Sagres Constr. Corp. v. Wash. Suburban Sanitary Comm'n

SAGRES CONSTRUCTION CORPORATION v. WASHINGTON SUBURBAN SANITARY COMMISSION

No. 0109-2021

Court of Special Appeals of Maryland

May 9, 2022

Circuit Court for Montgomery County Case No. 483226-V

Zic Ripken, Eyler, James R. (Senior Judge, Specially Assigned) JJ.

OPINION ^[*]

ZIC J.

This case arises from a contract for excavation and water main relocation services between Sagres Construction Corp. ("Sagres"), a contractor, and the Washington Suburban Sanitary Commission ("WSSC"), an administrative agency. While working on the project, Sagres encountered an underground duct bank and subsurface rock conditions. Sagres submitted two claims to WSSC's designated Engineer for additional payment and time extensions for the extra work it performed related to the conditions. The Engineer denied both claims. Sagres appealed the Engineer's final decisions to WSSC's Chief Procurement Officer. The Chief Procurement Officer issued two final decisions and orders, which affirmed the Engineer's final decisions. Sagres then filed a Petition for Administrative Mandamus in the Circuit Court for Montgomery County. The circuit court affirmed the Chief Procurement Officer's final decisions.

Sagres thereafter appealed to this Court, raising three questions.^[1] WSSC filed a motion to dismiss the appeal in connection with its brief, alleging that this Court lacks jurisdiction. As set forth more fully herein, we agree with WSSC that we lack jurisdiction and grant the motion to dismiss.

BACKGROUND

In January 2015, WSSC^[2] issued a solicitation to enter into an indefinite delivery, indefinite quality contract^[3] for water main replacements and relocations located in Montgomery County and Prince George's County. Sagres, a contractor that specializes in construction excavation and pipe laying and replacement, was one of the awardees under the solicitation. Sagres subsequently submitted a bid for the project. In March 2018 WSSC notified Sagres that it was selected as the winning bidder and awarded Sagres the contract for $1, 275, 960.50. The Notice to Proceed date was April 2, 2018.

The contract documents included General Conditions, drawings, specifications, and a soil report. Article 17, titled "Changed Conditions," sets forth the following:

17.1 The Contractor shall within 7 days, and before such conditions are disturbed, except in the event of an emergency, notify the Engineer by Written Notice of:

17.1.1 Subsurface or latent physical conditions at the site differing materially from those indicated in the Contract Documents; or

17.1.2 Unknown physical conditions at the site of an unusual nature, differing materially from those ordinarily encountered, and generally recognized as inherent in Work of the character provided for in the Contract Documents.

17.1.3 The provisions of 17.1.1 and 17.1.2 shall not apply to rock and/or water conditions that may be encountered during the construction of this Project. The provisions set forth in General Conditions, Article 18, "Physical Data," or the appropriate sections of the Contract Documents, including Drawings and/or Specifications shall be applicable.

(emphasis added).

Article 18 of the General Conditions, titled "Physical Data," states, in part, that "[e]ach Bidder shall determine to their own satisfaction the actual subsurface conditions including the character and type of soil and other material he will encounter in the Work to be done under the Contract" and that WSSC "will not be responsible for the completeness [of the soil report], nor for any deductions, interpretations or conclusions drawn therefrom, including specifically the physical conditions between boring locations." Pursuant to Article 32, titled "Claims and Disputes," any claim or dispute by Sagres against WSSC is governed by WSSC Procurement Regulation § 6-104.01, which added § 6.15.560 of the WSSC Code of Regulations governing "[c]ontract dispute resolution."^[4]

During the project, Sagres encountered two underground site conditions: an underground Verizon utility duct bank and subsurface rock and boulders. Sagres subsequently instituted administrative proceedings to recoup additional expenses and work time related to the additional excavation required to address the underground conditions.

Administrative Proceedings Before the Engineer

Pursuant to the contract documents and § 6.15.560 of the WSSC Code of Regulations, Sagres submitted two claims to the designated Engineer for additional payment and time extensions related for extra work it performed related to the subsurface conditions: Claim II (Duct Bank) and Claim IV (Rock Excavation).

As to Claim II, Sagres alleged that the duct bank was a changed condition and sought $17, 431.12 and a four-day extension for the additional excavation for a water main under the duct bank. In its Final Decision on Claim II, the Engineer noted that Sagres had "already been fully compensated for their work in this area" and "WSSC is not responsible for any additional compensation required because Sagres failed to take the necessary precautions." The Engineer determined that encountering the duct bank was not a changed condition because the duct bank was marked on the plans WSSC provided to Sagres and Sagres failed to test pit in accordance with the contract documents. The Engineer denied Claim II.

As to Claim IV, Sagres alleged that the subsurface rock conditions that it encountered constituted a differing site condition and sought $217, 586.17 and a 31-day extension. In its Final Decision on Claim IV, the Engineer determined that Sagres "failed to properly investigate soil conditions prior to construction" and that "the rock and hard materials were identified in the contract documents." The contract documents "provided soil boring test results[, ] which indicated rock and dense material was present in the subsurface." Even if rock conditions were not identified, the Engineer noted that the contract documents "explicitly state that the presence of rock does not represent a change of conditions." The Engineer denied Claim IV.

Administrative Proceedings Before the Chief Procurement Officer

Sagres subsequently appealed the Engineer's final decisions by filing a written appeal to WSSC's Chief Procurement Officer. In its written appeal of Claim II, Sagres argued that the duct bank qualified as a Type I differing site condition.^[5] As to Claim IV Sagres asserted that the rock qualified as a Type II differing site condition under Article 17. It further claimed that the limitations in Article 17.1.3-that rock does not qualify as a Type I or Type II differing site condition-is against Maryland law and public policy and, consequently, is not enforceable.

The Chief Procurement Officer informed Sagres and the Engineer that she wished to hold an "informal hearing" on the claims. The "informal hearing," however, was postponed due to the coronavirus pandemic, and the Engineer and Sagres ultimately requested that the "informal hearing" be waived. The Chief Procurement Officer granted the joint request and subsequently issued two Final Decisions and Orders.

In the Final Decision on Claim II, the Chief Procurement Officer analyzed whether the duct bank qualified as Type I differing site condition. To determine whether Sagres was entitled to additional compensation, Sagres had the burden of proving, by the preponderance of the evidence, the following six elements:

1. the solicitation affirmatively indicated or represented the subsurface conditions which form the basis of the claim;

2. it acted as a reasonable, prudent contractor in interpreting the solicitation;

3. it reasonably relied upon the indications of subsurface conditions contained in the solicitation;

4. the subsurface conditions actually encountered differed materially from those indicated in the solicitation;

5. the actual subsurface conditions must have been reasonably unforeseeable; and 6. its claims for excess costs must be shown to be solely attributable to the materially different subsurface conditions.

See Weeks Dredging & Contracting, Inc. v. United States, 13 Cl. Ct. 193, 218 (1987) (listing the six elements of a Type I differing site condition). The Chief Procurement Officer determined that Sagres met its burden for the first element, but it failed to prove the second element that it "acted as a reasonable, prudent contractor in interpreting the solicitation." The Chief Procurement Officer explained that the "[c]ontract [d]rawings placed Sagres on notice of the existence of an underground utility line" and the contract documents "required Sagres to take necessary precautions and protect underground utility lines." The Chief Procurement Officer declined to address elements three to six. The Chief Procurement Officer denied Claim II and affirmed the Engineer's final decision.

In the Final Decision on Claim IV, the Chief Procurement Officer first observed that, at common law, contractors bore the risk of unforeseen site conditions. It noted that the Maryland Board of Public Works later promulgated a rule requiring "an unforeseen site conditions clause in all Maryland state construction contracts." The Chief Procurement Officer explained, however, that such a "mandatory clause" is not applicable to WSSC because it only applies to entities subject to the General Procurement Law of the State Finance and Procurement Article.^[6] The Chief Procurement Officer concluded that "WSSC was not required by law to have a specific 'differing site conditions' clause . . . or to even have a 'differing site conditions' clause in the Contract." Under the principles of freedom of contract, WSSC was permitted to exempt rock conditions from Article 17 and "Sagres agreed to assume the risks associated with encountering rock...