Project owner’s liability for delays arising from design review comments that deviated from the contractually-established design process. Appeals of RBC Construction Corp. Armed Services Board of Contract Appeals (2020), by Hugh Anderson

Summary: The U.S. Army Corps of Engineers entered into a $12.3 million design-build contract with RBC Construction Corp., for design and construction of an Army Reserve Center in San Juan, Puerto Rico. Under the contract RBC was permitted to use fast-track design submittals, which would allow RBC to obtain approval for construction of specific portions of the project while the design process was still in progress for subsequent components of the work. The contract documents included detailed procedures for contractor submittals, and for government review and comments.

In February 2012 RBC submitted a fast-track site and foundation package. One of the submitted drawings showed a 40,000-gallon cistern for fire suppression below the foundation of the assembly hall building. Under the contractual submittal procedures, government comments on the site and foundation package were due in 14 days.

The contractual submittal procedures stated that the preliminary hydraulic calculations for a fire cistern were to be submitted in a later catch-all submittal called the interim design package. However, apparently the project planners had not anticipated that the design-build contractor might choose to locate the cistern under one of the foundations. When the cistern was depicted in the site and foundation package, the government required RBC to provide the cistern design calculations as a prerequisite to approval of the site and foundation package. The completion and approval of the package was ultimately delayed substantially, resulting in a contractor claim for additional time and compensation, and an appeal to the Armed Services Board of Contract Appeals.

Decision: On appeal, RBC contended that the government’s insistence on receiving fire cistern hydraulic calculations as part of the site and foundations package constituted a constructive change to the contract, resulting in an entitlement to an equitable adjustment. The government countered that by including the fire cistern in the footprint of one of the buildings, rather than as an external tank, RBC had caused the change, and was obligated to submit the calculations concurrent with the other foundation-related design submittals, in order to allow “a complete design analysis.” Government witnesses testified that the ultimate concern was that if RBC had undersized the cistern in the fast-track drawing—if an analysis of the hydraulic calculations later showed that a 40,000-gallon cistern was not sufficient to meet the facility’s fire suppression needs—then a portion of the foundation might need to be torn out to allow for installation of a larger cistern.

The Board concluded that although the government’s position regarding analysis of the fire cistern design was “eminently reasonable,” nonetheless the government’s own contract documents expressly stated that the hydraulic calculations were not required until the subsequent interim design submittal. The Board acknowledged that if RBC had undersized the cistern in the foundation submittal, it could be expensive and time-consuming to modify the foundation. According to the Board, the government had been well intentioned, and was “attempting to save RBC from itself,” but by demanding the hydraulic calculations out of sequence—a sequence the government itself had established—the government caused a compensable delay.

Comment: The owner-approved final site and foundation package contained a 40,000-gallon fire cistern, just as RBC had originally proposed. RBC had apparently been confident that its initial calculations would be sustained, and was willing to take the risk that it had undersized the tank, and would consequently need to tear it out and reconstruct the foundation. The government was not willing to allow that gamble to play out, and was therefore forced to pay for the resulting delay.

Perhaps the fast-track specifications could have been written to state that any additional facilities included in a package (beyond the required package elements) would need to be designed in full. This would have protected the government from unanticipated design features, such as the cistern being located within a building footprint, but at the same time might have detracted from fundamental goals of the fast-tracking.

RBC was also awarded 11 days of delay for the government’s failure to respond to the site and foundation package within the required 14 days. The decision indicates that a more common turnaround time would have been 30 days. As one of the government engineers opined, the government “shot itself in the feet” by committing to a 14-day review and response.

Summary: The U.S. Army Corps of Engineers entered into a $12.3 million design-build contract with RBC Construction Corp., for design and construction of an Army Reserve Center in San Juan, Puerto Rico. Under the contract RBC was permitted to use fast-track design submittals, which would allow RBC to obtain approval for construction of specific portions of the project while the design process was still in progress for subsequent components of the work. The contract documents included detailed procedures for contractor submittals, and for government review and comments.

In February 2012 RBC submitted a fast-track site and foundation package. One of the submitted drawings showed a 40,000-gallon cistern for fire suppression below the foundation of the assembly hall building. Under the contractual submittal procedures, government comments on the site and foundation package were due in 14 days.

The contractual submittal procedures stated that the preliminary hydraulic calculations for a fire cistern were to be submitted in a later catch-all submittal called the interim design package. However, apparently the project planners had not anticipated that the design-build contractor might choose to locate the cistern under one of the foundations. When the cistern was depicted in the site and foundation package, the government required RBC to provide the cistern design calculations as a prerequisite to approval of the site and foundation package. The completion and approval of the package was ultimately delayed substantially, resulting in a contractor claim for additional time and compensation, and an appeal to the Armed Services Board of Contract Appeals.

Decision: On appeal, RBC contended that the government’s insistence on receiving fire cistern hydraulic calculations as part of the site and foundations package constituted a constructive change to the contract, resulting in an entitlement to an equitable adjustment. The government countered that by including the fire cistern in the footprint of one of the buildings, rather than as an external tank, RBC had caused the change, and was obligated to submit the calculations concurrent with the other foundation-related design submittals, in order to allow “a complete design analysis.” Government witnesses testified that the ultimate concern was that if RBC had undersized the cistern in the fast-track drawing—if an analysis of the hydraulic calculations later showed that a 40,000-gallon cistern was not sufficient to meet the facility’s fire suppression needs—then a portion of the foundation might need to be torn out to allow for installation of a larger cistern.

The Board concluded that although the government’s position regarding analysis of the fire cistern design was “eminently reasonable,” nonetheless the government’s own contract documents expressly stated that the hydraulic calculations were not required until the subsequent interim design submittal. The Board acknowledged that if RBC had undersized the cistern in the foundation submittal, it could be expensive and time-consuming to modify the foundation. According to the Board, the government had been well intentioned, and was “attempting to save RBC from itself,” but by demanding the hydraulic calculations out of sequence—a sequence the government itself had established—the government caused a compensable delay.

Comment: The owner-approved final site and foundation package contained a 40,000-gallon fire cistern, just as RBC had originally proposed. RBC had apparently been confident that its initial calculations would be sustained, and was willing to take the risk that it had undersized the tank, and would consequently need to tear it out and reconstruct the foundation. The government was not willing to allow that gamble to play out, and was therefore forced to pay for the resulting delay.

Perhaps the fast-track specifications could have been written to state that any additional facilities included in a package (beyond the required package elements) would need to be designed in full. This would have protected the government from unanticipated design features, such as the cistern being located within a building footprint, but at the same time might have detracted from fundamental goals of the fast-tracking.

RBC was also awarded 11 days of delay for the government’s failure to respond to the site and foundation package within the required 14 days. The decision indicates that a more common turnaround time would have been 30 days. As one of the government engineers opined, the government “shot itself in the feet” by committing to a 14-day review and response.