The D.C. Court of Appeals (the Court) recently issued a decision covering some important public construction contract principles, most notably notice, cost and pricing data requirements, and the implied duty of good faith and fair dealing.
The District of Columbia hired a contractor to perform work at the Fort Totten Solid Waste Transfer Facility. The contractor filed claims against the District, seeking compensation for delay costs and change orders. The District of Columbia Contract Appeals Board (CAB) ruled in favor of the contractor. The District appealed and the Court affirmed in part and reversed in part.
30-Day Notice Requirement: The Court noted that recent case law in the District of Columbia interpreting notice requirements in public construction contracts is scarce. The Court adopted the rule, well established by federal courts and federal contract appeals boards, that the notice requirements for claims should be liberally construed and only strictly enforced when the contractor’s failure to give timely notice prejudiced the government. The Court found that there was no prejudice to the District for the contractor’s failure to meet the technical notice requirement because the District was aware of the facts underlying the delay claims and continued to press forward with the contract. Thus, the contractor’s claims were not barred for failing to provide written notice of its claims within the 30-day window.
Cost & Pricing Data Requirements: The Court found that the District’s reliance on a contract provision, requiring the contractor to submit certified “cost or pricing data” before negotiating prices for additional work, was misplaced because the contractor did not bring the claims when costs were prospective. The contract allowed the contractor to submit records of actual costs post-performance when the parties could not reach an agreement on the costs prior to the performance of changed work. The Court also rejected the District’s argument that DC Procurement Rule, 27 DCMR § 1624, requires submission of certified “cost or pricing data” with contract claims. Rather, it held that 27 DCMR § 3803.2 was the applicable provision, under which the contractor is required to submit “any data or other information in support of the claim.” The contractor submitted its actual cost breakdown, and thus its claims were not barred.
Duty of Good Faith and Fair Dealing: The Court ruled that in every contract there is an implied covenant of good faith and fair dealing applicable to each party and affirmed the CAB’s finding that the District had breached its implied duty of good faith and fair dealing by not fully cooperating with the contractor in obtaining a fire alarm permit. The District failed to respond to the contractor’s request for help and delayed in meeting with the Fire Marshall, which caused a significant delay in obtaining approval of the permit, thus entitling the contractor to damages.
The decision also addresses other important contract issues: the significance of a release in change orders, the implied warranty of design specifications, and the doctrine of patent ambiguity. Read the full decision here.