COFC decision denying a contractor’s claim is reversed. The dispute involved a contract for road construction. The contract provided that (1) construction waste could be disposed at certain government waste sites, (2) the government had received clearance for these waste sites under the National Environmental Policy Act, and (3) no further analysis of the environmental impacts of using the sites was necessary. It turned out the waste sites contained wetlands, and the contractor had to purchase wetland mitigation credits under the Clean Water Act. The contractor sought compensation for these credits alleging that the solicitation had stated no further environmental impact analysis had been necessary for the sites. The COFC had found that the “no further analysis of environmental impacts” only referred to analyses under the National Environmental Policy Act, not the Clean Water Act, so the contractor had to eat the cost of the mitigation credits. The Federal Circuit rejected the COFC’s interpretation, reasoning that the “no further analysis” language applied broadly and was not limited to analyses under the National Environmental Policy Act. Requiring the contractor to purchase wetland mitigation credits for the waste sites amounted to a constructive change.
The Federal Highway Administration (FHA) posted a solicitation for road design and reconstruction at the Tongass National Forest in Alaska. In performing the project, the contractor would need to dispose of waste—dirt, gravel, etc.—generated during road reconstruction. The solicitation provided that waste could be disposed at sites listed in Waste Disposal Site Investigation Report. The solicitation stated that the sites listed in the report had received clearance under the National Environmental Policy Act (NEPA) and that “no further analysis of environmental impacts of using these sites is needed . . . .”
In conjunction with the solicitation, FHA provided offerors with the Waste Disposal Site Investigation Report referenced in the solicitation, which identified approved disposal sites. FHA also provided offerors with a Categorical Exclusion, a document the agency prepared in accordance with NEPA to weigh the environmental impact of government action. The Categorical Exclusion referred to the sites listed in the Waste Report and reiterated language from solicitation stating that “no further analysis of the environmental impacts of using these sites for material and waste is necessary.”
The Categorial Exclusion estimated that approximately 43 acres of wetlands would be impacted by the road project. The solicitation provided that the contractor was responsible for purchasing wetland mitigation credits if necessary. The solicitation also required the contractor to obtain all permits required by the Clean Water Act.
FHA awarded the contract to Kiewit Infrastructure West Co. After it began performance, Kiewit requested an equitable adjustment for the cost of purchasing wetland mitigation credits for wetlands it had encountered at the government’s waste disposal sites. Kiewit claimed it had not expected to mitigate wetlands at the waste sites, so the cost of the credits was a compensable change. The contracting officer denied the request, reasoning that wetlands at the waste sites did not constitute a change. Kiewit filed a certified claim for the wetland credits, but the contracting officer denied that too.
Kiewit appealed to the Court of Federal Claims. The court, however, entered judgment in favor of the government. The court reasoned that although the solicitation and the Categorical Exclusion stated that “no further analysis of the environmental impacts of using the waste sites” was needed, the term “environmental impacts” only referred to NEPA environmental impacts, not to impacts under the Clean Water Act. The court concluded that because Kiewit was required to obtain permits required by the Clean Water Act, it had to bear the cost of wetland mitigation at the waste sites. Kiewit appealed to the Federal Circuit.
On appeal, Kiewit argued that FHA had constructively changed the contract by requiring the company to purchase wetland mitigation credits for the waste sites. The solicitation affirmatively represented that no further environmental analysis was required for the waste sites. Thus, the company had reasonably concluded that it would not need to perform any wetlands analysis at the sites.
The government, however, contended the term “environmental impacts” in the solicitation did not include wetland mitigation credits. Wetland mitigation credits, the government argued, are required under the Clean Water Act. But the solicitation only refers to NEPA, not the Clean Water Act. Thus, the only reasonable interpretation of this provision is that no further analysis of environmental impacts was necessary for NEPA clearance. The solicitation never promised that an environmental analysis would not be required under the Clean Water Act.
The court found the government’s argument unavailing. As the court noted, “contract language matters.” The solicitation did not state that that no further analysis would be necessary for NEPA purposes. Instead, it broadly claimed that “no further analysis of the environmental impacts of using [the waste] sites” would be required. If the government had intended to exclude wetland impacts from the “environmental impacts”, it should have included contract language to that effect. The court reasoned that the government’s interpretation of this provision attempted to rewrite the contract to add terms the parties never agreed to.
The government also argued that because the solicitation stated that the government waste sites had received NEPA clearance, Kiewit should have understood that the term “environmental impacts” did not include impacts under the Clean Water Act. The court found this argument meritless. NEPA requires the government to examine the environmental consequences of federal action. An agency’s NEPA assessment will frequently include an analysis of the impact on wetlands. The fact that the government received NEPA clearance did not somehow exclude the analysis of wetlands from the solicitation’s affirmative representation that no further environmental impacts of the waste sites would be necessary. To the contrary , the fact that FHA had already analyzed the wetlands as part of the NEPA process bolstered, rather than undercut, Kiewit’s conclusion that it would not need to conduct any further wetland analysis.
The court noted that the government’s position was further undercut by the Categorial Exclusion, which reiterated that language form the solicitation stating that no further analysis of environmental impacts would be necessary. Moreover, the Categorial Exclusion stated that FHA estimated that 43 acres of wetlands would be impacted. That estimate, however, was only based on the wetlands in the roadway corridor, not at the waste sites. The fact that the FHA included the waste sites in its NEPA analysis and yet did not identify any wetlands at those sites confirmed Kiewit’s’ reasonable belief that it would not need to perform wetland delineation at the waste sites.
Kiewit’s position was further bolstered by the Waste Report, which noted that many of the designated waste sites were situated in rock quarries in locations that would minimize impacts to wetlands. That the waste sites were selected to minimize the impact on wetlands reinforced Kiewit’s conclusion that wetland analysis at the waste sites would not be required.
The court concluded that Kiewit’s reading of the solicitation was reasonable—the government promised that no further environmental impacts analyses at the waste sites was required. The government therefore effected a constructive change when it required Kiewit to purchase wetland credits for the waste sites.
Kiewit is represented by John Spencer Stewart and Tyler J. Storti of Stewart Sokol & Gray, LLC. The government is represented by Sosun Bae, Ethan P. Davis, Allison Kidd-Miller, and Edward Kirschman, Jr. of the Department of Justice.
