By Bruce Jervis
The “Permits and Responsibilities” clause is found in every federal construction contract. It requires contractors, at no additional expense to the government, to comply with any federal, state, or municipal law, code, or regulation applicable to the performance of the work. Reasonable enough; code compliance is an inherent aspect of performing construction work. Few contractors realize, however, the scope of the risk that is allocated under this clause.
On a federal prison project in New Hampshire, state environmental regulatory authorities imposed limitations and restrictions on cut-and-fill activities, which greatly increased the contractor’s estimated costs and performance time. Perhaps some of these limitations should have been anticipated by the contractor, but many of the restrictions appear arbitrary and unreasonable.
The contractor contended the federal agency should pay for the increased costs. The contractor said the agency had an obligation to intervene with state authorities on the contractor’s behalf but failed to do so. The U.S. Court of Appeals for the Federal Circuit rejected this argument. The Permits and Responsibilities “clearly and unambiguously allocated the costs for complying with all permit requirements to [the contractor].”
What do you think? It is frequently said the federal construction contract documents include an implied obligation of good faith and fair dealing. Does that extend to federal intervention on behalf of federal contractors when state or local regulatory officials appear to exceed their authority or act arbitrarily? I welcome your comments.