Change-in-Scope Claim Denied in Recent Appeal
by Trent Cotney, partner, Adams & Reese, LLP
(Editor’s Note: Trent Cotney, partner at Adams & Reese, LLP, is dedicated to representing the roofing and construction industries. Cotney is General Counsel for the Western States Roofing Contractors Association and several other industry associations. For more information on this subject, please contact the author at email@example.com.)
Most design professionals can tell you that change in scope is among the most common complaints in construction projects. In such cases, the owner changes the scope of the work, the project takes more time, and the contractor files a claim for more compensation or more time, or both. However, for such claims to be successful, the contractor needs to provide ample evidence of the change in scope. Such evidence was not evident in a recent case. In GSC Construction, Inc. v. Secretary of the Army, there was a dispute about the contract’s scope. The United States Army Corps of Engineers (the Army) hired GSC Construction to build two warehouses. The contract stipulated that construction would begin on September 26, 2012, and be completed by February 3, 2014. Once the project was underway, GSC encountered issues that prevented it from finishing the project on time. As a result, GSC alleged that it was entitled to a 321-day extension. However, the contracting officer (CO) did not agree, and the contract was terminated on June 18, 2014.
What GSC Claimed
When the project began, GSC chose to use a waffle mat foundation for the structures. But, using this material required that the existing soil be removed and replaced with select fill. GSC did not believe it was responsible for replacing the soil, arguing that another contractor should do the work. The Army pointed to the contract language and insisted that GSC was responsible for this task. After months of discussion, GSC disagreed but began doing the work, only to find that the soil was heavy and wet, so removing it necessitated specialized equipment. The second contractor then stepped in for the soil removal, but by then, the project was already behind schedule.
In addition, GSC made an error when designing the metal framing of the warehouses’ exterior walls. It inadvertently used a more stringent design, which led to the Army rejecting the design drawings. The contractor argued that the Army should have caught its mistake and evaluated the drawings using a less stringent standard. However, this confusion led to more weeks of delay.
Given these two issues, GSC contended that the project’s scope had changed, and it was entitled to a time extension. When the CO terminated the contract, GSC also claimed that the owner had previously provided GSC with more time to complete the project, so the owner had forfeited the right to enforce the deadline. GSC took the case to the Armed Services Board of Contract Appeals (BCA). The BCA reviewed the case and denied the appeal. At that point, GSC turned to the United States Court of Appeals for the Federal Circuit.
What the Appellate Court Decided
On May 2, 2022, the appellate court reviewed the case and the issues in question. First, it considered the change-in-scope argument surrounding the soil removal. It rejected the contractor’s argument since the contract clearly stated that the soil removal was the responsibility of GSC. And the court was not convinced that the second contractor had any obligation to do the work.
Second, the court reviewed the time extension request resulting from the more stringent design issue, which had caused the delay. The court rejected GSC’s argument since the contract stipulated that the contractor was solely responsible for coordinating the necessary design work. Since GSC failed to use the correct design standards initially, it was responsible for the error and the subsequent delay. Finally, the court was not swayed by the forfeiture argument. In correspondence between the owner and the contractor, the owner repeatedly asked for timing updates and maintained the completion deadline.
While contractors often have good reason to file change-in-scope claims or request time extensions, GSC did not have the evidence to back up their arguments in this case. No doubt, the soil removal was cumbersome and the design error unfortunate, but the contractor was responsible for those issues, as stated in the contract.
Design professionals must read and understand every word of their contracts before signing them. Often, the architect may play a large role in contract administration and may be responsible for creating and clarifying scope. Therefore, ensuring that contracts have appropriate terms to deal with scope creep and changes is paramount.