Over the years, I have worked on a number of disputes involving materials designated by the DOT to be used on the project, but that the contractor was unable to use. When is the contractor able to recover its additional costs? In T. Brown Constructors, Inc. v. Pena, 132 F.3d 724 (Fed.Cir. 1997) the Federal Circuit Court of Appeals gives contractors a roadmap for recovery.
Minus quality
On Dec. 4, 1984, T. Brown Constructors Inc. and the Federal Highway Administration (FHWA) entered into a contract to build 4.6 miles of highway in the Lincoln National Forest, N.M. After project completion, Brown submitted a letter to the contracting officer asserting entitlement to additional compensation for extra work related to, among other issues, clay in the quarry.
The contracting officer and, later, the DOT Board of Contract Appeals denied Brown’s claims. Brown appealed to the U.S. Court of Appeals for the Federal Circuit. The court’s decision addressed five claims.
The contract required aggregate production from a designated quarry. FHWA had conducted two tests relative to clay content. FHWA first performed the “washed-sieve analysis” to determine quarry material quality in order to assist the contractor in planning and estimating the crushing operation. The test results indicated very little quarry clay: 2.2% to 5.9% of “minus 200” material, no value for the liquid limit and nonplastic for the plasticity index. However, the test sample used included weathered rock, a direct violation of FHWA’s standard.
FHWA’s second test involved taking test borings from seven different points in the quarry, including three points from the area used for aggregate production. The seven logs had a 77.4 mean average fractured limestone percentage. The board found the boring logs, “when read together, reported no clay at some locations and strata, very small amounts of clay in others, and unquantified amounts of clay at other locations and strata.”
Brown claimed that FHWA’s failure to include a note about using a weathered sample in performing the washed-sieve analysis resulted in misrepresentation of the quarry’s composition. The board disagreed, stating “it was unreasonable for [Brown] to have expected to obtain in production the same results reported in the Washed Sieve Analysis precisely because a washed-sieve analysis is not representative of raw quarry material.”
Test washed away
The court reviewed a number of federal cases to establish what the contractor must show to prevail on a misrepresentation claim: the government made an erroneous representation of a material fact; the contractor honestly and reasonably relied on it; and the reliance was detrimental to the contractor. The court found Brown satisfied these elements.
The court concluded FHWA made an erroneous representation about the clay content in the quarry. The court disagreed with FHWA’s assertion that it was objectively unreasonable to rely on the washed-sieve analysis results because it also provided the boring logs to bidders. According to the court, the more specific test data trumps the more general test results.
In reality, the quarry’s clay content was significantly higher than what the washed-sieve analysis indicated: The minus 200 material was closer to the contract limit of 12%, the liquid limit reached 29 and the plasticity index 11. Based on the disparity between the reported test results and the amount of minus 200 material actually encountered, the court found FHWA had made a material misrepresentation; the board’s holding to the contrary was reversed.
