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

[00:00:00] Speaker 02:
Our final case for argument today is 24-1134 Sheffield versus the Secretary of the Army.

[00:00:07] Speaker 02:
Mr. Wilson, please proceed.

[00:00:11] Speaker 00:
Thank you, Your Honors.

[00:00:13] Speaker 00:
May it please the Court.

[00:00:18] Speaker 00:
While this case contains many procurement issues in it, and it contains not only an affirmative claim that Sheffield Court of the Joint Ventures made,

[00:00:29] Speaker 00:
It also includes an appeal from the decision that the Corps of Engineers is entitled to reimbursement.

[00:00:39] Speaker 00:
I'm going to focus primarily, though, on the procurement issue involving what I think is the spirit and doctrine applicable to this service.

[00:00:58] Speaker 00:
In 1918, the typical procurement method was design, bid, bill, meaning there was usually a complete set of four construction drawings and specifications.

[00:01:10] Speaker 00:
And when the government did that, if there were errors in those plans and specifications, and the contractor relied on those plans and specifications and ended up incurring additional costs, the contractor would recover the additional cost, usually as an equitable adjustment.

[00:01:29] Speaker 00:
Today's world is different.

[00:01:32] Speaker 00:
And frequently, different federal agencies, including the Corps of Engineers, use design build.

[00:01:39] Speaker 02:
Well, how do you think that we should determine whether something is a performance specification or design specification?

[00:01:48] Speaker 00:
Well, I'm going to step back for a second and say, I understand that's the typical

[00:01:54] Speaker 00:
analysis that you see in many of this court's decisions.

[00:01:58] Speaker 00:
But I'm not sure one of the decisions indicated that we don't have to rely on the labels of performance versus design.

[00:02:09] Speaker 00:
The real key, I think, is, and quoting Robin's Maintenance versus United States, whenever the government uses specifications in a contract, there is an accompanying implied warranty that these specifications are free from errors.

[00:02:23] Speaker 00:
The test for recovery based on inaccurate specifications is whether the contractor was misled by these errors in the specifications.

[00:02:32] Speaker 00:
There has been distinctions identified in case law by this court as to what is performance.

[00:02:41] Speaker 00:
Typically, it's a more general, here's the end result we want as the government.

[00:02:48] Speaker 00:
And we don't tell you how to do it, contractor.

[00:02:50] Speaker 00:
You design it.

[00:02:51] Speaker 00:
You build it.

[00:02:53] Speaker 00:
This case is a little different.

[00:02:55] Speaker 00:
And frankly, I think it asks you to look behind the rationale of the Spear and Doctrine.

[00:03:04] Speaker 00:
The rationale again is if there's something furnished to a contractor that the contractor reasonably relies upon to its detriment and is misled, it's in the plans and specifications, I think there should be recovery.

[00:03:19] Speaker 00:
And based on an equitable adjustment,

[00:03:22] Speaker 03:
change change in this case we'll just assume for the moment that when I look through the statement of work provisions it really seems to contemplate that the contractor the winning bidder has a lot of design freedom and talks about

[00:03:43] Speaker 03:
what's being provided to the contractor is a conceptual design and and how the the winning contractor will then complete that design and in completing that design the burden is on the contractor to conform with all applicable criteria and codes and if that's the way I understand the statement of work

[00:04:11] Speaker 03:
then it would sound like what we have here are performance specifications and not design specifications.

[00:04:19] Speaker 03:
And if you could point me to something that dislodges that current view of the statement of work, I think that would be helpful.

[00:04:29] Speaker 00:
Actually, Your Honor, I'd agree with everything you said except the conclusion from that.

[00:04:33] Speaker 00:
I don't think it's necessarily a performance specification.

[00:04:36] Speaker 00:
And what I would point to is

[00:04:39] Speaker 00:
And it's not mentioned in the board's opinion.

[00:04:42] Speaker 00:
It's not mentioned in the contracting office final decision.

[00:04:45] Speaker 00:
And it's two sections, 1.2.4.1, which says this conceptual design is accepted by the government.

[00:04:53] Speaker 00:
That's Appendix 1831.

[00:04:55] Speaker 00:
And then 1.5, the conceptual drawings are included as part of this RFP to provide information and criteria for the contractor's completion of the design.

[00:05:06] Speaker 00:
I read that and my client read this as, here's a design you should take, the fundamental aspects of the conceptual design.

[00:05:14] Speaker 00:
And the prominent features that stood out in growing C101 were three buildings, a parking lot, a fenced in area.

[00:05:25] Speaker 00:
This was a, went from a 16.5 approximately acre to 15 acre site.

[00:05:31] Speaker 00:
But also prominent was a note and a

[00:05:36] Speaker 00:
configuration.

[00:05:37] Speaker 00:
of what was a retention model.

[00:05:40] Speaker 03:
Why shouldn't the term conceptual design conceptual drawings be understood as we the government have this very high level concept idea of what we want and now per these provisions it's up to the contractor to complete the design you know again in conformance with all applicable criterion codes so yes the government

[00:06:06] Speaker 03:
is accepting this high level concept plan, but when it comes to the conception of implementation, that's going to be on the contractor.

[00:06:18] Speaker 00:
And I agree that we should have been able to complete the design based on that concept.

[00:06:23] Speaker 00:
We could not complete the design based on that concept.

[00:06:26] Speaker 00:
The concept they had was a centralized stormwater system in one area.

[00:06:32] Speaker 00:
It could have been changed in the design builders, in my client's design.

[00:06:38] Speaker 00:
They could change where that was located, but it was centralized.

[00:06:41] Speaker 00:
It was going to be a retention bond.

[00:06:43] Speaker 01:
Where, if anywhere, does it say in the specification or contract that the stormwater management system had to be a centralized design?

[00:06:53] Speaker 01:
You point me to a specific

[00:06:55] Speaker 00:
Your Honor, it does not say centralized design.

[00:06:59] Speaker 00:
It's the configuration in the drawing in C101, which shows where the stormwater facility, singular phrase, not stormwater improvements, stormwater facility.

[00:07:13] Speaker 00:
And that is read by my design builder client as we're going to have a major feature, a retention pond.

[00:07:23] Speaker 00:
You'll provide swales to lead to it, maybe some piping, but you're not going to have 19 devices spread throughout the project site.

[00:07:33] Speaker 00:
And so we call it decentralized and centralized because that's the terminology that the Maryland Department of Environment uses.

[00:07:42] Speaker 00:
This is after the fact terminology.

[00:07:44] Speaker 00:
It does not say that in the specifications or plans, but the depiction is not consistent with a

[00:07:52] Speaker 00:
spreading out the stormwater devices throughout the site, which is a much more expensive design and construction.

[00:08:01] Speaker 00:
And again, I will say there are quotes from this court in different spirit cases that seem stronger against our client's position.

[00:08:16] Speaker 00:
But there are also quotes that I think look at the underlying rationale, which is if this misleads the contractor in terms of a plan or specification, the contractor should recover.

[00:08:28] Speaker 00:
For example, Franklin Pavlov construction, which we quote in our brief.

[00:08:34] Speaker 00:
Under the Speer and Doctrine, when the government provides a contractor with defective specifications, the government is deemed to have breached the implied warranty that satisfactory contract performance will result from adherence to the specifications, and the contractor is entitled to recover costs approximately $4 million.

[00:08:51] Speaker 03:
What about 1.2.4.3, which reads, quote, the conceptual design

[00:08:59] Speaker 03:
illustrates desired general arrangements, orientation, and adjacencies, and provides examples of exterior images which is acceptable to the government.

[00:09:09] Speaker 03:
It is not intended to dictate the final layout and image for the project.

[00:09:17] Speaker 03:
The contractor's designer shall develop and refine the conceptual site and building design in their completion of the design and construction documents.

[00:09:27] Speaker 03:
Such development shall be consistent with the criteria and acceptability of government.

[00:09:32] Speaker 03:
So the fact that they may have drawn out a sketch with a pond, I don't know if that necessarily

[00:09:42] Speaker 00:
Indicates based on all these provisions that they had a very Hard rigid specific demand of a centralized arrangement I don't think they did have a hard rigid demand that it had to be a certain size It had to be a certain depth that they didn't even say what the depth of the retention pond should be They don't say how the flow of the water from the rest of the site but typically you would grade it so that the water would

[00:10:11] Speaker 00:
end up either in a swale or at least have the gradients of the water would end up in the retention pond.

[00:10:17] Speaker 00:
But what it does say is that we have a, quote, stormwater facility, singular, and it's going to be somewhere.

[00:10:29] Speaker 00:
Now, it can be moved.

[00:10:30] Speaker 00:
It can be a little different size.

[00:10:32] Speaker 00:
That'll be the contractor's decision.

[00:10:34] Speaker 00:
But it doesn't say what we're looking for is

[00:10:39] Speaker 00:
defusing the stormwater facilities, the devices, infiltration devices, subterranean devices that will deal with the stormwater all throughout the site.

[00:10:50] Speaker 00:
It doesn't say that.

[00:10:51] Speaker 00:
So I think that it's a matter of, in terms of specifying by this drawing and by the other information in the plans and specs, which identified what that meant, and including the geotechnical engineer who read the drawings, it was put in the specifications for design builders to bid on.

[00:11:13] Speaker 00:
All of that identified a system that would be generally to the north or northwest and primarily rely on a retention basin.

[00:11:26] Speaker 01:
I think it's important.

[00:11:27] Speaker 01:
Is your argument that the board constructively changed the contract dependent on us concluding that the Spearing Doctrine applies in this case?

[00:11:37] Speaker 00:
It's my view, Your Honor, that the board did not consider two of the key provisions in the contract and didn't try to reconcile them with the rest of the contract documents.

[00:11:47] Speaker 00:
It did not deal with 1.5.

[00:11:50] Speaker 00:
It did not deal with 1.2.4.1.

[00:11:51] Speaker 00:
There's no mention of it.

[00:11:54] Speaker 00:
The contracting officer's final decision doesn't mention those sections at all.

[00:11:58] Speaker 02:
And what I say is... What about 3.4.5?

[00:12:02] Speaker 02:
What do we do about that?

[00:12:04] Speaker 02:
That's the one that says that the contractor has to comply with the federal, state, and local laws, and goes further, and it says decentralized systems can be used.

[00:12:14] Speaker 02:
What about that?

[00:12:16] Speaker 00:
I'm sorry.

[00:12:16] Speaker 02:
3.4.5.

[00:12:21] Speaker 00:
I think 3.4.5 dovetails with the permits and responsibilities clause.

[00:12:27] Speaker 00:
That's correct.

[00:12:28] Speaker 02:
Yes, absolutely.

[00:12:29] Speaker 02:
But that's all on the contractor.

[00:12:32] Speaker 02:
I mean, to sort out.

[00:12:34] Speaker 02:
Why doesn't that lend further weight to some of the other sections?

[00:12:40] Speaker 02:
Judge Chen was pointing to, like, 1.2.5.

[00:12:45] Speaker 02:
1.242, 1.243, all of which seem to be giving design permission to the contractor and not forcing strict compliance with the particular design.

[00:12:59] Speaker 00:
So Judge, let me back up a second.

[00:13:01] Speaker 00:
We're dealing with three phases.

[00:13:04] Speaker 00:
Solicitation phase, design phase, construction phase.

[00:13:08] Speaker 00:
The last two are obviously after the award.

[00:13:11] Speaker 00:
What does a design builder do

[00:13:13] Speaker 00:
when they receive a solicitation that says, here's the concept drawing that you can complete.

[00:13:19] Speaker 00:
And the other language in some of the sections.

[00:13:21] Speaker 02:
No, no, it doesn't say you can complete.

[00:13:22] Speaker 02:
They said we would find it acceptable.

[00:13:24] Speaker 02:
We'd find acceptable, but it also said, but you, contractor, have to make sure you're in compliance with all these other regulations and local laws.

[00:13:32] Speaker 00:
I think we cite, Your Honor, in our brief, the other sections in that same part that do say complete the design.

[00:13:38] Speaker 00:
They use the words

[00:13:39] Speaker 00:
Develop and refine, and develop and refine to me is complete based on the conceptual design.

[00:13:47] Speaker 02:
But going back to your question... You think if it says develop and refine, that means that it absolutely has to do everything that's in the picture.

[00:13:55] Speaker 02:
You only have the ability to, you know, add a tutu?

[00:13:58] Speaker 02:
I mean, what's the deal there?

[00:13:59] Speaker 02:
Like, I don't understand.

[00:14:00] Speaker 02:
Develop and design, that seems to give you permission to move some of those buildings around, for example.

[00:14:07] Speaker 00:
We have permission, we can't come up with another building or eliminate one of the buildings so we do have to comply with that conceptual design to its largest features and therefore there is some flexibility in terms of size, in terms of

[00:14:28] Speaker 00:
And in case of stormwater depth, it even could be moved along the northern edge, which makes sense because the slope... And doesn't the conceptual drawing actually tell you you have to determine the actual size and location?

[00:14:42] Speaker 00:
It does say in the parenthetical expression on the note that it is our decision on where that should be.

[00:14:49] Speaker 00:
But it doesn't say it's going to be a different kind of stormwater system.

[00:14:53] Speaker 04:
up to report what we've ever saved some time for but a little later left okay go ahead and have a chance thank you good morning your honor may it please the court the court should reject the contractors attempt here to shift the entirety of its risk for compliance with the terms and responsibilities clause

[00:15:18] Speaker 04:
from the contractor to the government.

[00:15:20] Speaker 04:
That would be in contravention of this court's precedent in cases such as Belhiri, where the court has held that the entirety of the risk under the Permits and Responsibilities Clause, at FAR 52-236-7, is on the contractor.

[00:15:35] Speaker 03:
Is it pretty standard now for the federal government to have this Permits and Responsibilities Clause in all of its construction contracts?

[00:15:44] Speaker 03:
Just shift all the risk.

[00:15:46] Speaker 03:
Who knows what problems they

[00:15:49] Speaker 03:
come around the corner.

[00:15:50] Speaker 03:
We don't have to worry about it.

[00:15:52] Speaker 03:
It's completely on the contractor.

[00:15:54] Speaker 04:
As a standard clause in the Federal Acquisition Regulation, I believe the government does routinely include that clause in federal government contracts.

[00:16:02] Speaker 04:
This Court and Bill Heery did recognize that the government can circumscribe its risk and the contractor's risk under that clause by also including in a contract specific limitations on the extent to which the contractor needs to engage with local authorities

[00:16:19] Speaker 04:
obtain permits and comply with them, there's no allegation in this case that there was such a specific limitation on the contract.

[00:16:25] Speaker 03:
Would you say that all design-build contracts the federal government enters into are just performance specifications and not design specifications?

[00:16:36] Speaker 04:
No.

[00:16:36] Speaker 04:
There are certainly design specifications in construction government contracts requiring design and construction.

[00:16:44] Speaker 04:
And this court's precedent in Blake construction recognizes that in one contract you may have both performance and design specifications.

[00:16:52] Speaker 04:
But in this case, as a condition precedent lacking for application of the Spearing Doctrine, which is what the contractor's claim relies upon.

[00:17:01] Speaker 04:
there is no design specification.

[00:17:04] Speaker 04:
In other words, as Spearin said at 248 U.S.

[00:17:07] Speaker 04:
at 136, Spearin doctrine requires, quote, the contractor is bound to build according to plans and specifications prepared by the government.

[00:17:16] Speaker 04:
Here there is no binding specification on where this stormwater management system shall be located within the site layout.

[00:17:24] Speaker 04:
This court has interpreted that direction.

[00:17:27] Speaker 01:
Yes.

[00:17:30] Speaker 01:
How should we interpret that contract provision saying the conceptual design is accepted by the government?

[00:17:37] Speaker 01:
Holy Council makes a lot of that sort of language.

[00:17:39] Speaker 01:
Can you give your response to that?

[00:17:41] Speaker 04:
Yes, Your Honor.

[00:17:42] Speaker 04:
Simply because the government has found the conceptual layout to be acceptable to it is not a warranty that the local permitting authorities

[00:17:51] Speaker 04:
Again, compliance with their requirements is wholly on the contractor.

[00:17:55] Speaker 04:
It bears the risk that the local permitting authorities would find that setting layout to be acceptable for purposes of their review.

[00:18:03] Speaker 04:
In the reply brief, the appellant even recognizes that page 10, for example, that the SKJV, the Sheffield-Courty Joint Venture Design Team, had the contractual obligation to and was committed to, quote, roll up their collective sleeves

[00:18:21] Speaker 04:
to refine and complete the design in a manner that complies with not only the US Army Corps' provided plans and specifications, but also the federal, state, and local laws and codes.

[00:18:33] Speaker 04:
So during performance, it was not sufficient that the government found the layout to be acceptable, but rather the local permitting authorities also needed to find that layout acceptable.

[00:18:44] Speaker 04:
And the contractor here bore the risk of the local authorities not finding that layout acceptable.

[00:18:50] Speaker 04:
In any event,

[00:18:51] Speaker 04:
The government's acceptance of that layout is qualified throughout the specifications, particularly as Judge Chen and Judge Moore, I believe, as well were speaking at Appendix 1831.

[00:19:03] Speaker 04:
There are multiple qualifications regarding the purpose for that conceptual design.

[00:19:11] Speaker 04:
in that the contractor had to refine it during design and permitting process.

[00:19:16] Speaker 04:
There was no representation by the government that that conceptual design would be sufficient for ultimate design approval by the local permitting authorities.

[00:19:25] Speaker 04:
And again, the risk is on the contractor to obtain that permission.

[00:19:29] Speaker 03:
What if the contract said, we the government, we want a centralized stormwater system.

[00:19:37] Speaker 03:
And then it turns out that the local state authorities demand that it be decentralized.

[00:19:47] Speaker 03:
Then what happens?

[00:19:49] Speaker 03:
Would the spirit warranty apply there?

[00:19:53] Speaker 04:
Reading the limitation that this court understood in Belhiri, that there is a, quote, specific limitation on the contractor's obligation to obtain permits or comply with local permitting authorities, if the court were to find that such a direction were a specific limitation on the extent to which the contractor nonetheless needed to engage with local permitting authorities and comply with local permitting requirements,

[00:20:19] Speaker 04:
then perhaps there could be a spearm warranty in that, or at least a defective specification theory that could lead to recovery in the situation your honor postulates.

[00:20:28] Speaker 04:
But in this case, that situation.

[00:20:31] Speaker 03:
Right.

[00:20:32] Speaker 03:
But I want to know your thoughts on whether the spearm doctrine would apply when the government has a specific instruction that says we want the centralized stormwater drainage system

[00:20:48] Speaker 03:
and the local authorities, you know, there's still the PNR clause in the contract and it's quite clear that the local county is not going to move.

[00:21:01] Speaker 03:
It has to be decentralized in their view.

[00:21:03] Speaker 04:
I believe in the situation, Your Honor, for it to be a clear case of contract or entitlement to an equitable adjustment, there would need to be a specific limitation per bell hearing on the contractor's obligations under the P&R clause.

[00:21:17] Speaker 04:
And to have that in the situation, Your Honor, postulates, we would need to have language from the government in the solicitation saying that essentially, regardless of what the local permitting authorities require,

[00:21:29] Speaker 04:
I, federal government, require you to have a centralize.

[00:21:32] Speaker 03:
Isn't that interesting, though, that the government would make a certain demand that's baked into the contract that's deemed illegal by some local authority, and now the contractors caught the twix in between there?

[00:21:49] Speaker 04:
No, it's not odd, because this was federal land.

[00:21:54] Speaker 04:
And the federal government had, I believe,

[00:21:59] Speaker 04:
The ability per federalism not to be subject to the local regulations and requirements, but rather the government as a good neighbor, the federal government chooses, as she says, is discretion to have its project subject to local permitting requirements.

[00:22:15] Speaker 04:
For example, it is in the contract, in the government's interest to do so because later down the road of conveyance of the property were to be in the government's interest to have a permitting compliant land.

[00:22:28] Speaker 04:
would enable potentially that conveyance.

[00:22:39] Speaker 04:
Your Honor, I believe we have covered most of the points discussed by Mr. Wilson.

[00:22:47] Speaker 02:
Does the recoupment issue stand or fall on the same

[00:22:54] Speaker 02:
questions we've already been discussing, which are basically, is this a performance contract or a design contract?

[00:23:00] Speaker 04:
Yes, Your Honor.

[00:23:00] Speaker 04:
In reply, as we pointed out in our response brief, the appellant agrees that the recoupment claim rises or falls with the success of its sphere and warranty claim, such that given the lack of the design specification as a condition precedent to sphere and applying,

[00:23:18] Speaker 04:
the recruitment claim fails.

[00:23:21] Speaker 04:
The challenge to the recruitment claim fails.

[00:23:24] Speaker 04:
The government's recruitment claim stands.

[00:23:27] Speaker 04:
But the affirmative claim by the contractor should be denied as the board found, and the court should affirm the board's decision.

[00:23:36] Speaker 04:
If there are no further questions, thank you.

[00:23:45] Speaker 02:
Thank you.

[00:23:48] Speaker 00:
I'm going to just briefly mention Hills materials because I think that was Triggered that case was triggered by the questions that were just asked and just at the end of my presentation those materials did allow the contract provision to specifically control over the permits and responsibilities folks in that case the

[00:24:17] Speaker 00:
accident prevention clause instructed the contractor to deal with the OSHA standards that had been issued.

[00:24:24] Speaker 00:
It was past tense.

[00:24:27] Speaker 00:
And new standards were applied.

[00:24:29] Speaker 00:
And the government said, well, you've got to follow those under permits and responsibilities clause.

[00:24:35] Speaker 00:
And the contractor recovered an equitable adjustment.

[00:24:39] Speaker 00:
And in that case, the court did say

[00:24:44] Speaker 00:
While compliance with the subsequent changes would not be excused, just like we wouldn't be excused once the state imposed their requirements, it could entail additional compensation.

[00:24:59] Speaker 00:
And so we believe, if we step back and look at what happens in the design-build scenario, we have a solicitation that tells us, among other things,

[00:25:10] Speaker 00:
that we're going to have a retention pond and a more centralized stormwater system.

[00:25:15] Speaker 00:
We're bidding.

[00:25:17] Speaker 00:
Michael Baker Inc.

[00:25:18] Speaker 00:
is the designer for the Corps, a very reputable firm.

[00:25:22] Speaker 00:
There's no reason for us to question that, and it tells us we should be able to rely on that.

[00:25:28] Speaker 00:
And so I believe the language in the specifications that talks about the conceptual design being acceptable, and we should

[00:25:38] Speaker 00:
The language I think can be read to mean Completed per the design with some flexibility, but not make a major change like this Creates liability.

[00:25:51] Speaker 01:
Thank you And I'm just on a question I asked before to make sure I have the answer on it.

[00:26:02] Speaker 01:
Oh You continue that the board Constructively changed the contract operate the question on the two parts

[00:26:09] Speaker 01:
Is that part of your argument?

[00:26:11] Speaker 00:
I'm claiming that the board ignored two key provisions.

[00:26:16] Speaker 01:
So does that mean you're not continuing that there was a constructive change in the contract?

[00:26:20] Speaker 00:
Well.

[00:26:21] Speaker 01:
Just yes or no?

[00:26:22] Speaker 01:
Just tell me one way or the other.

[00:26:23] Speaker 00:
I'm just trying to make sure.

[00:26:25] Speaker 00:
I wouldn't fit it that way, but I'd say yes.

[00:26:28] Speaker 01:
You'd say yes?

[00:26:29] Speaker 01:
Is that what you'd say?

[00:26:30] Speaker 00:
Yes, because they did not consider two key components of the contract.

[00:26:36] Speaker ?:
OK.

[00:26:37] Speaker 01:
Thank you.

[00:26:39] Speaker 02:
I have no further questions.

[00:26:39] Speaker 02:
Thank you.

[00:26:39] Speaker 02:
Thank both counsel.

[00:26:40] Speaker 02:
The case is taken under submission.