vs. ) CASE NO. 79-926BID
Respondent. )
Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, William E. Williams, held a public hearing in this cause on January 29 and 30, 1980, in Tallahassee, Florida.
For Petitioner: S. Kent Howell, Esquire and
Patrick A. Thompson, Esquire
Office of General Counsel Department of General Services Larson Building, Room 457 Tallahassee, Florida 32301
PCH Mechanical Contractors, Inc. ("Petitioner") filed a Petition for Release of Retention, Increase in Contract Price, and Other Relief dated April 16, 1979, seeking to recover from the State of Florida, Department of General Services ("Respondent" or "DGS") an amount not less than $94,614, together with interest, costs and attorneys fees as a result of disputes arising from Petitioner's performance of two contracts for improvements to the utility system at Florida State Hospital in Chattahoochee, Florida. The amounts which Petitioner seeks to recover are amounts alleged to be owing for delinquent payments from Respondent to Petitioner, amounts alleged to have been wrongfully retained as liquidated damages by Respondent under the two contracts, and additions to the negotiated contract amounts allegedly resulting from Respondent's refusal to allow Petitioner to commence construction as contemplated by the parties prior to the award of the two contracts. By letter dated April 20, 1979, Respondent requested the assignment of: a hearing officer from the Division of Administrative Hearings to conduct the formal hearing in this cause. Final hearing was scheduled for January 29, 30 and 31, 1979, by Notice of Hearing dated November 26, 1979.
At final hearing, Petitioner called Richard M. Crum as its only witness, and offered Petitioner's Exhibits 1 through 52, inclusive, each of which was received into evidence. Respondent called Larry Simmons, Thurman Duncan, T. A. Parker, Bryant Murray and Bill Rutherford as its witnesses. Respondent offered Respondent's Exhibits Numbers 1 through 6, each of which was received into evidence. In addition, the parties offered Joint Exhibits 1 through 5, which were also received into evidence.
At the conclusion of the final hearing, counsel for both Petitioner and Respondent waived the requirement of Chapter 120, Florida Statutes, that a Recommended Order be entered by the Hearing Officer within thirty days from conclusion of the final hearing.
On or about May 24, 1976, Petitioner and Respondent entered into a contract for State Project No. HRS-7525-A (hereinafter "Phase 1") for improvements to the utility system at Chattahoochee, Florida. The Phase I contract involved conversion of boilers located at that facility to fuel oil firing; additions to the system's cooling tower capacity; and repair of condenser shell and boiler stacks at the hospital. Petitioner was to be paid
;525,927 for work performed under the Phase I contract.
Although Respondent was referred to as the "owner" in the Phase I contract documents, it was responsible only for contracts and the work performed thereunder. The Florida Department of Health and Rehabilitative Services is the state agency responsible for operating Florida State Hospital and is referred to in the contract documents as the "using agency". The using agency's only responsibility under the Phase I contract was to coordinate periodic utility outages with Petitioner.
The firm of Tidewater Engineers, Inc. ("architect' or Tidewater") was referred to in the Phase I contract document as the Architect and/or Engineer. Tidewater engineered the Phase I contract, prepared the contract specifications, and provided general administration of the work performed under the contract.
Pursuant to the provisions of the Phase I contract, Petitioner received from Respondent a Notice to Proceed with construction dated June 28, 1976. In accordance with the contract documents, Petitioner was given 210 days, or until January 23, 1977, to complete construction on the project. Petitioner actually commenced work on Phase I on June 28, 1976. During the course of construction, Petitioner was granted a 23-day extension of time by change order, with a resulting extension of the tine for completion of the project through February 15, 1977.
The architect certified that Petitioner attained "substantial completion" of work, as that term is defined in the contract documents, on the project on February 23, 1977. Accordingly, "substantial completion" was accomplished eight-days beyond the date provided for in the contract, as modified by change orders approved by the architect.
The Phase I contract allowed Petitioner a period of 60 days between "substantial completion" and "final completion" of construction on the project. Thus, Petitioner was scheduled to conclude work on the project no later than April 24, 1977 However, "final completion" was certified by the architect to have been accomplished by Petitioner on July 21, 1977, or 88 day's beyond the period provided in the Phase I contract.
The Phase I Contract contained the following provision concerning liquidated damages for failure to attain "substantial completion" and "final completion" within the time limit agreed upon by the parties:
. . . it is hereby agreed that if the project is not substantially completed, according to the definition of "sub- stantial completion" in Article 8.3 hereof, or within such further time, if any, as in accordance with the provisions of the contract documents shall be allowed for such substantial completion, the Contractor shall pay to the Owner
as liquidated damages for such delay,
and not as a penalty, Two Hundred dollars ($200) for each and every calendar day elapsing between the date fixed for sub- stantial completion in Article 4 hereof and the date such substantial completion shall have been fully accomplished. It is also hereby agreed that if this project is not finally completed, in accordance with the requirements of the contract documents, the Contractor shall pay to the Owner as liquidated damages for such delay, and not as a penalty,
one-fourth of the rate indicated above. . . .
In accordance with the foregoing provisions of the Phase I contract, and in light of the 8-day overrun in attaining "substantial completion" and the 88-day overrun in attaining "final completion", the architect, by certificate dated December 12, 1978, assessed against Petitioner $1,600 in liquidated damages for failure to timely accomplish "substantial completion", and $4,400 for overruns on "final completion" of the project, for total liquidated damages of $6,000.
Petitioner contends that it should have been granted extensions of time by the architect sufficient to offset the amounts assessed as liquidated damages by virtue of its failure to-attain "substantial completion" and "final completion" within the time limits contained in the Phase I contract documents, as modified by change orders issued by the architect. The record in this proceeding establishes that additional delays in completion of construction of Phase I were attributable to an insufficient number of welders on the job site to complete construction as contemplated. Petitioner additionally asserts that adverse weather conditions and problems encountered by its subcontractors in interfacing the contract work with existing facilities caused unavoidable delay. In this regard, Section 8.3.1 of the General Conditions of the Contract for Construction provides that:
If the Contractor is delayed at any time in the progress of the Work by any
act or neglect of the Owner or the Archi- tect, or by any employee of either, or by any separate contractor employed by the Owner, or by changes ordered in the Work, or by labor disputes, fire, unusual delay
in transportation, unavoidable casualties or any causes beyond the Contractor's con- trol or by delay authorized by the Owner pending arbitration, or by any cause which the Architect determines may justify the delay, then the Contract Time shall be extended by Change Order for such reason- able time as the Architect may determine.
Further, Section 8.3.2 of the General Conditions provides that: [a]ll claims for extension of time shall be made in writing to the Architect no more than twenty days after the occurrence of the delay; otherwise they shall be waived
Petitioner did not timely submit a request for extension of time to reach "substantial completion" or "final completion" of construction on Phase I, nor is there any competent evidence in this proceeding to indicate that either Respondent or the architect agreed explicitly or by implication to waive the requirement of the contract documents that requests for extension of time be made in writing within twenty days of the occurrence giving rise to the request.
On or about October 19, 1976, after receipt and evaluation of competitive bids, Petitioner and Respondent entered into a contract for State Project Number HRS-7525-B (hereinafter "Phase II") . The Phase II contract involved demolition and removal of Boiler Number 5, installation of Boiler Number 9 and accessories, and other modifications to the steam distribution system at Florida State Hospital. Petitioner was paid a total of $276,322.44 for work performed under the Phase II contract. In addition, Tidewater also served as the architect on the Phase II contract.
Among the specifications contained in the Phase II contract documents as the following:
Bidders are required, before submitting their proposals, to visit the site of
the proposed work and completely familiar- ize themselves with the nature and extent of the work and any local conditions that may in any manner-affect the work to be performed, and the equipment, materials, and labor required. They are also required to examine carefully the drawings, speci- fications and other bidding documents, to inform themselves thoroughly regarding any and all conditions and requirements that may in any manner affect the work. [Original emphasis]. (Joint Exhibit number 2, p. B-4).
The specifications governing Phase II required Petitioner to attend a pre-construction conference before beginning work at the site, the purpose of which conference was to discuss the project under contract and prepare a program of procedure in keeping with requirements of the drawing and specifications." (Joint Exhibit number 2, p. H-1) . In addition, the Phase II specifications provided that it was Petitioner's responsibility " . . . to verify all conditions relating to the work in the field prior to proceeding with the installation." [Original emphasis]. (Joint Exhibit number 2, p. 1-1). The specifications further provided that where the work under the contract " . . .
ties into existing facilities [Petitioner] shall coordinate his work with the Owner so that a minimum of downtime and disruption will occur." (Joint Exhibit number 2, p. 1-1). The section of the Phase II specifications dealing with demolition and installation of the various boilers provided that:
It is imperative that the Contractor visit the jobsite prior to submitting his bid for the work. He shall carefully inspect the premises and shall include in his pro- posal such necessary contingencies as might be required by conditions at the site. Failure of the Contractor to visit the jobsite and include necessary contin-
gencies shall not relieve him from complete and correct prosecution of the work. (Joint Exhibit number 2, p. 6-1).
Finally, the Phase II specifications also provides that:
The plant will be in operation during construction. Any outages shall be scheduled at the convenience of the Owner and at a time designated by him. When required by Owner, temporary feeds will be provided by this Contractor to keep existing equipment in operation while installing new equipment.
On October 25, 1976, a conference was held at the construction site with representatives of Petitioner, Respondent, Florida State Hospital and the architect present. By letter dated October 26, 1976, Petitioner's president memorialized the discussions which occurred at this meeting as they applied to work under both Phase I and Phase 11. With respect to Phase II, this letter indicated that Petitioner's president:
. . . was advised by both [the architect] and [the hospital's representative] that the hospital must have the capability to fire three boilers at anytime during this
time of the year. [The architect] further advised that [Petitioner] could not start demolition of Boiler number 5 until all existing boilers are converted and checked out. [Petitioner's president] advised [the architect] that it would take [Petitioner] the minimum of six months to complete
Phase II of this contract after [Petitioner] is allowed to go to work. [The architect] advised that he would grant [Petitioner] this additional time from when [Petitioner is] allowed to proceed.
The evidence in this proceeding establishes that the demolition of Boiler Number 5 and the installation of Boiler Number 9 constituted the vast majority of work to be performed in Phase II. Accordingly, at all times following the meeting of October 25, 1976, Petitioner was aware that no date had
been established for commencement of the major portion of the Phase II contract work, but that it would be allowed an extension of time of six months to complete Phase II of the contract after receiving notice from Respondent to proceed with demolition of Boiler Number 5. The Phase II contract provided that work to be performed thereunder would be commenced within ten calendar days after receipt of a Notice to Proceed, and that work under that section of the contract was required to be "substantially completed" within 180 calendar days of receipt of the Notice to Proceed. However, as indicated above, Petitioner was advised at the October 25, 1976 meeting that it would receive, in addition to the time periods contained in the original Phase II documents, a 180-day period of time to complete the contract work after receipt of a Notice to Proceed with demolition of Boiler Number 5.
Petitioner received from Respondent a Notice to Proceed, dated November 4, 1976, establishing the starting date for the Phase II contract time as November 15, 1976. In accordance with the Phase II contract documents, the Notice to Proceed also established a "substantial completion" date of May 13, 1977. These dates were established subject to change consistent with the agreement between the parties reached at the October 25, 1976 pre-construction conference. The record clearly establishes that this Notice to Proceed was intended to allow Petitioner to begin that portion of the Phase II work not associated with demolition of Boiler Number 5 and installation of Boiler Number 9.
A second conference was held at the job site on November 15, 1976, which resulted in a pre-construction conference report signed by representatives of Respondent, Florida State Hospital, the architect and Petitioner. This report indicated that work on Phase II of the project was ". . . being delayed because of work on Phase I that the " . . . engineer agrees with delay on Phase II and suggests [Change Order] to extend time . .", and that a " . . . Change Order [is] to be issued when boiler is received and project starts." (Respondent's Exhibit number 1).
In reliance on the Notice to Proceed dated November 15, 1976, Petitioner apparently proceeded with some of the work called for under the contract, with the exception of work connected with the demolition of Boiler Number 5 and the installation of Boiler Number 9.
The understanding between the parties concerning the starting date for work on the two boilers was again memorialized in a letter from the architect to Petitioner dated December 7, 1976. That letter provided that:
Due to the circumstances involved while converting the existing boilers No. 6,
7 & 8 the institution has requested the use of boiler No. 5 during the conversion shut down. This boiler will remain in use until the new fuel oil pumping system is in operation serving the existing boilers No. 6, 7 and 3.
Since you have been notified to proceed with the Phase II contract and your con- strution time has begun, we will give you
180 calendar days from the time you are allowed to begin demolition of No. 5 boiler.
Please advise your subcontractors and suppliers of this change so they can arrange their schedules accordingly.
It appears that the work inside the
boiler room can begin about January 15, 1977.
The January 15, 1977 anticipated starting date referred to in the aforementioned letter apparently resulted from an estimate of the anticipated date of substantial completion of work on Phase I, which was scheduled for January 2.3, 1977. However, as a result of Change Orders issued on the Phase I project and construction overruns by Petitioner on the Phase I work, substantial completion was not reached on Phase I until February 23, 1977.
As a result, Respondent did not issue a Notice to Proceed with demolition of Boiler Number 5 until March 28, 1977. This Notice to Proceed established March 28, 1977 as the contract commencement time, and further established September 23, 1977 as the required date for substantial completion. This second Notice to Proceed also contained a notation that these new dates were being established because " . . . Project HRS-7525-A, Improvements to Utilities System, Phase I, was behind schedule, therefore the Using Agency could not shut dawn the existing boiler which is to be renovated under the contract." (Petitioner's Exhibit number 22).
In accordance with the earlier understanding by the parties reached on October 25, 1976, Petitioner was given a period of 180 days from March 28, 1977, in which to reach "substantial completion" of work on the project. In addition, the architect granted a 32-day extension by Change Order during the course of construction work. As a result, the date on which substantial completion was to have been reached by Petitioner was October 25, 1977. However, the architect certified that Petitioner attained substantial completion of work on the project on November 11, 1977, which constituted a 17-day overrun of the required substantial completion date.
The Phase II contract documents allowed Petitioner a period of sixty days from the date established for substantial completion to reach final completion of construction on the project. Accordingly, final completion of the project was scheduled to occur no later than January 10, 1978. However, final completion of work on the Phase II contract was certified by the architect to have been accomplished by Petitioner on February 16, 1978, 37 days beyond the date required by the contract documents.
The Phase II contract documents contained a provision that for each day of overrun in reaching substantial completion, the Petitioner would be assessed one hundred dollars as liquidated damages. In addition, the contract provided far a twenty-five dollar per day assessment of liquidated damages for each day of overrun in reaching final completion of the project. Accordingly, Petitioner was assessed $1,700 in liquidated damages for overruns on reaching substantial completion, and $925 for overruns in obtaining final completion.
Petitioner did not request an extension of time in accordance with the Phase II contract documents to offset the time overruns for which it was assessed liquidated damages. In addition, as with the Phase I contract, nothing in the record of this proceeding establishes that Respondent or its representatives in any way waived the notice provisions of the Phase II contract documents with regard to requests for extensions of time. Finally, the coordination problems encountered by Petitioner with materialmen which Petitioner asserts as justification for the overruns on the Phase II contract,
were among the matters which the contract documents required Petitioner to take into account in formulating its bid and cannot, at this late date, constitute an excuse for failure to comply with the time limits contained in the contract.
Periodic payments under both the Phase I and the Phase II contracts were scheduled to be made to Petitioner on a monthly basis depending upon progress in construction. The contract allowed Respondent to withhold 10 percent from the amount of each of the monthly progress payments as retainage. The contract documents also provided that upon substantial completion of the contract work, the 10 percent retainage figure could be reduced to 5 percent, in the discretion of the architect, with the remaining 5 percent constituting the final payment to be made upon final completion. All periodic payments were to be made to Petitioner upon approval by the architect.
Payment in the amount of $32,169.39 reducing Phase I retention from 10 percent to 5 percent was made on February 9, 1978, almost one year after the February 23, 1977, date certified by the architect for substantial completion on Phase I. Payment reducing retention on Phase II from 10 percent to 5 percent, in the amount of $34,730.70, was made on February 3, 1978, approximately three months after the November 11, 1977, certified date for substantial completion of construction on Phase II.
Final payment of all retention on Phase I, which payment amounted to
$20,451.50, was made on March 19, 1979, approximately 20 months after the July 21, 1977 certificate of final completion Issued by the architect. Final payment of all retention on Phase II, in the amount of $11,389.14, was made on May 29, 1979, approximately 15 months after the February 16, 1978, final completion date certified by the architect.
Petitioner claims that it is entitled to an award of interest on those parts of the contract sums remaining unpaid from the respective dates of substantial and final completion of the two projects until retainage payments were actually received. In this regard, the General Conditions of the contract documents contained a clause that provided that " . . [a]ny monies not paid when due to either party under this Contract shall bear interest at the legal rate in force at the place of the Project." (Joint Exhibit number 5 p. 12) However, in the specifications for both the Phase I and Phase II contracts there appears a clause which deletes the above-quoted interest provision in its entirety. It is, therefore, specifically found that the intent of the parties in deleting that portion of the contract documents providing for the payment of interest on past-due monies owing under the contracts was to relieve either- party from any liability for interest on such past-due amounts. Accordingly, Petitioner's claim for an award of interest on late payments is precluded by virtue of the provisions of both the Phase I and Phase II contract documents.
Finally, Petitioner claims entitlement to an increase in the contract sum on the Phase II contract because of its inability to proceed with demolition of Boiler Number 5 and installation of Boiler Number 9 until March 28, 1977. Petitioner calculates its claim for an increase in the contract sum based upon additional overhead expenses attributable to the lapse of time between the initial Notice to Proceed issued on November 15, 1976 and the second Notice to Proceed of March 28, 1977. In essence, Petitioner argues that there was nothing in any of the Phase II contract documents which would have put it on notice that construction on Phase II could not have commenced shortly after the award of the contract, and that it prepared its bid in reasonable reliance on its ability to begin construction shortly after the letting of the contract. Because of the using agency's need to keep Boiler Number 5 operating until completion of work
on Phase I, and the additional requirement that a coal chute at the hospital be left unblocked to facilitate unloading of fuel, Petitioner was not allowed to begin demolition of Boiler Number 5 until 134 days after issuance of the initial Notice to Proceed.
As indicated earlier in this Recommended Order, the Phase II contract documents required Petitioner
to visit the site of the proposed
work and completely familiarize [itself] with the nature and extent of the work and any local conditions that may in any manner affect the work to be performed, and the equipment, materials, and labor required . . . [Original emphasis]. (Joint Exhibit number 2, p. B-4).
The Phase II contract documents also required that "[w]here [Petitioner] ties into existing facilities, [it] shall coordinate its work with the Owner, so that a minimum of downtime and disruption will occur." (Joint Exhibit number 2, p.
1-1). Finally, the contract documents contained a provision that:
. . . If [Petitioner] is delayed at any time in the progress of the Work . . . by any cause which the Architect determines may justify the delay, then the Contract Time shall be extended by Change Order for such reasonable time as the architect may deter- mine. [Emphasis added]. (Joint Exhibit number 5, p. 12).
There is no provision in any of the Phase II contract documents setting a specific starting time for work on the project. Instead, the contract documents simply provide that "[t]he date of commencement of the Work is the date established in a notice to proceed (Joint Exhibit number 5, p. 12). In this regard, Petitioner knew at all times on and after October 25, 1976, that there would be a substantial delay in commencement of work on the demolition of Boiler Number 5. In accordance with the terms of the contract documents, Petitioner was advised on October 25, 1976, and at numerous times thereafter, that it would be granted the full 180-day time period to complete the Phase II work after receipt of a notice to proceed with demolition of Boiler Number 5. The record establishes that Petitioner acquiesced in this arrangement, and that it did not request an increase in the contract sum within twenty days of the October 25, 1976, meeting as it was required to do in the contract documents. (Joint Exhibit number 5, p. 17).
Finally, delays in commencement of work under the Phase II contract, unlike changes in or stoppage of the work once it has been started, cannot form the basis for an award of delay damages. Under the Phase II contract, delays in initial commencement of the work arising prior to the issuance of a notice to proceed can be redressed only by extension of the contract time. Accordingly, expenses incurred in preparation to perform work under the contract prior to the issuance of a notice to proceed, absent some contrary agreement, are undertaken at the contractor's risk. This is especially so under the facts of this case where Petitioner knew of the likelihood of delay on work on Phase II well in advance of the issuance of either of the notices to proceed, and where Petitioner itself, by virtue of its delinquencies in performing work under the
Phase I contract, thereby contributed to the delay in commencing work on Phase II.
Both Petitioner and Respondent have submitted proposed findings of fact in this proceeding. To the extent that those proposed findings have not been adopted herein, they have been rejected as either being irrelevant to the issues presented or as not having been supported by the evidence.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction of the subject matter and the parties to this action. Section 120.57, Florida Statutes.
Although all agency action involving the substantial interests of a party must be supported by competent substantial evidence, Section 120.68(10), Florida Statutes, where a party such as Petitioner in this proceeding seeks affirmative relief from an agency, the petitioning party bears the burden of proving by a preponderance of the evidence that the agency has acted arbitrarily or capriciously in denying the relief sought. See, Fitzpatrick v. City of Miami Beach, 328 So.2d 578 (3rd DCA Fla. 1976). The court in Agrico Chemical Company
v. Department of Environmental Regulation, 365 So.2d 759, 763 (1st DCA Fla. 1978) held that:
A capricious action is one which is taken without thought or reason or irrationally. An arbitrary decision is one not supported by facts or logic or despotic. Administrative discretion must be reasoned and based upon competent substantial evidence. Competent substantial evidence has been described as such evidence as a reasonable person would accept as adequate to support a conclusion.
The requirement that a challenger has the burden of demonstrating agency action to be arbitrary or capricious or an abuse of administrative dis- cretion is a stringent one indeed . .
Petitioner has failed to establish by a preponderance of the evidence that liquidated damages assessed against it in connection with work on both Phase I and Phase II was wrongfully withheld. In fact, the record in this proceeding clearly establishes that liquidated damages were properly assessed in accordance with the contract documents, that Petitioner did not timely request extensions of time to offset the time overruns giving rise to those assessments, and that neither Respondent nor its representatives waived the contractual provisions requiring submission of timely request for time extensions.
Petitioned's claim for interest on amounts of retainage withheld by Respondent is, under the circumstances of this case, barred by the terms of the Phase II contract documents. See also Burns, Kirkley and Williams Construction Co. v. Department of General Services, DOAH Case No. 75-1987.
Petitioner's claim for additions to the contract sum because of increased overhead due to delay in commencement of work on the Phase II contract should be denied because Petitioner knew of, and acquiesced in the delay before any such overhead expenses were properly incurred; Petitioner failed to give timely notice of its claim for additions to the contract sum; and the Phase II contract documents bar any claim for delay damages incurred prior to issuance of a notice to proceed instead requiring only a reasonable extension of time to complete the contract work, which extension was granted to the Petitioner on the Phase II project. See, e.g. Tuttle/White Constructors, Inc. v. Department of General Services, 371 So.2d 1096 (Fla. 1st DCA 1979)
That a final order be entered by the State of Florida, Department of General Services, denying the relief requested by Petitioner.
DONE and ENTERED this 12th day of May, 1980, in Tallahassee, Florida.
WILLIAM E. WILLIAMS
Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301
S. Kent Howell, Esquire and Patrick A. Thompson, Esquire
Sylvan Strickland, Esquire Office of General Counsel Department of General Services Larson Building - Room 457 Tallahassee, Florida 32301
