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District of Columbia v. Kora & Williams Corp.

December 30, 1999

DISTRICT OF COLUMBIA, ET AL., PETITIONERS,
v.
KORA & WILLIAMS CORPORATION AND INSURANCE COMPANY OF NORTH AMERICA, RESPONDENTS.



Before Farrell and Glickman, Associate Judges, and Newman, Senior Judge.

The opinion of the court was delivered by: Farrell, Associate Judge

Petition for Review of a Decision of the District of Columbia Contract Appeals Board

Argued October 28, 1999

In this dispute over the performance of a major government contract, the District of Columbia challenges the decision of the District of Columbia Contract Appeals Board ("the Board") converting the default termination of Kora & Williams Corporation to a termination for the convenience of the District of Columbia and awarding Kora & Williams and its surety (hereafter collectively "K&W") total costs of $12,410,991 plus interest at four percent per annum. The District primarily attacks two procedural rulings of the Board by which, at the entitlement hearing, *fn1 it restricted the testimony that two expert witnesses retained by the District would be allowed to give, and declined to impose sanctions on K&W for what the District argues was K&W's expert's failure to make discovery of the main exhibits he employed at the hearing. The District also challenges the Board's allocation of the burden of proof at the entitlement hearing, mounts an array of attacks on the manifold basis for the Board's decision on entitlement, and contends that the Board erroneously failed to require exhaustion of administrative remedies before deciding the issue of quantum. After considering all of the District's arguments, we affirm the Board's decision in its entirety.

I. Background

This litigation had its origin in Congress' passage of the Union Station Redevelopment Act of 1981 intended to complete the restoration and expansion of Union Station. As part of the Act, Congress gave the District of Columbia responsibility for completing the parking structure and developing railroad access facilities at Union Station. The project required completion of the bus and parking garage and construction of: a Main Level Extension between the garage and H Street; a Lower Track Access Facility; a Southeast Garage Ramp; and a Link Structure connecting the historic Union Station with the garage and the Lower Track Access Facility. Restoration of the Union Station historic structure was not the District's responsibility, but was to be performed contemporaneously by the Union Station Redevelopment Corporation, a public body. The District engaged Sverdrup & Parcel, Consulting Engineers ("Sverdrup") to do the structural and engineering design of the parking facility, and eventually contracted with K&W to perform the construction work. The contract with K&W established November 11, 1985 (550 calendar days) as the completion date for the Link Structure and October 27, 1986 (900 calendar days) as the completion date for all remaining contract work.

From the beginning, as the Board found, the construction work was beset with problems stemming from design. Specifically, Sverdrup had designed the Main Line Extension to require four or more train tracks to be out of service during construction, but AMTRAK (which, through a subsidiary, conducts the railroad operations at Union Station) insisted that no more than two tracks be out of service at any one time. Also, a "sequencing paradox" resulted from the fact that the contract specified completion of the Inbound Passageway (the majority of the Lower Track Access Facility) before construction of the adjoining lower level Link Structure, even though equipment systems on which the former depended were to be installed in the lower level Link. Additional problems developed during construction with the installation of the skylights and supporting structures, pile driving operations, AMTRAK's refusal to vacate certain offices, and denial of access to an active track spur that serviced the nearby United States Government Printing office, all problems which affected the planned overall construction sequence known as the "critical path."

These and similar problems made completion of the project by the contract dates impractical, although responsibility for the resulting delays was strongly disputed at the entitlement hearing. In January of 1987, the District purported to establish a new overall completion date of November 1987, later informing K&W that it would be held to a promised July 1987 finish date for the Link Structure. In April of 1987, the District warned K&W that it was considering action to terminate the contract for fault, and on June 19, 1987, it terminated the contract in a letter that gave as reasons K&W's:

current failure and refusal to make sufficient progress toward the timely completion of the link structure and garage; the lack of diligence to prosecute work toward timely completion; and failure and refusal to complete work on time throughout this contract . . . .

K&W appealed the termination to the Board, which eventually conducted an evidentiary hearing on entitlement at which over 6000 exhibits were introduced and testimony spanned more than 5800 transcript pages. Following post-hearing briefing, the Board issued a 170-page opinion and order in which it concluded that the default termination was unlawful and should be converted to one for the convenience of the District. The Board found, as independent grounds for its decision, that:

(1) K&W was excusably delayed in its "failure to make progress" toward the new completion dates; (2) in fact the District had waived and never reestablished contract completion dates; (3) the District's decision to terminate without analyzing and allocating responsibility for the delays was an abuse of discretion; (4) the District materially breached the contract by (a) refusing to grant equitable adjustments, (b) wrongfully withholding payments, and (c) failing to resolve major design defects; (5) the contracting officer abdicated his personal responsibility for the default decision; (6) the District failed to submit the proposed default termination to the Director of Administrative Services as required; (7) the default decision was arbitrary and capricious; and (8) the decision to terminate was made in bad faith.

Following unsuccessful negotiations and then a hearing on quantum, the Board awarded K&W costs for unpaid performance, subcontractor settlements, and claim preparation.

II. Discussion

A. Evidentiary Rulings

The District's primary argument in this court relates to two evidentiary rulings by the Board which the District contends undermined the fairness of the entitlement hearing. First, as a discovery sanction, the Board limited the testimony of the two principal experts the District intended to offer regarding cause for the construction delays to the testimony they had given at their depositions; and second, the Board refused to exclude exhibits prepared by K&W's main expert that had not been turned over to the District until a month before trial and after the witness had been deposed. We treat these rulings in succession. Ultimately, the District has not convinced us that it was prejudiced by either ruling to the extent necessary to permit reversal.

1. The Testimony of Myers and Fiander

a. Background

Following a premature appeal of the default termination to the Board (later voluntarily dismissed), K&W filed a claim with the Director of the Department of Administrative Services in January 1988, asserting that the default termination was improper because the District had not granted necessary time extensions or otherwise followed proper procedures in terminating. In November of 1989 K&W was permitted to appeal to the Board, *fn2 which it did in January of 1990 filing its formal complaint in March of that year. K&W served interrogatories on the District asking it, among other things, to identify its expert witness on the delay issues. In October of 1990, the District substituted new counsel, who moved for a 120-stay of the proceedings and an enlargement of time to respond to the interrogatories. The Board stayed further proceedings until January of 1991. Meanwhile the District had again assigned new counsel to the case, and he moved for an additional stay which the Board granted until the end of February. Over the next six months the District failed to meet an agreed deadline for response to interrogatories and document requests. At a status conference in June of 1991, the Board ordered the District to meet specific deadlines for discovery and, in particular, to identify its experts and their opinions by November 29, 1991.

In July of 1991, now four years after the termination, the District's counsel in the case for the first time advised the District of Columbia Department of Public Works of the need to retain expert witnesses. At the same time, the District responded "N/A" (non- applicable) to interrogatories asking it to identify its experts. In November 1991 the District's counsel suffered a heart attack and soon thereafter retired. New counsel - the District's fourth - moved for an extension of time until early February 1992 in which to name the District's experts and file supporting witness statements required by Super. Ct. Civ. R. 26 (b)(4). *fn3 Thereafter, as the Board later recounted:

With discovery continuing, and despite two Board orders granting the District enlargements of time in which to identify expert witnesses, the District moved again on January 13, 1992, for an enlargement of time in which to identify its proposed experts. When appellants opposed the motion four days later, they also moved for sanctions. On January 29, 1992, the Board ordered the District to provide, within seven days, an explanation as to why it had continually failed to identify its experts. Between that time and February 4, the parties entered into a stipulation regarding discovery: essentially, the District was given until February 28, 1992, in which to identify its trial experts, all discovery was to conclude by April 3, 1992, and the [entitlement] hearing was re- scheduled to commence on June 15, 1992. The parties' stipulations were incorporated into a Board order dated February 11, 1992.

On February 28 the District filed its Identification of Proposed Expert Witness Testimony naming two witnesses, Sylvester C. Myers and Leo L. Fiander, as its proposed trial experts. The District represented that Myers, an expert in construction management, construction costs and design engineering, would testify that: K&W "was unable and/or unwilling to perform the work required under the subject contract"; it had failed "to submit a [timely] construction schedule by Critical Path Method (CPM)"; *fn4 its "performance under the . . . contract became progressively worse, resulting in increasing delays in critical path activity, such as . . . begin Main Level Extension - 140 calendar days behind schedule"; "there was little evidence if any of the contractor's compliance with the terms of the . . . contract and/or the contracting officer's instructions"; and "the District was justified in terminating the contractor's right to proceed under the [Project] contract under Article 5 (default) of the General Provisions." The District asserted that Fiander, likewise an expert in construction cost and management, would testify that of the 141 logged change orders (requests by K&W to depart from the contract terms) "the significant number of these change orders were minor and could not have resulted in any delay in the completion"; and "the obvious reason for the delays in completion . . . is the inefficient use of manpower [by K&W and] the inability to utilize the manpower available."

At their depositions in March of 1992, neither Myers nor Fiander could confirm the opinions attributed to them in the Rule 26 (b)(4) statements. Although Myers initially asserted that the statement accurately reflected his opinions (subject to "refine[ment]"), he soon conceded that the critical comparison he intended to make between the "as planned" and "as built" ...


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