This article was originally published in the October 2015 issue of ConsensusDocs Construction Law Newsletter.
The U.S. Court of Federal Claims recently decided Vanguard Construction, Inc. v. United States, 2015 U.S. Claims LEXIS 1158 (Fed. Cl. Sep. 8, 2015), a case in which the U.S. Air Force (the Government) entered into a contract with Vanguard Construction, Inc. (Vanguard) to replace a roof. The contract incorporated by reference portions of the Federal Acquisition Regulation (FAR).
Vanguard’s demolition of the existing roof revealed that a significant section of the roof stem wall was missing. The parties’ contract did not address the contingency of a missing stem wall. Vanguard sent the Government several letters asking for guidance on how to proceed, including a request for information on structural requirements for building a stem wall. The Government refused to provide the requested information, asserting that the terms of the contract allocated to Vanguard the risk of dealing with latent or unanticipated site conditions and the burden of devising a solution to the problem.
While Vanguard disputed the Government’s assertions, it installed approximately 90 percent of the new roof, leaving undone only the portion of the roof near the missing stem wall, before demobilizing, claiming no more work was able to be completed. The Government issued Vanguard a Notice of Default, citing Vanguard’s failure to comply with its duty to “proceed diligently with performance” pending resolution of a dispute under FAR § 52-233-1(i), and terminated Vanguard’s contract.
Vanguard sought a conversion of the Government’s termination for default into a termination for convenience in the Court of Federal Claims. Vanguard argued that its failure to complete the roof was justified by the Government’s refusal to provide requested guidance and information necessary to complete the roof. The Government filed a motion for summary judgment, arguing that as a matter of law its termination for default was justified because Vanguard’s duty to proceed with performance was absolute.
In Vanguard, the court ultimately denied the Government’s motion for summary judgment. The court held that a contractor’s duty to continue performance under the standard “Disputes” clause is not absolute, but may be excused “if the decision to stop work is warranted under the particular facts.” Applying that standard, the court held that because the parties disputed two facts material to the issue of whether Vanguard’s decision to stop work was reasonable: whether the missing stem wall was visible prior to demolition, and whether the information requested by Vanguard was necessary to complete the roof near the missing stem wall, summary judgment was not appropriate.
Other courts have also considered whether the government’s failure to provide information can excuse a contractor’s performance. For example, in PBI Electric Corp. v. United States, 17 Cl. Ct. 128 (1989), the contract drawings contained circular symbols, but PBI Electric Corporation (PBI) did not inquire as to the meaning of the symbols until after being awarded the contract. When the government told PBI the symbols represented wall outlets, PBI requested details, drawings and specifications on wall outlets, asserting this information was necessary to continue its electrical work. The court noted that despite this assertion, the majority of the government’s and PBI’s own testimony established that the information would merely have made the electrical work easier and less expensive. As such, PBI did not act reasonably in stopping its work while waiting for the government to provide the information. And, even if this information had been necessary for PBI to continue its work, PBI did not act reasonably in failing to request the information before it bid the work because the circular symbols and the lack of accompanying detail were obvious on the face of the contract drawings.
A contractor’s duty to continue to perform in the face of allegedly insufficient information from the government was also addressed in Seven Sciences, Inc., ASBCA 21079, 77-2 BCA ¶12730. This dispute arose from the government’s award of a contract to Seven Sciences, Inc. (Seven) for the construction of a battery charger. Seven requested that the government provide legible copies of certain drawings and provide copies of drawings referenced in, but not included with, the drawing package, before it proceeded to construct the battery charger. In contrast to PBI Electric, the board in Seven Sciences found that the requested copies were necessary for Seven to construct the battery charger; and that the illegibility and the missing drawings were not obvious on the face of the drawing package, but would have required a “time consuming and expensive checking of the Government’s drawings prior to bidding.” As such, Seven acted reasonably in requesting the copies, and in stopping its work until the government provided them.
Similarly, the board in Remm Co., ASBCA 18430, 18545, 74-2 BCA ¶10876, held that insufficient information from the government could excuse a contractor’s performance. In Remm, the government rejected several valve assemblies on the grounds that a component part of the valves was insufficiently “straight.” When the valve manufacturer requested that the government specify the straightness required, the government responded that a straightness specification was not necessary for the contractor to produce an acceptable product. The board held that the manufacturer had acted reasonably in requesting the straightness specification where usual engineering practice was to empirically specify the straightness with a “TIR” value. The manufacturer acted reasonably in stopping work until the government specified the straightness required where the government had previously rejected the valves as having a component part that was insufficiently straight.
While Vanguard, PBI Electric, Seven Sciences and Remm all stand for the proposition that the government’s failure to provide information necessary to continue performance may except a government contractor from its duty to continue performance, the exception is limited to situations where the contractor’s decision to stop work is “reasonable.” Whether a contractor’s decision to stop work is reasonable is a fact-intensive question. Contractors and their counsel should carefully evaluate their contracts, the information available to them, and the scope and timing of any requests for information, before deciding to stop work under a government contract.
To read more about this case, including to view the full text of the court’s decision, courtesy of Lexis®, visit Pepper’s Construction blog at http://constructlaw.com/2015/09/28/court-of-federal-claims-holds-contractors-duty-to-continue-performance-under-disputes-clause-may-be-excused-where-government-fails-to-provide-information-necessary-to-continue-performance/#more-1272
To view construction cases of interest, visit www.constructlaw.com.
The material in this publication was created as of the date set forth above and is based on laws, court decisions, administrative rulings and congressional materials that existed at that time, and should not be construed as legal advice or legal opinions on specific facts. The information in this publication is not intended to create, and the transmission and receipt of it does not constitute, a lawyer-client relationship.