Court Opinion

ID: 4540023
Source: CourtListenerOpinion
Date Created: 2020-06-09 15:01:44.980841+00
Date Added: 2024-06-11T12:45:19.574619
License: Public Domain

Case: 19-1608    Document: 59     Page: 1   Filed: 06/09/2020

        NOTE: This disposition is nonprecedential.

   United States Court of Appeals
       for the Federal Circuit
                  ______________________

  UNITED STATES ARMY CORPS OF ENGINEERS,
                  Appellant

                             v.

            JOHN C. GRIMBERG CO., INC.,
                      Appellee
               ______________________

                        2019-1608
                  ______________________

     Appeal from the Armed Services Board of Contract Ap-
 peals in Nos. 58791, 59167, 59168, 59169, 59170, 59171,
 59717, Administrative Judge J. Reid Prouty, Administra-
 tive Judge Richard Shackleford, Administrative Judge
 Robert T. Peacock.
                  ______________________

                   Decided: June 9, 2020
                  ______________________

     ALBERT S. IAROSSI, Commercial Litigation Branch,
 Civil Division, United States Department of Justice, Wash-
 ington, DC, argued for appellant. Also represented by
 JOSEPH H. HUNT, ALLISON KIDD-MILLER, ROBERT EDWARD
 KIRSCHMAN, JR.; SCOTT SEUFERT, United States Army
 Corps of Engineers, Baltimore, MD.

    HERMAN MARTIN BRAUDE, Braude Law Group, P.C.,
Case: 19-1608     Document: 59     Page: 2     Filed: 06/09/2020

 2          U.S. ARMY CORPS OF ENG’RS   v. JOHN C. GRIMBERG CO.

 Rockville, MD, argued for appellee. Also represented by
 EDWARD JEROME PARROTT, Watt, Tieder, Hoffar & Fitzger-
 ald, McLean, VA.
                 ______________________

     Before O’MALLEY, WALLACH, and TARANTO, Circuit
                        Judges.
 O’MALLEY, Circuit Judge.
     The United States Army Corps of Engineers (“Corps”)
 appeals a decision of the Armed Services Board of Contract
 Appeals (“Board”) holding that John C. Grimberg Co., Inc.
 (“Grimberg”) is entitled to an equitable adjustment to the
 contract price for construction of the Navy Medical Biolog-
 ical Defense Research Laboratory (“Biolab”) in Fort
 Detrick, Maryland. John C. Grimberg Co., ASBCA Nos.
 58791, 59167, 59168, 59169, 59170, 59171, 59717, 18-1
 BCA ¶ 37,191. While we understand the Board’s desire to
 reach a conclusion it felt was not unjust in the circum-
 stances, for the reasons discussed below, we must reverse.
                       I. BACKGROUND
     The Corps issued a Request for Proposal (“RFP”) on
 February 23, 2009, seeking offers for the design and con-
 struction of the Biolab. The project entailed construction
 of a large laboratory building, an entry point building,
 parking facilities, an access road, stormwater manage-
 ment, and perimeter fencing. The RFP incorporated by ref-
 erence the standard differing site condition (“DSC”) clause,
 as prescribed by 48 C.F.R. § 52.236-2, pursuant to which a
 contractor can ask for a cost adjustment if subsurface con-
 ditions at the construction site “differ materially from those
 indicated in the contract.”
     The RFP also included, as an appendix, the “Geotech-
 nical Report and Requirements” (“Geotechnical Report”).
 J.A. 4248–4423. The Geotechnical Report, although “pre-
 liminary” was meant to provide “bidders with sufficient
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 U.S. ARMY CORPS OF ENG’RS   v. JOHN C. GRIMBERG CO.         3

 information to identify the general subsurface conditions of
 the site.” J.A. 4249. The Geotechnical Report stated that
 the Biolab should be supported by a deep foundation sys-
 tem of drilled piers (i.e., caissons or shafts) socketed into
 five feet of competent rock. J.A. 4256. The portion of the
 pier embedded in rock is called a “rock socket.”
     To assist contractors in developing bids for the Biolab’s
 foundation, the Geotechnical Report disclosed 46 test bor-
 ings to indicate the subsurface conditions at the project lo-
 cation. Eleven of the borings came from an investigation
 done during the construction of the National Interagency
 Bio-Defense Campus, of which the Biolab is a part. Just
 two of those borings, DH-11 and DH-12, were located
 within the planned footprint for the Biolab. Those two bor-
 ings indicated high quality rock, with no intervening in-
 competent rock.      The Geotechnical Report indicated,
 however, that contractors should not assume that the rock
 at the site would be free of voids given the information
 available from other borings. For example, certain borings
 taken between 300 and 500 feet from the Biolab footprint,
 in preparation for a different construction project, showed
 between 0 and 20 feet of incompetent rock.
     Notably, the bedrock below the Biolab project, like the
 surrounding area, is limestone in a Karst formation. Karst
 geology is a condition of limestone rock that occurs when
 portions of the rock have been degraded over time by a
 Karst solutioning process. This process can create large
 cracks, fissures, and voids in the rock. As the Board ex-
 plained, “Karst is a recognized geohazard, ‘[k]nown for its
 variability and its degree of inconsistency, both vertically
 and horizontally over extremely short distances.’” J.A. 2.
     In response to the Corps’ RFP, Grimberg submitted a
 proposal on March 31, 2009. Grimberg estimated that it
 would need to drill through 240 feet of rock (exactly 5 feet
 for each of 48 piers), at between $270 and $530 per foot,
 depending on the depth of the pier. This quote relied on
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 4          U.S. ARMY CORPS OF ENG’RS   v. JOHN C. GRIMBERG CO.

 the testing results from DH-11 and DH-12, and assumed
 that excavation of incompetent rock would not be required
 as part of the construction.
     On May 29, 2009, the Corps awarded the Biolab Project
 Contract to Grimberg. Grimberg proceeded on the contract
 and, once it began work on the foundation, quickly began
 to encounter incompetent rock. On March 10, 2010, Grim-
 berg notified the Corps that it was encountering, in its
 view, a DSC. Grimberg ultimately drilled through 923 feet
 of rock—683 feet more than it had accounted for in its bid.
 J.A. 3435.
     In May 2012, once the Biolab project was complete,
 Grimberg submitted a request for equitable adjustment of
 the contract price to the Corps, alleging a Type I DSC. J.A.
 3449–3452. The request acknowledged that Grimberg re-
 lied on only DH-11 and DH-12 when structuring its bid.
 J.A. 3450. The letter further stated that Grimberg drilled
 through an average of 13.6 feet more rock per pier than ex-
 pected to create the necessary rock sockets. J.A. 3451. The
 Corps denied Grimberg’s request in June 2012. In Decem-
 ber, Grimberg submitted a certified claim. The Corps
 again denied the claim and Grimberg appealed to the
 Board.
     The Board conducted an eight-day hearing and issued
 a lengthy opinion. Relevant to this appeal, the Board found
 that Grimberg encountered a Type I DSC. The Board ex-
 plained that Grimberg met the standard for a Type I DSC
 because “[t]he quantities of rock encountered greatly ex-
 ceeded the quantity reasonably foreseeable based on a fair
 reading of contractual indications.” J.A. 28. The Board
 found that Grimberg’s reliance on just two borings, DH-11
 and DH-12, was unreasonable. J.A. 28–29; see also J.A. 31
 (“Confronted with the plethora of cautionary contractual
 indications, ‘cherry picking’ a subset of 2 of 46 borings, re-
 gardless of their proximity to the Biolab foundation, was
 unjustifiable in the circumstances of this case.”). The
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 U.S. ARMY CORPS OF ENG’RS   v. JOHN C. GRIMBERG CO.         5

 Board explained, however, that Grimberg’s reliance on two
 borings was more reasonable than the government’s pro-
 posal that Grimberg should have relied on borings located
 300 to 500 feet from the Biolab footprint. J.A. 29. The
 Board explained:
     a primary reason for our conclusion that [Grim-
     berg] is entitled to relief despite its misreliance
     solely on DH-11 and DH-12, is the gross disparity
     between the quantities of incompetent rock actu-
     ally encountered and the quantity that we consider
     was reasonably indicated in the contract’s Geotech-
     nical Report. Even if it had expanded its pre-pro-
     posal analyses to include the seven most proximate
     borings to the Biolab site . . . or devoted the time
     and effort to analyze the 26 [other] borings as did
     the Corps at trial, the disparity was material and
     not reasonably foreseeable.
 J.A. 29.
      Having found that neither the Corps nor Grimberg pro-
 vided a reasonable estimate of the amount of rock a reason-
 able contractor would have expected, the Board engaged in
 a “jury verdict” type analysis. J.A. 30. Based on the expert
 testimony and evidence presented at trial, it concluded
 that the contract reasonably indicated that 360 feet of rock
 drilling (an additional 2.5 feet per pier) would be required.
Id. Because Grimberg actually encountered on average an
 additional 13.6 feet of incompetent rock, the Board found
 that Grimberg encountered more rock than was reasonably
 indicated in the contract. Id. Thus, the Board found for
 Grimberg on its DSC claim. The Board further found in
 favor of Grimberg on a claim for delays related to the DSC.
 J.A. 49.
      The Corps filed a motion for reconsideration. In deny-
 ing the motion, the Board explained that “[a]n ‘all or noth-
 ing’ resolution of this case would have been overly legalistic
 and unjust.” J.A. 70.
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                       II. DISCUSSION
     In an appeal from the Board, we review questions of
 law de novo. Rockies Exp. Pipeline LLC v. Salazar, 730
F.3d 1330, 1335 (Fed. Cir. 2013). The interpretation of con-
 tracts, statutes, and regulations is a question of law. Id.
 We review the Board’s factual findings to determine if the
 findings are arbitrary, capricious, or not supported by sub-
 stantial evidence. Id.; 41 U.S.C. § 7107(b).
     A Type I DSC exists when “subsurface or latent physi-
 cal conditions at the site . . . differ materially from those
 indicated in [the] contract.” 48 C.F.R. § 52.236-2(a)(1). To
 establish an equitable adjustment to contract price based
 on a Type I DSC, a contractor must prove by a preponder-
 ance of the evidence:
     [1] the conditions indicated in the contract differ
     materially from those actually encountered during
     performance; [2] the conditions actually encoun-
     tered were reasonably unforeseeable based on all
     information available to the contractor at the time
     of bidding; [3] the contractor reasonably relied
     upon its interpretation of the contract and con-
     tract-related documents; and [4] the contractor was
     damaged as a result of the material variation be-
     tween expected and encountered conditions.
 Comtrol, Inc. v. United States, 294 F.3d 1357, 1362 (Fed.
 Cir. 2002); see also Stuyvesant Dredging Co. v. United
 States, 834 F.2d 1576, 1581 (Fed. Cir. 1987). “While a con-
 tractor need not demonstrate that its interpretation of the
 contract is the only reasonable one, it does bear the burden
 of showing that its construction is at least a reasonable
 reading.” P.J. Maffei Bldg. Wrecking Corp. v. United
 States, 732 F.2d 913, 917 (Fed. Cir. 1984) (emphasis in orig-
 inal).
     The Corps argues that the Board erred when it held
 that Grimberg is entitled to an equitable adjustment to
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 U.S. ARMY CORPS OF ENG’RS   v. JOHN C. GRIMBERG CO.         7

 contract price despite having repeatedly stated that Grim-
 berg’s interpretation of the contract was unreasonable.
 Grimberg does not respond to this contention. In fact,
 Grimberg fails to even address the governing legal stand-
 ard in its briefing. Grimberg’s failure to contend with the
 required legal test is fatal to its claim.
     For over thirty years, we have required that, to receive
 an equitable adjustment to the contract price, a contractor
 must prove that it reasonably relied on its interpretation of
 the contract. See Stuyvesant Dredging, 834 F.2d at 1581.
 Here, the Board found that Grimberg failed to do just that.
 See J.A. 28–29, 31. We are thus left with the inescapable
 conclusion that Grimberg has failed to prove its entitle-
 ment to an adjustment. The Board erred as a matter of law
 when it concluded otherwise.
     The Board’s finding that the Corps’ interpretation was
 less reasonable than Grimberg’s does not change our con-
 clusion. Appellee’s Br. 60–64. Despite the moniker “equi-
 table adjustment” employed in this context, our case law
 does not permit us to balance the Corp’s reasonableness
 against that of the contractor. The focus of our inquiry
 must be on the reasonableness of the contractor. This focus
 serves the purpose of incentivizing contractors to carefully
 and reasonably interpret contract documents. See H.B.
 Mac, Inc. v. United States, 153 F.3d 1338, 1343 (Fed. Cir.
 1998). In this case, the Corps chose to propose what it
 viewed as a “reasonable” interpretation of the contract to
 contrast with the “reasonable” interpretation proposed by
 Grimberg. That both the Corps and Grimberg failed in
 their endeavor to establish what would have been reason-
 able for this particular contract does not somehow shift the
 burden of providing a reasonable interpretation from
 Grimberg to the Corps. Regardless of the Corps’ under-
 standing of the contract, our case law is clear that Grim-
 berg must bear the risk of bidding on a contract without
 reasonably interpreting what that contract discloses.
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 8          U.S. ARMY CORPS OF ENG’RS   v. JOHN C. GRIMBERG CO.

     The Board found more than once that Grimberg failed
 to prove that it reasonably relied on the test results from
 just two borings when formulating its Biolab bid. 1 Because
 Grimberg was unreasonable, under long-established law, it
 is not entitled to an equitable adjustment of the contract
 price.
                      III. CONCLUSION
     For the reasons discussed above, we reverse the
 Board’s holding that Grimberg is entitled to an equitable
 adjustment to contract price based on a Type I DSC.
                        REVERSED

     1    While Grimberg dedicates a significant portion of
 its brief to summarizing the evidence it presented to the
 Board, see Appellee’s Br. 18–50, Grimberg does not directly
 challenge the Board’s finding that Grimberg’s interpreta-
 tion of the contract was unreasonable, see id. at 58 (arguing
 that the Board’s interpretation of the contract was reason-
 able), 60 (arguing that the Board correctly rejected the
 Government’s interpretation of the contract as less reason-
 able than Grimberg’s). To the extent Grimberg challenges
 the Board’s factual finding that reliance on two borings was
 unreasonable, substantial evidence supports that finding.