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Construction Law

: The South Carolina Construction Law Blog

Interpreting Contract Terms Concerning Allocation of Risk

By Ryan McCabe

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            The Armed Services Board of Contract Appeals rejected a contractor's argument that it could charge the government an "equipment" price for what was in fact a cost for weather-damaged materials (ASBCA No. 54901, January 22, 2008).

            C.R. Pittman Construction Company, Inc. (Pittman) contracted with the U.S. Army Corps of Engineers (Corps) to do work on a drainage canal. Because of heavy rain, the Corps delayed the project by asking that Pittman stop work for a while. As a result, 100 of Pittman's timber mats deteriorated and had to be replaced. Dispute over the cost of and liability for the mats resulted in an appeal by Pittman.

            The contract between Pittman and the Corps provided that the party responsible for delays or changes must cover the resulting costs. On appeal, the government argued that it should not be liable for the replacement cost of the mats. It claimed that the damaged mats were a safety hazard and therefore, under the Accident Prevention Clause in the contract, Pittman was responsible to replace the mats at its own cost. In response, Pittman argued that the government was responsible for the delays that resulted in damage to the mats. Also, Pittman pointed that the government ordered that the mats be replaced, which is a change the government should bear the cost for. The Board sided with the Corps. It noted that the contract required that Pittman maintain a safe work environment. Also, the contract provided a daily rate that the government had to pay for delays. The Board found that the total to which Pittman was entitled to because of the delay was more than sufficient to cover the cost of the mats.

            The second issue on appeal was the method of calculating the costs for the mats. The parties stipulated that the Corps was liable for the delay costs. Pittman priced the replacement costs based on a prior course of dealing theory, alleging that the mats should be treated as equipment at $4.24 per mat. The Corps disagreed, arguing that the mats were materials, not equipment. It pointed to a contract provision which directed that costs and formulas from the EP 1110-1-8 contractorsÆ publication be used when cost data is unavailable. The EP 1110-1-8 publication indicated a price of $2.89 per unit. After noting that Pittman failed to present sufficient evidence to establish a prior course of dealing, the Board rejected Pittman's method of pricing and found the government's price appropriate.

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Full post as published by The South Carolina Construction Law Blog on February 01, 2009 (boomark / email).