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Claims Involving Warranty of Utilities

Performance of contracts on government sites often require contractor’s access to utilities such electricity, water, gas etc. In such contracts, the government may provide a warranty regarding the availability of utilities. The inclusion in the contract of the “Availability and Use of Utility Services” standard clause at FAR 52.236-14 as prescribed in FAR 36.514 is interpreted as a government warranty of utilities. Fixed-price construction contracts typically contain this standard clause when performance is contemplated on government sites, the available utilities are adequate for the needs of both the government and the contractor, and it is in the government’s interest to furnish the utilities. Unless the contract states otherwise, the standard clause makes it the contractor’s responsibility to pay utility charges at the prevailing rates charged to the government. When the utilities are produced by the government, the contractor is responsible for utility payments based on reasonable rates determined by the contracting officer (CO). In contracts without the standard clause, claims adjudicative forums review the relevant contractual language to determine whether the government has warranted the availability of utilities. Both the standard clause and relevant contract language are strictly interpreted in accordance with their plain meaning to determine if a warranty of utilities exists and whether the contractor is responsible for the payment of any utility charges.

In Armed Services Board of Contract Appeals (ASBCA) No. 42916, 42927, a decision issued on October 31, 1991, the Board reviewed the contract documents in the absence of the standard clause and held that the government had warranted the availability of gas service. The contractor was awarded two contracts for the construction of various buildings at the Naval Station Ingleside in Corpus Christi Bay, Texas. Both contracts required the contractor to furnish, install, and test hot water heating boilers. While the contracts did not include the clause at FAR 52.236-14, they contained a general paragraph titled “Utilities for Construction and Testing,” which was silent about gas service. The contracts also included a utility site plan drawing that showed the location of an existing gas line. Due to delays in a separate gas service contract, the contractor was prevented from completing performance in a timely manner. In the appeal before the ASBCA, the Board reviewed the contract and found that although it placed responsibility for furnishing certain utilities required for construction and testing on the contractor, it did not expressly mention gas service. Meanwhile, the contract drawings showed an existing gas line. The Board interpreted the contract documents and drawings together as a government warranty of gas service. Consequently, it was held that the government was responsible for furnishing gas service but had failed to do so in a timely manner.

In Labor Board of Contract Appeals (LBCA) No. 1997-BCA-4, the Board determined that the contractor was responsible for electricity charges during performance under the “Availability and Use of Utility Services” standard clause incorporated by reference into the contract. The Department of Labor (DOL) awarded the underlying fixed-price contract for the demolition, renovation, and construction of buildings at the Job Corps Center in San Jose, California. During the preconstruction conference, the government provided written materials stating that reasonable amounts of water and electricity would be provided. The contractor argued that this language created an exception to the general rule under FAR 52.236-14(a) that the contractor was responsible for the cost of using electricity. The Board noted that although not customary, the standard FAR clause regarding utilities and applicable case law established that, under certain circumstances, the contractor may not be required to pay utility charges. However, in this case, the text in the preconstruction conference materials alone was insufficient to create such an exception. Additionally, there was no factual support for the contractor’s allegations that the government made repeated statements at the preconstruction conference assigning liability for the electricity costs to the government. The contractor seemed to have conflated the distinction between the provision of electricity and the payment of electricity charges in interpreting the preconstruction conference materials. Ultimately, the Board held that the government had warranted the provision of electricity, but the contractor was required to pay for the electricity charges.

The government provides a warranty of utilities by the incorporation of the “Availability and Use of Utility Services” standard clause at FAR 52.236-14. Even in the absence of the standard clause, other relevant contract terms and conditions may amount to a warranty. Applicable case law has established that in most construction contracts it is customary for the government to provide certain utilities, such as electricity. Under the standard clause, while the government is responsible for the provision of reasonably required amounts of utilities, the contractor pays for the utilities it consumes. Contractors should remember that although the standard clause places responsibility for paying utility charges on the contractor, other contract terms may still be negotiated to shift this burden to the government. In other words, the standard clause does not preclude the contractor from negotiating the recovery of utility costs from the government. In a dispute over whether the government or the contractor is responsible for the utility charges, adjudicative forums will strictly interpret the language of the standard clause, if included in the contract, and any other applicable terms and conditions. Ultimately, while it may be relatively straightforward for contractors to establish the existence of a government warranty of utilities, especially in contracts containing the standard clause at FAR 52.236-14, proving government liability for utility charges may be more challenging unless the contract establishes an exception to the normal requirement that the contractor pays the cost of using available utilities.

This Federal Contract Claims Insight is provided as a general summary of the applicable law in the practice area and does not constitute legal advice. Contractors wishing to learn more are encouraged to consult the TILLIT LAW PLLC Client Portal or Contact Us to determine how the law would apply in a specific situation.

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When the contractor’s performance requires the government to furnish a work site, failure to make the site available may result in liability for the government. Even when furnished by the government, the availability of a work site may depend on many variables. Therefore, unless the contract can be interpreted to imply an unqualified guarantee, contractors may find it challenging to prove the existence of a warranty of site availability. The extent of definitiveness of the contract language pertaining to availability of the work site is key in determining whether a warranty exists. General government representations specifying a date for making a work site available are typically insufficient to amount to a warranty absent express and unqualified contractual language. If the availability of the site is dependent on factors outside the government’s control, such as completion of performance on another contract, a finding that a warranty of site availability exists becomes highly unlikely. On the other hand, if the government alone has complete control over site availability, it makes it more likely that a claims adjudicative forum will find that a warranty exists. Additionally, certain facts may indicate the presence of a warranty of site availability, including the critical importance of the site and the limited period within which the work must be performed. Similarly, contract clauses can be important indicators, with a warranty of site availability more likely to be found in contracts that include a suspension of work clause.

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Claims Involving Warranty of Utilities

TILLIT LAW Contract Claims Insights