________________________________________ GRANTED IN PART: March 29, 1996 ________________________________________ GSBCA 11029 STROH CORPORATION, Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. Ronald M. Kaplan, Jeffrey D. Stone, and Jeffrey L. Goodman of Shearer, Templer & Pingel, West Des Moines, IA, counsel for Appellant. Robert W. Schlattman, Office of General Counsel, General Services Administration, Washington, DC, counsel for Respondent. Before Board Judges BORWICK, NEILL, and HYATT. HYATT, Board Judge. Stroh Corporation claims entitlement to an equitable adjustment under a contract for the replacement of the cooling tower, chillers, and portions of the roof at the Federal Building in Des Moines, Iowa. The dispute arose when the Government ordered Stroh to wait until mid-October to remove existing chilling equipment in preparation for the installation of new equipment. Although the contract did not expressly prohibit removal of the existing cooling system during the summer months, the Government considered that Stroh's plan to remove chilling equipment in the summer patently conflicted with a contract clause that proscribed interference with the Government's continued conduct of business in the building. In an earlier decision in this appeal, the Board ruled that the terms of the contract itself did not bar Stroh's recovery if it could show that it incurred compensable delay as a consequence of the Government's order to wait until mid-October to remove the chiller units. Stroh Corp. v. General Services Administration, GSBCA 11029, 93-2 BCA 25,841, clarified on reconsideration, 94- 2 BCA 26,784. In this decision, the Board held that the absence of a provision in the contract stating that the contractor could not remove the chiller units from the roof until the end of the cooling season was not an obvious error or omission that imposed on Stroh a duty to inquire as to the Government's intent. The Board concluded that the "Government's order requiring Stroh to wait until the end of the cooling season to remove the chillers in effect changed the order of work under the contract, entitling Stroh to reasonable compensation and additional time for the delay." 93-2 BCA at 128,597. The Board subsequently clarified that its decision did not actually hold that there was in fact a compensable delay, but rather that appellant was entitled "to pursue its claim further and recover damages for any demonstrable delay." 94-2 BCA at 133,206. No contractual bar would impede recovery of damages if Stroh could prove that the delay increased its cost of performance. Id. This matter is now before us for a decision with respect to the amount of any equitable adjustment to which Stroh may be entitled. Stroh seeks an award in the amount of $214,505. For the reasons stated below, we find that Stroh is entitled to recover the amount of $31,569. Findings of Fact Background 1. On May 16, 1990, Stroh was awarded contract number GS06P90GYC0060 for the replacement of the cooling tower, two chillers, and sections of the roof around the cooling tower at the Federal Building in Des Moines, Iowa, for the fixed price of $676,000. Appeal File, Exhibit 4. The contract required the contractor to commence work immediately upon receipt of a notice to proceed, to prosecute the work diligently, and to complete the work within 240 days of receipt of the notice to proceed. Appeal File, Exhibit 1, Supplementary Conditions 4.01. The notice to proceed was issued on June 5, 1990, and received by Stroh on June 7, 1990. Id., Exhibit 5; Transcript at 109. In response to the notice to proceed, Stroh proposed June 11, 1990 as the date for starting work. Transcript at 48, 109; Appeal File, Exhibit 5. 2. The contract contained the Changes Clause located at FAR 52.243-4 (AUG 1987). The clause provides in relevant part: The Contracting Officer may, at any time, without notice to the sureties, if any, by written order designated or indicated to be a change order, make changes in the work within the general scope of the contract, including changes- (1) In the specifications . . . (2) In the method or manner of performance of the work; (3) In the Government-furnished facilities, equipment, materials, services, or site; or (4) Directing acceleration in the performance of the work. (b) Any other written or oral order (which, as used in this paragraph (b) includes direction, instruction, interpretation or determination) from the Contracting Officer that causes a change shall be treated as a change order under this clause; provided, that the Contractor gives the Contracting Officer written notice stating (1) the date, circumstances, and source of the order and (2) that the Contractor regards the order as a change order. (c) Except as provided in this clause, no order, statement, or conduct of the Contracting Officer shall be treated as a change under this clause or entitle the Contractor to an equitable adjustment. (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 such order, the Contracting Officer shall make an equitable adjustment and modify the contract in writing. . . . (e) The Contractor must assert its right to an adjustment under this clause within 30 days after (1) receipt of a written change order under paragraph (a) of this clause or (2) the furnishing of a written notice under paragraph (b) of this clause, by submitting to the Contracting Officer a written statement describing the general nature and amount of proposal, unless this period is extended by the Government. Appeal File, Exhibit 1. 3. The contract also contained the Suspension of Work Clause set forth in FAR 52.212-12 (APR 1984), which provides in pertinent part: (a) The Contracting Officer may order the Contractor, in writing, to suspend, delay, or interrupt all or any part of the work of this contract for the period of time that the Contracting Officer determines appropriate for the convenience of the Government. (b) If the performance of all or any part of the work is, for an unreasonable period of time, suspended, delayed, or interrupted (1) by an act of the contracting officer in the administration of this contract, . . . an adjustment shall be made for any increase in the cost of performance of this contract (excluding profit) necessarily caused by the unreasonable suspension, delay, or interruption, . . . . Appeal File, Exhibit 1. 3. On June 7, 1990, Stroh attended a pre-construction conference with the contracting officer's representative (COR), at which Stroh announced its intention to begin work at the site within two weeks. At that time, the COR instructed that the building's existing cooling system could not be taken out of service until the estimated end of the cooling season in mid- October. Appeal File, Exhibits 6, 7; Transcript at 48. This effectively precluded the commencement of on-site work until October 15, 1990. Transcript at 48. 4. In a letter to the contracting officer, dated June 29, 1990, Stroh stated its position that the COR's order prohibiting the commencement of demolition of the chiller units prior to October 15 constituted a change to the contract terms that would entitle it to an equitable adjustment for additional costs of performance and a day-for-day (130 days) extension to the time for completion. Stroh estimated that its additional performance costs would be in the neighborhood of $110,000. Stroh also enumerated the following specific types of costs that it expected to incur as a result of shifting the time frame for performance of the work: wage escalation, escalation in the cost of material and equipment, escalation of subcontractors' costs, loss of labor efficiency due to performing the majority of the work under adverse winter weather conditions, extended equipment rental and standby costs, escalation on warranty costs and underabsorbed home office overhead. Appeal File, Exhibit 7. 5. By letter dated July 5, 1990, the contracting officer responded to Stroh's initial letter, taking the preliminary view that the claim was not supportable because it would not be reasonable to expect to shut off the cooling system during the summer months. The letter further stated that if Stroh nonetheless wished to pursue the matter, a detailed claim for the additional costs should be provided. Appeal File, Exhibit 8. 6. Subsequently, by letter dated July 25, 1990, Stroh submitted a more specific request, asking for payment of the amount of $129,876 and a time extension of 130 days. This letter offered a brief explanation of the types of costs claimed, which included, among other items, 1) wage escalation due to shifting the bulk of the labor hours to be expended to the period after December 31, 1990; 2) loss of labor efficiency attributable to shifting work to the winter construction season; 3) escalation in cost of material and equipment because of delayed purchase of items; 4) additional costs charged by subcontractors[foot #] 1; 5) underabsorbed home office overhead; 6) overhead, profit and commission; and 7) bond premium. Stroh added that an extension of contract time by 130 days would be necessary because a review of Stroh's "planned sequence of construction indicates that, on this project, the time extension required will in fact be one day for each day that access to the project is effectively denied." Appeal File, Exhibit 9. 7. Stroh's letter of July 25 was referred by the contracting officer to the Chief, Project Operations Branch, for response. In a letter dated August 17, 1990, this individual informed Stroh of his opinion that no legal basis existed for Stroh to recover these costs. He further suggested that if Stroh continued to disagree, it should formally request a decision from the contracting officer pursuant to the Disputes Clause of its contract. Appeal File, Exhibit 10. 8. On August 22, 1990, Stroh submitted a formal certified claim, referencing its two previous letters and requesting a written decision from the contracting officer. Appeal File, Exhibit 11. By letter dated November 6, 1990, the contracting officer denied Stroh's claim for monetary compensation and a time extension. Appeal File, Exhibit 13. 9. After receiving this decision, Stroh considered that it had no choice but to complete the work by the originally scheduled contract completion date of February 4, 1991.[foot #] 2 It took the steps necessary to ----------- FOOTNOTE BEGINS --------- [foot #] 1 At the time it submitted its original request, Stroh anticipated that several subcontracts would escalate. Appellant's Exhibit 1; Transcript at 118-19. Instead, Stroh was able to renegotiate some subcontracts and other subcontractors did not assert claims despite the modification of the schedule. Transcript at 118-19, 193. As a result, Stroh did not incur any additional subcontract expenses and has not pursued this category of additional costs. [foot #] 2 A bilateral contract amendment, number PC03, issued on December 4, 1990, added a small amount of work to the contract and extended the completion date until February 13, 1991. Appellant's Exhibit 11. Another amendment, PC04, further extended the completion date through February 27. Appellant's Exhibit 13. ----------- FOOTNOTE ENDS ----------- rearrange its sequencing and scheduling of work to ensure that the work was completed by that date. Transcript at 114. Stroh's Quantum Claim 10. Because the existing equipment could not be dismantled, there was little work that could be accomplished at the site prior to the conclusion of the 1990 cooling season. At most, Stroh could have delivered some drawings and brought some materials to the site. Transcript at 111. Demolition commenced after October 15, 1990. The new chillers were delivered to Stroh's subcontractor in Des Moines in late November 1990, but because demolition was still in progress it was not feasible to deliver this equipment to the site until late December 1990. The old equipment had to be cut out and removed before the new equipment could be installed. Transcript at 34-35, 103-04. The new chiller equipment was set in place on December 20 and 21, 1990. Transcript at 103; Appellant's Exhibit 5. 11. In its appeal, Stroh alleges that the Government's refusal to allow demolition of the cooling system delayed virtually all field work[foot #] 3 from the middle of June to October 15, constituting a 130-day delay. Stroh alleges that all of its damages stem from this initial delay to the project and the Government's subsequent refusal to extend the period for contract completion. Transcript at 170. Stroh seeks these delay damages even though it completed the contract on time. 12. The dollar amount of Stroh's dollar claim was later adjusted to reflect actual costs incurred by reason of the delay in commencing on-site work. Stroh's initial request for an equitable adjustment on July 25, 1990 sought $129,876, based on estimated additional costs stemming from the change. Appellant's Exhibit 1. In a February 6, 1992 response to interrogatories, Stroh amended its claim amount to $151,734 to reflect an increase in underabsorbed home office overhead from $66,690 to $89,700. Appeal File, Exhibit 147 (Appellant's Response to Respondent's Second Set of Interrogatories). 13. On February 1, 1994, Stroh revised its claim to $245,014, changing its theory of recovery for underabsorbed home office overhead[foot #] 4 and seeking "compressed time ----------- FOOTNOTE BEGINS --------- [foot #] 3 The only field work that could have done without shutting down the building's cooling system was to establish a field office. Transcript at 111. [foot #] 4 Stroh originally applied the Eichleay formula ________ and used a 130-day alleged delay in its calculation. Appeal File, Exhibit 1. Beginning with its February 1, 1994 revision, Stroh changed its formula from one based on additional days of (continued...) ----------- FOOTNOTE ENDS ----------- frame" damages. Appellant's Exhibit 2. On February 11, 1994, Stroh deleted from its calculation overhead on underabsorbed home office overhead and reduced its total claim to $217,882. Transcript at 166, 184; Appellant's Exhibit 3. On February 25, 1994, Stroh submitted another revision to its claim, reducing it by $14,674 to exclude certain amounts based on increased costs of performance incurred as a result of the compressed time frame for completion. At that point, the claim totalled $207,969. Transcript at 172; Appellant's Exhibit 4. Stroh also revised its bond premium from .75 % to .63 %. Appellant's Exhibit 4. Stroh's final claim, including compression damages, was for $214,505. Appellant's Post Hearing Brief, Exhibit A. ----------- FOOTNOTE BEGINS --------- [foot #] 4 (...continued) overhead to one based on the inability of its project manager to perform his normal bidding duties and Stroh's subsequent loss of revenues from which to absorb home office overhead. Specifically, Stroh explained: [Dick Cook] was not able to perform his normal estimating duties and therefore he was not able to help Stroh secure projects in early to mid 1991. For that reason the revenues for the mechanical contracts dropped during that period of time until he could get this project completed, get back to estimating new projects, get them on line and get revenues coming in to cover the overhead. Appellant's Exhibit 2. ----------- FOOTNOTE ENDS ----------- 14. Stroh's claim as presented at the hearing is as follows:[foot #] 5 I. WAGE ESCALATION $ 182 727 labor hours shifted to later period at $.25/hour higher rate II. LOSS OF LABOR EFFICIENCY $ 17,313 Mobilization $ 461 Demolition $ 6,610 Insulating blankets $ 653 Domestic and chilled water piping $ 568 Condenser piping $ 1,847 Chiller equipment $ 552 Cooling towers $ 972 Punch list $ 2,425 Vern Peterson $ 1,190[foot #] 6 Electrical $ 2,035 Total $ 17,313 III. MATERIAL & EQUIPMENT ESCALATION $ 11,212 Material $ 224 Equipment $ 5,991 Subtotal $ 6,215 ----------- FOOTNOTE BEGINS --------- [foot #] 5 This calculation includes costs incurred as a consequence of performing in a compressed time frame. Stroh has separated out these claimed increased costs of performance in the event that the Board determines that respondent's jurisdictional challenge to these amounts is valid. Most of the costs associated with the compression of the time for performance occur in the loss of labor efficiency category. Under Stroh's alternative calculation, certain of these labor cost subcategories -- mobilization, domestic and chilled water piping, chiller equipment, and electrical -- are attributable solely to the effect of compression of the time frame. With the exception of the insulating blankets category, which arises solely because of the adverse effect of winter weather, the amounts claimed under the remaining loss of labor efficiency categories are reduced. In addition, the amounts claimed for underabsorbed overhead and for the direct overhead categories would be reduced if the time compression claim were to be rejected. [foot #] 6 Vern Peterson was the foreman assigned to this project. Transcript at 80. ----------- FOOTNOTE ENDS ----------- Victualic Fittings $ 4,997[foot #] 7 Total $ 11,212 IV. SUBCONTRACTOR ESCALATION $ - 0 - V. UNDERABSORBED HOME OFFICE OVERHEAD $ 152,375 Dick Cook $ 12,834[foot #] 8 Punch List - Dick Cook $ 2,060 Underabsorbed Home Office Overhead $137,481 Total $152,375 VI. OVERHEAD, PROFIT AND MISC. $ 25,427 a. Overhead (18.2% of Items I, II, and III) $ 5,225 b. Small Tool Expense (8.16% of Items I and II Labor) $ 1,428 c. Profit (10% of Items I - V, VIa. and VIb.) $ 18,774 Total $ 25,427 VII. BOND PREMIUM $ 1,343 Subtotal Items I - VI $213,162 Bond Premium (0.63%) $ 1,343 TOTAL REQUESTED $ 214,505 ____________ Quantum Proof Wage Escalation 15. Stroh's chief mechanical estimator initially projected that completion of the contract would require 2,675 labor hours. Transcript at 28. These estimates are set forth in a mechanical job estimate summary dated April 10, 1990. Appellant's Exhibit 21; Transcript at 247-48. 16. Stroh's labor agreement provided for a wage increase of $.25 per hour beginning on January 1, 1991. Transcript at 37, 167, 169-70. In bidding on the contract, Stroh had planned that the majority of the required labor for the project would be ----------- FOOTNOTE BEGINS --------- [foot #] 7 The term "victaulic fittings" is explained in Finding 47. [foot #] 8 Mr. Cook was the estimator and project manager for this contract. Transcript at 27, 60. ----------- FOOTNOTE ENDS ----------- completed before December 31, 1990. Transcript at 38; Appellant's Exhibit 6. As a result of the Government-mandated delay in the commencement of field work, a significant number of labor hours were shifted from calendar year 1990 to 1991, costing Stroh an additional $.25 per hour for that labor. Transcript at 167. 17. In bidding, Stroh estimated that its labor hours would be divided as follows: 2,408 man hours would be incurred on or before December 31, 1990 and 267 man hours would be incurred after December 31, 1990. Appellant's Exhibit 3; Transcript at 167-69. 18. Stroh calculated its claim by comparing the distribution of its labor hours as bid to the distribution as it actually occurred. Transcript at 167-70. Because Stroh's accounting system did not track man hours, Stroh derived actual labor hours by dividing labor expenditures by an hourly wage rate. From its Committed Cost Report dated February 15, 1990, Stroh determined that it expended $32,624.35 on labor through the end of December 1990. Appellant's Exhibit 6; Transcript at 167- 68. Stroh divided this figure by its average wage rate of $23.03 per hour for the four men (two apprentices, one journeyman, one foreman) on the job to determine that approximately 1,417 man hours were expended through December 1990. Transcript at 169. 19. Stroh then divided its total labor costs for the project ($55,513.43) by the average hourly rate of $23.03 to arrive at 2,410 total labor hours. Appellant's Exhibit 9; Transcript at 169. Stroh subtracted the 1,417 pre-1991 labor hours from the 2,410 total labor hours to arrive at a total of 994 post-wage increase hours. Stroh then compared the actual total of 994 hours to the bid estimate of 267 hours and determined that it had shifted 727 hours from 1990 to 1991. Transcript at 169-70. Multiplying this number by the additional labor rate of $.25 per hour, Stroh calculated the dollar amount of $182 for wage escalation. Transcript at 170.[foot #] 9 ----------- FOOTNOTE BEGINS --------- [foot #] 9 Stroh's Wage Escalation Calculation ___________________________________ Labor dollars expended through 1990 $ 32,624.35 _________ Divided by Average Hourly Labor Rate 23.03 Equals Number of Labor Hours through 1990 = 1,417 Total labor dollars expended $ 55,513.43 _________ Divided by Average Hourly Labor Rate 23.03 Equals Number of Total Labor Hours = 2,410 Minus Number of Labor Hours through 1990 - 1470 _____ Equals Number of Labor Hours after 1990 994 Minus Estimated Labor Hours after 1990 - 267 Equals Additional Labor Hours after 1990 = 727 (continued...) ----------- FOOTNOTE ENDS ----------- Loss of Labor Efficiency Generally 20. Stroh performed much of the labor required under the contract during winter weather conditions as a result of the delay in commencing on-site work. Transcript at 114, 172. Although the chillers were originally scheduled to be delivered in October, Stroh could have, if it had been permitted to proceed with field work in mid-June as it had planned, performed significant preparatory work at the site prior to the arrival of the new equipment. Transcript at 109-10. The delay of all on- site performance from mid-June until October 15 shifted a considerable portion of the performance period from summer and early autumn months into colder winter months. Transcript at 85, 100-01. 21. Stroh presented expert testimony concerning the impact of winter weather conditions on labor efficiency. Transcript at 172-74. It is a well-recognized concept in the construction industry that working in winter weather conditions will reduce the efficiency of labor. The Mechanical Contractors' Association of America (MCAA) manual offers efficiency reduction percentages to estimate the probable cost effect of seasonal weather conditions on labor productivity.[foot #] 10 With respect to weather, for a minor condition, the manual proposes a ten percent adjustment; for an average condition, a twenty percent adjustment; and for a severe condition, thirty percent. Appellant's Exhibit 36. In calculating its quantum claim, Stroh has used the thirty percent factor for severe conditions. 22. The mechanical job estimate summary did not explicitly state the crew size Stroh planned to use to accomplish various tasks, such as demolition of old equipment and installation of new equipment, at the time it prepared its bid. Transcript at 247-48. Stroh's estimator and executive vice president both testified, however, that Stroh had determined that overall the optimum crew size would be two men. Working 80 hours a week the job would take 34 weeks or 238 calendar days. Transcript at 29- 30; 114. This would have just allowed Stroh to complete the job within the required 240 calendar days. Transcript at 30. ----------- FOOTNOTE BEGINS --------- [foot #] 9 (...continued) Wage Escalation 727 x $.25 per hour = $182 [foot #] 10 The percentages in the MCAA manual are accompanied by the caveat that modifications may be appropriate depending on the individual circumstances which vary from contractor to contractor, crew to crew and job to job. Appellant's Exhibit 36. ----------- FOOTNOTE ENDS ----------- 23. Stroh was not permitted to commence meaningful field work until October 15, 1990. As a result of the late start date for demolition, Stroh assigned a larger overall crew to perform the job than would otherwise have been needed in order to finish by the deadline specified under the contract. Transcript at 37, 114. 24. The superintendent slated to oversee this job had substantial experience in successfully completing this type of project. The need to increase crew size to complete the work in less time detracted from the efficiency of the two-man crew and created additional coordinating processes that would not otherwise have been necessary. Transcript at 114-16. Stroh's expert confirmed that expansion of the crew size may impact unfavorably on labor productivity. This concept is well recognized in the industry. The MCAA manual contains a range of efficiency reduction percentages to estimate the probable cost effect of crew size inefficiency. The impact percentages range from ten percent for minor conditions to thirty percent for severe conditions. Appellant's Exhibit 36. Stroh has used a ten percent factor for this impact. Stroh took its actual costs from cost reports and multiplied them by the ten percent factor to derive its claimed costs for this item. Transcript at 174. Mobilization 25. As a result of the delayed start and compressed schedule, Stroh added more men to the job and spent more time organizing tools and man-power than it would have otherwise. Transcript at 40-41. In particular, the project superintendent, Vern Peterson, spent an additional sixteen man hours over and above what he normally would have spent getting the right equipment to the job and coordinating the delivery of materials because the shortened job time required tighter scheduling. Transcript at 83-84, 171. Stroh thus claims $461 for sixteen hours of additional labor provided by Mr. Peterson. This amount was calculated by multiplying Mr. Peterson's hourly wage rate including markups by sixteen hours. Appellant's Exhibit 3; Transcript at 171. Demolition 26. Demolition work included removal of the chillers, a portion of the piping, and the cooling tower. Transcript at 41, 85. The cooling tower had to be torn down and packed for removal by crane. Transcript at 85. Stroh claims $6,610 for additional demolition costs occasioned by the delayed start of field work. Appellant's Exhibits 2-3. a. Compression 27. Stroh calculates a ten percent impact of $1,642 from compression of the schedule. Stroh had determined that the optimum crew for the project was two. Transcript at 42, 86. The project superintendent testified that if Stroh had been able to start the on-site work in June, it would have immediately proceeded with the demolition work. Transcript at 86. The compression of the schedule into a shorter period of time forced Stroh to use a "larger than optimum" crew size of four men, leading to a loss of efficiency. Transcript at 41-42, 87-88, 173. The superintendent's work was slowed because his supervisory duties increased with a larger work crew. Transcript at 87. Mr. Peterson spent about thirty to thirty-five percent of his time supervising the four-man crew. Based on his experience, he would have spent about ten percent of his time supervising a two-man crew. Transcript at 87. 28. Stroh's estimator pointed to the labor units column which stated 176 hours and total labor hours of 352 as evidence of an intent to use two men. Transcript at 224. 29. At the same time, certain handwritten notes on Stroh's pricing sheets suggest that Stroh intended to use four men crews on at least portions of the demolition work.[foot #] 11 Item 21, above the entry "cooling towers," contains the notations "4 men 1 wk 4 men 2 days S & S." Appellant's Exhibit 21. When asked if that was his estimate (that Stroh would assign four men to work on demolition of the cooling tower), Mr. Cook responded, "That is what I would have been figuring, that to do it in this time that is what it would take. Yes." Transcript at 225. When asked if his estimate for chiller labor was based on four men working four days, Mr. Cook conceded that it could be. Transcript at 224-25. ----------- FOOTNOTE BEGINS --------- [foot #] 11 Pricing Sheet 1-SE reads "4 men, 2 days" and "3 men - 10 days" under the material column. Appellant's Exhibit 21. Mr. Cook explained that "4 men, 2 days" refers to hoisting work involving use of a crane to remove the old equipment out of the basement to be loaded onto a truck. Transcript at 222-23. The notation above "3 men - 10 days" is difficult to discern but significant in that it refers to a greater than two man crew. Appellant's Exhibit 21. Pricing sheet 1 - SM, above the entry "chillers," has handwritten "4 men, 4 day 4 men 8 OT." Mr. Cook could not recall why those notations were there. Transcript at 224. ----------- FOOTNOTE ENDS ----------- b. Weather 30. The demolition work, in particular removal of the existing cooling tower, had to be performed outdoors, principally on the roof of the building. Transcript at 83-84, 172. It is significantly colder on top of a ten story building than on the ground. Transcript at 114. The wind and other weather elements necessitated the wearing of heavy clothing and gloves, which had a significant slowing effect on the amount of work that could be accomplished. Transcript at 41. 31. Stroh seeks $4,958 for the impact of adverse weather on labor efficiency. This represents a factor of thirty percent. Transcript at 41, 86, 88-89. Insulating Blankets 32. On December 17, a hole was cut in the exterior foundation wall of the building to enable Stroh to remove the existing equipment and install the new equipment. Transcript at 42, 91, 175; Appellant's Exhibit 5. Because the hole was cut during the winter, the opening had to be covered daily with insulating blankets to protect the existing piping from cold. Accordingly, two apprentices spent thirty to forty-five minutes each morning and night tearing down and putting back up the heavy blankets. Transcript at 42-43, 89, 91, 175. Had Stroh been able to proceed with field work in June, as it had planned, the hole in the building would have been cut in October, prior to the onset of freezing temperatures requiring the use of insulating blankets to protect piping. Transcript at 43, 89-90. 33. Stroh seeks $653 for the labor costs incurred as a result of the need to protect existing piping with insulated blankets. Transcript at 176; Appellant's Exhibit 3. This was considered to be the least expensive method of proceeding because it would have taken many more labor hours to transport the equipment up and down the staircases to avoid using the hole. In any event a hole would still have been needed to bring switch gear into the building. Transcript at 43. Domestic and Chilled Water Piping 34. Stroh seeks a ten percent compression impact of $568 for interior work on domestic and chilled water piping. Appellant's Exhibit 3; Transcript at 177. Labor inefficiency resulted from the use of a four man crew instead of a two man crew. Transcript at 44. Mr. Peterson testified that his ability to supervise was affected "a little bit," but he managed his time to minimize the impact. Transcript at 93-94. Condenser Piping 35. Stroh seeks an additional $1,847 for installation of condenser piping. The piping work was affected by both compression and adverse weather. Transcript at 95. Of the claimed amount, Stroh attributes $739 to a ten percent compression impact because the pipe work had to be completed in half of the time that would have been available had Stroh been allowed to proceed in mid-June. Transcript at 178. 36. Because approximately half of the piping was on the roof of the building, about half of the work was impacted by winter weather. Transcript at 44-45. The condenser piping was located outside on the top of the tower and, at the time it was installed, working conditions were impeded by ice and snow. Transcript at 95. Stroh thus claims a thirty percent impact for the fifty percent of condenser piping labor performed outdoors. Transcript at 178. The amount claimed is $1,108. Chiller Equipment 37. Stroh claims a ten percent impact of $552 in increased labor costs due to the need to use a larger crew in order to complete the work of installing the replacement chillers in less time. Transcript at 45, 96-97, 179. Stroh does not allege any extra costs by reason of weather because the chiller equipment was all located indoors. Transcript at 45. Cooling Tower 38. Stroh seeks $972 for additional labor costs for work associated with installing the new cooling tower. Transcript at 181-82. Although a subcontractor actually installed and erected the cooling towers, Stroh had to hoist the equipment up to the roof and hook up the cooling towers after they were erected. These costs were increased both by the shortened time frame for performance and by weather conditions. Transcript at 46, 97. 39. Stroh claims a ten percent impact for work on the cooling tower as a result of compression of the time for performance and the need to use a larger crew. This amounts to $143 of the total requested sum of $972. Transcript at 50, 97, 181-82. 40. The new cooling tower was installed and hooked up on the top of the roof. The cold and severe weather impacted this work. Transcript at 47. Stroh's foreman testified that "there were days we had to step in an out of wind to warm up when your hands get so cold you can't hang onto tools and stuff." Transcript at 97. Stroh claims $829 for a thirty percent weather impact on the cooling tower work. Transcript at 182. Punch List 41. The winter weather and compressed schedule also led to additional errors in construction, contributing to an increase in the punch list items that had to be completed at the end of the project. Transcript at 98-99. Stroh's expert explained that this type of impact is typical in the circumstances presented here, where the schedule is compressed and outdoor work is shifted into winter months. Transcript at 183-84. Stroh estimates the cost of completing the additional punch list items over and above what would normally be expected to be $2,425. Transcript at 183. This amount was arrived at by applying the 30 percent weather and the 10 percent compressed schedule factors as follows: $1,819 for severe weather and $606 for schedule impact. Transcript at 183-84. Vern Peterson 42. Vern Peterson was the foreman assigned to start this project during the second week of June. Transcript at 48, 80, 115-16. Because Mr. Peterson could not start field work at that time, he was sent to another project.[foot #] 12 Transcript at 48, 185. The other job, an "average, small project," could have been done by a first-year journeyman at a lower wage rate. Transcript at 80-81, 116. As a foreman, Mr. Peterson was paid $1.30 per hour more than a journeyman would have earned plus 28.24 % in markups. Transcript at 186. Mr. Peterson remained on the job until October 14 and began work on the Federal Building on October 15, 1990. Transcript at 82, 117. Stroh thus claims the amount of $1,190 for wages paid to Vern Peterson that were higher than the rate that Stroh would have paid for a journeyman during the time Peterson was expected to be working on the job but could not because of the delay.[foot #] 13 Electrical 43. The electrical work was performed by a separate crew, whose work was affected by the compressed period for performance because it had to track with the mechanical work. Transcript at 51, 117-18. This resulted in a ten percent inefficiency of $2,035. Transcript at 118, 187-88; Appellant's Exhibit 3. ----------- FOOTNOTE BEGINS --------- [foot #] 12 Stroh was not willing to lay Mr. Peterson off on a temporary basis because of the high probability that he would not be available to work for Stroh when the project could be started. Transcript at 185. [foot #] 13 Stroh's calculation is as follows: 89 working days (from June 11 - October 14, 1990) x 8 hours per day x $1.67 (wage and benefit differential) = $1,190. ----------- FOOTNOTE ENDS ----------- Material and Equipment Escalation Material 44. Stroh seeks an adjustment of $224 for higher material costs caused by the shifting of the work to the later period at the Government's direction. Transcript at 51; Appellant's Exhibit 3. Stroh calculated its material escalation claim by multiplying its material cost ($35,588) by the 1990 government escalation rate for materials (1.8%) by the 130-day alleged delay (.35 years). Stroh's expert explained that the calculation was made this way because Stroh did not purchase all of its materials in one lump sum. Transcript at 189. Stroh originally planned to purchase materials for the project right after receiving the notice to proceed during the first week of June 1990. Transcript at 51. After the Government postponement of the demolition work prior to mid-October, Stroh decided not to purchase materials in June in order to avoid storage costs. Transcript at 188. Equipment 45. Stroh claims $2,035 for equipment escalation. Stroh multiplied its total equipment costs ($32,000) by the 1990 Government escalation rate for equipment (5.3%) by the delay period (.35 years). Mr. Cook stated that if Stroh had been able to negotiate with its suppliers earlier, it could have received better prices on the equipment. Transcript at 52. The chillers constituted the majority of the dollar value of the equipment. Transcript at 53. Although Stroh paid less for the chillers than it anticipated, if Stroh had been able to order the chillers shortly after it received the notice to proceed (which it would have if it could have begun field work immediately), Stroh would have paid even less. Transcript at 53, 191. 46. In addition to the chillers, Stroh purchased cooling towers, pumps, and chemical treatment equipment. Transcript at 53. With the exception of some of the smaller items, the suppliers of this other equipment agreed to hold to their prices. Transcript at 53-54. Victualic Fittings 47. Initially, Stroh planned to use welded fittings in installing the replacement equipment. If there had been no delay, Stroh would in all likelihood have had most, if not all, of the welding completed by the end of October. Transcript at 100. Welding is not easy to perform in cold weather. Transcript at 191-92. After the Government ordered the postponement of outdoor work until after October 15, 1990, Stroh made a business decision to use victualic, rather than welded, fittings. Transcript at 246. In a victualic system, the same pipe is used as with welding, but the fittings are grooved and held together by gaskets. Transcript at 54-55. Stroh chose to use victualic fittings to avoid the need for welding outdoors during the winter weather. Transcript at 55, 192. Because of the wind and cold, it would have been necessary to build screens and barriers around the welds, which would have been very inefficient. Transcript at 55, 101. 48. Victualic fittings are more expensive than welded fittings, but this difference is offset to some extent by lower labor expenses required. Transcript at 55. For example, victualic work did not require screens. Transcript at 101. Even so, victualic work was impacted to a degree by the weather. Transcript at 55-56, 102. In cold weather, the gaskets necessary for victualic sealing get very cold. Transcript at 102. Stroh's expert testified that although there was a winter weather impact on the victualic fittings work, it was much less significant than the impact the weather would have had on welded pipe. Transcript at 192-93. 49. The expected reduction in man-hour requirements from use of victualic fittings was not realized on this project because Stroh could not groove the fittings and put them together at the job site, which did not have adequate storage space for full lengths of pipe. Transcript at 236-37. Instead, Stroh had to groove the fittings off-site, bring them to the job site, and hoist them up to the roof. Transcript at 236. 50. Stroh has calculated that $4,997 is the net additional cost of using victualic fittings in lieu of welded fittings. Transcript at 56; Appellant's Exhibit 3. This amount is the cost overrun for steel pipe and fittings as reflected in the committed cost report. The job estimate was $17,296 for steel pipe and fittings, revised to $21,080 and the actual cost of victualic fittings was $26,076.74, an additional $4,996.74. Transcript at 56-57; Appellant's Exhibit 3. Underabsorbed Home Office Overhead Dick Cook 51. Stroh claims $12,834 for the additional time that one of its vice presidents, Mr. Cook, spent on the job as a result of the delay. Transcript at 197; Appellant's Exhibit 3. Mr. Cook served as the project manager under this contract. As a result of the delay, he spent more time "coordinating with suppliers and subcontractors to get [the work] done in a quicker time and the materials there quicker and make sure that they were there in a timely manner when we needed them, and getting the contractors to work -- do their work according to the weather conditions." Transcript at 56-57. Mr. Cook testified that from June 8 until the end of June, he spent thirty-two hours a week restructuring the job, and that he would normally spend four to six hours working on a similar project. Transcript at 58, 122, 145, 195; Appellant's Exhibit 3. From July until October 15, Mr. Cook's activities on the project consisted of normal project management and required only the time that would usually be expected. Thus, there was no additional cost for this period. Transcript at 58- 60, 195-96; Appellant's Exhibit 3. 52. Once the field work began on October 15, through substantial completion on February 7, Mr. Cook spent approximately eighty percent of his time (thirty-two hours per week) on the project. Transcript at 59-60. During this time Mr. Cook was coordinating work with Mr. Peterson and subcontractors, and rescheduling work because of weather problems. Ordinarily, Mr. Cook would have spent approximately four hours per week on a project of this nature. Transcript at 60; Appellant's Exhibit 3.[foot #] 14 53. For the first period, Stroh calculated twenty-eight additional hours per week were spent, resulting in sixteen extra working days. Transcript at 195. For the second impact period Stroh calculated twenty-eight extra hours per week for a total of seventy-eight additional working days by Mr. Cook. Transcript at 196. Adding the sixteen extra days to the twenty-eight extra days yields a total impact of ninety-four working days. This, divided by five working days per week, equals 18.8 weeks minus one week of planned time, which equals 17.8 weeks. Multiplying 17.8 weeks by twenty-eight hours yields 498.4 man hours, which divided by forty man hours per week comes to 12.46 billable weeks. Multiplying this by $1,030 per week equals $12,834, the additional overhead costs sought for Mr. Cook's time over and above what would have been required had the project proceeded as planned. Transcript at 196-97. Punch List - Dick Cook 54. Stroh claims $2,060 for additional cost of the project manager's time after February 9, 1991. Transcript at 197. The project manager was responsible for managing the punch list. Transcript at 197. Due to the longer punch list, Mr. Cook spent more of his time overseeing its completion than he would have ----------- FOOTNOTE BEGINS --------- [foot #] 14 Stroh provided the following chart depicting the added time for Mr. Cook: Dates Estimated Normal Time Actual Time _____ _____________________ ___________ June 8 - end of June 4 to 6 hours per week 32 hours per week July - October 15 no impact October 15 - February 7 4 to 6 hours per week 32 hours per week 78 + 16 = 94 additional work days 94/5 = 18.8 weeks - 1 week planned = 17.8 weeks 17.8 x 28 hours/week = 498.4 man hours 498.4/40 = 12.46 billable weeks 12.46 weeks x $1030/week (Cook's salary) = $12,834. ----------- FOOTNOTE ENDS ----------- otherwise. Transcript at 61, 197. Based on his experience, he was required to spend approximately two additional weeks overseeing punch list items caused by the impact of the delayed start. Transcript at 61. Applying the thirty percent weather factor and the ten percent compression factor, this is allocated as $1,545 for weather impact and $515 for the compressed schedule impact. Transcript at 198. Underabsorbed Home Office Overhead 55. Stroh claims the amount of $137,481 for underabsorbed home office overhead. Although Stroh originally used the Eichleay formula, applied to the alleged 130 day delay, Appellant's Exhibit 1, Stroh subsequently modified its theory of recovery. Stroh now seeks money for overhead it was unable to absorb because it lost revenue after it could not bid for other projects. Stroh's claim for this item is thus based on its reduced ability to bid for mechanical work because the delay required its mechanical estimator to spend extra time managing this job. Transcript at 62. 56. At the time the contract was awarded, Stroh's mechanical estimator, Mr. Cook, was responsible for between eighty to ninety percent of Stroh's mechanical estimating. This consisted of about four to eight projects per month, ranging in value from $60,000 to $4 million. Transcript at 62-63, 121. Stroh successfully bid for about twenty to twenty-five percent of the projects that Mr. Cook estimated. Transcript at 63, 121. Because of the delay to this project, however, Mr. Cook was unable to estimate other projects during the period from October 15 to February 7, 1991. Transcript at 62, 64, 200. 57. Stroh's general manager and executive vice president, John Stenberg[foot #] 15, testified that no one at Stroh could replace Mr. Cook as the project manager so that he could continue estimating during the period from October 15 to early February when he was required to spend extra time overseeing this project. It is Stroh's customary policy for the person who estimated a job to manage it because "the same person has the feeling for the job. He has taken it off. He know[s], he has some feeling what the labor is, how to put the jigsaw puzzle together." Transcript at 140. Mr. Stenberg also testified that time did not permit him to take over as project manager. Transcript at 140-41. In addition, Mr. Cook had started management of the job and dealt with all the problems. Transcript at 204. ----------- FOOTNOTE BEGINS --------- [foot #] 15 Mr. Stenberg was general manager and executive vice president for Stroh, reporting to the company president. As general manager, Mr. Stenberg oversaw all work for Stroh, with primary responsibility for the service division. Transcript at 108-09. ----------- FOOTNOTE ENDS ----------- 58. At the same time, Stroh was not able to make arrangements for a substitute mechanical estimator. Transcript at 126-28. Other Stroh employees were not trained to perform the mechanical estimating previously done by Mr. Cook. Mr. Stenberg could not undertake additional estimating responsibilities because he was already working long hours and had not estimated large projects of this nature in years. Transcript at 126-27. Stroh's other estimator was fully occupied with project management and the performance of electrical estimates. Transcript at 127. Stroh's president did not have the expertise to complete the estimates. Transcript at 128. According to Stroh's expert, it was not feasible to hire an outside estimator to perform this function temporarily because a new estimator would not be familiar with the inner workings of Stroh and its historical values, and the estimator would not have Mr. Cook's management experience. Transcript at 203. Even if Stroh had been able to find another estimator right away, Mr. Stenberg testified that it would be six months before the estimator was sufficiently familiar with Stroh's estimating system and had gained the confidence of the firm to replace Mr. Cook in this capacity. Transcript at 128-29. Furthermore, Mr. Cook was only occupied on this project for four months and an additional estimator would not be needed after that. Transcript at 129. 59. The inability of Mr. Cook to estimate new mechanical projects from October 1990 until February 1991 caused a loss of income to Stroh on projects it would otherwise have successfully bid for. There were plenty of projects to bid during this period. Transcript at 64, 130. As a result of Stroh's inability to estimate and resultant inability to bid new projects from October 15, 1990 through February 1991, Stroh's revenues fell from February of 1991 though July of 1991. Transcript at 124. In March, Mr. Cook was able to begin estimating again and Stroh returned to its "normal" sales pattern in September and October 1991. Transcript at 125. 60. Stroh's expert testified that the revenue stream from the project was originally scheduled to begin in June 1990. Transcript at 199. Instead, Stroh's revenues dipped in June, July, and August. Transcript at 199. Accordingly, the project was not absorbing Stroh's overhead during those months as planned. Transcript at 200. The billings were made up later in the November and December time periods when most of the work was accomplished. Transcript at 200. 61. Stroh has provided the following calculations to arrive at its claimed amount for underabsorbed overhead: 1. Calculation of Amount of Lost Revenue During Impact Period as Percentage of Expected Revenue 1990 Monthly Revenue $2,898,700 (1990 Revenue)/12 (months) = $241,558 Anticipated Revenue During Feb. - July 1991 $241,558 (monthly 1990 revenue) x 6 (impact months) = $1,449,348 Actual Revenue During Feb. - July 1991 $595,794 Lost Revenue (Anticipated Feb. to July - Actual Feb. to July) $1,449,348 - $595,794 = $853,554 $853,554 (lost revenue) $1,149,348 (anticipated revenue) = 58.89% shortfall 2. Calculation of Mechanical Overhead and Apply Shortfall Percentage $1,839,457 (mechanical sales 1991) = 39.59% $4,645,856 (total contract sales 1991) $1,179,252 (total company overhead 1991) x 39.59% (mechanical share of sales) = $466,907 attributable to mechanical work $466,907/2 = $233,454 = mechanical overhead from Feb. - July 1991 3. Application of Shortfall Percentage to Overhead During Affected Period $233,454 x 58.89% = $137,481 Overhead, Profit, and Small Tool Expenses 62. Stroh claims $5,225 for additional direct overhead expenses. Transcript at 135, 210. Stroh applied an 18.2% rate to additional costs from wage escalation, labor inefficiency, and material and equipment escalation, totalling $17,495. Transcript at 210. The 18.2% rate was based on historical data and Stroh's bid. Transcript at 135-36, 209. 63. Stroh claims $18,774 for a ten percent profit. Transcript at 211. Stroh's expert testified that a ten percent profit is standard for change orders and was similar to what Stroh originally anticipated. Transcript at 211. This profit figure was applied to all additional expenses claimed. Transcript at 211; Appellant's Exhibit 3. 64. Stroh claims $1,428 for additional small tool expenses. As Stroh buys small tools, it charges them to its small tool account. Transcript at 210. At the end of the project, the account equalled 8.16% of labor cost. Transcript at 146, 210. Stroh applied this 8.16% to its additional labor costs because small tool expenses increase with increased labor costs. Transcript at 136-37, 210. Small tool expenses compensate for wear and loss of tools. Transcript at 136. Mr. Stenberg testified that Stroh's figure was within the industry range. Transcript at 137. Stroh customarily bids its small tools as a percentage of labor. Transcript at 209. Bond Premium 65. Stroh seeks an additional bond premium of .63% on the additional contract monies awarded to compensate it for the costs incurred as a result of the Government's order postponing commencement of demolition prior to October 15. Appellant's Exhibit 3; Transcript at 137-39, 212. Stroh pays its bond premium based upon the final contract amount, including pricing adjustments. Transcript at 212. Discussion In addition to challenging the adequacy of Stroh's proof of its increased costs, at the outset, the Government disputes Stroh's entitlement to recover portions of the costs claimed. These costs are the "compression damages" and the "underabsorbed overhead" sought by Stroh. With respect to "compression" costs, respondent maintains that the Board lacks jurisdiction to entertain this aspect of appellant's claim; as to the underabsorbed overhead, it is respondent's position that the Board similarly lacks jurisdiction over appellant's revision of this claim from an Eichleay-based formula to a claim for underabsorbed overhead incurred as a result of a diminished revenue stream. Respondent also maintains that even if the Board has jurisdiction to decide this element of Stroh's claim, there is no legal entitlement to recover such costs. Jurisdictional Issues Compressed Schedule Costs Stroh characterizes its claim for additional costs incurred by reason of loss of labor efficiency as a result of the reduction in the contract performance period as "compression damages." According to respondent, Stroh first identified this element of additional cost in proceedings at the Board; the claim before the contracting officer only explicitly identified loss of labor efficiency due to severe winter weather. Appellant's Exhibits 1-4. Respondent contends that the elements of Stroh's damage claim described as "compression" costs actually comprise a claim for the effect of acceleration of the work, and as such was a new claim that was required to be presented to the contracting officer before it could properly be considered by the Board.[foot #] 16 See Placeway Construction Corp. v. ----------- FOOTNOTE BEGINS --------- [foot #] 16 In addition to its objection that the "compression" elements of Stroh's quantum claim were never properly presented to the contracting officer, respondent asserts a second basis for questioning the Board's jurisdiction. In (continued...) ----------- FOOTNOTE ENDS ----------- United States, 920 F.2d 903 (Fed. Cir. 1990); Santa Fe Engineers, Inc. v. United States, 881 F.2d 856 (Fed. Cir. 1987). In its February 25, 1994 opinion the Board did not rule on this issue with respect to appellant's "compressed schedule" costs, but recognized that a claim for acceleration damages may, under some circumstances, require different elements of factual proof than a delay claim and thus could be a different claim requiring a separate decision by the contracting officer. Stroh Corp., 94-2 BCA at 133,206 (citing Trepte Construction Co., ASBCA 38555, 90-1 BCA 22,595). Respondent now argues that the compressed schedule costs, which primarily encompass reduced productivity of labor and a portion of the underabsorbed overhead claimed by Stroh, can not be deemed part of the initial claim which was certified in August of 1990. In respondent's view, the "compressed timeframe" damages are necessarily based on a legal theory that acceleration of contract performance was constructively ordered by the Government. More specifically, respondent contends that because Stroh completed contract performance on time, the only permissible legal theory for recovery of the "time compression" damages is constructive acceleration. Relying on Utley-James, Inc., GSBCA 5370, 85-1 BCA 17,816, respondent asserts that Stroh must, with respect to these costs, prove the elements of acceleration, i.e. facts which demonstrate that there was a need for acceleration, a Government direction to accelerate, and that Stroh accelerated its work. The elements of acceleration were not, according to respondent, part of the nucleus of operative facts in Stroh's certified claim. Stroh, in response, defines its claim in terms of the broad remedial purpose of an equitable adjustment defined as "the difference between the reasonable cost of the work required by the contract and the actual reasonable cost to (the contractor) of performing the changed work, plus a reasonable amount of overhead and profit." Greenwood Construction Co., AGBCA 75-127, 78-1 BCA 12,893, at 62,831. Thus, any costs that are ----------- FOOTNOTE BEGINS --------- [foot #] 16 (...continued) particular, respondent cites SAE/Americon - Mid-Atlantic, Inc. v. ____________________________________ General Services Administration, GSBCA 12294, 94-2 BCA 26,890, _______________________________ to support the argument that because Stroh's entire claims dated February 1, 11, and 25, 1994 were never certified, the Board does not have jurisdiction over them. Because we conclude that these claims essentially clarify and augment the certified claim submitted to the contracting officer in 1990, however, recertification was not required. See, e.g., J.F. Shea Co. v. ___ ____ _________________ United States, 4 Cl. Ct. 46, 54 (1983); Lorentz Bruun Co., GSBCA _____________ __________________ 8504, et al., 88-2 BCA 20,719, at 104,699; cf. Tecom, Inc. v. __ ______________ United States, 732 F.2d 935 (Fed. Cir. 1984) (if the initial ______________ claim was under $50,000, a revision based on new information which causes the claim to exceed $50,000 will not require certification). ----------- FOOTNOTE ENDS ----------- reasonable and can be connected to the Government delay are recoverable. The added costs of proceeding under the shortened time frame required by the Government-imposed delay are a direct result of the suspension of the work. The Board is not, Stroh maintains, required to find a constructive acceleration by the Government to award these costs. In light of the facts in the fully-developed record in this case, a reexamination of the holding of Trepte Construction Co., ASBCA 38555, 90-1 BCA 22,595, persuades us that there is no jurisdictional bar to Stroh's claim of compressed schedule damages. In Trepte, after initially claiming relief based upon impact damages arising out of a stop-work order, the contractor filed an amended complaint alleging that certain Government actions constituted a "constructive acceleration for which [appellant] is entitled to an equitable adjustment under the changes clause in the contract." The amended complaint sought recovery of $476,800, the same amount as claimed in the request for the contracting officer's decision and in the original complaint. Id. The Government moved to strike the paragraph alleging constructive acceleration on the basis that the requirements to prove constructive acceleration differ from those required to prove entitlement to delay damages, and therefore the claim should have first been presented to the contracting officer. Id. The Board stated that the determination of whether allegations constitute a new claim "turns on whether the matter raised before the Board differs from the essential nature or the basic operative facts of the original claim." Id. The Board further explained: The introduction of additional facts which do not alter the nature of the original claim, a dollar increase in the amount claimed before the Board, or the assertion of a new legal theory of recovery, when based upon the same operative facts as included in the original claim, do not constitute new claims. Id. at 113,386-87. The Board then compared the elements required for proof of delay damages with those required for acceleration damages and found that the elements were different. The Board observed that compensation for delay damages required proof that the delay was Government caused and establishment of its effect upon performance. Id. at 113,386. In contrast, constructive acceleration had three distinct elements, including (1) the existence of excusable delay, (2) notice to the Government of the delay and a request for an extension of time, and (3) an express or implied Government order. Id. Because the elements of proof of the two theories were substantially different in Trepte, and the constructive acceleration basis for recovery was never presented to the contracting officer, the Government's motion to strike was granted. Id. The Board observed that the return of appellant's acceleration claim to the contracting officer would not necessarily waste resources because the contracting officer "could very well have increased that compensation had constructive acceleration been claimed. . . ." Id. In contrast to the circumstances of Trepte, we find here that the compressed schedule costs do not constitute a new claim but rather an extension of claims which the contracting officer had the opportunity to consider. With the benefit of a fully- developed record, it is clear that the claim for compression damages is indeed based on the same operative facts as the other claims: the Government's insistence that the cooling system not be disrupted until October 15 and subsequent delay of on-site work, resulting in a shortened performance period. Stroh explicitly notified the Government that it objected to the delay in commencing performance and required an extension of time. The Government effectively ordered Stroh to proceed as directed and complete the work within the original performance period. Thus, even if constructive acceleration were the only permissible legal theory to support recovery of compressed time frame costs, the facts underlying such a recovery were effectively presented to the contracting officer in Stroh's original claim and are not substantively different from those litigated before the Board. As such, there is no jurisdictional bar to recovery. See, e.g., Diversified Marine Tech, Inc., DOTBCA 2455, et al., 93-2 BCA 25,719. Underabsorbed Home Office Overhead In the claim initially submitted to the contracting officer, Stroh sought underabsorbed home office overhead for the alleged 130 calendar days of delay from the date of notice to proceed to the date that the cooling system could be shut down. Stroh calculated its damages under the Eichleay formula and reasoned that "[b]ecause of the unanticipated nature of this change order, Stroh is unable to replace the 'lost' work (due to lead times, restraints on bonding capacity and lines of credit) in order to 'absorb' the overhead expense during the originally planned construction period." Appeal File, Exhibits 9, 11. Stroh subsequently changed its theory of recovery for unabsorbed overhead. Beginning with its February 1, 1994 amended complaint, Stroh maintained that [Dick Cook] was not able to perform his normal estimating duties and therefore he was not able to help Stroh secure projects in early to mid 1991. For that reason the revenues for the mechanical contracts dropped during the period of time until he could get this project completed, get back to estimating new projects, get them on line, and get revenues coming to cover the overhead. Appellant's Exhibits 2-4; Findings 51-52. The Government argues that Stroh's claim for underabsorbed home office overhead based on lost revenues is a new claim which that Board is without jurisdiction to consider because it was never presented to the contracting officer. In support of its argument, the Government observes that Stroh's new legal theory has resulted in a different period of damages from the claim submitted to the contracting officer. Stroh's initial calculation, based on the Eichleay formula, resulted in alleged damages occurring from the middle of June to October 15, 1991 (the delay of on-site work), while the new theory alleges that the damages occurred during February through July 1991 (period of lost revenues from inability to bid on contracts). Thus, according to the Government, Stroh has "changed its tune." Once again, the "same operative facts" test is applicable. Stroh's original computation of underabsorbed home office overhead was based on a straight application of the Eichleay formula using a figure of 130 days of delay.[foot #] 17 Stroh's new theory is based on the delay's alleged effect on the work of the project manager and his resultant inability to bid on other mechanical work. Although the new theory (1) requires additional facts regarding the work of the project manager and Stroh's mechanical estimating ability, (2) increases the dollar amount of the claim and (3) asserts a new legal theory of recovery, each of these is permissible so long as the significant operative and related facts remain the same.[foot #] 18 Quantum Appellant seeks an adjustment to the contract price in the amount of $214,505, representing the increased costs it claims were incurred to perform the subject contract as a result of the Government's direction to postpone the removal of chiller equipment until after October 15. To obtain an equitable adjustment, a contractor must show three necessary elements: liability, causation, and resultant injury. Servidone Construction Corp. v. United States, 931 F.2d 860, 861 (Fed. Cir. 1991) (citing Wunderlich Contracting Co. v. United States, 351 F.2d 956, 968 (Ct. Cl. 1965)); Electronic and Missile Facilities, Inc. v. United States, 416 F.2d 1345, 1355 (Ct. Cl. 1969); ----------- FOOTNOTE BEGINS --------- [foot #] 17 Stroh subsequently determined that application of the Eichleay formula was inappropriate because there was no ________ "uncertain length of the [delay in the] performance period under the contract." Appellant's Post Hearing Reply Brief at 3. [foot #] 18 Respondent's challenge to Stroh's legal entitlement to recover underabsorbed overhead under its non- Eichleay formula is addressed below in the discussion of individual items of cost. ----------- FOOTNOTE ENDS ----------- Warwick Construction, Inc., GSBCA 5070, et al., 82-2 BCA 16,091, at 79,854. It is appellant's burden to demonstrate and prove the fact and amount of loss with sufficient certainty that the determination of the amount of an adjustment due the contractor is more than mere speculation. Lisbon Contractors, Inc. v. United States, 828 F.2d 759, 767 (Fed. Cir. 1987). To the extent that the Government has changed the work under a contract, the changes clause entitles a contractor to the increased costs of performance resulting from the change. Freeman Darling, Inc., GSBCA 7112, 89-2 BCA 21,882, at 110,102. The appellant must establish both (1) reasonableness of costs and (2) causal connection to delays caused by change orders. An equitable adjustment is a corrective measure which is simply intended to keep a contractor whole when the contract has been changed by the Government. E.g., Greenwood Construction Co., 78- 1 BCA at 62,831. The key is to put the contractor in as good a position as he would have been but for defendant's actions. George Bennett v. United States, 371 F.2d 859 (Ct. Cl. 1967). To the extent the Government's actions are more properly regarded as a suspension of the work, the contractor is similarly entitled to recover increased costs of performance, but may not recover profit associated with such costs. Warwick Construction Co., 82- 2 BCA at 102,960; Dravo Corp., ENGBCA 3915, 79-1 BCA 13,603; Finding 3. In this case, the Government's actions are most properly characterized as a suspension of the work, for which recovery is provided under the Suspension of Work Clause of the contract. Recoverable increased costs of performing delayed work include escalation in wages and the price of materials and equipment. See Berkeley Construction Co., VABCA 1962, 88-1 BCA 20,259; Garcia Concrete, Inc., AGBCA 78-105-4, 82-2 BCA 16,046; Excavation-Construction, Inc., ENGBCA 3858, 82-2 BCA 15,770, reconsideration denied, 83-1 BCA 16,388. Another allowable cost is the cost of labor and equipment that has remained idle or is underutilized, subject to reasonable efforts to mitigate the expense. Laburnum Construction Co., 325 F.2d 451 (Ct. Cl. 1963); Hardeman-Monier-Hutcherson (JV), ASBCA 11785, 67- 1 BCA 6210, at 28,748-49. Loss of efficiency is also a proper element of recovery. Luria Brothers & Co. v. United States, 369 F.2d 701 (Ct. Cl. 1966); Youngdale & Sons Construction Co. v. United States, 27 Fed. Cl. 516 (1993); Warwick Construction, Inc., 82-2 BCA 16,091; Sun Shipbuilding & Drydock Co., ASBCA 11300, 68-1 BCA 7054. Individual Elements of Increased Cost Wage Escalation Increased labor costs occasioned by increases in wage scales that become applicable as a result of Government-ordered delay are properly compensable. See J.D. Hedin Construction Co. v. United States, 347 F.2d 235, 257 (Ct. Cl. 1965), overruled in part on other grounds sub nom. Wilner v. United States, 24 F.3d 1397, 1402-03 (Fed. Cir. 1994); Garcia Concrete, Inc., 82-2 BCA 16,046. Stroh seeks $182, the amount it calculates was incurred by reason of the shifting of labor hours that would have been incurred in 1990 into 1991. Since the Government is responsible for these increased costs, we find that Stroh is entitled to recover this amount. Loss of Labor Efficiency - Generally The loss of labor productivity resulting from improper delay is also a proper element of damages. Luria Brothers, 369 F.2d at 712. To recover for loss of labor efficiency the contractor must demonstrate that a particular work activity was impaired by an action taken by the Government. To prove this, the contractor must show the normal or expected level of performance and must also show the extent to which the Government's action impacted that performance, reducing labor efficiency. Southwest Marine, Inc., ASBCA 39472, 93-2 BCA 25,682 (1992). It has also been recognized that loss of labor productivity is difficult to prove with exactitude and that the need to resort to estimates does not necessarily preclude recovery. Luria Brothers, 369 F.2d at 713; Southwest Marine, 93-2 BCA at 127,764. In fact, it is rare when the loss of productivity can be proven by books and records; the contractor must frequently resort to proof by expert witness. Even so, mere estimations are not sufficient. Id. In this case, Stroh has met its burden to show that the Government's actions reduced the efficiency of its labor force in two ways: 1) the work was shifted into adverse winter weather conditions, and 2) the reduced amount of time left for accomplishing demolition of the existing chillers and installation of the new equipment forced Stroh, at least for some of the work, to use a less than optimum crew size to perform the work. Labor Efficiency - Compression of the Schedule Stroh had less than half of the original time to complete the work because the start of on site work was pushed back from Stroh's planned start on June 11 until October 15, 1990, when Stroh was allowed to shut down the cooling system. Stroh claims that the reduction of the on-site performance period from 240 days to 110 days caused Stroh to abandon its original plans to use a two-man crew for much of the work and forced Stroh to use a less efficient four-man crew.[foot #] 19 Findings 22- 23. Stroh's expert witness testified that loss of labor ----------- FOOTNOTE BEGINS --------- [foot #] 19 As discussed below, there is evidence that Stroh would have used a four-man crew for certain efforts, particularly demolition of the existing equipment, even had it not been forced to postpone commencement of the on-site work. Finding 29. ----------- FOOTNOTE ENDS ----------- efficiency due to working under a compressed schedule is well- recognized in the construction industry. Finding 27. The expert relied on the Mechanical Contractor's Association of America (MCAA) manual to obtain the efficiency reduction percentages he used to calculate Stroh's additional costs. The ten percent factor used was for a minor impact. Finding 27. Stroh took its actual costs from cost reports and multiplied them by a ten percent factor from the MCAA manual. Given the testimony of Stroh's employees and its expert witness, this was a reasonable and supportable percentage to use for this purpose. Labor Efficiency - Severe Winter Weather That winter weather and adverse weather conditions reduce the efficiency of the labor force "only stands to reason." Luria Brothers, 369 F.2d at 712. Stroh persuasively maintains that it was forced to perform considerably more of the contract work during winter weather conditions as a result of the delay of on- site work. Findings 11-12. Although the chillers were originally scheduled to be delivered in October, Stroh has demonstrated that it would have begun on-site work in mid-June because there was work that needed to be done prior to the arrival of the new equipment. Finding 20. The delay of demolition activities at the site from mid-June until mid-October shifted the performance period into colder months. Finding 26. Stroh's expert credibly testified as to the acceptance of the concept of loss of labor efficiency from work done in severe winter weather. Finding 30. He relied on the MCAA manual for the percentages he used to calculate the effect of the winter weather on Stroh's costs. Similar to its compression calculation, Stroh took its actual costs from cost reports and multiplied them by percentage impacts from the MCAA manual. Finding 61. Although we agree that Stroh was forced to perform much of the outdoor work in colder weather and that this reduced its efficiency, we are not persuaded that the severity of the weather has been shown to justify application of the thirty percent factor across the board. There is substantial testimony that for a substantial portion of the performance period, severe winter weather, particularly cold temperatures and wind chill, impeded labor productivity. To compensate for the fact that at least some of the outdoor work would have been performed in October and early November, in relatively moderate conditions, and for the lack of evidence as to daily temperatures and conditions, we conclude that a factor of approximately twenty-five percent, representing a compromise between average and severe seasonal conditions, should be applied. The claimed costs are adjusted accordingly. Labor Efficiency - Quantum Mobilization Costs Stroh does not specify the wage rate of Mr. Peterson, and we have not located it in the record. Based on the number of hours and dollar amount claimed for this item, however, it appears that Stroh is claiming $28.81 per hour for Mr. Peterson.[foot #] 20 We allow the total amount of $461 as demonstrated and reasonable. Demolition The added demolition costs are based on both time compression and weather factors. With respect to the compression costs requested, the evidence is inconclusive as to the size crew that Stroh would have used. Although witnesses testified that a two man crew could have performed the job had the Government not delayed commencement until after October 15, the written notations on the estimating sheets, and testimony of one of the witnesses, suggests that Stroh may well have intended to use a four man crew for demolition. Thus, we do not allow the $1,162 claimed for compression costs for this item. We are persuaded that Stroh has produced credible evidence that its demolition efforts were adversely impacted by unfavorable winter weather conditions. The amount claimed by Stroh for this impact is $4,958. As discussed above, this amount is adjusted to reflect an approximate twenty-five percent factor; the amount awarded is $4,130. Insulating Blankets Stroh has shown that the requirement to put up and remove the insulating blankets was a result of the Government-ordered delay. Findings 32-33. The contractor is entitled to recover for the cost of extra protective measures required to protect the work against winter weather where those measures are required as a direct result of the Government's actions delaying performance. J.D. Hedin Construction Co., 347 F.2d at 256. We award $653, the amount of the labor costs Stroh has demonstrated were incurred in the performance of this task. Chilled Water Piping/Condenser Piping/Chiller Equipment/ Cooling Towers The added costs claimed by Stroh in connection with performance of the installation of these replacement items under the contract are discussed in Findings 34-40. Based on the evidence of record, the costs associated with the compressed schedule have been sufficiently demonstrated and are allowed. These costs come to $568 for installation of domestic and chilled ----------- FOOTNOTE BEGINS --------- [foot #] 20 This figure matches the entry next to Mr. Peterson's name in the expert's notes regarding appellant's claim and interviews with appellant's employees. Appeal File, Exhibit 151. ----------- FOOTNOTE ENDS ----------- water piping; $739 for installation of condenser piping; $552 for installation of the chiller equipment; and $143 for costs associated with hooking up the cooling towers. Adverse weather had an impact on the work with respect to condenser piping installed on the roof and the hook up of the cooling towers on the roof. Stroh claims weather impacts on labor efficiency of $1,108 (condenser piping) and $829 (cooling towers). After adjusting these amounts by a reduced weather factor, the amounts allowable for reduced labor efficiency are, respectively, $915 and $650. Punch List The evidence of record supports the conclusion that increased costs were in fact incurred in connection with the performance of added punch list items as a result of compression of the performance time and winter weather conditions. Finding 41. Thus, we allow the claimed amount of $606 for schedule impact and adjust the weather factor claimed to award the amount of $1,515 for winter conditions. Vern Peterson Stroh's decision to retain its experienced foreman, Mr. Peterson, to ensure it would be in a position to perform the contract properly after October 15 was reasonable. Stroh mitigated the added costs as best it could by assigning Mr. Peterson to other work. Finding 42. The claimed amount of $1,190 is allowed. Electrical Stroh has demonstrated entitlement to the extra costs of performance of the electrical work incurred as a consequence of the compressed schedule. We award the full amount of $2,035. Material and Equipment Escalation Materials and Equipment Stroh's witnesses credibly attested that had they been able to purchase materials and equipment when planned, in early summer 1990, the costs would have been lower than those incurred when they were finally able to order the equipment later in the year. Stroh was not in a position to order the equipment earlier than it did and store it until it was ready to be used. Stroh is entitled to recover the increased costs claimed of $6,215. Victualic Fittings We grant Stroh the full amount requested, $4,997, for the increased cost of using victualic fittings. Stroh presented credible testimony that choosing victualic fittings mitigated its weather impact because welding would have been severely affected by the weather conditions. Findings 47-50. This amount is reasonable and represents an appropriate effort to mitigate the effect of the suspension of work. Underabsorbed Home Office Overhead Stroh's claim for "underabsorbed" overhead is divided into three components -- the cost of additional time devoted by its project manager, a home office employee, to overseeing the project[foot #] 21; the cost of additional time of its project manager in overseeing the correction of punch list items; and the loss of revenues occasioned by the fact that its project manager was also the principal estimator for mechanical projects and was unable to perform his estimating duties during the compressed time frame for performance of the contract work. Respondent offers three principal arguments to support its position that Stroh is not entitled to recover underabsorbed home office overhead. First, respondent contends that (1) the period for contract performance was not delayed. Second, respondent points out that Stroh failed to use the required Eichleay formula. Third, respondent urges that such damages are unrecoverable because they are unforeseeable and speculative. With respect to the argument that the overall period of contract performance was not delayed, we note that Stroh fully intended to begin contract work before October 15 and that there was sufficient work to be done before arrival of the chillers such that Stroh was effectively delayed in its commencement of the work for 130 days after receipt of the notice to proceed. The manner of performance is largely within the discretion of the contractor. It would be good business sense for Stroh to plan on performing as much of the contract as possible before the onset of winter weather. The Government and appellant disagree on whether Stroh is required to use the Eichleay formula for its calculation of underabsorbed home office overhead. The Government maintains that under Wickham Contracting v. Fischer, 12 F.3d 1574 (Fed. Cir. 1994), Eichleay is the exclusive method to recover underabsorbed home office overhead. Appellant responds that Wickham applies only to unabsorbed overhead, not underabsorbed overhead, and that the Eichleay formula is only used when Government delays cause the work period to exceed the contract ----------- FOOTNOTE BEGINS --------- [foot #] 21 Had Stroh reflected the time spent by its project manager as a direct cost chargeable to the contract rather than including his entire salary in overhead, this amount, and time devoted to overseeing correction of punch list items, might well have been recoverable. On the record before us, however, we are unable to adjust Stroh's overhead claim so as to allow recovery of these amounts as a direct added cost of performing the contract. ----------- FOOTNOTE ENDS ----------- completion date or intended early completion date. Because Stroh's calculation of damages is not based on a completion date, Stroh argues that Eichleay is not applicable. In its place, appellant has utilized the "Stroh formula," which it claims is based on the same principles and data as Eichleay. To use the formula for home office overhead recovery provided in Eichleay, a court or board must find compensable delay and that the contractor could not have taken on other jobs. Wickham Contracting, 12 F.3d at 1577. Where the Eichleay prerequisites are met, Eichleay is the exclusive method for allocating overhead to delay of government contracts to compensate the contractor for unabsorbed home office overhead. Id. Here, the Eichleay prerequisites are not met. The Eichleay formula requires some degree of uncertainty as to the duration of the delay which makes it impracticable for the contractor to take on work. C.B.C. Enterprises, Inc. v. United States, 978 F.2d 669 (Fed. Cir. 1992). In this case there was no such uncertainty as Stroh knew from the time it was informed that on-site work could not commence in the summer months that the delay would be until October 15. Furthermore, Stroh is not entitled to an award of underabsorbed home office overhead under its modified Eichleay formula because, in reality, this claim seeks recovery of consequential damages. See Prudential Insurance Co. of America v. United States, 801 F.2d 1295 (Fed. Cir. 1986), cert. denied, 479 U.S. 1086 (1987).[foot #] 22 To be recoverable, ----------- FOOTNOTE BEGINS --------- [foot #] 22 In Prudential, a contractor terminated the __________ Government's lease, but the Government did not vacate the premises for ten months. During this period, the contractor informed the Government that it was negotiating a new lease which included the Government-occupied space and that it would suffer substantial damages if the Government did not vacate. The contractor was able to negotiate a new lease that included the Government-occupied space with a tenant already in the building. Subsequently, the tenant terminated the lease because the space occupied by the Government was not available by the required date. As a result of the Government's actions, the contractor was damaged not only by loss of a tenant for the property leased to the Government, but also loss of revenues from property in addition to that occupied by the Government. The Court of Appeals for the Federal Circuit followed Supreme Court precedent as to contracts between private parties, holding that "the party who breaches a contract can only be held responsible for such consequences as may be reasonably supposed to be within the contemplation of the parties at the time the contract was made." 801 F.2d at 1300 (citing Globes Refining Co. ___________________ v. Landa Cotton Oil Co, 190 U.S. 540, 544 (1902)). The Court of ______________________ Appeals upheld the Claims Court's determination that at the time (continued...) ----------- FOOTNOTE ENDS ----------- consequential damages must be foreseeable at the time of contract award. Land Movers, Inc., ENGBCA 5656, 92-1 BCA 24,473. Foreseeable means within the contemplation of the parties at the time of award. For damages to be recoverable, there must be no intervening incident; the Government's actions "must produce the effect inevitably and naturally." Ramsey v. United States, 121 Ct. Cl. 426, 433 (1951); accord Clark & Hirt, IBCA 1508-8-81, 84- 1 BCA 17,134, at 85,352-53. In this case, it would not be realistic to expect the Government to have foreseen that Stroh would be unable to bid for other contracts if the work was delayed because Stroh had only one mechanical estimator who would be forced to devote all of his time from October 1990 until February 1991 to the contract. Stroh's inability to bid on other mechanical contracts during the period from mid-October through early February was not a natural and probable consequence flowing from the Government-imposed delay. Stroh's reliance on a single person for its mechanical estimating and its decision to make him project manager were intervening causes of Stroh's damages. Overhead, Profit, and Small Tool Expense The award to Stroh under categories I (wage escalation), II (loss of labor efficiency), and III (material and equipment escalation) totals $24,999. Applying Stroh's 18.2% overhead rate to this amount, we find that Stroh is entitled to recover the amount of $4,550 in increased overhead. Small tool expenses are computed as a percentage of categories I and II. Applying the 8.16% factor to the increased costs awarded of $ 12,938 yields an adjusted amount of $1,125. Under the Suspension of Work Clause, profit is not allowable. The amount claimed for profit is thus disallowed. Bond Premium A contractor is entitled to recover the additional bond premium it is required to pay on pricing adjustments recovered under the contract. See, e.g., Proserv, Inc., 78-1 BCA 13,066, at 63,811 n.1. Stroh will incur a bond premium in the amount of .63% of the pricing adjustment of $29,600 awarded under this decision. See Findings 13-14. This amounts to $193. The total amount awarded is as follows: I. WAGE ESCALATION $ 182 ----------- FOOTNOTE BEGINS --------- [foot #] 22 (...continued) the lease was entered it was not foreseeable by the Government that if it held over the landlord would incur losses beyond the loss of a tenant for the property that the Government actually leased. Id. at 1301. ___ ----------- FOOTNOTE ENDS ----------- II. LOSS OF LABOR EFFICIENCY $ 14,157 Mobilization $ 461 Demolition $ 4,130 Insulating blankets $ 653 Domestic and chilled water piping $ 568 Condenser piping $ 1,654 Chiller equipment $ 552 Cooling towers $ 793 Punch list $ 2,121 Vern Peterson $ 1,190 Electrical $ 2,035 Total $ 14,157 III. MATERIAL & EQUIPMENT ESCALATION $ 11,212 Material $ 224 Equipment $ 5,991 Subtotal $ 6,215 Victualic Fittings $ 4,997 Total $ 11,212 IV. SUBCONTRACTOR ESCALATION $ - 0 - V. UNDERABSORBED HOME OFFICE OVERHEAD $ - 0 - VI. OVERHEAD, PROFIT AND MISC. $ 5,820 a. Overhead (18.2% of Items I, II, and III) $ 4,650 b. Small Tool Expense (8.16% of Items I and II Labor) $ 1,170 c. Profit (10% of Items I - V, VIa. and VIb.) $ - 0 - Total $ 5,820 VII. BOND PREMIUM $ 198 Subtotal Items I - VI $31,371 Bond Premium (0.63%) $ 198 TOTAL AWARDED $ 31,569 ____________ Decision The appeal is GRANTED IN PART as to quantum. Specifically, Stroh is entitled to recover $31,569 plus interest as provided under the Contract Disputes Act of 1978. 41 U.S.C. 611 (1994). _______________________ CATHERINE B. HYATT Board Judge We concur: ______________________ _______________________ ANTHONY S. BORWICK EDWIN B. NEILL Board Judge Board Judge