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Parties Involved:
John C. Grimberg Co., Inc.
Appellee
United States Army Corps of Engineers
Appellant

Document Text:

NOTE: This disposition is nonprecedential.

United States Court of Appeals 

for the Federal Circuit ______________________

UNITED STATES ARMY CORPS OF ENGINEERS,

Appellant

v.

JOHN C. GRIMBERG CO., INC.,

Appellee

______________________

2019-1608

______________________

Appeal from the Armed Services Board of Contract Appeals in Nos. 58791, 59167, 59168, 59169, 59170, 59171, 

59717, Administrative Judge J. Reid Prouty, Administrative Judge Richard Shackleford, Administrative Judge 

Robert T. Peacock.

______________________

Decided: June 9, 2020

______________________

ALBERT S. IAROSSI, Commercial Litigation Branch, 

Civil Division, United States Department of Justice, Washington, DC, argued for appellant. Also represented by 

JOSEPH H. HUNT, ALLISON KIDD-MILLER, ROBERT EDWARD 

KIRSCHMAN, JR.; SCOTT SEUFERT, United States Army 

Corps of Engineers, Baltimore, MD. 

 HERMAN MARTIN BRAUDE, Braude Law Group, P.C., 

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2 U.S. ARMY CORPS OF ENG’RS v. JOHN C. GRIMBERG CO.

Rockville, MD, argued for appellee. Also represented by 

EDWARD JEROME PARROTT, Watt, Tieder, Hoffar & Fitzgerald, McLean, VA. 

 ______________________

Before O’MALLEY, WALLACH, and TARANTO, Circuit 

Judges.

O’MALLEY, Circuit Judge.

The United States Army Corps of Engineers (“Corps”) 

appeals a decision of the Armed Services Board of Contract 

Appeals (“Board”) holding that John C. Grimberg Co., Inc. 

(“Grimberg”) is entitled to an equitable adjustment to the 

contract price for construction of the Navy Medical Biological Defense Research Laboratory (“Biolab”) in Fort 

Detrick, Maryland. John C. Grimberg Co., ASBCA Nos. 

58791, 59167, 59168, 59169, 59170, 59171, 59717, 18-1 

BCA ¶ 37,191. While we understand the Board’s desire to 

reach a conclusion it felt was not unjust in the circumstances, for the reasons discussed below, we must reverse. 

I. BACKGROUND

The Corps issued a Request for Proposal (“RFP”) on 

February 23, 2009, seeking offers for the design and construction of the Biolab. The project entailed construction 

of a large laboratory building, an entry point building, 

parking facilities, an access road, stormwater management, and perimeter fencing. The RFP incorporated by reference the standard differing site condition (“DSC”) clause, 

as prescribed by 48 C.F.R. § 52.236-2, pursuant to which a 

contractor can ask for a cost adjustment if subsurface conditions at the construction site “differ materially from those 

indicated in the contract.”

The RFP also included, as an appendix, the “Geotechnical Report and Requirements” (“Geotechnical Report”). 

J.A. 4248–4423. The Geotechnical Report, although “preliminary” was meant to provide “bidders with sufficient 

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U.S. ARMY CORPS OF ENG’RS v. JOHN C. GRIMBERG CO. 3

information to identify the general subsurface conditions of 

the site.” J.A. 4249. The Geotechnical Report stated that 

the Biolab should be supported by a deep foundation system of drilled piers (i.e., caissons or shafts) socketed into 

five feet of competent rock. J.A. 4256. The portion of the 

pier embedded in rock is called a “rock socket.” 

To assist contractors in developing bids for the Biolab’s 

foundation, the Geotechnical Report disclosed 46 test borings to indicate the subsurface conditions at the project location. Eleven of the borings came from an investigation 

done during the construction of the National Interagency 

Bio-Defense Campus, of which the Biolab is a part. Just 

two of those borings, DH-11 and DH-12, were located 

within the planned footprint for the Biolab. Those two borings indicated high quality rock, with no intervening incompetent rock. The Geotechnical Report indicated, 

however, that contractors should not assume that the rock 

at the site would be free of voids given the information 

available from other borings. For example, certain borings

taken between 300 and 500 feet from the Biolab footprint,

in preparation for a different construction project, showed

between 0 and 20 feet of incompetent rock. 

Notably, the bedrock below the Biolab project, like the 

surrounding area, is limestone in a Karst formation. Karst 

geology is a condition of limestone rock that occurs when 

portions of the rock have been degraded over time by a 

Karst solutioning process. This process can create large 

cracks, fissures, and voids in the rock. As the Board explained, “Karst is a recognized geohazard, ‘[k]nown for its 

variability and its degree of inconsistency, both vertically 

and horizontally over extremely short distances.’” J.A. 2. 

In response to the Corps’ RFP, Grimberg submitted a 

proposal on March 31, 2009. Grimberg estimated that it 

would need to drill through 240 feet of rock (exactly 5 feet 

for each of 48 piers), at between $270 and $530 per foot, 

depending on the depth of the pier. This quote relied on 

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4 U.S. ARMY CORPS OF ENG’RS v. JOHN C. GRIMBERG CO.

the testing results from DH-11 and DH-12, and assumed

that excavation of incompetent rock would not be required

as part of the construction. 

On May 29, 2009, the Corps awarded the Biolab Project 

Contract to Grimberg. Grimberg proceeded on the contract 

and, once it began work on the foundation, quickly began 

to encounter incompetent rock. On March 10, 2010, Grimberg notified the Corps that it was encountering, in its 

view, a DSC. Grimberg ultimately drilled through 923 feet 

of rock—683 feet more than it had accounted for in its bid. 

J.A. 3435.

In May 2012, once the Biolab project was complete, 

Grimberg submitted a request for equitable adjustment of 

the contract price to the Corps, alleging a Type I DSC. J.A. 

3449–3452. The request acknowledged that Grimberg relied on only DH-11 and DH-12 when structuring its bid. 

J.A. 3450. The letter further stated that Grimberg drilled

through an average of 13.6 feet more rock per pier than expected to create the necessary rock sockets. J.A. 3451. The 

Corps denied Grimberg’s request in June 2012. In December, Grimberg submitted a certified claim. The Corps 

again denied the claim and Grimberg appealed to the 

Board. 

The Board conducted an eight-day hearing and issued 

a lengthy opinion. Relevant to this appeal, the Board found 

that Grimberg encountered a Type I DSC. The Board explained that Grimberg met the standard for a Type I DSC 

because “[t]he quantities of rock encountered greatly exceeded the quantity reasonably foreseeable based on a fair 

reading of contractual indications.” J.A. 28. The Board 

found that Grimberg’s reliance on just two borings, DH-11 

and DH-12, was unreasonable. J.A. 28–29; see also J.A. 31 

(“Confronted with the plethora of cautionary contractual 

indications, ‘cherry picking’ a subset of 2 of 46 borings, regardless of their proximity to the Biolab foundation, was 

unjustifiable in the circumstances of this case.”). The 

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Board explained, however, that Grimberg’s reliance on two 

borings was more reasonable than the government’s proposal that Grimberg should have relied on borings located 

300 to 500 feet from the Biolab footprint. J.A. 29. The 

Board explained:

a primary reason for our conclusion that [Grimberg] is entitled to relief despite its misreliance 

solely on DH-11 and DH-12, is the gross disparity 

between the quantities of incompetent rock actually encountered and the quantity that we consider 

was reasonably indicated in the contract’s Geotechnical Report. Even if it had expanded its pre-proposal analyses to include the seven most proximate 

borings to the Biolab site . . . or devoted the time 

and effort to analyze the 26 [other] borings as did 

the Corps at trial, the disparity was material and 

not reasonably foreseeable.

J.A. 29. 

Having found that neither the Corps nor Grimberg provided a reasonable estimate of the amount of rock a reasonable contractor would have expected, the Board engaged in 

a “jury verdict” type analysis. J.A. 30. Based on the expert 

testimony and evidence presented at trial, it concluded

that the contract reasonably indicated that 360 feet of rock 

drilling (an additional 2.5 feet per pier) would be required. 

Id. Because Grimberg actually encountered on average an 

additional 13.6 feet of incompetent rock, the Board found 

that Grimberg encountered more rock than was reasonably 

indicated in the contract. Id. Thus, the Board found for 

Grimberg on its DSC claim. The Board further found in 

favor of Grimberg on a claim for delays related to the DSC. 

J.A. 49.

The Corps filed a motion for reconsideration. In denying the motion, the Board explained that “[a]n ‘all or nothing’ resolution of this case would have been overly legalistic 

and unjust.” J.A. 70. 

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6 U.S. ARMY CORPS OF ENG’RS v. JOHN C. GRIMBERG CO.

II. DISCUSSION

In an appeal from the Board, we review questions of 

law de novo. Rockies Exp. Pipeline LLC v. Salazar, 730 

F.3d 1330, 1335 (Fed. Cir. 2013). The interpretation of contracts, statutes, and regulations is a question of law. Id. 

We review the Board’s factual findings to determine if the 

findings are arbitrary, capricious, or not supported by substantial evidence. Id.; 41 U.S.C. § 7107(b). 

A Type I DSC exists when “subsurface or latent physical conditions at the site . . . differ materially from those 

indicated in [the] contract.” 48 C.F.R. § 52.236-2(a)(1). To 

establish an equitable adjustment to contract price based 

on a Type I DSC, a contractor must prove by a preponderance of the evidence:

[1] the conditions indicated in the contract differ 

materially from those actually encountered during 

performance; [2] the conditions actually encountered were reasonably unforeseeable based on all 

information available to the contractor at the time 

of bidding; [3] the contractor reasonably relied 

upon its interpretation of the contract and contract-related documents; and [4] the contractor was 

damaged as a result of the material variation between expected and encountered conditions.

Comtrol, Inc. v. United States, 294 F.3d 1357, 1362 (Fed. 

Cir. 2002); see also Stuyvesant Dredging Co. v. United 

States, 834 F.2d 1576, 1581 (Fed. Cir. 1987). “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.” P.J. Maffei Bldg. Wrecking Corp. v. United 

States, 732 F.2d 913, 917 (Fed. Cir. 1984) (emphasis in original). 

The Corps argues that the Board erred when it held 

that Grimberg is entitled to an equitable adjustment to 

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U.S. ARMY CORPS OF ENG’RS v. JOHN C. GRIMBERG CO. 7

contract price despite having repeatedly stated that Grimberg’s interpretation of the contract was unreasonable. 

Grimberg does not respond to this contention. In fact, 

Grimberg fails to even address the governing legal standard in its briefing. Grimberg’s failure to contend with the 

required legal test is fatal to its claim. 

For over thirty years, we have required that, to receive 

an equitable adjustment to the contract price, a contractor 

must prove that it reasonably relied on its interpretation of 

the contract. See Stuyvesant Dredging, 834 F.2d at 1581. 

Here, the Board found that Grimberg failed to do just that. 

See J.A. 28–29, 31. We are thus left with the inescapable 

conclusion that Grimberg has failed to prove its entitlement to an adjustment. The Board erred as a matter of law 

when it concluded otherwise.

The Board’s finding that the Corps’ interpretation was 

less reasonable than Grimberg’s does not change our conclusion. Appellee’s Br. 60–64. Despite the moniker “equitable adjustment” employed in this context, our case law 

does not permit us to balance the Corp’s reasonableness

against that of the contractor. The focus of our inquiry 

must be on the reasonableness of the contractor. This focus

serves the purpose of incentivizing contractors to carefully 

and reasonably interpret contract documents. See H.B. 

Mac, Inc. v. United States, 153 F.3d 1338, 1343 (Fed. Cir. 

1998). In this case, the Corps chose to propose what it 

viewed as a “reasonable” interpretation of the contract to 

contrast with the “reasonable” interpretation proposed by 

Grimberg. That both the Corps and Grimberg failed in 

their endeavor to establish what would have been reasonable for this particular contract does not somehow shift the 

burden of providing a reasonable interpretation from 

Grimberg to the Corps. Regardless of the Corps’ understanding of the contract, our case law is clear that Grimberg must bear the risk of bidding on a contract without 

reasonably interpreting what that contract discloses.

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8 U.S. ARMY CORPS OF ENG’RS v. JOHN C. GRIMBERG CO.

The Board found more than once that Grimberg failed 

to prove that it reasonably relied on the test results from 

just two borings when formulating its Biolab bid.1 Because 

Grimberg was unreasonable, under long-established law, it

is not entitled to an equitable adjustment of the contract 

price. 

III. CONCLUSION

For the reasons discussed above, we reverse the 

Board’s holding that Grimberg is entitled to an equitable 

adjustment to contract price based on a Type I DSC.

REVERSED

1 While Grimberg dedicates a significant portion of 

its brief to summarizing the evidence it presented to the 

Board, see Appellee’s Br. 18–50, Grimberg does not directly 

challenge the Board’s finding that Grimberg’s interpretation of the contract was unreasonable, see id. at 58 (arguing 

that the Board’s interpretation of the contract was reasonable), 60 (arguing that the Board correctly rejected the 

Government’s interpretation of the contract as less reasonable than Grimberg’s). To the extent Grimberg challenges 

the Board’s factual finding that reliance on two borings was 

unreasonable, substantial evidence supports that finding.

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