George Allen Constr. Co., Inc. v. Ohio Dept. of Adm. Serv.
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[Cite as George Allen Constr. Co., Inc. v. Ohio Dept. of Adm. Serv., 2001-Ohio-3957.]
IN THE COURT OF CLAIMS OF OHIO
GEORGE ALLEN CONSTRUCTION CO., :
INC.
:
Plaintiff
:
v.
:
DEPARTMENT OF ADMINISTRATIVE
SERVICES
:
Defendant
CASE NO. 2000-04766
REFEREE REPORT
William L. Clark, Referee
:
: : : : : : : : : : : : : : : : :
I. STATEMENT OF THE CASE
This case involves disputes arising out of the performance
of the interior general trades contract for a law library
addition for Cleveland State University (CSU).
Plaintiff George
Allen Construction Co., Inc. (GAC) was the interior general
trades prime contractor.
Defendant Ohio Department of
Administrative Services (defendant) acted as the contracting
agent for CSU.
The contract was let in 1995, with GAC’s work
scheduled to commence in mid-1996 following site preparation and
building erection work by other prime contractors.
The GAC
contract stipulated a lump sum price of $2,024,913, called for
completion within 670 calendar days, and permitted the assessment
of liquidated damages of $2,000 per day for late completion.
Defendant retained R.P. Carbone Construction Company in
association with O’Brien, Kreitzberg and Associates (RPC/OK) to
serve as construction manager.
[Cite as George Allen Constr. Co., Inc. v. Ohio Dept. of Adm. Serv., 2001-Ohio-3957.]
The project was behind schedule when GAC commenced work in
1996 due largely to delays and defective performance by J.P.
Sorma Construction Co., Inc. (Sorma), the building shell general
trades prime contractor.
As a result, the project construction
schedule affecting GAC and other prime contractors underwent
numerous modifications during the course of construction.
However, the project was completed essentially on time, and
liquidated damages for late completion were not assessed against
GAC.
In November, 1998, GAC filed suit against defendant for
additional compensation allegedly due for extra work it performed
and expenses incurred by it on the project.
That suit was
subsequently dismissed, and GAC asserted its claims in the
Article 8 dispute resolution process.
Several of those claims
were resolved for a total of $71,092 and are not before this
court.
Thereafter, GAC filed suit in this court on the rejected
claims, seeking recovery for:
1)
Alleged violation of GAC’s right to work due to union
interference at the site, which resulted in delay and additional
costs of completion and wrongful assessment of back charges for
cleanup;
2)
Cost of providing “J” bead at window mullion/drywall
partition intersections, which was allegedly beyond the scope of
GAC’s contract;
3)
Additional bond costs on several items of extra work;
4)
Extra cost of “out of sequence” work allegedly performed
by GAC through its subcontractor, Giorgi Interior Systems, Inc.
(Giorgi).
GAC’s lawsuit also included a claim for consequential
damages, alleging that the acts and omissions of defendant and
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REFEREE REPORT
its agents on this project caused GAC to go out of business.
That claim was withdrawn prior to trial.
GAC also seeks to recover interest on the amount of the
Article 8 award for an alleged 5½-month delay in effecting
payment, together with prejudgment interest and costs on the
other amounts to which it is found to be entitled herein.
Defendant filed its answer denying liability and requesting
dismissal of GAC’s complaint.
Thereafter, William L. Clark was
appointed “referee” pursuant to R.C. 153.12 and R.C. 2743.03 to
hear the case and submit his report and recommendations to Judge
J. Warren Bettis, the assigned judge.
A trial was conducted by
Referee Clark on June 28 and 29, 2001, and post-trial briefs were
submitted on behalf of the parties.
Upon consideration of the evidence, the applicable law and
the arguments of counsel, the referee hereby submits the
following report and recommendations.
II. DISCUSSION
A.
Right to Work Claim
1.
Claim for cost of employing union labor
GAC, a nonunion contractor, performed most of its work on
the project through union subcontractors, reserving for itself
miscellaneous labor and various items of material supply.
It is
conceded that GAC had the right to employ nonunion laborers and
material suppliers for such work so long as the prevailing wage
rates specified in the contract were paid.
(GC 1.2.5; WR 1.1.1;
Tr.570.)
On several occasions during construction, representatives of
Union Local No. 310, incorrectly informed GAC’s nonunion laborers
and material suppliers that it was a union job and nonunion
workers could not work there.
The representatives impliedly
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threatened reprisal for noncompliance.
REFEREE REPORT
GAC’s response was to
avoid confrontation with the union and to seek the assistance of
defendant’s construction manager to “set the union straight.”
Letters written by George Allen to RPC/OK, one in November 1996
and at least three in April 1997, describing the union
interference and requesting defendant’s assistance in resolving
the problem went unanswered.
GAC also sought to involve its
state representative, Hank Tersigni, and the state EEO officer,
Jim Burton, in the matter but without meaningful result.
On
May 1, 1997, GAC wrote to state architect Randall A. Fisher
seeking his assistance in addressing this and several other
concerns.
Fisher replied on June 9, 1997, promising to
investigate the matter.
forthcoming.
However, no further response was
(Plaintiff’s Exhibit 4.)
Clearly, defendant elected during the first several months
of the project not to assist GAC in the enforcement of its right
to employ nonunion labor and material suppliers on this project.
In the words of Joe Coreno, GAC’s project manager and on-site
superintendent, RPC/OK said in effect: “It’s your job.
care of it.”
(Tr. 116.)
You take
Mike Scaparotti of RPC/OK testified
that the construction manager, as an agent of defendant, was not
under contract to resolve labor disputes, but took his direction
in such matters from defendant or the university.
He said that
GAC should have ignored the attempted interference and proceeded
with the use of nonunion laborers and material suppliers as was
its right.
Scaparotti stated that if that were to result in
physical violence or other illegal activity, the appropriate
authorities would have been called in to deal with it.
574.)
(Tr. 570-
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REFEREE REPORT
In early May 1997, GAC engaged legal counsel to attempt to
move the matter ahead.
At a May 14, 1997, meeting attended by
representatives of GAC (George Allen, Joe Coreno and attorney
Alan Ross) and RPC/OK (Mike Scaparotti and Jon Dregalla) the
parties discussed establishing a “reserve gate” system to provide
a separate entrance to the worksite for nonunion laborers and
material suppliers and to restrict any picketing to that
location.
Later that day, or the next day, the idea was
abandoned, either because RPC/OK feared it would inflame Local
310 and create problems on this and perhaps other jobs, as
attorney Ross testified (Tr. 504), or because Joe Coreno opposed
the idea and most of the remaining work was expected to be done
by Giorgi without union opposition, as Mike Scaparotti testified
(Tr. 553).
Ross stated that Scaparotti offered, as an
alternative, to process a claim for whatever GAC’s previous union
interference-related costs were, grant an extension of time for
delays attributable thereto, and pay GAC’s extra costs for using
union labor in completing its work.
(Tr. 506-507; 531.)
Scaparotti vigorously denied Ross’ testimony on this point.
(Tr.
576.)
Nothing in writing was offered at trial to evidence RPC/OK’s
alleged offer or GAC’s acceptance thereof.
Therefore, even if
Ross’ version of the facts be true, the alleged agreement would
not have been enforceable against defendant because it did not
comply with the requirement of GC Section 7.1.2 that any change
in the work be in writing.
Foster Wheeler Enviresponse, Inc. v.
Franklin County Convention Facilities Authority (1997), 78 Ohio
St.3d 353, 678 N.E.2d 519.
The referee questions whether the establishment of a
“reserve gate” offered a real solution to the problem.
Even if
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REFEREE REPORT
all nonunion laborers and material suppliers could have gained
access to the site through such a gate and any picketing would
have been limited to that location, the union representatives
would still have been able to intimidate them when they attempted
to perform their work on site.
After being denied meaningful assistance from defendant and
continuing to elect not to challenge the union directly, either
by obtaining a court injunction or through self help, GAC
employed union laborers and material suppliers to perform the
work.
Allen testified that GAC employed Jay’s Boom Trucking
(JBT), a union contractor, between March 21, 1997, and July 31,
1997, to provide labor for general cleanup on the project at a
total cost of $18,161.50.
The hourly rate charged by JBT for
those services was $28.50 in April and $29.50 from May through
July, for a total of 627 hours.1
(Plaintiff’s Exhibit 4, Voucher
History Report, July 1, 1996 to December 31, 1997.)
The
prevailing wage rate for such work for the same period was $18.10
(Contract, Wage Determination, Hod Carriers and Common Laborers –
Building Construction), or a total of $11,348.70 for 627 hours.
Deducting the amount GAC would have paid at the prevailing wage
rates ($11,348.70) from the amount actually paid at union rates
($18,161.50) leaves a balance of $6,812.80, being the extra cost
incurred by GAC for cleanup by reason of using union labor.
Similarly, GAC hired Reliance Mechanical Corp. (Reliance) to
provide union labor to unload and move doorframes, wood and other
materials from delivery trucks to carpenters inside the building.
1
These figures exclude the amount of $759 paid by GAC to JBT for twenty-three
hours of labor at $33 per hour to move furniture, doors, etc., on May 21,
1997. (See pg. 7, infra.)
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REFEREE REPORT
The total amount GAC paid to Reliance for these services was
$2,730.
As previously noted, GAC paid Jay’s Boom Trucking $759
for similar services on May 21, 1997.
$3,489.
These two figures total
Allen stated that those costs were incurred solely
because the union representatives prevented the nonunion material
suppliers from unloading and delivering the materials on site, a
service which GAC had already paid for in the purchase price of
the materials.
(Tr. 769-770.)
Additional costs allegedly incurred by GAC as a result of
union interference were storage charges for indoor storage of
doors paid to Shippers Highway Express, Inc. from November 1996
through March 1997 for a total of $1,495.74.
GAC failed to
present evidence establishing a link between alleged union
interference and the need for four months of indoor storage of
doors.
However, Shippers Highway Express, Inc. also provided
union labor for unloading and delivering doors, a large reference
desk and bathroom partitions at the job site in March and May
1997, for a total charge of $3,059.63.
When added to the charges
for similar services provided by Reliance ($2,730) and Jay’s Boom
Trucking ($759), GAC’s cost of using union labor for delivery
services totals $6,548.63.
In summary, the referee finds that GAC incurred the
following extra costs by reason of union intimidation on the
project:
Extra cost of labor for cleanup
$6,812.80
Labor to unload and move door frames, wood
and other materials to points of use on site
6,548.63
Total
$13,361.43
GAC contends that defendant had a duty under the contract to
“police the union” to prevent it from harassing or interfering
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REFEREE REPORT
with GAC’s rights to hire nonunion labor at the prevailing wage;
that its failure to do so was a breach of contract; and that GAC
is entitled to recover its extra costs attributable thereto.
The
authority cited by GAC for this proposition is the testimony of
Alan Ross, GAC’s labor attorney who attended the meeting of
May 14, 1997.
Ross testified that GAC agreed to forego the use
of a reserve gate in return for reimbursement by RPC/OK of GAC’s
costs of using union labor and an extension of the contract time.
Ross also identified several contract provisions2 which, taken
together, show that defendant had a duty to give GAC access to
the job to perform its work and to regulate the intimidating
conduct of the employees of other contractors who employed union
labor.
(Tr. 522-525.)
GAC also cites Visintine & Co. v. The New
York, Chicago & St. Louis Railroad (1959), 169 Ohio St. 505, 506
for the same proposition, quoting the following language:
The state of Ohio owed certain duties to
plaintiff under the contract entered into
between them. Among those duties was that of
providing plaintiff with a site on which it
could perform its work without hindrance or
delay and of doing those things which it
promised to do at such time and in such manner
as would not hinder or delay the plaintiff.
Counsel for GAC has not informed the court how an
application of the rule of law in Visintine, supra, to the
specific contractual provisions in this case, supports its
2
GC Sections 2.5.2; 4.1.1; 4.1.2; 4.2.1; 4.2.2; 4.2.2.3; 4.2.4; 4.3.5;
4.3.5.1; 4.4; 4.4.2; 4.6; 4.6.1.1; 6.1; 6.1.4; and 6.3.
Case No. 2000-04766
position.
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REFEREE REPORT
Upon review thereof and consideration of the evidence
presented, the referee finds that defendant did provide GAC with
a site upon which to perform its work.
GAC planned from the
outset to do that work largely through union subcontractors and
did so without any union interference.
In the relatively few
instances where the union interfered with GAC’s right to use
nonunion laborers and material suppliers, GAC elected to ask
defendant to compel the union to alter its behavior rather than
going forward with the work or seeking a court injunction to
enforce its rights.
The referee finds no duty under the contract
or in law requiring defendant to intervene on plaintiff’s behalf.
In the event that violence or other illegal activity were to
erupt out of any encounter between the union and GAC or its
employees, defendant was ready to call in the campus police to
deal with it, as Mike Scaparotti testified.
Accordingly, the
referee recommends that GAC’s claim to recover the cost of union
labor for cleanup and deliveries be denied.
2.
Claim for reimbursement of cleanup back charges
GAC was back-charged the sum of $54,379 for its failure to
daily remove all waste materials and rubbish resulting from its
operations as required by GC Section 2.10 of the contract.
GAC
seeks to recover those back charges as being improperly assessed.
The record is replete with notifications and directions from
the construction manager to all prime contractors to comply with
this requirement.
(Defendant’s Exhibits AA – FF.)
exhortations went largely unheeded.
Those
As a consequence, the
construction manager proceeded in accordance with GC Section 5.3
of the contract to give the required three-day notices to the
defaulting contractors to perform the cleanup by other means, and
back-charge each contractor a proportionate share of the cleanup
Case No. 2000-04766
cost.
(Tr. 628-630.)
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REFEREE REPORT
Jon Dregalla, RPC/OK’s on-site project
manager, testified that the allocation of responsibility among
the various contractors for the cleanup cost was made carefully
and thoroughly by the construction manager’s field personnel
based upon daily observations of the accumulated trash.
Their
findings were reported weekly on detailed spread sheets.
(Tr.
594; 631-637; 711; Defendant’s Exhibits AA – FF.)
The affected
contractors did not participate in the cost allocations but could
review the field notes and other records backing up the proposed
change orders if they had questions.
(Tr. 635-636.)
Six
deductive change orders averaging approximately $9,000 per month
were issued to GAC covering the period from February 21, 1997,
through August 21, 1997.
Most of the cleanup work was performed
by Gorman-Lavelle Corporation at union labor rates.
The assessment of $54,379 against GAC represented seventysix percent of the total cleanup back charges of $71,374 levied
against five prime contractors which were on site during the
period in question.
The next largest back charge was against
Sorma Construction Co., the building shell contractor, in the
aggregate amount of $13,817, with lesser amounts being assessed
against Doan Electric Co. ($1,014), Reliance Mechanical ($1,766),
and S.A. Comunale Co. ($398).
Upon receipt of notices of insufficient progress regarding
cleanup, GAC would immediately call upon Giorgi, GAC’s interiors
subcontractor whose operations were allegedly creating the trash,
to take the necessary corrective action.
Exhibits P, Q, R, S, V; Tr. 245.)
(See, e.g., Defendant’s
Giorgi’s response in December
1996 and March 1997 was to deny that it had generated the trash.
(Defendant’s Exhibits R, T; Tr. 226; 247; 297; 299.)
However,
David Giorgi acknowledged at trial that the trash conditions
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REFEREE REPORT
shown in six of twelve photographs taken in April and May, 1997
(Defendant’s Exhibits MM1 to MM12) portrayed Giorgi’s “mess.”
(Tr. 369-372.)
Jon Dregalla testified that most of the debris
shown in those photographs appears to be trash resulting from
Giorgi’s work.
(Tr. 628.)
GAC concedes that the construction manager gave the threeday notice required by GC Section 5.3 of the contract and then
arranged for the cleanup work upon the default of the prime
contractors.
(Tr. 801.)
Although both GAC and Giorgi contended
during construction and at trial that more of the cleanup cost
should have been allocated to Sorma, no independent analysis of
cleanup costs was made by them to refute RPC/OK’s allocation.
(Tr. 801.)
GC Section 5.3.2.3 of the contract states: “The
decision of the Director to back-charge the Contractor shall be
final.”
The six change orders covering the back charges to GAC
for cleanup work all bear the approval of Deputy Director Kaitsa.
On the basis of the evidence presented, the referee finds
that the back charges for cleanup work assessed against GAC were
appropriate and made in accordance with the contract
requirements.
The referee fails to see any evidentiary link
between GAC’s claim for reimbursement of the cleanup costs and
its allegation of union interference.
Accordingly, the referee
recommends that GAC’s claim for reimbursement of the cleanup
costs assessed against it be denied.
B.
“J” bead Claim
GAC seeks to recover the sum of $4,377 for providing and
installing “J” bead at window mullion/drywall partition
intersections on the basis that such work was beyond the scope of
GAC’s contract.
[Cite as George Allen Constr. Co., Inc. v. Ohio Dept. of Adm. Serv., 2001-Ohio-3957.]
The detailed drawing for this installation, identified as
20M-20 and dated June 21, 1995, was prepared by Collins Rimer
Gordon Architects, Inc. (CRG), the associate architect on the
project.
(Plaintiff’s Exhibit 5.)
At the intersection between
the window mullion and the drywall the drawing shows “08520
prefinished alum. closure both sides” and at the same points “F
mold.”
Carder MacKnight, Giorgi’s estimator who assisted in the
preparation of Giorgi’s bid, interpreted this drawing as
indicating that an aluminum closure would be provided by the
manufacturer of the curtain wall system to receive the drywall
partitions and that the use of “J” bead would not be required in
the installation.
In a letter dated February 18, 1997, he
explained that the F mold and aluminum closure are shown as the
same piece, and he interpreted the reference to F mold as
indicating the form of the aluminum closure.
If the F mold had
been intended as a drywall bead, he reasoned, it would have been
given the master legend of 09255 and would have been called a “J”
bead.
There is no drywall bead, he said, that resembles an “F.”
(Plaintiff’s Exhibit 5.)
Therefore, he excluded the cost of
providing and installing “J” bead from Giorgi’s bid.
(Tr. 207-
208.)
On January 28, 1997, the construction manager submitted a
request for information (RFI) to the associate architect seeking
verification of Giorgi’s interpretation of drawing 20M-20.
The
next day, Jim Quandt of CRG advised that the F mold and aluminum
closure were two distinct components of the assembly and that the
F mold was a gypsum board corner bead, to be supplied by the
drywall installer (Giorgi).
He acknowledged two errors in the
drawing: 1) that the specification reference was incorrect
(“08520” should have been “08920”); and 2) that “F mold” should
have been “J” bead.
(Plaintiff’s Exhibit 5.)
[Cite as George Allen Constr. Co., Inc. v. Ohio Dept. of Adm. Serv., 2001-Ohio-3957.]
Giorgi did not agree with CRG’s explanation and, on
February 6, 1997, submitted a change order proposal to GAC to
provide drywall “J” bead and drywall finish for the sum of
$3,882.
(Plaintiff’s Exhibit 5.)
MacKnight explained at trial
that the installation of “J” bead involves labor and material
cost for applying the bead, taping, sanding and finishing rather
than simply sliding the drywall behind a piece of aluminum
closure as he had anticipated from the drawing.
(Tr. 213-214.)
In order to avoid delaying Sorma’s window trim work, GAC
instructed Giorgi to proceed with the installation under protest.
GAC also requested another letter from Giorgi providing greater
detail in support of its position that the “J” bead work was
beyond the scope of the contract.
That letter was provided on
February 18, 1997, as described above.
GAC forwarded the claim to the construction manager after
adding its markup of ten percent and bond cost of two and onehalf percent bringing the total claim to $4,377.
On February 21,
1997, in further correspondence with RPC/OK regarding this
matter, Quandt suggested that GAC be directed to install two
corner beads soldered together to create the “F” mold profile
shown in drawing 20M-20 which, he said, would be “extremely labor
intensive.”
Quandt stated further that “CRG considers this issue
closed and with no additional cost to the project.”
Exhibit 5.)
(Plaintiff’s
Giorgi proceeded with the installation of “J” bead
under protest.
GAC’s Article 8 claim for this item was submitted
under date of September 7, 1997.
(Plaintiff’s Exhibit 5.)
It
was rejected. (Defendant’s Exhibit Z.)
The evidence demonstrates that the errors contained in the
associate architect’s drawing 20M-20 caused the drywall
subcontractor reasonably to anticipate that “J” bead would not be
required at the window mullion/drywall partition intersections
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and to exclude that cost from its bid.
REFEREE REPORT
At trial, defendant did
not question the quality of the installation or the
reasonableness of the amount claimed.
Clearly, CSU received the
full benefit of this work.
It is well-established that the owner is required to furnish
sufficient plans and specifications to enable the contractor to
perform.
Bates & Rogers Constr. Co. v. Cuyahoga Cty. Bd. of
Commrs. (N.D. Ohio 1920), 274 Fed. 659; Valentine Concrete, Inc.
v. Ohio Dept. of Administrative Services (1991), 62 Ohio Misc.2d
591.
The architect is the agent of the owner, and the owner is
liable for any errors by the architect that create extra costs.
Mason Tire & Rubber Co. v. Cummins-Blair Co. (1927), 116 Ohio St.
554.
Accordingly, the referee recommends that GAC’s “J” bead
claim be allowed in the amount of $4,377.
C.
Increased Bond Cost Claim
GAC seeks to recover $7,138.15 for additional bonding costs
for change order work and for allowance increases during the
course of the project.
A total of 23 change orders authorizing
various increases in the contract price from August 13, 1996, to
April 18, 1997, and aggregating $259,569.03, are involved.
The
claim includes $6,489.23 in bond premiums calculated at 2.5
percent, plus one year of interest at the rate of ten percent per
annum, or $648.92.
(Plaintiff’s Exhibit 6.)
The claim is based upon GC Section 7.1.1.1, which mandates:
“*** The Contractor shall increase the amount of the Bond
whenever the contract price is increased.”
The change orders in question, copies of which are collected
in Plaintiff’s Exhibit 6, were based upon cost estimates prepared
by Joe Coreno, GAC’s project manager, showing the cost of
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REFEREE REPORT
materials and labor plus ten percent for overhead and profit.
These estimates did not include the amount of premium necessary
to increase the amount of the contractor’s bond as required by GC
Section 7.1.1.1.
George Allen explained at trial that Mr. Coreno
simply forgot to add that cost to the estimate.
(Tr. 433.)
On April 29, 1997, GAC wrote RPC/OK asking whether defendant
required additional bonding for: 1) the delayed alternates which
had been accepted the previous August in the amount of $199,1063;
and 2) other change orders and field work orders involved in this
claim which together totaled an additional $60,463.03.
RPC/OK
answered that the General Conditions require bonding on all
change orders; that bonding costs should have been included in
all of GAC’s quotations; and that no final bill for additional
bond premium would be entertained at the end of the project.
On
July 1, 1997, RPC/OK stated further that the contract documents
3
During the bidding process, GAC submitted the low bid for the interior work
and prices for several alternates. RPC/OK was afraid that GAC had failed to
include all costs for a large alternate pertaining to a connector bridge
between the law library building and another portion of the campus. When
called to its attention, GAC agreed, and the contract was awarded without
including that alternate. The price for that work was negotiated and was
incorporated by change order in August 1996, at the price which had been
calculated by RPC/OK’s estimator during the design phase. Several other
alternates were also accepted at that time. (Tr. 545-546; 608-609; Change
Order No. 072-203.)
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REFEREE REPORT
do not permit reopening of firm alternate prices submitted and
accepted.
(Plaintiff’s Exhibit 6.)
Some of the change orders which had been issued previously
to GAC by defendant had included bond costs.
(Tr. 433.)
Notwithstanding the exclusion of such costs from the change
orders in question, GAC was required to incur a bond cost for
each of them.
(Tr. 435.)
This claim was rejected in the Article 8 proceeding on the
grounds that: 1) the bond premium should have been included in
the bid for the delayed alternates; 2) the other change orders
would have resulted in only a few hundred dollars in bond
premiums; and 3) the change orders signed by GAC state that the
compensation provided for therein “constitutes full and complete
satisfaction for all direct and indirect costs and interest
related thereto.”
(Defendant’s Exhibit Z.)
Section 6.4.2 of the Instructions to Bidders makes it clear that
the contract bond is for the benefit of the State of Ohio. It
provides:
The Bond shall be in the full amount of
the contract to indemnify the State
against all direct and consequential
damages suffered by failure of the
Contractor to perform according to the
provisions of the contract and in
accordance with the plans, details,
specifications and bills of material
therefor and to pay all lawful claims of
Subcontractors, Material Suppliers, and
laborers for labor performed or
materials furnished in carrying forward,
performing or completing the contract.
uoted above, GC Section 7.1.1.1 requires the bond to be increased
whenever the contract price is increased.
The referee is not
Case No. 2000-04766
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REFEREE REPORT
aware of any contractual provision giving an agent of defendant
the power to waive that mandatory provision.
It seems clear, therefore, that inclusion of the bond premium in
each of the subject change orders was a non-waivable requirement
of the contract.
GAC was at fault in not proposing inclusion of
that cost; and RPC/OK was at fault in not observing the omission
of the bond premium and requiring its inclusion in the change
order.
The referee recommends that this court order to constructively
amend each of the subject change orders to add the cost of the
bond premium in the amount of 2.5 percent of the increase in the
contract price, and that defendant be ordered to pay GAC the
unpaid portion of the change orders so amended in the aggregate
amount of $6,489.23.
Out-of-Sequence Work Claim
This claim is asserted by GAC on behalf of Giorgi for alleged
losses of $86,500.
The loses are allegedly attributable to
RPC/OK’s failure to properly schedule, coordinate and manage the
work after it had fallen behind schedule due to the delays and
deficiencies in Sorma’s performance.
Sorma’s delays and
deficiencies, it is claimed, caused Giorgi not only to accelerate
its work at the direction of RPC/OK, for which it was
compensated, but also to lose planned efficiencies in its
performance, for which it was not compensated.
Defendant denies
liability on the grounds that the actions of the construction
manager were appropriate; that GAC was compensated by change
order for the work in question; and that the contract prohibits
any recovery against defendant for damage or expense to a
contractor resulting from interference, hindrance, disruption or
delay caused by another contractor.
[Cite as George Allen Constr. Co., Inc. v. Ohio Dept. of Adm. Serv., 2001-Ohio-3957.]
The facts regarding this claim are not seriously in dispute. When
Giorgi arrived on the site to begin work in July or August, 1996,
the building shell contractor and some of its subcontractors were
still there, the building was not yet watertight and temperature
control was lacking; all of which inhibited the performance of
drywall work.
(Tr. 274-278.)
Because of these conditions, some
of the drywall work had to be taken down and redone.
(Tr. 278.)
In January, 1997, Giorgi notified GAC of the delays and
inefficiencies to its work caused by other contractors.
(Plaintiff’s Exhibit 15.)
In a letter dated February 6, 1997, to
RPC/OK, GAC complained of similar problems such as Sorma’s
failure to complete and clean up after its work, which caused the
electrician and fireproofing contractor to be behind schedule and
in Giorgi’s way.
(Plaintiff’s Exhibit 16.)
In light of these problems, the project progress schedule was
revised and updated on numerous occasions by the construction
manager in conjunction with the various contractors.
The
revisions and updates were made pursuant to GC Section 4.3 of the
contract.
Some, but not all, of these schedules are collected in
Plaintiff’s Exhibit 7.
Mike Scaparotti of RPC/OK described the
rescheduling effort in the following terms.
(Tr. 575.)
We produced recovery schedules. We had
meetings with the contractors to talk
about how to meet those recovery
schedules. In the development of the
initial schedule, and in a lot of
participation in the subsequent schedules,
George Allen was not present, would not
make himself available.
(See, also, Tr. 611.)
One of the options available to the construction manager to
deal with the Sorma-caused delays was to grant the affected
Case No. 2000-04766
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REFEREE REPORT
contractors an extension of time to complete their work.
(GC
Sections 4.1.2; 6.3.) However, that option was not feasible here
because of CSU’s need to occupy the building before the start of
the fall quarter.
(Tr. 620.)
In lieu of extending the
completion date, defendant agreed to pay the contractors to
accelerate portions of their work, to relax some interim
scheduling milestones, and to develop “work around” schedules in
order to bring the work in on time, notwithstanding the previous
delays.
(Tr. 622-623; 626.)
The five change orders issued to
GAC for Giorgi’s overtime premium costs in April, May and June,
1997, are collected in Defendant’s Exhibits GG – KK.
The total
amount paid to GAC for this work, including GAC’s ten percent
markup and 2.5 percent bond premium cost was $47,370.
Offsetting
deductive change orders were issued to Sorma for that work so
that there was no additional cost to defendant.
Mike Scaparotti of RPC/OK testified that David Giorgi,
Giorgi’s project superintendent, was directly involved in the
discussions leading to the generation of those change orders and
had a full opportunity to advise RPC/OK of all additional work
Giorgi was required to do.
Scaparotti said that this was the
compensation being offered for acceleration on this project due
to delays encountered on the schedule.
There was no discussion,
he said, relating to a claim for additional compensation down the
road.
(Tr. 562.)
David Giorgi testified to the contrary, contending that
those change orders were not intended to compensate Giorgi for
the out-of-sequence work which resulted from the Sorma delays and
resultant rescheduling.
He described the normal sequence of
Giorgi’s work as doing the metal framing; allowing other trades
to do their work; coming back in to drywall and tape; letting the
Case No. 2000-04766
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REFEREE REPORT
painter prime; putting in acoustical ceiling grid; allowing the
mechanicals to install lighting and HVAC and then dropping the
ceiling tile.
All of this required that the different
contractors work sequentially in various areas in a continuous
flow.
(Tr. 267-268; 402-403.)
According to Giorgi, the numerous
delays and rescheduling resulted in his company going back and
doing small portions of work in various locations without
completing anything, all of which raised quality concerns, slowed
production, decreased efficiency and increased costs.
(Tr. 269-
271; 403.)
The only cost-related evidence offered in support of this
claim is David Giorgi’s testimony that Giorgi lost $86,500 due to
the out-of-sequence work it had to perform on the project. No
company financial records, reports or analyses were offered into
evidence to support this claim, and no record custodian or
financial expert was called to testify.
(Tr. 407.)
Using the
total cost method, David Giorgi testified that the company’s
total cost on this project, including an allowance for overhead
and profit, was $1,140,871 against contract revenues of
$1,025,000, leaving $115,871 as Giorgi’s gross deficit on the
project. He then discounted that figure by approximately 25
percent to account for other, unidentified causes of extra cost,
leaving a net claim of $86,500 for the out-of-sequence work.
(Tr. 313-315; 405-406.)
While it is probable that Giorgi did perform out-of-sequence
work and did incur unanticipated costs as a result of Sorma’s
delays and deficient performance, the referee recommends that
this claim be disallowed in its entirety for the following
reasons:
Case No. 2000-04766
1)
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GAC failed to prove that RPC/OK’s actions in
rescheduling and otherwise managing the project fell below the
requirements of the contract or the standards of the construction
industry;
2)
Under the applicable provisions of the contract, an
extension of time as determined by the Director is the sole
remedy available to GAC from defendant for the delay and
additional expense caused by Sorma’s neglect, delay or fault.
(GC Sections 6.2 and 6.3.)
In lieu of an extension of time,
which was not a viable option on this project, the Director
elected to require GAC to accelerate Giorgi’s work and to
reimburse the cost thereof at Sorma’s expense.
GC Section 6.3 provides:
Any extension of time granted pursuant to
paragraph GC 6.2 shall be the sole remedy
which may be provided by the Director. In
no event shall the Contractor be entitled
to additional compensation or mitigation
of liquidated damages for any delay listed
in paragraph GC 6.2, including without
limitation, costs of acceleration,
consequential damages, loss of efficiency,
loss of productivity, lost opportunity
costs, impact damages, lost profits or
other similar remuneration.” (Emphasis
added.)
Thus, defendant is not obligated to reimburse GAC for the
expenses claimed.
However, GAC would appear to have the right to
assert that claim against Sorma under GC Sections 4.1.2.1 and
4.1.2.2 of the contract;
3)
Quite apart from the merits of the claim, GAC failed to
provide credible evidence of the amount of its alleged damages.
The denial of recovery is justified on that basis alone.
Case No. 2000-04766
E.
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Interest
1.
For alleged delay in payment of Article 8 award
GAC seeks to recover interest in the amount of $3,291.66 on
the $71,092 Article 8 award for an alleged 169-day delay by
defendant in effecting payment.
The evidence discloses that the Article 8 award was
announced on June 14, 1999, by Deputy Director Kaitsa.
GAC was
requested to indicate its acceptance in writing and was advised
that the preparation and processing of a change order and other
necessary paperwork would require approximately 90 to 120 days
from the date of GAC’s acceptance.
(Tr. 787.)
GAC’s acceptance
was communicated in a letter from GAC’s counsel dated June 30,
1999, conditioned upon payment being made no later than July 15,
1999.
Compliance with that condition was not possible.
Processing of the change order, initially prepared on
August 8, 1999, was delayed by counsel for GAC’s request that
language be added to clarify that GAC was not waiving the claims
which had been rejected in the Article 8 process.
(Tr. 789.)
After review of that request by defendant’s legal counsel,
additional language was added preserving such claims to GAC.
GAC
finally accepted the Article 8 award without condition on
November 2, 1999.
Thereafter, CSU had to obtain release of
additional funding from the State Controlling Board before
payment could be made.
Payment of $71,092, the total amount of
the award, was made on December 30, 1999, approximately 60 days
after GAC’s acceptance.
(Defendant’s Exhibit Z; Tr. 781.)
George Allen testified that he was told by defendant’s
representatives on June 8, 1999, that payment would be made
within 30 days.
(Tr. 779.)
That testimony is inconsistent with
Case No. 2000-04766
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REFEREE REPORT
the statement in Deputy Director Kaitsa’s announcement letter of
June 11, 1999, discussed above.
(Defendant’s Exhibit Z.)
Article 8 of the contract does not specify a time limit for
payment of amounts awarded through that process.
A standard of
reasonableness would therefore apply.
The referee finds that payment of the Article 8 award was
made within a reasonable time after GAC’s acceptance thereof and
recommends that GAC’s claim for interest thereon be denied.
2.
On amounts awarded in this proceeding
The referee has recommended that GAC recover on the
following claims:
a.
“J” bead claim - $4,377.
Payment for this extra should
have been authorized by change order in February, 1997, and paid
upon completion of the installation by approximately April 30,
1997.
(Plaintiff’s Exhibit 7, Revised Schedule No. 8.)
The referee recommends that GAC recover interest on the
award of $4,377 in the amount prescribed by law;
b.
Increased bond cost claim - $6,489.23.
On April 29,
1997, GAC made its request for additional bond premium relating
to all change orders issued prior thereto for which no bond
premium had been included.
was $6,489.23.
The total amount of premium involved
Inclusion of the additional bond premium should
have been approved at that time.
[Cite as George Allen Constr. Co., Inc. v. Ohio Dept. of Adm. Serv., 2001-Ohio-3957.]
Accordingly, the referee recommends that GAC recover
interest on the award of $6,489.23 in the amount prescribed by
law.
___________________________________
WILLIAM L. CLARK
Referee
Entry cc:
Michael B. Fesler, Esq.
Joseph B. Jerome, Esq.
55 Public Square, #1801
Cleveland, Ohio 44113
Attorneys for Plaintiff
Robert J. Lally, Esq.
F. Thomas Vickers, Esq.
Penton Media Building
1300 East Ninth St., Suite 900
Cleveland, Ohio 44114
Special Counsel for Defendant
Peter E. DeMarco, Esq.
65 East State St., 16th Fl.
Columbus, Ohio 43215
Assistant Attorney General
WLC/cmd
Filed 12-27-2001
To S.C. reporter 2-4-2002
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