Opinion ID: 787384
Heading Depth: 3
Heading Rank: 2

Heading: Whether the Specification Was Patently Defective

Text: 21 Having concluded that Hamm relied on the understated policing acreage figure, we must still determine whether Hamm was aware of or should have been aware of the defect such that it is not entitled to recover an equitable adjustment. 3 22 The Navy contends that the annual policing acreage was a patent ambiguity and Hamm should not, therefore, be entitled to recover. In making this argument, the Navy primarily relies on the fact that the daily policing acreage was less than or equal to the single mowing acreage, which was contrary to section C.11 of the solicitation. This ambiguity would have been apparent to a reasonable person in the contractor's position, according to the Navy, based on the information available at the time of contracting. In particular, the Navy points out, Hamm could have calculated that the minimum annual policing acreage was at least 47,268 acres based on the correct single mowing acreage of 156 acres (156 acres x 303 days). As the Navy notes, this calculated minimum already exceeds the stated yearly policing acreage, in clear contravention of section C.11. Finally, the Navy argues that it would have been obvious from the PWC drawings that Hamm's proposal to police 166.77 acres per day underestimated the policing requirements. Thus, the Navy asks us to find a patent ambiguity and, because Hamm failed to inquire, to preclude Hamm from recovering an equitable adjustment. 23 Hamm disagrees, arguing that the understated policing acreage was not a patent ambiguity. First, Hamm notes, the specification was not patently defective because the line items seemed reasonable on their face. According to Hamm, the 4137 acres of mowing for the ten-month period (3959 acres of general mowing + 178 acres of prestige mowing) were significantly lower than the 32,856 acres of policing for the same time period, such that no patent ambiguity could be facially discerned. Second, Hamm contends that the fact that the single mowing and daily policing acreages were the same was not patent; arriving at this information required reverse engineering the total contract-period acreages for mowing and policing, which itself involved a series of complicated calculations using figures from various sections of the specification. Thus, Hamm concludes, [t]he fact that these acreages are, according to the Board, deducible by performing obtuse calculations and integrating various sections of the Contract did not obligate Hamm to verify a clear and — on its face — reasonable Contract specification. Appellant's Reply Br. 8. In arriving at this conclusion, Hamm relies on C.L. Michner v. United States, 26 Cont.Cas.Fed. (CCH) ¶ 83,111 (Ct.Cl.1979), available at 1979 WL 16464 (Ct.Cl. Trial Div.), aff'd, 220 Ct.Cl. 641, 618 F.2d 121 (1979), to argue that bidders may rightfully rely on government-supplied estimates even if measurements of scaled PWC drawings would have revealed the acreage differences, as long as the bidder acted reasonably. 24 We begin by noting that both the Navy and Hamm mistakenly argue over the existence of an ambiguity. At issue in this case is the existence of a defect, not an ambiguity. See Highway Prods., 530 F.2d at 922 (distinguishing defects in a specification from ambiguities in contract provisions). 25 An ambiguity exists when a contract is susceptible to more than one reasonable interpretation. Metric Constructors, Inc. v. NASA, 169 F.3d 747, 751 (Fed.Cir.1999). If an ambiguity exists, the next question is whether that ambiguity is patent. Id. The doctrine of patent ambiguity is an exception to the general rule of contra proferentem, which courts use to construe ambiguities against the drafter. Id. If, however, the ambiguity is latent, the general rule applies. Id. 26 There is no ambiguity here. Hamm and the Navy do not both present reasonable interpretations of a contract term such that we could find an ambiguity. The contract term at issue here, the policing acreage, is not a term that is susceptible to two different interpretations under the terms of the contract. Notably, because Hamm could rely on the Navy's specification in computing its bid, the existence of drawings from which Hamm could have calculated the correct policing acreage does not create two differing contract terms and, consequently, an ambiguity. 27 Rather than dealing with an ambiguous specification and whether that ambiguity is latent or patent, we are dealing here with a defective specification and whether that defect is latent or patent. Nevertheless, there are similarities in the law. A contractor may not recover for a patent ambiguity, but may recover for a latent ambiguity. See Metric Constructors, 169 F.3d at 751. Similarly, a contractor may not recover for a patent defect, but may — implicitly — recover for a latent defect. See Highway Prods., 530 F.2d at 921. In other words, just as a contractor may recover for a latent ambiguity, a contractor may recover for a latent defect; just as a contractor may not recover for a patent ambiguity, a contractor may not recover for a patent defect. Given these similarities, we will treat the parties' arguments as though they relied on the proper body of law, taking the Navy to argue in favor of finding a patent defect and Hamm as arguing in favor of finding a latent defect. 28 We conclude that the defect at issue here was latent. Hamm correctly notes that a facial inspection of the mowing and policing figures in the solicitation does not reveal any glaring or obvious discrepancy. The policing figure is significantly larger than the mowing figure, as expected given the additional area to be policed and the additional days requiring policing work (mowing is required once a week; policing once a day). This, in contrast to the Navy's argument, makes it far from obvious from looking at either the numbers or the drawings that the policing acreage was understated. Moreover, we are not convinced by the Navy's argument that, had Hamm used the single mowing acreage, Hamm would have noticed the minimum annual policing acreage was too high — at least 47,268 acres (156 acres x 303 days). The Navy incorrectly uses a six-day workweek in its calculations. As discussed, Hamm's bid, which was fully incorporated into the contract, provided for policing only five days a week. As such, using the single mowing acreage, the minimum yearly policing acreage would have calculated to at least 39,156 acres (156 acres x 251 days). While not much less than the annual policing acreage listed in the specification, 39,427 acres (32,856 acres/10 months x 12 months), we conclude that this does not demonstrate a patent defect. After all, as is proper under section C.11, the minimum annual policing acreage as calculated using the single mowing acreage is less than the annual policing acreage listed in the solicitation. 29 As a corollary to the analysis in the preceding paragraph, we agree with Hamm that the fact that the daily mowing and policing acreages were the same was not a patent defect. While the Board seems to have found this discrepancy dispositive in denying Hamm an equitable adjustment, we disagree. As Hamm points out, there are a number of steps necessary to reverse engineer the figures in the solicitation to arrive at a daily policing acreage for comparison with the single mowing acreage. In addition, this process involves using information from various different parts in the contract. More importantly, though, there is nothing in the contract or bidding process that requires or suggests performing these calculations. As discussed above, Hamm prepared its bid using the yearly figures given by the Navy, applying the Navy's EPS system to calculate the estimated costs for mowing and policing. This process does not rely on daily values but, rather, yearly values. Without reason to reverse engineer the mowing and policing figures, Hamm did not discover any discrepancy in calculating its bid. Hamm had no reason to calculate daily mowing and policing acreages under the EPS system; therefore, the defect was not, as the Navy suggests, patently obvious. 30 Given the Navy's implied warranty behind the figures in its solicitation, we conclude that Hamm rightfully used these figures to compute its bid. Any discrepancy was hidden within the contract documents and therefore latent. Without any reason to reverse engineer the daily mowing and policing acreages or, conversely, to calculate a minimum yearly total for policing using the single mowing acreage, Hamm had no reason to discern the error. Once Hamm's difficulty in keeping up with the policing work revealed the error in the solicitation, it properly had an expert use the drawings attached to the contract to submit a claim for an equitable adjustment. But it did not initially have a duty to prepare take-offs from these drawings because of the implied warranty behind the figures given in the Navy's solicitation. Because the numbers here did not reveal a glaring facial discrepancy such that Hamm would have had a duty to inquire into them at the outset, we conclude that the understatement of the yearly policing figure was a latent, not patent, defect.