Court Opinion

ID: 9900118
Source: CourtListenerOpinion
Date Created: 2023-11-18 22:00:47.640015+00
Date Added: 2024-06-11T09:20:59.981766
License: Public Domain

ARMED SERVICES BOARD OF CONTRACT APPEALS
 Appeal of -                                  )
                                              )
 Derian, Inc.                                 )   ASBCA No. 62957
                                              )
 Under Contract No. W912EF-19-C-0006          )

 APPEARANCE FOR THE APPELLANT:                    Mr. Mark Jensen
                                                   President

 APPEARANCES FOR THE GOVERNMENT:                  Michael P. Goodman, Esq.
                                                   Engineer Chief Trial Attorney
                                                  Theresa L. Hampson, Esq.
                                                   Engineer Trial Attorney
                                                   U.S. Army Engineer District, Walla Walla

                 OPINION BY ADMINISTRATIVE JUDGE TAYLOR

        In this appeal, the government deleted certain contract work pursuant to a
partial termination for convenience from a contract for the construction of oil water
separator systems and the installation of new turbine pit sump pumps inside the
powerhouse at the Lower Monumental Dam in Washington state. The contractor,
Derian, Inc. (Derian or appellant), seeks to recover partial termination for
convenience, delay, and constructive changes costs, and the reversal of the
government’s assessment of liquidated damages. The parties submitted the case under
ASBCA Rule 11 and requested a ruling on entitlement and quantum. We sustain the
appeal in part.

                                FINDINGS OF FACT

Contract Award and Requirements

1. On April 2, 2019, the United States Army Corps of Engineers (USACE or the
government) awarded construction Contract No. W912EF-19-C-0006 (the contract) to
Derian in the amount of $2,120,300 for the construction of oil water separator systems
and the installation of new turbine pit sump pumps inside the powerhouse at Lower
Monumental Dam in Washington state (R4, tab 3).

2. The contract included two Contract Line Items (CLINs) describing the work (R4,
tab 3 at 28). CLIN 0001 required the supply and installation of new oil water
separators at a price of $909,450, while CLIN 0002 required the supply and
installation of new turbine pit sump pumps at a price of $1,210,850 (id.).

3. Contract clause 52.211-10(c) required the contractor to complete “all on-site
installation ... of the headcover pumps for Main Units 1-6 between June 2019 and
December 2019” (R4, tab 3 at 34). No two units could be out of service at any one
time unless allowed by the contracting officer (id.). The clause further stated, “Each
unit must be completely operational, commissioned, and ready to be back on line prior
to taking another unit out of service” (id.). The clause also required that all on-site
installation work for the main units headcover pumps be completed by December 20,
2019, with complete system commissioning to be completed by January 19, 2020 – 30
days after the final installation date (id.). The parties agreed the original contract
completion date was January 19, 2020 (R4, tab 7a at 1342).

4. The contract incorporated by reference Federal Acquisition Regulation (FAR)
52.249-2, ALT I, “TERMINATION FOR THE CONVENIENCE OF THE
GOVERNMENT (FIXED PRICE) (APR 2012) – ALTERNATIVE I (SEP 1996)”
(R4, tab 3 at 32).

5. The contract also contained FAR 52.211-12, LIQUIDATED DAMAGES-
CONSTRUCTION (SEP 2000). That clause, in part, states:

              52.211-12 LIQUIDATED DAMAGES--
              CONSTRUCTION (SEP 2000)

              (a) If the Contractor fails to complete the work within the
              time specified in the contract, the Contractor shall pay
              liquidated damages to the Government in the amount of
              $1,335.00/day for each calendar day of delay until the
              work is completed or accepted.

(R4, tab 3 at 35)

6. Contract Section 01 45 04.00 28, paragraph 3.10 states the contracting officer will
notify the contractor of any detected noncompliance with the quality requirements (R4,
tab 3 at 218). After receipt of such notice, this section required Derian to immediately
take corrective action (id.). If Derian failed or refused to promptly comply, the
contracting officer could issue “an order suspending or stopping all or part of the
work” until Derian took satisfactory corrective action (id.).

7. The contract required Derian to submit a quality control plan (R4, tab 3 at 211).
Derian’s “Quality Control Plan” listed eight “Definable Features of Work” (DFOWs)
(R4, tab 6a at 1282-83). Derian’s list of DFOWs was derived from the contract’s

                                           2
technical specifications and were intended to “help facilitate scheduling preparatory
meetings” before beginning each activity (R4, tab 6a at 1282). The DFOW list
included “Division 26 – Electrical” and “Division 35 – Waterway and Marine
Construction,” which included the pump work (R4, tab 6a at 1283).

8. The contract also required Derian submit to the contracting officer for approval
separate Activity Hazard Analysis (AHA) reports at least 15 working days prior to
beginning “each activity, task or Definable Feature Of Work involving a type of work
presenting hazards not experienced in previous project operations, or where a new
work crew or subcontractor is to perform the work” (R4, tab 3 at 165).

9. Also, prior to beginning work on each DFOW, the contract required Derian to hold
a preparatory meeting and conduct certain preparatory activities, including reviewing
the minutes of the preparatory meeting (R4, tab 3 at 213-14). Likewise, Derian’s
quality control plan indicated preparatory meetings would be held before beginning
work on each DFOW, and the results of those meetings would be documented in
separate minutes (R4, tab 6a at 1278).

10. The contract required the contractor to conform to the contract drawings (R4, tab
3 at 39). The contract drawings showed the contract required monolithic pump plates
(R4, tab 3 at 394-95). The drawings also required the contractor to field verify the
steel pump plate dimensions prior to cutting and fabrication of the steel plates (R4,
tab 3 at 392, 394-95).

11. On April 9, 2019, the government issued Derian a notice to proceed with the
contract (R4, tab 3e at 501). The notice informed Derian that only a warranted
contracting officer had the authority to modify or change the contract’s terms and
conditions (id).

Contract Performance

12. On May 15, 2019, Derian and the government held a pre-work meeting at Lower
Monumental Dam (R4, tab 4a). During that meeting, the government again informed
Derian that only the contracting officer could make changes to the contract (R4, tab 4a
at 507). Similarly, the government informed Derian, at the pre-construction meeting
on June 24, 2019, that the Administrative Contracting Officer (ACO) had the contract
authority throughout the project, and Mr. Timothy Kuhlman, the government’s quality
assurance representative, had no such authority (R4, tab 7b at 1344).

13. Following the pre-work meeting and site visit, Derian informed the government
that the pump foundation plates may need to be modified due to various conflicts with
existing electrical outlets, cabling, and piping (R4, tab 4x at 946). Mr. Kuhlman
recalled telling Derian in response to their notification regarding the pump foundation

                                           3
plates that “the potential solution of using split plates would be easier to install in the
field than a single plate, a split plate appeared to be acceptable, and that an RFI would
need to be submitted to confirm acceptability” (id. at 947). The government accepted
the split plate modification (id at 948).

14. On July 11, 2019, Derian submitted an AHA for the activity/work task described
as “Pump Install (Electrical)” to the government (app. supp. R4, tab 1 at 1-3). The
AHA did not identify a DFOW (id.). On July 17, 2019, the government accepted the
AHA for the electrical work inside the main unit number four (MU4) with comments
(R4, tab 4u at 935). The comments included the direction to “[R]esubmit revised
AHA when definable features of work are added” (id.). The record does not indicate
Derian resubmitted the AHA for the electrical work.

15. Derian’s quality control report noted that as of July 22, 2019, the parties had not
held a preparatory inspection meeting for the electrical work (R4, tab 6d at 1335). The
preparatory meeting for the electrical work was subsequently held on August 12, 2019
(R4, tab 4u at 936).

16. On July 23, 2019, Derian’s pump inspector/technician and electrical subcontractor
personnel were inside the MU4 enclosure performing electrical “preparatory
activities” (R4, tab 5b at 962). That same day a dam-wide power outage occurred (R4,
tab 4b at 519). The power outage lasted approximately two hours (gov’t br. at 12; app.
supp. R4, tab 12 at 47; app. supp. R4 tab 13 at 48). The government determined an
open knife switch in the vicinity where Derian’s electrical subcontractor was working
caused the outage, but the responsible party could not be conclusively determined (R4,
tab 4u at 938; app. supp. R4, tab 12 at 46-47).

17. In an email dated July 23, 2019, Mr. Glenn Matlock, the USACE ACO, asked
Mr. Alexzander Newcomb, the USACE project manager, whether the government
should shut Derian down due to the power outage (app. supp. R4, tab 76 at 215).
Mr. Newcomb responded, “[T]hey are currently on a quasi-safety shutdown while the
project and Dave Kotas conduct an investigation to see what caused the outage” (id.).

18. On July 24, 2019, the USACE ACO notified Derian that the government was
concerned with various quality deficiencies in Derian’s quality control and directed
Derian to stop “all further installation of the head cover pumps and corresponding
electrical work” (R4, tab 4b at 520). The ACO noted various deficiencies, including
deficient pump foundation plates, failure to conduct required preparatory meetings,
and failure to provide the necessary oversight to its electrical subcontractor (id. at 519-
20). The ACO also directed Derian to submit a revised quality control plan and a
written recovery plan since they were behind schedule due to numerous “non
excusable delays” (id. at 520). The ACO cited contract section 01 45 04.00 28,
paragraph 3.10 as the authority to issue the stop work directive until the deficient

                                             4
processes were corrected (id.). The stop work directive did not mention the power
outage. We find the government issued the stop-work directive due to its concerns
with various Derian quality deficiencies, and not the power failure, even if the power
outage brought Derian’s deficiencies to the government’s attention.

19. On July 25, 2019, Derian responded to the ACO’s quality control and schedule
concerns (R4, tab 5a at 954-60). Derian indicated it had submitted an “RFI” with
corrective actions for review and approval on the pump foundation plates, reaffirmed
preparatory meetings would be held for all DFOW new work, and that the government
knew its subcontractor was performing preparatory onsite electrical work on Turbine
number four on July 22 and 23 (id. at 954).

20. On July 31, 2019, Mr. Kuhlman emailed Mr. Don Sayre, Derian’s quality control
systems manager, including pictures of the “Little Goose” dam turbine. In the email,
Mr. Kuhlman stated, “[T]his is the quality we will be looking for and Derian needs to
strive for.” (R4, tab 6d at 1337).

21. On August 6, 2019, Mr. Kuhlman and Mr. Neil Voit, Derian’s project manager,
toured the MU 4 Turbine area (app. supp. R4, tab 83 at 443). Derian’s “Quality
Control Document (QCR) Daily Log Of Construction” documented certain “Verbal
Instructions given by Government” (id.) The QCR Daily Log stated:

              Discussions between Derian and the QAR compared
              photographs of work in Unit 4 turbine pit to photographs
              of the same work in a turbine pit at Little Goose.
              According to the QAR, if our mechanical and pipe support
              installations look like those in photographs from Little
              Goose, “You’re good.” Derian agreed to imitate the
              photographs or provide acceptable, equivalent alternatives.

Id.

22. On August 8, 2019, Mr. Voit emailed Mr. Newcomb addressing the government’s
concerns that resulted in the stop work directive (R4, tab 7c at 1348-49). In that email,
Mr. Voit acknowledged Derian’s “current quality control program is not acceptable”
(id. at 1348). With regards to the government’s concern with the piping installation,
Mr. Voit noted Derian had:

              coordinated with Tim onsite in order to develop a
              mechanical system that matches the standard set for the
              Little Goose installation. There are minor material and
              pipe support variations that have been discussed and
              agreed upon with Tim as acceptable. We believe that we

                                           5
             have established confidence in our mechanical approach
             with Tim in order to meet USACE expectations.

Id. Mr. Newcomb forwarded that email to the ACO on August 8, 2019 (app. supp. R4,
tab 10 at 39).

23. The government authorized Derian’s return to work on Unit 4 on August 12, 2019,
following the government’s acceptance of Derian’s written recovery plan (R4, tab 4c
at 521).

24. On September 5, 2019, the government confirmed Derian had satisfactorily
installed new head cover pumps in Unit 4 and that the pumps worked well with the
unit on standby. The government noted, however, that the new pumps could not keep
up with the water inflow when the pumps were turned on. (App. supp. R4, tab 15
at 51)

25. The government determined it needed a design solution involving the installation
of Variable Frequency Drives (VFDs) to allow the pumps to keep up with the water
inflow (app. supp. R4, tab 9 at 37). The government further decided it needed to issue
a modification to the contract to install the VFDs (id.). The government noted it
would have to limit Derian’s schedule on the contract until the new VFD design was
completed (app. supp. R4, tab 9 at 36).

26. On September 13, 2019, the ACO informed Derian that the government was
working on some solutions to the leakage problem that would require a contract
modification (app. supp. R4, tab 60 at 148). The ACO further notified Derian to limit
its activities to placing pump plates and installing header pipes and suction pipes
unless they heard otherwise from himself or his staff (id.). The government indicated
it could be 2-3 weeks before a technical solution was finalized (id.). Derian informed
the government that this development would prevent it from proceeding as scheduled
on Unit 6 and impact its approved schedule (id.).

27. On November 26, 2019, the parties signed Modification No. A00002, that
required Derian to install VFDs for the headcover pumps to address the leakage issue
(R4, tab 3b). The modification increased the contract price by $131,438.40 to
$2,254,644.71 (id. at 493). The modification further stated the contract completion
date remained unchanged but:

             The Contractor is entitled to additional time related to this
             modification. As agreed by both the Government and the

                                           6
               Contractor, the time impact will be negotiated and settled
               through a future modification.

(Id. at 494)

28. The modification also included a “Closing Statement” that said:

               By signing this supplemental agreement, Derian, Inc.,
               hereby releases the Government from costs (excluding
               time impact) associated with future equitable adjustments
               and cumulative impact and inefficiency claims attributable
               to Modification A00002.

(R4, tab 3b at 494)

Contract Partial Termination

29. On December 12, 2019, the government determined it could complete the pump
installation in the turbine pits on its own (app. supp. R4, tab 14).

30. On December 19, 2019, the USACE Project Manager, Mr. Kurt Monger, signed a
“Project Change Request Form” to “De-scope portions of the work inside the turbine
pits from the current contract” (app. supp. R4, tab 85 at 450). In Part A, the form
stated:

               The contract stated that the contractor had certain dates
               that the Units would be available to perform the work. The
               contractor was provided these Units during the Contract
               stated dates, but the Contractor was not able to complete
               the required work during the outage timeframe. Unit 4 was
               not completed due to a differing site condition of excess
               leakage in the Unit. Some of these changes were
               government caused delays. These Units will not be
               available again until after the Contract Completion Date.
               Some Units that were missed may not be available until
               next year.

               The PDT [Project Delivery Team] determined that the best
               approach was to do a partial Termination for Convenience
               and modify the current contract to de-scope the remaining
               work in the Turbine Pits, having the Contractor complete
               the remaining work outside the Turbine Pits. The
               remaining work inside the Turbine Pits will be completed

                                            7
             by the Project Personnel at Lower Monumental Dam. The
             Contractor will turn over all materials and supplies to
             complete the work in the Turbine Pits. The Contractor will
             still be required to complete placement of the Oil Water
             Separator Tanks and installation of the Header Piping
             under this contract.

             This is the recommendation of the PDT that included
             concurrence during meetings with Lower Monumental’s
             OPM, The Resident Engineer and the Contracting Officer.

(App. supp. R4, tab 85 at 454)

31. The “Project Change Request Form” also indicated a revised physically complete
date from January 31, 2020 to September 31, 2020, (id. at 454-55).

32. The government’s change control board met the same day and approved the
recommendation to partially terminate the work inside the turbines (app. supp. R4,
tab 69 at 183-84). The government decided not to inform Derian until they could
complete a “very clear and detailed scope of work” describing the work the
government wanted Derian to complete (id. at 184).

33. By letter dated January 13, 2020, the ACO requested Derian submit a plan and
schedule by January 16, 2020, as to how they intended to complete all the remaining
work associated with the oil water separator system (R4, tab 4d at 523).

34. On January 16, 2020, Derian responded to the ACO’s January 13, 2020, letter
regarding scheduling concerns. Derian pointed out the January 19, 2020, completion
date was based on note 3 within contract section 52.211-10, which stated, “[T]he
Contractor shall complete system commissioning within 30 days of final installation.”
Derian maintained it had not yet been allowed to complete any “Main Unit”
installations due to USACE’s schedule limitations resulting from the leakage problem.
Nevertheless, Derian indicated it would install the mechanical and electrical systems
that week to prepare for oil water separator (OWS) commissioning. (R4, tab 5d at 971-
72).

35. On January 17, 2020, the government issued Derian a notice of partial termination
for convenience under FAR 52.249-2, ALT I, TERMINATION FOR
CONVENIENCE OF THE GOVERNMENT (FIXED-PRICE) (APR 2012) (R4,
tab 4e). The terminated work included connecting the turbine pit discharge piping to
the OWS intake header on four of the six units; installation of copper tubing and sight
glasses on OWS tanks; completion of preoperational tests, in service tests and
commissioning for the OWS system; demolition of existing electrical work for five

                                           8
units; demolition of existing pumps and piping in four units; installation of pumps and
piping in two units; installation of piping for three units; installation of the VFDs for
all six units; and completion of the commissioning for all six units (id. at 524).

36. On January 24, 2020, the USACE notified Derian that the contract completion
date of January 19, 2020, for the unterminated work had passed and “not all the work
associated with the oil-water separators, as-builts, O&M manuals, etc. are complete”
(R4, tab 4f at 529). The government further indicated it might withhold funds from
future payments in anticipation of the assessment of liquidated damages (id. at 530).
The government also informed Derian that it could submit a request for equitable
adjustment if it felt it needed an extension of time (id.).

37. On February 3, 2020, Derian responded to the government’s January 24, 2020,
notification. In its response, Derian disputed the January 19, 2020, contract
completion date. Derian asserted it had not been given the opportunity to complete the
final unit installation due to the government’s design delay. Derian also indicated it
had “completed all the required field mechanical and electrical work in anticipation of
beginning startup, testing, and commissioning of the OWS system on January 21,
2020.” Finally, Derian indicated it did not need to request a time extension since it
had complied with the contract. (R4, tab 5e at 1034)

38. On February 27, 2020, the parties entered into Modification No. A00003 (R4,
tab 3c). That modification set the contract amount at $2,250,044.71 (id. at 496).

39. By letter dated March 4, 2020, the USACE notified Derian that its construction
progress was sufficiently complete to allow the government use and possession of the
facility effective February 20, 2020 (R4, tab 4g at 532). The government further
notified Derian that “potential liquidated damage withholdings” ceased effective
February 20, 2020 (id.). In the final decision, the government noted the February 20,
2020, date was 32 days past the original contract completion date (R4, tab 2 at 13).

40. By letter dated April 2, 2020, the USACE provided Derian with revised marked-
up technical specifications “to reflect the clarifications and correspondence between
the Government and Derian” on the terminated work since the initial notice of partial
termination for convenience (R4, tab 4h at 541). On May 12, 2020, the USACE
provided Derian with the “final marked-up technical specifications” showing the
terminated work (R4, tab 4i at 571).

Derian’s Claims

41. On May 29, 2020, Derian submitted a “Final Cost Settlement” document in
response to the partial termination for convenience notice (R4, tab 5h). In that
document, Derian (1) discussed 11 USACE actions and changes that it alleged resulted

                                            9
in additional costs and delays; (2) listed subcontract termination costs in the amount of
$7,881 and its termination settlement costs associated with the termination inventory
and turnover process of $7,030; and (3) included four contract credits totaling $64,370
resulting from the terminated work (id at 1042-45). Derian requested a $61,935
adjustment to the contract price, increasing it from $2,250,044.71 to $2,311,979.71 (id.
at 1045).

42. On June 17, 2020, the government informed Derian its proposed additional costs
resulting from alleged changes and delays in its “Final Cost Settlement” should instead
be submitted as a request for equitable adjustment (REA) (R4, tab 4k).

43. On July 16, 2020, Derian submitted another letter entitled “Request for Equitable
Adjustment” (R4, tab 5i). Derian again listed the 11 USACE actions it alleged created
contract changes and delays resulting in increased costs (id. at 1262-64). Derian,
however, did not list its termination costs or credits for the terminated work in this
document. Derian requested a contract price adjustment in the amount of $111,394 for
these additional costs (R4, tab 5i at 1264).

44. The government responded to each of Derian’s 11 “additional costs” requests
under separate correspondence from August 28, 2020, through February 19, 2021 (R4,
tabs 4l - 4y).

45. On February 25, 2021, Derian submitted a certified claim indicating settlement
negotiations had reached an impasse and referenced its May 29, 2020, and July 16,
2020, letters and an attached “REA & Termination Settlement Summary” (R4, tab 1). 1
Derian asserted a request for an equitable adjustment and claim for “termination
settlement costs” (id. at 3). Derian also disputed the government’s liquidated damages
assessment (id.). Derian claimed the current contract amount should be revised from
$2,250,044.71 to $2,259,019.41, resulting in a final payment due Derian of
$372,835.55 (id.).

46. On May 13, 2021, the government issued unilateral Modification No. A00004
increasing the contract price from $2,250,044.71 to $2,263,279.71 resulting from the
government’s determination that Derian was entitled to additional costs in the amount
of $1,023 for the OWS Relocation, $1,860 for the pump plate modification, and
$10,352 for the supplemental pumping claims (R4, tab 3d).

1
    Neither party included the referenced attached “REA & Termination Settlement
         Summary” in the record.
                                           10
Government’s Final Decision

47. On June 8, 2021, the government issued a final decision in response to Derian’s
claim (R4, tab 2). In its final decision, the government addressed each of Derian’s 11
additional cost claims, Derian’s claimed termination for convenience costs, and
Derian’s request for remission of the liquidated damages (id.). The government
characterized Derian’s claim as “a change to the contract price in the amount of
$111,394, an extension of time equal to fifteen (15) calendar days, a proposed
termination cost credit of $102,409.30, and the remission of liquidated damages in the
amount of $42,720.00” (id. at 4). The final decision also noted Derian claimed an
entitlement to the remaining contract balance of $372,835.55 (id.).

48. The final decision found merit or partial merit in four of Derian’s 11 additional
cost claims and awarded Derian an additional $26,391 in costs (id. at 14). The
government agreed to pay Derian additional labor costs in the amount of $1,860 to
adjust the pump plates to deal with the existing electrical outlets and cabling (id.
at 10). The government noted it had issued Modification No. A00004 reflecting the
increased costs from three of Derian’s claims in the amount of $13,235 and intended to
issue a separate modification for the “foot valves” claim in the amount of $13,156 (id.
at 10-11). The record does not indicate the government ever processed the
modification for the “foot valves” claim.

49. The final decision also determined the government’s credit for the terminated
work was $186,985 (id. at 12). The final decision determined this amount based upon
an analysis of the terminated work prepared by its cost engineers and construction
personnel (id. at 11; R4, tab 8a at 1393-1413). The USACE engineers calculated the
government’s contract cost estimate for the deleted work using information from
Derian’s proposals when the information was “determined to be sufficiently
documented and acceptable” and “cost estimating tools, methods, labor rates and
indexes normally used in evaluating termination cost claims” (R4, tab 8a at 1369,
Schmode declaration). The USACE engineers did not rely upon or have any
knowledge of Derian’s contract pricing (id. at 1394). The government’s estimate
further indicated it used the Davis Bacon labor rates for Franklin County, Washington,
and material prices from quotes, supply catalogs, previous estimates, and the 2016
MCACES RSMeans Unit Price Book (id. at 1401). The estimate also included a
2.54% escalation factor from the mid-point of the construction period and applied a
27% overhead rate and a 5.95% profit from the weighted guidelines (id. at 1401-02).

50. Derian, on the other hand, apparently calculated the value of the terminated work
based on the original approved rates set out in its bid documents, along with approved

                                          11
profit and overhead rates applied throughout the project (app. br. at 2). Derian,
however, provided no supporting documentation for its calculations. 2

51. The below table summarizes the government’s and Derian’s calculations for the
contract’s deleted work:

                                                             Gov’t          Derian
         CLIN ITEM 0001 Supply And Install New
         Oil Water Separators                               49,113.00       24,044.40
            Install Parts                                      416.00               0
            Commissioning and Training                      19,731.00        4,292.95
            Curtain                                         11,713.00        9,016.52
            Sump Pump Drain to CRES Header                  17,253.00       10,734.93
         CLIN ITEM 0002 Supply And Install New
         Turbine Pit Sump Pumps                             81,906.56       22,407.99
            Equipment Nameplate Installation                   828.00        1,085.08

           Termination Costs for Inventory/
            Turnover of Materials
              General Contractor – Labor Report             (7,279.52)     (7,030.14)
              CREM – 25 Hours                               (3,708.92)     (7,880.84)
              Termination Costs - Negotiations                            (20,165.01)
           Remove Existing Pumps and Piping                 24,043.00        6,636.67
             Remove and Salvage Pumps                       13,318.00        5,804.75
             Remove and Salvage Flexible Pipe                4,162.00          831.92
             Remove Electrical                               6,563.00               0
           Install New Turbine Pit Sump Pumps               68,024.00       49,762.23
             Install Parts                                  33,296.00       24,450.50
             Electrical                                     11,605.00       12,865.78
             Commissioning Pumps in Turbine Pits            23,123.00       12,445.95
         ITEM 0004 Install Headcover VFDS                   55,966.00       55,966.00
                           TOTAL                           186,985.56     102,418.39

(R4, tab 8a at 1405-1413; App. br. at 18)

52. Finally, the final decision reasserted the government’s claim for liquidated
damages in the amount of $42,720 for 32 days at the contractual rate of $1,335 per day

2
    In its brief, Derian also contends it should be reimbursed for its actual incurred costs
           on the terminated work under a termination for convenience (app. br. at 13).
           Derian did not, however, provide any actual incurred cost data for the deleted
           work.
                                              12
(id. at 13). The final decision determined a contract completion date of January 19,
2020, and an actual completion date of February 20, 2020 (id.).

53. On June 15, 2021, Derian appealed the government’s final decision to the Board.

Derian’s Complaint

54. In its complaint, Derian reasserted its claim for four of the eleven increased cost
claims, including one on which the contracting officer awarded a partial amount
(compl. at 1-2). 3 The four remaining increased cost claims include delays and
increased costs for (1) its subcontractor Columbia River Electrical Maintenance
(CREM) in the amount of $13,362 due to the work stoppage resulting from the power
outage; (2) Derian’s and its vendor’s increased costs in the amount of $15,745
resulting from the government’s alleged failure to grant a safe clearance and the delay
due to the loss of power; (3) increased costs in the amount of $27,327 due to the
alleged changed contract requirement to provide different stainless-steel components
similar to that used at the Little Goose Dam; and, (4) increased costs in the amount of
$10,735 due to the changed requirement for split as opposed to monolithic pump plates
(id.). 4 Derian reduced its total increased cost claim to $67,169 (id.).

55. Derian also calculated a contract credit for the work removed from the contract by
the partial termination (compl. at 2-3) and disputed the government’s application of
liquidated damages to the final contract payment (compl. at 3-4). Finally, Derian’s
complaint sought termination settlement costs in the amount of $35,076 (compl. at 2-
3). These costs included $7,881 for its subcontractor, CREM, and $27,195 for its
termination settlement costs (id.).

                                     DECISION

I. Standard of Review

        The parties have elected a written disposition under Board Rule 11. Board
Rule 11 permits the parties “to waive a hearing and to submit [their] case upon the
record.” Reed Int’l, Inc., ASBCA No. 61451 et al., 20-1 BCA ¶ 37,587 at 182,513
(citing DG21, LLC, ASBCA No. 57980, 15-1 BCA ¶ 36,016 at 175,909 n.1). Unlike a
motion for summary judgment, which must be adjudicated based on undisputed facts,
the Board “may make findings of fact on disputed facts” when resolving an appeal

3
  Appellant’s complaint did not use numbered paragraphs. The citations are to the
       page numbers.
4
  Derian noted that the government in its final decision determined Derian’s claim for
       increased costs resulting from the pump plate modification had partial merit in
       the amount of $1,860 (compl. at 2).
                                          13
under Board Rule 11. U.S. Coating Specialties & Supplies, LLC, ASBCA No. 58245,
20-1 BCA ¶ 37,702 at 183,031 (citation omitted).

II. The Deductive Credit

        Although the government chose to delete the contract work pursuant to the
contract’s termination clause and not via a deductive change under the changes clause,
the parties have proceeded as if the reduction of work was a change rather than a
partial termination for convenience. Derian did not submit a termination settlement
proposal for any incurred costs on the terminated work. Rather, the parties sought to
agree upon a final contract price by negotiating the increased cost claims and
determining the contract price deduction due to the reduced contract work.
Subtracting the reduced contract work from the contract price to determine the
contract’s final price is typically used to calculate the government’s downward price
adjustment on a fixed-price contract resulting from a deductive change order. Celesco
Indus., Inc., ASBCA No. 22251, 79-1 BCA ¶ 13,604 at 66,683. Fortunately, we are
not bound by the contracting officer’s label of “partial termination” notice and will
treat the reduction of work as a deductive change to establish the contract’s final price.
Goetz Demolition Co., ASBCA No. 39129, 90-3 BCA ¶ 23,241 at 116,618, recons.
denied, 91-1 BCA ¶ 23,397.

       A contract equitable adjustment should safeguard contractors and the
government against the increased and decreased costs engendered by modifications
adding or deleting contract work. Nager Elec. Co. v. United States, 442 F.2d 936, 946
(Ct. Cl. 1971). As such, an equitable adjustment must be closely related to and
contingent on the altered position the contractor finds itself in because of the
modification. HCS, Inc., ASBCA No. 60533, 16-1 BCA ¶ 36,502 at 177,855. Hence,
the government is entitled to a downward adjustment in the contract price to the extent
any reduction in the contract work decreases Derian’s costs of performing the contract.
Goetz Demolition Co., 90-3 BCA ¶ 23,241 at 116,618. That credit is measured by the
contractor’s net cost savings from the deleted work. CTA Inc., ASBCA No. 47062,
00-2 BCA ¶ 30,947 at 152,762. The government has the burden of proof as to the
extent to which the contract requirements were reduced and the savings resulting from
those reductions, regardless of whether the reduction is deemed a partial termination
for the government’s convenience or a deductive change. Nager Electric Co., 442
F.2d at 946; Celesco Indus., Inc., 79-1 BCA ¶ 13,604 at 66,681. Derian is entitled to
receive the full contract price unless the government demonstrates it is entitled to a
price reduction for the deleted work. HCS, Inc., 16-1 BCA ¶ 36,502 at 177,855; CTA
Inc., 00-2 BCA ¶ 30,947 at 152,762.

      To determine the correct price reduction due to the deductive change, we must
attempt to reconstruct as accurate an estimate as possible the value or cost of the
unperformed work. Goetz Demolition Co., 90-3 BCA ¶ 23,241 at 116,618. Using the

                                           14
originally proposed prices to measure the downward adjustment has often been
considered and rejected. EJB Facilities Servs., ASBCA No. 57547, 13-1 BCA ¶
35,399 at 173,680-81. Deductive changes are usually based on a contractor’s current
estimate or “would have cost” projection rather than on the original proposal prices.
URS Fed. Support Servs., Inc., ASBCA No. 59998, 21-1 BCA ¶ 37,848 at 183,783-84
(Air Force’s calculation of the deductive change amount “flawed” because the
Air Force did not use URS’ actual costs data); Osborne Constr. Co, ASBCA
No. 55030, 09-1 BCA ¶ 34,083 at 168,513 (bid amount irrelevant to pricing deductive
change); Olympiareinigung, GmbH, ASBCA No. 53643, 04-1 BCA ¶32,458
at 160,563 (amount allocated in bid for deleted work irrelevant to pricing a
deduction); Fordel Films West, ASBCA No. 23071, 79-2 BCA ¶13,913 at 68,298
(contractor not bound by costs estimated in proposals in pricing a downward
adjustment); Celesco, 79-1 BCA ¶13,604 at 66,683 (deduction should be based on the
contractor’s current estimate or “would have” cost for performing the deleted
work); see also 11 THE NASH & CIBINIC REPORT ¶ 39, Equitable Adjustments for
Deleted Work: The Severability Exception to the “Would have Cost” Rule (1997);
12 THE NASH & CIBINIC REPORT ¶15, Postscript: Equitable Adjustments for Deleted
Work (1998).

        The government’s estimated cost of $186,985 for the deleted work appears to
be the appropriate starting point to determine the value of the reduced work since the
government based that estimate on Derian’s estimated costs to complete the work and
not Derian’s proposed price. The government calculated its estimate using Derian’s
documented and acceptable costs from its proposal and various cost estimating tools,
methods, labor rates and indexes (finding 49). Derian, on the other hand, calculated
the value of the deleted work based upon its original approved proposed rates (finding
50). As discussed above, it is well established that the Board has frequently rejected
using the original proposed prices to measure the downward adjustment in costs
resulting from a deductive change. EJB Facilities Servs., 13-1 BCA ¶ 35,399
at 173,680-81. Moreover, Derian provided no support in the record for its proposed
prices (finding 50).

         While the government’s estimated cost for Derian to complete the deleted
work appears to be the appropriate starting point, Derian, in its brief, identified
numerous errors in the government’s calculation. Derian first contends the
government’s estimate includes costs for non-terminated work (app. br. at 14). Derian
points out the government’s estimate “included a $17,253 credit to attach Sump Drain
to CRES Header (Transition Units 1-6) for all six units” (italics in original) (app. br. at
14 citing app. supp. R4, tab 72 at 197). The notice of termination confirms Derian had
already completed this work for Units 2 & 4 prior to the termination (finding 35). The
government did not respond to this contention in its reply brief. We find the $17,253
credit to attach the sump drain to the CRES Header should be reduced by one-third to
$11,502 since Derian had already completed that work on Units 2 & 4.

                                            15
        Similarly, Derian points out the government’s estimate for the deletion of the
installation of parts for the new turbine pit sump pumps is overstated (app. br. at 14).
The government’s estimate included costs for installing parts on four units (app. supp.
R4, tab 72 at 202). Derian contends it had already purchased and installed parts for
four of the pumps (app. br. at 14). The partial termination notice indicates the
government deleted the pumps and piping installation only on units 1 and 3 (finding
35). The government also did not respond to this contention in its reply brief. We find
the government’s estimate for the deletion of the installation of parts for the new
turbine pit sump pumps should be reduced by 50% to $16,648 since this work was
deleted on two, not four units. 5

       In its brief, Derian identifies other alleged mistakes in the government’s cost
estimate. For instance, Derian claims it installed the “totalizer for the mechanical gear
pump” before the termination (app. br. at 14 citing app. supp. R4, tab 72 at 199). The
government included this part in its deleted items in the amount of $416 as part of
CLIN Item 0001 (R4, tab 8a at 1407). We find this item should also be deleted from
the government’s cost estimate.

       On CLIN Item 0001, OWS Commissioning and Training, the government
included an estimated cost of $19,730 (id.). This cost included three subitems: (1)
“USR Startup Engineer” in the amount of $15,177; (2) “USR Assistance of
Commissioning Agent” in the amount of $2,484; and (3) “USR Water
Sampling/Testing” in the amount of $2,070 (id.). Derian contends it contracted with
Mercer International for the startup engineer services in the amount of $7,500 before
the termination and paid them on February 12, 2020, at the government’s direction
(app. br. at 14 citing app. supp. R4, tab 94). The government did not respond to this
contention in its reply brief. Since Derian provided actual cost data showing it had
already paid for this service, we find the $15,177 cost estimate to complete this work
should be deleted from the government’s OWS Commissioning and Training cost
estimate. The “OWS Commissioning and Training” estimated cost is reduced to
$4,554.

       Under CLIN Item 0002, “Supply and Install New Turbine Pit Sump Pumps”,
the government estimate included 112 man-hours at the cost of $13,318 to remove and

5
    Derian’s brief indicates it offered to include a credit for the main unit work based on
         its actual pricing for the incomplete work and not the government’s estimated
         completion cost (app. br. at 14). Hence, Derian includes a calculation of
         $24,451 for the installation of parts in its price reduction rather than 50% of the
         government’s $33,296 cost estimate. We reject Derian’s number because we
         base this decision on the government’s estimated cost to complete the deleted
         work, which in part is based upon Derian’s actual cost experience, not Derian’s
         proposed price.
                                              16
salvage the eight remaining pumps (app. br. at 15 citing app. supp. R4, tab 72 at 201-
02). The government estimated a crew size of 7 mechanical and 5 electrical workers
performing the work inside the main unit turbines (app. br. at 15 citing app. supp. R4,
tab 72 at 204). Derian contends this estimate is “patently unreasonable” (app. br.
at 15). Derian indicates it used a four-person mechanical crew and two electrical
workers to perform the removal and salvage work on the other four pumps (id.). We
find Derian’s cost estimate based upon its actual cost experience in performing this
task on the other four pumps more reasonable than the governments. The
government’s cost estimate for this service is reduced by $7,513 to Derian’s $5,805
estimated cost to complete this work.

        On CLIN Item 0002, the government also estimated a credit on five of the six
units for removing and salvaging flexible pipe in the amount of $4,162 and the
removal of electrical in the amount of $6,563 (app. supp. R4, tab 72 at 202). Derian
contends it had already performed this work on two units (four pumps), not one unit
(two pumps), so the government estimate is overstated since only eight pumps on four
units remained (app. br. at 15). The government does not refute this contention. The
government’s cost estimate should be reduced by one-fifth for both items resulting in a
cost estimate of $3,330 for the removal and salvaging of the flexible pipe and $5,250
for the electrical removal. 6

       In its brief, Derian also points out the government included $23,123 for
“Commissioning of Pumps in the Turbine Pits” in its estimate (app. br. at 16 citing
app. supp. R4, tab 72 at 203). Derian claims this estimate was overstated by $10,677
(app. br. at 16). Derian provided copies of its canceled signed subcontracts for this
work that totaled $12,446 (app. supp. R4, tabs 96, 97).

        In its reply brief, the government contends Derian’s figure is understated since
the contract required a manufacturer’s representative to make six separate trips to
startup and commission each unit (gov’t reply br. at 8). The contract stated, “[E]ach
unit must be completely operational, commissioned, and ready to be back on line prior
to taking another unit out of service” (finding 3). As a result, we find the government
is correct that the manufacturer’s representative would have had to make six different
trips to commission each unit. Moreover, the government noted Mr. Voit could not act
as the startup technician for Derian since he was not a “manufacturer’s representative”
(gov’t reply br. at 8). We find the government’s argument persuasive and accept its
$23,123 credit for commissioning the pumps as reasonable.

6
    In its brief, Derian suggests an estimated cost of $2,489 is reasonable for demolishing
           two pumps at each of the 4 remaining units (app. br. at 15). Derian’s brief,
           however, is unclear as to how it arrives at this figure, so we do not accept it.
                                             17
        Finally, the government cost estimate assumed a 27% overhead rate and a
5.95% profit on the prime contract (finding 49). On the other hand, Derian calculated
its estimate using the contractual agreed rates of 26.66% overhead and a profit ranging
from 4.35% to 6.66% (app. br. at 16). We find that we do not need to adjust the
government’s proposed rates since the difference between the two sets of proposed
rates is negligible.

        Both the government and Derian included costs for the inventory/turnover of
materials resulting from the government’s reduction of work on the contract as an
offset to the deductive credit price reduction (gov’t br. at 23; app. br. at 18). Derian
also included costs it labeled as “Termination Costs – Negotiations as of 2/5/21” as an
offset to its calculation (app. br. at 18). 7 Both parties, however, discussed the
allowability of these costs under the termination for convenience settlement clause
(gov’t br. at 23-25; app. br. at 18-20). Even though the government labeled its
reduction of work as a partial termination for convenience, the parties treated it as a
deductive change. Derian’s costs incurred in responding to and negotiating the
deductive change should therefore be addressed as contract administration costs
responding to this change rather than under the partial termination for convenience
clause.

       Derian first seeks a $20,165 offset for its costs incurred in discussions with the
government and responding to various information requests from the government
pertaining to establishing the value of the terminated work (app. br. at 18-19). In
support of those costs, Derian submitted a document entitled “Derian Termination
Negotiation Worksheet” dated February 5, 2021 (app. supp. R4, tab 104 at 624). This
document shows Mr. Mark Jensen, Derian’s president, incurred 57 hours ($6,993)
while Mr. Voit, Derian’s project manager, incurred 92 hours ($7,507) during the
negotiations establishing the price for the reduced contract work (id.). The document
also shows Mr. Philip Fielding, identified as CREM’s project manager, incurred five
hours ($632). The document has a subtotal of $15,132 in incurred labor costs, to
which Derian applied overhead ($4,034) and profit ($999) to arrive at the total claimed
amount of $20,165.

       Derian included supporting monthly timecards from September 2020 through
February 2021 for Mr. Jensen and Mr. Voit indicating the number of hours each month
they worked on the “Lower Monumental Dam” project (app. supp. R4, tab 104 at 626-
37). The government contends these timecards do not specifically describe the type of
work performed or any proof of payment (gov’t reply br. at 7). While the timecards do
not specifically identify that these two individuals worked on the contract price
reduction negotiations, Derian claims these individuals’ time during this period on this

7
    The government did not include any of Derian’s claimed “termination negotiation”
         costs in its cost reduction calculation (gov’t reply br. at 7).
                                           18
contract was exclusively devoted to weekly discussions and providing requested
information to the government pursuant to the termination (app. br. at 19). Since
Derian completed its performance on the contract in early 2020, we find Derian’s
assertion credible. Moreover, Derian did not submit its certified claim on this matter
until February 25, 2021 (finding 43). These costs do not appear to have been incurred
in connection with the prosecution of a CDA claim.

        Contract administration costs are “presumptively allowable if they are
reasonable and allocable” and not incurred in connection with pursuing a CDA claim.
Bill Strong Enterprises, Inc. v. Shannon, 49 F.3d 1541, 1549 (Fed. Cir. 1995)
overruled in part on other grounds, Reflectone, Inc. v. Dalton, 60 F.3d 1572 (Fed. Cir.
1995) (en banc). We find sufficient documentation exists supporting Mr. Jensen’s and
Mr. Voit’s time and determine that the claimed hours and costs are allocable and
reasonable.

        Derian did not, however, provide similar supporting documentation for
Mr. Fielding’s time. The only support for Mr. Fielding’s time is the hours listed on the
spreadsheet. Numbers on a spreadsheet without any additional supporting
documentation is insufficient to support the incurred costs. Vistas Construction of
Illinois, Inc., ASBCA Nos. 58479, 58480, 58481, 58482, 58483, 58486, 58487, 58488,
16-1 BCA ¶ 36,236 at 176,796-97 (other than numbers written on a spreadsheet, there
is no support for the hours alleged). We, therefore, disallow Mr. Fielding’s claimed
hours.

       In summary, we allow $19,323 as an offset to the cost reduction on the contract
for Mr. Jensen and Mr. Voit’s time negotiating the cost reduction including overhead
and profit. 8

       Derian also seeks an offset to the contract price reduction for both its own and
its subcontractor CREM’s costs for the inventory/turnover of materials resulting from
the government’s reduction of work on the contract (app. br. at 19-20). Derian seeks
an offset in the amount of $7,030 for its own incurred direct labor costs associated
with the inventory/turnover of materials (app. br. at 19). Derian supplied supporting
documentation for these labor hours (app. supp. R4, tab 103 at 610). Moreover, the
government does not challenge these costs. We find Derian’s claimed costs in the
amount of $7,030 to process the inventory associated with the reduced contract work
reasonable.

       Derian also claims $7,881 in costs as an offset to the contract price reduction
for costs its subcontractor allegedly incurred to determine final contract closeout and
document project turnover conditions (app. br. at 19). In support of those costs,

8
    $14,500 + (OH @ 26.66% = $3,866) + (profit at 6.6% = $957) = $19,323.
                                           19
Derian provided a proposal from CREM proposing 55 hours to close out the project
(app. supp. R4, tab 102 at 606-09) and a worksheet entitled “CREM Termination Costs
Worksheet” (id. at 604). The worksheet reflected the price for a “CREM Termination
Costs change order” in the amount of $5,914 with the addition of Derian’s overhead
and profit for a total claimed amount of $7,881 (id.).

       The government alleges CREM’s time records supporting these claimed
55 hours show only 30 of the claimed hours coded as direct labor for the termination
project (gov’t br. at 24 citing R4, tab 7f at 1355).9 The remaining 25 hours in CREM’s
records are apparently labeled “COVID” (id.). Derian responds that CREM switched
accounting systems during this time period, and their manager arbitrarily applied
“COVID” to 20% of all labor from the old system (app. reply br. at 14; R4, tab 7f
at 1354). CREM admits it no longer has any time sheets or daily reports from that
time (R4, tab 7f at 1352).

       Derian bears the burden of providing supporting documentation showing the
claimed costs have been incurred and are allocable to the contract. FAR 31.201-2(d),
DETERMINING ALLOWABILITY (MAY 2004). We find Derian has not met this
burden in supporting all its CREM subcontractor costs to close out the project.
Analytical Assessments Corp., ASBCA Nos. 52393, 52394, 01-2 BCA ¶ 31,483
at 155,426 (Board found that the evidence was insufficient to support cost
allowability). Hence, we disallow the 25 hours labeled as “COVID” and allow the
remaining unchallenged 30 hours. This results in a recovery of $4,299 in costs for the
CREM subcontract costs (55% of CREM’s $7,881 claimed subcontract labor hour
costs) as an offset to the contract price reduction for costs CREM incurred to
determine final contract close out.

The below table sets out our conclusions regarding the deductive credit amount:

                                                   Gov’t         Derian           Finding
CLIN ITEM 0001 Supply And Install New
Oil Water Separators                                 49,112         24,045          27,769
    Install Parts                                       416              0               0
    Commissioning and Training                       19,730          4,293           4,554
    Curtain                                          11,713          9,017          11,713
    Sump Pump Drain to CRES Header                   17,253         10,735          11,502
CLIN ITEM 0002 Supply And Install New
Turbine Pit Sump Pumps                               81,907         57,485          66,589
   Equipment Nameplate Installation                     828          1,085             828
   Remove Existing Pumps and Piping                  24,043          6,637          14,385

9
    Neither party provided CREM’s actual labor hour time entries in the record.
                                            20
    Remove and Salvage Pumps                        13,318          5,805          5,805
    Remove and Salvage Flexible Pipe                 4,162            832          3,330
    Remove Electrical                                6,563              0          5,250
  Install New Turbine Pit Sump Pumps                68,024         49,763         51,376
    Install Parts                                   33,296         24,451         16,648
    Electrical                                      11,605         12,866         11,605
    Commissioning Pumps in Turbine Pits             23,123         12,446         23,123
ITEM 0004 Install Headcover VFDS                    55,966         55,966         55,966
Costs for Inventory/Turnover of Materials
                  Derian’s Costs                    (7,280)        (7,030)        (7,030)
                  CREM’s Costs                      (3,709)        (7,881)        (4,299)
                  Derian Negotiation Costs                0      (20,165)       (19,323)
            TOTAL                                  175,996        102,420        119,672

We find the government is entitled to a deductive credit on the contract in the amount
of $119,672.

III. Derian’s Increased Cost Claims

        On July 16, 2020, Derian submitted an REA listing 11 actions that allegedly
created contract changes and delays resulting in increased costs (finding 43). In its
complaint, Derian reduced its claims for increased costs to four (finding 54). The four
remaining increased cost claims include: (1) $13,362 for its electrical subcontractor
CREM’s alleged increased costs due to the work stoppage resulting from the power
outage; (2) $15,745 for Derian’s own alleged increased labor and vendor costs
resulting from the delay due to the power outage and the government’s failure to grant
a safe clearance; (3) $27,327 due to the alleged changed contract requirement to
provide different stainless-steel components similar to that used at the Little Goose
Dam; and, (4) $10,735 in additional labor and material costs resulting from the alleged
changed requirement to use split pump plates rather than monolithic plates (id.). We
address each of Derian’s remaining increased cost claims in turn.

       a. Power Outage and Failure to Grant a Safe Clearance Claims

        In its complaint, Derian asserted claims for its subcontractor CREM’s and its
own alleged increased costs resulting from the power outage and the government’s
failure to grant a safe clearance (id.). In its brief, Derian broke down its claim for
these costs between the increased costs resulting from the power outage and the
increased costs resulting from the government’s alleged failure to grant safe clearance
(app. br. at 20).

                                          21
       Derian first asserts the government prevented its own and its subcontractor’s
personnel from accessing the dam and performing any work due to the power outage
(id.). We previously determined the government issued the stop-work direction due to
its concerns with various quality deficiencies and not due to the power outage (finding
18). Any additional costs Derian or its subcontractor incurred at that time resulted
from that stop work order and not the power outage. The power outage may have
brought Derian’s quality deficiencies to the government’s attention, but the
government issued the stop-work directive due to its concerns with Derian’s quality
deficiencies.

        To prevail on its delay claim, Derian must show the extent of the alleged delay,
the causal link between the government’s wrongful acts and the delay in its
performance, and the alleged harm to the contractor resulting from the delay. Kinetic
Builder’s Inc. v. Peters, 226 F.3d 1307, 1316 (Fed. Cir. 2000). We find the
government’s decision to suspend Derian’s work on July 23, 2019, due to the issues
with Derian’s quality control program, including deficient pump foundation plates, the
failure to hold the required preparatory meetings and working without adequate
oversight, until Derian submitted an acceptable revised quality assurance plan was
reasonable. Granite Constr. Co., ASBCA No. 62281, 21-1 BCA ¶ 37,756 at 183,281
(If the suspension is reasonable, there is no cost to the government.) Moreover,
Derian’s project manager acknowledged Derian’s quality control program was
unacceptable (finding 22).

        Furthermore, the government asserts it did not grant Derian safe clearance to
begin the electrical work inside the pump units on July 23, 2019, due to Derian’s
failure to complete the pre work clearance process (gov’t br. at 10). The government
notes Derian failed to obtain the required AHA report approval before beginning the
electrical work inside the pump unit (gov’t br. at 11). Derian claims it received that
approval when it submitted an AHA dated July 11, 2019, describing the
“Activity/Work Task” as “Pump Install (Electrical)” (app. br. at 20).

       The contract required Derian to submit AHA reports to the contracting officer
for approval before beginning each activity, task, or DFOW (finding 8). Derian’s
“Quality Control Plan” DFOW list included “Division 26 – Electrical” (finding 7).
The record indicates Derian submitted an AHA dated July 11, 2019, describing an
“Activity/Work Task” as “Pump Install (Electrical)” that the government accepted
with various comments on July 17, 2019 (finding 14). The comments included
direction for Derian to “[R]esubmit revised AHA when definable features of work are
added” (id.). The record does not indicate Derian resubmitted the revised AHA with
the DFOW’s (id.). The government’s refusal to give Derian safe clearance to begin
the electrical work inside the pump unit until Derian obtained the required government
approval for the DFOW, Division 26 – Electrical AHA was reasonable.

                                           22
        The government also asserts it did not grant Derian safe clearance to begin the
electrical work inside the pump units because Derian failed to hold the contractually
required preparatory meeting before beginning that electrical work (gov’t br. at 11-12).
The contract required Derian to hold preparatory meetings before beginning work on
each DFOW (finding 9). Derian did not hold the preparatory meeting for the electrical
work until August 12, 2019 (finding 15). The government’s decision to withhold
Derian’s safe clearance to begin the electrical work inside the pump unit until Derian
held the required preparatory meeting was also reasonable.

        In addition, Derian failed to establish with any reasonable certainty the extent
of any delay damages attributable to the government’s actions. To establish
entitlement to compensable delay damages, Derian must prove “the government was
responsible for specific delays; overall project completion was delayed as a result; and
any government-caused delays were not concurrent delays within appellant’s control.”
Env’t Chem. Corp., ASBCA Nos. 59280, 60760, 22-1 BCA ¶ 38,166 at 185,365 citing
WECC, Inc., ASBCA No. 60949, 21-1 BCA ¶ 37,948 at 184,306 (quoting Versar, Inc.,
ASBCA No. 56857 et al., 12-1 BCA ¶ 35,025 at 172,128). Moreover, Derian must
show the government’s actions affected activities on the critical path of its contract
performance. Essex Electro Eng’rs, Inc. v. Danzig, 224 F.3d 1283, 1295 (Fed. Cir.
2000) (contractor must demonstrate the government’s acts affected activities on the
critical path to recover under a delay claim). Here, Derian failed to establish any delay
days were solely attributable to government actions. Derian also failed to show that
any of the delay days impacted the contract schedule’s critical path. Derian’s claims
for its own, and its subcontractor CREM’s, alleged increased costs resulting from a
power outage and the government’s failure to grant a safe clearance are denied.

       b. Changed Stainless-Steel Contract Requirement

       Derian next asserts a claim for increased costs resulting from a constructive
change due to the alleged changed contract requirement to provide different stainless-
steel components similar to those used at the Little Goose Dam (app. br. at 21).
Derian alleges the government’s quality assurance representative, Mr. Kuhlmann,
directed Derian during the original MU4 installation to make the main unit head cover
pump installation look the same as the one installed at the Little Goose Dam (id.).
Derian claims this change required it to purchase premium materials beyond the
contract requirements and completely re-install the MU4 piping system (id.).

       The government contends Mr. Kuhlmann never directed Derian to perform
work outside the contract (gov’t br. at 16). In his declaration, Mr. Kuhlmann attested
he sent photos of a recently installed oil water separator at the Little Goose Lock &
Dam to Derian “as an example of the quality we expected” (R4, tab 2c at 22).
Mr. Kuhlmann denies saying, “make it look like the photos, and I’ll accept it” (id).
Mr. Kuhlmann’s declaration appears to be supported by the contemporaneous

                                           23
documentation. In an email dated July 31, 2019, Mr. Kuhlmann sent pictures of the
Little Goose oil water separator to Derian (finding 20). In that email, Mr. Kuhlmann
stated, “[T]his is the quality we will be looking for and Derian needs to strive for”
(id.). Mr. Kuhlmann did not appear to specifically direct Derian to use premium
materials or otherwise direct them on how to accomplish the piping installation.

       A contractor is entitled to an equitable adjustment for a constructive change to
the contract when it shows “(1) that it performed work beyond the contract’s
requirements, and (2) that the additional work was ordered, expressly or impliedly, by
the government.” BGT Holdings LLC v. United States, 984 F.3d 1003, 1012 (Fed. Cir.
2020); Kiewit Infrastructure W. Co. v. United States, 972 F.3d 1322, 1329 (Fed. Cir.
2020). Moreover, for a contractor to recover for a change, the person acting for the
government must possess authority to modify the contract. Winter v. Cath-dr/Balti
Joint Venture, 497 F.3d 1339, 1344 (Fed. Cir. 2007); Northrop Grumman Sys. Corp.
Space Sys. Div., ASBCA No. 54774, 10-2 BCA ¶ 34,517 at 170,238-39.

       Here, the government contends Mr. Kuhlman did not direct Derian to provide
different stainless-steel requirements (gov’t br. at 16). Moreover, the government
asserts Mr. Kuhlman had no authority to change the contract requirements even if he
had directed the changed work (id. at 17). The government identifies several instances
in which it informed Derian that only a warranted contracting officer acting within
their delegated authority had the authority to change the contract’s terms and
conditions (see e.g., findings 11, 12).

        Derian contends it called the ACO seeking clarification of Mr. Kuhlmann’s role
on the contract and left the ACO a voice message (app. br. at 21 citing R4, tab 5h
at 1043). Derian further contends the ACO did not return that call (app. br. at 21.)
Derian’s assumption that the ACO delegated the contract authority to the QAR by not
responding to a voicemail message is unreasonable. A contracting officer’s
ratification of an unauthorized act requires the contracting officer with the authority to
have knowledge of the unauthorized act and then act to adopt the unauthorized
action. Reliable Disposal Co., ASBCA No. 40100, 91-2 BCA ¶23,895 at 119,717.
Even if the ACO knew of Mr. Kuhlmann’s alleged direction, which we do not find,
there is no evidence the ACO acted to adopt the unauthorized action. Heartland
Energy Partners, ASBCA No. 62979, 22-1 BCA ¶ 38,200 at 185,519 (rejecting
ratification contention since no evidence contracting officer acted to adopt the
unauthorized action).

       As such, we find Mr. Kuhlmann did not direct Derian to perform additional
work on the main unit head cover pump. Moreover, we find Mr. Kuhlmann had no
authority to direct Derian to perform any such additional work. Derian’s claim for
increased costs resulting from the alleged additional work on the main head cover
pump is denied.

                                           24
       c. Pump Plate Modifications

        Finally, Derian asserts it is entitled to increased costs in the amount of $10,735
for additional labor and material costs resulting from a required change to the pump
plates (app. br. at 21). Derian contends that pump units 1-3 original design required
monolithic pump plates (id.). Derian further asserts that the government did not
provide it access to the turbine pit sump area during its pre-bid tour site visit, so it
relied upon the contract drawings design to prepare its bid (id.). During its initial
inspection of the pump units, Derian notified the government split pump plates would
be necessary to address various design conflicts with existing electrical outlets,
cabling, and piping (finding 13). The government apparently acknowledged a split
plate would be easier to install and would be acceptable (id.). Derian claims it
incurred additional costs in the amount of $10,735 to custom modify the pump plates
(app. br. at 21).

       The government responded that it was Derian’s responsibility under the
contract drawings to verify the pump plate dimensions prior to cutting and fabrication
(gov’t br. at 21). See Parker’s Mech. Contractors., Inc., ASBCA No. 32842, 88-1
BCA ¶ 20,472 at 103,542 (Specifications and drawings requiring field verification
place responsibility of choosing means and methods on the contractor). Specifically,
the government points out the contract drawings indicate, “[C]ontractor shall field
verify the dimensions prior to cutting and fabrication of steel plates” (finding 10). The
government further asserts Derian failed to verify the dimensions and chose the means
and installation method (gov’t br. at 21). In its final decision, however, the
government found partial merit in Derian’s claim and awarded additional labor costs
of $1,860 for the adjustment of the plates to deal with the existing electrical outlets and
cabling (finding 48).

        The government correctly notes the drawings indicate the contractor shall field
verify the plate dimensions (finding 10). In this instance, however, the issue is not the
size of the plates but whether the plates should be monolithic or split. The contract
drawings show monolithic plates (id.). The contract required Derian to conform to the
drawings (id.). It is well established that when the government requires a contractor to
follow detailed plans and specifications, it impliedly warrants that the result will be
adequate if the contractor follows the specifications. D.E.W., Inc., ASBCA
No. 35896, 94-3 BCA ¶ 27,182 at 135,459.

      Moreover, the government did not provide Derian access to the turbine pit
sump area during the pre-bid site tour, so Derian’s reliance upon the contract drawings
was reasonable (app. br. at 21). Derian notified the government of the potential
problem with the plates following its initial site visit (finding 13). The government
accepted the pump plate modification (id.). In its final decision, the government also

                                            25
agreed to pay Derian’s additional labor costs in adjusting the plates to deal with the
existing electrical outlets and cabling (finding 48). We find Derian was required to
install the split rather than monolithic pump plates to perform the contract. The
defective drawings resulted in a contract change, increasing Derian’s costs.

        Derian seeks $10,735 for the additional labor and material costs associated with
the split pump plates (app. br. at 21). In support of those costs, Derian provided two
invoices from Starman Metal Fabricators, LLC, in the amount of $2,163 that appear to
be for the increased costs resulting from splitting the pump plates in half and adding
splices (app. supp. R4, tab 92 at 554-55). Derian also provided a “Job Cost History
Report” showing wages paid from July 21, 2019, through December 13, 2019, for Job
1812, to “Install Pump Cost Type” in the amount of $15,848 (app. supp. R4, tab 92
at 556-60). Derian then subtracted the amount to install the pump labor from its
original bid ($9,956) and added overhead (26.66%) and profit (6.6%) to the difference
(app. supp. R4, tab 92 at 550).

        The government challenged the amount Derian claims for these increased costs
(gov’t br. at 21-22). The government’s claim evaluator, Mr. David Schmode, accepted
the two invoices from Starman Metal Fabricators since they detail the additional labor
to split the pump plates in half (R4, tab 8a at 1365). Mr. Schmode, however,
challenged Derian’s labor costs to install the pumps since they contain no explanation
of the work performed and show only the amounts paid to various individuals by
check number and amount (id.).

        Derian has the burden of proving its damages with “reasonable certainty.”
Precision Pine & Timber v. United States, 596 F.3d 817, 833 (Fed. Cir. 2010);
Environmental Chemical Corporation, ASBCA Nos. 59280, 60760, 22-1 BCA ¶
38,166 at 185,365. We find Derian failed to establish how its labor costs increased
because of the split pump plates. The government correctly notes that Derian’s labor
cost sheet does not explain the work performed (R4, tab 8a at 1365). Moreover,
Derian could have incurred the same labor costs installing the monolithic plates
without the split. We conclude Derian is entitled to an additional equitable adjustment
for the pump plate modification in the amount of $2,883 for the Starman Metal
Fabricators invoices fully burdened (overhead at 26.66% and profit at 6.6%) but has
failed to prove it is entitled to any additional costs for its own labor. 10

10
     As previously noted, the government already adjusted the contract price in
         Modification A0004 in the amount of $1,860 for Derian’s increased labor costs
         associated with adjusting the plates to deal with the existing electrical outlets
         and cabling (finding 46).
                                             26
IV. Liquidated Damages

       In its final decision, the government asserted a claim for liquidated damages in
the amount of $42,720 (finding 52). The government’s liquidated damages assessment
was for 32 days at the contractual rate of $1,335 per day based upon a finding of a
contract completion date of January 19, 2020, and an actual completion date of
February 20, 2020 (id.). Derian contends the government’s assessment of liquidated
damages is inappropriate since the government waived any contract completion date
when it partially terminated the contract and did not establish a new date for the non-
terminated work (app. br. at 22). 11

        It is well established “the Government bears the initial burden of proving that
the contractor failed to meet the contract completion date and that the period of time
for which it assessed liquidated damages is correct.” Sauer, Inc., ASBCA No. 62395,
21-1 BCA ¶ 37,845 at 183,753 citing KEMRON Envtl. Servs. Corp., ASBCA
No. 51536, 00-1 BCA ¶ 30,664 at 151,399. “Once the government has overcome the
initial burden, it is incumbent upon appellant to show either that the government
incorrectly assessed the damages under the contract, or that appellant’s failure to
comply with the terms of the contract was excusable.” Chem-Care Co., ASBCA
No. 53614, 06-2 BCA ¶ 33,427 at 165,726. Here, the parties dispute the appropriate
contract completion date.

        The government contends the contract explicitly states a substantial completion
date of January 19, 2020 (gov’t br. at 27). The government bases this date upon
contract clause FAR 52.211-10(c) that required all on-site installation work for the
main unit’s headcover pumps be completed by December 20, 2019, with complete
system commissioning complete by January 19, 2020 – 30 days after the final main
unit 1 installation date (finding 3). On January 24, 2020, the government notified
Derian that the contract completion date of January 19, 2020, for the unterminated
work had passed and “not all the work associated with the oil-water separators, as-
builts, O&M manuals, etc. are complete” (finding 36).

        Derian contends it was not allowed to complete any “Main Unit” installations
that formed the basis for the contract completion date since the government terminated
that portion of the contract for convenience (app. br. at 22). Derian correctly notes the

11
     Derian also disputes the government’s determination of the actual contract
         completion date since it contends the government took over the terminated
         portions of the contract and did not complete them until long after the alleged
         February 20, 2020, substantial completion date (app. br. at 7). We need not
         address this contention since we find the government did not establish a new
         contract completion date for the non-terminated work.

                                             27
government derived the contract completion date from the original contract schedule
wherein the parties contemplated Derian would install and commission each unit
during designated, planned outages (app. reply br. at 7). Following the partial
termination for convenience, the contract no longer required Derian to install the main
unit’s headcover pumps for all the units (finding 35). Derian further asserts it had
“completed all the required field mechanical and electrical work in anticipation of
beginning startup, testing, and commissioning of the OWS system on January 21,
2020” (finding 37).

        The original January 19, 2020, contract substantial completion date became
inapplicable when the government discovered a design defect and subsequently
partially terminated the contract for convenience. Derian satisfactorily installed the
new head cover pumps in Unit 4 (finding 24). The government noted, however, the
new pumps were unable to keep up with the water inflow when the pumps were turned
on (id.). The government decided to install VFDs to address this design deficiency
and allow the pumps to keep up with the water inflow (finding 25). The government
informed Derian to limit its activities on the contract until it developed a new technical
solution addressing the leakage problem (finding 26). Derian responded that this
development would prevent it from proceeding as scheduled on Unit 6 and was going
to impact the approved schedule (id.).

       The government initially authorized Derian to install the VFDs for the
headcover pumps to address the leakage issue (finding 27). The parties signed
Modification No. A00002 requiring Derian to install the VFDs at an increased contract
price of $131,438.40 (id.). The modification further indicated the contract completion
date remained unchanged, but the contractor was entitled to additional time related to
the modification, and the time impact would be negotiated and settled through a future
modification (id.). The future modification was never negotiated since the government
decided to install the VFDs and remaining pump units independently (findings 30, 35).

        In its “Project Change Request Form”, the government noted the contractor
could not complete the required work partly due to government-caused delays and the
differing site condition resulting from the excess leakage (finding 30). The
government further noted the units would not be available again to install until after
the contract completion date (id.). The government determined its best approach
would be to modify the current contract to de-scope the remaining work in the turbine
pits (id.). The government further noted the revised physically complete date would
be moved to September 31, 2020 (finding 31). The government issued the partial
termination notice to Derian on January 17, 2020 (finding 35). 12 The government did

12
     It is interesting to note that the government approved the partial termination on
           December 19, 2019, but did not issue the partial termination notice until
           January 17, 2020 (finding 32, 35).
                                              28
  not provide Derian with the “final marked-up technical specifications” showing the
  terminated work until May 12, 2020 (finding 40).

         In its final decision, the government used the original contract substantial
  completion date to assess the liquidated damages (finding 52). That completion date,
  however, was based on Derian’s installation of the main pump units. Following the
  government’s partial termination for convenience, the contract no longer required
  Derian to perform that work (finding 35). Hence, the contract’s substantial completion
  date was no longer applicable. The government never established a new contract
  completion date for the non-terminated work. As such, we conclude the original
  contract completion date was no longer applicable to this contract following the partial
  termination for convenience, and the government is not entitled to assess liquidated
  damages based upon that date.

                                      CONCLUSION

         Derian is entitled to be paid the contract price for the non-terminated work.
  Modification No. A0004 increased the contract price from $2,250,044.71 to
  $2,263,279.71 (finding 46). We have determined the government is entitled to a
  deductive credit in the amount of $119,672 resulting from the reduction of work. We
  have also determined Derian is entitled to an additional equitable adjustment in the
  contract price of $2,883 for the pump plate modifications. We find the government is
  not entitled to adjust the contract price for any liquidated damages. Finally, the
  contract price should be increased by $13,156 for the amount the government, in its
  final decision, determined Derian was entitled to for its claim for foot valves (finding
  48). In summary, we find the final contract price should be $2,159,646.71.

         The parties apparently agree Derian has been paid $2,044,870.41 under the
  contract (app. br. at 3). Derian is entitled to an additional payment of $114,776.30 on
  the contract plus CDA interest from the date of its certified claim (February 25, 2021).

         Dated: August 25, 2023

                                                  ARTHUR M. TAYLOR
                                                  Administrative Judge
                                                  Armed Services Board
                                                  of Contract Appeals

(Signatures continued)

                                             29
 I concur                                           I concur

 RICHARD SHACKLEFORD                                J. REID PROUTY
 Administrative Judge                               Administrative Judge
 Acting Chairman                                    Vice Chairman
 Armed Services Board                               Armed Services Board
 of Contract Appeals                                of Contract Appeals

        I certify that the foregoing is a true copy of the Opinion and Decision of the
Armed Services Board of Contract Appeals in ASBCA No. 62957, Appeal of Derian,
Inc., rendered in conformance with the Board’s Charter.

      Dated: August 25, 2023

                                                 PAULLA K. GATES-LEWIS
                                                 Recorder, Armed Services
                                                 Board of Contract Appeals

                                            30