Gilchrist Construction Co. v. State, Department of Transportation & Development
Docket: No. 2013 CA 2101
Court: Louisiana Court of Appeal; March 9, 2015; Louisiana; State Appellate Court
In a legal dispute involving a public highway project, the Louisiana Department of Transportation and Development (DOTD) is appealing a judgment that holds it liable for additional compensation to Gilchrist Construction Company, LLC. The case stems from a contract dated February 6, 2007, for the widening of Interstate 10, which Gilchrist completed ahead of schedule, receiving a total payment of $76,558,550.55, including change orders and an early completion bonus. On September 10, 2009, Gilchrist filed a lawsuit seeking $5,230,672.00 in construction delay costs, claiming these were due to the DOTD’s significant miscalculation of the embankment quantity needed. Gilchrist argued that this miscalculation necessitated a longer project timeline and resulted in increased costs.
The DOTD responded by denying Gilchrist's allegations and asserting defenses that the issues had been settled during the project and that any potential debt had been extinguished. On July 5, 2012, the DOTD sought to file a supplemental answer to introduce new defenses based on information obtained through discovery, claiming that Gilchrist’s own mismanagement caused delays. The DOTD argued that it did not have a legal duty to guarantee embankment estimates and, if found negligent, Gilchrist was also comparatively negligent. The trial court denied the DOTD’s motion to file a supplemental answer, a decision that was upheld upon review. The DOTD then filed a motion for summary judgment to dismiss Gilchrist's suit, which was also denied, leading to a six-day bench trial. The trial court later instructed both parties to submit proposed findings of fact and conclusions of law.
On August 21, 2013, the trial court ruled in favor of Gilchrist, awarding $4,195,127.00 against the Department of Transportation and Development (DOTD). The DOTD was granted a suspensive appeal of this judgment. In its appeal, the DOTD raised several alleged errors, including:
A. The trial court's denial of the DOTD's motion to file a supplemental answer for a jury trial, claiming it was a reversible error.
B. The denial of the DOTD's motion for summary judgment was also cited as a reversible error.
E. The rejection of Daryl Ivy, P.E. as an expert witness regarding the Critical Path Method of construction scheduling was claimed to be a reversible error.
F. The trial court's acceptance of Gilchrist's argument regarding damages for construction delay and the applicability of La. R.S. 38:2216 H to DOTD's defenses was challenged as a legal error.
G. The trial court's finding that the DOTD's estimate of embankment material was an error in the project plans was also contested as a legal error.
H. The trial court's conclusion that the evidence indicated a 180-day construction delay, based on flawed data, was deemed manifest error.
I. The trial court's finding that embankment or Type C Lime Treatment Work controlled project duration post-June 2007 was considered manifest error.
J. The determination that extra work by Gilchrist prolonged the project was regarded as manifest error.
K. The failure to recognize that Gilchrist’s mismanagement, rather than extra embankment work, extended project duration was labeled as manifest error.
L. The acceptance of Gilchrist's claim for home office and overhead costs was deemed a reversible legal error.
M. The finding that Gilchrist sustained losses related to its asphalt plant operation was also contested as manifest error.
In addressing the first assignment of error regarding the denial of a jury trial request, the court found no merit in the DOTD's argument, emphasizing that the request must be made promptly in accordance with La. C.C.P. art. 1738(C). The court clarified the distinction between a supplemental pleading, which arises after the original petition, and an amended pleading, which relates to issues before the original complaint was filed.
The court's discretionary authority to allow the filing of a supplemental answer is governed by La. C.C.P. art. 1155, permitting parties to include newly exigible damages, causes of action, or defenses related to existing claims. The Department of Transportation and Development (DOTD) initially claimed it had uncovered new information during discovery but failed to specify this information. On appeal, DOTD argued that it could assert Gilchrist’s comparative fault and a new defense of "compensation and set-off." However, evidence of Gilchrist’s alleged comparative fault was presented at trial, thereby expanding the pleadings under La. C.C.P. art. 1154. The "compensation and set-off" defense was already included in DOTD's original answer concerning contract amendments and compensation, leading the court to find no abuse of discretion in denying the supplemental answer.
Additionally, DOTD challenged the trial court's denial of its motion for summary judgment, which is generally not appealable but can be reviewed upon a final judgment. DOTD contended that Gilchrist’s claim was merely for compensation for extra embankment work, without addressing any delays caused by this work. Under La. R.S. 38:2216(H), any contract provision that waives a contractor's rights to recover costs for delays caused by the public entity is void. Therefore, if Gilchrist demonstrated damages due to delays attributable to DOTD, it could recover those damages regardless of contract terms.
The trial court's denial of the DOTD's motion for summary judgment is upheld due to the DOTD's failure to address a central issue of Gilchrist’s claim. The determination of whether Gilchrist suffered damages from project delays attributed to the DOTD remains a factual matter with genuine issues of material fact, justifying the trial court's decision. Gilchrist contends that the trial court erred in limiting expert Darrell Ivy's qualifications to civil engineering and not recognizing him as an expert in critical path method (CPM) scheduling. During the trial, Ivy was initially accepted as a civil engineering expert but not as a CPM expert, despite the DOTD's proffer of his testimony in that area. The trial court's discretion in evaluating expert qualifications is emphasized, and its ruling will not be disturbed absent clear abuse. The standard of review for evidentiary errors affecting fact-finding may require a de novo review. The admission of expert testimony follows Louisiana Code of Evidence Article 702, requiring that the expert’s qualifications, the reliability of their methodology, and the relevance of their testimony are properly assessed. A challenge to an expert's qualifications pertains only to the first prong of the inquiry established by the Louisiana Supreme Court in Cheairs. Ivy's voir dire indicated significant experience with CPM schedules in his role as a construction engineer for the DOTD.
Mr. Ivy, a civil engineer with ten years of employment at the SJB Group, holds a bachelor's degree from Texas A&M (1982) and a master's degree from Stanford (1989). He has been a licensed civil engineer since 1984 and possesses significant experience in Critical Path Method (CPM) scheduling, having studied it at both Texas A&M and Stanford under Professor Fondahl. He created his first CPM schedule in 1984 and has used Primavera software since 1987. Over ninety percent of his consulting work involved the Department of Transportation and Development (DOTD), focusing on CPM specifications. His curriculum vitae outlines responsibilities related to CPM scheduling during his tenure at T.L. James Company from 1982 to 1998.
The trial court qualified Mr. Ivy only as an expert in civil engineering, rejecting his testimony on CPM scheduling due to perceived inadequacies in his credentials and lack of detailed publication or demonstration of expertise in that area. The court noted that experience alone could suffice for expert qualification but found insufficient evidence of Mr. Ivy's expertise in CPM scheduling. Despite the trial court's reservations, the record supports Mr. Ivy's extensive experience and educational background in CPM scheduling, indicating he should have been qualified as an expert in this field. Consequently, the trial court abused its discretion by not permitting Mr. Ivy to testify as an expert on CPM scheduling, although not every evidentiary exclusion warrants a de novo review.
A preliminary de novo review can assess the impact of excluded evidence on a judgment. This review is limited to findings affected by incorrect legal principles and is only warranted if the error is prejudicial. If it is determined that the error did not impact the case adversely, the trial court's findings remain intact. In the case under review, the limited exclusion of Mr. Ivy's testimony regarding Gilchrist’s calculations related to delays from additional embankment and lime was found not to be prejudicial and thus did not disrupt the trial court’s factual determinations. Much of Mr. Ivy's testimony was effectively presented through other witnesses during the trial, rendering the exclusion harmless.
The appellant's arguments center on whether Gilchrist properly established it incurred delay damages due to increased quantities of embankment and lime. The project was awarded using a cost-plus-time bidding procedure, which considered both the contract amount and completion time. Gilchrist submitted the lowest bid price, significantly lower than the next competitor, and also proposed a shorter completion time. However, for the embankment pay item, Gilchrist's unit price was the highest among all bidders at $25.00 per cubic yard, compared to lower bids of $12.00, $9.50, and $15.00 from others. Despite this, it is acknowledged that contractors may intentionally overbid on certain items while underbidding others to maintain competitiveness in their overall bid.
Gilchrist exceeded the advertised embankment material by over sixty thousand cubic yards, a 40% increase, while completing the project in 769 days, significantly fewer than the contracted 899 days. The Department of Transportation and Development (DOTD) compensated Gilchrist at the contract price of $25.00 per cubic yard for the additional material and awarded the maximum early completion bonus of $1,710,000.00. Although DOTD contends that Gilchrist was fully paid for the additional work, Gilchrist claims damages due to delays caused by the extra embankment and lime treatment. To substantiate the delay, Gilchrist referenced its baseline Critical Path Method (CPM) schedule, arguing that it demonstrated a 180-day delay. However, DOTD disputes the validity of Gilchrist's CPM calculations. The contract mandated adherence to specific CPM guidelines for scheduling and progress measurement, stating that any discrepancies would be governed by the contract specifications. Gilchrist was required to submit detailed Construction Progress Schedules for DOTD approval, which became part of the contract documents. The determination of whether Gilchrist is entitled to additional compensation hinges on proving that the increased quantities of embankment and lime indeed caused project delays.
The construction schedule required detailed sequencing of activities and dependency relationships. A modification to Subsection 108.07 of the standard specifications stated that if the contract's fulfillment necessitated more work than specified, the contractor must submit a proposed CPM schedule reflecting the increased time and revised completion date for approval by the DOTD. A CPM schedule is also needed for processing change orders that extend contract time.
David Gilchrist, president and CEO of the company, described the project involving widening a ten-mile stretch of Interstate 10, which included filling the median for two new travel lanes, widening bridges, and rubberizing existing lanes. Gilchrist first alerted the DOTD about an embankment shortage in a July 9, 2007 letter from project engineer J.J. Hickey, indicating that field cross sections required an additional 56,658 cubic yards of embankment. The letter requested a timely response to adjust the contract schedule.
DOTD district project engineer Todd Landry responded on July 16, 2007, requesting original cross-section data and clarifications on the fill calculations. Further guidance on the submission of calculations was provided in a September 25, 2007 email. Gilchrist submitted satisfactory cross sections by March 2008, with the embankment work mostly completed by November 2007. A change order for the additional embankment was issued on August 8, 2008.
On February 6, 2009, Gilchrist submitted an updated claim for additional time and compensation related to embankment and lime overruns, referencing previous separate claims. This updated claim included three impacted CPM schedules that accounted for the extra quantities, labeled 10EM, 10LT, and 10EL. At trial, these schedules were introduced as evidence for delay damages, with expert witnesses Michael Myers and Dr. Jerry Householder supporting their validity in assessing the project’s progress impacts.
The analysis of the impacted schedules was found to align with the contractual requirements for assessing time extensions. Mr. Ivy acknowledged that the contract stipulates updating the CPM schedule upon identifying an unexpected event likely to cause a time impact, which should initiate discussions about potential time extensions. He emphasized that these updates should occur in a 'forward-priced situation' to agree on adjustments prior to the impacted work. Gilchrist's request for a time extension was triggered when it recognized a potential overrun in embankment and sought DOTD's acknowledgment to adjust the schedule accordingly. While DOTD acknowledged the overrun, it withheld a change order for the full quantity pending proper documentation.
Mr. Ivy stated that the CPM schedule could have been updated to reflect the extra quantities even without a change order, a position contrary to that of Jesse Guillory, Gilchrist’s project scheduler, who insisted that such updates required a change order. Due to the lack of an updated CPM schedule prior to incorporating the extra quantities, Mr. Ivy dismissed the retroactive time impact calculations based on the 10BL, arguing that schedules should primarily project future progress rather than retroactively assess past impacts. He asserted that the most accurate representation of the project was the PE25 schedule, which documented actual work performed, and it showed no delays were attributable to the additional embankment and lime.
Ultimately, Mr. Ivy critiqued the three impacted schedules as improper and misleading, asserting their delay calculations were flawed due to failure to correct earlier errors in the 10BL and to reflect actual production rates and construction sequences. The 10BL itself contained inaccuracies in projecting embankment usage, misallocating significant portions to areas not intended for the majority of the work. The only evidence of the claimed 180-day delay was based on the impacted CPM schedules derived from modifications of the flawed 10BL.
Mr. Guillory, the project scheduler for Gilchrist, created the 10BL schedule and updated it every 30 days. He relied on an "educated guess" for distributing the initial 160,510 cubic yards of embankment due to the absence of detailed plans from the DOTD. The distribution error was later rectified in the third updated CPM schedule, PE3. The 10BL inaccurately represented the actual work performance; it anticipated an embankment production rate of 409 cubic yards per day, while the actual rate was approximately 1100 cubic yards per day. Both Mr. Gilchrist and Mr. Guillory indicated that the intent was to complete the project ahead of schedule. Mr. Ivy’s review of the bid estimate paperwork showed that both the estimated and actual production rates significantly surpassed those projected in the 10BL.
Mr. Hickey testified that the accelerated production was necessitated by DOTD's refusal to grant additional time for extra embankment quantities, compelling Gilchrist to work at an increased rate to avoid liquidated damages. The 10BL maintained an original phased construction sequence, which differed from the actual sequence that consolidated embankment work into a single phase. In June 2007, Gilchrist identified safety concerns related to the planned sequencing, prompting Mr. Hickey to notify Mr. Landry of the DOTD about hazardous conditions from traffic shifts and temporary barriers affecting the asphalt shoulders. He urged for an analysis of alternative designs or sequencing to mitigate hazards. Subsequently, on November 29, 2007, Mr. Hickey formally proposed a change in the construction sequencing, which originally planned for three segments of approximately three miles each and a fourth segment just under a mile long.
Gilchrist plans to construct the inside widening areas of phases 1A and IB, transitioning traffic to these new lanes while rebuilding the existing outside lanes. The project strategy was designed to reduce the required quantity of concrete barriers by allowing for the inside lanes to be completed in phases rather than continuously. However, the existing outside lanes in phase 2A will not be rebuilt until later, despite a consensus among parties that this should happen promptly to minimize liability for both the Department of Transportation and Development (DOTD) and Gilchrist.
Due to deteriorating conditions of the existing lanes under heavy traffic and wet weather, Gilchrist and DOTD have been maintaining the road, which has incurred additional costs and risks. They have since realized that sufficient concrete barriers are available to fully close off the inside median across all three phases, enabling simultaneous construction of the inside lanes and a complete shift of traffic from existing lanes to the new ones.
DOTD has agreed to adjust the construction sequence based on this proposal. Although there were discrepancies in the project’s scheduling (10BL), neither party provided a time impact analysis using an updated schedule when overruns were first identified. Mr. Myers noted that calculating time effects on completed events is inappropriate, as they fall outside the scope of a Critical Path Method (CPM) schedule. He emphasized that an analysis conducted at the time of the overruns would yield similar results since actual production rates and end dates were unavailable. Dr. Householder echoed this sentiment, indicating that recognition of overrun quantities would have led to similar scheduling adjustments. Mr. Ivy attempted calculations based on the 10BL and concluded that earlier completion would primarily stem from changes in phasing rather than issues related to embankment distribution, production rates, or construction sequencing, asserting that the embankment overrun did not result in any project delays.
Lime treatment did not delay the project, and the trial court correctly accepted the impacted schedules as evidence of delays caused by increased embankment and lime quantities. The impacted schedules aligned more closely with the parties' contract than the PE25 figures suggested by the DOTD. Mr. Ivy, despite his objections to using the 10BL for the schedules, acknowledged it was a valid, feasible plan that complied with contract documents and resulted in timely completion. Both Mr. Hickey and Mr. Ivy confirmed that embankment work was completed on schedule, aided by a higher production rate than initially planned. Whether this increased pace was due to the threat of liquidated damages or Gilchrist's intent to expedite completion, it was ultimately faster than the approved rate. Dr. Householder supported the contractor's right to finish early and concluded that Gilchrist demonstrated the project was delayed due to increased embankment and lime quantities, attributing the cause of these increases to DOTD's actions or omissions. Dr. Householder also stressed that the 40% increase in embankment quantity was a mistake in planning, not an approximation. Change order 19 from the DOTD acknowledged that the original contract quantity was significantly underestimated, citing potential inaccuracies in the aerial photogrammetry survey method used for contract estimation as a possible reason for the overrun.
The project limits were expanded mid-design without conducting a new survey for the additional embankment. Patrick Landry, the DOTD design engineer, admitted that the bid quantities for the embankment were mistakenly calculated by the DOTD. The trial court correctly concluded that Gilchrist is entitled to recover costs incurred from delays experienced during the contract execution. The review of damages awarded by the trial court confirmed the legitimacy of claims for job site overhead, plant overhead, and additional lime costs, which were directly linked to the identified delays. The DOTD’s CPA expert recognized that extended project timelines result in real costs for contractors, and the responsible party for such extensions must cover those costs.
Despite the impacted schedules indicating a potential 180-day delay, it was found that Gilchrist completed the work within the original timeline due to changes in work performance. Therefore, the projected delays did not affect the actual progress of the project, particularly the embankment work, which was finished on schedule. However, evidence showed instances of idle equipment and stockpiled materials during construction. The DOTD contended that these issues stemmed from Gilchrist’s mismanagement, claiming that Gilchrist should have expedited operations following changes in the construction sequence. Gilchrist’s method involved completing significant portions of the embankment before advancing to the subgrade, base course, and asphalt, resulting in a delayed use of necessary materials and equipment despite the embankment work being ahead of schedule.
The construction project involved a sequence change where work on the median was prioritized before addressing existing travel lanes. Testimony from Mr. Ivy indicated that Gilchrist acted negligently by delaying the addition of subgrade material until nearly half of the embankment was completed. In contrast, Dr. Householder argued that the Department of Transportation and Development (DOTD) did not authorize a time extension for the extra embankment, forcing Gilchrist to work inefficiently to meet schedules by increasing labor and resources. Mr. Hickey noted that resources used for the embankment could not be applied to subsequent work. The DOTD claimed that Gilchrist's negligence caused delays in follow-on activities; however, Gilchrist demonstrated that delays were only temporary to manage the embankment overrun. The trial court's decision to award Gilchrist costs for idle equipment and stockpiled materials was upheld due to this conflicting evidence.
Regarding home office overhead, DOTD contested the trial court's decision to award Gilchrist costs calculated using the Eichleay formula, asserting that such an award is only justified in cases of complete work stoppage. DOTD argued that since work was ongoing, Gilchrist should not recover these costs. The Eichleay formula, established in a prior case, is used to allocate home office overhead—general administrative costs linked to running a business—during work suspensions. The definition of home office overhead includes indirect costs like salaries and utilities, which cannot be tied to specific contracts. The Eichleay case highlighted the need to allocate these expenses during periods of work suspension, which continue even during temporary or partial halts.
The Eichleay formula, used to calculate recoverable overhead for contractors experiencing government-caused delays, involves several steps: (1) calculating the ratio of contract billings to total billings, multiplied by total overhead for the contract period; (2) determining daily contract overhead; and (3) multiplying daily overhead by the number of delay days to find the amount claimed. For a contractor to utilize this formula, strict prerequisites must be met: (1) proof of a government-caused delay without concurrent contractor delays; (2) evidence of additional overhead expenses due to an extended performance period or early completion; and (3) demonstration of being on "standby" during the delay, which includes showing that the delay was substantial and indefinite, that the contractor was required to resume work immediately, and that most or all contract work was suspended.
In the present case, while the principle of the Eichleay formula was relevant—indicating that delays prevented the contractor from taking on other work—strict prerequisites were not satisfied. Specifically, there was no work stoppage, a key requirement for applying the formula. Although the formula has seen some adoption in state courts, its application has been inconsistent with established criteria. Consequently, the court declined to modify or extend the use of the Eichleay formula and vacated the trial court's award of home office overhead. The court affirmed the trial court's judgment in favor of Gilchrist for contract delay damages but amended the judgment accordingly.
The judgment award was reduced to $3,764,747.00 by deleting the home office overhead, while the amended judgment remains affirmed. Appeal costs of $7,515.00 are shared equally between the parties. The project in question involved two adjoining state projects on Interstate 10, totaling 10.916 miles. Gilchrist reduced its claim to $4,195,127.00 during discovery. The Department of Transportation and Development (DOTD) abandoned its assignments of error C and D due to a lack of briefing. Gilchrist accepted Mr. Ivy as an expert in Critical Path Method (CPM) scheduling but objected to his expertise in other areas. Article 702 was amended in 2014, but the changes were purely linguistic, with no substantive legal alterations. The litigation primarily revolves around the embankment's extra quantities, but Gilchrist also claimed a 30% increase in lime usage due to laboratory tests indicating the need for type C lime treatment throughout the project area. DOTD's CPA expert testified that Gilchrist underbid two base course items significantly. Gilchrist was required to provide a detailed construction schedule to the DOTD project engineer before the preconstruction conference, which would then be reviewed and finalized as the baseline schedule. The contract encompassed various documents, including the Project Construction Proposal and the Louisiana Standard Specifications for Roads and Bridges, with the 2000 edition introduced at trial. A supplemental specification modified the measurement of embankment, mandating that the contractor take original cross sections along the entire project length.
The supplemental specification outlines that quantity measurements will be based on cross sections established either by the original plan or newly obtained sections from the contractor. Initial calculations by Gilchrist identified a 56,658 cubic yards deficit, which was later revised to 63,945.91 cubic yards after utilizing typical sections for final templates. Due to the initial cross section data indicating a significant shortfall in the planned embankment quantities, change order 19 was issued on October 22, 2007, increasing the embankment by 10,000 cubic yards, with further adjustments addressed in change order 41. The specification mandates that cross sections adhere to DOTD procedures and require results to be presented in an engineer-approved format. The production rate is defined as the amount of work completed per unit of time. According to Gilchrist's CFO, lime costs associated with embankment work are linked to item code 203-04, with a specific claim for a time extension related to lime item code S-304-03-B. The embankment work was originally scheduled for completion in September 2008 but was actually finished in April 2008. The excerpt references a lack of pinpoint page citations and discusses relevant case law and literature on contractor damages in Louisiana.
