The contractor alleged the government breached the duty of good faith and fair dealing. The government argued the court lacked jurisdiction because the good faith/fair dealing claim hadn’t been submitted to the contracting officer. Rather, the government contended, the contractor had merely asked the agency for an equitable adjustment. The court rejected the government’s argument. The breach claim arose out of the same operative facts as the request for equitable adjustment. When the contractor requested an equitable adjustment, the agency was on notice that denial of that request could constitute a breach of the duty of good faith and fair dealing.
Aries Construction Corporation v. United States, COFC No. 22-166C
Background
Aries Construction had a contract with the National Park Service to construct a water pipeline. When Aries began work, it encountered unexpected hard rock. Aries needed additional equipment and labor to remove the hard rock. Aries requested an equitable adjustment. The agency denied the request.
Aries filed suit in the Court of Federal Claims, asserting claims for breach of contract and breach of the duty of good faith and fair dealing. The government moved to dismiss the claim for breach of the duty of good faith for lack of jurisdiction.
Analysis
The COFC cannot hear a claim under the Contract Disputes Act unless that claim is first presented to the agency. The government argued that Aries had not presented the good faith and fair dealing claim to the agency. Rather, the government reasoned, Aries had simply requested an equitable adjustment for the unexpected hard rock. That request had not said anything about a breach of the duty of good faith and fair dealing. Thus, the good faith/fair dealing claim was too different from the claim presented to the agency for the court to have jurisdiction.
A claim before the court may differ from the claim presented to an agency without negating the court’s jurisdiction. So long as the claim before the court arises from the same operative facts, a contractor may assert different legal theories than presented to the agency. The dispositive question is whether the contracting officer was on notice of the factual and legal substance of the claim.
A claim for breach of the duty of good faith and fair dealing must include a denial of the contractor’s expected benefit. Aries requested an equitable adjustment for the costs incurred by the unexpected rock. A contractor is entitled to an equitable adjustment when it has performed work beyond the contract’s requirements, and that work was ordered, expressly or impliedly, by the government. Here, when Aries requested an equitable adjustment, the contracting officer was on notice that if he denied the request, then Aries could allege that the contracting officer had denied a benefit — the equitable adjustment — the company was expected under the contract.
The government maintained the request for an equitable adjustment never put the contracting officer on notice of a potential claim for beach of the duty of good faith and fair dealing. But the court found the government had misconstrued the nature of the claim. Â A request for an equitable adjustment is not claim for breach; rather, it is a claim pursuant to contractual rights. The breach doesn’t occur until the agency denies the request for an equitable adjustment.
The court reasoned that if the government were correct, then a contractor denied an equitable adjustment could not sue for breach until they presented the contracting officer with a separate claim. But lawsuits for breach after denial of a request for equitable adjustment are common. Once the government denied Aries’s request, it had of a possible breach claim.
Aries is represented by Tara M. Patterson and William Morris Fischbach, III of Tiffany & Bocso, P.A. The government is represented by Daniel F. Roland, Brian M. Boynton, Patricia M. McCarty, and Elizabeth M. Hosford of the Department of Justice as well as Karen D. Glasgow of the Department of the Interior.
–Case summary by Craig LaChance, Senior Editor
