The contractor sought compensation for 525 days of delay and disruption costs arising from the government's defective and incomplete design of a nearly one-million-square-foot command facility. The contractor argued that the government breached the implied warranty of specifications (the Spearin doctrine), the duty of good faith and fair dealing, and the contract. The ASBCA agreed, finding the government provided an incomplete, error-riddled design at contract award and then spent years iteratively correcting design defects through over 1,100 modifications. The Board ruled the government breached its obligations and was liable for all delay and disruption costs flowing from the defective specifications.
Appeal of KiewitPhelps, ASBCA No. 62119
- Background - The government awarded KiewitPhelps a $524 million fixed-price contract to construct a replacement command facility for U.S. Strategic Command at Offutt Air Force Base, Nebraska. The project, advertised as "100 percent designed," was plagued from the start by an incomplete design resulting from pre-award budget cuts that removed an entire floor and vertical bays. During construction, the government issued over 1,100 modifications to correct design defects. The contractor submitted a $169 million claim for delay and disruption costs spanning November 2014 through April 2018. The contracting officer denied most of the claim, finding only 18 days of excusable delay. The contractor appealed to the ASBCA, which bifurcated the proceeding to address entitlement before quantum.
- The Chaotic Procurement - The government knew from the outset that its budget estimates were wildly inaccurate. Congress approved $564 million for construction, but all four initial proposals exceeded this amount by approximately $200 million. Rather than redesign the project or seek additional funding, the government chose a high-risk approach: award the contract after slashing $200 million in scope through solicitation amendments, then continue correcting the design during construction. The amendments removed an entire floor, four structural bays, and numerous building systems. The designer was given only 45 days after contract award to essentially redesign the facility—an impossible task that resulted in pervasive errors and omissions. The Board found this "design-as-you-go" approach was the root cause of the contractor's problems.
- Defective Specifications and the Spearin Doctrine - The contractor argued the government breached the implied warranty that specifications were adequate and free from defects. The government acknowledged the design was incomplete but argued the contractor should have anticipated change orders and known the "rushed re-design effort would have mistakes." The Board rejected this argument. Under the Spearin doctrine, when a contractor builds according to government specifications, the government warrants those specifications are adequate. The Board found the government provided a materially incomplete and defective design riddled with errors affecting structural elements, mechanical systems, walls, ceilings, and electrical systems. The government—not the contractor—was solely responsible for the design. The contractor had no reason to expect the design would be so defective it would require constant revision throughout the four-year construction period.
- Breach of Good Faith and Fair Dealing - The contractor argued the government breached the duty of good faith and fair dealing by failing to extend contract completion dates in a timely manner, using unreasonable inspection processes, failing to timely issue modifications for known changes, and failing to timely correct the defective design. The government argued it acted reasonably given the project's complexity and incrementally-funded nature. The Board agreed with the contractor on several points. The government knew from 2014 that the contractor could not meet the original completion date, yet waited until November 2016 to issue a substantial time extension—and only then because it needed early access to the building for joint occupancy.
- Releases and Accord and Satisfaction - The government argued many of the contractor's claims were barred by releases in bilateral modifications. The contractor responded that it specifically negotiated revised release language preserving its right to claim cumulative impact costs. The Board found the modified release language ambiguous but construed it in the contractor's favor based on the parties' conduct. Starting in 2014, the contractor put the government on notice of a potential cumulative impact claim. In 2016, the parties negotiated modified release language explicitly reserving the right to claim "costs and impacts caused by the cumulative impact of multiple changes and modifications." The government's subsequent conduct—including discussing the claim, issuing a 2017 modification acknowledging the parties had not agreed on responsibility for "total delay"—demonstrated both parties understood the releases did not bar a cumulative impact claim.
- Delay and Causation - The contractor had to prove that the government's actions affected activities on the critical path—the longest path of activities, where any delay would cause a day-for-day delay to the entire project. The contractor's expert used an "as-planned versus as-built" methodology, comparing the original schedule to actual events and dividing the claim period into six time windows. The government's expert challenged this methodology and performed a "half-step windows analysis," concluding the contractor was entitled to only 71 days of compensable delay. The Board found the contractor's analysis more persuasive. The government was responsible for design defects from the start of the contract through the end of the claim period. These defects, combined with the government's management failures (late beddowns, multi-part modifications, unreasonable inspections, joint-occupancy complications), caused the critical-path delays. The Board rejected the government's arguments that concurrent contractor-caused delays absolved it of liability, finding the contractor's performance issues were either minor or directly attributable to the government's defective design.
- Cumulative Impact and Loss of Productivity - The contractor also sought compensation for inefficiencies and disruptions caused by the government's actions. The contractor planned to work sequentially through the building using a "train" of trades moving in an orderly fashion through defined work areas. The government's constant design changes, multi-part modifications, and other actions derailed this plan, forcing the contractor to work in a fragmented, inefficient manner with repeated mobilization and demobilization, rework, trade stacking, and out-of-sequence work. The Board agreed. The contractor presented extensive testimony from its subcontractors describing how design changes forced them to return to areas multiple times, perform work in small disconnected spaces rather than efficient sequential areas, and constantly adjust manning and schedules. The government's actions materially altered the nature of the bargain and caused the contractor and its subcontractors to work in a delayed, inefficient, unproductive, and more costly manner throughout the claim period.
**The contractor is represented by Vivian Katsantonis, Christopher M. Harris, and John F. Finnegan, III of Watt, Tieder, Hoffar & Fitzgerald, LLP, and Michael A. Branca of Peckar & Abramson, P.C. The government is represented by Michael P. Goodman, Brett R. Howard, James J. Irvine, James M. Pakiz, and Anna F. Kurtz of the U.S. Army Engineer District, Omaha.**