Opinion filed February 27, 2007.
On Appeal from the 151st District Court, Harris County, Texas, Trial Court Cause No. 00-63143.
Panel consists of Justices ANDERSON, HUDSON, and GUZMAN.
Appellant, Gilbane Building Company ("Gilbane"), appeals a judgment rendered on a jury's award of damages in favor of appellee, Two Turners Electric Company d/b/a Turner Electric Company ("Turner Electric"). We affirm the trial court's judgment.
FACTUAL AND PROCEDURAL BACKGROUND
In December 1997 Clear Creek Independent School District ("CCISD") prepared to build two schools: Space Center Intermediate and League City Intermediate. With each covering almost 170,000 square feet, the schools were large, nearly identical, projects. CCISD hired Gilbane as the general contractor in charge of the construction of both schools. While Gilbane was a national building company, it was new to Texas school construction, having previously completed only two or three school projects. For the construction of these schools, Gilbane served exclusively as the project supervisor, hiring subcontractors to handle all aspects of the actual construction. CCISD imposed an absolute deadline of July 1, 1999 for the completion of both schools. Based on that deadline, Gilbane, as the general contractor, established the schedule for performance which included no overtime or compressed time. Gilbane then solicited bids from subcontractors based on these specifications of normal work weeks and approximately eighteen months to complete performance.
At the time of the events at issue in the trial, Daryl Turner served as the president of Turner Electric. Mr. Turner is a master electrician who has been in business since 1968. Mr. Turner has extensive experience building schools as he has previously bid on and built approximately twenty-five new school jobs as well as numerous smaller school projects. As a result of this experience, CCISD certified Turner Electric as one of eleven electrical subcontractors pre-qualified to bid on CCISD construction projects. Turner Electric submitted a bid for both schools. Mr. Turner prepared these bids based on the knowledge and experience he gained as a master electrician working on similar projects, the schedule prepared by Gilbane for the construction, as well as Gilbane's representations that normal construction practices would be employed, and the subcontractors would have approximately eighteen months to complete the construction of the schools.
According to Mr. Turner, "normal construction practices" means the following: (1) the presence of structural steel prior to the electricians installing electrical conduit and wiring, creating a place for the electricians to attach the conduit and wiring; (2) the absence of interior walls when the electricians were installing electrical conduit and wiring allowing the electricians to use motorized scaffolding in straight runs across the building, thus minimizing the time and number of electricians required to perform this task; (3) logical scheduling calling for construction from one end of the building to the other thereby minimizing repetitive set-up and maximizing completion of an area before moving to another; (4) proper scheduling of the work within the available eighteen months allowing Turner Electric to (a) use its own employees as opposed to more expensive and inefficient contract labor; and (b) not use overtime.
Gilbane awarded the electrical subcontracts for both schools to Turner Electric. The two subcontracts contained nearly identical language and pursuant to their terms, Turner Electric contracted to perform all electrical work on both schools for a lump sum price. Despite the fact both subcontracts called for Turner Electric to perform all electrical work for a lump sum price, both subcontracts, as well as the prime contract between CCISD and Gilbane, envisioned there could be changes in the work and included provisions on how those changes would be compensated. Section 8.4 of both subcontracts provides that if the parties cannot agree on a method to compensate a subcontractor for additional work, this section would apply. Section 8.4 provided for compensation of the subcontractor's costs plus a reasonable allowance for overhead and profit. In addition, section 8.4 defined costs as the "cost of materials including sales tax and cost of delivery, cost of labor including social security, old age and unemployment insurance and fringe benefits required by [a]greement or custom; workers or workmen's compensation insurance; bond premiums; rental value of equipment and machinery; and the additional costs of supervision and field office personnel directly attributable to the change." In addition, Section 8.6 allows a subcontractor a five percent markup for work performed by a sub-subcontractor.
The terms of the prime contract were incorporated into the two subcontracts signed by Turner Electric.
Serious issues arose before and during the early stages of the projects that dramatically impacted the construction of both schools. The most serious issue arose out of dimensional errors in the design drawings for the schools. As a result of these dimensional errors, the initial production of structural steel was incorrectly fabricated. The design errors resulted in the structural steel not matching up or coming together properly. Correcting these design errors turned out to be a complicated and time consuming process. The problem was so significant that, as early as May 6, 1998, barely a week after Turner Electric had executed the two subcontracts for the schools, Baker Concrete, the foundation subcontractor, wrote Gilbane "the dimensional mistakes . . . have been known for well over three weeks. To date, we still have no complete answers. This was not intended to be a Fast Track' project, but at this point it should be treated as such by the design team to maintain progress." Two days later, Gilbane wrote a letter to the architects on the project stating the dimension issue "turned out to be complicated and unavoidably disruptive" bringing about a "significant delay to the production and delivery of structural steel as a direct result of these dimensional problems." Gilbane went on to notify the architects it was completely suspending work in the affected areas of the projects and told the architects "we are unable to continue and we are being constructively delayed in our efforts with resulting impacts to project time and costs."
While Gilbane was not responsible for the dimension errors and the initial delays growing out of them, Gilbane made decisions in its handling of the dimension problem that directly and adversely impacted Turner Electric's performance of its duties under the subcontracts. Each of these decisions resulted in Turner Electric's work being compressed into a time significantly shorter than the amount of time originally envisioned for the work.
Initially, Gilbane made the decision to give priority for the fabrication of the structural steel to a Houston Independent School District ("HISD") school it was building even though the two CCISD schools had already been delayed while the dimensional issue was worked out by the architect and engineers. This resulted in even more delays in the fabrication, delivery, and erection of the structural steel. Under the original construction schedule established by Gilbane, the erection of the structural steel for Space Center was to have started in June 1998 and been completely installed by the middle of October 1998. Instead, as a result of the delays in the fabrication of the structural steel, as of September 1998, there was no structural steel on site at either school. In addition, by March 1999, only four months before the schools were to be completed, there was still structural steel being erected at both schools. This delay directly impacted Turner Electric as much of its work, primarily the installation of conduit and electrical lines, must be attached to the structural steel and therefore cannot be performed before the steel itself is installed. The end result of Gilbane's decision to give the HISD school's structural steel priority over the CCISD schools was the compression of Turner Electric's work into a period of time significantly shorter than the originally scheduled eighteen months.
While only the Space Center School schedule was entered into evidence, the testimony was that the schedules for the construction of the two schools were similar.
The next decision to directly impact Turner Electric was Gilbane's unilateral decision to put up the interior masonry walls before the structural steel was in place in an effort to make up some of the lost time on the project. According to Tom Singer, Gilbane's former senior project manager, Gilbane started looking for "something [Gilbane] can do to move on that's productive and at the same time is overall positive, that — that is, you know, beyond 50 percent positive." Gilbane made this decision without consulting the subcontractors, despite the fact that it impeded some subcontractors in the performance of their jobs. Gilbane persisted in following through with the decision even though, according to Mr. Singer, "everybody questioned it and the wisdom of it." As a result of Gilbane's decision, the interior masonry walls were built up to a height of approximately seven feet. This directly interfered with Turner Electric's performance of its job as there was no longer an open runway the length of the building for the electricians to use motorized lifts to install the parallel runs of conduit and electrical line once the structural steel was in place. Instead, the electricians had to resort to the time consuming and labor intensive process of using ladders, with the necessity of setting up and breaking down their equipment many times as they moved from room to room. This not only slowed the pace of the electricians' work, but also increased the number of electricians required to perform the work because of the slow pace and the compression of the time to perform.
Normal construction practice is to begin erecting the structural steel at one end of the building and then progress through the building to the other end. Crafts, such as the electricians and plumbers, which use the structural steel for portions of their work, then follow along behind the structural steel installation and, only when their work is complete, are the interior walls built. This procedure allows multiple crafts to work at the same time without impeding each other's work as they are in different areas of the building.
The third Gilbane decision to directly impact Turner Electric's performance was Gilbane's decision to abandon the original sequence of constructing the schools. Originally, Gilbane intended to follow the "normal" method for constructing a large school building. Under the "normal" method, work starts at one end of the building and progresses through to the other end. This method creates an efficient flow through the project as it allows each subcontractor to work in a single area until it is complete. This increases efficiency as it minimizes repetitive setting-up and breaking down of equipment as workers do not have to move back and forth from one area of the building to another, as well as minimizing the amount of interference caused by too many subcontractors working in a single area at the same time. According to Mr. Singer, Gilbane, in an effort to do something other than "sit on our hands," decided to require the subcontractors to work in any area of the schools ready for work. In essence, Gilbane decided to work on both ends of the school buildings toward the middle. Mr. Singer testified the only advantage created by this decision was it created the ability to work, but it did not allow the work to progress efficiently. Turner Electric was adversely impacted in several ways by Gilbane's decision. First, the pace of the work slowed as the electricians had to move from one area to another and then back again. Second, because there were more subcontractors working in a single area, efficiency decreased as they got in each other's way. Finally, by leaving the middle of each school, the section containing the bulk of the main electrical equipment, until the end, Turner Electric's time to complete its work was dramatically compressed as the electricians had to wait until the latter stages of the project, when the main electrical equipment was installed and functional, to perform much of their work.
Gilbane made the fourth decision impacting Turner Electric toward the end of the projects. Grinnell Fire Systems ("Grinnell") was a direct subcontractor of Gilbane for the installation of the fire alarm systems at both schools. In addition, Grinnell sub-subcontracted with Turner Electric for the installation of the data, sound, and telephone systems. As a result of Gilbane's earlier decisions, Grinnell's work on all of the systems had been compressed until the final months of the projects. As the July 1 deadline approached, Gilbane decided the fire alarm systems were more important than the data, sound, and telephone systems, as, in Gilbane's view, if each school had a functional fire alarm system, it increased the chance CCISD would accept the schools as complete even if significant work remained. Therefore, Gilbane ordered Grinnell to devote all its attention and resources to the fire alarm systems and let the systems Turner Electric was responsible for, data, sound, and telephone, wait. This decision further compressed the time available for Turner Electric to complete its work.
As a result of these decisions, Turner Electric's time to perform the work required under its subcontracts with Gilbane was significantly compressed. Mr. Singer even admitted the projects were seriously compressed. When a subcontractor's time to perform is compressed, it means more work must be performed in a shorter amount of time. This, in turn, requires the subcontractor to institute overtime for existing workers, hire more workers, or both, raising the subcontractor's labor costs. In addition, as the number of workers goes up, efficiency goes down as it is difficult to supervise the larger number. Finally, the compressed time requires more subcontractors to work in the same areas at the same time in an effort to get the work done with a resulting impact on efficiency.
Faced with a significantly compressed schedule, Turner Electric worked hard to complete the schools. According to Fred Niccum, Head of Facilities for CCISD, the two buildings were a beehive of activity, even late at night and on weekends, as electricians worked to get the buildings completed on time. In spite of all the problems, construction on the two schools was sufficiently complete to allow Space Center to open to students on time with League City opening only three days late. However, there was still considerable work to be done even after the schools opened as there were entire areas of the schools that had not yet been closed in. This work had to be completed in the evenings and on weekends, times that required the payment of overtime wages to the workers.
As soon as it became apparent that Turner Electric's labor costs were going to rise significantly, Turner notified Gilbane that Turner Electric would not be responsible for paying the higher costs caused by others. As the work continued, both Gilbane and Turner Electric documented Turner Electric's increased labor costs with invoices, schedules of value, field reports, time cards, payroll records, and overtime authorizations.
In response to the compressed schedule, Gilbane made the decision to hire two additional electrical companies to supplement Turner Electric's crews. Gilbane paid these two companies directly and therefore had knowledge of the costs and approved the costs prior to the performance of the work. Turner Electric supervised the electricians provided by these two companies. In addition, as a result of the compression, Turner Electric was forced to hire additional electricians through two staffing companies.
When a subcontractor incurs increased costs as a result of a compressed schedule, it is not allowed to present a claim directly to the owner. Instead, the subcontractor must present its claim to the general contractor, which, in turn, has a responsibility to pass that claim on to the owner for payment. As the time approached to close out the two projects, Turner Electric submitted a claim to Gilbane to be paid for the additional labor costs it incurred as a result of the compressed schedule. At this point, Gilbane made the final decision impacting Turner Electric, deciding not to present Turner Electric's claim to CCISD for consideration. Marshall Lightman, Gilbane's vice president and regional controller, testified that Gilbane does not encourage the making of claims by subcontractors, as, in his words, "it's not a good practice." Instead, even though Lightman admitted at trial that there were still open issues on Turner Electric's payment, Gilbane represented to CCISD that all subcontractors had been paid, and collected its final payment on the projects.
Ultimately, Turner Electric and Gilbane's negotiations on those open issues broke down when Gilbane made numerous deductions on the amount owed to Turner Electric resulting in a balance due to Gilbane. Litigation eventually resulted from this dispute. Turner Electric asserted both breach of contract and fraud causes of action against Gilbane. Gilbane counterclaimed for the sums it claimed Turner Electric still owed. The matter was submitted to a jury and the jury found in favor of Turner Electric on both its breach of contract and fraud causes of action, and against Gilbane on its breach of contract cause of action. Turner Electric elected to recover on its breach of contract cause of action and the trial court entered judgment in favor of Turner Electric in the amount of $532,504.75. In addition, the judgment awarded Turner Electric $76,490.00 for attorney's fees incurred through trial. This appeal followed. At oral argument Gilbane conceded there was evidence in the record supporting the jury's finding that Gilbane breached its agreements with Turner Electric and therefore the only contested issue in this appeal is the judgment's award of damages to Turner Electric.
THE STANDARD OF REVIEW
In this appeal Gilbane challenges both the legal and factual sufficiency of the evidence presented at trial. When both legal and factual sufficiency challenges are raised on appeal, we must first examine the legal sufficiency of the evidence. City of Houston v. Cotton, 171 S.W.3d 541, 546 (Tex.App.-Houston [14th Dist.] 2005, pet. denied) (citing Trimble v. Tex. Dep't of Protective Regulatory Serv., 981 S.W.2d 211, 217 (Tex.App.-Houston [14th Dist.] 1998, no pet.). In conducting a legal sufficiency review, we must consider the evidence in the light most favorable to the verdict and indulge every reasonable inference that supports it. City of Keller v. Wilson, 168 S.W.3d 802, 821B22 (Tex. 2005); Harris County v. Vernagallo, 181 S.W.3d 17, 24B25 (Tex.App.-Houston [14th Dist.] 2005, pet. denied); Prairie View A M Univ. v. Brooks, 180 S.W.3d 694, 705 (Tex.App.-Houston [14th Dist.] 2005, no pet.). The evidence is legally sufficient if it would enable reasonable and fair-minded people to reach the verdict under review. Keller, 168 S.W.3d at 823; Vernagallo, 181 S.W.3d at 24; Brooks, 180 S.W.3d at 705. This court must credit favorable evidence if reasonable jurors could, and disregard contrary evidence unless reasonable jurors could not. Keller, 168 S.W.3d at 822; Vernagallo, 181 S.W.3d at 24; Brooks, 180 S.W.3d at 705. The trier of fact is the sole judge of the witnesses' credibility and the weight to be given their testimony. Keller, 168 S.W.3d at 819; Vernagallo, 181 S.W.3d at 24; Brooks, 180 S.W.3d at 705. This court cannot substitute our judgment for that of the jury, so long as the evidence falls within the zone of reasonable disagreement. Keller, 168 S.W.3d at 822; Vernagallo, 181 S.W.3d at 24; Brooks, 180 S.W.3d at 705. But if the evidence allows of only one inference, neither jurors nor the reviewing court may disregard it. Keller, 168 S.W.3d at 822; Vernagallo, 181 S.W.3d at 25; Brooks, 180 S.W.3d at 705.
This court may sustain a legal sufficiency, or no evidence, point only if the record reveals one of the following: (1) the complete absence of a vital fact; (2) the court is barred by rules of law or of evidence from giving weight to the only evidence offered to prove a vital fact; (3) the evidence offered to prove a vital fact is no more than a scintilla; or (4) the evidence conclusively proved the opposite of the vital fact. Keller, 168 S.W.3d at 810; Brooks, 180 S.W.3d at 705.
In reviewing factual sufficiency, we must examine the entire record, considering both the evidence in favor of, and contrary to, the challenged findings. See Mar. Overseas Corp. v. Ellis, 971 S.W.2d 402, 406B07 (Tex. 1998); Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986). We may set aside the verdict for factual sufficiency only if it is so contrary to the overwhelming weight of evidence as to be clearly wrong and unjust. See Ellis, 971 S.W.2d at 406B07; Nip v. Checkpoint Sys., Inc., 154 S.W.3d 767, 769 (Tex.App.-Houston [14th Dist.] 2004, no pet.). However, we may not substitute our judgment for that of the jury, even if the evidence would clearly support a different result. Nip, 154 S.W.3d at 769.
A. Was Turner Electric's Proof of Damages Sufficient?
In Gilbane's first issue, Gilbane raises several separate but related arguments that Turner Electric's proof of its damages is legally and factually insufficient. First, Gilbane asserts Turner Electric introduced insufficient evidence of a causal nexus between Gilbane's actions and Turner Electric's damages. Second, Gilbane argues Turner Electric's damages are based on an improper measure of damages: the so-called "Total Cost Method." Third, Gilbane alleges there was insufficient evidence of the reasonableness of Turner Electric's costs. Finally, Gilbane argues the evidence was insufficient to establish the amount of overhead and profit attributable to Turner Electric's compression claim. We address each argument in turn.
1. Turner Electric Introduced Sufficient Evidence of a Causal Nexus Between Gilbane's Actions and Turner Electric's Damages.
A subcontractor is entitled to recover damages from a contractor for losses due to delay and hindrance of its work if the subcontractor proves: (1) that its work was delayed or hindered; (2) that it suffered damages as a result of the delay or hindrance; and (3) that the contractor was responsible for the act or omissions which caused the delay or hindrance. See Shintech v. Group Constructors, 688 S.W.2d 144, 148 (Tex.App.-Houston [14th Dist.] 1985, no pet.) (stating elements in a contractor-owner scenario). In this first sub-issue, Gilbane argues there was insufficient evidence connecting Gilbane's admitted breaches with Turner Electric's damages.
In this case the jury heard conflicting evidence relating to the various problems that resulted in Turner Electric's work on the CCISD projects being compressed. As laid out above, Turner Electric, through documents and the testimony of numerous witnesses, presented evidence of decisions, actions, or omissions by Gilbane that directly compressed the time available for Turner Electric to perform its contractual obligations with a resulting impact on Turner Electric's costs. In turn, Gilbane presented evidence that Turner Electric's problems arose not from Gilbane's acts or omissions, but from problems of Turner Electric's own creation. This evidence included testimony of (1) inadequate staffing of the job by Turner Electric; (2) poor planning and supervision of Turner Electric's work resulting from Turner Electric's decision not to participate in the initial schedule planning session as well as occasional absences from weekly planning meetings during the course of the project; (3) Turner Electric's hiring of lower quality and therefore less efficient electricians through staffing agencies; and (4) Turner Electric's tardiness in turning in required paperwork relating to the products and materials to be used in the CCISD projects for approval by the architect. Although Gilbane disputes it was responsible for Turner Electric's compression damages, the jury found otherwise and there is abundant evidence to support its finding. As there is more than a scintilla of evidence supporting the jury's finding, the evidence is legally sufficient. In addition, the evidence is factually sufficient as the finding is not so contrary to the overwhelming weight of evidence as to be clearly wrong and unjust.
2. Turner Electric's Damages Were Based on the Contract Language Not the Total Cost Method.
In its second sub-issue Gilbane asserts that (1) Turner Electric used an improper measure of damages, the Total Cost Method, to calculate its damages; and (2) the evidence is legally and factually insufficient to satisfy the elements of the Total Cost Method. We disagree Turner Electric used the Total Cost Method.
The ultimate goal in measuring damages for a breach of contract claim is to provide just compensation for any loss or damage actually sustained as a result of the breach. Mays v. Pierce, 203 S.W.3d 564, 577 (Tex.App.-Houston [14th Dist.] 2006, pet. denied). In addition, the parties to a contract can agree to the remedy to be applied in the event the agreement is breached. Shasteen v. Mid-Continent Refrigerator Co., 517 S.W.2d 437, 440 (Tex.Civ.App.-Dallas 1975, writ ref'd n.r.e.). This agreement on damages will be enforced by the courts unless it is illegal or against public policy. Id.
Turner Electric and Gilbane agreed on a measure of damages in the two subcontracts in the event they could not agree on the amount of compensation owed to Turner Electric. There is no allegation this agreement is illegal or against public policy. Far from following the Total Cost Method, which is universally disfavored according to Gilbane, Turner Electric's damages track the language found in the subcontracts. As pointed out by Gilbane, section 8.4 of the subcontracts provides that in the event the parties cannot agree on a method to compensate Turner Electric for changes in the work, Turner Electric will be entitled to (1) a reasonable allowance for overhead and profit; (2) the cost of materials including sales tax and cost of delivery; (3) the cost of labor including social security, old age and unemployment insurance, and fringe benefits; (4) the cost of workers compensation insurance; (5) the cost of bond premiums; (6) the rental value of equipment and machinery; (7) the additional costs of supervision and field office personnel directly attributable to changes in the work; and (8) a five percent markup for work performed by a sub-subcontractor. As the dispute over Turner Electric's compensation wound up in litigation, it is obvious the parties could not agree on Turner's compensation, thus section 8.4 governs this dispute over Turner Electric's compensation.
While Gilbane argues the Total Cost Method is universally disfavored, it cites a number of cases, many from the Federal Court of Claims, where the method has been applied to the calculation of damages. Under these cases, the courts applying the Total Cost Method have required four indicia of reliability before allowing its use: (1) it is impossible or highly impracticable to prove the contractor's actual losses directly; (2) the contractor's bid or estimate was realistic and reasonable; (3) the contractor's actual costs were reasonable; and (4) the contractor was not responsible for any added expenses, costs or delays. Propollex v. Brownlee, 342 F.3d 1335, 1339 (Fed. Cir. 2003); Cavalier Clothes, Inc. v. United States, 51 Fed. Cl. 399, 418 (2001); Integrated Logistics Support Sys. Int'l, Inc. v. United States, 47 Fed. Cl. 248, 260 (2000); United States v. R. M. Wells Co., 497 F.Supp. 541, 545 (S.D. Ga. 1980).
Turner Electric asked the jury to award the following as elements of its damages caused by Gilbane's breaches of the subcontracts: (1) the net value of the written change orders; (2) the cost of the staffing service electricians directly hired by Turner Electric as a result of the compressed time to perform the subcontracts; (3) the five percent fee for supervising the electrical sub-subcontractors hired by Gilbane and Turner Electric as a result of the compressed time to perform the electrical work; and (4) Turner Electric's extra regular and overtime costs caused by the compression of the projects plus a twenty percent burden, as allowed by the subcontracts. This burden covers Turner Electric's profit (five percent), overhead (ten percent), and the cost of taxes, insurance and supervision (five percent). Each element of these damages is permitted by section 8.4 of the subcontracts between Gilbane and Turner Electric. As Turner Electric's damages were not calculated using the Total Cost Method but instead tracked the language in the subcontracts, we overrule Gilbane's second sub-issue. 3. The Evidence Was Legally and Factually Sufficient to Establish the Reasonableness of Turner's Costs.
In five points within this second sub-issue Gilbane argued Turner Electric presented insufficient evidence to prove each of the Total Cost Method's four required indicia of reliability. As we have determined the damages were not calculated using the Total Cost Method, we need not address these points. Tex. R. App. P. 47.1.
In its third sub-issue, Gilbane argues the evidence was insufficient to establish the reasonableness of Turner Electric's damages. Once again, we disagree.
In a breach of contract case, a party seeking to recover its costs has the burden to prove that the damages sought are reasonable. See Mustang Pipeline Co., Inc. v. Driver Pipeline Co., Inc., 134 S.W.3d 195, 200 (Tex. 2004). Evidence of the amounts charged and paid, standing alone, is no evidence that such payment was reasonable and necessary. Id. at 200B01. In Mustang Pipeline the Supreme Court determined there was no evidence that Mustang's costs were reasonable. Id. at 201. However, "reasonable" and "necessary" are not magic words that a witness must speak to support a jury's award. Burke v. Union Pac. Res. Co., 138 S.W.3d 46, 73 (Tex.App.-Texarkana 2004, pet. denied). Instead, a party need only present sufficient evidence to support a jury's finding. Id.
Initially, as discussed in section A(1) above, there was substantial evidence that Gilbane's decisions, actions, or omissions compressed the time available for Turner Electric to complete its work under the subcontracts. As Mr. Singer testified, if a construction project gets compressed, the compressed subcontractors are going to experience increased costs.
There was evidence that Turner Electric's original bids were reasonable. This includes Mr. Turner's testimony that, based on his more than thirty years experience as an electrician, which includes the construction of twenty-five schools, he calculated the amount of time required to perform all of the electrical work in the two projects, right down to the installation of each electric plug and light fixture. Then, using Gilbane's project schedule and representations that Turner Electric would have the full contract time to perform its work, Mr. Turner determined Turner Electric could complete both projects using regular crews with no need to supplement the number of electricians or any overtime work. In addition, numerous witnesses testified that, barring compression or other disruption of the construction schedule, Turner Electric should have been able to complete both schools with no use of overtime or supplemental labor. This constitutes some evidence that Turner Electric's original bid amount was reasonable.
Mr. Niccum testified, "without a doubt [compression of the projects] had implications financially." For Turner Electric, these financial implications were significant increases in the cost of labor to complete the projects. Turner Electric introduced evidence demonstrating that the costs it incurred over the amount originally bid were reasonable and necessary as required by Mustang Pipeline. The evidence was undisputed that CCISD had imposed an absolute date of July 1, 1999 for substantial completion of the two projects. If the deadline was not met, the offending contractor or subcontractor could be exposed to liquidated damages of $1,000 per day that the deadline was not met. In addition, Mr. Turner testified Gilbane repeatedly told the subcontractors, including Turner Electric, there would be no extensions of time granted or requested from CCISD. When the time to complete the schools was compressed as a result of Gilbane's acts or omissions, and faced with the absolute July 1, 1999 completion date, Turner Electric had no choice but to hire additional electricians and work overtime. As Mr. Turner testified, Turner Electric took the actions necessary to make certain it could provide the needed manpower for the two jobs. Mr. Turner testified that his labor cost was $19.00 per hour. At the same time, Gilbane directly negotiated with two electrical companies to hire supplemental electricians at an hourly rate of $14.75. In addition to the hourly rate, Gilbane agreed to pay the supplemental electricians a 50.15% burden amount plus overhead and mark-up. With overtime, the cost of this supplemental labor exceeded $40.00 per hour.
Mr. Turner testified that walking off the project was not an option due to the severe consequences of such an act. The consequences included potentially losing all equipment on the two job sites, non-payment of any outstanding amounts owed to Turner Electric at the time, Gilbane could collect on Turner Electric's bond which was backed by Mr. Turner's personal assets, or Gilbane could hire replacement companies and Turner Electric would be responsible for any amount paid to them over the subcontract amounts, and finally, the impact on Turner Electric's reputation would have been devastating.
The testimony recounted above constitutes some evidence that the costs incurred by Turner Electric in completing the two projects were both reasonable and necessary. See Burke, 138 S.W.3d at 73 (concluding that evidence comparing the cost of successfully repairing a well with the cost of an unsuccessful repair attempt and the original cost of the well was sufficient for a rational jury to conclude the cost of repair was reasonable and necessary). As there is more than a scintilla of evidence supporting the reasonableness of Turner Electric's costs, the evidence is legally sufficient. In addition, while Gilbane argues the evidence is factually insufficient it fails to point out any contradictory evidence. Accordingly, the evidence is factually sufficient as the finding is not so contrary to the overwhelming weight of evidence as to be clearly wrong and unjust. We therefore find the evidence supporting the reasonableness and necessity of Turner Electric's extra labor costs is both legally and factually sufficient. We overrule Gilbane's third sub-issue.
4. The Evidence Supporting the Award of Overhead and Profit Was Legally and Factually Sufficient.
In addition to granting the actual cost of the additional time worked by Turner Electric employees, the judgment also included the award of a twenty percent burden rate. The burden includes compensation for profit (five percent), overhead (ten percent), and taxes, insurance and supervisor costs (five percent). Turner Electric also received a five percent supervisory fee for the work performed by the various contract electricians hired by Turner Electric and Gilbane. In Gilbane's fourth sub-issue, Gilbane attacks the sufficiency of the evidence supporting the judgment's award to Turner Electric of specific percentage amounts within the burden for profit and overhead, as well as the award of the sub-subcontractor supervisory fee to Turner Electric.
Initially, Gilbane relies on the language in the subcontracts requiring the payment of overhead, profit, and a supervision fee only if the claims arise out of a written change order. In Gilbane's view, because there were no written change orders for the additional labor damages awarded in the judgment, then Turner Electric cannot depend on the language found in the subcontracts and instead must prove up its actual overhead and profit attributable to the compression of the projects caused by Gilbane. However, Gilbane's reliance on this requirement of a written change order is misplaced. When a contractor breaches a construction contract, it relinquishes its contractual procedural rights concerning change orders and claims for additional costs. Shintech, 688 S.W.2d at 151. Thus, the fact there was not a written change order authorizing all of the additional work performed by Turner Electric does not preclude an award of damages under the terms of the subcontracts authorizing compensation for additional work.
Section 8.4 authorizes a subcontractor to receive a five percent markup for work performed by a sub-subcontractor. As the subcontracts specifically permit a five percent supervisory fee for work performed by a sub-subcontractor, Gilbane's attack on the inclusion of such a fee in the judgment is without merit.
As for the award in the judgment of ten percent for overhead and five percent for profit, Turner Electric had to introduce evidence establishing that such amounts were reasonable. Here there was evidence supporting that determination. First, the Space Center subcontract, in sections 8.3(c) and 12, addressing an alternative method for compensating additional work performed by Turner Electric, specifically calls for the payment of overhead in the amount of ten percent and a five percent profit. This is some evidence that the parties, Gilbane and Turner Electric, considered such amounts reasonable. In addition, Mr. Turner testified Gilbane and Turner Electric negotiated, and agreed to, the twenty percent burden rate, which includes overhead and profit. Finally, the fact Gilbane agreed to pay the contract electricians it directly hired to supplement the labor on the projects overhead of ten percent and profit of ten percent serves as further evidence that the rates awarded to Turner Electric were reasonable. As there is legally and factually sufficient evidence supporting the award of overhead, profit, and a supervisory fee to Turner Electric, we overrule the fourth and final sub-issue.
Having overruled each sub-issue, we overrule Gilbane's first issue on appeal.
B. Turner Electric Did Not Waive Its Claims or Fail to Comply With Conditions Precedent for Making a Claim.
In its fourth issue, Gilbane makes two separate arguments. First, Gilbane argues the evidence conclusively established that Turner Electric waived all claims for work that occurred prior to November 30, 1999. Second, Gilbane argues the evidence was insufficient to establish that Turner Electric complied with the conditions precedent for making claims. Again, we address each argument in turn.
1. Gilbane Waived its Affirmative Defense of Waiver.
Waiver is the intentional relinquishment of a known right or intentional conduct inconsistent with claiming that right. 4901 Main, Inc. v. TAS Auto., Inc., 187 S.W.3d 627, 632 (Tex.App.-Houston [14th Dist.] 2006, no pet.). Waiver is an affirmative defense. Tex. R. Civ. P. 94. The failure to request a jury question on an affirmative defense results in waiver by the party relying on it unless the issue is conclusively established. Tex. R. Civ. P. 279; XCO Prod. Co. v. Jamison, 194 S.W.3d 622, 632 (Tex.App.-Houston [14th Dist.] 2006, pet. denied).
Gilbane did not request a jury question on its affirmative defense of waiver and therefore it must demonstrate that the evidence conclusively establishes waiver. In support of its argument, Gilbane points to a "Partial Release and Waiver of Lien and Affidavit of Bills Paid" ("Releases") executed by Turner Electric for both projects. We disagree the Releases conclusively establish Turner Electric waived all claims for work that occurred prior to November 30, 1999.
The language of the Releases themselves work against Gilbane's argument. The Releases, which were executed on March 7, 2000, state: "Subcontractor hereby waives, relinquishes and releases its lien, claims and charges of every nature which have arisen by Subcontractor . . . to the extent such monies have been paid . . ." By their plain language, the Releases exclude any sums that were still owed to Turner Electric as of March 7, 2000. There was extensive evidence, both testimony and documents, that, at the time Turner Electric executed the Releases, there were outstanding sums still owed to Turner Electric and that Gilbane had notice of those claims. Turner Electric had presented its claims for the additional labor costs caused by the compression of the projects to Gilbane prior to the execution of the Releases. Among the evidence showing this was a January 21, 2000 letter to Gilbane in which Turner Electric notified Gilbane that it was still owed $313,000 on the projects and that amount did not include any amount for overtime or outside labor as those amounts were still not finalized. This evidence also includes the testimony of Mr. Lightman that he was aware at the end of the projects that there were outstanding issues on the payments due Turner Electric.
Mr. Niccum testified that it is common in the construction industry for claims by subcontractors for additional money under the subcontracts to not come in until the very end of the work. According to Mr. Niccum it occurs at the end as it is not until that point, after the work is mostly complete, that a subcontractor knows what costs above the subcontract amounts it has incurred. Mr. Niccum also testified that even though there might be outstanding payment issues, it is standard practice in the construction industry for subcontractors to submit the type of release at issue here in the expectation that all open payment issues would be resolved and a final payment would be forthcoming. Mr. Niccum continued that this practice is almost mandated by the fact that most owners, such as CCISD, require these releases before they will make final payments to the general contractor.
As the evidence does not conclusively establish waiver, Gilbane was required to submit a jury question on that issue. As it failed to do so, Gilbane waived this affirmative defense for purposes of appeal. XCO Prod. Co., 194 S.W.3d at 632. We overrule Gilbane's first sub-issue.
2. By Breaching the Subcontracts, Gilbane Relinquished Its Contractual Procedural Rights Concerning Change Orders and Claims for Additional Costs.
In this sub-issue, Gilbane argues there is insufficient evidence to establish that Turner Electric complied with the subcontracts' conditions precedent for submitting a claim. Specifically, Gilbane argues there is no evidence that Turner Electric promptly submitted a written claim for compression costs as required by section 8.1 of the subcontracts.
Initially, Gilbane's reliance on this requirement of a written claim presented in a certain format is misplaced. When a contractor breaches a construction contract, it relinquishes its contractual procedural rights concerning change orders and claims for additional costs. Shintech, 688 S.W.2d at 151. In addition, despite Gilbane's assertion otherwise, there is nothing in the subcontracts mandating a particular form or deadline for the submission of a claim.
Finally, even if Gilbane had not relinquished its contractual procedural rights by breaching the subcontracts, there is evidence in the record that (1) it was standard practice in the construction industry for claims to be made at the end of projects as it is not until that point in time that additional costs are known; (2) Turner Electric put Gilbane on verbal and written notice throughout the projects that it would not be responsible for additional costs caused by others involved in the projects; and (3) Turner Electric submitted to Gilbane a written claim that included back-up documentation for the amounts it was seeking. In addition, Mr. Turner testified that, in his thirty years of experience in the construction business, the type of documentation provided to Gilbane was sufficient to constitute a claim for delay costs. As there is more than a scintilla of evidence demonstrating that Turner Electric submitted a claim to Gilbane for its compression costs, the evidence is legally sufficient. While there was testimony that Turner Electric did not submit a claim, it was thus the jury's responsibility to weigh the credibility of the witnesses and decide the weight to be assigned to their testimony. The jury decided this issue against Gilbane. As the evidence supporting the jury's determination is not so contrary to the overwhelming weight of evidence as to be clearly wrong and unjust, the evidence is factually sufficient. We overrule Gilbane's second sub-issue.
Having overruled both sub-issues within Gilbane's fourth issue on appeal, we overrule Gilbane's fourth issue.
C. Gilbane Waived Its Argument That the Judgment Should be Modified.
In Gilbane's sixth issue, Gilbane asserts we should modify the amount of the judgment as it includes a double recovery because, in Gilbane's view, it awards Turner Electric the value of the labor performed for change orders twice. However, Gilbane cites no legal authority which supports this argument. On appeal, an appellant's brief must contain a clear and concise argument for the contentions made with appropriate citations to authorities and the record. Tex. R. App. P. 38.1(h). Failure to do so results in waiver of that issue on appeal. Accordingly, Gilbane has waived this issue on appeal and therefore, we overrule its sixth issue.
D. We Need Not Address Gilbane's Issues Attacking the Jury's Fraud Findings.
Turner Electric sued Gilbane asserting causes of action for both breach of contract and fraud. After the jury found in favor of Turner Electric on both causes of action, Turner Electric elected to recover under its breach of contract cause of action. We have overruled all issues raised by Gilbane addressing the breach of contract cause of action. In its second, third, and fifth issues, asserting various arguments, Gilbane attacks the jury's fraud findings. As we have overruled Gilbane's issues attacking the judgment based on breach of contract, we need not address the fraud issues. Tex. R. App. P. 47.1.
Having overruled all of Gilbane's issues on appeal necessary for a final disposition of the appeal, we affirm the trial court's final judgment.