Appeal from contractor’s denied claim is granted in part and denied in part. The contractor argued the agency had constructively waived a contract specification that required the installation of geotextile fabric in a levee with perpendicular seams. The board agreed, reasoning that the agency observed and accepted fabric with parallel seams. The contractor also contended that it was entitled to be reimbursed for costs incurred to remedy geotextile that failed to meet the contract’s strength requirements. The contractor claimed that while individual samples of the geotextile did not satisfy the contract’s requirements, the average strength of the multiple layers of geotextile did satisfy those requirements. The board, however, rejected the contractor’s “average strength” argument, reasoning that levee is only as strong as its weakest point. The integrity of the levee was a matter of public safety. (Indeed, were the levee to break, “cryin won’t help you [and] prayin’ won’t do you no good.”) Each sample of fabric had to satisfy the contract’s strength specifications.
Buck Town Contractors had a contract with the Army Corps of Engineers to reconstruct a hurricane protection levee in Louisiana. The contract required placement of geotextile—a permeable fabric that helps with soil stability and erosion control—at the base of the levee. The contract specified that the seams and overlaps of the geotextile had to be installed perpendicular to the centerline of the levee.
Buck Town’s subcontractor, however, installed the geotextile with seams parallel to the center of the levee. Multiple Corps officials observed, inspected, and photographed the parallel installation over the course of several weeks. The Corps’ quality assurance inspectors signed off on the installation, noting that Buck Town’s work was acceptable. It wasn’t until after a significant work on the levee had been completed that the Corps noticed the flaw in the installation. The Corps required Buck Town to degrade and rebuild the levee with a new layer of properly installed geotextile.
The contract also required Buck Town to test samples of the geotextile to ensure a minimum tensile strength of 1450 pounds at 5% strain. The tests on the geotextile that Buck Town had installed did not meet these specifications. The Corps directed Buck Town to once again degrade a portion of the levee and install geotextile that satisfied the specification and to install a berm—or raised bank—along another portion of the levee.
Buck Town submitted a $3 million claim to the Corps. Buck Town contended that it was entitled to a contractual adjustment for the parallel geotextile seams because the Corps, through its inaction, had constructively waived that perpendicular seam requirement. Buck Town also alleged that it was entitled to be reimbursed for the extra work performed as a result failed strength test on the geotextile. Buck Town claimed that the extra work was unnecessary economic waste because the two layers of geotextile that were installed, when averaged together, actually satisfied the contract’s tensile specifications.The Corps denied Buck Town’s claim, and Buck Town appealed to the ASBCA.
As to the claim regarding the costs to fix the parallel seams, Buck Town contended that the Corps was aware of and did not object to the parallel seams and thus constructively waived the perpendicular seams requirement.
The board noted that a constructive waiver occurs when (1) the contracting officer possessed knowledge of the work outside the scope of the contract, (2) action or inaction by the contracting officer indicated acceptance of non-specified performance, (3) the contractor relied on the contracting officer’s action or inaction, and (4) inequity would result if acceptance of non-specified performance were retracted.
Here, the board found that Buck Town had satisfied the elements of constructive waiver. With regard to the first element—knowledge of work outside the scope of the contract—the Corps argued that it lacked actual knowledge of the improper geotextile installation. The board, however, reasoned that a waiver can be based on the constructive knowledge. In this case, Buck Town’s quality control reports specifically stated that it was installing geotextile with parallel seams. None of the government’s quality assurance reports noted defects in the installation. Moreover, Corps representative visited the job site and observed the parallel seams. Based on the totality of the evidence, the contracting officer either knew or should have known that Buck Town was installing geotextile with parallel seams.
The board also found that the second element—action or inaction by the CO—was satisfied because inaction of the entire quality assurance team indicated to Buck Town that the Corps accepted the parallel seams. The third element was satisfied because Buck Town obviously relied on the Corps’ acceptance of the seams while building up the levee. The fourth element was satisfied because it would be inequitable for force Buck Town to bear the costs of the Corps’ failure to enforce the contract’s provisions.
The board, however, was less receptive to Buck Town’s economic waste claim concerning the failed strength tests. Buck Town alleged that the average strength of all the geotextile layers satisfied the contract’s tensile specification. But the board found that the proper analysis of levee safety must consider the first layer of geotextile at its weakest point rather than the average strength of the textile. Even assuming that the levee as a whole met the minimum strength requirements, it would still have been weaker than if built according to the actual contract specifications.
The board also noted that its own precedent holds that the economic waste theory does not apply when public safety is at issue. The levee in this case was part of a high risk system. Breach of the levee could result inundation of 191,000 structures and over $47 billion in damages. Given the stakes, the Corps did not act arbitrarily when it required Buck Town to satisfy the contract’s tensile requirements.
Buck Town is represented by W. Lee Kohler, Douglas A. Kewley, and Thomas F. Gardner of Gardner & Kewley, APLC. The government is represented by Michael P. Goodman, Stephen S. Bland, and William G. Meiners of the U.S. Army Corps of Engineers.
