Contract Performance Issues

A recently reported decision by the Armed Services Board of Contract Appeals underscores the necessity for bidders to review pre-bid data listed in the solicitation. In Mass Construction Group, Inc., ASBCA No. 55440, the contractor pursued a claim for a differing site condition, alleging that it had encountered a Type II condition, namely “unanticipated” groundwater flooding into its footing excavations.

The ASBCA, in denying the contractor’s appeal, made the following findings of fact:

1)  The solicitation advised bidders that subsurface data was available for review at a specified location. (the government’s contracting office).

2)  The subsurface data disclosed a groundwater table that existed between three and one half and six feet of the surface elevation.

3) The contractor did not review any of the subsurface data before submitting its bid and did not attend the pre-bid site visit.

4) The site conditions encountered by the contractor were quite similar to those disclosed in the subsurface drilling logs that the contractor neglected to review.

The ASBCA, therefore, found that the contractor had not established that it had encountered unanticipated site conditions. Significantly, the Board stated that the failure to review the subsurface data at the scheduled pre-bid site visit,” put Mass at risk of any unexpected subsurface conditions which it encountered.” 

The message in this decision is unmistakable: If the government’s solicitation advises potential bidders of subsurface data that is available for inspection, bidders must review this data or be willing to risk the potentially serious consequences of failing to do so.

In the most recent edition of Defense AT&L, a magazine published by the Defense Acquisition University, author Wayne Turk discusses the skills that a competent project manager needs to possess in the 21st Century.  In addition to people, financial and scheduling skills, Turk emphasizes seven attributes of a good project manager – patience, wisdom, sense of humor, flexibility, creativity, understanding of the law of unintended consequences, and subject matter expertise.  While Turk points out that there is no substitute for practical experience, he also provides sources of information and training for neophyte, as well as experienced, managers.  Reading this article, as well as Turk’s earlier “Ten Rules for Success as a Manager,” Defense AT&L, July-August 2004, provides useful information to prospective federal construction contractors about what agency source selection officials may look for when they review the qualifications of management personnel in connection with proposals on negotiated procurements.

The U.S. Army Corps of Engineers awarded an $88 million contract for the construction of a fifty-three mile road around a tropical island in the North Pacific. During contract performance, the contractor submitted a certified claim contending that the contract clause, "Time Extensions for Unusually Severe Weather," was defective, resulting in a gross misrepresentation of the number of adverse weather days that could be anticipated during performance of the work.  The contractor also contended that reliance on the defective specification led to an increase in the cost to perform the work. The certified claim included costs incurred up to the date of the claim submission and costs estimated to be incurred in the future.

The United States Court of Federal Claims found that $50 million of the contractor’s certified claim of $63.4 million was clearly fraudulent. During the trial, witnesses, including the corporate officer who certified the claim, testified that the $50 million claim "was a means to get the Government’s attention, and to show the Government what would happen if it did not approve the new compaction method that plaintiff wanted."  The Court stated that this part of the certified claim was not submitted in good faith, and was not for an amount which the Plaintiff honestly believed it was entitled. Daewoo Engineering and Construction Co., LTD. v. U.S., No. 02-1914C, October 13, 2006.  Accordingly, the projected additional costs based on estimates, and not yet incurred, were found to be fraudulent.

Continue Reading Contract Claim Designed to "Get the Government"s Attention" Found to be Fraudulent

The Armed Services Board of Contract Appeals recently reiterated the requirements a contractor must meet in order to recover unabsorbed home office overhead using the Eichleay Formula.  In Kato Corporation, ASBCA No. 51462, the Board held that a contractor must establish three elements to successfully maintain a claim for recovery of its home office costs as a result of a delay:

1) There must be a government-caused delay of an indefinite duration that delays completion of the entire project and there must be no concurrent contractor caused delay;

2) The original contract performance time must be extended by the delay, or the contractor must prove that it was going to finish early and was prevented from doing so by a government-caused delay; and

3) The contractor must show that it was required to remain on standby, ready to resume work, once the delay had ceased. 

In Kato, the contractor failed to prove that the government delayed the completion of the work. Although the contractor presented evidence that the government issued three change orders that delayed completion of specific portions of the work, it did not prove a causal link between those changes and a delay to the critical path, thus failing to demonstrate that the overall project had been delayed. The ASBCA further found that the work had not been suspended for an indefinite period of time because Kato had continuously performed some work at the site during the claimed delay period. Since Kato had been performing work, the Board also concluded that it could not prove that it was on “standby” during the purported delay. 

This decision points out the critical importance of proving that a government-caused delay occurred that it actually delayed completion of the overall project. 

Although a contractor encountered subsurface conditions in a dredging project that it may not have anticipated, it was unable to prove that the hard material was a differing site condition.   The contractor’s claim was that it had encountered a Type I differing site condition. The Armed Services Board of Contract Appeals denied the claim, stating that the contractor had not proven that the actual conditions differed materially from those indicated in the solicitation. The ASBCA reiterated the four elements of proof that a contractor must meet in order to prevail on a Type I differing site conditions claim, as follows:

1) The conditions in the contract must have differed materially from those encountered.

2) The actual conditions must not have been reasonably foreseeable based upon all of the information available to the contractor at bid time.

3) The contractor must have reasonably relied upon its interpretation of the contract and the contract related documents. (In this case there were additional boring logs referenced in the solicitation that were available upon request).

4) The contractor must have been damaged by the actual, materially different, conditions.

In denying the contractor’s claim for a differing site condition, the ASBCA held that “a contractor has a duty to review information that is made available for inspection.” The Board of Contract Appeals determined that had the bidder reviewed the referenced boring logs in conjunction with those appended to the solicitation, the site conditions encountered would have been reasonably foreseeable. The ASBCA found that the actual conditions, including rock, cemented sand, and other hard materials were reasonably foreseeable based upon the borings in the solicitation and the additional borings referenced in the solicitation as being available upon request.  See Appeal of Bean Stuyvesant L.L.C.