Opinion ID: 1672252
Heading Depth: 1
Heading Rank: 9

Heading: Adjustment of Unit Prices

Text: [9] The issue before this court is whether the unit prices for work units 9 through 11 should be reduced because there were large increases in the quantity of soil disposed of and seepage water removed and disposed of. The University claims the district court erred in applying a total cost method to adjust the contract. In asking for an equitable adjustment, the University relies upon article 7 of the general conditions of the contract for construction. Article 7 provides: 7.1.4 If unit prices are stated in the Contract Documents or subsequently agreed upon, and if quantities originally contemplated are so changed in a proposed Change Order or Construction Change Directive that application of such unit prices to quantities of Work proposed will cause substantial inequity to the Owner or Contractor, the applicable unit prices shall be equitably adjusted. The University also claims the contract states that for work units 9 and 11, the unit price for disposal of the soil or water could not be more than 15 percent above the actual unit rate disposal cost incurred for disposal from a permitted landfill, land application site, or authorized water treatment facility. Brief for appellant at 39-40. In effect, the University contends that Pavers was entitled to no more than 15 percent above the landfill fees and water treatment costs for disposal of the soil and water respectively. The provision of the contract relied upon by the University states: PART 4-BIDDING AND COST VERIFICATION MEASUREMENT AND PAYMENT The Contractor shall accept the compensation as herein provided, in full payment for furnishing all materials, labor, tools, equipment, and incidentals necessary to complete the Work as Lump Sum Price or Unit Price Items. . . . . . . . SOIL DISPOSAL shall include all equipment, materials [and] landfill fees and labor necessary for removing and hauling contaminated soils . . . based on the weight of the disposed soil in tons. . . . The unit rate for soil disposal cannot be more than 15% above the actual unit rate disposal cost incurred from a permitted landfill or land application site. . . . Payment will be made at the contract unit price per ton for Soil Disposal. .... SEEPAGE WATER DISPOSAL shall include all equipment, materials [and] landfill fees and labor necessary for removing, hauling and disposing of seepage water which is based in gallon units. The unit rate for seepage water disposal cannot be more than 15% above the actual unit rate disposal cost incurred from an authorized water treatment facility. Subcontract disposal costs must accompany the contractor's invoice as supporting documentation to verify that mark-up does not exceed 15%. . . . Payment will be made at the contract unit price per gallon for Seepage Water Disposal. [10] Our reading of these provisions does not lead us to the conclusion that the unit price was limited to a 15-percent markup of the unit rate charged by the landfill or the water treatment facility. We agree with the district court's determination that the contract specifications in work units 9 and 11 did not limit the unit price to 15 percent above the actual disposal costs, as argued by the University. These sections of the contract merely limited the markup by Pavers on the unit rate disposal costs from a landfill and/or water treatment facility to 15 percent as a part of the unit price. Each part of this contract clearly provides that payment will be made at the contract unit price. When the terms of a contract are clear, they are to be accorded their plain and ordinary meaning. Katherine R. Napleton Trust v. Vatterott Ed. Ctrs., 275 Neb. 182, 745 N.W.2d 325 (2008). [11] The University next argues that the district court erred by using the total cost method in making an adjustment. The University relies upon Pacific Architects and Engineers, Inc. v. United States, 203 Ct.Cl. 499, 491 F.2d 734, 739 (1974), where the court stated: It is well established that the equitable adjustment may not properly be used as an occasion for reducing or increasing the contractor's profit or loss, or for converting a loss to a profit or vice versa, for reasons unrelated to a [contract] change. A contractor who has underestimated his bid or encountered unanticipated expense or inefficiencies may not properly use a change order as an excuse to reform the contract or to shift his own risks or losses to the Government. Pacific Architects and Engineers, Inc. v. United States, supra , does not support the University's position, because it is the University, not Pavers, that seeks an adjustment or reformation of the contract. It is the University that underestimated the quantity of soil and water to be removed and disposed of, and it is the University that seeks to reform the contract and shift the costs to Pavers. Pavers seeks to enforce the unit price of the contract it bid on work units 9 through 11. The University seeks to reform the contract and shift its risk of loss to the contractor. Since the University is asking for a change in the contract, the burden is upon the University to establish a basis for the relief sought. The University had the burden to establish why the unit prices should be equitably adjusted, and it has not sustained that burden. The district court stated that the University has failed to meet its burden regarding its proposed equitable adjustment to the unit prices. In a bench trial of a law action, a trial court's factual findings have the effect of a jury verdict and will not be set aside on appeal unless clearly erroneous. Henriksen v. Gleason, 263 Neb. 840, 643 N.W.2d 652 (2002). The appellate court does not reweigh the evidence but considers the judgment in a light most favorable to the successful party and resolves evidentiary conflicts in favor of the successful party, who is entitled to every reasonable inference deducible from the evidence. Id. Pavers argues that the equitable adjustment provisions of the contract do not apply and that the district court should not have limited Pavers' award by adjusting the contract price. Pavers claims that the court erred when it concluded that some form of equitable adjustment should be applied to the contract price. We agree. Although it was not error for the district court to examine whether an equitable adjustment to the unit prices was required, the University did not prove that such an adjustment was warranted. The record does not disclose why the court did not award Pavers the full amount of the contract, except that the court was attempting to reach what it considered an equitable result under the facts presented. However, there is no showing that the University sustained its burden of proof to entitle it to an equitable adjustment of the unit prices. [12] We conclude the district court erred in not awarding Pavers the full amount of the contract. Without requesting an adjustment in the unit prices, the University directed Pavers to continue working on the project. The University knew large over-runs of quantity and, therefore, increased costs were occurring on a daily basis. The University was not without a remedy, as the contract allowed the University to seek an equitable adjustment while the work was being performed. If the University did not agree with Pavers as to what unit price should be charged, the University could have proceeded under the contract to seek an adjustment of the unit price. Article 7 of the contract gave the University a method for dealing with changes in the quantities of the work to be performed. Paragraph 7.3 permits the University to issue Construction Change Directives to change the work and propose a basis for adjustment of the contract sum. 7.3.1 . . . The Owner may by Construction Change Directive, without invalidating the Contract, order changes in the Work within the general scope of the Contract consisting of additions, deletions or other revisions, the Contract Sum and Contract Time being adjusted accordingly. 7.3.2 A Construction Change Directive shall be used in the absence of total agreement on the terms of a Change Order. .... 7.3.6 If the Contractor does not respond promptly or disagrees with the method for adjustment in the Contract Sum, the method and the adjustment shall be determined by the Architect on the basis of reasonable expenditures . . . including, in case of an increase in the Contract Sum, a reasonable allowance for overhead and profit. Before the work was completed, the University could have sought relief under article 7 of the contract based on the fact that the quantities had increased substantially from the original estimates. Once it was determined that the quantities had been greatly underestimated, the University had the opportunity to seek an equitable adjustment. However, the University did not tell Pavers to stop the work and did not attempt to seek an equitable adjustment before the work had been performed. Instead, the University directed Pavers to complete the project and now seeks to reduce the unit prices. We find nothing in the contract that permits the University to unilaterally reduce the unit prices in the contract after the work has been performed. Pavers performed the contract as directed by the University and should receive payment for the unit prices bid on the contract. [13] It was not the province of the district court to rewrite or adjust the contract to reflect the court's view of what was fair. See Kozlik v. Emelco, Inc., 240 Neb. 525, 483 N.W.2d 114 (1992). Each part of the contract was bid based upon a unit price. It was incumbent upon the University to seek an adjustment of the unit prices before the work was completed or sustain its burden of proof regarding an equitable adjustment to the unit prices. Because the University did neither, we award Pavers the contract price.