Teg-Paradigm Environmental, Inc. v. United States

United States Court of Appeals for the Federal Circuit
06-5007
TEG-PARADIGM ENVIRONMENTAL, INC.,
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee.
Robert C. Haase, Jr., Robins, Kaplan, Miller & Ciresi L.L.P., of Los Angeles,
California, argued for plaintiff-appellant. With him on the brief was Edward D. Lodgen.
Of counsel was David C. Veis.
Andrew P. Averbach, Trial Attorney, Commercial Litigation Branch, Civil Division,
United States Department of Justice, of Washington, DC, argued for defendant-appellee.
With him on the brief were Peter D. Keisler, Assistant Attorney General, David M. Cohen,
Director, and Donald E. Kinner, Assistant Director.
Appealed from: United States Court of Federal Claims
Judge Nancy B. Firestone

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United States Court of Appeals for the Federal Circuit
06-5007
TEG-PARADIGM ENVIRONMENTAL, INC.,
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee.
___________________________
DECIDED: September 29, 2006
___________________________
Before MICHEL, Chief Judge, RADER, and SCHALL, Circuit Judges.
SCHALL, Circuit Judge.
TEG-Paradigm Environmental, Inc. (“TEG”) entered into a contract with the
United States Department of Housing and Urban Development (“HUD”). Pursuant to
the contract, TEG agreed to perform asbestos abatement work at the Geneva Towers,
an apartment complex, in San Francisco. After the contract work was completed, TEG
submitted a claim to the contracting officer in which it sought an equitable adjustment in
the contract price. In support of its claim, TEG asserted that it had been required to
perform excessive cleaning and that it had been required to remove excessive

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quantities of asbestos. After the contracting officer denied the claim, TEG filed suit in
the United States Court of Federal Claims under the Contract Disputes Act of 1978, 41
U.S.C. §§ 601-613 (2000).
TEG’s complaint in the Court of Federal Claims contained three counts. In Count
One, TEG alleged breach of contract based upon HUD not permitting TEG to perform
the contract work in accordance with its original work plan. In Count Two, TEG alleged
that HUD breached the contract by requiring what it characterized as extraordinary and
unnecessary cleaning of the surfaces of the buildings. Finally, in Count Three, TEG
alleged that it was entitled to additional compensation under the contract based upon its
removal of excessive quantities of asbestos. TEG sought a combined breach of
contract and equitable adjustment recovery in the amount of approximately $4 million.
In due course, the parties filed cross-motions for summary judgment. The court
granted summary judgment for the government on Counts One and Two of the
complaint and for TEG on Count Three of the complaint. TEG-Paradigm Envtl., Inc. v.
United States, No. 00-507C, slip op. at 26 (Fed. Cl. Aug. 30, 2002). TEG now appeals
from the court’s decision granting the government’s motion for summary judgment on its
two claims of breach of contract. Finding no error in the Court of Federal Claims’s
decision, we affirm.1
BACKGROUND
I.
The Geneva Towers were two high-rise apartment buildings in San Francisco.
HUD acquired the buildings in 1991 and decided to implode them to make way for new
1 The government has not cross-appealed the court’s grant of summary
judgment in favor of TEG on Count Three.
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development. Id., slip op. at 2. However, the buildings contained asbestos, which had
to be removed before implosion. Id. HUD solicited bids on a contract for asbestos
abatement and TEG was awarded the contract on May 8, 1997, for a fixed price of
$5,153,625.00. The contract required that the abatement be complete on or by
December 31, 1997, and provided for liquidated damages of $5,000 per day of delay.
After several extensions, the deadline for finishing the abatement was changed to
February 15, 1998. Id., slip op. at 7. However, TEG did not finish the abatement work
until March 31, 1998, causing HUD to assess $220,000 in liquidated damages against
it. Id., slip op. at 8. This delay was purportedly caused at least in part by
disagreements between TEG and HUD over contract requirements. Specifically, the
parties disagreed as to (i) whether the contract required TEG to abate asbestos in the
pores and cracks of the Geneva Towers’ surfaces and (ii) whether TEG was required to
comply with the contract specifications rather than TEG’s work plan.
A.
We begin with the facts relevant to the first point of contention between the
parties, which concerns the level of asbestos abatement required by the contract
(Count Two of the complaint).
The original contract specifications provided two separate abatement standards,
one for friable and one for non-friable asbestos-containing materials. Friable materials
are capable, when dry, of being crumbled, pulverized, or reduced to powder by hand
pressure. Id., slip op. at 2. The original asbestos abatement standard was set forth at
Section 2080, 4.3C of the contract, which provided as follows:
Friable materials applied to concrete, masonry, wood and
nonporous surfaces, including but not limited to, steel
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structural members (decks, beams and columns), pipes and
tanks, shall be cleaned to a degree that no traces of debris
or residue are visible. Nonfriable materials applied to
concrete, masonry, [or] wood shall be cleaned until no
residue is visible other than that which is embedded in the
pores, cracks, or other small voids below the surface of the
material.
Thus, the original specifications established a stringent visibility standard for friable
materials and a less stringent standard, one which allowed the contractor to leave
asbestos in the pores and cracks, for non-friable materials. The original Section 2080,
4.3C likely provided the stringent visibility standard for friable asbestos-containing
materials because they are more likely to become airborne and thus pose a health risk.
In the course of the bidding process, prospective bidders, including TEG, raised
questions about which standard applied to the concrete on the exterior of the buildings.
During a conference call concerning the prospective contract, TEG’s representative
noted, “It’s a significant difference, because on one it has to be clean to a degree
there’s no trace; on the other, it’s clean to a degree that material can still be embedded
in pores, cracks and voids.”
In response to the questions raised during the bidding process about the original
asbestos abatement standard, the government modified the standard. The revised
section 2080, 4.3C set forth a single standard for all asbestos-containing materials and
provided as follows:
Asbestos-containing materials applied to concrete, masonry,
wood and nonporous surfaces, including, but not limited to,
steel structural members (decks, beams and columns), pipes
and tanks, shall be cleaned to a degree that no traces of
debris or residue are visible by the Observation Services
Contractor.
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Thus, the revised Section 2080, 4.3C abolished the old standard applicable for non-
friable materials that stated that it was acceptable to leave asbestos-containing
materials in pores and cracks. Instead, a standard requiring that there be no visible
asbestos, similar to the original standard for friable asbestos-containing materials, was
adopted for all asbestos-containing materials.2
As noted by the Court of Federal Claims, trade practice and custom in the
asbestos abatement field includes presuming that any “debris and residue” contains
asbestos. Id., slip op. at 13. The court based its finding on the American Society for
Testing Material (“ASTM”) standard for asbestos abatement, which provides, “Any
residue, dust, or debris found during the inspections is assumed to contain asbestos
. . . .” Id.
2 In a joint status report, the government provided an explanation for why
the stringent visibility standard was adopted for both friable and non-friable materials.
The government stated that
asbestos is a carcinogenic substance and is regulated under
the National Emission Standards for Hazardous Air
Pollutants (NESHAP), promulgated by the EPA under the
Clean Air Act at 40 CFR 61.145(c)(1). The NESHAP
required that all friable [asbestos-containing materials
(ACM)] be removed prior to demolition of a regulated
structure. . . . Non-friable ACM may be left in place prior to
demolition by standard techniques such as a wrecking ball.
However, allowing non-friable ACM to remain in a building
prior to an implosion was considered to be a gray area of the
regulation that may be impermissible due to the possibility
that the ACM could become friable under such
circumstances.
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B.
The parties’ second disagreement concerns whether the contract’s specifications
or TEG’s work plan controlled the terms of TEG’s performance (Count One of the
complaint).
Section C of the contract specifications states that the contractor will provide a
work plan for approval. The relevant portion of Section C provides:
Contractor[’]s Work Plan: Submit for approval a detailed plan
of engineering controls and the work procedures to be used
in the removal, repair, clean-up or encapsulation of materials
containing Asbestos.
1. For all projects submit:
a. Names of Superintendent, Foremen, Project Manager
and other key personnel, and their day time and
emergency telephone and pager numbers.
b. Detailed description of the method to be employed in
order to control pollution, including negative air
equipment calculations.
c. Personal air monitoring procedures.
d. Safety Plan in accordance with Contract Document
requirements.
(MATERIAL OMITTED)
e. Location of Asbestos Work Areas.
f. Layout and construction details of Decontamination
Enclosure Systems.
g. Project schedule including important milestones,
critical paths and interface of trades involved in the
Work.
h. Security Plan including sketches necessary to clearly
describe the plan.
i. Emergency evacuation plan for injured workers,
compressor failure, fire and other emergencies.
j. Firewatch Plan including names, telephone and pager
numbers, and qualifications of personnel, firewatch
duties, sketches necessary to clearly describe the
plan and, when applicable, specific requirements of
local building/fire department regulations.
k. A contingency plan, in the event of a major
contamination incident caused by fire (on or off the
floor being abated), a large breech in the Work area
containment barrier, the opening of stairwell doors,
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breakage of the buildings[’] exterior windows or
sabotage. Such a plan will focus on how to maintain
safety and order when the building is occupied by
building occupants, the public and other building
users.
Pursuant to this provision, HUD requested that TEG submit its work plan on April 21,
1997. On April 25, 1997, TEG submitted a first version of its work plan. In response to
deficiencies pointed out by HUD and ATC Associates, Inc. (“ATC”), HUD’s asbestos
engineer and technical advisor for the contract, TEG revised the work plan several
times in late April and early May of 1997. Two weeks after the initial submittal of the
work plan, TEG was awarded the contract.
Disputes arose during contract performance as to whether the work plan or the
contract specifications governed performance. TEG pointed out discrepancies between
the two documents in a letter dated June 17, 1997. For example, TEG noted in the
letter that it had not closed vertical pipe cavities, as required by the specifications,
because the work plan required the cavities to remain open in order to complete the
project. The discrepancies between the work plan and the contract specifications led to
the issuance of a Stop Work Order. After over a month of disputes, HUD accepted a
Value Engineering Change Proposal (“VECP”)3 from TEG that made changes to the
contract specifications to bring it more in line with the work plan. Work then continued
under the revised specifications.
3 A VECP is a contractor’s proposal to make a cost-reducing change to a
government contract. See 48 C.F.R. §§ 48-201, 52.248-1–.248-3 (2006); see also John
Cibinic, Jr., Ralph C. Nash, Jr. & James F. Nagle, Administration of Government
Contracts 409 (4th ed. 2006).
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II.
The Court of Federal Claims issued an opinion on August 30, 2002, evaluating
the parties’ cross-motions for summary judgment. The court outlined three issues
before it, corresponding to each of TEG’s three claims: (i) whether the contract required
the removal of asbestos residue in pores and cracks; (ii) whether TEG was required to
follow the contract specifications rather than its work plan; and (iii) whether TEG was
entitled to compensation for removing what it alleged were excessive quantities of
asbestos. Id., slip op. at 10.
The court began with the issue of the removal of asbestos residue from the pores
and cracks in the surfaces of the Geneva Towers. Id., slip op. at 10-16. The court
noted that the language of the contract required that “[a]sbestos-containing materials
applied to concrete, masonry, wood and nonporous surfaces . . . shall be cleaned to a
degree that no traces of debris or residue are visible.” Id., slip op. at 11. Based on this
language, the court identified two issues to be decided. First, it had to decide if the
contract required the removal of asbestos within pores and cracks. Second, it had to
determine what asbestos-containing “debris or residue” meant.
Beginning with whether the contract required the cleaning of pores and cracks,
the court found that any asbestos-containing material “applied to” a porous surface
would necessarily enter any pores or cracks. Thus, it found that pores and cracks were
in fact part of the surface of the material. Id., slip op. at 12. Further, the court reasoned
that asbestos-containing material could be visible within pores or cracks. Id. Therefore,
the court concluded, the contract required that the pores and cracks of the porous
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surfaces of the Geneva Towers be cleaned of all visible traces of asbestos. Id., slip op.
at 13.
Turning to the question of what asbestos-containing “debris or residue” meant,
the Court of Federal Claims found that there was no definition in the contract. Industry
standards clarified, however, that any residue, dust, or debris found during an
inspection was assumed to contain asbestos. Id. Thus, the court reasoned, TEG was
required to remove any residue, dust, or debris found. The court concluded that the
contract required that TEG remove all material containing more than 1% asbestos and
that TEG remove all visible traces of asbestos, including materials recessed in pores or
cracks. Accordingly, the court granted summary judgment in favor of the government
on the abatement standard issue. Id., slip op. at 16.
Addressing the issue of whether TEG’s work plan or the contract specifications
governed TEG’s performance, the Court of Federal Claims noted that the parties agreed
that there were conflicting provisions of the work plan and the contract specifications.
Id., slip op. at 21. Continuing, the court pointed out that one of the reasons for requiring
strict compliance with contract specifications is to prevent low bidders from using
substandard materials. Id., slip op. at 22. The court also pointed out that the
government awards contracts to those bidders whose bid “conforms to the
specification.” Id., slip op. at 23. The court found that generally the purpose of contract
work plans is to enable the government to determine whether or not the contractor is
able to perform. Id., slip op. at 24 (citing John Cibinic, Jr. & Ralph C. Nash, Jr.,
Formation of Government Contracts 405-06 (3d ed. 1995)). Further, the court noted
that when sealed bids are used, as was the case with the Geneva Towers contract, the
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contract cannot be modified after bids are received; the only criterion for contract award
other than the bid’s responsiveness to the specifications is bidder responsibility. Id., slip
op. at 24. The Court of Federal Claims reasoned that if, as TEG argued, HUD had
negotiated to replace the conflicting portions of the contract specifications with TEG’s
work plan, then it would have been violating these rules governing contracts made
through the solicitation of sealed bids and the contract would be void. Id., slip op. at 25.
The court concluded that the work plan was not incorporated into the contract. Id., slip
op. at 25-26. The court therefore denied TEG’s motion for summary judgment and
granted the government’s cross-motion on the work plan issue. Id., slip op. at 26.
Finally, the Court of Federal Claims granted summary judgment in favor of TEG
on its claim, in Count Three of the complaint, that it was entitled to an equitable
adjustment in the contract price by reason of having removed excessive quantities of
asbestos. As seen, the government has not appealed the court’s grant of summary
judgment on the “[e]xcess quantities” claim. TEG appeals the court’s grant of summary
judgment in favor of the government on the breach of contract claims in Counts One
and Two of the complaint. We have jurisdiction over TEG’s appeal pursuant to 28
U.S.C. § 1295(a)(3).
DISCUSSION
I.
Under Court of Federal Claims Rule 56(c) summary judgment is appropriate
when there is no genuine issue of material fact and the moving party is entitled to
judgment as a matter of law. Castle v. United States, 301 F.3d 1328, 1336 (Fed. Cir.
2002). We review the grant of summary judgment by the Court of Federal Claims de
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novo. Barron Bancshares, Inc. v. United States, 366 F.3d 1360, 1368 (Fed. Cir. 2004).
Contract interpretation is a question of law, which we also review de novo. Id.
II.
On appeal, TEG argues that the Court of Federal Claims erred in holding that
HUD applied the proper cleaning standard for abatement under the contract. TEG
argues that the contract at Section 2080, 4.3C required that asbestos-containing
materials be cleaned from “surfaces” so that no traces of debris or residue were visible.
TEG contends that “surfaces” are not defined in the contract, but that from common
usage dictionaries it is apparent that that they include only “[t]he outer-face, outside, or
exterior boundary of a thing; outermost or uppermost layer or area.” Appellant’s Br. at
21 (quoting a definition found in Random House Webster’s College Dictionary 1314 (2d
ed. 1999)). TEG argues that the pores and cracks are not part of the “surface” because
they are not on the “outer-face” of the concrete. Industry definitions of “debris” and
“residue” refer to visible particles that have settled in a work area or on an abated
“surface.” Thus, TEG argues, the dust in the pores and cracks of the concrete of the
buildings was not “debris” or “residue” on a “surface” and therefore not required to be
removed.
TEG supports its argument by pointing to what it says was HUD’s own
interpretation of the contract. First, TEG argues that even HUD recognized that its
Observation Services Contractor, Kellco Environmental Services, Inc. (“Kellco”), which
was responsible for observing the abatement process, enforced the visibility standard of
Section 2080, 4.3C in a “fanatical” way by requiring abatement of asbestos in the pores
and cracks. TEG points to an email authored by a HUD employee in which Kellco is
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described as having interpreted “what the contract says on a fanatical mode.” Second,
TEG recites a portion of a letter to HUD from ATC, which purported to clarify the visual
inspection standard set forth in Section 2080, 4.3C. ATC stated in the letter that
“[r]esidue recessed within the pores and cracks of the concrete substrate is not
expected to be extracted.” Third, TEG draws attention to a letter from HUD stating that
HUD had gone beyond federal standards for asbestos abatement on the Geneva
Towers project as well as deposition testimony to the same effect. In addition, TEG
claims that the court erred by failing to consider several pieces of evidence including the
ATC opinion and an expert opinion rendered by Andrew F. Oberta, the Task Group
Chairman of the ASTM Committee on Asbestos Management, to the effect that it would
be unreasonable to require a contractor to “chisel or grind away concrete to extract . . .
imbedded material even if it was asbestos containing material.” Mr. Oberta further
opined that he did not believe that the contract required abatement beyond industry
standards.
TEG also argues that the government interfered with its work plan, which was a
part of the contract. In support of its argument, TEG points out that the work plan was
physically attached by HUD to the contract. Further, TEG contends that under Federal
Acquisition Regulation (“FAR”) § 14.201-1(c), see 48 C.F.R. § 14.201-1(c) (2006), the
work plan, which is a representation or a statement of a bidder, was incorporated into
the contract. TEG also contends that it was required to proceed under the work plan
under FAR § 1552.211-74, 48 C.F.R. § 1552.211-74 (2006), and that therefore the work
plan was part of the contract. The Court of Federal Claims erred, TEG argues, in
finding that the work plan merely required that the contractor provide certain information
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because the contract itself required that the work plan comprise “a detailed plan for
engineering control and the work procedures to be used.” The Court of Federal
Claims’s reliance on the Cibinic and Nash government contracts treatise was
misplaced, TEG contends, because the section cited by the court pertained to the
determination of a contractor’s responsibility and not its work plan.
The government defends the Court of Federal Claims’s interpretation of the
contract’s provisions concerning the level of abatement, arguing that the contract’s plain
language requires abatement of all traces of visible debris and residue. In support of
this interpretation, the government notes that Section 2080, 4.3C was amended to
exclude any distinction between the abatement standard for friable and non-friable
materials. The revised section eliminated provisions that allowed non-friable materials
to remain in pores and cracks and instead applied a visibility standard to all asbestos-
containing materials. The government argues that even if we accept TEG’s arguments
concerning the abatement of asbestos on “surfaces,” the contract requires abatement of
all asbestos that has been applied to surfaces, including asbestos that seeps into pores
and cracks after application to the surfaces. The evidence presented by TEG
concerning trade usage and custom should be disregarded, the government urges,
because it is not directed to interpreting a particular term, but rather the abatement
standard as a whole. Additionally, the government contends that trade usage cannot
create an ambiguity in an otherwise unambiguous contract. The government also
argues that the court did not err by not considering the ATC opinion and Mr. Oberta’s
opinion because these sources could not be used to contradict the plain meaning of the
contract.
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The government argues that the Court of Federal Claims correctly found that the
work plan was not incorporated into the contract. The government notes that in order
for a document to be incorporated into a contract, there must be an express reference in
the incorporating document. Although sections J and K of the contract incorporated
certain materials by reference, they did not incorporate the work plan, the government
notes. The work plan, the government argues, was merely a pre-award submittal that
was meant to show that TEG was capable of doing the work. The government claims
that this is demonstrated by the fact that HUD never approved the work plan. Even if
the work plan had been approved, the government contends, that approval would not
have waived compliance with the contract specifications. The government argues that if
we were to hold that the work plan trumped the contract itself, we would be allowing
bidders to underbid competitors and then use non-conforming sub-par materials and
procedures. The government also argues that FAR §§ 14.201-1(c) and 1552.211-74,
which were cited by TEG for the proposition that external documents are incorporated
into government contracts, are not applicable to work plans. See 48 C.F.R. §§ 14.201-
1(c), 1552.211-74. Finally, the government urges that TEG’s efforts to have parts of its
work plan incorporated into the contract through the VECP show that the work plan was
not incorporated into the contract; it would have been unnecessary to have the contract
modified through the VECP if the work plan were already a part of the contract.
III.
When interpreting a contract, “‘the language of [the] contract must be given that
meaning that would be derived from the contract by a reasonably intelligent person
acquainted with the contemporaneous circumstances.’” Metric Constructors, Inc. v.
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Nat’l Aeronatics & Space Admin., 169 F.3d 747, 752 (Fed. Cir. 1999) (quoting Hol-Gar
Mfg. Corp. v. United States, 351 F.2d 972, 975 (Ct. Cl. 1965)). When deriving this
meaning, we begin with the contract’s language. Coast Fed. Bank, FSB v. United
States, 323 F.3d 1035, 1038 (Fed. Cir. 2003) (en banc). When the contract’s language
is unambiguous it must be given its “plain and ordinary” meaning and the court may not
look to extrinsic evidence to interpret its provisions. Id. at 1040; McAbee Constr., 97
F.3d at 1435. Although extrinsic evidence may not be used to interpret an
unambiguous contract provision, we have looked to it to confirm that the parties
intended for the term to have its plain and ordinary meaning. See Coast Fed. Bank, 323
F.3d at 1040 (looking to contemporaneous evidence of the parties’ understanding and
“not[ing] that much of it is consistent with the [contract’s] plain meaning”). When a
provision in a contract is susceptible to more than one reasonable interpretation, it is
ambiguous, Edward R. Marden Corp. v. United States, 803 F.2d 701, 705 (Fed. Cir.
1986), and we may then resort to extrinsic evidence to resolve the ambiguity, see
McAbee, 97 F.3d at 1435. We utilize extrinsic evidence to derive a construction that
effectuates the parties’ intent at the time they executed the contract. See Dureiko v.
United States, 209 F.3d 1345, 1356 (Fed. Cir. 2000).
Even when a contract is unambiguous, it may be appropriate to turn to one
common form of extrinsic evidence—evidence of trade practice and custom. Hunt
Constr. Group, Inc. v. United States, 281 F.3d 1369, 1373 (Fed. Cir. 2002). We have
stated that “evidence of trade practice may be useful in interpreting a contract term
having an accepted industry meaning different from its ordinary meaning—even where
the contract otherwise appears unambiguous—because the ‘parties to a contract . . .
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can be their own lexicographers and . . . trade practice may serve that lexicographic
function in some cases.’” Id. (quoting Jowett, Inc. v. United States, 234 F.3d 1365,
1368 (Fed. Cir. 2000)). Trade practice and custom may not be used, however, “to
create an ambiguity where a contract was not reasonably susceptible of differing
interpretations at the time of contracting.” Metric Constructors, 169 F.3d at 752.
The parol evidence rule provides a further limitation on the use of extrinsic
evidence in interpreting contracts. Under the parol evidence rule, extrinsic evidence
pre-dating a written agreement may not be used “to add to or otherwise modify the
terms of a written agreement in instances where the written agreement has been
adopted by the parties as an expression of their final understanding.” Barron
Bancshares, 366 F.3d at 1375 (citation and quotation marks omitted). However,
extrinsic evidence such as prior agreements and documents will be considered part of a
contract when they are incorporated into the contract. See S. Cal. Fed. Sav. & Loan
Ass’n v. United States, 422 F.3d 1319, 1330 (Fed. Cir. 2005). One common way to
incorporate extrinsic evidence is through an integration clause that expressly
incorporates the extrinsic evidence. Id.; McAbee Constr. v. United States, 97 F.3d
1431, 1434 (Fed. Cir. 1996). Although the parol evidence rule bars the use of extrinsic
evidence to supplement or modify a written agreement, the rule does not bar the use of
extrinsic evidence to interpret the terms of a contract when the plain and ordinary
meaning is not clear from the contract itself. See Restatement (Second) Contracts
§ 215 cmt. b (1981); 6-26 Corbin on Contracts § 579 (2006); Cibinic, Nash & Nagle,
supra, at 199. Armed with these rules, we turn to the issues TEG raises on appeal.
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IV.
We consider first TEG’s claim that the Court of Federal Claims erred in holding
that it was required to clean debris and residue from pores and cracks of the Geneva
Towers under the contract’s abatement standard. As seen, the provision of the contract
containing the abatement standard for the Geneva Towers project, Section 2080, 4.3C,
provided:
Asbestos-containing materials applied to concrete, masonry,
wood and nonporous surfaces, including, but not limited to,
steel structural members (decks, beams and columns), pipes
and tanks, shall be cleaned to a degree that no traces of
debris or residue are visible by the Observation Services
Contractor.
The Court of Federal Claims correctly identified two issues raised by the abatement
standard. First, we must determine whether this standard requires the removal of
asbestos within pores and cracks. Second, we must determine what asbestos-
containing “debris or residue” means.
Based upon the plain language of the abatement standard, we conclude that the
Court of Federal Claims did not err in ruling that TEG was required to remove asbestos
within pores and cracks. The plain language of the contract indicates that it requires
abatement to the point that there is no “debris or residue . . . visible.” Thus, to the
extent that “debris or residue” was “visible” within the pores and cracks of concrete or
other porous surfaces, it had to be abated under the contract. However, if the “debris or
residue” was not “visible” within the pores and cracks, it was not required to be abated
under the contract. Accordingly, we find that the plain and ordinary meaning of the
abatement standard required TEG to remove visible asbestos within the pores and
cracks of the towers.
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As we did in Coast Federal Bank, we turn to extrinsic evidence, specifically, the
course of dealing of the parties, to confirm that our interpretation of the plain and
ordinary meaning was, in fact, the parties’ understanding. See Coast Fed. Bank, 323
F.3d at 1040. The original specifications provided for two different abatement standards
for friable and non-friable materials. As far as friable materials were concerned, the
specifications expressly stated that materials must be cleaned “to a degree that no
traces of debris or residue are visible.” In contrast, the specifications provided that non-
friable materials “shall be cleaned until no residue is visible other than that which is
embedded in the pores, cracks, or other small voids below the surface of the material.”
Thus, the original specifications expressly allowed for the contractor to leave non-friable
asbestos in pores and cracks. In a pre-bid conference call, TEG’s representative stated
that it was not clear which standard, friable or non-friable, would apply and that this was
an important difference. TEG’s representative noted, “It’s a significant difference,
because on one it has to be clean to a degree there’s no trace; on the other, it’s clean to
a degree that material can still be embedded in pores, cracks and voids.” In our view,
the conference call demonstrates that TEG understood the visibility standard, which
was eventually adopted for all asbestos abatement under the contract, to require that no
asbestos remain in the pores and cracks.
We find unpersuasive TEG’s argument that the Court of Federal Claims erred by
failing to consider other pieces of evidence, including ATC’s letter and Mr. Oberta’s
expert opinion. These documents could be considered evidence of trade practice and
custom, which we have found appropriate to consider in some cases even when a
contract is unambiguous. See Hunt Constr., 281 F.3d at 1373. However, neither of
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these documents aids in the interpretation of a term of art in the asbestos abatement
field. Rather each document offers an alternate explanation of the contract’s abatement
standard generally. Under Hunt Construction, it is not permissible to use these
extrinsic sources to impart ambiguity into an otherwise unambiguous contract—they
may only be used to interpret a term of art. Id. at 1369; see also Metric Constructors,
169 F.3d at 752. Given the clarity of the meaning from the language and the parties’
pre-contractual negotiations, none of the extrinsic evidence cited by TEG carries weight.
We are also not swayed by TEG’s argument that Section 2080, 4.3C requires
only that “surfaces” be abated and that “surfaces” do not include pores and cracks.
TEG turns to a common usage dictionary that defines a “surface” as “[t]he outer-face,
outside, or exterior boundary of a thing; outermost or uppermost layer or area.”
Appellant’s Br. at 21 (quoting Random House Webster’s College Dictionary 1314 (2d
ed. 1999)). We reject TEG’s argument based on this definition that a “surface,” as used
in section 2080, 4.3C, is only the “outer-face” of the concrete and not the pores and
cracks. The definition upon which TEG relies does not expressly state that “surfaces”
do not include pores and cracks. Further, if we were to accept TEG’s argument we
would have to decide how small a crack or pore had to be in order to be excluded from
“surfaces.” The Court of Federal Claims correctly noted that we “would be left to
quarreling over the depth of recess needed to differentiate a crack or pore from a
smooth surface” if we adopted TEG’s interpretation. TEG-Paradigm, slip op. at 13. We
also find that TEG’s “surfaces” argument is weak in comparison to the evidence of the
parties’ understanding of the language in the contract as demonstrated by the
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conference call. Thus, we believe that the strict visibility abatement standard is more in
line with the parties’ contemporaneous understanding of Section 2080, 4.3C.
Turning to the second issue relevant to TEG’s abatement standard claim, the
meaning of “debris or residue,” we see no error in the Court of Federal Claims’s holding
that, under the contract, any dust or powder found on inspection was assumed to be
asbestos-containing “debris or residue” that had to be abated. “Debris” and “residue”
are not defined in the contract. As previously noted, evidence of trade custom may be
used to interpret terms of art such as “debris” and “residue.” See Hunt Constr., 281
F.3d at 1373. The ASTM standard for asbestos abatement provides that debris and
residue is “assumed” to contain asbestos. TEG-Paradigm, slip op. at 13. Therefore, we
agree with the Court of Federal Claims that trade practice and custom demonstrates
that in the asbestos abatement field any “debris and residue” found is assumed to
contain asbestos. Id.. Thus, we affirm the Court of Federal Claims’s holding that the
contract required TEG to clean all visible powder and dust found on inspection,
including powder and dust in cracks and pores.
V.
Turning to the work plan issue, we hold that the Court of Federal Claims correctly
determined that the contract specifications, rather than TEG’s work plan, governed the
terms of contract performance. The government required a work plan conforming to the
contract specifications before it accepted TEG’s bid. Therefore, the work plan
comprises a piece of extrinsic evidence pre-dating the formation of the contract. HUD
required that bidders submit a work plan stating the details of the bidder’s engineering
controls and work procedures. Nowhere does the contract state that the work plan is to
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be integrated into the contract and supersede the contract specifications. In contrast to
the work plan, several sections of the FAR are incorporated by Section F of the
specifications.4 Additionally, Sections I, J, and K to the contract list not only numerous
sections of the FAR that are incorporated by reference, but also several other
documents relating to payment bonds, performance bonds, and wage rates. Further,
we find unpersuasive TEG’s argument that the work plan was incorporated into the
contract merely by virtue of the fact that the plan was physically attached to the
contract. Rumsfeld v. Freedom NY, Inc., 346 F.3d 1359, 1361 (Fed. Cir. 2003) (per
curiam) (“One party to a contract cannot bind the other simply by attaching a document
to a copy of the contract, even if that particular copy is signed. . . . Rather, the
documents must clearly indicate that the parties intended that they be considered
together as a single contract.”) (internal citations omitted). Although the attachment of
the two documents lends some support to TEG’s argument, we conclude that it is not
enough to incorporate the work plan given the facts of this case, which otherwise show
that the work plan was not incorporated. Given that the contract expressly incorporates
certain extrinsic documents, but does not incorporate the work plan, we find that the
work plan is an extrinsic document that cannot be used to contradict or modify the
contract under the parol evidence rule. See S. Cal. Fed. Sav. & Loan, 422 F.3d at
1330.
4 For example, Section F incorporates FAR sections 52.252-2 (“Clauses
Incorporated by Reference”), 52.242-15 (“Stop-Work Order”), 52.242-17 (“Government
Delay of Work”), and 52.211-12 (“Liquidated Damages—Supplies, Services, or
Research and Development”). See 48 C.F.R. §§ 52.252-2, 52.242-15, 52.242-17,
52.211-12.
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We also find that there is no exception to the parol evidence rule for work plans
in government contracts. The Court of Federal Claims correctly characterized TEG’s
work plan not as part of the contract, but rather as a pre-award submission used to aid
the government in assessing TEG’s ability to perform the contract. TEG-Paradigm, slip
op. at 21. Under FAR 9.103, the government must award contracts to “responsible
prospective contractors only.” 48 C.F.R. § 9.103(a) (2006); see also Cibinic & Nash,
Formation of Government Contracts, supra, at 404-06. Thus, the government requires
pre-award submissions to assess whether the contractor will be able to perform the
contract. Pre-award submissions, such as a work plan, are not part of the contract
unless the contract specifically provides that they are to be incorporated. Examination
of the contract at issue confirms that TEG’s work plan was a pre-award submission that
did not override the contract specifications. Section C of the contract specifications
requires that the contractor submit a “work plan” containing information such as the
names and contact information of the key personnel who would perform the contract, a
detailed description of pollution control methods, and various safety and contingency
plans. Again, nowhere in the contract is it stated that the contract incorporates the work
plan. Thus, the government is correct that TEG’s work plan was not part of the contract,
but rather a piece of information that was used by the government to assess TEG’s
ability to perform in the pre-award stage.
Contrary to TEG’s arguments, FAR sections 14.201-1 and 1552.22-74 do not
compel us to find that work plans are incorporated into government contracts. FAR
14.201-1 sets forth the uniform contract format that must be used “to the maximum
practicable extent” for certain types of contracts. 48 C.F.R. § 14.201-1 (2006). Section
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14.201-1(c) states that acceptance of a bid “incorporates Section K, Representations,
certifications, and other statements of bidders, in the resultant contract even though not
physically attached.” Section K of the contract at issue incorporates several sections of
the FAR that require particular submissions, e.g., taxpayer identification, FAR 52.204-3,
whether or not the business is women-owned, FAR 52.204-5, and the type of business,
FAR 52.214-2, see 48 C.F.R. §§ 52.204-3, 52.204-5, 52.214-2 (2006), respectively.
However, the work plan is contained in Section C of the contract and is therefore not a
Section K representation, certification, or statement. We find TEG’s arguments under
FAR 1552.211-74(c) equally unpersuasive. FAR 1552.211-74(c) sets forth procedures
for stopping work when a work plan is not approved.5 It does not state that work plans
are incorporated into government contracts.
5 The contract provision contemplated by FAR 1552.211-74 states as
follows:
The Contractor shall acknowledge receipt of each
work assignment by returning to the Contracting Officer a
signed copy of the work assignment within __ calendar days
after its receipt. The Contractor shall begin work
immediately upon receipt of a work assignment. Within __
calendar days after receipt of a work assignment, the
Contractor shall submit __ copies of a work plan to the
Project Officer and __ copies to the Contracting Officer. The
work plan shall include a detailed technical and staffing plan
and a detailed cost estimate. Within __ calendar days after
recipt [sic] of the work plan, the Contracting Officer will
provide written approval or disapproval of it to the
Contractor. If the Contractor has not received approval on a
work plan within __ calendar days after its submission, the
Contractor shall stop work on that work assignment. Also, if
the Contracting Officer disapproves a work plan, the
Contractor shall stop work until the problem causing the
disapproval is resolved. In either case, the Contractor shall
resume work only when the Contracting Officer finally
approves the work plan.
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Finally, our holding that work plans are not incorporated into government
contracts is in accordance with the general principle that the government is entitled to
strict compliance with contract specifications. See Granite Constr. Co. v. United States,
962 F.2d 998, 1006-07 (Fed. Cir. 1992) (“[T]he government generally has the right to
insist on performance in strict compliance with the contract specifications and may
require a contractor to correct nonconforming work.”). This principle prevents
contractors from submitting low bids and then substituting less-expensive materials for
those required by the specification. Cibinic, Nash & Nagle, supra, at 815.
CONCLUSION
For the foregoing reasons, we therefore affirm the decision of the Court of
Federal Claims granting summary judgment in favor of the government on TEG’s claims
for breach of contract.
COSTS
Each party shall bear its own costs.
AFFIRMED
(Cont’d. . . .)
48 C.F.R. 1552.211-74.
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