Case Name: KAISER INDUSTRIES CORPORATION v. THE UNITED STATES
Court: United States Court of Claims
Jurisdiction: United States
Decision Date: 1965-01-22
Citations: 169 Ct. Cl. 310
Docket Number: No. 488-59
Parties: KAISER INDUSTRIES CORPORATION v. THE UNITED STATES
Judges: Before Cowen, Chief Judge, Laramore, Dureee, Davis and Collins, Judges.
Reporter: United States Court of Claims Reports
Volume: 169
Pages: 310–384

Head Matter:
KAISER INDUSTRIES CORPORATION v. THE UNITED STATES
[No. 488-59.
Decided January 22, 1965]
George O. Butler for plaintiff.
Alfred H. 0. Boudreau, Jr., with, whom was Assistant Attorney General John W. Douglas, for defendant.
Before Cowen, Chief Judge, Laramore, Dureee, Davis and Collins, Judges.

Opinion:
Per Curiam :
This case was referred pursuant to former
Rule 45(a) (now Rule 57(a)) to Trial Commissioner Saul Richard Gamer, with directions to make findings of fact and recommendations for a conclusion of law. The commissioner has done so in an opinion and report filed March 6, 1964, Exceptions to the commissioner's findings were made by the parties, briefs were filed by the parties and the case was submitted to the court on oral argument by counsel. Since the court is in agreement with the opinion, findings and recommendation of the trial commissioner, with minor modifications as hereinafter set forth, it hereby adopts the same as the basis for its judgment in this case. Therefore, plaintiff •is entitled to recover of and from the United States in the amount of seventy-one thousand, five hundred nine dollars and four cents ($71,509.04), and judgment is entered for plaintiff in this matter in this amount.
' Commissioner Gamer's opinion, as modified by the court, is as follows:
A construction contractor here claims approximately $185,-000 as .an equitable adjustment under the "Changed Conditions" article of its contract with the Army Corps of Engineers. This article provides that the contractor shall receive such an adjustment in its contract price if it encounters either "(1) subsurface or latent physical conditions at the site differing materially from those indicated in the contract, or (2) unknown physical conditions at the site, of an unusual nature, differing materially from those ordinarily encountered and generally recognized as inhering in work of the character provided for" in the contract.
Plaintiff's contract was for the repair of stone revetments at various locations along the shores of the McNary Dam Reservoir on the Columbia River in the States of Washington and Oregon. The embankment slopes were to be reshaped and riprap and random rock were to be placed thereon. The original contract amount, based on estimated quantities, was $1,028,466.
In this part of the country it is difficult to locate suitable rock for such a project. Most of the rock in the region is of basalt formation from lava flows and a considerable part of it is of a type that breaks too small for use as riprap of the size required. Defendant itself owned two quarries which the contract recited were "approved" as sources of rock for the project and which were made available to the successful bidder without charge. Other quarry sources could not be used without the permission of the contracting officer. In any event, as a practical matter there were no other known quarries which were believed to contain sufficient quantities of the kind of rock required and were so located as to be economically feasible for use under the contract. Defendant had spent considerable time over a period of years in making studies of potential sources of rock suitable for such work.
Plaintiff selected one of the two quarries made available by defendant, known as the Hover Quarry. However, after a relatively short and difficult túne during which, with an abnormal amount of waste, it was able to obtain some suitable rock, it abandoned the quarry. What rock that was in the quarry which could, in any economical fashion, be used to complete the requirements of the project was, insofar as any reasonably foreseeable successful operation was concerned, exhausted when plaintiff abandoned it. Outside of a satisfactory vein of rock which gave out within the first few weeks of operation, and from which plaintiff was able to produce the largest sized rock required by the contract, most of the rock plaintiff handled shattered, crumbled, and pulverized on handling. As operations proceeded further into the original cut of satisfactory rock, as well as in other areas, it became increasingly difficult to find sound rock. Other areas probed in the face of the quarry produced rotten and decayed rock interspersed with boulders, some of which were not suitable for production purposes. When apparently sound rock faces were blasted, the rock would crumble. Powder blast reductions to absolute minima failed to cure the situation. Seemingly good rock simply flaked or deteriorated when dug or, when loaded with the shovel on to the trucks and the barges, would shatter and disintegrate. Although it was originally reasonable to assume waste of approximately 15-20 percent, plaintiff's waste was over 60 percent. By the time plaintiff left Hover, the excavated perimeter constituting the quarry face extended over the unusually large area of 1,350 feet. There was no reasonable prospect that further exploration would produce any substantially different results. In short, it turned out that the quarry was not a commercially operable one at all for the purposes of supplying any appreciable amount of rock for the project. Upon discovery of the situation and prior to abandoning the quarry, plaintiff made a timely request for an equitable adjustment under Article 4.
After plaintiff moved from Hover to the other "approved" quarry, known as Cold Springs, there was no further difficulty. This was an excellent quarry that easily supplied approximately 300,000 tons of rock with a waste factor of approximately 10 percent, and indeed plaintiff completed the entire project, even as enlarged by change orders, 2 months ahead of time.
Plaintiff's claim for an equitable adjustment was denied both by the contracting officer and the Corps of Engineers Board of Contract Appeals.
Certainly, encountering a condition in a "quarry" — let alone an "approved" quarry — which makes it not a usable quarry at all for the purposes involved, should, it seems clear, normally be considered an "unusual" one not "ordinarily encountered and generally recognized as inhering in" quarrying operations. Thus, it seems almost self-evident that plaintiff would be entitled to an equitable adjustment under this plain language of the above-quoted second part of Article 4. Cf. Tobin Quarries, Inc. v. United States, 114 Ct. Cl. 286, 84 F. Supp. 1021 (1949), where the claimant was held to be entitled to an equitable adjustment under Article 4 when it turned out that the quarry rock "was quite friable, and it proved impossible to get rock of tlie required size without excessive waste." (p. 332)
' The reasons why defendant denied plaintiff such an adjustment appear to lie primarily in the language of the first part of Article 4. Defendant contends that the conditions plaintiff encountered at Hover did not differ "materially from those indicated in the contract" and that, instead, an intelligent and knowledgeable reading and interpretation of the specifications and drawings would have disclosed these very conditions. This defense also carries over to the second part of the article, the provisions of which apply only to "unknown" physical- conditions of the kind described. Defendant argues that plaintiff should have known of or reasonably anticipated the conditions encountered by what it contends the specifications and drawings clearly indicated, as well as by what should have been obvious had plaintiff made a careful investigation of the quarry sites and certain core borings therefrom which were available for inspection by bidders. Since plaintiff denies these contentions and, interpreting the specifications and drawings in quite different fashion, claims entitlement to an equitable adjustment on the basis of the first part of Article 4 as well as the second, and because defendant's defense seems to cut across both parts, it becomes necessary to examine the pertinent specifications and drawings to determine what was "indicated" therein and what was reasonably "knowable" or predictable therefrom, as well as from the site investigations and the core borings. .
Defendant appears to place greatest reliance upon paragraph SW-5 of the specifications, subparagraph a of which stated that Hover was "an approved source of stone for work included under Schedule C" and that Cold Springs was such an approved source "for work included under Schedule B," but that if the contract was awarded under Schedule A, "the Contractor may use either site or others as allowed by the specifications." The subparagraph went on to state, however, that in the latter event, which was the situation here, "the Government will not guarantee that" Hover "will produce satisfactory riprap for Schedule B work without excess fines' or that" Cold Springs "will produce satisfactory riprap for Schedule C work without excess oversize." Sub- paragraph b added that if the award went to two contractors, one to perforin the Schedule B work and the other the Schedule C work, then "the contractor performing work under Schedule B will not be permitted to use Site A [Hover] without prior approval from the Schedule C contractor, and the Contractor performing work under Schedule C will not be permitted to use Site B [Cold Springs] without prior approval of the Schedule B Contractor." Defendant argues that the proper interpretation of these provisions of sub-paragraphs a and b is that Hover was not approved for Schedule B work, which contained the units calling for the larger sized rock.
These "Schedule" references were based upon, and had meaning only in view of, the following background circumstances :
This project had been previously advertised for bids, but only two bids were submitted, one of them being plaintiff's. Both bids exceeded the Government's own estimate by impermissible amounts, necessitating their rejection and a re-advertisement. This time defendant offered contractors the opportunity of bidding on less than the whole project. It did so by splitting the project into two parts, one called the "Schedule B" portion and the other the "Schedule C." Under the previous invitation, the project, although advertised under "One Single Schedule", had been divided into 12 units "for purposes of acceptance" of the work. The second invitation deleted one of these units, grouped 8 of the remaining 11 into a "Schedule B", and 3 into a "Schedule C", with bidders being permitted to submit bids limited to the separate schedules. Nevertheless, bidders could still bid upon the entire project, consisting of all the units grouped under "Schedule A."
However, splitting the project into two parts would necessarily produce problems with respect to the use of the two approved Government quarries. Under the original invitation and specifications, the successful contractor could use either quarry. Under the new plan, however, it was conceivable that the two successful contractors might want to use the same quarry, resulting in interference and operational problems. It was obviously necessary, on a two Schedule basis, to assign Hover to one contractor, and Cold Springs to the other. Based on various factors, defendant had concluded, even prior to the first call for bids, that the Hover rock would break smaller than the Cold Springs rock. Defendant advised prospective bidders of this conclusion on a "Revetment Sources" contract drawing, referred to as Sheet 12, which was included in the first call for bids. This drawing depicted the layout of both quarries and graphically logged the results of the core borings from them. A "Note" thereon stated:
Logs give general character of rock. The contractor is urged to examine cores at the District Office for detailed information. In general rock at Quarry Site "A" [Hover] will break smaller and contain more fine stone than at Quarry Site "B" [Cold Springs].
This drawing and note was also part of the second invitation and the contract entered into with plaintiff. Thus specification SW-5 made the quarry assignments on the basis of Hover being assigned to the part of the project requiring most of the smaller size rock, being Schedule C, and Cold Springs being assigned to the Schedule B work, which contained most of the larger size rock. However, even on a two Schedule basis, either contractor could also use the other quarry provided he obtained the consent of the occupying contractor.
Obviously, to a Schedule A bidder — one bidding the entire job — these quarry assignments would be meaningless, for such a contractor was specifically permitted to use either quarry without restriction.
Therefore, defendant's interpretation of this particular provision of the specifications as amounting to an approval of Hover only for the limited work under Schedule C, which contained the bulk of the small rock, and that it constituted a plain warning that Hover would not be satisfactory for the balance of the project and its substantial quantities of larger rock, does not comport with its obvious purpose. The part of this specification upon which defendant relies so heavily could reasonably have been read only as a quarry allocation in the event of separate contracts. Since plaintiff was bidding on the entire project (Schedule A) and since the specifications told it that if it were successful it "may use either site," it justifiably had no concern about such an allocation. The inapplicability to plaintiff's situation of these "Schedule B" and "Schedule C" references is made manifest by the fact that when the final contract was assembled and executed, these schedules were not even incorporated.
Nor, in light of other specification and drawing provisions, is the statement in SW-5 that "the Government will not guarantee that Site A [Hover] will produce satisfactory rip-rap for Schedule B work without excess fines or that Site B will produce satisfactory riprap for Schedule C work without excess oversize" an additional clear warning, as defendant contends, that Hover would turn out to be the kind of quarry it was. Contrary to defendant's contention, this was not, and could not have been, designed to give plaintiff a special and pointed warning against Hover. The aforementioned Sheet 12, included in the original invitation, reiterated verbatim in the second invitation, and included as part of the contract drawings, made substantially the same statements about Hover. Thus SW-5 added nothing new in this respect. That Hover in all probability would not produce the large size rock "without excess fines" had also been discussed with plaintiff at a prebid conference in connection with the first invitation. The drafter of this specification made plain that the reference therein to the Hover "excess fines" did not constitute "anything new" since Sheet 12 already stated that Hover rock would "break smaller and contain more fine stone" than Cold Springs rock. And defendant's chief esti mator testified that insofar as he was concerned, SW-5 did not "have a great deal of significance."
These references to excess fines could not fairly be taken to mean that for all practical purposes the quarry could not, as it turned out, be used at all for the larger sized rock. It rationally meant that instead of the normal amount of quarry waste for the type of operation herein involved, i.e., approximately 10 percent, a contractor might expect 15 or 20 percent, or perhaps even somewhat more. It could hardly mean, however, to cover the unusual amount of over 60 percent for the relatively small amount of good large sized rock that was there and then its almost complete disappearance.
Similarly, it is not understood how the provisions in SW-55 lend support to defendant's position that the specification withdrew approval of Hover as a source of rock for Schedule B work. All that subparagraph did, in the event of a two contract situation, was to require approval by the occupying quarry operator before the other operator would be permitted to use his quarry. With such approval, either or both quarries could be used by each contractor. To imply from this provision, as defendant urges, a withdrawal of the prior Government approval of Hover for Schedule B work on the speculation that it is unlikely that such an occupying contractor approval would be given is not justified.
Going beyond SW-5 upon which defendant places chief •reliance, and examining other pertinent parts of the specifications against which SW-5 is also to be interpreted, there can be little doubt that the subsurface condition which plaintiff encountered "differed materially from those indicated in the contract."
Specification TP [Technical Provisions] l-04b(l), headed "Material — Riprap-Sources", flatly stated that "the Government will make available to the Contractor, as approved quarry sites: Hover Quarry-Site 'A' and Cold Springs Quarry-Site 'B', as shown on the plans and as hereinbefore specified." (Emphasis supplied.) That these approvals were based upon at least some measure of Government satisfaction with the quality of the quarries is "indicated" by the succeeding statement in the same specification that "these sites have been explored by core drilling at locations shown on the plans." The Hover site was made "available without restrictions as to its use." Similarly, Government testing of the rock from these quarries prior to their approval was indicated by the statement in subparagraph (3) of this specification, headed "Quality", that defendant could employ "suitable tests and service records to determine the acceptability" of the quality of the stone, and that: "In the event suitable test reports and service records that are satisfactory to the Contracting Officer are not available, as in the case of newly operated, or opened sources, such material" was subject "to such examination and tests as are necessary to determine its acceptability for use." (Emphasis supplied.) The clear inference was that testing had already been accomplished at the two approved quarries since they had already been subjected at least to core borings. Contractors could not use quarry sources other than Hover or Cold Springs without the approval of the contracting officer (TP 1-04&). Moreover, Specification SC [Special Conditions] -6, "Physical Data", stated: "The physical conditions indicated on the drawings and in the specifications are the result of site investigations by surveys, core borings and reconnaissance," and SC-24, "Material Sources",' further stated: "Government-owned sources of riprap for use in the various phases of work under this contract are shown on the drawings. The Government has made extensive investigations of riprap sources indicated on the drawings and the records of these investigations may be examined by the bidders."
Of particular importance is the above-mentioned contract drawing Sheet 12. This drawing, cannot be dismissed with the statement that it gave, as set forth in the above-quoted note, only "general" information, with the contractor being Obliged to assume complete responsibility based upon its own examination of the core borings and the site. In the language of Article 4, it "indicated" more than that. Defendant had taken five core borings from Hover and two from Cold Springs, and that drawing, after showing the layout of each quarry site, set forth logs of these borings. These logs represented the Government geologist's evaluation of the cores. As to each core at Hover, the logs referred to the first 13-15 feet of rock as being composed of hard basalt. Two referred to the rock as "sound." While all also made some reference to fractures, they were not of a character to nullify the references to the rock as being "hard" and "sound." Three logs followed the "hard" and "sound" descriptions with the statement "with some fractured zones," one merely stated "with fractured zones" and the fifth stated "fractured." Thus, despite fractured zones or areas, the indications were that there were also large areas of hard, sound, basalt. One of the two Cold Springs logs also described the core as being "highly fractured" at both the top and the bottom of the quarry face. No reference to the rock's being "sound" is contained on either Cold Springs log, although from past and current operations, Cold Springs was known to be an excellent quarry. Certainly, the core borings at Hover, as interpreted by the Government's own geologist, and as set forth on the contract drawing, more than "indicated" that Hover was a reasonably good commercial quarry for the purposes of this project, although, as the note on the sheet stated, a greater than normal allowance for fines or waste should be made if this quarry was to be used.
Such general caveatory language of other parts of the specifications upon which defendant relies as "Approval of a source shall not be construed as approval of all material from that source" (Par. SC-24); "the Government does not guarantee that all materials from these sources will meet the size or durability requirements of these specifications" (Par. TP l-04a); and "Unsound rock encountered in approved quarries will be rejected for use as riprap" (Par. TP 1-045(3)), cannot serve to deprive Article 4 of all force and effect or to negative completely the favorable "indications" inherent in the other parts of the contract specifications and drawings. No one could logically contend that approval of a quarry constituted a guarantee of perfection of the quarry and acceptability of 100 percent of the rock therefrom. But this cannot mean that if, after considerable contractor expense and effort, an "approved" quarry produces an insub stantial amount of satisfactory rock, defendant has no obligation under Article 4 to do anything about it because, under the aforementioned provisions, it had no obligation to accept any rock at all from the quarry.
Indeed, defendant does actually go so far as to contend that it was up to plaintiff to deliver acceptable rock, that defendant had no responsibilities whatsoever in the matter, that defendant was simply making its quarries available to plaintiff, and that plaintiff could use them, or, with the contracting officer's permission, any other quarry sources it desired. Thus, says defendant, "approval" meant nothing more than permission to use, without any obligation on defendant's part as to what the contractor would find. In this manner, defendant would in effect read Article 4 out of the contract entirely insofar as quarry sources or operations are concerned. Manifestly, this would not be proper. Loftis v. United States, 110 Ct. Cl. 551, 628, 16 F. Supp. 816 (1948). The quarry sources were an integral part of the contract, there were no known suitable quarries in this part of the country other than the two Government-owned ones, the Government went to considerable trouble to take core borings from both of them which were made available to bidders, it made logs of the borings which were incorporated in Sheet 12 and it made, as shown, various other statements about quarry sources. The very heart of this undertaking was the obtaining of suitable rock in a reasonably economical manner from a satisfactory quarry. It would be illogical to conclude that Article 4, specifically addressed to subsurface conditions, was inapplicable to the only part of the project that involved such operations. The very purpose of Article 4 is to prevent bidders from adding high contingency factors to protect themselves against unusual conditions discovered while excavating, for obviously no one can ever know with certainty what will be found during subsurface operations. The article is thus expressly designed to take at least some of the gamble out of subsurface operations. Defendant's attempt to divest itself of all contract responsibility with respect to these subsurface quarry conditions and to throw the entire risk thereof upon the contractor, including even the risk of total quarry failure, cannot, in view of the retention of Arti- ele 4 in the contract, be sustained. As the court stated in Loftis v. United States, supra, where defendant too, by reason of a specification provision, took the position that the claimant "assumed the risk of encountering unstable subsurface conditions this "argument of defendant might be justified if we could ignore the fact that the contract, and of necessity the specifications, also contained Article 4. The purpose of specifications and drawings is to supplement the formal contract by delineating the details of the work to be performed thereunder and not to void an express provision written into the contract." (pp. 627-8.)
Nor can plaintiff's prebid examination of the core borings and the sites fairly be subjected to the harsh criticism defendant makes concerning the adequacy thereof. Both examinations were made with reasonable care. And plaintiff was the only contractor to show up at a prebid conference arranged by defendant. Although trained geologists might debate interminably about the matter, insofar as an examination by a reasonably experienced and intelligent contractor-layman is concerned, there was no clear or obvious indication in the physical appearance of the Hover cores that the rock would act as it subsequently did. Core cracks and fractures frequently result from the extraction process itself and it is often difficult to tell when a crack is caused mechanically through extraction or whether it is inherent in the rock structure. In this respect there was no readily discernible difference between the Hover and Cold Springs cores. Indeed, even a competent geologist might have missed the difficult-to-detect characteristics in the cores upon which defendant now relies.
Plaintiff also inspected the Hover Quarry itself several times. There were two railroad cuts at or near this quarry, the line having been relocated in recent years. The old cut exposure, which was within the confines of the quarry and would constitute the likely area for the development of the quarry face, indicated some good rock as well as some of poorer quality. The new cut, which lay just outside the quarry limits but which could reasonably be considered as representative of the rock within the closely adjoining quarry area, indicated the presence of columns of good, large rock. It was known that when the new cut was made, large rock for riprap had been taken therefrom, some of it of such size ns to require secondary breakage. This was an important factor in causing the Government itself to approve the quarry in the first place. Explosive and construction experts, experienced in quarry and rock operations, accompanied plaintiff in appraising Hover. They also felt it would be satisfactory. Here again, although geologists might debate the significance of certain visual signs in the cuts, to a reasonably competent contractor-layman these cuts gave no plain warning, as defendant contends, that a contractor should stay away from Hover. Indeed, as shown, defendant's own approval of Hover was in substantial part based on the favorable showings of rock in the cuts and the knowledge of the large riprap that had come from the new cut.
The specifications, drawings, core borings and site investigation considered, plaintiff's selection of the Hover site was not, as defendant maintains, an imprudent, foolhardy act. Indeed, on the basis of what the Government knew and said about Hover, it seems safe to conclude that it was as surprised as plaintiff was that Hover turned out as it did. The record does not indicate that defendant made any kind of special tests of the Hover rock or that it had some peculiar information about Hover which it did not disclose or make available to bidders. At least before the Appeals Board, defendant's witnesses .testified that plaintiff was wholly justified in abandoning Hover and that, indeed, plaintiff had no practical alternative. This is, of -course, consistent with its contention that - plaintiff never should have gone in there in the first place. But if defendant was indeed not surprised, and if in fact it "knew" all along, as it now seems to contend, that Hover would be the kind of a quarry it turned out to be, then certainly it never should have "approved" it for contractor use in the first place. In view of the encouraging statements it did make about Hover, defendant's alleged knowledge would raise delicate and serious questions of misrepresentation or liability based on failure to disclose pertinent information. Potashnick v. United States, 123 Ct. Cl. 197, 105 F. Supp. 837 (1952); Helene Curtis Industries, Inc. v. United States, 160 Ct. Cl. 437, 312 F. 2d 774 (1963). However, defendant's contention based on its "knowledge" is construed to refer only to what it contends should have been the proper interpretation of the specifications, the cores and the railroad cuts, since, as stated, it does not appear that it had any pertinent data or reports which it failed to disclose. Under the circumstances, the situation must be considered comparable to Tobin Quarries, Inc. v. United States, supra, where it was also held that "Neither party expected that, to get proper rock from the" source there involved, "great quantities of material would have to be picked over, most of which would have to be disposed of as waste" (p. 333). Consequently, plaintiff's charges of intentional misrepresentation or deliberate fraud cannot be sustained. In the same way, however, since there were no other reports, data, or information which defendant had and which plaintiff was invited to inspect but nevertheless failed to do so, the case of Flippin Materials Co. v. United States, 160 Ct. Cl. 357, 312 F. 2d 408 (1963), upon which defendant relies, is not in point. And for another important reason is that case distinguishable. As the court there pointedly noted: "Significantly, the contract contained no clause relating to changed sub-surface conditions" (p. 363).
The conclusion that plaintiff did not act unreasonably in selecting Hover is not to deny that a contractor also might well have reasonably concluded that it would be better, considering all factors, to choose Cold Springs. As a result of prior work there, it was a proved quarry. And, despite the substantially larger mobilization costs involved, since so much of the required rock was of the larger size a contractor might well have elected to wrestle with the "excess oversize" (Spec. SW-5) and secondary breakage problem than with the "excess fines", and consequently larger waste, problem at Hover.
But by the same token, Hover admittedly had certain obvious advantages over Cold Springs. A truck haul of approximately V/2 miles from the Cold Springs quarry face to the barge-loading point on the river would be necessary. For the truck route, easements would have to be obtained from property owners. And after the trucks arrived at the riverbank, there was no site in the area for the location of a simple and inexpensive type of barge-loading facility. The natural elevation of the riverbank in this locality exceeded 30 feet above the water, necessitating expensive loading facilities. And to reach water sufficiently deep to accommodate the barges on which the rock was to be loaded, a causeway would have to be constructed from the mainland to an adjoining island where the barge-loading facilities would have to be constructed. Hover presented no such difficulties. It was not only located immediately adjacent to the river, but at a point where there was deep water available for close to the bank barge-loading operations and where, also, an inexpensive type of barge-loading facility could be constructed since the riverbank was only 7 feet above the water. And, since the rock would in all probability break closer to the specification sizes, the secondary breakage operation would be reduced. It seems clear that, considering all aspects of the situation, it was entirely reasonable for a contractor to choose Hover despite the "excess fines" problem. An allowance for "excess fines" did not mean that there would still not be sufficient good rock of all project sizes. Of course, it is here too, as is true in innumerable situations, essentially a matter of degree. Obviously plaintiff could not claim compensation for "excess fines" in amounts reasonably above normal quarry operations. But "excess fines" cannot fairly be construed to cover an enormous percentage of material handled, even a total lack of rock, although that too would indeed literally constitute "excess" fines.
Defendant further contends that a truly efficient operation here for a Schedule A contractor would, in view of what the specifications and drawings said about "excess oversize" at Cold Springs and "excess fines" at Hover, have been to use Hover for the small sized rock, and Cold Springs for the large, thus resulting in a two-quarry operation. Defendant says plaintiff's real trouble arose from attempting to produce the large sized rock from Hover, since the required order of operations called for plaintiff's first working on units requiring a substantial amount of the larger sized rock and which plaintiff was still working on when it abandoned Hover. Hover was and would have been, defendant says, entirely satisfactory for the small sized riprap and "random" rock, for which quarry waste was usable as a source.
Here again, although a two-quarry operation may conceivably have been economically possible and a plausible case made for it, it would not, nevertheless, appear to have been unreasonable for a contractor to decide against the very large costs of mobilizing and operating two quarries. After all, a contractor is understandably interested in as economical an operation as possible. The test is not necessarily what another contractor might, with reason, have defensibly done, and whether he might not, in the long run, have come out as well or even ahead of a one-quarry operator. The real test is whether, in light of everything the contract said about Hover, and all the other facts and circumstances, including the core borings and site investigations, plaintiff acted wholly unreasonably, as defendant maintains, in choosing Hover as the sole source of the project rock. It seems clear that it cannot fairly be concluded that it did.
Nor can significance be attached to the various criticisms defendant makes of plaintiff's operating procedures at Hover, such as its alleged improper use of a grizzly and its alleged failure to strip the overburden, thereby unduly contributing to the waste factor. Insofar as such criticism implies that Hover was a good quarry and would have supplied the required project rock had plaintiff only operated correctly, its position is quite inconsistent with its contention that no prudent Schedule A contractor would have selected Hover at all. It is also inconsistent with its position before the Board that plaintiff was justified in abandoning Hover and that it had no practical alternative. Secondly, while there always can be, of course, legitimate differences of opinion concerning what constitutes the best operating procedures under a given set of conditions, nevertheless all of plaintiff's alleged operating inefficiencies seemingly disappeared at Cold Springs. For there, with the same management, equipment, and crews, it is undisputed that no further troubles were encountered, that production of satisfactory project rock proceeded in a steady and abundant stream, and . that indeed, plaintiff was efficient enough' to complete the project, even as subsequently enlarged, 2 months ahead of time. The evidence shows that plaintiff did erect and use a grizzly at Hover, that no complaint was made at the time that such use was inefficient or improper, and that where there was overburden on a solid rock base which could, as a practical operating matter, be stripped, it was. There was no requirement that plaintiff use a grizzly to produce large riprap. Specification TP 1-06» provided that "the required stone sizes shall be obtained by selective loading at the quarry, use of a grizzly if necessary, at Hover Quarry, or other method or combinations of methods as might be necessary." Plaintiff used the commonly employed selective loading method, and there is no substantial showing that this was under the circumstances improper.
Defendant further contends that even if the contract did indicate that the rock at Hover was hard and "sound", the rock in fact was of such character because there is no disagreement that the 37,500 tons of the larger sized rock that plaintiff was able to produce out of Hover and place as rip-rap was sound in the sense that it performed satisfactorily as riprap once it was successfully placed on the riverbank. But soundness in the context here involved obviously means soundness from the point of view of standing up under the normal handling incident to the operation of a commercial quarry.
In all, defendant accepted approximately 50,000 tons of material from Hover. However, of this amount 25 percent was random material which had no specific gradation requirements and constituted riprap residue. Fifty thousand to sixty thousand tons of material was disposed of as waste. Since 25 percent of the 50,000 tons of pay rock in itself constituted quarry waste that was permitted to be used for project purposes, only 37,500 tons of real riprap came out of Hover. Thus, of approximately 100,000 tons, of material handled at Hover, the percentage of recovery of good rock was only around 37 percent, or an enormous waste factor of over 60 percent. On the first invitation, where the bidding was only on the basis of one Schedule for the entire project, and where, as shown, the information regarding Hover was substantially the same as on the second invitation, defendant's estimators compiled their cost estimate on the basis of obtaining 37,500 tons of- riprap from Hover for use on units which were subsequently included in Schedule B in the second invitation, and, in connection therewith, used a waste factor of only 15 percent (as against 20 percent calculated by plaintiff). Thus, it turns out that defendant itself, when in a position comparable to plaintiff as a one Schedule contractor, used Hover as a source for some of the larger sized rock which defendant now says no prudent contractor should have used.
It is further argued that the Board's decision denying recovery is entitled to finality. To the extent that this dispute properly falls within the Disputes clause of this contract, there was no timely objection to a trial de novo based upon the theory of United States v. Carla Bianchi & Co., Inc., 373 U.S. 709 (1963). Accordingly, the evidence admitted at such trial may be considered by the court. Stein Bros. Mfg. Co. v. United States, 162 Ct. Cl. 802, 337 F. 2d 861 (1963); WPC Enterprises v. United States, 163 Ct. Cl. 1, 323 F. 2d 874 (1963). Moreover, the Board's decision is almost wholly concerned with an analysis of the contract specifications and drawings to ascertain whether, in the language of Article 4, the conditions at the site differed "materially from those indicated in the contract." The Board apparently gave almost conclusive effect to Specification SW-5, evidently feeling that, properly interpreted, it gave contractors a clear warning not to use Hover for the large riprap. Thus, based as it essentially is on an interpretation of the contract, a question of law, its decision lacks finality. Simply because an "equitable adjustment" is involved does not automatically .project the case into the category of that kind of contract dispute to which administrative finality attaches. The fundamental issue is the basic nature of the controversy. When a decision concerning the allowability of an equitable adjustment turns on the proper interpretation of contract provisions, then what is ultimately involved is a question of law. Johnson Contracting Corp. v. United States, 132 Ct. Cl. 645, 656-7, 132 F. Supp. 698 (1955); Guyler v. United States, 161 Ct. Cl. 159, 314 F. 2d 506 (1963); W. H. Edwards Eng'r. Corp. v. United States, 161 Ct. Cl. 322 (1963); WPC Enterprises, Inc. v. United States, supra; Wingate Construction Co. v. United States, 164 Ct. Cl. 131 (1964).
In addition, the Board was, unfortunately, the recipient of important testimony offered by defendant which proved to be quite erroneous. To substantiate its contention that no prudent contractor would, under these specifications and drawings, have chosen Hover as a quarry from which to obtain the larger sized riprap, one of defendant's chief witnesses before the Board testified that the Government's own cost estimate on the first invitation, the one Schedule invitation, was based wholly on Cold Springs. However, as a result of discovery proceedings before this court, it turned out that the Government estimate in question was indeed based upon the production of 37,500 tons of such riprap from Hover and with only a 15 percent waste factor. Defendant's witness who testified erroneously before the Board explained before this court that his Board testimony constituted an honest and unintentional error, and there is no reason whatsoever to doubt this. On the other hand, who can tell what difference the important fact involved might have made in the Board's consideration of the case? Cf. Stein Bros. Mfg. Co. v. United States, supra, where, as a result of discovery proceedings in this court, important memoranda were disclosed of which the Appeals Board was not apprised, and which memoranda went far to rebut the position of the Government's witnesses before the Board as to the proper interpretation of the contract. Finality was, consequently, not accorded to the Board decision.
Further, an important contention in the Government's case before the Board was that SW-5, in the changed wording form incident to the second invitation for bids splitting the project into two parts, and issued, as it was, just 8 days prior to the opening of bids as part of an Addendum, constituted a special warning against Hover. The Government's testimony was that prior to this revised SW-5, Hover was approved without qualification as a quarry from which bidders could reasonably expect to fulfill their entire contract requirements. However, as already pointed out, in the further testimony before this court defendant's own witnesses, including the drafter of the provision, conceded that the provision added "nothing new", and that the second set of specifications and drawings involved in the contract as executed were in all material respects substantially the same as the first in the message they conveyed to contractors. If this interpretation testimony is accepted, then defendant's admission before the Board to the effect that Hover was fully approved as a source for all rock necessarily follows. Perhaps in this confusion on defendant's own part as to the true interpretation of its own specifications, the case should simply be disposed of on the familiar principle of resolving ambiguities against the author. As the court stated in Loftis v. United States, supra, in answer to defendant's contention that a certain specification provision should, despite Article 4, "be interpreted as a warning or the expression of an opinion that unstable and unusual subsurface conditions existed", if "the person who prepared this specification so intended, he succeeded in using language that was so indefinite and misleading as to conceal his intention." (p. 629.)
Again, as to the alleged "warnings" which defendant supposedly gave to plaintiff about Hover, the contracting officer stressed in his findings that plaintiff orally received from a Government representative specific warning and advice about the unsatisfactory nature of Hover at the prebid conference of April 5,1956, and the inspection of the cores immediately thereafter. Defendant's testimony before the Board sup ported the contracting officer's version. The Board's opinion emphasizes this finding (pp. 8-9). A picture was seemingly created of a foolhardy contractor who insisted on a course of action despite the plain warnings and advice of knowledgeable Government personnel. At the trial in this court, however, it was made plain by the official involved that he gave no such special oral warnings or advice against the use of Hover and that the little that was said about the quarries at the prebid conference amounted to nothing more than a reiteration of what the specifications and drawings already indicated. He conceded the possible erroneous connotations flowing from the use by the contracting officer and the Board of the terms "warning" and "advice."
And finally, as pointed out, defendant's witnesses before the Board had no criticism of plaintiff's abandonment of Hover. Instead, they unanimously agreed that if plaintiff were to complete the contract in any economical or timely fashion, it had no practical alternative and that the decision to abandon Hover was sound. The Board took special note of this by saying (p. 19): "Appellant's original claim letter charges that Hover will not produce rock of the quantity and size required by the (entire) contract, except at a cost which is unreasonable and prohibitive. With this, the Government would undoubtedly agree", and that: "Government witnesses agree that the Hover site was not suitable for the production of the total riprap requirements, and that appellant was prudent in moving to the Cold Springs site." (p. 6) At the trial in this court, however, the position was taken that, including the rock below water level, there was sufficient rock of all sizes at Hover to complete the contract and that plaintiff's real trouble lay in the alleged operational inefficiencies previously discussed, and particularly plaintiff's alleged ineffective use of the grizzly. And by this, defendant must mean that it was possible to complete the contract at Hover at a cost which was reasonable and not prohibitive — a position contrary to that taken before the Board — for surely it cannot be argued that, despite Article 4, a contractor would be expected to stay at Hover even if he were to go bankrupt while hunting for and culling out, with an enormous waste factor, sufficient, suitable rock.
Considering the erroneous testimony presented to the Board, and the various shifts in defendant's positions from those taken before the Board, the conclusion is compelled that, as the court stated in Johnson Contracting Corp. v. United States, supra, "whatever justification there may have been for the Board's decision upon the basis of the facts known to it, we feel certain that if it had had the evidence which we have, and which was in the possession of the Government and unknown to the plaintiff, it would have remanded the case to the contracting officer for a decision properly arrived at." (p. 661) Consequently the situation here would seem to be comparable to that in WPC Enterprises, Inc. v. United States, supra, where the court held: "On consideration of the record before the Board and in this court, we have concluded that, even if the Board's findings are fully treated as factual, they are not final under the [Wunderlich] Act because they lack substantial support in the record as a whole" (p. 9).
There is a final problem. Defendant contends that this suit is in effect brought for the benefit of the quarry subcontractor, but that this subcontractor, by his own admissions from the witness stand, conceded lack of liability by the prime contractor to him. Therefore, it is argued, the suit should, on the authority of Severin v. United States, 99 Ct. Cl. 435 (1943), cert. denied 322 U.S. 733 (1944), be dismissed for failure of the plaintiff, the prime contractor, to prove any damage.
The contention cannot be accepted. There is nothing in the subcontract "expressly negating plaintiff's liability to" the subcontractor "for the claims being asserted", nor is there any release executed by the subcontractor containing any "express exculpatory clause relating" thereto. J. L. Simmons Company, Inc. v. United States, 158 Ct. Cl. 393, 399, 304 F. 2d 886, 890 (1962). Expressions of opinion by a subcontractor-layman as to legal rights he thinks he has or does not have are immaterial, mc cormick, evidence § 241 (1954).
Based on all of the above considerations, plaintiff is entitled to an equitable adjustment under both parts of the Changed Conditions provision of the contract. The subsurface physical conditions at the site did differ materially from those indicated in the contract, and unknown physical conditions of an unusual nature, differing materially from those ordinarily encountered and generally recognized as inhering in quarrying operations, were encountered.
As to the proper amount of such adjustment, which plaintiff claims should be $184,391.61, and which Article 4 speaks of in terms of "an increase or decrease in the cost of performance of this contract", it would appear proper to allow plaintiff the following items in the following amounts: (a) the additional.'costs incurred at Hover attributable to the greatly reduced out-put during the limited time it was producing as compared with the tonnage it reasonably planned to produce during such period — $10,676.91; (b) the cost of moving from Hover to Cold Springs, an expense it would not have incurred had it not been necessary to abandon Hover — $682.20; (c) the cost of setting up its facilities at Cold Springs, also an extra cost it would not have incurred had it not been necessary to abandon Hover (no claim is made for the setting up expense at Hover) — $42,-404.89; (d) the excess cost of final moving out from Cold Springs to the home office at Pasco, Washington, as compared with what such costs would have been from Hover, plus the final site cleanup at Cold Springs (here too plaintiff makes no claim for the final site cleanup at Hover)— $2,678.17; (e) additional supervisory expense resulting from, the necessity of incurring dual expenses of that nature for 9 weeks prior to abandoning Hover and while mobilizing Cold Springs — $1,350; and increased industrial insurance costs due to the higher rates in Oregon, where Cold Springs was located, than the similar rates in Washington, where Hover was located — $4,370.68. The allowance of these items' constitutes, "the difference between what it cost it to do the work and what it would have cost it if the unforeseen conditions had not been encountered." Tobin Quarries v. United States, supra, p. 334. These amounts, totaling $62,162.85 to which are added overhead and profit at appropriate rates, result in a total amount of $71,509.04. The details and bases for the computation of these amounts are set forth in findings 59-68.
The largest item of plaintiff's claim, consisting of alleged' additional operating costs at Cold Springs in the amount of $83,766.44 is disallowed for failure of proof. While plaintiff did operate with more manpower and equipment at Cold Springs than what would seemingly have been necessary to produce the originally planned production at Hover (1,200 tons per day), there is no showing that this was not a management operating decision and choice from which great benefits flowed. With the increased manpower, some of it overtime, and the greater amount of equipment devoted,to. the Cold Springs operation, plaintiff poured out rock, at an average daily production rate of almost 1,600 tons. On one day production went as high as approximately 2,000 tons. The result was that plaintiff completed the job, even as enlarged by change orders, 2 months ahead of time. This, of course, necessarily greatly benefited plaintiff. Under the, circumstances, it is not proved that the operating labor and equipment costs in excess of what- they would have been at Hover to produce the planned 1,200 tons per day, was a true,» damaging, "excess" cost. For all that appears, plaintiff may well have produced only 1,200 tons per day at Cold Springs with substantially the same manpower and equipment as it had planned to use at Hover.
Consequently, it is recommended that judgment be entered for plaintiff in the sum of $71,509.04.
FINDINGS OF FACT
1. Plaintiff is a Nevada corporation which, has succeeded to all the rights and assets of General Construction Company, an Oregon corporation (hereinafter referred to as General), which was awarded by defendant Contract No. DA-45-164CIVENG-57-24, dated September 12,1956, upon which this suit is founded. Plaintiff brings this action in its own behalf as successor to General and, by its original petition, on behalf of its subcontractor upon the work, Edmund P. Erwen of Pasco, Washington, doing business as Erwen Construction Company. Due to the death of Erwen subsequent to the commencement of this suit, the petition has been amended to indicate that Erwen's interest has been succeeded by his Estate. The term plaintiff will hereinafter sometimes be used to refer to General, the actual performing prime contractor.
2. The contract was entered into by a contracting officer of the Corps of Engineers, Department of the Army, and was administered by the Walla Walla, Washington District of the Corps. The contract was for the repair and protection of the banks of the Columbia River between Pasco, Washington, and the McNary Dam, in the States of Washington and Oregon. The area of the work was at various specified locations along the shores of the McNary Dam Reservoir, extending approximately 43 river miles from the dam to the vicinity of Richland, Washington. The dam, location of units of work, and other material features along the reservoir were also designated or located by "river miles", which indicate the distance to (or from) the mouth of the Columbia River. The dam was at river mile 292, and the upper limits of the work required under the contract was immediately downstream from river mile 335. The work consisted, in general, of reshaping embankment slopes and placing dumped riprap and random rock along portions of both banks of the river. The work required the quarrying of rock from a site accessible to the river and thereafter placing the rock on the riverbanks with waterborne lifting equipment. This case is concerned only with the quarrying portion of the work.
3. The work was originally advertised for bids on March 16, 1956, with the bid opening scheduled for April 17, 1956. For the production of the required rock, the bid invitation offered two Government-owned quarry sites, referred to as the Hover site and the Cold Springs site, for use by the contractor without charge. There were no other known sites likely to contain sufficient quantities of rock conforming to the specifications and so located as to be economically feasible for use under the contract.
4. Most of the rock in the region in which the contract work was to be performed is of basalt formation from lava flows, and a considerable part of it is of a type that will break too small for use as riprap. With the advent of the system of dams on the Columbia River, which caused the relocation of roads and highways through large construction projects, the locating of good sources of stone for construction purposes became a definite problem. The Government engineer who had planned the instant project and was the author of the pertinent part of the specifications under the contract in suit had spent a considerable amount of his working time over a period of years in making studies of potential rock sources. He personally made the search, studies and examination of the area in order to find feasible rock sources for the work under the contract.
5. The Hover site was owned by the Government, having been acquired at some time prior to 1951 as part of the general area needed for the McNary Dam project. Because of the building of the McNary Dam, the Government had relocated the Seattle, Portland & Spokane Railroad line which had run close to the river, to a position further inland. The old railroad cut, in part, ran through the side of the Plover site which faced the river, and the new or relocated railroad cut ran in back of the Hover site some 1,500-2,000 feet away from the old railroad cut. The relocation work was performed in 1951 by Government contractors who had taken out of the new cut a quantity of large rock for use as riprap on the riverbanks both upstream and downstream from the Hover site. The obtaining of such rock from this cut was an important factor leading to the designation of Hover as a quarry site offered by defendant to contractors.
6. At Hover the quarry site was located on the .river's edge with direct access from the old railroad cut, the likely place for the development of the quarry face, to the river. The contract operations later commenced there began in a face approximately 100 feet from the river. There was deep water close in to shore, where a simple and inexpensive type of barge-loading facility could be constructed. The riverbank was only 7 feet above the water. Assuming substantially equivalent quality of the rock at Hover, these features of the Hover site would effect very substantial savings in the performance of the work as compared to the Cold Springs site.
7. The Cold Springs site was owned by defendant, haying been acquired in 1054 as a source of stone needed for repairs to the Union Pacific Railroad embankment. The quarry had been opened at the time of the issuance of the first bid invitation and approximately 10,000 cubic yards of rock had been quarried and used. It was established then and confirmed since that Cold Springs was an excellent quarry, though it was also clear that the rock was likely to break quite large, possibly two to six times the maximum size specified for the instant contract, and that secondary breakage would in all probability be required.
At Cold Springs the quarry face was a mile and a half from the river. Along the route from the pit to the barge-loading point, the Government had an easement for only part of the way, and the contractor would have four property owners with whom to deal. Also, the route to the river involved crossing Highway 710 which connects with the Pacific coast and involved the obtaining of a permit from the Oregon State Highway Department for a truck crossing. Deep river water was not readily accessible in the vicinity of Cold Springs, necessitating the construction of a causeway from the mainland to an island, after obtaining permission from the Port of Umatilla. The riverbank, at the barge-loading point, was more than 30 feet above the water, requiring a type of barge-loading facility which would be expensive to construct.
8. Prior to inviting bids, defendant drilled five core holes at Hover, each about 8 inches in diameter, and two at Cold Springs. Since Cold Springs was an operating quarry, the rock being clearly visible, it was felt necessary to take only two cores. Although satisfactory rock had been taken from the new railroad cut at Hover, that cut was at the edge of, and not directly in, the quarry site. Thus the site itself had not been worked as a quarry and was unproved. Therefore, it was felt that five cores should be taken from this site. As a result of their investigation of the Hover site and the two railroad cuts, the Cold Springs site and the operations there, and their study of the core borings at both sites, defendant's engineers and geologists concluded that, as set forth above, quarrying operations at Cold Springs would result in the rock breaking to excessive oversize. They also concluded that the rock at Hover would break with excessive fines and that there would be a larger waste factor there than at Cold Springs. They felt, however, that although a contractor would have operational problems at either quarry due to the excessive oversize at one and the excessive fines at the other, which, together with the other geographical factors set forth above, could result in some contractors selecting one and some the other, it would be practicable for a contractor to fulfill all of the contract requirements from either since, in their opinion, each was a reasonably good source of stone for the purposes of this contract. It was also their opinion that a contractor could conclude it would be feasible to use both quarries as rock sources, since the project required rock of various sizes and weights, and a contractor might conclude that Cold Springs should be used for the larger rock, and Hover for the smaller. The project was divided into units or sections of work, and it was felt that a contractor might see certain advantages in using each quarry for those units located geographically closest to a quarry, or located closest to the quarry that would furnish smaller or larger sized rock, as required by the particular units. A two-quarry operation, however, would necessarily involve large duplicate costs in mobilizing, operating, and dismantling each quarry.
9. General and Erwen joined together for the purpose of bidding the job as prime contractor and subcontractor, respectively. The division of responsibility between them was that General would handle the waterborne phases of the work, i.e., the placement of the riprap upon the riverbanks, and Erwen would drill, shoot, quarry and load the rock on General's barges. It was agreed that Erwen would investigate the quarry sites and make the selection as between Hover and Cold Springs.
10. (a) The provisions of the specifications offered by defendant on the first bid invitation of March 16, 1956, as amended by Addendum No. 1, dated March 23,1956, included the following:
PART II
GENERAL CONDITIONS
go-3, site investigation. — The Contractor acknowledges that he has satisfied himself as to the nature and location of the work, the general and local conditions, including but not restricted to those bearing upon transportation, disposal, handling and storage of materials, availability of labor, water, electric power, roads and uncertainties of weather, river stages, tides or similar physical conditions at the site, the conformation and conditions of the ground, the character of equipment and facilities needed preliminary to and during prosecution of the work. The Contractor further acknowledges that he has satisfied himself as to the character, quality and quantity of surface and sub-surface materials or obstacles to be encountered insofar as this information is reasonably ascertainable from an inspection of the site, including all exploratory work done by the Government as well as from information presented by the drawings and specifications made a part of this contract. Any failure by the Contractor to acquaint himself with the available information will not relieve him from responsibility for estimating properly the difficulty or cost of successfully performing the work. The government assumes no responsibility for any conclusions or interpretations made by the Contractor on the basis of the information made available by the Government. The Government also assumes no responsibility for any understanding or representations made by its officers or agents during or prior to the execution of this contract, unless (i) such understanding or representations are expressly stated in the contract and (ii) the contract expressly provides that the responsibility therefor is assumed by the Government. Representations which are not expressly stated in the contract and for which liability is not expressly assumed by the Government in the contract shall be deemed only for the information of the Contractor.
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gc-6. SUBCONTRACTORS. — At the request of the Contracting Officer the Contractor shall notify the Contracting Officer, in writing, of the names of all subcontractors, together with a summary of the extent and character of the work to be done by each subcontractor. If for sufficient reason, at any time during the progress of the work, the Contracting Officer determines that any subcontractor is incompetent or undesirable, he will notify the Contractor accordingly and immediate steps will be taken for cancellation of such subcontract. Subletting by subcontractors shall be subject to the same regulations. Nothing contained in this contract shall create any contractual relation between the subcontractor and the Government.
Jfc
PART III
SPECIAL CONDITIONS
sc-6. physical data. — Information and data furnished or referred to below are furnished for information only and it is expressly understood that the Government will not be responsible for any interpretation or conclusion drawn therefrom by the Contractor. Engineering data and all information available may be examined in the Office of the District Engineer upon request. Included in this data are preliminary cross sections of the work area and related computations, engineering work sheets, subsurface exploration data and photographs.
a. The physical conditions indicated on the drawings and in the specifications are the result of site investigations by surveys, core borings, and reconnaissance. No subsurface investigations have been conducted except those in the vicinity of the quarry sites as shown on the drawings.
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g. Transportation Facilities. — Each bidder, before submitting his bid, shall make his own investigation of the conditions of existing public and private roads, clearances, restrictions, bridge load limits and of the limitations affecting transportation and ingress and egress at the job site. The unavailability of transportation facilities or limitations thereon shall not become a basis for claims for damages or extension of time for completion of the work.
d. McNary Reservoir Water Depth Soimdings. — The Walla Walla District is not aware of the existence of any plotted or mapped water depth soundings of Mc-Nary Dam Reservoir, however various topographical maps of the reservoir area showing land elevations and contours prior to filling of the reservoir are available and may be examined in the Office of the District Engineer upon request. In addition there are on file cross sections of the various embankments and stone revetments in the reservoir area showing elevations and indicating contours at the time of completion of construction which may be examined upon request.
so — 24 material souroes. — Government-owned sources of riprap for use in the various phases of work under this contract are shown on the drawmgs. Random rock may be secured from quarry waste or from other approved sources selected by the Contractor. Gravel materials shall be obtained from approved sources selected by the Contractor. Approval of a source shall not be construed as approved [sic] of all material from that source and the Contracting Officer may reject certain areas, strata, or channels within the approved source when, in his opinion, the material is not suitable for the intended use. The Government has made extensive investigations of riprap sources indicated on the drawings, and the records of these investigations may be examined by the bidders. The Contractor shall secure, at no cost to the Government, all necessary property and access rights and pay all royalties, for any material or aggregate sources used other than those shown on the drawings.
$ $ ‡ ‡ $
PART IV
TECHNICAL PROVISIONS
:£
i-04. material. — a. General. — Government-owned quarry sites shown on the drawings and other Government-owned riprap and random rock sources within the reservoir boundary will be made available at no acquisition cost to the Contractor. The Government does not guarantee that all materials from these sources will meet the size or durability requirements of these specifications. Stripping of overburden materials shall be performed as required to expose bare rock. Selection and/or processing of rock shall be performed as necessary to meet size or quality requirements. The Contractor at his option and with approval of the Contracting Officer may utilize sources other than those indicated on the drawings, provided that he has submitted written evidence to the Contracting Officer that he has secured all necessary property and access rights to the material therein, will incur all cost of obtaining material from the substitute source and that materials from the substitute sources will meet requirements for size and quality as hereinafter specified. Approval of the use of a substitute source does not imply approval of materials produced from that source and shall not relieve the Contractor from the obligation to furnish material meeting specifications. Also such approval does not in any way commit the Government to acceptance of unsatisfactory material or to responsibility for the character, quantity or availability of material in such substitute sources.
b. Riprap. — (1) Sources. The Government will make available to the Contractor, Hover Quarry — Site "A" and Cold Springs Quarry — Site "B", as shown on the plans. These sites have been explored by core drilling at locations shown on the plans. Cores from the drill holes may be examined at the office of the District Engineer, Corps of Engineers, Walla Walla, Washington. Site "A" will be available without restrictions as to its use, but use of Site "B" must be coordinated with the Union Pacific Eailroad Company.
(2) Quality. — Stone for riprap shall be durable and of suitable quality to insure permanence in the structure. It shall be free from cracks, seams, soft material, and other defects that would tend to increase unduly its deterioration from natural causes. Suitable tests and service records will be used by the Contracting Officer to determine the acceptability of the stone protection materials. In the event suitable test reports and service records that are satisfactory to the Contracting Officer are not available, as in the case of newly operated or opened sources, such materials shall be subjected by the Contracting Officer to such examination and tests as are necessary to determine its acceptability for use. Tests to which the materials may be subjected include petrographic analysis, specific gravity, abrasion, absorption, wetting and drying, freezing and thawing, and such other examinations and tests as may be necessary to es tablish to the satisfaction of the Contracting Officer that the materials are acceptable for use in the work. All examination and tests will be made by or under the supervision of the Government at no cost to the Contractor. Unsound rock encountered in approved quarries will be rejected for use as riprap.
g. Random Rocíe. — Random rock shall consist of sound, durable stone containing not more than 20 percent by weight passing the %-inch screen. Random rock may be obtained from quarry operations, including quarry waste and rock unsuitable for riprap, or from other approved sources.
(b) The contract drawings accompanying the first bid invitation included a set of 13 sheets. One of them, referred to as Sheet 12, shows the layout of each quarry site and the locations of the core holes. Below each layout diagram are core logs consisting of a table for each site showing the elevation of the test holes; a calibration throughout the depth of each hole, from top to bottom; symbols, in a legend column, indicating the kind of rock present; and a description of the material encountered. All five of the Hover logs have some reference to fractures or fracturing, viz: "with some fracture zones" (3 holes) ; "fractured" (1 hole); and "with fracture zones" (1 hole) , The log for one of the Cold Springs holes bears the notation "highly fractured" at the bottom of the hole; and the other has notations "highly fractured" at both the top and bottom of the hole. The Hover logs indicated that a quarry face of approximately 13-15 feet could be developed because the hard basalt terminated at that point, meeting a soft, red, vesicular, material as the quarry floor. The hard basalt below the red material was below water level. The "fracture" references were to the material in such quarry face. The Cold Springs logs indicated a quarry face of hard, dense, basalt of some 25-30 feet without fracture zones. However, a quarry face of 12-15 feet such as was indicated at Hover, even with some fracture zones, would normally contain sufficient satisfactory rock for the project involved. The notations concerning fracturing had no bearing upon rock quality, but had to do only with the size of the rock to be expected from the pit.
Sheet 12 shows that all of the Hover holes contained "basalt, hard, dark grey" or "dark grey to black." Generally, the darker such rock is, the harder and sounder it is. Two of the Hover notations contain the additional word "sound", which is not used in connection with either of the Cold Springs holes. Overburden is shown on the Cold Springs logs, but none on the Hover logs. However this was due only to the fact that the Hover holes were intentionally drilled on rock outcrops. A view of the Hover site clearly showed pockets of overburden between rock outcroppings. The terrain of both sites was similar.
Sheet 12 also contains a note, as follows:
Note : Logs give general character of rock. The Contractor is urged to examine cores at the District Office for detailed information. In general rock at Quarry Site "A" will break smaller and contain more fine stone than Quarry Site "B".
(c) From the indications of the logs on Sheet 12 it was reasonable to conclude that a working face at Hover Quarry could be developed consisting of the first IB to 15 feet of the rock below the surface of the ground, and that the rock would be hard, sound basalt with some fractured zones.
(d) The invitation for bids contained the following:
12. Form of Contract. — Any contract awarded as a result of this invitation will be completed on Standard Form 23, Standard Form 2Ba, and Additions to Standard Form 23a, General Provisions, copies of which are available for inspection in the district office. A copy will be furnished upon written request.
Included in the invitation was a document entitled "Instructions to Bidders", which contained the following:
13. Contract am,d Bonds — The bidder to whom award is made shall, within the time established in the bid and when required, enter into a written contract with the Government and furnish performance and payment bonds on Government Standard Forms.
11. The Bid Form set forth a Unit Price Schedule in which, "for purposes of acceptance", the project work was divided into 12 "Sections", designated as numerical units, each of which was described and delineated in the specifications and drawings. All units were, however, included on "One Single Schedule" upon which bidders were to bid on a unit price basis, each section of work being divided into various pay items for the preparation of the foundation and the various types of rock to be placed thereon.
12. Erwen, in the process of making his selection of quarries, studied and relied upon the core logs on. Sheet 12 and the other contract documents. Pie reasonably believed that the Government had made extensive investigations of both sites, including at least some of the testing indicated in TP 1-04, 5, 2; that all information had been analyzed by the Government and put into the logs on Sheet 12, which he considered to be the Government's evaluation of the rock at both the Hover and Cold Springs sites; that Sheet 12 indi-, cated that Hover contained sound basalt rock; and that Hover was approved by the Government as a source of rock for the project, but that, if used, would produce excess fines.
13. After examining the documents accompanying the invitation to bid, Erwen visited both sites, going five or six times to Hover. There he looked over the terrain and examined the core drill holes with beams of sunlight reflected from a mirror, by which means he could see the sidewalls of the drill holes to a depth of 8 to 10 feet, the walls appearing to him to be smooth, bluish-black, hard basalt, which did not look fractured. He also examined the two railroad cuts at Hover, where he saw some good rock in the old railroad cut and some not so good, and some good, large rock, in the exposure made by ,the new railroad cut.
At Erwen's request, the following persons examined Hover to assist in making his evaluation of that site: John W. Koontz, an explosives salesman,, who had 43 years in the service of the du Pont Company in sales work and rendering technical assistance to rock contractors; John Ostello, a qualified explosives operator; and two experienced construction executives, Otto Herman, a vice president of General, and a Mr. Foss, who was general manager of the J. A. Ter- teling Construction Company of Boise, Idaho, which was in the heavy construction business involving a good deal of rock work. Each of these men recommended the Hover site to Erwen, after personal examination of the quarry area.
There was ample area at the Hover site to permit production of all the rock needed under the contract.
14. Prior to April 5, 1956, Erwen reached a decision to bid upon the basis of using the Hover Quarry. His decision was determined by what he considered the probable costs at each site, and in the belief that he could bid substantially less if he used Hover rather than Cold Springs.
15. A prebid conference was held at the Corps of Engineers' office in Walla Walla, Washington, on April 5, 1956. The Executive Officer of the Walla Walla District presided over the meeting which was attended by 12 other Corps of Engineers officials. Erwen and two of his key employees represented General, which was the only contractor to attend. Most of the discussion at the meeting was concerned with the waterborne operations under the contract. The Executive Officer stated, among other things, that nothing said at the meeting could change the invitation, which could only be changed by a published addendum. The Chief of the Construction Branch stated that contractors must have an understanding as to the meaning of the plans and specifications ; that the primary purpose of the meeting was to accomplish that end; that the project had been carefully planned; and that the plans and specifications proposed the best methods, the use of the most appropriate materials, and where necessary, the source of materials. The employee who had planned the project, located the quarry sources, and drafted the specifications relating thereto, and who then held the position of Chief of the Soils Section, Foundation & Materials Branch, stated that the Government had two quarry sites available, Cold Springs and Hover; that the rock at Hover would break smaller and contain more fines than Cold Springs; that cores from both sites were available for inspection; that contractors could examine both railroad cuts at Hover, as well as the stone on the embankment both upstream and downstream of Hover that had been obtained from the new cut; and that they could also examine at Cold Springs tlie exposed face where the railroad was obtaining emergency rock, as well as the stone from this site that had been deposited along the embankment. None of these Government officials gave any advice to General's representatives concerning which qnarry, in their opinion, a contractor should select for the work, nor did General's representatives seek any such advice. Similarly, none of the Government officials issued any warnings against the use of either Hover or Cold Springs. The only statements made at the meeting concerning the quarries were in substance repetitive of what the specifications and drawings already pointed out.
16. After the prebid conference was over, Erwen and his two employees went to another building at the invitation of the Chief of the Soils Section to see the cores, where the cores lay in boxes on a screened porch. The cores were not in direct sunlight and no optical instruments were used. Erwen was interested in comparing the Hover and Cold Springs cores, but could see no great difference between them. Although, as shown by the logs, the Cold Springs cores indicated longer lengths of sound, unfractured rock, there did not appear, even to experienced contractor-laymen, considering the kind of visual inspection that was there available, to be any substantial differences in the quality of the unfractured rock in each quarry (as distinguished from the soft red rock which would act as the quarry floor at Hover), nor was there any indication that there would be insufficient rock at Hover to meet all project sizes. Fractures and broken core pieces frequently result from the mechanical process of extracting the core. Nevertheless, a trained geologist might, on closer inspection of the Hover cores with a lens in bright sunlight, have detected evidences of so-called "banding", as well as minute jointing, in even the sound looking rock at Hover which might have served as a warning that much of the rock would not be sound, in the sense that it might not withstand normal quarry operations and handling. However, these defects were so minute that even a trained geologist might have missed them. Examination under a microscope would definitely disclose such basic structural weakness. However, such examinations are not normally made, and defendant made no such examination prior to approving Hover as a quarry source. Similarly, Erwen made no such examination, nor did he retain any geologist to advise him in connection with the selection of Hover as a quarry site.
During the conversation on the screened porch between the District's official and Erwen and his two employees, the official gave no personal opinions, advice or warnings concerning any deficiencies of Hover, although he did point out wherein the cores substantiated the statement on Sheet 12 that the rock at Plover would break smaller and with a greater amount of fines than at Cold Springs.
17. Bids were opened on the first invitation on April 17, 1956, with the following results:
Manson Construction & Engineering Co.-Osberg Construction Co_i-$1,241, 025
General Construction Company_ 1, 309,415
Government estimate (without profit)_ 773, 091
The low bidder, Manson-Osberg, was 60 percent in excess of the Government cost estimate, an amount which, under defendant's regulations, precluded an award, and both bids were therefore'rejected.
v 18.. In response to a question by an employee of the Corps of Engiheérs immediately after the bid opening, Erwen informed him that he had bid on Hover. Though not disclosed to defendant at the time, Erwen had given a bid to General of $1.35 per ton of riprap or random rock. In his bid, he allowed for 20 percent waste at Hover. He reasonably calculated that normal quarry waste on an operation of this kind would be approximately 10 percent, but in light of the note on Sheet 12, as well as his own inspection of the cores and the sites, it would- be prudent to double said percentage.
The Government's cost estimate for the quarrying portion of the work was based on using 99,300 tons of material from Hover, as follows: 14,800 tons of random rock; 47,000 tons of smaller riprap, and 37,500 tons of large riprap. The bal-unce of the material was, under the Government estimate, to come from Cold Springs. Thus, defendant was estimating on the basis of a two-quarry operation. The record does not indicate on what basis Manson-Osberg bid. The Government's waste allowance at Hover was 15 percent. The Government's cost estimate was $1.39 per ton -for materia] coming from Hover.
19. The low bidders, Manson-Osberg, filed a .protest against the rejection of their bid on the ground that the Government's cost estimate was unreasonably low. In reviewing the figures the Government estimators found some justification for increasing their estimate, but not enough to permit the making of an award. In accordance with the Corps of Engineers regulations, meetings were held at which Manson-Osberg was furnished with a copy of the Government estimate, and in turn furnished the Government copies of its bid sheets. However, after review of the matter by the District Office and by higher authority within the Corps of Engineers, the protest was ultimately disallowed.
20. The project was readvertised on July 30, 1956. The invitation stated that it was anticipated that the bid opening date would be August 30,1956, but the definite date thereof would be established by addendum.
The invitation contained the following:
2. Modifications Prior to Pate Set for Opening Bids. — The right is reserved, as the interest of the Government may require, to revise or amend the specifications and/or drawings prior to the date set for opening bids. Such revisions and amendments, if any, will be announced by an addendum or addenda to this Invitation for Bids. Copies of such addenda as may be issued will be furnished to all prospective bidders. If the revisions and amendments are of a nature which require material changes in quantities or prices bid or both, the date' set for opening bids may be postponed by such number of days as in the opinion of the District Engineer will enable bidders to revise their bids. In such case, the addendum will include an announcement of the new date for opening bids.
Included in the invitation was a document entitled "Instructions to Bidders", which contained the following:
13. Contract and Bonds. — The bidder to whom award is made shall, within the time established in the bid and when required, enter into a written contract with the Government and furnish performance and payment bonds on Government Standard Forms.
21. The work to be performed under this invitation, which was substantially the same as on the prior invitation, consisted of the following eleven separate "units" or sections, one of the units in the prior invitation having been dropped:
Unit 1, the left abutment of McNary Dam, involved work in the vicinity of the dam proper at approximately river mile 292. The embankment repair work on this unit involved placement of approximately 10,400 tons of dumped riprap comprised of rock having a maximum size of 1,500 pounds, an average size of 300-750 pounds, and a minimum size of 75 pounds. This was the largest sized riprap called for and was the only unit calling for such size. This unit also required placement of 900 tons of random rock.
Units 3 and 4, also on the left bank of the river, were designated and known as the Oregon State Highway (Unit 3) and the Union Pacific Railroad (Unit 4). Unit 3 started immediately above the Cold Springs Quarry and on the same side of the river, at approximately river mile 301-302 and extended to approximately river mile 304. Unit 4 started at that location and extended to approximately river mile 308. Unit 3 involved placement of approximately 24,000 tons of dumped riprap and 500 tons of random rock. Unit 4 involved placement of 60,000 tons of dumped riprap and 7,000 tons of random rock. The dumped riprap for both units, totaling 84,000 tons, was all rock in the next largest size range, with a 1,500-pound maximum, an average of 250-500 pounds, and a minimum of 75 pounds.
Unit 5, adjacent to Unit 4 and on the left bank of the river, also involved work on the relocated line of the Union Pacific Railroad. This also required placement of rock in the 1,500-pound maximum, 250-500-pound average, and 75-pound minimum, category, in the amount of 17,000 tons, and 2,500 tons of random rock. Unit 5 extended from approximately river mile 308 (adjacent to Unit 4) to approximately river mile 314.
Units 10,11,12 and 13 were on the opposite or right bank of the river. All four units involved work on the relocated line of the SP&S Eailroad. Unit 10 started at McNary Dam at approximately river mile 292 and extended to approximately river mile 300, or almost directly across the river from the location of the Cold Springs Quarry. Unit 11 started at river mile 300, and extended to approximately river mile 303; Unit 12 adjoined at that location and extended to approximately river mile 309-10; Unit 13 there adjoined and extended to approximately river mile 320.
Unit 10 work involved placement of approximately 6,000 tons of riprap and 500 tons of random rock; Unit 11 involved placement of approximately 19,000 tons of riprap and 900 tons of random rock; Unit 12 required placement of approximately 70,000 tons of riprap and 3,000 tons of random rock; and Unit 13 involved placement of approximately 18,000 tons of riprap and 900 tons of random rock. The riprap for all four units required rock having a maximum size of 1,500 pounds, an average of 250-500 pounds, and a minimum size of 75 pounds.
The Hover Quarry site was on the right bank of the river at approximately river mile 318-319. The work to be performed upstream from this site included Units 7,8 and 9, all of which were on the left bank of the river.
Unit 7 included work on the Union Pacific Eailroad Bridge Approach and Bonneville Tower. The bridge approach was at approximately river mile 323-324 and the tower at approximately river mile 325. These two items involved placement of 2,500 tons of riprap in the range of 1,500-pound maximum, 250-500-pound average, and 75-pound minimum, and 200 tons of random rock.
Units 8 and 9 were the Pasco Levees, 12-1 and 12-2, both on the left bank of the river, and located between approximately river mile 328 to 332. The two levees involved placement of 47,000 tons of riprap in a smaller size range, with a maximum size of 400 pounds, an average size of 80-150 pounds, and a minimum size of 25 pounds. The two levee units (8 and 9) also required placement of 1,200 tons of random rock.
22. In an attempt to evoke greater contractor interest and competition, defendant decided on the second invitation to give contractors the option of bidding on less than the whole project. For one thing, a smaller' contract would-require a smaller bond. Accordingly, on this invitation' as distinguished from the prior one where bidders could bid only on the one schedule, with all units or sections being "included therein, three schedules were offered, labeled A, B, and C.
Schedule B included Units 1, 3, 4, 5,10, 11,12 and 13 (or principally McNary Dam, the Highways and the Railroads). The work under Schedule B all required larger size rock in the sizes and gradations hereinabove noted. The total quantity thereunder was approximately 224,400 tons, or approximately 78 percent of the total contract tonnage. Most of the rock to be placed was in the vicinity of the Cold Springs Quarry.
Schedule C included Units 7, 8 and 9, involving placement of 47,000 tons of rock in the smaller sizes and gradations as above noted, or approximately 16 percent of the total contract tonnage. The only large rock included as a part of Schedule C was the 2,500 tons to be placed under Unit 7.
The random rock to be placed in all 11 units totaled 18,000 tons, or approximately 6 percent of the total tonnage for placement.
However, bidders were still invited to bid on a one Schedule basis, as they had on the first invitation. For this purpose, all 11 units were included in Schedule A.
The division point between the Schedule B and C contractors was established by specification provision SW-5 of the second invitation, as follows: -
sw-5. use on qtjakRy souroes. — a. If award is made under Schedule A, the Contractor may use any quarry site as indicated or as allowed by the specifications.
5. If award is made to more than one Contractor under Schedules B and C, all random rock and riprap for work under Schedule B shall be obtained from sources downstream from river mile 314 and all random rock and riprap for work under Schedule C shall be obtained from sources upstream from river mile 314.-
23. The' work in each; unit, or section involved three separate items of work on which unit bid-prices were to be submitted, based on the estimated quantities indicated in preceding findings, namely (1) Preparation of Foundation, (2) Random Rock, and (3) Dumped Riprap. The unit-price for foundation preparation, on a cubic yard basis, covered payment for all work incident to preparing the foundation for rock placement, as indicated on the plans for the'various areas involved; the unit prices for random rock and dumped riprap included payment for all ro.ck, labor and equipment for placement, complete, in the embankment, slopes which met specification requirements and on . a per. ton nnit- price- in place. Most of the placement was to be accomplished from barges or other floating equipment. . In some areas, placement from either waterside or landside was permitted.
24. Two addenda to .the. specifications were issued between the July 30,1956, invitation date and the August 30,1956, bid opening date. Addendum No. 1, issued on July 31, 1956, revised the bid form to make-certain changes in Schedule C and stated that the tentative August 30,. 1956, bid opening date was unchanged. Addendum No. 2 was issued on August 22, 1956. ' The cover sheet advised .all prospective bidders that this addendum established the bid opening date: as August 30,1956, and that it revised the specification provisions pertaining to "Order of Work'-' and' "Use of Quarry Sources." In addition, it added a' section pertaining to "Rates of Wages." . - . -
Both addenda also stated that receipt thereof must be acknowledged on the reverse side of the bid,.when submitted, and that noncompliance therewith would result in the bid being considered as not responsive and would be rejected.
25. As they did on the first invitation, the specifications consisted of four major parts, namely, Part I — Statement of Work; Part II — General Conditions; Part III — Special Conditions; and Part IV — Technical Provisions. Material portions thereof are set forth in succeeding findings.
26. As modified by the August 22, 1956 addendum, the contract requirement pertaining to the Order of Work (Part I — Statement of Work) provided as follows:
sw-3. order of work. — The Contractor shall schedule, perform and complete the work in accordance with the following:
a. Work shall be scheduled so that repair of stone revetments at Unit 3 — Oregon State Highway and Unit 4 — Union Pacific Railroad, will be commenced and completed within 100 calendar days after date of receipt of written notice to proceed because of need for early revetment repair in the Unit 3 and Unit 4 areas.
The units to be completed within the 100-day period above noted (Unit 3 — Oregon State Highway, and Unit 4 — Union Pacific Railroad) were both Schedule B work requiring the size riprap above described. The estimated quantity shown in the bid schedule for these two units was 84,000 tons, or 37 percent of the total estimated amount of 226,900 tons of dumped riprap in the larger size rock under Schedule B, thereby indicating the necessity of producing large amounts of rock meeting the requirements for Schedule B work within a comparatively short period of time after notice to proceed. The units involved, 3 and 4, were in close proximity to and extended immediately upstream from the Cold Springs Quarry, near river mile 300.
27. By the addendum dated August 22, 1956, paragraph SW-5 of the specifications was changed to read as follows:
sw-5. use of quarry sources. — a. Two Government-owned quarry sites are shown on the drawings. Quarry site A (Hover Site) is an approved source of stone for work included, under Schedule C, and Site B (Cold Springs Site) is an approved source of stone for work included under Schedule B, If award is made under Schedule A, the Contractor may use either site or others as allowed by the specifications, but the Government will not guarantee that Site A will produce satisfactory riprap for Schedule B work without excess fines or that Site B will produce satisfactory riprap for Schedule C work without excess oversize.
b. If award is made to more than one Contractor under Schedules B and C, the Contractor performing work under Schedule B will not be permitted to use Site A without prior approval from the Schedule C Contractor, and the Contractor performing work under Schedule C will not be permitted to use Site B without prior approval of the Schedule B Contractor. Neither Contractor will be limited in his use of other sources as allowed in the specifications.
28. Part II of the Specifications, General Conditions, con - tained provisions "GC-3, Site Investigation" and "GC-6, Subcontractors", which were identical with the provisions contained in the first invitation, set forth above.
29. Part III of the Specifications, Special Conditions, provided, in substance, as follows:
(1) SC-1 provided that work should be commenced within 10 days after notice to proceed and, with respect to Schedule A, be completed within 480 calendar days thereafter. (SC-1 of the original invitation provided only 860 days.)
(2) SC-2 provided for liquidated damages of $50 per day for failure to complete within the time stated, or extensions thereof. (The same, in this respect, as the original SC-2.)
(3) SC-3, which was identical as the one in the first invitation, provided as follows:
_ SC^-3. VARIATION'S IN'ESTIMATED QUANTITIES. — All quantity items are of such a nature that they may vary from the estimated quantities shown in the contract. Should the actual quantity of work performed under any of these items vary from the estimated quantity by more than 25 percent, an adjustment in the unit price for that item may be made on the following basis:
Where the actual quantities of work for an item exceed by more than 25 percent the estimated quantities stated in this contract for such item either party to this contract may make a demand for negotiation for a new unit price for the actual quantity of work that is in excess of the estimated quantity plus 25 percent thereof. Where the actual final quantity of work for an item is less than the estimated quantity stated in the contract by more than 25 percent the Contractor will be paid at the contract unit price for that item for the actual quantities of work 'performed and, in addition, may request compensation in an amount sufficient to provide a reasonable allowance for the loss .of indirect costs on the quantity of work represented by the difference between the actual quantity and the estimated quantity of work.less 25 percent thereof. In the event of a dispute as to the amount of any adjustment under this paragraph, the matter shall be treated as a question of fact to be determined in accordance with the "Disputes" article of. this contract.
(4). SC-5 (as. did the first one) listed the contract drawings with which the work was to conform. Sheet 12 was the same one as .is above described.
(5) SC-6, Physical Data, contained provisions which were identical to those in the first invitation hereinabove set forth.
(6) Provisions with respect to Government-furnished property for the .Cold. Springs Quarry and the right-of-way for haul roads (which were the same as those contained in the first invitation) read as f oliows ':
sc — 8. government-furnished property. — The Government will furnish to the Contractor the following property to be incorporated or installed in a cattle guard at the Cold Springs Quarry site highway fence. Such property will be furnished f.o.'b. Cold Springs Quarry access road site. . All such property may be installed and/or incorporated into the work at .the option of the Contractor. Any property so furnished which is excess upon the completion of the work shall remain the property of the Government. The Contractor shall check the quantity and conditions of such Government-furnished property when delivered to him, acknowledge receipt thereof in writing to the Contracting Officer, and in case of damage to or shortage of such property, he shall within 24 hours report in writing such damage and/or shortage to the Contracting Officer. •
Quantity Item deaeration
21 each Railroad ties, treated, 7-inches x 9 inches x 8 feet 0 inches. .
12 each Rails, 90-pound, 14-foot minimum length.
%
SO — 28. HAUL ROADS AND HAULING. — U. .The location of haul roads shall be subject to approval of the Contracting Officer. Right-of-way for construction of a haul road to the Cold Springs Quarry site will.be furnished by the Government as shown on the drawings. Government-furnished materials are furnished as specified in para graph SC-8 for construction of a cattle guard at the highway fence line at the option of the Contractor. All work and cost of construction or removal of. haul roads will be considered incident to and included in the applicable contract prices of the various items in the bid schedule.
' 5. Upon completion of the work, the Contractor shall barricade all haul roads which he has constructed leading to water landings by construction of an earth windrow 2 feet high and approximately 10 feet from high water line.
(7) SC-24, Material Sources, was identical to the provision in the first invitation set forth above.
30. (a) As did the similar provisions in the first invitation, Section 2, Eiprap Eepair, Part IV of the Technical Provisions of the specifications contained detailed provisions with respect to the rock to be used and the manner in which the . riprap should be placed to accomplish the required repairs. In addition to the provisions hereinafter noted in .text, in whole or in part, with respect to the size, gradation and quality of the rock, among others, the provisions all prescribed in detail the (1) major types of protection to be placed on the embankment slopes, (2) methods of operation to be employed in placement of specific units of the contract, including its accomplishment by waterborne equipment, from landside, or both, (3) methods of placement for keying the rock into the embankments, and (4) the working tolerances permissible in such placement.
Section 2 of Part IV prescribed the method of measurement and payment for the .three major features of the work (Preparation of Foundation, Dumped Éiprap and Eandom Eock) and, insofar- as here pertinent, provided that payment of the unit contract price per ton for Eandom Eock and Dumped Eiprap would be on the basis of the material satisfactorily placed in the embankment in conformity with the size, gradation, quality and placement requirements of the specifications.
(b) Paragraph l-04<z of the Technical Provisions, Section 1, was identical with such provision contained in the first invitation, as set forth above.
TP 1-045, Eiprap, (1) Sources, was changed from the form used in the first invitation, above quoted, the first sentence making explicit tbe approval of Hover as a quarry site, and additional provisions being added concerning the use of Cold Springs. The revised provision read as follows:
b. Riprap. — (1) Sowrces. — The Government will make available to the Contractor, as approved quarry sites: Hover Quarry — Site "A" and Cold Springs Quarry — Site "B", as shown on the plans and 'as herein-before specified. These sites have been explored by core drilling at locations shown on the plans. Cores from the drill holes may be examined at the office of the District Engineer, Corps of Engineers, Walla Walla, Washington. Site "A" will be available without restrictions as to its use, but Site "B" (Cold Springs Quarry) has been used as a source of rock for emergency riprap repair by the U.P. Eailroad. The Contractor will be permitted to remove the existing Government-owned spur track from the Cold Springs Quarry provided that a sufficient length is preserved to permit access to emergency rock by the railroad company and that the track is satisfactorily replaced by the Contractor upon completion of the contract. The Contractor will be required to work this quarry for the full depth of suitable rock. Use of Site "B" by the railroad company for emergency rock will be limited to a small area near the existing main line.
(c) A new provision, TP 1-045, Eiprap, (2) Test Weight of Quarry Eock Samples, was added in this invitation. This recorded the results of the only new tests or investigations of the rock from either quarry which defendant made between the first and second invitations. The provision read as follows:
(2) Test Weight of Quarry Rode Samples. — Tests of rock samples obtained from the Cold Springs and Hover Quarry sites by the Walla Walla District indicate that the approximate weight of solid rock from these sources is as follows:
(d) The provisions of TP 1-0463, Quality, and TP l-04c, Kandom Pock, were identical with those in the first invitation, set forth above.
(e) As did the first invitation, paragraph 1-06a of the Technical Provisions specified the following for the gradation of the stone for use as riprap in the various features of the work:
This paragraph of the specifications further provided (as did the first invitation), in pertinent part, that:
Dirt, rock fines, and spalls weighing less than the minimum size specified, will not be permitted in quantities exceeding 10 percent by weight.
The next to the last sentence of the same provision of the specification further stated that:
The required stone sizes shall be obtained by selective loading at the quarry, use of a grizzly if necessary, at Hover Quarry, or other method or combination of methods as might be necessary.
The comparable sentence in the first invitation had read:
Selective loading at the quarry, use of a grizzly, or other methods or combinations of methods shall be used as necessary to obtain the required stone sizes.
31. At the time of the issuance of the second invitation, defendant's officials were still of the opinion that Hover was a feasible source for the production of all of the stone for the project in accordance with a reasonably economical commercial quarrying operation.
No additional subsurface investigations were madé by defendant between the first and second invitations. . No additional facts with, respect to either quarry site were ascertained by defendant or its personnel in this period, other than some test results on the weight of the rock from both sites which was incorporated into the July 30, 1956, specifications (Par. TP 1-045 (2)), as above indicated.
No additional facts with respect to either quarry site or the rock to be procured therefrom came to the attention of defendant or its personnel between the issuance of the July 30, 1956, invitation and the bid opening date of August 30,1956. All pertinent factual data within the knowledge of defendant and its personnel with respect to both quarry sites were made available to all bidders.
32. Following issuance of the invitation and specifications of July 30,1956, which resulted in the contract here involved, Erwen renewed his interest in submitting a bid to General for a subcontract for the quarrying portion of the work. No further examination of the cores was made nor was any change made in his prior decision to submit a bid to General for a subcontract for the quarrying based on producing all rock at Hover for the entire contract, or Schedule A, under the' July 30,1956, specifications.
,33. The first two sentences of specification provision SW-5», as amended by Addendum No. 2 dated August 22, 1956, as well as the entire subparagraph SW-55, were intended to clarify the division of work between Schedule B and C contractors through an outright assignment of quarries in order to avoid possible conflicts. In the event of a two-contractor project, the units of work requiring the larger rock were assigned to the Schedule B contractor, to whom Cold Springs was assigned, and the units requiring the smaller sizes were assigned to the Schedule C contractor, to whom Hover was assigned. In addition, these units were located geographically closer to said units. The actual purpose behind the third sentence of S¥-5a is obscure. However, it reasonably was not interpreted either by responsible officials of the District or by Erwen as affecting in any way the approvals that had been previously given for the use of either quarry to supply stone for the entire project in the •event the successful - bidder was a Schedule A contractor. The sentence added nothing new by way of basic information. It amounted only to a recording for the first time in the narrative specifications of matters already known as a result of the note on Sheet 12 and inspections of the cores and the sites, i.e., that Hover would produce excess fines and Cold Springs excess oversize. The amended SW-5 was regarded as of little or no significance to the Corps, of Engineers' Estimating Section, which was in charge of preparing the Government's cost estimate, as it contained only information they had had before the issuance of the first bid invitation. Erwen and his estimator reasonably considered the amended SW-5 as virtually without significance to them since they considered it as primarily an instruction to Schedule B and C contractors, their competitors, and it told them nothing about the two quarry sites they.did not already know, namely, that excess oversize was contemplated at Cold Springs and excess fines at Hover. It reasonably was not construed as constituting a withdrawal of the approval of Hover as a source for any part of the project rock. Such important action might well have necessitated a recalculation of bids by prospective bidders and a postponement of the bid opening date. As shown, Addendum No. 2 effecting the amendment of SW-5, issued just 8 days prior to the bid opening date, did not effect any such postponement. Instead it confirmed the tentative date of August 30, 1956, as the bid opening date.
34. General submitted a bid under Schedule A, or for all units, dated August 30,1956, in time for the bid opening on the same date. The bid expressly acknowledged receipt of the two addenda hereinbefore noted.
Bids were opened on August 30, 1956, with the following results:
General_$1,028,466
Manson-Osberg_ 1,129,635
Government estimate (without profit)_'_ 966,459
The low bid was only 6 percent in excess of the Government's cost estimate, and an award was made to General on September 12,1956. The bids were on the basis of estimated quanr tities. • • •
General's bid, and the contract unit price, was $1.30 for Preparation of Foundation and $3.24 per ton for both Random Rock and Dumped Riprap, in place.
Bidders were not required to indicate the quarry source or sources which they contemplated using in. performance of the work nor was any such information here submitted.
35. Erwen again bid on the basis of using Hover for all the work, his price to General being 95 cents per ton of riprap or random rock. In his bid he allowed for 20 percent of the material at Hover being waste.
Erwen had originally given consideration to a two-quarry operation but, after a calculation of the costs thereof, rejected it. He concluded that the costs of mobilizing, equipping, operating and dismantling two quarries, plus the extra expense involved in the building of facilities to reach the river from the Cold Springs site, and the expensive loading facilities that would be required at the river, would be prohibitive.
The Government's cost estimate was based on two contracts being awarded, one for Schedule B and one for Schedule C. No Schedule A estimate as such was prepared on this invitation. For a Schedule A bidder, as was plaintiff, defendant merely combined its Schedule B and Schedule C estimates. Defendant's estimate was based on a unit price (without profit) on each of the three items of each unit or section of the work as set forth in the Unit Price Schedule in the specifications, namely (a) Preparation of foundation, (b) Dumped riprap in place, and (c) Random rock in place. Since the estimate was prepared on the two-contract basis, it was naturally based upon Cold Springs being used for the Schedule B units and Hover for the Schedule C units.
The Government's cost estimate on the July 30,1956, invitation (or the contract here in suit) was based upon obtaining 224,000 tons of dumped riprap and 16,000 tons of random rock from Cold Springs, and 49,500 tons of dumped riprap and 1,400 tons of random rock from Hover. Of the 49,500, 47,000 tons were of small riprap and 2,500 of the larger size.
The total average unit cost per ton, in place, on the rock procured from Cold Springs, was $3.01 per ton. Of this amount, $1.85 represented the portion of the work performed by Erwen under its subcontract with General, namely quarry ing and placement on barge, and $1.16 of the total average unit cost per ton, in place, represented the portion of the work performed under the contract by General.
The total average unit cost per ton, in place, for the rock procured from Hover, was $3.11 per ton. Of this amount, $1.61 represented the portion of the work performed by Erwen under its subcontract with General, and $1.50 of the total average unit cost per ton, in place, represented the portion of the work performed under the contract by General. The Hover waste allowance was 20 percent.
The proof fails to establish whether the Government's cost estimates were more or less reasonable than General's and Erwen's.
36. The prune contract between General and the Government, by the District Engineer, Walla Walla District, for the work listed in Schedule A, is dated September 12,1956. All provisions of the drawings, specifications and Schedule A, including the addenda, were attached to and made a part of the contract documents. Schedules B and C were not included in the contract. The stated contract consideration was $1,028,466, or General's unit bid prices at estimated quantities.
The contract provided that work would commence within 10 calendar days after receipt of written notice to proceed. Notice to proceed was issued by defendant on September 25, 1956, and acknowledged by General on October 1,1956.
37. Articles 4 and 6 of the contract provided as follows:
4. Changed Conditions
The Contractor shall promptly, and before such conditions are disturbed, notify the Contracting Officer in writing of: (1) subsurf ace or latent physical conditions at the site differing materially from those indicated in this contract, or (2) unknown physical conditions at the site, of an unusual nature, differing materially from those ordinarily encountered and generally recognized as inhering in work of the character provided for in this contract. The.Contracting Officer shall promptly investigate the conditions, and if he finds that such conditions do so materially differ and cause an increase or decrease in the cost of, or the time required for, performance of this contract, an equitable adjustment shall be made and the contract modified in writing accordingly. Any claim of the Contractor, for adjustment hereunder shall' not be allowed unless he has given notice as above required; provided that the Contracting Officer may, if he determines the facts so justify, consider and adjust any such claim asserted before the date of final settlement of the contract. If the parties fail to agree upon the adjustment to be made, the dispute shall be determined as provided in Clause 6 hereof.
6. Disputes
Except as otherwise provided in this contract, any dispute concerning a question of fact arising under this contract which is not disposed of by agreement shall be decided by the Contracting Officer, who shall reduce his decision to writing and mail or otherwise furnish a copy thereof to the Contractor. Within 30 days from the date of receipt of such copy, the Contractor may appeal by mailing or otherwise.furnishing to the Contracting Officer a written appeal addressed to the Secretary, and the decision of the Secretary or his duly authorized representative for the.hearing of such appeals shall, unless determined by a court, of competent jurisdiction to have been fraudulent or capricious or arbitrary or so grossly erroneous as necessarily to imply bad faith, or not supported by substantial evidence, be final and conclusive; •provided that, if no such appeal is taken, the decision of the Contracting Officer shall be final and conclusive. In connection with any- appeal proceeding under this clause, the Contractor shall be afforded an opportunity to be heard and to offer evidence in support of its appeal. Pending final decision of a dispute hereunder, the Contractor shall proceed diligently with the performance of the contract, and in accordance with the Contracting Officer's decision.
The term "his duly authorized representatives" as used in Article 6, was defined to mean "the Chief of Engineers, Department of the Army or an individual or board designated by him."
38. The subcontract between General and Erwen is dated October 12,1956. It provided in part as follows:
In consideration therefor, the subcontractor agrees as follows:
$ $ # $ ‡
2. To be bound by the terms of said main contract with the owner (including every part of and all the general .and special conditions, drawings, specifications and addenda), in any way applicable to this Subcontract, and also by the PROVISIONS printed on the reverse side hereop, which are hereby referred to and made a part of this Subcontract.
3. That the labor and materials to be furnished, and the work to be performed by the subcontractor are as follows: Drill — Shoot and load rock onto barges. Subcontractor to construct the jetty and loading facilities at Hover Quarry Site. General Contractor agrees to furnish enough tugs and barges in order that subcontractor can load 1,200 tons of rock in normal daylite shift of 8 hours. Payment is based on estimated quantities of 291,900 tons at the unit price of $.95 a ton for all items of random rock and riprap F.O.B. barges at Plover Quarry Site — subject to price adjustment for overruns and underruns as provided in Section SC-3 of the Specifications, Part III. The unit weight shall be a ton of 2,000 pounds. Method of weighing to be water displacement of barges or other approved method. Payments to be made on monthly estimates. Basis of quantities as paid for by the U.S. Army Engineers with 10% of estimate retained until final completion. All in accordance with the U.S. Army Engineers specifications for this work.
Additional provisions of the subcontract (on the reverse side) include the following:
THE SUBCONTRACTOR AGREES:
(a) To assume toward the contractor, so far as the subcontract work is concerned, all the obligations and responsibilities which the contractor assumed toward the owner by the main contract which includes the general and special conditions thereof, and the plans and specifications and addenda, and all modifications thereof incorporated in the documents before their execution (which documents shall be available t,o the subcontractor) . The subcontractor agrees not to assign or sublet said work or any portion thereof without the written consent of the contractor.
$ $ ‡ ‡ $
(k) To indemnify and save harmless the contractor from and against any and all suits, claims, actions, losses, costs, penalties, and damages, of whatsoever kind or nature, including attorney's fees, arising out of, in connection with, or incident to the subcontractor's performance of this SUBCONTRACT.
The production quota of 1,200 tons of material per day from the Hover Quarry, as provided in the subcontract, was arrived at by General and Erwen on the agreed assumption that it would take General 24 hours to place a day's quarry production on the riverbanks.
On October 18, 1956, General advised defendant that its only subcontractor on the work would be the Erwen Construction Company which would accomplish the necessary quarrying of rock and the loading of it on the contractor's scows.
39. The Erwen work force moved into Hover hi late September 1956 to do their preliminary work. The first production began on November 8, 1956. The mobilization of the quarry consisted of moving material to build a maintenance shop; moving in equipment; building a road; exploratory drilling and the development of a quarry face; and the building of dock and barge-loading facilities, consisting of a jetty to the point where water deep enough for the barges was reached, the driving of piling, and the construction of a head-wall, which resembled a ferry slip.
40. Although, as set forth, the specifications called for Units 3 and 4 as being the first order of work, defendant, due to cross-sectioning, was not prepared to receive the rock for these units when Erwen first commenced producing riprap on November 8,1956. Accordingly, General was ordered instead to commence placing the rock on Unit 1 — McNary Ham. As shown, this was the unit on which the largest sized riprap on the entire contract was required. However, only 10,400 tons thereof was required. By Modification No. 1, dated February 27, 1957, plaintiff was given a change order which extended its time for the completion of its work on Units 3 and 4.
41. The Hover site was a failure for the production of the riprap requirements for the prime contract in that it did not and could not produce the required riprap except at a cost which was unreasonable and prohibitive. It was not a feasible quarry for commercial use for the material required under the contract, and it is not known and could not be positively established without additional months of quarrying effort, whether the site could produce the required quan tities of riprap at all. The deficiencies of the quarry for the purposes of producing the rock needed for the contract were: (1) a very large proportion of the rock in the quarry was unsound in the sense that it would shatter, crumble or pulverize on handling, and elsewhere in the quarry there were areas of rotten and decayed rock interspersed with boulders, not suitable for production purposes; (2) the waste factor was so high as to render the effort to work the Hover Quarry uneconomic; and (3) the site was rapidly exhausted from the standpoint of commercial quarrying, and as the work went on there was not enough sound riprap available at Hover to keep up with the placement work on the river.
A satisfactory vein of rock at the commencement of operations gave out after the initial few weeks of operation. From this vein, plaintiff was able to produce the largest sized rock required by the contract (i.e., the McNary Dam unit rock, being 75 pounds minimum, 1,500 maximum, and 300-750 average), but as operations proceeded further into the original cut, as well as in extended areas of the quarry face, it became increasingly difficult to locate sound rock. The blasting of apparently sound rock faces resulted in the rock's crumbling. The amount of the powder charges used was successively lowered to ultimately irreducible mínimums, but this failed to correct the situation. Eock which was seemingly sound would flake or deteriorate when dug or, when loaded with the shovel on to the trucks and barges or otherwise handled in the normal course of quarry operations, would shatter and disintegrate. The excavated perimeter around the quarry face ultimately measured approximately 1,350 feet, which was unusually extensive. At the time operations ceased at Hover, there was no reasonable prospect that further exploration would produce any substantially different results.
The core borings indicated that sound rock existed beneath the red vesicular stratum. However, it would not have been feasible or practical to quarry such rock since it was below water level, therefore requiring, among other things, expensive pumping operations.
42. Defendant accepted approximately 50,000 tons of material from Hover, but of that amount 25 percent was random material which had no specific gradation requirements and was residue or waste of the riprap, as it was being removed from the barges. Approximately 50,000 to 60,000 tons of material, in addition to the rock accepted and paid for, was handled and disposed of as waste. Subtracting the 25 percent quarry waste from the 50,000 tons of rock accepted and paid for, leaves approximately 37,500 tons of real riprap produced at Hover. If the waste was 50,000 additional tons, the proportions of waste and good rock were 68 and 37 percent respectively. If the waste was 60,000 tons, the proportions were-66 percent waste and 34 percent good rock.
These waste percentage figures do not serve as the basis for a projection of the proportions of waste and good rock in respect of the parts of the site not excavated by the subcontractor because the good rock produced at Hover came in large part from a vein or strip at the front of the quarry which was mined out during the first few weeks of quarrying operations, and additional rock of equivalent quality could not be located in any substantial amount despite diligent efforts to do so. Therefore, further operations would almost certainly have resulted in an even higher waste percentage.
43. The 50,000 tons of riprap from Hover which General placed and for which it received payment were placed in units that had been included in Schedule B in the advertisement for bids, including, as stated, Unit 1, McNary Dam, calling for the largest rock sizes. All such rock met the quality and soundness requirements of the specifications.
44. There was no day at Hover when the production quota of 1,200 tons per day was met, the net average daily production being 687.3 tons. The prime contractor complained of lack of progress, as did defendant.
45. After approximately 60 days of production, Erwen concluded that it was hopeless to continue operations at Hover, and that he would, consequently, move to Cold Springs. This decision was reasonable and sound. He had no practical alternative.
46. In the latter part of December 1956, having arrived at his decision to leave Hover and operate at the Cold Springs Quarry, Erwen made verbal application to the resident en gineer for a change order to compensate him for the move. The application was denied.
47. The first 12 to 15 feet below the surface at the Hover site that Erwen excavated did not, for the most part, consist of hard, sound basalt with some fractured zones as indicated on Sheet 12 of the plans. The greater part of the rock at the quarry has an inherent physical and structural weakness which makes it unsuitable to withstand normal quarrying handling and operations. A geological sequence of events produced the conditions encountered by the subcontractor at the Hover site, namely, rock appearing as a solid wall or face but nevertheless disintegrating upon normal quarry handling, and, in other areas, large boulders nesting in quantities of rotten rock and debris.
48. Erwen's operations at Hover were in substantial com--pliance with the requirements of the specifications and were in accordance with acceptable and efficient procedures of the trade. The specifications required advance stripping of the overburden to expose bare rock. At this quarry, there were frequently small pockets of overburden between rock outcroppings into which it was not feasible to operate stripping equipment. In addition, it was often not possible to find a. flat expanse of hard rock which would support such stripping operations. This was an aspect of the quarry's defects. Where it was reasonably possible to strip the overburden to sound bare rock, such stripping was accomplished.
Also, plaintiff's use of the grizzly at Hover is not shown to have been improper. The specifications did not require the use of a grizzly to produce riprap of the required sizes. Selective loading was permitted and this was the procedure Erwen employed. ' The grizzly was used only to separate the-dirt from the random rock for later proposed use. This, is normal quarry operating procedure. A grizzly is not ordinarily used in the production of large riprap. The selective loading method is invariably employed.
During Erwen's stay at Hover, an undetermined amount-of such random rock was so produced and stockpiled for possible future use. When Erwen left Hover a pile of such rock: which theretofore had not been called for by defendant was-abandoned.
There is no substantial showing that the use of a grizzly at Hover for the production of large sized riprap would have resulted in any appreciably greater amount of such rock being produced or that this would have contributed in any substantial manner to overcoming the basic unsuitability of the quarry for the purposes of this contract.
49. Plaintiff's subcontractor Erwen encountered subsurface and latent physical conditions at the Plover site differing materially from those indicated on Sheet 12 of the plans. These conditions were also physical conditions of an unusual nature differing materially from those ordinarily encountered and generally recognized as inhering in quarry work of the character provided for in the contract.
50. On December 28, 1956, Erwen presented his claim for an equitable adjustment under Article 4 of the prime contract, by letter to the prime contractor for presentation to the contracting officer on his behalf. This letter, after quoting from Article 4 of the contract, states in pertinent part:
Investigation of the Hover Quarry Site will demonstrate quickly and conclusively that all parties concerned, the Government, your Company, and ourselves, were completely mistaken as to the nature and character of the subsurface material, despite study of core drillings and diligent examination of the site. The quarry is plainly unsuitable for the purposes intended by the contract and as before stated, will not produce rock of the quantity and size required by the contract, except at a cost which is unreasonable and prohibitive.
We will have to move from the Hover Site to the Cold Springs Site, entailing loss of use of the facilities which we have constructed at Hover, increased costs during our operation at Hover, the expenses of the move, and increased costs at Cold Springs.
It is our understanding of the relationships which the various parties bear to each other that it is your duty to present our claim to the Contracting Officer, in your own name as prime contractor, but for our benefit.
It is therefore requested that you make this presentation both to the Project Engineer and to the District Engineer.
By letter dated January 7,1957, General forwarded Erwen's letter to the contracting officer and stated in part:
In our opinion tbe Erwen Construction Company has a justifiable claim, and we forward this letter to you as notification of our intent to seek an equitable settlement of this condition.
51. By letter dated January 10, 1957, to General the contracting officer acknowledged receipt of the claim, stating:
Acknowledgment is made of receipt of your Serial Letter No. 17 dated 7 January 1957, which transmitted a letter from Erwen Construction Company stating their intention to submit a claim for alleged misrepresentation of the Hover Quarry by the Government.
On the basis of information presently available this office is unable to see any justification for this claim. However, the matter is being given a thorough study and at such time as a claim for a definite amount is submitted by you, you will be furnished a determination in this matter.
52. By letter dated January 30,1957, General transmitted to the contracting officer a letter dated January 22, 1957, to General from Erwen which stated:
Thank you for providing me with a copy of Lt. Col. William E. Hart's letter of January 10, 1957 .
It disturbs me considerably to find that my claim has been so thoroughly misunderstood. I did not even mention "misrepresentation" by the Government. My claim is under article 4 of the prime contract for an adjustment based upon Changed Conditions. Further, I think Col. Hart's procedural treatment of the claim is not right either. "Thorough study" of the claim at this stage is not enough; it being my understanding that the contracting officer should make an investigation in the field and should make findings of fact now upon which the claim of Changed Conditions will eventually be decided.
I would appreciate your forwarding copies of this letter to Col. Hart.
General's letter stated in part:
It would seem to us that a meeting of the parties and an inspection of the quarries should be made without delay so as to ascertain conditions as they now exist.
53. On February 8, 1957, a joint inspection of the Hover site was made by representatives of General, Erwen, and defendant. Following such inspection, Erwen, by letter of February 13, 1957, to General, stated as follows:
At the close of our joint inspection trip to the Hover Site on February 18,1957 there was some discussion with the Government people with regard to our making a presentation to the government m connection with our claim prior to the making of findings by the contracting officer. On thinking this over however it does not seem to us that this would really expedite matters and it might involve us in a certain amount of unnecessary expense.
The central point in our case is the unsuitability of the Hover Site as a quarry. We think it is self evident that the site is unsuitable, and we know of course that the Government has engineers and geologists in its employ locally who can report on this matter very readily. In addition to this the Government has our daily loadings showing what our production has been. There is really nothing that we can add to the open and obvious facts without engaging a geologist. Consequently we would prefer that the Government complete its engineering and geological reports on the quarry and tell us what they think the facts are. Then if there is any disagreement we could engage experts, an expense which we really do not believe is going to be necessary.
It would be appreciated if you would forward this letter to the project engineer.
Erwen's letter was forwarded to defendant by General's letter of February 21,1957.
54. Erwen kept the operation going at Hover, but transferred his drilling equipment to Cold Springs to begin preliminary work there. Also, he commenced acquiring the necessary rights of way so he could build the access road from the quarry face to the loading area..
The roads, causeway and loading facilities at Cold Springs were completed, and operations ceased at Hover, on February 21,1957, after 73 full production days at the site.
The operation at Cold Springs was in good working order within 5 days after the move from Hover, and thereafter the daily quota was continuously maintained.. The crews on the river were given all the rock they could handle, and the overall job, as substantially enlarged by change orders, was finished approximately 2 months ahead of time. The daily average production at Cold Springs was 1,567.08 pay tons. The best single day's production was 1,959 tons. The waste factor was approximately 10 percent. .
At' Cold Springs the operating procedures and routines were the same as they had been at Hover. The same crews, drilling, and equipment were used, except that additional trucks were placed on the job as well as additional equipment for barge loading. Also, a heavier demolition ball to handle secondary breakage of the large rock at Cold Springs was used.
55. By letter dated May 13, 1957, the contracting officer advised General that its claim for an equitable adjustment under Article 4 of the contract was denied because the "conditions which you have encountered at Hover Quarry are those which could be reasonably anticipated from the information furnished to you prior to bidding and which is set forth in the contract plans and specifications." General's attention was called to its right to appeal under the Disputes clause.
Attached to the letter were the contracting officer's "Findings of Fact", which stated in part that specification provision SW~5a, as revised by Addendum No. 2, constituted a "warning of the possible limitations of use of the rock from each quarry"; that the Hover logs on Sheet 12 "indicate that approximately the first 13 to 15 feet of the rock below the surface of the ground consists of hard, sound basalt with fractured zones", but that the entire log information was "very general", as indicated on the note on the sheet, and that "for a determination of the exact character of the materials a visual-inspection of the actual cores is required"; that an examination of the two railroad cuts at Hover would indicate "numerous vertical and horizontal fracture lines" which would result in "a large portion of the rock, breaking into relatively small pieces during quarrying'operations"; that at the prebid conference, Erwen was "warned that, while the Hover site would furnish large stone of good quality, there would also be a high percentage of small stone and spalls that would not be suitable for riprap along the highway and railways, and on the dam, and if the Hover source were used considerable selection and possibly a grizzly would be required to produce specification stone"; that "despite the warning contained in the specifications and given verbally to the Subcontractor prior to the opening of bids that rock from the Hover Quarry Site would contain an excess of fines and might require special processing for use under Schedule B work, the Subcontractor chose to develop the Hover Quarry Site as a source of riprap for both Schedule B and Schedule C work"; that plaintiff's difficulty was that, "of the rock produced by the Subcontractor from this quarry, a large percentage was too small for use under Schedule B work" and that "this problem was intensified by the fact that the Subcontractor did not strip the area to expose bare rock prior to drilling and shooting" and by his use of the grizzly "only to separate the dirt from material for random rock"; that the conditions found at Hover were those "which could reasonably be expected by a qualified person upon investigation of the site and examination of the cores " and was the same "as the Subcontractor had been advised by the Government that would be expected at this site."
56. (a) By letter of May 21, 1957, to General, the subcontractor advised that "we do not accept these findings, and believe them to be without foundation in fact." He requested a reconsideration of the matter by the contracting officer because "we feel very strongly that Colonel Page [the contracting officer] is not in possession of all of the facts." He also requested an extension of time to appeal. Erwen's letter was forwarded to defendant by General's letter of May 22,1957, which requested a meeting to reconsider the matter. This request was granted by letter from the contracting officer dated May 28, 1957, which extended plaintiff's time to appeal to June 17, 1957. Thereafter, a meeting was held on June 10,1957.
(b) At the meeting, Erwen presented a geologist's report which concluded that, due to geologic events (Hover being the thin, terminal point of a single lava flow on water, resulting in basic rock structural alterations and a highly jointed system), the rock at Hover was, in large part unsound for quarrying operations, an unsoundess which was not indicated by the cores and which was obscured (by weathering and erosion) by a site examination. Questions were raised about the representativeness of the five cores, all of which began in solid basalt outcrops which constituted, however, less than 50 percent of the ground surface area at Hover. After a discussion of the proper interpretation of the specifications, especially TP 1-04 and SW-5, the contracting officer stated his opinion remained unchanged, but he acceded to Erwen's request that additional drill holes be made at mutually selected locations.
(c) A timely notice of appeal from the contracting officer's decision was filed by General on June 11,1957.
57. Prior to the appeal hearing, three additional cores were drilled at Hover in locations other than rock outcroppings. Because of such locations, all three cores naturally showed less rock than the other five. Also, one core showed approximately 3.6 feet of badly shattered basalt. The other two were more nearly equal to the original five and did not materially change the general picture developed by them.
58. (a) After a hearing at which exhibits were introduced and plaintiff presented six witnesses and defendant three, the Corps of Engineers Board of Contract Appeals, on April 6, 1959, denied plaintiff's appeal. The Board decided, in pertinent part, that defendant had not "represented" that either quarry 'was capable of furnishing all of the rock requirements "; that SW-5, properly interpreted, "carries the clear implication that it [Hover] is not approved for the production of large riprap, representing 78% of the job"; that "subdivision b of the same paragraph alerted a bidder to the fact that if two contracts are let the Schedule B contractor would not even be allowed to use Hover without the approval of the other contractor in possession, an approval not likely to be given"; that the "contract was furthermore replete with statements that the rock generated at Hover would break small" and that the railway cuts and cores fairly foretold what plaintiff actually found; that plaintiff's claim that Hover was "exhausted" when abandoned was true only in the sense "that Hover would not produce rock of the quantity and size required by the (entire) contract, except at a cost which is unreasonable and prohibitive", a conclusion with which "the Government would undoubtedly agree"; and that, while "there is no doubt that Hover was a more tempting site than Cold Springs", the latter, as "a proven quarry5 should have been selected, at least for the larger rock.
(b) At the hearing, an important Government witness, who was the author of SW-5, in its original and revised forms, erroneously testified, in support of the Government's own intent, that the Government's cost estimate on the first invitation was based on the use of Cold Springs for the entire job. This testimony was an honest error. The correct facts were disclosed in discovery proceedings before this court. He also testified (Bd. tr:-, pp. 262-263) that up to the túne of the issuance 8 days before the second bid opening of the revised form of SW-5 by Addendum No. 2 both quarries were considered by defendant, and were stated in the specifications, to be "approved quarries without qualification," and that it was by the revised form of SW-5 that the approval of Hover was qualified. However, at the trial in this court, (Tr. 206) the witness testified that said revised form of SW-5 was not "anything new." Another Government witness similarly so testified. And the then Chief of the Estimating Section also testified (Tr. 453) at the trial that he did not believe SW-5 "would have a great deal of significance because we had the information from the very start" (no new investigations having been made between the first and second bid openings). All three Government witnesses testified before the Board that Erwen's decision to abandon Hover was sound. With respect to the contracting officer's findings that prior to bidding, Erwen was given oral "advice" and "warnings" concerning Hover at the prebid conference and at the inspection of the borings, the Government representative who was considered as having given such "advice" and "warning" testified before this court that that statement, as well as his testimony before the Board with respect thereto (the Board's factual statement reiterated the contracting officer's findings) should not be construed to mean that he actually gave plaintiff any "advice" or "warning", that he was not in agreement with this "wording" of the findings, and that what he said at tlie times in question merely amounted to "a reiteration of what is already in the specifications." (Tr. 349-350)
59. Plaintiff claims $11,264.01 as additional costs incurred at Hover due to the reduced production of rock while it was operating there 'as compared with the 1,200 tons it planned to produce.
Erwen spent 73 workdays at Hover in the actual production of rock. During this period he produced 51,100 tons of rock for which he received payment, an average of 700 tons per workday. It was reasonably estimated by both plaintiff and Erwen, and was so provided in the subcontract, that there would be an average production of 1,200 tons per day. Had a changed condition not occurred at Hover, Erwen could have produced this tonnage with his planned manpower and equipment. On this basis, he should have produced 87,600 tons during such 73 days. Thus, Erwen experienced lost production of 36,500 tons.
Plaintiff's total labor and equipment operating costs at Hover was $25,714.81. The lost production of 36,500 tons is equivalent to $10,676.91 of such total operating costs. This fairly represents Erwen's excess costs while operating at Hover (exclusive of mobilization and setting up expenses at Hover, which are not claimed).
60. Erwen expended $682.20 in moving the equipment at Hover to Cold Springs. These are costs which would not have been incurred but for the changed condition at Hover.
61. Erwen necessarily incurred certain preliminary costs to prepare the Cold Springs Quarry before production could commence. These expenditures were additional costs since Erwen would not have had to incur them had there been no changed condition at Hover, the similar setting up costs at Hover having already been incurred (and for which no claim is here being made). As the Cold Springs site was approximately 1% miles from the Columbia River, it was necessary to improve an existing road which went part of the way, and to extend it to the river by constructing a new road. Further costs were incurred to construct certain small buildings, a grizzly, and barge-loading facilities, including a chute, bulkhead, and a causeway-like fill between the mainland and a small island which was used as a terminal point for loading the barges. The total amount of these additional costs was $42,404.89.
62. Plaintiff claims entitlement to alleged additional operating costs incurred at Cold Springs. Its adjusted claim (originally $101,472.89) amounts to $83,766.44, composed principally of additional machinery utilized at Cold Springs above that used at Hover, and the cost of employees to rim such equipment, including labor overtime.
The use of the equipment and labor involved in this claim permitted plaintiff to complete the entire contract, including additional rock orders from defendant of substantial tonnage, approximately 2 months prior to the contract completion date. Substantial benefits, including decreased overhead, thus necessarily resulted. How much equipment and labor to devote to a job, including the balancing of the extra expenses of overtime and additional equipment as against the benefits to flow therefrom, are essentially management decisions of an operational nature. The record does not show how much, if any, of the extra equipment and labor expense claimed under this item is attributable to such a management decision, from which great savings and benefits resulted, as distinguished from the extra operational costs which would have been necessary at Cold Springs simply to produce 1,200 tons per day and to complete the project within the time limit originally planned for the Hover operation; i.e., there is no satisfactory proof as to whether Erwen could or could not have produced a daily average of 1,200 tons of rock at Cold Springs with substantially the same equipment and labor used at Hover. For instance, the extra equipment and labor expense incidental to the longer haul from the quarry face to the loading facilities, and the necessity of maintaining the haul road, may well have been more than made up by the equipment and labor savings incidental to the admittedly low waste factor (approximately 10 percent) at Cold Springs. For failure of proof, and because of its inherent speculative nature, no specific amount is reasonably attributable to this item of claim.
63. (a) At the termination of the job, Erwen's costs of moving out of Cold Springs to bis borne office at Pasco, Washington, were greater than they would have been from Hover, which is located only approximately one-third of the distance to Pasco as compared with Cold Springs. Plaintiff's method of calculating this excess as two-thirds of its total costs of moving out is reasonable. Such two-thirds amount is $872.16.
(b) Plaintiff also incurred site cleanup expenses at Cold Springs which it would not have had to incur had there been no changed condition at Hover. (It is not claiming its site cleanup expenses at Hover, so there is no duplication in plaintiff's claim. It was Erwen who incurred two site cleanup expenses.) These expenses totaled $1,806.01.
Thus, the total moving out and cleanup costs were $2,678.17.
64. Prior to abandoning Hover, it was necessary for Erwen to incur the expense of an additional superintendent at Cold Springs in connection with the mobilization of that site. This dual supervision expense covered the 9-week period beginning with the week ending December 29,1956, and continuing with the week ending February 23,1957. The additional costs thus incurred totaled $1,350.
65. The industrial insurance rates on labor were higher in Oregon, where Cold Springs was located, than in Washington, where Hover was located. Consequently, Erwen incurred increased costs of that nature in the amount of $4,370.68.
66. In his business operations, Erwen customarily applied overhead at approximately 15 percent of his direct costs, which was reasonable. However, the additional direct costs set forth in findings 59-65 include certain items, such as those referred to in findings 64 and 65, which Erwen normally considered to be included in and covered by the 15 percent overhead rate. Thus, for the purposes of this claim, these items are being treated as direct costs, rather than as overhead. On this basis, the overhead rate should be reduced to avoid a double recovery with respect to such items. The exclusion of those items from overhead, and their inclusion as direct costs, necessitates an overhead rate of 11.9 percent to remove the duplications. Accordingly, the proper overhead rate to apply on the additional direct costs hereinabove referred to is 11.9 percent. The additional direct costs Erwen incurred as set forth in findings 59-65 total $62,162.85. 11.9 percent thereof amounts to $7,397.38.
67. Claim is made for a profit allowance of 10 percent on the additional direct costs set forth in findings 59-65. (Erwen's bid to General contained a profit element of 12% percent of estimated direct costs.) The contention is that such a profit rate was a normal one for such contractors in the area herein involved. This contention is, however, insufficiently supported by the record. In addition, insofar as Erwen's particular situation was worsened by the failure to realize any profits on the additional direct costs referred to in findings 59-65, his own profit experience over a representative business period does not indicate a 10 percent profit loss. For the 1950-1955 period immediately preceding the instant 1956 contract, plaintiff's profit ratio to direct costs was 3.135 percent.
3.135 percent of the above-mentioned direct costs of $62,-162.85 amounts to $1,948.81.
68. The failure and abandonment of Hover, and the completion of the contract at Cold Springs, caused additional costs of $62,162.85, the application to which of appropriate overhead and profit allowances results in the total amount of $71,509.04, for which amount an equitable adjustment under Article 4 of the contract should have been issued, as follows: '
1. Additional costs incurred at Hover (finding 59)_$10,676.91
2. Cost of moving from Hover to Cold Springs (finding 60)___ 682.20
3. Setting up expenses at Cold Springs (finding 61)_ 42,404. 89
4. Moving out and cleanup costs at Cold Springs (finding 63)_ 2,678.17
5. Additional supervisory expense (finding 64)_ 1,350. 00
6. Increased industrial insurance costs (finding 65)- 4, 370.68
Total additional costs_ 62,162. 85
7. O verilead on additional costs @ 11.9 percent (finding 66)___ 7, 397. 38
8. Profit on additional costs @ 3.135 percent (finding 67)_ 1,948. 81
Total_ 71, 509. 04
CONCLUSION OF LAW
Upon the foregoing findings of fact, which are made a part of the judgment herein, the court concludes as a matter of law that the plaintiff is entitled to recover and it is therefore adjudged and ordered that it recover of and from the United States the sum of seventy-one thousand five hundred nine dollars and four cents ($71,509.04).
Plaintiff, a Nevada corporation, is the successor in interest to the General Construction Company, an Oregon corporation, which actually performed .the contract. The term "plaintiff" will be used herein to refer to plaintiff as if it were the performing contractor.
The quarry operations were sublet by the prime contractor, the General Construction Company, to Edmund P. Erwen of Pasco, Washington, doing business as the Erwen Construction Company. Erwen actually performed the quarrying of the rock and the instant claim is also being brought in his (i.e., his estate's) behalf. However, the term "plaintiff" will be used as if the prime contractor performed such work.
75 pounds minimum size, 1,500 maximum, and 300-750 average. Only 10,400 tons of this largest sized rock, comprising only 4 percent of the total contract work, was required under this contract. The bulk of the contract requirement, 74 percent, consisted of a somewhat smaller size, i.e., an average of 250-500 pounds, but with the same minimum and maximum sizes.
Because of the need for emergency repair work on a part of the river bank adjacent to the line of the union Pacific Railroad Company, the company had been permitted to take stone from the nearby Cold Springs quarry to make the repairs and was performing this work at the time of the call for bids. Thus, this possible interference problem also was present. The first call for bids noted this. After stating that the Government would make available both quarries, the specifications provided (TP l-04b(I)) that the Hover quarry would "be available without restrictions as to its use, but the use of" the Cold Springs quarry "must be coordinated with the union Pacific Railroad Company."
Except that the railroad company was still entitled to continue with its operations at Cold Springs, referred to in fn. 4. Spec. par. TP 1-04. However, this specification went on to state that use of Cold Springs "by the railroad company for emergency rock will be limited to a small area ."
The use of Cold Springs was subject to the emergency operations being conducted by the railroad. Also, the contractor was required under this specification "to work" Cold Springs for the full depth of suitable rock.
A grizzly is a kind of screen made of railroad ties. It was used at Hover to separate the dirt from the small sized rock which was stockpiled for later use as random rock. Plaintiff abandoned Hover leaving a substantial amount of such rock in the stockpile.
In all, defendant's estimate was for approximately 100,000 tons of rock to come from Hover, aronnd 37,500 tons to constitute rock of 75 pounds minimum and 1,500 pounds maximum size, witli an average size of 250-500 pounds, and the balance to constitute rock of 25 pounds minimum and 400 pounds maximum, with average size of S0-150 pounds. The larger size constituted the great bulk of the rock to be placed on this contract.
Tlie bid invitation contained a provision that if a revision or amendment was of such a nature as to require material changes in prices bid, the opening date could be postponed so as to enable bidders to revise their bids. If this addendum issued so close to the date of the bid opening was of such importance as to withdraw approval of a large part of the work from one of the previously unqualifiedly approved quarries, as defendant contended before the Board, it was certainly of such importance as to have warranted a postponement of the bid opening so as to permit bidders who were contemplating using Hover for all of the contract work to recalculate their bids. The fact that this was not done indicates that SW-5 at the time it was issued was not considered by defendant to have the major Importance testified to before the Board.
Defendant's position -with respect to the apparently sound basalt rock below the water table, is confusing. The then Chief of the District's Soils Section, who had spent considerable time in searching for quarry sources and who had located Cold Springs and Hover for use on this project, and who was also the author of the pertinent specifications herein involved, testified at the trial that it would have been practical to operate in the basalt rock below the water level and that there would not have been much of a water problem in connection therewith, He further testified, however, that' Erwen was not properly equipped either to remove. the covering red layer of. vesicular rock or to pump the small amount of seepage he would have encountered (Tr" pp. 308-309). Evidently this testimony was given in support of the thesis that Hover was a perfectly good quarry that would have provided all of the project rock had plaintiff only operated correctly or been adequately equipped. In its requested findings, however, defendant, In support of Its position that no prudent contractor should have selected Hover, points out that such sound basalt rock could not reasonably have been relied on because it was below the water table, which would have made "very diflicult any practicable production of riprap from this lower layer of rock." (p. 27)
The actual descriptive language In tie logs concerning the five Hover drill holes, referring to the upper 15 feet of the material in each core lying above the vesicular material was as follows :
Drill Hole 1A — "Basalt, hard, dark grey with some fract. zones". .
Drill Hole ZB — "Basalt, hard, sound, with some fract. zones, dark grey".
Drill Hole 3C — "Basalt, hard, dark grey to black w/some fract. zones".
Drill Hole 4D — "Basalt, hard, dark grey to black, fractured".
Drill Hole 5E — "Basalt, hard, sound dark grey w/fract. zones".
The quantity figures stated here and in subsequent comparable findings are the estimated figures for said items, subject, as stated in the contract documents, to adjustment for actual conditions.
Computation of the 78-percent figure actually includes the 2,500 tons of large size rock included as a part of the Schedule C work. If the total tonnage is to be considered as Schedule A (all work) the tonnage figure of all larger size rock should be 226,900 tons. Of this,- approximately 10,400 tons is in the largest size (McNary Dam), aggregating approximately 4 percent of the.total contract tonnage.
As to one area, a fourth bid item was included, i.e" gravel fill.
As initially stated in tlie specifications accompanying the invitation of July 30, 1956, and prior to revision by Addendum No. 2 of August 22, 1956, this provision read as follows:
SW-3. ORDER OF WORK. — The Contractor shall schedule, perform and complete the work in accordance with the following:
a. Work shall be scheduled so that repair of stone revetments at unit 3 — Oregon State Highway and Unit 4 — Union Pacific Railroad, will be com-jnenced and completed prior to work in other areas because of need for early revetment repair in the Unit 3 and Unit 4 areas.
Plaintiff claims such costs to be $27,128.81. The difference between the amount so claimed and the amount found is $1,414 and relates to a controversy between the parties as to the proper ownership expense hourly rate to be charged for the equipment used on the job. Erwen's records included an equipment ledger containing an hourly rate for each item of equipment. Plaintiff claims this rate, which was used for bidding purposes, does not fairly reflect the fact that equipment fully depreciated on a straight-line basis for income tax purposes nevertheless had value since such equipment was actually used and functioned on the job. Plaintiff, therefore, by an estimating process, attempted a reconstruction of an actual fair market value for such equipment and then included a depreciation element on such value in computing its hourly equipment rate. This inclusion of a depreciation element on such otherwise fully depreciated equipment resulted in a slightly higher hourly equipment rate than shown on its equipment ledger. However, the proof is insufficient to support the alleged fair market values and depreciation rates thereon, under the circumstances, it would appear proper, regardless of the propriety of plaintiff's basic theory, to utilize the rate appearing in the equipment ledger.
The operating costs of $25,714.81, divided by the reasonably expected tonnage of 87,600, equals .293-548 per ton. IThe lost production would thus amount to $10,714.50 (.293548X36,500). However, since Erwen's production per day at Hover was actually 700.24 tons rather than an exact 700, the accurate figure is $10,676.91.
Plaintiff's adjusted claim (originally $1,038.52) on this item is $931.17. Tile difference between tbis amount and $682.20, the amount hereinabove found and urged by defendant to be correct, pertains to transportation and incidental charges of moving a caterpillar tractor on February 14,1957, from Walla Walla, Washington, to Hover, and a water tank from Pasco, Washington, on March 28, 1957, to Coid Springs. The first item was prior to the actual move to Cold Springs and the second subsequent thereto. They are not items directly incurred in the move from Hover to Cold Springs. Plaintiff says the caterpillar was brought to Hover to replace one previously taken from Hover to Cold Springs and so was related to the overall necessity of moving to Cold Springs, as was the water tank brought to Cold Springs from Pasco, since no water tank was necessary at Hover. However, that plaintiff subsequently operated with two ijaterpillars at Cold Springs instead of only one at Hover, and that he employed certain equipment at Cold Springs, such as a water tank, which he did not employ at Hover, would appear to be essentially attributable to management decisions concerning the utilization of equipment. As is later shown in connection with plaintiff's claim for increased operating expenses at Cold Springs, defendant should not be required under this item of claim to pay the transportation costs from points other than Hover of additional equipment used at Cold Springs when plaintiff ultimately benefited so greatly from the use of such additional equipment.
Plaintiff's adjusted claim (originally $53,307.08) amounts to $42,937.52. Defendant contends the correct amount is $37,404.89. $532.63 of this discrepancy relates to the same equipment rate controversy discussed in footnote 16. Such amount, therefore, has been deducted from plaintiff's claim, resulting in the figure set forth in the finding. The balance of $5,000 relates to an amount expended by General for the costs in question. Erwen contends it is indebted to General for this amount, but defendant claims a subsequent (1959) credit allowance received by Erwen from General eliminated this indebtedness. The record shows, however, that this credit related to later transactions between General and Erwen out of which General owed Erwen $5,000. The payment was made by means of a credit against Erwen's prior indebtedness to General. This credit thus had nothing to do with Erwen's indebtedness to General for the costs involved in this claim. Furthermore, it should be of no concern to defendant whether these preliminary costs at Cold Springs were paid by General or Erwen. If General paid these expenses, then, as prime contractor, it is entitled to recover them.
Plaintiff's profit and loss and total direct costs for the years 1950 through 1955 totaled $93,880.82 and $2,994,741.05, respectively, for a profit to direct cost ratio of 3.135percent.