_______________________________________ GRANTED IN PART: December 13, 1994 _______________________________________ GSBCA 12335, 12384, 12527 FOREMOST MECHANICAL SYSTEMS, INC., Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. Thomas G. Jeter and Steven D. Olson of McKenna & Cuneo, Denver, CO, counsel for Appellant. Leigh Ann Holt, Office of Regional Counsel, General Services Administration, Denver, CO, counsel for Respondent. Before Board Judges PARKER, HYATT, and WILLIAMS. HYATT, Board Judge. Foremost Mechanical Systems, Inc. has appealed contracting officer decisions denying its claims for equitable adjustments and terminating for default its contract with respondent to perform modifications to ventilation systems in a federal office building located in Denver, Colorado. The three appeals filed by Foremost were consolidated for hearing and decision. The appeal docketed as GSBCA 12335 is from a contracting officer's decision denying appellant's claim for an equitable adjustment, in the amount of $7500, for certain roofing work considered by appellant to be outside the scope of its contract. GSBCA 12384 appeals a contracting officer's decision denying a miscellany of claims. Finally, GSBCA 12527 appeals the contracting officer's decision terminating Foremost's contract for default. For the reasons stated, we find that the termination for default was improper and grant that appeal. In the interest of judicial economy, the remaining claims presented by Foremost's appeals are resolved only to the extent necessary to provide guidance in determining the proper amount of Foremost's recovery under the termination for convenience, a matter to be addressed by further negotiations between the parties. Findings of Fact 1. Contract number GS-07P-91-JMC-0101 was awarded to Foremost Mechanical Systems, Inc., for a firm, fixed price of $92,640, on May 12, 1992. The contract required Foremost to modify existing heating, ventilation, and air conditioning (HVAC) systems in Building 14, Denver Federal Center, in Lakewood, Colorado. In addition, the contract required Foremost to construct an extension to the building and to provide new electrical service in an underground trench to the building from an existing electrical transformer.[foot #] 1 Appeal File, Exhibit 1, Specification and Bid Forms, Vol. III of III. 2. A preconstruction conference took place on May 20, 1992. The conference was held for the purpose of reviewing a checklist of items with the contractor and to answer any questions the contractor might have. One of the subjects discussed concerned the authority of various Government personnel and representatives, including the Government's management and inspection firm, Chen-Northern. Appellant's Exhibit 171; Transcript at 245-46. 3. The notice to proceed was issued on May 28 and received by Foremost on May 30, 1992. All of the contract work was to be completed within 110 days after contractor's receipt of the notice to proceed, or by September 17, 1992. Appeal File, Exhibit 5. 4. While performing work on the project, Foremost identified certain design issues, which it brought to the attention of the Government. Principally, these were as follows: 1) Foremost deemed the specifications for the main air handling unit (AHU-3) to be vague, ambiguous and internally conflicting; ----------- FOOTNOTE BEGINS --------- [foot #] 1 Specifically, the summary of work under the contract contained the following description of work to be accomplished: Modify existing HVAC, provide new air handling units, ductwork and controls, provide exhaust systems and fabricate workstations in Building 14. Excavate and construct extension of building to accommodate additions to the above systems. Replace existing ground and service entrance. Install new panel and provide lighting and power at workstations. Appeal File, Exhibit 1. ----------- FOOTNOTE ENDS ----------- 2) Foremost identified obstacles in the electrical trench that were not identified on the drawings; 3) Foremost determined that the drawings indicated the size of exterior walls to be smaller than they actually were; 4) The roof structure actually on the building differed from that depicted on the drawings; 5) Certain obstacles prevented installation of duct work as designed; 6) Foremost considered that the drawings and specifications were ambiguous with respect to contractual responsibility for the roofing membrane on the extension to the building; 7) The drawings failed to detail the face and by- pass damper on air handling unit number 4 so that it could be constructed; 8) Because of discrepancies in the drawings, the ductwork would not physically fit into the space as designed; 9) There was a discrepancy in the drawings as to the size of the main electrical panel and breaker which conflicted with the actual existing panel and raised safety and code concerns. Appeal File, Exhibits 8, 18, 35, 38, 156-57, 163. These issues were formally brought to the attention of the Government by Foremost. Transcript at 347-57; Appeal File, Exhibits 18, 163. Several Government witnesses conceded that the plans and specifications in fact contained defects. E.g., Transcript at 346, 523-24. Air Handling Unit Number 3 5. In a letter dated June 1, 1992, appellant advised the Government that the air handling unit number 3 as specified in the contract was not available. Appeal File, Exhibit 35. This was based on the specification in drawing M-4, which sought a unit that would provide 76,100 BTUs of heat rejection. Appeal File, Exhibit 1, Drawing M-4. In the industry, the specified BTU requirement is divided by 12,000 to derive the approximate tonnage of the unit. The tonnage for this unit would have been six and one-third or, rounded off, six and one-half. Transcript at 28, 592. Appellant's president testified that he thus based his bid on a six and one-half ton unit. Transcript at 26- 29.[foot #] 2 6. In addition to providing at least 76,100 BTUs of heat rejection, the unit was required to provide an airflow of 4000 CFM[foot #] 3 at altitude. Appeal File, Exhibit 1, Drawing M-4. Upon contract award, appellant's president looked into purchasing a compliant unit and discovered that a much larger unit than six and one-half tons would be required to obtain 4000 CFMs. Transcript at 26-29. Although Foremost was able to identify a unit that met the CFM requirement, that larger unit required adjustments to the specified ductwork and to the concrete footprint, or pad, on which the unit was to sit. In addition, the containment wall specified in the blueprints would not provide enough clearance for the larger unit. Transcript at 32-40. Accordingly, by letter dated June 16, 1992, appellant again notified the Government that it was experiencing difficulty locating a unitary roof-top unit that met the specifications for over-and-under ductwork and concrete pad size. Appeal File, Exhibit 8; Transcript at 41-42. Foremost took the position that this was a design defect for which the Government was responsible. Appeal File, Exhibit 8. 7. A manufacturer's representative for HVAC equipment explained that the tonnage and CFM requirements were correctly specified and were not internally inconsistent. Although the typical specification calls for 400 CFMs per ton, this relationship is applicable to units installed at sea level. The larger number of CFMs required was necessary because of the altitude and dry air in Denver.[foot #] 4 Transcript at 593-94; 599-600; see also Transcript at 357-60. ----------- FOOTNOTE BEGINS --------- [foot #] 2 Although Foremost's president priced his bid assuming that a six and one-half ton unit could be provided, he did not actually verify prior to bidding that a six and one-half ton unit that would meet all of the other specified characteristics actually existed. Transcript at 105-06. [foot #] 3 CFM refers to evaporator airflow expressed in cubic feet per minute. See Appeal File, Exhibit 148 at 13. ___ Essentially, this number reflects how much air the air handling unit delivers to the occupied space. Transcript at 592. [foot #] 4 The manufacturer's representative also testified that when appellant's president approached him about buying this air handling unit he contacted the Government engineer to verify the specifications. The engineer specifically wanted 76,100 BTUs and 4000 CFMs. Moreover, although the nominal BTU rating on a ten-ton unit would be 120,000 BTUs, actual performance in Denver's high-altitude, dry air climate would be considerably less than that, although it would exceed 76,100 BTUs. Transcript at 605-06. ----------- FOOTNOTE ENDS ----------- 8. It appears that the Government specification was initially designed around a particular unit manufactured by McQuay. The concrete pad and over and under ductwork specified on the drawings thus conformed to the dimensions of that unit. That unit was no longer available at the time that Foremost attempted to purchase air handling unit number 3, but had been superseded by a new McQuay model. Transcript at 364. 9. After considering available options, appellant's president initially proposed a Rheem unit. In order to install that unit, appellant needed the Government's approval to install side-by-side ductwork, rather than the over and under ductwork specified in the drawings. In addition, a larger concrete pad was required. Foremost proposed using the Rheem unit in a letter dated June 16, 1992. On July 22, 1992, the Government sent a letter to appellant stating, among other things, that the Rheem unit was acceptable. Nonetheless, appellant deferred the pouring of the concrete pad pending further clarification, and written confirmation from the contracting officer that the Rheem unit was acceptable. Appeal File, Exhibits 8, 39; Transcript at 108-20. 10. By letter dated September 4, 1992, the contracting officer notified appellant's president that the Government did not agree that the specifications for air handling unit number 3 were internally inconsistent. The Government took the position that appellant was required to provide a compliant unit. To the extent that an approved unit required adjustments to the concrete pad and ductwork, that was a cost to be absorbed by the contractor. Appeal File, Exhibits 41-42, 45, 47. 11. On August 26, 1992, appellant requested approval of a substitute McQuay unit it had identified as a possible alternative for the installation of air handling unit number 3. Appeal File, Exhibit 52. On September 11, 1992, the Government, through Chen-Northern, approved the substitution of the McQuay unit for the Rheem unit. Appeal File, Exhibit 58. 12. On September 23, 1992, Foremost received a drawing from the Government, prepared by the architect/engineer, and reflecting the dimensions and duct layout of the proposed Rheem unit. Appeal File, Exhibit 69. This prompted appellant to write again, on September 27, 1992, asking the Government to decide which unit it really wanted -- the McQuay unit with the original configuration or the Rheem unit with the new duct sizes and configuration. Appeal File, Exhibits 63-64. The contracting officer responded in a letter dated October 5, 1992: As with all GSA contracts, the government will not specify the product of a single manufacturer. Rather the specifications are written to set the criteria which may be met by the products of more than one manufacturer. It is your responsibility to submit a product for approval which meets or exceeds the requirements of a specification. You have now submitted two units, both of which have been approved by GSA. In order to avoid further delay, GSA suggests that you proceed with ordering the unit which you submitted most recently (McQuay model number CUR110G). It is our understanding that the McQuay unit will fit on the pad which you have already poured. . . . If you want to order and install a unit different from your most recent submittal, please submit the information required by your contract immediately. Appeal File, Exhibit 69. 13. On October 14, 1992, Foremost informed the Chen- Northern representative that the McQuay unit had been ordered. Appeal File, Exhibit 72. The McQuay unit arrived at the site on November 13, 1992. Appeal File, Exhibit 80. The Electrical Trench 14. The contract also required appellant to excavate a trench between the transformer station and the building. The drawings accompanying the specifications did not enumerate any obstacles in the ground where the trench was to be located. Appeal File, Exhibit 1; Transcript at 47-51. 15. In a letter dated July 22, 1992, appellant notified GSA's project manager of the situation: During the process of excavating the trench between Bldg 14 and the electrical power transformer, we have encountered numerous unanticipated obstacles, such as gas, sewer, electrical, telephone, and water lines, in addition to concrete foundation walls. These obstacles were not shown on the plans nor was any GSA representative able to offer us any information regarding the location of these utilities. The letter stated that appellant had undertaken repairs of damaged lines in order to facilitate continued usage, but had been not been able to reach the "depth of the trench as designated on the plans" because of the obstacles, which included old concrete foundations. In closing, the letter requested input from the Government "before we proceed any further." Appeal File, Exhibit 157; Transcript at 47-51; 210-11. Until the trench could be completed, Foremost's subcontractor was unable to proceed with installation of the electrical conduit. Transcript at 211. 16. Various discussions concerning the trench were held on site. Appeal File, Exhibits 62, 65, 67, 78, 112. Although the Government issued a modification to the contract on October 7, 1992, the portion of the modification that addressed the major issues relevant to the trench was cancelled. Appeal File, Exhibit 22. Instead, the Government requested Foremost to submit a pricing proposal by October 16, 1992. Foremost's proposal was not submitted until November 4, 1992, however. Appeal File, Exhibit 178. Negotiations concerning this change commenced on November 20. Appellant provided revised pricing information on November 25. No bilateral agreement was reached, as evidenced by exchanges of correspondence on the subject in early December 1992. Appeal File, Exhibits 84-85, 87, 91, 178. The electrical trench problems were not finally resolved until the issuance of unilateral modification number 5 to the contract on December 24, 1992. That modification provided in pertinent part: Provide PVC coated RGS conduit in lieu of PVC for new service from transformer. Bury RGS at a depth of approx. 18". Place on top of existing piping, conduit, etc. to the maximum extent possible. Do not remove existing concrete unless absolutely necessary. provide warning tape in trench. Appeal File, Exhibit 29.[foot #] 5 17. Foremost's electrical subcontractor testified that this resolution was communicated to it by Foremost on or about December 27, 1992. The change involved running a different type of conduit -- a rigid conduit with a PVC coating approved for underground installation. Because the rigid conduit was less susceptible to damage, it could be placed in a more shallow ditch. The subcontractor had to order the conduit, which required a lead time of seven to ten days. Transcript at 220-21. Exterior Wall Size 18. The blueprints provided that the contractor was to penetrate the east and west walls with sixteen- and eighteen-inch ductwork. On the west wall the contractor was also required to penetrate with a four inch conduit. Using the scale provided on the drawings, Foremost determined the walls to be eight inches thick. In fact, the walls were eighteen to twenty inches thick. Transcript at 56. ----------- FOOTNOTE BEGINS --------- [foot #] 5 Yet another modification concerning the trench was issued on January 29, 1993. Appeal File, Exhibit 32. ----------- FOOTNOTE ENDS ----------- 19. The thickness of the walls to be penetrated affects the cost of the drilling process. Foremost subcontracted this task to a core driller. Core drillers charge by the thickness of the wall, the elevation, and the diameter of the hole. Transcript at 57. 20. Foremost informed the Government of this discrepancy in a letter dated July 10, 1992. Appeal File, Exhibit 38. The problem was not resolved until unilateral modification number 6 was issued on December 24, 1992, increasing the price of the contract and extending the time for completion. Appeal File, Exhibit 30. Roof Structure 21. Under its contract, Foremost was required to repair and patch the roof where its work on the heating and ventilation systems made this necessary. Appeal File, Exhibit 1. The specifications and drawings represented that the existing roof was made of wood and that the new roof would also be made of wood. Appeal File, Exhibit 1. When Foremost commenced work in this area, it determined that the existing roof was actually made of steel. Transcript at 58-60. 22. In a letter dated September 25, 1994, appellant stated the following: While commencing with the work for a new roof addition we became aware of a vast discrepancy in the actual construction of the existing roof as opposed to what is shown on the plans. Consequently, we are seeking a change under the "differing site" clause. . . . We have informed Chen-Northern of this deviation from the prints, they did inspect the conditions, and then informed us, and we concur, that because of the possible changing weather conditions, we cannot leave the roof susceptible to moisture in any form. As a result we are continuing to make the necessary repairs, rather than waiting for any extended period of time, for the Contracting Officer to make a decision in this matter. Appeal File, Exhibit 18. 23. By letter dated October 5, 1992, the contracting officer addressed, inter alia, Foremost's concerns with respect to roofing materials. In that letter the contracting officer stated that "[i]f the actual construction of the existing roof differs from the conditions shown on the Construction Document, GSA and the contractor are bound" by the Differing Site Conditions Clause (Federal Acquisition Regulation (FAR) 52.236- 2). In addition, the contracting officer stated that: GSA will consider your letter dated September 25, 1992 as the written notice required by (a)[of the FAR clause]. Our M&I contractor for the project, Chen-Northern, was at the site on September 25, 1992, and observed minor discrepancies between the construction drawings and the actual construction of the existing roof. . . . GSA will assess the impact of the minor discrepancies, and an equitable adjustment to the contract will be issued in writing. Finally, with respect to this issue, the contracting officer pointed out that the specifications contained a clause requiring the contractor to provide temporary protective materials at the end of each day for exposed edges with respect to roof repairs, and indicated that no adjustments would be made for protection of unfinished roofing materials due to possible changing weather conditions. Appeal File, Exhibit 69. Ductwork Obstacles 24. After commencing work on the project, appellant determined that the ductwork depicted on the plans would not fit into the areas as shown because numerous obstacles were in the way. These included structural members in the walls, refrigeration pipe lines, water pipe lines, and other unidentified lines not shown on the plans or visible in the site inspection. Appellant formally notified the Government of the ductwork configuration problems in a letter dated June 16, 1992. Appeal File, Exhibit 8; Transcript at 62-64. Appellant again noted the existence of obstructions preventing installation of this ductwork in a letter dated July 11, 1992, sent to the project manager. Appeal File, Exhibit 142. Appellant informed the Government that it considered the problems concerning placement and size of ductwork to constitute differing site conditions. Appeal File, Exhibit 38. 25. Various efforts commenced thereafter to resolve these issues. The architect/engineer and Chen-Northern provided some clarifications in August and September 1992. Appeal File, Exhibits 48, 50. On-site discussions took place on October 6, 1992. On October 14, 1992, Chen-Northern acknowledged that a small portion of the redesign would not work. Appeal File, Exhibit 72; Transcript at 548, 567. On October 21, 1992, Chen- Northern, Foremost, and the sheetmetal subcontractor met to discuss problem areas with the ductwork. At this time, Foremost was asked to provide information needed to develop a solution. Thereafter, on October 26, Chen-Northern noted that some ductwork was in progress at the site. Appeal File, Exhibits 75-76. 26. On November 11, 1992, change request number 5 was issued with respect to the ductwork problems. Appellant was asked to provide a proposal by December 4, 1992. Appellant submitted a proposal by December 7, but did not provide the back- up documentation requested by Chen-Northern. Accordingly, negotiations did not proceed. Appeal File, Exhibits 146, 178. The remaining ductwork problems were resolved in unilateral modification number 6 to the contract, which was issued on December 24, 1992. The modification completely rerouted the ductwork. Appeal File, Exhibit 30. Contractual Responsibility for the Roof 27. The specifications and drawings set forth roofing requirements applicable to this contract. Appeal File, Exhibit 1. With respect to areas on the existing roof, drawing A-1 provides for the removal of equipment and curbs, cutting and patching of openings, and installation of new roofing to match existing roof. General note 10 on drawing A-1 calls for the abatement of asbestos in roofing material and for the tie-in of new roofing material to ensure a watertight seal. Drawing A-2 directs the installation of a new roof over the new building addition, to match the existing roof. Section 07511 of the specifications requires the contractor to provide an asphalt built-up roofing system and prescribes the installation process. Appeal File, Exhibit 1. 28. In addition, the drawings and specifications note the possible presence of another contractor on the site performing a contract to replace the existing multi-ply built-up roof and instruct the contractor to coordinate with the roofing contractor. This clause was added to appellant's contract because at the time there was a possibility that the two c o n t r a c t o r s w o u l d b e o n t h e j o b simultaneously.[foot #] 6 Appeal File, Exhibit 1. 29. In a letter dated June 16, 1992, appellant informed the Government that the clause stating the potential existence of another roofing contractor had led appellant to believe that no ----------- FOOTNOTE BEGINS --------- [foot #] 6 In particular, paragraph 3.02 under Section 01010 of the specifications provided: 3.02 COORDINATION WITH OTHER CONTRACTORS ON SITE: COORDINATION WITH OTHER CONTRACTORS ON SITE 1. Roof Replacement - The existing multi-ply, built-up roof may be in the process of being replaced during the term of this project. Coordinate with roofing contractor to allow both construction projects to proceed in a timely fashion. Appeal File, Exhibit 1. ----------- FOOTNOTE ENDS ----------- roof repair work would be required under its contract. Appeal File, Exhibit 8. 30. In fact, the roof repair contract had been delayed and was not in place at the time that Foremost was performing its contract to install the new rooftop HVAC units. In a letter dated September 4, 1992, the Government instructed Foremost to proceed with the work described on drawings A-1 and A-2. Foremost performed this work, but submitted a claim for additional costs, asserting that this work was beyond the scope of its contract. In a letter dated November 22, 1992, Foremost formally requested a "final decision" from the contracting officer with respect to its claim that it was entitled to an equitable adjustment in the amount of $7500 to cover expenses of roof repairs that Foremost contended should have been performed by another contractor, as well as repairs that did not conform to what was shown on the drawings. Appeal File, Exhibit 26. 31. By letter dated December 11, 1992, the contracting officer denied this claim. Appeal File, Exhibit 28. Face and Bypass Detail 32. The contract required Foremost to construct a face and bypass damper in connection with the installation of air handling unit number 4. The blueprints, however, although clearly referencing the need to construct the damper, did not, in appellant's opinion, provide a usable detail showing how the construction should be accomplished. Transcript at 71-74. 33. Appellant wrote a letter notifying the Government of this problem on September 17, 1992, and requesting a clarification of the face and bypass detail assembly. Appeal File, Exhibit 163; Transcript at 74. In a second letter, dated September 23, 1992, appellant specifically requested a detail for the arrangement of the face and bypass damper be provided by the Government. Appeal File, Exhibit 143. 34. In a letter dated October 15, 1992, appellant acknowledged that a detail of the face and bypass damper arrangement had been provided by the Government on September 30, 1992. Appeal File, Exhibit 73. 35. The contracting officer subsequently, in a letter dated December 10, 1992, confirming the advice of Chen-Northern, informed appellant that the requirement for a face and bypass damper did not constitute a change. Appeal File, Exhibit 90. On January 8, 1993, appellant requested a redesign of the detail. The redesign was provided on January 12, 1993. Appeal File, Exhibits 104, 108. Electrical Panel Design Deficiencies 36. The specifications required that a 350-amp breaker be installed into the existing main electrical panel. The existing main panel, however, was rated for only 250 amps. When Foremost's electrical subcontractor informed appellant that this violated applicable fire codes, Foremost passed this information on to the Government in a letter dated July 13, 1992. Transcript at 79; Appeal File, Exhibit 156. 37. Foremost's electrical subcontractor testified that the defects in the drawings involving the trench and the electrical panel effectively prevented performance of work in this area. It was possible to do a few things, such as relocate fire alarm conduits and wire, but the bulk of the work had to be postponed until the issues identified to the Government were resolved. In fact, outstanding issues such as the location of duct work also slowed electrical work because it is an industry standard to install duct work first and then run electrical conduits. Transcript at 216-18. 38. In contract modification 6, issued on December 24, 1992, the Government directed Foremost to install a new electrical panel sufficient to accommodate a 400-amp breaker. Appeal File, Exhibit 29; Transcript at 80. Foremost informed its subcontractor of the change. This size panel had to be custom built, although the turn- around was fairly quick -- one to two weeks. Transcript at 221-22. Effect of Problems Identified by Foremost 39. In a letter to the project manager, written on July 25, 1992, Foremost initially advised the Government that certain work under the contract had come to a standstill and could proceed no further until direction from the Government was forthcoming. Transcript at 81; Appeal File, Exhibit 9. 40. Regardless of the resolution of the various issues raised by Foremost, both Foremost and various Government witnesses testified that virtually all of the work that could be completed prior to the issuance of the modifications issued on December 24, 1992, had been completed by Foremost. Transcript at 81-88, 98, 218, 678-79. 41. On December 24, 1992, the Government issued change orders 5 and 6. Although the change orders taken together recognized that approximately ninety-four days were required to complete the modified work, the change orders computed time from October 1, 1992, rather than from the date the modifications were issued. The contracting officer agreed that sixty-four days of extension on a 110-day contract amounted to a "fairly substantial change."[foot #] 7 Transcript at 254. Nonetheless, because the time extensions were computed from October 1, the modifications only extended the date to complete to January 3, 1993, a period of ten calendar days. Appeal File, Exhibits 29- 30. Within these ten days were included two weekends and two holidays. Transcript at 255. The contracting officer testified that this was not a reasonable amount of time in which to complete the remaining work. Transcript at 255-56. 42. Upon receiving the change orders, Foremost promptly began to mobilize the necessary materials and equipment. Transcript at 427-28; Appeal File, Exhibits 94, 99. Nonetheless, some of the changes required fabrication time, and involved lead time for ordering supplies prior to installation at the site. Transcript at 428. The Termination for Default Action 43. The default clause in Foremost's contract provided as follows: (a) If the Contractor refuses or fails to prosecute the work or any separable part, with the diligence that will ensure its completion within the time specified in this contract including any extension, or fails to complete the work within this time, the Government may, by written notice to the Contractor, terminate the right to proceed with the work (or the separable part) that has been delayed. In this event, the Government may take over the work and complete it by contract or otherwise, (b) The Contractor's right to proceed shall not be terminated nor the Contractor charged with damages under this clause, if -- (1) The delay in completing the work arises from unforeseeable causes beyond the control and without the fault or negligence of the Contractor. Examples of such causes include . . . (ii) acts of the Government in either its sovereign or contractual capacity. . . . ----------- FOOTNOTE BEGINS --------- [foot #] 7 The contracting officer who signed the change orders was not the contracting officer who actually monitored this contract; the change orders were signed by a substitute for that contracting officer, who was out of the office that day. The contracting officer who testified at the hearing was the individual who had contract administration responsibilities for the Foremost contract. Transcript at 248-53. ----------- FOOTNOTE ENDS ----------- Appeal File, Exhibit 1. 44. On January 4, 1993, the contracting officer issued a show cause letter to Foremost stating that the Government was considering terminating the contract for default because of failure to perform within the time prescribed for performance. Foremost was given ten days to respond in writing with any facts relevant to whether the failure to perform arose from causes beyond its control and without negligence on its part. Appeal File, Exhibit 100. 45. On January 10, 1993, Foremost responded to the Government's show cause letter pointing out that various issues had been raised by appellant during performance, such as differing site conditions, changed work, and defective specifications. Foremost asserted that the Government's delay in resolving these issues had largely contributed to overall delays in contract completion, and stated that the extension of time, from December 24, 1992 through January 3, 1993, was wholly inadequate to permit completion of the work as modified by change order PC05, PC06, and PC07. Appeal File, Exhibit 106. 46. On January 20, 1993, the contracting officer prepared a memorandum for the file. In reviewing appellant's response to the show cause letter, the contracting officer concluded that any delays had been adequately addressed by modifications and that no excusable delay existed so as to justify failure to complete the work by the contract deadline. Appeal File, Exhibit 113. 47. In a letter dated January 21, 1993, the contracting officer formally terminated the contract for default. This letter stated that Foremost "failed to perform under the terms of the contract" and that its failure to do so was inexcusable. Specifically, the stated reason was that, despite extensions of the contract time for performance of 108 days (from September 17, 1992 through January 3, 1993), Foremost had still not completed work under the contract. The contracting officer cited the following acts or omissions that contributed to the default: 1. Foremost has requested clarification of issues and then continued to delay performance by failing to proceed when clarifications have been provided. Specifically, failure to proceed with roof repairs and ductwork fabrication and installation caused additional delays. 2. Foremost has delayed performance by failing to order air handling unit #3 (AHU#3) in a timely manner. Following written clarification of contract requirements and GSA approval of two different units, Foremost continued to delay ordering AHU#3 until specifically directed to by the Contracting Officer. This resulted in further delay to contract completion. 3. Foremost has been uncooperative in providing required pricing information to facilitate negotiation of change requests numbers 3 and 5 thereby increasing contract delay. 4. Foremost has failed to diligently pursue the performance of this contract. Extended periods of time elapsed when no work was performed and no contractor personnel were present at the job site. Appeal File, Exhibit 114. 48. After Foremost's contract was terminated for default, the Government conducted a reprocurement. In connection with the reprocurement, a justification for other than full and open competition was prepared and approved on January 29, 1993. Appeal File, Exhibit 123. A solicitation was issued to five prospective offerors on February 1, 1993. The offers received in response to the solicitation were opened on February 12, 1993. Appeal File, Exhibits 124-25. 49. After the conduct of negotiations, All Area Construction was selected for award, in the amount of $82,480, on March 2, 1993. The new contractor was given forty-five days to complete the work. Appeal File, Exhibit 133, 135; Transcript at 258. The reprocurement contractor took forty-three days to complete the project. Following issuance of the modifications on December 24, 1992, Foremost had worked for twenty-eight days prior to its termination. In total, then, it took seventy-one days to perform the modified work. Transcript at 258-60. 50. In a letter dated July 21, 1993, the contracting officer made demand for payment of excess reprocurement costs against Foremost. Appeal File, Exhibit 136. Discussion These appeals raise several issues, the principal one being whether the Government's action in terminating Foremost's contract for default was proper. In addition, Foremost has appealed two contracting officer decisions responding to claims for equitable adjustments to the contract price and time for completion which are inextricably intertwined with the default termination action. The claims for equitable adjustments were presented to the contracting officer for decision prior to the issuance of the default termination action, and were decided by the contracting officer at approximately the same time as the default termination decision was made. Appellant appealed these decisions to the Board within ninety days of receiving them. As discussed below, Foremost's appeal of the contracting officer's decision terminating its contract for default is sustained, thus converting that action to a termination for the convenience of the Government. Once it is determined that the contract was improperly terminated for default, appellant's monetary recovery is governed by the termination for convenience contract clause and the pertinent regulations. Foremost has not yet presented a termination proposal to the contracting officer for decision.[foot #] 8 As such, the amount of Foremost's recovery is not properly before us. The equitable adjustment issues presented in Foremost's first two appeals are thus to a large extent mooted by the conversion of the default action to a termination for the convenience of the Government. See Nolan Brothers, Inc. v. United States, 405 F.2d 1250 (Ct. Cl. 1969); PBI Electric Corp. v. United States, 17 Cl. Ct. 128 (1989). The facts presented in these appeals bear on the propriety of the default termination, however. In addition, Foremost may be entitled to an adjustment to its contract price in negotiating convenience termination costs.[foot #] 9 These appeals are thus also addressed for the purpose of providing guidance to the parties with respect to any adjustments to be made to the contract ceiling. GSBCA 12335 - Roof Repairs In a letter dated November 22, 1992, Foremost requested a "final decision" from the contracting officer with respect to its claim that it was entitled to an equitable adjustment in the amount of $7500 to cover expenses of roof repairs that Foremost contended should have been performed by another contractor. Finding 30. The gist of Foremost's contention is that the statement in the specification notifying the HVAC contractor that another contractor would be replacing the roof, and directing the HVAC contractor to coordinate repairs with that contractor, was construed by Foremost to mean that the other contractor would perform all the roofing work and that Foremost's entire ----------- FOOTNOTE BEGINS --------- [foot #] 8 We are not free to decide the amount of Foremost's recovery merely because the default termination action is presently before us. A certified convenience termination claim must have been presented to the contracting officer for decision in order for the Board to take jurisdiction. This is the case even though evidentiary proof presented in the default termination action may be identical to proof required to recover termination costs. SGW, Inc. v. United States, 20 Cl. Ct. 174, ___________________________ 177 (1990). [foot #] 9 Under the termination for convenience clause and applicable regulations, Foremost is entitled to recover its actual and allowable costs of work prior to the termination, limited to the total contract price. Maitland Bros., ASBCA ______________ 43088, 93-3 BCA 26,007, at 129,304. ----------- FOOTNOTE ENDS ----------- responsibility was to "coordinate" with that contractor.[foot #] 10 It is a basic tenet of contract construction that any interpretation adopted should, if possible, give meaning to all of the terms of the contract. E.g., Blake Construction Co. v. United States, 202 Ct. Cl. 794 (1973); Hol-Gar Mfg. Corp. v. United States, 351 F.2d 972 (Ct. Cl. 1965). Here, looking at the terms applicable to roofing matters as a whole, it is clear that the proper interpretation is that advanced by the Government -- that Foremost was to accomplish the roofing repairs described in the contract, while coordinating, to the extent necessary, with any roofing contractor that might be on the job at the same time as Foremost. Findings 27-28. Appellant's interpretation would render meaningless provisions in the blueprints containing instructions to the contractor as to roofing matters. Thus, this appeal is denied.[foot #] 11 GSBCA 12384 -- Other Equitable Adjustment Claims This appeal contests the contracting officer's decision rejecting Foremost's claims for pricing adjustments and extensions of time as a result of various design deficiencies, constructive suspensions of work, and differing site conditions. Specifically, Foremost's complaint in this appeal references disputes concerning air handling unit number 3, the differing wall thicknesses which impacted on core drilling, design deficiencies concerning the electrical distribution panel, the failure to detail the face and bypass damper on the drawings, the obstacles encountered in digging the electrical trench, and discrepancies in drawings depicting duct installations where it would be physically impossible to install ducts. ----------- FOOTNOTE BEGINS --------- [foot #] 10 In a footnote in its post-hearing brief, Foremost suggests that it no longer seeks a modification to the contract for issues raised in connection with disagreements over contractual responsibility for roofing repairs. This appeal has not formally been withdrawn by appellant, however, so that appellant's position is not altogether clear. The record on this appeal has been developed and entitlement to a contract modification for changed work could affect the adjusted contract ceiling for purposes of determining the proper amount to be awarded appellant under the termination for convenience. Accordingly, in the interest of judicial economy, we decide this appeal. [foot #] 11 To the extent that Foremost is entitled to an equitable adjustment to its price as a result of the fact that the roof structure was shown as wood, and turned out to be steel, we note that the Government has acknowledged that some adjustment may be warranted. See Finding 23. This is a matter to be resolved in the context of negotiating an appropriate termination settlement amount. ----------- FOOTNOTE ENDS ----------- We are not persuaded that the facts in the record materially support Foremost's contentions with respect to the air handling unit, in particular. Although Foremost was not able to locate a unit that precisely fit the minimum specifications stated by the Government, we think the Government has properly pointed out that these specifications simply set forth minimum requirements that had to be met. Moreover, any discrepancy in "standard" formulaic relationships of BTUs and CFMs was fully explained. Finding 7. There was more than one unit available that satisfied the minimum criteria for 76,000 BTUs and 4000 CFMs. Foremost mistakenly assumed in bidding that it would be safe to use the tonnage specification as a shortcut for determining the cost of the air handling unit. In the context of a firm-fixed price contract, this is a bidding risk that is borne by the contractor in the absence of a mistake in the specifications. The preponderance of the evidence establishes that the specifications as stated could be satisfied by various units, even though some minor modifications to the concrete pad and ductwork might have been necessary to install the unit eventually purchased by Foremost. Although Foremost was entitled to inquire of the Government if it would make adjustments to the blueprints to accommodate the unit it selected, the record does not support a conclusion that the Government was unduly dilatory in responding to Foremost's inquiries concerning whether the Government would approve a particular unit or permit modifications to the footprint, the ductwork, or other ancillary items dependent on the air handling unit selected. Thus, while Foremost may include costs related to the installation of the air handling unit in its convenience termination settlement proposal, see Maitland Bros., ASBCA 30089, et al., 90-1 BCA 22,367, at 112,388 (1989), these costs do not provide a basis for increasing the contract price that limits Foremost's recovery. With respect to electrical issues, the record supports Foremost's contention that, in at least some significant respects, the Government failed to provide it sufficient guidance to permit it to continue with the work. Foremost could not install a conduit in the trench because it was not able to dig to a sufficient depth so as to comply with code and safety requirements. The electrical work could not proceed until a determination was made with respect to the required size of the panel to be installed. The same rationale is applicable to the ductwork configurations as well. It is not disputed that the ductwork required revisions; final solutions to the issues raised by Foremost were not forthcoming until the issuance of modifications 5 and 6. Ultimately, the Government did not resolve these problems until the issuance of the unilateral modifications on December 24. Although the Government argues that the delay in issuance of a modification is partially attributable to Foremost's delinquency in providing pricing proposals, these delays were for relatively short time spans in the overall scheme of events. The record establishes that Foremost had in fact performed to the extent that it could prior to that time. Absent explicit directions from the Government as to how to proceed, Foremost could not reasonably be expected to assume the risk that the work it did might not be approved. GSBCA 12527 -- Termination for Default The Government's rationale for terminating the contract for default is that Foremost failed to perform the work in the amount of time allowed under its contract. Specifically, the Government asserts that Foremost was itself responsible for most of the delay that occurred in the performance of this contract. Thus, the Government asserts that the default termination action is justified not merely because appellant failed to complete the work by January 3, 1993, but principally because appellant failed from the outset of contract performance to diligently proceed with the work. It is well-settled that a termination for default is a drastic sanction, to be imposed upon a contractor only for good cause and on the basis of solid evidence. DeVito v. United States, 413 F.2d 1147 (Ct. Cl. 1969); J.D. Hedin Construction Co. v. United States, 408 F.2d 424, 431 (Ct. Cl. 1969); A.J.C.A. Construction v. General Services Administration, GSBCA 11541, et al., 94-2 BCA 26,949, at 134,203. Default terminations are strictly construed. DeVito, 413 F.2d at 1153. It is, moreover, the Government's burden to prove, by a preponderance of the evidence, that the termination for default was proper. Lisbon Contractors, Inc. v. United States, 828 F.2d 759 (Fed. Cir. 1987). In evaluating whether the Government is justified in exercising its right to terminate a contract for default, we look to the facts and circumstances giving rise to the termination. In this case, the Government has not sustained the burden of persuasion that the default termination of Foremost's contract was warranted. A good portion of the delay pointed to by the Government as supporting its decision to terminate the contract for default is excusable, largely due to the numerous requests made by Foremost for clarification and guidance as to how to proceed. Admittedly, not all of Foremost's complaints and inquiries were justified, and some portion of the delay that occurred in completion of contract work is attributable to Foremost. Nonetheless, a number of the issues raised, most notably the request for clarification of the electrical issues and the need for redesign of the installation of ductwork, and to some degree the unresolved issues regarding the face and bypass damper detail, required resolution by the Government. Although not all of the issues for which clarification was sought gave rise to an entitlement to an equitable adjustment to the contract price, it was nonetheless appropriate for Foremost to seek the Government's advice and clarification on how it should proceed. As appellant points out, the quantity and diversity of problems that arose, in the context of the small size and short duration of this contract, essentially brought work to a standstill until resolved. Although appellant's performance was by no means perfect, on balance, the record does not support the Government's decision to terminate for default on the basis of delays attributable to Foremost. See E.L. David Construction Co., ASBCA 29225, et al., 89-3 BCA 22,140, at 22,140; see also Singleton Contracting Corp., GSBCA 8552, 90-1 BCA 22,298, at 111,983 (1989). When all is said and done, many of the inquiries posed by Foremost were not effectively resolved until the issuance of the two contract modifications on December 24, 1992. The record supports Foremost's contention that it had in fact completed all of the work it could without receiving further direction from the Government. Foremost was justified in suspending work pending the receipt of directions from the Government, clarifying how it should proceed. See, e.g., Maitland Bros. Co., ASBCA 30089, et al., 90-1 BCA 22,367, at 112,387 (1989); Kahaluu Construction Co., ASBCA 31187, 89-1 BCA 21,308, at 107,465 (1988); see also William A. Hulett, AGBCA 91-230-3, et al., 93-1 BCA 23,289, at 126,457 (1992); Milwaukee Transformer Co., ASBCA 10814, 66-1 BCA 5570; cf. Singleton Contracting Corp., 90-1 BCA at 11,983 (Government instructed contractor to stop work until authorized to proceed, failed to approve changes necessary to complete the contract, never subsequently authorized the contractor to proceed, but nonetheless terminated for default). Moreover, the issuance of two significant modifications, long after the expiration of the contract date for completion of the project, effectively recognized that the earlier completion date was no longer applicable. Having issued the modifications, the Government was obligated to establish a reasonable time for completion of remaining work. See Wickham Contracting Co., IBCA 1301-8-79, 86-2 BCA 18,887, at 95,283. The preponderance of the evidence on this subject suggests that the remaining work would require at least sixty to ninety days to be accomplished. Finding 41. Once Foremost left the site, some twenty-eight days after issuance of the modification, the reprocurement contractor completed remaining contract work in forty-three days. Nonetheless, in effect, the Government gave Foremost only ten calendar days, most of which fell during the Christmas holiday period, in which to complete all of this work. Clearly, this was a hopeless endeavor for Foremost. As the testimony established, it was not even possible to obtain some of the necessary items to be installed within this time frame, let alone to actually install them. See Finding 17. Under these circumstances, the default termination simply was not justified -- the time established for completion was not reasonable. Since the default termination was improper, it must be converted to one for the convenience of the Government. Having concluded this, we need not consider whether the reprocurement was conducted properly because the Government is not entitled to assess reprocurement costs against Foremost. Decision The appeals are decided as follows: GSBCA 12335 is DENIED; GSBCA 12384 is GRANTED IN PART, DENIED IN PART, and MOOTED IN PART; GSBCA 12527 is GRANTED. The termination for default is converted to a termination for the convenience of the Government. _____________________________ CATHERINE B. HYATT Board Judge We concur: _______________________________ ______________________________ ROBERT W. PARKER MARY ELLEN COSTER WILLIAMS Board Judge Board Judge