Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca13-13-05002/USCOURTS-ca13-13-05002-0/pdf.json

Parties Involved:
Bell/Heery, A Joint Venture
Appellant
United States
Appellee

Document Text:

United States Court of Appeals 

for the Federal Circuit ______________________ 

BELL/HEERY, A JOINT VENTURE,

Plaintiff-Appellant,

v.

UNITED STATES,

Defendant-Appellee.

______________________ 

2013-5002

______________________ 

Appeal from the United States Court of Federal 

Claims in No. 11-CV-0462, Judge Lawrence J. Block.

______________________ 

Decided: January 7, 2014

______________________ 

ROBERT D. WINDUS, Moore & Lee, LLP, of McLean, 

Virginia, argued for plaintiff-appellant. With him on the 

brief was RICHARD O’SHEA WOLF. 

ELLEN M. LYNCH, Trial Attorney, Commercial Litigation Branch, Civil Division, of Washington, DC, argued for 

defendant-appellee. On the brief were STUART F. DELERY, 

Principal Deputy Assistant Attorney General, JEANNE E.

DAVIDSON, Director, HAROLD D. LESTER, JR., Assistant 

Director, and DEVIN A. WOLAK, Trial Attorney.

______________________ 

Case: 13-5002 Document: 32-2 Page: 1 Filed: 01/07/2014
2 BELL/HEERY v. US

Before PROST, MAYER, and REYNA, Circuit Judges.

Opinion for the court filed by Circuit Judge REYNA. 

Dissenting opinion filed by Circuit Judge MAYER. 

REYNA, Circuit Judge. 

Bell/Heery, a Joint Venture (“BH”), appeals from the 

decision of the United States Court of Federal Claims 

dismissing its complaint for failure to state a claim upon 

which relief can be granted pursuant to Rule 12(b)(6) of 

the Rules of United States Court of Federal Claims 

(“RCFC”). See Bell/Heery v. United States, 106 Fed. Cl. 

300 (2012) (“CFC Decision”). Because BH has failed to set

forth facts sufficient to state a viable claim for the requested relief under the theories presented in its complaint, we affirm. 

BACKGROUND

This appeal involves a contract dispute between BH 

and the Federal Bureau of Prisons (the “FBOP” or “Government”). In April 2006, the FBOP issued a Request for 

Proposal (“RFP”) soliciting bids for the “design-build” 

construction of a federal correctional institution in New 

Hampshire. The RFP detailed the specifications for the 

project and the duties of prospective contractors. In 

particular, the construction project involved a “cut-to-fill” 

site, meaning that the ground for the project had to be 

made level by excavating (or “cutting”) materials from one 

area of the work site and using those materials to fill the 

lower areas. The contract mandated that the cut-to-fill 

operations be performed in compliance with the rules and 

regulations of the New Hampshire Department of Environmental Sciences (“NHDES”). These requirements 

included obtaining and complying with an Alteration of 

Terrain (“AOT”) permit for the cut-to-fill operations. 

The RFP included a section entitled “Certification, 

Codes, Regulations, and Permits,” which included several 

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BELL/HEERY v. US 3

subsections regarding substantive and procedural obligations assumed by prospective bidders in addressing staterelated permit requirements in their construction plans. 

RFP § C.4. First, the provision advised that the contractor would be responsible for “prepar[ing] the necessary 

documentation and forms required for the permits, and 

shall apply for, pay for and obtain all such permits and 

submit the application(s) for the FBOP.” RFP § C.4(d)(1). 

Second, it advised that “[i]n preparing construction documents, the Contractor is to consult with appropriate 

officials of the State or a political subdivision of a State, or 

both, in which the project will be located, who would have 

jurisdiction if it were not constructed by a federal agency.” 

RFP § C.4(e). Third, it indicated that “[i]n no case are the 

comments or recommendations of these officials to be 

implemented into the developmental documents without 

the approval of the FBOP.” RFP § C.4(e)(3). 

In addition to the foregoing explicitly recited obligations, the RFP further advised that “[t]he FBOP Technical 

Design Guidelines shall be referenced by the Contractor 

for additional requirements.” RFP § C.4(d)(3). These 

requirements included a Technical Design Guideline 

(“TDG”) entitled “Codes, Regulations, Laws, Permits and 

Variances.” TDG 01415. The stated purpose of these 

guidelines was to “provide[] guidance to ensure that the 

Contractor obtains, reads, and complies with the terms 

and conditions of applicable permits . . . .” TDG 

01415(A)(1). The “Regulations” section of these guidelines 

further states that a prospective “contractor should . . . 

become familiar with of [sic] all Federal Acquisition 

Regulation (FAR) clauses incorporated into this project.” 

TDG 01415(C)(1). The Regulations section of the TDG 

expressly advises contractors that the FAR’s “Permits and 

Responsibilities clause,” set forth in 48 C.F.R. § 52.236-7, 

was incorporated into the contract and that it allocates all 

costs associated with obtaining permits to the Contractor 

“without additional expense to the Government”:

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4 BELL/HEERY v. US

The requirements for permits on projects are regulated by FAR clause 52.236-7: “The Contractor 

shall, without additional expense to the Government, be responsible for obtaining any necessary 

licenses and permits, and for complying with any 

Federal, State, and municipal laws, codes, and 

regulations applicable to the performance of the 

work. . . .” 

TDG 01415(C)(1)(a) (emphasis added). 

The TDG also reiterates many of the obligations specifically set forth in the RFP solicitation documents. For 

instance, the TDG provision entitled “Permits,” places the 

duty of obtaining, paying for, and complying with permits 

on the contractor. TDG 01415(F). The TDG section 

concerning “State and Local Government Consultation, 

Review and Inspection” (the “Consultation, Review, and 

Inspection” provision) imposes obligations on the contractor to: consult with state officials when “preparing the 

design for the project”; “submit plans and specifications 

for the project in a timely manner for review” by state 

officials; “allow inspections by [state] officials during 

construction of the project”; and, in conjunction with the 

Government, “give due consideration to [state official’s] 

recommendations and ensure that a written response is 

made to them.” TDG 01415(D)(1)(a), (d), (e), (f). The 

TDG’s Consultation, Review, and Inspection provision 

also states that “[t]he Contractor shall perform the [obligations regarding state official consultation, review, and 

inspection] in conjunction with the FBOP Project Management Team.” TDG01415(D)(1); TDG01415(D)(1)(f). 

Based on the criteria and obligations set forth in the 

solicitation documents, BH submitted its bid with a 

construction plan that assumed it would be granted a 

permit for cut-to-fill operations that would occur in a 

single step. Under BH’s one-step-cut-to-fill plan, the cut 

materials would be directly transported to their final fill 

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BELL/HEERY v. US 5

locations without interruption. According to BH, the onestep-cut-to-fill plan was adopted because it was the most 

efficient process for completing the required cut-to-fill 

operations. Based on information provided in the Government’s solicitation documents and its prior experience, 

BH believed the NHDES would approve an AOT permit 

for the one-step-cut-to-fill construction plan. As such, 

BH’s bid price for the construction contract was calculated 

based on the assumption that the cut-to-fill work would 

occur in one step. 

In May 2007, the Government selected BH’s bid for 

the construction contract for a base sum of $238,175,000. 

The contract included a scheduled completion date of 

June 10, 2010, and provided liquidated damages in the 

amount of $8,000 for each day completion was overdue. 

The contract also included a number of express provisions 

and incorporated several Federal Acquisition Regulation 

(“FAR”) provisions. In addition to the Permits and Responsibilities clause, the contract also incorporated the 

FAR’s “Changes” clause, which describes the procedure by 

which the Contracting Officer can “make changes in the 

work within the general scope of the contract.” 48 C.F.R. 

§ 52.243-4(a). The Changes clause further states that, for 

any such ordered change that “causes an increase or 

decrease in the Contractor’s cost of, or the time required 

for, the performance of any part of the work under [the] 

contract,” the Contracting Officer “shall make an equitable adjustment and modify the contract in writing.” Id. § 

52.243-4(d). 

After BH was awarded the contract, it applied for 

state permits to begin cut-to-fill operations under the onestep-cut-to-fill plan. The NHDES rejected the application 

because it would not authorize BH to proceed under the 

proposed one-step-cut-to-fill plan. Instead, the NHDES 

informed BH that it would only authorize cut-to-fill 

operations that were limited to a forty-acre disturbance 

area, meaning that BH could only disturb a maximum of 

Case: 13-5002 Document: 32-2 Page: 5 Filed: 01/07/2014
6 BELL/HEERY v. US

forty-acres of land at any given time. This restricted the 

cut-to-fill work to an area substantially less than BH 

anticipated under its one-step-cut-to-fill plan. To comply 

with the forty-acre restriction, BH revised its plans for

the initial phases of the cut-to-fill operations and submitted those plans to the NHDES for approval. The NHDES 

authorized BH to proceed with the plans for the initial 

phases of operations, but further required BH to submit 

plans for the subsequent phases for review and approval 

before BH could proceed with those additional phases. 

BH advised the FBOP of the restrictions placed on the 

cut-to-fill operations by the NHDES and the potential 

ramifications of those restrictions on BH’s performance 

under the contract. In a letter from BH to the Contracting Officer, BH indicated that the NHDES’s requirements 

would “restrict our contractor’s ability to complete the 

work based on the means, methods and durations anticipated in their [sic] bid.” Additionally, BH advised that it 

had additional risk of being unable to meet the contract’s 

performance deadlines since “the requirements for future 

phasing plan limitations are yet to be determined.” With 

these considerations in mind, BH advised the government 

of the “potential exposure for addition[al] cost and schedule impact based on the requirements of the NHDES 

through the [AOT permit] and we are reserving our rights 

for additional compensation resulting from the requirement of amendment A of the [AOT permit] as well as 

future requirements of the permit.” BH did not, however, 

refuse to proceed with construction under the restrictions 

imposed by the NHDES, nor did BH press the Government to directly intervene with the NHDES on BH’s 

behalf. 

After BH commenced work on the cut-to-fill activities, 

the NHDES imposed at least ten additional limitations on 

the cut-to-fill activities beyond the 40 acre disturbance 

limitation. Compl. ¶ 50. Under these additional limitations, the NHDES regularly prevented BH from directly 

Case: 13-5002 Document: 32-2 Page: 6 Filed: 01/07/2014
BELL/HEERY v. US 7

transporting cut materials to final fill locations and forced 

BH’s earth-moving operations to involve several steps. 

BH alleges that these multi-step requirements “caused 

excessive re-handling and handling of materials, increased equipment and manpower needs, caused problematic stockpile management, required additional import 

materials, increased costs for erosion control measures, 

added temporary stabilization areas, required temporary 

stockpile stabilization, required additional areas of restoration and rework and necessitated work during unanticipated winter weather conditions.” Compl. ¶ 55. Overall, 

the requirements imposed by the NHDES caused BH’s 

cut-to-fill activities to proceed at a much slower pace and 

with greater costs than BH anticipated under the proposed one-step-cut-to-fill plan. 

Throughout the duration of the cut-to-fill operations, 

BH repeatedly informed the Government of the restrictions imposed by the NHDES and their detrimental 

impact on BH’s performance of the cut-to-fill activities 

under the contract. This occurred through several letters 

BH sent to the Contracting Officer and during progress 

meetings with various Governmental officials. Compl. ¶¶ 

57-59. BH asserts that the Government never provided 

any written response to the notices it sent regarding the 

impacts caused by the NHDES’s allegedly “unreasonable 

administration of the AOT Permit.” Compl. ¶ 60. Additionally, BH alleges that during the partnering meetings, 

the Government, through two individuals associated with 

the FBOP, advised “that it would be treated fairly with 

respect to the extra work caused by the NHDES’s administration of the AOT permit.” Compl. ¶¶ 61, 75. 

According to BH, the NHDES’s restrictions went beyond the usual requirements of a standard AOT permit 

and were contrary to generally accepted industry practice. 

BH therefore, upon completion of the cut-to-fill operations, submitted a Request for Equitable Adjustment 

(“REA”) to the Contracting Officer in the amount of 

Case: 13-5002 Document: 32-2 Page: 7 Filed: 01/07/2014
8 BELL/HEERY v. US

$7,724,885 for the excess costs it incurred relative to what 

it expected to incur under the original one-step-cut-to-fill 

plan. The Contracting Officer rejected BH’s REA.1 BH 

then filed suit in the Court of Federal Claims (“CFC”). 

BH’s complaint alleged several theories of relief, including 

breach of contract, breach of the implied covenant of good 

faith and fair dealing, and relief under the doctrines of 

constructive or cardinal change. In response, the Government moved to dismiss the complaint for failure to 

state a claim upon which relief could be granted pursuant 

to RCFC 12(b)(6). The CFC agreed and granted the 

motion to dismiss as to each of BH’s claims. 

The CFC acknowledged that the central issue raised 

by the motion to dismiss was how the contract allocated 

between the two parties the risk of increased costs for 

compliance with environmental permits, like the 

NHDES’s AOT permit. It then determined that the 

Permits and Responsibilities clause “clearly and unambiguously” placed the burden of obtaining and complying 

with state and local permits for the construction project 

solely on BH “without additional expense to the Government.” CFC Decision, 106 Fed. Cl. at 312 (citations and 

internal quotations omitted). The CFC also rejected BH’s 

arguments that the TDG created an obligation on the 

Government to engage the NHDES on BH’s behalf regarding the restrictions imposed on the cut-to-fill activities. 

Accordingly, the CFC found that BH had not alleged a 

viable breach of contract claim or any violation of the 

implied duty of good faith and fair dealing. Additionally, 

because the Government did not control the actions of the 

NHDES, the CFC found there was no basis for imposing 

liability for constructive or cardinal change on the Gov1 The parties do not dispute that the REA was, in 

effect, a certified claim under the Contract Disputes Act. 

See 41 U.S.C. §§ 7103-04.

 

Case: 13-5002 Document: 32-2 Page: 8 Filed: 01/07/2014
BELL/HEERY v. US 9

ernment. Based on these findings, the CFC concluded 

that BH had failed to plead facts sufficient to state a 

claim upon which relief could be granted and dismissed 

the complaint. 

BH now appeals the CFC’s dismissal of the complaint. 

We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(3).

STANDARD OF REVIEW

“To survive a motion to dismiss, a complaint must 

contain sufficient factual matter, accepted as true, to 

‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. 

Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “In deciding 

a motion to dismiss, the court must accept well-pleaded 

factual allegations as true and must draw all reasonable 

inferences in favor of the claimant.” Kellogg Brown & 

Root Servs., Inc. v. United States, 728 F.3d 1348, 

1365 (Fed. Cir. 2013). This rule does not apply, however, 

to legal conclusions. Rack Room Shoes v. United 

States, 718 F.3d 1370, 1376 (Fed. Cir. 2013). We review 

the grant of a motion to dismiss a complaint de novo. 

Kam-Almaz v. United States, 682 F.3d 1364, 1368 (Fed. 

Cir. 2012). 

DISCUSSION

This appeal asks us to determine whether the CFC 

erred by dismissing BH’s complaint for failure to state a 

claim upon which relief can be granted because, under the 

terms of the contract, the Government cannot be liable for 

any of the costs BH incurred by complying with the 

NHDES’s permitting requirements. BH contends that the 

CFC erred because the Complaint alleges three viable 

claims for relief: (1) breach of contract; (2) breach of the 

implied covenant of good faith and fair dealing; and (3) 

constructive or cardinal change. We take each of these in 

turn.

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10 BELL/HEERY v. US

1. Breach of Contract

A breach of contract claim requires two components: 

(1) an obligation or duty arising out of the contract and (2) 

factual allegations sufficient to support the conclusion 

that there has been a breach of the identified contractual 

duty. See Hercules, Inc. v. United States, 24 F.3d 188, 198 

(Fed. Cir. 1994); San Carlos Irrigation & Drainage Dist. v. 

United States, 877 F.2d 957, 959 (Fed. Cir. 1989). In 

making this assessment, the court must interpret the 

contract’s provisions to ascertain whether the facts plaintiff alleges would, if true, establish a breach of contract. 

See S. Cal. Edison v. United States, 58 Fed. Cl. 313, 321 

(2003) (“Contract interpretation is a matter of law and 

thus may be addressed by the Court in resolving a motion 

to dismiss.”) (citing Kennedy Heights Apartments, Ltd., I 

v. United States, 48 Fed. Cl. 574, 578 (2001)). 

“Contract interpretation begins with the language of 

the written agreement.” Coast Fed. Bank, FSB v. United 

States, 323 F.3d 1035, 1038 (Fed. Cir. 2003) (citing Foley 

Co. v. United States, 11 F.3d 1032, 1034 (Fed. Cir. 1993)). 

When interpreting a contract, “if the ‘provisions are clear 

and unambiguous, they must be given their plain and 

ordinary meaning.’” McAbee Const., Inc. v. United States, 

97 F.3d 1431, 1435 (Fed. Cir. 1996) (quoting Alaska 

Lumber & Pulp Co. v. Madigan, 2 F.3d 389, 392 (Fed. Cir. 

1993)). A contract must also be construed as a whole and 

“in a manner that gives meaning to all of its provisions 

and makes sense.” Id. (citing Hughes Commc’ns Galaxy, 

Inc. v. United States, 998 F.2d 953, 958 (Fed. Cir. 1993)). 

The CFC rejected BH’s breach of contract claims because it did not find that the Government was obligated 

under the terms of the contract to undertake any actions 

with respect to permits during the project’s construction. 

To the contrary, the CFC determined that the Permits 

and Responsibilities clause clearly and unambiguously 

allocated the costs for complying with all permit requireCase: 13-5002 Document: 32-2 Page: 10 Filed: 01/07/2014
BELL/HEERY v. US 11

ments solely to BH because that clause expressly states 

that “[t]he Contractor shall, without additional expense to 

the Government, be responsible for obtaining any necessary licenses and permits, and for complying with any 

Federal, State, and municipal laws, codes, and regulations applicable to the performance of the work. . . .” TDG 

01415(C)(1)(a)) (emphases added). 

On appeal, BH alleges that the Permits and Responsibilities clause does not create an absolute bar to an 

equitable adjustment for breach of contract under the 

alleged facts. Rather, BH contends that the terms of the 

TDG’s Consultation, Review, and Inspection provision, 

RFP § C.4(e), and the contract’s “Changes” clause (FAR 

§ 52.243-4) impose limits on the extent of the obligations 

BH assumed under the Permits and Responsibilities 

clause. BH contends that the Government “completely 

disregarded its duty to work and cooperate with 

BELL/HEERY involving Phasing Plan design changes 

and site work changes dictated by NHDES,” leaving BH 

with “no choice but to concede to the NHDES’s arbitrary 

and unreasonable determinations” on its own. As such, 

BH asserts that the Government breached the contract 

because it “never made any effort to engage NHDES, or to 

otherwise resolve the problems caused by NHDES’s 

multiple changes” to the cut-to-fill plans. Compl. ¶ 63. 

We disagree. While the Permits and Responsibilities 

clause can be constrained by other contractual provisions 

that specifically limit the scope of the contractor’s obligations for permitting requirements, see Hills Materials Co. 

v. Rice, 982 F.2d 514, 516-17 (Fed. Cir. 1992), none of the 

identified contractual provisions limit the plain allocation 

of responsibility to BH for complying with permits under 

the Permits and Responsibilities clause. 

First, BH argues that the Government’s failure to engage the NHDES regarding the limitations imposed on 

the cut-to-fill operations breached the TDG’s ConsultaCase: 13-5002 Document: 32-2 Page: 11 Filed: 01/07/2014
12 BELL/HEERY v. US

tion, Review, and Inspection provision. In relevant part, 

this provision states: 

1. The Contractor shall perform the following in 

conjunction with the FBOP Project Management 

Team: 

a. In preparing for the design for the project, consult with appropriate officials of 

the State or a political subdivision of a 

State, or both, in which the project is located and who would have jurisdiction 

over the project if it were not a project 

constructed or altered by a federal agency. 

* * * 

e. Allow inspections by such officials during construction of the project, in accordance with the customary schedule of 

inspections for construction or alteration 

of projects in the locality. Scheduled inspections may take place if such officials 

provide to the Bureau a copy of the schedule before construction of the project has 

begun and provide reasonable notice of 

their intention to conduct any inspection 

before conducting such inspection. 

f. These appropriate officials may make 

recommendations to the Bureau concerning measures necessary to meet these requirements. Such officials may also make 

recommendations concerning measures 

necessary which should be taken in the 

construction or alteration of the project to 

account for local conditions. Contractors, 

in conjunction with the [FBOP’s] Project 

Management Team, are to give due consideration to such recommendations to enCase: 13-5002 Document: 32-2 Page: 12 Filed: 01/07/2014
BELL/HEERY v. US 13

sure that a written response is made to 

them.

TDG 01415(D) (emphasis added). BH argues that the 

phrase “in conjunction with” used in various places in this 

provision imposed a duty on the Government to meet and 

consult with the NHDES concerning the AOT permitting 

requirements. BH contends that the Government 

breached that duty by failing to intercede in the negotiations between BH and the NHDES during the cut-to-fill 

operations. Consequently, BH contends that the Government is liable for all of the increased costs BH incurred under the NHDES’s permit requirements in excess 

of those that it expected to incur under the proposed 

one-step-cut-to-fill plan. 

Although the parties dispute whether the phrase “in 

conjunction with” imposes any duty on the Government, 

we need not address this question. Even if we assume 

that the TDG’s Consultation, Review, and Inspection 

provision imposes an obligation on the Government, BH 

has not stated a claim for relief under the subject matter 

covered by this provision. Subparagraphs (a) and (e) of 

this provision involve only consultations and inspections 

by State officials. Subparagraph (a) is further confined 

only to activities undertaken in “preparing for the design 

for the project.” BH’s complaint, however, does not make 

any allegations that the Government refused to consult 

with state officials during the design phase of the project 

under subparagraph (a) or that the Government disallowed an inspection by State officials under subparagraph 

(e). Rather, BH’s complaint alleges that the Government, 

“did not, during the construction phase of the project . . . 

meet or consult with” the NHDES. (Compl. ¶ 48 (emphasis added).) This alleged failure to meet and consult with 

the NHDES during the construction phase of the project 

does not implicate the subject matter of subsections (a) or 

(e) of the TDG’s Consultation, Review, and Inspection 

provision. 

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14 BELL/HEERY v. US

Nor does BH plead facts sufficient to state a claim 

against the Government under subparagraph (f) of the 

TDG’s Consultation, Review, and Inspection provision.

This subsection covers only “recommendations concerning 

measures which should be taken in the construction or 

alteration of the project to account for local conditions.” It 

further indicates that “Contractors, in conjunction with 

the [FBOP’s] Project Management Team, are to give due 

consideration to such recommendations to ensure that a 

written response is made to them.” On its face, this 

subsection only deals with the obligation to “give due 

consideration” and “ensure that a written response is 

made” to “recommendations.” BH’s complaint does not 

mention any failure by the Government to consider or 

provide a written response to any recommendations made 

by the NHDES in order to comply with the permitting 

requirements; it complains about the actual requirements 

themselves. Thus, even if this subparagraph created an 

obligation on the Government, BH’s complaint does not 

allege any breach of this duty by the Government in 

connection with the limitations placed on the cut-to-fill 

operations by the NHDES under the AOT permit. 

Furthermore, BH’s arguments regarding the obligations imposed on the Government under TDG’s Consultation, Review, and Inspection provision are contrary to the 

express language of the TDG’s Permits provision. See 

TDG Section 01415(F)(1). That TDG provision specifically 

assigns responsibility for complying with all terms and 

conditions of permits for the project to “[t]he Contractor.” 

It does not mention any obligation on the Government 

regarding permits and does not use the “in conjunction 

with” language found in the TDG’s Consultation, Review, 

and Inspection provision. Thus, when read in the context 

of all relevant provisions of the TDG as we must, see 

McAbee Const., Inc., 97 F.3d at 1435, it is apparent that 

the consultations, reviews, and inspections are to be 

performed “in conjunction with” the Government, whereas 

Case: 13-5002 Document: 32-2 Page: 14 Filed: 01/07/2014
BELL/HEERY v. US 15

all obligations regarding permits were placed solely on 

BH. 

BH also argues that RFP § C.4(e) created a contractual duty on behalf of the Government to interact with 

NHDES during design and construction of the project. 

This assertion is without merit. In relevant part, RFP 

§ C.4(e) states:

In preparing construction documents, the Contractor is to consult with appropriate officials of 

the State or a political subdivision of a State, or 

both, in which the Project will be located, who 

would have jurisdiction if it were not constructed 

by a federal agency . . . . These appropriate officials may make recommendations to the FBOP 

concerning measures which should be taken in the 

construction of the Project to account for local 

conditions . . . . In no case are the comments or 

recommendations of these officials to be implemented into the development documents without 

approval of the FBOP. 

RFP § C.4(e). 

Contrary to BH’s assertions, there is nothing in RFP 

§ C.4(e) that imposes a contractual obligation on the 

Government. On its face, it only creates contractual 

duties for “the Contractor.” Those duties require BH to 

consult with state officials in preparing construction 

documents and mandate that BH cannot incorporate any 

comments or recommendations of the state officials into 

the construction documents without first obtaining the 

Government’s consent. Accordingly, this provision does 

not limit the relevant scope of the obligations assumed by 

BH under the Permits and Responsibilities clause. 

Finally, BH argues that its complaint supports a 

claim that the Government breached the “Changes” 

clause of FAR § 52.243-4, which was incorporated into the 

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16 BELL/HEERY v. US

contract by reference.2 Specifically, BH asserts that the 

Government breached this clause “by not issuing a change 

2 In relevant part, the Changes clause states:

(a) The Contracting Officer may, at any time, 

without notice to the sureties, if any, by 

written order designated or indicated to be 

a change order, make changes in the work 

within the general scope of the contract, including changes— 

(1) In the specifications (including drawings 

and designs);

(2) In the method or manner of performance 

of the work;

(3) In the Government-furnished facilities, 

equipment, materials, services, or site; 

or 

(4) Directing acceleration in the performance of the work.

(b) Any other written or oral order (which, as 

used in this paragraph (b), includes direction, instruction, interpretation, or determination) from the Contracting Officer that 

causes a change shall be treated as a 

change order under this clause; provided, 

that the Contractor gives the Contracting 

Officer written notice stating (1) the date, 

circumstances, and source of the order and 

(2) that the Contractor regards the order as 

a change order.

(c) Except as provided in this clause, no order, 

statement, or conduct of the Contracting 

 

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BELL/HEERY v. US 17

order or equitable adjustment to cover the excess costs 

necessitated by the onerous, unreasonable and overzealous NHDES official, and by the FBOP’s directive under 

Section (b) [of the Changes clause] to comply with the 

permitting authority’s directives.” We find BH’s argument that the Government breached the Changes clause 

to be without merit. 

In order for the Changes clause to apply, there must 

have been a change in the form of a “written or oral order 

. . . from the Contracting Officer that causes a change.” 

48 C.F.R. § 52.243-4(b); see also 48 C.F.R. § 52.243-4(c). 

BH’s complaint, however, fails to allege that the Contracting Officer ever ordered BH to perform any specific work 

in conjunction with the cut-to-fill operations. BH only 

alleges that the Government ratified the changes by its 

silence in response to BH’s various complaints. BH 

cannot rely on mere silence to support its allegations 

because any such contractual “ratification must . . . be 

based on a demonstrated acceptance of the contract.” 

Harbert/Lummus Agrifuels Projects v. United States, 142 

F.3d 1429, 1434 (Fed. Cir. 1998). “Silence in and of itself 

is not sufficient to establish a demonstrated acceptance” 

Officer shall be treated as a change under 

this clause or entitle the Contractor to an 

equitable adjustment. 

(d) If any change under this clause causes an 

increase or decrease in the Contractor’s cost 

of, or the time required for, the performance 

of any part of the work under this contract, 

whether or not changed by any such order, 

the Contracting Officer shall make an equitable adjustment and modify the contract in 

writing. 

48 C.F.R. § 52.243-4(a)-(d). 

 

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18 BELL/HEERY v. US

of a contractual change by the Contracting Officer. Id. In 

the absence of any change accepted by the Contracting 

Officer, there can be no claim for a breach of the Changes 

clause and, accordingly, it does not limit the obligations 

assumed by BH under the Privileges and Responsibilities 

clause. 

In sum, BH has not stated a claim that the Government breached the contract because the costs for complying with the NHDES’s AOT permit were allocated to BH. 

BH appears to accept this conclusion, at least in part, by 

conceding that it knowingly “accept[ed] the allocation of 

risk for certain costs of performing the Contract in compliance with New Hampshire law.”3 The plain language 

of the Permits and Responsibilities clause also unequivocally assigns all of the risk for complying with the permitting requirements to BH “without additional expense to 

the Government.” Since BH’s complaint does not identify 

any countervailing contractual duty on the Government 

that contradicts or renders ambiguous the express allocation of risk to BH for compliance with the NHDES’s AOT 

permit, it has not demonstrated a cognizable claim for 

breach of contract. 

2. Breach of the Implied Covenant of Good Faith 

and Fair Dealing

Implied in every contract is a duty of good faith and 

fair dealing that requires a party to refrain from interfer3 Presumably, BH’s bid price accounted for the risk 

it knowingly assumed for these costs under the contract. 

While BH apparently underestimated the risk associated 

with the costs for complying with the NHDES’s AOT 

permit under the contract, the mere fact that BH underestimated the risk of those costs is not a sufficient basis to 

interpret the contract so as to reallocate those costs to the 

Government under the present contract. 

 

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BELL/HEERY v. US 19

ing with another party’s performance or from acting to 

destroy another party’s reasonable expectations regarding 

the fruits of the contract. Centex Corp. v. United States, 

395 F.3d 1283, 1304 (Fed. Cir. 2005). For example, this 

implied covenant guarantees that the government will not 

eliminate or rescind contractual benefits through action that is specifically designed to reappropriate the 

benefits and thereby abrogate the government’s obligations under the contract. Precision Pine & Timber, Inc. v. 

United States, 596 F.3d 817, 829 (Fed. Cir. 2010). An 

implied covenant, however, cannot “create duties inconsistent with the contract’s provisions.” Id. at 831. As we 

have recently explained, “[a]lthough the implied duty of 

good faith and fair dealing attaches to every contract, 

what that duty entails depends in part on what that 

contract promises (or disclaims).” Id. at 830 (emphasis 

omitted). 

BH alleges that the Government breached its obligation of good faith and fair dealing by advising BH it would 

be treated fairly with respect to extra work caused by 

NHDES’s administration of the AOT permit and subsequently refusing to compensate BH for the costs, delays, 

and inefficiencies associated with the NHDES’s unreasonable administration of the AOT permit. Compl. ¶104. 

BH has not, however, presented any allegations that the 

Government engaged in conduct that reappropriated 

benefits promised to BH under the contract. As noted 

above, the complaint does not allege facts sufficient to 

support a breach of contract claim against the Government for failing to engage with the NHDES regarding the 

limitations imposed on BH’s cut-to-fill operations under 

the state-regulated AOT permit. Under these circumstances, the implied duties of good faith and fair dealing 

cannot “form the basis for wholly new contract terms, 

particularly terms which would be inconsistent with the 

express terms of the agreement.” Jarvis v. United States, 

43 Fed. Cl. 529, 534 (1999). Because BH’s complaint 

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20 BELL/HEERY v. US

focuses on the frustrating conduct of the NHDES, an 

independent state agency, the allegations do not set forth 

a viable claim for breach of the implied covenant of good 

faith and fair dealing. 

3. Constructive or Cardinal Change

Finally, BH further alleges that the Government 

should be made to reimburse BH under the doctrines of 

constructive and cardinal change. To demonstrate a 

constructive change, a plaintiff must show (1) that it 

performed work beyond the contract requirements, and 

(2) that the additional work was ordered, expressly or 

impliedly, by the government. The Redland Co. v. United 

States, 97 Fed. Cl. 736, 755-56 (2011) (citing Miller Elevator Co. v. United States, 30 Fed. Cl. 662, 678 (1995)); 

Tecom, Inc. v. United States, 66 Fed. Cl. 736, 774 (2005). 

A cardinal change is similar, but has two distinguishing 

features: (1) a cardinal change requires work materially 

different from that specified in the contract, and (2) a 

cardinal change amounts to an actual breach of contract. 

See id. at 755 n.9. Here, BH’s complaint alleges that it 

was the actions of the NHDES that compelled it to modify 

the cut-to-fill operations. There are no allegations that 

the Government demanded BH to engage in any work 

that went beyond what BH was required to perform under 

the contract. Thus, under the contract, the doctrine of 

constructive change cannot be invoked against the Government because it did not itself effect an alteration in 

the work to be performed, much less an alteration “so 

drastic that it effectively” resulted in a cardinal change 

“requir[ing] the contractor to perform duties materially 

different from those originally bargained for.” Krygoski 

Constr. Co. v. United States, 94 F.3d 1537, 1543 (Fed. Cir. 

1996) (citations and internal quotations omitted).

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BELL/HEERY v. US 21

CONCLUSION

We have considered BH’s remaining arguments and 

do not find them persuasive. We therefore affirm the CFC 

Decision dismissing BH’s complaint. 

AFFIRMED

COSTS

Each party shall bear its own costs for this appeal. 

Case: 13-5002 Document: 32-2 Page: 21 Filed: 01/07/2014
United States Court of Appeals 

for the Federal Circuit ______________________ 

 

BELL/HEERY, A JOINT VENTURE,

Plaintiff-Appellant,

v.

UNITED STATES,

Defendant-Appellee.

______________________ 

2013-5002

______________________ 

Appeal from the United States Court of Federal 

Claims in No. 11-CV-0462, Judge Lawrence J. Block.

______________________ 

MAYER, Circuit Judge, dissenting.

The court improperly tests the complaint filed by 

Bell/Heery, a Joint Venture (“Bell/Heery”), “in a crucible 

hotter than the plausibility standard demands.” Rodriguez-Reyes v. Molina-Rodriguez, 711 F.3d 49, 53 (1st Cir. 

2013). Bell/Heery’s complaint contained well-pled allegations that the Federal Bureau of Prisons (the “Bureau”) 

breached two express contractual provisions when it 

refused to meet or consult with local officials who had 

imposed permitting restrictions that were contrary to 

accepted industry standards and sound engineering 

practices. Because these allegations were more than 

sufficient to stake out “a plausible claim for relief,” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009), the court errs in 

affirming the dismissal of Bell/Heery’s complaint. I 

therefore respectfully dissent.

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2 BELL/HEERY v. US

I.

In its complaint, Bell/Heery alleged that New Hampshire officials imposed permitting restrictions that were 

so arbitrary and unreasonable that they “devastated” its 

ability to perform under its contract with the Bureau. 

J.A. 26. Bell/Heery claimed that it could not reasonably 

have anticipated, at the time of bid, the capricious demands made by local permitting agents given that their 

restrictions were contrary to “prudent earthwork engineering practice[s]” and long-established industry standards. Id. at 26. It asserted, moreover, that the Bureau 

breached two express contractual provisions—Technical 

Design Guideline 01415(D) (“TDG 01415(D)”) and Section 

C.4 of the Request for Proposals (“Section C.4”)—when it 

refused to meet or consult with officials from the New 

Hampshire Department of Environmental Services 

(“NHDES”) regarding their exceedingly onerous permitting demands.* J.A. 21-32. The detailed allegations 

contained in Bell/Heery’s twenty-four page complaint 

were more than adequate to withstand the government’s 

* For example, NHDES officials required Bell/Heery 

to revise its design for performing site work on the project 

eleven different times, notwithstanding the fact that its 

original site-work plan was purportedly fully compliant 

with state regulations. J.A. 23-29. According to 

Bell/Heery, when excavating a site, a contractor normally 

is allowed to cut and clear materials from one area and 

then use those same materials as “fill” at another area of 

the project. Id. at 26-29. Without any apparent justification, however, NHDES officials precluded Bell/Heery from 

using the standard “cut-to-fill” method, instead requiring 

materials that had been cut from one area to be stockpiled 

for extended periods, thereby “caus[ing] excessive rehandling and handling of materials” and dramatically 

increasing costs under the contract. Id. at 29-30.

 

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BELL/HEERY v. US 3

motion to dismiss. See San Carlos Irrigation & Drainage 

Dist. v. United States, 877 F.2d 957, 959 (Fed. Cir. 1989) 

(explaining that a plaintiff states a claim for breach of 

contract by identifying a duty arising out of that contract 

and alleging facts sufficient to show a breach of that 

duty).

Without question, neither TDG 01415(D) nor Section 

C.4 is a model of clarity regarding the scope of the government’s obligations with respect to local permitting 

requirements. At the pleading stage, however, we are 

constrained to accept as true all well-pled factual allegations and “indulge all reasonable inferences” in a plaintiff’s favor, Sommers Oil Co. v. United States, 241 F.3d 

1375, 1378 (Fed. Cir. 2001), especially when the government drafted the contract. Applying that standard, TDG 

01415(D) and Section C.4 can plausibly be read to require 

the Bureau to confer with local permitting authorities and 

to approve or not any recommendations made by them. 

TDG 01415(D)(1)(a) requires the Bureau, together 

with Bell/Heery, to “consult” with state officials when 

“preparing the design for the project.” Section C.4 mandates that “[i]n no case are the comments or recommendations of [state and local] officials to be implemented into 

the developmental documents without the approval of the 

[Bureau].” Section C.4(e)(3). Read together, these provisions can reasonably be interpreted, at least for purposes 

of assessing the viability of Bell/Heery’s complaint, to 

require the Bureau to take an active role in consulting 

with state permitting officials and approving their recommendations. 

There is no merit to the court’s assertion that TDG 

01415(D) cannot support a breach of contract claim because it only applies during the “design” phase, and not 

during the “construction” phase, of a project. See ante at 

13-14. The Bureau’s alleged breach occurred when 

Bell/Heery was still clearing and excavating the site for 

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4 BELL/HEERY v. US

the project, well before any actual construction had begun. It was when Bell/Heery was revising its “Phasing 

Plan”—which contained detailed drawings showing its 

proposed plan for excavation and clearing on the project—

that the Bureau allegedly failed to fulfill its duty to 

consult with New Hampshire officials. The Phasing Plan, 

as the Court of Federal Claims correctly noted, consisted 

of “a series of documents and drawings setting forth the 

design of [the Berlin Correctional Institution] and contemplating construction in ‘phases.’” See Bell/Heery v. 

United States, 106 Fed. Cl. 300, 306 n.2 (2012) (emphasis 

added). Because the Bureau’s failure to consult with state 

officials occurred during the period when Bell/Heery was 

revising its site-work “design,” it can reasonably be inferred that the alleged breach occurred during the design, 

rather than the construction, phase of the project. At the 

very least, the question of whether the alleged breach 

occurred during the design phase is a disputed issue of 

material fact, one that must be resolved in Bell/Heery’s 

favor when assessing the adequacy of its complaint. See 

Sommers, 241 F.3d at 1378. 

In any event, Section C.4, unlike TDG 01415(D), is 

not limited to the design phase of the project, but instead 

applies when “preparing construction documents.” Section C.4(e). Section C.4 specifically requires the Bureau 

to approve recommendations from New Hampshire officials before going forward. See id. (“In no case are the 

comments or recommendations of [state and local] officials 

to be implemented into the developmental documents 

without the approval of the [Bureau].”). Bell/Heery’s 

allegation that the Bureau repeatedly refused to “meet or 

consult” with “NHDES representatives regarding NHDES 

comments, recommendations and requirements for the 

Project,” J.A. 27, therefore provides an ample predicate

for a breach of contract claim. The Bureau, allegedly, 

failed to fulfill its duty to approve or disapprove recommendations from local officials because it simply “ignored” 

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BELL/HEERY v. US 5

those recommendations, leaving Bell/Heery with “no 

choice but to concede to the NHDES’ arbitrary and unreasonable determinations.” Id. at 32. 

II.

In affirming the dismissal of Bell/Heery’s complaint, 

the court places undue weight on the Permits & Responsibilities clause (“P&R clause”). That clause provides: 

“The Contractor shall, without additional expense to the 

Government, be responsible for obtaining any necessary 

licenses and permits, and for complying with any Federal, 

State, and municipal laws, codes, and regulations applicable to the performance of the work.” 48 C.F.R. 

§ 52.236–7. While the P&R clause broadly assigns responsibility for obtaining required permits to Bell/Heery, 

it says nothing about whether the Bureau had an independent obligation, under TDG 01415(D) and Section C.4, 

to meet with state permitting authorities and approve or 

disapprove their recommendations. 

As we have previously recognized, the scope of a contractor’s liability under the P&R clause is not unbounded, 

but can instead be constrained by other contractual 

provisions that specifically limit obligations related to 

compliance with regulatory and permitting requirements. 

Hills Materials Co. v. Rice, 982 F.2d 514, 517 (Fed. Cir. 

1992); see also J.E. McAmis, Inc., 2010-2 B.C.A. ¶ 34607, 

2010 WL 4822734 (ASBCA 2010) (concluding that the 

P&R clause did not bar recovery where a contract identified certain “haul routes” for transporting materials and 

county officials later passed an ordinance restricting use 

of such routes); Odebrecht Contractors, Inc., No. 6372, 

2000 WL 975128, at *33 (ENGBCA July 6, 2000) (concluding that “the boiler plate ‘Permits and Responsibilities 

clause’” did not preclude an equitable adjustment where a 

contract provided for unrestricted access to certain wells 

and the local regulatory authority later denied the contractor access to those wells); Dravo Corp., 79-1 B.C.A 

Case: 13-5002 Document: 32-2 Page: 26 Filed: 01/07/2014
6 BELL/HEERY v. US

¶ 13575, 1978 WL 2244 (ENGBCA 1978) (concluding that 

the P&R clause did not preclude recovery where a contract specifically designated certain areas as 

“work/storage areas” and local officials subsequently 

denied a contractor access to those areas). Here, TDG 

01415(D) and Section C.4 can be interpreted, at least for 

purposes of assessing the viability of Bell/Heery’s breach 

of contract claim, as limiting the reach of the P&R clause 

and imposing a duty on the government to consult with 

local permitting officials and evaluate their recommendations. In affirming the dismissal of Bell/Heery’s complaint, the court turns a blind eye to these provisions, 

effectively reading them out of the contract. See Hills, 

982 F.2d at 516-17 (emphasizing that every government 

contract must be read as a whole and that the P&R clause 

must be applied in a manner that accounts for all provisions of the agreement between the parties); see also 

Medlin Constr. Group, Ltd. v. Harvey, 449 F.3d 1195,

1200 (Fed. Cir. 2006) (emphasizing that a government 

contract must be interpreted in a manner that “assure[s] 

that no contract provision is made inconsistent, superfluous, or redundant” (citations and internal quotation 

marks omitted)).

At the pleading stage, the salient inquiry is not 

whether Bell/Heery is likely to prevail on the merits, but 

instead whether it is entitled to offer evidence in support 

of its claims. Chapman Law Firm Co. v. Greenleaf Constr. 

Co., 490 F.3d 934, 938 (Fed. Cir. 2007); see also Bell Atl. 

Corp. v. Twombly, 550 U.S. 544, 556 (2007) (“[O]f course, 

a well-pleaded complaint may proceed even if it strikes a 

savvy judge that actual proof of [the facts alleged] is 

improbable, and that a recovery is very remote and unlikely.” (citations and internal quotation marks omitted)). 

The court’s decision to affirm the dismissal of Bell/Heery’s 

complaint is an unjustified effort to “collapse discovery, 

summary judgment and trial into the pleading stages of 

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BELL/HEERY v. US 7

[the] case.” Petro-Hunt, L.L.C. v. United States, 90 Fed. 

Cl. 51, 71 (2009).

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