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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. State of Alaska, Department of Transportation and Public Facilities v. Osborne Construction Company (5/1/2020) sp-7447
Notice: This opinion is subject to correction before publication in the P ACIFIC REPORTER.
Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts,
303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email
corrections@akcourts.us.
THE SUPREME COURT OF THE STATE OF ALASKA
STATE OF ALASKA, DEPARTMENT )
OF TRANSPORTATION AND ) Supreme Court No. S-17048
PUBLIC FACILITIES, )
) Superior Court No. 3AN-17-04261 CI
Petitioner, )
) O P I N I O N
v. )
) No. 7447 - May 1, 2020
OSBORNE CONSTRUCTION )
COMPANY, )
)
Respondent. )
)
eview from the Superior Court of the State of
Petition for R
Alaska, Third Judicial District, Anchorage, Erin B. Marston,
Judge.
Appearances: Jeffrey P. Stark, Chief Assistant Attorney
General, Anchorage, and Kevin G. Clarkson, Attorney
General, Juneau, for Petitioner. Michael E. Kreger and Sarah
C. Gillstrom, Perkins Coie, LLP, Anchorage, for Respondent.
Before: Winfree, Stowers, Maassen, and Carney, Justices.
[Bolger, Chief Justice, not participating.]
CARNEY, Justice.
I. INTRODUCTION
A state agency appeals a superior court decision reversing the agency's
decision in an administrative appeal. The agency denied a contractor's claim for
----------------------- Page 2-----------------------
additional compensation because the claim was filed outside the filing period allowed by
the contract. After applying our independent judgment to interpret thecontract, we agree
with the agency that the contractor failed to file its claim within the period allowed. We
therefore reverse the superior court's decision and reinstate the agency's.
II. FACTS AND PROCEEDINGS
A. Facts
In August 2013 the Alaska Department of Transportation and Public
Facilities (DOT) entered into a contract with Osborne Construction Company to upgrade
the Aircraft Rescue and Fire Fighting building at the Fairbanks International Airport to
withstand damage in the event of an earthquake. The contract listed a series of upgrades
to be completed. In addition to renovations to the building, the contract required "soil
structure improvements" to the building site.
The purpose of the soil structure improvements was to alleviate the risk of
1 This was to be accomplished by compaction grouting, a process in which
liquefaction.
grout is injected into the ground at regularly spaced intervals to increase soil density.2
The contract provided specifications for the material to be used in the grouting process;
Osborne was responsible for obtaining conforming materials.
1 Soil liquefaction is a phenomenon in which the strength of a soil is reduced
by strong ground shaking. This reduces the ability of the soil to support foundations for
EOLOGICAL SURVEY , What is liquefaction?,
buildings. U.S. G
https://www.usgs.gov/faqs/what-liquefaction? (last visited Mar. 11, 2020).
2 The grout was required to be a combination of cement, "fine aggregate,"
and water. The aggregate had to be a particular type of sand: "naturally occurring,
clean, round to subrounded, hard, water-worn siliceous material, free of flat or elongated
pieces, . . . or . . .foreign matter, and graded within the limits" set by the contract.
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Thecontractalsoestablished proceduresfor changes to thecontract (Article
9), resolution of disagreements (Article 15), and requests for additional compensation
or time (Article 15). Article 15 set out a series of deadlines by which the contractor had
to notify DOT of any claim for additional compensation.
3 in October 2013 as a subcontractor to perform the
Osborne hired AVAR
compaction grouting work; DOT accepted AVARas a subcontractor in November 2013.
AVAR then prepared and submitted a compaction grouting proposal to Osborne in
December; Osborne forwarded it to DOT in January 2014. In March Osborne submitted
a revised plan to DOT, identifying 437 grout injection points, the material and equipment
to be used, and the installer's qualifications. DOT accepted the proposal in late March.
AVAR began the grouting work on June 30, 2014, but encountered
difficulties. The sand AVAR intended to use was no longer available from the local
supplier identified in its bid, and AVAR proposed an alternative source of sand to
Osborne. Osborne provided an analysis of the sand to DOT's engineers, Shannon &
Wilson, and requested they approve its use. Shannon & Wilson recommended rejecting
the sand as non-compliant with the contract terms. AVAR then located another
alternative from an Anchorage-based source; Shannon & Wilson again recommended
its rejection.
AVAR located and began to import sand from a new source in California
in late July. But even after obtaining better quality sand, AVAR was delayed again by
equipment issues. AVAR was finally able to begin compaction grouting with the
imported sand in mid-August.
3 In its proposal to Osborne, AVAR identified itself as "GMI, A Division of
AVAR." This entity is referred to as GMI throughout the record, but because the parties
use "AVAR" in their briefs, we do as well.
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By September 7, 2014, AVAR had successfully completed 154 injection
points in the exterior area surrounding the building. Grouting within the building's
interior began the next day. AVARimmediately encountered issues with grouting inside
the building, and hired a consulting firm, Langan Treadwell Rollo (Langan), to study the
soil underneath the building and determine the source of the problem.
Langan prepared a report for AVAR and made several recommendations
to alleviate the difficulty while still achieving the desired level of soil improvement. The
Langan report attributed the difficulty of injection to nearby grouting injection points
outside the building, which made the soil beneath the building more dense. AVAR
provided the Langan report to Osborne on September 24.
The next day Osborne petitioned DOT for a modification of the grouting
plans, attaching a copy of the Langan report. On October 9 DOT tentatively approved
Osborne's request to increase the spacing between injection points, but withheld final
approval until after Shannon & Wilson was able to observe and confirm that the
modification was acceptable. DOT ultimately approved Osborne's request to increase
the spacing between injection points but did not permit any other changes.
AVAR completed the injection grouting work the next day, on October 10.
On October 13 Osborne transmitted to DOT a letter from AVAR, dated October 3 and
addressed to Osborne, which was entitled "NOTICE OF CHANGE IN GROUND
CONDITIONS." In the letter AVAR stated that it had incurred increased costs due to
soil conditions inside the building that were "dramatically different" than conditions
outside the building. The letter also promised to provide Osborne with an analysis of the
additional costs and the results of bore studies analyzing the soil conditions.
On February 2, 2015, AVAR sent a letter with a claim for additional
compensation to Osborne. The letter was addressed to both Osborne and DOT's
Anchorage office. In the letter AVAR stated two bases for its claim for increased
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compensation: (1) differing site conditions and (2) a lack of locally available sand that
met the contractual specifications.
On May 11, 2016, Osborne submitted a claim to DOT seeking additional
compensation for the compaction grouting work, incorporating AVAR's February 2015
letter to Osborne. DOT notified Osborne on July 13 that its claim was not valid because
4 DOT requested that Osborne remedy
it did not comply with certification requirements.
the certification issue and re-submit the claim, which Osborne did on September 20.
B. Proceedings
TheDOTcontracting officer issued awrittendecision on October 28, 2016,
denying Osborne's May 11, 2016 claim for additional compensation. The contracting
officer first explained that the claim did not comply with Article 15 of the contract.
Article 15.1.5 states:
If the claim or dispute is not resolved by the
DEPARTMENT, then the CONTRACTOR shall submit a
written Claim to the Contracting Officer within 90 days after
the CONTRACTOR becomes aware of the basis of the claim
or should have known the basis of the claim, whichever is
earlier.
The contracting officer concluded that Article 15.1.5 required Osborne to file a written
claim with DOT within 90 days of becoming aware of the basis of the claim. The
contracting officer also concluded that, under the contract, failure to file a claim within
4 In its claim, Osborne stated that it was "not the real party in interest," and
"must accept and rely on the certification of [AVAR] at face value." Because DOT was
not in privity of contract with AVAR, DOT determined that this certification was "not
relevant to the contract." DOT required Osborne to certify the claim itself. See
AS 36.30.620(a) (requiring a contractor "certify that the claim is made in good faith, that
the supporting data are accurate and complete to the best of the contractor's knowledge
and belief, and that the amount requested accurately reflects the contract adjustment for
which the contractor believes the state is liable").
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the specified time resulted in the waiver of a contractor's right to claim.
To determine whether Osborne filed its claim within the prescribed period,
the contracting officer first calculated the latest date on which Osborne could have
properly submitted its claim. The contracting officer found the latest date by which
Osborne should have known the basis of the claim for additional compensation was the
date of completion of the grouting work - October 10, 2014 - and that the claim
should have been filed by January 8, 2015.
Thecontracting officer also considered two possiblealternativedates. First
the contracting officer posited that even if Osborne could argue that the date that AVAR
submitted its claim to Osborne was the date upon which Osborne became aware of the
basis for the claim, Osborne still failed to file its claim within the required period.
Because AVAR submitted its claim to Osborne on February 2, 2015, Osborne would
have been required to file its claim by May 6, 2015. Finally, the contracting officer
calculated that even using the date of the project's substantial completion - March 24,
2015 - as the latest possible date that Osborne could argue it became aware of the basis
of its claim, the deadline for a timely claim would have been June 22, 2015.
The contracting officer concluded that because Osborne's claim for
additional compensation was initially submitted on May 11, 2016, and the corrected
claim on September 20, 2016, "Osborne at best was just under a year late and at worst
over a year and four months late in filing its claim." Because the contract required a
contractor to "submit in writing a claim to the Contracting Officer within 90 days after
the Contractor becomes aware of the basis of the claim or should have known the basis
of the claim, whichever is earlier," the contracting officer found that Osborne had failed
to file its claim within the contractual time period.
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The contracting officer then turned to the requirements in the state
5
procurement code, AS 36.30.005-.995, for filing a contract claim.
Noting that
AS 36.30.620(a) requires a claimto be "filed within 90 days after the contractor becomes
aware of the basis of the claim or should have known the basis of the claim, whichever
is earlier," the contracting officer concluded Osborne "did not file its claim by the date
required" by statute. After examining both Osborne's contract and the procurement
code, and finding that Osborne's claim failed to meet the deadline established by either
of them, the contracting officer ruled that Osborne's claim was barred by statute as well
as by the contract.
Osborne appealed the contracting officer's decision to the DOT
Commissioner. On December 16, 2016, the Commissioner "adopt[ed] the [contracting
6 The
officer's decision] as the final administrative decision without a hearing."
Commissioner's decisiondiscussed therequirements ofsubmitting aclaimfor additional
compensation and the untimeliness of both the notice of the claim and the claim itself.
The Commissioner determined that the contracting officer's decision was
sound because the contract language was clear that a contractor's failure to assert a claim
within 90 days would result in the waiver of its claim. And while the Commissioner
adopted the contracting officer's decision on this ground, he also addressed and rejected
Osborne's arguments that the contract's terms were "aspirational" rather than
"mandatory,"and that DOT'sactual noticeof the groutingdifficulties excused thefailure
5 The procurement code "applies to every expenditure of state money by the
state, acting through an agency, under a contract," other than specific exceptions which
do not apply here. AS 36.30.850(b).
6 See AS 36.30.630(b) ("Except [in arbitration cases under]
AS 36.30.627(a)(1), within 15 days after receipt of an appeal on a contract claim, the
commissioner . . . may adopt the decision of the procurement officer as the final decision
without a hearing.").
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to comply with the contract's dispute provisions.
Osborne appealed the Commissioner's decision to the superior court. The
superior court reversed the Commissioner's decision. The court agreed with Osborne
"that in certain circumstances contractual or statutory formal notice requirements are
excused or satisfied by actual notice." Concluding that DOT had actual notice of both
the differing site condition and the local unavailability of material, and was not
prejudiced by the lack of formal notice, the court determined that the "contractual and
statutory notice requirements were satisfied." Because it decided that actual notice
satisfied both the contract and the procurement code's notice requirements the court did
not address the untimeliness of Osborne's claim. The court remanded the matter to DOT
and ordered that it hold an evidentiary hearing before an administrative law judge to
determine the merits of Osborne's claims and for a final decision by the Commissioner
in accordance with AS 36.30.675(a).
DOTpetitioned for our review of the superior court's decision. Wegranted
the petition.
III. STANDARD OF REVIEW
"When the superior court is acting as an intermediate court of appeal in an
administrative matter, we independently review the merits of the agency or
7 A different standard of review is applied when
administrative board's decision."
reviewing agency decisions depending on the subject of review.8 "We apply the
substitution of judgment standard to questions of law where no agency expertise is
involved" and may "substitute [our] own judgment for that of the agency even if the
7 Davis Wright Tremaine LLP v. State, Dep't of Admin. , 324 P.3d 293, 298
(Alaska 2014) (quoting Shea v. State, Dep't of Admin., Div. of Ret. &Benefits , 267 P.3d
624, 630 (Alaska 2011)).
8 Id. at 299.
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----------------------- Page 9-----------------------
agency's decision had a reasonable basis in law." 9
IV. DISCUSSION
The DOT Commissioner adopted the contracting officer's determination
that Osborne's claimwas filed outsidetheallowableperiod established in its contract and
denied the claim on that basis. Questions of contractual interpretation are questions of
law that do not involve agency expertise.10 We therefore review whether the
Commissioner correctly interpreted the contract using our independent judgment.
A. The Contract
The 88-page contract between DOT and Osborne outlines the general
conditions of the agreement and the parties' responsibilities. It also specifies the
procedures for changing the contract and for requesting more funding or time to
complete a project, among other topics.
Article 15 of the contract outlines the process of filing a claimfor additional
compensation. Article 15.1.1 states that "[t]he CONTRACTOR shall notify the
DEPARTMENT in writing as soon as the CONTRACTOR becomes aware of any act or
occurrence which may form the basis of a claim." If the contractor and DOT do not
agree how to address the act or occurrence, Article 15.1.3 describes the next step. "If the
matter is not resolved by agreement within 7 days, the CONTRACTOR shall submit an
Intent to Claim, in writing, to the DEPARTMENT within the next 14 days." Article
15.1.4 directs the contractor to keep "complete, accurate, and specific daily records
concerning every detail of the potential claim including actual costs incurred" if it
9 Id. (first citing Marathon Oil Co. v. State, Dep't of Natural Res. , 254 P.3d
1078, 1082 (Alaska 2011); then citing Tesoro Alaska Petroleum Co. v. Kenai Pipe Line
Co., 746 P.2d 896, 903 (Alaska 1987) (alteration in original).
10 State, Dep't of Nat. Res. v. Alaskan Crude Corp., 441 P.3d 393, 398
(Alaska 2018).
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----------------------- Page 10-----------------------
believes additional compensation is warranted.
Following submission of a written Intent to Claim within 14 days after
failing to reach an agreement with respect to the written notification, the contract sets a
deadline for the contractor to file its claim with the designated contracting officer.
Article 15.1.5 states that "[i]f the claim or dispute has not been resolved by the
DEPARTMENT, then the CONTRACTOR shall submit a written Claim to the
Contracting Officer within 90 days after the CONTRACTORbecomes awareofthebasis
of the claim or should have known the basis of the claim, whichever is earlier."
Another section of the contract, Article 15.2.1, specifies the information
11 required by Article 15.1.5 must contain:
that the written Claim
a. The act, event, or condition the claim is based on[;]
b. The Contract provisions which apply to the claim and
provide relief[;]
c. The item or items of Contract work affected and how
they are affected[;]
d. The specific relief requested, including Contract Time
if applicable, and the basis upon which it was
calculated[; and]
e. A statement certifying that the claim is made in good
faith, that the supporting cost and pricing data are
accurate and complete to the best of [the
CONTRACTOR'S]knowledgeandbelief,andthatthe
amount requested accurately reflects the Contract
adjustmentwhichtheCONTRACTORbelieves is due.
Article 15.1.6 makes clear that its terms are binding, warning that a
"CONTRACTOR waives any right to claim if the DEPARTMENT was not notified
11
We use "Claim" to refer to the written and certified claim required by
Article 15.1.5.
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properly or afforded the opportunity to inspect conditions or monitor actual costs or if
the Claim is not filed on the date required."
B. The Parties' Positions
While both Osborne and DOT acknowledge that a claim must be filed
within the 90-day period specified by Article 15.1.5, they disagree about when the 90-
day window begins. DOT argues that the plain language of the contract establishes that
the 90-day limitation begins when the contractor becomes aware of the underlying
condition that forms the basis of the claim that the contractor is entitled to an increase in
the contract price. According to DOT, unless a written and certified Claim is filed within
90 days of the contractor becoming aware of the basis of a claim for additional
compensation, the claim is waived.
Osborne, on the other hand, argues that the 90-day limitation period for
filing a written and certified Claim begins only after an initial claim is denied. It disputes
the Commissioner's conclusion that the contractor's deadlines to give notice of a claim
under Article 15.1.1 and to file a certified Claim under Article 15.1.5 both begin when
the contractor becomes "aware of any act or occurrence which may form the basis of a
claim." Osborne essentially argues that the phrase "basis of a claim" is defined
differently in these two provisions of the contract.
Osborne asserts DOT incorrectly calls a "claim" under Article 15.1.1 what
is actually a request for a change in the contract price pursuant to Article 9. Article 9
authorizes DOT to unilaterally change the contract under certain circumstances. Article
9.9 is entitled "Differing Site Conditions"; Article 9.9.1 requires that a contractor
"promptly, and before such conditions are disturbed," notify the contracting officer in
writing if it encounters "subsurface or latent physical conditions at the site differing
materially from those indicated in the Contract, and which could not have been
discovered by a careful examination of the site, or . . . unknown physical conditions at
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the site, of an unusual nature, differing materially from those ordinarily encountered."
After receiving such written notice, the contracting officer must then "promptly
investigate" and modify the contract if the differing conditions require. Article 9.9.2
mandates that "[a]ny claim for additional compensation by the CONTRACTOR under
this clause shall be made in accordance with Article 15." Osborne contends that Article
9.9.1 requires DOT to modify the contract when conditions have changed, and,
accordingly, the "basis of a claim" arises only after DOT has denied the contract's
remedy by refusing a change request.
Osborne argues that DOT's failure to modify the contractual price or time
requirements after a change in the work would amount to a breach of the contract
because it would not comply with the conflict resolution procedures the parties agreed
to. Such a breach of contract becomes the "basis of a claim" that starts the clock for
filing a certified Claim under Article 15.1.5. Osborne therefore argues that the 90-day
deadline to file its claim for additional compensation had not expired when the certified
Claim was submitted in 2016 - and has not yet begun to run - because DOT "never
responded to Osborne's February 5, 2015 pass-through of AVAR's claim."
Further, Osborne argues that its interpretation is correct because
interpreting Article 15.1.5 in line with DOT's characterization would contradict
12 Osborne
provisions in Article 13, which concerns payments made to a contractor.
13
urges us to adopt the reasoning of Millgard Corp. v. McKee/Mays, a Fifth Circuit case,
to conclude that the date of accrual for a construction claim should be the date of denial
of a change request.
12 Article 13 is entitled "Payments To Contractor And Completion" and
concerns paymentprocedures, includingthewaiver ofclaims bythecontractor oncefinal
payment has been made and accepted.
13 831 F.2d 88 (5th Cir. 1987).
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C. Interpretation of the Contract
When interpreting contracts, we start with the language of the contract
14
itself.
We then look to "relevant extrinsic evidence" and "case law interpreting similar
15 16
provisions." The goal is to "give effect to the reasonable expectations of the parties."
17
When interpreting a term, we consider both "the provision and agreement as a whole,"
and give "words their 'ordinary, contemporary, common meaning' unless they are
18
'otherwise defined.' "
Starting with the text of the contract, Article 15 outlines three steps to the
claims process. Article 15.1.1 requires the contractor to provide written notice when it
becomes aware of the basis of a claim for additional compensation. Next, Article 15.1.3
provides that if the matter is not resolved by agreement within 7 days, the contractor
must submit an Intent to Claim, in writing, to DOT within the next 14 days. Finally, if
the "claim or dispute" is not resolved by the department, Article 15.1.5 requires the
contractor to submit a "Claim" to the contracting officer within 90 days of when the
contractor became aware, or should have become aware, of the basis of the "claim."
14 See Flint Hills Res. Alaska, LLC v. Williams Alaska Petroleum, Inc. , 377
P.3d 959, 975 (Alaska 2016).
15 Graham v. Municipality of Anchorage, 446 P.3d 349, 352 (Alaska 2019)
(quoting Flint Hills Res. Alaska, LLC, 377 P.3d at 975).
16 Id. (quoting Stepanov v. Homer Elec. Ass'n., 814 P.2d 731, 734 (Alaska
1991)).
17 Id. (quoting Flint Hills Res. Alaska, LLC, 377 P.3d at 975).
18 SMJ Gen. Constr., Inc. v. Jet Commercial Constr., LLC, 440 P.3d 210, 215
(Alaska 2019) (quoting Norville v. Carr-Gottstein Foods Co., 84 P.3d 996, 1001 n.3
(Alaska 2004)).
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Osborne's proposed reading ofthe contract terms contradicts the contract's
plain text. Its interpretation fails to consider how the phrase "basis of a claim" is used
throughout the contract. Article 15.1.1 defines the "basis of a claim" as "any act or
occurrence" that could result in a request for "additional compensation or an extension
of [time]." Yet Osborne argues that the phrase has a different meaning in Article 15.1.5,
referring there to a "breach of the contract" resulting from the denial of a change request.
Osborne's reading would require us to interpret the phrase "basis of [a]
claim" differently depending on where in the contract it appears. But "interpretation of
a contract term does not take place in a vacuum," requiring instead "consideration of the
19 Because"[w]eseekto interpret contractual terms
provisionand agreement as a whole."
harmoniously, 'avoiding those interpretations that cause conflicts among the
provisions,' " the same language cannot have different meanings in Article 15.1.1 and
20
15.1.5.
Having determined that the "basis of a claim" is defined consistently
throughout the contract, we next turn to Osborne's contention that the contract requires
DOT to notify Osborne its informal claim has been denied before the 90-day limitation
period for filing a Claim begins.
We first note that contrary to Osborne's argument, the contract does not
require DOT to notify the contractor if it does not "resolve" a claim. Article 15.1.3
simply mandates that if the matter (that is, the claim) "is not resolved by agreement
within 7 days the CONTRACTOR shall submit an Intent to Claim, in writing, . . . within
the next 14 days." DOT is not obligated to respond to a claim that is not certified
19 Graham, 446 P.3d at 352 (quoting Flint Hills Res. Alaska, LLC, 377 P.3d
at 975).
20 See O'Connell v. Will, 263 P.3d 41, 45 (Alaska 2011) (quoting Rockstad
v. Global Fin. & Inv. Co., 41 P.3d 583, 586-87 (Alaska 2002)).
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----------------------- Page 15-----------------------
according to Article 15.2.1. And although a contracting officer is required to "promptly
investigate" once notified of differing site conditions, there is no contractual requirement
that the officer respond or modify the contract if investigation reveals that conditions do
not differ. Because the contract does not require DOT to notify the contractor if DOT
disputes or denies thebasis of the contractor's claim, Osborne's argument thatthe90-day
period does not start until after DOT notifies the contractor of DOT's dispute or denial
fails.
Additionally, Article 15.1.5, which establishes the 90-day time limit for
submitting a Claim, contains no reference to Article 15.1.3's informal process for
resolving a contractor's notice of a basis of a claim. Instead it simply states that the
contractor must submit a written Claim to the contracting officer "within 90 days after
the CONTRACTOR becomes aware of the basis of the claim, or should have known the
basis of the claim." Because the 90-day window begins when a contractor knows, or
should know, of the existence of a basis for a claim, the contractor's knowledge, not any
action taken by DOT, determines when the 90 days begin to run.
Osborne's argument that DOT's interpretation of Article 15 is inconsistent
with Article 13 is also unconvincing. Article 13.17 states that "[t]he making and
acceptance of final payment will constitute a waiver of all claims by the CONTRACTOR
against the DEPARTMENT other than those previously made in writing and still
unsettled." Osborne reads this provision to mean that all written claims are preserved
until DOT settles them. It asserts that DOT's reading of Article 15 cannot be correct
because it would result in the waiver of any unsettled written claim unless the claim was
a timely submitted "certified 'written Claim,' " which would create a contradiction
within the contract.
ButOsborneis mistaken. Article13.17 concerns only acontractor's waiver
of a claim. It provides that if a claim was filed in writing with DOT under Article 15,
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----------------------- Page 16-----------------------
that claim would be preserved in the event that a contractor accepts final payment under
the contract. But if it had not been filed in writing, the claim would be waived by the
contractor's acceptance of the final payment. Article 13.17 has no effect on the 90-day
deadline for filing a Claim. It provides only that unsettled claims previously submitted
in writing are not waived by accepting final payment on all resolved claims under the
contract; it does not preserve claims indefinitely.
Millgard Corp. v. McKee/Mays, the Fifth Circuit case Osborne cites, does
21
not persuade us otherwise. After Millgard's claim for additional compensation due to
allegedly differing site conditions was denied, it sued for breach of contract four years
22
after the project's date of completion. McKee contended that the four-year Texas
statute of limitations for contract claims barred the action, but the Fifth Circuit
23 The Fifth Circuit instead held that although under Texas law the right to
disagreed.
recover traditionally accrues at the time performance is completed, it had accrued when
McKee denied Millgard's claim for a change in compensation six months after the work
24 Because the contract provided for dispute resolution procedures that
was performed.
continued past the date of completion, Millgard's right to sue accrued only after that
contractual remedy failed.25 And because Millgard sued within four years of the denial,
the action was filed within the limitations period.26
21 See 831 F.2d 88, 89-90 (5th Cir. 1987).
22 Id. at 90.
23
Id. at 90-91.
24 Id.
25 Id. at 91.
26 Id.
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Millgard is distinguishable on three grounds. First, unlike this case,
Millgard concernsabreach of contract claimrather than a disputeover theadministrative
27 Second, a crucial consideration in the Fifth
claims process contained in the contract.
Circuit's decision was Millgard's full participation in the contractual claims process -
Millgard provided formal written notice, kept records, and engaged thoroughly with
McKee.28 Here Osborne failed to comply with the procedures specified in the contract.
And third, the contract in Millgard did not contain a specific period of limitation, while
the contract here did.29 Unlike in Millgard, where the contractor met all of its contractual
requirements, Osborne did not;30 instead Osborne invites us to interpret the contract in
a way that would excuse its failure to comply. We decline the invitation.
Osborne's contract with DOT required it to file a written Claim for
additional compensation no later than 90 days after it became aware of the basis of a
potential claim, and to begin to keep accurate records of the additional costs for which
it was seeking payment. Osborne knew or should have known that it had a potential
claim when the grouting was completed on October 10, 2014. The deadline for Osborne
to file its Claim was therefore January 8, 2015. Alternatively, if, as the contracting
officer discussed, Osborne did not know of the basis for its claim until it received
AVAR's letter on February 5, 2015, its deadline for filing would have been May 6, 2015.
But determining the actual deadline is unnecessary, because even using the "last possible
date which [Osborne] could argue it became aware of the basis of the claim" - when the
project was substantially completed on March 24, 2015 - Osborne was required to have
27 Id. at 90.
28 Id. at 89-91.
29
Id. at 89-90.
30 Id.
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filed its Claim by June 22, 2015.
Osborne did not file its Claim until May 11, 2016. As the contracting
officer wrote, "Osborne at best was just under a year late and at worst over a year and
four months late in filing its claim." Article 15.1.6 clearly states that "the
CONTRACTOR waives any right to [a] claim" if it fails to file its Claim within the 90-
day period set by Article 15.1.5. Because Osborne failed to file its Claim within the time
period required by its contract, Osborne waived any right to additional compensation. 31
V. CONCLUSION
The DOT Commissioner correctly interpreted Osborne's contractual
obligations when it adopted the contracting officer's decision denying the claim. We
therefore REVERSE the superior court's order and REINSTATE the Commissioner's
decision barring Osborne's claim as untimely.
31 Because the terms of the contract clearly support the Commissioner's
decision and bar Osborne's claim, we do not reach the issues of whether the statute also
barred the claim or whether DOT's actual notice required that it accept Osborne's claim.
We note, however, that the contractual language tracks that of the procurement code
nearly verbatim.
-18- 7447
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