Contractor’s entitlement to additional compensation for remedying defects that the Owner had ignored during initial performance of the work. Appeal of Buck Town Contractors & Co. Armed Services Board of Contract Appeals (2019), by Hugh Anderson

Summary: The Corps of Engineers entered into a contract with Buck Town Contractors to rebuild a hurricane protection levee in St. Charles Parish, Louisiana. The design documents included detailed requirements regarding the placement of the specified geotextile material at the base of the levee. One requirement was that the geotextile was to be installed in full-length rows without seams.

During construction, Buck Town “installed some of the geotextile rows using overlapped, partial-length pieces of geotextile, when the end of a geotextile roll was reached in the middle of installing a row.” This practice was documented repeatedly in the daily quality control reports, and was observed by inspectors. The contractor also submitted photographs of the overlap installations. In due course the Corps approved the geotextile phase of the work and authorized Buck Town to place fill over the geotextile and build up the levee.

When a second related levee project was underway, the Corps inspectors on that project learned that the geotextile had not been properly placed on the first project. The Corps required Buck Town to pull apart the first levee, replace the geotextile, and rebuild. Buck Town sought a $2.9 million change order for this reconstruction work. The Corps denied the claim, and Buck Town appealed to the Armed Forces Board of Contract Appeals (ASBCA).

Decision: After a two-day hearing in New Orleans, the ASBCA held that the Corps had constructively waived its right to enforce the geotextile specification. Based on the factual record, the Board concluded that either the contracting officer for Buck Town’s project knew or should have known of the well-documented deviations from the design. Quoting a previous decision, the Board stated that “if [the contracting officer] did not know, he ought to have known, and knowledge is imputed to him.”

The Board also ruled that the Corps could have and should have caught the error and required it to be corrected before authorizing the contractor to build up the levee; therefore it would be inequitable to force the contractor to bear all the costs of reconstructing the levee.

The ASBCA decision only addressed Buck Town’s entitlement to relief; the parties were ordered to negotiate the amount (quantum) of compensation.

Comment: The EJCDC Standard General Conditions of the Construction Contract (C-700) contain several clauses that enforce the principle that the Contractor retains primary responsibility for compliance with the Contract Documents. For example, the Contractor’s duty to comply with the Contract Documents is not released by observations of the Work by Engineer, inspections, or the issuance of a notice of acceptability. C-700 2018, Paragraph 7.17.D. And the EJCDC construction documents do not provide for constructive waiver of the requirements of the Construction Documents (though an express waiver is allowed in C-700 2018, Paragraph 14.04, Acceptance of Defective Work). Nonetheless, prudent administration of the construction contract entails vigilance in recognizing defects in the Work, and prompt notice to the contractor, in order to avoid contentions of waiver.