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Contractors must pay attention to details before starting a job

Article May 16, 2003
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Comtrol, Inc. v. United States, 294 F.3d 1357 (Fed. Cir.
2002) is a recent Federal Circuit Court of Appeals case that makes clear how
contractors can lose a claim for differing site conditions and defective
specifications prior to bidding.

The Federal Aviation Administration awarded Comtrol Inc. a
contract to construct an air traffic control tower at the Salt Lake City
International Airport. The solicitation included the standard differing site
condition and site investigation clauses. Paragraph 1.6 of the solicitation
stated that "[h]ard material . . . may be encountered," and that
"[n]o pipes . . . except those indicated, will be encountered."

Paragraph 1.1.5 incorporated by reference a soils report and
four sets of construction drawings. Comtrol did not review the soils report
prior to submitting its bid and did not request or obtain the construction
drawings until after experiencing difficulty on the project due to encountering
quicksand.

Comtrol filed suit against the U.S. seeking an equitable
adjustment based on claims of differing site conditions and defective
specifications. The court granted summary judgment in favor of the government
on Comtrol's claims. Comtrol appealed this decision to the U.S. Court of
Appeals for the Federal Circuit.

Running into problems

Comtrol's two claims for differing site conditions and
defective specifications were based on its encounter with quicksand and the
placement of the Chevron pipeline in the utility corridor. First, Comtrol
alleged its unexpected encounter with quicksand during the course of
construction constituted a differing site condition and that the specification
was defective for failing to disclose the presence of quicksand. In the federal
contract, Type I differing site conditions consist of "subsurface or
latent physical conditions at the site which differ materially from those
indicated in the contract." FAR § 52.236-2(a)(1) (1994). With regard
to Comtrol's claim for differing site conditions, the court found that Comtrol
was not reasonable in assuming the pervasive existence of hard material from
Paragraph 1.6 of the solicitation, which provided that hard material may exist.
Because Comtrol's contract did not affirmatively represent that only hard
material would be encountered, Comtrol could not establish that the conditions
encountered differed materially from those specifically indicated in the
specification.

In support of its claim for defective specifications,
Comtrol alleged the soils report suggested that Comtrol would encounter dense
and cohesive materials. In order to recover on a defective specifications
claim, a contractor must show that it was actually misled by the erroneous
statements. Because Comtrol failed to obtain and review the soils report, which
was incorporated by reference into the contract, Comtrol could not rely on the
report to support its claim for either defective specifications or differing
site conditions. 

While a contractor is charged with knowledge it could have
gained from contract documents, a contractor cannot rely on contract documents
it has never read. The court concluded that because Comtrol chose to bid
without securing the relevant bid documents, "it cannot bid in ignorance
and then base a claim for equitable adjustment on a document it did not review."

Second, Comtrol alleged that the Chevron pipeline was not
disclosed in the contract, thereby constituting a differing site condition for
which it is entitled to compensation. However, one of the drawings specifically
depicted a structure labeled "Existing Chevron Pipeline" with a note
that the pipeline was to be relocated to the utility corridor by others.
Because the court determined that the documents were on their face ambiguous
and the ambiguity in the documents was patent, Comtrol could not establish a claim
for differing site conditions or defective specifications relating to the
pipeline because it failed to satisfy its duty to seek clarification of a
patent ambiguity.

What are the points to be learned here? Contractors must
review soils reports and plans and must clear up patent ambiguities to
establish a claim for differing site conditions or defective specifications.
Additionally, contractors must seek clarification of obvious ambiguities.

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