ASBCA Reaffirms the Limits of a Contractor’s Duty to Discover Unforeseen Conditions during a Pre-Bid Site Investigation

On March 20, 2019, GSI & Whitesell-Green JV (“GWG”) prevailed in their appeal of a claim arising from a change to a $6.6 million contract for the renovation of a hangar at Columbus Air Force Base in Mississippi.  This victory demonstrates that the Boards and Courts continue to apply reasonable limits to the contractor’s duty to discover unforeseen conditions prior to bid.

GWG’s claim arose from a dispute over gas service to a building next to the hangar to be renovated.  There was a gas meter attached to the exterior of the hangar, but inside the walls and beyond view of potential bidders, the gas line from the meter split to service both the hangar and the neighboring building.  While the pipe running to the neighboring building was visible on the exterior of the hangar for about a foot, it was not marked or painted as a gas line.  In fact, it was painted the same color as the surrounding walls.

The contract required the contractor to cap the gas line running to the hangar, but did not mention the gas line running to the neighboring building.  However, after contract award, the contracting officer directed GWG to provide temporary gas service to the neighboring building, and to relocate the gas meter to allow for permanent service.  GWG asserted that this work was beyond the scope of the contract and filed a claim for the unanticipated costs to perform this additional work.

The Air Force denied the claim.  It relied upon an increasingly common government defense: that it was the contractor’s responsibility to uncover the issue during the site investigation and submit a pre-bid inquiry.  The agency also emphasized that the contract generally disclaimed the accuracy of the utility locations provided in the contract documents, and required the contractor to field verify the location of utilities before starting work.

The Board disagreed with the agency’s conclusion.  First, the Board held that the contractual disclaimer regarding the location of the utility lines did not override the Changes clause or the Differing Site Conditions clause, or shift the risk for unidentified utilities to the contractor.  The Board determined that based on the disclaimer, a bidder reading the contract “would not have been aware that, if it found an unidentified utility line that necessitated work on the gas supply to a different building, then it would bear the financial consequences.”  The Board was unwilling to assign liability to the contractor “absent clear language that alerts contractors that they would bear the risk (allowing them to factor it into their bids).”

Then the Board held that GWG was not obligated to inquire about the pipe, even though CWG had observed the pipe, and photographed it, during the pre-bid site visit.  While GWG was responsible for knowing what a reasonable site-visit would have revealed, the Board held that the “duty to make an inspection of the site does not require the contractor to discover conditions beyond the limits of an inspection appropriate to the time available.”  The Board was persuaded that a reasonable contractor would not have recognized the pipe as an unidentified utility line necessitating an inquiry because: the pipe was not identified as a utility line in the plans; it was not painted or marked as a utility line; it was very small and painted so as to blend in to the surroundings; there was insufficient time afforded during the site visit to note every detail; and none of the other 26 bidders present at the site visit had noticed or inquired about the pipe.

In recent years we have seen an increase in government efforts to read the Differing Site Conditions and Changes clauses out of the contract by including broad disclaimers in government contracts and attempting to place responsibility on contractors to discover unforeseen conditions pre-bid.  The GWG decision is evidence that the Boards and Courts will limit such defenses to what can reasonably be expected from contractors both in reading solicitations and pre-bid site visits.  If carefully presented, contractors can still expect to prevail in claims for extra work arising from changes, or reasonably unforeseeable site conditions.  If you need help presenting such a claim, contact Maria Panichelli at maria.panichelli@obermayer.com or Michael Richard at michael.richard@obermayer.com.

About the Authors

Maria L. Panichelli

Partner

Maria is a partner and the Chair of the Government Contracting department.   She focuses her practice exclusively on federal government contracting and procurement, guiding her clients throughout the entire lifecycle of their...

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Michael A. Richard

Associate

Michael is an attorney in Obermayer’s Government Contracting Department, where he excels at getting clients to the settlement table. Michael’s tenacity is truly a force to be reckoned with. Over the past...

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