UNITED STATES CIVILIAN BOARD OF CONTRACT APPEALS KIEWIT-TURNER A JOINT VENTURE v. DEPARTMENT OF VETERANS AFFAIRS Contract No. VA101CFM-C-0100 Replacement Medical Center Facility Project No. 554-501 Aurora, Colorado ) ) ) ) ) ) ) ) ) ) ) CBCA No. 3450 APPELLANT’S PROPOSED FINDINGS OF FACT William E. Dorris Chad V. Theriot Reginald A. Williamson Damian M. Brychcy Kilpatrick Townsend & Stockton LLP 1100 Peachtree Street, Suite 2800 Atlanta, GA 30309-4530 Tel: (404) 815-6500 Fax: (404) 815-6555 Michael A Branca Peckar & Abramson, P.C. 2055 L Street, NW, Suite 750 Washington, DC 20036 Tel: (202) 293-8815 ext. 7116 Fax: (202) 293-7994 US2008 5819490 1 TABLE OF CONTENTS I.  The Hearing .........................................................................................................................1  II.  Identity of the Parties ...........................................................................................................2  A.  Kiewit-Turner ..........................................................................................................2  B.  Kiewit .......................................................................................................................2  C.  Turner .......................................................................................................................4  D.  Department of Veterans Affairs ...............................................................................7  E.  JVT .........................................................................................................................10  F.  RLB ........................................................................................................................10  G.  VA’s Consultants ...................................................................................................11  H.  III.  a.  Jacobs .........................................................................................................11  b.  VCI .............................................................................................................13  c.  Leland Saylor and Associates ....................................................................13  Kiewit-Turner’s Experts ........................................................................................13  a.  Al Aardsma ................................................................................................13  b.  Steve Howard .............................................................................................15  c.  Don Meyer .................................................................................................16  Project Background and Solicitation .................................................................................17  A.  Project History .......................................................................................................17  B.  VA Appropriations.................................................................................................18  C.  Kiewit-Turner Solicitation .....................................................................................19  D.  IDc Contract Type..................................................................................................19  E.  The Construction Contractor Was Brought On Too Late ......................................20  F.  Award of CLIN-001 to Kiewit-Turner ..................................................................21  G.  The Parties’ Experience With IDc-Type Contracts ...............................................22  i US2008 5819490 1 H.  The A/E And Its Contractual Design Responsibilities ..........................................23  I.  The ECCA ..............................................................................................................23  J.  IV.  V.  VI.  a.  The History And Intent Of The ECCA ......................................................23  b.  How To Determine Whether The Designer’s Design Met The ECCA .........................................................................................................24  c.  If Actual Costs Are Not Used, And They Should Be, An Independent Cost Estimator Should Be Used To Verify The Estimate, Not The A/E ...............................................................................27  Use Of Independent Government Estimates ..........................................................28  CLIN-001 and Preconstruction ..........................................................................................29  A.  Preconstruction Responsibilities ............................................................................29  B.  Preconstruction Submittals ....................................................................................30  C.  Kiewit-Turner’s Preconstruction Submittals Warned The VA Of The Design’s Deficiencies ............................................................................................32  D.  Kiewit-Turner Satisfied Its Preconstruction Responsibilities ................................34  E.  Lack of Reconciliation Between the JVT and Kiewit-Turner Estimates ...............35  F.  Despite No Reconciliation And Warnings Against It, The VA Unilaterally Decided To Proceed Without A Reconciliation of the JVT’s And KiewitTurner’s Costs ........................................................................................................37  Negotiations of a Firm Target Price...................................................................................39  A.  Jacobs Estimate August 2011 IGE .........................................................................39  B.  Kiewit-Turner’s “Book” ........................................................................................41  C.  Negotiation Of Kiewit-Turner’s “Book” ...............................................................43  SA-007 ...............................................................................................................................46  A.  November 9, 2011 Meeting On The FTP ..............................................................46  a.  Purpose Of FTP Meeting ...........................................................................46  b.  The VA’s Mr. Kyrgos Throws Out Kiewit-Turner’s “Book”....................47  c.  The Parties Reach An Impasse ..................................................................50  ii US2008 5819490 1 B.  VII.  d.  Impasse Is Overcome .................................................................................52  e.  Terms Of Agreement Reached On Night Of November 9, 2011 ..............52  f.  The Parties Discussed The ECCA In The November 9, 2011 FTP Meeting ......................................................................................................57  g.  After The November 9, 2011 FTP Meeting, Kiewit-Turner Submits A New FTP Proposal Pursuant To The Terms Reached On November 9, 2011 ......................................................................................58  Terms And Meaning Of SA-007............................................................................59  a.  Drafting SA-007’s Final Language ............................................................59  b. No Drawings Or Scope Attached To SA-007 ............................................62  c.  SA-007’s Continuation Page and Subsequent Modification .....................63  C.  Certification Of Firm Target Price Proposal..........................................................64  D.  In SA-007, The VA Guaranteed To Cause The A/E to Produce a Design that Could be Constructed for the ECCA ..............................................................64  Procurement of Project And The Consents To Subcontract ..............................................68  A.  The VA Was Involved In The Procureemnt Of Kiewit-Turner’s Subcontractors........................................................................................................68  B.  The Contracting Officer’s Consents To Subcontract .............................................69  C.  Kiewit-Turner Was Transparent In Its Procurement Of the Subcontractor Bids And They Were Obtained With The VA’s Consent ......................................71  VIII.  Construction And Design Issues With The Main Hospital Campus (CLIN-002) .............72  IX.  A.  Scheduling..............................................................................................................72  B.  The VA’s Delayed Issuance of The Design And Kiewit-Turner’s Attempt To Mitigate The VA’s Delay .................................................................................77  C.  The VA’s 100% Design Was Incomplete And Uncoordinated .............................81  D.  Jacobs Reported To The VA The Problems With the JVT’s Incomplete And Uncoordinated 100% Design .........................................................................84  Impact Of The VA’s Late 100% Design............................................................................87  iii US2008 5819490 1 X.  XI.  XII.  A.  Subcontractors Refused To Bid The Project Due To The VA-caused Uncertainty .............................................................................................................87  B.  Subcontractor Pricing Increased From SA-007 To The 100% Design ..................91  The Project’s Estimated And Actual Costs Continued To Climb As The Design Was Completed By The JVT .....................................................................................................92  A.  95% Design Estimates ...........................................................................................92  B.  Design Estimates Between The 95% And 100% Design.......................................93  C.  Jacobs 100% Estimate Is $200 Million Over The ECCA ......................................95  D.  Kiewit-Turner’s 100% Design Firm Fixed Price Proposal ....................................96  E.  JVT 100% Estimate ...............................................................................................98  F.  RLB Is Not Independent – “Wolf Watching The Henhouse”..............................101  Kiewit-Turner Met Its Obligation Under SA-007, But The VA Did Not ........................104  A.  Kiewit-Turner Satisfied Paragraph 10 Of SA-007...............................................104  B.  VA Failed To Provide A Design Capable Of Meeting The ECCA Of $582 Million..................................................................................................................107  C.  VA Failure To Control And Manage The Designer And End User ....................110  D.  The JVT’s Poor Performance Evaluations ...........................................................115  E.  The VA Failed to Incorporate the Needed Cost Reduction and Value Engineering to Bring the Project Back to Budget ................................................117  The VA Lacks Funding For the Full Cost of the Project .................................................123  XIII.  Kiewit-Turner Will be Forced to Fund the Project Because of the VA’s Failure to Provide a Design Capable of meeting the ECCA..........................................................................124  XIV.  The VA Breached the Duty of Good Faith and Fair Dealing ..........................................125  A.  The VA Did Not Address Kiewit-Turner’s PCOs or Issue JSIs For Over One Year ..............................................................................................................125  B.  The VA Told KT The Design Would Be 100% In August 2012, But Knew It Would Not Be ...................................................................................................129  C.  VA Dysfunction and Mismanagement on the Project .........................................131  iv US2008 5819490 1 XV.  The VA’s Lack Of Good Faith And Fair Dealing In 2013 ..............................................139  A.  The VA’s Initial Reliance On The Jacobs 100% Estimate ..................................139  B.  The Blue Ocean Meeting .....................................................................................141  C.  VA Changes New Strategy Toward KT ..............................................................145  D.  VA Revisits the Proposed Termination of Kiewit-Turner ...................................147  E.  The VA Rejects The Jacobs 100% Estimate........................................................150  F.  The VA Reinterprets SA-007...............................................................................155  G.  Directive To Proceed And Failure To Incorporate Any Cost Cutting Measures ..............................................................................................................159  H.  The VA Was “Estimate Shopping”......................................................................161  I.  The VA In Bad Faith Relied On A Biased, Inaccurate Estimate Provided By The JVT And Established The JVT Estimate As The Independent Government Estimate...........................................................................................164  v US2008 5819490 1 Appellant Kiewit-Turner a Joint Venture submits the following proposed Findings of Fact: I. THE HEARING 1. The parties in the above-captioned filing had a seven-day hearing in Denver, Colorado before Judge Candida S. Steel with the Civilian Board of Contract Appeals (“Board”) from May 28, 2014 through June 5, 2014 (the “Hearing”). 2. During the course of the Hearing, the Board heard live testimony from 16 witnesses and the parties introduced 207 exhibits, both real exhibits and demonstrative exhibits. 3. Kiewit-Turner a Joint Venture (“Kiewit-Turner”) called the following employees: Mike Colpack, A.J. Klebba, Chris Jahrling, Paul Blatnak (former employee), Aaron Wiebelhaus, and Dayle Jones as fact witnesses. Kiewit-Turner called three experts: Al Aardsma, Don Meyer and Steve Howard. Kiewit-Turner also called James Chang (Resident Engineer for the VA on the Project), James Lynn of Jacobs Engineering Group, Inc. (“Jacobs”) (construction manager consultant for the VA on the Project) and Richter Schneider of Jacobs (lead healthcare estimator for Jacobs who performed Jacobs’ 100% design estimate). 4. The VA called in its case: Chris Kyrgos, Tom Hayden, Tim Pogany and Thaddeus Willoughby. 5. The parties agreed and stipulated that the depositions of the following individuals may be used in lieu of calling the person as a witness at the Hearing: Stella Fiotes, Glenn Haggstrom, Dewey Newton, Mike Rossi, Brad Saylor, and Rob Taylor. 6. exhibits. US2008 5819490 1 The Rule 4 File for this Appeal contains 1,554 exhibits, including 126 trial II. IDENTITY OF THE PARTIES A. Kiewit-Turner 7. Appellant Kiewit-Turner is a joint venture of Kiewit Building Group, Inc. and Turner Construction Company. 8. Kiewit Building Group (“Kiewit”) and Turner Construction Company (“Turner”) teamed up based on Turner’s healthcare experience and Kiewit’s experience and presence in the Denver market. (Newton Depo. 19:11-20:21). B. Kiewit 9. Kiewit Building Group is a sub-division of Kiewit Corporation. Kiewit and its employees have a vast amount of experience in vertical construction and healthcare construction. (Colpack Tr. 53:20-54:3). Kiewit is – and has been for many years running – the largest general contractor in the Denver area. (Colpack Tr. 53:20-24). 10. Mr. Colpack, who testified at the Hearing, was previously the Executive Vice President of Kiewit Building Group and has been with Kiewit Corporation for over 25 years. (Colpack Tr. 49:3-7; 46:11-14). Mike Colpack is currently the President of Mass Electrical Company, a wholly owned subsidiary of Kiewit Corporation. (Colpack Tr. 45:7-11). 11. Mr. Colpack has worked his entire career in the field of construction. (Colpack Tr. 47:2-6). During his career, Mr. Colpack has been involved in the design and construction of a wide variety of construction projects, including projects worth over $1 billion. (Colpack Tr. 50:9-20; AF2002). Mr. Colpack has also performed construction work for the federal government on numerous occasions. (Colpack Tr. 50:21-25; AF2002). 12. Mr. Colpack has extensive experience with guaranteed maximum price (“GMP”) and Construction Manager at Risk (“CM@Risk”) construction projects. (Colpack Tr. 51:14- 2 US2008 5819490 1 52:1). These contract types are very similar in nature to that used on the Denver VA Replacement Medical Center Project (the “Project”). (Id.) 13. Mr. Colpack was the managing partner for the Kiewit-Turner joint venture, the executive level contact for Kiewit-Turner and the VA. (Colpack Tr. 45:24-46:2). After award of the preconstruction services to Kiewit-Turner through the exercise of Construction Line Item Number 1 (“CLIN-001”), Mr. Colpack participated in project meetings periodically and was involved in high level negotiations with the VA. (Colpack Tr. 113:13-16). In November 2013, Mr. Colpack was promoted to President of Mass Electric Company, after which he was no longer involved in the Project. (Colpack Tr. 45:20-46:10). 14. AJ Klebba testified at the Hearing and is an employee of Kiewit Building Group. (Klebba Tr. 304:9-11). Mr. Klebba is the deputy managing partner of Kiewit-Turner and was the lead person on-site for Kiewit-Turner. (Colpack Tr. 66:1-4; Klebba Tr. 309:8-13). 15. Mr. Klebba has been in the construction industry for approximately 30 years, including 16 years with Kiewit. (Klebba Tr. 305:3-8). Prior to joining Kiewit, Mr. Klebba worked in the civil engineering squadron for the United States Air Force. (Klebba Tr. 307:18308:12). 16. Mr. Klebba’s 16 years with Kiewit have all related to healthcare construction. (Klebba Tr. 305:16-20). This includes healthcare construction for the federal government. (Klebba Tr. 306:25-307:12). 17. During the preconstruction phase of the Project, the preconstruction department reported to Mr. Klebba. (Klebba Tr. 309:14-22). 18. Mr. Blatnak testified at the Hearing and was the Preconstruction Manager for Kiewit-Turner from June of 2009 to June of 2013. (Blatnak Tr. 626:1-6). As Preconstruction 3 US2008 5819490 1 Manager, Mr. Blatnak was responsible for reviewing the design for constructability, identifying value engineering, and providing cost estimates for the Project. (Blatnak Tr. 626:9-14). 19. Paul Blatnak is currently an employee of PCL Construction. (Blatnak Tr. 625:13- 15; AF2001). Mr. Blatnak is currently the head of preconstruction services for PCL. (Blatnak Tr. 625:16-17; AF2001). 20. Mr. Blatnak has approximately 15 years of experience in the construction field, primarily in preconstruction services and estimating. (Blatnak Tr. 627:15-20; AF2001). Mr. Blatnak has been working in the Denver market since 2003. (Blatnak Tr. 627:21-24). C. Turner 21. Turner Construction Company, founded in 1902 in New York City, is the nation’s largest general building contractor with 40 offices in the United States and international offices in Europe and Asia comprising approximately 5,200 employees. (Jahrling Tr. 172:24-173:10). 22. Turner and its employees have a vast amount of experience in federal procurement and healthcare construction. Turner is the largest builder of healthcare facilities focusing on hospitals, nursing homes, clinic facilities that are outpatient facilities, and ambulatory care facilities. (Jahrling Tr. 174:6-21; Colpack Tr. 53:16-17). 23. Turner has been involved in some of the most recognizable buildings in the world, such as the Burj Khalifa in Dubai, the world’s tallest building, the Rock ‘n Roll Hall of Fame in Cleveland, Ohio, and Madison Square Garden. (Jahrling Tr. 173:11-23). Turner has worked with various U.S. Federal agencies such as the Corps of Engineers, NASDAQ, the GSA, the Department of Homeland Security, the VA, and TSA. (Jahrling Tr. 173:24-174:5). 24. While Turner performs a significant amount of design/build work, it does not have in-house design capabilities and would typically engage design firms to prepare the design. (Jahrling Tr. 174:22-175:3). Turner is very familiar with the Construction Manager (“CM”) 4 US2008 5819490 1 model of construction delivery and approximately 75% of its work uses the CM@Risk basis as opposed to a fixed-price or other construction delivery method. (Jahrling Tr. 175:4-13). 25. Chris Jahrling testified at the Hearing and is an employee of Turner and currently serves as the vice president and general manager in charge of Turner’s federal services group and has worked for Turner for over 29 years. (Jahrling Tr. 171:9-19). 26. Mr. Jahrling was Turner’s senior executive responsible for the Project who supported Kiewit-Turner very early on during the proposal phase and then became more involved as SA-007 was negotiated. (Jahrling Tr. 172:9-23). At all times during the project, Mr. Jahrling had people reporting to him who were physically present at the site when he was not, specifically Mr. Dave Duffy and Mr. Al Amin. (Jahrling Tr. 185:12-19). 27. Mr. Jahrling holds a bachelor’s degree in geology from Syracuse University and has a master’s degree in science from the University of New Hampshire with a specialty in structural geology and geophysics. (Jahrling Tr. 175:14-25). His first professional job after graduating from graduate school was with Turner and he has been with Turner his entire career. (Jahrling Tr. 176:1-7). His roles and responsibilities include obtaining and delivering all of Turner’s direct federal construction contracts across the United States, which is approximately $500 million a year. (Jahrling Tr. 171:20-172:5). 28. Aaron Wiebelhaus testified at the Hearing and is an employee of Turner. (Wiebelhaus Tr. 569:10-12; AF2007). Mr. Wiebelhaus has worked with Turner for seven years. (Wiebelhaus Tr. 569:13-15; AF2007). 29. Mr. Wiebelhaus has 17 years of experience in the construction field, with approximately 14 years being in an operations role. (Wiebelhaus Tr. 570:18-23; AF2007). 5 US2008 5819490 1 30. Mr. Wiebelhaus became involved with the Project in November of 2010 as the purchasing manager. (Wiebelhaus Tr. 569:16-24). He left the role as purchasing manager in June of 2012, but maintained oversight of the new purchasing manager, Dayle Jones. (Wiebelhaus Tr. 569:25-570:7). 31. Dayle Jones testified at the Hearing and is an employee of Turner. (Jones Tr. 597:17-18; AF2004). Mr. Jones has worked with Turner for 12 years, his entire career. (Jones Tr. 599:14-16; AF2004). 32. Mr. Jones has 12 years of experience in the construction field. (Jones Tr. 599:14- 16; AF2004). He was initially involved in an operations role for Turner and then moved to procurement. (Jones Tr. 601:6-9). Since moving to Colorado in 2005, Mr. Jones has developed personal and professional relationships with subcontractors in the Denver area. (Jones Tr. 602:17-25). 33. Mr. Jones became involved with the Project in June of 2011 as a purchasing agent. (Jones Tr. 598:5-13). He was promoted to purchasing manager in June of 2012 to take over for Mr. Wiebelhaus. (Jones Tr. 598:16-17). 34. Dewey Newton, who testified by way of deposition, is an employee of Turner. (Newton Depo. 10:14-18). Mr. Newton has worked with Turner for 29 years, his entire career. (Newton Depo. 10:14-18). Mr. Newton’s entire 29 year career has been in construction. (Newton Depo. 10:21-15:14). 35. Mr. Newton was the managing partner on the Turner side for Kiewit-Turner on the Project. (Newton Depo. 19:1-3). Mr. Newton oversaw the preparation and strategy of Kiewit-Turner’s proposal and would oversee project issues elevated to his level. (Newton Depo. 19:6-10; 26:3-9). Mr. Newton also reviewed the preconstruction submittals submitted to the VA. 6 US2008 5819490 1 (Newton Depo. 41:13-19). Mr. Newton was promoted and left the Project on November 9, 2011, and Chris Jahrling became the managing partner for Turner. (Newton Depo. 68:7-23). D. Department of Veterans Affairs 36. The Department of Veterans Affairs (the “VA”) operates one of the nation’s largest healthcare delivery systems, charged with addressing the issues of increasing medical demands and aging medical facilities. (AF0507-2). The VA provides services for over 6 million veterans through the Veterans Health Administration, one of the largest healthcare systems in the country. (AF0507-5). 37. Glenn Haggstrom, who testified by way of deposition, is the Principal Executive Director of the VA’s Office of Acquisitions, Logistics and Construction. (Haggstrom Depo. 6:811). He reports directly to the Deputy Secretary of the VA and oversees, among others, the VA’s Office of Construction and Facilities Management (“CFM”). (Haggstrom Depo. 8:3-13). CFM is responsible for all VA construction projects over $10 million. (Haggstrom Depo. 10:8-12). Stella Fiotes, the Executive Director of CFM, reports directly to him. (Haggstrom Depo. 17:2218:4). 38. Stella Fiotes is a senior executive with the VA and testified by way of deposition. She joined the VA in 2013, replacing Bob Neary. (Fiotes Depo. 13:7-17). Ms. Fiotes first became involved with the Project in January of 2013. (Fiotes Depo. 16:12-18; 18:1-19:12). 39. Chris Kyrgos testified at the Hearing and is the VA’s national director of acquisition, is in charge of the national cemetery projects nationwide, and is responsible for the VA’s New Orleans, Orlando, and Denver construction projects. (Kyrgos Tr. 1073:22-1074:3). 40. Thaddeus Willoughby testified at the Hearing and became the Contracting Officer for the Project in September 2010. (Willoughby Tr. 1474:13-19). As Contracting Officer, Mr. 7 US2008 5819490 1 Willoughby is responsible for administering the Contract, including “making sure terms and conditions are adhered to.” (Willoughby Tr. 1474:1-12). 41. Timothy Pogany is an employee of the Department of Veterans Affairs in facilities management. (Pogany Tr. 1172:10-12). Outside of the Project, the largest project he has worked on was approximately $100 million, but the majority of his projects were in the $50$60 million range. (Pogany Tr. 1348:1-16). This Project was the first IDc-type contract Mr. Pogany had worked on. (Pogany Tr. 1348:17-20). 42. Mr. Pogany testified at the Hearing and was the Project Executive who had overall responsibility for the entire Project, not just the construction contract, but the architect engineer’s (“A/E”) contract as well. (Pogany Tr. 1173:9-1174:1). He was in charge of handling all the budgets. (Pogany Tr. 1173:9-1174:1). As Project Executive, his role was also to oversee the entire peer review process. (Pogany Tr. 1176:23-1177:25). The Project Executive was also in charge of the design and making sure that the contractual relationship between the A/E and the VA was met. (Pogany Tr. 1287:1-6). Tim Pogany made the ultimate determination as to what value engineering would or would not be included in the Project design. (Pogany Tr. 1225:241226:4). 43. James Chang testified at the Hearing and is a resident engineer for the VA’s CFM. (Chang Tr. 665:3-11). Mr. Chang has a bachelor’s of science degree in civil engineering and a master’s degree in construction and environmental engineering, both from the New Jersey Institute of Technology. (Chang Tr. 666:23-25; 667:15-668:6). Mr. Chang is a professional engineer and is registered in Colorado, New Jersey, New York, Connecticut, and Maryland. (Chang Tr. 668:10-17). Mr. Chang has been involved in construction and engineering for his entire 24-year career. (Chang Tr. 669:22-670:6). 8 US2008 5819490 1 44. Mr. Chang started working for the VA in 2007 as a resident engineer. (Chang Tr. 670:18-20). Mr. Chang has been involved in the Project since 2009. (Chang Tr. 671:17-22). As the resident engineer, Mr. Chang was tasked with reviewing RFIs, reviewing submittals, coordinating work with the contractor in the field, and writing change orders under the direction of the Senior Resident Engineer. (Chang Tr. 672:20-673:15). 45. Thomas Hayden testified at the Hearing and was the Senior Resident Engineer (“SRE”) on the Project for the VA. (Hayden Tr. 1396:11-17). As the SRE, Mr. Hayden was hired by the VA to be a construction management engineer to supervise the performance of the contractor in relation to meeting contract requirements. (Hayden Tr. 1400:2-23). Mr. Haggstrom knew Mr. Hayden from the Air Force and believes that he referred Mr. Hayden to the position with the VA. (Haggstrom Depo. 20:21-21:20). 46. Judi Guy, who testified by way of deposition, is the project coordinator for the VA’s Medical Center on the Project. (Guy Depo. 24:6-7). Ms. Guy has been involved in nursing and healthcare since 1970 and has been working for the VA since 1995. (Guy Depo. 15:1-16). Ms. Guy was selected to be the project coordinator for the Project in 2004. (Guy Depo. 17:16-19). Ms. Guy defined her role as acting as an advocate on the Project for the medical center, the veterans, and the medical center staff. (Guy Depo. 24:8-11). 47. Julius “Jay” Sztuk, who testified by way of deposition, is a cost estimator by training and is currently the director of cost estimating for the VA’s CFM. (Sztuk Depo. 12:313). Mr. Sztuk was part of the team that invented the term Estimated Construction Cost at Award (“ECCA”) as part of the VA’s updating process of the cost estimating form in 2006 and 2007. (Sztuk Depo. 17:2-18). 9 US2008 5819490 1 48. Mr. Sztuk testified that the ECCA is used to make sure that an A/E designs a project that can be built within the ECCA. (Sztuk Depo. 25:13-18). Mr. Sztuk further testified that you would also look to the market prices to determine if an A/E’s design has met the ECCA. (Sztuk Depo. 31:7-20). 49. Mr. Sztuk is familiar with an independent government estimate (“IGE”) and has prepared several IGEs. (Sztuk Depo. 38:16-20; 40:18-21). Over the course of his career, he testified he rejected only one IGE. (Sztuk Depo. 42:4-43:7). E. JVT 50. On January 10, 2006, the VA signed a contract with a design team comprised of Skidmore Owings & Merrill (“SOM”), S.A Miro, Cator Ruma, and H+L Architecture to act as the Project’s A/E. (AF0001). They were commonly referred to as the JVT. (Colpack Tr. 61:1423). F. RLB 51. Peter Knowles, a shareholder of RLB, testified that the JVT initially hired RLB in 2007 to provide cost estimating services. (Knowles Depo. 14:19-15:3). RLB’s role on the Project was to provide cost estimating services to the JVT. (Knowles Depo. 15:23-17:1). 52. Rider Levett and Bucknall (“RLB”) was contracted directly with the JVT on the Project. (Taylor Depo. 25:3-6). RLB’s cost estimates were supposed to be credible, reliable estimates of the Project’s probable cost that the VA would incur for the Project design. (Taylor Depo. 51:15-52:2; Knowles Depo. 14:19-15:3). 53. Rob Taylor, who testified by way of deposition, is employed by RLB and was assigned the task of coordinating the estimating efforts for the Project. (Taylor Depo. 19:2320:1). Mr. Taylor reported directly to Peter Knowles on the Project. (Taylor Depo. 20:2-6). Mr. 10 US2008 5819490 1 Taylor was the front man for RLB in the cost reconciliation process for the Project. (Taylor Depo. 77:11-14). G. VA’s Consultants a. 54. Jacobs Jacobs Engineering Group, Inc. (“Jacobs”) offers design and project management services employing over 70,000 people with global divisions. (Schneider Tr. 743:17-744:9). Jacobs is the VA’s construction manager for the Project, but as Mr. James Lynn, Jacobs’ senior employee for the Project, testified, this role is more akin to “staff augmentation” in supporting the VA. (Lynn Tr. 845:1-22; 846:10-15). The VA repeatedly turned to Jacobs on the Project for its cost estimating services and for its expertise and support based on Jacbos’ estimating experience. (Pogany Tr. 1257:13-1258:8). 55. James Lynn is a professional architect, licensed in the state of California. (Lynn Tr. 846:22-847:11). Mr. Lynn has over two decades of experience in healthcare design and construction, both as a practicing architect as well as in construction program management for a variety of owners and types of healthcare projects. (Lynn Tr. 847:12-853:11). This includes the design and construction of an entirely new healthcare system for the State of California’s Department of Corrections, involving seven facilities each 1-million square feet for a total value of almost $6 billion. (Lynn Tr. 851:16-852:11). 56. Mr. Lynn has been Jacobs’ team leader on the Project full-time since March 2011. (Lynn Tr. 846:6-9; 854:16-18). Mr. Lynn currently oversees a staff of between 35 and 40 people working on-site, which began with just 4 or 5 people on-site, after a significant staff increase in the first quarter of 2013. (Lynn Tr. 854:19-855:19). Mr. Lynn described the environment at the Project as “restrictive” where Jacobs has no authority to provide direction on-site and has 11 US2008 5819490 1 “limited influence with the owner, but I would underline the word ‘limited.’” (Lynn Tr. 853:12854:11). 57. Mr. Lynn, who testified at the Hearing pursuant to a subpoena, did not appear voluntarily to testify about his client, the VA. (Lynn Tr. 879:21-880:1). 58. Richter Schneider who testified by way of subpoena at the Hearing is an employee of Jacobs and has worked for Jacobs for over 24 years. (Schneider Tr. 734:23-735:2). Mr. Schneider has steadily progressed over his career at Jacobs from estimating, to preconstruction services, all the way to his current position as manager of estimating for healthcare and large projects. (Schneider Tr. 735:18-736:5). He focuses exclusively on estimating Jacobs’ healthcare and large projects across the country. (Schneider Tr. 735:11-17). 59. Mr. Schneider is a graduate of the Milwaukee School of Engineering, holds an architectural building construction engineering technology degree, and holds lifetime professional certifications with the American Society of Professional Estimators and the Certified Professional Estimators organizations. (Schneider Tr. 736:6-23). 60. Mr. Schneider is very familiar with IGEs and has prepared between 200 to 300 IGEs during the course of his 24-year career. (Schneider Tr. 737:15-738:11). In fact, he has provided estimates on several large VA hospital projects, specifically the VA Omaha, VA Denver, and VA California projects. (Schneider Tr. 737:4-14). 61. Mr. Schneider was the lead estimator for the Jacobs August 24, 2011 estimate for the Project that totaled $677,697,408. He testified that this was a fair and reasonable price for the design given the state of the design as of August 2011. (Schneider Tr. 739:9-740:24; AF0118). 12 US2008 5819490 1 b. 62. VCI VCI is an engineering management, construction management, and project management company and the VA’s consultant who had been hired to advise the New Orleans project and was working under an existing IDIQ contract. (Kyrgos Tr. 1153:20-24; Rossi Depo. 27:9-20). VCI, and specifically Mr. Rossi as the co-owner of VCI, were engaged by the VA on the Project in three separate instances: (1) first, to teach a broader class on early contractor involvement; (2) second, to advise the VA on the solicitation for the Project; and (3) third, to advise the VA on a path forward on the Project. (Rossi Depo. 31:2-32:9). Mr. Rossi testified by way of deposition. c. 63. Leland Saylor and Associates Leland Saylor Associates (“LSA”) is a consulting firm which provides estimating services, including conceptual estimating, schematic estimating, design/development estimating, full CD estimating, independent cost reviews, independent cost estimates, and third-party peer reviews. (Saylor Depo. 28:2-24). The VA engaged LSA to perform a cost estimate review of three different cost estimates prepared by the JVT, Kiewit-Turner, and the VA’s independent cost estimator, Jacobs. (AF0762-14). Brad Saylor is an employee of LSA. (Saylor Depo. 21:19-25). Brad Saylor testified by way of deposition. H. Kiewit-Turner’s Experts a. 64. Al Aardsma Kiewit-Turner proffered Allen H. Aardsma as its expert in the preconstruction process for the Project and he testified at the Hearing. Mr. Aardsma holds a Bachelor of Arts from Hope College, as well as post graduate studies in philosophy at Syracuse University and the completion of Yale University’s Executive Program in Healthcare Management. (Aardsma Tr. 978:2-10; 986:9-17). 13 US2008 5819490 1 65. Mr. Aardsma is a senior director at FTI Consulting, specifically in the Construction Solutions Group. For the past 43 years, Mr. Aardsma has been involved in the construction industry, focusing on healthcare construction, healthcare operations, and program management. (Aardsma Tr. 975:22-976:12; 976:25-977:6; TE045-2). Mr. Aardsma has worked as an owner’s representative and program manager for over 100 different hospital projects valued at over $10 billion dollars. (TE045-2). 66. Mr. Aardsma has testified as an expert witness regarding preconstruction services for hospital construction projects. (Aardsma Tr. 976:10-12). He has worked on projects similar in scope and size to the Project, including a $400 million hospital project for St. Joseph’s in Denver which was built in the same period as the Project. (Aardsma Tr. 982:7-984:12). In light of his extensive experience, the VA did not object to him testifying as an expert witness. (Aardsma Tr. 986:18-987:7). 67. Mr. Aardsma was engaged by Kiewit-Turner’s counsel to investigate the preconstruction period on the Project. (Aardsma Tr. 995:16-23). In addition to reviewing the contract documents, all of the preconstruction submittals, other project documents for the preconstruction period, the appeal file documents, and deposition exhibits, Mr. Aardsma interviewed nine Kiewit-Turner representatives and reviewed the depositions of twenty four other individuals involved with the Project, including the depositions of representatives of the VA, JVT, and RLB. (Aardsma Tr. 988:20-1000:22; TE044-6; TE044-7; TE048-4). Based on his investigation, Mr. Aardsma prepared a report dated February 28, 2014 and a Supplemental Report dated April 11, 2014 detailing his investigation, findings and opinions. (TE044; TE045; TE048). 14 US2008 5819490 1 68. Mr. Aardsma, through FTI Consulting, drafted a report on Kiewit-Turner’s preconstruction services on the Project after interviewing Kiewit-Turner employees, reviewing deposition transcripts, and reviewing other documents related to Kiewit-Turner’s preconstruction submittals on the Project. (Aardsma Tr. 997:23-998:19). b. 69. Steve Howard Kiewit-Turner proffered Steve Howard as its expert to evaluate the 100% Project estimate prepared by RLB. (Howard Tr. 757:1-759:7). 70. University. Mr. Howard holds a degree in construction management from Colorado State (Howard Tr. 752:11-15; TE049A-25). Mr. Howard has been involved in construction cost management, project management, schedule management, and estimating for the past 28 years. (Howard Tr. 752:16-754:3; TE049A-25). 71. For the past ten years Mr. Howard has worked for Cumming Corporation. Mr. Howard is a managing principal at Cumming and the Vertical Leader of the Cumming Healthcare sector, a role he has held since 2009. (Howard Tr. 750:20-21; TE049A-25). His practice focuses on working with owners and designers to establish the cost of projects, manage budgets, and negotiate contracts. (Howard Tr. 756:19-23). Mr. Howard has previously been deposed and testified at trial as a cost estimating expert. (Howard Tr. 755:21-756:6). 72. Mr. Howard has performed IGEs before, including providing an independent third-party estimate on the VA Las Vegas Replacement Hospital. (Howard Tr. 755:2-14). 73. Mr. Howard, through Cumming, drafted a report on the methodology of estimating on a large healthcare project and provided a review of RLB’s 100% estimate of the Project. (Howard Tr. 757:15-758:1). Mr. Howard reviewed deposition transcripts and other documents related to RLB’s estimate on the Project. (Howard Tr. 758:2-759:7; TE049A-28). The VA did not object to Mr. Howard as an expert witness. 15 US2008 5819490 1 c. 74. Don Meyer Kiewit-Turner proffered Donald H. Meyer, a CPM scheduling consultant and President of Automated Construction Technology, Inc., as its expert to review and analyze the updated monthly schedules which Kiewit-Turner prepared and submitted to the VA for the months of November 2011 (CPM update no. 5) through August 2012 (CPM update no. 14). (Meyer Tr. 798:13-20; 790:6-791:2; TE046). He also reviewed the VA’s return of submittals approving those monthly updated schedules and certain correspondence regarding the updates. (Id.) 75. Mr. Meyer has been scheduling construction projects for 47 years and the vast majority of his work has been on federal projects. (Meyer Tr. 790:11-19; 794:9-13). Since 1977, his firm has served as the CPM scheduling consultant on over 176 VA construction projects with a total contract value of over $5 billion. (Meyer Tr. 794:19-795:15; TE046-2). Mr. Meyer has been the CPM scheduling consultant on more VA construction projects than anyone else. (Meyer Tr. 795:19-23). 76. For each of those VA projects, Mr. Meyer was hired by the contractor and was expressly approved by the VA to be the scheduling consultant for the project. (Meyer Tr. 795:24-796:13). The VA raised no objection to Mr. Meyer’s credentials as an expert witness on CPM scheduling and analysis. (Meyer Tr. 800:3-5). 77. Though Mr. Meyer was not the scheduling consultant to Kiewit-Turner on this project, he assisted in the preparation of the baseline schedule, which was approved by the Contracting Officer on June 25, 2013. (Meyer Tr. 796:14–799:19; AF0828). Following the approval of the baseline schedule and pursuant to the VA’s Network Analysis System specification, Kiewit-Turner was required to prepare and submit for approval monthly updates of the baseline schedule. (Meyer Tr. 802:25–802:12; TE046-3; TE052-9 at ¶ 1.9D). Mr. Meyer 16 US2008 5819490 1 also provided advice and assistance to Kiewit-Turner regarding the preparation of the monthly CPM updates. (Meyer Tr. 797:2–798:6). III. PROJECT BACKGROUND AND SOLICITATION A. Project History 78. The idea for a new replacement medical facility in Colorado began over 14 years ago, in April of 2000. (AF2271-4). The initial intent focused on collaboration between the VA and the University of Colorado Hospital (“UCH”) to construct a new facility at the Fitzsimons Campus. (AF2271-4). 79. In September of 2001, UCH sent a letter to the Secretary of the VA for commitment within a year to a UCH-VA medical center. (AF2271-4). The proposed medical center would be a joint UCH-VA tower hospital. (Id.) 80. In October of 2002, the Secretary of the VA explained that more time was required to evaluate the proposed UCH-VA medical center. (AF2271-4). 81. In July of 2003, H.R. 116, the New Fitzsimons Regional Federal Medical Center Act of 2003, directed the Secretary of the VA to consult with the Department of Defense about building a medical center on the Fitzsimons Campus. (AF2271-5). 82. In August of 2003, the VA Planning Committee recommended a joint VA- Department of Defense facility. (AF2271-5). 83. In May of 2004, the VA’s Capital Asset Realignment for Enhanced Services (“CARES”) Commission recommended a replacement medical facility in Denver. (AF2271-5). 84. In July of 2004, over four years after the initial proposal for a replacement VA medical center, the VA solicited an architect/engineer to design the Project. (AF2271-18). 85. In December of 2004, the Secretary of the VA wrote the Colorado VA Delegation explaining the need for a stand-alone VA facility. This was a large departure from the originally 17 US2008 5819490 1 envisioned build out of an existing building to a tower construction to a campus construction. (AF2271-6). 86. On January 10, 2006, the VA signed a contract with the JVT to act as the Project’s A/E. (AF0001). 87. However, in 2006, the JVT effort was suspended until the VA acquired a site for the Project. (AF2271-7). In 2007 and 2008, the VA acquired 31 acres for $60.4 million dollars. (Id.) 88. The JVT was remobilized and began developing schematic design 2 (“SD2”) drawings in November 2007. (AF2271-7). The JVT’s 1.58 million square foot design was estimated to cost $1.1 billion. (AF2271-19). The VA then ordered a redesign of the Project to fit within the Project’s $800 million cost cap. (AF2271-29). 89. In March of 2009, the VA approved a “final” space program of 1,069,985 square feet. (AF2271-19). 90. On September 24, 2009, the VA and the JVT entered into a supplemental agreement for the JVT to prepare the SD2 design for $5,195,000. (AF0007-1). 91. As currently designed, the Project is slightly more than 2 million square feet: 1.3 million square feet of medical space and 900,000 square feet for parking. (Colpack Tr. 55:1-11). B. VA Appropriations 92. Congress has appropriated $800 million for all aspects of design, construction, land acquisition and other services for the Project. (Fiotes Depo. 36:19-37:4). 93. The VA has approximately $660 million appropriated for the construction portion of the Project. (Fiotes Depo. 37:5-11). 94. The VA is no longer seeking any additional appropriations for the Project. (Haggstrom Depo. 142:3-17). 18 US2008 5819490 1 C. Kiewit-Turner Solicitation 95. On August 27, 2009, the VA issued Solicitation Number VA 101-09-RP-0166 for the construction of the Project in Aurora, Colorado. (AF0006). 96. From September of 2009 to June of 2010, the VA issued 12 amendments to the Solicitation for potential bidders. (AF0008; AF0009; AF0010; AF0014; AF0015; AF0016; AF0017; AF0018; AF0020; AF0021; AF0024; AF0025). 97. At the time of solicitation, the design of the Project was at the SD2 phase. (Colpack Tr. 68:13-18). D. IDc Contract Type 98. The VA solicited the Project using an integrated design and construct type (“IDc”) contract. The VA’s IDc contract is very similar in nature to the private sector’s GMP and CM@Risk construction. (Colpack Tr. 51:14-52:1; Rossi Depo. 23:1-24:3; AF0006-1). The solicitation itself stated that the contract type was “similar to Construction Management at Risk or Construction Management as Constructor.” (Jahrling Tr. 194:8-18; AF0032-21; AF0006-19). 99. Mr. Willoughby, the VA’s Contracting Officer, testified he was responsible for developing the contract type for the VA, and specifically looked to the Army Corps of Engineers for guidance. (Willoughby Tr. 1481:18-1482:11). “One of the first things we did, we contacted other agencies like the Army Corps of Engineers ... We went to them, we talked to them, we met with them. We went to places where they were implementing the contracts. And from that information we gained that Army Corps was best suited ... the Army Corps had found a way to deliver, and we used Army Corps methods.” (Id.) 100. Under a traditional design-bid-build, the designer and the owner work together to develop a design and then bid it out to the market. (Colpack Tr. 52:9-12). The IDc delivery method brings the contractor in early to provide preconstruction services, primarily to give input 19 US2008 5819490 1 on where the project cost is trending so that the owner can make design changes or procure additional funds. (Colpack Tr. 52:13-21). Under an IDc-type contract, the owner must be more involved and engaged compared to a design-bid-build contract. (Rossi Depo. 146:13-147:17). If the owner is not involved, there is potential for scope, quality, and cost increases. (Rossi Depo. 185:21-186:7; AF0802). 101. Contractors are generally brought on board during the conceptual phase of the project – prior to schematic design – to ensure contractors can help appropriately guide and influence the project. (Colpack Tr. 53:2-7; 69:1-3). The contractor does not have control over the design under this IDc-type contract, just like a design-bid-build. (Rossi Depo. 148:16-20). Mr. Lynn testified regarding the differences between an IDc contract being used by the VA for the Project and their project delivery method of “Design-Bid-Build.” (Lynn Tr. 884:3-885:1). In Design-Bid-Build, design documents are not bid out until they are complete, at which point general contractors provide lump sum bids to construct the documents. (Id.). IDc, on the other hand, brings the contractor in before design documents are complete. (Id.) E. The Construction Contractor Was Brought On Too Late 102. The IDc requires “an attitudinal change to collaborate as a team. The only way any kind of early contractor involvement type of approach works is if there’s true collaboration and a level of trust built between the parties, the owner, architect and contractor. And that’s a different cultural paradigm than design-bid-build.” (Lynn Tr. 885:2-21). Mr. Lynn believes the VA, including VA management in Washington, D.C., lacked the necessary background and experience. (Lynn Tr. 885:22-886:3). 103. The VA itself recognized this as a problem in its Project Management Plan, where it identified the following as a “high” project risk factor: “IDc represents new contracting 20 US2008 5819490 1 approach for VA; does not fit existing procedures which is complicated by VA culture that does not encourage or is [not] comfortable with new approaches.” (AF0547-26). 104. Mr. Colpack testified that at the time of award, the design was already in the DD- 1 phase. (Colpack Tr. 68:13-22). Mr. Newton testified that Kiewit-Turner was brought on too late for the IDc type of contract. (Newton Depo. 41:22-42:20). Key decisions had already been made on this Project: the program was already complete, the budget was already set, and the schematic design was already completed. (Newton Depo. 44:11-45:9). 105. In Mr. Aardsma’s opinion, the VA failed to properly administer the IDc contract because of its lack of knowledge and experience in this type of contract, as detailed in his supplemental report. (TE048-5; TE048-6; TE048-7). The VA did not challenge any of the points in Mr. Aardsma report detailing the VA’s failure to properly administer the IDc contract. F. Award of CLIN-001 to Kiewit-Turner 106. Kiewit-Turner was awarded CLIN-001, the preconstruction services portion of the Contract on August 31, 2010. (Colpack Tr. 62:11-21; AF0029; AF0032). The preconstruction services portion of the Contract was approximately $1.3 million. (Colpack Tr. 62:11-21; Jahrling Tr. 191:4-192:12; AF0029; AF0032). 107. The preconstruction services portion of the Contract did not include any construction of the Project. (Colpack Tr. 63:12-16). 108. This Contract incorporated FAR 52.216-17 which is the Incentive Price Revision Successive Target clause. (Jahrling Tr. 192:13-20; AF0032-47). This clause essentially establishes the boundaries for contractual behavior that starts with a target price, a target profit, a ceiling price, and then describes the method by which the parties move forward from there and ultimately reach either a firm target cost or a firm fixed price, or both in that succession. (Jahrling Tr. 192:21-193:13; AF0032-47-52). 21 US2008 5819490 1 109. Kiewit-Turner’s Contract with the VA included two Contract Line Item Numbers, or CLINs: CLIN-001 and CLIN-002. (AF0032-42; AF0032-44). CLIN-001 was for the “preconstruction phase” and CLIN-002 was for the “construction phase.” (Id.) 110. Kiewit-Turner’s Contract with the VA also stated that the JVT was “contractually obligated to design the project to within a specified cost limitation.” (AF0032-13). G. The Parties’ Experience With IDc-Type Contracts 111. The IDc-type contract at FAR 52.216-17 had never previously been used by the VA. (Lynn Tr. 884:3-885:7). No VA personnel on the project had ever before managed the construction phase of an IDc contract. (Lynn Tr. 885:2-7). Mr. Pogany told Ms. Guy that he wished the VA had never used the IDc process and instead used design-bid-build. (Guy Depo. 277:19-278:6). Mr. Willoughby acknowledged that the Project was his first project administering the construction phase of an IDc-type contract. (Willoughby Tr. 1679:24-1680:7). 112. Mr. Lynn attended a training session in DC where he met Mr. Rossi, a consultant to the VA on the IDc contract. (Lynn Tr. 886:4-887:3). Mr. Lynn testified that he and Mr. Rossi had a discussion regarding whether “the VA understood what they were getting into with IDc, and Mike shared with me that he said he didn’t think they really understood it and they were likely not going to have a favorable implementation of it because of their lack of understanding. That was his – those were his comments to me during that training session.” (Id.). This testimony was unrebutted by the VA. (Lynn Tr. 886:4-887:9). 113. On the other hand, both Kiewit and Turner are familiar with this type of contract in the commercial world. (Newton Depo. 27:13-28:8). Turner also had prior experience with an IDc contract on a federal hospital project, Fort Belvoir. (Newton Depo. 27:19-28:5). Mr. Jahrling and Turner were involved with the construction of the Fort Belvoir Community Hospital, which is a 1.2 million square-foot medical facility similar to the Denver VA facility in 22 US2008 5819490 1 that it had a number of buildings spread out, with a central plant, and it was procured under the very same FAR clause as the Project, FAR 52.216-17. (Jahrling Tr. 179:5-17; Newton Depo. 28:13-25). The owner for the Fort Belvoir Community Hospital was the US Army. (Jahrling Tr. 179:21-25). H. The A/E And Its Contractual Design Responsibilities 114. The solicitation, and ultimately the Contract between the VA and Kiewit-Turner, expressly provides that the Project will be designed by an A/E firm hired by the VA. (Jahrling Tr. 196:22-197:3; AF0032-10). Nothing in the contract transferred any design responsibility to Kiewit-Turner. (Jahrling Tr. 200:24-201:4). Mr. Lynn of Jacobs testified that while Kiewit- Turner’s Contract has certain requirements to participate in constructability reviews and value engineering, Kiewit-Turner has no contractual authority over the A/E; only the VA has such contractual authority. (Lynn Tr. 897:22-898:6). 115. Mr. Haggstrom acknowledged that despite Kiewit-Turner having preconstruction responsibilities, the A/E still remained responsible for the design of the Project. (Haggstrom Depo. 160:13-17). 116. The A/E also has the express task of providing a design that fits within the established ECCA. (Sztuk Depo. 23:22-24:14). Specifically, it is the A/E’s obligation to provide a design that can be built within the set ECCA. (Sztuk Depo. 25:13-18). I. The ECCA a. 117. The History And Intent Of The ECCA The ECCA is the estimated construction cost at award and is a term used by the VA that indicates what the expected bid price would be at the time bids are opened or received from the market. (Sztuk Depo. 17:2-18). The ECCA is established when the design process begins. (Sztuk Depo. 19:1-11). 23 US2008 5819490 1 118. The VA uses the ECCA to constrain the designer. (Sztuk Depo. 23:22-24:14). The ECCA is not “a moving target. Like I said, it’s a -- it’s a constraint, budget constraint that the A/E is supposed to – to meet. And we don’t just change it, you know.” (Sztuk Depo. 108:12-21). That is, it is established as the designer’s budget – as part of the budget for the project; it’s the construction component of the budget. (Sztuk Depo. 23:22-24:14; 25:10-16). And it’s based on not any particular design, but on the project parametric requirements, such as size of the project. (Sztuk Depo. 23:22-24:14; 25:10-15). 119. On August 31, 2010, the same day that Kiewit-Turner was awarded CLIN-001, the VA and the JVT executed Supplemental Agreement 21 to their contract. (AF0031-1). The JVT’s original contract with the VA contained FAR 52.236-22, Design within Funding Limitations. (AF0001-57). Part(c) of this provision, which sets the “estimated construction contract price,” was left blank in the original contract. (AF0001-57). Supplemental Agreement 22 provided replacement pages for FAR 52.236-22, Design within Funding Limitations, in the JVT’s contract with the VA. (AF0027-4). Supplemental Agreement 22 set the “total estimated construction cost at award (ECCA)” at $582,840,000.00 in the JVTs contract with the VA. (AF0027-4). 120. The ECCA of approximately $582 million was established on July 2, 2010. (Sztuk Depo. 23:13-21; AF0027-1). It has not increased since being set at $582 million. (Sztuk Depo. 23:13-21). 121. By the time Kiewit-Turner was awarded CLIN-001, the ECCA was established between the JVT and the VA to be $582,840,000. (AF0027-4). b. 122. How To Determine Whether The Designer’s Design Met The ECCA As the director of cost estimating for the VA’s CFM, Mr. Sztuk testified that it has been his experience that one would look to bids and/or proposals received to determine 24 US2008 5819490 1 whether or not the ECCA was met by the designer. (Sztuk Depo. 37:19-38:15). Actual bids received are used to verify if the designer met the ECCA because the “bids would reflect the bidding climate, or the contractors’ proposals. I mean, those are the contractors’ proposals. So that would reflect the – the market at that time.” (Sztuk Depo. 31:7-20; 32:3-20; 33:2-7). 123. According to Mr. Sztuk, the ultimate determination of whether a design is within budget is a signed contract; that is the best indicator of what the price of a particular project will cost. (Sztuk Depo. 109:5-19; AF0346). A signed contract is a better indicator of the cost of a design than historical, estimated data. (Id.) 124. According to Mr. Sztuk, “actual market pricing would be a more reliable source than an estimating book or, I mean, some – some other type of data … because it’s more reflective of what you can actually buy something for.” (Sztuk Depo. 54:2-12). 125. Mr. Howard testified that the reason that actual subcontractor bids are more accurate than historical costs is the same reason using a thermometer is more accurate than using historical weather data – they tell you what the Project will actually cost. (Howard Depo. 775:11-776:18; 779:1-8). Similarly, Mr. Sztuk testified that actual bids received would reflect the cost of the design and if you have actual bids there is no need to prepare an estimate. (Sztuk Depo. 33:2-7; 84:13-17). 126. According to RLB’s Mr. Knowles, “[t]he pricing coming back from the market is ultimately the price the owner will pay.” (Knowles Depo. 50:5-13). Peter Knowles repeatedly stresses to his employees to use current, realistic data, and not just estimates. (Taylor Depo. 56:20-57:25). He stresses this because it increases the credibility and realism of the estimates. (Id.) 25 US2008 5819490 1 127. According to Mr. Sztuk, “[i]f you know the cost of something, there’s no need to do an estimate.” (Sztuk Depo. 84:13-17). As Mr. Sztuk, testified: A. Normally you prepare a cost estimate in advance of actual costs. In this case some of the work was awarded; some was not. So if you know the cost, then you no longer need an estimate. Q. Because as we talked about earlier, the actual cost is a more realistic value of what the work would cost? A. In this – correct. In this case the contract was already [construction] executed, the cost was known, so … Q. If the idea is to provide the owner a realistic assessment of what the project would cost, I presume you would want to use actual costs where you had actual costs? A. Correct. Q. And where you don’t have an actual cost, you would use an estimate based on estimating guidelines and principles? A. Right. (Sztuk Depo. 84:20-85:16; see also Saylor Depo. 301:1-19). 128. It is important when estimating that costs reflect the currently occurring costs in the area where the project is located. (Saylor Depo. 64:23-65:5; 164:18-165:1). If an estimate does not reflect the currently prevailing costs in the market, the cost estimate would not necessarily match the cost coming from the competitive bid process and therefore would result in an inaccurate estimate. (Saylor Depo. 64:23-65:5). 129. Using currently prevailing costs in the projects’ market helps to ensure that the cost estimate is reliable and realistic. (Saylor Depo. 65:6-66:9; Knowles Depo. 240:23-241:8). As a cost estimator, you would want to use costs that are reflective of the current market, under competitive bidding, such as those established by recent bids from contractors. (Saylor Depo. 65:6-66:9). 130. When estimating under an IDc-type contract, an estimator should use the markups – such as general requirements, general conditions, fee, overhead – of a contract that has already been executed, if one has. (Saylor Depo. 96:10-98:7). 26 US2008 5819490 1 131. The VA’s cost estimating guide states that an estimate will “[s]how the current cost of construction as of the date of the estimate. The base estimate shall reflect current costs on the date the estimate is received.” (AF0531-5). 132. Moreover, Mr. Lynn testified he thought the subcontractor prices were probably more representative of the true cost of the work than estimates: “I thought the subcontractor prices, because they were the results of competitive bidding, were probably more representative of the true cost of the work.” (Lynn Tr. 966:20-967:2). c. 133. If Actual Costs Are Not Used, And They Should Be, An Independent Cost Estimator Should Be Used To Verify The Estimate, Not The A/E In the 2009 GAO Cost Estimating and Assessment Guide, Chapter 1 describes the characteristics of credible cost estimates and a reliable process for creating the same. (AF217523). In this GAO Report, the GAO found that an independent review of the estimate is crucial to establishing confidence in the estimate and that known costs should be included to increase the reliability and accuracy of cost estimates. (AF2175-24). 134. The VA’s Project Executive testified that an independent third-party, not the A/E, should provide estimating services instead of relying on the A/E’s cost estimates. (Pogany Tr. 1333:10-1334:7). In fact, the Project Executive told the former Secretary of the VA this as well. (Pogany Tr. 1333:10-1334:7; AF2272-225-227). 135. In May 2012, Mr. Willoughby and Mr. Pogany presented a PowerPoint to the Secretary of the VA, Eric Shinseki, describing the Project, including lessons learned. (Willoughby Tr. 1701:25-1703:14; AF0664). Among the lessons learned, Mr. Willoughby and Mr. Pogany recommended the Secretary “Employ third party estimator to do cost estimates during design submittal for the project to insure A/E is designing within their cost target.” 27 US2008 5819490 1 (AF0664-63). Mr. Willoughby agreed with this statement that this was a “lesson learned” on this Project. (Willoughby Tr. 1703:15-1704:6). J. Use Of Independent Government Estimates 136. An IGE is used to “establish a fair and reasonable price for the goods or services” the government contracts to procure. (Sztuk Depo. 39:12-40:2). Another purpose of an IGE is to establish a realistic and reliable price that the government may pay. (Sztuk Depo. 43:8-44:2; 51:11-16; 52:20-53:7; Saylor Depo. 297:17-22). 137. The goal of cost estimates is to provide an as accurate a reflection of the cost of the design as possible so that the owner has information that it can use to move forward with the project as designed. (Sztuk Depo. 53:18-54:1). 138. An IGE is a third-party estimate for a government project that is a stand-alone estimate independent of the design team and/or the contractor. (Saylor Depo. 29:17-30:1; 32:18). An IGE is different than other routine cost estimating services because it has to be performed by a different entity other than whoever is providing the cost estimating services under the A/E contract with the VA. (Knowles Depo. 15:23-17:1). 139. As RLB’s Mr. Knowles testified, the IGE has to be performed by an entity separate from the A/E cost estimator because the owner presumably needs “a second opinion on the estimated cost of a project.” (Knowles Depo. 17:16-22). 140. It is important for an independent cost estimator to not only be independent, but also appear to be independent. (Saylor Depo. 114:11-115:6). In fact, it is an underlying theme of the code of ethics for the American Society of Professional Estimators to avoid “any -- any suggestion of -- of being colored by any specific outside party.” (Saylor Depo. 114:11-115:6). 28 US2008 5819490 1 141. Normally, a third-party review of a cost estimate provided by someone that is not the designer or the contractor is considered an independent cost estimate. (Saylor Depo. 189:525). IV. CLIN-001 AND PRECONSTRUCTION A. Preconstruction Responsibilities 142. Kiewit-Turner’s preconstruction responsibilities were listed in Part 2 of the Contract. (AF0032-8-9). The majority of the preconstruction services related to estimating. (Colpack Tr. 63:21-64:2). 143. Article 2.0 of the parties’ Contract lists the preconstruction services, obligations, and responsibilities of the parties. (Jahrling Tr. 195:22-196:14; AF0032-8). The A/E has the responsibility for the Project design and its quality, and the contractor is to inform the VA’s project manager regarding design problems and issues that may be discovered. (Id.). According to Article 2.1, if Kiewit-Turner raises an issue in the preconstruction services portion of the Project, the VA’s project manager is the person who ultimately makes the decision to correct the issue. (Jahrling Tr. 195:22-196:18; AF0032-8). 144. Mr. Jahrling of Turner was involved in the preconstruction services portion of the Project. (Jahrling Tr. 195:9-21). Mr. Jahrling has had a significant amount of experience doing preconstruction work. (Jahrling Tr. 180:14-25). 145. Preconstruction services are all the services delivered by the contractor before construction starts and involve planning, estimating, and providing cost feedback to the owner so it knows what the project is costing at a given point. (Jahrling Tr. 181:1-12). In a typical preconstruction scenario, you have the owner, the architect, and the contractor, where the owner has a separate contract with the architect and a separate contract with the contractor but the contractor and the architect are not bound by a contract. (Jahrling Tr. 181:22-184:23; AD016). 29 US2008 5819490 1 The mission among all three entities is to balance the costs with the schedule and the scope, along with the quality of the design. (Id.). The contractor’s role in preconstruction is to provide cost information to the owner so it can make decisions on the design with the architect; the owner is the one ultimately who has to make the decision as to which elements of scope they want or do not want in the program, and they act as the referee at times. (Id.) 146. Kiewit-Turner was to collaborate and merely “detect” errors, conflicts, and omissions in the design and report them. (Jahrling Tr. 197:17-200:23; AF0032-10). After Kiewit-Turner reported these errors, conflicts, and omissions to the VA, it was the VA’s responsibility to get those comments to the JVT to address. (Id.). Kiewit-Turner had no contractual ability to force the JVT to correct the issue or control costs, those were the VA’s contractual responsibilities. (Jahrling Tr. 201:5-25; Newton Depo. 73:11-74:19; AF0032-10; AF0525). 147. The design issues detected by Kiewit-Turner also had to be reasonably discoverable. (Jahrling Tr. 197:17-200:23; AF0032-10). If Kiewit-Turner properly reported these issues, it would be contractually relieved of any responsibility for any design issues, to the extent it was responsible at all, which it was not. (Jahrling Tr. 203:1-11). B. Preconstruction Submittals 148. Kiewit-Turner initially anticipated providing only two preconstruction submittals, one for the DDs and one for the CDs. (Blatnak Tr. 628:16-17). However, because of the multiple iterations of design packages, Kiewit-Turner was required to perform substantially more preconstruction services than anticipated. (Blatnak Tr. 628:20-629:11). 149. As such, Kiewit-Turner provided numerous “preconstruction submittals.” (AF0039; AF0086; AF0125; AF0233; AF0352; AF0355; AF0359; AF0360; AF0362; AF0364; AF0371; AF0373; AF0374; AF0379; AF0383; AF0421; AF0490). 30 US2008 5819490 1 150. Kiewit-Turner submitted preconstruction submittals starting with the STR-1 and 2 designs in 2010. (Blatnak Tr. 628:9-13; TE042). The majority of Kiewit-Turner’s preconstruction submittals were submitted as part of the Rule 4 File. (AF0039; AF0086; AF0125; AF0233; AF0352; AF0355; AF0359; AF0360; AF0362; AF0364; AF0371; AF0373; AF0374; AF0379; AF0383; AF0421; AF0490). 151. Kiewit-Turner’s final preconstruction submittal was for the 95% CLC design in January of 2013. (Blatnak Tr. 628:12-13; TE042). 152. Kiewit-Turner’s preconstruction submittals included a project schedule, a design review report, which was an assessment of the quality of the drawings, a constructability review, which was an assessment of some of the details, means and methods for construction, as well as a project estimate and any value engineering ideas. (Blatnak Tr. 629:14-630:18; Newton Depo. 46:6-16). 153. Kiewit-Turner would also provide comments on the design into Dr. Checks during their preconstruction services. (Newton Depo. 124:16-125:10; AF0034; AF0035). Kiewit-Turner would comment on issues such as the design being incomplete, needing more information, or if information was missing. (Newton Depo. 124:16-125:10). 154. Kiewit-Turner often went above and beyond its required preconstruction responsibilities, including when it submitted a detailed 266-page variance report detailing why the estimate from the Schematic Design to DD-1 increased by over $70 million. (AF0054). 155. Kiewit-Turner also reported these design issues to the VA through the Dr. Checks program, design reports, design submissions, letters, meetings with the VA, and monthly reports it prepared and provided to the VA. (Jahrling Tr. 200:12-23; 204:10-25; 212:10-19). The Dr. Checks program is a computerized system used by several governmental agencies to evaluate the 31 US2008 5819490 1 design; on the Project, the Dr. Checks program was accessible by Kiewit-Turner, the VA, the designer, the peer reviewers, and Jacobs. (Jahrling Tr. 201:5-25; 211:10-212:9). 156. Kiewit-Turner submitted complete reports on the design issues it saw as the design progressed through each design phase. (Jahrling Tr. 203:12-23). Indeed, at the end of the preconstruction phase, Kiewit-Turner also compiled the preconstruction efforts and transmitted the complete compendium of all its reports to the VA to show that Kiewit-Turner had, in fact, met all of the preconstruction requirements. (Jahrling Tr. 203:24-204:9). 157. Kiewit-Turner dedicated approximately ten people to put together its preconstruction submittals, not including any operations, engineering, or procurement staff. (Blatnak Tr. 632:6-18). Kiewit-Turner worked hard at detecting what it could and expended a significant amount of resources. (Jahrling Tr. 197:17-200:23; 205:5-21). For example, each of the preconstruction reports issued for each design phase required hundreds and hundreds of hours. (Jahrling Tr. 217:10-17). The estimate itself, which is contained in the preconstruction submittal, is very detailed because Kiewit-Turner had to count all the items depicted on the design and price them. (Id.). This effort “took a lot of people a lot of effort to do these.” (Id.) 158. On May 9, 2012, Kiewit-Turner issued a compilation submittal of its preconstruction submittals and provided notice to the VA that it had completed its preconstruction services on the Project pursuant to CLIN-001. (TE008A; TE009A; TE010; TE011A; TE012). C. Kiewit-Turner’s Preconstruction Submittals Warned The VA Of The Design’s Deficiencies 159. It was clear during the preconstruction services period of the Contract that the Project was significantly over-designed, and as Mr. Newton testified, well beyond the normal standard of care of a healthcare institution. (Newton Depo. 96:20-22). 32 US2008 5819490 1 160. Kiewit-Turner informed the VA through its preconstruction submittals that the design lacked coordination and completeness at every stage, all the way up to the 100% percent design drawings. (Blatnak Tr. 632:24-633:2). 161. Kiewit-Turner also informed the VA through its preconstruction submittals and review of the design that it was over budget, that value engineering was not being incorporated, and that the drawings continued to show more things than anybody anticipated. (Newton Depo. 99:5-100:11). The designer was including design elements well past the standard of care for a healthcare facility such as: custom glass, custom walls, custom wood, and custom floors. (Newton Depo. 99:5-12). 162. Every time Kiewit-Turner provided a preconstruction submittal for a particular design phase, it went through the A through P requirements as required by Article 2.4 of the Contract to list the design issues it identified. (Jahrling Tr. 208:14-209:12; AF0359-4-5). 163. On January 11, 2011 Kiewit-Turner submitted its preconstruction submittal for the Design Development 1 (“DD-1”) drawings. (AF0359; AF0360). Kiewit-Turner estimated the DD-1 design at approximately $589 million. (Colpack Tr. 71:4-6; AF0053-1). The design at this time was approximately 30-35% complete. (Jahrling Tr. 210:14-19). 164. Kiewit-Turner submitted its DD-2 preconstruction submittal on April 18, 2011. (Jahrling Tr. 214:4-16; AF0076-1). Kiewit-Turner’s DD-2 estimate for the project design was approximately $659 million. (Colpack Tr. 71:14-16; Newton Depo. 80:17-20; AF0076-5). Kiewit-Turner’s DD-2 estimate exceeded the ECCA by approximately $100 million at the time. (Newton Depo. 78:4-12). The design at the DD-2 design phase was approximately 50% complete. (Jahrling Tr. 215:1-216:11; AF0076). 33 US2008 5819490 1 165. Kiewit-Turner submitted its final preconstruction submittal in May of 2012. (TE011). Mr. Klebba testified that this final preconstruction submittal was a compilation of the DD-1, DD-2, and 95% packages. (Klebba Tr. 467:2-22). D. Kiewit-Turner Satisfied Its Preconstruction Responsibilities 166. Mr. Klebba testified that each of these preconstruction submittals were previously submitted and Kiewit-Turner was lumping them together to fulfill their final preconstruction obligation. (Klebba Tr. 467:13-468:11). 167. Along with this final preconstruction compilation submittal, Kiewit-Turner submitted a letter dated May 7, 2012 entitled “Conclusion of Pre-construction Services.” (TE011-3). Mr. Klebba testified that this was Kiewit-Turner indicating that it had completed its preconstruction services. (Klebba Tr. 470:8-471:7). 168. Mr. Klebba testified that no one from the VA ever disagreed with Kiewit-Turner’s letter stating they had satisfied their preconstruction services. (Klebba Tr. 471:8-10; TE011-3). Mr. Klebba further testified that the VA was very happy with Kiewit-Turner’s preconstruction services. (Klebba Tr. 471:11-15). 169. Mr. Klebba testified that Kiewit-Turner’s preconstruction costs exceeded the $3.4 million paid to them by the VA by approximately $600,000 to $700,000 because of the additional services needed to satisfy Paragraph 10 of SA-007. (Klebba Tr. 471:22-472:3). 170. Kiewit-Turner fulfilled all of its preconstruction contractual requirements pursuant to the contract. (Jahrling Tr. 205:1-4; Pogany Tr. 1262:16-1263:6). 171. Kiewit-Turner did not receive, ever, any negative feedback or criticism from the VA regarding Kiewit-Turner’s preconstruction efforts or services. (Jahrling Tr. 206:16-25). 172. Based on his extensive investigation including reviewing all of the pre- construction submittals, Mr. Aardsma, Kiewit-Turner’s expert on preconstruction issues, testified 34 US2008 5819490 1 that Kiewit-Turner fulfilled its preconstruction responsibilities. (Aardsma Tr. 1028:12-1029:14; TE044-51). He also found that the VA’s representatives agreed that Kiewit-Turner had satisfied its preconstruction responsibilities. (Aardsma Tr. 1029:15-1032:13). 173. Mr. Willoughby testified unequivocally that, in his opinion as the Contracting Officer, Kiewit-Turner satisfied its preconstruction obligations under the Contract. (Willoughby Tr. 1715:3-11). 174. The VA’s counsel at the Closing Arguments also admitted that “[K-T] did design reviews, and they did constructability reviews, they sat down in weekly minutes with the A/E .... The evidence will show that they were intimately involved. They were sitting at the table. And did they do a good job? I believe they did. Did they do a good job? Our witnesses say that they did.” (Closing Argument Tr. 67:4-14). E. Lack of Reconciliation Between the JVT and Kiewit-Turner Estimates 175. The Contract required reconciliation between Kiewit-Turner’s estimate and the JVT estimate. (AF0032-13). The reconciliation process is a tool that the owner has to ensure that the designer’s design can be built within the ECCA. (Knowles Depo. 101:25-102:3; Taylor Depo. 44:1-8). The reconciliation process is supposed to give the owner, here the VA, confidence that it could afford the project and, therefore, direct the design to proceed. (Taylor Depo. 76:18-77:10; AF0740). 176. The Contract required a reconciliation of the direct costs as well as the indirect costs. (Pogany Tr. 1264:15-22). The Contract further required reconciliation of the KiewitTurner and JVT estimates to be within 5% before the parties could move forward. (Klebba Tr. 476:15-22). Mr. Willoughby testified reconciliations were a contractual requirement and are done “to see where the costs are going.” (Willoughby Tr. 1487:7-12). 35 US2008 5819490 1 177. During the DD-2 reconciliation process the JVT never provided Kiewit-Turner with a copy of their estimate, as Mr. Newton testified, “they were very tight to their vest” with their estimate. (Newton Depo. 93:7-22). 178. After the DD-2 preconstruction submittal was provided to the VA, Kiewit-Turner and the JVT attempted to reconcile their estimates. (Id.). Kiewit-Turner’s estimate increased from $659 million to $664 million during the reconciliation process. (Colpack Tr. 71:19-24). 179. Kiewit-Turner and the VA did not reconcile their DD-2 estimates. (Newton Depo. 79:18-22). 180. Kiewit-Turner’s 95% estimate was $717 million and the JVT’s 95% estimate was $607 million. (Klebba Tr. 473:23-474:3; AF0662). Jacobs’ 95% estimate at the time, which was not shared with Kiewit-Turner as Mr. Klebba testified, was $712 million. (Klebba Tr. 474:1120). 181. Mr. Klebba testified that there were several days of meetings to attempt to reconcile the JVT and Kiewit-Turner estimates. (Klebba Tr. 475:3-6). Mr. Klebba further testified that Kiewit-Turner provided several letters to the VA explaining why reconciliation did not occur and why its estimate was so far from the JVT’s estimate. (Klebba Tr. 477:2-6; AF0412; AF0434; AF0435). 182. These letters listed specific examples of why the JVT’s estimate was flawed, but Mr. Klebba testified that the JVT did not adjust their estimates. (Klebba Tr. 477:7-480:15; 484:3-13; 487:4-7; AF0412; AF0434; AF0435). Mr. Klebba testified that Kiewit-Turner pointed out major discrepancies in the JVT’s estimated unit rates, the JVT’s estimated quantities, and the failure of the JVT to price the actual cost of building the Project. (Klebba Tr. 484:3-485:12; 36 US2008 5819490 1 AF0412; AF0434; AF0435). Mr. Klebba further testified that the JVT responded that they only estimated what was on the drawings and left it at that. (Klebba Tr. 484:3-13). 183. Kiewit-Turner made clear to the VA that one of the key problems was that the JVT’s 95% estimate did not include known costs from Kiewit-Turner which was creating an artificial number and allowing the inclusion of scope that would cause the cost for the Project to exceed the funding limit approved by Congress. (AF0412-3). Mr. Klebba testified that KiewitTurner asked Mr. Willoughby to direct the JVT to include the known indirect costs that KiewitTurner was using. (Klebba Tr. 488:21-489:1; AF0412-4). 184. Kiewit-Turner and the VA never reconciled their 95% estimate with the JVT’s 95% estimate. (Colpack Tr. 128:25-129:2; Klebba Tr. 476:11-14; Taylor Depo. 71:7-11). 185. In Mr. Aardsma’s opinion, the VA failed to properly enforce the reconciliation provisions in the Contract. (Aardsma Tr. 1032:14-1037:9; TE044-51). The VA’s failure to properly enforce the reconciliation provisions contributed to it effectively losing control over any effort to cause the design to comply with the budget. (Aardsma Tr. 1036:13-1037:9). F. Despite No Reconciliation And Warnings Against It, The VA Unilaterally Decided To Proceed Without A Reconciliation of the JVT’s And KiewitTurner’s Costs 186. The Contract entitles Kiewit-Turner to “review, participate and sign off on the reconciliation” after the Firm Target Price (“FTP”) has been determined. (Willoughby Tr. 1695:4-1696:25; AF0032-13). 187. Bill Green, the VA’s own third-party peer reviewer, stated that reconciliation did not occur at DD-1 and warned Mr. Pogany of the importance of reconciliation by stating: “[e]stimated costs need to be reconciled as soon as possible in order for all parties to have a clear vision and plan to adhere to.” (AF0058). 37 US2008 5819490 1 188. There was never a true reconciliation of direct and indirect costs on the Project. (Taylor Depo. 188:5-23). Notwithstanding the lack of reconciliation, Mr. Klebba testified that Mr. Willoughby directed Kiewit-Turner to proceed with the 100% documents. (Klebba Tr. 494:1-5). Mr. Willoughby acknowledged Kiewit-Turner has never signed off on the reconciliation. (Willoughby Tr. 1695:4-15). Nonetheless, Mr. Willoughby directed KiewitTurner to proceed with construction. (Willoughby Tr. 1695:16-18). 189. Mr. Willoughby acknowledged there was no reconciliation at DD-2, which Mr. Willoughby blamed on a “big discrepancy in indirect cost.” (Willoughby Tr. 1491:1-1492:11). Mr. Willoughby testified that he felt the VA “could handle the indirect cost at a later date” by doing a DCAA audit of the indirect costs. (Willoughby Tr. 1494:1-10). Otherwise, “I felt as though it was close enough, it was good enough to the satisfaction that the direct cost was less than 1 percent. So with that information I decided, let’s move forward with the design.” (Willoughby Tr. 1493:25-1494:15; 1495:19-1496:17; AF0032-13). 190. The A/E strongly advised the VA not to proceed with an FTP with Kiewit-Turner, both in formal written correspondence sent October 11, 2011 and at a follow-up meeting between the VA and A/E management on October 13, 2011. (Willoughby Tr. 1692:10-1694:18; AF0648; AF0704). At the October 13, 2011 meeting, Mr. Willoughby acknowledged and agreed that the estimated costs were not reconciled as of the Design Development Phase. (Willoughby Tr. 1694:19-23; AF0704). 191. On October 11, 2011, the JVT sent a letter to the Contracting Officer reminding him that the JVT construction estimate and Kiewit-Turner’s proposals had not been reconciled, except for just the direct costs of work, and further warned that the VA was “proceeding with the award of the construction contract in spite of the budget reconciliation requirements.” (AF2226). 38 US2008 5819490 1 192. Mr. Willoughby admitted the parties were nowhere near 5 percent for the direct cost of work at the 95% reconciliation in May 2012. (Willoughby Tr. 1681:13-1683:21). Mr. Willoughby blamed this on the fact that the “unit pricing had changed,” even where Mr. Klebba sent the VA three lengthy letters detailing the increased quantities in the STR, CS-1 and IFO-1 packages respectively. (Willoughby Tr. 1684:12-1686:14; AF0412; AF0434; AF0435). 193. Mr. Willoughby testified he never read or reviewed these letters addressing the 95% reconciliation, even though Mr. Willoughby was copied on the correspondence and acknowledged that he was e-mailed a copy of the correspondence. (Willoughby Tr. 1697:11700:23). 194. Mr. Willoughby further testified that Mr. Pogany was responsible for telling him which correspondence he was supposed to read, even when Mr. Willoughby was separately distributed a copy of the correspondence. (Willoughby Tr. 1700:24-1701:18). 195. By directing Kiewit-Turner to proceed without a reconciliation, the VA unilaterally changed the terms of the reconciliation provision in the contract when it understood that there was no cost reconciliation of the overall construction estimates, as contractually mandated, by directing the architect to proceed to the next level of design. (Pogany Tr. 1264:151265:14; AF0412; AF0434). 196. On March 18, 2013, the JVT wrote the VA stating the following: “[n]o true reconciled cost baseline was ever established yet the project was directed [by the VA] to move forward.” (AF2320). V. NEGOTIATIONS OF A FIRM TARGET PRICE A. Jacobs Estimate August 2011 IGE 197. On July 7, 2011, Kiewit-Turner and the VA agreed that Kiewit-Turner would submit a FTP Proposal for $603 million with a ceiling price of $609 million. (AF0098). 39 US2008 5819490 1 198. As part of this agreement, Kiewit-Turner informed the VA that “[o]ver the next thirty days we will work together to determine which documents form the basis of this new ceiling and target prices, which qualifications and assumptions are necessary to document same, and our plan to lock down the majority of the Value Engineering committed to date ($23,000,000).” (AF0098-1). 199. On July 8, 2011, the VA requested that Jacobs provide an independent estimate for the entire Project. (AF0100). Mr. Willoughby testified he requested Jacobs provide an estimate of the DD-2 documents because he wanted an estimate that was “independent” of both the A/E and the contractor. (Willoughby Tr. 1706:14-1707:17). Mr. Lynn was involved in negotiating a modification to Jacobs’ contract in July 2011 to provide an independent cost estimate of the DD-2 level design. (Lynn Tr. 922:25-923:23; AF0647). 200. The VA and Jacobs met on July 12, 2011 to discuss the independent estimate to be prepared by Jacobs, and the meeting minutes stated that the “VA has requested an independent estimate of the project that will serve as the government's official estimate.” (AF0670-1). 201. On August 24, 2011, Jacobs provided its independent estimate to the VA. (AF0118-1). Jacobs’ estimate was approximately $677 million. (AF0118-14). This included numerous qualifications and allowances. (AF0118-6-10). 202. Mr. Schneider was the lead estimator for the Jacobs August 24, 2011 estimate for the Project that totaled $677,697,408. He testified that this was a fair and reasonable price for the design given the state of the design as of August 2011. (Schneider Tr. 739:9-740:24; AF0118). 40 US2008 5819490 1 B. Kiewit-Turner’s “Book” 203. Kiewit-Turner and the VA attended a meeting on July 7, 2011 to discuss a FTP proposal. (Klebba Tr. 313:5-9). The meeting was attended by Mike Colpack, Chris Jahrling, and AJ Klebba for Kiewit-Turner and Thaddeus Willoughby, Tim Pogany, and Tom Hayden for the VA. (Klebba Tr. 314:14-23). 204. The VA made clear at the July 7, 2011 meeting that they could not afford a project for $664 million, Kiewit-Turner’s DD-2 estimate at the time, and that $603 million was what they could afford. (Klebba Tr. 314:1-8). 205. It was agreed on July 7, 2011 that Kiewit-Turner would provide the VA with a FTP of $603 million and a proposal that would “show [the VA] how we get there.” (Colpack Tr. 74:6-19; Klebba Tr. 312:23-313:9; AF0098; AF0388-5). 206. Kiewit-Turner presented the VA with a spreadsheet to show the VA how it would get the Project price down to $603 million. (AF0098-3-4). Mr. Colpack testified that this reduction from $664 million to $603 million was achievable and met the VA’s project goals. (Colpack Tr. 77:21-78:2). 207. Several Kiewit-Turner representatives similarly testified that the concept of a million square foot hospital for $500 to $600 million was a very doable goal for a healthcare facility. (Jahrling Tr. 230:18-231:21; 179:5-20; Newton Depo. 98:2-99:12). 208. 209. The detailed proposal would “describe everything that was included in the $603 million” and provide a roadmap to the JVT to “design the project to meet the goal of $603, $609 million.” (Colpack Tr. 75:1-8). This included $23 million in value engineering items that were agreed to between Kiewit-Turner and the VA. (Klebba Tr. 318:8-319:5). 41 US2008 5819490 1 210. This proposal would also contain assumptions and qualifications because at the time, the design was not complete and Kiewit-Turner had to define the parameters to get the cost down because at that point the design cost significantly more than $603 million. (Colpack Tr. 75:12-19). 211. This type of proposal, with assumptions and qualifications, is typical in the commercial world for a CM@Risk type of contract where the design is incomplete. (Colpack Tr. 80:17-81:2; Newton Depo. 35:3-10; 36:2-10). 212. Mr. Newton testified the plans and specifications were nowhere near $604 million, and the qualifications and assumptions would cause to the JVT to incorporate certain things into the plans and specifications to bring the price down. (Newton Depo. 107:8-108:6). Mr. Newton further testified that the Book was basically a report telling the VA if they do all these things, Kiewit-Turner could build the hospital for the ceiling price. That was the intent of the Book. (Newton Depo. 108:7-10; 111:7-17). 213. The Book was itself going to become part of the Contract and take precedence over the design. (Colpack Tr. 82:3-11; Klebba Tr. 335:23-336:7; AF0388-95). 214. On August 25, 2011 Kiewit-Turner submitted its first FTP Proposal to the VA. (AF0379). The FTP Proposal was known as “the Book.” (Colpack Tr. 79:1-6; Klebba Tr. 310:21-311:1; AF0379). 215. Kiewit-Turner provided the “Book” as a price proposal for CLIN-002 so that the parties could advance to perform the work with CLIN-002; it was a transition from preconstruction to construction. (Jahrling Tr. 223:10-25). Kiewit-Turner’s “Book” was a recipe for the VA to follow that, if followed, would result in a $604 million completed hospital. 42 US2008 5819490 1 (Colpack Tr. 80:3-6; Jahrling Tr. 230:18-231:25; Klebba Tr. 311:2-11; Klebba Tr. 340:7-21; AF0388-95). 216. The Book as originally submitted to the VA, contained nine different tabs. (Klebba Tr. 312:2-13; AF0379-3). The tabs represented the various sections of the Book: the estimates, the allowances, the basis of proposal, value engineering, schedule narrative, document list, organizational chart, and some additional attachments. (Klebba Tr. 312:4-13). The Basis of Proposal tab included the assumptions, qualifications, and clarifications for Kiewit-Turner’s FTP Proposal. (Klebba Tr. 333:25-334:6). 217. The allowances tab was necessary because the design was not complete and there was not enough information to adequately estimate certain design elements. (Klebba Tr. 332:1625). The allowances communicated to the VA and to the JVT the value those items had to be designed to to meet the budget. (Id.). The Book also included a list of the design documents and design specifications upon which the Proposal was based. (Klebba Tr. 345:11-16; AF0379-160163). C. Negotiation Of Kiewit-Turner’s “Book” 218. Kiewit-Turner and the VA negotiated the original submittal of the Book for approximately two months, updating and revising various parts of the Book. (Colpack Tr. 81:619; Newton Depo. 111:20-112:2). 219. Mr. Klebba was the main negotiator for Kiewit-Turner. (Colpack Tr. 83:19-25). Mr. Willoughby was the main negotiator for the VA. (Klebba Tr. 351:5-9). 220. Every page was reviewed to make sure it was something that both parties would accept. (Klebba Tr. 351:19-352:3). 43 US2008 5819490 1 221. If any changes were made, then instead of resubmitting the entire Book, only individual pages were revised and substituted into the Book with an updated date. (Klebba Tr. 352:4-24). 222. The VA solicited Jacobs’ input to review Kiewit-Turner’s FTP Proposal. (AF0122-1). Jacobs provided its initial review to the VA on September 12, 2011. (Id.) 223. On September 20, 2011, the VA and Kiewit-Turner exchanged comments on an early draft of the FTP proposal. (AF2221A). 224. On September 23, 2011, the VA provided Kiewit-Turner with its comments on Kiewit-Turner’s initial FTP Proposal. (AF0381). 225. On October 4, 2011, Kiewit-Turner submitted a revised FTP Proposal to the VA with just the individual sheets that were replaced from the initial August 25, 2011 FTP Proposal. (Klebba Tr. 353:6-18; AF1108). 226. These revised sheets were all based on agreements reached with the VA. (Klebba Tr. 354:1-8). 227. After the October 4, 2011 revised Book pages were submitted to the VA, Mr. Willoughby issued a draft change order to Kiewit-Turner. (Klebba Tr. 355:12-356:6; AF0384). The draft change order was labeled SA-007 and had a future effective date of October 17, 2011. (Klebba Tr. 356:2-10; AF0384). 228. The draft change order was intended to incorporate the Book as part of the Contract. (Klebba Tr. 357:1-18; AF0384). Essentially, each tab in the updated October 4, 2011 Book was referenced and Mr. Willoughby would document the VA’s agreement or exceptions to each tab. (Klebba Tr. 357:18-358:8; AF0384-2). 44 US2008 5819490 1 229. This draft change order specifically referenced Tab 7 of the FTP Book which was the list of drawings, or document list. (Klebba Tr. 359:14-360:6; AF0384-3). 230. All the tabs in the Book were going to be incorporated into the Contract unless specifically noted by the Contracting Officer in the draft change order. (Klebba Tr. 358:20-25). 231. There were multiple draft change orders exchanged between Kiewit-Turner and the VA. (Klebba Tr. 355:7-11; AF0385). Kiewit-Turner would respond to the VA’s proposed draft change orders with their comments. (Klebba Tr. 361:2-11; AF0385). 232. Mr. Willoughby believed he had reached an agreement with Kiewit-Turner in September 2011, but for a few stipulations. (Jahrling 226:4-11; Kyrgos Tr. 1090:16-1091:4). 233. On October 27, 2011, the parties were discussing one of the last remaining issues: the economic price adjustment (“EPA”) clause to be incorporated into the FTP Proposal. (AF2230; AF2231). Mr. Willoughby confirmed this when he e-mailed VA executives that day and informed them that “there is one issue remaining to negotiate, the economic price adjustment clause.” (AF0141). One day later, on October 28, 2011, Mr. Willoughby e-mailed KiewitTurner to confirm that “[c]urrently, there is one issue remaining to negotiate, the economic price adjustment clause.” (Colpack Tr. 85:14-86:5; AF0143). 234. After exchanging comments on the draft SA-007 modification, Kiewit-Turner submitted an updated draft SA-007 to the VA. (AF0386). This draft modification continued to reference specific tabs in Kiewit-Turner’s Book. (AF0386-2). 235. On November 4, 2011, Mr. Klebba e-mailed to Mr. Willoughby a list of proposed commodities and indices to use with the economic price adjustment clause. (AF0145). 45 US2008 5819490 1 236. On November 9, 2011, Kiewit-Turner submitted its final, revised FTP Proposal to the VA. (AF0388). This was Kiewit-Turner’s FTP Proposal, or Book, as updated through November 9, 2011. (Jahrling Tr. 222:17-23; AF0388). 237. The VA’s consultant on IDc contracts, Mr. Rossi, recommended that the VA not enter into a FTP until after the 100% design. (Rossi Depo. 120:12-122:7; 204:13-16; AF0796; AF0804). Mr. Rossi testified that without a 100% design the contractor would be forced to put contingencies into the pricing. (Rossi Depo. 121:13-122:7; AF0796). VI. SA-007 A. November 9, 2011 Meeting On The FTP a. 238. Purpose Of FTP Meeting Veterans Day was approaching on November 11, 2011, around the same time the parties were negotiating the Book. (Jahrling Tr. 221:11-15). There was a tremendous amount of pressure on the VA in the Fall of 2011 to exercise CLIN-002 and start construction. (Kyrgos Tr. 1119:23-1120:13). 239. Following an internal VA meeting, the VA scheduled a meeting in the afternoon of November 9, 2011 with Kiewit-Turner to “finalize negotiations of the firm target price.” (Willoughby Tr. 1522:8-14). The purpose of the November 9, 2011 meeting was to finalize the agreement with Kiewit-Turner and proceed with the construction option, CLIN-002. (Colpack Tr. 88:6-9; Jahrling Tr. 225:21-226:11; Pogany Tr. 1207:13-24). 240. The November 9, 2011 meeting was a milestone meeting and a turning point on the Project to either execute the construction option of CLIN-002, or go out to bid and find another contractor to do the construction work. (Kyrgos Tr. 1108:13-1109:15). 241. Chris Kyrgos, Mr. Willoughby’s supervising contracting officer, flew in town to discuss these last remaining issues along with the VA’s general counsel and other members of 46 US2008 5819490 1 the VA. (Willoughby Tr. 1520:2-18). The VA employees participating that day included the VA “project team” of Mr. Willoughby, Mr. Pogany, and Mr. Hayden, Mr. Kyrgos, as well as the VA’s general counsel, and Mr. Lynn of Jacobs. (Colpack Tr. 88:13-19; Jahrling Tr. 186:18-22; Kyrgos Tr. 1093:24-1094:6; Pogany Tr. 1207:5-12; Willoughby Tr. 1521:6-14). Mr. Kyrgos was the lead negotiator for the VA during the negotiations on November 9, 2011. (Lynn Tr. 893:11-18; Willoughby Tr. 1617:1-14). 242. For Kiewit-Turner, the November 9, 2011 meeting was attended by A.J. Klebba, Chris Jahrling, and Mike Colpack for Kiewit-Turner, as well as Paul Blatnak for parts of the meeting. (Colpack Tr. 88:13-89:4). 243. Jim Lynn and Steve Bliss also attended for Jacobs. (Colpack Tr. 88:20-23). 244. Kiewit-Turner brought an updated copy of the Book to the November 9, 2011 meeting. (Klebba Tr. 363:12-364:1; AF0388). This updated Book included a drawing list in Tab 7 that was essentially an updated drawing list from the original August 25, 2011 Book. (Klebba Tr. 404:1-23; AF0388-157). 245. Mr. Colpack testified that Kiewit-Turner expected Chris Kyrgos to review the Book and there would be a final signing of the Book. (Colpack Tr. 88:1-5; 89-13-14). Mr. Klebba testified that there were only two items remaining to negotiate in the Book. (Klebba Tr. 363:3-11; AF2234). b. 246. The VA’s Mr. Kyrgos Throws Out Kiewit-Turner’s “Book” Mr. Klebba testified he understood that the economic price adjustment clause and a low voltage issue in the CBS building were the only two open items remaining to be negotiated in the November 9, 2011 meeting. (Klebba Tr. 401:1-402:9; AF0659-2). These were the only issues that Kiewit-Turner and the VA on-site team had not reached an agreement on in the Book. (Klebba Tr. 402:22-403:25). 47 US2008 5819490 1 247. Mr. Klebba testified that neither of those items was ever discussed at the November 9, 2011 meeting because the VA’s Mr. Kyrgos instead had issues with the Book. (Klebba Tr. 402:10-16). As of the November 9, 2011 meeting, however, Mr. Kyrgos testified that he had not reviewed the Book. (Kyrgos Tr. 1098:13-1099:14). 248. Mr. Kyrgos stated that he did not realize that the Book involved qualifications or clarifications and wanted an agreement without any of these stipulations. (Colpack Tr. 89:17-23). The parties discussed the EPA clause and the schedule, and at that point, the “clarifications and assumption issue came up with Mr. Kyrgos.” (Willoughby Tr. 1523:7-1523:21). 249. Kiewit-Turner also explained to Mr. Kyrgos that the Book did not contain the most recent set of design drawings and Kiewit-Turner had not priced the most recent design drawings. (Colpack Tr. 89:24-90:9). Mr. Kyrgos was upset that the Book did not include the current design documents at that time. (Klebba Tr. 365:10-19). Mr. Willoughby testified Mr. Kyrgos was “adamant” that no clarifications and assumptions should be in the proposal because of Kiewit-Turner’s involvement during preconstruction. (Willoughby Tr. 1523:22-1524:8). 250. Mr. Klebba testified that Kiewit-Turner informed Mr. Kyrgos and the VA that it would take 10 to 12 weeks to update the estimate for the most current set of design documents. (Klebba Tr. 367:6-368:3; Willoughby Tr. 1526:6-1527:22). Mr. Willoughby testified that Kiewit-Turner responded that clarifications and assumptions were needed because the design was not complete. (Willoughby Tr. 1524:9-16). Kiewit-Turner was simply “making their case known --- they are making their case known that this is how they view the documents and this is what they took into consideration.” (Id.). In fact, Mr. Willoughby had actually determined the clarifications “weren’t too bad, they weren’t bad at all to me.” (Willoughby Tr. 1525:6-18). But Mr. Kyrgos was “adamant” and he went so far as to accuse Mr. Willoughby of being “too easy” 48 US2008 5819490 1 on the contractor. (Id.). Mr. Willoughby did not know if Mr. Kyrgos had even looked at the clarifications and assumptions. (Willoughby Tr. 1525:19-21). 251. Mr. Kyrgos said that he wanted Kiewit-Turner to sign up to the $603 million outlined in the Book without any qualifications or assumptions listed in the Book, and he also said he wanted the $603 million price based on the then-current set of design drawings. (Colpack Tr. 90:10-14; Jahrling Tr. 227:1-229:14; Klebba Tr. 368:3-15). Mr. Kyrgos would not agree to any of the Book. (Colpack Tr. 148:22-149:3). Everyone at the time knew that the design at that time did not represent a design that could be built for $603 million. (Colpack Tr. 91:7-8). 252. Mr. Kyrgos threw out the Book and stated in the November 9, 2011 meeting that the Book was not accepted by the VA. (Colpack Tr. 101:5-23; 155:4-11; Klebba Tr. 376:6-17; 546:16-25; Kyrgos Tr. 1098:13-1099:14; Pogany Tr. 1209:1-1210:13; Haggstrom Depo. 129:1013; Fiotes Depo. 67:10-18). There was no part of the Book that he accepted. (Jahrling Tr. 232:1-4). Mr. Willoughby admitted that neither the handwritten Path Forward Memorandum, nor SA-007, references the FTP Proposal Book. (Willoughby Tr. 1742:22-1744:5; AF0160; AF0167). 253. Chris Kyrgos made it clear in the November 9, 2011 meeting that Kiewit-Turner’s FTP Proposal Book was no longer on the table for consideration. (Hayden Tr. 1408:18-1409:3). Mr. Willoughby admitted that during the November 9, 2011 negotiations Mr. Kyrgos rejected the FTP Proposal Book entirely: “He made that statement as to he would not accept the book.” (Willoughby Tr. 1585:21-1586:10). 254. Mr. Kyrgos undid all the work the team had prepared and negotiated leading up to the November 9, 2011 meeting. (Jahrling Tr. 227:1-229:14). 49 US2008 5819490 1 c. 255. The Parties Reach An Impasse The meeting was long and intense. (Kyrgos Tr. 1097:16-21). Mr. Kyrgos was agitated during the meeting. (Jahrling Tr. 227:1-229:14). 256. Mr. Kyrgos was insistent that Kiewit-Turner use the most current, up-to-date design information that it had in their possession at the time of the agreement being signed. (Jahrling Tr. 227:1-229:14; Pogany Tr. 1209:1-1210:13). Kiewit-Turner indicated during that meeting that they had not reviewed those documents and didn’t know what impact on the final cost or schedule those may have and were leery of those documents coming into the agreement. (Id.) 257. Kiewit-Turner made it clear that those conditions were unacceptable because everyone knew the Project was already over budget at the time. (Colpack Tr. 90:15-21). Mr. Colpack said that the parties would have to part ways. (Colpack Tr. 90:15-21; Klebba Tr. 368:12-15; Hayden Tr. 1441:21-1442:10). 258. Mr. Kyrgos walked out of the November 9, 2011 meeting. (Jahrling Tr. 227:1- 229:14; Kyrgos Tr. 1097:22-25). He walked out of the meeting because Kiewit-Turner was not prepared to commit to the construction option, CLIN-002, without the VA agreeing to the Book. (Jahrling Tr. 227:1-229:14; Kyrgos Tr. 1098:8-12). 259. Mr. Lynn recalled the “big sticking point” was the fact that Kiewit-Turner’s FTP Proposal Book “included over 30 pages of qualifications and exclusions and things that the VA found unacceptable.” (Lynn Tr. 892:10-20). Mr. Lynn testified the VA sought all qualifications and exclusions be removed, while Kiewit-Turner “shot back and basically said, ‘Well, those qualifications and exclusions are what enable us to offer this price. And you can’t really have the price without these other caveats.’ So the whole thing kind of broke down.” (Lynn Tr. 892:2125). 50 US2008 5819490 1 260. Mr. Lynn testified another sticking point was whether Kiewit-Turner agreed to the price based on the most current document list explaining that “some of the documents that were listed in it as referenced were somewhat old in relationship to documents that were currently available ... but estimating takes time. So if a document was released, you know, one week prior to this negotiation session, it’s not reasonable to assume that you know what’s on those documents ... a project this large, you need several weeks to digest these documents.” (Lynn Tr. 894:7-22). However, Mr. Lynn continued that while “there was a lot of discussion about whether to incorporate the latest documents or not...at the end of the day, the proposal itself that included the document list was not really being considered.” (Lynn Tr. 894:22-895:1). 261. Discussions further broke down when discussing the document list and Mr. Willoughby testified that negotiations “got kind of loud, if you want to put it mildly” because “Mr. Kyrgos felt as though the documents that Kiewit-Turner had, they did not price.” (Willoughby Tr. 1526:4-1527:5). However, Mr. Willoughby unequivocally testified that he had agreed with Kiewit-Turner’s position and told Mr. Kyrgos that he had agreed to “draw a line” and only price documents as of a certain date. (Id.) 262. Mr. Willoughby admitted he had represented to and agreed with Kiewit-Turner during the two months of negotiations leading up to the November 9, 2011 negotiations that the FTP Proposal Book should be based on a certain set of documents, the DD-2 enhanced documents. (Willoughby Tr. 1583:17-1584:20). Mr. Willoughby believed the revised Book addressed the issues the VA had, except for a “couple of outliers” like the EPA clause. (Willoughby Tr. 1518:9-20). Otherwise, he believed the FTP Proposal Book reflected a contract that “was a good thing to do” subject to concurrence from VA legal. (Willoughby Tr. 1519:1322). 51 US2008 5819490 1 263. Following the disputes over the clarifications and assumptions as well as the drawing list, Mr. Willoughby believed the parties were at a real breakdown. Stating “we already was not talking about clarifications and assumptions because that was an issue we couldn’t get past. Now the document list came up, that was an issue we couldn’t get past. At that time that’s when I think we broke down and Mr. Kyrgos was saying we can’t come to an agreement, we’re done.” (Willoughby Tr. 1527:23-1528:7). 264. The parties were at an impasse and Mr. Lynn attempted to negotiate a resolution by asking the parties what they could both agree upon as a team. (Colpack Tr. 91:1-6; Klebba Tr. 368:18-369:16). d. 265. Impasse Is Overcome Mr. Lynn acted as the mediator after the parties reached an impasse during the November 9, 2011 meeting. (Jahrling Tr. 227:1-229:14; Jahrling Tr. 229:23-230:17). Mr. Lynn facilitated the parties through the impasse by getting the parties to determine what they could agree on. (Lynn Tr. 896:7-21). 266. Jim Lynn wrote the handwritten Path Forward Memorandum. (Lynn Tr. 895:19- 896:6; Willoughby Tr. 1528:8-1529:2; AF0160). 267. Mr. Lynn asked Kiewit-Turner, if the VA promised to provide a design for the ECCA, would Kiewit-Turner stay engaged on the Project and build the Project for the target price of $603 million; Kiewit-Turner agreed to that. (Colpack Tr. 91:7-17; Klebba Tr. 369:17370:10). e. 268. Terms Of Agreement Reached On Night Of November 9, 2011 Mr. Lynn then drafted a handwritten agreement on November 9, 2011 that captured the agreement between Kiewit-Turner and the VA. (Colpack Tr. 91:21-92:11; AF0160). 52 US2008 5819490 1 269. Kiewit-Turner agreed that if the VA committed to providing a design in the future for the $582 million ECCA, Kiewit-Turner would commit to building it for $604 million. (Klebba Tr. 370:3-14). 270. Paragraphs one and two of the handwritten agreement from the November 9, 2011 meeting were the most discussed topics at the final part of those negotiations. (Hayden Tr. 1439:16-19; Willoughby Tr. 1586:24-1588:21; AF0160; AF0167). 271. Paragraph one of the handwritten agreement, entitled “Agreements – Path Forward” states that “All parties agree that they must get price to $604 million. They will each expend resources to keep that goal.” (AF0160). Regarding paragraph one of the handwritten Path Forward Memorandum, Mr. Lynn understood this to address the VA’s need “to control the architect so that the final documents were meeting that budget.” (Lynn Tr. 896:22-897:10; AF0160). Tom Hayden understood paragraph one of the handwritten agreement required the VA to value engineer and find cost reductions in the current design to get the project within the $604 million budget. (Hayden Tr. 1439:20-25). 272. Mr. Colpack testified that what was discussed regarding paragraph one was that all the teams would commit resources to control the design and the project cost of $604 million. (Colpack Tr. 94:2-12; Klebba Tr. 371:12-22). This was necessary because all the parties knew that the design at the time was more than the $604 million described in paragraph one. (Klebba Tr. 371:12-22). 273. Paragraph two of the handwritten agreement states that “VA shall cause JVT to produce a design that meets their ECCA with use of alternates and other methods as a safety net.” (AF0160). During the November 9, 2011 meeting, Kiewit-Turner expressly requested that the VA make sure the A/E provided a “final design” that met the ECCA; this agreement was 53 US2008 5819490 1 incorporated into the handwritten agreement from that night as well as within the executed SA007. (Pogany Tr. 1207:25-1208:25) (emphasis added). According to Mr. Hayden, the VA was agreeing to make sure that the JVT’s final design could be built for the amount of the ECCA. (Hayden Tr. 1440:18-23). 274. Regarding paragraph two of the handwritten Path Forward Memorandum, Mr. Lynn understood this to address the “concern that the architect needed to be managed and that they needed to be managed to budget. And so because the VA was in a position to make this happen, that’s what this means, is that the VA will cause the architect to manage the design to budget.” (Lynn Tr. 897:11-21; AF0160). 275. Regarding paragraph two of the Path Forward Memorandum, which became paragraph 11 of SA-007, Mr. Willoughby agreed that in paragraph 11, the VA was making a commitment to Kiewit-Turner that it was going to find further VE to get the job back within the ECCA, testifying “it’s the same thing as paragraph 1, [the VA] had to expend resources to do that, to do the VE. Also, again, the A/E contract requires them to be at the ECCA.” (Willoughby Tr. 1591:4-1592:8; AF0160; AF0167). Describing paragraph two of the handwritten Path Forward Memorandum, Mr. Willoughby testified that he had no problem with the language because “the VA is required by the A/E contract to make sure the A/E meets the ECCA.” (Willoughby Tr. 1530:4-9; AF0160). 276. Mr. Willoughby testified that it was agreed by the parties in the handwritten Path Forward Memorandum paragraph two and SA-007 paragraph 11 that further value engineering would be done to get the project within the ECCA: Q: Was it agreed to in this handwritten memo and further agreed in SA-007 that further value engineering would be done, whatever was necessary, in order to get the project within the ECCA? A: I think that was part of expending the resources to get it within the ECCA, yes. 54 US2008 5819490 1 Q: That’s part of the commitment the VA was making in this paragraph 2? A: Yes. (Willoughby Tr. 1598:19-1599:11; AF0160). Mr. Willoughby understood the reference to “alternates and other methods as a safety net” to mean that “in case the ECCA wasn’t met, the VE items that were to be used, and make sure the ECCA ... to bring down the firm target price ... to use the VE items to bring that cost down.” (Willoughby Tr. 1530:10-18; AF0160). 277. Mr. Lynn testified regarding paragraph two’s reference to “alternates and other methods as a safety net” stating that “alternates” arose out of a discussion during the November 9, 2011 negotiations: “Essentially, there was a discussion about how are we were going to make sure this project is on budget. So there was discussion, ‘Well, we can use alternates. We can try this and then have an alternate design that’s maybe less expensive.’” (Lynn Tr. 899:7-15). Testifying further, Mr. Lynn analogized an “alternate” from paragraph two as being a situation where the design calls for a gold chalice, but the alternate would be a paper cup: “You know, they both hold water, and they both perform a function, but one costs a lot more than the other one does.” (Lynn Tr. 899:19-900:13). Mr. Lynn testified that the parties agreed that night that the design would have to have alternates and other methods to provide a safety net to make sure that the ECCA could be met. (Lynn Tr. 900:23-901:3). 278. “Other methods” referred to value engineering and redesign that would cause the Project to cost less money. (Lynn Tr. 899:15-18). 279. Mr. Lynn agreed that paragraph two was the paragraph that broke the impasse between the parties, testifying: “Yes, I believe so, because essentially the VA was saying, ‘Hey, we’re going to take responsibility for our architect, and whatever that architect produces, we’re going to make sure it’s on budget.’” (Lynn Tr. 901:4-12). Mr. Colpack testified that this 55 US2008 5819490 1 guarantee was the watershed moment that allowed Kiewit-Turner to agree to move forward with the Project. (Colpack Tr. 95:3-7; Klebba Tr. 371:23-372:8). 280. It was discussed at the meeting that the language “use of alternates and other methods as a safety net” was intended to allow the VA to exercise alternates if subcontractors’ bids came in above or below budget. (Colpack Tr. 95:8-21; Klebba Tr. 372:9-23). 281. The parties also agreed in the November 9, 2011 meeting for a project duration of 1,228 days. (Kyrgos Tr. 1105:9-1106:25). 282. The handwritten agreement further extended the preconstruction services that Kiewit-Turner would provide on the Project. (Colpack Tr. 100:4-10; Klebba Tr. 373:14-25; AF0160). The extension of preconstruction services also moved some money for preconstruction services from CLIN-002 to CLIN-001. (Klebba Tr. 374:3-25). 283. Paragraph five was crossed out because the $604 FTP was already in the document. (Klebba Tr. 375:21-24; AF0160). 284. Paragraph six was crossed out because there was no need for an economic price adjustment clause, or EPA, if the VA was going to provide Kiewit-Turner with a design that met the ECCA. (Klebba Tr. 375:25-376:5; AF0160). 285. The handwritten document makes no reference to Kiewit-Turner’s FTP Proposal, it makes no reference to the document list, and it makes no reference to any then-existing design. (Lynn Tr. 901:13-22; Willoughby Tr. 1600:1-6; AF0160). 286. The only design referenced in the handwritten Path Forward Memorandum is the design that the VA is going to cause the A/E to produce in the future that would meet the ECCA of $582 million. (Colpack Tr. 101:8-15; Lynn Tr. 901:23-902:2; 903:7-904:17; Hayden Tr. 1441:10-20; AF0160). 56 US2008 5819490 1 287. The handwritten agreement was signed by Mr. Willoughby, Mr. Pogany, Mr. Hayden, Mr. Klebba, Mr. Jahrling, and Mr. Colpack. (Colpack Tr. 92:12-25; AF0160). Mr. Kyrgos did not sign the handwritten agreement reached on November 9, 2011. (Colpack Tr. 93:7-12; Jahrling Tr. 233:9-12; AF0160; Kyrgos Tr. 1107:17-19). Mr. Kyrgos was asked by Mr. Willoughby to sign the handwritten agreement, but declined to do so. (Hayden Tr. 1438:20– 1439:9; Willoughby Tr. 1599:17-25; AF0160). f. 288. The Parties Discussed The ECCA In The November 9, 2011 FTP Meeting The parties knew the value of the ECCA during the negotiations and discussed an agreed upon amount of $582 million in the November 9, 2011 meeting. (Jahrling Tr. 232:5-13; 234:14-235-9; Lynn Tr. 898:7-898:23). 289. It was well understood and discussed at the November 9, 2011 meeting that the ECCA at the time was $582 million. (Colpack Tr. 91:10; 94:18-21; Klebba Tr. 370:5-14; 384:1119). 290. Mr. Willoughby testified unequivocally that the value of the ECCA at the time of the negotiations was $582,840,000.00. (Willoughby Tr. 1606:17-1607:5). Mr. Willoughby further testified this amount was commonly known among the management of Kiewit-Turner, the A/E and the VA. (Willoughby Tr. 1658:4-1659:2). The value of the ECCA has not changed and remains $582,840,000.00. (Willoughby Tr. 1607:22-1608:3). 291. Mr. Lynn testified the “delta between 582 and 604 was a variety of other issues that for complicated reasons ... were not considered part of the architect’s ECCA.” (Lynn Tr. 898:24-899:6). 292. On November 10, 2011 at 10:28 AM, Kiewit-Turner sent a confirming email to the Contracting Officer and Project Executive stating, “In follow-up to last night’s conversation, 57 US2008 5819490 1 please confirm that the current ECCA is $582 million.” (AF2235). In response, the Project Executive confirmed by saying “in round numbers yes, but that does not include the cost of the off-site design package.” (AF2235). g. 293. After The November 9, 2011 FTP Meeting, Kiewit-Turner Submits A New FTP Proposal Pursuant To The Terms Reached On November 9, 2011 After the November 9, 2011 handwritten agreement, the parties understood that it was necessary to make this a formalized supplemental agreement. (Colpack Tr. 102:3-11). 294. Kiewit-Turner was tasked with preparing a new proposal and the VA would take that and draft a supplemental agreement based on the new proposal. (Colpack Tr. 102:14-17; Klebba Tr. 376:6-17). 295. A new proposal was required because the prior draft change orders of SA-007 were based on the Book and laid out what parts of the Book were specifically incorporated. (Klebba Tr. 376:18-377:1). 296. Kiewit-Turner submitted its new two-page FTP Proposal to the VA on November 11, 2011. (Colpack Tr. 102:18-23; 156:6-10; Klebba Tr. 377:11-378:11; AF0759). Mr. Klebba testified that the entire proposal for the FTP Proposal was these two pages. (Klebba Tr. 561:1215; AF0759). 297. Mr. Colpack and Mr. Klebba testified that paragraphs one through six of the new FTP Proposal essentially tracked the language of the handwritten agreement, with a few clarifying details. (Colpack Tr. 104:1-6; Klebba Tr. 378:12-21). Mr. Hayden understood that Kiewit-Turner’s two-page letter dated November 9, 2011 was Kiewit-Turner’s revised proposal as a result of the negotiations on November 9, 2011. (Hayden Tr. 1442:11-21; AF0759). 298. The new FTP Proposal did not reference any design drawings or any parts of the Book. (Colpack Tr. 104:7-13; Klebba Tr. 379:15-380:8; AF0759). 58 US2008 5819490 1 299. Mr. Klebba testified that the new FTP Proposal was based on the commitment from the VA to provide a design that met the ECCA. (Klebba Tr. 380:9-12). Mr. Jahrling testified that the $604 million price in SA-007 was achievable and that he’s been “doing this a long time, so I know hospital – big hospitals are in the $400 square foot range, that the typical range for a big hospital … so I felt, yes, it’s definitely doable.” (Jahrling Tr. 230:18-231:21). B. Terms And Meaning Of SA-007 a. 300. Drafting SA-007’s Final Language The formal contract modification, Supplemental Agreement or SA-007, was developed based on this FTP Proposal. (Colpack Tr. 104:24-25). 301. SA-007 was where the parties reached an agreement on a basis other than the Book. (Haggstrom Depo. 129:14-16). Paragraphs 9, 10, and 11 of SA-007 confirm, with slight modifications, what had been in the handwritten agreement. (Colpack Tr. 110:3-7; AF0167; TE051). 302. Mr. Willoughby drafted the initial draft SF30 of what would become SA-007 immediately following the November 9, 2011 negotiations that contained a single continuation page based on the terms in the handwritten Path Forward Memorandum. (Willoughby Tr. 1600:15-1602:21; AF0160; AF0167). 303. Mr. Willoughby testified he was “not sure” which documents formed the basis of SA-007 when he left the negotiations on November 9, 2011 that culminated in the handwritten Path Forward Memorandum. (Willoughby Tr. 1614:6-12; AF0160). Mr. Willoughby further testified that when he drafted SA-007 he testified he “knew there were documents” but wasn’t sure they were the same documents Mr. Kyrgos wanted. (Willoughby Tr. 1614:13-20). He testified he did not list any documents in SA-007 because “that wasn’t the agreement.” Q: And, therefore, you didn’t list or reference any documents in SA-007, correct? 59 US2008 5819490 1 A: That wasn’t the agreement, so it wasn’t listed. (Willoughby Tr. 1614:21-24). 304. The only relevant document to understand the scope of SA-007 is SA-007 itself; any previous document used in the negotiations leading up to SA-007 had no relevance or weight regarding the parties’ Contract. (Kyrgos Tr. 1155:17-1156:22; AF0714-1). 305. In accordance with paragraph 10 of SA-007, Kiewit-Turner would now provide weekly budget trends of where the design estimated cost was compared to the budget. (Colpack Tr. 112:14-114:13; 116:4-10; AF0167; TE051). 306. Mr. Willoughby acknowledged that the document list in the FTP proposal was not agreed to in the handwritten Path Forward Memorandum, which he further acknowledged was memorialized in SA-007. Q: Okay. So what was your understanding after leaving the meeting ... Why did the parties feel the need to put the discussions or the results of the discussions onto this note? A: Because we were stuck. We had clarifications and assumptions that weren’t being agreed to. We had a document list that wasn’t being agreed to. So we had to move forward somehow if we were going to get this done. So we had to memorialize the problems with the parts that were due to move the project forward. *** Q: Okay. And did you memorialize it in the standard form 30? A: Yes, we did. It’s called SA-007. (Willoughby Tr. 1533:6-24; AF0160). 307. Mr. Willoughby acknowledged that prior drafts of the SA-007 SF30 continuation page expressly referenced and incorporated specific tabs from the FTP proposal notebook. (Willoughby Tr. 1570:21-1571:18; AF0384; AF1112). 308. For example, Mr. Willoughby admitted the draft SA-007 SF30 shows “all information contained in tab 4 of the FTP” was “accepted,” except Paragraph 19, FAR Clause 60 US2008 5819490 1 52.216-4 Economic Price Adjustment, which the draft SA-007 SF30 notes “will be considered at a later date.” (Willoughby Tr. 1575:23-1576:19; AF0384). 309. Comparing the draft SF30 to the then-current FTP proposal notebook shows Tab 4 is the “Basis of Proposal.” (AF0384; AF1112). The Basis of Proposal includes the clarifications and assumptions, which, as Mr. Willoughby admitted, means in this draft SF30, all clarifications and assumptions were accepted except the EPA clause. (Willoughby Tr. 1577:101578:20; AF0384; AF1109). 310. Similarly, the draft SF30 shows the entirety of Tab 7 – the Document List – was accepted, without exception. (Willoughby Tr. 1579:8-1580:1; AF0384; AF1112; AF1107). 311. Mr. Willoughby admitted that while prior drafts of the SA-007 SF30 stated with specificity the components of the FTP proposal notebook that were being accepted or not accepted, when the actual SA-007 SF30 was finally drafted, it contained no such detailed references. (Willoughby Tr. 1581:25-1582:18). 312. It was the VA’s obligation in paragraph 11 of SA-007 to make sure that the architect delivered a design to meet its contractual obligations. (Jahrling Tr. 229:23-230:17; Kyrgos Tr. 1103:3-23; AF0160). 313. In SA-007, paragraph 11 expressly states that it was the VA’s obligation to ensure the JVT will produce a design that meets the ECCA for the entire project, not just parts of the project. (Jahrling Tr. 233:13-24; Kyrgos Tr. 1170:11-21; AF0160). 314. The parties also negotiated in SA-007 paragraph 11, the use of alternates as a safety net which allowed the VA to include more design if the bids from the subcontractors came in lower than estimated. (Jahrling Tr. 233:25-234:13; AF0160). 315. Mr. Colpack signed SA-007 on November 11, 2011. (Colpack Tr. 105:1-2). 61 US2008 5819490 1 316. Without paragraph 11, Kiewit-Turner would not have signed SA-007. (Colpack Tr. 166:5-7). Kiewit-Turner would not have agreed to an FTP price of $604 million or a ceiling price of $610 million without paragraph 11 in SA-007. (Jahrling Tr. 235:21-236:3; AF0160). 317. Conversely, in its opening, the VA stated that the ECCA was a red herring in this dispute. (VA Opening Tr. 39:16-17). b. 318. No Drawings Or Scope Attached To SA-007 There is no mention of any design documents in SA-007. (Colpack Tr. 109:16- 20; Fiotes Depo. 65:3-8). SA-007 makes no mention of the Book, any parts of the Book, or any iteration of the Book. (Colpack Tr. 109:21-24). 319. Mr. Klebba testified that the documents that existed at the time of SA-007 were not part of SA-007 and that the document list that was part of the Book was thrown out. (Klebba Tr. 549:11-18). Mr. Klebba further testified that the only design referenced in SA-007 was the one to be provided by the JVT that met the ECCA. (Klebba Tr. 549:19-25). 320. Mr. Kyrgos later wrote: “only what is stated in the SA document [SA-007] itself has relevance” and “[a]ny previous document used in negotiations has no relevance or weight in this contract.” (AF0714). 321. SA-007 confirmed in paragraph 11 that the agreement was based on a design that the VA was going to ensure that the JVT produced, in the future, to meet the ECCA. (Colpack Tr. 110:8-14; 146:23-24; AF0167; TE051). 322. Mr. Willoughby agreed that SA-007 represented a commitment by the VA for the construction documents, to be issued in the future, to meet the ECCA. (Willoughby Tr. 1595:221596:23). 62 US2008 5819490 1 c. 323. SA-007’s Continuation Page and Subsequent Modification Shortly after signing SA-007, the VA asked to substitute out the continuation pages in SA-007. (Colpack Tr. 105:5-8). 324. On November 18, 2011, Mr. Klebba drafted a letter to the VA setting out Kiewit- Turner’s understanding of SA-007 and agreement to the new continuation pages. (Colpack Tr. 105:9-15; Klebba Tr. 385:17-386:11; AF0650). 325. This letter confirmed that the ECCA was approximately $582 million and that this number did not include the off-site infrastructure work valued at approximately $6 million. (Colpack Tr. 106:7-11; Klebba Tr. 390:17-391:12; AF0650). Mr. Klebba testified this was the perfect opportunity to document the exact value of the ECCA in more formal correspondence. (Klebba Tr. 390:22-391:22). 326. The new continuation pages added an incentive/disincentive clause and a profit amount. (Colpack Tr. 107:9-14; Klebba Tr. 387:15-388:7). 327. Mr. Willoughby explained that the incentive/disincentive clauses were added at the direction of the VA’s Office of General Counsel. (Colpack Tr. 107:18-21; Klebba Tr. 389:10-16). 328. Kiewit-Turner also clarified in their November 18, 2011 letter that the disincentive clause should never apply because the VA committed to ensure that the JVT would produce a design that meets the ECCA. (Klebba Tr. 391:23-392:6; AF0650). Mr. Klebba testified that this language was put in the letter to make it crystal clear to the VA that the disincentive clause applied simply because the VA had to provide a design that met the ECCA. (Klebba Tr. 392:13-18) 329. The Office of General Counsel also changed the language from Kiewit-Turner’s FTP Proposal that the VA “will cause” the A/E to produce a design to “shall ensure” the A/E will 63 US2008 5819490 1 produce a design. (Colpack Tr. 108:4-12; Klebba Tr. 389:17-390:5). Mr. Klebba testified Kiewit-Turner was perfectly fine with this language because to Kiewit-Turner “shall ensure” essentially meant a guarantee. (Klebba Tr. 390:1-5). 330. Kiewit-Turner agreed to all these changes in the new continuation documents. (Colpack Tr. 108:13-17). 331. Kiewit-Turner’s November 18, 2011 letter was signed by Mr. Willoughby. (Klebba Tr. 392:19-22; AF0650-2). 332. The new, official SA-007 used the agreed-upon continuation pages. (Colpack Tr. 108:23-109:7; AF0167; TE051). 333. Mr. Klebba testified that he crossed out the original continuation pages and added the new continuation pages. (Klebba Tr. 395:15-396:12; TE051). C. Certification Of FTP Proposal 334. On November 18, 2011 at the request of the Contracting Officer, Kiewit-Turner provided a cost and pricing certification for its new two-page FTP Proposal dated November 9, 2011. (Klebba Tr. 563:9-564:7; Willoughby Tr. 1605:3-23; 1656:23-1657:25; AF0389; AF0759). The VA’s Office of General Counsel requested the certification letter and, as explained by the Contracting Officer, the VA needed this certification to “check a box.” (Klebba Tr. 567:5-568-3; AF2238). 335. Mr. Klebba testified that he certified paragraphs 1-5 of the new two-page FTP Proposal. (Klebba Tr. 565:2-566:4; AF0389). D. In SA-007, The VA Guaranteed To Cause The A/E to Produce a Design that Could be Constructed for the ECCA 336. On December 14, 2011, Kiewit-Turner, the VA, and the JVT attended a senior executive partnering session facilitated by FMI. (Klebba Tr. 407:15-408:14; TE050-14). 64 US2008 5819490 1 337. Mr. Klebba testified that at that meeting the parties understood that SA-007 was a unique agreement and Mr. Klebba and Mr. Willoughby, in the months following the meeting, put together a presentation on SA-007 to both of their staffs. (Klebba Tr. 409:3-19; TE114). 338. This presentation was given to their staffs in February and March of 2012. (Klebba Tr. 409:21-23). 339. The presentation was developed jointly by Mr. Klebba and Mr. Willoughby to “make sure the team was on the same page.” 1549:13-1551:2; TE114). (Klebba Tr. 449:17-450:4; Willoughby Tr. Mr. Willoughby and Mr. Klebba met before the presentation in February 2012 and went over the slides, agreeing on the final slides to be used in the “Managing to the $604” presentation. (Willoughby Tr. 1636:24-1639:14; AF0397). The parties collaborated on each slide and went through several iterations of the presentation. (Klebba Tr. 454:9-18). Slides that were presented by Mr. Klebba were denoted with an “A” and slides that were presented by Mr. Willoughby were denoted by a “T.” (Klebba Tr. 453:18-25). 340. Mr. Willoughby could only recall presenting at one session of the “Managing to the $604” PowerPoint presentation in February 2012, but unrebutted evidence clearly shows two of these joint VA-Kiewit-Turner presentations were given, including a second March 1, 2012 presentation to senior Kiewit-Turner leadership and members of the A/E. (Willoughby Tr. 1639:15-1640:13; AF0397). This evidence included a meeting invite that Mr. Willoughby accepted to attend the March 1, 2012 presentation (AF0397) and an email correspondence from a representative of the A/E complementing Mr. Willoughby on his presentation and asking for copies of the materials. (TE053). Mr. Willoughby acknowledged this evidence showed he jointly presented the “Managing to the $604” PowerPoint presentation at the March 1, 2012 65 US2008 5819490 1 meeting to the VA, Kiewit-Turner and members of the A/E. (Willoughby 1640:14-1645:1; AF0397; TE053). 341. site. The first presentation was presented to the most senior management on the Project (Klebba Tr. 450:9-12). The second presentation was presented to a wider audience including the JVT. (Klebba Tr. 450:13-24). 342. The title of the presentation was “SA-007 and Managing to the $604 million.” (AF0398-1). Mr. Klebba testified that the purpose of the presentation was to explain the contract type and clear up any misunderstanding on SA-007. (Klebba Tr. 452:10-22). 343. The presentation asked “Does SA-007 clearly define the scope of work?” and answered “No. Defines the box.” (Klebba Tr. 455:5-13; AF0398-21). The presentation then stated that SA-007 did not clearly define the CPM schedule, but defined the box. (Klebba Tr. 455:18-25; AF0398-21). 344. The presentation also discussed how to manage to the $604 million and included seven bullet points. (Klebba Tr. 457:4-458:8; AF0398-23). Mr. Klebba testified that this included continuing to do design review reports and constructability reviews, continuing to reconcile the estimates, continuing to do value engineering, and to do this the parties would use the ECCA. (Klebba Tr. 457:18-458:2; AF0398-23). 345. Mr. Klebba testified that in order to manage to the $604 million, the first step in that is that Kiewit-Turner had to be provided a design for the $582 million ECCA. (Klebba Tr. 458:9-18). 346. At the joint SA-007 presentation on March 1, 2012, one of the factors that Kiewit- Turner and the VA identified to manage the Project budget had to do with the ECCA. (Willoughby Tr. 1648:1-19; TE114-24). 66 US2008 5819490 1 347. Slides 21 through 26 were presented by Mr. Klebba and no one from the VA ever objected to the slides saying that SA-007 was based on any design documents because, as Mr. Klebba testified, “Everybody was aware that SA-007 wasn’t based on any design documents.” (Klebba Tr. 463:1-14). Mr. Klebba further testified that no one from the VA ever suggested any part of the Book was part of SA-007. (Klebba Tr. 463:15-19). 348. The “Managing to the $604” PowerPoint posed a rhetorical question during the presentation for managing to the FTP of $604 million: “So ‘How’ do we do that?” (TE114-24) (emphasis in original). The slide then lists seven ways the parties were going to use to manage the project to the $604 million FTP. (Id.). Among these seven items, the PowerPoint lists “Estimated Contract Cost at Award” or ECCA. (Willoughby 1648:13-19; TE114-24). 349. The VA began using the JVT’s obligation to meet the ECCA as a means to manage the project to $604. (Willoughby Tr. 1648:20-1650:8; AF0708). In fact, immediately following the presentation of the “Managing to the $604” PowerPoint to an audience that included members of the JVT, Mr. Willoughby wrote a letter to the A/E reminding the A/E of their contractual obligation to design the project to the ECCA. (Id.) 350. On December 9, 2011, the VA also wrote to the JVT informing it that the JVT was not relieved of its obligation to provide a facility within the current ECCA in accordance with FAR 52.236-22. (AF2244). On December 16, 2011, the VA told the JVT that it was withholding retainage against it because the JVT’s provided design was above the ECCA. (AF2246). 351. Mr. Willoughby testified, however, it was a mere “coincidence” that his letter reminding the A/E of its contractual obligation to design to the ECCA was sent to the JVT the 67 US2008 5819490 1 very same day that Mr. Willoughby and Mr. Klebba jointly presented to the JVT that the ECCA was a key tool in managing the project to the $604 million budget. (Willoughby Tr. 1651:6-17). VII. PROCUREMENT OF PROJECT AND THE CONSENTS TO SUBCONTRACT A. The VA Was Involved In The Procurement Of Kiewit-Turner’s Subcontractors 352. Kiewit-Turner was only going to self-perform approximately 15% of the work and subcontract the rest out. (Jahrling Tr. 244:19-245:9). 353. A significant portion of Kiewit-Turner’s subcontractors on the Project were small businesses, veteran-owned small businesses, and service-disabled veteran-owned small businesses. (AF725-16). 354. To subcontract the work, Kiewit-Turner developed a manual, known as the procurement manual, that was a guideline for procuring all the subcontracts on the Project. (Wiebelhaus Tr. 571:25-572:2). The procurement manual was prepared with the VA’s Contracting Officer. (Wiebelhaus Tr. 572:5-15). 355. Kiewit-Turner’s Contract with the VA required that Kiewit-Turner obtain at least three competitive bids from subcontractors and provide that information to the government for review. (AF0032-16). 356. Kiewit-Turner would qualify subcontractors to bid on the Project. This involved evaluating a subcontractor’s past project experience and the financials. (Wiebelhaus Tr. 573:16574:2). As Mr. Wiebelhaus testified, this exercise was done to eliminate risk for both the contractor and the owner. (Wiebelhaus Tr. 578:19-21). 357. After subcontractors were qualified, Kiewit-Turner would create a bidders list. (Wiebelhaus Tr. 574:3-7). The VA was involved in determining what the bidders list looked like 68 US2008 5819490 1 and was informed by Mr. Wiebelhaus of the bidders list prior to Kiewit-Turner going to the subcontractor market. (Wiebelhaus Tr. 574:11-15). 358. After developing the bidders list, Kiewit-Turner would create the various bid packages and then go to the subcontractor market. (Wiebelhaus Tr. 574:19-575:6). The Contracting Officer was also involved in setting the format and content of the information contained in Kiewit-Turner’s bid packages. (TE003). Kiewit-Turner provided the VA a copy of every subcontractor proposal over $300,000 for its review so that it could provide its consent to subcontract. (TE002). 359. After receiving the bids from subcontractors, Kiewit-Turner would level the subcontractor bids which involved taking the subcontractor bids and making sure they were all on Kiewit-Turner’s bid form. (Wiebelhaus Tr. 575:12-22). 360. The VA was invited to be a part of the leveling meetings with Kiewit-Turner. (Wiebelhaus Tr. 576:2-4). After the subcontractor bids were leveled, Kiewit-Turner would ask for a Best and Final Offer (“BAFO”). (Wiebelhaus Tr. 576:8-12). After receiving the BAFOs from the subcontractors, Kiewit-Turner would assemble all the subcontractor bids on a Consent to Subcontract form for the Contracting Officer’s final review. (Wiebelhaus Tr. 576:16-19). B. The Contracting Officer’s Consents To Subcontract 361. The Consent to Subcontract form was drafted with the Contracting Officer’s input. (Wiebelhaus Tr. 577:2-12). The Consent to Subcontract form was essentially divided into two pages with the first page indicating that Kiewit-Turner followed a fair and reasonable process under the Federal Acquisition Regulations. (Wiebelhaus Tr. 577:19-578:1). 362. Under the procurement manual, every subcontract over $300,000 required a Consent to Subcontract. (Wiebelhaus Tr. 583:1-9). This same process was followed for every subcontract awarded on the Project. (Wiebelhaus Tr. 583:22-584:1). 69 US2008 5819490 1 363. Mr. Willoughby and Mr. Wiebelhaus agreed that if the first page was legitimate and all the bidders passed the test, only then would the Contracting Officer flip to the second page of the Consent to Subcontract. (Wiebelhaus Tr. 579:3-9). 364. The second page of the Consent to Subcontract involved the pricing of the bid package. (Wiebelhaus Tr. 579:3). This included every bid from every subcontractor on that bid package. (Klebba Tr. 515:3-14). 365. Mr. Willoughby specifically asked during the drafting of the Consent to Subcontract to include the DD-2 budget for each bid package on the second page. (Wiebelhaus Tr. 579:16-20; 582:11-14). 366. Mr. Willoughby would review each Consent to Subcontract prior to Kiewit- Turner awarding the work. (Klebba Tr. 515:9-14). Every Consent to Subcontract, including the design assist subcontractors, was signed by the Contracting Officer. (Wiebelhaus Tr. 582:21-24). 367. Mr. Willoughby testified he consented to the fact that all subcontracts over the requisite threshold were competitively bid. (Willoughby Tr. 1548:13-1549:8). Mr. Willoughby acknowledged by giving his consent to subcontract, he was consenting in accordance with both FAR 52.244 and FAR 52.244-2 under the Contract part 3.2. (Willoughby Tr. 1800:12-1801:10; AF0032-16). 368. There were occasions where the Contracting Officer refused to provide his consent to subcontract because he did not like the numbers being proposed by the subcontractors. (TE018; TE033). This forced Kiewit-Turner to go back to the same market for more bids/rebids. (TE018; TE033). There were other times the Contracting Officer would refuse to provide his consent to subcontract without any reason and direct Kiewit-Turner to rebid. (TE034). 70 US2008 5819490 1 C. Kiewit-Turner Was Transparent In Its Procurement Of the Subcontractor Bids And They Were Obtained With The VA’s Consent 369. Kiewit-Turner’s Purchasing Buyout Analysis spreadsheet contained tracking information regarding the bid packages, such as original estimate, actual subcontractor pricing, bid leveling, and the status of bid evaluations. (TE004; TE013). 370. From September 2012 through March 2013, Kiewit-Turner’s purchasing group met weekly to address the procurement of subcontractors and trades to perform the work based on Kiewit-Turner’s receipt of the completed design from the JVT. (AF2008–AF2050). These meetings were recorded in meeting minutes where Kiewit-Turner spent countless hours leveling the bids. (AF2008–AF2050). 371. Mr. Willoughby signed a Consent to Subcontract for every bid package on the Project. (AF0369). Mr. George Szwarzman, the Associate Executive Director of CFM, e-mailed Mr. Pogany, Mr. Willoughby, Mr. Hayden and Mr. Kyrgos, among others, in December of 2012, and stated that the VA could not complain about the procurement process that is called for in the Contract. (AF0549-1). 372. Kiewit-Turner tracked each bid package and provided the voluminous supporting information to show why a certain subcontractor or vendor was selected during the procurement process. (AF2051–AF2174). While each bid package is different and contains different information, the majority of the packages contain the (1) Consent to Subcontract signed by the Contracting Officer, (2) memo to file explaining why a particular subcontractor was recommended and/or approved by the VA, (3) proposals received for each bid package, and (4) additional information used by Kiewit-Turner to evaluate the proposals. (AF2051–AF2174). 373. Mr. Haggstrom acknowledged that Kiewit-Turner’s process for procuring subcontractors on this project had been transparent. (Haggstrom Depo. 158:15–159:18). 71 US2008 5819490 1 VIII. CONSTRUCTION AND DESIGN ISSUES WITH THE MAIN HOSPITAL CAMPUS (CLIN-002) A. Scheduling 374. On July 18, 2011 the JVT released an updated design schedule. (AF0378). However, Kiewit-Turner did not receive the updated design schedule until September 7, 2011. (AF0380). The updated design release schedule indicated that the 100% Core and Shell drawings would be released in October of 2011 and the 100% Interior Fit Out drawings would be released in January of 2012. (AF0378). Kiewit-Turner provided the VA a letter that these design release dates were delayed and could potentially impact the construction schedule. (AF0380). 375. On October 3, 2011, Mr. Pogany provided Kiewit-Turner another document that, largely consistent with the JVT’s updated design release schedule, indicated that the 100% Core and Shell drawings would be released in November of 2011 and the 100% Interior Fit Out drawings would be released in January of 2012. (AF0382). 376. Kiewit-Turner submitted its first baseline schedule, VAB1, on January 20, 2012. (AF0393). This baseline schedule contained the expected design delivery dates for the 100% design drawings, including the 100% design for the Core & Shell package on November 28, 2011 and the 100% design for the Interior Fit Out package on January 30, 2012. (AF0393). This initial baseline was approved by the VA – which necessarily includes their agreement to the design delivery dates. (Meyer Tr. 797:11-19). Subsequent baseline schedules, including VAB2.1.BL, were also approved by the VA and included those same agreed-upon delivery dates for the 100% design package. (AF0828; AF0512-1). 377. Mr. Meyer, Kiewit-Turner’s scheduling expert, was engaged by counsel for Kiewit-Turner to review and analyze the updated monthly schedules which Kiewit-Turner 72 US2008 5819490 1 prepared and submitted to the VA for the months of November 2011 (CPM update no. 5) through August 2012 (CPM update no. 14). (Meyer Tr. 798:13-20). He also reviewed the VA’s return of submittals approving those monthly updated schedules and certain correspondence regarding the updates. (Id.) 378. Based on his review and analysis, Mr. Meyer determined that the approved CPM schedule update nos. 5 through 14 showed that the Project’s completion was delayed by 278 days by the VA’s failure to timely issue the construction documents to Kiewit-Turner. (Meyer Tr. 805:6-15; TE046-3). This caused the Project’s predicted completion date to move from the Contract completion date of April 2, 2015 to January 5, 2016. (Meyer Tr. 805:16-24; TE046-4). As a result of the VA’s late issuance of the construction documents, Mr. Meyer testified that, as of the end of August 2012, the earliest feasible completion date of the project was January 5, 2016. (Meyer Tr. 842:12-19). 379. Mr. Meyer’s report contained a table summarizing the month-by-month delays shown in the approved update nos. 5 through 14. (TE046-4). He also provided a graph showing how the monthly updates combined to account for the overall delay of 278 days during this overall period. (AD005). 380. Mr. Meyer specifically addressed four instances where the VA appeared to take a different position than what had been shown in Kiewit-Turner’s approved monthly schedule and provided an analysis of each such instance both in his report and during his testimony. The first such instance involved update no. 5 for November 2011. (Meyer Tr. 813:3-14). Mr. Meyer testified that approved update no. 5 showed that the Project’s critical path had been delayed 15 days due to the VA’s failure to issue the construction documents. (Id.). The VA’s return of submittal approving that update expressly confirmed this, stating: “The predicted completion 73 US2008 5819490 1 date moved 15 calendar days to April 17, 2015 as a result of VA action/inaction in providing 100 percent CDs for the CS-1/IFO-3 (activity IFO-4840).” (Meyer Tr. 818:14-21; AF2355). 381. The normal procedure where there was agreement on what an approved update showed was, in Mr. Meyer’s experience, for the VA to issue a time extension for the amount of time recognized by the approved monthly update. (Meyer Tr. 818:22–819:4). However, in this instance, the Contracting Officer only granted a time extension of 2 days for November 2011. (AF2391). Mr. Meyer testified that there was no basis for reducing the delay from 15 days to 2 days. (Meyer Tr. 821:11-12). The Contracting Officer’s time extension did not provide any explanation for the reduction, but simply cited an internal VA analysis. (Meyer Tr. 819:5– 820:15). Despite having been requested to provide that analysis, the VA never did so and the basis for the Contracting Officer’s refusal to acknowledge the full delay shown by update no. 5 remains unexplained and unsupported. (Meyer Tr. 820:23–821:6; AF2396). 382. The second specific update addressed by Mr. Meyer involved the approved update no. 6 for December 2011, which showed a delay of 41 days due to the VA’s failure to issue the construction documents. (Meyer Tr. 821:20–823:11). A portion of this delay was because the landscaping work scheduled toward the end of the project was shown as being pushed into a period when the specifications prohibited that work. (Meyer Tr. 823:12–824:2). The VA’s return of submittal approving update no. 6 contended that 21 of the 41 days of delay were due to the impacted landscaping work. (Meyer Tr. 825:11–826:17; AF2357). Mr. Meyer testified that this was not proper from a scheduling standpoint and that the entire delay of 41 days was justified by the approved update no. 6. (Meyer Tr. 824:22–825:6). He also showed that, even under the VA’s approach, it should have added those 21 days to the delays recognized in approved update no. 7, but that it failed to do so. (Meyer Tr. 826:18–831:19). 74 US2008 5819490 1 383. The third area Mr. Meyer addressed involved a revision the VA made in several updates. (TE0460-4). Beginning in update no. 8 and in several of the updates after it, the VA broke a tie between two activities in the approved schedule in an effort to demonstrate that a portion of the delay caused by the VA’s failure to issue the construction documents was concurrent with the contractor failing to make progress on another activity. (TE046-3-6). Mr. Meyer testified that this action by the VA was improper since the tie in the schedule was legitimate and logical, and was repeatedly approved by the VA. (Meyer Tr. 834:4–836:13). The schedule reflected that the fabrication and delivery of a particular underground tank had to occur before the tank could be installed in the ground. (Meyer Tr. 834:9-19). However, the VA broke the tie between those two activities in its concurrent delay analysis. (Meyer Tr. 834:20-835:7). Mr. Meyer testified that by doing so the VA’s concurrent delay analysis was premised on the absurd proposition that the underground tank could be installed in the ground before the design for it had been issued by the VA, before a subcontractor had been hired to furnish and install it, before a supplier of the tank had prepared and submitted shop drawings for the tank, before the VA had approved the shop drawings for the tank, before the tank had been fabricated, and before the tank had been delivered to the site. (Meyer Tr. 835:11-23). As a result, Mr. Meyer testified that there was no basis for the VA to break the tie between those activities. (Meyer Tr. 835:810). 384. Mr. Meyer testified that, at its core, the VA’s position was that the contractor’s supposed lack of progress of some unidentified non-critical path activity had caused a concurrent delay to the project. (Meyer Tr. 836:14-837:2). He testified that delays to non-critical activities cannot delay the project completion and therefore cannot be considered to be concurrent delays. (Meyer Tr. 802:24-803:6; 837:3-8; TE046-3; TE052-11, ¶ 1.12B). 75 US2008 5819490 1 385. The specific final area addressed by Mr. Meyer involved some minor variations in the way the VA updated certain of the monthly updates. (Meyer Tr. 837:16-839:7; AF2363). In the VA’s return of submittals for updates. 9 -14, the VA stated that it had made some minor variations in the updating of the monthly schedules. (Id.). Though Mr. Meyer identified that these minor variations in the updating caused some differences on a month-by-month basis during those six updates, over the entire period, he found that both the VA and Kiewit-Turner recognized the same overall impact to the project. (Meyer Tr. 840:11-842:11). As a result, he testified that the updating variations were not an issue. (Meyer Tr. 842:8-11). 386. Neither the Contracting Officer nor any other VA witness contested any of Mr. Meyer’s testimony or opinions. His report and testimony are, therefore, uncontroverted and the record is clear that because of the 278 days of delay caused by the VA’s failure to timely issue the construction documents, as of the end of August 2012, the earliest feasible completion date of the project was January 5, 2016. 387. Mr. Willoughby testified regarding scheduling meetings held between VA management and the VA’s construction manager Jacobs on April 19, 2013. (AF0827). In the meeting, Mr. Kyrgos indicated the drawings current as of SA-007 should be used as the baseline for determining the schedule, while Mr. Willoughby disagreed and stated the 100% documents should be used for purposes of determining the schedule. (Willoughby Tr. 1774:10-1778:2; AF0827). 388. On April 23, 2013, there was an internal VA meeting with Jacobs wherein the VA was trying to determine what to say about what SA-007 meant and what it was based on and Mr. Willoughby said that the VA should “just let the situation play out”. (AF827). 76 US2008 5819490 1 389. Mr. Willoughby acknowledged that Kiewit-Turner had made it clear to the VA that there was no way to build the project in 1228 days based on the 100% documents (CDI-11 and CDI-12); instead, Kiewit-Turner’s updated baseline schedule (VAB2.3) showed the project would be delayed until the Summer of 2016. (Willoughby Tr. 1778:25-1780:22). 390. Under cross-examination, Mr. Willoughby admitted that he was taking two different positions regarding the relevant design documents under SA-007: one set of design documents for cost and one set of design documents for schedule. (Willoughby Tr. 1781:21783:21). 391. Mr. Willoughby further acknowledged that because Kiewit-Turner has said a schedule using 100% design documents cannot be shown as being completed in 1228 days, Mr. Willoughby has allowed Kiewit-Turner to build a schedule showing 1228 days on something other than the 100% design documents. (Willoughby Tr. 1783:22-1784:5). 392. On June 18, 2013, the Contracting Officer approved Kiewit-Turner’s baseline schedule submittal. (AF2341). B. The VA’s Delayed Issuance of The Design And Kiewit-Turner’s Attempt To Mitigate The VA’s Delay 393. On November 18, 2011, the VA issued a Notice To Proceed to Kiewit-Turner for the work associated with CLIN-002. (AF2242). 394. At the end of January 2012, Kiewit-Turner expected to receive the 100% design packages for the IFO, the interiors, and the completion of the mechanical and electrical. (Jahrling Tr. 237:8-14; Klebba Tr. 500:11-21; Jones Tr. 603:20-21;). Kiewit-Turner expected these 100% design packages delivered at the end of January 2012 to be complete and fully coordinated. (Jahrling Tr. 238:6-19). 77 US2008 5819490 1 395. In anticipation of the 100% design being released by January of 2012 as planned, Kiewit-Turner brought on additional procurement agents. (Jones Tr. 603:22-604:7). 396. Sometime in late 2011, the VA let lapse the IDIQ A/E peer review contract which delayed the issuance of the 100% complete design package. (Kyrgos Tr. 1131:10-1132:4; Pogany Tr. 1269:4-1270:5). The VA’s delay in issuing the 100% design drawings “hinged on the VA having a peer review firm under contract, and there was a delay in getting a peer review firm under contract, conducting the peer review, and then subsequently incorporating the results of that peer review into those documents.” (Lynn Tr. 909:22-910:5). 397. On December 5, 2011, Kiewit-Turner notified the VA that the design deliverables for the 100% design were late and that the CS-1 and IFO-1 packages were then being projected to be delivered by April 2012, more than three months later than agreed to. (AF2243). 398. In an effort to hold the 1228 schedule agreed to by the parties, Kiewit-Turner requested from the VA on January 20, 2012 the ability to solicit bids on the 95% design drawings and not wait for the VA to issue the 100% design packages. (AF0395; AF0399; TE006). The VA rejected Kiewit-Turner’s request, which forced it to cancel the in-place solicitations. (TE007). 399. On March 26, 2012, the VA internally recognized “significant delays in ‘VACO’s peer review process’ for construction documents.” (AF2260). 400. On April 5, 2012, Kiewit-Turner sent the VA another letter expressing the impact of the lack of 100% construction documents. (AF0406). Kiewit-Turner stated that the “lack of this information is currently creating numerous negative impacts in material procurement/fabrications, obtaining approvals of submittals, coordination of trades, putting work in place in the field, as well as obstructing our ability to maintain the schedule as currently 78 US2008 5819490 1 planned.” (AF406-1). Another letter was sent by Kiewit-Turner the next day on April 6, 2012, that documented the delay, and impact from that delay, for each design package. (AF0407). 401. On April 24, 2012, and after another request from Kiewit-Turner to mitigate the impact of the VA’s late design, the Contracting Officer told Kiewit-Turner not to use the 95% drawings to procure any items or services and that if Kiewit-Turner wished to procure any such items or services it would be doing so at Kiewit-Turner’s own risk. (AF2264). 402. Kiewit-Turner sent another letter to the VA on May 8, 2012, providing an update on the impact from the delayed issuance of the 100% documents. (AF0417). 403. At a May 16, 2012 VA Construction Review Council on the Project attended by then Secretary Shinseki, Mr. Haggstrom and other VA representatives, Mr. Kyrgos admitted that he was responsible for the delay caused by the VA not having a peer reviewer contractually available for the Project. (Haggstrom Depo. 152:22-153:13; AF0847-23). 404. On July 20, 2012, Kiewit-Turner received another letter from the VA that stated that the “VA does not advise on construction based on 95% CD’s and, while trying to assist K-T with coordination to minimize risk, does not assume risk when 100% CD’s are released,” which precluded Kiewit-Turner from mitigating the impact from the delayed 100% design. (AF0425). Kiewit-Turner made this clear five days later by responding to the VA’s letter and informing the VA that “[a]s I am sure you realize, KT cannot assume the risk associated with design change. If KT is to be held responsible for design modifications post-construction for the agreed upon items, we will not be able to construct any item (approved or not) at the 95% level. Therefore, we would be restricted to construction of items that have been issued at the 100% CD level.” (AF0426-2). 79 US2008 5819490 1 405. On August 17, 2012, the VA informed Kiewit-Turner that the 100% design that was expected in January 2012 would not be delivered until August 2012. (Jahrling Tr. 240:13242:2; AF0237). It was Kiewit-Turner’s expectation that it would receive the 100% complete, coordinated design on August 31, 2012. (Jahrling Tr. 242:3-10; AF0237). 406. On September 20, 2012, the JVT submitted a request for Contract modification to the VA based on the VA-caused delay in reviewing the 100% design. (AF0665). The JVT stated that the lack of a VA peer reviewer delayed the 100% CS1 design by 40 weeks and the 100% design for the 100% IFO design by 32 weeks. (AF0665). The VA requires 100% construction documents to be peer-reviewed before they are released to the contractor for construction. (Kyrgos Tr. 1121:25-1122:6). It is the VA’s responsibility to hire a peer reviewer to perform this review. (Kyrgos Tr. 1121:25-1122:6). 407. The 100% construction documents were delivered to Kiewit-Turner on August 31, 2012. (Colpack Tr. 131:1-6). 408. On October 26, 2012, Kiewit-Turner met with the VA and informed it that the JVT’s dates for distribution of JSI/Narratives exceeded the dates required to maintain the procurement bidding schedule and that this impact may ultimately delay the construction schedule. (TE017). 409. Construction documents, CDs, are 100% complete designs that allows the contractor to take out to the marketplace to receive bids. (Jahrling Tr. 188:11-190:8). JSIs are the Joint Venture Team’s, the A/E’s, supplemental instructions and/or additional pieces of design information that the designer issues when for some reason or another the construction documents are missing a piece of design information. (Jahrling Tr. 188:11-190:8; Jahrling Tr. 238:23239:12). RFIs are requests for information that are generated when the subcontractors or the 80 US2008 5819490 1 contractors have additional questions that they don’t understand from the one hundred percent design or the JSIs; it usually indicates that there is a design element missing such as a dimension may be missing or the need for clarification. (Jahrling Tr. 189:2-189:12; 219:6-25). 410. Kiewit-Turner had no role in causing this design, but was caused by an internal VA issue in failing to get a peer reviewer to look at the 100% design. (Lynn Tr. 910:6-15). 411. On November 21, 2013, the VA approved Kiewit-Turner’s schedule update No. 14 extending the Project schedule and completion date to January 5, 2016, due “solely due to VA action/inaction in providing 100% CDs” for certain design packages. (AF2370; AF2371). C. The VA’s 100% Design Was Incomplete And Uncoordinated 412. On August 31, 2012, the VA issued to Kiewit-Turner 2,772 sheets of design which was a major impact to the team because over 44% of these design sheets had to be revised. (Jahrling Tr. 249:23-250:23). This August 2012 delivery of 2,772 sheets was the bulk of the total design sheets for the Project, which was a total of 3,897 sheets. (Jahrling Tr. 250:24-251:7). And after they were issued as 100% complete, 44% had to be revised at least once, which had a significant impact on the subcontractor community who lost confidence in the Project and its design. (Jahrling Tr. 251:2-252:10). It was apparent that the design documents were uncoordinated, incomplete, and lacking information. (Jones Tr. 604:21-24). 413. The VA internally realized that the 100% design was full of mistakes. (Chang Tr. 687:22-25). 414. Mr. Blatnak testified that it was apparent that the 100% design drawings were also not complete because of the number of JSIs issued to Kiewit-Turner. (Blatnak Tr. 633:25-624:7). Mr. Chang similarly testified that the reason all the JSIs were received was because so much critical information was not on the 100% design or the design was incorrect. (Chang Tr. 688:3- 81 US2008 5819490 1 23). Mr. Chang also testified that this was more JSIs than you would expect on a project like this. (Chang Tr. 689:3-5). 415. A JSI is a joint supplemental instruction – a change or modification to the 100% design – issued by the JVT to Kiewit-Turner. (Blatnak Tr. 633:25-634:16). The VA issued approximately 87 JSIs after the 100% design drawings were issued. (Chang Tr. 689:2). There are currently still over 85 JSIs on the Project. (Pogany Tr. 1197:1-4). As of the date of the hearing, June 3, 2014, the VA is still considering some valued engineering items to the purported 100% design. (Pogany Tr. 1243:4-6). 416. The changes to the 100% design by JSI were often significant. (Jahrling Tr. 248:1-249:22; AF2417). There were JSIs that redesigned the energy center (ENC), parking visitors south (PVS), and parking visitors north (PVN). (Blatnak Tr. 634:18-19). This was especially significant here because, generally, the first building that gets built is the energy center. (Blatnak Tr. 634:18-635:6). 417. These post-August 2012 JSIs had a significant impact on Kiewit-Turner and its subcontractors attempting to bid the Project. (Blatnak Tr. 636:3-13). Kiewit-Turner informed the VA that the JSIs were impacting the procurement schedule. (Klebba Tr. 507:21-508:14; TE017). 418. According to Mr. Aardsma, the number of RFIs and JSIs between September 2012 and January 2013 shows that the construction documents issued by the VA were incomplete. (Aardsma Tr. 1011:7-20). 419. In addition to Kiewit-Turner, Kiewit-Turner hired a third-party, Plan Check Associates, to do a full review. (Jones Tr. 604:8-605:12). The review by Plan Check Associates reinforced what Kiewit-Turner already knew, that the design documents were missing information and that there was not one full set of documents. (Jones Tr. 605:5-12; AF2302-8). 82 US2008 5819490 1 420. After receiving the 100% design, Kiewit-Turner intended to obtain subcontractor bids – or buyout the work from subcontractors – from September 2012 to December 2012. (Klebba Tr. 503:21-504:5; Jones Tr. 605:18-22). Mr. Jones and Mr. Wiebelhaus were in charge of buying out the work for Kiewit-Turner. (Klebba Tr. 504:6-10). 421. After August 2012 and through January 2013, the VA issued to Kiewit-Turner several JSIs that the designer issued to fix deficiencies in the design and the design became more and more complicated resulting in more RFIs. (Jahrling Tr. 242:11-243:12). In response to the JSIs and incomplete design, Kiewit-Turner and its subcontractors submitted over 435 pre-bid RFIs to the VA to clarify issues with the 100% design. (Jones Tr. 606:20-608:10). This number of pre-bid RFIs was not typical following the receipt of a 100% design. (Jones Tr. 606:1-3). Kiewit-Turner did not have the ability to provide clear direction to the subcontractors without answers to the pre-bid RFIs. (Jones Tr. 608:13-16). 422. The VA was also failing to respond to the RFIs and was rejecting the RFIs as not the appropriate process to ask for clarification, even though this was the process used for previous packages. (Jones Tr. 609:6-17; AF2419). 423. When the VA did provide responses they were incomplete or informed Kiewit- Turner that a response would occur later through a forthcoming JSI. (Jones Tr. 609:21-24; 611:6612:7; AF0457). No date was provided for when the forthcoming JSI would be provided. (Jones Tr. 612:5-7; AF0457). 424. On September 10, 2012, Kiewit-Turner provided the VA a report from Weidlinger Associates, Inc., a consulting engineering firm, which found that the JVT’s design required further definition by JVT to properly define the project's systems and components to conform to the Physical Security Design Manual for VA Facilities, dated July 2007, and that in 83 US2008 5819490 1 the absence of this technical blast performance requirements and definition, bid pricing from the subcontractor community would be incomplete and not conform to the VA’s Manual. (TE014). 425. In December 2012, Kiewit-Turner sent a letter to the VA explaining Kiewit- Turner’s concern with these RFI responses and that Kiewit-Turner was not contracted to perform quality control of the design. (Jones Tr. 612:8-22; AF0457). This type of quality control was preventing Kiewit-Turner from going out and actually bidding the design documents. (Jones Tr. 612:15-22). D. Jacobs Reported To The VA The Problems With the JVT’s Incomplete And Uncoordinated 100% Design 426. The Project Management Plan is a report initially prepared in September 2011 and then updated through July 2011. (Lynn Tr. 874:2-6; Lynn Tr. 926:23-927:15; AF0547; AF0823). The Project Management Plan was prepared by the VA and Jacobs. (Lynn Tr. 873:8874:1; AF0547). 427. The Project Management Plan included a “risk log” that showed the risk, the probability of the risk occurring, the priority level of a particular risk, and ways to mitigate or monitor the risk. (Lynn Tr. 874:11-875:5; AF0547-25). 428. The September 2011 Project Management Plan identified the fact that “Project is over budget” as a risk. (AF0547-27). The risk log showed a “high” probability for this risk, and stated “Hold budget sessions to clarify what should be done” as a mitigation strategy for this risk. (AF0547-27). Mr. Lynn confirmed that for this risk, “it basically means that either you need to figure out a way to make the project cost less or add money to the project.” (Lynn Tr. 876:2-19; AF0547-27). 429. For example, the Project Management Plan identified “Problem with scope and design management has caused budget overruns” as a risk. (AF0547-25). The risk log showed a 84 US2008 5819490 1 “high” probability for this risk, and stated “extensive VE required, see budget section below” as a mitigation strategy for this risk. (AF0547-25). As of September 2011, the VA Project Management Plan had identified budget overruns as a significant risk and was recommending “extensive VE” as a required mitigation strategy. (Lynn Tr. 875:6-876:1; AF0547-25). 430. The Project Management Plan then identified the fact that “Architect does not believe there is a budget problem” as a risk. (AF0547-27). The risk log showed a “high” probability for this risk, and stated “insist that appropriate VE be done quickly” as a mitigation strategy for this risk. (AF0547-27). Mr. Lynn confirmed this risk, testifying that a “key problem” on the project was the fact that the A/E was producing its own estimates that showed the design on budget, which kept them from taking steps to solve the problem. (Lynn Tr. 876:20-877:16; AF0547-27). Mr. Lynn reiterated that the architect’s inherent conflict of interest was its root cause for denying the budget problem: “it’s a conflict of interest to have somebody with a design to budget clause in their contract be responsible for reporting whether or not they’re on budget. It’s a bad scenario to be involved in.” (Lynn Tr. 877:17-878:4; AF0547-27). 431. On March 25, 2013, the VA’s Risk Assessment of the Project stated that there was a risk of a significant price increase from the firm fixed proposal that ranged from $200 million dollars to $300 million dollars. (Pogany Tr. 1311:11-1313:6; AF2322). 432. Mr. Lynn confirmed that the same risks identified in September 2011 remained risks in July 2012 when the Plan was updated. For example, Mr. Lynn acknowledged the risk of the A/E’s continued reluctance to participate in the VE process. (Lynn Tr. 927:16-928:24; AF0823). 85 US2008 5819490 1 433. The Project Management Plan continued to recognize the fact that the project was over budget as a project risk. (Lynn Tr. 928:25-929:7; AF0823). However, the A/E “still” did not believe there was a budget problem. (Lynn Tr. 931:21-932:8; AF0823). 434. The Project Management Plan continued to stress the need to rein in the A/E and Mr. Lynn emphasized only the VA could provide the A/E this direction. (Lynn Tr. 932:9932:21; AF0823). 435. Lynn testified regarding internal discussions held among VA executive leadership acknowledging “we have this problem, this budget problem, how will we find the money, and there were discussions about transferring money from other projects in VA’s capital plan.” (Lynn Tr. 929:8-930:22). Lynn also participated in meetings where the VA discussed seeking funds from Congress, but was reluctant because of a belief they only had one shot with Congress and did not know how much money they would need. (Lynn Tr. 930:23-931:16). 436. On May 30, 2013, the subcontractors, such as a major electrical subcontractor, were still in need of vendor drawings for all of the owner provided equipment in order to coordinate its installations with the 100% Design Drawings. (AF2339). This subcontractor needed this information to complete the coordination effort on time in an effort to efficiently plan its installations. (AF2339). 437. Mr. Lynn confirmed comments from the Contracting Officer in his A/E performance evaluation that the design was not at the level of completion expected. (Lynn Tr. 866:6-867:1; AF0548-6). Jacobs personnel looked at this specific issue with regards to the 100% design. (Lynn Tr. 867:2-868:5). The Jacobs employee – an architect and fellow at the American Institute of Architects – reported the 100% design documents to be around 80% complete. (Id.) 86 US2008 5819490 1 IX. IMPACT OF THE VA’S LATE 100% DESIGN A. Subcontractors Refused To Bid The Project Due To The VA-caused Uncertainty 438. By the fall of 2012, it was known in the subcontractor market that subcontractors were not being paid on the Project, were being paid late, or were not being paid for additional change order work. (Jones Tr. 615:20-24). 439. Further, the late, incomplete 100% design frustrated the subcontracting community. (Jones Tr. 613:2-7). In order to receive good subcontractor bids, a contractor should send out very precise bid packages with little uncertainty about what subcontractors are pricing. (Rossi Depo. 156:14-157:5). 440. Ms. Guy of the VA Medical Center testified that even the end user, the VA Medical Center, was aware the Project had earned a reputation about subcontractors not being paid in a timely manner. (Guy Depo. 100:9-19). In December of 2012, Mr. Chang sent an email to other VA employees saying that no one wanted to bid the Project because the bad name of this Project was on the street. (AF0636). Mr. Chang testified that he thought the problem was due to contractors not being paid. (Chang Tr. 728:19-729:2). 441. Subcontractors that had performed work on the CBS Building, the first construction option on the Project, refused to bid on other parts of the job because of the lack of payment from the VA on this Project. (Jones Tr. 618:23-619:15; AF2292). 442. The poisoned reputation of the Project was well known to the VA because Kiewit-Turner compiled letters from subcontractors who refused to bid the Project. (Jones Tr. 618:16-22; AF0449). 443. For instance, on October 24, 2012, Sherri Lindsey from Concepts in Millwork – a subcontractor already performing a small scope on the Project – informed Kiewit-Turner that it 87 US2008 5819490 1 would not be bidding on a larger bid package. (AF0449). Ms. Lindsey wrote in an e-mail to Kiewit-Turner that Concepts in Millwork would not be bidding because the VA was several months late on paying for work already performed on the Project and this represented a great risk to their company. (AF0449-1). Another subcontractor e-mailed Kiewit-Turner on December 13, 2012 and stated that they would not be bidding because they “had been told that the payments on the VA project are at or exceeding 120 days. (AF0464). 444. On March 22, 2013, Kiewit-Turner made clear that the VA’s actions – particularly its ability to process change orders – were impacting the Project’s cost. (AF0505). Kiewit-Turner wrote that: “The VA's delay in paying KT's subcontractors is also having an impact to the project as a whole. For example, as KT issues bid packages to the market, fewer and fewer subcontractors are responding. The VA's payment uncertainty is a real market risk that is ultimately increasing the project's costs.” (AF0505-1). 445. The VA Project received significant negative media attention regarding payment and other related issues. (AF2405; AF2407; AF2408; AF2412; AF2413; AF2414; AF2415; AF2346). 446. Subcontractors reported to Kiewit-Turner that they would not bid on the VA Project because they had added additional, new work from other projects in the area and were not willing to bid. (AF0467; AF0469-1; TE022). 447. Others reported that the JVT’s design was the “worst” design they had ever reviewed. (AF2326; TE023). Others cited the incompleteness of the drawings and specifications along with the inability to clarify its bid, and the extremely short amount of time to review over 2,500 documents, as being simply “just too much risk to accept.” (AF2299; TE024). Other subcontractors did not want to deal with the VA and the payment issues associated with the 88 US2008 5819490 1 Project. (AF2292; AF2311; AF2317; AF2344; AF2386; AF2387; AF2389; AF2390; AF2393; AF2395). 448. The Project’s design specifications were oftentimes stringent or unreasonable, preventing Kiewit-Turner from receiving any subcontractors bids on certain bid packages. (AF2048-3). 449. Subcontractors were also having difficulty obtaining bonds from sureties for this Project. (Jones Tr. 614:8-15). Sureties informed subcontractors that this was because of the negative publicity on the Project due to numerous subcontractor being unpaid and the Project being underfunded. (Jones Tr. 616:11-25; AF2385). 450. Subcontractors expressed concern that: … the VA has a horrible reputation. The bonding companies are very concerned subcontractors aren't getting paid in a timely manner. The bonding companies said they have clients that aren't getting paid for 6 months and it's been so bad a few subcontractors have left the job. There is a lot of bad press with news articles, blogs and Senators needing to get involved. Also there is a VA project in another state that is having the same issues. We have contacted many large bonding companies around the country and none of them are interested in bonding us on this job because of the conditions previously stated. They said we could get bonded all things the same if there was a different owner that was paying in a timely manner. (TE036; see also AF2301; AF2345, AF2358, AF2384, AF2403). 451. Another subcontractor reported that even the “SBA has advised that some of the companies to which they have issued bonds have encountered extreme difficulty in getting paid for the project. Our subcontractor was advised that there were at least 16 current lawsuits that have been filed against the VA relative to this project claiming a lack of funds due to slow payment and/or non-payment issues associated with the project. As a result, before the SBA issues a bond commitment letter on our subcontractors behalf, the SBA requires some 89 US2008 5819490 1 additional information.” (TE039) (emphasis added). This sentiment was even echoed by banks lending money to potential subcontractors on the Project. (AF2385; AF2404). 452. This frustration resulted in bidder fatigue and many subcontractors dropped out of the bidding process. (Jones Tr. 613:10-12; Jones Tr. 620:16-23). 453. Mr. Jones testified that it got to a point where subcontractors did not want to touch the Project anymore. (Jones Tr. 614:16-24; 620:24-621:1; AF2301). The VA was too difficult to work for. (Jones Tr. 620:1-6; TE015). To overcome this issue, the Kiewit-Turner procurement team was forced to go outside the Colorado market to get additional bids for the Project. (Jones Tr. 614:19-20; AF2301). 454. Mr. Lynn testified he was told by resident engineers for the VA, including Mr. Chang, Mr. Preston Maseda, and Mr. Todd Bofinger, that there were problems at the VA processing change orders (“things were just sort of stopped within the office”) and these resident engineers were expressing concerns that the situation “wasn’t good. We need to get this stuff off our desks and back to the contractors.” (Lynn Tr. 890:21-891:17). The VA poisoned the subcontractor market by not processing changes and providing slow responses in general. (Aardsma Tr. 1025:13-17; TE044-52). 455. Jacobs personnel attended as many bid openings as possible, and were otherwise receiving regular reports of how the subcontractor bids were coming in. (Lynn Tr. 940:8-940:25; AF0829). Mr. Lynn testified that he was beginning to receive reports of problems with subcontractors bidding the job which included a developing reputation in the subcontractor community that there was risk you would not be paid. (Lynn Tr. 941:1-13). Mr. Lynn confirmed that for a period of time before the FFP was submitted by Kiewit-Turner, the VA had simply stopped paying individual change orders. (Lynn Tr. 941:14-25). 90 US2008 5819490 1 456. Mr. Lynn testified it was “reasonable” to draw a correlation between the subcontractor community not bidding the project and the VA’s failure to process change orders. (Lynn Tr. 942:10-15). 457. The VA’s many revisions to the construction documents during the same time Kiewit-Turner was seeking bids from the subcontractors caused the prospective bidders to view the project as having even more risk and to increase their prices accordingly. (Aardsma Tr. 1026:19-1027:22). B. Subcontractor Pricing Increased From SA-007 To The 100% Design 458. Generally, uncertainty in the design will result in a premium from the subcontractor market for those subcontractors that decide to participate and provide a bid. (Rossi Depo. 158:6-13). 459. Increased bidder participation should result in lower pricing on a project. (Saylor Depo. 91:6-92:15). Conversely, less bidder participation should result in higher prices for the project. (Id.) 460. The impact on the inordinate amount of JSIs and RFIs in response to the designer’s uncoordinated and incomplete design issued in August 2012 created confusion and difficulty for the subcontractors who were dealing with inordinate volumes of paperwork. (Jahrling Tr. 245:20-247:12). 461. Through 2010 and early 2011, the subcontractors were excited and the market was hungry for work. (Jahrling 220:18-221:10; Taylor Depo. 53:14-54:17). The VA was informed by their design peer reviewer, Bill Green, that in late 2010 the market conditions were currently favorable to the VA, and that several large hospital projects were gearing up for commencement in 2011. (AF0037-2). 91 US2008 5819490 1 462. By the Fall of 2012 when the VA’s purported 100% design was issued however, the Denver market was out of a recession period with several large projects under construction: Denver International Airport, Saint Joe’s Hospital, and Union Station redevelopment. (Jahrling 245:20-246:24; Jones Tr. 613:16-22; Taylor Depo. 53:14-54:17). The construction subcontractor market in Denver “flipped” from a “buyers’ market” to a “bidders’ market” between late 2011 and the fall of 2012. (Aardsma Tr. 1024:15-1025:12). During this time, over $1 billion worth of other healthcare projects in Denver came onto the market. (Aardsma Tr. 1023:9 - 1024:1). Subcontractors were no longer dependent on the Denver VA Project for work. (Jones Tr. 613:1622). 463. In 2012, other projects came online and the contract conditions on the VA Project became “too onerous.” (Taylor Depo. 54:14-22). In 2012, subcontractors began losing interest in the VA project and refused to give pricing. (Taylor Depo. 55:4-17). 464. After receiving the 100% design in August 2012, the subcontractor bids were coming in significantly higher than any of the estimates. (Colpack Tr. 131:14-19). X. THE PROJECT’S ESTIMATED AND ACTUAL COSTS CONTINUED TO CLIMB AS THE DESIGN WAS COMPLETED BY THE JVT A. 95% Design Estimates 465. The 95% documents, or the CD1 package, should be 100% complete design documents subject to a quality control check. (Colpack Tr. 70:1-3; Chang Tr. 690:19-23). There should not be any design changes or evolution from the 95% to the 100% drawings. (Colpack Tr. 70:11-17). 466. Except for certain limited examples, the majority of the CS-1 95% drawings were not to the level of completeness or coordination to be used for bidding as they were missing important specifications and drawings. (TE005). 92 US2008 5819490 1 467. Mr. Chang testified that the 95% design on this Project was only 80% complete. (Chang Tr. 690:1-13). The incompleteness of the 95% design made it more difficult to control the cost of the Project. (Chang Tr. 691:3-5). 468. Kiewit-Turner, the JVT, and Jacobs performed estimates on the 95% design. (Klebba Tr. 473:18-474:17; AF0662). 469. The VA paid Jacobs an additional $516,000 in February 2012 to perform an IGE and for use to substantiate estimates by the JVT and Kiewit-Turner. (Lynn Tr. 923:24-925:4; AF0655). On April 24, 2012, Jacobs issued its 95% Design estimate which was $712 million. (Schneider Tr. 741:5-742:3; Lynn Tr. 925:5-926:7; AF0656; AF0662). Mr. Schneider was the lead estimator for this IGE and testified at the hearing that this was a fair and reasonable price based on the information he was provided as of April 2012. (Schneider Tr. 741:5-742:3; AF0656). Mr. Willoughby acknowledged he received no complaints regarding the Jacobs 95% estimate and, in fact, was satisfied enough with the Jacobs 95% estimate to ask Jacobs to perform a 100% project estimate. (Willoughby Tr. 1723:9-724:3). 470. Kiewit-Turner’s 95% Design estimate was approximate $717 million while the JVT’s estimate was approximately $607 million. (Klebba Tr. 473:18-474:17; AF0662). 471. The $712 million Jacobs 95% Design estimate was within $5 million of Kiewit- Turner’s 95% estimate, but approximately $105 million above the A/E’s 95% estimate. (Lynn Tr. 926:8-12; Willoughby Tr. 1721:18-1722:11; AF0662). B. Design Estimates Between The 95% And 100% Design 472. The Project cost estimates were climbing as a result of Kiewit-Turner receiving subcontractor pricing for the various 100% packages. (Blatnak Tr. 639:1-22). These increasing costs were communicated to the VA on a weekly basis at the Firm Fixed Price Meetings as the 93 US2008 5819490 1 subcontractor pricing became available. (Klebba Tr. 505:17-506:2; Blatnak Tr. 639:12-17; TE017). 473. The FFP Meeting also discussed the Purchasing Buyout Analysis. (TE017). Mr. Klebba testified that the Purchasing Buyout Analysis broke the Project budget of $604 million down into approximately 80 bid packages. (Klebba Tr. 509:10-21; TE017). As bids were received, the amount of the bid package was added to the Purchasing Buyout Analysis to update it based on the awarded amount. (Klebba Tr. 511:14-512:10; TE017). 474. By October 25, 2012, the Purchasing Buyout Analysis estimated the Project Cost at $712 million. (Klebba Tr. 512:19-25; TE017). However, the Purchasing Buyout Analysis also stated that at that time Kiewit-Turner had not received the majority of the subcontractor bids for the 100% design yet. (Klebba Tr. 513:15-25; TE017). 475. On December 13, 2012 Mr. Blatnak sent an e-mail in lieu of an FFP Meeting that contained the updated Purchasing Buyout Analysis. (Klebba Tr. 520:10-22; TE031). The Purchasing Buyout Analysis on December 13, 2012 estimated the Project at $768,909,149. (Klebba Tr. 523:7-14; AF0277-5; TE031-13). This estimate was a result of more bids from subcontractors coming in. (Klebba Tr. 523:15-19). The Purchasing Buyout Analysis made clear that, as Mr. Klebba testified, this $768 million estimate included the $50 million in approved VE, and if any was not achieved the estimate would necessarily increase. (Klebba Tr. 523:20524:13). Kiewit-Turner expressed concern as to whether the necessary $50 million in approved VE could actually be achieved. (Klebba Tr. 521:1-11; TE031). 476. Around the same time in December 2012, the VA’s resident engineer, Mr. Chang, sent an e-mail to other VA employees explaining that he estimated the Project would cost at least 94 US2008 5819490 1 $800 million just for construction (not purchase land or design services) and that the VA could expect a mega claim. (Chang Tr. 727:7-728:12; AF0636). C. Jacobs 100% Estimate Is $200 Million Over The ECCA 477. Although Jacobs is a competitor to RLB, RLB’s Mr. Taylor testified that Jacobs’ cost estimating group is reliable and that they do good work. (Taylor Depo. 202:16-203:1). 478. Jacobs was paid over $1 million to develop independent estimates based on the 100% Design and the 95% Design. (Lynn Tr. 938:6-17; Willoughby Tr. 1557:3-12; Willoughby Tr. 1723:1-8). The VA specifically requested that the Jacobs estimating team remain independent of the project team. (Lynn Tr. 939:23-940:7). 479. The VA specifically asked Jacobs to prepare the estimate without using any actual costs coming in from Kiewit-Turner’s subcontractors. (Lynn Tr. 939:23-940:7; Willoughby Tr. 1722:12-1722:22). 480. On January 21, 2013, Jacobs issued an estimate based on the purported 100% design documents which totaled $784,963,063. (Schneider Tr. 742:12-23; Schneider Tr. 748:810; Willoughby Tr. 1722:23-25; AF0672). Jacobs estimated the 100% design documents to be $784 million, which is approximately $200 million over the ECCA. (Lynn Tr. 938:18-25; AF0672). 481. Mr. Schneider was involved in preparing this estimate. (Schneider Tr. 742:24- 482. The preparation of Jacobs 100% estimate was a significant effort wherein Mr. 743:1). Schneider oversaw over 15 estimators who helped prepare this estimate. (Schneider Tr. 743:29). Mr. Schneider testified it took this team of over 15 estimators between 3 to 4 weeks to develop this estimate. (Lynn Tr. 939:17-22; Schneider Tr. 743:7-16). 95 US2008 5819490 1 483. Jacobs’ 100% estimate included, among other things: a basis of estimate, a market study, as well as a list of design drawings used to prepare the estimate. (Schneider Tr. 745:1746:4). This 100% Jacobs estimate was based on the purported 100% design drawings and specifications. (Schneider Tr. 746:21-747:7; AF0672). 484. Mr. Schneider testified that this 100% Jacobs estimate was prepared independently of the VA, the JVT, RLB, and Kiewit-Turner. (Schneider Tr. 747:8-22). 485. Mr. Schneider also testified that based on his years of experience preparing and performing IGEs, he prepared this 100% Jacobs estimate using the same means and methods that he would typically employ in preparing an IGE. (Schneider Tr. 747:23-748:2). 486. Mr. Schneider testified that he stood by this estimate and believed that the estimate was a fair and reasonable price for the design that he was provided. (Schneider Tr. 748:3-14). 487. The Jacobs 100% estimate is consistent with what Kiewit-Turner was independently reporting to the VA at the same time. (Jahrling Tr. 220:10-17). D. Kiewit-Turner’s 100% Design Firm Fixed Price Proposal 488. On December 13, 2012, Mr. Blatnak e-mailed an updated Purchasing Buyout Analysis to the VA. (TE031-1). The Purchasing Buyout Analysis tracked each bid package – for example Structural Steel – and indicated the subcontractor that the bid package was awarded to, the FTP allocation for each bid package, and the actual competitive market price for that bid package. (TE031-12). 489. The actual market pricing indicated that the Project was trending far over budget. (TE031-13). Mr. Willoughby was aware that the market pricing was coming in over budget because he consented to every subcontract that Kiewit-Turner entered into on the Project. (AF2051–AF2174). 96 US2008 5819490 1 490. On March 14, 2013, Kiewit-Turner submitted its Firm Fixed Price Proposal to the VA. (AF502-2). 491. Kiewit-Turner’s FFP Proposal was for approximately $897 million. (Colpack Tr. 141:4-5; AF502-2). 492. The Firm Fixed Price was “composed of current trade subcontractor bids; Design Assist subcontractor cost proposals, contract modifications to date, potential change orders (PCO's), as well as estimates for work not yet bid.” (AF502-2). The FFP Proposal was comprised primarily of subcontractor pricing on various bid packages. (Blatnak Tr. 656:9-22). 493. There were also some bid packages that were not yet bid out yet and Kiewit- Turner used estimates for those. (Colpack Tr. 142:17-23; Blatnak Tr. 656:9-22; Blatnak 662:7663:1; AF502-8). 494. Over 90% of Kiewit-Turner’s $898 million FFP Proposal was based on actual subcontractor costs. (Blatnak Tr. 663:5-7). 495. Kiewit-Turner’s Firm Fixed Price Proposal also included a cost summary that communicated whether the cost of a bid package was from a competitive bid or whether it was an estimate. (AF502-7; AF502-8). Over 90% of the Firm Fixed Price Proposal was based on competitive bids. (AF502-7; AF502-8). These competitive market bids valued the cost of the Project at approximately $898 million. (AF502-8). 496. Kiewit-Turner’s FFP also provided a summary page that demonstrated the continuous rise of the Project’s cost based on new drawings and bids from the subcontracting community. (Blatnak Tr. 656:23-657:18; AF0502-4). 97 US2008 5819490 1 497. The FFP Proposal also included a significant number of qualifications and clarifications. (Colpack Tr. 141:16-17; AF502-6). In addition, the FFP Proposal carried allowances. (AF502-6). 498. These allowances and clarifications were necessary because Kiewit-Turner was getting design modifications to complete the 100% construction documents. (Blatnak Tr. 659:16661:16). 499. The VA rejected Kiewit-Turner’s FFP Proposal. (Colpack Tr. 143:6-7). E. JVT 100% Estimate 500. Peter Knowles was involved with the preparation of the JVT’s 100% design estimate. (Knowles Depo. 254:3-5). 501. The VA asked the JVT to perform a 100% Design estimate on the Project. (Fiotes Depo. 58:16-22). Interestingly, no one in the VA had provided the senior executive for CFM, Ms. Fiotes, with the JVT 100% estimate or informed Ms. Fiotes of the amount of the 100% JVT estimate after it was performed. (Fiotes Depo. 50:8-51:5). 502. RLB understood that it was not providing an IGE with this estimate as it was not part of its scope of work. (Knowles Depo. 15:23-17:1). In fact, RLB has not been asked to provide an IGE on this Project. (Id.). RLB does not know what its 100% design cost estimate was going to be used for by the VA. (Knowles Depo. 134:19-135:4; Knowles Depo. 293:5-24). RLB did not recall any of the objectives being to provide an estimate of what the VA may pay for the 100% design. (Knowles Depo. 293:5-24). 503. Even after performing its 100% Design estimate, RLB’s lead estimator testified that he doesn’t know what the VA will pay for the Project’s 100% design. (Knowles Depo. 108:15-18; Knowles Depo. 270:18-271:6). 98 US2008 5819490 1 504. For the 100% design estimate, RLB did not do the following: consider current vendor prices (Knowles Depo. 109:8-17); source pricing from then existing Denver market (Knowles Depo. 113:5-23); consider the actual G&A rates being charged by, and paid by the VA, to Kiewit-Turner (Knowles Depo. 147:4-14); account for the several month schedule extension the VA granted Kiewit-Turner due to the VA’s late issuance of design (Knowles Depo. 161:5-15); that the 100% design was uncoordinated and incomplete, which could lead to more costs than estimated (Knowles Depo. 209:17-213:1); any costs associated with JSIs 43-70 (Knowles Depo. 214:6-16); and actual bid pricing consented to by the contracting officer (Knowles Depo. 286:21-287:20). 505. RLB has not even received a copy of Kiewit-Turner’s contract on the Project, including SA-007. (Knowles Depo. 118:2-20; Knowles Depo. 124:6-15; Taylor Depo. 62:2163:23). In fact, RLB understood, incorrectly, that Kiewit-Turner had a fixed-price contract with the VA. (Knowles Depo. 136:10-20). 506. The RLB 100% design estimate was not performed like a traditional cost estimate, but was rather an exercise specifically guided by the instructions and parameters directed by the VA. (Knowles Depo. 172:25-173:25). The VA, through the JVT, provided the parameters RLB used to develop the 100% design estimate. (Knowles Depo. 222:22-25; AF0738). 507. Mr. Knowles, the lead estimator for RLB on the 100% design estimate, testified that he has “no idea whether [criteria it used]” in its estimate accurately reflects the Project conditions. (Knowles Depo. 296:24-297:14). 508. RLB understood there were significant exclusions in the parameters the JVT and VA jointly created for RLB’s 100% design estimate and that these significant exclusions could 99 US2008 5819490 1 have an influence on the ultimate cost estimate. (Knowles Depo. 244:25-245:17). RLB believes that its 100% design estimate reflects the criteria that it was “directed to use,” but has no idea if it is reflective of what the owner may pay for the Project. (Knowles Depo. 292:2-22). 509. RLB’s role on the 100% design estimate was not “to try to replicate the number or anything else given by the contractor. I think our role was very clear that we had somewhat of an academic exercise to develop our cost estimate the way we saw it in the marketplace.” (Knowles Depo. 129:13-24). (emphasis added.) RLB’s 100% design estimate was an academic or “theoretical” exercise to develop that estimate as compared to reflecting the actual marketplace. (Knowles Depo. 130:2-22; AF0731). RLB was expressly told not to account for the perception in the marketplace about the negative issues surrounding the job as that may influence the estimate it was preparing. (Knowles Depo. 131:6-132:7). 510. The parameters the JVT and VA provided RLB for the 100% design estimate included: a scheduled Project completion date of April 2, 2015; labor rates based on the Davis Bacon rates set in February 2011 (not the then currently prevailing labor rates) (Knowles Depo. 230:10-231:1); and a schedule of only 1,228 days (Knowles Depo. 236:24-237:7). 511. The VA expressly directed RLB during its 100% design cost estimate exercise not to be influenced “by anything that’s occurring within the [Kiewit-Turner/VA] contract.” (Knowles Depo. 128:5-129:12; Knowles Depo. 130:7-16; Knowles Depo. 132:21-133:6). This direction likely came from Mr. Willoughby. (Knowles Depo. 128:5-129:12). RLB believed not using actual known market information was “an awkward thing.” (Knowles Depo. 288:7-19). 512. The JVT’s estimate of the 100% design shows that it will cost $630 million, or $48 million over the ECCA to build. (AF0781-25; AF0874-10). (emphasis added). 100 US2008 5819490 1 F. RLB Is Not Independent – “Wolf Watching The Henhouse” 513. Mr. Lynn agreed with recommendations by the Contracting Officer in his JVT performance evaluation that cost estimating be removed from the JVT: in “all my previous experience, an owner would never ask an architect for an estimate because there is an inherent conflict of interest, in particular, if that architect has a design-to-budget clause in their contract. To me, it doesn’t – it’s not logical to do things that way.” (Lynn Tr. 869:6-870:2). 514. Jacobs, on the other hand, could provide an independent estimate “because [Mr. Lynn testified that Jacobs] didn’t have a vested interest in the price being higher or lower. We were – we had nothing to gain or lose just by being completely honest.” (Lynn Tr. 870:13-25). 515. RLB has been paid $900,000 by the JVT for RLB’s cost estimating services on the Project. (Knowles Depo. 21:21-22:6). RLB took direction from the JVT. (Knowles Depo. 22:4-6). 516. It was a routine practice on the Project for the JVT to “scrub” RLB’s estimates prior to RLB issuing the final estimate. (Taylor Depo. 99:7-24; AF0742). 517. The JVT expressed concerns to RLB about RLB’s cost estimates showing the design being over the ECCA. (Taylor Depo. 135:3-9; AF0746). The JVT told RLB that if the RLB cost estimates were over the ECCA, the JVT would have to perform redesign to get the design back to within the ECCA at its own cost. (Taylor Depo. 135:22-136:5). The JVT told RLB that the JVT would prefer not to be in that situation. (Id.) 518. The JVT gave RLB suggestions how to prove to the VA that the JVT’s design could be built for the ECCA of $582 million. (Taylor Depo. 157:20-158:15; AF0751). 519. The JVT directed that RLB write letters where the JVT provided the specific language that RLB was to include. (Knowles Depo. 174:1-177:3; AF0732). RLB did in fact write the letter that the JVT requested and used the same words that JVT provided RLB. (Id.) 101 US2008 5819490 1 520. During the reconciliation process, the JVT demanded that RLB must be the JVT’s “advocate in reconciliation with [Kiewit-Turner].” (Knowles Depo. 191:22-192:25; AF0735). The JVT wrote to RLB telling it that the RLB’s cost estimates and reconciliation process are “the key to [the JVT] getting paid or having to redesign on our nickel and it’s our only line of defense.” (Id.) 521. Internally, the JVT and RLB discussed whether the ECCA should be increased and developed a plan called the “escalation strawman” plan. (Knowles Depo. 167:22-169:10). After the plan was hashed, RLB concurred with the JVT that the JVT should “sell it” to the VA. (Knowles Depo. 198:7-199:21; AF0736). 522. Mr. Bill Green, the VA’s peer reviewer and trusted advisor to Mr. Pogany, e- mailed Mr. Pogany and stated he thought the JVT “may have been ‘backing into the budget’ with their estimates… .” (AF0537-1). The VA’s Project Executive had suspicions that the JVT was shuffling money around in its cost estimates and that the VA was not sure the JVT was accounting appropriately for the costs in its estimates. (Pogany Tr. 1331:13-18). 523. In September of 2011, the VA CFM requested that the U.S. Army Corps of Engineers (“COE”) conduct an independent review of two large VA hospital projects, including the Denver VA Project. (AF0646; AF0646-5). The report concluded that “the IDc contract type may not have been appropriate for the Medical Center Replacement in Denver” and that the Project was set to use a more typical design-bid-build method. (AF0646-11). 524. The COE Report also noted that after a “review of the events, as well as discussions with the Denver Project Executive team revealed that the goals of the joint venture performing the design may not be aligned with the project goals of delivering a functional facility at the lowest price.” (AF0646-11). 102 US2008 5819490 1 525. In May 2012, Jacobs reported to the VA’s Tim Pogany that all RLB’s cost estimates were consistently lower than Kiewit-Turner’s for each bid package, that RLB was unable to come to a reconciled cost with Kiewit-Turner, that RLB’s construction cost at award is $100 million less than Kiewit-Turner’s, that RLB used a low 1% G&A rate in its estimate where the RS Means (an industry standard) average G&A rate for a general contractor averages 3.9% for volume in excess of $10 million, and that the JVT has used RLB’s estimates as a basis for making design decisions. (AF2273). 526. After Jacobs submitted its 100% estimate, it was reviewed by the JVT. (AF0676- 2). On February 11, 2013, Mr. Bliss e-mailed Mr. Pogany and Mr. Willoughby to respond to several of the JVT’s criticisms of Jacobs’ estimate. (AF0676-1). Mr. Steve Bliss with Jacobs wrote that: “The JVT is doing exactly what we expected by attempting to discredit our estimate. They have a substantial risk and will defend against the risk as much as they can.” (AF0676-2). Mr. Bliss further noted that the JVT was comparing Jacobs’ estimate to a completely different set of drawings. (AF0676-2). 527. The VA claimed it had to peer review the Jacobs 100% estimate due to a VA policy or procedure in place that requires it to have the A/E do the 100% estimate. (Willoughby Tr. 1796:24-1797:8). The VA has not provided a copy of any such policy and no such purported policy exists in the Rule 4 File. (Willoughby Tr. 1801:11-25). 528. Mr. Willoughby testified allowing the A/E to provide the estimate of its own design was akin to having a “wolf watching the henhouse.” (Willoughby Tr. 1712:8-1713:3). 103 US2008 5819490 1 XI. KIEWIT-TURNER MET ITS OBLIGATION UNDER SA-007, BUT THE VA DID NOT A. Kiewit-Turner Satisfied Paragraph 10 Of SA-007 529. Paragraph 10 of SA-007 provides: “Both parties agree that they must achieve a goal to get the project price at or below $604,087,179.00. Both parties agree to expend the necessary resources to keep the project goal.” (TE051). 530. Mr. Pogany testified that all parties, including Kiewit-Turner, expended significant amount of resources to try and reduce the overall cost of the design after SA-007 was executed. (Pogany Tr. 1248:19-1249:6). 531. Kiewit-Turner devoted substantial resources to identify value engineering ideas on the Project. After SA-007, Kiewit-Turner brought on Jim Galligan specifically to work on the value engineering efforts. (Klebba Tr. 444:11-20; Blatnak Tr. 636:14-637:3). Mr. Galligan reported to Mr. Blatnak on the Project. (Klebba Tr. 448:17-23). 532. It was necessary to bring Mr. Galligan to the Project because the DD-2 estimate was $664 million, so as Mr. Klebba testified, the team had a long way to go get back to the $604 million budget. (Klebba Tr. 446:4-9). 533. Kiewit-Turner held weekly value engineering meetings as well as discipline meetings to help develop cost control ideas – meetings in support of Paragraph 10 in SA-007. (Klebba Tr. 544:2-545:15; Blatnak Tr. 637:6-16). These meetings were attended by KiewitTurner, Jacobs, and the VA. (Blatnak Tr. 637:6-9). Mr. Klebba testified that Mr. Blatnak would break out each discipline – such as structural or exterior enclosure – and assign members from Kiewit-Turner, the VA, and the JVT to each discipline. (Klebba Tr. 431:6-432:21; AF0176). 534. Mr. Klebba testified that Kiewit-Turner had approximately 20 people involved in the discipline meetings and an additional 10-20 in the field. (Klebba Tr. 433:3-17). The design 104 US2008 5819490 1 assist subcontractors were also involved in these meetings. (Klebba Tr. 433:18-434:17; AF0176). 535. Mr. Klebba testified that the design assist subcontractors did a great job of suggesting value engineering ideas to get the Project at or below the budget. (Klebba Tr. 441:2442:4). Mr. Klebba further testified that this was a part of Kiewit-Turner’s efforts to expend the necessary resources to get the Project within the $604 million total. (Klebba Tr. 442:5-10). 536. In the early part of 2012, Kiewit-Turner presented hundreds of millions of dollars of VE ideas to the VA. (Klebba Tr. 443:10-444:1). Mr. Klebba further testified that you normally do not expect to do this amount of value engineering at a time when the contractor has 95% documents. (Klebba Tr. 436:3-12; 444:21-445:4). Mr. Klebba testified that the VA’s own Program Guide 18-15, requires that all value engineering should be done at the design development document stage. (Klebba Tr. 445:5-24). Mr. Klebba testified on this Project it was necessary because Kiewit-Turner was trying to get the Project back to the $604 million budget. (Klebba Tr. 436:3-14). 537. Kiewit-Turner devoted significant resources, including over thirty estimators, in order to expend the necessary resources to try and help the VA keep the project goal of $604 million. (Colpack Tr. 144:4-23). 538. After the DD-2 submittal, Kiewit-Turner worked with the JVT and VA in “silo” meetings for specific disciplines. (AF0082). The intent of the “silo” meetings was to maintain schedule and budget control throughout the preconstruction phase. (AF0082-1). 539. Kiewit-Turner also continued to provide input on the Project’s design; the Dr. Checks report for the Project included over 1,800 pages of comments on the JVT’s design. (AF2426). 105 US2008 5819490 1 540. Kiewit-Turner also began weekly meetings regarding the trending of the Project cost. (Klebba Tr. 418:5-14). These meetings began in January of 2012. (Klebba Tr. 418:18-22). 541. These meetings were run by A.J. Klebba and Paul Blatnak. (Colpack Tr. 113:13- 21). Mike Colpack also attended. (Id.). Kiewit-Turner would provide a document known as the Project Trend Report or Project Trend Log showing a summary of the current estimate. (Colpack Tr. 115:20-116:3). Mr. Klebba testified that these meetings were attended by the VA, Jacobs, and the JVT. (Klebba Tr. 419:14-19). 542. Mr. Klebba testified that the goal of these meetings was to ensure that the construction costs were within the Project budget. (Klebba Tr. 420:6-12). Mr. Klebba further testified that these Project Trend meetings were outside the scope of Kiewit-Turner’s preconstruction services and were one of the requirements to spend the necessary resources to keep the Project on budget described in Paragraph 10 of SA-007. (Klebba Tr. 420:13-23). 543. The first Project Trend meeting was in January of 2012. (Klebba Tr. 419:1-10; AF0172). 544. Mr. Klebba testified that during these meetings Kiewit-Turner would review where the current estimate of construction costs was in comparison to the budget. (Klebba Tr. 421:4-12). After that, teams would be assigned to provide solutions to get the Project back to budget. (Id.). Mr. Klebba testified that these “teams” were called discipline meetings and broken down by different trades such as structural or electrical. (Klebba Tr. 421:13-22). 545. Mr. Klebba testified that these discipline meetings were part of the effort of the parties to expend the necessary resources to make the Project price goal of $604 million. (Klebba Tr. 437:2-12). 106 US2008 5819490 1 546. Further, beginning in March of 2012, Kiewit-Turner began providing the VA detailed monthly Project reports. (AF0413). The monthly reports updated the VA on the key project issues, the project financials, and the status of RFIs and submittals. (AF0413-3). For instance, in March of 2012, Kiewit-Turner was informing the VA that the Project was trending over $700 million and that the 100% CDs were delayed and still not issued. (AF0413-4). Kiewit-Turner provides these monthly Project reports to the VA every month. (AF0413; AF0416; AF0423; AF0433; AF0438; AF0446; AF0452; AF0470; AF0475; AF508; AF509; AF514; AF517). By March of 2013, Kiewit-Turner was reporting an estimated overall potential Project cost of almost $1.1 billion. (AF0514-6). B. VA Failed To Provide A Design Capable Of Meeting The ECCA Of $582 Million 547. Paragraph 11 of SA-007 provides: “The VA shall ensure the A/E (Joint Venture Team) will produce a design that meets their Estimated Construction Cost at Award (ECCA) with use of alternate and other methods as a safety net.” (TE051). 548. The VA did not fulfill its promise to provide a design that met the ECCA of $582 million. (Colpack Tr. 145:1-6). When awarded, the subcontractor bids were above the $582 million ECCA. (Colpack Tr. 145:7-10; AF0502-2-3). 549. On December 16, 2011, the VA was withholding retainage from the JVT and the JVT requested the release of the retainage. (AF0707). Mr. Willoughby wrote a letter to the JVT on December 16, 2011, and denied the release of the retainage, stating that: “Additionally, there is a concern regarding the estimated construction cost at award (ECCA) is currently above the contract stated limit. Due to the ECCA above the contract stated limit and the complete design has not been accepted your request for release of the retainage is denied.” (Id.) 107 US2008 5819490 1 550. On April 30, 2012, Jacobs issued a report to the VA’s project executive telling the VA that “every effort must be made to contain the project cost within or as close to $604 million as possible” and that this will require “massive” VE. (Pogany Tr. 1305:8-1306:16; AF0557). 551. On May 8, 2012, the VA wrote to the JVT that the VA “will work with JVT to incorporate VE items that will bring the cost of the project back to the ECCA…” (AF2269). 552. In July 2012, the VA issued another Project Management Plan that identified the project scope as being a high risk, there was still a need for extensive VE to be performed, that the Project was over budget, and that the A/E still does not believe there is a budget problem. (Pogany Tr. 1308:11-1309:10; AF0823). 553. After receiving the Jacobs 100% estimate on January 21, 2013, the VA had a meeting with Mr. Pogany, Mr. Kyrgos, and Mr. Fromm with the JVT, to discuss the massive cost overage and what the VA and JVT could do to redesign to get the Project within budget. (Pogany Tr. 1309:11-1310:20; AF0562). Addressing the massive cost overage was a high priority for the VA. (Id.). During the meeting, the VA was also discussing the quality and completeness of the JVT’s design. (Id.) 554. On January 23, 2013, the VA sent a letter to the JVT stating that the “current design” exceeded the ECCA by more than $199 million and directing the JVT to do a redesign. (Fiotes Depo. 108:8-109:7; AF0298; AF0810). 555. On April 12, 2013, Kiewit-Turner delivered a letter to the VA stating that a critical problem facing the Project was that the VA failed to have the JVT produce a design meeting the requirements of SA-007. (Klebba Tr. 541:25-542:9; AF0337). Mr. Klebba testified that the point he was trying to convey here was that the fact that the Project was over budget had 108 US2008 5819490 1 nothing to do with Kiewit-Turner’s preconstruction services but rather the VA’s failure to provide a design that met the ECCA. (Klebba Tr. 542:12-22). 556. Mr. Klebba’s letter also made clear that the two obligations, to design and construct are not mutually exclusive, and that Kiewit-Turner cannot construct a project within the bounds of the $604 million FTP if the design exceeds the ECCA by approximately $199 million. (Klebba Tr. 543:9-15; AF0337). Mr. Klebba testified that he was trying to rebut the VA’s assertion that the two were independent of each other – that somehow it did not matter what they designed the project to, Kiewit-Turner still had an obligation to build the Project to the FTP. (Klebba Tr. 543:17-544:1). 557. Ms. Fiotes testified that the ECCA means that the architect of record has to provide a 100% design that can be built to the amount allocated to that Project. (Fiotes Depo. 38:13-19; 42:20-43:9). Ms. Fiotes further testified that if the JVT’s 100% estimate was $630 million, that is over the ECCA. (Fiotes Depo. 70:15-71:1). 558. On March 25, 2013, the VA issued an updated Risk Management Report that identified as a risk to the Project a significant price increase from the Firm Fixed Price proposal of Kiewit-Turner. (Pogany Tr. 1311:11-1313:6; AF2322). To mitigate this risk, the VA identified a few options: (1) complete VE process, (2) cut scope, (3) redesign, (4) evaluate fixed price proposal, (5) force Kiewit-Turner to build to fix price contract, and (6) ask Congress for additional funds. (Pogany Tr. 1311:11-1313:6; AF2322). 559. On June 18, 2013, Kiewit-Turner sent the VA a letter requesting a written explanation of the ECCA. (AF0515). Kiewit-Turner asked, for the second time, that the VA “describe how it determines the current ECCA and its components” because it “was apparent that 109 US2008 5819490 1 the VA's approach for determining the ECCA differed from KT's understanding.” (AF0515-1). The VA never responded to either letter describing the ECCA. (AF0515-1). 560. The VA ultimately exercised Option #1 to force Kiewit-Turner to build to the $604 million figure despite having an independent estimate from Jacobs valued $199 million over the ECCA and with the VA fully expecting “a court battle on a large claim.” (Pogany Tr. 1358:19-1360:2; TE035). C. VA Failure To Control And Manage The Designer And End User 561. Mr. Willoughby agreed that in paragraph 11, the VA is making a commitment to Kiewit-Turner that it is going to find further VE to get the job back within the ECCA, testifying the VA “had to expend resources to do that, to do the VE. Also, again, the A/E contract requires them to be at the ECCA.” (Willoughby Tr. 1591:4-1592:8; AF0160; AF0167; TE051). Mr. Willoughby further testified that the VA is required to make sure the A/E meets the ECCA. (Willoughby Tr. 1530:4-9; TE051; AF160). 562. Mr. Willoughby testified that both he and the Project Executive Mr. Pogany lacked control and oversight over the A/E by acknowledging that they both failed to aggressively instruct the A/E to change the design to meet the budget. (Willoughby Tr. 1718:14-1721:9; AF0547-27). 563. Kiewit-Turner did not have any ability to control the designer. (Guy Depo. 134:6-14; AF0611). Ms. Guy testified that it was VA CFM’s responsibility to direct the designer to design to the budget. (Guy Depo. 134:15-135:2; 164:23-165:2; AF0611). 564. On VA projects, the strong leadership of the project executive helps determine whether the project is successful or not. (Kyrgos Tr. 1119:9-22). 565. Mr. Rossi, the VA’s IDc Consultant wrote an e-mail to Mr. Kyrgos on February 17, 2011 describing the key risks associated with the IDc Contract. (AF0802). Several risks Mr. 110 US2008 5819490 1 Rossi highlighted relating to the IDc contract were: “Risk of Scope/Quality/Cost creep if limited owner involvement early on” and “Risk that Estimate of Cost to Complete during design gets lost without constant owner vigilance.” (AF0802-1). 566. Mr. Pogany was responsible for controlling the scope. Mr. Pogany did not control the scope. (Chang Tr. 716:18-22). He could have controlled the scope by controlling the designer. (Chang Tr. 716:23-25). 567. Bill Green is a VA independent peer reviewer and an advisor to Mr. Pogany whom Mr. Pogany respected and believed in his professionalism. (Pogany Tr. 1287:11-25). Mr. Green informed the VA very early on in the design phase regarding concerns that he had with the JVT’s cost estimating, specifically how the scope increased, but their cost estimate stayed the same or went down. (Pogany Tr. 1288:1-1289:12; AF0040). Mr. Green identified this as a critical issue. (Id.) 568. Ms. Guy testified that Mr. Pogany did not control the JVT or the design. (Guy Depo. 88:1-5). Ms. Guy testified that Mr. Pogany often deferred to her and told the JVT to listen to what Ms. Guy wanted. (Guy Depo. 147:7-13). Ms. Guy further testified that it was 100% the VA CFM’s responsibility to control the Project and the budget. (Guy Depo. 165:9-25). Ms. Guy further testified that she was never told to stop asking for things for the Medical Center. (Guy Depo. 262:23-263:9). 569. Mr. Chang testified that Mr. Pogany, the Project Executive, failed to control the designer and the designer dictated the process on the Project. (Chang Tr. 691:6-22; AF0581). Mr. Chang further testified that the JVT management was unwilling to work with the VA and told the VA what to do. (Chang Tr. 694:5-695:11; AF0581). The Project Executive and Senior Resident Engineer were ineffective at directing the JVT. (Chang Tr. 695:8-24; AF0581). 111 US2008 5819490 1 570. Mr. Newton testified that the VA failed to enforce or direct the JVT to make any changes to the design. (Newton Depo. 101:4-21). 571. The end users for the VA, the VA medical center, overrode the Contracting Officer, Project Executive, and Senior Resident Engineer and stated the zig-zag wall VE item was rejected. (Blatnak Tr. 646:1-6; 647:6-9; AF0623-4). 572. Ms. Guy, the representative for the end user VA Medical Center, testified that at the schematic design stage she was never constrained by the Project’s budget because the VA Medical Center has no control over the budget. (Guy Depo. 75:23-76:2). 573. According to Mr. Hayden, Judi Guy was very assertive and aggressive, and wanted to run every little detail associated with the project. (Hayden Tr. 1443:12-1444:2; AF0631). Mr. Hayden never saw Mr. Pogany push back to Judi Guy or refuse to go along with what Ms. Guy was insisting on. (Hayden Tr. 1444:3-7). Ms. Guy usually got whatever she wanted. (Hayden Tr. 1444:8-10). 574. Ms. Guy testified that she never saw cost and had no involvement in cost. (Guy Depo. 106:24-107:4; 122:18-24). Ms. Guy further testified that when deciding on VE or costsaving items, cost would not be a consideration she took into account. (Guy Depo. 142:7-22). 575. In December 2010, the VA was complaining that the JVT was failing to listen to the VA’s needs and was putting forth the bare minimum on the Project. (Guy Depo. 83:8-84:2; AF0604-6; AF0604-10). Ms. Guy testified that one of the JVT’s goals was winning design awards and the JVT was placing a higher priority on appearance over functionality while the VA just wanted a function facility to serve the veterans. (Guy Depo. 86:14-87:11). Ms. Guy further testified if aesthetics or function had to suffer to meet the budget, it should be the aesthetics. (Guy Depo. 90:15-25). 112 US2008 5819490 1 576. Mr. Green also identified the JVT’s failure to have and stick to a cost plan. (Pogany Tr. 1289:13-1290:5; AF40). Mr. Green stated that the JVT’s fluctuation in cost estimates reflected too fluid of a design process. (Id.). Mr. Green also reported to the VA that the JVT lost focus on where to spend money and that they were spending money on the design putting aesthetics over function. (AF0040). 577. According to the VA’s own employees, the JVT emphasized aesthetics over function. These aesthetic design choices cost more and did not improve patient care. (Chang Tr. 681:19-682:5). 578. Mr. Chang testified that the parking garages as designed on the Denver VA Project were twice as expensive as similar parking garages at the Children’s Hospital next door. (Chang Tr. 682:19-683:4). Mr. Chang testified this was another example of the JVT choosing aesthetics over function. (Chang Tr. 684:4-13). 579. Another example of the JVT choosing aesthetics over function was the size of the concourse which Mr. Chang testified could be one story high, but was another example of “goldplating” of the design. (Chang Tr. 685:3-12). Mr. Colpack testified that the concourse, which essentially is a lobby for the Project, was four football fields long and roughly the height of a sixstory building. (Colpack Tr. 57:7-16). He said it was a “humongous lobby. The biggest lobby that I think potentially in the world for health care or a building facility.” (Colpack Tr. 57:2123). 580. Mr. Lynn agreed with Mr. Colpack’s assessment of the “lobby” as he testified the A/E did not have much regard for the budget: “as the design progressed, it became apparent that the architect, in my opinion, didn’t really have much regard for the budget. The exterior cladding on the building, the precast on the north sides of the building and then the curtain wall 113 US2008 5819490 1 on the south sides of the building, was highly customized, and in my opinion, really was only designed that way for aesthetic purposes, not because of any functional requirement.” (Lynn Tr. 860:23-861:11). Mr. Lynn also criticized the concourse “as an example of design for what I would consider primarily aesthetic purposes,” which Mr. Lynn further characterized as like a “shopping-mall type experience,” “highly customized” and “quite expensive.” (Lynn Tr. 862:15-863:2). 581. During a March 18, 2013 meeting with the VA, Kiewit-Turner’s representative noted in his meeting minutes via email that: [Stella Fiotes with the VA] said to Tim [Pogany], ‘Tim why didn't you control the designers? Didn't you know the designers were changing the design? Who authorized the change? Don't we have a VA architect that is reviewing the documents the JVT is providing?’ Tim had pretty much no answers except, the JVT is doing it on their own, why would the VA direct the design of a keeled ceiling?’ Stella concluded by thanking KT for presenting at a high level the handful of scope changes. (AF2321-2)(emphasis added). 582. Mr. Lynn, as well as Jacobs management, including Paul Grenhalgh who runs Jacobs national health care program management plan, reviewed the design in 2011 and found “basic fundamental issues with the design,” including “inherent inefficiencies in the site plan.” (Lynn Tr. 855:20-856:25). Jacobs encouraged the VA to pursue a more efficient design to save money, but were unsuccessful because the project executive Tim Pogany said it was “too late” to change the design. (Lynn Tr. 857:1-858:4). 583. Mr. Lynn questioned the design overall, particularly where the VA has a history of designing very functional buildings at a lower cost. (Lynn Tr. 861:12-862:14). 584. Testifying further, Lynn stated he was concerned with the Project budget “from day one.” “Just because you have a budget doesn’t mean you need to spend all the money. 114 US2008 5819490 1 Again, as a taxpayer, I was concerned that even if it wasn’t on budget, why is the Government spending so much money to indulge an architect.” (Lynn Tr. 872:20-873:7). 585. Mr. Aardsma testified that the VA failed to control the JVT and the medical center. (Aardsma Tr. 1037:10-1038:12; TE044-51). His investigation revealed that because neither the VA’s project executive nor the contracting officer had effective controls in place to cause the design to comply with the budget, the A/E focused on satisfying its ultimate customer, the medical center, providing whatever the medical center wanted. (Aardsma Tr. 1037:141038:6). D. The JVT’s Poor Performance Evaluations 586. On November 19, 2010, Mr. Pogany expressed frustration to his superiors regarding the JVT’s actions on the Project, telling his superiors that the JVT was not listening to his instructions and/or directions and that they were “being somewhat obstinate in certain aspects of their client relationships.” (Pogany Tr. 1291:22-1292:16; AF0534). In fact, Mr. Pogany considered withholding retainage from the JVT to get their attention. (Pogany Tr. 1292:17-22). At that time, Mr. Pogany also considered providing an official poor performance evaluation of the JVT team. (Pogany Tr. 1292:23-1293:2). 587. At some point early on in the design phase, the Project Executive considered firing the JVT. (Pogany Tr. 1295:24-1296:20). The Project Executive testified that he considered firing the JVT because they listened to the advice of a former VA Secretary that told them the following: “the pie in the sky is what we’re shooting for here, so whatever you want from the Denver area, I will get you, whatever additional funds you need, so design me what the Medical Center wants and that’s exactly what [the JVT] did.” (Id.). The JVT was given “a blank check to put in everything that the Medical Center needed to have a complete, functional 115 US2008 5819490 1 replacement hospital at 1.6 million square-foot and that’s what [the JVT] designed.” (Pogany Tr. 1296:12-1297:6). 588. On September 29, 2011, Mr. Pogany, the Project Executive for the VA, and Mr. Willoughby, the Contracting Officer, issued an official A/E performance evaluation critical of the JVT. (AF0548). Mr. Willoughby acknowledged the performance evaluation is a serious document, can affect whether a contractor receives future federal work, and yet Mr. Willoughby gave the A/E only a “conditional” recommendation for future work. (Willoughby Tr. 1708:251710:03; AF0548-6). 589. In that evaluation, the Project Executive stated that the JVT had chosen form over function, placed an over emphasis on visual aesthetic aspects, and some design team members were over protective of their design choices and became defensive and restrictive to any questions. (Pogany Tr. 1294:6-1295:20; AF0548). The VA Project Executive testified that some of the JVT members were less than cooperative in their dealings with the VA. (Id.) 590. “Here the cost of the project has decreased as the scope has increased. I believe that is due to the cost estimating being part of the A/E team. I would recommend the cost estimating be removed from the A/E team.” (AF0548-6). Mr. Willoughby confirmed these comments in his testimony, stating his belief the VA “would get a better – a truer estimate” if estimating was removed from the A/E. (Willoughby Tr. 1711:9-1712:7). 591. The Project Executive also complained in the 2011 performance evaluation of the A/E that the JVT would provide a design that the VA did not want or did not request and that the JVT would then charge the VA to redesign what the VA originally wanted and requested. (Pogany Tr. 1297:7-1298:1; AF0548). It was only after the VA paid the JVT additional funds as they demanded before the JVT would become “more serious about participating in actually 116 US2008 5819490 1 incorporating the value engineering items into their documents as changes to their documents.” (Pogany Tr. 1307:21-1308:10). 592. Mr. Lynn agreed with comments made by the Contracting Officer in the A/E Evaluation, in particular the comment that “[t]he current architectural design provided is above the need of the client. The architectural designer refuses to change the building envelope to a simpler design.” (AF0548). Regarding this comment, Mr. Lynn testified “it was my opinion that the design was not appropriate for the mission.” (Lynn Tr. 859:10-860:22; AF0548-6). 593. Mr. Lynn commented he was “surprised” to read these comments when he first saw them at his deposition: “from my experience, if you’re the owner and you tell your architect that you want something done, they do it. I’m a little mystified as to why if the owner felt this way they weren’t getting the architect to follow their lead. It doesn’t compute for me.” (Lynn Tr. 863:3-17). 594. Jacobs also provided a review of the JVT to the VA in May of 2013. (AF0569). Jacobs was highly critical of the JVT and wrote that “the 100% documents are not 100% complete and coordinated. Consensus on the % complete was in the 80-85% range” and “the [JVT’s] staunchly defended ECCA of $589 M has caused the VA to make decisions based on what has been determined to be an unrealistic estimate.” (AF0569-1; AF0569-2). E. The VA Failed to Incorporate the Needed Cost Reduction and Value Engineering to Bring the Project Back to Budget 595. According to the Contracting Officer’s performance evaluation of the JVT in September 2011, “[t]he [JVT’s] current architectural design provided is well above the need of the client. The architectural designer refuses to change the building envelope to a simpler design.” (AF0548). 117 US2008 5819490 1 596. If Mr. Pogany had controlled the designer, it would not have been necessary to do so much value engineering on the Project. (Chang Tr. 704:7-10). 597. VE, valued engineering, is used to reduce the design costs to get the cost of the design back within a budget or the ECCA. (Taylor Depo. 98:22-99:1). The VA made the ultimate decision as to whether or not particular VE proposals were approved and incorporated into the final design. (Pogany Tr. 1263:7-21). 598. Generally, VE is either marked as accepted, pending, incorporated, or rejected. Here, there was value engineering that was “accepted in theory” and “approved” value engineering, which as Mr. Blatnak testified was a tactic in delaying a decision on any VE. (Klebba Tr. 447:9-448:8; Blatnak Tr. 637:17-22). 599. There were times when value engineering items that were accepted and approved at all levels of the VA and still would not be incorporated into the design documents by the JVT. (Klebba Tr. 448:9-16; Pogany Tr. 1255:5-14). It was a typical occurrence that the VA medical center would reject value engineering items because this is the design that the medical center wanted. (Blatnak Tr. 647:14-24). 600. Kiewit-Turner proposed large value engineering items to the VA as a way to reduce the cost of the Project. (Blatnak Tr. 650:11-652:16). After the DD-2 estimate of approximately $659 million, the VA told Kiewit-Turner that everything is on the table, except program, to pull the Project back into budget. (Blatnak Tr. 649:3-15). 601. Kiewit-Turner proposed many multi-million dollar VE items to help get the Project in budget including: (1) merging the two clinic buildings into one building; (2) moving the parking visitors south up out of the ground to eliminate the need for foundation walls, 118 US2008 5819490 1 waterproofing, and subgrade foundation systems; and (3) moving the loading dock above ground. (Blatnak Tr. 650:11-652:16). 602. Many of the VE items presented by Kiewit-Turner were rejected by the VA and/or the A/E for aesthetic reasons. (Blatnak Tr. 652:17-653:4). 603. One of these large item value engineering items related to a change to the exterior wall in the concourse building. (Blatnak Tr. 640:13-22). 604. As designed by the architect, the western side of the Concourse wall had an expensive saw-tooth “zig-zag” design. (Blatnak Tr. 640:13-22; 653:12-25). The zig-zag design had no relation to patient care and was just there for aesthetics. (Blatnak Tr. 642:6-13). The zigzag wall was a value engineering item discussed by Kiewit-Turner and the JVT in February of 2011. (AF0065-4). 605. The Contracting Officer, Project Executive, and Senior Resident Engineer for the VA all agreed, and Mr. Blatnak testified that they all expressed this sentiment to Kiewit-Turner, that the zig-zag design needed to be removed. (Blatnak Tr. 641:15-18; 642:13-21; AF0624-2). Ms. Guy similarly testified that Mr. Pogany stated on multiple occasions that the zig-zag wall needed to be removed. (Guy Depo. 184:10-185:1). 606. In September of 2012, Mr. Blatnak e-mailed the VA and Jacobs indicating that approved VE items were not being incorporated into the design, including the zig-zag wall. (Blatnak Tr. 645:15-646:2; AF0623). 607. Despite the Contracting Officer telling the VA medical center that he wanted to value engineer the zig-zag wall out of the final design, the zig-zag wall design VE was never incorporated into the 100% design. (Blatnak Tr. 644:24-645:6; Pogany Tr. 1255:15-1256:6; 119 US2008 5819490 1 AF0624). The JVT stated at that time that the zig-zag wall “is still in the current design, and will remain.” (AF0065-4). 608. Mr. Taylor believed that the VA wanted a Porsche for the price of a Volkswagen Beetle. (Taylor Depo. 81:7-83:3; AF0741). Specifically, he referenced the zig-zag wall as an item that would be very impressive to build and was driven more by aesthetics than function. (Id.) 609. Value engineering ideas for the exterior of the building were discussed in December of 2012 at SOM’s office in Chicago. (AF0264-1). The suggestion of changing the zig-zag wall to a flat wall was rejected because it had already been rejected by the medical center twice despite acknowledging a reduction in cost to the Project if it was accepted. (AF0264-2). 610. In the September 2011 Project Management Plan, the VA also stated that they had to “insist” that the A/E perform VE because there was a problem with the A/E incorporating the VE into the design. (Pogany Tr. 1303:22-1304:20; AF0547). The VA once again complained that the JVT would not incorporate certain VE items until the VA paid them additional funds. (Id.). The VA stated that there was a high risk with the design management that resulted in budget overruns, that the project was over budget, that the design was inconsistent with the VA’s budget and cost objectives, that the A/E had to be reined in and instructed to change designs to meet the budget, and that there was pressure from Congress to show progress in the field. (Pogany Tr. 1301:22-1304:3; Pogany Tr. 1304:21-1305:7; AF0547). 611. The March 25, 2013 Risk Management Report also identified as a high risk the design errors and omissions with an option to “go back to A/E to correct errors,” and that the A/E did not “do their due diligence.” (Pogany Tr. 1314:5-1315:13; AF2322). It further identified as a $30 million risk that the A/E was not incorporating VE changes into the final 120 US2008 5819490 1 design documents. (Pogany Tr. 1315:22-1316:4; AF2322). To correct this A/E problem, the VA developed two options: either default them or pay them more money. (Pogany Tr. 1315:221316:25; AF2322). 612. According to the March 2013 Risk Management Report, the A/E was not incorporating most of the VE items and was taking a long time to incorporate the few. (Pogany Tr. 1317:1-13; AF2322). 613. Mr. Lynn testified that Mr. Pogany was the person responsible for directing the A/E and in this regard, believed the A/E should have been directed to produce a simpler design; if they refused, the A/E should have been replaced. (Lynn, Tr. 863:18-864:13). To the contrary on this Project, Mr. Lynn testified the A/E “frequently” was given value engineering ideas to implement that simply were not implemented. (Lynn Tr. 864:14-18). Or, the A/E would be given a value engineering idea to implement, and would include the value engineering, but then add additional elements so that the end design would be more expensive. (Lynn Tr. 864:19866:5). “That didn’t just happen once. That happened several times.” (Id.) 614. Jacobs issued monthly reports on the project. (Lynn Tr. 907:1-4). Jacobs February 2012 monthly report (dated March 7, 2012) noted “VACFM/Jacobs to ensure VE is being implemented as agreed to between VA, KT and JVT.” (AF0693-2). Regarding this report item, Mr. Lynn testified Jacobs was “trying to assist the VA in making progress on value engineering.” (Lynn Tr. 907:5-908:17; AF0693). However, Jacobs further noted that the VA had not “instructed the [A/E] to make all changes necessary to achieve the required $27 million savings. If VACFM waits much longer to give clear direction, the costs of making the needed plan changes will increase and JVT will request an increasing amount of compensation to make the changes.” (AF0693-3). Mr. Lynn confirmed the VE efforts were not as successful as they 121 US2008 5819490 1 intended to be, and needed to be, and that the A/E failed to recognize or understand the VE targets. (Lynn Tr. 910:16-911:22). 615. Mr. Lynn recognized that Kiewit-Turner participated in discipline meetings, where the parties would attempt to drill down on particular VE items by discipline. (Lynn Tr. 912:8-914:2; AF0557-3). The parties would assess the trend logs and develop VE in an effort to get the project back to the $604 million budget. (Id.) 616. However, Mr. Lynn confirmed Jacobs’ contemporaneous observation in its April 2012 monthly report that the A/E refused to participate in the VE process as they refused to believe there was a budget problem: “because [the A/E] does not believe there is actually a budget issue, they are not fully cooperating with the VE process. Additionally, VA is not exerting pressure on [the A/E] to acknowledge the budget issues and redesign to budget.” (Lynn Tr. 914:3-17; AF0557-2). 617. On the other hand, Mr. Lynn testified that Kiewit-Turner was an active participant in the VE process, helping the team identify approximately $150 million worth of VE items. (Lynn Tr. 914:25-915:21; AF0557-3). 618. In this regard, Mr. Lynn testified the project presented a “target rich” environment for identifying VE because “the design itself was not appropriate for the mission. It was not in keeping with what I understand are the values of the Department of Veterans Affairs. It was over the top.” (Lynn Tr. 915:22-916:2). 619. As of April 2012, Jacobs increased its recommendation for VE from $25 million to $50 million to reflect the increasing cost of the design. (Lynn Tr. 917:2-918:2; AF0557-3). However, Jacobs also recognized that the VA’s continuing failure to provide clear direction on the necessary VE was threatening the potential VE savings: “VA has not instructed [the A/E] to 122 US2008 5819490 1 make changes necessary to achieve anything close to $50 million in savings. If VA waits much longer to give clear direction, the costs of making the needed plan changes will increase and [the A/E] will request an increasing amount of compensation to make the changes. Additionally, as each day passes the opportunity to accept some VE items disappears as the construction continues.” (AF0557-4). Mr. Lynn testified it was Jacobs’ advice to get out in front of the problem and address it swiftly. (Lynn Tr. 918:3-25). 620. Mr. Klebba testified that in February of 2014 the VA stated it was no longer pursuing any more value engineering. (Klebba Tr. 538:16-24). XII. THE VA LACKS FUNDING FOR THE FULL COST OF THE PROJECT 621. The VA has approximately $630 to $640 million dollars to pay Kiewit-Turner for the construction costs of this Project. (Pogany Tr. 1313:15-22; Fiotes Depo. 37:5-11; Haggstrom Depo. 153:21-155:1; AF0097-2). 622. Of the $800 million appropriated for the entire Project, Mr. Pogany communicated to his superior, Mr. Flor on June 30, 2011, that the maximum that VA could afford to pay for construction of the 100% CDs was $629 million. (AF0097-2). The remaining $171 million was allocated to other necessary services, including: land acquisition, A/E services, peer reviews, impact costs, and utility agreements. (AF0097-2). 623. As early as the DD2 stage, when Kiewit-Turner presented their $659 million estimate to the VA, the VA informed Kiewit-Turner it did not have a budget for that. (Colpack Tr. 71:25-72:17). The VA informed Kiewit-Turner it did not have $664 M, that they only had $603 M to build the Project. (Colpack Tr. 73:19-74:5). 624. In January of 2013, Glenn Haggstrom stated in a meeting that the Project needed to be brought back into budget because the money was not there. (Guy Depo. 131:21-132:6; AF0611). 123 US2008 5819490 1 625. On May 24, 2013, Mr. Chang wrote in discussing the “pros” of terminating Kiewit-Turner that “[c]urrently, there is no money to complete the project.” (AF0601-1). 626. The VA would be required to obtain Congressional approval to move funds from another project to the Denver Project. (Haggstrom Depo. 91:1-15). 627. Though Mr. Haggstrom acknowledged that his subordinates recommended in March 2013 seeking $100 million in re-programming of funds to this Project, he never moved forward with that request. (Haggstrom Depo. 147:15-148:3; AF0853). 628. The VA needs Congressional approval to reprogram, or transfer funds above 10% of the project’s budget from one project to another,. (Lynn Tr. 929:8-930:11). No such request has been made on this project. (Id.) 629. The VA has never sought additional funds for the Projec, and, as of April 18, 2014, is not planning to seek additional funds. (Fiotes Depo. 152:1-7; Haggstrom Depo. 142:1517; AF2399). XIII. KIEWIT-TURNER WILL BE FORCED TO FUND THE PROJECT BECAUSE OF THE VA’S FAILURE TO PROVIDE A DESIGN CAPABLE OF MEETING THE ECCA 630. Mr. Chang wrote to Mr. Maseda and Mr. Lynn on April 21, 2012, that “the VA has no control on the spending and budget” and that Kiewit-Turner was financing work without funding from the VA. (AF0590). 631. As of the Hearing in Denver in May/June 2014, Kiewit-Turner is at least $20 million out of pocket on the Project. (Jahrling Tr. 281:22-282:20; TE037). 632. Kiewit-Turner projects that by the end of this year it will be in excess of $100 million out of pocket to fund the Project. (Id.) 633. Kiewit-Turner is projecting the Project’s total cost will be approximately $1.085 billion. (Id.; TE037). 124 US2008 5819490 1 634. If Kiewit-Turner and its subcontractors are forced to finance the Project to the end of its scheduled completion, they will have to finance $457 million, which would be a “crushing” amount of money. (Jahrling Tr. 281:22-282:20). XIV. THE VA BREACHED THE DUTY OF GOOD FAITH AND FAIR DEALING A. The VA Did Not Address Kiewit-Turner’s PCOs or Issue JSIs For Over One Year 635. The VA testified that the government has an obligation to treat the contractor and contracting community in a fair and reasonable way. (Fiotes Depo. 99:20-110:2). 636. Ms. Fiotes testified that a contractor should be entitled to a reasonable response on a PCO within a certain period of time and that not responding to PCOs for over a year is “most likely” not reasonable. (Fiotes Depo. 143:16-144:12). 637. Mr. Hayden acknowledged that the Contracting Officer directed him not to issue change orders from the spring of 2011 until the spring of 2012. (Hayden Tr. 1410:10-12; AF0583). Other VA witnesses confirmed the clear documentary evidence that the Contracting Officer expressly directed VA personnel to outright ignore Kiewit-Turner’s PCO’s and NCO’s for over a year from Spring 2011 to Spring 2012. (Hayden Tr. 1423:20-1425:16; see also Lynn Tr. 890:15-891:17). The PCOs were just sitting in Mr. Hayden’s office. (Chang Tr. 707:18- 708:3; AF0584). 638. During this time, Mr. Hayden and Mr. Pogany recommended to the Contracting Officer on approximately six separate occasions that they be permitted to respond to KiewitTurner’s requests for change orders. (Hayden Tr. 1419:3-20). 639. Kiewit-Turner was complaining that its subcontractors and it were not getting paid for work which was being done. (Hayden Tr. 1424:11-20). 125 US2008 5819490 1 640. Mr. Hayden acknowledged that this primarily involved work which the VA directed Kiewit-Turner perform. (Hayden Tr. 1416:9-14; AF0583). 641. On April 21, 2012, Mr. Chang wrote an e-mail to Mr. Maseda and Mr. Lynn about the VA’s inability to make payments. (AF0590). Mr. Chang wrote that “the VA has no control on the spending and budget. Our payments to JVT, Jacobs, and KT are all behind.” (AF0590). Mr. Chang even stated that Kiewit-Turner should “refuse to do the work.” (AF0590). 642. Mr. Haggstrom was never informed that the Contracting Officer had told Mr. Hayden not to process change orders for a year and testified that he would find that surprising on a project like this one since problems could arise from change orders backing up. (Haggstrom Depo. 77:1-19). 643. In April 2012, a significant subcontractor on the CBS building expressed frustration regarding the impacts to small businesses regarding the change order process noting that the VA has consistently acknowledged additional work being required, but that the VA had failed and refused to issue change orders in a timely manner. (AF2265; AF2291). 644. On January 30, 2013 – a week after receiving Jacobs’ 100% estimate of $784 million – Kiewit-Turner sent the VA a letter based on the VA’s rejection of over 20 proposed change orders. (AF0492). Kiewit-Turner complained about the rejections because they were based not on their merits, but only on “technical grounds.” (AF0492). Kiewit-Turner further stated that: Strikingly, tens of millions of dollars are at issue and small business subcontractors are being forced out of business and the VA cannot even bother itself to explain to KT and its subcontractors why their change requests are being rejected. Every government contract includes the duty of good faith and fair dealing, and the VA's form letter rejection of KT's PCO's does not even come close to meeting this standard. (AF0492-1). 126 US2008 5819490 1 645. On March 7, 2013, Mr. Chang sent an e-mail to Mr. Maseda regarding the Jacobs’ 100% estimate and the VA’s strategy for Kiewit-Turner’s PCOs. (AF0639). Mr. Chang wrote: “What [Mr. Pogany, Mr. Willoughby, and Mr. Hayden] did was lying to Leo [Flor] and DC at beginning. Now, DC found the problem after Jacobs cost estimate was evaluated and it was very close to KT’s number. The new tactic is attacking KT by reject [sic] their PCO with all excuses.” (AF0639-1)(emphasis added). 646. The VA’s failure to recognize changes rose to the level that on August 14, 2013, members of the Committee for Veterans Affairs in the House of Representatives wrote a letter to the then-Secretary of the VA describing the issues on the Project. (AF0518). Importantly, the letter stated that the members of Congress “have received numerous complaints from prime and subcontractors regarding VA's failure to recognize increases in the scope of work and subsequently issue change orders to detail the change in pay for the additional work.” (AF05181). 647. Many of the PCOs that sat in Mr. Hayden’s office had proposed costs for subcontractors and these subcontractors were complaining about not being paid. (Chang Tr. 721:22-722:3). 648. As Mr. Chang testified, the Senior Resident Engineer did not understand the change order process and was not able to manage the change order process. (Chang Tr. 732:1023). 649. Similar to the PCOs, many of the JSIs were not processed for over 14 months. (Chang Tr. 702:10-16; 713:21-714:11; AF0584). The JSIs sat in the Senior Resident Engineer’s office. (Chang Tr. 702:21-23). 127 US2008 5819490 1 650. This delay in responding to PCOs and JSIs created a backlog of PCOs and JSIs, while more PCOs and JSIs were coming in to the VA. (Chang Tr. 720:22-25). Specifically, Mr. Chang testified that there was approximately $50 million in backlog of change orders in September of 2012. (Chang Tr. 731:6-10). The backlog of PCOs still exists as of today. (Chang Tr. 721:1-5). 651. Mr. Chang testified that no explanation was ever provided as to why the JSIs sat in Mr. Hayden’s office for so long. (Chang Tr. 714:12-14). 652. This backlog also extended to the VA failing to respond to letters from Kiewit- Turner. (Chang Tr. 724:18-725:8; AF0587). 653. In an internal e-mail, Mr. Chang forewarned of the problems to come with the VA’s lack of payment by stating that “there is a storm coming.” (Chang Tr. 721:10-25; AF584). 654. Two resident engineers for the VA on the Project, James Chang and Preston Maseda, returned their administrative contracting officer warrants. (Chang Tr. 712:3-13). Both Mr. Chang and Mr. Maseda returned their ACO warrants because of concerns with the Senior Resident Engineer lacking a warrant on the Project. (Chang Tr. 712:14-713:20). 655. Mr. Lynn observed numerous “bottlenecks” on the project, resulting in a project environment that did not have a free flow of information. (Lynn Tr. 879:7-20). 656. These bottlenecks included Mr. Hayden, Mr. Pogany, and Mr. Willoughby. (Lynn Tr. 880:2-18). Mr. Lynn testified that his client, the VA, was unlike any he had ever had, where there were “secret documents” or “documents that we were not permitted to see.” (Id.). The risk log identified the VA staff’s extreme secrecy measures as a project risk. (AF0547-28). Mr. Lynn testified the level of secrecy extended even to the VA’s resident engineers, including 128 US2008 5819490 1 one who fell and hurt themselves trying to climb into Mr. Hayden’s locked office. (Lynn Tr. 878:5-879:6, 880:19-881:2; AF0547-28). 657. Mr. Klebba testified there were many times when the VA, particularly Mr. Hayden, did not want Kiewit-Turner talking to the JVT. (Klebba Tr. 423:16-424:1). Mr. Klebba testified that if Kiewit-Turner did talk to the JVT, it could not be about price or schedule. (Klebba Tr. 423:24-424:1). B. The VA Told Kiewit-Turner The Design Would Be 100% In August 2012, But Knew It Would Not Be 658. The CS-1 (core and shell) and IFO (interior fit out) design packages were the bulk of the design. (Pogany Tr. 1271:16-18). 659. The VA was supposed to deliver the 100% complete CS-1 package to Kiewit- Turner on November 28, 2011, while the 100% complete ISO package was supposed to be delivered to Kiewit-Turner on January 31, 2012. (Pogany Tr. 1270:6-1271:15; AF0390). The VA missed these deadlines and initially told Kiewit-Turner that these packages would be delivered in April 2012. (Id.) 660. As of October 9, 2011, it was Kiewit-Turner’s understanding that it would receive the CS-1 100% design at the end of November 2011, the IFO 100% design at the end of January 2012, and the CLC 100% design in April 2012. (AF2225). 661. On May 16, 2012 there was an internal VA “lay down” meeting held with the former VA Secretary, Mr. Shinseki. (AF2272). During the Laydown meeting, there was a discussion regarding when the VA would issue Kiewit-Turner the 100% complete design. (Pogany Tr. 1272:1-1273:16; AF2272-147). 662. In the Laydown meeting on May 16, 2012, Mr. Pogany informed the Secretary that the 100% complete design would be issued to Kiewit-Turner later that year in August 2012. 129 US2008 5819490 1 (Pogany Tr. 1274:6-12; AF2272-191-192). In this meeting, Mr. Pogany took responsibility to make sure that the 100% complete design would be delivered by August 2012, and if not, he would have to explain it to the Secretary. (Pogany Tr. 1274:6-1277:7; AF2272-191-192). Mr. Pogany testified that he was under pressure to make sure that Kiewit-Turner received the 100% design by August 2012. (Pogany Tr. 1277:17-21). 663. In June 2012, Mr. Pogany writes to William Ulibrri, a project manager for the VA, that Kiewit-Turner indicated that a delay of the hundred percent design to August 31, 2012 was impacting Kiewit-Turner’s construction schedule. (Pogany Tr. 1278:2-19; AF0560). Mr. Pogany also indicated that as of June 2012, $60 million in planned redesign would further extend design deliverables. (Pogany Tr. 1278:20-1279:12; AF0560). 664. In June 2012, the VA Medical Center directed over 1,400 design changes to be included in the August 31, 2012 CDI issuance. (AF2274; AF2278). The JVT told the VA that in order to meet the August 31, 2012 100% design deliverable schedule, it would not be able to incorporate the 1,400 design changes, that it would not be able to incorporate the previously approved VE items, and that it needed clear direction from the VA on over 3,000 peer-reviewed comments. (AF2274; AF2278). 665. Faced with another design deliverable delay, the VA decided that they would incorporate the $60 million in planned design changes into the Project through change orders and JSIs after the purported 100% design was issued in August 2012. (Pogany Tr. 1279:13-1280:15; AF0560). 666. By June 27, 2012, the VA medical Center requested 1,400 design changes which, in most cases, Kiewit-Turner had not even been provided. (Pogany Tr. 1282:12-24; AF2274). 130 US2008 5819490 1 In fact, as Mr. Pogany testified, many design changes are still “in the hopper” and the VA will issue these to Kiewit-Turner sometime in the future. (Pogany Tr. 1282:12-1283:9; AF2274). 667. On August 10, 2012, however, the VA told Kiewit-Turner that the 100% complete design – which would be issued by August 31, 2012 – would not need to “cloud” or highlight any changes in the design documents because they were supposed to be 100% complete. (Pogany Tr. 1284:6-1285:11; AF0240). 668. At a weekly meeting on August 24, 2012, the VA informed Kiewit-Turner that the 100% CDs would not be clouded because they are “a first issue CDI.” (AF0240-5). 669. As discussed above, the 100% Design issued to Kiewit-Turner in August 2012 was uncoordinated, incomplete, and lacking information and full of mistakes. (Jones Tr. 604:21-24; Chang Tr. 687:22-25). C. VA Dysfunction and Mismanagement on the Project 670. The situation on the VA-side of the Project became uncontrollable. (Chang Tr. 717:22-718:2; AF0584). 671. Mr. Chang testified that the VA lacked staff, leadership, and knowledge in construction. (Chang Tr. 708:23-709:1; Chang Tr. 718:3-23; AF0584). This understaffing continues to this day. (Chang 708:23-709:1). This understaffing affected how quickly the VA can process and administer the contract. (Chang Tr. 708:20-22). 672. Mr. Haggstrom’s educational training was in landscape architecture and prior to joining the VA in 2008, he had not been involved in any hospital or healthcare projects. (Haggstrom Depo. 12:7-12; 15:2-5; 16:8-17:9). Likewise, he had no prior experience with or training in IDc type contracts. (Haggstrom Depo. 15:8-13; 25:13-17). 131 US2008 5819490 1 673. In the fall of 2010, Mr. Hayden told Mr. Haggstrom that the Project and process was broken. (Haggstrom Depo. 73:1-75:17; AF0846). Mr. Haggstrom did not address the concerns, telling Mr. Hayden to go through the chain of command. (Id.) 674. Though the Corps’ September 2011 report was sent to him, Mr. Haggstrom testified that he never even reviewed it. (Haggstrom Depo. 50:2-51:8; AF0844). Likewise, he was never briefed regarding it. (Haggstrom Depo. 28:3-11). As a result, he was never aware of the concerns expressed by the Corps in its evaluation of the Denver project and took no steps to address them. (Haggstrom Depo. 34:14-35:8; AF0646). For example, he did not know that the Corps had stated that there appeared to be a shortfall of VA project control staff with expertise in construction cost estimating for change orders, schedule controls and evaluation, and document management and controls. (Id.). He therefore took no steps to address this staffing concern. (Haggstrom Depo. 35:9-18). It was not until the spring of 2013 that he became aware of the concerns about the VA’s staffing levels on the project. (Haggstrom Depo. 35:19-38:11). 675. Ms. Guy also testified that Tom Hayden is extremely difficult to work with, he micromanages, and he certainly does not like it when a female questions him. (Guy Depo. 56:17-24). There were times when Mr. Hayden attempted to bully Ms. Guy. (Guy Depo. 59:1860:20). 676. Ms. Guy further testified that Leo Flor, Tim Pogany’s superior, tended not to listen to the complaints about Mr. Hayden or Mr. Pogany from the Medical Center. (Guy Depo. 58:10-59:3). 677. Ms. Guy testified that the VA Medical Center felt that they could not trust Mr. Pogany or Mr. Hayden. (Guy Depo. 271:14-19). 132 US2008 5819490 1 678. this Project. Mr. Hayden determined that the Contracting Officer was “in over his head” on (AF0541). He was also highly critical of the Contracting Officer’s lack of collaboration, writing about the Contracting Officer in a May 23, 2011 memo to Mr. Pogany: “I do not believe he is a team player – he sees himself as the guy in charge of everything.” (AF0541-2). 679. Mr. Hayden had no authority to direct Kiewit-Turner, but nonetheless routinely acted without authority in violation of federal procurement law. (AF0597). Mr. Hayden had no warrant to take any authorized contractual action from the time he was hired for the project in June 2010 until January 2013. (Hayden Tr. 1458:10-14). The Contracting Officer lobbied for two years to have the Mr. Hayden replaced with someone who had the qualifications to adequately perform the job. (AF0597). 680. The Contracting Officer was so disappointed in Mr. Hayden’s lack of training to be authorized to take any contract actions that he wrote to Leo Flor, the head of the VA CFM’s Western Region, on May 20, 2011 that “[d]ue to Mr. Hayden’s limited knowledge and experience as a VA SRE and understanding of VA contracting methods,” Mr. Hayden would not be allowed to direct any contractor on the project. (AF0570). He further warned and recommended: Additionally, this project is one of the largest projects the VA is undertaking, to have a SRE who has no experience leading a VA project is setting the SRE up for failure. Further, I would recommend that Mr. Hayden be removed as the SRE until he has gained the knowledge and required coursework to be VA SRE. (AF0570). 681. On May 20, 2011, Mr. Willoughby requested to upper-level VA management that Mr. Hayden be removed as the Senior Resident Engineering on the Project. (AF0570). 133 US2008 5819490 1 682. In June 2011, the VA resident engineers expressed a concern that Mr. Hayden was making commitments on behalf of the VA without the requisite authority and approval of the Contracting Officer. (AF2204). 683. In March 2012, Mr. Chang believed, and reported to the Contracting Officer, that Mr. Hayden was providing directions to Kiewit-Turner in violation of the law because he did not have the required warrants. (AF2253; AF2254; AF2259). He also reported that the VA was not following its own filing system and that the most current drawings and specifications were not updated and could not be found at the Project site. (Id.). He also reported that the SRE doesn’t understand the FARs and that the VA Project lacked leadership, communication, and trust. (AF2253; AF2254). He also reported that the JVT was not being managed and that the JVT was directing the SRE regarding the design, not the other way around. (AF2253; AF2254). 684. Mr. Chang believed that the VA managers were hired without adequate experience and knowledge regarding construction, engineering, acquisition, and teambuilding. (AF2261). 685. The relationships between Mr. Hayden and Resident Engineers Maseda and Chang were very strained. (Hayden Tr. 1432:20-24). Mr. Hayden had trouble getting Mr. Maseda to do what Mr. Hayden wanted him to do. (Hayden Tr. 1432:25-1433:2). Though Mr. Chang was very capable, competent, and hardworking, Mr. Hayden also could not get Mr. Chang to do what he wanted because of Mr. Maseda’s undue influence. (Hayden Tr. 1433:3-10). He testified that if had still been in the military, he would have instituted disciplinary proceedings against both Mr. Maseda and Mr. Chang, but was unable to do so within the VA system. (Hayden Tr. 1460:5-15). 134 US2008 5819490 1 686. After Mr. Chang and Mr. Maseda each requested that their authorizations to issue changes be rescinded, Mr. Hayden also requested the removal of their authorizations. (Hayden Tr. 1429:21-25; AF2293; AF2296). 687. On October 2, 2012, Mr. Chang wrote to the then-acting Executive Director of VA CFM, Robert Neary, and stated that the VA “don’t know their roles, responsibilities, and authorities… Project delay due to no decisions and don’t have understanding about construction and CPM.” (AF0598). Mr. Chang further wrote that another resident engineer suggested to Mr. Hayden that the VA inform the Deputy Secretary and DC about the Project issues, but Mr. Hayden said that was too early. (AF0598-1). Mr. Chang wrote that Mr. Hayden made those statements six months previously and recovery “did not occur,” instead the VA was “deeper into the mud.” (AF0598-1). 688. On October 30, 2012, Mr. Maseda’s Administrative Contracting Officer delegation was rescinded by the VA. (AF0447). Less than 3 months later, on January 15, 2013, Mr. Chang’s Administrative Contracting Officer delegation was also rescinded by the VA. (AF0474). 689. On November 17, 2012, Mr. Chang wrote an e-mail to Mr. Maseda and Mr. Lynn and listed many of the same issues that plagued the problems from his October 2, 2012 e-mail. (AF0599; AF0598). Mr. Chang also wrote that: A mega law suit from KT is unavoidable, and we are not doing anything to ease the tension, and prepare for the fight. As I said that, "We can't even handle a $30M renovation project, how can we manage a $600M+ project?" You can see all the technical and scheduling problems are coming, and this is only the beginning. (AF0599-2). 690. Prior to this project, Mr. Hayden apparently had no experience with hospital and health care projects (Hayden Tr. 1392:8-1393:21) since the only project allegedly similar to this 135 US2008 5819490 1 one he identified as having worked on was a weapons laboratory. Likewise, he had no experience working for the VA or within its system. (Hayden Tr. 1460:16-20). Also, he was not given any formal training when he started. (Hayden Tr. 1396:18-20). For example, other than talking to Mr. Pogany and Mr. Willoughby, he received no formal training on the IDc form of contracting. (Hayden Tr. 1461:3-8). 691. Over the course of the project, Mr. Hayden had difficulty getting clear direction regarding his role and responsibilities. (Hayden Tr. 1463:2-6). This was due, in part, to the fact that the description of the SRE’s role and responsibilities in the VA’s Resident Engineer Handbook did not apply to this “mega-project.” (Hayden Tr. 1462:4-14). 692. Mr. Hayden admitted on cross examination that he instructed Jim Lynn of Jacobs to send an advance copy of Jacobs’ monthly reports to Mr. Willoughby and Mr. Pogany for their review before the reports were distributed to others. (Hayden Tr. 1465:21-1466:6). Mr. Hayden did this because he was concerned that Jacobs may put something in writing in its monthly report that Kiewit-Turner would find during discovery and use against the VA. (Hayden Tr. 1466:7-17). 693. Though Mr. Hayden received Jacobs’ monthly reports, he only reviewed them on occasion. (Hayden Tr. 1465:4-16). 694. Mr. Hayden was ultimately reassigned and removed from his position as Senior Resident Engineer in or about June 2013. (Fiotes Depo. 134:21-22). Mr. Hayden was removed to being a Technical Evaluation Manager, a position with fewer responsibilities. (Hayden Tr. 1457:17 - 1458:2). Mr. Hayden was replaced because Ms. Fiotes heard concerns about his leadership and management style. (Fiotes Depo. 138:1-9). 695. Ms. Guy testified that Mr. Pogany did not have the interpersonal skills she would expect from someone in his position and that he often answered questions with his head down. 136 US2008 5819490 1 (Guy Depo. 49:1-16). Ms. Guy submitted several complaints to have Mr. Pogany removed from his role as Project Executive. (Guy Depo. 51:3-15). 696. At times during the project, Mr. Hayden thought the Contracting Officer wanted to control more than what Mr. Pogany and he expected and more than what the Resident Engineers Handbook indicated was the Contracting Officer’s role. (Hayden Tr. 1463:7-18). 697. Tim Pogany was reassigned and removed from his position as Project Executive. (Fiotes Depo. 133:15-134:7). Mr. Pogany was replaced because Ms. Fiotes believe they needed a stronger leader and someone more assertive. (Fiotes Depo. 136:17-137:1). 698. Mr. Lynn confirmed the sentiment he expressed to Mr. Chang and Mr. Maseda that “it’s going to take some bold and decisive leadership to deal with the design, budget, schedule, coordination, quality and teamwork issues. I can only pray that somehow the leadership emerges from somewhere and we can work our way out of the mess the project is in.” (Lynn Tr. 933:1-934:8; AF0830). Mr. Lynn testified that as of May 2012, he was not optimistic that the VA leadership team then in place – in particular Mr. Pogany and Mr. Hayden – had the leadership necessary to improve “the mess” the project was in. (Lynn Tr. 934:9-19). 699. Mr. Lynn further testified that Mr. Willoughby expressed concern that he was being forced to act beyond the role typically expected of a Contracting Officer in order to fulfill a project management role in order to fill the leadership void created by Mr. Pogany and Mr. Hayden. (Lynn Tr. 935:10-936:16). 700. In Spring 2013, Steve Bliss of Jacobs, Mr. Lynn’s “right hand man” on the project, compiled a list of issues on the Project. (Lynn Tr. 951:5-22; AF0684). One such issue was “VA management staff is overwhelmed, ineffective and untimely,” which Mr. Lynn confirmed was “largely true.” (Lynn Tr. 951:23-952:5; AF0684). Before the management 137 US2008 5819490 1 change in June 2013, Mr. Lynn agreed that the VA’s on-site management was the least effective and most dysfunctional staff on any project that he had ever seen.” (Lynn Tr. 952:6-20). 701. Mr. Lynn agreed that a risk on the Project was the VA’s slow decision making and lack of responsiveness. (Lynn Tr. 881:3-881:22; AF0547-28). Mr. Lynn testified the VA’s lack of responsiveness “improved dramatically” once Mr. Pogany was removed as project executive and Mr. Hayden was removed as the senior resident engineer in June 2013. (Lynn Tr. 881:23-882:25, 883:5-884:2; AF0547-28). 702. The VA was drastically understaffed on the Project and the JVT wrote in a formal A/E questionnaire dated November 8, 2011 that “[t]this project has been hampered by the fact that it has been severely understaffed… The VA needs to properly staff this project. The CO, PE, and SRE are up to their necks.” (AF0554-8). 703. Mr. Lynn testified that he was familiar with IDc and CM@Risk contracting methods, and that the VA was not adequately staffed on the Project to be responsive enough for this type of contract method until around the time Mr. Pogany and Mr. Hayden were removed from their roles in mid-2013. (Lynn Tr. 887:22-888:21). Until this point, Mr. Lynn testified the VA was understaffed, which caused the VA to be unresponsive in administering the Project. (Lynn Tr. 888:22-889:24). For example, Mr. Lynn testified that there was a period of time where two to three hundred formal correspondence letters by Kiewit-Turner had not been responded to by the VA. (Lynn Tr. 889:25-890:20). 704. On April 9, 2013, Jacobs reported to the VA that the VA suffered from lack of communication and that the VA managers do not hold weekly meetings that are having an impact on the Project. (AF2328). 138 US2008 5819490 1 705. On September 12, 2013, the VA revoked the COTR authority from Tim Pogany and Tom Hayden. (AF2353). On the same date, the VA revoked the ACO for Tom Hayden. (AF2352). 706. In April 2012, Mr. Chang reported to Mr. Willoughby that “if we end up in court with KT, there is no way for us to explain to the judge why the VA [is] allowing Tom [Hayden] [to continue] signing all documents without authority.” (AF2262). XV. THE VA’S LACK OF GOOD FAITH AND FAIR DEALING IN 2013 A. The VA’s Initial Reliance On The Jacobs 100% Estimate 707. In late 2012, the VA contracted with Jacobs to “perform an independent government estimate as a means of validating the A/E’s estimate.” (AF0346-1). The VA paid Jacobs $500,000 to prepare this 100% design estimate. (Pogany 1328:1-5). 708. On August 29, 2011 the VA had previously used a Jacobs August 2011 estimate as an IGE to support the VA’s increase of the Contract’s ceiling price from $587 million to $609 million. (Pogany Tr. 1383:3-11; AF2216). 709. After the VA received Jacobs 100% design estimate in January 2013, the VA set into motion a great deal of activity. (Pogany Tr. 1317:16-1318:1). This occurred because the VA received this estimate – which was at approximately $785 million – from a trusted cost estimator who the VA looked to for their cost estimating expertise and cost realism. (Pogany Tr. 1318:2-15). From January 2013 through March 2013, the VA took actions based on what was presented in the Jacobs 100% design estimate. (Pogany Tr. 1326:17-1327:4). 710. Mr. Willoughby admitted the Jacobs 100% estimate “caused me to act” where it showed the estimate project cost was closer to Kiewit-Turner’s estimates and not what the JVT had been estimating the project to cost. (Willoughby Tr. 1724:10-1725:7). 139 US2008 5819490 1 711. In January 2013, the VA internally expressed a concern about providing a defense to SA-007. (Sztuk Depo. 67:14-68:17; AF0788). The VA also internally knew at this point that the IDIQ A/E indirectly supported Kiewit-Turner’s claim that the 95% design was not truly 95% complete. (AF0788). 712. On January 23, 2013, and based on the Jacobs 100% estimate, the VA wrote to the JVT to direct it to redesign the design. (Pogany Tr. 1319:4-1320:13; Willoughby Tr. 1557:13-19; AF0298; AF0672). The January 23, 2013 letter was prompted by the VA’s receipt of the Jacobs 100% design estimate. (Pogany Tr. 1319:19-23; Pogany Tr. 1320:11-13; AF0298). 713. Testifying further, Mr. Willoughby said that he wrote the January 23, 2013 letter to the A/E because he now had information from both Kiewit-Turner and Jacobs that the A/E’s design price was $199 million over their ECCA, “so I immediately took action to put the A/E on notice that the costs that were getting in was above the ECCA.” (Willoughby Tr. 1557:201558:1; AF0298) (emphasis added). 714. Mr. Willoughby testified what he was trying to communicate in his January 23, 2013 letter was to say to “the A/E the you have went over the ECCA.” (Willoughby Tr. 1558:11-16). Further, the A/E was “to develop a plan to bring that back down.” (Id.) 715. Later, upon hearing news that Mr. Willoughby had sent a letter to the A/E stating the A/E was $199 million over the ECCA, a senior official with the VA asked for a copy of the letter “before we all go to the roof and jump.” (Willoughby Tr. 1762:5-1763:24; AF2331). 716. Mr. Kyrgos “concurred” with the Contracting Officer sending the JVT the January 23, 2013 letter directing the JVT to redesign the design within funding limits. (Kyrgos Tr. 1147:25-1148:21; AF0298). 140 US2008 5819490 1 717. On January 25, 2013, just two days after the VA’s letter redirecting the JVT to redesign, the VA internally believed the JVT appeared to have misled the VA delivering a project way above the design to cost. (Kyrgos Tr. 1151:23-1152:13; AF0565). The VA reached this opinion based on the Jacobs 100% design draft estimate. (Id.) 718. On January 24-25, 2013, the VA prepared a PowerPoint discussing various options based on Jacobs 100% estimate. (Pogany Tr. 1321:1-14; AF0564). 719. On January 28, 2013, the VA had a teleconference with Kiewit-Turner wherein it “explained that the VA’s intent is to focus on the JVT’s obligation to deliver a design at or below the ECCA; therefore, [the VA is] is looking for a menu of redesign items … so that we can direct a set of options to meet a given cost.” (Pogany Tr. 1321:24-1323:20; AF0566). This conference was prompted by the VA’s receipt of the Jacobs 100% design estimate. (Pogany Tr. 1324:3-6). The purpose of this conference was to set up the Blue Ocean meeting. (Pogany Tr. 1323:211324:2; AF0566). B. The Blue Ocean Meeting 720. On January 18, 2013, after receiving the Jacobs 100% estimate of $784 million, the VA showed a much larger concern about the project price going up. (Colpack Tr. 134:21135:1; Klebba Tr. 525:18-23). The VA did not share a copy of the Jacobs 100% estimate with Kiewit-Turner, and Kiewit-Turner first received the estimate through discovery. (Klebba Tr. 525:24-526:5). 721. It was at this time, in late January of 2013, that the VA called a meeting of the JVT and Kiewit-Turner to identify cost-cutting ideas into the Project. (Colpack Tr. 135:2-8). Mr. Klebba testified that Leo Flor approached him on January 22, 2013 to ask Kiewit-Turner to be involved in a “radical redesign” meeting. (Klebba Tr. 525:1-7). Mr. Klebba testified that Mr. 141 US2008 5819490 1 Flor told him that the purpose of this meeting was to solicit Kiewit-Turner’s help in bringing the Project back to budget. (Klebba Tr. 525:7-10). 722. Mr. Willoughby acknowledged the “Blue Ocean” meeting was in response to the Jacobs 100% estimate and his 1/23/2013 correspondence to the A/E. (Willoughby Tr. 1560:410). He described the Blue Ocean meeting as where the A/E “provided their solutions if, in fact, they were over the ECCA.” (Id.) 723. Mr. Willoughby acknowledged he directed Kiewit-Turner to continue with construction of the 100% design despite the $784 million Jacobs 100% estimate, the ensuing Blue Ocean exercises dedicated to redesigning the project to reduce costs, and despite the fact that the VA had not agreed to a Firm Fixed Price with Kiewit-Turner. (Willoughby Tr. 1725:81729:24). 724. Mr. Lynn participated in the telephone conversation between the VA and Kiewit- Turner wherein the VA requested Kiewit-Turner participate in a redesign effort. (Lynn Tr. 943:6-944:4; AF0566). Mr. Lynn confirmed that Mr. Flor’s email summarizing the conversation was an accurate summary of the discussion stating “the VA’s intent is to focus on the [A/E’s] obligation to deliver a design at or below the ECCA; therefore, we are looking for a menu of redesign options, prioritized from most feasible to the least desirable, so that we can direct a set of options to meet a given cost reduction.” (Lynn Tr. 944:5-17; AF0566). 725. Mr. Lynn stated the VA’s intent was to seek a menu of redesign options to direct the A/E to satisfy its obligation to deliver a design “at or below the ECCA” led to the so-called “Blue Ocean” exercises. (Lynn Tr. 944:15-945:24). Jacobs brought in a value engineering expert named Betty Hooks to facilitate the session. (Id.). The stated cost reduction target was $200 million. (Lynn Tr. 945:25-946:7). 142 US2008 5819490 1 726. On January 27, 2013, the VA held an initial meeting prior to the radical redesign meeting. (Klebba Tr. 524:18-525:10). The VA brought the JVT into the room to explain the plan to bring the Project back to budget. (Klebba Tr. 527:8-14). Mr. Klebba testified that the plan was essentially to hold a brainstorming meeting to come up with ideas to ultimately be incorporated into the design. (Klebba Tr. 527:15-24). 727. Mr. Klebba and Mr. Colpack testified that these cost cutting meetings were called Blue Ocean meetings and the VA was attempting to find at least $200 million in value engineering to reduce the price of the Project and this meeting was based on the VA’s receipt of the Jacobs 100% design estimate. (Colpack Tr. 135:11-15; Klebba Tr. 527:17-24; Pogany Tr. 1324:7-1325:10; AF0310-1). Mr. Klebba testified that the reason it was called Blue Ocean was because it was brainstorming any idea – wide open – a Blue Ocean. (Klebba Tr. 529:9-16; Guy Depo. 205:13-17). 728. Mr. Klebba testified that the Blue Ocean meetings spanned three days. (Klebba Tr. 528:9-17). The VA asked Jacobs to bring in a professional value engineering consultant to facilitate the meetings. (Klebba Tr. 528:2-8). 729. Mr. Jahrling was the lead person for Kiewit-Turner in the Blue Ocean meetings. (Klebba Tr. 529:3-8). 730. According to Jacobs’ Blue Ocean summary spreadsheet, over $508 million of cost reduction was proposed at the Blue Ocean meeting. (AF0312-6). Jacobs’ meeting minutes recap stated that the cost reduction was over $400 million, without duplication of scope. (Colpack Tr. 135:21-25; AF0825-4). Jacobs’ Blue Ocean meeting minutes also stated that $157 million of the $400 plus million of cost reduction items were either “easy/likely acceptance” or “Local Approval only Required.” (AF0825-4; AF0323). 143 US2008 5819490 1 731. The cost reduction ideas were then forwarded to Judi Guy and Lynette Roff of the VA Medical Center to prioritize. (Lynn Tr. 946:8-948:7). Ms. Guy in turn submitted a prioritized list showing those items that were “acceptable to VAMC,” “undesirable but will live with,” or “not acceptable to VAMC.” (Lynn Tr. 948:8-949:22; AF2315; AD0014). The Medical Center determined over $140 million in cost reduction ideas to be “acceptable” and over $100 million to be “undesirable but will live with.” (AD0014). 732. The cost reduction measures proposed ranged from reducing quality of interiors to deferring entire buildings on the campus (AF0310-3; AF0310-4). The parties developed an extensive list of cost reduction ideas during the Blue Ocean meetings. (AF2416). 733. These options to reduce costs were realistic and achievable. (Jahrling Tr. 271:25- 272:22). Based on the items identified in the Blue Ocean meeting, the VA directed the JVT to incorporate value engineering items. (Pogany Tr. 1325:14-1326:16; AF0667). Kiewit-Turner was optimistic coming out of the Blue Ocean meeting. (Jahrling Tr. 280:3-8). 734. For example, based on the Blue Ocean meeting, the VA Medical Center had approved eliminating the catwalk in the concourse because they said they were very few items that need to be accessed by the catwalk. (Pogany Tr. 1256:7-1257:12). Nevertheless, the concourse catwalk is still in the 100% final design. (Id.) 735. However, by June 2013, the Contracting Officer directed the JVT not to incorporate these value engineering items. (Pogany Tr. 1329:1-21; AF0667). The VA did not tell Kiewit-Turner that it had changed direction and Kiewit-Turner was laboring under the understanding as of June 2013 that the VA was moving forward with incorporating the Blue Ocean design changes. (Id.) 144 US2008 5819490 1 736. The VA did not tell Kiewit-Turner that the VA decided not to do Blue Ocean cost reductions while Kiewit-Turner continued to proceed with its directives to build the work and continue to update the VE Log. (Pogany Tr. 1328:23-1329:15; AF667). 737. Mr. Lynn testified that Jacobs tracked these cost reductions items for a period of time, but simply could not get the VA to make a decision on them. (Lynn Tr. 949:23-950:18). Asked if Jacobs simply quit tracking the ideas, Mr. Lynn testified “Well, we kept trying to get Mr. Pogany to make decisions and provide direction, and it became increasingly difficult to get him to sit down and focus on this. So it started to appear to me at least that we were bothering him, and that’s the last thing I want to do, bother my client.” (Id.) 738. Kiewit-Turner testified that to his knowledge nothing was redesigned based on the Blue Ocean meetings. (Jahrling Tr. 280:9-15; Klebba Tr. 537:19:538-1; AF667). 739. Kiewit-Turner testified that in February of 2014 the VA stated it was not doing any more value engineering. (Klebba Tr. 538:16-24). 740. Mr. Lynn testified that nowhere near the $200 million in targeted cost reductions were achieved. (Lynn Tr. 950:19-951:4). C. VA Changes New Strategy Toward Kiweit-Turner 741. The VA invited the A/E to participate in Kiewit-Turner’s FFP presentation in March 2013. (Willoughby Tr. 1748:6-21; AF0334). Following the presentation, the VA and A/E corresponded and conducted a meeting regarding a strategy to respond to Kiewit-Turner’s FFP proposal and assist in negotiations. (Willoughby Tr. 1748:22-1752:15; AF0334; AF0712). 742. In an internal email dated March 21, 2013, the JVT indicated that the VA reviewed the JVT’s “help letter” and agreed with it and the email stated: “We expressed concern about the baseline. They (TW) stated the baseline for quantities would be the DD-2 reconciliation between KT and RLB. The FTP book is not the baseline. Still not sure exactly how 145 US2008 5819490 1 this will be addressed. TW stated it will be crystal clear to the VA soon ….” (Willoughby Tr. 1751:23-1752:7; AF712; AF334). 743. Then on April 10, 2013, there was a meeting held among the VA, JVT, RLB, Jacobs and VCI (Mr. Rossi) to discuss the VA’s exposure to Kiewit-Turner’s claims and to defend against them. (Lynn Tr. 952:21-954:10; Kyrgos Tr. 1154:11-1155:16; Pogany Tr. 1348:21-1350:25; AF0713; AF0714). Kiewit-Turner was not invited or present at this meeting. (AF0714). Mr. Lynn kept notes (AF0713) and the A/E kept meeting minutes labeled “strictly confidential.” (AF0714). 744. In this meeting, the VA directed the JVT to prepare an estimate on the 100% design and to use estimates that should not be influenced by actual amounts that was, from the outset, intended by the VA to be the new IGE. (Pogany Tr. 1351:6-1354:1; Pogany Tr. 1367:151368:24; Willoughby Tr. 1757:12-22; AF0714). The fact that this was going to be an IGE was made absolutely clear to the JVT and RLB during this meeting. (Kyrgos Tr. 1158:2-11; Pogany Tr. 1368:7-24; Willoughby Tr. 1757:23-1759:07; AF714). 745. The VA did not consult with Mr. Jay Sztuk of the VA when directing the JVT to ignore actual known costs in preparing a 100% design estimate. (Pogany Tr. 1354:2-15). 746. Mr. Willoughby acknowledged this decision was made months before Mr. Sztuk’s email regarding the Jacobs 100% estimate. (Willoughby Tr. 1759:8-11). 747. At the meeting, the minutes show Mr. Kyrgos stated, “only what is stated in the SA document itself has relevance. Any previous document used in negotiations has no relevance or weight in this contract.” (Lynn Tr. 954:25-956:6; AF0714). Mr. Lynn’s notes reflect that a question in his mind during these discussions was “why” the Book was thrown away. (Lynn Tr. 954:11-24; AF0713). 146 US2008 5819490 1 748. Mr. Willoughby sent Kiewit-Turner a letter on June 28, 2013 that laid out what the VA would consider the basis for any changes in Kiewit-Turner’s requests for equitable adjustment arising out of the 100% design. (AF2361). The letter attached the document list from tab 7 of the FTP proposal book, also known as the “DD-2 enhanced” documents, which Mr. Willoughby determined would provide the baseline for measuring changes. (Willoughby Tr. 1765:20-1767:6; AF2361). 749. The letter also states “all associated gap pricing” would be used in determining the basis of change for Kiewit-Turner’s 377 series requests for equitable adjustment. (AF2361). At the hearing, Mr. Willoughby testified this letter should say “gap quantities” and not “gap pricing,” alleging further “there is no pricing in tab 9” of the FTP proposal notebook. (Willoughby Tr. 1767:7-1768:16; 1769:24-1770:12; AF2361). Mr. Willoughby testified that while the basis of change letter does not refer to allowances or value engineering from the FTP proposal book, Mr. Willoughby stood by his prior testimony that both should be used to measure Kiewit-Turner’s basis of change. (Willoughby Tr. 1768:17-1769:23; AF2361). D. VA Revisits the Proposed Termination of Kiewit-Turner 750. Mr. Pogany described certain options/outcomes, depending on what Jacobs’ 100% estimate showed. One option would be: based on the third-party estimate to be provided in January 2013, increase the ceiling price if it is within the available funds and force the contractor to perform the work for the new ceiling and completion date. (TE035; AF811). Or, Pogany wrote, based on the third-party estimate to be provided in Jan 2013, if the estimate exceeds the available funds after exhausting all remaining VE items, request an internal cost limit increase. (Id.) 147 US2008 5819490 1 751. The final two options were: reduce scope which no one wants to do and would require going back to congress or last option – go to Congress for a cost limit increase which no one wants to do. (Id.) 752. On January 24 and 25, 2013, the VA met to discussion its “options” with Kiewit- Turner. (AF0564). The VA considered several termination options and several options to keep Kiewit-Turner. (AF0564-23; AF0564-25). Of the options to keep Kiewit-Turner, Option 1 was to “continue with KT and direct $610 ceiling performance.” (AF0564-25). The other three keep Kiewit-Turner options involved increasing the ceiling price, reducing the Project scope, or requesting additional funding from Congress. (AF0564-25). Directing Kiewit-Turner to perform to the $610 million ceiling price was the option recommended by the Office of General Counsel, the VA’s attorneys. (AF0852-13). 753. In a January 25, 2013 e-mail from Mr. Kyrgos to Mr. Willoughby, Mr. Pogany, Mr. Lynn, and Mr. Flor, Mr. Kyrgos wrote that “A/E appears to have misled the VA in delivering a project way above the ‘design to cost[.]’ The 3rd party draft estimate is dangerously closed [sic] to KT making our situation weak. So we can no justify [sic] [termination for default] at this time.” (AF0565). 754. On April 30, 2013, the same day that Kiewit-Turner provided its request for Contracting Officer’s final decision in this Appeal, the VA internally shared an email that discussed options it had on the Project. (Pogany Tr. 1355:9-1356:6; TE035). This options paper was originally drafted in mid-January 2013 after receiving the Jacobs 100% estimate. (Pogany Tr. 1355:20-1356:16; TE035). 755. When it was originally drafted in mid-January 2013, the VA project team recommended Option #6, which was a partial termination for convenience and re-procure. 148 US2008 5819490 1 (Pogany Tr. 1356:17-1357:23; TE035-13). Option #1 was to continue with Kiewit-Turner and direct $610 million ceiling performance while directing Kiewit-Turner to complete construction and expect “a court battle on a large claim” from Kiewit-Turner. (Pogany Tr. 1358:16-1359:7; TE035-6). 756. Option #1 contemplated directing Kiewit-Turner to continue work despite the fact that the VA had an estimate from Jacobs showing the design was $200 million over the ECCA. (Pogany Tr. 1359:18-22). 757. One consideration the VA internally disused with Option #1 was that Kiewit- Turner and its subcontractors “would likely complain to the press, to congress and the VSOs that VA is unfairly attempting to force them to complete a project that is underfunded.” (Pogany Tr. 1364:6-18; TE035-7). The least favorite option, according to the VA’s Project Executive, was going to Congress for additional funds because of the political fallout and political nightmare. (Pogany Tr. 1365:13-1366:9; TE035). 758. During this options discussion, the VA considered terminating Kiewit-Turner for convenience, but the VA did not consider terminating Kiewit-Turner for default. (Pogany Tr. 1367:15-20). 759. On May 24, 2013, Mr. Chang e-mailed Mr. Lynn and Mr. Maseda to discuss the pros and cons of terminating Kiewit-Turner. (AF0601). Mr. Chang wrote in discussing the “pros” of termination that:  Stop the bleed because scope, budget and schedule are all in trouble.  Currently, there is no money to complete the project.  Gives time to get additional funding for FFP and have a 100% document.  Change on-site management (preferable).  Cover mismanagement-until we go to court. 149 US2008 5819490 1  KT is going to sue us anyhow. It is cheaper to be sued now than later - see my note. (AF0601-1). E. The VA Rejects The Jacobs 100% Estimate 760. The VA contracted with Jacobs to perform a 100% estimate to validate the JVT’s estimate of the 100% design. (Sztuk Depo. 100:5-9; AF0797). 761. When the JVT and RLB received the Jacobs 100% estimate of more than $199 million over the ECCA, it volunteered to critique the Jacobs estimate. (Taylor Depo. 183:6-24; AF0675). The VA understood that at the time they received the Jacobs 100% estimate, that they had “a more difficult road ahead.” (AF0809). 762. RLB offered to do this critique because it saw it as an opportunity to defend its own estimate. (Taylor Depo. 185:23-186:10). RLB clearly understood that if its estimate was shown to be inaccurate, its client, the JVT, would have to perform a redesign at its own cost. (AF0675). RLB wanted to defend is estimates because it was concerned about the perception in the marketplace that it’s estimate was not credible. (Taylor Depo. 191:5-9). 763. The VA director of VA CFM cost estimating determined that Jacobs’ failure to use actual known costs was a “fatal flaw” that undermined the reliability of the entire estimate. (Sztuk Depo. 90:17-22). In fact, that was the sole determining factor to reject the Jacobs 100% estimate. (Sztuk Depo. 91:1-3; Sztuk Depo. 93:6-13). 764. Criticizing Jacobs for not using known costs but using estimates instead, is not unique to the Jacobs estimate. All estimates should be measured by the same benchmark to determine reliability, accuracy, and reasonableness. (Sztuk Depo. 84:4-17; Sztuk Depo. 107:512; Sztuk Depo. 113:5-14; AF0346). It was Mr. Sztuk’s opinion that the “known costs should have been used” and that the fact that Jacobs’ estimate did not use known costs available to it 150 US2008 5819490 1 was a “flaw in this estimate. So how could – if those numbers are wrong, then the entire thing is not a reliable estimate.” (Willoughby Tr. 1735:8-1736:11; Sztuk Depo. 87:2-19; Sztuk Depo. 107:5-12; AF0346; TE044-52 (Aardsma Report)). 765. Mr. Willoughby confirmed, however, that he never explained to Mr. Sztuk that he, Mr. Willoughby, directed Jacobs not to use actual subcontracting pricing in its preparation of the 100% estimate. (Willoughby Tr. 1735:8-1736:11). 766. As of February 2014 during his deposition, however, Mr. Sztuk testified that he did not recall receiving the Jacobs 100% estimate. (Sztuk Depo. 72:13:15). In fact, he personally did not, nor did his group, review the Jacobs’ 100% estimate. (Sztuk Depo. 85:2186:4). He further testified that he did not personally review the RLB estimates or offer an opinion as to the reliability of the JVT’s estimates, but instead his office merely performed a “high-level review” of them. (Sztuk Depo. 73:3-12; Sztuk Depo. 112:21-113:1). 767. Mr. Willoughby testified the Project Executive Tim Pogany and Jay Sztuk at VACO was responsible for rejecting the $784 million Jacobs 100% estimate. (Willoughby Tr. 1732:18-1733:17). 768. Mr. Willoughby acknowledged that Jay Sztuk provided grounds for rejecting the estimate in an email dated June 4, 2013. (Willoughby Tr. 1733:18-1735:7, 1747:15-1748:5; AF0346). 769. Mr. Willoughby testified he called off the Blue Ocean value engineering exercise based on this June 4, 2013 email from Mr. Sztuk. (Willoughby Tr. 1737:17-1738:4; AF0667). However, this testimony conflicts with evidence that shows the VA gave verbal direction in a meeting with the A/E to suspend cost reduction exercises on May 7, 2013, nearly a month before 151 US2008 5819490 1 the Sztuk email. (Willoughby Tr. 1738:5-1741:3; AF0666; AF0667). This direction appears to have been reiterated in a subsequent meeting with the A/E on May 31, 2013. (AF0667). 770. The VA hired Leland Saylor Associates (“LSA”) to review the Jacobs 100% estimate, but LSA’s scope was not to perform a take-off. (Saylor Depo. 104:1-11; Sztuk Depo. 78:19:79:9;). It was instead to simply compare various estimates and to note variances. (Saylor Depo. 50:12-23; Saylor Depo. 104:1-11; Saylor Depo. 145:3-13; Sztuk Depo. 78:19:79:9). 771. LSA did not tell Mr. Pogany that the Jacobs estimate was fatally flawed, since it was not its scope of work to opine on whether any estimate was fatally flawed or not. (Saylor Depo. 147:5-19). LSA was only tasked with doing a comparative analysis. (Saylor Depo. 148:1-4). 772. Although LSA noted variances in the RLB, Jacobs and Kiewit-Turner estimates, it could not explain why there was a variance because it did not perform a quantity survey. (Saylor Depo. 232:5-25; AF762-14). 773. LSA was not provided with the complete project documentation that would have allowed it to perform an IGE, which LSA was not tasked to do. (Sztuk Depo. 98:10-99:6). 774. LSA never provided the VA with a recommendation on the credibility, reliability, or reasonableness of any estimate on the Project. (Saylor Depo. 146:1-147:424; Sztuk Depo. 99:11-100:1). LSA did not provide any findings or opinions as to whether any estimate was more or less reliable or authoritative. (Saylor Depo. 157:4-17; Sztuk Depo. 103:9-104:7). 775. In fact, the Jacobs 100% estimate was never peer-reviewed to determine if it was credible or reliable. (Sztuk Depo. 102:7-15). 152 US2008 5819490 1 776. When performing its review, LSA did not verify the estimating information that was provided to RLB, Jacobs, or Kiewit-Turner because the basis and assumptions, as well as other estimating information, were not provided to LSA. (Saylor Depo. 108:21-109:10). 777. LSA’s research of the market conditions was not extensive and not what it would typically do because that was not part of its scope of work. (Saylor Depo. 110:16-21). 778. LSA was expressly directed by Mr. Pogany not to consider as part of LSA’s scope of work anything beyond the documents that the VA provided LSA, which was only the list of documents referenced in the LSA report. (Saylor Depo. 134:12-135:21). LSA only received the drawing document set dated August 31, 2012 and some limited specifications to review. (Saylor Depo. 136:1-137:9). 779. After its review, LSA concluded that Jacobs’ 100% estimate met the requirements as outlined in the VA’s manual for preparing cost estimates. (Saylor Depo. 140:15-141:3). Further, LSA could not make any statement as to the accuracy of the quantities contained in Jacobs estimate because it was not tasked with performing a quantity takeoff. (Id.) 780. LSA did not opine as to whether or not the Jacobs estimate could or could not be relied upon as it was not part of LSA’s scope of work. (Saylor Depo. 157:4-17). 781. LSA produced its final report on March 11, 2013. (AF0762). 782. Mr. Pogany directed LSA to make adjustments in its supplemental report to include actual subcontractor bids to “normalize” the estimated construction costs after markups. (Saylor Depo. 199:19-201:22). 783. LSA produced its supplemental report on April 30, 2013. (AF0338). 784. LSA expressly recommended to the VA that it should engage a peer reviewer to explore the responsibility of the designer to meet the design to budget requirement because based 153 US2008 5819490 1 on LSA’s own review, the project appeared to be exceeding what LSA understood to be the ECCA. (Saylor Depo. 238:11-239:3; AF0338). 785. LSA never made a recommendation to the VA that it should discount Jacobs estimate in its entirety because this was beyond LSA’s scope of work. (Saylor Depo. 249:2250:24). In fact, Mr. Saylor expressly testified that he could not offer such a conclusion because he had not performed the all-important quantity takeoff that he had requested, but was denied by the VA, to do. (Saylor Depo. 243:15-244:13). 786. Mr. Saylor with LSA disagreed with Mr. Pogany’s testimony that Mr. Saylor had reported to the VA that the Jacobs estimate had a fatal flaw and had some major mistakes in the estimate. (Saylor Depo. 244:14-248:2). 787. The LSA report was one of, if not the, most critical items relied on by the VA to reject the Jacobs 100% design estimate of $784 million. (Pogany Tr. 1383:22-1385:20). But LSA was not provided enough information to allow it to render an opinion on the accuracy, reliability, or sufficiency of the Jacobs 100% design estimate. (Pogany Tr. 1385:21-1386:11). Nevertheless, the VA relied on the LSA report to throw out the Jacobs 100% design estimate. (Id.) 788. Mr. Lynn testified he sat in on a conference call where the Jacobs estimate was discussed. The discussion was between Jay Sztuk for the VA and Richter Schneider and Steve Bliss for Jacobs. (Lynn Tr. 958:18-959:9). Mr. Lynn recalled Mr. Sztuk saying the estimate “wasn’t any good.” (Lynn Tr. 939:1-13). 789. Mr. Willoughby acknowledged the $784 million 100% Jacobs estimate has never been formally rejected in writing. (Willoughby Tr. 1747:5-20). 154 US2008 5819490 1 F. The VA Reinterprets SA-007 790. In January 2013, the VA internally expressed a concern about providing a defense to SA-007. (Sztuk Depo. 67:14-68:17; AF0788). The VA also internally knew at this point that the IDIQ A/E indirectly supported Kiewit-Turner’s claim that the 95% design was not truly 95% complete. (AF0788). 791. In February of 2013, the VA started to change its position regarding SA-007. At a senior executive partnering session on February 13, Mr. Kyrgos came up with the idea that SA007 was based on the design at the time that the agreement was signed. (Colpack Tr. 136:16-20). 792. Mr. Colpack made clear that SA-007 was in no way or shape associated with any design at that point in time and that Kiewit-Turner stayed involved only because the VA would cause the design to be built for the ECCA. (Colpack Tr. 137:5-11). 793. At this time, Mr. Klebba asked Mr. Willoughby if SA-007 was based on any design at the time. Mr. Willoughby said it was not, that he informed Chris Kyrgos of that at the time, and it was probably a mistake. (Colpack Tr. 137:14-22; Klebba Tr. 531:2-18; Klebba Tr. 534:24-535:15; AF0822-4). Mr. Klebba testified that that pretty much ended the debate on SA007 at the meeting. (Klebba Tr. 531:19-23). 794. At the Hearing, no witness corrected or contradicted Mr. Willoughby’s earlier statement and Mr. Willoughby merely stated that he did not know if he would do anything differently. (Willoughby Tr. 1675:22-1676:11). 795. Mr. Klebba testified that this was consistent with a conversation he had with Mr. Willoughby two weeks earlier. (Klebba Tr. 531:24-532:3). Mr. Klebba testified that during that conversation Mr. Willoughby told him that he talked to Mr. Kyrgos that morning: “I told him that SA-007 wasn’t based on any design, and he understands.” (Klebba Tr. 532:20-25). 155 US2008 5819490 1 796. The official meeting minutes taken by FMI of the February 13, 2013 meeting confirmed that “it was noted by the VA that the $604 million FTP agreement between the VA and KT was not based on any set of design documents.” (Colpack Tr. 139:7-24; AF0651). 797. Mr. Klebba testified that his assistant also took notes at the February 13, 2013 meeting. (Klebba Tr. 533:13-18; AF0822). The notes indicate that Mr. Klebba said “Going to put Thaddeus on the spot here, when executed the $604, was this based on any documents?” and Mr. Willoughby responded that “At that time, no. I told the team the same thing. I believe this was a mistake.” (Klebba Tr. 535:1-12; AF0822-4). Mr. Klebba testified that this is consistent with his recollection of the meeting. (Klebba Tr. 535:13-15). 798. Mr. Klebba testified that he was becoming concerned with Mr. Willoughby’s changing interpretation of SA-007 in April of 2013. (Klebba Tr. 540:13-24). 799. After the FFP Proposal, the Contracting Officer changed his interpretation of SA- 007, that is was based on some design at some point in time. (Colpack Tr. 143:8-13). 800. This issue rose to a discussion point amongst the parties at a subsequent meeting on June 27, 2013. (AF0726). There, the parties discussed “how to treat the ‘book’ from KT that was thrown out.” (Lynn Tr. 956:7-956:25; AF0726). The parties discussed which parts of the book could be used for negotiations and further discussed the concern that where SA-007 does not reference any construction documents, there is no contractual link between those documents and the contract: “it seemed quite clear, at least to me, that if supplemental authorization that gave them essentially notice to proceed with construction didn’t reference a particular estimate or a particular set of documents – construction documents, that there’s no contractual link between those documents and the contract ... this was a concern that was discussed at this meeting.” (Lynn Tr. 957:10-23). 156 US2008 5819490 1 801. The VA’s current interpretation of SA-007 was created well after the parties executed SA-007 in November 2011. (TE051). 802. A long time after SA-007 had been signed, the Contracting Officer sought out Mr. Kyrgos to find out what he thought SA-007 was based on. (Kyrgos Tr. 1139:23-1140:22). 803. Mr. Willoughby testified that certain tabs from the FTP proposal notebook were not agreed to in SA-007, but that all other tabs were included in SA-007: specifically, tab 3 (List of Allowances) and tab 8 (Commodities Index). (Willoughby Tr. 1660:8-1663:12; AF0388) 804. But on cross examination, Mr. Willoughby testified this testimony was “probably a mistake” and that instead he meant Tabs 4 (Basis of Proposal) and tab 8 (Commodities Index). (Willoughby Tr. 1621:3-1622:12). Testifying further, Mr. Willoughby stated, “[a]gain, it goes back to the same thing I said earlier, clarifications and assumptions, we didn’t accept those. I just stated the wrong tab. Instead of list of allowances, it should have been basis of proposal.” (Willoughby Tr. 1622:13-22). 805. At the hearing in June 2014, Mr. Willoughby acknowledged he was changing his sworn testimony in this regard, but reiterated that he believes Tabs 4 and 8 are out of SA-007, but the remainder of the FTP proposal notebook were a part of SA-007. (Willoughby Tr. 1663:13-1665:23). 806. Mr. Willoughby was asked, to be clear, whether the allowances were “in or out” and Mr. Willoughby testified that “in his mind” he has now decided the document list also forms a part of SA-007. (Willoughby Tr. 1622:23-1623:5; 1665:24-1666:25; see also 1796:4-8). 807. Mr. Willoughby was offered a chance to further clarify this testimony on cross examination, but reiterated that the document list in the FTP proposal book was included in SA007 even where SA-007 does not reference the document list, nor does the handwritten Path 157 US2008 5819490 1 Forward Memorandum, and the document list was vehemently objected to by the VA’s lead negotiator, based on his decision in 2013 to decide SA-007 included such documents. (Willoughby Tr. 1623:2-1624:3). 808. Mr. Willoughby candidly acknowledged that his sworn testimony at the hearing was contrary to his sworn testimony at his deposition that Mr. Kyrgos had rejected the document list from the FTP proposal notebook. (Willoughby Tr. 1669:13-24). 809. Mr. Willoughby also admitted he did not come up with this interpretation until 2012 and did not reduce it to writing until 2013: “I reduced it to writing in 2013, but in my mind I came up with it in 2012.” (Willoughby Tr. 1667:10-15) (emphasis added). Again, SA007 was executed in November 2011. (TE051). 810. Mr. Willoughby testified he came up with this interpretation through conversations with Mr. Kyrgos. (Willoughby Tr. 1667:16-1668:7). Mr. Willoughby admitted that Mr. Kyrgos said at the November 9 2011, FTP negotiation that he was “throwing out the book.” (Id.) 811. Mr. Willoughby testified he sat down with Mr. Kyrgos to determine what he meant when he said “the book is out.” Through these 2012 discussions, Mr. Willoughby came to the conclusion that Mr. Kyrgos, when he threw out the book, really only threw out the clarifications and assumptions in Tab 4. (Willoughby Tr. 1614:25-1616:2, 1669:5-12). 812. These discussions occurred months after SA-007 was executed, in early 2012. (Willoughby Tr. 1616:3-7). Mr. Willoughby testified that he told no one on the night of November 9, 2011, or at any time prior to executing SA-007, that he had decided that SA-007 includes certain tabs from the FTP proposal notebook but not others. (Willoughby Tr. 1667:1-9). 158 US2008 5819490 1 813. Mr. Willoughby was still “not sure” what design documents formed the basis of SA-007, but understood Kyrgos believed it was the current document list. (Willoughby Tr. 1616:8-25). Mr. Willoughby testified that he accepted this interpretation from Mr. Kyrgos “for a about a month or so,” but then came to a new interpretation about which design documents form the basis of SA-007. (Willoughby Tr. 1616:16-1618:5; 1669:25-1670:21). 814. On January 13, 2013, Mr. Kyrgos e-mailed Mr. Willoughby asking Mr. Willoughby for any “evidence [KT] agreed on 604.” (AF0820). Importantly, Mr. Kyrgos noted that the SF30, the form modification for SA-007, was “silent as to what this FTP is based on.” (AF0820). 815. Mr. Willoughby did not inform Kiewit-Turner in writing of his new interpretation of SA-007 until February 2013. (Willoughby Tr. 1619:9-14). 816. Mr. Willoughby admitted that this subsequent interpretation was motivated by his after-the-fact desire to have a baseline to measure changes from. (Willoughby Tr. 1624:41625:14; 1674:24-1675:17). G. Directive To Proceed And Failure To Incorporate Any Cost Cutting Measures 817. Mr. Klebba testified that after the Blue Ocean meeting, there was concern from Kiewit-Turner that if it continued construction on the Project at the same pace the Project would lose opportunities to incorporate certain cost saving elements. (Klebba Tr. 535:24-536:11). 818. On August 16, 2012, the Contracting Officer directed Kiewit-Turner to proceed with construction of all CDI packages delivered on August 16, 2012 or shortly thereafter. (AF2288). On September 17, 2012, Kiewit-Turner requested confirmation from the VA’s prior direction of August 16, 2012 to proceed on all issued August 31, 2012 100% design drawings. (AF2288). 159 US2008 5819490 1 819. On April 12, 2013, Mr. Klebba sent a letter to Mr. Pogany and Mr. Willoughby responding to a letter on project funding. (Klebba Tr. 535:24-537:1; AF0337). Mr. Klebba testified that he sent the letter because they were very concerned that Kiewit-Turner was constructing the Project during the on-going redesign effort. (Klebba Tr. 537:2-18; AF0337). 820. On March 1, 2013, Kiewit-Turner wrote a letter to the VA expressing concern about the Project’s funding and requesting written confirmation of the VA’s directive to proceed in light of an independent cost estimate $199 million over the ECCA. (AF0325). Kiewit-Turner also reiterated that: “[t]he VA's directives to its design team confirm what KT has repeatedly told the VA: the project is underfunded and ill-designed, resulting in a material, legal risk to KT and perhaps to the VA.” (AF0325-2). On the same day, Kiewit-Turner sent the VA a letter that it must increase the FTP and ceiling price because the VA cannot legally direct Kiewit-Turner to complete the current Project as designed unless and until additional funding is allocated. (AF0327-1). 821. On March 19, 2013, the VA responded to Kiewit-Turner’s letters from March 1, 2013, and directed Kiewit-Turner to continue performance to the FTP and Ceiling Price. (AF0333-3). 822. On May 15, 2013, the VA rejected Kiewit-Turner’s Firm Fixed Price Proposal. (AF0339). The VA again directed Kiewit-Turner to continue performance to the FTP and Ceiling Price. (AF0339-2). 823. Kiewit-Turner responded to the VA’s rejection of the Firm Fixed Price Proposal on June 12, 2013. (AF0343). Kiewit-Turner expressed its concern with the VA’s rejection by stating that: This recent VA decision to reject KT’s FFP proposal without discussion or negotiation has grave consequences. The VA knows its own designer has not 160 US2008 5819490 1 provided a design that could be built to meet the contractually required ECCA of $582 million. Simply put, there is a fundamental, underlying problem that needs immediate attention. It is clear that the FTP was predicated on the VA's assurance that it would provide KT a design that could be built for the ECCA of $582 million. The VA has not done so and is well aware that the design it provided significantly exceeds the ECCA. While the VA has directed its A/E to revise the design to lower the project cost, the VA is simultaneously directing KT to construct the current and more expensive design. By recognizing this fundamental disconnect which the VA created, it becomes clear that the VA's present position is borne out of bad faith. (AF0343-2)(emphasis added). H. The VA Was “Estimate Shopping” 824. The JVT and VA have an interest to ensure the design meets or comes in below the ECCA. (Knowles Depo. 60:24-61:3). The VA and the JVT’s interests are aligned on the Project. (Knowles Depo. 61:9-16). 825. Mr. Lynn had a conversation with a VA employee wherein they discussed the VA’s behavior seeking additional estimates from the JVT for the 100% Design as “estimate shopping.” (Lynn Tr. 962:8-15). 826. Mr. Lynn acknowledged that the JVT’s estimates on the Project had reduced to a “self-fulfilling prophecy when you have somebody in that kind of position and they’re asked to provide an estimate ... you’re admitting you’ve breached your contract if you report something that’s too high.” (Lynn Tr. 926:13-22). 827. On October 18, 2013, the VA e-mailed Mr. Lynn and other Jacobs employees the instructions that were sent to the JVT to prepare the new 100% estimate. (AF0766). Mr. Lynn continued to expressed concern about the JVT performing the estimate and wrote, “[i]s the JVT going to be influenced by the ‘design to budget’ clause in their contract? What assurance can you get that they will in fact be independent and objective?” (AF0766-1). 161 US2008 5819490 1 828. The RLB 100% design estimate parameters were arrived at through the collaboration of the JVT and the VA. (Knowles Depo. 236:13-20). RLB took the lead from what the VA was charging it to perform and despite RLB knowing there were issues with the parameters, RLB did not “write to the VA saying, hey, guys, this is all misguided, it’s not what you want … but [RLB thinks] everyone was very clear about the parameters, what was required, what was not required.” (Knowles Depo. 242:24-243:24). 829. RLB’s preliminary draft 100% design cost estimate dated December 20, 2013 totaled $645,363,514. (Knowles Depo. 255:10-256:7; AF0873). It was provided to the JVT for review, but not to Kiewit-Turner or the VA. (Knowles Depo. 256:2-10). 830. RLB did not provide the draft 100% Design estimate to Kiewit-Turner for its review because it believed the perception from the VA would be that Kiewit-Turner would then have influence over its estimate. (Knowles Depo. 153:19-155:2). RLB was expressly told not to let Kiewit-Turner review the draft estimate. (Knowles Depo. 157:10-13). From RLB’s perspective, if Kiewit-Turner were to review and critique RLB’s 100% estimate before it was issued to the VA, it would fail the test of independence. (Knowles Depo. 153:19-154:15; Knowles Depo. 155:22-156:9). However, after RLB completed its draft of the 100% design estimate, it provided it to the JVT for its review and critique before being issued to the VA. (Knowles Depo. 94:13-18). 831. RLB’s final 100% design cost estimate dated February 3, 2014 totaled $630,883,388. (Knowles Depo. 262:1-17; AF0781; AF0874). RLB reduced its final 100% design cost estimate by more than $15 million. (Knowles Depo. 262:1-17). 162 US2008 5819490 1 832. RLB’s Taylor believed that it was “coincidental” that the JVT’s 100% estimate equaled $630 million, the same amount that the VA has agreed to pay Kiewit-Turner through modifications. (Taylor Depo. 160:14-161:4). 833. The fact that the JVT’s first draft was $645 million and then reduced to $630 million, the same amount of construction funds for Kiewit-Turner, was also deemed to be a “coincidence” by the VA’s Project Executive. (Pogany Tr. 1379:14-25). 834. Mr. Lynn expressed continuing concern with the A/E providing estimating services for the 100% estimate and recommended the VA hire one of Jacobs’ competitors to perform the 100% independent estimate. (Lynn Tr. 959:20-960:6). Lynn believed the VA needed “to get an unbiased opinion, and I didn’t believe there was any way to obtain an unbiased opinion from the [A/E].” (Id.) 835. On August 11, 2013, Mr. Lynn received an e-mail from Jeff Carpenter, another Jacobs employee, asking Mr. Lynn his thoughts on why the VA was going to the JVT for another 100% estimate. (AF0698). Mr. Lynn replied that the VA was “[e]stimate shopping. Whichever is less that will be the government position.” (Lynn Tr. 960:7-962:15; AF0698-1; AF0699). 836. According to the VA, there are currently no plans to redesign and it has accepted the JVT $630 million estimate as the IGE. (Kyrgos Tr. 1162:24-1163:22; Pogany Tr. 1380:11381:22; AF2399). The VA did not have an independent peer review of the JVT’s $630 million estimate. Instead, the VA found special circumstances to have the VA’s central office do a cost realism, validation of the JVT’s cost estimate. (Pogany Tr. 1381:4-12; Pogany Tr. 1380:11381:22; AF2399). 837. In fact, the VA did not seek a peer review of the Jacobs IGE performed in August 2011 before it accepted it as an IGE either. (Pogany Tr. 1381:4-12). 163 US2008 5819490 1 I. The VA In Bad Faith Relied On A Biased, Inaccurate Estimate Provided By The JVT And Established The JVT Estimate As The Independent Government Estimate 838. Mr. Pogany was concerned that the JVT’s estimates were low. (Guy Depo. 108:21-109:5). Nevertheless, the VA adopted the JVT’s 100% Design estimate of $630 million as the VA’s IGE. (Kyrgos Tr. 1161:24-1162:23; AF2399). 839. The JVT’s 100% design estimate of $630 million is still approximately $50 million over the ECCA of $582 million. (AF0874-10). 840. Notably, RLB and the JVT also entered into a joint defense agreement in November of 2013. (AF0875). The joint defense agreement included the statement that the JVT and RLB “have an identical and/or common interest in establishing that the allegations made by Kiewit-Turner relative to their services are without merit or otherwise subject to various defenses.” (AF0875-1). 841. The joint defense agreement further clarified for Steve Howard, Kiewit-Turner’s expert on cost estimates and cost estimating, that the JVT 100% estimate was not an IGE. (Howard Tr. 766:5-767:1). 842. Mr. Howard testified that JVT’s 100% estimate does not represent an IGE. (Howard Tr. 759:16-19; TE049-3). The JVT’s 100% estimate was managed through the design team, they were not independent, they were instructed to follow a methodology, and they did not follow the structure of a government estimate. (Howard Tr. 761:17-762:15). Mr. Howard also relied on Mr. Knowles’ deposition in coming to this conclusion because the head estimator of the JVT 100% estimate did not believe they were providing an independent government estimate. (Howard Tr. 764:1-765:5). 843. The JVT’s estimate of the 100% design was not a reasonable and realistic estimate of what it would cost to construct the project, in Mr. Aardsma opinion, as detailed in his 164 US2008 5819490 1 supplemental report. (TE048-10-19). The VA did not respond to nor challenge any of his critique of the A/E’s estimate. 844. Mr. Howard also testified that the JVT estimate followed a design/bid/build estimate and not a negotiated GMP/IDc methodology. (Howard Tr. 768:15-19). Mr. Howard testified that under an IDc-type contract, when actual contract costs are known they are used in lieu of estimates where available. (Howard Tr. 771:12-17). Mr. Howard concluded that the JVT did not use the IDc-type cost estimating method. (Howard Tr. 771:18-22; TE049-3). 845. Mr. Howard testified that the 100% JVT estimate does not represent the probable construction cost for this Project. (Howard Tr. 772:1-9; TE049-4). The estimate instead represents the cost of a theoretical project built and bid under some different conditions as directed by the VA. (Howard Tr. 772:1-773:12; TE049-4). Mr. Howard testified that this was consistent with Mr. Knowles’ deposition testimony where Mr. Knowles testified that he does not know if this 100% estimate is an accurate reflection of what the VA will pay. (Howard Tr. 774:6-18; TE049-4). 846. Mr. Howard also found that the JVT 100% estimate was inaccurate and unreliable because it failed to consider and include actual, known contract cost data for the Project. (Howard Tr. 775:12-25; TE049-4). At the direction of the VA, the JVT used historical data. (Howard Tr. 776:1-18). 847. The Government Accountability Office Cost Estimate and Assessment Guide states that one of the issues with inaccurate estimates was the lack of inclusion of known costs. (AF2175-23). Mr. Howard agrees with this statement and it was one of the reasons he found the JVT 100% estimate to be inaccurate. (Howard Tr. 775:22-25). Mr. Howard also agreed with Mr. Sztuk’s deposition testimony that using actual pricing increases accuracy and reliability of a 165 US2008 5819490 1 cost estimate because that is reflective of what you can actually buy something for. (Howard Tr. 779:9-780:14). 848. Mr. Sztuk testified that if RLB had actual known costs available to them, RLB should have used those actual known costs and not estimated costs in its estimates, especially if RLB wanted to provide an accurate, realistic cost estimate for the Project. (Sztuk Depo. 122:217). 849. Both Mr. Klebba and Mr. Colpack testified that Mr. Willoughby stated on multiple occasions that he was not concerned about some of the estimates being above or below budget, because they were just estimates. (Colpack Tr. 130: 20-25; Klebba Tr. 502:6-20). Mr. Willoughby stated that the parties would not know what the real cost is until Kiewit-Turner bid the project to subcontractors. (Colpack Tr. 130:20-25). Respectfully submitted on July 25, 2014. ______________________________ William E. Dorris Chad V. Theriot Reginald A. Williamson Damian M. Brychcy Kilpatrick Townsend & Stockton LLP 1100 Peachtree Street, Suite 2800 Atlanta, GA 30309-4530 Tel: (404) 815-6500 Fax: (404) 815-6555 bdorris@kilpatricktownsend.com ctheriot@kilpatricktownsend.com rwilliamson@kilpatricktownsend.com dbrychcy@kilpatricktownsend.com Counsel for Appellant 166 US2008 5819490 1 CERTIFICATE OF SERVICE The undersigned hereby certifies that a true and correct copy of the foregoing APPELLANT’S PROPOSED FINDINGS OF FACT was this day served upon Respondent’s counsel of record by email as follows: Charlma Quarles charlma.quarles@va.gov Khalia Wrenn Khaliah.Wrenn@va.gov Joylyn Winter Joylyn.Winter@va.gov Benjamin Diliberto Benjamin.Diliberto@va.gov Eyvonne Mallett Eyvonne.Mallett@va.gov Office of the General Counsel (025B) Department of Veterans Affairs 810 Vermont Avenue NW Washington, DC 20420 Tel: (202) 461-4998 Fax: (202) 273-9384 This 25th day of July, 2014. Chad V. Theriot US2008 5819490 1