The decision of the Court of Federal Claims in Marine Industrial Construction LLC v. United States, 158 Fed. Cl. 158 (2022), includes detailed analysis of several legal issues familiar to contractors facing challenging subsurface conditions on a federal construction contract. In addition to the sufficiency of the contractor’s compliance with the unique notice requirements in FAR 52. 236-2(a), the court’s opinion sheds light on how the elements of proof of a differing site conditions claim compare to those in a claim asserting that the government improperly withheld superior knowledge.

The case involved a Corps of Engineers contract for maintenance dredging on the Quillayute River in La Push, Washington. When the Corps terminated the contract for default because the contractor was behind schedule, the contractor claimed that the termination was improper because it was entitled to additional compensation and time extensions as a result of differing site conditions and failure to disclose superior knowledge.

The contractor asserted two differing site conditions claims—one for naturally occurring material such as clay and floating logs, and another for artificial debris such as tires, rubber, boat parts, nets, and cable. The contractor separately asserted that the government breached the contract by failing to disclose superior knowledge of logs, clay, and artificial debris as well as the fact that a 12” discharge pipe would be the minimum pipe size needed to complete the dredging. The court’s decision resolves numerous motions and cross-motions for summary judgment.

Notice requirements in FAR 52. 236-2(a)

The decision is interesting in part because it specifically addresses whether the contractor’s notifications to the government were submitted “promptly, and before the conditions are disturbed. ” The court held that the contractor failed to give timely notice that it considered clay and floating logs to be differing site conditions. The contractor dredged “24/7” for at least a month before notifying the government that it considered the clay and logs to be differing site conditions.

With respect to artificial debris, the court held that the contractor’s January 5, 2015 email to the contracting officer was timely with respect to conditions encountered on or after December 30, 2014. The email explained that pumping was difficult and being impacted by debris. It stated that the contractor “feels a conversation needs to be had with regard to the amount of artificial debris being found in the Boat Basin. ” Recognizing that it might be difficult to evaluate whether a notice is even appropriate, the court held that a one-week delay in giving notice was reasonable under the circumstances. And the government waived any argument it may have had about the sufficiency of the contents of the notice. As of early January 2015, the Corps was well aware that the contractor considered the debris encountered on site to be a differing site condition.

Comparing the elements of differing site conditions and superior knowledge

Apart from its discussion of notice, the decision in Marine Industrial addresses the contractor’s entitlement under both the differing site conditions clause and the superior knowledge doctrine. The court held that there was no differing site condition and no basis for a superior knowledge claim with respect to clay because the presence of clay was described in a publicly-available document cited in the solicitation.

With respect to artificial debris, the court reserved the contractor’s Type 1 differing site conditions claim for trial. The question to be resolved at trial was whether solicitation language stating that the contractor “may encounter” debris and that the government had “no knowledge of artificial obstructions” was a sufficient affirmative representation that there would be no debris.

The court granted summary judgment in favor of the contractor on the contractor’s claim that the government breached the contract by failing to disclose superior knowledge of artificial debris. The contractor proved the government’s knowledge that debris was present and that it withheld this knowledge simply by showing that the government had removed warnings about the presence of debris from the solicitation. Past solicitations for maintenance dredging in the same area included a specific warning as to the presence of debris:

Debris including fish nets, steel trolling wire, and machinery may be found in the basin area requiring frequent downtime for cleanouts and disposal . . . .  Sunken boats, fishnets and other miscellaneous debris may be encountered.

The court reached a similar conclusion on the contractor’s claim that the government withheld superior knowledge that a 12-inch discharge pipe was the smallest size pipe that could be used to complete the work. In the court’s words, “[t]he government included a 12” minimum pipe size requirement in four of the five previous solicitations for this dredging contract, and then reinserted the requirement in the 2015 resolicitation after plaintiff failed to perform the contract with its 10” pipe. ”

The practical side of unanticipated subsurface conditions

The decision in Marine Industrial offers substantive guidance on the practical issues facing contractors that encounter unanticipated subsurface conditions. First, it shows that contractors should not hold back on notifying the government of a potential differing site condition until after they have investigated and addressed the problem. Contractors seeking to assert a differing site conditions claim must be prepared to show that they gave notice “promptly, and before conditions are disturbed.” The idea is that the notice will allow the government to investigate and make its own determination as to the presence or absence of differing site conditions.

Second, contractors seeking an adjustment of the contract price or the schedule to address the impact of a differing site condition should consider asserting a claim that the government improperly withheld superior knowledge. The elements of proof are different, and it may be possible to support a superior knowledge claim even when there is no basis for a differing site condition.