bell/heery v. United States
2014 U.S. App. LEXIS 220
| Fed. Cir. | 2014Background
- In 2006 the FBOP issued an RFP for design-build construction of a federal prison in New Hampshire; the contract required compliance with state permits, including an Alteration of Terrain (AOT) permit, and incorporated TDG 01415 and FAR clause 52.236-7 (Permits and Responsibilities).
- Bell/Heery (BH) bid assuming a one-step cut-to-fill earthwork plan; the bid price reflected that method and associated costs.
- NHDES refused to approve BH’s one-step plan and imposed a 40-acre disturbance limit plus multiple additional phased and multi-step requirements that significantly increased cost and time.
- BH notified the Contracting Officer of the permit restrictions and reserved rights for additional compensation, submitted a Request for Equitable Adjustment for ~$7.7M, and the CO denied it; BH sued in the Court of Federal Claims.
- The CFC dismissed for failure to state a claim, concluding the Permits and Responsibilities clause unambiguously allocated permit compliance costs to BH and that other contract provisions (TDG §01415, RFP §C.4, FAR Changes clause) did not create a government duty that would shift that risk.
- This appeal affirms the CFC: court holds BH’s complaint did not plausibly allege (1) a contractual breach by the Government, (2) a viable implied-duty claim, or (3) a constructive/cardinal change ordered by the Government.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Government breached the contract by failing to consult/engage NHDES and thereby forcing BH to incur extra permit-related costs | BH: TDG §01415(D) and RFP §C.4 (and the “in conjunction with” language) imposed a duty on the Government to meet/consult with NHDES and approve recommendations; government’s refusal to act breached contract | Gov: FAR 52.236-7 (Permits & Responsibilities) and TDG §01415(F) unambiguously allocate permit-obligation and cost to contractor; other provisions do not override that allocation | Held for Government — Permits clause clearly allocates permit compliance costs to contractor; BH failed to plead a conflicting contractual duty that would support breach |
| Whether the Government breached the implied covenant of good faith and fair dealing by promising fair treatment then not compensating BH | BH: Government assurances in partnering meetings created expectation of equitable treatment for extra permit-driven costs; refusal to pay violates implied covenant | Gov: Implied covenant cannot create duties inconsistent with express contract terms; BH still bore permit risk under the express clause | Held for Government — no reappropriation of promised benefits; implied duty cannot override express allocation of risk |
| Whether the Government effected a constructive or cardinal change by its conduct (entitling BH to equitable adjustment) | BH: Government’s inaction and alleged ratification of NHDES-imposed changes made BH perform beyond contract and justify constructive change relief | Gov: Changes clause applies only to orders by the Contracting Officer; BH has not alleged an order (written or oral) from CO — silence does not constitute a change order or ratification | Held for Government — no CO order; no basis for constructive/cardinal change |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility standard for complaint)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (Twombly pleading standard)
- Kellogg Brown & Root Servs., Inc. v. United States, 728 F.3d 1348 (Fed. Cir. 2013) (inferences at motion to dismiss)
- Kam-Almaz v. United States, 682 F.3d 1364 (Fed. Cir. 2012) (de novo review of dismissal)
- Hercules, Inc. v. United States, 24 F.3d 188 (Fed. Cir. 1994) (elements of breach of contract claim)
- San Carlos Irrigation & Drainage Dist. v. United States, 877 F.2d 957 (Fed. Cir. 1989) (pleading breach elements)
- McAbee Constr., Inc. v. United States, 97 F.3d 1431 (Fed. Cir. 1996) (contract interpretation rules)
- Hills Materials Co. v. Rice, 982 F.2d 514 (Fed. Cir. 1992) (Permits clause can be constrained by other contractual provisions)
- Harbert/Lummus Agrifuels Projects v. United States, 142 F.3d 1429 (Fed. Cir. 1998) (silence is not demonstrated acceptance/ratification)
- Centex Corp. v. United States, 395 F.3d 1283 (Fed. Cir. 2005) (implied covenant cannot create duties inconsistent with contract)
- Precision Pine & Timber, Inc. v. United States, 596 F.3d 817 (Fed. Cir. 2010) (scope of implied covenant)
- Krygoski Constr. Co. v. United States, 94 F.3d 1537 (Fed. Cir. 1996) (cardinal-change standard)