In a recent opinion, the Federal Circuit limited the federal government’s ability to shift the risk of differing site conditions to a contractor. In Metcalf Construction Co., Inc. v. United States, 742 F.3d 984 (Fed. Cir. 2014), the government rejected a design-build contractor’s claim for additional compensation arising from the discovery of differing site conditions. In vacating the trial court’s decision, the Federal Circuit clarified the scope of the duty of good faith and fair dealing between the federal government and a contractor while also discussing risk allocation.
The Court found that a requirement to make a post-award site inspection did not negate the standard changed conditions clause and did not shift the risk of differing site conditions to the contractor where there was no express or implicit warning that the contractor could not rely on the government’s affirmative representations. Further, the Court noted that the inclusion of the phrase, “for preliminary information only,” in the government’s soil report was not an effective disclaimer and did not shift the risk of differing site conditions to the contractor.
This is an important decision for government contractors because its suggests that neither broad disclaimers in bid documents nor requirements for post-award site inspections will entirely shift the risk of differing site conditions from the government to the contractor.