Government Contracting Database
A government inspector and the inspection process can have a dramatic effect on the profitability of a construction contract. Although the government has the right, and the responsibility, to assure that the project is built in conformance with the plans and specifications, the government is not permitted to use the inspection clause to exact a higher standard of performance than required by the contract, or to obtain the performance of additional work for which it does not intend to pay the contractor. Most assuredly, the inspection clause is not to be used to punish a contractor for what the government perceives to be performance deficiencies.
As recognized in Astro Dynamics, Inc., ASBCA No. 28381, 88-3 BCA 20,832 (1988), the government’s use of different and more stringent inspection standards or tests that is required by the contract is improper, amounts to a constructive change, and entitles the contractor to recover its increased costs of performance. Similarly, rejection of a contractor’s work on the basis of different and more stringent inspection standards than those required by the contract is improper as well. Process Equip. Co., NASABCA No. 166-3, 67-1 BCA 6,142 (1967); Appeal of al Johnson Const. Co., ENGBCA No. 4170, 87-2 BCA 19952 (citing General Motors Corp., ASBCA No. 10418, 65-2 BCA 4,885 (1965)). The same result occurs where the government requires the contractor to perform at a higher standard than is recognized in the industry. In Re A & D Fire Prot., Inc., ASBCA No. 53103, 02-2 BCA ¶ 32053 (2002) (citing D.E.W. Inc., ASBCA No. 37232, 93-1 BCA 25,444 (1993)); Marvin Eng’g. Co., ASBCA No. 25460, 82-2 BCA 16,021 (1982).
In circumstances involving multiple punch list inspections, for example, the government has been found responsible for the incurred extra costs. The rule to be applied was enunciated by the Board in W.F. Kilbride Construction, Inc., ASBCA No. 19484, 76-1 BCA 11,726. There the ASBCA declared that:
[I]f inspection procedures are confusing and vacillating, and the contractor’s work is subjected to multiple inspections and to differing standards by different officials, an equitable adjustment should be granted under the Changes clause for any delay or increased costs. A similar result follows if an inspector is arbitrary and capricious in requiring work not required by the contract . . .
The rule stated by the Board in Kilbride has long been recognized and has repeatedly been reaffirmed. See e.g., Appeal of H.G. Reynolds Co., Inc., ASBCA No. 42351, 93-2 BCA ¶ 25797 (1993); Randall H. Sharpe, ASBCA No. 22800, 79-1 BCA 13,869 (1979); Appeal of United States Instrument Co., WDBCA 940, 3 CFF 814 (1945); WRB Corp. v. United States, 183 Ct. Cl. 409 (1968) (citing Roberts v. United States, 174 Ct. Cl. 940, 357 F.2d 938 (1966)); and Adams v. United States, 175 Ct. Cl. 288, 358 F.2d 986 (1966).
A long line of well-established case law holds that it was, and is, the government’s burden to establish that the work it rejects (or penalizes) was, in fact, deficient, in the sense that it was not in conformance with the contract requirements. M.A. Mortenson Co. v. United States, 40 Fed. Cl. 389, 423 (1998) (citing Southwest Welding and Mfg. Co. v. United States, 188 Ct. Cl. 925, 413 F.2d 1167 (1969)); Hardeman-Monier-Hutcherson, ASBCA No. 11785, 67-1 BCA 6210 (1967); Randall H. Sharpe, supra; Appeal of Con-Seal, Inc., ASBCA No. 41762, 98-1 BCA ¶ 29501 (1998) (citing F.P. Lathrop Construction Co., ASBCA No. 25800, 83-2 BCA 16,790 (1983)); Tamp Corporation, ASBCA No. 25766, 84-2 BCA 17,398 (1984); J.G. Enterprises, Inc., ASBCA Nos. 27287 and 28033, 84-1 BCA 17,106 (1984); Orbas & Associates, ASBCA No. 32922 et al., 87-3 BCA 20,051 (1987).
In North American Maintenance Company, ASBCA No. 21986, 78-2 BCA 13,316 (1978), the Board struck down all of the government’s “deficiency deductions,” without extended analysis of individual contractor deficiencies, because the government’s use of many different, largely untrained inspectors was inherently unreasonable. The Board said there that “employing 40 inspectors with varying standards of what constitutes adequate performance” (78-2 BCA at p. 65,133) was an unreasonable inspection system. To paraphrase the Board’s observation, in a case in which it disallowed deficiency deductions and the assessment of reprocurement costs: “In compiling the deficiency listing, the [inspectors were] not inhibited by the requirements of the specifications for [they] had never read them . . .” J.G. Enterprises, Inc., supra, 84-1 BCA at p. 85,154. As the ASBCA has said, in another case in which it found the government’s inspection actions unreasonable: “We do not mean to imply herein that the visitations by [government] personnel were deliberately undertaken to harass the appellant . . . but the effect was the same whether intended or not.” G.W. Galloway Company, ASBCA No. 16656, 73-2 BCA 10,270 (1973).
When a contractor is subjected to confusing and vacillating inspection procedures, the result is excusable delay to the contractor. Appeal of United States Instrument Co., WDBCA 940, 3 CFF 814 (1945). A similar result can be expected when the contractor is subjected to multiple inspections (reviews) of the same work by different government representatives, and the previous approval is followed by subsequent rejection. WRB Corp. v. United States, 183 Ct. Cl. 409 (1968), (citing Roberts v. United States, 174 Ct. Cl. 940, 357 F.2d 938 (1966)); and Adams v. United States, 175 Ct. Cl. 288, 358 F.2d 986 (1966). These differing standards by different officials entitled the contractor to an equitable adjustment under the Changes clause for any delay or incurred costs. Appeal of Hull-Hazard, Inc., ASBCA No. 34645, 90-3 BCA ¶ 23173 (1990) (citing W. F. Kilbride Construction, Inc., ASBCA No. 19484, 76-1 BCA 11,726).
Updated: July 2, 2018