Court: District Court, D. Massachusetts; November 22, 1982; Federal District Court
The legal proceedings involve a construction contract between D. Federico Company, Inc. (plaintiff) and New Bedford Redevelopment Authority (defendant), with jurisdiction established under 28 U.S.C. 1471 following an Order for Relief for D. Federico Company on September 18, 1980. The surety, United States Fidelity and Guaranty Company (U.S.F.G.), has fulfilled its financial obligations under the payment and performance bonds, asserting its right to equitable subrogation and claiming assignment of all contract balances from Federico. The City of New Bedford has taken on the Authority's liabilities through a Closeout Agreement with the Department of Housing and Urban Development.
The case focuses on Contract No. 5 of the South Terminal Urban Renewal Project for reconstructing Homer’s Wharf and Leonard’s Wharf. The trial was bifurcated, with liability determined in December 1981 and the damages trial conducted from April to July 1982. A stipulation established total retainages due to the plaintiff at $252,457.52, plus an additional $140,000 determined due for traffic and maintenance, with the Authority entitled to a credit of $1,552.26 for prior overpayments. Consequently, the potential total amount owed was $390,905.26, subject to further damages and any offsets from the Authority's counterclaim.
In a significant procedural ruling, the Court denied the Authority's late attempt to amend its counterclaim regarding eight line items after the damages trial had commenced, citing the stipulation on the accuracy of Estimate No. 53 and the established trial preparation based on prior liability findings. The Court referenced precedents to support its decision, thereby prohibiting the introduction of conflicting evidence regarding the semi-final estimate.
The Court found that both the Authority and the contractor acted imprudently regarding the excavation of Raymond concrete piles. The Authority possessed information that could have assisted bidders by detailing the composition of the collapsed pier, while the contractor failed to conduct a thorough visual examination of the pier remains, which would have revealed the existence of the piles. Consequently, the contractor's bid, characterized as superficial, did not warrant holding them accountable for the initial bid amount, as doing so would unfairly benefit the Authority.
The Court determined that the Authority must cover the costs of removing the Raymond concrete piles, which would have been included had the Goodkind-O’Dea Engineering Report been available. In considering damages, the Court evaluated various expert bids for removal, which ranged significantly in price and reflected unrealistic assumptions about labor and equipment. Cross-examinations revealed flaws in these estimates, with the plaintiff’s expert disregarding competitive bidding dynamics and the Authority’s expert relying on outdated pricing methods not suited for marine construction.
To establish a fair resolution, the Court acknowledged the need for a balanced approach that accounts for the imprudence of both parties, rather than relying solely on the flawed bidding estimates presented.
The Court concluded that the plaintiff’s issues stemmed from its own imprudence and that while neither party should profit from the situation, they also should not bear the entire cost. A reconstruction of the hypothetical bidder is deemed unlikely to yield an equitable outcome; instead, a reasonable charge for removing the Raymond concrete piles should be determined. The Court found sufficient evidence during the trial to ascertain both the quantity of cubic yards involved and the corresponding cost per cubic yard.
The plaintiff's bids were rejected because they inadequately accounted for the excavation work, which included both the piles and other materials that did not warrant additional compensation. Testimony indicated that some materials covered by the plaintiff’s bid were equally problematic as the piles. Although the plaintiff's original bid of $10 per cubic yard was the lowest overall, it was the highest specific to this item, compared to competing bids of $3.50, $6, and $7 per cubic yard. The Court found that the plaintiff could not claim compensation for additional difficulties that should have been anticipated.
An estimate by Mr. Kassap suggested a bid of $89.81 per cubic yard for 3000 cubic yards, with 1060 cubic yards being concrete. However, this was deemed low since it did not account for the production challenges of removing only the piles. Consequently, the Court determined that $100 per cubic yard would be a fair and reasonable rate for the removal of the Raymond concrete piles and any attached materials. The next step is to ascertain the total cubic yards of Raymond concrete piles involved, with expert testimony establishing limits based on the original project plans and conditions, including input from Robert Noyer, a former resident engineer.
The plaintiff requests the Court to consider Noyer’s testimony, which estimates the old pier's perimeter at approximately 520 linear feet, suggesting a total of 260 Raymond concrete piles, each estimated at two cubic yards in volume, resulting in 520 cubic yards of concrete. However, NBRA's expert, Steven MacCaffrie, contests this, stating that a Raymond pile measuring 1' x 2' x 45' has a volume of 3.33 cubic yards, leading him to conclude there are 275 piles, totaling 915.75 cubic yards. MacCaffrie did not account for horizontal piles, even though their existence was acknowledged, with Noyer suggesting they were smaller at 6 to 8 feet or half a cubic yard each. Federico’s expert, David Kassap, claims 550 linear feet and 329 sheet piles, estimating 1,375 cubic yards based on a different pile measurement. The Court accepts MacCaffrie's volume calculation of 3.33 cubic yards per pile, leading to an estimated 865.80 cubic yards from Noyer’s pile count, while acknowledging that horizontal piles and potential debris should add a third to the total. The Court concludes that the total amount of excavated Raymond concrete piles is 1,443 cubic yards. At a valuation of $100 per cubic yard, this amounts to $144,300, reduced by a previously paid credit of $10 per cubic yard, resulting in $129,870 owed to Federico. This damage assessment is supported by evidence from Federico's engineer, who estimated actual excavation costs at $139,423, including a 15% profit margin.
Evidence was introduced via a letter dated July 11, 1977, by Capacefalo, who stated it was prepared for the NBRA to document Federico's additional expenses in removing obstructions. Salah-Pecci heavy equipment removed approximately 5,000 cubic yards of difficult obstructions between August 27 and November 20, 1976, at a total cost of $36,414.94, including equipment rental and indirect labor costs. If it is assumed that out of an estimated 60,000 cubic yards of excavation, 20,000 cubic yards were difficult and unexpected, multiplying the Salah-Pecci costs by four would suggest an additional total of $145,659.76 for this extra work.
For the installation of wales, the contractor provided documentation showing a cost of $40,316.46 to lower 260 linear feet from a depth of -3 to .5. The contractor was required to credit the Authority for the installation of 2,100 feet of wale at .5, as it was not consistent with the original bid specifications. Although the contractor claimed minimal savings in time, evidence suggested that Federico saved at least $65,000 by installing the wales at .5 instead of -3.
The Authority is also entitled to damages for Federico's failure to apply coal tar epoxy to securing bolts along Homer’s and Leonard’s Wharf, as this work was specified in the contract but not completed. Although the bolts were made of corrosion-resistant material, which may have rendered the epoxy unnecessary, the Authority is still entitled to a credit for the unperformed work. A semi-final estimate was provided to the plaintiff in January 1979, outlining a punch list of corrective actions needed.
The Authority retained $3,500 for coating tie-rod bolts with coal tar epoxy, based on an estimate of 330 bolts at $10.61 per bolt. However, diver Steve Cassidy claims the cost to clean and coat 1,229 bolts will be $28,615. Federico's expert, David Kassap, calculated the cost per bolt at $9.39 in 1979 and $9.99 in 1980, initially estimating for 2,106 bolts. The Authority must prove both the number of bolts and the associated costs. While the Court acknowledges Cassidy's underwater inspection likely reflects actual conditions, Cassidy's cost estimate is deemed inflated. Consequently, the Court favors the original Authority estimate of $10.61 per bolt, totaling $13,039.69.
Regarding the failure to install nuts on 32 securing bolts on Homer’s Wharf, Kassap suggested using patch plates to prevent pier fill leakage, estimating costs at $5,605.05 in 1978 and $6,109.65 in 1980, including overhead and profit but excluding indirect costs. The Authority disputes Kassap’s cost estimates, noting inconsistencies, such as his omission of indirect costs on this estimate while including them elsewhere. The Authority argues that labor costs should be adjusted by $505.92 to reflect adequate time for the work. Kassap's labor time estimates are criticized for being insufficient, particularly regarding the cleanup before and after welding, indicating a need for more labor resources than accounted for.
Two laborers are estimated to work 17 hours each at Kassap's rate, which is doubled due to tidal considerations. Damage estimates pertain to the first six months of 1980, following the warranty's expiration, with an assumption that the Authority would perform necessary work in a reasonable timeframe. Labor costs increased by 10% from 1978 to 1980, resulting in total labor costs of $556.51 for 1980. Kassap's initial estimate, excluding profit and overhead, is $5,605.81, which, when adding 40% for indirect costs ($2,242.32), totals $7,848.13. Including 10% overhead ($784.81) and 10% profit ($863.29), the final amount due to the Authority is $9,496.33 for installing patch plates over bolt holes.
Regarding the failure to install 430 four-inch square washers on securing bolts, the Authority contends that re-excavation is the only adequate remedy. Expert Fred Hanach estimates the cost for this work at $196,605. Both experts agree that washers increase bearing area to prevent material spillage and bolt slippage. While Hanach's method may ensure full performance, damages should reflect the reasonable cost of fulfilling the contract and rectifying defects, per legal precedent. Kassap's alternative repair method proposes installing slotted, beveled washers, which he claims would be 99% as effective as proper installation, at an estimated cost of $21,845.69.
The Authority disputes Kassap's labor estimates, arguing that his figures assume multiple bolts can be worked on simultaneously instead of one at a time. Kassap counters that his estimates account for individual bolt work, estimating labor rates at 10 bolts loosened per hour, 50 washers placed per hour, 20 bolts tightened per hour, and 40 bolts epoxied per hour. This translates to approximately 86 hours to complete the installation of 430 bolts, with Kassap allowing 96 hours of labor, indicating sufficient time has been allocated for the task.
Mr. Kassap's cost estimate for installing washers does not include indirect costs, despite a 40% factor being applied to excavation estimates. By adding 40% for indirect costs, the total installation cost rises to $30,583.97. An additional 10% is deemed necessary to account for incomplete structural integrity, resulting in total damages owed to the Authority of $33,642.37 due to the plaintiff’s failure to install the washers correctly.
Regarding liquidated damages, the plaintiff contends that the $100 per day provision in the contract should not be enforced as it constitutes a penalty. The defense of unconscionable penalty will fail if the liquidated damages are not excessive, have a rational connection to actual damages, or were a reasonable forecast at the time of contract formation. Citing relevant case law, including Rex Trailer Co. v. United States and Priebe Sons v. United States, the text emphasizes that liquidated damages are justified when actual damages are difficult to quantify. The law generally supports the enforceability of such provisions when they represent fair attempts to approximate anticipated loss from a breach, particularly in government contracts. The courts favor allowing parties to honor their agreements as long as they are made freely without coercion and the terms are not unconscionable. In municipal contracts, where public interest is at stake, it is crucial to have reasonable provisions for compensating delays, reinforcing the importance of adhering to the original terms of the bid.
Federico, an experienced contractor, was aware of the contract's terms, including the liquidated damages provision, which was deemed reasonable at $100 per day. He had opportunities to object to this rate before signing the contract but did not. Although extensions were granted for delays, the Authority made it clear that failure to improve performance would result in enforcement of the liquidated damages. The Court determined that liquidated damages would apply starting from the extended completion date of October 30, 1976, with a total of 761 days of chargeable delay possible if the contractor could not prove any excusable delays.
The plaintiff claimed delays due to encountering an unanticipated ledge, late steel sheeting delivery, and slowdowns from nearby construction; however, these were either accounted for in previous extensions or did not qualify as excusable delays. The Court recognized that Federico was entitled to some excusable time for delays related to the Raymond concrete piles, as the Authority had withheld information about them. Nevertheless, Federico was found not entitled to time lost from using inappropriate machinery. The Court concluded that liquidated damages could be assessed against Federico for unexcused delays, and that the contractor bore the burden of proving any excusable delays under the contract's terms.
Most of the issues arose before May 5, 1976, and were considered partially accounted for. Federico successfully completed 5,000 cubic yards of challenging excavation in 40 days using the Salah-Pecci crane, contributing to a total of approximately 60,000 cubic yards excavated, with about 20,000 cubic yards from the obstructed area. Federico is permitted to recover additional costs solely for the removal of 1,443 cubic yards of Raymond concrete piles. Initially, Federico's bid was based on removing 3,000 cubic yards, but the actual workload increased by 57,000 cubic yards, justifying an excusable delay. Mr. Capacefalo estimated that removing 3,000 cubic yards would take six days at a rate of 500 cubic yards per day, leaving 55,557 cubic yards to be removed, which would take about 111 days.
Additionally, the time taken to remove the Raymond concrete piles should be factored in; it took about 40 days to remove 5,000 cubic yards, translating to a rate of 125 cubic yards per day, thus requiring approximately 12 more days for the 1,443 cubic yards of piles. In total, Federico incurred an extra 123 days for excavation, which should exempt them from liquidated damages. Considering a five-day work week, this results in a credit of 171 days. While Federico proved excusable delay due to the Raymond concrete piles, they are not entitled to compensation for delays caused by inadequate machinery. The Authority had already considered the obstruction issue by extending the contract to October 1976. Despite Federico's delays from using improper equipment, the significant challenges posed by the Raymond concrete piles, which impeded excavation, warrant recognition of excusable delays. The complexity of excavating the piles, likened to "playing pick up sticks," further complicated the process. Therefore, the delays due to experimenting with inadequate equipment are somewhat balanced by the unexpected difficulties encountered with the concrete piles.
Pecci's capacity was limited to 125 cubic yards per day. A delay of 171 days was excused due to pile issues and additional excavation. Mr. Capacefalo noted delays in obtaining necessary equipment, which were accounted for in an extension dated October 5, 1976. The plaintiff claimed a six-month delay from driving steel sheeting that encountered obstructions, necessitating withdrawal, excavation, and reinstallation. Federico was contractually obligated to drive the sheeting and manage obstructions, including pre-excavation inspections by a diver. Capacefalo argued against using a diver, claiming obstructions were below the mud line, though diver probes and visible outcroppings could have indicated the need for excavation. Despite the unexpected obstructions warranting additional excavation and time, a six-month claim required better substantiation. Instead, 45 days of excusable time were estimated based on procedures involving driving, removing, excavating, and re-driving, assuming initial refusals and problem discovery would not exceed 25% of the work.
Federico also requested two weeks for subsurface obstructions at Leonard’s Wharf, but without evidence of collapse, the Authority’s accountability was questioned. Allowances for this work were included in a previous extension. Additionally, Federico claimed a four-week delay related to the Parisi building's potential collapse, which resulted in adjustments to job sequencing and equipment relocation. However, there was no complete work stoppage, leading to a determination of 14 days as excusable delay for addressing building issues.
Moreover, Federico reported delays in establishing an alternative tie-rod installation method due to unanticipated obstructions and a concrete cap. Although lengthy discussions occurred, evidence showed that the Authority had been requesting tie-rod plans since 1975, and the contractor did not submit the required shop drawings until May 17, 1977, with approval by May 23, 1977. The delay in providing the drawings was not attributed to the Authority, while Federico seemed more focused on experimenting with installation methods than formalizing plans.
Federico is entitled to a two-month excusable delay related to drafting new procedures and obtaining approvals for change orders due to unforeseen concrete conditions, which necessitated a reconsideration of the original tie-rod plan. However, most of the claimed six-month delay is not excusable as it stems from Federico's indecision and failure to submit a definitive plan rather than any fault of the Authority or its engineers. Additionally, a further six months attributed to construction difficulties lacks sufficient documentation and does not account for the time that should have been spent under the original bid. Issues with tie-rod delivery were linked to payment problems, not unavoidable circumstances. Federico is recognized for an additional four months related to the increased difficulty of installing tie-rods through concrete, totaling an excusable delay of 183 days. Claims for extra time spent lowering wales are dismissed, as this was a requested change by Federico to save time. Ultimately, Federico completed the contract 761 days after the last authorized completion date, with 413 days deemed not excusable, resulting in the Authority being entitled to liquidated damages of $34,800. The plaintiff's motion to strike parts of the defendant's memorandum was noted, particularly regarding misrepresentations and unsworn testimony. The Court also addressed a motion to strike concerning maintenance and protection of traffic, stating that the cost of steel had exceeded the original price, thus affecting Federico's waiver of that item. The motion to strike was denied, but the Authority was allowed to present further evidence on the steel pricing issue.
The Authority's post-trial memorandum claimed that evidence regarding steel prices would have been irrelevant and potentially stricken based on footnote 6. The Court rejected this claim, stating that the Authority had the opportunity to present its evidence during the trial but chose not to. The Authority's motion to strike footnote 6 was denied. The plaintiff's motion to strike parts of the defendant's memorandum was also denied, as the trial was jury-waived, and findings were based solely on the evidence presented.
A breakdown of damages indicated that D. Federico's claims amounted to $520,775.26, while the Authority's counterclaims totaled $90,978.39, leaving a net amount due to Federico of $429,796.87. The issue of applicable interest under Massachusetts General Laws chapter 30, section 39G was addressed, highlighting the Authority's obligation to promptly pay undisputed items. The Court determined that penalty interest would apply to the amount of $161,479.13, calculated from February 5, 1978, until payment, due to the Authority's failure to meet statutory payment timelines following substantial project completion on December 1, 1978.
Counsel for the plaintiff was instructed to submit interest calculations within ten days, with the defendant's counsel to respond within seven days if any discrepancies arose. The excerpt concludes with a dialogue regarding competitive bidding and pricing strategies, indicating a discussion of market pressures on pricing.
The witness emphasizes that during job bidding, the focus is on determining job costs rather than beating competitors. When describing the job conditions, the witness compares the excavation task to a game of "pick up sticks," noting that various materials, including boulders and Raymond concrete piles, were buried in fill and not interconnected. The court seeks clarification on the difficulties presented by these materials, to which the witness responds that all materials posed equal challenges. Federico's payment to Hub Foundation for installing wales is highlighted, along with an expert analysis indicating savings of $71,000 to $119,737, suggesting no additional costs were incurred. A letter from Mr. Horn indicates that if Federico did not perform the work, the Authority would complete it and charge Federico. The court finds that the work should have been performed shortly after the letter's date, as cost estimates were relatively consistent. Direct costs totaled $18,054.29, with indirect costs of $7,221.72, leading to total costs of $25,276.01 and additional profit and overhead of $30,583.97. The contractor is required to hire a diver to inspect the site before pile driving and must excavate obstructions beforehand. All shop drawings must be submitted for approval well in advance, and the contractor assumes risk if they proceed without approval. The recapitulatory section lists delays attributed to extra excavation involving Raymond concrete piles (171 days), issues with sheeting (45 days), the Parisi problem (14 days), and tie-rod problems (183 days), totaling 413 days of excusable delay.
