The government may sometimes unilaterally direct the contractor to perform additional work outside the scope of the changes clause of a government contract. Such an order for alterations is a cardinal change and amounts to a breach. In order to establish that a cardinal change has occurred, the contractor must show that the work ordered by the government, either explicitly or impliedly, was beyond the contract requirements and materially different from what the contract specified. To determine whether a cardinal change exists, claim adjudicative forums compare the total altered work with the work included in the contract. If the alterations in the work are out of character with the work contemplated in the contract or require a level of effort reasonably unforeseeable at the time of formation, a cardinal change has occurred. In other words, a cardinal change exists when the government requests a unilateral change that so drastically alters the work that the contractor must essentially perform duties that are materially different from those it originally bargained for. While facts and figures involving the number of days of delay and performance cost increases may be helpful in understanding the extent of the additional work, establishing whether a cardinal change has occurred involves a highly fact specific inquiry that must look beyond such numbers alone, into the contractor’s entire undertaking. Once established, a cardinal change is a breach of contract and accordingly has the effect of freeing the contractor from its contractual obligations.
In Edward R. Marden Corp. v. United States, 442 F.2d 364 194 Ct. Cl. 799 (Ct. Cl. 1971), the Court of Claims held that a cardinal change had occurred when considering the entire undertaking of the contractor. The U.S. Navy awarded a contract for, among other things, the construction of a new aircraft maintenance hangar at the Naval Air Station in South Weymouth, Massachusetts. During construction, the entire structure collapsed, causing death, serious injuries, and significant damage to the already completed work. Following the collapse, the government directed the contractor to clean up the debris and complete the construction of the hangar per the government’s instructions. The contractor reconstructed the hangar under protest and later brought a breach of contract claim against the government for $3,700,000, alleging that it had been supplied defective specifications. The Court noted the fluid nature of the cardinal change doctrine and stressed the importance of individualized analysis of each case based on its own facts and circumstances, while giving due consideration to the magnitude and quality of the government-ordered changes and their cumulative effect on the project. Although the final reconstructed building was presumably identical to the one contemplated by the original specifications, the change in this case involved major reconstruction that the contractor could not have foreseen at contract formation. The contractor also suffered increased costs of almost double the contract price and the work was materially different from what the parties had bargained for. Under the circumstances, the Court held that a cardinal change had occurred because of the sheer magnitude of reconstruction work stemming from the allegedly defective specifications.
Meanwhile, in Armed Services Board of Contract Appeals (ASBCA) No. 62285, a decision issued on December 30, 2022, the Board determined that no cardinal change had occurred when a one year construction project took nearly four years to complete. The U.S. Air Force awarded the contract in question for the repair and renovation of a building located on Minot Air Force Base in North Dakota. Due to numerous delays, the project was completed 1021 days after the original contract completion period of 365 days. The contractor alleged that the government had accepted responsibility for 97% of the delays because it issued modifications extending the performance period for a total of 986 days. Notably, the contractor did not provide a critical path analysis or address the government’s contentions that the mere grant of extensions did not establish government responsibility for the delays and that the government delays accounted for no more than 246 days. The Board found that the contractor had failed to satisfy its burden of proof to establish a cardinal change. Since the application of the cardinal change doctrine requires a fact-intensive inquiry, the contractor was required to provide the details necessary for the Board to determine whether the government was responsible for the delays and difficulties on the project. However, the contractor did not provide a critical path analysis or respond to the government’s contrary assertions about the responsibility for the delays. Furthermore, the work performed did not result in a materially different project and the work and level of effort were essentially the same as the contractor bargained for before the contract was awarded. Consequently, the contractor failed to establish a cardinal change.
A cardinal change is a breach of contract that occurs when the government directs the contractor to make alterations in the work that are so drastic that the contractor is forced to perform materially different duties from those the parties originally bargained for at the time of contract formation. Since, by its very definition, a cardinal change is not redressable under the contract, if a claim can be resolved within the remedy-granting clauses of the contract, such as the changes or the differing site conditions clause, the cardinal change claim is denied, and the contractor is granted remedy within the contract. Contractors should be mindful that there is no exact mathematical formula to determine whether a change is a cardinal change. In this regard, while numbers such as the total days of delay and the increased costs of performance are helpful in determining the magnitude of the alterations in work, they may not be sufficient in and of themselves to establish that a cardinal change has occurred. Instead, Courts and Boards resolve the highly fact-specific inquiry by assessing the parties’ intentions at the time of contract formation, evaluating the quality and magnitude of the changed work, and reviewing the overall impact of the change on the project as a whole. If the altered work is materially different from the work contemplated under the contract or the contractor’s level of effort is drastically different and not foreseeable at formation, a cardinal change has likely occurred. Once established, a cardinal change renders the government in breach and releases the contractor of liability under the contract.
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.
