GRANTED IN PART: October 12, 1993 GSBCA 12306 KOLL CONSTRUCTION COMPANY, Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. Richard Lee Brown of Bishop, Payne, Williams & Werley, L.L.P., Fort Worth, TX, counsel for Appellant. Thomas Y. Hawkins, Office of Regional Counsel, General Services Administration, San Francisco, CA, counsel for Respondent. Before Board Judges DANIELS (Chairman), PARKER, and NEILL. DANIELS, Board Judge. The parties to a construction contract have agreed to modify the details of part of the work, but dispute the amount by which contract payments should be adjusted as a consequence of the change. They have submitted the case to us for a decision on the basis of a written record. Rule 11. In most regards, we hold for the Government. We agree with the contracting officer's assessment of the elements of the adjustment and with his determination of prices for two of the three factors. As to the price of the third item, we find that the appropriate amount is between the sums proposed by the two parties. Findings of Fact 1. This case involves a contract between the General Services Administration (GSA) and Koll Construction Company (Koll). The contract provides that in exchange for payment of $40,200,000 (including options), Koll was to construct tenant improvements in the Edward F. Roybal Federal Building in Los Angeles, California. Appeal File, Exhibit 10. The instrument was awarded on February 28, 1991, with work to begin on April 2 of that year. Id., Exhibits 10, 11. 2. The contract calls for the installation of various types of doors in the building; requirements are prescribed for each of them through specifications and drawings. Appeal File, Exhibits 1-9. The instrument contains a standard changes clause, FAR 52.243-4 (AUG 1987), which says that when the contracting officer alters the specifications or drawings, with an impact on the contractor's cost of performance, he shall make an equitable adjustment to the contract price. Id., Exhibit 1 at page 27 of GSA form 3506. Determination of the amounts of these adjustments is governed by another standard contract clause, GSAR 552.243-71 (APR 1984), "Equitable Adjustments." Id. at pages 27-28 of GSA form 3506. Koll made claims under these clauses regarding five different changes that were made to the requirements during the course of construction. Id., Exhibit 34. The contracting officer decided that as a result of all five changes, GSA is entitled to a credit of $53,952. Id., Exhibit 35. 3. The contracting officer calculated this sum as follows. First, he determined the appropriate amount for each of the five changes (which the parties refer to as "conditions"). The total of these amounts is a credit to GSA of $32,337. To the total, he added markups in this fashion: 1. Conditions 1-5 ($32,337) 2. Overhead costs of Koll's door subcontractor, WBH International, Inc. (WBH), 25 percent of line 1 ( 8,084) 3. WBH's profit, 10 percent of line 1 ( 4,042)[foot #] 1 4. Subtotal, lines 1-3 ( 44,463) 5. Tax, 8.25 percent of line 4 ( 3,668) 6. Subtotal, lines 4 & 5 ( 48,131) 7. Bond, 0.675 percent of line 6 ( 325) 8. Total subcontractor's cost, lines 6 & 7 ( 48,456) 9. Koll's commission, 10 percent of line 8 ( 4,846) 10. Subtotal, lines 8 & 9 ( 53,302) 11. Bond, 0.55 percent of line 10 ( 293) 12. Liability insurance, 0.55 percent of line 10 ( 293) 13. Gross receipts tax, 0.118 percent of line 10 ( 64) 14. Total, lines 10-13 ($53,952) ----------- FOOTNOTE BEGINS --------- [foot #] 1 This amount is actually 12.5 percent of the base amount for conditions 1-5 (line 1). Ten percent of the base amount for conditions one through five is $3,234. Had the contracting officer used the latter number, the total credit calculated would have been $52,970. ----------- FOOTNOTE ENDS ----------- Appeal File, Exhibit 35 at 4. GSA actually took a credit in the calculated amount via a unilateral modification to the contract. Id., Exhibit 36. 4. Koll does not contest the contracting officer's determination regarding conditions two through five. Appeal File, Exhibit 38. For those conditions, the base amount (line 1 in Finding 3) is an increase of $7,098 in contract payments to Koll. Applying the markups in the fashion employed by the contracting officer, the total amount for these conditions is $11,627. 5. The parties' dispute concerns condition one. For this change, the contracting officer determined that the base amount should be a credit of $39,435 to the Government. Appeal File, Exhibit 35 at 2. With markups, this results in a credit of $64,597. Koll believes that the base amount should be an increase in contract payments of $1,195. Koll uses a method slightly different from the contracting officer's to determine the total amount for this condition. It calculates profit on the basis of the base cost plus overhead (using the Finding 3 scheme, line 3 is ten percent of the sum of line 1 plus line 2), and it does not include any markups for the bond, liability insurance, and gross receipts tax shown on lines 11 through 13, thus making the line 10 amount the total due. Complaint at 2. Koll consequently claims that it is owed $1,970 for the changes denoted as condition one. 6. Condition one pertains to a change which the parties agree involves doors with which are associated 2,390 linear feet of seals. Appellant's Brief at 2; Respondent's Brief at 4; see Appeal File, Exhibits 35 at 2, 37 at 3d unnumbered page. The contract required that these doors have certain properties. Most of the properties were delineated in the document's specifications: The doors had to be made of wood, have solid cores, and meet a stated standard for retarding transmission of sound. Appellant's Brief at 1; Respondent's Brief at 3. The doors also had to have magnetic seals. Id.; Appeal File, Exhibit 1 at 08710-9. In addition, the doors had to be "essentially the standard catalogued products of manufacturers regularly engaged in production of such products and . . . be the manufacturer's latest standard design that complies with the specification requirements." Appeal File, Exhibit 1 at 01632-5. The doors had to carry a manufacturer's warranty as well. Id. at 08210-3. One additional property that the contract required of the doors was shown on the contract drawings: metal strips had to be inlaid in the doors. Appellant's Brief at 2; Appellant's Reply Brief at 1; Respondent's Brief at 3.[foot #] 2 The Government's ----------- FOOTNOTE BEGINS --------- [foot #] 2 Koll believes that the fact that some required properties of the doors were stated in the specifications and another was shown in the drawings is (continued...) ----------- FOOTNOTE ENDS ----------- brief asserts -- in a statement not challenged by the contractor -- that the strips were to be installed so that they could "marry with the specified magnetic seals." Respondent's Brief at 3; see also Appeal File, Exhibits 23 at 2 (Nov. 21, 1991, letter from WBH to Koll: "magnetic seals would not hold against a wood surface"), 28. 7. GSA stated in the contract that Glenmar was a manufacturer "offering [these] doors which may be incorporated in the Work." Appeal File, Exhibit 1 at 08210-4. On May 21, 1991 -- nearly two months after the starting date for contract performance -- Koll told GSA that doors meeting all specifications were not being made by Glenmar. According to Koll, sound-retardant wood doors were available from Buell Door Company, in the form of modified Weyerhaeuser Corporation doors; however, sound-retardant wood doors were not "available with the type of seals shown on the drawings mortised into the face of the door. STC [sound-retardant] DOORS MUST BE FURNISHED WITH THE EXACT TYPE OF SEAL WITH WHICH THEY WERE TESTED; OR THE STC RATING BECOMES INVALID." Id., Exhibit 12.[foot #] 3 8. A week later, GSA authorized Koll to "provide STC wood doors, frames and seals as tested by the manufacturer." Appeal File, Exhibit 14. The agency's project manager (a commercial firm) advised Koll that as a result of this change, the contractor could provide doors with compression seals, rather than ones with magnetic seals and corresponding metal strips. The project manager said that an adjustment to the contract price would ensue. Id., Exhibit 16. 9. GSA's construction manager (another commercial firm) told the agency on June 15, 1992, that although Koll had been ----------- FOOTNOTE BEGINS --------- [foot #] 2 (...continued) important. In making this argument, Koll directs our attention to the presence in the contract of a standard clause entitled "Specifications and Drawings," GSAR 552.236-77 (APR 1984), which says that "[i]n case of difference between . . . Drawings and the specifications, the specifications will govern." Appeal File, Exhibit 1 at page 7 of GSA form 3506; see also id. at 01090-3. ________ ___ [foot #] 3 This last point was made more fully in a letter dated January 30, 1992, from door subcontractor WBH to Koll: "IF WOOD DOORS HAD BEEN SUPPLIED WITH RECESSED STRIPS AS SHOWN ON THE CONTRACT DRAWINGS . . . THERE WOULD HAVE BEEN NO WARRANTY. . . . In [the contract], the only reference to available manufacturers is Glenmar solid core acoustical doors; and although Glenmar is now out of business, the only product that they produced; or the only product produced by other sources is in every single case regularly produced only with compression seals." Accompanying this letter are supporting statements from manufacturers Weyerhaeuser and Algoma Hardwoods, Inc. Appeal File, Exhibit 24. ----------- FOOTNOTE ENDS ----------- authorized to substitute compression seals for magnetic seals on the doors in question, "[t]he doors as installed are furnished with a fibre weather-strip only." The construction manager urged that Koll be directed to install "acoustical gasketting accessories" as well, to ensure that the doors meet the prescribed sound-retardancy test. Appeal File, Exhibit 29 at 1. The GSA program manager agreed that Koll should install the additional items. Id., Exhibit 30. The contracting officer believed that Koll had ultimately installed weatherstripping, not compression seals, in lieu of the magnetic seal and metal strip called for in the contract. He said that GSA had accepted the substitution. Id., Exhibit 35 at 2. The record does not contain any challenge by the contractor to the agency's conclusion as to the sealing mechanism actually used, other than a letter from WBH to Koll dated February 1, 1993. This letter states that "[t]he seals actually furnished for wood doors are manufacturer's standard which have been tested with the door." Id., Exhibit 37 at 2d unnumbered page.[foot #] 4 Admittedly, making determinations of credibility in cases submitted for decision on the basis of a written record is often difficult. We find here, however, that GSA's assertion of the mechanism actually used is more credible than Koll's position. The agency's contention is backed by contemporaneous memoranda written during the course of construction; the contractor did not contest this conclusion until more than two months after the contracting officer had issued his decision, and although Koll has submitted three affidavits in the course of this litigation, none of them contains any support for the contractor's position on this disputed issue. On the basis of the record before us, we conclude that the doors were actually supplied with fibre weatherstripping, not compression seals. 10. On September 9, 1992, Koll made a claim regarding conditions one through five. Appeal File, Exhibit 34. In making this claim, the contractor contended that the condition one changes should be at no cost to either party. Id. at 8th unnumbered page. This conclusion was apparently based on the statement by WBH's president that when the subcontractor made its bid to Koll, "wood doors were correctly figured with compression seals/approved with compression seals." (The president said that this was because the doors were not commercially available with ----------- FOOTNOTE BEGINS --------- [foot #] 4 WBH did make an earlier statement that "the net cost of the seals AS ACTUALLY FURNISHED ON WOOD STC DOORS IS $4.00 PER LINEAR FOOT." Appeal File, Exhibit 26 at 1; see also ________ id., Exhibit 25. This sentence speaks to the seals that are ___ regularly furnished with wood sound-retarding doors, but it does not address the sealing mechanism that is on the doors that Koll/WBH supplied to GSA in the building in question. Whether the sentence's lack of precision is an artful dodge or not, the words do not clearly support the position Koll would have us accept. ----------- FOOTNOTE ENDS ----------- recessed metal strips, and the strips could not have been added without invalidating the manufacturer's warranty.) Id. at 5th- 6th unnumbered pages. While this case was before the Board, Koll submitted affidavits from WBH's president and project manager, both of which said that the president's earlier statement is incorrect; the original bid was based on the provision of magnetic seals (though not recessed metal strips) for the doors. Affidavit of Harley D. Webb (July 16, 1993) at 2; Affidavit of Roger Dugan (July 14, 1993). 11. The contracting officer rendered his decision on the claim on November 25, 1992. In this decision, he determined the base amount due the agency in three steps. First, he assumed prices, on a per linear foot basis, for each of the three sealing materials he thought were involved -- the weatherstripping, magnetic seal, and metal strip. Second, he assigned a credit to the Government for the items which were deleted from contract work -- the magnetic seal and the metal strip -- and an offset to the contractor for the item which was added -- the weatherstripping. He finally arrived at a total amount by multiplying the affected 2,390 linear feet of material by the net per linear foot price differential. He believed that the prices per linear foot were, for the weatherstripping, fifty cents; for the magnetic seal, $10.50; and for the metal strip, $6.50. Appeal File, Exhibit 35 at 2. 12. Koll has not challenged the contracting officer's determination that the type of weatherstripping he believed Koll had installed costs fifty cents per linear foot. The contractor's position is not that weatherstripping has a price different from fifty cents a foot, but that the price of weatherstripping is irrelevant because a different sealing mechanism was used. On March 5, 1992, WBH maintained that "the net cost of the seals AS ACTUALLY FURNISHED ON WOOD STC DOORS IS $4.00 PER LINEAR FOOT." Appeal File, Exhibit 26 at 1; see also id., Exhibit 25. After the contracting officer issued his decision, WBH changed its position: "The seals actually furnished for wood doors . . . [have a] net cost [to WBH of] $2.00 per linear foot." Id., Exhibit 37 at 2d unnumbered page. The record contains a facsimile transmission from Weyerhaeuser to Koll which says, "S88 Pemko door gaskets are $2.00/lineal foot." Id. at 8th unnumbered page. These are the seals shown in the manufacturer's catalog as being supplied with the doors. Id., Exhibit 35 at 41st-44th unnumbered pages. The contractor has not demonstrated, however, that Pemko S88 seals have actually been installed on the doors. Finding 9 & n.4. The $2.00 figure is the one used in Koll's complaint and brief. 13. The contracting officer used the price of $10.50 per linear foot for a magnetic seal because this is the price claimed by Koll/WBH for magnetic seals for condition four doors. Appeal File, Exhibits 34 at 16th unnumbered page, 35 at 2. Condition four involves paneled steel doors. Koll insists, as it did while the amount of the equitable adjustment was before the contracting officer, that "[t]he seals for wood doors are entirely different from seals on hollow metal doors; and the cost is appreciably less." Appellant's Reply Brief at 2; Appeal File, Exhibits 26, 27; Affidavit of Roger Dugan (Aug. 4, 1993) (Second Dugan Affidavit). Although we find Koll's evidence as to this point to be credible, we also find the contractor's assertions as to the actual price of the magnetic seals for the wood doors involved in condition one to be inconsistent with each other. WBH has steadily maintained that the list price of the magnetic seals specified in the contract for the condition one wood doors was $4 per linear foot. Appeal File, Exhibits 26 at 1st unnumbered page, 27, 37 at 2d unnumbered page; Second Dugan Affidavit. This is indeed the catalog price for those seals. Id., Exhibits 26 at 4th unnumbered page, 37 at 3d-6th unnumbered pages. WBH has provided various figures, however, for the price it was actually quoted for these seals -- the per linear foot price was stated to be $1.29 on March 5, 1992; $1.62 on March 6, 1992; and $1.50 on February 1 and August 4, 1993. Id., Exhibits 26 at 1st unnumbered page, 27, 37 at 2d unnumbered page; Second Dugan Affidavit. WBH said on February 1, 1993, that the figure of $1.50 "can be verified with the Pemko factory if necessary." Id., Exhibit 37 at 2d unnumbered page. Koll has presented no evidence, however, regarding Pemko's discounted prices. The figure of $1.50 is the one used in Koll's complaint and brief. 14. The price of $6.50 per linear foot which was used by the contracting officer for a recessed metal strip is the same one that was proposed by WBH on March 5, 1992, with particular reference to condition one doors. Appeal File, Exhibits 26 at 2, 34 at 2. Discussion This contract called for the installation of wood doors with magnetic seals. Finding 6. The contractor, Koll, complained to GSA that doors with these seals could not meet other contract specifications -- they could not pass a prescribed sound- retardancy test, be standard commercial products, or carry a manufacturer's warranty. Finding 7; see also Finding 6. Koll proposed that GSA permit it to provide doors with compression seals, as furnished by the manufacturer, rather than magnetic seals. Finding 7. GSA agreed to the proposal. Finding 8. The parties understood that a ramification of this change in seals would be an equitable adjustment to the contract price. Findings 8, 10. They have been unable to agree about two matters, however: first, whether the Government is entitled to a credit for the deletion of a requirement that metal strips be inlaid in the doors; and second, what the appropriate price adjustments should be for each of the elements involved in the changed requirements. The metal strips are shown in the contract drawings as being recessed in the doors, apparently to serve as the object that the magnetic seals would attract so that the doors would close. Finding 6. Once GSA eliminated the requirement for magnetic seals, the metal strips were no longer needed. The Government consequently took a credit for the cost that the contractor would have incurred if it had had to install the strips in the doors. Findings 2, 3, 11. Koll contends that a credit is not due. The contractor's theory rests on an application of the standard contract clause which provides that "[i]n case of difference between . . . Drawings and the specifications, the specifications will govern." See n. 2. The specifications mandate that the doors meet a certain test and be standard commercial products which carry a manufacturer's warranty; the drawings require insertion of the metal strips into the doors. Finding 6. According to Koll, no door could meet all these requirements; the strips, being mentioned in the drawings rather than the specifications, must therefore be read out of the contract. Indeed, in the current version of Koll's protean story of its door subcontractor's bid design, the subcontractor understood this on reading the solicitation and did not include a price for the strips. Finding 10. Koll's theory is factually inconsistent with statements made by it and its subcontractor while work was progressing. Both firms maintained that the magnetic seals, as well as the metal strips, could not be provided without special design and voiding manufacturers' warranties. Finding 7 & n. 3. The seals were mandated by specification -- and without the corresponding metal strips, these seals would not work. Finding 6. Thus, to the extent there was any inconsistency in contractual requirements, it was among specifications, not between specifications and drawings. Koll (or more precisely, its subcontractor, WBH) was admittedly aware of this problem before bidding. The best spin that can be put on Koll's position is that the contract was marred by a patent ambiguity. Such a circumstance raises a duty to inquire; having failed to ask GSA about the problem before bidding, the contractor must lose on its claim for an equitable adjustment. Interstate General Government Contractors, Inc. v. Stone, 980 F.2d 1433 (Fed. Cir. 1992); see also Plaza Maya Limited Partnership, GSBCA 9086, 91-1 BCA 23,425, at 117,499 (1990). This rule holds true regardless of how Koll constructed its bid. Id. GSA is entitled to a credit for deleting from contract work the requirements to install magnetic seals and to inlay metal strips in the doors. We turn now to the determination of the appropriate amounts of the three elements of the price adjustment. GSA is due a credit for the deletion of the metal strips and magnetic seals; the agency must pay an extra amount for the addition of the replacement means of sealing the door openings, which we have found to be weatherstripping. See Finding 9. The value of two of these elements is clear: the parties agree that the cost of the metal strips is $6.50 per linear foot, and the contracting officer's price of fifty cents per linear foot for weatherstripping is not in dispute. Findings 12, 14. The contracting officer used a figure of $10.50 per linear foot for the magnetic seals. Findings 11, 13. This number may be appropriate for magnetic seals on metal doors, but we credit the statements made by WBH executives, including through an affidavit, that magnetic seals for wood doors -- the kind at issue here -- are very different and much less expensive. Finding 13. The list price for the magnetic seals required by the contract for these wood doors was four dollars per linear foot. Id. According to subcontractor WBH, the per linear foot price that it would actually have had to pay for these seals is much less; it is $1.29, $1.62, or $1.50, depending on the date one chooses. Id. No proof (such as an affidavit from a supplier) has been produced for any of these discounted prices, however. In the absence of any justification for selecting a price other the one in the manufacturer's catalog, we find that the figure of four dollars per linear foot should be used for the magnetic seals. The parties have slightly different methods of calculating the markups to be applied to the base amounts for the three elements involved in the equitable adjustment. Findings 3, 5. GSA's method is acceptable to Koll for adjusting the price for conditions two through five. Finding 4. The same markups should be applied to this adjustment as well. Singleton Construction Co., GSBCA 9614, et al., 90-3 BCA 23,125, at 116,109, and cases cited therein. We are now able to determine the appropriate amount of adjustment to the contract which should result from GSA's agreement to accept weatherstripping instead of magnetic seals and corresponding inlaid metal strips on the condition one wood doors. The base amount for this change (line 1 in Finding 3) is 2,390 linear feet times the following sum: fifty cents per linear foot for the weatherstripping, less four dollars per linear foot for the magnetic seals, less $6.50 per linear foot for the metal strips. The product (2,390 x $10) is a credit of $23,900 to GSA. With markups (lines 2-14 in Finding 3), the total credit to GSA for condition one doors is $39,150. The parties agree that Koll was entitled to an increase of $11,627 in the contract price as a result of the changes designated conditions two through five. The net credit to GSA for conditions one through five is consequently $27,523. GSA actually took a credit for these conditions amounting to $53,951. This credit is $26,428 larger than the one to which the agency is entitled. Decision The appeal is GRANTED IN PART. GSA shall remit to Koll $26,428, plus interest from the date on which the contracting officer received the claim dated September 9, 1992, as per the Contract Disputes Act of 1978, 41 U.S.C. 611 (1988). _________________________ STEPHEN M. DANIELS Board Judge We concur: _________________________ _________________________ ROBERT W. PARKER EDWIN B. NEILL Board Judge Board Judge