Court: U.S. Court of Appeals for the Federal Circuit
Meridian Engineering Company v. United States
Case no.: 2017-1584
Date filed: March 20, 2018
The U.S. Court of Appeals for the Federal Circuit has ruled that a contractor was not required to conduct a pre-bid independent subsurface investigation. However, the contractor was charged with knowledge of conditions that could have been observed during a reasonable pre-bid site inspection. This included saturated surface soil 100 feet from the work area.
The Army Corps of Engineers solicited bids for construction of a flood control project in Chula Vista, California. The project consisted primarily of a series of reinforced concrete channels. One section of the specifications said the underlying soils included “hard unyielding material.”
The contract documents were not consistent in this representation, however. The specifications went on to say that “water in varying quantities may be flowing in natural washes throughout the length of the project.” The contract drawings showed the site to be a floodplain. Test boring logs included with the contract documents indicated the presence, in some locations, of wet silty clay with medium to high plasticity.
The government awarded the contract to Meridian Engineering Company, which had bid the job on the basis of the contract documents alone. Meridian’s president later testified that he anticipated extensive de-watering during construction, but understood that unyielding subsurface material would support the concrete channels. In fact, a layer of saturated clay necessitated extensive soil remediation.
Meridian asserted a claim for a Type I differing site condition, alleging that the actual subsurface conditions differed materially from the representations in the contract documents and the actual conditions were not reasonably foreseeable. The U.S. Court of Federal Claims denied the claim. The contract documents, read as a whole, alerted a prudent bidder to the presence of saturated soils. Furthermore, a reasonable pre-bid site inspection would have revealed saturated surface soils 100 feet from the work area.
Meridian appealed, arguing that the Claims Court incorrectly interpreted the contract documents and impermissibly placed a burden on the contractor to conduct an independent pre-bid evaluation of subsurface conditions.
The Federal Circuit said it agreed with the claims court’s interpretation of the contract documents. A prudent, experienced contractor that read the documents as a whole would have been alerted to the presence of saturated subsurface soils. The contract documents did not affirmatively represent hard unyielding material throughout the work area. The actual conditions encountered by Meridian were foreseeable.
The court said that even if the contract documents had not informed the contractor of the saturated soil, a pre-bid site inspection would have alerted the contractor. Large areas of saturated alluvial soil were visible on the surface 100 feet from the work area. The contractor was charged with knowledge of that information even if the contractor declined the opportunity for a pre-bid site inspection.
The court rejected Meridian’s argument that the claims court improperly imposed a requirement for an independent pre-bid subsurface investigation. “The Court of Federal Claims did not state that a reasonable contractor would make an independent soils investigation…. Meridian [had the] ability to visit the site and visually assess the ground conditions.”
“A reasonable and prudent contractor would have foreseen the saturated soil condition, based on the Contract documents and the fact that the actual conditions at the site indicated such conditions.”
Federal contract law is well settled on the scope of pre-bid site investigation. A contractor is charged with knowledge of anything that could have been observed during a reasonable site inspection. But a contractor is not expected to conduct invasive or destructive testing. Nor is a contractor required to seek independent expert technical evaluation.
For Meridian Engineering: Maria L. Panichelli, Philadelphia, Pennsylvania
For the Army Corps of Engineers: Chad A. Readler, Los Angeles, California
Before: Judges Prost, Reyna and Wallach
Opinion by: Judge Wallach
Outcome: Denial of contractor appeal regarding differing site condition affirmed.
Please click here to read the complete opinion.