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High Level Conclusory Allegations Unsupported by Any Concrete Facts are Insufficient to Support a Claim for an Equitable Adjustment

Posted Dec 15, 2010
Allison L. Pehlview author profile and contact info

On December 9, 2010, the United States Court of Federal Claims held that contractor Delhur Industries, Inc. (“Delhur”) was not entitled to an equitable adjustment of $2,115,525 for fourteen claim items on a road construction contract (the “Project”) with the Federal Highway Administration (“FHWA”) due to its failure of proof. The Court agreed with the government that the contractor’s certified claim was deficient in several respects.

This decision highlights the importance of proper project documentation to support a contractor’s claim and that the contractor bears the burden of proving the elements of its claim by a preponderance of the evidence. Although the burden imposed on a contractor is not one of exact precision, it does require a contractor to furnish the court with evidence of at least a reasonable basis for the computation of the amounts that it claims is due and owing it.
The Court of Federal Claims evaluated Delhur’s claim for an equitable adjustment under the elements set forth in SAB Constr. Inc. v. United States, 66 Fed. Cl. 77, 85 (2005).  To prove an equitable adjustment, Delhur, like any other contractor in its situation, must be able to show “liability, causation, and injury, and it must prove that the government somehow delayed, accelerated, augmented, or complicated the work, and thereby caused it to incur specific additional costs, and that those costs were reasonable, allowable, and allocable to the contract.”  When applying these principles to Delhur’s claim, it was clear to the Court that Delhur had failed to prove the necessary elements which would entitle it to a claim for an equitable adjustment.

The Court found that Delhur presented high-level conclusory allegations which were unsupported by any concrete facts. Delhur claimed extra costs due to excess excavation but failed to demonstrate that it reasonably relied on all the contract documents when formulating its bid. The only evidence of Delhur’s bid preparation for the work consisted of “fifteen pages of cryptic handwritten notes” that could not be adequately explained by anyone who represented Delhur at trial. There was also no evidence that Delhur reviewed any of the geotechnical reports in preparing its bids. The Court’s analysis certainly suggests that a lack of contemporaneous note-taking during the bid formulation state can be fatal to a contractor’s right to recover an equitable adjustment caused by a differing site condition later encountered on the Project.

The Court also concluded that “Delhur did not provide the Court with sufficient evidence to show that its damages were caused by errors in the plans or government direction, and not by Delhur’s own mistakes.” Thus, Delhur could not prove the elements of liability and causation required for a claim of equitable adjustment. Delhur’s bare assertion that it suffered damages because it had to haul extra excavation from the Project was not enough. Delhur claimed 25,500 cubic meters of excess excavation on the Project but failed to show the Court how it came to this figure. Thus, the Court concluded that it had no way of knowing if Delhur’s estimate was reliable or how it was determined, and consequently denied Delhur’s claim for the same.

Similarly, Delhur was not entitled to recover any field or home office overhead costs because the evidence it submitted was insufficient.  Delhur could not show that the FHWA was solely responsible for any delay that occurred on the Project. Delhur failed to present a project schedule analysis to assess which party may have caused the delay, and again, relied on a bare assertion that the government caused the delay and should be responsible. Yet again, the Court’s analysis shows the importance of proper project documentation and that it is the contractor’s burden to prove the elements of its claim by a preponderance of the evidence submitted.

Adding insult to injury, Delhur could not recover its last claim for a reimbursement of $45,000 in liquidated damages. Because Delhur could not provide any competent evidence to show that its project delays were excusable, it was similarly not entitled to a reimbursement.

SBA Suspends EG Solutions and MultimaxArray

Posted Nov 22, 2010
Anne Marie Tavellaview author profile and contact info

The Small Business Administration (SBA) announced on November 18, 2010 that it has suspended two more firms in its investigation into small business contracts that are being illegally passed through to larger companies. EG Solutions and MultimaxArray were both suspended from federal contracting based on allegations that the firms misrepresented themselves on a large Homeland Security (DHS) Department information technology contract.

Both EG Solutions and MultimaxArray won multi-million dollar task orders, set-aside for small businesses, on DHS’ $3 billion FirstSource contract for IT hardware, software and services. But, according to suspension letters, most if not all of the work required to be performed in connection with the contracts were performed by subcontractors. The suspension letters also allege that both EG Solutions and MultimaxArray actively tried to conceal the nature of their relationship with the subcontractor after concerns were raised early on about their potentially wrongful conduct in regards to the contracts at issue.

The suspension letters do not name the subcontractor, but the suspension of EG Solutions and MultimaxArray comes just weeks after the SBA suspended GTSI Corp., based on allegations that it was performing virtually all the work on a $165 million delivery order that was awarded to MultimaxArray. GTSI also served as a subcontractor to EG Solutions on the FirstSource contract.

GTSI’s suspension was lifted after two weeks, following the resignation of its top two executives and the indefinite suspension of three other executives. EG Solutions and Multimax Array have 30 days to formally respond to the SBA’s suspension.

Anne Marie Tavella; The Government Contracts Practice Group at Oles Morrison has an established history of assisting contractors with claims against federal and state agencies, bid protests and providing advice and counseling on all issues involving public procurement


 

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