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Government Cannot Eliminate Performance Options Set Out in Project Specs, Federal Circuit Holds
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March 10, 2008
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Howrey LLP
A government contractor was awarded a $14.3 million fixed price contract to construct a vehicle maintenance plant. The contract's specifications allowed the contractor to choose between two different materials - polystyrene rigid insulation or precast concrete -- for the project's fiber void retainers under grade beams. The specifications referred the contractor to the project's drawing detail for any changes to the dimensions of the materials.
The project's drawing detail, in contrast to the contract specifications, only made reference to the precast concrete retainers. The dimensions for concrete retainers were changed on the drawing. It did not state that polystyrene was unacceptable.
After award of the contract, the Army Corp of Engineers informed the contractor that the government understood the contract to require the use of precast concrete for the retainers. The contractor disputed that interpretation, contending that the specifications gave the contractor the option of using either concrete or polystyrene. The contractor asserted that it had based its bid on use of polystyrene.
The contractor subsequently filed a claim with the Armed Services Board of Contract Appeals seeking $56,140, the difference in cost between the precast concrete retainers the government forced it to construct and the polystyrene retainers the contractor had contemplated in its bid. The BCA ruled for the government.
The contractor appealed the BCA's decision to the U.S. Court of Appeals for the Federal Circuit. The court reversed the BCA. Medlin Construction Group, Ltd. v. Harvey, 449 F.3d 1195 (Fed. Cir. 2006).
The court determined that the issue on appeal was whether the drawing detail could legally limit options provided for in the contract's specifications. The contractor argued that the specifications and drawings were not in conflict because the specs gave the contractor two choices of retainer material. While the drawings altered the dimensions for the concrete retainers, they did not eliminate the polystyrene option.
The government claimed that while the drawings "narrow[ed] the latitude or options" allowed by the specifications, there was no conflict between the specifications and drawings.
The court held that the contractor's interpretation of the contract was the only reasonable interpretation because it gave meaning to all of the contract's provisions. In contrast, it held, the government's interpretation would render superfluous the contract's provisions describing the polystyrene retainers because the only purpose for including them was to provide a construction option for the retainer portion of the project. The government's interpretation would not just narrow the options but rather would completely eliminate the contractual option to choose the retainer material, causing a direct conflict between the specifications and drawing detail, the court concluded.
The contractor's interpretation avoided any conflict between the specifications and the detail drawing because the drawing simply gave dimensions required if the contractor chose to use precast concrete, the court wrote.
The court applied FAR 52.236-21(a)'s "like effect" provision to read the missing specification information, regarding the option for polystyrene retainers, into the drawing detail. Under FAR 52.236-21(a), in the event that either a contract's specifications or drawing details are missing information contained in the other, that missing information is incorporated into both documents. Here, the court applied the option for polystyrene retainers to the drawing detail.
Because the court found the contractor had a contractual right to choose the material for the project's retainers, the court held the contractor was entitled to reimbursement for the additional cost of fabricating the precast concrete retainers instead of the polystyrene retainers.
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For more information about the issues covered in this report, please contact Paul Berning in our San Francisco office at 415-848-4996 or at paulberning@howrey.com or contact your Howrey attorney. For more information about Howrey's Construction Practice Group, click here.
©2008 Howrey LLP
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