Recently on the blog, I covered one of the major risks encountered by construction contractors – subsurface or unexpected physical conditions discovered after the work begins (commonly known as Differing Site Conditions under Federal Acquisition Regulation (FAR) 52.236-2).
In that post, I explained that a government contractor that uncovers a Differing Site Condition on a federal project must take three basic steps:
(1) Properly document the condition
(2) Notify the government, and
(3) Preserve the right to bring a Request for Equitable Adjustment or Certified Claim.
Today, I’d like to drill down on the second requirement – providing proper notice to the government – by examining a recent decision from U.S. Court of Federal Claims (COFC).
The case concerned a contractor seeking additional compensation in connection with its performance of a construction contract with the International Boundary and Water Commission (for the widening and rehabilitation of the top surface of the Urban Presidio Level in Presidio, Texas). The contractor was required to test the embankment soil to ensure compliance with certain performance specifications, including moisture content and compaction.
The contractor struggled to achieve the required soil conditions and, accordingly, experienced project delays. The contractor sought to shift responsibility for the delays to the government, arguing that it was required to place the embankment material over an “unacceptable, non-constructible subgrade.” Specifically, the contractor alleged that the contract documents misrepresented the site’s subgrade conditions, resulting in a differing site condition under FAR 52.236-2.
The government sought summary judgment on the contractor’s claim based on an allegedly unreasonable contract interpretation. That is, the government argued that no reasonable contractor would have interpreted the contract documents as indicating that the project’s subgrade would meet the embankment specifications. Additionally, the government claimed that – even if there was a differing site condition – the contractor failed to provide adequate notice.
On the latter point, the contractor did not dispute that it failed to provide formal notice, but nevertheless argued that the government was “constructively” on notice of the subgrade condition. The COFC disagreed, finding that “constructive notice” may only take the place of actual notice where there is no prejudice to the government. Simply stated, the contractor must communicate with the contracting officer when or if it discovers a condition that does not meet its expectations.
In this case, the contractor did not provide such notice and, moreover, waited for more than a year to raise the issue through a request for equitable adjustment.
The takeaway for contractors is an easy one – communicate, communicate, communicate. Regular updates to the government are probably part of your contract anyway, but regardless, should be part of your firm’s best practices. If a differing site condition is encountered, providing notice to the government pivots from a best practice to an absolute necessity.