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Kiewit Construction Appeals Decision for Equitable Adjustment

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Kiewit Infrastructure West Co. appealed a judgment of the U.S. Court of Federal Claims denying its request for equitable adjustment for the cost of purchasing wetland mitigation credits. The judgment originated from a suit under the Contract Disputes Act (CDA) seeking equitable adjustment for the cost of purchasing wetland mitigation credits at government-designated waste sites.

Background

In June 2012, the Western Federal Lands Highway Division of the FHA issued a solicitation for a road design and reconstruction project (Deweyville project). The project was for the realignment and reconstruction of 12 miles of road through Tongass National Forest on Prince of Wales Island in Alaska. In conjunction with the issuance of the solicitation, solicitors were provided a Waste Disposal Sits Investigation Report that identified locations where contractors could dispose of waste materials generated from road construction. The report stated, “the criteria for establishing waste disposal sites included identifying locations that would minimize negative impacts to wetlands, wildlife, fisheries, streams, and karst formation.”

The solicitation for the Deweyville project stated the contractor was responsible for obtaining any necessary permits and clearances to complete the project. Contractors were required to purchase wetland mitigation credits if necessary. The solicitation also included the Revised Standard Specification 105.06 (RSS 105.06). The provision stated, “no further analysis of the environmental impacts of using government-designated waste sites would be needed unless an expansion of a site were proposed.”

The FHA awarded the Deweyville project to Kiewitt in August 2012. In March 2013, Kiewitt requested an equitable adjustment from the Deweyville project manager for the cost of purchasing mitigation credits for the wetlands it encountered in the waste sites. Kiewit asserted the additional cost was “compensable under the contract changes clause” of the contract with FHA. Jane Traffalis, the Deweyville project manager stated the claim for equitable adjustment should be considered a “differing site condition claim” rather than constructive change. She argued the contract with FHA did not “represent anything about the presence or absence of wetlands at the disposal sites identified in the Waste Site Report and … a reasonable site investigation would have revealed the presence of wetlands.” After rejecting Kiewitt’s additional request for equitable adjustment, Ms. Traffalis issued a final decision in January 2015 rejecting Kiewit’s claim.

Kiewitt appealed to the Court of Federal Claims where it argued the presence of wetlands at government-designated waste disposal sites was a constructive change to its contract with FHA and a differing site condition. The court granted summary judgment in favor of the government. It found “no further analysis of the environmental impacts of using waste sites” would be required unless a contractor chose to expand those sites.” Kiewitt filed an appeal with the U.S. Court of Appeals. The court reviewed the grant of summary judgment de novo.

Contract Dispute Act

The CDA resolves contract disputes between contractors and the government. The exercise of CDA jurisdiction by the Court of Federal Claims requires “a final decision by a contracting officer on a valid claim.” The claim must have a “clear and unequivocal statement that gives the contracting officer adequate notice of the basis and amount of the claim.” The Court of Federal Claims stated Kiewit properly presented a constructive change claim to the contracting officer. It found no dispute that the contracting officer issued a final decision on the claim. The government argued the Court of Federal Claims “erred in exercising jurisdiction” because Kiewit did not submit a certified claim for a differing site condition to the contracting officer, and the officer never issued a final decision on such claim.

The Court of Federal Claims stated, “two claims may be considered the “same” for CDA jurisdictional purposes if “they arise from the same operative facts, claim essentially the same relief, and merely assert differing legal theories for that recovery.” The court stated it didn’t need to resolve whether Kiewit’s differing site condition and constructive change claims should be considered separate claims. Kiewit’s request for an equitable adjustment could be assessed under a constructive change rubric. It found it “unnecessary to consider its alternative theory of recovery based upon an alleged differing site condition.”

Kiewit’s Constructive Change Claim

A constructive change occurs where a contractor performs work beyond the contract requirements without a formal order. Kiewit asserted it performed work beyond the requirements in the contract with FHA because it was required to purchase mitigation credits for wetlands in government-designated waste disposal sites. Kiewit argued the solicitation indicated contractors would not be required to conduct environmental impact analysis of the government-designated waste sites unless it decided to expand those sites. It concluded it would not need to perform wetland analysis on those sites.

The Court of Federal Claims agreed with Kiewit. It noted the dispute between Kiewit and the FHA was on the term “environmental impacts” in RSS105.06. The specification states that unless if a contractor expands the government-designated waste sites, “no further analysis of the environmental impacts of using” such sites would be necessary.” The government argued wetland mitigation credits were excluded from the “environmental impacts” covered by RSS 105.06 because it did not refer to “section 404 of the Clean Water Act or to wetlands, but only to NEPA.”

The Court of Federal Claims found the government’s argument “unavailing.” It noted RSS 105.06 broadly states, “no further analysis of the environmental impacts of using sites” would be required. The court stated that if the government intended to exclude wetland impacts from RSS 105.06, it should have included language to that effect. The court also found no merit in the government’s argument. It stated it could not accept that because the government-waste sites received NEPA clearance, it would exclude the analysis of wetlands from the provision that “no further analysis of the environmental impacts of using those sites” would be necessary. The Court of Federal Claims concluded that because the FHA, “as part of the NEPA process, had already undertaken evaluation of the effects of the Deweyville project activities on wetlands,” bolstered Kiewit’s conclusion that it would not need to conduct further wetlands analysis at the waste disposal areas.

Conclusion

The Court of Federal Claims reversed judgment of the U.S. Court of Federal Claims and remanded for further proceedings.

Are you experiencing a challenge from a government agency over a constructive change? Contact us today as Whitcomb, Selinsky, PC has a team of experienced government contract attorneys ready to help you.

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About the AuthorRaymundo Ribota

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