When entering federal contracts, the government acts in a proprietary capacity and owes contractors certain express and implied obligations. One such implied obligation is to disclose to the contractor facts and information vital to performance. Under the “doctrine of superior knowledge,” the government may be held liable for breach of contract if it fails to disclose vital information. Notably, the doctrine of superior knowledge applies only to critical information withheld during the solicitation phase, and a related but distinct implied duty of good faith and fair dealing attaches post-contract formation. Contractors may prove that the government was in breach of contract under the superior knowledge doctrine by producing evidence that they: (1) undertook performance without vital knowledge of a fact that affects performance costs or duration, (2) the government was aware that the contractor had no knowledge of and had no reason to obtain such information, (3) contract specification supplied by the government misled the contractor or did not put it on notice to inquire, and (4) the government failed to provide the relevant information.
Contractor Undertook Performance Without Vital Knowledge of a Fact that Affects Performance
For the doctrine of superior knowledge to apply, the contractor must begin performance under the contract without being aware of a material fact that affects the contract’s performance or duration. To be deemed vital, the withheld information must affect the performance phase of the contract, either by increasing the contractor’s incurred costs or by extending the contract duration. The government must be aware of the relevant information, which must have been unavailable to the contractor from public sources, as the government is typically under no obligation to volunteer public information. Since the vital information must affect performance, an unexpected increase in the contractor’s non-performance-related costs, such as post-performance settlement costs or litigation expenses, is unrecoverable.
Government was Aware of the Contractor’s Lack of Knowledge
The contractor must produce evidence that the government was aware that the contractor was undertaking performance without knowledge of the vital information and had no reason to obtain the information. The contractor’s experience and expertise in the industry may be relevant to whether the government is deemed reasonably aware of the contractor’s lack of knowledge. For instance, the government’s failure to warn a small business that extensive research and development (R&D) efforts would be required on a fixed-priced small business set-aside contract – where such work is critical to performance, and the contractor has little to no prior experience in such R&D work – would likely lead to a conclusion that the government was aware of the contractor’s lack of knowledge.
Any Contract Specifications Supplied by the Government Misled the Contractor or did not put it on Notice to Inquire.
For the doctrine of superior knowledge to apply, government-supplied information or specifications must mislead the contractor or fail to put the contractor on notice to inquire. The contractor need not demonstrate the government’s intent to deceive to satisfy this element as long as it can show that it relied on the false or misleading information supplied by the government. It is worth noting in this connection that adjudicative forums recognize the contractor’s right to rely on government-supplied specifications. The government-supplied information must also not trigger the contractor’s duty to inquire before contract formation.
Government Failed to Provide the Relevant Information
Finally, the government must fail to provide the relevant information, thereby making it more difficult for the contractor to perform under the contract. As previously noted, a superior knowledge claim concerns the government’s non-disclosure of information prior to contract formation, rendering the government’s conduct during contract performance largely irrelevant. Consequently, to demonstrate government liability under the doctrine, the contractor must demonstrate that the government failed to provide it with vital information during the solicitation phase.
Although involving similar principles, the government’s implied duty to disclose superior knowledge is distinct from its implied duty of good faith and fair dealing, which attaches post-contract formation. The doctrine of superior knowledge requires the government to disclose, before the formation of the contract, certain vital information affecting performance costs or duration that the contractor is unaware of. The government must also be aware that the contractor had no knowledge of and no reason to obtain the information. Furthermore, government-supplied information or specifications must have misled the contractor or did not put it on notice to inquire. Finally, the government must actually fail to provide the relevant information. By understanding the four elements required to establish a superior knowledge claim against the government, contractors are better positioned to recover for cost increases or performance delays.
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.
