Better Roads

December 2014

Better Roads Digital Magazine

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32 December 2014 Better Roads InCourt by Brian Morrow, P.E., Esq. Attorney Brian Morrow is a partner in Newmeyer & Dillion LLP and a licensed civil engineer specializing in construction law, including road and heavy construction. I n a recent case involving utility work on an Army base – Appeal of Tug Hill Construction, Inc. (Oct. 16, 2014) – the Armed Services Board of Contract Appeals (Board) denied a contractor's claim for $11.4 million based on an alleged breach of the covenant of good faith and fair dealing by the government. The implied covenant of good faith and fair dealing is a legal doctrine which provides that parties to a contract will deal with each other honestly, fairly and in good faith with each other, and observe reasonable commercial stan- dards of fair dealing in the performance and enforcement of the contract. This duty is implied in every contract in order to reinforce the express promises of the contract to ensure the parties' reasonable expectations. This duty has been read into contract negotiations, performance, and enforcement of contract obligations. Good faith has been defined as "honesty in fact" in the parties' conduct, and may require something more of the parties than simply refraining from acting in bad faith. In Tug Hill, on April 9, 2010, the U.S. Army Corps of Engineers (Corps) issued a Request for Proposals (RFP) for a fixed-price contract for utility work at Fort Bliss, located in El Paso, Texas. The scope of work included the demoli- tion of existing utility systems, constructing new electric, water, sanitary sewer, communications, and natural gas utility systems, and connecting back to the existing main utility systems. The RFP included a special notice that noted the following: This scope of work includes coordinating project utility requirements with the owners of the privatized utility systems. . . Contractors shall be responsible for negotiating and finalizing utility system work with the utility providers. The Contractor will include its cost for such work in its cost proposal. Three proposals were submitted by Tug Hill, J.D. Abrams, and Sundt Construction. The Fort Bliss water utility provider was Fort Bliss Water Services Company (FBWS), the electric utility provider was Rio Grande Electric Cooperative, Inc. (RGEC), both of whom owned the utility systems through 50-year contracts with the Army. Tug Hill was aware of the Special Notice. On May 19, 2010, Tug Hill received word from a company named CF Jordan that "[FBWS] is going to be doing the water/sewer [work]." Prior to submitting their cost proposals, Sundt and J.D. Abrams contacted FBWS and RGEC. RGEC would not provide a price quote for the electrical utility work. On May 20, 2010, FBWS provided a quote of $11,071,000 to Sundt and J.D. Abrams for the water utility work. Tug Hill did not seek price quotes from FBWS or RGEC. On the morning of May 24, 2010, at 10:02 a.m., Tug Hill was told that "[RGEC] will not let anyone do their work on this project," "[RGEC] does not like the [Government's] design and intends to redesign the proj- ect," and "[RGEC] will not have a price for this for 3 to 4 weeks." On May 24, 2010, at 1:43 p.m., Tug Hill submit- ted its proposal. On June 16, 2010, the Corps awarded a contract to Tug Hill for the fixed price of $28,024,550. On August 24, 2010, Tug Hill informed the Government it had received pricing from RGEC and FBWS that was higher than the pricing included in its proposal. Tug Hill requested that the Government "direct the Utility Providers to provide Contractor's Claim Against Government for Breach of Implied Covenant of Good Faith and Fair Dealing Denied

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