Change-in-scope claims are one of the most common contractor claims. Typically, scope disputes center on whether work that the owner directed a contractor to perform was part of the original scope of the contractor’s work. If it was part of the original scope, then the contractor may not be entitled to additional compensation or time to perform that work. But if it was out-of-scope work, it may be a breach of contract for the owner to refuse to pay for that work.
At times, scope disputes can result in the termination of the parties’ contract. That’s what happened in a recent dispute between the federal government and a contractor in GSC Construction, Inc. v. Secretary of Army.
In GSC, the United States Army Corps of Engineers awarded a contractor, GSC, a contract to build two warehouses. The contractor had about one year and four months to complete the warehouses.
Ultimately, the contractor failed to complete the project on time and claimed that it had several excuses for its untimely performance. As a result, the contractor claimed it was entitled to a 321-day time extension. The contracting officer disagreed and terminated the contract for default.
The contractor appealed the CO’s decision to the Armed Services Board of Contract Appeals. The BCA denied the contractor’s appeal, and the contractor then appealed the BCA’s decision to the United States Court of Appeals for the Federal Circuit.
The appellate court considered the contractor’s three arguments that the termination was wrongful. First, the court considered the contractor’s contention that the owner materially breached the contract because the owner required the contractor to perform work outside the scope of the contract. In particular, the contractor argued that it should not have been required to remove and replace the soil with select fill before placing a foundation for the warehouses.
The court rejected the contractor’s scope claim because several sections of the contract expressly stated that the contractor must remove and replace the soil. The court found it unpersuasive that a second contractor performing work nearby had provisions in its contract that required the second contractor to “provide the site pad for [the contractor] complete” because under the contractor’s reading, that would render the other provisions placing the soil-removal work in the contractor’s scope meaningless.
Second, the contractor argued that the BCA erred in denying its claim for a time extension because the owner erroneously applied a new, stricter design standard that resulted in weeks of delay. The court also rejected that argument because under the contract, the contractor was expressly responsible for coordinating design work. Since the contractor failed to use the correct design standard in its own submissions, it was responsible for that mistake and any delay resulting from that mistake.
Finally, the contractor contended that the BCA erred in holding that the owner did not forfeit the contract’s completion date. Under the contractor’s argument, it contended that the owner forfeited any right to enforce the completion deadline because the owner initially provided the contractor with additional time to complete the project. The court quickly rejected the contractor’s “forfeiture” argument because in previous correspondence between the owner and the contractor, the owner repeatedly reserved its rights under the contract, including maintaining the completion deadline.
Bottom Line: Scope claims remain very common in construction disputes. The issue will ultimately come down to whether the contract specified the disputed work as an item of work that the contractor agreed to perform. That will require the parties to closely review the scope language of the contract and evaluate whether the contractor’s claim is truly out-of-scope work. If it is, the contractor should generally be paid. If it’s not, then the owner may not have to pay the disputed work.
If you have any questions about the strength of a scope claim, please feel free to reach out.
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