Government Contracts & Investigations

Government’s Apparent Acquiescence Doesn’t Overcome “Plain” Contract Language

By | April 23, 2020

Despite “troubling” government conduct, the Armed Services Board of Contract Appeals (ASBCA) recently denied an appeal arising out of electrical work performed on a $38 million construction project involving the ground-up construction of four buildings for the United States Army. The dispute in Watts Constructors, LLC, ASBCA No. 61493 involved the use of rigid conduit as opposed to the more economical integrated metal clad (MC) cable in the running of electrical power lines through the newly constructed buildings. While the ASBCA’s decision was ultimately based upon an application of the contract’s plain language, the factual twist relating to the government’s conduct during the construction process is something to note for all contractors and subcontractors.

The contract and specifications contained numerous references to conduit and other rigid wiring requirements suggesting that conduit, and not MC cable, were required. Additionally, the contract drawings exclusively referenced conduit-related materials. Despite these statements, there were a few instances in the contract and specifications that also mentioned MC cable. The electrical subcontractor, apparently relying upon these few instances, proceeded with the wiring of the facilities using nearly half MC cable products and completed nearly three of the four buildings before the Government’s quality assurance electrical engineer informed it that its use of the MC cable was in violation of the contract and would have to be redone. Notably, the project had been inspected on several other occasions by other government quality assurance personnel, but never by the quality assurance individual specifically responsible for the electrical work.

Upon receiving this notification, the subcontractor was forced to remove a substantial portion of the installed MC cable, requiring the removal of walls and other materials surrounding the installed electrical work. As a result, the subcontractor submitted a claim to the prime for approximately $415,000, which the prime then passed-through to the government.

On appeal from the contracting officer’s denial, the ASBCA ruled against the contractor, primarily citing the contract’s plain language. Noting its interpretation must “give reasonable meaning to all [] parts of the contract,” the ASBCA nevertheless found that the subject contract contained “unnecessary boilerplate” language describing cabling types that were plainly not intended to be used in the construction—including MC cable. The ASBCA determined the contract language and specifications left “no room for doubt that only rigid conduit” could be used to the exclusion of MC cable and, thus, its finding against the contractor was supported by the contract’s plain language.

The more interesting aspect of the decision was the ASBCA’s finding that the Army had not acquiesced to the use of the MC cable or waived its right to enforce the otherwise plain contract language. First, because the ASBCA found the contract was not ambiguous, it noted that it was not required to go beyond the contract language to “divine its meaning.”

Second, and perhaps most interesting, the ASBCA found that the silence on the part of the quality assurance inspectors that examined the work prior to the government’s communication that the MC cable was not permissible was not “particularly helpful” in interpreting the contract requirements. The ASBCA further found that no waiver had occurred because “there [wa]s no evidence that any government personnel knowingly waived the contractual terms inasmuch as the quality assurance representatives on site who observed the use of MC appear to have been of the opinion that it was not precluded by the contract.”

The decision raises some very important takeaways all contractors should keep in mind. One, if there are contradictory or superfluous terms in the contract, clarification should be sought at the outset and documented in writing. Two, despite months or years of work being performed and apparently inspected in a manner consistent with the contractor’s interpretation, in the end, the contract language may still control regardless of the government’s conduct. Finally, if there are multiple trades and multiple government quality assurance inspectors involved in a project, it would behoove the contractor to get formal approval of their work by the responsible trade-specific inspector as early in performance as possible. Had this occurred here, the contractor would have likely saved hundreds of thousands of dollars and potentially avoided having to navigate the appeals process.

Contact Roddy Stieger for more information.