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MEMORANDUM OF DECISION

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF WASHINGTON

AT SEATTLE

_______________________________________)

LAKE UNION DRYDOCK COMPANY, )

INC., )

) No. C05-2146RSL

Plaintiff, ) 

v. ) MEMORANDUM OF DECISION

)

UNITED STATES OF AMERICA, )

)

Defendant. )

_______________________________________)

I. INTRODUCTION

This matter was heard by the Court in a bench trial commencing on September 10, 2007

and concluding on September 18, 2007. In this maritime contract case, plaintiff Lake Union

Drydock Company, Inc. (“LUDC”), a ship repair facility located on Seattle’s Lake Union,

claims that defendant United States breached the contract for the repair and conversion of the

USNS VINDICATOR to a National Oceanic and Atmospheric Administration (“NOAA”)

research vessel, the R/V HI’IALAKAI. The Court has admiralty jurisdiction in this case under

28 U.S.C. § 1333 and based on the Suits in Admiralty Act, 46 U.S.C. § 30901, et seq. (formerly

§§ 741-52), the Public Vessels Act, 44 U.S.C. § 31101, et seq. (formerly §§ 781-90), and the

reservation of jurisdiction for maritime contracts in the Contract Disputes Act, 41 U.S.C. § 603. 

The Court has considered the evidence presented at trial, exhibits admitted into evidence, and

the arguments of counsel. Being fully advised, the Court now makes the following Findings of

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MEMORANDUM OF DECISION -2-

Fact and Conclusions of Law:

II. FINDINGS OF FACT

1. In July of 2003, defendant (hereinafter “NOAA” or the “Government”) prepared a

solicitation for a contract to repair and convert the VINDICATOR, originally a Navy T-AGOS

class vessel that had been in service by the Coast Guard, to a scientific research vessel for

NOAA. Ex. 1.

2. LUDC submitted the low bid for the VINDICATOR’s conversion and repair. The bid

spread of 10% between the four bidders was “very close” and the second lowest bid was within

2% of LUDC’s bid. Ex. 26, 27. On September 19, 2003, at the Government’s request, LUDC

confirmed its bid amount. Ex. 504. On September 30, 2003, the Government awarded the

VINDICATOR contract (hereinafter the “Contract”) to LUDC in the amount of $4,069,417.00. 

Ex. 2. 

3. On October 1, 2003, work commenced in accordance with the Notice to Proceed and

was scheduled to be completed by January 18, 2004. Ex. 11. Ultimately, the completion date

was extended to February 20, 2004. Ex. 6 (Contract Modification 6). The VINDICATOR was

returned to NOAA’s pier, which is adjacent to LUDC’s pier on Lake Union, on March 4, 2004. 

The project was finally completed at NOAA’s pier on March 18, 2004. Ex. 13. The

Government paid LUDC a total of $3,994,410.00 for its performance under the Contract. Ex. 6

(Contract Modification 8). 

4. LUDC’s President, George Nielson, testified that after the project was completed,

LUDC examined its financial returns on a job-wide basis and discovered that LUDC had

incurred a direct loss on the project in excess of $1.1 million, excluding profits. To determine

what caused the shortfall, LUDC met with its craft foremen and job superintendents. Based on

this information, LUDC decided to “put together a claim.”

5. On October 11, 2004, LUDC submitted a certified claim for $526,450 to NOAA’s

Contracting Officer, Paul Reed. Ex. 12 (hereinafter “certified claim”). The certified claim

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MEMORANDUM OF DECISION -3-

identifies 8 Government actions justifying LUDC’s claimed amount:

1. DRAWINGS: Government provided conversion drawings that either did not

properly depict the actual arrangement of the vessel or depicted an impractical

method of installation.

2. LACK OF CHIEF ENGINEER: Lack of either a full time or on call vessel

engineer that would be familiar with the arrangement and location of the ship’s

systems. 

3. LATE RESPONSE TO CONDITION PROBLEM REPORTS (CPR)

4. REJECTION OF ESTIMATED COSTS: Rejection of “job study” and other

appropriate labor costs in negotiated change orders for new work.

5. DIRECTED WORK OUTSIDE THE JOB SCOPE

6. EXTENDED PERIOD OF PERFORMANCE (due to the above listed issues).

7. EXCESS FUEL ABOARD VESSEL

8. GLOBAL DISRUPTION ON THE PROJECT (relating to the above listed

issues).

Id. at 1-2.

6. On December 10, 2004, in response to the certified claim, the Contracting Officer

requested additional information from LUDC by February 15, 2005. Ex. 32. On February 15,

2005, LUDC provided the additional information in a letter clarifying the certified claim, where

LUDC conceded that it was responsible for some portion of the cost overrun but contended that

its claimed amount was still appropriate because LUDC’s total loss had been reduced by 9,100

hours to account for its fault: 

LUDC does not suggest that its performance was without flaws on the Vindicator

project and LUDC has thoroughly analyzed the factual development of the project

and the respective performance of LUDC and NOAA. This analysis has

demonstrated that the causation of increased costs and schedule delay on the

Vindicator was principally due to NOAA actions at variance to the contract. The

LUDC responsibility is more than compensated by the 9,100 man hours of effort

expended by LUDC and not being claimed by LUDC. This equates to 25%

variance of LUDC effort against its compensation.

Ex. 15 at 7.

7. In response to the additional information, on October 5, 2007, the Contracting Officer

issued a final decision and denied all of the certified claim, with the exception of item 6,

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1

 In its Complaint, LUDC alleges that “NOAA stated that it would compensate LUDC in one

instance for work it directed LUDC to perform outside the job scope, even though to the date of this

Complaint, NOAA has failed to pay the amount due for this work.” Dkt. #1 at ¶3.17. On January 11,

2006, the Contracting Officer agreed to pay the $6,210 on this item upon receipt of an invoice. Ex. 38

(“Please submit an invoice requesting payment in the amount of $6,210 to the attention of COTR Tim

Trembley . . . and NOAA will process the invoice for payment.”). In its trial brief, LUDC did not assert

that it was entitled to recovery for the work identified in item 6 of the certified claim. For all these

reasons, the Court finds that the portion of LUDC’s claim relating to item 6 of the certified claim,

“Directed Work Outside the Job Scope,” has been resolved pending LUDC’s submission of the

requested invoice. 

MEMORANDUM OF DECISION -4-

“Directed Work Outside the Job Scope,” for which the Government agreed to compensate

LUDC $6,210.1

 Ex. 13. 

8. As a result, LUDC filed this action on December 25, 2005. LUDC claimed at trial

that the same Government actions identified in the certified claim caused LUDC’s damages. 

Dkt. #34 (Plaintiff’s Trial Brief) at 34. For clarity, the Court organizes the findings below based

on these issues.

A. Adequacy of the Drawings & Specifications

9. At trial, Gary Decker, who helped prepare the certified claim for LUDC, testified that

he expected the drawing package to be “perfect.” LUDC’s own naval architecture expert

Stanley Stumbo, a registered professional engineer and the former chief naval architect for the

Washington State Ferry System, however, conceded that he has “never seen a perfect set of

conversion drawings.” Mr. Stumbo also testified that the overall drawing package in this case

was “good” and generally of high quality with no more than the usual number of errors. In Mr.

Stumbo’s words, there were “no show stoppers.” The Court finds that the Government’s

drawings and specifications were reasonably accurate and workable. 

10. The Court also finds that LUDC did not prove that deficiencies with the repair and

conversion drawings caused the damages claimed. Mr. Decker testified that he prepared the

certified claim by conducting interviews with the project craft foremen. With respect to the

drawings, Mr. Decker stated that during the interviews with the foremen they identified

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MEMORANDUM OF DECISION -5-

problems with the drawings and then after these interviews, and in preparation for the claim,

LUDC found that there were drawings that were not coordinated with one another. Despite the

fact that LUDC based its certified claim on interviews with the foreman, in its case-in-chief,

LUDC presented testimony from only one craft foreman, Tom Hooper, the foreman of LUDC’s

sheet metal shop. On cross-examination, however, Mr. Hooper testified that he had not been

interviewed about the issues in the claim until this year. Based on the factors identified in 9th

Circuit Jury Instruction 3.6, the Court finds that LUDC’s claim that drawing errors caused its

damages in this case is not supported by credible evidence. 

11. Section H.4.(i) of the Contract states: “The Government does not guarantee the

correctness of the dimensions, sizes, and shapes given in any sketches, drawings, plans or

specifications prepared or furnished by the Government. The Contractor shall be responsible for

the correctness of the shape, sizes and dimensions of parts to be furnished hereunder, other than

those furnished by the Government.” The Court finds that this provision does not affect the

disposition of the case because it is a general disclaimer and does not relieve the Government of

its obligation to provide adequate drawings and specifications.

B. Lack of a Chief Engineer

12. In its certified claim, LUDC stated that the “Vindicator did not have a Chief

Engineer assigned to it during the conversion, as was reasonably anticipated and generally

suggested in the contract specifications.” Ex. 12 at 4. Detailed Specification Item 103,

“Propeller Shaft, Shaft Seals & Bearing Inspections” states in paragraph 4.2.2.3: “Obtain the

weardown gage from the ships [sic] engineer (Item 16) and measure and record intermediate

bearing weardown both top and bottom. If the weardown gage is not available it is within the

scope of this item to fabricate an adapter which fits in the weardown plug hole so that a depth

micrometer may be used to take weardown readings.” Ex. 4 at 10 (emphasis added). Detailed

Specification Item 101 requires that LUDC “[p]rovide COTR / Ships [sic] Officer parking for

four vehicles within the contractors [sic] facility,” in addition to “at least 200 square foot office

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MEMORANDUM OF DECISION -6-

space for the ship’s command,” and “covered, dry, secure (lockable) temporary storage area for

the ship’s crew.” Id. at 3-4. 

13. Mr. Nielson testified that based on these specifications LUDC assumed that the

Government was providing a full-time chief vessel engineer for the project. The Court finds,

however, that this assumption is unreasonable and does not make sense in light of the other

contract provisions, including section M of the Solicitation, which states: “The vessel is

currently inactive and has no crew, however the Government intends to crew the vessel prior to

the conclusion of the conversion period.” Ex. 2 at 62 (emphasis added). The Court finds that

this clause is unambiguous and LUDC did not submit any questions under section L of the

Solicitation to clarify the Government’s staffing of the vessel during the project.

14. The presence of a full-time vessel engineer is not necessary to give effect to the

provisions cited by LUDC as requiring this position. At times during the project the

Government did staff the project with a vessel engineer, Sara Greene, which means that at times

there was a ship’s engineer from whom the wear-down gage could have been obtained. And,

had the project been completed during the time the vessel was at LUDC’s pier, the newly

commissioned crew would have needed the office and parking space provided for in the

Contract.

15. The Court also finds that LUDC failed to carry its burden to show that its damages

were caused by a lack of a full-time chief vessel engineer. The Contracting Officer credibly

testified that in negotiations between LUDC and the Government during the project, LUDC

never raised the issue of the absence of a full-time chief engineer nor did LUDC submit a

Condition Problem Report for this item. Furthermore, this claim is purportedly founded on

interviews with the craft foreman, but the one foreman who testified stated that he had not been

interviewed until this year. 

C. Response time to Condition Problem Reports

16. In its certified claim, LUDC stated: “[b]eyond additional costs relating to servicing

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MEMORANDUM OF DECISION -7-

the contract without benefit of information and assistance normally provided by a chief

engineer, LUDC incurred significant expense servicing inefficiencies caused by untimely

response to Condition Found Reports (CPRs).” Ex. 12 at 6. LUDC contends that the

Government breached the contract by failing to respond to CPRs “within approximately two

days.” Dkt. #34 (Trial Brief) at 24. 

17. The Court finds that the Contract is silent on the definition of a CPR and the

procedure and timing of a CPR response. The only relevant Contract provision setting a time

for a Government response states that “[d]ocumentation, including drawings and other

engineering products and reports, required by the contract to be submitted for review, comment,

acceptance or approval will be acted upon by the Government within 30 calendar days after

receipt by the Government, unless another period of time is specified.” Ex. 2 at section H.15(a)

(emphasis added). 

18. Table 4 of the certified claim establishes LUDC’s support for the portion of the

claim relating to late CPR responses. The Government’s expert Everett Harry credibly

established, however, that over half of the line-items in this table have some type of

discrepancy. The Contracting Officer’s Technical Representative (“COTR”), Tim Trembley,

also credibly testified that by taking into account the CPRs where LUDC did not indicate a

requested response date, duplicate CPRs, and weekend dates, the COTR responded to the CPRs

in an average of 3 days. The Court finds that this was a reasonable response time and

accordingly, finds that LUDC’s expectation that the Government respond within approximately

2 days was unreasonable and was not contractually required. 

D. Rejection of Estimated Costs

19. The Contract contemplated that the Government would add additional scope to the

project. Section H.29 “Additional Government Requirements” of the Contract states that: “(a)

This clause applies to growth and new work items. The Contractor shall be able to perform

work items so as to permit up to 10,000 man-hours of work to be performed as ‘additional

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Government requirements’ during the contract period of performance, without causing delay or

disruption to the work performance under this contract . . . and without giving rise to any claim

for an equitable adjustment to supplement the price specified in paragraph (e) below.” Section

H.29(e) provides that “[r]equirements ordered pursuant to this clause will be priced using the

man-hour reservation rate specified in Section B, pricing item 201” and section H.29(h) further

provides that the “Contractor shall not be entitled to payment for any hours awarded under Item

201, until such hours are ordered through a written contract modification.” Ex. 2. Under

section H.29(b), the 10,000 hours are defined as “production man-hours” for activities such as

welding, pipe fitting, and boilermaking. Id. 

20. As part of its bid, LUDC agreed to a $50/hour rate for the 10,000 production manhour reservation in Item 201. Id. at 3. Under section H.29(b), this $50 rate was to be “the

burdened rate for production man-hours,” meaning that rate included necessary support

functions that otherwise would not be allowed as part of the 10,000 hour reservation. Necessary

support functions expressly incorporated in the burdened rate include activities like “Fire

watch,” planning, and supervision. The Court finds that section H.29 of the Contract is

unambiguous. 

21. As part of change order requests, LUDC submitted hours for activities qualifying as

support functions in Item 201’s 10,000 hour reservation, and these hours were rejected by the

Government. The Court finds that the Government’s rejection of these costs was justified. 

When LUDC bid this project, it agreed be bound by a $50 rate under Item 201, which was to be

a rate burdened by non-recoverable support functions. Allowing LUDC to claim support

function hours within the 10,000 hour reservation would mean that LUDC failed to include a

properly burdened rate in its bid. As the Contracting Officer testified, allowing support function

hours within the 10,000 hour reservation would be inequitable to the other bidders who included

a properly burdened rate in their bids.

22. Based on credible testimony from the Contracting Officer and Edward Rockenstire,

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2

 At times, LUDC confused the scheduling methodology required for this Contract. The

Contract expressly states in section H.29 that the Production Schedule “shall identify the critical path.” 

Ex. 2. Testimony from Jeff VanGaver, LUDC’s contract administrator, and Hobbie Stebbins, LUDC’s

VP of Production and Sales, coupled with LUDC’s trial brief, however, indicates that LUDC was at

times scheduling this project using bar-chart or “Gantt” chart scheduling instead of the critical path

method. Dkt. #34 (Trial Brief) (stating that “LUD[C] also submitted . . . the first production schedule, a

critical path schedule (or Gantt chart) which identifies work that if delayed will impact the scheduled

completion date.”) (emphasis added); Richard F. Smith, Scheduling for a Construction Project, in

Fundamentals of Construction Law, 201, 205 (Carina Y. Enhada et al. eds., 2001) (“On smaller

projects, a frequently used, inexpensive method is the bar chart or ‘Gantt’ chart . . .[, but] a bar chart

inadequately describes whether a delay to a particular activity will affect other activities or the ultimate

project completion date. . . . As a result, most large construction projects will use the Critical Path

Method (‘CPM’).”) (emphasis added).

MEMORANDUM OF DECISION -9-

the Contracting Officer’s supervisor, the Court also finds that there was no agreement by the

Government in a November 2003 meeting, or otherwise, to waive the express requirements in

section H.29.

E. Extended Period of Performance

23. In its certified claim, LUDC contends that it is owed $2100/day for the nine days it

alleges that the VINDICATOR remained at LUDC’s pier beyond agreed upon extensions. Ex.

12 at Table 1. This claim is based on LUDC’s assertion, discussed in Section II.B above, that

the Government failed to timely respond to CPRs. Ex. 12 (“It is LUDC’s claim that the

performance period extended beyond the contractual date because of the government’s failure to

respond promptly and accurately to the contractor’s request for information.”); Dkt. #34

(Plaintiff’s Trial Brief) (“NOAA’s failure to timely respond to CPRs, and to authorize the

change work, caused well over nine days delay on several critical path items.”). 

24. As the Court found above, the Government did not fail to timely respond to LUDC’s

CPRs and requests for information, and therefore the Court also finds that the Government is not

responsible for the claimed 9-day delay. LUDC also has failed to prove that the items of delay

were on the critical path.2

 Furthermore, LUDC conceded in its February 15, 2005 clarification

letter that it was responsible for project delay, but it failed to present proof of clear

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MEMORANDUM OF DECISION -10-

apportionment of the delay and expense attributable to each party.

F. Excess Fuel

25. In its certified claim, LUDC asserted it was entitled to additional compensation

because “[t]he disruptive impact of storing fuel aboard beyond the original 42,000 gallons

planned for was not anticipated when pricing CO [Change Order] 47A.” Change Order 47A, in

the amount of $39,542, was incorporated into the Contract by Modification 7. Ex. 6, 526. 

Modification 7 was signed by LUDC on April 6, 2004, after the project was complete. Id.

Given this late date, LUDC had adequate time in which to calculate and include all costs

associated with the excess fuel into the Contract modification. Modification 7 also contains a

release stating: “In consideration of the modification agreed to herein as complete equitable

adjustments for the change orders incorporated, the Contractor hereby releases the Government

from any and all liability under this contract for further equitable adjustments attributable to

such facts or circumstances giving rise to the proposal for adjustment.” Id. LUDC did not seek

to reserve its rights on the amount of the adjustment for the fuel transfer, nor does the Court find

credible the testimony from Mr. VanGaver that the Government waived enforcement of this

provision.

26. LUDC’s agreement to a post-completion modification releasing the Government for

future claims based on the excess fuel supports the evidence at trial showing that this differing

condition did not cause LUDC damage beyond the $39,542 already claimed and received under

Change Order 47A and Modification 7.

G. Global Disruption on the Project

27. At trial, Mr. Nielson testified that LUDC recognized the “uniqueness” of section

H.29 of the Contract requiring 10,000 hours of indefinite work. LUDC estimated that the

defined work would take approximately 28,000 hours during a short 14-week time frame. Mr.

Neilson also acknowledged that including 10,000 hours of unspecified work on a 14-week

project effectively meant that constructive planning could not be done in advance. LUDC had

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MEMORANDUM OF DECISION -11-

this information, and despite these considerations, bid on the work. 

28. In its certified claim, Ex. 12 at 11 and Table 6, and at trial, LUDC claimed that it

was damaged by “global disruption” on the project because the Government exceeded the

10,000 hour reservation, and the allocation of the hours during the project violated section

H.29(g), which states:

The additional Government requirements for production man-hours under item

201, if needed, shall be ordered during the contract period of performance, as may

be modified on the following schedule:

1. No more than 75% of the hours during the first half of the contract

period of performance.

2. No more than 50% of the hours during the third quarter of the contract

period of performance.

3. No more than 30% of the hours during the fourth quarter of the contract

period of performance.

29. The Court finds, however, that LUDC’s contention that the Government exceeded

the 10,000 hour reservation and breached section H.29(g) is not supported by credible evidence. 

As contract Modifications 2-7 show, the hours applied by LUDC against Item 201 in the

Contract do not exceed 10,000 hours. LUDC’s certified claim also shows that less than 8,500

hours were applied by LUDC to Item 201. See Ex. 12 at Table 6 (showing 8,127 LUDC hours);

Ex. 15 at Table 6 (revised) (showing 8,379 LUDC hours). Although LUDC contends that when

“subcontractor growth hours” are considered the 10,000 hour reservation was exceeded by 685

hours, LUDC failed to provide proof that the subcontractor growth hours were actually incurred

and were properly charged to Item 201. See Ex. 15 Table 6. None of LUDC’s subcontractors

testified at trial and LUDC has failed to meet its burden to show that the 10,000 hour reservation

was exceeded. LUDC also has failed to prove that the permitted allocation of the 10,000 hours

under section H.29(g) was exceeded because this contention is also based on the inclusion of

“subcontractor growth hours,” which have not been established. Finally, by agreeing to

Modifications 2-7, LUDC expressly released the Government from liability for further equitable

adjustment. Ex. 6.

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3

 For example in Table 6 of the certified claim, all of the 552 hours for the fuel transfer, as

allowed by Change Order 47A , are allocated to the fourth quarter of the contract period because they

were included in Modification 7, which was signed on April 4, 2004. Ex. 12. But, testimony at trial

established that the hours incurred for the fuel transfer activity were actually expended relatively early,

not at the very end of the project.

4

 See supra note 2; Ex. 2, section H.32 (“The Contractor shall provide the Contracting Officer

and COTR with the following documents within (5) workdays of the ship’s arrival at the Contractor’s

facility: a. Production Schedule . . . The Production Schedule shall list the earliest, latest and scheduled

start and completion date for each work item awarded and shall identify the critical path. Change Order

schedules shall be added to the Production Schedule . . . and submitted to the Contracting Officer and

COTR at each weekly Progress Meeting.”); Ex. 505 (Deficiency Report).

MEMORANDUM OF DECISION -12-

30. LUDC also has not proven that it correctly allocated the hours identified in Table 6

of the certified claim to section H.29(g)’s requirements. LUDC used the contract modification

dates to apply the hours incurred for Item 201 work to section H.29(g). Section H.29(g),

however, provides that the allocation is to be based when the hours are “ordered” not on when

the modification is signed.3

31. Finally, the Court finds that LUDC has not shown that “the number of changes, lack

of a ship’s engineer, and drawing deficiencies combined to cause cumulative delay and

disruption damages.” Dkt. #34 at 26. As the Court found above, LUDC has not met its burden

to show that the lack of a full-time chief engineer and drawing deficiencies caused damage in

this case. Furthermore, the Court finds that there was not an excessive number of changes

because of the expectation under section H.29 that the Government could add 10,000 hours of

new work items. The Government did not exceed Item 201’s 10,000 hour reservation and

therefore the Court finds that the Government did not act beyond the scope of the Contract. 

32. Based on the evidence presented at trial, the Court finds that the difficulties

experienced by LUDC in this case are in large part attributable to LUDC’s failure to

appropriately track the project through the contractually required critical path method and

updated CPM schedules.4

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III. CONCLUSIONS OF LAW

A. Jurisdiction

 1. This is a maritime contract action. See Norfolk S. R.R. Co. v. Kirby, 543 U.S. 14, 23-

4 (2004). “It is undisputed that contracts for the repair of United States government ships are

governed by the provisions of the Suits in Admiralty Act [46 U.S.C. § 30901, et seq. (formerly

§§ 741-52)], and are entrusted, as marine contract actions, to the admiralty jurisdiction of the

United States district courts. At the same time, all government contracts are subject of the

Contract Disputes Act of 1978 [“CDA”], 41 U.S.C. §§ 601-613.” Bethlehem Steel Corp. v.

Avondale Shipyards, Inc., 951 F.2d 92, 93 (5th Cir. 1992) (internal citation omitted). There is a

special provision in § 603 of the CDA for maritime contracts. “[S]ection 603, rather than

completely excluding maritime contracts from the [CDA], simply vests appeals from the

administrative determination of claims in the district courts, rather than in the Court of Claims

or the Court of Appeals for the Federal Circuit.” Id. at 94. The submission of a certified claim

to the contracting officer is a prerequisite to the district court’s subject matter jurisdiction over

claims arising out of maritime contracts brought under the CDA. Id. at 94-95; Southwest

Marines, Inc. v. United States, 926 F. Supp. 142, 145 (N.D. Cal. 1995).

2. In this case, there is no dispute that the Court has jurisdiction over this matter and the

LUDC submitted a certified claim to the Contracting Officer. The Government, however,

contends that the Court does not have jurisdiction over LUDC’s damages that exceed the

$526,450 amount in LUDC’s certified claim because this increased amount was not certified

and submitted to the Contracting Officer. See Dkt. #31 at 7. LUDC contends, however, that

certification is not necessary for breach of contract claims like breach for cardinal change, citing

Air-A-Plane Corp. v. United States, 408 F.2d 1030 (Ct. Cl. 1969). LUDC’s reliance on this preCase 2:05-cv-02146-RSL Document 42 Filed 10/10/07 Page 13 of 20
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5

 See, e.g., Justin Sweet, The Amelco Case: California Bars Abandonment Claims in Public

Contracts, 32 Pub. Cont. L.J. 285 (2003) (“Originally, the [cardinal change] concept had a jurisdictional

function. . . . To get to a court . . . the claimant had to show that there had been a breach of contract. To

support its claim of a breach, the claimant would contend that there had been many more changes

ordered than could have been expected or, less commonly, that the scope of the change had exceeded

the power granted to order changes. The Federal Contract Disputes Act of 1978 eliminated the

jurisdictional problem. This gave the claimant a choice. It might go to the U.S. Claims Court or to an

agency board of contract appeals.”) (emphasis added).

6

 This legal issue, however, is not dispositive here because of the Court’s conclusion below that

LUDC is not entitled to recover any damages in this case.

MEMORANDUM OF DECISION -14-

CDA case for jurisdictional purposes is misplaced.5 But, because the Court has found that the

claims presented in this case are the same as those presented to the Contracting Officer, the

monetary relief sought in this case above the $526,450 in the certified claim did not need to be

presented to the Contracting Officer and recertified.6

 See Tecom, Inc. v. United States, 732

F.2d 935,938 (Fed. Cir. 1984) (“[T]he general principle [is] that a monetary claim properly

considered by the contracting officer . . . need not be certified or recertified if that very same

claim (but in an increased amount reasonably based on further information) comes before a

board of contract appeals or a court.”) (emphasis in original). 

B. Breach of Contract

3. “When the United States enters into contract relations, its rights and duties therein are

governed generally by the law applicable to contracts between private individuals.” Franconia

Assocs. v. United States, 536 U.S. 129, 141 (2002) (internal quotation marks omitted). 

Accordingly, the Court here applies “principles of general contract law.” Id. Interpreting a

contract starts with the “plain meaning” of the agreement. McAbee Constr., Inc. v. United

States, 97 F.3d 1431, 1435 (Fed. Cir. 1996). A court will “give the words of the agreement their

ordinary meaning unless the parties mutually intended and agreed to alternative meaning.” 

Harris v. Dep’t of Veterans Affairs, 142 F.3d 1463, 1467 (Fed. Cir. 1998). Contract

interpretation must be undertaken “in a manner that gives meaning to all of its provisions and

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7

 LUDC has failed to show as a matter of law that the failure to provide the bridge log in this

case entitles LUDC to the presumption that a knowledgeable ship’s engineer was available and that this

engineer was required to be on-board and available for the contract period. Dkt. #34 (Plaintiff’s Trial

Brief) at 25-26.

MEMORANDUM OF DECISION -15-

makes sense.” McAbee, 97 F.3d at 1435. While “ambiguities in contracts drawn by the

Government are construed against the drafter,” terms are ambiguous only if they are

“susceptible to more than one reasonable interpretation.” Blount Bros. Constr. Co. v. United

States, 346 F.2d 962, 973 (Ct. Cl. 1965); McAbee, 97 F.3d at 1435. Based on this authority,

and the findings set forth above, the Court concludes that the Government did not breach the

contract as claimed by LUDC by: (1) providing inadequate drawings and specifications, (2)

failing to provide a full-time engineer,7

 (3) failing to provide timely responses to CPRs, (4)

rejecting estimated costs under Contract section H.29, (5) failing to compensate LUDC for the

additional time the Vindicator remained at LUDC’s pier, (6) failing to compensate LUDC for

disruptions caused by excess fuel, and (7) globally disrupting the project.

C. Causation

4. “Recovery of damages for a breach of contract is not allowed unless acceptable

evidence demonstrates that the damages claimed resulted from and were caused by the breach. 

‘The costs must be tied in to fault on defendant’s part.’” Boyajian v. United States, 423 F.2d

1231, 1235 (Ct. Cl. 1970) (quoting River Constr. Corp. v. United States, 159 Cl. Ct. 254, 270

(1962). In the context of delay damages, “[t]he general rule is that where both parties contribute

to the delay neither party can recover damages unless there is in the proof a clear apportionment

of the delay and expense attributable to each party.” William F. Klingensmith, Inc. v. United

States, 731 F.2d 805, 809 (Fed. Cir. 1984) (internal quotation marks and citation omitted). 

Based on the Court’s findings above, LUDC failed to prove by a preponderance that its claimed

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8

 At trial, the use of the 1982 NAVSEA Guidelines on Factors Influencing Cost for Forward

Pricing Change Order Disruption, Delay, Acceleration and Cumulative Effects (the “NAVSEA

Guidelines”) as a means of calculating global disruption damages in this case was hotly contested. See

Ex. 15. Because the Court has concluded that the Government did not breach the Contract as LUDC

contends, and LUDC has not proven causation, the Court does not need to reach the merits of whether

the use of the NAVSEA Guidelines is an appropriate methodology to prove damages in this type of

case. The NAVSEA guidelines, similar to other global approaches like the total cost method, are only a

means of calculating damages. In a breach of contract case, breach and causation must be established. 

See, e.g., Bernhard A. Aaen, The Total Cost Method of Calculating Damages In Construction Cases, 22

Pac. L.J. 1185, 1190-91 (“The total cost method is not a substitute for proof of causation but rather a

method for calculating the amount damages. The total cost method has validity as a technique for

calculating the amount of damages only after establishing the legal obligation to pay damages.”). 

MEMORANDUM OF DECISION -16-

damages were caused by a Government breach.8

D. Implied Warranty

5. “In the world of government contracts, a jurisprudential difference exists between

what are known as ‘design specifications’ and ‘performance specifications.’” Travelers Cas. and

Sur, of Am. v. United States, 74 Fed. Cl. 75, 89 (2006) (citing John Cibinic, Jr. et al.,

Administration of Government Contracts 276-86 (4th ed. 2006)). A performance specification

lays out the “objective without specifying the method of obtaining the objective.” White v.

Edsall Constr. Co., Inc., 296 F.3d 1081, 1084 (Fed. Cir. 2002). In contrast, “[d]esign

specifications . . . describe in precise detail the materials to be employed and the manner in

which the work is to be performed. The contractor has no discretion to deviate from the

specifications, but is ‘required to follow them as one would a road map.’” Blake Constr. Co. v.

United States, 987 F.2d 743, 745 (Fed. Cir. 1993) (quoting J.L. Simmons Co. v. United States,

412 F.2d 1360, 1362 (Ct. Cl. 1969)). Whether a contract is a design or performance

specification is a mixed question of fact and law. Travelers Cas. and Sur. of Am., 74 Fed. Cl. at

86. “[D]etailed measurements, tolerances, materials, i.e., elaborate instructions on how to

perform the contract” together may constitute a design specification. Stuyvesant Dredging Co.

v. United States, 11 Cl. Ct. 853, 860 (1987). Based on this authority and the Court’s findings

above, the Court concludes that the Contract in this case is a design specification contract. 

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 6. In a design specification contract there is an implied warranty that “satisfactory

contract performance will result from adherence to the specifications.” Franklin Pavkov Constr.

Co. v. Roche, 279 F.3d 989, 995 (Fed. Cir. 2002). This implied warranty flows from the

Supreme Court’s decision in United States v. Spearin, 248 U.S. 132 (1918), where the Court

explained:

[I]f the contractor is bound to build according to plans and specifications prepared

by the owner, the contractor will not be responsible for the consequences of

defects in the plans and specifications. This responsibility of the owner is not

overcome by the ususal clauses requiring builders to visit the site, to check the

plans, and to inform themselves of the requirements of the work[.]

Id. at 136 (internal citations omitted).

7. Under this implied warranty, “general disclaimers requiring the contractor to check

plans and determine project requirements do not overcome the implied warranty, and thus do not

shift the risk of design flaws to contractors who follow the specifications.” White, 296 F.3d at

1085 (Fed. Cir. 2002) (citing Al Johnson Constr. Co. v. United States, 854 F.2d 467, 468 (Fed.

Cir. 1988) (“The implied warranty is not overcome by the customary self-protective clauses the

government inserts in its contracts[.]”). “Only express and specific disclaimers suffice to

overcome the implied warranty that accompanies design specifications.” Id. Based on this

authority and the findings above, the Court concludes that Contract section H.4.(i) does not

negate the implied warranty. Even with an implied warranty, however, a contractor must still

prove “that the warranty was breached and that [its] damages were caused by the breach.” 

Hercules Inc. v. United States, 24 F.3d 188, 198 (Fed. Cir. 1994). The Court concludes that

LUDC did not meet its burden on either of these requirements.

8. First, although design specifications are intended to provide a contractor with a

detailed guide on how to complete a project, they “need not be paragons of perfection” but must

simply be “reasonably accurate.” Travelers Cas. and Sur. of Am., 74 Fed. Cl. at 89 (citations

omitted). A defective specification or drawing is one that is “so faulty as to prevent or

unreasonably delay completion of the contract performance.” Wunderlich Contracting Co. v.

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United States, 351 F.2d 956, 964 (Ct. Cl. 1965). The government’s documents must be

“substantially deficient or unworkable” in order to be considered a breach of the contract. Id. 

9. Here, based on the Court’s findings and the testimony from LUDC’s expert Stanley

Stumbo, the Court concludes that the Government did not breach the implied warranty that the

drawings and specifications are free from design defects. Furthermore, most of the design errors

identified by LUDC were situations where there was a patent mistake in the conversion

drawings, and in these circumstances, LUDC had a duty to inquire about the drawing conflict

before proceeding. See White, 296 F.3d 1085 (“The implied warranty . . . does not eliminate

the contractor’s duty to investigate or inquire about a patent ambiguity, inconsistency, or

mistake when the contractor recognized or should have recognized an error in the specifications

or drawings.”). Additionally, even to the extent that there were design errors, LUDC failed to

prove that these errors caused its claimed damages. The fact that the four bids were close also

supports the conclusion that the bid package was sufficiently complete.

E. Cardinal Change

10. “[A] cardinal change is a breach. It occurs when the government effects an alteration

in the work so drastic that it effectively requires the contractor to perform duties materially

different than those originally bargained for. By definition, then, a cardinal change is so

profound that it is not redressable under the contract, and thus renders the government in

breach.” Allied Materials & Equip. Co., Inc. v. United States, 569 F.2d 562, 563 (Ct. Cl. 1978). 

“A cardinal change can occur even when there is no change in the final product because ‘it is the

entire undertaking of the contractor, rather than the product, to which we look.’” Rumsfeld v.

Freedom NY, Inc., 329 F.3d 1320, 1332 (Fed. Cir. 2003) (quoting Edwin R. Marden Corp. v.

United States, 442 F.2d 364, 370 (Ct. Cl. 1971). “The finding of cardinal change is ‘principally

a question of fact.’” Id. (quoting Allied Materials, 569 F.2d at 565). “There is no exact formula

for determining the point at which a single change or a series of changes must be considered to

go beyond the scope of the contract and necessarily in breach of it. Each case must be analyzed

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9

 In its trial brief, LUDC further confuses this claim by asserting that it is based on the equitable

doctrine of quantum meruit. See Dkt. #34 at 33. Recovery in quantum meruit is dependant on a

contract either implied-in-law or implied-in-fact. Int’l Data Prods. Corp. v. United States, 492 F.3d

1317, 1326-27 (Fed. Cir. 2007). “An implied-in-fact contract is an agreement founded upon a meeting

of the minds, which, although not embodied in an express contract, is inferred, as a fact from conduct of

the parties showing, in the light of the surrounding circumstances, their tacit understanding. By

comparison, an implied-in-law contract is a fiction of law where a promise is imputed to perform a legal

duty, as to repay money obtained by fraud or duress.” Teets v. Chromalloy Gas Turbine Corp., 83 F.3d

403, 407 (Fed. Cir. 1996) (internal citations and quotation marks omitted). At trial, LUDC did not

present evidence supporting recovery based on an implied contract justifying recovery in quantum

meruit.

MEMORANDUM OF DECISION -19-

on its own facts and in light of its own circumstances, giving just consideration to the magnitude

and quality of the changes ordered and their cumulative effect upon the project as a whole.” 

Wunderlich, 351 F.2d at 966. 

11. Based on this authority, and the findings set forth above, the Court concludes that

there was no cardinal change. The changes that occurred in this case were redressable under

section H.20 of the Contract. Section H.29 also expressly states that there will be growth and

new work and the Government did not exceed its reservation for this work.

F. Unjust Enrichment

12. LUDC’s claim for “unjust enrichment” is mis-named. See Dkt. #1 (Complaint) at 9

(“Claim for Breach of Contract – Unjust Enrichment).9

 “[T]he proper cause of action is

restitution; unjust enrichment is an element of a claim for restitution not an independent cause

of action.” Morse Diesel Int’l, Inc. v. United States, 66 Fed. Cl. 788, 794 n.5 (Cl. Ct. 2005)

(citing Restatement of Restitution § 1 (1937) (“A person who has been unjustly enriched at the

expense of another is required to make restitution to the other.”). “To succeed on a claim of

restitution based on a theory of unjust enrichment, [plaintiff] must establish the following

elements: (1) a benefit conferred on the [defendant] by the [plaintiff]; (2) an appreciation or

knowledge by the [defendant] of the benefit; and (3) the acceptance or retention by the

[defendant] of the benefit under such circumstances as to make it inequitable for the [defendant]

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to retain the benefit without payment of its value.” Int’l Air Response v. United States, 75 Fed.

Cl. 604, 612 (Cl. Ct. 2007) (internal quotation marks omitted). In this case, based on the

Court’s findings above, the Government compensated LUDC for benefits received and therefore

LUDC is not entitled to recovery based on a theory of unjust enrichment.

IV. CONCLUSION

Based on the findings recited above and the Court’s conclusions of law, the Court finds

in favor of defendant on all of plaintiff’s claims for breach of implied warranty, breach of

contract for cumulative delay and disruption, cardinal change, and unjust enrichment. The Clerk

of Court is directed to enter judgment in favor of defendant and against plaintiff.

DATED this 10th day of October, 2007.

A

Robert S. Lasnik

United States District Judge 

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