Court Opinion

ID: 9487026
Source: CourtListenerOpinion
Date Created: 2023-08-05 12:06:31.369586+00
Date Added: 2024-06-11T17:52:03.755049
License: Public Domain

PAULINE NEWMAN, Circuit Judge,
dissenting.
I respectfully dissent. It is inequitable to require the contractor to pay for the VA’s after-the-fact reading of the specification, when the specification was, in retrospect, ambiguous, when the ambiguity was latent, and the contractor’s reading was reasonable. The government now has the benefit of a chiller that is $72,000 more expensive than the chiller that was bid, at the expense of the contractor who was free of fault. I would remand for a fair allocation of the burdens flowing from the government’s less-than-perfect specification.

A

This is not a case of a contractor cutting corners by installing less than it proposed. This is not a case of concealment, or switch, or any sharp practice or unjust enrichment of the contractor. Indeed, the VA’s reading of the contract enriched the government at the expense of the contractor, for the parties did not bargain for and there was no meeting of minds on the chiller that the government required Interwest to install.
*617The contract specification was read by the contractor and others in the trade as authorizing the chiller that was bid. Section 2.1 paragraph A required chiller cooling capacity to “meet requirements shown on the drawings.” The drawings showed 900-ton capacity. Paragraph C authorized use of “one of the halogenated hydrocarbon gases as refrigerant.” Paragraph P stated that the chiller shall be furnished with either a low-ODF refrigerant or be capable of conversion to low-ODF if required “at a later date.” Paragraph P does not state that the 900-ton capacity must be maintained after conversion, and it was conceded that the government knew that this was technologically impossible at the time.
All of the prospective subcontractors bid in the same way. All read the contract specification as requiring a chiller with a 900-ton capacity as installed. None bid on a chiller having an additional installed capacity of at least 150 tons, as would have been required on the government’s interpretation of paragraph P.

B

A patent ambiguity is one that is recognized as “an obvious omission, inconsistency, or discrepancy of significance.” Beacon Construction Co. of Mass. v. United States, 314 F.2d 501, 504, 161 Ct.Cl. 1 (1963). The doctrine of patent ambiguity is an exception to the rule of contra proferentum, to ensure that contractors do not take unfair advantage of the government by remaining silent in the face of a significant and obvious ambiguity in the contract. Newsom v. United States, 676 F.2d 647, 649, 230 Ct.Cl. 301 (1982). The government is not relieved of all responsibility, however, for “as the author, [it] has to shoulder the major task of seeing that within the zone of reasonableness the words of the agreement communicate the proper notions — as well as the main risk of a failure to carry that responsibility.” WPC Enterprises, Inc. v. United States, 323 F.2d 874, 877, 163 Ct.Cl. 1 (1963).
A patent ambiguity places a duty of inquiry upon the contractor. Interstate General Government Contractors v. Stone, 980 F.2d 1433, 1434-35 (Fed.Cir.1992). “The existence of a patent ambiguity in itself raises the duty of inquiry, regardless of the reasonableness vel non of the contractor’s interpretation.” Newsom, 676 F.2d at 650 (emphasis in original). A latent ambiguity, in contrast, exists when the ambiguity is “neither glaring nor substantial nor patently obvious.” Mountain Home Contractors v. United States, 425 F.2d 1260, 1264, 192 Ct.Cl. 16 (1970). If the ambiguity is latent the court will consider whether the contractor’s interpretation of the contract was reasonable. Newsom, 676 F.2d at 650.

C

I agree that there is ambiguity in this contract. However, it is not patent, for the contract is silent as to the capacity requirement and other conversion obligations in the event of the contingency. Upon such silence, the contractor acted reasonably in bidding a chiller having 900-ton capacity as installed, paragraph C, and capable of conversion, paragraph P.
In interpreting the terms of a construction contract, “the bargain between the parties is one that is drawn with the trade standards and practices of the relevant business community in mind.” Alfred A. Altimont, Inc. v. United States, 579 F.2d 622, 625, 217 Ct.Cl. 628 (1978). The contemporaneous reading of these specifications by all of the potential subcontractors who bid must be given appropriate weight. See Community Heating & Plumbing Co., Inc. v. Kelso, 987 F.2d 1575, 1579 (Fed.Cir.1993) (evidence of other bidders’ interpretations of the contract considered in determining the reasonableness of a contractor’s interpretation of latent ambiguity)-
None of the potential subcontractors read the contract as does the government. The drawing was read as requiring the 900-ton capacity upon installation, not future contingency. None of those concerned offered the more expensive chiller now demanded by the government. It appears that none of those concerned spotted the now-asserted ambiguity, for the Board stated that “there is no record that any of the bidders or potential subcontractors for this project ever sought *618clarification of the chiller specifications and drawings prior to the opening of bids.”

D

The contractor agrees that subparagraph (2) of the VA Guide Specification would have changed its view of what was required. However, subparagraph (2) was omitted from the contract, although subparagraph (1) was included. It is hard to understand the omission of subparagraph (2). However, we must conclude that the omission was either deliberate, in which ease the requirement now imposed was not intended to be included, or the omission was erroneous, in which case the consequences of the error must be borne by the party who made the error.
Indeed, I doubt that the government intended to require the initial installation of a chiller of significantly more than 900-ton capacity, or an otherwise more expensive chiller than was needed, simply to provide for the remote contingency of conversion. This requirement would have significantly raised the cost to the VA and the taxpayer. When
those in the trade all read a specification in the same way and see no need to inquire, it is unwarranted for a court to decide that an ambiguity, when it appears, is other than latent.
The question is not whether the VA’s interpretation of its own contract was reasonable. The question is whether that of Inter-west was reasonable. Interwest’s reading was for the most economical equipment, surely a factor in reasonableness. If the specification was not so flagrantly ambiguous that the contractor must be held to an absolute duty to inquire, and if the contractor acted reasonably, then fairness requires that the additional cost required by the government must be equitably allocated. I would remand for that purpose.