Design Flaws in Large Historical Building Renovation are Recipe for $12.5 Million Contractor Recovery

In a lengthy opinion, the Civilian Board of Contract Appeals (“Board”) awarded Suffolk Construction Company, Inc. (“Suffolk”) over $12 million, plus interest, on numerous claims against the General Services Administration (“GSA”) arising out of significant design issues on a large ($136 million) historical building project. Suffolk’s scope of work involved massive renovation and restoration work on a 22-story building in Boston, Massachusetts originally built in 1933. The various tenants of the new and improved building included the Environmental Protection Agency, Department of Education, United States Bankruptcy Courts, United States Trustees, and various divisions of GSA.

 GSA was responsible for preparing the design plans and specifications. Faced with funding obligation deadlines, GSA hastily bid many aspects of the design work, which truncated the deep investigation necessary to design the renovation of such a large historical building. The resulting design was largely ambiguous and inaccurate, especially in “interstitial” or concealed spaces, such as the spaces between walls, under ceilings, and building shafts and chases (spaces for pipes and conduit). As the work progressed, it became apparent that numerous design changes were necessary to accommodate the actual conditions in the concealed spaces. These changes resulted in a multitude of change orders and delays. The Board decision analyzes numerous direct cost potential change orders (“PCOs”) resulting from the changes, for items ranging from less than $1,000 to hundreds of thousands of dollars, and finds Suffolk’s entitlement for the vast majority of them. The Board also found entitlement to loss of productivity damages and general conditions costs resulting from delay. The Board did not address entitlement to or calculation of overhead in any detail.

With regard to GSA, the Board determined that GSA was entitled to $229,000 in credits, but summarily denied GSA’s warranty claims arising out of two leaks. GSA claimed Suffolk was liable for the leaks pursuant to the Federal Acquisition Regulation warranty clause, which requires a contractor to remedy damage to government-owned or controlled property resulting from defective installation. The Board rejected these arguments, finding, among other things, that GSA had failed to demonstrate defective work and that GSA had not contributed to the leaks.

Although the contractor ultimately prevailed, the Suffolk case is a prime example of the exponential costs that can result from design flaws. When a contractor has no control over, or responsibility for, design, the contractor often has no choice but to mitigate its damages and push for timely completion while the design issues snowball. The Suffolk case also demonstrates the benefit of meticulously detailing changes and extra costs in anticipation of these types of issues. Because Suffolk had what appeared to be detailed and accurate records, the Board was able to carefully confirm its entitlement, no matter the size. Maintaining this level of detail and organization, and requiring the same of subcontractors, can make a world of difference when tackling claims of any size.

This article, "Design Flaws in Large Historical Building Renovation are Recipe for $12.5 Million Contractor Recovery," was published in the Bradley Construction and Procurement Law Newsletter for the first quarter of 2020.