APPLYING JURY VERDICT METHOD IN QUANTIFYING DAMAGES DUE TO DEFECTIVE SPECIFICATIONS

Posted on March 1, 2026March 1, 2026 by David Adelstein

An older case deals with three important considerations: (1) defective specifications; (2) whether the defective specifications were misleading or misrepresentative; and (3) applying the jury verdict method in quantifying damages.

In Metric Construction Co., Inc. v. U.S., 80 Fed. Cl. 178 (Fed. Cl. 2008), a contractor was contracted by the federal government to construct a warehouse. There were defects in the structural steel design specifications underlying the standing seam metal roof installed by the contractor and, as a result, the roof system leaked causing damage. The contractor incurred significant costs in repairing the damage, and pursued recovery of these costs against the government. The contractor claimed the structural steel design serving as the framework for the metal roof was defective and misleading and caused the leaks.

1. Defective Specifications

The first issue pertained to the defective specifications.

The test for recovery based on inaccurate specifications is whether the contractor was misled by errors in the specifications. However, the government’s implied warranty of its specifications is generally voided if the contractor does not follow those specifications.

***

Even if a specification is defective, however, contractors must be reasonable in their conduct during construction. Contractors have a duty to inquire as to inconsistent specifications which include patent, that is, obvious glaring defects. If the erroneous nature of a defective specification is not glaring or obvious, however, the contractor may recover if it has been misled by the specification.

Metric Construction, supra, at 185-86 (citations omitted).

Here, there was erroneous information (as to the dead loads) in the specifications. This erroneous information was not patent and resulted in defective specifications. The contractor also acted reasonable once the problem had been discovered.

2. Did the Defective Specifications Mislead the Contractor

The second issue pertained to whether the contractor was misled by the defective specification.

“To demonstrate that it was misled, the contractor-claimant must show both that it relied on the defect and that the defect was not an obvious omission, inconsistency or discrepancy of significance – in other words, a patent defect—that would have made such reliance unreasonable.” Metric Construction, supra, at 186 (included in parenthetical and citation omitted). In other words, did the contractor rely on the misleading/misrepresentative specification to its detriment. “In addition, if the government misrepresents information regarding its specifications in its communications to the contractor during performance, the government may be liable if the contractor relies on such information.” Metric, supra, at 188 (citation omitted).

Here, the specifications misrepresented the dead loads and the contractor installed the roof in reliance on those specifications. Further, the government misrepresented its answer to an RFI regarding dead loads, which the contractor further relied on.

3. Damages: Applying Jury Verdict Method

The third issue pertains to damages related to the roof leaks and the Court applying the jury verdict method in quantifying damages.

“To the extent that plaintiff’s evidence could be argued to have not proved the exact quantum of the equitable adjustment to which it is entitled, in the alternative the court finds that $1,323,214.20 is also a fair and reasonable computation of the equitable adjustment due [contractor] according to the jury verdict method.” Metric, supra, at 196.

Importantly, regarding the jury verdict method, the Court noted:

As the Federal Circuit has explained:

In order to adopt the jury verdict method, “[a court] must first determine three things: (1) that clear proof of injury exists; (2) that there is no more reliable method for computing damages; and (3) that the evidence is sufficient for a court to make a fair and reasonable approximation of the damages.” This court makes clear, however, that the jury verdict method may only be used when other, more exact, methods do not apply.

In this case, Metric [contractor] has clearly shown, and indeed the parties have stipulated to, the costs incurred as a result of the roof leaks. No better method (other than the rough calculations presented in this opinion) for computing damages exists, given the perplexing nature of the origin of roof leaks, which would provide a more precise dollar amount for the Corps’ [government’s] liability in this case. In addition, plaintiff presented clear and abundant evidence, in testimony and expert reports, which showed the relative importance of the residual camber issue in causing the most serious leaks in the roof and necessitating roof replacement, enabling the court to determine a fair and reasonable amount of damages due Metric. Thus, in the alternative, the figure of $1,323,214.20 is justified by the jury verdict method of computing damages.

Metric, supra, at n. 16.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

FIVE ISSUES TO CONSIDER IN GOVERNMENT CONTRACTING (OR ANY CONTRACTING!)

Posted on July 20, 2024July 20, 2024 by David Adelstein

The appeal of Appeals of – Konecranes Nuclear Equipment & Services, LLC, ASBCA 62797, 2024 WL 2698011 (May 7, 2024) raises interesting, but important, issues that should be considered. In this case, the government (in a supply contract) procured four portal cranes from the claimant. After an initial test of one of the cranes failed, the government refused to accept delivery even after the issue was addressed by the claimant. The government did not accept the manner in which the claimant addressed the issue and would only accept cranes if the claimant employed “an unnecessary alternative solution [that] caused further delay and increased [claimant’s] costs.” On appeal, it was determined the government’s decision to delay delivery based on its demand for the alternative solution was not justified, i.e., constituted a breach of contract. Below are five issues of consideration in government contracting, or, for that matter, any contracting.

Issue #1- Patently Ambiguous Specifications

The government argued that the specifications were patently ambiguous and because the claimant failed to inquire regarding the ambiguous specifications prior to performance, its interpretation of the ambiguous specifications should govern. The contractor countered that the specifications were unambiguous and it met the specifications.

“Contract interpretation begins with the language of the written agreement.” If unambiguous, the plain meaning of a contract controls. “A contract term is unambiguous if there is only one reasonable interpretation.” However, “[w]hen a contract is susceptible to more than one reasonable interpretation, it contains an ambiguity.” “‘To show an ambiguity it is not enough that the parties differ in their respective interpretations of a contract term,’ rather, both interpretations must be reasonable.” To show a patent ambiguity, which we construe against the non-drafting party, the drafting party must show an ““obvious, gross, [or] glaring” ambiguity so substantial as to impose a “duty to inquire” before contract formation.

Appeals of – Konecranes, supra (internal citations omitted).

Here, it was determined “there was no ambiguity, much less an obvious, gross, or sufficiently glaring ambiguity that would trigger [claimant’s] duty to inquire before contract formation.” Id.

Issue #2 – Rejection of Work Based on Specifications

The government rejected the cranes for not complying with the specifications.

“When the Government rejects work as being not in compliance with its specifications, the Boards of Contract Appeals have held that the burden is upon the Government to demonstrate that fact.” We have explained this anomaly of the government bearing the burden for a contractor claim “as a variation of the implied warranty of specifications seen in impossibility and defective specifications cases and characterized it as the government ‘putting in issue the sufficiency of its own specifications.”’ In assessing these ““inspection and rejection cases,” we focus on whether the evidence demonstrates that a product fails “to meet contract requirements.”

Appeals of – Konecranes, supra (internal citations omitted).

Here, it was determined, “[r]egardless of which party bears the burden of proof, [claimant] proved by a preponderance of the evidence that the luffing drums [in the cranes] complied with the Contract’s specifications after changing the wire rope and should not have been found defective with the new rope.” Id.

Issue #3 – Delay

The claimant argued the government had no basis to reject delivery of a crane because it complied to the specifications after the claimant addressed the initial issue. To this point, the claimant argued the government’s refusal to allow it to ship cranes unless it employed the unnecessary alternative solution resulted in delays.

“A contractor seeking to prove the government’s liability for a delay must establish the extent of the delay, the contractor’s harm resulting from the delay, and the causal link between the government’s wrongful acts and the delay.” As to causation, “a contractor has the burden of demonstrating that the specific delays were due to government-responsible causes, that the overall completion was delayed as a result, and that any government-cause[d] delays were not concurrent with delays within the contractor’s control.”

Appeals of – Konecranes, supra (internal citations omitted).

Here, it was determined the government’s refusal to accept delivery when the cranes met the specifications resulted in compensable delay.

Issue #4 – Implied Duty Not to Interfere

Yes, there is an implied duty of good faith and fair dealing that exists in government contracts:

In the absence of a contract provision allowing the government to unilaterally stop or delay a contractor’s performance, any government caused delay constitutes a breach of the government’s implied duty not to interfere with a contractor’s performance.The implied duty not to interfere derives from the implied duty of good faith and fair dealing, assuring that one party cannot destroy the other party’s reasonable expectations regarding the fruits of a contract. “An implied duty of good faith and fair dealing exists in government contracts and applies to the government just as it does to private parties.”

Any implied duty derives from the explicit terms of a government contract. Here, as we concluded above, the [government] unreasonably inspected [claimant’s] cranes pursuant to the inspection provisions of the Contract Terms and Conditions — Commercial Items clause and Contract’s specifications. The [government’s] unreasonable inspection and ensuing delays resulted in a breach of the implied duty not to interfere.

Appeals of – Konecranes, supra.

Issue # 5 – Christian Doctrine

This was a supply contract so it did not incorporate a provision that allowed the government to stop or suspend work where it was determined such provision did not need to be incorporated:

However, the Contract does not include a Stop-Work Order, Government Delay of Work, or Suspension of Work clause. Instead, because we cannot incorporate these clauses by operation of law in a commercial items contract, we find that the Navy breached its implied duty not to interfere by unreasonably inspecting the cranes. There can be no “constructive” suspension or stop-work order if there is no clause to base it on. It becomes a breach.

For our Board “to incorporate a clause into a contract under the Christian doctrine, it generally must find (1) that the clause is mandatory; and (2) that it expresses a significant or deeply ingrained strand of public procurement policy.” Here, the Suspension of Work, Government Delay of Work, and the Stop-Work Order clauses are not mandatory for commercial items contracts and, thus, we will not incorporate any of these clauses into the contract by operation of law.

In particular, the Contract does not incorporate a Suspension of Work, Government Delay of Work, or Stop-Work Order clause. … Notably, the FAR implements the congressional requirement that commercial items contracts “shall, to the maximum extent practicable, include only those clauses” required by law or “consistent with customary commercial practice.” So, given the policy preference to limit the number of standard FAR contract clauses in a commercial items contract, we should not be surprised that there is no explicit suspension, delay, or stop-work provision to hang the parties’ “constructive” hat on.

Instead, we must assess whether any of these clauses is mandatory and must be incorporated by operation of law under the Christian doctrine. Only fixed-price construction or architect-engineer contracts, not commercial items contracts, require the Suspension of Work clause. The Government Delay of Work clause would permit similar suspension of work for a fixed-price supply contract. FAR However, the Government Delay of Work clause is “optional,” not required, for commercial supply contracts such as this one.

Appeals of – Konecranes, supra (internal citations omitted).

DON’T DRAFT AN AMBIGUOUS SCOPE OF WORK IN YOUR CONSTRUCTION CONTRACT

Posted on November 26, 2014November 8, 2024 by Edward Garber

Contractors should spend time carefully drafting and agreeing to a detailed scope of work. Otherwise, a dispute may arise relating to that scope of work. This dispute can take the form of a change order dispute where the contractor argues that the subcontractor’s change order request was base contract work and, thus, does not entitle the subcontractor to additional compensation. Or, the dispute can take the form of a defect claim where the subcontractor argues that the defect being asserted against it was never within its scope of work to begin with.

If there is a scope of work dispute, a court will look to the contract and any applicable change orders in order to see what the contract requires. If an ambiguity exists relating to the scope of work, the court will determine whether the ambiguity is a patent ambiguity or a latent ambiguity. A patent ambiguity clearly exists on the face of the contract based on defective, insensible, or obscure language used in the contract whereas a latent ambiguity is not apparent from the face of the contract, but becomes apparent when extrinsic / parol evidence is introduced that leads to the contract being interpreted in two reasonably plausible manners. See Barrington v. Gryphon Investments, Inc., 32 So.3d 668 (Fla. 2d DCA 2010). With a patent ambiguity, parol evidence (extrinsic evidence used to clarify the intent of the parties relating to a contractual provision) is NOT allowed to clear up the ambiguity; rather, it is up to the trier of fact (judge or jury) to interpret the patent ambiguity without extrinsic evidence explaining the intent of the parties. See, e.g., Barclays American Mortg. Corp. v. Bank of Central Florida, 629 So.2d 978 (Fla. 5^th DCA 1993) (it was up to trier of fact to interpret letter of credit containing 2 different expiration dates). On the other hand, with a latent ambiguity, parol evidence is allowed to be introduced relating to the parties’ intent to assist the trier of fact in clearing up the ambiguity.

The opinion in Macky Bluffs Development Corp. v. Advance Construction Services, Inc., 2008 WL 109390 (N.D.Fla. 2008) illustrates what can happen if there is an ambiguous scope of work. Here, a developer entered into a change order with a contractor to fix the collapsed wall of a retention pond. The change order required the contractor to haul off collapsed material from the bottom of the pond. To fix the wall, the contractor hauled collapsed material and stockpiled the material on lot #8 (owned by the developer). The contractor reused suitable material in reconstructing the wall in addition to material it excavated from lot #8. The unsuitable material the contractor did not use in reconstructing the wall was spread out and compacted on lot #8 versus being hauled offsite to a dumping site.

Years later, the developer discovered the unsuitable materials had been buried on lot #8 that required it to excavate and remove this material and refill with suitable material. The developer then sued the contractor for the costs it incurred in remediating this issue. The contractor moved for summary judgment arguing that lot #8 was never part of its scope of work and it reconstructed the wall of the retention pond pursuant to the change order. Unfortunately, the change order did not specify whether the contractor was required to haul off unsuitable material to an offsite dumping facility or it was required to leave that material on lot #8. In fact, it does not appear the change order even mentioned that the contractor was going to stockpile collapsed material on lot #8 and reuse suitable material in reconstructing the wall. The owner’s position was that while the contractor could use lot #8 as a temporary storage area, the contractor was always required to haul off unsuitable material to an offsite dumping facility. The contractor disagreed stating it was always going to leave unsuitable material on lot #8 that it could not reuse to reduce the costs associated with fixing the wall. Yet, the change order did not address this issue and was ambiguous as to what the contractor’s scope of work consisted of relative to reconstructing the wall with stockpiled suitable material and what it was required to do with unsuitable material it did not reuse.

The Northern District maintained that the scope of work in the change order contained a latent ambiguity because the change order did not identify where the contractor was required to haul off the collapsed material and both the contractor and owner’s interpretation of this scope of work was plausible and reasonable. The court’s opinion includes a good discussion about the difference between a patent ambiguity and a latent ambiguity:

“Under Florida law, the interpretation of a contract is a matter of law for the court’s determination so long as the terms of the contract are unambiguous. The existence of an ambiguity in a contract is also a matter of law. There are two types of ambiguities that can exist in a contract: patent and latent. A patent ambiguity is one that appears on the face of the contract. A latent ambiguity, on the other hand, exists where the language employed is clear and intelligible and suggests but a single meaning, but some extrinsic / parol evidence creates a necessity for interpretation or a choice among two or more possible meanings. If the ambiguity is patent, then parol evidence cannot be used to clarify the parties’ intent. If the court finds, however, that there is a latent ambiguity in the contract, then parol evidence must be heard in order to explain the meaning of the ambiguous term. After receiving parol evidence clarifying the latent ambiguity, if there is no genuine issue of material fact remaining, the court can resolve the ambiguity as a matter of law. Where, however, the terms of the written instrument are disputed and reasonably susceptible to more than one construction, an issue of fact is presented as to the parties’ intent which cannot properly be resolved by summary judgment.”

Macky Bluffs Development Corp., supra, at *2 (internal citations and quotations omitted).

Had the parties clearly clarified the scope of work relating to how collapsed material was going to be stockpiled on lot #8 and reused and whether unsuitable material was going to be (a) hauled offsite or (b) left on lot #8, there probably would be no scope of work dispute. But, because this issue was not truly defined, it presented an ambiguity that naturally resulted in a dispute when the developer needed to remove the unsuitable material on lot #8. The key is to spend the effort to clearly articulate the scope of work, whether it is base contract work or change order work, to best support your argument when a scope of work dispute subsequently arises.