Civilian Board of Contract Appeals Rules that Government Can Pursue Architect for Specific Performance and Consequential Relief

This last October, the Civilian Board of Contract Appeals (“Board”) held that the Government may pursue both specific performance and actual or consequential damages for breach of contract against an architect. In Moshe Safdie and Assoc., Inc. v. Gen. Serv. Admin., 2011 WL 4905540 (Civilian B.C.A. Oct. 13, 2011), the General Services Administration (“GSA”) had awarded a contract to an architecture firm for the design of a courthouse located in Springfield, Massachusetts.  The contract required delivery of bid-ready documents within 27 weeks and set a construction cost limit of $35 million.  The contract also incorporated by reference the following design within funding limitations clause:

When bids or proposals for the construction contract are received that exceed the estimated price, the contractor shall perform such redesign services as are necessary to permit contract award within funding limitation.  These additional services shall be performed at no increase in the price of the contract.

Bids on the original design significantly exceeded the construction cost limit.  The GSA directed the architect to redesign the project to meet an adjusted $43.8 million target.  The architect proceeded with the redesign; however, bids continued to exceeded the new target.  The GSA did not require a further redesign and instead entered into a construction contract for approximately$53 million.

When the architect filed a lawsuit for $3 million seeking additional compensation for the numerous changes made during the initial design process, the GSA counterclaimed for more than $5 million in damages, claiming that the architect delivered bid-ready documents 20 months after the deadline, during which time its construction costs escalated.  The architect argued that the GSA’s counterclaim for construction cost escalation was barred as a matter of law pursuant to the funding limitations clause, which limited the GSA to the remedy of specific performance (i.e,  redesign services at no cost).  The architect claimed that because the contract identified a specific remedy, the GSA was barred from pursuing other forms of relief, such as consequential damages for construction cost escalation.

The Board disagreed.  First, the Board held that the Government is not barred from pursuing both specific performance and consequential damages for breach.  Second, the Board held that even when a contract provides for a specific remedy, it does not necessarily negate the pursuit of additional remedies, such as consequential relief.  The Board interpreted the funding limitations clause in the contract, and stated that since the clause did not specifically use any wording as to delays, nor expressly exclude consequential damages, the provision for specific performance was merely permissive and not exclusive of other remedies.  Therefore, unlike liquidated damages which establish the exclusive basis and amount for relief for non-performance, a clause requiring specific performance does not as a matter of law exclude consequential relief for construction cost escalation.  The Board’s ruling is a reminder to federal government contractors who wish to limit exposure to specific performance to expressly include a waiver in their contracts excluding actual and exemplary damages for non-performance.