U.S. Court Of Claims Denies Contractor’s “Superior Knowledge” Claim Against Owner Despite Owner’s Withholding Of Reports That Would Have Revealed To Contractor Extent Of Subsurface Deterioration Of The Wharf To Be Reconstructed

by Pepper Hamilton LLP
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RDA Constr. Corp. v. United States, No. 11-555 C, 2017 U.S. Claims LEXIS 875 (Fed. Cl. July 27, 2017)

This case arises out of a public construction project at the Newport Naval Station.  The Naval Facilities Engineering Command (“NAVFAC”) contracted with RDA Construction (“RDA”) for the demolition, removal and reconstruction of a fifty-year-old deteriorating wharf and bulkhead.  The wharf was supported by 248 steel H-pile beams, encased in concrete and driven into the sea floor.  In 2005, NAVFAC commissioned the Appledore Report which found that these structures exhibited advanced deterioration, much of which could only be observed during underwater inspection and could not support any vehicular loads.  A second report, commissioned in 2008, recommended that the structure not be used during its reconstruction.

In May 2009, NAVFAC issued its project solicitation but did not disclose these reports or their findings.  Instead, NAVFAC invited bidders to the site and encouraged them to investigate it carefully.  Hazardous site conditions were marked with sawhorses, barriers and fencing.  After visiting the site, RDA submitted its bid and was identified as the apparent low bidder.  Two days later, NAVFAC notified RDA that its bid was “substantially lower” than NAVFAC’s estimate and requested that it review and confirm its bid and the scope of work.  RDA assured NAVFAC that it had made no mistakes and would honor its bid.  RDA then provided its technical and management plans to NAVFAC, noting that it planned to perform demolition work from the wharf using land-based equipment.  After receipt of these plans, NAVFAC awarded the contract to RDA; RDA signed the contract on October 13, 2009 and received its Notice to Proceed two days later.  In November, at a pre-construction meeting, RDA again explained its plan to use the wharf during construction as a staging area for its excavators and demolition equipment.  NAVFAC personnel were “shocked” by this plan because the wharf was “condemned”  and subsequently provided RDA with the Appledore report. 

In light of the report, RDA concluded that its work would have to be performed from the water on barge-mounted equipment, rather than on the wharf and filed a claim requesting that NAVFAC adjust the contract price to reflect this more costly method.  NAVFAC denied the claim and RDA filed a complaint in the U.S. Court of Claims, claiming, inter alia, that NAVFAC violated its duty to disclose “superior knowledge” regarding the wharf’s deterioration.  The court ultimately rejected this and RDA’s other claims for differing site conditions and misrepresentation.

The court first held that RDA’s “superior knowledge” claim failed.  While RDA may have undertaken to perform the contract unaware of the wharf’s load restrictions, and NAVFAC failed to provide such information, RDA was on notice to inquire about the conditions as a result of its site visit.  The existence of sawhorses, concrete barriers and fencing indicating that vehicles could not drive on the wharf, along with sinkholes running along the edge of the wharf, suggested that the structure and its surrounding area were unstable.  The court concluded that from these facts, a reasonable contractor would have reason to obtain additional knowledge about the project’s conditions.

The court also used this same evidence to reject RDA’s differing site conditions and misrepresentation claims.  RDA had argued that the structure’s deterioration constituted a latent condition which differed materially from that indicated in the contract.  But the court found that the contract made RDA responsible for determining what type of equipment the wharf could withstand and here, a reasonable contractor could see that the wharf could not support vehicular traffic, much less heavy equipment.  Also, the court held that a reasonable contractor would not have interpreted a solicitation to reconstruct a wharf to suggest that the same wharf could support demolition equipment.  Thus, the court held, NAVFAC had made no misrepresentations.

As such, the court rejected RDA’s claims and denied it any adjustment to the contract price.

To view the full text of the court’s decision, courtesy of Lexis®, click here.

 

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