Community Heating & Plumbing Co., Inc. v. Kelso

• Decision Date: 11 March 1993
• Docket Number: No. 92-1362,92-1362
• Parties: 38 Cont.Cas.Fed. (CCH) P 76,488 COMMUNITY HEATING & PLUMBING COMPANY, INC., Appellant, v. Admiral Frank B. KELSO, II, Acting Secretary of the Navy, Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1575

987 F.2d 1575

38 Cont.Cas.Fed. (CCH) P 76,488

COMMUNITY HEATING & PLUMBING COMPANY, INC., Appellant, v. Admiral Frank B. KELSO, II, Acting Secretary of the Navy, Appellee.

No. 92-1362.

United States Court of Appeals, Federal Circuit.

March 11, 1993.

Gary R. Boehlert, Watt, Tieder, Killian & Hoffar, McLean, VA, argued for appellant. With him on the brief was Douglas C. Proxmire.

Dean L. Grayson, Atty., Commercial Litigation Branch, Dept. of Justice, Washington, DC, argued for appellee. With him on the brief were Stuart M. Gerson, Asst. Atty. Gen., David M. Cohen, Director and Martha H. DeGraff, Asst. Director. Also on the brief was Ronald L. Fouse, Office of Gen. Counsel, Dept. of the Navy, of counsel.

Before NEWMAN, Circuit Judge, BENNETT, Senior Circuit Judge, and LOURIE, Circuit Judge.

BENNETT, Senior Circuit Judge.

This is an appeal from a decision of the Armed Services Board of Contract Appeals (board) denying the claims brought by Community Heating and Plumbing Co., Inc. (Community), against the Secretary of the United States Navy (Navy). ¹ The claims arose out of a contract to remove and replace the condensate and steam system located at the Marine Corps Air Station, Cherry Point, North Carolina. Community seeks compensation for: 1) the costs associated with the installation of conduit sleeves in existing manholes; and, 2) the costs which arose from delays experienced by the project. ² We affirm the decision of the board.

The Conduit Sleeve Claim

On May 18, 1982, Community submitted a bid in response to the Navy's Invitation for Bids. On May 19, Navy Contract Specialist Rosalind D. Rogers replied by mail informing Community that although it was the apparent low bidder, its bid appeared "somewhat out of line" as compared to the Navy's estimate and the other bids received. In fact, Community's estimate for the project was 14% below the Navy estimate and 5% below the second lowest bid received. Accordingly, Ms. Roger's letter instructed Community to check its proposal and confirm its bid price in writing. In addition, Navy officials decided that if the bid were confirmed, Community should also be required to meet with the Navy officials to reverify the project's scope. On June 1, 1982, Community confirmed its bid, and on June 3 a bid confirmation meeting was held at the Navy's offices. Those present at the meeting included Mr. Levy for Community and Mr. Manger (LANTDIV Engineer), Mr. Hiteshaw (the drafter of the project drawings), and Ms. Rogers for the Navy. ³ The only evidence in the record regarding the discussions which took place at the meeting was the testimony of those in attendance and a memorandum written by Ms. Rogers the following day.

On June 4, 1982, the day after the meeting, Mr. Levy wrote a letter to the Navy referencing the meeting and stating in part:

The items listed below were discussed and approved during our June 3, 1982 conference.

....

3. The conduit sleeves shown on Sheet M-5 in the lower righthand corner are for the new manholes only for both condensate and steam.

(Emphasis added.)

The Navy responded to Community's June 4 communication with a letter dated June 21, 1982. That letter made no express objection to Community's contract interpretation regarding the conduit sleeves, but it did state in part:

The meeting referred to in your letter was held as part of the bid confirmation process in order to insure that you had considered all components of the job in preparing your bid. Contract awards on formally advertised procurements must be made in strict accordance with the terms of the Invitation for Bids.

....

It is requested that you verify in writing the correctness of your bid in accordance with the Invitation for Bids.

On June 30, 1982, the bid was confirmed in writing, and on July 15, 1982, the contract, No. N62470-81-C-1345, was awarded to Community.

After the contract was awarded, the Navy directed Community to furnish conduit sleeves in new and existing manholes "where needed." Community then brought a claim for additional compensation, ASBCA No. 38167, arguing that the contract required installation of conduit sleeves at new manholes only. Upon consideration of the evidence, the board ruled in favor of the Navy in a final decision dated February 24, 1992. The board held that the contract was unambiguous since there was "no way" the contract could be construed in the manner advocated by Community. Community now appeals.

Standard of Review

Under 41 U.S.C. § 609(b) (1988), the decision of the board on any question of law is not final or conclusive, but the decision on any question of fact "shall be final and conclusive and shall not be set aside unless the decision is fraudulent, or arbitrary, or capricious or so grossly erroneous as to necessarily imply bad faith, or if such decision is not supported by substantial evidence." See Triax-Pacific v. Stone, 958 F.2d 351, 353 (Fed.Cir.1992).

Community argues that the contract contained latent ambiguity and, because the June 4 letter gave notice of Community's contract interpretation, the Navy is bound to that interpretation by its failure to object. Lykes-Youngstown Corp. v. United States, 420 F.2d 735, 190 Ct.Cl. 348, cert. denied, 400 U.S. 865, 91 S.Ct. 102, 27 L.Ed.2d 104 (1970); Maxwell Dynamometer Co. v. United States, 386 F.2d 855, 181 Ct.Cl. 607 (1967); Midwest Transit, Inc., PSBCA No. 1504, 87-3 BCA (CCH) p 20,079 at 101,656. However, Community's alternate contract interpretation cannot be adopted if the present contract is unambiguous, Perry & Wallis, Inc. v. United States, 427 F.2d 722, 725, 192 Ct.Cl. 310 (1970) (holding that where a contract is not ambiguous, the wording of the contract controls its meaning and resort cannot be had to extraneous circumstances or subjective interpretations), or if the ambiguity is patent. Fortec Constructors v. United States, 760 F.2d 1288, 1291 (Fed.Cir.1985) (holding that the existence of a patent ambiguity raises a duty to inquire, regardless of the reasonableness of contractor's interpretation).

Community asserts that the contract, as it pertains to the conduit sleeves, is ambiguous. It contests the Navy's reading of the contract, which was adopted by the board, and argues in favor of an alternative contract interpretation based upon its own reading of the contract language, specifications and drawings. However, contracts are not necessarily rendered ambiguous by the mere fact that the parties disagree as to the meaning of their provisions. Brunswick Corp. v. United States, 951 F.2d 334, 337 (Fed.Cir.1991); Blake Constr. Co. v. United States, 597 F.2d 1357, 1359, 220 Ct.Cl. 56 (1979); John C. Grimberg Co. v. United States, 7 Cl.Ct. 452, 457 (Cl.Ct.), aff'd without opinion, 785 F.2d 325 (Fed.Cir.1985). That the parties disagree with a specification, or that a contractor's interpretation thereof is conceivable, does not necessarily render that specification ambiguous so as to require that it be construed against the drafter. Ace Constr. Co. v. United States, 401 F.2d 816, 820, 185 Ct.Cl. 487 (1968). A contract is ambiguous if it is susceptible of two different and reasonable interpretations, each of which is found to be consistent with the contract language. Edward R. Marden Corp. v. United States, 803 F.2d 701, 705 (Fed.Cir.1986); Highway Prods., Inc. v. United States, 530 F.2d 911, 917, 208 Ct.Cl. 926 (1976); Sun Shipbuilding & Dry Dock Co. v. United States, 393 F.2d 807, 815-16, 183 Ct.Cl. 358 (1968).

Here, Community's contract interpretation, based on its reading of the contract drawings and specifications, is not reasonable. First, there is substantial evidence in the drawings to support the board's finding that conduit sleeves are required in new and existing manholes. ⁴ Second, the M-6 project drawings are entitled "Typical Detail Showing Penetration of Exist. Manholes or Bldg. Pit Wall for Condensate Line". (Emphasis added.) Finally, other bidders interpreted the drawings to mean that the conduit sleeves are required in new and existing manholes. ⁵

In addition, the board held that the contract was unambiguous. Contract ambiguity is a question of law, Newsom v. United States, 676 F.2d 647, 649, 230 Ct.Cl. 301 (1982), which is reviewable de novo by this court. 41 U.S.C. § 609(b) (1988). However, the board has considerable experience and expertise in interpreting government contracts, and its interpretation is given careful consideration and great respect. United States v. Turner Constr. Co., 819 F.2d 283, 285 (Fed.Cir.1987) (quoting Fortec Constructors v. United States, 760 F.2d 1288, 1291 (Fed.Cir.1985)). Accordingly, the contract is unambiguous, and Community's conduit sleeve claim must be rejected.

Assuming the contract were ambiguous, Community's claim would still fail because the contract ambiguity is patent and not latent. ⁶ The determination of whether an ambiguity is patent is not a "yes-no proposition." Newsom, 676 F.2d at 650. "When determining whether contract language is patently ambiguous, the language must be placed at a point along a spectrum of ambiguity." Fort Vancouver Plywood Co. v. United States, 860 F.2d 409, 414 (Fed.Cir.1988). "There is a grey area between the point along this spectrum at which a document requires more exacting language and that at which additional detail will add nothing but worthless surplusage." Id. Thus, a patent ambiguity does not exist where the ambiguity is "neither glaring nor substantial nor patently obvious." Mountain Home Contractors v. United States, 425 F.2d 1260, 1264, 192 Ct.Cl. 16 (1970). Here, Community did inquire about the conduit sleeves and any ambiguity would have therefore been patent. Vista Scientific Corp. v. United States, 808 F.2d 50, 52 (Fed.Cir.1986).

If a contract contains a patent ambiguity, the contractor is under a duty to inquire and must seek clarification of the proper contract interpretation. Interstate Gen. Gov't Contractors, Inc., v. Stone, 980 F.2d 1433 (Fed.Cir....