Summary: The U.S. Army Corps of Engineers and KiewitPhelps (a joint venture) entered into a $524 million contract for construction of a new facility for the U.S. Strategic Command at Offutt Air Force Base near Omaha, Nebraska. The drywall work was subcontracted to Cleveland Construction, Inc. (CCI), for $16 million. HDR Architecture was the designer of the project.
Drywall finishing refers to the application of joint tape and drywall compound (“mud”) to prepare the drywall for decorative finishes such as paint or wallpaper. There are six levels of drywall finishing, ranging from 0 (blank drywall), to Level 1 (fire-taping), to Level 5. Levels 2-5 differ in the number of applications of joint compound that are layered on the joints.
On the project, a substantial number of square feet of drywall was required to be installed in locations that ultimately would be concealed or inaccessible, and never seen after completion—for example, where drywall extended above the ceiling level. Paragraph 3.11.6 of the drywall specifications instructed the contractor to “Apply Joint Compound and Tape in accordance with fire-rated design.” Based on their bid submittals, CCI and the other drywall bidders all had concluded that this was referring to Level 1 finish, and was the minimum level required project wide. For various exposed locations, the specifications stated specific levels of finish, primarily 4 and 5. The specifications then stated “all remaining locations, unless noted otherwise, Level 4 Finish.” Based on their bid submittals, CCI and the other drywall contractors had interpreted this to mean “all remaining exposed locations.”
During the first 18 months of drywall work, CCI finished concealed locations with Level 1 (fire taping) only. Subsequently, the owner and architect informed CCI that Level 4 Finish was required at all locations, even if concealed. This ultimately cost CCI an additional $5.4 million (claimed). A dispute over responsibility for the increased costs ensued, eventually reaching the Armed Services Board of Contract Appeals (ASBCA).
Decision: The ASBCA determined that both the Corps (Government) and the subcontractor had reasonable interpretations of the specifications. CCI’s interpretation was supported by trade practices, the conclusions of the other bidders, the fact that the painting specification clearly stated that concealed locations would not be painted, and the 18 months of acceptance of the Level 1 finishing. The Government’s position was supported by credible testimony from HDR that it had indeed intended the specification “all remaining locations…Level 4” to apply everywhere, not just to remaining exposed areas. The ASBCA concluded that when there are two reasonable interpretations, a specification is ambiguous, and when a specification is ambiguous, it will be construed against the drafter (here, the Government) under the rule contra proferentem.
Comment: The ASBCA pointed out that the result might have been different if the ambiguity had been “patent.” In that case, the contractor would have had an obligation to seek clarification. The board explained that “patent” in this context means “obvious, gross, glaring, so that…contractor had a duty to inquire about it at the start.” The board concluded that the ambiguity was not patent, as evidenced by the 18 months of unchallenged Level 1 work.
EJCDC has contractual requirements and bidding rules that demand that the contractor (bidders) bring ambiguities to the owner’s attention: this case and others cited by ASBCA may provide guidance for future examination of these EJCDC clauses.