Two recent decisions, by the Court of Federal Claims and by the Department of Transportation Board of Contract Appeals, remind us of basic federal contract law about interpretation of contract documents, here in type I (subsurface conditions materially different from those shown) differing site conditions.
In Betancourt & Gonzalez, S.E., DOTCAB No. 2789, 95-1 BCA ¶ 27,455 (1995), the contractor was to excavate and install sewer mains at the U.S. Coast Guard Air Station Borinquen, Aguadilla, Puerto Rico. During performance, the contractor alleged that it encountered a type I differing site condition when it removed almost five times the amount of limerock than that shown in the boring logs. The solicitation contained copies of the boring logs. The boring logs “did not show the existence of limerock such as would impede excavation,” and there was “nothing in the drawings[that] would indicate that limerock in such quantities or formation would be encountered.” Id. at 136,764. Although the contractor had previous experience and knew that it was common to encounter limerock in the general area, it did not factor this into its bid. The Coast Guard denied the contractor’s differing site condition claim on the ground that the contractor should have known of the condition from previous experience.
The DOTCAB reviewed general federal law about a contractor’s right to base its bid on government specifications:
The rule is well established that where the Government makes positive statements in the specifications or drawings for the guidance of bidders, that a [sic] contractor has a right to rely on them regardless of contractual provisions requiring the contractor to make investigations. Arcole Midwest Corporation v. United States, 125 Ct. Cl. 818, 822 (1953) (citations omitted). The [differing site] conditions clause makes it clear that bidders are to compute their bids, not on the basis of their own pre-award surveys or investigations, but upon the basis of what is indicated and shown in the specifications and on the drawings. Foster Construction C.A. v. United States, 193 Ct. Cl. 587, 614, 390 F.2d 926 (1968).
Id. at 136,765-6.
The DOTCAB dismissed the Coast Guard’s argument about the contractor’s knowledge and previous experience, holding that:
In essence the Coast Guard is arguing that the Board should engraft a new theory onto government contracts law, that whenever a bidder has worked in a general, widespread area, prior to bidding that firm is obligated to contact the contracting officer and educate him/her as to all the subterranean peculiarities prevalent for miles around the base which might affect performance, notwithstanding representations by the government in the solicitation as to conditions to be encountered. We see no reason to so add to the burden of local contractors, to the benefit of those from outside an area who are not familiar with local conditions and therefore have no commensurate obligations.
In general, contractors are not responsible for conducting their own prebid subsurface investigations; the contracting agency takes this responsibility and makes its investigations a part of the solicitation. Contractors may base bids on what is shown in the specifications, the boring logs, and the drawings.
In Kit-San-Azusa J.V. v. United States, 32 Fed. Cl. 647 (1995), the contractor claimed that it encountered a differing site condition when it found more cobbles and boulders than expected while performing excavation work. The Bureau of Reclamation (BR) denied the contractor’s claim and argued that the contract documents put the contractor on notice that cobbles and boulders should have been anticipated. The Court summarized the facts:
The specifications indicate that much of the building site is composed of Quatenary Glacial Outwash (“Qw”). Paragraph 1.3.13 of the specifications defines Qw to be ‘generally composed of a heterogenous mixture of silt, sand, gravel, cobbles, and boulders.’ At subparagraph (6), the specific site geology is described as composed of fill and slope wash overlaying fluviolacustrine deposits, which, in turn, overlay deposits of Qw. Fluviolacustrine (“Qf”) is defined as “Undivided lake deposits (silt, sand, or clay) and interbedded shoreline accumulations of sand, gravel, and cobbles.
The Bureau took a substantial number of soil borings at the site. They are referred to in the specifications at the same subparagraph. There the contractor is informed that “glacial outwash . . . was encountered at the site in all drill holes and consists of a heterogenous mixture of silt sand, gravel, cobbles, and boulders.
The drilling notes bear out this description. The drillers indicate boulder in three of the five sets of notes available. When those notes were translated into the drilling logs furnished to the contractor, however, no reference was made to boulders. What did remain is reference in five of the drilling logs to cobble, or “scattered cobble,” as well as other soils.
Id. at 651. The Court held:
While the contractor cannot ignore the site description, it is entitled to place greater reliance on boring logs if they are numerous and well spaced, as these were. The specifications’ reference to boulder, even at the site-specific level, was due to the general classification type of the soil.
The Government places too much emphasis on the general classification of the soil and not enough on what was specifically found, at least insofar as what was shown the contractor in the boring logs.
. . . .
The court concludes that to the extent there was boulder, and that the boulders interfered with construction, the Contractor encountered a differing site condition. To hold to the contrary means that a contractor has to assume from the possibility of boulder in a general type of geologic stratum, that boulder could be encountered at any point, despite the lack of indications in the boring logs. Such an assumption would be nearly impossible to factor into a bid.
The Court went further and dismissed BR’s argument that one cannot extrapolate more than one foot from a boring log. The Court recognized that such a principle would create havoc with the parties’ ability to interpret subsurface information:
[A] private consulting engineering geologist, testified for the Government that one cannot extrapolate more than a foot from a boring log. Under that approach, the site could have had no boulders, or, according to the Government, it could be virtually solid boulder. Would there be no differing site condition so long as there was no boulder within a few feet of any of the boring holes? Clearly at some point the degree of difficulty due to boulder becomes a differing site condition. That point was reached here.
Again, as in Betancourt & Gonzalez, familiar contract principles apply. When the contractor is presented with specific information about subsurface conditions from boring logs and general information from the specifications about the type of soil, the contractor should place greater reliance on the specific, rather than the general, information.
— Stuart Nash
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