rejected the notion that Eichleay requires the contractor to bear the burden of proving the fact of injury before the formula may be applied. Capital Electric Co., supra, at 745-46. The latter case intimates that, upon the "mere showing" of such facts as plaintiff notes in this record, the Eichleay formula presumes, unless the defendants prove otherwise, that a contractor is injured by delay. The Eichleay formula then provides a method, justified by generally accepted principles of accounting, of estimating the damages so presumed. Id. at 745-47; 747-48 (Friedman, J. concurring).
These cases suggest that it may be unnecessary to decide whether the Board found that Hyman proved that it had been damaged by delay, and support summary judgment for Hyman on this issue. Even without this line of authority, however, Hyman must on this issue prevail. As discussed above
the record contains substantial evidence that the Board did not award damages attributable to overhead costs without first finding that damage was occasioned by delay.
As set forth above, the General Manager was not supported by the record in her primary objection and conclusion that the Board "simply assumed" application of the Eichleay formula without first making a careful examination of the damage occasioned by the delay. Given the Board's careful analysis (based on an extensive record, see supra note 9) and the recent endorsement of use of the Eichleay method in similar circumstances by the Federal Circuit,
it is concluded that the Eichleay method was appropriately applied by the Board in calculating the amounts properly reimbursed to Hyman and the subcontractors.
Accordingly, the accompanying order will grant plaintiff's motion for partial summary judgment on this issue. With the benefit of this decision, the parties should be able to determine the amount due for office overhead resulting from the delay between themselves. To facilitate this process, the accompanying order will schedule a conference between counsel followed, if necessary, by a status conference in court.
Hyman also claims that it is entitled to recover the cost of capital expended in financing the increased costs caused by WMATA's delays. The Board held that the distinction between the cost of borrowed capital and the cost of equity capital was not important, and that Hyman was entitled to interest on the equity capital Hyman had to use to finance the increased costs occasioned by the delays. According to the Board, this charge is readily discernible because of Hyman's practice of putting its surplus capital into certificates of deposit at American Security Bank. WMATA's General Manager in her final decision rejected the cost of capital theory on which the Board relied, and added that none of the signatories of the WMATA Compact have laws that permit the award of prejudgment interest on an unliquidated debt. Final Decision at 3-4. Hyman disputes both of these propositions, and argues that the contractual suspension of work clause encompasses recovery for cost of capital.
The Suspension of Work Clause provides for contractor reimbursement whenever a delay occasioned by the Contracting Officer in the administration of the contract results in "any increase in the cost of performance," although such adjustment will "exclude profit." Hyman reasons that the loss of the use of the capital that it had to consume to finance the increased costs of performance itself constituted an increased cost of performance, because Hyman was prevented from putting the capital to more profitable uses.
Hyman attempts to distinguish adverse precedent in the area of federal procurement law on the ground that most of the precedent cases held that interest on claims against the United States could not be awarded unless expressly provided for in a contract or statute. The statutory provision on which this principle was based, 28 U.S.C. § 2516(a) (1976), has since been effectively overridden in the contract dispute context. See Contract Disputes Act of 1978, 41 U.S.C. § 611 (1978).
Hyman contends that 41 U.S.C. § 611 was based on a congressional realization that contractors must be compensated for their capital costs when progress payments are delayed. Plaintiff further contends that 41 U.S.C. § 611 also invalidates Court of Claims precedent which suggests that interest cannot be recovered absent an express contractual or statutory provision. Hyman finally notes that, in any event, WMATA was never subject to 28 U.S.C. § 2516 or any similar provision.
Plaintiff similarly attempts to distinguish adverse precedent found in Judge Smith's recent conclusion in a similar case that a contractor's claim for interest was really a claim for lost profit and that the contractor therefore could not recover for the cost of capital. See Excavation Construction, Inc. v. WMATA, No. 83-1125, slip op. at 5 (April 19, 1985). Plaintiff argues that Judge Smith incorrectly relied on federal procurement precedent which was rendered irrelevant by 41 U.S.C. § 611. Hyman also argues that the case before Judge Smith was in a different posture, because in that case both the Board and WMATA's General Counsel had ruled against the contractor. See id. at 4-5.
Equally persuasive, however, is WMATA's contention that plaintiff's demand for reimbursement of cost of capital expended as a result of the delay is essentially a claim for prejudgment interest. As plaintiff itself stated in its pleadings, its cost of capital claim is as large as it is because
since performance of the contract work during the years 1974-1977, WMATA has required Hyman to pursue an extremely lengthy administrative appeal process which has consumed seven years . . . only to then reject the most important conclusions reached after a lengthy trial. Meanwhile, WMATA refuses to pay even undisputed amounts, while it argues that it is not liable for interest on any amount.
Memorandum of Points and Authorities In Support of Plaintiff's Renewed Motion for Partial Summary Judgment at 29.
WMATA is an agency and instrumentality of Maryland, Virginia and the District of Columbia, and as such might enjoy certain incidents of sovereign immunity. Cf. Morris v. WMATA, 226 U.S. App. D.C. 300, 702 F.2d 1037, 1041 (D.C. Cir. 1983); Heffez v. WMATA, 569 F. Supp. 1551, 1555-56 (D.D.C. 1983). One such incident of sovereign immunity is that prejudgment interest is not allowable against the state or its instrumentalities absent a statutory or contractual waiver of that immunity.
No Virginia statute
expressly subjects the Commonwealth to liability for prejudgment interest.
Moreover, precedent in this Court supports the conclusion that the capital cost reimbursement claim is in essence one for lost profit, the award of which is precluded by the Suspension of Work clause in this case. Compare Excavation Construction, Inc. (April 19, 1985), supra, with General Railway Signal, supra. In view of these principles and the ample authority cited by WMATA in support thereof,
it cannot fairly be said that the General Manager's decision to disallow plaintiff's claim for the loss of the use of its capital was arbitrary and capricious, without substantial evidence to support it or contrary to law. Accordingly, the accompanying order will grant defendants' motion for summary judgment on this issue.
For reasons more fully stated in the accompanying Memorandum, it is this 10th day of October, 1985, hereby
ORDERED, ADJUDGED, and DECREED: that plaintiff's motion for partial summary judgment is granted in part and denied in part; and it is further
ORDERED, ADJUDGED, and DECREED: that defendants' motion for summary judgment is granted in part and denied in part; and it is further
ORDERED: that the parties shall, on or before October 25, 1985, confer in a good faith effort to determine the amount of the overhead cost due to plaintiff as a result of this decision; and it is further
ORDERED: that a status conference will be held at 9:30 A.M. on October 30, 1985, in Courtroom No. 3, U.S. Courthouse, Washington, D.C.
The issues in this case which were at controversy between the parties having been decided by Memorandum dated October 11, 1985, and it appearing that the parties have agreed that the amount due in accordance with the Court's Memorandum is $105,360.10, it is this 5th day of November, 1985, hereby,
ORDERED, that judgment is entered for plaintiff against defendant Washington Metropolitan Area Transit Authority in the amount of $ 105,360.10. plus interest to accrue from date of judgment.