the defects. The evidence having established the cause of a particular defect and that the defect occurred in significant numbers of pipes over a substantial period of time, the refusal to permit such defects to be repaired did not constitute a change to the contract. The Government's refusal to permit certain other repairs which the evidence established was based on concern for the integrity of any repair generally rather than the contractor's continuing failure to take known corrective action did constitute a change to the contract. Contracts: Construction and Operation: Changes and Extras-Contracts: Disputes and Remedies: Burden of Proof Where the Concrete Manual placed limitations on the repairable area of certain defects and did not limit the repairable area of certain other defects but the evidence established that all such defects were not repairable without regard to magnitude and extent, and the evidence established that repairs normally permitted by the Concrete Manual were not allowed, but evidence of the extent of defects on rejected pipes was lacking, the Board holds that the contractor has failed to carry its burden of proof that pipes were improperly rejected. As to identified pipes which appellant's expert witness testified were repairable in accordance with the Concrete Manual, the Board holds that appellant has established prima facie that the pipes were improperly rejected. Contracts: Disputes and Remedies: Burden of Proof-Contracts: Performance or Default: Acceptance of Performance-Contracts: Performance or Default: Inspection Where substantial quantities of pipes which had been accepted were rejected on a subsequent inspection, and the evidence did not establish that the pipes did not conform to contract requirements, the subsequent rejection of the pipes was improper even though the initial acceptance was not the final acceptance contemplated by the contract and even though it is a general rule that the burden is on the seller to prove that goods rejected prior to acceptance conform to contract requirements. The Board holds that the initial acceptance; in the absence of evidence to the contrary, established that the pipes conformed to the requirements of the contract. Contracts: Construction and Operation: Changes and Extras-Contracts: Disputes and Remedies: Burden of Proof Where the Government refused to allow repairs to certain defects permitted by the Concrete Manual prior to conducting hydrostatic tests on the pipes and it appeared that at least some of the pipes would have passed the test and been acceptable if repairs in accordance with the Concrete Manual had been allowed, the Government by its actions has made the evidence unavailable and the Board utilizes a "jury verdict" approach to determine the number of pipes which could have been repaired under the Concrete Manual and made acceptable. Contracts: Construction and Operation: Changes and Extras-Contracts: Disputes and Remedies: Equitable Adjustments Where the Government required hydrostatic tests of pipes in excess of those specified by the contracts, the Board rules that the contractor's entitlement to compensation for such tests could properly turn on the results of the tests inasmuch as the Inspection and Acceptance Clause of the General Provisions (Standard Form 23-A, April 1961 Edition) allows the Government at any time before final acceptance of the entire work to request the removal of completed work at the contractor's expense if the work does not conform to contract requirements and for February 7, 1973 an equitable adjustment to the contractor if the work does conform to the contract. Contracts: Construction and Operation: Changes and Extras-Contracts: Disputes and Remedies: Equitable Adjustments Where the evidence failed to support the contractor's claim as to the amount of extra repair work and testing required by the Government and the quantity of pipe which was improperly rejected and there was substantial evidence that the contractor had underbid the work and that a significant portion of the contractor's costs in addition to its estimates was due to factors such as unproven or unsuitable machinery and equipment, improper maintenance and inexperienced and unskilled labor, justification for the total cost method of computing an equitable adjustment has not been established. The Board holds that the equitable adjustment due the contractor may properly be computed on the basis of summaries of costs from appellant's books and records, overruling a Government objection to such cost presentation made for the first time on brief that the books and records from which the summaries were prepared were not available at the hearing, since the record revealed that appellant had repeatedly offered to make its records available for audit by the Government prior to the hearing. Contracts: Construction and Operation: Changes and Extras-Contracts: Disputes and Remedies: Jurisdiction The Board denied the Government's motions to dismiss as beyond the jurisdiction of the Board, the contractor's claims to be compensated for inefficiency resulting from the interim wrongful rejection of substantial quantities of pipes and for reimbursement of a sum paid to its subcontractor because of the unavailability of pipe for laying which was allegedly attributable to the Government's incorrect interpretation of the contract as to permissible internal diameters of the pipe. On the merits the latter claim was denied, since Government responsibility for this payment had not been established. Contracts: Construction and Operation: Changes and Extras-Contracts: Disputes and Remedies: Jurisdiction A Government motion to dismiss as beyond the jurisdiction of the Board a claim arising out of severe and arbitrary inspection was denied, the Board holding that such a claim was not readily distinguishable from claims based upon the imposition of excessive standards of workmanship which claims are clearly cognizable by the Board as constructive changes. A contractor's claim for lost profits in such circumstances was dismissed as beyond the jurisdiction of the Board since the concept of an equitable adjustment excludes anticipated or unearned profits on work not accomplished. Contracts: Construction and Operation: Changes and Extras-Contracts: Disputes and Remedies: Equitable Adjustments A contractor's claim for interest as part of an equitable adjustment was denied where there was no evidence of specific loan transactions or of payments of interest in the record. APPEARANCES: H. A. Federa, Secretary and Counsel, Cen-Vi-Ro of Texas, Inc., c/o Raymond International, Inc., Houston Texas for the appellant; Henry J. Strand and David J. Askin, Department Counsel, Denver, Colorado, for the Government. OPINION BY MR. NISSEN INTERIOR BOARD OF CONTRACT APPEALS These appeals involve claims for constructive changes, which as initially asserted and excepted from the releases (Exhibits 5A and 81A) total $3,297,385.05.1 We have previously ruled on appellant's motion to expunge certain exhibits from the appeal file. In a prophetic statement Government counsel asserted that the appeals raised "such substantial questions of fact that it is or will be virtually impossible to resolve them adequately." (Second Statement of Position, p. 4.) An extended hearing and prolonged study of the record have convinced us of the accuracy of that assertion. Contract No. 14-06-D-5028 (Exh. 1) was awarded to Cen-ViRo of Texas, Inc.,3 on November 12, 1963. The contract incorporated Specifications DC-6000 (pertinent portions of which are attached as Appendix "A") and called for the completion of the earthwork, concrete pipe and structures of a portion (approximately 90 miles) of the Main Aqueduct of the Canadian River Project for an estimated price of $12,464,227. Cen-Vi-Ro undertook to manufacture the pipe 1 Claims totaling $134,750 ($120,314 of which was applicable to DC-6000), constituting the estimated costs of disposing of disputed rejects, were withdrawn at the hearing (Tr. 987, 993). 2 IBCA-718-5-68 and IBCA-755-12-68 (May 28, 1970), 77 I.D. 106, 70-1 BCA par. 8297. a The name Cen-Vi-Ro is derived from the centrifugation, vibration, and rotation method of producing concrete pipe (Tr. 18). Cen-Vi-Ro of Texas, Inc., is a wholly-owned subsidiary of Raymond International, Inc., and was formed for the express purpose of bidding on the Canadian River Project (Tr. 5). 4 The Canadian River Project involved the construction of a total of 322 miles of pipeline, pumping plants and related facilities for the furnishing of water to 11 cities in the Panhandle of Texas (Tr. 1979). The contracts involved in these appeals are the second and third of four major contracts. (principally 54-, 60-, 66- and 72inch in diameter), and subcontracted laying of the pipe and all other work to R. H. Fulton. Contract No. 14-06-D-5244 (Exh. 79) was awarded to R. H. Fulton 5 on August 13, 1964. The contract called for completion of earthwork, concrete pipe and structures of a portion of the Main Aqueduct (Lubbock to Lamesa), Southwest Aqueduct, totaling approximately 140 miles of pipeline, and Pumping Plants Nos. 8, 9, 10 and 11 in accordance with Specifications DC-6130 for an estimated price of $8,785,519.02. In conformance with the practice of the parties, the contracts will be referred to in this opinion by their specification numbers. At the time of award of the first contract (DC-6000), Cen-Vi-Ro had no facilities for the manufacture of pipe in the Panhandle of Texas area (Tr. 1982). Cen-Vi-Ro commenced construction of a plant, referred to as the north plant, for the manufacture of reinforced concrete pressure pipe (RCP) at Plainview, Texas, in December 1963 and substantially completed it in May of 1964. The plant consisted essentially of equipment for the mixing While the notice of appeal under this contract (Exh. 82) was from Cen-Vi-Ro in the name of R. H. Fulton, the parties have consistently referred to the appeals as those of Cen-Vi-Ro in reliance upon a power of attorney from R. H. Fulton, dated November 24, 1967 (Exh. 76). Tr. 1214, 1215. The first steel reinforcing cage was manufactured on May 25, 1964, and the first concrete pipe was spun on May 29, 1964 (Tr. 1380, 1858; Inspectors Daily Reports of May 25 and May 29, 1964, Exh. 44). Reference to Inspectors Daily Reports will be to Exhibit 44 unless otherwise indicated. February 7, 1973 (batching) of concrete and the manufacture of steel reinforcement cages, a 20-foot spinner for the manufacture of 66- and 72-inch diameter pipe referred to as the "gyro" spinner," a 16-foot spinner for the manufacture of 54- and 60inch diameter pipe sometimes called the pneumatic spinner, steam tunnels for curing the pipe, a stripping area where forms were removed from the pipe and facilities for hydrostatic tests (Tr. 1323-1327; Plant Layout, Exh. 75 and Special Report, dated May 21, 1965, Exh. 83). After receipt of a purchase order (Exh. 81B) from R. H. Fulton for approximately 682,000 feet of concrete pipe in diameters ranging from 18 through 72 inches in accordance with Specifications DC6130, appellant began construction of a facility for manufacture of 18through 42-inch pipe referred to as the south plant. In addition to mixing equipment, this facility consisted of a 16-foot spinner for the manufacture of 27- and 42-inch diameter pipe and a 12-foot spinner for the manufacture of 18- through 27-inch diameter pipe together with equipment for prestressing, coating, and wrapping pipe cores, steel reinforcement fabrication and hydro In the "gyro" spinner, the rotating force was applied to the form by steel wheels tracking in rings which encircled the form at points equidistant from the ends (Tr. 1330-1332, 1856; Photos B, F and G attached to Government's Statement of Position, IBCA-7185-68). In this spinner the rotating force is applied to the form by rubber-tired drive wheels (see references note 7, supra). static testing. The south plant for the manufacture of the smaller diameter RCP (42-inch and below) was completed on or about February 1, 1965, and the first NCP pipe core was manufactured on April 2, 1965.10 Wrapping, testing and coating of NCP pipe cores commenced on June 3, 1965 (Tr. 921; Inspectors Daily Report of June 3, 1965, Exh. 100). Early Production Cen-Vi-Ro experienced immediate difficulties with the manufacture of adequate quantities of acceptable reinforcement cages for RCP pipe (Tr. 347). These difficulties principally concerned sizing, spacing of steel within permissible tolerances and workmanship." Mr. Kenneth Thomas, chief of plant pipe inspection for the Bureau, testified that cages were probably one of the greatest causes of delay in Exhibits 75 and 83. A proposed construction production schedule, dated August 7, 1964 (Exh. 81P), reflects that 261,586 foot of pipe for DC-6130 was to be NCP (noncylinder prestress) pipe while the balance was to be RCP pipe. RCP pipe was for heads not to exceed 125 feet (paragraph 77.b., Specifications DC6130). NCP concrete pipe consisted of a core containing prestressed longitudinal reinforcing rods, wires or strands which was helically wound with steel wire under high tension and a mortar encasement (Subparagraphs 79.e. and g., Specifications DC-6130). 10 Tr. 920, 921; Franklin memoranda dated February 1 and March 3, 1965, Cen-Vi-Ro Correspondence, Exh. 120; Inspectors Daily Report of February 1, 1965, Exh. 100. Exhibit 120 was obtained by the Government on discovery and stipulated into evidence (Tr. 689). References to this exhibit hereinafter will be to "Cen-Vi-Ro Correspondence." 11 Tr. 1335-1347; see, among others, Inspectors Daily Reports of June 19 and 22, July 1, 8, 15, 20 and 31, August 3, 5, 6, 19, 24, and 31, 1964. production (Tr. 1349). Mr. M. J. Franklin, appellant's resident project manager until May of 1965, admitted that cage manufacture problems were partially attributable to a machine that was not suitable (Tr. 557, 58). While Cen-Vi-Ro continued to have problems with cages throughout the period of pipe manufacture, these difficulties were largely resolved by January 1965, through the replacement of the foreman for cage manufacture and the addition of a second mandrel-type cage machine (Tr. 1342, 1345-1347). Cen-Vi-Ro also experienced numerous difficulties in the manufacture of acceptable pipe. Among the difficulties was so-called "gyro area" concrete in pipes manufactured on the 20-foot spinning machine (Tr. 472, 1847). This concrete had a different color or texture and appeared on the pipes at points where the gyro rings encircled the forms on which the pipes were made (Tr. 98, 1847). The Bureau took the position that this concrete was unconsolidated or porous and did not comply with the specifications. Other difficulties encountered by Cen-Vi-Ro included fallouts-segments of concrete pulling or falling away from the reinforcing steel (Tr. 1366, 1854, 1858); rocky bells-exposed aggregates in bell areas (Tr. 579, 1364; Exh. 5M, p. B4); longitudinal and circumferential cracks (Tr. 18751877; Exh. 69); unconsolidated concrete in barrel and spigot areas and cracking and flaking interiors. It should be emphasized that there is no such thing as "zero defects" in concrete pipe. In the words of CenVi-Ro's expert witness, Mr. Howard Peckworth, "it is impossible for any pipe man to build a perfect piece of [concrete] pipe." (Tr. 79, 210.) While Cen-Vi-Ro brought some experienced personnel, i.e., machine operators and supervisory personnel, from California (Tr. 348, 499), it relied principally on the surrounding area for its supply of labor (Tr. 503–505). Mr. Franklin admitted that many of these people were inexperienced in industrial, production or construction work and that he did have problems with inexperienced personnel (Tr. 511). He also admitted that labor was a contributing cause of defects and that there was a substantial turnover in the work force, but stated that Cen-Vi-Ro paid prevailing wages and denied that this turnover was attributable to low pay.12 There is evidence that Cen-Vi-Ro's management attributed its difficulties, at least, in part, to inexperienced and unqualified labor (Tr. 521, 788; Murray memorandum, dated July 8, 1965, Cen-Vi-Ro Correspondence; Travel Report of R. C. Borden, dated June 9, 1965, Exh. 23; Notes on Meeting of July 24, 1965, Exh. 24). See also undated statement of 12 Tr. 519, 520, 521. Mr. Mike Herrera, production manager, from July 10, 1965, until the completion of pipe production in June of 1966, confirmed that there was a high turnover of personnel and that it was excessive at the start of the job (Tr. 789). Although Mr. Herrera was not assigned permanently to the Cen-Vi-Ro plant until May of 1965 the record reflects that he made frequent, extended visits to the plant as an adviser and was present in June, July, August, September and October, 1964 and in February 1965 (Tr. 690, 755; Inspectors Daily Reports). |