Who Bears the Risks of War? Federal Circuit Affirms ASBCA’s Decision That the Contractor Bore the Risk of Changes to Base Access

DefenseIn a previous post, we reported on ECC International, LLC, ASBCA No. 60484, Nov. 16, 2018, 18-1 BCA ¶ 37203, which rejected a contractor’s claims arising out of the Government’s closure of a key access route to a construction site in Afghanistan. The Armed Services Board of Contract Appeals (ASBCA, or “Board”) ruled that the contractor bore the risk of changes to base access, the contract did not warrant continued access through a particular gate, the Government did not impliedly warrant access through that gate, and closure of the gate was not a constructive change. The Federal Circuit now has agreed with the Board’s decision in No. 60284 and related appeals, explaining that “the change in security procedures was not a constructive change in the contract for which ECC is entitled to compensation.”

ECC International (ECC) had a construction contract with the United States Army Corps of Engineers (USACE) in Afghanistan. The contract contained a Security provision providing that “[a] detailed security plan […] shall be approved by the Government before construction notice to proceed.” Before starting performance in 2011, ECC submitted a Security Plan for the Government’s review. The Security Plan stated ECC’s intent to use the “Friendship Gate” for moving workers and materials to the construction site on Camp Shorab in Afghanistan. The Government approved ECC’s plan, and ECC began performance of the contract using the Friendship Gate to gain access to the construction site. In December 2012, the U.S. Marine Corps closed the Friendship Gate to non-military personnel in response to deteriorating security conditions. As a result, ECC and its subcontractors had to move workers, concrete, and other materials using longer access routes. ECC sought compensation for the costs arising out of the Government’s closure of the Friendship Gate, but the Government contended that ECC assumed the risk of any changes to base access procedures or requirements.

ECC contended that by accepting its proposed price and security plan premised on the use of the Friendship Gate, the Government impliedly warranted that ECC would be able to use the access route and that no additional security requirements would be imposed. The security plan, however, was never incorporated into the contract. To the contrary, the contract put ECC on notice that it was operating in a combat environment and assigned ECC responsibility for complying with applicable installation access procedures, which could change at any time.

The ASBCA held the Government did not provide an implied warranty of access through the Friendship Gate. In reaching this conclusion, the Board cited Oman-Fischbach Int’l (JV) v. Prie, 276 F.3d 1380 (Fed. Cir. 2002), which held that, “a warranty is an assurance by one party to an agreement of the existence of a fact upon which the other party may rely; it is intended precisely to relieve the promisee of any duty to ascertain the facts for himself.” ECC International, LLC, ASBCA No. 60484, Nov. 16, 2018, 18-1 BCA ¶ 37203276 (quoting 276 F.3d at 1383). To establish an implied warranty of access through the Friendship Gate, ECC would need to demonstrate that: (1) USACE assured ECC that it could access the work site through the Friendship Gate; (2) ECC had no duty to determine whether access would be available; and (3) access through the Friendship Gate became unavailable. The contract’s requirement that the Government approve ECC’s security plan prior to beginning construction did not amount to an assurance of continued access to the work site through the Friendship Gate.

The Federal Circuit agreed with the ASBCA, stating that there was no meaningful distinction between this case and Oman-Fischbach. The Federal Circuit explained, “[i]n Oman‑ Fischbach, the mere fact that the contract depicted several routes to a disposal site on a map did not explicitly assure the contractor of access to any particular route.” Similarly, in ECC’s case, there were no contract provisions warranting continued access through the Friendship Gate. The Federal Circuit thus affirmed the ASBCA’s decision that ECC bore the risk of changes to base access, because the Board correctly concluded that changes in security procedures were not a constructive change entitling ECC to compensation.

While the results in cases stemming from war zone risks can run the gamut, the Federal Circuit’s affirmation in this case confirms the one point that is clear from all of those cases: contractors should look closely at how contract provisions allocate the risk of additional costs or delays that may arise in a combat environment and should think carefully about how to respond when security, access, or other types of changes occur.