No one can escape the basic rules of contracting, even the federal government. If the contract is clear and unambiguous, then the four corners of the agreement set the rules for the project and the parties – and there’s not much room for interpretation. The government was recently reminded of this cold, hard truth after it refused to grant a contractor an equitable adjustment of the contract price for purchasing wetland mitigation credits.
In Kiewit Infrastructure W. Co. v. United States, the government issued a solicitation for bids for the design and construction of roadways through the heart of the Tongass National Forest in Prince of Wales Island, Alaska. Part of the solicitation included a Waste Disposal Sites Investigation Report, which specified where waste could be disposed of during construction. In referring to the Report, the government’s solicitation clarified that “no further analysis of the environmental impacts of using government-designated waste sites would be needed unless an expansion of a site were proposed.” The solicitation was clear, however, that the chosen contractor would maintain responsibility for all permits and clearances, including the need for any potential wetland mitigation credits and ensuring compliance with the Clean Water Act.
Considering this directive, Kiewit dispatched a team to the remote national forest and performed a two-day investigation to consider the environmental impacts of the project. Kiewit’s investigation did not include a consideration of the Waste Disposal Sites due to the solicitation’s assurance that no further analysis was needed. Upon completion of its investigation, Kiewit submitted a bid that included $1 million for wetland mitigation credits.
Kiewit was awarded the contract and got to work. Several months into the project, Kiewit discovered the potential for environmental wetland impacts at the government’s Waste Disposal Sites. It informed the government of this fact and requested an equitable adjustment for the costs of additional wetland mitigation credits.
The government denied the contractor’s request, asserting that Kiewit had an obligation to investigate the environmental impacts under the Clean Water Act prior to submitting its proposal. Kiewit appealed to the Federal Claims Court. The court agreed with the government that despite Kiewit’s two-day investigation, it should have done more to determine the environmental impacts at the Waste Disposal Sites under the Clean Water Act.
The Court of Appeals for the Federal Circuit disagreed and drew the parties back to the terms of their agreement. The Federal Circuit declined to spend much time parsing through the facts and circumstances of Kiewit’s initial investigation and bid. Instead, the court found all that it needed to make its ruling was in the four corners of the contract.
The court explained that Kiewit reasonably relied on the parties’ agreement that “no further environmental impacts analysis” was necessary regarding the government-designated waste sites. In explaining its decision, the court reminded the parties, “contract language matters.” At the end of the day, it didn’t matter that the government intended the contractor’s obligations to comply with the Clean Water Act to apply to all aspects of the project. The parties’ agreement unambiguously carved out an exception for the waste sites, and the contract, as always, ruled the day.
This case is reminder that parties should always carefully and explicitly draft their agreements to make sure their intentions are on paper, in black and white. If there is any confusion or ambiguity, the best practice is to clarify in writing and make any necessary modifications in the contract itself before signing. Clarity and confirmation in writing is always the safest strategy, because everyone is subject to the terms of the agreement – no matter the job, no matter the party.
This article, "Contract Language Matters, Even to Uncle Sam," was published in the Bradley Construction and Procurement Law Newsletter for the first quarter of 2021.