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May 16, 2003

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.

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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