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KodiakBuyer

FOIA and Construction Contracts

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My Agency recently received what appears to be a 'blanket' FOIA from a law firm requesting copies of 'any and all field reports, diaries, photographs, emails, memoranda, investigations, analyses, any calculations relating to the production, shipment or placement of riprap for the above projects, both at the project locations and quarry sites' plus 'any and all records relating tot he development of the plans and riprap specifications'. This is for two projects that appear to have been copied from FedBizOpps info.

The letter goes on to ask that we 'let them know when it would be convenient' for them to come over and view our files and copy our records.

Needless to say, the request is way too vague and would, in most cases, be months if not years worth of effort to provide. This will also cost them a lot. Just reviewing and redacting records will be very time consuming, let along the costs involved.

Is this a 'new' tactic for law firms teaching construction contracting / claims law?

These are working files for projects CURRENTLY under construction.

Since FOIA and construction contracting offer special 'opportunities to excel', perhaps someone with broad experience in this area could comment???

Any suggestions?

Any stories? THANKS B)

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Guest carl r culham

Two quick thoughts.

In my experience FOIA requests can be negotiated to more specific documents. Looks like you have a fishing expedition of sorts on your hands and with some discussion you may be able to narrow intent of request and as result have fewer documents to provide. In my experience this approach was taken with advice and assistance of FOIA office. Finding out, in general or specifically, why the documents were wanted helped narrow scope of requests as agreement was reached as to what would be provided.

Remember too that if you find out the request is specific to an intended request for equitable adjustment that evolves into a claim before the Board or Court documents would have to be provided in discovery. With this in mind and if request before you is for the EA purpose being as transparent as possible may help in doing exactly as the FAR provides, "resolve all contractual issues in controversy by mutual agreement at the contracting officer's level."

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OKAY!! The other shoe just dropped. The law firm is trying to avoid costs involved in litigation by using FOIA rather than Discovery.

Can't go into details on the contract, but suffice it to say the contractor is trying to find a reason / excuse why he did not comply with clear specifications -- and wants us to use the doctrine of 'economic waste' to allow him to not comply -- with minimal costs to him for substandard work.

Guess he thinks it is Christmas AND Easter. We'll see. :D

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Sorry I didn't see this before. This is normal and not unusual for the lawyers or claims consultants to come in and go through the contract files, looking for evidence.

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Sorry I didn't see this before. This is normal and not unusual for the lawyers or claims consultants to come in and go through the contract files, looking for evidence.

Guess I've been lucky in the past -- or maybe the economy was better and penny pinching wasn't the new mantra. In your experience, have they usually used FOIA? And are you familiar with the 'Economic Waste' theory? Thanks, as always.

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OKAY!! The other shoe just dropped. The law firm is trying to avoid costs involved in litigation by using FOIA rather than Discovery.

Can't go into details on the contract, but suffice it to say the contractor is trying to find a reason / excuse why he did not comply with clear specifications -- and wants us to use the doctrine of 'economic waste' to allow him to not comply -- with minimal costs to him for substandard work.

Guess he thinks it is Christmas AND Easter. We'll see. :D

Look at your agency FOIA regs - sometimes FOIA searches/responses must be paid for, other times they must be done for free.

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Look at your agency FOIA regs - sometimes FOIA searches/responses must be paid for, other times they must be done for free.

Yes, we're already working on the FOIA portion. Thank you.

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Guess I've been lucky in the past -- or maybe the economy was better and penny pinching wasn't the new mantra. In your experience, have they usually used FOIA? And are you familiar with the 'Economic Waste' theory? Thanks, as always.

I dont remember how they obtained prermission but they came to the official office of record for the contract files (ACO field office for some files and PCO contracting office for others) and they performed the search and they made the copies. We may have charged for the number of copies they made. Yes, I am familiar with "economic waste". You can look it up on the web for an explanation. Try this link plus others. http://federalconstruction.phslegal.com/tags/economic-waste/

As a government contract claims expert, I also have done done the same thing. Ya do what ya gotta do...

One bit of advice. Send them to the official file repository. If your office has some official files and some reference file copies, only allow thgem access to the official files. Send 'em off to the official file location for the others. :D

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Check out " Granite Construction Co. v. United States, 962 F.2d 998, 1006-07 (Fed. Cir. 1992) for a really good explanation of the Economic Waste Theory. I was familiar with that case, although not directly involved in the situation.

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Check out " Granite Construction Co. v. United States, 962 F.2d 998, 1006-07 (Fed. Cir. 1992) for a really good explanation of the Economic Waste Theory. I was familiar with that case, although not directly involved in the situation.

Thanks Joel!

Unfortunately all our files are still 'active' as this project has not been completed. I just sent a request to the company asking them to give me written permission to speak with their attorney and to designate exactly what and how much authority he has to speak for them.

I had ALREADY suggested most of what they now have decided they want. The only real disagreement is on how the Federal Government should be compensated for the out of spec work. We are unwilling to pay them full price for items that are clearly out of spec. The Economic Waste Theory was based on an under one percent deviation, and quite frankly, could have been a deviation resulting from 'measuring' equipment not being calibrated correctly. Our problem involves a LARGE deviation where they also continued to place product after we notified them of the deviation. Personally I think the Government deserves an equitable adjustment -- not just contractors -- when specs are clear and they purposely ignore them.

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If the contractor has not yet filed an appeal with a board or the Court of Federal Claims, then they would not have the power of "discovery" to obtain access to documents. If they are simply preparing or negotiating a claim, they can use FOIA to obtain access to government documents. It's not a way to save money.

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Kodiak, I fail to understand that , once you discovered that the installation didnt meet the contract requirements, why your office didn't direct the contractor to stop work due to a failure of its quality control system until such time that it demonstrated that further work would be installed in compliance with the contract. Such a directive is not a "suspension of work for the convenience of the government".

At any rate, the government should be entitled to an equitable adjustment for acceptance of the defective work, which assumes that it is essentially fit for its intended purpose. The following is an excerpt from the Granite decision that I mentioned above:

"...the government should not be permitted to direct the replacement of work in situations where the cost of correction is economically wasteful and the work is otherwise adequate for its intended purpose. In such cases, the government is only entitled to a downward adjustment in the contract price. Toombs & Co., Inc., ASBCA Nos. 34590 et al., 91-1 B.C.A. (CCH) p 23,403 at 117,433, 1990 WL 172728 (1990). Cf. Farwell Co. v. United States, 148 F.Supp. 947, 950, 137 Ct.Cl. 832 (1957). ..

"The concept of economic waste has long been recognized at common law. See the seminal case of Jacob & Youngs v. Kent, 129 N.E. 889, 230 N.Y. 239 (1921). The Restatement of Contracts 2d, ? 348(2) endorses the economic waste approach for calculating damages in certain instances where defective performance is rendered. Section 348(2) provides that an owner may recover the reasonable cost of remedying defective work if that cost is not clearly disproportionate to the owner's loss in value. If the cost is disproportionate to the loss in value, then damages are limited to the diminution in the value of the property. Illustration 4 of ? 348(2) is based on Jacob & Youngs v. Kent.

"In addition, numerous state courts have utilized the economic waste rules. See Annotation, "Modern Status of Rule as to Whether Cost of Correction or Difference in Value of Structures is Proper Measure of Damages for Breach of Construction Contract," 41 A.L.R. 4th 131 (1985)."

I didnt read the references, but I think, though I may be wrong, that the credit adjustment should include an allowance for profit. Also, G&A and any other applicable overheads are indirect costs, which are definitely elements of total cost and should be applied to the direct cost credit consistently, similarly to how it would be applied to modifications involving increased costs.

I don't know the details of your specific situation or whether or not the work is fit for its intended purpose. We once took a credit, including allowance for profit, on several million dollars worth of large, underground, high voltage primary electrical cable on a housing project, based upon the economic waste theory. The installed cable insulation did not meet the contract requirements but was fit for its intended purpose, although the estimated service life was less than the specified cable. I don't remember if it was what was submitted in the construction submittal or not. The credit for reduced value to the government was based upon the estimated reduction in service life from 25 or 30 years years to 20 or 25 years (can't remember the exact numbers anymore, but I think we lopped 5 years off).

Note that the Granite decision discusses other principles including how lack of government testing or inspection does not relieve the contractor of its responsibility or liability for failure to comply with the contract.

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Kodiak, it doesn't matter whether or not the files are still "active" or not. The contractor may request copies of official files under FOIA. Like I said, the lawyers made arrangements through legal and contracting to come sift through various official files. There were some that were privileged, but I don't remember which, off hand. When I defended claims, I also scoured the entire (up to four years in two cases) set of contract files. Contractors are good at selectively using files to build a case. My research put them in context of the whole story.

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Kodiak, it doesn't matter whether or not the files are still "active" or not. The contractor may request copies of official files under FOIA. Like I said, the lawyers made arrangements through legal and contracting to come sift through various official files. There were some that were privileged, but I don't remember which, off hand. When I defended claims, I also scoured the entire (up to four years in two cases) set of contract files. Contractors are good at selectively using files to build a case. My research put them in context of the whole story.

For those who are employed by or contract with DoD, 32 CFR 97 might be an interesting read on this subject.

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Kodiak, I fail to understand that , once you discovered that the installation didnt meet the contract requirements, why your office didn't direct the contractor to stop work due to a failure of its quality control system until such time that it demonstrated that further work would be installed in compliance with the contract. Such a directive is not a "suspension of work for the convenience of the government".

At any rate, the government should be entitled to an equitable adjustment for acceptance of the defective work, which assumes that it is essentially fit for its intended purpose. The following is an excerpt from the Granite decision that I mentioned above:

"...the government should not be permitted to direct the replacement of work in situations where the cost of correction is economically wasteful and the work is otherwise adequate for its intended purpose. In such cases, the government is only entitled to a downward adjustment in the contract price. Toombs & Co., Inc., ASBCA Nos. 34590 et al., 91-1 B.C.A. (CCH) p 23,403 at 117,433, 1990 WL 172728 (1990). Cf. Farwell Co. v. United States, 148 F.Supp. 947, 950, 137 Ct.Cl. 832 (1957). ..

"The concept of economic waste has long been recognized at common law. See the seminal case of Jacob & Youngs v. Kent, 129 N.E. 889, 230 N.Y. 239 (1921). The Restatement of Contracts 2d, ? 348(2) endorses the economic waste approach for calculating damages in certain instances where defective performance is rendered. Section 348(2) provides that an owner may recover the reasonable cost of remedying defective work if that cost is not clearly disproportionate to the owner's loss in value. If the cost is disproportionate to the loss in value, then damages are limited to the diminution in the value of the property. Illustration 4 of ? 348(2) is based on Jacob & Youngs v. Kent.

"In addition, numerous state courts have utilized the economic waste rules. See Annotation, "Modern Status of Rule as to Whether Cost of Correction or Difference in Value of Structures is Proper Measure of Damages for Breach of Construction Contract," 41 A.L.R. 4th 131 (1985)."

I didnt read the references, but I think, though I may be wrong, that the credit adjustment should include an allowance for profit. Also, G&A and any other applicable overheads are indirect costs, which are definitely elements of total cost and should be applied to the direct cost credit consistently, similarly to how it would be applied to modifications involving increased costs.

I don't know the details of your specific situation or whether or not the work is fit for its intended purpose. We once took a credit, including allowance for profit, on several million dollars worth of large, underground, high voltage primary electrical cable on a housing project, based upon the economic waste theory. The installed cable insulation did not meet the contract requirements but was fit for its intended purpose, although the estimated service life was less than the specified cable. I don't remember if it was what was submitted in the construction submittal or not. The credit for reduced value to the government was based upon the estimated reduction in service life from 25 or 30 years years to 20 or 25 years (can't remember the exact numbers anymore, but I think we lopped 5 years off).

Note that the Granite decision discusses other principles including how lack of government testing or inspection does not relieve the contractor of its responsibility or liability for failure to comply with the contract.

Thanks Joel. Yes, the work was shut down immediately. Economic Waste Theory probably won't apply here as the fix we are willing to accept is well below the cost of repairing HOWEVER the problem appears to be that the contractor wants us to accept the 'non spec' in place of the 'spec' product without a reduction in price. We are still in negotiations, so I cannot discuss more fully.

We've already pointed out that 'our' testing is for 'our' benefit and they should have been testing all along ESPECIALLY after we pointed out that it appeared the rock was not meeting spec. We had to do our testing in order to actually have proof -- or a legal leg to stand on for shutting them down.

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Well, you can always take the reduction unilaterally and let the contractor submit a claim.

Now, If the actual installation will fully meet the performance requirements and service life, I would expect that a court would say that the government is entitled to a credit for the difference in cost between compliant stone and non-compliant stone, plus profit. That would represent the difference in value to government between specified and actual product.

If such is the situation, I think that contractor has little or no legal leg to stand on. What can he argue? "I used a cheaper product than that specified, therefore I did not comply with the contract and pocketed the difference? In that scenario, I'd quit screwing with the contractor, make a final offer, then implement it, take the credit and make contractor justify why him pocketing the difference between compliant and non-compliant materials doesn't represent a reduction in value to government.

If I pay for a Buick and get a Yugo, I believe the value I received was that of a Yugo, not the Buick, even though both will get me from point A to point B.

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Well, you can always take the reduction unilaterally and let the contractor submit a claim.

Now, If the actual installation will fully meet the performance requirements and service life, I would expect that a court would say that the government is entitled to a credit for the difference in cost between compliant stone and non-compliant stone, plus profit. That would represent the difference in value to government between specified and actual product.

If such is the situation, I think that contractor has little or no legal leg to stand on. What can he argue? "I used a cheaper product than that specified, therefore I did not comply with the contract and pocketed the difference? In that scenario, I'd quit screwing with the contractor, make a final offer, then implement it, take the credit and make contractor justify why him pocketing the difference between compliant and non-compliant materials doesn't represent a reduction in value to government.

If I pay for a Buick and get a Yugo, I believe the value I received was that of a Yugo, not the Buick, even though both will get me from point A to point B.

I fully agree.

I get the impression that this is the way they always do business and we are the first ones who have called them on the carpet. Disappointing to say the least.

Bottom line, they bid on a job with specific specifications; it was awarded based on those specs; and we expect them to PERFORM to those specs. If they had a problem with the specs they had ample time to come up with an alternative BEFORE work started. They get paid to the SPEC, not 'good enough' for government work.

Thanks for the support.

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