United States Army Corps of Engineers v. John C. Grimberg Co., Inc.

NOTE: This disposition is nonprecedential.

United States Court of Appeals
for the Federal Circuit
______________________

UNITED STATES ARMY CORPS OF ENGINEERS,
Appellant

v.

JOHN C. GRIMBERG CO., INC.,
Appellee
______________________

2019-1608
______________________

Appeal from the Armed Services Board of Contract Ap-
peals in Nos. 58791, 59167, 59168, 59169, 59170, 59171,
59717, Administrative Judge J. Reid Prouty, Administra-
tive Judge Richard Shackleford, Administrative Judge
Robert T. Peacock.
______________________

Decided: June 9, 2020
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A
LBERT S. IAROSSI, Commercial Litigation Branch,
Civil Division, United States Department of Justice, Wash-
ington, DC, argued for appellant. Also represented by
J
OSEPH H. HUNT, ALLISON KIDD-MILLER, ROBERT EDWARD
KIRSCHMAN, JR.; SCOTT SEUFERT, United States Army
Corps of Engineers, Baltimore, MD.

HERMAN MARTIN BRAUDE, Braude Law Group, P.C.,
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U.S. ARMY CORPS OF ENG’RS v. JOHN C. GRIMBERG CO.
2
Rockville, MD, argued for appellee. Also represented by
EDWARD JEROME PARROTT, Watt, Tieder, Hoffar & Fitzger-
ald, McLean, VA.
______________________

Before O’MALLEY, WALLACH, and TARANTO, Circuit
Judges.
O’MALLEY, Circuit Judge.
The United States Army Corps of Engineers (“Corps”)
appeals a decision of the Armed Services Board of Contract
Appeals (“Board”) holding that John C. Grimberg Co., Inc.
(“Grimberg”) is entitled to an equitable adjustment to the
contract price for construction of the Navy Medical Biolog-
ical Defense Research Laboratory (“Biolab”) in Fort
Detrick, Maryland. John C. Grimberg Co., ASBCA Nos.
58791, 59167, 59168, 59169, 59170, 59171, 59717, 18-1
BCA ¶ 37,191. While we understand the Board’s desire to
reach a conclusion it felt was not unjust in the circum-
stances, for the reasons discussed below, we must reverse.
I.
BACKGROUND
The Corps issued a Request for Proposal (“RFP”) on
February 23, 2009, seeking offers for the design and con-
struction of the Biolab. The project entailed construction
of a large laboratory building, an entry point building,
parking facilities, an access road, stormwater manage-
ment, and perimeter fencing. The RFP incorporated by ref-
erence the standard differing site condition (“DSC”) clause,
as prescribed by 48 C.F.R. § 52.236-2, pursuant to which a
contractor can ask for a cost adjustment if subsurface con-
ditions at the construction site “differ materially from those
indicated in the contract.”
The RFP also included, as an appendix, the “Geotech-
nical Report and Requirements” (“Geotechnical Report”).
J.A. 4248–4423. The Geotechnical Report, although “pre-
liminary” was meant to provide “bidders with sufficient
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U.S. ARMY CORPS OF ENG’RS v. JOHN C. GRIMBERG CO.
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information to identify the general subsurface conditions of
the site.” J.A. 4249. The Geotechnical Report stated that
the Biolab should be supported by a deep foundation sys-
tem of drilled piers (i.e., caissons or shafts) socketed into
five feet of competent rock. J.A. 4256. The portion of the
pier embedded in rock is called a “rock socket.”
To assist contractors in developing bids for the Biolab’s
foundation, the Geotechnical Report disclosed 46 test bor-
ings to indicate the subsurface conditions at the project lo-
cation. Eleven of the borings came from an investigation
done during the construction of the National Interagency
Bio-Defense Campus, of which the Biolab is a part. Just
two of those borings, DH-11 and DH-12, were located
within the planned footprint for the Biolab. Those two bor-
ings indicated high quality rock, with no intervening in-
competent rock. The Geotechnical Report indicated,
however, that contractors should not assume that the rock
at the site would be free of voids given the information
available from other borings. For example, certain borings
taken between 300 and 500 feet from the Biolab footprint,
in preparation for a different construction project, showed
between 0 and 20 feet of incompetent rock.
Notably, the bedrock below the Biolab project, like the
surrounding area, is limestone in a Karst formation. Karst
geology is a condition of limestone rock that occurs when
portions of the rock have been degraded over time by a
Karst solutioning process. This process can create large
cracks, fissures, and voids in the rock. As the Board ex-
plained, “Karst is a recognized geohazard, ‘[k]nown for its
variability and its degree of inconsistency, both vertically
and horizontally over extremely short distances.’” J.A. 2.
In response to the Corps’ RFP, Grimberg submitted a
proposal on March 31, 2009. Grimberg estimated that it
would need to drill through 240 feet of rock (exactly 5 feet
for each of 48 piers), at between $270 and $530 per foot,
depending on the depth of the pier. This quote relied on
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U.S. ARMY CORPS OF ENG’RS v. JOHN C. GRIMBERG CO.
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the testing results from DH-11 and DH-12, and assumed
that excavation of incompetent rock would not be required
as part of the construction.
On May 29, 2009, the Corps awarded the Biolab Project
Contract to Grimberg. Grimberg proceeded on the contract
and, once it began work on the foundation, quickly began
to encounter incompetent rock. On March 10, 2010, Grim-
berg notified the Corps that it was encountering, in its
view, a DSC. Grimberg ultimately drilled through 923 feet
of rock—683 feet more than it had accounted for in its bid.
J.A. 3435.
In May 2012, once the Biolab project was complete,
Grimberg submitted a request for equitable adjustment of
the contract price to the Corps, alleging a Type I DSC. J.A.
3449–3452. The request acknowledged that Grimberg re-
lied on only DH-11 and DH-12 when structuring its bid.
J.A. 3450. The letter further stated that Grimberg drilled
through an average of 13.6 feet more rock per pier than ex-
pected to create the necessary rock sockets. J.A. 3451. The
Corps denied Grimberg’s request in June 2012. In Decem-
ber, Grimberg submitted a certified claim. The Corps
again denied the claim and Grimberg appealed to the
Board.
The Board conducted an eight-day hearing and issued
a lengthy opinion. Relevant to this appeal, the Board found
that Grimberg encountered a Type I DSC. The Board ex-
plained that Grimberg met the standard for a Type I DSC
because “[t]he quantities of rock encountered greatly ex-
ceeded the quantity reasonably foreseeable based on a fair
reading of contractual indications.” J.A. 28. The Board
found that Grimberg’s reliance on just two borings, DH-11
and DH-12, was unreasonable. J.A. 28–29; see also J.A. 31
(“Confronted with the plethora of cautionary contractual
indications, ‘cherry picking’ a subset of 2 of 46 borings, re-
gardless of their proximity to the Biolab foundation, was
unjustifiable in the circumstances of this case.”). The
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Board explained, however, that Grimberg’s reliance on two
borings was more reasonable than the government’s pro-
posal that Grimberg should have relied on borings located
300 to 500 feet from the Biolab footprint. J.A. 29. The
Board explained:
a primary reason for our conclusion that [Grim-
berg] is entitled to relief despite its misreliance
solely on DH-11 and DH-12, is the gross disparity
between the quantities of incompetent rock actu-
ally encountered and the quantity that we consider
was reasonably indicated in the contract’s Geotech-
nical Report. Even if it had expanded its pre-pro-
posal analyses to include the seven most proximate
borings to the Biolab site . . . or devoted the time
and effort to analyze the 26 [other] borings as did
the Corps at trial, the disparity was material and
not reasonably foreseeable.
J.A. 29.
Having found that neither the Corps nor Grimberg pro-
vided a reasonable estimate of the amount of rock a reason-
able contractor would have expected, the Board engaged in
a “jury verdict” type analysis. J.A. 30. Based on the expert
testimony and evidence presented at trial, it concluded
that the contract reasonably indicated that 360 feet of rock
drilling (an additional 2.5 feet per pier) would be required.
Id. Because Grimberg actually encountered on average an
additional 13.6 feet of incompetent rock, the Board found
that Grimberg encountered more rock than was reasonably
indicated in the contract. Id. Thus, the Board found for
Grimberg on its DSC claim. The Board further found in
favor of Grimberg on a claim for delays related to the DSC.
J.A. 49.
The Corps filed a motion for reconsideration. In deny-
ing the motion, the Board explained that “[a]n ‘all or noth-
ing’ resolution of this case would have been overly legalistic
and unjust.” J.A. 70.
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U.S. ARMY CORPS OF ENG’RS v. JOHN C. GRIMBERG CO.
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II. DISCUSSION
In an appeal from the Board, we review questions of
law de novo. Rockies Exp. Pipeline LLC v. Salazar, 730
F.3d 1330, 1335 (Fed. Cir. 2013). The interpretation of con-
tracts, statutes, and regulations is a question of law. Id.
We review the Board’s factual findings to determine if the
findings are arbitrary, capricious, or not supported by sub-
stantial evidence. Id.; 41 U.S.C. § 7107(b).
A Type I DSC exists when “subsurface or latent physi-
cal conditions at the site . . . differ materially from those
indicated in [the] contract.” 48 C.F.R. § 52.236-2(a)(1). To
establish an equitable adjustment to contract price based
on a Type I DSC, a contractor must prove by a preponder-
ance of the evidence:
[1] the conditions indicated in the contract differ
materially from those actually encountered during
performance; [2] the conditions actually encoun-
tered were reasonably unforeseeable based on all
information available to the contractor at the time
of bidding; [3] the contractor reasonably relied
upon its interpretation of the contract and con-
tract-related documents; and [4] the contractor was
damaged as a result of the material variation be-
tween expected and encountered conditions.
Comtrol, Inc. v. United States, 294 F.3d 1357, 1362 (Fed.
Cir. 2002); see also Stuyvesant Dredging Co. v. United
States, 834 F.2d 1576, 1581 (Fed. Cir. 1987). “While a con-
tractor need not demonstrate that its interpretation of the
contract is the only reasonable one, it does bear the burden
of showing that its construction is at least a reasonable
reading.” P.J. Maffei Bldg. Wrecking Corp. v. United
States, 732 F.2d 913, 917 (Fed. Cir. 1984) (emphasis in orig-
inal).
The Corps argues that the Board erred when it held
that Grimberg is entitled to an equitable adjustment to
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U.S. ARMY CORPS OF ENG’RS v. JOHN C. GRIMBERG CO.
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contract price despite having repeatedly stated that Grim-
berg’s interpretation of the contract was unreasonable.
Grimberg does not respond to this contention. In fact,
Grimberg fails to even address the governing legal stand-
ard in its briefing. Grimberg’s failure to contend with the
required legal test is fatal to its claim.
For over thirty years, we have required that, to receive
an equitable adjustment to the contract price, a contractor
must prove that it reasonably relied on its interpretation of
the contract. See Stuyvesant Dredging, 834 F.2d at 1581.
Here, the Board found that Grimberg failed to do just that.
See J.A. 28–29, 31. We are thus left with the inescapable
conclusion that Grimberg has failed to prove its entitle-
ment to an adjustment. The Board erred as a matter of law
when it concluded otherwise.
The Board’s finding that the Corps’ interpretation was
less reasonable than Grimberg’s does not change our con-
clusion. Appellee’s Br. 60–64. Despite the moniker “equi-
table adjustment” employed in this context, our case law
does not permit us to balance the Corp’s reasonableness
against that of the contractor. The focus of our inquiry
must be on the reasonableness of the contractor. This focus
serves the purpose of incentivizing contractors to carefully
and reasonably interpret contract documents. See H.B.
Mac, Inc. v. United States, 153 F.3d 1338, 1343 (Fed. Cir.
1998). In this case, the Corps chose to propose what it
viewed as a “reasonable” interpretation of the contract to
contrast with the “reasonable” interpretation proposed by
Grimberg. That both the Corps and Grimberg failed in
their endeavor to establish what would have been reason-
able for this particular contract does not somehow shift the
burden of providing a reasonable interpretation from
Grimberg to the Corps. Regardless of the Corps’ under-
standing of the contract, our case law is clear that Grim-
berg must bear the risk of bidding on a contract without
reasonably interpreting what that contract discloses.
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U.S. ARMY CORPS OF ENG’RS v. JOHN C. GRIMBERG CO.
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The Board found more than once that Grimberg failed
to prove that it reasonably relied on the test results from
just two borings when formulating its Biolab bid.
1
Because
Grimberg was unreasonable, under long-established law, it
is not entitled to an equitable adjustment of the contract
price.
III. CONCLUSION
For the reasons discussed above, we reverse the
Board’s holding that Grimberg is entitled to an equitable
adjustment to contract price based on a Type I DSC.
REVERSED

1
While Grimberg dedicates a significant portion of
its brief to summarizing the evidence it presented to the
Board, see Appellee’s Br. 18–50, Grimberg does not directly
challenge the Board’s finding that Grimberg’s interpreta-
tion of the contract was unreasonable, see id. at 58 (arguing
that the Board’s interpretation of the contract was reason-
able), 60 (arguing that the Board correctly rejected the
Government’s interpretation of the contract as less reason-
able than Grimberg’s). To the extent Grimberg challenges
the Board’s factual finding that reliance on two borings was
unreasonable, substantial evidence supports that finding.
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