The government has the right to insist upon strict compliance with the contract specifications. However, the government does not have an unlimited right to require corrective work when it is not really necessary and amounts to economic waste. In other words, just because a contractor has failed to comply with the precise requirements of the specifications, that does not mean that the government can force the contractor to needlessly spend thousands of dollars when the work is otherwise acceptable. The economic waste doctrine is an exception to the general rule that “the government generally has the right to insist on performance in strict compliance with the contract specifications and may require a contractor to correct nonconforming work.”

A recent case before the United States Court of Federal Claims highlights the viability of the exception. In M.A. DeAtley Construction, Inc. v. United States, (Fed. Cl. February 28, 2007), the contractor pursued a claim of over $250,000.00 because the government directed removal and replacement of a roadway subbase. The specifications required that no more than 10% of the aggregate in the subbase pass the #200 sieve. The contractor’s stone aggregate gradation was 10.69%. Although the contractor maintained that the gradation substantially complied with the specifications, the government directed removal because of the .69% overage. The contractor offered a small credit to the agency because of the slight deviation, but the government rejected the offer.

The government moved to dismiss the economic waste claim on the procedural ground that the argument had not been presented to the contracting officer, as required by the Contract Disputes Act. The Court denied the motion stating that the contractor had presented the “operative facts” of an economic waste claim to the contracting officer, namely that the contractor had substantially complied with the specifications, that the work was adequate for its intended purpose, and that removal and replacement was economically wasteful.

Contractors should carefully review government directives to remove and replace work. If it can be established that the work substantially complied with the specifications and was otherwise adequate for its intended purpose, it may prudent to present this argument to the contracting officer before undertaking costly removal and replacement work.