Today, we have a question for our federal construction readers — If your project is operating within an anticipated budget, are you still entitled to the additional costs associated with a differing site condition? Recently, the Civilian Board of Contract Appeals (CBCA) answered our question with a resounding yes.
This point is particularly important in the context of requests for equitable adjustments or claims asserted against the government. You may think (or the government may try to convince you) that there is no entitlement when the project is below budget. That is simply not the case. The CBCA decision makes the point that damages are based upon the actual cost of performance — your bid should not be used against you. In short, extra costs due to differing site conditions should always be tracked and documented — even if you are meeting or below a projected budget.
The case in question involved construction contractor Tucci and Sons Inc., which filed a claim seeking more than $80,000 on a DOT Federal Highway Administration contract for the reconstruction of a 9.7 mile stretch of highway in Mount Rainier National Park. Tucci claimed that it experienced extra costs based on the unexpected need to work around a number of larger boulders impeding the work.
The government filed a motion to dismiss, arguing that Tucci could not have been damaged because its alleged costs of performance – including the alleged increased costs associated with the boulders – were still lower than the anticipated costs bid at the beginning of the job.
The Board disagreed with the government, holding that it applied the wrong standard for calculating damages – and that the contractor's anticipated costs were wholly irrelevant to damages based on a differing site condition. Instead, the Board focused only on the additional costs incurred by the contractor – in other words, the difference between what the work would have cost if the unforeseen condition had not been encountered.
One note of warning – the Board did indicate the possibility of less than clear sailing for Tucci moving forward. Specifically, it expressed a certain amount of uncertainty over Tucci's ability to prove its claimed damages. In this context, it is always worth a reminder to contractors that extra costs must be verified and backed by sufficient supporting documentation in order to prevail on a claim.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
