Government Contracts Board Erred in Granting Equitable Adjustment for DSC
Monday, July 13, 2020

Board Erred in Granting Equitable Adjustment for DSC

By Government Contracts Editorial Staff

The Court of Appeals for the Federal Circuit reversed a board’s ruling that a construction contractor was entitled to an equitable adjustment for a Type I differing site condition because the contractor did not prove it reasonably relied on its interpretation of the contract. In an appeal arising from a design-build contract to construct the Navy Medical Biological Defense Research Laboratory, the Armed Services Board of Contract Appeals used a “jury verdict” type analysis to find the contractor encountered more rock than was reasonably indicated in the contract (18-1 BCA ¶37,191). The board found the contractor’s reliance on two test borings was unreasonable, but the government’s position the contractor should have relied on borings located 300 to 500 feet from the laboratory’s footprint was less reasonable.

Focus on Contractor’s Reasonableness. A Type I DSC exists when “subsurface or latent physical conditions at the site … differ materially from those indicated in [the] contract” (FAR 52.236-2(a)(1)). The conditions actually encountered must have been reasonably unforeseeable based on all information available to the contractor at the time of bidding, and the contractor must have reasonably relied on its interpretation of the contract and contract-related documents. Here, however, the board found the contractor failed to prove it reasonably relied on the test results from just two borings when formulating its bid. Therefore, the board erred as a matter of law in ruling the contractor was entitled to an equitable adjustment. The board’s finding that the government’s interpretation was less reasonable did not change this conclusion, because the focus of the inquiry must be on the contractor’s reasonableness, not a balance of the government’s reasonableness against that of the contractor. This focus incentivizes contractors to carefully and reasonably interpret contract documents. (U.S. Army Corps of Engineers v. John C. Grimberg Co., CA-FC, 64 CCF ¶81,939)

Back to Top

Interested in submitting an article?

Submit your information to us today!

Learn More