Metcalf Construction Company v. United States
2014 U.S. App. LEXIS 2515
| Fed. Cir. | 2014Background
- In 2002 the Navy awarded Metcalf a design‑build contract to construct military housing on Oahu (originally 188 units, later 212), with performance starting Dec. 2002 and completion scheduled for Oct. 17, 2006.
- Pre‑bid government reports represented the site soil had only a "slight" expansion potential and that chlordane levels were acceptable; the RFP also told bidders these reports were "preliminary" and required the contractor to perform post‑award investigations.
- Metcalf’s post‑award geotechnical testing (Geolabs) showed soil swell potential higher than reported, prompting disputes, over‑excavation, adoption of post‑tension slabs, and alleged extra costs (~$4.8M claimed). Metcalf also discovered higher chlordane in some soils; the Navy eventually granted a 286‑day extension and reimbursed approximately $1.49M but denied some additional claims.
- The Court of Federal Claims mostly found for the government on liability but found two breaches: (1) violation of FAR 52.236‑2(b) for late investigation of expansive soil, and (2) a late notice to proceed, awarding Metcalf ~$272k for the latter and assessing liquidated damages for delayed completion, leading to a net judgment for the government.
- On appeal, the Federal Circuit held the trial court applied an overly narrow standard for breach of the implied duty of good faith and fair dealing and misinterpreted certain contract provisions (site‑condition allocations and scope of government approval for design variations), vacating and remanding for reconsideration under the correct standards.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of implied duty of good faith and fair dealing | Metcalf: duty protects against government conduct that frustrates contract purpose or reasonable expectations even if not "specifically targeted" | U.S.: relief requires specific targeting or breach of an express contractual provision (trial court adopted a "specific‑targeting" requirement) | The Federal Circuit: rejected single‑factor "specific‑targeting" rule; applied standard based on contract bargain and reasonable expectations — remand for reconsideration under broader precedent |
| Meaning and effect of pre‑bid site representations and FAR 52.236‑2 (differing site conditions) | Metcalf: pre‑bid representations were part of the bid bargain and did not shift risk of inaccurate government reports to the contractor; FAR clause contemplates equitable adjustment for materially differing conditions | U.S.: contractor’s obligation to perform site investigations relieved government statements of binding effect; Metcalf bore risk of differing conditions | The Federal Circuit: trial court misread the contract; pre‑bid representations and FAR clause are consistent with allocating some risk to the government — issue to be reexamined on remand |
| Requirement for written government approval of design changes | Metcalf: not all design changes (especially those remaining within RFP performance requirements) required written approval | U.S.: contract language and precedence clauses require government approval for variations from contract requirements | The Federal Circuit: rejected broad reading that all changes require written approval; remand to clarify meaning of "contract requirements" and whether specific changes required written approval |
Key Cases Cited
- Precision Pine & Timber, Inc. v. United States, 596 F.3d 817 (Fed. Cir.) (explains implied‑duty inquiry in light of the specific contract bargain)
- Centex Corp. v. United States, 395 F.3d 1283 (Fed. Cir.) (implied covenant protects reasonable expectations and prevents interference with performance)
- Malone v. United States, 849 F.2d 1441 (Fed. Cir.) (discusses lack of diligence/interference as elements of implied duty)
- First Nationwide Bank v. United States, 431 F.3d 1342 (Fed. Cir.) (implied duty breach where external action changed contract consideration balance)
- Scott Timber Co. v. United States, 692 F.3d 1365 (Fed. Cir.) (contrasts contract provisions allocating risk where third‑party obligations exist)
- Foster Constr. Co. A. & Williams Bros. Co. v. United States, 435 F.2d 873 (Ct. Cl.) (changed conditions clause rationale: shifts some subsurface risk away from bidders)
- H.B. Mac, Inc. v. United States, 153 F.3d 1338 (Fed. Cir.) (discusses differing site conditions principles)
- United Contractors v. United States, 368 F.2d 585 (Ct. Cl.) (presumption against broadly disclaiming liability for changed conditions)