Employment Omitted Tasks and Contract Negotiations

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1 To: Secretary Jeffrey B. Mullan, MassDOT From: Stephen H. Clark, Administrative Law Judge Date: April 3, 2010 Re: Report and Recommendation I am pleased to submit for your consideration and approval the attached report and recommendation. N.E.L., Inc. (NEL) seeks $16, for work that was apparently omitted from the pay items and specifications of contract #39741 for emergency repair of bridges in District 4. The Contract provided that NEL take no advantage of an error in the plans or specifications and obliged it to immediately notify the Engineer of omissions. NEL knew of the apparent omissions before it bid but did not notify the Engineer or take action that would have allowed the Engineer to correct errors and publish clarifications to all prospective bidders. A contractor must inquire if he finds an obvious error. If a contractor fails to at least ask for clarification before bid he may not rely on the principle that errors, omissions and ambiguities may be held against the government drafter. Because NEL did not ask the Engineer for corrections but acted to take advantage of the omissions it believed existed it is barred from recovery. John F. Miller Co., Inc. v. George Fichera Construction Corp., 7 Mass. App. Ct. 494, 499 (1979). I recommend that NEL s appeal be denied. [Approved by the Secretary April 13, 2010] 1

2 INTRODUCTION N.E.L., Inc. (NEL) appeals from two decisions of the claims committee (Committee) of MassHighway, 1 which denied six claims arising under contract #39741 (Contract). The Contract was awarded to NEL on May 12, 2005 for emergency repair and maintenance of all bridges in District 4. The Committee first denied NEL s claim for extra work of $2, for these tasks: (1) jacking and shoring of existing stringers; (2) highway guard removal and reset; (3) fence removal and reset; (4) temporary precast concrete median barrier; (5) cleaning of pier caps/abutments of debris left behind by other contractors. The Committee then denied extra work of $14, to (6) remove and reset guardrail and Jersey barriers. 2 The unpaid work is referred to as Claimed Extra Work or Omitted Tasks. NEL argues that the Claimed Extra Work was not specified in the Contract. Though the Omitted Tasks were necessary to perform the Contract, it argues the Contract specifications were defective because no plain language or separate bid pay item identified the Omitted Tasks, as had been done in previous District 4 emergency-maintenance bridge contracts. NEL points out that the Omitted Tasks were entirely absent from Special Provision 905.2, Cement Concrete Masonry. MassHighway argues that the Omitted Tasks were included within Special Provision because they were incidental to cement concrete masonry work on the theory that it is not possible to excavate or replace concrete without them. MassHighway also contends that NEL can not claim extra work in any event because it failed before it bid to notify the Engineer 1 On November 1, 2009, the Massachusetts Highway Department was reorganized as the Highway Division of the Massachusetts Department of Transportation (MassHighway). See G.L. c. 6C, s Claims 1 through 5 were decided in the Committee s first ruling on March 6, 2006; claim 6 in the Committee s second ruling on December 17, The appeals are consolidated here. 2

3 of the obvious apparent omissions in the specifications, which Subsection 5.04 of the Standard Specifications (Subsection 5.04) requires. I conclude that it is unnecessary to determine whether the specifications were defective or whether NEL performed extra work because NEL failed to adhere to the requirements of the Contract. Subsection 5.04 prohibited NEL from taking advantage of any apparent error or omission in the plans and specifications and placed on it the affirmative obligation to immediately notify the Engineer of errors or omissions it discovered so that the Engineer could make needed corrections or interpretations. When NEL discovered before it bid that obvious tasks needed to excavate and replace concrete to perform bridge repair were apparently missing, it did not notify the Engineer. NEL prevented MassHighway from correcting obvious omissions or clarifying the intent of the Contract to all prospective bidders. Accordingly, NEL is barred from recovery. John F. Miller Co., Inc. v. George Fichera Construction Corp., 7 Mass. App. Ct. 494, 499 (1979). BACKGROUND AND FINDINGS NEL submitted the winning bid of $2,052,042 for the Contract to perform scheduled and emergency repairs on all bridges in District 4. The specific bridges in need of repair were not identified in the bid documents; bidders were notified that locations were to be stated at the preconstruction conference. The Contract generally described the work to be performed as (1) removing deteriorated concrete from stem piers, pier caps, pier columns, wing walls, back walls and abutments; (2) replacing excavated concrete and damaged reinforcing steel with new materials, as specified; (3) replacing existing but damaged slope paving with cement concrete slope paving, as directed, and (4) providing related traffic control. Contract at A

4 NEL and MassHighway disagree about what work is described (or not described) in Special Provision 905.2, Cement Concrete Masonry. 3 Special Provision provides, among other things The work under this Item 905 consists of excavating existing areas, as identified by work order or as directed by the Engineer, and placing 30 Mpa, 10 mm, 425 kg cement concrete masonry of the excavated areas. The Basis of Payment for Item provides: All labor, excavation of existing reinforced concrete, materials including bonding grout, tools, equipment, engineering services and incidentals necessary to complete the work [which] consists excavating existing areas, and placing concrete also consists of the removal and disposal of all deteriorated and spalled concrete located at the existing surfaces of the various substructure units. (Emphasis added.) The Method of Measurement for Item states the work shall be measured by the cubic meter [of concrete], complete in place and accepted. NEL is an experienced public contractor that has successfully bid and performed many MassHighway district-wide emergency bridge repair and maintenance contracts. NEL knew before it bid that the specifications of MassHighway maintenance contracts varied from district to district. Mr. Galasso, a corporate officer of NEL, prepared NEL s bid. After reviewing the bid documents Mr. Galasso came to believe that bid items of six tasks--the Omitted Tasks--which had previously been separate bid items on District 4 emergency bridge repair contracts were 3 The parties argue whether the Omitted Tasks were included in Item Their dispute centers on the meaning of the word incidental found in Special Provision NEL contends the Omitted Tasks can only be incidental to a unit price bid item when explicitly stated, since a careful description of the work item [is] imperative. It says MassHighway s arguments are patently untenable because neither party knew whether the Omitted Tasks would be required at all or in what quantities. MassHighway counters that it intended that all work required to excavate and replace concrete was paid by Item as contractors knew that work could never be performed otherwise. 4

5 entirely absent. Mr. Galasso noted that Item paid for both excavation and replacement of cement concrete but did not expressly refer to any of the Omitted Tasks. When preparing NEL s bid Mr. Galasso knew that excavating and replacing cement concrete under Special Provision would necessitate in every instance NEL to perform some or all of the Omitted Tasks. Mr. Galasso believed that, because six pay items apparently had been omitted from the bid sheet and because that work was not particularly described in 905.2, NEL would be successful in a claim for extra work. Before NEL bid Mr. Galasso telephoned three MassHighway employees he knew. The first was to the contracts office. Mr. Galasso told the employee that he believed that unit price pay items for work specified in previous bridge maintenance contracts was apparently omitted from the Contract. The conversation consisted of whether [pay items for the Omitted Tasks] were purposefully left out of the contract or I considered them a mistake, Galasso testified. According to Mr. Galasso the employee told him MassHighway would take Mr. Galasso s views under advisement. 4 Mr. Galasso then separately called two employees in District 4. Mr. Galasso told each that he considered the Omitted Tasks outside the Contract and thus extra work. According to Mr. Galasso neither employee told him whether the Omitted Tasks were included within Cement Concrete Masonry bid under Item Mr. Galasso did not make any contemporaneous record of his telephone calls. NEL did not write to MassHighway seeking clarification or explanation. NEL did not attempt to notify the Engineer of the apparent omissions in the specifications it thought existed. NEL did not submit a written question to MassHighway seeking clarification about the work included within 4 Mr. Galasso testified he was not absolutely sure of whom he spoke to in the contract section, though he named the person he normally spoke to when I have those problems. 5

6 Special Provision or why the anticipated pay items for the Omitted Tasks were unexpectedly absent. NEL submitted its bid on March 29, When NEL bid it believed that MassHighway would have to pay NEL extra for performing the Omitted Tasks. On March 29, 2005 MassHighway opened and read contractor proposals. NEL submitted the lowest bid and was awarded the Contract on May 12, The notice to proceed was issued on May 26, 2005; the pre-construction conference held on June 3, On or before June 16, 2005 NEL notified District 4 that there were missing bid items in the Contract. On July 18, 2005 NEL began work. On July 19, 2005 NEL requested a meeting with District 4 to discuss extra work orders that have already become necessary. On July 28, 2005 NEL formally requested extra work orders for the Omitted tasks, which were denied by District 4 on August 10, On August 10, 2005, District 4 stated that the Claimed Extra Work was included within Item On September 15, 2005, NEL submitted a written claim for extra work items as they become required. The District denied the claim and the matter was forwarded to the Committee, which denied the claim. On May 3, 2006 NEL appealed the Committee s denial here. On April 14, 2006, NEL notified the District that it claimed additional extra work of $14, for removal and reset of guard rail and temporary concrete barriers. NEL submitted that claim to this Office on that day. On August 25, 2006, this Office notified NEL that it had no jurisdiction over the claim because the Committee had not ruled. The Committee then heard NEL s claim for $14,583.67, denying it on December 26, NEL then timely appealed here. The Hearing 6

7 All NEL s claims under the Contract were heard on September 29, 2008, as continued to October 3, Present were: Stephen H. Clark Administrative Law Judge Edmund Naras, Esq. Assistant Counsel, MassHighway Jane Estey, Esq. Assistant Counsel, MassHighway Prem Kapoor Structure Maintenance Eng. (9/29/08 only) Michael Deverix Construction Engineer, District 4 John S. Davagian, II, Esq. Attorney for NEL Albert Enos President, NEL Michael J. Galasso Vice president, NEL The following exhibits were admitted into evidence. Bench Exhibits ALJ #1 Contract #39741 ALJ #2 Statement of Claim, May 3, 2006 ALJ #3 District Response to Statement of Claim, May 18, 2006 ALJ #4 Statement of Claim, February 8, 2007 ALJ #5 District Response to Statement of Claim, February 26, 2007 ALJ #6A Memo to Tanya Barros from Judge Clark, August 15, 2007 ALJ #6B Memo to Tanya Barros from Judge Clark, August 15, 2007 ALJ #7 Standard Specification Section 748 (1995 Metric) ALJ #8 MHD Contract #41856 Exhibits of NEL Ex. #1 Contract #39741 Ex. #2 Section 100 of Standard Specifications for Highway and Bridges (1995 Metric) Ex. #3 Section 101 of the Metric Supplemental Specifications (12/11/02) Ex. #4 Section 901 of Standard Specifications for Highway and Bridges (1995 Metric) Ex. #5 Section 901 of Metric Supplemental Specifications dated December 11, 2002 Ex. #6 Bid List for Project No (Contract #39741) Ex. #7 Substructure List (06/03/05) Ex. #8 NEL Statement of Claim 5/3/06 Ex. #9 NEL Statement of Claim 2/8/07 Ex. #10 MHD contract #99192 Ex. #11 MHD contract #99193 Ex. #12 MHD contract #55025 Exhibits of MassHighway 7

8 Ex. C-1 Section 700 of Supplemental Specifications (12/11/02) (1995 Metric) Ex. C-2 Section 900 of Supplemental Specifications (12/11/02) (1995 Metric) Ex. D-1 Construction Diary, Nat. Ass. of Women in Construction ( th ed.) Ex. E-1 Wikipedia Definitions for construction terms ( Falsework ) as of 9/17/08 Ex. E-2 Wikipedia Definitions for construction terms ( Shoring ) as of 9/17/08 NEL and MassHighway submitted post-hearing briefs. DISCUSSION NEL s duty to clarify errors and omissions in the specifications is expressly set forth in Subsection 5.04, which provides The Contractor shall take no advantage of any apparent error or omission in the plans or specifications. In the event the Contractor discovers such an error or omission he shall immediately notify the Engineer. The Engineer will then make such corrections and interpretations as may be deemed necessary for fulfilling the intent of the contract. Generally, provisions such as Subsection 5.04 that obligate contractors before bidding to seek clarification of specifications are designed to enable potential contractors (as well as the Government) to clarify the contract s meaning before the die is cast. Beacon Constr. Co. v. United States, 314 F.2d 501, 504 (Ct. Cl. 1963) (Beacon). Specifically, the duty to seek clarification during the pre-bid phase is a means of preventive hygiene to (1) resolve issues of interpretation and prevent post award disputes; (2) advance the goal of informed bidding by putting bidders on an equal footing and encouraging competitive bids based on equal information; and (3) deter a bidder who knows (or should have known) of obvious errors or ambiguities from making a low bid and then crying change or extra when the government disagrees with his interpretation after award. S.O.G. of Ark. v. U.S., 546 F.2d 367, (Ct. Cl. 1976). In Massachusetts it is settled law that [w]here a contractor is presented with an obvious omission, inconsistency or discrepancy, he should at least ask for clarification if he 8

9 expects to rely on his pre-bid interpretation of a specification to support a later claim. John F. Miller Co., Inc. v. George Fichera Construction Corp., 7 Mass. App. Ct. 494, 499 (1979) (Miller), citing Beacon at Where a contractor fails to properly seek clarification, he can not rely on the principle that all errors, omissions and ambiguities in specifications written by the government will be held against the drafter. Id. 6 Where a mistake is obvious, so that a contractor reviewing specifications should have seen it, he must bring it to the government s attention before bid; but if the mistake is subtle, so that a contractor might be excused for not finding it, the contractor may recover. See Miller at Subsection 5.04 places an affirmative obligation on the contractor to address and resolve errors and omissions that might lead to claims; and it prohibits the contractor from taking advantage of obvious errors. In order to prevail on a claim based on its own interpretation of a provision that contains an obvious, apparent omission, the contractor must first discharge his duty to clarify that is, at least ask for clarification if he intends to bridge the crevasse [of a disputed interpretation] in his own favor. Miller at 499, citing Beacon at 504. Subsection 5.04 is the bridge over the crevasse which the contractor must cross. If he fails to do so he is barred from recovery. Beacon at 504. Here, there is no doubt that NEL knew before it bid that MassHighway had apparently omitted work that NEL knew would have to be done to perform the Contract for emergency bridge repair. The Omitted Tasks were not called out by name in the specifications. The omissions were obvious, indeed glaring, which NEL perceived at the time. But instead of 5 Whether the contractor actually knows an obvious omission exists is not necessary to establish, since it is the obviousness of discrepancy which imposes the duty of inquiry not the fact of actual knowledge. Chris Berg, Inc. v. U.S., 455 F.2d 1037 (Ct. Cl. 1972). 6 The bidder who is on notice of an incipient problem, but neglects to solve it as he is directed to do by this form of contractual preventive-hygiene, cannot rely on the principle that ambiguities in contracts written by the Government are held against the drafter. Beacon at

10 forthwith notifying the Engineer and seeking a clarification, as obliged by the Contract, NEL took no affirmative steps. NEL was content that all the apparently obvious omissions were left unresolved before bid. It did not properly seek any pre-bid clarification that would have resulted in the Engineer s pre-bid corrections and interpretations published to all prospective bidders. Instead, NEL bid on the Contract believing glaring omissions to exist. 7 NEL did not write the Engineer seeking clarification; it did not submit a formal question pre-bid that would have elicited the Engineer s written response to all prospective bidders. NEL s phone calls did not satisfy the notice requirement of Subsection Phone calls without concomitant written notice to persons charged with the responsibility of finally approving the Contract s specifications before bid are not sufficient to immediately notify the Engineer. I think NEL s actions are consistent with an unstated intention that MassHighway would be bound by its mistakes and required to pay for extra work post award should NEL submit the low bid and be awarded the Contract. 8 7 NEL argues without citation that District 4 s departure from its practice asking unit price bids for the Omitted Tasks was so great that the changes should be explicitly stated in the bid documents. The very fact that the apparent omissions were so glaring are a compelling reason that NEL should have notified the Engineer. MassHighway was not required by law to flag the changes made to prior District 4 emergency bridge maintenance Contracts. 8 There is no evidence on this record to show what other bidders knew before the bid. MassHighway s routine comparison of all bids shows that for Item 905.2, Cement Concrete Masonry, the office estimated a quantity of 423 cubic meters (CM) at $4,156/CM, for a total estimated price of $1,757,988. The estimate for Item was 78% of total office estimate for the entire contract ($2,254,815.00). The bid comparison sheet, which is part of the Contract, shows Item Quantity (CM) Item $/CM Item Bid Price Total Bid All Items Office 423 4,156 1,757,988 2,254, NEL 423 3,854 1,630,242 2,052, SPS 423 4,905 2,074,815 2,131, Const. Dyn ,375 2,273,625 2,664, MIG 423 7,000 2,961,000 3,132, Per Cent Bid Price/ Total Bid 10

11 I conclude that NEL s pre-bid actions were designed from the outset to take advantage of the obvious, apparent omissions it found. NEL s silence on the one hand and private contacts with public employees on the other worked to vitiate the salutary purpose of Subsection The net result was that MassHighway was unable to correct errors, avoid claims or assure that all bidders were privy to the same information. NEL did not bridge the crevasse in its own favor and so it is barred from recovery for extra work. See Miller at 499; Beacon at 504. CONCLUSION Because NEL failed to notify the Engineer of the obvious omissions it found and because its failure precluded MassHighway from clarifying or correcting any error that may have existed in the specifications, NEL should not recover for the Claimed Extra Work. RECOMMENDATION NEL s appeal should be denied. Respectfully submitted, Stephen H. Clark Administrative Law Judge April 8,