Last month, the Federal Circuit issued its opinion in Hawaiian Dredging Construction Co. v. United States, a government contract case we have been tracking because it attracted an amicus brief. In this case, the Federal Circuit reviewed a determination by the Court of Federal Claims to dismiss HDCC’s complaint for failure to state a claim upon which relief could be granted. HDCC alleged that the government owed it an “equitable adjustment for various delays and increased costs” during its contract performance, and that HDCC “experienced excusable delays due to government changes and additions to the contact work relating to the retaining wall construction.” In an opinion authored by Judge Prost and joined by Judges Dyk and Clevenger, the Federal Circuit affirmed the dismissal of HDCC’s claim regarding excusable delay related to a retaining wall; reversed the lower court’s dismissal with respect to government delays for delivery of rights of way, utility relocation, and a repayment claim; and remanded the case for further proceedings.
Judge Prost began by outlining the procedural and factual background of the case:
The United States Department of Transportation, acting through the Federal Highway Administration, Central Federal Lands Highway Division (‘the agency’), selected HDCC as a general contractor for the Lahaina Bypass 1B2 design-build construction project in Lahaina, Maui, Hawaii (‘the Project’). . . . On June 3, 2016, the agency awarded HDCC a firm fixed-price contract to complete the Project . . . . While HDCC’s contract work was substantially completed by July 24, 2018, on July 17, 2020, HDCC filed a Contract Disputes Act (‘CDA’) claim requesting an ‘equitable adjustment for various delays and increased costs during its [c]ontract performance. . . .’ HDCC alleged that it required final ROWs from landowners near the highway, relocation of overhead utilities, and construction permits; and the government’s ‘failure to secure the ROWs in a timely manner,’ and differences between the final ROWs and the ROWs proposed in the request for proposals (‘RFP’), caused HDCC to suffer construction delays and increased costs. . . . HDCC also alleged that it experienced excusable delays due to government changes and additions to the contract work relating to the retaining wall construction. . . . The government moved to dismiss . . . because ‘HDCC bore the risk of increased costs’ under the terms of the contract. . . . The CFC found that HDCC ‘failed to plausibly allege that there were [g]overnment directed changes to the [c]ontract’ because ‘[w]hat HDCC interprets as changes are, in fact, obstacles that arose during contract performance which deviated from assumptions HDCC held at the time of its bid. . . .’ The CFC . . . granted the government’s motion to dismiss without prejudice. . . . HDCC timely appealed. We have jurisdiction under 28 U.S.C. § 1295(a)(3).
Judge Prost then explained that the Federal Circuit reviews the lower court’s “legal conclusions de novo and its factual findings for clear error.” Further, she explained, the Federal Circuit would review the government’s motion to dismiss de novo, assessing whether HDCC’s complaint contained “enough facts to state a claim to relief that is plausible on its fact,” accepting “as true all factual allegations pleaded.”
Next, Judge Prost described HDCC’s initial argument, that the Court of Federal Claims “erred in granting the government’s motion to dismiss” because it “did not accept all of HDCC’s well pled factual allegations as true in the light most favorable to HDCC.” Specifically, she explained, HDCC argued “the government caused project schedule delays which prevented HDCC from timely completing the contract with regard to (a) work requiring ROWs, (b) utility relocation, and (c) retaining wall construction.”
First, turning to work requiring ROWs, Judge Prost explained how HDCC alleged the government’s “failure to timely secure and provide the ROW . . . constituted a constructive change because it forced HDCC to perform additional work and caused delays to HDCC’s performance.” Based on the contract language, Judge Prost reasoned, the government was “obligated . . . to ‘obtain right-of-way,’ not HDCC.” Moreover, the government’s obligation included providing ROWs “in a ‘reasonable time, place and manner.” But here, she pointed out, the government provided “the ROWs four months after it issued” its notice to proceed, triggering a “fact-intensive inquiry” to determine whether “timing was ‘reasonable’ or ‘foreseeable.'” Additionally, “the question of whether the final ROWs delivered by the government materially deviated from those specified in the RFP” was also fact intensive. As a result of this analysis, she determined that dismissal was “not proper” and reversed and remanded this aspect of the case for further proceedings.
Second, Judge Prost addressed “HDCC’s argument regarding utility relocation,” including the argument that the Court of Federal Claims “‘ignored the allegations . . . that the [g]overnment’s failure to timely execute agreement with utility companies as required by the [c]ontract caused delays to HDCC’s performance.'” Judge Prost reasoned that whether the government’s “209-day period to return the executed agreements was reasonable under the duty of good faith and fair dealing” or foreseeable “is a factual determination.” Therefore, she concluded that the Court of Federal Claims “erred in dismissing this claim” and reversed and remanded this aspect of the case for further proceedings.
Third, Judge Prost addressed a dispute regarding the construction of a retaining wall. She explained that HDCC alleged it “incurred a 482-day ‘standby’ due to the government’s ‘delayed approval” of the retaining wall work. She noted that the government argued it “instructed HDCC not to perform” the wall work because it “was not required by the contract” and HDCC’s decision to continue contributed to delay. She described the lower court’s findings that “HDCC intentionally contributed to the delay” and “did not continue to perform the contract despite its pending disputes with the [a]gency.” Ultimately, she agreed with the Court of Federal Claims “that HDCC had not pled sufficient facts to demonstrate excusable delay” because “HDCC admits it decided to wait for the government issued approved contract modifications and award of the . . . work, which HDCC ultimately was not awarded.” Therefore, the Federal Circuit affirmed the lower court’s decision granting the government’s motion to dismiss with respect to this dispute.
Finally, Judge Prost addressed HDCC’s remaining argument, that “a portion of its claims were not subject to the motion to dismiss” because neither the Court of Federal Claims “nor the government addressed these claims.” She noted that the government acknowledged a “repayment claim [was] related to the utility-relocation work” and, therefore, reversed the dismissal alongside “HDCC’s complaint for utility delays and payment.” The Federal Circuit reversed and remanded this issue to the lower court.
In sum, the Federal Circuit panel affirmed in part, reversed in part, and remanded the case to the Court of Federal Claims for further proceedings.