Two weeks ago, I presented on Common Issues in Government Contract Interpretation. The course examined common issues encountered by government contractors in bidding on and performing government contracts – as well as the dispute resolution process under the Contract Disputes Act.
One of the course’s major topics was the Plain Meaning Rule – the concept that Boards and Courts interpreting government contracts will look to the contract language first. In fact, if the language is clear, the Judge will look at the contract exclusively and ignore any outside (or extrinsic) evidence concerning the parties’ intent.
On the heels of that presentation, the Armed Services Board of Contract Appeals (ASBCA) issued a decision that highlights the critical role that the Plain Meaning Rule plays in government contract disputes.
The contract at issue in the case involved the construction of a hospital facility and dental clinic at Joint Base Andrews, Maryland. On appeal, the contractor argued that the owner of existing water and sewage infrastructure was responsible for the construction of new systems expected to connect to existing infrastructure. The Navy countered that the contract clearly differentiated between new systems (priced and performed by the offeror) and work performed on existing systems (performed by the current system owner and priced after award).
The Board sided with the Navy, finding that the government’s interpretation offers the only reasonable way of reading the contract.
In specifically discussing principles of contract interpretation, the Board states:
[The Board cannot] grant summary judgment if we needed to consider disputed extrinsic evidence to resolve an ambiguity. The problem we see with [the contractor’s] argument is that the contract’s language . . . is unambiguous.
In other words, the Board will only turn to extrinsic evidence outside the four corners of the contract if it finds the language ambiguous. Because it found only one reasonable interpretation of the contract language, the inquiry ended there (in favor of the Navy).
The Plain Meaning Rule presents the minimum threshold a contractor must clear in order to present extrinsic evidence of intent to the Board or Court. In this case, the contractor may well have possessed key evidence of shared intent with the Navy – but the Board never heard it.
The unambiguous contract language controlled.
The key takeaway for contractors is to work aggressively and proactively against potential ambiguities during the pre-bid phase. If you can see two ways of interpreting contract language, do not assume the government shares your intent. Raise the issue and push the agency to go on record regarding its interpretation.
Once the contract is signed, it automatically becomes the best – and perhaps only – form of evidence the Court or Board will examine.
Nick Solosky is a Partner in Fox Rothschild’s Government Contracts & Construction Practice. You can reach Nick directly at NSolosky@FoxRothschild.com or 202-696-1460.