Liquidated Damages Case

[bob7947]

Somone mentioned liquidated damages this past week. I found a nice opinion on it--K-Con Building Systems, Inc.--today at the Court of Claims.

[joel hoffman]

Somone mentioned liquidated damages this past week. I found a nice opinion on it--K-Con Building Systems, Inc.--today at the Court of Claims.

Very interesting situation. Good discussion concerning how the liquidated damages were formulated and how the government's costs are considered. This is also a good study for NOT how to award or administer a design-build contract.

I don't know how the job was acquired - sole source - competitively? The authorizing statute for Coast Guard design-build is, as far as I know, the Clinger-Cohen Act identified in FAR 36.104 and implemented in FAR 36.3 (the 2 Phase D-B method*). This requires competition, not a sole source procurement.

A root cause of the problems appears to be agreeing to accept a non-conforming proposal that took precedent over conflicts with the solicitation requirements without amending the requirements to reflect what was actually agreed as the final requirements. It basically became a free for all. The contractor deviated from both the proposal and the solicitation and the government responded with "recommended" design review comments, rather than simply enforcing the requirements - whatever those were. Even when the government defended itself in the claim, it there isn't any indication that the government clearly identified exactly where the requirements are in the building codes and ASHRAE design references. The citations weren't included in the design review comments or in the KO's remarks cited in the Ruling.

If this was a sole source negotiated procurement, then the government and contractor should have sorted out and clarified the scope and requirements before signing the contract. If it was competitively negotiated acquisition, the government should not have accepted a non-conforming proposal. Especially considering the subsequent confusion and the failure to agree on the scope (a situation that the Court has determined still exists), how could the government compare proposals based on different scopes?

*The two-phase method in 41 U.S.C. 253m applies to Coast guard D-B authority, absent some other specific authority. Per 10 U.S.C. 2801 (d), 10 U.S.C. 2305a and 10 U.S.C. 2862 (one-step turn-key method) do not apply to USCG.

EDITED: 7 January 2015:

I recently discovered that 14 USC 677 and 48 CFR 3036.104-90 (May 6, 2008) provide the authority for the US Coast Guard to use the One-Step Turnkey Design-Build acquisition method. The three Suits discussed in the 19 August 2011 Decision were apparently acquired through a 2001 FSS contract for Prefabricated Structures and Outdoor Smoking Shelters. The three Coast Guard Orders were awarded back in the 2003-2004 time frame.The Court of Federal Claims decided the three suits separately. This one was for design and construction of a prefabricated structure to serve as a cutter support team building in Port Huron. I don't know how the GSA had statutory authority to award design-build FSS contracts or how the USCG had statutory authority to use them or to acquire design-build through sole source negotiations from an FSS contract.