Very Bad Behavior Without Bad Faith is Not a Breach of Contract

Despite “abhorrent” behavior by the Army Corps of Engineers, a majority of the Armed Services Board of Contract Appeals held there was no breach of the duty of good faith and fair dealing.  Yet, the Contractor recovered almost all of its claimed damages because the Corps forced the Contractor to sign a modification under duress and ignored a significant constructive change.

In this story, two bids were submitted for maintenance dredging of the Scarborough River, Scarborough, Maine.  The successful bidder was 40% lower than the Government’s initial estimate.  Before contract award the Corps requested a change to the winning bidder’s plan at no additional cost to the Government and the Corps revised its Government estimate to be only 14% higher than the winning bid.

After award, the Corps unilaterally reduced the amounts it had agreed to pay for certain CLINs, which effectively cut off the contractor’s cash flow for the Project.

From these facts, a minority of the Board found the Corps breached its duty of good faith and fair dealing.  However, a majority of the Board held there was no breach, despite the Corps’ “abhorrent” and unreasonable behavior.  (A split of opinion on the Board is rare.)

The full opinion has more detail of how unfairly the Corps treated the Contractor.

Appeals of North American Landscaping, Construction, and Dredge, Co., Inc., Armed Services Board of Contract Appeals Nos. 60235, 60236, 60237, and 60238 (August 9, 2018).

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