Sample Letter – Notice of Change Resulting from Defective Design
Dear (Contracting Officer):
This is to provide notice, in accordance with the Changes clause in the contract, that we regard the need to modify the installation of the reinforcing steel to be a change to the contract. The plans and specifications provided the precise locations of rebar and represented that the if the design was followed, the rebar could be installed according to the design. To the contrary, we have encountered numerous locations where the reinforcing steel cannot be installed as shown either because of insufficient room, or because of the interference of mechanical and electrical utilities. Unfortunately, it was not possible to anticipate these design deficiencies during the preparation of our bid.
The specification is a “design specification” which provides specific details of the reinforcing steel installation. The government warrants the adequacy of its specifications and it is not our responsibility to verify the correctness of the design during the bidding stage. We were given thirty days to prepare our bid, but the government spent two years designing the project. Under these circumstances, we cannot be faulted for failing to anticipate the serious design deficiencies we have encountered.
We believe that the reinforcing steel needs to be redesigned in order to minimize the impact of what is becoming a monumental problem. If we are forced to continue to deal with each design problem as it occurs, without redesign assistance or direction from the government, we anticipate at least a one year slippage in the schedule and a cost increase in excess of two million dollars for which we will hold the government responsible. Accordingly, we respectfully request that a change order be issued promptly containing a corrected design and providing additional time and money to compensate us for the impact of this change.
If you are unwilling or unable to address the problem at this time, we request that the contract be terminated for the convenience of the government. We are not in a position to finance the increased costs occasioned by the government’s defective design.
Please respond at your earliest convenience and be assured that we remain committed to the successful completion of this project.
Very truly yours,Read More
SAMPLE LETTER ASSERTING CARDINAL CHANGE; REQUEST FOR SUPPLEMENTAL AGREEMENT; INDEMNIFICATION
Dear Mr. [ ]:
We are writing to bring to your attention a serious issue concerning the referenced project. During [ contractor ] excavation of the area for the construction of the foundation and underground parking structure, contaminated water was encountered. It has been determined that the water is contaminated with gasoline, oil, and other substances which are both health and safety hazards. Since the contract documents did not disclose the presence of contaminated water within the project’s construction limits, a revision to the project design was undertaken by [ owner ] in order to deal with the differing site conditions encountered by the contractor.
Given the extent of the remedial design measures necessitated by the unanticipated subsurface conditions encountered, the modification which [ owner ] now proposes qualifies as a “cardinal change.” Because such a change constitutes a material breach of the contract by the government, [ contractor ] is under no obligation to continue performance absent a negotiated supplemental agreement. See, Ling-Temco-Vought, Inc. v. United States, 201 Ct.Cl. 135, 475 F.2d 630 (1973); Northern Helex Co. v. United States, 197 Ct.Cl. 118, 124-25, 455 F.2d 546, 550-51 (1972).
The purpose of the cardinal change doctrine is to provide a remedy for contractors who are directed by the government to perform work which is not within the general scope of the contract. Edward R. Marden Corp. v. United States, 194 Ct.Cl. 799, 808, 442 F.2d 364, 369 (1971). A cardinal change is not encompassed by the Changes clause because it is one which fundamentally alters the contractual undertaking of the contractor. Marden, 194 Ct.Cl. at 808; Air-A-Plane Corp. v. United States, 187 Ct.Cl. 269, 275-76, 408 F.2d 1030, 1033 (1969). The basic standard, therefore, is whether the directed change comprises “essentially the same work as the parties bargained for when the contract was awarded.” Aragona Construction Co. v. United States, 165 Ct.Cl. 382, 391 (1964).
In determining whether a change is within the general scope of the contract, consideration must be given to both the character and magnitude of the change, as well as to its cumulative effect upon the project as a whole. Wunderlich Contracting Co. v. United States, 173 Ct.Cl. 180, 194, 351 F.2d 956, 966 (1965); Keco Industries v. United States, 176 Ct.Cl. 983, 998-99, 364 F.2d 838, 847-48 (1966), cert. denied, 386 U.S. 958 (1967). Thus, while a cardinal change will exist where the ordered deviations “alter the nature of the thing to be constructed,” Aragona, 165 Ct.Cl. at 391, it is the entire undertaking of the contractor which is critical to the analysis. Marden, 194 Ct.Cl. at 808.
It is well-established that a change incorporating extensive redesign resulting from a defective specification is beyond the scope of the contract and therefore constitutes a cardinal change. In Luria Bros. & Co. v. United States, 177 Ct.Cl. 676, 369 F.2d 701 (1966), the Court determined that the original specifications were defective because they misrepresented the nature of the bearing value of the material underlying the foundation of the structure, thereby affecting the required dimensions and depth of the structure’s footings. As a result of revised specifications, the footings were placed 5 to 10 feet lower than the original elevations, with the size of each footing dependent upon its elevation. Given the required redesign, the Court made the following ruling:
Under these circumstances we are of the opinion that the changes made as the result of encountering the unsatisfactory material at the subgrade elevations were of such magnitude that they were not within the scope of the original contract but rather constituted a breach thereof.
Luria, 177 Ct.Cl. at 687, 369 F.2d at 707. Thus, the Court of Claims repeatedly has determined that where the specifications for a building foundation are found to be inadequate due to the conditions encountered, substantial redesign of the foundation constitutes a cardinal change. See, e.g., Saddler v. United States, 152 Ct.Cl. 557, 287 F.2d 411 (1961); Stapleton Construction Co., Inc. v. United States, 92 Ct.Cl. 551 (1941); Sobel v. United States, 88 Ct.Cl. 149 (1938); Rust Engineering Co. v. United States, 86 Ct.Cl. 461 (1938).
As the result of unanticipated subsurface conditions and defective specifications, [ owner ] has proposed major design changes affecting the building foundation. Indeed, the design has been transformed from a typical foundation with a conventional dewatering system to a massive foundation requiring 100% watertight installation. In particular, the original design entailed a perforated drain system to channel the flow of any subsurface water away from the foundations. By contrast, the recently issued foundation redesign employs a waterproofing system, instead of the perforated drain system, and a redesigned structural foundation.
Judged by the standard established in the foregoing cases, this complete redesign of the building foundation is beyond the scope of the original contract, as it has fundamentally altered [ contractor ] contractual undertaking. Indeed, the changes required by the defective specification are far more substantial than those upon which the Court in Luria Bros., 177 Ct.Cl. 676, 369 F.2d 701, based its finding of a cardinal change. Moreover, given the contaminated state of the water table, it can hardly be said that the changed work is the same as the parties bargained for when the contract was awarded. To the contrary, building a structure in the face of such adversity raises considerable risks and exposure to future liability for injury to third parties which likely would have led to a decision not to bid the project had such conditions been disclosed in the solicitation. The government cannot now require [ contractor ] to assume such risks on the basis of a major redesign necessitated by a defective specification. See, e.g., Sierra Pacific Airlines, Comp. Gen. Dec. B-205439, 82-2 CPD 54 (1982) (cardinal change exists where the proposed modification alters the nature of the contract and the risks associated with performance is such that a significant segment of the potential competition would have been dissuaded from bidding on the procurement).
A cardinal change has been defined as one which cannot be redressed within the contract by an equitable adjustment to the contract price. Allied Materials & Equipment Co., Inc. v. United States, 569 F.2d 562, 215 Ct.Cl. 406 (1978). It is undeniable that [ contractor ], in submitting a bid on the original solicitation, did not purport to assume the risk associated with performing environmentally sensitive work. Should [ contractor ] perform the changed work only to be subject to lawsuits resulting from injury stemming from the environmental hazard which the contamination presents, it will not have been compensated by the equitable adjustment. Indeed, due to the nature of the changed work and the conditions encountered, an equitable adjustment alone cannot possibly redress the risks posed by the modification. [ contractor ] therefore is not obligated to perform the proposed cardinal change.
Additionally, given that much of the foundation will be located beneath the water table, [ contractor ] has grave concerns regarding the feasibility of such a design. A requirement of the proposed specification is a five-year warranty for defective materials or workmanship with respect to the waterproofing membrane. Based upon its experience with subsurface water conditions, however, [ contractor ] does not believe that the proposed waterproofing system will function as intended and is therefore skeptical that the proposed warranty will be obtainable. Indeed, the water infiltration problem is seriously compounded in this instance because the water is contaminated with substances that may not be compatible with the waterproofing materials.
It is well-settled that a contractor may not proceed with performance where he has reason to believe that resulting work will be defective or fail to produce the desired result. J.D. Hedin Construction Co. v. United States, 171 Ct.Cl. 70, 77, 347 F.2d 235 (1965); R.M. Hollingshead Corp. v. United States, 124 Ct.Cl. 681, 683, 111 F.Supp. 285, 286 (1953). This is particularly true where the contract purports through its indemnification clause to shift all risk of a faulty design to the contractor in contravention of the government’s established warranty of design. See United States v. Spearin, 248 U.S. 132 (1918). Indeed, the Indemnification clause, 18.01(A), purports to place the burden on [ contractor ] for all damages incurred by the Government, even those resulting from the negligence of the Government’s employees. By its terms, therefore, [ contractor ] would be required to defend any actions by third parties against the Government for injuries or liabilities due to the contaminated water and the Government’s design of the structure. This is simply unacceptable, particularly in view of the fact that the authority for the clause is unclear, and it may be an unauthorized deviation from the Federal Acquisition Regulation.
For the foregoing reasons and in light of the fact that this proposed change is a cardinal change to the contract, [contractor] believes that this matter can only be resolved through a negotiated supplemental agreement. As part of this supplemental agreement, [ contractor ] will seek a release from the Indemnification clause, 18.01(A) of the Supplementary Conditions. The risk of injuries or damages as a result of contaminated water was not a risk assumed by [ contractor ] in bidding this project, because such conditions were not made known to it in the bidding documents. It would be unconscionable for the Government to now require [ contractor ] to assume that indemnification risk. If [ contractor ] had been aware of these hazardous conditions coupled with the indemnity clause, it likely would have declined to submit a bid on this project.
In addition, [ contractor ] requests that an indemnification clause be incorporated in the supplemental agreement such that the Government indemnifies [ contractor ] for any damages to third parties as a result of the contaminated water. The General Accounting Office has allowed such written indemnification agreements if those agreements comply with the Anti-Deficiency Act, 31 USC 1341.
Our client finds itself in the unenviable position of being the “little fish in a big pond” – a role which the company does not enjoy and to which it is unaccustomed. It appears that because the original “phased” approach has been rendered impossible by the defects in design, the competing interests of [first prime contractor] are being given priority without consideration as to the cost or impact to [ contractor ]. To make matters worse, the project has been plagued by a suspension of work, differing site conditions, and a number of outstanding claims which have had a cumulative cost impact of approximately one million dollars. This is a matter of considerable concern because it is not the practice of our client to generate claims, and it does not relish having to resort to the disputes process as the only method of obtaining relief.
The interests of [ contractor ] cannot be ignored, and its rights cannot be abrogated in favor of [first prime contractor] or the designer of the project. Although it is obvious that the dollar value of [ contractor ] contract is dwarfed by the related project, the potential risk occasioned by the contaminated water is not proportionately reduced. (AGENCY’s) inability to deal with issues in a timely manner, coupled by the failure to address change order requests and claims, and to answer correspondence, are making a mockery of the contract administration process. This cannot continue and it is for this reason that we request a meeting with you at the earliest possible opportunity, so that, through your assistance and intervention, a solution to these problems may be achieved.
We would appreciate your prompt consideration of this request.
Very truly yours,
(Also See The Government Contractor Defense)Read More
Sample Letter – Request for Buy American Act Waiver
Dear (CONTRACTING OFFICER):
(CONTRACTOR) hereby requests a waiver of the Buy American Act with respect to certain ceramic tile installed in buildings at (LOCATION) under the above contract. The ceramic tile, furnished by our subcontractor’s supplier, (SUPPLIER), was installed in two buildings by our subcontractor-installer after being approved by the Corps of Engineers during the submittal phase. Unknown to (CONTRACTOR) and the Corps of Engineers was the fact that the tile had apparently been manufactured in Mexico.
It appears that for purposes of Buy American Act compliance, the supplier and installer of the tile were focusing on the fact that over 80% of the materials in the tile were of American origin. This led to the assumption by our supplier that the tile met the Buy American Act. Clearly the Buy American Act violation was unintentional and the result of a good faith error on the part of the parties involved. (CONTRACTOR), therefore, seeks a waiver of the Buy American Act for the tile already installed. It also offers to the Government a credit for the costs of the installed tile material as part of its request for waiver. This request for waiver is based, in part, on the fact that the tear out and reinstallation costs are far in excess of the cost of the material in place, and therefore removal would work an undue hardship on the prime contractor and its subcontractors without any attendant benefit to the Government.
The regulation, FAR 25.2, allows consideration of individual cases and some flexibility in application of the act. This is not a case where either (CONTRACTOR), or its subcontractor, made a conscious choice between domestic and foreign tile at the time of bidding. The substantial additional cost now involved in removal and replacement makes such a remedy impractical and a reasonable alternative is required. In fact, the Comptroller General has long recognized a flexibility inherent in the application of the Buy American Act and had ruled that a contractor in good faith violation of the Act is not obligated to use domestic materials. For example, in 36 Comp. Gen. 718 (1957), the contractor inadvertently violated the Act by installing foreign-made insulation in a government construction project. The Comptroller General held that in view of the lack of culpability on the contractor’s part, the Act did not require the use of domestic insulation. Id. at 722. Similarly, in 42 Comp. Gen. 401 (1963), the Comptroller General ruled that to require removal or replacement of the foreign materials incorporated in the project would be unduly harsh to the contractor and possibly detrimental to the government’s interest as a result of the attendant delay. Id. at 404.
Given the lack of culpability, the unintentional nature of the violation and the high removal and reinstallation costs, a waiver of the Buy American Act for the previously installed ceramic tile is most appropriate. (CONTRACTOR), upon discovery of the problem, immediately ordered its installer to obtain tile of American manufacture. Additionally, (CONTRACTOR) assures the Government that all future tile installed on the project will be in compliance with the Buy American Act.
Your prompt consideration of this request is appreciated.
Very truly yoursRead More
SAMPLE PROTEST RE POSTPONEMENT OF BID OPENING – FAILURE TO DISCLOSE INFORMATION
Office of the General Counsel
United States Government Accountability Office
441 “G” Street, N.W.
Washington, DC 20548
Attn: Procurement Law Control Group
Re: IFB No.
We hereby protest a solicitation issued by (INSERT AGENCY NAME), bearing IFB No. , which was issued on (DATE). Although we have questioned the propriety of the solicitation, the U.S. Army Corps of Engineers has refused to postpone the bid opening which is scheduled to be held on (DATE). The basis of the protest is that the solicitation is defective in that it fails to provide information which will enable all bidders to compete on an equal basis. The (AGENCY) has not made relevant information available concerning a prior project in the same area.
The failure to make this information available results in a restrictive solicitation which favors the current contractor, while denying all other interested bidders access to the records of the earlier project. The Government will suffer as a result of this non-disclosure because it will impair the ability of potential bidders to submit competitive bids. We attempted to obtain this information, but we have been access to the pertinent information.
Though the Government concedes that this information is relevant to the referenced project, it has not disclosed it to any bidder other than the contractor who performed the prior maintenance project. This is patently unfair and violates the purpose of the Competition in Contracting Act of 1984. Bidders must be able to compete on an intelligent and relatively equal basis DSP, Inc., B220062, 86-1 CPD 43 and Hero, inc. 83-2 CPD 687.
The failure to make necessary historical information available results in a defective procurement which is unlikely to culminate in a contract award at the lowest possible price. It is respectfully requested that the Comptroller General rule in favor of the protestor by sustaining the protest and directing the (AGENCY) to make the requested information available to all bidders.. We further request, by copy of this letter, that the Contracting Officer postpone the bid opening pending your decision on this protest. If the bid opening is not postponed, however, we request that the solicitation be cancelled and the project be re-advertised after release of the requested information.
cc: Contracting OfficerRead More