__________________________ DENIED: November 22, 1995 __________________________ GSBCA 12741 POWER CONTRACTING AND ENGINEERING CORP., Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. Paul Hansfield of Fuchs & Roselli, Chicago, IL, counsel for Appellant. Gerald L. Schrader, Office of General Counsel, General Services Administration, Washington, DC, counsel for Respondent. Before Board Judges DANIELS (Chairman), VERGILIO, and DeGRAFF. DeGRAFF, Board Judge. The General Services Administration (GSA) and Power Contracting and Engineering Corp. (PCEC) entered into a contract for the renovation of a building. A dispute developed between the parties concerning fireproofing material, and PCEC requested that GSA adjust the contract price. GSA decided that no adjustment was warranted, and this appeal followed. We deny the appeal, for the reasons set forth below. Findings of Fact Part of each floor deck of the Everett M. Dirksen Federal Building in Chicago, Illinois is divided by steel beams into a grid containing 7' x 28' sections. The structural framing of each of these sections consists of a metal deck covered with concrete. Exhibit 91. The metal deck is made up of rows of hollow cells which are used as passageways for wires and cables for electrical, telephone, and other systems. Penetrations exist in the cells of the deck and the concrete so that the wires and cables can run up out of the cells to where they are needed. Exhibit 90. A lined penetration is called an insert. An unlined penetration is a hole. Usually, a fitting can be attached to an insert either to complete an electrical device, for example, or to serve as a cap to close the penetration. A "classified" or "rated" insert is one which has been rated by Underwriters Laboratories (UL) for fire resistance and which has a fitting attached. An unclassified insert is any other type of insert. Inserts can be either preset, which means they are made at the time the deck is constructed, or afterset, which means they are made after the deck is constructed and the concrete is poured on top of the deck. Complaint, Attachment 3. The Dirksen Building is thirty years old and has been altered many times, and penetrations in the deck are normal and to be expected. Exhibit 87. On January 28, 1991, GSA issued solicitation GS-05P-91-GBC- 0048 for the second phase of the renovation of the Dirksen Building. Exhibit 1. According to the technical specifications, the second phase contractor would be required to spray fireproofing material onto the underside of the floor decks in whatever thickness was needed to achieve specified fire resistance ratings. The solicitation required the contractor to provide a letter from UL stating UL's recommended thickness of the contractor's fireproofing material. The solicitation provides, "Only letters provided by Underwriters Laboratories referencing this project are acceptable." Exhibit 1 at 1504-05, 1511. Most of the work required by the solicitation was to be performed on the second, third, fourth, fifth, eighth, fourteenth, fifteenth, and sixteenth floors, although some work was required on several other floors as well. Exhibit 1 at 115. The thickness of fireproofing material needed to achieve a particular fire resistance rating is affected by the types of penetrations found in a floor deck. Exhibit 1 at 1705; Exhibit 18. The thickness of fireproofing within a grid section has to be uniform. The presence of a single unclassified insert in a grid section requires either applying the maximum thickness of fireproofing material over the entire section, or installing a classified insert and applying a thinner coating of fireproofing material. Exhibits 87, 88, 91. The solicitation contains many requirements in addition to those for sprayed-on fireproofing material. The contractor was to perform demolition, asbestos removal, plumbing, electrical, mechanical, and construction work. The technical specifications provide that the contractor would be required to coordinate the work of different subcontractors. Exhibit 1. L.B. Hall Enterprises, Inc. (Hall) was the fireproofing subcontractor for the first phase of the Dirksen Building renovation. Hall applied sprayed-on fireproofing material to decks on two floors of the building. Exhibit 90. The contractor who performed the first phase of the Dirksen Building renovation installed rated inserts into holes found in the decks, which meant that Hall was able to apply a thinner coat of fireproofing material than would have been required if no inserts had been installed. Exhibit 87. On April 15, 1991, Hall submitted a bid to PCEC to provide sprayed-on fireproofing material manufactured by Structural Coatings, Inc. (SCI) for the second phase of the renovation. Exhibit 77. When Hall submitted its bid to PCEC, GSA had not yet awarded a contract. Accordingly, no demolition had begun and the floors were covered with carpet, which meant that Hall could not inspect the decks to determine where penetrations were located. Exhibits 88, 89. On May 6, 1991, UL wrote to a product manager at W.R. Grace & Company (Grace). Grace is a manufacturer of sprayed-on fireproofing material. In its letter, UL made certain assumptions about the construction of the floor deck units, and provided Grace with an opinion concerning the work required to achieve the fire ratings specified in the solicitation. In UL's opinion, the thickness of Grace's sprayed-on fireproofing material would depend upon the type of penetrations in the deck. Sections with unclassified penetrations would require thicker material than areas with classified penetrations. On May 7, 1991, the Grace product manager wrote to Grace's sprayed-on fireproofing specialist in the Chicago area. The product manager concluded that, in order to provide the fire rating specified in the solicitation, the greatest thickness of sprayed-on fireproofing material mentioned in UL's letter would have to be applied to the project's decks. These letters were provided to GSA by Grace. Exhibits 72, 73. Amendment 7 to the solicitation, which was issued on May 15, 1991, provides information concerning existing conditions at the Dirksen Building. Among the existing conditions is this: "A combination of unclassified electrical insert [sic] and UL Classified Walker Type 446X afterset inserts." Amendment 7 also states that UL had determined that the required fire resistance ratings could be achieved by applying different thicknesses of fireproofing material depending upon whether a grid section contained no inserts, classified inserts, or unclassified inserts. The information concerning the thicknesses of material was taken directly from UL's May 6, 1991 letter to Grace. Exhibit 1 at 1705; Exhibit 72. No drawings were available to show the location of the inserts described in Amendment 7. Exhibit 90. Hall assumed that the inserts mentioned in Amendment 7 were shown on the solicitation's telephone and electrical drawings, and that additional openings or holes would be filled by someone other than Hall. Hall also assumed that approximately two-thirds of each floor had no inserts and that one-third of each floor would require an additional thickness of fireproofing material, due to the presence of inserts. Exhibits 24, 51. Hall planned to apply 3/4 inch of fireproofing in areas with no inserts. Hall made some unspecified allowance for applying 13/16 inches of material to cover areas with classified inserts. Exhibit 90. GSA awarded the second phase renovation fixed price contract to PCEC on June 19, 1991. Exhibit 2. GSA also entered into a contract with Lohan Associates, Inc. (Lohan) to serve as the architect-engineer for the contract. Lohan was supposed to observe PCEC's work and to advise GSA whether PCEC and its subcontractors were complying with the contract; to respond to questions from PCEC and its subcontractors which could readily be answered by referring to contract requirements, but not to interpret the contract; to make recommendations to the contracting officer concerning change orders and time extensions; and to review PCEC's submittals. Complaint, Attachment 1. On August 13, 1991, Hall entered into a contract with PCEC to apply sprayed-on fireproofing on six entire floors (third, fourth, fifth, fourteenth, fifteenth, and sixteenth floors) and parts of eight other floors. Exhibits 49, 51. On August 20, 1991, Hall sent PCEC a letter proposing to install SCI's SprayDon Standard JN Mineral Fiber sprayed-on fireproofing material, and to apply that material in accordance with the manufacturer's recommendations and in a thickness of 3/4-inch under the floor deck. Exhibit 83. On August 23, 1991, PCEC notified Lohan that there were numerous holes in the concrete floor extending into the cellular deck, and that these holes did not have outlets or afterset inserts and could not be capped. PCEC asked Lohan what to do about these holes. On September 13, 1991, PCEC told Lohan that, on the third and fourth floors, there were sixty-seven holes without inserts and sixty-two "holes with parts missing." The record is unclear as to what constitutes "holes with parts missing." On December 16, 1991, Lohan recommended to GSA that it adjust the contract price and direct PCEC to provide the required electrical component materials to seal the cellular floor. Exhibit 75. In January 1992, the parties signed CE5002, in which they agreed to a contract modification addressing several items. Item 5 adds work which is described as, "Provide metal caps and inserts for floor duct system. Unforseen conditions only." Item 5 lists the quantities as sixty-seven holes without inserts and sixty-two holes with parts missing on the third and fourth floors. Exhibit 62. Over a period of several months, UL provided letters to SCI concerning the thickness of SprayDon that would be needed to achieve fire resistance ratings in decks of the type found in the Dirksen Building. UL's letters, however, assume that the decks would contain only classified inserts. Lohan rejected several of PCEC's fireproofing submittals because, among other things, PCEC provided no information addressing unclassified inserts. Exhibits 7, 13, 14, 16, 18, 20. On February 10, 1992, a meeting was held to discuss PCEC's fireproofing submittals. The meeting was attended by representatives of GSA, PCEC, Hall, SCI, and Lohan. Lohan asked for clarification of the thickness of material required when unclassified abandoned inserts were present. Hall stated that it had not addressed this issue and would seek clarification from UL. Exhibit 21. On February 13, 1992, UL responded to a question posed by SCI. According to UL, SCI stated that the floor decks contained afterset inserts, which could be "activated" by screwing a fitting into the threads of the insert. UL concurred with SCI that, in these areas, 1-1/4 inch of SCI's sprayed-on fireproofing material would be needed to maintain the fire rating required by the specifications. According to UL, SCI also stated that some of the penetrations would be filled with concrete. UL concurred with SCI that, in these areas, 3/4 inch of material would be needed to maintain the required fire rating. On February 13, 1992, Hall transmitted this UL letter to PCEC. Exhibit 77. On March 17, 1992, Hall wrote to PCEC. Hall stated that the fourth floor deck contained many openings in addition to "specified" electrical inserts, and that a PCEC employee had directed Hall to apply fireproofing material on the fourth floor deck at a uniform thickness of 1-1/4 inch. Hall advised PCEC that this order would result in an added cost of $13,300. Exhibit 24. On April 1, 1992, Hall again wrote to PCEC. Hall stated that it "took exception to" holes and openings which were disclosed after demolition. Hall pointed out that UL's February 13, 1992 letter permitted PCEC to fill all openings and holes, and that this would have permitted Hall to apply 3/4 inch of fireproofing material instead of 1-1/4 inch of material. Hall asked that PCEC submit a claim to GSA for its additional cost of applying added fireproofing material to the fourth floor deck. Exhibit 25. Work on the third and fourth floors was completed by PCEC in June 1992. Exhibit 87. Both the March 17 and April 1, 1992 letters show that copies were supposed to be sent to Lohan. Exhibits 24, 25. A field report prepared by Lohan on September 22, 1992, says that PCEC was to begin demolition on the fourteenth floor soon, and that Lohan looked at the cellular deck and verified that all signal, power, and telephone covers were in place. A field report prepared by Lohan on September 24, 1992, says that PCEC was to begin work on the fifteenth floor soon, and that Lohan verified that all signal, power, and telephone covers were in place in the cellular deck. Exhibit 26. A GSA employee and a Lohan employee had the opportunity to view some of the fourth and all of the fourteenth and fifteenth floors after the carpet was removed and before demolition work was performed by PCEC. They observed nothing that they considered to be a differing site condition. All items documented in the Lohan field reports were in place. Exhibits 87, 92. When PCEC installed floor coverings on the third, fourth, fifteenth, and sixteenth floors, Lohan observed that the floors were level and that there were no penetrations. Exhibit 59. According to Hall, as a result of demolition, hundreds of openings were made in the floor decks. This caused to appear abandoned inserts which were not in existence at the time of bidding. Exhibit 90. A former Lohan employee explained that PCEC's demolition subcontractor removed and discarded the classified and unclassified inserts which had capped existing penetrations in the deck, although this was not part of the contract's demolition requirements. By the time Hall arrived to perform its work, the previously existing conditions had been changed radically by the demolition subcontractor. The electrical subcontractor installed inserts after Hall completed its work. Exhibit 92. On December 1, 1992, PCEC wrote to Lohan and requested an adjustment to the contract price to compensate for the additional material and labor required to increase the thickness of fireproofing material on the decks of the fourth, fifth, sixth, fifteenth, sixteenth, and seventeenth floors. PCEC stated that this work was necessary because of the existence of hundreds of holes and unclassified inserts. PCEC claimed that the presence of these holes and inserts constituted a differing site condition. Exhibit 27. Before this appeal was filed, Lohan told GSA that it received PCEC's letter on December 2, 1992, that Hall's March 17 and April 1, 1992 letters were attached, and that this was the first notice Lohan received that Hall had encountered what it believed to be a differing site condition. Exhibit 59. A Lohan employee and a former Lohan employee signed affidavits affirming that Lohan first received the March 17 and April 1, 1992 letters on December 2, 1992. Exhibits 91, 92. Lohan replied to PCEC's December 1 letter on December 10, 1992. Lohan stated that PCEC had documented a number of holes on the third and fourth floors, and that CE5002 was issued to take care of those holes. Lohan noted that the third and fourth floors had been covered with carpet since June 1992. Lohan also stated that PCEC provided no documentation concerning the conditions on the other floors. Exhibit 28. On February 11, 1993, Hall wrote to PCEC and stated that it had inspected the sixteenth floor ceiling. Hall was unable to determine the location of classified and unclassified inserts because the seventeenth floor was not vacant and because Hall could not tell what holes might appear during demolition on the seventeenth floor. Hall advised that, if PCEC wanted Hall to begin work immediately, Hall would have to apply the maximum thickness of fireproofing material at an added cost of approximately $13,300. Exhibit 29. On February 15, 1993, PCEC asked Lohan whether Hall should apply the maximum thickness of fireproofing material to the ceiling above the sixteenth floor. Exhibit 30. Lohan responded on February 17, 1993, stating that it would not direct PCEC's construction activities. Exhibit 32. On March 10, 1993, Hall wrote to PCEC and enclosed a drawing of the locations of penetrations in the fifteenth and sixteenth floor decks, and a drawing of the locations of electrical, telephone, signal, and unknown outlets on the seventeenth floor. Exhibit 38. On March 15, 1993, PCEC sent Hall's letter to Lohan and asked Lohan to adjust the contract price because the amount of fireproofing material was adjusted from 3/4 inch to 1-1/4 inch, due to the fact that the contract documents did not show the presence of all of the penetrations encountered by Hall. Exhibit 40. Also on March 10, 1993, PCEC wrote to Lohan and enclosed a March 1, 1993 letter from Hall concerning the seventeenth floor which, according to PCEC, documented conditions found on that floor. PCEC again asked Lohan to adjust the contract price. Exhibit 39. On May 12, 1993, an attorney for Hall and PCEC submitted to the contracting officer a claim on behalf of PCEC. The claim states that PCEC is entitled to an equitable adjustment of $103,917.68 to the contract price, based upon the contract's differing site conditions clause. The claim explains that Hall could not inspect the decks at the time it bid, so Hall relied upon the specifications and drawings in preparing its bid, and that the specifications and drawings did not show the true conditions of the building. Hall first observed numerous holes in the fourth floor deck in January 1992, when carpeting and fixtures were removed from that floor. The claim also states that GSA "obviously" had superior knowledge of the locations of the penetrations in the decks and that GSA's failure to disclose its knowledge constitutes a breach of contract. The claim states that Hall and PCEC were directed to treat all electrical inserts as unclassified, even though a majority of the inserts were classified, and that Hall was directed to treat areas without holes and inserts as if those areas contained unclassified inserts. The claim requests payment for work performed on six entire floors (third, fourth, fifth, fourteenth, fifteenth, and sixteenth floors), and for work performed on parts of eight other floors. Exhibit 51. PCEC supplemented its claim on September 3, 1993. Exhibit 60. On October 22, 1993, the contracting officer denied PCEC's claim for the third and fourth floors because PCEC did not promptly notify GSA of the existence of a differing site condition, and this denied GSA the opportunity to investigate and evaluate the conditions that existed. The contracting officer stated that, if conditions had been as PCEC alleges, GSA would have addressed those conditions as it did in CE5002. The contracting officer also denied PCEC's claim for the fourteenth, fifteenth, and sixteenth floors because there were no differing site conditions on those floors. The contracting officer stated that no decision would be issued concerning the fifth floor because work had not yet begun on that floor. The contracting officer's decision does not mention the claim for work performed on parts of eight other floors. In the decision, the contracting officer states that the deck system contains Walker header duct. Header duct is a sheet metal enclosure that is installed across the cells of a cellular floor deck system. Header duct manufactured by Walker meets fire standards established by UL. Exhibit 62. There is no evidence in the record to establish whether, in fact, the deck system contains header duct. PCEC filed this appeal on January 21, 1994, requesting an equitable adjustment of $185,000. In its notice of appeal, PCEC says that the specifications identify some of the existing project conditions that might require "special treatment" to preserve the fire rating of the structure, and that additional openings were "caused by or uncovered by demolition." At the time of contracting, PCEC says that Hall could not determine the various thicknesses of fireproofing material that would be required because demolition had not yet occurred. According to PCEC, UL standards permit preserving the fire rating either by increasing the thickness of the fireproofing material or by treating the openings. PCEC says that, after demolition, GSA did not respond to Hall's inquiries as to how to deal with the openings it found in the deck. According to PCEC, it directed Hall to apply the maximum thickness of fireproofing material throughout the project in order to expedite the work. Exhibit 66. Clause 24 of the contract reads, in part: DIFFERING SITE CONDITIONS (a) The Contractor shall promptly, and before the conditions are disturbed, give a written notice to the Contracting Officer of (1) subsurface or latent physical conditions at the site which differ materially from those indicated in this contract, or (2) unknown physical conditions at the site, of an unusual nature, which differ materially from those ordinarily encountered and generally recognized as inhering in work of the character provided for in the contract. (b) The Contracting Officer shall investigate the site conditions promptly after receiving the notice. If the conditions do materially so differ and cause an increase or decrease in the Contractor's cost of, or the time required for, performing any part of the work under this contract, whether or not changed as a result of the conditions, an equitable adjustment shall be made under this clause and the contract modified in writing accordingly. Exhibit 1 at 23. Discussion PCEC argues that an equitable adjustment to the contract price is required because it encountered a differing site condition and because GSA possessed superior knowledge of the conditions in the Dirksen Building and failed to share that knowledge with PCEC. PCEC has not established that it is entitled to recover under either of these theories. In order to prove that an equitable adjustment is due according to paragraph (a)(1) of the differing site conditions clause, PCEC must establish that the contract contains reasonably plain or positive indications of what conditions would be encountered, and that it encountered different conditions which were reasonably unforeseeable. PCEC must also establish that it reasonably relied upon a reasonable interpretation of the terms of the contract, and that it was damaged as a result of a variation between the expected conditions and the encountered conditions. Stuyvesant Dredging Co. v. United States, 834 F.2d 1576 (Fed. Cir. 1987); P.J. Maffei Building Wrecking Corp. v. United States, 732 F.2d 913 (Fed. Cir. 1984). PCEC has not established that it encountered any reasonably unforeseeable conditions. Amendment 7 to the solicitation put offerors on notice that they would encounter classified and unclassified inserts. The contract does not identify the location of such inserts and does not contain an approximate number of inserts which might be encountered. Hall encountered classified and unclassified inserts, just as Amendment 7 anticipated. The existence of classified and unclassified inserts was reasonably foreseeable, given the language of Amendment 7. Hall also encountered holes, which are not mentioned in Amendment 7. The record does not establish, however, whether any of the holes were latent conditions or whether all of the holes were created by PCEC's demolition subcontractor. The differing site conditions clause makes GSA responsible only for latent conditions, and not for conditions created by one of PCEC's subcontractors. PCEC has not established that it reasonably relied upon a reasonable interpretation of the terms of the contract. Instead, PCEC, through Hall, relied upon several unreasonable assumptions when it agreed to perform the fireproofing work. It is normal to find penetrations in the cellular floor decks of a thirty-year old building. At the time bids were submitted, the building was occupied and the parties could not see the location or the type of penetrations that existed. Even though Amendment 7 warned of unclassified inserts, even though the contract did not show the location of such inserts, and even though the existence of just one such insert in a grid section would require the application of the maximum thickness of fireproofing material over the entire section, neither PCEC nor Hall made an allowance for encountering or replacing unclassified inserts. In fact, it was not until after GSA awarded the contract to PCEC that Hall, through SCI, asked UL what thickness of material would be required for unclassified inserts. The basis for Hall's assumption that only one-third of each floor would require some additional fireproofing material is not apparent from the facts, and this assumption has no support in the contract or the record. Finally, Hall assumed that PCEC would convert unclassified inserts into classified inserts, as had the contractor for the first phase of the renovation of the Dirksen Building, and that PCEC would then require Hall to apply a thinner coating of fireproofing material. This assumption is not based upon any interpretation of the terms of the contract. In summary, PCEC is not entitled to recover pursuant to paragraph (a)(1) of the differing site conditions clause. The conditions encountered by PCEC were reasonably foreseeable except for the holes, and PCEC did not establish that any of the holes were latent conditions. In addition, PCEC did not rely upon a reasonable interpretation of the contract when it reached its conclusion concerning the number and type of inserts it might encounter. In order to prove that an equitable adjustment is due according to paragraph (a)(2) of the differing site conditions clause, PCEC must establish that the conditions it encountered were unusual and different from those a contractor would expect to find when performing the work required by the contract. The Dirksen Building is thirty years old and has been altered many times. Penetrations in the deck are normal and to be expected. Thus, PCEC is not entitled to recover pursuant to paragraph (a)(2). In addition to the fact that PCEC has not established the existence of a differing site condition, PCEC is not entitled to recover for the third and fourth floors because it did not provide the notice required by the contract. The contract provides that PCEC was obligated to provide the contracting officer with prompt, written notice if it encountered a condition which differed materially from that indicated in the contract. Work on the third and fourth floors was completed in June 1992. PCEC waited until December 1992 to notify Lohan of the purported differing site condition. Although copies of Hall's March 17 and April 1, 1992 letters to PCEC were supposed to have been sent to Lohan, there is no evidence that copies were actually sent, and Lohan states that it first received copies of these letters in December 1992. PCEC notes that GSA placed the letters in the appeal file, but this does not establish when the letters were sent to Lohan. Because the third and fourth floors were completed approximately six months before PCEC notified Lohan of the purported differing site condition, Lohan was prevented from investigating conditions on these floors. The lack of timely notice of conditions on the third and fourth floors was prejudicial to GSA because it prevented GSA from verifying the existing conditions and from choosing a procedure for remedying whatever conditions existed, as it had done previously for these two floors when the parties agreed to CE5002. PCEC's superior knowledge arguments fail as well. First, PCEC argues that GSA knew of the number or location of unclassified inserts. PCEC provided no evidence to support this argument. Second, PCEC argues that GSA knew that the maximum thickness of fireproofing material would be needed because this was the conclusion reached by Grace's product manager in his May 7, 1991 letter. The information that Grace provided to GSA establishes that, in UL's opinion, it was not always necessary to apply the maximum thickness of fireproofing material. Instead, it was possible to apply less material if classified inserts were present. The May 7, 1991 letter establishes only what Grace, a fireproofing material manufacturer, would have anticipated if it had submitted a bid to perform the fireproofing work required by the contract. The May 7 letter does not establish that the maximum thickness of fireproofing material was always required. Finally, PCEC argues that GSA knew of the existence of Walker header duct. There is no evidence in the record to establish whether the floor decks contain Walker header duct, and PCEC never submitted this superior knowledge claim to the contracting officer. Decision PCEC has not established the existence of a differing site condition and has not established that GSA possessed superior knowledge which it failed to share with PCEC. For these reasons, the appeal is DENIED. _______________________________ MARTHA H. DeGRAFF Board Judge We concur: ________________________________ _______________________________ STEPHEN M. DANIELS JOSEPH A. VERGILIO Board Judge Board Judge