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.

In case of contract disputes, contractors must typically carry the burden of proof to establish the excusability of delays in performance of government contracts. This burden of proof must be carried by meeting the preponderance of the evidence standard. That is, contractors must generally show that it was more likely than not that the government was responsible for the performance delays. Depending on the terms of the contract and the circumstances surrounding the delay, contractors may need to rely on various types of evidence to achieve this. While the burden of proof may be relatively low, proving excusability of delays may nevertheless be challenging in the absence of properly documented evidence. For instance, the government may be in control of some of the evidence necessary to establish excusability, or there may be concurrent events contributing to delays in performance. Such scenarios may require contractors to produce different types of evidence, which may complicate their path to recovery. Therefore, contractors attempting to prove excusable delays must document, maintain, and produce detailed records demonstrating the government’s share of responsibility for the delay in performance.

The federal government monitors the performance of contractors through inspections to ensure contract requirements are being met. The Federal Acquisition Regulation (FAR) includes several inspection clauses permitting the government to inspect contractor performance. On fixed-price service contracts, the government has the right to inspect and test all services provided for the duration of the contract. While the government has no formal obligations to perform such inspections, it may choose to do so pursuant to the specific conditions outlined in the contract at any time and place as practical. In contracts for services exceeding the simplified acquisition threshold, FAR § 46.304 requires contracting officers to insert the inspection of services fixed-price clause at FAR 52.246-4. Under the clause, contractors must maintain an acceptable system of inspection, along with a complete record of all inspections conducted during contract performance.

If the government chooses to perform inspections on contractor premises, the contractor must provide reasonable facilities and assistance accommodating the inspection at no additional cost to the government. Of course, disputes may and often do arise regarding what constitutes reasonable assistance and the extent to which the government may expect such assistance during an inspection. In case the contractor does not meet the standards of performance required under the inspection, the government has the right to demand that the contractor perform the services again to conform with its contractual obligations under the same terms as the original contract. Notably, if the contractor is unable to cure the performance defects through re-performance, the government may require the contractor to take necessary actions to ensure future performance under the contract conforms with the contract requirements. In such situations, the government may additionally reduce the contract price to reflect the reduced value of the services delivered under the fixed-price contract.