Many federal governmental bid documents contain a soils report and copies of the boring logs. However it is also possible for the bid documents to simply reference availability of a soils report. The reference, apparently however slight, may be sufficient to shift the burden to the contractor to acquire the referenced report or further inquire. The Postal Service Board of Contract Appeals has ruled that the inclusion of preliminary soils reports in the Solicitation and a Project Manual's reference to a full soils testing report was sufficient to alert bidders to the availability of that information and defeated the contractor's claim that the government had failed to disclose superior knowledge. Thomas J. Young Jr., PSBCA Nos. 3885, 3983, 98-2 BCA p. 29,772.
Young competed for and was awarded a contract by the U.S. Postal Service to purchase land, design and construct a post office building, and lease the building back to the Postal Service. While preparing the site, Young encountered unexpected buried debris and filed a claim with the contracting officer for the additional costs it incurred to remove the unsuitable material. Although a full soils analysis had been conducted on the site, the Solicitation contained only a preliminary soils report and a reference on the Project Manual title page which stated: "Note: Full report shall be available to bidders upon request." The preliminary report did not address potential subsurface debris, although the full analysis contained a warning about its presence. Young contended that the Postal Service had failed to disclose to bidders information that would have indicated the presence of a prior existing house on the property and the necessity of debris removal. The Postal Service asserted that the contractor bore the risk of its failure to obtain a copy of the referenced soils report that did warn of the buried debris.
Failure to Disclose Information
At the board, Young argued the obscure reference to the soils report constituted a failure to disclose vital information to bidders and such a reference was insufficient to put a reasonable contractor on notice of the unsuitable soil. Alternatively, Young argued that given the limited amount of time allowed for bid preparation, the information was not reasonably available due to the bidder's inability to receive and analyze the soils report prior to bid submission. The Postal Service contended that the soils testing report containing detailed information of subsurface debris was identified in the Solicitation and the means to obtain a copy of the full report was explained. Therefore, the information in the report was reasonably available to Young during bid preparation and there was no basis to recover from the government on the basis of failure to disclose special information ("superior knowledge" theory). The board agreed with the government's position and denied Young's claim.
The government has a duty to disclose superior knowledge when it "possesses special knowledge, not shared by the contractor, which is vital to the performance of the contract." A.S. McGaughan Co., Inc. v. United States, 24 Cl.Ct. 659 (1991). This duty arises only when the information is unavailable elsewhere. H.N. Bailey & Associates v. United States, 196 Ct. Cl. 156 (1971). The government's duty to disclose superior knowledge arises when:
- A contractor undertakes to perform without vital knowledge of a fact that affects performance cost or duration;
- The government was aware the contractor had no knowledge of and had no reason to obtain such information;
- A government supplied contract specification misled the contractor, or did not put it on notice to inquire; and
- The government failed to provide the relevant information.
Although there was no dispute that the information regarding the existence of subsurface debris was "vital", the board determined that Young had failed to demonstrate the information was not available to it and that the contractor was not at least on inquiry notice before it prepared the bid. The board dismissed Young's assertion that it did not have time to receive and analyze the soils report as unsupported by the evidence. (The potential issue of the inaccurate/incomplete nature of the summary as a factor lulling the contractor to ignore the reference was not specifically addressed.)
Duty to Inspect
This decision calls into question what constitutes the available bid documents and what constitutes a reasonable inspection of bidding documents. Information regarding subsurface conditions is often considered knowledge of which the government should assume the contractor is unaware. See Levering & Garrigues Co. v. United States, 73 Ct. Cl. 566 (1932) (government found liable for nondisclosure of sunken sea wall) and Flores Drilling & Pump Co., AGBCA 82-403-3, 83-1 BCA p. 16,200, recons. denied, 83-1 BCA p. 16,336 (government knowledge about probable nature of the material and the information to be encountered assumed to be unknown by the contractor). This assumption exists because a reasonable site visit would likely not discover subsurface conditions. However, if the bid documents make a reference to a full soils engineered analysis, the contractor is often charged with the duty to read and understand the report or at least inquire as to the subsurface conditions. In that context, the contractor bears the responsibility for its failure to review the soils test results and to consider the information reasonably obtained from that review. The contractor must reasonably investigate the subsurface conditions based upon the information supplied by the government. This duty may include an obligation to inspect any referenced information. See A.S. McGaughan Co., Inc., 24 Cl. Ct. 659 (1991) see also Ashbach Construction Co., PBSCA No. 2718, 91-2 BCA p. 23,787.
The practical implication of the Postal Board's decision in Young is that a contractor must obtain and read any documents referenced in the solicitation. Failure to do so may be fatal to a claim of government non-disclosure. A suggestion that time would not permit receipt and analysis of the report must be supported by evidence. To that end, it is crucial, no matter how close to the bid submittal deadline, that the contractor at least submit a written request for the materials and inquire as to their significance. It is clear after the decision in Young that a contractor's failure to inquire about referenced documents may be fatal to a claim based upon the government's alleged failure to disclose superior knowledge.