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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. North Pacific Erectors, Inc. v. State, Dept. of Administration (9/6/2013) sp-6818

North Pacific Erectors, Inc. v. State, Dept. of Administration (9/6/2013) sp-6818

         Notice:  This opinion is subject to correction before publication in the PACIFIC  REPORTER .  

         Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts,  

         303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email  

                                                                                     

         corrections@appellate.courts.state.ak.us.  



                   THE SUPREME COURT OF THE STATE OF ALASKA  



NORTH PACIFIC ERECTORS, INC.,  )  

                                                      )        Supreme Court No. S-14606  

                           Appellant,                 )  

                                                      )        Superior Court No. 3AN-09-09085 CI  

         v.                                           )  

                                                      )        O P I N I O N  

STATE OF ALASKA,                                      )  

DEPARTMENT OF                                         )        No. 6818 - September 6, 2013  

ADMINISTRATION,                                       )  

                                                      )  

                           Appellee.                  )  

                                                      )  



                  Appeal from the Superior Court of the State of Alaska, Third  

                                                               

                  Judicial District, Anchorage, William F. Morse, Judge.  



                  Appearances:  Paul J. Nangle, Paul J. Nangle & Associates,  

                                                             

                  Anchorage, and Terry R. Marston II, Marston Legal, PLLC,  

                  Kirkland, Washington, for Appellant. David T. Jones, Senior  

                                                                                   

                  Assistant  Attorney  General,  Anchorage,  and  Michael  C.  

                  Geraghty, Attorney General, Juneau, for Appellee.  



                  Before:  Fabe, Chief Justice, Winfree, Stowers, Maassen, and  

                                               

                  Bolger, Justices.  



                  FABE, Chief Justice.  



I.       INTRODUCTION  



                  This appeal arises from a contract dispute between North Pacific Erectors,  

                                                   



Inc. and the Alaska Department of Administration.  North Pacific and the Department  



contracted for a renovation and asbestos removal project in the Juneau State Office  


----------------------- Page 2-----------------------

Building.  After work began, North Pacific requested additional payment for the asbestos  

                                                                                                                



removal,  claiming  there  was  a  differing  site  condition  that  made  the  project  more  



labor-intensive than it had expected. The Department denied the differing site condition            



                                                                                       

claim, and North Pacific filed an administrative appeal. A hearing officer recommended  



that North Pacific was entitled to additional compensation.  But the hearing officer's  



                                                                    

recommendation was rejected, and a final agency decision was issued denying North  



Pacific's  claim  for  additional  compensation.    North  Pacific  challenged  the  agency  



decision in superior court, arguing that the agency decision was procedurally flawed and  



                                                                                           

incorrectly resolved the contract issues.  The superior court affirmed the agency decision.  



                                                                                                                            

                     North Pacific appeals the superior court's judgment, arguing that it has a  



valid differing site condition claim, that the Department breached its duty to disclose  



                                                                                                                                 

information about the project, and that the agency decision was procedurally flawed.  We  



                                  

conclude that even if North Pacific could prevail on its differing site condition claim or  



its procedural claims, North Pacific's failure to comply with the express provisions of  



                                                                                     

the contract requiring the contractor to keep records of all damages would bar recovery.  



We therefore affirm the superior court's decision affirming the agency decision.  



II.       FACTS AND PROCEEDINGS  



          A.         Facts  



                     1.        Bidding process  



                          

                     In  2006  the  Alaska  Department  of  Administration  solicited  a  bid  for  



                                                                        

asbestos abatement and the renovation of one floor in the Juneau State Office Building.  



                                                      

The Department's bid solicitation notified potential bidders that they were responsible  



                                                           

for investigating the project site.  The bid solicitation provided that by submitting a bid,  



the contractor represented that it had "visited and carefully examined the site and is  



                                                                                                                          

satisfied as to the conditions to be encountered in performing the Work."  At a prebid  



                                        

meeting, the Department provided an opportunity for contractors to visit the project site.  



                                                                 -2-                                                          6818
  


----------------------- Page 3-----------------------

One  bidder  visited   the  project   site.     It   is  uncontested   that   North   Pacific  and  its  



subcontractor did not visit the job site or participate in the prebid meeting before bidding       



                                                                                                                            1 

on the contract.  Contractors would not have been able to see the pan deck surface                                            at a  



site visit, however, because fireproofing was still covering the pan deck at the site.  But  



                                                                                         

some other areas of the pan deck were uncovered in the State Office Building.  The  



                                                                                                                   

Department  reported  to  the  hearing  officer  that  it  was  normal  practice  to  show  a  



                                                                                              

contractor any part of a job site or site condition upon request and that if there had been  



such a request it would have set up an inspection of the exposed pan deck surface.  



                                                                                                                

                    North Pacific was the successful bidder for the renovation and asbestos  



abatement project.  The contract between North Pacific and the Department included the  



same  site  investigation  provision  as  the  bid  solicitation,  which  provided  that  the  



                                                                                                  

contractor  had  "visited  and  carefully  examined  the  site  and  is  satisfied  as  to  the  



conditions to be encountered in performing the Work."  The contract also contained  



detailed provisions establishing procedures for measuring and documenting damages and  



maintaining cost records of claims for additional compensation.  



                    North Pacific hired a subcontractor for the asbestos abatement.  Once work  



began, North Pacific asserted that its asbestos abatement subcontractor was entitled to  



                                                                                                   

additional compensation beyond the contract price for the project.  North Pacific claimed  



that the asbestos removal was significantly more difficult and time-consuming than it  



could have foreseen because the pan deck surface was dimpled rather than smooth.  



                    2.        Dispute  



                                                                                   

                    After the subcontractor began work  on  the  project, its project manager  



                                                                                                               

made a note in his daily report about the dimpled pan deck surface and described the  



          1         North  Pacific  describes  the  metal  pan  deck  as  "the  material  on  which  



concrete is poured to create the floors of each successive story of a building."  



                                                               -3-                                                             6818  


----------------------- Page 4-----------------------

cleaning process for the "indentations" and "prot[ru]sions" in the pan deck that "cost[]  

                                                                                                      



us considerable time."  The workers had to use toothbrushes to clean the bumpy surface,  

                                                                    



but the contractor's daily report did not contain any time estimate for the additional  



cleaning efforts.  The hearing officer found that "[t]his [initial] entry [was] the only entry  



. . . made in the daily reports relating to the embossed pan deck."   By  contrast, the  

                                                                                                            



subcontractor  repeatedly  referred  to  other  problems  in  the  daily  reports,  including  

                                                                                                   



problems with air pressure and containment, foam that failed to expand, and issues with  

                                                                                            



metal flashing.  



                                               

                   The subcontractor notified North Pacific about the pan deck problem, and  



North Pacific then transmitted the information to the Department, requesting additional  



                                                

compensation.  The Department denied the initial request for additional compensation.  



                   North Pacific next filed a claim pursuant to the contract's differing site  



conditions clause.  The clause provided:  



                   The   CONTRACTOR   shall   promptly,   and   before   such  

                   conditions   are   disturbed   (except   in   an   emergency   as  

                   permitted by paragraph 6.19), notify the Contracting Officer  

                                                                           

                   in writing of:  (1) subsurface or latent physical conditions at  

                   the  site  differing  materially  from  those  indicated  in  the  

                                                                                                    

                   Contract, and which could not have been discovered  by a  

                   careful  examination  of  the  site,  or  (2)  unknown  physical  

                   conditions   at   the   site,   of   an   unusual   nature,   differing  

                   materially from those ordinarily encountered and generally  

                   recognized as inherent in work of the character provided for  

                   in  this  Contract.    The  Contracting  Officer  shall  promptly  

                   investigate  the  conditions,  and  if  the  Contracting  Officer  

                   finds that such conditions do materially so differ and cause an  

                   increase or decrease in the CONTRACTOR's cost of, or time  

                                                                                      

                   required  for,  performance  of  this  Contract,  an  equitable  

                                                                        

                   adjustment  shall  be  made  and  the  Contract  modified  in  

                                                                          

                   writing accordingly.  



                                                             -4-                                                      6818
  


----------------------- Page 5-----------------------

                  .  .  .  In  the  event  that  the  Contracting  Officer  and  the  

                  CONTRACTOR                are     unable      to   reach      an    agreement  

                  concerning         an    alleged      differing      site    condition,       the  

                  CONTRACTOR  will be required to keep an accurate and  

                  detailed  record  which  will  indicate  the  actual  "cost  of  the  

                                                   

                  work"  done  under  the  alleged  differing  site  condition.  

                  Failure to keep such a record shall be a bar to any recovery  

                              

                  by  reason  of  such  alleged  differing  site  conditions.    The  

                  Contracting   Officer   shall   be   given   the   opportunity   to  

                  supervise and check the keeping of such records.  



The  contract  expressly  required  that  the  contractor  keep  an  "accurate  and  detailed  



record" of the actual cost of work performed under the alleged differing site condition:  

                                                                       



                  If the CONTRACTOR believes additional compensation or  

                  time is warranted, then he must immediately begin keeping  

                  complete, accurate, and specific daily records concerning  

                  every  detail  of  the  potential  claim  including  actual  costs  

                                                                                    

                  incurred.        The      CONTRACTOR                 shall     provide        the  

                  DEPARTMENT access to any such records and furnish the  

                  DEPARTMENT copies, if requested.  Equipment costs must  

                                                                        

                  be   based   on   the   CONTRACTOR's   internal   rates   for  

                  ownership, depreciation, and operating expenses and not on  

                  published  rental  rates.    In  computing  damages,  or  costs  

                  claimed for a change order, or for any other claim against the  

                  Department for additional time, compensation or both, the  

                  contractor must prove actual damages based on internal costs  

                                                                       

                  for  equipment,  labor  or  efficiencies.    Total  cost,  modified  

                        

                  total  cost  or  jury  verdict  forms  of  presentation  of  damage  

                  claims are not permissible to show damages.  



(Emphasis  added.)  After  considering  numerous  exhibits,  including  the  contract,  bid  



documents, and a construction report, the Department's procurement officer found that  



North  Pacific  was  not  entitled  to  additional  compensation  under  the  differing  site  

                                                                 



conditions clause.  



                                                         -5-                                                   6818
  


----------------------- Page 6-----------------------

         B.       Proceedings  



                  North Pacific brought an administrative appeal of the procurement officer's  



decision.    While  this  matter  involves  a  contract  between  North  Pacific  and  the  



                                                                                         

Department  of  Administration,  AS  36.30.625(a)  dictates  that  the  Department  of  

Transportation   and   Public   Facilities   hears   construction   contract   appeals.2                      The  



Department  of  Transportation  and  Public  Facilities  Chief  Contracts  Officer  Mark  



O'Brien designated a hearing officer to hold a hearing and prepare a recommended  



                                                             

decision.  Alaska Statute 36.30.675 provides that the "hearing officer shall recommend  

                                                                                                   3  Under the  

a decision to the . . . commissioner of transportation and public facilities."    



statute, the commissioner has the broad authority to "affirm, modify, or reject the hearing  

                                             



officer's recommendation in whole or in part," or "remand the matter to the hearing  

officer."4  



                  This case primarily involves five underlying decisions:  (1) the hearing  



officer's initial recommended decision; (2) the Department of Transportation and Public  



Facilities's decision to remand the case to the hearing officer; (3) the hearing officer's  



recommended decision on remand; (4) the Department of Transportation and Public  



Facilities deputy commissioner's final decision; and (5) the superior court's decision.  



                                                                                    

                  1.       Initial hearing officer recommendation  



                  The  hearing  officer  concluded  that  there  was  a  differing  site  condition  



entitling North Pacific to additional compensation.  Even though the subcontractor "did  



                                                                                          

not segregate its labor costs," and its "expert utilized a method of requesting damages  



         2        See AS 36.30.625(a); AS 36.30.990(6) ("construction" includes projects  



"altering" and "repairing" a public building).  



         3        AS 36.30.675(a).  



         4        AS 36.30.675(b).  



                                                        -6-                                                  6818
  


----------------------- Page 7-----------------------

which is prohibited by the contract," the hearing officer "decline[d] to enforce strictly  



the construction contract limitations" because he found that the Department "should have  



                                                                                                

disclosed this condition [of the pan deck surface] to all bidders." The hearing officer also  



                                                               

explained that the "contract contemplates when differing site conditions are discovered,  



                                                           

the Contracting Officer and the parties will seek to make a resolution at that time during  



the contract performance," concluding that both parties failed to follow "the requirements  



of  the  contract  to  resolve  the  dispute  over  the  differing  site  conditions  during  



                         

performance of the contract."  The hearing officer recommended that North Pacific was  



                                                                                           

entitled to an award of $158,821 for "cost overruns attributed to the embossed pan deck."  



                         

                    2.        Agency remand of the hearing officer recommendation  



                                                    

                    The  Department  of  Transportation  and  Public  Facilities  remanded  the  



hearing officer's recommended decision, explaining that "the recommended decision  



                                                                                                                          5  

                                                                                                                            On  

fails to address a number of fundamental issues bearing on liability and damages." 



                                               

remand, the agency instructed the hearing officer "to reconsider this matter in light of  



                                                                                                          

relevant legal principles and to issue a revised decision conforming to applicable law."  



In particular, the agency directed the hearing officer to address the site inspection clause,  



                                                      

which provided that the contractor had "visited and carefully examined the site and is  



satisfied  as  to  the  conditions  to  be  encountered  in  performing  the  Work,"  and  the  



"seemingly unambiguous proof requirements" in the contract.  



                    3.        Hearing officer recommendation on remand  



                    On remand, the hearing officer again decided that North Pacific was entitled  



                                           

to additional payment.  The hearing officer recommended three conclusions of law:  (1)  



that the Department of Administration was obligated to disclose the condition of the  



          5  

                                                                                 

                    See     id.   (authorizing   the   agency               to   remand   the   hearing   officer's  

recommended decision).  



                                                              -7-                                                            6818  


----------------------- Page 8-----------------------

                        

embossed  pan  deck  and  failed  to  do  so;  (2)  that  the  pan  deck  was  a  differing  site  



condition; and (3) that the Department's failure to comply with the contract precluded  



                                                                                         

it from relying on the strict damages provisions.  On these grounds, the hearing officer  



                                                                    

recommended  an  award  of  $156,539   in   damages,  slightly  less  than  his  initial  



recommendation of $158,821.  



                                                                                       

                    First, the hearing officer concluded that the Department was obligated to  



                                                                                                           

disclose the condition of the pan deck surface because the Department had information  



        

that  "an  ordinary  bidder  would  not  reasonably  acquire  .  .  .  without  resort  to  [the  



                                                                                                              

Department]" and the Department was aware that the contractor had no knowledge or  



                                                                            

reason to obtain the information.  Reasoning that North Pacific had bid and performed  



                       

the abatement work without "vital information," the hearing officer concluded that the  



                       

Department's failure to disclose the pan deck condition "was a breach of its contractual  



obligations"  and  justified  recovery.    The  officer  explained  that  the  Department's  



                                                                                                         

knowledge "(a) came from prior projects and an intimate and unique understanding of  



the  actual  conditions  in  the  facility  and  (b)  was  well-based  in  fact  and  first-hand  



involvement."  



                    Second, the hearing officer determined that the pan deck was a differing site  



                                                                       

condition because the contractor was unaware of the condition, the contractor could not  



                                                                                   

have anticipated the condition from a site inspection or from general experience, and the  



pan deck surface varied from the norm.  



                                                                                          

                    Third,  based on the Department's failure to disclose the condition, the  



hearing officer "decline[d] to enforce strictly the construction contract limitations in  



                                                                                               

Section 15.1.4" that required "complete, accurate, and specific daily records" regarding  



"every detail of the potential claim including actual costs incurred."  



                                                               -8-                                                         6818
  


----------------------- Page 9-----------------------

                   4.        The deputy commissioner's final agency decision  



                   At North Pacific's request, the Department of Transportation and Public  



Facilities  commissioner  recused  himself  and  delegated  his  final  decision-making  



                                                       6  

authority to the deputy commissioner.   North Pacific does not challenge this delegation  



                                                                                               

of authority.  In June 2009 the deputy commissioner issued the final agency decision.  



                

"Because the hearing officer's proposed conclusions [were] at variance with the law,"  



the deputy commissioner declined to accept the hearing officer's conclusions.  Rather,  



the deputy commissioner concluded that under the applicable law North Pacific had  

failed to carry the burden for additional compensation.7  



                                                                                                    

                             a.        North Pacific's differing site condition claim  



                   To analyze the  differing site condition claim, the deputy commissioner  



applied a three-part test from a construction law treatise:  (1) the contractor "did not  



                    

know about the relevant condition encountered; (2) it could not have anticipated the  



condition  from  site  inspection,  reasonable  investigation,  or  general  experience;  and  



          6        2     Alaska       Administrative           Code       (AAC)         12.740(a)        (2012)       gives  



commissioners  the  authority  to,  in  their  discretion,  "delegate  their  authority  under  

AS 36.30 to an employee in a department or agency."  This "delegation of authority must  

                       

be in writing."  Id.  



          7        An assistant attorney general, with assistance from Chief Contracts Officer  

                                                                                      

O'Brien, prepared the draft agency decision.   Because there was no transcript of the  

                                                                                                                      

hearing prepared at the time, the assistant attorney general primarily relied on the hearing  

                                          

officer's findings of fact, the exhibits introduced at the hearing, and an email message  

from  the  hearing  officer  sent  in  response  to  an  inquiry  from  O'Brien.    The  deputy  

                                                  

commissioner later testified that, after reviewing the draft decision and discussing it with  

                                                                       

his staff, he signed the agency decision.  The deputy commissioner did not personally  

      

read the hearing officer's recommended decision or the hearing record.  



                                                             -9-                                                       6818
  


----------------------- Page 10-----------------------

                                                                                                             8  

(3)  the  condition  varied  from  the  norm  in  similar  contracting  work."     The  deputy  

       



commissioner stated that North Pacific "demonstrated it lacked actual knowledge of the  

                                                                                                          



embossing" on the pan deck and therefore met the first prong of the test for a differing  

                                                                                     



site condition claim.  



                                                                                                                           

                    But under the second prong of the test, North Pacific had to show that it  



                                                               9  

could not have anticipated the condition.   "This is a heavy burden" according to the  



                                                                                    

deputy commissioner. The deputy commissioner noted that "[a]s a rule, contractors must  



                                                                                                  

'conduct pre-bid inquiries or reasonable site inspections since recovery on . . . [this]  



                                                                                              

claim is available only if a condition is unknown.  A condition is not unknown if it would  



                                                                                                         10  

                                                                                                             But "[h]ere, in  

have been revealed upon inquiry or a reasonable site investigation.' " 



spite of [the State]'s admonitions, [North Pacific] did not conduct a site investigation."  

                                                                



Therefore,  the  deputy  commissioner  explained,  North  Pacific  "is  charged  with  the  



knowledge a reasonable investigation would have revealed."  The deputy commissioner  



                                                                                                                  

explained that a reasonable investigation should have at least entailed a request  for  



                                                                                                            

photos or other information on the pan deck.  The deputy commissioner also pointed out  



                                                                             

that North Pacific could have obtained information from the five previous subcontractors  



that had performed asbestos removal for the Department.  The agency concluded that  



          8         See, e.g., 4A PHILIP L.  BRUNER &  PATRICK J.  O'CONNOR ,  JR .,  BRUNER &  



O'C                                             

       ONNOR ON CONSTRUCTION LAW  14.53, at 800-01 (2009); see also Fru-Con Constr.  

Corp. v. United States, 44 Fed. Cl. 298, 311 (Fed. Cl. 1999) (quoting Lathan Co. v.  

United States, 20 Cl. Ct. 122, 128 (Cl. Ct. 1990)); Municipality of Anchorage v. Frank  

                            

Coluccio Constr. Co., 826 P.2d 316, 323 (Alaska 1992); 64 AM .  JUR .  2D Public Works  

and Contracts  166 (2011).  



          9         See Frank Coluccio Constr. Co.                  , 826 P.2d at 323;        see also Fru-Con Constr.  



Corp., 44 Fed. Cl. at 311.  



          10        The deputy commissioner quoted Appeal of Shumate Constructors, Inc. ,  



VABCA No. 2772, 90-3 BCA  22,946.  



                                                              -10-                                                         6818
  


----------------------- Page 11-----------------------

                                                                                           

"reasonable investigation would have revealed the exposed pan deck and its embossing."  



Thus,  North  Pacific's  own  failure  to  reasonably  anticipate  the  condition  caused  the  



"unplanned expense and delay."  



                   The  deputy  commissioner  relied  on  several  facts  to  conclude  that  a  



                                               

reasonable investigation would have revealed the uncovered pan deck.  Many of these  



                                                                    

facts are based on the hearing officer's factual findings.  But the deputy commissioner  



                                                                                              

made an error of fact in his decision.  The deputy commissioner mistakenly found that  



                                                                                     

"at the alternative site [the Department] had offered to show comparable ceiling pan deck  



[that] was exposed and its surface was clearly visible to any prospective bidder who  

                              11  But the Department did not actually offer to show a portion of  

chose to observe it."                    



exposed pan deck. Rather, as the hearing officer found, "there was no exposed pan deck  

                             



in the area [the Department] showed to the contractor, but had the contractor requested  

                 



to see it, there were other areas at the [State Office Building] site in which the pan deck  

                                                                          



is exposed and the embossed pan deck is clearly visible."  



                                                                        

                   The Department acknowledges that the deputy commissioner's "decision  



referred to [the] incorrect information" from an email exchange between O'Brien and the  



hearing officer.  O'Brien inquired of the hearing officer:   



          11       The  deputy  commissioner  made  the  same  mistake  in  a  footnote  in  his  



decision:   



                   We note [the Department] had offered to provide access to  

                   the exposed deck after normal business hours.  As owner of  

                         

                   a functioning office building undergoing asbestos abatement,  

                   [the Department] is entitled to adopt reasonable measures to  

                                                                

                   minimize  operational  disruptions  within  the  building  and  

                   possible  risks  to  employee  well-being.    On  the  evidence  

                   presented,        we     do    not    find     [the    Department]'s           offer  

                   unreasonable.  



                                                           -11-                                                      6818
  


----------------------- Page 12-----------------------

                             During  the  prebid  conference  were  other  bidders  

                    offered the opportunity to observe the embossed pan deck at  

                    an  alternate  location?             I  see  reference  to  an  "alternate  

                                                                                        

                    location" but I couldn't tell if that was offered at the prebid,  

                                                                              

                    or whether it was assumed that a contractor could have asked  

                    on their own to view it at an alternate location.  



The hearing officer responded that  



                    [f]rom the evidence all bidders were offered a site inspection.  

                                                                          

                    The site inspection would not have revealed the embossed  

                                                            

                    pan  deck  because  it  was  covered  with  fire  proofing.    All  

                    bidders were offered the chance to inspect pan deck that was  

                                                                                   

                    not  covered,  which  was  at  another  location  in  the  S[tate]  

                    O[ffice]  B[uilding],  so  not  technically  the  site,  and  the  

                    inspection had to be at a different time of the day and after  

                                                                                               

                    normal office hours.  



Thus it is undisputed that, based on this exchange, the deputy commissioner incorrectly  

                                                           



stated that the Department had affirmatively offered participants at the prebid meeting  



an opportunity to view an uncovered pan deck.  



                    The deputy commissioner also cited  an uncontested fact in the hearing  

                                                                            



officer's decision that stated "[o]nly one contractor, during the pre-bid conference, asked  



to see the area from which asbestos would be removed" and "[a] ceiling tile was removed  

                                                                                                        



so  the  contractor  could  see  the  area."    Aside  from  the  factual  error,  the  deputy  

                                                                                                     



commissioner  relied  on  North  Pacific's  failure  to  conduct  a  site  investigation  or  to  

                                                



request any photos or other related information on the site to reject the claim.  In short,  

                                                                                                         



the deputy commissioner concluded that North Pacific had not met the second prong of  

                                                                                                         



the differing site conditions test because a "reasonable investigation would have revealed  



the exposed pan deck and its embossing."  



                                                             -12-                                                       6818
  


----------------------- Page 13-----------------------

                                                                                 

                   The third prong of a differing site condition is whether the condition varied  



                                                        12  

                                                            The deputy commissioner acknowledged that  

from the norm in similar contract work. 



North Pacific "offered evidence supporting the basic proposition that embossed decks  



are  generally  uncommon  outside  Juneau"  but  noted  that  North  Pacific  "offered  no  



                                          

evidence demonstrating that embossed pan decks installed in 1970[]s era buildings are  



                                                                                 

outside the norm."  The deputy commissioner concluded that North Pacific had failed to  



                                                                                  

demonstrate that the pan deck surface was outside  the  norm, and that North Pacific  



therefore did not have a valid differing site condition claim.  



                             b.       North Pacific's superior knowledge claim  



                   The deputy commissioner next addressed North Pacific's contention that  



the  Department  had  a  duty  to  disclose  relevant  information  regarding  the  pan  deck  



surface.  Because North Pacific could have acquired the relevant information on the pan  



                                                                                                  

deck through an independent investigation, the deputy commissioner decided that North  



Pacific had failed to show that the Department had breached a duty to disclose.  The  



deputy  commissioner  reasoned  that  because  the  Department's  staff  experience  was  



                                             

limited to Juneau and based on previous asbestos abatement projects involving dimpled  



pan decks, they had no reason to believe the pan deck surface was unique.  



                   The deputy commissioner considered and rejected the hearing officer's  



                                                                                   

recommendation for damages.  The deputy commissioner stated that he did not find the  



Department's investigation of the claim to be unreasonable.  In addition, the deputy  



                                                                                  

commissioner pointed to the fact that North Pacific had failed to maintain an accurate  



daily record of alleged damages as required by the contract.  



          12  

                                                                

                   See Fru-Con Constr. Corp., 44 Fed. Cl. at 311; Earthmovers of Fairbanks,  

                                                 

Inc. v. State, Dep't of Transp. & Pub. Facilities , 765 P.2d 1360, 1364 (Alaska 1988)  

(recognizing  that  federal  case  law  may  be  useful  in  analyzing  disputes  between  the  

government and contractors).  



                                                           -13-                                                        6818  


----------------------- Page 14-----------------------

                   North Pacific appealed the agency decision to the superior court, arguing  



                                                                          

that the decision was procedurally flawed and that the agency had incorrectly resolved  



the contract claims.  



                   5.	       The superior court decision  



                   The superior court conducted a limited trial de novo on North Pacific's  



procedural  objections  to  the  administrative  process.    As  to  the  contract  claims,  the  



                                                

superior court intended "to play its traditional role as an intermediate appellate court."  



                                                                                 

While the superior court was "troubled" by some of the procedural issues, it ultimately  



                           

held that the final agency decision "was not legally flawed" and the State's "resolution  



of the legal questions raised by [North Pacific] was reasonable."  



                             a.	      The  superior  court's  limited  trial  de  novo  on  North  

                                      Pacific's procedural claims  



                                                                           

                   The superior court held a limited trial de novo to consider North Pacific's  



                                                                              

procedural arguments regarding (1) the timing of the deputy commissioner's decision,  



                                                                                                     

(2) the decision-making role of the deputy commissioner, (3) the role of Department of  



                                                                                        

Transportation and Public Facilities staff in the decision, (4) the alleged deprivation of  



a hearing, and (5) the alleged ex parte contact.  After trial, the superior court made  



thorough findings of fact on the agency appeals process, the agency's factual error,  



                                            

communications between the deputy commissioner and the staff, and the lack of bias in  



the  agency  decision-making  process.    Finally,  the  superior  court  concluded  that  the  



agency decision was not procedurally flawed.  



                                      i.	       Timing of the deputy commissioner's decision  



                   North Pacific pointed out that the deputy commissioner's decision was  



                              

issued 48 days after the hearing officer's recommended decision.  North Pacific argued  



                                              

that the passage of 48 days after the issuance of the first recommended decision triggered  



AS 44.64.060(e), which governs the timing of agency action on decisions issued by  



                                                           -14-	                                                     6818
  


----------------------- Page 15-----------------------

                                                                                                          13  

administrative  law  judges  within  the  Office  of  Administrative  Hearings.                                 Alaska  



Statute 44.64.060(e) requires the final decision maker to take action within 45 days of  



                                                                     14  

the administrative law judge's proposed decision.                        If the final decision maker does not  



                                                                   

act within 45 days, then the administrative law judge's proposed decision becomes the  

final decision.15  



                   The  superior  court  first  concluded  that  AS  44.64.060(e)  applies  to  



administrative   law   judges   and   not   hearing   officers   under   the   Department   of  



                                                   16  

                                                       The superior court then determined that even if  

Transportation and Public Facilities. 



                                                                

the statute was applicable, the time frame was directory and not mandatory.  The superior  



                                                                                          

court further reasoned that "[i]t makes little sense to penalize a party" by requiring it to  



                                                                                                    

be bound by the recommended decision, simply because the agency  responsible for  



                                                                                                 

timely action was tardy and that North Pacific "was not prejudiced in any way by the  



delay of three additional days."  



         13        AS 44.64.060(e) (procedure for hearings in the Office of Administrative  



Hearings).  



         14        AS 44.64.060(e)(1)-(5).  



         15        AS 44.64.060(f).  



         16        See AS 36.30.627(a) (  establishing procedures for appeals "from a decision  



of the procurement officer of a claim involving a construction contract");  AS 36.30.680  

(stating   that   "a   decision   by   the  commissioner   of   transportation   and  public  facilities  

involving procurement  of  construction shall be sent to all parties by personal service or  

certified   mail within 45 days after receipt by the commissioner of transportation and  

public facilities of the hearing officer's decision").  



                                                          -15-                                                    6818
  


----------------------- Page 16-----------------------

                                     ii.	     Role of the deputy commissioner  



                  North Pacific argued that there was institutional bias in the decision-making  



                                                                                                         

process and that the communications between agency staff and the hearing officer were  



inappropriate.  North Pacific further claimed that the deputy commissioner, as the final  



                                                                 

decision maker, improperly relied on his staff in rendering the final decision.  Rejecting  



                              

these arguments, the superior court concluded "that all the commissioner needs to do to  



comply with AS 36.30.675 and .680 is to issue the final decision."  



                                     iii.	    Role      of   institutional        subordinates         within       the  

                                              Department of Transportation and Public Facilities  



                  North  Pacific  argued  that  Chief  Contracting  Officer  O'Brien  and  the  



agency's  assigned  assistant  attorney  general  could  not  play  any  role  in  the  process  



                                                                                                             

leading  to  the  final  decision.             The  superior  court  determined,  however,  that  the  



involvement  of  institutional  subordinates  did  not  taint  the  agency's  neutrality  or  



                                                                       17  

                                                                           The superior court further found  

"overstep any statutory assignments of authority." 



                 

that North  Pacific had "not proved by a preponderance of evidence that [the deputy  



                                                                                      

commissioner], [Chief Contracting Officer] O'Brien and [the assistant attorney general]  



were individually or collectively personally biased against [North Pacific]."  



                                     iv.	     Alleged deprivation of a hearing  



                  North Pacific argued that it was deprived of a hearing because the final  



decision  maker  had  minimal  exposure  to  the  raw  information  from  the  hearing.  



                                                                                                       

Specifically, North Pacific objected to the deputy commissioner's failure to review the  



         17        See    AS    36.30.675(b)  ("The  commissioner  of  administration  or  the  



commissioner of transportation and public facilities may affirm, modify, or reject the  

hearing officer's recommendation in whole or in part, may remand the matter to the  

hearing officer with instructions, or take other appropriate action."); AS 36.30.685(a)-(b)  

(allowing the final decision of the commissioner of transportation and public facilities  

                                                                      

to be appealed to the superior court).  



                                                         -16-	                                                   6818
  


----------------------- Page 17-----------------------

record  before  rejecting  the  hearing  officer's  decision.    Although  the  superior  court  



                                                         

acknowledged that this argument had "more than a little surface appeal," it nonetheless  



                                                                                                

rejected North Pacific's argument for two reasons:  (1) "the oral testimony was not the  



                                                           

entire record," and the agency decisions were based on the hearing officer's decision and  



the available exhibits; and (2) the "problem is that to enforce an adequate role by the  



final  decision  maker  would  almost  always  require  exploration  into  the  deliberative  



                                                                                

process."  As a result, the superior court concluded that North Pacific had "been provided  



a hearing process that complie[d] with due process."  



                                                                                         

                                       v.        Alleged ex parte contact  



                    North Pacific claimed the final agency decision was based on ex parte  



                                                                                           

communications between O'Brien and the hearing officer and thus violated due process.  



Again, the superior court rejected North Pacific's argument.  While the superior court  



                                                                                                   

found that O'Brien requested clarification from the hearing officer and that the hearing  

officer responded,18 the court concluded that there was no traditional ex parte contact  



because the communication did not involve a party to the case.  The superior court  



further  concluded  that  the  erroneous  factual  finding  that  was  likely  caused  by  the  



exchange did not substantially impact the agency decision.  



                             b.	       The  superior  court's  appellate  review  of  the  alleged  

                                       errors of contract interpretation  



                                                                                                     

                    After reviewing North Pacific's differing site condition claim, the contract,  



                                                

and the reasoning of the hearing officer and the deputy commissioner, the superior court  



                                                                                                              

considered whether North Pacific "could have learned of the condition of the pan deck  



                              

by a site inspection or other reasonable inspection."  The superior court concluded that  



                                                                                                                

the Department of Transportation and Public Facilities had a reasonable basis in deciding  



          18        See supra Part II.B.4.a.  



                                                             -17-	                                                         6818  


----------------------- Page 18-----------------------

                                                                       

                   a) that [North Pacific] should have inspected the site; and b)  

                   that  had  it  attended  the  pre-bid  meeting  and  asked  the  

                   simplest question (but the most important to its bid): May we  

                                                                                                

                   see  a  sample  of  the  exposed  pan  deck?;  and  c)  that  [the  

                                                                                              

                   Department] would have provided an effective prompt and  

                   informative response, that is, [the Department] would have  

                                                     

                   revealed  a  portion  of  exposed  embossed  pan  deck  for  

                   inspection.  By asking that question [North Pacific] would  

                   have received an appropriate response and [North Pacific]  

                   would not be where it is today.  



Thus,  the  superior  court  affirmed  the  agency's  conclusions  denying  North  Pacific's  



differing site condition claim.  



                             c.       Attorney's fees  



                   The State requested attorney's fees and costs as the prevailing party.  North  

                                                                                                            

Pacific opposed, arguing that AS 09.60.01019  

                                                                   barred an award of attorney's fees to the  



                                                                                                        

State because North Pacific had raised constitutional due process issues. Finding that the  



                                                                                        

State was the prevailing party, the superior court awarded it thirty percent of the actual  



                                                                                

reasonable fees incurred under Alaska Civil Rule 82 as well as costs under Alaska Civil  



Rule 79.  



III.      STANDARDS OF REVIEW  



                   The superior court acted in part as an intermediate court of appeal and in  



                                                                                       

part as an initial fact-finder.  "When the superior court acts as an intermediate court of  



                                                                                                             20  

                                                                                                                 We will  

appeal from an agency decision we review the agency decision directly." 



          19       AS  09.60.010(c)  (costs  and  attorney's  fees  in  actions  concerning  the  



enforcement of a right under the United States Constitution or the Alaska Constitution).  

                                                                                       



          20  

                                  

                   Pyramid Printing Co. v. Alaska State Comm'n for Human Rights , 153 P.3d  

994, 997-98 (Alaska 2007) (citations omitted).  



                                                            -18-                                                         6818  


----------------------- Page 19-----------------------

                                                                                                      21  

uphold an agency decision if it is supported by substantial evidence.                                     "We apply the  



reasonable basis standard of review to questions of law involving agency expertise, and  



                                                                                                                          22  

the substitution of judgment standard to questions outside the agency's expertise."                                           



                                                                                              

                    "Where the superior court conducts a partial trial de novo, we review the  



                                                    23  

court's findings and conclusions."                      We review the superior court's factual findings  

under the clearly erroneous standard and the superior court's legal conclusions de novo.24  



                                                                              

                    Generally we review an award of Civil Rule 82 attorney's fees for an abuse  



                    25  

                        "As to reviewing an award under AS 09.60.010(c), '[t]he independent  

of discretion. 



                                             

standard of review . . . applies to considering whether the trial court properly applied the  



                                                         26  

law when awarding attorney's fees.' "                         



                                   

IV.	      DISCUSSION  



          A.	       The  Department  Did  Not  Breach  The  Duty  To  Disclose  Superior  

                    Knowledge.  



                                                                                        

                    North Pacific argues that the hearing officer "properly found that [North  



                                

Pacific] was entitled to an equitable adjustment to its contract price" because "the State  



knew of, but did not disclose, concealed dimpling of the pan deck that substantially  



          21	       Id. at 998.  



          22	       Id. (citing Leigh v. Seekins Ford , 136 P.3d 214, 216 (Alaska 2006)).  



          23        Nash v. Matanuska-Susitna Borough                       , 239 P.3d 692, 698 (Alaska 2010)  



(citing City of Nome v. Catholic Bishop of N. Alaska                        , 707 P.2d 870, 875 (Alaska 1985)).  



          24	       Id. (citations omitted).  



          25  

                                                                              

                    See Schultz v. Wells Fargo Bank, N.A., 301 P.3d 1237, 1241 (Alaska 2013)  

(reiterating this court's longstanding position holding trial courts to have broad discretion  

in fashioning attorney's fee awards under Rule 82).  



          26  

                                            

                    State v. Jacob , 214 P.3d 353, 358 (Alaska 2009) (alteration in original)  

(quoting DeNardo v. Cutler , 167 P.3d 674, 677 (Alaska 2007)).  



                                                             -19-	                                                       6818
  


----------------------- Page 20-----------------------

                                                                                                                               

increased the costs of [North Pacific's] work."   The Department contends that "had  



                                   

North Pacific or its subcontractor conducted a reasonable investigation - or simply  



                             

asked any of the subcontractors who worked on the five prior asbestos-abatement jobs  



at the State Office Building - it would have learned of the patterned pan deck."  



                      Although the hearing officer concluded that the Department was obligated  



                                                                                                                     

to disclose the condition and failed to do so, the deputy commissioner determined that  



                                                                                                                              

the Department did not have a duty to disclose the site condition, reasoning that it was  



possible for North Pacific to have obtained the information through site visits or an  



                                                                                                                                        

independent investigation.  According to the deputy commissioner, "recognition of a  



                                                                                                                      

superior  knowledge  claim  would  effectively  reverse  the  allocation  of  contractual  



responsibilities."  



                                                                                      

                      In Morrison-Knudsen Co. v. State , we explained our test for imposing on  



the State a duty to disclose information in its possession:  



                                                

                      [D]id the state occupy so uniquely-favored a position with  

                                                                                                          

                      regard to the information at issue that no ordinary bidder in  

                                                

                      the     plaintiff's        position         could       reasonably           acquire        that  

                                                                                                     

                      information without resort to the State?  Where resort to the  

                      state   is   the   only   reasonable   avenue   for   acquiring   the  

                                                                                      

                      information, the state must disclose it, and may not claim as  

                      a   defense   either   the   contractor's   failure   to   make   an  

                      independent request or exculpatory language in the contract  

                                         [27] 

                      documents.               



           27         519 P.2d 834, 841 (Alaska 1974);                          see also Conner Bros. Constr. Co. v.  



United States, 65 Fed. Cl. 657, 688 (Fed. Cl. 2005) ("There are four requirements for   

establishing when the government has failed in its duty to disclose superior knowledge.   

First, the contractor undertakes to perform without vital knowledge of a fact that affects  

performance costs or direction.  Second, the government was aware that the contractor  

                                                                                                                        

had no knowledge of and had no reason to obtain such information.  Third, the contract  

                                                                                                                

specification supplied either misled the contractor, or did not put it on notice to inquire.  

                       

                                                                                                                        (continued...)  



                                                                    -20-                                                              6818
  


----------------------- Page 21-----------------------

In  Morrison-Knudsen ,  the  contractor  claimed  that  the  State  should  have  disclosed  



                                                 

information it had received from two other bidders regarding the feasibility of hydraulic  



                                               28  

dredging  at  a  construction  site.                  The  contract  bid  documents  contained  a  drawing  



                                                                                                                      29 

                                                                                                                          But  

showing that some underwater areas were "Areas Proven Suitable For Dredging." 



                                                                                                      

dredging  those  areas  was  in  fact  not  feasible,  and  as  a  result,  the  contractor  had  to  

                                                                                        30   Because the contractor  

                                                                                                           

transport the fill material by barge to the construction site.  



"could easily have conducted equally extensive research on its own" and because the  



                                                                                                          

other contractors had obtained the information without special technical assistance from  



                                          

the State, we concluded that the State had no duty to disclose information it had received  



                                                                                                             31  

from another contractor on the feasibility of hydraulic dredging at the site.                                       



                    We  arrived  at  a  similar  conclusion  in  B-E-C-K  Constructors  v.  State,  



                                      32  

Department of Highways .                   In B-E-C-K Constructors , the contractor asserted that the  



                                                                                                                33  

State had a duty to disclose earthquake damage reports concerning a bridge.                                          But we  



                                                                                          

again concluded that the State had no duty to disclose because the reports "were all based  



          27(...continued)  



Fourth, the government failed to provide the relevant information."); 2 P 

                                                                                                       HILIP L. BRUNER  



                                                                                                            

& PATRICK J. O'CONNOR , JR ., BRUNER & O'CONNOR ON CONSTRUCTION LAW  5:108,  

at 176 (2002).  



          28        Morrison-Knudsen Co. , 519 P.2d at 838-39.  



          29        Id. at 836.  



          30        Id. at 836-38.  



          31        Id. at 842.  



          32        604 P.2d 578, 585 (Alaska 1979).  



          33        Id.  



                                                             -21-                                                       6818
  


----------------------- Page 22-----------------------

on information obtained by simple visual inspection of the bridge" and the contractor  



                                                                                                                 34  

could have independently performed a visual inspection of the bridge.                                                 



                      In short, a successful superior knowledge claim by a contractor requires the  

                                                                                        



                                                                                         35  

government  to  have  unique  control  over  information.                                       For  instance,  in  Morrison- 

                                   



Knudsen , we noted several federal decisions involving successful superior knowledge  

                                                          



claims:  



                      [I]n Helene Curtis Industries , the government "knew much  

                     more about the product than the bidders did or  could" by  

                     virtue of having sponsored all the research that had been done  

                                                                                                

                      on chlormelamine; in Aerodex , the government "was in a far  

                                                                                                            

                     better position than . . . any . . . bidder to tell whether the  

                                                                                                   

                      [thermal]   resistor   would   be   available   from   W[estern]  

                      E[lectric]" by virtue of its intimate involvement with Western  

                      Electric's work on the resistor; and in Hardeman-Monier- 

                     Hutcherson ,  the  government  possessed  "vital  information  

                                                                       

                      concerning  the  weather  and  sea  conditions  at  the  site"  by  

                                                                     

                     virtue of having commissioned the . . . reports, which were  

                                                  

                     not generally available.  Liability was imposed in all three  

                      cases, even though the contractor specifically requested the  

                      government's  information  only  in  Hardeman ,  and  even  

                     though the contracts in all of the cases contained exculpatory  

                                                                    

                                  [36]  

                      clauses.  



                     Applying this standard, we conclude that the Department did not occupy   



such "uniquely-favored a position with regard to the information at issue that no ordinary  



           34        Id.  



           35        See id ; Morrison-Knudsen Co. , 519 P.2d at 839-41.  



           36        Morrison-Knudsen Co. , 519 P.2d at 841-42 (first alteration added; other  



alterations in original) (citations omitted) (quoting Hardeman-Monier-Hutcherson v.  

 United States, 458 F.2d 1364, 1371-72 (Ct. Cl. 1972); Aerodex, Inc. v. United States , 417  

                                                                                                     

F.2d 1361, 1366 (Ct. Cl. 1969); Helene Curtis Indus., Inc. v. United States , 312 F.2d  

774, 778 (Ct. Cl. 1963)).  



                                                                  -22-                                                             6818
  


----------------------- Page 23-----------------------

bidder in the plaintiff's position could reasonably acquire that information without resort       



                    37  

                        In this case, the State owns the buildings and a mere visual inspection of  

to the State."                                            



the building site would not have revealed the surface of the pan deck.  Although the  

                                             



Department had more control over the information here than in Morrison-Knudsen and  

                                               



B-E-C-K Constructors , the Department did not have absolute control over the relevant  

                                                                                                             



information.    Rather,  North  Pacific  could  have  reasonably  acquired  the  information  



without resort to the Department.  North Pacific  could have requested photos or an  



inspection of an exposed pan deck, spoken to other contracting companies that had  



previously performed asbestos abatement for the Department in Juneau, or researched  



                                                                                               

conditions of similar buildings in the area.  Indeed, one of the other bidders for this  



                                                                                                                     

abatement subcontract had worked in the same building and was aware of the dimpled  



condition  of  the  pan  deck.    We  conclude  that  North  Pacific  could  have  conducted  



                    

research on its own and was not dependent on the Department as the only reasonable  



                                                                           

avenue for acquiring information on the surface of the pan deck.  Accordingly, we hold  



that the State had no duty to disclose information regarding the pan deck surface.  



                                                                   

          B.	        North Pacific's Failure To  Comply With The Contractual Records  

                                                             

                     Requirement And The  Damages Provision Bars Recovery For The  

                                                                           

                     Differing Site Condition Claim.  



                                

                     Under  the  differing  site  conditions  provision,  the  contract  expressly  



required a contractor "to keep an accurate and detailed record which will indicate the  



actual 'cost of the work' done under the alleged differing site condition" and further  



                                                              

provided that  "[f]ailure to keep such a record shall be a bar to any recovery by reason  



                                                                                                                  

of such alleged differing site conditions."  The contract also mandated that for additional  



                                                                        

compensation  claims,  the  contractor  "must  immediately  begin  keeping  complete,  



accurate,  and  specific  daily  records  concerning  every  detail  of  the  potential  claim  



          37         Id. at 841.  



                                                                -23-	                                                             6818  


----------------------- Page 24-----------------------

including actual costs incurred" and "[i]n computing damages, or costs claimed for a   



change  order,  or  for  any  other  claim  against  the  Department  for  additional  time,  



                       

compensation or both, the contractor must prove actual damages based on internal costs  



for equipment, labor or efficiencies."  Under the contract, "[t]otal cost, modified total  



                                           

cost or jury verdict forms of presentation of damage claims are not permissible to show  



                                                                                                              

damages."  Finally, "[l]abor inefficiencies must be shown to actually have occurred and  



can  be  proven  solely  based  on  job  records."  Thus,  the  parties  contracted  to  require  



                                                                                                      

detailed records for differing site condition claims and to establish the actual cost method  



as the only permissible method to calculate damages.  



                                         

                    We conclude that North Pacific's failure to comply with these provisions  



                                                                                                        

in the contract bars recovery for the differing site condition claim.  A fundamental rule  



in  contract  interpretation  is  that  "[u]nless  a  different  intention  is  manifested,  where  



language has a generally prevailing meaning, it is interpreted in accordance with that  



               38  

                                                           

meaning."           And "[p]arties are free to enter into contracts that contain provisions that  



                                  

apportion damages in the event of a default, and may agree to a particular measure of  



                                                                      39  

damages in the event of a breach or a default."                           The contract at issue here expressly  



                                                                                                             

provided for the actual cost method to calculate damages and prohibited the total cost,  



modified cost, and jury verdict methods.  



                                                                                      

                    Not only did the contract call for actual cost data, under Alaska law, "[t]he  



preferred method is the actual cost method, 'in which each element of extra expense  



          38        RESTATEMENT (SECOND) OF CONTRACTS  202(3)(a) (1981).  



          39        24 RICHARD A.  LORD ,  WILLISTON ON  CONTRACTS  64:17, at 152 (4th ed.  



2002) (emphasis added) (footnotes omitted).  



                                                             -24-                                                           6818  


----------------------- Page 25-----------------------

incurred because of the [alleged breach] is added up for a total claimed amount.' "40  



Similarly, other jurisdictions "have shown a strong preference for the actual damage                                      



                                        41  

method of calculation."                     Courts prefer the actual cost method because it provides the  



           

court with a record of discrete additional costs, guaranteeing that the final amount of the  



                                                                      42  

adjustment will be equitable and reliable.                                



                       Here the hearing officer found that the subcontractor wrote only one daily  

                                                                           



report discussing problems encountered at the outset with the embossed pan deck and  

                               



that the subcontractor "did not segregate its labor costs."  We note that the single daily  

                                                                                                         



report concerning problems cleaning the pan deck surface is worded in broad, general  

                                                                                       



terms and does not contain any estimate of additional costs or work hours.  And instead  

                                                                                           



of relying on the contractually mandated method to calculate damages, North Pacific's  

                        



expert relied on the modified total cost method, and the hearing officer relied on the jury  

                            



verdict method to calculate damages.  We have occasionally approved of the jury verdict  



                                                                                    

method to calculate damages when the contractor has put forth some actual cost data, in  



                                                                              

addition to other evidence, and when specific contractual record-keeping requirements  



           40         Power Constructors, Inc. v. Taylor & Hintze , 960 P.2d 20, 41 (Alaska  



 1998) (quoting Municipality of Anchorage v. Frank Coluccio Constr. Co. , 826 P.2d 316,  

                                                                                                                            

324-27 (Alaska 1992)); see also ROBERT F.   CUSHMAN ET AL .,   PROVING AND  PRICING  



                             

CONSTRUCTION CLAIMS  4.07[B][3], at 132 (3d ed. 2001).  



           41  

                                                                                                                        

                       WILLIAM           SCHWARTZKOPF                   &     JOHN        J.   MCNAMARA ,                 CALCULATING  



                             

CONSTRUCTION DAMAGES  1.03[A] (2d ed. Supp. 2012).  



           42          See id.; CUSHMAN  ET  AL ., supra  note 40,  4.07[B][3], at 132; see also  



Frank Coluccio Constr. Co. , 826 P.2d at 325 (stating that the actual cost method of  

damages  calculations  involves  the  addition  of  each  element  of  extra  costs  incurred  

because of the differing site condition).  



                                                                      -25-                                                               6818
  


----------------------- Page 26-----------------------

                         43  

                                                       

were not at issue.           The jury verdict method permits the contractor to "present evidence  



of the cost of additional work to the finder of fact[,] including any actual cost data,  



                                                       

accounting records, estimates by law and expert witnesses, and calculations from similar  



               44  

projects."      But the jury verdict method is only appropriate once the contractor has  



                                                                                                              45 

                                                                                                                   Although  

shown that " 'there was no more reliable method for computing damages.' " 



our decisions indicate that the jury verdict method, in conjunction with some actual cost  



                                                                                                     

data, may be appropriate when there is no more reliable method to calculate damages,  



North Pacific is bound by the express provisions of the contract.  



                                                                                                            46 

                    Our conclusion is supported by federal decisions in this area.                              The United  



                                                                                            

States Court of Claims stated in Joseph Pickard's Sons Co. v. United States that, to rely  



                                                                                                            

on the jury verdict method, a contractor must show "a justifiable inability to substantiate  



          43        See, e.g., Power Constructors, Inc., 960 P.2d at 41-45; Frank Coluccio  



Constr. Co., 826 P.2d at 326.  



          44        Power Constructors, Inc. , 960 P.2d at 41 (quoting                       Frank Coluccio Constr.  



Co., 826 P.2d at 325) (internal quotation marks omitted).  



          45        Frank Coluccio Constr. Co. , 826 P.2d at 327 (quoting Fattore Co. v. Metro.  

                                                                                                               

Sewerage Comm'n of Milwaukee Cnty., 505 F.2d 1, 5 (7th Cir. 1974)); see also Corban  

                                                                                                                      

Indus., Inc. v. United States , 24 Cl. Ct. 284, 287 (Cl. Ct. 1991); Power Constructors,  

Inc. , 960 P.2d at 41; Allen L. Overcash & Jack W. Harris, Measuring the Contractor's  

                                         

Damages by "Actual Costs" - Can It Be Done? , 25 CONSTRUCTION   LAW   31, 31-32  

(Winter 2005).  



          46        See Joseph Pickard's Sons Co. v. United States, 532 F.2d 739, 742-44 (Ct.  



Cl.  1976)  (denying  claim  based  on  contractor's  failure  to  provide  direct  proof  of  

       

additional costs); see also Corban Indus., 24 Cl. Ct. at 287-88 (deciding that contractor  

                                                                                  

forfeited its claim to recover costs by failing to produce reliable evidence of actual costs);  

                                                                                 

Assurance Co. v. United States , 813 F.2d 1202, 1204-06 (Fed. Cir. 1987) (holding that  

                                                                        

contractor was not entitled to use the jury verdict method to calculate damages because  

                                         

contractor had failed to submit cost documentation or explain the absence of records).  



                                                             -26-                                                        6818
  


----------------------- Page 27-----------------------

the amount of his resultant injury by direct and specific proof."                              47  Because the contractor  



in that case had not shown that it "was prevented from specifically proving its damages"     



by a reason beyond its control, the Court of Claims upheld the Armed Services Board of   



Contract  Appeals'  finding  that  the  failure  to   produce  records  of  actual  costs  was  



                                                   48  

inexcusable and fatally defective.                      



                     Despite the express contract provisions requiring detailed records and use  

                                                                                                              



of the actual cost method to calculate damages, North Pacific argues that it is entitled to  



additional compensation because (1) it maintained cost records and (2) the contractual  

                                                                                       



remedy "failed of its essential purpose."  Citing the contract's requirement for "complete,  

                                                                                             



accurate,  and  specific  daily  records  concerning  every  detail  of  the  potential  claim  



including  actual  costs  incurred,"  the  Department  responds  that  "[t]he  undisputed  



evidence  established  that  neither  North  Pacific  nor  its  subcontractor  maintained  the  



detailed cost records that the contract required."  



                     First, North Pacific claims that the contract "just requires keeping actual  



records of the costs, which the hearing officer found was done."  But the hearing officer  



did not find that North Pacific had complied with the contractual records requirement.  



                                           

Rather, the hearing officer pointed out that the subcontractor had made only one daily  



report on the alleged differing site condition and did not separate or track additional  



                               

costs.  The hearing officer further acknowledged that the subcontractor's expert used "a  



method of requesting damages which is prohibited by the contract."  Nonetheless, the  



hearing officer "decline[d] to enforce strictly the construction contract limitations in  



                                                                                               

Section 15.1.4," reasoning that the "limitation in this contract for damages should not be  



          47         532 F.2d at 742.  



          48        Id. at 744.  



                                                               -27-                                                              6818  


----------------------- Page 28-----------------------

enforced as an equitable matter because [the Department] failed to disclose the embossed   



                                 49  

pan deck prior to bid."              



                    Second, North Pacific argues that "[a]s applied to [North Pacific]'s differing  



                                                                                                

site condition claim, the State's clause would deny any remedy at all because [North  



                                      

Pacific]'s added costs are not distinguishable from its as-planned costs without using one  



of the prohibited quantification formulas" and the remedy thus "failed of its essential  



                                                                                                      

purpose."  But North Pacific does not offer any explanation why it was unable to provide  



a contemporaneous record of the actual additional costs incurred and how the agreed- 



                                                                                               

upon contractual method of calculating damages would deny any remedy.  North Pacific  



                                                          50  

relies on Pierce v. Catalina Yachts, Inc .   to argue that the records requirement "failed  



                                                                         

of its essential purpose and is unenforceable," but our reasoning in Pierce does not apply  

                                                                            51  case, we held that when a limited  

                                                                                        

to this case.  In Pierce , a Uniform Commercial Code 



warranty  fails  due  to  a  seller's  breach,  a  separate  provision  of  the  warranty  barring  



                                                                                                                 52  

consequential damages will survive as long as the bar is not unconscionable.                                         In that  



                                      

case, we further held that the bar to consequential damages was unconscionable because  



                                            53  

the  seller  acted  in  bad  faith.               In  construing  the  Uniform  Commercial  Code,  we  



considered  the  policy  behind  the  failure-of-the-essential-purpose  rule,  which  is  to  



          49        The  hearing  officer  also  stated  that  the  Department  "did  not  make  an  



attempt  to  resolve  the  issue  with  [the  subcontractor]  during  the  performance  of  the  

contract."  



          50       2 P.3d 618 (Alaska 2000).  



          51       We  note  that  the  Uniform  Commercial  Code  applies  to  "commercial  



transactions" or transactions in goods but this case involves a  contract  for services.  

U.C.C.  1-102(2)(a) (2011); see AS 45.02.102.  



          52       Pierce , 2 P.3d at 622-23.  



          53       Id. at 623-24.  



                                                            -28-                                                       6818
  


----------------------- Page 29-----------------------

                                                                                                      54  

guarantee that a buyer has "at least minimum adequate remedies."                                          Although Pierce  



                                                                          

requires minimum remedies when one party has acted in bad faith, North Pacific has not  



                                                                                                                   55  

shown  that  the  Department  acted  in  bad  faith  or  breached  the  contract,                                       and  any  



                      

limitation on remedies is due to North Pacific's own failure to maintain the requisite  



                                                                                                                       

records.  Moreover, the hearing officer did not make any findings to indicate bad faith  



actions or unconscionability.  



                    North Pacific also cites Illinois case law to support its argument that the  



                                                                     56  

express contract provisions are inapplicable.                            In Razor v. Hyundai Motor America ,  



                             

another  Uniform  Commercial  Code  case,  the  Illinois  Supreme  Court  held  that  a  



warranty's          consequential           damages         provision         was      enforceable          unless       it   was  



unconscionable, regardless of whether the warranty's limited remedy failed its essential  



             57  

                                                                                       

purpose.         Razor has limited applicability to the contract for services here.  While Razor  



involves  the  relationship  between  a  consequential  damages  provision  and  a  limited  



                         

remedy clause, this case involves an express record-keeping requirement, and there were  



                                                       58  

no allegations of unconscionability.                        



                                                                                           

                    In sum, North Pacific is barred from recovery for any alleged differing site  



                                                                                           

condition  because  it  did  not  substantially  comply  with  the  damages  and  records  



provisions of the contract.  



          54        Id. at 621 (internal quotation marks omitted).
  



          55        See discussion supra Part IV.A.
  



          56
       See, e.g., Razor v. Hyundai Motor Am.                     , 854 N.E.2d 607 (Ill. 2006);              Adams  



v. J.I. Case Co.        , 261 N.E.2d 1 (Ill. App. 1970), abrogated by  Razor , 854 N.E.2d 607.  



          57         854 N.E.2d at 622.  



          58        See id. at 620-21.  



                                                               -29-                                                         6818
  


----------------------- Page 30-----------------------

           C.        North Pacific's Procedural Claims  



                                                              

                     North Pacific challenges the superior court's legal conclusions following  



the court's trial de novo on procedural issues.  North Pacific raises several procedural  



claims:  (1)  the  deputy  commissioner  did  not  review  directly  the  hearing  officer's  



                                                                                          

recommended decision or the hearing transcripts; (2) the deputy commissioner relied on  



a  false  finding  of  fact  that  was  not  supported  by  evidence  at  the  hearing;  (3)  any  



procedural  defects  were  not  cured  by  a  delegation  of  authority  to  staff;  and  (4)  the  



                                                                      

hearing  officer's  recommended  decision   should  be  deemed  final  when  a  valid  



                                                                                                         59  

commissioner's decision was not "appropriate" or timely issued.                                               The Department  



                                                                                                                   

responds  that  the  deputy  commissioner  was  not  required  to  review  the  record,  a  



recording, or a transcript of the hearing and maintains that the deputy commissioner's  



                                 60  

decision was proper.                  While the deputy commissioner made a factual error, and the  



           59        See AS 36.30.675(a) ("The hearing officer shall recommend a decision to     



the commissioner of administration or the commissioner of transportation and public                                      

facilities, as appropriate, based on the evidence presented. The recommendation must  

include findings of fact and conclusions of law."); AS 36.30.680 ("[A] decision by the  

                                                                                                                  

commissioner   of   transportation   and   public   facilities   involving   procurement   of  

construction  shall  be  sent  to  all  parties  by  personal  service  or  certified  mail  within  

45 days after receipt by the commissioner of transportation and public facilities of the  

hearing officer's decision.").  



           60        See, e.g., In re Reinstatement of Wiederholt , 24 P.3d 1219, 1233 (Alaska  



2001) (holding that Rule 29 time limits were merely directory rather than mandatory,  

despite legislature's use of "will," because the legislative intent was to create guidelines  

                                                                    

for orderly conduct of public business, and because "serious, practical consequences  

would follow from a finding that it is mandatory" (citations omitted)); State, Dep't of  

                                                                                 

Commerce  &  Econ.  Dev.,  Div.  of  Ins.  v.  Schnell,  8  P.3d  351,  357  (Alaska  2000)  

                                                                                                 

(concluding that "shall" language in statute governing insurance was directory because  

                                                                                       

the statute imposed no consequence for an untimely decision and there was no injury  

                                                                                     

from the delay); Oaksmith v. Brusich, 774 P.2d 191, 201-02 (Alaska 1989) (explaining  

                                                             

that other courts had concluded that time limits for trial courts' issuance of decisions are  

                                                          

                                                                                                                    (continued...)  



                                                                 -30-                                                            6818
  


----------------------- Page 31-----------------------

                                                                            

"clarification" email between the hearing officer and the agency raises some concerns,  



                                        

we do not need to reach the procedural issues because we reject North Pacific's superior  



knowledge  argument  as  a  matter  of  law  and  because  North  Pacific  is  barred  from  



recovery  for  its  differing  site  condition  claim.    Thus,  we  conclude  that  the  deputy  



                                                 

commissioner's factual error was harmless and the ex parte exchange between O'Brien  



and the hearing officer, while a questionable practice, did not affect North Pacific's  



substantial rights.  



         D.        The Attorney's Fees Award Was Not An Abuse Of Discretion.  



                                                                                                        

                   The  Department  of  Transportation  and  Public  Facilities  awarded  the  



Department of Administration attorney's fees and costs following the administrative  



                 61  

proceeding.          Subsequently the superior court awarded attorney's fees and costs to the  



Department  of  Administration  and  the  Department  of  Transportation  and  Public  

Facilities.62  Arguing it should be the prevailing party on appeal, North Pacific challenges  



                                                                                        

the awards of attorney's fees to the State under Rule 82 for the administrative appeal and  



                                                                         

under AS 09.60.010 for its due process claims.  The Department first responds that North  



                                                                                                             

Pacific was not the prevailing party and that, even if North Pacific prevailed on appeal,  



"it  would  not  be  entitled  to  an  award  of  full  reasonable  attorney's  fees  under  



AS 09.60.010(c)(1)."  The Department further relies on subsection (d)(2) of the statute.  



         60(...continued)  



directory and not mandatory).  



         61        The     Department         of    Transportation         and     Public      Facilities     awarded  



$ 12,899.19 to the Department of Administration for attorney's fees and costs from the  

                                                                                           

administrative appeal.  



         62        The superior court awarded attorney's fees of $35,537.40 to the Department  



of  Administration  and  $16,439.99  to  the  Department  of  Transportation  and  Public  

Facilities.  



                                                          -31-                                                     6818
  


----------------------- Page 32-----------------------

Alaska Statute 09.60.010(d)(2) provides that "[i]n calculating an award of attorney fees   



and costs under (c)(1) of this section, . . . the court shall make an award only if the     



claimant did not have sufficient economic incentive to bring the suit, regardless of the  



constitutional claims involved."  Based on this requirement, the Department maintains  



                                                                                                              

that North Pacific is not entitled to attorney's fees because North Pacific had sufficient  



economic incentive to bring its claim for additional compensation.  



                    Alaska Statute 09.60.010(c)(2) prohibits a court from ordering a party to  



                                                                             

pay the attorney's fees of the opposing party where the claims concerned "constitutional  



                                      

rights if the . . . plaintiff . . . did not prevail in asserting the right, the action or appeal  



                                                               

asserting the right was not frivolous, and the claimant did not have sufficient economic  



                                                                          

incentive to bring the action or appeal regardless of the constitutional claims involved."  



                                                                   

Although North Pacific alleged due process violations, we conclude that North Pacific  



                         

had  "sufficient  economic  incentive  to  bring  the  action  or  appeal  regardless  of  the  



                                                63  

constitutional claims involved."                    North Pacific's primary requested relief in superior  



court was an order vacating the deputy commissioner's decision and "judgment in favor  

                                                



of  North  Pacific  Erectors,  Inc.  in  the  amount  of  $163,173.42."    Because  additional  



                                   

compensation was the motivation throughout the litigation and because North Pacific  



                                     

does not explain how it lacked sufficient economic motivation, AS 09.60.010 does not  



apply.  We therefore affirm the award of reasonable attorney's fees to the State as the  



prevailing party.  



V.        CONCLUSION  



                    We AFFIRM the judgment of the superior court.  



          63        AS 09.60.010(c)(2).  



                                                             -32-                                                            6818  

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