Gideon Contracting LLC issued an appeal claiming that suspensions of a work order by the Army Corp of Engineers were unreasonable, and that they were entitled to compensation. The government demanded liquidated damages for delays to completion of the contract.
Background
On September 19, 2020, the government issued a task order to Gideon Contracting LLC for work on the Pine Creek Dam in Mccurtain County, Oklahoma, under an existing Indefinite Delivery Indefinite Quantity Multiple Award Task Order Contract (MATOC) for civil works and construction. The firm-fixed price was $996,990, and the period of performance was 180 days from the notice to proceed. The task order contained Federal Acquisition Regulation (FAR) 52.211-12, LIQUIDATED DAMAGES—CONSTRUCTION (SEP 2000), mandating $2,710 in liquidated damages from Gideon for each day it delayed completing the work. Due to frequent risk of flooding Gideon would be required to suspend work for as long as was required for the lake to be drained to acceptable levels. The contract stipulated that acceptable levels were between 438 and 462 ft, if water levels reached 462 ft, water release was mandated but both the contract officer or contractor could preemptively request water release if water levels were expected to rise.
Throughout the course of the work order period work was suspended several times for lake drainage and weather, and the contract completion date was extended by a total of 144 days. Disagreements arose between Gideon and the government regarding how many of these days of delay were excusable and/or compensable. On October 28, 2022, Gideon submitted a certified claim to the CO seeking a 144-day time extension. It relied upon the Suspension of Work clause to claim 86 of the days were compensable in the amount of $314,138.37. The CO’s January 31, 2023, final decision acknowledged Gideon was entitled to 20 days associated with the first water release, 94 days associated with the second release, and an additional 30 days claimed to arise from related disruptions, totaling a 144-day extension. However, the CO denied any compensation. The 144-day extension would extend the contract completion date to October 10, 2021. Work was officially considered complete on November 23rd, 2021 forty-four days late, which according to FAR 52.211-12 in the contract allowed the government to claim liquidated damages.
Ruling
Administrative Judge Melnick ruled on the party’s entitlement to damages in the case. He ruled that the majority of the delays were reasonable and therefore Gideon was not entitled to compensation, however 10 days of delay were considered unreasonable and therefore Gideon was entitled to compensation for those days. The delays were considered unreasonable when no clear justification for the continuing of drainage could be found. He also ruled that because the government had delayed in claiming entitlement to liquidated damages they had waived the entitlement. Judge Melnick stated: “Although government waiver of completion dates has a more limited application to construction contracts than to supply contracts, waiver has been found when the government’s conduct indicated that time was no longer of the essence and that it was not assessing liquidated damages.” Given the government’s silence on collecting liquidated damages for over a year after the contracts completion Judge Melnick ruled they had waived the right as they had demonstrated that time was not of the essence and they had given no indication that they were considering the damages Therefore the government’s action to pursue damages at a later date could be considered punitive as Gideon alleged.
Gideon’s appeal from the denial of its claim for compensation was sustained to the extent it was entitled to an adjustment for the increased cost of performance associated with three days of suspension. It was also entitled to an adjustment for the increased cost of performance associated with seven additional days it was suspended. Otherwise, its claim for compensation was denied. Gideon’s appeal from the government’s assessment of liquidated damages was sustained. The appeal was returned to the parties to address quantum.A key point to take away from the case is that the government did not attempt to assess liquidated damages until a claim was submitted by the contractor. Contractors should always have this in mind during contract performance, and attempt to properly document delays, the government’s responsibility for delays, and the government’s waiver of extended performance. Without properly documenting these aspects, this contractor would have been liable for liquidated damages. Always keep in mind the government will most likely make counterclaims to any claim submitted by a contractor and you should be prepared to defend against these allegations.
Source: https://www.asbca.mil/LinkClick.aspx?fileticket=yVx2vYnwx5s%3d&portalid=143 (Opinion by Administrative Judge Melnick)
