LAWS Construction Corp. v. Dep t of Parks and Recreation OATH Index No. 1445/14, mem. dec. (May 28, 2014)

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1 LAWS Construction Corp. v. Dep t of Parks and Recreation OATH Index No. 1445/14, mem. dec. (May 28, 2014) CDRB lacks jurisdiction over contractor s delay claim. To the extent any portion of the claim does not qualify as a delay claim, contractor waived the claim in its application for an extension of time. Appeal dismissed. NEW YORK CITY OFFICE OF ADMINISTRATIVE TRIALS AND HEARINGS CONTRACT DISPUTE RESOLUTION BOARD In the Matter of LAWS CONSTRUCTION CORP. Petitioner - against - CITY OF NEW YORK DEPARTMENT OF PARKS AND RECREATION Respondent MEMORANDUM DECISION ALESSANDRA F. ZORGNIOTTI, Administrative Law Judge/Chair LAURA RINGELHEIM, ESQ., Mayor s Office of Contract Services BRUCE FEFFER, ESQ., Prequalified Panel Member Pending before the Contract Dispute Resolution Board ( CDRB or Board ) is an appeal filed by LAWS Construction Corporation ( LAWS ). This dispute arises out of a $53,851,874 contract awarded by the Department of Parks and Recreation ( Parks ) to LAWS in 2009 to build a tournament-quality golf course in the Bronx ( Contract ). The Contract requires LAWS, inter alia, to manage the on-site handling of imported cover material for the golf course. LAWS argues that due to changed conditions relating to the performance of this work, it incurred additional expenses for which it seeks $1,700,000 in compensation. Parks moves to dismiss the appeal on the grounds that the claim is for delay

2 - 2 - damages which the Board lacks jurisdiction to hear and that even if this is subject to the Contract s dispute resolution process, LAWS waived the claim in its application for an extension of time. Oral argument on the motion was held on April 17, The record was held open until May 12, 2014, for additional submissions. The Board finds that it lacks jurisdiction over LAWS claim because it is a delay claim and to the extent any portion of the claim does not qualify as a delay claim, LAWS waived the claim in its application for an extension of time. BACKGROUND The Board s authority to resolve contract disputes between the City of New York ( City ) and a vendor is set forth in the Procurement Policy Board rules ( PPB rules ). The PPB rules were incorporated into Article 27 of the Contract. The dispute resolution process involves three steps of review: by the agency head, by the Office of the Comptroller ( Comptroller ), and finally by the CDRB. 9 RCNY 4-09 (Lexis 2013); Contract Art. 27. The Board s review is limited to the agency head s decision. 9 RCNY 4-09(g); Contract Art This dispute arises out of Item 241 of the Contract entitled COVER LAYER MATERIAL IMPORTED BY OTHERS (CUSTOM ) (Resp. Ex. B). Under Item 241, LAWS is required to load, move, place, and compact cover layer material stockpiled or delivered to the site by others in order to bring the site to the required grades indicated on the drawings and directions of the project engineer. General Conditions Section A of the Contract indicates that the drawings show in general and in detail the character of the work and that, if necessary supplementary drawings will be provided. No work affected by supplementary drawings that requires an adjustment in the bid price may be done until LAWS obtains written authorization from the project engineer. Item 241 specifies that the cover material be placed to produce a well graded mass in a horizontal layer of 12 inches in depth and that there will be on-going importation of material 1 To the extent LAWS seeks a remand to the Comptroller, the dispute resolution process does not provide for such a remedy. 9 RCNY 4-09(g); Contract Art. 27.7; Pile Foundation Construction Co., Inc. v. Dep t of Environmental Protection, OATH Index No. 1785/09, mem. dec. at 7 (Apr. 15, 2009), aff d, 2010 NY Slip Op 31067(U) (Sup. Ct. N.Y. Co. 2010) (Board does not have jurisdiction over findings made by the Comptroller).

3 - 3 - from offsite sources. A 2009 memorandum to bidders (Pet. Ex. B at Ex. F) stated that cover material would be imported daily and that while it was not possible to quantify, it would not exceed 3,000 cubic yards per day. Under Item 241 LAWS is also responsible for coordinating the delivery of cover material, including directing trucks to suitable stockpile locations or placement areas approved by Parks. According to LAWS, on or before January 2012, 50,000 cubic yards of pre-bid, on-site cover material was found to be contaminated and unavailable for use. Moreover, Parks was unable to supply cover material in a timely manner as represented in the bid documents and phasing schedule in the Contract. It should have been procured by November 2009 but was not delivered until May 2012 (Pet. at 3, 6). On June 22, 2012, Parks issued Directive (Item 241) to LAWS (Resp. Ex. C). Parks reiterated that Item 241 included the on-site handling of cover material and did not specify the daily quantity to be imported. Parks informed LAWS that having delivery trucks haul material over unsafe routes and dumping it in unsafe locations was a hazard. Moreover, having the material dumped along the toe of the mounds and pushing it with a bulldozer was altering the approved rough shape features, was comingling the shaping and the cover materials, and was not producing a uniform 12-inch cover layer as required. Parks directed LAWS, at no additional cost: to provide safe access and delivery of imported cover material; to place material on top of the mounds using methods already used in other areas to ensure a 12-inch depth without altering the approved shaping; and to coordinate the stockpiling of material or to direct trucks to ready locations to minimize handling. On June 26, 2012, LAWS requested a change order based on the following: changed contours; Parks inability to provide usable cover material; and changes to the phasing schedule as a result of the unusable material (Pet. Ex. B). The parties represented that the change order was denied but did not provide a copy of the denial. By Notice of Dispute dated July 20, 2012 (Pet. Ex. B), LAWS sought to have the agency head vacate the directive and approve a change order for additional costs incurred for reloading, transporting, dumping, spreading and shaping Item 241 material. LAWS alleged that additional

4 - 4 - costs were due because: the as-built contours that utilize the cover material vary significantly from those set forth in the Contract; Parks was unable to supply the cover material as represented since the on-site material was contaminated; LAWS could not complete the project as originally planned which resulted in increased costs to haul and spread the material; and the supplier of the material could not access the roughs to dump it resulting in additional stockpiling and loading not required under the Contract. By letter dated February 27, 2013 (Resp. Ex. E), Parks agency head designee denied LAWS request finding: LAWS dispute over [Park s] directive for additional costs is based upon delayed performance of the contract, reasoning that if the cover material was onsite or had been completed prior to November 2009, it would not have incurred additional cost as it would have been able to efficiently conduct its operations. The delay in performance and loss of efficiency/productivity are elements of a delay claim and cannot be resolved by way of dispute resolution. On March 26, 2013, LAWS submitted a Notice of Claim to the Comptroller (Pet. Ex. C). LAWS asserted that it was entitled to extra compensation based on: the unacceptable on-site cover material; phasing changes; design changes; Parks inability to timely provide the cover material; and stockpiling the subsequently delivered material. While the Notice of Claim was pending, LAWS submitted a request for an additional 150 days to complete the project (Resp. Ex D). LAWS agreed to waive all claims it may have against the City except for generally worded claims arising from increased costs due to delays, extensions of time, and extra work. On November 19, 2013, the Comptroller determined that LAWS claim arose from alleged delays and inefficiencies, and thus was not subject to the dispute resolution process in Article 27 of the Contract. The Comptroller also found that, to the extent the claim was disputable LAWS generally worded reservation language in it application is insufficiently precise to preserve a fully ripened claim or overcome clear waiver language (Resp. Ex. F). LAWS timely filed the instant appeal.

5 - 5 - ANALYSIS LAWS argues that because of Park s failure to timely procure and deliver suitable cover material and changes to the golf course s contours, there were unanticipated costs associated with the storing, hauling, and placement of Item 241 material. Parks argues that the additional expenses were incurred solely due to delay and must be dismissed. The PPB rules and Article 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 2013). The Board has interpreted analogous contract provisions and language in PPB rule 4-09(a)(2) as limiting its jurisdiction to those claims, placing delay damages beyond its purview. See, e.g., 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 stated 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). 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

6 - 6 - representatives, and agrees that all it may be entitled to on account of any such delay is an extension of time to complete performance of the Work as provided herein. (Contract, Art ). 2 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 Summit Mechanical Systems Ltd. v. Dep t of Parks & Recreation, OATH Index No. 665/13, mem. dec. (Sept. 19, 2013), the Board found that additional costs incurred due to design flaws, omissions, errors and cost overruns, constituted delay damages. Likewise in URS Corp. New York on behalf of T & R Alarm Systems, Inc. v. Dep t of Design and Construction, OATH Index No. 804/05, mem. dec. (Dec. 29, 2004), the Board found where the damages incurred were caused by the delay from the discovery of hazardous waste at the site and a resulting stop work order, the claim constituted delay damages; see also Schlesigner-Siemens Electrical, LLC v. Dep t of Environmental Protection, OATH Index No. 604/10, mem. dec. (Apr. 16, 2010) (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). 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. New York, 67 N.Y.2d 297, (1986). LAWS claim stems from the contaminated pre-bid stockpiled cover material and Parks 2 However, Article 11 of the Contract sets forth the procedures for filing a delay claim with the agency head.

7 - 7 - inability to immediately procure new material. As a result LAWS was unable to proceed with the construction phases of the golf course as originally planned. This caused accessibility problems for trucks delivering the new material as well as unanticipated stockpiling and moving of the material. We find the inability to perform the work as scheduled and the additional work related to the Item 241 material are elements of a delay claim that cannot be resolved through the dispute resolution process. LAWS s assertion that its claim should be construed as an extra work claim, not as a delay claim, must fail. Attempts by contractors to characterize delay claims as extra work claims are routinely rejected. See, e.g., 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 delay damages); Blue Water Environmental, Inc. v. Village of Bayville, 44 A.D.3d 807, 810 (2d Dep t 2007) ( Extra work caused by delay falls within the category of damages for delay ); Gemma Construction Co., 246 A.D.2d 451, 453 (1st Dep t 1998) ( while a contractor may be required to perform additional work on account of a delay,... that expense does not, ipso facto, become extra work, as that term is defined in the contract. ); Calcedo Construction Corp., OATH Index No. 345/12 at 7 (claim for extra work, including unanticipated field labor, clearly claim for delay damages). The only portion of the claim that may not qualify as a delay claim is that Parks made design changes to the golf course which resulted in extra work. Contract Article defines extra work as work other than that required by the Contract at the time of award which is authorized by the Commissioner pursuant to Chapter VI of this Contract. LAWS argues that Parks allowed consultants to modify the Contract contours to create steep slopes and massive mounds. These changes caused additional costs to the placement of cover material and precluded trucks from traversing the areas and dumping material in the roughs. In support LAWS provided drawings that it prepared showing the alleged contour changes. Parks argues that the design changes are part of the delay claim and that, in any event, the changes were minor and contemplated by the Contract.

8 - 8 - LAWS acknowledged that the design changes were due in part to the untimely procurement of the Item 241 material (Tr. 19) and that they resulted in extra costs related to the moving of the cover material. Since the design changes are inextricably intertwined with the delayed cover material, they are delay damages. Kalisch-Jarcho, Inc. v. City of New York, 58 N.Y.2d 377, 381 (1983) ( city s endless revisions of scores of plans and drawings, [ ] failure to co-ordinate the activities of its prime contractors, of which plaintiff was one of four, and [ ] other acts of omission or commission interfering with the sequence and timing of the work were delay damages); see also J.H. Electric of New York, Inc. v. Dep t of Sanitation, OATH Index No. 2637/09, mem. dec. (Aug. 27, 2009) (changes to the contract specifications which were ordered and then canceled by the City, delay claims). Even if LAWS design change claim is a distinct extra work claim subject to the Article 27 dispute resolution process, LAWS waived the claim when it filed for its extension of time to complete the project. Contract Article (c) requires that an application for an extension of time set forth: A statement that the Contractor waives all claims except for those delineated in the application, and the particulars of any claims which the Contractor does not agree to waive. Failure to reserve a claim is deemed a waiver. LAWS submitted a request for a Partial Extension of Contract Time, #6 (With Claim) (Resp. Ex. D). LAWS listed 17 reasons for the request including the loss of 79 days and another 71 days related to issue with the cover material. LAWS also stated: In consideration of the granting, for the purpose of expediting payment, by the Board of Extension of Contract Time... for completion of work therein specified, we hereby agree to waive and release [all claims] including, but not limited to [sic] damages for delay or any other cause whatsoever which we may have against the City of New York in connection with this contract except for the following: A. The payment of the additional and increased costs... resulting from delays to, interferences with and construction changes in the work caused by the City of New York.... C. The payment of all contract monies... due... including all monies for extra and additional work....

9 - 9 - (Resp. Ex. D) (emphasis added). New York courts have consistently enforced waiver of claims in connection with extensions of time. See Honeywell, Inc. v. J.P. Maguire Co., 1999 U.S. Dist. LEXIS 1872, at *27 (S.D.N.Y. Feb. 2, 1999), modified in part, adhered to in relevant part, 2000 U.S. Dist. LEXIS 3699 (S.D.N.Y. Mar. 17, 2000); Mars Associates, Inc. v. City of New York, 53 N.Y.2d 627 (1981), aff g, 70 A.D.2d 839 (1st Dep t 1979); Herman H. Schwartz, Inc. v. City of New York, 100 A.D.2d 610 (2d Dep t 1984); Naclerio Contracting Co., Inc. v. Environmental Protection Admin., 86 A.D.2d 793 (1st Dep t 1982); E.M. Substructures, Inc. v. City of New York, 73 A.D.2d 608 (2d Dep t 1979); Teller Paving and Contracting Corp. v. City of New York, 73 A.D.2d 589 (1st Dep t 1979); see also Commodore Maintenance Corp., OATH No. 1118/14 at 8-9; Ferreira Construction Co., Inc. v. Dep t of Transportation, OATH Index No. 1619/12, mem. dec. at (Nov. 16, 2012); ADC Contracting & Construction, Inc. v. Dep t of Parks & Recreation, OATH Index No. 1010/04, mem. dec. at 3 (June 24, 2004). In Mars, a contractor applied for an extension of time to complete a contract after it commenced a lawsuit on an outstanding delay claim under the contract. In the extension request, it agreed to waive and release all claims which we may have against the City of New York arising out of the aforesaid contract except the following: various change orders and work under protest. Mars, 70 A.D.2d at 839. The contractor argued that the institution of the lawsuit before the execution of the waiver indicated an intent on its part not to waive the delay claim. The Appellate Division rejected that argument. The Court held the City s waiver was clear on its face and that the contractor waived all claims, save only those arising out of change orders and work done under protest, which the parties understood meant extra work. Since the delay claim had no underpinning in the exemptions, it was dismissed. In affirming this decision, the Court of Appeals found that this was a sophisticated contractor and that the circumstances of the waiver demonstrate as a matter of law that it was designed to cover the claim upon which [the contractor] now sues. 53 N.Y.2d at 629. The Court further held that it was incumbent on the contractor to state its intentions with clarity if the exemptions were intended to be broader in

10 scope. Id The instant case is similar to Mars. LAWS is a sophisticated contractor who secured a $53,851,874 contract with the City. LAWS applied for an extension of time to complete the Contract after it commenced an Article 27 dispute and provided a waiver of all claims save for some generally worded exemptions. Like in Mars, LAWS prior submission of the Notice of Dispute to Parks and the Comptroller cannot be construed as intent not to waive the claim it now seeks to pursue. Moreover, unlike in Mars, there is no evidence that LAWS exemptions, interferences with and construction changes in the work and payment of... all monies for extra and additional work were understood by the parties to cover any specific claims. Rather, the generally worded exemptions could cover a number of claims arising under Article 27. Thus, it was incumbent on LAWS to state its exemptions with clarity if it intended to have them cover the claim at bar. We also reject LAWS argument that it is not obligated to specify claims until the end of the project. In support LAWS points to the following Form 48 language included in their extension request: (Pet. Ex. G; Resp. Ex. D). At the time of a request for an extension of time for a substantial or final payment, I hereby commit myself to prepare and furnish a verified itemized statement of claims in accordance with the terms of the contract. However, the Contract merely sets forth procedures for filing, at the end of the project, supporting financial documentation for damages incurred. See Contract Articles 30, 40, and 45. Nothing in the Contract allows LAWS to wait until the end of the project to specify a claim for purposes of asserting damages. Indeed, allowing a contractor to do so would violate public policy. Almar Plumbing & Heating Corp. v. Dormitory Auth. of the State of New York, 21 Misc.3d 1119(A) at (Sup. Ct. Kings Co. 2008) (for public policy reasons the requirement that contractors must specifically reserve claims or release them... is imperative for a public body for purposes of financial planning, budgeting for future projects, [and] reporting accurately to... institutions for which it constructs projects.... ).

11 CONCLUSION LAWS appeal is denied and Parks motion to dismiss the appeal is granted. This constitutes the final decision of the Board. All panel members concur. May 28, 2014 APPEARANCES: RICH, INTELISANO & KATZ, LLP Attorneys for Petitioner BY: DANIEL KATZ, ESQ. ZACARY W. CARTER, ESQ. CORPORATION COUNSEL Attorney for Respondent BY: BENJAMIN MILLER, ESQ. Alessandra F. Zorgniotti Administrative Law Judge/Chair

NEW YORK CITY OFFICE OF ADMINISTRATIVE TRIALS AND HEARINGS CONTRACT DISPUTE RESOLUTION BOARD

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