Appeal of General Dynamics – National Steel and Shipbuilding Company, ASBCA No. 61524
Ambiguous terms in a government contract are typically construed against the drafter, i.e., the government. But in denying this appeal, the board construed it against the contractor. The board reasoned that the ambiguity was so obvious and glaring that the contractor had a duty to inquire. Moreover, the contractor’s interpretation of the ambiguous clause would have rendered the clause inexplicable or superfluous.
Background
General Dynamics – National Steel and Shipbuilding Company had a contract with the Navy to provide dry-dock maintenance for a ship. The contract had a fixed price, but it also obligated the contractor to reserve labor and material for growth work—i.e., work that the government might assign in the future.
The contract had a list enumerated work items, which set forth what the Navy would receive from General Dynamics. Some of those work items required General Dynamics to set aside 60 days of labor and $16,000 of materials for each item as designated by the supervisor. General Dynamics and the Navy got into a dispute over the meaning of this set aside clause. The Navy believed the set asides were for growth work that General Dynamics would perform in addition to the work defined in the work items. General Dynamics believed that this language was a cap that limited the work it was required to do under the work items.
When the Navy required General Dynamics to perform in excess of the alleged cap, General Dynamics submitted a claim seeking reimbursement for what it believed was extra work. The Navy denied the claim. General Dynamics appealed to the ASBCA alleging the government had constructively changed the contract.
Legal Analysis
- No Constructive Change – To recover for a constructive change, the contractor must show that it was compelled to perform work that was not required under the contract. Here, however, the General Dynamics had not performed extra work. The evidence showed that the parties had intended the set asides for growth work, not as a cap on General Dynamics’ performance. The board noted that the amounts set aside—60 days and $16,000—were woefully inadequate to perform the work actually listed in the work item. Reading these as caps on performance was nonsensical.
- Work Items Were Not Optional – In support of its position, General Dynamics argued that the work items containing the set aside were just optional menus that it only had to perform if directed by the government. The board rejected that argument, reasoning that nothing in the work items were optional. Indeed, where the contract had indicated optional work, it had used the words “as directed by the supervisor.” The work items did not contain that language and to read those work items as optional would have rendered them superfluous.
- Board Construed Ambiguity Against General Dynamics – The board reasoned that even if it were to find the set asides ambiguous, it would have construed the ambiguity against General Dynamics. If a contractor is aware of an ambiguity and fails to seek clarification, then they are bound by the government’s interpretation. Here, General Dynamics knew of the ambiguity. When the company solicited bids from subcontractors, the subcontractors had not treated the set asides as caps or the work items as optional. Even if General Dynamics had not been aware of the ambiguity, the board found it was so glaring, that if General Dynamics really believed it was a cap on performance, it should have still inquired about it with the Navy.
General Dynamics is represented by Willaim M. Pannier of Pannier Law, PC. The government is represented by Craig D. Jensen and Devin A. Wolak
