ASBCA Declines to Presume Knowledge by Government

07/07/2013

In a recent decision involving differing site conditions in a ship repair contract, Appeal of Atlantic Drydock, ASBCA No. 54936 (20 June 2013), the Armed Services Board of Contract Appeals declined to presume that the Government had knowledge regarding the square footage requiring work. The contract argued that since the Navy built and maintained the ships, it clearly knew the vessels non-vertical square footage, and thus was responsible for misleading the contractor by indicating in the contract documents what turned out to be less square footage than was required. The contractor did not request or perform a ship check prior to bidding. The Government claimed it did not have documents establishing a measurement, and its estimator testified he only did a rough estimate for the Government estimate.

The ASBCA declined to adopt the Contractor’s position that the Board should presume that the square footage information existed somewhere in the Navy’s data repositories. In doing so, the ASBCA noted its rejection of the adoption of a “should have known” standard under those circumstances, holding that principle only applied to unilateral mistake / bid verification cases and unconscionability cases. The ASBCA noted further that it was unaware of any case law supporting a finding of failure to disclose superior knowledge based on knowledge the Government should have known, and expressly declined to adopt such a premise for this case.

The case also has a good, detailed discussion of the admissibility of trade practice evidence, and when it is admissible. In that case, the Board rejected the Contractor’s trade practice evidence because it held it was not supported by substantial evidence, finding instead that the applicable decision by the Contractor was an exercise of business judgment only.

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