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pricelesspearl

Requirements for Assumptions and Clarifications

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Hi, hoping for some advice and direction on this issue ...

We are the DOR on an A/E project. In the SOW there was no mention of performing a seismic analysis on the structure we are working on, which is required by design standards when the cost of repair/renovation is a certain percentage of the total replacement cost of the structure. We were never provided the total replacement cost. Our proposal included no cost or schedule for performing the analysis and was accepted.

Now the CO is requiring the analysis be done. When we suggested it was not part of the SOW, the CO argued that as an experienced design firm we should have known that there was a possibility it would be required and should have included an assumption in our proposal that it wasn't required or asked for clarification. I understand that we have no obligation to seek clarification unless there is a patent ambiguity or conflict. I'm not sure how there can be a patent ambiguity/conflict regarding a requirement that is not even mentioned in SOW. If they had provided us the replacement value and it indicated that an analysis was required, that would be an ambiguity as the SOW made no mention of one. But that was never provided. My thinking is that, at best, it would be a latent ambiguity and would be construed against the Gov't and we are entitled to an adjustment.

Am I correct with this line of thinking? Also, I am not sure about the argument that we should have included an assumption. I tend to think that by logical extension, if we have no obligation to ask for clarification, there is no obligation for an assumption. An assumption implies some ambiguity in the same way clarifications do, but I haven't been able to find any information in my research that seems to address that issue.

Any of you more experienced professionals have any thoughts?

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Really, has the contracting officer REQUIRED you to do the analysis? In a formal way?

You could reply to the contracting officer that according to _____ (legal citation), seismic analysis is required only when the cost of repair/renovation is a certain percentage of the total replacement cost of the structure. But the Government never never furnished the total replacement cost to you, and you had no way of knowing it otherwise. Therefore, you disagree with the contracting officer's assertion that the analysis is required under the contract. However, if the Government still wants you to do the analysis, you will be happy to do it and will submit a proposal for the new work. Or, you might say you will start the analysis without delay but that you see it as added work and will be submitting a claim for the added work.

Oh, and contact your attorney. If the contracting officer really REQUIRES you to do the analysis, then you have a legal argument about the standard of practice. All your talk about ambiguity and assumptions is irrelevant.

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Yes, the CO is requiring it. The renovation cost meets the threshold that the design standards require it. We have done almost exactly as you suggest already and the CO's response was that we waived our right to any kind of adjustment because we failed to make an assumption and/or request clarification on the issue. A separate proposal to perform the analysis will not be accepted because as far as they are concerned our price should already include the cost of performing the analysis.

They brought the assumptions issue up, so I don't see how responding to it is "irrelevant". If we aren't entitled to an adjustment because we didn't make an assumption, then whether or not we were required to make an assumptions seems very relevant.

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A separate proposal to perform the analysis will not be accepted because as far as they are concerned our price should already include the cost of performing the analysis.

Have you read Vern Edwards' blog article on this site about the differences between a Request for Equitable Adjustment (REA) and a claim? If not, I suggest you search it out and see if it provides any insight into your situation.

Hope this helps.

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here2help Thanks for suggestion. I am familiar with (if hardly an expert) the distinction between an REA and a claim, but whether it's an REA now or a claim later the issues would be the same. I was hoping for some insight into the strength of the gov't position.

If we can't get an adjustment now we are considering requesting T4C. This issue along with another (which I didn't raise because I didn't want to confuse the question) will more than double our cost of performance. That along with the cost of filing a claim that we may or may not win for who knows how long it will take is not worth it to our business decision makers.

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Presumably your proposal was not put on contract.

Presumably the SOW does have a requirement for a final design, and a design that is compliant with the standard that is driving the seismic analysis. Why, then, isn’t the seismic analysis implicitly required?

It sounds like what you are arguing is that it should not be so treated because of the Government’s superior knowledge. If I remember correctly, when a contractor raises this as a defense, the contractor has to show, among other things, that it wasn’t on notice to inquire about the facts the Government had that the contractor did not. If the circumstances governing when a seismic analysis is required are as straightforward as you’ve described them, I don’t understand why you weren’t on notice to inquire. (I don’t work construction, so that may be my ignorance.)

If I were the government CO, your explanation of why you weren’t on notice to inquire could potentially have an impact on my consideration of your REA or claim.

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pricelesspearl,

Has the contracting officer ORDERED you to perform the analysis? In what form or format did he or she issue the order? What contract clause did he or she cite in the order? Have you discussed the order with your attorney?

The talk about assumptions and ambiguity is irrelevant.

The question is whether the contracting officer has the right to order you to perform the analysis, or not. That answer will come from the contract itself (and local standards of practice, to the degree such are incorporated into the contract) and the facts of your case. While you're reading the contract, read the Disputes clause in the contract. If you think the seismic analysis is outside the scope of the work of your contract, you need to unambiguously say so. If you're willing to do the analysis after you negotiate a contract modification to pay for the work, you need to unambiguously say to. If you really feel you have been ordered, then you need to see para. ( i ) of the Disputes clause and unambiguously file a claim against the Government.

Or, if the contracting officer is right, then you are obligated to perform the analysis.

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pricelesspearl,

One thing I learned from reading Vern's blog (and attending his seminar) is that the distinction between REA and claim is not nearly as straightforward as most folks think. Do yourself a favor; read the blog article. If you are thinking about requesting a contract termination (which you style as a T4C but might also fall into the anticipatory breach category) then do yourself a favor; read the blog article first.

Whether you ultimately prevail or not might turn on legal issues and case law. But your overall strategy and near-term tactics should be informed by rights delineated by your contract and its clauses. Vern's article is a good starting point to understand whether your CO can "refuse to accept" your proposal for increased costs.

H2H

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I am assuming that you were selected for this A-E award using the Brooks Act procedures. You were selected based upon qualifications, then submitted a cost proposal, then participated in negotiations and discussions concerning the scope of the services and the fee, correct? If not, how were you selected and what did I add or miss?

Did your firm and the government negotiate the design fee and estimated effort required to accomplish the design in any detail, including any required studies? Was there a level of detail provided with the proposal that would identify any planned studies? If the two issues mentioned here would more than double your cost of performance, should it have been evident to the government during their proposal evaluation and during negototians that something was missing?

There is a statutory limit of 6% of the cost of the construction for the cost of design. Including or excluding the two issues might have been significantly noticeable with respect to this limit, had the government prepared an estimate and had they recognized the need for the services before award.

You didn't provide any detail concerning the scope of the project that you are designing or the design scope of work but did say that "design standards" require the seismic study under certain conditions, which hint that this is a renovation of an existing building. The indication that standards of design are applicable makes me wonder whether an experienced designer should have inquired or brought the question up during negotiations. We don't have enough information to offer an intelligent opinion.

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Guest Vern Edwards

pricelesspearl:

My thought is: Who knows?

Surely you understand that the answer to your question depends on a reading of the contract in its entirety. But even if we had the contract in front of us and could see that it is silent about seismic analysis, that might not settle the issue. Much will depend on the facts of your situation.

Start from the simple premise that you don't have to do anything that the contract does not expressly require you to do. Then ask yourself if there is any reason to think otherwise with respect to the seismic analysis. Is there a standard professional principle or practice? Is seismic analysis something that a prudent A-E would have discussed with the client during contract formation on a job like this? Could it be considered an integral part of the work described in the SOW? Is the CO correct in saying that there was a known possibility that seismic analysis could be required? If so, based on what? On what words in the solicitation or contract? How much of a possibility? More than 50-50? Is it reasonable to think that you should known about that possibility? Would a prudent A-E have inquired about replacement cost? Would a reasonable CO have asked you about it?

Refusing to perform the seismic analysis is risky. You could end up in big trouble. I suggest that you demand the CO's interpretation of the contract in writing. If after reading it you still think the CO is wrong, you could notify him that you'll proceed on the basis that his interpretation is a change and that you will seek compensation based on a constructive change.

Of course, you should seek professional legal advice.

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It would seem prudent to obtain competent legal advice. Depending upon the facts concerning how the A-E selection and negotiation was conducted, there might be a case for negotiating a Termination for Convenience. If including the cost of the study and the other issue would have caused the fee to exceed the statutory fee limit and if both parties simply failed to consider the possibility, perhaps the government could be persuaded to Terminate the order or contract for convenience.

But, if you considered the possibility of the need for the study but decided to wait until it was later determined necessary, it could seem to me that there was a patent ambiguity and you should have inquired, especially if the cost is significant, if it would have or will cause the fee to exceed the 6% design fee limit. If the fee was part of the A-E selection criteria and influenced whether or not you would have included the cost in your proposal, the whole process was improperly conducted.

See - there are lots of possible considerations, depending upon the detailed facts.

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I really appreciate all the feedback. I will look at the blog as suggested over the weekend. In the meantime, I will try and address some of the questions asked. The TO was awarded under a sole source IDIQ and there was minimal negotiations.6% design fee limit is applicable.

I can only go by what my technical people tell me as to why they didn't inquire, but am told that normally when the agency anticipates the analysis will be required they provide a standard form (don't recall which one it is) with the RFP that provides the replacement value and it is in the SOW for the designer to determine if an analysis is necessary. Neither of those was the case here and that is not unusual if the agency doesn't believe one will be necessary. Occassionally, even when they don't initally believe one will be necesssary it turns out it is and we are given an opportunity to revise our proposal before award.I don't know and haven't been able to find out if the agency is under any obligation to provide the replacement value with the RFP or if that is just standard practice but we have no way of knowing the replacement value without it. If it been provided we would have inquired even if it was not in the SOW.

Hope that brings some clarity. Thanks for again for the responses.

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You might be able to make a case based upon prior course of dealings or normal practice with this customer that your interpretation was that no studies were anticipated.

I don't know if the seismic study is considered to be "a cost for producing the design", thus to be counted within the 6% design fee limitation. But if it is and if you would have included it in the price, the agency supposedly wouldn't have been able to make an award if the total design fee exceeded the limit. From what you said, this is a significant cost. If the agency knew or suspected that, it might be a reason for deciding not to include the seismic study requirement.

This is yet another example why both parties shnould participate in meaningful - not "minimal" - negotiations. Even if the government tries to minimalize - take the lead if necessary to review the requirements etc. If nothing else it is helpful to ensure that the scope of work is clearly understood by all parties and to clearly understand what additional studies and reports might be necessary.

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