Federal Circuit Court Of Appeals Upholds Claim For Differing Site Conditions

ACE Constructors, Inc. v. U.S.
2007 U.S. App. Lexis 22309 (Fed. Cir. September 19, 2007)

The US Court of Appeals for the Federal Circuit upheld a contractor’s claim for additional compensation due to differing site conditions.

ACE Constructors, Inc. (“Contractor”) entered into a contract with the United States Army Corps of Engineers (“Government”) to build a structure designated as the Ammo Hot-Load Facility, at Biggs Army Airfield at Fort Bliss in El Paso, Texas. The project included construction of a loading area for cargo planes, various roadways, buildings, a storage pad, a loading apron, and a taxiway for airplanes. The site contained hills and other terrain that needed to be excavated, leveled, and filled. The bid solicitation materials included architectural drawings and engineering specifications prepared for the government by the engineering firm of Crawford, Murphy & Tilly, Inc., which plans were incorporated into the contract.

During performance Contractor encountered numerous difficulties. Contractor was required to alter its construction procedures due to actual conditions encountered, and experienced significant additional costs. The project was ultimately completed to Government’s satisfaction, and Contractor filed several claims for its additional costs based on the unforeseen conditions and defective specifications. The contracting officer granted some of Contractor’s claims and denied others.

Contractor appealed to the Court of Federal Claims, as provided by the Contract Disputes Act, 41 U.S.C. §605. After a five-day trial, the Court of Federal Claims decided several issues in favor of Contractor, awarded damages in the amount of $1,383,009 and ordered the return of liquidated delay damages in the amount of $246,130. Government appealed the decision of the Court of Federal Claims on several issues; the method for measuring concrete smoothness specified within the contract, concrete paving and a differing site conditions “earthwork” claim.

The trial court found that Contractor encountered a Type I differing site condition in that “[r]ather than being a balanced project as indicated by the cut-and-fill schematics, the site required approximately 129,000 additional cubic yards of soil.” A “balanced project” is one where the amount of dirt excavated from a site is roughly equivalent to what is needed for fill-ins and to meet embankment requirements. The government did not dispute that this discrepancy was the result of a defective specification, and that 129,000 additional cubic yards of fill were required.

The trial court found that the conditions were reasonably unforeseeable by Contractor, and awarded Contractor a total of $501,012.49, calculated as $462,745.76 for direct costs on the differing site condition and additional costs due to constructive acceleration.

The Government did not contest its liability, but disputed the quantum of compensation, arguing that despite the defective specifications provided by Government, there was evidence that Contractor “knew better” concerning the conditions of the site. On appeal Government contended that Contractor should have foreseen this error in the specifications, and bid accordingly. The Court of Appeals found that the record showed that before Contractor bid on the project, it retained an expert consultant, Dirt-Tek, Inc., who analyzed the project based on the plans provided by Government and concluded, based on those plans, that the project would be relatively balanced, in that an approximately equal amount of dirt would be excavated as needed for fill. The trial court found that Contractor acted reasonably in concluding that it would not need a significant amount of additional fill, and calculated its bid accordingly.

On appeal, Government also argued that the court should have taken into account that Contractor expected to achieve savings through excess fill or a “balanced project” — although it turned out to have been seriously unbalanced — and that Government should be credited with Contractor’s expected albeit unrealized savings. The Court of Appeals found that argument devoid of merit because it was not presented to the contracting officer and was not discussed in the decision of the Court of Federal Claims. Holding that the amount of fill used and the costs incurred were not disputed, the Court of Appeals affirmed the judgment of the Court of Federal Claims.

Click here to view full opinion as PDF (provided with the permission of LexisNexis).

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