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United States v. Travelers Casualty and Surety Company of America

December 4, 2009

UNITED STATES OF AMERICA, FOR THE USE AND BENEFIT OF GREENMOOR, INC., PLAINTIFF,
v.
TRAVELERS CASUALTY AND SURETY COMPANY OF AMERICA, AND BURCHICK CONSTRUCTION COMPANY, INC., DEFENDANTS.



The opinion of the court was delivered by: Cathy Bissoon U.S. Magistrate Judge

Magistrate Judge Cathy Bissoon

FINDINGS OF FACT AND CONCLUSIONS OF LAW

INTRODUCTION

This is a breach of contract action arising out of the renovation of the Moorhead Federal Building in Pittsburgh, Pennsylvania. The action is brought by the asbestos abatement subcontractor, Greenmoor, Inc.,*fn1 against the general contractor on the project, Defendant Burchick Construction Company, and its surety, Travelers Casualty and Surety Company of America (collectively, "Defendants").

FINDINGS OF FACT

Having conducted a bench trial in the above-captioned case, the Court now enters these findings of fact and conclusions of law.*fn2

I. BACKGROUND

A. The Parties and Other Entities

1. Plaintiff/Counter-Defendant Greenmoor, Inc. ("Greenmoor"), is a licensed asbestos abatement contractor. (2/2/09 Tr. (Doc. 109) at 52, 58-60 (Dellovade); Joint Ex. 1, Joint Stipulation of Uncontested Facts ("Jt. Ex.") at ¶29). Mr. Fred Dellovade is the owner and President of Greenmoor.

2. Defendant/Counter-Plaintiff Burchick Construction Company ("Burchick") is a Pittsburgh-based general contractor engaged in the construction of various types of commercial, institutional and governmental projects. (3/30/09 Tr. (Doc. 124) at 6-9, 12 (Burchick).)

Mr. Joseph Burchick is the owner and President of Burchick.

3. Defendant Travelers Casualty and Surety Company of America ("Travelers"), served as the surety on the Moorhead Federal Building Renovation Project ("Moorhead Project"), and issued the performance and payment bonds for Burchick, as principal. (Jt. Ex. 1 at ¶ 27; Pl. Ex. 19.)

4. United States Surety Company ("US Surety") served as Greenmoor's surety on the Moorhead Project and issued the performance and payment bonds for Greenmoor.

5. The United States General Services Administration (the "GSA") was the owner of the Moorhead Project. Mr. Mark Lewandowski was the chief contracting officer for the GSA.

6. URS Corporation ("URS") was the construction manager on the Moorhead Project.

7. Gobbell Hays Partners, Inc. ("Gobbell Hays") was the asbestos abatement expert for the Moorhead Project. Gobbell Hays prepared the specifications for the Moorhead Project as they related to asbestos. (3/30/09 Tr. at 75 (Burchick).)

B. The Moorhead Federal Building Renovation Project

8. The Moorhead Federal Building, located at the corner of Liberty and Grant Streets in Pittsburgh Pennsylvania, is a twenty-five story office complex with two basement levels, totaling approximately 780,000 gross square feet of floor space. (Jt. Ex. 1 at ¶ 2.)

9. In January of 2003, the United States General Services Administration (the "GSA") issued a bid solicitation for the renovation of the Moorhead Federal Building. (Jt. Ex. 1 at ¶1.)

10. Work on the Moorhead Project consisted of interior renovation, replacement and upgrades to the architectural, mechanical, plumbing, fire protection, telecommunications and electrical systems of the building. The scope of the Moorhead Project virtually required a complete replacement of the plumbing, HVAC, electrical and similar systems within the building. (Jt. Ex. 1 at ¶ 3; 3/30/09 Tr. at 21, 25-26 (Burchick).)

11. The Moorhead Project included the reconfiguration of the interior space and the replacement and/or upgrade of interior finishes in the building. (Jt. Ex. 1 at ¶ 4.)

12. The Moorhead Project contained large quantities of asbestos and asbestos containing materials (collectively, "ACM") within the fireproofing materials, insulation, floor tile, and in other interior areas. (Jt. Ex. 1 at ¶ 10.)

13. Work in various areas was to be prosecuted while other areas of the building were occupied by the building tenants. (Jt. Ex 1 at ¶ 5.)

14. To accommodate this situation, the Moorhead Project was divided into five phases spanning nearly five years. (Jt. Ex 1 at ¶ 6.) In general, the phases represented different floors within the existing building, each of which required varying levels of work. Id.

15. Phase I included floors 21 through 25; Phase II included floors 19 and 20; Phase III included floors 12 through 18; Phase IV included both basement levels and floors 1 through 6; and Phase V included floors 7 through 11. (Pl. Ex 17 at GR 2083-2084.)

16. At the commencement of each phase, the adjacent floors to be completed during the phase would be vacated. (Jt. Ex 1 at ¶7.) Following completion of each phase, from demolition and abatement through renovation, there was a brief interim period during which the tenants would return to the new space. (Jt. Ex 1 at ¶8.)

17. In addition to the work done on the floors vacated during each phase, certain activities had to be completed out of sequence, i.e., on floors that were not vacated for a given phase, in order to accommodate the continuous operation of the building infrastructure, such as the plumbing and mechanical systems. (Jt. Ex. 1 at ¶ 9.)

18. GSA issued a set of specifications and comprehensive schematic drawings, or plans, to identify the general scope of work to be done on each floor. (Jt. Ex. 1 at ¶ 12; Pl. Ex. 17 (hereinafter, the "Specifications").

19. The Specifications were contained in three volumes, with the first volume primarily directed to architectural demolition and asbestos abatement. (Jt. Ex. 1 at ¶ 14; Pl. Ex. 17.)

20. The schematic drawings or plans addressed the work that had to be done to prepare each floor for renovation and were divided into two sets. (Jt. Ex. 1 at ¶14; Pl. Ex. 6.)

21. One set of drawings or plans were the architectural demolition drawings ("AD drawings"), which established the scope of the demolition work necessary to remove existing structures (walls, partitions, etc.) so that future renovation could take place. (Jt. Ex. 1 at ¶ 14; Pl. Ex. 6.)

22. The other set of drawings or plans were the hazardous material drawings ("H Drawings"). The H Drawings established the scope of asbestos abatement on each floor, including removal of spray-on fireproofing material, vinyl asbestos tile, and textured plaster ceilings. (Jt. Ex. 1 at ¶14; Pl. Ex. 6.)

C. Asbestos Abatement

23. Asbestos abatement was the most critical activity to the project schedule as other work could not proceed until the abatement work was completed. (Def. Ex. 183.)

24. The abatement and handling of asbestos and asbestos-containing material is heavily regulated by the United States Environmental Protection Agency ("EPA"), the Occupational Safety and Health Administration ("OSHA"), the Pennsylvania Department of Environmental Protection ("DEP") and the Allegheny County Health Department ("ACHD").

25. OSHA has instituted a classification system to classify work in construction based on the potential or possibility of exposure to asbestos. (Pl. Ex. 653 at 1-15, Bates No. P653-029-030.) There are four classes of work, with Class I work providing the potential for the highest asbestos exposure and Class IV work providing the potential for the least exposure. Id.

26. The asbestos abatement work that was to be completed on the Moorhead Project was Class I asbestos work. (1/30/09 Tr. at 182-83 (B. Shaffer).)

27. Class I asbestos work consists of "activities involving the removal of sprayed-on or trowled-on SMs and TSI materials."*fn3 (Pl. Ex. 653 at 1-15, Bates No. P653-029-030.) "OSHA has found that SMs and TSI materials have the highest likelihood of releasing fibers when disturbed. For this reason, OSHA requires rigorous control methods when performing this type of work," e.g., Class I asbestos work. Id. (emphasis added).

28. Asbestos abatement may only be performed by licensed or certified abatement contractors. (2/2/09 Tr. at 64-65 (Dellovade); 3/30/09 Tr. at 13 (Burchick); Pl. Ex. 20).)

29. Greenmoor is a licensed asbestos abatement contractor and has been so licensed since its inception in 1990. (2/2/09 Tr. at 63-64 (Dellovade).)

30. Burchick is not, nor has it ever been, licensed or certified as an asbestos abatement contractor. (3/30/09 Tr. at 68 (Burchick).)

31. Asbestos abatement is performed in "containment," the set-up of which is one of the first steps in the abatement process. (Jt. Ex. 1 at ¶ 33.)

32. A containment is intended to isolate the area from which the asbestos is being removed from the remainder of the building. (Jt. Ex. 1 at ¶ 34.)

33. Generally, plastic sheeting, called "poly," is placed over all of the outside walls of the floor. (Jt. Ex. 1 at ¶ 35.)

34. Thick rubber sheeting, called "EPDM", is rolled across the entire floor and up the walls, and each sheet is overlapped and sealed to prevent water (which is required in removing spray-on fine resistant material ("SOFRM")) from escaping from the containment. (Jt. Ex. 1 at ¶ 36.)

35. In addition, any heating, ventilating and air conditioning ("HVAC") vents or other ductwork penetrating the ceiling, through which asbestos fibers might escape, are sealed with poly and duct tape. These seals are called "criticals." (Jt. Ex. 1 at ¶ 37.)

36. The contractor that is licensed to perform asbestos abatement -- in this case, Greenmoor -- is responsible for the custody and control of the containment. (3/31/09 Tr. (Doc. 125) at 129 (Sekowski).)

37. The Specifications for the Moorhead Project as to the procedures to set up containments were "over and beyond" the industry standards. (2/4/09 Tr. (Doc. 111) at 103-04 (Mlecsko).)

38. Prior to construction of the containment and decontamination units or areas, negative air machines or, "NAMs," are placed into the containment area and operated. NAMs are referred to in a variety of ways, including air filtration units ("AFUs"), air filtration devices ("AFDs"), and the asbestos jargon term "hogs." (Jt. Ex. 1 at ¶ 52.)

39. NAMs are intended to draw a vacuum into containment, thereby directing the flow of air into, rather than out of, containment. (Jt. Ex. 1 at ¶ 53.)

40. Under applicable regulations, the negative pressure, or negative air, inside containment is measured by a device called a manometer. NAMs filter the air through special asbestos abatement filters called "HEPA" filters, which are 99.97% effective at removing asbestos fibers that are 0.3 microns in diameter. (Jt. Ex. 1 at ¶ 54.)

41. The filtered air is then exhausted from the NAMs through a flexible plastic tube, called a "flex duct," and out of the building through blanks installed in three windows on the floor. (Jt. Ex. 1 at ¶ 55.)

42. The integrity of the containment, and primarily the criticals, is often checked using a "smoke test." (Jt. Ex. 1 at ¶ 57.)

43. Once containment has been constructed and the NAMs become sufficiently operational to achieve the required negative pressure, gross abatement or removal of asbestos may commence. (Jt. Ex. 1 at ¶ 59.)

44. This is typically done by adequately wetting the material (as required by the applicable regulations), and scraping or power-washing the ACM from the steel deck. (Jt. Ex. 1 at ¶ 60.)

45. The waste material is placed into plastic bags, called "poly bags" and then transported through the equipment decon, down the freight elevator, and placed into a dumpster that is ultimately hauled to a permitted asbestos disposal facility. (Jt. Ex. 1 at ¶ 61.)

46. Once abatement is complete, the area is subject to an inspection by URS and then the ACHD to ensure that the work was properly completed. If ACHD certifies the floor as abated, the abatement work is completed and construction may begin. (Jt. Ex. 1 at ¶ 62.)

D. The Role of URS Corporation In The Asbestos Abatement Work

47. GSA retained URS Corporation ("URS") to be the construction manager on the Moorhead Project. (Jt. Ex. 1 at ¶15.) URS is a nationally-recognized construction management company and acted as an extension of GSA's staff to monitor and manage the project for the GSA or, stated simply, GSA's "eyes and ears" on the Moorhead Project. (3/31/09 Tr. at 44 (Sekowski), 137-38 (M. Lewandowski).) Mr. David Sekowski was the individual URS employee responsible for reporting to the GSA on a day-to-day basis. (3/31/09 Tr. at 138

(M. Lewandowski).)

48. In turn, URS, pursuant to an interoffice agreement, retained the Industrial Hygiene division of URS ("URS-IH") to monitor and inspect the asbestos abatement work throughout the Moorhead Project. (3/31/09 Tr. at 42 (D. Sekowski); Jt. Ex. 1 at ¶16.) URS-IH primarily was responsible for conducting air monitoring inside and outside the areas where asbestos was being abated to confirm that abatement was proceeding in such a way that asbestos fibers remained within acceptable levels as provided in the specifications. (3/31/09 Tr. at 43 (Sekowski); Jt. Ex. 1 at ¶16.) In addition, URS-IH was to assist URS in ensuring that contract requirements were being followed. (3/31/09 Tr. at 43 (Sekowski).)

49. Much of Burchick's contact with the GSA was through URS. (3/31/09 Tr. at 44 (Sekowski), 207-08 (Finney).)

50. URS was involved in the day-to-day inspection of the asbestos work. (3/30/09 Tr. at 199 (Burchick).)

51. URS-IH inspectors would report either directly to Mr. Sekowski or to John Reiger, a URS-IH employee, who then would relay those reports to Mr. Sekowski. (3/31/09 Tr. at 44 (Sekowski).)

52. URS did not make any recommendation as to what abatement subcontractor Burchick used. (3/31/09 Tr. at 105.)

53. Because URS was acting on behalf of the GSA, consistent with GSAR 552.236-71, Burchick was obligated to follow URS's instructions and/or contractual interpretations on the Moorhead Project. (3/31/09 Tr. at 61; Pl. Ex. 15.)

54. GSAR 552.236-71, which is entitled "Authorities and Limitations," provides as follows:

(a) All work shall be performed under the general direction of the Contracting Officer, who alone shall have the power to bind the Government and to exercise the rights, responsibilities, authorities and functions vested in him by the contract documents, except that he shall have the right to designate authorized representatives to act for him. Wherever any provision of this contract specifies an individual (such as, but not limited to, Construction Engineer, Resident Engineer, Inspector or Custodian) or organization, whether Government or private, to perform any act on behalf of or in the interests of the Government, that individual or organization shall be deemed to be the Contracting Officer's authorized representative under this contract but only to the extent so specified. The Contracting officer may, at any time during the performance of this contract, vest in any such authorized representative additional power and authority to act for him or designate additional representatives, specifying the extent of their authority to act for him; a copy of each document vesting additional authority in an authorized representative or designating an additional authorized representative shall be furnished to the Contractor.

(b) The Contractor shall perform the contract in accordance with any order (including but not limited to instruction, direction, interpretation, or determination) issued by an authorized representative in accordance with his authority to act for the Contracting Officer; but the Contractor assumes all the risk and consequences of performing the contract in accordance with any order (including but not limited to instruction, direction, interpretation, or determination) of anyone not authorized to issue such order. (Pl. Ex. 15; Def. Ex. 33 at BCCI 2212) (emphasis added).

55. The GSA, i.e., the Contracting Officer, retained URS to act as the Construction Manager on the Moorhead Project. Therefore, it follows that under GSAR 552.236-71(a), URS is the entity authorized or specified "to perform any act on behalf of or in the interests of the Government" and is the GSA's "authorized representative." Id.

56. Under GSAR 552.236-71(b), URS can issue an order, "including but not limited to instruction, direction, interpretation, or determination." Id.

57. An obligation, such as that outlined in GSAR 552.236-71, to follow the interpretations, directions, and instructions of the owner's representative, i.e., URS, is typical in the industry. (4/3/09 Tr. (Doc. 128) at 42-43, 48 (Varga); Def. Ex. 476.)

II. THE BID PROCESS AND THE AGREEMENTS BETWEEN THE PARTIES

A. The Bid Process

58. In January 2003, Burchick responded to a Solicitation to Bid issued by the GSA for the Moorhead Project. (Jt. Ex. 1 at ¶ 17; 3/30/09 Tr. at 16, 177 (Burchick), 210-11 (Huber).) Burchick was among the many construction firms bidding for the entire project as a general contractor. (Jt. Ex. 1 at ¶ 18.)

59. Although the GSA designed the Moorhead Project to be performed in the five phases set forth above, it was always contemplated that a single contract between the GSA and the successful bidder would be utilized to cover the entire Moorhead Project. (3/30/09 Tr. at 31-32, 170 (Burchick).)

60. Burchick submitted Technical and Price proposals to the GSA, explaining its qualifications, experience, pricing and plans for the sequencing and means and methods of carrying out the work on the Moorhead Project. (Jt. Ex. 1 at ¶ 20; 3/30/09 Tr. at 16-18, 21 (Burchick); Def. Ex. 21; Pl. Ex. 218.)

61. To prepare the proposals it submitted to the GSA, Burchick prepared quantity take-offs to estimate costs for the work it would perform itself. Burchick also solicited bids from subcontractors for those portions of the work that it anticipated would be performed by others. (Jt. Ex. 1 at ¶ 21; 3/30/09 Tr. at 19 (Burchick).)

62. For nearly the next year, Burchick participated in the bid process, which required the company to submit, inter alia, Technical Proposals delineating not only past experience, but the manner in which the work would be performed, which included work that Burchick would perform and work that subcontractors would perform. (Jt. Ex. 1 at ¶ 22.)

63. Also in this process, Burchick identified subcontractors with whom it sought to work or "team" for several portions of the Moorhead Project, including the asbestos abatement portion of the Moorhead Project. Burchick contacted and began discussions with Greenmoor about the Moorhead Project in an effort to include Greenmoor on Burchick's "team" (which included Burchick's other major subcontractors) for purposes of planning and bidding on the Moorhead Project. (3/30/09 Tr. at 19-20, 213-215 (Burchick).)

64. Burchick sought to enter into contracts with subcontractors that covered the entire Moorhead Project, i.e., each contract that a subcontractor might enter into would cover all of the work to be performed by that subcontractor on the entire Moorhead Project. (3/30/09 Tr. at 35-36 (Huber); 3/30/09 Tr. at 226-227 (Huber).)

65. Greenmoor agreed to team with Burchick as one of Burchick's major subcontractors during the planning and bidding phase. (3/30/09 Tr. at 18-19 (Burchick).)

66. Burchick issued multiple invitations to bid to selected subcontractors being considered for services on the Moorhead Project, including Greenmoor. (Jt. Ex. 1 at ¶ 23; 3/30/09 Tr. at 18-19 (Burchick).)

67. In October 2003, Burchick issued to Greenmoor a formal invitation to bid. (Jt. Ex. 1 at ¶ 24.)

68. By letter dated October 13, 2003, Burchick notified Greenmoor that Burchick required "a payment and performance bond in the full amount of your contract value for the [Project]." (Def. Ex. 11; 3/30/09 Tr. at 221-22 (Huber).)

69. Greenmoor provided to Burchick a final lump sum bid for all of the asbestos abatement on the Moorhead Project, inclusive of Phases I through V. (2/3/09 Tr. at 113-114 (Dellovade); 3/30/09 Tr. at 226 (Huber); Def. Exs. 22, 22a; Pl. Ex. 22.)

70. At no time did Greenmoor ever give Burchick a price for anything less than all of the asbestos abatement work on the Moorhead Project, nor did any of Burchick's subcontractors ever provide a price for anything less than the entirety of their respective scopes of work on the overall Moorhead Project. (3/30/09 Tr. at 226-27 (Huber); Def. Exs. 16, 22, 22a; Pl. Ex. 22.)

71. GSA awarded the contract for the entire Moorhead Project in the original principal amount of $53,817,607.00 to Burchick on March 15, 2004. (Jt. Ex. 1 at ¶ 25; Pl. Ex. 16.) As a result, Burchick became the general contractor for the Moorhead Project.

72. The contract between Burchick and the GSA consisted of the GSA solicitation, Burchick's offer, and the written award. Consequently, the contract between Burchick and the GSA included the specifications, the drawings and also the Federal Acquisition Regulations ("FARs") included in the solicitation as GSA Form 3506, Construction Contract Clauses. (Pl. Ex. 15 at GR 3631, GR 3635.)

B. The Subcontract Agreements Between Burchick and Greenmoor

73. On or about April 1, 2004, Burchick provided to Greenmoor a letter of intent to enter into a subcontract with Greenmoor. (Def. Ex. 25 ("Letter of Intent").) In the Letter of Intent, Burchick set forth Greenmoor's scope of work and the contract price for that work and indicated that a "complete contract" would be forthcoming:

Please consider this correspondence as formal confirmation of Burchick Construction Company's intent to enter into [a] contract with Greenmoor Inc. The scope of work will include all demolition, removal, abatement and disposal of asbestos containing materials including but not limited to the work identified in Division 2 of the specifications. The contract price will be $7,267,500. The complete contract will detail the quantities and unit prices applicable to the allowances, along with a detailed scope of work and any issues that were incorporated at bid time.

Id.

74. In June, 2004, after Greenmoor had begun working on the Moorhead Project, Burchick forwarded the subcontract agreement to Greenmoor, which took the form of five (5) documents entitled "Moorhead Federal Building Subcontract Agreement" for Greenmoor to execute. (Def. Ex. 33; 2/2/09 Tr. at 125, 128 (Dellovade).)

75. Each of the five documents Burchick forwarded was dated May 19, 2004 and each corresponded to each of the five phases of the Moorhead Project. (Def. Ex. 33.) The five documents, collectively, total the $7,267,500.00 referenced in Burchick's April 1, 2004 Letter of Intent and represents the amount Burchick agreed to pay Greenmoor in exchange for Greenmoor performing the asbestos abatement work required on the entire Moorhead Project. (Def. Ex. 33; 2/3/09 Tr. at 125-26 (Dellovade).)

76. Each of the five documents consisted of four virtually identical attachments. (Def. Ex. 33.) Attachment A consisted of the drawings, specifications, schedules, exhibits, attachments and other project-related documents. Attachment B consisted of the Federal Acquisition Regulations ("FARS") and Attachment C consisted of the General Services Administration Regulations ("GSARS"). Finally, Attachment D provided the scope of work for the asbestos abatement portion of the Moorhead Project. (Def. Ex. 33.)

77. Burchick forwarded five documents (as opposed to one document) as an accommodation to Greenmoor for its inability to obtain a single performance bond for the entire Moorhead Project. See infra ¶¶ 109-112.

78. Despite its accommodation to Greenmoor, Burchick always intended to have one subcontract agreement with one asbestos abatement subcontractor for all of the asbestos abatement work in all five phases of the Moorhead Project. (3/30/09 Tr. at 31-32 (Burchick).)

79. Greenmoor never intended to enter into five separate subcontract agreements when it bid on the Moorhead Project and was indifferent as to the number of subcontract documents that existed. (2/3/09 Tr. at 134-35 (Dellovade).)

80. Greenmoor executed each of the five documents on June 9, 2004. (Def. Ex. 33.)

81. In December, 2004, in connection with audit of its business, Greenmoor sought confirmation from Burchick that it had a single "Original Contract Price" of $7,267,500 for the asbestos abatement work on the Moorhead Project. (Def. Ex. 86; 2/3/09 Tr. at 119, 134.)

82. In addition to the Subcontract Agreement itself, the parties' contractual relationship expressly was governed by the (i) the contract between Burchick and the GSA; (ii) the drawings and specifications, which were attached to the Subcontract Agreement as Attachment A; (iii) the FARS and the GSARS, which were attached as Attachments B and C, respectively; (iv) any other documents referenced in any of the other contractual documents; and (v) "[a]ny agreed upon and written modifications to any of the above listed documents issued after the date hereof." (Def. Ex. 33, Art. I.)

83. The description of the work to be performed by Greenmoor is set forth in Attachment D. (Def. Ex. 33; see also infra ¶¶ 95-109 (setting forth the findings pertaining to Greenmoor's scope of work).)

1. Key Provisions Under the Subcontract Agreement

84. Under the Subcontract Agreement, Greenmoor had a duty to provide work safely and consistent with the highest generally accepted level of care. All of the Agreement documents contain the following provision:

Subcontractor warrants that all Work performed hereunto shall be (i) conducted in a manner consistent with the highest generally accepted level of care and skill ordinarily exercised by persons or entities performing services of a nature similar to that Subcontractor is performing on the Project, taking into account standards, state-of-the-art, laws and requirements existing at the time the Work is performed; (ii) in strict compliance with the Subcontract Documents; and (iii) safely, lawfully, efficiently and properly performed. Subcontractor acknowledges and agrees that Contractor is relying upon Subcontractor's special and unique abilities and the accuracy, competence and completeness of Subcontractor's Work. (Def. Ex. 33, Art. III.d) (emphasis added).

85. In addition, under Article I.b. of the Subcontract Agreement, Greenmoor was contractually obligated to perform to the satisfaction of both Burchick and the GSA. Specifically, Article I.b. provides: "Subcontractor shall perform all work . . . in strict accordance and full compliance with the terms of this Subcontract, and to the satisfaction of Contractor and Owner." (Def. Ex. 33, Art. I.b) (emphasis added).

86. Article IV of the Agreement outlines Greenmoor's liability for failing to perform consistent with the Subcontract. In relevant part, paragraph b of Article IV provides:

[Greenmoor] shall be liable to [Burchick] for all costs [Burchick] incurs as a result of [Greenmoor's] failure to perform this Subcontract in accordance with its terms. . . . [Greenmoor's] liability shall include, but not be limited to (1) damages and other delay costs payable to [Burchick] to [GSA]; (2) [Burchick's] increased costs of performance, such as extended overhead and increased performance costs resulting from Subcontractor-caused delays of improper Subcontractor work; (3) warranty and rework costs; (4) liability to third parties; and (5) attorney's fees and related costs. [Greenmoor's] obligations under this Article IVb shall be in addition to any indemnity liability imposed by the Subcontract, including, without limitation, the Contract Documents. (Def. Ex. 33, Art. IV.b.)

87. Under the Subcontract, Burchick had the right to terminate the agreement for, inter alia, Greenmoor's failure to perform. Specifically, Article VIII provides as follows:

If, in the opinion of the Contractor, Subcontractor shall at any time (1) refuse or fail to provide sufficient properly skilled workmen or materials of the proper quality; (2) fail in any respect to prosecute the Work according to the current Work schedule; (3) cause, by any action or omission, the stoppage, or delay of or interference with the work of Contractor or of any other building or subcontract; or (4) fail to comply with all provisions of this Subcontract or the Subcontract Documents, including, without limitation, the Contract Documents, then, after serving three (3) day's notice Contractor may, at its option . . . (ii) terminate the Subcontract for default. (Def. Ex. 33, Art. VIII) (emphasis added).

88. The Subcontract additionally sets forth the process for making changes to the scope of the work. Article VII provides that Burchick "may, at any time, unilaterally or by agreement with Subcontractor . . . make changes in the Work covered by this Subcontract. Any unilateral order, or agreement, under this Article VIIa shall be in writing. Subcontractor shall perform the Work as changed without delay." (Def. Ex. 33, Art. VII.a.)

89. In addition to being incorporated by reference, Greenmoor expressly represented that it had read and agreed to be bound by the FARs and GSARs. (Def. Ex. 33, Art. I & III.)

90. GSAR 552.236-71 is expressly incorporated into the Subcontract Agreement.

91. Under GSAR 552.236-71, Greenmoor (just the same as Burchick) is obligated to follow URS's orders, including URS's "instruction, direction, interpretation, or determination." (Def. Ex. 33 at BCCI 2212.)

2. Key Payment Terms Under The Subcontract Agreement

92. The Subcontract Agreement specifically provides that Burchick is to pay Greenmoor for work that it has performed approximately seven (7) days after Burchick receives payment for that work from the GSA. (Def. Ex. 33, Art. II.) In relevant part, Article II provides:

b. Payment for Work performed shall be due on or about the 7th day following receipt of payment from Owner [e.g., GSA] by Contractor [e.g., Burchick]. Under no circumstances whatsoever shall Subcontractor [e.g., Greenmoor] be entitled to any payment whatsoever unless and until Contractor is paid by Owner.

e. Final payment shall be made after the Work has been accepted by Owner, satisfactory proof of payment of all amounts owed by Subcontractor in connection with this Subcontract has been provided, the Work is complete, and Contractor has been paid in full by Owner for the Work. Acceptance of final payment by Subcontractor shall constitute a waiver of any and all claims by Subcontractor against Contractor for the Project. (Def. Ex. 33, Art. II.)

93. The Subcontract Agreement additionally outlines the terms for payment to the Subcontractor in the event the Contractor terminates the subcontract for default:

In the case of termination for default, Subcontractor shall not be entitled to receive any further payment until the Work shall be fully completed and accepted by the Owner. At such time, if the unpaid balance of the price to be paid to Subcontractor prior to its default shall exceed the expense incurred by Contractor, such excess shall be paid by Contractor to Subcontractor. If the expense incurred by Contractor exceeds such unpaid balance, then Subcontractor shall pay to Contractor the difference within five (5) business days following demand by Contractor. Subcontractor shall pay all reasonable costs of collection, if any. (Def. Ex. 33, Art. VIII.)

94. Finally, the Subcontract Agreement contemplates payment for extra work provided that such requests for payment are submitted as follows:

Subcontractor shall submit in writing any claims for adjustment in the price, schedule or other provisions of the Subcontract claimed by Subcontractor for changes directed by Owner or as a result of deficiencies or discrepancies in the Contract documents, to Contractor in time to allow Contractor to comply with the applicable provisions of the Contract Documents. Contractor shall process said claims in the manner provided by the provisions of the Contract Documents. (Def. Ex. 33 at Art. VII.b) (emphasis added).

C. Greenmoor's Scope of Work

95. A critical aspect of the Subcontract is Attachment D, which primarily defines and delineates Greenmoor's scope of asbestos abatement work. (Def. Ex. 33.)

96. Attachment D provides that Greenmoor is to:

Provide for the removal and proper disposal of all Asbestos Containing Material (ACM) reflected on the Contract documents including, but not limited to, Spray-On-Fireproofing, Pipe Insulation and Floor Tile. The removal shall include the demolition above the ceiling line of all mechanical and electric appenditures in accordance with the contract documents, drywall partitions and barriers, ceiling tile and grid. (Def. Ex. 33, Att. D.)

97. Attachment D further defines Greenmoor's scope of work with respect to the ceiling tile in the building:

This Subcontractor shall remove the acoustical ceiling tile and vacuum clean ACM and palletize ceiling tile for removal by BCCI as construction debris.

Id.

98. Pursuant to Attachment D, Greenmoor's scope of work included the disposal of ceiling tile.*fn4

99. Attachment D was the culmination of extensive discussions during the bid process.

100. In 2003 and early 2004, based on a series of eighteen (18) addenda updating the Plans and Specifications issued by the GSA, the technical aspects of the Moorhead Project and the projected pricing were revised. (Def. Exs. 7, 8, 2, 26; Pl. Ex. 218.)

101. Several of the addenda issued by the GSA affected the scope of work of the asbestos abatement work. (2/4/09 Tr. at 53-55; 3/30/09 Tr. at 218-19; Def. Exs. 7, 8.)

102. One significant addendum addressed Option 1 (one of several options on the Moorhead Project), which dealt with the renovation of the restrooms in the building. A September 30, 2003 addendum clarified that "asbestos work associated with the Options shall be performed as part of the base building bid whether or not the Options are accepted." (2/4/09 Tr. at 53-54; Def. Ex. 7.)

103. As modifications were made to the Plans and/or Specifications, Burchick would provide that information, as applicable, to any bidders with whom it was negotiating, including Greenmoor. (2/4/09 Tr. at 53-54 (Dellovade); 3/30/09 Tr. at 219-21, 225 (Huber); Def. Exs. 7, 8, 15, 16.)

104. Burchick and Greenmoor discussed the scope of Greenmoor's work extensively prior to Burchick issuing the formal invitation to bid on October 1, 2003, and prior to the parties executing the Subcontract in May 2004. These discussions included the manner in which both the architectural demolition and the asbestos abatement work would be performed. (3/30/09 Tr. at 215-16 (Huber).)

105. In this process, Burchick primarily dealt with Greenmoor's Chief Estimator and Project Manager, Joseph Mlecsko and to a lesser extent, with Greenmoor's President, Fred Dellovade. (3/30/09 Tr. at 214-15 (Huber).)

106. During the summer and fall of 2003, James Huber of Burchick met several times with Mr. Mlecsko to discuss Greenmoor's bid and the scope of Greenmoor's work. In discussing the scope of Greenmoor's work, Mr. Huber and Mr. Mlecsko reviewed the H Drawings, AD drawings, Contract Specifications and other contract documents. (3/30/09 Tr. at 214-215 (Huber); Pl. Exs. 6, 17, 21; Def. Exs. 7, 8.)

107. Mr. Huber and Mr. Mlecsko discussed the manner in which architectural demolition would occur, including the sequence of the demolition of the corridor masonry walls and the methods for removal and disposal of ceiling tile. (3/30/09 Tr. at 215-16, 221 (Huber).)

108. On December 4, 2003, Burchick met with its potential subcontractors, including Greenmoor, to again discuss the scope of the bid and the manner in which the work was to be performed. (3/30/09 Tr. at 223-24; Def. Ex. 16.)

109. During this meeting, which was conducted by Mr. Huber on behalf of Burchick, Burchick and Greenmoor specifically discussed the sequence and procedure for ACM abatement and architectural demolition. (3/30/09 Tr. at 223-24; 3/31/09 Tr. at 9-10, 37-38.)

D. The Performance Bonds and The Escrow Agreement

110. As Burchick was required to post both performance and payment bonds for the Moorhead Project, it required many of its subcontractors, including Greenmoor, to similarly obtain and post performance bonds. (3/30/09 Tr. at 32 (Burchick).)The bonds were intended to give Burchick protection that Greenmoor would complete the Moorhead Project. (3/30/09 Tr. at 186 (Burchick).)

111. Although Greenmoor attempted to obtain a bond for the entire Moorhead Project from United States Surety Company ("US Surety"), it was unable to do so. (2/3/09 Tr. at 124-28 (witness).) Ultimately, US Surety agreed to individually bond Phases I, II and III of the Moorhead Project at the outset of the Moorhead Project, and then bond Phases IV and V once the first three phases of the Moorhead Project were complete. (2/2/09 Tr. at 135 (Dellovade); 3/30/09 Tr. at 33 (Burchick).)

112. Because Greenmoor could not obtain bonds for Phases IV and V at the outset of the Moorhead Project, Burchick required Greenmoor to set up an escrow account to ensure that Greenmoor would eventually produce the requisite bonds. (2/2/09 Tr. at 136 (Dellovade); 3/30/09 Tr. at 34-35 (Burchick).) As a result, Burchick and Greenmoor entered into and executed an Agreement to Establish Escrow Account.*fn5 (Pl. Ex 14, Agreement to Establish Escrow Account ("Escrow Establishment Agreement").)

113. Burchick agreed to execute five separate documents to evidence the subcontract as an accommodation to Greenmoor for its inability, at the outset of the Moorhead Project, to secure a single performance bond for the full amount of the subcontract. (3/30/09 Tr. at 32-34 (Burchick).)

114. Under the Escrow Establishment Agreement, Burchick agreed to place ten percent (10%) of payments otherwise due to Greenmoor under each payment application for Phases I, II and III into an escrow account:

4. Within seven days of receipt by [Burchick] from the General Services Administration of progress payments which include sums earned by Greenmoor, Burchick shall pay 90% of the allocable amount to Greenmoor and deposit 10% of the allocable amount to the Escrow Account on behalf of Greenmoor. (Pl. Ex. 14 at ¶ 4.)

115. Also under the Escrow Establishment Agreement, Burchick agreed to release the escrowed funds to Greenmoor if, at the conclusion of Phase III of the Moorhead Project, Greenmoor produced the bonds for Phases IV and V of the Moorhead Project. Specifically, the Escrow Establishment Agreement provided:

5. The monies deposited in the Escrow Account shall be remitted to Greenmoor by the Escrow Agent if and when it timely provides to [Burchick] the required bonds for both Phase IV and Phase V and [Burchick] certifies same to the Escrow Agent. The bond for Phase IV in the amount of $2,196,816 shall be timely only if evidence thereof is provided to [Burchick] by close of business on 11/01/2006 and the bond for Phase V in the amount of $1,654,982 shall be timely only if evidence thereof is provided to [Burchick] by close of business on 10/01/2007.

6. If and when Greenmoor provides to [Burchick] the required bonds, [Burchick] shall within five (5) business days issue to the Escrow Agent the Certification in the form at Exhibit B thereby causing the Escrow Agent to pay the entire Escrow Account balance to Greenmoor.

Id. at ¶¶ 5-6.

116. The escrow account "in essence became a retention account" containing monies that Greenmoor had already earned on completed work. (3/30/09 Tr. at 149-50 (Burchick).)

117. Burchick received a bond for Phases I, II, and III that was in an acceptable format, and Burchick accepted those bonds. (3/30/09 Tr. at 186 (Burchick); Def. Ex. 33.)

118. By letter dated August 18, 2006, Greenmoor forwarded the bonds for Phases IV and V. (Pl. Ex. 26.) These bonds were forwarded well before the November 1, 2006, and October 1, 2007 deadlines outlined in the Escrow Agreement. (Pl. Ex. 14.)

119. Burchick, however, considered the bonds to be improper. Accordingly, by letter dated August 23, 2006, Burchick identified specific changes it wanted Greenmoor to make to the bonds and stated that it was returning "the original bonds for [Greenmoor's] further action consistent with this letter." (3/30/09 Tr. at 187-89 (Burchick); Pl. Ex. 27.)

120. By letter dated October 24, 2006, Greenmoor provided revised bonds to Burchick and noted that Greenmoor was "fully mobilized and prepared to commence work on Phase IV of this Project." (3/30/09 Tr. at 189 (Burchick); Pl. Ex. 28.)

121. Greenmoor made all of the requested changes outlined in Burchick's August 23 letter. (3/30/09 Tr. at 189-90 (Burchick).)

122. Burchick refused to accept the bonds for Phases IV and V because it had terminated Greenmoor and, as a result, "didn't have a contract" with Greenmoor. (3/30/09 Tr. at 190-92 (Burchick).)

123. Burchick has not paid Greenmoor any monies from the escrow account.

III. PHASE I

124. Phase I of the Moorhead Project encompassed the five top floors of the Moorhead Federal Building -- floors 21 through 25. Work was to begin on floor 25 and proceed downward through the completion of the remaining floors. (Jt. Ex. 1 at ¶ 65.)

125. The scope of abatement on each of the floors differed. (Jt. Ex. 1 at ¶ 66; Pl. Ex. 6.) Both the 25th and 24th floors were penthouse floors, with very little abatement to be done. (Pl. Ex. 6 at Bates No. GR 19344-45.) Although the 23rd floor was a full floor, it was necessary only to conduct abatement in and above the corridor hallway that runs nearly the entire length of each floor, which was roughly 200 feet. (Jt. Ex.1 at ¶ 67; Pl. Ex. 6 at GR 19343.) Floors 21 and 22 also were full floors, but little abatement had to be completed because significant portions of those floors previously had been abated, so-called "historically abated areas." The "historically abated areas," therefore, were not included in the scope of abatement. (Jt. Ex. 1 at ¶¶ 67-68.)

126. Greenmoor's Project Manager on Phase I was Mr. Joe Mlecsko. (1/30/09 Tr. (Doc. 108) `at 186 (B. Shaffer); 2/3/09 Tr. at 92-93 (Dellovade).)

127. Greenmoor's supervisors on Phase I were Messrs. Don Miller and Lawson Bell. (1/30/09 Tr. at 186 (B. Shaffer).)

128. Greenmoor assigned one supervisor per shift. (2/2/09 Tr. at 40 (Povelitis).) 129. Greenmoor's supervisors were "working" supervisors who performed labor while they supervised a work force that could exceed fifty (50) people. (2/5/09 Tr. at 90 (Mlecsko), 170-171 (Bell).)

130. On March 31, 2004, the GSA issued to Burchick a Notice to Proceed with Phase I of the Moorhead Project. (Jt. Ex. 1 at ¶ 63.)

131. Greenmoor mobilized to the Moorhead Project around May 19, 2004, but began work in earnest in July, 2004. (2/2/09 Tr. at 154 (Dellovade).)

132. The primary work of abating floors 21 through 25 was completed in November, 2004. (Pl. Ex. 78 at 1-8.) Greenmoor completed all of its work on Phase I, including all of the work associated with the shafts on the Phase I floors, by December, 2004. (2/2/09 Tr. at 150-51 (Dellovade); Pl. Ex. 78 at 1-10.)

133. Each floor in Phase I passed inspection and was certified as abated by the Allegheny County Health Department ("ACHD"). (Jt. Ex.1 at ¶ 71; Pl. Ex. 9 at 78.)

134. Burchick never refused to accept a floor that was abated and that Greenmoor turned over to it during Phase I. (2/2/09 Tr. at 153 (Dellovade).) Burchick moved onto each floor completed by Greenmoor and did the remainder of its Phase I work. (2/2/09 Tr. at 153 (Dellovade).)

A. Deficiencies in Greenmoor's Work on Phase I

135. Between July, 2004 and March, 2005, URS observed a number of deficiencies in Greenmoor's performance, which created the possibility that workers and tenants within the Federal Building could have been exposed to asbestos. (2/3/09 Tr. at 167-173 (Dellovade); 3/30/09 Tr. at 36-39, 53-55 (Burchick); Def. Exs. 45, 180.)

136. URS, as the GSA's agent, brought these problems to Burchick's attention. (3/30/09 Tr. at 41-43 (Burchick); 3/31/09 Tr. at 45 (Sekowski).)

137. As it learned of Greenmoor's various performance issues, Burchick notified Greenmoor. (2/2/09 Tr. at 170 (Dellovade); 3/30/09 Tr. at 41-43, 48-51 (Burchick); 3/31/09 Tr. at 208-09 (Finney); 4/1/09 Tr. (Doc. 126) at 108-10, 115-16 (Finney); Def. Exs. 45, 66; Pl. Ex. 85.)

138. Burchick relied upon the information supplied by URS with respect to these issues both because it was contractually obligated to respond to the concerns of the GSA and because it needed to rely upon information gathered by those with special knowledge of the abatement work. (Def. Ex. 33 at BCCI 2212, GSAR 552.236-71.)

139. On July 1, 2004, after learning that ACM may have been tracked outside of the containment on the 24th floor into a public stairwell, Greenmoor went to clean up the suspected material. (Def. Exs. 45, 46, 180; 2/3/09 Tr. (Doc. 110) at 169 (Dellovade); 3/31/09 Tr. at 51-53 (Sekowski).) Prior to cleaning it up, however, URS observed that Greenmoor was prepared to use improper equipment -- a wet vacuum -- rather than the proper equipment -- a HEPA vacuum. Id. URS, accordingly, directed Greenmoor to use the proper HEPA vacuum equipment to clean up the material. Id.

140. On July 21, 2004, URS observed that Greenmoor's EPDM installation did "not meet specs." (Pl. Ex. 80 at Bates No. URS 000311.) Specifically, Greenmoor had used spray adhesive, rather than butyl adhesive, to seal the EPDM seams. (Pl. Ex. 79.)

141. The notation to use butyl adhesive, rather than spray glue, appears in an annotation on the Abatement Details Drawing. (Pl. Ex. 6 at GR 19346, Detail 2.) The annotation provides as follows: "1 layer 40 mil (min.) rubber EPDM membrane to be applied to walls and floors as denoted. Seal seams w/ butyl adhesive glue.." Id.

142. Greenmoor overlooked the specific detail about the use of butyl prior to being notified during the construction of the containment on the 22nd floor. (2/2/09 Tr. at 165 (Dellovade); Pl. Ex. 81.)

143. On July 26, 2004, URS learned that Greenmoor had begun removing ceiling tile and scraping ACM fireproofing on the 22nd floor, contrary to URS's agreement with Burchick that abatement activities would not proceed until URS reinspected the containment on July 26, 2004. (3/31/09 Tr. at 53-54 (Sekowski); Def. Ex. 180 at Bates No. BCCI 3937.)

144. Upon inspecting the containment on July 26, 2004, URS discovered that the manometer readings, e.g., negative air readings, were below the required levels and that the floors had not been properly sealed. (Def. Ex. 180 at Bates No. BCCI 3937.)

145. URS notified Burchick of this incident by e-mail dated July 29, 2004. (Def. Ex. 180 at Bates No. BCCI 3937.)

146. Burchick provided its first formal written notice to Greenmoor about deficiency issues by letter dated July 26, 2004. (3/30/09 Tr. at 36-39; Def. Ex. 45.)

147. Prior to sending the July 26 letter, Mr. Burchick called Mr. Dellovade to discuss the situation, inform him that the GSA was displeased with Greenmoor's work to date, and to inform him that the letter would be forthcoming. (3/30/09 Tr. at 37 (Burchick).) Part of Burchick's motivation in sending the letter was to appease the GSA's concerns. (3/30/09 Tr. at 36-38 (Burchick).)

148. Greenmoor responded to Burchick's July 26 letter with a letter of its own dated July 29, 2004. (Def. Ex. 46.) In that letter, Greenmoor attempted to explain its position on the several deficiencies URS observed and that Burchick relayed. Id. Also in that letter, Greenmoor "assured" Burchick that "Greenmoor will do everything possible to get this project to where it should be." Id.

149. By e-mail correspondence dated August 4, 2004, Burchick notified Greenmoor that URS had observed that the flex ducts on the negative air machines had been off every night for approximately seven (7) consecutive nights, which had caused Greenmoor's manometer readings to be low. (Def. Ex. 51.)

150. In early to mid-August 2004, upon learning from URS of additional abatement procedure deficiencies on the 22nd floor, Burchick and Greenmoor discussed various steps that Greenmoor would take to remedy those issues. (Def. Ex. 53.)

151. By letter dated September 29, 2004, Burchick informed Greenmoor that the recurring deficiencies might result in termination of the subcontract. Burchick specifically noted Greenmoor's "lack of supervision, the lack of adherence to proper safety protocols and procedures" as problems that create a "risk by jeopardizing the health and welfare of all the construction workers and the tenants of the building." (3/30/09 Tr. at 39-42 (Burchick);

Def. Ex. 66.)

152. Burchick's understanding of Greenmoor's recurring deficiencies included, among other things, lack of supervision. (3/30/09 Tr. at 41 (Burchick).)

153. In response to the September 29 letter, Messrs. Burchick and Finney of Burchick and Messrs. Dellovade and Mlecsko of Greenmoor met for lunch on October 1, 2004. During that lunch meeting, Mr. Dellovade gave Burchick his commitment that the deficiencies would not continue and that Greenmoor would get the job would get back on track. (3/30/09 Tr. at 42 (Burchick); 4/1/09 Tr. at 86-87 (Finney).).

154. Despite Mr. Dellovade's assurances at the October 1 lunch meeting, concerns with Greenmoor's performance continued.

155. By e-mail dated October 8, 2004, Burchick notified Greenmoor that it had noticed that Greenmoor's manpower had been reduced and expressed concern about the work being completed consistent with Mr. Dellovade's commitments. (Def. Ex. 67.)

156. On October 26, 2004, URS observed that Greenmoor re-used EPDM flooring in the 20th floor restroom that appeared to contain ACM residue and that this activity occurred outside of containment. (Def. Ex. 180 at Bates No. BCCI 3939.) URS noted that this occurred despite having previously instructed Greenmoor that EPDM may be reused so long as it is "properly cleaned, bagged, transported and installed under the proper conditions." Id.

157. URS notified Burchick of this incident by e-mail dated October 27, 2004. (Def. Ex. 180 at Bates No. BCCI 3939.)

158. In that e-mail, URS noted that the EPDM incident was "at least the third occasion on which ACM has been encountered outside a containment or in an incomplete containment . . . Errors such as the one described . . . will not be tolerated on occupied floors." (Def. Ex. 180 at BCCI 3939.)

159. More significantly, URS informed Burchick:

It should be noted . . . that there have been at least 3 incidents involving Greenmoor that could have jeopardized the health and safety of workers and/or building occupants. It is strongly recommended that Burchick address Greenmoor's failures to properly execute their work directly with Greenmoor's home office. (Def. Ex. 180 at BCCI 3939.)

160. By e-mail dated October 27, 2004, Burchick notified Greenmoor of the additional concerns that URS had observed with the installation of EPDM flooring in the 20th floor restroom. (Def. Ex. 70.)

B. The Interim Period Between Phases I and II

161. Following completion of the primary abatement work Phase I on November 1, 2004, Greenmoor performed out of sequence work throughout the Moorhead Federal Building. (Jt. Ex. 1 at ¶ 70.)

162. After the work on Phase I ended, and before work on Phase II was to begin in March 2005, Burchick requested Greenmoor to submit a comprehensive plan of action for Phase II that would identify the "changes in means and methods that Greenmoor proposes to utilize in phase 2 that are different than those conducted during phase 1." (4/1/09 Tr. at 90-91 (Finney); Def. Exs. 77, 95.) By email dated November 8, 2004, Burchick requested Greenmoor to submit the plan of action by December 10, 2004. (Def. Ex. 77.)

163. After Greenmoor failed to submit the plan of action by the requested date, by e-mail dated December 20, 2004, Burchick inquired about the plan. (Def. Ex. 77.)

164. Greenmoor ultimately submitted the plan of action by letter dated January 6, 2005, but Burchick found it deficient. Burchick notified Greenmoor of the problems it had with the proposed plan of action by letter dated January 10, 2005. (Def. Ex. 95.)

165. As Burchick reflected upon and assessed the recurring problems with Greenmoor's performance on Phase I, Burchick determined that Greenmoor was either unwilling or unable to perform its work properly, safely and timely. (3/30/09 Tr. at 47, 54-55 (Burchick).) Burchick perceived that Greenmoor's problems might result in personal harm to the tenants or the other workers in the Moorhead Federal Building and increasingly became concerned about the problems having a negative impact on its relationship with the GSA. (3/30/09 Tr. at 47, 54-55 (Burchick); 4/1/09 Tr. at 113 (Finney).)

166. As a result, on February 28, 2005, Burchick contacted Greenmoor and offered to amicably sever the parties' contractual relationship. Greenmoor refused. (3/30/09 Tr. at 47 (Burchick).)

167. By letter dated March 4, 2005, Burchick followed up with Greenmoor and with Greenmoor's surety, on the offer to amicably sever the relationship. In that letter, Burchick identified a non-exhaustive list of fifteen (15) deficiencies in Greenmoor's performance on Phase I. (3/30/09 Tr. at 48-49 (Burchick); 4/1/09 Tr. at 116-17 (Finney); Pl. Ex. 85.) To its March 4 letter, Burchick attached relevant correspondence, including e-mail correspondence from URS to Burchick wherein URS identified for Burchick problems with Greenmoor's performance. (Pl. Ex. 85.)

IV. PHASE II

168. Phase II of the Moorhead Project consisted of the 19th and 20th floors. Both were full floors, requiring some level of asbestos abatement throughout the entire floor. (Jt. Ex. 1 at ¶ 72.)

169. On March 9, 2005, Greenmoor began work in earnest on Phase II with the set-up of containment on the 19th floor. (Jt. Ex. 1 at ¶ 74.)

170. On March 10, 2005, Greenmoor set off a fire alarm in the Building. (Def. Ex. 180.) This occurred when a smoke detector was activated as a result of a Greenmoor worker cutting metal studs with a grinder. (Id.; Pl. Ex. 89; 2/5/09 Tr. (Doc. 112) at 120-21.)

171. The fire alarm resulted in the 21st floor of the building being evacuated. (3/31/09 Tr. at 55-56 (Sekowski); Def. Ex. 180.)

172. There was a procedure in place at the time, pursuant to which any contractor or subcontractor was required to obtain a hot work permit to conduct metal grinding activities such as the ones conducted by Greenmoor. (3/31/09 Tr. at 55-56 (Sekowski).)

173. Had Greenmoor obtained a hot work permit, the fire alarm system could have been disabled, and the fire alarm may not have occurred. (3/31/09 Tr. at 55-56 (Sekowski).)

174. The GSA formally notified Burchick of the hot work permit incident by letter dated March 14, 2005. (Def. Ex. 180.)

175. Even before receiving formal notification from the GSA, however, Burchick had already been apprised of the hot work permit incident. By letter dated March 11, 2005, Burchick notified Greenmoor that the hot work permit incident illustrated a "continued lack of supervision." (Def. Ex. 148.) Burchick informed Greenmoor that it would be "assigning additional [Burchick] personnel to each Greenmoor crew" in an effort to "address concerns that Burchick and the GSA have with Greenmoor's obvious neglect of proper procedures despite numerous warning in the past." Id.

176. In its March 11 letter, Burchick further informed Greenmoor that it "intend[ed] to declare Greenmoor in default" and requested a meeting with Greenmoor to be scheduled for March 21, 2005 at 10:00 am at Burchick's offices. Id. Burchick requested Greenmoor's confirmation as to whether it could attend the March 21 meeting. Id.

177. By letter dated March 14, 2005, Burchick formally notified Greenmoor's surety that it intended to declare Greenmoor in default and requested a meeting for March 21, 2005 at 10:00 am. (Def. Ex. 150.)

178. On March 24, 2005, during a walk through and smoke testing on the 19th floor, URS noted that a critical shaft ("Shaft 2") was not properly sealed. (Def. Ex. 180.) As a result, URS directed Mr. Mlecsko of Greenmoor not to begin any work with the 19th floor perimeter demolition and critical barriers until Shaft 2 was properly sealed and until URS had an opportunity to "collect[] and review[] a day[']s worth of reliable manometer readings and had a chance to re-smoke test." Id.

179. Shaft 2 is a return air shaft that takes air from all of the floors in the building back into the shaft to all the other air handlers and distributes it back to the other floors. (3/31/09 Tr. at 56-58 (Sekowski); Def. Ex. 180.) Given the manner in which it distributes air to the building, if Shaft 2 is exposed to asbestos, the occupants of the building also may be exposed to asbestos. Id.

180. Contrary to its directions to Mr. Mlecsko, URS determined that work had been done with the 19th floor perimeter demolition and critical barriers before URS had the opportunity to confirm whether Shaft 2 was properly sealed. (3/31/09 Tr. at 56-57 (Sekowski); Def. Ex. 180.)

181. From URS's perspective, Greenmoor failed to follow a procedure that URS and Greenmoor had agreed would be followed. (3/31/09 Tr. at 57 (Sekowski); Def. Ex. 180.)

182. URS notified Burchick of this issue by e-mail dated March 30, 2005. (Def. Ex. 180 at Bates No. BCCI 3947.)

183. As a result of the problems on the 19th floor, on March 29, 2005, URS directed Greenmoor to obtain written authorization from URS before removing ceiling tile. (3/31/09 Tr. at 58-59 (Sekowski); Def. Ex. 180.)

184. Mr. Mlecsko of Greenmoor acknowledges that he and Mr. Sekowski of URS agreed that "URS was to provide written authorization after smoke testing the shaft before the work could proceed with the ceiling tile removal." (2/4/09 Tr. at 205-06 (Mlecsko).)

Mr. Mlecsko, however, failed to convey this information to Mr. Lawson Bell, his fellow supervisor and co-worker, because Mr. Mlecsko "went home, fell asleep, didn't call Lawson." Id.

185. URS did not give any authorization -- verbal or otherwise -- to remove the ceiling tiles that were the subject of the March 29, 2005 agreement between URS and Greenmoor (per Mr. Mlecsko). (Def. Ex. 180.)

186. On the morning of March 30, URS learned that Greenmoor (specifically, Mr. Lawson Bell) had proceeded to remove ceiling tile without first obtaining written authorization from URS. (3/31/09 Tr. at 59.) From URS's perspective, the problems were twofold in that URS did not have a chance to determine that Shaft 2 was properly sealed and a disregard for an agreement that it felt it had reached with Mr. Mlecsko. Id.

187. From URS's perspective, the removal of ceiling tile without authorization on March 30 was "significant;" URS conveyed to Mr. Burchick that the removal without authorization was a "serious incident." Id.

188. URS notified Burchick of the March 30 incident in an e-mail correspondence dated March 30, 2005. In that correspondence, URS expressed to Burchick:

The limitations and contract requirements that we set are to protect the occupants and construction workers in this building. Failure to follow those directions could jeopardize the health and safety of all the occupants and put Burchick and Greenmoor at risk of serious financial liability. Greenmoor ignored our direction on the two occasions noted above. Incidents such as these cannot be tolerated. (Def. Ex. 180 at Bates No. BCCI 3947.)

189. In its March 30 e-mail, URS also directed Burchick to "take whatever steps are necessary to correct the management or communication deficiencies that exist that have resulted in this problem" and asked that Burchick submit a corrective action plan "no later than close of business on 4/1/05." (Def. Ex. 180 at Bates No. BCCI 3947.)

190. As previously noted, under GSAR 552.236-71, Greenmoor was obligated to follow URS's direction. (Pl. Ex. 15; Def. Ex. 33 at BCCI 2212).

191. Greenmoor failed to follow URS's direction not only by proceeding to engage in work on the 19th floor perimeter demolition and critical barriers, but also by proceeding to remove ceiling tile on the 20th floor without first receiving written authorization from URS.

192. During the course of the Moorhead Project, URS was not able to maintain a good working relationship with Greenmoor because direction and agreements were "not being met." (3/31/09 Tr. at 62 (Sekowski).) Mr. Sekowski testified that it was "difficult to work day-to-day [with Greenmoor] when you are giving direction and direction is not ...


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