_____________________________ DENIED: June 17, 1993 _____________________________ GSBCA 11543 FOX CONSTRUCTION, INC., Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. Curtis D. Elton of Larsen & Stewart, Salt Lake City, UT, counsel for Appellant. John M. Hewins, Office of Regional Counsel, General Services Administration, Denver, CO, counsel for Respondent. Before Board Judges DEVINE, HYATT, and WILLIAMS. HYATT, Board Judge. Fox Construction, Inc. has appealed a contracting officer's decision denying a claim, asserted on behalf of its mechanical subcontractor, for the cost of replacing freeze-damaged air conditioning condenser units mounted on the roof of the Internal Revenue Service (IRS) Center in Ogden, Utah. For the reasons stated herein, we deny the appeal. Findings of Fact 1. On November 17, 1989, the General Services Administration (GSA) awarded to Fox Construction, Inc. contract number GS-07P-89-JXC-0057 in the amount of $655,826. The contract was for the renovation of warehouse space in an existing building to accommodate the new "Check Handling Enhancement and Expert System" (CHEX) computer room in the IRS Building located in Ogden, Utah. The project required installation of access flooring and temperature and humidity controls, as well as electrical modifications to provide computer-grade power. It also included some paralleling of emergency generators. Appeal File, Exhibit 2; Transcript at 31, 181-82. 2. Under the contract, performance was to be completed within 345 days of issuance of the notice to proceed. The notice to proceed was issued on November 28, 1989, establishing an initial project completion date of November 8, 1990. Appeal File, Exhibits 2, 4. 3. During the course of contract performance, modifications PS01 through PS10 were issued, resulting in a contract price increase of $124,203 that raised the total contract price to $780,029. Appeal File, Exhibits 5-14; Transcript at 181. Modifications PS06, PS08, PS09, and PS10 resulted in extensions of time for performance for 60, 45, 75, and 55 calendar days, respectively, establishing a final completion date of February 21, 1991. Appeal File, Exhibits 10, 12-14. 4. In performing this contract, Fox's subcontractor, R&D Plumbing & Heating, installed seven rooftop air conditioning condenser units, or dry coolers, with heat exchanger coils cooled by fans. The system is designed so that circulating fluid in the coils, once cooled, flows back down into the building from the rooftop units and cools the units installed inside the building. Transcript at 32, 143. 5. Installation of the roof-mounted air conditioning condenser units and the piping that connected to the indoor air conditioning units was complete in August 1990. Appeal File, Exhibit 20; Transcript at 50-51. The installation of the roof- mounted dry coolers and piping was timed to avoid delaying the work of follow-on subcontractors responsible for insulating and covering up the piping installed in walls and ceilings. Transcript at 143. R&D was asked to complete work expeditiously so that other contractors could proceed with their work and permit the IRS to occupy the room. Transcript at 75, 256. 6. The project specifications required pressure testing of the system after installation. Appeal File, Exhibit 1, Volume II. This testing, which reveals whether the pipes leak, ideally should be performed prior to insulation of the pipes and before construction of the walls and ceilings that cover the pipes. Transcript at 243. Consequently, pressure testing of the units was performed by R&D upon completion of installation, in August of 1990. Transcript at 142. 7. Section 15060 of the specifications addresses the installation, inspection, and testing of pipes and pipe fittings in the project. Subpart 3.03 governs cleaning, flushing and inspecting of piping after installation: A. General: Clean exterior surfaces of installed piping systems of superfluous materials, and prepare for application of specified coatings (if any). 1. Inspect pressure piping in accordance with procedures of ASME [American Society of Mechanical Engineers] B31. 2. Flush piping systems with clean water and drain completely. 3. Refill and inspect each run for completion, supports and accessory items. Make any repairs required until system is tight. Repair piping systems' sections which fail required piping test, by disassembly and reinstallation, using use [sic] materials to the extent required to overcome leakage. Do not use chemicals, stop-leak compounds, mastics, or other temporary repair methods. 4. Fully drain the system and refill with a solution of sodium hydroxide . . . , disodium phosphate . . . . 5. Circulate the solution with the system pumps for a minimum of four (4) hours. 6. Fully drain and flush the system twice with clear water, circulating the water with system pumps for 30 minutes minimum each time. 7. Proceed to fill the system. a) Provide 43% Propylene glycol/water solution. Propylene glycol solution shall be a specially inhibited fluid providing efficient heat transfer over a wide temperature range. Propylene glycol solution shall be of type specially manufactured for HVAC [heating, ventilation, and air conditioning] systems and as approved by the contracting officer. Automotive type antifreeze is not acceptable. Appeal File, Exhibit 1, Volume II. 8. The relevant specification providing for pressure testing, ASME B31.937, was incorporated into the contract by reference and stated in pertinent part: 937.1 GENERAL Prior to initial operation each piping system shall be tested for leakage. Hydrostatic testing in accordance with 937.3 shall be employed if possible. Pneumatic testing may be used in lieu of hydrostatic testing only in accordance with the limitations in 937.4. Initial service testing may be used within the limitations of 937.5. . . . . 937.3 HYDROSTATIC TESTING 937.3.1 Test Medium. Water at ambient temperature shall be used as the test medium except where there is risk of damage due to freezing. Another liquid may be used if it is safe for workmen and compatible with the piping. Appellant's Exhibit 29.[foot #] 1 9. As of the date that R&D completed installation of the dry cooler units, no electrical power was available at the site. Transcript at 33. 10. R&D, not concerned in August that there was any immediate danger of freezing, performed hydrostatic testing of the dry cooler units. The units were filled with water and tested with a hand-operated pump. Immediately thereafter, R&D undertook to drain the condensers and also used compressed air to further purge water from the system and dry out the coils. R&D considered that these measures constituted adequate precautions to dry out the system. In doing this, it verified with a surveyor's transit that the condenser coils were installed level. Transcript at 164, 170-71. 11. Another plumbing contractor, called by appellant, testified on the basis of his expertise in installing and testing these units that the coils in the system are not easy to drain. The piping has numerous elbows with the potential to create vacuums. Normally, a pump would be needed to ensure complete drainage. This witness also indicated that when some doubt exists as to whether water or air pressure testing is preferable, the contractor should seek guidance from the owner. Transcript at 87-90. 12. In conjunction with pressure testing, the contractor was supposed to flush the system out with water and a caustic solution. Appeal File, Exhibit 1; Transcript at 95. This flushing process was required to be performed with the system pumps. When the system is operational, these pumps circulate ----------- FOOTNOTE BEGINS --------- [foot #] 1 For safety reasons, part 937.4 permits pneumatic testing only under certain limited conditions. These include the situation where traces of water in the system "would be detrimental to the intended use of the piping." Appellant's Exhibit 29, ASME B31 937.4.1. An example of such a situation would be where steel piping is used, and pressure testing with water could result in rusting of the pipes. Transcript at 89-90. ----------- FOOTNOTE ENDS ----------- coolant from the roof units to the indoor air conditioning units and back to the roof again. Following the cleaning and flushing process, R&D was to fill the system with a solution of water and glycol, to protect the system in cold weather and to facilitate heat removal from rooftop coils when cooled by a fan. Finding 7; Appeal File, Exhibit 1, Volume II; See Transcript at 148. 13. R&D did not perform the flushing process, or fill the units with glycol immediately upon completion of hydrostatic testing, because the system pumps, which were needed to circulate the glycol, could not be operated at that time. One reason given by R&D for its failure to circulate glycol immediately was that the specifications for the project failed to include the control wiring necessary to operate the air conditioning system and pumps. The mechanical section of the specifications stated that this was the work of the electrical contractor; the electrical specifications stated that controls were the responsibility of the mechanical contractor. Appeal File, Exhibit 1, Volume II; Transcript at 41. Without installation of the control wiring, it was not feasible to operate the system pumps and to open valves to permit fluid to circulate. Transcript at 145-46. 14. In late December 1990, the lack of a specification providing for control wiring was finally discovered. Change order PS08 was issued in mid-January. Appeal File, Exhibit 12; Transcript at 46. Control wiring was not complete until the first week of February 1991. Transcript at 148. 15. The other reason given by R&D for not circulating glycol in the system in August 1990 was the lack of electricity at the site. Change order PS06 addresses Government delay in reviewing shop drawing submittals for the transfer switch and paralleling switch gear. The change order extended the contract performance by sixty calendar days, from November 8, 1990, through January 7, 1991. Appeal File, Exhibit 10. 16. It is necessary for the paralleling switch gear to be installed to have available the electrical power needed to circulate glycol in the condenser units. Transcript at 60, 121- 22, 145-46. The switch gear drawings were approved by the Government on July 5, 1990, and released that day to appellant for fabrication. Appellant's Exhibits 17-19; Transcript at 130- 31, 201. 17. Paralleling switch gear must be specially fabricated, a process that may require up to twenty weeks for completion. The entire process, including manufacture of the equipment and its installation, takes approximately six months. Appellant's Exhibit 11; Affidavit of Ronald Keller (Dec. 11, 1991) 10. 18. In February 1991, when the control wiring necessary to operate the system pumps was installed, and electricity was available, R&D returned to the project to flush the system and circulate glycol. At that time, which was prior to acceptance, it discovered that residual water had remained in the condenser coils of the rooftop units and had frozen, expanded, and split the coils. Coil repair was not feasible. Transcript at 237. 19. GSA required Fox, which required R&D, to replace the damaged condenser units. The cost to replace the units, including materials, labor, and equipment, plus profit and overhead, totalled $33,808.42. Transcript at 150. 20. The contract required GSA to make temporary power available to contractors. Appeal File, Exhibit 1; Transcript at 191, 198. R&D did not pursue this alternative approach to powering the system pumps, however, because of its belief that the use of temporary power to operate the system controls would create an unacceptable risk of damage to the equipment. R&D discussed this alternative with an electrician at the time it pressure tested the system and was told that the pumps could be shorted out if temporary power was used to jump start them. Transcript at 169-70.[foot #] 2 The Government's architect, who consulted with a GSA engineer and the company that sold the units to R&D, testified that he knew of no reason why the pumps could not have been temporarily powered to circulate glycol through the condenser units. Transcript at 197, 212. 21. The contract included the standard GSA clause with respect to the contractor's use of subcontractors: (a) Nothing contained in the contract shall be construed as creating any contractual relationship between any subcontractor and the Government. The divisions or sections of the specifications are not intended to control the Contractor in dividing the work among subcontractors, or to limit the work performed by any trade. (b) The Contractor shall be responsible to the Government for acts and omissions of his own employees and of subcontractors and their employees. He shall also be responsible for the coordination of the work of the trades, subcontractors and suppliers. Appeal File, Exhibit 1, Volume I. 22. In addition, the contract contained Federal Acquisition Regulation (FAR) 52.236-6, providing for superintendence of the work by the contractor: ----------- FOOTNOTE BEGINS --------- [foot #] 2 Fox asserted, as well, that GSA's temporary power supply was for 120, 220, and 480 volts. R&D would have required 460 volt, three-phase, temporary power to operate the system pumps. Ordinarily 460, three-phase, temporary power is not available. Neither Fox nor R&D inquired, however, whether such voltage could in fact be arranged. Transcript at 258. ----------- FOOTNOTE ENDS ----------- At all times during performance of this contract and until the work is completed and accepted, the Contractor shall directly superintend the work or assign and have on the worksite a competent superintendent who is satisfactory to the Contracting Officer and has authority to act for the Contractor. Appeal File, Exhibit 1, Volume I. 23. The contract also contained the standard clause, FAR 52.236-7, governing permits and responsibilities: The Contractor shall, without additional expense to the Government, be responsible for obtaining any necessary licenses and permits, and for complying with any Federal, State, and municipal laws, codes, and regulations applicable to performance of the work. The Contractor shall also be responsible for all damages to persons or property that occur as a result of the Contractor's fault or negligence, and shall take proper safety and health precautions to protect the work, the workers, the public and property of others. The contractor shall also be responsible for all materials delivered and work performed until completion and acceptance of the entire work, except for any completed unit of work which may have been accepted under the contract. Appeal File, Exhibit 1, Volume I (emphasis added). 24. Another term of the contract, FAR clause 52.232-5, provides that: (f) All material and work covered by progress payments made shall, at the time of payment, become the sole property of the Government, but this shall not be construed as (1) Relieving the contractor from the sole responsibility for all material and work upon which payments have been made or the restoration of any damaged work; or (2) Waiving the right of the Government to require the fulfillment of all of the terms of the contract. Appeal File, Exhibit 1, Volume I. 25. There is no evidence in the record that the condenser units were tampered with or that Government employees occupying the area added water to the units after testing. The parties agree that water must have remained in the pipes as a result of the hydrostatic testing process performed in August 1990. Discussion This appeal requires us to decide which party should bear the cost of the freeze damage that was sustained by the condenser units, or, in other words, to determine how this risk was contractually allocated under the circumstances. Fox contends that it is entitled to recover the cost of replacing the freeze- damaged dry cooler units because the damage is attributable to the Government's defective design specifications and to the Government's slowness to approve submittals involving electrical work. R&D, according to Fox, took every reasonable precaution to protect the equipment, given the timing of the testing process, and thus should not be forced to bear the additional costs incurred by reason of the freezing of the units prior to circulation of glycol. GSA disagrees, maintaining that Fox, as the general contractor, was responsible for ensuring that the units were not damaged until acceptance by the Government. Acceptance had not occurred as of the time the freeze damage was sustained. In GSA's view, Fox was fully aware of the delays in obtaining switch gear approval and knew in August 1990 that electricity would not be available in time to circulate glycol prior to the onset of winter. Accordingly, Fox should have requested that the units be pressure tested with air, rather than water, or, alternatively, should have arranged somehow for circulation of a glycol mixture through the roof-mounted units. As a general proposition, under the Permits and Responsibilities Clause, the contractor is liable for contract work until it is completed and accepted. If work that is partially completed is damaged prior to acceptance by the Government, it is the contractor's obligation to restore it without additional compensation. This responsibility is contractually assigned under the unequivocal language of the Permits and Responsibilities clause, which provides that "[t]he contractor shall also be responsible for all materials delivered and work performed until completion and acceptance of the entire work, except for any completed unit of work which may have been accepted under the contract." Finding 23. It is not necessary to find fault or negligence on the part of the contractor to apply this clause. See John McShain, Inc. v. United States, 375 F.2d 829 (Ct. Cl. 1967); Joseph Becks & Associates, Inc., ASBCA 31126, 88-1 BCA 20,428 (1987); Adams Brothers, Inc., AGBCA 82-211-1, 84-1 BCA 17,016; Fidelity Construction Co., ASBCA 24882, 81-1 BCA 15,022. The same responsibility is imposed by the terms of the payment clause of the contract. Finding 24; Fidelity. At the same time, the contractor is not the "absolute insurer" of the work pending final acceptance. See Welch Construction, Inc., GSBCA 6391, 83-2 BCA 16,742; Gilles and Cotting, Inc., GSBCA 5754, 83-1 BCA 16,480 (citing Halvorson v. United States, 126 F. Supp. 898 (E.D. Wash. 1964). If it can be demonstrated that the cause of the damage to unaccepted work was or was likely have been the fault of the Government, the Permits and Responsibility Clause does not operate to impose the risk of loss on the contractor. Indeed, the Board in Gilles and Cotting and in Welch actually suggested that risk of loss may not borne by the contractor if it can simply be shown that the damage was beyond its control.[foot #] 3 One of the more common exceptions permitting contractors to shift the risk of loss to the Government arises when damage is attributable to defective Government design specifications.[foot #] 4 Joseph Becks & Associates, Inc., 88-1 BCA at 103,326; Fidelity Construction Co., 81-1 BCA at 74,338. To prevail under this exception, however, the contractor must meet its heavy burden to prove that the specifications were defective, that it complied fully with applicable specifications, and that the damage was directly attributable to the design defect. Santa Fe Engineers, Inc., ASBCA 27933, et al., 85-2 BCA 18,001. ----------- FOOTNOTE BEGINS --------- [foot #] 3 Although a superficial reading of Gilles and __________ Cotting and Welch might suggest that this Board applies a more _______ _____ lenient standard than other boards, a careful review of the facts supporting these two decisions reveals that this is not the case. In both of these decisions, the risk of loss was in fact shifted to the Government as a consequence of facts tending to show Government responsibility for the damage. In Gilles and Cotting, __________________ a chiller unit that had been installed by the contractor froze during a period when the contractor was off the job site as a result of Government-caused delay. During this period, the Board found, someone, most likely a Government employee, had opened the chiller's valves, allowing water to enter the lines during the winter months which led to the freeze damage. Since the contractor could not have prevented the opening of the valves, the Board would not hold it responsible for the damage. Similarly, in Welch, the contractor had, in performing the _____ contract work, poured concrete on underground cables not shown on the contract documents. The contractor, in attempting to chip the concrete off the cables, damaged them. The Board held that this risk of damage could not be allocated to the contractor. Again, the damage incurred in Welch could ultimately be deemed _____ attributable to the Government's failure to show the placement of the underground cables in the contract documents. [foot #] 4 The Government is generally deemed to have provided an implied warranty of the adequacy of its design specifications to produce the result desired and must compensate the contractor for extra work required or for additional costs incurred in the event the specifications prove defective. See ___ United States v. Spearin, 248 U.S. 132 (1918); Ordnance Research ________________________ _________________ Inc. v. United States, 609 F.2d 462 (Ct. Cl. 1979); Jordan & ______________________ _________ Nobles Construction Co., GSBCA 8349, et al., 91-1 BCA 23,659. _______________________ ----------- FOOTNOTE ENDS ----------- Appellant thus argues that it should not be required to shoulder the additional expense of replacing the condenser units because the freeze damage is directly attributable to the Government's breach of the implied warranty of the specifications and to the delays in approval of the switch gear which resulted in a lack of electrical power at the site until February 1991. Although appellant is technically correct, the deficiencies it points to have not been shown to be the actual cause of the damage suffered. Respondent correctly points out that, regardless of the delays, appellant was well aware in August 1990, when the roof-mounted units were installed, that the switch gear necessary to provide electricity at the site would not be operational prior to December 1990. Since appellant takes the position that use of temporary power to circulate glycol would not have been feasible, finding 20 n.2, appellant, in August, was in possession of all the information needed to realize at that time that circulation of a glycol solution would not be possible prior to mid-winter, well after the likely date of the first freeze of the winter season. As such, appellant should either have anticipated the need to perform pressure testing with a liquid other than water or with air, findings 7-8, or should could have looked into alternative methods of circulating the requisite glycol mixture. Although we agree that leakage testing needed to be performed at the time of installation to permit the remaining work to proceed, appellant's reading of the applicable test specifications is unreasonably shortsighted. The provisions for testing cannot fairly be construed to provide that water testing should always be used whenever there is no immediate danger of freezing. All the information available to Fox at this time indicated that electricity to run the pumps would not readily be available in advance of the first freeze. As the general contractor, responsible for coordinating all of the work,[foot #] 5 Fox could and should have considered the likelihood that these roof units would thus not be fully operational for some time. The testing specifications, read as a whole, and in light of existing information about the progress of construction, would consequently support and permit an alternative approach, such as use of a liquid other than water or pneumatic testing. The contractor should also have recognized that pressure testing for leaks was not, under the specifications, provided for separately from the remainder of the process, which included flushing and draining the system and adding the propylene glycol mixture. It was the decision of appellant and its subcontractor to separate out these procedures, and was also their ----------- FOOTNOTE BEGINS --------- [foot #] 5 See M.A. Mortenson Co., ASBCA 28936, 84-2 BCA ___ __________________ 17,337, at 86,395-96. ----------- FOOTNOTE ENDS ----------- responsibility to consider the probable consequences.[foot #] 6 Appellant's failure to ensure that a glycol mixture was circulated in the system prior to the first freeze, was the direct cause of the damage, not the design deficiencies and delays pointed out by appellant.[foot #] 7 Had appellant properly discharged its responsibility to consider the likely timetable for completing the job in light of changes and delays that had taken place prior to August, steps could have been taken to avoid the freeze damage that ultimately occurred. Cf. Jordan & Nobles Construction Co., GSBCA 8349, et al., 91-1 BCA 23,659, at 118,513 (contractor is expected to perform changed work in a manner that will minimize expense to Government and itself). Appellant cannot shift to the Government the loss that occurred by reason of its lack of foresight and its mistaken belief that the water in the condenser units had been fully drained. Finally, as appellant itself admits, the principal case on which it relies, Gilles and Cotting, which also involved the issue of which party should bear the cost of freeze damage sustained to chiller units, is more compelling on its facts because the damage in that case was almost certainly attributable to actions of a Government employee in adding water to the system. This distinction is decisive here. Unlike the damage that occurred in Gilles and Cotting, this loss could readily have been avoided by more vigilant coordination of the overall work, a responsibility that, under the contract, is squarely placed on the contractor. The freeze damage sustained to the condenser units was neither the fault of the Government nor beyond the control of the contractor. ----------- FOOTNOTE BEGINS --------- [foot #] 6 Indeed, appellant's failure to demonstrate full compliance with all applicable specifications provides yet another reason why its appeal must be denied. See Santa Fe ___ ________ Engineers, Inc., ASBCA 27933, et al., 85-2 BCA 18,001, at ________________ 90,247. [foot #] 7 While the Government assumed responsibility for the omission of the specification for control wiring in issuing change order PS08, at most this is a concession that the omission was not so glaring as to have charged contractor with the responsibility to discover it prior to submitting its bid. Although neither party has pressed this issue, the clause requiring appellant to coordinate the work would seem to encompass a responsibility to ferret out omissions of this nature in a reasonably timely manner during the course of construction. Appellant, once it started construction, was in as good a position as the Government to discover and remedy the omission of control wiring in the contract specifications. It would seem that appellant should at least have noted the omission at the time its subcontractor proceeded to test for pipe leakage, particularly since the specifications called for immediate circulation of the glycol mixture. ----------- FOOTNOTE ENDS ----------- Decision The appeal is DENIED. ____________________________ CATHERINE B. HYATT Board Judge We concur: ______________________________ ____________________________ DONALD W. DEVINE MARY ELLEN COSTER WILLIAMS Board Judge Board Judge