Disputes regarding a contractor’s scope of work are common. Frequently, there are times when a contract or solicitation is unclear as to whether a certain item of work is within a contractor’s scope.
In federal government contracts, if a contract is ambiguous as to whether a contractor must perform a specific item of work, the issue may turn on whether it was a patent or latent ambiguity. A patent ambiguity is one that is readily apparent or obvious. In contrast, a latent ambiguity is one that is hidden or could not be discovered through the exercise of reasonable care.
The distinction is important because if an ambiguity as to whether a contractor has to perform a specific item of work is patent or obvious, the contractor has an affirmative duty to seek clarification before submitting its proposal. If the contractor fails to seek clarification, the ambiguity must be construed against the contractor.
Practically, this means that if the contract is obviously ambiguous as to whether a certain item is in the contractor’s scope of work, the contractor is responsible for performing that work under the contract and will receive no additional compensation.
A recent example of this issue arose in a relatively recent appeal in the United States Court of Appeals for the Federal Circuit–Lebolo-Watts Constructors 01 JV, LLC v. Secretary of the Army. In that case, a contractor asserted a claim for additional compensation for circuit breakers it installed for a project. The contracting officer denied the contractor’s claim, and the Armed Services Board of Contract Appeals agreed with the CO’s denial.
On appeal, the ASCBA’s decision was affirmed. The court reasoned that although the contract was ambiguous as to whether the contractor had to install the circuit breakers, the ambiguity was patent or obvious. The court noted that the information available to the contractor should have put the contractor on notice that the circuit breakers were important because, among other reasons, the contract provided that the power for the associated building that the contractor had to build would get its power from the existing switchgear in an adjacent building. Thus, “it would have been clear that not having [the] circuit breakers . . . would result in a delay in providing power to the [required new building].”
Also, the court found that the ambiguity was patent because one of the potential subcontractors that submitted a bid included the new circuit breakers in its bid to perform the electrical portion of the work. As such, the court concluded the ambiguity about whether the circuit breakers were within the contractor’s scope was patently ambiguous.
Since the ambiguity was patent, the ambiguity was properly construed against the contractor. Thus, the contractor was responsible for furnishing and installing the circuit breakers, and the contractor’s claim for additional compensation was properly denied.
Bottom Line: When reviewing a solicitation or the potential scope of work for a project, a contractor must be alert for potential ambiguities as to whether it is responsible to perform a specific item of work. If there is any doubt as to whether an item of work is required to be performed, the best practice is for the contractor to seek clarification before it submits its bid or proposal. Otherwise, a contractor may risk not being paid for work that was not clearly included in its scope.
With that said, project owners should also make the scope of work as clear as possible. While the above court concluded the ambiguity was patent, the court may have just as easily of found that it was a latent ambiguity that should be construed against the owner.