Contractor Can’t Blame Inspector Who Failed to Note Non-Compliant Work

An electrical contractor was supposed to run power cables through conduit, but elected on its own to run about 40% of the power cable with flexible metal-clad (MC) cable, without conduit. For a large portion of the project, Army Corps of Engineers inspectors made no comment about use of the MC cable. But then an electrical inspector for the Corps visited the site, and directed removal and replacement of the MC cable.

The contractor made a claim for $415,120 in additional costs of this work, which was denied by the contracting officer.

The contractor’s first argument on appeal, that the contract was ambiguous, failed. The Armed Services Board of Contract Appeals held that the specifications clearly required use of conduit for power cable.

The second argument is that the Corps should have noticed the use of MC cable. Thus, its failure to stop the contractor was either a signal that the Corps agreed with the contractor’s interpretation of the specs, or else that the Corps had waived the contract requirements.

The Corps’ failure to note the improper installation until the project was nearing completion, per the ASBCA, was “troubling, to say the least.” But it was the contractor’s obligation to meet the specs in the first instance. And “absent affirmative misconduct,” the Corps’ failure to note the improper installation did not bar the Corps from later demanding removal and replacement of the improper material.

This outcome is consistent with standard contract language. Common contract templates provide that the owner’s or architect/engineer’s failure to identify non-compliant work is no excuse for a contractor who has failed to properly perform the work. See, e.g., AIA A201-2017 § 9.6.6 (payment does not constitute approval of non-conforming work), and § 13.3.2 (no act or failure to act of owner or architect shall mean approval of improper work).

This confirms what contractors should expect: failure of an inspector to identify improper work does not let the contractor off the hook. The case is Appeal of Watts Constructors, LLC, ASBCA No. 61493 (Mar. 19, 2020).