Opinion
Civ. NO. 97-0342 SEC. "B"(5)
March 28, 2000
OPINION
Nature of Action
This is a contract dispute between third-party plaintiff Traylor Brothers, Inc. (TB) and third-party defendant the Port of New Orleans (Port). TB bid on and the Port awarded TB the contract to serve as the prime contractor on Wharf C of the Nashville Avenue wharf project. The project was eventually completed, after encountering numerous delays and difficulties. TB filed this third party suit against the Port, claiming, in essence, that the project as built was not the project bid on, and seeking damages for expenses incurred of $14,000,000. The Port has filed a counterclaim against TB seeking liquidated damages in the amount of $985,000.
Trial on the merits was conducted, ending March 22, 1999. The Court took the ruling under advisement and requested that the parties submit post trial briefs.
Parties' Contentions and Discussion
Traylor Bros., Inc.'s (TB) primary complaint is that the delays caused by unknown infrastructures to the dredging and concrete pile driving portion of the project caused a "ripple effect", leading to delays throughout the entire project. The dredging subcontractor, T.L. James Company, Inc. (TLJ), discovered site conditions which differed so drastically from that set forth in the request for bids and plans that they began keeping an unknown infrastructure log. TLJ recorded in that log all infrastructures encountered which were not discoverable from the original plans.
A concrete slab was encountered in the middle of the dredge area by TLJ. This was also an unknown infrastructure, and consequently neither TLJ nor TB had the necessary equipment on-site for the removal of the slab. The Port was notified of the existence of the slab on December 22, 1994. On January 20, 1995, a diver was sent down to determine the nature of the slab and found a solid piece of concrete, 36' across x 25' toward outriver x 2' thick. The Port delayed taking any action for the removal of the slab, resulting in TLJ demobilizing and leaving the job on March 14, 1995. It wasn't until March 31, 1995 that the slab was removed. The Port subcontracted this job to an outside operation.
TB argues that the Port knew there were obstructions in the site area, but merely directed the bidders to its map room. TB also argues that it relied entirely on the bid package. However, TB also knew that there were obstructions in the area due to ongoing demolition work. Furthermore, the contract itself put bidders on notice that there were unknown infrastructures in the site area, and referred them to the Port map room and archives for detailed maps of the area.
Maintenance dredging had to be done due to river conditions and siltation problems. This was beyond the control of either party. The contract shifted this risk onto TB by requiring a certain grade before rip-rap placement and pile driving could be done.
TB estimates that almost 40% of the piles were driven out of tolerance due to obstructions and soil conditions. This resulted in TB having to purchase a different form system for the pile caps. Additionally, the contract called for a 4-inch tolerance on the pilings. However, even when that was accomplished, TB discovered that the design layout of the rebar allowed only a 1-1/2 inch tolerance. This required extensive retying of the rebar cage, which also contributed to delay in the project stages which occurred after placement of the rebar cage.
TB also argues that it had to cutoff roughly 75% of the concrete piles, as they were too long once driven to the appropriate depth. The pile driving was bid at a per pile cost of installation. A cutoff is part of that installation. The contract states that there shall be no measurement or payment for cutoffs on the concrete piles. ¶ 7, p. 2367-6. TB did not allow for any cutoffs in its bid as a margin of error.
The Port has withheld $287,000 from TB for demurrage charges for barges which transported the concrete piles from the manufacturer to the site. The Port insisted that TB could not release the barges until it was ready to accept another shipment of pilings (each shipment being 4 barges). Due to the delays in dredging and pile driving, TB was not ready to accept a new shipment each time one was completely unloaded. There was no basis in the contract for the stance taken by the Port. The clause simply states that demurrage shall accrue if TB fails to release the barges from a single shipment within a 168 hour unloading window. Addendum 3, p. 2637-3.
Discussion of Facts and Law
TB's claim is essentially for equitable adjustment due to changed conditions, breach of contract and associated delays. TB has the burden of proof. L.G.W., Inc. v. Redman, 496 So.2d 384, 389 (La.App. 4th Cir. 1986). TB cannot merely show that the work was made more difficult. Schenk v. Capri Construction Co., 194 So.2d 378, 380 (La.App. 4th cir. 1967)
Generally speaking, it is a question of law as to whether or not a changed condition exists. Perini Corporation v. United States, 381 F.2d 403, 415 (Ct.Cl. 1967). However, the latter case deals with a federal construction contract, between a contractor and the federal government. The instant case is a contract between a contractor and a division of a state municipality. As noted by TB in their brief, Louisiana law controls this contract. Therefore, any reference by the Port to United States Claims Court cases and the law contained therein does not have binding precedential value in the instant matter, but only persuasive effect where not inconsistent with Louisiana contract law.
As a matter of law, the conditions actually encountered in the field must have been reasonably unforeseeable based on all the information available at the time of the bid. The contractor must demonstrate that it reasonably relied upon its interpretation of the contract and related documents and that it was damaged as a result of the material difference between the expected and encountered conditions. Stuyvesant Dredging Company v. United States, 834 F.2d 1576, 1581 (Fed. Cir. 1987)
We agree with TB that, in this diversity case, any ambiguity in the contract should be interpreted against the Port. Con-Plex v. La. D.O.T.D., 439 So.2d 567 (La.App. 1st Cir. 1983). Generally, the owner is responsible for things caused by defects in the plans and specifications. Spearin v. United States, 248 U.S. 132, 136, 39 S. Ct. 59, 61 (1918).
The project built was essentially the same project that was bid, with some changes which were compensated by price adjustments. Cf. Wunderlich Contracting Company v. United States, 351 F.2d 956 (Ct.Cl. 1965). The Port acknowledged payment for the unforeseeable marine leg footing or slab on the river bank. This payment was made because the Port was unaware of the slab's existence and the slab does not appear on any of the drawings in the Port's archives/ map room.
At the time of the slab's removal, TB was driving piles at Station 187 + 50, 350 feet away from the slab or a distance of almost 30 bents of pilings. This removal occurred long before it could have caused any delay or disruption of TB's work; there is no persuasive evidence from TB otherwise. Any delays experienced must be of an unreasonable duration and proximately caused by the owner's actions for the contractor to be entitled to equitable adjustment. Id. at 967.
Regarding the issue of dredging and rip-rap placement, the hydrologist testified that siltation and scour were caused by the natural action of the river. Had the work been done in the proper assembly line fashion (dredge, rip-rap, pile drive), there would not have been a problem with maintenance dredging and the design grade would have been maintained. The risk of the siltation and scour problem was shifted to TB by the contract, as the contract required a specific grade before pile driving and rip-rap placement could proceed. When delays are occasioned by factors beyond the control of either party, the contractor cannot recover damages for those delays; nor can the owner recover liquidated damages for the delay. Cf. J.D. Hedin Construction Company v. United States, 347 F.2d 235, 253 (Ct.Cl. 1965). It was reasonably foreseeable for a prudent bidder or contractor to encounter varying river currents and accompanying siltation problems in wharf/bridge work on the lower Mississippi River.
The contract, at para. 7, p. 2367-6, states that there shall be no measurement or payment for cutting off the 18" concrete piles. A cutoff is part of that per pile cost of installation discussed earlier. TB has never specified the exact number of cutoffs, but the experts opined about 75%. TB did not allow for any cutoffs in its bid, although the experts testified a competent contractor would.
Regarding the soil conditions, TB hasn't shown that the conditions in the documents were materially different from those encountered in the field. Sample soil information provided a reasonable representation of the site conditions.
Test piles are driven to confirm or establish the load capacity of the pile. The pile driving criteria changes were not a major deviation from the original, but were adjusted due to soil variation at the site. Any assumptions made by the contractor regarding the test piles are done at the contractor's risk. TB failed to make allowance for the dense sand shown in the contract documents, and has failed to demonstrate any material difference between the conditions in the contract and those encountered in the field.
In United States v. Rice, 317 U.S. 61, 63 S.Ct. 1942 (1942), the Court held no damages were owed a contractor where delays were attributable to changes caused by unsuitable soil on the work site. And where, in anticipation of changes and delays, the contract provides a method to seek extension, which the Port as owner reserved the right to grant, the failure by TB to properly and timely seek extensions does not, standing alone, open the door for TB to seek delay damages. Cf. Crook v. U.S., 270 U.S. 4, 46 S.Ct. 184 (1926) and U.S. v. Howard P. Foley, 329 U.S. 64, 67 S.Ct. 154 (1946). As an example, change orders involving extra work by Painter Smith, the project's railroad subcontractor, were approved and paid for by the Port to Painter Smith and TB. TB's argument and evidence for monetary damages associated with railroad work delays fails to support entitlement to such an award.
Delay does not per se mandate damages. Delays caused by the Port only entitle the contractor to extensions of time, not damages. The Port also claims that it was not given proper notice in writing of any delays encountered, even though TB spent over a year preparing its claim. Note: Article 8 of the Specifications, PE 1.1; Pretrial Order Uncontested Facts Nos. 10 17d; and Article 5-31 of Specifications. TB has no damages for delay.
TB's reliance upon evidence of the Port's administrative shortcomings is negated by related evidence that TB made numerous personnel changes in key positions.
Even if damages were due, TB's use of the total cost method has not met the legal requirements for justifying the use of that method. Those requirements are: 1) impractibility of proving actual losses directly; 2)reasonableness of the bid; 3) reasonableness of actual costs; and, 4) lack of responsibility for added costs. Dawco Construction, Inc. v. United States, 930 F.2d 872 (Fed. Cir. 1991). TB failed to present reliable proof of its claimed damages.
The Port has withheld $287,000 for barge demurrage. TB argues that the Port's insistence on TB not releasing barges after unloading until TB was ready to accept another 4 barges of pilings has no basis or authority in the contract. This was the result of a side agreement between the Port and the piling supplier. We agree with TB. It was grossly unreasonable for the Port to punitively assess demurrage charges against TB under the foregoing circumstances.
There is no contractual or legal basis that exempted TB from the ultimate responsibility for payment of local taxes. TB's argument and evidence here is unconvincing.
Lastly, the Port fails to convince us that liquidated damages are due. It acknowledges that some delays are inevitable in a major construction project and gave instances when a claimed delay was unforeseeable by any party, including but not limited to discovery and removal of the large marine leg footing or slab, and river siltation and scour problems.
ORDER AND JUDGMENT
Accordingly, IT IS ORDERED AND ADJUDGED that: (1) Traylor Brothers, Inc. shall be awarded $287,000, representing intentionally withheld payments by the Port of New Orleans due to demurrage charges, plus interest and related reasonable costs and fees associated with this award only and; (2) The remaining claims by Traylor Brothers, Inc. and the counterclaim by the Port of New Orleans shall be dismissed, with each side bearing their respective costs and fees related to and/or associated with all dismissed claims and counterclaim.
New Orleans, Louisiana, this 23 rd day of March, 2000.