Siemens Electrical, LLC v. Dep t of Environmental Protection OATH Index No. 962/15, mem. dec. (Aug. 14, 2015)

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1 Siemens Electrical, LLC v. Dep t of Environmental Protection OATH Index No. 962/15, mem. dec. (Aug. 14, 2015) City moves to dismiss contractor s claim as one for delay damages which is outside the jurisdiction of the CDRB. Motion granted, dismissing all petitioner s claims except one for the additional work for duct bank/concrete. Respondent is directed to respond to that claim on the merits by September 7, NEW YORK CITY OFFICE OF ADMINISTRATIVE TRIALS AND HEARINGS CONTRACT DISPUTE RESOLUTION BOARD In the Matter of SIEMENS ELECTRICAL, LLC Petitioner - against - DEPARTMENT OF ENVIRONMENTAL PROTECTION Respondent MEMORANDUM DECISION INGRID M. ADDISON, Administrative Law Judge/Chair LAURA RINGELHEIM, ESQ., Special Counsel, Mayor s Office of Contract Services CHARLES M. KASS, ESQ., Prequalified Panel Member Pending before the Contract Dispute Resolution Board ( CDRB or Board ) is a motion filed by respondent, the Department of Environmental Protection ( DEP or Respondent ), seeking dismissal of a revised petition/appeal filed by petitioner, Siemens Electrical, LLC ( SE or Petitioner ). The disputes arise out of a $29,415,000 contract that SE entered into with DEP in 2006 for the performance of rehabilitation work and various upgrades at the Wards Island Water Pollution Control Plant ( Contract ). In its revised petition, SE seeks an award of $8,642,044 for costs incurred due to alleged acts and omissions by DEP, and relief from liquidated damages for extended performance of the Contract arising from circumstances beyond SE s control.

2 - 2 - PROCEDURAL HISTORY SE filed its Notice of Breach/ Notice of Dispute with DEP on December 8, 2008, advising that it intended to submit a request for equitable adjustment and a ruling from the Commissioner amending the contract to extend its duration, and it would also seek additional compensation (Pet. s Correspondence Compendium Ex. 1). DEP denied the claim on June 15, 2009 (Pet. s Correspondence Compendium Ex. 2). SE submitted its request for an equitable adjustment to the Comptroller on December 9, 2009 (Pet. Correspondence Compendium Ex. 2). The Comptroller rejected the claim on December 30, 2009, on grounds that it was not subject to the alternative dispute resolution provision in the contract because it arose out of alleged contract delays/inefficiencies (Pet. Correspondence Compendium Ex. 5). SE filed its initial petition with the CDRB on February 9, On March 5, 2010, SE withdrew the petition without prejudice and reserved its right to resubmit the petition at a later time. DEP had restructured the project performance methodology, and the parties agreed that it would be premature to adjudicate the claims in the original petition at that time (Rev. Pet. Ex. 1). On August 8, 2013, following completion of the project, SE submitted a revised petition, reincorporating the original, but updating certain materials to reflect subsequent developments such as DEP mitigation measures and revised/reduced damages to reflect the partial success of these measures (Rev. Pet. at 1-2). On September 26, 2013, the parties entered into a tolling agreement pursuant to which SE again withdrew the petition without prejudice. Upon expiration of the tolling period on October 23, 2014, SE requested that the matter be restored to the active calendar, but before that could take place, attempted to negotiate a second tolling agreement. The matter was restored to the calendar on SE s application on January 9, 2015, after the parties failed to execute a second tolling agreement (Jan. 12, 2015 letter from Naggar to Rainbow). In lieu of filing an answer on the merits, DEP filed a motion to dismiss on February 23, The parties agreed to waive oral arguments and have the motion decided by the CDRB on the papers (Feb. 26, 2015 letter from Feinrider to ALJ Addison). SE submitted its opposition to the motion on March 16, 2015 and the DEP replied on March 31, ANALYSIS DEP issued the Notice to Proceed on the Contract on August 23, 2006, establishing

3 - 3 - August 15, 2010, as the expected date of completion. Due to complications, including the discovery of PCBs inside the pump and blower buildings, a number of delays occurred and substantial completion was not achieved until March 1, 2013, a little more than two and one-half years late (Rev. Pet. Ex. 2). DEP did not assess any liquidated damages in connection with the delays. SE received a final time extension on March 4, 2014, and it received final payment on August 6, 2014 (Resp. s Motion to Dismiss at 2). SE argues that material contract breaches by DEP resulted in a cardinal change which doubled the duration of the work from 48 months to 79 months and increased the costs of performance by $8,642,044 (Rev. Pet. at 3, 24-25). SE alleges that it incurred additional costs due to a stop work order which was issued because of the discovery of PCB s inside the pump and blower building. As a result, the site was placed on restricted access from November 6, 2007 to April 16, SE also alleges that it incurred additional costs due to defective plans and designs, and to change orders issued directly to SE or indirectly through the general contractor, Silverite Construction ( Silverite ). In its revised petition, SE asserts that DEP s breaches caused Silverite to divert trench dewatering tasks, required by the Contract, which made SE s duct bank work more complex, in that it required a work-around which involved procurement of pre-cast manhole structures and lease of a 300 ton crane and crew to lower the structures into position, rather than cast-in-place structures in the trenches (Rev. Pet. Ex. 7). SE further alleges that DEP supplied bid drawings for duct bank work which were inaccurate, depicting under-sized duct banks. To perform the contract, SE had to construct larger duct banks than depicted in the bid drawings, causing it to incur additional labor and material costs than contemplated at bid (Rev. Pet. Ex. 8). Ultimately, it led to SE releasing its concrete subcontractor and performing this work in-house at an additional cost of $1,006,143 (Rev. Pet. at 24 summary of compensation sought item no. 13). SE summarizes its damages as follows: 1. Extended general conditions from 8/13/10 to 3/1/13 - $3,025, Wage escalation increase: $361, Extended warranty - $301, Extended home office overhead - $622, Additional bond expense - $94, Project related consulting and scheduling services - $145, Loss of productivity - $1,786,388

4 Additional work duct bank concrete - $1,006,143 Subtotal - $7,342,830 Markup 10% - $734,283 Subtotal - $8,077,113 Finance and interest costs - $24,931 Lost completion bonus - $540,000 Total - $8,642,044 DEP s motion to dismiss the petition is predicated on its argument that what SE seeks is delay damages, which are outside the scope of the CDRB process. The PPB rules and Article of the Contract authorize the Board to hear claims about the scope of work delineated by the contract, the interpretation of contract documents, the amount to be paid for extra work or disputed work performed in connection with the contract, the conformity of the vendor s work to the contract, and the acceptability and quality of the vendor s work RCNY 4-09(a)(2) (Lexis 2014). The Board has interpreted analogous contract provisions and section 4-09(a)(2) of the PPB Rules as limiting its jurisdiction to those claims, placing delay damages beyond its purview. See Commodore Maintenance Corp. v. Dep t of Transportation, OATH Index No. 1118/14, mem. dec. at (Apr. 3, 2014); Schlesinger-Siemens Electrical, LLC v. Dep t of Environmental Protection, OATH Index No. 1817/10, mem. dec. at 4-5 (Apr. 28, 2010); J.H. Electric of New York, Inc. v. Dep t of Sanitation, OATH Index No. 2637/09, mem. dec. at 7 (Aug. 27, 2009); Samson Construction Co. v. Dep t of Parks & Recreation, OATH Index No. 1327/06, mem. dec. at 3 (May 15, 2006). This approach has been affirmed by the Appellate Division, which has articulated that the dispute resolution process is a procedural device [that] is limited by the parties agreement to claims arising out of disputed work, a category that does not include delay damages. CAB Assoc. v. City of New York, 32 A.D.3d 229, 232 (1st Dep t 2006) (citation omitted); see also, LAWS Construction Corp. v. Contract Dispute Resolution Bd., Index No /2014 (Sup. Ct. N.Y. Co. July 6, 2015), aff g, OATH Index No. 1445/14, mem. dec. (May 28, 2014). The Contract, which provides that the Board s decision must be consistent with the terms of the Contract (Contract, Art ; see also 9 RCNY 4-09(g)(4)), also expressly precludes claims for delay damages: No Damage for Delay: The Contractor agrees to make no claim for damages for delay in the performance of this Contract occasioned by any act or omission to act of the City or any of its representatives, and agrees that all it may be entitled to on account

5 - 5 - of any such delay is an extension of time to complete performance of the Work as provided herein. (Contract, Art ). In considering whether a claim constitutes delay damages, the Board has consistently found the cause of the damages to be determinative. Calcedo Construction Corp. v. Dep t of Homeless Services, OATH Index No. 345/12, mem. dec. at 5 (Mar. 1, 2012). For example, in Expert Electric, Inc. v. Department of Design and Construction, OATH Index No. 1879/02, mem. dec. (Oct. 10, 2002), the Board found that delivery of an Uninterrupted Power Supply System that was timely delivered but not energized within the required six months, thereby jeopardizing the viability of its batteries, was a delay claim. Likewise in Prismatic Development Corp. v. Department of Sanitation, OATH Index No. 109/15, mem. dec. (Nov. 18, 2014), the Board held that the provision of temporary power due to scheduling issues was a delay claim that could not be resolved through the dispute resolution process. See also Schlesinger-Siemens Electrical, LLC v. Dep t of Environmental Protection, OATH Index No. 604/10, mem. dec. (Apr. 16, 2010) (delay claims where contractor was not granted access to a new fuel tank and boiler facilities, a basic premise of the contract, until 18 months after the start of the contract); Siemens Electrical, LLC v. Dep t of Environmental Protection, OATH Index Nos. 1303/15 & 1310/15, mem. dec. (Feb. 18, 2015)(claim based on inadequate ventilation, resulting in OSHAmandated work-rest cycles which caused contractor to incur increased labor costs and lost productivity because it took longer to complete the job was a delay claim outside of the CDRB process). As the Court of Appeals stated: All delay damage claims seek compensation for increased costs, however, whether the costs result because it takes longer to complete the project or because overtime or additional costs are expended in an effort to complete the work on time. It is of no consequence that the obstruction, whatever its cause, occurs during the term of the contract or afterwards or whether it disrupts the contractor s anticipated manner of performance or extends his time for completion. The claims are claims for delay and the exculpatory clause was drafted and included in the contract to bar them. Corinno Civetta Construction Corp. v. City of New York, 67 N.Y.2d 297, (1986). SE s claim for extra costs resulting from restricted site access due to the discovery of

6 - 6 - PCBs, and the resulting stop work order, is essentially the same as the claim dismissed as delay damages in URS Corporation v. Department of Design and Construction, OATH Index No. 804/05, mem. dec. (Dec. 29, 2004)(where hazardous waste had been discovered at the worksite causing the Department to issue a stop work order which remained in effect for eighteen months, CDRB dismisses claims as delay damages finding that because the damages incurred were for increased labor costs, profit, overhead, markup, and bonding, which the contractor asserted was occasioned by the delay caused by the stop work order, the claim constituted delay damages which were beyond its jurisdiction). It is also indistinguishable from LAWS Construction Corp. where the contractor sought extra compensation following the discovery of contaminated material and the City's delay in procuring new material, which precluded LAWS from proceeding with the construction in phases as planned. The CDRB dismissed the claim as one for delay damages, which the court affirmed on appeal, finding it was not irrational for the CDRB to determine that since the design changes were intertwined with the delayed material, the claims were for delay damages. The delay in the procurement of the Item 241 material preceded all of LAWS' other additional work costs. It was the initial "cause" of the damages, which is the determining factor for the CDRB when assessing whether or not a claim constitutes delay damages. Courts have routinely barred contractors' attempts to label delay claims as extra work claims. LAWS Construction, Corp., Index No /2014 at 14-15, citing Plato Gen. Constr.Corp./EMCO Tech Canst. Corp. v Dormitory Auth. of State of New York, 89 A.D.3d 819, (2d Dep t 2011), rev g, 27 Misc 3d 1226(A) (Sup. Ct., Kings Co. 2010) (delays and complete planning failures by contractee did not support damages for additional work, as contemplated by the contract and covered by "no-damages-for-delay" clause); Blue Water Envtl., Inc. v Incorporated Vil. of Bayville, N.Y., 44 A.D.3d 807, 809 (2d Dep t 2007) ("no-claim-fordelay" clause barred claims stemming from winter weather damages or delays caused by entities mentioned in the contract including engineer, owner or government agency); see also Harrison & Burrowes Bridge Constructors, Inc. v State of New York, 42 A.D.3d 779, 782 (3d Dep t 2007) (cold weather delays and delays in reviewing shop claims were delay and not extra work claims). See also, Commercial Electrical Contractors, Inc. v. Pavarini Construction Co., Inc., 50 A.D.3d 316, 317 (1st Dep t 2008) (characterizing damages from defendant s improper scheduling and organization of subcontractors, changes to the work, and failure to provide temporary heating as

7 - 7 - delay damages). In a prior case involving the same parties, petitioner sought to recover additional costs due to so many changes to the contract that they constituted a cardinal change for which it was entitled to extra compensation. Schlesinger-Siemens Electrical, LLC v. Dep t of Environmental Protection, OATH Index No. 1817/10, mem. dec. at 2 (Apr. 28, 2010). The expected time to complete phase one of the contract was extended when it was discovered the aeration tank petitioner was to upgrade had deteriorated and needed remediation work by another contractor before petitioner could begin. Further, a change order issued to another contractor delayed the construction of the Blower Building, which delayed petitioner s work in that building. In addition, petitioner claimed that extended performance period/increased cost of general conditions; loss of labor productivity; escalation of materials cost; escalation of labor cost; additional home office overheads and profit; additional bond costs; extended warrant and service costs; and financing costs on retention withheld longer. Schlesinger-Siemens Electrical, LLC v. Dep t of Environmental Protection, OATH Index No. 1817/10, mem. dec. at 4 (Apr. 28, 2010). There, as here, respondent moved to dismiss on the ground that petitioner sought delay damages, which are beyond the scope of the ADR process. Likewise, petitioner in that case argued that its claims are not for delay damages, but rather they are for cardinal changes and material breach of contract arising from the imposition of extra work, the (non) issuance and or registration of change orders, changed conditions and failure to provide access to the work site. Schlesinger- Siemens Electrical, OATH 1817/10, mem. dec. at 3. The CDRB dismissed the claims finding that Petitioner s detailed discussion of each of these items reveals that they are each based on the additional time the changes added to the project (citation omitted). Id. The damages sought in that case are similar to those sought by SE here: extended performance period/increased cost of general conditions; loss of labor productivity; escalation of materials cost; escalation of labor cost; additional home office overheads and profit; additional bond costs; extended warrant and service costs; and financing costs on retention withheld longer. OATH 1817/10 at 4. The CDRB found that the claims were delay damages claims which were outside the scope of the CDRB s jurisdiction. Here, SE similarly asks for additional compensation based upon: Extended general conditions from 8/13/10 to 3/1/13; Wage escalation increase; Extended warranty; Extended home office overhead;

8 - 8 - Additional bond expense; project related consulting and scheduling services; Loss of productivity; Finance and interest cost; and Lost completion bonus. Rev. Pet. at 24 (Summary of compensation sought). Petitioner s only claim which may not be characterized as a delay claim is the one in which it seeks compensation for extra costs incurred from having to construct larger duct banks than what was originally contemplated in the bid, and which was attributable to DEP s inaccuracy in its drawing of undersized duct banks. CONCLUSION Petitioner s claims are dismissed except for the additional work claim for duct bank/concrete. Respondent is directed to respond to that claim on the merits by September 7, All panelists concur. August 14, 2015 Ingrid M. Addison Administrative Law Judge/Chair APPEARANCES: MANATT, PHELPS & PHILLIPS, LLP Attorneys for Petitioner BY: NANCY K. FEINRIDER, ESQ. ZACHARY W. CARTER, ESQ. CORPORATION COUNSEL Attorney for Respondent BY: SUSAN SMOLLENS, ESQ.