International Technology Corp. v. Winter
523 F.3d 1341, 38 Envtl. L. Rep. (Envtl. Law Inst.) 20094, 2008 U.S. App. LEXIS 8406 (2008)
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Rule of Law:
A contractor's claim for breach of contract based on misrepresentation of site conditions fails if a reasonable contractor would not interpret the contract documents as making a definitive representation, and if the contractor's reliance on the alleged misrepresentation was unreasonable due to conflicting information in the contract documents and the contractor's own knowledge of flaws in the data.
Facts:
- The Department of the Navy awarded International Technology Corporation (ITC) a cost-plus-fixed-fee contract for environmental remediation at a facility in Stockton, California.
- The Navy's Delivery Order (DO) for the project directed the contractor to examine a 'Solvent Technology Report' and a 'Feasibility Study'.
- The Solvent Technology Report contained a table showing nine soil samples with low clay content (6-11%), but also noted that clay lumps and low permeability had caused problems during a prior pilot study.
- The Feasibility Study, also referenced in the DO, contained data indicating some soil samples from the same site were composed of a majority of clay.
- ITC subcontracted the soil treatment work on a fixed-price basis to Terra Kleen Response Group, Inc. (TK).
- TK's President, Alan Cash, was present when the nine soil samples for the Solvent Technology Report were collected and knew they were taken only from the surface perimeter of the soil stockpile, not from its interior.
- During performance, TK encountered soil with clay content between 23.2% and 28.8%, far higher than the nine samples in the Solvent Technology Report, which increased treatment time and cost.
Procedural Posture:
- Terra Kleen (TK) submitted a request for equitable adjustment to the prime contractor, ITC, for increased costs due to high clay content.
- ITC submitted a formal pass-through claim for equitable adjustment to the government's Contracting Officer (CO).
- The CO issued a final decision denying ITC's claim.
- ITC, the appellant, appealed the CO's decision to the Armed Services Board of Contract Appeals ('Board').
- The Board denied ITC's appeal, finding the government had not warranted the soil conditions or breached the contract.
- ITC appealed the Board's decision to the U.S. Court of Appeals for the Federal Circuit.
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Issue:
Does the government breach its contract by misrepresenting site conditions when contract documents contain conflicting information about those conditions and the contractor has independent knowledge that calls the reliability of the allegedly misrepresented data into question?
Opinions:
Majority - Dyk
No, the government does not breach its contract under these circumstances. To prevail on a site conditions claim, a contractor must show that the contract made a definitive representation and that the contractor's reliance on it was reasonable. Here, a reasonable contractor would not have interpreted the contract documents as representing low clay content, because the documents as a whole contained conflicting information; the Feasibility Study indicated high clay content and the Solvent Technology Report itself warned of problems with clay. Furthermore, TK's reliance was unreasonable because it had actual knowledge of a fundamental flaw in the sampling methodology used to generate the low-clay data, as its own president witnessed the surface-only collection of samples. Therefore, ITC's pass-through claim for breach of contract fails.
Analysis:
This decision clarifies the high bar for contractors asserting differing site conditions claims based on government-provided information. It emphasizes that contractors must evaluate all contract documents as a whole and cannot selectively rely on favorable data while ignoring conflicting or cautionary information. The ruling underscores the importance of a contractor's own knowledge, holding that reliance is unreasonable if the contractor knows the underlying government data is flawed or incomplete. This reinforces the principle of contractor due diligence and limits government liability when provided information is not presented as a definitive warranty of site conditions.
