By Jon Straw
When you visit your doctor (or lawyer) do you only provide the information that you think is important or do you “lay all your cards on the table”? Usually, more information is better than less.
Under contract with the U.S. Army Corps of Engineers, a contractor was to perform hydraulic dredging for a waterway in Washington State. Since the waterway needed dredging about every two to three years, a new contract was solicited and awarded each time. This contractor had over 60 years of dredging experience, but did not perform a pre-bid site visit that the government recommended. This is the story of Marine Industrial Construction, LLC v. U.S., 158 Fed. Cl. 158 (Feb. 17, 2022).
Unlike prior contract cycles, the government’s solicitation/RFP: (i) warned of dangerous weather conditions and some debris in the dredging area, but also stated that the government had no information about artificial obstructions that would require any special efforts; (ii) excluded warnings of sunken boats, fishnets, steel trolling wire, and machinery; and (iii) excluded precipitation information for the area and warnings about the resultant faster currents that could carry large trees and debris that could arise with little warning and potentially damage dredging equipment. The contractor encountered nearly all the problems that the government had advised in prior contract cycles. Subsequently, the government terminated the contractor for default for delays.
The contractor argued, among other things, that the government withheld superior knowledge that, had such information been known to the contractor, cost and delays could have been avoided or mitigated. Proving this required that the contractor show three elements: (1) that the contractor undertook performance without vital knowledge of fact(s) affecting performance, (2) the government knew the contractor did not know of such fact(s), and (3) any information that the government did provide either misled or did not inform the contractor of such fact(s). Although this was a federal contract, nearly every state has adopted this doctrine of superior knowledge with very similar elements.
Proving the elements of superior knowledge is not easy. This doctrine is often asserted, but rarely successful. In this instance, the contractor argued several facts were of sufficient importance that the government should have, but did not share them. For example, in prior dredging contracts, the government had required a minimum hydraulic dredging pipe size of 12 inches, but that minimum requirement was not included in this contract. Instead, the performance specifications imply identified the goal and left it to the contractor with 60-years of experience to determine the best means to accomplish that goal. This contractor used a pipe size of 10 inches, the two-inch difference was enough that clogging was a significant factor in the contractor’s inefficiency. The contractor successfully argued that if the government had shared all, or even some more than none, of the information from prior contracts about debris and the like, then the contractor would have known that the pipe size was a fact vital to the contractor’s performance.
The court held that when the government establishes a minimum requirement that it uses for several years and which is repeatedly identified as “minimally sufficient” (in prior contracts), and then failed to inform the contractor that such minimum requirement was removed from the specifications, the government impermissibly withheld vital knowledge. The contractor was also successful in proving the government withheld vital information about sunken debris, since a site visit would not have apprised the contractor of such information.
In another example, however, a site visit and other information in this solicitation should have provided just enough information to the contractor of surface debris and the likely effects of weather-related events. On these facts, the contractor was unsuccessful.
After terminating the contractor for delays, the government re-inserted into the next contract some of the warnings and information from the prior contracts. The replacement contractor, which was also the contractor on several prior dredging contracts, timely completed the remaining dredging work. R&B