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HPS Mechanical, Inc. v. JMR Construction Corp.

United States District Court, N.D. California

August 1, 2014

JMR CONSTRUCTION CORP., et al., Defendants.


JOOSEPH C. SPERO, Magistrate Judge.


1. The disputes in this case arose during the construction of the San Ramon Valley Recycled Water Project - Pump Station R200A and Pipeline, located in the City of San Ramon, California (hereafter, "the Project").

2. The owner of the Project was the United States Army Corps of Engineers ("USACE").

3. JMR Construction Corp. ("JMR") submitted a bid to the USACE on April 14, 2008. Morrill Expert Report, Exh. 291 at 3. The USACE awarded the Prime Contract to JMR on April 30, 2008 in Contract No. WP912P-08-C-0004. See id.; Exh. 329 (Prime Contract).

4. JMR awarded HPS Mechanical, Inc. ("HPS") a Subcontract Agreement for the Project (hereafter, "the Subcontract"). See Subcontract, Exh. 328.

5. Pursuant to the Miller Act, 40 U.S.C. § 3131, JMR was required to furnish a "payment bond with a surety... for the protection of all persons supplying labor and material in carrying out the work provided for in the contract for the use of each person." 40 U.S.C. § 3131(b)(2). JMR obtained a payment bond with a surety, Great American Insurance Company ("GAIC"), which made GAIC liable to "[e]very person that has furnished labor or material in carrying out work provided for" the Project "and that has not been paid...." 40 U.S.C. § 3133(b)(1).

6. On June 1, 2011, HPS filed this action against JMR and GAIC (collectively, "Defendants"). Dkt. No. 1. HPS asserts claims under the Miller Act, 40 U.S.C. § 3133(b)(1), and for breach of contract. On September 9, 2011, JMR filed a counterclaim against HPS for breach of contract. Dkt. No. 13.

7. On November 6, 2013, the Court denied Defendants' motion for partial summary judgment. See HPS Mech., Inc v. JMR Constr. Corp., No. 11-cv-02600-JCS, Dkt. No. 111, 2013 WL 5954895 (N.D. Cal. Nov. 6, 2013). A bench trial for this case was held on the 19th, 20th, 24th and 25th of February of 2014. Dkt. Nos. 139-44. The parties submitted post trial briefing on the 11th and 28th of April of 2014, along with proposed findings of fact and conclusions of law. Dkt. Nos. 150-55. Given the extensive nature of this briefing, the Court finds that final oral argument is not necessary.

8. After considering and weighing all the evidence and the parties' arguments, and having assessed the credibility of the witnesses, the Court enters the following findings of fact and conclusions of law as required by Federal Rule of Civil Procedure 52(a).


A. Overview of the Project

9. The Project involved two components. The first component entailed the installation of a pipeline in one traffic lane of Bollinger Canyon Road in the City of San Ramon (hereafter, "the Pipeline"). Testimony of John Morrill ("Morrill"), Tr. 474. The second component of the Project entailed the construction of a pump station to allow the system to stay pressurized (hereafter, "the Pump Station"). Id. at 475.

10. The Pipeline component of the Project required installation of approximately 6, 558 feet of a 16-inch mainline. Morrill Expert Report, Exh. 291 at 5. Eight-inch branch laterals were to be connected to the 16-inch mainline by special butterfly valves at three intersections along Bollinger Canyon Road. Morrill, Tr. 476-77; Testimony of Jack Sloss ("Sloss"), Tr. 31.

11. HPS submitted a bid to conduct certain work on the Project on April 10, 2008. See HPS Bid, Exh. 212. HPS and JMR entered into a Subcontract on June 16, 2008. See Subcontract, Exh. 328 at 34. Under the Subcontract, HPS was required to do most of the work for the Pipeline portion of the Project. HPS expert John Irwin describes HPS's scope of work for the Pipeline as follows:

HPS had to trench the street, then transport each fused section and drop it into the pipe trench. HPS then connected sections together with couplings, installed 16-inch butterfly valves where required along the line, installed air release piping and valves, installed blow off piping, and installed the laterals.

Irwin Expert Report, Exh. 623 at 8; see also Subcontract, Exh. A (Subcontractor's Scope of Work). HPS was also responsible for "backfill" of the trench, which required HPS to fill and compact aggregate base in the trench up to about six inches below asphalt paving. Testimony of Gareth Figgness ("Figgness"), Tr. 595.

12. The Subcontract also required HPS to do some work on the Pump Station. John Irwin describes HPS's scope of work for the Pump Station as follows:

HPS's scope of work at the Pump Station included piping within the Pump Station and underground piping outside the Pump Station to the existing 16-inch DERWA pipe in Iron Horse Trail. HPS did not provide or install any of the mechanical equipment inside the Pump Station - pumps, air compressor, surge tank and HVAC equipment. HPS only was required to connect piping to equipment.

Irwin Expert Report, Exh. 623 at 8.

B. Project Deadlines

13. The contract performance period was 365 days from the day the USACE issued JMR the Notice to Proceed, which occurred on May 16, 2008. Prime Contract, Exh. 329 at 21. Therefore, May 16, 2009 was the deadline for completion of the entire Project. Morrill, Tr. 472.

14. In addition, August 22, 2008 was a milestone deadline for the installation of the Pipeline portion of the Project. The following provision is included in the Scope of Work of the Subcontract:

The pipeline portion of the project shall begin no sooner than May 1, 2008 and be completed before August 22, 2008 (before school begins). Once work on the pipeline begins it shall be continuous and uninterrupted, the work on the pipeline shall not remain dormant once begun.

Exh. 328 at 31. Section 3.4 of the Subcontract incorporates the specifications for the Project and the Prime Contract, which also require complete installation of the Pipeline by August 22, 2008. Subcontract, Exh. 328 at 5 (Art. III, § 3.4); Prime Contract, Exh. 329 at 21, Specifications, Exh. 278 at 196.

15. This August 22, 2008 deadline for complete installation of the Pipeline was noted in Section 3.3.2 of the Project specifications. Exh. 278 at 196. When HPS submitted its bid to JMR on April 10, 2008, HPS was aware of the August 22, 2008 deadline. Testimony of Kenneth Pourroy ("Pourroy"), Tr. 316.

16. The August 22, 2008 deadline was put in place because the City of San Ramon (hereafter, "City") was concerned that installation after school began would cause undue traffic congestion on Bollinger Canyon Road, a main thoroughfare. Testimony of Theresa Peterson ("Peterson"), Tr. 218. The encroachment permit issued by the City for the installation of the Pipeline expired on August 22, 2008. Encroachment Permit, Exh. 404 at 43. An encroachment permit was necessary for any work to encroach upon the City's property. Peterson, Tr. 218.

17. HPS contends that August 22, 2008 was only a deadline to install the mainline portion of the Pipeline, and not the laterals and valves. However, the evidence supports the Court's conclusion that August 22, 2008 was the deadline to complete full installation of the Pipeline, including the 16-inch mainline, the 8-inch laterals, and the specialty butterfly valves. Testimony of Eileen Nixdorf ("Nixdorf"), Tr. 117-18; Peterson, Tr. 216; Testimony of Roy Shields ("Shields"), Tr. 252; Morrill, Tr. 484, Figgness, Tr. 570; Testimony of Ron Rivard ("Rivard"), Tr. 606.

18. HPS's evidence to the contrary is unpersuasive. HPS notes that by June 11, 2008, the City had only approved a traffic control plan for installation of the mainline, and planned to create a traffic plan for the laterals and valves at a later date. Meeting Notes, Exh. 695; Shields, Tr. 257. However, JMR presented testimony that it only takes one day to approve a traffic control plan. Rivard, Tr. 610. Thus, the fact the traffic control plan was not complete did not have a material impact on the August 22, 2008 deadline.

19. Moreover, the contemporaneous evidence shows that the traffic control plan was not complete for the installation for the laterals and valves because JMR, HPS and the City sought to redesign the location of the valves away from the intersections. See Meeting Notes, Exh. 695. Contrary to HPS's contention, the fact the traffic control plan was incomplete in June 2008 does not say anything about what HPS was required to install by August 22, 2008.

20. HPS also contends that JMR prepared a baseline schedule on May 19, 2008, which indicated that the intersection work on the Pipeline would take place in the evenings beginning on August 18, 2008, and continue through September 16, 2008. See Irwin, Tr. 368-69; Exh. 442 (May 19, 2008 project schedule). This schedule depicted in Exhibit 442 indicates that Pipeline construction would be complete on September 19, 2008, that only the mainline portion of the pipeline would be complete by August 21, 2008, and that work on the valves and laterals would take place at night after August 22, 2008. Exh. 442 at 12; Irwin, Tr. at 368-70.

21. However, evidence of record shows that this "baseline schedule"[1] was created in reaction to information that the butterfly valves would not be delivered in time to connect the 8-inch laterals to the 16-inch mainline. See JMR's REA, Exh. 523 at 6 ("the delivery of the needed valves for interconnecting the lateral ties at the roadway intersections could not be delivered for full completion of all pipeline work by August 22, 2008. Therefore, completion of this remaining portion of the lateral pipeline work was to be performed during a night shift operation upon delivery of the valves to the site.") (emphasis added). As discussed below, the delayed delivery of the valves was the responsibility of HPS.

22. Pursuant to section 3.8 of the Subcontract, "[n]o modification of [the Subcontract] shall be binding unless the same is in writing signed by the Contractor and the Subcontractor." Subcontract, Exh. 328 at 6. HPS has not presented evidence of any change order or any other writing signed by JMR relieving HPS of its obligation to install the laterals and valves by August 22, 2008. The "baseline schedule" proffered by HPS does not relieve HPS of its contractual obligations. Accordingly, the Court finds that HPS was at all times required to complete the Pipeline portion of the Project, including the valves and laterals, by August 22, 2008.

C. Course of the Project

i. June 2008 - August 2008

23. HPS started physical construction on the Project between June 16 and 19, 2008. Morrill, Tr. 472; Irwin Expert Report, Exh. 623 at 24.

24. HPS did not complete installation of the Pipeline by the milestone deadline of August 22, 2008.

25. As discussed below, there are several reasons why HPS did not complete installation of the Pipeline by the August 22, 2008 milestone deadline. The most important factor was the delayed delivery of the butterfly valves that would connect the 8-inch laterals to the 16-inch mainline of the Pipeline. Other factors include: 1) the initial delay in starting work; 2) HPS encountering several obstructions in the path of the Pipeline; 3) HPS's forty-seven failed compaction tests; and, 4) a two-day Safety Stand-Down in which all work was stopped.

Delayed Delivery of the Valves

26. The butterfly valves required for the Pipeline were unusual because they opened clockwise instead of counterclockwise. Testimony of Les DenHerder ("DenHerder"), Tr. 428-29; Morrill, Tr. 558; Exhs. 424, 441.

27. To supply the valves, HPS subcontracted with a supplier, R&B Company ("R&B"). Testimony of Kurt Vincellete ("Vincellete"), Tr. 120. R&B sourced the valves from the manufacturer, Henry Pratt Company. Pourroy, Tr. 123. On March 22, 2008, Henry Pratt Company informed R&B that the valves had a 10 to 14 week lead time after receipt of order. Exh. 738.

28. Prior to the time in which HPS submitted its bid to the USACE, R&B did not inform HPS that the valves had a 10 to 14 week lead time after receipt of order. Pourroy, Tr. 316. HPS was not informed of the long lead time until the USACE approved the submittals for the valves on July 25, 2008. Id. at 324; Vincellete, Tr. 124-25; Exh. 731.

29. At trial, Kenneth Pourroy testified that HPS did not determine whether the valves had a long lead time prior to submitting its bid because its "normal protocol is to rely on [its] suppliers" to determine the lead time. Pourroy, Tr. 316. R&B states that it did not inform HPS of the long lead time because R&B "did not have a general practice of providing that information until" it receives a "firm lead time" from the manufacturer, which it does not receive until the USACE approves the submittals. Vincellete, Tr. 124-25, 129.

30. An order for the valves was submitted to Henry Pratt Company on or around July 25, 2014, commencing the 10 to 14 week lead time. Notably, the "firm lead time" provided on July 25, 2008 after the USACE approved the submittals is the same 10 to 14 week lead time provided to R&B on March 22, 2008. See Exhs. 731, 738.

31. In addition to the 10 to 14 week lead time, the manufacturing of the valves was further delayed because worm gear for the valves required in the specifications needed to be outsourced. Vincellete, Tr. 131. For these reasons, the valves did not arrive in California until the first shipment arrived on October 28, 2008, and the second shipment arrived on November 3, 2008. Irwin, Tr. 370.

Other Factors Causing Delay

32. There was an initial delay in both procuring the valves and in the start of construction on the Pipeline. The contract documents state that construction on the Pipeline could begin on or after May 1, 2008. Subcontract, Exh. 328 at 31. USACE awarded JMR the Prime Contract on April 30, 2008, and issued the Notice to Proceed on May 16, 2008. Irwin Expert Report, Exh. 623 at 24. HPS received the Subcontract from JMR on June 3, 2008, though it had received letter of intent to contract from JMR on May 9, 2008 that had requested HPS to "forward a complete submittal package" by May 16, 2008. Exh. 675 (Letter of Intent to Contract); Morrill Expert Report, Exh. 291 at 3.

33. HPS did not begin the process of procuring the valves until June 8, 2008, after HPS received the Subcontract on June 3, 2008. Irwin Expert Report, Exh. 623 at 24. On June 13, 2008, JMR received the Subcontract from HPS, which it signed on June 16, 2008. Subcontract, Exh. 328 at 34; Dkt. No. 152, ¶ 17. JMR obtained an encroachment permit from the City on June 9, 2008. Encroachment Permit, Exh. 404. HPS began construction between June 16 and 19, 2008. Morrill, Tr. 472; Irwin Expert Report, Exh. 623 at 24.

34. Once HPS actual began construction, HPS was delayed when it encountered a total of eleven obstructions in the path of the Pipeline. See Sloss, Tr. 11-13; Irwin Expert Report, Exh. 623 at 24-25. HPS claimed that these obstructions caused approximately five days of delay. See Morrill Expert Report, Exh. 291 at 6.

35. HPS was also delayed when it failed forty-seven compaction tests. Figgness, Tr. 578; Morrill Expert Report, Exh. 291 at 6; Irwin, Tr. 355; Irwin Expert Report, Exh. 623 at 25 ("HPS had some issues in early July in not achieving appropriate compaction of the trench backfill."). This also caused approximately five days of delay. See id.

36. There was a two-day delay for a "Safety Stand-Down" called by JMR's superintendant on the Project, John Morrill, "in response to unsafe conditions involving HPS activity in a trench that contained unidentified electrical lines." Morrill Expert Report, Exh. 291 at 6. Morrill excerpts correspondence between JMR and HPS regarding this issue in his expert report:

HPS was notified on numerous occasions of unsafe work habits, and consistently performed excavation for the 16" pipeline without prior potholing. A meeting with HPS' site superintendant occurred during this stand-down time period to discuss safety, and project coordination requirements in an effort to remedy the problems.

Id. Testimony at trial revealed that HPS employees had run over and removed traffic control, not worn hard hats, and unsafely excavated around the Kinder Morgan Pipeline. See Bewley, Tr. 145-46; Peterson, Tr. 238-41; Morrill, Tr. 491; Figgness, Tr. 579.

37. Prior to August of 2008, HPS only had one crew working on the Pipeline. Shields, Tr. 274-75. Starting in late July and August 2008, JMR directed HPS's crew to work overtime on nights and weekends. Sloss, Tr. 26; Pourroy, Tr. 323; Morrill, Tr. 509; Exhs. 593, 864. At this time, HPS increased its crew from about 9 workers to 13. Irwin Expert Report, Exh. 623 at 26.

Directional Drilling

38. The contract documents gave HPS the option to install the Pipeline in the intersections by one of two methods: 1) direct drilling, or 2) open cut. "Directional drilling" means boring a hole. "Open cut" means digging a trench and laying the pipe. Bewley, Tr. 140; Pourroy, Tr. 198, 303-04, 308-09; DenHerder, Tr. 425-26; Rivard, Tr. 453-54; Exhs. 419, 440.

39. In an attempt to finish installation of the mainline of the Pipeline prior to the August 22, 2008 deadline, "HPS along with the concurrence of JMR engaged a subcontractor Wellco to install the pipe through the three intersections using directional drilling." Irwin Expert Report, Exh. 623 at 25-26.

40. There is a factual dispute as to whether JMR required HPS to use the directional drilling method through the intersections, or if HPS decided to directionally drill on its own initiative. Sloss, Tr. 21; Pourroy, Tr. 196-99; Exh. 711. An email shows that JMR gave HPS the option to hire and pay for a directional driller, or have a deductive back charge be issued reducing the amount of their Subcontract amount. Exh. 711. One can infer from this email that JMR did not give HPS any other option but to use the directional drilling method, and pay for it. See id.

41. JMR has presented evidence which shows that HPS may have intended to use the directional drilling method at the time HPS submitted its bid to JMR. Morrill testified that HPS excluded 2, 580 cubic yards from its bid for JMR to cover the cost of that haul off, but that if HPS had planned to use the open cut method in the intersections, HPS would have estimated twice that amount of dirt to be hauled off. Morrill, Tr. 515. Morrill also testified that HPS would have needed a shoring plan to use the open cut method on the intersections, and that HPS had not submitted a shoring plan at any point prior to telling JMR they were going to directionally drill. Id.

42. JMR does not dispute that HPS actually began to use the open cut method on the first intersection they approached, but was prevented by JMR from continuing with the open cut method. See Sloss, Tr. 20. Thus, JMR's evidence does not show that HPS "always intended" to use the direct drilling method. See JMR Br. at 17. Rather, JMR's evidence shows, at best, that HPS changed its mind, as was its option, after HPS submitted its bid to use the open cut method instead of the direct drilling method.

ii. September 2008 - March 2009

43. HPS was not allowed to do any further excavation after the expiration of the encroachment permit on August 22, 2008. From Monday, August 25, 2008 through September 9, 2008, HPS worked on some incidental repairs on the Pipeline. Irwin Rebuttal Report, Exh. 624 at 15.

44. From September 9, 2008 to March 28, 2009, HPS did not do any work for the Project. Id.; Irwin, Tr. 358-59. During this period, HPS asked JMR on several occasions when it would be allowed to return to work. Pourroy, Tr. 321; Exhs. 834, 836, 843. HPS would often receive no response. Pourroy, Tr. 321

45. The reason for the work stoppage between September 2008 and March 2009 is the source of much dispute between the parties. The Court finds that there were three main reasons why work was stopped during this time: 1) the delayed delivery of the valves; 2) the dispute about fees for the City's encroachment permit fees; and 3) the delay in having the submittals for the redesign of the laterals and valves approved. The Court discussed the delayed delivery of the valves in the previous section. The Court now addresses the permit fee dispute and the submittals for the redesign.

The Permit Fee Dispute

46. After the Encroachment Permit expired on August 22, 2008, the City offered to issue an extension to the Encroachment Permit once JMR paid its outstanding balance of permit fees and submitted a new down deposit. Peterson, Tr. 230-32; Exhs. 768, 774.

47. However, JMR did not believe it was required to pay any additional permit fees, as it had already paid the City of San Ramon a $25, 000 deposit at the onset of the Project. Nixdorf, Tr. 111; Exh. 789.

48. The permit fees reflected the City's costs of having employees on-site during construction and to write their reports. Nixdorf, Tr. 111. The City's permit fees were relatively high in this case because of safety issues and the delays. Peterson, Tr. 242-43.

49. Ultimately, the Corps agreed to pay the additional permit fees requested by the City. By the end of the Project, the permit fees totaled approximately $250, 000. Nixdorf, Tr. 118.

50. In the winter of 2008-2009, before JMR learned that the Corps would pay for the additional permit fees, JMR told HPS that it would be responsible for the additional permit fees, which JMR believed were the result of HPS's poor performance. Exhs. 200, 834 at 8436.

51. The Corps issued a change order for the additional permit fees, and on February 17, 2009, JMR issued two checks in favor of the City in the amounts of $51, 358.35 and $20, 000. Morrill, Tr. 531; Exh. 327 at 66-69. This effectively ended the permit fee dispute.

Submittals for Relocating the Valves & Laterals

52. The original design for the Project had the butterfly valves connecting the 8-inch laterals to the mainline in the middle of the intersections. Shields, Tr. 258-59; Exhs. 437-39.

53. In June 2008, the City, HPS and JMR suggested that the Project be redesigned to relocate the valves and laterals away from the intersections. See Figgness, Tr. 582. Because the pipe was installed in the intersections at a deeper depth, relocating the valves and laterals away from the intersections allowed for time and cost savings. Morrill, Tr. 529; Figgness, Tr. 582-83.

54. On September 23, 2008, JMR submitted a Request for Information No. 12 on behalf of HPS to seek the USACE's approval to relocate the valves and laterals outside the intersections. See Exh. 327 at 1.

55. On November 4, 2008, HPS wrote to JMR in an email: "Also, we plan on re-mobilizing later this week so we are ready to start on Monday with the valve installations and final pipeline work. Have the proposed relocation drawings been approved by the USACE? Will we be able to start the remainder of our work Monday?" Exh. 834 at 8436.

56. On January 6, 2009, JMR wrote a letter to HPS asking it to forward the submittals for the relocation of the valves and laterals "at your earliest convenience for submission to the USACE." Exh. 327 at 14.

57. The USACE approved the submittals to relocate the laterals away from the intersection on March 20, 2009. Exh. 327 at 49; Morrill, Tr. 529. Installation of the laterals and valves could not begin until the Corps approved the submittals. Shields, Tr. 272-73; Morrill, Tr. 529.

* * *

58. In finding that the above factors contributed to the delay in this phase of Project, the Court also finds that other factors did not contribute to this delay. First, the absence of a traffic control plan to install the valves and laterals did not cause any significant portion of this delay. See Rivard, Tr. 610. Once the submittals for the valves and laterals were approved by the USACE, JMR could put together a traffic control plan for the City to approve within one or two days. See id.

59. There is also insufficient evidence to indicate that weather or "winterization" was the cause of any delay during this period of time. The City's manger for the Project, Theresa Peterson, testified that she could not recall whether the installation of the Pipeline was stopped on account of weather. Peterson, Tr. 234-35. The contemporaneous evidence shows that the City would have allowed JMR/HPS to continue working if JMR would pay the permit fees. See Exhs. 768, 774. Further, while JMR expert John Elmer constructed an "as-built" schedule that displays a planned winter shut down, Elmer relies on John Morrill for the factual conditions of the Project, and Morrill's expert report does not mention any period in which there would be no progress on the Project due to "winterization." Elmer Expert Report, Exh. 244 at 9; see generally, Morrill Expert Report, Exh. 291.

iii. March 2009 - October 2009

60. Work on the Project resumed on March 29, 2009. Irwin Expert Report, Exh. 623 at 27; Irwin, Tr. 358-59. By this time, HPS still needed to finish installing the last few hundred feet of the 16-inch mainline, connect the 8-inch laterals to the mainline with the valves, test the Pipeline, and also do the required work on the Pump Station. See Sloss, Tr. 45; Morrill, Tr. 489-90.

61. In April 2009, HPS installed the remaining portion of the mainline. Then, HPS installed the valves and laterals. Irwin Expert Report, Exh. 623 at 27.

62. If the valves had been available in the summer of 2008, HPS would have installed the valves and laterals while installing the mainline. Testimony of Mike Jones ("Jones"), Tr. 56-58. However, due to the delayed delivery of the valves, HPS had to re-excavate portions of the Pipeline to install the valves, which created more work and increased HPS's and JMR's costs. Id.

Chanterella Intersection

63. HPS continued work without significant difficulties until early June 2009, when problems arose at the Chanterella intersection. See Irwin Expert Report, Exh. 623 at 27.

64. On or before June 5, 2009, HPS installed PVC offsets for a lateral at the Chanterella intersection, but East Bay Municipal Utilities District ("East Bay MUD") objected to the installation and demanded that steel offsets be used. Jones, Tr. 60-69; Morrill, Tr. 544. East Bay MUD and Dublin - San Ramon Services District, as partners in an entity known as "DERWA, " contributed about 25% of the money for the Project. Bewley, Tr. 134.

65. HPS eventually installed steel offsets at the direction of JMR and the USACE. The steel offsets were not available to be picked up from East Bay MUD until late July 2009. Exh. 476 at Report No. 439. Thus, HPS stopped working on the Chanterella intersection on July 6, 2009, and resumed again on July 20, 2009. Irwin Expert Report, Exh. 623 at 27. HPS then continued installation of the Pipeline.

66. While installing one of the steel offsets, HPS encountered a pipe that supplied a fire hydrant at the elevation for the steel offset depicted on the plans. Jones, Tr. 62-63. While the hydrant pipe was marked the plans, "[t]he elevation [of the hydrant pipe] wasn't on the plans." Id. HPS had to re-install the steel offset at a different elevation. Id. at 63.

67. The delay caused by steel offset requirement was exacerbated by excess water run-off. Jones, Tr. 59. The excavation was deeper than the other excavations, and the Chanteralla intersection is located at the bottom of a hill. Id. On August 20, 2009, JMR described the delay at the Chanteralla intersection as follows:

This has been an ongoing operation delayed for various reasons. The excavation is next to an existing pipe and the area has been open longer than would be ideal. This condition coupled with ground conditions affected by excessive water runoff not noted in soils reports for that area. Thus, HPS was dealing with the situation the best they could under differing conditions.

Exh. 476 at Report No. 461.

Pipeline Testing

68. After completing the installation of the Pipeline, HPS began to test the Pipeline on September 11, 2009. Irwin Expert Report, Exh. 623 at 28.

69. Generally, a pipeline is tested at different sections as installation is completed. However, due to the late delivery of the valves, the Pipeline was not tested until it was fully installed. See Irwin Expert Report, Exh. 623 at 27; Exh. 949; Jones, Tr. 64.

70. HPS discovered the first leak when it started testing the Pipeline in September 2009. Jones, Tr. 64. HPS did not finish testing the Pipeline until May 26, 2010. Morrill, Tr. 472; Exh. 271 at 34.

71. HPS was not, however, testing the pipeline from September 2009 to May 2010. On or around October 20, 2009, HPS was directed to stop work when JMR was temporarily terminated from the Project in October 2009, and HPS could not resume work until the City issued another extension to the permit in March 2010. Irwin Expert Report, Exh. 623 at 28.

iv. October 2009 - March 2010

72. The leaks in the Pipeline delayed HPS's progress past the extension to the encroachment permit. On September 23, 2009, the City issued a one-week extension on the encroachment permit to September 30, 2009, and informed JMR that this new deadline was "essential." Exh. 271 at 1.

73. On Friday, October 2, 2009, JMR issued a "Notice to Comply" for HPS to repair a failed pipe at the Chanterella intersection. Exh. 271 at 7. In a letter sent to HPS that day, JMR wrote, "If you fail to continue work this weekend at the Chanterella intersection pipe repair we will be forced to bring in others to perform this work and make appropriate back charges to your contract to cover the cost of this work." Id. at 6.

74. HPS's crew worked on the repairs on Saturday, October 3, 2009, but not on Sunday, October 4, 4009. Exh. 271 at 9-10.

75. On October 4, 2009, the USACE wrote the following in a letter to JMR:

We have received no reply to our serial letter C-0030 to you and you have failed to perform work on Sunday, October 4, 4009, as you had committed to in order to complete this work per our agreement. Based on these facts, the Government is considering terminating said contract pursuant to the Clause titled Default' of the contract clauses.

Exh. 271 at 9.

76. JMR was verbally terminated by the USACE on Friday, October 16, 2009, after the City refused to issue another extension to the encroachment permit. Exh. 949; Exh. 271 at 14. JMR and HPS were directed to vacate the City of San Ramon. Exh. 476 and Report No. at 519.

77. In an effort to avoid termination, JMR wrote a letter to the USACE on October 19, 2009, in which JMR listed several "unforeseeable" reasons why the pipeline was not completed by August 22, 2008, and therefore, why JMR should not be terminated: (1) the pipeline portion of the work was to begin on May 1, 2008, but JMR was not issued a Notice to Proceed by the Corps until May 15, 2008; (2) the butterfly valves were a specialty item and were not on site until January 2009; (3) pipeline testing took longer because valve installation and testing was done out of sequence; (4) the City did not want work to restart until weather permitting in late March 2009; and (5) East Bay MUD's request for steel offsets caused a 60-day delay in June and July 2009. ...

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