In a recent decision, the U.S. Court of Appeals for the Federal Circuit (“CAFC”) the supervising court for the Court of Federal Claims and the Boards of Contract Appeals, among others) clarified important legal principles concerning the federal government’s duty of good faith and fair dealing and its responsibility for differing site conditions. Metcalf Construction Company, Inc. v. United States controls disputes with the federal government and also provides authority and rationale useful to contractors in disputes with any project owner, public or private.
In October 2002, Metcalf Construction, a small business based in Hawaii, was awarded a $48 million contract to design and build 212 housing units for the U.S. Navy on a Marine Corps base in Hawaii. Saying the project did not go smoothly is an understatement. Metcalf’s performance was hindered and delayed by unanticipated soil conditions and other issues made worse by the Navy’s failure to administer the contract fairly and according to its terms. By the time the Navy finally accepted the project as complete in March 2007, almost two full years after the original completion date, Metcalf had incurred costs in excess of $76 million — leaving the contractor with losses of approximately $27 million.