T & Wedmier Corporation v. State of Illinois

OPINION

Birnbaum, J.

THIS MATTER is before the Court on a recommendation filed by Commissioner Argionis, following a hearing before the Commissioner beginning on October 29, 2010.Claimant filed its Complaint on February 10, 2005, alleging respondent breached its contract with Claimant for the construction of a reservoir in Hickory Hills, Illinois. Specifically, Claimant alleges Respondent failed to [*155] compensate Claimant for the additional work it was forced to perform as a result of unforeseen soil condition.

Nature of the Claim

For approximately 30 years, Claimant has worked as a contractor in the site excavation business, specializing in projects involving the movement of large amounts of soil. Its previous work includes, among other things, the construction of roads, parking lots and airplane runways. Claimant's projects have also involved reinforcement or shoring up of the banks of streams and rivers.

In 1997, Claimant

successfully bid $2,300,402.02 on a State of Illinois Department of Natural Resources project to build a reservoir and pumping station in Hickory Hills, Illinois. Within the first few weeks of the project, Claimant discovered "bad soil", increasing the complexity and length of the excavation process as the soil lacked the load bearing qualities of normal peat or sand. The bid was based upon an estimate that the project would take 181 days to complete.

As a result of the unforeseen complexities arising from the soil issues, the project took 773 days to complete. Claimant seeks $1,094,925.25 in additional compensation for the alleged extra work in excavation and dewatering. Conversely, Respondent argues that section 109.02 of the contract expressly states that work performed without a change order will not be paid for and Respondent did not approve of any change order granting additional compensation for dewatering, or for payment on a time and material basis for excavation and offsite disposal of material.

Upon discovering the bad soil in the northwest quadrant of the reservoir, Claimant hired H.H. Holmes, a construction soil testing company, to do soil testing to confirm that the soil was in fact bad soil (H.H. Holmes Testing Report).

Subsequently, in September of 1997, Claimant submitted the H.H. Holmes report to Respondent and a year later, in August of 1998, the State reviewed and responded to the soil reports. (Tr. 50). Irrespective of the report, the State believed the soil would be stable enough and instructed Claimant to proceed with earth removal in the northwest quadrant of the reservoir.

However, Claimant refused to excavate this area because it believed that the bad soil would collapse. (Tr. 53, 196). The owner of T.W. Edmier Corporation, Thomas W. Edmier, Sr., testified that to avoid Claimant's liability for a soil collapse, the State agreed it would direct Claimant's men and equipment under the direction of Mr. Hoffman, the DNR site superintendent. However, Mr. Hoffman denied that the State directed Claimant's workers or machines in such a manner. (Tr. 236).

In August

1998 while excavating the bad soil, it began to collapse into the reservoir. A year later. Respondent agreed with the H.H. Holmes report that it would have to install a sheet piling to remove the bad soil. Sheet piling is a wall or solid retaining system utilized to hold the bad soil from collapsing. Respondent recognized the 30,000 cubic yards of bad soil as an unforeseen condition and agreed to pay Claimant $92,987.00 for the excavation of the [*156] bad material. Thus, a change order was properly put into place and Claimant was subsequently paid for the cost of sheet piling the bad soil. (Change Order No. 5, September 27, 1999). During the delay leading up to the change order for sheet piling the bad soil, Mr. Hoffman testified that there were many other things Claimant could have been working on while it was waiting for Respondent to decide what to do with the bad soil. (Tr. 412).

According to Thomas Edmier, Jr.'s testimony, Claimant was told in conversations with the State that it should proceed on a time and material basis in hauling out the remaining bad soil offsite. (Tr. 197-98). Specifically, he testified that in late 1999 Mr. Hoffman (DNR Site Superintendent), Mr. Schuck (DNR Division Manager of Project Implementation) and Mr. Edmier, Sr. were all present for ongoing conversations, during which they agreed the excavation would be done on a time and material basis. (Tr. 197). As a result of these discussions, Claimant presented the State with a daily log of the costs involved with hauling out the remaining bad soil, but Mr. Hoffman testified that neither he nor Mr. Schuck had the authority to grant any additional changed work conditions and Claimant never received approval from Respondent to proceed on a time and material basis hauling the bad soil offsite.

(Tr. 434).

Mr. Schuck also testified that Respondent never agreed in writing to pay for any additional hauling costs for the bad soil. (Tr. 236). Instead, Mr. Schuck stated Respondent only agreed to pay for the tipping fee resulting from Claimant losing their old dumpsite.

(Tr. 235).

Specifically, the contract (Contract FR-390) required Claimant to excavate approximately 180,000 cubic yards of soil material and erect a pumping station to dewater the excavated area within 180 working days unless Respondent's Engineer permitted additional time. (FR-390, ^|7). The original payment figures in the contract specified a $14,000 lump sum for dewatering the site and $8.79 per cubic yard for earth excavation. (FR-390, ¶8).

Specifically, the Special Provision for Dewatering states, "The lump sum payment will also be considered as full compensation for all incidental dewatering necessary for the completion of the project, as directed by the Engineer..." (Dept. of Transportation Proposals, p. 21). Although the contract did not specify the process Claimant was to use in dewatering the reservoir, the "General Notes" on page 2 of the Plans for the project direct Claimant to build the permanent pumping station as soon as possible: "NOTE: The Contractor's first efforts shall be the construction of the pump station so that the existing force main can be completely utilized to handle flood waters at the earliest possible time". Instead, Claimant chose to use diesel operated temporary pumps to dewater the site while it began excavation.

The

permanent pumping station was not functional until June 2001.

Claimant argues that the reasons for the delay in the construction of the permanent pumping station were threefold: Respondent's failure to pay for an electrical hook-up, Respondent's pump warranty requirements and a redesign in the pumping system. Allegedly, Respondent and Claimant made a verbal [*157] agreement for Claimant to pay ComEd for the electrical connection to the reservoir and the State would reimburse Claimant.

Claimant paid ComEd $10,540.25. However, Thomas W. Edmier, Sr. testified electricity was not delivered to the site until February 2001. (Tr. 179).

Respondent's witness, Mr. Schuck, testified that there was no reason to bring electricity to the site prior to 2000. (Tr. 279). Mr. Schuck testified that in order to bring electricity to the pumping station the station must be first built and be ready to receive electricity. (Tr. 244-45).

Secondly, Claimant argues that the delay of the permanent pumping station was due to Respondent's pump warranty requirements. Specifically, the contract required that the pumps be covered by a five year warranty that began to run as soon as the pumps were turned on. Thomas W. Edmier, Sr. testified that, had the permanent pumps been turned on immediately upon excavation, the warranty would have expired.

(Tr. 31). However, on cross-examination, Mr. Edmier, Sr. testified that Claimant never made any written requests to change the pump warranty requirement. (Tr. 160).

Additionally, Mr. Schuck testified that at no point did Claimant address the pump warranty issue with the State. Lastly, Claimant argues that the delay in the permanent pump station was due to an electrical redesign in the pumping system. Mr. Edmier, Sr. testified that Claimant's electrical contractor had design suggestions that took the State three months to approve and it took the City of Hickory Hills approximately fifteen months to approve the pump station equipment. (Tr. 35 and 423). All excavation was done around September 2000 and the construction of the pumps began around December 2000. They were finally complete and running in June 2001.

Testifying for Respondent, Mr. Hoffman opined that Claimant bid unreasonably too low in their lump sum for dewatering the reservoir. (Tr. 431- 32).

Specifically, Claimant listed the cost of operating one diesel pump, originally installed, at $100 per hour. Thus, Mr. Hoffman testified that this would be less than one hour of pumping per working day based on the original 180-day working contract.

(Tr. 432). Both Mr. Hoffman and Mr. Schuck testified that per the instructions in the "General Notes" of the Department of Transportation Proposal Plan, the pumping station should have been built immediately following the project's starting date.

(Tr. 236).

Specifically, Mr. Schuck testified that had the pumping station been built first, the water would have been automatically hauled out during the excavation process.

Mr. Edmier, Sr. also testified that Claimant was forced to stop work because it had not yet received any payment from Respondent. (Tr. 7 1). As a result of this delay in payment, Claimant stopped work on the project from November 5, 1997, through November 23. 1997. However, Claimant continued to run the original temporary diesel pumps to dewater the reservoir.

Claimant seeks payment for the cost of dewatering during this shutdown period. Conversely, Respondent provides evidence of a February 6, 1998, letter from the State DNR to Claimant that reads, "... the decision to cease operations was yours, not the Departments. Therefore, we must deny your request for payment for what we consider to be included under the contract pay item 'Dewatering.'" Testifying for the [*158] Respondent, Mr. Hoffman testified that Claimant often stopped working even though there was no stop work order in place. (Tr. 332). Mr. Edmier, Sr. testified while there was no stop work order in place when Claimant chose to stop working, they stopped working due to the State's delayed payments. However, Respondent never penalized Claimant for its alleged lack of work.

(Tr. 406, 408).

Testifying for Respondent, Mr. Schuck explained that it often takes the State time to process payments and that delayed payments is a routine part of entering into a contract and working with the State of Illinois. (Tr. 263-64).

IDOT Standard Road Specifications, as implemented into the contract between the parties, require a written change order to receive extra compensation. Relevant portions of the Standard Specifications are found in Section 109, entitled "Measurement and Payment", which states:

The Contractor shall receive and accept the compensation

as herein provided, in full payment for furnishing all materials,

labor, tolls and equipment; for performing all work contemplated

and embraced under the contract; for all loss or damage arising out

of the nature of the work and from the action of the elements; for

any unforeseen difficulties or obstructions which may arise or be

encountered during the prosecution of the work until its final

acceptance by the Department; for all expenses incurred by or in

consequence of suspension or discontinuance of such prosecution of

the work as herein specified. ..Extra work which results from any of

the changes as specified in Article 104.02 shall not be started until

authorization from the Engineer is received, which authorization

shall state the items of work to be performed and the method of

payment for each item. Work performed without such order will not

be paid for. (Emphasis added) §109.02.

Mr. Edmier, Sr. testified that he was familiar with the IDOT Standard Road Specifications in the contract and that he knew that in order to receive extra compensation he would need a change order. (Tr. 162, 173).

Claimants received three negotiated change orders for approximately $340,000.00 in addition to the original contract.

Change Order number 5 provided for payment for the sheet piling, payment for an additional four calendar months for the field office due to the delays associated with the "Force Account" removal of the bad soil and extended the completion date for the contract to December 31, 1999. (Respondent's Ex. 3). Change Order number 6 provided Claimant with an additional $114,000.00 for extra dump site charges for the bad soil. (Respondent's Ex. 4). Lastly, pursuant to Change Order number 7, Claimant received $142,400.00 for differing site conditions, which were excavated under "Force Account" basis, which was anticipated to take 20 working days.

(Respondent's Ex. 4).

[*159] In August 2001, Mr. Edmier, Sr. and Thomas Edmier, Jr. attended a meeting in Springfield, Illinois with Don Vonnahme, Director of the DNR, and Mr. Schuck. (Tr. 113). During this meeting, Claimant requested payment from the State for the money it believed it was still owed (in addition to Change Orders 5, 6 and 7) for work in removing the bad soil. A year later, the State's position about the additional request for money was memorialized in a letter dated August 22, 2002, from Mr. Vonnahme. The letter denied Claimant additional costs for dewatering and excavations, explaining that Claimant had been instructed in pre-construction conferences to build the permanent pump station first in order to quickly dewater the site. Furthermore, the State argued they never agreed to pay the Claimant for excavation of the bad soil on a time and material basis. Instead, they agreed to pay Claimant the unit price it bid for the work. The only item the State agreed to pay the Claimant (in addition to Change Order 5, 6 and 7) was for the extra tipping fee associated with the new dumpsite.

Analysis

Ultimately, our analysis rests on the language of the statutory grant of jurisdiction over contract claims in section 8(b) of the Court of Claims Act. 705 ILCS 5O5/8(b). Under 705 ILCS 505/8(b), the Court of Claims has exclusive jurisdiction on all claims against Respondent "founded upon any contract entered into with the State of Illinois".

In order to prove a breach of contract, the Claimant has the burden of proving by a preponderance of the evidence that a contract existed, the breach and resulting damages. Black v. State, 49 Ill.Ct.Cl. 143 (1996).

The general rule in a construction contract with the State is that the contractor is bound by the damage provisions of the contract and has no right to additional compensation for delays that prevent the contractor from completing the contract unless the delays are the sole responsibility of the State.

Walsh Construction Co. v. State, 24 Ill.Ct.Cl. 441 (1964). The one significant cause for delay in the present instance is the unforeseen soil condition. However, this Court agrees with Respondent that Claimant could have continued work on other areas of the reservoir when waiting for the State's decision regarding the H.H. Holmes report. Additionally, this Court finds that the delays in payment of electricity and building the permanent pumping station are not the sole responsibility of the State. Claimant's role in coordinating the electricity and further installation of the permanent pumping station is expressly provided within the contract (Dept. Transportation Proposal p. 57). Further, Mr. Edmier, Sr. testified that Claimant failed to issue a written request for electricity prior to February 2001. (Tr.179). There is additional evidence that the delay in electricity was due to Claimant's failure to begin construction of the permanent pump station until December 2000. Even if the delays were found attributable to Respondent, Claimant never submitted any change order request indicating these were delays for which they sought recovery.

[*160] Without authorization via a valid written change order, this Court has held that Claimants are not entitled to compensation for extra work.

Fidelity

and Deposit Co. v. State of Illinois, 35 Ill.Ct.Cl. 129 (1982). A Claimant must prove that the additional costs were considered extra work under the project's conditions and must obtain the necessary change orders pursuant to the terms of the contract. J.M. Corbett Co. v. State of Illinois, 35 Ill.Ct.Cl. 15 (1981).

In this case, section 109.02 of the contract entered into by Claimant and Respondent expressly states that work performed without a change order will not be compensated.

The parties did agree to a change order (Change Order 6) yielding a payment for the excavation and dumping of the bad materials. Respondent also agreed to pay for the tipping fees for hauling the good materials, but they never agreed to pay for the disposal of the good materials on a time and material basis. Similar to the Claimant in Fidelity, T&W Edmier Corporation argues that it relied on the words and conduct of the State in proceeding with the soil removal on a time and material basis.

However, as the Fidelity Court concluded, this Court finds, other than the aforementioned approved change orders, the State would not give authorization for payment for the extra work, consisting of the additional dewatering or additional payment on a time and material basis for excavation and off-site disposal of material.

When a party enters into a contract with the State, this Court cannot analyze and determine the equity of the bargain. This Court may only apply the law and the contract language binding the parties to the contract entered into at armslength. Keller Construction, Inc. v. State of Illinois, 50 Ill.Ct.Cl. 338 (1998). In this case the contract terms clearly indicate that the dewatering, including incidental dewatering, for the completion of the reservoir was to be compensated from a lump sum payment. (Special Provisions regarding Dewatering, p. 20-21).

Thus, this Court finds that Claimant failed to prove that dewatering the reservoir was extra work pursuant to the contract and therefore is denied any additional compensation. Further, the original contract gave Claimant the right to choose how and where they dumped materials. The two parties agreed to change the terms of compensation, via the agreed change orders, for removal of the bad soil. However, Respondent did not agree to pay additional compensation on a time and material basis for any additional removal.

For the foregoing reasons, we find that the compensation for dewatering was anticipated in the $14,000 lump sum for these services set forth in the agreement. Additionally, Claimant failed to get a required change order for payment on a time and material basis for excavation and extra off-site disposal work, other than the aforementioned approved change orders. The Respondent is entitled to the contract bargain it made, and the Claimant is bound by the contract it signed. Keller Construction, Inc. v. State, 50 Ill.Ct.Cl. 338 (1998).

[*161] IT IS HEREBY ORDERED that Claimant is denied recovery for additional costs resulting from dewatering and excavation.

However, according to Mr. Schuck's testimony before Commissioner Argionis, Claimant is still owed $70,000 on the original contract.

Thus, Respondent is ordered to pay Claimant the remaining amount owed on the contract.