Contractor’s differing site conditions and delay claims proceed as government’s motion to dismiss denied
In a recent court decision involving a contractor’s request for equitable adjustment and lawsuit regarding Type I and II differing site conditions and government-caused delays regarding adverse weather — Extreme Coatings, Inc. v. U.S. (February 26, 2013) — the U.S. Court of Federal Claims denied the government’s motion for partial dismissal, which was partially based on an alleged “act of God” defense.
An “equitable adjustment” is a creature of federal procurement statutes and the Federal Acquisition Regulations. Requests for equitable adjustments (REA) allow a contractor to seek reimbursement of its reasonable costs incurred, including a reasonable profit. REAs focus on the changed position in which the contractor finds itself, and include items such as added or deleted work, substituted materials, Type I and Type II differing site conditions (DSC) claims and delay claims regarding unusually severe weather.
Type I and Type II differing site conditions claims apply to site conditions that are sub-surface or otherwise concealed, physical, found at the site and differ materially from conditions reasonably anticipated. Type I claims address subsurface or latent physical conditions at the site which differ materially from those indicated in this contract. In contrast, Type II claims address site conditions that are unknown, unusual and materially different from comparable work.
The term “act of God” in government contracts is typically applied to unusually severe weather conditions such as abnormal heat, drought, high winds, excessive rains, flooding, etc. Acts of God provisions are significant because contracts often provide them as an acceptable excuse for delays or failure to complete a project, though they do not entitle a contractor to additional money. To receive a time extension, weather-related delays must be documented by showing the weather conditions were abnormal, unanticipated and adversely affected the schedule.
In Extreme Coatings, the contractor performed partial re-coating of radial spillway radial gates at the downstream side of a dam. The contractor ran into problems, including project delays and with the re-coating work itself. The contractor submitted a certified REA that was largely denied by the contracting officer (CO). Thereafter, the contractor sued the U.S. pursuant to the Contract Disputes Act (CDA), and the government moved for partial dismissal, in part relying on an “act of God” defense.
On June 3, 2009, plaintiff, Extreme Coatings, Inc. (ECI), was awarded a contract valued at $705,368.35 to perform “partial re-coating of the downstream side of the spillway radial gates at Yellowtail Dam [on Big Horn Lake], located approximately 45 miles southwest of Hardin, Mont.” The contracting agency was the U. S. Department of the Interior, Bureau of Reclamation. The project was to proceed in two phases. Phase I was to take place within 120 days from the issuance of the Notice to Proceed, which meant that ECI was to finish Phase I by October 10, 2009. Phase II was to take place during a 45-day window triggered by lower water levels, and was eventually scheduled for April 14, 2010 through May 29, 2010.
ECI’s complaint alleged that neither Phase I nor Phase II was performed within the contract schedule due to government-caused delays that damaged ECI, in addition to other allegations against the government. On May 23, 2011, ECI filed a certified claim with the CO for an REA.This claim was denied in large part, though an adjustment of $28,500 was provided to ECI.
On August 15, 2012, ECI filed its claims in the U.S. Court of Federal Claims, alleging Type I and II differing site conditions and government caused delays. The government filed a motion to dismiss the Type I and II claims, arguing that ECI’s failure to allege a time period when each DSC occurred was fatal to these claims. The government also argued it did not represent the water levels that would be encountered by ECI at the dam, and that the high water levels were an “act of God.”
The court denied the government’s motion to dismiss. The court found that with respect to the Type I and Type II claims, a time limitation is not a required element of these claims. Further, the court found that ECI’s complaint alleged plausible Type I and II claims even if a time limitation was required.
With respect to the alleged high water levels at the dam, ECI asserted the contract represented certain water levels at the dam, including statements in the solicitation and by the Bureau at a pre-bid site visit. ECI’s complaint alleged high water levels encountered in 2009 and 2010, and did not suggest they were caused by unusual weather. ECI argued the high water levels were subject to government control and could be attributed to government-caused delays that pushed the schedule into an unfavorable time of year. The court agreed with ECI that there were uncertain factual issues that related to ECI’s high water level DSC and delay claims. As a result, and construing the factual allegations in ECI’s favor, the court denied the government’s defense based on an “act of God,” and denied the motion to dismiss.
The Extreme Coatings matter illustrates the care that must be taken in bringing claims against the government. The contractor initially filed a certified REA, which itself is the subject of extensive work-up and documentation. After its REA was denied in large part, the contractor filed suit pursuant to the Contract Disputes Act. The government moved for partial dismissal, wherein the contractor was able to defend the (initial) viability of its claims based on legal doctrines. In short, Extreme Coatings highlights the procedural complexities and pitfalls that await a contractor that does not proceed carefully against the government. If ECI had alleged facts in its REA and/ or complaint in a different manner, the government might have prevailed.
About the author: Brian Morrow is a partner in Newmeyer & Dillion LLP, a California law firm. He is also a licensed California civil engineer, and specializes in construction law, including road and heavy construction. Contact at [email protected].