2000 - Audit Report

U.S. Department of Labor
Office of Inspector General
Office of Audit

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OIG QUESTIONS $1.3 MILLION OF ADDITIONAL COSTS CLAIMED BY CONTRACTOR

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ETA awarded Will H. Hall & Son, Inc. (WHH) a $17,230,000 firm fixed-price contract for the construction of seven buildings at the new Job Corps Center in Flint, Michigan. WHH encountered problems on the site (which it claimed were beyond its control). WHH submitted a Request for Equitable Adjustment (REA) to DOL in which it claimed additional costs totaling $2,365,622. The REA stated that WHH was never able to achieve a smooth flow of construction primarily because of:

errors and omissions in contract drawings;

differing site conditions;

failure of DOL’s architect/engineer (A/E) to respond to submittals, shop drawings, and requests for information; and

failure of DOL's A/E to address errors and omissions in plans in a timely and adequate manner.

At ETA’s request, we looked at whether the additional costs claimed by WHH were reasonable, allowable, and allocable under the Federal contract cost principles and the terms and conditions of the contract between DOL and WHH. We questioned $1,365,278 and set aside for further consideration by ETA an additional $981,462. Of the $2.3 million claimed by the contractor, we accepted only $18,882 as allowable costs. The primary reasons for the questioning of the costs were that:

WHH failed to substantiate its claim that various events under the DOL contract constituted compensable construction delays caused by the owner (DOL); and

certain amounts claimed were either "double counted" as both direct and indirect costs, already covered under the original firm fixed-price contract, or based on estimates instead of actual costs incurred.

(Report No. 18-00-003-03-370, issued January 31, 2000)

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