The following article first appeared in “Legal Notes,” Wickwire Gavin's client newsletter.
The article addresses the role of “Order of Precedence” clauses in the resolution of ambiguities in plans and specifications. The bidding of any substantial project typically involves voluminous plans and specifications containing detailed technical information. Conflicts or ambiguities in such documents invite disputes. One method of addressing potential disputes and curbing claims is the use of an “Order of Precedence” clause. As noted by the author, such a clause may assist in the clarification of ambiguities in contract documents including plans and specifications.
Owen Shean, Feature Editor
The days leading up to bid opening on a large public construction contract can be hectic and full of confusion. Bid day itself can reach a state of controlled chaos. Subcontractors and suppliers are continually calling or faxing in revised numbers, new addenda may be issued, glitches are corrected, and the bid must continually be worked over and scrutinized.
Provisions in contract documents have a profound impact upon the resolution of ambiguities in plans and specifications. In the process of bid preparation, contractors normally conduct a careful review of the plans and specifications for the job. In their review, they may notice areas where the requirements are less than crystal-clear. Indeed, some areas where the plans and specifications are unclear may go entirely unnoticed.
Typically, the bidding documents will provide that the contractor should submit a written request for clarification in cases where the contractor notices an ambiguity or discrepancy in the plans and specifications. A pre-bid conference may well provide the bidders with an opportunity to seek clarification. If the contractor proceeds without obtaining a clarification and submits a bid based upon an assumption as to how the discrepancy is to be resolved, the bidder risks an expensive dispute with the owner over the “correct” interpretation.
A substantial body of law has developed over the years that distinguishes between patent and latent ambiguities in plans and specifications. Where an ambiguity is patent or obvious, the courts have imposed a duty upon the contractor to seek pre-bid clarification of the meaning of the ambiguous or conflicting aspects of the plans and specifications.1 Many cases have been decided upon the rule that a contractor who fails to seek a clarification of a patent ambiguity cannot rely upon its interpretation of the ambiguous terms to recover for a constructive change to the contract.2
On the other hand, where an ambiguity in plans and specifications is latent or not obvious, and the contractor did not actually take note of the ambiguity, the contractor has no duty to seek clarification and may recover damages incurred as a result of reasonable reliance upon the plans and specifications.3 This rule is the corollary of the oft-cited rule that unobvious ambiguities in a written contract are to be construed against the party that drafted the contract.4
One decision by the Federal Circuit provided a little extra protection for contractors bidding on public contract documents containing ambiguities. In Hensel Phelps Construction Co. v. United States,5 the court considered a case in which the contractor, several months after being awarded the contract, requested a clarification of a discrepancy between the specifications calling for 18 inches of fill and a note on the drawings calling for 36 inches of fill. The contracting officer directed that 36 inches of fill should be provided. Thereafter, the contractor requested an equitable adjustment in the contract price based upon the higher cost of providing 36 inches of fill rather than the 18 inches which had been assumed in the bid. The government contended that the discrepancy was patent, and therefore that recovery should be barred.
In ruling in favor of the contractor, the court cited a provision of the contract providing that “In case of difference between drawings and specifications, the specifications shall govern.” The court reasoned that this “order of precedence” clause resolved the discrepancy between the specifications and the drawings, such that the contractor had no duty to seek clarification and was entitled to rely upon the specification as the contract provision with higher precedence.6
Although cases such as Hensel Phelps provide a theory upon which a contractor may proceed in pursuing a claim in connection with ambiguous or conflicting contract documents, bidders who recognize an ambiguity in the documents nonetheless should seek clarification. To proceed in the face of a recognized ambiguity, in reliance on an order of precedence clause, is to take a substantial risk that the court will find that the contractor was merely trying to take advantage of a discrepancy. As noted above, there are numerous cases that have denied contractor claims in such circumstances. Bidders should also seek clarification of ambiguities and discrepancies, and should do so well in advance of bid opening, so that the owner may issue a clarifying addendum in time to ensure that all bidders are playing on a level field.
Notes
1. Monarch Painting Corp. v. United States, 16 Cl. Ct. 280 (1989); George E. Newsome v. United States, 676 F.2d 647 (Cl. Ct. 1982).
2. Longo-Puerto Rico, Inc., ENG BCA No. 5828, 93-1 BCA ¶25,354; Rainbow Construction, Inc., AGBCA No. 87-370-1, 92-3 BCA ¶25,130.
3. Harrison Western/Frani-Denys, Inc., ENG BCA No. 5523, 92-1 BCA ¶24,582.
4. Neal & Co., Inc. v. United States, 945 F.2d 385 (Fed. Cir. 1991); Sturm v. United States, 421 F.2d 723 (Cl. Ct. 1983).
5. 886 F.2d 1296 (Fed. Cir. 1989).
6. See also Kiewit Construction Co., ASB-CA N. 43154, 92-1 BCA ¶24,681 (December 23, 1991).