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Construction
9 min read
Areas of Expertise :
Construction, Geotechnical Engineering, Construction Claims, Government Contracts, Construction Delay
Published Date:
Last Modified Date:
Jurisdiction:
Federal. Federal Circuit
What began as a routine federal housing build in Hawaii ultimately evolved into a landmark dispute over risk allocation, subsurface uncertainty, and the limits of government contract duties. Metcalf Construction Co. v. United States, 742 F.3d 984 (Fed. Cir. 2014), arose from a multi-year disagreement over a U.S. Navy design-build contract for military family housing at Marine Corps Base Hawaii in Kaneohe Bay, Oahu. During performance, Metcalf Construction encountered expansive soils that were more severe than the conditions described in the pre-bid materials. The work also involved chlordane contamination, foundation redesign, additional excavation, construction delays, and disagreements over payment.
The dispute reached the U.S. Court of Appeals for the Federal Circuit after the U.S. Court of Federal Claims rejected most of Metcalf’s claims and entered a net judgment in favor of the federal government. The Federal Circuit determined that the trial court had applied an incorrect legal standard to the implied duty of good faith and fair dealing and had misinterpreted the contract provisions governing subsurface risk. The appellate court vacated the affected portions of the judgment and returned the case to the Court of Federal Claims for further proceedings.
The U.S. Navy awarded Metcalf Construction Company a $42,971,000 design-build contract for 188 military family housing units at Marine Corps Base Hawaii in Kaneohe Bay, Oahu. The Navy later exercised an option for 24 additional units, increasing the project to 212 units, and subsequent modifications raised the final contract price to $49,947,872. The subsurface information provided before bidding described the project site as generally having slight soil expansion potential. The contract also incorporated FAR 52.236-2, the federal Differing Site Conditions clause, which establishes procedures for reporting physical conditions that materially differ from those described in the contract.
After receiving the contract, Metcalf retained Geolabs to conduct the subsurface investigation required for final design and construction planning. Geolabs issued a report identifying moderate-to-high soil expansion potential in portions of the site, rather than the slight expansion potential described in the pre-bid materials. Metcalf notified the Navy that the conditions could require deeper excavation, imported non-expansive fill, and revisions to the planned foundation system. The parties then disputed whether the newly identified conditions qualified as a differing site condition and whether the Navy or Metcalf was financially responsible for the additional work.
To address the expansive soils, Metcalf performed over-excavation, imported suitable fill, and installed post-tensioned concrete slabs. The project also involved chlordane contamination, which led to further testing and additional construction measures. The Navy granted a 286-day extension and paid Metcalf $1,493,103 for certain contamination-related costs. The parties continued to disagree over soil-related expenses, delay damages, contract administration, and the unpaid portion of Metcalf’s environmental-work claim.
Metcalf submitted a certified claim to the Navy contracting officer under the Contract Disputes Act. The claim requested compensation for the expansive-soil work, chlordane-related expenses, project delays, and other costs that Metcalf attributed to the Navy’s administration of the contract. Metcalf argued that the actual site conditions and resulting construction work exceeded the risks assigned to the contractor under the design-build agreement.
After the claim was not resolved through the administrative process, Metcalf filed suit in the U.S. Court of Federal Claims on November 5, 2007. The contracting officer issued a formal final decision on February 4, 2008, after which Metcalf amended its complaint.
On December 9, 2011, the Court of Federal Claims issued its liability opinion, rejecting most of Metcalf’s claims but finding that the Navy failed to investigate Metcalf’s differing-site-condition notice promptly and failed to issue a proper notice to proceed. In its December 10, 2012 damages opinion, the court awarded Metcalf $272,191.59 for 99 missed workdays associated with the notice-to-proceed breach. It did not award damages for the delayed investigation because it found that the later chlordane conditions, rather than the investigation delay, caused the relevant completion delay.
On December 28, 2012, the court entered final judgment. After offsetting Metcalf’s $272,191.59 award against $2,673,507 in liquidated damages assessed in favor of the government, the court entered a net judgment of $2,401,315.41 in favor of the United States, plus interest.
The U.S. Court of Appeals for the Federal Circuit concluded that the trial court had used an overly narrow standard when evaluating Metcalf’s implied-duty claim. The appellate court explained that a breach of the implied duty of good faith and fair dealing does not always require proof that the government specifically targeted the contractor to deny it a contractual benefit.
The Federal Circuit also rejected the conclusion that the post-award investigation requirement transferred the financial risk of inaccurate pre-bid soil information to Metcalf. It vacated the affected liability findings, damages judgment, and liquidated-damages award. The court did not decide that Metcalf was entitled to additional compensation. Instead, it returned the case to the Court of Federal Claims for further consideration under the correct legal standards.
Following the Federal Circuit’s remand, the parties jointly moved to dismiss the remaining proceedings. On December 17, 2015, the Court of Federal Claims dismissed the case with prejudice, with each party responsible for its own attorneys’ fees, costs, and expenses. The publicly available dismissal order did not identify any payment, settlement amount, or other financial terms.
Court:
United States Court of Appeals for the Federal Circuit
Case Name:
Metcalf Construction Company, Inc. v. United States
Construction Contracts
Contract Disputes
Contract Disputes Bad Faith
Good Faith
Government Projects
Soil Engineering
Subsurface Investigation
Foundation Engineer
Delays
Environmental Contamination
What began as a routine federal housing build in Hawaii ultimately evolved into a landmark dispute over risk allocation, subsurface uncertainty, and the limits of government contract duties. Metcalf Construction Co. v. United States, 742 F.3d 984 (Fed. Cir. 2014), arose from a multi-year disagreement over a U.S. Navy design-build contract for military family housing at Marine Corps Base Hawaii in Kaneohe Bay, Oahu. During performance, Metcalf Construction encountered expansive soils that were more severe than the conditions described in the pre-bid materials. The work also involved chlordane contamination, foundation redesign, additional excavation, construction delays, and disagreements over payment.
The dispute reached the U.S. Court of Appeals for the Federal Circuit after the U.S. Court of Federal Claims rejected most of Metcalf’s claims and entered a net judgment in favor of the federal government. The Federal Circuit determined that the trial court had applied an incorrect legal standard to the implied duty of good faith and fair dealing and had misinterpreted the contract provisions governing subsurface risk. The appellate court vacated the affected portions of the judgment and returned the case to the Court of Federal Claims for further proceedings.
The U.S. Navy awarded Metcalf Construction Company a $42,971,000 design-build contract for 188 military family housing units at Marine Corps Base Hawaii in Kaneohe Bay, Oahu. The Navy later exercised an option for 24 additional units, increasing the project to 212 units, and subsequent modifications raised the final contract price to $49,947,872. The subsurface information provided before bidding described the project site as generally having slight soil expansion potential. The contract also incorporated FAR 52.236-2, the federal Differing Site Conditions clause, which establishes procedures for reporting physical conditions that materially differ from those described in the contract.
After receiving the contract, Metcalf retained Geolabs to conduct the subsurface investigation required for final design and construction planning. Geolabs issued a report identifying moderate-to-high soil expansion potential in portions of the site, rather than the slight expansion potential described in the pre-bid materials. Metcalf notified the Navy that the conditions could require deeper excavation, imported non-expansive fill, and revisions to the planned foundation system. The parties then disputed whether the newly identified conditions qualified as a differing site condition and whether the Navy or Metcalf was financially responsible for the additional work.
To address the expansive soils, Metcalf performed over-excavation, imported suitable fill, and installed post-tensioned concrete slabs. The project also involved chlordane contamination, which led to further testing and additional construction measures. The Navy granted a 286-day extension and paid Metcalf $1,493,103 for certain contamination-related costs. The parties continued to disagree over soil-related expenses, delay damages, contract administration, and the unpaid portion of Metcalf’s environmental-work claim.
Metcalf submitted a certified claim to the Navy contracting officer under the Contract Disputes Act. The claim requested compensation for the expansive-soil work, chlordane-related expenses, project delays, and other costs that Metcalf attributed to the Navy’s administration of the contract. Metcalf argued that the actual site conditions and resulting construction work exceeded the risks assigned to the contractor under the design-build agreement.
After the claim was not resolved through the administrative process, Metcalf filed suit in the U.S. Court of Federal Claims on November 5, 2007. The contracting officer issued a formal final decision on February 4, 2008, after which Metcalf amended its complaint.
On December 9, 2011, the Court of Federal Claims issued its liability opinion, rejecting most of Metcalf’s claims but finding that the Navy failed to investigate Metcalf’s differing-site-condition notice promptly and failed to issue a proper notice to proceed. In its December 10, 2012 damages opinion, the court awarded Metcalf $272,191.59 for 99 missed workdays associated with the notice-to-proceed breach. It did not award damages for the delayed investigation because it found that the later chlordane conditions, rather than the investigation delay, caused the relevant completion delay.
On December 28, 2012, the court entered final judgment. After offsetting Metcalf’s $272,191.59 award against $2,673,507 in liquidated damages assessed in favor of the government, the court entered a net judgment of $2,401,315.41 in favor of the United States, plus interest.
The U.S. Court of Appeals for the Federal Circuit concluded that the trial court had used an overly narrow standard when evaluating Metcalf’s implied-duty claim. The appellate court explained that a breach of the implied duty of good faith and fair dealing does not always require proof that the government specifically targeted the contractor to deny it a contractual benefit.
The Federal Circuit also rejected the conclusion that the post-award investigation requirement transferred the financial risk of inaccurate pre-bid soil information to Metcalf. It vacated the affected liability findings, damages judgment, and liquidated-damages award. The court did not decide that Metcalf was entitled to additional compensation. Instead, it returned the case to the Court of Federal Claims for further consideration under the correct legal standards.
Following the Federal Circuit’s remand, the parties jointly moved to dismiss the remaining proceedings. On December 17, 2015, the Court of Federal Claims dismissed the case with prejudice, with each party responsible for its own attorneys’ fees, costs, and expenses. The publicly available dismissal order did not identify any payment, settlement amount, or other financial terms.
Geotechnical Engineering Expert Witness
In a dispute involving conditions similar to those reported by Metcalf, geotechnical analysis may compare the Navy’s pre-bid soil information with the findings from Geolabs’ post-award investigation. The review could address expansive soil, excavation depth, imported fill, drainage, soil treatment, and the suitability of the foundation systems selected for the site.
Construction Delay Expert Witness
Schedule analysis may focus on the baseline schedule, project updates, critical-path activities, sequencing changes, and delays associated with soil conditions, contamination, or government administration. The review may also distinguish delays attributed to the Navy from delays caused by concurrent construction or environmental events.
Construction Cost and Damages Expert Witness
Cost analysis could examine labor, materials, equipment, overhead, excavation, imported fill, foundation changes, and contamination-related work included in the contractor’s claims. The review may also assess whether the claimed amounts were supported by project records and connected to the alleged contract changes or differing site conditions.
Environmental Engineering Expert Witness
The contamination component could require analysis of chlordane testing, site conditions, environmental controls, construction procedures, and the timing of remediation-related work. The review may also consider whether the contamination affected project sequencing, excavation methods, scheduling, or cost.
Federal Government Contracts Expert Witness
Evidence concerning federal contract administration may address notice procedures, change documentation, scheduling practices, cost accounting, and the processing of contractor claims. Contract interpretation, legal risk allocation, and conclusions about compliance with contractual duties remain matters for the court.
Federal Construction Contract Good-Faith Duties
The implied duty of good faith and fair dealing requires each contracting party to cooperate with the other and avoid conduct that interferes with performance or denies reasonably expected contract benefits. A claimant does not always need to prove that the government specifically intended to harm or target the contractor.
Differing Site Conditions Under FAR 52.236-2
FAR 52.236-2 applies when physical conditions differ materially from those described in the contract or from conditions ordinarily encountered in work of the same general type. The contractor must provide written notice to the contracting officer promptly and before disturbing the affected conditions. The contracting officer must then investigate, and the contract may be equitably adjusted if the conditions materially differ and cause an increase or decrease in the contractor’s cost or performance time.
Contractor Reliance on Government Soil Information
A requirement to conduct a post-award site investigation does not automatically prevent a contractor from relying on subsurface information supplied during bidding. Risk allocation depends on the complete contract language, including incorporated FAR clauses, site-investigation provisions, design responsibilities, and pre-award representations.
Preliminary Geotechnical Data and Contract Disclaimers
Describing geotechnical information as preliminary does not necessarily transfer all subsurface risk to the contractor. Courts may interpret that wording together with the differing-site-conditions clause, design requirements, site-investigation duties, and other provisions governing reliance and risk allocation.
Implied-Duty Claims and Bad-Faith Claims
A claim for breach of the implied duty of good faith and fair dealing is not identical to a claim that the government acted in bad faith. The Federal Circuit rejected the view that Metcalf had to prove the Navy specifically targeted the company before the implied-duty claim could proceed under the correct standard.
Metcalf Construction Co. v. United States involved disputes over expansive soils, chlordane contamination, foundation work, project delays, and the Navy’s administration of a military housing contract in Hawaii. The Federal Circuit concluded that the Court of Federal Claims had used an incorrect standard for the implied duty of good faith and fair dealing and had misinterpreted the provisions governing subsurface risk.
The appellate decision did not finally determine that Metcalf was entitled to additional compensation. It vacated the affected rulings and returned the dispute to the Court of Federal Claims, where the parties later obtained a dismissal with prejudice in December 2015. Because the public dismissal order did not disclose payment or settlement terms, no financial resolution beyond the terms of that order can be confirmed from the public record.
Did the Federal Circuit award Metcalf additional damages?
No. The Federal Circuit vacated the affected rulings and remanded the case for further proceedings under the correct legal standards. It did not directly award Metcalf additional compensation.
Did the post-award soil investigation transfer all subsurface risk to Metcalf?
The Federal Circuit concluded that the investigation requirement did not automatically transfer the risk of inaccurate pre-bid soil information to Metcalf. The contract had to be interpreted as a whole, including the Differing Site Conditions clause and the provisions governing design and investigation duties.
What was the main difference between the pre-bid and post-award soil information?
The pre-bid materials generally described the site as having slight soil expansion potential. Geolabs later reported moderate-to-high expansion potential in portions of the site.
What did the Court of Federal Claims award before the appeal?
The trial court awarded Metcalf $272,191.59 for missed workdays associated with the Navy’s failure to issue a proper notice to proceed. After an offset for $2,673,507 in liquidated damages, it entered a net judgment of $2,401,315.41 in favor of the United States, plus interest.
Why was the liquidated-damages award vacated?
The Federal Circuit vacated the liquidated-damages award along with the affected liability and damages rulings because the trial court’s analysis relied on legal interpretations that required reconsideration on remand.
Did the dismissal with prejudice establish that either party prevailed on remand?
The dismissal ended the remaining proceedings and prevented the dismissed claims from being refiled in that action. The public order did not disclose payment or settlement terms and did not provide a further merits ruling on the remanded claims.
Geotechnical Engineering Expert Witness
In a dispute involving conditions similar to those reported by Metcalf, geotechnical analysis may compare the Navy’s pre-bid soil information with the findings from Geolabs’ post-award investigation. The review could address expansive soil, excavation depth, imported fill, drainage, soil treatment, and the suitability of the foundation systems selected for the site.
Construction Delay Expert Witness
Schedule analysis may focus on the baseline schedule, project updates, critical-path activities, sequencing changes, and delays associated with soil conditions, contamination, or government administration. The review may also distinguish delays attributed to the Navy from delays caused by concurrent construction or environmental events.
Construction Cost and Damages Expert Witness
Cost analysis could examine labor, materials, equipment, overhead, excavation, imported fill, foundation changes, and contamination-related work included in the contractor’s claims. The review may also assess whether the claimed amounts were supported by project records and connected to the alleged contract changes or differing site conditions.
Environmental Engineering Expert Witness
The contamination component could require analysis of chlordane testing, site conditions, environmental controls, construction procedures, and the timing of remediation-related work. The review may also consider whether the contamination affected project sequencing, excavation methods, scheduling, or cost.
Federal Government Contracts Expert Witness
Evidence concerning federal contract administration may address notice procedures, change documentation, scheduling practices, cost accounting, and the processing of contractor claims. Contract interpretation, legal risk allocation, and conclusions about compliance with contractual duties remain matters for the court.
Federal Construction Contract Good-Faith Duties
The implied duty of good faith and fair dealing requires each contracting party to cooperate with the other and avoid conduct that interferes with performance or denies reasonably expected contract benefits. A claimant does not always need to prove that the government specifically intended to harm or target the contractor.
Differing Site Conditions Under FAR 52.236-2
FAR 52.236-2 applies when physical conditions differ materially from those described in the contract or from conditions ordinarily encountered in work of the same general type. The contractor must provide written notice to the contracting officer promptly and before disturbing the affected conditions. The contracting officer must then investigate, and the contract may be equitably adjusted if the conditions materially differ and cause an increase or decrease in the contractor’s cost or performance time.
Contractor Reliance on Government Soil Information
A requirement to conduct a post-award site investigation does not automatically prevent a contractor from relying on subsurface information supplied during bidding. Risk allocation depends on the complete contract language, including incorporated FAR clauses, site-investigation provisions, design responsibilities, and pre-award representations.
Preliminary Geotechnical Data and Contract Disclaimers
Describing geotechnical information as preliminary does not necessarily transfer all subsurface risk to the contractor. Courts may interpret that wording together with the differing-site-conditions clause, design requirements, site-investigation duties, and other provisions governing reliance and risk allocation.
Implied-Duty Claims and Bad-Faith Claims
A claim for breach of the implied duty of good faith and fair dealing is not identical to a claim that the government acted in bad faith. The Federal Circuit rejected the view that Metcalf had to prove the Navy specifically targeted the company before the implied-duty claim could proceed under the correct standard.
Metcalf Construction Co. v. United States involved disputes over expansive soils, chlordane contamination, foundation work, project delays, and the Navy’s administration of a military housing contract in Hawaii. The Federal Circuit concluded that the Court of Federal Claims had used an incorrect standard for the implied duty of good faith and fair dealing and had misinterpreted the provisions governing subsurface risk.
The appellate decision did not finally determine that Metcalf was entitled to additional compensation. It vacated the affected rulings and returned the dispute to the Court of Federal Claims, where the parties later obtained a dismissal with prejudice in December 2015. Because the public dismissal order did not disclose payment or settlement terms, no financial resolution beyond the terms of that order can be confirmed from the public record.
Did the Federal Circuit award Metcalf additional damages?
No. The Federal Circuit vacated the affected rulings and remanded the case for further proceedings under the correct legal standards. It did not directly award Metcalf additional compensation.
Did the post-award soil investigation transfer all subsurface risk to Metcalf?
The Federal Circuit concluded that the investigation requirement did not automatically transfer the risk of inaccurate pre-bid soil information to Metcalf. The contract had to be interpreted as a whole, including the Differing Site Conditions clause and the provisions governing design and investigation duties.
What was the main difference between the pre-bid and post-award soil information?
The pre-bid materials generally described the site as having slight soil expansion potential. Geolabs later reported moderate-to-high expansion potential in portions of the site.
What did the Court of Federal Claims award before the appeal?
The trial court awarded Metcalf $272,191.59 for missed workdays associated with the Navy’s failure to issue a proper notice to proceed. After an offset for $2,673,507 in liquidated damages, it entered a net judgment of $2,401,315.41 in favor of the United States, plus interest.
Why was the liquidated-damages award vacated?
The Federal Circuit vacated the liquidated-damages award along with the affected liability and damages rulings because the trial court’s analysis relied on legal interpretations that required reconsideration on remand.
Did the dismissal with prejudice establish that either party prevailed on remand?
The dismissal ended the remaining proceedings and prevented the dismissed claims from being refiled in that action. The public order did not disclose payment or settlement terms and did not provide a further merits ruling on the remanded claims.
Construction Contracts
Contract Disputes
Contract Disputes Bad Faith
Good Faith
Government Projects
Soil Engineering
Subsurface Investigation
Foundation Engineer
Delays
Environmental Contamination
Geotechnical Engineering, +4
Construction
Industrial Hygiene, +7
Construction