Reliance Insurance v. United States

36 Cont. Cas. Fed. 75,892, 20 Cl. Ct. 715, 1990 U.S. Claims LEXIS 245, 1990 WL 89041
CourtUnited States Court of Claims
DecidedJune 27, 1990
DocketNo. 180-89C
StatusPublished
Cited by6 cases

This text of 36 Cont. Cas. Fed. 75,892 (Reliance Insurance v. United States) is published on Counsel Stack Legal Research, covering United States Court of Claims primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Reliance Insurance v. United States, 36 Cont. Cas. Fed. 75,892, 20 Cl. Ct. 715, 1990 U.S. Claims LEXIS 245, 1990 WL 89041 (cc 1990).

Opinion

ORDER

LYDON, Senior Judge.

This government contract case comes before the court on defendant’s motion for partial summary judgment with regard to four of plaintiffs’ six construction claims. Plaintiffs oppose the motion, alleging the existence of material factual disputes. Oral argument on the motion was held on February 16, 1990. For the following reasons, the court grants defendant’s motion for partial summary judgment.

FACTS

Plaintiffs are Reliance Insurance Company (Reliance), a surety, and its principal, L.G. Lefler, Inc. (Lefler), a construction contractor. Lefler and the Department of Veterans Affairs (VA) entered into a construction contract on September 30, 1982, for the construction of an addition to the VA hospital in Tucson, Arizona. The original contract price was $11,331,500, and the original completion date was May 26, 1985 (950 calendar days). Reliance, as surety, assumed the ultimate liability for completing the project when it issued performance and payment bonds pursuant to the contract, naming Lefler as principal. Plaintiffs’ complaint identifies six claims which arose during the course of the project, to-talling $1,306 million. Defendant’s motion for partial summary judgment involves four of the six disputed claims. The four claims, totalling $1,126 million, seek the recovery of additional delay overhead costs, in excess of overhead costs already awarded to plaintiffs pursuant to the 10 percent limitation on recovery of such costs imposed by contract clause G-10, for construction delays arising from certain change orders. It should be noted that plaintiffs’ claims are limited to recovery of overhead costs in excess of the 10 percent limit in clause G-10.

In its summary judgment motion, defendant argues that clause G-10 of the contract expressly limits the amount of over[717]*717head that may be recovered as a result of a change order, citing Santa Fe Engineers, Inc. v. United States, 801 F.2d 379 (Fed. Cir.1986). Clause G-10(A)(4) provides, in pertinent part:

Allowances not to exceed 10 percent each for overhead and profit for the party performing the work will be based upon the value of labor, material and use of construction equipment required to accomplish the change. As the value of the change increases, a declining scale will be used in negotiating the percentage of overhead and profit. Allowable percentage on changes will not exceed the following: 10% overhead and 10% profit on first $20,000; llk% overhead and 7V2% profit on next $30,000; 5% overhead and 5% profit on balance over $50,000. Profit shall be computed by multiplying the profit percentage by the sum of the direct costs and computed overhead costs.

Clause G-10(A)(9) defines “overhead” as follows:

Overhead and Contractor’s fee percentages shall be considered to include insurance other than mentioned herein, field and office supervisors and assistants, watchman, use of small tools, incidental job burdens, and general home office expenses, and no separate allowance will be made therefore [sic]. Assistants to office supervisors includes all clerical, stenographic and general office help. Incidental job burdens include, but are not necessarily limited to, review and coordination, estimating and expediting relative to contract changes are associated with field and office supervision and are considered to be included in the contractor’s overhead and/or fee percentage.

The contract in dispute also contains a standard changes clause, which provides, in pertinent part:

(a) The Contracting Officer may, at any time, without notice to the sureties, by written order designated or indicated to be a change order, make any change in the work within the general scope of the contract, including but not limited to changes:
(1) In the specifications (including drawings and designs);
(2) In the method of manner or performance of the work;
(3) In the VA-fumished facilities, equipment, materials, services, or site;
(4) Directing acceleration in the performance of the work.
(d) If any change under this clause causes an increase or decrease in the Contractor’s cost of, or the time required for, the performance of any part of the work under this Contract, whether or not changed by any order, an equitable adjustment shall be made and the Contract modified in writing accordingly____1

As the party opposing defendant’s motion for partial summary judgment, plaintiffs are entitled to have their factual allegations taken as true. See D.L. Auld Co. v. Chroma Graphics Corp., 714 F.2d 1144, 1146 (Fed.Cir.1983). The delays in the project were the result of defective drawings, specifications and other contract documents, which required the VA to issue frequent and substantial change orders. Such change orders not only caused delay requiring extension of the contract completion date by 498 days, but the change orders also caused increased costs as well. Lefler submitted approximately 150 requests for information to the VA during the course of the project, in an effort to clarify and correct the defective drawings, specifications and contract documents. The VA issued 192 field change orders and 38 central office change orders during the course of the contract. The change orders extended the completion date by 298 calendar days, to March 20, 1986, and the project was finally completed on October 6, 1986, 200 days beyond the 298-day adjustment. Plaintiffs seek an additional 181 calendar day extension to September 17, 1986.

[718]*718Reliance became involved in the project during the latter part of 1984, when Reliance became aware that Lefler needed financial help to complete the contract due to Lefler’s acknowledged default. Thereafter, Reliance assumed responsibility for, and became actively involved in managing and completing the project. As a result, Reliance has spent approximately $1,660,-000 to complete the project. The record does not indicate how much of this amount has already been paid to Reliance by change orders or otherwise, although plaintiffs’ complaint seeks recovery of only $1,306 million. All six of plaintiffs’ equitable adjustment claims were submitted to, and denied by, the contracting officer for the VA.

On February 26, 1987, plaintiffs submitted their first claim to the contracting officer, arising out of change order 2A, involving x-ray equipment. Plaintiffs claimed $100,718 for extended home office overhead and “extended general conditions,” 2 as well as $4,707 for critical path method (CPM) costs incurred in preparing the claim,3 and a 15-day time extension. The claim was resubmitted on December 20, 1988 after proper certification, and the contracting officer denied the claim on February 17, 1989.

Plaintiffs also submitted a second claim to the contracting officer on February 26, 1987, arising out of change order 2G, involving installation of part of the ventilation system. Plaintiffs claimed $169,800 for extended home and field office overhead, as well as a time extension of 63 days.

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Cite This Page — Counsel Stack

Bluebook (online)
36 Cont. Cas. Fed. 75,892, 20 Cl. Ct. 715, 1990 U.S. Claims LEXIS 245, 1990 WL 89041, Counsel Stack Legal Research, https://law.counselstack.com/opinion/reliance-insurance-v-united-states-cc-1990.