I have written in the past on a contractor’s duty to inquire pre-bid about ambiguities in plans and specifications.
Generally, the duty to make such inquiries arises when the ambiguities are patent or, in other words, obvious. Whether an ambiguity is patent or latent is not always an easy question to resolve. A recent case in Alabama is particularly instructive because, in addition to addressing the typical latent/patent question, it examines the impact an owner’s approval of shop drawings containing the contractor’s incorrect assumptions has on the contractor’s liability.
Unfortunately for contractors, the news is not good. Otis Elevator Co. v. W.G. Yates & Sons Constr., 589 Fed.Appx. 953 (11th Cir. 2014) involved a project to expand the Huntsville-Madison County Airport. Included in the plans were drawings covering four new escalators—two exterior to the building and two in the interior. Those drawings contained a “tick mark” indicator that showed a nominal escalator width of 39.5 in. The prime contractor received two pre-bid quotes from escalator manufacturers—Otis Elevator and Schindler Elevator produced stair treads and both quoted 32-in.-wide stair treads. Otis, the ultimately successful subcontractor, later explained that it had interpreted the 39.5-in. dimension in the drawing as referring to the width between the rubber handrails, which, by standard escalator dimensions, equated to 32-in. stair treads. Testimony in the case would later prove that standard escalator stair treads come in 24, 32 and 40 in. widths. Testimony further proved that Otis’ standard 40-in. stair tread was actually 39.37 in. wide and Schindler’s is 39.5 in. wide.
During the project, Otis submitted its shop drawings, which clearly denoted the 32-in. stair widths, and neither the prime contractor nor the owner’s designer questioned the widths. The shop drawings were approved and returned to Otis. Unfortunately, after Otis fully installed all escalators, a representative of the design firm discovered the problem during a site visit, and the owner subsequently demanded that the prime contractor replace all escalators with wider 40-in. treads. Otis argued that the 39.5-in. dimension contained in the drawings was “cryptic” and could reasonably be interpreted as applying either to the width between the rubber hand rails, which would equate to 32-in. stair widths, or to the actual stair widths (i.e., the 40-in. nominal stair width). Although the prime informed Otis that it believed Otis should have raised this issue pre-bid, it agreed to present Otis’ arguments to the owner.
Those arguments failed to convince the owner and, after much negotiation, the prime agreed to credit the owner $100,000 in return for its acceptance of the narrowed escalators and to provide a new fifth escalator complying with the 40-in. stair width requirement. The prime and Otis agreed to reserve their rights to seek reimbursement from each other. After the work was finished, Otis sued the prime and actually prevailed.
On appeal, Otis argued that the drawings were ambiguous in that the 39.5-in. dimension could reasonably be interpreted as applying either to the stair tread width or the distance between the handrails. Significantly, Otis pointed out that Schindler’s bid to the prime also specified 32-in. stair tread widths. Otis also argued that both the owner and prime contractor approved Otis’ shop drawings and never objected to the dimension until after the escalators were fully installed and operational. The appeals court agreed that the dimension was ambiguous, but because Otis’ estimator admitted in testimony that he noticed the discrepancy, it determined that the ambiguity was patent and, therefore, Otis had a duty to make a pre-bid inquiry. By not making such an inquiry and assuming one interpretation over another, Otis assumed the risk that its assumption was incorrect. The court thus ruled for the prime contractor.
As is often the case, both the prime contract and the subcontract contained provisions absolving the owner and prime contractor for any liability for failing to detect errors in shop drawing submittals, so the court rejected Otis’ other arguments. One note is worth pointing out: Had Otis argued that the dimensions were unambiguous, it could have cited Schindler’s quote using the same stair tread width as evidence that there was no confusion over what the drawings intended. Unfortunately, given Otis’ admission that the dimension was ambiguous, Schindler’s quote constituted nothing more than evidence that Schindler made the same assumption Otis did.