Government's Engineers Couldn't Modify Contract, Says ASBCA

A construction contractor was unable to recover the costs of performing changed work allegedly ordered by the government’s project engineers because the engineers did not have authority to modify the contract.

As demonstrated in a recent Armed Services Board of Contract Appeals decision, only a contracting officer or the contracting officer’s designated representatives may modify a contract, and a contractor bears the risk of non-payment by performing changed work directed by an unauthorized government employee.

The ASBCA’s decision in Circle, LLC, ASBCA No. 58575 (July 1, 2015) involved a contract between Circle, LLC and the U.S. Army Corps of Engineers, pursuant to which Circle was to construct a concrete flume on the Two Mile Canal in Jefferson Parish, Louisiana. As part of its scope of work, Circle was to erect a Temporary Retaining Structure to stabilize the site while the flume was constructed.

Circle was responsible for designing a TRS to meet the contract’s requirements, including identifying the appropriate sheet piles for the project. While Circle was required to submit design calculations for the TRS, nowhere did the contract call for computer calculations.  After performing hand calculations, Circle’s engineering consultant concluded AZ 18×60 sheet piles would satisfy the contract’s requirements.

During the Pre-Construction Conference, Circle representatives meet with both the CO and the Administrative Contracting Officer. At the meeting, Circle was informed that the CO and ACO were the only persons authorized to make changes to the contract.

A few weeks after the Pre-Construction Conference, Circle claims to have attended an “Expectations Meeting” with Corps representatives to discuss TRS submission procedures and expectations (notably, the government officials who were supposedly in attendance at this meeting had no recollection of the meeting ever occurring). Neither the CO nor the ACO were present at this meeting. According to Circle, at this meeting, Corps engineers informed Circle that it would need to submit new TRS calculations using the Corps’ proprietary software, CWALSHT.

Following the Expectations Meeting, Circle had its engineering consultant recalculate the TRS specifications using the CWALSHT program. The results suggested that AZ 18×60 piles would be insufficient to meet the load demands required under the contract. As a result, Circle increased the size of the piles from those in its proposal to AZ 26×66 piles. Since steel piles are sold by the pound, the size increase resulted in cost increases and time delays.

Circle submitted a request for equitable adjustment to compensate it for the increased costs. The contracting officer denied the claim and Circle appealed to the ASBCA.

Circle’s principal argument was that the Corps representatives present at the Expectations Meeting had implied authority to make contract changes. Circle contended that, because the Corps’s engineers allegedly instructed Circle to use CWALSHT, the Corps had made a constructive change to the contract for which Circle was entitled to compensation.

The ASBCA wrote that “where a party contracts with the government, apparent authority of the government’s agent to modify the contract is not sufficient; an agency must have actual authority to bind the government.”  Although authority can arise by implication, such an implication may be unreasonable where–as here–the contractor is on notice that specific agency officials are the only persons able to modify a contract.  The ASBCA continued:

“[T]here is no genuine issue of material fact that the Corps’ engineers lacked the authority, express or implied, to modify Circle’s contract.  Circle has conceded that they lacked the express authority to do so and that it was notified that no one, other than the CO and ACO (up to a point) had the authority to change the contract.  Circle’s contentions that the engineers were cloaked with implied authority are conclusory and unsupported by material evidence.”

The ASBCA granted the Corps’ motion for summary judgment.

Circle highlights an important point for government contractors: the Contracting Officer, and those with the Contracting Officer’s delegated authority, are the only individuals who can make contract changes. Contractors who rely on changes made by unauthorized officials do so at their own risk. 

Ian Patterson, a summer law clerk with Koprince Law LLC, was the primary author of this post.

For more government contracts legal news and notes, visit my blog at smallgovcon.com