Opinion
Case No. 1:99-CV-960.
March 23, 2001.
MEMORANDUM OPINION
In its complaint filed with this Court (Dkt. 1), Gleason Construction Company, Inc., ("Gleason") asserts claims of breach of contract and breach of implied warranty against Cascade Charter Township ("Cascade" or "the township"). Specifically, Gleason seeks reimbursement for increased cost of performance under a Differing Site Conditions clause in its contract for horizontal drilling with the township. Cascade filed a counterclaim (Dkt. 3) against Gleason for breach of contract and against Gleason's surety, North American Insurance Company, for failure to satisfy its obligations under a performance bond. Jurisdiction is based on diversity of citizenship pursuant to 28 U.S.C. § 1332.
On May 5, 2000, Cascade filed a motion for summary judgment (Dkt. 20) on all claims and counterclaims. Gleason filed its own motion for summary judgment on June 9, 2000 (Dkt. 25). The Court held a hearing on the parties' motions on July 10, 2000. The parties thereafter submitted additional pleadings and affidavits. For the reasons provided herein, the parties' motions for summary judgment are granted in part and denied in part.
The Court originally struck (Dkt. 27) Gleason's motion for summary judgment for violating the briefing procedures established at the Rule 16 conference. During the July 10, 2000, hearing, the Court determined that it would treat the submission as a motion for summary judgment. See Tr. at 9.
I. BACKGROUND
Gleason is a commercial contractor specializing in underground directional drilling. In August 1998, the township invited Gleason to submit a bid on a proposed contract to install a new water main extension beneath the Thornapple River. To prepare its bid, Gleason obtained a set of plans and specifications for the project from the township.
After reviewing the plans and specifications and after performing a surface site investigation of the proposed project, Gleason prepared and submitted its bid. The bid was accepted by Cascade, and on September 28, 1998, the two parties entered into a contract for Gleason to construct the new water main extension beneath the river. The contract was for a fixed amount of $367,000 with a substantial completion date of January 22, 1999, and a final completion date of January 29, 1999, as extended by agreement.
The contract incorporated by reference a document entitled "Standard General Conditions of the Construction Contract." See § 700 ("the General Conditions"). The General Conditions were prepared jointly by the National Society of Professional Engineers, the American Consulting Engineers Council, the American Society of Civil Engineers, and the Constructions Specifications Institute. The Differing Site Conditions clause at issue here is found in the General Conditions, and states in pertinent part:
4.2.3. Notice of Differing Subsurface or Physical Conditions: If CONTRACTOR believes that any subsurface or physical condition at or contiguous to the site that is uncovered or revealed either:
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4.2.3.3. differs materially from that shown or indicated in the Contract Documents, . . .
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CONTRACTOR shall, promptly after becoming aware thereof and before further disturbing conditions affected thereby or performing any Work in connection therewith notify OWNER and
ENGINEER in writing about such condition. CONTRACTOR shall not further disturb such
Conditions or perform any Work in connection therewith . . . until receipt of written order to do so.
4.2.4. ENGINEER's Review: ENGINEER will promptly review the pertinent conditions, determine the necessity of OWNER's obtaining additional exploration or tests with respect thereto and advise
OWNER in writing (with a copy to CONTRACTOR) of ENGINEER's findings and conclusions.
4.2.5. Possible Contract Documents Change: If ENGINEER concludes that a change in the Contract Documents is required as a result of a condition that meets one or more of the categories in paragraph 4.2.3., a Work Change Directive or a Change Order will be issued as provided in Article 10 to reflect and document the consequences of such a change.
4.2.6. Possible Price and Times Adjustments: An equitable adjustment in the Contract Price or in the Contract Times, or both, will be allowed to the extent that the existence of such uncovered or revealed condition causes an increase or decrease in CONTRACTOR's cost of, or time required for performance of, the Work: subject, however, to the following:
4.2.6.1. such condition must meet any one or more of the categories described in paragraphs 4.2.3.1 through 4.2.3.4, inclusive
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4.2.6.4. CONTRACTOR shall not be entitled to any adjustment in the Contract Price or Times if:
4.2.6.4.1. CONTRACTOR knew of the existence of such conditions at the time CONTRACTOR made a final commitment to OWNER in respect of Contract Price and Contract Times by the submission of a bid or becoming bound under a negotiated contract; or
4.2.6.4.2. the existence of such condition could reasonably have been discovered or revealed as a result of any examination, investigation, exploration, test or study of the site and contiguous areas required by the Bidding Requirements or Contract Documents to be conducted by or for CONTRACTOR prior to CONTRACTOR' making such final commitment; or
4.2.6.4.3. CONTRACTOR failed to give the written notice within the time and as required by paragraph 4.2.3.
If OWNER and CONTRACTOR are unable to agree on entitlement to or as to the amount or length of any such equitable adjustment in the Contract Price or Contract Times, a claim may be made therefor as provided in Articles 11 and 12. However, OWNER, ENGINEER, and ENGINEER's Consultants shall not be liable to CONTRACTOR for any claims, costs, losses or damages sustained by CONTRACTOR on or in connection with any other project or anticipated project.
Also incorporated into the final contract were the bid documents. Section 100 of the bid instructions states in pertinent part:
4.2. Reference is made to the Supplementary Conditions for identification of:
4.2.1. Those reports of explorations and tests of subsurface conditions at or contiguous to the Site which have been utilized by ENGINEER in preparation of the Contract Documents. Bidder may rely upon the general accuracy of the "technical data" contained in such reports but not upon other data, interpretations, opinions or information contained in such reports or otherwise relating to the subsurface conditions at the Site, nor upon completeness thereof for the purposes of bidding or constructions [sic].
Bidder is responsible for any interpretation or conclusion drawn from any "technical data" or any such data, interpretation, opinions or information.
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4.5. Before submitting a Bid, each Bidder will be responsible to obtain such additional or supplementary examinations, investigations, explorations, tests, studies and data concerning conditions (surface, subsurface and Underground Facilities) at or contiguous to the Site or otherwise, which may affect cost, progress, performance or furnishing of the Work and which relate to any aspect of the means, methods, techniques, sequences or procedures of construction to be employed by Bidder and safety precautions and programs incident thereto or which Bidder deems necessary to determine its Bid for performing and furnishing the Work in accordance with the time, price and other terms and conditions of the Contract Documents.
The bid documents also included several soil boring logs. Two of the logs were taken near the planned entry and exit points for the pipeline. Both borings were taken to a depth of 80'. The bore near the entry point, soil bore number B-22, reported 3" of asphalt over road gravel and then "brown, well graded sand; few fine gravel, moist" down to 8'. Beneath that layer, the soil is described as "light brown sand poorly graded" with increasing amounts of moisture as the bore descended. The bore near the exit point, bore number B-23, described 8" of top soil, with "brown sand" in varying degrees of coarseness density and moisture to a depth of approximately 52.5'. The log further reported a layer of very stiff to hard silty clay to a depth of 63', and brown wet sands to the end of the bore. No "cobbles" (rocks measuring 10"-12" in diameter) or "boulders" (rocks measuring in excess of 12" in diameter) appear in the boring log. The length of the water main between the two bores was estimated to be in excess of 2,000 linear feet.
A. PLAINTIFF'S CLAIMS
On or about November 30, 1998, Gleason commenced drilling the pilot hole beneath the river for the water pipeline project.The contract drawings depicted the elevation of the bottom of the river and the elevation of the directional drill to install the pipeline. Gleason contends that the plans depicted sufficient cover over the proposed drill path to the bottom of the river. Unknown to Gleason, however, the river bottom was allegedly lower than indicated in the plans. As plaintiff began drilling at the specified elevation, drill fluid broke out beneath the river. Lamb Aff. (5/26/2000 ) ¶ 42. This allegedly prevented it from completing the river crossing at the proposed elevation. Gleason avers that the lower-than-depicted river bottom elevation, and the resulting inadequate confining soil for the fluid, differed materially from conditions indicated in the contract and drawings, thereby meeting the standard found in § 700, ¶ 4.2.3.3. Id.
Gleason notified Brian Vilmont, Project Engineer for Cascade, of the blowout. Vilmont instructed plaintiff to proceed drilling at a lower elevation than depicted on the plans in order to obtain sufficient cover. Id. ¶ 44. As plaintiff began drilling at the lower elevation, it alleges it encountered nestled cobbles and boulders in the drill path. It maintains that these obstructions prevented completion of the pilot hole using conventional drilling equipment. Id. ¶ 45.
The encountered cobbles were not depicted in the soil borings or other contract documents. Gleason therefore notified Vilmont in writing of the problem. Id. ¶ 46 ; see also Facsimile Letter (1/26/99) from Pascoe to Vilmont. Despite acknowledging that "the project soil borings did not indicate any cobble areas," the township rejected Gleason's position that the presence of cobbles and boulders satisfied the requirements of the Differing Site Conditions clause. Lamb Aff. (5/26/2000) ¶ 48. Furthermore , Cascade allegedly failed to furnish plaintiff with directions as to how to proceed with the drilling operation, and refused to grant an equitable adjustment to the contract length or price. Id. ¶¶ 49-50. The township threatened Gleason with liquidated damages if it did not complete the project on time. Id. ¶ 50.
Gleason asserts it made several attempts at completing the pilot hole employing conventional drilling equipment, including the use of a "duckbill" drill head. It could not successfully complete the pilot hole using this equipment. It switched to a "motorized" head that could drill through cobbles and boulders and thereby maintain a specified alignment. Id.
A "duckbill" or "steering shoe" is a flat drill bit with a tapered nose. "The flat piece at the nose extends out beyond the leading edge of the head. As the drill string rotates, the extended piece overcuts the soil to create a slightly larger annular space through which the drill string may easily pass." Hanson Aff. (5/30/2000) ¶ 8.
Gleason completed the pilot hole using the motorized drill head. After performing several back reaming operations, however, the connection between the two back reaming "heads" broke about 800 linear feet from completing the final pull-back operation. Id. ¶ 56. Gleason alleges that the nature of the break and location indicates that cobbles fell into the hole, jammed the equipment, and broke the connection. Id. This apparently rendered the installed pipe virtually useless. Id.
"Back reaming" is a procedure used to enlarge the diameter of a drilled hole. After a pilot hole is drilled, "the tip of the drill string emerges from the ground ready to accept the appropriate back reamer. The back reaming operation enlarges the hole to a suitable diameter for the product pipeline. . . . Generally, the contractor attaches the reamer to the drill string on the bank opposite the drilling rig, and pulls the reamer back into the pilot hole." Lamb Aff. (5/26/2000) ¶ 5.
Plaintiff notified Cascade of the break and its impact on the project and sought direction on how to proceed. Id ¶ 57. Cascade allegedly refused to give any direction, and instead asked plaintiff to provide recommendations of alternative means to complete the river crossing. Id. ¶ 62. Gleason provided alternative proposals, but did not have the capabilities to provide the requisite engineering to support each alternative. Id. ¶ 64. After several months of discussions on how to proceed next, Cascade terminated the contract in August 1999 before any decision could be reached regarding a new drill path. Id. ¶ 84.
Gleason presents its two claims under § 700, ¶ 4.2.3.3. as both breaches of contract as well as implied warranty. Further, Gleason maintains that Cascade's refusal to investigate and to advise it of a new design also resulted in a breach of contract and implied warranty. It seeks damages for excess costs; legal, consulting, accounting and administrative fees; loss of funds and increases in interest expenses; and loss of anticipated profits. Complaint ¶ 90. It estimates such damages exceed $600,000. Id.¶ 91.
B. DEFENDANT'S POSITION
Cascade denies that the contract drawings inaccurately depict the elevation of the river bottom or that the river bottom elevation was causally related to Gleason's failure to complete the project. Answer ¶¶ 21, 24. It maintains the alleged breakout of drill fluid occurred early enough that Gleason could have completed the river crossing in time. Cascade also alleges that Gleason did not properly seek reimbursement under the Differing Site Conditions clause prior to filing this lawsuit, nor has it provided any evidence to substantiate the claim. Id. ¶ 22.
Moreover, the township maintains that Gleason had the responsibility to determine the appropriate vertical elevation for the project. Cascade provided it with a survey of the Thornapple River showing the elevation of the riverbed, and advised Gleason on the amount of fill cover over the pipe that had to be maintained to comply with applicable Michigan Department of Environmental Quality ("MDEQ") requirements. Vilmont Aff. (4/28/2000) ¶ 9. It also advised Gleason of the maximum drilling depth suitable for the specified pipe material. Id. Cascade maintains that it was Gleason's responsibility, working within these parameters, to determine the specific vertical alignment for the drilling project.
Cascade also denies that either it or its engineering firm, Fishbeck, Thompson, Carr and Huber ("FTCH"), made any representations or supplied any information regarding the subsurface soil conditions beneath the Thornapple River. Although it confirms that the geotechnical data provided to bidders included the results of soil borings performed on both sides of the river, the township argues that this data could not be considered part of the "Contract Documents," and did not reflect subsurface conditions beneath the river. Cascade asserts, moreover, that based on contract language and express acknowledgments, Gleason was not entitled to rely upon the completeness and accuracy of the data in evaluating subsurface conditions beneath the river.
Accordingly, Cascade argues that plaintiff has failed to state a valid claim pursuant to § 700, ¶ 4.2.3.3. Rather, the contractor's failure to complete the project was a result of a "catastrophic equipment failure" which occurred on or about February 1, 1999 (i.e., the break that occurred during the final reaming). Cascade denies that it bears any responsibility for this failure or that it was caused by conditions materially different than those indicated in the contract documents.
Cascade asserts counterclaims against Gleason for breach of contract for failure to complete the drilling project pursuant to the contract terms. It seeks monetary damages, including recovery of approximately $75,000 already paid; engineering expenses incurred as a result of the breach; liquidated damages; future expenses incurred in connection with completing the project; and attorney fees and costs. Further, Cascade has a third-party claim against Gleason's surety, North American Insurance Company, for failure to satisfy obligations under the Construction Performance Bond.
II. ANALYSIS
A. SUMMARY JUDGMENT UNDER FED. R. CIV. P. 56
Under Fed.R.Civ.P. 56, the Court must look beyond the pleadings and evaluate the facts to determine whether there is a genuine issue of material fact that warrants a trial. Barnhart v. Pickrel, Schaeffer Ebeling Co., 12 F.3d 1382, 1388-89 (6th Cir. 1993). An issue of fact is "genuine" if the evidence is such that a reasonable jury could return a verdict for the nonmovant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). An issue of fact concerns "material" facts only if establishment thereof might affect the outcome of the lawsuit under governing substantive law. Id.
When reviewing the pleadings and other submissions on summary judgment, the Court must draw all reasonable inferences in the light most favorable to the nonmovant. Timmer v. Michigan Dep't of Commerce, 104 F.3d 833, 842 (6th Cir. 1997). A complete failure of proof concerning an essential element necessarily renders all other facts immaterial. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). Production of a "mere scintilla of evidence" in support of an essential element will not forestall summary judgment. Anderson, 477 U.S. at 251. A party must "do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Ind. Co., Ltd. V. Zenith Radio Corp., 475 U.S. 574, 586 (1986).
B. GENERAL PRINCIPLES OF CONTRACT CONSTRUCTION AND INTERPRETATION
In support of their respective positions, both parties rely on language in various contract documents. Under both federal and state law, the interpretation of contract provisions is a question of law for the court. See Ferro Corp. v. Garrison Indus., Inc., 142 F.3d 926, 931 (6th Cir. 1998) (federal law); UAW-GM Human Resources Center v. KSL Recreation Corp., 228 Mich. App. 486, 491 (1998) (state law). "The primary goal in the construction of any contract is to honor the intent of the parties." Rasheed v. Chrysler Corp., 445 Mich. 109, 127 n. 28 (1994). "The initial question whether contract language is ambiguous is a question of law. If the contract language is clear and unambiguous, its meaning is a question of law. Where the contract language is unclear or susceptible to multiple meanings, interpretation becomes a question of fact." Port Huron Ed. Ass'n v. Port Huron Area Sch. Dist., 452 Mich. 309, 323 (1996) (citations omitted).
A contract is ambiguous if "its words may reasonably be understood in different ways." Raska v. Farm Bureau Mutual Ins. Co., 412 Mich. 355, 362 (1982). "Contractual language is construed according to its plain and ordinary meaning, and technical or constrained constructions are to be avoided." Dillon v. DeNooyer Chevrolet Geo, 217 Mich. App. 163, 166 (1996). "If the meaning of an agreement is ambiguous or unclear, the trier of fact is to determine the intent of the parties." KSL Recreation, 228 Mich. App. at 492.
Until recently, it appears that Differing Site Conditions clauses were not commonly used, if at all, in Michigan municipal or state contracts. The parties have not cited to any state cases involving judicial construction or interpretation of such a clause. Likewise, this Court's review of Michigan case law found no such instances . When novel issues arise before them, state courts have often turned to federal case law for guidance. See, e.g., Murad v. Wayne State Regents, 239 Mich. App. 538, 542 (2000) (noting that state courts may look to federal case law to interpret state labor statutes modeled after similar federal statutes); Langlois v. McDonald's Restaurants of Mich., Inc., 149 Mich. App. 309, 314-15 (1986) (finding federal case law under Title VII of the Civil Rights Act persuasive on analogous questions under Michigan's Civil Rights Act); Kensington Corp., E. C. v. Michigan, 74 Mich. App. 417, 420 (1977) ("We also agree that a review of Federal court experience, where a substantial amount of litigation in this area has occurred, is helpful.").
As of October 6, 1998, Michigan requires government entities to include Differing Site Conditions clauses in some of their construction contracts. See MCL § 125.1592.
Cascade refers to a decision by the Michigan Court of Appeals in support of several of its arguments. Upon review, however, the Court finds that the decision in Loyer Constr. Co. v. Novi, 179 Mich. App. 781 (1989) is of little relevance to the current dispute. There was no Differing Site Conditions clause at issue in that case; rather, the contract specifically included an alternate means — unit pricing — for compensating the contractor for additional work and materials necessitated by unexpected conditions. Additionally, the court found in that case that the unit pricing provision was clear and unambiguous, and declined the contractor's request to readjust the unit pricing provision. Here, Gleason does not contend that it seeks modification of the contract. It argues instead that the contract indications clearly show that it could expect sand and clay soils, and the subsequent conditions triggered the Differing Site Conditions provision.
Unlike Michigan courts, federal courts-especially the Court of Federal Claims (formally the Claims Court and Court of Claims) and the Court of Appeals for the Federal Circuit-have extensive experience construing, interpreting, and applying Differing Site Conditions clauses and claims arising thereunder. Accordingly, this Court shall look to federal case law for guidance in analyzing plaintiff's claims arising under § 700, ¶ 4.2.3.3 of the contract.
C. POLICY RATIONALE FOR DIFFERING SITE CONDITIONS CLAUSES
If a commercial contractor lacks specific information of subsurface conditions at a proposed project site, it faces the risk that unanticipated conditions may exist which could result in increased costs of completion or make it practicably impossible to complete. In the face of such risk, the contractor can either: (1) gather its own information, either directly or through a geotechnical consultant; or (2) build in a contingency fee into its bid to cover the expected cost of the risk.
On the other hand, for various reasons, a government entity may have limited or more extensive information of subsurface conditions. To encourage the exchange of such information, and reduce the contingency fee typically charged, the parties may include a Differing Site Conditions clause in the contract. The clause permits a contractor to base its bid price on information provided to it by the government, with the assurance that if the encountered conditions are materially different than those reasonably indicated, it can seek an equitable adjustment to cover the increased labor and materials.
The information provided to the contractor and the Differing Site Conditions clause work in concert: "the presence of the [Differing Site Conditions] clause works to reassure bidder[s] that they may confidently rely on the [technical information] and need not include a contingency element in their bids." Foster Constr. C.A. Williams Bros. Co. v. United States, 435 F.2d 873, 887 (Ct.Cl. 1970). Without the ability to rely upon the provided information, however, contractors would be faced with the same risk, and would "revert to the practice of increasing their bids" to compensate. Id. "The purpose of the changed conditions clause is thus to take at least some of the gamble on subsurface conditions out of bidding." Id.
It is not uncommon for a government agency or municipality also to include exculpatory clauses in a contract requiring, for instance, contractors to investigate the project site and decide for itself whether further investigation is required. While such clauses may serve valid purposes-e.g., spreading costs of inspections to those best suited to bear them and requiring at least a minimal amount of investigation by potential bidders-an "overly expansive" duty of the contractor to perform an extensive and exhaustive site inspection (or otherwise to bear the risks of the lack of such an investigation) would frustrate the "[f]aithful execution" of the policy behind Differing Site Conditions clauses. Id. For, if the contractor bore all of the responsibility of gathering site information and all of the risk of not performing an exhaustive investigation, many, if not all, contractors would simply build a risk contingency into the bid price, thereby nullifying the very effect that the clause is intended to accomplish. Accordingly, "caution continues to be observed that the duty to make an inspection of the site does not negate the [Differing Site Conditions] clause by putting the contractor at peril to discover hidden subsurface conditions or those beyond the limits of an inspection appropriate to the time available." Id. at 888 (citations omitted).
D. "TYPE I" DIFFERING SITE CONDITIONS CLAUSE
Gleason seeks recovery under the "Type I" Differing Site Conditions clause found at § 700, ¶ 4.2.3.3. To prevail on its claims, Gleason must show by a preponderance of the evidence "that it has encountered a subsurface or latent physical condition differing materially from the conditions which are indicated in the contract documents or may be implied from other language in the contract documents." Youngdale Sons Constr. Co., Inc. v. United States, 27 Fed. Cl. 516, 528 (1993).
In general, there are two types of Differing Site Conditions clauses. A "Type II" Differing Site Condition clause applies when a contractor encounters "unknown physical conditions at the site, of an unusual nature, which differ materially from those ordinarily encountered and generally recognized as inhering in work of the character provided for in the contract." 48 C.F.R. § 52.236-2(a)(2). Gleason is not asserting that nestled cobbles and boulders are "conditions . . . of an unusual nature," but rather are conditions not to be expected based on the reasonable inferences it made from the contract documents and soil boring logs.
As developed in the federal courts, a contractor asserting a claim for adjustment under a Differing Site Conditions clause must establish six elements:
(i) the contract documents must have affirmatively indicated or represented the subsurface conditions which form the basis of the plaintiff's claim; (ii) the contractor must have acted as a reasonably prudent contractor in interpreting the contract documents;
(iii) the contractor must have reasonably relied on the indications of subsurface conditions in the contract; (iv) the subsurface conditions actually encountered, within the contract site area, must have differed materially from the subsurface conditions indicated in the same contract area; (v) the actual subsurface conditions encountered must have been reasonably unforeseeable; and (vi) the contractor's claimed excess costs must be shown to be solely attributable to the materially different subsurface conditions within the contract site.Weeks Dredging Contracting, Inc. v. United States, 13 Cl. Ct. 193, 218 (1987) (citations omitted). As will be discussed below, several of these elements involve overlapping factual issues. See also Stuyvesant Dredging Co. v. United States, 834 F.2d 1576, 1581 (Fed. Cir. 1987).
1. AFFIRMATIVE INDICATIONS OR REPRESENTATIONS
A claim arising under a Differing Site Conditions clause "stands or falls upon what is indicated in the contract documents." Weeks Dredging, 13 Cl. Ct. at 219 (quoting Stuyvesant Dredging Co. v. United States, 11 C1. Ct. 853, 858 (1987)). A contract "indication" need not be explicit or specific. Rather, the contract documents must only "provide sufficient grounds to justify a bidder's expectation of latent conditions materially different from those actually encountered." P.J. Maffei Bldg. Wrecking Corp. v. United States, 732 F.2d 913, 916 (Fed. Cir. 1984). As noted in Foster Construction, "[a]n `indication' may be proven, moreover, by inferences and implications." Foster Constr., 435 F.2d at 881.
a. THE NOVEMBER 30, 1998, DRILL FLUID BREAKOUT
Gleason argues that several provisions in the contract documents and drawings affirmatively indicate or represent that sufficient confining soil existed for it to drill at or near the upper horizontal drilling parameter-i.e., a minimum of 10' below the riverbed. In § 2665, ¶ 3.02(A), the contractor is directed to lay the project pipe to the "grades and elevations indicated in the Drawings." The drawings show various elevations under the riverbed, and specifically point to several low areas where the pipe must be placed at a minimum 10' below the river bottom. The contract further directs the contractor to use fluids during drilling. Gleason argues that, based on this, Cascade warranted the various elevations under the riverbed and affirmatively indicated that sufficient confining soil could be expected at all points within the allowable drilling elevations, including up to 10' below the river bottom.
Plaintiff has failed to present sufficient proofs that the elevations depicted in the drawings were in fact materially inaccurate. Furthermore, the contract provisions and drawings do not affirmatively indicate or represent that adequate confining soil would exist throughout the allowable drilling elevations. The drawings show that the 10' depth below the riverbed was explicitly labeled as a "minimum" depth to be maintained throughout the project area. The minimum depth requirement was in accordance with MDEQ regulations, not any findings made by Cascade or its engineering firm. See Lamb Aff. (5/26/2000) ¶ 49. The contract specifically permitted Gleason to drill at lower depths based on its interpretation of soil data. See § 2264, ¶ 3.01(A)(2)(d). Gleason has pointed to no contract provisions that otherwise affirmatively show that adequate confining soil would exist at all drilling depths-including 10' below the riverbed-throughout the project area. Thus, even when viewed in the light most favorable to it, Gleason has not presented sufficient evidence to survive summary judgment on this issue. Accordingly, judgment shall be granted to Cascade on Gleason's claims of breach of contract and implied warranty related to the November 30, 1998, breakout of drill fluids during its attempt to drill a pilot hole.
b. UNANTICIPATED COBBLES AND BOULDERS
i. CONTRACT DOCUMENTS
Gleason's second claim centers on whether its alleged encounter with cobbles and boulders during drilling satisfies § 700, ¶ 4.2.3.3. In support, it relies in part on certain engineering reports and soil boring logs to show that it reasonably inferred that sand and clay soils were to be expected under the riverbed.
Cascade objects to Gleason's reliance on the engineering reports. It points to § 800, ¶ 4.2.1. of the Supplemental Conditions which expressly excludes the reports from the set of "Contract Documents." Further, the instructions to bidders provide that they may not rely upon the accuracy or completeness of any non-technical data, interpretations, opinions or other information contained in the reports. § 100, ¶ 4.2.1.
Gleason has cited to no contract provisions that would somehow re-incorporate such reports into the set of "Contract Documents" or otherwise create an ambiguity in the contract. Accordingly, under the plain language of the contract, the Court finds that the referenced engineering reports are not "Contract Documents." Any non-technical data, interpretations, opinions or other information in the reports may not be relied upon here to support its claim.
Cascade further argues that the soil bore data provided to bidders should also be excluded from the contract documents. At oral argument, defense counsel asserted that the soil borings were provided to Gleason for "informational purposes" only, and not as part of the contract. See Tr. at 22. See also Cascade's Brief in Support of Motion for Summary Judgment at 20 ("Notwithstanding the fact that the soil borings were not contract documents. . . ."). As such, Cascade maintains that the borings cannot be used as an indication or representation of subsurface conditions at or near the river.
Yet, § 800, ¶ 4.2.1.1.1. specifically provides that "[t]he technical data contained in [the engineering] report upon which [Gleason] may rely is the soil boring logs at the locations and for the conditions at the time the soil borings were taken." Thus, while the reports that were based in part on those boring logs may not be considered "Contract Documents," Cascade and its engineering firm explicitly provided that Gleason could rely upon the boring log data.
Moreover, as explained in Shank-Artukovich v. United States, 13 C1. Ct. 346, 350 (1987), "[i]n determining the contract requirements the contractor is bound to examine the contract in its entirety, including additional specifications, site examinations, core samples, and boring logs.", (emphasis added); see also Foster Constr., 435 F.2d at 888 ("Even unmistakable contract language in which the Government seeks to disclaim responsibility for drill hole data does not lessen the right of reliance."). The costs to any bidder of engaging a firm to perform similar borings along the riverbank and riverbed would be prohibitive, and, given the short time frame that bidders had to submit their bids, such borings could not likely be completed in time to be of any use. Accordingly, the Court finds that it was not improper for Gleason to have relied upon the data in the soil borings when attempting to determine the indications or representations made in the contract, if any, regarding subsurface soil conditions.
ii. REPRESENTATION OF SUBSURFACE CONDITIONS
BENEATH THE RIVERBED BASED SOLELY ON SOIL BORING LOGS
Gleason offers two separate but related arguments regarding what was represented or otherwise indicated in the contract documents and boring log data. Initially, Gleason asserts that it was reasonable to assume-based solely on extrapolation-that the subsurface soil conditions underneath the river were similar to conditions near the entry and exit points for the project.Such an assumption, however, was not reasonably based upon any affirmative indication or representation made in the contract documents or soil borings. While the logs provide data that a bidder could reasonably rely upon in determining the subsurface conditions near the entry and exit points on each side of the river, they do not provide any indication of the subsurface conditions underneath the riverbed or otherwise purport to show or warrant that a continuous strata of sand and clay soils exists underneath the riverbed. Any extrapolation of the conditions underneath the riverbed based on these two borings was inherently risky given the length of the proposed pipeline (over 2,000 linear feet from entry to exit) and the heterogenous nature of the project geology (from one riverbank, underneath the riverbed, to the other riverbank). See H.B. Mac, Inc. v. United States, 153 F.3d 1338, 1346-47 (Fed. Cir. 1998) (extrapolations from soil bore logs 300 yards away from project site found unreliable); Weeks Dredging, 13 Cl. Ct. at 223 (extrapolations between boring log gaps from 300 to 1,000 found unreliable and not reasonably indicated from the contract, and therefore could not form the basis of a claim arising under a Differing Site Conditions clause). Gleason's assertion that the soil boring logs alone provide a sufficient basis for reimbursement under § 700, ¶ 4.2.3.3. is without support in the record.
iii. INDICATIONS OF SUBSURFACE CONDITIONS BENEATH THE RIVERBED BASED ON SEVERAL FACTORS
Gleason further argues that the logs, along with provisions in the contract requiring a specific "means and methods" for drilling the pilot hole, indicate that sand and clay soils could be expected throughout the allowable drilling area. In support, it relies primarily upon the analysis in Foster Construction. In that case, the plaintiff-contractor brought a claim for reimbursement under a Type I Differing Site Conditions clause. It argued that certain specifications in the contract dictated the means and methods it was to employ in performing the project. The contract directed plaintiff to pour a foundation "in the dry" and excluded a particular type of seal from being used. The contractor argued that these requirements reinforced other indications in the contract documents-including soil boring logs-that certain subsurface conditions were to be expected. Foster Constr., 435 F.2d at 890-92. The Court of Claims found that these "contract indications" supported the plaintiff's expectation "that it would be able to excavate in the dry" and that it was entitled to recover for certain increased costs caused by unexpected subsurface conditions. Id.
Gleason contends that, similar to the situation in Foster Construction, certain contract specifications reinforced its inference that sand and clay soils were to be expected under the riverbed. In § 2264, ¶ 3.03(A)(2), the pilot hole is limited to a maximum size of 6" in diameter. According to Gleason, the smallest machine capable of drilling the specified distance and then pulling the 95,000 lbs. of pipe back under the river would require a 5" drill stem with 6" tool joints. Hanson Aff. (8/9/2000) ¶ 7. On this drill stem, Gleason maintains, a contractor could satisfy the 6" pilot hole limitation utilizing a duckbill drill head. It is asserted, however, that the use of a duckbill is effective only in sand and clay soils, and specifically not in soil with cobbles and boulders. Hanson Aff. (5/30/2000) ¶ 11.
Moreover, § 2264, ¶ 3.03(D)(3) provides that during prereaming, the contractor is to "[u]se a rotary compactor to maintain hole integrity as required by the soil conditions." Gleason asserts that such a tool is used only in "granular and [clay] soils." Gleason's Brief in Support of Motion for Summary Judgment at 1; see also Hanson Aff. (8/9/2000) ¶ 7.
Cascade rejects the assertion that the pilot-hole limitation and rotary compactor provision result in a de facto requirement of the means and methods Gleason was to use. Cascade's engineer states in his affidavit that "[t]he specification of the 6-inch maximum pilot hole diameter was intended to limit the subsurface disruption made during the pilot hole installation." Vilmont Aff. (8/9/2000) ¶ 5.
At first blush, this contention makes little sense. The pilot hole was intended to be just that: an initial hole from which further, more extensive reaming could take place. The final drill hole was intended to be in excess of 20" in diameter. Further "subsurface disruption" is exactly what was intended with the subsequent reaming operations. In any event, the unstated "intention" of a contracting party or its engineering firm is of little import when the plain meaning of the provision is clear on its face.
Cascade's proposed horizontal drilling expert, Hugh W. O'Donnell, disputes Hanson's assertions regarding the technical limitations created by the maximum 6" pilot hole and rotary compactor requirements. O'Donnell maintains that "[t]here were any number of combinations of drill stems and mud-motors available to Gleason, compatible with its drill rig, which would have enabled Gleason to successfully complete a pilot hole in this project while remaining within the 6-inch pilot hole limitation." O'Donnell Aff. (8/8/2000) ¶ 9(d). Further, O'Donnell disputes Gleason's contention that "rotary compactor" somehow indicated sand or clay soils. "The term `rotary compactor' is a generic term describing different types of equipment to be used in all different types of subsurface conditions, whether it be sand, clay, gravel or rock." Id. ¶ 9(e).
Although contract interpretation is ultimately a question of law for the Court, there exist underlying questions of material fact that need to be resolved before the Court can make its finding. Such questions include, but are not necessarily limited to, whether (1) a pilot hole with a maximum diameter of 6" over a distance of 2000 linear feet underneath a riverbed could physically be completed by a drilling system capable of passing through nested cobbles and boulders; (2) such a system, if technically possible, is used by commercial drillers, and, if so, the prevalence of such usage; and (3) the commercial viability of such a system relative to the cost of the present contract. Some of these underlying factual issues have been touched upon by the parties and their experts, while others have not. Until such questions (and possibly others) have been resolved by a finder of fact, the Court cannot make a finding of law on this element.
2. "REASONABLE AND PRUDENT" CONTRACTOR AND "REASONABLE RELIANCE"
In its role in interpreting the contract and its documents, the Court is to place itself in the shoes of a "reasonable and prudent" contractor. See P.J. Maffei, 732 F.2d at 917. "While a contractor 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." Weeks Dredging, 13 Cl. Ct. at 224 (quoting P. J. Maffei, 732 F.2d at 917).
Cascade argues that a reasonable and prudent contractor would not have inferred that the 6" pilot-hole limitation and "rotary compactor" provision actually limited the means and methods for performing the project or otherwise indicated the subsurface conditions a contractor could expect to encounter. The township argues that Gleason had an affirmative duty under the contract to clear up any ambiguities found in the contract or other bid documents prior to submission of its bid. Further, Cascade's expert avers that multiple variations of equipment-some of which could cut through cobbles and boulders-are compatible with a 6" pilot-hole limitation and rotary compactor requirement. Accordingly, a reasonable and prudent contractor would not infer that specific drilling equipment was required or that the subsurface conditions under the river would be similar to conditions found along the riverbanks.
In the public construction industry, a pre-bid conference is commonly held between potential bidders and the contracting agent and/or its design firm. One of the purposes of a pre-bid conference is to provide potential bidders an opportunity to ask questions to clear up any perceived ambiguities or other problems in the contract provisions. In this instance, it is unclear whether such a conference was actually held prior to the award of the contract. See Vilmont Aff. (8/9/00) ¶ 7 ("There was no pre- bid conference."); Lamb Aff. (8/9/00) ¶ 12 ("The Court inquired whether there was a pre-bid meeting. There was in fact a pre-bid meeting.").
Regardless of whether a conference took place, there is language in the contract that Cascade argues required Gleason to make an inquiry. Section 100, ¶ 1 4.1.5. of the bid places the responsibility on each bidder "[t]o promptly notify ENGINEER of all conflicts, errors, ambiguities or discrepancies which Bidder has discovered in or between the Contract Documents and such other related documents" (emphasis added). The township argues that based on this, Gleason had the duty to raise questions prebid on whether certain contract provisions amounted to a de facto direction of the means and methods.
In addition to this contract provision, federal courts have generally found that a contractor aware of an "incipient problem" prior to submission of its bid cannot rely on contract ambiguities to excuse its non-performance or increased costs of performance. "The bidder in such case is under an affirmative obligation to make appropriate inquiries in an effort to obtain clarification of a seeming ambiguity." Max Drill, Inc. v. United States, 427 F.2d 1233, 1243 (Ct.Cl. 1970). "The contractor cannot bridge the gap in his own favor when presented with an obvious omission, inconsistency, or discrepancy of significance."
Id. at 1244. Yet, this duty to inquire is not unbounded. "[I]t is not every possible ambiguity or doubt which imposes a duty on the contractor to make formal inquiry. A potential contractor is not required to seek clarification of all possible differences in interpretation." Id. (citations omitted).
The Court does not find that Gleason had an affirmative duty under the contract to verify its alleged inferences with Cascade. Under such an interpretation, the boring log data, 6" pilot-hole limitation, and "rotatory compactor" requirement were consistent with the inference drawn by Gleason that subsurface conditions underneath the riverbed were expected to be sand and clay soils, and were not in conflict with each other or otherwise create a discrepancy. See Foster Constr., 435 F.2d at 889-90 (finding that "design details and directions" in the contract confirmed other indications in the contract-specifically boring log data-that certain soil conditions could be anticipated). Furthermore, Gleason was not in a position to determine whether the provisions contained any factual error.
The Court also finds that the provisions are not ambiguous on their face. The data from the boring logs, while not as comprehensive as Gleason may have wanted, is clear and straightforward. The pilot-hole limitation and "rotary compactor" provision are also clear and, on their face, not open to conflicting interpretations. While it is certainly possible that reasonable and prudent contractors could have drawn different inferences from these provisions based upon their own experience and understanding of technological and commercial realities, such inferences do not imply that an ambiguity exists between the plain text of the contract language and soil boring logs.
Defense counsel suggests as much where, in support of defendant's motion for summary judgment, he states in part: "based upon a fair reading of the unambiguous contract provisions,. . . ." Cascade's Brief in Support of Motion for Summary Judgment at 2 (emphasis added).
As the record has been developed this far, however, the Court cannot determine whether Gleason acted as a reasonable and prudent contractor in concluding that its means and methods for drilling were, in essence, dictated by certain contract provisions, and, along with the soil boring logs, that such means and methods somehow indicated that it could expect sand and clay soils under the river. Nor can the Court determine whether such reliance upon the contract provisions and soil logs was reasonable. Several of the factual issues relevant to the question of contract indications and representations are likewise relevant to these elements. For example, the technological and commercial feasibility of a drilling system capable of passing through nestled cobbles and boulders while still meeting the pilot-hole limitation is certainly relevant to whether a reasonable and prudent contractor would infer that such a limitation implied, for all practical purposes, that sandy and clay soils could be anticipated. Other practical considerations, including the costs of such alternative systems relative to the contract price and the general geography of rivers in the area, may also be relevant.
3. REASONABLY UNFORESEEABLE CONDITIONS
Moreover, there remains a genuine issue of material fact on whether nestled cobbles and boulders were reasonably unforeseeable in the drilling area. It is undisputed that, in general, nestled cobbles and boulders could be expected to exist beneath many of Michigan's rivers. See Halderman Aff. (8/9/2000) ¶ 8; O'Donnell Aff. (8/8/2000) ¶ 11. Yet, this does not necessarily imply that such cobbles and boulders should have been expected in the project area at issue here. If its means and methods were effectively limited to using equipment for drilling through nestled cobbles and boulders, Gleason may have reasonably inferred that such conditions would not be present. While subsurface conditions of other rivers as well as along different portions of this river may be relevant to this element, such information is not dispositive at the summary judgment stage.
On August 21, 2000, Cascade submitted several photographs to the Court (Dkt. 36). The photographs show several large exposed boulders in the middle of a river. In an affidavit submitted in response to Gleason's motion to strike, Vilmont states that the photographs depict the Thornapple River approximately 1 mile from the project site. There are conflicting statements regarding the relevance and materiality of exposed rock on the surface of a river as to the subsurface conditions below the exposed rock. It is not at all clear, however, whether the existence of several exposed boulders in a river in Michigan, almost a mile from a project site, has any relevance or materiality as to the subsurface conditions at the project site. While the Court denies Gleason's motion to strike (Dkt. 40) in an order dated this same day, the Court finds that the photographs offer little relevant or material information, at least based on the current record. See also Foster Constr., 435 F.2d at 895 ("Doubts as to materiality of the exposed rock are further raised by the fact that the contracting officer may have improperly given weight to the exposure of rock a half-mile distant from the bridge.").
While complete resolution of this issue is not appropriate here, the Court does find that Gleason was not obligated to perform an extensive subsurface inspection prior to submitting its bid. "The well-established principle is true that a contractor is not required `to discover hidden subsurface conditions or those beyond the limits of an inspection appropriate to the time available.'" Youngdale Sons, 27 Fed. Cl. at 533-34 (quoting Foster Constr., 435 F.2d at 888). Nor is a contractor "charged with the technical intellect or grasp of a geologist or other expert." Id. Rather, a contractor is deemed to be on notice of subsurface conditions indicated in the boring logs and such reasonable indications of subsurface conditions "which would put a reasonable and prudent contractor . . . on notice that there may be subsurface conditions different that those indicated in the contract boring logs." Weeks Dredging, 13 Cl. Ct. at 238.
In the instance case, Gleason avers, and Cascade does not dispute, that a geotechnical inspection of subsurface conditions beneath the riverbed-including soil borings-would have cost approximately $35,000 and taken about five weeks to complete. Given that the project bid price was $367,000 and the bid had to be completed and submitted within a few weeks, such a substantial pre-bid investment by a potential bidder would have been unreasonable and, given the time constraints, likely impossible to complete. While it may have been unreasonable for Gleason to infer that the subsurface conditions would be sandy and clay soils based on the available information and contract provisions, its failure to make an extensive subsurface inspection was not unreasonable.
4. MATERIALITY AND ATTRIBUTION OF COSTS
The final two elements-materiality and attribution of costs-are likewise not ripe for summary judgment. Cascade raises several concerns regarding the methodology and results of Gleason's subsequent subsurface inspection of the project site purportedly showing substantial nestled cobbles and boulders. The township disputes that such conditions exist throughout the permissible drilling area, and argue that Gleason had ample drilling area to complete the project. Without suggesting that simply raising such concerns is always, or even usually, sufficient to create a genuine issue of material fact, the Court finds that there exist sufficient questions of fact on these elements to survive summary judgment.
III. CONCLUSION
Accordingly, for the reasons provided herein, plaintiff Gleason's motion for summary judgment (Dkt. 25) shall be GRANTED IN PART and DENIED IN PART and defendant Cascade Township's motion for summary judgment (Dkt. 20) shall be GRANTED IN PART and DENIED IN PART.
Specifically, judgment shall be granted in favor of defendant Cascade Township on plaintiff Gleason's claims of breach of contract and implied warranty based on the November 30, 1998, breakout of drill fluid. Plaintiff Gleason's claims of breach of contract and implied warranty based on its alleged encounters with cobbles and boulders shall survive summary judgment, consistent with this memorandum opinion. Likewise, defendant Cascade Township's counterclaims survive summary judgment.
An order of partial judgment consistent with this memorandum opinion shall issue forthwith.
ORDER OF THE COURT
Consistent with the memorandum opinion of even date, plaintiff Gleason Construction Company's motion for summary judgment (Dkt. 25) is GRANTED IN PART and DENIED IN PART. Defendant Cascade Township's motion for summary judgment (Dkt. 20) is GRANTED IN PART and DENIED IN PART.IT IS SO ORDERED.