Equitable Adjustment Awarded To Contractor For Defective Specification In RFI
On November 21, 2021, the Civilian Board of Contract Appeals (the “Board”) (an independent tribunal within the General Services Administration (“GSA”) that presides over contract disputes between government contractors and agencies under the Contract Disputes Act) issued a decision in Wu & Associates v. General Services Administration. Wu & Associates (“Wu”) challenged a denial by the GSA for additional funds for claimed expanded scope of work. Specifically, Wu sought additional funds to strengthen flooring in order to move heavy equipment for an elevator modernization project. GSA denied the claim, arguing that work was included in the scope of Wu’s contract and Wu alone was responsible for its means and methods in moving equipment.
In 2018, GSA awarded Wu a contract to provide construction services for the project, located at the Ted Weiss Federal Building in New York, NY. The project included providing all labor, materials, tools, and equipment to modernize ten elevators. In a pre-award Request for Information (“RFI”), a bidder requested guidance on moving heavy equipment down a 17th floor hallway as well as the type of floor protection recommended to distribute the weight. GSA responded:
This would be “Means and Methods” by the contractor. It may be a challenge but requires careful planning. On 17th floor, proper skids are required over the raised floor to distribute the load. Freight elevators can take up to 8,000 lbs. but may require distributing the load evenly on the cabs.
Post-Award, Wu submitted a change order to protect the floor in the freight elevator lobby on the 17th floor in order to move new elevator machines over it and remove the existing ones. Wu would later question GSA’s RFI response, specifically regarding the requirement for skids. In Wu’s opinion, GSA’s method was not feasible based on drawings received post-award. GSA denied the change order, stating: “Unless otherwise expressly stated in the Contract, the Contractor shall be responsible for all means and methods employed in the performance of the Contract.” GSA also cited the Site Investigations and Conditions clause at FAR 52.236-3, which requires a contractor to give prompt notice of site conditions that materially differ from those indicated in the contract.
Ultimately, Wu solved the floor problem by hiring a structural engineer to provide the necessary engineering to reinforce floor stanchions. Wu sought reimbursement for the cost incurred to remedy the problem.
Wu filed its appeal after the GSA denial. Both parties filed for summary judgement. Wu argued it was entitled to recover based on the Changes clause of its contract as a result of GSA’s failure to disclose vital information about the contract or, alternatively, under the theory of an implied warranty of the specifications in the contract. Wu argued GSA misrepresented the load capacity of the floor on the 17th floor, resulting in Wu incurring additional costs. Wu argued:
“In this case, the GSA was not simply silent about the load capacity of the raised floor on the 17th floor, but in fact affirmatively misrepresented that capacity. Specifically, when asked in RFI #37 about this issue, the GSA responded (without performing any engineering calculations whatsoever!) that the elevator equipment could be moved across the raised floor if skids were used to distribute the loads, and provided that there was “’careful planning.’”
First, the Board agreed with Wu’s contention that the method it ultimately used to solve the floor issue, i.e. stanchions, differed from the method prescribed in RFI #37, i.e. skids. The Board noted that GSA language that “proper skids are required” did not provide Wu with any discretion regarding its means and methods. Instead, GSA set forth what was required to successfully distribute the load of the elevator equipment. Wu, and other bidders “would have no reason to believe that the language meant anything other than what it plainly stated.” The Board noted it would interpret contract language in accordance with its plain and ordinary meaning, which in this matter would lead to an interpretation that skids were mandatory for the contractor. In contrast, GSA’s position would require the Board to ignore the plain meaning of the language it used or to decide it to be meaningless or superfluous.
Next, the Board addressed whether Wu was entitled to an equitable adjustment for the increased cost it incurred due to GSA’s misstatements in RFI #37 during the bidding process. The Board noted that “[a] contractor may recover an equitable adjustment under the [FAR’s] Changes clause using the theory of constructive change for both a claim of misrepresentation and defective specification.” Further, “to receive an equitable adjustment for a claim of misrepresentation, [a contractor] must show that the Government made an erroneous representation of a material fact that appellant honestly and reasonably relied upon to its detriment.” Finally, “to receive an equitable adjustment for a defective specification claim, [a contractor] must show that it was misled by an error in the specification.” In previous matters, the Board found “[w]hen the Government provides a contractor with design specifications, such that the contractor is bound by contract to build according to the specifications, the contract carries an implied warranty that the specifications are free from design defects.”
Turning to RFI #37, the Board first found it to be a design specification and GSA’s statement regarding the requirement to use proper skids to be directional. Therefore, it was reasonable for Wu to assume proper skids would provide the required load capacity to move heavy equipment. Next, the Board found that design specification to be defective, noting that GSA did not contest Wu’s argument that skids were not a feasible solution. The Board further found there was no ambiguity in the contract that would have obligated Wu to seek clarification on RFI #37. As a result, the Board found that: “RFI #37 included a defective specification upon which Wu relied and, to the extent that Wu can prove that it incurred additional costs to remedy issues resulting from the defective specification, it is entitled to an equitable adjustment for these additional costs.”
The decision reinforced the importance of contract language and giving plain meaning to unambiguous terms, as well as the importance of carefully examining RFIs and responses. Here the contractor was awarded the contractor “equitable adjustment” for additional costs incurred in conscientiously performing the work after a critical review of the content of the RFI.