DENIED: July 8, 1994 GSBCA 12510 THERMODYN CONTRACTORS, INC., Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. Larry M. Ramos of Thermodyn Contractors, Inc., El Paso, TX, appearing for Appellant. Kevin M. Myles, Office of Regional Counsel, General Services Administration, Fort Worth, TX, counsel for Respondent. Before Board Judges DANIELS (Chairman), HENDLEY, and WILLIAMS. DANIELS, Board Judge. Through this appeal, Thermodyn Contractors, Inc. (Thermodyn), challenges a General Services Administration (GSA) contracting officer's decision which assesses liquidated damages of $22,630 for failure to complete a construction project on time. The contractor maintains that the project was substantially complete earlier than the date as of which the agency approved it as such. The contractor contends additionally that the contract completion date should have been extended and that imposition of any liquidated damages was inappropriate. We reject Thermodyn's contentions and deny the appeal. Findings of Fact 1. On December 31, 1991, GSA awarded to Thermodyn a contract in the amount of $7,013,000 to construct facility improvements to the Colombia/Laredo, Texas, border station. Appeal File, Exhibit 1. Thermodyn was to build "additions to [the] station consisting of automobile and truck inspection facilities, a new administration building, a dog kennel, a new export lot and building and other miscellaneous buildings and site improvements." Id. at 01010-2. The contract singled out for special attention "CCTV [closed circuit television] AND DURESS SYSTEMS"; the contractor was to "Furnish and Install complete CCTV and Duress system monitoring equipment as part of Base Bid." Id. at 01031-2. 2. The contract required that Thermodyn "[c]omplete the entire work ready for use not less than 365 calendar days from the date the notice to proceed is received." Appeal File, Exhibit 1 at 00800-2. The contract also provided, "If the Contractor fails to complete the work within the time specified in the contract, or any extension, the Contractor shall pay to the Government as liquidated damages, the sum of $730.00 dollars for each day of delay." Id. at 00800-7. 3. Thermodyn received GSA's notice to proceed on January 17, 1992. Appeal File, Exhibit 3. Thus, the contract completion date was initially January 16, 1993. 4. During contract performance, Thermodyn asked on numerous occasions that the completion date be extended because precipitation in the Laredo area had been greater than normal. For the months January 1992 through February 1993, Thermodyn asked for an extension of 68 days. Appeal File, Exhibits 5-7, 11, 13, 19. GSA modified the contract to extend the completion date by 65 days -- until March 22, 1993. Id., Exhibits 9, 12, 14, 36. 5. On March 1, 1993, appellant requested that GSA perform a substantial completion inspection on March 11. Appeal File, Exhibit 15. GSA denied this request on the ground that several required items had yet to be finished. Id., Exhibit 17; see also id., Exhibits 16, 18. 6. Thermodyn did not contest the agency's reason for its conclusion. Appeal File, Exhibit 19. On March 15, the contractor requested a substantial completion inspection on March 25, notwithstanding its recognition that several items would not be finished by that date. Id., Exhibit 21. On March 23, the contractor asked that the inspection be delayed until March 31 because the security systems installation subcontractor could not finish its work until March 30. Id., Exhibit 23. 7. From March 29 through April 1, 1993, construction management, architectural, and inspection firms hired by GSA performed a substantial completion inspection of the project. Appeal File, Exhibit 26. The firms concluded that "the project is not substantially complete and the contractor's request for substantial completion at this time [should] be denied." Id. Specifically, the firms' report stated: Inspection of the project revealed that several items which are critical to the operation of the facility remain incomplete, specifically, the CCTV security system, the fire alarm system, duress alarm system and the fire sprinkler system. The contractor had previously assured GSA in his letter dated 3/23/93 that those systems would be operational or in the testing stage by the requested inspection date (3/31/93). However, as observed during this inspection, the security and fire alarm systems contractor (Simplex) was still installing CCTV cameras, duress alarms and pulling associated wiring throughout the facility and little, if any, effort was being made to complete the fire alarm system. Id. In addition, "the project demands more attention from the contractor . . . in order to adequately address the extensive Defects and Omissions as well as the incomplete items." Id. An 18-page list of defects and omissions was given to Thermodyn on April 6, and an even thicker compilation was forwarded to the contractor two days later. Id., Exhibits 30, 31. 8. In a pleading filed with the Board, Thermodyn asserts that at no specified date, but apparently the March 31 inspection, the security systems were eighty percent complete and deficiencies (most of which were cosmetic) remained to be remedied. The contractor estimated the value of the work to be completed as $54,000 -- less than one percent of the entire contract amount. Letter to Board (July 29, 1993). 9. GSA approved the project as substantially complete as of April 23, subject to the correction of defects and omissions. Appeal File, Exhibit 32. 10. On June 8, 1993, GSA sent Thermodyn a proposed contract modification assessing liquidated damages in the amount of $22,630 -- $730 daily damages times 31 days (March 24 to April 23). Appeal File, Exhibit 33. Thermodyn refused to sign the document. It argued: We have failed to find anywhere in the specifications or plans where it defines [the security systems] to be completed prior to accomplishing substantial completion. Furthermore, we feel that the project was at a stage where it did not impact the operations of said facility as a whole. The agencies had been operating in the administration bldg. since the middle of November of 1992. They also had or could use the other bldgs. if needed. Before the occupancy of the administration bldg., the agencies were operating out of (5) five portable bldgs. of which there was no duress, CCTV or fire protection at all. The government's contention that these systems had to be completed prior to attaining substantial completion does not correlate. Id., Exhibit 34. 11. GSA's construction management firm responded: [We take] exception to the contractor's statement that the project was at a stage where it would not have impacted the operations of the facility. At the time of the last requested inspection (3/31/93) the border station was operating with a minimal staff and since the facility had a[n] incomplete/inadequate security surveillance system the station was in our opinion unable to operate as intended per the documents and could not sufficiently protect the facilities personnel. Furthermore the facility was only open to automobile and empty truck traffic at the time and no cargo shipments were allowed. . . . [T]he facility was operating considerably less than its capacity . . . . [T]his occupancy in no way constituted acceptance of the work. Appeal File, Exhibit 35. 12. On July 15, 1993, GSA unilaterally amended the contract to impose liquidated damages of $22,630. Appeal File, Exhibit 37. A contracting officer's decision to like effect was issued on the same date. Id., Exhibit 38. This decision incorporated the construction management firm's views. It was predicated on the conclusion that "in order to operate the facility at full capacity as intended by the contract, the life safety and security systems must be complete." Id. 13. Thermodyn appealed this decision on July 23, 1993.1 Discussion ____________________ 1 The notice of appeal states that Thermodyn "will also file claims for extra work performed without compensations [sic]," and includes a list of twelve such items, with an alleged value of $22,895. Appeal File, Exhibit 40. We do not know whether these claims have ever been filed; in any event, the contracting officer's decision that is the subject of this appeal does not address them, and Thermodyn has not pursued them in the context of this case. Thermodyn's objections to GSA's imposition of liquidated damages may be summarized as follows: (1) The work was substantially complete at an earlier date than GSA determined. (2) The contract completion date should have been extended further than GSA authorized; the agency gave insufficient consideration to the impact of bad weather. (3) Imposition of liquidated damages was inappropriate for two reasons -- Thermodyn was making enormous efforts to complete the work on time, and the Government could not use the border station fully at any relevant time because roads to the station had not been completed. We do not find any of these arguments meritorious. (1) GSA approved the project as substantially complete as of April 23, 1993. Finding 9. Thermodyn contends that the date should have been earlier. Although the contractor does not put forward any particular date, from the fact that it did not object to GSA's refusal to conduct a substantial completion inspection on March 11, and later asked that a scheduled inspection be postponed until March 31, we gather that Thermodyn favors the latter date. See Findings 5, 6. The contractor notes that the Government occupied the border station earlier than March 31 and asserts that work was more than 99 percent complete by that date. See Complaint 4, Answer 4 (facility opened in November 1991); Finding 8. The contractor maintains further that completion of the security systems was not essential to the operations of the station, and therefore was not necessary for substantial completion to be achieved. Finding 10. Whether a construction contract is substantially complete is determined by whether the facility in question is "occupied and used by the Government for the purposes for which it was intended." R.J. Crowley, Inc., GSBCA 11080(9521)-REIN, 92-1 BCA 24,499, at 122,274 (1991) (quoting Joseph Morton Co., GSBCA 4876, 82-2 BCA 15,839, at 78,524); Electronic & Missile Facilities, Inc., GSBCA 2787, 71-1 BCA 8785, at 40,814; cf. M.C. & D. Capital Corp. v. United States, 948 F.2d 1251, 1256 (Fed. Cir. 1991); Franklin E. Penny Co. v. United States, 524 F.2d 668, 677 (Ct. Cl. 1975) (termination for default cases). Government occupancy of a building is not conclusive proof of substantial completion. Haas & Haynie Corp., GSBCA 5530, et al., 84-2 BCA 17,446, at 86,896. Further, "the percentage of work completed does not, of itself, govern whether contractually required work has been substantially completed." Jorge Construction Co., GSBCA 5194, 80-2 BCA 14,520, at 71,562 (citing Electronic & Missile Facilities, in which a project 99 percent complete was found not to be substantially complete because the building was not in such condition as to permit the owner to carry out normal business operations), aff'd on reconsideration (Sept. 30, 1980). When the Government claims liquidated damages, it bears the burden of proving the validity of the grounds for asserting that the contractor failed to substantially complete the project. Jorge Construction; Lemar Construction Co., ASBCA 37294, 90-3 BCA 23,151, at 116,209, reconsideration denied, 91-1 BCA 23,564 (1990). Here, there is no doubt that Thermodyn did not complete the security systems or correct numerous defects and omissions by March 31; the inspection report prepared for the agency makes findings which the contractor has effectively admitted. Findings 7, 8. The key question is whether the noted items had to be finished for the facility to be used for the purpose for which it was intended. In other cases, boards of contract appeals have held that the completion of essential safety features is a prerequisite for substantial completion of a construction contract. For example, in Haas & Haynie Corp., 84-2 BCA at 86,897, fire, duress, and intrusion alarm systems were found to be major work items in a contract for the construction of a courthouse; failure to install and test them was a valid ground for the Government's determination that the project was not substantially complete on the date alleged by the contractor. In Saturn Construction Co., ASBCA 22653, 82-1 BCA 15,704, at 77,690, failure to install a required sprinkler system in a mess hall justified a finding that substantial completion had not taken place. In the instant case, we know from reading the contract that the security systems were considered to be an important part of the border station's construction. Finding 1. In addition, GSA has placed in the record statements by the contracting officer and the agency's construction management firm as to the inability of the facility to operate at full capacity without functioning security systems. Findings 11, 12. Although we would prefer to have better evidence on this point -- affidavits from officials of agencies which are actually using the border station would have been helpful -- we consider that when coupled with the contract's emphasis, the statements are convincing. Much like a courthouse, a border station is a law enforcement facility in which security systems are essential to full operation. Until the systems were working this station could not be considered substantially complete. Thermodyn has not suggested that the systems were operational earlier than April 23. We consequently cannot fault GSA's determination that substantial completion was achieved on that date. Because we have found a valid justification for this determination, we need not consider whether the contractor's failure to remedy listed defects and omissions by an earlier date was independent good cause for the Government's conclusion. (2) GSA extended the contract completion date by 65 days because the Laredo area, where construction was taking place, incurred rain on considerably more days than was usual during the construction period. Finding 4. Thermodyn maintains that an additional extension should have been granted, apparently because the rain interfered with work not only while it was falling, but also afterwards, in that the ground remained sodden. The extra length of time that Thermodyn considers appropriate is not specified; apparently it is the three days that the contractor requested, but the agency did not allow. See Finding 4. Unusually severe weather may be a valid excuse for delay in contract performance. It is such an excuse, however, only if the contractor can show that the weather had an actual impact on the performance of the work. Eurostyle Inc., GSBCA 10037, 91-1 BCA 23,595, at 118,278 (1990). Thermodyn has not made such a showing here; even if we are to believe the contractor's assertion that the construction site was indeed sodden, we cannot find for the firm because it has not demonstrated that this condition impaired its ability to perform work. We therefore leave undisturbed GSA's determination that March 22, 1993, was an appropriate contract completion date. (3) Thermodyn lastly maintains that even if we find for GSA on the first two matters, we should hold that the agency should not have imposed liquidated damages. The first reason advanced for this finding is that Thermodyn was making enormous efforts to complete the work on time; it secured a workforce (notwithstanding labor shortages caused by the remote location of the site and a building boom in the nearest city), and completed work itself after two of its subcontractors defaulted. Thermodyn contends that it acted in good faith, and that "the intent of [the liquidated damages] clause is not to penalize those who make every effort to conform with . . . contractual obligations." Appellant's Brief at 3. Reasonable liquidated damage provisions "are not to be regarded as penalties." Rex Trailer Co. v. United States, 350 U.S. 148, 151 (1956). The Supreme Court has explained that they represent "attempts to fix just compensation for anticipated loss caused by breach of contract. They serve a particularly useful function when damages are uncertain in nature or amount or are unmeasurable, as is the case in many government contracts." Priebe & Sons, Inc. v. United States, 332 U.S. 407, 411 (1947); see also United States v. Imperial Food Imports, 834 F.2d 1013, 1016 (Fed. Cir. 1987). The imposition of liquidated damages thus has nothing to do with Thermodyn's approach to the work, and everything to do with the Government's loss consequent to the work not having been completed by the specified date. Thermodyn suggests that no such loss actually occurred because during the spring of 1993, the Government could not use the border station fully since roads to the station were not completed. This argument, even if true, is irrelevant. Courts have consistently held that "the situation existing at the time of the contract is controlling in determining the reasonableness of liquidated damages." Southwest Engineering Co. v. United States, 341 F.2d 998, 1003 (8th Cir.) (emphasis added), cert. denied, 382 U.S. 819 (1965); see also Priebe & Sons, 332 U.S. at 412. The forecast, not hindsight, is critical. Jennie-O Foods, Inc. v. United States, 580 F.2d 400, 413-14 (Ct. Cl. 1978). Thermodyn has not contended that when the contract was entered into, $730 per day (the amount of liquidated damages, Finding 2) was an unreasonable estimate of damages which the Government would incur from late completion of the project. Decision We uphold the contracting officer's decision. The appeal is DENIED. _________________________ STEPHEN M. DANIELS Board Judge We concur: _________________________ _________________________ JAMES W. HENDLEY MARY ELLEN COSTER WILLIAMS Board Judge Board Judge