Better Roads

December 2014

Better Roads Digital Magazine

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Better Roads December 2014 33 competitive pricing." The Corps' contracting officer (CO) informed Tug Hill their sole remedy was to continue negoti- ating with the utility providers. In November 2010, Tug Hill entered into a contract with FBWS, for $11,726,123 for the water utility work. In January 2011, Tug Hill entered into a contract with RGEC for $8,821,602.99 for the electric util- ity work. In March 2011, Tug Hill presented a certified claim to the CO for $11,357,528.20. Tug Hill claimed its proposal had included $5,867,800 for FBWS' work and $5,973,050 for RGEC's work. On October 31, 2011, the CO denied Tug Hill's claim. Tug Hill appealed. On appeal, Tug Hill argued the government breached the implied covenant of good faith and fair dealing by not help- ing Tug Hill negotiate with the utilities after contract award. The Board reviewed the facts and found no breach by the government. The Special Notice required the contractor to coordinate, negotiate and finalize the utility work with the utility providers. It did not require the government to help the contractor perform that work, or to help the contrac- tor obtain lower prices from the utility providers. Tug Hill agreed to a fixed price for a scope of work that included negotiating with the utility providers, and Tug Hill bore the risk of whether that price covered the eventual cost of the work. Tug Hill agreed to perform the work for the fixed price of $28,024,550 without having negotiated with the utility providers. As a result, Tug Hill assumed the risk the work would cost more anticipated in its proposal. Tug Hill ar- gued that FBWS and RGEC charged more than anticipated, and the process of coordinating, negotiating, and finalizing agreements with the utility providers increased its costs. However, Tug Hill bore that risk when it submitted its pro- posal. As a result, the Board denied Tug Hill's appeal. The Tug Hill matter highlights the difficulties of proving a breach of the implied covenant of good faith and fair deal- ing. Although this duty is implied in every contract, it does not expand a party's contractual duties beyond those in the express contract. In Tug Hill, the failure to properly under- stand and determine the potential risks and costs of submit- ting a bid for utility work – without understanding who would be allowed to perform that work and what it might cost – resulted in Tug Hill's claim for $11.4 million being denied.

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