______________________________________________ GRANTED IN PART: November 7, 1995 _____________________________________________ GSBCA 12131, 12209 P.J. DICK, INCORPORATED, Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. John T. Flynn and Thomas J. Kelleher, Jr., of Smith, Currie & Hancock, Atlanta, GA, counsel for Appellant. Sharon A. Roach, Gerald L. Schrader, Martin A. Hom, Robert C. Smith, and M. Leah Wright, Real Property Division, Office of General Counsel, General Services Administration, Washington, DC, counsel for Respondent. Before Board Judges DANIELS (Chairman), BORWICK, and NEILL. BORWICK, Board Judge. Background This appeal involves a contract for the renovation of certain floors of the United States Courthouse and Post Office, Pittsburgh, Pennsylvania, a thirteen story building. The con- tractor and appellant is P.J. Dick, Incorporated (P.J. Dick). The respondent is the General Services Administration (GSA). During the renovation, GSA partially terminated for convenience work in the basement. Although GSA proceeded under the Termina- tion for Convenience clause, the parties treated the resulting price adjustment as a deductive change. The parties dispute the proper credit for the deleted work. We conclude that GSA is entitled to a credit of $180,340.76 Findings of Fact Scope of Termination 1. On September 5, 1990, GSA's Design and Construction Division recommended to the contracting officer that work in- volved in providing concrete topping and floor drainage in the proposed parking area of the basement be terminated for the convenience of the Government. Appeal File, Exhibit 320. The area needed substantial redesign of sloping, plumbing for drain- age, and architectural modification of elevators which served the space. Id. 2. On September 17, 1990, GSA issued modification AOE8, which terminated certain work in the basement for convenience. Item 1 described work not terminated. Appeal File, Exhibit 321. P.J. Dick was to install all work per the contract documents from column line C to the north end of the building. P.J. Dick was also to install all basement offices of the Federal Bureau of Investigation per the original requirements. The modification deleted the following work (starting at item 2): the new wall at column line A between column lines 2 and 5; (3) microprocessor parking controller and associated parking gate equipment; (4) new ramp designated as UP ramp; (5) all work associated with note 3.9 on drawings 3-A-18, 3-A-19 and A-207, within the boundaries outlined in the drawings that were handed to P.J. Dick at the September 13, 1990, termination meeting; (6) plumbing work associated with drain installation in the parking area except for that which had been completed to date; and (7) insulation of the piping associated with the existing steam radiation serving the basement area. Id. P.J. Dick's Estimates 3. On August 23, 1991, P.J. Dick submitted quotation 243 in the amount of $126,031 for the estimated cost of the deleted work. Appeal File, Exhibit 322. The quotation included $102,372 for P.J. Dick's cost of labor and material, with no allowance for overhead. Subcontractor direct cost was $19,372 for a total of $121,744. P.J. Dick estimated profit at 1.568 percent for a subtotal of $123,674.86. Insurance, bond and business and occupation tax amounted to $2,356.01 for a grand total of $126,- 030.67. P.J. Dick then rounded up to $126,031. Id. The esti- mate included a "0" credit for deleted plumbing work. Id. 4. On August 25, 1991, GSA wrote to P.J. Dick, advising that its proposal for the basement termination was incomplete because, among other things, it: (1) did not contain copies of purchase orders for material that had been proposed, (2) omitted cost for overhead, (3) failed to include settlement agreements with subcontractors, (4) failed to include a certificate of cost and pricing data, (5) provided illegible recapitulation sheets for P.J. Dick and a subcontractor, Stanley Magic-Door, Inc., (6) failed to include a rationale as to the labor rate P.J. Dick was using and why, (7) failed to indicate who was to install deleted guard rails and (8) failed to indicate whether Tri-City Steel was to provide installation of wire mesh for concrete. Respondent's Supplemental Appeal File, Exhibit 12. 5. In response to that letter, P.J. Dick: (1) enclosed copies of purchase orders from Davidson Sand & Gravel Company for concrete that had been ordered on the job-site, (2) argued that it did not include a credit for overhead because P.J. Dick's overhead was not reduced by the termination, (3) advised GSA that P.J. Dick had not entered into any settlement agreements with affected subcontractors, (4) promised a certificate of cost and pricing data at the close of negotiations, (5) enclosed legible copies of recapitulation sheets, (6) estimated crew sizes for the terminated work, and in (7) and (8) identified Moore & Mooreford and Tri-City Steel as subcontractors who were to perform the guard rail, wire mesh and decking installations. Respondent's Supplemental Appeal File, Exhibit 13. 6. At the hearing on the merits of this appeal, the chief estimator for Sherry & O'Leary (the plumbing subcontractor) conducted a detailed take-off of the remaining plumbing deleted by the basement termination. Transcript at 2358. Based on his examination of Plumbing Drawings 9-P-18 through 9-P-20, the estimator described the extent of the remaining plumbing work deleted by modification AOE8. On drawing 9-P-18, the estimator described deletion of three area drains, 4-inch piping from the 8- inch pipe to two area drains, and one area drain on the 8 inch main run. On drawing 9-P-19, he described the deletion of six area drains, three area drains on the main run of 8-inch pipe, 4- inch branch lines from the 8-inch main and the 8 inch main from sleeves on ward. On drawing 9-P-20, he described deletion of an 8-inch main line and deletion of three 4-inch branch lines. Transcript at 2356-59. 7. Before the termination for convenience modification was issued, the work of trenching the concrete had already been done. Transcript at 2369. The estimator for Sherry & O'Leary therefore calculated the labor for laying the pipe, not for trenching the concrete. Id. Plumbers lay pipe in ten foot lengths. Id. at 2366. Based on the take-off, the estimator calculated that the deleted pipe amounted to 486 linear feet, Appellant's Exhibit 107. and that it would take two plumbers 113.67 hours to lay the pipe at $27.90 per hour for a subtotal for labor of $3,171.39. Id. 8. It would take two laborers sixteen hours, at $19.26 per hour, to spread bedding under the pipe for a labor subtotal of $308.16. It would take two laborers forty-eight hours, at $19.26 per hour, to backfill the trenches for a labor subtotal of $924.48, with $486 for saw cutting. Appellant's Exhibit 107. The cost of bedding material was $120 and the cost of five hangers for fifty feet of suspended piping was $22.70. The material and labor subtotal was $5,032.73. Tax on material was $8.56 for a labor and material total of $5,041.29. Sherry & O'Leary's estimator added ten percent overhead ($504.13) for a total of $5,545.12 and profit at ten percent ($554.54) for a total of $6,099.96. Sherry & O'Leary's estimator added bond ($88.45) for a total of $6,188.41. Sherry & O'Leary did not add material costs such as piping and the drains to the deleted work because those materials had been delivered and turned over to GSA as inventory. Transcript at 2376; Respondent's Supplemental Appeal File, Exhibit 15. 9. At the hearing on the merits of this appeal, P.J. Dick's project coordinator revised the credit P.J. Dick main- tained was due GSA for the basement termination. Appellant's Exhibit 113. The project coordinator used unit costs of perform- ing the same work on other aspects of the pro- ject.[foot #] 1 Transcript at 2454-55. Where actual costs were not available, appellant's original estimate was used. Id. at 2456-57. The project coordinator modified P.J. Dick's original estimate by adding a credit for placement of control and expansion joints in the concrete, items of work which were left out of the first estimate. When the project concrete was poured, P.J. Dick had to use a concrete buggy, rather than pump it; use of a buggy is a more expensive process. The project coordinator revised the credit upwards by the cost the buggy. Transcript at 2455-56. The estimated cost of the terminated basement concrete work totalled $124,731. Appellant's Exhibit 113. Subtraction of costs incurred for work done in preparing the termination result- ed in a total of $121,089. Id. The total subcontracted work (including $6,188 of Sherry & O'Leary's cost) was $25,560. Id. Settlement expenses were $1,040. Appeal File, Exhibit 321, Schedule E. GSA's Estimates 10. GSA originally estimated that the credit for the deleted work would be $168,885, consisting of credits for dele- tion of six line items as follows: ----------- FOOTNOTE BEGINS --------- [foot #] 1 For example, the project coordinator used actual costs as the basis for a credit for termination of lightweight concrete work in the basement. Transcript at 2461. Actual hourly costs for the lightweight concrete fill placed on other portions of the project was $12.86 per hour. Appellant's Exhibit 113 at 2. The actual unit cost (labor, fringe benefits and materials) for placing lightweight concrete on other portions of the building was $83.07 per cubic yard. Id. The project coordi- ___ nator multiplied that unit cost by the number of cubic yards of lightweight concrete fill deleted by the termination--866--to obtain the estimated credit of $71,939. Id. ___ ----------- FOOTNOTE ENDS ----------- Item Amount Basement Concrete Fill $120,450 Up Ramp 20,000 Island at Entrance 14,500 Rebar at Ramps 1,215 Reinforcing Mesh 9,720 Plumbing at Drains 3,000 Respondent's Supplemental Appeal File, Exhibit 3. 11. On October 11, 1991, GSA's resident engineer revised P.J. Dick's estimate to $244,138.78. Appeal File, Exhibit 324. The resident engineer added on $90,506.99 as additional concrete credit and $27,600.92 as additional plumbing credit. The resi- dent engineer added the additional plumbing credit because: The resident engineer reviewed the work to be performed by Sherry & O'Leary . . . and found that none of the piping and area drains on the contract drawings for the basement parking area have been installed. Appeal File, Exhibit 324. The additional figure of $27,600.92 for plumbing was based on deletion of: installation of 355 linear feet of 4-inch drain pipe, 211 linear feet of 8-inch drain pipe, installation of eighteen drains, with a total material cost of $6,410.72, and labor cost of $13,468.25 for a total material and labor cost of $19,878.97. The addition of credits (profit, commission and business and occupation tax) resulted in $27,- 600.92. Respondent's Exhibit 84. 12. On November 20, 1992, the contracting officer issued his decision in which he determined the credit for the basement termination to be $259,223, consisting of $36,627 for deleted plumbing, $223,636 for deleted concrete and $1,040 for settlement expenses. Respondent's Supplemental Appeal File, Exhibit 9. The total was based on estimated costs of P.J. Dick of $223,636, subcontracted costs of $36,627 and settlement expenses of $1,040. Respondent's Supplemental Appeal File, Exhibit 7 at 4 (unnumbered page).[foot #] 2 13. At the hearing on the merits, GSA presented a revised estimate for the credit due on termination of the basement work. That estimate totalled $339,245. Respondent's Exhibit 79. ----------- FOOTNOTE BEGINS --------- [foot #] 2 P.J. Dick's appeal from this decision was docketed as GSBCA 12209. On July 31, 1992, P.J. Dick had submit- ted a claim. The contracting officer failed to timely respond, and P.J. Dick filed an appeal from the deemed denial. Complaint, GSBCA 12131, 8, 9. This appeal was docketed as GSBCA 12131. The Board consolidated the appeals. ----------- FOOTNOTE ENDS ----------- GSA's estimator, Mr. Herr, estimated all labor at $34 per hour, save for miscellaneous clean-up and hauling, which he estimated at $30 per hour. He assumed that laborers would have spent 4,382 total man-hours placing lightweight concrete over 62,600 square feet with a material total of $81,380 at a material unit cost of $1.30 per square foot. He assumed that the placement of the concrete slab would have included sloping to drains and a method of placement called checker panel pour. Respondent's Exhibit 79. He included $9,703 for concrete curing and another $9,703 for a bonding agent, and $12,238 as the estimated cost for building the ramp (using earth fill and concrete cheek walls) and $2,000 for painting parking lines. Id. He estimated a credit of $18,140 for plumbing and drainage. Id. 14. Sloping of the concrete basement deck, however, was not included in the base contract. Sloping was included in Request for Proposal 85, which was withdrawn. Transcript at 2445; Appeal File, Exhibit 320. At the hearing on the merits of these ap- peals, the estimator admitted that if sloping of the concrete deck was not included, the quantity of concrete and labor needed would be reduced. Transcript at 1988. He admitted that if concrete were spread by buggy and not poured, the mix of laborers to finishers would change. Id. He also admitted that laborers working on the concrete decking were paid significantly less than $34 per hour. Id. GSA's estimator did not know the type of bonding agent P.J. Dick used on the project or the type of concrete curing P.J. Dick used. Transcript at 1989, 1991. 15. Painting of parking lines was work not included in the contract. Transcript at 2450. For the parking ramp, P.J. Dick did not intend to use earth fill; it intended to use a structural steel deck with reinforcing mesh and concrete to form a composite slab.[foot #] 3 Transcript at 2449. Discussion The parties are in as sharp a dispute regarding the appro- priate credit for termination for convenience of the basement work as they were regarding the credit for the termination for convenience of the fourth floor work. P.J. Dick, Inc. v. General Services Administration, GSBCA 12215, 95-1 BCA 27,574, modified on reconsideration, GSBCA 12215-R (Oct. 13, 1995). We apply the same principles as we applied in deciding the credit due for the fourth floor termination for convenience. First, we accept the deductive change method of pricing the convenience termination used by the parties (as opposed to pricing the cost of the completed work, which is contemplated by the termination for convenience clause). P.J. Dick, Inc., 95-1 BCA at 137,417. ----------- FOOTNOTE BEGINS --------- [foot #] 3 Moore & Mooreford's proposed credit included $484 for deletion of eleven feet x twenty-two feet of decking material at $2 per foot. Respondent's Supplemental Appeal File, Exhibit 13. ----------- FOOTNOTE ENDS ----------- Respondent bears the burden of establishing the proper credit. The credit should compensate the Government for the cost of the deleted work the contractor would have performed, taking into account the circumstances of the contractor. Id. The credit includes the overhead cost the contractor would have incurred and profit or commission the contractor would have earned. Id. In the appeal for the fourth floor convenience termination, we concluded that the appropriate overhead was fifteen percent, and that the appropriate profit on P.J. Dick's work and commission on its subcontractor work were each eight percent. Id. at 137,417; P.J. Dick Inc., 12215-R, slip op. at 2. We cannot accept Mr. Herr's analysis of the credit due because of its inaccuracies. His labor estimate for the light- weight concrete work was far in excess of the actual labor costs for P.J. Dick to perform similar concrete work. Compare Finding 13 with note 1. Mr. Herr overstated the scope of the concrete work by assuming that the base contract required sloping of the concrete deck; the base contract did not so require. Findings 13, 14. He incorrectly assumed that P.J. Dick would have had to paint parking lines on the completed parking deck; that was not a contract requirement. Findings 13, 15. He assumed a method of construction of a parking ramp that P.J. Dick had not contemplat- ed. Id. He overstated the amount and cost of the plumbing work to be deleted; his estimate of the plumbing stands in sharp contrast to the detailed and knowledgeable take-off performed by Sherry & O'Leary's estimator. Compare Finding 13 with Findings 6-8. We accept P.J. Dick's revised estimate as the appropriate estimate for calculating quantum. P.J. Dick's estimates are supported by actual labor costs for similar work on the project. P.J. Dick's revised estimate is the most accurate as to quanti- ties of work to be performed, and incorporates Sherry & O'Leary's precise estimate as to the plumbing work that would have been performed. Quantum is as follows: P.J. Dick's Work P.J. Dick Direct Cost $121,089.00 P.J. Dick Overhead @ 15% 18,163.35 Subtotal 139,252.35 P.J. Dick Profit @ 8% 11,140.19 Total 150,392.54 Subcontracted Work Subcontracted work 25,560.00 P.J. Dick Commission @ 8% 2,044.80 Total 27,604.80 Totals Credit for P.J. Dick's Direct Cost 150,392.54 Credit for subcontractor's work 27,604.80 Subtotal 177,997.34 Less Settlement Expenses (1,040.00) Subtotal 176,957.34 Bond, Insurance and B&O Tax @ 1.912% 3,383.42 Total Credit $180,340.76 Decision The appeals are GRANTED IN PART. GSA is entitled to a credit of $180,340.76 for the termination for convenience of the basement work. ________________________________ ANTHONY S. BORWICK Board Judge We concur: ____________________________ _________________________________ STEPHEN M. DANIELS EDWIN B. NEILL Board Judge Board Judge