Week 5 Case Study

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Texas A&M University *

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715

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Law

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Feb 20, 2024

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docx

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Was contract specification ambiguous? A contract is ambiguous when two provisions conflict or when a term is reasonably susceptible to more than one meaning. If both sides have reasonable interpretations of the same term, then the contract is ambiguous. According to the U.S. Department of Justice, Justice Manual, Civil Resource Manual, a contract term is ambiguous “If more than one meaning is reasonably consistent with the contract language.” There are two types of ambiguities, latent and patent. A patent ambiguity is one that is readily apparent or obvious, an uncertainty or inconsistency on the face of a legal document. A latent ambiguity is one that is hidden or could not be discovered through the exercise of reasonable care. The contract specification was ambiguous. Between CDM and the US Army Corps of Engineers as a set of design and drawing ambiguities relating to the evaporation pools designed to allow the wastewater to evaporate. The latent ambiguity in the contract with respect to the Average Daily Flow, evaporation coefficient, water depth requirement, and acreage for the evaporation ponds. that Table 8 provides the Government’s conceptual design unit requirements. The Government’s concept may be incomplete, and the Contractor shall provide a complete system. The Contractor shall meet the quantities in Table 8 as a minimum but additional unit, if required to meet the criteria herein, shall be provided. Table 8 indicated "NUMBER OF PONDS ... 2 + 1 STANDBY.'' It did not mention standby capacity or what would be included in the specifications of STANDBY. This identification is considered to be an example of latent ambiguity which is not an obvious or not sufficient to trigger the patent ambiguity exception. Table 8 in the contract indicated a standby system, which creates ambiguity because it is not defined and there is no specification as to what the capacity of operation would be. The CH2M Hill a reasonable contractor would have noticed that in the drawings showed that one of the three EPs would not be used in day-to- day operations. Who should bear risk of contract ambiguities? The Government should bear the risk of contract ambiguities. The rule of contra proferentem applies, as the party who drafts and offers the contract, it states that where there is an ambiguity it will be interpreted against the party who drafts the contract. In this case, the Government proffers the contract, so they are ultimately at risk of contract ambiguities. In appendix A they stated that drawings were provided for information only from a 2009 partial design by CH2M HILL Constructors Inc. of the process required that was based on a Design/Build/Operate business process. The ambiguity lies within unclear specifications of the actual sizing of the tanks, pumps, piping, etc. There is also an Order of Precedence Clause in this agreement which is set to clear any ambiguities in the contract which is defined as the following Where the various elements of the RFP are in conflict, the following priority shall be used to establish precedence, unless specifically noted otherwise: a. Appendices A - I and Technical Specifications, where furnished. b. Section 01 10 10 DESIGN REQUIREMENTS, GENERAL. c. Drawings. CDM had no direct guidance from the government on the specifications of the equipment. The contract specifications had many inconsistencies surrounding the Average Daily Flow, evaporation coefficient, water depth, and the acreage that would be allotted for the evaporation ponds. The contract documents did not require CDM to use any evaporation coefficient for any specific water depth. This being an ambiguity in the contract as far as what the specifications were for a particular evaporation coefficient. CDM’s EP expert did make her opinion that it was industry standard to use historical flow data to

develop the ADF. With Amendment 8 it eliminated the reference to the 2.0 to mgd ADF. The contract did not require CDM to use any particular ADF. Did the government change the contract? Yes, the Government changed the contract. The contract contained the FAR 52.243-4, CHANGES; (a) The Contracting officer may, at any time, without notice to the sureties, if any, by written order designated or indicated to be a change order, make changes in the work within the general scope of the contract, including changes – (1) In the specifications (including drawings and designs); (2) In the method or manner of performance of the work; (3) In the Government-furnished property or services; or (4) Directing acceleration in the performance of the work. They are defined in FAR 43.1 Unilateral changes can only be made by a contracting officer in writing but cannot affect the contractors’ substantive rights on the other hand, a bilateral contract modification is a supplemental agreement that is signed by both the contracting officer and the contract. The Government changed the contract when they reduced the recovery rate in Amendment 8 by stricken text “The Contractor . . . water quality requirements. For the range of design flows (2.0 to 2.5 MGD annual average daily flow; 0.8 MGD minimum daily flow; and 5.4 maximum daily flow), the WTP material/mass balance design shall be designed to exceed a minimum of 99% recovery efficiency.” Regarding the evaporation coefficient and water depth the contract documents did not require CDM to use any specific numbers for either. FAR Clause 52.243-7 places an affirmative responsibility on a contractor to notify the Administrative Contracting Officer and that the government conduct that the contractor regards as a change to the contract meaning actions and or inactions and written or oral communications, although the timing can be negotiated. I If so, was it a formal change or constructive change? These changes were made through a constructive change to the contract. They did not have the bilateral or unilateral changes as specified through the FAR guidelines. They introduce the standby EP and adjustments to the ADF and evaporation coefficient. Most notably through Amendment 8. The changes were directly communicated by the Government to the contractors. On May 22, 2013, CDM sent the Corps a notification of change where CDM stated that the issues ere that the Government’s definition of “standby” does not allow for use of the “standby” pond during routine maintenance and cleaning of a pond. This constructive change provides clear changes made to the contract, offering a basis for addressing claims for adjustment. Although the proper channels were not notified, and the correct procedure may not have been conducted there was a written communication of the letter on May 22, 2013. They had been given notice of the changes through formal channels but regardless, the formal change raised further questions of the design elements and requesting specific changes which had to be addressed thereafter. Should contractor be able to recover via a Request for Equitable Adjustment under the contract? The contract contains the FAR 52.243-4 clause under which the Corps had to provide CDM with an equitable adjustment if there was any written or oral direction, instruction, interpretation or determination from the CO that caused a change. Contractor CDM should be entitled to recover via Request for Equitable Adjustment under the contract. According to FAR 252.243-7002 Requests for

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