GRANTED: May 17, 1994 GSBCA 11541, 11557 A.J.C.A. CONSTRUCTION, Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. R. K. Jonrowe, President of A.J.C.A. Construction, Austin, TX, appearing for Appellant. Leigh Ann Holt, Assistant Regional Counsel, General Services Administration, Denver, CO, counsel for Respondent. Before Board Judges HENDLEY, WILLIAMS, and GOODMAN. WILLIAMS, Board Judge. Appellant, A.J.C.A. Construction (AJCA), challenges the termination for default of contract number GS-07P-89-JXC-0139 with respondent, the General Services Administration (GSA), and the assessment of $20,041 in excess reprocurement costs.[foot #] 1 The parties elected to waive a hearing and present their cases on the record. For the reasons stated below, the appeals are granted. Findings of Fact On December 15, 1989, respondent issued invitation for bids (IFB) number GS-07P-89-JXC-0139 for the installation of scientific equipment in Building 56 of the Denver Federal Center in Lakewood, Colorado. The equipment consisted of nine growth ----------- FOOTNOTE BEGINS --------- [foot #] 1 These appeals were filed on October 22 and October 28, 1991, and on December 18, 1991, the Board consolidated these appeals. ----------- FOOTNOTE ENDS ----------- chambers and two roof-mounted condensing units furnished by the Government.[foot #] 2 Appeal File, Exhibit 1. Additional work included moving the equipment from storage, cutting a hole in the roof, removing a tile floor, cleaning the concrete floor, painting exposed surfaces, and installing and testing the piping for the equipment. Id. Respondent received thirteen bids in response to the IFB. Appeal File, Exhibit 4. Appellant's bid of $24,198 was low, and the other bids ranged from $33,890 to $76,480.[foot #] 3 Id. GSA's estimate for the work was $49,759. Respondent's Brief, Attachment 2. At the request of the contracting officer, appellant verified its bid on January 24, 1990. Appeal File, Exhibit 5; Deposition of Contracting Specialist Diane Railsback (Railsback Deposition) (May 20, 1993) at 4. Although GSA personnel initially believed AJCA's bid was too low, they discussed this with AJCA's president and concluded the bid was current and realistic. The Government's award memorandum states in pertinent part: (6) Necessary organization, experience, operational controls, and technical skills (FAR 9.104-1(e)). Basis(es) for determination. In reviewing Standard Form 1419, Abstract of Offers - Construction, Attachment #4, it appears A.J.C.A. Construction missed a major element of the project as their bid is $25,561 or 49% below the government estimate and $9,692 or 29% below the next low bidder. Tom Birlson, Design and Construction, discussed this project in detail with Mr. Jonrowe, A.J.C.A. Construction, as Mr. Birlson was involved in the design phase and was concerned that A.J.C.A. Construction did not consider all elements of this project. Through discussions, it was discovered that the major element in question was the electrical equipment to be purchased and installed by the contractor. The government estimate for the electrical equipment was based on the Means Estimating Guide, which is historically high, in lieu of obtaining commercial current pricing. The government's equipment estimates for the transformer, 3/0 wire and main breaker were compared with the estimates A.J.C.A. Construction obtained for bidding purposes. This resulted in the ----------- FOOTNOTE BEGINS --------- [foot #] 2 The growth chambers are approximately 8'4" x 3'4" x 6'8" and weigh 1,355 pounds each. Appeal File, Exhibit 1. [foot #] 3 The other bids were: $33,890, $35,400, $36,300, $42,914, $43,257, $49,263, $49,410, $50,995, $52,000, $57,700, $59,360, and $76,480. Appeal File, Exhibit 4. ----------- FOOTNOTE ENDS ----------- understanding that A.J.C.A. Construction received competitive, current, commercial pricing instead of using book reference prices. Mr. Jonrowe did verify his prices again with his suppliers to be assured his prices were accurate and verbally verified his bid to Mr. Birlson and commented he was willing to go to work as soon as possible. Based on the foregoing, actual quoted prices received by A.J.C.A. Construction versus Means Estimating Guide estimates, it appears that the former is more current and realistic. Accordingly, all of the elements listed above for this item have been satisfied. . . . Appeal File, Exhibit 40 at 11th unnumbered page. On February 15, 1990, respondent awarded the contract to AJCA in the amount of $24,198. Appeal File, Exhibit 6. The Default clause provides: (a) If the Contractor refuses or fails to prosecute the work or any separable part, with the diligence that will insure its completion within the time specified in this contract including any extension, or fails to complete the work within this time, the Government may, by written notice to the Contractor, terminate the right to proceed with the work (or the separable part of the work) that has been delayed. In this event the Government may take over the work and complete it by contract . . . . The Contractor and its sureties shall be liable for any damage to the Government resulting from the Contractor's refusal or failure to complete the work within the specified time, whether or not the Contractor's right to proceed with the work is terminated. This liability includes any increased costs incurred by the Government in completing the work. Appeal File, Exhibit 1; 48 CFR 52.249-10 (1984) (FAR 52.249.10). The Excusable Delays clause states: (a) Except for defaults of subcontractors at any tier, the Contractor shall not be in default because of any failure to perform this contract under its terms if the failure arises from causes beyond the control and without the fault or negligence of the Contractor. Examples of these causes are . . . (2) acts of the Government in either its sovereign or contractual capacity, . . . In each instance the failure to perform must be beyond the control and without the fault or negligence of the Contractor. "Default" includes failure to make progress in the work so as to endanger performance. Appeal File, Exhibit 1. The contract also contains a Disputes clause which includes the following provision: (h) The Contractor shall proceed diligently with performance of this contract, pending final resolution of any request for relief, claim, appeal, or action arising under or relating to the contract, and comply with any decision of the Contracting Officer. Appeal File, Exhibit 1; FAR 52.233-1. GSA issued a notice to proceed on March 5, 1990, and work was to commence on March 15 and be completed in 100 days, i.e. by June 14, 1990. Appeal File, Exhibit 7; Railsback Deposition at 4. On May 9, 1990, the Government's management and inspection contractor met with AJCA's superintendent and AJCA's electrical subcontractor and inspected the Government-furnished growth chamber and condensing equipment. The construction engineer's daily diary reflects his findings: . . . One condenser has 2 motors rated 7.2 amp max and the other condenser has 3 motors rated 10.8 amps max; all motors are single phase 208/230 volt, in parallel. The condenser name plate AMP ratings exceed the panel "P" breaker normal operating range during starting due to the single phase motors supplied. The single 20 AMP breaker in the panel is sized for three phase motors. Each condenser unit should be separately protected by a 15 amp max fuse size per nameplate rating. Also-there are no start-stop controls furnished or shown for either condenser. . . . Note: The 112.5 kva main transformer on [drawing] E2-4 must handle 114.56 kw (panel "P") plus 9.6 kw (panel "L1-5") per design. Appeal File, Exhibit 40 at 44th-45th unnumbered pages. On May 14, 1990, GSA's construction engineer received a call from the manufacturer of the growth chamber who recommended "automatic shutdown of condensers via interlocking each growth chamber via a relay contact to a [corresponding] condenser." Appeal File, Exhibit 40 at 43rd unnumbered page. The manufacturer's representative "[did] not recommend an on-off switch since the condenser could be shut off in error." He "also advised that each condenser 208/volt motor has an overload, built in, and there are no automatic temperature controls or flow controls associated with the condenser." Id. GSA's engineer was advised by GSA's project manager and GSA's consultant not to proceed with any change order at this time. Id. On May 16, 1990, GSA issued request for modification number 1 and requested appellant's proposal by May 24, 1990. The modification originally consisted of two parts. Appeal File, Exhibit 2; Railsback Deposition at 5. Part 1a required cleaning of a concrete floor by shot blasting. Appeal File, Exhibit 2. Part 1b requested the following electrical revisions for the condensers: 1. Two 2-pole 15 amp single phase circuit breakers in main panel. Breaker specified is 3 phase and is incorrect. 2. Provide 2 magnetic starters and 9 relays to interlock 9 growth chambers to 2 condenser units as recommended by the supplier of the equipment to automatically shut off the condensers when the growth chambers are shut down. 3. Hook up controls per enclosed sketches and fasten wires on terminals of equipment. 4. Provide starters and relays per enclosed parts list. 5. Provide engraved plastic identification nameplates for starters and relays. Fasten with 2 screws. 6. Test interlock sequence and show revised system on the project record drawings. Id. On May 24, 1990, appellant submitted a bid of $1,466.52 for the work under part 1a only. Appeal File, Exhibit 2; Railsback Deposition at 5. The contract specialist testified in her deposition as follows: [She] was told by [AJCA's president] that his electrical subcontractor was out of the country, therefore, he could not submit a proposal for Item 1-B even after the Government encouraged him to go to another electrical subcontractor. [AJCA's president] refused, therefore, [the inspection firm] requested him to submit a price on 1-A only so there would not be any delays on the project. Railsback Deposition at 5. On May 25, 1990, the contracting officer authorized appellant to perform the work under part 1a, and increased the contract amount to $25,665. Appeal File, Exhibit 2. Appellant did not request an extension of the completion date for that work.[foot #] 4 Id. According to the construction engineer's daily diary, AJCA's president called the Government's management and inspection contractor on June 25, 1990, to discuss pricing for item 1b. The daily diary entry for that day states: Discussed pricing for item 1b on C/R No. 1. I urged [AJCA's president] to send price for the electrical work since he was already past his contract completion date of 6-14-90. [AJCA's president] said the prices he had obtained from electrical subs were high and he was waiting for "his" electrician to return from another job before submitting a price. I told [AJCA's president] to send price to GSA FAX, attention: [construction engineer], if he wanted to. Basic contract work has not been completed. Contractor is due three days for cleaning floor on item 1a C/R No. 1. Appeal File, Exhibit 40 at 35th unnumbered page. Appellant's superintendent left the jobsite on June 26, 1990, and returned to Texas. Appellant contends that it did not vacate the jobsite, but left the jobsite with the intention to return because modification 1b was still being negotiated. Appellant states: At the time we paused in working on the job the work remaining was over 90% electrical and the work proposed by Modification PS01-1b was 100% electrical. If we had called the electricians back to do as much as possible without affecting the work of Modification PS01-1b, they would have been there only a few days and then we would have had to send them away to return when negotiations were settled on Modification PS01-1b. We would then have had to suffer additional mobilization cost to get the electricians back to complete the remaining electrical work. The work of proposed Modification PS01-1b was not a separate item that was to be merely added on to the work of the contract like an appendage. It was work that was to substantially change the electrical portion of the original contract. If we had proceeded to complete the work of the contract without regard to proposed Modification PS01-1b and Modification PS01-1b had then gone forward we would have had to demolish ----------- FOOTNOTE BEGINS --------- [foot #] 4 Although appellant did not request a time extension, the contracting officer subsequently extended the contract completion date by three days from June 14 to June 17, 1990, in the termination for default letter. Appeal File, Exhibit 11. ----------- FOOTNOTE ENDS ----------- much of the work we would have done in completing the original contract. It was our belief that the government would not have paid for the rework since they were already extremely dissatisfied with the extra costs being proposed without such rework. Letter from Appellant to the Board (Nov. 30, 1993). Appellant further explained why AJCA left the jobsite: By contract I was not allowed to unilaterally raise the price of the contract and I was also not allowed to change the ultimate intended function of the work of the contract. After it had been established that the change in question would change the [useability] of the work product of the contract, it was obvious that the change had to be decided for or against by the users of the facility we were working on and by the contracting officer. Since the work of the change in question was directly in the critical path of the remainder of the work of the contract it was impossible for us to continue without the direction of the contracting officer. This decision, if made wrongly by us, could have resulted in our possibly not getting paid for the extra work in question and could also have resulted in our having to redo and reverse the extra work in question. Appellant's Answer to Interrogatory No. 4. On June 26, 1990, the contracting officer sent a letter to appellant stating that liquidated damages of $30 per day had been accruing since the June 14, 1990, original completion date. Appeal File, Exhibit 8.[foot #] 5 The contracting officer gave appellant until July 6, 1990, to explain any excusable delays. Id. Appellant did not respond to this letter. Railsback Deposition at 7. On June 28, 1990, the contract specialist telephoned appellant to discuss appellant's failure to submit a price proposal for modification 1b. Appeal File, Exhibit 9. The contact record prepared by the contract specialist concerning her conversation with AJCA's president states: ----------- FOOTNOTE BEGINS --------- [foot #] 5 On June 8, 1990, appellant submitted invoice number four in which it represented that the total work completed to date was 66.65% of the contract. Appellant's First Supplemental Response to Respondent's Request for Production of Documents. On June 14, 1990, respondent paid that invoice. Id.; ___ Appellant's Response to Interrogatory No. 9. More work was completed between June 8, 1990, and June 26, 1990. Appellant's Response to Interrogatory No. 9. ----------- FOOTNOTE ENDS ----------- [AJCA's president] returned my call from this A.M. Subject of discussion was the price proposal on CR#1 Item 1b electrical. Issued to [AJCA] May 16, 1990, due May 24, 1990. To . . . date, [the] proposal has not been submitted. [AJCA's president] talked my ear off for 45 minutes w/excuses, but no substance of why proposal not submitted. Claimed he mailed proposal 6- 27-90, not FAX as requested in the amount $5,580, w/o a breakdown of costs. I set a suspense date of 7-2-90 to get the breakdown to us to commence [negotiations]. [AJCA's president] confirmed the superintendent has returned to [Texas] as of yesterday. Will fly him back up to complete job after [negotiations] & CO issued. Informed [AJCA's president] he is in liquidated damages since 6-14-90; again full of excuses. I tried several methods to motivate [AJCA's president] to no avail, as he would come up with more excuses, with no validity. Suspense: 7-2-90. Appeal File, Exhibit 9 at 6th-7th unnumbered pages. Appellant submitted two bids on part 1b. Appeal File, Exhibit 9. The first, dated June 25, 1990, which had been mailed to the contract specialist, was in the amount of $6,044, and requested a 30-day extension of the completion date. Id. Appellant's second bid, dated June 29, 1990, was in the amount of $4,919, and also requested a 30-day extension of the completion date. Id. Appellant's second bid was transmitted by facsimile to the Government's consultant on July 2, and was received before the first bid. Id.; Respondent's Brief at 9; Appellant's Response to Request for Admission No. 17. Appellant did not submit a cost breakdown for either of its bids. Appellant's president claims that during negotiations on modification 1b, he was told "not to bother submitting a cost breakdown unless [he] lowered [his] price significantly." Letter from Appellant to the Board (Aug. 16, 1993) at 3. Appellant's president continued: When we answered the letters regarding default the letters were apparently intentionally lost and [the contract specialist] had clear sailing right into dealing with us with dispatch. [The contract specialist] and I had a personality conflict from the beginning of our relationship when she returned my first invoice without even a phone call forcing me to go over her head to get immediate approval of the invoice by the Contracting Officer in spite of her fervent objection. Id. The Government did not contact appellant regarding its offer for part 1b until July 13, 1990. Then, by letter dated July 13, 1990, the contracting officer advised appellant that the Government was considering terminating the contract for default for failure to perform the contract within the time limits provided. Appeal File, Exhibit 10. In this July 13 letter, respondent also withdrew its request for a price proposal for part 1b of modification PS01 stating "the additional work is no longer required." Id. at 3. The electrical work under 1b would have changed some of the electrical work originally required and was necessary for the growth chambers to be operable. Appeal File, Exhibits 2, 29, 40; Letter from Appellant to the Board (Nov. 30, 1993); Board Conference Memorandum (Nov. 10, 1993). The July 13 letter further stated: On June 26, 1990, you were notified that your performance time had past and that damages would be assessed. You were given until July 6, 1990 to document any delays that you felt would justify additional time being added to the contract performance period. You have failed to respond and provide said documentation. Also, on June 26, 1990, your superintendent . . . vacated the jobsite and no further work has been completed on the contract. Prior to vacating the jobsite, [your superintendent] had continued to install materials and construct details that are not in accordance with the specifications e.g., he was observed brazing refrigerant piping without inert gas which cannot provide an acceptable joint. It appears that [your superintendent] lacks the requisite skills in this field. This matter was previously discussed with him at the beginning of the project. We have been apprised, by our inspector, of numerous work elements that remain incomplete on your base contract. These items are provided only to apprise you of the deficiencies and is not to be construed as a comprehensive list: 1. Level chambers 2. Rework refrigeration/piping 3. Level the condenser/roof isolation pads 4. Install lighting (available in Denver) 5. Provide electrical power to the condenser 6. Install electrical transformer 7. Connect the growth chamber electrical 8. Freon charge 9. Rework curb 10. Install traps in hot gas lines 11. Thread conduit installed on the roof 12. Final clean up Appeal File, Exhibit 10 at 1-2. The letter also stated: "The above listed work elements [represent] approximately 20% to 25% of your base contract which equates to approximately 130 man hours." Id. at 2. Finally, the contracting officer asked AJCA's president to contact the contract specialist via telephone with written confirmation "[i]f it is your intention to complete your contractual obligation." Appeal File, Exhibit 10 at 4. Appellant did not respond to the July 13, 1990, letter. Appellant's president claims he was on vacation when the show cause letter was issued and that he did not have an opportunity to prepare a response before receiving the final termination notice. Appeal File, Exhibit 29. On August 1, 1990, the contracting officer issued a final decision terminating the contract for default stating: The determination to issue this Notice of Default is based upon A.J.C.A.'s failure to complete the work within the time specified in this contract . . . which specifically states '...(c) Complete the entire work ready for use not later than 100 calendar days after the contractor receives the notice to proceed...' The notice to proceed was issued to you during the Preconstruction Conference on March 5, 1990, which established June 14, 1990 as the contract completion date. An additional 3 calendar days is hereby granted, which is attributable to Change Order Number PS01, Item 1a, and reestablishes the contract completion date as June 17, 1990. Appeal File, Exhibit 11 at 1. The letter further provided in pertinent part: On June 26, 1990, your superintendent . . . vacated the jobsite and no other work has been completed on the contract. . . . . On July 13, 1990, GSA issued a letter requesting A.J.C.A. to show cause why its contract should not be terminated, plus numerous other issues. No response has been received from your firm to this date. Id. at 2. The contracting officer also noted that on May 23, 1990, the Government's inspector issued a letter informing appellant that some of the piping work was unsatisfactory and that certain joints and piping had to be replaced.[foot #] 6 Id. The contract specialist testified that AJCA was terminated for default because it vacated ----------- FOOTNOTE BEGINS --------- [foot #] 6 The Government inspector's May 23 letter is not in the record. ----------- FOOTNOTE ENDS ----------- the jobsite and did not respond to the show cause letter. Railsback Deposition at 7. AJCA was never directed by the contracting officer to stop work. Id. The contract account contained $8,509 at the time of the termination. Appeal File, Exhibit 27. By letter dated August 13, 1990, appellant responded to the default termination letter. Appellant stated in pertinent part: The failure to complete within the time specified is attributable to the government's delay of the work relative to time spent and days lost in negotiation and completion of modification 1a and to time spent and days lost in negotiation of modification 1b. 3. We temporarily left the jobsite inactive because we were unable to reach an accord with the government over the modification of the switching equipment and we were unable to proceed further until the modification was settled. This inability on our part to continue the work was directly attributable to the government's failure to process the subject modification within a reasonable amount of time and was due to no fault on our part. The work involved in modification 1b was integral to the work of the basic contract. Nothing more could be done until it was established that the work of the modification would or would not take place. In initial negotiations with [the government's consultant] we had presented the government with our subcontract bids received by us from various Denver electricians and those bids had been rejected by [the government's consultant] for being too high in his opinion. In fact we were told that the bids were so high that there was no need to present them in writing. [The government's consultant] expressed the view that we should use the subcontractor who had done the electrical work on the main job since he was very reasonably priced and would therefore probably be willing to do the work of modification 1b for much less than other subs seem to be willing to do it for. After a mutually agreed upon delay while waiting for a bid from the electrical subcontractor who had done the first part of the work (who was out of town at the time), and then waiting for the return to town of [the government's representative] in preliminary negotiations, we were subsequently unable to get our subcontractor on site to discuss the work and we again turned to our subcontract bids which the government had previously rejected. This time we submitted our bid in writing rather than verbally to prevent any misunderstanding about what was actually transpiring between my company and the government. After a subsequent month of waiting for a government response we were abruptly notified by mail that there was no longer a need for the modification and that the contract was being considered for default. No phone calls had been made by the government to my company. No warning of any sort was issued. When the letter warning of possible default came in I was out of town on vacation and by the time I read the letter and started to formulate a response I had already received the notice of default. All of this took place between the third week of July and the first week of August. . . . Appeal File, Exhibit 29 at 2nd-3rd unnumbered pages. The Government did not receive appellant's letter of August 13, 1990, until October 10, 1991. Appeal File, Exhibit 32. Appellant claims that its August 13, 1990, letter, which it termed an appeal of the termination for default, was forwarded to GSA's Denver facility and was either lost in the mail or lost at GSA Denver.[foot #] 7 Appeal File, Exhibit 39. Appellant submitted that letter to this Board on October 23, 1991, when it filed appeal of the default termination with the Board. Id. On August 20, 1990, Conviron, the manufacturer of the growth chambers, issued a report to the Bureau of Reclamation on the damage done to the nine growth chambers which had been installed by AJCA. Respondent's Brief, Attachment 5. That letter advised that the damage appeared to be only cosmetic and not structural. Id. The letter further stated: On the installation, the piping appears to be close to complete. The welding looks quite acceptable. I would recommend changing the trap on the hot gas discharge lines to the condenser. Some of them are very large and could accommodate a lot of oil. . . . The roof mounted condensers are two multi-circuited Bohn units. They don't appear to be leveled properly and are not sitting on isolation or fastened down. The refrigeration lines from the units are not hooked up to the condensers yet but the quick connects are installed. One set of lines is not piped correctly. This has to be changed. The shader valves on the other quick connect located in the growth chambers don't have any valves cores or caps. Since they have to be taken out when the quick connects are welded to the piping I presume they have been lost and need to be replaced. . . . ----------- FOOTNOTE BEGINS --------- [foot #] 7 The letter was addressed to: General Services Administration, Building 41, Denver Federal Center, Denver, CO 80225-0546. Appeal File, Exhibit 29. ----------- FOOTNOTE ENDS ----------- The electrical is not as complete as the piping. The wire has been pulled from a central location to all the chambers but no connections have been made on other end. The wires have not been identified as to phases, neutral or ground. (all wires are black). Although there is a conduit through the roof, no wiring has been done on the condensers. Loop wire for communications between Conviron data logger and the chambers has not been run nor have provisions been made for it. Id. at 4. By letter dated August 28, 1990, Conviron submitted a total price of $1,861.85 to perform the repairs described in the August 20 letter. Respondent's Brief, Attachment 5. The Reprocurement Actions Respondent initiated a reprocurement action on September 27, 1990, by issuing request for proposals number GS-07P-90-JXM-0144. Appeal File, Exhibit 12. GSA estimated the remaining work to cost $16,504. Letter from Respondent to the Board (Nov. 30, 1993), Exhibit A. The contracting officer followed small procurement procedures for procurements estimated below $25,000. Respondent's Brief, Attachment 3; Railsback Deposition at 8. GSA solicited offers from four potential offerors, and three offers were received in the amounts of $30,515, $48,200, and $52,040. Letter from Respondent to the Board (Nov. 30, 1993), Exhibit C; Appeal File, Exhibit 13. Respondent's negotiations with the three bidders failed to lead to an offer under $25,000. Appeal File, Exhibits 17-19; Railsback Deposition at 9. Therefore, on October 22, 1990, the contracting officer canceled the small purchase procurement action. Appeal File, Exhibit 20. Respondent then revisited its estimate for the reprocurement work and increased that estimate to $30,000. Respondent's Brief, Attachment 4; Letter from Respondent to the Board (Nov. 30, 1993). Respondent began a second reprocurement action on November 15, 1990, with the issuance of request for proposal number GS-07P-91-JXC-0022. Appeal File, Exhibit 21. This solicitation requested a "Base Bid" and an "Alternative Additive Bid." As part of the Base Bid, the solicitation required the contractor to: Furnish all labor, tools, equipment, materials, machinery, transportation and supervision to perform all work in strict accordance with the specifications and drawings for Request for Proposal Number GS-07P-91-JXC-0022, Project Number A-CO-90-007, Growth Chambers, Building 56, Denver Federal Center, Lakewood, Colorado; but, NOT including any work under Alternate #1, which is listed separately below. CAUTION: Bidders please note that this Request for Proposal, GS-07P-91-JXC-0022, is a reprocurement of the work described in said specifications; and therefore, certain work required by the specification has been accomplished and only that work described herein is required. It is imperative that the job site be inspected to ascertain the scope of the work that remains undone under Request for Proposal, GS-07P-91- JXC-0022. A. Level presently in place Growth Chambers - The Contractor shall insure that all the Growth Chambers are sitting level in accordance with Specification Section 15743, Air Cooled Condensers and Growth Chambers, and Drawing 2-1, Drawing Title, Plans & Sections. B. Rework presently in place Refrigerant Lines - Repipe those refrigerant lines that do not run parallel with the building lines and complete the refrigerant system, to include installation of valves and proper trap sizes as required, plus test, charge and start up the system in accordance with Specification Section 15530, Refrigeration Piping, and Drawing 2-1, Drawing Title, Plans & Sections. Piping is to be anchored to prevent excessive vibration. C. Level all presently in place condensers and provide and anchor isolation pads in accordance with Specification Section 15743, Air Cooled Condensers and Growth Chambers, and Drawing 2-1, Drawing Title, Plans & Sections. D. Rework presently in place roof curb in accordance with Specifications Sections 07511, Built-Up Asphalt Roofing System, and 07600, Flashing and Sheet Metal, Drawing 2-1, Drawing Title, Plans & Sections, Section 2, to insure a water tight installation. E. Reposition existing Government Furnished Equipment as shown on Drawing 2-1 entitled Drawing Title, Plans & Sections. F. Electrical work, in accordance with Specifications Sections 16010, Basic Electrical Requirements, thru 16535, Emergency Lighting . . . . Id., Vol. 3, at 4-5. Under the Alternative Additive Bid the solicitation required essentially the same electrical work as the work described in part 1b of modification PS01. Id. at 6-8; Board Conference Memorandum (Nov. 10, 1993). On November 19, 1990, the contracting officer received approval to utilize procedures for other than full and open competition. Appeal File, Exhibit 22. The Government solicited seven local firms, and received three offers: $31,950, $51,368, and $404,800. Appeal File, Exhibits 22, 23. On December 14, 1990, GSA awarded the reprocurement contract to Treadway Construction (Treadway) for $31,950. Appeal File, Exhibit 24. Of the total $31,950 reprocurement price, $28,550 covered the remaining incomplete work from the original contract, and $3,400, the Alternative Additive Bid, consisted of the electrical work from modification 1b which had never been added to the original contract. Id.; Railsback Deposition at 8-9. Respondent issued the notice to proceed to Treadway on January 2, 1991, which required all the work, both the Base Bid and the Alternative Additive Bid, to be completed in forty-five days, by February 16, 1991. Appeal File, Exhibit 25. Treadway substantially completed the contract work by February 15, 1991, and completed all work by March 30, 1991. Appeal File, Exhibit 26. Respondent made final payment to Treadway on April 18, 1991. Appeal File, Exhibits 26, 41. On October 1, 1991, the contracting officer issued a demand letter to AJCA for $20,041. Appeal File, Exhibit 27. GSA calculated the amount sought from appellant as follows: Reprocurement price $ 31,950 Alternate not on original - 3,400 contract $ 28,550 Funds transferred from - 8,509 original contract TOTAL DUE TO GSA $ 20,041 Id. Discussion It is well established that a termination for default is a drastic sanction which can only be imposed for good cause and on the basis of solid evidence. J. D. Hedin Construction Co. v. United States, 408 F.2d 424, 431 (Ct. Cl. 1969); The Flooring Co., GSBCA 8297, 89-3 BCA 22,167, at 111,547 (citing Ed Grimes, GSBCA 7652(7345)-REIN, et al., 89-1 BCA 21,528). The Government has the burden of proving the propriety of the default termination by a preponderance of the evidence. Lisbon Contractors, Inc. v. United States, 828 F.2d 759, 763-65 (Fed. Cir. 1987); The Flooring Co., 89-3 BCA at 111,547 (citing Air-O-Plastic Corp., GSBCA 4802, et al., 81-2 BCA 15,338). Respondent has terminated AJCA's contract for default for essentially two reasons: AJCA's abandonment of the jobsite when there was no Government-caused delay and its failure to respond to the show cause notice. Respondent's Brief at 7-12. Respondent has not met its burden of proving that the termination for default was justified. To prove abandonment the Government must demonstrate that appellant's "words or conduct . . . manifest[ed] a positive, unequivocal and unconditional intent not to perform the contract in any event, or at any time." James W. Sprayberry Construction, IBCA No. 2130, 87-1 BCA 19,645, at 99,456. Here, both the contractor's words and actions evinced a clear intention to continue performance. On June 25, 1990, appellant's president advised the Government's management and inspection contractor that he was waiting for "his" electrician to return from another job before submitting a price on modification 1b because the prices he had obtained from other electrical subcontractors were high. Appeal File, Exhibit 40. That same day appellant mailed its offer on modification 1b to GSA. Thus, when appellant left the jobsite on June 26, its first offer for the electrical work under modification 1b was pending. Subsequently, on July 2, appellant made a second, lower offer for this same work. On June 28, appellant's president spoke with the contract specialist regarding modification 1b. The Government's "contact record" of this conversation reflects appellant's intention to return to the job. According to that record appellant's president said: "will fly [the superintendent] back up to complete job after negotiations and CO [change order] issued." Appeal File, Exhibit 9 at 6th unnumbered page. On the date the show cause notice was issued, appellant's offer on modification 1b was pending and the parties were in essence negotiating. Delfour, Inc., VABCA 2049, et al., 89-1 BCA 21,394, at 107,858 (when the parties are engaged in a dialogue and Government is aware that work ceased pending resolution of the dialogue Government has an obligation to affirmatively cut off that dialogue and put contractor on notice that it must proceed or face the consequences of default); Marine and Industrial Insulators, Inc., VABCA 2499, 88-3 BCA 21,120, at 106,633. During this period of so-called abandonment, the Government could have informed appellant that it was no longer considering appellant's offer on modification 1b and unilaterally directed appellant to proceed, but it did not. Moreover, this was a small job and not the type of project which would have warranted a contractor to remain on site while awaiting directions from the Government. Thus, considering the evidence as a whole, appellant's departure from the jobsite while its offer on modification 1b was pending does not constitute abandonment or justify a termination for default. Nor can the default termination be justified on the ground that appellant failed to proceed with the remaining work in a timely fashion. Appellant has demonstrated that proceeding with the remaining contractual work before the Government decided on modification 1b would have been commercially impracticable, if not altogether senseless. Modification 1b changed the electrical work originally required; it required starters and relays to interlock the nine growth chambers to the two condenser units as well as the hook-up of controls and the fastening of wires on terminals, inter alia. Appeal File, Exhibit 2. This change affected the useability of the growth chambers. Appeal File, Exhibit 40. Appellant contended, and the Government did not refute, that the work in modification 1b was in the direct critical path of the work remaining to be done. See Respondent's Response to Appellant's Initial Record Submission at 2. Had the remaining work been completed and the work under modification 1b later been ordered, at least some of that original work would have been rendered useless.[foot #] 8 Appellant's Answer to Interrogatory No. 4; Letter from Respondent to the Board (Nov. 30, 1993); Appellant's Initial Record Submission. Finally, under the unusual circumstances of this case, we conclude that appellant's failure to respond to the show cause notice did not warrant termination. The show cause notice was issued on July 13, at a time when appellant reasonably believed the Government was considering its offer on modification 1b -- which had been submitted on July 2. The Government never did negotiate with appellant on that offer. Instead, in the show cause notice respondent advised appellant for the first time it no longer required the work under modification 1b. Then, when it did not receive a response to the show cause notice, respondent immediately terminated appellant's contract. In fact, the work under modification 1b was still needed and was, in fact, reprocured along with some of the remaining work. Under these circumstances, appellant's failure to respond to the show cause notice is an insufficient ground for upholding the ----------- FOOTNOTE BEGINS --------- [foot #] 8 Ultimately the work required under modification 1b was reprocured separately under "Alternate 1" of the reprocurement solicitation. The Government's management and inspection contractor's statement supports appellant's position that the remaining work was in the critical path of the work under modification 1b and that part of the remaining work would not have been needed if modification 1b had been effected. In its November 30, 1993, letter to the Board, respondent states: The electrical work required by Alternate 1 modified the original contract by changing some of the required electrical work. While the addition of the Alternate 1 work made that work necessary for the growth chambers to be operable, the cost and time associated with performing the Alternate 1 work could be priced separately. In addition, the major effect of the work __________________________________________ required by Alternate 1 would have been to decrease, ----------- FOOTNOTE BEGINS --------- not increase, the cost of performing the original ----------- FOOTNOTE BEGINS --------- remaining contract work as part of the remaining work ----------- FOOTNOTE BEGINS --------- was no longer required. ______________________ Letter from Respondent to the Board (Nov. 30, 1993) (emphasis added). ----------- FOOTNOTE ENDS ----------- termination for default. As our appellate authority has recognized: "the default article of the contract does not require the Government to terminate on a finding of default, but merely gives the procuring agency the discretion to do so, and that discretion must be reasonably exercised." Darwin Construction Co. v. United States, 811 F.2d 593, 596 (Fed. Cir. 1987) (citing Schlesinger v. United States, 390 F.2d 702, 709 (Ct. Cl. 1968)). Here, the Government did not conclude its negotiations on the modification covering work in the critical path of the remaining contract work until it issued a show cause notice regarding the termination for default. Then, the Government claimed that it no longer needed the work in the modification when in fact it did. Finally, the Government improperly concluded that appellant abandoned the jobsite and terminated appellant's contract without giving appellant a reasonable opportunity to return to the site after advising that the modification would not be effected. The evidence, fragmented as it is, does not support a conclusion that the agency reasonably exercised its discretion in terminating the contract for default. Generally, an improper default termination converts automatically to a termination for convenience, entitling the terminated party to recover its termination-for-convenience costs. Westinghouse Electric Corp. v. Garrett Corp., 437 F.Supp. 1301, 1339 (D. Md. 1977), aff'd, 601 F.2d 155 (4th Cir. 1979). Here, awarding such costs would not be appropriate since appellant was not without fault in bringing this situation about. Specifically, appellant did not respond as promptly as it should have to the requests regarding modification 1b or the Government's letters and should have communicated with the Government when it left the jobsite. Appellant was paid for the work it performed. Under the circumstances, it would be inequitable to shift any termination-for-convenience costs to respondent. Dynelectron Corp. (Pacific Div.) v. United States, 518 F.2d 594, 603 (Ct. Cl. 1975); Insul-Glass, Inc., GSBCA 8223, 89-1 BCA 21,361, at 107,675; Big Star Testing Co., GSBCA 5793, 81-2 BCA 15,335, at 75,940-41, aff'd on reconsideration, 82-1 BCA 15,635, at 77,235-36. Decision The appeals are GRANTED. The termination for default is converted to a no-cost termination for convenience. Respondent is not entitled to excess reprocurement costs. ____________________________ MARY ELLEN COSTER WILLIAMS Board Judge We concur: __________________________ _________________________ JAMES W. HENDLEY ALLAN H. GOODMAN Board Judge Board Judge