ARMED SERVICES BOARD OF CONTRACTAPPEALS Appeal of

-- ) ) Jaynes Corporation ) ) Under Contract No. W912PL-09-C-OOIO ) APPEARANCE FORTHE APPELLANT:

APPEARANCES FORTHE GOVERNMENT: ASBCA No. 59234

Judith Ward Mattox, Esq.

Colorado Springs, CO Thomas H. Gourlay, Jr., Esq.

Engineer ChiefTrial Attorney John F. Bazan, Esq.

EngineerTrial Attorney U.S. Army Engineer District, Los Angeles OPINION BYADMINISTRATIVEJUDGE CLARKE This is a quantum case relating to our 7 May 2013 Rule 12.3 and Rule 11 decision in Jaynes Corporation, ASBCA No. 58385. The Boardhasjurisdiction pursuantto the Contract Disputes Act (CDA), 41 U.S.C. §§ 7101-7109. DISCUSSION The Army Corps ofEngineers awarded ContractNo. W9l2PL-09-C-OO10 to Jaynes Corporation (Jaynes) on 26 May 2009 to design and build an unmanned aircraft systems operations facility at Creech AirForce Base, Indian Springs, Nevada. 

### Jaynes Corporation, ASBCA No. 58385, 13 BCA**~** 35,311 at 173,348. Jaynes claimed thatthe government improperly rejected certain pipe to be used in a fire sprinkler system. In our 7 May 2013 decision the Board found "[t]he government changed the contract when it rejected appellant's initial pipe submittal. Appellant is entitled to recover its costs associated with the change, plus CDA interest on that amount from the date ofreceipt of the claim by the contracting officer." 

### Jaynes, 13 BCA**~** 35,311 at 173,353. We sustainedthe appeal on entitlement and remanded the matterto the parties to determine quantum. 

### Id. Theparties were unable to agree on quantum and on 1April 2014 we docketed appellant's request that the Board determine quantum as ASBCA No. 59234. Jaynes claims increased costs of$56,305 plus CDA interest from 20 June 2012 (app. br. at 2; app. reply hr. at 7). Although the government challenges certainprofit and Jaynes' failure to creditthe governmentwith salvage value ofthe rejectedpipe, it does not dispute the accuracy ofthe itemized costs that Jaynes presents orthe 20 June 2012 date. While the government admits that it "mustpay Jaynes reasonable costsrelated to whatthis constructive change caused Jaynes in damages" (gov't br. at 1 ), it makes several arguments in its defense ofquantum that webriefly discuss. 

### Jaynes' Quantum Numbers Jaynes' 20 June 2012 certified claim is inthe amount of$56,305. 

### Jaynes, 13 BCA

### ii 35,311 at 173,352. This amount is based on Southland Industries, Inc., Jaynes' pipe subcontractor, calculation ofthe cost ofthe replacement Wheatland1pipe of$50,579.70 (app. br. at 2, ex.Bat 5of11). This amount included a 17% mark-up for "Margin" (app. br., ex.Bat 5of11). Appellant included an affidavit from Mr. Nicolas Sfeir, VP Southland Industries, stating that a "mark-up" of 17%margin was their normal rate for similar governmentwork (id. at 2of11). We interpret margin to include both overhead andprofit. Appellanttakes Southland's $50,579.70 and calculates its claim as follows: Cost for Material (Schedule 40 Pipe) Appellant's Overhead and Profit (10%) Appellant's Bond and Insurance Total {App. br. at 2, ex.Bat 5of11) 

### Adjustments to Jaynes' Quantum Numbers $50,579 $ 5,058 $ 668 $56,305

In his affidavit, Mr. Sfeir explains thatthe cost ofmaterials amount of$28,221.39 used above was an estimate and thatthe actual costwas $27,434.69. Therefore, the $50,579.70 must bereduced by $786.70 for a value of$49,793.00. The claim value is then changed as follows: Cost for Material (Schedule 40 Pipe) Appellant's Overhead and Profit (10%) Appellant's Bond and Insurance Total (App. br., ex.Bat 1 of 11, ex.Cat 13-16of16) $49,793.00 $ 4,979.30 $ 668.00 $55,440.30

1The support for this amount states that it is for the rejected Alliedpipe, butthe invoices and Mr. Sfeir's affidavit establish that Southland usedthe Wheatland numbers (app. br., ex.Bat 1, 5of11).

2Salvage Value of RejectedAlliedPipe Appellant states that the salvage value ofthe rejected Alliedpipe is $1,295 (app. br., ex.Bat9of11). The government does not contestthis amount, but contends that this amount should be credited to the government in the total quantum calculation. Appellant counters that it need not credit the governmentthe salvage value ofthe pipe because the contract was a fixed-price contract and not a time and materials contract (app. reply br. at 3). Appellant provides no case precedent in support ofthis position and its cite to a FARprovision is unpersuasive. We agree with the government that it should receive a credit in the amount of$1,295 for the salvage value ofthe Allied pipe retained by appellant. The value ofthe claim then becomes $55,440.30

- $1,295.00 = $54,145.30. Unreasonable Profit The governmentpoints outthat appellant includes 10% mark-up for its overhead and profit and that its subcontractor included a 17% mark-up in its calculation. We considerJaynes' 10% for both profit and overhead reasonable. We accept Mr. Sfeir's assertion in his affidavitthat 17% "mark-up" for overhead and profit is Southland's usual rate and therefore consider it reasonable. Design Costs The government objects to Southland including $400 in "Design Impact" costs associated with the replacement Wheatland pipe (app. br., ex.Bat 5of11). The government contends it should be responsible for this amount because "Jaynes, however, was already obligated underthe contractto design the system and has been paid for the design" (gov'tbr. at 5). The government overlooks Southland's 4 May 2012 letter that explains the design time was spent on material submittals (app. br., ex. B at 4 of 11). We find the $400 spent on submittals for government approval ofthe replacementpipe reasonable. RejectedAlliedPipe The government makes several arguments2 based on the ideathat since the government rejected the Alliedpipebefore Jaynes purchased it, Jaynes caused its own damage. We agree with appellant's characterization ofthis argument as "absurd" {app. reply br. at 4). The government neverhadthe right to reject the Allied pipe that was fully in conformance with contract requirements. The government, primarily ACO Caskie, was wrong on 2 December 2011, wrong on 2 February 2012, wrong on 10 April 2012, wrong on 3 May 2012, wrong on 4 May 2012 and wrong on 8May 2012.

2 Arguments D and E at government briefpages 5 to 7.

3

### Jaynes, 13 BCA**~** 35,311 at 173,349-52, findings 4-9, 12. The government was consistently andpersistently wrong and we will not shiftthe fault to appellant. 

### The Government's CostDifferenceArgument The government's final argument is that the proper measure ofdamages is "the reasonable costtoperform the work as originally required and the reasonable cost to perform the work as changed" (gov'tbr. at 7). While this premise may be an accurate description ofthe computation ofan equitable adjustment under the Changes clause, the government's argument does not follow this principle in that it suggests that the damage simply be the difference in the cost ofthe Allied pipe and the Wheatlandpipe when appellant, due to the government's change had to buy both pipes. We reject this method ofcalculating damages because it would result in Jaynes paying for both the Allied pipe and the Wheatland pipe and recovering only the difference in cost which is certainly not an equitable adjustment. 

### Quantum Decision Jaynes was entitledto use the Alliedpipe and since it was required to replace the Alliedpipe with Wheatland pipe, Jaynes is entitled to recover its increased costs associated with the constructive change of$54,145.30plus CDA interest from 20 June 2012. CONCLUSION Jaynes is entitled to $54,145.30 plus CDA interest from 20 June 2012. Dated: 19 May 2015

RICHARD SHACKLEFORD Administrative Judge Vice Chairman Armed Services Board ofContractAppeals

4 Administ tive Judge Armed Services Board ofContractAppealsI certify that the foregoing is a true copy ofthe Opinion and Decision ofthe Armed Services Board ofContractAppeals in ASBCA No. 59234, Appeal ofJaynes Corporation, rendered in conformancewith the Board's Charter. Dated:



### 5 JEFFREY D. GARDIN Recorder, Armed Services Board ofContract Appeals