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Oles Morrison

You Don’t Always Get What You Pay For: Government Waives a Credit for Work Not Performed

By on January 22, 2018 | Posted in Claims and Disputes

In Appeal of American West Construction, LLC, the Armed Services Board of Contract Appeals considered whether the U.S. Army Corps of Engineers (Government) lost its right to claim a credit under the Changes Clause by waiving its right to insist on compliance with the contract specifications prior to insisting on such compensation.  Finding the Government was fully aware of the Contractor’s use of a less expensive construction method than in the specifications, the Board found the right to claim there was a change to the contract was “dead” and no credit was owed for the work not performed.

American West was awarded a MATOC contract for design-build construction services.  In August 2015, the Government awarded Delivery Order 02 (DO2) under the MATOC contract for construction of bridges over irrigation canals in El Paso, Texas.  The DO2 specifications provided that the work would be performed by first building two temporary bridges over the canals so the Contractor could access the site.  The Contractor, however, sought access to the construction site via a levee owned by the local water district.  However, because negotiations with the water district over access to the levee were pending and the Contractor could not be sure that access would be granted, the Contractor proceeded under the assumption the temporary bridges would still be necessary.

Over the course of the work, the Contractor made clear to the Government its intention to try and secure site access through the levee.

The Contractor noted such potential access in (among other things) its Construction Site/Traffic Safety Plan and weekly meeting minutes.  The Government’s resident engineer and Administrative Contracting Officer (ACO) was also frequently present on the site and observed the Contractor had not built the temporary bridges and was instead accessing the site through the levee.

The ACO testified that he was aware of the proposal to use the levee, but that he did not object to the same so long as the costs to the Government were roughly equivalent.  Months later the parties exchanged correspondence, with the Government demanding a credit and the Contractor denying any was owed.  After reaching an impasse, the Contracting Officer issued a final decision asserting the Government was owed a credit for the estimated difference in the price specified for the temporary bridges and cheaper access via the levee.

The Board found no question that the terms of DO2 required the Contractor to build temporary bridges, and that the Government had a right to insist on strict compliance.  Having been “well aware” of the Contactor’s decision to access the site via the levee, however, it was the timing of the Government’s demand for a credit months later that carried the day.  Not only did the ACO observe the Contractor’s work on a near-daily basis, the Government also made progress payments to the Contractor (without objection) for the costs of obtaining the levee agreement with the local water district.  These facts, the Board ruled, rendered the contractor requirement for the temporary bridges “dead.”

The Board found the Changes Clause did not entitle the Government to any credit for the cheaper work because the terms of the contract no longer required the Contractor to build the temporary bridges at the time the Changes Clause was invoked. Thus, the Government ended up not getting what they paid for because they waived their rights to the Contractor’s savings.

Image Courtesy of Flickr (licensed) by Hadley Paul Garland