The primary method for managing risks associated with latent physical conditions encountered in construction projects is the differing site conditions clause in Federal Acquisition Regulation (FAR) 52.236-2. Since fully redressable claims under specifically included contract clauses may not be brought under separate breach of contract claims, most claims for hidden site conditions are brought under the differing site conditions clause. However, certain federal contracts for smaller construction projects awarded through simplified procedures, and some custom-negotiated construction contracts may lack a well-defined differing site conditions clause. In such cases, contractors must pursue their claims arising out of unforeseen conditions, such as claims related to subsurface conditions under traditional breach of contract theories. Additionally, when faced with unforeseeable events like extreme and unpredictable weather or unanticipated changes in labor conditions that are not typically covered by the differing site conditions clause, construction contractors may opt to initiate breach of contract claims to recover their increased costs.

The Government’s non-disclosure or misrepresentation of information material to site conditions are two breach of contract actions available to construction contractors in such situations. To be successful in a non-disclosure claim, the construction contractor must demonstrate that the Government possessed information pertinent to a material site condition, which it failed to disclose to the contractor. The contractor must also establish that the presence of the material site condition could not have been readily determined through a site inspection or other reasonable methods. Government misrepresentation is the other breach of contract claim commonly applicable in contracts without a differing site conditions clause. A misrepresentation claim is essentially based on the Government breaching its duty to disclose its superior knowledge of the site condition. To prove that the Government breached its duty to disclose, the Court of Federal Claims (COFC) has previously required that the contractor demonstrate Government culpability. One way of demonstrating Government culpability is by proving that the Government knew that the contractor was unaware of the differing site conditions. However, the Federal Circuit has recently rejected the Government culpability requirement, making contractor claims easier to prove in such situations. Therefore, depending upon the circumstances, the adjudicative forum’s analysis for a breach of contract claim for Government misrepresentation is similar if not identical to a differing site conditions claim.

The impracticability of performance doctrine is applicable in situations where the contractor’s performance of a contract, although not impossible, is rendered impracticable due to a problem encountered that was unforeseen at the time of formation of the contract. This impracticability of performance may be caused by a variety of unforeseen situations faced by the contractor during performance, including substantial increases in costs, significant problems encountered, or technological changes. Contractors must satisfy at least three conditions for the doctrine of impracticability to be applicable. First, the contractor must demonstrate that an unexpected condition or contingency occurred during the performance of the contract. Secondly, the contractor must show that it did not assume the risk of that contingency either expressly or through trade usage or custom. Finally, the contractor must prove that the unexpected condition or contingency caused the impracticability of performance.

Existence of Unexpected Condition or Contingency

The claim adjudicating forum may consider several factors to determine whether an unexpected condition or contingency exists. For instance, it may consider whether any other similarly situated contractor could have performed the contract. That is, whether the requirements or conditions are subjectively impractical for the contractor bringing the claim or impractical for any contractor in its position. Another factor to consider is the extent of the contractor’s efforts to meet the performance requirements in face of the contingency. Generally, the contractor must demonstrate that it was diligent and exhaustive in its attempts to perform the contract. In cases where the contractor alleges commercial impracticality or unfeasibility, it must prove that the performance costs would be so high that performing the contract would not make commercial sense. Notably, non-substantial increases in contract price will not result in successful commercial impracticability claims.

A basic tenet of the U.S. federal public procurement system is a fair and competitive bid process. This means federal agencies must provide potential contractors with sufficiently detailed solicitations that are clear and concise so they may compete intelligently and on a relatively equal basis. However, sometimes, issues arise when the solicitation itself contains hidden pitfalls. These are known as latent ambiguities. A latent ambiguity in a bid protest arises when a defect in the solicitation is not initially visible but only becomes apparent with the introduction of additional evidence, such as additional technical specifications, past performance evaluations, or discussions. Latent ambiguities may be differentiated from patent ambiguities, which are apparent solicitation defects or errors evident on the face of the solicitation.

A latent ambiguity may arise due to various reasons, including poorly drafted solicitation provisions, inconsistent or conflicting solicitation language, a lack of adequate clarification or guidance from the agency in response to offeror queries, or just a change in circumstances since the issuance of the solicitation. To demonstrate the presence of a latent ambiguity, the protestor should demonstrate that the ambiguity is not readily resolvable by referencing the solicitation or any applicable regulations. Furthermore, the protestor must prove that the latent ambiguity is genuine and material. To prove materiality, contractors can demonstrate that the latent ambiguity ultimately had a bearing on the source selection decision. The protestor must also show reliance on its reasonable interpretation of the latent ambiguity and competitive prejudice stemming from that reasonable reliance. In other words, the protestor must show that the latent ambiguity could have two or more reasonable interpretations and that the protestor relied on its own reasonable interpretation of the latent ambiguity in drafting its proposal. Finally, the protestor’s reliance on its own reasonable interpretation should have resulted in competitive prejudice.

Due to the highly regulated nature of federal government contracts, their formation and administration are governed by a well-defined set of rules. Despite this, government contracts rely on a foundation of mutual trust and cooperation between the government and its contractors. Parts of this invisible layer of obligation are embedded in the implied duties of cooperation, good faith, and fair dealing. Therefore, while related and somewhat interchangeable concepts, these implied duties are inherent to all government contracts and help ensure a successful, productive, and professional relationship between the contracting parties. However, from time to time, the Government may violate these implied duties, giving rise to contractor claims. Understanding these duties empowers contractors to navigate potential issues by identifying causes of action for Government breaches that result in disruption in performance or monetary damages. Therefore, a general discussion distinctly describing these obligations may be helpful to contractors alleging Government violations during contract performance.

o Duty of Cooperation

The Government’s duty to cooperate during the performance phase is as inherent to a government contract as the Government’s right to expect performance in accordance with specifications. Since both parties are required to work together as partners to achieve common contractual objectives, a lack of cooperation during performance by the Government may, and often does, become a source of disputes. When facing scenarios where contractors suspect a lack of adequate cooperation by the Government, they should evaluate the Government’s conduct in the context of the contract’s overall objectives. If the conduct at issue is inconsistent with the Government’s stated mission needs or hinders the contractor’s performance, the Government may be in breach of its duty of cooperation. The Government’s duty to cooperate during performance may be viewed independently by adjudicative forums in accordance with the facts at issue or in contrast with its treatment of other similarly situated contractors. Understanding the government's duty to cooperate empowers contractors to identify potential roadblocks and seek redress for hindered performance.