James Talcott Construction, Inc. v. United States, No. 14-427 C, 2019 BL 72711, at *1 (Fed. Cl. Mar. 4, 2019)

In May of 2010, the United States, acting through the Department of Defense (the “Government”) awarded a contract to James Talcott Construction, Inc. (“Talcott”) to replace existing housing for military families at the Malmstrom Air Force Base in Great Falls, Montana.  Talcott was required to construct thirteen buildings, each comprising seventy housing units.  Each building was to be constructed with concrete foundations and wood framing, and the project’ design called for wooden floor joists and subfloor decking to be enclosed in crawlspaces.  The contract stated that the “structural drawings and specification represent the finished structure… [but] do not indicate the method of construction.  The contractor will provide all measures necessary to protect the structure during construction.”  The plans and specifications were silent as to ventilation of the crawlspaces.

Talcott enclosed the crawlspaces with “Exposure 1” Opposed Strand Board sheathing, which requires that moisture levels be maintained below 19% and did not install ground vapor barriers to prevent groundwater intrusion.  Several months after the work commenced, Talcott discovered significant mold growth in the crawlspaces of one of the buildings.  Talcott’s subsequent investigation revealed that humidity within the crawlspaces measured more than 80%.  After performing initial mold cleanup, Talcott retained an industrial hygienist to formulate a comprehensive remediation plan.  Ultimately, after performing the necessary remediation, Talcott completed the project 145 days after the contract’s deadline.  It submitted a request for equitable adjustment claiming, among other things, that it was entitled to additional costs associated with mold remediation because the existence of mold was the result of flaws in the Government’s design.  The contracting officer denied the claim.

Talcott then filed an action in the Court of Federal Claims, asserting claims against the Government for costs associated with mold remediation.  First, Talcott asserted a claim for breach of implied warranties under the Spearin Doctrine.  Under Spearin, where the Government includes detailed design specifications in the contract, it impliedly warrants that those specification are adequate to achieve a finished product that meets the Government’s requirements.  Under this theory, Talcott argued that it was entitled to rely upon the adequacy of the Government’s plans and specifications, but that the specifications did not contain adequate procedures to prevent mold growth and failed to vent crawlspaces adequately.  In response, the Government argued that Spearin did not apply because the contract did not include detailed design specifications.  Instead, the Government argued that the contract merely indicated the result to be achieved, but gave Talcott discretion to select its own means and methods.  The Court agreed with the Government and held that the contract permitted Talcott to select its own means and methods to achieve the specified finished product.  Therefore, Talcott did not have a valid warranty claim under Spearin.

Second, Talcott claimed that the Government breached the contract because it had superior knowledge of the risk of mold at the project site, but failed to disclose the relevant facts to Talcott.  The Court rejected this claim for two reasons.  First, the Court reasoned that a contractor  may not prevail on a superior knowledge claim where the contractor actually knew or should have known of the issue.  Here, Talcott had worked as a subcontractor on other phases of the same project and, in that capacity, was generally aware of damp conditions onsite and specifically aware of mold growth on other buildings.  Second, the Court reasoned that the project’s geotechnical report, which was provided to Talcott during bidding, disclosed the information necessary to put Talcott on notice of moist soil conditions.  The Court therefore held that Talcott did not have a valid breach of contract claim under a superior knowledge theory.  Talcott therefore was not entitled to recover any costs to remediate mold or associated delays.

To view the full text of the court’s decision, courtesy of Bloomberg Law, click here..