Maria Panichelli and Michael Richard | Obermayer Rebmann Maxwell & Hippel
Many federal construction contractors have been there: it’s near the end of the project and the government raises an issue with work that was done much earlier, but is not in strict compliance with the specifications. The contracting officer demands strict compliance with the specifications, even if it means tearing out completed work to fix the defect. And of course, the contracting officer insists that the government does not have to pay for the additional work. The contractor has to proceed as directed, but is the contractor actually entitled to additional compensation or not? On December 17, 2019, the Armed Services Board of Contract Appeals handed down its decision in the Appeal of Buck Town Contractors & Co., confirming that if the government knew about the defective work during performance but said nothing, then it has constructively waived strict compliance with the contract specifications and the contractor is entitled to additional compensation.
Buck Town involved a U.S. Army Corps of Engineers project to rebuild a levee with strips of reinforcing geotextile. The specifications required that all seams between the strips be perpendicular to the centerline of the levee. The contractor installed the strips in the right direction, but when it reached the end of a roll of geotextile, it would simply continue that installation with a piece from a new roll. This created a seam on certain strips that was parallel to the centerline of the levee, in clear violation of the specifications.
During performance, this non-compliant work was observed by the Corps’ Quality Assurance representatives, who approved of the work without objection. Buck Town’s installation of connected strips with parallel seams was noted in both the government’s QA logs and the contractor’s Quality Control logs, without identifying it as non-compliant with the specifications. In reliance on the government’s approval, Buck Town rebuilt the levee above the non-compliant geotextile installations. Later on, Corps’ personnel from another project discovered the defect, and the contracting officer directed Buck Town to remove the levee and reinstall the geotextile in compliance with the contract specifications. Buck Town did the additional work and then submitted a claim for the time and costs incurred.
The Corps denied the claim arguing that it was entitled to strict compliance with the contract specifications. Buck Town appealed to the ASBCA, arguing that the Corps had waived strict compliance by approving the non-compliant installation and allowing it to proceed with the work. The contracting officer testified that he was unaware of the non-compliant installations, and the Corps’ QA representatives testified that they were unaware that the geotextile installations failed to meet the contract requirements. The Corps argued that it could not have waived compliance with the contract specifications when the contracting officer did not have actual knowledge that the reinforcing geotextile was not being installed in conformance with the contract requirements.
The Board rejected these arguments, holding that the knowledge of the QA representatives was imputed to the contracting officer and therefore he knew, or should have known, that the work was not being performed in strict compliance with the contract. By failing to identify the non-compliant work during performance, the government waived strict compliance with the contract specifications. The Board sustained Buck Town’s entitlement to time and money incurred in correcting the defective work.
The takeaway for contractors is that you may be entitled to additional time and money for corrections to defective work, provided you can show that the government knew about the defective work and allowed you to proceed anyway.