 days are excusable, in other words, concurrent delays. [00:11:38] Speaker 01: And the board didn't address that or reduce the liquidated damages award by those 90 days. [00:11:46] Speaker 01: And so again, what we have is an agency admission that the board didn't take into consideration or didn't fully explain its reasoning for. [00:11:58] Speaker 01: And we would submit that that is arbitrary, and capricious, and not supported by substantial evidence. [00:12:05] Speaker 01: I see that my time is running short, and that I'm about to get into my rebuttal time. [00:12:11] Speaker 00: So you called it correctly. [00:12:15] Speaker 00: Why don't we hear from the other side, and they'll reserve your rebuttal time. [00:12:18] Speaker 00: Thank you. [00:12:19] Speaker 00: Thank you. [00:12:20] Speaker 00: Mr. Byrd. [00:12:23] Speaker 02: Good morning, Your Honor, and may I please support [00:12:25] Speaker 02: This is a simple failure of proof case. [00:12:28] Speaker 02: In this appeal, Annex seeks the second bite of the apple by selectively appealing only a few of the board's nonfactual findings. [00:12:35] Speaker 02: These are not legal conclusions on appeal here. [00:12:38] Speaker 04: Can I direct you to the argument, this is Judge Hughes, to the argument that the government in its post-trial brief made an admission of the 1546, even with the conflicting evidence. [00:12:54] Speaker 04: Why isn't it if the government, you know, puts in its post-trial beef and says, well, you know, they shouldn't get the full amount, but the appropriate rate if you give delay at all is $15.46. [00:13:06] Speaker 04: Why isn't that an admission against interest that should be held against you? [00:13:11] Speaker 02: Your Honor, to Your Honor's, I guess, pre-deceit point, the [00:13:17] Speaker 02: Agency's expert calculation in the case, which is best explained at Appendix 14-554 in the... No, no, no. [00:13:25] Speaker 04: I get this. [00:13:26] Speaker 04: I think the expert did not do an actual... Did not... Your expert did not do an actual cost adjustment, and that 1546 wouldn't be a factual... Reliable factual evidence for actual cost. [00:13:39] Speaker 04: But nonetheless, in your post-trial brief, you apparently, according to your friend on the other side, agreed to the 1546. [00:13:47] Speaker 04: Even if that's not a correct number, if you agree to it, why aren't you held to that? [00:13:56] Speaker 02: Well, again, Your Honor, there's no evidence in the case that Amec had an inability reasonably to prove it. [00:14:02] Speaker 04: No, you're not answering my question. [00:14:04] Speaker 04: You're not answering my question at all. [00:14:06] Speaker 04: I understand Amec didn't meet its burden of proof. [00:14:10] Speaker 04: Your expert's report doesn't supply an alternative basis on that. [00:14:14] Speaker 04: But nonetheless, if you put in a post-trial brief a number wherever that number comes from and says this is the number they're entitled to, why isn't that number in admission? [00:14:28] Speaker 02: Additionally, Your Honor, in the briefing before the board, the agency consistently contended that Amec was not entitled to any time related information. [00:14:38] Speaker 04: I'm going to give you one more try to see if you're going to answer my question. [00:14:40] Speaker 04: If you're not, we'll just, you know, stop wasting my time and we can move on. [00:14:44] Speaker 04: I understand all of that. [00:14:46] Speaker 04: The point is, if in your post-trial briefing you say, we disagree with all of their arguments, they didn't prove actual costs, they shouldn't get any money at all, blah, blah, blah. [00:14:56] Speaker 04: But if you disagree with us on the compensation for days of delay, here is the dollar amount they should get per day. [00:15:06] Speaker 04: If you said that in your brief, why shouldn't you be held to that? [00:15:11] Speaker 02: Your Honor, that's not an admission and that the government did not say that Amec wasn't entitled to that amount necessarily. [00:15:18] Speaker 02: The government said, the agency said, that if the board concluded there was an invincible delay, that was a more reasonable approximation of Amec's cause. [00:15:28] Speaker 02: However, at base, that calculation was still not Amec's actual cause. [00:15:33] Speaker 02: And faced with a failure of proving a reasonable [00:15:37] Speaker 04: So are you saying it doesn't meet the legal standard for the admission against interest? [00:15:44] Speaker 04: And if so, what's that standard and why doesn't it meet it? [00:15:52] Speaker 02: Well, it is not an unqualified statement of the agency that this is the actual extended general conditions cause as experienced by the contractor in this case. [00:16:04] Speaker 02: And therefore, without any qualifications, we agree that this is the rate that they should be entitled to recover for each day of extended general conditions during the period of commercial delay. [00:16:17] Speaker 03: Mr. Byrd, shouldn't we just be looking at the actual words to decide whether this is an admission? [00:16:23] Speaker 03: If you look at page 17, 726, [00:16:28] Speaker 03: The sentence says, if the board awards MEC delays days per principal delay, the NPS believes the appropriate daily rate to be applied for general conditions is $15.46. [00:16:45] Speaker 02: No, Your Honor, because that statement is against a legal backdrop that requires a contractor to prove a reasonable inability to establish costs. [00:16:56] Speaker 02: based on actual costs before the board would resort to awarding the contractor using evidence of costs that are less than actual costs. [00:17:06] Speaker 02: So no. [00:17:09] Speaker 03: I don't see how you can read that end of that sentence. [00:17:13] Speaker 03: Sorry, this is Judge Hughes again. [00:17:14] Speaker 03: Is your point that in the context, this is in the context, there's already been a major discussion before the deciding judges [00:17:25] Speaker 03: as to whether or not the schedule should apply at all. [00:17:30] Speaker 03: And so there's been a whole question about costs, actual costs. [00:17:34] Speaker 03: And nonetheless, there is this flat statement. [00:17:38] Speaker 03: Let me put it to you this way. [00:17:39] Speaker 03: If we were to decide this is an admission, is there any reason why the government should not be held to an admission? [00:17:48] Speaker 02: If the court were to decide that this is a, [00:17:51] Speaker 02: and admission of a more reasonable approximation of Amex extended general conditions cost, that still doesn't meet the standard for awarding Amex cost during the compensable period of delay when the record otherwise establishes that Amex failed to prove that it could not reasonably have shown the board reliably and the reasonableness of its actual cost experience during that compensable delay period. [00:18:21] Speaker 04: So this is Judge Hughes again. [00:18:23] Speaker 04: Is your point on this, even though it's not really clearly worded, that to the extent this is admission, it's an admission that if the board uses Amex methodology, there still needs to be an adjustment and it should use 1546 rather than the 1900 number under Amex contractual methodology, but it doesn't admit anything about actual cost. [00:18:50] Speaker 02: That is correct, Your Honor, and we do demonstrate in our response brief in this case that essentially what the agency's expert did to the daily rate AMEX expert had calculated was to back out aspects of that rate that AMEX expert had calculated that should not have been in there. [00:19:09] Speaker 02: The primary example of that is home office overhead, which is not an element of extended general condition because as opposed to home office overhead, [00:19:17] Speaker 02: extended general conditions are site supervision costs, not the cost of the home office. [00:19:24] Speaker 02: So the agency's expert at Bayes simply backed out that component of that daily rate that Amex expert had calculated to get a potentially more reasonable approximation of Amex actual cost experience if the board awarded the cost using the method that Amex expert had calculated. [00:19:46] Speaker 02: Turning to the second issue in the case, the modification one, regarding time, Amec does not contest the board's conclusion that modification one entitled Amec to an extension for the mod not attributable for the time to perform it, not attributable to Amec's fault. [00:20:03] Speaker 02: Amec instead can test the board's factual finding that could see no basis in the record to determine how long that modification should have taken to perform. [00:20:12] Speaker 02: Substantial evidence supports the board's finding there that Amec had failed to prove how long it reasonably should have taken the Amec to perform the modification. [00:20:21] Speaker 02: Primarily, we demonstrate this in our brief response pages 32 through 36. [00:20:27] Speaker 02: Regarding additional compensation for the modification, substantial evidence also supports the board's finding that Amec failed to prove that it incurred costs while performing this modification. [00:20:38] Speaker 02: above the price that it was paid for the modification, approximately $300,000. [00:20:45] Speaker 02: Primarily, the dispute on appeal with regard to compensation boils down to the final period of performance of the contract where the substantial evidence in the record establishes that ANMAC needed to segregate costs during that period because it was performing both modified and base scope of work. [00:21:06] Speaker 02: And lastly, to finish, on the preparation cost for AMEX request for equitable adjustment, as the board recognized, AMEX may have been able to recover costs for that REA preparation and contract administration. [00:21:22] Speaker 02: However, substantial evidence supports the board's finding that AMEX failed to prove that its claim costs were recoverable because it did not prove that it incurred costs for the genuine purpose of materially advancing negotiations with the government. [00:21:36] Speaker 02: as the board found AMEX failed to detail why these costs were encouraged, stating only that its experts, again, had allocated the requested amount to Modification 1. [00:21:48] Speaker 02: And again, at base, the case really does come down to AMEX failure to prove the amount that it was entitled to during its work on the construction project. [00:22:01] Speaker 02: And if there are no further questions from the court, we respectfully request that the court affirm the CBTA's decision. [00:22:07] Speaker 02: Thank you. [00:22:10] Speaker 00: Thank you. [00:22:12] Speaker 00: Ms. [00:22:12] Speaker 00: Ticket, you've got three minutes left. [00:22:16] Speaker 01: Thank you, Your Honor. [00:22:17] Speaker 01: I just want to briefly address some of the points that Council opposite raised. [00:22:26] Speaker 01: On the request for equitable adjustment costs, [00:22:32] Speaker 01: In the briefs, the government argues that negotiations had ceased and that that's a reason why the court should affirm the board's determination that this was not for the purpose of negotiating or contract administration, but instead for prosecuting a claim. [00:22:54] Speaker 01: And we point to record evidence that the board had before it. [00:23:00] Speaker 01: the government continued to ask for information as part of negotiations through August of 2014. [00:23:08] Speaker 01: The board also had before it the invoices from AMEX third-party contractors, its attorneys, and its consultants that it utilized in preparing the request for equitable adjustment. [00:23:24] Speaker 01: And those invoices have descriptions of the work done and numerous, I mean, [00:23:31] Speaker 01: Many, many of those descriptions state prepare REA, phone conference on REA, strategy for REA. [00:23:40] Speaker 01: The descriptions in the invoices themselves speak to the purpose of why those costs were being incurred. [00:23:48] Speaker 01: And the board relied heavily on the fact that some of those descriptions were redacted. [00:23:58] Speaker 01: However, the board didn't cite [00:24:01] Speaker 01: any law and I've been unable to find any law, the fact of redaction is enough to overcome the strong presumption that these costs were incurred for a legitimate purpose and of negotiation and not for the purpose of prosecuting the claim. [00:24:22] Speaker 01: And on that point, we asked that the court [00:24:27] Speaker 01: reverse and remand and on the other issues as well. [00:24:31] Speaker 01: And again, I see that my time is about to expire. [00:24:34] Speaker 01: I do want to leave a moment to answer any questions that the court may have. [00:24:41] Speaker 01: Hearing none, thank you, Ms. [00:24:43] Speaker 01: Pickett. [00:24:44] Speaker 01: We thank both sides and the case is submitted. [00:24:47] Speaker 00: Thank you very much, Your Honor.