Opinion ID: 2513995
Heading Depth: 4
Heading Rank: 4

Heading: The dedicated equipment theory for idle equipment

Text: The hearing officer awarded Quality compensation for idle equipment time from May 17, 1996 through August 17, 1996. The state contends in its cross-appeal that this was error, because post-termination idle equipment time is limited to the reasonable time it should take the contractor to remove its equipment from the project site. The state argues that Quality's recovery for idle equipment should not be based on a dedicated equipment theory, but instead should be limited to compensating Quality for its idle equipment time from the termination of the contract on June 19 until July 31, when Quality removed its equipment from the job site. Quality responds that it should be reimbursed for reasonable idle equipment time as provided in the termination-for-convenience clause of the contract. Section 108-1.09 of the contract permits an award of costs for reasonable idle equipment time. The hearing officer correctly realized that a contractor must `dedicate' equipment to a project once it is awarded the contract. Contractors must be assured that they may maintain some level of minimal readiness, otherwise they would be reluctant to dedicate any equipment to a job site in preparation for a job, and perhaps even after a job is awarded. In determining Quality's standby award, the hearing officer relied on the state's May 17, 1996 notice-to-proceed letter and the statement in Gordon Hayes's October 13, 1997 letter that Quality was back in full force by mid-August. We hold that substantial evidence supports the hearing officer's decision. [21] Our own interpretation of the termination-for-convenience clause also leads us to conclude that it was plausible to read the contract to grant recovery for idle time beyond the time for removing equipment from the Chena site. Given evidence that it was the industry custom not to charge demobilization costs to a current project, it is logical to conclude that the words reasonable idle equipment time in the termination-for-convenience clause cover something other than removing equipment from a job site. We recognize that this is not the only reading those words might have, but it is a plausible reading shared by the hearing officer and accepted by the commissioner. The hearing officer applied what he termed the business judgment rule to determine what equipment Quality dedicated to the Chena project and the duration of that dedication. The state asserts that the hearing officer erred in applying the dedicated equipment theory doctrine and that this was a legal error. It does not appear, however, that the hearing officer was creating a separate category of recovery that turned simply on whether equipment was dedicated or not. The real question was the duration of idle time, and substantial evidence supported the hearing officer's choice in this regard. We are not prepared to say as a matter of law based on the record here that a termination-for-convenience clause that permits recovery for reasonable idle equipment time precludes recovery after some brief period of removal ends. The state cites Nolan Bros. v. United States, [22] in which the United States Court of Claims examined a termination-for-convenience claim for idle equipment time, as holding that the standby period for idle equipment is limited to the time immediately following the termination of the contract. The court of claims then proceeded to define immediately as 1.6 months based on the facts before it. [23] The essential debate in Nolan, an issue not very different from that in this case, was over the length of time for which recovery would be reasonable. As Quality notes, the court in Nolan relied on Brand Investment Co. v. United States , which explained that when the Government ... in effect condemns a contractor's valuable and useful machines to a period of idleness and uselessness, we think that it should make compensation comparable to what would be required if it took the machines for use for a temporary period, but did not in fact use them. [24] The superior court declined to read Nolan and other cases cited by the state to be so persuasive that they compel Alaska courts to hold that idle equipment recovery time must end as soon as equipment reasonably could have been removed from a job site. The state's final argument is that Quality's dedicated equipment claim is for loss of anticipated profits, a loss category which is not allowable under § 108-1.09. Section 108-1.09 explicitly allows recovery for reasonable idle equipment time. The hearing officer awarded Quality standby for equipment dedicated to or utilized for the project. [25] This award did not grant anticipated profits to Quality and was not contrary to § 108-1.09 of the contract. We therefore conclude that it was not error to grant this award.