Hindsight About Unforeseen Site Conditions
Tunnel Vision Costs
Contractor in
Differing Site Conditions Case
Doug Shevelow, P.E.
Reprinted from June 2008 Brickerconstructionlaw.com
Psychologists define “tunnel vision” as a form of selective
attention that yields partial solutions to complex problems that can lead to more intractable, additional problems. A recent differing site
conditions case from the U.S. Court of Appeals for the Federal Circuit points out this phenomenon. The case, International
Technology Corp. v. Secretary of the Navy, 2008 U.S. App. LEXIS 8406, involved the remediation of several large stockpiles of soil contaminated with DDT and other pesticides.
The contractor was awarded a cost plus contract with a Limitation of Cost provision to remediate the contaminated soil by extracting the contaminants from the soil particles with a special solvent, separating the contaminants from the solvent, then reusing the solvent to extract more contaminants. The government’s request for proposals included two reports—a Solvent Technology Report that included the results of a solvent extraction pilot study and a Feasibility Study that compared and contrasted several different methods for remediating the soils, including the solvent extraction method used by the contractor.
The Solvent Technology Report showed that successful pilot study results were obtained on soils with low clay contents—10 percent or less. However, the Report warned that extraction cycles for soils with higher clay contents took much longer and were plagued with problems—but the Report did not quantify the problematic clay content and reported only the low clay contents from the successful trials. The Feasibility Study also included caveats regarding applying the solvent extraction study to soils with high clay contents.
The contract required completion of the remediation in 13 months. The contractor completed its work 20 months late and submitted a request for equitable adjustment for more than $1 million, the bulk of which was a pass-through claim from the subcontractor who performed the actual solvent extraction.
The contracting officer denied the claim based on untimely notice and the Limitation of Cost provision in the contract. The Armed Services Board of Contract Appeals (ASBCA) affirmed the denial and the contractor appealed to the U.S. Court of Appeals for the Federal Circuit.
Instead of focusing on the ASBCA’s favorable view of the government’s technical defenses to the claim, the bulk of the Court of Appeals’ opinion dealt with the contractor’s underlying entitlement to damages. And since the court found no entitlement, the issues of notice and the Limitation of Cost provision were moot.
The court noted that in order to successfully pursue a compensation for a Type I differing site condition (conditions different from what were represented in the contract documents) a claimant must prove the following:
The claimant reasonably interpreted the data at the root of the claim;
Actual conditions were not reasonably foreseeable, i.e. the claimant was entitled to rely on the contract’s representations;
The claimant did in fact rely on the false representations; and
Actual conditions were different and the claimant was damaged as a result.
The court held that the contractor was unable to prove the first two elements and so it upheld denial of the claim.
Regarding whether the contractor reasonably interpreted the furnished information, the court, unlike the contractor, was not fixated on the parts of the Solvent Technology Report and Feasibility Study that spoke only to soils with low clay content. On the contrary, the court set out in painstaking detail the parts of these two documents that warned about higher clay contents and then deemed the contractors rosy outlook unreasonable.
As to the second element, the court gave great consideration to testimony from the subcontractor’s CEO, who admitted that he knew that the soil samples used in the Solvent Technology Report were not representative of all parts of the stockpiles because the samples came from only the surface of the stockpiles. The court then concluded that any reliance on data rooted in obviously unrepresentative soil samples was unjustified, especially after it learned that the subcontractor took samples from deep within the pile when it evaluated clay content.
Contractors bidding a project like this, where there are multiple approaches and the owner is prescribing a performance specification, must take care not to become too fixated on one approach and ignore unfavorable data. Such tunnel vision was fatal to this contractor’s claim. Oftentimes it is better to take a pass and look for another project to bid.
