Free Cross Motion [Dispositive] - District Court of Federal Claims - federal

Case 1:06-cv-00113-MBH

Document 39-2

Filed 06/15/2007

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS

)

OAK ENVIRONMENTAL CONSULTANTS, INC.,)

v. )

Plaintiff, )
) )

Civil Action No. 06-113C
)

(Judge Horn)

THE UNITED STATES OF AMERICA, )

Defendant. )

)

) )

AFFIDAVIT OF EDUARD J. EICHEN

1. I am the President of Oak Environmental Consultants,
Inc. ("Oak"), I am personally acquainted with the facts stated
herein, and I am fully authorized to make this declaration.
2. Oak, a small business 8 (a) contractor, entered into a

contract with the Department of the Navy to renovate family housing units at the Newport Naval Station, Newport, RI on

September 30, 2002. The award price of the contract was

$2,453,160.00. This was an important proj ect for our small
company and required the dedication of virtually all of our
resources, and the application of most of our bonding capacity.

3. As part of its contractual obligations Oak submitted the required performance and payment bonds. Oak's bonding
capacity, based on limitations imposed by its surety, was three

million dollars. Accordingly, almost all of Oak's bonding

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capacity was committed to this contract, and therefore limited
Oak's ability to bid or obtain other federal work.

4. On May 2, 2003, after completion of approximately 50
percent of the proj ect, the Navy ordered a suspension of Oak's

work until May 1, 2004.

I was advised that the reason for the

suspension was because the Navy was considering the
privatization of housing at the Newport Naval Station and,

therefore, would possibly need to demolish the housing units
that Oak was in the process of renovating.

5. During my subsequent discussions with Navy personnel at
Newport, including the Contracting Officer, Denise Abraham, I

was advised that the Navy might not actually privatize the

housing, and that Oak might be directed to resume work. In
fact, the Assistant Regional Officer in Charge of Construction
later confirmed in a letter he wrote on our company's behalf i

that ". it was thought that the privatization would not go
through and the proj ect could not be restarted at any time." He

further stated that "Oak was asked to remain on standby and

prepared to continue the work during this period in the event
the project could be restarted." (AR, 125).

6. I was not advised that higher authority within the
Navy, as early as April 2003, had already directed Navy
personnel to close out our contract.
I only learned of that

fact when my attorney provided me with copies of documents

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obtained during discovery in connection with this litigation.
Accordingly i I am at a loss to explain, or understand, why the

Navy suspended our contract for one year commencing on May 2,

2003, and continued to hold our bonds, while apparently knowing that they would not ever be directing us to resume work on the

proj ect .
7. The Navy subsequently asked Oak to provide a close-out
proposal and I was led to believe that our contract would be

terminated for the convenience of the government. Although the
suspension of work order remained in place, we provided a
termination for convenience close-out proposal on August 13,

2003.
8. When it became apparent to me that the Navy was
planning to terminate our contract for convenience, I requested
release of our bond so that Oak could seek other work.
I made

numerous requests to the Navy to release the bond, or to allow
us to replace the bond with one that would reflect the value of

unfinished work beginning in late May 2003. No responses to
these requests were received as confirmed by the detailed letter I wrote to the Regional Officer in Charge of Construction on

August 13, 2003 (AR 54), as well as two letters to the
Contracting Officer dated September 30, 2003 and October 24,

2003, and my e-mail message to the Contracting Officer on

November 5, 2003 (AR 59-63) .

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9. The Navy took no action in response to my requests that
our bonds be released and refused to formally, or informally,

advise our surety that our obligation to continue performance of
the contract had been terminated.

10. When the Navy failed to release the bonds as I
requested, I offered to substitute bonds in a lower amount to cover any potential warranty work, in the hope that this would
free up most of Oak's bonding capacity so that our company could

seek other work. The Navy did not accept this offer.

11. It was not until December 12, 2003, almost five moths
after our work was suspended, that our contract was terminated
for convenience, but even then the Navy did not release our

bonds.
12. The Navy's failure and refusal to release our bonds
caused our company to continue to incur home office overhead
expenses without any opportunity to obtain other work to absorb
those overhead expenses.

13. In fact, even after terminating our contract for
convenience, the Navy continued to treat Oak as a company that

was still under contract. As part of the proj ect, Oak installed
new boilers that were to be vented through new exhaust stacks in

the existing roofs. During the course of performance of the
renovations, Oak encountered severe winter weather.
In order to

avoid roofing work during this winter weather, the Navy directed

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Oak to connect the new boilers to the existing exhaust stacks.

Oak complied with this directive. After the contract was
terminated for convenience, however, the Navy required Oak to

perform additional work on the project involving the connection
of new boilers in some of the previously renovated buildings to
new exhaust vents.

14. Although the government has attempted to characterize
our work on the exhaust stacks as the correction of a "safety
deficiency," to the extent that there was a "deficiency" it was

the result of a Navy directive. When we returned to correct
this "deficiency," well after the contract had been terminated
for convenience, we were paid for this work.
It has been my

experience that federal government agencies do not compensate
contractors for the correction of deficient work.

15. Oak's bonding capacity was not restored until May
2004, and the Assistant Regional Officer in Charge of
Construction later confirmed in the letter I mentioned above,

that "Oak Environmental's bond was not released as it was thought that the privatization would not go through and the

proj ect could be restarted at any time." He further stated that
"Oak and the ROICC office remained in regular contact during

this time with regards to either restarting the work or

releasing the bond. The bond was finally released on May 17,

2004 .

"

(AR, 125).
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16. It was only after our bonds were finally released on
May 17, 2004, that our company had the opportunity to use its

bonding capacity to seek other work. Costs related to the
termination for convenience were subsequently negotiated and
were embodied in a contract modification issued on August 3,

2005.

(AR, 37-38). The modification specifically allowed Oak

to "reserve its right to file a request for equitable adjustment, or a claim, for home office overhead pursuant to the

Eichleay formula."

(AR 38) .

17. Although Oak requested extended home office overhead
costs measured from the date of the suspension of work order, May 2, 2003, to the date when the bonds were released, May 17,

2004, the Navy has refused to compensate us in any way for those

incurred costs.
I declare under penalty of perjury that the foregoing is

true and correct to the best of my knowledge, information and

belief.
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