Appeal of

TIP TOP CONSTRUCTION, INC.

Under Contract No. 332495-07-B-0497

PSBCA No. 6351

APPEARANCE FOR APPELLANT:
Michael A. Gordon, Esq.

APPEARANCE FOR RESPONDENT:
Barbara H. Cioffi, Esq.
St. Louis Law Office
United States Postal Service

OPINION OF THE BOARD

            Respondent, United States Postal Service, awarded Appellant, Tip Top Construction, Inc., an indefinite quantity contract for renovation and alteration projects at postal facilities in the U.S. Virgin Islands.  After awarding Appellant a work order for installation of an air conditioning system, Respondent changed certain system requirements.  Appellant filed a claim for increased costs, which the contracting officer granted in part and denied in part.  The contracting officer denied the portion of Appellant’s claim seeking consultant and legal costs related to the change, and Appellant appealed.  Respondent does not contest Appellant’s entitlement to recover the amount the contracting officer granted in the final decision.

            At the election of the parties, the appeal is being decided on the record without an oral hearing in accordance with 39 C.F.R. §955.12, and entitlement and quantum will be addressed (December 13, 2010 Order).  Appellant elected application of the Board’s accelerated procedure, 39 C.F.R. §955.13.

FINDINGS OF FACT

            1.  On July 26, 2007, Respondent awarded Appellant an Indefinite Quantity Job Order Contract (“IQC/JOC”) for repair and alteration projects at postal facilities located in the U.S. Virgin Islands.  The IQC/JOC contemplated that Respondent would assign Appellant individual projects by issuing work orders.  (Appeal File, tab (“AF”) 1; Respondent’s Exhibits (“Resp. Exh.”) R1, R4 (Declaration of R. Manka (“Manka Decl. I”), ¶¶4, 7); Stipulation of Facts, paragraph (“Stip.”) 11, 12).

            2.  The IQC/JOC included a Unit Price Book, which described and established unit prices for construction tasks to be included in work orders.  It also included an adjustment factor or “multiplier,” which Appellant offered in its Price Proposal Package.  Application of the multiplier to the tasks and prices in the Unit Price Book resulted in a price for the listed work.  The IQC/JOC provided that the multiplier included “all profit, overhead, bonds, insurance, and other contingencies over and above the direct costs of construction.  No allowance for such items will be made after contract award.”  (AF 2 (p. 64); Stip. 12; Resp. Exh. R1 (Contract Clause B.310, Contract Terms (Clause F-303) (March 2006), subsection f); Manka Decl. I, ¶5).

            3.  The IQC/JOC established procedures for issuance of a project work order.  First, the parties conducted a Joint Scope Meeting at which Respondent explained the project to Appellant, provided an opportunity for a site visit, and obtained Appellant’s input.  Thereafter, Respondent prepared a Detailed Scope of Work (“DSOW”) on which Appellant based its proposal (Price Proposal Package).  The Price Proposal Package was a lump-sum, fixed-price proposal based on the task prices from the Unit Price Book, the quantities of work, and Appellant’s multiplier.  For required project work that was not included in the Unit Price Book, the Price Proposal Package included a fixed price, consisting of Appellant’s direct costs (labor, material and equipment), subcontractor costs, overhead, and profit.  (Resp. Exh. R1 (Contract Clauses B.309, Work Order (Clause F-302) (March 2006), subsection a, and B.605, Definition of Terms Used in Contract Documents (Clause F-601) (March 2006), subsection e, and Contract Attachment 14, Procedures for Ordering Work, section B); Manka Decl. I, ¶6; Stip. 12).

            4.  The IQC/JOC provided,

The Postal Service reserves the right to reject a Price Proposal Package or cancel a project for any reason.  The Postal Service also reserves the right not to issue a work order if that is determined to be in its best interest.  The Postal Service may accomplish such work by any other means or not at all.  The contractor shall not recover any costs arising out of or related to the development of the work order including but not limited to the costs to review the Detailed Scope of Work or prepare a Price Proposal Package (including incidental architectural and engineering.).

(Resp. Exh. R1 (Contract Clause B.309, Work Order (Clause F-302) (March 2006), subsection l)).

            5.  Respondent’s acceptance of the Price Proposal Package resulted in issuance of a work order.

A separate Work Order will be issued for each project.  A Work Order will contain a Detailed Scope of Work, the Project Completion Time, and the price to be paid for the work.  Each Work Order issued under this contact will be itself a Firm Fixed Price contract for the completion of the Detailed Scope of Work.  The contractor shall perform the Detailed Scope of Work within the Project Completion Time and for the fixed price of the Work Order.

Adjustments - Since each work order is a Firm Fixed Price Contract, there will be no adjustments in quantities except when the additions or deletions to quantities are required and they are a change to the detailed scope of work.  This is accomplished with the issuance of a modification to the work order by the contracting officer.

(Resp. Exh. R1 (Contract Clause B.309, Work Order (Clause F-302) (March 2006), subsections d, n).  All clauses of the IQC/JOC were applicable to each work order (Resp. Exh. R1 (Attachment 14, Procedures for Ordering Work, subsection C.4)).

            6.  The Changes clause authorized the contracting officer to order changes to the work, and provided,

If any change under this clause causes an increase or decrease in the supplier’s cost of, or the time required for, the performance of any part of the work under the contract, whether or not changed by any order, the contracting officer will make an equitable adjustment and modify the contract in writing.

(Resp. Exh. R1 (Contract Clause B.1006, Changes (Construction) (Clause B-37) (March 2006) Modified, subsections a, c)).

            7.  The contract’s Price Adjustment clause provided,

When costs are a factor in determining any contract price adjustment under the Changes clause or any other provision of this contract, the

Conduct Price/Cost Analysis topic of the Evaluate Proposals task of

Process Step 2: Evaluate sources in the Postal Services Practices in effect on the date of this contract will serve as a guide in negotiating the adjustment.

(Resp. Exh. R1 (Contract Clause B.1003, Pricing of Adjustments (Clause B-10) (March 2006)).

            8.  The IQC/JOC provided,

a. All publications and other documents (such as manuals, handbooks, codes, standards, and specifications) cited in this contract for the purpose of establishing requirements applicable to equipment, materials, or workmanship are hereby incorporated by reference in the contract as fully as if printed and bound with the specifications of this contract, in accordance with the following:

*    *    *

the supplier must comply with the requirements set forth in the edition specified in this contract or, if not specified, the latest edition or revision, as well as the latest amendment or supplement in effect on the date of the solicitation except as modified by the specifications of this contract.

(Resp. Exh. R1 (Contract Clause B.604, Standard References (Clause B-55) (March 2006)).

            9.  On May 26, 2009, Respondent issued Appellant a work order to replace the air conditioning system at the Main Post Office in Christiansted, Virgin Islands, for the price of $229,736.92 (AF 3; Manka Decl. I, ¶8; Stip. 13).

            10.  The IQC/JOC specifications neither specified R-22 refrigerant nor barred its use in the new air conditioning system (AF 3 (p. 79); Resp. Exh. R9 (Supplemental Declaration of V. Morales (“Morales Decl. II”), ¶¶2, 3); Stip. 13).

            11.  A drawing Respondent provided to Appellant before the work order was issued specified Carrier as the manufacturer and identified the basic Carrier models to be used.  Nevertheless, Appellant was required to submit the manufacturer’s equipment and refrigerant specifications for Respondent’s approval.  (Resp. Exh. R1 (Specification Sections 01320c, 15770a-1.1 C); Appellant’s Supplement to Appeal File (“ASAF”) pp. 324-325; Appellant’s Exhibit A).

            12.  Respondent contracted with a construction manager to oversee the project on its behalf, including reviewing and approving equipment submittals and shop drawings (Stip. 8, 9).  On July 16, 2009, Appellant sent the construction manager its mechanical subcontractor’s submittals for Carrier Air Cooled Condensers Model 09DK020 and Carrier Air Cooled Indoor Unit Air Handler Model 05BV024 (ASAF pp. 207-212; Stip. 14).  The former could be used with refrigerants R‑12, R-22, R-500, R-502, or R-134a and the latter with refrigerants R-22 or R‑410a (Morales Decl. II, ¶4; Resp. Exh. R10).  The equipment submittals did not identify the refrigerant Appellant intended to use (Morales Decl. II, ¶4).

            13.  On July 23, 2009, Respondent’s construction manager approved the submittals, noting only a comment regarding an electrical issue (ASAF pp. 207-213).  Based on the approval, Appellant, through its mechanical subcontractor, ordered the listed equipment and ordered associated fittings and piping (ASAF pp. 203-206 (Declaration of I. Diaz (“Diaz Decl. I”), ¶3); see Appeal File Attachment, pages (“AFA”) 26-27).

            14.  In September 2009, Appellant sent Respondent’s construction manager its submittal for the system refrigerant, identifying the refrigerant as R‑22 (Resp. Exh. R5 (Declaration of V. Morales (“Morales Decl. I”), ¶¶5-8 and Attachment A (pp. 3-12); Stip.14).

            15.  By email of September 18, 2009, the construction manager returned the submittal to Appellant marked “Reviewed, no exceptions taken.”  However, later that day, he emailed Appellant, “Please ignore[ ] Submittal 15009 R-22 Refrigerant previous approval.  Refrigerant should be R-410A.”  (Morales Decl. I, ¶6 and Attachment A (pp. 3-13); Stip. 15).

            16.  Appellant previously had contracted with an independent construction consultant to oversee its projects, including the Christiansted air conditioning project.  Appellant paid the consultant at the rate of $60 per hour.  (Stip. 2; ASAF p. 201 (Declaration of P. J. Hollins (“Hollins Decl. I”), ¶2)).

            17.  On September 25, 2009, Appellant’s consultant emailed Respondent’s construction manager the following:

The a/c equipment was ordered with R-22 refrigerant and not the R-410a that you are requesting after approval of the equipment submittal.  The drawings do not specify a refrigerant and the equipment was priced with R-22 refrigerant.

According to information received from our sub-contractor and Carrier, the specified equipment is only available with R-22 refrigerant and a change at this time would involve additional cost and penalties (estimated at $20,000).  In addition, the change in the order would move the order to the end of the production line (line production time of 10 weeks + 2 weeks shipping).

Please, provide us with your directive on how to proceed.

(AFA 24; Diaz Decl. I, ¶6).

            18.  On September 28, 2009, Respondent’s construction manager emailed Appellant’s consultant, “Please submit a proposal to furnish and install AC equipment that uses refrigerant 410A.”  (AFA 28).

            19.  Appellant’s consultant responded on that date or the next,

Confirming our telephone conversation, you have requested to halt the manufacturing/production of the A/C units for the project.  I will be sending you a detailed cost proposal tomorrow for replacing the units with the R‑410A refrigerant.

(AFA 28; Diaz Decl. I, ¶6).

            20.  After the R-22 refrigerant submittal was rejected, Appellant’s construction consultant assisted Appellant in negotiating the change order work with the mechanical subcontractor and with the equipment manufacturer.  From September 18, 2009, through October 13, 2009, the consultant engaged in discussions with the subcontractor and manufacturer to review and select substitute equipment, to negotiate schedule adjustments with Carrier and the subcontractor, and to coordinate installation and other changes needed to accommodate the substitute equipment (Diaz Decl. I, ¶5).  During this period, the consultant billed Appellant 42.75 hours at $60 per hour on this project for a total of $2,565.  As Appellant’s work on the project essentially was stopped while arrangements for substitute equipment were being made, all of the consultant’s time on this project was devoted to effecting the change to the work.  (ASAF pp. 219-220, 231-232, 277-280; Hollins Decl. I, ¶2); Diaz Decl. I, ¶5).

            21.  On October 13, 2009, Appellant submitted specifications for air conditioning equipment that used refrigerant R-410a to replace the equipment initially proposed.  Respondent’s construction manager approved the substitute equipment on October 15, 2009, specifically noting on the approval that the air conditioning units were required to use R-410a refrigerant.  (ASAF pp. 214-218; AFA 31).

            22.  On October 19, 2009, Appellant submitted a $28,838.43 proposal for additional costs associated with changing the air conditioning system from one that utilized R-22 refrigerant to one using R-410a refrigerant (Diaz Decl. I, ¶8; AF 9 (pp. 99-110)).

            23.  The proposal included change costs of Carrier and Appellant’s mechanical subcontractor, including the subcontractor’s overhead and profit and gross receipts tax (AF 9 (pp. 99, 101-110); ASAF pp. 245-248).

            24.  In its cost proposal to Respondent, Appellant represented Carrier’s and the subcontractor’s costs to be $21,361.80.  To this, Appellant added 15% overhead, 10% profit, 4% insurance, 4% gross receipts tax, and 2% workers’ compensation to reach the $28,838.43 costs of its claim.  (AF 9 (p. 101); ASAF p. 244).

            25.  In early November 2009, the contracting officer orally instructed Appellant to proceed with the change in refrigerant (Manka Decl. I, ¶11).

            26.  By letter dated January 12, 2010, the contracting officer again directed Appellant to proceed with the equipment substitution to use R-410a refrigerant rather than R-22, at a price to be determined, but not to exceed $28,838.43.  (AF 4 (p. 83); Manka Decl. I, ¶11).

            27.  The parties discussed pricing for the changed work from September 2009 through June 2010 (Stip. 17; AF 101, 111-114).  Appellant’s president and the construction consultant negotiated on behalf of Appellant.  On April 16, 2010, the contracting officer advised Appellant that under clause F-302 (B.309 in the IQC/JOC (Finding 4, above)), costs of estimating services were not recoverable and that Respondent would not reimburse Appellant for its costs associated with preparing its change proposal (Stip. 18; ASAF pp. 254-255).

            28.  Thereafter, Appellant engaged an attorney to advise it regarding Respondent’s liability for proposal preparation costs under a work order modification.  In April, May and June 2010, the attorney expended eight hours reviewing the contract, researching the issue, advising Appellant, and preparing a memorandum supporting Appellant’s request for such costs.  Appellant paid the attorney’s fees and expenses for this work.  (ASAF pp. 257-262).

            29.  On June 18, 2010, Appellant submitted a $34,533.77 claim to the contracting officer for an equitable adjustment

for preparation of estimates, extended overhead and the work associated with the Postal Service’s request for a proposal for the R 410 Refrigerant change and $2,745 for attorney fees incurred in attempting to resolve this prior to the submission of a claim.

(AF 7).  Appellant’s claim listed the subcontractor’s price for the change to be $18,757.43.  To this Appellant applied 10% profit, 4% insurance, and 4% gross receipts tax, to reach a subtotal of $22,133.77.  To this Appellant added $9,655 for “Preparation Costs & Extended Overhead” and $2,745 for “Legal Fees.”  (AF 7 (pp. 88-91); Stip. 19).

            30.  The “Preparation Cost & Extended Overhead” item consisted of the time of Appellant’s construction consultant and the time of Appellant’s president attempting to convince the contracting officer to pay Appellant’s proposal preparation costs, plus Appellant’s overhead markup (Hollins Decl. I, ¶¶2, 3).

            31.  On June 23, 2010, the contracting officer issued a final decision that partially granted and partially denied Appellant’s claim.  He granted an adjustment of $22,133.77, which he considered the actual cost of the change.  He denied the remainder of the claim—for preparation of the adjustment proposal and the June 18 claim and for attorney fees.  The contracting officer stated two reasons for his partial denial.  First, he pointed to contract clause B.309 (l) (Finding 4) and asserted that that provision precluded recovery of proposal preparation costs.  Second, he concluded that the consultant costs of $6,704.66[1] were excessive in comparison with the proposal’s value of $22,133.77 for the changed work.  (AF 8 (pp. 95-96); Stip. 20).

            32.  On August 17, 2010, the contracting officer issued a unilateral modification increasing the work order price by $22,133.77 for the “[c]hange in A/C equipment and accessories due to the change in refrigerant type from R-22 to R-410a.”  (AF 9 (pp. 97-98)).

            33.  On September 21, 2010, Appellant filed its Notice of Appeal, identifying the contested portion of its claim as $12,400 (AF 10 (p. 116)).

DECISION

Applicability of Clause B.309

            Respondent argues that clause B.309 providing that Appellant “shall not recover any costs arising out of or related to the development of the work order” (Finding 4) bars recovery of the consultant and legal costs Appellant seeks.  Appellant argues that Clause B.309 relates to preparation of the Price Proposal Package associated with the original issuance of the work order, and that the contract’s Changes clause governs a change to the work after the work order is issued.

            We agree with Appellant.  The language Respondent relies on from Clause B.309 precludes recovery of Appellant’s cost of preparing a price for the original work order, i.e., the Price Proposal Package.  It specifically bars recovery of Appellant’s “costs to review the Detailed Scope of Work,” a process exclusive to award of the original work order.  In addressing the changed equipment requirements, Respondent did not prepare a DSOW for Appellant’s use, and the term “Detailed Scope of Work” has no applicability to issuance of a change under an issued work order.  Moreover, subsection (d) of clause B.309 plainly contemplates applicability of the Changes clause to a change to the work required under an issued work order by noting that a change to the scope of a work order “is accomplished with the issuance of a modification to the work order by the contracting officer,“ and it is in the Changes clause that contract modifications are addressed (Findings 5, 6).  Accordingly, the contract’s Changes clause (Finding 6) governs resolution of Appellant’s claim, which is not barred by Clause B.309.

Were Consultant Costs Included in Appellant’s Multiplier?

            Respondent argues that the amounts claimed may not be recovered because they are included in Appellant’s “multiplier,” which encompasses “all profit, overhead, bonds, insurance, and other contingencies over and above the direct costs of construction.”  (Finding 3).  Appellant argues that the multiplier does not apply under the circumstances of a change to already-assigned work.

            Again, we agree with Appellant.  The modification was not priced using the Unit Price Book, and accordingly, the multiplier (and whatever costs it included) was inapplicable, and Appellant’s claim is not barred thereby.

Changes Clause

            Under the Changes clause, Appellant is entitled to an equitable adjustment for increased costs it incurred due to a change to the work directed by Respondent (Finding 6).  The equipment and refrigerant Appellant proposed to use met the requirements of the work order (Finding 10).  Respondent approved use of the proposed equipment, which, as configured for use with R-22 refrigerant, met the requirements of the drawing provided before Appellant submitted its Price Proposal Package (Finding 11),[2] and then required Appellant to substitute different equipment.  Respondent thus limited Appellant’s method of performance, and this limitation constituted a change to the contract.  See A. S. McGaughan Co., PSBCA Nos. 1752, 1754, 88-1 BCA ¶ 20,326; Long Servs. Corp., PSBCA No. 1606, 87-3 BCA ¶ 20,109, aff’d on recon., 88-1 BCA ¶ 20,270; CWC, Inc., ASBCA No. 28847, 84‑2 BCA ¶ 17,282, aff’d on recon., 85-1 BCA ¶ 17,876.  As we stated in Long Services, at 101,831,

It is recognized that improper imposition of a specific method for performing contract work, or improperly restricting a contractor's choice of methods, which increases a contractor's costs, constitutes a constructive change for which an equitable adjustment is required.  E.g., Bill Wright Painting & Decorating, Inc., ASBCA No. 33343, 87-1 BCA ¶ 19,666; Otto Randolph, Inc., ASBCA No. 11539, 66-2 BCA ¶ 5928.

Consultant Costs before Substitute Equipment Approved

            Respondent argues that none of the contested costs Appellant seeks in this appeal are recoverable because they are unallowable costs of prosecuting its claim against Respondent and because they are not reasonable.  Respondent contends that the contract’s Price Adjustment clause (Finding 7) bars their recovery because it requires application of certain limitations on a contractor’s recovery of costs.  The reference in the Price Adjustment clause that Respondent contends contains a cost recovery limitation is to “Conduct Price/Cost analysis topic of the Evaluate Proposals task of Process Step 2: Evaluate sources in the Postal Service Practices.”  Respondent submitted, as Exhibit R3, an excerpt from its Handbook P-2, Design and Construction Purchasing Practices, and, as Exhibit R2, an excerpt from its Purchasing Manual, but nothing in either text conforms to the descriptor of the standard in the Price Adjustment clause.  Additionally, the section numbering cited in Respondent’s brief, at pages 17-18, as the source of the cost recovery limitation does not square with the numbering in either offered document.  Therefore, we are at a loss to understand what, if any, direction regarding recoverability of costs might be found in the Price Adjustment clause.[3]

            Additionally, the referred-to standard is to “serve as a guide in negotiating the adjustment.”  This language does not effect incorporation by reference because the clause lacks the clear and express language of incorporation necessary to unambiguously communicate incorporation of the referenced material, and merely acknowledged that the referenced material may be used as a guide.  Precision Pine & Timber, Inc. v. United States, 596 F.3d 817, 826 (Fed. Cir. 2010).[4]  Moreover, whatever standard might be found in the Price Adjustment clause would not be mandatory in any event; it would be merely a reference to be considered.  See Automation Fabricators & Eng’g Co., PSBCA No. 2701, 90-3 BCA ¶ 22,943.

            Respondent also argues that Appellant has not proved that it incurred consultant costs resulting from the change because its evidence lacks sufficient specificity to be accepted as proof.  Respondent points out that although the consultant in his declaration recites that he held many conference calls with Carrier, the subcontractor, and Appellant to identify substitute equipment he does not supply details of such conferences and does not explain how much time he spent coordinating the substitution of equipment and when such time was spent.

            The evidence demonstrates that the consultant coordinated the steps necessary to complete the change, that had it not been for Respondent’s change those efforts would not have been required, and that Appellant incurred a cost for those efforts.  Therefore, Appellant has shown the elements necessary to recover an equitable adjustment—liability, causation, and resultant injury.  See Servidone Constr. Corp. v. United States, 931 F.2d 860, 861 (Fed. Cir. 1991).  Under these circumstances, we will not deny Appellant recovery because its evidence of the exact amount of damage is less than perfect.  See Specialty Assembling & Packing Co. v. United States, 355 F.2d 554, 572 (Ct. Cl. 1966); Applied Companies, ASBCA No. 50593, 04-2 BCA ¶ 32,786, at 162,172; Richard R. Wilson, PSBCA No. 4104, 99-1 BCA ¶ 30,212, recon. denied, 99-1 BCA ¶ 30,336.

            Appellant provided time sheets showing the time the consultant spent on this project, presented unrebutted evidence that the project was essentially stopped pending resolution of the change, and demonstrated, again through the unrebutted statements of Appellant’s witnesses, that the only work the consultant performed on this project during the pendency of the change was to coordinate and manage the various aspects of the change (Finding 20).  The measure of the adjustment to which Appellant is entitled is the difference between the reasonable cost of providing the substitute equipment and the reasonable cost of performing as Appellant originally planned.  See Santa Fe Eng’rs, Inc., ASBCA No. 48331, 95-1 BCA ¶ 27,505, at 137,076.  Based on the evidence in the record, we find that Appellant incurred unexpected costs of $2,565 for the consultant’s work (Finding 20), which, without evidence to the contrary, we find were reasonable.  Those costs are compensable as this was an increase in Appellant’s direct cost of performance due to the change.  See Sage Constr. Co., ASBCA No. 34284, 90-1 BCA ¶ 22,576, at 113,300, recon. denied, 90-2 BCA ¶ 22,726.[5]

Consultant and Other Costs after Substitute Equipment Approved

            Respondent argues that Appellant did not provide documentation of its costs when it submitted its claim to the contracting officer and has not proved such costs in this proceeding.[6]  While Appellant submitted time sheets for the consultant for periods after the approval of the substitute equipment, we do not give these the same weight as those pertaining to the pre-approval period.  Appellant’s president states in his declaration that until March 2010, the project was stopped so all of the consultant’s time allocated to this project was associated with the change.  We accepted that explanation regarding the consultant’s time up to approval of the substitute equipment.  However, Appellant has shown no reason why it could not proceed with the work once the substitute equipment was approved on October 15, 2009 (Finding 21).  As the consultant likely was working on other project matters, it was incumbent upon Appellant to identify hours, if any, spent on the equipment change issue, and it has not done so.  Moreover, it does not identify any time spent by its president[7] and puts no figure to its overhead included in the claim.  By not demonstrating post-approval consultant costs, its president’s costs and its overhead associated with the change, Appellant has failed to prove damages for the post-approval period.  See Willems Indus., Inc. v. United States, 295 F.2d at 831.           

            Additionally, we do not find that costs identified after approval of the substitute equipment were reasonably incurred in performance of the changed work or as genuine contract administration costs.[8]  Appellant has shown no reason why, once the substitute equipment was approved and it knew the specifications of the approved equipment, it could not have ordered the replacement equipment and performed other work on the project.  Moreover, the contracting officer told Appellant orally in early November and in writing in early January to proceed with the work (Findings 25, 26).  While the parties disagreed on Appellant’s entitlement to its costs of preparing its estimate and the exact amount of any recovery for the changed work, their discussions in this regard, the efforts of its consultant, and the work of Appellant’s attorney had nothing to do with performance of the changed work or genuine contract administration and were solely directed at trying to convince the contracting officer to accept Appellant’s figure for the change and maximizing Appellant’s monetary recovery.  Those costs were not incurred as a result of the change to the work and we find that they are not recoverable.  See Yadkin, Inc., PSBCA No. 2051, 89-2 BCA ¶ 21,709; Celesco Indus., Inc., ASBCA No. 22251, 79-1 BCA ¶ 13,604, at 66,684.

            Appellant relies on our decision in Unarco Material Handling, PSBCA No. 4100, 00-1 BCA ¶ 30,682, for the proposition that its consultant and legal costs are recoverable.  In that appeal, the Postal Service had granted such costs, and the issue before the Board was whether Unarco could recover its profit on those costs.  The Board held it could but did not address the recovery of the underlying costs, which is what Appellant seeks here.  Thus, Unarco is inapplicable to the facts before us.  In Allied Materials and Equip. Co., ASBCA No. 17318, 75-1 BCA ¶ 11,150, also relied upon by Appellant, the parties negotiated the terms of a modification to a supply contract, and the issues negotiated involved not just the price of the adjustment but also an associated change in the delivery dates and other contract terms, and legal fees for the attorney’s time in conducting these negotiations was found to be a recoverable cost of administration.  Id., at 53,086.  In Appellant’s case, however, once the substitute equipment was approved, nothing remained to be negotiated except the price.  There is no evidence that the parties’ negotiations addressed an extended delivery schedule or any other changes to contract performance requirements.  Accordingly, Allied is distinguishable on its facts from this appeal.

Conclusion

            Appellant is entitled to recover $2,565 for the consultant costs incurred before the substitute equipment was approved, plus Contract Disputes Act interest on that amount from the date of its claim, June 18, 2010, until paid.  The appeal is granted to that extent and is otherwise denied.

                                                                        Norman D. Menegat
                                                                        Administrative Judge
                                                                        Board Member

I concur:                                       
William A. Campbell
Administrative Judge
Chairman                                                      

[1] This number appears for the first time in the contracting officer’s final decision but nowhere in the evidentiary record of this appeal.  We note, however, that it is exactly the difference between Appellant’s $28,838.43 initial cost proposal of October 19, 2009 (Finding 22) and the claimed costs of $22,133.77 for its mechanical subcontractor and the manufacturer, and Appellant’s markups as stated in its claim (Finding 29).  In its Complaint, Appellant identifies $6,704.66 as the out-of-pocket consultant costs and the rest of the $9,655 claimed as Appellant’s overhead applicable to the consultant costs (Complaint ¶22), but there is no detailed breakdown in the evidentiary record of the constituent amounts.  In his declaration, Appellant’s president states that the $9,655 consists of the consultant’s costs, the time of Appellant’s president, and Appellant’s overhead (Hollins Decl. I, ¶3).

[2] The Detailed Statement of Work for this work order is not in the record, so the drawing provided the Board the only description of what Respondent required for the project.

[3] Neither the Design and Construction Purchasing Practices nor the Purchasing Manual is a regulation of the Postal Service (39 C.F.R. §601.102) that might otherwise be binding on Appellant.  See Wayne L. Orr, PSBCA No. 6268, 10-2 BCA ¶ 34,560; Robert B. Joy, PSBCA Nos. 938, 979, 1981 WL 7678 (September 30, 1981).

[4] The conclusion that the Price Adjustment clause was not intended to incorporate by reference the unidentified standard is bolstered by a comparison of the language used in that clause to that used in the contract’s Standard References clause (Finding 8).  The language of the latter—certain documents cited in the contract “are hereby incorporated by reference in the contract as fully as if printed and bound with the specifications”—demonstrates the drafter was familiar with language of incorporation and likely would have used the same or similar language in the Price Adjustment clause had there been an intention to incorporate a mandatory standard into the contract.  See Northrop Grumman Info. Tech., Inc. v. United States, 535 F.3d 1339, 1347, n. 1 (Fed. Cir. 2008).

[5] There is insufficient evidence in the record to allow determination of any markups on these direct costs to which Appellant may be entitled.

[6] Appellant responds to Respondent’s charge that it failed to provide the contracting officer with documentation of the $9,655 claimed by complaining that in the discussions of its claim, Respondent never asked for it and it had no reason to know it was an issue of concern to Respondent (January 31, 2011 Declaration of P.J. Hollins, ¶3).  It is Appellant’s burden to prove its damages.  Willems Indus., Inc. v. United States, 295 F.2d 822, 831 (Ct. Cl. 1961).  That Respondent never requested the documentation does not excuse a failure to prove Appellant’s case in this proceeding.

[7] Additionally, remuneration for company officials is recoverable as an indirect overhead cost, not as a direct cost to which another level of overhead could be added.  See Ralcon, Inc., ASBCA No. 43176, 94-2 BCA ¶ 26,935, at 134,142.

[8]  In Bill Strong Enterprises, Inc. v. Shannon, 49 F.3d 1541, 1550 (Fed. Cir. 1995), overruled in part on other grounds by Reflectone, Inc. v. Dalton, 60 F.3d 1572 (Fed. Cir. 1995), the Court offered a test for determining whether costs were recoverable contract administration costs by seeing whether the costs were incurred “for the genuine purpose of materially furthering the negotiation process.”  This was in the context of a FAR cost limitation prohibiting recovery of costs of prosecuting a claim against the Government.  While the FAR is inapplicable to Respondent, Overflo Public Warehouse, Inc., PSBCA Nos. 4531, 4550, 4649, 04-1 BCA ¶ 32,488, at 160,713, and we have not found in Appellant’s contract a similar limitation, the discussion in Bill Strong regarding how to determine whether efforts are in good faith aimed at furthering contract negotiations is instructive nonetheless in our determination whether the claimed costs were reasonable.